COMMISSION OFTHEEUROPEAN COMMUNITIES
COM (88)744 final
Brussels ,12December 1988
RECOMMENDATION FOR A
COUNCIL DECISION
authorizing theCommission toopen negotiations with aview toconcluding
anagreement intheform of an exchange ofletters between theEuropean
Economic Community andthePrincipality ofAndorra
(presented bytheCommission )
<1

EXPLANATORY MEMORANDUM
1 .Itwasstated intheJoint Declaration onfuture trade arrangements with
Andorra annexed totheActofAccession ofSpain andPortugal totheEuropean
Communities that within twoyears oftheentry into force oftheActof
Accession anarrangement governing trade relations between theCommunity and
Andorra andreplacing thenational arrangements atpresent inforce would be
finalized .
2.TheCommission has inthemeantime contacted thestaff ofthetwoCo-Princes
thePresident ofthe French Republic and the Bishop ofUrgel ,andalso the
French andSpanish administrations .Certain substantive andprocedural problems
have been clarified asaresult .
3.TheDelegation ofthePrincipality ofAndorra presented amemorandum to
theCommission on15July ofthis year requesting that negotiations be
opened between Andorra andtheCommunity (Annex 2).
4.Inthe light of theforegoing ,theCommission hasdrawn updraft directives
fornegotiations with Andorra .Twomain concerns underlie these directives ,
namely theremoval ofthedisparities andpoints ofincompatibility between
thenational arrangements atpresent applied toAndorra andCommunity law,
forthepurpose ofreplacing them byuniform Community arrangements .The
second concern istheneed totake thespecific nature ofAndorra 'ssituation
into account so as tosafeguard itseconomic andcommercial interests .
5.TheCommission proposes totheCouncil :
i.that theCommission beauthorized toopen negotiations with the
Principality ofAndorra with aview toconcluding anagreement
intheform ofanexchange ofletters ;
ii.that theattached negotiating directives beadopted .

