RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG84/3
20 September 2000
(00-3751)
Committee on Regional Trade Agreements Original:  English
FREE TRADE AGREEMENT BETWEEN HUNGARY AND LATVIA
Communication from the Parties
I. BACKGROUND INFORMATION ON THE AGREEMENTS
1. Membership, Dates of Signature, Ratification and Entry into Force
Date of Signature: 10 June 1999 in Budapest (the Republic of Hungary)
Ratification 10 September 1999 (the Republic of Hungary);
23 September 1999; amendments – 16 December 1999
(the Republic of Latvia)
Provisional Application: -Entry into Force: 1 January 2000
2. Type of Agreement
Type of Agreements Free-trade area
Plan and Schedule: The objective of the Agreement is to establish
free-trade areas in conformity with the definition set out in
Article XXIV:8(b) of GATT 1994 and with the
Understanding on the Interpretation of Article XXIV of the
GATT (1994) created by the Agreement establishing theWTO.
3. Scope
The provisions of the Free Trade Agreement between the Republic of Hungary and the
Republic of Latvia (hereinafter the Agreement) are applied to products originating in the Parties to the
Agreement and falling within Chapters 1 to 97 of the Harmonized Commodity Description and
Coding System (HS).  The Agreement envisages the elimination of duties and other barriers to trade
in respect of substantially all the trade between the Parties in accordance with the requirement of
Article XXIV GATT 1994.
The Agreement also contains provisions on state aid, state monopolies, competition,
intellectual property rights and public procurement.
4. Trade Data
See Annex.WT/REG84/3
Page 2
II. TRADE PROVISIONS
1. Import Restrictions
1.1 Duties and charges
Pursuant to Article 4 and 12 of the Agreement, the basic duty, to which the successive
reductions of customs duties set out in the Agreement are applied, is the Most Favoured Nation rate of
duty in force on 11 February 1999.  However, if after entry into force of the Agreement, any tariff
reduction is applied on an  erga omnes  basis, such reduced duties shall replace the basic duties.
In accordance with Articles 3, 5 and 10 of the Ag reement, the Parties to the Agreement shall
introduce no new customs duty on imports or charge having equivalent effect as well as no duties of
a fiscal nature.
The existing customs duties on imports of industrial products and all charges having
equivalent effect were abolished between the Parties to the Agreements on 1 January 2000, except forproducts included in Protocol 1.  The customs duties and all charges having equivalent effect on
imports of products listed in Protocol 1 shall be abolished on 1 January 2001.  Concessions on
agriculture products are contained in Protocol 2.  According to this Protocol:
- Hungary shall grant preferential treatment to the agricultural products originated in Latvia
listed in Annex A of the Protocol from 1 January 2000;
- Latvia shall grant preferential treatment to the agricultural products originated in Hungary
listed in Annex B of the Protocol from 1 January 2000.
1.2 Quantitative restrictions
Pursuant to Article 7 of the Agreement, the Parties to the Agreement shall introduce no new
quantitative restrictions on imports or measures having equivalent effect.
The Republic of Hungary shall progressively abolish quantitative restrictions on imports and
measures having equivalent effect thereto on industrial products originating in the Republic of Latvia(fish, tinned fish) by 1 January 2001.
The Republic of Latvia abolished all quantitative restrictions on imports and measures having
equivalent effect thereto on industrial products originating in the Republic of Hungary on the date of
entry into force of the Agreement, i.e., 1 January 2000.
1.3 Common external tariffThe Agreement does not envisage the establishment of a Common External Tariff.
2. Export Restrictions
2.1 Duties and charges
Export duties and charges are governed by the provisions of Article 6 of the Agreement.  The
Parties to the Agreement shall introduce no new customs duty on exports or charge having an
equivalent effect.
The existing duties and charges on exports were abolished on the date of entry into force of
the Agreement.WT/REG84/3
Page 3
2.2 Quantitative restrictions
In accordance with Article 8 of the Agreement,  the Parties to the Agreement shall introduce
no new quantitative restrictions on exports and measure having equivalent effect.  All existingquantitative restrictions and measures having equivalent effect on exports of products originating in
the Parties were abolished on the date of entry into  force of the Agreement, except those that might be
required for the administration of international obligations.
3. Rules of Origin
Rules of origin of goods and related methods of administrative co-operation are specified in
Article 16 and in Protocol 3 to the Agreement, which is integral part of it.  In this Protocol, the
principles and rules for a definition of the concept of “originating products”, for a proof of origin, for
a rule of “drawback and exemption”, territorial requirements, arrangements for administrative
co-operation and other provisions are laid down.
The Parties to the Agreement apply the concept of the Pan-European cumulation.
