WORLD TRADE ORGANIZATION

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1 WORLD TRADE ORGANIZATION WT/REG240/1 31 March 2009 ( ) Committee on Regional Trade Agreements FACTUAL PRESENTATION Free Trade Agreement between Turkey and Albania (Goods) Report by the Secretariat This report, prepared for the consideration of the Free Trade Agreement between Turkey and Albania has been drawn up by the WTO Secretariat on its own responsibility and in full consultation with the Parties. The report has been drawn up in accordance with the rules and procedures contained in the Decision for a Transparency Mechanism for Regional Trade Agreements (WT/L/671). Any technical questions arising from this report may be addressed to Ms. Jo-Ann Crawford (tel: ).

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3 Page iii TABLE OF CONTENTS Page I. TRADE ENVIRONMENT 1 II. CHARACTERISTIC ELEMENTS OF THE AGREEMENT 4 A. BACKGROUND INFORMATION 4 III. NATIONAL TREATMENT AND MARKET ACCESS FOR GOODS 4 A. IMPORT DUTIES AND CHARGES, AND QUANTITATIVE RESTRICTIONS 4 1. General provisions 4 2. Liberalization of tariff lines and trade 5 3. Albania's liberalization schedule 6 4. Turkey's Liberalization Schedule 8 B. RULES OF ORIGIN 9 C. EXPORT DUTIES AND CHARGES, AND QUANTITATIVE RESTRICTIONS 11 D. REGULATORY PROVISIONS OF THE AGREEMENT Standards 12 (a) Technical barriers to trade 12 (b) Sanitary and phytosanitary measures Safeguard mechanisms 12 (a) Global Safeguard Measures 12 (b) Structural Adjustment 12 (c) Restrictions to safeguard balance of payments Anti-dumping Subsidies and countervailing measures Other regulations 13 (a) Customs-related procedures 13 (b) Government Procurement 13 (c) Rules on Competition 13 (d) Other 13 IV. PROVISIONS AFFECTING TRADE IN GOODS 14 A. INTELLECTUAL PROPERTY 14 B. SECTOR-SPECIFIC PROVISIONS OF THE AGREEMENT 14 C. INSTITUTIONAL PROVISIONS OF THE AGREEMENT Exceptions and reservations Accession Institutional framework Dispute settlement Relationship with other agreements concluded by the Parties 15 ANNEX I 16 ANNEX II 20

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5 Page 1 FREE TRADE AGREEMENT BETWEEN TURKEY AND ALBANIA (GOODS) Factual Presentation by the Secretariat I. TRADE ENVIRONMENT 1. The Free Trade Agreement (FTA) between Turkey and Albania (hereafter "the Agreement") is Turkey's 14th and Albania's third regional trade agreement (RTA) notified to the WTO. The countries are quite different in terms of population size but similar in economic structure. In 2006, manufactures accounted for 81.2% and agricultural products for 10.1% of Turkey's merchandise exports, while for Albania the corresponding figures were 73.8% and 9.8% Turkey's GDP was US$402.7 billion in 2006, while that of Albania reached US$9.1 billion. 2 With total merchandise exports of US$85.6 billion and imports of US$139.6 billion, Turkey ranked in 2006 as the 34 th top exporter and the 20 th top importer; with merchandise exports of US$798 million and imports of US$3.1 billion, Albania ranked as the 147 th top exporter and the 115 th top importer in that year. The two economies showed similar average trade/gdp ratios in with Turkey's ratio 63.0 and Albania's Developments in recent years in global and intra-party merchandise trade are presented in Charts I.1 and I.2. Over the period surveyed ( ), Albania has run a consistent and growing trade deficit with Turkey and the world. Chart I.1 - Albania: Merchandise imports from and exports to world and Turkey, US$billion 3.5 US$million Left hand sale: Total imports Total exports Right hand sale: Imports from Turkey Exports to Turkey Source: UNSD, Comtrade database. 1 WTO Statistics Database, Trade Profiles. 2 WTO Statistics Database, Trade Profiles.

6 Page 2 Chart I.2 - Turkey: Merchandise imports from and exports to world and Albania, US$billion US$million Left hand sale: Total imports Total exports Right hand sale: Imports from Albania Exports to Albania Source: UNSD, Comtrade database. 4. The commodity structure of trade among the Parties, as well as of their imports and exports to the world in the period , is shown in Chart I.3, on the basis of HS section product categories. 5. Three product categories base metals, minerals and raw hides - accounted for 66% of Turkey's imports from Albania in the period ; vegetables and vehicles accounted for a further 8.7%. Albania's three largest export product categories textiles, footwear and base metals - made up 72.9% of its total exports in and accounted for 37.7% of Turkey's imports from Albania. 6. Four product categories base metals, textiles, prepared foods and minerals - accounted for 64.6% of Albania's imports from Turkey in the period Turkey's three largest export product categories textiles, base metals and machinery - made up 45.9% of its total exports in the period and accounted for 49.2% of Albania's imports from Turkey.

