RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG72/M/1
20 April 2000
(00-1627)
Committee on Regional Trade Agreements
Twenty-Fifth Session
EXAMINATION OF THE FREE TRADE AGREEMENT BETWEEN
TURKEY AND BULGARIA
Note of the Meeting of 30 March 2000
Chairman:   Mr Jae Gil LEE
1. The meeting was convened in document WTO/AIR/1268 and Corr.1.
2. Under Agenda Items F.IV of its Twenty-Fifth Session, the Committee on Regional Trade
Agreements (hereinafter CRTA or the Committee) took up the examination of the Free Trade
Agreements (FTAs) between the Turkey and Bulgaria.
3. The Chairman said that he was looking forward to working with the Committee and hoped
that it would make significant progress regarding both the examination of agreements and the
systemic discussion.  The notification of this Agreement could be found in documentWT/REG72/N/1, with the text of  the Agreement appearing in document WT/REG72/1.  He proposed
to use the Standard Format, document WT/REG72/3, to guide the debate and drew the Committee's
attention to a new set of statistics submitted by Turkey, which had been distributed in document
WT/REG72/4/Corr.1.  Before giving the floor to the Parties for general statements, he recalled that
the terms of reference for the examinatio n were contained in document WT/REG72/2.
General Statements
4. The representative of Turkey welcomed the opportunity to present the FTA between Turkey
and Bulgaria.  Turkey had committed itself to the creation of an open and liberal trading system.  One
of its policy objectives was to facilitate economic development, particularly in the countries of the
region, through increased trade.  Accordingly, Turkey's regional preferential trading arrangements had
to be evaluated in the context of active policies promoting regional cooperation schemes in adjacent
regions.  Turkey was satisfied that its preferential schemes had stimulated trade.  Furthermore, asMembers might recall, within the framework of the customs union signed between Turkey and
European Communities, Turkey had undertaken to conclude agreements with the central and eastern
European countries and the Baltic States.  It was in this context that Turkey had concluded an FTA
with Bulgaria.  The Agreement had entered into force on 1 January 1999 and had been notified to the
WTO on 6 April 1999, after completion of the internal approval procedures of the Parties.  The Partieswere of the view that the Agreement fulfilled the requirements of Article XXIV.  First of all, the
Agreement was in compliance with Article XXIV:5, since duties and other regulations of commerce
applicable at the formation of the free-trade area to the trade of parties not included in the area were
not higher or more restrictive than the corresponding duties and other regulations of commerce prior
to the formation of the free-trade area.  The Agreement did not introduce any barriers for thirdcountries.  In addition, the Agreement was in compliance with Article XXIV:8(b), since the Parties
had eliminated duties and other restrictive regulations of commerce on substantially all the trade
between them.  The Agreement covered all trade in industrial products, as well as a number ofWT/REG72/M/1
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agricultural products.  He stressed that since industrial products, which constituted a significant share
of total trade between the Parties, were completely  covered by the Agreement, the trade between the
constituent territories was facilitated to a great extent.  Given the comprehensiveness of the
information provided in the Standard Format, he intended to confine his comments to a general
overview of the Agreement.  The exploratory talks on the completion of the FTA between Turkey andBulgaria had been initiated in September 1997; after two rounds of official negotiations, held in May
and June 1998, the Agreement had been signed on 1 July 1998.  Turkish import figures from Bulgaria
for the past three years indicated that the Agreement covered almost all trade between the Parties:
98 per cent in 1996, 99 per cent in 1997 and 93 per cent in 1998.  The Agreement provided for a
transitional period of three years for the so-called sensitive products; 2002 would complete the
process of establishing a free-trade area, after the full elimination of remaining tariffs on sensitive
industrial products.  Moreover, the Parties had granted each other concessions on a number ofagricultural and processed agricultural products under positive lists.  The open-ended liberalisation of
trade in agricultural products was an important co mponent of the Agreement, since the Parties were
committed to granting further concessions on these products within Joint Committee meetings.  The
FTA between Turkey and Bulgaria was parallel to the implementation of Turkey's far-reaching
Uruguay Round market access commitments and to the further liberalisation of its trade regimethrough the implementation of the customs union with the European Communities; both of these had
positively helped to narrow preferential margins and had offered increased trading opportunities to
third countries.  It was the Parties' view that the Agreement fully complied with the principles of the
multilateral trading system since it facilitated trade between the Parties and did not raise barriers to
trade with third parties.
