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DOCUMENTS "COM"
COM(79)583
Vol.1979/0201

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM (79)583 final
Brussels /25thOctober 1979
GATT -MULTILATERAL TRADE NEGOTIATIONS
(Communication from the Commission tothe Council )
SUPPLEMENT TOTHE FINAL REPORT ONTHE GATT MULTILATERAL
TRADE NEGOTIATIONS INGENEVA (TOKYO ROUND )
AND PROPOSAL FOR ACOUNCIL DECISION
(doc'sCOM (79)514final )
•^
RESULTS BYSECTORc J
VIlI
COM (79)583 final

1 PartIII
Section 1
5.Resultsbysector
5.1.Chemicals
1Thenegotiations inthechemicalsectorconcentrated toagreatextent
ontheEEC-USArelations;theUSAistheEEC'smainexportmarket,
taking40%ofits"non-EFTA"exports(Japantakesabout15%and
Canada5%),whiletwo-thirdsoftheEEC'sMFNdutiableimportscome
fromtheUSA(70%oftheremainingone^third comefromtheEastern
tradingarea).
TheEEChadofferedtoapplytheSwissformula,butwas,obligedto
reviseitspositioninthelightofitspartners'offers.Itthere-
Vforemadea/lumberofwithdrawals,mainlyonproductswheretheUS
industryhascostadvantagesasregardsrawmaterialsand/orenergy,
andon.productschieflysuppliedbyEasterntradingareacountries,
giventhelackoftruereciprocity fromthesecountriesandtheir
particularpricestructures. .
r
Inthechemicalssector,theEEC'saimwastwofold:
2 , ....*(i)theabolitionoftheASPsystemofcustomsvaluation,and
(ii)majorreductions byitspartners.
WheretheUSAwasconcerned,oneofthemainaimswastheelimination
ofthe"AmericanSellingPrice"methodofcustomsvaluation.Asurvivor
frompre-GATTlegislation,andhencesubjecttotheProtocolof >
ProvisionalApplication,thismethodestablished thecustomsvalueof
benzene -chemicaIproducts(intermediate products,dyestuffs,.pesticides,
pharmaceuticals ,etc)onthebasisofthesellingpriceoflikeproducts
manufactured intheUSA.
• ' .·■ ι
Therearetwodrawbackstothissystem:
(i)firstly,itincreased,oftenbyaconsiderable amount,thedutyor.
importedproductswherea"like"USproductexisted("competitive "
•products)andtheAmericansellingpricewashigherthantheimport
price;
2Chapters28to39oftheCustomsCooperationCouncilNomenclature .
AmericanSellingPrice.

-2-Part^4.:
Seet1or;
(ii)itwasalsoasourceofcontinualuncertaintyforexporters,asonly
theUSCustomscouldruleontheexistenceofalikeUSproductand
itssellingprice.
Anagreementtoabolishthissystemwasreachedinthecourseofthe
KennedyRoundinconnectionwiththechemicalsarrangement,butthiswas
neverratifiedbytheUnitedStatesCongress. -
InthelatestroundofMTNstheASPsystemassuchwasdealtwithinthe
frameworkofthecodeoncustomsvaluation,andtheEECrefusedtooffer
any"compensation "foritsabolition.Thetariffnegotiations concentrated
ontheconversionofdutiesandtheofferonASPproducts.
Initslistofconcessions annexedtothe6ATT,theUSAhadreservedthe
right,shouldtheASPbeabolished,toadjusttheleveloftheduties
enteredtomakeupthedifference betweentheASPandfobvalues,andthus
retainthesamelevelofprotection. '
AsintheKennedyRound,therefore,theUSAproceeded irvtwostages:
convertingtheenteredratetoarriveatnewrates,thenofferingconcessions
basedontheconvertedrates.
.Whilethefirstconversion -proposaIpreparedbytheInternational Trade
Commission,publishedinMarch1978,lookedafairone,thefinalproposal,
whichformedabasisfortheofferlodgedbytheUSAinJune1978,was
extensively modifiedfollowingthepublichearingswhichhadtakenplacein
themeantime.
Afterlookingatawidernageofcustomsdeclarations,theITChadproposed
convertedratesfornumerousproducts,entailingthesubdivision ofexisting
tarifflines.Inthecaseofindividualproductsactuallyimportedinto
theUSA,theconversions seemedfair:customsdutiesonproductsnot
manufactured intheUSA("non-competitive "products)werenotconverted,
thoseonproductsmanufactured intheUSA("competitive "products)were
converted,andthecalculations lookedsound.only
and

PartIII
Section 1
Theproblemsarosewiththetreatmentoftheproductgroupings,
particularly theresidual"Other"headings,whichcoveredtheproducts
notitemizedinthenewnomenclature .UnlikethefirstITCproposal,"
theofferactuallylodgedbytheUSAspecifiedupwardconversionsfor
mostoftheseheadings.Furthermore,manyoftheconvertedrateswere-
made.thesubjectofexceptions.ThustheUSapproachmeantthatall
productsnotitemizedinthenomenclature weredeemedtobe"competitive "
Ν ■ , ■ 4
andsubjecttoahighrate.Theargumentforthisapproachwasthat
manyproductsmanufactured intheUSAhadnotsofarbeenimported,
andiftherewerenoconversion,USindustrywouldbedeprivedof
protection whichithadalwaysenjoyed.
TheCommission,ontheotherhand,consideredthisconversioninequitable
ontwocounts,andintheendmanagedtowinsatisfaction onbothpoints:
i
(a)Firstly,theresidualheadingsincludedproductswhichwereactually
Ν
exportedtotheUSA,butwerenotmanufactured there,andtherefore
non-competitive .TheUSAagreedtotakeout,withoutconversion,
anynon-competitive productsnotifiedbefore31July1979.The
CommissionforwardedseverallistsofproductsexportedbyEuropean
industries,andthesearecurrentlybeingexaminedbytheUS
Administration .
Cb)Secondly,theresidualheadingswouldhaveincludednotonlyall
chemicalsnotitemizedintheUSofferandcurrentlybeingproduceo,
butalso,moreimportantly,anynewproductswhichmightcomeonthe
marketin.future.InthefieldofchemicaIs,particularlyfine
chemicals,thereisaparticularly highrateofinnovation.In-
practice,theUSapproachwouldhavehadtheresultofperpetuating
theprotectiveeffectoftheASPsystembypenalizingourfuture
exportsbyhighduties;indeeditcouldhavereinforcedit,as.
probablyahighproporition offutureproductswouldhavebeen•
"non-competitive .

