AGREEMENT IN THE FORM OF AN EXCHANGE OF LETTERS between the European Community and the People's Republic of China amending the Agreement between the European Economic Community and the People's Republic of China on trade in textile products as last amended by Agreements initialled on 13 December 1995

Letter from the Council of the European Union

Sir,

1. I have the honour to refer to the consultations held between our respective delegations for the purpose of amending and extending the Agreement between the European Economic Community and the People's Republic of China on trade in textile products initialled on 9 December 1988, as last amended by Agreements initialled on 13 December 1995 (hereinafter referred to as 'the Agreement`).

2. As a result of the consultations, both Parties agreed to amend as of 1 January 1999 the following provisions of the Agreement:

2.1. The text of Article 12 shall be amended by the addition of the following paragraph:

'3. China confirms that the benefit of any concessions made or advantages extended by China to third states in respect of trade in textile and clothing products will be automatically and immediately extended also to the European Community on the basis of MFN in accordance with the provisions of Article 3 of the Trade and Economic Cooperation Agreement between the Parties.`

2.2. The text of the second sentence of Article 20(1) shall be replaced by the following:

'It shall be applicable until 31 December 1999.`

2.3. The text of Article 21 shall be replaced by the following:

'This Agreement shall be drawn up in two copies in the Danish, Dutch, English, Finnish, French, German, Greek, Italian, Portuguese, Spanish, Swedish and Chinese languages, each of these texts being equally authentic.`

2.4. Annex I which sets out the products concerned by the Agreement shall be replaced by Appendix 1 to this letter.

2.5. Annex III shall be replaced by Appendix 2 to this letter for the year 1999.

2.6. The Annex to Protocol E which sets out the quantitative restrictions for economic outward processing operations shall be replaced by Appendix 3 to this letter for the year 1999.

2.7. In the Joint Declaration on Berlin Fair set out in Appendix 8 to the Agreement initialled on 8 December 1992, the reference to 'the years 1993, 1994, 1995` shall be replaced by '1999`.

3. All agreed minutes and declarations annexed to this letter shall form an integral part of the Agreement.

4. Should the People's Republic of China become a Member of the World Trade Organisation before the date of expiry of this Agreement, the restrictions in force shall be phased out in the framework of the WTO Agreement on Textiles and Clothing and China's Protocol of Accession to the WTO.

5. I should be obliged if you could kindly confirm the acceptance of your Government of the foregoing. Should this be the case, this Agreement in the form of an exchange of letters shall enter into force on the first day of the month following the day on which the Parties have notified each other that the legal procedures necessary to this end have been completed. In the meantime, it shall be applied provisionally from 1 January 1999 on conditions of reciprocity.

Please accept, Sir, the assurance of my highest consideration.

For the Council of the European Union

The President

APPENDIX 1

'ANNEX I

PRODUCTS REFERRED TO IN ARTICLE 1

1. When the constitutive material of the products of categories 1 to 114 is not specifically mentioned, these products are to be taken to be made exclusively of wool or of fine hair, of cotton or of man-made fibres (1).

2. Garments which are not recognisable as being garments for men or boys or as being garments for women or girls are classified with the latter.

3. Where the expression "babies' garments" is used, this is meant to cover garments up to and including commercial size 86.

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>TABLE>

>TABLE>

ANNEX IA

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(1) Where there is an "ex" symbol in front of a CN code, the products covered in each category are determined by the scope of the CN code and by that of the corresponding description.`

APPENDIX 2

'ANNEX III

(The full product descriptions of the categories listed in this Annex are to be found in Annex I to the Agreement)

COMMUNITY QUANTITATIVE LIMITS

>TABLE>

`

APPENDIX 3

'ANNEX TO PROTOCOL E

OUTWARD PROCESSING TRAFFIC

COMMUNITY QUANTITATIVE LIMITS

>TABLE>

`

AGREED MINUTE CONCERNING ARTICLE 11

In the context of the Agreement in the form of an exchange of letters between the European Community and the People's Republic of China amending the Agreement between the European Economic Community and the People's Republic of China on trade in textile products as last amended by Agreements initialled on 13 December 1995, the European Community again raised the question of continuing difficulties in the implementation of provisions of Article 11 of the Agreement, in particular paragraph 1 thereof concerning supplies of raw materials from China at conditions not less favourable than to Chinese domestic users.

