RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/220
11 July 2000
(00-2818)
Council for Trade in Goods Original:  Spanish
REPLIES BY THE GOVERNMENT OF COLOMBIA TO QUESTIONS
FROM THE EUROPEAN COMMUNITIES1 REGARDING
THE TRIMS EXTENSION REQUEST MADE BY
 THE GOVERNMENT OF COLOMBIA2
The following communication, dated 5 July 2000, has been received from the Permanent
Mission of Colombia.
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1. Please describe in detail the measures for which the government of Colombia (GoC) is
requesting an extension pursuant to Article 5.3 of the TRIMs Agreement.  In particular, please
specify the product coverage and the local content percentages.
The goods that qualify are agricultural goods from production chains in which there are
problems in marketing products of local origin.
The programme covers the production chains of cereals, oil-seeds and vegetable oils,
including the raw materials involved in production and the intermediate and end-products obtained
from them.
A coefficient is established relating the physical quantities imported to domestic production.
This coefficient is based on an evaluation of the volumes of internal and external purchases, theestimated quantities of consumption and production, and the changes occurring in these parameters
within each year.
2. Are all economic operators, domestic and foreign, affected by the TRIMs?  Are there
exceptions?  If so, please describe.
The requirement to demonstrate absorption of domestic production applies to any natural or
legal person, whether national or foreign, independently of their economic activity, who intends to
import goods subject to this requirement.
There are no local or foreign-owned entities that are exempt from the requirement to absorb
domestic production in order to have access to imports.
The domestic and foreign producers affected by these measures are the processors of
agricultural goods whose imports are subject to the requirement relating to the absorption of domesticproduction.
                                                     
1 (G/C/W/202).
2 (G/C/W/169 and Add.1).G/C/W/220
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3. We understand that compliance with the local content requirement is a precondition to
obtaining import licences.  Please describe how the system functions and how import licences
are issued.
The import licence authorizes the entry into the national customs area of a specific volume of
agricultural products.  The document contains a description of the product in accordance with the
nomenclature of the Harmonized System and a statement of the volume that it is wished to import.
The licence is valid for a single operation to import the product described therein, although this
operation may be carried out in one or more shipments up to the volume stated.  All imports of
agricultural products into Colombia require an import licence and, in the case of goods subject to the
absorption requirement, the right to import is only  granted on the basis of proof of the absorption of
domestic production.
4. We also understand that there are instances in which importers can benefit from
preferential customs duties.  Please describe in detail the functioning of the system.
(a) What is the rate of tariff preference, and on which basis is it calculated?(b) What is the total amount of benefits accruing annually to economic operators in the
form of preferential tariff treatment?
In Colombia there are no preferential tariffs of any kind.
5. Please provide data FDI in the sectors covered by the TRIMs, broken down by country
of origin.
FDI in those sectors is insignificant.
6. The GoC has mentioned, in its request for ex tension, the need to maintain the TRIMs in
the framework of the illegal crops eradication policy.  Please provide evidence that the TRIMs
in question are instrumental to achieve the objectives of this policy.
The eradication of illegal crops requires joint action by the international community, in which
Colombia has fully demonstrated its leadership.  Thus, the police action directed towards suppressingand eliminating the cultivation of illegal crops has been accompanied by the creation of the necessary
conditions for private investment to return to th e countryside and to strengthen those agricultural
activities that are able to compete with foreign products, so that such activities can create new and
better sources of employment and legal income and can attract the workers employed in the
cultivation of illegal crops.
Thus, the strengthening of the chains of yellow maize – sorghum – manioc –
poultry-farming – pig-breeding, dairy products and palm oil, together with the advances being made
in other production chains, provide the economic basis for the eradication of illegal crops.
7. In G/TRIMS/W/5 dated 23 December the GoC announced that it would make "full use
of the time periods established for the developing countries".  It went on to say that "the
possibility of transforming the absorption poli cy into Sectoral Competitiveness Agreements"
was being studied.
(a) When did it become evident that the dead line of 31 December 1999 for the elimination of
the TRIMs could not be met, and why?
The conditions involved in the production and marketing of agricultural goods subject to the
absorption policy during the last five years have not made it feasible to consider removing theG/C/W/220
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absorption policy, owing to the harmful effect that  such a measure would have on the performance of
the sector in terms of the productive resources – mainly the agricultural workers – employed in those
activities.