7 Page 3 Chart I.3 Turkey and Albania: product composition of merchandise trade, annual average ( ) Per cent Turkey's imports from Albania Albania's imports from Turkey Other 25.3 Base metals 37.1 Miscellaneous 2.7 Stone, Cement 3.0 Plastics 3.7 Other 6.1 Base metals 24.0 Vegetables 3.9 Chemicals 5.7 Vehicles 3.1 Vegetables 5.6 Machinery 10.2 Textiles 15.0 Raw Hides 12.6 Minerals 16.3 Minerals 11.3 Prepared foods 14.3 Pearls 3.5 Textiles 5.4 Plastics 5.5 Chemicals 2.1 Stone, Cement 2.3 Plastics 2.9 Total: US$14.8 million Turkey's global imports Other 26.6 Other 25.4 Minerals 3.4 Prepared foods 3.4 Chemicals 8.2 Vegetables 4.5 Vehicles 8.4 Total: US$117.6 billion Turkey's global exports Vehicles 10.2 Total: US$74 billion Machinery 18.7 Minerals 12.4 Base metals 11.2 Textiles 23.6 Machinery 11.0 Base metals 11.3 Miscellaneous 2.3 Footwear 2.8 Animals 2.9 Plastics 3.3 Stone, Cement 3.7 Vegetables 6.2 Vehicles 6.2 Prepared foods 4.5 Raw Hides 2.3 Minerals 5.8 Base metals 15.3 Total: US$197.5 million Albania's global imports Other 6.3 Chemicals 7.1 Prepared foods 7.8 Raw Hides 2.0 Miscellaneous 2.1 Vegetables 3.0 Machinery 3.6 Total: US$2.7 billion Machinery 16.1 Albania's global exports Other 6.1 Textiles 9.6 Total: US$684.5 million Minerals 12.3 Base metals 11.1 Textiles 30.6 Footwear 27.0 Source: UNSD, Comtrade database.

8 Page 4 II. CHARACTERISTIC ELEMENTS OF THE AGREEMENT A. BACKGROUND INFORMATION 7. The Free Trade Agreement between Turkey and Albania was signed by the Republic of Turkey and the Republic of Albania (the Parties) on 22 December 2006; it entered into force on 1 May On 9 May 2008, the Parties notified the Agreement to the WTO under Article XXIV:7(a) of the GATT 1994 (WT/REG240/N/1). The text of the Agreement is available at the following internet links: Albania: Turkey: 8. The Agreement is composed of 37 Articles, 2 Annexes and 2 Protocols, as follows: Box II.1 Table of Contents of the Agreement Chapter I Industrial Products Chapter II Agricultural and Fishery Products Chapter III Services and Investments Chapter IV Common Provisions Annex I List of Products referred to in Articles 3 and 9 Annex II Albanian Tariff Concession for Industrial Products originating in Turkey Protocol I List of Products referred to in Article 9 Protocol II Definition of the Concept of "Originating Products" and Methods of Administrative Cooperation Source: Free Trade Agreement between Turkey and Albania. 9. Article 1 of the Agreement provides for the gradual establishment of a free-trade area over a transitional period lasting a maximum of five years from the date of entry into force, i.e. by 1 January Duty reductions take place on the date of entry into force of the Agreement and on 1 January in the following years. III. NATIONAL TREATMENT AND MARKET ACCESS FOR GOODS A. IMPORT DUTIES AND CHARGES, AND QUANTITATIVE RESTRICTIONS 1. General provisions 10. The Parties agree to abolish customs duties and charges or measures having equivalent effect, on imports of industrial goods in accordance with Article 4 and Annex II. 3 The Parties agree to abolish quantitative restrictions, and charges or measures having equivalent effect on imports of industrial goods from the date of entry into force of the Agreement. No new customs duties or quantitative restrictions on imports of industrial products, and charges or measures having equivalent effect, may be introduced (Articles 4 and 7). 3 Industrial goods are defined by the Parties as those falling within Chapters of the Harmonized System with the exception of products listed in Annex I of the Agreement (which are treated as agricultural products under the Agreement).

9 Page In the case of Turkey, the Agreement provides for the elimination of duties on imports of all industrial goods originating in Albania upon the date of entry into force. In the case of Albania, the Agreement provides for the elimination of duties on imports of all industrial goods except for those listed in Annex II which are subject to 20% annual reductions in duties from the date of entry into force of the Agreement until the elimination of duties on 1 January The Parties agree to exchange concessions on certain basic agricultural, processed agricultural and fishery products in accordance with Protocol I. Annexes I and II to this Protocol list the products where preferential treatment has been granted by Albania and Turkey, respectively. In both cases concessions are in the form of elimination of in-quota duties on a limited number of agricultural products; for some products the quota is also removed (see Annex II of this report for further details). In Article 10.2, the Parties agree to examine the possibility of granting each other further concessions in agricultural products within the Joint Committee The basic duty to which successive reductions apply is the MFN applied duty in force as of the date of entry into force of the Agreement, i.e. 1 May If a Party reduces its MFN rate thereafter, such reduced duties will replace the basic duties as from the date when such reductions are applied (Article 2). 2. Liberalization of tariff lines and trade The elimination of tariffs applicable between the Parties is detailed in the corresponding Parties' schedules. Tariff elimination started on 1 May 2008, from the MFN rates applied on that date. 15. The overall tariff elimination under the Agreement is depicted in Tables III.1A and III.1B below. 6 In the case of Albania, 35.6% of total tariff lines were already duty-free on an MFN basis in A further 45.5% of tariff lines became duty-free for imports from Turkey in 2008; in terms of imports from Turkey for the period , these figures amount to 20.5% and 45.4%, respectively. By the end of the transition period in 2013, a further 1.3% of tariff lines are to be liberalized, accounting for 24.2% of imports from Turkey for the period Thus, a total of 82.4% of tariff lines are liberalized under the Agreement, corresponding to 90.1% of imports by value from Turkey for the period Table III.1 Tariff elimination commitments under the Agreement and corresponding average trade values A. Albania Duty phase-out period Number of lines % of total lines in Albania's tariff schedule Value of Albania's imports from Turkey ( ) in million US$ % of Albania's total imports from Turkey MFN duty free (2008) 3, , Remain dutiable 1, Total 10, Note: Calculations exclude tariff lines having an in-quota rate. Only trade falling under HS Chapter 1-97 is included. Source: WTO estimates based on data provided by Albania. 4 According to the Parties, as of March 2009 no further concessions in agriculture have been granted. 5 Unless otherwise specified, all statistics, tables and charts contained in this document have been prepared on the basis of data provided by the Parties. 6 Tariff lines containing in-quota duties are excluded from all the tariff-related calculations. Lines subject to specific duties are taken into account in the number of lines liberalized where relevant, but are not included in the tariff analysis. 7 Albania's tariff is composed of 10,175 tariff lines at the HS 8-digit level, all of which have ad valorem rates.

