Note: Advance written questions by WTO Members and replies provided by the Government of
Bulgaria are reproduced in document WT/TPR/M/121/Add.1 and will be available online
at:  http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm.WORLD TRADE
ORGANIZATIONWT/TPR/M/121
20 November 2003
(03-6189)
Trade Policy Review Body
15 and 17 October 2003Original:  English
TRADE POLICY REVIEW
BULGARIA
Minutes of Meeting
Chairperson:  H.E. Mrs. Mary Whelan (Ireland)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3II. OPENING STATEMENT BY THE REPRESENTATIVE OF BULGARIA 4III. STATEMENT BY THE DISCUSSANT 6
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 7
V. REPLIES BY THE REPRESENTATIVE OF BULGARIA AND ADDITIONAL
COMMENTS 12
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 14WT/TPR/M/121
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The first Trade Policy Review of Bulgaria was held on 15 and 17 October 2003.  The
Chairperson (H.E. Mrs. Mary Whelan) welcomed the delegation of Bulgaria, headed by Mr. Radoslav
Bozadzhiev, the deputy Minister of Economy, and the discussant H.E. Mr. Henrik Reé Iverson
(Denmark).  As usual, the discussant would speak in his personal capacity and, in accordance withestablished procedures, he had made available in advance a broad outline of the themes he intended to
raise (document WT/TPR/D/99).
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures of the meeting.  The Report by the Government of Bulgaria was contained in
document WT/TPR/G/121 and that of the Secret ariat in document WT/TPR/S/121.  Copies of
advance written questions, submitted by Switzerland;  the European Union;  Canada;  Japan;  India;
the Republic of Korea;  Argentina;  Brazil;  and the United States
 had been transmitted to the
delegation of Bulgaria. These questions, and replies provided by the representative of Bulgaria, are
reproduced in WT/TPR/M/121/Add.1.
3. The Chair noted that the documentation prepared for the Review of Bulgaria underlined the
substantial progress in macroeconomic and structural reforms implemented since 1997, including in
trade policies (which had gone beyond WTO commitments). These she noted, had contributed torapid economic growth, reduced inflation and sustainable public deficit over the last five years.
Increasingly, Bulgaria’s trade policies were being pursued through a wide network of bilateral and
regional trade agreements, the most important of which was with the EU. Preparation for EU
accession was also spurring further trade and trade-related reforms. She said that the continuation of
these reforms would be important in sustaining macroeconomic recovery and reducing the high levelsof unemployment and poverty. Recently, there appeared to be hopeful signs in both these respects.WT/TPR/M/121
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF BULGARIA
4. The representative of Bulgaria noted that the first trade policy review of the Republic of
Bulgaria was taking place at a crucial time following the Fifth Ministerial Conference, and during the
negotiations on the country’s accession to the European Union.
5. He said that, since its accession to the WTO, Bulgaria had pursued its transition towards a
functioning market economy capable of meeting the challenges of the globalizing world.  The policies
implemented were based on three pillars: maintaining financial stability, promoting solid economic
growth, and finalizing structural reforms.  Po licies implemented over the period 1996-2003 included
sound macroeconomic policies such as the introduction in July 1997 of the Currency Board
Arrangement and a conservative fiscal policy;  and a sharp acceleration of structural reforms, in the
areas of agriculture, energy, privatization, price and trade liberalization, of social sector reforms and
financial discipline in the enterprise sector.  More than 81% of the assets subject to privatisation wereprivatised. The privatisation of the banking sector was completed.  These reforms had shown a
favourable impact on the economy; high levels of growth since 1998 (reaching 4.8% in 2002), low
levels of inflation (5.8% in 2002), increase in foreign direct investment (reaching US$5.2 billion in
January 2003), and a variable tendency towards declining unemployment. All GDP components had
contributed to the growth. The GDP structure gradually changed largely due to the expansion of theseries sector that reached 58.1% in 2002.
6. In 2002, the European Commission recognized Bulgaria as "a functioning market economy
able to cope with competitive pressure and mark et forces within the Union in the medium term,
provided it continues implementing its reform programme to remove remaining difficulties."
7. Total external trade increased by over 40% in the period 1996-2002 and since 1999 exports
have grown steadily. Improved access to foreign markets for Bulgarian goods and services had been
important in ensuring steady economic growth, increased investment, and increased employment
opportunities. Foreign technologies and industrial inputs had played an important role in the
restructuring process and in ensuring efficient resource allocation.  Imports had provided consumers
with a larger choice of products and services at competitive prices.
