WORLD TRADE
ORGANIZATIONWT/TPR/M/83
26 June 2001
(01-3183)
Trade Policy Review Body
9 and 11 May 2001
TRADE POLICY REVIEW
COSTA RICA
Minutes of Meeting
Chairperson:  H.E. Mr. Pekka Huhtaniemi (Finland)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3
II. OPENING STATEMENT BY THE REPRESENTATIVE OF COSTA RICA 4
III. STATEMENT BY THE DISCUSSANT 8IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 11
V. REPLIES FROM THE REPRESENTATIVE OF COSTA RICA AND
ADDITIONAL COMMENTS 20
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 27
ANNEX RESPONSES PROVIDED BY COSTA RICA TO ADVANCE
WRITTEN QUESTIONS AND TO OTHER QUESTIONS
RAISED DURING THE MEETING 29WT/TPR/M/83
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I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The second Trade Policy Review of Costa Rica was held on 9 and 11 May 2001.
The Chairperson, H.E. Mr. Pekka Huhtaniemi (Finland), welcomed Mrs. Gabriela Llobet,
Vice Minister for Trade a.i., as head of the Costa Rican delegation, and the delegation from San José
and from the Costa Rican Mission in Geneva.  He also introduced the discussant, H.E. Mr. Sergio
Marchi (Canada) and reminded Members that the discussant would speak in his personal capacity and
not as a representative of his government.  In accordance with the established procedure, thediscussant had made available in advance an outline of the main issues he intended to raise.  This was
contained in document WT/TPR/D/62.
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures of the meeting.  The Report by the Government of Costa Rica was contained in
document WT/TPR/G/83, and that of the WTO Secr etariat in document WT/TPR/S/83.  Copies of
advance written questions submitted by Switzerland;  Chile;  Hong Kong, China;  Japan;  Canada;  the
European Union;  the United States;  Thailand;  and Uruguay had been transmitted to the delegation
of Costa Rica.  Replies to these questions are reproduced in the Annex.WT/TPR/M/83
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II. OPENING STATEMENT BY THE REPRESENTATIVE OF COSTA RICA
3. The representative of Costa Rica, Vice Minister for Trade a.i. Mrs. Gabriela Llobet, stated
that since its previous Review, Costa Rica had continued to open up its economy and strengthen trade
integration, mainly because the dimensions of the national economy were not sufficient to offer all the
opportunities for growth that the country required.  For this reason, over the years Costa Rica had
consistently developed a trade policy aimed at ensuring its fullest integration in the world economy.
4. The success of the policies followed had been reflected in export growth, product and market
diversification, increasing foreign direct investment, and the generation of employment by the export
sector.  To further enhance this pattern, Costa Rica attached the highest importance to the trade
agenda for the next few years;  high on this agenda was an active and constructive participation in the
multilateral trade negotiations as well as in the regional and bilateral schemes in which it was
involved.
The economic and trade environment in Costa Rica
5. Since the second half of the 1990s Costa Rica had changed the general approach of its
development strategy by introducing a more aggressive external policy based on two parallel
elements:  greater trade liberalization, and the attraction of foreign investment.
6. The combination of these two elements had made it possible for Costa Rica to show a real
average growth over the six previous years of 4.7% with rates higher than 8% over two consecutive
years (1998 and 1999), while the GDP per capita had risen from US$3.541 in 1995 to US$4.062
in 2000.
7. The consolidation of this whole process of elim inating the barriers to foreign trade, and the
closer relations with important trade partners had contributed to the important role played by the
external sector in Costa Rica.
8. While merchandise imports and exports represented 59% of the country's production in 1991,
this percentage reached almost 79% in 2000.  Adding services trade flows, the relative importance in
terms of the GDP would have risen from 70.8% in 1991 to 96.6% in 2000.  Tourist activity had
generated a large amount of resources which had enabled the country to show successive surpluses in
the services accounts of its balance of payments over the previous six years.
9. Exports of goods had increased on average by 13.4% during the previous five years of the
1990s mostly as a result of the manufacturing industry, which had grown by 21.7% on average.  In
early 2001, industrial exports accounted for more than three fourths of Costa Rica's total exports.
10. The highest level of exports of the whole decade (US$6.720 million) had been reached
in 1999.  Exports had dropped slightly in the year 2000, due to certain external factors, such as the
drop in coffee prices, the negative impact of the banana conflict, and certain domestic difficulties inproducing certain industrial goods.
11. Most industrial exports came from the electronics sector, textiles, and drugs.  In the
agriculture sector, the most exposed to price fluctuations on the international market, bananas and
coffee were still the major exports.  Other important products included pineapples, melons, plants, and
shrubs.  Main industrial exports included part s and computer components, accessories, medical
equipment, textiles, hairdryers, and drugs, which were among the main 15 products for exports.WT/TPR/M/83
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12. Although Costa Rica's traditional export products, like bananas, coffee, sugar, and meat had
continued to play an important role, their share in total exports had dropped significantly as theagriculture sector was becoming more diversified, not only with regard to destination but also to the
type and number of products.  While traditional exports represented 35% of goods exported in 1995,
in 2000 they accounted for 15% of the total, due to export growth in other sectors.
13. The dynamism of the export sector between 1995 and 2000 had allowed Costa Rica to halve
the deficit in its trade balance.
14. The import sector had shown a slower growth rate during that period, at annual average
of 9%.
15. As from 1990, Costa Rica had adopted an aggressive policy to attract foreign investment.  It
had established the conditions, in areas such as education, processing of administrative measures,
deregulation, customs reform, and exchange policy, which were required in order to promote apropitious climate to attract these investments.
16. As a result, FDI flows increased significan tly reaching US$620 million in 1999, representing
4.2% of GDP.
17. The establishment of foreign capital enterprises in the national territory had injected greater
dynamism both in the domestic market as well as  the export sector, by creating new sources of
employment, ensuring technology transfer, and generating foreign exchange earnings.
18. This improved dynamism of the Costa Rican economy was reflected in a slight decline in
unemployment rates over the previous few years,  reaching 5.2% in 2000.  Economic growth, based on
broader liberalization of the economy and attracting investment, had created the sources foremployment needed to absorb most of the population into the country's labour force.
19. Nevertheless, despite the satisfaction with the successful investment policy and the
integration of the Costa Rican economy into international markets, important imbalances persisted in
public finance.
20. The approval of the Code of Tax Standards and Procedures and the elimination of Tax Credit
Certificates, as well as efforts to improve tax collection had begun to show positive signs in terms of
fiscal revenues at the end of 2000.
21. These policies had been complemented by a process of financial engineering in which internal
debt had been substituted by external debt in order to alleviate the interest payments and their terms.
22. Public sector deficit between 1995 and 2000 had remained at around 3% of GDP, while in
2000, internal debt had represented a third of the country's production.  However, the financial
situation of the public sector had not undermined efforts to maintain price stability.  Inflation had been
reduced from 22.6% in 1995, to 10.3% in 2000, remaining relatively stable from 1997.
Trade policy
23. The representative noted that her country's foreign trade policy was part of a general policy of
development aimed at raising the standard of li ving of the whole population through economic and
social development.
24. The main trade policy objective in Costa Rica was to promote, facilitate, and consolidate
Costa Rica's integration into the international economy.  To this end, from 1995 to 2001 a series of
guiding principles had been used;  these had given coherence to national policies to increase
participation in world markets.WT/TPR/M/83
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25. In order to reach higher levels of development through trade, Costa Rica had applied the
following guiding principles:  promoting the necessa ry internal changes for a more efficient economy,
which would facilitate foreign trade growth;  improving and ensuring access for Costa Rican products
in foreign markets; defending Costa Rica's trade interests before protectionist measures in other
countries;  establishing rules and procedures to adequately govern trade relations;  linking all
domestic sectors with export activities;  promoting Costa Rica's exports in foreign markets; and
promoting the conditions necessary to attract national and foreign investment.
26. In order to insert Costa Rica in the world economy, the Government had followed a strategy
which included its participation in the multilateral system, further regional integration, the negotiation
of trade and investment agreements, and unilateral liberalization initiatives.
27. Costa Rica had always trusted in a multilateral system, and since the creation of WTO had
supported all the initiatives undertaken in order to strengthen the system.  A strong multilateraltrading system with clear and transparent rules co uld only benefit small economies, such as Costa
Rica, dependant on international trade.
28. Furthermore, Costa Rica had been able to verify from its own experience that the dispute
settlement mechanism could be a useful instrument to preserve rights, and provide security and
predictability in trade relations.  Costa Rica believed that the dispute settlement mechanism was a
fundamental tool for developing countries.
29. Given the importance of the multilateral trading system, Costa Rica had made important
efforts to meet its commitments under the principles and rules of WTO.  Over the previous two years
Costa Rica had notified a number of measures through which it had adapted its trade policies andlegislation to the agreed rules.  First of all, Costa Rica had notified the elimination of measures that
were incompatible with the TRIMs Agreement.  It  had also notified the entry into force of the
Customs Valuation Agreement.  Furthermore, at the end of 2000, changes in intellectual property
legislation, which would adjust the national legal system to the TRIPS Agreement, were notified.
30. Costa Rica considered important the various efforts to increase regional integration, since
they promoted trade liberalization and complemented the multilateral trade liberalization process.
31. Costa Rica had been an active and constructive participant in the FTAA process since its
launch in December 1994.  This participation was reflected in the work carried out throughout the
process, not only for its constant supply of ideas in negotiation groups but also for the important role
it had played in various assignments it had been given.
32. At a Central American level several actions had been taken to improve the disciplines
governing intra-regional trade and to eliminate barriers and facilitate trade.
33. The adoption of a Central American trade dispute resolution treaty was a particularly
important improvement of the Central American integration scheme, since it would enable Membersto resolve conflicts in an active and effective manner.
34. The FTA between Costa Rica and Mexico had entered into force in January 1995.  It was the
first instrument of its type signed between two developing countries in Latin America.  As a result ofthis agreement, trade between the two countries had increased substantially.
35. In 1998, negotiations for a free-trade agreement between Central America and the Dominican
Republic had been concluded.  The agreement had been approved by the Congresses of Costa Rica
and the Dominican Republic.  Furthermore, in 1999, the countries of Central America and Chile had
signed a treaty of the same type, which had already been approved by the Costa Rican LegislativeAssembly.WT/TPR/M/83
Page 7
36. On 23 April 2001, Costa Rica and Canada had signed a free-trade agreement, the first
agreement on the American continent between an industrialized country and a small economy.
37. Costa Rica was also carrying out negotiations for a free-trade agreement with Panama and
had begun discussions on a trade agreement with Trinidad and Tobago.
38. Costa Rica was continuing its policy of protecting foreign investment through reciprocal-
protection and investment-promotion agreements.  Since 1995, the Legislative Assembly had
approved agreements of this type with Germany, Argentina, Canada, Chile, Spain, France, theNetherlands, Paraguay, the United Kingdom, the Czech Republic, China, and Venezuela.  Other
agreements were going through the legislative process or were being negotiated.
39. From 1995, Costa Rica had reduced its average MFN tariffs in the agriculture sector as well
as in industry.  The average tariff rate had gone from 11.7% in 1995 to 6.1% in 2000, while average
tariffs weighted by imports, had fallen from 9.9% to 4.3%.
40. However, agricultural products still carried higher tariff rates than other products (13.72%
compared with 4.96% in the industrial sector).  Nevertheless, in 1999, the Government had
established a programme to reduce its tariffs peaks for agricultural imports with tariff levels higher
than the average bound rates, in particular for poultry and dairy products.
41. In the industrial sector, which accounted for nearly 90% of total imports, more than half of
tariff lines were duty free in 2000;  this explained the average weighted tariff rates for goods and
industrial materials (3.6%).
42. Over the past few years, Costa Rica had continued to strengthened its liberalization and trade
integration process, constantly developing trade policies to better integrate Costa Rica in the
international economy.
43. The success of the policies had been reflected in a growth in exports, diversification of
products and markets, an increase in foreign direct investment, and employment generation in theexport sector.  The foreign sector was clearly of great importance for Costa Rica.  Thus, Costa Rica
would continue its policies of open trade as a fundamental element within its development policies.WT/TPR/M/83
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III. STATEMENT BY THE DISCUSSANT
Introduction
45. The discussant (H.E. Mr. Sergio Marchi) welcomed the Costa Rican delegation and noted that
the strong bilateral partnership between Canada and Costa Rica, had been considerably fortified by
the signing of the Canada–Costa Rica FTA two weeks earlier in Ottawa.  This agreement was an
example of the mutual benefits that could accrue to partners – big and small, developed and
developing – through liberalization.
46. In terms of a general overview of trade policy, Costa Rica was, in many respects, a success
story; a story that would no doubt continue to get better. It was also a story with challenging chapters
that still needed addressing.  For example, Costa Rica had a large deficit and had to continue to tackle
its high public debt, which amounted to 54% of GDP. It also faced serious difficulties in the
agriculture sector and had to address shortcomings in the services sector.  However, Costa Rica'sapparent willingness and ability to face the challenges ahead was comforting.
47. The discussant had been impressed by Costa Rica’s economic performance over the previous
five years.  One of the important conclusions to be drawn from the Government and Secretariat
Reports was that while Costa Rica might be a relatively small economy,  it was a very dynamic
economy, whose exports accounted for some 54% of its GDP.  Positive signs of Costa Rica'sperformance were reflected in its strong GDP growth, the increased inward foreign direct investment
(FDI), the lowering of inflation, and the 52% aver age annual growth in trade in services, between
1995 and 2000.  One constant in Costa Rica’s track record over the previous five years was its general
commitment to liberalized trade.  For example, Cost a Rica’s average MFN tariffs were relatively low,
and over the period had been reduced from 12% to 7%.
48. Costa Rica’s involvement in bilateral, regional  and multilateral was also a testament to its
commitment to liberalization and strengthening of international trade rules.  Bilateral agreements
included free-trade agreements with Chile, Mexico, Panama, the Dominican Republic, and Canada.
The Costa Rica-Mexico FTA was a salient example of possible mutual benefits to be gained from
increased liberalization.  Costa Rica’s exports to Mexico had grown by 40% annually between 1994
and 1999.  On a regional basis, Costa Rica was continuing to deepen economic integration through the
Central American Common Market. Costa Rica also continued to participate actively in the FTAAhemispheric negotiations.  Costa Rica was also a keen multilateral player offering consistent
leadership in the WTO, in particular through its active role in the various working groups and
committees;  he specifically mentioned Costa Rica's chairmanship of the Working Group on
Government Procurement, its adherence to the Fifth Protocol on Financial Services, its efforts relating
to the revision of the DSU, its prompt adherence to the ITA, and its active contribution to thepreparations for the Doha Ministerial Conference.
49. Costa Rica was a prime example of how small WTO economies could approach trade
liberalization and reap the benefits of the WTO as a rules-based multilateral trading system.  A case in
point was Costa Rica’s experience using the DSU:  the successful case brought under the Agreement
on Textiles and Clothing was a good and practical illustration of the benefits of a rules-based system,for small developing countries.
Specific issues and questions
Economic environment
50. Over the course of the previous five years Costa Rica had experienced a strong and
impressive growth of its real GDP.  However, wh ile per capita GDP had grown at an annual rate ofWT/TPR/M/83
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2.2%, national disposable per capita income had grown at an annual rate of only 0.5%. He asked
Costa Rica to explain this discrepancy and the stagnation of national disposable income, and todescribe the strategies or initiatives it was taking to redress this situation.
51. He noted that Costa Rica had managed to curb inflation from an annual rate of 23% in 1995
to 10% in 2000, and requested information on Costa Rica's policy choices and strategies to curb
inflation, and on projected targets for future inflation reduction.  He also noted that Costa Rica
supported the external competitiveness of domestic goods through daily adjustments of the exchange
rate.  He asked for clarifications on the policy considerations behind this rather stronginterventionism, and the alternatives that were considered to achieve the same ends.
Trade policy regime
52. Costa Rica was experiencing a transition from an agro-export and import substitution model
of development towards a high tech, information and services based economy;  the free zones were
obviously a major contributing factor.  The discussant was interested in Costa Rica's assessment of the
lack of linkages between free zones and the rest of the economy, the efforts that had been made to
address this problem, and their results.
53. The duality between free zones and the local economy also presumably had socio-economic
consequences.  He asked how Costa Rica assessed this duality from a social and economic
perspective, and what mechanisms were in place to manage this duality between, on the one hand, the
generally more educated population, which benefited from well-remunerated jobs in the high-tech
sector, and, on the other hand, the population left to the more precarious traditional sector, which had
had its share of difficulties in past years.
54. On the related subject of export subsidies, Costa Rica was to eliminate these by 2003 to be in
compliance with its WTO obligations under the Agreement on Subsidies and Countervailing
Measures (SCM).  He asked how Costa Rica intended to do this, and how and to what extent CostaRica expected this would affect the free zones and the structure of the economy as a whole.  He askedfor further details on the new WTO-compatible incen tive mechanisms that were being contemplated.
55. Costa Rica’s average MFN tariffs had been reduced from an average of 12% to 7% between
1995 and 2000.  However, most tariffs were bound at 45%, and some were even bound at 233%.  He
wondered whether Costa Rica was considering a reduction in the gap between applied and bound
tariffs that would lead to more predictable market access conditions.
Trade policies by measure and by sector56. One of the most important notes of discord within Costa Rica's generally liberalized economy
was in the services sector.  Commitments appeared in only 5 of the 12 categories of services, and
generally did not go beyond consumption abroad.  The discussant noted the exception of banking, butat the same time felt compelled to point out, that state-owned banks were somewhat favoured by
regulations and dominated the sector.  In this respect he asked whether Costa Rica could provide more
detail on the status and implications of the draft legislation submitted in March 2001 by the President
of the Central Bank.
57. The discussant was aware of the political sensitivities linked to the liberalization of sectors
such as telecommunications, transportation and energy distribution.  In particular, since these sectors
were closely associated with historical symbols and socio-economic development, their liberalization
was often decried by civil society.  Costa Rica’s limited services commitments, particularly in
telecommunications, transportation, and electricity appeared to be an inhibiting factor in promoting
and enhancing the competitiveness of local industry.  These sectors required massive investments formaintenance and upgrading, but the country’s fiscal situation and relatively narrow tax base limited itsWT/TPR/M/83
Page 10
ability to make the necessary investments.  He asked whether further services commitments would not
be part of the solution for better infrastructure in Costa Rica.  Telecommunications, for example,would benefit from substantial services commitments as there were very long waiting lists for access
to conventional telephone services and cellular phones, and Internet services were not the most
reliable.  The discussant asked how Costa Rica reconciled this situation with its overall commitment
to information technologies and e-commerce.  He was also interested in learning how Costa Rica
planned to approach the domestic opposition to further liberalization in services, and its plans forfurther liberalization.
58. In manufacturing there had been a rapid and successful development of the electronics sector.
INTEL’s exports had accounted for some 40% of Costa Rica’s goods exports in 1999.  In fact, it had
just been reported that Costa Rican exports had slid by more than 25% in the first quarter of 2001,
compared with the previous year.  According to Costa Rican officials, this drop was in very large partattributable to INTEL's sluggish sales abroad.  He asked how Costa Rica was managing and
addressing this striking dependance on a single producer of electronics components.
59. While the discussant was aware of who still maintained some quantitative restrictions against
Costa Rica under the Agreement on Textiles and Clothing, he expressed interest in knowing what
steps Costa Rica was taking to prepare for the removal of bilateral restrictions in its export marketsand increased competition in those markets from other textile exporters.  He also asked for
clarifications on the motives behind the measures affecting specific agricultural exports, such as
bananas and coffee, in particular the tax applied on banana exports, and the quantitative restrictions
applied to coffee exports.
60. Costa Rica had made major strides in modernizing its customs services, and considerable
effort and resources had been put in place to modernize customs administration.  He thought it would
be valuable if Costa Rica could share with Members  its further plans to continue to upgrade andimprove its customs procedures as well as the major lessons in terms of developing and implementing
a customs modernization programme.  He asked whether Costa Rica had received technical assistance
and, if so, whether it had any suggestions on how to improve this assistance.  He was also interested
in learning about Costa Rica's experience, albeit relatively short, with the implementation of the WTO
Customs Valuation Agreement from September 2000, in particularly of any specific problems thatmight have emerged.
Conclusion
61. The common thread in Costa Rica's TPR was its firm commitment to trade liberalization and
to the multilateral trading system.  As a small yet dynamic country, Costa Rica was to be commended
for its initiatives and success in providing a stable economic and political environment.  At the sametime, Costa Rica displayed a genuine willingness to squarely face and ultimately overcome the
challenges it continued to encounter.  The discussant was convinced that this TPR would help to
better identify these challenges, and contribute to finding the necessary solutions.WT/TPR/M/83
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IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
62. The representative of the United States noted that bilateral relations between her country and
Costa Rica remained excellent, reflecting shared demo cratic values and traditions.  The United States
and Costa Rica had strong commercial ties, which were being further strengthened.  The United States
imported more than 50% of Costa Rica's exports, which in 2000 had totalled US$3.5 billion.  In the
same time year, U.S. exports to Costa Rica had totalled US$2.4 billion.  Many U.S. companies
operated in Costa Rica, several of which had made  substantial new investment in previous years.
63. In the 1980s the United States had supported Costa Rican efforts to stabilize its economy and
broaden and accelerate economic growth, through policy reforms and trade liberalization, with more
than US$1.1 billion in economic and development assistance programmes.  Starting in the mid 1980s,
the U.S. had also launched the Caribbean Basin Initiative designed to encourage economic
revitalization and export diversification in countries like Costa Rica.  Costa Rica had been able to takeadvantage of the provisions of the Caribbean Basi n Initiative for the duty-free treatment for eligible
articles.
64. Costa Rica had become one of the most stable and robust democracies in Latin America, and
a model in certain areas.  Its outward-oriented, export-led development had allowed its GDP to grow
at an average annual rate of near 5% from 1986.  The reorientation of the economy to sectors such asagriculture, which employed a large number of poor, had reduced the number of poor in the process.
Costa Rica's development agenda focused on continuing integration and promoting new foreign
private investment, particularly in the area of high tech businesses.
65. Costa Rica used to be known principally as a producer of bananas and coffee.  While these
products were still critical to the Costa Rican economy, the contribution of manufacturing and
industrial production to GDP had overtaken agricultur e.  For the previous five years, Costa Rica's
trade in goods had grown at 18% annually and the manufacturing sector had become the engine ofgrowth in exports;  the share of agricultural exports had fallen from 68% in 1995 to just 31% in 1999.
66. Services had also been growing at an impressive rate.  Costa Rica's trade in services had
grown at 52% annually over the previous five years as the number of visitors increased from 700,000
in 1996 to over a million in 1999.  Tourism earned more foreign exchange than that earned from
bananas and coffee combined.  Costa Rica's economic growth strategy had also helped it become aleader in capitalizing on environmental protection.  With 27% of the country's land area protected,
Costa Rica's biodiversity had led a boom in a very lucrative sector of growth in ecotourism.
67. Costa Rica had also been taking steps towards future trade liberalization.  In March 1998,
Costa Rica and other Central American countries had established a Trade and Investment Council
with the United States.  Costa Rica had also been an active participant in the negotiation of thehemispheric Free-Trade Area of the Americas, a process that the Costa Rican Government had
chaired in preparation for the April 1998 Summit of the Americas in Chile.
68. The United States appreciated the active role Costa Rica played in the WTO.  Costa Rica had
been one of the original supporters of the Inform ation Technology Agreement and it was a leader in
support of the expansion of the products covered by the ITA.  Costa Rica had also supported thedevelopment of a trade facilitation agreement, which recognized the importance of a WTO rules-
based border transaction environment for economic development.  In addition, the United States
appreciated the skilful leadership that Ambassador Saborío had provided as Chairman of the Working
Group on Transparency in Government Procurement.WT/TPR/M/83
Page 12
69. The United States was pleased with Costa Rica's support for the establishment of a fair and
market-oriented system of agricultural trade, including the elimination of export subsidies.  CostaRica also recognized the importance of the process of  including further service sectors within the rules
on market access and national treatment.
70. Costa Rica's trade policies were generally oriented towards integrating the country into the
global economy.  However, its trade practices in a number of areas raised serious concerns, with
recent developments undermining the benefits of a liberal trading regime.
71. Costa Rica was signatory of all major international agreements and conventions on trade
marks, copyrights and patent protection and had approved laws for the purposes of bringing the
country's legal framework into compliance with the TRIPS Agreement.  However, recent legislative
actions had weakened enforcement capabilities and copyright enforcement efforts by Costa Rica
authorities had continued to decline.
72. Costa Rica was also apparently using sanitary and phytosanitary licensing procedures to
restrict access for agricultural imports.  It appeared that permits were being denied for reasons other
than sanitary concerns and, as such, would have run contrary to commitments made by the Costa
Rican Government.
