WORLD TRADE WT/TPR/M/18
31October 1996
ORGANIZATION(96-4572)
Trade Policy Review Body
25-26 September 1996
TRADE POLICY REVIEW
COLOMBIA
MINUTES OFMEETING
Chairperson: H.E. MsAnne Anderson (Ireland)
Page
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON 2
II. OPENING STATEMENT BYTHE REPRESENTATIVE OFCOLOMBIA 3
III. STATEMENT BYTHE FIRST DISCUSSANT 5
IV. STATEMENT BYTHE SECOND DISCUSSANT 6
V. STATEMENTS BYMEMBERS 7
VI. REPLIES BYTHE REPRESENTATIVE OFCOLOMBIA
AND ADDITIONAL COMMENTS 11
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON 20WT/TPR/M/18
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I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON
1. Thesecond Trade Policy Review ofColombia washeldon25and26September 1996. The
ChairpersonwelcomedthedelegationofColombia,headedbyTheHonourableMr.MorrisHarfMeyer,
Minister ofForeign Trade, andthediscussants, H.E. Mr.Alejandro delaPeña ofMexico and
Mr.RicWells ofAustralia. Asusual, bothdiscussants would speak intheirpersonal capacities and
notasrepresentatives oftheircountries. Inaccordance withtheestablished procedures, thediscussants
hadmade available, inadvance, outlines ofthemain issues theyintended toraise.
2. TheChairperson recalled thepurpose oftheTrade Policy Reviews andthemain elements of
theprocedures forthismeeting. Thereport bytheGovernment ofColombia wascontained in
document WT/TPR/G/18 andthatoftheWTO Secretariat indocument WT/TPR/S/18; themainissues
toberaised bythediscussants werecontained indocument WT/TPR/D/2. Copies ofwritten questions
submitted byseven delegations (Australia, Canada, theEuropean Union, Hong Kong, Japan,
NewZealand andtheUnited States) hadbeentransmitted tothedelegation ofColombia. Iffullreplies
could notbeprovided during themeeting, supplementary written replies should beprovided later.
3. Recalling thatintergovernmental organizations could attend meetings oftheGeneral Council
through decisions taken onthebasisofadhocarrangements, theChairperson proposed thattheTrade
Policy Review Body invite theEBRD, EFTA, FAO, IMF, OECD, UNCTAD andtheWorld Bank,
which hadrequested observer status, toitsnextmeeting. Itwassoagreed.WT/TPR/M/18
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II. OPENING STATEMENT BYTHE REPRESENTATIVE OFCOLOMBIA
4. Therepresentative ofColombia thanked theWTO Secretariat forthepreparation ofits
comprehensive report andannounced thatthisdocument wastobeusedasthebasis forthefollow-up
ofhiscountry 'strade policies atnational level. Hethenproceeded inhispresentation which focused
onfourmajor areas: (i)themodernization oftheinstitutional framework; (ii)macroeconomic aspects;
(iii)foreign trade policy; and(iv)themultilateral context.
(i) Themodernization oftheinstitutional framework
5. Inthepastfiveyears thorough changes, including thetradeopening, themodernization ofthe
economyandinstitutionalreforms,hadtakenplaceinColombiawithoutdisruptingtheproductionprocess
ordisturbing domestic andforeign markets. Themajor political change consisted oftheadoption of
the1991Constitution which hadexpanded andreinforced theprotection offundamental rights. Major
reforms hadaffected theExecutive, Legislative andJudicial powers through, interalia,thestrengthening
ofCongressional control, thereinforcement ofindependence offiscal agencies andtheconsolidation
ofdecentralization. Among thechanges, heattached particular importance tothegranting ofautonomy
totheCentral Bank aswellasthelegislative changes and/or action inareas liketheforeign exchange
régime, thefinancial sector, themovement oflabour, thesocial security, privatization andforeign
investment régimes.
(ii) Macroeconomic aspects
6. Colombia, duetoitscautious andorthodox macroeconomic management, hadmaintained its
macroeconomicstabilityandithadneverrecordednegativegrowthrates.Colombiahadnothadconcerns
relating toexternal debtoritsrescheduling. Since 1993therehadbeenacurrent account deficit, mainly
duetoproduction-related imports, aswellasadeterioration intheterms oftradebecause ofaccelerated
growth ofimports, particularly ofcapital goods. Thisdeficit which hadbeenfinanced withlong-term
debtandforeign direct investment inflows, hadnotaffected thelevel ofinternational reserves.
Mechanisms hadbeenintroduced toavoid anynegative effect ontheeconomy oftheforthcoming foreign
exchange earnings fromadditional oilexports tobegenerated fromtheexploitation ofnewoilfields.
(iii) Foreign trade policy
7. Institutional reforms, including thecreation oftheMinistry ofForeign Trade andthePermanent
Mission totheWTO aswellastherestructuring ofpublic entities, hadbeenanimportant element for
introducing dynamism inthemanagement offoreign trade. Thorough reforms intheforeign trade
régime,includingthereductionoftarifflevels,thesimplificationofthetariffstructureandtheelimination
ofvirtually allnon-tariff barriers, hadopened theeconomy toforeign competition.
8. Regional integration, which hadstimulated economic growth andboosted tradeflows, remained
acornerstone ofColombia 'sforeign trade policy anditsdevelopment. Regionalism, carried outin
thelightoftheGATT/WTO legalframework, wasnoworiented towards linking partner economies
within theglobal market. Itwasseenascomplementary tothenational process ofliberalization and
deregulation. Thestrengthening oflinks withAndean Group partners, including theadoption ofa
Common External Tariff (CET) andtheestablishment ofafree-trade area,hadledtosignificant growth
ofbilateral tradeflows withbothVenezuela andEcuador. Progress hadalsobeenmade intheadoption
ofcommon(i.e.AndeanGroup)rulesinareassuchasagriculture,customsvaluation,standards,sanitary
andphytosanitary measures, subsidies, unfair trade practices andintellectual property rights.WT/TPR/M/18
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9. Healsonoted theimportance ofnewregional initiatives suchasagreements withother Latin
American countries leading totheformation offree-trade areas (e.g. withChile, withMexico and
Venezuela, establishing theGroup ofThree) oragreements forthedevelopment oftrade and
investment (e.g.withtheCaribbean Common Market andCentral American countries) orplans for
establishingfree-tradeareaswithotherpartners(e.g.MERCOSUR,theFree-tradeAreaoftheAmericas).
GATT 'sEnabling Clause hadprovided theframework forthisprogress.
(iv) Themultilateral context
10. Hethenhighlighted Colombia 'sachievements atmultilateral level byrecalling thatinthe
Uruguay Round hiscountry 'scommitments covered boththegoods andtheservices sectors; market
access undertakings inthelatter hadbeenwide-ranging. TheMarrakesh Agreements hadbeenan
historicalachievementandhadrequiredsacrificesfromallcountries,particularlythedevelopingcountries
whose special anddifferential treatment allowing theuseofexport subsidies wastodisappear inless
thanonedecade.
11. Theagriculturalandautomotivesectorswerealsotobeaffectedbysuchcommitments.Already,
inagriculture, there werenobudget outlays forproduction assistance orsubsidies. Themeasures in
force aimed toguarantee thepurchase ofcrops from small producers, andwere tobeadjusted to
WTO requirements. Nevertheless, hisGovernment wasparticularly concerned withthefragile nature
ofthesectorandthesocialproblemsinruralcommunities.Concerningtheautomotiveindustry,although
Colombia wasmaking useofthespecial conditions provided intheWTO Agreements, hisGovernment
wasconcerned about thecurrent pressure ondomestic suppliers ofparts andcomponents andtheir
forthcoming exposure toforeign competition, inaperiod considered asshort inthelightofindustrial
reconversion plans.
12. HisGovernment wasworried about theexistence offoreign legislation withanextraterritorial
scope ofapplication which could leadtotheunilateral adoption oftradesanctions. Thiswasthereason
whytheWTO Dispute Settlement wassuchanimportant instrument. Hethenrecalled thatinboth
dispute settlement cases where Colombia hadbeeninvolved asacomplainant theGATT Council had
notadopted thepanel reports. Regarding thebanana export régime oftheECunder theFramework
Agreement, Colombia hadsigned amemorandum ofunderstanding withtheUnited States thusending
aSection 301investigation. Hiscountry, which wasthirdparty intheWTO panel ontheECbanana
importsrégime(FrameworkAgreement),hadmadeasubmissionaimedatdemonstratingthecompatibility
oftheAgreement withtheWTO provisions.
