EMBARGO: NOT FOR PUBLICATION BEFORE
1300 HOURS GMT 6DECEMBER 1995
PRESS/TPRB/19
29November 1995
SLOVAKIA COUNTS ONTRADE TOCONTINUE ECONOMIC
REFORMS AND GROWTH
After fiveyears ofeconomic andinstitutional reform, Slovakia 'seconomy isnowexperiencing
robust growth. Inthefirsthalfof1995, GDP increased by6.2percent,following growth of4.8per
centin1994, thereby sharply reversing thesteep declines indomestic production intheearly 1990s.
Inefforts toestablish amarket-based economy, Slovakia hasdecontrolled prices, opened theeconomy
toforeign investment andliberalized itsforeign exchange regime. Ithasalsorelaxed oreliminated
foreign trade restrictions andprivatized many ofitsstateenterprises.
Slovak reforms began in1990 under theCzech andSlovak Federal Republic. They were
continued afterSlovakia became asovereign stateon1January 1993. According tothereport, the
reforms andthecountry 'sliberal traderuleshavebeeneffective andarecomplemented bythecountry 's
generally open direct investment regime. Aconcern noted inthereport, however, isthepaceof
Slovakia 'sprivatization programme. Thereport questions towhat extent privatization isleading to
theeffective separation ofnewly privatized firms from stateinfluence.
Asaresult ofSlovakia 'stransition, thecountry 'stradepattern haschanged fundamentally since
1989 when mosttrade waswiththeSoviet Union andother central andeastern European countries.
Excluding trade withtheCzech Republic, which isSlovakia 'slargest trading partner, thereport notes
thattheshare ofSlovakia 'smerchandise exports soldtoindustrialized countries inwestern Europe
increased from19percentin1989to71percentin1994. Asmuch as91percentofallmerchandise
imports andexports areexchanged withEuropean countries, including Russia. TheSlovak Republic
formally applied inJune1995 forEuropean Union membership.
Slovakia andtheCzech Republic arepartofacustoms union andshare acommon external
tariff averaging eight percent.Goods fromthirdcountries, however, donotcirculate freely between
theCzech andtheSlovak Republic. Thereport states thatSlovakia 'stariffs arecurrently applied at
theirbound ratesandthatnospecific orother nonadvalorem tariffs areused, making theexternal
tariff verytransparent. Average tariffs risefromfourpercentonprimary products tosixpercenton
semi-processed products and10percentonfullyprocessed products. Exceptions canbenoted for
agriculture, which, following theUruguay Round, hasparticularly hightariffs onafewitems. Food
products andbeverages, forexample, havetariffs averaging 19percent,nearly triple thelevelelsewhere
intheeconomy. Preferential tariff ratesarecurrently granted under theGSPscheme toimports from
developing andleast-developed countries.
95-3860
MORE PRESS/TPRB/19
Page 2/3
According tothereport, Slovakia 'smerchandise tradewithpreferential partners insixregional
trade agreements accounts for83percentofexports and70percentofimports. Except forRussia,
preferential agreements encompass allmajor Slovak trading partners. Thecountries withwhich Slovakia
haspreferential agreements would likely beSlovakia 'smajor trading partners evenintheabsence of
suchagreements.Thereportstatesthatthisseemstolimitthetradediversionthatresultsfrompreferential
agreements andsuggests thatSlovakia 'snetwork oftradeagreements is,onbalance, nettrade-creating.
Thereport notes thatfinalconsumer products arecurrently subject toa10percenttemporary
import surcharge. Thelatter wasintroduced forbalance ofpayments reasons inMarch 1994 when
Slovakia 'sofficial reserves stood attheequivalent oflessthanonemonth 'smerchandise imports. There
hassince beenasubstantial improvement inreserves.
Slovakia isanoriginal member oftheWTO andisparty toallmajor multilateral agreements
inthefieldofintellectual property. Ithasnoanti-dumping, countervailing dutyorsafeguards legislation
inforce andhasnever applied suchmeasures. However, legislation isnowbeing prepared inthese
areas forimplementation sometime in1996. Thereport cautions thatsuchlegislation, ifusedatall,
should bedesigned soastolimitpotential abuse bydomestic firms trying tostifleeconomic competition.
Non-automaticimportlicensingrequirementsareusedoccasionally,sometimesforenvironmentalreasons.
Slovakia 'sservices tradeaccounted formostofitssubstantial current account balance in1994,
largely asaresult oftourism receipts andnatural gaspipeline fees.Services accounted for57percent
ofGDPin1994. Thereport states thatSlovakia wasastrong advocate fortheintroduction ofmultilateral
rulesforservices tradeintheUruguay Round andmade acomparatively largenumber ofcommitments
invarious service sectors. Withfewexceptions, these include allowing foreign companies toestablish
commercial presence andbecome foreign-owned service providers.
Thereport concludes thatSlovakia 'ssizeanditshighpropensity totradesuggest itskeeninterest
inthetrade policies ofpartner countries. TheUruguay Round results andthecreation oftheWTO
shouldbeverybeneficialforSlovakia,notonlybecauseofthereductionsintradedistortions,butbecause
ofstrengthened andbroadened multilateral rules.
