MEMORANDUM OF UNDERSTANDING between the European Community and the Islamic Republic of Pakistan on arrangements in the area of market access for textile products

1. In accordance with the understanding reached between the Government of Pakistan and the European Commission on the occasion of the Ministerial meeting held in Marrakesh in April 1994 to conclude the Uruguay Round of trade negotiations, representatives of both delegations held consultations in order to find a satisfactory solution to outstanding problems in the area of market access for textiles and clothing products and thus to create an improved, stable framework for future bilateral trade relations.

2. The Government of Pakistan noted the European tariff offer on textiles and clothing products annexed to the WTO Agreement, which is summarized in Annex I.

3. The European Commission noted that the Government of Pakistan has reduced its tariffs on all textiles and clothing products to a maximum level of 70 % on 1 July 1994 and will bind this level under the relevant WTO provisions before 31 December 1995. Furthermore, tariffs will be reduced and bound on the items listed in Annex II at the levels and according to the timetable indicated.

4. The Government of Pakistan will also remove during 1994 all quantitative restrictions on the textile products given in Annex II. However, should a critical situation arise in the textiles industry of Pakistan or in relation to the balance of payments situation of Pakistan, the Government of Pakistan retains the right under GATT 1994 and the WTO to reintroduce, after necessary consultations with the European Commission, quantitative restrictions.

5. The Government of Pakistan confirmed that the dual pricing policy for the export of raw cotton had been abolished. It hoped that this would meet the concerns expressed by the European textiles industry in this regard. While Pakistan reserved its right under the GATT to take action in order to address a critical situation that might arise in this area, it was its policy to avoid such measures.

6. In view of the significant contribution to achieving effective access to the market of Pakistan for textiles and clothing products which these additional commitments represent, the European Commission is prepared to give favourable consideration to requests which the Government of Pakistan might introduce in respect of the management of existing quota restrictions for exceptional flexibility (including carry-over, carry-forward and inter-category transfers) not exceeding for each quota year the following amounts:

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In each quota year the total amount of exceptional flexibilities may not exceed 2 000 tonnes for any particular category.

7. Moreover, the European Commission will initiate immediately the necessary internal procedures in order to ensure that all restrictions currently affecting the importation of products of the handloom and cottage industries of Pakistan are removed before entry into force of the WTO.

8. The Delegation of Pakistan drew the Commission's attention to the importance which the Government of Pakistan attached to the early integration into GATT of certain categories currently under restraint in the European Union.

9. The Delegation of Pakistan and the European Commission recalled that in accordance with the notifications which they would make to the WTO Secretariat concerning the provisions of their existing bilateral agreement on textile products to be maintained as administrative arrangements under the WTO Agreement, the basket exit mechanism would be replaced by the safeguard clause of the WTO textiles agreement and that current procedures regarding circumvention would be maintained (i.e. any charges made to quotas after consultations would not exceed the amount of goods in question).

10. The Government of Pakistan and the European Commission agreed to consult with each other periodically to ensure the proper implementation of the Memorandum of Understanding and to explore further possibilities for mutual expansion of trade in textiles and clothing.

Por la Comunidad Europea

For Det Europæiske Fællesskab

Für die Europäische Gemeinschaft

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For the European Community

Pour la Communauté européenne

Per la Comunità europea

Voor de Europese Gemeenschap

Pela Comunidade Europeia

Euroopan yhteisön puolesta

På Europeiska gemenskapens vägnar

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ANNEX I

TARIFF REDUCTIONS MADE BY THE EUROPEAN UNION ON TEXTILES AND CLOTHING PRODUCTS

As part of the World Trade Organization Agreement on Market Access, the European Union has scheduled tariff commitments whereby duties on textiles and clothing products will not exceed the following maximum levels:

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Where current duty rates are lower, the lower rates will continue to apply.

ANNEX II

LIST OF PRIORITY EXPORT ITEMS TO PAKISTAN

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