73. Costa Rica's customs procedures had long been complex and bureaucratic.  The general
customs law passed in 1995 had formalized reforms aimed at customs procedures and much of the
processing was now electronic.  In September 2000, Costa Rica had adopted the provisions of the
Customs Valuation Agreement.  In spite of the progress that had been made, however, these remained
a need for a quicker and more streamlined process.
74. Costa Rica had bound most of its tariff lines at an ad valorem  rate of 45%;  closing the wide
margin between applied and bound rates would further increase the predictability of market access
conditions.
75. While much of Costa Rica's economy was in the hands of the private sector, state monopolies
cover insurance, telecommunications, energy distri bution, petroleum distribution and marketing, and
railroad transportation.  In addition, there were restrictions on the participation of foreign companies
in some private sector activities, such as customs handling, medical services, and other professions.
This had led to a number of inefficiencies, which were a drag on the economy.  The United Statesencouraged the Government to reduce or eliminate these monopolies through privatization and
liberalization.  Costa Rica had enacted laws and established a system to oversee government
procurement.  In order to attract more investment th ese laws needed to be applied consistently in such
sectors as telecommunications.
76. Costa Rica had made significant economic progress in recent years.  It had adopted an export-
oriented strategy that had been successful in increasing and diversifying its exports.  It was
encouraging to see a developing country that was committed to following a trade policy to integrate
further into the global economy obtain such promising results.  The United States supported Costa
Rica in these efforts and looked forward to continui ng to work closely with it towards further trade
liberalization and integration.
77. The representative of Chile said that his country and Costa Rica had a long common history
beyond the scope of the trade issues.  They had common interests and objectives at the bilateral,
regional and multilateral levels.  Their position in agriculture, services, and investment, among others,
was similar and they shared the wish to launch a comprehensive Round of trade negotiations,
hopefully at the next Ministerial Conference in Doha.WT/TPR/M/83
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78. The Costa Rican economy was very open for goods, but also for services and investment.
This openness was reflected in the participation of the external sector in the GDP and the high level offoreign investment.  However, Chile was concerned by the existence of tariff and non-tariff barriers in
certain sectors, like dairy, sugar and professional services, as well as by the State monopoly in the
telecommunications, insurance, and energy.  All these areas were of interest to Chile, as reflected in
its advance written questions.
79. In 1999, Chile and Costa Rica, together with the other Central American countries, had signed
an FTA, which was expected to be adopted by th e Chilean Congress.  This agreement reflected the
common interests and objectives that linked the two countries.  Its scope covered most trade in goods
and a substantial part of cross-border trade in services and investments.
80. This FTA guaranteed access to the government procurement market for all parties and set
disciplines to ensure transparency in the proces ses.  This was Chile's first agreement including
government procurement issues.
81. With respect to air transport, the FTA consolidated the open skies policy agreed in the
Bilateral Air Convention 1998;  any dispute that might arise in that area was subject to the dispute
settlement provisions included in the FTA.
82. The representative hoped that Costa Rica would take the announced legislative measures
required to reduce progressively the remaining trade restrictions.  Chile would work hand in hand
with Costa Rica, within the present and future multi lateral trade negotiations, to limit the distortions in
the agricultural market, which would enable Costa Rica to eliminate barriers in that sector.
83. The representative of Hong Kong, China stated that it was very encouraging to witness the
fruits of Costa Rica's efforts after its continual open trade policy over ten years.  This had
demonstrated the benefits of a full integration into the global economy and of adhering to the
multilateral trading system.  Costa Rica's constant belief in the multilateral trading system and activeparticipation in various WTO Committees were also very impressive, and had set a very good
example to WTO Members.
84. Hong Kong, China commended Costa Rica for having brought down its average tariff rate
and for the resulting improvement in access to the Costa Rican market.  However, closing the wide
margin between applied and bound rates could further increase the predictability of market access.
85. Hong Kong, China was pleased to note that Cost a Rica seldom resorted to non-tariff trade
barriers, and joined Costa Rica's call to other Members to remove their barriers.
86. Hong Kong, China welcomed Costa Rica's commitment to the coming services negotiations,
and shared its views regarding the elimination of the MFN exemptions.  Costa Rica appeared to have
liberalized more on the goods side, and was urged to liberalize more in its services sectors duringthese negotiations.
87. The representative raised concerns about possible trade diversion effects that might have been
induced by preferential trade arrangements.
88. The representative of Japan noted that Costa Rica, in spite of its size, was a big player in the
WTO.  This was due to its very active role and valuable contribution to the promotion and
strengthening of the rules-based multilateral trading system.WT/TPR/M/83
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89. Costa Rica was an important partner for Japan in Central America.  According to Japan's
trade statistics, the total value of bilateral trade amounted to around US$277 million in 1998.  Japan'scumulative investment in Costa Rica at the end of 1996 had amounted to US$137 million.
90. Japan commended Costa Rica for its positive attitude to foreign investment and believed it
had contributed greatly to the past good performance of its real GDP growth.
91. In addition to the role it played in the multilateral trade agreements, Costa Rica was active in
regional trade agreements.  Japan recalled that regional trade agreements should be consistent withWTO rules and be complementary to the multilateral trading system.
92. Costa Rica was a member of the Cairns Group, which promoted market-oriented agricultural
trade and sought elimination of trade distortion measures, including government interference, for that
purpose.  Nevertheless, Costa Rica maintained certain agricultural measures.  For example, the Agro-
Industrial Cane Sugar League (LAICA) controlled almost all sugar exports, although legally it did nothave exclusive control.  Moreover, the LAICA was responsible for granting permits for bulk sugar
exports.  The National Flower Exporters Council cont rolled flower exports, for statistical purposes.
Furthermore, 20% of all coffee production had been reserved for stock instead of export since May
2000.  Japan was interested in Costa Rica's views on the rationale for these measures, particularly in
light of the general stance on agricultural trade.
93. Japan commended Costa Rica's effort to conclude treaties concerning the protection of
intellectual property rights, including the WIPO  Copyright Treaty and WIPO Performances and
Phonograms Treaty.  Japan also appreciated that the numerous amendments and new laws adopted in
recent years had been notified to the Council for TRIPS.  The law for the protection of new varieties
of plants was still being examined by the Legislative Assembly at the beginning of 2001.  Japan was
interested in knowing the content of the law,  together with the situation of its process.
94. While Japan appreciated Costa Rica's liberalization efforts in financial services, its Schedule
included commitments in only five of the 12 categories of services, and the State retained monopoly
rights in some key service activities such as telecommunications and insurance.  Japan hoped that
Costa Rica would made further commitments in these key sectors, which would be discussed during
the ongoing WTO services negotiation.
95. Finally, Japan strongly supported Costa Rica's effort for the launching of the new WTO
Round.  It was through a broad-based Round that the concerns and interest of all the Members could
be addressed in a substantive way.  Furthermore, Japan commended Costa Rica's view concerning
implementation, and shared the view that implementa tion was an important issue for the WTO.  Japan
agreed fully with Costa Rica in the adoption of a pragmatic approach in order to achieve meaningful
results, and supported Costa Rica's view that many of the issues arising under the so-calledimplementation process could be more effectively addressed in a negotiating round than in a case-by-
case review of the issues.  Japan therefore believed that the programme could find a place on the
negotiating agenda.  Japan wished to work constructively with Costa Rica in order to ensure the
success of the Fourth Ministerial Conference in Doha.
96. The representative of Canada noted that sin ce its previous Review Costa Rica had pursued an
active trade policy at the bilateral, regional, and multilateral levels.  It had concluded bilateral free-
trade agreements with Mexico, Chile, the Dominican Republic, and most recently with Canada.  At
the regional level, Costa Rica had played an important role in the Free-Trade Area of the Americas
process, chairing various negotiating groups and hosting the FTAA Ministerial meeting in 1998.  At
the WTO, Canada welcomed Costa Rica's advocacy for increased trade liberalization and economicreform.  Costa Rica had demonstrated its commitm ent to the multilateral trading system when itWT/TPR/M/83
Page 15
became the first Latin American country to adop t liberalization commitments under the Agreement on
Information Technology Products (ITA) in 1997.  Costa Rica continued to take concrete action tomeet its WTO commitments;  it had passed modern intellectual property legislation in conformity
with its obligations under the TRIPS Agreement.  The upcoming WTO review of developing
countries' implementation of TRIPS agreement commitments, during which Costa Rica was scheduled
to be reviewed, would provide an opportunity to examine Costa Rica's progress in this area.
97. Costa Rica had been undergoing a process of transition from an agricultural-based economy
to an information technology and services-based economy.  Costa Rica's investment promotion
activities had been successful in attracting some of the world's leading corporations, including INTEL,
Procter & Gamble, and Abbott Laboratories.  In addition, Costa Rica had placed great emphasis on
the potential of tourism to create jobs and generate income.
98. Costa Rica had demonstrated that governments committed to maintaining a liberal and
transparent trade regime would be better placed to enjoy fully the benefits of increased international
trade and global economic growth.  Costa Rica's real GDP had grown at an annual average of almost
5%.  As a new free-trade partner, Canada was particularly pleased with Costa Rica's continued
economic growth and prosperity, built on strong macroeconomic fundamentals and a liberal trade
regime.
99. While the Canada-Costa Rica FTA was a bilateral initiative, it was noteworthy insofar as it
further demonstrated that trade liberalization was possible between large and small economies.  In
addition to benefiting respective producers and consumers, Canada believed this agreement could
offer food for thought at the regional and multilateral levels in areas such as competition policy, trade
facilitation, and cooperation in labour and environment.
100. The representative of Thailand noted that Costa Rica's economic performance had improved
since its previous Review in 1995, due to its export-oriented strategy, the improvement of its tariff
and fiscal regimes, and the expansion of its exports of manufacturing products.  This was a good
example of the benefits of the open market system.
101. Thailand commended Costa Rica for its open market policy for goods but noted that its tariff
on agricultural products were still high and in some cases prohibitive.  Costa Rica was encouraged to
extend its open market policy to other sectors including services.
102. Trade between Costa Rica and Thailand was quite limited, accounting for less than 1% of
Thailand's total trade, most of it in manufactured products.  There was still a lot of room to increase
trade volume between Costa Rica and Thailand.
103. Thailand noted that the Costa Rican Government still regulated the price of several goods and
services as well as the marketing of several agricultural products, including rice.  The measure thathad been imposed on rice raised concerns in particular with respect to its WTO consistency.
104. The representative of the European Union highlighted the constant efforts of the Costa Rican
Government to consolidate its integration in the world economy, specifically through a strategy of
liberalization, which brought with new commitments at both the multilateral and regional levels.
105. Economic and political relations between the European Union and Costa Rica were of a great
importance for the European Union.  Costa Rica was the most stable country in its region and it was a
point of reference.  Political relations with Costa Rica were based on the San José dialogues in the Rio
Group and the Framework Cooperation Agreement between Central America and the European
Union.WT/TPR/M/83
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106. The European Union was one of Costa Rica's mo st important trade partners, as such it had a
great interest in the policies recently set up which sought to open and liberalize the Costa Ricaneconomy.  These policies would contribute to the possibilities for growth which the country needed.
107. The EU was aware that Costa Rica was going through a difficult period from an economic
point of view, but highlighted the achievements Costa Rica had made recently, and remained
optimistic about Costa Rica's capacity to deal with the challenges it faced and to maintain its position
in globalization framework.
108. The European Union recognised the active role played by Costa Rica in the WTO as well as
its support for the multilateral system, and was also aware of the positive attitude of the authorities
and the population in Costa Rica towards the system.  A small economy such as Costa Rica which
depended on international trade could only benefit from a solid multilateral trade system based on
fair, transparent, and predictable rules.
109. Costa Rica's support for the launch of a broad-based round of trade negotiations was
welcomed.  Another sign of Costa Rica's trade liberalization policy was its commitments at the
regional level and the dynamics of those regional integration processes.  This reflected Costa Rica'swish to favourably situate its exports in basic markets, anticipating the entry into force of the FTAA.
110. The EU believed that Costa Rica shared its view that WTO was the appropriate place to deal
with trade issues and that a new Round was needed.  The efforts of all Members were needed in that
process.  The EU was satisfied with the declaration made in common with Group of Rio in Santiago at
the Ministerial Meeting in March 2001.  The Ministers wanted to strengthen their work to launch anew broad based round with a balanced agenda taking into account the interests of all the members of
the multilateral system.  This Round would have to focus on strengthening access to markets, without
excluding any sector, to develop and improve WTO rules to facilitate integration of developingcountries in the multilateral system.
111. The representative asked Costa Rica to explain its plans with regard to negotiating of free-
trade agreements.  Although these agreements were important it also seemed important to strengthenthe multilateral system.  The EU was afraid that re gionalism might be detrimental to some countries.
112. The EU noted with satisfaction that Costa Rica had reduced its tariffs since its previous
Review.  The representative asked whether Costa Rica would further reduce its tariffs and whether itwas likely to bind them to the applied levels in the new Round.
113. With respect to exports and their importance for the stabilization of Costa Rica's position in
the world market, the EU asked what measures Costa Rica was going to put in place in order to
improve the competitiveness of its exports.
114. Costa Rica's efforts in developing its legislation on intellectual property specially referring to
copyrights were highlighted, nevertheless additional information was requested:  how informationgiven to the government was protected, in practice, under article 8 of Law No. 7975 on reserved
information;  details on mechanisms in place to protect geographical indications;  and, with regard to
the policies to enforce intellectual property rights, what steps had been taken in order to adopt
transitional measures.
115. The services sector was of major importance for Costa Rica.  Nevertheless, commitments in
this sector were limited, and the European Union encouraged Costa Rica to deregulate and open its
services to competition.  The State maintained a dominant position in some key services, whichimplied inefficiencies, given that they had not been able to keep up with technological and market
changes.  The EU was interested in knowing the Government's strategy to modernize basic services
such as energy, insurance, and telecommunications.WT/TPR/M/83
Page 17
116. The representative of Uruguay noted that through an export-oriented strategy based in tariff
concessions and other tax concessions, Costa Rica had managed to carry out rapid change in
manufacturing activities and broadly increased its exports.  At the same time, Costa Rica had been
able to reduce the inflation rate considerably.
117. Although bilateral trade was not significant, statistics had shown that trade was increasing
over the last years and would hope fully continue to increase.  On a regional level Costa Rica and
Uruguay participated together in the process of the FTAA.  At the multilateral level Uruguayemphasized the active role that Costa Rica had taken in all areas of WTO, highlighting in particular
the excellent work carried out by Ambassador Ronald Saborío as the Chairperson of the Working
Group on Transparency and Government Procurement.
118. Costa Rica and Uruguay worked together in the Cairns Group to defend the legitimate and
fair interests of efficient exporting countries of agricultural products, against the subsidies that somedeveloped countries granted and the distortions they provoked on international markets.  Uruguay
shared Costa Rica's views on the causes of stagnating agricultural exports.  Uruguay highlighted the
positive results and performance of the trade policies in Costa Rica and applauded its efforts in
contributing to the strengthening of the multilateral trade system.
119. The representative of Malaysia was pleased to note that Costa Rica's open policies had led to
positive rates of economic growth, substantial infl ows of foreign direct investment and the strong
growth in exports.  These policies had helped to contribute to the dynamism of the Costa Rican
economy.  Export growth had also been impressive , with manufacturing exports as the leading growth
sector.  However, volatility in export performance had contributed to the decline in GDP growth
in 2000.  In addition, concerns were raised about sustained fiscal deficits, which had led to high
interest rates, which would have an impact on domestic capital formation and economic activities.
120. Nevertheless, Malaysia welcomed Costa Rica's continued commitment to maintain an
environment conductive for foreign investment and for the promotion of external trade.  Its attractive
trade regime, with low average MFN tariffs and its high rate of bindings, would continue to help
attract more diversified foreign investment and encourage economic growth.
121. Malaysia was interested in knowing how Costa Rica would address the need for greater
linkages between the domestic and export-oriented industries to strengthen the domestic industrialbase, and whether the recourse to domestic financing for the fiscal deficit would crowd-out local
investment and impact on the development of private sector economic activities.  Malaysia wondered
whether measures were taken to encourage re-investment so as to tap the profit outflows.
122. The representative of the Czech Republic complimented Costa Rica for its active role in the
multilateral trading system, and all the efforts contributing to launch a new Round.  Costa Rica had
taken part in the Committee on the Expansion of Trade in Information Technology Products, and had
been the first Latin American country to accede to  the Information Technology Agreement (ITA).  In
the context of the preparation for the next Ministerial Conference, he echoed Costa Rica's position in
favour of a multilateral comprehensive framework fo r investments.  Costa Rica had been taking part
in the negotiations on financial services and had accepted the Fifth Protocol annexed to the GeneralAgreement on Trade in Services (GATS).  In the sphere of intellectual property, the Czech Republic
welcomed recent legislative changes notified to the TRIPS Council.
123. Although development regarding market access for goods had been predominantly positive
since the previous Review, differences between applied and bound rates raised some concern.
Closing the wide margin between applied and bound ra tes would further increase the predictability of
the market access conditions.WT/TPR/M/83
Page 18
124. The Czech Republic asked for clarifications ab out the internal marketing regime for spirits
and alcoholic products, under which foreign products were treated differently from domestic products,and its compatibility with WTO Agreements.
125. As regards customs clearance, the representative noted that the customs declaration should
contain information on the exchange rate, and wondered how this requirement could be fulfilled in
light of the fact that exchange rate was adjusted daily by the Central Bank.
126. The representative of Australia noted that bilateral trade with Costa Rica was relatively small.
However, the two countries shared a close working relationship within the Cairns Group.  Thanks to
its open market, tariff reductions, and export-oriented liberalization strategy, Costa Rica had
experienced steady GDP growth since 1995, and inflation had come down.
127. Australia welcomed the reforms Costa Rica had undertaken in its agriculture sector.  Australia
appreciated the problems that Costa Rica experienced with market access for its agricultural productsand welcomed Costa Rica's interest in the further lib eralization of international trade in agriculture.
128. In services, Australia encouraged Costa Rica to continue its efforts at reforming and
modernizing key sectors, such as telecommunications, insurance, and energy distribution, all of which
were state-run.
129. Costa Rica was congratulated on the economic growth it had experienced, and its active
presence in the WTO.
130. The representative of Honduras noted that through its investment strategy Costa Rica had
been able to generate more employment opportunities and had also ensured a better diversification of
its exports.  Costa Rica had made important efforts to comply with its WTO obligations, in particular
with respect to the TRIPS commitmen ts and the dismantling of TRIMs.
131. Despite all Costa Rica's efforts to comply with its obligations, exports of agriculture products
had dropped for the year 2000.  One of the factors leading to this situation was the lack of access toforeign markets, in particular for bananas.  H onduras urged Member countries to recognize and
respond to the efforts undertaken by Costa Rica.  Honduras congratulated Costa Rica for the
integration policies they had developed at the Central American level.
132. The representative of Argentina congratulated Costa Rica for its sustained efforts throughout
the last years to develop its economy in a consistent manner and strengthen the process of opening
and integrating trade.  The figures for average gr owth of the economy, the measures implemented in
order to attract foreign direct investment, as well as the various measures that had resulted in greater
trade opening and increasing exports, had demonstrated the efforts carried out by the authorities to
consolidate a more efficient and integrated economy and bring it into the folds of a multilateral
trading system.  Argentina welcomed the improvem ent in the market access conditions for imported
products in Costa Rica.  Nonetheless, the authorities were encouraged to ensure that this was extended
to agricultural products, where levels were a lot higher than those applied to other products.  Concerns
about the low filling rates of import quotas for agricultural products were raised.  Argentina
encouraged Costa Rica to increase its competitiveness in certain sectors, and shared Costa Rica's
concern regarding access to foreign markets.
133. The representative of Colombia noted that Costa Rica had successfully carried out the
opening of its economy and had a successful policy to attract foreign direct investment.  The Costa
Rican economy was integrated at the international level, and the economic performance had resulted
in some of the best social indicators in Latin Am erica, for instance, for the life expectancy rates orWT/TPR/M/83
Page 19
absolute infant mortality rates.  All of this natura lly strengthened Costa Rica's society, institutionally,
and facilitated the promotion of economic development.
134. Colombia and Costa Rica had historically close ties in all areas.  Bilateral trade, mainly based
on industrial products, had been growing over the last years but could benefit from more dynamism.
Colombia highlighted increased investment in the agricultural sector in Costa Rica and its market
orientation which strengthened its exports.  Colombia shared Costa Rica's view that the launch of a
new Round in Doha was necessary to strengthen multilateralism, which had been weakened over thelast few years.  Colombia stressed the importance of eliminating trade distortion affecting agricultural
products.  Colombia acknowledged the excellent work carried out by the Costa Rican Mission in
Geneva despite its scarce resources.
135. The representative of India noted that Costa Rica had continued to step up its process of trade
opening and integration and that this had led to growth in exports, diversification of products and
markets, increased foreign direct investment and generation of employment by the export sector.
136. Recognizing the importance attached to regional trade agreements by the Government of
Costa Rica, India considered it important to ensure that these agreements were complementary to the
multilateral trading system, were fully compatible wi th the WTO rules, and that there were no trade
diverting effects.  India was interested in hearing Costa Rica's view on the benefits derived from itsparticipation in various regional agreements and how compatibility with WTO rules was being
ensured.
137. India requested Costa Rica to share the reasons for the substantial drop of agricultural
products in total exports, and its plans for diversification of production and export of non-agricultural
products.
138. India asked Costa Rica to comment on the Government's dominant position in a number of
key services, in some of which inefficiencies had arisen over time as regulations had failed to keeppace with technological and market changes, and on the suggestion that further improvements in
resource allocation would be aided by a more uniform treatment of all activities, enhanced internal
competition, and addressing existing shortcomings in the services sector.
139. India was surprised to note that Costa Rica was convinced that many of the issues arising
under the so-called implementation issues could be more effectively addressed in a negotiating roundrather than through a case-by-case review of the issues, and therefore, believed that the programme
could find a place on the negotiating agenda for the new Round of negotiations.  Developing countries
were strongly of the view that the problems of implementation had arisen from non-realization of
benefits anticipated from the existing Agreements of the Uruguay Round, and had to be resolved
through the on-going General Council process.  They could not be linked to negotiations under anyother framework.  India strongly disagreed with th e view expressed by Costa Rica that these should be
dealt with under a new Round of negotiations.  Deve loping countries could not be expected to look at
new commitments until existing inequities and imbalances were rectified.
140. The representative of Guatemala said his country shared many of Costa Rica's views in the
multilateral trading system as well as bilateral trade agreements.  He acknowledged the efforts by the
Costa Rican representatives in this Review.WT/TPR/M/83
Page 20
V. REPLIES FROM THE REPRESENTATIVE OF COSTA RICA AND ADDITIONAL
COMMENTS
141. The representative of Costa Rica welcomed the interest shown by many delegations and noted
that about 205 questions were raised.  Detailed written responses were circulated during the meeting
(Annex).
I. THE ECONOMIC ENVIRONMENT
142. The discussant, and another delegation had asked about the contrast between the high growth
in Costa Rica's GDP and the more modest per capita disposable income.  In relation to this issue they
had commented on a duality between free-trade zones and the local economy as well as on its
socioeconomic consequences.
143. Costa Rica had made considerable efforts in order to achieve economic growth that resulted
in the improvement of the standard of living of the population.  To this end, one of the main axes ofits development policy was the opening of its economy.  From a human development point of view
Costa Rica had made great strides in many areas.  He alth was one of those:  information showed that
life expectancy reached 76 years of age, which was comparable to that in developed countries, and
infant mortality was 11 per thousand, which represented a 17% reduction between 1996 and 1998,
according to UNDP data.  In education, Costa Rica had also made great efforts over the last few years,reaching a level of literacy superior to 95%, one of the highest levels in developing countries.
144. Unemployment levels had been reduced from 6% in 1999 to 5.2% in 2000, while more than
400,000 immigrants had been received and welcomed over the last decade, representing more than
10% of the population.  Costa Rica's capacity to absorb the labour force increase had thus been much
more important than it appeared at the first glance.
145. These figures confirmed that despite the apparent gap between GDP and NDI, growth
conditions were favourable and had enabled Costa Rica to reach one of the highest levels of humandevelopment in the world.
146. Nevertheless, Costa Rica was aware that it had to improve distribution and the rhythm or pace
of NDI growth, and to do so it had doubled its efforts to strengthen the education of its work force, its
insertion in the world market, the efficiency of its financial system, and to improve the conditions
needed to guarantee its competitiveness.
147. With this objective in mind, the project for the Development of Suppliers for High Tech
Multilateral Enterprises had begun in July 2000.  The objective of this project was specifically to
increase domestic value added in Costa Rica's exports.  At the same time, there had been other
benefits, some of which were difficult to quantify, such as those arising from the signing of
agreements between exporting companies and higher education institutions in Costa Rica to improveeducation and teaching conditions in various areas.  Costa Rica believed the gap between export
oriented and domestic activities would be progressively reduced and that benefits from foreign
investment would rise progressively.
