WORLD TRADE WT/TPR/M/11
23May1996
ORGANIZATION(96-1945)
Trade Policy Review Body
14-15 February 1996
TRADE POLICY REVIEW
DOMINICAN REPUBLIC
MINUTES OFMEETING
Chairperson: H.E. Mrs. Anne Anderson (Ireland)
Page
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON 3
II. OPENING STATEMENT BYREPRESENTATIVE OFTHE
DOMINICAN REPUBLIC 4
III. STATEMENT BYTHE FIRST DISCUSSANT 7
IV. STATEMENT BYTHE SECOND DISCUSSANT 9
V. STATEMENTS BYMEMBERS 11
VI. REPLIES BYTHE REPRESENTATIVE OFTHE DOMINICAN REPUBLIC
AND ADDITIONAL COMMENTS 15
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON 26
ANNEX 1 31Dominican Republic WT/TPR/M/11
Page 3
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON
1. ThefirstTradePolicyReviewofDominicanRepublicwasheldonthe14and15February1996.
TheChairperson welcomed thedelegation oftheDominican Republic, headed byHisExcellency the
Secretary ofState ofIndustry andTrade, Dr.JoséRamón González Pérez, andthediscussants
Ambassador Carmen LuzGuarda (Chile) andMr.JoséLuisPérez Sánchez (Spain).
2. TheChairperson recalled thepurpose oftheTPRMechanism andthemain elements ofthe
procedure forthismeeting. Thereport bytheGovernment oftheDominican Republic wascontained
indocument WT/TPR/G/11 andthatoftheWTO Secretariat indocument WT/TPR/S/11; outlines
ofthemainissues toberaised bythediscussants werecontained indocument WT/TPR/W/14. Copies
ofthewritten questions submitted byfivedelegations (theUnited States, Australia, theEuropean Union,
Canada, andJapan) hadbeentransmitted tothedelegation ofDominican Republic. Where fullreplies
could notbegiven during themeeting, supplementary written replies could beprovided later. These
would becirculated asadocument toallcontracting parties.
3. Recalling thattheHeads ofDelegations totheGeneral Council approved ataninformal meeting
anadhocarrangement toenable intergovernmental organizations toattend meetings ofdifferent WTO
bodies asobservers, theChairperson proposed thattheTPRB agreed toinvite EFTA, FAO, IMF,
UNCTAD andtheWorld Bank, which hadrequested observer status, toitsnextmeeting.WT/TPR/M/11 Trade Policy Review
Page 4
II. OPENINGSTATEMENTBYTHEREPRESENTATIVEOFTHEDOMINICANREPUBLIC
4. TheRepresentative oftheDominican Republic, Dr.JoséRamón González Pérez (Minister
ofIndustry andTrade), emphasized theimportance ofinternational trade fornational development.
Membership totheWorld Trade Organization (WTO) wasconsidered essential forconsolidating and
improving itsaccess toworld markets. Herecognized thatinorder toseize theopportunities and
confront therelated challenges theDominican Republic would need tomake institutional changes
appropriate tothecoherent functioning ofgovernmental agencies within thenewmultilateral order
ofinternational traderelations. Inthiscontext, theDominican Republic hadstarted astructural reform
in1990, asaresult ofwhich theeconomy hadgrown atanannual growth rateof5percentsince1992;
thataverage annual inflation ratehadbeenreduced from80percentin1990to9.2percentin1995.
TheDominican Republic wasalsorunning asurplus onthebalance-of-payments current account, an
event thathadnotoccurred for30years.
5. Heattributed thegoodperformance oftheexternal account tothestabilization policy andthe
competitiveness ofthemore buoyant sectors oftheeconomy, namely tourism, industrial freezones,
andtelecommunications. Thisimprovement inthemainexternal indicators demonstrated thedynamism
ofthesesectors aswellasincreasing external diversification. Theperformance could alsobeattributed
totheliberalization ofinternational trade ingoods andservices which hadhelped boost thecountry 's
export potential. Thus, by1995, foreign tradeingoods andservices accounted forroughly 63percent
ofgross domestic product, confirming thehighdegree ofopenness oftheDominican economy. He
indicated thatinrecent years, thecomposition ofDominican exports hadundergone considerable change;
thevalue andvolume oftraditional goods haddecreased, while theservices sector hadbeenmore
buoyant.
6. Hereiterated thatthese successes were allduetotheimplementation ofanambitious
macroeconomic adjustment andstructural reform programme launched in1990. Under the
aforementioned programme, exchange andinterest rateshadbeenfreed, thefiscal deficit hadbeen
eliminated, price controls hadbeenabolished andthemoney supply hadbeenadjusted totheneeds
oftherealeconomy, making itpossible tokeeptheinflation ratedown toasingle digit, andpermitting
exchange ratestability, freecurrency convertibility, competitiveness oftheirexport goods andservices
and,asstated earlier, sustained growth inrealpercapita income andadropinunemployment.
7. Atthesame time, hestated, theGovernment hadadopted measures designed toimprove the
efficiency ofresource allocation, reduce anti-export bias,promote greater private-sector participation
inallbranches oftheeconomy, andstimulate competition onthemarkets. These reforms hadbeen
made infourbasic areas: foreign trade, taxes, finance, andlabour.
8. Hesaidthattheprocess hadbegun bymodifying thetariff schedule, changing theratesfrom
arange of0percentto200percenttoarange of3percentto35percent. Themyriad tariff laws
andrates were rationalized; specific taxes were replaced withadvalorem levies; simple, modern
procedures hadbeenadopted; average tariff levels hadbeenreduced; andtheproductive sector was
being prepared foradjustment toexternal requirements. Inaddition, 27laws, 50decrees and87special
contracts hadbeenabolished, aswellasprohibitions, quotas andnon-tariff import barriers. Sectoral
tariff exonerations andexemptions, granted through special contracts withtheStateorbypromotion
laws,hadbeensuppressed,andmultipleexchangeratesappliedtothetariffstructurehadbeensuspended.
Theimport surtax, which was20percentin1990, hadbeenabolished in1995, thereby reducing the
effective protection rate.Dominican Republic WT/TPR/M/11
Page 5
9. Heindicated thatthestructural reform process wasnotrestricted toforeign trade. Inthefiscal
area,theTaxCode hadbeenpromulgated toharmonize taxlawswithaviewtoupdating andenhancing
fiscal management andtherealvalue oftaxrevenues; toincrease thetaxburden tobring itintoline
withthecountry 'slevel ofdevelopment; toprotect wage-earners; andtosimplify thetaxsystem,
ensuring more equitable income distribution. With thisCode, 50lawsandfourdecrees thathad
established 100different taxrateshadbeenabolished. Taxexemptions hadalsobeenabolished. The
purpose ofthenewTaxCode, together withthetariffreform, wastoreduce thetaxsystem 'sdependence
ontheexternal sector. Healsoemphasized thatasthetaxadministration improved, theGovernment
would beinabetter position toreduce thisdependence further.
10. Regarding thereform oftheLabour Code, theseincluded theestablishment oflabour tribunals
throughout thenational territory, simplification oflabour procedures, strengthening oflabour laws
andprotection ofwomen. Inother social sectors theDominican Government hadundertaken aseries
ofhighly effective initiatives, suchasimplementation in1993 ofaTen-Year Education Plan, which
would guide education policy untiltheyear2000. ThisPlanwasradically transforming thequality
ofprimary education inthecountry, andhadreduced thepupil drop-out rate. Public spending on
education asaratioofGDP haddoubled inthelastfouryears.
11. Hecommended thefactthatCongress hadrecently passed anewForeign Investment Law
providing fornational treatment forforeign investors, maintaining restrictions solely onthose activities
thataffected public health andecological balance andthose relating toproduction ofmaterials and
equipment directly linked tonational defence andsecurity. ThisLawpermitted freerepatriation, in
convertible currencies, ofallcapital investment anddividends pertaining toeachfinancial year, as
wellasfeesfortechnical services andtechnology transfer andpayment ofroyalties.
12. Similarly, thecountry hadsigned theAgreement ontheWorld Bank'sMultilateral Investment
Guarantee Agency (MIGA), which wasawaiting ratification byCongress. ThisAgreement offered
security andfixed rules forforeign investment inthesettlement ofpossible disputes.
13. Hereferred tothereform ofthefinancial sector which hadbeenunder waysince 1991. The
reform wasintended tomake financial operations more efficient, byestablishing universal banking
andincreased competition among sectoral agencies, including freeaccess toresources ininternational
capital markets. Bank supervision hadalsobeenstrengthened, andintheprevious threeyears banking
rulesandprudential measures hadbeenapplied inaccordance withtheBasel Agreements, thusenhancing
thesolvency andefficiency offinancial intermediaries. Hementioned thataDraft Lawestablishing
aMonetary andFinancial Code tounify allmonetary andfinancial lawswasnowbefore theNational
Congress; itprescribed rulesthatwould make formore effective management ofthebanking, financial
andexchange ratesystem.
14. Hemade reference totheDraft General LawonElectricity which hadbeenprepared andsent
toCongress, andwould become anappropriate instrument fortheprivatization ofatransparent, efficient
electricity sector. Regarding theprocess ofprivatization henoted thatprivatization hadbeeninitiated
intheElectricity Corporation (Corporacíon Dominicana deElectricidad ),theSaltMines (Refinería
deSal),theDominican Cement Factory (Fábrica Dominicana deCemento )andtheTobacco Company
(Compañía Anónima Tabacalera );thelasttwobelonging totheCORDE Group. Heclarified that
ofthe26Stateenterprisesbelongingtothisgroup,eightwereinactiveandtheremainderhadsubstantially
reduced theirproduction capacity and,consequently, theirshare inthesectoral product. Hestated
thatthereform ofthetelecommunications régime hadalsostarted inorder tomodernize thelegaland
institutional framework, guarantee auniversal service, andpromote competition.WT/TPR/M/11 Trade Policy Review
Page 6
15. With regard totheimplementation oftheAgreement onAgriculture, hementioned that,the
Dominican Republic washolding bilateral talkswithanumber ofmember countries, seeking technical
modification ofeight items which were submitted tothisOrganization foritsconsideration. The
Representative alsosaidthat, great strides hadbeenmade towards speeding upmodernization ofthe
agricultural sector.
16. Inrelation tothelegal reform therepresentative oftheDominican Republic saidthatthe
Government wasintheprocess ofidentifying thelegalprovisions thatwereinconsistent withstipulations
contained intheWTO agreements, whether administrative orresulting from application ofthelaw.
Likewise, alawwasbeing drafted todefine theinstitutional framework forapplication oftheUruguay
Round Agreements onunfair trading practices andsafeguard measures, since these agreements had
force oflawunder theDominican legalsystem.