13. Heconcludedbyexpressinghisfaithinthemultilateraldisciplinesandrecognizingthatsacrifices
wererequired toabolish sectoral policy discretion. Colombia considered thattheSingapore meeting
should focus onimplementation aspects oftheWTO Agreements rather thantheinclusion ofissues
suchaslabour standards. Heindicated thatissues suchasinvestment andcompetition could betaken
under consideration. Newareas should beevaluated cautiously taking intoaccount thelimitations of
thedeveloping countries.WT/TPR/M/18
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III. STATEMENT BYTHE FIRST DISCUSSANT
14. Thefirstdiscussant(AmbassadorAlejandrodelaPeña)underlinedtheimportanceofColombia's
political andeconomic changes which hadbeenundertaken sinceitsfirstTrade Policy Review in1990
inthecontext ofthedifficult domestic andinternational situation. Macroeconomic developments had
beenpositive andallindicators hadfollowed therighttrend. However, itseemed thatfor1996 the
target rateforinflation would bedifficult toattain. Hesought theGovernment 'slatestinflation estimates
andasked about theimpact oftheSocial Pact(Pacto deProductividad, Precios ySalarios )oninflation.
15. Withreferencetothesignificantimprovementinpublicfinances,heconsideredthatoneweakness
wasthelackofstability infiscal policy which hadbeenreformed onaverage every 27months since
1974. Heasked about thelikelihood ofincreased taxevasion resulting fromtheincreased VAT levels,
thebroadening ofthepublic sector deficit duetofiscal decentralization andthesignificant riseinpublic
expenditure resulting fromsocial reforms. Healsosought more information onthefinancing ofthe
Development Plan, progress inprivatization andtherelationship between trade andfiscal policy.
16. Although Colombia hadsucceeded inreducing itsexternal debt, ithadtocopewiththerecent
current account deficit; inthiscontext, heacknowledged thecontribution ofthereforms inthearea
offoreign direct investment. Hewasinterested inlearning more about efforts todiversify investments
toareasother thanoil,thediversification inthesources offoreign direct investment andthestimulation
ofdomestic rather thanforeign savings asasource ofinvestment. Concerning theexpected drastic
increase inforeign exchange earnings from oilasfrom 1997, heinquired about measures tocontain
anynegative Dutch-disease effects thatmight arise, including through realexchange rateappreciation.
Furthermore, herequested information onColombia 'sexperience withtheFund forOilSavings and
Stabilization.
17. Regarding achievements intheareaoftrade policy, hecited theimprovements inbinding
commitments, theelimination ofmostquantitative restrictions, thesimplification ofthetariffstructure
andtheintroduction ofnewlegislation inanumber ofareas, inparticular government procurement
where national treatment wasnowgranted onareciprocal basis. These changes hadbeenreflected
inthesignificant riseoftheshare oftrade toGDP andthisdespite thegradual reduction ofexport
subsidization. Heconcluded byseeking theviews oftheauthorities ontheevolution oftheColombian
tradepolicy inthelightofeconomic performance, inflation andpublic expenditure prospects in1996.WT/TPR/M/18
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IV. STATEMENT BYTHE SECOND DISCUSSANT
18. Theseconddiscussant(Mr.RicWells)pointedoutColombia'sincreasedparticipationinregional
tradeagreements asasignificant feature ofitstradepolicy developments sincetheprevious Trade Policy
Review. Thistrend wasalsoreflected inColombia 'slegislative changes anddirection oftrade,
particularly inthecontext oftheAndean Group. Although Colombia claimed tobefollowing apattern
of"open integration"; however, while theAndean Group appeared tobetrade creating, ithadalso
adopted restrictive measures, including safeguards inagriculture (onalimited basis). Agriculture had
been excluded from theAgreement oftheGroup ofThree. How would Colombia useregional
arrangements tounderpin acontinuous process ofeconomic restructuring?
19. Colombia should becongratulated forconfronting thedifficult issue ofadjustment inthe
agriculture sector. Trade liberalization hadledtoasubstantial increase ofimports andareduction
inimport-competing crops. Nevertheless, awide range ofborder andproduction-related measures
stillassisted domestic producers. Colombia considered variable levies anddomestic absorption
requirements asbeing incompliance withWTO undertakings. Given theircost,werethese measures
appropriate andeffective? HadColombia considered rationalizing these measures andusing the
WTO Agreements asanopportunity forfurther agricultural reforms? Hesought information onthe
rôleofSectoral Competitiveness Agreements inagriculture anditsrestructuring.
20. While commenting onthemixed performance ofthemanufacturing sector, henoted thefast
growth inthechemicals, machinery andcarassembly industries aswellasthepricing offuelandenergy
below world prices. Inthetextiles andclothing sector, despite therestructuring which hadbeeninduced
bythelowering oftrade barriers, anarray ofgovernment measures wasavailable. Inthelightofthe
peso appreciation, heasked whether these measures remained appropriate. HadtheSectoral
Competitiveness Agreements assisted inrestructuring thetextiles andclothing sector?
21. Thecarassembly industry seemed tohavebenefited fromamixofmarket-opening andhigh
effective ratesofassistance aswellasfromAndean Group arrangements which hadadded flexibility
inthesector andboosted trade flows. Given thesector 'sgrowth andforeign investment potential,
would Colombia consider theremoval ofmeasures which could distort thedevelopment ofanexport-
oriented automotive industry?WT/TPR/M/18
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V. STATEMENTS BYMEMBERS
22. Members oftheTPRB welcomed thepresence ofMinister Morris HarfMeyer asheadofthe
Colombian delegation. Members thanked theColombian representative andthediscussants fortheir
opening statements, andextended theirappreciation totheColombian Government andtheSecretariat
fortheirrespective reports. Participants commended Colombia forliberalizing theeconomy under
theApertura programme anditssuccessful macroeconomic management since thefirstTrade Policy
Review in1990. Theliberalization oftheforeign exchange andinvestment régimes were also
complimented. Members noted thatlegislation hadbeenintroduced tomeetinternational commitments
andthatimplementing regulations remained tobeadopted inanumber ofareas.
23. Therepresentative oftheUnited States noted Colombia 'sefforts toadapt itspractices and
procedures totheWTO Agreements. Nevertheless, inagriculture, which constituted anexception to
Colombia 'sopening, hebelieved thatwork remained tobedoneifcommitments weretobemetby
theyear2000. Hisdelegation, which hadsubmitted anumber ofwritten questions onspecific matters,
wasconcerned bythefactthatColombia hadyettoissueimplementing legislation onimport licensing
procedures, technical standards, health andsanitary measures, safeguards, anti-dumping and
countervailing measures, intellectual property rights andrestrictions ontradeinagriculture andservices.
Heconcluded byexpressing hisappreciation forColombia 'sinvolvement inthenegotiation ofregional
trade agreements andencouraged itspro-active involvement intheFree-trade Area ofthe
Americas (FTAA) process.
24. Therepresentative ofNewZealand commended Colombia fortheprogress made insimplifying
itstrade rules. Oncustoms valuation, anissue ofparticular interest forhiscountry, heexpressed the
hopethatColombia would bring itssystem intolinewithinternational norms within thetransition period
provided bytheWTO Agreement. Heexpressed concern overthedistortive effects ofreference prices,
which should beabolished. Heexplained howthese hadbeenapplied tomilkimports in1996 and
howtheauthorities hadreacted toaddress individual imbalances. Although hiscountry hadnot
experienced anyproblems withthedomestic absorption requirements forimport licensing purposes,
hewasoftheviewthatthese should be"tariffied".
25. Regional initiatives guided Colombia infreeing upandbringing trade rules intolinewith
mainstream policies elsewhere. Hewasinterested inlearning about recent developments within the
Andean community aswellasbetween thisGroup andtheMERCOSUR.
26. TherepresentativeofHongKongcomplimentedColombiaforitswide-rangingeconomicreforms.
However, hewasconcerned about thenegative effects ofprotection afforded tocertain sectors including
agriculture,textilesandclothing.Protectionfromforeigncompetitionwouldleadtoincreasedproduction
costs, reduced economic efficiency, introduce adisincentive forinnovation anddistort economic reality.
Hehoped thattherewould befurther liberalization inthelongruninlinewithmultilateral commitments.
27. Therepresentative ofCanada sought anupdate onthesituation withrespect tolawsand
regulations tobepassed tofullyimplement multilateral commitments. Withrespect tothedismantling
ofcertain Trade-Related Investment Measures (TRIMs) andother policies benefiting fromatransition
period forbringing them intoconformity withWTO obligations, hewished toknow whether there
were anyplans tointroduce thechanges progressively.
28. Therepresentative ofAustralia complimented Colombia 'sinvolvement andcommitments in
theUruguay Round, including itsparticipation tofurther agricultural trade negotiations in1999, in
thecontext oftheCairns Group. Shedrewattention toconcerns about Colombia 'sagricultural policy
which hadbeenexpressed atseveral meetings oftheCommittee onAgriculture sinceNovember 1996,WT/TPR/M/18
Page8
andencouraged Colombia tofullyimplement itsUruguay Round undertakings inagriculture. She
soughtclarificationonissuessuchasimportrestrictionsconditionedbydomesticabsorptionrequirements,
theintroduction arégime fortariffquota allocation andtheoperation ofvariable levies under theAndean
Price Band System.
29. Regarding Colombian provisions onforeign investment inthecoalindustry, shewelcomed
theremoval ofprior authorization requirements forparticipation inmining projects aswellasthe
proposed reform ofthemining code. Nevertheless, Australia hadsome concerns about development
plans andforeign investment encouragement forthisindustry.