-4-PartIil
Section
IntheendtheUSAagreedtoexcludefutureproductsfromconversion .For
thispurposetheUSAdministration isdrawingupaListofproductsimported
intothecountrybefore1January1978(onthebasisoftheITCpublications )
ormanufactured intheUSAbefore1May1978.Productsnotonthislistwill
bebroughtunderaspecialtariffheadingcarryinganunconverted duty-
whichinmanycaseswillbereduced.TheCommissionandUSDelegationswill
alsobeabletoproposetheadditionordeletionofanychemicalproducts
omittedorwronglyincludedintheITCrecordsofimportedproducts.
InitsactualMTNoffertheUSAindicatedanumberoftotalorpartial
exceptionstotheformulaforcertainintermediate productsanddyestuffs,
butthehighestduties,afterreduction,willnotexceed20%.Medicaland
pharmaceutical productsandaromatics,however,aregivenreductionsin
accordancewiththeformula;andinaddition,theofferonfutureproducts,
withtheexceptionofdyestuffs,willnotbephasedinbutwillcomefully
intoeffecton1July1980,themaximumrate(withasingleexception :
anti-depressants )being13.5%.Therewillthusbenoincreasein
protection,evenonatemporarybasis,andforsomeproductsrelatively
lowrates(6%or8%)areoffered.Forfuturedyestuffs,theofferwillbe
implemented infivestages,thecurrentrateof20%beingreducedto15%
by1984. ~
AmongchemicalsnotsubjecttotheASPsystem,theUSAhasmadeseveral
products(mainlypetrochemicals andplastics)subjecttoexceptions,buthas
madeusefulcuts,particularly onantibiotics,medicinesandperfumery.
Whilebeforethenegotiations 80tarifflines-6%oftheUSA'sdutiable
importsfromtheEEC-weresubjecttodutiesover20%,onlytwo<0.16%
ofimports)nowbearsuchduties.

-5-PartIII
Section 1
ThereductionsmadebyJapanresultinrelatively lowrates(withsome
exceptions:menthol,citricacid).Theconcessionsonfinechemicals
(particularly medicines)areespeciallyuseful.
Canadamadesomeusefulconcessions,e.g.sodiumhydroxidereducedfrom
15%to0%;bindingofthesuspensionfor.xylenesatzero;someanti­
bioticsreducedfrom15%to9.2%.Fordyestuffs,suspensions werebound
atzeroorrates'reducedfrom15%to12%(otherpigmentsfordyestuffs).
InthissectorAustralia'soffercoveredperfumery,pharmaceuticals and
someplastics.
OntheCommunitysidefertilizers andthermoplastic materialsandtheir
precursors,giventheirsensitivesituation,weremadesubjecttowith­
drawals.Torealignitsownofferwiththoseofitspartners,the
Communitydecidedtoreduceitsofferondyestuffsandseveralfine
chemicals,particularly productsmainlyexportedbyEasterntradingarea
countries. •
TheCommunity'stwofoldaimhas.beenachieved,astheASPistobe
abolished,andtheaveragetariffreductionswillbesizeable.For
bilateral EEC-USAtrade,theywillbeoftheorderof35%.Japanwillcut
itslegalratesofdutyonimportsfromtheEECby48%,anditsapplied
ratesby26%,whileEECdutiesonimportsfromJapanwillbereduced
1byabout35%,Canada'sreductionsaresmaller,andoftentaketheform
> ^
ofbindingsofsuspensions orceilingrates.
Buttheaveragetariff^afterreductionwillbe:
EECvis-&-visJAPAN:8.1%
JAPANvis-à-visEEC:5.7%

PartIII
Section 1
AstheUSAcouldnotimplementitsconcessions onASPchemicalsuntil
theentryintoforceofthecustomsvaluation code,whichisscheduled
for1January1981,theUSAandtheCommunityagreedbilaterally to
bringthecodeintoeffecton1July1980.Pendingimplementation of
theUSconcessions ,theEECwillnotmakethefirstone-eighth cuton
productsinCCTchapters29,32and39untilthatdate;theUSAwilldo
likewiseforthecorresponding chemicals.Thesecondstagewillstarton
1January1981,thuscomingbackintolinewiththenormalschedule.
V
TheUSAhasalsopromisedthatduringthetransition periodbefore
abolitionoftheASP,theUSCustomswillexamineeachnewcasecarefully
inordertoavoidanyinadvertent application oftheASPtoproducts
whichshouldnotbesubjecttoit.TheCommission reservedtherightto
seekconsultations incaseofdifficulties (seeexchangeoflettersin
AnnexA8).

