San José, Costa Rica, since 1956

Free-Trade Agendas Get Wind in Their Sails

Costa Rica’s free-trade agenda took two steps forward and one step back this month.

Central America scored trade concessions from the European Union and the Legislative Assembly passed a free-trade deal with Panama, but opposition lawmakers appeared likely to delay Costa Rica’s entry into the Central American Free-Trade Agreement with the United States (CAFTA).

“If we look at progress this month on the three treaties, we’re content with Panama and the European Union … but we’re worried about CAFTA,” said Mónica Araya, president of the Chamber of Exporters (CADEXO).

The Panama treaty, which passed Tuesday in a second and final vote, eliminates tariffs for nearly 80 percent of agricultural goods and 93 percent of industrial goods that cross the border. With some exceptions, the remaining goods will lose their tariffs gradually over three to 17 years, according to a Foreign Trade Ministry (COMEX) report.

Costa Rica has run a trade surplus with Panama nearly every year since 1990. Exports to Panama in the first seven months of this year reached $293.3 million, up 35.6 percent from the same period last year.

The Foreign Trade Promotion Office (PROCOMER) announced Wednesday that it would open a branch in Panama City.

Central America has also made progress on negotiations on a regional accord with the European Union, which will include chapters on trade, political cooperation and EU development aid to the region.

In talks in Guatemala City earlier this month, the EU agreed to make permanent unilateral trade benefits for shrimp and ethanol.

Tariffs on ethanol would remain at zero, and tariffs on shrimp, now at 3.6 percent, would decrease to zero over three years.

In 2007, Costa Rica exported $2.8 million worth of shrimp and $15 million worth of ethanol to the EU, according to Francisco Monge, who heads the COMEX department that monitors foreign investment and trade.

Still, a few sticking points remain. During a World Trade Organization meeting in August, the EU reneged on an agreement to reduce tariffs on Central American bananas from 176 euros (about $239) per ton in 2009 to 114 euros per ton in 2016. Central America is now seeking to resurrect that deal, and will push for even greater concessions, Monge told The Tico Times.

“We’ve made progress,” Araya said, “but we have to make more.”

The next round of negotiations will be held in Brussels in December. Costa Rica hopes to finish negotiations in the first semester of 2009.

Last year, about 15 percent of Costa Rica’s exports went to the 27 EU countries, while about 11 percent of imports came from the EU, according to COMEX figures.

Still, the distance and complexity of Europe’s market vexes Tico firms, said Alonso Elizondo, director of the Costa Rican Chamber of Commerce.

In early November, the chamber plans to open a one-man office in Brussels to represent and advise Costa Rican exporters.

“Our job is to dismantle the myth that the market is too remote,” Elizondo said. On the CAFTA front, the Arias administration’s efforts to enter that treaty have hit yet another snag. Lawmakers have passed 12 of the 13 bills required to put Costa Rica in compliance with the pact by a Jan. 1 deadline. But despite intense lobbying from export groups and COMEX, lawmakers from the opposition Citizen Action Party (PAC) have vowed to challenge the 13th bill in the Constitutional Chamber of the Supreme Court (Sala IV).

The Sala IV can take up to a month to decide whether the bill, which would govern intellectual property, violates the Constitution.


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