30. Australia supported regional integration initiatives inSouth America provided thatthese were
outward-looking,consistentwithWTOprovisions/proceduresanddidnotundermineorretardmultilateral
commitments. While theAgreement oftheGroup ofThree hadnotyetbeennotified, shesought
Colombia 'sassurance thatthiswould besubmitted forWTO scrutiny. Sheasked whether theAgreement
withChile wasmeant tobeafree-trade agreement under Article XXIV orapreferential trading
agreement under theEnabling Clause. Shewasinterested inlearning about Colombia 'sintentions on
theformation orextension ofpreferential trading arrangements aswellasthedirection andobjectives
oftheentire process inthenearfuture.
31. Therepresentative oftheEuropean Union considered thatColombia 'seconomic achievements
reflected itscommitment totrade liberalization andintegration intheworld economy. Theunilateral
opening andthenewlegal framework hadassisted inreducing uncertainty andincreasing foreign
investment inflows. Nevertheless, foreign investors remained concerned withimplementation delays,
thefrequency inregulatory changes andprovisions suchasthose relating toexpropriation without
compensation, currently under review. Hesought more information ontheoperation ofthe"war tax".
Value added (VAT) andconsumption taxesseemed todifferentiate between domestic andforeign goods,
andshould bebrought intoconformity withWTO commitments.
32. Although overall customs procedures hadbeen simplified andliberalized, inadequate
administration oftheseprocedures andrecent preshipment inspection requirements constituted additional
costs fortheimporters. Heasked fordetails ontheoperation ofthequality certificate requirements.
Complicated andlengthy sanitary registration requirements foranumber ofproducts, including
foodstuffs, beverages andpharmaceuticals, represented animportant andcostly barrier toimports,
inparticular ofalcoholic beverages. Noting thatimports ofporkmeat(especially ham) werebanned
forsanitary purposes, heasked whether Colombia envisaged bringing these procedures intolinewith
international requirements.
33. Hesought information ontheareas which hadbenefited fromexport subsidization, including
their performance, andexport markets. Heasked whether these items forced competition from
preferential imports inthedomestic market. Healsoasked about Colombia 'splans foradhering to
thePlurilateral Agreements onTrade inCivilAircraft, Government Procurement andtheInternational
Dairy Agreements.
34. TherepresentativeofJapancommendedColombia'seconomicreformsaswellasitsparticipation
inregional integration initiatives. Itsinterest included theAsia-Pacific Economic Cooperation (APEC)
where ithadapplied formembership on25April 1996. Healsoexpressed hisappreciation forthe
recent changes intheinvestment régime aswellasthose inthefinancial sector.
35. TherepresentativeofVenezuelacommendedColombia'stradepolicyreformswhichhadyielded
results interms ofrealeconomic growth, inflation control, market andproduct diversification and
increased domestic value added. However, henoted that,intheabsence ofaprompt response, theWT/TPR/M/18
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pesoappreciation could affect competitiveness andgiverisetoprotectionist pressures. Hejoined other
delegations intheir concerns overtheprice certification procedures andtheadditional costtothe
importers from thepreshipment inspection régime.
36. BilateraltradeandinvestmentrelationsbetweenColombiaandhiscountryhadbeenstrengthened
inanumber ofareas. Bothcountries hadundertaken efforts toreinforce thelegalframework ofthe
Andean Group. They hadjointly negotiated agreements withcountries intheregion (e.g.Mexico,
theCaribbean Common Market andCentral American countries) andwere moving forward in
negotiations withMERCOSUR.
37. Therepresentative ofChile noted theliberalizing reforms undertaken since 1990 either ina
unilateral manner orinthecontext ofmultilateral orregional negotiations. There wasstillroom for
further market-opening inareas suchastextiles, foodandbeverages, which enjoyed higheffective
protection.
38. Agriculture benefited fromtariffandothertraderestrictive measures mostofwhich hadalready
beennotified; theirelimination wasexpected within thetransition period which wasprovided for
developing countries intheWTO Agreements ortheschedules ofconcessions.
39. Inthelightofthebroad deregulation which hadbeencarried outrecently inthefinancial sector,
sherequested anup-to-date description ofthesituation inthisindustry. Regarding basic
telecommunications, which were undergoing aderegulation process, sheasked whether there were
anyplans withrespect totheright toreserve thesupply ofthese services tonationals; Colombia 's
active participation inthenegotiations inthisareawasencouraged. Clarifications weresought onthe
current status andplans inthesupply oflongdistance services.
40. Therepresentative ofIndiapraised Colombia 'sautonomous changes, undertaken inthecontext
ofadifficult external environment, aswellasitsachievements interms ofgrowth andexport
diversification. Hehighlighted theadoption ofthenewConstitution, theinstitutional reorganization
intheareaofforeign trade, thefiscal decentralization, theprivatization plans, thesocial security reform
andchanges intheareaoftrade andforeign exchange policies. Concerning theintroduction ofnew
issues intheWTO agenda, hisdelegation supported Colombia 'sposition. Herecalled thesacrifice
oflegitimate aspirations ofmany countries inorder toconclude theUruguay Round.
41. Therepresentative oftheCzech Republic expressed hisappreciation forColombia 'sinitiatives
inthefieldofinternational tradeco-operation intheregion anditsclearposition against protectionism.
Concerning institutional reorganization, hesought more information about therôleoftheMinistry
ofForeign Trade andthatoftheHigher Council forForeign Trade.
42. Hewasinterested inknowing howtheGovernment wasgoing todealwiththecurrent account
deficit. What export promotion measures were envisaged? Hesought theGovernment 'sviews on
theimpact oftherecent riseinindebtness. Heasked theauthorities toelaborate ontheimportance
ofoil-based resources intheshort andlongtermperspective.
43. Ontheissue ofexpropriation without compensation, heconsidered thatthiscould influence
potential investors andcould cause aslowdown intheconclusion ofinvestment protection agreements;
hesought information onthelatest developments inthisfield. Regarding theproblem ofillicit drugs
trade, hesought theauthorities 'position withrespect totheexternal threat ofunilateral tradesanctions
against Colombia.WT/TPR/M/18
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44. Therepresentative ofArgentina welcomed Colombia 'sliberalizing efforts intrade, foreign
exchange andinvestment policies. Hehadnoted thereference oftheColombian representative tothe
liberalization ofthelabour market, including theelimination ofrestrictions inlabour movements, and
measures relating totheState-run social security schemes. Heasked fordetails ofthemeasures taken
inthisrespect, andtheirimpact ontheemployment rate.
45. Concerning theAndean Price Band System, hesought clarification onoperational aspects,
including theobservance oftariffbinding commitments andtheuseofthesystem tocounter subsidized
agricultural exports. Comments weresought onthe"temporary restrictions" onimports ofusedmotor
vehicles, usedmotorcycles andusedpartsandcomponents. Heasked about therationale forpreshipment
inspection procedures aswellasthelistofsensitive items subject tocompulsory inspection requirements.
Herequested detailed andup-to-date statistical dataontheparticipation ofState-trading entities, other
thanthose notified byColombia totheWTO, inforeign trade activities. Heasked about theplans
fortheState-ownedAgriculturalMarketingInstitute(IDEMA).Healsoaskedwhetherthecompensatory
tariffreduction applied under thedomestic absorption régime wasstillinforce. Finally, hequestioned
thereason fordifferent VAT ratesfordomestic andimported goods?
46. Therepresentative ofBrazil noted theeffects oftheopening oftheeconomy onthestructure
ofColombia 'sforeign trade. Theinformation ontheregional priorities hadbeenappreciated. Colombia
pursued openregionalism. Hesought anevaluation oftheprospects forstrengthening relations with
MERCOSUR andanappraisal oftheprocess oftheFTAA. Inthelightofthediscovery ofnewoilfields,
heasked about theinvestment régime which wastoapply fortheoilsector.
47. Hisdelegation andmany developing countries hadexperienced thesamedifficulties asColombia
adjusting toseveral Uruguay Round commitments, inparticular those inthefieldofTRIMs. Thesame
appliedtotheagendafortheSingaporemeetingwhere,despitetheseimplementationproblems,anumber
ofcountries wereinsisting ontheinclusion ofnewissues; these included labour matters which were
notpartoftheWTO 'scompetence.
48. TherepresentativeofPakistantooknoteofthewide-rangingeconomicreformsandofColombia's
macroeconomic stability. Considering theconcentration ofitstrade inasmall number ofmarkets,
heexpressed thehopethatinthefuture thispattern would become more evenly balanced.
49. Therepresentative ofPeruasked whether there wereanyforeign investment incentives other
thanthose offiscal nature. Hewasinterested inknowing anyplans tointroduce constitutional
amendments onexpropriation without compensation. Hesought detailed information onanymeasures,
taken inthecontext oftheforeign exchange policy, toavoid therealappreciation ofthepeso. Regarding
theprivatization programme, hewondered whether thepublic companies citedintheSecretariat report
werestillincluded inthethree-year agenda. Heshared Colombia 'sconcerns overtheissues onthe
agenda oftheSingapore meeting.