- . Part III
Section 1
5.2 .Textiles
TheCommunity still retains major export interests :inthis sector ,beset asit
isbyproblems andundergoing aprocess ofindustrial redeployment .
In1976 ,theEECexported about 6.000 million E\JRworth oftextiles ,butwas
nevertheless anetimporter ,itsimports forthat year being worth about 9.000
million EUR (ofwhich about 2.000 miIlion EURforrawmaterials ).
The EECopted ,intextiles asintheother sectors ,for areduction inaccordance
with theSwiss "harmonizing "formula ,achoice made allthemore suitable here as
isthis asector where ourpartners ,particularly theUSA<1),hadhigh duties ,and
harmonization allowed burden sharing .
Asthe initial offers oftheUSA,Japan andCanada had listed numerous exceptions
/
inthis sector ,astate ofaffairs aggravated bywithdrawals inDecember 1978 ,
theCommunity found itseld obliged toreadjust itsoffer ontextiles .Despite
protectionist pressures intheUSAtoexclude textiles from thenegociations ,it
wasfinally possible tonegotiate adjustments and improvements intheconcessions
particularly onthepart oftheUSA .
\
Thenegociations resulted inai\average reduction oftheorder of204 (2)bythe
EEC,theUSAandJapan onimports from allsouces .Canada 'saverage reduction was
about 10% (3).Australia ,which has hadrecourse tosafeguard measures ,made no
concessions ,andthe other developed ordeveloping partners likewise offered no
concessions ,orminimal ones .
Atbilateral level ,the USreduction onimports from the EEC is27.5% (4)andthe
EEC'sreduction is22.6% ;the USA'accepted theprinciple ofhigher bilateral cuts
onitspart tomake upforthedisparities between the initial duties inthis
.sector .
(1)80%ofUSimports subject toduties above 20%aretextiles .
(25Asintheother sectors ,allpercerntages a.reworked outonthebas.is of ■
imports interms ofvalue .
(3)Onthebasis oflegal rates . .
(4)This figure takes into account thequantitative deterioration oftheUS
offer duetothefact that theoffer onproducts liable tomixted duties
wasformulated mainly orwholly interms ofadvalorem duties .

Part III
Section 1
The weighted average ofUSduties vis-a-visthe EECfell from 19.5% to14.1%
while the EECaverage vis-a-vis the USA isreduced from 13.1% before the
negociations to10.3% .Despite exceptions athigh duties ,theproportion of
USimports .from the EEC subject toduties over 20%comes down from 48%before
the negotiations to19% after . " .
TheCommunity attempted torationalize andharmonize itsoffer bymaintaining
duties oftheorder of8%onyarns ,10%-11%on.fabrics ,and 13% -14% on
clothing .Italso maintained protection inthis sensitive sector ,particularly
onsynthetic ;yarns(1 ),with aduty of9%,ontufted carpets ,with aduty of
14%,andonsome imports (e.g. linen fabrics )from Eastern trading area
countries ,again with a14%duty .
The USreductions have helped simplify and harmonize the UStariff .The EEC
haswonquantitative andqualitative concessions on,forexample ,silk and wool
fabrics ,aswell asreductions inthe following areas :
-synthetic yarns :from 16%to10% and 14%to9.1%
-cotton fabrics :from 18% /22% to12% /15%
-silk fabrics :from 11% to6%
-woollen fabrics ofavalue higher than S9/lb:from 44.4% to33%
-hosiery :from 23%to17%
-women 'swoollen clothing :from 23% /24%to17%
-woollen pullovers :from 24%to17% ^
-cotton dresses :from 21% to12% .
The Japanese tariff ,which also featured peaks ,hasbeen harmonized ,thepro­
portion oflegal duties over 15%having fallen from 37%to12.5 %.
Itshould benoted ,however ,that while there mayten0rea l-improvement -.in
market access fortextile products (fewreductions inapplied duties ),bindings
inthis sector arenot without value ,since theCommunity has anexpanding
market inJapan for itsclothing exports .,
(1)Inconnection with these products theCommission 'sstatement tbthe Coucil
inApril ,onthe incidence ofenergy andoil-based rawmaterial prices ,
should also beborne inmind .Consultations arecurrently under waytoget
aclearer picture ofthe situation inthe USA .

PartIII
Section 1
TheEECisanetexportertoCanada(1),andsomeoftheCanadianconcessions,
whilelimitedinscope,arenevertheless useful,e.g.theofferofareduction
from20%to12.5%onsilkheadscarves .
Toallowtimetocompletetheindustrial adjustments neededinthissector,the
tariffreductions (2)will-onlystartfortheCommunity anditspartnersin1982,
andwillmostlybephasedoverasix-yearperiod. •
TheCouncilhasalreadynotedthattheUSAhasmadethemaintenance ofitstariff
concessions ofthetextilesectorsubjecttothecontinuation ofsatisfactory
/,' ■ '
tradearrangements fortheseproducts.
'7
Inthesecircumstances ,bearinginmindthedifficultsituationinthissector,
theCommunity hasreservedtherighttoreviewitsownconcessions intheabsence
ofamutuallyacceptable arrangement regardinginternational trade ,intextiles.
.(1)In1976exportswerenearlyseventimesgreaterthanimports,whichwere
worth31*millionEUR.
(2)Chapters51to62.

-10-" PartXII
~* Section 1
Steel
IntheironandsteelsectortheUnitedStates'offerwas,tobeginwith,
madecontingentupontheachievementofUSseotoralobjectivesandthe
natureofthemeasurestakenbytheprincipalproducercountriestoreduce
whattheAmerioansreferredtointheirinitialofferascyolioaldistortions
resultingfromtrademeasures*
Onlyafteragreementwasreachedonthesetting-upoftheCEO'sSteel
CommitteewastheUnitedStatesabletodroptheseconditions.Promthe
outsettheUnitedStates'offeralsostipulatedamandatoryexceptionfor
specialsteels.Inaddtion,partialexceptionsweremade,formajorexport
productssuchascoils(TSU3608.84)andgalvanizedsheetsandplates(TSUS
608.95). ' '
*
TheCommunity,however,obtainedcertainimprovements fromtheUnitedStates,
exceptonspeoialsteels,andsecureditsagreementtocontinuethe
harmonization whichwasstartedbackintheKennedyRound.Mentionshouldbe
madeoftheconcessions onironandsteelsheetsandplates(TSUS607.83)
from8ioto5*1%%°n"tubes,pipesandsections"(TSUS610.52)from13
to7.5$andon"tubeandpipefittings"(TSUS610.80)from11$to6.2
CanadafollowedtheUnitedStatesbymakinganexceptionforspecialsteels
andcertainotherproductsinthissector.
Japan'sofferalsoledtocutswhichresultedinmoderaterates.
TorestorebalancetoitsownofferstheCommunitymadecompleteorpartial
exceptions ,forspeoialsteelsandcertainironorsteeltubesandpipes.

