RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/169
1 December 1999
(99-5179)
Council for Trade in Goods Original:  Spanish
REQUEST BY COLOMBIA UNDER THE PROVISIONS OF ARTICLE 5.3
OF THE AGREEMENT ON TRADE-RELATED
INVESTMENT MEASURES
The following communication, dated 29 November 1999, has been received from the
Permanent Mission of Colombia.
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The Government of Colombia, pursuant to Article 5.3 of the Agreement on Trade-Related
Investment Measures (TRIMs Agreement), requests an extension of the transition period for themeasure notified in document G/TRIMS/N/ 1/COL/2 for a period of seven years.
I. INTRODUCTION
In 1995 Colombia notified, in accordance with Article 5.1 of the TRIMs Agreement, the
measure to subject imports of agricultural products to the absorption of domestic production as part of
the policy of developing the agricultural sector.
Pursuant to Articles 64, 65 and 66 of the 1991 Political Constitution of Colombia and in
accordance with international treaties, the policy of absorbing domestic agricultural production was
adopted with a view to promoting the development of agricultural and fishery activities and
promoting the improvement of farmers' incomes and living standards, as well as the competitiveness
of the sector within the framework of the policy of gradual and selective liberalization of suchproducts.
II. REQUEST FOR EXTENSION
SCOPE
This request refers to the measure notified by Colombia with regard to the policy of absorbing
agricultural products.
DURATION
Until 31 December 2006.
BASIS
Colombia is experiencing particular difficulties in eliminating this measure on account of the
structural weaknesses in the domestic marketing of agricultural goods, the unfavourable effects on the
agricultural sector of the structural adjustment resulting from the change in the economic model from
1991 onwards and the urgent need to facilitate the structural changes that arrive from the substitutionof illegal crops and that are required if the internal armed conflict is to be settled.G/C/W/169
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Structural flaws in domestic marketing
The trade liberalization measures introduced at the beginning of the 1990s revealed the
precarious market relations between domestic produc ers and the agricultural processing industry due
to the previous very high level of State intervention.
The marketing of a number of agricultural products in Colombia was characterized by
fragmented and dispersed sources of supply and by oligopsonies on the demand side.  Added to this
were the deregulation of the domestic market;  deficiencies in the means of financing and storage for
the purchase of domestic crops, as compared with those available in the international market for
imported products, and a largely unfavourable macroeconomic situation.  All these factors led to
problems in the internal marketing of domestic agricultural production and to relatively low prices forthe domestic producers.  The absorption policy helps to reduce these problems.
The absorption policy involved temporary guidance by the State with a view to promoting the
creation of modern market relationships able to respond to international competition and structured
around the needs of the intermediate and final consumers and the particular features of supply anddemand.  It has operated in such a way as to allow the volume of imports to continue to rise between
1995 and 1998 (Table No. 1).
The absorption policy has been implemented in accordance with the sectoral strategy of
improving the competitiveness of the production chains, which has produced a new culture ofnegotiation between those involved, and has encouraged, in turn, the establishment of alliances,
agreements and other forms of cooperation.  This policy has acted as a means of bringing together
supply and demand in the domestic markets, encouraging a shift towards more developed forms of
transaction, such as negotiations through the National Agricultural Exchange, forward purchasing
contracts, the financing of crops, and seed associations between industrialists and farmers, so as tocreate certainty between the actors involved.
The absorption policy is an example of State guidance that brings greater efficiency into the
transaction costs, brings about a balance in the negotiating strength of farmers and agro-industrialists
and contributes towards the creation of channels of communication that will help to establish and
consolidate modern relationships in domestic trade.
The adverse effects of economic liberalization
The transition towards a model of development based on a more open and internationalized
economy through macroeconomic, financial and trade reforms has led to changes in the structures of
foreign trade and production with certain adverse effects that are mentioned below.
The displacement of domestic production by imports and the decline in seasonal crops
With the opening up of the economy the volume of imports has increased so as to respond to
the growth of domestic demand and of exports, with the consequent partial displacement of thedomestic production of seasonal crops, in particular raw materials that are not very competitive in an
international market highly distorted by subsidies.
Since the opening up of the economy began there has been a marked stagnation in the value
of agricultural production, accompanied by a fall in its contribution to the GDP.  On the other hand,agri-industrial production has continued to show grow th rates similar to those of the economy as a
whole.