148. Costa Rica had also taken a number of measures aimed at improving the economic situation.
Inflation was brought under control.
149. Different monetary policy instruments had been used by the Central Bank in order to control
the inflation.  Some of these elements included cont inuing the process of structural reform, solving the
problem of losses by the Central Bank, controlling liquidity through open market operations, creatingWT/TPR/M/83
Page 21
stability in the international reserves, and making further efforts to resolve the problem of public
finance.  Despite a considerable reduction in inflation, Costa Rica was aware of the need to bring itsinflation in line with international levels.  To this end, it was considering measures such as
eliminating pressure arising from the Central Bank losses, putting order in its public finances, fixing
salaries on a basis of expected rather than real inflation, and the de-indexation of other products such
as fuels.
150. Over the last 15 years Costa Rica had been using an exchange regime of mini-devaluations,
the methodology of this regime was regular devaluation of the Costa Rican currency, the colón, in
order to bring it in line with the inflation rates of its most important trading partners.  By proceeding
in this way, the exchange rate could not be used as an instrument to promote exports or to generate
important but ephemeral benefits.  Costa Rica was not using the exchange rate adjustments to promote
the competitiveness of its exports;  it was seeking to promote export growth by taking advantage of itscomparative advantages and a closer integration of its economy to the world market.
151. Although the participation of the agriculture sector in total exports had fallen from 68%
in 1995 to 31% in 1999, the value of exports in the sector had grown at an annual average rate of 4%
and its volume had increased by 2% over the previous six years.  The most important factors
explaining the reduction of the share of agricultural exports in total exports were the expansion ofindustrial exports and the adverse effects of international prices on basic agricultural products such as
bananas and coffee.  The dynamism shown by industrial exports, in particular by the electronic
components industry, had increased their participation in total exports by 20 percentage points
between 1995 and 2000.
152. This change in the composition of Costa Rican exports had made the manufacturing industry
the driving force behind growth in the export sect or, especially since 1998.  Although this dynamism
was closely tied to sales of electronic components, other market niches had grown, such as equipmentfor infusions and transfusions of serum, drugs, and hair dryers.
153. The reduction in the prices of agricultural products had also had an important impact on Costa
Rican exports in the sector.  Nevertheless, excluding bananas and coffee, the value of agricultural
exports had increased by 9% on average, while their volume had increased by 5% between 1995
and 2000.  This growth had been limited by the negative influence on agricultural trade fromdistorting measures maintained by some trading pa rtners, and thus, it was inadequate to compare
growth in agricultural and industrial exports in a developing country without comparing the rules
governing trade and the market access conditions it faced.  The agriculture sector continued to be
subject to serious distortions that did not allow developing countries to benefit from their comparative
advantages.  The policy of agricultural subsidies was probably the measure that most affected thetrade and economic growth in developing countries.  As long as the agriculture sector in developing
countries had to compete with the fiscal capacity of developed countries, the growth of their
agricultural exports and development objectives would be limited.
154. With respect to the promotion of exports in the manufacturing sector, since the second half of
the 1990s, Costa Rica had focussed on developing a strategy to attract foreign direct investment.  As aresult, important inflows of FDI were registered  from 1998, reaching the equivalent of 4.2% of GDP
in 1999.  The high-tech activities had given a new thrust to the domestic market as well as to the
export sector, through the generation of new sources of employment, the transfer of technology, and
of the generation of foreign exchange revenues.
155. The consolidation of the liberalization process over the second half of the last decade, the
elimination of trade barriers, the establishment of mechanisms to facilitate trade, and theWT/TPR/M/83
Page 22
strengthening of Costa Rica's relations with important trade partners, contributed to the diversification
of Costa Rican exports in terms of variety, number of products, and destination markets.
156. With respect to the expansion of trade in serv ices, specially in tourism activities, Costa Rica
had been able to develop its comparative advantage in that area relying on its natural resources.
Between 1995 to 1999 the tourism sector ranked second in terms of foreign direct investment, having
attracted some 14% of total FDI inflows.  Costa Rica's Central Bank had registered important
transactions from trade in services, including not only tourism services but also medical, education,
informatics, and business and information services.
157. The Costa Rican Government supported the launching of a new Round of negotiations with
broad coverage and believed that the opportunity offered by the Ministerial Conference in Doha in
November 2001 had to be taken.  Trade liberalization commitments reached in Marrakech had been of
great value for the development of Costa Rica and other developing countries.  Nevertheless it wasconvinced that the opening process was progressi ve and that an ambitious impulsion of WTO
negotiations could not be postponed.  All sectors had to be included in this negotiation, not only
agriculture and services or the other sectors already covered by the WTO but other trade-related topics
such as investment, competition policy, trade facilitation, and electronic commerce, as well as a
broadening of the coverage of the ITA.
158. Costa Rica considered it important to strengthen its regional integration to reach higher trade
liberalization in complement to WTO's multilateral trad e liberalization process.  In that sense, Costa
Rica would continue to participate in different fora at a regional level in order to promote investment,
to facilitate trade, and to reduce trade barriers at all levels.
159. The discussant appreciated Costa Rica's responses.  He acknowledged Costa Rica's
achievement in social development and its commitmen t to democratic institutions.  However, despite
Costa Rica's very good social indicators, the stagnation of disposable income in the context ofsignificant GDP growth, raised questions about income distribution.
160. With respect to inflation, the discussant was interested in the Government's future target
levels and whether it was satisfied to keep inflation at 10.3% or was seeking further reduction.
161. On agriculture, he enquired about the rationale for applying an export tax on bananas and
quantitative restrictions on coffee exports.
162. The discussant was concerned about the strong reliance of industrial exports on a single
company, and was interested in the Government's opinion on this situation.
163. Costa Rica and Canada had similar views, both considered the regional integration initiatives
and the multilateral liberalization process as complementary rather than competing processes.
164. The representative of Costa Rica said that the export tax on bananas was partially used to
finance a compensatory fund in favour of banana producers and, thus, this tax should not be perceived
as a desincentive to banana production.  The export restriction on coffee was intended as a measure to
stabilize the price of coffee, and thus to benefit producers.  More details on these issues could be
found in the Secretariat Report and in the replies that had been circulated during the meeting.  With
respect to inflation, the target for 2001 had been set at 9%.  Regarding the dependence of exports on alimited number of products, this constituted a challenge not only for Costa Rica but for a large
number of countries.  Costa Rica's export supply was much more diversified than six years before,
with some 3,000 products being exported to some  150 different markets.  However, Costa Rica's
Government would continue to attach high importance to this issue.WT/TPR/M/83
Page 23
165. The representative of the European Union was impressed by Costa Rica's very firm
commitment to the multilateral trading system and to a dynamic and ambitious development of the
WTO.  Simultaneously, Costa Rica was following an integration process in Central America with a
group of countries which, in terms of size, number of inhabitants, and economic structure, were quite
similar.  The representative of the EU was puzzled that countries that were in a fairly advanced stage
of integration or that were very similar could have radically different views and approaches to the
multilateral trading system and its objectives, and in particular to the programme for futurenegotiations.
166. The representative of Costa Rica replied that she could only speak on behalf of Costa Rica
and could not refer to other Central American countries' policies or approaches to the multilateral
system.  She stressed that Costa Rica's view was that economic opening and trade integration with the
world were fundamental for its development because the limited dimensions of its domestic economyand of the Central American economy did not  offer the required growth opportunities.
II. TRADE POLICY MEASURES
167. The representative of Costa Rica noted that the reduction of the WTO bound rates was an
option that Costa Rica could consider in the context of future multilateral negotiations.  With respect
to the application of other duties and charges on imports, the selective consumption tax was adomestic tax, which was applied to a small number of goods mainly for fiscal purposes.  This tax did
not discriminate between domestic or foreign originating products and affected goods that the
Government considered to be luxury goods.  A Bill that would eliminate the selective consumption
tax on close to 100 products had been proposed to the Legislative Assembly.  Furthermore, Costa
Rica applied the IDA tax at a rate of 5% on domes tic carbonated drinks and 10% on soft drinks that
were produced in Costa Rica under licence of international brands or on soft drinks that had been
imported.  Furthermore, the IFAM tax was applied at 10% on imported beer and 3% on domesticbeer.  The Government of Costa Rica had requested the Republic's General Attorney to clarify the
scope of the provisions of this tax, although no ruling had been adopted.  Nevertheless, a fiscal court,
in the context of obligations resulting from a free-trade agreement, concluded that on the basis of the
principle of national treatment imported beers under that preferential trade agreement should be given
the same treatment as domestic beers.
168. Over the past years Costa Rica had implemented a series of innovations to update its national
custom service, including the adoption of general customs law and regulations, which had been in
force since 1996.  This constituted the legal framework that had made possible the modernization of
the custom services.  She stressed, inter alia , that control verification systems were updated, entry
procedures were reformed, a national customs network had been set up that connected the Customs
General Directorate and the six main customs offices of the country.  In this process Costa Rica hadreceived technical assistance from a number of international organizations.  The Government intended
to continue with the customs reform process, and several technical cooperation projects were ready to
be put into operation with a support of countries that were WTO Members.  With respect to concerns
raised about the delays faced by some perishable goods in customs offices, due to the nature of these
products, permits were required in order to safeguard the sanitary and phytosanitary status of the
country;  however a number of efforts had been made to streamline these proceedings.  The
representative also recalled that Costa Rica had implemented the Agreement on Customs Valuation byenacting in September 2000 the National Law on Valuation and its related regulations.
169. On anti-dumping, she said that Costa Rica had always considered that the use of anti-dumping
measures should be made in strict compliance with WTO commitments, that Costa Rica would reject
any use of this mechanism as a protectionist tool, and raised concerns about the increasing use of
these measures among some trading partners.  Costa Rica would support any initiative to strengthen
WTO rules in this area, and to avoid unjustified use of this mechanism.WT/TPR/M/83
Page 24
170. Costa Rica's incentives in its free-zone regime were under review in the light of the
multilateral provision that prohibit granting certain incentives as of 1 January 2003.  Costa Rica hadrecognized the vital role played by foreign direct investment in its economy, and the importance of the
free-zone regime to attract these investments.  The Government was working to define a modified
regime that would support investment and would be compatible with Costa Rica's obligations.  The
Export Increment Certificates (CIEX) had never been used.
171. Costa Rica protected intellectual property rights through the application of various domestic
and international provisions.  Since 1995 domestic legislation had been broadly reformed in order
to comply with Costa Rica's obligation.  The Law on Trademarks and other Distinctive Signs, of
January 2000, did not allow the use of geographical indications in the designation or the presentation
of a product or service when such an indication was false or misleading.  Regarding protection of
plant varieties the Government had submitted a Bill to the Legislative Assembly based on the UPOVConvention of 1991, in response to a need for legislation to support the efforts of public and private
institutions participating in the creation of new varieties through genetic processes.  The Law of
Procedures for Observance of Intellectual Property Rights had introduced important provisions to
protect intellectual property right holders by establishing precautionary measures and appropriate
border measures amongst other possibilities.  Despite the short time this law had been in force, CostaRica had made considerable progress and its provisions had been enforced in several cases.  In the
specific case of copyrights, the law had much more effective and comprehensive provisions to fight
privacy.  As stated by the European Union, Costa Rica granted protection that went beyond the
requirements contained in the TRIPS Agreement.
172. The representative of the United States requested details on the measures taken to streamline
customs procedures in the case of imports of perishable products.  He also asked for details on why
U.S. poultry imports were denied access in some cases.
173. The representative of Costa Rica said that detailed answers on customs procedures had been
given in writing.  Regarding sanitary and phytosanitary measures and the recent measure that Costa
Rica had adopted for poultry imports from the United States, Costa Rica had already explained in the
Committee on Agriculture that this issue was being examined at the domestic level and that an answer
would be provided as soon as possible.
III. SECTORAL POLICIES
174. With regard to the administration of tariff quotas, information on quota availability was
disseminated through announcements in the Official Journal .  The administration of quotas was
transparent, with no state intervention, and any interested party had the opportunity to participate in
the allocation process.
175. The objective of the Agroindustrial Cane Sugar League (LAICA) was to maintain an
equitable productive regime between sugar cane growers and sugar processors, guaranteeing
development and stability.  LAICA was made up of growers and processors in the sugar cane
industry.  The Costa Rican Govern ment named representatives to its Directive Board.  LAICA had no
exclusive rights for setting export quotas or prices of sugar exports, although it controlled the majority
of exports in Costa Rica.  There was no quantitative restriction affecting imports of sugar in Costa
Rica.  The Government did not interfere in the marketing process.
176. Turning to the manufacturing sector, the representative noted that although INTEL had had an
important effect on the Costa Rican Economy, Costa Rica was also highly competitive in other
products that generated important export earnings, such as coffee, bananas, textiles, medicines, or
infusion equipment.  Tourism represented another source of export earnings and employment in theWT/TPR/M/83
Page 25
country, and represented some 15% of Costa Rica's exports of services.  Costa Rica recognized the
change that INTEL had had on the economy, however, its impact should be diluted over the nextyears with the arrival of other companies.  The mentioned dependency should be reduced with the
announced arrival of companies, such as Abbot Laboratories and Procter & Gamble, and the increased
export opportunities generated by the intensification of trade liberalization.  In order to increase the
domestic value added in the production of the high-tech multinational enterprises (EMAT) located in
Costa Rica's free zones, the Government had created a project for the development of domesticsuppliers to the high-tech multinational enterprises, mainly aimed at small and medium enterprises.
Efforts were also carried out in order to broaden the coverage of this programme to all types of
activities related to local businesses in the free zones, not only related to high-tech activities.  This
programme had been widely accepted by multinational firms present in Costa Rica.
177. With respect to services, the Costa Rican Government had shown its interest in carrying out
the reforms necessary to foster services provision in conditions that would enable the country to be
more competitive.  In that context several draf t laws were being discussed in the Legislative
Assembly.  The Government had tried to modernize the energy and telecommunications sectors
in 2000.  Although popular demonstrations had prevented the adoption of the new legislation, the
authorities were trying to adopt and implement a seri es of modifications in these sectors, within the
established legal framework.  Additionally, the Legislative Assembly had set up a special committee
to analyse draft laws to strengthen these sectors.
178. Costa Rica did not believe that the political difficulties the country had had to face in order to
modernize the telecommunication sector would have an effect on the liberalization of other sectors.
Costa Rica had supported the ITA from the outset, as well as a new agreement on broadening the
basis of the ITA.  In the same way, Costa Rica had been in favour of efforts to maintain electronic
commerce free of restrictions.
179. With regard to the banking sector great strides had been made over the previous decade,
reflected for the most part in the commitments Costa Rica had made under the Fifth Protocol to the
GATS.  Recently, a draft law to reform the national financial system had been presented to the
Legislative Assembly.  This legislation might created the legal basis for operations such as electronic
payment, give more independence and autonomy to the Costa Rican Central Bank, eliminatedistortions, provide more flexibility to the State Bank, and enable foreign banks to open representative
offices and branches.
180. There was also a draft insurance law which was being studied by the Legislative Assembly;
this would introduce reforms into the insurance sect or and improve competition.  It would also create
an insurance supervisory body.
181. The representative noted that commitments assumed at an international level should take into
account the national reality and Costa Rica was giving great importance to the negotiations on
services carried out in the WTO.
182. The discussant was interested in sharing Costa Rica's experience in dealing with the public
opposition to important reforms in the services sectors.
183. The representative of Japan welcomed Costa Rica's willingness to introduce reforms in order
to foster competition in several services areas and wondered whether these reforms were envisaged in
telecommunications, energy, and insurance.  She asked for details on the means envisaged to
introduce more competition, and whether the privatization of the state monopolies was being
considered.  Japan was interested to know Costa Rica's position with respect to making morecommitments during the ongoing services negotiations.WT/TPR/M/83
Page 26
184. The representative of Costa Rica recalled that Costa Rica's social and democratic
development had been different from that other Latin American countries.  The state-managed
services sectors had played a very important role in Costa Rica's development process.  Over the
previous few decades they had worked well, covering a large part of Costa Rica's population.
However, the Government considered that these sectors should be modernized and, despite the
opposition of certain organized groups, efforts in that sense were still being made.  A special
committee had been created in the Legislative Assembly to look at the different options available.This special committee was made up not only of deputies but also of representatives from different
groups in civil society.  The sectors being considered for reform were telecommunications, energy,
insurance, and banking services.  For the latter sector, a draft bill was being discussed in the
Legislative Assembly.  The different options envisaged to modernize the sectors would be determined
according to the specific characteristics of each se ctor.  With regard to new commitments within the
negotiations on services, Costa Rica believed that its international commitments should be a
complement to and reflect the situation that existed in Costa Rica.
185. Finally, in response to the Chairman's Concluding Remarks, the representative of Costa Rica
noted that these reflected most of the discussions over the previous two days of meeting but that, as
reflected in Costa Rica's answers and comments, Costa Rica did not share all the views expressed inthe Concluding Remarks.WT/TPR/M/83
Page 27
VI. CONCLUDING REMARKS BY THE CHAIRPERSON
186. Our discussions over the past two days have allowed us to come to a fuller understanding and
appreciation of Costa Rica's trade policies and practices.  This has been greatly helped by the
openness and frankness of the delegation, led by Vice-Minister Llobet, and I am sure that we are all
very grateful for their active participation.  Members were all favourably impressed by Costa Rica's
good economic performance in recent years.  They noted that underlying this performance was Costa
Rica's generally liberal trade regime, open investment environment and successful strategy to shiftproduction towards manufacturing, notably into export industries.  Trade has also been an important
element in this performance with the share of trade to GDP rising from 71% to 97% over the last
decade.  However, growth of per capita disposable income had not been as impressive as overall
growth, suggesting the need to strengthen the linkages between domestic and export-oriented
activities.  Costa Rica has recognized the problem and is already taking steps in this direction.
187. Members complimented Costa Rica for its continued strong support for the multilateral
trading system and for its active participation in the work of the WTO.  Several Members welcomed
Costa Rica's clear support for the launching of a new round of negotiations with a broad agenda.Members took note of Costa Rica's increased participation in preferential arrangements and
highlighted the importance of ensuring that such pa rticipation is fully consistent with multilateral
principles, so as to ensure the complementarity of multilateral and regional liberalization efforts andto avoid the marginalization of third countries.
188. Members commended Costa Rica for its success in providing a stable economic and
institutional environment.  However, some recent difficulties to reform and modernize importantsectors, such as telecommunications, insurance and energy, raised concerns about Costa Rica's ability
to keep up with technological and market developments.
189. Participants recognized that access to the Costa Rican market is generally liberal.
Nevertheless, Members noted the persistence of access barriers in a few but important sectors,
particularly in some services areas.  Members also raised some concerns about the wide gap between
applied and bound tariff rates, relatively high protection in the agricultural sector, price and marketing
regulations, and remaining monopolies in telecommunications, insurance and energy distribution
services.  The Costa Rican delegation noted that legislative initiatives were in course to address someof these issues.
190. Specific questions were also asked regarding Costa Rica's:
• strong dependence of exports on a single producer of electronic components;
• export incentives mechanisms, including after they expire in 2003;
• schemes to encourage backward linkages between export-oriented activities and the domestic
economy;
• differential treatment of national and imported alcoholic beverages;
• plans to further upgrade and improve customs procedures and administration;
• use of labelling and SPS measures;
• marketing of agricultural products, including sugar and coffee;
• administration of tariff quotas and special safeguards on a few agricultural products;
• plans to liberalize and reform the services sector, and access conditions to professional, air
transport and financial services;
• GATS commitments;
• possible participation in the GPA;  and
• protection of IPRs.WT/TPR/M/83
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191. Members clearly appreciated the comprehensive responses provided by Costa Rica to
questions addressed in writing and to the questions raised during the Review.  I thank in particular theCosta Rican delegation for its dedication and hard work in providing written answers to the many
questions posed by Members.
192. In conclusion, it is my clear impression that this Body appreciates Costa Rica's commitment
to a strong rules-based multilateral trading system.  Costa Rica is a prime example of how small WTO
economies may benefit from trade liberalization and the multilateral trading system.  Generally,Members see the Costa Rican trade and investment regime as open and transparent, but are also aware
of remaining barriers.  In this respect, several Me mbers believed that liberalization should also extend
to those sensitive service areas that to date lag the process of reform.  This would bring these sectors –
some of which, such as telecommunications, are vital for the infrastructure – in line with policies in
other areas.  This would complement Costa Rica's otherwise growth-supportive policies, to the benefitof both Costa Rica's economy and the multilateral trading system.WT/TPR/M/83
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ANNEX
RESPONSES PROVIDED BY COSTA RICA TO ADVANCE WRITTEN
QUESTIONS AND TO OTHER QUESTIONS RAISED
DURING THE MEETING
DISCUSSANT
Economic Environment
Costa Rica, over the course of the past five years (1995-2000) has experienced a strong and
impressive growth of its real GDP.  The average  annual rate from 1995-2000 was 4.7%.  It is
however perplexing to note that while the per capita GDP grew at an annual rate of 2.2%, national
disposable per capita income only grew at an annual rate of 0.5%.  How does Costa Rica explain this
discrepancy and the stagnation of national disposable income?  And what strategies or initiatives isCosta Rica taking to redress this situation?
Before turning to the relationship between GDP and national disposable income, this question
being based on a comparison of them, it is important to clarify Costa Rica's situation regarding the
second element.  For that purpose, we should consider some social indicators that provide a clearer
picture of the situation of Costa Rican society.
Costa Rica has deployed considerable efforts to ensure that economic growth is reflected in
improved standards of living for the population.  Costa Rica has therefore stated that a core element of
its development policy is the policy of economic opening.  From the standpoint of human
development, Costa Rica has made outstanding advances in various areas.  Health is one of them,
where life expectancy is 76 years, a figure comparable with that of developed countries.  Infant
mortality is 11 per thousand, which represents a 17% reduction between 1996 and 1998, according to
UNDP data.  In education, Costa Rica has achieved a level of literacy above 95%, one of the highestamongst developing countries.
The unemployment rate declined from 6% in 1999 to 5.2% in 2000.  In considering these
figures, however, it should be borne in mind that Costa Rica has absorbed more than
400,000 immigrants over the past decade, which is more than 10% of the country's population.  It may
be concluded from this that the economy's capacity to absorb labour has been enormous.
The data cited confirm that despite the gap between the increase in GDP and the increase in
national disposable income, Costa Rica has a dynamic and growing economy that has attained a very
high level of human development.
Nevertheless, Costa Rica is aware that it must improve distribution and the pace of growth of
national income.  Therefore, the country has renewed its efforts to step up the training of its labourforce, its presence on the world market, the efficiency of the financial system and to improve the
conditions necessary to guarantee its competitiveness.
Inflation
On the issue of inflation, in the context of Costa Rica’s monetary policy, the Government has been
able to curb inflation from an annual rate of 23 % in 1995 to 10% in 2000.  What policy choices is the
Costa Rican Government facing in its efforts to curb inflation, and what are the projected targets for
future reduction in inflation levels?WT/TPR/M/83
Page 30
After an annual increase of 22.6% in consumer prices for 1995, inflation was held down to
10.3% in 2000.  The formula used by the Central Bank to control inflation has been a combination ofdifferent monetary policy instruments as required by the circumstances.  The main components of that
policy mix, the intensity of which has depended on developments, include:  the continuity of the
structural reform process, solving the problem of the Central Bank's cumulative losses, controlling
liquidity in the economy by means of open market transactions, achieving stability in the balance of
international currency reserves, and greater efforts to resolve the problem of public finances.
Yet, being a small and open economy, Costa Rica has not been spared the effects of
international developments, which undoubtedly have a significant domestic impact, as in the case of
world oil price increases.
In its monetary projections for 2001, the Central Bank has set a goal of 10% annual inflation,
a percentage similar to that achieved in 2000.
Monetary Policy
To conclude this section on Costa Rica’s economic environment, I would like to briefly address one
aspect of the country’s monetary policy.  The Secretariat Report indicates that Costa Rica supports
the external competitiveness of domestic goods through the daily adjustments of the exchange rate.  In
this case, what are the policy considerations behind this rather strong interventionism, and arealternatives being considered to achieve the same ends?
For the past 15 years Costa Rica has been using the exchange rate system of "mini
devaluations", which consists of regular devaluations of the colón, in keeping with the difference
between domestic inflation and that of the country's principal trading partners.  This method of
calculation prevents the exchange rate from being used as an export promotion tool or for obtaining
short-term profits.  On the contrary, according to Central Bank data, the Multilateral Real Effective
Exchange Rate Index – calculated with the 19 trading partners – has shown a slight discrepancy of0.8% over the past three years, caused basically by the devaluation of the currencies of those trading
partners.
