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PRESS RELEASE
PRESS/TPRB/56
26 JUNE 1997TRADE
POLICY REVIEW BODY: REVIEW OF CYPRUS
TPRB'S EVALUATION Back to top
The Trade Policy Review Body
of the World Trade Organization (WTO) concluded its first review of Cyprus' trade policies
on 26 June 1996. The text of the Chairperson's concluding remarks is attached as a summary
of the salient points which emerged during the discussion.
The review enables the TPRB
to conduct a collective examination of the full range of trade policies and practices of
each WTO member country at regular periodic intervals to monitor significant trends and
developments which may have an impact on the global trading system.
The review is based on two
reports which are prepared respectively by the WTO Secretariat and the government under
review and which cover all aspects of the country's trade policies, including: its
domestic laws and regulations; the institutional framework; bilateral, regional and other
preferential agreements; the wider economic needs and the external environment.
A record of the discussions
and the Chairperson's summing-up, together with these two reports, will be published in
due course as the complete trade policy review of Cyprus and will be available from the
WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the
following reports have been completed: Argentina
(1992), Australia (1989 & 1994), Austria (1992), Bangladesh (1992), Bolivia (1993),
Brazil (1992 & 1996), Cameroon (1995), Canada (1990, 1992, 1994 & 1996), Chile
(1991), Colombia (1990 & 1996), Costa Rica (1995), Côte d'Ivoire (1995), the Czech
Republic (1996), Cyprus (1997), the Dominican Republic (1996), Egypt (1992), El Salvador
(1996), the European Communities (1991, 1993 & 1995), Fiji (1997), Finland (1992),
Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993),
Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 & 1995), Kenya (1993),
Korea, Rep. of (1992 & 1996), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico
(1993), Morocco (1989 & 1996), New Zealand (1990 & 1996), Nigeria (1991), Norway
(1991 & 1996), Pakistan (1995), Peru (1994), the Philippines (1993), Poland (1993),
Romania (1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic (1995), South
Africa (1993), Sri Lanka (1995), Sweden (1990 & 1994), Switzerland (1991 & 1996),
Thailand (1991 & 1995), Tunisia (1994), Turkey (1994), the United States (1989, 1992,
1994 & 1996), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia (1996) and
Zimbabwe (1994).
TRADE POLICY REVIEW BODY: REVIEW OF
CYPRUS
CONCLUDING REMARKS BY THE CHAIRPERSON Back
to top
The Trade Policy Review Body
has now completed the first review of the Republic of Cyprus' trade policies and
practices. These remarks, made on my own responsibility, summarize the main points of the
discussion. They are not intended to substitute for the collective evaluation and
appreciation of the Cyprus' trade policies and measures. Details of the discussion will be
reflected in the minutes of the meeting.
Prior to the start of the
Review there was an exchange of views on the political aspects of the situation in Cyprus,
as referred to in paragraph 8 of the Republic of Cyprus' Government Report contained in
document WT/TPR/G/25, where their respective positions were expressed by the parties
concerned. This exchange will be reflected in document WT/TPR/R/2.
The discussion of Cyprus'
trade policies was underscored by the appreciation of Members for the considerable steps
already taken by Cyprus to liberalize its import markets, reduce export restrictions, and
establish a rules based, transparent trading and investment environment. The economy had
clearly benefited from the reduction in distortions by developing trade in manufactures
and, particularly, services; per capita income levels had grown considerably. Cyprus was
urged to continue its trade liberalization and to embed it solidly within the rules and
principles of the multilateral trading system, particularly by increasing its commitments
in the WTO. In this context Members raised a number of issues including:
- the
outlook for sustainable growth in the economy and the prospects for exports and investment
in goods and services;
- fiscal
discipline, partly linked to the Maastricht criteria, and its role in helping to sustain a
stable macroeconomic environment. Relevant to this issue were the link of the Cyprus pound
to the ecu, monetary policy considerations and associated prospects for the rate of
inflation;
- the
vulnerability of Cyprus' economy to the external environment, as reflected in a structural
trade deficit, and measures to strengthen the production base, to lend stability to
economic growth;
- economic
and legislative preparations for the integration of Cyprus into the European Union. In
this connection, several Members clearly expressed the view that this integration should
not be at the expense of Cyprus' full participation in the multilateral system, and
emphasized the need for greater geographical diversification of trade;
- investment
objectives, especially equity participation limits on some FDI and the nature of the
"economic interest" clause;
- the
tariff structure, notably divergences between applied and bound rates; surcharges for
safeguard reasons; the still significant number of specific rates; the use of excise
taxes; and participation in the ITA;
- the
use of standards by Cyprus that are more stringent than international standards in some
areas;
-
taxation and standards applied to automobiles;
- Cyprus'
law and policy on anti-dumping and public procurement and its possible accession to the
Government Procurement Agreement; and
- certain
aspects of its competition, environment and intellectual property legislation.
