External relations including customs union

1. The Copenhagen criteria for membership: the ability to cope with competitive pressures

1.1. Participation in a wider market

In parallel to the process of establishing a free trade area the Bulgarian economy will be progressively involved into a wider market encompassing the market territories of Bulgaria and the of the European Union.

Meanwhile the harmonisation of norms, standards and technical requirements will facilitate trade and thus strengthen the capacity of Bulgarian industries to compete on European markets.

The restructuring and modernisation of the entire economy will be influenced by the promotion of trade which is crucial for strengthening its competitiveness and increasing of the benefits of the economic reform.

With this regard the adoption of the Union’s internal market acquis is expected to further improve market access for Bulgarian exports in the area of technical barriers to trade.

The very establishment of the free trade area between Bulgaria and the European Union will assist the process of progressive adaptation to market forces within the internal market.

At the same time the functioning of the free trade area will take the integration process closer to achieving the objective of customs union and thus to membership as the Community is founded on a customs union.

1.2. Basic principles of the customs union

The establishment of the customs union between the six original Member States involved two parallel processes of convergence: to gradually abolish the customs duties that applied in trade between them and to gradually introduce a Common Customs Tariff (CCT) applicable to goods imported from third countries. On 1 July 1968 the tariff union was accomplished. Since then any new Member State joining the Community has undergone the process of abolishing duties on intra-Community trade and aligning its external tariff to the CCT.

The necessity to facilitate trade resulted in growing harmonisation and for further simplification of customs procedures. Thus the Single administrative document and the Combined nomenclature were introduced. In parallel, the EEC-EFTA Convention on a Common transit procedure was signed on 20 may 1987.

As far as trading relations with non-Member States are concerned, the Community Customs Code has consolidated virtually all the Community customs provisions into a single coherent text. the Community customs code and its implementing provisions entered into force on 1 January 1994.

1.3. Level of tariff protection and alignment of tariffs

Pre-Uruguay Round

The simple average tariff protection of the Community for industrial products is 6.4 per cent. Under the currently applied Bulgarian customs tariff the simple average level of protection for industrial products is 16.8 per cent. On a sector by sector basis the simple average varies from 10 per cent for works of art to 27.3 per cent for footwear (the respective Community averages for the same sectors are 0 per cent and 11.7 per cent).

The comparison indicates that as a result of an alignment of tariffs Bulgaria will face the necessity to lower its level of tariff protection. For products for which the Community is the main supplier (accounting for more than 50% of total Bulgarian imports) such as plastics, rubber, textiles and textile articles, footwear, works of art the alignment exercise may not affect substantially the tariff protection of the economy as at that time the main import flows for the products concerned would have been duty-free further to the establishment of the free trade area with their main supplier.

For products imported mainly from other sources the implementation of a lower level of tariff protection, particularly if these are manufactured goods will need a transitional period in order to allow national industries to adapt. At present imports for which the Community accounts less than 30% of total imports include the following sectors: mineral products, fuels; wood, articles of wood; base metals and articles thereof.

For agricultural products the comparison could be done at a later stage as the process of Bulgarian accession to the WTO is not completed yet while the Community recently (1 July 1995) put into effect the results of the GATT Uruguay Round.

Post-Uruguay Round

Tariff questions/Average tariffs.

Across all products, the Communities’ simple average tariff as of 1 July 1995 is estimated at 9.6%.

Non-agricultural products.

As an outcome of the Uruguay Round negotiations, the European Community will have unweighted average duty rates for non-agricultural products at the level of 3.7% in 2000 (down from some 6% in 1995).

The EC subscribed to the complete elimination of duties (zero for zero) in the sectors of construction equipment, medical equipment, pharmaceuticals, furniture, most steel categories, agricultural equipment, paper products, selected toys and soaps and detergents. Community imports in these sectors represent around 10% of total non-agricultural EC imports. This means that when new duty free trade is added to previous duty free commerce, close to 40% of all Community industrial import will, after full implementation, be free of duty.

As a result, the Community customs tariffs will become, particularly for industrial products, even more homogeneous than before, with the vast mass of duty rates between 3 and 10%. Only three sectors, clothing, footwear and fish, will have an average tariff of 10% or more; in these three sectors, the average rates are anyway lower than 12.5%. The Community will have only few rates above 15% and none above 22% (trucks).

Agricultural products.

