RESTRICTED
WORLD TRADE WT/ACC/SPEC/ALB/1/Add.1
6November 1996
ORGANIZATION(96-4677)
Original: English
ACCESSION OFALBANIA
Communication from Albania
Addendum
Thefollowing details andcomments onthepreparation ofthedraftagriculture schedules have
beenreceived from theMinistry ofAgriculture andFood oftheRepublic ofAlbania.
________________
1. MARKET ACCESS: PART I(MOST-FAVOURED-NATION-TARIFF):
Withrespect totheactual schedule, column 6(special safeguard) doesnotapply tous;column 7
(initial negotiating rights) hastobefilled outatalaterdate,column 8(other duties andcharges) will
havetoremain blank asAlbania doesnothaveanysuchcharges inplace; column 5(Implementation
period) depends upon thetimeofaccession which istobedetermined through negotiations.
2. DOMESTIC SUPPORT:
The"Green Box" Measures (Supporting Table DS:1):
General Services :
- alldatausedhereiscollected fromtheDirectorate ofEconomics andFinance intheMinistry
ofAgriculture andFood;
- monetary values ofmeasures inplace havebeenaveraged forthelastthree years including
1994-95-96;
- onlymeasures which constitute direct budgetary outlays (paid forbytheAlbanian taxpayers)
havebeenaccounted for.
Domestic Food Aid(Complementary Information) :
Infact,basic foodstuff (wheat, flour, sugar, oil)havebeenprovided tolowincome people
tohelpthemcopewithshortages anddisruptions infoodsupplies duetotransition factors (5billion Lek
forfouryears/1992-1995). Thiswas,however, provided under external assistance programmes as
emergency aidorother types ofassistance. Intherecent years, theprogramme wastargeted toremote
areas andisnowterminated.WT/ACC/SPEC/ALB/1/Add.1
Page2
Regional Assistance Programmes :
According toWTO definition, thiswould include solely programmes limited totheextracosts
orthelossofincome involved inundertaking agriculture activities indisadvantaged regions. Itexcludes
therefore programmes forpoverty alleviation orruraldevelopment which involve theprovision ofsome
basic infrastructure (other than those included under "general services") such asschools,
telecommunications, hospitals etc.Albania
Special andDifferential Treatment (Supporting Table DS:"2):
Investment subsidies generally available toagriculture (complementary information) :
Credit hasbeenprovided atpreferential ratesforagro-processing enterprises tosupport their
restructuring andprivatisation process (SME/EU -800,000 ECU). Ministry ofFinance sources. It
isnotshow intheschedule asfunds areexternally provided.
Input subsidies generally available tolow-income orresource-poor producers :
Thisincludes revenue foregone totheGovernment from provision ofirrigation water at
preferential ratesforpoorfarmers.
Atpresent, theroleoftheState intheprovision ofirrigation anddrainage infrastructure is
focused onfinancing therehabilitation costs. Itisexpected thatallsmall irrigation anddrainage
infrastructure including secondary andtertiary canals aretobegradually handed overtotheWUA 's.1
These latter, willberesponsible foroperating andadministering theschemes andforfinancing allcosts
related totheiruseincluding anyinvestment andrehabilitation costs. TheroleofWater Enterprises
(State enterprises) willbethatofoperating andmaintaining suchinfrastructure untilthisisprivately
taken overbyWUA 's.Also, forsome years tocome, Water Enterprises willoperate those schemes
which WUA 'sareneither ablenorinterested torun(basically bigirrigation schemes) andsupervise
theoperations inthose schemes administered bytheWUA 's.
Thecostsofrehabilitating theexisting infrastructure arenotpaidforbybeneficiaries. These
remain Government funds usedfortheprovision ofthebasic public infrastructure foragriculture.
Therehabilitation work is,however, mainly externally financed whereas direct budgetary outlays for
investment inirrigation anddrainage infrastructure account foranannual ofLek226million.
Inaddition, although legislated byLawNo.7846 of21July1994, "Ontheconstruction,
Administration, Maintenance andOperation ofIrrigation andDrainage Works", theactual applicable
water charges aredefined yearly upon Government Decrees. Current rates aresubsidised2
(Lek300Million fortheyear1995). Itisimportant tomention, though, thatthese subsidies areto
begradually reduced andultimately phased out.
1WUA 'sstarted creating in1995. Sofar,some 700suchassociations areestablished throughout
thecountry which operate onsome180,000 haofirrigated lane(430,000 haofarable landareirrigated).