17. Hereported thatintheareaofintellectual property, apreliminary draftlawhadbeenprepared
tomaketheexistinglegislationconsistentwithTRIPSAgreementcommitments.Thisdraftwasintended
tosupplement thenewDraft LawonIntellectual Property withlegislation topromote competition,
consumer protection andrepression ofunfair practices, merging these functions inasingle regulatory
body.
18. Withregard totheCustoms Valuation Agreement, henoted thattheDominican Republic was
availingitselfofthefive-yeartransitionperiodestablishedforthedevelopingcountriesandtheauthorities
were nowengaged inthenecessary modernization fortheapplication oftheCode. Hepointed out
thattheprogramme wasaimed atreforming thelegalframework ofthecustoms, computerization of
ports, speeding upcustoms procedures, andtechnological training foritsstaff. Theprogramme had
already managed tobring theaverage clearance timedown considerably, from 45daystotwo.
19. Henoted thateventhough theDominican PortAuthority, aState-owned agency responsible
foradministering ports hadnotyetbeenprivatized, anopening-up process toincrease theshare of
theprivate sector inportsandservices wasbeing promoted. Atthesametime, theairtransport system
would bemodified byanAirSpace Lawcurrently before Congress, which would develop theopen-skies
policy. TheDominican Government alsointended toreform therights ofusers ofmaritime transport,
through accession tothemaininternational agreements inthisfieldandmodification oftheportrégime.
20. Toconclude theRepresentative saidthathisGovernment, asasignatory totheUruguay Round
Agreements, wasdetermined topursue economic policies designed toachieve macroeconomic stability,
structural reform, amarket economy andopentrade, allessential forefficient allocation ofresources
from private investment intheeconomy, andidentification ofnewforeign markets forDominican
products.Dominican Republic WT/TPR/M/11
Page 7
III. STATEMENT BYTHE FIRST DISCUSSANT
21. Thefirstdiscussant (Mr. JoséLuisPérez Sánchez) pointed totheveryfavourable outcome
ofthestabilization planusedtotackle thecrisis inthe1980s, theresult being thatGDP hadgrown
inrealterms andtheprice index hadmoved favourably. During theperiod 1980to1993a"stop and
go"policy hadbeenfollowed, sothatinflationary highs hadbeenaccompanied byareduction inreal
wealth. However, owing tothestabilization plan, theperformance ofmacroeconomic variables had
beenbrought under control, andasingle-digit rateofinflation hadbeenreached by1995. Heconsidered,
however, thatthe22percentrateofemployment mentioned intheGovernment 'sreport, although
ithadfallen, wasstillhigh. Nevertheless, itshould beborne inmind thatthisfigure didnotcover
theinformal sector oftheeconomy.
22. Hereferred totheincrease inproductivity inthemostopensectors oftheeconomy, suchas
thefreezones andtourism, andthegreater share ofthose sectors inGDP, duetotheir higher
competitiveness within theoverall economy oftheDominican Republic. Nevertheless, heemphasized
theimportance ofincreasing productivity inother areas oftheeconomy, suchasdomestic industry
andagriculture; otherwise, theproblems anddangers ofadualeconomy would emerge. Accordingly,
heconsidered that,ifprogress wastobemade attheeconomic andsocial level, itwould benecessary
tocontinue toopenupandpromote competitiveness inthemostbackward sectors, striking abalance
between theory andactual possibilities.
23. Heconsidered thatsince 80percentoftheDominican Republic 'sforeign trade waswiththe
United States, making useoftheCaribbean Basin Initiative, and8percentwiththeEuropean Union
within theLomé preferential framework, therewasaneedtoexamine whether thepresent development
model should beretained orwhether itshould beadjusted tocopeoverthelongrunwiththedecline
inpreferential treatment, theoverall progressive liberalization oftrade, thedevelopment ofregional
integration schemes andtheintroduction oftheFree-Trade AreafortheAmericas, which would erode
theDominican Republic 'smargins ofcompetitiveness. Inaddition, hementioned theexistence ofa
preferential agreement withCosta Rica, which hadnotbeencommunicated toGATT/WTO.
24. Reference wasmade tothree basic problems: (i)thelackofasound statistical base; (ii)the
possible accentuation ofadualeconomy failing increased competitiveness inother sectors, and(iii)the
lackofinvestment inhuman capital, bothintheprivate andinthepublic sectors andatalllevels.
25. Healsopointed tosome matters which affected thebasic economic infrastructure. Firstwas
theenergy problem, although itwashoped thatthenewprivatization lawwould resolve thehydrocarbons
andelectricity problem, which could otherwise turnintoabottleneck forthecountry 'sdevelopment.
Astothefinancial system, hereferred tothemaintenance oftheMonetary Board 'sdiscretionary powers
andstressed theneedtoadopt thenewFinancial Monetary Code, which would make thesystem more
predictable. Inhisopinion, thegreater independence oftheCentral Bankwasoneofthemainelements
ofafinancial reform.
26. Thediscussant saidthattherewerenosignificant subsidies orassistance toproduction, except
asprovided forintheLawonIndustrial Protection andPromotion. However, hequestioned theneed
evenforthissupport, since thebalance ofpayments hadmoved favourably andthere werenoforeign
exchange controls. Hesuggested thatsuchsupport forindustry should bereplaced bysupport for
research anddevelopment. Healsopointed totheneedtoestablish andmaintain ahealthy climate
ofdomestic competition, forwhich aregulating bodyandalegalframework toprovide itwithproper
support would beneeded. Furthermore, herecommended adjustments indomestic legislation andtheWT/TPR/M/11 Trade Policy Review
Page 8
introduction oftherequisite mechanisms sothattheTRIPS Agreement could operate assoonaspossible.
Healsoreiterated theneedtoinitiate theprocess ofprivatization.
27. Hereferred totheimportance oftheservices sector intheDominican Republic, especially
tourism. TheDominican offerinregard toservices intheUruguay Round wasquitebroad, although
there weresome inconsistencies withDominican legislation. Hereiterated theneedfortheadoption
oftheFinancial andMonetary Code asanincentive fortheestablishment offoreign banks. Thetransport
sector needed tobedeveloped, since itwasbasic tothedevelopment oftourism.
28. Inaddition, hehoped thattheprocess oflegislative adjustments following theUruguay Round
Agreements would become areality andthatlegalprovisions contradicting thecommitments undertaken
intheschedule ofservices would beabrogated. Lastly, hecongratulated thedelegation ontheadoption
oftheForeign Investment Law.Dominican Republic WT/TPR/M/11
Page 9
IV. STATEMENT BYTHE SECOND DISCUSSANT
29. Theseconddiscussant(AmbassadorCarmenLuzGuarda)mentionedthebroadprocessofreform
initiated in1990, designed tointernationalize theeconomy andtransform theexport sector, which was
undertaken inconjunction withamacroeconomic stabilization programme designed toredress existing
imbalances.
30. Sheconsidered however thatitwould takesome timebefore tangible results ofthese policies
could befullyappreciated; these involved thetransition from onemodel toanother or,from one
development strategy toanother. Furthermore, shepointed outthatthissortofsituation wasexceedingly
complex, since theeconomic actors werefaced atthesame timewithchanges inrelative prices -some
permanent, others transitory -hindering thereallocation ofresources andsometimes delaying theprocess
orproducing over-adjustments thatincreased thesocial costthatanyreform process entails. Thismeant
thattheauthorities hadtopersevere andkeepuptheirpresent efforts sothattheycould establish stable,
predictable long-term conditions thatwould inspire theprivate sector tomake therequired changes.
31. Shecommended theprocess ofreform, emphasizing thattheeffort wasnotonlynoteworthy
foritsspeed, butalsoforitsscope anddepth. Shenoted thatanumber ofmeasures thatwere not
strictly consistent withtheprovisions ofthe1947 GATT hadbeeneither abolished orbrought into
linewiththeoldandnewobligations under theWTO agreements. However, there wereafewareas
inwhich greater progress could bemade intrade policy. Forinstance, shefeltthatthetariffstructure
could besimplified further sincethetariffstructure stillshowed greatdispersion, andthatlessdeviation
from theaverage tariff levelwould alsomake formore efficient resource allocation.
32. Shereferred totheheavy reliance onimport tariffs proceeds forfiscal revenue. Shesuggested,
thatinorder tomake forafreerandmore flexible trade policy, theITBIS (taxontransfer ofgoods
andservices) could bereformed, making itmore likeavalue-added taxsystem, reducing thenumber
ofexemptions, andincreasing thepresent rateof8percent This, sheconsidered would alsomake
theeconomy more efficient andcompetitive andleadtofewer andbetter fiscal controls, thatwould
alsoreduce taxevasion.
33. Shecommended thefactthatsince 1990 thepolicies being applied were basically intended
toeliminate theanti-export bias. However, shepointed outthataccording tothereport bythe
Secretariat, therewasstillroom forfurther increasing theefficiency ofbureaucratic procedures tohelp
stimulate theexport sector.
34. Sheexpressed several concerns regarding thewayinwhich theDominican Republic 'sexports
would develop inthefuture, since itwasoneofthefewcountries thatenjoyed preferential access to
boththeUnited States through theCaribbean Basin Initiative, andtheEuropean Union through the
Lomé Convention.
35. Firstly, shepointed outthattheCaribbean Basin Initiative wasclosely linked toexports
originating inthecountry 'smany freezones. Thus, shewondered ifinthelongrunthisprivileged
situation would helpdevelop anexport sector withcompetitiveness notbased exclusively ontariff
preferences andlabour costs, butgenuine competitiveness derived fromtechnological innovation and
first-rate entrepreneurial capability.
36. Secondly, sheobserved thatinrecent years export development hadmoved towards free-zone
activities, sothatexports originating inthose zones hadmorethandoubled national exports. ShehopedWT/TPR/M/11 Trade Policy Review
Page 10
thatthiswould berectified astheopening upoftheeconomy would reduce therelative advantages
ofoperating inthefreezones. Sheconsidered thatiftheaimwasfortheexport sector tobecome
theengine ofeconomic growth, theprofits generated byexports would needtobedistributed throughout
theeconomy. Sheconsidered thattherecent Foreign Investment Lawwasasteptowards redressing
thisexport biasintheDominican Republic 'seconomy.
37. With regard totheproblems encountered inthedevelopment oftheagricultural sector, she
saidthattheycould partially beexplained bytheadoption ofanimport substitution policy which assigned
priority toindustrial production andhadanegative impact ontheprofitability oftheagricultural sector.
