RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/ACC/SPEC/LTU/12 
3 February 2000 
 (00-0423) 
Working Party on the  
Accession of Lithuania Original:   English 
 
 
 
ACCESSION OF LITHUANIA 
 
Communication from the Republic of Lithuania  
 
 The Permanent Mission of the Republic of Lit huania has submitted the following information 
concerning Agriculture and Related Issues.  
_______________ 
 
 
Agriculture and Related Issues
 
 
Lithuania appreciates the comments and suggest ions of its negotiating partners on the 
improvement of Lithuania’s offer on agricultura l commitments. With the latest submission and 
additional explanations on the remaining outstanding  issues Lithuania wishes the negotiations to move 
forward to their conclusion. 
Lithuania submits this document summarising the concessions made in response to requests of 
its negotiating partners . The concessions on offer are considerable . A number involve a serious risk of 
damaging specific sections of Lithuania’s agriculture. 
Because of the complexity and interdependen ce of the issues involved, the Lithuanian 
delegation maintains that treating the accession commitments as a package is reasonable and well-
founded. This document presents the advances made by Lithuania in the negotiations on agricultural 
issues indicating areas where it has moved forward to meet the requests of its negotiating partners and 
areas where it has less flexibility because of th e extreme sensitivity of the issues involved. 
Agriculture is of major economic and social significance to Lithuania, at this point of time 
relatively much greater than in any of its neighbour  countries. At constant prices the gross value of 
agricultural production makes for more than 11 per ce nt of GDP and 22 per cent of the workforce are 
employed in agriculture. Lithuanian agriculture has been very severely hit by the financial and 
economic breakdown in Russia, by far its largest export market. In 1995-97, exports to Russia 
accounted for about 37 per cent of agricultural e xports. In 1998, exports to Russia dropped by 
35.1 per cent, and during 1999 by as much as 71.4 per cent compared with 1998 (data for 9 months). 
The largest reductions were recorded in the export of  meat and meat offal, sausages, tinned meat, milk 
and milk products. On top of the trade losses Ru ssian importers owe Lithuanian enterprises 
US$64.5 million.  
 
Specific issues  
 
Market access   
Lithuania has offered major concessions for many  sensitive products and is ready to phase-in 
the reductions over only four years,  a period considerably shorter th an initially foreseen. These offers 
were being made despite the fact that the Governme nt felt itself compelled to increase import tariffs on 
1 November 1998 on meat, milk, suga r, cereals and their products in order to alleviate the adverse WT/ACC/SPEC/LTU/12 
Page 2  
 
 effects of the Russian crisis. Among these offers is  the conversion of minimum import prices for sugar 
into tariffs. Lithuania has also renounced a claim to  benefit, like other WTO Members, of the special 
safeguard measures (SSG) for agricultural commodities. Furthermore, Lithuania also agreed to join the 
voluntary zero-for-zero initiative on beer and brown spirits. 
The Lithuanian delegation has noted the a ccession conditions negotiated by Latvia and 
Estonia, in particular their bindings well above currently applied rates for sensitive products. As the 
Lithuanian delegation has mentioned on numerous occasions before, the Baltic Free Trade Agreement 
came into force on 1 January 1997. In this agreem ent, the Baltic countries have undertaken to fully 
liberalise the agricultural market for products of domestic origin. The functioning of this market 
inevitably requires a gradual harmonisation of domestic  and foreign trade policies including policies, 
towards third countries. In this context the Lithuanian  delegation would like to note, that for tariff lines 
HS 0207, 0209, 0403, 0702, 0808, 0408, 1001, 1002.00, 1003.00, 1004.00.00, 1101.00, 1601.00, 1602, 2007 the proposed levels of bound tariffs are be low the respective levels of one or both other 
Baltic countries. On the other hand, the revised offer on bound tariffs for tariff lines HS 0201, 0202, 
0203, 0204, 0206, 0207, 0209, 0210, 0401, 0402, 0403, 0405, 0406, 0407, 1001.90, 1003.00, 
1004.00.00, 1101.00, 1107.10, 1602.41-1602 .50, 1604, 1704.90, 1905, 2203.00 representing the most 
sensitive products are below currently  applied Lithuanian MFN rates. 
Customs valuation
 
The Government has approved the new Order of  Customs Valuation of Goods, which put an 
end to the minimum import prices and the “price-in-c hecking” system. Moreover, in eliminating the 
application of the minimum import prices, which ensu red an appropriate level of market protection, 
Lithuania agreed not to tariff these measures, except for sugar which in Lithuania - more so even than 
in many other countries - is an extremely sens itive product. After adoption of the new Order of 
Customs Valuation of Goods, the current legisla tion now fully conforms with WTO requirements. 
Sugar regime  
On 8 July 1999 Parliament approved the Am endment and Supplement to the Law on Sugar 
and thereby eliminated the special provisions that protected the domestic sugar market including the 
minimum import prices, the possibility to apply qu antitative restrictions, the arrangement for sugar 
processors to import sugar under tariff quota only on  the condition that they had purchased specified 
quantities of domestically produced sugar beets and the exemption from the Law on Competition for the union of sugar producers.  
Domestic support
 