Trade Policy Regime.  Free zones
The first issue relates to the free zones.  We are witnessing, in Costa Rica, a transition from an agro-
export and import substitution model of developmen t towards a high tech, information and services
based economy.  The free zones obviously contribute and favor this transition.  The Secretariat Report
explicitly refers to the lack of linkages between export-oriented activities related to the free zones, and
the rest of the domestic industry.  The report further states that there has been little spill-over effect
for the local economy.  In addition to the fact that national disposable income increased much less
than GDP, in 1998, only some 4% of purchases by co mpanies in free zones were made from local
businesses.  What is Costa Rica's assessment of this lack of linkages between free zones and the rest of
the economy?  What efforts have been made to address this problem, and what results have they
yielded to date?
Moreover, this duality between free zones and the local economy also presumably has socio-economic
consequences.  Towards this end, how does Costa Rica assess this duality from a social and economic
perspective?  And what mechanisms are in place to manage this duality between, on the one hand, the
generally more educated population that benefits from  well-remunerated jobs in the high-tech sector,
and, on the other hand, the population left to the more precarious traditional sector which has had its
share of difficulties in past years?WT/TPR/M/83
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The Costa Rican Government knows that it is important to strive for increasing integration of
the companies set up in free zones with industry operating outside them.  To that end, as of July 2000,the Project for the Development of Suppliers of High Technology Transnational Corporations came
on stream, with the aim, precisely, of increasing the value added of national output through the output
from companies located in the free zones.
The establishment of enterprises of this kind has brought about significant benefits that are
difficult to quantify, such as the agreements signed by some of these enterprises with Costa Ricaninstitutions of higher learning in order to help improve education and buttress the teaching staff in
various disciplines.
It should be pointed out that Costa Rica regards the process of reducing this gap as a gradual
one and that the magnitude of the benefits to the country from the activities of companies in the free
zones will continue to increase.
As pertains to the impact of Costa Rica's economic growth from the standpoint of its
development policy, the indices given in reply to the first question concerning the economic
environment should be underlined.
On the related subject of export subsidies, Costa Rica is to eliminate them by 2003 to be in
compliance with its WTO obligations under the WTO Agreement on Subsidies and CountervailingMeasures (SCM).  How does Costa Rica intend to eliminate its export subsidies?  As well, how and to
what extent does Costa Rica expect this will have an impact on the free zones and on the structure of
the economy as a whole?
Furthermore, the Secretariat Report states that Co sta Rica is studying new WTO-compatible incentive
mechanisms.  Is Costa Rica in a position to el aborate on the options currently being contemplated?
Costa Rica's incentives under its free zone regime are essentially fiscal incentives and are
currently being revised in the light of multilatera l regulations prohibiting the granting of certain
incentives as of 1 January 2003.
Costa Rica has recognized the vital role played by Foreign Direct Investment (FDI) in its
economy, and the importance of the free zone regime in attracting FDI.  Therefore, the Government is
now devising an amended investment support regime compatible with the country's assumed
obligations in order to continue to provide suitable conditions that make for a climate attractive toforeign direct investment.
Tariffs
As it regards the issue of tariffs, Costa Rica’s average MFN tariffs are relatively low.  These have
been reduced between 1995 and 2000 from an average of 12% to 7%.  However, most tariffs are
bound at 45%, and some are even bound at 233%.  In this area then, is Costa Rica considering areduction in the broad discrepancy between applied and bound tariffs that would lead to more
predictable market access conditions?
The reduction of bound tariff levels in the WTO is a possibility that Costa Rica could
consider in the context of forthcoming multilateral negotiations.
Without prejudice to the foregoing, Costa Rica has carried out a major process of unilateral
tariff roll-back, which has gradually reduced the average applied tariff from 11.7% in 1995 to 6.1%
in 2000.  Similarly, in line with the objectives set by the Central American countries, the vast majorityWT/TPR/M/83
Page 32
of tariff headings are distributed in the zero to 15% range and almost half of them are at a level
ranging between zero and 1%.  This is evidence of the considerable headway the country has made inreducing its tariffs.
Trade policies by measure and by sector
Services
One of the most important notes of discord with the generally liberalized nature of the Costa Rican
economy is in the services sector.  Commitments appear in only 5 of the 12 categories of services, andgenerally do not go beyond consumption abroad.  I note the exception of banking, but at the same
time feel compelled to point out, that state-ow ned banks are somewhat favored by regulations and
dominate the sector.  In this respect, I understand the Central Bank President submitted draft
legislation in March of this year.  Could Costa Rica provide greater details on the status and
implications of this legislative initiative?
Costa Rica has carried out major banking reforms in recent years and it should therefore not
be assumed at the outset that there is differential treatment within the banking sector.
A draft law was recently tabled before the Legislative Assembly designed to overhaul the
national financial system, and which can be consulted by the public at large on the website
www.asamblea.go.cr.
This draft must be approved by legislative commission before continuing through the various
stages of lawmaking.
Amongst other things, the draft provides a legal basis for electronic payment transactions, it
gives greater independence and autonomy to the Central Bank of Costa Rica, it eliminates certain
distortions (toll charges, reserve requirements, growth ceilings and margins, sale of foreign
exchange), grants flexibility to State banks (hiring, wages, etc.) and enables foreign banks to open
representative offices, agencies and branches.
I am aware of the political sensitivities linked to the liberalization of sectors such as
telecommunications, transportation and energy distribution.  These sectors are closely associated
with historical symbols and socioeconomic developmen t.  Liberalizing them is often decried by civil
society.
It seems that Costa Rica’s limited services commitments, particularly in the telecommunications,
transportation and electricity sectors are an inhibiting factor in promoting and enhancing the
competitiveness of local industry.  These sectors require massive investments for maintenance and
upgrading, but the country’s fiscal situation and relatively limited tax base limit Costa Rica's ability
to make the necessary investments.  One obvious question is, whether further services commitmentswould not be part of the solution for better infrastructure in Costa Rica?
Costa Rica believes that its internationally assumed commitments must take account of the
country's circumstances and economic situation.  The country attaches the utmost importance to the
current WTO negotiations on services.  It will therefore continue to participate actively in them.
A good example of a sector that would benefit from substantial services commitments seems to be the
telecommunications sector where we understand there are, for example, very long waiting lists for
access to conventional telephone services and cellular phones, and where internet services are not the
most reliable.  How does Costa Rica reconcile this situation with its overall commitment to
information technologies and e-commerce?WT/TPR/M/83
Page 33
Although e-commerce and information technology are based on communications, the matter
of whether telecommunications are public or private does not necessarily affect the fate ofcommitments assumed under the ITA and the subject of e-commerce.  What is important is universal
availability and public access.  To that end, Costa Rica has programmes, such as the "programa
costarricense.com", which provides all residents with electronic accounts and webpages so as to
afford them on-line contact with the world economy.
Without prejudice to the foregoing, efforts to modernize the services sector are ongoing and
the Government has included in the national agenda initiatives and reforms in the sector to improve
the quality of services and further modernize them.
As services are not mentioned in the “future policy directions” section of the Government Report, I
would also be interested in having Costa Rica’s perspective on this issue, how it plans to approach
the domestic opposition to further liberalization, and its plans for further liberalization?
Many years ago the Government of Costa Rica stated its interest in carrying out the reforms
needed to encourage the provision of the services mentioned so as to enable the country to become
highly competitive.  In that connection, draft laws are now being discussed in the Legislative
Assembly on insurance and financial reform.
In the specific cases of energy and telecommunications sectors, the Government endeavoured
to modernize them during the year 2000.  Nevertheless, popular opposition prevented the adoption of
the legal changes necessary to implement those measures.  In consequence, work has been under way
on the adoption and implementation, within the existing legal framework, of a series of reforms and
updates in the sectors so as to improve the quality of these services.  Besides, a special commission
now exists in the Legislative Assembly to study legislative proposals for strengthening these sectors.
Manufacturing
As we move to manufacturing, we note that there has been a rapid and successful development of the
electronics sector in Costa Rica. INTEL’s exports, in 1999, accounted for some 40% of Costa Rica’s
goods exports.  In fact, it was just reported that Costa Rican exports slid by more than 25% in the first
quarter of 2001, compared to the same period last year.  According to Costa Rican officials, this drop
is in a very large part attributable to sluggish INTEL sales abroad.  Therefore, how does Costa Rica
manage and address this striking dependence on one single producer of electronics components?
Although it is true that Intel has had a very significant impact on the Costa Rican economy, it
is no less true that Costa Rica is highly competitive in other products that generate appreciable
amounts of foreign exchange for the country, such as coffee, bananas, textiles, medicaments and
infusion equipment, amongst others.  In 2000, the country exported a total of 2,291 products to
132 different foreign markets.  Between 1990 and 1998, when Intel had not yet started its operationson the national territory, exports had grown at an average annual rate of 16.4%.
Similarly, tourism is another source of foreign exchange earnings and job creation of great
importance to the country as it represents 15% of services exports.
Though we must recognize the impact on the national economy of the arrival of Intel, that
impact is expected to wane over the coming years.  The arrival of new, large high-technologycompanies such as Abbot Laboratories and Procter & Gamble on the Costa Rican market as a result of
a more aggressive policy of attracting direct foreign investment and the creation of greater business
opportunities for exporters thanks to the intensification of the process of trade opening are factors that
will lessen this dependency.WT/TPR/M/83
Page 34
Textiles
The WTO Secretariat Report indicates that textiles and clothing continues to be a relatively important
industry (17% of non-food manufacturing, second to modular circuits).  While I am very aware of
who still maintains some quantitative restrictions against Costa Rica under the Agreement on Textiles
and Clothing, I would be interested in knowing what  steps Costa Rica is taking to prepare for the
removal of bilateral restrictions in its export markets and increased competition in those markets
from other textile exporters.
The significant weight of the textile industry in aggregate export figures supports the position
that Costa Rica has been defending in international forums, that of the continued gradual and effective
integration of textiles and clothing into the rules and disciplines of the GATT, in compliance with the
provisions of the Agreement on Textiles and Clothing (ATC).  Indeed, this means that Costa Rica is
continuing to advocate compliance with the ATC and greater competition on the world market where
textile exporting countries will be able to participate under the same rules and disciplines governingthe trade of goods.
Measures affecting exports and agriculture
On the issue of measures affecting exports, and more particularly agriculture, I would assume that
Members would like to better understand the motives behind the measures affecting specific
agricultural exports such as bananas and coffee.  Knowing the adverse international market
conditions faced by banana and coffee exports, why is a tax being applied on banana exports, and
why are quantitative restrictions being applied to coffee exports?
Given the low world prices, the volume of coffee and bananas exports from Costa Rica has
changed by comparison with other years.  The measures applied do not adversely affect the
production sector, on the contrary, they support its development by providing it with resources to
enable it to maintain its productivity.
Costa Rica does not believe that any of the ab ove-mentioned measures prejudices producers
or constitutes a disincentive to production.  It should be pointed out that in both cases and for theduration of the application of these measures, Costa Rica has continued to be the world's most
competitive producer in terms of output per hectare.
Customs ModernizationAs highlighted in the WTO Secretariat Report (Section III, para. 15), Costa Rica has made major
strides in modernizing its customs services. It is clear that  considerable effort and resources have
been put in place to modernize customs administrat ion.  I think it would be valuable if Costa Rica
could share with us three aspects of its program.  First, its further plans to continue to upgrade and
improve its customs procedures.  Second, and I am  now thinking in terms of sharing Costa Rica’s
experiences with other Members, what major lessons can Costa Rica share with us in terms ofdeveloping and implementing a customs modernizati on program.  And, third, did Costa Rica receive
technical assistance, and if so, would Costa Rica have any suggestions on how to improve technical
assistance?
Efforts to undertake a comprehensive reform of the customs administration started as of the
last quarter of 1991 with the launch of the Customs Modernization Programme.  During 1992, several
tasks were carried out, intended basically to design a customs model that was better suited to the
situation in Costa Rica.  Salient components of the reform process were, inter alia , the automation of
work processes, enhancing the professionalism and specialization of human resources, creating a
modern and flexible organizational structure, simplifying procedures and standardizing and
harmonizing of formats.WT/TPR/M/83
Page 35
Since its inception, the basic aim of the customs reform programme has been to transform the
National Customs Service into a dynamic and professional entity that would meet the needs ofinternational trade, capable of ensuring speed and fl exibility in the flow of goods whilst guaranteeing
effective control by the State.
In addition to this main objective, there were three further aims, namely increasing the speed
and efficiency of customs services, improving tax collection and fiscal control and ensuring the timely
generation of tax and international trade statistics.
For the purposes of the reform, the following areas were designated as basic components:
customs legislation, the Customs Information System (S.I.A.), infrastructure, organizational
restructuring, training and the production of a teaching handbook.  As of 1994, action has been
focused on organizational restructuring, inspecti on and automation, customs procedures and customs
legislation.
Under the Customs Modernization Programme, a model Customs System was designed and
put into practice through the activities carried out in the various priority areas.  These activities were
gradual and coordinated.  With the entry into force in July 1996 of the new customs legislation,
comprised of the CAUCA II, the General Customs Law and its Implementing Regulations, the
necessary conditions were created for most of the activities originally planned in each component tobe considered as complete.
The following factors may be considered as decisive in attaining the results achieved during
the customs reform process:
(a) The historical circumstances surrounding the launch and development of the reform favoured
the existence of a universal consensus between the private sectors and the customs institution
itself as to the need to transform the Customs Service;
(b) from the very beginning, the setting of the objectives and activities of the components of the
customs reform was the outcome of the work of the technical support group commissioned by
the State Cooperation Foundation, former senior officials of the General Customs Directorate
and of the Ministry of Finance and a group of customs officers who were interested in
participating in the reform;
(c) one decisive factor was the fact that the proposed solutions to the problems of the customs
service were, from the very beginning, based on a comprehensive view of the various aspects
to be reformed, such as the laws, administrative organization, the profile of customs officers
and the resources needed for carrying out the work;
(d) the work of the various components was planned in such a way as to ensure continuity of the
customs services rendered to users, bearing in mind short, medium and long-term needs andtheir flexible implementation in line with th e internal and external requirements of the
Customs Service;
(e) it was clearly important to have the support of external resources from the United States
International Development Agency, the Organization of American States and the Inter-
American Development Bank, which were administered through an institution such as theState Cooperation Foundation, which combined the advantages of providing the reform
projects with agile execution mechanisms and guarantees of supervision by the Government
and the Comptroller-General of the Republic.
Despite the foregoing, there are still major tasks outstanding and in the process of
development and implementation, such as the generalized submission by electronic transmission ofprepaid customs declarations, whose value has been established by the importer, the modernization of
the customs information system, the introduction of the electronic signature, the adoption of specificWT/TPR/M/83
Page 36
measures concerning business and trade facilitation and the conduct of more thorough inspection,
especially through risk analysis methods.
Consequently, the Government of Costa Rica is now engaged in relaunching and stepping up
the customs reform process and intends to follow this through by means of several cooperation
projects that will undoubtedly contribute to the attainment of that objective.
Customs Valuation
I also noted that Costa Rica implemented the WT O Customs Valuation Agreement in September 2000,
so it has had a relatively short experience with the Agreement.  But I would still be interested in
knowing about this experience, particularly any specific problems that may have emerged.
I believe that Costa Rica’s experience could, again, provide valuable lessons for all Members,
including providers of technical assistance as we move into the post-implementation period.
In September 2000, Costa Rica enacted a new law on the customs valuation of imports, on the
basis of the provisions of the Agreement on Implementation of Article VII of the General Agreement
on Tariffs and Trade 1994.
As part of the implementation of the Agreement, the Directorate-General of Customs has
worked towards the creation and implementation of a series of procedures and reinforced the internal
bodies responsible for administrating the application of these new regulations.  Similarly, the customsauthorities have undertaken to provide training to the business chambers bringing together the
country's main associations of importers and exporters.
One of the first things done was to prepare a new format for Value Declaration based on the
new system of customs valuation, together with the corresponding instructions for completion and
submission.  Besides, the National Customs Valuation and Inspection Authority was restructured into
two departments, one devoted exclusively to investigating customs valuation fraud and the other with
the main task of developing the aspects of computer systems used for customs valuation.
CANADA
Summary Observations:  introduction;  other measures affecting trade;  economic development,
paragraph 3
According to paragraph 3, real GDP grew at an annual average of rate 2,2%, over 1995-2000, while
disposable national income grew at only 0,5%, the difference being mainly explained by profitremittances associated with free zone activities.  Does the Government of Costa Rica intend to
address the need to accelerate disposable national income growth in order to better distribute the
gains from free zone investments, and to create  domestic incentives for consumer spending, savings
and investment?
Before turning to the relationship between GDP and national disposable income, this question
being based on a comparison of them, it is important to clarify Costa Rica's situation regarding the
second element.  For that purpose, we should consider some social indicators that provide a clearer
picture of the situation of Costa Rican society.
Costa Rica has deployed considerable efforts to ensure that economic growth is reflected in
improved standards of living for the population.  Costa Rica has therefore stated that a core element ofits development policy is the policy of economic opening.  From the standpoint of human
development, Costa Rica has made outstanding advances in various areas.  Health is one of them,WT/TPR/M/83
Page 37
where life expectancy is 76 years, a figure comparable with that of developed countries.  Infant
mortality is 11 per thousand, which represents a 17% reduction between 1996 and 1998, according toUNDP data.  In education, Costa Rica has achieved a level of literacy above 95%, one of the highest
amongst developing countries.
The unemployment rate declined from 6% in 1999 to 5.2% in 2000.  In considering
these figures, however, it should be borne in mind that Costa Rica has absorbed more than
400,000 immigrants over the past decade, which is more than 10% of the country's population.  It maybe concluded from this that the economy's capacity to absorb labour has been enormous.
The data cited confirm that despite the gap between the increase in GDP and the increase in
national disposable income, Costa Rica has a dynamic and growing economy that has attained a very
high level of human development.
Nevertheless, Costa Rica is aware that it must improve distribution and the pace of growth of
national income.  Therefore, the country has renewed its efforts to step up the training of its labour
force, its presence on the world market, the efficiency of the financial system and to improve the
conditions necessary to guarantee its competitiveness.
Summary Observations: introduction; sectoral policies; paragraph 19According to paragraph 19, despite high tariffs and safeguard measures, fiscal incentives and specific
financing programmes, and the traditionally high productivity of Costa Rica producers, its two major
agricultural exports, banana and coffee, have come under considerable pressure in recent years .
Please outline any additional measures/ incentives currently being considered by the Government of
Costa Rica to alleviate the pressure on this industry.
In the first place, it should be made clear that neither in the case of coffee nor bananas are
higher-than-average tariffs or safeguard measures applied.  The problems facing the two main
agricultural export products are clearly due to external cyclical factors such as the downtrend in world
coffee prices and the negative effects of the banana war.
As pertains to the question of possible additional measures in these two sectors, the
Government has decided on no additional measures.
Summary Observations: introduction;  sectoral policies;  paragraph 20
The Secretariat Report indicates that the WTO services negotiations could give new impetus to the
reform process in services sectors where the State retains monopoly rights but that this will require
building up wider awareness of the need to improve the quality and reduce the cost of banking,
insurance, telecommunications and energy distribution services.  Please explain Costa Rica’sobjectives with respect to sectors where the State retains monopoly rights.
Many years ago the Government of Costa Rica stated its interest in carrying out the reforms
needed to encourage the provision of the services mentioned so as to enable the country to become
highly competitive.  In that connection, draft laws are now being discussed in the Legislative
Assembly on insurance and financial reform.
In the specific cases of energy and telecommunications sectors, the Government endeavoured
to modernize them during the year 2000.  Nevertheless, popular opposition prevented the adoption of
the legal changes necessary to implement those measures.  In consequence, work has been under way
on the adoption and implementation, within the existing legal framework, of a series of reforms and
updates in the sectors so as to improve the quality of these services.  Besides, a special commission
now exists in the Legislative Assembly to study legislative proposals for strengthening these sectors.WT/TPR/M/83
Page 38
Trade Policy Regime:  framework and objectives;  international relations; preferential agreements;
Central American Common Market (CACM);  paragraph 32
According to para. 32, negotiations are under way among members countries of the Central
American Common Market (CACM) to conclude a tr eaty on services and investment.  What progress
has been made towards concluding this treaty?  Please clarify which services are covered by this
treaty.  What is the proposed timeframe for liberalization of the services sectors covered by this
treaty?
The negotiations to conclude a Central Amer ican Treaty on Services and Investment have
progressed satisfactorily, even though they have not yet ended.  The Agreement aims to have broad
coverage similar to that achieved in the chapte rs on services and investment of the Free Trade
Agreement between Costa Rica and Mexico.  In those chapters, the countries assume the obligation of
improving those service and investment measures that may not be in conformity with the principlesestablished therein.
Trade Policy Regime:  framework and objectives;  in ternational relations;  preferential agreements;
Central American Common Market (CACM);  paragraph 44
Para. 44 lists products that were excluded from Costa Rica – Dominican Republic FTA, but neglects
to include clothing products.  Please confirm that clothing products are also excluded from tariffelimination.
Textiles and clothing are covered in the Free Trade Agreement signed between Central
America and the Dominican Republic.
Trade Policy Regime: framework and objectives; international relations;  preferential agreements;
paragraphs 31–36;  43-45
Certain products tend to be consistently excluded from tariff elimination in Costa Rica´s bilateral
FTAs, such chicken, dairy products, and more veget ables.  There are some other products that are
excluded depending on the partner; however, thos e products that are often excluded are of
considerable interest to the Parties of the agreements, such as sugar and coffee in the CACM or
apparel in the Costa Rica–Dominican Republic FTA.  What is the rationale for excluding thesesproducts from tariff elimination?
In the first place, it should be pointed out that in signing free trade agreements, the
non-inclusion of some products is the outcome of a negotiation process that takes account of thesensitivities of the participating countries.
Sugar and coffee are two of few products that are currently not freely traded in Central
America, as they are sensitive products for the countries in the region.
As already stated, textiles and clothing are covered in the FTA signed between Central
America and the Dominican Republic.
Trade Policy Regime:  framework and objectives;  inte rnational relations;  preferential agreements;
paragraph 49
According to para. 49, Costa Rica excluded fore st products (wood and wood furniture) from tariff
elimination in its FTA with Chile.  This decision could entice Costa Rica to source forest products
internally, rather than importing them.  Has Costa Rican authorities considered the potential adverse
effects on its internal forest resources and on its rainforests and eco-tourism industry as a result of
this decision?  What is the rationale for excluding forest products from tariff elimination?WT/TPR/M/83
Page 39
The environmental laws and regulations applied in Costa Rica have enabled and fostered the
controlled forestry of non-native species, which means that the practices followed in the country donot endanger the national biodiversity nor is it considered that they adversely effect the eco-tourism
industry or the protected areas.  To that  same end, the Forestry Act, Law No. 7575 of
13 February 1996, prescribes closed seasons for the felling of certain forest species in order to protect
the environment.
As already stated, the non-inclusion of certain products in a specific free trade agreement is
the result of a process of negotiation that takes account of the sensitivities of the participating
countries.
Trade policies and practices by measures;  introduction;  paragraph 2
According to para. 2, internal taxes are applied at the same rates to domestic and foreign products,
“except in the case of certain beverages”.  Which beverages?  Likewise, the internal marketingregime for spirits and alcoholic drinks treats foreign products, except for those from Mexico and
Central America, differently from domestic products .  Please explain the differences in treatment.
At present, an IDA rate of 5% is applied to domestic brands of aerated soft drinks and 10% to
soft drinks produced in Costa Rica by franchisees of international brands and imported soft drinks.
Besides, an IFAM tax of 10% is applied to imported beer and 3% to domestic beer.It should be mentioned that recently, in the context of the obligations arising from a free trade
agreement, the First Chamber of the Administrative Fiscal Tribunal found that imported beer in the
case in question should be given the same treatment as domestic brands, on the basis of the principleof national treatment.
As pertains to the regime for the domestic marketing of spirits and alcoholic beverages,
paragraphs 169-171 of Chapter III.4 of the Report of the Secretariat set out the internal regulations
affecting that regime.  It should be pointed out that in its ruling C-134-2000, the Office of the
Procurator-General of the Republic expressed the opinion that based on the principle of nationaltreatment prescribed under a Free Trade Agreement, the domestic marketing of the imported spirits inquestion should be done under the same conditions applied to the sale of domestic spirits.
In the light of the foregoing, the authorities of the Ministry of Foreign Trade consulted the
Office of the Procurator-General of the Republic with a view to clarifying the scope of the taxprovisions covering the above-mentioned taxes.  The Procurator-General's opinion is still pending.