8. The liberalization of Bulgaria's foreign trade regime was directed towards increasing the
effectiveness of production and the competitiveness of Bulgarian goods. Bulgaria’s trade policy was
shaped primarily by its WTO membership and by its continued progress as a candidate for EU
membership. Accession to the WTO had facilitated the country's transition to a market economy,
ensured stability of the domestic market, and promoted investments, which had  led to better competitive
conditions for trade.  All reduction commitments in  tariff protection had been implemented on schedule.
9. He noted that Bulgaria's tariff regime was characterized by its transparency and predictability
with an average applied MFN rate for all goods of about 11% in 2003 and simple average MFN rates
of 21.7% for agricultural products and 8.6% for industrial products. Bulgaria applied ad valorem
duties for all industrial products with the exception of one tariff line, and for 84% of agricultural
products. Since the accession of Bulgaria to the Agreement on Information Technology, on 1 January
2002, zero duties applied to all products under this Agreement.  Bulgaria also provided favourablemarket access under the Generalized System of Preferences to 118 developing and least developed
countries. All export taxes had been eliminated.
10. Bulgaria had introduced only a few trade remedy measures. Non-tariff measures were applied
only to address legitimate environment, health, public morals, and security-related concerns.  Bulgaria
had met its commitments on tariff reductions on all goods and on domestic support and exportsubsidies for agricultural products.  Since acceding to the WTO, Bulgaria had made considerable
progress in liberalizing its agricultural trading regime. Since 1997, licensing requirements for the
import and export of agricultural products had been removed. Customs procedures had beenWT/TPR/M/121
Page 5
simplified and reforms of the customs and tax administrations were ongoing in order to enhance the
performance of these institutions. During and since Bulgaria’s accession to the WTO, it had improved
the legislative framework for the protection of intellectual property rights and had further streamlined
its disciplines and practices to guarantee an adequate protection of these rights.
11. Bulgaria had also liberalized market access in services. In its Schedule of Specific
Commitments attached to the GATS, Bulgaria made  commitments across all major service sectors
and in more than 90 subsectors. It participated in subsequent negotiations on further liberalization of
trade in basic telecommunications and financial services, and made meaningful commitments under
the respective agreements.
12. The representative noted that Bulgaria was party to a number of free trade agreements whose
main objective was to support, through regional trade cooperation, the transformation of the economy
to a free market system and to strengthen regional economic integration and stability. Agreementswere in force with the European Communities and Member States through the Europe Agreement,
with the Central European Free Trade Area, and with the European Free Trade Area. Bilateral
agreements were also maintained with Estonia, Latvia, Lithuania, Israel, Macedonia, and Turkey. In
2001, Bulgaria signed a Memorandum of Understanding on Trade Liberalization and Facilitation
between countries in South-Eastern Europe with in the framework of the Stability Pact and in
consequence finalized the negotiations on free trade agreements with Albania, Serbia and
Montenegro, and Bosnia and Herzegovina. These agreements had proven useful in restoring and
developing economic ties, while strengthening the multilateral trading system.
13. Negotiations on the accession of Bulgaria to the EU were in an advanced stage. Membership
in the European Union was a strategic goal for Bulgaria. The EU accession effort rested, among otherthings, on broad public support in Bulgaria and the Government’s political will to successfully
complete preparation for EU membership.
14. In the new round of multilateral negotiations Bulgaria was guided by the principle that the
overall outcome of negotiations had to be sufficiently positive and acceptable for all members. Each
member should be able to find a positive balance for itself in each step, in each area of thenegotiations and in the final results of the single undertaking.  Areas of importance for Bulgaria in the
new round were in improvement of market access for agricultural and non-agricultural products,
further enhancement of trade in services, and extension of the protection of geographical indications
under the TRIPS Agreement.
15. In conclusion, the representative expressed the willingness of the Bulgarian Government to
maintain its transparent and predictable trade and economic policy in compliance with its obligations
and commitments under the WTO Agreement.WT/TPR/M/121
Page 6
III. STATEMENT BY THE DISCUSSANT
16. The discussant praised Bulgaria for the reforms pursued since the economic crisis of 1996;
these had brought about considerable positive change in the economic climate since 1997. The pursuit
of legislative reforms, privatization, and other moves towards a market economy had created the basis
for the current benefits, including positive growth rates and declining unemployment.