50. Therepresentative ofSwitzerland encouraged Colombia tocontinue pursuing thesame open
policy path. Hisdelegation hadparticular interest inquestions which hadbeen raised byother
participants onissues suchasgovernment procurement, theimport régime forusedvehicles andspare
parts andthedevelopment ofthenetwork ofregional trade agreements.
51. Heasked whether Colombia envisaged modifying itsWTO schedule oftariff commitments
inorder toraisebound ratesuptothelevelofthose setattheCET. Herecalled that230items were
exempt from CET tariffs andthese hadtobegradually phased inwithin afour-year period starting
in1995. HadtheCEToftheAndean Group anditsexemption listbeennotified totheWTO? Had
theschedule forthereduction ofexempt items beenobserved?WT/TPR/M/18
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52. Therepresentative ofCôted'Ivoire recalled hercountry 'stieswithColombia andcommon
experiences. Sheurged theinternational community toassist Colombia inmoving forward initstrade
liberalizing efforts.
VI. REPLIESBYTHEREPRESENTATIVEOFCOLOMBIAANDADDITIONALCOMME NTS
53. Thereplies bytherepresentative ofColombia weredivided intofourbroad themes: (i)general
issues concerning reforms; (ii)regional andmultilateral issues; (iii)general trade issues; and
(iv)sectoral issues. Following thereplies, theChairperson opened thefloor toTPRB members for
further comments andquestions.
(i) General issues concerning reforms
54. Therepresentative ofColombia underlined thewide-ranging changes which hadtaken place
inthe1990s. These had,interalia,affected theConstitution, thedevelopment pattern andregional
administration (departmental andmunicipal). Colombia wasthusundergoing atransition period which
wasreflected initsmacroeconomic management.
55. Concerning theinstitutional reforms oftheStateintheearly1990s, heexplained thatalthough
thesizeofthecentral Government hadbeenreduced, certain areas including policy formulation and
thedevelopment oftheregulatory framework remained important government responsibilities.
Decentralized andregional entities hadbeengiven implementation responsibilities. Private sector
participation hadbeenencouraged inadequately regulated areas. Theinstitutional reforms inforeign
trade were aimed atcentralizing theformulation andincreasing thecoherence oftrade policies.
56. Thefinancing ofnewresponsibilities created bythenewConstitution hadrequired fiscal
adjustments,andthecentralgovernmentconsolidateddeficitnowstoodat1percentofGDP;significant
public reforms were required toprevent arise. The1997 Budget included assetsales, taxevasion
controls, legislative changes forcertain sectors, mergers, etc.Areport ontherationalization ofpublic
expenditure wastobesubmitted shortly anditsrecommendations were tobeconsidered forfurther
adjustments.
57. Another effect oftheexpected changes wasthecurrent account deficit which wasoffset by
higher capital inflows. Thelatter hadbrought about thecurrency appreciation which affected the
dynamism ofexports. However, thedeficit wasexpected tobeprogressively reduced, mainly because
ofthesignificant riseinrevenue from oilexports, aswellasincreased foreign direct investment
channelled towards privatization andinfrastructure projects inthecountry. Hethenhighlighted the
major features ofrecent changes intheinvestment régime, including thesuppression ofdiscriminatory
taxes against foreign investors; theobjective hadbeentoturnrules simpler andmore expeditious.
The"war tax"hadbeenabolished forinvestments made from 1995 onwards while, forinvestments
made prior tothatdatethetaxwould begradually phased outbytheyear2001.
58. Hesaidthatefforts hadbeenmade toavoid using theexchange rateasananti-inflationary
instrument. Arealexchange rateatcompetitive levels depended ontheoverall macroeconomic
management rather thanonCentral Bank interventions; thiswasthereason whytheGovernment was
co-ordinating itsmacroeconomic programme withtheCentral Bank andmaking efforts toreduce the
fiscal deficit.
59. Hisauthorities wereconscious thatinflation hadtobereduced. Thishadtobedoneinagradual
rather thanadrastic manner which could generate highsocial costs. TheSocial Pact, allowing foraWT/TPR/M/18
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jointperiodic revision ofinflation targets bythegovernment, theemployers andworkers unions, had
introduced aculture ofnational debate andconsultation oneconomic issues.
60. Measures hadbeentaken toencourage private sector savings and,untiltheearly 2000s, to
make compulsory thesavings intheoilsector. TheFund forOilSavings andStabilization hadbeen
designed toprevent anypossible Dutch-disease effects from oilrevenues aswellastocontrol
macroeconomic variables suchastheexchange rate,which could affect foreign trade. In1996, its
firstyearofoperation, revenues hadexceeded "ordinary" levels andsubstantial inflows wereexpected
asfrom 1998.
61. Thefirstdiscussant recalled thattheTrade Policies Review Mechanism hadbeendesigned for
theexamination ofbroad economic policies rather thantheircompatibility withWTO provisions. With
respect tomacroeconomic issues, itwould bemore beneficial toexchange views onindividual
experiences. Colombia 'scasewasveryinteresting formany developing countries, particularly those
oftheLatin American region. Animportant structural reform wasstillunder way. Hewasinterested
inlearning about anyimplementation problems anddeviations from theoriginal reform plans.
62. Thesecond discussant recognized thestress placed byColombia onfiscal deficit consolidation
andasked about theeffects oftheprojected assetsalesinthisexercise. Regarding thesimplification
ofrulesinthefieldofforeigndirectinvestment,heconsideredthatthisprocesswasparticularlyimportant
tomaintain Colombia 'srégime competitiveness attheregional level. Hesaidthatexchange rate
appreciation could beaproblem inthefuture. Itcould haverepercussions onexport-oriented sectors
andrequire control ofcapital inflows.
63. Therepresentative oftheUnited States saidthatalthough therehadbeencommendable opening
intheinvestment régime, in1994, inaneffort tocurbmoney-laundering, theauthorities hadprohibited
foreign direct investors ownership ofrealestate notconnected withother investment activities. He
requested more information ontheJune1996 improvements andfurther liberalization plans inareas
ofinterest toforeign investors including realestate, mining andhydrocarbons, public services, legal
services,insurance,publicnetworkbroadcastprogrammingandthemotionpictureindustry.Concerning
theconstitutionalprovisionsonexpropriationwithoutcompensation,heconsideredthatthesediscouraged
foreign investment andasked about anyplans toamend these provisions.
64. TherepresentativeoftheEuropeanUnionrequestedinformationonthedestinationofinvestment
bytheFund forOilSavings andStabilization. Heasked about theusefulness ofthediscriminatory
"war tax"andthedestination oftherevenue collected from thistax.Heenquired about anyplans
forchanging theprovisions onexpropriation without compensation totheinvestor.
65. Therepresentative ofPerureiterated hisquestion overtheexistence ofnon-fiscal investment
incentives.
66. TherepresentativeofColombiarepliedthattheprovisionsonexpropriationwithoutcompensation
were notdiscriminatory (domestic orforeign investors) andhadnever beenapplied inpractice. A
proposal foraConstitutional amendment aimed ateliminating theprovision hadbeensubmitted tothe
Congress andhadbeenapproved atafirstdebate; duetocompulsory constitutional procedures, it
could notbefullyabolished until1997.
67. Controlling deviations fromoriginal reform plans hadbeenanissue. Forexample, thefiscal
management hadnecessarily tobeadjusted andtheriseinoilrevenue hadnotbeenforeseen. Concerning
theconsolidation ofthefiscal deficit, assetsales, which in1997weretoinclude electric-power entities
andacoalmine (CARBOCOL), didnotform partofthestructural adjustment.WT/TPR/M/18
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68. Currencyappreciationwaslinkedtooilfielddiscoverieswhichwouldbringsignificantadditional
revenue butwould notconvert Colombia intoatypical oil(producing) country. Oilrevenue should
notgenerate apermanent expenditure. Regarding theFundforOilSavings andStabilization, heclarified
thatonlynational firms weresubject tosavings requirements (noforeign firms). ACommittee was
formulating theFund'spolicies which weresimilar tothose oftheCentral Bank. Itsinvestment was
keptabroad andcautiously managed bytheCentral Bank. The"war tax"hadbeenintended toprovide
resources toaddress domestic guerilla problems.
69. Whiletherehadbeensignificantprogressinopeningforeigninvestmentsince1991,herecognized
thatcertain sectoral restrictions likethose inlegalservices remained linked tocertain lawswhich still
needed tobeamended; andplans foramendment wereunder examination. Regarding theprohibition
oninvestment inrealestate, heclarified thatitdidnotcover production- andconstruction-related
activities; thismeasure targeted speculative operations andmoney-laundering. While stating that
non-fiscal incentives werenotavailable forforeign investors, herecalled thatsuchinvestors benefited
from thetaxstability contracts which hadbeenintroduced inthelastfiscal reform.