11 PartIII
Section1
Althoughtheaveragereductionmadebythemajorpartnersinthissector
wasoftheorderof20$thebilateralincidenceoftheUSoffervis-ar-vis
theCommunityisaround29.5$(l)andthatoftheCommunityvig–a^-visthe
UnitedStates24$inasectorinwhichUSimportsfromtheCommunityare
muchhigherthanCommunityimportsfromtheUnitedStates.
InordertohelptheEuropeanironandsteelindustrytocopewiththe,
repercussions ofthetariffcutstheCounoilagreedthatforCCTheadings
-73.01to73.20thecutswouldnotstarttobemadeuntil1982#TheUnited
States'scutswillbestagedaccordingtothesametimetable. '
TheUnitedStatesconvertedspecificdutiesonproductsofthissector
pursuanttoArticleXXVIII;thevariationsinincidencerelatingtothis
conversionoperationarenottakenintoaccount*

-12- PartIII
Section 1
Paper
Thissector,inwhichtheEEChasabigtradedeficit,wasatoppriority
fortheUnitedStatesandCanada,particularly inviewoftheCommunity's
agreementwiththeEFTAcountries.Takingaccountofourpartners'initial
offerstheEEC,in-ordertobalanceitsoffer,madewithdrawalsinthis
sectorintheformofmaintenanceofcustomsdutiesforkraftpaperand"board
andamaximumcutof3pointsforotherpaperandpaperboardofChapter48
oftheCET.Itwasfound,however,duringthebilateralnegotiations ,that
theUnitedStateswasparticularly interestedinCommunityconcessionsinthis
sectorandconsidereditakeyareaofthenegotiations »
Accordinlgy ,theCommunityintheendfeltthatitwouldbeadvisabletomake
somefurtherreductionsinthepapersector.
Thedutyonkraftpaperandboardwill"becutfrom8$to6%exceptinthe
caseoflarge-capacity bags.MentionshouldbemadeoftheUSpressurefor
kraftlinertobedefined(seeletterfromViscountDavignontoAmbassador
McDonaldinAnnexI,PartIII,Section1,letterA12).
Themaximumreductionisstill3pointsfortheotherproducts,exceptfor
coabedpaperweighingmorethan160gof480O7C,wallpaperandcertain
specialized products.
Whileourpartnersmadeverybigcuts(between35$and60'fa)inthissector
theEEC'sreductionvis-ar-vlsMFNoriginswasslightlylowerat25%(l)
thantheoverallreductiononindustrialproducts®Vis-a-vistheUnitedStates
thereductionwasaround26$(l)«
PaperofinteresttotheEECfromtheexportanglewerethesubjectof
concessionsinlinewithorgoingbeyondtheformula "bytheUnitedStatesand
Canadaandgenerallyinlinewiththeformula "byJapan.
(l)Thesecalculationstakeaocountofthe30$reductionondutiesappliedto
newsprintimportsoutsidetheboundquota.

»
-13-PartIII
Section1
Mentionmaybemadeofcutsonwallpaper–from5^to0^intheUnited
Statesandfrom15$to7»5$inCanada-andUScutsforcertainprinting
papers,from4*8i°"t°1*9
Inviewofthespecialdifficulties ofthepaperindustrytheconcession
onkraftlinerwill"beimplementedinthefirstphaseintwostagesof0.5point
eachin1983and1984and,inthesecondphase,intwostagesof0.5point
eachinI986and1987*
AttheAprilCouncilmeetingitwasdecidedthatonthebasisofregular
reportsfromtheCommissiontheCouncilwillmonitordevelopments inthis
industryandtakeappropriate measuresonproposalsfromtheCommission.
TheCommissionalsostressesitsdetermination topursueitseffortsto
combatdumpingharmfultotheCommunityindustrybyseeingtoitthatthe
exportpriceschargedbytheprincipalproducercountriesarenotbeloweither
theirdomesticpricesortheirnormalcosts.Mentionmaybemadeofcutsonwallpaper–
Statesandfrom15$to7»5$inCanada–
papers,from4*8$"t°1*9

-14 Part III
Section 1
Wood
Inthewood sector ,which wasinitially subject tothetariff-cutting formula ,
there were withdrawals andoffers inexcess oftheformula going asfaras
exemption inview ofthepartners foffers andthedeveloping countries'
requests .
Thewithdrawals concerned panels (44*15 plywood ,44*11 fibre panels and
.44*18 particle panels )theduties onwhich were harmonized at10
TheUnited States and Canada ,whioh regarded this asanimportant sector
ofthenegotiations ,airetheprincipal beneficiaries oftheincrease inthe
bound quota forconiferous plywood from400000m^ito 600000m^(seeletter
onrplywood inAnnex I,Part III,Section 1,letter A13)* ,
Theaverage Community reduction inthis eeotor was27*5 $.for allorigins
and37$and .40$(l)vis-a-visCanada andtheUnited States .
(l)Including theincrease inthequota forconiferous plywood .

