WT/TPR/S/94 Trade Policy Review
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
(1) INTRODUCTION
1. Guatemala is in the process of consolidating a legal and institutional framework sorely tested
by more than three decades of internal armed conflict.  Strengthening governance is a priority, and a
necessary condition for Guatemala to achieve its ambitious development objectives.  As identified by
the authorities, this also requires the creation of new trade and investment opportunities throughsector-neutral policies that encourage a more even domestic allocation of resources, and an outward-
looking trade strategy that fosters closer integration into the global economy.  To this end, Guatemala
has adopted a multi-pronged trade strategy that seeks liberalization through unilateral, bilateral,
regional, and multilateral initiatives.
2. The Central American Common Market (CACM) has historically been a focal point of
Guatemala’s trade policy efforts, and measurable progress has been made in recent years towards
trade liberalization in the context of this group.  However, closer economic integration has been an
elusive target and there are centrifugal forces at work that raise questions about CACM’s integration
objectives.  This is in part due to the economic appeal of the Free Trade of the Americas initiative
(FTAA), which holds the promise of creating and securing market-access opportunities far beyondCentral America.  A similar rationale holds true for Guatemala’s Free Trade Agreement with Mexico,
which, supported by new initiatives for closer physical integration, may result in considerable benefits
by bringing together potential complementary economies.
3. Nevertheless, Guatemala’s institutional weaknesses bring into question its capacity to
participate effectively in simultaneous initiatives in  different fora, each imposing its own negotiating
and implementation demands.  In this regard, Guatemala’s new free-trade agreements are
compounding considerably trade policy implementation difficulties by, among others, requiring theadministration of different tariff-reduction programmes and rules of origin.  Incompatibilities between
agreements may also emerge, for example with respect to customs valuation or safeguard measures.
In this respect, provisions in some of Guatemala’s free-trade agreements take precedence over
multilateral rules.
4. Trade policy is primarily conducted by the Ministry of Economy, which is the lead ministry
for all foreign-trade-related issues.  Guatemala became a Member of the WTO in July 1995;  the
WTO Agreements take precedence over domestic legislation.  It has been relatively active in the
multilateral trading system, taking part in the extended negotiations on telecommunications services,
and making use of the dispute settlement mech anism in a few occasions.  Guatemala has also
participated actively in the mandated negotiations on services and, as a member of the Cairns Group,on agriculture.
(2) T
RADE POLICY FORMULATION AND IMPLEMENTATION
(i) General legal and institutional framework
5. Guatemala is a unitary republic.  The territory is divided in 22 departments, which are in turn
sub-divided into 331 municipalities.  The authorities indicated that the administration of these entitiesis decentralized and that the municipalities are autonomous.  Development regions, consisting of one
or more departments, can be constituted with specific economic, social, and cultural objectives.
6. The present Constitution was adopted in 1985 and amended in 1993.  The Constitution
provides for a separation of powers among the executive, legislative, and judicial branches of
government.  The President of the Republic exercises the Executive Power.  The President is electedGuatemala WT/TPR/S/94
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by universal suffrage for a term of four years, without the possibility of re-election.  He is responsible
for concluding and ratifying international treaties but, before their ratification, must submit them as
well as public service concessions for approval by Congress.  The President has the exclusive power
to appoint and dismiss ministers of the Government, and presides over the Council of Ministers;  the
latter is composed of the President, the Vice-President and ministers of the Government.
7. Legislative power is vested in a unicameral Congress of 113 Deputies.  Members are elected
for four years through a system of electoral districts and a national list;  deputies may be re-elected.Draft laws may be submitted to Congress by its deputies, the Executive Power, the Supreme Court of
Justice, Guatemala’s University of San Carlos or  the Supreme Electoral Tribunal.  Congress has the
exclusive right, inter alia , to enact, reform and repeal laws;  approve or modify the public budget;
and approve before their ratification, all international treaties that, among other things, could involve
submitting issues to international arbitration or affect existing laws for which the Constitution requires
the same majority vote.  Congress also has the exclusive right to establish national taxes (local taxes
are set by municipalities).  With the approv al of Decree 123-84 of 28 December 1984, the Congress
delegated the right to modify tariffs to the Council of Ministers Responsible for Economic Integration.
8. The process to ratify an international agreemen t involves, after discussion and assent by the
legislature, the enactment by Congress of a decree formally approving the agreement, a ratification
instrument issued by the Ministry of Foreign Affair s on behalf of the Executive, to be signed by the
President.  Both the decree and the ratification instrument must be published in the Official Gazette
for the agreement to come into force.
9. The judicial power is vested in the Supreme Court of Justice and other courts established by
law.  The Supreme Court of Justice is formed by 13 magistrates appointed by Congress for renewable
terms of five years.  A separate permanent Constitutional Court, an independent tribunal with
exclusive jurisdiction, is charged with upholding the constitutional order by ruling on whether laws of
any kind, including international treaties, and acts subject to public law are constitutional.
10. Peace accords brokered by the United Nations were signed in December 1996, ending a
36-year internal conflict.
