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Slovakia: December 1995

“ Structural reform had been facilitated by a stable macroeconomic environment. The process of reform had already begun to lead to strong growth. The fiscal accounts were improving; the external current account was in surplus and international reserves were at a reasonably comfortable level.”

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First press release
Summary of Secretariat report
  > Summary of Government report

8 December 1995

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The Trade Policy Review Body of the World Trade Organization (WTO) conducted its review of the Slovak Republic's trade policies on 5 and 6 December 1995. The text of the Chairman's concluding remarks is attached as a summary of the salient points which emerged during the two-day 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 Chairman's summing-up, together with these two reports, will be published in due course as the complete trade policy review of the Slovak Republic 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), Cameroon (1995), Canada (1990, 1992 & 1994), Chile (1991), Colombia (1990), Costa Rica (1995), Côte d'Ivoire (1995), Egypt (1992), the European Communities (1991, 1993 & 1995), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 and 1995), Kenya (1993), Korea, Rep. of (1992), Macau (1994), Malaysia (1993), Mexico (1993), Morocco (1989), New Zealand (1990), Nigeria (1991), Norway (1991), Pakistan (1995), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992), Slovak Republic (1995), South Africa (1993), Sri Lanka (1995), Sweden (1990 & 1994), Switzerland (1991), Thailand (1991), Tunisia (1994), Turkey (1994), the United States (1989, 1992 & 1994), Uganda (1995), Uruguay (1992) and Zimbabwe (1994).

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This meeting of the Trade Policy Review Body has now completed the first review of the Slovak Republic's trade policies and practices. These remarks, which are 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 Slovak Republic's trade policies and practices. Details of the discussion will be reflected in the minutes of the meeting.

The discussion developed under two broad themes: the economic transition; and international trade policies.

The Economic Transition

Participants praised the Slovak Republic for the significant progress in its transition to a market economy. Structural reform had been facilitated by a stable macroeconomic environment. The process of reform had already begun to lead to strong growth. The fiscal accounts were improving; the external current account was in surplus and international reserves were at a reasonably comfortable level. However, participants noted that inflation was higher than in partner countries, although it seemed to have declined in recent months. Also a smoothly functioning financial system was not yet fully in place, which might be negatively affecting savings. Questions were raised on the contribution of the import surcharge to a reduction of the fiscal deficit and on policy changes that might generate higher savings.

Some members felt that an apparent slowdown in privatization, together with a change in method, may have contributed to uncertainty for foreign investors, and affected investment flows. Members asked how the current approach to privatization would lead to an effective separation of enterprises from State influence. Some members asked Slovakia to state the reasons for its dissatisfaction with the voucher method of privatization.

Members noted that trade had been important in fostering competition in Slovakia. In this context, Slovakia was asked about its plans for liberalization beyond that agreed in the Uruguay Round. Further questions were asked about plans to increase the effectiveness of bankruptcy procedures and to liberalize remaining price controls.

Much of Slovakia's recent growth had been export-led; however, capacity constraints were being encountered in many sectors with increased investment thus urgently needed in these areas. Clarification was sought on the criteria used by the National Bank of Slovakia to grant approval for foreign direct investment in financial services and telecommunications, and other areas vital to the infrastructure.

Slovakia's trade had been largely reoriented toward the European Union and other European market economies, following the disintegration of the CMEA; new regional agreements also played a rôle in this process. Comments were sought on the relationship between Slovakia's obligations under regional agreements and those under the WTO.

In response, the representative of Slovakia noted that inflation had slowed in 1995, with a target of 6 to 8 per cent for 1996. Unemployment remained high at some 13 per cent. The import surcharge had contributed 1.6 per cent of budget revenue. Efforts were underway to improve Slovakia's financial system with the new Act on Banks in preparation and expected to enter into force in 1996. The low level of savings was influenced by the standard of living; increased savings would depend on decreasing unemployment and the growth of incomes.

The authorities intended to accelerate and complete the privatization process in the near future, with the second wave to be finished in late 1996. Voucher privatization had been replaced by bond privatization; privatization was geared towards creating a competitive environment that would lead to company restructuring. Trade was also important to fostering competition; in 1996 tariffs would be eliminated on a number of lines, going beyond the commitments Slovakia had made in the Uruguay Round. An amendment of the bankruptcy law was being prepared.

Slovakia's foreign investment régime was generally open. Foreign investors were granted national treatment, no investment measures were maintained that were not consistent with the TRIMs Agreement, and there were no restrictions on current external payments related to investments. In the banking sector, all investments, both domestic and foreign, required the approval of the National Bank, but this was only for prudential reasons. The development of the telecommunications infrastructure was a government priority, with plans to sharply increase the number of telephones per inhabitant; however, the existing monopoly in voice telephony would remain until 2003

Regional trade agreements were of great importance to Slovakia. All such arrangements were based on the principles of GATT Article XXIV and were therefore in conformity with Slovakia's obligations under the WTO.