The new tariff profile for agricultural products shows peaks for meat and meat products, dairy products, sugar and derivatives, and tobacco products. Tariffs will remain low or zero on oilseeds, fruit and vegetables, and plants (cut flowers and many fruit and vegetable categories are subject to seasonal tariffs).

Tariff suspensions.

Under Article 28 of the Treaty of Rome, the Council may grant tariff suspensions by a qualified majority vote. There are some 650 such cases per year, representing a revenue loss of about 5% of total duties collected. Suspensions are generally granted for one year, in some cases for 6 months, with the possibility of extension. Suspensions have been relatively frequent for microelectronics and chemicals.

1.4. Trade policy alignment

The necessity to adapt the existing Bulgarian trade policy is very much facilitated by the finalization of the Uruguay Round of multilateral trade negotiations under the GATT and the establishment as of January 1st, 1995 of the World Trade Organisation.

The trade policy maintained by the EC is based on same multilaterally agreed principles that are laid down in the Marrakesh Agreement establishing the WTO and its Annexes. In this respect, any alignment with the EC trade policy can turn irrelevant without prior Bulgarian accession to the said World Trade Organization. The necessity of Bulgaria joining the GATT system is as well stipulated in the Europe Agreement. However, it should be stressed that the new WTO embodies rules and disciplines which have a much wider scope than the GATT, because now they cover important new areas: Agriculture, Services (GATS), TRIMS, TRIPS.

The currently negotiated accession of Bulgaria to the WTO will fulfil the obligation undertaken under the Europe Agreement and will give the economy the so badly needed qualification of "being a transparent and predictable one". In addition the WTO accession will align Bulgaria with the other Central and East European economies (already WTO Members) while negotiating details on membership to the EU.

Following are the main trade policy areas where Bulgaria has to align with the EU on the basis of the multilaterally agreed principles stipulated in the Marrakesh Agreement establishing the WTO and its respective Annexes.

Tariffs

Under the accession to the WTO the Bulgarian tariff protection will be reduced in comparison to the one the economy presently enjoys and will be bound at certain level (different for each respective tariff line), which means that tariffs could be lowered but certainly cannot be increased above the set "bound level". On most of the tariff lines Bulgaria will still even after WTO accession maintain considerably higher than the EU tariff protection. In a very limited number of cases Bulgaria will bind the tariff under the WTO at "0" level. This is a positive element for the protection of the Bulgarian economy vis-a-vis third countries for the present.

However, when becoming a member of the EU, Bulgaria will have to undertake the Common customs tariff and thus face a considerable discrepancy in the level of tariff protection, i.e. between high pre-EU membership tariff protection and the low or in some instances "0" tariff protection in the post-EU membership period. With the view to have the economy prepared for membership in the EU and secure a smooth transition, respective measures are to be taken without delay now. These might be complex and include inter alia:

-- To develop a mid- and where possible long-term programme for each sector of the economy and for each particular production. Due consideration in this process is to be given to the availability of inputs, present markets, assessment of future market possibilities, availability of human resources, and last but not least - financing of the "modernisation process" (privatisation may in this respect be also considered).

-- Competitive vital productions and those undergoing or scheduled for "modernisation of the production" should consider as of day one of the Bulgarian application for membership to the EU the possible changes in the competition conditions on the Bulgarian market when Bulgaria undertakes the Common customs tariff (this issue is also relevant to the question of adaptation of the economy for smooth implementation of the Europe Agreement where some 35-40% of the Bulgarian total imports will enter at "0" duty by the year 2002).

-- Based on the results under 1. and 2. above, the difficulties for adaptation areas could be identified and thus enable the preparation of documentation in advance for specific transitional requirements which are possible but negotiable (f.ex. Finland was allowed a reduction over 3 years of the customs tariff applicable to third countries for certain products, mostly textiles, clothing, footwear, metals, plastic and rubber products).

Trade defence instruments

Within the framework of the accession of Bulgaria to the WTO, the Bulgarian Government undertook the obligation to implement the respective agreements under Annex 1A: inter alia, the new Agreement on implementation of Article VI (the Anti-Dumping Agreement), the new Agreement on Subsidies and Countervailing Measures (the Subsidies Agreement), the Agreement on Safeguards and the Agreement on TBT. In practical terms this means that the WTO Anti-Dumping Agreement and the Agreement on Safeguards are to be transposed into the Bulgarian legislation and thus substitute the presently existing Regulations No.180/1993 (Safeguards) and No.181/1993 (Anti-dumping).

