WORLD TRADE
ORGANIZATIONWT/TPR/M/108
14 February 2003
(03-0950)
Trade Policy Review Body
27 and 29 November 2002
TRADE POLICY REVIEW
VENEZUELA
Minutes of Meeting
Chairperson:  H.E. Ms Amina Chawahir Mohamed (Kenya)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3
II. OPENING STATEMENT BY THE REPRESENTATIVE OF VENEZUELA 4
III. STATEMENT BY THE DISCUSSANT 7
IV. STATEMENT BY MEMBERS OF THE TRADE POLICY REVIEW BODY 10V. REPLIES FROM THE REPRESENTATIVE OF VENEZUELA 20
AND ADDITIONAL COMMENTS
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 25WT/TPR/M/108
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The second Trade Policy Review of Venezuela was held on 27 and 29 November 2002.  The
Chairperson (H.E. Ms Amina Chawahir Mohamed)  welcomed the Honourable Mr. Ramón Rosales,
Minister of Production and Commerce, as head of the delegation of Venezuela, the delegation from
Caracas, and H.E. Ambassador Blancanieve Portocarrero and her colleagues from the Mission inGeneva as well as Ambassadors Luisa Romero and Gustavo Márquez. The Chairperson welcomed
H.E. Alfredo Vicente Chiaradia (Argentina) who had kindly agreed to act as the discussant for this
Review.  As usual, the discussant would speak in his personal capacity and not as a representative of
his government and, in accordance with the established procedures, he had made available in advance
outlines of the main issues he intended to raise (WT/TPR/D/87).
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures of the meeting.  The Report by the Government of Venezuela was contained in
document WT/TPR/G/108 and that of the WT O Secretariat in document WT/TPR/S/108.
3. Copies of advance written questions submitted by New Zealand;  Hong Kong, China;  the
European Union;  Japan;  Chinese Taipei;  Chile;  Canada;  Switzerland; the United States;  Brazil;and Mexico had been transmitted to the delegation of Venezuela.  These questions and the replies
provided by the delegation of Venezuela are reproduced in WT/TPR/M/108/Add.1.
4. The Chairperson noted that Venezuela had made efforts to continue on the path of trade
liberalization during the period under review.  Both the Secretariat and Government Reports
emphasized Venezuela's commitment to the multilateral trading system while pointing out itsengagement in regional integration initiatives.  She also noted that wide-ranging legislative and
institutional changes had been adopted in several areas, as witnessed by the large number of laws and
regulations passed since Venezuela's first Review in 1996.  Against this background, she thought it
would be interesting to hear the views of the Ve nezuelan delegation concerning the implementation of
those changes, and their impact on trade and investment flows and liberalization.  The delegationmight also want to address the possibility of anchoring such liberalization by expanding Venezuela's
WTO commitments.WT/TPR/M/108
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF VENEZUELA
5. The representative of Venezuela (Mr. Ramón Rosales, Minister of Production and
Commerce), thanked the members of the Trade Policy Review Body for the opportunity to present
Venezuela's trade policies.  Since its first Trade Policy Review in 1996, Venezuela had continued the
process of integration into the multilateral trading system.  Venezuela was committed to continue toactively contribute to the improvement of the system, so that all Members could benefit from it.
However, Venezuela's integration to the multilateral trading system had not always been easy.  He
noted that Venezuela was very bound in economic terms to oil;  half of its exports were oil and
petroleum products, mostly to the United States, whereas non-traditional exports were destined to
Colombia and the European Union.  Venezuela wanted to reduce its dependency on oil and move
towards a more diversified economy.
6. Since its first Review, Venezuela had undertaken institutional reform and important legal and
structural changes in order to correct some secu lar trends that had hindered economic growth and
development.  From 1996 until 1998, the main policy concern had been the fight against inflation.
Beginning in 1998, Venezuela had begun a process of constitutional reform.  A new Constitution had
been passed in late 1999 that clearly established the principles of the socio-economic system,
emphasising social justice, democracy, free competition, environmental protection, increasedproductivity, and solidarity.  To achieve these goals, the State and the private sector would act
together to foster economic growth, increase employ ment, and ultimately raise the standard of living
of the population.  The Constitution specifically protected private property, guaranteed national
treatment to foreign investors, and favoured and supported international relations and compliance with
international agreements.  In this respect, and based on this constitutional mandate, Venezuela wasbuilding up legal security.
7. With respect to the evolution of the principal macro economic variables during the period
under review, the representative of Venezuela noted that from 1996 until 2001, there had been a
decrease of inflation.  This drop in inflation, however, had not been accompanied by continuous GDP
growth, owing to Venezuela's high dependency on oil and the consequent volatile nature of itseconomy.  The inflation-control policy applied during those years had been based on maintaining a
fixed exchange rate system;  this had had some negative effects, like preventing the creation of formal
employment.  The employment figures showed that the economy was not solid enough to generate the
jobs needed to achieve a stable economy with sufficient purchasing power.
8. Venezuela's economic difficulties had been compounded by the attempted coup d'état of
April 2002, which had had a negative impact on the economy.  Despite the difficulties it faced,
Venezuela would continue to fulfil its internatio nal commitments and offer investment possibilities
for all investors, national or international, without discrimination;  there were investment
opportunities in all economic sectors.  The challenge for Venezuela today was to use trade as an
instrument to create employment.
9. There had been a number of important changes in Venezuela's trade policy regime since its
first Review, in February 1996.  At that time, Venezuela had restrictions on trade and capital flows;in 2002 there were no such restrictions.  Beginning in 1996, there had been far-reaching economic
deterioration, with some recovery in 2000 and 2001.  United Nations figures showed that in these two
years, Venezuela had also recovered some ground with regard to human development, as measured by
the U.N. Human Development Index.  This had been possible thanks to social investment efforts,
basically aimed at reducing inequality and poverty.
10. During the period under review, legislation with respect to safeguards, anti-dumping,
competition policy, and other areas had been introduced or amended.  To comply with its
commitments under the WTO Agreement on Customs Valuation, Venezuela had introduced a new
customs valuation regime in March 2001.  The new regime had been notified to and examined by theWT/TPR/M/108
Page 5
Committee on Customs Valuation.  Additionally, Venezuela had introduced a customs automation
system, which was expected to be fully implemented during 2003.
11. Also since the last Review, new and important laws had been passed to provide greater legal
security to investors, in areas such as hydrocarbons, gas hydrocarbons, and telecommunications.  The
Law on Hydrocarbons and the Law on Gas Hydrocarbons had opened these activities to the privatesector.  The Law on Telecommunications had been recognized by many countries as a transparent
instrument that had enabled Venezuela to modernize this sector.  To promote and protect investors,
Venezuela had completely operative instruments for the signing of legal stability contracts.  With
respect to the oil sector, Venezuela was encouraging the inclusion of international partners, who had
been invited to invest in Venezuela and to explo it some of the oil wealth.  Strategic association
agreements with companies from various countries had been signed for the exploitation of off-shore
natural gas, for the development of Orimulsion, and in the areas of petrochemicals, coal, industrial
services, and oil exploration and production.  An important aspect of Venezuela's investment regime
was the signing in recent years of 19 bilateral investment agreements with various countries.
12. Addressing the issue of industrial policy, the representative of Venezuela noted that his
country was facing a period of de-industrialization, which had led to an increase in unemployment
and informal sector employment.  Some measures had been adopted to tackle the de-industrialization
problem, all consistent with Venezuela's commitments under the WTO and under regional integration
agreements.  Industrial policy in Venezuela was geared towards rescuing domestic production, in a
transparent and competitive framework, as mandated by Venezuela's Constitution.  Themanufacturing sector needed to create sustainable productive employment.  In this respect, temporary
incentives had been adopted to foster small and medium-size enterprise participation in labour-
intensive activities.
13. With respect to agricultural policy, the Government of Venezuela had a constitutional
mandate to develop agriculture, promoting it in a sustainable way so as to guarantee food security,that is, the stable availability of food to consumers.  This by no means meant Venezuela sought
autarky in the sector:  this was very far from Venezuela's possibilities, since the country imported
over 60% of the food it consumed.  The agriculture sector had experienced a deterioration in recent
years;  it had been losing relative weight in GDP, and its share currently stood at less than 5%.  In this
context, Venezuela had deployed efforts to promote the development of its agricultural potential, but
would continue depending on international sources to meet its food needs.  Venezuela expected that
international trade in agricultural products would take place in a framework of fair and transparentrules.
