RECTRICTEDWORLD TRADE
ORGANIZATIONWT/REG83/M/2
WT/REG84/M/2
9 March 2001
(01-1169)
Committee on Regional Trade Agreements
Twenty-Eighth Session
EXAMINATION OF THE FREE TRADE AGREEMENTS BETWEEN
HUNGARY AND LITHUANIA;  AND HUNGARY AND LATVIA
Note on the Meeting of 22 February 2001
Chairman: Mr. Jae Gil LEE (Korea)
1. The meeting was convened in document WTO/AIR/1484.  Under Agenda Items D.XI-XII of
its Twenty-Eighth Session, the Committee on Regional Trade Agreements (hereinafter CRTA or theCommittee) took up the second round of examinati on of the Free Trade Agreements (FTA) between
Hungary and Lithuania, and between Hungary and Latvia.
2. The Chairman stated that the minutes of the first round of examination, which had taken place
in October of the previous year, had been distributed as documents WT/REG83/M/1 and
WT/REG84/M/1.  Questions and replies on the two Agreements, which had been submitted followingthe last meeting, had been distributed in docu ments WT/REG83-84/4, respectively.  He proposed that
the Committee consider the two Agreements together, it being understood that this would have no
impact on the examination per se , as each Agreement would be judged on its own merits and would
have its own report with its own conclusions.
3. The representative of Hungary thanked delegations for their written questions to which the
Parties had responded.  He explained that the transitional period which was included in both
Agreements had expired as of 1 January 2001.  He expressed his hope that the detailed statistics andreplies to questions which had been provided by the Parties would enable the Committee to conclude
its factual examination in the day's meeting.
4. The representative of Canada said that according to the reply given to question 4
in WT/REG83/4, the agricultural im ports of Hungary from Lithuania represented 5.3 per cent of total
imports in 1999.  She wondered if the Parties could provide a similar figure with respect to the tradein the other direction.
5. The representative of Australia said that, despite the information provided, his delegation
retained its concerns over the treatment of trade in agricultural products under these Agreements.
6. The representative of the United States stated that the answers provided by the Parties tended
to confirm her delegation's earlier concerns about the lack of coverage in agriculture.  In the absence
of detailed tariff-line statistics, it was difficult to conclude that there was adequate coverage in
agriculture.  The Parties' answers to the questions on drawback benefits (No. 11 and 7 of
WT/REG83/4 and WT/REG84 /4, respectively), confirmed that drawback benefits were accorded to
countries which were not Parties to the Agreements to the relative disadvantage of other WTO
Members, including the United States:  her delegation could only conclude that these provisionsappeared inconsistent with Article I of the GATT and were not covered by Article XXIV.  With
respect to standards, the answer given to questi on 12 in WT/REG83/4 was that Hungary had initialledWT/REG83/M/2
WT/REG84/M/2
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a conformity assessment agreement with the EC, but there was no reference to Latvia's or Lithuania's
involvement in such arrangements.  She wondered if the Parties could elaborate on the treatment of
goods from Latvia or Lithuania, or goods that might be certified as conforming to standards in those
countries, or whether there were plans for Latvia or  Lithuania to enter into such arrangements with
Hungary.
7. In relation to question 1 in document WT/REG83/4, the representative of Japan asked
whether Protocol 1, which covered the concessions made in agriculture, had been submitted to the
Secretariat.  He shared the concerns expressed by the representative of United States on the issue of
the provision of tariff-line information for agricultural trade.
8. In reply to the question on agricultural imports, the representative of Hungary said that
agricultural imports from Hungary represented 47 per cent of Lithuania's total imports.  This figure
was missing due to a typographical error.  In response to the concerns expressed by several
delegations on the coverage of agriculture, or the lack of it, he said that it was the Parties' view that
the Agreements conformed with the "substantially all the trade" criterion and contributed to the trade
and economic relations of the countries concerned.  He had responded to the question on tariff lines
during the last meeting and also in written form.  While he respected the differing views ofdelegations, his delegation did not consider this issue relevant in the context of Article XXIV:  it had
been extensively debated in the past and would, no doubt, continue to be debated in the future.  In
response to the question on Protocol 1, he confirmed that all Annexes and Protocols to the
Agreements had been supplied to the Secretariat where they could be consulted by interested
Members;  the Parties could also supply a copy of  Protocol 1, if necessary.  His delegation did not
agree with the view that the rules of origin system was not consistent with Articles I and XXIV of
the GATT.  It was his delegation's view that the rules of origin employed in the Agreements had
helped make the rules more predictable, promotin g investment and helping traders anticipate what
kind of treatment to expect on imports or exports.  The fact that there had been changes in the
drawback system did not affect the consistency of the Agreements.  He added that his delegation'sview, which had been shared by the United States in the context of the examination of the NAFTA,
was that preferential rules of origin were not part of the test of Article XXIV.  Nonetheless, the Parties
to the pan-European system of cumulation of orig in had provided detailed information on several
occasions and had taken time to explain the substance of the system, for information purposes.  In
relation to the question on conformity assessment, he conceded that his delegation had misunderstood
the question which had resulted in a slightly confusing answer.  He confirmed that no agreement on
conformity assessment existed either betwee n Hungary and Latvia, or between Hungary and
Lithuania.  For information purposes, the Partie s had provided additional information which had
nothing to do with these particular FTAs.
9. The representative of Canada thanked the representative of Hungary for his response to her
question on the level of agricultural imports, but joined with others in expressing her delegation's
concern about the coverage of agriculture in the Agreements.  Even without tariff-line information,
which her delegation considered necessary to determine the question of "substantially all the trade",
the fact that 47 per cent of trade from Hungary into Lithuania did not enjoy duty-free treatment  meant
that the requirement of Article XXIV:8(b) to eliminate duties on substantially all the trade had not
been met.
10.  The representative of Hungary said that the Agreement between Hungary and Lithuania had
entered into force on 1 March 2000.  The Parties had provided statistics for the years 1996-1999.  The
percentage which he had quoted was for an exceptional year in 1999 and corresponded to the
purchase of one product.  The average was around 10-15 per cent, not 47 per cent.  The representative
of Lithuania added that almost 25 per cent of all trade in 1999 was represented by the import of raw
tobacco from Hungary at zero duties.WT/REG83/M/2
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11. The Chairman said that the day's meeting had allowed Members to go a step further in the
examination of these two Agreements.  He suggested that any further questions be submitted to the
Secretariat by 23 March and that the Parties respond in writing to such questions by 30 April.  If no
questions were submitted by the deadline, he proposed that the Secretariat begin drafting theexamination report.  The representative of Hungary said that in his view the factual examination of the
Agreements should be considered complete.  The outstanding issues related to systemic issues whichwould not be resolved through further examination.  The Chairman replied that given that this was
only the second round of examination he would like to give Members further time to reflect and posequestions.
12. The Committee took note of the comments made.
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