Between 1990 and 1997 the area devoted to agriculture decreased by 782,000 hectares,
resulting from an increase of 232,000 hectares of permanent crops and a decrease ofG/C/W/169
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1,014,000 hectares of seasonal crops and coffee.  In addition, land used for farming was turned over to
cattle-raising.
The absorption policy is in no way intended to limit imports, which have continued to
increase in response to the growth and development of the domestic market on the basis ofcompetitive production and modern marketing relations.
This is reflected in the fact that the allocation of imports of goods to those who have
specifically applied the absorption policy has guaranteed transparent access for the applicants to
import quotas in the cases in which this method has been applied and has made it possible to meet
domestic demand without excessive shocks for the agri-business sector.  Table No. 2 shows recent
trends in the administration of imports subject to the absorption policy.
The impact on job creation and rural poverty and the need to facilitate the structural changes resulting
from illegal crop substitution
As a result of the changes in patterns of trade and production, since 1990 only 45,600 net jobs
have been created in the agricultural sector, a shift having taken place in jobs away from seasonal
crops and coffee towards other permanent crops and cattle-raising.
While the rural population has increased by almost 1,200,000 during the 1990s many of those
working in agriculture have moved into non-agricultural rural activities and to urban centres, givingrise to difficulties in absorbing unskilled migrant workers.  In addition, uneven patterns of
employment within the country between activities in expansion and those in recession have led to
pockets of regional unemployment and internal migration.
During this period the incidence of poverty in rural areas has sharply increased.  In 1988,
62 per cent of the rural population was poor, while in 1995 this percentage had risen to 68 per cent, of
whom 4.8 million people lived in conditions of extreme poverty.
1  The poverty level for the rural
population reached 51.8 per cent in 1999, with the extreme poverty level at 42.1 per cent, whereas in
urban areas 42.5 per cent of the population was poor and 10.4 per cent were suffering extreme
poverty.
Research by the National Department of Planning2 shows that poverty in rural areas has
considerably worsened since 1992 with an increase of 600,000 in the number of poor people by 1995,
widening the poverty gap, reducing people's purchasing power and decreasing the Gini-coefficient of
the poor, which means greater equality at a lower level of poverty.
Furthermore, the serious problems that still exist regarding the quality and relevance of
education in rural areas tend to perpetuate inequalities and deprive people of opportunities.
At the same time, the eradication of illegal crops, to which end Colombia has made serious
international commitments and undertaken major effo rts, means redirecting the people involved in
this activity towards economically viable and competitive agricultural activities.
The eradication of illegal crops also very often involves the need to relocate people into areas
close to centres of distribution and consumption, so  as to preserve the environment and avoid the
devastating effects of extending the agricultural frontier.
                                                     
1 National Department of Planning, Poverty, Bulletin No. 16, 1998.
2 Ibid.G/C/W/169
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The need to facilitate the structural changes required by the settlement of the internal armed conflict
In recent years there has been a revival of the armed conflict in Colombia with serious
implications for agricultural production.  This broadening of the conflict has had harmful effects not
only in the area of cultivation, but also in the marketing of domestic agricultural products.  Moreover,it has led to additional security and protection costs that have made the production and marketing of
agricultural produce more expensive.
The rural sector has been the main scene of the war between armed guerrilla groups, the
paramilitaries and organized crime.  One recent study
3 shows that the presence of guerrilla fighters
has expanded in the rural areas of the country, so that whereas  173 municipalities were affected in
1985 that figure rose to 622 in 1995, most of which were predominantly farming communities inagricultural frontier zones and regions of agri-business development.
As part of this process over a million people from the most deprived social groups have had to
move to urban centres, adding to the burden of their economic, social and cultural rootlessness.  Those
most affected are juveniles and women, who make up 75 per cent of those displaced.
Insofar as the internal conflict facing Colombia is mainly taking place in the countryside, like
the production of illegal crops, the solutions lie in the introduction of modern production and
marketing methods in places where such relationships currently do not exist.
Conclusions
The strengthening of modern market relationships on the basis of production that has shown
itself to be competitive and functional for the socio economic survival of agriculture as a consequence
of structural adjustment, the imperative need to relocate production and some population groups as ameans of settling the armed conflict and providing substitution for illegal crops are the determining
factors in the need to maintain the absorption policy for an additional period of seven years from 2000
onwards in order to promote social, productive and domestic marketing processes that must be
gradually assimilated by all those involved in production and marketing, against a background of
permanent socio economic change.
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3 "Inseguridad, violencia y desempeño económico en las áreas rurales" (Lack of security, violence and
economic activity in rural areas), Jesús Antonio Bejarano, 1997.