WT/REG278/2  
WT/REG331/2  
WT/REG336/2  
 
2 April 2014  
(14-2044)  Page: 1/6  
Committee on Regional Trade Agreements  Original: English/Spanish  
 
FREE TRADE AGREEMENT BETWEEN CENTRAL AMERICA  
(HONDURAS, NICARAGUA AND GUATEMALA) AND PANAMA 
(GOODS AND SERVICES) 
QUESTIONS AND REPLIES 
 The following communication, dated 1 April 2014, is being circulated at the request of the 
delegations of Honduras, Nicaragua, Guatemala and Panama.  
 This document reproduces the questi ons addressed to the Parties and the 
responses submitted.  
_______________ 
  
Questions from the delegation of the European Union 
 
Relationship with other agreements concluded by the Parties 
 
1.1.  Table 5.1 indicates that Panama join ed the Central American Common Market since 
6 May 2013 and this has not been notified to the WTO. Therefore, the EU understands that the provisions on Trade in goods may already have been revoked:  
a. Could Panama, Honduras, Nicaragua and Guatemala indicate when the 
accession of Panama to the Central Am erican Common Market will be notified? 
Panama's Protocol of Accession to the Economic Integration Subsystem of the Central 
American Integration System will be notified at a later date, because although it did, in fact, enter 
into force in May 2013, some of its provisions are still being negotiated.  
b. Could Panama, Honduras, Nicaragu a and Guatemala clarify whether the 
Agreement which is the object of the pr esent notification has been revoked, 
even partly, as a consequence of the accession of Panama to the CACM? 
According to Article 11 of the Protocol of Accession, trade relations between Panama and 
each one of the member countries of the Central American Economic Integration Subsystem shall 
be governed by the rules and legal instruments of the Subsystem.   
However, any matters that are not regulated by the said Protocol of Accession that fall 
within the scope of the FTA will be regulated by the provisions of the FTA itself and its bilateral protocols. 
 
This will be the case until such time as th ese matters are regulated within the framework 
of the Subsystem.  WT/REG278/2 • WT/REG331/2 • WT/REG336/2 
 
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  Questions from the delegation of Thailand 
 
PROVISIONS ON TRADE IN GOODS  
Import duties and charges and quantitative restrictions  
General provisions  
 1.2.  In Article 3.03, it is provided that ea ch Party shall accord to the goods of the other 
Party treatment (national treatment) no le ss favourable than the most favourable 
treatment accorded to similar, directly comp etitive or substitutable goods of national 
origin, pursuant to Article III of the GATT 1994 and the interpretative notes thereto, 
which are incorporated as an integral part of the Agreement. In the case of Panama, 
Nicaragua and Guatemala, however, national  treatment does not apply to certain 
measures that appear in Annex 3.10(6) (Import and export restrictions).  
 The Parties undertake (Article 3.10) co mpletely and immediately to eliminate 
non-tariff barriers, with the exception of th e rights under Articles XX and XXI of the 
GATT 1994 and those regulated in Chapters 8 (Sanitary and phytosanitary measures) and 9 (Standards-related measures, metrolog y and approval procedures). Except as 
otherwise provided in the Agreement, no Part y may adopt or maintain any prohibition or 
restriction on the import of any goods from th e other Party or on the export or sale for 
export of any good destined for the other Part y, except in accordance with Article XI of 
the GATT 1994. To this end, this Article and it s interpretative notes are incorporated into 
the Agreement and form an integral part th ereof. The Parties set out restrictions in 
Annex 3.10(6).   
 Please specify the reason why certain measures appeared in Annex 3.10
(6) are 
excluded from the obligation of NT under th is Agreement or Exception under GATT 1994.  
 
