 
 RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/REG147/M/1 
19 November 2004 
 
 (04-5042) 
Committee on Regional Trade Agreements 
Thirty-Seventh Session  
 
 
 
FREE TRADE AGREEMENT BETWEEN CANADA AND COSTA RICA 
 
Note on the Meeting of 8 October 2004  
 
Chairman:  Mr. B. Weston (Trinidad and Tobago) 
  
1. The meeting was convened in document WTO/AIR/2393. 
2. Under Agenda Item B.XI of its Thirty-Sev enth Session, the Committee on Regional Trade 
Agreements (hereinafter CRTA or the Committee)  took up the examination of the Free Trade 
Agreement (FTA) between Canada and Costa Rica.  The following topics were discussed: 
 A. General Remarks  
 B. Background Information on the Agreement  C. Trade Provisions  
3. The Chairman
 noted that it was the first round of examination of the FTA between Canada 
and Costa Rica.  The notification of the Agreement had been distributed in document WT/REG147/N/1 and the text of the Agreement in document WT/REG147/1.  He proposed to 
organize the examination by first asking the Par ties and other Members for general comments and 
then turn to the specifi cs of the Agreement, using the Standard  Format (WT/REG147/3) to guide the 
debate.  He recalled the terms of reference for th e examination, adopted on 13 March 2003 by the 
Council for Trade in Goods, as contained in document WT/REG147/2. 
A. 
GENERAL REMARKS  
4. The representative of Costa Rica , informed the Members that negotiations for the FTA 
between Canada and Costa Rica had been launched in  2000; the instruments of ratification had been 
exchanged in November 2002 and the Agreement ha d been notified to the WTO on 17 January 2003.  
The objectives of the Agreement were to promote regional integration and to create opportunities to 
improve the level of development of the Parti es.  The Agreement was based on the fundamental 
principles of the multilateral trading system, name ly national treatment, most-favoured-nation (MFN) 
treatment and transparency.  Since its entry into force in November 2002, the Agreement had met its 
objectives to eliminate barriers to trade and fac ilitate the cross-border movement of goods between 
the Parties;  promote conditions of fair competition in the FTA;  substantially increase investment 
opportunities in the territories of the Parties;  crea te effective procedures for the implementation and 
application of the Agreement and for its joint admi nistration and for the settlement of disputes;  and 
establish a framework for further bilateral, regiona l and multilateral cooperation.   Parallel agreements 
on labour and the environment were strengthening co-operation between the Parties with a view to 
protecting and improving the environment and prom oting innovation, quality and productivity in the 
area of labour through the effective enforcement of domestic law without recour se to trade sanctions.  
He noted that it was the first Agreement to include a chapter on trade facilitation between a 
developing and a developed country .  Furthermore, as the first FTA between Costa Rica and a WT/REG147/M/1 
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 developed country, the Agreement had created a powe rful stimulus for further trade liberalization in 
the Americas and beyond.  He said that the Agr eement was comprehensive in scope, it substantially 
liberalized trade between the Parties and it establis hed a more secure and predictable framework for 
the conduct of business in the FTA.  The Agreement ha d heralded a new era in Canadian/Costa Rican 
economic relations, which had been re inforced in recent years.  In th e last five years, and especially 
since the Agreement came into force, bilateral trade had doubl ed, rising from US$ 168.5 million in 
1998 to approximately US$ 260 million in 2003. 
5. He turned to highlight certain aspects of the Agreement which the Parties considered to be 
particularly relevant and which proved its consistency with Article  XXIV of the GATT.  Over 80 per 
cent of total trade between the Parties had been liber alized upon the entry into force of the Agreement.  
Canada and Costa Rica undertook, with the exceptions set forth in the FTA, to adopt or maintain only 
import and export restrictions which were consistent with Article XI  of the GATT 1994.  With regard 
to standards, both countries confirmed their ri ghts and obligations under the WTO Agreements.  
Concerning sanitary and phytosanitary measures, th e Parties undertook to consider the development 
of operational guidelines to facilitate implemen tation of mutual recognition and equivalence 
agreements, and product control, in spection and approval procedures.  They had also undertaken to 
consider the recognition of pest- or disease-free areas .  The Agreement provided for the possibility of 
applying bilateral safeguard measures during the transition period and the obligation to afford 
compensation.  With regard to subsidies, the Pa rties were governed by WTO rules, and they had 
undertaken to eliminate all export subsidies on agri cultural products as from January 2003.  With 
regards to anti-dumping, the Parties had undertaken  to refrain from unfair trading practices that 
caused or threatened to cause distortions to trade.  (I n this context, he also recalled that the Parties had 
also shown an interest in promo ting improvements to, and clarifica tions of, WTO provisions in that 
field, with a view to securing transparent and predictable methods for th e establishment of anti-
dumping duties).  Provisions had also been laid do wn in the Agreement to liberalize and ensure 
reciprocal access to government procurement.  One of  the novel aspects of the Agreement, in addition 
to its focus on cooperation through parallel agre ements on labour and the environment, was the 
Parties' decision to include a chapter on trade facilitati on.  In that chapter, the Parties had established a 
framework of specific principles and obligations, essen tially on customs-related matters, with a view 
to contributing to bilateral trade facilitation;  it c overed issues such as the effi ciency and transparency 
of import and export procedures and other trade -facilitating measures, and set out provisions on 
