RECOMMENDATION FOR A COUNCIL DECISION AUTHORIZING THE COMMISSION TO OPEN NEGOTIATIONS WITH A VIEW TO CONCLUDING AN AGREEMENT IN THE FORM OF AN EXCHANGE OF LETTERS BETWEEN THE EUROPEAN ECONOMIC COMMUNITY AND THE PRINCIPALITY OF ANDORRA
Date: 1988-12-12
Institutions: European Commission
Subjects: Andorra, agreement (EU), export, free circulation, ratification of an agreement, third country

COMMISSION OF THE EUROPEAN COMMUNITIES

COM ( 88 ) 744

final

Brussels , 12

December 1988

RECOMMENDATION FOR A

COUNCIL DECISION

authorizing the Commission to open negotiations with a view to concluding
an agreement in the form of an exchange of letters between the European
Economic Community and the Principality of Andorra

(presented by the Commission )

<1

EXPLANATORY MEMORANDUM

1 .
It was stated in the Joint Declaration on future trade arrangements with
Andorra annexed to the Act of Accession of Spain and Portugal to the European
Communities that within two years of the entry into force of the Act of
Accession an arrangement governing trade relations between the Community and
Andorra and replacing the national arrangements at present in force would be
finalized .

The Commission has in the meantime contacted the staff of the two Co-Princes

2 .
the President of the French Republic and the Bishop of Urgel , and also the
French and Spanish administrations .
have been clarified as a result .

Certain substantive and procedural problems

The Delegation of the Principality of Andorra presented a memorandum to

3 .
the Commission on 15 July of this year requesting that negotiations be
opened between Andorra and the Community ( Annex 2 ).

In the light of the foregoing , the Commission has drawn up draft directives

4 .
for negotiations with Andorra .
Two main concerns underlie these directives ,
namely the removal of the disparities and points of incompatibility between
the national arrangements at present applied to Andorra and Community law ,
for the purpose of replacing them by uniform Community arrangements .
The
second concern is the need to take the specific nature of Andorra 's situation
into account so as to safeguard its economic and commercial interests .

5 .

The Commission proposes to the Council :

i .

that the Commission be authorized to open negotiations with the
Principality of Andorra with a view to concluding an agreement
in the form of an exchange of letters ;

ii .

that the attached negotiating directives be adopted .

DRAFT DECISION

THE COUNCIL OF THE EUROPEAN COMMUNITIES ,

Having regard to the Treaty establishing the European Economic Community /
and in particular Article 113 thereof .

Having regard to the Recommendation from the Commission ,

Whereas it is stated in the Joint Declaration on future trade arrangements
with Andorra , annexed to the Act of Accession of Spain and Portugal , that
an arrangement governing trade relations between the Community and Andorra
will be finalized within two years of the entry into force of the Act of
Accession and that it will replace the national arrangements at present in
force ;

Whereas in a memorandum of 15 July 1988 the Principality of Andorra requested
the opening of negotiations with the Community ,

HAS DECIDED AS FOLLOWS :

Sole Article

The Commission is hereby authorized to open negotiations with a view to
concluding an agreement between the European Economic Community and the
Principality of Andorra in the form of an exchange of letters .

The Commission will conduct these negotiations in consultation with the
representatives of the Member States and in accordance with the directives

contained in Annex 1 .

3

ANNEX I

1 .

Customs union for industrial products
1.1 .

A customs union should be established between the Community and
Andorra and apply , subject to any specific derogations , to all
industrial products , i.e. to products not covered by Annex II
to the EEC Treaty .
The rules to be determined should apply to :
( a )

goods produced in the Community or in Andorra, including
those obtained wholly or in part from products which come
from third countries and are in free circulation in the
Community or in Andorra ;
goods which come from third countries and are in free circulation
in the Community or in Andorra .

Cb )

These rules should be subject , where appropriate , to special
surveillance measures in the case of certain sensitive products
( see point 4.1 .).
In relations between the Community and Andorra , this customs union
should entai l :

1.2 .

1.2.1 .

1.2.2 .