Product-specific support to farmers is provide d through the Government budget. Direct 
subsidies are paid through the programme referred to as “direct subsidy paid through processors to 
maintain minimum prices paid to primary producers” in Supporting Table DS:6. It is a direct payment 
per ton, per hectare or per head of marketed  product from the government budget to farmers in 
addition to the support provided through the guar anteed minimum purchase prices indicated in 
Supporting Table DS:5. Payments are made through processors as the most practical and efficient 
channel to pay farmers directly with the aim to  maintain a certain farm  income level without 
stimulating increased production. 
Lithuania now accepts that the measure which it called “cost to cover the price gap between 
administered set-up price and the price for the marketing sale” (which was included in an earlier version of Supporting Table DS:6) cannot be considered  as a direct payment. Therefore, it has been 
deleted from current Supporting Table DS:6. Howeve r, for three products, beef, condensed milk and 
butter a product specific equivalent measurement of support has been calculated in Supporting Table 
DS:8. For these three products market price support c ould not be calculated in conformity with Annex 
3 of the Agreement on Agriculture as in 1995 and 1 996 the external reference price was higher than 
the administered internal support price. Consequently , an equivalent measurement of support was used 
in conformity with Annex 4 of the Agreement on Agriculture.  WT/ACC/SPEC/LTU/12 
 Page 3 
 
 
 As regards non-product specific support (Suppor ting Table DS:9) the Lithuanian delegation 
agrees to exclude the following support measures from its calculations: exemptions from income tax 
on natural persons, exemption from profit tax of ag ricultural enterprises and from land tax and land 
rent tax for agricultural producers, VAT compensati on for bread products for January-March in 1997, 
9 per cent rate of VAT (instead of 18 per cent)  for purchases of domestic agricultural products. 
Furthermore, Lithuania has removed from the calcu lations the item “utilization of subsidised assets”. 
It is, however, of the opinion that under the provis ions of the Agreement on Agriculture items such as 
“input cost reduction (concessional tariffs for electr icity and natural gas applied to agricultural 
producers)”, “interest rate subsidies (10 per cent) for short term loans paid to farmers for purchasing 
inputs” qualify as domestic support. Also soft credits allocated to primary producers for purchase of 
equipment and machinery and to processors fo r purchase of agricultural production qualify as 
domestic support. 
The total domestic support commitment on the ba sis of the changes made has been reduced 
from the previous level, namely US$690.3 million in 1998 to 231.4 milli on. Lithuania has thus already 
made a huge AMS reduction and considers this figure to be its final offer of commitment.   
Export subsidies  
Lithuania agrees to eliminate export subsidies, but the present economic conditions of its 
agricultural economy compel it to insist on keeping th e possibility to continue to use export subsidies, 
targeted to the Russian market, over a period of four  years. For Lithuania it is of vital importance to 
maintain export subsidies to that destination for a limited period of time. Under current circumstances, 
Lithuania needs to apply export subsidies to go back  to the level of exports to Russia which preceded 
the crisis so as to be in a position to continue th e restructuring of its processing industry and to provide 
minimum job opportunities. The continuation of expor t subsidies limited in time will allow farmers 
and the food processing industry a much needed te mporary assistance to improve product quality and 
productivity. The production of raw materials and inputs and the infrastructure of marketing and 
distribution of ready-made products is insufficiently  developed. Direct foreign investment does not 
satisfy the needs of restructuring of the food pro cessing industry as such investment goes mainly into 
the trade sector and enterprises with the participati on of foreign capital focus on the domestic market. 
Detailed justification of the necessity to use export subsidies in a limited segment of the 
Lithuanian export market (Russia) and the impact of the crisis in this major export market on the 
economic, political and social situation in Lithuania have been presented during meetings held in the 
framework of Lithuania’s accession to the WTO. 
Currency used in Lithuania’s commitments  
Since 1 April 1994 the national currency unit Litas (Llt) is pegged to the US dollar under a 
Currency Board Arrangement at a fixed exchange rate  of 4 Llt = 1 US$. The Lithuanian Government 
had declared its intention to modify this currenc y regime. But the change has been indefinitely 
postponed because of the crisis in Russia and its  impact on the Lithuanian economy. Lithuania’s 
proposed commitments are expressed in US dollars to avoid misunde rstanding and a re-calculation of 
the commitments in the future. However, the Lithuanian delegation is also aware of the serious difficulties faced by Hungary when it had taken GATT commitments in Forints.  When Hungary later 
had to devalue its currency this led to difficulti es in complying with its official commitments 
undertaken during the Uruguay Round of negotiations. La tvia for its part has recently notified state 
aids expressed in SDR.  The Lithuanian delegation urges its negotiating partners to accept to express 
the Lithuanian commitments in US dollars. 
Data used for domestic support calculations
 
The Law on State Regulation of Economic Relati ons in Agriculture No.I-734 of 22 December 
1994 provides the legal basis for Lithuania’s agricultu ral policy for the base period (1995–1997) used 
to establish commitments on domestic support. Detaile d regulations for the application of specific WT/ACC/SPEC/LTU/12 
Page 4  
 
 support measures were established by the Resolutions of the Ministry of Agriculture adopted during 
the same three years period (1995–1997). These ha ve been submitted to the WTO Secretariat. 
In preparing its commitments on domestic support L ithuania has used the data available in the 
Ministry of Agriculture. The same data were used by the OECD in “Review of Agricultural Policies. 
Lithuania”, OECD, 1996 and “Agricultural Po licies in Emerging and Transition Economies” 
(Supplement to Agricultural Policies in Emerging a nd Transition Economies “Agriculture at a Glance 
in Emerging and Transition Economie s”), OECD, 1999. External refere nce prices were taken from this 
OECD publications. 
Conclusion  
In view of the very delicate and tense situation of agriculture in Lithuania at the end of a long 
and painful transition from a state controlled system to a market economy, considering also the various 
imaginative solutions which have been devised in th e WTO to take account of particular - very often 
temporary - situations of its Members, Lithuania urgently asks its negotiating partners to accept its 
proposals and thereby show understanding for the extrem e social and political sensitivity of the issues 
involved. Lithuania’s proposals should be seen as  a final package of concessions made in the 
expectation that they will bring the negotiations to a rapid conclusion. 
__________