WT/REG2 83/M/1  
 
25 July 2013 
(13-4018) Page: 1/5 
Committee on Regional Trade Agreements  
Sixty -ninth  Session    
 
 CONSIDERATION OF THE FREE TRADE AGREEMENT  BETWEEN EL SALVADOR,  
HONDURAS AND THE SEP ARATE CUSTOMS TERRIT ORY OF TAIWAN, PENGH U,  
KINMEN AND MATSU , GOODS AND SERVICES  
NOTE ON THE MEETING OF 3 JULY 2013 
Chairman:  Ambassador Francisco Lima Mena (El Salvador)  
1.1.  The 69th Session of the Committee on Regional Trade Agreements (hereinafter 'CRTA' 
or the 'Committee') was convened in Airgram WTO/AIR/ 4130/Rev.1  dated 21 June 2013. 
1.2.  Under Agenda Item B. V the CRTA reviewed  the Free Trade Agreement  (FTA) between 
El Salvador,  Honduras and the Separate Customs Territory of Taiwan, Penghu, Kinmen and 
Matsu  (Chinese Taipei) , goods and services  (hereinafter "the Agreement").  
1.3.  The Chairman  said that the Agreement had entered into force  on 1 March 2008  for 
El Salvador and Chinese Tai pei and on 15 July 2008  for Honduras and Chinese Taipei . It had 
been notifie d to the WTO by the Parties on 6 April 2010 under Article XXIV:7(a) of the 
GATT  1994 and the Understanding on the Interpretation of Article XXIV of GATT 1994 
notified as an Agreeme nt establishing a free trade area (document WT/REG 283/N/1) and 
under GATS Article  V:7(a) as an Agreement providing for the liberalization of trade in 
services within the meaning of Article V of the GATS (document S/C/N/ 544). The text of the 
Agreement was a vailable, together with its Annexes, on the Parties' official websites. The 
Factual Presentation on the goods and services aspects (document  WT/REG 283/1 dated 23 
April 2013) had been prepared by the Secretariat on its own responsibility in full 
consultatio n with the Parties, in accordance with paragraph 7(b) of the Transparency 
Mechanism for Regional Trade Agreements (document WT/L/671) ("TM").  In addition w ritten 
questions and replies on this Agreement had been distributed in document WT/REG 283/2 
dated 28 June 2013. He proposed to organize the consideration of the Agreement by first 
asking the Parties and then other Members to give any general comments and then go into 
the specifics of the Agreement using  the Factual Presentation, document WT/REG 283/1 to 
guide the disc ussion , followed by the questions and responses .  
1.4.  The Representative of Chinese Taipei  thanked the Secretariat for the factua l 
presentation and El Salvador and Ho nduras for their work in prepa ration for the 
consideration.  She also thanked the E uropean Union and Argentina for their written 
questions, whi ch had all been duly answered.  
 
1.5.  Chinese Taipei had enjoyed close and mutually beneficial trading relationships with 
both El  Salvador and Honduras for several years before they had started to cons ider a Free 
Trade Agreement. Starting in May 2006, there had been four rounds o f negotiations, with all 
three Parties signing the Agreement on 7  May 2007. The Agreement between Chinese Taipei 
and El Salvad or had come into effect on 1  March 2008 and the agr eement wi th Honduras  on 
15 July 2008.  
 
1.6.  Being reciprocal and mutually be neficial , the purpose  of the Agreement was to 
eliminate or reduce tariffs and other restrictive trade barriers on substanti ally all the trade 
between the P arties. It also aimed to make full and complementary use of their respective 
economies, and to strengthen trade, investment and cooperation so as to enhance business 
opportunities, thereby creating more employment opportunities, and improving the welfare WT/REG 283/M/1 
 
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  of their people. At the same ti me, the Agreement attempted  to improve the  international 
competitiveness of each Party, enabling them to respond more effectively to the growing 
challenges of globalization and liberalization.  
 
1.7.  The Agreement was built on the rights and obligations of the Marrakesh Agreement 
Establishing the WTO. It con sisted of 18 Chapters covering trade in goods; trade barriers; 
investment; trade in services; dispute settlement; transparency and other institutional 
issues.  
 
1.8.  In terms of the liberalization of trade in goods , immediately after the Agr eement had 
come into force, Chinese Taipei  had offered El Sal vador zero tariffs on  5,698 items ( 64.4% 
of their total  tariff lines), and  Honduras zero tariffs on 6,145 items (69.5% of their total  
tariff lines). El Salvador had off ered Chinese Taipei zero tariffs  on 3,777 items ( 57.5% of El 
Salvador's  total tariff lines) and Honduras had offered zero tariffs  on 4,069 items (62% of 
Honduras'  total tariff lines) . At the end of the implementation period, Chinese Taipei would 
have offer ed both El Salvador an d Honduras free market access  for 97.5% of their products. 
El Salvador and Honduras would have offered  free access to  their market s for 73.1% and 
77.8% respectively of Chinese Taipei's  products . 
 