Bulgaria has also to reorganize the national standardization system to make it in conformity with the requirements of the Agreement on Technical Barriers to Trade. The mandatory "standards" under the Bulgarian legislation (equivalent to "technical regulations" as defined in the TBT Agreement) are to be transposed to voluntary non-mandatory status. The conformity assessment infrastructure is to be developed.

Other general trade policy issues.

In general the Bulgarian trade policy, while aligned with the EC trade policy based on WTO principles and discipline, should inter alia:

-- not result in discrimination between domestic and foreign suppliers;

-- be predictable and transparent, i.e. frequent changes would be totally unacceptable by the respective trading partners;

-- apply protectionist measures only within the scope of those allowed in the WTO; in this respect following trade policy tools are questionable under the WTO rules and thus need further corrective measures on the part of the Bulgarian Government: application of export taxes (in most cases actually an export ban and thus an indirect subsidy), export bans, non-automatic licensing, the scope of the automatic licensing.

1.5. Harmonisation of legislation

In parallel to the process of trade liberalisation the adoption of the Combined Nomenclature (CN) of the Community for coding and description of goods is under way. At present for customs and statistical purposes Bulgaria applies the classification under the Bulgarian customs tariff. The basis of the two classifications is the Harmonised System for coding and description of goods and therefore the adoption of the CN may not involve major efforts of the Bulgarian side. A lot of progress has been achieved so far with a view to introduce the CN as of the beginning of 1996. Bulgaria already applies the Single Administrative Document. With the introduction of the CN will be possible to aim at simplification of procedures and thus facilitate of trade.

According to the services of the Commission the four Visegrad counties, Romania and Slovenia have officially applied to start negotiations for joining the Common Transit system. The adhesion to the Common Transit System will require the adoption of the Community’s Combined Nomenclature (which is under way in Bulgaria), the adoption of the single administrative document together with the establishment of a credible guarantee system. The Bulgarian side has not applied yet for joining the system.

As far as other elements of tariff policy are concerned the Customs Code of Bulgaria (not adopted yet) has been drafted on the basis of the Community Customs Code.

2. Agreements of the European Union with third countries concerning trade

The agreements, concluded by the European Union with third countries constitute the Community acquis in the area of external relations.

The legal basis for the conclusion of association agreements is Article 238 of the Treaty establishing the European Economic Community according to the provisions of which the Community may conclude with a third State, a union of States or an international organisation agreements establishing an association involving reciprocal rights and obligations, common action and special procedures.

Such Agreements are negotiated by the Commission subject to the powers vested in it in this field and concluded by the Council, after consulting the European Parliament where required by the Treaty. Agreements concluded under these conditions shall be binding on the institutions of the Community and on Member States.

The legal basis for the conclusion of tariff and trade agreements is Article 113 of the Treaty related to the context of the common commercial policy, which is based on uniform principles, particularly in regard to changes in tariff rates, the achievement of uniformity in measures of liberalisation, export policy and measures to protect trade such as those to be taken in case of dumping or subsidies. Where agreements with third countries need to be negotiated the Commission makes recommendations to the Council which authorises the Commission to open such negotiations. In exercising the powers conferred upon it by Article 113 the Council shall act by a qualified majority. The agreements under Article 113 are concluded by the Council on behalf of the Community by a qualified majority.

Upon accession any new Member State accepting the Treaties on which the European Union is founded shall apply the Agreements concluded by the European Union (association Agreements and agreements concluded in the context of the common commercial policy. 1)

The necessary adjustments to those Agreements to take account of the enlargements of the Union are negotiated by the Commission with the co-contracting countries.

At present the list of those Agreements comprise the following:

2.1. Agreements based on Article 238

2.1.1. The Agreement establishing the European Economic Area has been signed in Oporto in May 1992 between the European Communities and their Member States of the one side and the each one of the EFTA States of the other (Austria, Finland, Iceland, Liechtenstein, Norway, Sweden and the Swiss Confederation). The purpose of the Agreement is to establish an integrated economic area (19 countries and 380 million people) making provisions for free movement of goods, persons, services and capital. The Agreement entered into force in 1 January 1994. 2), 3). In the area of free movement of goods, the Agreement provides for prohibition of duties and quantitative restrictions and measures with equivalent effect in trade in industrial products between the parties to it. The objective of free trade has been partially met by the application of the free trade Agreements concluded in 1972 with each of the EFTA countries.