At the moment no such plan exists, since it is hoped that the extension requested will be
approved on the basis of the evaluation to be carried out by the Council for Trade in Goods on the
current conditions of Colombian agriculture.  As stated in the document submitted by Colombia on
1 December 1999 and again in this document, time is needed to build up modern and sustainable
market relationships between the agricultural producers and the agro-industry, since this is an
economic process that involves changes in the traditional culture of trade.
The creation of modern market conditions is a cultural process that needs time.  The
absorption policy has favoured understanding and information flows between the representatives of
supply and demand who have designed mechanisms to agree prices for the purchase of agricultural
raw materials. This has enabled producers to dispose of their production as required.  However, the
extension and consolidation of modern market relations in those production chains with structural
difficulties require further public and private efforts.
In some production chains, the absorption policy has made it worthwhile for the agro-industry
to supply itself with domestic raw materials, us ing the instruments provided by sectoral policy and
financial investment by the agro-industry.
One of the most prominent cases is the production chain of yellow maize – sorghum –
manioc – poultry-farming – pig-breeding, where thro ugh coordination and competitiveness it is hoped
that, with the help of a productivity package and technological assistance, by the end of 2002
domestic production will replace 40 per cent of current imports of yellow maize and produce
440,000 tonnes of dry manioc under competitive conditions so as to meet part of the demand for rawmaterials for the manufacture of animal feed.
The wet-milling maize industry is developing an agricultural contract project covering
3,000 hectares for the production of yellow maize in  the Cauca Valley, with a view to meeting
50 per cent of its requirements from domestic production by the end of three years.
Palm-oil producers and processors have established alliances among themselves and with
small producers with a view to strengthening the centres of production in the country and increasing
exports of oil and its by-products.
The livestock and dairy industry is developing a competitiveness sectoral agreement that
seeks to raise the quality of its products, increase domestic milk production by 8 per cent each year,raise annual per capita consumption from 137 to 170 litres and produce exports of at least
10,000 tonnes of powdered milk a year.
Other production chains (e.g. rice, beans, tobacco and brown sugar) are studying what they
need to do to improve their competitiveness, guar antee their market and increase their production.
Thus, the absorption policy is improving the efficiency of the producer organizations,
promoting direct links between producers and their customers, encouraging cooperation among
organizations at the grass-roots level and promot ing the introduction of new forms of social contact
and microeconomic organization within the framewor k of an increasingly internationally-oriented
economy.
Since this is a social process that requires commitments by the production chains themselves
and by the Government and the monitoring of the re sults by the Government with a view to creating
the conditions that will lead to the achievement of the objectives set, the formulation andG/C/W/220
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implementation of the strategy of competitiveness is only the beginning of the process and at the
present time few of the production chains have formulated a strategy and many still remain outside
the process.
The slow pace of change may be largely due to the normal scepticism among farmers and the
agro-industry regarding the feasibility of creating new market conditions and regarding the stability of
the political conditions that would enable the proposed programmes to be implemented.  It also
indicates the social difficulties involved in making domestic production adjust to the new economic
framework.
(b) Please describe how the Sectoral Competitiveness Agreements would have operated.  Do
you still consider the SCAs as an al ternative to the absorption policy?
Economic and social policies are the main factors employed in Colombia to reduce
Government intervention and increase competitiveness.
In the case of agriculture the sectoral policy seeks to include the rural sector within plans for
modernization and competition that will help to increase production so as to supply the domestic
market and increase the supply available for export, through genuine increases in productivity that
will create employment and raise the level of income and the living conditions of the rural population.
This policy views the State as the facilitator of private activity, using methods that comply
with the country's international commitments so as to support the development of competition as
regards the production chain and with a view to building up larger units and promoting regional
specialization.
The concept of a production chain means that the actors, mostly private enterprises, making
up each link of the production activity, should make the necessary efforts to strengthen the weak links
that may endanger the success of the whole chain.
The agricultural policy is made up of four basic elements:  (1) investment, capitalization and
financing;  (2) technological development;  (3) ma rketing as a means of promoting competitiveness;
and (4) rural development.  All these elements are included in the Agricultural Revival Programme
(PROAGRO), whose aim is to increase the production and improve the competitiveness of a numberof agricultural products and production chains that are in a position to win new markets, both at home
and abroad, and that have a significant impact on employment in that sector and on the standard of
living of the rural population.