(ii) Regional andmultilateral issues
70. Therepresentative ofColombia reiterated thatregional economic integration formed partof
hiscountry 'sdevelopment pattern. There hadbeenare-direction fromaninward-oriented toanopen
regionalism withgradually increasing commitments which obliged domestic industry toimprove and
preserveitscompetitiveness.Theintegrationprocesshadboostedintra-regionaltradebytakingadvantage
ofthecomplementarity among partner economies andhadnotrade-diverting effects.
71. Inreply tonotification concerns related totheAndean Group, heassured members oftheTPRB
thatthenewly-created Secretariat General oftheAndean Community (ex-JUNAC) would beurged
tosubmit anotification onallrecent developments oncethenewsub-regional scheme hadbeenratified
byitsmembers. TheCET oftheAndean Group whose Cartagena Agreement hadbeennotified to
theGATT under theEnabling Clause, wastobenotified totheCommittee onTrade andDevelopment.
Regarding the230items exempt fromCETrates, heclarified thatthese weretobeeliminated bythe
year2000 attherateof50eachyear, starting inJanuary 1996.
72. Regarding theagricultural products which hadbeenexcluded fromtheAgreement oftheGroup
ofThree, hesaidthese corresponded toitems covered under theAndean Price Band System andthat
theirshare intradeamong thethree partners waslow. Given thatthisAgreement hadbeennegotiated
inthecontext oftheMontevideo Treaty, notification requirements were undertaken bythe
LAIA Secretariat which hadrecently notified theagreements concluded inthepasttwoyears. This
notification wastobeexamined bytheCommittee onTrade andDevelopment inthenearfuture.
73. Withrespect tothetransposition oftheschedule ofcommitments inHS96, heannounced that
thenewlistwastobedeposited withtheSecretariat inthenextfewdays; changes werenotaffecting
commitments. Legislative changes hadtaken place prior totheconclusion oftheUruguay Round;
adjustments tomeet WTO commitments hadbeencarried outincertain cases while others were to
bemade during theextended transition period available fordeveloping countries.
74. Thefirstdiscussant noted thechange inColombia 'sdevelopment patterns (export-oriented)
andadded thatinother countries ithadcreated a"virtuous" cycle; export-related agents could exert
pressure forfurther liberalization. Heasked whether Colombia hadanymore regional agreements
inthepipeline. Astheceiling level ofapplied rateswaslower thanbinding level, heassumed that
Colombia 'sautonomous liberalization hadbeenmore far-reaching thanthemultilateral. Hadregional
agreements allowed Colombia tocapitalize onitsselective opening? Hewondered whether there hadWT/TPR/M/18
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beenanynegotiation problems which could explain Colombia 'slesser degree ofliberalization atthe
multilateral level. Forexample, were these adjustment problems requiring atransition period, or
reciprocity problems, orhadtrading partners beenunwilling tomake market access concessions on
items ofexport interest toColombia?
75. Thesecond discussant praised Colombia 'sinvolvement inregional trade agreements which
didnotconstitute simply asearch forgreater market access butalsoameans toforce greater
competitiveness onthedomestic market. While regional agreements prepared thewayformore
comprehensive multilateral liberalization, themosteffective wayofimplementing liberalization was
byreducing m.f.n. bound ratesandexpanding multilateral non-tariff commitments. Ifcompetitiveness
andliberalization werethegoals, multilateral commitments made political management easier because
there wasnopossibility forreversal.
76. Therepresentative ofVenezuela wasinterested inColombia 'sviews ontheprocess forthe
formation oftheFTAA. Should theconclusion ofpartial regional agreements beafirststep?
77. Therepresentative ofAustralia sought clarification onwhether theAgreement withChile was
afree-trade agreement under Article XXIV orapreferential arrangement under theEnabling Clause.
78. Inreplytherepresentative ofColombia saidthatthereweredifferent possibilities fortheFTAA
process; thiscould proceed through hemispheric WTO commitments orabsorption ofLatin American
countries byNAFTA orbuilding-up sub-regional integration blocks. Forexample, theframework
agreement between theAndean Group andMERCOSUR members, which hadbeensigned inLima
aweekago,envisaged initiating negotiations in1997fortheformation ofafree-trade area. Considering
thatChile hadnegotiated agreements withbothsub-regional groups, theestablishment ofafree-trade
areabetween these blocks would mean theestablishment oftheSouth American FreeTrade Zone.
Further steps could bedecided intheforthcoming ministerial meetings fortheFTAA process.
79. Inresponse toconcerns ontheissueofregionalism versus multilateralism, hesaidthatregional
integration wasseenascomplementary tothemultilateral process; regional agreements opened the
wayforadhering tobroader multilateral commitments, including areduction ofbound levels inthe
nearfuture. TheAgreement withChile which hadbeenincluded inLAIA Secretariat 'snotification
mentioned earlier, wascovered bytheEnabling Clause.
(iii) General trade issues
80. Onpreshipment inspection, therepresentative ofColombia clarified thatthiswasatransitory
mechanism which hadproven itsusefulness andbecome compulsory since February 1996. While its
scope hadbeenreduced onseveral occasions, atpresent itcovered about 18percentofthecustoms
tariff; theseweresensitive products frequently subject totechnical smuggling, including under-invoicing
andinadequate merchandise description. While procedures werenotdiscriminatory, importers had
theright ofrecourse totherelevant WTO provisions which hadbeen incorporated intodomestic
legislation. Healsorecalled thatadditional measures hadbeenintroduced in1995 toeaseimport
procedures. Colombia accepted certificates oforigin issued inconformity withthelegislation ofthe
country oforigin.
81. WithrespecttothedifferentialVATtreatmentonimportedvehicles,hesaidthattheGovernment
wasexamining ways tocorrect thismeasure. In1995 themethod forthecalculation ofthetaxbase
fortheconsumption taxondomestic liquors andbeers hadbeenrationalized andbrought tothesame
levelasthatoftheimported goods (i.e.depending ontheretail price). Allservices were subject to
thegeneral VAT rate.WT/TPR/M/18
Page15
82. Concerning theanti-circumvention clause incorporated inthe1995legislation onanti-dumping,
heclarified thatitapplied onlytopartsandcomponents which could beusedinassembly operations.
According totheanalysis undertaken intherelevant WTO committee some months ago,Colombian
legislation wasconsistent withWTO provisions. Pastlegislative gapswithrespect tosubsidies and
countervailing duties hadbeencovered byLaw170implementing theWTO Agreements.
83. Import restrictions ofusedmerchandise werebased onArticle XXofGATT 1994. TheHigher
Council forForeign Trade hadsetthecriteria forimport approval. Inthecaseofusedvehicles and
usedspare parts, thisrestriction, originating inAndean Group commitments under theComplementarity
Agreement fortheAutomotive Sector withEcuador andVenezuela, hadnoeffect onthevolume of
trade flows forsuchitems; these were insignificant compared withtrade innewmerchandise.
84. Intheareaofstandards, anewsystem hadbeenlaunched inJune1996 (Decree 1112) to
centralize information ontechnical regulations andtesting procedures attheMinistry ofEconomic
Development. Since then, newstandards could beapplied 65daysfollowing theirnotification tothe
WTO.
85. Inemergency cases (i.e.national security andenvironmental protection) technical regulations
could beissued immediately andthenpromptly notified totheWTO.
86. Inthelightoflegislative changes ingovernment procurement, public tenders were usedin
80percentofthecaseswhile direct contracting wasexceptional (e.g.forloans, leasing andrealestate).
Thereciprocity principle wasapplied attheselection stage andnoassociation wasrequired withlocal
suppliers; nochanges wereforeseen inthisrespect. Theunified registry forsuppliers hadallowed
formore transparency andefforts were being undertaken forcompiling statistics ongovernment
procurement. Colombia maintained observer status under theWTO Agreement onGovernment
Procurement inorder tobecome more familiar withitsprovisions.
87. With respect toexport measures, heprovided details ontheframework ofconditions and
beneficiaries oftheCERT andSIEX/ PlanVallejo régimes. These hadbeennotified andColombia
wasworking outways tobring themintoconformity withtheWTO provisions. Noexport licensing
wasoperated except foritems subject toCITES orother requirements setatthemarket ofdestination.
88. Onintellectual property matters, Colombia applied Andean Group decisions which incorporated
boththenationalandm.f.n.principles;thesesupra-nationalregulationscouldbemodifiedatsub-regional
levelonly. Colombia, which haditsownenforcement mechanisms fortheprotection ofintellectual
property rights, wastomake useofthetransition period available todeveloping countries before
implementing theAgreement onTrade-Related Aspects ofIntellectual Property Rights.
89. Thesecond discussant sought comments onthevarying importance overtimeofexport-related
measures suchasSIEX orCERT, including variations intheirsectoral application.