5. The representative of the European Communities fully subscribed with the general thrust of
the Parties' introduction and agreed that this Agreement was beneficial not only for the Parties, but for
the wider circle of interested Members, which included his delegation.
Section I – Background Information on the Agreement
6. The representative of the United States noted that the Parties had indicated that the
Agreement covered HS Chapters 25-97, as well as a number of agricultural products, with full
implementation to be completed 2002; they also had stated that there were positive lists for a number
of processed agricultural and fisheries products which received preferential treatment.  He asked
which products had been included in those lists and about the extent of preferential treatment granted.
Were any products subject to zero duties, or did merely preferential non-zero rates apply?  With
respect to the statistics given in document WT/REG72/4, noting that they referred to imports into
Turkey, he wondered if Bulgaria could submit comparable information for the same periods.Regarding the schedule of implementation, he understood that the 2002 date applied to products listed
in HS Chapters 25-97.  Was the schedule for the positive list of agricultural products the same?
Lastly, he asked whether or not the Agreement covered trade in services.  The representative of
Australia supported the request for information on the number of lines covered for agricultural
products.
7. The representative of Canada said there were some gaps in the information provided, as noted
by previous speakers.  She had two additional questions.  First, if the Parties were not able to provide
information on a tariff line basis, could they indicate what products were covered?  Second, Article 2
of the Agreement stated that industrial products meant those falling within  HS Chapters 25-97, with
the exception of the products listed in Annex I.  Could the Parties elaborate on what Annex Icontained?
8. The representative of the United States remarked that questions often arose with respect to the
annexes and protocols of various agreements, particularly in the area of the coverage of agricultural
products.  Given that this information had already been submitted to the Secretariat, he wondered ifWT/REG72/M/1
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the annexes containing the positive lists could be distributed with the Standard Format in order to
facilitate the discussion.  The representative of the Secretariat clarified that the annexes and protocols
were often voluminous and reproduction of them would increase the amount of paper to be processedand consulted, which could be counter-productive.  She added that WT/REG72/1 contained the usual
footnote stating that the annexes and protocols could be consulted in the Secretariat and that interestedMembers could always get a copy.  This seemed a more economical means of distributing the
information.  The representative of Hungary agreed that the annexes and protocols should not be
reproduced for all Members, as interested delegations could access them in the Secretariat.  Therepresentative of Australia agreed that while the reproduction of some documents could be quite
burdensome on the Secretariat, it would be useful to  have a summary or overview of what the annexes
contained, rather than a detailed line-by-line description.  The representative of Canada said that the
issue here was transparency.  She was not looking for a complete reproduction of documents already
in the Secretariat. Rather, she wanted an outline or summary of the contents of Annex I in order to see
which products were excluded.  The representative of Slovenia urged delegations to consult the
annexes and protocols themselves, in order to avoid Members citing detailed lists of their contents.She added that the protocol on rules of origin was the most voluminous in the European agreements
and this was not relevant to coverage.
9. The representative of Turkey assured Members that they would have the Parties' full
cooperation to facilitate the examination of the Agreement and agreed to distribute the list of the
18 products.  He said that these products had been excluded, as they were not considered industrial
products for the purpose of the Agreement.  He repeated that some industrial products were subject to
a gradual phasing out of duties, with the complete elimination to be completed by 1 January 2002.Annex III listed the sensitive products as far as Turkey was concerned.  It was composed of
326 eight-digit lines, consisting of:  fertilizers, various cases, boxes and bags, paper, certain footwear
and partial footwear, tableware, kitchenware, othe r household articles, toilet articles, porcelain and
china, articles of sand, jars, bottles, semi-finished products of iron and non-alloyed steel, flat-rolled
products of iron and steel, bars and rolls and angles , shapes and sections of iron or non-alloyed steel,
tubes, pipes and hollow profiles of iron or st eel, sanded wire, ropes, cables, and so on.
