RESTRICTED
WORLD TRADE WT/TPR/S/1
9May1995
ORGANIZATION(95-1146)
TRADE POLICY REVIEW
COSTA RICA
Report bytheSecretariat
Thisreport, prepared forthefirstTrade Policy Review ofCosta Ricahasbeendrawn
upbytheWTO Secretariat onitsownresponsibility. TheSecretariat has,asrequired
bytheAgreement establishing theTrade Policy Review Mechanism (Annex 3ofthe
MarrakeshAgreementEstablishingtheWorldTradeOrganization),soughtclarification
from theGovernment ofCosta Ricaonitstrade policies andpractices.
Document WT/TPR/G/1 contains thepolicy statement submitted bytheGovernment
ofCosta Rica.
Note: Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body onCosta Rica.Costa Rica WT/TPR/S/1
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS xi
(1) Introduction xi
(2) Costa Rica inWorld Trade xii
(3) Institutional Framework xiii
(4) Trade Policy Features andTrends xiii
(i) Evolution oftrade policies andinstruments xiv
(ii) New initiatives xvi
(5) Trade Policies andForeign Trading Partners xvii
(6) Conclusion xvii
I. THE ECONOMIC ENVIRONMENT 1
(1) Main Features oftheEconomy 1
(2) Recent Economic Developments 7
(i) Introduction 7
(ii) Supply anddemand 7
(iii) Savings andinvestment 7
(iv) Prices 9
(v) Public finance 9
(vi) Monetary policy 11
(vii) Balance ofpayments 13
(3) Composition andDirection ofMerchandise Trade 15
(i) Composition oftrade 15
(ii) Direction oftrade 15
(4) Outlook 19
Annex I.1 20
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 21
(1) Introduction 21
(2) General Framework 21WT/TPR/S/1
Page ivTrade Policy Review Mechanism
Page
(3) Structure ofTrade Policy Formulation 21
(i) Legislative andexecutive branches ofgovernment 21
(ii) Advisory bodies 22
(4) Trade Policy Objectives 23
(i) General trade policy objectives 23
(ii) Sectoral trade policy objectives 23
(iii) TheUruguay Round 23
(5) Trade Laws andRegulations 24
(6) Trade Agreements andArrangements 25
(i) Multilateral agreements 25
(ii) Regional agreements 28
(iii) Bilateral agreements 31
(iv) Other agreements orarrangements 31
III. FOREIGN INVESTMENT AND TRADE 33
(1) Framework forForeign Direct Investment 33
(2) Trends andPatterns inForeign Direct Investment 35
IV. TRADE POLICIES AND PRACTICES BYMEASURE 37
(1) Overview 37
(2) Measures Directly Affecting Imports 38
(i) Registration, documentation 38
(ii) Tariffs 40
(iii) Tariff quotas 47
(iv) Import surcharges andsurtaxes48
(v) Other levies andcharges 48
(vi) Preshipment inspection51
(vii) Customs valuation 52
(viii) Import prohibition 52
(ix) Import licensing 53
(x) Import quotas 53
(xi) State trading 54
(xii) Import cartels 58
(xiii) Countertrade 59
(xiv) Standards andother technical requirements 59
(xv) Government procurement 61
(xvi) Local content requirements 65
(xvii) Rules oforigin 65Costa Rica WT/TPR/S/1
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Page
(xviii) Anti-dumping andcountervailing dutyactions 66
(xix) Safeguard actions 67
(xx) Balance-of-payments measures 68
(xxi) Other measures 68
(3) Measures Directly Affecting Exports 68
(i) Registration, documentation 68
(ii) Export taxes, charges andlevies 69
(iii) Minimum prices 71
(iv) Export prohibitions 71
(v) Export licensing 72
(vi) Export quotas 73
(vii) Export cartels 73
(viii) Voluntary restraints, surveillance andsimilar measures 73
(ix) Measures maintained byimporting countries 73
(x) Export subsidies 74
(xi) Duty andtaxconcessions 74
(xii) Export finance 77
(xiii) Export insurance andguarantees 77
(xiv) Export promotion, marketing assistance 77
(xv) Export performance requirements 77
(xvi) Free-trade zones, export processing zones 78
(4) Measures Affecting Production andTrade 79
(i) Adjustment assistance 79
(ii) Assistance forresearch anddevelopment (R&D) 79
(iii) Production assistance, taxconcessions 80
(iv) Pricing andmarketing arrangements 81
