WORLD TRADE WT/BOP/N/18
27March 1997
ORGANIZATION(97-1291)
Original: English Committee onBalance-of-Payments Restrictions
NOTIFICATION UNDER PARAGRAPH 9OFTHE UNDERSTANDING
ONTHE BALANCE-OF-PAYMENTS PROVISIONS OFTHE
GENERAL AGREEMENT ONTARIFFS AND TRADE 1994
Thefollowing communication, dated 20March 1997, hasbeenreceived fromthePermanent
Mission oftheRepublic ofBulgaria.
____________________
TheGovernment oftheRepublic ofBulgaria hereby notifies, onthebasis ofParagraph 9of
theUnderstanding ontheBalance-of-Payments Provisions ofGATT 1994, theexisting restrictions
maintained onimports forBOPpurposes aswellasdetails forthelegalbasis oftheirapplication.
I. Legal basis oftheimport restriction
Pursuant toRegulation oftheCouncil ofMinisters No.118of30May1996(published inState
Gazette No.48of1996) theGovernment oftheRepublic ofBulgaria hasintroduced atemporary
surcharge onimports intotheRepublic ofBulgaria, witheffect from4June1996inorder toforestall
animminent threat ofaserious decline initsbalance-of-payments position.
IntheviewoftheRepublic ofBulgaria, thesoinstituted import surcharge isconsistent with
therelevant provisions ofGATT 1994.
II. Coverage oftheimport surcharge
Asurcharge of5percentislevied onimports, calculated onthebasis ofthecustoms value
oftheimported goods. Thesurcharge applies toallgoods imported withtheexception ofsome essential
products (Annex I).
III. Treatment ofimports from different sources
Themeasure isprice-based, uniform andapplied inanon-discriminatory manner toimported
goods irrespective oftheirorigin. Itcovers imports fromallcountries, aswellasfreetradeagreement
partners (EU, EFTA States, theCzech Republic, theSlovak Republic, Slovenia).
IV. Envisaged timetable forphasing-out ofthesurcharge
Theintention oftheGovernment oftheRepublic ofBulgaria istopursue reform programme
through economic measures which expand, rather thancontract international trade. Inthisrespect,
thesurcharge willbeprogressively reduced andeliminated according tothefollowing schedule:WT/BOP/N/18
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- reduction tofourpercentage points by1July1997
- reduction totwopercentage points by1July1998
- reduction toonepercentage point by1July1999
- elimination by1July2000.
DependingonthestrengthofBulgaria'sexternalposition,theGovernmentwillstrivetoaccelerate
thephasing outofthesurcharge.
V. Reasons fortheadoption ofarestrictive measure
Marked progress instabilization wasachieved in1995: inflation fellsharply, economic growth
increased,andthebalanceofpaymentsstrengthened.However,thesestabilizationgainswereshort-lived
because ofdeeply entrenched problems inthefinancial sector. Since thelatter halfof1995adepletion
oftheforeign exchange reserves, arenewed pressure ontheexchange rateandrealinterest rateswere
observed.
Significant changes inthemacroeconomic environment, including aweakening ofeconomic
growth andrevenues, higher thanexpected inflation andnominal interest rates, amuch sharper than
expected depreciation oftheBulgarian lev,widespread withdrawal ofdeposits (particularly offoreign
exchange) fromthebanking sector andlossofgreater partofthecountry 'sforeign exchange reserves
followed in1996.
Thereisuncertaintyaboutbalance-of-paymentsprospectsfor1997.Althoughtheoverallbalance
ofpayments fortheyear1995 waspositive, thenegative trend became obvious inthelastquarter of
1995. Thedeficit forthefirstquarter of1996oftheoverall balance ofpayments wasUS$583.5 million.
Though arealdepreciation ofacurrency isexpected ingeneral toimprove theexternal
competitiveness, bothexternal andinternal factors reduced Bulgarian export volume in1996. Export
volume fellduetoweak foreign demand onsome important, forBulgaria, markets, lower international
prices formetals (animportant export commodity forBulgaria), weak crops, enterprise restructuring
andslowdown indomestic production.
Official reserves havefallen toaprecariously lowlevelofaround US$650 million inthefirst
halfof1996, andbelow US$500 million asofFebruary 1997.
Inthiseconomic situation, thehighexternal indebtedness isasubstantial factor indevising
theappropriate economic policies andmeasures.
Theforeign debtpayment reached apeakofUS$1,186 million in1996 andin1997and1998
willremain atsubstantially thesame high level-US$1,117.3 million andUS$1,012.6 million
respectively. Intheyears 1999 and2000 thepayments should become lower, butstillremain ata
veryhighlevel-US$848 million andUS$725.5 million, respectively,
TheRepublic ofBulgaria isfullydetermined torestore theconfidence initsnational currency
andinitsability tosustain theregular servicing ofitsexternal debt. Forthispurpose, anumber of
measures havebeenundertaken toincrease budget revenues andtoimprove thebalance-of-payments
position.
Themeasures oftheGovernment aretargeted toincrease theofficial andtoimprove theoverall
balance ofpayments byreducing thedeficit.WT/BOP/N/18
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VI. Effects oftheimport restriction ontrade
After considering different options aimed toforestall theimminent threat ofaserious decline
inBulgaria 'sforeign exchange reserves, theGovernment haschosen themeasure leastdistortive to
trade. Inaccordance withtheUnderstanding ontheBalance-of-Payments Provisions oftheGATT 1994,
theimport surcharge asaprice-based measure isconsidered tohavelessdisruptive effect ontrade
thanalternative quantitative restrictions orother similar measures, since itwillnotinterfere withthe
policies aimed atgranting alltraders equal opportunity toengage ininternational commerce.
Because ofitscomprehensive trade coverage, thesurcharge isnotusedforthepurpose of
protecting anyspecific industry orsector oftheeconomy.
Theapplication oftheimposed surcharge willnotexceed what isnecessary toaddress the
balance-of-payments situation.WT/BOP/N/18
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ANNEX I
Products Exempted from theImport Surcharge
Description ofgoods Tariff itemnumber
Crude oils ex2709 00
Natural gas 2711 11000;2711 21000
Electrical energy 2716 00000
Coalandbriquettes 2701
Lignite 2702
Coke andsemi-coke ofcoalorlignite 2704
Nuclear fuel ex2844 20;ex840130
Copper oresandconcentrates 2603 0000
Unwrought aluminium 7601
Chemical wood pulp 4703; 4704
Polyvinyl chloride ex3904
Cotton 5201
Medicaments 3003; 3004
Rawcanesugar ex1701
Wheat 1001
Maize forforage 1005 90001
Wheat flour ex1101 00000