Minister Leo Brincat addresses the EU/Malta Joint Parliamentary Committee on Free Trade Area proposal

When addressing the EU/Malta Joint Parliamentary Committee on Malta's free trade proposal to the EU, Minister of Finance and Commerce, Leo Brincat, said that a free trade area between the two sides was one of the pillars on which the Malta Government sought to build its closest possible relationship with the Union which fell short of membership in the foreseeable future.

Mr. Brincat said that although some of the local constituted bodies preferred the full membership option, two rounds of informal consultations had already been held on a free trade area, with the Federation of Industries, the Chamber of Commerce and the GRTU.

Mr. Brincat said that the present CET system which replaced VAT could help this evolutionary process take place with relative ease, should there be the political will of both sides to move in this direction.

The Free Trade Area proposal would no doubt be the top item on the agenda for the planned Council of Association.

Malta was also proposing the setting up of a special team to work on this proposal on a practical level.

The Malta Government wanted a free trade area as it was a policy which it wanted to pursue because it considered it to be the most suitable for Malta and in the best interest of Malta.

Mr. Brincat said that one hopes that the Commission will analyse and assess Malta's free trade area proposal objectively. It was interesting to note that one of the top agenda items of the forthcoming EU - Malta Customs Committee will be the possibilities and modalities of Malta's moving towards a free trade area with the EU. This meeting will be held either in December of this year or else early during the New Year.

The Malta Government does not accept the claim that the new tax violated Articles 4 and 2.1 of the Association Agreement. Article 4 prohibited any discrimination between goods imported from the EU and goods produced in Malta. The Article prohibited only internal fiscal measures which added a cost on imported goods. Import duties were not prohibited. The Maltese side could not accept the argument that Malta could not impose import duties, and Article 4 was not intended to prevent Malta from doing so.

The present Government had a political commitment not to pursue actively EU membership and to remove VAT. To replace VAT the government had to introduce again customs duties. This was not prohibited by the Association Agreement. All that the Government was bound to do was to maintain the 35% preferential treatment for EU imports.

Apart from the fact that the Maltese Government had not received a single complaint from any European exporters, Mr. Brincat mentioned that when Hans Van den Broek, the EU Commissioner, had visited Malta at the time when the new tax legislation was being discussed in Parliament, he had told the Joint Parliamentary Committee that he had wanted to express his appreciation for the Maltese Government's willingness to take account of EU concerns in the preparation of its draft legislation on the replacement of VAT by other forms of taxation. This had also been the reaction of an EU technical team that had visited Malta prior to the debate in the Maltese Parliament.