Proposal for a COUNCIL DECISION on the signing, on behalf of the European Community, of an Agreement in the form of a Memorandum of Understanding between the European Community and the Democratic Socialist Republic of Sri Lanka on arrangements in the area of market access for textile and clothing products, and authorising its provisional application

(presented by the Commission)

EXPLANATORY MEMORANDUM

In accordance with the Council negotiating directives of 9 November, the Commission has negotiated a Memorandum of Understanding concerning market access in the textiles and clothing sector with Sri Lanka.

The agreement provides that Sri Lanka will:

- Bind its import tariffs for the textile and clothing sector within the WTO at the rates the European Union considers appropriate for developing countries save for some rare exceptions;

- Reduce its tariffs to those new bound levels where they currently exceed them;

- Undertake not to apply any tariffs in the sector higher than the current applied rates ('standstill') where the current applied rates in the sector are lower than the bindings;

The agreement provides that the European Community:

- Will suspend the operation of the four categories of quantitative restrictions currently in force (Categories 6, 7,8 and 21) following Sri Lanka's notification to the WTO of the agreed bound rates and its respect of the agreed rates;

- Retains the right to re-apply the quota regime at the level applicable for the year in question in the event that Sri Lanka fails to abide either by the above commitments or by its non-tariff obligations set forth in the agreement (see below).

The agreement further provides that certain categories of textile and clothing products from Sri Lanka to the European Community (being a wider range than the previous quotas) will be covered by a double checking system.

The agreement also places the Parties under the obligation not to introduce any non-tariff barriers for trade in the textile and clothing sector.

The agreement provides for periodic consultations and for consultations on request on any of its provisions and further provides that the Parties will cooperate fully concerning any necessary notifications to be made to the WTO or any of its bodies.

The Council is invited to approve this proposal for a Council Decision on the signing, on behalf of the European Community, of a Memorandum of Understanding on Market Access in textile products between the European Community and the Democratic Socialist Republic of Sri Lanka and authorising its provisional application pending the formal conclusion of that Agreement.

2000/0362 (ACC)

Proposal for a COUNCIL DECISION on the signing, on behalf of the European Community, of an Agreement in the form of a Memorandum of Understanding between the European Community and the Democratic Socialist Republic of Sri Lanka on arrangements in the area of market access for textile and clothing products, and authorising its provisional application

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 133 thereof, in conjunction with the first and second subparagrah of Article 300 (2) thereof,

Having regard to the proposal from the Commission [1],

[1] OJ C ...

Whereas:

(1) The Commission has negotiated on behalf of the Community a bilateral Agreement in the form of a Memorandum of Understanding on trade in textile products with Sri Lanka;

(2) The Agreement in the form of a Memorandum of Understanding was initialled on 5 December 2000;

(3) The Agreement in form of a Memorandum of Understanding should be signed on behalf of the Community;

(4) In order to allow its benefits to accrue to both Parties immediately following the relevant notifications to the WTO, it is appropriate to applythis Agreement on a provisional basis as from 1 December 2000 pending completion of the relevant procedures for its formal conclusion, subject to reciprocity.

HAS DECIDED AS FOLLOWS:

Article 1

Subject to its possible conclusion at a later datethe President of the Council is hereby authorised to designate the persons empowered to sign, on behalf of the European Community, the Agreement in the form of a Memorandum of Understanding on trade in textile products with Sri Lanka.

The text of the Agreement is annexed to this Decision.

Article 2

Subject to reciprocity, the Agreement in the form of a Memorandum of Understanding shall be applied on a provisional basis from 1 December 2000 pending the completion of the procedures for its formal conclusion

Article 3

1. The Commission, in accordance with the procedure referred to in Art. 17 of Council Regulation 3030/93 on common rules for imports of certain textile products from third countries [2], may modify the application of the double-checking regime for certain products, after consultations with Sri Lanka under Point 7 of the Memorandum of Understanding.

[2] OJ No L 275, 8.11.1993, as last amended by Council Regulation (EC) no 824/97 (OJ No L 119, 8.5.97,p.1)

2. The Commission shall re-apply the quota regime in the event of the failure on the part of Sri Lanka to fulfill the obligations covered by Points 2 and 6 of the Memorandum of Understanding in accordance with the procedure referred to in Art. 17 of Council Regulation 3030/93 on common rules for imports of certain textile products from third countries2.