Trade policies and practices by measures;  measures affecting imports;  other charges affecting
imports;  paragraph 49
According to para. 49, in February 2001, the Legislative Assembly approved the Tax Simplification
Act, intended to improve the tax legislation and to  reduce the number of goods subject to selective
consumption tax.  If this bill were to be enacted, which products would no longer be subject to theSelective Consumption Tax?  Although only 100 lines will be removed from the list of products subject
to that tax, are there plans to remove more lines in the near future?
The Tax Simplification Act is still being discussed in the Legislative Assembly.  Once it
becomes a law of the Republic, it is hoped that the selective consumption tax on some 100 products
will be eliminated, including preserves, chocolates, some types of bread and pastry, fruit juices,
sauces, soups, perfumes, photographic products, leather goods, some products of the graphics
industry, products of glass, steel and aluminium, some electrical applicances, boats, etc.WT/TPR/M/83
Page 40
Apart from the provisions of that draft law, the Government currently does not envisage any
further changes to the number of goods subject to the selective consumption tax.
Trade policies and practices by measures;  measures affecting imports;  other charges affecting
imports;  paragraph 51
As per para. 51, there are instances where the Selective Consumption Tax applied on goods that are
not produced domestically.  In some instances, this tax is as high as 93% and can therefore act as a
significant barrier for import of these goods (particularly in the automotive sector).  What is therationale for applying such a high tax on products that are not produced domestically?  Are there
plans to eliminate or reduce this tax?   If yes, what is your time line.
The selective consumption tax targets what the Government considers as goods representing
conspicuous consumption or luxury items and is a revenue measure.  It covers both imported and
domestic goods.  Recently, there was a 10% reduction in this tax on automotive products.  TheGovernment currently envisages no further changes.
Trade policies and practices by measure;  meas ures affecting imports;  regulations, standards, and
other requirements;  paragraph 82
According to para. 82, genetically modified food must be clearly identified, though special labelling is
not required.  Please clarify what you mean by this statement.  Has Costa Rica developed a
mandatory labeling requirement for foods derived from  biotechnology?  Was this requirement notified
through the WTO?
There are no mandatory labelling requirements in Costa Rica for products derived from
biotechnology.
Trade policies and practices by measure;  measures directly affecting exports;  exports taxes and
charges;  paragraph 114
According to para. 114, at the end of 2000, only bananas were subject to an export tax. Although
some of the revenue generated is returned to producers through the Compensation Fund, does this
export tax not create a disincentive to productions?  What is the rationale behind maintaining this
tax?  Does the Government of Costa Rica intend to eliminate this tax, as it did for coffee and meat? If
yes, what is your time line?
Costa Rica does not consider this fund to represent a disincentive to production.  On the
contrary, its aims include making resources available to producers to enable them to maintain their
productivity and combat disease.  Costa Rica does not believe that any of the aims of this fund, whose
beneficiaries are the producers themselves, create disincentives to productions.  For the duration of its
application, Costa Rica has continued to be the world's most competitive producer in terms of output
per hectare.
The reason for creating the fund was to assist producers in the face of the crisis in the banana
industry caused by the negative consequences and the insecurity resulting from the dispute over the
regime for the importation of bananas into the European Communities.
There are no current plans to eliminate this tax.WT/TPR/M/83
Page 41
Trade policies and practices by measure;  measures directly affecting exports;  duty and tax
concessions;  paragraph 129
According to para. 129, the Export Promoti on Act introduced export increment certificates
(Certificados de Incremento de Exportaciones, CIEX) which enable enterprises to be granted a sum
equivalent to 10% of the increase in their exports over the previous year.  As the CIEX is a subsidy
linked to export performance requirements, did Costa Rica notify this program to the WTO Committee
on Subsidies?
Since their creation, the Government of Costa Rica has not authorized a single budget outlay
for the purposes of the CIEXs.  In practice they have never been used and there are no plans to use
them in the future.
Trade policies and practices by measure;  measures directly affecting exports;  free zones;
paragraph 136
According to para. 136, the amount of benefits granted to enterprises operating in free trade zones
depends on the area in which these enterprises locate.  The report notes that there is a reduction in
the benefits granted to enterprises that set up in free zones in “relatively less developed” areas?  Why
are benefits reduced in enterprises set up in these “relatively less developed” areas?  Please outline
the criteria used to determine which areas are “relatively less developed”.
Under the current legislation, companies operatin g in free zones in relatively less developed
areas do have access to benefits additional to those available to companies located in relatively more
developed areas.  Nevertheless, the 1998 legislative amendments reduced the benefit accorded for
wages paid from 15% to 10%.
Despite this, these relatively less-developed areas continue to enjoy additional benefits for the
companies setting up in them.  The classification of the degree of development must be made by the
Ministry of Foreign Trade after receiving a report from the Ministry of National Planning andEconomic Policy.  For that purpose, the Ministry of Planning can base itself on specific legislation
enabling it to reliably determine the social development indicators for each district in the Republic,
and it is those indicators that serve to determine whether a district is located in a relatively less or
more developed area.
Trade Policies and Practices by Measure;  (4) Other Measures Affecting Trade;  (v) Incentives;
paragraph 175
According to para. 175, support for Costa Rican industry is channeled to enterprises through direct
incentives.  Is that also the case for incentives, especially the exemption of corporate tax, provided in
Costa Rica’s Free Trade Zones?  Is Costa Rica on schedule to eliminate the direct incentives by 2003
in accordance with its WTO commitments?
The incentives granted by Costa Rica under its free-zone regime are basically tax incentives
and are currently being reviewed in the light of multilateral regulations prohibiting the granting of
certain incentives as of 1 January 2003.
Costa Rica has recognized the vital role of foreign direct investment in its economy, as well
as the importance of the free-zone regime in attracting FDI.  Therefore, the Government is working todesign an amended investment support regime that is compatible with the obligations assumed by the
country.WT/TPR/M/83
Page 42
Trade policies and practices by measure;  other measures affecting trade;  incentives; paragraph 175
and 193
According to para. 175, support for Costa Rican industry is channeled to enterprises through direct
incentives.  Is Costa Rica on schedule to eliminate these incentives by 2003 in accordance with its
WTO commitments?  According to para. 193, the Free  Zones Act also contains a number of incentives
and concessions granted by the State to enterprises that make new investments in the country.  Will
these incentives and concessions in the Free Zones, such as the exemption of corporate tax, also beeliminated?
Please refer to the preceeding answer.
Trade policies by sector, manufacturing sector;  paragraph 40
According to paragraph 40, to increase domestic add ed value in the domestic production of the high
technology multinational companies under the free zone regime, the development project for suppliersto high technology multinational companies began in July 2000.  By the end of 2000, seven link
projects were in progress and one had been finalized;  authorities were hoping to finalize the
implementation of 45 projects during the next three years.  What measure of success has been
achieved since the above mentioned project began in  July 2000?  Has the Government of Costa Rica
considered the impacts of these efforts and of free zone privileges in general on those domestic
industries that do not have similar advantages?  If yes, what have you found?  Are there other
incentives which are linked to economic infrastructure development in the areas such as roads,
energy, and communications?
In order to help increase the domestic added value of the national output of the high
technology multinational companies established in Costa Rica under the free-zone regime, the
Development Project for Suppliers to High Tec hnology Multinational Companies was created.  The
project, which is financed by the Inter-American Development Bank and local organizations, ismainly aimed at small- and medium-sized enterprises (SMEs).
As this programme is still in the very early stages of implementation, its impact on the
national economy has not yet been gauged.  Nevertheless, efforts are under way to extend the
coverage of the programme to all activities connected with companies located in free zones, not only
high technology companies.  The intention is to extend the programme's coverage to other areas and
hence to involve a greater number of local companies.  This programme is currently being very wellreceived by multinational companies established on the national territory.
Similarly, the Government has been conducting the Impulse Programme (Programa Impulso)
designed to foster a climate favourable to business and competitiveness in the country.  A nationaldebate is currently under way as to the importance of adopting and implementing a competitiveness
agenda that would introduce significant changes in various areas such as customs, infrastructure,
energy and telecommunications.  While such measures are being decided upon, the Government has
been undertaking very specific actions in such fields as the simplification of formalities for
exportation and investment, improving the country's technological base and supporting small- andmedium-sized enterprises, amongst others.
Trade Policies by Sector, services;  principle characteristics;  paragraph 46-47
According to paras. 46 and 47, there have been no major changes to the service sector since 1995, yet
in 1999 the service sector’s contribution to overall employment was almost 65%.  Given the
importance of this sector and the long-term opportunities it represents, when does the Government ofCosta Rica intend to reintroduce modernization legislation that previously failed to pass?  What
further steps are envisaged to liberalize the service sector?WT/TPR/M/83
Page 43
The Government recognizes the importance of the services sector to the Costa Rican
economy.  For example, the tourism industry has been extremely buoyant in recent years.  Theservices sector is undergoing constant modernization and the Government has placed initiatives and
reforms for its modernization on the national agenda.
Trade policies by sector, services;  principle characteristics;  paragraph 48-50
According to para. 48, partly a reflection of the privileges retained by the State in major services
sectors, Costa Rica’s Schedule Commitments under the GATS is rather limited.  It includes services inonly 5 of the 12 categories of services listed in the services sectoral classification list
(MTN.GNS/W/120) and generally services are bound only for the mode of supply involving
consumption abroad.  Does Costa Rica intend, in the current services negotiations, to undertake
commitments with respect to other se rvices sectors and modes of supply?
Costa Rica believes that its internationally assumed commitments must take account of the
country's circumstances and economic situation.  The country attaches the utmost importance to the
current WTO negotiations on services.  It will therefore continue to participate actively in them.
Trade Policies by Sector, services;  financial services;  paragraph 55-72
According to para. 57, a bill on financial entities is currently being reviewed by the financial sector in
an attempt to reform certain aspects of the Nati onal Financial System (SFN).  Please indicate how
such a bill will level the playing field between private and state-owned banks?
A draft law was recently tabled before the Legislative Assembly designed to overhaul the
national financial system, and which can be consulted by the public at large on the website
www.asamblea.go.cr.
This draft must be approved by legislative commission before continuing through the various
stages of law-making.
Amongst other things, the draft provides a legal basis for electronic payment transactions, it
gives greater independence and autonomy to the Central Bank of Costa Rica, it eliminates certain
distortions (toll charges, reserve requirements, growth ceilings and margins, sale of foreign
exchange), grants flexibility to State banks (hiring, wages, etc.) and enables foreign banks to open
representative offices, agencies and branches.
Trade Policies by Sector, services;  financial services;  banking and financial paragraph 57According to para. 57, a bill on financial entities is currently being reviewed by the financial sector in
an attempt to reform certain aspects of the Nati onal Financial System (SFN).  Please update the
progress of this legislation.
Please refer to the previous reply.
Trade Policies by Sector, services;  transport;  air transport, paragraph 102According to para. 102, Costa Rica awards conces sions for airport services (i.e. administration,
operation and development of air terminals, including financing and construction of works) as part of
its airport privatization scheme.  Are foreign service providers allowed to take part in this
privatization scheme?  If yes, please outline the requirements to obtain a concession.WT/TPR/M/83
Page 44
Costa Rica has now awarded to a firm with a foreign capital base the concession for the
administration services, operation and development of  the Juan Santamaría International Airport by
means of the legal institution of "gestión interesada" (management by a party with an interest in the
enterprise).
The Costa Rican law regulating "gestión interesada" clearly sets out the requirements that
must be met by both locals and aliens in order to be awarded contracts.
CHILE
Trade policies by measure
What is the purpose of the Liga Agrícola Industrial de la Caña de Azúcar?  Is it a profit-making
entity?
Pursuant to the Agriculture and Sugar Cane Industry Act No. 7818 of 22 September 1998, the
Liga Agrícola Industrial de la Caña de Azúcar (LAICA) is a non-State corporation, subject to public
law in the exercise of its legal powers and duties, and to private law in the conduct of its marketing
and other corporate activities.
Pursuant to the aforementioned Act, the purpose of this entity is to maintain equitableness
between producer and processor in the production sy stem, thus guaranteeing the development of both
sectors and the stability of the industry.
What is the role of the above-mentioned Liga in setting sugar export quotas and prices?  Does it have
a role in setting import quotas or determining othe r measures that affect sugar imports into Costa
Rica?
Legally, LAICA does not have exclusive control over the setting of sugar export quotas or
prices, although it does play a significant part in th e exportation of Costa Rican sugar, most of which
is done through the Liga.
There are no quantitative import quotas or other measures affecting the importation of sugar
into Costa Rica.  Consequently, LAICA plays no role in this regard.
Who are the members of the Liga?  Is there State participation or intervention?
The Liga Agrícola Industrial de la Caña de Azúcar is made up of sugar cane producers and
processors whose representatives form part of its Board of Directors of that institution, together with
two representatives of the Government of Costa Rica.  The function of the Governmentrepresentatives is to ensure the proper implementation and observance of Law 7871, the Agriculture
and Sugar Cane Industry Act of 22 September 1998.
The Government of the Republic plays no part in the marketing process and therefore neither
enforces or establishes limits pertaining to the export or import process or the domestic marketing of
sugar.
Why are companies wishing to market their products directly obliged to insure their crops and even
the delivery of sugar or cane syrup?  Who is the beneficiary of the insurance?  Under what
circumstances does it become payable?
Companies wishing to market their products directly must comprehensively insure the sugar
in order to guarantee the producer payment for his output in the event of loss owing to a naturalWT/TPR/M/83
Page 45
disaster or a fortuitous event.  The beneficiary of the insurance is the merchant or processor himself,
who must then fulfill his obligations vis-à-vis  the producer.  In the event of disaster, LAICA will
ensure that the industrialist meets his obligation towards the producer.
Paragraph 5 indicates that the State intervenes in the setting of prices for various goods and services
in certain circumstances.  Which are these goods and services apart from those indicated by the
Secretariat?  Who determines that market conditions do not appear to ensure a balanced relationship
between the economic operators?  Are such price controls temporary or of indefinite duration?
Rice is the only product whose price is regulated by law owing to the domestic conditions of
production and marketing.  There is no other product or good with a mandatory minimum price.  This
price will continue to be set for as long as the market distortions persist.
In the specific cases of coffee and sugar, the setting of the foreign and domestic sale price
depends on market conditions.  The State does not regulate those prices, instead it is the
producers/industrialists who agree with their purchasers on the price of sale.
Similarly, the State decreed a benchmark minimum price for bananas, though it is not
binding.
Besides, public utility prices are controlled by the Public Utilities Regulatory Authority,
which sets those rates by means of a procedure in which a hearing is given to all the partiesconcerned.
Paragraph 48 states that in relation to the IFAM tax rates for liquor, distilled beverages and other
spirituous beverages, the authorities were examining the consistency of these taxes with Costa Rica's
international commitments.  Why do the authorities believe that there is inconsistency and which
would be the international commitments infringed?  Has the opinion of the Office of the Procurator-
General of the Republic been sought, as intimated in the report of the Secretariat?  What was the
opinion of that Office?
Considering that at present an IDA tax of 5% is applied to domestic brands of aerated soft
drinks, and 10% to soft drinks produced in Costa Rica by franchisees of international brands and
imported soft drinks, and that an IFAM rate of 10% is applied to imported beer and 3% to domestic
beer, the authorities of the Ministry of Foreign Trade consulted the Office of the Procurator-General
of the Republic in order to clarify the scope of the tax provisions dealing with the aforementionedtaxes.  To date, the Office of the Procurator-General of the Republic has not issued an opinion.
It should be mentioned that recently, in the context of the obligations arising from a free trade
agreement, the First Chamber of the Administrative Fiscal Tribunal found that imported beer in the
case in question should be given the same treatment as domestic brands, on the basis of the principle
of national treatment.
Insurance servicesWe would like to know whether the Government of Costa Rica intends to privatize this sector or at
least open it up to participation by new competitors.
A draft law is currently being studied by the Legislative Assembly aimed at introducing
reforms to the sector and improving the conditions of competition, as well as creating a HigherInspection Authority.  The draft must undergo the relevant formalities in order to become a law of the
Republic.  At present, the opinion of the Legislative Commission examining that draft is being
awaited.WT/TPR/M/83
Page 46
We would also like to know whether the insurance sector falls entirely outside possible bilateral or
multilateral trade agreements.
As stated previously, the Legislative Assembly is now examining a draft law intended to
introduce reforms to the sector and to improve the conditions of competition.  The adoption of that
draft law would make it possible to include this sector in future trade negotiations.
Telecommunications services
The report points out that the draft General Telecommunications Act was withdrawn in the face of
opposition and rejection by the Costa Rican society.  We would like to know the reasons for suchopposition and rejection.
Early in 2000 the Government initiated a reform of the telecommunications sector intended to
improve competitive conditions.  However, some organized sectors such as trade unions, student
groups and some political parties voiced their opposition to that reform.  The draft was withdrawn
from the Legislature and it was decided instead to set up a commission to study the various options
for modernizing the sector.
Is it expected that a new law will be enacted and when?  Should this Law be adopted, will there be an
opening for foreign investment or will national treatment-type discrimination persist?
The preceding reply mentions the creation of a special commission to look into the various
options for modernizing the sector.  To date, that Commission has not yet concluded its work.
Moreover, it should be pointed out that there is currently no discrimination based on national
treatment in the telecommunications sector in Costa Rica.  It is only the State, through theCosta Rican Electricity Institute, that is legally entitled to provide services in this sector.
We would also like to know whether the telecommunications sector falls entirely outside the scope of
bilateral or multilateral trade agreements.
As pointed out in the preceding answer, it is only the State, through the Costa Rican
Electricity Institute, that is legally entitled to pr ovide services in this sector.  Once that situation
changes, thought can be given to including this sector in future trade negotiations.
Professional services
Paragraph 112 mentions that some of  the discrimination established in the regulations of professional
bodies "could be considered unconstitutional".  In the light of this, is there a draft law intended to
amend those unconstitutional regulations, with partic ular reference to the prerequisite of permanent
residence in order to belong to a professional body?
The Constitutional Court of Costa Rica examines only those cases that are specifically
brought before it.  As such, there is no draft law intended to amend possible unconstitutional
regulations.
As an example of a decision by the Constitutional Court in this connection, we may mention
that the law requiring Costa Rican nationality in order to practise the notary's profession was declared
unconstitutional by Vote No. 2093-93 of 19 May 1993, when it was found that there should be no
discrimination whatsoever between nationals and foreigners for the purposes of exercising that
profession.WT/TPR/M/83
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Is there freedom to establish professional bodies?  If this is so, what are the requirements for their
creation?
In Costa Rica, professional bodies are classifi ed as non-State entities and therefore subject to
the principle of legality.  These professional bodies are not associations in the strict sense but entities
created by law in order to regulate the various professions.  Therefore, a professional group that does
not have such a body must organize itself and request that it be created through the enactment of a
law.
Professional bodies are established as public-interest entities on account of their form and the
public-interest goals being pursued.  The State therefore delegates part of its policy-making and
supervisory powers to them, investing them w ith disciplinary powers over their members.
Is it possible for more than one professional body to exist per profession in the country?
Owing to their public-interest function, there is one professional body per profession in
Costa Rica.  This does not mean that some professional bodies may not cover two or more
professions.
What possibility is there that the Government of Costa Rica may extend to other members the benefits
obtained under agreements recognizing the educat ion or experience obtained, requirements met, or
licences or certifications granted in a particular country, as established in Article 7.2 of the GATS?
Under the GATS, Costa Rica, like any other WTO Member, must provide adequate
opportunities to interested Members to negotiate their accession or a new treaty, so long as it is
demonstrated that the education, experience, licences or certificates obtained in that other Member
State are similar and serve the same purposes.
The Government of Costa Rica is ready to evaluate these factors in order to reach agreements
with other Members.
Is there any category of professional services the provision of which does not require membership in
a professional body?  If so, which ones?
There are indeed professional bodies in which membership is not required in order to practise
the profession, such as journalists, information technology and computer professionals and primary
school teachers.
UNITED STATES
Introduction;  trade policies by sector, services.  (Para. 2, Para. 33, Para. 46, Para. 76)
The Secretariat Report notes that “the State ma intains a dominant position in a number of key
services, in some of which inefficiencies have arisen over time as regulations have failed to keep pace
with technological and market changes.”  What steps is the Government of Costa Rica taking or
considering taking to reform regulations in the services area?
In the year 2000, the Government of Costa Rica attempted to open up some of these sectors
such as energy and telecommunications.  Nevertheless, popular expressions of disapproval prevented
the adoption of the legal reforms necessary to implement the measures.  The result is that work is now
under way to adopt and implement a series of reforms and updates in those sectors with a view to
improving the services, these measures being taken within the existing legal framework.WT/TPR/M/83
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As pertains to the insurance sector, there is now a draft law before the Legislative Assembly
designed to introduce reforms to the sector and improve competitive conditions, as well as to create aHigher Inspection Authority.  That draft law must undergo the relevant formalities in order to become
a law of the Republic.  The opinion of the legislative commission responsible for examining it is now
being awaited.
Economic Environment.  Economic polic y and economic development (para. 3)
Costa Rica’s inflation rate has fallen from 23,2% in 1995 to 10,3% in 2000.  What is Costa Rica
doing to continue to mantain this trend?
After recording a 22.6% annual increase in consumer prices for 1995, inflation was held
down to 10.3% in 2000.  In spite of this significant reduction in the rate of increase in domestic
consumer prices, Costa Rica is aware of the need to step up its efforts to balance domestic inflation
with international inflation.  To that end, Costa Rica is contemplating measures such as eliminatingthe pressures stemming from the financing of Central Bank losses, ordering public finances (reducing
interest payments on the public debt) setting wages based on expected rather than recorded inflation
and the de-indexation of certain products (such as fuels).
Trade developments.  Trade in goods.  Para. 2
For the last five years Costa Rica’s trade in goods grew at 18% annually.  The manufacturing sector
became the engine of growth in exports with th e share of agricultural exports falling from 68%
in 1995 to only 31% in 1999.  What did Costa Rica do to encourage these developments?
In the second half of the 1990s, Costa Rica made a significant shift in its development
strategy by devising a policy for attracting foreign investment that was more aggressive and geared
towards high-technology industries.  As a result of these endeavours, 1998 saw the start of substantial
inflows of foreign direct investment (FDI) in to the country, amounting to 4.2% of GDP in 1999
(US$620 million).  The establishment of these hi gh-technology enterprises on the national territory
brought greater dynamism both to the domestic market and to the export sector by creating new
sources of employment and processes of technology transfer, and generating an appreciable amount of
foreign exchange.
The consolidation of the process of opening in the second half of the past decade, the removal
of barriers to foreign trade, and the forging of closer ties with major trading partners are factors thathave helped to account for the diversification of Costa Rica's exports both in terms of variety andnumber of products as well as markets of destination.
Trade in services ( para. 1)
For the last five years Costa Rica’s trade in services grew at 52% annually.  Much of the increase
was due to the tourism sector.  What did Co sta Rica do to encourage these developments?
The wealth of Costa Rica's natural resources had given it a competitive advantage in tourism,
which has boomed throughout the 1990s.  Costa Rica has exploited this relative advantage and has
successfully sold itself worldwide using a range of mechanisms to publicize its image as a tourist
destination.  Accordingly, statistics by origin of annual FDI flows between 1995 and 1999 rank the
tourism sector as the second major recipient of investment (13.8% of the total).
Besides, although the country still has no adequate statistical base in this sector, Central Bank
cash flows have been showing significant transactions accounted for by the trade in services.
Prominent among these are not only the tourism indus try, but also, medical, student and computing
services as well as corporate service and information centres.WT/TPR/M/83
Page 49
Trade Policy Regime:  Framework and Objectives.  Formulation and Application of Trade Policy
General legal and institutional frameworkUnder the Protocol to the General Treaty for Central American Economic Integration, the
contracting parties in September 1996 decide to transfer certain powers to the Council of Ministers
for Economic Integration, which is responsible for the coordination, harmonization, convergence and
unification of countries’ tariff policies.  Accordingly, the Minister of Foreign Trade, as a member of
COMIECO, can change customs duties by Executive De cree without the need for such changes to be
approved by the Legislative Assembly.  How often has this provision been used?
Under the Convention on the Central American Tariffs and Customs Regime of 1985 and
particularly with the Third Protocol to the Convention on Central American Tariffs and Customs
Regime of November 1996, the Council of Minist ers for Economic Integration of the Central
American Countries, at the request of the countries and after a technical analysis, may modify theapplied tariffs by issuing resolutions that are published as executive decrees in each country.
The few resolutions issued by the COMIECO in recent years have been to authorize
reductions in applied tariffs.
Foreign Investment Regime.  Para. 2
The Secretariat Report notes that Costa Ricans and foreigners are prohibited from engaging in the
importing, refining and distribution of petroleum, the production of alcohol, insurance services, the
sale and distribution of electricity and postal services, all of which are monopolies of the State.  Are
there plans to change these prohibitions?