Notes toEditors:
TheWTO Secretariat 'sreport, together withareport prepared bytheSlovak Republic, will
bediscussed bytheWTO Trade Policy Review Body (TPRB) on5and6December 1995.
TheWTO'sTPRBconductsacollectiveevaluationofthefullrangeoftradepoliciesandpractices
ofeachWTO member atregular periodic intervals andmonitors significant trends anddevelopments
which mayhaveanimpact ontheglobal trading system.
Tworeports, together witharecord oftheTPRB 'sdiscussion andoftheChairman 'ssumming
up,willbepublished induecourse asthecomplete Trade Policy Review oftheSlovak Republic and
willbeavailable from theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211
Geneva 21.
Thereports cover development ofallaspects oftheSlovak Republic 'stradepolicies, including
domestic lawsandregulations, theinstitutional framework, trade practices bymeasure andbysector.
Since theWTO cameintoforce, the"new areas" ofservices tradeandtrade-related aspects ofintellectual
property rights arealsocovered. Attached arethesummary observations from theSecretariat and
government reports. Fullreports willbeavailable forjournalists fromtheWTO Secretariat onrequest.
MOREPRESS/TPRB/19
Page4
Since December 1989, thefollowing reports havebeencompleted: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995),
Canada (1990, 1992&1994), Chile (1991), Colombia (1990), Costa Rica(1995), Côted'Ivoire (1995),
Egypt (1992), theEuropean Communities (1991, 1993&1995), Finland (1992), Ghana (1992), Hong
Kong (1990 &1994), Hungary (1991), Iceland (1994), India(1993), Indonesia (1991 and1994), Israel
(1994), Japan (1990, 1992and1995), Kenya (1993), Korea, Rep.of(1992), Macau (1994), Malaysia
(1993),Mauritius(1995),Mexico(1993),Morocco(1989),NewZealand(1990),Nigeria(1991),Norway
(1991), Pakistan (1995), Peru(1994), thePhilippines (1993), Poland (1993), Romania (1992), Senegal
(1994), Singapore (1992), South Africa (1993), SriLanka (1995), Sweden (1990 &1994), Switzerland
(1991),Thailand(1991),Tunisia(1994),Turkey(1994),theUnitedStates(1989,1992&1994),Uganda
(1995), Uruguay (1992) andZimbabwe (1994).
MOREPRESS/TPRB/19
Page 5
TRADE POLICY REVIEW BODY
THE SLOVAK REPUBLIC
Report bytheSecretariat -Summary Observations
Slovakia became asovereign stateon1January 1993 following thedissolution oftheCzech
andSlovak Federal Republic (CSFR). Thedismantling oftheformer central planning régime and
movement toward amarket economy were begun under theCSFR in1990 andhavelargely been
continued bySlovakia. Market-oriented reforms have encompassed thedecontrol ofprices, the
privatization ofmany State enterprises, theopening oftheeconomy toforeign investment, the
liberalization oftheforeign exchange régime, andtherelaxation orelimination offoreign trade
restrictions.
During thereform period theauthorities 'prudent management ofthemacroeconomy has
facilitated theimplementation ofreforms. Nevertheless, thecollapse ofexport demand fromformer
keytrading partners andtheinitial effects ofeconomic reforms combined tocause asevere economic
contraction during theearly 1990s. Thiswastemporarily aggravated bythedisruption ofmarketing
channels andthediscontinuation offinancial transfers associated withthedissolution oftheCSFR.
Since Slovakia became asovereign State, successive Governments havebuilttheinstitutions
instrumental toamarket economy andhavecontinued toimplement many economic reforms. Although
theprivate sector wasresponsible forsome 62percentofGDP inthefirsthalfof1995, delayed
privatization andtheabandonment ofcoupon privatization infavour oflesstransparent methods have
fostered uncertainty about thisparticular areaofreform. Thisshould notdetract fromthesuccessful
reforms thathavebeenmade throughout much oftheeconomy, particularly withrespect tointernational
trade.
With theexception ofthe10percenttemporary surcharge onimports ofconsumer goods,
Slovakia hasliberal andtransparent international trade policies. Itstrade régime ischaracterized by
m.f.n. tariffs applied atmoderate ratesonanadvalorem basis andbytheinfrequent useofnontariff
barriers. Theresulting openness hascontributed toSlovakia 'srecent economic revitalization; the
multilateral obligations thatSlovakia hasaccepted inmany areas, suchasitscomprehensive tariff
bindings, helptoensure thecontinuation ofthisopenness.
Slovakia inWorld Trade
Ledbya23percentincrease inthevalue ofmerchandise exports, Slovak realGDP grew by
4.8percentin1994. Percapita income increased totheequivalent ofUS$2,340. Robust growth,
ledbyexports andinvestment, continued inthefirsthalfof1995, asGDProseatanannual 6.1percent
rate. Slovakia 'smerchandise trade surplus andlarge services trade surplus werethemain factors in
anoverall 1994current account surplus equivalent to5.7percentofGDP. Thecontinued strong balance
ofpayments performance generated increases inofficial reserves totheequivalent ofmore thanthree
months ofimports ofgoods andservices byJuly1995, undermining Slovakia 'seconomic argument
fortheimport surcharge itintroduced forbalance-of-payments reasons inMarch 1994. Inflation was
keptto13.4percentin1994 anddeclined toan11.2percentannual rateinthefirsthalfof1995.