personnel involved in customs procedures, consulta tions with the trading community prior to the 
implementation of modifications to the procedures, technical assistance and the exchange of 
information among the Parties.  Since cooperatio n was recognized as instrumental in facilitating 
compliance with the Agreement, the Parties had ag reed to develop a work programme in various 
customs-related areas such as risk assessment, training and the electronic exchange of information.  It 
was the first bilateral agreement on such matters between a developing count ry and a developed one. 
6. The representative of Costa Rica
 continued by pointing out that the effects of the FTA, 
observed over a period of over a year since it came into  force, had been very positive.  Trade between 
Canada and Costa Rica had expanded considerably in the 1990s whic h added to the complementarity 
of the Parties' economies; it indicated that trade and reciprocal investment could be increased through a strategic alliance between the Parties and that th is served as a basis for entering other markets in 
which they had not traditionally operated.  While  trade between Costa Rica and Canada stood at 
approximately US$ 73 million in 1990, by 2003 it ha d more than tripled to US$ 260 million.  During 
the last 10 years, Costa Rican exports to Cana da had grown at an average annual rate of 
approximately 14 per cent and Ca nadian exports to Costa Rica had increased by 9 per cent, which 
demonstrated the mutual benefit that could be de rived from an alliance between a developing country 
and a developed one. Upon the entry into force of the Agreement, more than 80 per cent of the 
Canadian market was free of tariffs for Costa Rica , while over 65 per cent of the Costa Rican market 
was tariff-free for Canada.  Pursuant to the tariff elimination schedule, 85 per cent of trade between 
the Parties would be liberalized in the first eight years of the Agreement.  By maintaining a fluid  WT/REG147/M/1 
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 dialogue between the Governments, the Commission r esponsible for administering the Agreement had 
been able to solve problems and achieve further pr ogress in bilateral relations.  In conclusion, he 
reaffirmed the Parties' commitment to the multilatera l trading system and to agreements such as this 
one, which were built on the basis of the WTO di sciplines and promoted not only economic growth 
and the efficiency of the parties, but also multilateral trade liberalization. 
7. The representative of Canada  expressed satisfaction for being the first developed country to 
have negotiated a bilateral FTA with Costa Rica.  In support of the statement made by the representative of Costa Rica he said that the Ca nada-Costa Rica Free Trade Agreement (CCRFTA) 
was comprehensive in scope, substantially libera lized trade between the Parties and established a 
more secure and predictable framework for the cond uct of business in the free-trade area.  He stated 
that by any measure, the Agreement covered substan tially all of the trade between the Parties.  For 
Canada, the Agreement provided immediate duty-free entry into Costa Rica for 65 per cent of the tariff items;  duties on 33.3 per cent of the remaini ng tariff lines would be eliminated in a maximum 
of 15 years. For Costa Rica, the Agreement provided immediate duty free entry into Canada for 82.5 per cent of the tariff items; duties on 15.6 per cent of  the remaining tariff lines would be eliminated in 
a maximum of eight years.  Furthermore, the Ag reement had liberalized trade between the Parties 
without creating any new barriers to trade with thir d countries, or making duties or other regulations 
of commerce any higher than before the formation of  the free-trade area.  In his concluding remarks 
he said that the CCRFTA was a clear signal that it was possible for larger and smaller economies to 
negotiate this type of agreement and for both to reap  benefits.  He added that the Parties were of the 
opinion that the CCRFTA was fully consistent w ith WTO obligations and they looked forward to 
Members' questions. 
8. The representative of the United States
 thanked the Parties for their introductory comments 
and for the documentation that had been provided.  He informed the Committe e that since they had 
not yet fully reviewed the information contained in  the Standard Format, his delegation planned to 
submit questions to the Parties at a next meeting of the CRTA.  Having noted the comments made by 
the representative of Costa Rica regarding the tr ade facilitation provisions in the Agreement he 
concurred that these would be beneficial to fac ilitating the trade between the two countries.  With 
respect to the increase in trade flows in both directio ns, but particularly from Costa Rica to Canada, he 
was interested in knowing whether this was a broad- based growth in trade or concentrated solely in 
one sector, such as semiconductors. The representative of Costa Rica  reiterated that trade facilitation 
was an important element of the Agreement and one which had benefited both Parties.  He remarked 
that the importance attached to this chapter was a ll the more relevant given the incoming negotiations 
on this topic in the WTO.  On the second point rai sed, he said that although integrated circuits did 
make up a considerable part of the overall increas e in industrial goods exports, Costa Rica had also 
experienced a significant increase in exports of so me agricultural goods, including bananas, tropical 
products and sugarcane;  other agricultural goods also experiencing an increase in exports included 
coffee, melons and flowers. 
B. BACKGROUND INFORMATION ON THE AGREEMENT  
9. The representative of Chile  noted, with respect to coverage, that the Parties in their 
introductory statements had referred to immediate duty-free entry of 65 per cent for Canada and 82 
per cent for Costa Rica whereas the Standard Format referred to 87 and 93 per cent, respectively.  She 
asked the Parties what acc ounted for the difference.  The representative of Canada  clarified that the 
percentages contained in the Table on page two of th e Standard Format referred  to the elimination of 
