RESTRICTED
WORLD TRADE WT/TPR/G/18
26August 1996
ORGANIZATION(96-3375)
Original: Spanish
TRADE POLICY REVIEW
COLOMBIA
Report bytheGovernment
Pursuant totheAgreement Establishing theTrade Policy Review Mechanism (Annex 3ofthe
Marrakesh Agreement Establishing theWorld Trade Organization), thepolicy statement bythe
Government ofColombia isattached.
Note: Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body onColombia.Colombia WT/TPR/G/18
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TABLE OFCONTENTS
Page
1. Executive summary 1
2. Major economic reforms 1
3. Theeconomic andtrade environment, 1990-1996 3
4. Outlook fortheeconomy 4
5. Developments intrade negotiations, 1990-1996 5
5.1 Uruguay Round -World Trade Organization 6
5.2 Andean Community 6
5.3 Latin American Integration Association (LAIA) 7
5.3.1 FreeTrade Agreement among Colombia,
Mexico andVenezuela 7
5.3.2 Chile 8
5.3.3 Southern Common Market 8
5.4 Other regional negotiations 8
5.5 Settlement ofdisputes 9
6. Future policy trends 9
6.1 Integration intheAmericas 9
6.2 Globalization oftrade andcooperation relations 10
6.3 Agenda oftheWorld Trade Organization 10Colombia WT/TPR/G/18
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1. Executive summary
Until thelate1980s, Colombia pursued agrowth strategy based onimport substitution,
combining protection oftheagricultural andindustrial sectors through import quotas andhightariffs
withpromotion ofexports through tax,credit andexchange support measures. Although thisstrategy
allowed thedevelopment ofaproduction baseandthecreation ofadomestic market, itwasalready
showing signsoffatigue andthiswasreflected inreduced growth intheeconomy 'sproduction capacity.
Moreover, thesolution oftheLatin American debtcrisis underlined theneedtosecure alarger
share oftheglobal market onthebasis ofanefficient andcompetitive domestic economy.
Consequently, intheearly 1990s, major structural reforms were undertaken withaview to
restoring highratesofeconomic growth, enhancing theoperational efficiency ofmarkets, strengthening
links withinternational markets, anddiversifying exports.
Inthe1990s, Colombia alsointensified itsefforts attheinternational leveltodevelop regional
integration andmultilateral negotiation ascomplementary ways ofintegrating thedomestic economy
intotheglobal economy. Ittherefore strove toensure thattheAndean Common Market andthe
free-trade areawithChile would become areality bytheendofthecentury, tostrengthen regional
agreements withMERCOSUR, Central America andtheCaribbean, andtoassist inestablishing the
FreeTrade Area fortheAmericas (FTAA). Atthemultilateral level, participation intheUruguay
RoundandsubsequentlyintheWorldTradeOrganizationhasgivenColombiaanidealforumforpursuing
theopening upoftrade embarked upon independently andboosted byregional negotiations.
2. Major economic reforms
Since itstradepolicy waslastreviewed in1990, Colombia hasundergone radical changes both
atthepolitical andeconomic levels.
Themajor transformation tookplacein1991withtheadoption ofthenewPolitical Constitution.
Allsectors ofsociety were involved indrawing uptheConstitution, whose underlying principle is
theestablishment ofparticipatory democracy andwhose cornerstone isthedefence ofeachindividual 's
rights andfreedoms. Ithasalsocreated solid, flexible andmodern institutions inorder torespond
totheneeds oftheworld today, ensure stable andresponsible management oftheeconomy andprovide
theframework forpeaceful coexistence among allsectors ofsociety.
Inpursuit ofthese objectives, in1991 theCongress oftheRepublic adopted Law7,known
astheFramework Foreign Trade Law, which provided fortheinstitutional reorganization ofthesector,
inparticular, thecreation oftheMinistry ofForeign Trade andthesetting upoftheHigher Council
forForeign Trade (Consejo Superior deComercio Exterior ),chaired bythePresident oftheRepublic
andtheleading interministerial body inthissector.