MOREPRESS/TPRB/19
Page6
Services accounted for57percentofGDPin1994, while industry andconstruction accounted
for36percent, andagriculture andforestry for7percent. Slovakia isanetimporter offuelsand
related products (which comprise onefifthoftotalmerchandise imports) andmachinery andtransport
equipment. Itisanetexporter ofintermediate manufactured products (twofifths ofexports) and
miscellaneous manufactures.
Slovakia 'sgeographic pattern oftradehaschanged fundamentally since1989, when mosttrade
waswiththeSoviet Union andother central andeastern European countries. Excluding trade with
theCzech Republic, theshare ofSlovakia 'smerchandise exports soldto(western) industrial countries
increased from 19percentin1989 to71percentin1994. Slovak trade isconcentrated inEurope,
with91percentofbothmerchandise imports andexports exchanged withEuropean countries, including
Russia. Thelargest shares ofimports arefrom theCzech Republic, theEuropean Union (EU) and
Russia, while thelargest shares ofexports gototheCzech Republic andtheEU.
Trade Policy Framework
Aliberal tradepolicy isseenbytheSlovak authorities ascentral toachieving efficient resource
allocation, particularly inthecontext ofSlovakia 'soverriding economic objective toattain, by2010,
astandard ofliving comparable tothatoftheadvanced European countries. Slovakia aimsforabalanced
geographic expansion oftrade underpinned byitsowntrade liberalization andbythatofitspartners.
Whetherbilateralormultilateral,Slovakiahasemphasizeditscommitmenttoundertakesuchliberalization
incompliance withWTO rules.
Czechoslovakia wasanoriginal member oftheGATT, andSlovakia acceded totheGATT
in1993withnolapseinitsapplication oftheGeneral Agreement. Slovakia ratified theUruguay Round
package inDecember 1994 andisanoriginal member oftheWTO. AllWTO members andGATT
contracting parties receive atleastm.f.n. treatment fromSlovakia, asdoseveral other countries with
which Slovakia hasbilateral agreements calling form.f.n. treatment.
Slovakia'smerchandisetradewithpreferentialpartnersinsixregionaltradeagreementsaccounts
for83percentofexports and70percentofimports. Thesixagreements aretheCzech-Slovak Customs
Union, theEUAssociation Agreement, theCentral European FreeTrade Agreement (CEFTA, which
includes theCzech Republic, Hungary andPoland), andfreetradeagreements withRomania, Slovenia,
andthecountries oftheEuropean FreeTrade Area(EFTA). Except forRussia, preferential agreements
encompass allmajor Slovak trading partners. Russia provides some 18percentofSlovak imports,
mostly rawmaterials onwhich Slovakia 'sm.f.n. tariffs arezero. Agreements withother countries
arebeing considered orareunder negotiation.
Slovakia 'scustoms union withtheCzech Republic tookeffect on1January 1993, upon the
dissolution oftheCSFR. Thecountries share acommon external tariff, though goods from third
countriesdonotcirculatefreelybetweenthem.Mostothertrade-relatedpolicies,suchasimportlicensing
andpreferences under theGeneralized System ofPreferences (GSP), areharmonized. Apayments
clearance agreement tookeffect when monetary union ended inFebruary 1993butwaseliminated on
30September 1995. TheSlovak koruna isnowfullyconvertible forcurrent account purposes.
Slovakia applied forEUmembership inJune1995. Much ofitstrade-related legislation has
already beenharmonized tothatoftheEU,andthisprocess ofharmonization continues. TheCzech-
Slovak common external tariff, withasimple average of8percent,averages some 2percentage points
lessthantheEUtariff.
MOREPRESS/TPRB/19
Page 7
Thecountries withwhich Slovakia haspreferential agreements would likely beSlovakia 'smajor
trading partners evenintheabsence ofsuchagreements. This, together withSlovakia 'srelatively low
m.f.n. tariffs, limits trade diversion andsuggests thatSlovakia 'snetwork oftrade agreements is,on
balance, nettrade-creating. Solongastariffs onproducts from thirdcountries arenotraised, these
features increase thelikelihood thatSlovakia 'snetwork oftradeagreements iseconomically beneficial
from aglobal perspective.
Slovakia 'sliberal traderulesarecomplemented byitsgenerally opendirect investment régime.
Foreign direct investment isencouraged, andinvestments inSlovakia under mostcircumstances are
notsubject toapproval requirements. Following registration, foreign firms andindividuals mayconduct
business inSlovakia under thesame conditions andtothesame extent asdomestic firms, withfew
exceptions. Foreign investors maytransfer theirshare ofafter-tax profits totheircountry oforigin,
andforeign-owned capital maybefullyrepatriated intheevent ofthedissolution ofanenterprise.
Under theGeneral Agreement onTrade inServices (GATS), Slovakia hasundertaken horizontal and
specific commitments thathelptoensure thatforeign firms areabletoestablish acommercial presence
inSlovakia inorder toprovide many types ofservices.
