Abstract

The Baltic Free Trade Agreement (BFTA) was signed in 1993, took effect on April 1, 1994, and is intended to be the first step in the formation of a customs union. However, agricultural products (agriculture, food industry, and fisheries) were excluded from the initial text, which provided that a separate agreement covering the missing trade areas would be worked out. The process of reaching this agreement was a long and difficult one, and policy asymmetry was a major obstacle throughout the negotiations, since Estonia had no import tariffs and the other countries had tariffs ranging from 20 to 60 percent. Finally, in May 1996 leaders of the three countries personally agreed that they would accept free trade for all products of the three countries meeting a domestic rules of origin requirement. The governments of the three countries promptly worked out the specifics of an agreement, which was signed in June 1996. By October 4, 1996, the Parliaments of all three countries had ratified the agreement, and it became law on January 1, 1997.