10. The representative of Canada asked whether the 326 tariff lines of sensitive products were
those on which duties were being eliminated over  a longer period.  She understood that 18 products
from HS Chapters 25-97 were not covered by the Agreement.  These products were listed in Annex I
as stated in Article 2 of the Agreement.  She wondered if Turkey could provide a list of the products
contained in Annex I, together with an explanation of why they had been excluded.  Perhaps this
would be evident once delegations had seen the list.  The representative of the United States
welcomed the information provided by the representa tive of Turkey with respect to the description of
sensitive products.  Contrary to the views of other delegations, he had found the list rather interesting,
particularly the reference to steel products.  He wondered if the products listed by the representative
of Turkey were the so-called sensitive products on which duties were to be eliminated by 2002, or
whether they were the 18 products which were not covered at all.
11. The representative of Turkey clarified that the products he had listed were those subject to
gradual elimination of duties by the end of 2001.  Thus far, 60 per cent of duties had been eliminated
on the 326 sensitive products.  By the beginning of 2001, 75 per cent of the duties would be
eliminated.  And, by 1 January 2002, duties would be completely eliminated on all industrial products,
except the 18 products not subject to elimination of duties as they were not considered industrialproducts under the Agreement.  The representative of Australia wondered if the 18 products not
subject to the elimination of duties were fish and fish products.  If not, what were they?  Therepresentative of Turkey replied that they were not fish or fish products.  He did not want to go over
the list, but said that it would be circulated to delegations.WT/REG72/M/1
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12. The Chairman reminded the Committee that interested Members could access the annexes
and protocols in the Secretariat.  The representative of the European Communities suggested that
perhaps the easiest way forward would be to list the headings of the annexes for easier reference.
Section II – Trade Provisions
13. With respect to sector-specific provisions relating to agriculture, the representative of
Australia asked the Parties if the response given during the examination of the previously considered
three Agreements (FTAs between Turkey and the Czech Republic; Turkey and the Slovak Republic;and Turkey and Estonia) also applied to this Agreement.
1  He had noted that no timetable had been
specified and that the Joint Committee had not met with respect to the previous three Agreements, but
he wondered if the Joint Committee intended to meet in the foreseeable future.  Secondly, in relation
to state monopolies he requested a progress report on the progressive adjustments to any state
monopoly of a commercial character that had been made by the end of the year following the entryinto force of the Agreement, as envisaged in Article 23 of the Agreement.
14. The representative of the United States had a question with respect to import restrictions,
which followed on from the earlier discussion on coverage.  With respect to the excluded products,
did the Parties apply anything other than MFN duties to those products, and if so, which duties?  Also,
did the Parties maintain any quantitative restrictions, and if so, what were they?  In particular, he wasinterested in any quantitative restrictions maintained in the area of textiles and apparel.  On rules of
origin, he sought confirmation that the pan-European system of cumulation of origin applied to this
Agreement and asked whether Bulgaria had implemented the pan-European system.  On safeguards,
he asked if the Agreement provided for the exclusion of the other Party from a global safeguard
measure and if not, why not?  Lastly, he requested additional information on the operation of theprovisions relating to subsidies and state aid and whether they had been used.
15. In relation to safeguards, the representative of Canada had noted that Article 19, dealing with
structural adjustment, allowed duties to be imposed in respect of problems faced by infant industries
and sectors undergoing restructuring.  She wondered if the Parties had a definition of "infant
industries" and of "sectors undergoing restructuring", or if when an industry sought redress under thisprovision did they have to make a case that fitted within the parameters of Article 19?
16. With regard to import restrictions, the representative of Japan asked whether any new
restrictions would be raised against third parties.  He also requested information on the pan-European
system of cumulation of origin.  With regard to safeguards, he asked whether they would be applied
without discrimination to Parties and non-parties.