17. Nonetheless, he observed, that GDP was still below its 1989 level, a high proportion of
people earned low incomes, and even though salaries were rising, minimum wages were not rising as
fast as the average wage. Other problems included the small and dispersed nature of farms,
under-capitalization of the agriculture sector, and difficulty in accessing farm and other credit. He
asked how all these problems were being addressed.  He commended Bulgaria for its efficient use of
structural funds from the European Union under various assistance programmes, recognizing that
these had been a great success.
18. The discussant remarked that Bulgaria had liberalized its trade system and customs rates and
believed that it was as well on schedule as it could be. Legislative reforms had also gone ahead well,
and many economic sectors now had a strong lega l foundation.  However, implementation of legal
reforms was still at a preliminary stage:  putting m odern legislation into practice remained a challenge
for Bulgaria.  He sought comments on how implementation was being pursued, in particular inenforcing legislation on intellectual property rights.
19. On sectoral issues, the discussant wondered on whether Bulgaria intended to support its
agriculture sector through high consumer prices, once it entered the EU. He also raised the issue of
how political support for the continuation of the reforms would continue, given that it appeared the
Bulgarian population were expecting miracles. On the energy sector, Bulgaria exported about half ofits electricity production and also had a high consumption per capita level. He encouraged Bulgaria to
address its relatively high energy consumption levels, keep production in line with the outside world,
and increase its exports. He further enquired on the possible environmental consequences of its energy
production given that about 45% was from nuclear s ources. The discussant took note of developments
in the grey economy, observing the number of people coming out of it and sought information ongovernment plans for further reducing activity in this sector. The importance of increasing investment
in infrastructure to the level necessary for the functioning of a market economy was also underlined,
in particular in the tourism sector and in irrigation facilities.WT/TPR/M/121
Page 7
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
20. Members congratulated Bulgaria for the economic reforms implemented since the economic
crisis of 1996, including the establishment of a currency board arrangement, a conservative fiscal
policy, privatization of state-owned enterprises, and liberalization of its trade regime. Legislative
reforms encompassed areas such as intellectual property, government procurement, competitionpolicy, and sanitary and phytosanitary measures. It was noted that these reforms had contributed to the
recent favourable performance of the Bulgaria n economy. Some members (Croatia, Cyprus, Czech
Republic, Lithuania, Poland, and Slovak Republic) also expressed their support for Bulgaria's
strategic goal of acceding to the European Union.
21. The representative of Switzerland recalled the good bilateral trade relationship between their
countries, including similar views on a broad range of areas under discussion in WTO fora.  He
welcomed the process of economic reform in Bulgaria, including its firm commitment to liberal tradepolicies, and was pleased that the Bulgarian economy was on a recovery path with rapid economic
growth and low inflation. The representative encouraged Bulgaria to ensure a sound financial and
banking system, given the impressive capital inflows in recent years, and to consolidate its economic
reforms. He hoped that from a multilateral trade perspective increased integration into the EU would
be predominantly trade creating and economically beneficial for non-EU member states.
22. Bulgaria's efforts to improve its legal intellectual property framework over the past few years
was commended; and the government was urged to intensify its efforts in effectively combating
counterfeiting and piracy.
23. The representative of the European Co mmunities thanked the WTO Secretariat and
Government of Bulgaria for their well-prepared re ports, but he disagreed with some comments on
Bulgaria's tariff regime, in the summary of the Secretariat report, which did not appear to have a basis
in the main body of the report.
24. He recognized the efforts undertaken by Bulgaria to change its fundamental political and
economic system from that of a state trading one to that of a market economy. He underlined the
strong relationship between the EU and Bulgaria, highlighting the progress of Bulgaria in itsaccession process, as well as their extensive cooperation, including via a free-trade area.
25. Bulgaria had achieved a high degree of macroeconomic stability, strong economic growth,
low inflation, declining unemployment, and a relatively low current account deficit.  This, he said,
could be attributed to a number of factors, including a good policy mix brought about by the currency
board arrangement, a tight fiscal stance, wage moderation, and good progress in structural reforms
such as through the reduction of state aid, banking sector reforms, and improvements in the regulatory
environment.  Many of these changes were a consequence of Bulgaria’s decision to integrate with theEU. The EU was of the view that the experience of  Bulgaria in carrying out economic liberalization
and strengthening the laws and rules necessary for that liberalization to be sustainable offered a good
model for many other WTO members seeking to strengthen their economies through a rules based
approach.