90. Therepresentative ofCanada asked forclarification, including specific examples, onpre-
publishing andnotification changes tosanitary andphytosanitary measures. Withrespect torestrictions
onimports ofusedmotorcycles andautoparts, hewondered whether these werebeing implemented
under Article XXofGATT 1994. Were these restrictions orprohibitions? Ifthese wererestrictions
allowing forsome imports, hewasinterested inhowthese wereadministered. Heasked fordetails
ontheapplication ofcustoms clearance requirements. Hewondered whether thelawsongovernment
procurement intheareas ofexploration andexploitation ofnatural resources, telecommunications and
financial services granted thesame treatment toforeigners asLaw80.WT/TPR/M/18
Page16
91. Thefirstdiscussant sought information onoperational aspects, including thetype of
beneficiaries (entities ornations), ofreciprocity rights intheareaofgovernment procurement.
92. Therepresentative oftheUnited States expressed concern about delays, lackoftransparency
andother unwarranted market access barriers caused bythepreshipment inspection entities. Hesought
clarification on:theirregular delivery bythese entities ofadetailed written explanation ontherefusal
toissue aClean Report ofFindings totheexporter; theavailability ofpreliminary verifications of
price andcurrency exchange rate; thewithdrawal ofalready accepted prices orcurrency exchange
rates; price verification components (costofproduction); information toexporters onappeals; and
theconfidentiality ofinformation handled forverification purposes. These practices related to
commitments under theAgreement onPreshipment Inspection. Colombia wasresponsible forensuring
thattheconduct ofthese entities wasconsistent withthemultilateral disciplines andtherepresentative
asked forstepsinthisrespect. Heasked about thedateforimplementing theAgreement onCustoms
Valuation aswellasitsrelation withtheAndean Price Band System.
93. Hisdelegation waspleased withlegislative improvements intheareaofprotection ofintellectual
propertyrightswhereinternationalcommitmentshadgreatlyexpanded,includingtheadoptionofAndean
Group decisions; these were considered asafloor rather thanaceiling. Nevertheless, therégime
remaineddeficientwithrespecttocompulsorylicensing,workingrequirements,biotechnologyinventions,
pharmaceutical patent protection foressential drugs listed bytheWHO, pipeline protection andparallel
imports. Heurged Colombia tofullyimplement theAgreement onTrade-Related Aspects ofIntellectual
Property Rights andasked about actions taken toremedy enforcement weaknesses.
94. Therepresentative ofJapan joined thedelegation oftheUnited States withrespect toconcerns
onColombia 'spreshipment inspection régime.
95. Therepresentative oftheEuropean Union expressed similar concerns toCanada andtheUnited
States ontheimplementation ofsanitary measures.
96. Therepresentative ofColombia clarified thatLaw80didnotexplicitly cover thereciprocity
principle ingovernment procurement forthesectors mentioned bythedelegate ofCanada; nevertheless,
these benefited fromsimilar clauses. Reciprocity wasgranted tothecountry oforigin whenever such
clause wascontained inmultilateral orbilateral agreements.
97. Regarding thelegaljustification forrestrictions ofimports ofuseditems, those ofusedclothing
orusedtyres werecovered byArticle XXwhile temporary restraints onusedvehicles orusedspare
partswerepartofAndean Group commitments. Information onprocedures forobtaining authorization
toimport usedarticles wastobesupplied.
98. Ontheoperatingguidelinesforpreshipmententities,hesaidthatColombiahadpassedlegislation
ontheconditions anddeadlines fortheissueofpreshipment certificates; tosome extent thislegislation
dealtwiththeconcerns which hadbeenexpressed. Oncustoms valuation, Colombia hadadopted the
WTO provisions through theAndean Group Decision 378.
(iv) Sectoral issues
Agriculture
99. Onthedomestic absorption policy, therepresentative ofColombia emphasized thatitwas
designedtoguaranteethepurchaseofcertainagriculturalitemsandnottomeetself-sufficiencyobjectives.
Thispolicy andthepriorimport authorization requirement (vistobueno )forcertain agricultural itemsWT/TPR/M/18
Page17
constituted alternatives tothehightariff levels which hadbeenbound intheUruguay Round. His
Government considered thatthedomestic absorption régime constituted amore efficient means for
attaining Governmental objectives andwaslessrestrictive ontradethantheimplementation ofthebound
tariff levels.
100. Inreplytoamember 'sconcern ontheprocedure perseforobtaining priorimport authorization,
heclarified thatitwasnotrestrictive, and,thus, inconformity withtheprovisions oftheAgreement
onImport Licensing Procedures. Inaddition, heargued thatthisrégime waslegally covered bya
number ofprovisions oftheAgreement onTrade-Related Investment Measures andenjoyed afive-year
transition period ofwhich hisGovernment intended tomake fulluse. Induecourse, itwould be
phased-out through therelevant Sectoral Competitiveness Agreements which wereintended toimprove
efficiency inproduction totheextent permitted byinternational commitments.
101. Incompliance withmarket access commitments, theapplied duties were lower thanbound
rates including those setforthein-quota (tariff quota) imports. Inpractice, imports in1995 had
significantly exceeded thebound market access levels involume terms formostitems; these datahad
alsoincluded imports enjoying preferential treatment, asinthedatasubmitted when Colombia had
made itsoffer intheUruguay Round. Iftariff quotas hadnotbeenfullyusedforcertain items, the
reason wasnottheabsorption policies butchanges inthedomestic consumption patterns incertain
cases aswellasthelackofsufficient demand forother items.
102. Inresponse toaspecific concern ontheimpact ofimport licensing ontheobservance of
WTO commitments withrespect tocertain products, heclarified thatoutofallitems which hadbeen
listed onlybutter anddried beans weresubject tomarket access undertakings. These twoitems were
notcovered bydomestic absorption andprior import licensing requirements. In1995allrequests for
prior import authorization fortheremaining items ofthelist(i.e.frozen meat, malt, soybeans and
oilseeds) hadbeenapproved. Hepointed outthatinthesame yearColombia hadimported poultry
meatandriceinsignificantly larger quantities thanthose included initsWTO commitments andtheir
applied tariff waslower thanbinding levels.
103. Withrespect tovariable levies applied under theAndean Price Band System, hesaidthattheir
objective consisted ofstabilizing import costs of138items withhighly volatile prices intheworld
market. Thissystem, which wasnottraderestrictive, allowed fortheobservance ofthetariffbinding
commitments, wasinconformity withtheAgreement onAgriculture anddidnotconstitute areference
price mechanism related toSpecial Safeguards foragricultural products. Inaddition, thesystem was
consistent withColombia 'sundertakings forthedelayed application ofcertain provisions ofthe
Agreement onCustoms Valuation; theminimum import prices oftheSystem werenottobesuppressed
prior totheexpiry ofthetransition period available tothedeveloping countries.
104. Hesaidthatthevarious sectoral measures, aimed atsustaining thelevelofthenominal income
ofruralareas, hadhadpositive effects onproducer prices andhadpartly offset theimpact ofthemarket
opening andcurrency appreciation onproducers.
105. Inresponse toqueries onsanitary andphytosanitary measures (SPS), hereiterated thatthe
regulatory developments were similar tothose explained earlier intheareaofstandards. Colombia
hadnotnotified itsSPSmeasures because these werebased oninternational regulations; restrictions
covered items which hadbeensubject tosimilar actions intheircountry oforigin. Thesanitary measures
against imports ofunprocessed porkmeat anddifferent types ofhamfromanexporting country were
nolonger inforce; thesemeasures hadbeenadopted atAndean Group level, priortotheestablishment
oftheWTO, duetothepresence ofAfrican swine fever inthecountry oforigin.WT/TPR/M/18
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106. Since 1993, IDEMA 'sactivity asamarketing entity wasconfined toareas withsignificant
social andeconomic problems andthisonlywhen theprivate sector could notcope.
107. Thefirstdiscussant appreciated theclarifications oncertain mechanisms. Heunderstood that
theabsorption policy constituted aTRIM because oftheexistence ofatariff concession which was
conditioned bydomestic absorption requirements. Heasked whether thisTRIM wascompulsory or
optional. What would bethecaseifanimporter didnotwanttomake useofthisTRIM? Could he
haverecourse toatariffquota contained intheschedule ofcommitments ofColombia? Heconsidered
thattheabsorption policy could bemore effective thelarger thedifference between thebound tariff
(ofthetariff quota) andtheautonomous tariff rate.
108. With respect totheAndean Price Band System, hewasinterested inknowing whether there
were anyproducts which were covered byboththedomestic absorption requirements andtheBand
System. Ifthiswasthecase, hewanted toknow therelationship between thetwopolicies
(i.e.Colombian versus Andean Group).
109. Thesecond discussant saidthathisunderstanding oftheColombian response wasthatinorder
tomeetdomestic policy objectives theabsorption requirements hadbeenpreferred to"tariffication"
athighbound levels. Asheunderstood theColombian representative, norequests forimports made
under theabsorption régime hadbeenrefused.
110. Given thattheagricultural sector wasincreasingly being opened tocompetition, imports were
increasing. Hestillwondered whether "tariffication" would besimpler thanthecomplex andless
transparent domestic absorption system.
