Costa Rica WT/TPR/S/1
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II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(1) Introduction
1. Costa Rica, which became anindependent republic in18481,hasenjoyed remarkable political
stability andvirtually uninterrupted democratic civilian rulesince 1889. Thepresent Government of
President JoséMaría Figueres waselected inFebruary 1994andtookoffice inMayofthesame year.
(2) General Framework
2. Costa Ricaisaunitary republic. Thelegislature, theexecutive andthejudiciary aredistinct
andindependent. General elections fortheLegislative Assembly andthePresident areheldevery
fouryears.
3. Executive power isinthehands ofthePresident, whoiselected byuniversal suffrage. The
Cabinet iscurrently composed of18Ministers, selected bythePresident, usually fromhisownpolitical
party. Ministers neednotbemembers ofthelegislature.
4. Legislative power isvested ina57-member unicameral Legislative Assembly. Members are
elected through asystem ofproportional representation, atthesame timeasthepresidential elections.
5. ThejudiciaryconsistsoftheSupremeCourt(consistingof22memberselectedbytheLegislative
Assembly foreight-year terms)2,fourappellate courts, criminal courts, civilcourts andspecial courts.
Aspecial Chamber oftheSupreme Court (SalaConstitutional orSalaIV)hastheresponsibility of
ruling onwhether lawsareconstitutional.3
6. EachofCostaRica'ssevenProvincesiscomposedofcantonsandisadministeredbyaMunicipal
Council, elected bypopular voteevery fouryears. These Councils areclosely regulated bynational
law,particularly inmatters offinance.
(3) Structure ofTrade Policy Formulation
(i) Legislative andexecutive branches ofgovernment
7. TheLegislative Assembly mayenactlawsandimpose orapprove taxes. Billsmaybeintroduced
bymembers orbytheExecutive. After firstreading andpublication intheofficial journal (LaGaceta ),
theyareconsidered bytherelevant parliamentary committee andreturned totheAssembly forfinal
reading where theymaybeapproved ordebated byaCommittee oftheWhole (Comísion Plena ).
Amendments totheConstitution, approval ofinternational agreements ortreaties andreforms tothe
LawsofConstitutionalJurisdiction(LeydelaJurisdicciónConstitucional)mustgothroughanobligatory
process ofconstitutional consultation bytheConstitutional Chamber afterfirstreading intheAssembly.
1After obtaining independence from Spain in1821, Costa Ricabecame partoftheMexican Empire fortwo
years (1821-23) andsubsequently member oftheCentral American Federation (EIU, 1993, p.10).
2They areautomatically re-elected forasecond termunless theLegislative Assembly decides tothecontrary
byatwo-thirds majority vote.
3TheConstitutional Chamber wascreated in1989 (Law 7128, 18August 1989).WT/TPR/S/1
Page 22Trade Policy Review Mechanism
ThePresident mayvetoandreturn billspassed bytheAssembly. TheAssembly maynotoverride
theveto, butcaninitiate anewprocess onasimilar law.
8. TheExecutive ensures thatthelawsandtheprovisions oftheConstitution arecarried out,
andmaintainsorder.TheExecutive(thePresidentandthecompetentminister)hasthepowertonegotiate
international treaties andforeign loans; these, however, aresubject toratification orapproval bythe
Legislative Assembly.
9. Trade policy formulation isdirected bytheCabinet (Consejo deGobierno )which comprises
allministers. TheMinistry ofForeign Trade (Ministerio deComercio Exterior ,COMEX), established
in1986, hasthemainresponsibility fortrade policy formulation andimplementation inco-ordination
withother Government agencies.4These include theMinistry ofFinance (Ministerio deHacienda )5,
theMinistry ofEconomy, Industry andCommerce (Ministerio deEconomía, Industria yComercio ,
MEIC), theMinistry ofAgriculture andLivestock (Ministerio deAgricultura yGanadería ,MAG),
theMinistry ofExternal Relations (Ministerio deRelaciones Exteriores yCulto),theMinistry ofScience
andTechnology (Ministerio deCiencia yTecnología )andcertain product-specific institutions.
10. While COMEX isresponsible forrepresenting Costa Rican trade interests inmultilateral
negotiations andbilateral relations, MEIC deals withtariff policy andCentral American integration
issues.
11. CertainState,semi-privateorprivateinstitutionswhichrepresentproducerinterests,areconsulted
ontradepolicy within theirrespective fields ofresponsibility. These cover items suchascoffee, rice,
meat, sugar andbananas. Themain institutions aretheCoffee Institute (Instituto delCafé,ICAFE),
theNationalOfficeforRice(OficinaNacionaldelArroz,ONA),theCorporationforLivestockPromotion
(CorporacióndeFomentoGanadero,CORFOGA),theAgro-industrialSugarCaneLeague(LigaAgrícola
Industrial delaCaña deAzúcar ,LAICA) andtheNational Banana Corporation (Corporación Bananera
Nacional ,CORBANA).