Moreover,theprocessofopeninguptheeconomy,whichresultedinthereallocationofresourcestowards
more economically viable crops, wasaslowprocess entailing highcosts.
38. However,shealsonotedthatagriculturalproductionintheDominicanRepublicwasconcentrated
ongoods suchassugar, tobacco, cocoa, bananas andlivestock. Theinternational markets forthese
products wereverydistorted asaresult oftheprotectionist policies pursued byanumber ofcountries,
including thedeveloped countries. Shestressed theneedforthedismantling oftrade barriers andthe
abolition ofthesubsidies granted inthissector.
39. Shewasstrick bytheextent ofthedualism intheDominican Republic 'smanufacturing activity:
onedynamic sector, geared totheoverseas market (centred onthefiscal benefits derived from the
free-zone régime) andwithlittleconnection totherestoftheeconomy; andamanufacturing sector
geared tothedomestic market, enjoying veryhighratesofeffective protection asaresult ofpronounced
tariff escalation. Sheconsidered thatthissituation wasunsustainable inthelongrun,since balanced
economic development required thatthebenefits bespread across allproductive activities. Sheenquired
whether these twosectors were onaconverging course.
40. Shebelieved thatthemanufacturing sector 'sdevelopment inthefreezones seemed topose
twopotential problems, thefirstbeing thehighconcentration ontheproduction oftextiles andclothing,
andthehighdegree ofconcentration ofthetarget markets forthose exports. Thesecond, asalready
mentioned, wastheproblem ofthesources ofthisindustry 'scompetitiveness, which derived, onthe
onehand, fromfiscal advantages andlowlabour costs, and,ontheother hand, fromthepreferential
access enjoyed bytheseproducts tooverseas markets. Sheemphasized thatlong-term competitiveness
should bebased onother factors andwondered towhatextent preferential access could bethebasis
forlong-term development.
41. Toconclude shestated thattheReview haddemonstrated theDominican Republic 'sendeavours
toopenupitseconomy andmake itstrade lawsconsistent withitsWTO obligations.Dominican Republic WT/TPR/M/11
Page 11
V. STATEMENTS BYMEMBERS OFTHE TPRB
42. Members commended theefforts made bytheDominican Republic inadopting astabilization
programme andopening uptheeconomy. Theyconsidered theachievements oftheDominican Republic
tobeimpressive andencouraged theGovernment tobuild onthose achievements; theyhoped that
theDominican Republic would continue theliberalization reform ofthetradeandinvestment régimes.
43. Therepresentative oftheUnited States agreed withmany ofthepoints made bydiscussants
inthattheDominican Republic hadmade considerable progress since 1990inreforming itseconomy.
Thecountry hadgonealongwaytowards increasing investor confidence andtoincrease theopenness
oftheDominicanRepublictradingsystem.TherepresentativeurgedtheDominicanRepublictocomplete
therevision ofthelegislative framework tointroduce consistency andtransparency. Hestressed the
needtocontinue theefforts toreduce therôleoftheState intheeconomy.
44. Heexpressed hisconcern about theexistence oftheITBIS ataxwhich expressly taxed "the
importationofindustrialgoods".Intherepresentative'sviewthetaxwasunlikelytohavemuchdomestic
application sinceitwastargeted toimports andtherefore violated theArticle III:2requirement ofnational
treatment inrespect ofinternal taxation. Henoted thatintheGovernment 'sstatement there wasa
listofunilateral openings andreforms butthatthere wasnoreference totheelimination oftheITBIS.
Heasked iftheelimination ofthetaxwasunder consideration.
45. Healsoasked several questions about theuseofquantitative restrictions onagriculture products,
specifically onmeat, pork, coffee andtobacco, which required animport permit, andbeans, chicken,
corn, garlic, milk, onions, riceandsugar, which were subject toimport licences. These measures
appeared toviolate thenational treatment obligations oftheWTO aswellastheUruguay Round
Agreement onAgriculture.
46. Heexpressed concern thattheDominican Republic based itscustoms valuation system on
minimum values andnotontransaction values. However, itseemed from theDominican Republic
statement thatthesystem wasbeing reviewed.
47. Hecommended theDominican Republic forthepassage ofthenewforeign investment law
(FDI) buthethought thatitshould becoupled withimprovements inenforcement withrespect to
intellectual property, especially ifthecountry hoped tobenefit from technological transfer.
48. Therepresentative ofAustralia considered thatimprovements hadbeenmade intheareaof
agriculture sincetherewerenodirect payments tofarmers linked toexports; pricecontrols inanumber
ofproducts hadbeeneliminated andinterest ratestosmall- andmedium-sized enterprises werenolonger
subsidized. However, hethought itwasparticularly unfortunate thattheDominican Republic atthis
early stage oftheconclusion oftheUruguay Round wanted tomodify agreed bindings oneight
agricultural products even thought itwaswithin therights oftheDominican Republic under the
Article XXVIII oftheGATT; seeking thismodification raised some uncertainty about thepredictability
anddirection offuture Dominican Republic policies.
49. Henoted thedominance ofproduction from thefreezones inDominican exports andthe
importance ofpreferences totheDominican Republic, asituation thathebelieved theGovernment
might wanttolookatcarefully, inorder toachieve self-sustaining industrial export growth. Hehoped
thatastheprocess ofreform continued, theDominican Republic would alsolookattheproblem of
tariff escalation.WT/TPR/M/11 Trade Policy Review
Page 12
50. Inregard totheITBIS therepresentative noted thatthere wereanumber ofproducts exempt
from thepayment ofthistax;however, theexemption benefited onlydomestic products andmainly
foodstuffs.
51. Hecommended theDominican Republic forefforts made toimprove competition andonthe
passage ofthenewFDIlaw; thenewCompetition Policy lawshould help.
52. Hereferred totheinstitutional difficulties, particularly withcustoms procedures. Despite the
improvement incustoms clearance, there appeared tobecontinuing difficulties inthatarea.
53. Therepresentative oftheEuropean Union enquired whether theMarrakesh tariffconcessions
werebeing implemented, since there seemed tobequantitative restrictions foragricultural products;
these would notbeinconformity withtheAgreement. Inregard toconsular feesforshipment tothe
Dominican Republic, hementioned thatthere wasalackofconsistency intheratethatwasapplied
andsought clarification onthispoint.
54. Henoted thelackoftransparency andpredictability ofimport rules. Heunderlined that,since
mostofthese rules weretheresponsibility oftheexecutive, theydidnothavetopassparliament so
thatintheendthere wasalacktransparency. Inaddition, some administrative decisions concerning
foreign tradeseemed tobeadopted inadiscretionary manner. Hecitedasanexample theimport licence
requirement foragricultural products, forwhich there wasnogeneral legislation.
55. Regarding therectification procedure, hesaidthattheDominican Republic hadoffered toopen
tariff quotas inorder tocompensate fortheincrease ofthegeneral tariff fortheconcerned products.
However, hesawaproblem inthepotential arbitrary distribution ofthese licences.
56. Healsoexpressed concern about internal taxation, given themany taxexemptions fordomestic
products thatwere notapplicable toimported products.
57. Heinformed thedelegation oftheDominican Republic thatSpain, atraditional exporter of
pigmeat products tothisarea, hadrecently been declared freeofAfrican swine fever bythe
European Commission, andhehoped thattheSPSmeasures adopted bytheDominican Republic against
Spain would belifted.
58. Heinquired about thefuture ofState-trading monopolies andwhether theyhadbeennotified
under Article XVII oftheGeneral Agreement.
59. Therepresentative ofCanada noted thattrade taxes represented averyimportant source of
government revenue andthatreliance onsuchtaxes could conflict withfurther liberalization efforts.
Inthisregard, hehighlighted thefactthattariffrelief, exemptions fromvarious taxesandtheprovisions
ofother governmental incentives tothefreezones, represented averysignificant drawonGovernment
finances. Thisadverse fiscal impact seems tobeattenuated bythemaintenance ofhightariffs and
other taxes onimports destined tothedomestic economy. However, henoted thatiffreezones did
notgenerate large spillover effects, theveryhightaxburden onconsumers andenterprises outside
thefreezones could hinder thecountry 'seconomic growth prospects aswellasthedomestic industry 's
internationalcompetitiveness.Inthiscontext,hethoughtthattheGovernmentoftheDominicanRepublic
might wishtopayparticular attention totheoverall economic gains derived from these freezones.Dominican Republic WT/TPR/M/11
Page 13
60. Intheareaofagriculture, therepresentative mentioned thattheDominican Republic still
maintainedquantitativerestrictionsanddiscretionarylicensingoncertainproductspendingthecompletion
oftechnical rectifications toitsUruguay Round Schedule. Hementioned thatCanada hadengaged
inconsultations withtheDominican Republic onthismatter andhoped thatasatisfactory outcome
would bereached soon.
61. Therepresentative ofJapan considered thatthegeneral leveloftariffs washighcompared to
otherLatinAmericancountries.HenotedthatJapanesefirmswerefindingcustomsprocedurescomplex,
andhecitedtheconsular feeasanexample ofanunnecessary bureaucratic procedure.
62. Therepresentative ofNewZealand welcomed themove towards centrality intheareaoftax
reform intheDominican Republic butfeltthatthere wasstillsome distance togo.Taxes suchasthe
ITBIS andtheSelective Consumption Taxtargeted imports inareas where there wasnoproductive
activity intheDominican Republic. Theprinciple oftaxneutrality would dictate thatsuchtaxesshould
bereduced andeliminated
63. HealsobelievedthatintheagriculturesectortheliberalizationprocessintheDominicanRepublic
stillhadsome waytogo.Itwasanunfortunate precedent thatsosoonaftertheUruguay Round the
Dominican Republic wasseeking tomodify thebindings onnumber ofagricultural products.
64. Theadministration oftariff quotas ofagricultural products wasofparticular interest for
NewZealand. Thus, therepresentative underlined theneed toputinplace aflexible, open and
transparent system fortheadministration oftariffquotas, allowing exporters tochoose theirownimport
partner.
65. Heenquired about theimport consular fees; noting that,intheproposed schedules ormodified
schedules oftheDominican Republic, thecolumn forother duties andcharges wasblank; hehoped
thissignified thattheconsular dutywastoberemoved. Inanycase, asamatter oftaxprinciple this
wasnotaverygood wayofraising revenue from imports.
66. Inrelation tocustoms valuation hehoped thattheDominican Republic would notusethewhole
five-year transition period fortheremoval oftheminimum price system.
67. Therepresentative ofArgentina noted thestrong dependence oftheDominican Republic upon
import taxes forfiscal revenue. There wasaneedtoprogressively extend thereach ofthetaxsystem
totheinformal sector oftheeconomy, inorder tokeepthefiscal deficit under control. Henoted that
realexchange ratedidnotseem tobeadecisive factor indetermining trade flows inthe
Dominican Republic.