1  The Peace Accords contained an agreed list of constitutional reforms to
improve, modernize, and strengthen the three branches of government.2  The reforms were approved
by Congress but rejected in a national referendum in May 1999.  The implementation of the Peace
Accords has benefited from financial support from the international community, including to improve
the effectiveness of public administration.3
11. The top priority of the current Administration, inaugurated in January 2000, is to enhance
governance, and address public concerns about crime and corruption, by focusing on security issues
and the modernization of institutions.4  In the context of concerns expressed about institutional
instability in Guatemala, the authorities emphasized that the Government is continuing to strengthen
the institutional order to ensure compliance with the rule of law.5
                                                     
1 The text of the Peace Accords may be found in the United Nations Verification Mission in Guatemala
(MINUGUA) online information.  Available at:  http://www.minugua.guate.net/.
2 The proposed reforms are outlined in IDB (1999).
3 See, for example, World Bank (1997), and IDB Press Release, 16 March 1997, "IDB-Finland
Agreement to Support Guatemala Peace Process".  An assessment of the role of the World Bank and the IDB in
the peace process is contained in Ruthrauff (1998).
4 President Alfonso Portillo, State of the Nation Statement, 14 January 2001.
5 The concerns are contained in the Sixth Repor t by United Nations Secretary-General on the
Verification of Guatemala’s Peace Accords, (2001) [O nline].  Available at:  http://minugua.guate.net/.WT/TPR/S/94 Trade Policy Review
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(ii) Trade policy objectives and formulation
12. Guatemalan trade policy strategy is part of a more general economic development agenda
aimed at breaking away from the previous import substitution model that implied, as the authorities
acknowledge, closing the economy to foreign compe tition to grant economic privileges to particular
groups at the cost of consumers.6  In contrast, current efforts are aimed at bringing about a fully
competitive market where producers’ position reflects their productivity;  this, however, is confinedwithin the concept of “systematic competitiveness”, which sets as the overriding objective of
generating employment and tradeable goods.  Subsidiary objectives are to increase the domestic value
added of exported raw materials, develop domestic suppliers for firms currently relying on imported
components, and establish networks of small and medium-size firms able to export.  Trade policy
appears to place little emphasis on the pursuit of sectoral objectives.
13. Ultimately, by creating linkages between modern, dynamic sectors and the rest of the
economy, the current trade strategy is expected to intensify Guatemala’s insertion into the world
economy.  Considering the latter a precondition for economic development, Guatemala is making
efforts to open new export markets, intensify its initiatives for greater regional integration, and
negotiate new reciprocal trade agreements.
7
14. Following the general objectives set by the Council of Ministers, the Ministry of Economy is
the lead agency in trade policy formulation and implementation, in coordination with other
Government agencies.  The Ministry handles all foreign trade matters, negotiates trade agreements
and monitors their application, including issues related to Central American integration and tariff
policy.  It also represents Guatemala in the WTO and has responsibility for related negotiations.
15. No formal, overall, periodic review of trade policy is operated by any independent body.
Private-sector associations undertake periodic reviews in specific areas, and various universitiespublish studies on more general policy issues.  Guatemala has no formal governmental advisory body
for trade policy formulation.  The authorities noted that the private sector participates in most policy
formulation activities, and is represented in the National Council for Export Promotion (CONAPEX)
and the National Export Coordination Commission (CONACOEX).
16. CONAPEX advises the Government on export policy formulation, making recommendations
on the promotion and diversification of exports as well as overseeing policy implementation.
CONAPEX' decisions are coordi nated and implemented by CONACOEX, which is made up of
representative from each of the member organizations of CONAPEX.  The private sector coordinates
its own positions and assesses the negotiations in which Guatemala participates through the
Managerial Commission for International Trade Negotiations (CENCIT), which groups firms engagedin the goods and services sectors.
(iii) Main trade laws and regulations
17. The Constitution takes precedence over all other laws.  The principal laws and regulations
governing trade are listed in Table II.1.  Once published in the Official Gazette , international treaties
become national laws.  As such, any person may invoke their provisions in the domestic courts.Under certain circumstances, Central American Common Market decisions and regulations do not
require legislative approval.
                                                     