Many years ago the Government of Costa Rica stated its interest in carrying out the reforms
needed to encourage the provision of the services mentioned so as to enable the country to become
highly competitive.  In that connection, draft laws are now being discussed in the Legislative
Assembly on insurance and financial reform.
In the specific cases of energy and telecommunications sectors, the Government endeavoured
to modernize them during the year 2000.  Nevertheless, popular opposition prevented the adoption of
the legal changes necessary to implement those measures.  In consequence, work has been under way
on the adoption and implementation, within the existing legal framework, of a series of reforms and
updates in the sectors so as to improve the quality of these services.  Besides, a special commissionnow exists in the Legislative Assembly to study legislative proposals for strengthening these sectors.
Trade Policies and Practices by Measure.  Introduction.  Measures affecting imports.  Procedures.
Para. 15
The United States Government applauds Costa Rica ’s efforts to modernize their customs process and
is especially pleased to hear that the average customs clearance time is now one hour.  Given this,how does Costa Rica explain the habitual delays that  U.S. onion and potato imports suffer at certain
times each year;  delays in which many containers of onions end up waiting for inspection for up to
three days?  These delays result in damaged product which Costa Rica then rejects for quality
reasons.  Will the continuations of the reform process spare U.S. onion and potato shipments from
excessive delays this coming year?
In order to safeguard the country's sanitary and phytosanitary situation, permits must be
obtained from the entities responsible for health protection, sometimes including physical inspectionWT/TPR/M/83
Page 50
and phytosanitary approval.  Perishable goods are given priority treatment by the customs authorities
and by the other Government institutions involved in the inward clearance of goods.  Despite this, theformalities for such non-customs measures are undertaken by the importer or his representative with
the competent authority.  At present, work is under way in coordination with the Ministry of
Agriculture and Livestock (MAG) so that such permits can be transmitted electronically to the
customs once the inspection is complete, in order to further speed up inward clearance formalities.  It
is hoped that MAG permits will be transmitted electronically as of June next and subsequently tointegrate the other Government institutions responsible for issuing permits.
Customs valuation.  Para. 17
In September 2000, Costa Rica adopted the provisions of the Customs Valuation Agreement.  Are
used cars receiving the same treatment for valuation purposes as other products?  If not, could Costa
Rica explain what customs authorities are now accepting for valuation purposes for used cars?
In the case of used vehicles, mindful that imports of used vehicles are not subject to import
duties but only to domestic taxes, the Government of Costa Rica has developed a procedure for the
valuation of imports of used vehicles, published in Decree No. 29265-H of 7 February 2000, under
which three sources of values are validated:  the invoice, the so-called Black Book, and the Direct
Taxation Database, regardless of the country of origin and the provenance of the merchandise.
Tariffs
In the Uruguay Round, Costa Rica bound 82 percent of its entire customs tariff at a maximum rate of
45% ad valorem.  Is the Government considering closing the wide margin between applied and bound
rates, thereby increasing the predictability of market acces conditions?
The reduction of bound levels beyond 45% is an option that Costa Rica could evaluate in the
context of future multilateral negotiations.
Without prejudice to the foregoing, Costa Rica has carried out a major process of unilateral
tariff roll-back, which has gradually reduced the average applied tariff from 11.7% in 1995 to 6.1%
in 2000.  Similarly, in line with the objectives set by the Central American countries, the vast majority
of tariff headings are distributed in the zero to 15% range and almost half of them are at a level
ranging between zero and 1%.  This is evidence of the considerable headway the country has made in
reducing its tariffs.
Tariff quotas.  Para. 35
Can Costa Rica explain why the use of their tariff quotas has been so limited since 1995 and
whether they plan to take any steps to make their tariff rate quota administration more transparent
and more effective in filing?  Why does Costa Rican Customs Service allow goods to be imported at
the out-of-quota rate when their tariff quotas have not yet been filled?
The mechanism used since 1995 to administer tariff quotas is fully transparent and free of
State intervention.  It affords any interested party the possibility of participating in signing quotas,
with no restrictions or qualifications – with or without a documented record in the production sector –
thereby allowing the entry of some products at tariff levels below the applied tariff and below the
general bound level.  Costa Rica has given no thought to changing this system as it has yielded verygood results.WT/TPR/M/83
Page 51
Under the mechanism, when quotas are assigned, besides the issue of a certificate which is
submitted to the customs authorities for the purposes of applying the preferential import tariff for the
quota, both the Agricultural Commodity Exchange as well as the Ministry of Agriculture advise the
customs authorities either of the amount assigned and/or the natural or legal person to whom it is
assigned.  The issue of the certificates and the statistical control carried out by these institutions
guarantee the proper administration of the amounts available from year to year.
Import licensing.  Para. 58The United States is pleased that the Government of Costa Rica only requires import licenses for
goods imported under tariff quotas.  Can Costa Rica explain why it frequently engages in non-
transparent trade distorting import licensing ar rangements by delaying issuance of SPS import
approval forms for rice and other products without notifying the exporter or the United States
Government for the reason ?
Costa Rica abides by its obligations under the WTO Agreement on Sanitary and
Phytosanitary Measures and has taken measures permitted under this Agreement no more frequently
than dictated by sanitary and phytosanitary needs.  As for transparency, the Costa Rican laws on
animal and plant health are publicly available and the application of measures is made public in
compliance with the law of the land.
Regulations, standards and other technical requirements.  Sanitary and phitosanitary measures.
Para. 89
The United States respects that Costa Rica has rules in place to certify that food imports are safe.  If
products meet their standards, they are supposed to be allowed into the country in keeping with Costa
Rica’s commitment to liberalize agricultural trade.  In light of this, can Costa Rica explain how they
can ban U.S. poultry imports without notification, without scientific justification, and without
responding for requests for justification?
The reply to the previous question also applies to this one.  As pertains to the United States
challenge to the recent measure taken by Costa Rica in relation to poultry imports from that country, it
should be stressed that Costa Rica has already explained to the Committee on Agriculture that the
matter is being looked at internally and a report will be made on it.
Government procurement.  Para. 101Costa Rica has enacted laws and established a syst em to oversee governmen t procurement.  It is
important that these laws are applied consistently in such sectors as telecommunications in order to
attract more investment.
Costa Rica is a State governed by the rule of law where laws are applied consistently and
there are mechanisms available through which parties may challenge administrative decisions,whether by administrative channels or through administrative courts.
Costa Rican laws on government procurement cover all the sectors in which this activity takes
place.WT/TPR/M/83
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Other Measures Affecting Trade
Intellectual property rights.  Enforcement of intellectual property rightsPara. 239 (358)  Although the Secretariat Report states that complaints of piracy lead to intervention
of the courts and uniform positive results, this is not always the case.  In our experience, however, we
have found that enforcement actions have often been inadequate to deter intellectual property
violations.  What is the Government of Costa Rica doing to increase enforcement efforts?
The Government of Costa Rica has deployed a major effort to align the obligations arising
from the TRIPS Agreement with its national laws;  in many cases, it was necessary to enact new
legislation on the matter owing to the absence of  regulations or the insufficiency of existing
regulations.
Of the entire process of reforming intellectual property legislation, the Law on Procedures for
the Enforcement of Intellectual Property Rights enacted in October last year is the most important ofall the laws in that it ensures effective protection of intellectual property rights and the respective
procedures and provides for sanctions in this regard.
The Law on Procedures for the Enforcement of Intellectual Property Rights provides
protection for all rights of this kind deriving from national laws and international agreements in force
in the country.  This Law contains adequate provisions on precautionary measures, border measures,administrative and civil procedures and penal sanctions.
Although this Law was enacted only quite recently – October 2000 – it has already been
successfully applied in some instances, especially concerning preventive embargoes imposed on
counterfeit goods.  The application of effective precautionary measures is but one example of the way
in which holders of intellectual property rights are enforcing their rights in Costa Rica.
In October 2000, Costa Rica passed an intellectual property law that established civil sanctions and
criminal penalties for copyrights piracy.  The law appea rs to be less than what is necessary.  It also
increases the requirements to obtain injunctive relief.  What is the government of Costa Rica doing to
ensure that there are adequate civil sanctions and criminal penalties?
In the specific case of copyright, the Law on Procedures for the Enforcement of Intellectual
Property Rights, Law 8039 of October 2000, indeed contains much more effective and comprehensive
provisions against the piracy of these rights.
Following is an itemization of the rules that afford much more effective protection of
copyright:
• precautionary and border measures were included that did not exist under the Copyright Act;
• the Administrative Registry Tribunal was created in order to examine appeals against
proceedings and definitive rulings by the various Registries making up the National Registry,including the National Registry of Copyright and Related Rights;
• the Code of Civil Procedures was amended so that intellectual property cases could be dealt
with by abridged proceedings, which avoided using the special procedure previously
established under the Copyright Act which in practice was as complicated as an ordinary
procedure;
• prison sentences were established for copyright infringements and several offences against
information technology were added in order to enforce more effectively the commitmentsassumed by Costa Rica under the new WIPO WPPT and WCT Agreements.WT/TPR/M/83
Page 53
Although the Government of Costa Rica believes that the laws on the observance of
intellectual property rights represent a vital step forward in the effective protection of such rights, itshould be stated in that connection that the government has taken due account of some comments
made by holders of copyright with a view to improving the legislation enacted.  In the light of this, the
Executive Branch will soon be tabling a draft law before the Legislative Assembly intended to
institute further custodial sanctions for intelle ctual property rights infringements, to reform
proceedings for copyright infringements so that they  are initiated by the public rather than private
proceedings and to repeal Article 70 of the law concerning the principle of the existence of injury and
the de minimis  notion.
IV. Trade Policies by sector
Agriculture.  Policy objectives and instruments
Para. 22 In November 1999, Costa Rica has established a compensation fund for producers funded by
a banana export levy.  Who is allowed to receive compensation from the fund?
The beneficiaries of the compensation fund are natural or legal persons who produce bananas
and sell them to domestic or foreign intermediaries for export and whose output is effectively
exported.
Electric Power.  Para. 33The Costa Rican Electricity Institute (ICE), a State corporation, controls the transmission,
distribution and marketing of the bulk of electric power and much of its generation.  There have been
proposal to liberalize the sector, promote the participation of private investors and increase
competition with ICE.  What is the status of the Joint Commission´s efforts to examine various reform
options for the electricity sector?
Early in 2000 the Government initiated a reform of the telecommunications sector intended to
improve competitive conditions.  However, some organized sectors such as trade unions, studentgroups and some political parties voiced their opposition to that reform.  The draft was withdrawn
from the Legislature and it was decided instead to set up a commission to study the various options
for modernizing the sector.  The commission has not yet concluded its work.
Manufacturing SectorManufacturing exports rose from $1.8 billion to $5.1 billion in 1999, with most of the growth coming
from the development of the electronic component s industry.  The Government has started a project
financed by  the Inter – American Development Bank to help increase domestic added value in the
production of these high technology goods.  What is the status of this project?
In order to help increase the domestic added value of the national output of the high
technology multinational companies established in Costa Rica under the free zone regime, theDevelopment Project for Suppliers to High Tec hnology Multinational Companies was created.  The
project, which is financed by the Inter-American Development Bank and local organizations, is
mainly aimed at small- and medium-sized enterprises (SMEs).
As this programme is still in the very early stages of implementation, its impact on the
national economy has not yet been gauged.  Nevertheless, efforts are under way to extend the
coverage of the programme to all activities connected with companies located in free zones, not only
high technology companies.  The intention is to extend the programme's coverage to other areas and
hence to involve a greater number of local companies.  This programme is currently being very wellreceived by multinational companies established on the national territory.WT/TPR/M/83
Page 54
Services.  Principal characteristics.  Para. 46
The Secretariat Report notes that Costa Rica´s schedule of commitments under GATS is rather
limited.  This is partly a reflection of the privileges retained by the Government in major service
sectors.  What plans does the Government have to increase its GATS commitments and reduce State
monopolies in services sectors?
Costa Rica believes that its internationally assumed commitments must take account of the
country's circumstances and economic situation.  The country attaches the utmost importance to thecurrent WTO negotiations on services.  It will therefore continue to participate actively in them.
Financial services.  Banking and financial services .  Market structure and performance.  Para. 56
The Secretariat Report notes that the share of private banks in the domestic market has increased
gradually since 1998 when the monopoly of State banks ended.  Is the Government going to loosen the
stringent conditions imposed on private banks in attracting resources?
A draft law was recently tabled before the Legislative Assembly designed to overhaul the
national financial system, and which can be consulted by the public at large on the website
www.asamblea.go.cr.
This draft must be approved by legislative commission before continuing through the various
stages of lawmaking.
Amongst other things, the draft provides a legal basis for electronic payment transactions, it
gives greater independence and autonomy to the Central Bank of Costa Rica, it eliminates certain
distortions (toll charges, reserve requirements, growth ceilings and margins, sale of foreign
exchange), grants flexibility to State banks (hiring, wages, etc.) and enables foreign banks to open
representative offices, agencies and branches.
Regulatory framework.  Insurance services.  Para. 76
The Secretariat Report notes that the insurance market in Costa Rica is affected by a number of
problems, including the high costs and narrow range of services compared with those available in
more competitive markets.  Is the Government considering reducing the monopoly held by the State as
part of reforming the insurance sector?
A draft law is currently being studied by the Legislative Assembly aimed at introducing
reforms to the sector and improving the conditions of competition, as well as creating a HigherInspection Authority.  The draft must undergo the rele vant formalities in order to become a law of the
Republic.  At present, the opinion of the Legislative Commission examining that draft is being
awaited.
Communication services.  Para. 80
The Secretariat Report notes that there is an unsatisfied demand for cellular phones and that only
51% of cellular calls are completed.  What is the status of Costa Rica’s efforts to expland cellular
service?  What is the Government doing to ensure that there is an opening bidding process for a
public tender in the cellular area?
Indeed, the Costa Rican Electricity Institute is now carrying out projects to improve and
expand the cellular service.  Bidding is currently under way for 400,000 cellular lines in order tocover the country's cumulative demand.WT/TPR/M/83
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Costa Rican laws ensure fair and non-discrimi natory treatment for the various bidders, who
may avail themselves of statutory remedies to enfor ce their rights in the event that they believe them
to have been violated.
Professional services.  Para. 112
The Secretariat Report lists limitations on national treatment for the provision of various professional
services.  What restrictions and requirements are there on foreigners performing architectural and
construction services?
The Federated Association of Architects and Engineers is made up of the Association of Civil
Engineers, which includes civil engineers, topographical engineers, geodetic engineers, mining
engineers and related professions;  the Association of Architects, which includes architects, landscape
architects and related professions;  the Association of Electrical, Mechanical and Industrial Engineers,
which includes mechanical engineers, mechanical engineering administrators, mechanical electrical
engineers, industrial engineers and electronic engineers and related professions.
The prerequisites for joining this Association are the status of resident migrant in Costa Rica
and a minimum of five years of uninterrupted residence in the country.  Only active members of the
Federated Association may freely practice the prof ession or professions of which they are members.
HONG KONG, CHINA
We are glad to see that the average tariff fell from about 12% in 1995 to 7% in March 2000  which
resulted in improvement in access to the Costa Rican market.  However, it is noted that an additional
import tariff of 1% is imposed for all imports.  We are interested to know the nature and purpose of
this additional tariff, and why it is not combined with the normal tariff.
At present, Costa Rica applies an additional tariff of 1% on the c.i.f. value of all imports,
excepting those covered by the bilateral free trade agreements in force in Costa Rica (Mexico and
Panama), goods originating in the Central American Common Market (CACM) as well as goodscovered by the WTO Information Technology Agreement (ITA).
Costa Rica notified this 1% tariff in its accession to the GATT in 1990 as the only import
surcharge and it was bound under the heading of other import charges.  This tax was created by
Law 6946 of 13 January 1984 in order to generate some income for the Education and Nutrition
Centre and the Comprehensive Childcare Centres (CENCINAI).
Import Procedures
It is mentioned that the lodging of a customs impor t declaration requires the intervention of a customs
broker.  We are interested in knowing more about the role of the broker, the rationale of involving
him and whether Costa Rica has considered other alternatives, for instance, allowing importers to
lodge declarations themselves.
In Costa Rica the customs agent is considered under the law as a professional customs service
auxiliary responsible mainly for providing services to  third parties in customs formalities, regimes and
operations.  Under the customs law, the customs agent is the legal representative of his principal for
the purposes of the actions and notices emanating from customs clearance and from the related
procedures.  Besides, he bears civil liability for any patrimonial damage arising as a result of thefulfilment of his functions and shall be answerable to the fiscal authority for any infractions or
offences committed.WT/TPR/M/83
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The customs agent is considered as a professional in customs and foreign trade matters,
responsible for advising private enterprises or natural persons engaging in customs transactions.Given the specialized and technical nature of the matters under his responsibility, the Government of
Costa Rica has historically made customs agents responsible for customs matters on its behalf.  They
are also covered by a financial guarantee provided to the National Customs Service.
For the time being, it is not envisaged that importers will be allowed to submit their own
import declarations under all customs regimes.  Nevertheless, it should be pointed out that the currentcustoms legislation prescribes that the involvement of customs agents is optional under some regimes,
which allows importers to submit import customs declarations directly on their own behalf.  This may
take place in the case of goods subject to bonded warehousing, ship's stores, the outward processing
customs regime, the free-zone regime and customs procedures for travellers' luggage, relief
consignments, samples of no commercial value, express deliveries, duty-free shops, non-commercialimports, family consignments, amongst others.
Regulations, Standards and Other Requirements
It is noted that regulations which involve requirements and restrictions relating to health, security,
the environment and consumer protection are developed with the participants of representatives of the
sectors concerned by placing a public notice in La Gaceta (Costa Rica's Gazette) 60 days before aregulation is made official.  Could Costa Rica share with us more information on how public
comments would be taken into account in finalizing the regulation given the relatively short 60 days
period for both comment and consideration of comments received.
The 60-day period is established only for receiving comments from the sectors concerned.
Once this period has expired, there are another 30 days for analysing the comments received and
changing the technical regulations where appropriate.  Such regulations will take effect upon
publication in the Official Journal La Gaceta.
INDIA
The Secretariat Report as well as the Government Report note the importance attached to regional
trade agreements by the Government of Costa Rica.  While these agreements could be beneficial to
the Costa Rican economy, it would be important for the Government of Costa Rica to ensure that
these regional agreements are complimentary to the multilateral trading system and are fully
compatible with the WTO rules and that there are not trade diverting effects.  We would like to hear
from the delegation from Costa Rica their views on this issue especially on the benefits they have
derived from their membership of various regional  agreements and how their compatibility with WTO
rules is being ensured.
Costa Rica attributes enormous importance to the various efforts aimed at achieving greater
regional integration, as vehicles of great utility for achieving greater trade liberalization on the onehand and for complementing the WTO trade liberalization process on the other.
The intensification of these regional endeavours have been of benefit to the country in
consolidating its process of integration into the world economy.  All the agreements signed by Costa
Rica are consistent with the rules and disciplines of the World Trade Organization.
We note from the Secretariat Report that the share in agricultural products in total exports has
substantially dropped from 68% in 1995 to some 30% in 1999.  However, the report also notes that
given the size of employment, this sector conti nues to be an important sector of the economy.  We
would like to request the delegation of Costa Rica to share with us the reasons behind this.  We would
like to know from the delegation of Costa Rica their plans for diversification of production and export
of non-agricultural products.WT/TPR/M/83
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Although it is stated that the share of the ag ricultural sector in total goods exports declined
from 68% in 1995 to 31% in 1999 (according to Table AI.1), agricultural exports have grown at anannual average of 4% in value and 2% in volume terms over the past six years.
The main factors accounting for the reduction of the percentage share of agricultural exports
in overall exports are, in the first place, the expansion of industrial exports and, in the second, adverse
world price movements for the main agricultural products, namely bananas and coffee.  As a result of
the great buoyancy shown by industrial exports, above all activities connected with the electroniccomponents industry, that sector advanced by 20 pe rcentage points in total exports between 1995 and
2000.
The outcome of this change in the make-up of Costa Rica's exports is that the manufacturing
sector has become the driver of growth in export activity, in particular since 1998.  Although this
buoyancy is closely related to sales of modular circuits, new market niches have also been emerging,such as serum infusion and transfusion equipment, drugs and hairdryers.
The decline in the prices of some agricultural products had a significant impact on Costa
Rica's exports in that sector.  Nevertheless, if we exclude bananas and coffee which are the main
products affected by those problems, agricultural ex ports show average growth of 9% in value terms
and 5% in volume terms over that period.  It should be pointed out that this growth has been limitedby the negative impact on the agricultural trade of distorting measures taken by other trading partners.
It is inappropriate to compare the percentage growth of a developing country's agricultural exports
with its industrial exports without comparing the trad ing rules to which each of these sectors is subject
on other markets.  The farming sector is still facing serious distortions that prevent developing
countries from exploiting their competitive advantages.  The policy of agricultural subsidies is
perhaps the factor that most seriously affects trade and hence the advancement of developing
countries.  For as long as the competitiveness of the farming sector in developing countries lies in itscapacity to compete with the fiscal authorities of  developed countries, the growth of agricultural
exports and their own development objectives will continue to be seriously hampered.
Paragraph 2 of the summary observations in the Secretariat Report states that "the Government
maintains a dominant position in a number of key services, in some of which inefficiencies have arisen
over time as regulations have failed to keep pace with technological and market changes.  Furtherimprovements in resource allocation would thus be aided by a more uniform treatment of all
activities, enhanced internal competition, and addressing existing shortcomings in the services
sector".  We would like the delegation of Costa Rica to comment on these observations.
Many years ago the Government of Costa Rica stated its interest in carrying out the reforms
needed to encourage the provision of the services mentioned so as to enable the country to become
highly competitive.  In that connection, draft laws are now being discussed in the Legislative
Assembly on insurance and financial reform.
In the specific cases of energy and telecommunications sectors, the Government endeavoured
to modernize them during the year 2000.  Nevertheless, popular opposition prevented the adoption of
the legal changes necessary to implement those measures.  In consequence, work has been underwayon the adoption and implementation, within the existing legal framework of a series of reforms and
updates in the sectors so as to improve the quality of these services.  Besides, a special commission
now exists in the Legislative Assembly to study legislative proposals for strengthening these sectors.WT/TPR/M/83
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JAPAN
Rules of origin
According to the Report, Costa Rica does not apply any non-preferential rules of origin.  Japan
considers that the country of origin is one of the most important factors in applying AD or safeguard
measures, as well as in compiling trade statistics.  How does Costa Rica decide on the country of
origin relating to goods under non-preferential treatment?  Is the method to decide the country of
origin relating to non preferential treatment non- discriminatory and transparent ?
Costa Rica has no non-preferential rules of origin.  Yet this situation has created no problems
in determining and applying anti-dumping or safeguard measures and has not meant resorting to
treatment that is discriminatory or lacking in transparency.
The normal practice is to consider as the country of origin the one declared by the importer of
the goods in the import documents based on data supplied by the exporter.  That data is used both forcompiling import and export statistics and for determining the country of origin in those cases where
it is necessary to apply a non-preferential trade policy instrument.
Tariffs
According to the report, Costa Rica bound 82% of its entire customs tariff, mostly at maximum
ad valorem rate of 45%. Please explain the perspective for reducing the rate of bound tariffs.
The reduction of tariff levels bound beyond 45%  is a possibility that Costa Rica could
consider in the context of forthcoming multilateral negotiations.
Without prejudice to the foregoing, under the tariff reduction programme agreed at Central
American level, Costa Rica has gradually reduced the average applied tariff from 11.7% in 1995 to
7% in 2000.  Similarly, in line with the objectives set by the Central American countries, the vast
majority of tariff headings are distributed in the zero to 15% range and almost half of them are at a
level ranging between zero and 1%.  This is evidence of the considerable headway the country hasmade in reducing its tariffs.
Regulations, standards and other requirements
The Report states that “the Ministry of Agriculture and Livestock is authorized to restrict of prohibit
the importation and transit  of good where such action is justified on technical grounds and it is
considered that using them would be prejudicial to agriculture, health or environment”, Are there
and detailed conditions for applying a such restriction or prohibition?  Is transparency ensured for
these conditions, for example, by publication?
In pursuance of Costa Rica's assumed international obligations, Article 44 of the
Phytosanitary Protection Act, Law No. 7664 of 1997 prescribes that in examining the reasons for
restricting the entry of goods, the Costa Rican sanitary and phytosanitary authorities must ensure thatthe measures in question are based on scientific principles, take account of the rules, directives and
recommendations of the relevant international organizations, are applied in a non-discriminatory
manner, and do not constitute a hidden barrier to international trade.
In addition, the sanitary and phytosanitary regulations adopted by the country must be
published in the Official Journal, La Gaceta, in k eeping with the guidelines laid down in Annex B of
the WTO Agreement on Sanitary and Phytosanitary Measures.WT/TPR/M/83
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Export, prohibitions and licenses
According to the Report, the  Agro-Industrial Cane Sugar  League (LAICA) controls almost all sugar
exports although legally it does not have exclusive control.  How is the government involved in thisorganization’s export?  What is the relationship between the government and this organization?