68. Hebelieved thatitwould beadvisable tosimplify theimport procedures anddocumentation,
where possible, doing away withconsular intervention indrawing upconsular invoices andimport
documents. Regarding customs procedures hethought itimportant thatthemechanism beadjusted
inthelight oftheprovisions oftheWTO Agreement. Hecommended thesteps taken bythe
Dominican Republic inthisrespect.
69. Heenquired about thescope ofapplication oftheSelective Consumption Taxandiftherewere
anyintentions toeliminate orreplace itbysome other form oftaxation. Hereferred totheimport
licensing régime which, asmentioned byother members, didnotoperate inamanner fullycompatible
withGATT provisions.WT/TPR/M/11 Trade Policy Review
Page 14
70. Heconsidered tariffescalation asthemostchallenging issuefacing theDominican Republic 's
economy, sincethecorresponding higheffective protection encouraged domestic producers offinished
goods toproduce solely forthelocalmarket, theexception tothisrulebeing inthechemical industry
which produced inputs foragriculture. Regarding thetaxincentives forfreezones, these could serve
asstimuli nottoincrease thedomestic industrial value added. Thus, heconsidered thatthere seemed
tobeasplitbetween themomentum generated bythefreezones andthepossibility ofreaching higher
levels ofindustrialization.
71. Therepresentative ofColombia noted thatthereform programme oftheDominican Republic
wasaimed atmodernizing economic management. Through macroeconomic adjustment, the
Dominican Republic hadbeenabletocounter threats ofinflation. Moreover, sound macroeconomic
policy hadencouraged capital inflows intheformofforeign direct investment. Henoted theimportant
rôlethatthefreezones andtourism hadplayed ingenerating foreign exchange earnings.
72. Theconcentration interms ofexport destinations aswellasthesource oftheirimports could
entail some vulnerability. Thiscould become more ofanissueinthelightoftheDominican Republic 's
general tradepolicy goals, namely, anoutward looking traderégime, integration intotheworld market,
andimproved market access forDominican products. These objectives could notbeattained withthe
existing concentration ofmarkets andsuppliers.
73. Henoted thatintheDominican Republic anumber ofsectors andactivities weredominated
bytheStateentities. Some hadceased operations, others hadreduced theirscope ofactivity, butthere
werefurther possibilities forprivatization, which would attract FDI, constituting anewmotor force
fordevelopment.
74. Heemphasized thefactthattheDominican Republic hadencountered thesame problems as
otherexportersofagriculturalproducts:barriersintheimportingcountries,importquotas,andvolatility
intheinternational prices -hence, theneed fordiversification. Moreover, henoted thatexport
diversification intheDominican Republic hadbeenaimed atoneveryimportant market, thatoftextiles
andclothing; however, thiswasanother market affected byimport quotas andbyrestrictions.
75. Therepresentative ofHong Kong commended themove towards amoreoutward-oriented trade
régime andfurther integration intotheworld economy, byremoving alargenumber oftraderestrictions,
simplifying thetariffrégime, reducing tariffs substantially, andapproving anewlawonforeign direct
investment.
76. Heaskedaboutthestepspresentlybeingtakentoclarifythelegalframework,especiallyregarding
thelackoflegislation onimport licences oronlicensing procedures. Healsosought anexplanation
fortheimport prohibition onsalt.
77. Therepresentative ofIndia praised thereforms bytheDominican Republic since 1990 inthe
form ofamacroeconomic development programme, coupled withthereform oftrade policies and
practices andthemodernization ofthelegalandinstitutional framework. Hecommended theefforts
made todevelop theservices sector andthepromotion oftheclothing industry andtourism. Henoted
thatthelegislative framework hadnotyetbeencompletely revised andwasstillbeing rationalized to
ensure transparency andpredictability intrade. However, theWTO Agreement hadbeenratified and
theMultilateral Agreements hadbeenincorporated intoDominican law. Inaddition, hementioned
thataninter-agency technical teamhadbeenestablished toidentify theexisting legalprovisions that
were inconsistent withthese Agreements, andtotakeremedial action. Hewelcomed thisstepand
encouraged theDominican authorities tospeed uptheprocess.Dominican Republic WT/TPR/M/11
Page 15
VI. REPLIES BYTHE REPRESENTATIVE OFTHE DOMINICAN REPUBLIC
AND ADDITIONAL COMMENTS
78. TheChairperson invited therepresentative oftheDominican Republic tofocus hisresponses
onthreemainthemes: (i)thegeneral economic situation andthereform programme; (ii)theexistence
ofa"dual economy" andconsequences fordomestic industry and(iii)anumber ofother specific issues.
However, sheproposed thatherefertothetwomain themes together.
(1) General economic situation, thereform programme andthe"dual economy"
79. The representative oftheDominican Republic stated that theGovernment ofthe
Dominican Republic haddemonstrated itspolitical willtomake theinternal changes required toadjust
thelegal andinstitutional framework totherequirements oftheWTO agreements. However, he
recognized thatatthistimeoftransition thecountry wasfaced withthesociological reality that
developments hadovertaken thepre-existing legalframework.
80. Hereferred tothestabilization measures andstructural reforms undertaken sofarasameans
tofacilitatethecreationofmarketconditionsthatwouldsupportthestrengtheningofthereforms,creating
anideal atmosphere forattracting foreign investment which, inturn, would allow thetransfer of
technology needed toreduce thevulnerability ofexisting exports ofgoods andservices. Inaddition,
in1990, thereform oftheeducation sector wasstarted. Thisprogramme known as"Decimal Education
Plan" hasbeencommended byseveral international organizations inorder tocreate morehuman capital.
81. Regarding thefreezones hesaidthatthese could beseenasanintermediate objective inthe
process ofintegrating thedomestic market intotheworld market. Forinstance, hesaidthattherehad
beenanincreased useofdomestic inputs bytheenterprises operating intheindustrial freezones, which
were playing agreater partinbotheconomies. Inaddition, henoted thatthefreezones hadalso
contributed significantly totechnology transfer andthetraining oftheDominican labour forceinspecific
fields. Inaddition, thefreezones contributed tothediversification oftheDominican export base.
82. Hepointed totherapid development oftheservices sector which offered thecountry the
opportunity todiversify itsexport markets. Forinstance, hereferred totherapid growth ofthetourism
sector which hadabsorbed much ofthecountry 'sexport capability, mainly foritems suchasfresh
fruitandvegetables.
83. Heemphasized thatonlygreater diversification oftheexport markets forDominican goods
andservices would reduce thecountry 'svulnerability caused bytheexistence ofpreferential systems
ofaccess. HesaidthattheDominican Republic wasinthemidst oftheprocess ofdiversification but
thatonlywithtimewould itbepossible todiversify further. Heconsidered theUnited States asa
natural market fortheDominican Republic given itsproximity, itssize,andtheconcentration of
investments bynationals ofthatcountry.
84. Regarding preferential tariff schemes hesaidthatthese schemes hadapositive impact on
Dominican exports.
85. Inreferencetoexportsoftextiles,hesaidthatthisitemwouldobviouslybeaffectedbyreductions
inpreferences. However, henoted thattheagreement ontextiles andclothing would itselfautomatically
increase theexport quota inthree stages ofintegration uptotheyear2004, which presented an
opportunity fortransforming thisfree-zone sector, andintegrating itintothedomestic economy.WT/TPR/M/11 Trade Policy Review
Page 16
86. Inresponse tothequestions regarding theslowimplementation ofprivatization policies, the
representative pointed outthatthevastmajority oftheDominican Republic 'sState-owned enterprises
were notattractive toprivate investment, nordidtheyholdadominant position which would allow
them toblock theentry ofnewcompetitors. Asaresult, hestated thatinrecent years thepublic
enterprises 'weight inthedomestic market hadsteadily diminished. Theprofitability ofCORDE
enterprises hadbeenconsiderably reduced andsome hadalready beenclosed down.
87. Furthermore, heclarified thattheDominican Republic hadnoStateimport monopolies. The
lastwereINESPRE,DominicanMills(MolinosDominicanos)andtheDominicanOilRefinery(Refinería
Dominicana dePetróleo ),inwhich Shell held50percentofthecapital stock. Initstime, hesaid,
INESPRE hadamonopoly onimports ofmilkandedible fats,butthishadbeendiscontinued, ashad
occurred recently withDominican Mills inthecaseofwheat. Inthecaseoffuels, distributors were
allowedtoimportunleadedgasolinedirectly,andtheprivatepowergenerators,whoprovided35percent
oftheelectricity produced, could alsoimport theirfuelsdirectly. Hestated thattheprice offuelswas
determined onthebasis oftheimport parity price.
88. Inreference totheenquiries made about taxesandtariffs hereplied thattheDominican Republic
hadapproved aTaxCode andaTariff Code in1992 and1993 respectively, asanintegral partofits
structural reform process. Inall,77laws, 54Decrees and87special contracts andanumber of
administrative regulations were abolished andtheirregulatory framework grouped intotwolaws.
89. HealsosaidthattheUruguay Round agreements weresigned twoyears laterandwereratified
bytheNational Congress in1995. They hadthenacquired thesame legalcharacter astheTaxand
Tariff Codes, which could haveresulted incertain contradictions between legaltexts.
90. Inrelation tosome queries about theapplication oftheITBIS andtheconcerns thatitviolated
theArticle III:2requirements fornational treatment inrespect ofinternal taxation, hesaidthatthe
Dominican Republic wasaware thatthissituation would require legislative adjustment. Heemphasized
thatthefactthattheGovernment hadpursued apolicy ofreducing exemptions overtimeshowed the
country 'scommitment toeliminating anydiscriminatory elements intheapplication ofthistax.Thus,
since 1983, when theITBIS wasintroduced, thetaxbasehadbeengradually extended togoods that
were previously exempt.
91. Hethought thatthere seemed tobesome confusion astothemanner inwhich thistaxwas
levied onimports. HesaidthattheITBIS wascollected bymeans ofcredit procedures: theimporters
acted asholding agents fortheITBIS, which theycollected when theysoldtheirproducts towholesalers
and/or retailers. When theimporters declared these funds totheIncome TaxDirectorate-General
(DGISR), theyhadtostatetheamount oftaxretained aswellastheamount oftheITBIS paidincustoms
when thegoods wereimported; thiswould beconsidered asacredit forpurposes ofthenetamount
tobepaidtotheDGISR.