12. TheCentralBankofCostaRicadealswithforeignexchange,monetaryandcreditpolicymatters.
13. Anumber ofpublic sector institutions, including theMinistry ofPlanning (Ministerio de
Planificación,MIDEPLAN)andtheCentralBank,publishanalyseswhichalsocovertradepolicyissues.
(ii) Advisory bodies
14. Noformal, overall periodic review oftrade policy isoperated byanyindependent body.
However, theCosta Rican authorities believe thatsuccessful trade policies depend onthedegree of
involvement andparticipation oftheprivate sector intheirelaboration. Tothisend,theGovernment
informs andconsults extensively withbusiness interests within adhocworking groups. Private sector
associations publish annual reports, while theEconomic Research Institute (Instituto deInvestigaciones
enCiencias Económicas )oftheUniversity ofCosta Ricapublishes studies onspecific policy issues.
TheAcademíadeCentroaméricaalsopublishesstudies,sometimesmakingrecommendationsoneconomic
policies, including trade policy. Generally, theGovernment doesnotsystematically seekassistance
oradvice ontrade policy fromuniversities orresearch institutes, unless there isspecial reason todo
so.
4COMEX 'sresponsibilities alsoinclude thepromotion ofexport-related investment activities.
5Thecustoms authorities (Dirección General deAduanas )form partofthisMinistry.Costa Rica WT/TPR/S/1
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(4) Trade Policy Objectives
(i) General trade policy objectives
15. Until thelate1970s, Costa Rica'strade policy objectives weresetinageneral framework of
import substitution. However, asnoted inChapter I,inthecontext ofamacroeconomic stabilization
programme, efforts wereinitiated in1986toexpand exports ofnon-traditional products. Since 1990,
when itacceded totheGATT, Costa Rica'strade policy hasfurther evolved towards amore neutral
outward orientation, andimport barriers havefallen (Chapter IV).
16. TheGovernment hasplaced considerable emphasis onimproving andsecuring access for
Costa Rican exports totheworld market. Itisalsotrying tocounter elements which create ananti-export
bias,including administrative obstacles.6While theintroduction ofasimplified tariffschedule isunder
consideration, regional commitments maylimitthepossibilities forCosta Ricatoactautonomously
inthisrespect (seebelow andChapter IV).
17. Regional andbilateral agreements constitute important elements inthetradepolicy framework.
These arebelieved tohelpavoid tradeandinvestment diversion, aswellastoassist inthediversification
ofexport markets. Inthiscontext, apriority objective fortheauthorities istoobtain conditions of
access totheUnited States market similar tothose granted toMexico through NAFTA.
(ii) Sectoral trade policy objectives
18. Inthepastdecade Costa Rica'strade policy objectives were shaped bytheneedtopromote
ordefend itscoffee andbanana exports todeveloped countries, aswellasdomestically manufactured
goods totheCentral American market. Inviewofthechanges initsexport structure, Costa Ricais
nowalsolooking totheUnited States andtheEuropean Union, inparticular, toexpand itsexports
offruit, other thanbananas, andofclothing.
(iii) TheUruguay Round
19. Costa Ricahasbeenaparticipant intheUruguay Round from theoutset, i.e.,evenbefore
itsaccession totheGATT. Itsprime objective inthenegotiations wastoimprove market access for
tropical products suchasbananas andcoffee, where itmade specific proposals, either individually
orinassociation withother Central American countries.7Intheareaofservices, Costa Ricafavoured
abalanced treatment ofthemovement ofproduction factors toensure greater transfer oftechnology
towards developing countries, andrecognized theneedformultilateral action toreduce theimpact
ofrestrictive business practices bydominant foreign enterprises ondomestic service suppliers.8
6Thegeneral trade policy objectives ofeachgovernment arecontained inafour-year National Development
Plan(Plan Nacional deDesarrollo ).
7Costa Ricawasparticularly concerned withtheEU'sbanana import régime (seeChapters IV,VandIV),
aswellasthesubstantial increase inselective internal taxes oncoffee andproducts thereof (Imposti diConsumo
suCaffe eCacao )inItaly (MTN.SB/SN/22/Rev.1, 27June 1991; MTN.SB/SN/25, 23March 1993).