14. Venezuela believed in the multilateral trading system, which would contribute to diversify its
economy.  Within the process of political and economical transformation under way, Venezuela
supported and was ready to subscribe to various international legal instruments to guarantee trade
security in accordance with the principles of the WTO.  Venezuela also advocated and supportedefforts being made by some countries to consolidate their regional integration process, in particularly
the Andean Community and MERCOSUR.  The Andean Community was a very successful
experiment;  it was making progress and expected to establish a fully-fledged Common External
Tariff in 2003 and create a Common Market by 2005.  Venezuela also participated, with Colombia
and Mexico, in the Free Trade Agreement of the Group of Three, which had been reactivated in recentyears.  Venezuela had signed a number of preferential regional agreements within the framework of
the LAIA;  the scope of some of these agreements, e.g. with Chile, Brazil, and Argentina, had
broadened in recent years.  Trade and investment  agreements with CARICOM countries had also been
signed, taking advantage of the triple condi tion of Venezuela as an Andean, Caribbean, and
Amazonian country.  In the past two years, Venezuela had also broadened its trade and cooperationrelations with a number of countries in Europe, Asia, and Africa.  Venezuela supported closer
relations between MERCOSUR and the Andean Community.  Since June 1995, Venezuela hadWT/TPR/M/108
Page 6
participated in the negotiations for a Free Trade Area of the Americas.  Venezuela also sought to
facilitate trade with other countries outside these regional agreements.
15. Recognizing that notifications with respect to some WTO Agreements were overdue, the
representative of Venezuela stated that this was due to a lack of human resources and internal
coordination problems;  technical cooperation from  the WTO Secretariat had been requested to help
meet these obligations.  The second Trade Policy Review of Venezuela had taken place at a time of
important change for the country.  During the period since the last Review, Venezuela had been an
active participant in the multilateral trading system.  Venezuela considered that trade liberalization
was not an end in itself, but a means for development.  Venezuela advocated the introduction of
changes necessary to decrease the gap between th ose who had benefited from trade until now and
those who had been excluded.  The morning's meeting with the Director General of the WTO had
given Venezuela hope that this could be achieved so that all Members could be winners.WT/TPR/M/108
Page 7
III. STATEMENT BY THE DISCUSSANT
16. The discussant (H.E. Mr. Alfredo Vicente Chia radia) welcomed the delegation of Venezuela
headed by Mr. Ramón Rosales, including the Ambassador and permanent representative of Venezuela
Blancanieve Portacarrero.  He noted that he had organized his presentation on the basis, as was
traditional, of three main headings:  the macroeco nomic environment;  the trade policy regime;  and
sectoral policies.
17. It was evident that the general situation of the Venezuelan economy continued to be strongly
subordinated to the oil sector.  The figures offered by the WTO Secretariat Report clearly
demonstrated that the importance of oil had increased since Venezuela's last Review, in 1996.  More
than half of total government revenues came from the oil sector, which represented over one fourth ofVenezuela's GDP and more than 80% of the total va lue of its exports.  This meant that oil-price
fluctuations to a large degree affected the value of exports and investment patterns, and had an impact
on fiscal planning.  The Secretariat Report emphasized the efforts carried out by the Venezuelan
Government to achieve a more adequate balance between the oil sector and other economic sectors.
He encouraged Venezuela to continue these efforts to diversify exports and thus contribute tostrengthening its presence in international markets and promoting investment in a more balanced way,
both sectorally and regionally.
18. The Secretariat Report also pointed out that, after periods of moderate growth, the economy
had contracted in the first quarter of 2002, and prospects for the rest of the year at the time of the
Report's preparation, were not encouraging.  The situation in Venezuela was not very different fromthat of the majority of countries in South Ameri ca whose economies had been affected by a series of
negative factors in the financial and trade spheres.  These factors had exacerbated the limited internal
capacity of these countries to adapt to the new global conditions.  In this context, although this would
only occur in the medium term, he hoped that the multilateral and regional trade negotiations that
were under way would offer opportunities for countries like Venezuela to control economic instabilityand achieve a better and greater integration to the international economy.
19. In the first Trade Policy Review of Venezuela, several WTO Members had expressed their
concern about exchange rate controls, particularly in  regard to the exchange rate applied to priority
imports, and to differences in treatment across suppliers.  That situation no longer existed and the
exchange rate policy applied by Venezuela differed substantially from the policy in effect in 1996.
Venezuela had adopted a floating exchange rate scheme in February 2002, which had resulted in an
important correction of the exchange rate and a rather moderate increase in inflation, relative to themagnitude of the exchange rate change.  He asked the delegation of Venezuela to elaborate on
developments that had occurred after the Secretariat Report was finalized, in particular regarding the
level of inflation and the consequences brought on by the introduction of the floating exchange rate
system.
20. The Venezuelan Government had also adopted a number of fiscal measures, such as the
increase of the value-added-tax rates.  Moreover, the Secretariat Report mentioned that the
Government was considering speeding up the privatization programme.  He asked what measures the
Government was contemplating in this area.
21. With regard to the evolution of trade, the high dependency on the oil sector had given rise to a
certain anti-export bias in the non-oil sector.  This bias had been aggravated by the exchange ratesystem in force until February 2002.  Hence, it was not surprising that imports had increased sharply
between 1996 and 2001.  The introduction of a floating exchange system as of February 2002 should
have a very strong impact in the correction of this bias.
22. The direction of Venezuelan trade had remained relatively stable;  the United States continued
to be Venezuela's leading trading partner.  However, Venezuela's exports to its Andean CommunityWT/TPR/M/108
Page 8
partners had dropped in 2001.  This could indicate that Venezuela's export potential could be
improved if there was a broader trading-partner base.  In that context, he underscored the major
potential that a broadened economic space in South America would have;  this was the focal point of
the negotiations between the Andean Community and MERCOSUR.  Likewise, the negotiations
unfolding in the WTO, if successful in removing the major market access obstacles faced bydeveloping countries, would provide new opportunities for Venezuela.  He was interested in hearing
Venezuela's position with respect to the multilateral and inter-regional negotiations currently
unfolding.
23. Regarding the trade policy regime, and on the question of the Andean Price Band system, the
discussant noted that, according to paragraphs 45 to 50 of the Secretariat Report, this system
established the application of variable duties, which were related to the international price of imported
goods.  The system made a distinction between two types of products:  the marcadores , whose prices
on the international market were used to provide for the calculation of the price band, and the related
or linked products.  He requested more information with respect to the application of the system for
linked products and how products were categorized as marcadores  or linked products.  In the WTO
Committee on Agriculture, a number of Members had expressed their concern that the application of
this system could give rise to customs duty rates that could exceed the bound levels agreed forin-quota tariff rates.  He asked how Venezuela prevented applied rates from exceeding bound rates.
24. Some Members had also expressed their concern in the WTO Committee on Agriculture
regarding the granting of import licences for agricultural products.  Here, again, he asked for an
explanation of the current system, how it was implemented, and its compliance with Venezuela's
commitments under the WTO.  He further enquired how it was possible, under the current system, tocomply with the principles of transparency and neutrality, which must guide the administration and
granting of licences.
25. Regarding government procurement, the Govern ment Report stated that to increase the
participation of the domestic industry and in order to generate more jobs, the legal framework had
been strengthened recently, emphasising the concession of commercial and financial advantages forsuppliers accomplishing transformation and value-added generating activities.  The Secretariat Report
had noted the use of margins of preference on purchases for domestic enterprises.  He requested more
information regarding these specific practices.  Venezuela had also established many sanitary and
phytosanitary regulations and rules.  The Secretariat Report nonetheless had stated that a number of
notifications were still pending in this area.  It had been also pointed out that these notifications were
currently been prepared.  In that context, it would be useful to receive additional information
regarding the phytosanitary regime.
26. The discussant also asked for more detailed information with respect to export promotion
programmes, the preparation of the National Plan for the Encouragement of Non-Traditional Exports,
as well as the industrial investment programmes and whether these were earmarked for sectors that
could generate exports.
27. Regarding sectoral policies, and with respect to the agriculture sector, it was extremely
important that the granting of licences and authorizations did not in any way distort trade.  He noted
that the liberalization of the agriculture sector in Venezuela had been relatively limited in scope.  He
trusted that the current negotiations in the WTO would serve to make strides for more equitable
trading in this area.  The Secretariat Report noted that the ultimate goal of Venezuela's agricultural
policy was rural development and the improvement of living conditions of the rural population.  It hadalso been mentioned that the State would ensure food security for the population.  The question of
food security was very important, and he sought information regarding the various measures that
Venezuela was adopting to make food security a reality.WT/TPR/M/108
Page 9
28. The discussant congratulated Venezuela for its efforts towards openness in services, in
particular financial services and telecommunications.  He enquired about Venezuela's readiness to
continue its active participation in the current multilateral negotiations, especially on services of
special interest for developing countries.
29. Various measures had been adopted to enhance foreign participation in petroleum and natural
gas.  With respect to the latter, an Organic Law for Gaseous Hydrocarbons had been approved that
established rules for gas exploitation in Venezuela.  The new legislation allowed national and foreign
shareholding in a number of activities.  He asked for more details regarding the requirements and the
granting of licences and permits needed to perform those activities.
30. In its section on manufacturing other then petroleum, the Secretariat Report noted that the
Automotive Sector Complementation Agreement between Colombia, Ecuador, and Venezuela had
been renewed in 2000, and that the sub-regional content requirements had been eliminated.  He
requested more details on the new Agreement as well as on the Family Vehicle Programme.
31. He congratulated Venezuela on its great effort to continue the trade reform programme started
when it joined the GATT.  He also applauded its active participation throughout its membership,notwithstanding its difficult economic circumstances in recent years.WT/TPR/M/108
Page 10
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
32. Members welcomed the delegation of Venezuela, and thanked Minister Rosales for his
introductory remarks, the discussant for his contribution, and the Government of Venezuela and the
WTO Secretariat for their reports.  A number of Members referred to the questions they had submitted
to the Venezuelan delegation in writing;  they looked forward to receiving the replies to these
questions.