1.9.  In terms of liberalization of trade in  services , the Agreement adopted a negative list  
approach. In other words, it was only those few service s sectors that were listed by the 
Parties (included i n the "negative list ") to which no ne or conditional  access  was granted, 
while all other services se ctors were open . This was a further demonstration  of the high level 
of commitment by  the Parties to trade liberalization.  
 
1.10.   She then  briefly described the current and future effects and benefits of the 
Agreement . In terms of effectiveness, the re had been positive effects on both trade volume 
and investment in the five years since the Agreement had been  signed. For example, the 
volume of bilateral trade with El  Salvador  had increased by 31% in the first year of the 
implementation  of the Agreement, reaching US $109.80 million  in 2008. Alt hough in 2009  
bilateral trade had decrease d by 18%, the following year had seen a recovery of 9%, with  
the value of bilateral trade nearly doubl ing in 2011 to a total of US$192.29 million . 
Specifically, in that year, imports fro m El Salvador had amounted to US$62.26 mill ion, an 
upsurge of 211%, and exports to El Salvador had amounted to US$130.02  million, some 
66% above the previous year. Total bilateral trade had reached a total va lue of US$154.93 
million  in 2012.  
 
1.11.   As for bilateral trade with Honduras, this had increased by 47% in the first year of 
implementation  of the Agreement, reaching US$96.64 million in 2008. Like for  El Salvador , 
there had been a decrease of 43% in 2009 and recovery had begun the followin g year with 
an in crease of 44% in 2010 . The year 2011 saw a rise of just 2% and the total value of 
bilateral trade in 2012 was  US$79.53 million . 
 
1.12.   As far as investment  was conce rned, by April 2013 Chinese Taipei  had invested 
US$73.43  million in 45 project s in El Salvador an d US$ 150 million in 25 projects in 
Honduras. Chinese Taipei was convinced that the Agreement would  realize its full potential 
and make a substantial  positive contribution to their  trade figures, as well as help make a 
contribution to global trade.  
 
1.13.   The rep resentative of Honduras  presented a joint statement with El Salvador on the 
Agreement. He thank ed the Secretariat for the preparation of  the factual presentation , and 
other work  for the meeting , the European Union and Argentina for their questions , and 
delegations and the Parties for their support.  
1.14.   The Agreement represented for El Salvador and Honduras a concrete statement of 
one of the measures by which  their trade policy had sought to meet econo mic growth and 
development needs , to ensure continued  improv ements in the ir living standards . This meant 
taking full advantage of increased access to and integration in the markets of preferential 
export destinations . The Agreement also  represented  an important opportunity to enter 
market s in Asia . WT/REG 283/M/1 
 