(v) Regional assistance 84
(vi) Competition policy 85
(vii) Enforcement ofintellectual andindustrial property rights 86
(viii) Other measures 88
V. TRADE POLICIES AND PRACTICES BYSECTOR 89
(1) Overview 89
(2) Agriculture 92
(i) Crops andlivestock 94
(ii) Forestry 104
(iii) Fishing 105
(3) Mining andEnergy 105
(i) Mining 105
(ii) Energy 106WT/TPR/S/1
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(4) Manufacturing 108
(5) Services 114
(i) Tourism 116
(ii) Banking, finance andinsurance 117
(iv) Telecommuncations 119
Annex V.1 121
VI. TRADE DISPUTES AND CONSULTATIONS 128
(1) Dispute Settlement under GATT 1947 128
(i) Complaints against Costa Rica 128
(ii) Complaints byCosta Rica 128
(iii) Third party interests 130
(2) Dispute Settlement under theMultifibre Arrangement 132
(3) Disputes outside GATT 132
REFERENCES 133
APPENDIX TABLES 135Costa Rica WT/TPR/S/1
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CHARTS
Page
I. THE ECONOMIC ENVIRONMENT
I.1 Real percapita income, 1970-93 2
I.2 Trade ingoods andnon-factor services aspercentage ofGDP, 1970-93 5
I.3 Sectoral distribution oFGDP, 1982 and1993 5
I.4 Selected indicators ofmacroeconomc development, 1971-93 8
I.5 REER index andmerchandise trade (1987 prices), 1970-92 14
I.6 Commodity composition oftrade, 1970, 1980 and1992 16
I.7 Origin ofimports, 1970, 1980 and1992 17
I.8 Direction ofexports, 1970, 1980 and1992 18
III. FOREIGN INVESTMENT AND TRADE
III.1 Foreign investment inflows bysector, 1990-92 36
IV. TRADE POLICIES AND PRACTICES BYMEASURE
IV.1 Average tariff levels andfiscal revenue from imports inCosta Rica, 1980-95 41
IV.2 Tariff exemption schemes, 1989 toMarch 1993 45
IV.3 Public procurement market, 1993 64
IV.4 Imports bythepublic sector, 1989 toMarch 1993 65
IV.5 Taxrevenue from exports, 1989-93 70
IV.6 Trend infiscal revenue from exports, 1980-93 71
IV.7 Recipients ofCAT benefits, 1990-93 76
V: TRADE POLICIES AND PRACTICES BYSECTOR
V.1 Nominal tariff protection inCosta Rica, 1994 90
V.2 Traditional andnon-traditional merchandise exports, 1981-92 92
V.3 Structure ofagriculture, livestock, forestry andfisheries output, 1992 93
V.4 Bananas: areaunder cultivation, productivity andexports, 1987-93 96
V.5 Coffee exports: volume andaverage f.o.b. price, 1989-94 98
V.6 Producer Subsidy Equivalents, 1986-89 102
V.7 Value added inservices, 1992 115WT/TPR/S/1
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TABLES
Page
I. THE ECONOMIC ENVIRONMENT
I.1 Basic economic andsocial indicators 3
I.2 Economic performance 4
I.3 Balance ofpayments 6
I.4 External debt 14
III. FOREIGN INVESTMENT AND TRADE
III.1 Sectoral distribution offoreign direct investment stock, 1970-1990 36
IV. TRADE POLICIES AND PRACTICES BYMEASURE
IV.1 Level andstructure oftheCosta Rican customs tariff, 1986-95 42
IV.2 Structure ofcharges onimports ofselected products, 1994 49
IV.3 Trading andmarket activities oftheConsejo Nacional deProducción ,1988-94 55
IV.4 Status ofCODESA holding companies, 1984-95 56
IV.5 State involvement intheCosta Rican economy, 1995 57
IV.6 Export taxes, 1995 70
IV.7 Fixed profit margins fordomestic traders, asofMarch 1994 83
V. TRADE POLICIES AND PRACTICES BYSECTOR
V.1 Coffee: Operational stages oftheAPPC Retention Scheme 99
V.2 Manufacturing output andvalue added, 1987 and1992, andnumber
ofestablishments, 1990 109
V.3a Costa Rica'simport trade withtheworld 1980, 1985 and1992 by
ISIC three-digit codes andfour-digit SITC Rev.1 items 110
V.3b Costa Rica'sexport trade withtheworld 1980, 1985 and1992 by
ISIC three-digit codes andfour-digit SITC Rev.1 items 112Costa Rica WT/TPR/S/1
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APPENDIX TABLES
Page
AI.1 Merchandise imports bybroad commodity group 137
AI.2 Merchandise exports bybroad product group 138