Done at Brussels,

For the Council

The President

ANNEX

MEMORANDUM OF UNDERSTANDING

between the European Community and the Democratic Socialist Republic of

Sri Lanka on arrangements in the area of market access

for textile and clothing products

initialled in Brussels on 5 December 2000

1. Delegations of the European Community and the Democratic Socialist Republic of Sri Lanka met on 10 October and 22 November 2000 with a view to discuss improvements in access to the respective markets of both Parties for textile and clothing products.

2. The Democratic Socialist Republic of Sri Lanka agrees:

1. To bind its tariffs on textiles and clothing at the rates shown in Column 1 of Annex 1 by making an appropriate notification to this effect to the World Trade Organisation. Sri Lanka agrees to consult with the European Community prior to making the notification.

2. Where the applied rates as shown in Column 2 are lower than the rates of import duty shown in Column 1 of Annex 1 Sri Lanka undertakes not to apply any rates higher than the rates shown in Column 2 on imports into Sri Lanka from the European Community.

3. Where the applied rates as shown in Column 2 are higher than the rates of import duty shown in Column 1 Sri Lanka agrees to reduce those rates to the bound rates set out in column 1.

3. The European Community agrees that following confirmation by Sri Lanka to the Community that the notification foreseen in Point 2.1 has been effected and the provisions of paragraphs 2.2 and 2.3 have been implemented by Sri Lanka, the European Community will suspend the application of the quantitative restrictions currently in force in respect of imports of textile and clothing products from Sri Lanka (being those in respect of Categories 6, 7, 8 & 21).

4. The Parties agree that the European Community retains the right to reapply the quota regime at the level applicable for the year in question in the event that Sri Lanka fails to fulfil any of the obligations contained in Points 2 and 6 of this Agreement. The European Community agrees to consult with Sri Lanka pursuant to Point 7 before exercising this right

5. Without prejudice to Point 4 the Parties agree that the products set out in Annex 2 will be subject to all the procedures foreseen in the double checking system set out in Articles 18 - 24 of Annex III to Council Regulation 3030/93. The double checking system will be introduced following confirmation by Sri Lanka to the Community that the notification foreseen in Point 2.1 has been effected. The Parties agree to keep the products subject to the double-checking system under review and may propose changes to it following consultations pursuant to Point 7.

6. The Parties agree to refrain from adopting any non-tariff measures that could hinder trade in textile and clothing products. In this context the Parties agree that quantitative limits will not be introduced on the products referred to in Point 3 except in the event the European Community exercises the right to reapply the quota regime pursuant to Point 4.

7. The Parties agree that the balance of the present agreement, 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.

In the event that the European Community seeks to exercise the right contained in Point 4 the European Community will provide Sri Lanka 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 a written request unless the Parties agree otherwise. In the event the Parties cannot agree on appropriate remedial action within 30 days from the start of the consultations the European Community will have the right to proceed under Point 4.

8. The Parties agree to cooperate fully in respect of any notifications that may be necessary to the World Trade Organisation or any of its Bodies. Any such notifications will be made jointly by the Parties unless they agree otherwise.

9. 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.

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

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

12. 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 on conditions of reciprocity.

Annex 1

>TABLE POSITION>

Annex 2

Products subject to the double-checking system:

Categories 4, 5, 6, 7 and 26

Agreed Minute

In the context of the Agreement in the form of a Memorandum of Understanding on trade in textile and clothing products between the European Community and the Democratic Socialist Republic of Sri Lanka initialled in Brussels on 5 December 2000 and more particularly with reference to Paragraph 6 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 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, labeling, the description or composition of the product or the description of the manufacturing of products which, either in their formulation of 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.

Declaration

In the context of the Agreement in the form of a Memorandum of Understanding on trade in textile and clothing products between the European Community and the Democratic Socialist Republic of Sri Lanka and the Agreed Minute thereto initialled in Brussels on 5 December and more particularly with reference to the possible reintroduction of quotas in the event of a failure by Sri Lanka to fulfil the obligations referred to in Point 6 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.