6 President Alfonso Portillo, State of the Nation Statement, 14 January 2001.
7 See SEGEPLAN (2001);  and President Alfonso Portillo, State of the Nation Statement, 14 January
2001.Guatemala WT/TPR/S/94
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Table II.1
Main laws and regulations relating to foreign trade, July 2001
Name or description Domestic StatuteDate of
issueEntry into
force
General legislation
Constitution of Guatemala n.a. 31.05.1985 14.01.1996
Amendments to the Constitution Decree 18-93 17.11.1993
Commercial Code Decree 2-70 28.01.1970 01.01.1971
Foreign Investment Law Decree 9-98 04.02.1998 11.03.1998
Preferential trade
General Treaty on Central American Economic Integration Decree 1435 13.04.1961 05.06.1961
Protocol to the General Treaty on Central American Economic
Integration06.05.1996 06.05.1996
Central America-Dominican Republic Free Trade Agreement Decree 26-2000 26.04.2000 not yet in force
Central America-Chile Free Trade Agreement Not ratified not yet in force
Free Trade Agreement with Mexico Decree 86-2000 29.11.2001 15.03.2001
Customs procedures
Central American Uniform Customs Code (CAUCA III) Ministerial Decision 610-2000 24.10.2000 27.10.2000
Regulations for the Central American Uniform Customs Code COMIECO Resolution 71-2000 30.10.2000 15.11.2000
Protocol Amending the Central American Uniform Customs
Code (CAUCA II)Decree 105-97 04.12.1997 04.12.1997
Second Protocol Amending the Central American Uniform
Customs CodeNot ratified
Central American Regulations on the Origin of Goods COMIECO VII Resolution 20-98 05.03.1998 05.04.1998
Tax and tariff concessions
Export Promotion and Maquila Law Decree 29-89 23.05.1989 19.06.1989
Regulations for the Export Promotion and Maquila Law Governmental Decision 533-89 02.08.1989 19.08.1989
Free Trade Zones Law Decree 65-89 14.11.1989 30.12.1989
Regulations for the Free Trade Zones Law Governmental Decision 242-90 05.03.1990 07.03.1990
Reforms to the Export Promotion and Maquila Law Governmental Decision 12-97 16.01.1997 05.03.1997
Government procurement
Government Contracts Law Decree 57.92 05.10.1992 11.11.1992
Regulations for the Government Contracts Law Governmental Decision 1056-92 22.12.1992 25.12.1992
Technical requirements, rules and standards
Law Establishing COGUANOR Decree 1523 25.04.1962 01.08.1962
Central American Regulations on Standardization, Metrology
and Authorization ProceduresMinisterial Decision 463-99 11.10.1999 03.11.1999
Sanitary and phytosanitary standards
Law on Animal and Plant Health Decree 36-98 06.05.1998 16.06.1998
Regulations for the Recognition of Testing Procedures Ministerial Decision 610-99 10.08.1999 02.09.1999
Regulations for the Import of Vegetables, Related Products, and
SeedMinisterial Decision 679.99 27.08.1999 13.09.1999
Regulations for Food Safety Governmental Decision 969-99 30.12.1999 02.02.2000
Central American Regulations on Sanitary and Phytosanitary
MeasuresMinisterial Decision  463.99 11.10.1999 03.11.1999
Anti-dumping, countervailing and safeguard measures
Central American Regulations on Unfair Business Practices Governmental Decision 178-96 27.05.1996 27.06.1996
Central American Regulations on Safeguard Measures COMRIEDRE IV Decision 19-96 22.05.1996 22.06.1996
Intellectual Property
Law on Copyrights and Neighbouring Rights Decrees 33-98 and 56-2000 28.04.1998 20.06.1998/
01.11.2000
Industrial Property Law Decree 57-2000 31.08.2000 01.11.2000
n.a. Not applicable.
Source: Information provided by the Guatemalan authorities.WT/TPR/S/94 Trade Policy Review
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18. No basic trade law per se exists in Guatemala.  Trade regulations in certain areas
(e.g. customs procedures, anti-dumping and safeguards) incorporate provisions of legal texts agreed at
Central American, multilateral or international level into domestic legislation.  To align its legislation
with Uruguay Round commitments, Guatemala has introduced amendments or new laws in specific
spheres such as customs valuation or intellectual property (Chapter III).
(3) FOREIGN INVESTMENT REGIME
19. Guatemala grants national treatment to foreign investors in most sectors and areas of the
country, including with respect to incentives and taxation.  This reflects the obligation the
Constitution imposes on the State "to create adequate conditions to promote the investment of national
and foreign capital".  The Constitution restricts foreign investment in border areas and reserves for
Guatemalans the exploitation of forests.  There are no restrictions on remittances of capital or profits.
20. The Foreign Investment Law (Decree 9-98) of 4 February 1998 was enacted to consolidate
into a single statute the different regulations on foreign direct investment, and to create more
favourable conditions for foreign capital.  With the important exception of sectors covered by specific
laws, the Foreign Investment Law offers national treatment;  as detailed in Chapter IV, sectors where
limitations to foreign investment apply include transport, insurance, and regulated professionalservices.  Also with certain exceptions, notably those related to Guatemala’s participation in free-trade
agreements, the Foreign Investment Law offers the same treatment to all investment regardless of
origin.
21. In order to promote foreign direct investment , the Department for Investment Promotion has
been established to facilitate the constitution of private enterprises;  the Department is responsible for
liaising with and coordinating the work of the diff erent official entities involved in forming a
company.
22. Guatemala’s domestic investment statutes are supplemented by bilateral, regional, and
multilateral agreements providing guarantees and protection for foreign investment.  In particular,
most of Guatemala’s recent free-trade agreements contain provisions on investment (section (4)(ii)
below).  Guatemala has bilateral investment agreements in force with Argentina, Chile, Chinese
Taipei, Cuba, and France.  It has negotiated agreements, which are not yet in force, with Austria,Canada, Germany, the Czech Republic, the Republic of Korea, and the Netherlands.  Further
agreements are currently being negotiated with India, Italy, Poland, Romania, Russia, the United
Kingdom, and the United States.
23. At the regional and multilateral levels, Guatemala is a member of the Inter-American
Development Bank’s Inter-American Investment Co rporation and of the World Bank's Multilateral
Investment Guarantee Agency (MIGA).  It ratified the Inter-American Convention on International
Commercial Arbitration in 1986.  Guatemala signed the Convention on the Settlement of Investment
Disputes between States and Nationals of other States, which the authorities indicated was in the
process of ratification in mid-2001.
24. Investment is subject to various environmental requirements.  The Law on the Protection and
Improvement of the Environment (Decree 68-86), of 28 November 1986, requires a prior
environmental impact study for constructions and industrial projects that could disturb the
environment or cultural heritage.  The Law on  Protected Areas (Decree 4-89), of 10 January 1989
contains a number of restrictions on commercial activities in protected zones.  Reductions on real
estate taxes are available for persons making properties available for private natural reserves.Guatemala WT/TPR/S/94
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25. The Guatemalan Constitution prohibits the double or multiple internal taxation of foreign
investment that is subject to the investment agreements Guatemala has concluded.  Guatemala has not
signed double taxation agreements with other countries.  There are no special tax regulations for
foreign investment.