DRAFT DECISION
THE COUNCIL OFTHEEUROPEAN COMMUNITIES ,
Having regard totheTreaty establishing theEuropean Economic Community /
and inparticular Article 113thereof .
Having regard totheRecommendation from theCommission ,
Whereas itisstated inthe Joint Declaration onfuture trade arrangements
with Andorra ,annexed totheAct ofAccession ofSpain andPortugal ,that
anarrangement governing trade relations between the Community andAndorra
will befinalized within twoyears oftheentry into force ofthe Act of
Accession and that itwill replace thenational arrangements atpresent in
force ;
Whereas inamemorandum of15July 1988 thePrincipality ofAndorra requested
theopening ofnegotiations with theCommunity ,
HAS DECIDED ASFOLLOWS :
Sole Article
TheCommission ishereby authorized toopen negotiations with aview to
concluding anagreement between theEuropean Economic Community andthe
Principality ofAndorra intheform ofanexchange ofletters .
TheCommission will conduct these negotiations inconsultation with the
representatives oftheMember States and inaccordance with thedirectives
contained inAnnex 1.
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ANNEX I
1.Customs union forindustrial products
1.1.Acustoms union should beestablished between theCommunity and
Andorra andapply ,subject toanyspecific derogations ,toall
industrial products ,i.e. toproducts notcovered byAnnex II
totheEECTreaty .
Therules tobedetermined should apply to:
(a)goods produced intheCommunity orinAndorra ,including
those obtained wholly orinpart from products which come
from third countries andareinfree circulation inthe
Community orinAndorra ;
Cb)goods which come from third countries andare infree circulation
intheCommunity orinAndorra .
These rules should besubject ,where appropriate ,tospecial
surveillance measures inthecase ofcertain sensitive products
(seepoint 4.1.).
1.2 .Inrelations between theCommunity andAndorra ,this customs union
should entai l:
1.2.1 .theabolition ofcustoms duties ,andcharges having equivalent
effect ,onimports andexports ;
1.2.2 .theabolition ofquantitative restrictions ,andmeasures
having equivalent effect ,onimports andexports .
1.2.3 .These arrangements should beapplied progressively over a
transitional period and inaccordance with atimetable to
beagreed on.
Theperiod andtimetable could bemodelled onthose laid
down inthe Act ofAccession ofSpain .
During this period ,Andorra should undertake totake account
initstrade with theMember States oftheCommunity and
with third countries ofthequantitative restrictions which
Spain isauthorized under the Act ofAccession toretain in
respect oftheMember States andthird countries .
Inorder toavoid deflections oftrade intheproducts subject
tothese quantitative restrictions ,special surveillance
measures could beintroduced .
1.3 .Inrelations between Andorra andthird countries ,provision should
bemade for the following :
1.3.1 .immediately upon theentry into force oftheactagreed upon ,
theadoption andapplication byAndorra oftheCommon Customs
Tariff andoftheCommunity customs legislation essential to
theproper working ofthecustoms union ;
1.3.2 .customs clearance (entry into free circulation )ofgoods from
third countries being exported toAndorra atspecifically
designated customs offices within theCommunity ;
1.3.3 .thecustoms duties should beassigned toAndorra 'sBudget in
accordance with aprocedure to be specified .1Andorra should
undertake nottorefund these sums directly orindirectly to
theparties concerned .
VAnoverall amount corresponding totheadministrative costs borne by the customs
authorities intheCommunity would bededucted from thecustoms duties .
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1.4 . (NB)Arrangements applicable toprocessed agricultural products
Thetariff arrangements applicable tothese products should involve
thefollowing :
i..between theCommunity andAndorra ,thefixed component of
customs duties would beabolished ;
ii.Andorra would apply thefixed component laid down inthe
Common Customs Tariff tothird countries ;
iii .fortheprocessed agricultural products covered by
Regulations (EEC)Nos3033 /80and3035 /80,thevariable
components andexport refunds provided for inthose
Regulations would continue tobeapplied intheir entirety .
2.Arrangements foragricultural products
2.1 .Thecustoms union referred toabove should notinclude agricultural
products covered byAnnex IItotheTreaty .Itwould nevertheless
beadvisable toallow thefollowing :
2.1.1 .certain agricultural products which are atpresent covered
byexchanges ofletters between Andorra and France andbetween
Andorra and Spain andwhich inaccordance with rules tobe
determined atalater date or on thebasis ofthepreferential
rules oforigin that exist inrespect ofother countries
originate inAndorra should beimported duty-free into the
Community ;
2.1.2 .other agricultural products from Andorra should besubject
to"third country "treatment onimport into theCommunity .
3.Taxarrangements ^
Asregards tax
3.1 'each party should undertake not toimpose ,directly orindirectly ,
onproducts imported from theother party taxation inexcess ofthat
imposed ,directly orindirectly ,onlike or competing national
products (provision based onArticle 95 of theEECTreaty );
3.2 Andorra should consider adapting itstaxation ^so as to avoid too
great adisparity between the levels ofindirect taxation inAndorra
and intheCommunity .
Itshould bepointed outthat Andorra would continue toreceive third-country
treatment asregards refunds onexports from theCommunity toAndorra .
^Forthepurposes ofestablishing thetaxrelief to be granted totravellers
returning from Andorra totheCommunity ,account would betaken ofthe
arrangements applied inthis respect .totravellers returning from anythird
country andalso ofthespecific importance oftourism forAndorra .In
order totake account offrontier zone movements ,specific quantitative
limits could belaid down forcertain sensitive products .
^The"consumer tax"atpresent levied onimported products would bereplaced
byavalue-added tax .
Notes 2and 3
Thesituation must bereviewed ,andtheagreement adapted ifandwhen necessary ,
totake account oftheeffects ontaxation ofthesingle market .

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4.Other provisions
4.1 .Inorder toprevent deflections oftrade resulting from the import
into Andorra and the re-export totheCommunity ofgoods previously
imported from third countries ,aflexible system for the statistical
surveillance ofimports into andexports from Andorra should be
introduced forcertain sensitive products .Theoperation ofthis
system would befacilitated bythefact that products imported from
third countries would gothrough specifically designated customs
offices (seepoint 1.3 .3.).
4.2 .TheCommunity could request consultations with Andorra should
deflections oftrade undermine theapplication ofCommunity commercial
policy measures .
4.3 .Theagreement to be concluded could contain asafeguard clause
applicable incases where such deflection occurred .This clause
could bebased onArticle 115oftheEECTreaty .
4.4 .Ajoint working party should besetup.This working party ,which
would meet attherequest ofoneofthecontracting parties ,would
beresponsible for the administration oftheagreement andwould
examine anymatters which arose during itsimplementation ,notably
matters concerning theapplication ofthemeasures referred toin
paragraphs 4.1,4.2and4.3above .
4.5 .Theagreement should apply forfive years .Oneyear before its
expiry ,thetwoparties should open negotiations inorder to
determine ,inthe light oftheresults oftheapplication ofthe
agreement ,theprovisions which should subsequently govern their
relations .
5.Legal form
Asregards thelegal form which theactto be negotiated should take
(agreement ,arrangement ,exchange ofletters with annex ),that ofan
exchange ofletters would appear tobepreferable given itsflexibility
andthespecial international status ofAndorra .

