For import duties and taxes, the reductions are to be accomplished by stages. All reductions are to be made from the "basic duties," which are defined in the treaty as those maintained by member states on January 1, 1957.1 These basic import duties are to be reduced by 30 percent during the first stage, by 30 percent during the second stage, and by 40 percent during the third stage. The formula for accomplishing these reductions calls for a 10-percent reduction in the basic duty on each product by the end of the first year. This initial period will be followed by 4 periods of 18 months each and by 1 period of 12 months. In each of these periods further reductions of 10 percent are to be made, not for each product, as in the first year, but in total customs receipts. Customs receipts are to be calculated by multiplying the value of imports from each member state by the basic duties." This change of procedure after the initial period will give member states some leeway with respect to individual items in maintaining an average reduction of 10 percent in each period. They will be free to reduce some duties by more than 10 percent to compensate for duties that they may wish to reduce by less than 10 percent; the duty on each product, however, must be reduced by at least 5 percent. Each member state's right to reduce duties by less than the average of 10 percent in each period does not apply to products on which there would still remain a duty of more than 30 percent ad valorem at the end of the 6 reduction periods; for such duties the minimum reduction in each period may not be less than 10 percent. 18 Thus, at the end of the 8 years during which the basic duties are to be reduced (the first two stages), the average reduction will amount to at least 60 percent, and the reduction for each individual product will be at least 50 percent. The remaining 40-percent reduction in the average basic rates of duty, and the remaining 50-percent reduction for any individual product, is to be accomplished during the final 4-year stage on the basis of a timetable to be worked out later by the Council and the Commission of the European Economic Community. Unless the transition period is extended as provided in the treaty, customs duties will be completely abolished at the end of 12 years.

16 Member states agree not to introduce on intermember trade any new customs duties or equivalent taxes on imports or exports, and not to increase the level of those already applied to intermember trade on January 1, 1957.

17 Fiscal duties are not to be taken into consideration in calculating either total customs receipts or the reduction periods. However, fiscal duties are subject to reduction, as are nonfiscal duties, except that fiscal duties must be reduced by at least 10 percent of the basic duty at each period of reduction. Member states are free to reduce such duties more rapidly than they are required to by the specified time schedule. Member states retain the right to substitute internal taxes for fiscal duties, provided such taxes are no higher than those they levy on similar domestic products.

18 For example, since a basic duty of 50 percent ad valorem would be reduced to only 32.5 percent after one 10-percent reduction and five consecutive 5-percent reductions, the formula calls for six 10-percent reductions, which would reduce the basic duty to 20 percent.

Should their general economic situation and the situation of the particular sector of economic activity permit, member states are obligated to reduce their customs duties on intermember trade at a more rapid rate than is provided in the duty-reduction timetable of the treaty. During the transition period any member state may, independently of this dutyreduction timetable, suspend in whole or in part the collection of duties that it levies on products imported from other member states.

The Common Market Treaty also establishes a time schedule for abolishing-between member states-quantitative restrictions on imports. and exports and all measures having an effect equivalent to such restrictions; it also prohibits member states from establishing any new quantitative restrictions or measures that have an equivalent effect. However, the obligation of member states to abolish quantitative restrictions is to apply only to the level of trade liberalization they have attained in applying the liberalization decisions made by the Council of OEEC on January 14, 1955.19 Under the Common Market Treaty, quantitative restrictions are to be progressively abolished on the same time schedule as that established for abolishing tariff duties—that is, in 3 stages of 4 years each.

The first step in the abolition of quantitative restrictions on imports requires member states to convert into global quotas any bilateral quotas they have granted to other member states. This conversion is to be accomplished 1 year after the treaty enters into force, and the global quotas are to be open to all other members of the Community without discrimination. The objective of this procedure is to increase the quotas until they become ineffective-that is, until they become so large as to cover, or more than cover, any likely imports of the commodities subject to this form of restriction. They are to be completely abolished by the end of the transition period. The whole of the global quotas established by the end of the first year are to be immediately enlarged by not less than 20 percent, compared with the year preceding their establishment. Moreover, each global quota for each product is to be increased each year by not less than 10 percent of the quota for the preceding year. Because of the possibility that the first stage of the transition period may be extended, the treaty provides that the fourth increase in the quotas shall take place at the end of the fourth year from the effective date of the treaty, and that the fifth increase shall take place 1 year after the beginning of the second stage of the transition period.

Special provisions of the Common Market Treaty call for the establishment and subsequent increase in quotas for products that at the

19 On this date OEEC decided that the percentage of liberalization to be attained by members of OEEC should be 90 percent for private imports as a whole and at least 75 percent for each of the 3 categories-foods and feedstuffs, raw materials, and manufactured goods. In July 1956 these percentages of liberalization were extended until the end of 1957.

beginning of the transition period have not been freed of import restrictions, and therefore are not eligible for importation. Still other provisions of the treaty pertain to the calculation of the total value of global quotas and related matters to be considered in the gradual elimination of quantitative restrictions. The individual member states declare their readiness, should their general economic situation and the situation of the particular economic sector involved so permit, to abolish their quantitative restrictions on trade with the other member states at a more rapid rate than the time schedule of the treaty provides. According to the Common Market Treaty, quantitative restrictions on exports (and any measures having an equivalent effect) are to be abolished not later than the end of the first stage.