Far-reaching reforms were alsoadopted inthefinancial andlabour sectors. Reform ofthe
financialsectorwasundertakenwiththeaimofestablishingamorecompetitiveenvironmentandreducing
Stateparticipation intheassignment ofcredit andinvestment byfinancial institutions. Foreign capital
wasallowed toenterwithout restrictions, anumber offinancial institutions wereprivatized andprogress
wasmade towards amore competitive framework foroperations byvarious intermediaries.
Inthelabour sector, restrictions onlabour mobility wereabolished, together withcompulsory
reinstatement, payment ofpensions asapunitive measure, andretroactive severance pay,which allWT/TPR/G/18 Trade Policy Review
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helped toincrease frictional unemployment. Inaddition, thewage concept wasclearly defined inorder
toavoid anyuncertainty regarding theobligations andrights ofparties.
The1991Constitution established anindependent Board ofDirectors attheBankoftheRepublic
(Central Bank) withresponsibility forconducting thecountry 'smonetary, exchange andcredit policies.
TheBoard isindependent oftheGovernment anditsprimary taskistoachieve price stability, in
coordination withtheGovernment 'seconomic policy.
There havealsobeenfar-reaching reforms inthepublic sector, bothasregards itsfunctioning
anditsorientation. These include fiscal decentralization, theprivatization andconcession programme
andsocial security reform. Thebasis fordecentralization isagradual augmentation inthetransfer
ofresources andresponsibilities toregional entities soastomeetthepopulation 'sbasic needs more
efficiently andpromptly.
Thepurpose ofprivatization ofpublic sector assets istofreetheGovernment resources tied
upinactivities thatcould becarried outmore efficiently bytheprivate sector andtotransfer them
tosectors where Government intervention isessential, forexample, education, health, justice and
security. Inthecourse ofthisprocess, theprivate sector hasbeengiven extensive opportunities to
participate ininfrastructural works andpublic services.
Intheareaofsocial security, theState'smonopoly onthesupply ofhealth services andpensions
hasbeenabolished, leaving thewayopenforasystem thatallows contributors tochoose freely between
private agencies andpublic services.
Regardingthetradeenvironment,between1990and1991theforeigntraderegimewasreformed
inorder toopenuptheColombian economy toforeign competition andprepare ittoachieve higher
levels ofcompetitiveness andinternational interaction.
Thisprocess implied suchradical changes astheunilateral reduction oftariffs, fromanaverage
figure of45percenttoaround 11percenttoday, simplification ofthetariff structure byreducing
the14levels toonlyfive,theabolition ofalmost allquantitative restrictions, moving away fromthe
situation in1990when over60percentoftariffheadings required import licences tothecurrent situation
where only2percentneedlicences forreasons suchasthecontrol ofprecursor substances, arms,
textiles andusedvehicles, industrial waste andtoxic andnuclear residues. Inaddition, import and
export formalities havebeensimplified.
Theexchange reform abolished thestrict exchange control regime inplace since theadoption
ofDecree Law444in1967 andreplaced itbyaflexible andfreeexchange system under which
international payment transactions areeffected through exchange market intermediaries, resulting in
greater flexibility intheflows ofimport andexport payments.
Since 1991, newrulestomodernize thelegalframework forforeign investment inColombia
havebeenadopted. Theprinciples underlying thesechanges areequal treatment fordomestic andforeign
investors, abolition oftheprior authorization forinvestment inColombia, universality under which
foreign investment isallowed inpractically allsectors oftheeconomy, andstability oftheexchange
regime atthetimetheinvestment ismade, which continues ineffect forthatparticular investment even
ifchanges aremade tothesystem inthefuture.
TheBank oftheRepublic 'smonopoly offoreign currency transactions wasabolished and
exchange market intermediaries wereauthorized tocarryoutsuchtransactions. Theexternal debtsystemColombia WT/TPR/G/18
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wasalsomade more flexible. Regarding exchange rates, the"crawling peg"system wasreplaced by
"dirty flotation", which became effective in1994withtheimplementation ofanintervention exchange
band.
Thepresent Government tookoffice inAugust 1994 andhasendeavoured todevelop further
thestructural reforms described above andtorectify thetrendincertain macroeconomic variables which,
iftheyhadcontinued, might havecompromised thelong-term stability andgrowth oftheeconomy.