33. The representative of New Zealand welcomed Venezuela's commitment to further
strengthening the multilateral trading system and to the introduction of particular measures.  New
Zealand was disappointed, however, that tariff protection for agricultural products remained
substantially higher than for other products, and that Venezuela's tariff structure showed clear signs of
escalation.  Such measures increased the potential for distortion in the allocation of resources, to the
detriment of Venezuela's economy.  New Zealand was likewise disappointed that there had been anincrease in the use of non-tariff measures, and agreed with the observation in the Secretariat's Report,
that this was probably no more than a second-best solution to long-standing structural distortions.
New Zealand urged Venezuela to ensure that such measures were not used to inhibit the importation
of certain goods and, in particular, encouraged Venezuela to make its tariff quota administration
systems, especially for dairy products, more transparent and predictable to enable end-users to obtainthe quantity and specification of imported products that they required.
34. The representative of Hong Kong, China commended the efforts of the Venezuelan
authorities to modernize the legal framework a nd to continue to consolidate the process of
implementation of its commitments under the multilateral trading system.  He noted that a new
customs law had been passed and a new customs valuation regime had been introduced to implementthe provisions of the WTO Agreement on Customs Valuation.  Noting that the Venezuelan authorities
promoted the strengthening of regional and sub-regional integration schemes, he hoped that such
regional initiatives would complement and reinforce the trade liberalization efforts being taken in the
WTO.
35. Hong Kong, China was pleased that Venezuela had bound all its tariff lines at ad valorem
rates in the WTO, but noted that there was a gap between the bound and applied rates.  Venezuela's
applied MFN tariff rates for non-agricultural products ranged generally from 0 to 20%, with an
average of about 12%, whereas the bound rates were generally at the 35% level.  Hong Kong, China
encouraged Venezuela to participate actively in the non-agricultural market-access negotiations under
the Doha Development Agenda with a view to reducing the bound rates and addressing tariff
escalation.  Hong Kong, China also noted that Venezuela had yet to fully fulfil its notification
obligations under certain WTO Agreements.  Venezuela had not submitted any notification to theCommittee on Sanitary and Phytosanitary Measures regarding its SPS measures.  On technical
regulations, while there were 386 mandatory technical regulations in Venezuela only 24 notifications
had been submitted to the TBT Committee.  Hong Kong, China looked forward to the fulfilment of
the notification obligations by Venezuela in the near future, with assistance from the Secretariat, as
necessary, to assure that transparency of its trade regime.
36. Hong Kong, China welcomed Venezuela's adoption of policies to liberalize its investment
regime by relaxing restrictions.  Foreign investors were granted national treatment, except in reserved
sectors.  Venezuela had made considerable progress in the liberalization of services, in particular
telecommunications and financial services, where liberalization had gone well beyond its WTO
commitments.  Hong Kong, China looked forward to  Venezuela's active participation in the ongoing
services negotiations, and to further liberalization commitments corresponding to its current regime
and beyond, so as to provide impetus to multilateral liberalization in trade in services.
37. The representative of Brazil congratulated Venezuela for its contributions to the work of the
WTO, especially with respect to the defence of developing countries' interests.  Venezuela and BrazilWT/TPR/M/108
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shared similar viewpoints, in some cases identical, in a number of themes that were part of the WTO
agenda.  It was Brazil's intention to continue to work together with Venezuela to set up a more
equitable multilateral trading system.  Venezuela was a very important trading partner for Brazil;
bilateral trade had reached some US$2 billion in 2001.  Venezuela was also a very important partner
in South American integration, in particular with respect to establishing tighter bonds between theAndean Community and MERCOSUR, which Brazil co nsidered of great importance for setting up an
economic space in South America.  Brazil was concerned that the economy of Venezuela seemed to
have a number of vulnerable points.  Its dependency on the petroleum sector still stood in the way of
Venezuela's integration into the world economy.  Nevertheless, major structural reform efforts were
being undertaken by the Government, especially in services.  The presence of a very strong delegationwas a sign of Venezuela's commitment to the WTO.
38. The representative of the European Union noted that Venezuela had the largest economy in
the Andean Community and, although it was very unevenly distributed, it seemed to enjoy one of the
highest GDP's per capita in Latin America.  Venezuela was going through a period of important
change affecting the political, social, and economic spheres.  The Government of Venezuela hadlaunched reforms not only in the political arena, but had also tackled a number of significant
economic reforms with important social implications resulting in strong protests from some social and
productive sectors.  Venezuela had undergone ma jor political turmoil in April 2002, which had
highlighted the countries social polarization.  The European Union continued to follow the political
situation in Venezuela with attention and concern, and remained supportive of the mediation andefforts of the tripartite working group to facilitate the national dialogue in Venezuela.
39. Relations between the European Union and Venezuela were largely conducted on a regional
basis with the Andean Community, through a comple te institutional framework, which made use of
several instruments in each field of the EU-Andean political trade and cooperation relation.  In
addition, on a regional level, the institutional dialogue between the European Union and the RioGroup was aimed at strengthening relations with La tin America, covering political, economic, social,
and humanitarian domains.  In the EU-Andean relationship, special emphasis was placed on the
question of drugs in the Andean area.  This was also  reflected in the trade relations and the specialized
high-level dialogue on drugs in which Venezuela participated.  The European Union was a moderately
important trading partner for Venezuela.  Venezuela's exports consisted mainly of energy products
while the main imports from Europe consisted of machinery and transport equipment.  On the
investment side, Europe was the largest investor in Venezuela, focusing on the energy and servicessectors.  The level of EU investment in Venezuela was increasing.
40. The European Union welcomed the high usage level of the EU's Generalized System of
Preferences (GSP) by Venezuela, and believed there were important benefits in terms of export
diversification, regional integration, and progress in  the fight against drugs production and trafficking.
Recent figures showed that the GSP played a major role in Venezuelan-EU trade relations.  Due to theMFN clause and the GSP scheme, notably its spec ial provision to combat drug production and
trafficking, around 80% of Venezuela's exports to  the European Union were exempt from customs
duties.
41. The European Union followed with interest regional integration in the Andean Community,
and the representative requested more details on the latest steps to complete the common externaltariff and on the measures envisaged towards the establishment of the Andean Common Market by
December 2005.  He also asked for Venezuela's views on the economic and trade implication of the
latest developments of the FTAA process, as well as regarding the interface between Venezuela's
regional efforts and the WTO.
42. With respect to Venezuela's import regime, under the Family Vehicle Programme, low-value
new cars imported from Europe were subject to value-added tax on importation and on sale, whereas
certain low-value new cars from the Andean Community countries or produced locally were subjectWT/TPR/M/108
Page 12
to VAT on sale only.  The EU was interested to know whether Venezuela considered this practice to
be in conformity with GATT rules.  The allocation of import licences, in particularly for cheese and
other diary products, was another issue under the import regime where European producers faced
difficulties;  he requested further information on the latest developments on this.  With respect to
contingency measures, the European Union asked Venezuela to explain the increase in the number ofanti-dumping and countervailing investigations initiated and the number of provisional and definitive
duties applied in recent years.  Clarification was also sought with respect to the measures undertaken
by Venezuela to ensure the sustainability of the agriculture sector and with respect to assessment of
the potential negative environmental and social effects of the Land Law of 2001, geared to increase
the sector's productivity.
43. With respect to Venezuela's commitments on labour rights made in the ILO, and also at
Singapore, Geneva, and Doha over the last five years, although Venezuela had ratified seven of thecore ILO labour conventions, serious problems persisted with collective bargaining, discrimination,
and child labour.  This appeared to be linked, in particular, to the strong government interference in
the affairs of trade unions, especially the refusal to recognize the country's largest trade union
confederation.  Consequently, workers were unable to defend their rights effectively, while their
organizations were under direct threat.  The Europe an Union would appreciate it if national provisions
in this respect were brought into line with intern ational practice, according to the recommendation of
the ILO.
44. The representative of Japan commended Venezuela's efforts toward structural reform, which
had seen the adoption of a new Constitution in 1999, as well as its adjustments in trade policies in
order to be consistent with the WTO Agreements.  However, despite such efforts, Venezuela wasfacing difficulties.  After two years of moderate growth, in 2000 and 2001, real GDP had decreased
by 7% in the first half of 2002, compared with the same period of 2001.  Although serious attempts
had been made to diversify economic activity, the petroleum's sectors share of GDP had increased
since the last review of Venezuela in 1996.  Japan hoped that Venezuela continued its efforts towards
sustainable growth and social development.
45. Japan shared Venezuela's view that the interests of developing countries should not be left out
of the Doha Development Agenda, and believed that a successful outcome of the Agenda was sure to
bring great benefits to Venezuela's economic development.
46. Japan welcomed Venezuela's liberalization of its investment regime since 1996, through
relaxing of restrictions, as well as the adoption of policies to attract larger inflows of foreign direct
investment.  Despite such efforts, however, foreig n investment flows had been relatively stable over
the last decade.  Japan hoped that Venezuela's efforts would result in a real increase of FDI and askedfor Venezuela's views on any further measures to be taken to increase it.
