WORLD TRADE WT/REG50/1
15January 1998
ORGANIZATION(98-0126)
Original: English Committee onRegional Trade Agreements
THE EUROPEAN COMMUNITIES-HUNGARY EUROPE AGREEMENT,
SERVICES
Joint Communication from theParties
Standard Format forInformation onEconomic Integration Agreements onServices
Inacommunication dated 12December 1997, theEuropean Communities, alsoonbehalf of
Hungary, hastransmitted thefollowing documentation establishing anassociation between theEuropean
Communities andtheirMember States andHungary.
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I. BACKGROUND INFORMATION ONTHE AGREEMENT
1. Membership: Hungary, theEuropean Communities andtheirMember States
Dateofsignature: 16December 1991
Entry intoforce: 1February 1994
2. General Description oftheStructure oftheAgreement
The“Europe Agreement ”between Hungary andtheEuropean Communities andtheirMember
States isawide-ranging economic integration agreement thatestablishes anAssociation between the
twoParties. Thestated aims oftheAgreement arebothpolitical andeconomic, andinclude the
development ofclosepolitical relations andtheexpansion oftradebetween theParties. TheAgreement
isdesigned asastepping-stone toHungary ’smembership oftheCommunity, andprovides aframework
forthenecessary integration.
TheAgreement isbased upon clearundertakings onliberalisation oftrade andeconomic co-
operation. Inturn, these undertakings arereinforced bypolitical dialogue between thetwoParties at
alllevels, including ministerial andparliamentary dialogue. AnAssociation Council, meeting at
ministerial levelatleastonceayear, ischarged withoverseeing theimplementation oftheAgreement.
Below theleveloftheCouncil, anAssociation Committee anditssub-committees arecharged with
theresponsibility ofassisting theAssociation Council intheperformance ofitsduties. Thetechnical
aspects oftheimplementation oftheAgreement arediscussed andagreed upon bytheinstitutions of
theAgreement. Theentire process isreinforced byprovisions foreconomic co-operation onallmajor
issues ofmutual interest.
TheAgreement isapreferential agreement structured around amaximum tenyeartransitional
period, divided, inprinciple, intotwostages offiveyears. Bytheendofthetenyearperiod, afree
tradeareaforgoods together withaliberalised regime fortheestablishment ofcompanies andnationals
between thetwoParties willhavebeenestablished. Thesupply ofservices willhavebeenprogressively
liberalised during thatperiod.WT/REG50/1
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3. Planandschedule:
Article 1 Aims
TitleI Articles 2-5 Political Dialogue
TitleII Article 6 General Principles
TitleIII Articles 7-36 FreeMovement ofGoods
TitleIV Articles 37-58 Movement ofWorkers, Establishment, Supply of
Services
TitleV Articles 59-69 Payments, Capital, Competition andOther Economic
Provisions, Approximation ofLaws
TitleVI Articles 70-96 Economic Cooperation
TitleVII Article 97 Cultural Cooperation
TitleVIII Articles 98-103 Financial Cooperation
TitleIX Articles 104-124 Institutional, General andFinal Provisions
4. Relationship oftheAgreement toawider process ofeconomic integration
Hungary applied tojointheEuropean Union on31March 1994. TheEurope Agreement
provides aframework forthenecessary preparations formembership, including theremoval oftrade
barriers, theharmonisation oflegislation andliberalisation inthefieldofservices. Membership of
theEuropean Union implies fullparticipation intheEuropean Single Market.
5. Economic andTrade Data
Trade dataattached.
II. PROVISIONS AFFECTING TRADE INSERVICES
1. Sectors orsub-sectors andmodes ofdelivery
TheAgreement provides fornational treatment intheareaofestablishment andtheliberalisation
oftrade inservices between theParties inallservices sectors except those services mentioned under
Article 51.Inprinciple, nosector isexcluded fromthescope oftheAgreement. Interms oftimetable,
forestablishment, most services aretobecovered bytheendofthefirststage, i.e.afterfiveyears
(Article 44).Having regard totheprovisions ofArticle 6establishing amaximum tenyeartransitional
period, theliberalisation ofthesupply ofservices willtakeplace progressively andtheAssociation
Council ischarged withtaking thenecessary measures.