The implementation of this new origin network has two major consequences.  Firstly,
semi-finished products originating in any country of the system and which are further processed or
assembled in other partner country may always be considered as originating products.  Secondly,originating products can be traded between any of the countries involved in the system.
With regard to territorial requirements, the principle of territoriality is established and the
terms related to direct transport and exhibitions, as well as the prohibition of drawback of, or
exemption from, customs duties, are set out in the Protocol 3.
In the area of proof of origin, the document EUR 1 is used as a movement certificate in trade
between the Parties to the Agreement.  The ar rangements for administrative co-operation cover
inter alia , mutual assistance, verification of proofs of origin, dispute settlement, penalties and free
zones.
4. Standards
4.1 Technical barriers to trade
The Agreement does not contain any specific provision relating to technical barriers to trade.
4.2 Sanitary and phytosanitary measures
Article 15 of the Agreement contains provisions on veterinary, sanitary and phytosanitary
measures.  The veterino-sanitary and phytosanitary measures and the work of the veterinary services
will be in accordance with international convention s in this field.  The Parties to the Agreement also
commit themselves to apply their regulations in sanitary and phytosanitary matters in a
non-discriminatory fashion and not to introduce any new measure that has the effect of unduly
obstructing trade.
5. Safeguards
Each Party to the Agreement can apply safeguard measures on the conditions and in
conformity with the procedures specified in the Agreement.  These safeguard measures cover general
safeguards (Article 27), structural adjustment (Art icle 28), re-export and serious shortage (Article 29),WT/REG84/3
Page 4
balance-of-payment difficulties (Article 32) and special safeguard measures in agricultural sector
(Article 14).
Article 31 of the Agreement provides for a procedure for the application of safeguard
measures, which foresees consultations within a Joint Committee with a view of solving anydifferences and finding a mutually acceptable solution.  The safeguard measures taken shall be the
subject of periodic consultations within the Joint Committee with a view to their relaxation as soon as
possible, or abolition when conditions no longer justify their maintenance.
6. Anti-Dumping and Countervailing Measures
As contained in Article 26 of the Agreement, the application of anti-dumping measures has to
be in accordance with Article VI of the General Agreement on Tariffs and Trade, as well as with the
conditions and provisions laid down in Article 31 of the Agreement.
7. Subsidies and State-aid
7.1 State-aid
As provided for in Article 23 of the Agreem ent, the Parties to the Agreement adopted an
obligation to avoid any aid granted by a State Party to the Agreement, or through state resources in
any form whatever, which distorts or threatens to distort competition by favouring certainundertakings or the production of certain goods.  The agricultural products are excluded from the
above mentioned provisions.
If a Party to the Agreement considers that a particular practice is incompatible with the
provisions of the Agreement or such practice causes or threatens to cause a serious prejudice to theinterest of that Party or material injury to its domestic industry, the concerned Party may take
appropriate measures under the conditions of and in accordance with the provisions of Article 31 of
the Agreement.  Such appropriate measures may only be taken in conformity with the procedures and
under the conditions of the WTO and any other relevant instruments negotiated under its auspices
which are applicable between the Parties.
7.2 State monopoliesArticle 20 of the Agreement contains an obligation for the Parties to adjust progressively any
state monopoly of commercial character so as to ensure  that by entry into force of the Agreement. i.e.,
1 January 2000, no discrimination regarding the conditions under which goods are procured and
marketed exists between nationals of the Parties.
7.3 Rules of competition concerning undertakingsArticle 22 sets out the rules of competition concerning undertakings.  The following are
incompatible with the proper functioning of the Agreement insofar as they may affect trade betweenthe Parties:
- all agreements between undertakings, decisions by associations of undertakings and
concerted practices between undertakings which have as their object or effect the
prevention, restriction or distortion of competition,
- abuse by one or more undertakings of a dominant position in the territories of the
Parties as a whole or in substantial part thereof.WT/REG84/3
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These provisions shall apply to the activities of all undertakings including public undertakings
and undertakings to which the Parties grant special or exclusive rights.  Undertakings entrusted with
the operation of services of general economic interest or having the character of a revenue-producing
monopoly, shall be subject to these provisions in so far as the application of these provisions does not
obstruct the performance, in law or in fact, of the particular public tasks assigned to them.
With regard to agricultural products these provisions shall not apply to such agreements,
decisions and practices which form an integral part of a national market organisation.
If a Party considers that a given practice is incompatible with the provisions of the Agreement
in the field of rules of competition and if such practice causes or threatens to cause serious prejudice
to the interest of that Party or material injury to its domestic industry, it may take appropriatemeasures under the conditions and in accordance with the procedure set out in Article 31 of the
Agreement.