AI.3 Imports byprincipal region andcountry oforigin 139
AI.4 Exports byprincipal region andcoutry ofdestination 140
AV.1 Average nominal tariff protection, 1994 141
AV.2 Tariff escalation andtariff ranges inCosta Rica, 1994 145
AV.3a Imports toCosta Rica, 1980, 1985 and1992 byISIC three-digit codes and
four-digit SITC Rev.1 items 148
AV.3b Exports from Costa Rica, 1980, 1985 and1992 byISIC three-digit codes and
four-digit SITC Rev.1 items 156
AV.4 Treaties relating totrade inservices towhich Costa Rica isasignatory 161Costa Rica WT/TPR/S/1
Page xi
SUMMARY OBSERVATIONS
(1) Introduction
1. Following thedebtcrisis oftheearly
1980s, Costa Ricabegan aseries ofreforms to
reduce macroeconomic imbalances andrestore
growth. In1986, economic policies wereshifted
fromanimport-substitutiontoanexport-oriented
model, supported byexport incentives. These
reforms helped toenhance theeconomy 's
international competitiveness andreduce anti-
export bias. From 1990, inamove towards
more neutral, outward-looking policies, trade
liberalization wasintensified andmade more
secure through commitments made onCosta
Rica'saccession totheGATT andsubsequent
membershipoftheWTO.Averagenominaltariff
protection wascutfrom about 17percentin
1989 to11.2percentin1994; prior import
deposits,tariffsurcharges,restrictiveimportand
export licensing requirements have been
eliminated;administrativeprocedureshavebeen
streamlined andfinancial assistance tonon-
traditional exports isbeing phased out.Official
pricesandexclusivemarketingarrangementsfor
basic foods havebeenabandoned. Protection
ofintellectual property isbeing reinforced.
2. Underthereformprogramme,realGDP
grew atanannual average rateof4percent
inthelastdecade, driven largely byprivate
consumption andinvestment; in1994growth of
4.5percentwasachieved.Inflationwaslargely
brought under control, falling fromsome90per
centin1982tofluctuate inthe10to30percent
range, according tothestop-go cycles which
characterizeCostaRica'seconomic
management. Realpercapita income grew at
amoderate paceinthelastdecade andreached
US$2,482 in1994; with extensive social
programmes, Costa Rica'ssocial indicators are
among thebestinLatin America, although
adverselyaffectedbyausteritymeasuresadopted
inthewake ofthedebtcrisis.
3. Fiscalreformsintroducedin1990helped
toreduce thepublic sector deficit but,inmid-
1993, thedeficit widened again asspendingincreased ahead ofthe1994elections. In1994,
theshare ofthepublic deficit inGDPwasthree
times thatof1993, exacerbated byincreases in
wages andpensions, internal debt interest
payments andtransfers tothepublic andprivate
sectors. Inflation, which felltobelow 10
percentin1993, roseagain tosome20percent
in1994. ThenewGovernment plans toaddress
thedeficit with ataxreform package
comprising, interalia,a50percentincrease
insalestax,modification ofcertain revenue tax
rates andelimination of23internal taxes of
marginal revenue interest. Theprojected Third
Structural Adjustment Plan(PAE III),expected
tocutthefiscal deficit though public sector
reform andderegulation, wasdropped in
March1995,althoughCentralBankreformsare
currently being legislated. Inaddition, ithas
been learned thatCosta Rica hasrecently
introduced somesignificant tariffincreases (not
notified totheWTO bythecompletion ofthis
report), forfiscal reasons andwillreduce public
expenditure (andemployment) bysubstantially
lessthanenvisaged under PAEIII.
4. Theratio ofinvestment toGDP has
grownstronglyinrecentyears;however,savings
havenotincreased inparallel, leaving agap
which hasbeen filled byforeign direct
investment, mostly intourism andretail trade.
Apartfromownership-relatedlimitations,mostly
affecting someservices, Costa Rica'sinvestment
legislation isneutral, freeofrestrictions on,or
incentives exclusively available to,foreign
investors.