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  1.15.   The Agreement formed part of their strategies to strengthen political, economic and 
trade cooperation . Such links were  strengthened with the entry into  force of the Agreement 
in 2008. It wa s important to highlight that from the outset it had been  agreed that the 
negotiati ons would  be guided by a recognition of the differen ces in the levels of development 
of the Parties,  and respect  for their legal systems , the principles and obliga tions stemming 
from their  membership  of the WTO and for the principles and rules of internati onal l aw. The 
Agreement  aimed inter alia to promot e, expan d and diversif y trade in goods and servi ces 
between the Parties,  eliminate trade barriers  to facilitate the cross b order movement  of 
goods and services  between the territories of the Parties and pro mote, protect and increase  
investment  in each Party. 
1.16.   In view of the Parties' participation in a regional economic integration pr ocess, unless 
otherwise specif ied, the agreement applied  bilaterally between El Salvador and Chinese 
Taipei  on the one hand , and  between  Honduras and Chinese Taipei  on the  other . The 
Agreement envisaged the  liberalization of trade in agricultural  and industrial goods together 
with supplementary disciplines , such as rules of origin, customs and trade facilitation 
procedures, technic al standardization, SPS Measures, safeguard m easures, and unfair trade 
practices. It also included commitments on  investment, cross  border trade in services,  the 
temporary entry of business persons , dispute settlement and co operation.  
1.17.   In the area of market  access for goods,  the Agreement contained  provisions for the 
progressive  elimination of customs tariffs. Unless otherwise provided in  the Agreement, 
neither Party could  increase an existing tariff, or adopt a new tariff . Similarly  non-tariff 
barriers to t rade would be eliminated except fo r those maintained under  Articles XX  and XXI  
of GATT  1994 and those regulated under  Chapter s 8 and 9 of the Agreement. As a result of 
the imp lementation of the Agreement, by  2027 73.1% of El Salvador's tariff lines would b e 
liberaliz ed for imports from Chinese Taipei while Chinese Taipei would have  liberalised 
97.4% of its  tariffs for imports from El  Salvador and Honduras by 2022 . Since the entry into 
force of the Agreement, El Salvador and Honduras' trade with Chinese Taip ei had grown , 
with a positive trade balance for the latter . Honduras' average exports during 2009-2013 
had increased by  187.69% in comparison to the period  2005-2008 as a result of tariff 
preferences provided by the Agreement . The t rade balance showed a de ficit of  US$24.373 
million  in 2008  and by the end of 2012, 4 years after the Agreement entered into  force the 
trade deficit  was US$9.954  million  which means a reduction in the deficit of 40.84 % in 
comparison  to 2008.  During the period 2010 -2012, the sale o f ferrous waste and scrap, re -
melting scrap ingots of iron or steel, farmed shrimp  and green coffee  were Honduras' main 
export s to Chinese Taipei. Othe r significant  export s were  aluminium  waste  and scrap , and 
waste and scrap of paper or paperboard . 
1.18.   Between  2009 and 2012, following the entry  into force of the Agreement, Honduras'  
exports to Chinese Taipei grew at an annual rate of 62%  from US$6.241 million  to 
US$26.520 million. During 2010 -2012 Honduras' imports from Chinese T aipei consisted in 
particular of  flat rolled products of other alloy steel, flat rolled products of iron or non -alloy 
steel, bicycles, bumpers, magnetic discs and tyres for automobiles . 
1.19.   Regarding trade between El Salvador and Chinese Taipei, the total value of El 
Salvador's exports  and imports doubled between 200 0 and 2008. Its exports  increased by 
more than 400% between 2007 and 2012 from US$6.2 to US$33.4 billion. Among its main 
export s to Chinese Taipei are agro-industrial  products, mechanic al engineering products , 
paper and paperboard , and food and beverages.  The A greement also contributed to the 
dynamism  of Salvadoran exports to  Chinese Taipei , since during  January to April 2013 
Salvadoran exports totalled US$26.4 million, a significant increase over the same period in 
2012 when they totalled  US$4.1 million . 
1.20.   El Salvador's i mports from Chinese Taipei also increased following signature of the 
Agreement,  doubl ing between 2007 and 2012 and growing  from US$139.7 million  in 2011  to 
US$157.4 million  in 2012 . The main products imported include d materials of plastic, 
electrical machinery  and appliances , textiles, mechanical metals, transport equipment and 
various manufactured products.  
1.21.   The representative of El Salvador , continuing the joint statement, said that with 
regard to services the Agreem ent guaranteed non -discriminatory treatment between WT/REG 283/M/1 
 
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  domestic and foreign  service providers  and did not include obligations with respect to the 
supply of services in the exercise of governmental authority. With respects to  the most 
favoured nation (MFN) obligation, this would not  apply  when a Party autonomously or 
through an agreement recognize d the education  or experience  obtained , requirements  met, 
or licences or  certification s granted in the territory of one P arty or non -party. The 
Agreement  also containe d provisions on transparency, d omestic regulation , mutual 
recognition, transfers and payments and denial of benefits.   
1.22.   The Agreement contained disciplines aimed at facilitating the temporary entry of 
business persons connected with trade in goods, services  and investment, on a reciprocal 
and transparent basis, while protecting the domestic labour market and permanent 
employment in the territories of the Parties.  
1.23.   On investment the Agreement ai med to stimulate and develop  investment flows by 
creating a legisl ative framework conducive to a stable and secure investment climate. It 
included a full definition of investment aimed at protecting it, and established guarantees for 
national and MFN treatment, fair and equitable treatment, compensation for losses, 
expro priation and compensation, transfers, performance requirements, denial of benefits, 
subrogation, environmental measures, non -conforming measures and a mechanism for 
resolving disputes between investors and the State. National treatment was guaranteed for 
investors and investments from El Salvador, Honduras and Chinese Taipei.  The Agreement 
contained provisions on performance requirements under which such requirements could not 
be imposed as a condition for the granting of investment incentives.  It also prov ided for 
sectoral commitments in the form of reservations to national and MFN treatment and senior 
management obligations.  
1.24.   In 2012, investments in El Salvador from Chinese Taipei totalled US$19.1 million and 
chiefly concerned the textiles and clothing indu stry, the plastics sector and the processing of 
various manufactures. Chinese Taipei's foreign direct investment in Honduras had reached 
an average of US$3.6 million during 2008 -10. 
1.25.   With regard to co operation, the Agreement established guidelines for Chin ese Taipei 
to strengthen its co operation with El Salvador and Honduras in the economic, financial and 
technical areas as a development instrument to contribute to achieving  the Agreement's 
objectives and principles. Special emphasis was placed on commerc ial and industrial 
cooperation, micro -, small and medium sized enterprises and tourism.  
1.26.   During the five years in which the Agreement with Chinese Taipei had been in force, 
particular importance had been given to strengthening the capacity of human resources i n 
the public and private sectors, with special emphasis on the training of small and medium 
sized Salvadoran enterprises which had identified niches in Chinese Taipei's market. There 
had been a number of training sessions on conditions for access to the ma rket of Chinese 
Taipei and in particular on compliance with rules of origin, labelling requirements and health 
regulations. A lso worth mentioning was the co operation provided by Chinese Taipei to 
ensure the participation of Salvadoran companies in the "Foo d Taipei" show held in June 
each year, as a result of which over the last three years Salvadoran companies had been 
well represented. The show was an important window to the world and a number of 
Salvadoran products had been successfully exhibited. On trad e and investment promotion, a 
number of events had been organized in Honduras to advertise the opportunities offered by 
the Agreement and ac hieve greater rapprochement, co operation and mutual understanding 
in the private sector. As a result, it had been po ssible to improve, intensify and diversify 
trade relations with Chinese Taipei including the promotion and development of mi cro-, 
small and medium enterprises and the development of the cou ntry's exports. Through such 
cooperation it had also been possible to achieve a certain amount of success in promoting 
trade and investment flows between enterprises.  
1.27.   To conclude she said that El Salvador and Honduras would continue their efforts to 
promote their trade relations with Chinese Taipei in the hope of strength ening trade flows 
through the preferences granted and encouraging direct investment flows between the 
Parties. El Salvador and Honduras hoped that the consider ation of the Agreement would 
contribute to a better understanding of its terms  and were ready to respond to any 
additional questions from Members.  WT/REG 283/M/1 
 
