RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG83/4
9 January 2001
(01-0072)
Committee on Regional Trade Agreements Original:  English
FREE TRADE AGREEMENT BETWEEN HUNGARY AND LITHUANIA
Questions and Replies
This document reproduces questions addressed to Hungary and the responses submitted.  The
questions and replies set out below are organized in accordance with document WT/REG83/3.
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I. BACKGROUND INFORMATION ON THE AGREEMENT3. Scope1. With regard to the scope of the Agreement,  the schedule for eliminating the duties on
agricultural products is not clear to us.  We think that it is both important and necessary to
make the schedule clear.  Can the Parties clarify this point as soon as possible?
Concessions of agricultural products are containe d in Protocol 1 as provided for in Article 10
and 11.
2. What percentage of tariff line items (at the eight-digit level) is covered? 
The question is not relevant in the context of Article XXIV review.
3. With respect to coverage of agricultural items, the tables on page 11 of WT/REG83/3
specify that no imports from Hungary into Lithuania will be subject to duty elimination.
Rather, MFN rate will remain for 24.1 per cent of agricultural imports from Hungary (based on
1999 trade), while the balance is subject to preferential rates, not zero duty.  Similarly, no
Lithuanian imports into Hungary will be subject to duty elimination; 17.2 per cent of
agricultural will remain at MFN rates while th e balance is accorded only preferential rates.
Please explain on what basis the use of p referential rates is permitted under the GATT 1994.
We have concluded the Agreement on the basis of Article XXIV of the GATT.  The Parties
are convinced that the provisions of the Agreement are in full conformity with the existing WTO rules
set out in Article XXIV of the GATT 1994.  The issue of "trade coverage" belongs to the so-called
"systemic" issues.  Otherwise there is no provision in Article XXIV, which would exclude the use ofpreferential rates.
4. Trade Data
4. With regard to the trade data, we think that the entire trade coverage of the total trade
percentage of the two counties is not clear.  We therefore request the Parties to provide such
trade data.WT/REG83/4
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All necessary data and statistics are cont ained in the Annex of WT/REG83/3.  The
agricultural import of Hungary from Lithuania was 5.3 per cent of the total import in 1999.
5. It can be noted from WT/REG83/3 that zero  per cent of agricultural trade between the
parties is subject to zero duty.  In the case of Lithuania’s imports from Hungary 75.9 per cent oftrade in agricultural products is at concession  rates.  Of Hungary’s imports from Lithuania,
82.8 per cent of trade in agricultural products is at concession rates.  We would be grateful for
more information on:
(a) How the parties established which agricultural product lines should be excluded
from the agreement;
(b) What percentage of trade between the parties (of both parties) is trade in
agricultural products;
(c) What plans do the parties have to ensu re that a greater proportion of trade in
agriculture will be subject to a duty rate of zero per cent.
(a) The Agreement contains a positive list relation to agricultural products.  The products were
selected on the basis their importance in trade, as well as giving preference to traditional and
potential export products.
(b) All necessary data and statistics are c ontained in the Annex of WT/REG83/3.  The
agricultural import of Hungary from Lithuania was 5.3 per cent to the total import in 1999.
(c) Article 31 o the Agreement (Evolutionary clause) provides for the possibility of further
liberalization.
II. TRADE PROVISIONS
1. Import Restrictions6. It can be noted from WT/REG83/3 that if tariff reductions on an across the board basis
lead to the disappearance of concessions granted by any Party, the concerned Party is to re-establish the margin of preferences proportional ly to those granted by the Agreement at its
commencement.   Please provide further details regarding what plans the Parties have to reduce
the concession rate for trade in agricultural products to zero outside of a WTO round.
Answer to this question could be found in Article 4 of Protocol 1 of the Agreement and also
in Article 31 of the Agreement.  As of now th ere is no plan for the duty free treatment of the
agricultural products.
7. It can be noted that the basic duty to which the successive reductions of customs duties
set out in the Agreement are applied is the MFN rate of duty in force on 1 April 1997 in
Lithuania (WT/REG83/3 records the date as 1 April 1998, however the AgreementWT/REG83/1 notes the date as 1997) and on 29 February 1992 in Hungary.  Thus, we would be
grateful for more information on:
• the MFN rate of duty on 29 February 1992 in Hungary;
• on what basis the parties decided that the MFN rate of duty in force on
29 February 1992 would become the basic duty;
• the MFN rate of duty on 1 April 1997 in Lithuania;WT/REG83/4
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• the MFN rate of duty in force in each country when the agreement was signed in
November 1998.
All free trade agreements concluded by Hungary contain the same tariff phase-out plan;
i.e. all industrial tariffs are to be eliminated by 1 January 2001.  Since in the Interim Agreement
between the EU and Hungary we have used the MFN duties applied on 29 February 1992, as baserates for reduction, the same base rates apple in all other agreements containing phase-out plan.  In
this context we also call the attention to paragraph 2 of Article 4 of the Agreement.  Hungary, in each
and every year, has provided her customs tariff to the GATT and to the WTO.
8. Can the Parties confirm that all tariffs and non-tariff barriers scheduled for elimination
will be eliminated as of 1 January 2001?
Yes.