Members also raised a number
of questions in connection with Cyprus' sectoral policies. Thus, in agriculture, questions
were posed on the use and level of subsidies, and on the MFN and preferential
implementation of certain tariff quotas, including on sheepmeat. In manufacturing, the use
of export subsidies related to local content was questioned. Members also raised questions
on Cyprus' plans for further liberalization in financial services; its position on
deregulation in telecommunications and possible WTO commitments; plans to expand the
tourism sector, including by liberalizing the investment regime; and a possible relaxation
of restrictions in maritime and port services. While two members recalled Paragraph 4
of the Singapore Ministerial Declaration, they posed questions relating to the observation
of "core labour standards" by Cyprus.
In response, the
representative of the Republic of Cyprus replied to the questions raised under three
headings; macroeconomic and structural policies, trade-related policy objectives and
instruments, and sectoral issues. Cyprus undertook to provide written answers to certain
other questions.
Cyprus' economic growth rate
had been favourable compared to other European countries; the forecast for 1997 was around
3 per cent. Clothing and footwear exports faced severe international
competition, while agriculture and pharmaceuticals trade showed favourable trends. The
Government's target was to maintain a fiscal deficit below 3 per cent of GDP;
expenditure was to be closely monitored and tax efficiency increased, while public sector
reform was a key policy. The link of the Cyprus pound to the ecu, which was partly in
consequence of Cyprus' aim to join the EU, had not affected export performance adversely;
the link reduced the variability in exchange rates vis-à-vis Cyprus' European partners,
which were its major markets. Stability of the link was maintained through a combination
of exchange controls and monetary policy, together with the overall health of the economy.
The vulnerability of the
economy to external shocks and the structural trade deficit were being improved by
measures to increase productivity, especially to reduce unit labour costs, and to
strengthen the services sector, including by investment incentives.
Regarding Cyprus'
preparations for joining the EU, the application of the EU common external tariff would
result in tariffs lower than the rates bound in the WTO by Cyprus, hence in more
favourable conditions. No new quotas or other trade barriers would result from the customs
union; all quantitative restrictions had been lifted from 1 January 1996, with a
tariff quota system introduced on various products, including textiles.
On trade related policies
and objectives, the representative of Cyprus saw no conflicts between acceptance of the EU
acquis communautaire and WTO objectives. Cyprus followed the continuous progress of
EU legislation on international issues. Foreign investment had been largely liberalized
and administrative procedures simplified, with 100 per cent foreign ownership
allowed in most sectors; in a few areas, such as finance, applications were considered on
a case-by-case basis to monitor quality.
On more specific issues,
"surcharges" applied by Cyprus were increased tariffs resulting from the process
of elimination of QR's; most surcharges would be removed by end-1998, and residual
surcharges would be lifted by 2002/3. The "refugee levy" would be removed on all
products contained in the EU Association Protocol from 1 January 1998; products outside
the Protocol would remain subject to the levy. Import duties on cars would be reduced to a
MFN rate of 10 per cent by end 1997, with a zero rate for imports of cars from
the EU. Excise taxation of cars was an important revenue-effective element of taxation.
The representative of Cyprus
continued by noting that new anti-dumping legislation, in line with the WTO Agreement,
should be completed by late 1997. On environmental matters, a draft framework law was in
preparation, while interest rate concessions and other incentives were granted for
pollution control. Similarly, restrictions on fishing nets were imposed for conservation
reasons. With respect to public procurement, a bill on the matter had been submitted in
February 1997 and was expected to pass Parliament in the autumn of this year. Detailed
regulations and tender specifications would be prepared in accordance with existing
policy; Cyprus' procedures would be harmonized with those of the EU and would be
consistent with its obligations under the WTO.
On sectoral matters, in
agriculture the system of administration for the tariff quota on sheepmeat had been
introduced to ensure fair and equitable treatment. Demand for meat had fallen in 1996 as a
result of BSE and reduced tourist trade, but the market was recovering in 1997. In
services, 100 per cent foreign participation was allowed on freight and
passenger transport, in specified circumstances. Telecommunications liberalization was
under way and an offer on basic telecoms would be submitted to the WTO before the end of
1997. Conditions for tourism services would be harmonized with those of the EU.
Overall, I believe we have
had a useful review of Cyprus. I know what difficulties the Cypriot delegation have
laboured under in preparing their replies at such speed, and I thank them warmly for their
efforts. I am sure that, as requested by some delegations, Cyprus will back up its
participation in this meeting with written answers to some of the questions to which
replies have been promised. Back to top |
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