Legally, LAICA does not have exclusive control over the setting of sugar export quotas,
though it does play a significant part in the exportation of Costa Rican sugar, most of which is donethrough the Liga.
Pursuant to the Agriculture and Sugar Cane  Industry Act No. 7818 of 22 September 1998, the
Liga Agrícola Industrial de la Caña de Azúcar (LAICA) is a non-State corporation, subject to public
law in the exercise of its legal powers and duties, and to private law in the conduct of its marketingand other corporate activities.
The Liga Agrícola Industrial de la Caña de Azúcar is made up of sugar cane producers and
processors whose representatives form part of its Board of Directors, together with two
representatives of the Government of Costa Rica.  The function of the Government representatives is
to ensure the proper implementation and observance of Law 7871, the Agriculture and Sugar CaneIndustry Act of 22 September 1998.
The Government of the Republic plays no part in the marketing process and therefore neither
enforces nor establishes limits pertaining to the export or import process or the domestic marketing of
sugar.
According to the Report, the National Flower Exporte rs Council controls flower export, for statistical
purposes.  Please explain the functions of these organizations in a concrete manner.
The National Flower Exporters Council inspects fl ower exports from Costa Rica for statistical
purposes only.  The need to quantify exports and keep track of their destinations calls for new
promotional strategies and the study of possible export varieties depending on the requirements of the
market of destination.
Export CartelsPlease explain the consistency between the export restrictions applied since May 2000 (allocations of
20% of all coffee productions to stock reservation instead of export) and Article 12 of Agreement on
Agriculture.
Given the low world prices, the volume of coffee exports from Costa Rica has changed in
comparison with other years.
Costa Rica does not consider this measure to infringe the provisions of Article 12 of the
Agreement on Agriculture.
Export, promotion, marketing assistance
The Report states that “PROCOMER’s annual budge t is approximately US$1.3 million.  About 22%
of this budget is earmarked for export promotion ac tivities.”  Please explain in detail the export
promotion activities taken by PROCOMER.  Als o, kindly explain the consistency between the
expenditure for these activities and the provisions of Agreement on Subsidies and CountervailingMeasures.
The promotional activities of PROCOMER may be divided into three major areas:WT/TPR/M/83
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• Fostering competitiveness:  the intention is to give fresh impetus to the development of an
export culture in the country and to strive to increase the added value of exports by reducing
the competitive disadvantages of companies.  It has programmes such as:  Prosoftware, CostaRica supplies (CR Provee), Creating Exporters and Promotional Consortia (Creando
Exportadores y Consorcios de Promoción);
• Training:  the aim is to inform and train the business community through  programmes such
as the Annual Business Training Plan (Plan Anual de Capacitación Empresarial) and
Specialized Sectoral Training (Capacitación Sectorial Especializada);  and
• Trade promotion activities:  these are intende d to encourage participation by the business
sector in various activities such as international fairs, exporters' missions, purchasers'
missions, marketplacecostarica.com, export showcases, expodegustaciones and trade offices.
The description of PROCOMER's activities makes clear that they are not inconsistent with the
Agreement on Subsidies and Countervailing Measures.
Intellectual property rightsPlease explain in concrete terms the content of the bill concerning the protection of new varieties of
plants.
The Government has submitted to the Legislative Assembly a draft law on the protection of
new plant varieties.  That draft law arose not only on the basis of our country's commitments in the
TRIPS framework, but in response to a distinct need for legislation to support the efforts of public and
private institutions that are currently involved in generating new varieties through geneticimprovement programmes.
The basic discussion text was drawn up on the basis of the model law conforming with the
requirements of the 1991 Act of the UPOV Conventi on.  It should further be mentioned that a draft
law is now being examined with a view to amending the Seeds Act so as to empower the National
Seeds Office to register new plant varieties.
Agriculture
The Report states that “the CNP is also responsible for maintaining a fair balance in the relationship
between agricultural producers and consumers, fo r which purpose it has the power to intervene in
supply and demand in the domestic market to guarantee the country’s food security”.  Please explainin details the ways in which the CNP intervenes in supply and demand in the domestic market.
As is indeed mentioned in the Report by the Secretariat, since the enactment of Law 7742 on
15 January 1998 prescribing that the CNP is respons ible for maintaining balance on the domestic
market, no measures have been taken with respect to securing such balance and it is market forces, the
free play of supply and demand, that have been responsible for any corrections made.
Services
In order to become members of the College of Dental Surgeons, members of College of Physicians
and Surgeons, as well as to become an optometrist, the Report states that foreigners have to satisfythe requirement demanded of Cost Rican citizens.  In the case of becoming an accountant, foreigners
have to submit evidence of the other requirements demanded of Costa Rican citizens.  Does this mean
that national qualifications are necessary for these professions and that foreigners have to pass the
same national examination as that for Costa Rican citizens?
For the purposes of the above-mentioned professional associations, both nationals and aliens
must meet the relevant requirements for membership established under the pertinent laws.WT/TPR/M/83
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MALAYSIA
We would be interested to know further how Cost a Rica would address the need for greater linkages
(as highlighted in the Secretariat Report) between the domestic and export-oriented industries to
strengthen the domestic industrial base?
Costa Rica takes the greatest interest in the ma tter of the linkages between local enterprises
and multinational enterprises established in the country.
In order to help increase the domestic added value of the national output of the high
technology multinational companies established in Costa Rica under the free zone regime, the
Development Project for Suppliers to High Tec hnology Multinational Companies was created.  The
project, which is financed by the Inter-American Development Bank and local organizations, is
mainly aimed at small- and medium-sized enterprises (SMEs).
As this programme is still in the very early stages of implementation, its impact on the
national economy has not yet been gauged.  Nevertheless, efforts are under way to extend the
coverage of the programme to all activities connected with companies located in free zones, not only
high technology companies.  The intention is to extend the programme's coverage to other areas and
hence to involve a greater number of local companies.  This programme is currently being very well
received by multinational companies established on the national territory.
Similarly, the Government has been conducting the Impulse Programme (Programa Impulso)
designed to foster a climate favourable to business and competitiveness in the country.  A national
debate is currently under way as to the importance of adopting and implementing a competitiveness
agenda that would introduce significant changes in various areas such as customs, infrastructure,
energy and telecommunications.  While such measures are being decided upon, the Government has
been undertaking very specific actions in such fields as the simplification of formalities for
exportation and investment, improving the country's technological base and supporting small- andmedium-sized enterprises, amongst others.
We would also ask whether the recourse to domes tic financing for the fiscal deficit would crowd-out
local investment and impact on the development of private sector economic activities.
The Government of Costa Rica has deployed major efforts to address its fiscal imbalance,
both as regards income as well as expenditure.  On the income side, the Code of Tax Standards andProcedures (Código de Normas y Procedimientos  Tributarios), was approved, providing a legal
framework has made it possible to improve tax collection;  the combined effect of this law and the
expiry of the so-called Tax Credit Certificates (Certificados de Abonos Tributario) has improved
controls and collection of tax income.  On the expenditure side, a process of financial engineering has
been carried out whereby domestic debt was replaced with external debt so as to alleviate domesticinterest payments.  Thanks to both factors, the bala nce of the internal debt diminished by 5.9% in real
terms over the past two years and it has been possible to increase the amount of public funds budgeted
for health, education, public security, infrastructure and social programmes.
Between 1995 and 2000, all these actions have gone hand-in-hand with reduced government
borrowing on the local financial market, which has tended to lessen the pressure on local interest ratesand reduce competition with the private sector in raising funds.WT/TPR/M/83
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Are there measures taken by the government to encourage re-investment so as to tap the profit
outflows?
For many years now, a fundamental element of the policy to attract Costa Rican investment
has been the creation of the conditions necessary to encourage reinvestment in the country.  These
conditions cover the areas of education, administrative formalities (tramitología), deregulation,
customs reform and exchange rate policy, amongst others.
The outcome of these efforts can be seen from the marked increase in investment flows in the
country which, for 1999, amounted to US$620 million.  This figure covers both new foreign direct
investment as well as reinvestment.
CZECK REPUBLIC
According to the Secretariat Report, internal marketing regime for spirits and alcoholic products
treats foreign products differently from domestic pr oducts.  We would like to hear more clarification
on this regime from the perspective of its compatibility with WTO Agreements .
At present, an IDA rate of 5% is applied to domestic brands of aerated soft drinks and 10% to
soft drinks produced in Costa Rica by franchisees of international brands and imported soft drinks.
Besides, an IFAM tax of 10% is applied to imported beer and 3% to domestic beer.
It should be mentioned that recently, in the context of the obligations arising from a free trade
agreement, the First Chamber of the Administrative Fiscal Tribunal found that imported beer in the
case in question should be given the same treatment as domestic brands, on the basis of the principle
of national treatment.
As pertains to the regime for the domestic marketing of spirits and alcoholic beverages,
paragraphs 169-171 of Chapter III.4 of the Report of the Secretariat set out the internal regulations
affecting that regime.  It should be pointed out that in its ruling C-134-2000, the Office of the
Procurator-General of the Republic expressed the opinion that based on the principle of nationaltreatment prescribed under a Free Trade Agreement, the domestic marketing of the imported spirits in
question should be done under the same conditions applied to the sale of domestic spirits.
In the light of the foregoing, the authorities of the Ministry of Foreign Trade consulted the
Office of the Procurator-General of the Republic with a view to clarifying the scope of the tax
provisions covering the above-mentioned taxes.  The Procurator-General's opinion is still pending.
As regards customs clearance, we understand that customs declaration should contain information
among others, the exchange rate.  Please explain how to fulfill these requirement in light of the fact
that exchange rate is daily adjusted by the Central Bank.
The Costa Rican Central Bank adjusts the exchange rate each day at 3 p.m., that rate being
valid for the following day.
Exchange rate information can be accessed in various ways, including by electronic means
(Central Bank's web page www.bccr.fi.cr), by telephoning the Central Bank, through the information
bulletin published daily by the Central Bank, the national dailies or other telecommunications media.
It is mandatory for the importer or his customs agen t to record in the customs import declaration the
exchange rate applicable on the day of submission of that declaration, and this will be verifiedelectronically by the customs computer systems.WT/TPR/M/83
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SWITZERLAND
Please explain in detail how your legislation provides protection for geographical indications.  In
particular, please give details regarding the procedure and the conditions for registration of
geographical indications as provided in the “Trademark and Other Distinctive Signs Act” (Law
No. 7978 of 6 January 2000) and the protection conferred by such registration.
The Trademarks and Other Distinctive Signs Act, Law No. 7978 of 6 January 2000, defines
geographical indications as the geographical name of a country, region or locality used in presenting agood to indicate its place of origin, provenance, manufacture, harvesting or extraction.
This Law does not permit the use of a geographical indication in trade by any means related
to the designation or presentation of a product or service when that indication is false or indicates or
suggests to the public a false or deceptive idea as to its origin, or when such use could create
confusion or mislead the public with regard to the origin, provenance, features or qualities of theproduct or services.
Nor may geographical indications be used in such a manner as to constitute an act of unfair
competition.
Besides, the law forbids the use in advertising and in the commercial documents pertaining to
the sale, exhibition or offer of products or services, of an indication that could be misleading or create
confusion as to the geographical provenance of the products that do not originate from the place
named by the geographical indication, or even if the origin of the product or service is indicated,
nonetheless creates confusion among the public.  In the registration of trademarks, Law 7978 also
prohibits the use of expressions such as "class", "type", "style", "imitation" or other similar
expressions.
As pertains to the procedure and conditions for the registration of designations of origin, it
should be pointed out that Article 75 et seq. of Law No. 7978 lay down some of the more importantspecial provisions, including:  prohibition, application, procedure, duration, modification and
termination of registration.
Please explain whether in your legislation patents are available for all categories of products?  Are
there any exceptions?
Article 1 of the Patents, Industrial Design s and Utility Models Act, Law No. 6867 of
25 April 1983, as amended by Law No. 7979 of 6 January 2000, defines what is meant by patentable
inventions and indicates what is not considered as inventions, as well as a series of exceptions to
patentability, which are in line with the possibility provided in Article 27 of the TRIPS Agreement.
For the purposes of the Patents Act, the following are not deemed to be inventions:
• discoveries, scientific theories, mathematical methods and computer programs taken in
isolation;
• purely aesthetic creations, literary and artistic works;
• economic plans, principles or methods for advertising or business and those pertaining to
purely mental or intellectual activities or to games;
• the juxtaposition of known inventions or mixt ures of known products, the alteration of their
form or use, dimensions or materials, except where it is a combination or fusion in such a
manner that they cannot function separately or where their characteristic qualities or functions
are modified so as to obtain an industrial result that is non-obvious to an expert in the matter.WT/TPR/M/83
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The exceptions set forth in Law 6867 and its amendments are the following:
• inventions whose commercial use should objectively and necessarily be prevented so as to
safeguard public order, morality, the health or life of persons or animals, or to preserve plant
species or avoid serious environmental damage;
• diagnostic, therapeutic and surgical methods for the treatment of persons or animals.
• plants and animals;
• essentially biological procedures for the production of plants or animals.
Please explain whether parallel imports of patent ed products are permitted by your legislation?
Parallel imports are permitted in Costa Rica under the hypotheses contemplated in Article 16
of the Patents Act which sets forth the rights conferred and their limitations.  In keeping with
Article 30 of the TRIPS Agreement, this Article stipulates that so long as it does not unreasonablyconflict with the normal exploitation of the patent and does not unreasonably prejudice the legitimate
interests of the patent owner or his licensee, the ri ghts conferred by the patent do not extend to acts of
selling, putting up for sale, using, holding in usufruct, importing or marketing in any way a product
protected by the patent, once it has been introduced into a country's trade, with the consent of the
patent holder or licensee.
Please give details about the way the “Undisclose d Information Act” (Law No. 7975 of 4 January
2000) provides for protection of undisclosed information.
Law No. 7975 of 4 January 2000 introduces the following provisions on the protection of
undisclosed information into Costa Rican legislation:
• It lays down the scope of protection and the information excluded therefrom;
• it sets the conditions governing the authorization of use by third parties, the ways,  acquisition
or disclosure without the consent of the owner;
• it regulates liability and confidentiality in industrial and commercial relations;
• it protects data submitted to obtain approval of the marketing of pharmaceutical or
agricultural chemical products;
• it protects information not disclosed by administrative and judicial authorities and in the
respective proceedings.
Please indicate the remedies provided by your new legislation on enforcement of intellectual property
rights, which constitute effective deterrents to infringements of intellectual property rights.
With the enactment of the Intellectual Property Rights Enforcement Procedures Act, Law
No. 8039 of 12 October 2000, Costa Rica adopted a legal instrument making for effective protection
of intellectual property rights.  Amongst the more salient aspects of that law, the following may be
highlighted:
• Protection of holders of intellectual property rights by means of needed regulations on
preventive measures (including those applied at customs), administrative and civil procedures
and penal sanctions;
• applicability of preventive measures by the administrative or judicial authority, provided that
the applicant demonstrates that he is the right holder or his representative.  The competentauthority will require a guarantee from the applicant;
• need to grant a hearing on the application of preventive measures, except where such a
hearing could nullify their effects;  nevertheless, where a preventive measure has beenWT/TPR/M/83
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implemented without a hearing, the authority shall accordingly notify the concerned party
within at least three working days of its implementation;
• decision allowing the initiating party to file the administrative complaint or judicial
application within a period of one month as from the notification of the decision containingthe preventive measure;
• entitlement of the right holder to request the admi nistrative or judicial authority to order the
customs authorities to suspend importation or exportation at the time of clearance;  he willnevertheless be requested to prove that he is the right holder or his representative, to deposit a
guarantee and provide such information and description of the goods as will enable thecustoms authorities to identify them without difficulty;
• obligation on the part of the customs authorities to act ex officio and to suspend the clearance
of goods if there is the presumption that they may be infringing an intellectual property right.
The authorities must report the infringement to the Public Prosecutor's Office within 24 hours
of the detention of the goods;
• empowerment of the judicial authorities to order the customs authorities to destroy or
eliminate infringing goods;
• protection of those sustaining injury as a re sult of the unwarranted detention of goods;
• creation of the Administrative Registration Court;
• competence of the National Consumer Commission to hear cases of unfair competition;
• hearing of intellectual property cases by abridged proceedings (Law 7979, amendment of the
Code of Civil Procedure) except for cases of unfair trademark competition, which will beheard in summary proceedings (Competition Promotion Law);
• penal sanctions for infringements of intellectual property rights.  These sanctions include
prison sentences of up to three years.
THAILAND
Trade Policy Regime:  Framework and objectives
International Trade Relations.  WTO
What are the Costa Rica's stance with regard to the issues of performance requirements, investment
incentives and dispute settlement, whether they should be included in a multilateral framework oninvestment or not?
Costa Rica has always supported the development in the WTO of multilateral rules for
investments.  Costa Rica believes that the WTO is  a forum in which a framework of principles should
be developed for the full and comprehensive regulation of investment in order to guarantee that
account is taken of the interests and objectives of both developed and developing countries.
Costa Rica stands ready to discuss all aspects of investment and the way in which they could
become part of an agreement on investment in  the WTO, including performance requirements,
incentives for investment and dispute settlement.
Measures affecting imports.  Tariff quotaIt is indicated in the report that “it is possible that economic operators are still unfamiliar with the
tariff quota administration mechanism”.  We are of interest to know whether Costa Rica has any plan
to improve the effectiveness of TRQ administrati on.  If yes, please specify the plan in details.
As indicated in the Report by the Secretariat, Costa Rica has taken a range of steps to
publicize the availability of quotas through the mechanism by means of advertisements in national
dailies and in the official journal La Gaceta.  This latter publication has been used to announce theopening of the mechanism for the respective year, as well as its distribution, whether partial or total.WT/TPR/M/83
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The mechanism used since 1995 to administer tariff quotas is fully transparent and free of
State intervention.  It affords any interested party the possibility of participating in signing quotas,with no restrictions or qualifications - with or without a documented record in the production sector -
thereby allowing the entry of some products at tariff levels below the applied tariff and below the
general bound level.
We would like to seek clarification on the objectives and functions of Rice Board as well as its
relationships with other government agencies.
The Rice Board carries out statistical research and compilation.  It is comprised by and large
of representatives of the production, industrial and commercial branches of the rice industry, as well
as government representatives.  It operates as a non-profit entity without commercial interests and
participates neither in the importation or exportation of rice.
In the Secretariat Report, it seems that the rice market in Costa Rica is still under strict control from
the government both in the domestic price levels the import regulation.  It is reported that “import
quotas are determined on the basis of the qu antity that cannot be supplied from domestic
production.”  We are of the view that this measure might not be relevant to the WTO Rules especially
under the Agreement on Agriculture.  We would like to seek clarification from Costa Rica on this
matter. In addition, we would like to know the MFN tariff for rice.
The Report by the Secretariat states that only the price of rice is controlled, owing to the
existence of oligopolistic conditions in rice production and marketing.  The pricing is based on a cost
model developed by the Ministry of the Economy, Industry and Trade, which incorporates the cost of
growing and processing rice.
The price of imports is not regulated and there is no obstacle or limitation whatsoever to the
importation of rice.
For the benefit of consumers, in times of shortage, the Government of the Republic
establishes an import quota for a specific amount of rice, generally corresponding to the domestic
production shortfall.
That quota may enter at a tariff significantly less than the MFN rate, by means of an
alternative import mechanism and through the Agricultural Commodities Exchange (BOLPRO).  This
alternative mechanism is not a product of Costa Rica's WTO obligations but of a unilateral decisionby the Government of Costa Rica.  It is similar to the one used to administrate import quotas.
The MFN tariff currently being applied to heading 1006 is 35%.
Services.  Financial Services.  Banking and financial services
Apart from the presentation of accounts subject to audit, are there any other requirements for foreign
banks domiciled aboard to fulfill before they could form part of a national financial group?  Are thesefinancial groups suject to supervision by the General Superintendency of Financial Institutions like
other governmental and private banks?
To form part of a Costa Rican financial group, banks and financial entities domiciled abroad
must meet the requirements prescribed in Article 147 of the Central Bank Organization Act,
Law 7558 and the Regulations on the Formation, Transfer, Registration and Operation of FinancialGroups, such as the amount of equity, domicile, etc.WT/TPR/M/83
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Besides, the SUGEF carries out off-site auditing1 of Costa Rican financial groups through the
auditing firm, provided that the group includes an enterprise domiciled in Costa Rica and engaging infinancial intermediation, failing which the inspection would be carried out by the body that in
Costa Rica individually audits the enterprise(s) of the group domiciled in the national territory and
owning the majority stake.  It may also be that the entities comprising the group are not individually
inspected by any of the designated auditing bodies, in which case the National Supervisory Council
for the Financial System s (CONASSIF) w ill determine which body is responsible for the audit.
Insurance Services
Could Costa Rica specify the proposed reform measur es on the insurance sector in details?  What are
the major reforms?
A draft law is currently being studied by the Legislative Assembly aimed at introducing
reforms to the sector and improving the conditions of competition, as well as creating a HigherInspection Authority.  The draft must undergo the rele vant formalities in order to become a law of the
Republic.  At present, the opinion of the Legislative Commission examining that draft is being
awaited.
Comunications services.  Telecomunications
We noted that instead of pursuing the reforming of  the telecommunications sector through the general
telecommunications law, a Commission comprising of representatives of trade unions, civil society
and the various political parties was set up.
In this regard, is the draft general telecommunica tion law used as a basis for further examination by
the Commission?  If yes, we would also like to se ek further information on progress of the work
undertaken by the Commission especially for concessions as well as restrictions on National
Treatment.  If no, please also specify the work of the Commission in details as well as progress, if any.
Early in 2000 the Government initiated a reform of the telecommunications sector intended to
improve competitive conditions.  However, some organized sectors such as trade unions, student
groups and some political parties voiced their opposition to that reform.  The draft was withdrawn
from the Legislature and it was decided instead to set up a commission to study the various options
for modernizing the sector.  The commission has not yet concluded its work.
TransportIn addition to the reciprocity, are there any other requirements in order to issues licences to foreign
providers to operate public air services?
In addition to reciprocity, the following requirements must be met:
• They must be authorized by their government  to carry out the international service being
offered;
• they must expressly agree to be subject to the provisions of the General Law on Civil
Aviation and to the jurisdiction of the Costa Rican authorities in the event of injury to fare-
paying passengers, cargo or crew, or persons or groups of third parties on the ground,
expressly renouncing recourse to diplomatic channels;
                                                     
1 That is, auditing done by examining information sent by the group's auditing company to the SUGEF
pursuant to Article 145 of Law 7558 and the Regulations on the Formation, Transfer, Registration andOperation of Financial Groups.WT/TPR/M/83
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• the applicant's State of origin must grant the relevant authorization to operate the proposed
international services;
• the authorization of the service must be in line with national interests or international
conventions signed by the Government of Costa Rica.
Professional services
Please specify the mechanism for fixing and applying rates for air passengers or goods transport by
the Civil Aviation Technical Council in details.
The Civil Aviation Technical Council is guided  by the following criteria in setting and
applying tariffs for air passengers or goods transport:
• The public interest in ensuring adequate and efficient transport with the maximum possible
safety for persons and goods;
• obtaining the best value for money consistent with the advantages and conditions of the
service;
• its effects on the volume of traffic;
• the nature and quality of the service being provided;
• the profit margin to be allowed to the companies, under conditions of honest, economic and
efficient management;
• the differences in the economic capacity of comp anies providing international services.  Rates
offered by an under-developed company may vary by up to 20% on those of a company that is
economically fully developed, with a 20% tariff on jet aircraft.
In the cases of countries with whom a bilateral air transport agreement is in force, the clause
governing prices (rates) shall apply.
Please specify regulations and conditions on market access of engineering and architecture services.
The Federated Association of Architects and Engineers is made up of the Association of Civil
Engineers, which includes civil engineers, topographical engineers, geodetic engineers, miningengineers and related professions;  the Association of Architects, which includes architects, landscape
architects and related professions;  the Association of Electrical, Mechanical and Industrial Engineers,
which includes mechanical engineers, mechanical engineering administrators, mechanical electrical
engineers, industrial engineers and electronic engineers and related professions.
The prerequisites for joining this Association are the status of resident migrant in Costa Rica
and a minimum of five years of uninterrupted residence in the country.  Only active members of the
Federated Association may freely practice the profes sion or professions of which they are members.
EUROPEAN UNION
Multilateral systems
We are pleased to note that Costa Rica is very committed to continue supporting the launch of a
broad round of negotiations.  It has made proposals in many areas that can be looked at in a new
round, and where we both, the EU and Costa Rica, will find much in common.