8MTN.GNS/27, 22December 1989.WT/TPR/S/1
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20. Costa Ricasigned theMarrakesh Agreement concluding theUruguay Round, which itratified
on26December 1994tobecome afounder member oftheWTO. Thestrengthening ofthemultilateral
legalframework inareas suchasdispute settlement, trade inagriculture, subsidies andcountervailing
duties isseenasbeing ofparticular benefit toCosta Rica. Theimplementation ofmultilateral rules
insectors such asagriculture andtextiles, thetariff reductions intheindustrial sector andthe
establishment ofalegalframework intheservices sector arethought likely toboost world trade and
stimulate theworld economy. Although tariff reductions areexpected toerode preferential treatment
indeveloped country markets, theauthorities recognize thatm.f.n. bound ratesprovide more sound
market access thanunilateral preferences.
21. Regarding theWTO agenda, Costa Ricaisseriously concerned bythepossible inclusion of
issues which maydisguise protectionist trends. Itwill,therefore, oppose theinclusion ofitems like
labour conditions. While Costa Ricawelcomes theestablishment ofaprogramme ofwork ontrade
andtheenvironment, itwillbemindful ofitsinterests inthisarea.9
(5) Trade Laws andRegulations
22. Although inferior toCosta Rica'sConstitution, international treaties, including theGATT and
theWTO multilateral agreements, prevail overdomestic legislation, andcanbedirectly invoked before
thecourts including when domestic lawsareconsidered asinfringing theirrules.
23. Article 46oftheCosta Rican Constitution prohibits private monopolies, requires defacto
monopolies tobesubject tospecial legislation, andalsorequires newStateormunicipal monopolies
tobeapprovedbytwothirdsofthemembershipoftheLegislativeAssembly.Article121,paragraph14,
oftheConstitution, although allowing forprivate sector exploitation foralimited period oftime10,
prohibits definitive lossofState ownership overpower-generating activities which aredependent on
theuseofwaters inthepublic domain; natural resource deposits (beds ofcoal, wells anddeposits
ofpetroleum, anyother hydrocarbons andradioactive materials); andwireless services (Chapter IV).
Ownership andcontrol ofthenational railroads, docks andairports arereserved exclusively forthe
State.
24. Nobasic trade lawassuchexists inCosta Rica. Trade lawsincertain areas (e.g.customs
procedures, anti-dumping andsafeguards) incorporate provisions oflegal texts agreed atCentral
American, multilateral orinternational levelintodomestic legislation.
25. Toharmonize domestic legislation withtheprovisions oftheWTO Agreements, changes are
tobeundertaken incertain areas, including theabolition ofimport licensing foragricultural products,
tariffication, andlegislation onsafeguards andunfair tradepractices. Billsonanumber oftrade-related
issues,includingthedetailedimplementationoftheUruguayRoundresultsinspecificareas,areexpected
toreceive theapproval oftheLegislative Assembly inthecourse of1995 (Chapter IV).11TheFree
9MTN.TNC/MIN(94)/ST/96, 14April 1994.
10Exploitation isauthorized inaccordance withthelaworbyspecial concession onthebasis oftheconditions
andstipulations setbytheLegislative Assembly.
11Apart from theimplementation oftheUruguay Round results, additional billscovered keytrade matters
such asindustrial secrets andindustrial property rights, customs matters, safeguards, technical standards,
phytosanitary protection, government procurement, Central American integration, promotion ofcompetition,
consumer protection, broadcasting andmaritime transport.Costa Rica WT/TPR/S/1
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Trade Agreement withMexico andthenewlawoncompetition andconsumer protection wereapproved
inDecember 1994.12TheParis Convention ontheprotection ofindustrial property wasexpected to
beapproved inMarch 1995.
26. Trade regulations areimplemented mainly bylaws, butdecrees orresolutions (reglamento )
mayalsobeissued byGovernment institutions oragencies. Thewideuseoflawsrather thandecrees
provides astable andpredictable legalframework, which appears tobeappreciated bythebusiness
community.
(6) Trade Agreements andArrangements
(i) Multilateral agreements
27. Following procedures initiated inJune1987, Costa Rica'saccession toGATT wasapproved
bytheCONTRACTING PARTIES on20November 1989.13ItsProtocol ofAccession wasratified
on25October 1990 andCosta Rica became the100th contracting party onemonth later, on
24November 1990.
28. Upon accession, aswellasmaking tariffcommitments, Costa Ricapledged toeliminate import
surtaxes andsurcharges which, together withapplied rates, exceeded thenewly bound rates. Italso
agreed toeliminate allimport licensing andquantitative restrictions theninforce (Chapter IV).
29. CostaRicawasnotasignatorytoanyoftheMTN(TokyoRound)AgreementsorArrangements,
although itmaintained observer status oftheArrangement Regarding Bovine Meat. Themainreason
foritsnon-adherence toanyofthese Codes related tothecoincidence ofitsaccession withthe
re-negotiation ofthese agreements inthecontext oftheUruguay Round. Theauthorities considered
itpreferable towaitfortheconclusion ofthenegotiations before undertaking anysuchcommitment.