5. Costa Rica'sinternal imbalances are
reflected byapersistent, substantial current
account deficit. While merchandise exports and
income fromtourism havegrown substantially
inrecent years, responding toaslight
depreciation oftherealeffective exchange rate,
thishasnotoffset thestrong import growth
resulting from increased demand asa
consequence ofexpansionary fiscal policies and
trade reforms. Despite constraints related to
pastoperational losses oftheCentral Bank, theWT/TPR/S/1
Page xiiTrade Policy Review Mechanism
useofmonetary policy toattempt tocontrol
inflation hasincreased interest rates, attracting
foreign capital and slowing therate of
depreciation, aswellaspushing upoperating
costs ofbusiness.
6. Therecent increase intaxes andtariff
ratesmayhelptoreduce thefiscal andcurrent
account deficits intheshort term. Should this
succeed, itmaybepossible toeasemonetary
policy andreduce interest rates, paving theway
formore sustainable, low-inflation growth.
However, inopting toreduce thefiscal deficit
byagreater emphasis onincreased taxreceipts
thanonpublic sector reforms,Costa Rica is
likely toforgo some opportunities toimprove
resource allocation andtomaintain theexisting
structural rigidities thatunderlie thechronic
current account deficits. Moreover, thetariff
increases create uncertainties concerning the
stability ofthetrade régime, aswell as
inhibiting structural change andsacrificing
higher gains fromtrade.
7. Thesectoral composition ofGDP has
changed littleovertime. Thedominant services
sector hasledeconomic growth inthelast
20years, andthere seems tohavebeenaslight
shiftfromagriculture toindustry. Thiscould
beaccentuated under policies, adopted since
1990, which reduce self-sufficiency objectives
and envisage lower State involvement in
agriculture; producers ofbasic foodcrops will
face pressures todiversify orconvert to
alternative, export-oriented crops. In1994,
plans toimprove theinfrastructure and
encourage expansion ofthefisheries sector were
introduced. Inmanufacturing, where most
output isinfoodprocessing, theobjective of
raisingdomesticvalueaddedwascomplemented
byemphasis onincreasing competitiveness,
encouraging technology transfer andfostering
agro-industrial activities.
8. Historically,extensiveStateinvolvement
intheeconomywasmaintainedlargelyforsocial
welfare reasons, including security ofbasicfood
supplies. However, theStatepresence hasbeen
scaled back; since 1986, thepublic holdingcompany CODESA, engaged inproduction,
trade and services activities, has been
progressively downsized. Nevertheless, state
monopolies remain inoilimports andrefining,
insuranceandcertainbankingand
telecommunication operations. Inother areas
suchasmining, distilling, electricity generation
anddistribution,portadministrationandcertain
public services, private companies mayoperate
through franchises orjointventures. Nomajor
privatization plans seem tobeunder way.
9. The private sector has generally
supported market opening. However, it
remains concerned withhighimport duties on
raw materials, lack ofprotection against
possible dumping byforeign exporters, high
interest rates, highcharges forcertain public
services (ports, electricity, telecommunications)
andinadequate export-related infrastructure.
The Government 'sability torespond is
constrained bythefiscal situation anditsown
hesitancy towards privatization. While anti-
dumpinglawsbeingintroducedmaymeetprivate
sector demands, carewillbeneeded toensure
thatsuchmeasures arenotusedtodissipate the
effects oftrade reforms.
(2) Costa RicainWorld Trade
10. Costa Ricaistheleading merchandise
trading nation inCentral America. In1993,
Costa Rica wastheworld 'ssecond largest
banana exporter andin1992ranked asthefifth
coffee exporter, witharound one-fifth ofworld
exports ofbananas andabout 4percentof
coffee exports. Between themid-1980s and
1993, theshare oftrade ingoods andservices
toGDP rosefrom 60to93percent. Main
export markets forgoods aretheUnited States,
theEuropeanUnionandotherCentralAmerican
countries. Preferential treatment granted bythe
United States andmeasures suchasfreezones,
exportcontractsandtemporaryadmissionunder
maquila régimes introduced byCosta Ricain
the1980s haveallowed non-traditional exports
togrow faster thanthetraditional products.Costa Rica WT/TPR/S/1
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11. In1993 and1994, tourism wasthe
major source offoreign exchange, ahead of
bananas andcoffee. Between 1985 and1992,
importsandexportsofcommercialservicesrose
two-andthree-fold; tourism accounted forover
halfofservices exports.