Profit-seeking firms thatrespond tomarket forces andarefreefromStateinfluence areessential
totheeffectiveness ofamarket economy. TheSlovak Government officially recognizes thecentral
rolethatprivatization mustplayintheprocess ofeconomic transformation andplaced the"continuation
andacceleration" ofprivatization among thestated priorities ofits1995 programme. Privatization
hasconsisted ofacombination ofstandard methods, suchasdirect sales, andvoucher (coupon)
privatization. Thefirstwave ofprivatization waslargely complete bythetimeofthedissolution of
theCSFR attheendof1992. Allsmall-scale enterprises thataretobeprivatized were included in
thefirstwave, along withsome large-scale enterprises.
Thesecond wave ofprivatization hasbeenamajor political issue inSlovakia. Successive
Governments havechanged policy andevenoverturned privatization decisions. Theresult hasbeen
persistent delay inimplementing thesecond wave. Asaresult oflegislation recently reaffirmed by
theNational Council after having been returned bythePresident, voucher privatization willbe
abandoned, unless anexpected challenge totheConstitutional Court succeeds inoverturning the
legislation. Itisnotcleartowhatextent privatization, asnowapplied inSlovakia, isleading tothe
effective separation ofnewly privatized firms from State influence. Criticism ofthewayinwhich
standard privatization methods arebeing applied hascentred onthelackoftransparency inselection
ofnewowners andmanagement andonwhether domestic investors arebeing preferred overforeign
investors.
Trade Policy Features andTrends
Type andincidence ofpolicy instruments
Overall, theSlovak import régime hasrelatively fewnon-tariff import barriers orexport
measures. Non-automatic import licensing requirements areused occasionally, sometimes for
environmental reasons. Automatic licensing requirements, apparently motivated byhealth andsafety
considerations, existfortheexporting orimporting ofmany products. Insomecases, suchasfortextiles
andclothing, exports arerestricted ormonitored inaccordance withbilateral tradeagreements. Export
subsidies arelimited tothose intheagriculture sector.
MOREPRESS/TPRB/19
Page8
Slovakia applies theEU'sCombined Nomenclature (CN) tariff classification, consisting of
10,446 eight-digit tariff lines. Only 3percentoftariff linesintheCzech-Slovak common external
tariffwereunbound asoftheendof1994. Allremaining unbound tariffs werebound uponthebeginning
oftheimplementation oftheUruguay Round, on1January 1995.
Alltariffs arecurrently applied attheirbound ratesandnospecific, composite orother non
advalorem tariffs areused, making theexternal tariff verytransparent. While thesimple average
m.f.n. tariff rateisrelatively moderate, Slovakia 'sm.f.n. tariffs areescalatory: average tariffs rise
from4percentonprimary products to6percentonsemi-processed products and10percentonfully
processed products. Thesimple average tariff applied onimports from preferential trading partners
ranges from 1.9percentforSlovenia to4.7percentforRomania, andequals 4.0percentforthe
EU. Slovakia haslowduties ontheproducts thatittends toimport from non-preferential partners:
when weighted byimports fromnon-preferential partners, theaverage m.f.n. tariffisonly1.7percent.
Slovakia isaparty toallmajor multilateral agreements inthefieldofintellectual property.
Foreign rightholders receive thesame treatment asSlovak legalornatural persons, except thatinthe
areas ofindustrial designs andpatents Slovakia grants national treatment onlyonareciprocal basis.
Theauthorities believe thatacceptance byother parties oftheTRIPS Agreement willbeconsidered
tosatisfy thereciprocity requirement.
Temporary measures
InMarch 1994 Slovakia 'sofficial reserves stood attheequivalent oflessthanonemonth 's
merchandise imports. Slovakia thenintroduced atemporary 10percentimport surcharge onimported
goods fromallsources forbalance ofpayments reasons. While thebasis forthesurcharge isbroad,
covering mostchapters intheHarmonized System, inpractice itischarged onlyonconsumer goods,
which comprised 13percentofSlovak imports in1994. Asaresult, average import surcharge rates
(based onsurcharge revenue data)varywidely across product categories: 2percentorlessforproducts
in56HSchapters, but5percentormore in27chapters. Theapplication oftheimport surcharge
onlytoconsumer goods, which tendtobehighly processed, worsens thetariffescalation already noted.
Thesurcharge hasasubstantial protective effect onSlovakia 'sconsumer goods industries. TheGATT
andWTO Committees onBalance-of-Payments Restrictions haverequested thatSlovakia eliminate
thesurcharge bytheendof1995, ifpossible, butinanycasebefore 30June1996.