10 Page In the case of Turkey, 23.8% of total tariff lines were already duty-free on an MFN basis in A further 61.1% of tariff lines became duty-free for imports from Albania in 2008; in terms of imports from Albania for the period , these figures amount to 59.5% and 33%, respectively. There is no tariff phase down in the case of Turkey, thus, a total of 84.9% of tariff lines are liberalized under the Agreement as of its date of entry into force, corresponding to 92.5% of imports by value from Albania for the period Table III.2 Tariff elimination commitments under the Agreement and corresponding average trade values B. Turkey Duty phase-out period Number of lines % of total lines in Turkey's tariff schedule Value of Turkey's imports from Albania ( ) in million US$ % of Turkey's total imports from Albania MFN duty free (2008) 4, , Remain dutiable 2, Total 18, a a Note: Only trade falling under HS Chapter 1-97 is included. For tariff lines subject to TRQs only the out-of-quota duty is included in the tariff-related calculations; for the calculation of MFN averages specific rates are excluded and the ad valorem part of alternate rates are included. 3. Albania's liberalization schedule 17. The base rates used by Albania for implementing its tariff liberalization scheme provided for 35.6% of tariff lines being duty free before the entry into force of the Agreement. As can be seen from Chart III.1, the lines freed of duties in 2008, 2011 and 2013 are subject to rates of 20% or less. The 1,789 tariff lines which remain subject to duties have a range of 2% to 15%. 8 Turkey's tariff is composed of 18,239 tariff lines at the HS 12-digit level, of which 17,956 are subject to ad valorem rates; 30 are subject to specific duties; 113 to compound duties; 56 to mixed duties; and 84 are other duties.

11 Page 7 Chart III.1 Albania's duty elimination under the Agreement 2013 Year of duty free treatment ,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Number of duty-free lines (cumulative) MFN is: Duty-free <10% <20% Source: WTO Secretariat estimates, based on data provided by Albania. 18. Table III.3 shows Albania's trade liberalization commitments under the Agreement on the basis of products' treatment at the HS 8-digit level organized by HS section product categories. Of the 10,175 tariff lines forming Albania's tariff schedule, 3,623 tariff lines were already duty-free on an MFN basis in 2008; the lines liberalized upon entry into force of the Agreement and in 2011 and 2013 cover a wide range of HS sections. The lines which remain subject to duties are mostly agricultural products, but also include chemicals, hides and skins, and textiles. The average final tariff on dutiable items ranges from 2% to 12.5%. Table III.3 Albania: Tariff elimination under the Agreement, by HS section HS section and description MFN average % Total No of lines MFN dutyfree 2008 Number of duty-free lines Lines Remaining dutiable Average Final Tariff on Dutiable Lines I Live animals and animal products II Vegetable products III Animal or vegetable fats and oils IV Prepared food etc V Minerals VI Chemical and products 1.6 1, VII Plastics and rubber VIII Hides and skins IX Wood and articles X Pulp, paper etc XI Textile and textile articles 9.7 1,288 1, XII Footwear, headgear XIII Articles of stone XIV Precious stones, etc XV Base metals and products 5.8 1, XVI Machinery 1.3 1,679 1, XVII Transport equipment Table III.3 (Cont'd)