92. Regarding theSelective Consumption Tax,hesaidthattheratesvaried according toproduct,
thehighest being applied toautomobiles andtodomestic electrical goods notproduced inthecountry,
thereby respecting theconcept ofneutrality. Henoted thatsince1995when Law6-95waspromulgated,
theselective consumption taxontobacco andalcoholic beverages, theonlyimported goods thathad
beensubject todiscrimination, wasunified, theratesstood at20percentand25percent,respectively.
Hesaidthatwiththeimplementation ofthese reforms, theDominican Republic hadbegun toreduce
itsdependence ontrade taxes forfiscal revenue.Dominican Republic WT/TPR/M/11
Page 17
93. Henoted that,atthesametime, thetax-collection bodies werebeing restructured andtechnically
strengthened andthatwork wasinprogress tobroaden thetaxbaseforthevarious taxes. Headded
thatthecreation ofadditional -mainly municipal -taxes wasalsounder study.
94. Inrelation totheeffective import tariff, hepointed outthatithadbeenscaled down during
theperiod ofimplementation ofthetariff reform. Thus, theaverage effective ratein1994 was
14percent, including fuels, adropof6percentfrom the1990 average.
95. Thefirstdiscussantsaidthatthegeneraleconomicpolicywasclearlyheadedintherightdirection
andprogress hadbeen made. However, herecognized that, duetotherapid changes, the
Dominican Republic hadgonebeyond theformal legalframework. TheAuthorities recognized this
factandintended toadapt theirlegalframework topresent realities.
96. Thepositive effects ofopening upthemarket included theincrease inpermanent flows of
capital which would eventually increase income aswellasthewelfare ofthepopulation. Heconsidered
aspositive thefactthatinthefreezones there wasalready specialization interms ofhightechnology
andthatdomestically produced inputs werealsoused. Hewelcomed thefactthattheopening upprocess
would becontinued anddeepened.
97. Inrelation totheproblem ofdiversification hethought itinadvisable toleaveittotimetoresolve
theissue, assuggested bytheauthorities. Herecommended thattheauthorities implement aneconomic
policy thatwould gradually pushtheprocess ofdiversification forward andeliminate medium-term
risksimplied bylackofdiversification.
98. Herecognized theimportance ofanefficient customs system, butalsostressed theneedfor
areliable legalframework thatwasstable andpredictable forimporters.
99. Inrelation totheIndustrial Incentives Act,which encouraged import substitution, heconsidered
thatthistypeofincentive should bedropped andthatitshould bereplaced byincentives thatwere
notexclusive tothefreezones butavailable toallsectors.
100. Thesecond discussant recommended theintensification oftheintegration ofthefreezones
inthenational economy andthediversification oftheexport base. Tourism wasanexample ofasector
whose development hadpositive repercussions fortheDominican economy byproducing andsupplying
auxiliary services.
101. Regarding public enterprises shewelcomed thefactthatnoStateimport monopolies werebeing
retained andthatthefewenterprises thatdidhaveamonopoly rôlehadinfactbeendismantled. This
meant thatthere would beanincrease incompetition within thedomestic market which inturnwould
encourage theestablishment ofprivate enterprises. There would nodoubt alsobeanimprovement
inthefiscal andbudgetary situation.
102. Thediscussant noted alsothatthecontradictions between domestic legislation andthe
Uruguay Round agreements textsweretoberemoved andthatthedomestic legislation wastobebrought
intolinewiththose provisions. Inthisregard, shewelcomed thefactthattheITBIS would beadjusted
tobring itintolinewithArticle III:2oftheGATT (1994). Sheconsidered thetaxreform asaway
toimprove theoperation oftheeconomic machine, andexisting exemptions should beeliminated.
Inrelation totaxexemptions sheenquired whether theenterprises established inthefreezones wereWT/TPR/M/11 Trade Policy Review
Page 18
exempt from corporate taxes andcorporate profit taxes. Tax reform should enable the
Dominican Republic todiminish itsdependence upon trade taxes.
103. Therepresentative oftheUnited States questioned theassertion thatthelargemajority ofpublic
enterprises werenotattractive toprivate investment. Hepointed outthatifthese enterprises didnot
haveadominant rôleinaparticular sector, asstated bytheauthorities, andthere wascompetition
from other private companies thensome serious questions should beraised astowhythere needed
tobeState enterprises.
104. Inrelation tothedismantling oftheimport monopolies therepresentative oftheEuropean Union
sought detailed information about thelegal form ofthisprocedure andasked whether ithadbeen
approved byparliament orifitwasonlyanadministrative decree orinternal decision. Healsoexpressed
hisconcernabouttheapplicationinpracticeoftheDominicanRepublic'sUruguayRoundtariffschedule.
105. Inresponse tothequestion raised bythefirst discussant therepresentative ofthe
Dominican Republic reiterated thatthelawonexemption forindustries hadbeenrevoked atthetime
oftheentry intoforce oftheTaxCode. Heconfirmed thatenterprises inthefreezones wereexempt
from income tax. Heconsidered these taxexemptions asoneoftheprinciple attractions forthe
establishment ofenterprises inthefreezones. However, workers 'incomes weresubject totaxation.
106. Inresponse tothepoint raised bytheUnited States representative onpublic enterprises, the
representative saidthatthepublic enterprises intheDominican Republic ingeneral wereenterprises
thathadpreviously belonged totheTrujillo family. Ninety-nine percentoftheseenterprises hadbeen
transferred totheState afterthefalloftheTrujillo régime andhadbeenmanaged since 1961 by
successive administrations. However, theseenterprises hadnever beenmodernized, andhadgradually
beendecapitalized. Therefore, thereality wasthattheseenterprises werenotattractive tothedomestic
private sector. That waswhymany ofthem hadsimply disappeared. Others, suchasMolinos
Dominicanos andRefinería Dominicana nowfaced competition, while theDominican Cement plant,
which isintheprocess ofbring privatized, nowalsofaced competition fromotherprivate cement plants.
However, duetotheobsolete nature oftheirequipment, other enterprises oftheCORDE group had
notprompted theinterest ofprivate investors. Forinstance, theglass plant wasaState monopoly,
butthere werenorestrictions ontheimport ofglass. Furthermore, anewprivate glass factory was
tobeestablished intheDominican Republic. There werestilldiscussions about theprivatization of
theremaining Statemonopolies. However, intheexisting pre-election period, theprivatization process
wasahighly sensitive political issue.
107. With regard totheadoption ofthetariff codetherepresentative oftheDominican Republic
emphasized hiscountry 'scommitment tocomply withalltheAgreements oftheUruguay Round. He
recalled thattheDominican Republic hadbound itstariffs ataceiling rateof40percent, andthat
theceilings stipulated inthetariff codedidnotgobeyond these bindings. Aswasclearly indicated
intheSecretariat report, tariffs were being applied atseven ratesbetween 3and35percent.
108. Inrelation totheITBIS, aseries ofquestion were raised bytherepresentative ofthe
United States. Hecommended thefactthattheauthorities recognized theneedtotakethenecessary
legislative measures toamend theITBIS, since itwasinconsistent withArticle III:2. Heasked how
andwhen thetaxwastobeamended andwhether thelegislation would make itclear thatalltaxes
should apply tothesame goods whether imported ordomestically produced. Healsoasked foracopy
oftheregulations listing allthedomestic goods exempt from theITBIS andhowthetaxwasapplied
inthecaseofimports.Dominican Republic WT/TPR/M/11
Page 19
109. Therepresentative oftheDominican Republic saidthattheITBIS waslevied atthetimeof
importation, when theimporter soldthegooddomestically tothewholesaler orretailer. Inresponse
totheother concerns about theITBIS, hereiterated thattheamendment ofcertain aspects ofthistax
required theapproval ofCongress where theGovernment didnothaveamajority.
110. Therepresentative oftheUnited States emphasized thattheUnited States wasextremely
concerned about theITBIS andwould appreciate action onthismatter.
(2) Specific issues
111. Regarding therectification process foragricultural goods, therepresentative ofthe
DominicanRepublicstatedthatfollowingtheconclusionoftheUruguayRound,theDominicanRepublic
presented arectification request totheWTO thatwould allow thecountry toraisebound tariffs on
eight sensitive products, namely rice,beans, chicken, whole milk, garlic, onions, cornandsugar.
Within thedeadline established bytheWTO, theDominican Republic 'srequest waschallenged by
severalcountries,withwhichbilateralnegotiationswereinitiated.HestressedtheDominicanRepublic's
desire toconclude these consultations assoonaspossible.
112. HesaidthattheGovernment applied noborder restrictions onmarket access fortheseproducts;
thattheycontinued tobeimported inaccordance withmarket requirements, subject tothetariffs defined
intheexisting schedule. Withregard tospecial safeguards, hesaidthatthese would beapplied solely
andexclusively toproducts whose tariffication wasproposed intheabove-mentioned technical
rectification process, onceithadbeenaccepted byWTO.
113. Inrelation tothepricing policy forrice,heexplained thattheDominican Republic 'seconomy
hadbegun tomove towards amarket economy in1986, when themonopoly onthesaleofriceand
price controls atthevarious levels ofmarketing riceaswellasdairy products, beans andedible oils
were abolished. Similarly, allprice controls onthebasic basket (foodstuffs andother products for
daily consumption), which wereadministered bytheSecretariat ofStateforIndustry andTrade, had
beenlifted in1989. However, hepointed outthat,eventhough theOrganic Lawestablishing INESPRE
(Institute forPrice Stabilization) hadnotbeenrepealed, theInstitute imposed noprice controls onany
product, nordiditreceive anyfinancial support from theGovernment.
114. Inreference tothesubsidies thathadbeenmentioned, heclarified thattheytooktheformof
direct income support toproducers, theywerenotexport subsidies, thattheyhadonlyapplied tococoa
andcoffee asatemporary measure prior totheentry intoforce oftheUruguay Round Agreements,
andthattheywere inanycasenolonger ineffect. Consequently, there wasnoinconsistency; the
Dominican Republic hadnever given export subsidies -butrather direct income support -toproducers
andonlyincases where hightaxes hadamarked effect onforeign salesofthese products.
115. Inrelation totheprivatization ofStatelands, hesaidthatthisprocess hadbegun withtheclosing
down oftwosugar factories. Their landwasnowusedforprivate agribusiness, cultivating products
suchaspineapples andcitrus fruitforexport. AnExecutive Decree granted fullland-title under the
agrarian reform.
116. With regard toimport restrictions, hementioned that,there werenorestrictions onimports
ofcoffee, meat, tobacco orsalt.There wasfreeaccess tothemarket inpractice, andthemarket was
actually glutted withimports ofthiskind. Thenational tobacco industries imported substantial quantitiesWT/TPR/M/11 Trade Policy Review
Page 20
ofVirginian tobacco foruseinproduction. Cigar producers alsoimported leaftobacco required for
theouter wrapping ofcigars.
