The Lithuanian Foreign Ministry on March 19 handed a note to the Latvian Embassy in which it states that Latvia has broken the free trade agreement both countries have adhered to since 1997.
The note was in response to a Latvian note submitted a week ago in which Latvia announced that it had imposed customs evaluation prices on Lithuanian goods.
Latvian Foreign Ministry spokesman Toms Baumanis said Latvia disagrees with Lithuanian accusations.
Latvia established minimum prices on Lithuanian agricultural imports which it uses to calculate Value Added Tax March 15. This move was prompted by the same procedure practiced by Lithuania.
At the beginning of the year Lithuania introduced a minimum price floor on imported agricultural foodstuffs which it uses to calculate taxes. As the established prices are above the market level, imports cannot compete with locally produced goods, and both Latvia and Estonia want this measure scrapped.
Lithuania agreed to lower the minimum prices but said it won't junk them altogether.
Although Lithuania claims its customs procedure does not violate the Baltic trade agreement, in its note it called the "retaliatory" measures taken by Latvia 15 illegal.
"The retaliatory measures aimed at protecting the market were introduced in Latvia without observing the procedures provided for in the agreement. First of all, Latvia did not prove that Lithuania violated the above agreement," the note reads.
Baumanis pointed out that Latvia is entitled to undertake response measures under article 21 of the agreement. He said he regrets that the free trade agreement's joint committee so far has been unable to reach an agreement on marginal prices.
The Lithuanian note also states it is ready to carry on with consultations on the issue. According to the Lithuanian note, the Lithuanian procedure of customs valuation does not restrict trade between the countries.
The Lithuanian Agricultural Ministry has already drafted a new list of customs valuation, where prices are closer to the real market prices.
Baumanis expressed a conviction that the exchange will not harm the friendly relations between Latvia and Lithuania because "this is a dispute with commercial nature that is a short-term phenomena and will be solved."