Thefollowing arethemajor objectives oftheeconomic policy followed since 1994:
(i) Todecrease therapid rateofgrowth indomestic demand, which inrealterms exceeded
10percentbetween 1992 and1994, caused bythefreeing ofthecapital account, the
opening upoftrade andacertain revaluation oftheexchange rate. Although this
accelerated growth wasmoderate intheLatin American context, itledtoadeterioration
inthebalance ofpayments current account fromasurplus of5.5percentofGDP in
1991 toadeficit of4.5percentin1994.
(ii) Tocurbtherevaluation oftheexchange rateinrealterms, which ledtoafallinthe
growth ratefornon-traditional exports. Itbecame necessary toreturn tothereal
exchange rateforlong-term balance, defined for1986, inorder toensure sustained
andbalanced growth inthetradable andnon-tradable sectors oftheeconomy.
(iii) Toreduce inflation progressively soastoguarantee macroeconomic stability.
Inorder toreach thesegoals, theBank oftheRepublic elaborated amonetary andcredit policy
thatwasmore restrictive thantheprevious policy, while theGovernment attenuated theincrease in
public spending andatthesame timeputbefore Congress ataxreform thatwasadopted in1995.
Mechanisms toregulate theshort-term external debtwerereinforced andapetroleum stabilization fund
(Fondo deEstabilización Petrolera )wassetuptoprovide amechanism thatwould allow some ofthe
considerable revenue derived fromtheexploitation ofnewhydrocarbon deposits tobesaved abroad.
3. Theeconomic andtrade environment, 1990-1996
Colombia hadoneofthehighest ratesoflong-term growth inLatin America. Between 1970
and1995, theaverage riseingross domestic product (GDP) was4.5percent. During the1990s the
rateroseto5.3percent, 5.7percentand5.3percentintheyears 1993 to1995 respectively andit
ishoped thatanaverage rateof5percentwillbemaintained fortheremainder ofthedecade.
During thesame period, therateofinvestment recovered toreach oneofthehighest levels
ofthepastfourdecades (25percentofGDP in1995). Foreign investment inparticular increased
substantially androsefrom traditionally lowlevels (around 1.2percentofGDP) to2.4percentof
GDP in1995. Foreign investment isnotonlyoccurring inthepetroleum andmining sectors butalso
inothersectors suchasindustry, services andinfrastructural development. In1995, foreign investment
other thaninhydrocarbons, gasandcoal, increased by95percentindollar terms, andinthefirst
fourmonths of1996rosebyaround 63percent. Alarge partofthecurrent account deficit hasbeen
financed byforeign investment flows, which rosefromUS$501 million in1990toUS$2,461 million
in1995.
Incontrast totheglobal fallintherateofinvestment inthe1980s, there wasaspectacular
increase incapital formation inColombia inthe1990s. Theannual average growth ratebetween 1990
and1994 was16.5percent, in1994 itwas11.7percentandin1995 13percent.WT/TPR/G/18 Trade Policy Review
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Thisisahighly significant indicator ofColombia 'smacroeconomic stability andthegrowth
indomestic andinternational demand, whose satisfaction necessitates large-scale investment, andfor
theprivate sector itmeant annual average growth of20.4percentbetween 1990 and1994, witha
growth rateof11.6percentin1995, duetoadropininvestment inhousing caused bythecyclical
nature ofthissector. Anincrease inpublic investment ininfrastructure meant thatthisrosefrom a
2.6percentdecrease in1994 toa21.3percentincrease in1995. In1995, foreign investment was
concentrated infoursectors: petroleum, manufacturing, finance andtelecommunications.
Theadjustmentpolicyachieveditsmajorobjectives.ThetradedeficitfellfromUS$1,039million
inthefirstfivemonths of1995 toUS$906 million during thesame period in1996. Ifthistrend
continues, theexternal adjustment process willbemuch more rapidthaninitially envisaged. Moreover,
thecurbonrevaluation made itpossible toachieve more balanced economic growth between the
marketable andnon-marketable sectors. In1994, therateofgrowth inthese sectors was8.4percent
and3.7percentrespectively, whereas in1995 itwas5.4percentand5.3percent.
