Commission Report (2002): Latvia

Recent developments under the Europe Agreement, including bilateral trade

The fifth meeting of the Association Council and the fifth Association Committee were held in February and June 2002 respectively. The system of sub-committees continues to function as a forum for technical discussion.

Since the Commission`s last Regular Report, the Joint Parliamentary Committee, comprising representatives of the Latvian and European Parliaments, met in June 2002. co-operation with the Committee of the Regions has continued at a working level.

Latvia`s trade with the EC has continued to increase, both in absolute terms and in its rate of growth. Latvia`s exports to the EC accounted for 61 % (EUR 2 billion) of total 2001 exports, while its imports from the EC amounted to 53 % (EUR 2.4 billion) of total imports in the same year. In 2001 Latvia`s exports to the EC increased by 3 % by comparison with the previous year and imports from the EC increased by 19 %. Latvia`s export to the EC is heavily dominated by wood, followed by textiles, minerals, machinery and electrical equipment, while its most important imports from the Union are machinery, electrical and transport equipment, and agricultural goods.

As a consequence of the agreement which emerged from the first round of trade negotiations in the agriculture sector (adopted on an autonomous basis, pending the conclusion of an Additional Protocol to the Europe Agreement), approximately 94% of EC agricultural imports from Latvia and 74% of EC agricultural exports to Latvia are duty-free or benefit from preferential reduced duty rates (average trade figures for 1998--2000).

Negotiations on a further round of liberalisation, covering more sensitive sectors, began at the end of 2001 and were concluded in April 2002. The result of this further round, applicable as of July 2002, enhances the existing agricultural trade preferences between the parties and promotes the abolition or reduction of import duties either within tariff quotas or for unlimited amounts, in sectors such as cereals, dairy products, beef and sheep meat. This further agreement also includes a commitment by the parties to eliminate export refunds in certain sectors.

In October 2001, the Association Council took a decision on improvements in the trade with processed agricultural products in Protocol 2 to the Europe Agreement. Both parties agreed on the application of a more favourable trade regime for processed agricultural products. Tariff quotas on export and import of processed agricultural products between Latvia and the EC became effective from December 2001.

With regard to further liberalisation of trade in fish and fisheries products, technical negotiations on reciprocal tariff concessions have been concluded between the European Community and the Republic of Latvia.

In March 2002, in response to protectionist measures taken by the US, which greatly restricted access to their market and created the risk of considerable trade diversion, the EU initiated provisional safeguard measures, with erga omnes effect, on imports of certain steel products. The measures were partly confirmed in September 2002.

The Protocol to the European Agreement on Conformity Assessment and Acceptance of Industrial Products (PECA) and four sector annexes to the Protocol were signed in May 2002 in Brussels. New sectoral legislation on chemicals, cosmetics, medical equipment, explosives, food safety, and other areas was adopted in 2001.

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