47. Venezuela granted tariffs and non-tariff preferences on its imports from other Latin American
and Caribbean countries;  non-tariff preferences included exceptions to certain general import bans.
Japan sought clarification regarding the reasons for such import prohibitions.  Concerning intellectual
property rights, Japan was interested to know what prospect there was of Venezuela ratifyingthe WIPO treaties on copyright, performers, and phonograms, which Japan considered to be
particularly important for the protection of intellectual property rights in the era of Internet.  Japan and
Venezuela had maintained a good bilateral relationship.  In light of the importance of Venezuela in
terms of trade in investment, Japan had been extending cooperation in such spheres as health and
medical treatment, as well as transportation and other social infrastructure development.  Japanintended to continue its contribution as necessary to Venezuela's development.
48. The representative of Chinese Taipei was pleased to note that, despite its economic
difficulties, Venezuela had continued to consolidate the process of implementing its commitments
under the multilateral trading system.  He also welcomed the general direction in which VenezuelaWT/TPR/M/108
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had been moving recently, towards stimulating competition through further liberalization of its trade
and investment regime.  He noted, however, that Venezuela's economic performance over the years
had not been consistent.  One of the problems seemed to be the continued low level of investment
from both within and abroad.  Another concern was the economy's high dependence on petroleum.
While his delegation acknowledged that certain steps had been taken by the authorities to relaxrestrictions on FDI and to grant national treatment to foreign investment, it remained to be
seen whether this would prove sufficient to attract the higher levels of private investment needed
to diversify the economy.  Trade between Venezuela and Chinese Taipei amounted to nearly
US$160 million in 2001.  Chinese Taipei saw great potential for improvement.
49. Chinese Taipei was concerned about the lack of transparency in Venezuela's import licensing
procedures, in particular with respect to sanitary and phytosanitary measures, as well as in standards
and technical regulation requirements.  In this resp ect, Chinese Taipei requested further explanation
with respect to how these measures worked, as well as detailed information on the considerable
number of mandatory standards requirements which had yet to be notified to the WTO.  Concern was
also expressed with respect to the compliance of Venezuela's decree law on safeguard measures withArticle 4.1(c) of the WTO Agreement on Safeguards, and clarification was sought on the definition of
"a major proportion of local production".
50. The representative of Chile noted that trade relations between Chile and Venezuela were
conducted not only in the framework of their resp ective commitments in the WTO, but also in the
framework of the Economic Complementarity Agreement, which both countries had signed in 1993,and through which 97% of bilateral trade in goods was tariff free.  He noted that Chile wished to
extend the 1993 agreement to other areas, such as services and investment.  Chile shared Venezuela's
vision that international trade was an instrument for economic development, as well as its efforts to
develop a more diversified export base with greater value added.  However, Chile was concerned that,
on occasion, these goals had been pursued through instruments of a discriminatory nature.  Chileappreciated Venezuela's efforts to adapt its institutional and legal framework to the requirements of an
open economy and to meet its WTO commitments, as well as to liberalize various services areas.
Chile also shared Venezuela's efforts towards integration in various fora, especially for the
establishment of a common market w ithin the Andean Community for 2005.
51. Chile was concerned, however, by certain restrictions that affected its exports to Venezuela,
particularly of fresh agricultural products and white meats.  Although the Venezuelan health
authorities demanded compliance with various sanitary and phytosanitary requirements, theregulations establishing the procedures, deadlines, conditions, and requirements to grant import
permits were not known, and had not been notified to the WTO.  Sanitary and phytosanitary permits
seemed to be granted in a discretionary manner, with no reasons given for denial, and to be used to
establish import quotas, operating de facto as import licences.  This practice had restricted Chile's
exports to Venezuela of products such as pears, apples, grapes, pork meat, turkey meat, kiwis, andcherries, and had stopped some exports of products such as garlic, despite Venezuela's WTO market
access commitments.  Chile was participating as a third party in consultations requested by the United
States on this matter.  Chile was also concerned by the recent value-added-tax law which, for various
agricultural products, appeared to discriminate between imports and local production.  Chile would
appreciate greater clarity on the content and scope of this legislation.
52. The representative of Canada noted that relations between Canada and Venezuela had
traditionally been sound and friendly.  Progress had been made to enhance business and economic
cooperation with the entry into force of a foreign investment promotion and protection agreement in
1998, and a double taxation agreement, which was currently awaiting final signature.  Moreover, in
August 2002, Canada and the Andean Community had announced that they would begin preliminarytalks towards a possible free-trade agreement.  Canada welcomed Venezuela's participation in further
liberalizing trade and investment;  such an agreement would further demonstrate Venezuela's
commitment to freer trade.  However, there were a few clouds on the horizon, particularly in the areasWT/TPR/M/108
Page 14
of investment and in access for agricultural products.  It had been noted by the Secretariat that there
had been low levels of foreign investment in Vene zuela in recent years.  Canada agreed with the
Secretariat's observation that this was likely due to the perception among potential investors that there
were high levels of institutional and regulatory uncertainty in Venezuela.  Canada encouraged the
Venezuelan authorities to resolve disputes in accordance with the principles of transparency, goodfaith, and due process of law.  Expeditious, just, and above-all amicable solutions to disputes would
be to the benefit of foreign investors and Venezuela alike.
53. Regarding access for Canadian agriculture, Canada had a long-standing issue involving
Venezuela's import permit requirements for agri-food products, which were adversely affecting
exports of potatoes, onions, pulses and meat.  In Canada's view, Venezuela had been administering its
import permit requirements in a discretionary fashion, inconsistent with its WTO obligations.  Canada
had made bilateral representations at the highest level but Venezuela had taken no steps to resolve thematter.  Venezuela's import permit policy also lacked transparency.  Its continuing failure to resolve
the issue and unwillingness to treat it seriously was having a significant, negative impact on its
reputation.  Canada believed that governments th at were committed to maintaining a liberal and
transparent trade regime were better placed to fully enjoy the benefits of increased international trade
and global economic growth.  Canada encouraged the Government of Venezuela to undertakesignificant reforms and to ensure a WTO-consistent regime.  While recognizing that this was no easy
task, particularly in view of the slow-down in the world economy, Canada was convinced that
combined with efforts to secure lasting institutional stability, further trade liberalization would
contribute to Venezuela's participation in the global economy, further enhancing its prospects for
long-term economic growth and social development.
54. The representative of Switzerland stated that her delegation was aware of the evolving
institutional legal framework in which Venezuela was developing and implementing its trade policies.
Switzerland was pleased to note the market opening and liberalization carried out in several areas
since the last Trade Policy Review of Venezuela in 1996.  In particular, the services sector had
undergone important liberalization in recent years, particularly telecommunications and the bankingsector.  Venezuela's economy had a strong potential because of its important petroleum resources, but
it was also very dependent on this market's developments. Foreign investment, including in
hydrocarbons, was currently on a downward trend;  in this regard, the institutional and legal
framework offered by a country were extremely important. Welcoming Venezuela's many important
liberalization measures and efforts to set up appropriate institutions for economic promotion and
procedure facilitation, Switzerland asked about the Government's intentions regarding the total
openness to private investment of the petroleum and electricity sectors, along the lines of what had
already been done for gas.  She noted with some c oncern the growing recourse to non-tariff measures
and the implementation of a policy of protection in certain sectors, such as new labelling standards for
shoes and textiles.
55. Switzerland asked whether Venezuela intended to adhere to the WTO Plurilateral Agreement
on Government Procurement, and whether Venezuela considered that a strategy to open its tradingsystem would favour the competitive nature of its industry.  Switzerland hoped that the introduction
of a floating exchange rate regime in February  2002, an important step, would stimulate production
and allow the non-petroleum industrial sector to regain competitiveness.  The manufacturing sector
had experienced a sharp down-turn in recent years and its share in GDP had constantly dropped.
Switzerland was also interested in the views of the Venezuelan delegation with respect to the regionalintegration process under way and the progress expected in this area.  Switzerland followed these
developments with great attention. Venezuela's trade policy challenges were delicate:  it had to ensure
the diversification of the economy, economic growth, and the improvement of the social situation,
while maintaining an open economic regime offering  an appropriate institutional legal framework to
its international partners.  Switzerland wished Venezuela success on the path to meet these challenges.WT/TPR/M/108
Page 15
56. The representative of the United States noted that the historically strong trade between the
United States and Venezuela had been a cornerstone of their bilateral relations and had generated
important benefits for both countries.  Venezuela was the United States' 13th largest supplier of
imports and 25th largest export market, with US$20.9 billion in two-way goods trade during 2001.
U.S. and Venezuelan companies had made significant direct investments in each other's economies.The United States looked forward to working with  the Venezuelan Government towards meeting the
January 2005 deadline for completing the WTO negotiations.  The United States was also engaged in
free-trade negotiations with Venezuela in the context of the Free Trade Area of the Americas.  The
United States commended the Government of Venezuela on the liberalization of important sectors of
its economy.  Much of this reform had been accomplished since Venezuela's last Review in 1996,particularly in the banking and telecommunications sectors.  The United States encouraged
Venezuela's continuing participation in the GATS process.