(4) INTERNATIONAL RELATIONS
(i) World Trade Organization
(a) General participation
26. Guatemala joined GATT in 1991 and became a full member of WTO on 21 July 1995, after
the approval by Congress of the Marrakesh Ag reement through Decree 37-95 of 15 May 1995.  As an
international treaty, the WTO Agreements take precedence over domestic legislation and may be
invoked directly before domestic courts.  Guatemala provides at least MFN treatment to all its tradingpartners.
27. Tables II.2 shows the notifications made by Guatemala under the different WTO Agreements.
28. Guatemala took part in the Negotiating Group on Basic Telecommunications but, due to
changes in its Telecommunications Law, was unable to ratify the Fourth Protocol to the General
Agreement on Trade in Services (see also Chapter IV(5)(iv)(a)).  Guatemala subsequently submitted arevised telecommunications schedule of commitments under the WTO certification procedure, which
concluded in 1999.
8  Guatemala did not participate in the extended negotiations on financial services
nor has it acceded to the Information Technology Agreement (ITA).
29. Reflecting the sector’s economic importance, Guatemala has participated actively in the
ongoing WTO negotiations on agriculture.  Guatemala has made proposals in this regard as part of the
Cairns Group;  it has also called for the multilateral agricultural reform process to reflect the principle
of special and differential treatment for developing countries, and for the process to be completed nolater than 2003.
9  With other Members, Guatemala has proposed the negotiation in the WTO on
disciplines on export credits, credit guarantees, and insurance programmes for agricultural products.10
30. At the Singapore Ministerial Conference in 1996, Guatemala expressed concerns about the
lack of implementation of commitments in vital sectors, including agriculture and textiles and
clothing, and attempts to link trade to issues such as labour standards and the environment.11
Guatemala considered the dispute settlement system significantly improved, and supported the
creation of a study group on investment.  At the Geneva Ministerial Conference in 1998, Guatemala
restated its concerns about implementation, noting also the emergence of non-tariff barriers in the
form of rules of origin, technical requirements, and others.12  Guatemala considered agricultural
negotiations a priority and supported the inclusion of investment, competition policy, tradefacilitation, and electronic trade in the WTO work programme.  It expressed interest in participating in
service-related initiatives, provided it could strengthen its own capacities.
                                                     
8 WTO documents S/C/W/88, 11 December 199 8 and S/C/W/128/Rev. 1, 22 October 1999.
9 WTO documents G/AG/NG/W/68, 28 November 2000 and G/AG/NG/W/113, 19 February 2001.
10 WTO document G/AG/NG/W/139, 21 March 2001.
11 WTO document WT/MIN(96)/ST/121, 12 December 1996.
12 WTO document WT/MIN(98)/ST/118, 20 May 1998.WT/TPR/S/94 Trade Policy Review
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Table II.2
Guatemala's notifications under the WTO Agreements (as of 20 October 2001)
WTO AgreementWTO document – date
(latest document if recurrent) Description of requirement
Agreement on Agriculture
Article 9.1 G/AG/N/GTM/19 – 9.3.00 Table ES.1 – Export subsidies
Article 18.2 G/AG/N/GTM/22 – 17.10.01 Table MA.1 – Tariffs and other quotas
Article 18.2 G/AG/N/GTM/21 – 17.10.01 Table MA.2 – Tariffs and other quotas
Article 18.2 G/AG/N/GTM/18 – 9.3.00 Table MA.5 – Special safeguard measures
Article 18.2 G/AG/N/GTM/11 – 19.5.99 Table DS.1 – Domestic Support
Agreement on Implementation of Article VI (Anti-dumping)
Article 16.4 G/ADP/N/65/Add.1 – 19.10.00 Semi-annual reports
Article 16.5 G/ADP/N/14/Add.11 – 20.10.00 Competent authorities
Article 18.5 G/ADP/N/1/GTM/2 – 2.10.96 Incorporation of the Agreement into national legislation
Agreement on Implementation of Article VII (Customs Valuation)
Annex III(1) G/VAL/W/52/Add.2 – 11.2.00 Strengthening of customs operations
Annex III(1) G/VAL/W/52/Add.1 – 9.2.00 Request for moratorium
Annex III(2) G/VAL/N/4/GTM/1 – 13.12.00 Progress in application
Agreement on Import Licensing Procedures
Articles 1.4(a) and 8.2(b) G/LIC/N/1/GTM/2 – 28.1.00 Laws and regulations
Article 7.3 G/LIC/N3/GTM/1 – 1.2.00 Replies to the questionnaire on import licensing procedures
Agreement on Preshipment Inspection
Article 5 G/PSI/N/+/Add.9 – 21.3.2001 Laws and regulations
Quantitative Restrictions (Decision on Notification Procedures for Quantitative Restrictions)
WTO document G/L/59 G/MA/NTM/QR/1/Add.7 – 16.6.00 Initial and biennial reports
Agreement on Rules of Origin
Article 5 and Annex II(4) G/RO/N/21 – 20.7.98 Non-preferential and preferential rules
Agreement on Safeguards
Article 12.6 G/SG/N/1/GTM/2 – 6.8.99 Laws and regulations
Article 12.6 G/SG/N/1/GTM/1 – 3.4.95 Laws and regulations
Agreement on the Application of Sanitary and Phytosanitary Measures
Article 7, Annex B G/SPS/N/GTM/1-9  2/96 – 5/00 Nine notifications on changes and emergency measures
General Agreement on Trade in Services (GATS)
