WORLD TRADE G/L/183
17September 1997
ORGANIZATION(97-3720)
Original: English Council forTrade inGoods
6October 1997
HUNGARY -AGRICULTURAL EXPORT SUBSIDIES
Request foraWaiver
Thefollowing communication, dated 8September 1997, hasbeenreceived fromthePermanent
Mission ofHungary.
_________________
1. REQUEST
Hungary requests thatMembers grant awaiver1from itsobligations under paragraph 3of
Article 3,Article 8andparagraph 2ofArticle 9oftheAgreement onAgriculture fortheperiod ending
on31December 2001inorder thatHungary cancarryoutthefundamental adjustment ofitsagricultural
policies necessitated bytheerroneously established Section IIofPartIVofitsSchedule. Thisrequest
ismade inaccordance withtheGuiding Principles tobefollowed inconsidering applications forwaivers
adoptedon1November1956,theUnderstandinginRespectofWaiversofObligationsundertheGeneral
AgreementonTariffsandTrade1994,andparagraphs3and4ofArticleIXoftheMarrakeshAgreement
Establishing theWTO. Theexceptional circumstances justifying awaiver aredescribed below.
2. DESCRIPTION OFTHE MEASURES FOR WHICH AWAIVER ISREQUESTED
Hungarywouldbepermittedtoprovideexportsubsidiesinaperiodendingon31December2001
listed inparagraph 1ofArticle 9oftheAgreement onAgriculture inrespect ofagricultural products
specified intheAnnexes tothisrequest, andinconformity withthebudgetary outlay, quantity and
other commitments specified intheAnnexes tothisrequest. Asof1January 2002 Hungary would
havetoapply export subsidies onlyaccording toSection IIofPartIVofitsSchedule.
3. SPECIFIC POLICY OBJECTIVES PURSUED
Theagro-food sector traditionally plays anoutstanding roleintheHungarian economy.
Agriculture provides employment forover12percentoftheactive population. Itaccounts forsome
10percentinGDP production andmore than20percentintotalexports. Theagricultural exports
exertsubstantial positive influence onthetradebalance, tradedeficits experienced inrecent years have
beentoalarge extent mitigated bythissector inview ofitshighshare intotalexports. Statistical
datashow adirect correlation between thelevelofagricultural exports andthestability ofthebalance
ofpayments. Inviewofheavy export subsidization andexcessively hightariffs andother protective
measures stillprevailing ontheworld market foragricultural products, acertain degree ofexport
subsidization isneeded inorder tomaintain thelevelandmarket share ofHungarian agricultural exports.
1Seedraft waiver decision indocument G/C/W/86.
./.G/L/183
Page2
4. REASONS FOR THE REQUEST FOR AWAIVER
Atthetimewhen Section IIofPartIVofHungary 'sSchedule LXXI wasestablished, acritical
error occurred. Thereason forthiserror isrelated tothedeepsystemic changes inHungary that
coincided withthesecond phase oftheUruguay Round. Theeffects ofthepolitical andeconomic
changes ontheorderly functioning oftheadministrative bodies concerned withagricultural policies
andthelackofavailable comprehensive information onexport subsidies provided during the
Uruguay Round baseperiod through secret, non-transparent regulations andad-hoc arrangements, in
particular concerning trade conducted innon-convertible currencies resulted inafailure tocorrectly
calculate thebasis fortheestablishment ofSection IIofPartIVofitsSchedule.
Asaconsequence ofthiserror, thereferred section ofHungary 'sSchedule covers onlyasmall
fraction oftheproducts subsidized andtheamounts ofsubsidies intheUruguay Round baseperiod
1986-90. TheSchedule contains 16narrowly-defined products withanaggregate baseoutlay level
of22billion Forints (equal toUSD 423million) against therealfigures ofsome 720subsidized products
andover58billion Forints innominal terms (equal toUSD 1billion) annual average export subsidies
intheUruguay Round baseperiod.
Asthepractically complete elimination ofexport subsidies which istheconsequence ofthe
error committed during theestablishment ofSection II,PartIVoftheHungarian Schedule callsfor
thefundamentalrestructurizationofagriculturalsupportpoliciesandbearinginmindthatthepreservation
ofthelevel ofagricultural exports isofcritical importance totheoverall economic situation ofthe
country,atransitionperiodinvolvingalimitedandcontinuouslydecreasingdegreeofexportsubsidization
isneeded untilthisadjustment process isconcluded.
5. TRADE EFFECTS OFTHE WAIVER
Agriculturalexportsubsidizationpermittedbythewaiverisnotexpectedtohavenegativeimpact
oncompetitors sincebaselevels forthereduction ofbudgetary outlays andforthesubsidized quantities
wereestablished bytaking intoaccount thesubstantial autonomous reductions since 1990interms of
budgetary outlays andproduct coverage: theamount ofexport subsidies werecutbyalmost twothirds
andthenumber ofproducts benefiting fromexport subsidies by50%compared totheperiod of1986-90.
Asnomajor expansion ofHungarian agricultural exports and/or negative influence onmarket conditions
could beexperienced duetohigher export support inthefirsthalfofthe90'ssucheffects caneven
lessbeexpected inthewaiver period: theterms andconditions ofthewaiver willplace further
limitations ontheuseofexport subsidies thusdiminishing theirincidence withregard toHungarian
agricultural exports.
6. CONCLUSION
Inlightoftheexceptional conditions brought about bythepolitical andeconomic transition
ofthecountry thatledtothecritical error andtaking intoaccount thatadherence totheerroneously
established Schedule would jeopardize themacroeconomic situation andtheviability oftheagricultural
sector ofthecountry, Hungary requests thattheMembers oftheWTO approve itsapplication fora
waiver.