30. Under theAgreement Establishing theWTO, Costa Rica assumed, aspartoftheSingle
Undertaking, allcommitments under theMultilateral Trade Agreements which apply toMembers.
Costa Ricaintends toadhere totheInternational Dairy Agreement, buthasnoplans toadhere toany
other plurilateral trade agreements, which arebinding onlyonthose whohaveaccepted them.14
31. From March 1988 Costa Ricawasasignatory totheArrangement Regarding International
Trade inTextiles (theMultifibre Arrangement (MFA)).15Under theMFA, Costa Ricamaintained
bilateral agreements withtheUnited States andCanada.
12Law 7474, 20December 1994; Law7472, 20December 1994.
13GATT document L/6607, 27November 1989.
14TheUruguay Round plurilateral trade agreements comprise theAgreement onTrade inCivil Aircraft, the
Agreement onGovernment Procurement, theInternational Dairy Agreement andtheInternational Bovine Meat
Agreement.
15Costa Ricainitially signed theMFA on14March 1988, before becoming aGATT contracting party. It
subsequently signed extensions totheArrangement inAugust 1991 andMarch 1993 (COM.TEX/51/Add.6,
31October 1988; COM.TEX/70, 29November 1991; COM.TEX/74, 20April 1993).WT/TPR/S/1
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32. Since 1971 Costa Ricahasbeen abeneficiary under various GSP(Generalized System of
Preferences) schemes. However, mostoftheseareofminor importance toCosta Rica, given thelimited
value ofexports todonor countries other thantheEUandtheUnited States.16Nevertheless, the
authorities areoftheviewthatCosta Rica'sgraduation fromthePolish GSPscheme in1994adversely
affected banana, coffee, flower andother exports tothismarket. In1994, Costa Ricadecided toamend
itslabour legislation soastoavert suspension oftrade privileges under theU.S.GSP.17
33. Since 1January 1992, theEUhasgranted exceptional temporary assistance tomembers of
theCentral American Common Market (Mercado Común Centroamericano ,CACM) andPanama
byextending totheiragricultural exports GSPtariff preferences similar tothose already provided to
Bolivia, Colombia, Ecuador andPeru. Thistreatment isintended toassist thesecountries intheirfight
against thecultivation andtrade ofillegal drugs byboosting export earnings. Itconsists offull
suspension ofthecommon customs tariff duties levied onEUimports ofcertain agricultural goods
fromtheregion.TheCostaRicanauthoritiesconsiderthatin1993theschemecontributedtoasignificant
increaseinnon-traditionalexports,whichhadamountedtoonly20percentofexportstotheEUmarket.
Thisscheme, which wastoduetoexpire inDecember 1994, hasbeenrenewed foranother year.
34. Costa Ricahasbeenabeneficiary oftheCaribbean Basin Initiative (CBI) since 1984.18The
CBIprovides forduty-free access totheUnited States 'market formostproducts, withcertain exceptions
including textiles andclothing. Since almost 80percentoftheregion 'sexports werealready covered
bytheU.S. GSPscheme, theCBIproduct listmeant anestimated increase of15percentintrade
coverage.19Costa Ricaviews thescheme asameans ofhelping toreduce unemployment, foreign
exchange shortages anditsheavy debtburden byopening theU.S.market andinducing greater foreign
investmentintheregion.20TheCBIhashelpedinstimulatingdiversificationinagriculturalandindustrial
activities. Forexample, in1983, twothirds ofallCosta Rica'sexports totheUnited States were
"traditional" products, while in1989 twothirds were "non-traditional" exports (mainly fresh fish,
crustaceans, molluscs, flowers, bulbs, vegetables, banana plantains, pineapples, mangoes, avocados,
jewellery articles, plastics, etc.).
16According toCENPRO, between January andAugust 1994, 39percentofCosta Rica'sexports totheEU
were estimated tohavebenefited from GSPtreatment. Thecorresponding shares fortheUnited States (including
CBI), Canada andJapan were 24percent, 28percentand66percent.
17Amendmentswereexpectedtoconsistofthelegalizationofpublicsectorstrikes,barredforthepast16years,
andtheratification of13ILO(International Labour Office) Conventions (EIU, 1994a, p.12).
18TheCBIentered intoforce in1984 foraperiod of12years under theCaribbean Basin Economic Recovery
Actof1983 (CBERA). TheCaribbean Basin Economic Recovery Expansion Actof1990 (CBEREA) converted
theCBIintoapermanent programme andexpanded preferential treatment tocertain goods untilthenexcluded
underCBERA.In1991and1992,twoPresidentialProclamationsfurtherextendedthescopeofdutyfreetreatment
under thescheme. Currently 24countries qualify forsuchtreatment. Beneficiaries include Central-American
countries suchasCosta Rica, ElSalvador, Guatemala, Honduras andNicaragua, aswellasPanama andvirtually
thewhole oftheCaribbean (L/7304, 10November 1993). Foradetailed analysis ofthescheme, see
R.L. Breitenecker (1992), p.920.