Theadjustmentinexternalaccountsmadeitpossibletoattenuatethemacroeconomicimbalances.
Itistherefore expected thattherateofprivate saving, which rosefrom 8percentofGDP in1994
to8.8percentin1995, willexceed 10percentin1996.
Inaddition, therateofinflation fellbymore than3percentage points, from22.6percentin
1994 to19.5percentin1995.
Until themid-1980s, Colombian exports were characterized byconsiderable rigidity, low
buoyancy, andreliance oncoffee, which accounted forover50percentofexports. In1986, thesituation
changed, ascanbeseenfromthemarked diversification process andthehighratesofgrowth. Inthe
period 1990 to1994, theshare ofcoffee fellto20percent, agricultural exports remained around
10percent,whileindustrialexportsincreasedtheirsharefrom20to32percentandmineralsrepresented
28percent.
Theexpansion ofmineral exports hasbeen significant, particularly coal, ferro-nickel and
petroleum, which in1994represented 14percentofGDP, andthegrowth trend intheseexports means
thatintheyear2000theywillprobably account for20percentofGDP. Inthisconnection, itshould
benoted thatthemain challenge tobefaced bytheColombian economy overthenexttwodecades
willbeefficient management oftheresources derived from increased petroleum earnings.
Therapid growth inimports since 1986, which hasaccelerated toanunprecedented degree
since 1992 asaresult oftheopening upoftheeconomy, accounted foranamount equivalent to
17percentofGDPin1994. Thisshare iscombined withastable trend incapital inflow duetofuture
export prospects resulting from thediscovery ofsizeable petroleum wells. Colombian imports are,
however, mainly anindication oftheconversion andgrowth ofdomestic production since onaverage
45percentarecapital goods, 40percentsemi-manufactured goods and15percentconsumer goods.
Apart from theperiod 1982-1984, when there wasafallinnetinternational reserves, over
thepast25years these reserves havecontinually increased from US$152 million in1970 tosome
US$8,300 million in1985. Asimilar levelispredicted for1996.
4. Outlook fortheeconomy
Although itisforecast thatthere willbeaslight slowing down intherateofeconomic growth
in1996, when itwillbearound 4percent,itisexpected thatin1997-98 therewillbeanupward trendColombia WT/TPR/G/18
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intherate. Thiswillcoincide withthepeakinpetroleum earnings, butitwillmainly bebased on
animprovement intheproductivity andcompetitiveness ofenterprises asaresult ofthemodernization
ofColombia 'sproduction structure. Thesystem ofleading indicators andGovernment forecasts for
1997 shows reasonably favourable economic growth prospects, exceeding 5percent. Thisgrowth
willbebacked upbyasubstantial increase inproduction, petroleum andnon-traditional exports, together
withanacceleration ofindustrial activity.
Thetrade deficit, which willbearound US$3,100 million in1996, willgradually fallover
thenextfewyears andshould bearound US$1,100 million intheyear2000.
Thefuture levelofreserves should besound and,ashasalways beenthecase, theexternal
debtpolicy willcontinue tobeprudent. Although thecurrent account deficit wasUS$4,256 million
in1995, thisshould starttofallin1997 asaresult ofthereturns oninvestment inthenewpetroleum
resources andthereduced growth inimports.
5. Developments intrade negotiations, 1990-1996
Oneofthemajor tasksforColombia andLatin America inthe1990s hasbeentostabilize their
economies byconsolidating thenewmodel ofgrowth towards theexterior, withparticular emphasis
onwhat isknown asopen integration, based ontherules ofthemultilateral system oftrade and
development.
Unlike thetraditional configuration ofclosed regional blocs, open integration leads tothe
elimination oftradebarriers, withminimum listsofexceptions andverysimple accession procedures.
Asfarascountries outside theregion areconcerned, itisforeseen thatincentives within theblocwill
replicate thespecialization patterns intherestoftheworld. Inother words, foracountry likeColombia
intheprocess ofstructural reform andglobal opening up,regional integration should beunderpinned
byconditions favourable toitsintegration inthenewglobal economic scenario.