12 Page 8 HS section and description MFN average % Total No of lines MFN dutyfree 2008 Number of duty-free lines Lines Remaining dutiable Average Final Tariff on Dutiable Lines XVIII Precision equipment XIX Arms and ammunition XX Misc. manufactured articles XXI Works of art, etc Total ,175 3,623 4, , Note: For tariff lines subject to TRQs only the out-of-quota duty is included in the tariff-related calculations. Source: WTO estimates based on data provided by Albania. 4. Turkey's Liberalization Schedule 19. The base rates used by Turkey for implementing its tariff liberalization scheme already provided for 23.8% of tariff lines being duty free before the entry into force of the Agreement. As can be seen from Chart III.2, most of the additional 61.1% of tariff lines freed upon entry into force held base rates of 10% or less. The 2,758 tariff lines which remain subject to duties have a range of 1% to 225%. 9 Chart III.2 Turkey's duty elimination under the Agreement Year of duty free treatment ,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Number of duty-free lines (cumulative) MFN is: Duty-free <10% <20% <30% Non ad valorem duty Source: WTO Secretariat estimates, based on data provided by Turkey. 20. Table III.4 shows Turkey's trade liberalization commitments under the Agreement at the HS 12-digit level organized by HS section product categories. Of the 18,239 lines forming Turkey's tariff schedule, 4,335 lines were already MFN duty-free in 2008; an additional 11,146 tariff lines were liberalized upon entry into force of the Agreement (comprising for the most part industrial 9 For those items subject to ad valorem duties.

13 Page 9 products). A total of 2,758 tariff lines covering all HS sections remain dutiable under the Agreement with the average final tariff on dutiable items ranging from 1.0 to 82.2%. Table III.4 Turkey: Tariff elimination under the Agreement, by HS section HS section and description MFN average% Total No of lines MFN duty-free 2008 Number of duty-free lines 2008 Lines Remaining Dutiable Average Final Tariff on Dutiable Lines I Live animals and animal products a II Vegetable products a III Animal or vegetable fats and oils a IV Prepared food etc , a V Minerals VI Chemicals and chemical products 4.4 3, , a VII Plastics and rubber VIII Hides and skins IX Wood and articles a X Pulp, paper etc XI Textiles and textiles articles 7.9 3, ,924 XII Footwear, headgear XIII Articles of stone XIV Precious stones, etc XV Base metals and base metals 3.9 1, ,268 products XVI Machinery 2.1 2, ,879 XVII Transport equipment XVIII Precision equipment XIX Arms and ammunition XX Misc. manufactured articles XXI Works of art, etc Total ,239 4,335 11,146 2, a Note: Combination of ad valorem and specific duties (for tariff lines with non ad valorem components, only the ad valorem part of the rate was included in the calculation of the tariff averages). In-quota tariff lines are excluded. Source: WTO estimates based on data provided by Turkey. B. RULES OF ORIGIN 21. Disciplines regarding rules of origin and administrative co-operation on products covered by the Agreement are set out in Protocol II. Protocol II is modelled on the Pan-European-Mediterranean system. Articles 2-15 of Protocol II deal with the rules of origin themselves, while Articles relate to other customs-related issues. 22. The basic requirements for a product to be considered originating (Articles 2 and 6 of Protocol II) are: (a) (b) the product is wholly obtained in one of the Parties 10 ; or the product obtained incorporates materials which have undergone sufficient working or processing in one of the Parties, according to specific requirements. 10 This concept applies to mineral products extracted from their soil or seabed; vegetable products; live animals born and raised in the Party; products from live animals in the Party; products obtained from hunting of fishing in the Party; products of sea fishing and other products taken from the sea outside the territorial waters of Turkey or of Albania by their vessels; products made aboard factory ships; used articles fit only for the recovery of raw materials, including used tyres fit only for retreading or for use as waste; waste and scrap resulting from manufacturing operations conducted in the Parties; products extracted from marine soil or subsoil outside the Parties' territorial waters provided that they have sole rights to work that soil or subsoil; and goods produced using the aforementioned products.

14 Page There are no regime-wide rules of origin, but a list of specific criteria that non-originating materials should meet so that the final product acquires originating status, as contained in Annex II of Protocol II. In most cases, origin is granted if the working or processing carried out on nonoriginating materials results in a change in tariff classification (CTC) on an HS basis, at the heading level (CTH 4-digit). This rule requires changes from either "any heading except that of the product" or from a specific heading or material, as is the case in prepared foodstuffs, wood and wood pulp, textiles, footwear, articles of stone and plaster, pearls and base metals. In some cases, materials from the same heading may be allowed, normally within a certain limit (some petroleum products, chemicals, plastics, machinery, and miscellaneous manufactured articles). In a few cases, there are some headings from which the product cannot be manufactured. 24. An import content test (MC) can also be provided either to supplement the CTH (for some prepared foodstuffs, wood pulp, base metals, machinery, transport equipment and measuring instruments, and musical instruments) or as a standalone rule (for some vegetables, prepared foodstuffs, chemicals, plastics, footwear, machinery and mechanical appliances, transportation equipment, measuring instruments, arms and ammunition, and furniture); 11 in the case of chemicals, plastics, machinery and mechanical appliances, transportation equipment, measuring instruments, and furniture the MC test is offered as an alternative criterion; 12 the permissible limit for non-originating materials is normally 40%, but different thresholds may apply (ranging from 20% to 50%). A technical test or process rule, requiring that some production processes take place in the territory of the Parties, is required for some minerals, chemicals, plastics, wood, textiles, hides and skins, glass products and base metals. In the case of textiles and glass products, the technical test is offered as an alternative rule in combination with an import content test. Rules requiring certain materials to be obtained in the territory of the Parties (wholly obtained rules) are used for many processed agricultural products. 25. Articles 3 and 4 provide for bilateral cumulation between the Parties. There is no provision in the Agreement for diagonal cumulation with the other countries participating in the Pan-Euro-Mediterranean protocol on rules of origin. 26. Article 6 of Protocol III provides for an "absorption principle". Accordingly, if a product has acquired originating status by meeting the corresponding processing requirement, no account is taken of the non-originating materials which may have been used in its manufacture once incorporated into a final product. 27. The "tolerance rule" in Article 6.2 provides that non-originating materials which would otherwise not be accepted may, nevertheless, be used provided that (i) their total value does not exceed 10% of the ex-works price of the product, and (ii) any of the percentages given in the list for the maximum value of non-originating materials are not exceeded. This rule applies to all products except textiles and clothing (HS Chapters 50-63) Article 7 lays down a list of insufficient working or processing operations carried out in the territory of the Parties that do not confer origin, whether or not the product meets the tolerance rule. Article 8 defines the unit of qualification to be used when determining classification using the HS nomenclature; Articles 9-11 deal with how certain materials (accessories, spare parts or tools, sets, and neutral elements) are to be treated or valued when determining the origin of the goods. 11 The MC requirement establishes the maximum value of non-originating materials allowed in the final product, expressed as a percentage of the ex-works price of the product. 12 Column 3 of Annex II to Protocol II describes the specific rule. When an alternative rule appears in column 4, either rule can be applied. 13 Special "tolerance rules" apply to certain textile products made of a mixture of materials (see notes 5 and 6 of Annex I to Protocol II).