Slovakia 'simport surcharge could begin todamage theeconomy. First, thesurcharge-based
protection ofimport-competing consumer goods industries pullsresources fromexporting industries
andfrom those import-competing industries thatdonotreceive surcharge protection. With fewer
resources devoted totheproduction oftheirgoods, exporting industries reduce exports, while imports
oftheproducts made byimport-competing industries unprotected bythesurcharge increase. Other
thanperhaps forashortperiod ofseveral months, trade-restrictive measures willnotimprove thebalance
ofpayments. Second, astimegoeson,theprotection thatthesurcharge provides todomestic consumer
goods industries willbecome more andmore difficult toeliminate. Ifthesurcharge remains inplace
forlong, itsremoval could leadtonewadjustment pressures, thethreat ofwhich would generate
opposition totheremoval. Thismayalready behappening, because Slovakia 'srelatively sound external
reserves position (which hasincreased totheequivalent ofmore thanthree months ofimports) and
strong balance ofpayments situation imply thattheinitial motivation behind thesurcharge nolonger
exists. Moreover, tariff reductions forpreferential partners havebeenimplemented asscheduled
evenwhile thesurcharge hasbeeninplace; thissuggests thatcurrent conditions provide anexcellent
opportunity toeliminate thesurcharge withaminimum ofadjustment being necessary.
MOREPRESS/TPRB/19
Page 9
Slovakia hasnoanti-dumping (AD), countervailing duty(CVD) orsafeguards legislation in
force andhasnever applied suchmeasures. Legislation isbeing prepared intheseareasandisexpected
tobeimplemented sometime in1996. Slovakia, likeother WTO members thatchoose toinclude such
provisions indomestic law,faces theproblem ofdesigning rules sotominimize thepossibility that
established domestic firms canabuse them tostifle economic competition. Slovakia hassometimes
found itself ontheother endofsuchpractice andhasadopted export monitoring (export license
requirements) partly toavoid ADorCVD actions being taken against Slovak exporters. Tohelpprotect
effectiveeconomiccompetition,aprincipleenshrinedintheSlovakConstitution,Slovakiacouldconsider
including twoprovisions initslegislation. First, theuseofanti-dumping measures could berestricted
tothose occasions when foreign firms canbeshown toengage inpredatory pricing withtheintent
ofestablishing amonopoly position intheSlovak market; similar standards aresometimes usedin
domesticcompetitionlaw.Second,apublicinterestclauserequiringthattheeconomiceffectsofpotential
ADandCVD measures onconsumers anddownstream industries beconsidered inthedecision process
could beincluded inthelegislation.
Sectoral policy patterns
Slovakia 'sm.f.n. tariffs arefairly uniform across economic sectors. Exceptions areagriculture,
which, following Uruguay Round tariffication, hasparticularly hightariffs onafewitems, andfood
products andbeverages, which havetariffs averaging 19percent, nearly triple thelevel elsewhere
intheeconomy. Incontrast totherelative uniformity across sectors, apattern oftariff escalation is
present within mostsectors oftheeconomy, astariffs increase withthelevelofprocessing. Thisis
mostnoticeable insectors suchasfoodprocessing, andtextiles andclothing, andisworsened bythe
10percenttemporary import surcharge onfinalconsumer goods. Tariffs andthesurcharge combine
toprovide substantial import protection tohigher-level processing activities inmanufacturing sectors.
Active industrial policy islimited totheagriculture sector. TheStateisinvolved through setting
intervention prices andgranting export subsidies forsome commodities andbyproviding concessionary
loans andcredit guarantees. Many measures, suchastariff quotas andseasonal tariffs, areapplied
toagricultural imports, asinmany other countries; some ofthese replaced variable import levies as
aresult oftheUruguay Round. Notably, Slovakia counts imports made atpreferential tariffratesagainst
them.f.n. tariff quota levels established asaresult oftheUruguay Round minimum market access
provisions; thisreduces themarket access fornon-preferential suppliers.
Services tradegenerated mostofSlovakia 'ssubstantial current account balance in1994, largely
asaresult oftourism receipts andnatural gaspipeline fees. Slovakia wasastrong advocate forthe
introduction ofmultilateral rulesforservices trade intheUruguay Round andmade acomparatively
large number ofcommitments under theGeneral Agreement onTrade inServices (GATS). These
include ahorizontal commitment (with some sectors excepted) nottolimittheability offoreign firms
toestablish acommercial presence, thusproviding amore secure environment fortheestablishment
inSlovakia offoreign-owned service providers. Slovakia haslisted sixmeasures inconsistent with
m.f.n. treatment. These measures affect fivedifferent services sectors and,under theGATS, should
notbeapplied formore thantenyears. They aresubject tofuture negotiations.
Trade Policies andTrading Partners
International tradeisextremely important toSlovakia, withtheratioofmerchandise andservices
tradetoGDPequaltosome138percentin1994.Recognizingthisimportance,Slovakiahasconstructed
arelatively opentrading régime thatunderpins itstransition toafullmarket economy. Trade promotes
effective economic competition, which liesattheheart oftheeconomic transition. Abletopurchase
MOREPRESS/TPRB/19
Page10
inputs fromabroad without, inmostcases, substantial taxesorrestrictions being imposed, Slovak firms
arebecoming more competitive, bothindomestic andforeign markets. Thisisbeing reflected inthe
highexport (and, tosome extent, import) growth andstrong GDP growth of1994 andearly 1995.