In this context, China outlined the measures which it had already taken to give effect to Article 11(1), and in particular to the increase in the reimbursement in VAT from 6 to 11 % on the export of raw silk. China further undertook to examine all remaining charges and levies in order to ensure the implementation of Article 11(1).

The Parties agreed that, in the event of any difficulties in provision and delivery of raw materials, consultations may be held with a view to finding a mutually satisfactory solution.

For the European Community For the People's Republic of China

AGREED MINUTE ON THE INDUSTRY RESERVE

In the context of the Agreement in the form of an exchange of letters between the European Community and the People's Republic of China amending the Agreement between the European Economic Community and the People's Republic of China on trade in textile products as last amended by Agreements initialled on 13 December 1995, China took note of concerns expressed by the European Community regarding the implementation of Article 3(2) and (3) and the footnotes to Annex III setting out quantities reserved for European industry. With a view to strengthening a mutual understanding and cooperation in this field the Chinese side put forward the following account of the current procedure in force regarding the implementation of the industry reserve:

- the Chinese authorities will take the list of Community enterprises provided by the European Community authorities as being those users entitled to benefit from the industry reserve,

- Community industry will make contact with Chinese exporters with a view to entering into contracts with the Chinese manufacturers and exporters,

- the Chinese manufacturers or exporters will submit applications for use of the industry reserve together with the contracts to MOFTEC via the relevant foreign trade administrative bodies,

- within the limits of the reserve, MOFTEC will grant quota to Chinese manufacturers or exporters for the duration of the reserve, according to the relevant regulations,

- thereafter, the relevant foreign trade administrative bodies will issue export licences to allow the fulfilment of purchasing contracts for Community users notified on the lists provided by the Community authorities.

In this regard, the Chinese authorities undertake:

- to operate the system promptly and in a non-discriminatory manner,

- to provide the names and addresses of the relevant foreign trade administrative bodies,

- to provide texts of the relevant regulations as soon as they are available,

- to ensure that export licences under this system are identified as industry reserve,

- to supply separate statistical information concerning licences issued pursuant to these provisions,

- to cooperate with the European Community authorities to ensure that licences issued pursuant to these provisions are identified within the exchanges of information via the SIGL network.

The Parties agreed that, in the event of any difficulties in the application of the provisions relating to the 'industry reserve`, consultations may be held with a view to finding a mutually satisfactory solution.

For the European Community For the People's Republic of China

Letter from the Government of the People's Republic of China

Sir,

I have the honour to acknowledge receipt of your letter which reads as follows:

'Sir,

1. I have the honour to refer to the consultations held between our respective delegations for the purpose of amending and extending the Agreement between the European Economic Community and the People's Republic of China on trade in textile products initialled on 9 December 1988, as last amended by Agreements initialled on 13 December 1995 (hereinafter referred to as "the Agreement").

2. As a result of the consultations, both Parties agreed to amend as of 1 January 1999 the following provisions of the Agreement:

2.1. The text of Article 12 shall be amended by the addition of the following paragraph:

"3. China confirms that the benefit of any concessions made or advantages extended by China to third states in respect of trade in textile and clothing products will be automatically and immediately extended also to the European Community on the basis of MFN in accordance with the provisions of Article 3 of the Trade and Economic Cooperation Agreement between the Parties."

2.2. The text of the second sentence of Article 20(1), shall be replaced by the following text:

"It shall be applicable until 31 December 1999."

2.3. The text of Article 21 shall be replaced by the following text:

"This Agreement shall be drawn up in two copies in the Danish, Dutch, English, Finnish, French, German, Greek, Italian, Portuguese, Spanish, Swedish and Chinese languages, each of these texts being equally authentic."

2.4. Annex I which sets out the products concerned by the Agreement shall be replaced by Appendix 1 to this letter.

2.5. Annex III shall be replaced by Appendix 2 to this letter for the year 1999.

2.6. The Annex to Protocol E which sets out the quantitative restrictions for economic outward processing operations shall be replaced by Appendix 3 to this letter for the year 1999.

2.7. In the Joint Declaration on Berlin Fair set out in Appendix 8 to the Agreement initialled on 8 December 1992 the reference to "the years 1993, 1994, 1995" shall be replaced by "1999".

3. All Agreed Minutes and Declarations annexed to this letter shall form an integral part of the Agreement.

4. Should the People's Republic of China become a Member of the World Trade Organisation before the date of expiry of this Agreement, the restrictions in force shall be phased out in the framework of the WTO Agreement on Textiles and Clothing and China's Protocol of Accession to the WTO.