Colombia hasmade energetic efforts inthisdirection onseveral different fronts. Atthe
multilateral level, itparticipated constructively andoptimistically inpreparations fortheUruguay Round
andthesubsequent negotiations, became afounding member oftheWorld Trade Organization and
usedmultilateral mechanisms todefend itslegitimate national interests.
With regard toregional integration, there hasbeen thereactivation oftheAndean Pact,
negotiations onFreeTrade Areas withChile andtheG-3together withMexico andVenezuela,
renegotiation ofthePartial Scope Agreements within LAIA withaviewtofuture negotiations with
MERCOSUR, theestablishment ofmore favourable conditions forthedevelopment oftrade and
investment inCentral America, opening upoftrade withCARICOM countries, theextension ofthe
Partial Scope Agreement withCuba, andstrengthening oftraderelations withtheAmerican continent
through negotiations ontheFreeTrade Area fortheAmericas.
Inrelation tointernational cooperation, itisimportant tohighlight theestablishment ofthe
AssociationofCaribbeanStates,participationintheglobalsystemoftradepreferencesamongdeveloping
countries, theefforts toestablish closer relations withthePacific Basin, aswellastheextension and
exploitation ofpreferential treatment forColombian exports inthemarkets ofthemajor economies
ofthedeveloped world.WT/TPR/G/18 Trade Policy Review
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5.1 Uruguay Round -World Trade Organization
Traditionally, andmoreparticularly during the1990s, Colombia 'stradepolicy hasbeenpursued
according tomultilateral principles ofopenness andnon-discrimination. Furthermore, Colombia was
oneofthemajor instigators inpromoting thelaunching oftheeighth round ofnegotiations within GATT.
During theUruguay Round, Colombia bound allitscustoms tariffs andmade wide-ranging
commitments onservices. When therewasadeadlock inthenegotiations intheearly1990s, Colombia
substantially reformed thetreatment offoreign investment andtheinstitutional organization ofitsforeign
trade, further developed themechanisms tocombat unfair competition, especially anti-dumping and
countervailing measures, reduced tariffandnon-tariff protection and,attheAndean level, substantially
improved therulesandprocedures oncustoms valuation andintellectual property, anticipating theresults
oftheRound itself.
Regarding theimportance oftheWorld Trade Organization 'sagenda, thefruitoftheUruguay
Round negotiations, Colombia considers thatitconstitutes theunique channel forimproved andmore
secure access toexport markets, thatitreinforces theliberalization andreforms adopted unilaterally
andisthemost appropriate forum forColombia todefend itself against anypressure orbilateral
discrimination, particularly from countries withstronger negotiating powers.
InLaw170of15December 1994, theNational Congress approved theAgreement Establishing
theWorld Trade Organization andtheattached Multilateral Agreements, aswellastheInternational
Bovine Meat Agreement. Subsequently, aftercompleting thenecessary constitutional formalities, the
Government deposited itsinstruments ofratification on31March 1995. TheWTO Agreement therefore
entered intoforce on1January 1995, butonlystarted togiveColombia rights andobligations on
30April 1995 (30daysafterratification).
Colombia tookanactive partinthenegotiations onfinancial services, maritime transport and
basic telecommunications. Although theresults ofthese groups didnotcome uptotheexpectations
oftheMarrakesh Declaration, Colombia intends tocooperate inanynegotiations ontheseissues within
WTO inthesame spirit ofcompromise withwhich itparticipated intheUruguay Round andwhich
implied commitments onprofessional services, engineering, dataprocessing andvalue-added
telecommunications.
Inthemeantime,Colombia'spolicyisfullopennessforfinancialservicesandmaritimetransport
andsince 1994 ithasbeencarrying outanextensive long-term programme forthegradual opening
upofbasictelecommunications, soitisunilaterally contributing towards theglobalization oftheworld
economy.
Colombia alsohasaspecial interest innegotiations onrequirements related toorigin andtrade
andtheenvironment. Atthedomestic level, ithasamended anumber ofprovisions andprocedures
onsafeguardmechanisms,anti-dumping,importlicences,agricultureandsanitaryandtechnicalstandards.