57. There were some areas of concern in Venezuela's trade policy regime.  In particular,
Venezuela used various forms of discretionary import licencing to restrict imports of yellow corn,
sorghum, diary products, soybean meal, pork, poultry, beef, grapes, and yellow grease.  Theseproducts had been subject to complete denial or partial issuance of import licences, inordinate delays
in the issuance of import licences, and licence validity periods that were too short to be of any
practical use to the importers.  Another element of uncertainty facing exporters of agricultural
products to Venezuela was the price band system.  The United States believed Venezuela might have
trouble reconciling its application of variable duties under this system with the obligations of theWTO Agreement on Agriculture.  Similarly, domestic purchase requirements on imports of corn
appeared difficult to justify under the WTO.  In addition, the United States questioned the
WTO-compatibility of a recent change in the application of the value-added tax, which treated certain
imported products differently from domestic products unless there was no national production of the
goods.
58. The United States also had concerns about new labelling requirements for footwear and
textiles that Venezuela recently imposed and that were extremely onerous and appeared to constitute
an unnecessary obstacle to trade.  The United States requested more information about a number of
programmes that appeared to constitute subsidies and asked whether Venezuela intended to notify
them to the SCM Committee.  In the area of intellectual property rights, recent actions by the
Government of Venezuela called into question whether it was protecting against the unfair
commercial use of pharmaceutical test data.  Also, government resources devoted to the enforcementof intellectual property rights required by the WTO did not appear to be adequate.
59. The representative of Mexico noted that there were many links that bound Mexico and
Venezuela.  Both had found themselves in a state of deep-seeded change, and had amended their legal
framework to meet the international commitments under the GATT and the WTO.  To achieve this,
Mexico and Venezuela had made great efforts and had had to surmount countless obstacles, but hadcome to understand the importance of the rules-based system and its benefits to developing countries.
Mexico considered that trade policy reviews were the most objective, transparent, and functional
mechanism to identify the congruency of the measures adopted by WTO Members with the
multilateral trading system.
60. Venezuela was one of Mexico's leading partners  in Latin America, and, along with Colombia,
a co-partner in the free-trade agreement known as the G-3 treaty.  Mexico had an interest in being able
to count on a strong Venezuela, actively involved in the multilateral trading system.  With this in
mind, Mexico expected that the review would help Venezuela to identify areas where there was room
for improvement in order to comply with the multilateral trade agreements and enhance trade
liberalization.
61. The representative of India noted that Venezuela possessed one of the word's largest
proven crude reserves.  This abundant natural endowment had, however, established dependencyWT/TPR/M/108
Page 16
of the Venezuelan economy on a single sector.  Recession globally, and especially in the
United States, had also adversely affected the Venezuelan economy.  India hoped that there would be
an early recovery of the Venezuelan economy.  India and Venezuela enjoyed a strong bilateral
relationship.  India was confident that its bilateral interaction with Venezuela would widen and
deepen further in the years to come.  In international trade policy, Venezuela placed a strong emphasison regional initiatives, as was evident in its participation in the Andean Community, the
Free Trade Agreement of the Group of Three, and in Latin American integration initiatives.  India
hoped that such agreements would be consistent with WTO rules.  Referring to the mandate under
which trade policy reviews were conducted, India stressed that labour and political issues were
beyond the mandate and competence of the TPRB and of the WTO and should not be included in
Trade Policy Review discussions.
62. The representative of Cuba noted Venezuela's efforts to improve the standard of living of its
population and in this regard, underscored the far-reaching legislative work, which was kicked off by
the adoption of the Constitution of 1999.  Forty-nine new laws involving various economic sectors
had been adopted under the framework of the Constitution.  The Venezuelan economy had historically
been and still was heavily dependent upon the exportation of petroleum and hydrocarbon products,
which accounted for more than 80% of the total value of exports.  Since its last Review in 1996,Venezuela had been severely affected by lower oil prices in 1997;  the recovery in world oil demand
in 1999, and an increase in government spending had facilitated growth in 2000.  Venezuela had
weathered well the fall in demand for commodities in the aftermath of 11 September 2001, managing
to post a 2.7% GDP growth rate in 2001.  These indi cators showed the effort by the Government of
Venezuela to cut down inflation and stimulate GDP  growth.  Venezuela was Cuba's main trading
partner, mainly due to the importation of petroleum products from Venezuela into Cuba.  Medical
equipment, vaccines, and steel products were among st the main Cuban exports to Venezuela.  Cuba
acknowledged the great efforts made by Venezuela to fulfil its commitments under the multilateral
trading system and encouraged Venezuela to continue to defend its national interests.
63. The representative of Nicaragua noted that Venezuela's strong delegation at this Review bore
witness to its solid commitment to international trade and to WTO disciplines and rules.  Venezuela
was a very important trading partner for Nicaragua and was a source of crude oil and derivative
products, particularly under the San José Agreement, which also enabled the use of resources for
development programmes.  Venezuela and Nicaragua also worked hand-in-hand in various
infrastructure programmes through Venezuela's Investment Fund.  Nicaragua was sure that,
notwithstanding the economic and socio-political problems facing Venezuela, the policies adopted
would be framed within its commitments to the multilateral trading system.
64. The representative of Kenya noted that the vulnerability of the Venezuelan economy had been
heavily influenced by its high dependence on the petroleum sector, characterized by frequent
fluctuations in world prices of crude oil.  This phenomenon had been responsible for instability in the
market economic fundamentals with negative effects particularly on the level of investments and the
competitiveness of its non-tradeable oil sector  He noted that external trade was not only poorlydiversified in terms of export products but also in destinations, with nearly 60% of total exports
absorbed by the United States.  The over-reliance on oil production, which accounted for one quarter
of GDP, and dependence on a single export market was having negative implications on the
Venezuelan economy.  Kenya encouraged Venezuela to enhance its efforts towards product
diversification as well as identifying and developing new markets for non-traditional products.
65. Kenya complimented Venezuela for having undertaken a liberalization programme since its
first Trade Policy Review in 1996.  Many of its laws and regulations had been overhauled to conform
to multilateral trade norms.  Whereas these effort s had added predictability to the domestic trading
environment, they had not produced the desired levels of growth.  The introduction of new measures
to stimulate foreign investments had not resulted in any sizeable increase in investment flows.  KenyaWT/TPR/M/108
Page 17
encouraged Venezuela to examine the factors that had weighed on its performance and to design
appropriate  policies to address this situation.
66. The Kenyan delegation attached great importance to transparency, which was one of the
fundamental principles of the WTO.  For Venezuela, this was not the case, particularly in the area of
standards and technical regulations, where approximately 300 technical regulations had been adopted,but as of September 2002 only 24 had been notified to the WTO.  As of June 2002, not a single
notification on SPS measures had been made.  Kenya commended Venezuela for its efforts
in implementing the WTO Customs Valuation Agreement and in simplifying customs procedures.
67. The representative of Argentina stated that the specific function of the Trade Policy Review
Mechanism was to deal with trade policies and practices and not with questions to do with labour
relations.  The representatives of Brazil, Cuba, Nicaragua, Colombia, Kenya, Bolivia, Chile, and
Uruguay expressed their association with the statements by the representatives of Argentina and India.
The representative of the European Union stated that he had carefully taken note of the comments
with regard to his remarks relating to labour issu es.  The European Union did not share entirely the
views expressed, but assured all delegations, that it would also use the other international fora to raiseits concerns.
68. The representative of Norway welcomed Venezuela' s positive attitude towards foreign
companies and the liberalization of its investment regime by relaxing restrictions.  Norway also
welcomed the liberalization that Venezuela had undertaken in the energy sector.  Norway noted with
some concern the increase in the use of non-tariff measures, including contingency measures, andstressed that these measures must conform with Venezuela's WTO obligations.  Venezuela and
Norway were both net exporters of oil and gas.  Norway underlined the importance it attached to the
constructive dialogue between the two countries re garding the establishment of an offshore oil and
gas and a sub-contracting industry in Venezuela.  In services, Norway appreciated Venezuela's active
participation, in particular in relation to the on going negotiations on energy services.  Norway's and
Venezuela's proposals had much in common.  Norway  looked forward to working with Venezuela to
ensure that the negotiations took into account the services important to oil and gas producing
countries.  Although trade between Norway and Venezuela was relatively small, a number of
Norwegian companies were established in Venezuela,  mainly in the energy sector, but also in fields
such as metals, telecommunications, and shipping.  With respect to maritime transport, according to
paragraph 187 of the Secretariat Report, the right to maritime transport services was subject to a
reciprocity agreement.  Norway wished to know mo re about this rule, including whether it would be
applied to international services or only to cabotage.