15 Page Articles of Protocol II establish that outward processing outside Turkey or Albania is not allowed unless certain conditions are fulfilled. These conditions allow retention of originating status provided that it can be demonstrated that the returning goods are the same as those exported and that they have not undergone any operation beyond that necessary to preserve them in good condition; with respect to the latter a tolerance rule of 10% of the ex-works price of the end product applies. Non compliance with these conditions will result in the loss of originating status. The provisions on outward processing do not apply to textile products in HS Chapters Articles 13 and 14 deal, respectively, with the direct transport of goods and goods sent for exhibitions. 30. Article 15 provides for a no-drawback rule of customs duties applicable to non-originating materials used in products benefiting from preferential treatment and having obtained originating status in Turkey or Albania. The drawback prohibition only applies when products are exported and not when they are retained for home use. Box II.3: Rules of Origin: Basic Features at a Glance No regime-wide rules of origin Specific rules common to both Parties apply to products covered in the Agreement Product specific criteria: Wholly obtained or entirely produced goods In general, CTC at the heading levels MC rules used, either alone or as supplementary rules Two alternative rules for many products Process rules used in certain cases Cumulation: Bilateral cumulation between Albania and Turkey Absorption principle Tolerance rule at a maximum of 10%. Does not apply to textiles and clothing. No duty drawback Outward-processing not authorized. C. EXPORT DUTIES AND CHARGES, AND QUANTITATIVE RESTRICTIONS 31. Article 6 of the Agreement provides for the elimination of all customs duties or charges having equivalent effect on exports of industrial products in trade between the Parties and prohibits the introduction of any new such duties from the date of entry into force of the Agreement. Similarly, Article 7 provides for the elimination of all quantitative restrictions or measures having equivalent effect on exports of industrial products in trade between the Parties and prohibits the introduction of any new quantitative restrictions from the date of entry into force of the Agreement. 32. Article 19 allows the Parties to take appropriate measures, in cases where compliance with the provisions of Articles 6 and 7 leads to re-export towards a third country against which the exporting Party maintains for the product concerned quantitative export restrictions or serious shortages that cause or are likely to cause, major difficulties for the exporting Party. In the event of such difficulties, the Party may take appropriate measures under the conditions laid out in Article 21 of the Agreement. 33. There is no provision in the Agreement for the elimination and prohibition of customs duties and quantitative restrictions on exports of agricultural products. 34. Article 14 provides that products exported to the Parties may not benefit from repayment of internal taxes in excess of the amount of indirect taxes imposed on them.

16 Page 12 D. REGULATORY PROVISIONS OF THE AGREEMENT 1. Standards (a) Technical barriers to trade 35. In Article 8 the Parties state that their rights and obligations relating to standards or technical regulations and related measures are governed by the WTO Agreement on Technical Barriers to Trade. (b) Sanitary and phytosanitary measures 36. In Article 11, the Parties agree to apply their sanitary measures in accordance with the WTO Agreement on Sanitary and Phytosanitary Measures. Measures concerning veterinary and phytosanitary control among the Parties are to be harmonized on the basis of EU legislation. 2. Safeguard mechanisms (a) Global Safeguard Measures 37. According to Article 18, the Parties retain their rights and obligations under Article XIX of GATT 1994 and the WTO Agreement on Safeguards. (b) Structural Adjustment 38. Article 16 provides for the Parties to take exceptional measures of limited duration in the form of increased duties in the case of infant industries, or certain sectors undergoing restructuring or facing serious difficulties, particularly where these difficulties produce important social problems. Customs duties applicable on imports introduced by these measures may not exceed 25% ad valorem and should maintain an element of preference for the other Party. The total value of imports of the products subject to these measures may not exceed 15% of total imports of industrial products from the other Party during the last year for which statistics are available. Such measures may be applied for a period not exceeding five years unless a longer duration is authorized by the Joint Committee and shall cease to apply at the latest on the expiry of the transitional period. No measures can be introduced in respect of a product if more than three years have elapsed since the elimination of all duties and quantitative restrictions or changes or measures having equivalent effect concerning that product. (c) Restrictions to safeguard balance of payments 39. In accordance with Article 25, where either Party is in serious balance of payments difficulties or under imminent threat thereof, they may adopt restrictive measures in accordance with the WTO Agreement. Any restrictive measures shall not apply to transfers related to investment and to the repatriation of investment. 3. Anti-dumping 40. The Parties may take appropriate measures against anti-dumping or in accordance with the WTO Agreement on the Implementation of Article VI of the GATT 1994 (Article 17).