Slovakia 'ssizeanditshighpropensity totrade suggest itskeeninterest inthetrade policies
ofpartner countries. TheUruguay Round results andthecreation oftheWorld Trade Organization
should beverybeneficial forSlovakia because ofthereductions intradedistortions thatwerenegotiated
andbecause ofstrengthened andbroadened multilateral rules. During theRound, Slovakia was
particularly concerned withsuchissues asincreasing theeffectiveness ofthedispute settlement system
andintroducing multilateral rules forservices trade.
TheUruguay Round andtheinternational trading system havehelped provide greater economic
security forSlovakia. Slovakia 'sfirmcommitment tomultilateral rules, displayed, forexample, through
itscomprehensive tariffbindings, willhelpensure thatSlovakia provides asecure trading environment.
Theprompt removal oftheimport surcharge would reaffirm Slovakia 'scommitment toatransparent
system ofimport protection based onbound tariffs.
MOREPRESS/TPRB/19
Page 11
TRADE POLICY REVIEW BODY
THE SLOVAK REPUBLIC
Report bytheGovernment -Summary Observations
Introduction
TheSlovak Republic became asovereign Stateon1January 1993 afterthedissolution ofthe
Czech andSlovak Federal Republic. Asoneofthetwosuccessor States theSlovak Republic continued
theprocess oftheeconomic transformation, thebasisofwhich waslaiddown in1989forthecommon
Czech andSlovak economic space. Basic pillars ofeconomic reform introduced in1991 were:
privatization andde-monopolization ofState-owned companies, restructuring oftheeconomy, price
liberalization, foreign tradeliberalization, introduction ofinternal convertibility ofthecurrency, support
oftheprivate sector intheframework ofmacroeconomic measures andcreating newconditions for
economic development inaninternational competitive environment.
Thefastimplementation oftheeconomic reform, thedisintegration oftheCOMECON with
theconsequent collapse oftheEastern European markets aswellastheglobal economic recession of
theworld economy together hadsome negative consequences. These elements caused major disruption
toeconomic andtraderelations andprocesses, andtotraditional tradeflows andchanges inthesystem
ofpayments. They alsoledtothedeepening oftheSlovak economic recession: decline inproduction;
lowlevel ofproduction capacity utilization; obsolete technological equipment; highgrowth of
unemployment; increase ofinflation ratemainly caused byprice liberalization; decline incurrency
andforeign exchange reserves; anddecline ofexports withtheconsequent decline ofdomestic
production. In1991GDPdecreased by14.5percent,in1992by7percentandin1993by4.1percent.
Thissituation required substantial changes inthestructure ofindustry, trade andservices;
continuous solutions totheconsequences ofthefastconversion inthemachinery industry (armament
industry); creation ofaneweconomic, financial, andmonetary policy; andtheadoption offundamental
legislation measures toovercome theeconomic transformation process.
Economic transformation necessarily needs tobestructured todiminish, totheextent possible,
itsnegative effects ontheliving standards ofthepopulation andtopreserve social harmony.
Inspiteoftheunfavourable startin1993 andthebeginning of1994, theSlovak Republic is
continuing theprocess ofeconomic transformation andtheresults of1994 andthefirsthalfof1995
illustrate thegradual revival oftheSlovak economy. Thepositive impact ofthemeasures adopted
bytheGovernment andtherecovery from theworld economic recession canbeproven bythelow
rateofinflation, thestable leveloftheunemployment rate,thegrowth ofGDPandincreasing exports.
TheGDPinconstant prices asof1January 1994wasUS$5.88 billion andincomparison with
1993 increased by4.8percent. Theopenness oftheSlovak economy (theshare ofexports inGDP
incurrent prices) reached 53.8percentin1994, while in1993 itwas49.3percent. In1994 in
comparison to1993Slovak exports increased by27.8percentandimports by8.6percent. Therate
ofinflation declined from23.2percentin1993to13.4percentin1994. Therateofunemployment
reached 12.2percentin1993 and13.3percentin1994.
MOREPRESS/TPRB/19
Page12
Inthefirsthalfof1995theSlovak Republic continued economic development; GDPincreased
by6.2percentincomparison tothefirsthalfof1994. Thisgrowth wasduetoincreased domestic
demand. Therateofinflation reached 11percentandtheslowdown inthegrowth oftherateofinflation
wasduetothepositive relationship between theincrease oflabour productivity andtheincrease of
theaverage nominal salary, thesmall increase ofloans indomestic currency andbythestable level
offoreign exchange stocks. Inthefirsthalfof1995therateofunemployment reached 13.7percent,
exports increased by22.8percentandimports by24.6percentresulting inabalance ofUS$18.75
million, andopenness oftheSlovak economy reached 54.5percent.
Foreign Trade andMacroeconomic Linkages
Foreign trade plays avital rôleintheeconomic development oftheSlovak Republic.
Consequently tradepolicy forms anintegral partoftheglobal economic strategy oftheSlovak Republic,
having regard tothefactthateconomic growth canbeachieved onlyifSlovak exports arecompetitive.
Measures serving thisaimarebeing taken inthemacroeconomic environment andinthemicroeconomic
environment, including measures fortheintensification ofexports, promotion offoreign investment,
etc. TheSlovak Republic hasplayed anactive rôleintheliberalization process andsupported
international efforts toliberalize global trade intheframework oftheUruguay Round ofGATT on
amultilateral basis. Thisprocess isbeing further supported byregional agreements.