The aim of the EEA Agreement is to extend the prohibition on duties to include also a ban on quantitative restrictions and measures of equivalent effect; emphasis is also placed with regard to prohibition of all discriminatory trade practices by state monopolies, anti-dumping measures and technical barriers to trade; border controls and formalities relating to goods are subject to simplification and the common market is extended to include public procurement.

2.1.2. The Europe Agreements with countries from Central and Eastern Europe

These agreements are based on Articles 113 and 238 of the Treaty. The Agreements are establishing an Association between the European Communities and their member States and each one of the countries from Central and Eastern Europe and are forerunners to possible accession providing for a time-table and a phased approach. All agreements are based on identical model, providing for the establishment of bilateral free trade areas between the Community and each one of those countries. As of 1995 the schedule for duty dismantling on the Community side provides for equal treatment for any of the countries concerned. The respective schedules of the countries differ according to their bilateral Agreements with the Community.

At present such Agreements are concluded with:

- Poland and Hungary- signed on 16 December 1991, entered into force on 1 February 1994; Interim agreements providing for the entry into force of the trade provisions were signed on the same date and entered into force on 1 March 1992;

- Poland and Hungary presented an application for accession in March 1994;

- the Czech Republic, the Slovak Republic - signed on 16 December 1991, entered into force on 1 February 1995 (due to the necessity to conclude two separate agreements with the Czech and the Slovak Republic based on the Europe Agreement with former Czechoslovakia); Interim agreements providing for the entry into force of the trade provisions were signed on the same date and entered into force on 1 March 1992;

- the Slovak Republic presented an application for accession in June 1995;

- Romania - signed 28 February 1993 entered into force 1 February 1995; Interim Agreement, providing for the entry into force of the trade provisions was signed on the same date and entered into force on 1 May 1993; Romania presented an application for accession in June 1995.

- the Baltic States (Lithuania, Latvia, Estonia) - The Agreements on free trade and trade related matters were signed on 18 July 1994 and entered into force on 1 January 1995. The Europe Agreements were negotiated afterwards and concluded during the first half of 1995;

- Slovenia - the Commission’s mandate to negotiate an Association Agreement (Europe Agreement) with Slovenia was approved by Council in May 1995 with a view to conclude such an Agreement by the end of 1995.

2.1.3. Agreement establishing an association between the European Economic Community and the Republic of Cyprus was signed on 19 December 1972 and entered into force on 1 June 1973. The first stage was due to be completed by 30 June 1977, but was subsequently extended. The Protocol laying down the conditions and procedures for the implementation of the second stage of the Agreement establishing an Association between the EEC and the Republic of Cyprus was signed on 19 October 1987 and entered into force on 1 January 1988. It provides for the establishment of a customs union in two phases:

-during a first phase of 10 years (1988-97 in principle) Cyprus is to abolish customs duties for industrial products originating in the EEC and adopt the Common Customs Tariff. The two parties will abolish their customs duties for the agricultural products covered by reciprocal concessions in the Association Agreement. The Community will progressively increase the tariff quotas for Cyprus’s principal agricultural exports of cereals, beef and veal and vegetable oils;

- the second phase (5 years) will enter into force by a decision of the Association Council. The measures necessary to implement the free movement of agricultural products in a customs union will be applied Cyprus has now presented an application for accession. The Community took a decision to open the accession negotiations six months after the end of the Intergovernmental Conference due to be opened in 1996.

2.1.4. An Agreement establishing an Association between the European Economic Community and Malta was signed on 5 December 1970 and entered into force on 1 April 1971 for an unlimited period. The Agreement provides for two stages:

- the first (duration: 5 years) was twice extended by an Agreement and an Additional Protocol (expiring on 31 December 1980). The trade provisions of the Agreement and the protocols were unilaterally extended until 30 June 1984 and subsequently further extended to 31 December 1985. The Community and Malta subsequently implemented unilaterally the trade provisions of the Agreement.

A Supplementary Protocol to the Agreement establishing an Association between the European Economic Community and Malta was signed on 14 December 1988 and entered into force on 1 April 1989 extending the first stage until 31 December 1990.

Another protocol was signed on 20 December 1990 extending the first stage until 31 December 1991 and providing for further automatic extensions from year to year thus providing for an extension de facto for an unlimited period.

Following the lodging by Malta of its application for accession, the Association Council called on 8 April 1992 for negotiations to begin as soon as possible.