17 Page Subsidies and countervailing measures 41. The Parties may take countervailing measures in accordance with the WTO Agreement on Subsidies and Countervailing Measures and the Parties' own related internal legislation (Article 17). In Article 20, they agree to progressively adjust any state monopoly of a commercial character so as to ensure that no discrimination regarding the conditions under which goods are procured and marketed will exist between nationals of the Parties, by the end of the fourth year following the entry into force of the Agreement, i.e. by December Other regulations (a) Customs-related procedures 42. Customs procedures related to rules of origin are detailed in Titles V and VI of Protocol II; Title V (Articles 16-30) details the administrative questions and disciplines regarding proof of origin. Proof of origin in the form of a movement certificate (EUR.1) is to be issued by the exporting authorities at the request of the exporter. Title VI (Articles 32-36) lays down the arrangements for administrative co-operation to be followed by the Parties customs authorities, in particular with respect to mutual assistance, verification of proof of origin, resolution of disputes, penalties, and free zones. (b) Government Procurement 43. In Article 27, the Parties agree on the objective of a progressive liberalization of public procurement. They agree to progressively develop their respective rules, conditions and practices on public procurement with a view to granting suppliers of the other Party access to contract award procedures on their respective public procurement markets not less favourable than that accorded to companies of any country or territory. The Parties shall try to accede to the relevant Agreements negotiated under the auspices of the GATT 1994 and the Marrakesh Agreement. (c) Rules on Competition 44. Article 24 lays out the practices relating to rules of competition which are incompatible with the proper implementation of the Agreement including all agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which prevent, restrict or distort competition; abuse by one or more undertakings of a dominant position in the territories of the Parties as a whole or in a substantial part thereof; and any state aid which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods. The Parties agree to ensure transparency in the area of state aid and shall provide information on cases of state aid upon request. In the event that a Party considers a particular practice incompatible with the Agreement, it may take appropriate measures after consultation within the Joint Committee or after thirty working days following referral for such consultation. (d) Other 45. In Article 13 the Parties agree to cooperate with the aim of further promoting investment and achieving a progressive liberalization and mutual opening of their markets for investment and trade in services, taking into account the relevant provisions of the General Agreement on Trade in Services.

18 Page 14 IV. PROVISIONS AFFECTING TRADE IN GOODS A. INTELLECTUAL PROPERTY 46. In Article 26, the Parties agree to grant and ensure adequate, effective and non-discriminatory protection and enforcement of intellectual property rights. Furthermore they agree to accord each other national treatment no less favourable than that accorded to their own nationals and to nationals of any other country. Exceptions to national treatment must be in accordance with the provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights, in particular Articles 4 and 5. The Parties agree to regularly review the implementation of the provisions of this Article. B. SECTOR-SPECIFIC PROVISIONS OF THE AGREEMENT 47. There are no sector-specific provisions in the Agreement. C. INSTITUTIONAL PROVISIONS OF THE AGREEMENT 1. Exceptions and reservations 48. Article 31 incorporates general exceptions similar to those found in Article XX of the GATT 1994 into the Agreement. Article 30 contains security exceptions similar to those found in Article XXI of the GATT Accession 49. There is no provision in the Agreement for the accession of third parties. 3. Institutional framework 50. Articles deal with the administration of the Agreement; in particular, they establish a Joint Committee responsible for the administration and proper implementation of the Agreement. The Committee may take decisions in cases provided for in the Agreement and make recommendations on any other matter. It is also mandated to serve as the forum for Parties' consultations and to keep under review the possibility of further removal of obstacles to trade between the Parties. The Committee meets whenever necessary at the request of the Parties, but at least once a year; it acts by common agreement. 51. No general review of the Agreement is foreseen; however, Article 33 provides for an evolutionary clause through which one Party may submit a request to extend the scope of the Agreement to the other Party. The Parties may then instruct the Joint Committee to examine the request and, where appropriate, make recommendations to them, particularly with a view to beginning negotiations. Any agreement resulting from such a process will be subject to ratification or approval by the Parties in accordance with their national legislation. 4. Dispute settlement 52. Article 21 sets out the procedures that apply to the settlement of disputes between the Parties. Before initiating the procedure for the application of measures, the Parties agree to try to solve any differences through direct consultations. If consultations in the Joint Committee do not yield a decision within one month of the matter being referred to it, the concerned Party may adopt measures it considers necessary to remedy the situation. Such measures shall be notified immediately to the