69. The representative of Uruguay noted that in various WTO fields and themes, Venezuela's
positions were similar to his country's.  In the regional sphere, Uruguay and Venezuela were members
of the Latin American Integration Association and participated jointly in the hemispheric integration
process in the Americas.  Venezuela was an importa nt trading partner of Uruguay.  Uruguay's exports
to Venezuela had risen from US$15 million in 1997 to US$22 million in 2001 and its imports from
Venezuela from US$88.5 million to US$174.5 million.  This indicated the slow growth of Uruguay's
exports compared with the rapid growth of its im ports from Venezuela.  In both cases, trade flows
were strongly concentrated in certain products. Venezuela's exports were concentrated in crude
petroleum and derivatives and Uruguay's in dairy products.  In this respect Venezuela's administrationof tariff quotas and import licences for dairy products was a subject of concern.  In various meetings
of the WTO Agriculture Committee, Uruguay had raised its concern with respect to the serious
market access problems for its dairy products since 1999.  Dairy products were subject to a quota and
import licencing system.  Uruguay considered that the procedure followed by Venezuela lacked the
necessary transparency.  Conditions for assigning the quotas varied from year to year.  Uruguayan
exports had also been seriously affected by delays or non-granting of import licences, which altered
trade flows and the normal provisions for exporting companies.  In the first half of 2002, the majority
of Uruguayan cheese-exporting enterprises had been unable to carry out a single commercialWT/TPR/M/108
Page 18
operation in the Venezuelan market.  Figures showed a steep decline in volumes exported between
2000 and the first half of 2002.  Uruguay hoped that the serious difficulties faced by Uruguayan dairy
products in the Venezuelan market would be solved as soon as possible.
70. The representative of the Dominican Republic noted that Venezuela had continued to
consolidate the process of implementation of its undertakings under the WTO.  Since the last review
Venezuela had adopted important measures in order to attract FDI.  There had also been liberalization
of the investment regime, and national treatment was generally granted.  Measures had been
introduced to modernize customs and to implement the WTO Agreement on Customs Valuation.
There had also been progress in the service sector, with liberalization going beyond Venezuela's WTO
commitments, particularly in telecommunications and financial services.
71. The representative of Jamaica commended the Government of Venezuela on its efforts to
achieve economic growth and stability through a range of structural reforms.  The process of
facilitating adjustment had not been easy.  Over recent years the performance of the Venezuelan
economy had been variable, as reflected in the trends in the macroeconomic indices for 1996 to 2001.
It had been noted in both reports that the high dependence on the oil sector, particularly given the
fluctuation in oil prices, had contributed to a number of domestic imbalances in the Venezuelan
economy.  In this regard, Jamaica wished to encourage the Venezuelan authorities to pursue domesticdiversification and greater integration between the oil sector and other sectors of the economy.
Jamaica also noted that poverty alleviation was a major challenge for the Government;  the
Government Report acknowledged that as the re form process deepened and consolidated, the
Venezuelan authorities would seek to ensure that the poorer sections of the population were able to
derive benefits from the reforms.
72. Venezuela continued to be a supporter of an open multilateral trading system as evidenced by
its continued efforts to implement its WTO commitm ents and its active participation in the work of
the WTO.  Jamaica looked forward to Venezuela's constructive involvement in the Doha Work
Programme.  Regional economic integration was an important element of Venezuela's trade policy as
it was a member of a number of regional trade arrangements.  Jamaica and Venezuela had maintainedwarm bilateral relations over the years and had strong ties in a number of areas.  Jamaica was a
beneficiary of the Caracas Energy Cooperation Arrangement, which was Venezuela's supplement to
the San José Accord.  Jamaica encouraged Venezuela to press ahead with its reforms.  Jamaica
understood the many and complex challenges that lay ahead of Venezuela in the trade and economic
spheres and hoped that the Trade Policy Review process had contributed to its capacity to meet these
challenges.
73. The representative of Malaysia commended Venezuela for its open trade regime with
relatively low average applied tariffs of 12%.  The current account of the balance of payments was in
surplus as was the tradition, despite lower oil revenues and a real depreciation of the bolivar.  The
economy had exhibited moderate growth in 2000 and 2001.  Nevertheless, Malaysia noted that
improvement could be made towards diversification from reliance on oil, and asked the Venezuelan
delegation for information on the measures being undertaken to diversify the economy.  Malaysiawould also asked for more information on how Venezuela was enhancing its competitiveness in
manufacturing and services:  it had already taken steps, such as liberalizing telecommunications and
financial services, and substantial steps towards increasing the cost competitiveness of its services.
Malaysia hoped that this would extend to the other sectors of the economy.  However, Malaysia also
noted that a number of challenges remained, amidst a very difficult global environment, and wishedVenezuela all success in overcoming these challenges.
74. The representative of Bolivia stated that Venezuela was not only a trading partner for his
country but was also an engine for the integration process in Latin America.  Bolivia had a deep-
seated respect and friendship for Venezuela.  He pa id tribute to the great effort towards political and
economic transformation carried out by the Venezuelan Government and people in very difficultWT/TPR/M/108
Page 19
internal and external circumstances.  He supported Venezuela's efforts towards enhancing integration
with the multilateral trading system, reducing poverty, and diversifying exports.  The Government
was creating a new society and these changes would have tremendous repercussions.  Greater security
for FDI was the most important element to secure foreign investments.
75. The representative of Colombia stated that the high level and technical qualification of this
delegation illustrated the unflagging commitment of Venezuela to the multilateral trading system.
Colombia and Venezuela were not only neighbours with a long border in common, they also shared a
large portion of their history and were committed to making a better future of their populations.
Colombia and Venezuela accounted for 70% of su bregional trade within the Andean Community.
Trade relations with Venezuela had grown in importa nce, as it had become Colombia's largest market
after the United States.  Colombia in turn was th e main trading partner of Venezuela in the Andean
region and the second destination for its total exports and its main destination for non-oil exports.
Such relations had strengthened considerable during the 1990s thanks to mutual efforts to consolidate
the free-trade zone established since 1992, to implement the common external tariff, and to prepare
for the establishment of an Andean Common Mark et in 2005.  Colombia was fully aware of the
efforts carried out by the Venezuelan authorities in order to fulfil its WTO commitments.  Many had
been carried out jointly within the regional integr ation framework.  The adoption of a new customs
valuation law, the application of tariff levels always below rates bound in the Uruguay Round
commitments, the use of multilateral rules of intellectual property protection, services liberalization,
particularly telecommunications and financial services, were all examples of Venezuelan commitmentto the WTO.
76. The representative of Ecuador noted that Venezuela and the rest of the Andean countries were
working towards a full fledged common market by the end 2005.  Ecuador congratulated Venezuela
for having liberalized its economy, particularly telecommunications and financial services.  Ecuador
also congratulated Venezuela for strengthening its WTO commitments despite the reduction offoreign direct investment flows, and resisting protectionist practices despite very serious political and
social tensions.
77. The representative of the Secretariat presented the programme of reviews for 2003, which
had been distributed;  21 Members were schedule d for review organized under 16 TPRD meetings.  It
was the most ambitious programme undertaken but was drawn up strictly under the guidelines that all
WTO Members be reviewed at least once as soon as possible.  Therefore, on the programme for 2003,
six Members were to be reviewed for the first time.  Taking into account the request that in view ofthe capacity-building properties of the Trade Policy  Review Mechanism, special attention be paid to
LDCs, there were six LDCs in the 2003 programme.  The programme was also dictated to some
extent by the cycles mandated in Annex A of the Uruguay Round Agreements.  Considerable use of
the flexibility provision had been made, whereby some countries had been allowed to slip as much as
six months in the rotation process mandated in Annex A.  That was the case for Canada, the SouthernAfrican Customs Union (SACU), New Zealand, and in  particular, the United States, which would
have been on the 2003 programme but, because of scarce resources in the TPRD, would now be the
first review in 2004.WT/TPR/M/108
Page 20
V. REPLIES FROM THE REPRESENTATIVE OF VENEZUELA AND ADDITIONAL
COMMENTS
Macroeconomic and institutional environment
78. The representative of Venezuela noted that, in February 2002, Venezuela had decided to
abandon the fluctuating band exchange rate system and let the exchange rate float, to correct
imbalances in the external sector.  This had enabled Venezuela to adopt a pro-active monetary policy,
and take the necessary measures to achieve the inflation objective.  Fiscal policy had pursued a
medium-term balance of the public sector accounts.
79. The Central Bank of Venezuela and the Ministry of Finance pursued the basic aim of
controlling inflation.  The flexible exchange regime would in part help to improve the competitiveness
of the exporting sector;  however, the effectiveness of this policy could not be assessed yet as it had
been in force only for a very short time.  He was concerned with the economic reliance on certainprimary products such as oil, mainly due to the unstable international prices of such commodities;
this lack of stability affected the Venezuelan economy, its foreign debt, and the balance of payments.
80. The fiscal policy adopted in Venezuela aimed to reduce the non-oil deficit.  The Government
was engaged in an administrative and tax reform, without disregarding infrastructure and social needs.
Venezuela believed that fiscal policy reform would reduce the pressures of fiscal instability on thebalance of payments.
81. Foreign debt accounted for only 27% of GDP.  This was manageable, and well below
the debt/GDP ratio of other countries.  Venezuela's international foreign exchange reserves were
equivalent to over a year of imports.  Venezuela's trading partners could rest assured of a stable
situation in this regard.