The Community took a decision to open the accession negotiations six months after the end of the Intergovernmental Conference (as with Cyprus).

2.1.5 An Agreement establishing an Association between the European Economic Community and Turkey was signed on 12 September 1963 and entered into force on 1 December 1964 for an unlimited period. The Agreement provides for the establishment of a customs union. It comprises three stages:

- a preparatory stage (duration: around five years);

- a transitional stage (twelve years) involving the establishment of a customs union;

- a final stage.

A Financial Protocol was signed on 23 November 1970 providing for the establishment of the conditions, arrangements and a timetable for the transitional stage. During the following periods second, third and fourth financial protocols were negotiated and concluded. On the last (fourth protocol) negotiations were completed on 19 June 1981. The Protocol was initialled only in 1991, but the Greek opposition continues to block the release of the ECU 600 million set aside by this Protocol for the financing of development and co-operation projects over a period of five years (1991-96).

The attainment of the objectives set by the Agreement is administered by the Association Council (it resumed its activities on 30 September 1991 following a five year gap).

In 1992 a co-operation programme was finalised between the Commission and the Turkish government with the aim of relaunching the EEC- Turkey association. In a joint statement issued at the end of the meeting of the EEC-Turkey Association Council in November 1992 the Association Council called for political dialogue and co-operation to be stepped up. The Association Council meeting in March 1995 called for the entry into force of the final stage of the customs union on 1 January 1996 (duration of this stage: five years after entry into force).

2.1.6 Several co-operation agreements between the EEC and the Mediterranean and Middle East countries were concluded in the late 1970's as follows:

- with the People's Democratic Republic of Algeria - signed on 26 April 1976, entered into force on 1 November 1978 for an unlimited period;

- with the Arab Republic of Egypt - signed on 18 January 1977, entered into force on 1 November 1978 for an unlimited period;

- with the Hashemite Kingdom of Jordan - signed on 18 January 1977, entered into force on 1 January November 1979 for an unlimited period;

- with the Lebanese Republic - signed on 3 May 1977, entered into force on 1 November 1978 for an unlimited period;

- with the Kingdom of Morocco - signed on 27 April 1976, entered into force on 1 November 1978 for an unlimited period;

- with the Syrian Arab Republic - signed on 18 January 1977, entered into force on 1 November 1978 for an unlimited period;

- with the Republic of Tunisia - signed on 25 April 1976, entered into force on 1 November 1978 for an unlimited period.

All these are comprehensive co-operation agreements, providing for the possibilities for financial arrangements governed by specific protocols and allowing for the conclusions of protocols enabling traditional export trade of these countries with the Community to be maintained. On the basis of these agreements and in conformity with Article 113 of the Treaty arrangements for specific agricultural imports into the Community originating in each of these countries were concluded.

Negotiations for the conclusion of new generation agreements are currently underway. A new Agreement has been initialled with Tunisia by the end of the first half of 1995 and the conclusion of such agreements with Morocco and Israel is expected to take place until the end of 1995. A lot of progress has been achieved also in the negotiations with Egypt, Jordan and Lebanon.

The Euro- Mediterranean Conference to be held in Barcelona on 27-28 November 1995 is expected to lay the foundations for a Euro-Mediterranean partnership with ambitious co-operation goals with a view to establish a Euro-Mediterranean economic area based on free trade in accordance with the obligations arising from the WTO. The establishment of the free trade area is to be progressively completed by the year 2010 covering most trade.

2.2. Agreements based on Article 113 of the Treaty

2.2.1. Agreement between the European Economic Community and the Swiss Confederation

The Agreement was signed on 22 July 1972 and entered into force on 1 January 1973 for an unlimited period; It is a preferential Agreement, creating a free trade area and laying down a detailed schedule for the dismantling of tariffs, on completion of which industrial products circulate freely. The Agreement has been amended on several occasions by Additional protocols, Exchange of letters or Decisions of the Joint Committee. Since the Swiss Confederation did not join the European Economic Area bilateral negotiations are under way with a view to improve the economic provisions of the existing Agreement.

2.2.2. An Agreement between the European Economic Community and the State of Israel was signed on 11 may 1975 and entered into force on 1 July 1975 for an unlimited period. This is a free trade and co-operation agreement. Several protocols governing the financial aspects of the co-operation were concluded. The latest one covering a period of five years expires on 31 October 1996.

Negotiations for a new generation agreement are currently under way in the context of the Mediterranean policy of the European Union.