PROAGRO is not only the element that brings together the various measures of our
agricultural policy, but it is also the means by which the objectives of that policy are attained through
the joint action of the various actors in the production chains and the action of the local, departmental
and national bodies, in the following ways:
1. Coordination with the private sector :  PROAGRO is being implemented in close
consultation and coordination with the public and private sectors through the Sectoral
Competitiveness Agreements of the respective production chains.
2. Regionalization :  PROAGRO is being carried out on a decentralized basis in the
regions that have greatest advantages in the production of a specific product coveredby the programme.  To that end, action is being taken to set up regional councils for
the competitiveness agreements, in which those making up the respective production
chains will coordinate their activities so as to increase production, improve
competitiveness and promote specialization in the products of the region.G/C/W/220
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3. Modernization :  PROAGRO promotes activities and measures to modernize
production and marketing by the production chains and encourages technological
innovation.
4. Fulfilment of commitments :  The success of PROAGRO depends on the seriousness
with which those making up the production chains, the representatives of the
associations and the State assume their responsibilities.  Accordingly, all those
involved in the production chains, including the national Government, undertake
commitments within the framework of the National and Regional Councils of the
Sectoral Competitiveness Agreements.
8. What steps has the GoC undertaken between 1995 and 1999 to prepare for the
elimination of the measures?
The trade policy applied to Colombian agriculture since 1991 is open and seeks to bring about
the integration of domestic production and enable it to compete on an equal footing with foreign
goods in both the domestic and international markets.
Accordingly, the basic ad valorem  tariffs applicable to the imports of agricultural goods have
been reduced from levels of between 45 and 65 per cent to a maximum of 20 per cent;  the
administration of imports through import licensing and IDEMA's monopoly control of imports has
been replaced by a free import regime;  support prices, which were calculated on the basis ofestimated domestic production costs and which were  the prices at which local production was
acquired by the IDEMA, have been replaced by minimum guaranteed prices, which are calculated on
the basis of international prices and, with the abolition of the IDEMA, only constitute a reference
point of the cost of admitting imported goods into the domestic market.
The changes that have taken place in agricultural policy have highlighted the difficulties
involved in marketing domestic production and, in order to overcome them, the national Government,
as part of its agricultural policy, has promoted a serious strategy of coordination directed towards
establishing direct market relations between agricultural producers and the processing industries,
initially within the framework of the committees monitoring production, imports and the marketing of
agricultural goods and, once the productivity and co mpetitiveness strategy has been initiated, in the
framework of the sectoral competitiveness agreements of each of the production chains.
The results have included the conclusion of sectoral competitiveness agreements for the
chains of yellow maize – sorghum – manioc – poultry-farming – pig-breeding, dairy products,
oil-seeds, rice, cotton – textiles – clothing, etc., in which measures are being promoted to strengthen
domestic production in the face of international competition, leading to achievements such as thosementioned in the reply to question 7(a).
9. The GoC has requested an extension until 31 December 2006.  How did the GoC arrive
at the conclusion that this period is necessary?
The changes required to modify the domestic content requirement are economic and social.
The former involve reaching levels of productivity and competitiveness in line with those in the world
market.  The social changes involve the strengthening of modern market relationships which, in
addition to institutionalizing at the social level the direct links between agricultural producers and the
processing industries, will help production to adjust to changing scenarios, so that in the event of aspecific product requiring reconversion or being forced out of the market altogether this will take
place without traumatic social consequences.
10. Why and how will the situation in 2006 be different from the present one and how would
this allow for elimination of the TRIMs?G/C/W/220
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We consider that by that date, the processes in which the country is engaged, such as the
consolidation of peace and economic stability, will have evolved sufficiently to be able to proceed as
described in the reply to question 7.
11. What is the process (administrative/legisl ative) envisaged for the elimination of the
TRIMs in question?
The local content requirements will be altered or eliminated after the completion of the stages
of evaluating the various production chains and their links and the introduction of the strategies for
making them economically competitive and sustainable.  When that has been done, the legal
requirement on domestic content will not be necessary and can be abolished through an administrative
act by the Executive.
However, this implies the existence of market conditions that guarantee the absorption of
domestic production and assumes that the production chains and their links will have reached levels of
productivity and competitiveness in line with those prevailing on the world market.
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