82. Some Members had expressed concern about the legal and institutional instability affecting
investors, but this was a mistaken preconception, due maybe to a politically biased negative
propaganda.  In fact, the Venezuelan Government ha d been adopting a series of measures to promote
investment, which included a set of deep reforms both to the institutional and legal settings.  Foreign
investors had the necessary stability and security to perform their activities normally.  Nationaltreatment was provided for under the Constitution;  a law had been passed to protect and promote
investments, and regulations had been adopted to implement this law, whereby legal stability
contracts between the State and private citizens were provided for.  Venezuela was also carrying out a
study regarding legal measures needed to simplify the red tape for investors.  The registration of
foreign investment was an ex-post requirement, for investment protection and statistical purposes.
Thus, prior authorization was not needed in order to invest in Venezuela.  Venezuelan legislation was
entirely open towards foreign investors, with the exception of three sectors in which there was a
limitation to foreign participation:  television and radio broadcasting;  Spanish-language newspapers;
and professional services.  In case of expropriation, the law provided for compensation equivalent to
the value of the investment object of the exprop riation at the date immediately prior to the
expropriation.
83. Venezuela viewed competition policy as a fundamental mechanism for fair trade.  The
Constitution banned monopolies and provided for the establishment of a competition policy authority.
A draft bill in this respect was currently before Parliament.
84. Regarding Venezuela's participation in regiona l integration schemes, the Andean Community
countries had managed to integrate their tariffs to a large extent and hoped to reach total agreement
for a Common External Tariff before March 2003.  Venezuela was party to the negotiating process inthe FTAA, but it was not in the position to analyse the benefits and disadvantages of the FTAA until
the negotiations were further along.WT/TPR/M/108
Page 21
85. With respect to the benefits of the Generalized System of Preferences (GSP), Venezuela
considered that the GSP schemes applied by the European Union, Canada, and the United States had
been most valuable for Venezuela and had helped to diversify its exports.
86. The discussant noted that one of the general concerns was the external vulnerability of
Venezuela's economy.  Because of its basic characteristics and present circumstances, it was virtually
a single-commodity economy, and the price of this commodity was extremely volatile.  This element
should not be disregarded when assessing the macroeconomic situation of Venezuela.  The other
aspect was internal vulnerability, evidenced by a rise of unemployment, a process of relative
de-industrialization, and an increase in poverty over the past few years.  Added to this, the world
growth cycle was such that developing countries could not expect developed countries to act asengines of growth for the rest of the world.  For the first time in many years, there had been a slight
drop in international trade figures in 2001 and 2002.  Forecasts for 2003 were well below the average
of the last few years.  Other negative circumstances were the situation of most of Venezuela's
neighbours and a trend towards risk aversion with respect to capital and investment flows.  This
combination of negative circumstances in a single country obviously had a serious impact on socialand institutional stability, and certain fractures in internal social cohesion could emerge.
87. The effects of the devaluation on the competitiveness of the economy had been extremely
positive in Venezuela.  A 90% devaluation, giving rise to inflation of only 25-30% was quite an
outstanding result.  This showed quite clearly that the devaluation would go some way towards
reaching Venezuela's objectives.  Its effects on exports, particularly non-oil exports, would probablytake some months to be felt.  As noted by academics, a devaluation tended to initially produced a J-
curve effect, meaning that exports would initially drop and imports rise.  However, a few months
later, the situation would turn around, and the devaluation would create an incentive for exports.
Trade policies by measure
88. The representative of Venezuela stated that his country had implemented the WTO Customs
Valuation Regulations (CVA) in March 2001.  This was an important step to determine the tax base of
imported goods in accordance with international undertakings.  Following the principles of the CVA,
the valuation basis for goods should be their transaction value, that is, the actual price or the price to
be paid for the goods.  However, Article 17 of the Agreement, gave administrations the right to check
the accuracy of the documents submitted to Customs.   Within the framework of this provision, the
customs authorities could be supported in their determinations by the use of benchmark or reference
prices.  Venezuela used reference prices based on international market prices obtained fromtraditional importers to verify declared import values in cases of reasonable doubt.  The use of
reference prices was aimed at preventing under-invoicing;  they could not be used to reject a priori
the transaction value without giving the importer the opportunity to present proof of his claims.
Hence, the reference prices used by Venezuela were not minimum prices, nor minimum values, they
were just a benchmark for information purposes used by the Customs Administration to deal withfalse prices.  If the importer did not justify the declared transaction value, this value would be rejected
and the customs value determined in accordance with the methods included in the CVA.
89. The new Customs Act had introduced some important changes and had improved the control
of the customs system.  The Act allowed for some waivers and exemptions that were granted to a
certain number of activities.  There had been some questions pertaining to tariff-quota administrationand availability.  These issues were linked, however, to current consultations with the United States
and other countries regarding import licences, and the representative considered it prudent to pursue
the consultations in accordance with WTO regulations.  A value-added tax had been put in place on
1 June 1999, in lieu of the excise and wholesale tax.  Products not subject to the VAT included basic
commodities, whether domestically produced or imported.WT/TPR/M/108
Page 22
90. With respect to contingency measures, by definition, anti-dumping, countervailing, and
safeguard measures tried to counter different situations.  Although nothing prevented the simultaneous
application or implementation of these measures, no situation had arisen in Venezuela that would
demand this.  As regarded the increased use of anti-dumping measures by Venezuela, this was a
legitimate trade policy tool and imports to Venezuela had risen considerably during the period underreview.  Venezuelan imports in the 1996-01 period had increased by 84% over the 1992-96 period.
Out of 12 anti-dumping investigations since 1996, the authorities had been able to make a
determination of dumping in all cases, even if final measures had not always been applied.
91. Referring to the remarks made regarding Venezuela's delay in notifying technical regulations,
he noted that Venezuela's technical regulation regime was transparent.  Standards and technical
regulations were prepared on the basis of international standards. Venezuela was making every effort
to meet its notification obligations and undertook to do so as soon as possible.  As regards sanitaryand phytosanitary measures, he pointed out that the criteria for the issue of SPS certificates were those
agreed or accepted by international organizations.  Venezuela was readily available to take care of any
concerns with respect to the application of its SPS regulations.  Venezuela was making every effort to
meet its notification obligations and undertook to do so as soon as possible.
92. Venezuela's government procurement regime was transparent, both for domestic and foreign
suppliers.  Procurement legislation allowed for promotion and development of domestic production,
particularly in labour-intensive sectors.  Venezuela was not a party to the WTO Plurilateral
Agreement on Government Procurement.  In accordance with its legislation, Venezuela encouraged
the use of tendering for its government procurement;  this was the most used procurement modality;
there was only limited use of direct awards.
93.  Venezuela granted loans to its manufacturing sector for the purchase of tangible and
intangible assets and working capital through the industrial credit fund FONCREI.  These loans were
geared towards quality improvement and increase valued added, and were granted in a
non-discriminatory fashion, without the intention of subsidizing the sector.  Venezuela did not
consider it was necessary to notify these loans to the WTO.
94. Intellectual property rights protection had been strengthened in Venezuela in recent years,
through a process of amendments to laws and by adherence to international agreements.  Venezuela
considered the recognition and protection of traditional knowledge of indigenous populations of
utmost importance.  Parallel imports were permitted under Andean Community legislation.
Venezuela's legislation provided for the granting of compulsory licences in certain specific
circumstances stated in Venezuela's legislation, such as national public interest.  To date, however, no
compulsory licences had been granted.
95. The discussant remarked that the introduction of a floating exchange rate regime would
probably lead to more infrequent use of measures such as reference prices, and trade defence
measures, such as anti-dumping, safeguard or countervailing measures.  When the national currency
was overvalued, imports increased, giving rise to demand for protection;  once the overvaluation was
corrected, this situation tended to change.
96. He also noted that any country in difficulty, and in particular a developing country, should
make use of all the flexibility provided for in th e multilateral trading system.  This flexibility made
the system fair and allowed it to benefit all participants.
97. The representative of Korea noted that since the introduction of the Safeguard Act in 1999,
there had been a number of safeguard investigation initiations.  He emphasized that even the initiation
of an investigation could damage an exporting country, and requested Venezuela to take a more
prudent stance with respect to safeguard investigations.WT/TPR/M/108
Page 23
98. The representative of the United States stated that the Venezuelan Food and Drug Regulatory
Agency appeared to have begun, in February 2002, to approve the commercialization of drugs that
were the bio equivalents of patented drugs.  Venezuela had revoked previously issued patents.  The
United States believed such practices seriously undermined patent rights.  He asked how Venezuela
reconciled these practices with its obligations under TRIPS Agreement.
99. The representative of Venezuela, referring to the question by the representative of Korea,
stated that Venezuela had resorted to the safe guard mechanism in compliance with WTO rules and
had been so cautious that it had not applied any safeguard measure to date.  Safeguard requests
currently under investigation were being processed pursuant to what was established in the legislation.
He assured all trading partners, and Korea in particular, that Venezuela would abide strictly by WTOrules.  With respect to the statement by the representa tive of the United States, he stated that a written
response would be provided.
