Explanatory Memorandum to COM(2000)351 - Exceptional trade measures for countries and territories participating in or linked to the EU's stabilisation and association process, amending Regulation (EC) No 2820/98, and repealing Regulations (EC) Nos 1763/1999 and 6/2000

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dossier COM(2000)351 - Exceptional trade measures for countries and territories participating in or linked to the EU's stabilisation and ...
source COM(2000)351 EN
date 07-06-2000
1. The current EC trade regime with the Western Balkan countries already contains unilateral trade preferences on an autonomous basis for Bosnia and Herzegovina and Croatia i, for Albania i and, on the basis of a Co-operation Agreement, for the former Yugoslav Republic of Macedonia i. These preferences are similar in nature and substance to those in the 1980 Co-operation Agreement between the European Economic Community and the Socialist Federal Republic of Yugoslavia which was renounced by the Council in 1991. They provide for duty-free access to the EC for more than 80% of the imports from these countries.

Despite this high degree of duty-free access to the EC market, several important industrial products are still governed by tariff ceilings and only limited concessions have been made so far for agricultural products where many products are subject to tariff quotas.

Trade promotion and co-operation is a core action of the EU both within the EU Stabilisation and Association process and the Stability Pact for South-Eastern Europe. The EC is by far the most important trading partner for the region. Although current trade volumes are modest, the EC's position means that changes to its trade policy vis-à-vis the region have some potential to increase the economic activity and trade in the Western Balkans in the medium term. Further opening of the EC market for products from these countries could promote much needed foreign direct investment, help these countries to develop their generally low export capacities and, above all, contribute to political and economic stabilisation in the region. The economies of the Western Balkans are relatively small and weak and given the very low level of imports from the Western Balkan countries (0.6% of total imports), it is unlikely that further trade liberalisation would have a negative impact on the EU.


2. The Lisbon European Council of 23/24 March 2000 stated that Stabilisation and Association Agreements with Western Balkan countries, which involve the establishment of Free Trade Areas 'should be preceded by asymmetrical trade liberalisation'. As part of the Stabilisation and Association process the Commission proposes to further improve the existing autonomous trade preferences, which will be replaced in due course by Stabilisation and Association Agreements with the countries concerned.

3. With a view to supporting economic revival in Kosovo it is equally proposed to extend these preferences to Kosovo which, under UNSC Resolution 1244 of 10 June 1999, is subject to international civil administration by the United Nations Mission in Kosovo (UNMIK). In accordance with UNSC Resolution 1244 (10th and 11th preambular), UNMIK's mandate is defined as an interim administration 'under which the people of Kosovo can enjoy substantial autonomy within the Federal Republic of Yugoslavia' and its responsibilities include 'performing basic civilian administrative functions where and as long as required'.

By Regulation No 1999/3 of 31 August 1999, UNMIK has established a customs service of around 120 local staff working under the authority of an UNMIK Director General of Customs. This service is present at the international borders and has established several taxation points at the administrative boundary lines of Kosovo in close co-operation with KFOR and CIVPOL. The EC funded Customs Assistance Mission in Kosovo (CAM-K) is a team composed of 10 international customs experts, which is supporting the modernisation of the UNMIK customs service and the establishment of customs procedures harmonised with the EU practises. One of the areas of technical assistance to the UNMIK customs service is the establishment of effective procedural and organisational measures to enable certificates of origin to be issued. CAM-K is also assisting with the drafting of a revision of UNMIK administrative directive No 1999/01 which will provide the legislative framework for the implementation of the administrative measures necessary for the correct functioning of the system. Furthermore, customs co-operation between the UNMIK customs service and the former Yugoslav Republic of Macedonia was established on 7 March 2000 with the initialling of a Joint Statement on cross-border co-operation.

4. The Republic of Montenegro, within the Federal Republic of Yugoslavia, has no independent customs administration. The extension of the trade preferences to the Republic of Montenegro is, therefore, not possible. However, in order to support economic and democratic reforms in that Republic, it is proposed to grant limited and specific concessions (duty-free tariff quotas) for aluminium products, produced in one plant in Montenegro and not in other parts of the Federal Republic of Yugoslavia. The proposal therefore foresees arrangements applicable for certain industrial products originating in the Federal Republic of Yugoslavia without prejudice to the exclusion of the Federal Republic of Yugoslavia from the autonomous trade preferences as a whole and in full respect of Council Regulation (EC) No 1294/99 of 15 June 1999 i.

Contents

1.

5. The aim of the attached proposal for a Council Regulation (EC) is:


* to abolish remaining tariff ceilings for certain industrial products originating in Albania, Bosnia and Herzegovina and Croatia and to improve access for agricultural products including processed agricultural products and fishery products originating in these countries;

* to extend these preferences to Kosovo as defined by UNSC Resolution No 1244 of 10 June 1999;

* to grant limited concessions (tariff quotas) for Montenegrin aluminium products originating in the Federal Republic of Yugoslavia;

* to streamline and concentrate the autonomous trade preferences for the countries of the Western Balkans in a single new Regulation, thus repealing Regulations (EC) Nos 6/2000 and 1763/1999;

* to remove the countries covered by the proposed Regulation from the GSP.

These measures are proposed as part of the EU Stabilisation and Association process, in response to the specific situation in the Western Balkans. They will not be proposed for other regions and will not constitute a precedent for the EC trade policy with other third countries.

6. It is proposed to link the granting of these improved preferences to the readiness of Albania, Bosnia and Herzegovina and Croatia to engage in effective economic reforms and in regional co-operation with the other countries concerned by the EU Stabilisation and Association process and of all the countries and territories concerned to respect a standstill as regards duties, quantitative restrictions or charges having equivalent effect on imports from the EC.

The proposal establishes safeguards against the risk of fraud and non-respect of rules of origin. The standstill provision is underpinned by a strengthened temporary suspension clause, which equally applies in cases of evidence of fraud, non-respect of rules of origin and/or massive increase of exports into the Community above the level of normal production and export capacity of the beneficiary countries and territories. The period of application of this Regulation is limited to two years. Additionally, under the EU Stabilisation and Association process, support is being provided to the beneficiary countries to strengthen their institutional and administrative capacities and to intensify customs cooperation.

2.

7. Furthermore, this proposal will imply several actions, amendments and adjustments to be made in directly connected areas:


* In order to avoid any discrimination, the granting of equivalent trade preferences to the former Yugoslav Republic of Macedonia on a separate basis - complementing the existing Co-operation Agreement, by means of an exchange of letters, prior to the signature of a Stabilisation and Association Agreement;

* The amendment of Regulation (EC) No 517/94 on quantitative limits for imports of textiles products to include separate textile quotas for Kosovo as defined by UNSC Resolution 1244 of 10 June 1999; in addition, the Commission intends to propose as soon as possible the opening of negotiations for textile agreements with Bosnia and Herzegovina and Croatia in order to liberalise trade in textiles with them and to substitute the quotas with a double-checking system and administrative co-operation provisions (textiles representing around 30% of their exports to the EC) and to remove these countries from Regulation (EC) No 517/94;

* The possible amendment of the implementing provisions relating to the Community Customs Code (Commission Regulation 2543/93) as regards products originating in Kosovo as defined by UNSCR 1244 of 10 June 1999;

* The adjustment of the waiver currently being introduced in the WTO by the Commission for the EC trade regime with the Western Balkan countries, taking into account the elements of improvement and extension of the preferences as foreseen in the proposed Regulation.

8. The Commission proposes the attached proposal for a Council Regulation (EC) for adoption to the Council.