Interms ofmodes ofsupply, theliberalisation oftrade inservices doesnotexclude anyof
themodes ofsupply .Itshould benoted thattheAgreement distinguishes between themovement of
workers, establishment andthesupply ofservices inlinewiththeprinciples oftheEuropean Community
single market assetoutintheTreaty ofRome, rather thaninterms oftheclassification ofmodes of
delivery asusedintheGATS. Articles 55to58provide forcross-border supply andconsumption
abroad, Articles 44to51provide forestablishment/commercial presence andArticles 37,41,42and52,
provide forthepresence ofnatural persons.
2. Elimination ofDiscriminatory Measures
TheaimoftheAgreement isliberalisation between theParties and,assuch, itprovides for
theabsenceoreliminationofsubstantiallyalldiscriminationthrougheliminationofexistingdiscriminatory
measures andprohibition ofnewormore discriminatory measures. While thetimetable establishedWT/REG50/1
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forthecomplete elimination ofexisting discriminatory measures isinlinewiththeoverall transitional
period onwhich theAgreement isbased -i.e.within 10years -many discriminatory measures are
prohibited from thedateofentry-into-force. Theprinciple articles concerned withtheprohibition
ofdiscrimination areasfollows:
Article37oftheAgreementprohibitsdiscriminationonthebasisofnationalityagainstHungarian
workers oncetheyareemployed ontheterritory ofanECMember State andECworkers oncethey
areemployed inHungary withregard toworking conditions, remuneration orredundancy.
Article 44oftheAgreement requires Hungary togrant national treatment fortheestablishment
andoperation ofECcompanies andnationals (with some phasing-in ofsectors) andrequires theEC
Member States togrant national treatment fortheestablishment andoperation ofHungarian companies
andnationals.
Article 55oftheAgreement provides fortheliberalisation ofthesupply ofservices between
theParties andthetemporary movement ofservice suppliers.
Article 56oftheAgreement deals withthesupply oftransport services inbetween Hungary
andtheEC.Formaritime transport, theParties undertake toapply theprinciple ofunrestricted access
tothemarket andtraffic. Forairandinland transport, thereisastandstill provision andacommitment
byHungary tobring itslegislation intolinewithCommunity legislation. Thisarticle alsocommits
theAssociation Council toexamining ways ofcreating thenecessary conditions fortheimprovement
oftheprovision ofairandlandtransport services.
Article 113oftheAgreement provides fornon-discriminatory access foranatural orlegal
person ofoneParty tothejudicial system intheother Party inorder todefend theirindividual and
property rights, including intellectual, industrial andcommercial property.
Article 115oftheAgreement isageneral non-discrimination clause covering thetreatment
ofnationals andcompanies from bothParties.
3. Restrictions Remaining inForce
Establishment andOperation
Asstated above, theAgreement provides fornational treatment fortheestablishment and
operationofcompaniesandnationalsofthePartiesinallservicessectors.Fromentry-into-force,national
treatment isgranted across allsectors bytheCommunity toHungarian companies andnationals for
bothestablishment andoperation. National treatment isalsogranted foroperation fromentry-into-force
byHungary toCommunity companies andnationals established inHungary. National treatment by
Hungary fortheestablishment ofECcompanies andnationals, isgranted attheendofthefirststage
ofthetransitional period (5years) forallsectors, except forfinancial services, agency activities for
realestate andnatural resources. Those lattersectors willallbeliberalised bytheendofthetransitional
period (10years).