Article III:3 S/C/N/109 – 6.10.99 Elimination of tax exemptions, exonerations and deductions
ArticleIII:4 S/ENQ//57 – 9.3.99 National enquiry point
Understanding on the Interpretation of Article XVII (State Trading)
Article XVII(4)(a) G/STR/N/5/GTM – 30.11.99 Annual state-trading activities
Agreement on Subsidies and Countervailing Measures
Article 25.11 G/SCM/N/62/Add.1 – 25.10.00 Semi-annual report on countervailing duty actions
Article 25.12 G/SCM/N/18/Add.11 – 20.10.00 Competent authorities
Article 32.6 G/SCM/N/1/GTM/2 – 2.10.96 Laws and regulations
Article 25.1 G/SCM/N/48/GTM – 9.7.00 Annual report on subsidies
Article 25.2 G/SCM/N/71/GTM – 5.7.01 Tax exemptions
Agreement on Technical Barriers to Trade
Article 10.6 G/TBT/Notif.00/243, 287, 288, 323,
324, 477, 569 – 19.5.00 - 5.12.00Proposed and adopted technical regulations
Table II.2 (cont'd)Guatemala WT/TPR/S/94
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WTO AgreementWTO document – date
(latest document if recurrent) Description of requirement
Article 15.2 No notification Measures taken to implement the Agreement
Annex 3C No notification Acceptance of code of good practice
Article 10.6 G/TBT/N/GTM/1, 2 - 25.9.01 Proposed and adopted technical regulations
Agreement on Textiles and Clothing
Article 2.17 G/TMB/N/305 – 1.10.97 Administrative arrangement with the United States
Articles 2.6 and 2.7(b) G/TMB/N/40 – 28.4.95 List of products to be included in the first stage of the
integration process
Articles 2.8(a) and 2.11 G/TMB/N/304/Corr.2 – 11.3.98 List of products to be included in the second stage of the
integration process
Articles 2.8(b) and 2.11 G/TMB/N/373 – 17.1.01 List of products to be included in the third stage of the
integration process
Article 6:1 G/TMB/N/13 – 2.3.95 Retention of right to use transitional safeguards
Agreement on Trade-Related Aspects of Intellectual Property Rights
Article 63.2 IP/N/1/GTM/C/1/Rev.1 – 20.11.00 Laws and regulations: Law on Copyright and Neighbouring
Rights
Article 63.2 IP/N/1/GTM/I/1 – 13.10.00 Laws and regulations: Industrial Property Law
Article 69 IP/N/3/Rev.3/Add.4 – 15.4.99 Contact points
Source : WTO Secretariat.
31. In the context of the preparations for the Seattle Ministerial Conference in 1999, Guatemala
submitted a number of communications, individually or with other Members.13  Its communication on
small developing economies examined the challenges and opportunities the participation in themultilateral trading system and the global economy presents for these economies.
14  At the Seattle
Ministerial Conference, Guatemala reaffirmed  its position, expressed at the two previous
Conferences, emphasizing the need for radical reform in agriculture to bring this sector onto an equal
footing with other activities.15  It argued for WTO’s work programme to identify problems faced by
small developing economies and for the participation of all Members, without exception, in WTO
activities including negotiations.  On the occasion of this Conference, Guatemala became a member
of the Cairns Group.
32. At the time of preparing this draft, in mid-2001, the authorities were in the process of
finalizing Guatemala's positions for the Doha Ministerial Conference in November 2001, including
with respect to the possible launch of a new round of WTO negotiations.  The authorities expressed
their support for such a round, provided that various implementation issues were resolved and that
issues relating to Guatemala's status as a developing country were taken into account.  This in part
reflected misgivings about Guatemala’s benefits from a new round, particularly in view of theongoing costs of meeting commitments arising from the Uruguay Round and the perception that the
resulting benefits have so far been minor.  To strengthen trade-related public-sector areas, and thus
enhance Guatemala’s ability to engage in trade liberalization on several fronts, the Inter-AmericanDevelopment Bank approved a US$5 million loan for Guatemala in early 2001.
(b) Dispute settlement
33. Guatemala has been involved in only a few dispute cases under the multilateral dispute
settlement mechanism.  Those resulting in the establishment of panels concerned two products:
                                                     
13 For example, see WTO documents WT/GC/W/375, 18 October 1999, WT/GC/W/330, 23 September
1999, and WT/GC/W/392, 24 November 1999.
14 WTO document WT/COMTD/W/56, 10 February 1999.
15 WTO document WT/MIN(99)/ST/53, 1 December 1999.WT/TPR/S/94 Trade Policy Review
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bananas and grey portland cement.  Guatemala was a complainant in the first panel and a defendant in
the second.
34. Guatemala’s multilateral challenge to measures applied to banana imports in the European
Union go back to 1993, when along with four other Latin American countries it requested the
establishment of two separate panels to examine the measures maintained by individual members of
the European Communities, and the common import bananas regime introduced in 1993.  The two
panels found the measures inconsistent with the GATT and recommended that they be brought intoconformity with the General Agreement but neither of the Reports was adopted.