17. With respect to agriculture, the representative of Turkey said that the scope of agricultural
trade liberalisation was not as wide as the liberalisation of industrial goods.  The Parties had
nevertheless declared their intention to further liberalise trade in agriculture and to discuss this issue
periodically within the Joint Committee, as defined in Article 12 of the Agreement.  Furthermore,
Article 12.3 stated that the Parties would examine the possibility of granting each other further
concessions.  Although the Agreement had a provision for the expansion of trade in agricultural
products, no timetable had been specified.  Agricultural products accounted for six per cent ofTurkey's total imports from Bulgaria in 1996, four per cent in 1997 and 14 per cent in 1998.
Agriculture did thus not constitute a large percentage of total imports.
18. In response to the question on import restrictions, the representative of Turkey confirmed that
no new restrictions would be applied against third countries.  As far as safeguards were concerned,
Article 19 dealt with structural adjustment, Artic le 20 with dumping, Article 21 with emergency
                                                     
1 See document WT/REG68-69-70/M/2, paragraph 19, in this respect.WT/REG72/M/1
Page 5
action, Article 22 with re-export and serious shortage, and Article 24 with safeguard procedures.  The
Parties were permitted to take appropriate measures in full conformity with their obligations arising
from WTO rules.  Measures would be enforced under the rule of non-discrimination between Parties
and non-parties.  Of the safeguard measures set out in the Agreement, only the measures applying to
infant industries and sectors undergoing restructuring or facing serious difficulties could justify amargin of preference for the Parties.  This measure was limited in duration and would be phased out
by 1 January 2002.  With respect to the 18 excluded products, MFN rates of duty were applied to
these products, but they might be subject to liberalisation over time.
19. The representative of Turkey continued, saying that his country had only one state monopoly,
which operated in accordance with WTO rules in a non-discriminatory manner concerning
commercial decisions, without creating any disadvantages against non-parties to the Agreement.  The
monopoly was still in existence, but programmes were under study in the Turkish Parliament tochange the nature of its operation.  As to the definition of infant industries, given that this was
subjective and had been the subject of controversy over the years, he was not in a position to provide
a definition.
20. The representative of Australia asked in which sector the one state monopoly operated.  The
representative of Turkey replied that it was in alcohol and alcoholic beverages.
21. The representative of the United States appreciated the attempt made by the representative of
Turkey to respond to a long list of technical questions.  With regard to his question on quantitative
restrictions, the Parties had provided a response relevant to the treatment of third parties, but he was
interested in whether other restrictive regulations of commerce had been eliminated between the
Parties, as required by Article XXIV:8.  In particular, he wondered whether any quantitativerestrictions remained in the area of textiles and apparel between the Parties.  With respect to the
pan-European system of cumulation of origin, he had asked if the Parties could confirm that the
system was being applied under this Agreement and if Bulgaria had implemented it.  Finally, he had
noted that global safeguards would be applied on a non-discriminatory basis and he asked why the
Parties would allow a global safeguard action to be applied among themselves and how this fittedwithin the context of Article XXIV:8.  While he recognized that this was a systemic issue which had
been raised in other contexts, he asked if the Parties could elaborate on it.  He added that he was not
expressing concern, but merely sought confirmation that global safeguards could be applied between
the Parties and what the rationale for this was.
22. The representative of Canada took the point made by the Parties that they were unable to
provide a definition of infant industries.  She assumed that if an industry wanted to make a case for
structural adjustment and for the application of duties , there was no predefined list of infant industries.
She wondered if the same held true for the sectors undergoing restructuring referred to in Article 19.2:
could any sector put forward a request for structural adjustment and have it considered, or was there a
predefined list of such sectors?