19EIU(1993), p.8.
20Statement made in1987 byMuni Figueres deJimenez, ex-Minister ofTrade ofCosta Rica, attheSub-
Committee onTrade oftheHouse Committee onWays andMeans, cited inR.L. Breitenecker (1992).Costa Rica WT/TPR/S/1
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35. CBIbenefits seem tohavedovetailed wellwiththecreation offree-trade zones (including the
establishment ofanoff-shore assembly régime (maquiladoras ))andother"self-help" measures instituted
byCosta Ricatoimprove itsinvestment climate, which created astrong baseforbusiness development
inthe1980s (Chapters IIIandIV).Indeed, foreign investment appears tohavebeendirected toCBI-
eligible non-traditional agricultural products andlow-capital, labour-intensive industries, requiring
medium-skill complexity inproduction.21
36. Generally, thebilaterally negotiated Guaranteed Access Levels (GALs) fortextile andclothing
items excluded from theCBIhavebeenoflimited value toCosta Rica, except thatquota utilization
bytheCosta Rican exporters forcotton trousers, slacks andshorts stood at91percentand63percent
for1993 and1994, respectively. Toalarge degree, theGALs areintended topromote theuseof
textiles made intheUnited States; Costa Rican exporters offinished goods complain thanthesetextiles
arenotalways available inadequate quantities, proper quality andcompetitive prices, compared to
other foreign supplies. While Costa Rica isentitled tonational treatment status under theCBI
Government Procurement Initiative, ithasnotbeenabletotakeadvantage ofthisscheme.
37. Under Partial-Scope agreements based onthe1980 Montevideo Treaty establishing theLatin
American Integration Association (LAIA), Colombia andVenezuela unilaterally granttariffpreferences
tocertain Costa Rican exports.22Venezuela provides tariff reductions, ranging between 50percent
and100percent, forsome 23eight-digit items. TheAgreement withColombia ensures tariff and
non-tariffpreferencesfor26eight-digititems;tariffpreferencesrangefrom10to100percent.Between
1990 and1992, exports under these agreements attained US$2.4 million andwereconcentrated ina
fewitems suchaspaper waste, machinery forgrains selection, hides andskins, andammonium nitrate.
Similar treatment, offered byMexico, isnowincorporated inthe1994 FreeTrade Agreement with
thiscountry (seesection onCACM).
38. InJune1994 Costa Ricajoined theAssociation ofCaribbean States (Asociación deEstados
delCaribe ).23Itsobjective istoestablish aframework forflexible co-operation onissues suchas
economic integration, trade, investment, transport, communications, science andtechnology and
environmental protection.
39. Costa Ricadoesnotparticipate intheGlobal System ofTrade Preferences.
40. Costa Ricaisamember oftheUnited Nations, theInternational Monetary Fund (IMF), the
International Maritime Organization (IMO) andtheWorld Bank, aswellasregional bodies suchas
theInter-American Development Bank(IDB), theOrganization ofAmerican States (OAS) andtheLatin
American Economic System (SELA). Itisalsoasignatory oftheUNCode ofConduct forLiner
Conferences andtheWIPO Convention (seeChapter IV).
21R.L. Breitenecker (1992), p.934.
22Costa RicaisnotaLAIA member. Previous GATT TPRM reports onArgentina, Bolivia, Brazil, Chile,
Colombia, Mexico, Peru andUruguay provide background material onLAIA.
23TheAssociation ofCaribbean States wasestablished in23June 1993. Apart fromCaribbean island States,
other participants areColombia, ElSalvador, Honduras, Mexico, Nicaragua, Suriname andVenezuela (Journal
ofCommerce, 6December 1994).WT/TPR/S/1
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41. Costa Ricahassigned theCommon Fund forCommodities. Itisalsoamember ofthe
International Coffee Agreement, International Cocoa Agreement, theInternational Sugar Agreement,
theInternational Agreement onOlive OilandtheInternational Grain Arrangements.