16
35. At the request of Guatemala and four other countries, and after consultations had failed to
find a solution, the Dispute Settlement Body (DSB) established a Panel to examine the EuropeanUnion’s regime for the importation, sale, and distribution of bananas.  The final report, submitted in
April 1997, concluded that aspects of that regime were inconsistent with multilateral rules, and
recommended that the European Union be requested to bring its regime into  conformity with its
obligations under GATT, the WTO Licensing Agreement and the GATS.
17  Subsequently, Guatemala
and four other countries made a request for binding arbitration to define the “reasonable period oftime” proposed by the European Union to comply with DSB recommendations, which was followed
by a request for consultations on EU compliance with DSB recommendations.
18  In March 1999,
Guatemala asked to be joined in consultations requested by the European Union with the United
States19;  in April 2001, Guatemala asked to be joined in consultations with the European Union
requested by Ecuador, after the EU and the United States reached an agreement concerning the EUbanana import regime.
20
36. In view of its interest in the implementation of the reports concerning the banana dispute
outlined above, since 1998 Guatemala has requested to be joined in two consultations requested bythe European Union with regard to various sections of the United States’ Trade Act of 1974.
21
Guatemala also requested to be joined in the consultations requested by the European Unionconcerning import measures imposed by the United States in the context of implementing the reportson the banana dispute.
22
37. The case involving Guatemala as a defendant relates to a challenge by Mexico of a
Guatemalan anti-dumping measure on grey portla nd cement.  In September 1999, after consultations
between the two parties failed to find a solution, at  the request of Mexico the DSB established a panel
to examine the issue.  The Panel report, adopted in November 2000, concluded that Guatemala's
initiation of an investigation, the conduct of the investigation, and the imposition of a definitive
measure had been inconsistent with WTO rules, finding such violations “to be of a fundamental
nature and pervasive”.23  The Panel recommended that Guatemala be requested to bring its measures
into conformity with its WTO obligations, and suggested that Guatemala revoke the anti-dumping
measure at issue.  Guatemala did so in October 2000.24
                                                     
16 Further details on this and the following case may be found in WTO (1999), Chapter II(7)(i).
17 WTO document WT/DS27/R/GTM, 22 May 1997.
18 WTO documents WT/DS27/13, 20 November 1997, and WT/DS27/18, 31 August 1998.
19 WTO document WT/DS165/5, 18 March 1999.
20 WTO document WT/DS27/57, 1 May 2001.  See also WTO documents WT/DS105/3, 14 November
1997, and WT/DS158/1 for other related requests for consultations.
21 WTO documents WT/DS152/4, 9 December 1998 an d WT/DS200/7, 26 June 2000.  See also WTO
(2001a), Chapter II(1), for information on the "Carousel Amendment" embodied in Section 306 of the Trade Act
of 1974.
22 WTO document WT/DS165/5, 18 March 1999.
23 WTO document WT/DS156/R, 24 October 2000.
24 WTO document WT/DSB/M/94, 15 February 2001.Guatemala WT/TPR/S/94
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38. In early 2001, Guatemala requested consultations with Chile concerning Chilean safeguard
measures and the price band system relating to certain agricultural products.25  Guatemala reserved its
third-party rights in the panel established in March 2001, at the request of Argentina, to examine
Chile’s safeguard measures and price band system.26  Guatemala asked to be joined in the
consultations Colombia had requested with Chile regarding Chilean safeguard measures on sugar.27
Guatemala also made a request to be joined in the consultations Canada and Mexico requested with
the United States regarding the amendment to the U.S. Tariff Act of 1930 (the Continued Dumpingand Subsidy Offset Act of 2000).
28
(ii) Preferential agreements
(a) The Central American Common Market
39. Guatemala is a founding member of the Central American Common Market (CACM)
established in 1961, composed also of Costa Rica, El Salvador, Honduras, and Nicaragua.  Efforts in
recent years to modernize the CACM include the Tegucigalpa Protocol to the Charter of the
Organization of Central American States, in force since June 1995, which amended the legal regionalframework creating the Central American Integration System as the institutional framework for
Central American regional integration.   The Guatemala Protocol to the General Treaty on Central
American Economic Integration was also ratified and entered into force on 6 May 1996.  This
Protocol defines the objectives, principles, and measures to achieve economic union, the goal set by
the Central American presidents as a complement to the Tegucigalpa Protocol.
40. The vast majority of intra-CACM trade that meets regional rules of origin receives duty-free
treatment in Guatemala and other members.  The main exceptions include products such as coffee,
ethyl alcohol and alcoholic beverages, sugar, wheat flour, and various petrol-based products.  Third-
country tariffs have been set at general rates of 0, 5, 10 and 15% but may exceed 100% for tariffied
agricultural products (Chapter III(2)(iii)).  Howe ver, the CACM does not yet have a common external
tariff (CET) as differences exist across members in both the number of tariff lines and tariff rates.
41. Common Market rules have been modified in recent years to facilitate intra-regional trade and
to align them with the WTO commitments of CACM members.  New regulations have thus been
approved concerning rules of origin, safeguard measures, standardization measures, and sanitary and
phytosanitary measures.  Negotiations for a dispute settlement mechanism were concluded in 2000,
but had not been ratified by all parties as at mid-2001.
