Memorandum of Understanding

between the European Community and the Islamic Republic of Pakistan on transitional arrangements in the field of market access for textile and clothing products, initialled in Brussels on 15 October 2001

1. Delegations of the European Community and the Islamic Republic of Pakistan, following earlier negotiations beginning in March 2001, met again on 15 October 2001 in Brussels to discuss improvements in access to the respective markets of both Parties for textile and clothing products. The Parties considered that, without prejudice to possible further discussions between them, they could agree on a framework for improved market access for the textiles and clothing sector. The Parties recorded their agreement in the following terms.

2. The Islamic Republic of Pakistan agrees:

2.1. to bind its tariffs on textiles and clothing at the rates shown in column 1 of the Annex applicable from the date of notification and at the rates shown in column 2 of the Annex applicable from no later than 1 July 2002 by making an appropriate notification to this effect to the World Trade Organisation (WTO). Pakistan agrees to consult with the Community prior to making the notification;

2.2. where Pakistan applies lower rates of duty than those provided for in point 2.1, Pakistan undertakes not to apply any rates higher than those currently applied to imports of such products from the Community;

2.3. without prejudice to point 2.2, Pakistan agrees to reduce its applied rates to the bound rates set out in the Annex and to continue to apply those rates until further reduced by any subsequent notifications by Pakistan.

3. Following confirmation by Pakistan of the notification provided for in point 2.1 and the application of the tariffs provided for in column 1 of the Annex for 2001, the Community agrees to increase the quota as currently laid down for the year 2001 by 15 % following which increase the quota levels for the years 2002 to 2004 will be calculated on this new base level for 2001.

4. The Parties agree to refrain from adopting any non-tariff measures that could hinder trade in textile and clothing products.

5.1. The Parties agree that the balance of this Memorandum of Understanding, forming a package of mutual concessions freely extended between the Parties, depends on the full and faithful implementation of all the terms of this Memorandum of Understanding. As a result the Parties agreed to consult periodically in order to ensure the proper implementation of this Memorandum of Understanding. In addition, the Parties agree to consult following the request of either Party concerning any aspect of this Memorandum of Understanding.

5.2. In the event that the Community seeks to exercise the right contained in point 6, the Community will provide Pakistan with details of any alleged failure in writing. Consultations with a view to remedying the failure in question will be held within 30 days of such written request unless the Parties agree otherwise. In the event that the Parties cannot agree on appropriate remedial action within 30 days from the start of the consultations, the Community will have the right to proceed under point 6.

6. The Parties agree that the Community retains the right to reduce the quota level to the levels previously applicable, in the event that Pakistan fails to fulfil any of the obligations contained in points 2 and 4.

7. The Parties agree to cooperate fully in respect of any notifications that may be necessary to the WTO or any of its bodies. Any such notifications will be made jointly by the Parties unless they agree otherwise.

8. The Parties agree that this Memorandum of Understanding is without prejudice to the possibility of seeking mutual concessions concerning market access from other trading partners in the sector.

9. The Parties agree that this Memorandum of Understanding is without prejudice to their rights to invoke the WTO Dispute Settlement Understanding.

10. The Agreed Minutes and Declarations annexed to this Memorandum of Understanding shall form an integral part of it.

11. The Parties agree that this Agreement in the form of a Memorandum of Understanding shall enter into force on the first day of the month following the day on which the Parties have notified each other that the internal procedures necessary to this end have been completed. In the meantime, it shall be applied provisionally from 1 December 2001 on conditions of reciprocity.

For the European Community

For the Islamic Republic of Pakistan

ANNEX

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AGREED MINUTE

In the context of the Agreement in the form of a Memorandum of Understanding between the European Community and the Islamic Republic of Pakistan on transitional arrangements in the field of market access for textile and clothing products initialled in Brussels on 15 October 2001 and more particularly with reference to point 4 thereof, the Parties recorded their understanding that non-tariff barriers related to all forms of hindrance to trade in the sector include but are not limited to matters such as:

- any additional duties on the import or sale of products of EU origin in excess of the custom duties set out in the Agreement, or any other taxes of equivalent effect, which are higher than any such duties or taxes imposed on the production or sale of equivalent domestic goods,

- technical regulations or standards, or conformity assessment or certification rules, procedures or practices going beyond the purposes for which they are required,

- any formal or informal minimum import price requirement, or other customs valuation rules, procedures or practices giving rise to barriers to trade,

- rules, procedures or practices for pre-shipment inspection that are discriminatory, non-transparent, excessively lengthy or the imposition of customs controls for the clearance of goods to shipments that have been the subject of pre-shipment inspection,

- excessively burdensome, costly or arbitrary rules, procedures or practices concerning the certification of the origin of products or requiring direct shipment of goods from the country of origin to the country of destination,

- any non-automatic or discretionary licensing requirements or any automatic licensing rules, procedures or practices imposing disproportionate burdens or having restrictive effects on imports,

- requirements or practices concerning marking, labelling, the description or composition of the product or the description of the manufacturing of products which, either in their formulation or in their application, are in any form discriminatory as compared with domestic products,

- unduly long customs clearance delays or excessively burdensome, excessive or costly customs procedures, including inspection requirements, which have an unnecessary restrictive effect on imports,

- subsidies causing injury to the EU textiles and clothing industry.

For the European Community

For the Islamic Republic of Pakistan

DECLARATION

In the context of the Agreement in the form of a Memorandum of Understanding between the European Community and the Islamic Republic of Pakistan on transitional arrangements in the field of market access for textile and clothing products and the Agreed Minute thereto initialled in Brussels on 15 October 2001, the Parties declare that the commitments taken concerning non-tariff barriers are bilateral commitments entered into between the Parties independently of any multilateral commitments also applicable to the Parties. In consequence the Parties agree that the application of these provisions is of a purely bilateral nature. The Parties further agree that these bilateral commitments are not intended to go beyond or place them under higher standards or obligations than the level of commitments they have entered into in a multilateral context.

For the European Community

For the Islamic Republic of Pakistan