ANNEX 2
Document
fortheattention ofMrJacques Delors ,President oftheCommission ofthe
European Communities
containing
theofficial request fortheopening ofnegotiations andproposals which could
form thebasis for atrade agreement between theEuropean Economic Community
and the Principality ofAndorra
transmitted by
theAndorran Delegation for relations with theEuropean Economic Community .
Brussels ,
15July 1988
Andorra laVella ,

Letter from :Andorran Delegation forrelations with theEuropean Economic
Community
To: MrJacques Delors
Following your communication of7March 1988 ,wehave thehonour hereby to
request theofficial opening ofnegotiations between theEuropean Economic
Community andAndorra inorder todetermine ,asplanned ,the new trade
arrangements between the two sides .
Weenclose apaper setting outtheproposals which weconsider could form a
basis for thenegotiations .

Introduction
Inthe light of Joint Declaration No9,contained inthe Act ofAccession of
Spain totheEuropean Communities of12June 1985 ,concerning theestablishment
ofnewtrade relations between Andorra andtheCommunity toreplace ,in
accordance with Article 234oftheEECTreaty ,thebilateral agreements which
have been inforce between Andorra andFrance andSpain since 1867 ,Andorra ,
asanon-Community country situated inthemiddle oftheCommunity ,declares its
willingness toadapt tothenewEuropean context while maintaining itspopulation'
standard ofliving and itsindependence .
Inmaking this adjustment Andorra will have to act inaccordance with the
Community 'srules andinterests .Andorra istherefore anxious that the
adjustment should not inany way undermine theproper functioning ofthe
common commercial policy inaccordance with Article 113oftheEECTreaty .
TheCommunity for itspart must recognize Andorra 'sright and need topreserve
thebasis ofitsprosperity andtobeable todevelop itseconomy .Inthis
respect itmust benoted that Spain 'sfull integration into thecommon market
will inevitably cause thePrincipality 'scommercial attractiveness todecline ,
and acertain degree ofdiversification istheonly means ofoffsetting this .
Itwill also benecessary toovercome thedrawbacks specific toAndorra ,such
asgeographical isolation ,the lack ofspace andinfrastructure ,the lack of
skilled labour ,and soon.
Forthis diversification totake place Andorra must define clearly itseconomic
relations with theCommunity .

Themain factors which could determine future trade relations between Andorra
and the European Community
(a)Taking into account thepresent features ofAndorra 'seconomy and the
prospects forthefuture (seeattached document :Andorra 'seconomy -present and
future ),Andorra wishes tonegotiate trade arrangements with theEuropean
Community covering thefollowing spheres :
1.Industrial products .
2.Agricultural products .
3.Tax relief fortravellers .
4.Establishment ofajoint structure .
(b)Without wishing topredjudice theresults oftheforthcoming negotiations
andconsidering that none ofthematters tobediscussed can,generally
speaking ,benegotiated separately butthat each item will form anintegral
part ofthefuture agreement ,theAndorran Delegation presents brief comments
onthe four factors listed :
1.Industrial products
Inorder toavoid undermining theproper functioning oftheCommunity 'scustoms
union ,Andorra isprepared toforgo theexercise ofsome ofitsrights and to
make aneffort toadapt byestablishing acustoms union with theCommunity ,
subject topossible exceptions ,andadapting itslegislation accordingly .
2.Agricultural products
Andorra wishes tomaintain ,subject topossible exceptions ,itsstatus ofthird
country inrespect ofagricultural products .This seems logical given the
absence ofanyreasons which would justify Andorra 'sparticipation inthecommon
agricultural policy .
4?

3.Taxandcustoms relief granted totravellers
Since tourism andtrade form themainstay ofitseconomy ,Andorra would like
this matter toberedefined inthe light ofthearrangements adopted .
4.Establishment ofajoint structure
Andorra proposes that ajoint management committee should besetup.Itwould
beauthorized toensure theproper functioning oftheagreement and tomake
proposals forextending the scope ofarrangements .

ANNEXE PETITES ETMOYENNES ENTREPRISES
Lesnégociations projetées seront sans effet sur Lasituation des
Petites etMoyennes Entreprises delaCommunauté .