1.2.3 .

the abolition of customs duties , and charges having equivalent
effect , on imports and exports ;
the abolition of quantitative restrictions , and measures
having equivalent effect , on imports and exports .
These arrangements should be applied progressively over a
transitional period and in accordance with a timetable to
be agreed on .
The period and timetable could be modelled on those laid
down in the Act of Accession of Spain .
During this period , Andorra should undertake to take account
in its trade with the Member States of the Community and
with third countries of the quantitative restrictions which
Spain is authorized under the Act of Accession to retain in
respect of the Member States and third countries .
In order to avoid deflections of trade in the products subject
to these quantitative restrictions , special surveillance
measures could be introduced .

1.3 .

In relations between Andorra and third countries , provision should
be made for the following :
1.3.1 .

immediately upon the entry into force of the act agreed upon,
the adoption and application by Andorra of the Common Customs
Tariff and of the Community customs legislation essential to
the proper working of the customs union;
customs clearance ( entry into free circulation ) of goods from
third countries being exported to Andorra at specifically
designated customs offices within the Community;
the customs duties should be assigned to Andorra 's Budget in
Andorra should
accordance with a procedure to be specified . 1
undertake not to refund these sums directly or indirectly to
the parties concerned .

1.3.2 .

1.3.3 .

VAn overall amount corresponding to the administrative costs borne by the customs
authorities in the Community would be deducted from the customs duties .

4

- 2 -

1.4 .

( NB ) Arrangements applicable to processed agricultural products

The tariff arrangements applicable to these products should involve
the following :

ii .

iii .

i .. between the Community and Andorra , the fixed component of

customs duties would be abolished ;
Andorra would apply the fixed component laid down in the
Common Customs Tariff to third countries ;
for the processed agricultural products covered by
Regulations ( EEC ) Nos 3033 / 80 and 3035 / 80, the variable
components and export refunds provided for in those
Regulations would continue to be applied in their entirety .

2 .

Arrangements for agricultural products

2.1 .

The customs union referred to above should not include agricultural
products covered by Annex II to the Treaty .
It would nevertheless
be advisable to allow the following :
2.1.1 . certain agricultural products which are at present covered

by exchanges of letters between Andorra and France and between
Andorra and Spain and which in accordance with rules to be
determined at a later date or on the basis of the preferential
rules of origin that exist in respect of other countries
originate in Andorra should be imported duty-free into the
Community ;

2.1.2 . other agricultural products from Andorra should be subject
to " third country " treatment on import into the Community .

3 .

Tax arrangements^

As regards tax

3.1 ' each party should undertake not to impose , directly or indirectly ,

on products imported from the other party taxation in excess of that
imposed , directly or indirectly , on like or competing national
products ( provision based on Article 95 of the EEC Treaty );
Andorra should consider adapting its taxation^ so as to avoid too
great a disparity between the levels of indirect taxation in Andorra
and in the Community .

3.2

It should be pointed out that Andorra would continue to receive third-country
treatment as regards refunds on exports from the Community to Andorra .
^For the purposes of establishing the tax relief to be granted to travellers
returning from Andorra to the Community, account would be taken of the
arrangements applied in this respect . to travellers returning from any third
country and also of the specific importance of tourism for Andorra .
In
order to take account of frontier zone movements , specific quantitative
limits could be laid down for certain sensitive products .
^The "consumer tax " at present levied on imported products would be replaced
by a value-added tax .

Notes 2 and 3

The situation must be reviewed , and the agreement adapted if and when necessary ,
to take account of the effects on taxation of the single market .

4 .

Other provisions

- 3 -

4.1 .

4.2 .

4.3 .

4.4 .

4.5 .

In order to prevent deflections of trade resulting from the import
into Andorra and the re-export to the Community of goods previously
imported from third countries , a flexible system for the statistical
surveillance of imports into and exports from Andorra should be
introduced for certain sensitive products .
system would be facilitated by the fact that products imported from
third countries would go through specifically designated customs
offices ( see point 1.3 . 3 .).

The operation of this

The Community could request consultations with Andorra should
deflections of trade undermine the application of Community commercial
policy measures .

The agreement to be concluded could contain a safeguard clause
applicable in cases where such deflection occurred .
could be based on Article 115 of the EEC Treaty .

This clause

This working party , which
A joint working party should be set up .
would meet at the request of one of the contracting parties , would
be responsible for the administration of the agreement and would
examine any matters which arose during its implementation , notably
matters concerning the application of the measures referred to in
paragraphs 4.1 , 4.2 and 4.3 above .

