HUNGARY Report.pdf - Agra CEAS Consulting

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DG Trade: Identification and analysis of trade barriers for processed food<strong>HUNGARY</strong>existing annual preferential quota of 1,600 hl will be increased to 6,000 hl, while in-quotatariffs will fall from 40% to 32% (normal tariff is 68%).On the other hand, CEFTA members were planning the introduction of full liberalisation inintra-CEFTA agri-food trade by January 1999 but, following the Russian crisis and tradeproblems in the region, these talks largely came to a standstill. Despite these problems, inOctober 2000 the Czech Republic, Slovakia and Hungary reached a deal for furtherliberalisation in agricultural trade between the 3 countries, due to come into effect in January2001. The deal will be based on bilateral agreements between the countries.Pan-European cumulation of origin:Since July 1997 new rules of origin based on the concept of pan-European cumulationhave been applied in a number of Free Trade Agreements within Europe. The model of thenew cumulation rules for Hungary is similar in structure and substantive provisions withthat of the other associated CEECs. The Origin Protocol in the EU-Hungary agreement hasbeen replaced by the pan-European cumulation provisions. In all other respects, theframework of the Europe Agreement has remained unchanged. Hungary has agreed toamendments to the pan-European cumulation of origin system, which are due to enter intoforce on 1 January 2001.The implementation of the new origin rules has two major consequences. Firstly, semifinishedproducts originating in any country of the system and which are further processedor assembled in any other partner country may always be considered as originatingproducts. Secondly, originating products can be traded between any of the countriesinvolved in the system. The introduction of European cumulation should be particularlybeneficial in the case of trading of originating products in the agri-food sector.The advantages of the new system of cumulation of origin for producers and traders, bothin and outside the pan-European cumulation area, are significant. Customs procedures aresimplified by the fact that once a product has been given “European origin” there is noneed for the origin to be verified again. For firms established in Europe, including foreignownedfirms, this means more freedom in using input material or deciding in whichcountry to invest their production facilities. With regard to third country materials, the newrules are generally more flexible due to the fact that they provide for a general tolerancerule as well as alternative processing rules allowing more input of third country materials.Bureau Européen de Recherches Hungary / 2
DG Trade: Identification and analysis of trade barriers for processed food<strong>HUNGARY</strong>Further information on the matter has been notified by the different countries involvedboth to the WTO Committee on Rules of Origin and, in the context of the examination ofindividual agreements under GATT Article XXIV, to the WTO Committee on RegionalTrade Agreements.1.2. Tariff barriersHungary is a member of the GATT/WTO and all tariff rates are ad valorem. In 1999,Hungary applied tariffs which averaged 12.4% on all products, 33.5% on agricultural,15.0% on fishery and 7.4% on industrial products.As a result of the GATT Uruguay Round Agreements, the level of overall bound tariffsincreased from 83% to 95.7%. The increase in bindings was particularly marked foragricultural products. By the end of the implementation period the nominal MFN tariffaverage would fall below 7% in industry and to about 27% in agricultural/food products.There is certain tariff escalation in that raw materials generally carry lower tariffs thanprocessed products.Prior to the Uruguay Round, Hungary applied low tariffs on agricultural products, andquantitative restrictions served as the main protection against imports. In accordance withthe GATT Agreement on Agriculture, these measures were abolished as of 1 January1995, with a parallel increase in tariff protection. In line with WTO rules, Hungary alsoopened preferential tariff quotas for more than 100 products to provide market accessopportunities.Data on the uptake of agricultural and food preferential tariff quotas in 1998 and 1999,show a heavy underutilisation in most cases.Hungary has a number of customs free zones/customs warehouses which have beencriticised by the EU with regards to the preferential treatment (VAT/customs duty andcorporate tax exemptions) given to manufacturers established in these zones. The abolitionof these zones is envisaged.Bureau Européen de Recherches Hungary / 3
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