(3) Institutional Framework
12. Trade measures inCosta Rica are
mainly based onlaws; particular emphasis is
given to ensuring that such laws are
constitutional. This provides astable and
predictable policy framework which is
appreciated bythebusiness community. Costa
Rica'slegislation incorporates regional,
multilateralandotherinternationalagreements.
13. Althoughplansforrationalizationexist,
trade policy-making isdecentralized and,
therefore, highly dependent oncooperation
among therelevant Government bodies. The
MinistryofForeignTrade(COMEX)hasoverall
responsibility fortrade policy formulation and
implementation,includingsectoralcoordination,
aswell asproviding representation in
multilateral forasuchastheWTOandpursuing
bilateral negotiations. The Ministry of
Economy,IndustryandCommerce(MEIC)deals
withCentral American integration issues and
tariff policy matters.
14. TheCosta Rican authorities believe that
theelaboration ofsuccessful trade policies
depends ontheinvolvement andparticipation
oftheprivate sector. Thus, theGovernment
consults systematically withbusiness interests
inadhocworkinggroups.However,noformal,
periodic review oftrade policy ismade byany
independent body.
15. Costa Rica acceded totheGATT in
1990. Until theconclusion oftheUruguay
Round, itmaintained observer status inone
Tokyo Round agreement, theArrangement
Regarding Bovine Meat. From 1988, itwasa
signatory oftheMultifibre Arrangement, under
which itmaintained bilateral agreements with
theUnited States andCanada.16. Costa Ricawasanactive participant in
theUruguay Round, ratifying theMarrakesh
Agreement on26December 1994 tobecome a
founder member oftheWTO. Itplans tosign
one Plurilateral Trade Agreement, the
International Dairy Agreement. Costa Rica's
textile andclothing exports maybeadversely
affectedbycompetitionfromlowercostsuppliers
asrestrictions arephased out,andfromerosion
ofCBIpreferences intheU.S.market. While
Costa Ricahaswelcomed theestablishment of
aWTO work programme ontrade andthe
environment, itisexpected tooppose issues
which may disguise protectionist trends,
including discussion oftrade andlabour
conditions.
(4) Trade Policy Features andTrends
17. Costa Rica conducts itsmain formal
traderelationsthroughtheWTOandtheCentral
American Common Market (CACM). Theshare
ofCentral American countries initsimports is
lessthanhalfofthatinitsexports totheregion;
thisgapseems tohavewidened since 1987.
Theshare ofmerchandise exports destined to
non-regional markets hasrisenconsiderably in
recent years.
18. Regional andbilateral agreements are
important elements inCosta Rica'stradepolicy.
On1January 1995, theFree Trade Area
Agreement between Costa Rica andMexico
entered intoforce. Costa Ricahasbeenactive
intheestablishment oftheAssociation of
Caribbean States, tobelaunched inmid-1995
andintended topromote greater integration in
theregion through liberalization oftrade,
investment andtransport. Costa Ricaistaking
partindiscussions toestablish afreetrade area
among themembers oftheCACM, Colombia
andVenezuela by2003, aswellasaprogramme
foraFreeTrade AreafortheAmericas by2005.
19. While Costa Ricahassofarsupported
fullimplementation oftheCACM freetrade
area, itdoes notsupport thecreation ofa
common external tariff, acommon taxcollection
bodyorthefreemovement ofpersons.WT/TPR/S/1
Page xivTrade Policy Review Mechanism
20. Costa Ricaalsomaintains preferential
trade agreements withtheDominican Republic
andPanama; thelatter covers alarge partof
thetrade flows between thesignatories.
(i) Evolution oftrade policies and
instruments
21. CostaRica'seconomicpolicieschanged
direction inthemid-1980s, when apolicy of
region-oriented import substitution was
gradually replaced byoneofexport orientation.
Considerable efforts were made toachieve
better, more secure access forCosta Rican
exports andexpand clothing andnon-traditional
agricultural exports. However, since 1990
emphasis hasbeenplaced onreducing import
barriers andexport incentives, toachieve a
more neutral régime.
22. Onaccession totheGATT, Costa Rica
bound itstariffs atageneral level of
55percent. These commitments were
strengthened intheUruguay Round byagreeing
toreduce thebound rateto45percentby2004.