The agreement should apply for five years .
expiry , the two parties should open negotiations in order to
determine , in the light of the results of the application of the
agreement , the provisions which should subsequently govern their
relations .

One year before its

5 .

Legal form

As regards the legal form which the act to be negotiated should take
( agreement , arrangement , exchange of letters with annex ), that of an
exchange of letters would appear to be preferable given its flexibility
and the special international status of Andorra .

ANNEX 2

Document

for the attention of Mr Jacques Delors , President of the Commission of the
European Communities

containing

the official request for the opening of negotiations and proposals which could
form the basis for a trade agreement between the European Economic Community
and the Principality of Andorra

transmitted by

the Andorran Delegation for relations with the European Economic Community .

Brussels ,

15 July 1988

Andorra la Vella ,

Letter from :

Andorran Delegation for relations with the European Economic
Community

To :

Mr Jacques Delors

Following your communication of 7 March 1988, we have the honour hereby to
request the official opening of negotiations between the European Economic
Community and Andorra in order to determine , as planned , the new trade
arrangements between the two sides .

We enclose a paper setting out the proposals which we consider could form a
basis for the negotiations .

Introduction

In the light of Joint Declaration No 9, contained in the Act of Accession of
Spain to the European Communities of 12 June 1985 , concerning the establishment
of new trade relations between Andorra and the Community to replace , in
accordance with Article 234 of the EEC Treaty , the bilateral agreements which
have been in force between Andorra and France and Spain since 1867, Andorra ,
as a non-Community country situated in the middle of the Community , declares its
willingness to adapt to the new European context while maintaining its population'
standard of living and its independence .

In making this adjustment Andorra will have to act in accordance with the
Andorra is therefore anxious that the
Community 's rules and interests .
adjustment should not in any way undermine the proper functioning of the
common commercial policy in accordance with Article 113 of the EEC Treaty .

The Community for its part must recognize Andorra 's right and need to preserve
the basis of its prosperity and to be able to develop its economy .
respect it must be noted that Spain 's full integration into the common market
will inevitably cause the Principality 's commercial attractiveness to decline ,
and a certain degree of diversification is the only means of offsetting this .
It will also be necessary to overcome the drawbacks specific to Andorra , such
as geographical isolation, the lack of space and infrastructure , the lack of
skilled labour , and so on .

In this

For this diversification to take place Andorra must define clearly its economic

relations with the Community .

The main fac tors which could determine future trade relations between Andorra

and the European Community

Taking into account the present features of Andorra 's economy and the
( a )
prospects for the future ( see attached document : Andorra 's economy - present and
future ), Andorra wishes to negotiate trade arrangements with the European
Community covering the following spheres :

1 .
2 .
3 .
4 .

Industrial products .
Agricultural products .
Tax relief for travellers .
Establishment of a joint structure .

Without wishing to predjudice the results of the forthcoming negotiations

( b )
and considering that none of the matters to be discussed can , generally
speaking , be negotiated separately but that each item will form an integral
part of the future agreement , the Andorran Delegation presents brief comments
on the four factors listed :

1 .

Industrial products

In order to avoid undermining the proper functioning of the Community 's customs
union , Andorra is prepared to forgo the exercise of some of its rights and to
make an effort to adapt by establishing a customs union with the Community ,
subject to possible exceptions, and adapting its legislation accordingly .

2 .

Agricultural products

Andorra wishes to maintain , subject to possible exceptions , its status of third
country in respect of agricultural products .
absence of any reasons which would justify Andorra 's participation in the common
agricultural policy .

This seems logical given the

4?

3 .

Tax and customs relief granted to travellers

Since tourism and trade form the mainstay of its economy , Andorra would like
this matter to be redefined in the light of the arrangements adopted .

4 .

Establishment of a joint structure

Andorra proposes that a joint management committee should be set up .
be authorized to ensure the proper functioning of the agreement and

It would

to make

proposals for extending the scope of arrangements .

ANNEXE

PETITES ET MOYENNES ENTREPRISES

Les négociations projetées seront sans effet sur La situation des
Petites et Moyennes Entreprises de la Communauté .