42. Considered a major step in the regional integration process, Guatemala and El Salvador re-
started the process of establishing a customs union in 1999;  Honduras and Nicaragua joined the
process in 2000.  The initiative envisages the free movement of goods and trade-related services
within the union, eventually leadin g to the elimination of custom formalities between the parties and a
joint tariff-collection system.  To streamline proc edures and reduce the cost and time involved in
customs procedures, bi-national customs offices started to be set up in 2000.  The four participants in
the customs union initiative are also working on arrangements for the mutual recognition or
harmonization of customs requirements and docume ntation.  Also within the framework of the
customs union, the four countries are engaged in negotiations on an agreement on trade in services.
43. The first annual report on the Central American integration process, published by
INTAL-IDB in 2000, notes that since the 1990s the regional integration process has
been characterized by trade liberalization, a recovery in trade volumes, and greater export                                                     
25 WTO document WT/DS220/1, 10 January 2001.
26 WTO document WT/DS207/3, 23 May 2001.
27 WTO document WT/DS230/2, 30 April 2001.
28 See also WTO (2001a), Chapter III(1)(ii), for information on the Continued Dumping and Subsidy
Offset Act.WT/TPR/S/94 Trade Policy Review
Page 22
diversification.29  According to the report, it can be argued that Central America is a functioning but
incomplete free-trade area:  although the regional integration process has a general legal framework,
in practice progress has been slow in areas such as economic policy harmonization, the customs
union, and the free movement of factors.  Moreover, there are significant differences in members’
perceptions of the benefits accruing from deeper  Central American integration and, thus, members
have concentrated on trade relations with third countries, making concessions in that context that theywere unwilling to grant within the CACM.  The report also notes that the negotiations for the Free
Trade Area of the Americas have caused members to question the need to make additional efforts to
complete the CET.
(b) Free-trade agreements (FTAs)
44. The free-trade agreement signed by Guatem ala, El Salvador and Honduras (Northern
Triangle) with Mexico entered into force on 15 March 2001 for Guatemala and El Salvador, and on1 June for Honduras.  The Agreement applies to relations between each of the Central American
countries and Mexico, but does not affect relations between CACM members.  This FTA is
comprehensive, covering trade in goods and services, tariff and non-tariff measures, investment,
intellectual property rights and dispute settlement.
30  Chapter I, Article 3 of the agreement confirms
the signatories’ rights, and obligations under the WTO Agreement and other international treaties, andstates that in case of incompatibility between these treaties and the FTA the latter prevails.
45. Most tariffs were eliminated at the time of entry into force of the Agreement;  other tariffs are
to be phased out according to schedules ranging from three to 11 years. Customs valuation makes
allowance for the use of reference prices, in Guatemala’s case for products such as specified worn
clothing, used motor vehicles, and poultry meat.  Bilateral safeguard measures may be introduced
during a transitional period;  there is also a special safeguard mechanism for agricultural products.  A
specific annex governs trade in sugar and related products.
46. Complex rules of origin classify goods as "originating" if they are wholly obtained or
produced in the preferential area, produced enti rely in such area exclusively from originating
materials, or produced from non-originating materials that undergo a change of tariff classification inthe area and comply with other requirements.  A regional value content (RVC) test is used to
determine origin in the case of goods produced entirely in the area from non-originating parts.
Specific rules of origin are provided for certain textiles and clothing.
47. In its investment chapter, the FTA between the Northern Triangle and Mexico guarantees
national treatment to its signatories.  The agreement prohibits the use of performance criteria or the
relaxation of environmental standards to attract investment.  All parties also agreed to bind existing
access conditions, and to engage in negotiations to reduce remaining restrictions.  The agreement callsfor future negotiations on government procurement and ground transport.  The dispute settlement
mechanism envisages a three-stage settlement process:  an initial consultative stage, followed by
recourse to the Free Trade Commission, and then an arbitral tribunal.
48. Negotiations were completed in 1998 on a free-trade agreement between the CACM and the
Dominican Republic;  the agreement was expected to enter into force in late 2001.
31  T h i s  F T A
establishes rules and disciplines for trade in goods and services, investment, intellectual property, anddispute settlement.  Most tariffs are to be eliminated when the agreement enters into force;  exceptions
                                                     
29 IDB-INTAL (2001).
30 The text of the Agreement is available from Guatemala’s Ministry of Economy online information.
Available at:  http://www.mineco.gob.gt/tlc/.
31 The text of the Agreement is available from INTAL’s online information.  Available at:  http://www.
iadb.org/intal/.Guatemala WT/TPR/S/94
Page 23
include products for which a programme of phased reductions was agreed.  In addition, some products
were excluded from liberalization, including sugar, petroleum products, coffee, wheat flour, rice,
chicken, powdered milk, onions, garlic, beans, tobacco, and cigarettes.  Rules of origin are based on
the change of tariff classification principle but specific requirements apply in some cases.
49. In October 1998, the CACM members and Chile concluded the text for a free-trade
agreement;  at of mid-2001, Costa Rica was the only party that had ratified the agreement in its
entirety;  negotiations were still ongoing between the other Central American parties and Chileconcerning country-specific protocols.
32  The agreement states that in case of incompatibility between
international treaties, including the WTO Agreement, and the FTA, the latter prevails.  Individual
CACM members and Chile agreed to negotiate market access bilaterally, including tariff reduction
schedules.  The FTA establishes rules and disciplines applicable to trade in goods and services,
investment, government procurement, and dispute se ttlement.  The agreement permits explicitly the
use of price bands.33  In general, rules of origin follow the same basic pattern of the FTA between the
Northern Triangle and Mexico.