5. I should be obliged if you could kindly confirm the acceptance of your Government of the foregoing. Should this be the case, this Agreement in the form of an exchange of letters shall enter into force on the first day of the month following the day on which the Parties have notified each other that the legal procedures necessary to this end have been completed. In the meantime, it shall be applied provisionally from 1 January 1999 on conditions of reciprocity.`

I have the honour to confirm that my Government is in agreement with the contents of your letter.

Please accept, Sir, the assurance of my highest consideration.

For the Governmentof the People's Republic of China

APPENDIX 1

'ANNEX I

PRODUCTS REFERRED TO IN ARTICLE 1

1. When the constitutive material of the products of categories 1 to 114 is not specifically mentioned, these products are to be taken to be made exclusively of wool or of fine hair, of cotton or of man-made fibres (1).

2. Garments which are not recognisable as being garments for men or boys or as being garments for women or girls are classified with the latter.

3. Where the expression "babies' garments" is used, this is meant to cover garments up to and including commercial size 86.

>TABLE>

>TABLE>

>TABLE>

>TABLE>

>TABLE>

>TABLE>

ANNEX IA

>TABLE>

(1) Where there is an "ex" symbol in front of a CN code, the products covered in each category are determined by the scope of the CN code and by that of the corresponding description.`

APPENDIX 2

'ANNEX III

(The full product descriptions of the categories listed in this Annex are to be found in Annex I to the Agreement)

COMMUNITY QUANTITATIVE LIMITS

>TABLE>

`

APPENDIX 3

'ANNEX TO PROTOCOL E

OUTWARD PROCESSING TRAFFIC

COMMUNITY QUANTITATIVE LIMITS

>TABLE>

`

AGREED MINUTE CONCERNING ARTICLE 11

In the context of the Agreement in the form of an exchange of letters between the European Community and the People's Republic of China amending the Agreement between the European Economic Community and the People's Republic of China on trade in textile products as last amended by Agreements initialled on 13 December 1995, the European Community again raised the question of continuing difficulties in the implementation of provisions of Article 11 of the Agreement, in particular paragraph 1 thereof concerning supplies of raw materials from China at conditions not less favourable than to Chinese domestic users.

In this context, China outlined the measures which it had already taken to give effect to Article 11(1), and in particular to the increase in the reimbursement in VAT from 6 to 11 % on the export of raw silk. China further undertook to examine all remaining charges and levies in order to ensure the implementation of Article 11(1).

The Parties agreed that, in the event of any difficulties in provision and delivery of raw materials, consultations may be held with a view to finding a mutually satisfactory solution.

For the People's Republic of China For the European Community

AGREED MINUTE ON THE INDUSTRY RESERVE

In the context of the Agreement in the form of an exchange of letters between the European Community and the People's Republic of China amending the Agreement between the European Economic Community and the People's Republic of China on trade in textile products as last amended by Agreements initialled on 13 December 1995, China took note of concerns expressed by the European Community regarding the implementation of Article 3(2) and (3) and the footnotes to Annex III setting out quantities reserved for European industry. With a view to strengthening a mutual understanding and cooperation in this field the Chinese side put forward the following account of the current procedure in force regarding the implementation of the industry reserve:

- the Chinese authorities will take the list of Community enterprises provided by the European Community authorities as being those users entitled to benefit from the industry reserve,

- Community industry will make contact with Chinese exporters with a view to entering into contracts with the Chinese manufacturers and exporters,

- the Chinese manufacturers or exporters will submit applications for use of the industry reserve together with the contracts to MOFTEC via the relevant foreign trade administrative bodies,

- within the limits of the reserve, MOFTEC will grant quota to Chinese manufacturers or exporters for the duration of the reserve, according to the relevant regulations,

- thereafter, the relevant foreign trade administrative bodies will issue export licences to allow the fulfilment of purchasing contracts for Community users notified on the lists provided by the Community authorities.

In this regard, the Chinese authorities undertake:

- to operate the system promptly and in a non-discriminatory manner,

- to provide the names and addresses of the relevant foreign trade administrative bodies,

- to provide texts of the relevant regulations as soon as they are available,

- to ensure that export licences under this system are identified as industry reserve,

- to supply separate statistical information concerning licences issued pursuant to these provisions,

- to cooperate with the European Community authorities to ensure that licences issued pursuant to these provisions are identified within the exchanges of information via the SIGL network.

The Parties agreed that, in the event of any difficulties in the application of the provisions relating to the 'industry reserve`, consultations may be held with a view to finding a mutually satisfactory solution.