7.4 Public procurement
In Article 24 of the Agreement, the Part ies to the Agreement commit themselves to
progressively develop their respective regulations  for public procurement with a view to grant
suppliers of the other Party access to contract award procedures on their respective public
procurement markets. The Parties shall endeavour to accede to the relevant Agreement negotiated
under the auspices of the World Trade Organization.
8. Sector-Specific Provisions
With the exception of agriculture, the Agreement does not contain any specific provisions
applicable to trade between the Parties to the Agreement in individual sectors.
III. GENERAL PROVISIONS OF THE AGREEMENT
1. Exceptions and Reservations
The Agreement includes provisions regarding general and security exceptions (Articles 18
and 19).  The Parties to the Agreement may prohibit or restrict their imports, exports or goods in
transit justified on the grounds of public morality, public policy or public security, the protection of
human, animal or plant life or health, the protection of national treasures possessing artistic, historic
or archaeological value, the protection of intellectual property or rules relating to gold or silver or the
conservation of exhaustible natural resources if such measures are made effective in conjunction withrestrictions on domestic production or consumption.  Such prohibitions or restrictions must not be a
means of arbitrary discrimination or a disguised restriction on trade between the Parties.
For the reasons of security each Party to the Agreement may take any appropriate measures,
which it considers necessary, in order to prevent disc losure of information contrary to its essential
security interests and to protect its essential security interests or to implement its international
obligations or its national policies.
2. Accession
There is no provision in the Agreement that allows other countries to accede to the
Agreement.WT/REG84/3
Page 6
3. Dispute Settlement Procedures
The provisions regarding the dispute settlement are not contained in the Agreement.
4. Relation with Other Trade Agreements
As contained in Articles 36 of the Agreement, the Agreement applies to trade relations
between the Republic of Hungary and the Republic of Latvia.  It does not prevent the maintenance or
establishment of customs unions, free-trade areas or arrangements for frontier trade to the extent that
they do not affect the trade regime and, in particular, the provisions concerning rules of origin
provided for by the Agreement.
The Agreement does not contain any provision which establishes any specific relation with
other bilateral, plurilateral and/or multilateral trade arrangements.  However, in the preamble to the
Agreement as well as in other Articles, a reference to the GATT 1994 and the WTO is made.
5. Institutional Framework
In accordance with Article 34 of the Agreemen t, the Joint Committee of the representatives of
the Parties to the Agreement is established in which each Party shall be represented.
The main task of each Joint Committee is to su pervise and to administer the implementation
of the Agreement.  The Joint Committee may take  decisions in the cases provided for in the
Agreement.  On other matters, it may make recommendations.  The Joint Committee shall keep under
review the possibility of further removal of the obstacles to trade between the Parties.
In respect of the procedures of the Joint Committee referred to in Article 35, the Joint
Committee meets whenever necessary but at least once a year, and acts by consensus.  Each Party to
the Agreement may request that a meeting of Joint Committee be held.  The Joint Committee may
decide to set up such subcommittees and working groups as it considers necessary to assist it in
accomplishing its tasks.
For the purpose of the Agreement, the Joint Committee shall adopt its rules of procedure
which, inter alia , contain provisions for convening meetings and for the designation of the Chairman
and the term of office.
IV. OTHER
The Agreement covers trade in goods;  trade in services is not subject to the provisions of the
Agreement. Article 33 of the Agreement contains an  evolutionary clause providing for the possibility
of extending the coverage of the Agreement to new fields.WT/REG84/3
Page 7
ANNEX
Latvia - Imports from Hungary, 1996-99
(US$)
Year H.S.
Chapter 1996 1997 1998 1999
Total 14,384,000 20,616,900 23,156,600 27,437,800
1 - - 7,300 21,700
2 1,051,600 295,600 70,200 -
3- - - -
4 1,800 7,000 73,900 132,600
6- - - -
7 106,000 69,900 200,300 252,500
8 345,800 381,000 356,900 415,500
9 129,600 4,700 12,300 39,800
10 2,700 - 413,000 192,500
11 218,500 721,000 735,700 625,800
12 457,800 439,500 578,900 360,900
14 600 500 - -
15 141,600 940,700 1,542,100 913,200
16 - 5,500 12,100 100
17 11,400 6,800 17,500 153,900
18 300 64,600 35,300 50,300
19 114,100 24,900 202,100 193,700
20 1,499,400 1,471,400 1,969,300 3,050,500
21 60,500 174,100 483,600 470,900
22 2,233,000 2,072,800 1,978,400 1,805,500
23 - - 16,700 123,800
25 12,100 43,400 58,100 4,800
27 50,200 31,700 17,800 1,600
29 100 - 43,600 51,900
30 1,555,600 5,389,100 6,072,800 5,889,500
32 39,200 87,100 221,400 397,300
33 89,600 123,400 146,400 147,800
34 5,000 21,700 57,100 123,500
35 6,600 - 600 8,600
36 - - 300 3,900
37 - - - 9,000
38 3,100 61,500 137,600 80,900
39 834,800 1,341,500 1,580,600 156,700
40 976,900 882,200 389,800 377,300
41 7,700 12,800 5,600 11,300
42 10,700 18,400 7,100 3,700
44 3,800 2,000 4,100 800
46 - - 400 1,300
48 1,895,000 1,835,200 1,749,400 1,144,600
49 14,000 3,600 38,900 12,400WT/REG84/3
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Year H.S.