117. Onthesubject oftransparency ofrestrictions onforeign trade, hesaidthattheSecretariat of
StateforAgriculture hadabolished therequirement ofpriorlicensing forimports. Regarding exports
ofporkfrom Spain, hesaidthathehadtaken noteoftheEuropean Union 'scertification thatSpain
wasnowfreeofAfrican swine fever; hefelt,therefore, thatthere would benomajor difficulty with
repealing thephytosanitary restriction onimports ofSpanish products.
118. TheDominican Republic hadmade noprofound efforts todevelop thefisheries sector because
ofthelowtechnological level inthissector andtheverydeepcoastal waters owing tothenarrow
submarineshelf.Nonetheless,hepointedoutthateffortshadbeenmadewiththesupportofinternational
organizations todevelop deep-sea fishing. Theprivate sector hadinvested infish-farming, especially
toboost theshrimp industry forexport andthetourist trade.
119. Regarding customs valuation, henoted theadvances made bytheDominican Republic inthe
areaofmerchandise clearance including streamlining import formalities, computerization, and
decentralization offunctions. Atthesame time, hepointed outthatthecustoms valuation schedule
ended thecustoms officials 'discretionary powers, aspartofamodernization programme aimed at
rationalizing customs procedures andformalities, cutting clearance procedures from45daysonaverage
in1990 tounder three withtheadvance processing system. Furthermore, hepointed outthatin
accordance with thefive-year transition clause contained inArticle 20oftheAgreement on
Implementation ofArticle VIIofGATT 1994, theauthorities planned abolish thismechanism inthe
verynearfuture.
120. ThenewForeign Investment Lawinstituted national treatment forallinvestors, removing
previous sectoral barriers. Therepresentative saidthattherestrictions maintained wereonthefollowing:
toxicwaste, radioactive materials, activities thataffect health andtheenvironment, andthemanufacture
ofmaterials linked todefence andnational security. Thenewlawalsoprovided forunrestricted
repatriation ofcapital, dividends androyalties. Moreover, foreign firms would beabletoparticipate
inprivatization bidsonanequal footing withnational firms.
121. Inrelation tothelegalandinstitutional reforms heclarified thatthe1968 Lawtoprotect and
promote industry wasnolonger inforce, having beenrepealed bytheenactment oftheTaxCode.
122. Regarding tradeinservices, heresponded tothemembers whocommented onthecontradictions
between theUruguay Round commitments onmaritime transport andtourism andthelawsinforce
intheDominican Republic. Hesaidthatmostofthesectoral lawshadbeenbrought intolinewith
theDominican Republic 'scommitments byinclusion ofanarticle repealing thespecific articles that
were inconflict withtheoffer.
123. Heconsidered thatthecases ofmaritime transport andtourist guides deserved special mention.
Hestressed thattheDominican offer ontransport, submitted within theUruguay Round offer on
services, wasperhaps thebroadest ofanycountry, covering allforms ofcargo transport services as
wellasmaritime transport support services. Thisoffer wasmade withtheideaofintroducing an
optimum multi-modal system inthecountry.
124. However, henoted thatthecommitments undertaken byhiscountry inrespect ofmaritime
transport would notbebinding untilthenegotiations hadbeencompleted andtheirresults ratified byDominican Republic WT/TPR/M/11
Page 21
theLegislative Chambers ofthemember countries oftheNegotiations Group. Hence, theexistence
ofLaw3003 of1951 onmaritime transport didnotconflict withthecountry 'sWTO obligations.
125. Regarding thequestion ofrestrictions onservices byforeign tourist guides, hesaidthatthis
issue would besettled through theenactment ofaLawonProfessional Services, which wasunder
consideration inanticipation oftheresults ofthenegotiations nowinprogress intheWTO.
126. Adraft Lawonintellectual property hadbeenprepared toadjust national legislation tothe
provisions oftheAgreement onTrade-Related Aspects ofIntellectual Property Rights (TRIPS). The
draft would bereferred totheLegislative Chambers, together withcomplementary legislation on
promotion ofcompetition, consumer protection andrepression ofunfair competition. Hesaidthat
these regulations would prohibit anycollusive practices, including export practices, while eliminating
theneedtorestore theprice controls abandoned in1990.
127. Henotedthatthecompetitionrégimewouldbesupplementedwithspecificprovisionstosafeguard
competition inthenewlawsontelecommunications, transport andenergy, andthrough theestablishment
ofspecialized regulatory organs which would behierarchically andfinancially independent oftherest
oftheExecutive. Liketheregulatory body ofthecompetition régime, these specialized regulatory
organs would havetheirownmechanisms forthesettlement ofdisputes.
128. Withregard tothedraftLawontelecommunications hesaidthatitrepresented thecommitment
tocompetition, independent regulation, therightofsuppliers tofreeinterconnection andusers'right
tochoose. Inaddition, hestated thatthemechanism forpromotion ofauniversal system wasbeing
overhauled, obviating theneedforanytypeofcross-subsidization.
129. Inthecaseofenergy, hepointed outthatboththeLawbefore theLegislature andthetechnical
regulations foritsapplication established thatallpower generating companies maybeinterconnected
tothedistribution system aslongastheyproduced atlowest cost, asdetermined byoptimum scale
criteria, which atpresent stood atonly10percentofthenominal generating capacity established in
thecountry.
130. Healsoreferred tothereforms inthetransport sector thatwere tobeinstituted thisyear.
131. Regarding theconsular invoice, hesaidthatunder Dominican lawthisdocument hadtobe
certified bytheDominican consulates. Hepointed outthattheinvoice feewasrelatively verylow
andwascollected fortheservice provided. Itsduration waslinked tothetime-period forimplementation
oftheCustoms Valuation Code provided fordeveloping countries.
132. Hesaidthattheexisting sanitary andphytosanitary regulations didnotdiscriminate according
toorigin, andrequired asanitary certificate tobeissued. Livestock imports weresubject toquarantine
toprevent contagious diseases from entering thecountry, ashadoccurred inthelateseventies with
African swine fever, theelimination ofwhich hadtaken ahugetollontheStateandnational pig-farmers.
Since itwastheintention oftheGovernment oftheDominican Republic toapply scrupulously the
stipulationsoftheWTOPhytosanitaryAgreement,theGovernment'saimwasforanyprotectivemeasure
applied toparticular animals orcertain products toberemoved within thetwo-year deadline established
intheAgreement fordeveloping countries.WT/TPR/M/11 Trade Policy Review
Page 22
133. Regarding rules oforigin governing thesource ofmerchandise, hesaidthattheywere only
applied intheDominican Republic toimports fromCosta Ricainaccordance withthestipulations of
thefree-trade agreement concluded between thetwocountries in1982.
134. Asregards economic indicators, hesaidthatunemployment currently stood at15percent;
female participation inthework force was36percent; thebasic school enrolment ratiofor1993was
101percent. Henoted thattheCentral Banktraditionally prepared thenational accounts andbanking,
monetary andbalance-of-payments statistics andthattheTechnical Secretariat tothePresidency supplied
theCentral Bank withtheforeign tradefigures, while theSecretariat forFinance andTechnical Affairs
oftheOffice ofthePresident supplied thefiscal figures.
135. HesaidthatthenewMonetary Code would maintain thediscretionary powers granted tothe
Monetary Board under theMonetary LawandtheConstitution oftheRepublic under thenewMonetary
Code. ThenewCode embodied market mechanisms withafreeinterest rateandfullconvertibility
intheexchange market.
136. Thefirstdiscussant referred tothepreferential agreement withCosta Ricaandconsidered that
itshould benotified tothenewCommittee onRegional Agreements.
137. Thesecond discussant waspleased tolearn thatthere werenorestrictions oncoffee, tobacco,
cocoa andsalt,andthattherequirement forprior import licences orpermits forcertain agricultural
products hadalsobeeneliminated. However, shenoted thatSPSrequirements included athorough
analysis andexamination ofthegoods concerned. Shetooknoteofthereasons given tojustify the
under-development ofthefisheries sector; however, shehoped thatthisactivity would develop in
thefuture. Generally speaking, theeconomy seemed tobefunctioning welldespite theneed for
adjustments inareassuchastheITBIS andcustoms valuation. Shesaidthatincreasing emphasis needed
tobeplaced ontheregulation ofcompetition andtheestablishment ofrulesagainst unfair competition
when aneconomy became deregulated andopened uptoforeign trade. Forthisreason, shewelcomed
thefactthatlegislation onsuchmatters wasbefore parliament. Sheenquired whether anyprices other
thanforfuels were stillcontrolled. Sheenquired whether theprocess ofprivatization included the
ownership oflandandsought details about thelandreform.
138. Therepresentative oftheUnited States asked whether itwasfairtosaythatimport permits
andlicences nolonger existed formeat, pork, coffee, tobacco, beans, chicken, corn, garlic, milk,
onions, riceandsugar, and,ifthiswasthecase, which wasthelegislative mechanism thatputthis
intoeffect. Henoted thestatement made intheGovernment report "existe libreacceso almercado
enlapráctica "(there isinpractice freemarket access). Thiscould mean thatimport licences and
permits stillexisted butwere notapplied. Ifthatwere thecase, heenquired when the
Dominican Republic Government would eliminate these restrictions. Henoted that the
Dominican Republic hadnotnegotiated special safeguards intheUruguay Schedule, andenquired how
theDominican Republic planned tojustify implementing safeguards. Inrelation tosubsidies, hepointed
outthattheDominican Republic didnotclaim anyexport subsidies andspecified azeroaggregated
measure support initsUruguay Round schedule, andhesought anexplanation fortheinconsistency
between thisandmeasures being applied.
139. Regarding import restrictions inagriculture, therepresentative oftheEuropean Union had
thesame concerns astherepresentative oftheUnited States. Hereiterated that, under the
General Agreement, there wasnorectification procedure forsubstantial changes ofconcessions.
Rectification procedures should normally belimited toobvious mistakes intheschedules suchastypingDominican Republic WT/TPR/M/11
Page 23
errors, etc.However, inthiscasemajor concessions were atissue andhewished tounderline that
thiswasnottotally within theframework ofnormal GATT procedures. Nevertheless, the
European Union hadembarked onthatprocedure andhoped toreach agreement soon. The
European Union hoped theDominican Republic would bealittlemore flexible, otherwise itwould
bedifficult toreach agreement.