-15-Part III
Section 1
5.6Rawhld.es andskins ,leather ,furskins andfootwear
%
»
Onthewhole ,reduotions inthis seotor (l)were below average .
Λ
Intheir initial offer theunited States ,Japan andCanada made partial or
total exceptions foralarge proportion oftheproducts ofinterest totheEEC.
TheEEC also felt obliged tomake withdrawals iThese ooncerned footwear .
(total withdrawals ),certain leather garments (rate harmonized at7$)»and
gloves (rate harmonized at10/£)•IIalso sought toobtain improvements from
itspartners butonly small ones were possible .
Sinoe theUnited States had0MA.S (2)with certain developing countries in
respeot ofcertain kinds offootwear (3)ithadnoroom formanoeuvre under
*itslegislation (mandatory exceptions ),andthere were humerous other produots
where theEECaccounted foronly asmall share ofUSimports andtheaverage -
prices ofimports from theEECwere much thesame astheimport prices of
itscompetitors *Nevertheless ,improvements were obtained ,particularly
forcross -country skishoes andleather bags worth more than s£20.
«
Furthermore ,bigimprovements vrere obtained ongloves worth more than £20
perdozen (from 25$to14$)•
Asintheoase ofchemioals (seeSeotion 5*1onchemicals )theUnited States
will convert theduties onrubber andplastio footwear subject totheASP *
This conversion will ,however ,take place on1July I98I andwill notbe
accompanied byareduction .TheEEC ,however ,manages toensure that the
conversion would notaffect sports footwear worth more than $12andsecured
theestablishment ofamixed duty forfootwear worth between ^6.50and^12,
theinoidenoe ofwhich deoreases astheprice inoreases .
(l)Chapters 41#42,43and64°?theCCT.
, S
(2)Orderl:-*' Market Agreement *"Voluntary restraint "agreement vith South Korea/L.*-LV
.and iaiwan .
(3)Other than rubber .

-16-
PartIII
Section1
Theaveragebilateraltariffreductions (1)aredeterminedbythestructure
ofimports:around500millionsworthoffinishedEuropeanexportsand
around$50millionworthofprimaryUSexports(leather-particularly
WetBlue)wereaffected.
ForinternalhistoricalreasonsJapanhasalwaysmaintainedhighdutiesin
thissector,someofthemnotbound.DespitepressurefromtheEECitwas
notpossibletoobtainsatisfactory cutsfl?omJapan.Sincethelevelof
CommunityimportsfromJapaninthissectorislow(2fo)itwasnotpossible
toisolate"Japanese"productswithaviewtomakingwithdrawals.The
Communityreductionvis-a^-visJapanis18%andJapan'scut,thoughnegligible
inquantitative terms,nevertheless includessomebindingsandreductions
onfurskins.
WithnumerousinitialexceptionsCanadafolloweditssouthernneighbourand
madefurtherwithdrawals.OnfootwearalreadysubjecttoanArticleXIX
procedure,itgrantedconcessionsattheendofthenegotiations :shoesand
bootsfrom25$to22.5and.skibootsfrom25$to20Thiswas,however,
aconcessionforthefutureasrestrictions onfootwearimportscontinueto
exist.
Australiahaditselftaken"escapeclause"measuresonfootwear(ArticleXIX)
andthereforedidnotmakeanyconcessions.footwear(ArticleXIX)
(l)UnitedStatestariffexitinrespectofimportsfromtheEECs51°»
Communitycutvis-a-visimportsfromtheUnitedStates:27»8

17 PartIIISection .1
Hon–ferrousmetals
Proposalstocutsubstantially orabolishdutiesinthissectorwereput
forward ,"byCanadatinderthesectoralapproach*Intheeventtheseproposals
weretosomeextentreflectedintheUnitedStatesoffer;Japan,however,had
appliedtheformulawithexceptionsonrelativelyhighduties.
TheEEC,whichhadinitiallyappliedtheformulaonrelativelylowduties,
wasnotabletofollowCanada'sapproach,especiallyasthelatterwas
generallynottheleadingsupplieroftheseproduts.TheCommunity,inorder
torestorebalancetoitsoffer,madewithdrawals onraremetals,certain
unwroughtmetals(aluminium,lead,zinc,magnesium,titanium)andonmost
semi-finished goods,includingthosemadeofcopper.Nevertheless ,thegaps
betweenthedutiesappliedtounwroughtmetalsandthoseapplyingtosemi­
finishedproductswillgenerally "bereduced..
Theoverallcutsvaryfrom8.7$(l)forJapantoaround35$"theUnited
StatesandCanada(2).TheEECcutitstariffby15$inthissector.The
biggestvolumeoftradeisbetweentheUnitedStatesandtheEEC,involvingon
eachsideatotalofaround^300million.TheUnitedStateswillreduceits
dutiesbyaround31.4%(3)vis-a-vistheEECandthelatterwillcutitsduties
by17*3$vis-a-vistheUnited'States.
AmongtheconcessionsofferedbytheUnitedStatesmentionmay"bemadeof
cold-rollednickelangles,shapesandsections(TSUS62022)from^$to4.7$,
uncoatedaluminiumbars,rodsandfoil(TSUS61825).from3.8$to3$and
unwroughtmagnesium(TSUS62855)from20$to8fo.Unwroughtandrefined-
titaniumwasinitiallycompletelyexcludedexceptforoneexheadingonwaste.
TheEEC,whichemphasizeditsexportinterest,eventuallyobtainedaconcession
onthesetwoheadingsof18$to15
(1)Calculatedontheappliedrates.Reductionof21$onthebasisofthe
legalrates.
(2)Thereisverylittlevariationbetweenlegalandappliedrates.
(3)TheUnitedStatesconvertedspecificormikeddutiespursuanttoArtiole
XXVIIIforproductsofthissector;thevariationsininoidencerelating
tothisconversionoperationarenottakenintoaccount. f