Notes:

1) After their accession Austria, Finland and Sweden had to withdraw from the Convention establishing the European Free-Trade Association and to apply to their former EFTA partners the Agreements concluded by the European Union.

2)After referendum the Swiss Confederation did not ratify the Agreement;

3) After their accession to the EU Austria, Finland and Sweden participate on the Union's side; at present parties to the EEA Agreement are the EC-15 of the one side and Iceland, Norway, Liechtenstein of the other side.

4) Bulgaria, Hungary, the Czech and the Slovak Republic shall abolish duties on imports from the Community nine years after the entry into force of the Agreement, Poland - seven years after entry into force, Lithuania - seven years after entry into force, Latvia - four years after entry into force, Estonia abolished duties and quantitative restrictions on imports from the Community with the entry into force of the Agreement. Thus the Europe Agreement between Estonia and the Community is the only one providing for an immediate establishment of a free trade area including trade in the sensitive sectors (in trade in textiles applies the double checking system on imports into the Community).

5)However in October 1990, to allow for the consequences of the Gulf crisis, the European Communities adopted an economic aid programme for Turkey, Jordan and Egypt

3. Current status of regional co-operation of Bulgaria

The integration process of the European Union is an example how economies sharing common values may develop their co-operation on the basis of mutual benefit.

To prepare for the intensive type of integration within the Community co-operation with associated to the EC countries must be developed.

The Central European countries (the Visegrad) countries realised the necessity of deepening relationship between themselves in parallel to their bilateral agreements with the European Union.

The Central European Free Trade Agreement was concluded between the Czech Republic, the Republic of Hungary, the Republic of Poland and the Slovak Republic and entered into force on 1 March 1993.

The implementation of the Agreement is aimed to progressively eliminate the obstacles to substantially all trade thus fostering the intensification of mutually beneficial trade relations and contributing to the process of integration in Europe.

3.1. Free trade agreement with EFTA

In March 1993 Bulgaria has signed a Free Trade Agreement with the EFTA States, covering trade in industrial products, fish and processed agricultural products. The Agreement is parallel in many ways with the Europe Agreement with the EC. There is also an asymmetry in the implementation schedule of trade liberalisation in favour of Bulgaria. Bilateral agreements in agricultural products were concluded with each individual EFTA State and signed on the same date

3.2. Free trade agreements with the associated countries from Central and Eastern Europe

The Bulgarian side indicated its willingness to negotiate bilateral free trade agreements with the other associated to the EU countries from Central and Eastern Europe.

Negotiations with the Czech Republic and the Slovak Republic are well under way with a view to be completed by the end of 1995. Exploratory talks have been held with Poland and Romania with a view to schedule negotiations as soon as possible. Bulgaria and Slovenia agreed in principle to hold negotiations on a free trade agreement.

3.3. Cumulation of rules of origin

While technical in character the cumulation of preferential rules of origin between the associated countries from Central and Eastern Europe and the European Union will foster trade in the region.

This will also strengthen the effectiveness of the Europe Agreement by allowing economic operators to fully exploit its provisions. At present the diagonal cumulation provision is included in the Agreements of the Visegrad countries.

The adaptation of the their Europe Agreements to extend the diagonal cumulation to include Bulgaria (and Romania) is dependant on all associated countries agreeing on one system and agreeing on an agreement between themselves.

The intentions of the Community are afterwards to introduce diagonal cumulation to the extent possible (some product sectors, probably textiles and vehicles will be excluded) between EC/EFTA treated as one territory for the purposes of rules of origin and the associated countries.

As a result all EC/CEEC/EFTA countries would then be involved in what could be called European cumulation.

Before the introduction of full cumulation into all Europe agreements as a third stage a thorough evaluation would be undertaken on the basis of the sectoral and regional consequences on European industry of introducing full cumulation, taking into account the effects of the first two stages.

The progress achieved so far in the multilateral discussions between the six associated countries on the adaptation of their Europe Agreements in order to harmonise the rules of origin and to extend the cumulation of origin to include Bulgaria and Romania indicate their willingness to proceed expeditiously (two rounds of negotiations have been held in Brussels between the European Commission and the customs authorities of the countries concerned).

When achieved, harmonisation of rules of origin and the extension of cumulation possibilities, would strengthen the effectiveness of the Europe Agreements, improve market access for originating products and stimulate economic co-operation throughout Europe.