26. He recalled that average per capita income in Bulgaria remained low, and encouraged
Bulgaria to continue reforms in several areas in order to improve the flexibility of markets and to
increase confidence in the economy. Bulgaria needed to improve the efficiency of the administrative
and judicial system, streamline regulatory procedures for the enterprise sector, restructure and
liberalize the network industries, eliminate rigidities in the labour market, and improve the education
system; further progress was also needed in the privatization process, notably in the privatization ofBulgartabac and of the Bulgarian Telecom Company (BTC).WT/TPR/M/121
Page 8
27. The representative of Canada acknowledged Bulgaria’s accomplishments in its ongoing
transformation to a market economy and commended the widespread economic reforms introduced.
The Secretariat report had highlighted many initiatives contributing to Bulgaria’s improved economic
prospects, including privatization and reform in key sectors such as telecommunications,
manufacturing, banking and insurance; strengthened competition and intellectual property rightslegislation; and the extension of national treatment and incentives to attract foreign direct investment.
Additional positive factors included the significant reduction in Bulgaria’s average MFN tariff rate,
and improved customs procedures.  Canada was also pleased to note Bulgaria’s success in promoting
skilled labour and natural resources to attract investors and giving priority to fighting corruption.
These initiatives should encourage foreign investment. Continued strong macroeconomic discipline,
tax reform to support social programmes, good governance, and social safety nets could help to offset
the high social cost of unemployment and ensure that the benefits created by trade and investmentliberalization could be realized by all sectors of society.
28. Canada welcomed Bulgaria’s commitment to its obligations within the framework of the
WTO and regional free-trade agreements. These liberalization efforts had created a more open and
predictable trade and investment environment, and were helping Bulgaria prepare for its targeted
accession to the EU in 2007. Canada believed that Bulgaria’s commitment to further tradeliberalization and to the Doha Development Agenda  would be an important contribution to ensuring
an open, rules-based multilateral trade system that benefited developed and developing countries
alike. Canada looked forward to working closely with Bulgaria and the rest of the WTO membership
to get the negotiations moving forward again.
29. The representative of Japan praised Bulgaria's consistent efforts in establishing democracy, a
functioning market economy, and liberalizing its trade regime under the WTO agreement. Japan had
steadfastly supported Bulgaria in its transition to a market economy; in March 2003, a joint
Ministerial announcement had been made on a new partnership between Japan and Bulgaria.
30. Japan hoped that Bulgaria would continue to develop and liberalize its economy and enhance
the multilateral trading system.  He highlighted three points.  Firstly, the large gap between appliedtariffs on goods of  EU origin and those of non-EU origin, including from Japan, might be an obstacle
for export from non-EU countries. He hoped that Bulgaria would consider a  reduction of the applied
tariff rate for goods of non-EU origin.  Next, while Japan appreciated the improvements made to the
government procurement system in Bulgaria, further measures were needed to implement the system
smoothly, such as the establishment of a single window procedure.  Lastly, Japan appreciated
Bulgaria’s endeavours to improve enforcement of intellectual property rights and hoped that Bulgaria
would continue to maintain and enhance such protection.
31. The representative of the Republic of Korea noted that bilateral trade between Bulgaria and
Korea had risen sharply, from about US$30 million in 2001 to more than US$43 million in 2002, and
was expected to reach almost US$60 million in 2003.  He hoped that Bulgaria would continue its
economic success by maintaining and further accelerating its liberalization policy.
32. He raised concerns regarding the VAT system in Bulgaria, in particular the burdensome
requirement to make a refundable deposit of 20% on exported goods. He also asked for the
justification for the high tariff rates of 40% or more on some food products, in particular on instant
noodles, and whether Bulgaria had any plans to reduce these rates in the future.  Foreign companies
operating in Bulgaria reportedly still had difficulties in effectively settling commercial disputes and he
sought information on measures taken so far and to be taken in future to ease this situation.
33. The representative of Argentina took note of the significant improvements in Bulgaria's
macroeconomic performance between 1998 and 2002. Bulgaria had set its trade policy on a dynamic
course in multilaterally, regionally and bilaterally and had also taken autonomous liberalization
measures. He hoped that Bulgaria would support the positive results achieved by striving harder toWT/TPR/M/121
Page 9
liberalize agricultural trade and sanitary and phytosanitary measures. He took note that agricultural
tariff quotas were under utilized because of the application of lower tariffs. Argentina believed that
this situation could be avoided by use of tariffs only, without resort to tariff quotas. Although
Bulgaria's Aggregate Measure of Support had increased, it was still below the overall average level,
and he hoped that Bulgaria would reduce its AMS on foodstuffs in the next few years and thuspromote the competitiveness of its farm sector.