50. Guatemala and the other CACM countries re-opened negotiations with Panama in 2000 to
establish a FTA based on the agreement between Central America and Chile.  The general text of the
FTA was finalized in mid-2001.  The ongoing stage involves each country negotiating separately its
own list of products and services to be included in individual schedules.
51. In mid-2001, Guatemala, El Salvador, Honduras , and Nicaragua were negotiating an FTA
with Canada, following the conclusion of a similar agreement between Costa Rica and Canada.
52. Guatemala also participates in the negotiating groups of the Free Trade Area of the Americas
(FTAA), where it is coordinating negotiating positi ons with El Salvador, Honduras, and Nicaragua.34
Participation in the FTAA is of priority for Gu atemala, reflecting in great part the economic
importance of some countries of the region as Gu atemala’s main trading partners.  Guatemala has
chaired the consultative group on small economies and, in mid-2001, was chairing the Negotiating
Group on Agriculture;  it has also held the vice-chair of the Committee on Electronic Commerce.
53. The FTAA process, which began in 1994, seeks to eliminate progressively barriers to trade
and investment, with negotiations to be completed by no later than January 2005.  At the sixth
Ministerial meeting, in Buenos Aires in 2001, Ministers established April 2002 as the deadline for
preparing the technical guidelines for market-access negotiations, and directed that these negotiations
should begin no later than May 2002 and that the Agreement should enter into force no later than
December 2005.  Ministers also agreed to release to the public the existing draft consolidated text ofthe agreement.
35
(iii) Other Arrangements
54. Guatemala has concluded several agreements under the Latin American Integration
Association (LAIA).36  Partial Scope Agreements signed by Guatemala in this context include those
with Colombia (1984), Venezuela (1985 and 1992) and Cuba (1999).  The first two include tariff
concessions but are otherwise of relatively lim ited scope.  The agreement with Cuba is more
                                                     
32 The text of the Agreement of the Organization of American States online information.  Available at:
http://www.sice.oas.org /trade/chicam/chicamin.asp.
33 See WTO (1997), Chapter III(2)(v) for a description of Chile’s price band system.
34 Information on the integration process in the Western hemisphere is available from the ALCA/FTAA
online information.  Available at:  htttp://www.alca-ftaa.org.
35 The draft text may be accessed through the FTAA online information.
36 Further information on the Association and related agreements may be found at LAIA’s online
information.  Available at:  http://www.aladi.org/.WT/TPR/S/94 Trade Policy Review
Page 24
ambitious, covering areas such as tariff preferences, internal taxes, contingency measures, services,
investment, and dispute settlement.  Guatemala al so participates in LAIA’s framework agreement
between MERCOSUR and the CACM concluded in 1998;  the agreement aims to foster trade,
investment, and technology transfer but does not incl ude tariff preferences.  In addition, Guatemala
signed an agreement with Panama in 1974.
55. As of mid-2001, Guatemala, El Salvador, and Honduras had initiated tariff preference
negotiations with the Andean Community.
56. In addition to negotiated preferences, Guatemala enjoys unilateral concessions granted by
Canada, the United States, and the European Union (EU) under the Generalized System of
Preferences (GSP), and by the United States' Caribbean Basin Initiative (CBI).  These schemes are
outlined in the Secretariat reports for the Trade Policy Reviews of the Members granting them.37
57. Except for Canada’s GSP, the other unilateral preferential schemes under which Guatemala
benefits are conditional on various non-trade factors and may be subject to compliance reviews.  In
this regard, the United States announced the suspension of a worker rights review of Guatemala in
May 2001 after the country enacted new labour laws and undertook additional measures.38  It is likely
that Guatemala benefits mainly from these schemes through the export of textiles and clothing underthe CBI (see also Chapter IV(4));  however, the Guatemalan authorities indicated that there were no
adequate statistics to assess in detail the relative importance of any such schemes.
58. Guatemala, other Central American countries, and Mexico launched in 2001 the Puebla-
Panama Plan.  The initiative aims to foster economic development in the seven countries of Central
America and Mexico's south and southeast regions, by creating infrastructure corridors physically
connecting them and establishing joint sectoral programmes.
39  The Plan is expected to complement
the existing FTAs between Central America and Mexico by addressing the problem of poorinfrastructure linking the parties.  The initiative  is divided into eight main areas:  sustainable
development, human development, natural-disaster prevention, trade facilitation, roadway integration,
electrical interconnection, telecommunications deve lopment, and eco-tourism promotion.  The trade
facilitation initiative is aimed at promoting the elimination of non-tariff barriers and other obstacles to
intra-regional commerce, emphasizing the modernization of customs to streamline and speed upprocedures, as well as fostering cooperation among small and medium-size enterprises to boost
exports.  The Inter-American Development Bank ha s been appointed as coordinator of a high-level
financing committee charged with identifying public, private, and multilateral sources of financing.
59. Guatemala does not participate in the Global System of Trade Preferences among Developing
Countries.
60. Guatemala is a member of the International Coffee Agreement and, in a provisional manner,
the International Sugar Agreement.
                                                     
37 See in particular WTO (2001b), Chapter II(2)(i)(c);  WTO (2001a), Chapter II(3)(iii);  and
WTO (2000), Chapter II(4)(iii)(a).
38 See WTO (2001a), Chapter II(2)(vi).
39 The Central American countries involved are Belize, Costa Rica, El Salvador, Guatemala, Honduras,
Nicaragua and Panama.