-18- p^tm
Section 1
Ceramics
Whendecidingwhichconcessionstowithdrawinordertorestorethe"balance
ofitsoffervis-a-visitspartners,theCommunityseleotedaconsiderable
«
numberofceramicsproductssincemanyoftheproducershadtocontendwith
low-pricedimportsfromcountriesofferingnorecriprocalconcessions (Eastern
tradingareaandcertaincountriesinSouth-EastAsia)•
Forthemanytariffheadingswhicharesubjecttoadvaloremdutieswithspecific
minimumamounts,calculationoftheincidenceofthoseamountsshowedthatthis
wasalmostinvariablybelowtheadvaloremduties.Thisisduetoprice
trendsinrecentyearsandexplainswhytheEECmaintainedadvaloremdutiesbut
offeredtodoawaywithspecificminimumamounts.Thelattermeasurehasbeen
deferredandwillnotstartuntil1982.
TheEECalsowithdrewanumberofpureadvaloremduties.
DetailsofUStariffconcessionsinrespectofceramictablewarewillbegiven
intheseparatereportontherenegotiation ofArticleXXVTII.Mentionshould
bemade,however,oftheconcessioncuttingtherateforporcelainorchina
tableware(withtheexceptionoftablewareforthecateringindustry)from
17.5$to8$.
Furtherconcessions inrelation ,toinitialofferswerealsoobtainedfromthe
UnitedStatesandCanadaforceramictiles(cutsfrom22.5$to19$onvarnished
orenamelledtilesbytheUnitedStatesandfi*om20$to12.5$onceramictiles
byCanada).
Canadaalsomadesignificant concessionsforceramictableware.
/
Tariffcutsinthissectorvariedfrom16$inthecaseoftheEECto43%
inthecaseofJapan(26$inrelationtotheappliedrates).TheUnitedStates
cutitstariffby22$andCanadabyabout41$(approximately one-thirdin
relationtotheappliedrates)«
Itshouldbeaddedthatowingtothefailureofthenegotiations withJapanon
theabolitionofquantitativerestrictions ,therestrictions vis-a-visthat
country(andtheEasterntradingarea)willbemaintainedinthissector.

-19
PartIII
Section 1
Mechanical engineering
Afterthecivilaircraftsector,thissectoristheoneinwhichthe-
fewestexceptionsweremadeintheoffersoftheUnitedStates,Japan,
Canadaandthe'EEC.'
Itcomprisesaverywiderangeofproducts:engines,liftingandhandling
machinery,buildingequipmentandmachinery,agricultural machinery,
officeequipment,computersandmachinetools.
TheCommunity *saimhasbeentoobtaingreateroutletsonthemarketsof
itspartnerssinceEECexportsinthissectorwerethreetimesgreater
thanitsimportsin1976.Inaddition,thedutiesleviedbyJapanand
CanadaareonaveragehigherthanCommunityduties,whichareintheirturn
slightlyhigherthantheUnitedStatesaverage.
Nevertheless ,theCommunityofferdidnotcontaincutsforfivelipes–
sewingmachines,certainboringmachines,ballbearingsandrollerbearings
whilepartialexceptionsweremadeforanumberofotherlines.
TheUSofferexceptedonlyfourtarifflines:total'exceptionsforcertain
ballbearingsandmachinetoolaccessories andpartialexceptionsfor
certainironorsteeltapsandvalvesandcertaingearboxparts.
Themostsignificant concessions obtainedinthissectorconcerneddigging
machines,from5$to2.Sj£,liftsandconveyors,from5$to2$,andtextile
machinery,from1%"to4*7%andfrom6%to4«2?S.Concessionsthatwent
"beyondtheformulawereexchanged,inparticularwiththeUnitedStateson
productsofcommoninterestas"cross"exports(viz.pumps,refrigerators ,
certainprintingmachinery,certainmachinetoolsformetalworkandcertain
othertools).
Chapter84oftheCommonCustomsTariff,withtheexoeptionofaircraft
engines•

-20-
Part III
Section 1
Inrelation tothelegal rates ,partial exceptions were made foronly ten
tariff lines (outof500)intheJapanese offer ,viz .industrial steri­
lisation ,pasteurisation andother equipment ,farming machinery and
certain machinery forfood processing ,printing ,thetreatment ofleather
andfootwear andthetobacco industry .Themany significant concessions
included that onnuclear reactors ,forwhich thetariff wascutfrom 15$
to6.570
»
Canada toomade very fewexceptions inrelation tothelegal rates .On
theother hand ,itsoffer inrespect ofcomputers (down from high rates of
duty toaslittle as3*9% )and "the"machinery programme "achieves major
reductions andoften does away with thedistinction between whether ornot
goods are "Made inCanada ",thus bringing therates down .
Thereductions made bytheCommunity 'spartners average 33!$fortheUnited
States ,64$forJapan (52$ontheapplied rates )andaround 47$forCanada
(approximately 32$ontheapplied rates ). TheEECaverage wasonly 30$
orsoowing tothelowrates ofduty itapplies inthis sector .
A
Onabilateral level ,theUnited States made tariff cuts of32$vis-a-vis
theEEC ,while theEECreduced itstariff by36$.TheCommunity offered
a20$reduction vis-s^-visJapan ,while Japan offered toreduce itstariffs
by58$ (44$ontheapplied rates )inrelation totheEEC .
-TheCommunity offer vis-a-visCanada was40$andthecorresponding
Canadian offer was 5Cf/o(approximately 35$ontheapplied rates ). Imple­
mentation of^concessions onvapour generating boilers andauxiliary plant
(84.01 and84.02),steam power units (84-05 ),water wheels andwater tur­
bines(84.07),certain gasturbines ,engines andparts(84.08BII ,84-08 C
and84.O8 DIl)andwireless telephonic andtelegraphic apparatus (85.13 B)
1hasbeen postponed fortheEEC ,Japan andCanada until theUSconcessions
onthese products take effect .TheUnited States hasmade itsownappli­
cation ofconcessions onthese products conditional ontheinclusion of
theentities purchasing such products inthegovernment procurement code .
ΛIntheform ofageneral reservation .