(ii) Regional agreements
CACM
42. Since 1963, Costa Ricahasbeen asignatory oftheGeneral Treaty onCentral American
Integration (Tratado General deIntegración Económica Centroamericana )establishing theCentral
American Common Market (CACM) oneoftheearliest regional groupings inLatin America.24The
CACM'sobjectivesare:tocreateacommonmarket;topromoteandco-ordinateindustrialdevelopment;
toco-operate inmonetary andfinancial areas; todevelop anintegrated infrastructure; and,tofacilitate
intra-regional investment. AllCACM members arenowcontracting parties totheGATT.25
43. Duringthe1960sCACMmemberssucceededinremovingtariffson94percentofintra-regional
trade, establishing acommon external tariff covering almost 80percentofextra-regional trade and
adopting acommon tariff nomenclature. Import substitution atregional levelwasfostered bothby
thestructure ofthecommon external tariff andtheindustrial integration arrangement ofthe
General Treaty. However, inthe1970s andtheearly 1980s, under pressure ofincreased external
indebtedness andtheeconomic slowdown, CACM members actedindividually toprotect theirindustries
byrestricting imports through priority lists,including goods ofCACM origin. They alsoincreased
import duties andintroduced temporary import surcharges, amain set-back fortheimplementation
ofthecommon external tariff andintra-regional trade flows. Inaddition, friction wasgenerated by
theuneven distribution ofbenefits from theentire scheme.
44. Efforts torevive andmodernize thescheme were initiated on14December 1984, when the
Central American Tariff andCustoms Agreement wasconcluded. Itstipulated theintroduction ofa
commonCCCN nomenclature(NAUCAII);thetransformationofalldutiesfromspecifictoadvalorem;
theelimination ofalltariffexemptions onrawmaterials, intermediates andcapital goods; theabrogation
ofregional investment incentives; and,thecreation ofaCentral American Council forTariffs and
Customs (Consejo Arancelario yAduanero Centroamericano ),withauthority toestablish andmodify
import tariffs without theneedforlegislative action byindividual member countries. Italsocontained
acommitment toaccelerate thenegotiation ofnewtariffs forintermediates, rawmaterials, capital and
consumer goods. These changes were tobeputinplace nolaterthanOctober 1985.
45. In1990, work started ontheestablishment ofanewCentral American Import Tariff (Arancel
Centroamericano deImportación );revision oftheCACM Treaty; andtheimplementation ofanew
customs nomenclature based ontheHarmonized System. Non-tariff preferences werenotenvisaged.
Toguarantee foodsecurity intheregion consideration wasgiven totheestablishment ofprice bands
forcertainagriculturalproducts,suchasmaizeanddriedbeans,althoughCostaRicachosenottosupport
oradopt thisproposal.
24CACM wascreated on12October 1961 bytheentry intoforce oftheGeneral Treaty onCentral American
Integration signed inManagua on13December 1960.
25CACM members other thanCosta Rica are: ElSalvador, Guatemala, Honduras andNicaragua.Costa Rica WT/TPR/S/1
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46. PlansforimprovingfreetradebetweenCACMcountrieshavebeenimplemented,andtheCentral
American Import Tariff, nowexpressed intheHarmonized System, hasbeenrationalized. Thistariff,
which isnotacommon external tariff andisapplied withsignificant variations bymembers ofthe
CACM, seeks toharmonize tariff levels atratesof5,10,15and20percentadvalorem.26Inthis
context, aCentral American Uniform Customs Code (Código Aduanero Uniforme Centroamericano,
CAUCA II),defining thefuture customs regulations ofCACM, establishing thesystem andsetting
customs valuation procedures, hasentered intoforce, except forCosta Rica (Chapter IV). In
October 1993, Costa Ricasigned theProtocol Modifying theGeneral Treaty (Protocolo Modificatorio
delTratado General deIntegración Económica Centroamericana )which, interalia,creates asub-system
ofeconomic integration (Subsistema deIntegración Económica Centroamericana ),allowing CACM
members toproceed towards economic union atdifferent speeds. Asstated earlier, agenda- and
procedure-related delays haveimpeded theLegislative Assembly 'sapproval oftheprotocol.
47. Costa Ricahasstrongly supported thefullimplementation ofthefree-trade areawithin CACM.
Nevertheless, atpresent itcannot accept further movement inmatters suchastheestablishment ofa
common tariff, ataxcollection body orthefreemovement ofpersons. Without prejudice torights
deriving fromtheprovisions oftheEnabling Clause, Costa Ricawould notobject totheexamination
oftheCACM scheme under Article XXIV.
48. TheCACM free-trade areaseems tohaveresulted inashifttoregional sources ofsupply for
lightmanufactures,processedfoods,andotherstandardizedindustrialandagriculturalitems(ChapterIV).
However, thirdcountries appear tohavebenefited fromaconsequential increase indemand forimported
capital goods forthemanufacturing processes, while rising standards ofliving havealsogenerated
ademand formore sophisticated consumer goods, alsoimported from outside theregion.27
49. Today, theimportance oftheCACM forCosta Ricaappears torestontheexport siderather
thanonimports. In1992CACM countries accounted formore than7percentandabout 15percent
ofCosta Rican imports andexports, orUS$181 million andUS$249 million, while inJanuary-
September 1993thesefigures stood atUS$147 million andUS$190 million.28Between 1987and1992,
theshare ofintra-CACM imports inCosta Rica'stotalfellby12percent,while thatofCosta Rican
exports toCACM markets rosebyabout 49percent. Major suppliers wereGuatemala andElSalvador,
while Guatemala andNicaragua tookthelarger partofCosta Rican exports totheregion.