Attheendofthetransitional period, theonlyremaining restrictions ontheestablishment of
companies andnationals intheservices sector willbeonthetransport sector (airtransport, transport
byinland waterway andmaritime cabotage services), legalservices (with theexception ofadvice on
commercial affairs) andservices related togaming. There willalsoremain limits onthesale,purchase
andlongtermrental ofrealestate andnatural resources. TheAssociation Council ischarged, however,
withmakingrecommendationsfortheimprovementofestablishmentandoperationsintheabovetransport
sectors andwithconsidering theinclusion oftheother excluded sectors.WT/REG50/1
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Supply ofServices between theCommunity andHungary
Forthesupply ofservices between Hungary andtheEC,allservices sectors aretobe
progressively liberalised bytheendoftheten-year transitional period. Transport services aretreated
differently fromother services sectors inthisarea. Forinternational maritime transport, bothParties
make acommitment toapply theprinciple ofunrestricted access tothemarket atentry-into-force, while
forairandinland transport, theParties commit themselves toconcluding separate agreements toco-
ordinate development andprogressively liberalise thesectors. Inaddition, forthesesectors, theParties
undertake toobserve astandstill andHungary commits itself toadapting itslegislation tothatofthe
ECinsofarasitpromotes liberalisation purposes.
4. Treatment ofServices andService Providers from Third Countries
There arenoprovisions which affect thetreatment ofservices andservice providers fromthird
countries andnomodifications totheschedules ofspecific commitments areproposed. Noprovisions
intheAgreement raisethelevelofrestrictions ontrade inservices foranyother WTO Member.
5. Rules ofOrigin forCommunity/Hungarian Companies
Article 48oftheAgreement setsoutthedefinition of“Community company ”and“Hungarian
company”.A“Communitycompany”anda“Hungariancompany”respectivelyshallmean“acompany
orafirmsetupinaccordance withthelawsofaMember StateorofHungary andhaving itsregistered
office, central administration, orprinciple place ofbusiness intheterritory oftheCommunity or
Hungary. However, should thecompany orfirm, setupinaccordance withthelawsofaMember
State orHungary, haveonlyitsregistered office intheterritory oftheCommunity orHungary, its
operations mustpossess arealandcontinuous linkwiththeeconomy ofoneoftheMember States or
Hungary respectively. ”Under Article 54,theprovisions oftheAgreement onestablishment andservices
arealsoextended tocompanies jointly owned byHungarian andCommunity companies andnationals.
Article 48alsodefines whatismeant byCommunity national andHungarian national -“anatural
person whoisanational ofoneoftheMember States orofHungary respectively ”.
Finally, withregard tointernational maritime transport, Article 48alsoextends coverage of
theEstablishment andSupply ofServices Chapters tonationals orshipping companies oftheparties
established outside theParties iftheirvessels areregistered intheMember States orinHungary.
Nochanges havebeenintroduced tothecriteria fordetermining theorigin ofservice suppliers
asaresult oftheAgreement.
6. Standards/Recognition
Article 46oftheAgreement commits theAssociation Council toexamining what steps are
necessary forthemutual recognition ofqualifications. Articles 67and68commit Hungary toensuring
thatitslegislation willbegradually made compatible withthatoftheCommunity.
7. Safeguards
Theprovisions intheAgreement concerning theapplication ofsafeguard mechanisms donot
provide fortheexclusion ofoneorother Party fromsafeguard measures applied tothirdparties. Under
specified andrestricted circumstances, theimplementation oftheprovisions onestablishment incertain
sectors maybedelayed asprovided forinArticle 50.Thissafeguard clause hasnoeffect onservice
suppliers from thirdcountries.WT/REG50/1
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8. Subsidies andState-aid
Chapter IIofTitleVoftheAgreement setsoutrulesonsubsidies, stateaidandcompetition.
Parties maytakeappropriate measures ifaparticular practice isincompatible withthefunctioning of
theAgreement asdefined inArticle 62,ifthepractice causes serious prejudice totheinterest ofthe
other Party, oritsdomestic industry. AsbothParties areWTO Members, anymeasures taken must
becompatible withWTO rules; thisisstated intheAgreement.
9. Government Procurement
Under theterms ofArticle 66,fromentry-into-force oftheAgreement, Hungarian companies
aregranted access tocontract award procedures intheCommunity pursuant toCommunity procurement
rulesunder atreatment nolessfavourable thanthataccorded toCommunity companies. Community
companies established inHungary enjoy theequivalent right, while allCommunity companies will
begranted thatrightatthelatest bytheendofthetransitional period.