2Theapplied feeforthemountainous areas is1.5Lek/m3andfortheplains is2Lek/m3.WT/ACC/SPEC/ALB/1/Add.1
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Product Specific Aggregate Measure ofSupport:
Market Price Support (Supporting Table D:5:
Though aGovernment Decision (Decision No.273,dated 16June1993) aceiling price for
salesofflour(75%) which isusedtoproduce onetypeofbread called "thenormal bread" wasestablished
at29.6Lek/kg. Onpaper, theprice become effective on1July1993. Itwascalculated based on
areference international price forwheat, thecosts ofdomestically producing flour andbread anda
minimum profit margin. Defacto, upuntilthesecond halfof1995, however, themarket price has
never reached theceiling providing, thus, fortheadministered price nottobeeffective. Theactual
price fluctuated around values 30-10% lower thanthefixed ceiling because oflargeamounts ofwheat
available fromFood Aidsandbecause oflow(lower thanforeseen) world prices forwheat andflour
which were thenimported intothecountry.
During 1993 -1995, several increases intheprices ofauxiliary materials, fuel,steam, etc.
andinlocalsalaries, tookplace. Although thisresulted inhigher production costsforfourandbread,
because ofthelowpricefortherawmaterial (wheat), thereflection ofsuchcostsinprices ofthefinished
product (flour, bread) wasnotsubstantial, stillallowing foramarket price below theadministered
ceiling.
Since inthesecond halfof1995, theabove picture haschanged. Mainly, duetoexternal shocks
(wheat price increased sharply ininternational markets), itbecame difficult forlocalflour andbread
producers tosustain theceiling price.
Tomitigate sucheffects, thegovernment implemented anumber ofmeasures including:
- thereduction inthepriceofpower andwater provisions when usedfortheproduction offlour
andbread. Thishadaneteffect of164.7 Lek/kg inreducing theunitcosts ofbread. The
annual revenues foregone tothe Government amount to330million Lek
(1647 Lek/ton x200,000 tonannual bread production);
- bread other thanthe"normal bread" wasexempt from theturnover tax("normal bread" was
never taxed). Suchameasure makes upanannual costof180million LektotheStatebudget
(revenue foregone) given thattheamount of"non-normal bread" produced annually isestimated
at40,000 tons(40,000 tones x30,000 Lek/ton x15%);
- whatandflourimports havebeenexempt fromcustom duties. Only forflour, suchmeasure
coststhebudget some1.3million US$annually (170US$/ton x100,000 tonsannual imports);
- wheat andfloursupplies fromaidorGovernment purchases havebeensoldatprices wellbelow
themarket rates. Theprice gapforwheat (import price anddomestic price) sustained bythe
Government is40US$/ton (200US$-160US$). Within thefirsthalfof1996, 40,000 tons
ofwheat aretobepurchased bytheGovernment andsome additional 30,000 tonsofwheat
andflourwillreach thecountry intheformoffoodaidfromtheUSA, France, Czech Republic.
These willbesoldinthedomestic market at160US$/ton.
Ofcourse, itispossible toquantify theeffect ofsuchsubsidization inthecosts offlour
production. Wehavenot,however, included thisinthecalculations oftheAMS asitcould
beconsidered atemporary measure toensure allcitizens haveadequate access tobread (food
security reasons) which, eventhough itinvolves purchasing ofGovernment stocks andsales
atsubsidised ratestoinfluence thedomestic price, isallowed fordeveloping countries.WT/ACC/SPEC/ALB/1/Add.1
Page4
Theabove mechanisms are,however, notsufficient tomaintain thedomestic price forflour
within limits which allow forthepre-set ceiling tobesustained. Ontheother hand, localproducers
areweakandsubsistence oriented and,moreover, theredonotexisttherequired marketing arrangements
which could make possible theexporting ofcereals. Asaresult localproducers cannot benefit from
higher world prices.
Tocalculate themarket price support, wehaveconsidered thesetadministered ceiling price
forflour asfrom thegovernment Decision (29.6 Lek/kg) andanexternal reference price converted
intoourlocalcurrency (340US$/kg equal to34.00 Lek/kg) which isonlyrelevant fortheperiod from
July1995 onwards. Ifanaverage price forthelastthree years would beapplied, itwould bevery
misleading andnotrepresentative asitwould notreflect theactual situation. Also, forthesamereasons,
weonlycalculate theAMS ontheamount offlour which isactually soldattheadministered rate
(10,000,000 kg).Asexpected theAMS isnegative which indicates thattheactual policy isprotecting
consumers andindirectly taxing producers (inthesense thattheyarenotallowed tobenefit frompotential
higher prices given thatprivate imports docome intothecountry athigher prices). Itisessential to
mention thattheabove were temporary measures toberemoved verysoon. Infact, upon the
Decision No.470of15July1996, theprices ofbread, flourandwheat wereliberalized. Water and
power usedforproducing flourandbread willstillcontinue tobesubsidised buttobe,gradually, phased
out.Bread andflourarealsoexempt fromtheVAT andimports areexempt fromanyborder duties.