111. Inreply therepresentative ofColombia stated thattheabsorption scheme wasadulynotified
TRIM which established specific import requirements; anyproducer could import provided thathe
hadpreviously complied withdomestic absorption requirements. Inthiscontext, herecalled thattariffs
were much lower thantheirbinding levelandtariff quotas were notused.
112. Withrespect tothecombined utilization oftheAndean Price Band System andtheabsorption
policy, heexplained thattheBand wasalong-term stabilization device which wascompatible with
andhadnoeffect ontheabsorption policy.
113. Ontheissue of"tariffication" versus absorption policy, heconsidered thatinthelightofthe
import developments ofthelasttwoyears, thelatter wasmuch lessrestrictive thantheformer and
easier toimplement. IntheUruguay Round, Colombia hadbound tariffs atparticularly highlevels
becausetheagriculturalsectorwasexcessivelysensitiveinbothsocialandpoliticalterms.Theabsorption
policy wasmuch more favourable forbothColombia anditssuppliers.
Other sectoral issues
114. Therepresentative ofColombia saidthatthequestions ontheautomotive andtextiles sectors
hadbeendealtwithearlier sohewould concentrate ontheissues relating totheservices sector. He
explained thatalthough thesupply ofbasictelecom services werereserved fortheState, apublic tender
hadbeenopened fortwomore operators oflong-distance (national andinternational) calls. Inthis
context, heclarified thattheelimination oftheStatemonopoly ofTELECOM hadtaken place following
adeliberate government decision. Furthermore, market access hadalready beengiven tosixoperators
ofmobile telephone networks.WT/TPR/M/18
Page19
115. Concerning thefinancial sector, hestated thatthere werenolimitations ontheestablishment
offoreign firms andthenational treatment principle wasfullyapplied asregards capital andsolvency
requirements. Theissueofreciprocity asanexception tom.f.n. treatment wasexplained bythelevel
ofcommitments offered toColombia from other trading partners.
116. Therepresentative oftheUnited States urged Colombia toliftbarriers inareaslikeaudiovisual,
franchising, dataprocessing, marine insurance andprofessional services (including those onforeign
lawyers, architects, engineers andfinancial sector personnel). Hewasinterested inlearning about
Colombia 'sintentions inthese areas.
117. Inthenegotiations onbasic telecommunications, Colombia hadreserved therighttodeprive
WTO members from liberalization benefits, allowed forunrestricted discrimination against foreign
investment andmaintained economic needs tests. Hewanted toknow thedatefortheopening the
market toforeign investors andforterminating theStatemonopoly inthisarea. Ifforeign investment
wascurrently allowed, hewondered whyabinding commitment hadnotbeenmade tothiseffect.
118. Recent legislation (Law 182/95) intheaudiovisual sector hadincreased protection forall
copyrighted programming andpermitted private television broadcasters tocompete withtheState-owned
broadcaster. Ithadnevertheless increased restrictions onforeign content andcontained burdensome
requirements forforeign investors, including mandating reciprocity andtechnology transfer. Hewas
interested inknowing thesteps taken toeliminate these impediments.
119. While referring tomeasures affecting imports oftheautomotive sector, therepresentative of
theEuropean Union asked whether there were anyplans fortheelimination ofthedifferentiating
VAT rates onimported motor vehicles. Itwas hisunderstanding that local-content and
export-performance requirements weretobeeliminated bytheyear2000, according totheprovisions
oftheAgreement onTRIMs.
120. Inreply, therepresentative ofColombia clarified thatinthefinancial sector theestablishment
ofsubsidiaries offoreign institutions wasprohibited asamatter ofcautiousness. Nochanges were
envisaged inrespect oftheprovisions inthelabour legislation governing theparticipation offoreign
professionals ineconomic activities. Inthelight oftheextension ofthenegotiations onbasic
telecommunications untilFebruary 1997, theinitial Colombian offerwasbeing revised, inparticular,
concerning foreign participation rights. Herecalled anearlier statement clarifying thatchanges tothe
VAT treatment ofimported vehicles were under examination. TheTRIM intheautomotive sector
wastobeeliminated infiveyears.WT/TPR/M/18
Page20
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON
121. Over thepasttwodays, theTrade Policy Review Body hasconducted thefirstreview of
Colombia 'strade policies andpractices under theWTO framework. These remarks, intended to
summarize thesalient points, aremade onmyownresponsibility anddonotsubstitute fortheBody's
collective evaluation andappreciation. Details ofthediscussion willbereflected intheminutes of
themeeting.
122. Thediscussion developed under fourmain themes: (i)general issues concerning reforms;
(ii)regional andmultilateral issues; (iii)general trade issues; and(iv)sectoral issues.
(i) General issues concerning reforms
123. MemberscommendedColombiaonthepositivemacroeconomicdevelopmentssincetheprevious
review in1990 aswellasthelegislative, policy andinstitutional reforms, including theliberalization
oftheforeign trade, exchange andinvestment régimes. These hadbeenreflected insolideconomic
growth, adecline intherateofinflation, strong capital inflows andimproved public finances. Concern
wasexpressed thatrecently, thereappeared tohavebeensome economic slowdown andslight increase
ininflation. Questions wereposed withrespect to:thefrequency oftaxchanges; theimpact ofthe
anti-inflationary Social Pact; possible increases inpublic expenditure arising from social spending
under theDevelopment Plan; fiscal andstructural implications oftheprivatization programmes; the
compatibility between constitutional provisions onexpropriation andnewlawsguaranteeing investors '
rights; thepossible impact ofoilrevenues andoil-related investment ontheeconomy, including the
operation oftheOilStabilization Fund; andthesocial costsoftheadjustment programme. Questions
were alsoposed onthestage ofimplementation ofvarious legislative reforms.
124. Therepresentative ofColombia began hisresponse byindicating thatthetradepolicy changes,
begun inthe1990s, hadtaken place inthecontext ofmuch wider changes intheConstitution andthe
rôleoftheState, which werestillcontinuing. Heoutlined changes inthemanagement oftrade policy
andinmacroeconomic management, aswellasthelatest trends ineconomic indicators. Hegavedetails
oftheColombianGovernment'sexpectationsfortheperiodahead,withacontinuedreductionininflation
andthefiscal deficit, non-traditional andpetroleum exports wereexpected tocontinue growing while
thegrowth ofimports would slowdown. Theprivatization programme wascontinuing, withelectricity
supply andCARBOCOL currently ontheagenda.
125. Therepresentative went ontoprovide details ofthemost recent changes intheinvestment
régime, continuing thetrend togreater openness; therewerefewincentives forinvestment other than
arecent taxpremium provision. Heclarified thatexpropriation without compensation provisions
contained inthe1991Constitution hadnever beenapplied; aconstitutional amendment hadachieved
firstapproval byCongress andwould continue theprocess inthenextlegislature. Further legislative
changes allowing forforeign investment insectors suchaslegal andinsurance services were under
consideration. Landspeculation andmoney laundering wasthemaintarget ofrestrictions onrealestate
purchases.
126. Therepresentative emphasized thattheColombian Government wasconscious oftheneedto
maintain thestability oftherealexchange rateandhadtaken steps toavoid anydisruptive effects of
large capital inflows. Measures hadbeentaken togenerate sufficient savings toensure BOPstability
andmaintain ahighrateofpublic andprivate investment. Thenewpetroleum sources wereexpected
tobring innewearnings for10-20 years: thePetroleum Savings andStabilization Fund, which was
toinvest abroad, wasintended topromote prudent useofthese earnings andavoid inflationary andWT/TPR/M/18
Page21
other macroeconomic pressures. The"wartax"wasintended tosupport anti-guerilla activity; ithad
beeneliminated forinvestments made after1995 andwould becompletely eliminated in2001.
(ii) Regional andmultilateral issues
127. MemberstooknoteoftheimportanceattachedbyColombiatoincreasedparticipationinregional
trade agreements, including those withtheAndean Group, theGroup ofThree andChile, aswellas
itsactive involvement intheplans fortheestablishment ofaFree-trade Area oftheAmericas.
Colombia 'sinterest instrengthening economic links withtheAsia-Pacific region countries through
PECC andAPEC wasalsonoted. Members sought Colombia 'sviews ontheprospects foropen,
outward-oriented andtrade-creating regionalism aswellasonthefurther development ofrelations with
MERCOSUR intradeandinvestment. Some participants recalled thatColombia hadyettomeetfully
itsWTO notification obligations relating toregional agreements.
128. Members welcomed theexpansion ofColombia 'smultilateral commitments, particularly with
respect totariff bindings, andnoted theerosion ofpreferential treatment asaresult ofthe
Uruguay Round. They asked forup-to-date information onColombia 'simplementation ofthe
WTO Agreements, particularly those withlonger periods forimplementation bydeveloping countries.
SomeparticipantsinquiredabouttheprospectsforColombia'sbecomingamemberofcertainPlurilateral
Agreements.