Transposition ofCosta Rica'sSchedule LXXXV
intotheHarmonized System wascompleted in
1994.
23. InJanuary 1995, Costa Ricaadopted
anewtariffschedulecomprising28tiers,adding
anumber ofhigh duties (ranging upto
270percent) reflecting tariffication under the
Uruguay Round ofagricultural andprocessed
products previously subject toimport
restrictions, aswell assome revisions to
industrial tariffs tocounter distortions inworld
trade incertain textile items. Tariffs thusapply
inanon-neutral manner across sectors, with
tariff escalation apparently designed tofavour
domestic manufactures andrawmaterials of
CACM origin. Thenewtariff increased tariff
dispersion andpeaks. Asnoted, further
changes were apparently made inearly April
1995, buthavenotyetbeennotified totheWTO.
24. Concessional entry isavailable for
imports covered bypreferential agreements;
items under régimes suchasfreezones, exportcontracts, tourism contracts andtemporary
admission; andgoods purchased byState
agencies andprivate firms providing public
services. Reduced tariffs apply foragricultural
andindustrial inputs when local supplies are
notavailable insufficient quantity, quality or
price. In1992, 50percentofimports were
covered bytariff concessions andpreferences.
25. Thetaxoncustoms value hasbeen
incorporated inthetariff andforms partof
Costa Rica'sUruguay Round Schedule. Import
surcharges wereeliminated inMarch 1992.
26. Internal taxes donotdiscriminate
between domestic andforeign goods. A
10percentsales tax(possibly tobeincreased
to15percent) affects virtually allgoods and
services. Aselective consumption taxranging
from 5to75percent applies mainly to
industrial goods. Twotaxes (IDA andIFAM)
withratesfrom2.5percentto14percentare
collected mainly onalcoholic beverages, certain
bottled waters andcigarettes. Cement and
second-hand transport equipment aresubject to
specific sales taxes.
27. Registration anddocumentation fees
appear based onthecostofservices rendered
andaffect trade inarelatively uniform manner.
Mooring andhandling feesarehigher for
imports thanexports. Portfeesarerelated to
volume, except forstorage fees(including those
forcustoms warehouses) which contain an
advalorem element based onthec.i.f. value.
28. With theaim ofsimplifying and
accelerating import andexport administration,
a"single window" forforeign trade procedures
wasintroduced inNovember 1994. Tariffs,
taxes, feesandcharges relating toimports are
collected bytheCentral Bank orother state-
owned banks.
29. Import prohibitions aremaintained on
public health, security and environmental
grounds. Abanonimports ofallfoodstuffs
containingcoffeewasabolishedin
December 1994. Import licensing, used toCosta Rica WT/TPR/S/1
Page xv
protect domestic production ofcertain
agricultural items, waseliminated atthesame
time. Theallocation ofremaining quotas on
imports (e.g.tariff quotas under theUruguay
Round minimum access commitment) isnow
made through BOLPRO, thecommodity
exchange established in1992.
30. Despite thereduction intheactivities
ofCODESA andcutsinState intervention in
agriculture, stateentities stillenjoy monopoly
rights,grantfranchisesthroughpublictendering
andparticipate inanumber ofeconomic
activities. Since 1983, barter trade withcertain
countries hasassisted Costa Ricainobtaining
rawmaterials oreliminating coffee surpluses.
31. Public procurement ofgoods and
services, worth about US$1.4 billion in1993,
isgoverned bydetailed rules, except forstate
trading enterprises, whose purchasing issubject
onlytogeneral principles. Although nospecific
margins apply, preference isgiven toanysole
domestic supplier ofgoods orservices, andto
nationalfirmswhichcanoffersimilarconditions
toforeign firms tendering forpublic work
contracts. TheNational Supplies Agency
organizes procurement procedures andthe
Comptroller-General'sOfficemonitors
adjudications andappeals. Nodetailed dataon
contracts orsuppliers wereavailable fromthe
authorities.
32. Costa Ricaapplies standards adopted
atinternational, regional ordeveloped country
levels. TheStandards Office (ONNUM) ensures
thatlegitimate objectives arepursued inthis
areaandchecks compliance byspot-sampling
ofgoods.
33. Export restrictions, reflecting mainly
internationalobligations,affectcoffeeanditems
covered bytextile agreements, while access to
EUtariffquotas forbananas hasbeenregulated
throughexportcertificatessince1January1995.