Trade policies by sector
100. Referring to agricultural policy, the representative of Venezuela stated that information had
been requested about Venezuelan strategies aimed at guaranteeing food security for the populationpursuant to Article 305 of the Constitution.  From a legal standpoint, a set of new laws complemented
the specific articles in the Constitution that referred to agriculture.  These included the Land Act, the
Fisheries Act, and the Agricultural Production Act.  These laws dealt with the various factors that
together influenced agriculture, and were drawn up on the principle of participatory democracy and
joint responsibility between the private sector and the Government.  With respect to food security, a
high level Commission, reporting directly to the President of the Republic, and made up of private
and public sector representatives had been put in place to coordinate the measures necessary to put
into effect Article 305.  As part of its agricultural strategy, the Government aimed to reorganize all
farm production chains, with the technical and financial assistance of international organizations.
These measures were beginning to bear fruit, although modestly, but had given some impetus to asector that employed a large part of Venezuela's population.  Venezuela was a net food importer.
Some 70% of the food consumed in the country was imported.  The measures aimed at enhancing
food security would enable Venezuela to reduce this degree of dependence, which diminished the
sovereignty of the country.
101. Venezuela did not grant any subsidy in fisheries.  An innovative law that fostered small-scale
fishing had been passed recently.  This policy had already shown positive results in some areas of the
country.
102. With respect to hydrocarbons, Venezuela offered participation to domestic and foreign
investors in the oil sector.  The rules applied were transparent;  the existing legal framework respected
the terms granted to investors before the Organic Law on Hydrocarbons came into force in 1999.  The
legal framework allowed for up to 100% private-sector capital in the refining and marketing of
hydrocarbon products.  This complete market access opening applied to the whole chain of productionin the case of the gas production sector.  As a result, the national petroleum company PDVSA foresaw
investments of US$3 billion over the next five  years, some 40% of which would be private
investment.
103. Regarding manufacturing, questions had been asked about the Family Vehicle Programme,
which was temporary.  This programme had not been notified to the WTO because it was aimed atbenefiting consumers, and did not cover the entire auto-vehicle market in Venezuela.  With respect to
the Automotive Agreement with Colombia and Ecuador, Venezuela would coordinate the reply to
these questions with its partners in the Agreement and would respond within 30 days, as allowed for
under the rules of procedure.WT/TPR/M/108
Page 24
104. Questions had been received with respect to the privatization thrust in the electricity sector.
He stated that if privatization was understood to be  the simple and straight-forward sale of State
shares to the private sector, then the Government had radically changed the process for electricity.
This did not imply, however, that the private sector, be it national or foreign, was excluded.  The
Electricity Law, enacted in 1999, quite clearly allowed private participation in the activities ofgeneration, distribution, and marketing of electrical supply.  Regarding telecommunications,
information had been requested on the Universal Service Fund.  This mechanism provided funds to
develop telecommunications infrastructure in areas that, for geographic and economic reasons, could
not be covered by the private sector.
105. The discussant noted that, in terms of the membership of the WTO, the sectoral measures
undertaken by Venezuela were entirely legitimate, and geared towards diversifying its production and
export potential.  External vulnerability would be tackled insofar as Venezuela developed alternativeactivities to oil production.
106. Venezuela lived in a food exporting area.  Therefore, policies for food security and to deal
with the high percentage of food that was imported, needed to be strong, have international backing,
and be in conformity with international rules, co mplying with criteria such as green box programmes.
107. The representative of Venezuela stated that the Trade Policy Review had been a very good
opportunity for Venezuela to present to its trading partners the problems it currently faced.  Despite
the difficulties, Venezuela supported the multilateral trading system, but advocated the introduction of
changes to ensure that the undoubted benefits of the system could accrue to all Members.WT/TPR/M/108
Page 25
VI. CONCLUDING REMARKS BY THE CHAIRPERSON
108. This second Trade Policy Review of Venezuela has contributed considerably to a better
understanding of Venezuela's trade and investment policies, and the context within which they have
been formulated and implemented.  The full and admirable engagement of the strong Venezuelan
delegation, headed by Minister Rosales, and the active involvement of many Members, as well as thecomprehensive replies and comments have allowed us to achieve this understanding, shedding light
on the many revisions made to Venezuela's institutional and legal framework since its first Review in
1996.
109. Members recognized that Venezuela was going through a period of momentous economic,
political and social changes.  These were reflected in a number of legislative and institutional reforms,some of which had encountered strong opposition.
110. Members welcomed Venezuela's commitment to fu rther strengthening the multilateral trading
system, but several observed that Venezuela has yet to fulfil various notification obligations
concerning technical regulations, SPS and, perhaps, incentive programmes.  Venezuela was invited to
file those notifications in the near future, with the aid of the WTO Secretariat if necessary and, thus,enhance the transparency of its trade regime.
111. Venezuela's economic performance has fluctuated considerably since 1996.  After a period of
moderate economic growth in 2000 and 2001, Venezuela entered into a recession in 2002.  Members
attributed this in part to a high and growing reliance on the petroleum sector, which has left the
economy vulnerable to developments in the world oil market.  This reliance has also resulted in anarrow export base, eroded the competitiveness of the non-oil sector, and discouraged a deeper
integration in the world economy.  Members considered that Venezuela's adoption of a floating
exchange rate regime would help address its structural problems, and encouraged Venezuela's
ongoing efforts to diversify its export markets and products.
112. Venezuela is strengthening and modernizing its competition policy legislation.  Members
praised Venezuela for the liberalization of its investment regime and the adoption of a new foreign
investment law since its last Review.  These represent important steps to increase private investment,
particularly in view of Venezuela's historically lo w investment to GDP ratio.  In this context, some
Members requested Venezuela to consider taking further steps to make its institutional and legal
framework more predictable, including by locking-in recent liberalization initiatives under
multilateral rules.
113. Venezuela was commended for having simplified its customs procedures and taking measures
to implement the Customs Valuation Agreement.  All tariffs are bound but there is a relatively wide
gap between applied and bound tariffs.  In this respect, Venezuela was invited to participate actively
in the non-agricultural market access negotiations under the Doha Development Agenda with a view
to lowering bound tariffs, and thus increase predictability.  Members noted that the Andean Price
Band System applied by Venezuela was an element of uncertainty facing exporters, and askedquestions about its WTO consistency.  Also questioned was the apparently different application of the
value-added tax to domestic and foreign products.
114. Members expressed concern with respect to Venezuela's increased use of non-tariff measures.
The import licensing regime came under particularly close scrutiny, especially with respect to its
transparency and the scope for discretion in its use.  Related concerns were raised about SPS permits.Several queries related to new labelling requirement for footwear and textiles.  Members also noted
the increase in the number of anti-dumping and countervailing measures, and asked about certain
provisions in Venezuela's new Safeguards Law.WT/TPR/M/108
Page 26
115. A number of Members requested further information with respect to Venezuela's incentives
regime.  In the area of intellectual property, questions were raised regarding the ratification of some
WIPO Treaties and Venezuela was encouraged to step up its enforcement efforts.  The legal
framework governing government procurement, including the preferences granted to domestic
suppliers attracted much interest, and some Members encouraged Venezuela to accede to theplurilateral Agreement on Government Procurement.
116. Members also sought further clarification on a number of specific areas, including:
• monetary and fiscal policy, the exchange rate regime, and inflation;
• the foreign investment regime, remaining related restrictions, and legal stability contracts;
• tariff exemptions and tariff quotas;  and
• intellectual property rights, parallel imports, and compulsory licensing.
117. With respect to sectoral policies, Members note d that there is scope for further liberalization
in agriculture, as witnessed by high tariff rates, the use of variable levies and import permits.  They
also took note of the importance Venezuela grants to developing the agricultural sector, as part of itsefforts to improve living standards and diversify its economy.
118. Members clearly welcomed the liberalization of several key service activities over the last six
years, which has resulted in increased foreign presence in areas such as banking and
telecommunications.  Venezuela was encouraged to make further liberalization commitments in the
ongoing WTO negotiations, corresponding to its current regime and beyond.  As well, Membersrequested information on:
• restrictions and incentives in the energy sector, and its further opening;
• assistance to motor vehicle production, including the Family Vehicle Programme;  and
• electricity and maritime transport.
119. The delegation of Venezuela provided written and oral answers to the questions posed during
the Review and undertook to send further responses within 30 days.  The replies provided have made
a major contribution to this meeting, and were clearly appreciated by Members.
120. This brings us to the conclusion of our second Review of Venezuela.  This Review is taking
place at a difficult time for Venezuela, but I have the conviction that it will meet the challenge,
building on its natural wealth, human capital, and a clear resolve to persevere in the path of economicmodernization and liberalization.  In this respect, I am heartened by Venezuela's conviction that full
integration in the world economy is a priority in its strategy to achieve a higher standard of living for
its people.  I am further encouraged by Venezuela's renewed pledge to meet its international
commitments.  Rigorous compliance with the rule of law, at all levels, does indeed offer Venezuela
reliable markers to guide it out of the current diffic ulties.  Thus, in order to strengthen further the
multilateral trading system, I urge Venezuela to continue participating actively in the Doha
Development Agenda, and to use this process to inject greater predictability to its own trade andinvestment regime.
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