9. It can be noted from WT/REG83/3 that there do not appear to be provisions regarding
the abolition of quantitative restrictions (QRs) on imports or measures having equivalent effect
on agricultural products.  Thus, we would be grateful for information concerning:
• what QRs on imports, or measures havi ng an equivalent effect, currently exist
on agricultural products;
• when the Parties intend to eliminat e QRs on agricultural products.
The Agreement does not contain provisions regarding the abolition of the QRs concerning
agricultural products because the Parties of the Agreement do not maintain such restrictions.
2. Export Restrictions
10. With respect to QRs, which measures are be ing applied or might be applied in either
Hungary or Lithuania that “are required for the administration of international obligations”
(Article 8; Section II.2.2. of WT/REG83/3).
The measures are applied for arms, drugs, radioactive material and waste, hazardous waste
and products falling under UN embargo.
3. Rules of Origin
11. With respect to rules of or igin, in the interest of brevity, the U.S. would like to
incorporate by reference our comments in the examinations of other agreements with respect to
the Pan-European system of cumulation.  In addition:
(a) Is drawback disallowed for goods origin ating in all non-Parties in the Hungary-
Lithuania Agreement, or for goods originating only in Members that are not
participants in the pan-European  cumulation system of origin?
(b) Can you confirm whether goods originating in certain third countries that are
not Party to the Hungary-Lithuania Agreement (but are participants in the pan-European system of cumulation) will receive preferential treatment under the
rules of origin or no-drawback rule, while goods of WTO Members who are
similarly not parties to the Hungary-Lithuania Agreement (but not participants
in the pan-European system of cumu lation) will not receive preferential
treatment under cumulation?WT/REG83/4
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(a) The drawback is not allowed for goods origin ating only from members not participants in the
Pan-European system of cumulation.
(b) Yes.
4. Standards
12. With respect to standards, do the Partie s participate in any arrangements on the
recognition of conformity assessment procedures, or have plans to do so?  Would such an
arrangement be an amendment or part of this RTA?
Hungary has initialled an Agreement on the recognition of conformity assessment procedures
with the European Union which does not in any way modifies the Free Trade Agreement.
5. Safeguards
13. It is not clear from the document whether the global safeguard measures will be applied
without discrimination to the Parties and to the non-parties. Can the Parties clarify on this?
The Agreement does not effect the rights and obligations of the Parties in relation with
safeguard measures applied vis-à-vis third parties.
14. With respect to safeguards generally: does the agreement provide for the exclusion of
the other Party from global safeguard measures?  Does it require preferential treatment to the
other Party in the application of a global safeguard measure?  If so, please describe how the
preferential treatment operates.  Does the agreement allow preferential treatment to the other
Party in the application of a global safeguard measure?
The Agreement does not effect the rights and obligations of the Parties in relation with
safeguard measures applied vis-à-vis third parties.
15. Article 12 provides for what appears to be a unilateral safeguard mechanism available
for agricultural products, permitting a Party to take whatever “measures it deems necessary”
with respect to agricultural products subject to concessions under the RTA.  Are there any
bilateral legal constraints on the extent of the measures taken under this article?  Are such
measures limited to a snapback provision (i.e. to restore the MFN rate)?  
The Agreement does not contain explicit provision in this respect but only the concession
could be partially or fully withdrawn.
7. State-aid
16. WT/REG83/3 provides that agricultural pr oducts are excluded from the provisions
limiting/regulating State-aid.  In light of this we would be grateful for information regarding an
estimate of the percentage of agricultural trade between the Parties (for each Party) which
would have benefited from State-aid.
The question is not relevant in the context of the review of this FTA.  All support measures
relating to agricultural products are contained in the relevant notifications provided by the parties tothe WTO.
17. Please provide information on the operatio n of the subsidies and State-aid provisions.
Have they been used?WT/REG83/4
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We have never used such provisions.
18. With respect to public procurement, what is the status of current Lithuanian and
Hungarian efforts to open up their procurement processes?  Have the Parties developed any
lists or schedules of types of procurement that will be subject to special contract awardprocedures?
14. There is no such a list.  The issue will be examined by the Joint Committee.
8. Sector-Specific Provisions
19. Does any part of the Agreement require a margin of preference vis-a-vis MFN trade for
agricultural imports?  If so, what is the average or mean margin of preference?  Please provide
more detailed information on the treatment of agricultural products, particularly in terms of
groups of products.
4. Article 10 of the Agreement and Article 4 in Protocol 1 answer the question.  More detailed
information could be obtained about the treatment of agricultural products in Annex A and B ofProtocol 1.
20. With respect to agricultural trade, Article 11 of the Agreement appears to permit each
Party to deviate from the RTA to any extent it  wishes to adopt measures under its respective
agriculture policy.  Does this mean that a Party can unilaterally restore MFN treatment withoutconsequences in the balance of concessions of the agreement?
No.  The said Article contains the expression of "without prejudice to the concession".
IV. OTHER
21. Does either of the Parties employ a consolidated tariff schedule that reflects all the rates
of duty applicable to all the free trade agreements to which they are party?
Hungary provides each and every year her customs tariff to the WTO.
22. Does this Agreement in any way prevent or discourage parties to the Agreement from
making multilateral concessions, including MFN concessions?  Are there any implicit
agreements between the Parties to refrain from making multilateral concessions?
No.
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