Export quotas forcoffee aresettaking into
account domestic consumption, aswell as
retention commitments bytheAssociation of
Coffee Producing Countries whenever theseareinforce; sucharetention scheme operated from
October 1993toMay1994. Export licensing,
based ondomestic supply considerations, was
abolished inDecember 1994; thiscannowbe
usedonlyinexceptional circumstances asalast
resort.Environmentalprotection,datacollection
orcompliance withinternational orbilateral
commitments arethemain reasons for
maintaining suchrequirements.
34. Export licensing feesonanadvalorem
basis affect wildanimal andplant species as
wellasrestrictedtextileitems.Currently,export
taxes affect only thetraditional exports of
bananas, coffee, meatandcattle. Aminimum
export price forbananas isset,inlinewith
world market price developments, topreserve
abalance between theinterests ofdomestic
producers andthose ofthetransnational fruit
companies. About halfofCosta Rica'sbanana
exports areproduced byindependent growers,
butlessthan10percentisexported directly by
them; thelarger share issold tothe
transnationals.
35. Nocomprehensive drawback system
applies inCosta Rica. Tariff and tax
concessions aregranted under theFreeZones,
Export Contracts andTemporary Admission
régimes; these haveplayed animportant rôle
inattracting foreign investors since the1980s.
When local content conditions aremet,
assistanceonnon-traditionalexportsisprovided
through taxcredit certificates (CATs), partof
theExport Contracts régime, atratesfrom7to
11.5percentor14percentinveryspecial
circumstances. TheCATfacility hasnotbeen
usedinnewcontracts sinceDecember 1992and
istodisappear ontheexpiry ofallindividual
contracts, either in1996 orby1999 when the
Export Contracts régime willbediscontinued.
36. Government setting ofproducer and/or
consumerprices,andofmaximumprofitmargins
forspecified goods, was abolished in
December 1994; price fixing cannowonlybe
introduced inexceptional circumstances. Since
1992, theNational Production Council has
ceased marketing basic foods andmoved intoWT/TPR/S/1
Page xviTrade Policy Review Mechanism
themaintenance offoodreserve stockpiles and
promotion offood processing andtrading
activities. Small-scale agricultural producers
andmanufacturing firms benefit from non-
subsidized credit facilities. TheState may
acquire landforallocation topeasant farmers,
while theMinistry ofAgriculture andLivestock
provides support services toproducers. A
number ofmeasures, including taxincentives
andlogging licenses, areused toencourage
reafforestation andthesustainable useofforest
resources. Pending anewpricing policy,
electricity prices arefixedona"no-loss" basis
anddiffer according totheconsumer category.
37. Costa Rica supports research and
technologytransferthroughmeasuresotherthan
fiscal concessions, which were abolished in
1992. Tofoster industrialization inrural areas
anddiscourage migration tourban areas, the
benefits oftheFreeZone régime areextended
tofirms installed inallless-developed areas.
38. Undertheminimumaccessopportunities
oftheWTO Agreement onAgriculture, the
quantity ofcertain agricultural products subject
totariff quota commitments istoincrease
progressively byaround 67percentingeneral
by2004. However, there willbenoincrease
forcertain types ofmilkandcheeses orfor
yellow maize. Costa Ricamaintains Special
Safeguard Provisions on76agricultural items
which, untilrecently, were subject toimport
licensing. Under itsobligations relating tothe
Aggregate Measurement ofSupport, Costa Rica
isexpected toreduce support todomestic
producers through pricefixing andcompulsory
purchase, by15percentoverall by2004, tocut
budgetary outlays onCATs by24percentand
tosuppress revenue taxholiday facilities
provided under theExport Contracts régime.
39. Costa Ricaisasignatory ofnumerous
international andregional agreements inthe
areaofintellectual property rights. Inrecent
years ithasundertaken efforts toimprove their
protection. Nevertheless, domestic legislation
inthisareaistobemodified, within therelevanttimeperiod, tobring itintoconformity withthe
Agreement onTRIPs.
40. Tourism istheonlybranch ofservices
where specific incentives have applied since
1985. Market access restrictions andstate
involvement,includingmonopolieswithexclusive
rights, characterize anumber ofservice
activities. Banking deregulation hasbeen
initiated inrecent years, buttighter provisions
onprudential supervision arebeing legislated.