Trade policy isformulated inaccordance withthepossibilities ofeconomic growth. The
legislation creating theframework forthispolicy isthemost important instrument along withthe
responsible ministries andinstitutions thatparticipate intheimplementation ofthispolicy according
totheirpowers.
Thebasicobjective ofthetradepolicy oftheSlovak Republic istopromote theeconomic growth
ofSlovakia andtopromote thecreation ofnewjobsbased onthedevelopment ofexports. These
objectives canberealized onlyinanopeninternational trading system without barriers andanyform
ofdiscrimination. Thefundamentals oftheforeign-trade policy oftheSlovak Republic andthestarting
points forfurther development offoreign trade inthenextfewyears wereestablished considering the
above-mentioned factsandinthecontext ofthecontinued process ofliberalization anddemonopolization
ofallactivities, particularly inforeign trade.
Thefactthatthestability ofconditions intheforeign trade environment influences toahigh
degree theformation ofexport-import proportions andrelations hasbeenconfirmed especially inthe
firsttwoyears oftheexistence ofthesovereign Slovak Republic. In1993 GDP declined by4.1per
centcompared with1992, andindustrial production by3.8percentcompared with1992, butunlike
in1992 thisdecline wasmainly duetothereduction inexports. Theinfluence ofunstable conditions
inforeign trade wasreflected instructural, territorial andglobal indicators.
Thecreation ofstable relations inforeign trade andtheestablishment ofnewexport-import
proportions isalong-term process. TheSlovak Republic isstrongly committed tothecreation and
development ofsuchrelations withallcountries oftheworld. Thedefined traderelations oftheSlovak
Republic withindividual territories, written down inAgreements, increase therateofstability inthe
areaofforeign trade.
Trade Policy
Considering theneeds oftheSlovak economy forthenexttwoyears, thetrade policy aims
atmaintaining apositive balance inforeign trade; maintaining thedegree ofopenness oftheSlovak
MOREPRESS/TPRB/19
Page 13
economy atthelevelofapproximately 55percentandtheimprovement ofthecommodity structure
oftheexports infavour ofthecommodity groups withhigher value added; andthecreation ofnew
jobsbymeans oftheexport promotion inthose branches withexisting capacities andcompetitive
products. These aimsaredeclared intheconception oftheforeign trade, including theinstruments
toachieve them.
Theconcept oftheforeign tradeoftheSlovak Republic isbased onandcorresponds withforeign
policy andcomplies withitspriorities. Thefirstpriority istheintensification oftheexisting policy
ofcloser relations withtheEuropean Union. Theaimistheintegration oftheSlovak Republic tothe
EUandtheintensification ofrelations withallneighbouring countries, i.e.theCzech Republic, Poland,
Hungary, Austria andUkraine anddevelopment ofeconomic relations based onmutual benefit with
almost allcountries oftheworld.
Theindustrial policy oftheSlovak Republic contributes totheachievement ofthese aims.
Itisbased ontheidentification ofinternal andexternal problems, itdetermines theprinciples ofcreation
ofthebasicconditions forsuccessful development oftheindustry andprivate enterprises. Atthesame
timemeasures aretaken toensure therealization ofthepolicy.
Astheindustrial policy isinterrelated withtheforeign trade policy itisimportant thatthese
twopolicies areco-ordinated inorder tocreate acompetitive environment through theliberalization
ofthetrade policy. Thiswillcontribute todeveloping thecompetitiveness ofdomestic products.
Theconcept oftheforeign-trade policy oftheagricultural sector isoriented towards the
implementationofinstrumentstypicalforthisspecifictradecomplyingwiththeAgreementonAgriculture
intheframework oftheWTO. Other objectives aretoincrease therateofliberalization oftrade and
toremove barriers totrade inagricultural products, toimprove theexploitation oftheconcessions
based onregional andbilateral agreements andtoincrease theexports ofthose commodities where
domestic production willexceed demand onthedomestic market.
Thetradepolicyisalsoco-ordinatedwiththeanti-monopolypolicyastheyarecloselyinterrelated
anddirectly influence trade. Judgement ofrestrictive tradepractices isconsidered inaccordance with
thelegislation, which corresponds toanti-monopoly legislation indeveloped market economies. Special
attention isgiven toexport andimport cartel agreements, voluntary export restraints, market access
barriers, supranational mergers andstrategic dumping, where theyhaveadirect influence onthetrade
structure oftheSlovak Republic anditscompetition environment.
ThePolicy ofTransport Infrastructure
Theacceleration andrationalization ofthetransport ofgoods plays animportant rôleinforeign
trade. Therefore theconcept ofthepolicy oftransport infrastructure aimstoaccelerate thedevelopment
oftheinfrastructure withtheparallel adaptation ofthetransport sector totheconditions ofafreemarket
andtheharmonization oftechnical andeconomic conditions withthose oftheEU.Theconcept proceeds
ontheassumption thatcomparable conditions fortheSlovak forwarders willbeestablished based on
mutual benefit. When creating infrastructure connections tothecontinental andregional European
transport networks itisnecessary toincrease thetechnical standards andthestateofmeans oftransport,
tomodernize theequipment ofstations andtransit points toneighbouring countries andtocomplete
andconnect theinternational motorway network.