34. The representative of Brazil commended Bulgaria for the comprehensive economic reforms
undertaken during the last few years, following a transitional period of severe difficulties,
compounded by a tough external environment.  He congratulated Bulgaria for its recent
macroeconomic performance and encouraged it to continue the process of integration into the world
economy, consolidating its institutions and contributing to the well-being and social development of
its people.  He urged Bulgaria to pursue further trade liberalization by improving market access for all-countries, particularly in the agriculture sector.
35. The representative of India acknowledged the structural and economic reform programme
being implemented in Bulgaria and its favourable impact on economic growth. The boost to economic
reforms arising from the process of EU accession was also noted. He appreciated the binding of
Bulgaria's tariff schedule and the legislative measures adopted in order to ensure compliance with themultilateral trading system. Bulgaria participated actively in regional trade initiatives and he hoped
that Bulgaria would take measures to ensure that RTA's entered into did not create trade diversionary
effects for its non-preferential trading partners.
36. The representative of the United States commended and supported Bulgaria’s efforts to
achieve a democratic, market-oriented society based on the rule of law.  The United States was
providing technical assistance aimed at improving the business legal environment. On average,
Bulgaria’s exports to the United States had grown by 14% each year since Bulgaria entered the WTO
in 1996, and the stock of U.S. direct investment in Bulgaria stood at about $305 million. Having taken
positive steps towards a free-market economy since the beginning of its transition, Bulgaria stood out
as a regional leader in areas such as legislative reform, especially in the area of intellectual propertyprotection.
37. Bulgaria’s reform agenda had resulted in a real improvement in the macroeconomic
environment and increased trade volumes. Furthermore, growth in domestic consumption, and gross
fixed capital formation spurred on by privatization, demonstrated renewed confidence in Bulgaria’s
economy.
38. Bulgaria’s extensive legislative reforms in customs valuation, anti-dumping and
countervailing actions, safeguards, TBT and SPS measures, services, government procurement, andTRIPs were welcomed. Though Bulgaria had taken great strides in improving its intellectual property
regime since becoming a WTO member, in the last several years, optical media piracy had been
growing via a weak enforcement environment.
39. The representative of the United States also remarked on the differing pace of Bulgaria's
liberalization amongst MFN partners and preferential partners.  This limited the potential for tradecreation and for improved competitiveness.  Despite these differentials, the United States continued to
provide substantial unilateral preferences to Bulgaria through the GSP programme.  The United States
highlighted the recommendation of the WTO report urging Bulgaria to liberalize its MFN tariff
regime and encouraged Bulgaria to press forward in its work toward accession to the WTO
Government Procurement Agreement.  She stressed that the United States would continue to supportBulgaria's process of reform.
40. The representative of Turkey underlined the importance his country attached to its relations
with Bulgaria in economic, commercial, and security  areas, and looked forward to future cooperation.WT/TPR/M/121
Page 10
He paid tribute to Bulgaria for its economic and political reforms undertaken since 1996 in the midst
of a very painful transition period and regional political crisis. Sound macroeconomic policies were
being combined with comprehensive trade policy measures such as tariff liberalization, reforms in
anti-dumping and safeguard legislation, government procurement, and intellectual property rights.
Bulgaria also seemed to be solving its problems of unemployment and poverty.
41. The representative of the Slovak Republic stressed the need for Bulgaria to continue with its
reform process in order to complete its structural reform and economic recovery.  He acknowledged
the positive effects of the accelerated pace of structural reform, including trade liberalization, on the
macroeconomic environment, real GDP growth, low inflation, increased foreign trade, and increased
investments. He underlined the importance of bilateral relations including in trade and economic
cooperation between the two countries.  He believed  that the accession of Bulgaria to the EU would
have further positive implications for its trade performance.
42. The representative of Romania recalled the bilateral trade relations between the two countries
through CEFTA;  their common goal of developing trade on a sustainable basis, and with the aim of
improving economic growth, quality of life and social welfare;  and their strategic goal, of acceding to
the EU.