Trade Policies

Participants appreciated the openness of Slovakia's trade régime and congratulated Slovakia for having ratified the Uruguay Round package and becoming an original WTO member. Questions were asked about the trade policy making process, including the rôles of consumer groups and the private sector.

Participants sought information on legislative changes required to implement the WTO Agreements, particularly in the areas of TRIPs and customs procedures. Information was also sought on the extent to which Slovakia had satisfied its notification obligations under the WTO.

While tariffs were low in comparison to many other transition economies and developed countries, they were seen as escalatory, with possibly adverse effects on export growth and diversification. It was noted that Slovakia had retained its import surcharge despite favourable economic progress and a strong balance of payments; participants urged Slovakia to remove the surcharge in line with its commitments in the BOP Committee. The basis of Slovakia's value added tax (VAT) as applied to imported goods was queried and the authorities were asked whether a new tax law, to be introduced in 1996, would ensure that VAT would be calculated on the basis of the actual duty-inclusive price, even for goods under preferential arrangements. In-quota tariff rates on agricultural products covered by tariff quotas were expected to remain fixed in ad valorem terms, while the out-of-quota tariff declined in line with Uruguay Round commitments; confirmation of the convergence of the two rates was sought from the authorities.

Some participants noted that free movement of third-country goods was not a feature of the Czech-Slovak Customs Union and asked whether changes were envisaged. Clarification was sought on the effects of Slovakia's m.f.n. tariff reduction on automobiles. Questions were also asked about Slovakia's GSP programme; its potential accession to the European Union; the preparation of legislation on anti-dumping, countervailing duties and safeguards; and the need to avoid a built-in protectionist bias; the automaticity of import licensing and government procurement preferences and Slovakia's intention to accede to the Plurilateral Agreement.

Several participants noted that government policy was relatively more active in agriculture than in other sectors. Slovakia was asked about its seed subsidy programme and other subsidies; the operation of the State Fund for Market Regulation; import allocations under tariff quotas; health certification requirements on food and beverages; and the preferential tariff quota for imports of poultry meat from the United States.

The importance of the services sector in generating Slovakia's current account surplus was noted. Slovakia was asked whether it would consider soon eliminating its six m.f.n. GATS exemptions; it was hoped that the reciprocity provision on financial services would be removed on implementation of the new Act on Banks.

In reply, the representative of Slovakia responded that the Ministry of the Economy was responsible for foreign trade and prepared policy in this area. New legislation was being prepared on trademarks to bring it into full conformity with the TRIPS Agreement. In addition, a new Customs Act was under preparation, as was legislation on anti-dumping, countervailing duties and safeguards; these would all be in conformity with the WTO Agreements. The Slovak Government had already submitted notifications in several areas, including agriculture, textiles and customs valuation, and was preparing procedures to meet the notification requirements under other WTO Agreements.

The representative did not agree that the Slovak tariff showed escalation, with the weighted average m.f.n. rate on industrial imports slightly less than 2 per cent. Slovakia intended to meet its commitments made in the BOP Committee on the withdrawal by 30 June 1996 of the import surcharge. Under the new Tax Law to be introduced in 1996, the basis for the VAT on imported products would include the actual duty. Slovakia did not have any commitments to reduce in-quota tariff rates.

The representative continued that at present the free movement of third-country goods was not under consideration in the Customs Union. The unilateral elimination by Slovakia of tariffs on certain automobiles was a temporary measure taken for environmental reasons. Slovakia's new GSP scheme entered into force on 1 January 1995, providing zero tariffs for all imports from least-developed countries; the limit of US$2 million on preferential imports from each developing country reflected Slovakia's economic situation. Import licensing was transparent and automatic, being maintained only for monitoring purposes. On government procurement, no distinction was made between domestic and foreign bidders; Slovakia intended to accede to the Government Procurement Agreement in 1998. Consultations would be held before any negotiations for membership to the European Union, but it was too early to provide concrete information on this subject.

The representative said that no change was foreseen in the operation of the State Fund for Market Regulation, which had been notified to the WTO. Support for agriculture was in line with national priorities, which included employment for the rural population. In accord with Slovakia's notification of its Uruguay Round commitments in agriculture, it maintained certain country-specific allocations for its tariff quotas. The Slovak Republic had established an Inquiry Point in accord with the TBT Agreement; this Point was ready to provide any information that might be needed about certification requirements and procedures. The preferential quota of imports of poultry meat from the United States was the result of bilateral negotiations in the framework of the Uruguay Round.

The representative concluded that Slovakia's m.f.n. exemptions in services would be removed in accordance with its GATS obligations. The new Act on Banks would eliminate the reciprocity requirement upon its expected introduction in 1996. Back to top