Financial Policy
MOREPRESS/TPRB/19
Page14
Withregard totheobjectives oftheforeign tradepolicy, thepriority taskofthefinancial policy
istocreate conditions forinvestment promotion, thedevelopment ofscience andtechnology andto
ensure apositive tradebalance. Themainfinancial instruments aretaxation, taxexemptions andtariff
reductions. Theactivities forthepromotion ofthecapital market, prepared intheframework ofnew
legislation,andthecontinuoustransformationofthebankingsector,enhancedbythepreparedamendment
totheLawontheNational BankoftheSlovak Republic andActonBanks, should contribute toarevival
oftheeconomy.
Price Policy
After comprehensive liberalization ofprices in1991 andfurther deregulation ofprices inthe
following years onlyapproximately 5percentoftheprices ofgoods andservices isregulated inretail
trade. These areprices forpublic services, prices ofenergy, gas,heatandelectricity, which are
regulated forprivate consumers. These prices donotcover thecosts. Thegovernment ispreparing
aprogressive adaptation ofprices ofnatural gasandelectricity inorder tocover thecosts. These
adaptations areprepared verycarefully inrelation tothesocial programme.
Monetary Policy
Theestablishment ofanindependent monetary system intheSlovak Republic afterseparation
from theCzechoslovak currency required anindependent monetary policy. Thebasic aimswere to
stabilize thenational currency, tominimize theinflationary tendencies, tomaintain thebalance of
payments, tostrengthen theforeign exchange reserves andtomaintain theinternal convertibility of
thecurrency.
Theinternal convertibility ofthecurrency wasintroduced from1January 1991intheformer
Czech andSlovak Federal Republic. This wasmaintained alsointheSlovak Republic until
1October 1995. Theinternal convertibility régime oftheSlovak Crown made itpossible for
entrepreneurs tomake theirpayments totheirforeign partners inforeign currencies. These currencies
could bepurchased from thecommercial banks intheSlovak Republic forSlovak Crowns. Onthe
other handtheentrepreneurs wereobliged toselltothebankallforeign currency reserves, except for
thecapital share ofaforeign subject inajoint-venture, ordonations, inheritance ordevise.
Following thegradual programme toachieve thefullconvertibility oftheSlovak Crown, the
factthatForeignExchangeActNo.528/1990hasnotfullyreflectedthestageofeconomictransformation
oftheSlovak Republic, andtocontinue theliberalization offoreign economic relations, anewForeign
Exchange Actcame intoforce on1October 1995. ThisnewActbrings intoeffect theconvertibility
oftheSlovak Crown onthecurrent account ofthebalance ofpayments. Transactions oncapital account
aresubject toNBS'sforeign exchange permission. ThenewForeign Exchange Actallows non-residents
tocarry outfinancial transfers pertaining tocurrent account transactions andalsoallows residents to
carry outpayments abroad. TheForeign Exchange Actequalizes theposition oflegal andnatural
persons, whoareresidents, inexecuting transactions oncurrent account. Trading inforeign securities,
purchase offoreign exchange incash, granting financial credits andguarantee instruments for
non-residents, acceptance offinancial credits from abroad, export/import ofdomestic andforeign
currency andopening bankaccounts inforeign currency (except certain exemptions) is,according to
thenewForeign Exchange Act,subject toforeign exchange permission. TheForeign Exchange Act
concerns thefollowing:
- rights andduties ofresidents andnon-residents: trading inforeign exchange assets,
acquisition ofrealestate fornon-residents, acceptance offinancial credits fromabroad,
MOREPRESS/TPRB/19
Page 15
investment abroad, reporting andsurrender requirements, dutytotransfer financial
funds, dutytodeposit, operations oncapital andmoney markets andother foreign
exchange relations;
- sphere ofactivity offoreign exchange authorities;
- sphere ofactivity ofcustoms authorities according tothisAct;
- foreign exchange control.
ThenewForeign Exchange Actfulfils theprovisions ofArticle VIIIoftheIMFArticles ofAgreement.
Protection oftheIntellectual Property
TheIndustrial Property Office hasbeenestablished toprotect intellectual property rights. The
SlovakRepublichassignedallimportantmultilateralagreementsconcerningtheprotectionofintellectual
property. These agreements include theParis, BernandRome Conventions (with theirrevised and
amended wordings), aswellastheMadrid, Lisbon andLocarno Agreements andother bilateral and
multilateral agreements setting therules fortheprotection ofintellectual property intheframework
oftheWorld Intellectual Property Organization (WIPO).
Thelegislation oftheSlovak Republic isfullycompatible withthose agreements andwiththe
agreements concluded intheframework oftheWIPO andtheWTO. TheSlovak Republic guarantees
efficient protection ofintellectual property. IntheSlovak legislation covering thesector ofintellectual
property noregulations areincluded which would notcomply withtheAgreement onTrade-Related
Aspects ofIntellectual Property Rights (TRIPS).
END
MORE