Thetelecommunications sector currently faces
competitionfrominternational
telecommunicationservicesprovidedbyoffshore
foreign companies andthestatus ofthestate
monopoly incellular telephone operations
remains tobeclarified.
41. Costa Rica'scommitments under the
General Agreement onTrade inServices involve
informatics,education,health-relatedandsocial
services, andaffect commercial presence and
thepresence ofnatural persons. Inviewofits
commitments toitsCACM partners, Costa Rica
hasexempted professional, advertising andland
transportservicesindefinitelyfrom
m.f.n. treatment. Other horizontal exemptions
have been invoked under investment-related
bilateral agreements.
(ii) Newinitiatives
42. InJanuary 1995, theGovernment
introduced anewexport promotion programme,
thePlan5000deExportación, whose target is
toraiseexports toUS$5,000 million bytheyear
2000. ThePlan constitutes Costa Rica's
strategy forexport-driven integration ofits
economy intoworld markets.
43. Newlawsimplementing theresults of
theUruguay Round, theFreeTrade Agreement
withMexico andimproving thepromotion of
competition andconsumer protection, were
approved bytheLegislative Assembly in
December 1994.Costa Rica WT/TPR/S/1
Page xvii
44. In1995, newbillsoncustoms matters,
dumping, safeguards, technical standards,
phytosanitaryprotection,government
procurement, industrial property rights,
broadcastingandmaritimetransport,arebefore
theAssembly. Other changes planned include
eliminationofcertaininternaltaxes,theincrease
insalestax,modifications ofcustoms valuation,
pre-shipment inspection, theprivatization ofthe
statealcohol monopoly FANAL, newbanking
andradio broadcasting legislation. The
restructuringandmodernizationoftheinsurance
market, including theprivatization ofthe
insurance agents 'network, isunder
consideration.
(5) Trade Policies andForeign Trading
Partners
45. Although Costa Rica'sexports benefit
from several GSPschemes aswell as
preferential treatment inColombia and
Venezuela,thegreatestgainsinthisfieldappear
toderive from preferential treatment inthe
European Union andtheUnited States. Since
1992, theexceptional temporary assistance
granted bytheEUtoCACM countries through
duty-free access foragricultural goods helped
boost nontraditional exports tothismarket.
Theauthorities consider thatCosta Rica's
graduation fromPoland 'sGSPscheme in1994
adversely affected itsexports tothisdestination.
46. Since 1984, the United States '
Caribbean Basin Initiative (CBI) (now made
permanent) hascontributed toattracting foreign
investment, diversifying agricultural and
industrialactivities,andraisingsignificantlythe
share ofnon-traditional exports totheU.S.
market. However, some provisions such as
Guaranteed Access Levels fortextile items and
theGovernment Procurement Initiative have
been oflimited usetoCosta Rica. Sugar
exports totheUnited States earntwicetheworld
market price butaresubject toimport quotas.
Exports ofmeat, certain dairy products and
concentratedfruitjuicesalsofaceentrybarriers.47. Costa Rica, together with other
contracting parties, wasacomplainant intwo
GATT dispute settlement cases concerning EU
andmember State import measures affecting
bananas. Thepanel reports have notbeen
adopted. Since January 1995, Costa Rican
banana exports totheEUhavebeensubject to
preferential tariff quotas under the1994
Framework Agreement onBananas.
(6) Conclusion
48. Overall,CostaRica'smerchandisetrade
andinternal taxrégime hasbeensubstantially
liberalized inrecent years. Since 1986 and
more particularly since 1990, there hasbeen
serious liberalization, coupled withimportant
moves toderegulate andincrease competition
inthedomestic economy. Despite tariff
reductions andrationalization, thesystem
remains rather complex, withwidedispersion;
adegree ofuncertainty, deriving fromthewide
gapbetween applied andbound rates, hasbeen
confirmed bytariff increases inApril 1995.
Some restrictions appear toremain inthe
services field, where State intervention seems
quite widespread.
49. Intheshort term, tackling internal and
external imbalances intheeconomy bytaxand
tariff increases, rather than public sector
reforms toreduce expenditure andtherôleof
theState, forgoes anopportunity toenhance
resource allocation anddiminishes thepotential
gains from trade. Inthelonger term, such
reforms arenecessary topave thewayfor
improving theefficiency oftheeconomy and
achieving international competitiveness.