129. Therepresentative ofColombia indicated thateconomic integration wasapillar ofColombia 's
model ofoutward-oriented economic development; itwasseenasstrongly complementary tounilateral
liberalization. Closer relations with other Latin American countries -including therecent
Andean-MERCOSUR framework agreement andanagreement withChile, were seenbyColombia
assteps onthewaytotheFreeTrade AreaoftheAmericas andtofurther multilateral liberalization;
inthiscontext, herecalled thattheUruguay Round commitments werepartoftheoverall framework
thatallcountries nowapplied. TheCartagena Agreement hadbeen notified toGATT under the
provisions oftheEnabling Clause; theagreement withChile hadsimilar status. Thecommon external
tariff(CET) applied since January 1995wasconsistent withmore openregionalism, obliging industry
tobecome more competitive. While intra-regional growth hadbeenstrong, thiswasnotattheexpense
ofother trading partners. National exceptions totheAndean CETwerebeing progressively eliminated
andshould disappear bytheyear2000. Theexclusion ofagricultural products intheG3Agreement
wasrelated tothesensitivity ofthese products, butthecoverage wasverylow; thisAgreement was
concluded within theLAIA framework andhadbeennotified totheWTO Committee onTrade and
Development.
(iii) General trade issues
130. MembersexpressedtheirappreciationforColombia'stradeliberalizationthroughtariffreductions
andtheelimination ofvirtually allquantitative orlicensing measures. Information wassought onthe
current listofColombia 'sexceptions totheAndean Group 'sCET. Members sought clarification on
many aspects ofthepreshipment inspection régime andprocedures, theconsistency ofthecustoms
valuationsystemwiththeWTOAgreement,standards,thedifferentialratesofVATandtheconsumption
taxapplicable todomestically produced andimported goods, safeguard andanti-dumping/countervailing
measures, government procurement andSPSprocedures.
131. Members noted thatnon-traditional exports hadgrown, partly because ofsupport fromexport
assistance schemes suchasCERT andSIEX andinquired about anyplans fortheirphase-out by2003
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132. Several members appreciated theintroduction ofnewandimproved legislation onintellectual
property; theyalsoasked fordetails onitsenforcement.
133. Therepresentative ofColombia tooknoteoftherecognition bymembers oftheprogress
Colombia hadmade initsunilateral tradereforms. Hegavedetails oftheoperation ofthePSIsystem,
which wasdesigned tofacilitate trade andessentially targeted atgoods most susceptible to
under-invoicing. Customs valuation wasnowconsistent withWTO procedures, under Andean Group
legislation. TheGovernment wasstudying howtoeliminate thedifferential VAT onsmall, imported
vehicles. Details weregiven ontheoperation oftheconsumption taxonspirits andbeer. Information
wasalsogiven onconditions foracceptance ofcertificates oforigin; theoperation oftheanti-dumping
mechanismonsparepartsandequipment;restrictionsontheimportationofsecond-handgoods,including
vehicles andpartswhich, therepresentative said,hadnocommercial significance andwerebased on
therelevant Andean Group Resolution. Henoted thatother restrictions werefounded onArticle XX
ofGATT 1994andthatthenew,national information system onstandards wasbased oninternational
rulesincluding those oftheWTO. Gaps inColombia 'ssafeguards legislation hadalready been filled
under thenewLaw170.Therepresentative provided details onnewrulesongovernment procurement;
open tendering withnational treatment onareciprocal basis, wasthegeneral rule. Mining and
telecommunications werealsocovered bythereciprocity principle, which applied tothetreatment given
bytrading partners. Colombia wasanobserver intheAgreement onGovernment Procurement;
however, nodecision hadyetbeentaken onitspossible future membership.
134. Therepresentative alsoprovided further information onColombia 'sexport régime, including
export-linked taxexemptions onimported materials andconcessions oncapital goods available toall
enterprises under thePlanVallejo, which hadbeendulynotified totheWTO Committee onSubsidies.
Colombia wasworking tobring itsCERT ratesintolinewithWTO provisions. There werenoexport
licences except under CITES andgoods subject toimport restrictions inoverseas markets.
135. Therepresentative ofColombia saidthathisGovernment applied Andean Group decisions on
intellectual property rights, onanm.f.n. basis. Administrative andpenal provisions existed toenforce
these rules. Colombia wasavailing itself ofthetransitional provisions oftheTRIPS Agreement to
bring itslegislation andpractices fullyintoline.
(iv) Sectoral issues
136. Questions wereraised onthecompatibility withtheUruguay Round Agreement onAgriculture
ofmeasures currently inforce intheagricultural sector, including marketing arrangements, reference
prices, import licensing under thedomestic absorption régime. Members alsoquestioned whether the
variable levies under theAndean Price BandSystem werelegitimate, orcould leadtoviolation oftariff
bindings. Colombia wasalsoasked when aprocedure forimplementation oftariff quotas would be
implemented. More information wassought ontherôleoftheSectoral Competitiveness Agreements
inagriculture.
137. Members asked questions about several aspects ofColombia 'sautomotive policy, including
local-content andexport-performance requirements andrestrictions onimports ofusedmotor vehicles.
Itwasrecognized thattheremoval ofpastrestrictions hadledtosubstantial growth intradeinvehicles.
Questions wereraised onplans relating tothephase-out ofexisting measures under theprovisions of
theTRIMs agreement.
138. Clarification wasrequested ontherégime affecting long-distance telecommunication services,
including theareareserved fornationals, andforColombia 'sactive participation inthenegotiationWT/TPR/M/18
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onbasic telecommunications wasencouraged. Similar inquiries weremade about recent deregulation
inthefinancial sector andrestrictions applied inprofessional, insurance andaudiovisual.
139. Therepresentative ofColombia gaveextensive details ofhiscountry 'sagricultural policies:
domestic absorption policies weredesigned toguarantee theacquisition oflocalproduction, notfor
self-sufficiency goals. These werelessrestrictive thanincreasing tariffs toceiling bindings. Colombia
believed thatthese measures were permitted under provisions oftheTRIMs Agreement, including
exceptionsfordevelopingcountries,andthattheproceduresappliedwerecompatiblewiththeAgreements
onAgriculture andonImport Licensing Procedures.
140. Therepresentative stated thatColombia hadfullymetitsmarket access commitments. Applied
tariffs were normally below bound levels, including in-quota levels. Ofthose products referred to
byoneMember, onlybutter andbeans weresubject tominimum access commitments butthese were
notcovered bydomestic absorption orimport licensing provisions. Forother products, domestic
absorption requirements werenotthereason forthelackofgrowth ofimports, butalsodepended on
supply anddemand forparticular products. Insome cases imports substantially exceeded Colombia 's
access commitments. Bothm.f.n. andpreferential imports werecounted against access commitments.
141. Therepresentative gavedetails ontheoperation oftheAndean Price Band System, which was
designed tostabilize import costsdespite fluctuations ininternational prices. InColombia 'sview, the
system wascompatible withtheWTO Agreement onAgriculture; ithadresulted inapplied tariffrates
wellbelow bound levels. Theminimum reference prices forcustoms valuation purposes werecovered
byColombia 'sreservation under Article 20andAnnex IIIoftheCustoms Valuation Agreement. The
price bandmechanism hadhelped tomaintain incomes inpoorsectors.
142. Therepresentative ofColombia explained thatSPSprovisions were based oninternational
standards andonlyapplied afterduenotification totheWTO. Restrictions onimports ofporkand
hamfromaEuropean country related totheincidence ofAfrican Swine Pestintheexporting country;
onevidence oftheelimination ofthedisease, these hadbeenlifted forallAndean countries.
143. Sectoral Competitiveness Agreements weredesigned toincrease efficiency andcompetitiveness.
TheGovernment haddecided toreduce therôleofthestateagency, IDEMA, inpurchases andstock
management, leading toagreater rôlefortheprivate sector ininternal marketing.
144. Onservices, therepresentative stated that,while basic telecommunications wasreserved to
theState, themarket fornational long-distance andinternational services wastobeopened totwonew
operators from 1997: mobile telephony hadalsobeenopened up.Thus, thenational monopoly for
long-distance services haddisappeared because ofdeliberate Government decision, notbecause of
unauthorized call-back services. There werenolimits onforeign participation intheestablishing of
companies toprovide financial services; however, theyweresubject tothesameprudential conditions
asnational companies. Colombia 'soffers intheareaoffinancial services were linked totheoffers
ofitsmajor trade partners.
********************
Overall
145. Members welcomed theimportant steps taken inrecent years byColombia towards amore
open andliberal economy, through constitutional, legislative andadministrative reform, tariff
simplification andreduction, andprivatization programmes inanumber ofsectors. Concerns about
certain sectors emerged clearly inthediscussion, including agriculture, textiles, automobiles andsomeWT/TPR/M/18
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services. Itwasalsoemphasized thatregional arrangements should befullyconsistent withmultilateral
liberalization andrulesunder theWTO. Overall, however, thethrust ofthediscussion wassupportive
oftheunderlyingdirectionofColombia'seconomicandtradepoliciesduringaperiodofsharptransition.
There wasstrong encouragement fortheColombian authorities toconsolidate andbuild onthe
achievements ofthepastfewyears.
146. Welookforward toreceiving thewritten replies promised byColombia induetime.