43. She encouraged Bulgaria to continue efforts towards developing trade, based on multilateral
trade rules, and commended the Bulgarian authoritie s for their willingness to engage in bilateral
consultations in cases of trade defence measures.  She noted Bulgaria's active role in the WTO, [in
presenting] and steady support for negotiations in areas of interest for certain countries in the region,
as well as others.  The representative asked the Bulgarian delegation to supply further details on the
way the authorities succeeded in reducing the "grey sector".
44. The representative of Hungary underlined the longstanding bilateral economic and trade
relations with Bulgaria.  He recalled the deep st ructural changes occurring in the Bulgarian economy
and how accession to the WTO and preparation for EU accession had had a positive impact on its
economy.  He noted the level of Bulgaria's applied MFN tariffs and bindings as well as the
autonomous liberalization undertaken.  He could not support some of the conclusions in theSecretariat's report, in particular the need for Bu lgaria to reduce the margin between its applied MFN
and preferential rates. He was of the view that given the remarkable level of liberalization already
undertaken by Bulgaria, and its current low income status (US$1,700 per capita GDP) it was
inappropriate for Bulgaria to undertake further unilateral liberalization and also unrealistic in the light
of the ongoing DDA negotiations. The representative felt that the summary of the Secretariat report
could rather have emphasized other elements of Bulgaria's trade regime including its liberal nature
and the fact that it operated a GSP scheme.
45. The representative of the Czech Republic welcomed recent developments in the Bulgarian
economy, including that it was on a recovery path with strong economic growth.  He commended
Bulgaria for its prudent fiscal policy, which had contributed to an improved financial position and
containment of inflation.  More progress was needed in certain areas to ensure sustainable growth and
improve living standards. He encouraged Bulgaria to  reinvigorate the well-advanced structural reform
process.  On trade policies and practices, he noted Bulgaria's continued effort to improve market
access, the fulfillment of its WTO commitments, and its active involvement in day-to-day business in
the WTO.
46. In light of Bulgaria’s accession to the European Union, the representative noted that further
changes and reforms, including those related to Bulgaria’s trade policy regime, were envisaged. EU
enlargement represented a unique opportunity for all traders and investors and was an important
building block of the multilateral trading system.  He recalled bilateral relations between the two
countries and expressed interest in further deepening cooperation with Bulgaria.WT/TPR/M/121
Page 11
47. The representative of Poland recognized the active role of Bulgaria in the WTO, including in
the launching of the Doha Development Agenda. Bulgaria was an important trade partner and he
looked forward to a further increase in the general trade turnover between the two countries. There
was a special role for cooperation between local authorities and chambers of commerce, as well as for
further export promotion activities.  The representative believed that the forthcoming accession ofPoland to the European Union would only intensify mutual trade relations and closer bilateral contacts
with Bulgaria.
48. The representative of Lithuania concurred with views expressed by the European
Communities and Hungary with regard to some of the conclusions in the Summary Observation from
the Secretariat report. He congratulated Bulgaria for overcoming its economic difficulties and the
successful implementation of its economic reform programme.  He believed that Bulgaria was on the
right track in solving the remaining problems of unemployment and poverty. He acknowledged theliberal trade policies pursued by Bulgaria and recalled the bilateral trade relations between the two
countries, including the goal of acceding to the EU, as well as the similarity of their positions in the
DDA negotiations.  The representative encouraged Bulgaria to improve its trade policy after the
conclusion of the DDA, and to refrain from the use of trade remedies to the extent possible.
49. The representative of Norway underlined his appreciation for the cooperation between EFTA
and Bulgaria over the ten years since the entry into force of the free trade agreement. He hoped that
this had contributed to the economic growth and development of Bulgaria and looked forward to
strengthened relations in the future.  He recognized the challenges facing Bulgaria in its transition to a
market economy and hoped that the accession process to  the EU would help bring the reform process
forward. Bulgaria's privatization process had been set back lately, leading to a cooling-off effect onforeign investors. Furthermore, the use of safeguard measures by Bulgaria was on the increase.
Norway would follow this situation with interest.