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  1.28.   The Chairman  opened the f loor for any general comments . 
1.29.   The representative of the European Union  thanked the Secretariat and the Parties for 
the presentations. The EU  had submitted questions on 16  May reque sting clarifications on 
some provisions on exports, local commercial presence and market access indicators. He 
thanked the Parties for their replies to which the EU may come  back with additional  
questions.  
1.30.   The Chairman  then turned to the specif ics of the A greement and to the responses 
provided by the Parties  in document WT/REG 283/2. 
1.31.   The representative of the United States  thanked the Secre tariat and the Parties for 
the m aterials provided . The United States noted the low level of tariff elimination particula rly 
by El Salvador and Honduras.  With regard to Section 5 of the Factual Presentation  the U.S.  
looked forward to the notification of non -notified RTAs mentioned in Table 5.1. In this regard 
the United  States  strongly disagree d with Chinese Taipei that the  Agreement with China —
the Economic Co -operation Framework A greement  (ECFA), did not need to be notified at 
present since an early announcement with the text and  annexes had been made and the 
Agreement was only a framework Agreement. Paragraph 3 of the TM cl early stated that as a 
rule notification would occur no later than directly following the Parties' ratification of the 
RTA or any Party's decision on the application of the relevant parts of the Agreement and 
before the application of preferential treatmen t between the Parties. The ECFA had been in 
force, providing for preferential treatment between the Parties since September 2010. The 
U.S. urged Chinese Taipei and China to notify the Agreement under GATT Article XXIV and 
GATS Article V as soon as possible .  
1.32.   The representative of  Chinese Taipei  stated that Chinese Taipei  remain ed committed  
to notify the A greement with China following its ratification and application . 
1.33.   The representative of El Salvador  thanked the United States for its comments and 
questions.  The Agreement had already liberalized 81.7% of El Salvador's tariff for imports 
from Chinese Taipei in 2007 and that figure would have increased since that time.  
1.34.   The representative of Honduras , like El Salvador,  noted that the number of tariff lines 
liberalized under the Agreement would continue to increase until full implementation . 
1.35.  The Chairman  said that the  consideration of the Goods and Services Aspects of the 
Free Trade Agreement between El Salvador, Honduras and the Separate Customs Territory 
of Taiwan, Penghu, Kinmen and Matsu  had allowed the Committee  to clarify a number of 
questions and the oral discussion of this RTA could be concluded  in accordance with 
paragraph 11 of the Transparency Mechanism.  If any delegations wish ed to ask follow up 
questions they were invited to forward submissions in writing to the Secretariat by 1 0 July 
2013 and Parties were asked to submit replies in writing by no later than 24 July 2013.  In 
accordance with paragraph 13 of the Transparency Mechanism all written su bmissions, as 
well as minutes of this meeting would  be circulated promptly, in all WTO official languages, 
and would  be made available on the WTO  website.   
1.36.  The Committee  took note  of the comments made.  
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