5.2 Andean Community
Withexperiencegainedovermorethan25years,theAndeancountries,withapopulationaround
100million, andintrasubregional tradeofoverUS$5,000 million in1995, havebeenabletoestablish
aregional integration process based ontheimproved competitiveness ofmember countries, withthe
short-term objective ofsustainable progress towards globalization.Colombia WT/TPR/G/18
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In1989, theintegration process hadbeeninexistence for20years anditthenembarked upon
arenewal andreactivation stage thathasnotyetended. Since 1992, afree-trade areahasbeendefined,
giving Peruareasonable period tocarry outitsmacroeconomic adjustment planbefore itisintegrated
intothearea. In1994, theCommon External Tariff wasfixedanditishoped thattheAndean Common
Market willbeestablished bytheyear2000.
Asfarasregulatory aspects areconcerned, themultilateral disciplines haveprovided theimpetus
forthesignificant progress made inareassuchasintellectual property, sanitary andtechnical standards,
agricultural policy, customs valuation, subsidies andcombating unfair trade practices.
With regard tosectoral development, attention should bedrawn totheopenskies policy in
effectsince1992,theAndeanPriceBandSystemandthe1993AutomobileAgreementamongColombia,
Ecuador andVenezuela, which aimstopromote thecompetitiveness ofthesubregional spare parts
industry within theframework oftrade liberalization.
Oneresult ofthisprocess hasbeenthesizeable increase intrade withVenezuela, which rose
from afigure ofUS$518 million foroverall trade in1995 toUS$2,218 million in1995, andisstill
growing. Likewise, during thesame period trade withEcuador roseoverall from US$167 million
toUS$696 million.
Despite thetemporary withdrawal ofPerufrom commitments ontrade liberalization andthe
Common External Tariff inthesubregion, thebilateral agreement hasenabled Colombia tomaintain
opentradeforover75percentoftradewithPeru. Liketradewithother Andean countries, theoverall
trade figure rosefrom US$322 million toUS$681 million between 1991 and1995.
TheAndean Community isthemajor market forColombian exports ofmanufactures.
5.3 Latin American Integration Association (LAIA)
TheLatin American economic integration scheme hasprogressed within theframework ofthe
1980Montevideo Treaty, notified toWTO under theEnabling Clause (Decision 28ofNovember 1979).
Themaininstruments inimplementing thisprocess arethePartial Scope Agreements andtheEconomic
Complementarity Agreements.
Astheinstitutional embodiment ofLatin American integration, during the1990s LAIA had
tofacemajor challenges instrengthening theprocess attheregional level, including thereinforcement
ofandsupport forthevarious integration schemes involving member countries andtheimprovement
oftheextensive economic relations withthird countries ontheAmerican continent andinEurope.
Within thisprocess, thefollowing areofspecial importance toColombia.
5.3.1 FreeTrade Agreement among Colombia, Mexico andVenezuela
Theso-called"GroupofThree"or"G-3"representsthefirsteffortmadebyColombiatobecome
integrated inaneconomy withahigher levelofrelative development, acomplementary economy and
ahighlevelofpurchasing power, through abroad andintegral agreement. Itisforeseen thatthere
willbeagradual liberalization oftrade over10years, together withtheestablishment ofbroad
commitmentsonservicesandinvestmentanddetailedrulesinvarioustradepolicyinstruments,including
governmentprocurementandintellectualproperty.TheAgreemententeredintoforceon1January1995.WT/TPR/G/18 Trade Policy Review
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TheG-3Agreementhasbroadscopeandcoversanumberofdifferentareas.Inthefirstinstance,
itdeals exhaustively withaspects related totrade ingoods through rules onmarket access andthe
elaboration ofatariff reduction programme. Because ofitsspecial nature, theAgreement provides
forseparate treatment forgoods intheagricultural andautomobile sectors. Inorder toensure that
tradefunctions satisfactorily andthattheAgreement isusedproperly, special rulesonorigin, safeguards
andunfair practices havebeendefined.
Secondly, liberalization commitments havebeenmade ontradeinservices ingeneral andmore
particularly onthetemporary entry ofpersons, professional services, value-added telecommunications,
transport andfinancial services. Nevertheless, withtheexception ofvalue-added telecommunications,
special programmes arebeing negotiated toopenuptheother sectors onthebasisoflistsofrestrictions
andreservations.