III. GENERAL PROVISIONS OFTHE AGREEMENT
1. Exceptions andreservations
Liberalisation ofestablishment andthesupply ofservices issubject tolimitations justified on
grounds ofpublic policy, public security orpublic health. Activities connected, evenoccasionally,
withtheexercise ofofficial authority arealsoexcluded.
2. Accession
TheAgreementwasconcludedspecificallybetweentheEuropeanCommunityandtheirMember
States andHungary withaviewtothatcountry ’seventual accession intotheEC.Similar Agreements
havebeenconcluded between theECandnineother countries inCentral andEastern Europe, allof
which haveapplied tojointheEuropean Union.
3. Dispute settlement procedures
Following Article 107oftheAgreement, theAssociation Council maysettle adispute relating
totheapplication ofinterpretation oftheAgreement bymeans ofadecision. Intheevent ofthisnot
being possible, arbitrators maybeappointed, onebyeachParty andonebytheAssociation Council.
TheParties arebound bydecisions taken either bytheAssociation Council orbythearbitrators. The
dispute settlement procedures relate solely totheAgreement andhavenoimpact onother dispute
settlement procedures towhich theParties might besubject asaresult ofotherinternational obligations.
4. Institutional framework
Asdescribed above, theAgreement isadministered through theAssociation Council, the
Association Committee anditssub-committees.WT/REG50/1
Page6Geographical Breakdown oftheCurrent Account 1992-1995 (Source: Eurostat)
Reporter: EUR15
Partner: Hungary
1992 1993 1994 1995
Credit Debit Net Credit Debit Net Credit Debit Net Credit Debit Net
GOODS 5,659 5,503 155 6,787 5,186 1,600 8,240 6,361 1,878 8,835 7,694 1,140
SERVICES 1,526 1,457 69 1,636 1,445 191 1,979 1,644 335 1,563 1,765 -201
Transportation 308 264 44 298 365 33 297 345 -48 277 414 -138
SeaTransport 37 35 2 35 46 -10 34 57 -23 34 52 -19
AirTransport 114 121 -7 124 142 -18 119 200 -82 139 281 -142
Other Transportation 157 108 49 139 78 61 144 87 57 104 81 23
Travel 154 629 -475 165 603 -438 182 624 -442 178 574 -396
Other Services 1,054 556 498 1,161 570 590 1,483 664 819 1,101 772 329
Communication Services 31 14 16 12 7 5 17 7 10 39 32 8
Construction Services 50 138 -88 83 115 -32 236 194 42 142 197 -54
Insurance Services 24 11 13 31 8 23 36 11 26 40 15 24
Financial Services 28 8 20 68 17 51 46 9 37 29 11 18
Computer/info. Services 23 18 5 29 23 7 62 25 36 48 24 25
Royalties andLicence Fees 17 8 9 23 11 13 37 10 27 49 9 40
Other Business Services 852 254 598 890 299 591 990 313 677 698 283 415
Personal, Cultural andRecreational 10 23 -12 10 27 -17 14 29 -15 22 114 -92
Government Services 20 82 -62 14 63 -50 44 67 -22 33 88 -55
Services NotAllocated 11 8 2 12 6 6 17 11 6 8 5 3
INCOME 892 310 582 779 396 384 855 252 603 929 258 671
Compensation ofEmployees 8 37 -29 10 87 -78 10 36 -26 9 41 -32
Investment Income 884 274 610 770 308 462 845 216 629 919 217 702WT/REG50/1
Page71992 1993 1994 1995
Credit Debit Net Credit Debit Net Credit Debit Net Credit Debit Net
CURRENT TRANSFERS 28 280 -252 45 319 -274 40 342 -303 28 252 -224
CURRENT ACCOUNT 8,105 7,551 554 9,247 7,345 1,902 11,113 8,601 2,513 11,354 9969 1385
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