-21PartIII
Section 1
5.10.Electrical andelectronics sectors
1TheEECexports 1twiceasmuchasitimportsinthissector.Its
objectivesintheelectricalsectordifferedfromthosforelectronics,
however.
IntheelectricalsectortheEEC'saimwastoopenupthemarket
andonseeingitspartners *offersit^madewithdrawals withregardto
•sometarifflines(notablygenerators,motorsandtransformers )and
negotiatedreciprocalconcessionsgoingbeyondtheformulainthecase
ofsomeproducts.
TheEEChadtwoobjectivesintheelectronicssector:first,to
enableCommunityindustrytomaintainitspresentrolein"consumer"
electronics inthefaceofcompetition fromcountries ,whichdidnot
makeanycounter-offer inthenegotiations ;second,toretaincertain
meansofencouraging theemergenceofaCommunityindustryinthefield
ofmicrocircuits ,wheretechnological innovationisthekeytothe
development offutureproducts.downstream.
Sofaras"consumerelectronics (radioandtelevisionsets)are
concerned,theCommunityhadofferedtoapplytheformulabutmade
withdrawals onseeingtheoverallpackageofoffersmadebycertain
partners.
Withregardtomicrocircuits ,theCommunitycompletelywithdrew
itsoffer.Theadvantagetobederivedfromthestrategyfollowed
depends,however,onthemeasurestobetakentodevelopthis
sector.
Reductionsinthissectorvaryfrom13%inthecaseofthe
EECto59.4%forJapan(42.3%ontheappliedrates);theUnited
States1reductionis25.8%andCanada'sisaround47%(approximately
30%ontheappliedrates).
AtthebilateralleveltheCommunity'sreductionvis-a-vis
theUnitedStatesandCanadaisaround18-19%butonly9%vis-a-vis
Japan.
TheUSA'sreductionvis-a-vistheEECisonethird,while
Japan'sis59%(44%ontheappliedrates)andCanada'sisaround
42%(approximately 24%ontheappliedrates).-
1Chapter85oftheCCT.

-22-
PartIII
Section 1
.\ ...15.11.Precisionandopticalinstruments,clocksandwatches
Intheprecisioninstrumentandopticalsectorsthetradebalance
2isinsurplus,whereasintheclockandwatchsector-wherethe
volumeoftradeissmaller-itisindeficit.
«
TheEECmodifieditsinitialofferonlyslightlyonseeingits
partners *offers.Withdrawals weremadeinrespectofonlyfour
tarifflines:lenses(90.02);microscopes (90.12);certainelectronic
measuringinstruments (90.28);roughwatchmovements (91.11E).
TheUSofferalsocontainedfewexceptionsandinthissector,where
USdutieswerehigh/ausefuldegreeofharmonization wasachieved
fromthestandpointofquality.Furthermore,sofarasclocksand
watcheswereconcerned,theUSofferresultedinarestructuring of
theUStariff,withtheintroduction ofvaluebrackets.
TheJapaneseoffercontainedexceptionsforlensesandspectacle
frameswhichwereparticularly keenlyfeltbytheCommunityindustry.
TheCanadianofferalsocontains'fewexceptions (mainlyinrespectof
"largeclocks").
TheEECreduceditstariffinthissectorbyaround38%vis-a-visall
itspartners,resultinginanaveragelevelofdutyof6.5%.It.
obtainedaredactionof48%fromtheUnitedStates,givinganaverage
of5.5%,42%fromJapan(21.3%ontheappliedrates),whichgivesan
averageof6.4%,andaround43%fromCanada(approximately 35%on.,
theappliedrates,givinganaverageof8.4%.
1Chapters90and91oftheCommonCustomsTariff.
^2.500millionEURforexportsfexcludingEFTA)and2000millionEURfor
importsfrom"mostfavourednation"countries.
/
220millionEURforexports (excluding EFTA)and230millionEURfor
importsfrom"mostfavourednation"countries.

15.12.Vehiclesandcycles-23-
PartIII
Section 1
•In1976theCommunityexportedfivetimesmorethanitimportedin*
thissector.Butthisfiguredoesnottake-intoaccount •investment •
andmarkettrendsandcoversavariedsituationcharacterized bya
fermentoftechnological changeresultingbothfromenergyproblems
andfromtheroleofcertainfactorsinthestrategyofdesignand
assembly,whichisessentially whatmotorvehicleproduction amounts
to.
ί ,· _
Inadditiontothetechnological transformation alreadybegunby
certainUSandJapanesemanufacturers (anti-pollutionmeasures,
introduction ofelectronics *automotiveindustriesarebeingdeveloped
inothercountries.IntheCommunitycommercialvehicleindustry,
moreover,thefollowingfactorsmaybeobserved:
.i.thesector'sstructuraldifficulties havenotyetbeenovercome;
ii.productionofcommercialvehiclesintheEECisrelatively low,
numerically speaking,bycomparisonwiththeUnitedStatesandJapan
*iii.commercialvehiclemarketsinthedeveloping countreshaverecently
•beenlost.
Initsinitialoffer,theUnitedStatesproposedtoabolishits3%
dutyoncars.Itsfinal'concession wastoreducethedutyto2.5%,
asitspartnerswerenotpreparedtopayforareductiontozero.
/
Apartfromtheexceptionwithregardtolorries,'(25%),nodutyon
motorvehicleswillexceed4.2%.Thereisanexceptioninrespect
ofbicycles,butdutiesonpartswillbebelow10%.-.
TheEECreduceditsdutiesoncarsfrom11%to10%andonlargemotor
coachesandbusesfrom22%to20%.Itmaintaineditsdutiesonsmall
motorcoachesandbuses(11%)andonlorries(22%)andfhaintainedits
dutiesonallvehiclesdrivenbyenginesothertharrspark''ignition
orcompressionignitionengines(10£forlorriesand12.5%forcars,.
motorcoachesandbuses).TheEECreduceditsdutiesonmotor-cycles
from10.5%to9%andmaintaineditsdutiesoncycles(17%).
Generallyspeaking,itappliedtheformulainthecaseoftractors,
carchassis,andpartsandaccessoriesforcarsandmotor-cycles .
Chapter87oftheCCT.