Thirdly, thereareseparate provisions ontechnical standardization, government procurement,
policy onState enterprises, investment, intellectual property, settlement ofdisputes, administration
oftheAgreement andtransparency.
5.3.2 Chile
Theformer Partial Scope Agreement andtheregional tariffpreference between Colombia and
Chile werestrengthened byanEconomic Complementarity Agreement signed in1993withtheobjective
ofexploiting thestructural conditions oftwoeconomies thatarebasically complementary. Trade
liberalization began in1994andwillbecompleted in1999. Onecharacteristic ofthisAgreement that
should behighlighted isthat,inaddition tocreating favourable conditions fortrade andmutual
investment, entrepreneurs actively participate initsimplementation andtheybearresponsibility toa
large extent foragreement onoracceleration oftariff reduction.
5.3.3 Southern Common Market
Since 1983, Colombia hashadPartial Scope Agreements withthecountries belonging tothe
SouthernCommonMarketorMERCOSUR(Argentina,Brazil,ParaguayandUruguay)andtheseremain
ineffect until31December 1996. Inaddition, theregional tariff preference alsoapplies.
Inpursuit ofthesubregional objective ofestablishing aSouth American free-trade areainthe
nearfuture, byDecember 1996itishoped thattheAndean countries andtheMERCOSUR members
willhaveagreed tomake thePartial Scope Agreements multilateral and,by1997 willhavedecided
ontheform ofnegotiations onthefuture free-trade area.
5.4 Other regional negotiations
In1994, Colombia signed aPartial Scope Agreement withCuba, covering products thatare
ofthegreatest interest bilaterally anditishoped thatthiswillbecome thebasis forincreased trade
between thetwocountries. In1994, thefirstPartial Scope Agreement withPanama came intoeffect
andin1995trade liberalization between Colombia andtheCaribbean Common Market (CARICOM)
wasinitiated, providing forreciprocal opening upoftrade asfrom 1998. Steps arebeing taken to
reactivate atthebilateral level(Colombia andVenezuela being oneparty) theFramework Agreement
onTrade andInvestment between Colombia andVenezuela andtheCentral American Common Market.Colombia WT/TPR/G/18
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5.5 Settlement ofdisputes
Overthepastfouryears, Colombia hashadtoresort tothemultilateral system forthesettlement
ofdisputes inorder todefend itself against action undertaken bytwoofitsmajor trade partners that
notonlyaffected Colombia 'strade interests butalsohadharmful effects ontheliving conditions of
large sectors ofthecountry 'svulnerable population.
In1993and1994,anumberofLatinAmericancountrieswhichexportedbananastotheEuropean
Union, including Colombia, brought before twodifferent panels therestrictions imposed byseveral
European Union member countries against banana exports andRegulation 404of1993, which provides
fortheestablishment ofcommon organization ofthebanana market asfrom1July1993, astheynot
onlyrestrictedColombia'sexportsbutalsocreatedunfavourableconditionsfortheirmarketing.Although
bothpanels decided infavour ofthearguments putforward bytheLatin American countries, their
recommendations were notadopted bytheGATT Council.
Nevertheless, within theframework oftheUruguay Round, anAgreement wasreached to
attenuate some oftheharmful effects oftheregime ontheeconomies oftheLatin American countries
(Framework Agreement onBananas). Following thisAgreement, however, Colombia wasthesubject
ofaninvestigation under Section 301oftheUnited States Trade Act. Together withtheother Latin
American exporting countries concerned, Colombia requested theestablishment ofapanel todecide
onthelegality oftheCommunity regime forbanana imports, including theFramework Agreement
signed byColombia, Costa Rica, Nicaragua andVenezuela. Colombia andtheaforementioned parties
became interested thirdparties andputforward therelevant arguments.
Colombia hasalsobeeninvolved inpanels ontunaandtobacco, which considered theunilateral
restrictions imposed bytheUnited States onimports ofthese products.
Asaresultoftheforegoing,Colombiaisfullyawareoftheimportanceofmaintainingmultilateral
principles ofnon-discrimination andofthecontinued strengthening ofthesystem forthesettlement
ofdisputes. Inthiscontext, many oftheefforts made toreach agreement onmore transparent rules
andmore extensive commitment toopenness could easily beundermined iftherestrictive unilateral
action bymajor trade partners persists.