The Government of Costa Rica firmly supports the earliest possible launch of a new, broad
round of trade negotiations and believes that the opportunity provided by the Fourth Ministerial
Conference of the WTO in November 2001 should be seized to pursue this objective.  Costa Ricaregards the trade liberalization commitments achiev ed in Marrakesh to be of great value to itsWT/TPR/M/83
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development and to that of developing countries.  Nevertheless, it is of the view that the process of
opening is a gradual one and that it is high time it received an ambitious boost within the WTO.These negotiations should cover all the sectors of trade, including not only topics with a negotiating
mandate, such as agriculture and services, or those already covered by the WTO, but also topics
pertaining to trade, such as investment, competition policy, trade facilitation, electronic commerce, as
well as the extension of the coverage of the Agreement on Information Technology.
Regional foraWhat are Costa Rica’s plans with regard to the ne gotiation of further bilateral or regional free trade
agreement?
Costa Rica attributes great importance to efforts aimed at greater regional integration as
extremely useful vehicles for achieving greater trade liberalization on the one hand and as a
complement to the process of multilateral trade liberalization in the WTO on the other.
Accordingly, Costa Rica will continue to participate in the various regional fora in order to
promote investment, facilitate trade and reduce the barriers at all levels.  The country will therefore
continue to participate actively and constructively in the talks to wind up the negotiations on the Free
Trade Area of the Americas.  At the level of Central America, efforts will continue to strengthen that
regional integration scheme and, given its particular importance to our country, to implement at theearliest possible time a flexible and effective trade dispute settlement mechanism that is able to
resolve any trade problems that might arise in the region.
The country will continue to carry out a range of actions to bolster its bilateral relations with
other trading partners.  To that end, negotiations are now under way for the signing of a Free Trade
Agreement with Panama, and the coming weeks will see the start of negotiations on a free trade
agreement with Trinidad and Tobago.
Market access for goodsWe are pleased to note that Costa Rica’s tariffs  have fallen since that last Trade Policy Review
in 1995.  The vast majority of its tariffs are bound, albeit at a relatively high rate of 45%.  Could
Costa Rica please indicate whether it has the intention of further reducing applied rates and to bind
at applied levels (or lower) within the context of a New Round?
The reduction of tariff levels bound beyond 45% is a possibility that Costa Rica could
consider in the context of forthcoming multilateral negotiations.
Without prejudice to the foregoing, under the tariff reduction programme agreed at Central
American level, Costa Rica has gradually reduced the average applied tariff from 11.7% in 1995 to
7% in 2000.  Similarly, in line with the objectives set by the Central American countries, the vast
majority of tariff headings are distributed in the zero-to-15% range and almost half of them are at alevel ranging between zero and 1%.  This is evidence of the considerable headway the country has
made in reducing its tariffs.
Customs valuation and rules of origin
Apparently Costa Rican customs
Apparently Costa Rican customs only use U.S. "Blue Box" values to determine the price of imported
vehicles for duty calculation purposes.  This might  create a disadvantage for non-U.S. manufacturer/
dealers.  We would be grateful if Costa Ri ca could give some clarifications on this.WT/TPR/M/83
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The Government of the Republic of Costa Rica considers that because imports of used
vehicles are not subject to import duties but only  to domestic taxes, the GATT valuation rules do not
apply.  A system was therefore developed for the valuation of imported used vehicles, published by
means of Decree No. 29265-H of 7 February 2001 whereby three sources of value are used:  the
so-called "Black Book", the invoice and the database kept by the General Directorate of Direct
Taxation, regardless of the market of origin and the provenance of the vehicle.
TariffsThere seems to be concern that Costa Rica's customs classify spare parts in another tariff group than
the original goods which might have an impact on the calculation and on the prices of imports.  Could
the Costa Rican Government please further elaborate on this?
In Costa Rica, the tariff classification of spare parts is done in keeping with the General Rules
for the Interpretation of the Harmonized Commodity Description and Coding System establishing thatthe classification is legally determined by the word ing of the headings and of the section or chapter
notes, among which mention may be made of Legal No te 2 of Section XV, which states that parts and
accessories of general use are classified under the corresponding heading, regardless of the machine
or article to which they belong.  Similarly, Legal Note 2 of Section XVI is observed, itself also
regulating the classification of spare parts.  Accordingly, if a spare part has a specific heading, it isclassified under that heading (for example, a screw or a nut).  If it is a matter of a part identifiable as
exclusively or principally designed for a machine or a specific apparatus but having no specific
heading, it must be classified under the heading corresponding to the machine or apparatus to which it
belongs.
Anti-dumping, countervailing and safeguards measures
In general terms, we should like to congratulate Costa Rica for the responsible way it has used its
antidumping instrument, and operated with what seems to be genuine restraint in this area
Costa Rica has always believed that the resort to anti-dumping measures must always be
done in the strictest observance of WTO commitments and based on an extremely rigorous
interpretation of the provisions of the Agreement on the Implementation of Article VI of the
GATT 1994 (Anti-Dumping Agreement).  Costa Rica therefore rejects any use of this mechanism as a
protectionist measure, and is concerned over the increasing resort by some trading partners to thesemeasures in recent years.  Besides, Costa Rica supports any initiative designed to strengthen the WTO
rules and disciplines in this area so as to avoid the unwarranted use of this mechanism.  For these
reasons and in keeping with its position, Costa Rica has used anti-dumping procedures in a
responsible manner.
Can Costa Rica please indicate whether it has been concluding investigations within the deadline of
18 months after initiations established in Articl e 5.10 of the WTO Anti-Dumping Agreement and in the
Article 12 of the Central American Regulation on Unfair Business Practices which entered into force
in Costa Rica on 12 January 1996?
To date, no measures of this kind have been applied in any of the anti-dumping investigations
initiated by Costa Rica.  Of the four investigat ions started between 1995 and 2000, three ended within
18 months.  Only one remains to be settled owing to the large number of appeals made by the
interested parties against the decisions and findings of the investigating authority, with the result that
the investigation has been delayed.WT/TPR/M/83
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Regulations, standards and other requirements
We would be grateful if Costa Rica could clarify its reference to “obligations and rights in the field of
metrology laid down in the WTO/TBT Agreement”, and the role of the Ministry of Health in the
context of the WTO/TBT Agreement.
Pursuant to Decree No. 24662-MEIC-S-MAG-MIRENEM-MOPT-PLAN of 9 October 1995
creating the National Quality System, the Inter-Ministerial Technical Regulations Commission
(Comisión Interministerial de Reglamentación Técnica) is designated as the National Body forTechnical Regulations.
The main function of this Body is to contribute, through regulatory activities, to ensuring and
improving the quality of all technical activities carried out in the country as well as that of its
processes and products, including their safety, health and environmental aspects, thereby improving
the well-being of the general public.
The Inter-Ministerial Technical Regulations Commission comprises representatives of
various government institutions, including the Ministry of Health.  This makes it possible for
representatives of this portfolio to participate in the drafting of technical regulations in Costa Rica
through the activities of the Inter-Ministerial Commission.
Could Costa Rica explain if the INTECO´s activities in the field of standardisation are open to
importers and foreign operators?
The Costa Rican Technical Standards Institute (Instituto de Normas Técnicas de Costa Rica,
INTECO) is responsible for non-statutory standardization.  Therefore, all organizations, whether
public or private, with responsibilities in areas subject to standardization channel their activities
through this Institute.  It is INTECO's task to ensure effective participation by and consensus amongst
all the relevant national operators, thereby ensuri ng representation.  The standardization activities of
INTECO are fully open to importers and foreign operators.
Could Costa Rica indicate how many standards are currently in force and for which products their
technical regulations are not identical or based on international standards?
As indicated in the Report by the Secretariat, at the end of October 2000, there were some
240 technical regulations in Costa Rica.  A very large number of these regulations are identical to or
based on international standards.
Could Costa Rica confirm that no mandatory technical regulations are applied to electronic and
telecommunications products?
There are no technical regulations applicable to electronic and telecommunications products
in Costa Rica.
Could Costa Rica indicate which products are currently subject to mandatory labeling requirements?
There are mandatory labelling requirements for all food products (Codex Alimentarius), paper
and related products for use in schools and offices, textile products, cosmetics, medicaments,
chemicals and toxic substances.WT/TPR/M/83
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Government procurement
We note that public procurement accounts for a significant proportion (around 13%) of GDP.  Could
Costa Rica please inform whether current procurem ent practices are to be changed and if it intends
to sign up to the GPA?
Costa Rica's legislation on government procurement is open and allows for foreign
participation with no discrimination whatsoever.  The government is contemplating no changes to the
current legislation for the time being and there are no initiatives in that regard.
Costa Rica is not currently considering accession to the Government Procurement Agreement.
Duty and tax concessions
(para. 127)  The Report states that the inward processing procedure, which allows goods to enter the
national customs territory with relief from all dutie s and taxes subject to the provision of a guarantee
covers, inter alia "machinery, equipment and parts directly involved in the production process".  Can
Costa Rica please explain whether the machinery, equipment and parts must be involved in the
production process of products which are the exported?  If yes, does Costa Rica consider these
measures to be subsidies contingent upon export performance?
Under the inward-processing customs regime for machinery, equipment and parts directly
involved in the production process, these items may be used in the manufacture of products forsubsequent sale on the domestic market or for export.  There is no direct link between production and
exportation.  In practice, enterprises may export and sell locally such amounts of their output as
demanded by the markets.
(para 129)  The Report states that "the Export  Promotion Act (Law No. 5162 of 22 December 1972)
introduced export increment certificates (Certific ados de Incremento de las Exportaciones, CIEX)
which enable enterprises that meet the requirements to be granted a sum equivalent to 10% of the
increase in their exports over the previous year".  Can Costa Rica please indicate what the eligibilitycriteria are for receiving export increment certificates?  Does Costa Rica consider these measures to
be subsidies contingent upon export performance?
Since their creation, the Government of Costa Rica has authorized no budgetary
disbursements for the payment of CIEXs.  They have never been used in practice and there are no
plans for their use in future.
(para. 129)   What measures is the Government of Costa Rica contemplating in order to improve the
competitiveness of the country’s export sector in the context of greater economic liberalization and
the recent removal of the CAT scheme?
Amongst other initiatives, the Government has been conducting the Impulse Programme
(Programa Impulso) designed to foster a climate fa vourable to business and competitiveness in the
country.  A national debate is currently under way as to the importance of adopting and implementing
a competitiveness agenda that would introduce significant changes in various areas such as customs,
infrastructure, energy and telecommunications.  While such measures are being decided upon, the
Government has been undertaking very specific actions in such fields as the simplification of
formalities for exportation and investment, improving the country's technological base and supportingsmall- and medium-sized enterprises, amongst others.WT/TPR/M/83
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Free zones
We note that Costa Rica is under obligation to eliminate every type of subsidy by 1 January 2003.
What is Costa Rica’s strategic with regard of th e post-2003 scenario, after the elimination of the
incentives currently provided in the free trade zones?
Costa Rica's incentives under its free zone regi me are now being reviewed in the light of
multilateral rules prohibiting the grant of certain incentives as of 1 January 2003.
Costa Rica has recognized the vital role played by Foreign Direct Investment (FDI) in its
economy, as well as the importance of the free zone regime in attracting FDI.  The government is
therefore engaged in devising an amended regime in support of investment compatible with the
country's assumed obligations.
Intellectual property rights
Undisclosed information:  Article 8 of the Costa Rican Law n.7975 on Undisclosed information
purports to implement and basically mirrors Ar ticle 39 TRIPs.  With respect to approval of
agricultural and pharmaceutical products, will be protected against “unfair commercial use” (uso
comercial desleal) unless, inter alia, use of such data is needed to “prevent having recourse to
practices that limits trade in an unjustified manner (recurso a prácticas que limiten el comercio
injustificadamente).
Could Costa Rica please explain:  (i) how prot ection for data submitted to governments is, in
practice, implemented?  (ii) What are those pr actices that limit trade in an unjustified manner?
Would the filing of generic pharmaceutical applications be one of them?
Before the entry into force of Law 7975 on 4 January 2000, Costa Rica had no legislation
whatsoever on this matter.
At present, the competent bodies are working on the supplementary regulations for that
legislation.  One of the aspects that will be tackled in those regulations is giving more detailedconsideration to the scope of what could be considered as practices that limit trade in an unjustifiedmanner.
Although this regulatory process is ongoing, it must be pointed out that Article 8 of
Law No. 7975 not only reflects the provisions of  Article 39 of the TRIPS Agreement, but also
Article 8 of that same Agreement which - as in Article 8 of the Costa Rican Law - provides that
Members may apply appropriate measures, provided that they are consistent with the provisions of theTRIPS Agreement, to prevent the abuse of intellectual property rights by right holders or the resort to
practices which unreasonably restrain trade.
Geographical Indications:  Could Costa Rica inform whether it has any effective system of protection
of GIs, in particular how Section III of the TRIPs (on GIs) is implemented in the country?
The Trademarks and Other Distinctive Signs Act, Law No. 7978 of 6 January 2000, defines
geographical indications as the geographical name of a country, region or locality used in presenting a
good to indicate its place of origin, provenance, manufacture, harvesting or extraction.
This law does not permit the use of a geographical indication in trade by any means related to
the designation or presentation of a product or service when that indication is false or indicates or
suggests to the public a false or deceptive idea as to its origin, or when such use could create
confusion or mislead the public with regard to the origin, provenance, features or qualities of the
product or services.WT/TPR/M/83
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Nor may geographical indications be used in such a manner as to constitute an act of unfair
competition.
Besides, the law forbids the use in advertising and in the commercial documents pertaining to
the sale, exhibition or offer of products or services, of an indication that could be misleading or create
confusion as to the geographical provenance of the products that do not originate from the place
named by the geographical indication, or even if the origin of the product or service is indicated,
nonetheless creates confusion among the public.  In the registration of trademarks, Law 7978 alsoprohibits the use of expressions such as "class", "type", "style", "imitation" or other similar
expressions.
As pertains to the procedure and conditions for the registration of designations of origin, it
should be pointed out that Article 75 et seq. of Law No. 7978 lay down some of the more important
special provisions, including:  prohibition, application, procedure, duration, modification andtermination of registration.
(para. 224)  With reference to trademarks the formulation of the second sentence indicates that Costa
Rica is applying full exhaustion on lawfully marked products.  However, it is also indicated that the
rightholder might prohibit the uses of a mark should the “... product ... cause injury to the owner or
successor in title”.  Could Costa Rica please clarify these two positions, which apparently cause astate of opposition?
Costa Rica wishes to clarify that there are no two positions giving rise to contradiction with
respect to the substance of the question by the European Union, which is the exhaustion of the right to
use the mark.  Article 27 of the new Trademarks and Other Distinctive Signs Act, Law No. 7978 of
6 January 2001 specifically regulates this topic.
Costa Rican law allows a third party to use the mark provided that the products concerned are
legitimate and have been introduced into trade (whe ther in the country or abroad) by the right holder
or another person who has the consent of the right holder.  This possibility of using the mark is
permitted under Costa Rican legislation, provided that the products and containers and packaging that
are in contact with such products "have not been subject to any modification, alteration or
deterioration and that they cause no injury to the owner or successor in title".
Enforcement:  We would be grateful if Costa Ri ca could inform us of any concrete steps to be
undertaken in order to increase the availability of provisional measures and the enforcement of
border measures.
The Intellectual Property Right Enforcement Procedures Act introduces important provisions
providing protection for intellectual property right holders by establishing preventive measures and
measures at the border, amongst others.  Articles 3 to 9 of the law cover preventive measures andArticles 10 to 18 contain provisions on measures at the border.  The most salient aspects of these rules
are the following:
• Protection of holders of intellectual property rights by means of needed regulations on
preventive measures (including those applied at customs), administrative and civil proceduresand penal sanctions;
• applicability of preventive measures by the administrative or judicial authority, provided that
the applicant demonstrates that he is the right holder or his representative.  The competent
authority will require a guarantee from the applicant;
• need to grant a hearing on the application of preventive measures, except where such a
hearing could nullify their effects;  nevertheless, where a preventive measure has beenWT/TPR/M/83
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implemented without a hearing, the authority shall accordingly notify the concerned party
within at least three working days of its implementation;
• decision allowing the initiating party to file the administrative complaint or judicial
application within a period of one month as from the notification of the decision containingthe preventive measure;
• entitlement of the right holder to request the admi nistrative or judicial authority to order the
customs authorities to suspend importation or exportation at the time of clearance;  he willnevertheless be requested to prove that he is the right holder or his representative, to deposit a
guarantee and provide such information and description of the goods as will enable thecustoms authorities to identify them without difficulty;
• obligation on the part of the customs authorities to act ex officio and to suspend the clearance
of goods if there is the presumption that they may be infringing an intellectual property right.
The authorities must report the infringement to the Public Prosecutor's Office within 24 hours
of the detention of the goods;
• empowerment of the judicial authorities to order the customs authorities to destroy or
eliminate infringing goods;
• protection of those sustaining injury as a re sult of the unwarranted detention of goods.
Despite the short time that this new law has been in force, Costa Rica has made some
signficant strides and to date there have been several positive cases of application of that law, for
example, the embargoes imposed on several enterprises engaged in trademark counterfeiting.
Copyrights (para. 223, Table III.12):  Costa Rica should be congratulated for bringing its laws fully
up to and beyond the minimum requirements for TRIPS, by providing life protection plus 70 years
instead of life plus 50 years for copyrights protection, and 70 years protection instead of 50 years for
neighboring rights.  Furthermore, she provides  for international exhaustion of rights and has
legislated for and ratified the WIPO Copyrights Treaty and the WIPO Performances and Phonograms
Treaty.  Could Costa Rica please provide English language versions of the laws relating to
copyrights, integrated circuits and enforcement listed in Table III.12 of the Secretariat Report?
The official journal La Gaceta publishes the nation's laws in the Spanish language.
Costa Rica notified the WTO of the law on intellectual property in this language, one of three official
languages of the Organization.
Agriculture.  Policy objectives and instruments
Does Costa Rica have plans to reduce the tariff rates for rice imports outside the reduced tariff
quotas, and eliminate special safeguard measures?
Costa Rica bound the tariff on rice in the husk and pounded rice in 1990 and the tariff
currently being applied is 35%.  The Government does not currently envisage reducing that tariff;
nevertheless, this situation could be evaluated in the framework of multilateral negotiations.  The
special safeguard now being applied will be automatically eliminated as soon as the world price
recovers to a level equal to or near the trigger price.
ServicesThe EU would like to encourage Costa Rica to deregulate and open up its services sectors to
competition as the country’s schedule of specific Commitments under the WTO General Agreement on
Services in Trade is rather limited.WT/TPR/M/83
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Costa Rica attributes the greatest importance to the negotiations on services now under way in
the WTO.  It will therefore continue to participate actively in them.
In the year 2000, the Government of Costa Rica attempted to open up some of these sectors
such as energy and telecommunications.  Nevertheless, popular expressions of disapproval prevented
the adoption of the legal reforms necessary to implement the measures.  The result is that work is now
under way to adopt and implement a series of reforms and updates in those sectors with a view to
improving the services, these measures being taken within the existing legal framework.
What is the Government’s strategy with respect to the modernization of basic services such as energy,
telecommunications, insurance, given the public’s demonstrated sensitivity to the question of
privatization?
As regards the insurance industry, a draft law is currently being studied by the Legislative
Assembly aimed at introducing reforms to the sect or and improving the conditions of competition, as
well as creating a Higher Inspection Authority.  The draft must undergo the relevant formalities in
order to become a law of the Republic.  At present, the opinion of the Legislative Commission
examining that draft is being awaited.
Tariffs and charges
The positive effects of low tariff rates are set off by a large number of various taxes and fees which
can represent a considerable burden on imported goods. Examples of such taxes and fees are
consumption taxes of various kinds, a 1% tax on customs value (Law 6946), customs agents charges,
storage handling and port fees. As result a 1,3-car may enter Costa Rica “duty free” but will be
charged over 70% of its import value under such taxes and fees ( consumer tax alone: 43%)  Does
Costa Rica intend to reduce the number of charges and fees as well as their respective rates/amounts?
The selective consumption tax is a domestic tax that is essentially a revenue measure applied
to a small number of goods.  It makes no distinction between domestic or foreign goods and is leviedon those goods that the Government considers as conspicuous or luxury consumption items.  A 10%
reduction in that tax was recently approved for automotive products, but no further reductions are
envisaged for the time being.
Without prejudice to the foregoing, the Legislative Assembly is now studying a draft law
designed to remove the consumption tax from some 100 products currently subject to it.  Theseproducts include preserves, chocolates, some types of bread and pastry, fruit juices, sauces, soups,
perfumes, photographic products, leather goods, glass products, products of the graphics industry and
some electrical appliances.
As for the costs and charges arising from cust oms activities, these are determined by the free
play of supply and demand amongst the agents operating on that market, which means that theGovernment has no influence over the setting of these rates.
Imported goods are charged with certain minimum fees for storage even when they are removed from
customs directly without any storage having occurred at all.  Does Costa Rica intend to alter this
practice which does not appear to be in conformity with GATT Article VIII.I?
The enactment of the General Customs Law in 1995 created the figure of the warehouse
keeper as a customs service auxiliary who cooperates with the Government in controlling goods and is
responsible for the warehousing and custody of goods and for transmitting inventories to the customs
computer systems.WT/TPR/M/83
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Under the new and modern customs concept, the customs warehousing services pass into
private hands and the relationship pertaining to those services is established between the depositor andthe importer of the goods, and are of a private nature.  In that context, the supervisory function of the
State is to ensure that no unlawful dealings take place in customs and there is detailed oversight of
goods inventories.
URUGUAY
Economic developments
Could Costa Rica comment on paragraph (1)(iii)3 of the Summary Observations of the Report by the
Secretariat, which refers to the stagnation of agricultural exports (their share in total exports having
dropped from 68% in 1995 to some 30% in 1999), if possible giving the main causes of this situation?
Although it is stated that the share of the ag ricultural sector in total goods exports declined
from 68% in 1995 to 31% in 1999 (according to Table AI.1), agricultural exports have grown at anannual average of 4% in value and 2% in volume terms over the past six years.
The main factors accounting for the reduction of the percentage share of agricultural exports
in overall exports are, in the first place, the expansion of industrial exports and, in the second, adverse
world price movements for the main agricultural products, namely bananas and coffee.  As a result of
the great buoyancy shown by industrial exports, above all activities connected with the electroniccomponents industry, that sector advanced by 20 pe rcentage points in total exports between 1995 and
2000.
The outcome of this change in the make-up of Costa Rica's exports is that the manufacturing
sector has become the driver of growth in export activity, in particular since 1998.  Although this
buoyancy is closely related to sales of modular circuits, new market niches have also been emerging,
such as serum infusion and transfusion equipment, drugs and hairdryers.
The decline in the prices of some agricultural products had a significant impact on Costa
Rica's exports in that sector.  Nevertheless, if we exclude bananas and coffee which are the main
products affected by those problems, agricultural ex ports show average growth of 9% in value terms
and 5% in volume terms over that period.  It should be pointed out that this growth has been limited
by the negative impact on the agricultural trade of distorting measures taken by other trading partners.
It is inappropriate to compare the percentage growth of a developing country's agricultural exportswith its industrial exports without comparing the trad ing rules to which each of these sectors is subject
on other markets.  The farming sector is still facing serious distortions that prevent developing
countries from exploiting their competitive advantages.  The policy of agricultural subsidies is
perhaps the factor that most seriously affects trade and hence the advancement of developing
countries.  For as long as the competitiveness of the farming sector in developing countries lies in itscapacity to compete with the fiscal authorities of  developed countries, the growth of agricultural
exports and their own development objectives will continue to be seriously hampered.
Trade policy framework (paragraph (1)(iii)2)
Could Costa Rica comment on what is stated in paragraph (1)(iii)2 of the Summary Observations of
the Report by the Secretariat to the effect that "… Costa Rica's commitments under the GATS are
relatively limited;  in general, for the sectors included in its Schedule, only market access
and national treatment for consumption abroad were bound", especially bearing in mind
paragraph (III) (9) of the Report by the Government, which states that "… As regards bringing more
services under the commitments on market access and national treatment, this must be done on agradual basis and taking into account the development policies of Members …"?WT/TPR/M/83
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Costa Rica has always actively promoted a broad round of negotiations and therefore
considers it important to strive towards greater participation by developing countries in the gradualprocess of liberalization of services, in the first place, so that these countries may secure the
guarantees offered by the GATS for all those service sectors in which they have comparative
advantages and second, on account of the growing impact of services on competitiveness in producing
goods for the world market.  It is from this perspective that Costa Rica believes that the incorporation
of new sectors should take place on a gradual basis and should respect the situation of countries.
Costa Rica attributes the greatest importance to the negotiations on services now taking place
in the WTO.  It will therefore continue to play an active part in them.
__________