140. Henoted thattheDominican Republic considered theprinciple ofconsular invoices tobein
conformity withtheCustoms Valuation Code fordeveloping countries. However, heconsidered that
therewereproblems withtheimplementation, since sometimes amuch higher feethantheofficial one
wasrequested, notonlypershipment butpercontainer. Thiswasnotinconformity withanydisposition
oftheGATT.
141. Inresponse therepresentative oftheDominican Republic saidthatatpresent there were no
realrestrictions onimports onanyproduct. However, thelegalrectification hadnotyetbeenintroduced
inthebooks andwould bemade when thecongressional situation soallowed. TheSecretary ofState
ofAgriculturehadpubliclyannouncedinthenewspaperson11December1995thatfrom1January1996
restrictions ofanytypeontheimportation ofanyproduct would beabolished.
142. Inrelation tothelandreform, hesaidthatatpresent only50percentoftitles hadbeen
distributed duetothedeficiencies intheofficial rural landregistry, butthelandregistry wasinthe
process ofbeing improved tofinish thedistribution oflandtitles.
143. Heconfirmed thatprice controls existed onlyinthecaseoffuel,buttheprice ofunleaded
fuelwascurrently setbytheforces ofsupply anddemand.
144. Subsidies hadnotbeenmentioned intheUruguay Round schedule since theywere notused
bytheDominican Republic, andhereiterated thatthere were noexport subsidies.
145. Inanswer totherepresentative oftheEuropean Union concerning the7rectification process
initiated onabilateral basis bytheDominican Republic, hesaidthattheinitial offer bythe
Dominican Republic wasanextremely liberal one. However, theattitude adopted byother countries
hadledtheauthorities toexercise theirsafeguard rights.
146. Regarding consular invoicing hesaidthatDecree 512established ascale offees,ofUS$32
forashipment ofUS$100 orlessandofUS$82 forashipment ofgreater value.
147. Inrelationtothefree-tradeagreementwithCostaRicahesaidthathisGovernmentwouldcontact
theCosta Rican authorities withaviewtomaking therelevant notification totheCommittee onRegional
Agreements
148. Therepresentative ofAustralia hadseveral specific questions onagriculture. Heasked ifthe
Dominican Republic wasplanning tonegotiate special safeguards. Heasked foraclarification regarding
theapplication ofimport licences totheso-called rectification commodities, beans, chicken, corn,garlic,
milk, onions, riceandsugar. Healsoasked whether thebound rateintheUruguay Round Schedule
wasbeing applied pending negotiations withregard tothose commodities.
149. Therepresentative ofCanada alsosought clarification about theapplication ofimport licences.
Henoted thatinrecent weeks theDominican Republic hadsought toavailitselfofthetwo-year delay
fortheapplication oftheprovisions onimport licences intheImport Licensing Agreement. However,WT/TPR/M/11 Trade Policy Review
Page 24
hedidnotseetheneedforseeking suchadelayed application ifthere werenolonger anyrestrictive
import licences. Furthermore, henoted that,during thediscussion about thetechnical rectification,
ithadbeenstated thatthiswould entail thecreation oftariffratequotas. Hewondered howthesetariff
quotas were tobeadministered ifimport licences nolonger existed.
150. Therepresentative ofJapan referred totheconsular invoices andnoted thatcustoms procedures
wererather longandcomplicated. Heencouraged theDominican Government topursue theefforts
thattheyhadalready begun tostreamline thecustoms procedures, within thewider framework of
liberalization.
151. TherepresentativeoftheDominicanRepublicansweredthatasadevelopingcountry,hiscountry
wasentitled toatwo-year period toimplement theprovisions oftheImport Licensing Agreement.
However, special safeguards hadbeennegotiated fortheeight agricultural products forwhich the
Dominican Republic hadbeennegotiating thetechnical rectification. Hereiterated thattheissue of
licences hadbecome automatic. Regarding theAustralian concern, hereplied thattheexisting tariff
would apply. Itwaswithin theceiling of40percentthatwasbound intheUruguay Round. Headded
thatthespecial safeguards mentioned bytheEuropean Union would onlyapply totheeight products
thatwere currently subject tonegotiation.
152. Therepresentative oftheUnited States asked several questions about thelawsrelated to
intellectual property andtheirenforcement.
153. Concerning theautomaticity oftheissueoflicences, therepresentative oftheEuropean Union
enquired about thelegal status ofthisdecision, whether there wasatextavailable, andwhat legal
recourse wasavailable totraders. Regarding theapplication ofthespecial safeguard clause forthe
eightproducts, hecontested theconformity ofthisapplication withWTO rules, since hewasunaware
ofanysuchagreement. Hecould notseehowaMember could legally apply these special safeguards
because theMember wasnegotiating arectification.
154. Inresponse tothese enquiries therepresentative oftheDominican Republic reiterated that,
on10December 1995, theSecretary ofStateofAgriculture hadpublished inallnational newspapers
anannouncement totheeffect thatfrom1ofJanuary 1996therewould nolonger berestrictive import
licences inrespect ofproducts thathadpreviously required aspecial authorization fromtheSecretary
ofStateofAgriculture forimportation. These licences were, therefore, converted toautomatic licences.
Instructions hadbeengiven totheDirector ofCustoms topermit entry intothecountry ofallproducts
onwhich theimport taxwaspaid. Licences were nowapplied onafirstcome, firstserved basis.
There werenoimport restrictions foranyproduct. These reforms would beestablished asalawas
soonasthenegotiations forrectification wereconcluded; thiswould allow theauthorities topresent
Congress withonlyonepackage.
155. Headded thatanyone whoconsidered himself affected byanymeasure taken bytheSecretary
ofStateofAgriculture ortheSecretary ofStateofIndustry andTrade hadtherightunder theconstitution
togototheadministrative court, which wasthebody forsettlement ofdisputes between thecitizens
andtheadministration.
156. With regard tointellectual property therepresentative oftheDominican Republic saidthat
although there hadbeenaLawonRegistration ofTrade Names andaLawsince the1940s onthe
Protection onPatents since1911, anewlawwasbeing prepared togobefore Congress on27February,
atthebeginning ofthenewsession ofthelegislature. Thislawwould extend theprotection ofintellectualDominican Republic WT/TPR/M/11
Page 25
property andwould beinconformity withthestandards ofWIPO andtheParisAgreement. According
tothislaw,acollegiate body forsupervision andregulation would besetup,withrepresentatives of
boththeprivate sector andtheGovernment. Itwould hearalldisputes thatmight ariseconcerning
theapplication ofthelegislation inquestion. Headded thatthedraftlawwasincompliance withthe
TRIPS Agreement andtheUruguay Round.
157. Therepresentative oftheUnited States reiterated thathisquestion wasabout thepractical aspect
ofenforcement. Were thereanymechanisms suchasenforcement teams either inthenational orlocal
police forcethatsought toprevent theselling ofpirated audio disksorcomputer programmes? Inrelation
totheITBIS, hewondered ifthere could beasimilar declaration withrespect totheelimination of
thediscriminatory aspects oftheITBIS tax.
158. Concerning intellectual property, therepresentative oftheDominican Republic saidthatany
dispute could behandled under themechanism fordispute settlement oftheWTO, andthat,inaddition,
therewasacopyrightofficeintheDominicanRepublic.Intheeventofcomplaintsconcerningcopyright,
thenational police wasempowered totakeaction toensure thatthelawwasbeing enforced. Thus,
intellectual property rights were guaranteed intheDominican Republic.WT/TPR/M/11 Trade Policy Review
Page 26
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON
159. Atitsmeeting onthe14and15ofFebruary theTrade Policy Review Body helditsfirstreview
ofthetrade policies andpractices oftheDominican Republic. These remarks, made onmyown
responsibility, summarize thesalient points ofthediscussion andarenotintended tosubstitute forthe
collective evaluation andappreciation oftheDominican Republic 'stradepolicies andpractices, which
willbereflected intheMinutes.
160. Thediscussion developed under three main themes: (i)thegeneral economic situation and
reform programme; (ii)theexistence ofa"dual economy" andconsequences fordomestic industry
and(iii)anumber ofspecific questions.
(1) General economic situation andreform programme
(i) Economic reform
161. TheDominicanRepublicwaswidelycommendedbymembersfortherapidprogressofeconomic
andtrade reform since 1990. Itwasrecognized thatthereforms hadhadpositive effects bothon
macroeconomic variables andontheexternal accounts.
(ii) Trade liberalization
162. Members appreciated thattheDominican Republic hadmade great strides towards amore
outward-oriented trade régime. However, notewastaken ofthehighreliance offiscal revenue on
tradetaxes, andconcern wasexpressed thatthiscould impede further reforms unless awaywasfound
tobroaden thetaxbase.
(iii) RôleoftheState intheeconomy
163. Participants noted thecrucial roleoftheState inkeysectors oftheDominican Republic 's
economy, andrequested further information ontheprivatization programme andonremaining price
controls. Some members emphasized theimportance ofprivatization insectors suchaselectricity to
enhance productivity byimproving thecapital stock. Onemember asked iftheDominican Republic
hadnotified itsStatetrading monopolies inconformity withtherequirements ofArticle XVII ofthe
GATT.
(iv) Concentration ofexports
164. Members expressed theirconcern about thevulnerability oftheDominican economy dueto
itsheavy reliance onalimited number ofexport products andmarkets. Members attributed this
concentration topreferential arrangements suchastheCBIandtheLomé Convention, andraised
questions concerning theeffects ofsuchconcentration onthelong-term competitiveness oftheeconomy
andthedevelopment ofother sectors. Theneedforactive stimulation ofthediversification process
wasemphasized.
165. Inresponse, therepresentative oftheDominican Republic saidthestabilization measures and
structural reforms wereaimed atcreating market conditions insupport ofthereforms, andatattracting
foreign investment which would allow thetransfer oftechnology necessary toreduce thevulnerability
oftheeconomic andexport structure inbothgoods andservices. Theauthorities recognised that,inDominican Republic WT/TPR/M/11
Page 27
small economies, onlysuchopenness could guarantee permanent flows ofcapital andtechnology.
Herecognised thattheprocess ofmarket opening mustbedeepened further, topreserve thegains that
hadbeenmade andtofindnewniches ininternational markets.
166. Therepresentative stressed thattheauthorities wereconscious oftheneedforfurther market
diversification, although ithadtoberecognized thattheproximity ofthehugeNorth American market
andpreferential schemes hadinfluenced developments andprovided important benefits inthepast.
Thereduction ofpreferences intextiles might haveinitial negative effects, butthere wasstilltimeto
make thenecessary adjustments.
167. Hestated that,while theprivatization process hadbeenslow, most public enterprises were
notveryattractive toprivate investors; however, there were nobarriers toentry inthese sectors.