6. Future policy trends
Colombia willpursue theorthodox management oftheeconomy soastoensure itsstability
andprovide asatisfactory framework forinvestment andeconomic growth. Itsmacroeconomic policy
willbeconsistent withtheobjective ofmaintaining thegradual reduction intheinflation rate,seeking
toachieve one-digit levels bytheendofthedecade without having recourse totheartificial solution
ofrevaluation ofthepesoorsacrificing economic growth.
Inforeign trade policy, theguidelines of"openness", modernization, competitiveness and
internationalization laiddown during the1990s willbemaintained.
6.1 Integration intheAmericas
AttheSummit ofHeads ofState ofthe34countries ontheAmerican Continent heldin
December 1994theideaofestablishing aFreeTrade AreafortheAmericas (FTAA) bytheyear2005
wasputforward. Colombia considers thattheFTAA isanextremely serious commitment towhich
itisdedicating itsutmost efforts andwhose realization isguaranteed notonlybypolitical support butWT/TPR/G/18 Trade Policy Review
Page 10
alsobythesignificant progress made inthesubregional integration processes andbytherulesagreed
uponintheWorld Trade Organization. Asproof ofColombia 'sgoodwill, ithosted theSecond Meeting
ofAmerican Ministers forTrade inMarch 1996.
Colombia 'sparticipation insubregional integration agreements willbereinforced bythecurrent
development andmodernization ofAndean integration, which should seethefullestablishment ofthe
Andean Common Market bytheyear2000. There areofcourse otherchallenges suchasthenegotiations
ontheMERCOSUR-Andean Community Free Trade Area andthestrengthening ofthetrade
commitments withCentral America andtheCaribbean.
6.2 Globalization oftrade andcooperation relations
Because ofthestrategic importance ofthePacific Basin countries, Colombia isparticularly
interested instrengthening trade andcooperation relations withthisregion. Italsorealizes thatmuch
work hastobedonewithother important regions suchasCentral andEastern Europe, andAfrican
andEastAsian countries.
6.3 Agenda oftheWorld Trade Organization
Barely twoyears aftertheWorld Trade Organization came intobeing, itsMembers havebeen
abletoseethebenefits afforded bytheenhanced system ofrulesandtheguarantees which theeffective
functioning ofthemultilateral system forthesettlement ofdisputes offer toallcountries.
Nevertheless, much remains tobedone inorder toimplement theMarrakesh Agreements,
withaveryextensive programme ofwork contained intheso-called "built inagenda". Alargemeasure
ofcaution mustbeexercised however when including newissues intheWTO Agenda untilthebenefits
ofthesystem canbeseen, theinitial commitments havebeenassimilated attheinternal levelandthe
newmultilateral trading system hasbecome areality. Caremustalsobetaken nottoinclude issues
thatappear tobeconsistent withWTO objectives butcome under othermultilateral forums, forexample,
labour rights, which areappropriately dealtwithintheInternational Labour Organization.
There canbelittledoubt that,intheinterests ofreaching agreement onapackage inorder
tofinalize theUruguay Round, many countries, particularly developing countries, hadtosacrifice their
legitimate aspirations, forexample, regarding tropical products, agricultural subsidies, textiles and
recognition oftheirunilateral opening up.Onthelatter point, theimportance oftaking effective steps
toextend current obligations cannot beexaggerated. Inthisarea,Colombia isalsocommitted tofurther
development ofthework programme agreed inMarrakesh andisready tocooperate instudying other
issues suchasenvironment andtrade.
Colombia firmly believes inthemultilateral disciplines established intheMarrakesh Agreement
andconsequently hasamended itsdomestic legislation where necessary, making useoftheperiods
granted todeveloping countries forthis. Thismeans sacrifices suchasgiving upitsdiscretionary
authority informulating sectoral policies appropriate toitseconomy 'slevel ofdevelopment.
Nevertheless, itisconfident thatthebenefits ofthesystem willbeshared, which canbeachieved if
thesupply ofexports fromdeveloping countries suchasColombia istreated inthesamewayasproducts
andservices from developed countries.