Commission Report 2002 (Hungary)

• Progress since the last Regular Report
• Overall assessment
• Conclusion

Chapter 26: External relations

Progress since the last Regular Report

Since the last Regular Report Hungary has continued to align with the acquis on the common commercial policy and to co-ordinate its positions and policies within the World Trade Organisation (WTO) with the EU, in particular with regard to the Doha Development Agenda negotiations.

As regards the common commercial policy, upon accession Hungary will be required to align its tariffs with those of the EC. Hungary`s applied tariffs currently average 11.7% (MFN) on all products, 30.9% on agricultural products, 14.8% on fishery products and 7% on industrial products. By comparison, EC tariffs currently stand at 6.3% on all products, 16.2% on agricultural products, 12.4% on fishery products and 3.6% on industrial products.

As regards bilateral agreements with third countries, Hungary has concluded a free trade agreement with the Federal Republic of Yugoslavia, which entered into force in July 2002. In January 2002, Hungary concluded a non-preferential agreement with the United States, which foresees a reduction of tariffs, in some cases to the level of the EC`s common external tariff, for seventy products on an MFN basis. This agreement was negotiated without the EC being sufficiently consulted or fully informed in advance.

Hungary, as a member of the Central European Free Trade Agreement (CEFTA), signed the Additional Protocol no. 10 on the liberalisation of agricultural and food trade and no. 11 related to rules of origin of goods in November 2001.

With regard to development policy, co-operation and assistance, Hungary is an active member of the OECD and is adapting its development practices to the principles laid down by the Development Assistance Committee. Preliminary work has started to set up the organisational and institutional framework necessary for development co-operation within the Ministry of Foreign Affairs in the second half of 2002. A detailed budgetary plan for the Fund of the International Development co-operation is under preparation and will probably be approved as part of the State Budget for 2003. For the implementation of humanitarian aid initiatives, the authorities continue to co-operate with NonGovernmental Organisations established in Hungary. Total bilateral and multilateral external assistance given by Hungary to developing countries in 2001 amounted to EUR 29 million (EUR 20.5 million for official aid (OA) and EUR 8.5 million for official development assistance (ODA)).

Overall assessment

The EU and Hungary have established a framework for co-operation regarding WTO issues both at ministerial and at departmental level. Hungary has been supportive of EU policies and positions within the WTO framework, in particular also during the preparation for and the launching of the Doha Development Agenda. This close co-operation should continue. Close co-operation is also needed and should continue to ensure the smooth alignment of Hungary`s GATS commitments with the EC`s commitments and MFN exemptions, and appropriate steps have been defined to this extent. Hungary is an observer to the WTO plurilateral agreement on trade in Civil Aircraft. With regard to the WTO Agreement on Trade in Textiles and Clothing (ATC), co-ordination has taken place within the third stage of integration under the ATC to align Hungary`s integration programmes with those of the EC.

Besides the new agreements mentioned above and the Europe Agreement, Hungary has concluded bilateral agreements with EFTA, Turkey, Israel, Estonia, Lithuania, Latvia and Croatia. Hungary is also a CEFTA member. Hungary needs to ensure that the Union is kept fully informed both about existing trade agreements and about any negotiations aimed at the conclusion of new trade agreements with a third country. Prior to accession, Hungary will need to renegotiate or renounce all international agreements concluded with third countries, including the Friendship and Navigation Treaty with Japan, that are incompatible with its future obligations as an EU Member State.

Concerning the licensing of traded goods, the Licensing and Administrative Office within the Ministry of Economic Affairs and Transport continues to be in charge of, inter alia, the issuing of export licenses for arms.

Hungarian legislation on export control of dual-use goods has been amended, and alignment to the list of dual use goods under control is under elaboration. Full alignment to the acquis, in particular the general export authorisations, can only take place upon accession. Hungary keeps the industry regularly informed of developments in this field and has developed bilateral contacts with the EU Member States to exchange best practices on export control issues.

Export credits are in line with EC rules. However, further efforts are required to strengthen the institutions in the field of foreign trade licensing.

Hungary`s alignment with and future participation in the common commercial policy is administered by the Ministry of Foreign Affairs. Its role was further strengthened on an administrative level when, in May 2002, the State Secretary in charge of EU accession was also assigned the task of trade policy. However, inter-institutional consultations on the creation of administrative capacities in light of EU accession have not yet resulted in the promised action plan. Further efforts are needed to ensure that the administrative capacities with a view to Hungary`s participation in EU committees and working groups for development co-operation are in place upon accession. The administrative infrastructure, which needs to be in place with respect to customs services, is discussed in the chapter on customs union (see Chapter 25 - Customs union).

Development and humanitarian aid are administered by the Ministry of Foreign Affairs. Hungary still needs to progressively shape a development policy in accordance with EC lines.

Conclusion

In its 1997 Opinion, the Commission concluded that Hungary was well placed to be able to meet Community requirements in this field.

Since the Opinion, Hungary has made good progress. It has now reached a good level of alignment with the acquis in this area.

Negotiations on this chapter have been provisionally closed. Hungary has not requested any transitional arrangements. Hungary is generally meeting the commitments it has made in the accession negotiations in this field.

In order to complete preparations for membership, Hungary`s efforts now need to focus on finishing the process of legislative alignment, including bringing its bilateral agreements with third countries into full conformity with its EU membership obligations, as well as on ensuring appropriate administrative capacity to fully implement and enforce the EC acquis in this field upon accession. This includes the shaping of a development policy that is in accordance with EC lines. Hungary will also need to put in place the necessary administrative structures, which will allow its participation in EC committees and working groups. Further progress is also required in the field of foreign trade licensing.

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