23. In response to the question on safeguards, the representative of Turkey confirmed that the
Parties were entitled to apply safeguards against each other in a global safeguard action.  This was a
controversial topic which had been debated within the context of systemic issues.  As regards
quantitative restrictions, he replied that none were in place between the Parties, including in the textile
and apparel sectors.  As far as the rules of origin were concerned, he conceded that it was a technical
subject which he did not want to explore too deeply.  The pan-European cumulation system had been
notified to the WTO in August 1998 and discussions on this issue had been published in documentWT/REG/GEN/1.  Members interested in technical details could refer to this document.  The
representative of Bulgaria confirmed that Bulgaria was a party to the pan-European system of
cumulation of origin.WT/REG72/M/1
Page 6
24. In response to the question on structural adjustment, the representative of Turkey said that
economic texts defined infant industries as newly established industries.  Well-established companies
were not considered as infant industries.  However, he could not give a definition of infant industries
as this had been the subject of long discussions and controversy in many circles.
Section III – General Provisions of the Agreement
25. The representative of the United States asked the Parties to clarify the first sentence of
Section III, paragraph 5 of the Standard Format as he was unsure what it meant.  Secondly, he
requested confirmation that there was nothing in the Agreement that in any way prevented or
discouraged the Parties from making multilateral concessions, including MFN tariff reductions.  The
representative of Turkey replied that any trade concessions provided within the framework of the
WTO would replace the duties referred to in the Agreement.  In the event that multilateralnegotiations required the Parties to reduce their basic duties after the entry into force of the FTA, theduties in the Agreement would be replaced by the outcome of the multilateral negotiations.
Accordingly, there were no provisions in the Agreement preventing the Parties from making
concessions within the framework of the WTO.  The representative of the United States said that the
ambiguity arose as he was unsure what was meant by "basic duties", as mentioned in Article 3 of the
Agreement.  A clarification of this term woul d help him understand the sentence in Section III,
paragraph 5 of the Standard Format.  The representative of Turkey replied that "basic duties" were
those which applied to WTO Members and therefore were those which would be subject to reductionin the case of multilateral negotiations.
26. As there were no further questions, the Chairman said that the Committee had completed the
first round of examination of the FTA between Turkey and Bulgaria, but some outstanding questions
remained to which the Parties would provide answ ers.  He invited delegations with additional
questions to submit them to the Secretariat by 20 April to enable the Parties to provide replies by the
end of May.
27. The representative of Turkey asked whether any oral questions remained unanswered.  If no
additional questions were submitted, could his delegation assume that Members were satisfied with
the answers?
28. The representative of Hungary said it was his impression that Members were satisfied with
the answers provided.  The only issue was whether there would be further questions within the
deadline specified.  If there were no further questions, then the factual part of the examination should
be considered complete.
29. The representative of the United States said that while the Parties had done a commendable
job in responding to the oral questions posed, some questions were such that oral responses had not
been possible.  For example, the Parties had said that import data for Bulgaria would be provided
later.  With respect to the proposal made by the representative of Hungary, he said that unlike the case
of the three Agreements examined earlier in the day, his capital had not yet had an opportunity to
review the oral replies given for this Agreement and to develop any follow-up questions.  Therefore,
he did not want to limit the possibility of having a further round of examination, as it was possible
that his delegation would have some follow-up questions which could be usefully raised orally in a
further meeting.  The representative of Australia supported the previous speaker.  His delegation
would reflect on the responses provided and might then ask for further clarification.
30. The representative of Bulgaria asked the delegations of Australia and United States if they
could submit any further questions by 20 April, so that the examination could be expedited and
hopefully joined with that of the FTAs between Turkey and the Czech Republic; Turkey and the
Slovak Republic; and Turkey and Estonia.  As the Chairman had said, the structure of the AgreementWT/REG72/M/1
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was similar.  Many of the questions posed, and the answers given, for that set of Agreements also
applied, mutatis mutandis , to this Agreement.
31. The Chairman asked Members to submit outstanding questions by 20 April to which the
Parties would reply by the end of May.  While some delegations had proposed that the examination of
this Agreement should be integrated with the previously considered three Agreements, others
considered this premature.  He proposed to consult with Members to see if another meeting was
necessary, after the receipt of the questions and replies.
32. The Committee took note of the comments made.
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