50. The representative of Croatia noted the developing bilateral relations between the two
countries, including in trade, and their similar difficulties related to transition reforms.  Croatia was
pleased with the recovery of the Bulgarian economy, which would not have been possible without themacroeconomic and structural reforms pursued.  He recognized the compatibility of Bulgaria's trade
policy regime with WTO rules, its active role and participation in the work of WTO, in particular in
Doha Development Agenda negotiations. Croatia supported Bulgaria's approach to trade
liberalization;  the combination of multilateral and regional integration, in particular the process of EU
accession, and believed that multilateral and bilateral initiatives were complementary.  Croatia
informed members about the bilateral Free Trad e Agreement between the two countries that was
signed on the 4 December 2001 and was provisionally applied from 1 January 2002.  He noted thatthis Agreement had been replaced by the Agreement on Accession of the Republic of Croatia to
CEFTA from 1 March 2003.WT/TPR/M/121
Page 12
V. REPLIES BY THE REPRESENTATIVE OF BULGARIA AND ADDITIONAL
COMMENTS
51. The Chairperson invited the representative of Bulgaria to focus his responses on three main
themes;  (i) economic environment;  (ii) trade policies and measures;  and (iii) sectoral policies and
measures.
(i) Economic environment
52. The representative of Bulgaria presented his delegation’s written responses under this theme
to questions raised by Members in advance and during the meeting (WT/TPR/M/121/Add1).
53. The discussant commended the Bulgarian delegation for the full responses, which had been
prepared in a very short time.
(ii) Trade policies and measures
54. The representative of Bulgaria presented his delegation’s written responses under this theme.
55. The representative of the United States commended the Bulgarian delegation for their detailed
responses to questions submitted by the U.S. He noted that the widening gap between Bulgaria's
preferential and applied MFN rates raised some issu es for theoretical consideration rather than the
questioning of its obligations within the WTO. From an economic point of view, where a gap between
the applied MFN and preferential rates could be trade diverting, patterns of production anddistribution could be entrenched such that upon adopting the EU's common external tariff, these may
not change in economically efficient ways. Furthermore, from a political perspective, during this
transitional period, losses by MFN partners were not desirable. With regard to Bulgaria's explanation
that it needed some level of protection, this would have been the case if Bulgaria was not already
exposed to full competition from the EU. He sought further comments from the Bulgarian delegationon why there was differentiation between compet ition from the EU and from MFN partners.
56. The representative of Bulgaria noted that the points raised about trade diversion in the
summary observations of the Secretariat report were not based on any specific analysis for improved
competitiveness, resource allocation or gains from trade in the body of the report but on general
theoretical considerations which would and thus applied to any free-trade agreement. He was of theview that the concept of trade diversion, however, was not part of the definition or of any agreed
understanding of regional trade agreements under the multilateral trade agreements. Therefore, the
recommendations based on this concept went beyond the objectives in the mandate of the Trade
Policy Review Mechanism to “contribute to improved adherence to rules, disciplines and
commitments made under the Multilateral Trade Agreements” and were not appropriate. Bulgaria
wished to apply a certain degree of protection; this had been taken care of in the framework of its
MFN tariff and regional trade agreements. He noted that Bulgaria had done much more than requiredfrom it under the rules, disciplines and commitments made under the Multilateral Trade Agreements
through additional liberalization undertaken autonomously, including tariff reductions, a generous
GSP scheme, covering countries with a higher per capita income, etc. Bulgaria’s regional
arrangements were in full conformity with the rules of the GATT and the WTO.  He asserted that there
was no disruption or widening of the gap between the MFN and preferential rates and that this gapwas being reduced through the autonomous liberalization being undertaken. However, there was a
limit on how far to liberalize, and this was a matter of judgement and political responsibility. He
considered the argument to reduce bound rates in order to increase predictability to be fundamentally
flawed because it discouraged autonomous liberalization, such as the one undertaken by Bulgaria in
good faith and was therefore counterproductive for the liberalization of trade. He underlined thatBulgaria’s trade regime was very predictable and its predictability was only enhanced by the prospect
of membership in the European Union and the ta king over of its Common Customs Tariff. ReductionsWT/TPR/M/121
Page 13
of bound tariffs constituted trade concessions and were therefore undertaken in the course of trade
negotiations on a mutually advantageous basis.
57. The representative of the EC fully supported the response of Bulgaria. He also said that he
had heard yet another interpretation of Article XXIV, especially paragraph 6. He stated that if
everything went according to plan, when Bulgaria  acceded to the EU on 1 January 2007, the customs
union would enter into force. However, Bulgaria was not currently in a customs union with the EU,
and thus he could not understand why it was being asked to make unilateral tariff concessions that
might later be the subject of negotiations.  In the context of the Europe Agreement, which was a very
enhanced free-trade agreement, the EU was in the same position as the United States regarding their
agreements with other countries.