PartIII
Section 1
Canadareduceditsdutiesonmotorvehicles(andonmanyparts)and
onelectrictrolley-buses from15%to9.2%,onbicyclesfrom25%
to13.2%(witheffectfrom1January1983,overaneight-yearperiod)
butmaintainedcertainexceptionsinrespectofbicycleparts.The
« •
reductionbytheUnitedStatesandtheEECis19%whereasJapan's
redcutionis83.5%(46.1%ontheappliedduties).Theimportanceof
non-tariffbarriersinthissector,notablyinJapan,shouldalso
be"borneinmind.
Canadaofferedareductionofaround40%(approximately 30%onapplied
duties).

-25
Part III
Section 1
5.13 Civil aircraft
This sector isdealt with separately insection 6ofPart III .
Many oftheproducts onwhich tariffs ,areabolished areones
onwhich duties have already been suspended inthe EEC .Duties are
already suspended onpart ofthe Canadian concessions .The
Japanese import system ismore complex but duties have also
been suspended for certain products byadhocdecision .On
theother hand ,theUnited States ,which iscurrently the
largest exporter ,levied theduties which are tobeabolished
atthe ful Irate .

-26-
Part III
Section 1
Other industrial products
Metal articles
Most parties have applied thegeneral tariff-cutting formula ,
with the result that theduties levied onCommunity goods have
been reduced by37% bytheUnited States ,46% byJapan (29.5%
ontheapplied rates )andapproximately 40%byCanada onboth
the legal andapplied rates . '
The EEC reduced itsduties onproducts from the United States
and Canada by31% and onJapanese products by22% .
Itshould benoted that the EEC :
(a) withdrew anumber ofconcessions oncutlery (inparticular
knives and blades ,scissors ,spoons and forks );
(b) obtained certain improvements inthe U.S. offer ,especially
for scissors (areduction from 34.4% to20% onscissors
costing over 21.75 perdozen ).
Glassware
The EEC decided towithdraw anumber ofconcessions oncertain flat
andhollow glass and glass fibre products primarily owing tothe
lack ofreciprocity onthepart ofthemain suppliers ofthese
products (mainly thestate-trading countries ).
The United States excepted flat glass ,towhich very lowduty rates
apply ,and aproportion ofhollow glass products .However ,it
offered reductions onproducts ofinterest tothe EEC,inparticular
oncrystal costing over 25apiece (down from 10.5% to6%).
Theduty oncrystal glasses hasbeen reduced inCanada too (from 20%
to11.3% .) •

27-
Part III
Section 1
ν-
The total EEC reduction inthis sector is23% .Vis-a-vis
theUnited States ,however ,the cut isasbig as28.4% and --
the U.S. reduction onCommunity goods is29.6% .The EEC
reduced itstariff ongoods from Japan and Canada -countries
with which thevolume oftrade ismuch smaller -by30% and
they fortheir part reduced their tariffs by50%and35%
respectively (legal andapplied rates ).
Articles ofStone
The EEChasobtained significant concessions from theUnited
States andCanada ,particularly formarble andarticles of
marble .
Fuels
Asaresult oftheU.S. move ,noconcessions were made foroil
orrefined products bythemain partners .
Rubber
The United States maintained a5%duty ontyres (aproduct
previously onthe Final List which wasabolished during these
negotiations ).Japan granted concessions higher than theformula
formotor vehicle tyres ,resulting inrates of5.8% and6.5% .
The EECmade offers based ontheformula orgoing beyond it-(a
final rate of5.8% inthe case oftyres ),except forconveyor
belts .^
Precious metals and jewellery
The EECobtained very substantial reductions from itspartners in .
this sector .Itisworth noting that .theUnited States offered
zero rates fordiamonds (previously 5%)andcertain cutbutunset
precious stones forjewellery (previously 4%).Japan reduced its
./.
1 • An •a« ■ ■ •t> a • 4 -1-1Anoffer with regard tothis product was -made conditional onthe
--abolition ofnon-»tariff barriers in -the United States .

-28-
Part III
Section 1
duties oncutdiamonds forjewellery from 5%to2.5% andonother
precious stones forjewellery from 5%to3.2% .
Canada offered toreduce itsduties onjewellery (diamonds are
already exempted )from 25% to11.3% ..
Medical instruments andaudio-visual recorders orreproducers
Inorder torestore balance toitsoverall package ofoffers vis-
a-vis certain partners ,the Community did notmaintain all its
offers .Itwithdrew the concessions ithadoffered inrespect
ofcertain musical instruments (accordeons ),sound recorders and
reproducers andvideo-recorders .However ,itobtained from its
partners concessions for itsmain exports which were asgood as
orbetter than the formula .
Firearms .
The EECobtained significant concessions despite certain exceptions
made initially byJapan .
Furniture
Inthis sector significant concessions were offered byboth the
United States andJapan .Canada ,however ,maintained theexceptions
ithadmade for wooden furniture ..
Toys and sports equipment
The EECapplied theformula inthis sector ,through making better
offers for anumber ofproducts .
./.

Part III
Section 1
Concessions ofconsiderable interest totheCommunity were offered ,
inparticular bytheUnited States and Canada with regard totoys
and skis and accessories .

30-
Part III
Section 1
Renegotiations ofArticle XXVIII
InOctober 1978 ,theUnited States ,inamove onthesidelines
ofthetrade negotiations ,invoked Article XXVIII inorder to :
«
(a) modify thenomenclature ofitstariff inthe ceramics
sector ,
<b) offset theincreased duties resulting from changes made
inthe nomenclature ofits tariff in1968 for mixed woollen
fabrics ;
(c) convert specific ormixed duties into advalorem duties ,
with particular reference tonon-ferrous products ,steels
andball bearings .
These renegotiations were accompanied byanoffer inthecontext "
ofthe MTNs . -
Aseparate andmore detailed report describing theoutcome ofthese
renegotiations will besent totheCouncil atalater stage for
conclusion .