For the People's Republic of China For the European Community

(1) For the purpose of setting off exports against the agreed quantitative limits a conversion rate of five garments (other than babies' garments) of a maximum commercial size of 130 cm, for three garments whose commercial size exceeds 130 cm may be applied for up to 5 % of the quantitative limits.

(2) These figures include the following quantity reserved for European industry for a period of 180 days - 635 000 pieces.

(3) For products of category 5 (other than anoraks, windcheaters, waister jackets and the like) of fine animal hair, the following sublimit applies within the quantitative limits established for category 5 for 1999 - 227 000 pieces.

(4) These figures include the following quantity reserved for European industry for a period of 180 days - 1 137 000 pieces.

The following additional quantities of shorts (CN codes 6203 41 90, 6203 42 90, 6203 43 90 and 6203 49 50) may be exported to the European Community by China in 1999, namely 1 130 000 pieces.

(5) These figures include the following quantity reserved for European industry for a period of 180 days - 685 000 pieces.

(6) These figures include the following quantity reserved for European industry for a period of 180 days - 1 107 000 pieces.

(7) These figures include the following quantity reserved for European industry for a period of 180 days - 306 000 pieces.

(8) These figures include the following quantity reserved for European industry for a period of 180 days - 993 000 pieces.

(9) For the purpose of setting off exports against the agreed quantitative limits a conversion rate of five garments (other than babies' garments) of a maximum commercial size of 130 cm, for three garments whose commercial size exceeds 130 cm may be applied for up to 5 % of the quantitative limits.

(10) For the purpose of setting off exports against the agreed quantitative limits a conversion rate of five garments (other than babies' garments) of a maximum commercial size of 130 cm, for three garments whose commercial size exceeds 130 cm may be applied for up to 5 % of the quantitative limits.

(11) These figures include the following quantity reserved for European industry for a period of 180 days - 336 000 pieces.

(12) For the purpose of setting off exports against the agreed quantitative limits a conversion rate of five garments (other than babies' garments) of a maximum commercial size of 130 cm, for three garments whose commercial size exceeds 130 cm may be applied for up to 5 % of the quantitative limits.

(13) These figures include the following quantity reserved for European industry for a period of 180 days each year - 201 tonnes.

(14) For the purpose of setting off exports against the agreed quantitative limits a conversion rate of five garments (other than babies' garments) of a maximum commercial size of 130 cm, for three garments whose commercial size exceeds 130 cm may be applied for up to 5 % of the quantitative limits.

(15) These figures include the following quantity reserved for European industry for a period of 180 days - 635 000 pieces.

(16) For products of category 5 (other than anoraks, windcheaters, waister jackets and the like) of fine animal hair, the following sublimit applies within the quantitative limits established for category 5 for 1999 - 227 000 pieces.

(17) These figures include the following quantity reserved for European industry for a period of 180 days - 1 137 000 pieces.

The following additional quantities of shorts (CN codes 6203 41 90, 6203 42 90, 6203 43 90 and 6203 49 50) may be exported to the European Community by China in 1999, namely 1 130 000 pieces.

(18) These figures include the following quantity reserved for European industry for a period of 180 days - 685 000 pieces.

(19) These figures include the following quantity reserved for European industry for a period of 180 days - 1 107 000 pieces.

(20) These figures include the following quantity reserved for European industry for a period of 180 days - 306 000 pieces.

(21) These figures include the following quantity reserved for European industry for a period of 180 days - 993 000 pieces.

(22) For the purpose of setting off exports against the agreed quantitative limits a conversion rate of five garments (other than babies' garments) of a maximum commercial size of 130 cm, for three garments whose commercial size exceeds 130 cm may be applied for up to 5 % of the quantitative limits.

(23) For the purpose of setting off exports against the agreed quantitative limits a conversion rate of five garments (other than babies' garments) of a maximum commercial size of 130 cm, for three garments whose commercial size exceeds 130 cm may be applied for up to 5 % of the quantitative limits.

(24) These figures include the following quantity reserved for European industry for a period of 180 days - 336 000 pieces.

(25) For the purpose of setting off exports against the agreed quantitative limits a conversion rate of five garments (other than babies' garments) of a maximum commercial size of 130 cm, for three garments whose commercial size exceeds 130 cm may be applied for up to 5 % of the quantitative limits.

(26) These figures include the following quantity reserved for European industry for a period of 180 days each year - 201 tonnes.