Timetable for Establishing a Common Tariff

The timetable for adjusting to a common level the individual customs tariffs of the 4 customs territories 20 included in the European Economic Community is correlated with the timetable for reducing and eventually eliminating the duties on the mutual trade of the 6 countries. The common external tariff is to be applied not later than the date on which the transition period ends, but the treaty contains numerous provisions to govern the progressive introduction of the common tariff during this period. For most products the level of the common tariff is to be determined before the beginning of the transition period (as explained later), and therefore can be used as a reference by the member states in alining their own tariffs with the common level. Alining the various tariffs with the common level will result in increases in duties by some of the member states, particularly the Benelux countries, and reductions of duties by others, especially France and Italy.

Member states of the Common Market are required to modify import duties that are applicable to third countries according to specified procedures, but they are free to modify them more rapidly than is required by the timetable, should they care to do so. With respect to tariff headings 21 on which the duties on January 1, 1957, are not more than 15 percent above or below the duties in the common tariff, the duties in the common tariff are to be applied at the end of the fourth year after the entry into force of the treaty. In the case of tariff headings on which the duties on January 1, 1957, are more than 15 percent above or below the duties in the common tariff, the member countries are to apply—at the end of the fourth year of the transitional period-a duty which reduces by

20 The customs tariffs of France, the Federal Republic of Germany, Italy, and the Benelux countries. The Benelux countries already have a common customs territory.

"The tariff headings used in the Brussels Nomenclature-which is employed by all the Common Market countries-may cover only one or several commodities.

30 percent the difference between the actual duty on January 1, 1957, and that specified in the common tariff. At the end of the second stage the difference is again to be reduced by 30 percent. Since it is anticipated that the duties for certain tariff headings in the common tariff may not be known at the end of the first stage, special provision is made for determining the new rates for those commodities. This arrangement is necessary because of the fact that, although the duties for certain products in the common tariff are to be negotiated among the member states and presumably will be known by the end of the first 4-year stage, the negotiators may not be able to reach agreement by that time. In that eventuality, the Council of the European Economic Community is authorized to establish the common tariff duties on those products. Member states must apply these new rates within a period of 6 months after the Council makes its decision.

A postponement provision applicable to duties under certain headings. of a member state's tariff permits the Commission of the European Economic Community to authorize a member state to delay the notification of its duties in adjusting them to the common tariff. The postponement may be granted only for a limited period, and only for tariff headings which together represent not more than 5 percent of the value of the country's total imports from third countries during the latest year for which statistical data are available. Under article XXIV of the General Agreement on Tariffs and Trade, member states of the European Economic Community, in establishing their common external tariff, must apply substantially the same duties and other commercial regulations to the trade of territories not included in the Common Market. The formula that the Common Market countries adopted to meet this requirement calls for establishing duties under the common tariff at the level of the arithmetic average of the duties applied in the four customs territories embraced by the Common Market. 22 The duties to be employed in calculating the arithmetic average are those that the member states applied on January 1, 1957. Use of the Brussels Nomenclature by all the member states facilitates the calculation of the arithmetic average. In negotiating the Common Market Treaty, literal adherence to the principle of a simple arithmetic average in calculating the common external tariff proved to be impossible. Exceptions were made to permit some rates of duty to be higher or lower than the average. The Common Market Treaty establishes arbitrary maximum rates of duty, or ceilings, for specified lists of commodities that embrace most raw materials and semimanufactures. These ceilings are 3 percent ad valorem for raw materials, 10 percent ad valorem for semimanufactured products, 15 percent ad valorem for inorganic chemicals and organic and inorganic

"This average is the maximum level authorized for new customs unions by art. XXIV of the General Agreement on Tariffs and Trade.

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compounds of certain metals, and 25 percent ad valorem for organic chemicals. For a list of commodities consisting mainly of foodstuffs, unmanufactured tobacco, a few chemical products, crude petroleum, animal hides and skins, raw cotton and certain other fibers, and some nonferrous metals, the duties in the common tariff have been established by mutual agreement. For another relatively short list of commodities, consisting of certain foodstuffs, chemicals, metals, ores, wood, fibers, and certain machinery and tools, the duties in the common tariff are to be negotiated by the member states. The rates of duty decided upon for these few commodities probably will not greatly affect the general level of the common tariff.

In calculating the arithmetic average, France has been permitted— for a number of commodities—to substitute specified duties for the duties actually in effect on January 1, 1957. The list of such commodities includes a number of chemicals, a few medicinal products, artificial fertilizers, some films and plastics, paper, certain yarns, and several types of machines. For purposes of calculating the arithmetic average, Italy also will be permitted to make certain adjustments in using its tariff rates. With respect to the products that will have a fixed maximum rate of 25 percent ad valorem in the common tariff, the Benelux countries have been permitted-for the purpose of calculating the arithmetic average to increase to 12 percent ad valorem any duties that do not exceed 3 percent ad valorem.

In formulating that part of the Common Market Treaty that deals with alining the tariffs of the member states with the common tariff, it was anticipated that a member state might find the supplies of a particular commodity within the Community insufficient to meet its own requirements. The Commission of the European Economic Community, therefore, is authorized to permit imports to enter such a country from third countries if it finds that supplies in the Community are not adequate to meet the requirements of the particular country and if it finds that such supplies traditionally have been imported to a considerable extent from third countries. This arrangement was provided for the importation of raw materials, semimanufactured products, and the group of commodities that includes inorganic chemicals. A particular member state may be permitted to import these commodities under quotas at reduced rates of duty or duty-free. For organic chemicals and the other products for which the common tariff rates have yet to be negotiated, provision is also made for the importation of the commodities under quotas at reduced rates of duty or duty-free. However, the arrangement for the importation of such commodities from third countries depends on whether a change in sources of supply or a shortage of supplies within the Community would harm the processing industries of the member state concerned. In both cases mentioned above, the quotas may not exceed the limits beyond