There werenolonger anyStateimport monopolies intheDominican Republic. Complete privatization
would depend oncongressional approval; heemphasized thedifficulties foraminority government
tohavebillsaccepted, particularly inanelection period. Fuels were theonlyproducts nowsubject
toprice controls.
(2) "Dual Economy" andconsequences fordomestic industry
(i) FreeZones
168. Theimportant roleoffreezones inpromoting theexport sector asanengine ofgrowth inthe
Dominican economy wasnoted. However, members stressed theimportance ofreaching abetter balance
between thefree-zone sector andtherestoftheeconomy, through thedevelopment ofappropriate
linkages.
(ii) Tariff escalation
169. Members welcomed theconsiderable rationalization andreduction oftariffrates, butexpressed
some concern about thecontinued tariff escalation, which affected resource allocation byproviding
higheffective protection forsome industrial sectors. Some members recommended amore uniform
tariff régime, withfewer rates.
(iii) Taxneutrality-ITBIS
170. Members commended thetaxreform implemented bytheDominican Republic, butexpressed
theirconcern about thelackoftaxneutrality intheITBIS taxwhich, theyconsidered, targeted imports
more thandomestically produced goods. Itwassuggested thattheITBIS wasnotcompatible with
theArticle III:2requirement fornational treatment inrespect ofinternal taxation.
171. Inresponse, therepresentative oftheDominican Republic saidthatthefreezones wereseen
asanintermediate stepintheintegration oftheDominican economy intoworld markets. They had
already contributed totechnology transfer andlabour training. Inaddition, thefreezones contributed
tothediversification oftheDominican export base. Therapid development oftheservices sector,
especially tourism, hadallowed further market development.
172. Referring toquestions ontheITBIS, therepresentative wasaware thatlegislation needed to
beupdated. Heemphasized thatthetaxwascollected onlyatonestage. Exemptions hadbeen
progressively eliminated, showing thecommitment toeliminate anydiscriminatory elements. ThebaseWT/TPR/M/11 Trade Policy Review
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hadalsobeenextended toother goods, previously exempt. Details ontheoperation ofthetaxwere
provided. TheSelective Consumption Taxhadvarying rates, mainly applying toautomobiles and
domestic electrical goods notproduced inthecountry. Rates fortobacco andalcoholic beverages had
beenunified, sothatthiswasnolonger discriminatory.
173. Taxreforms hadreduced thedependency ontrade taxes to4.1percentofGDP, compared
with5.7percentin1992. There hadalsobeenareduction intariff escalation; average effective rate
hadfallen by6percentfromthesituation in1990to14percentin1994. ThenewTariff Code was
fullyconsistent withtheauthorities 'Uruguay Round commitments.
(3) Specific issues
(i) Agriculture
174. WhilememberspraisedtheactiveroleoftheDominicanRepublicintheUruguayRound,widely
shared concerns wereexpressed overthemodifications nowbeing sought toitsbindings inagriculture.
Onemember feltthatseeking tomodify thecommitments sosoonafterconclusion oftheRound raised
questions about thetransparency andsecurity ofaccess totheDominican market.
(ii) Import licences
175. Members commended theDominican Republic forhaving largely eliminated prohibitions and
import licensing. However, members wereconcerned about thelegalstatus ofremaining import licences
andscope fordiscretion intheirallocation. Clarification wassought inthisarea.
176. Inresponse,therepresentativeoftheDominicanRepublicsaidthathisGovernmentwascurrently
conducting negotiations torectify itsUruguay Round Schedules inrespect ofsome agricultural items,
andhoped tocomplete thesesoon. Asofficially published, from1January 1996, therewerenolicensing
restrictions onanyagricultural items; however, legaladoption oftheseadministrative measures would
require congressional approval. Onlyitems tariffied under theproposed rectification ofschedules would
besubject tospecial safeguards. Details wereprovided onother measures tomove progressively to
amarket economy intheagricultural sector, including newlandreform initiatives. Some Dominican
products faced restrictions onaccess todeveloped country markets. Theauthorities noted thatSpain
hadbeendeclared freeofAfrican swine fever andthismatter would beresolved inthecontext of
harmonization withtheWTO rules.
(iii) Customs reform
177. Members recognized theefforts oftheDominican Republic inthisarea. Nevertheless, some
stillconsidered customs procedures tobecumbersome. They alsoenquired about intentions toreform
thepresent valuation system, based onminimum values, toconform totheWTO Customs Valuation
Agreement. Several members alsoconsidered consular invoice feesasanextra taxonimports.
(iv) Foreign investment
178. Thepassage ofthenewforeign direct investment lawwaswelcomed. Details ofthelegislation
wererequested. Onemember stressed that,toderive fullbenefits, including fromtechnology transfers,
thenewlawshould gohand-in-hand witharevised Intellectual Property Law.Dominican Republic WT/TPR/M/11
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(v) Services
179. While members generally welcomed thecommitments made bytheDominican Republic in
theGATS,somecalledattentiontoapparentdiscrepanciesbetweenthesecommitmentsandsomenational
legislation. Onemember stressed theneedforrapid approval ofthenewMonetary andFinancial Code.
(vi) Rules oforigin andpreferential agreements
180. Questions were asked about therules oforigin applied bytheDominican Republic. The
authorities were requested tonotify thefree-trade agreement withCosta Rica.
181. Questions werealsoasked ontheimplementation ofUruguay Round commitments intheareas
ofcompetition lawandanti-dumping andcountervailing measures.
182. Inresponse tothese questions, therepresentative oftheDominican Republic responded that,
tosomeextent,thepaceofdevelopmentshadovertakenthepre-existinglegalandinstitutionalframework.
Alarge body oflaws, decrees andspecial contracts hadalready beeneliminated. ThenewForeign
Investment Lawwould accord national treatment toforeign investment andremove mostrestrictions
except forenvironmental andsecurity requirements; freerepatriation ofcapital waspermitted and
foreign anddomestic firms could participate equally inprivatization bids.
183. TheDominicanauthoritiesrecognisedtheimportanceofthelinkbetweenprotectionofintellectual
property andforeign investment, andadraftlawhadbeenprepared tobring Dominican legislation
intolinewiththeTRIPS Agreement. Therepresentative alsogavedetails ofenforcement ofintellectual
property laws.
184. Competition ruleswould becompleted withspecific rulestosafeguard competition intheareas
oftelecommunications, transport andenergy, andanewregulatory framework wasbeing created.
185. Details weregiven onthemodernization ofcustoms procedures andtheadvances which had
beenmade. Thelistofcustoms values hadreduced thediscretion ofcustoms officers. Theauthorities
expected toconform toWTO requirements within theallowed five-year period. Consular feeswere
applied onasliding scale. Rules oforigin werelinked onlytotrade withCosta Ricaunder theFTA
withthatcountry andusedthe"substantial transformation" criterion.
186. Most lawsrelating toservices hadbeenbrought intolinewiththecommitments given bythe
Dominican Republic. Intheareaoftransport, theDominican offer wasperhaps thewidest ofany
country, including inmaritime services, andwaslinked tothedesire ofthecountry tointroduce a
multi-modal transport system. Since negotiations onmaritime services werestillongoing, theoffer
could notyetberegarded asfinal; existing laws could thusnotbeinconflict withtheWTO.
Restrictions ontourist guide services would beresolved withthepromulgation ofanewlawon
professional services being drafted inanticipation ofthecompletion ofthese negotiations intheWTO.
***
187. Ingeneral, theTPRB haswelcomed thethoroughgoing reforms thattheDominican Republic
hasundertaken, especially since 1990. Weare,however, concerned about aspects suchasthedualism
oftheeconomy and,asyet,anapparent lackofcoherence inthelegal framework fortrade policy
making. Inthiscontext, werecognize thattheauthorities aretaking serious steps tomodernise andWT/TPR/M/11 Trade Policy Review
Page 30
unify thisframework andwewishthem wellinthese efforts, which should create amore stable and
predictable trading environment foreconomic development. Wearealsoconscious ofthepotential
vulnerability oftheeconomy because ofthelimited number ofexport products andmarkets, andwould
strongly encourage active Government leadership inthediversification process.Dominican Republic WT/TPR/M/11
Page 31
Annex 1
Additional comments bytheGovernment oftheDominican Republic ontheITBIS
TheDominican Republic 'sTaxontheTransfer ofIndustrialized Goods andServices (ITBIS) isa
value-added tax.Thetaxisapplied using thecredit method, withtheenterprise paying taxbased on
thevalue ofitssalesandclaiming adeduction fortheITBIS paidonitspurchases ofgoods andservices.
Inother words, thetaxpaidontheinputs purchased isdeducted from thetaxwhich theenterprise
paysonthesaleofitsproducts. Inthecaseofimports, theimporter paysITBIS atthetimeof
importation anddeducts theITBIS paidatimportation when hesellstheproduct onthemarket.
Coverage oftheITBIS. Food, medicine, agricultural inputs, petroleum andpetroleum derivatives,
andelectrical energy areexempt from thepayment ofITBIS. Theexemptions areslightly different
forgoods produced locally andimports. Thegoods listed below areexempt fromITBIS when locally
produced butnotwhen imported: Primary-sector products derived fromagriculture (maize andwheat),
animal husbandry, forestry, hunting, fishing andmining which arepassed onbytheproducer without
processing ortreatment other thanthatnecessary topreserve them intheirnatural state.
Milk, rawandpasteurized.
Bread, flouringeneral, leguminous vegetables, processed cereals, ground coffee, chocolate fordomestic
consumption andcocoa.
Rice, tomato sauce, oilandother condiments ingeneral, andother industrialized staples.
Poultry andeggs.
Fruit andgreen vegetables oftheagricultural sector, fresh, frozen, dried orcanned.
Meat, fresh, frozen ordehydrated, fish,seaweeds, shellfish, fresh orfrozen.
Water, natural.
Cheese, butter, salami, sausage andpasta.
Saltfordomestic use,sugar andhoney.
Coalfordomestic use.
Works ofartbynational artists.
Matches.
Natural soapfrom torchwood ("cuaba"), inbarsandballs, toothpaste anddetergents.
Since theintroduction ofITBIS in1983, theGovernment oftheDominican Republic has
systematically enlarged thetaxbase, gradually including goods previously exempt. There arevarious
reasons whythebasehasbeenenlarged gradually: (1)toreduce resistance tothetax;(2)because
oftheneedtoimprove theadministration ofthetaxbefore extending itscoverage. Inourcountry,
where wehavenoexperience ofthistypeoftax,these factors arehighly relevant. Thefactthatthe
Government haspursued apolicy ofprogressively reducing theexemptions demonstrates thecountry 's
commitment toapplying thistaxinanon-discriminatory manner.