19 Page 15 Joint Committee and shall be the subject of regular consultations within the Joint Committee with a view to their relaxation or abolition when conditions no longer justify their maintenance. 53. When exceptional circumstances requiring immediate action make prior examination impossible, the Party concerned may take precautionary measures strictly necessary to remedy the situation. Such measures shall be notified without delay to the Joint Committee. 5. Relationship with other agreements concluded by the Parties 54. The Agreement does not prevent the maintenance or establishment of customs unions, free-trade areas or arrangements for cross-border trade with third countries to the extent that such agreements do not negatively affect the trade regime and in particular the provisions concerning rules of origin provided for in the Agreement (Article 15). 55. Table IV.1 lists the RTAs, notified and non-notified to the GATT/WTO and in force, to which Albania and Turkey are parties. Table IV.1 Turkey and Albania: Participation in other RTAs (notified and non-notified in force), as of March 2009 Partner /Agreement Date of entry Type of GATT/WTO Notification into force agreement Year WTO Provision TURKEY Georgia Goods 2009 GATT Art. XXIV Egypt Goods 2007 Enabling Clause Syria Goods 2007 GATT Art. XXIV Morocco Goods 2006 GATT Art. XXIV Tunisia Goods 2005 GATT Art. XXIV Palestinian Authority Goods 2005 GATT Art. XXIV Croatia Goods 2003 GATT Art. XXIV Bosnia and Herzegovina Goods 2003 GATT Art. XXIV FYROM Goods 2001 GATT Art. XXIV Israel Goods 1998 GATT Art. XXIV European Communities Goods 1995 GATT Art. XXIV EFTA Goods 1992 GATT Art. XXIV PTN Goods 1971 Enabling Clause ECO Signed not implemented Goods 1992 Enabling Clause ALBANIA CEFTA Goods 2007 GATT Art. XXIV European Communities Goods 2007 GATT Art. XXIV Source: WTO Secretariat. EFTA: European Free Trade Area. PTN: Protocol relating to Trade Negotiations among developing countries. ECO: Economic Cooperation Organization. FYROM: Former Yugoslavian Republic Of Macedonia. CEFTA: Central European Free Trade Agreement.

20 Page 16 ANNEX I Indicators of Trade Liberalization under the Agreement 1. A comparison between the scheduled elimination of tariffs applied to the Parties' mutual imports and the duty rates applied by them on MFN imports is shown in Tables AI.1 (Albania) and AI.2 (Turkey), by agricultural (WTO definition), non-agricultural and total products. Applied MFN duty rates in 2008 serve as a comparison. 2. In 2008 Albania's (unweighted) average MFN rate was 5.4%; the tariff applied to agricultural products is almost double that applied to non-agricultural products. 35.6% of Albania's tariff lines are duty-free at an MFN level. On entry into force of the Agreement, Turkey's exporters enjoyed a relative margin of preference of 97.7% on non-agricultural products vis-à-vis the prevailing average MFN tariff in 2008, and a relative margin of preference of 4.5% in agricultural goods. By the end of the transition period in 2013, the average tariff faced by Turkey's exporters on all products is set to be 1.7%, with the share of duty-free tariff lines increasing from 35.6% to 82.4%, although the share of duty-free tariff lines on agricultural products rises from 10.3% to only 14.7%. Table AI.1 Albania: Indicators of MFN tariff rates and preferential rates for imports from Turkey ALL PRODUCTS Agricultural products a Non-agricultural products Origin of goods Year Average applied tariff On Overall dutiable Share of duty-free tariff lines Average applied tariff On Overall dutiable Share of duty-free tariff lines Average applied tariff On Overall dutiable Share of duty-free tariff lines MFN Turkey a Note: WTO Definition. For tariff lines subject to TRQs only the out-of-quota duty is included in the tariff-related calculations. Source: WTO Secretariat estimates based on data provided by Albania. 3. Turkey has a variable MFN tariff structure. Its (unweighted) average MFN rate (2008) is 11.5% on all goods, with an average tariff applied to agricultural goods almost ten times that applied to non-agricultural products. 23.8% of Turkey's tariff lines are duty-free at an MFN level. On entry into force, Albania's exporters enjoyed a relative margin of preference of 82% on non-agricultural products vis-à-vis the prevailing average MFN tariff in 2008, and a relative margin of preference of 0.64% in agricultural goods. The share of duty-free tariff lines on all products increases from 23.8% to 84.9% upon entry into force of the Agreement, while the share of duty-free tariff lines in agricultural products is expected to rise from 13.3% to only 15.9%.