Chapter 1996 1997 1998 1999
51 - - - 1,900
52 - - 13,000 21,000
53 - - 200 -
54 8,400 20,600 36,900 48,900
55 - - 900 2,300
56 370,300 257,000 108,300 129,900
57 - - 2,200 4,400
58 - - - -
59 33,400 54,900 2,900 44,200
60 - - - -
61 23,900 10,500 68,400 242,800
62 309,700 40,700 22,300 74,000
63 11,300 6,200 11,500 15,000
64 1,800 48,500 98,300 146,000
65 - - - 400
66 - - 100 -
68 4,000 9,100 7,800 -
69 - 9,900 99,800 107,500
70 60,700 38,000 107,700 179,600
71 - - - 400
72 36,800 72,800 108,200 27,600
73 10,200 30,000 23,900 33,000
74 300 700 22,100 700
76 33,100 37,900 66,000 48,400
80 - - - -
81 1,400 - 8,100 -
82 - 700 600 5,000
83 2,200 27,100 37,100 229,300
84 154,100 907,000 338,800 3,263,400
85 816,100 1,631,600 1,621,700 206,000
86 - 9,600 195,900 1,602,800
87 249,600 709,100 805,800 378,900
88 - 200 - -
90 66,400 57,800 50,500 83,000
91 - - 4,800 3,100
94 215,500 34,300 12,200 30,500
95 65,500 43,800 5,700 21,400
96 30,200 24,900 45,100 13,000
97 - - 100 -WT/REG84/3
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Hungary - Imports from Latvia, 1996-99
(US$)
Year H.S.
Chapter 1996 1997 1998 1999
Total 2,357,460 1,891,173 1,806,491 2,108,793
3 72,760 61,981 18,613 40,887
16 300,028 166,953 17-8,182 240,015
17 - - - 22
20 - 3 - 6,655
22 16,512 11,008 2,721 1,179
27 - - 12,393 112,153
29 - - 2,070 4,110
30 27,587 60,120 6-7,393 75,887
33 - 10 - -
35 - 73,558 - -
37 60 - 361 -
39 51,000 - 15,335 6,891
40 965 5,058 - 127,835
41 486,088 136,774 18,751 -
44 443,256 857,416 689,695 865,633
48 80 - 71,069 55,077
49 3 5 - 3,293
51 14,819 560 - -
52 8,681 55,423 18,566 30,901
53 - - 36,467 117,610
54 74,482 71,665 44,658 -
55 209,616 - - -
56 2,518 - 19,231 75,960
58 - - - 394
59 - - 868 -
60 - - - 10,766
61 179,394 22,833 23,460 12,049
62 26,553 33,697 60,671 48,220
63 18,119 10,152 1,795 -
64 - 9,928 3,028 15,192
70 - 38 64,233 23,069
72 5,269 - 10,115 -
73 31,714 130,255 56,649 6,409
74 - - - 1,336
76 135 10,570 - -
82 - 444 391 1,363
83 594 11 - 3,376
84 16,534 22,301 6,988 9,602
85 275,633 132,162 163,464 57,591
87 1,532 105 81,331 17,155WT/REG84/3
Page 10
Year H.S.
Chapter 1996 1997 1998 1999
88 51,525 1,756 - -
90 10,860 793 - -
94 29,699 15,594 137,947 138,095
95 1,394 - 46 68
98 50 - - -
Imports of Latvia from Hungary, 1999,
by Different Duty Levels According to the Agreement
Duty Rate Agricultural products
(%)Industrial products
(%)
0% 0 100
Less than MFN 40.68 0
MFN 59.32 0
Total imports: 27,437,800 US$
Imports of Hungary from Latvia, 1999,
by Different Duty Levels According to the Agreement
Duty Rate Agricultural products
(%)Industrial products
(%)
0% 0 100
Less than MFN 97.7 0
MFN 2.3 0
Total imports : 2,108,793 US$
__________