(iii) Sectoral policies and measures
58. The representative of Bulgaria presented his delegation’s written responses under this theme.
59. In conclusion, the representative of Bulgaria thanked Members for the very positive
assessment of his country’s trade policy regime and for the recognition of the efforts in the transition
to a market economy and of the significance of the liberalization and reform of trade policies. He
expressed the willingness of the Bulgarian Government to maintain its transparent and predictable
trade and economic policy in compliance with its obligations and commitments under the WTOAgreement. He underlined the particular importance of the final recommendation in the last paragraph
of the Summary Observations of the Secretariat Report pointing out that the benefits of Bulgaria’s
reforms would be significantly reinforced by impr oved market access provided by Bulgaria’s MFN
trading partners. He hoped that Bulgaria’s trad ing partners would follow this recommendation and
provide improved market access, including by means of maintaining and expanding GSP treatment
for Bulgarian products.WT/TPR/M/121
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VI. CONCLUDING REMARKS BY THE CHAIRPERSON
60. This Trade Policy Review has allowed us all to understand and better appreciate the trade
policies and practices of Bulgaria. Our dialogue has been thorough, positive and comprehensive,
stimulated by the full and open engagement of the high-level Bulgarian delegation, led by Deputy
Minister Radoslav Bozadzhiev.
61. Members praised Bulgaria for the significant macroeconomic and structural reforms
implemented since its economic crisis in 1996. Membership of the WTO and the objective of
accession to the EU had contributed to the process. Reforms implemented included trade and
investment liberalization, privatization, and introduction of new legislation on bankruptcy and
competition policy as well as in other trade-related fields. These had contributed to high rates of
economic growth in the past five years. However, problems of widespread poverty and high levels of
unemployment, and the proportion of economic activity in the grey economy, remained to be tackled,although there were recent signs of improvement in social indicators. Members encouraged Bulgaria
to continue consolidating its reforms.
62. Bulgaria's active participation in the multilateral trading system since its WTO accession in
1996 was acknowledged. All tariff lines were bound and average applied MFN rates had fallen from
17.6% in 1997 to 11.2%  in 2003. Bulgaria had also undertaken GATS commitments with widecoverage of sectors and modes of supply. Furthermore, autonomous liberalization in goods and
services had gone beyond Bulgaria's WTO commitments. However, some Members, observing that
there remained a considerable margin between bound an d applied tariff rates, stated that reduction of
this margin would enhance the predictability of the tariff regime. Some Members also noted that there
remained high tariffs on particular products.
63. Regional trade liberalization, including the objective of EU membership, had contributed to
Bulgaria's economic development.  Some Members were of the view that, given Bulgaria's level of
development and the significant levels of tariff liberalization already undertaken, it was inappropriate
for Bulgaria to further reduce its applied MFN tariff  rates. Others encouraged Bulgaria to reduce the
gap between MFN and preferential rates in order to optimize net trade creation effects.
64. Bulgaria's legislative reforms in customs administration, contingency trade measures,
government procurement, SPS and technical requirements, and intellectual property rights were
commended. Issues were raised regarding the need  for effective implementation and enforcement of
these reforms.
65. On sectoral matters, the restoration of farm land to previous owners was commended,
however the resulting structure  of partitioned, small farms, and the lack of adequate complementary
capital for investment, were seen as hindering the development of the sector and the reduction ofpoverty. Continuation of privatization reforms in energy and services areas was also encouraged.
66. Clarification was also sought by Members on the following issues:
• progress under the judiciary reform programme;
• tariff quota utilization;
• customs and trade facilitation provisions;
• internal taxation provisions;
• implementation of trade remedies;
• government procurement procedures;
• foreign direct investment procedures and guidelines;
• regulatory measures for biotechnology products;
• energy price liberalization and State aids to the energy sector;WT/TPR/M/121
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• a variety of intellectual property issues, including enforcement questions;
• trade in unbound services and the current round of negotiations;  and
• issues in the services sector, particularly financial and telecommunication services.
67. Members expressed their appreciation for the oral and written responses provided by the
Bulgarian delegation to these issues.
68. In conclusion, I believe that the Trade Policy Review Body is highly appreciative of the
reform efforts undertaken by Bulgaria and their positive effects to date.  I hope that Bulgaria has
found the trade policy review process a positive exer cise.  Bulgaria participates actively in the Doha
Development Agenda and Members encourage it to continue working constructively in the
multilateral trading system.
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