duties on actual trade while the figures mentioned in  the introductory statement were references to 
tariff lines.  On that point, the repr esentative of the European Communities  noted that according to 
that Table, around US$ 104 million (2001 figures) of b ilateral trade were to be liberalized against a 
total bilateral trade in 2001 of US$ 161.3 million as indicated in the Chart on page four of the 
Standard Format.  He remarked, furthermore, that the press release upon the signature of the WT/REG147/M/1 
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 Agreement put that figure even higher, at US$ 196 milli on.  He asked the Parties if they could clarify 
those figures in order to determine the exact coverage  of the Agreement, since if it were to be based 
on the figure of US$ 104 million, then actual liberalization would be less that 65 per cent.  The representative of Costa Rica
 acknowledged the disparity and speculated that it might be due to the 
transhipment of many of Costa Rican exports thr ough the United States to Canada and therefore the 
need for cross-referencing with Canada to determine the exact trade data.  In any case, he said that he 
would send the data back to Capital for further information. 
C. TRADE PROVISIONS  
10. The representative of th e European Communities  noted that Costa Rica had been granted a 
15-year transition period for the products listed in Category C of its schedule and was interested in 
hearing from the Parties for the rational be hind invoking the possibility in “exceptional 
circumstances” for transition periods longer th an 10 years. The representative of Costa Rica  said that 
the longer transition period was due to the sensitive nature of the products concerned.  He stressed, 
however, that such products had neve rtheless been included in the sche dule of tariff elimination rather 
than being excluded altogether. The representative of Canada  added that the longer implementation 
period for Costa Rica also took into account the di fferent levels of devel opment and size of the 
Parties' economies.  In this respect, he stat ed that the Agreement was a good example of how 
countries with different economic siz es could negotiate successful FTAs. 
11. With respect to preferential rules of origin , the representative of the European Communities  
asked the Parties for more information on Annex IV on  the specific rules of origin relating to Fungible 
Materials and the FIPO and LIPO methods contained therein.  Furthermore, he sought clarification on 
the functioning of the concept of "tariff preference le vel" under the special rules of origin for textiles, 
since it seemed to imply that each Party of the Ag reement granted preferential treatment to goods 
non-originating in the other Party but meeting other requirements.  He inform ed the Parties that he 
would submit the question in writing. 
12. The representative of Chile , recalling the introductory statement by the delegate of Costa Rica 
and his reference to improvements in the area of anti-dumping, was interested in knowing what were 
those improvements since she did not think that the obligations on anti-dumping under the Agreement 
were any different from those under the WTO.  The representative of Canada  acknowledged that the 
Parties had not undertaken any commitments on anti-dumping in addition to their existing WTO 
obligations.  He added, however,  that in light of the many areas of anti-dumping, where there was 
room for discretion by authorities, in particular tr ansparency and procedures,  the provisions in the 
Agreement signified a common understanding between the Parties about the desirability for a 
significant level of transparency in their procedures through some sort of co-operation and harmonization. 
13. The representative of the European Communities
 noted that the Agreement included a very 
ambitious chapter on trade facilitation and was in terested in knowing from the Parties how these 
provisions functioned in practice and their experien ces, both positive and negative, in implementing 
them since that would benefit the current debate in  the WTO on trade facilitation.  On a more specific 
note, he asked the Parties if the simplifications and improvements of trade procedures as provided in 
the Agreement would apply, following its implementa tion, equally to trade with the other Party and 
trade with non-parties.  If that was not the case, how would the different procedures be applied in 
practice.  Finally, he asked whether Canada consid ered the chapter on trade facilitation to be a model 
agreement for other FTAs or other fo ra.  The representative of Costa Rica  said that, based on the 
information available to him, the most important aspect at that stage was co-operation in implementing the commitments assumed under the Agre ement.  In that respect, over the past two 
years and even before that period, his authorities ha d been in contact with the Canadian counterparts 
to deal with assistance and co-operation in the im plementation of issues related to risk assessment,  WT/REG147/M/1 
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 among other.  As to whether those provisions appl ied only between the Parties, he said that the 
measures were non discriminatory and that they would apply to any Member exporting to, or 
importing from, the Costa Rican market.  The representative of Canada  added that the trade 
facilitation procedures of the Agreement could certainly  help efforts in the WTO and that they would 
probably play a role in future FTA  negotiations undertaken by Canada. 
14. The Chairman  said that the first round of examinatio n of the FTA between Canada and Costa 
Rica had allowed the Committee to clarify some questions; however, a number of issues remained pending.  He asked delegations wishing to submit wr itten questions to forward them to the Secretariat 
by 29 October 2004 and for the Parties to submit writ ten replies by not later than 3 December 2004.  
The examination of this Agreement would con tinue at a future Session of the Committee. 
15. The Committee took note
 of the comments made. 
__________ 