RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG50/2/Add.4
19 February 2001
(01-0795)
Committee on Regional Trade Agreements Original:  English
EUROPEAN COMMUNITES-HUNGARY EUROPE AGREEMENT, SERVICES
Joint Communication from the Parties
Addendum
This document reproduces additional questions addressed to the Parties and the joint
responses provided by them.
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Note by the Parties: In answering the questions, we have focussed on the liberalisation provisions
of the Europe Agreement. WTO Members should, however, be aware of the relationship of this
Agreement to the wider process of economic integration and law approximation between the
European Communities (EC) and its Member States and Hungary in view of preparing Hungary forEU membership.   This process is  in itself liberalising.
1. The Chart opens up some questions, including coverage of movement of persons.  For
example, Chapter III of Title IV, addressing key personnel, among other issues, seems to be
largely hortatory and subject to “progressive liberalisation” without specifying an
implementation date. We welcome clarification of how this mode of supply has or will beliberalized under the Agreement.
Mode 4 can cover a variety of situations of temporary movement of services providers as
reflected by the horizontal provisions of the GATS  schedules, key personnel being only one of them.
The coverage of mode 4 in the Europe Agreement is comprehensive.  It includes notably key
personnel (see Article 52(2) and Article 55(2)), temporary movement of natural persons providing a
service (see Article 55(2)), establishment of self-employed persons (see Article 44(5)(a)(i)) and
temporary movement of a natural person to negotiate the sale of a service or to enter into an
agreement to sell services (see Article 55(2)).  Moreover, movement of workers is dealt with underChapter I of Title IV of the Agreement.
The temporary movement of key personnel, of natural persons providing a service or to
negotiate a sale of service or to enter into an agreement to sell services is covered by Article 55(2).
Article 55(2) stipulates that the liberalisation for these situations should take place "in step with theliberalisation process mentioned in paragraph 1."  Article 55(1) stipulates that "The parties undertake
in accordance with the provisions of this Chapter to take the necessary steps to allow progressively
the supply of services by Community or Hungarian companies or nationals who are established in a
Party other than that of the person for the services are intended taking into account the development of
the services sectors in the Parties."  Article 6 which lays down a transition period of a maximum
duration of ten years is a horizontal provision applicable to Article 55.  It is therefore the objective of
both  Parties to achieve the undertaking under Article 55 within the  transition period.WT/REG50/2/Add.4
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2. Article 44:6 of Chapter II (Establishment) in Title IV seems to provide flexibility to
introduce transition periods on top of the exis ting very long 10-year or greater transition
periods.  How do the EU and Hungary see this as meeting the requirements under GATS
Article V to eliminate discrimination between the Parties?
The scope of this Article is limited as the possibility of extending the duration of the
transition period is restricted to establishment for financial services, acquisition, use and rent of state-
owned assets under privatisation process and dealing and agency activities in real property and natural
resources.  This provision only applies to Hungary and can only be granted with the EC’s agreement
within the Association Council.  This could onl y be done in exceptional circumstances and for a
limited period of time.
Such a very limited flexibility to extend the duration of a transition period for one of the two
Parties is justified given the asymmetric nature of the EC and Hungary economies and in relation with
the overall framework of integration of Hungary within the EC.
3. Earlier documentation states that mode 1 (cross-border) and mode 2 (consumption
abroad) are "covered" by the Agreement in Chapte rs 55-58.  Unfortunately, in reviewing these
provisions, it is not entirely clear how these modes are covered.  Please clarify.
Article 55(1) covers the “supply of services by Community or Hungarian companies or
nationals who are established in a Party other than that of the person for the services are intended.”
Despite the difference of wording which is due to the fact that the Europe Agreements were
negotiated before GATS was concluded, this must be understood as covering consumption abroad and
cross-border supply of services.
As indicated above, Article 6 which lays down a transition period of a maximum duration of
ten years, is a horizontal provision applicable to Article 55.  It is therefore the objective of both
Parties to achieve the undertaking under Article 55 within the transition period.
For the purpose of implementing Article 56 of the Europe Agreement, an agreement was
signed in 1998 between the EC and other countries (including Hungary) on passenger inland
waterway transport.  Furthermore, the EC and other countries (including Hungary) are conductingnegotiations on European Common Aviation area.
4. What constitutes "contractual services" and how are they covered under the
Agreement?
The Europe Agreement between the EC and its Member States and Hungary functions on the
basis of negative listing.  The Agreement covers all services sectors.  Only those services which are
excluded or for which specific transition periods are given, or special rules apply, are mentioned,
either in the text of the Agreement itself or in Annexes XII:a to XII:c.  As contractual services are not
specifically excluded and as no specific transition periods are given in the Europe Agreement, theseservices are covered by the general provisions of the Europe Agreement applicable to services.WT/REG50/2/Add.4
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5. The general information provided in WT/REG50/2/Add.3, including the charts,
indicates that several sectors are "covered" by the EU-Hungary Agreement.  Could the Parties
provide a deeper analysis of whether the financia l services and telecommunication services will
be fully liberalized at the end of the transitional period?
Telecommunication Services
Telecommunication services are covered by the liberalisation process which principles are
determined in the Europe Agreement.
As regards establishment (equivalent to mode 3and part of mode 4), the EC grants full
national treatment for the establishment and operation of Hungarian firms and nationals established inthe EC from the date of entry into force of the Agreement. From the entry into force of the Agreement
Hungary has granted national treatment for the operation of Community nationals and companies
established in Hungary.  The European Agreement provided for that Hungary should grant full
national treatment for the establishment of EC firms and nationals before the end of the first stage of
the transitional period. Hungary has already fulfilled this obligation.  The right of establishmentincludes the right to employ key personnel.
As regards supply of services (equivalent to modes 1, 2 and part of mode 4),
telecommunication services are not excluded from the sc ope of Article 55(1) and 55(2).  It is therefore
the objective of both  Parties to achieve the undertaking under Article 55 within the  transition period.As regards movement of workers, telecommunication services are not excluded from the provisions of
Article 37, 41 and 42 (application of national treatme nt in respect of legally employed workers).
Financial Services
Financial services are covered by the liberalisation process which principles are determined in
the Europe Agreement.
Financial services are defined in Annex XII:a of the Agreement (see Article 49).As regards establishment (equivalent to mode 3 and part of mode 4), the EC grants full
national treatment for the establishment and operation of Hungarian firms and nationals established inthe EC from the date of entry into force of the Agreement.  From the entry into force of the
Agreement Hungary has granted national treatment for the operation of Community nationals and
companies established in Hungary.  Hungary must grant right of establishment and full national
treatment to EC firms and nationals at the latest at the end of the ten-year transitional period
(Article 44(1) and Annex XII:a of the Europe Agreement).  The right of establishment includes theright to employ key personnel.
As regards supply of services (equivalent to modes 1, 2 and part of mode 4), Financial
services are not excluded from the scope of Article 55(1) and 55(2).  It is therefore the objective of
both  Parties to achieve the undertaking under Article 55  within the  transition period.
As regards movement of workers, financial services are not excluded from the provisions of
Article 37, 41 and 42 (application of national treatme nt in respect of legally employed workers).
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