50. On20August 1992thefiveCACM members signed aframework agreement setting common
guidelines forseparate bilateral talkswithMexico. Theobjective wastoboost intra-regional trade
andinvestment, aswellastoattain economic complementarity. TheCosta Rica-Mexico agreement
isdiscussed below.
26The Central American Import Tariff was expected tocover 98percent ofalltariff lines by
31December 1994. Essential (e.g. agricultural inputs, medicines) and"fiscal" goods (e.g. vehicles, perfume,
jewellery), subject to1percentand25percentduty, respectively, would beexcluded from thiscommitment
(L/7160/Add.3).
27Bureau ofNational Affairs (1990).
28Data supplied byCENPRO.WT/TPR/S/1
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51. InFebruary 1993, CACM members signed anagreement withColombia andVenezuela to
launch negotiations aiming attheestablishment ofafree-trade areaby2003. Apart fromtheelimination
ofduties, theagreement isalsoexpected tocover non-trade-related areas suchasemployment, health,
shipping andnatural resources. Atpresent, thenegotiations aresuspended.
52. Thesecond five-year framework Cooperation Agreement between theEuropean Union and
theCACM wassigned in1993, although ithasnotbeen formally approved bytheCosta Rican
Legislative Assembly. Theagreement guarantees mutual m.f.n. treatment intrade, andisaimed at
facilitating andstrengthening linkages inanumber ofareassuchastrade, agriculture, forestry, fisheries,
mining, industry, investment, science andtechnology, protection ofindustrial andintellectual property,
transport, information technology andtelecommunications, tourism, environment, biological diversity,
health, etc.29Under theAgreement, theCACM countries asagroup arereported tohave, sofar,
received US$170 million offinancial aidfrom theEU. Inaddition, aspecial programme toassist
municipal authorities hascontributed US$180 million since 1992.30
53. Costa Ricacould have aninterest injoining theNorth American FreeTrade Agreement
(NAFTA).31Theapproval andentry intoforce oftheNAFTA mayhaveadverse effects onthegrowth
ofnon-traditional exports totheUnited States aswellasU.S.investment inCosta Rica(Chapter III).
CBIbenefits forcertain items mayalsobeeroded bythescheme.32Aproposal togiveCACM exports
ofclothing andtextiles NAFTA parity isexpected tobeapproved bytheU.S.Congress latein1995.33
54. InDecember 1994, Costa Ricaparticipated intheSummit oftheAmericas, atwhich Heads
ofStatefromallcountries inthewestern hemisphere (except Cuba) agreed onaprogramme foraFree
Trade AreafortheAmericas (FTAA) bytheyear2005. ThePlanofAction callsfortheOrganization
ofAmerican States (OAS) andtheInter-American Development Bank(IDB) totaketheleadinfollowing
uptheSummit 'sdecisions, andlaysoutaprogramme ofmeetings forTrade Ministers inJune1995
andMarch 1996 towork ontheFTAA.
29Official Journal oftheEuropean Communities No.C77, 18March 1993.
30Caribbean andCentral America Report, 1September 1994.
31EIU(1994c), p.10.
32ThemostvulnerableitemstoMexicancompetitionareexpectedtobetextilesandapparel,andgoodsexcluded
from theCBI(footwear, leather products, canned tuna, watches). CBIpreferences aretobeeroded foritems
which areexcluded from theU.S. GSP(fruits andvegetables suchaspineapples, cantaloupes, etc.). Finally,
Mexico, asaNAFTA partner, should nowhaveaccess totheU.S.dairy market which hasbeenpractically closed
tohighly competitive Costa Rican products sofar.
33EIU(1994d), p.1.Costa Rica WT/TPR/S/1
Page 31
(iii) Bilateral agreements
55. Costa Ricasigned aFreeTrade Agreement (Tratado deLibre Comercio )withMexico in
April 1994.34Thisagreement, which entered intoforceon1January 1995, provides fortheprogressive
elimination oftariffs onnearly allgoods inlessthantenyears andthesuppression ofallnon-tariff
barriers (except forcertain items suchasmineral oilsandfuels, rubber andmade-up textile articles
forCosta Rica; andmineral oilsandfuels, organic chemicals andtransport equipment forMexico).