21 Page 17 Table AI.2 Turkey: Indicators of MFN tariff rates and preferential rates for imports from Albania ALL PRODUCTS Agricultural products a Non-agricultural products Origin of goods Year Average applied tariff On Overall dutiable Share of duty-free tariff lines Average applied tariff On Overall dutiable Share of duty-free tariff lines Average applied tariff On Overall dutiable Share of duty-free tariff lines MFN Albania a Note: WTO Definition. Calculations exclude specific and in-quota rates and include the ad valorem part of alternate rates. Source: WTO Secretariat estimates based on data provided by Turkey. 4. Table A.3 shows the market access opportunities in Albania for Turkey's top 25 exports, which in accounted on average for 22.5% of Turkey's global exports. The table shows at which year all HS 8-digit tariff lines corresponding to the product definition (i.e. applying to the 6-digit HS code used to capture the volume of trade) will become duty-free in Albania. 5. Turkey's top 25 exports cover a total of 95 HS 8-digit tariff lines. Seven of Turkey's top 25 exports already benefited from zero MFN duties in Albania's market: in 2008, 17 products (accounting for 79 tariff lines and 17.7% of Turkey's average global exports) gain immediate duty-free access. One product cotton not carded or combed is excluded from tariff liberalization. The margin of preference granted to Turkey by Albania under the Agreement varies from 1.3 to 10 percentage points. Table AI.3 Market access opportunities under the agreement for Turkey's top 25 exports Access Conditions to Albania's import markets MFN (2008) Turkey's top export products in HS number and description of the product Share in global exports Average MFN applied rate Number of tariff lines Dutiable Number of Tariff Lines Dutyfree Dutyfree in Motor cars of a cylinder capacity exceeding ,500 cc but not exceeding 3,000 cc Flat-rolled products of iron or non-alloy steel, of a thickness of less than 3 mm Motor vehicles for the transport of goods, g.v.w. not exceeding 5 tonnes Aluminium, not alloyed Motor cars, of a cylinder capacity exceeding 1,500 cc but not exceeding 2,500 cc Portable digital automatic data processing machines, weighing not more than 10 kg Motor cars of a cylinder capacity not exceeding 1,500 cc Parts and accessories of motor vehicles of headings to 87.05, other Poly(vinyl chloride), not mixed with any other substances Engines of a kind used for the propulsion of vehicles of Chapter Light oils and preparations Polyethylene having a specific gravity of or more Parts and accessories of motor vehicles of headings to 87.05, other Aluminium alloys Gold, non-monetary, other unwrought forms Other petroleum oils and oils obtained from bituminous minerals other than light oils and preparations Remain Dutiable

22 Page 18 Turkey's top export products in HS number and description of the product Share in global exports Access Conditions to Albania's import markets MFN (2008) Number of Tariff Number of tariff Lines lines Average MFN applied rate Dutiable Dutyfree Dutyfree in 2008 Remain Dutiable Other waste and scrap other than turnings, shavings, chips, milling waste, sawdust, filings, trimmings and stampings Petroleum oils and oils obtained from bituminous minerals, crude Bituminous coal Other liquefied petroleum gases Other medicaments Polypropylene Cotton, not carded or combed Cathodes and sections of cathodes Transmission apparatus incorporating reception apparatus Total of above Source: WTO estimates based on data provided by Albania and UNSD, Comtrade data. 6. Table A.4 shows the market access opportunities in Turkey for Albania's top 25 exports (at the HS 6-digit level), which accounted on average for 64.5% of Albania's exports to the world in The table shows at which year all HS 12-digit tariff lines corresponding to the product definition (i.e. applying to the 6-digit HS code used to capture the volume of trade) will become duty-free in Turkey. 7. Albania's top 25 exports cover a total of 129 HS 12-digit tariff lines. Seven of Albania's top 25 exports (which account for 20 HS 12-digit lines and 13.7% of Albania's average global exports in the period ) already benefit from zero MFN duties in Turkey's market; a further 16 products, accounting for 97 HS 12-digit lines and 46.7% of Albania's average global exports in the period are granted duty-free access in Two of Albania's top 25 export products anchovies and other plants and parts of plants used primarily in perfumery are excluded from tariff liberalization under the Agreement. The margin of preference granted to Albania by Turkey under the Agreement varies from 2.7 to 12 percentage points. Table AI.4 Turkey: Market access opportunities under the agreement for Albania's top 25 exports Access Conditions to Turkey's import markets MFN (2008) Albania's top export products in HS number and description of the product Share in global exports Avg. applied rate Number of tariff lines Dutiable Number of Tariff Lines Dutyfree Dutyfree in 2008 Remain Dutiable Parts of footwear, uppers and parts thereof, other than stiffeners Trousers, bib and brace overalls, breeches and shorts, of cotton Men's or boys' shirts, of cotton Petroleum oils and oils obtained from bituminous minerals, crude Other locks Chromium ores and concentrates Copper waste and scrap Other footwear, with uppers of leather or composition leather Anchovies Table AI.4 (Cont'd)

23 Page 19 Albania's top export products in HS number and description of the product Share in global exports Access Conditions to Turkey's import markets MFN (2008) Number of Tariff Number of tariff Lines lines Avg. applied rate Dutiable Dutyfree Dutyfree in 2008 Remain Dutiable Other footwear with outer soles of leather other than covering the ankle T-shirts, singlets and other vests, knitted or crocheted, of cotton Other plants and parts of plants (including seeds and fruits), of a kind used primarily in perfumery, in pharmacy or for insecticidal, fungicidal or similar purposes Other bars and rods of iron or non-alloy steel containing indentations, ribs, grooves or other deformations Women's or girls' blouses, shirts and shirtblouses, knitted or crocheted, of cotton Ferro chromium containing by weight more than % of carbon Briefs and panties, of cotton Other footwear Aluminium waste and scrap Men's or boys' underpants, of cotton Other waste and scrap Petroleum bitumen Other footwear with outer soles of leather, Covering the ankle Other sacks and bags, including cones Other footwear covering the ankle T-shirts, singlets and other vests, knitted or crocheted, of other textile materials Total of above Source: WTO estimates based on data provided by Turkey and UNSD, Comtrade data.