Preferential arrangements ontrade insugar areestablished infavour ofCosta Rica. TheAgreement
alsoallows fornational treatment forinvestors fromeachcountry. Itcontains provisions ongovernment
procurement, intellectual property rights, dispute settlement procedures andtrade inservices.35
56. In1973Costa Ricasigned aFreeTrade Agreement withPanama (Tratado deLibre Comercio
eIntercambio Preferencial ). According totheGovernment, this Agreement covers
991eight-digit NAUCA IItariff items, 84percentofwhich enjoy unrestricted duty-free access in
Costa Rica, 8percentaresubject tosurveillance byimport licences issued byMEIC, 7percentare,
inprinciple, covered bytariff quotas (Chapter IV),andtariff cutsof8,25or50percentapply to
around 1percent.36In1991 theAgreement covered 87percentofCosta Rica'sexports toPanama
and58percentofimports from thatcountry.
57. Since 1981 Costa Ricahashadatrade agreement withtheDominican Republic (Convenio
Comercial ).Atpresent, zeroduties apply tofewgoods (22CCCN eight-digit items).
58. CostaRicahasalsoconcludedreciprocaltradeagreementswithAlbania(notratified),Argentina,
Austria, Germany, Bulgaria, Chinese Taipei, theformer Czechoslovakia, Denmark, France, Hungary,
Honduras, Italy, Japan (notratified), Jamaica, theRepublic ofKorea, Norway, Poland, Romania, the
former Soviet Union, Spain, theUnited States andtheformer Yugoslavia.
(iv) Other agreements orarrangements
59. Under a1980 agreement, known astheSanJoséPact, Mexico andVenezuela supply oilto
Central American andCaribbean countries onconcessionary terms. Partoftheinvoice value
(20percent)isreserved infavour oftheimporting countries andcanbereturned asdevelopment aid
intheform ofsoftloans. Preferential treatment isgiven toloans forenergy sector projects. The
agreement isautomatically renewed eachyear. However, littleusehasbeenmade ofthisfacility
since 1988.
34COMEX (1994b). This agreement wasnotified totheGATT attheCouncil meeting ofMarch 1994
(C/M/271, 7April 1994).
35Some concern hasbeenexpressed insome business andpolitical circles overtheimpact ofthedevaluation
oftheMexican pesoonthebilateral trade balance. Thiscould disadvantage Costa Rican exports totheMexican
market while favouring imports from Mexico. Inthiscontext, theCosta Rican Government hasannounced that,
ifnecessary, theemergency clauses oftheAgreement could beinvoked (Caribbean andCentral America Report,
26January 1995).
36Developments inCACM 'sCustoms Tariff Nomenclature arealsodiscussed inChapter IV.WT/TPR/S/1
Page 32Trade Policy Review Mechanism
60. Between 1979 and1990 Costa Ricaisestimated tohavereceived financial aidofmore than
US$1.0billionfromtheUnitedStates,althoughassistancelevelstoCostaRicahavedeclinedsignificantly
inrecent years.37Inthepast, aidtookvarious forms; forexample, theUnited States Agency for
International Development (USAID) funded projects providing training intheUnited States forCosta
Ricans, family planning services andnatural resource conservation.38Italsocreated andfunded the
Costa Rican Coalition forDevelopment Initiatives (Coalición Costaricense deIniciativas deDesarrolo ,
CINDE), entrusted withpromoting foreign investment, training farmers andmarketing non-traditional
products. In1990 theUSAID assisted Costa Rica innegotiating successfully thebuy-back of
US$767 million ofitsprincipal debtplusUS$223 million ofdefault interest payments, thereby reducing
thecommercial bankdebtby61.5percent.
61. On30September 1994, anagreement wassigned withtheUnited States tochannel funds from
UScompanies which produce carbon dioxide emissions intoprotecting tropical forests inCosta Rica.
Theideaconsistsofprovidingenvironmentalaidtoneighbouringcountrieswhoseforestshelpincleaning
theairintheUnited States.39Theagreement contains provisions relating totechnology andinformation
transfer tofacilitate thedevelopment ofprojects aimed atreducing theemission ofgases responsible
forthe"greenhouse effect".
37In1991 economic aidtoCosta Ricathrough USAID (16percent), P.L.480(30percent) andeconomic
support funds (50percent) wereestimated atUS$50.3 million or28percentofthe1987 level. Thiswasmainly
duetoadecline ineconomic support funds toone-sixth oftheir 1987 level anda50percentreduction inthe
USAID contribution (EIU, 1993, p.25). Since 1983 theamounts provided under P.L. 480have alsobeen
declining; theyfellfrom US$28 million in1983 toUS$15 million in1986. In1991, 1993, 1994 and1995 no
assistance ofthistypewasgiven toCosta Rica.
38R.L. Breitenecker (1992), pp.939-942.
39EIU(1994d), p.20.