The measures that appear in Annex 3.10 are special cases, applied in conformity with 
the GATT 1994 exceptions, in which Parties reserve the right not to apply national treatment in specific instances such as the prohibition on exports of lumber, for environmental protection reasons; restrictions on the import of arms, for security reasons; restrictions on the import 
of ozone-depleting substances, for environmental reasons; etc.  
 1.3.  As regards tariffs (Article 3.04), as of the entry into force of the Agreement, 
the Parties agree to eliminate customs duties and any other fees or charges on trade 
in originating goods, other than those liste d in Annex 3.04 - Tariff Reduction Programme 
(TRP). Except as otherwise determined in the Agreement, the purpose is not to prevent 
a Party from increasing or maintaining a customs tariff in accordance with the 
WTO Agreement or any other agreement that forms part of the WTO. The Article does 
not prevent a Party from raising a tariff to a level that does not exceed that determined 
in the TRP if this tariff has been unilaterally  decreased to a level lower than that in the 
TRP. During the elimination process, the Partie s shall apply the lower of the tariff in the 
TRP or that in force pursuant to Article I of the GATT 1994 (MFN tariff). Consultations 
shall be held, at the request of any Party, to examine the possibility of accelerating the 
elimination of the tariffs set out in the TR P. Furthermore, the Parties may maintain, 
adopt or modify tariffs on goods not listed in the TRP.  
Does the tariff reduction under this Agreement apply to those taxes under the 
duty drawback scheme?  
 
The reductions do not apply to that context,  but rather to decreases that may be made 
in the MFN tariff. 
 
1.4.  Subject to certain conditions, each Pa rty shall grant duty-free temporary admission 
for some goods, namely: (i) professional equipment necessary for carrying out a 
business activity, trade or pr ofession; (ii) equipment for the press or for sound or 
television broadcasting and cinematographic equipment; ( iii) goods for sports purposes 
or for display or demonstration; and (iv)  commercial samples and advertising films, 
imported from the territory of the other Party, regardless of their origin and whether 
like, directly competitive or substitutable goods are available (Article 3.05). Likewise, 
each Party shall authorize duty-free import of commercial samples of negligible or no WT/REG278/2 • WT/REG331/2 • WT/REG336/2 
 
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  commercial value and of printed advertising ma terials (Article 3.06) . No Party may apply 
a customs duty to a good that has been re-i mported into its territory after repair or 
alteration or has been imported temporarily into its territory for repair or alteration. 
Re-import and admission shall take place wi thin the time-limits established in the 
relevant laws of the Parties (Article 3.07). 
 Please describe the criteria for a Party to  apply a custom duty to a good that has 
been re-imported into its territory after repair or alteration or has been imported 
temporarily into its territory  for repair or alteration. 
 
According to Article 3.07 (Goods Re-entered after Repair or Alteration), in the case of both 
re-entry under paragraph 1 and temporary admission under paragraph 2, no Party may apply a 
customs duty to a good regardless of its origin, that  re-enters its territory after that good has been 
exported or temporarily removed from its territory to the territory of another Party for repair or 
alteration, regardless of whether such repair or alteration could be performed in its territory.  
 
PROVISIONS ON TRADE IN SERVICES 
Scope and definitions  
 
1.5.  Chapter 11 does not apply to: (i) subsid ies or donations accorded by a Party to a 
State enterprise, including loans, guar antees and insurance supported by the 
Government; (ii) air services , including domestic and inte rnational air transportation 
services, whether scheduled or non-schedule d, and auxiliary services related to air 
transport services, except for aircraft repa ir and maintenance services, the sale and 
marketing of air transport and comput erized reservation systems services; 
(iii) government services or functions, such as law enforcement, social rehabilitation, 
pensions, unemployment insurance, social secu rity, social welfare, public education, 
public training, health and child care; (iv) cross-border financial services; and 
(v) procurement by a Party or a State-owned enterprise (Article 11.02.3); and measures 
affecting nationals of a Party seeking acce ss to the employment market of the other 
Party, or employed on a permanent basis in it s territory, or conferring any right on such 
persons with respect to such  access or employment.  
As Chapter 11 (Cross-border trade in service) does not apply to some measures 
i.e. subsidies or donations accorded by a Pa rty to a State enterprise, including loans, 
guarantees and insurance supported by the Government, please clarify whether such 
subsidies cover the tax exemption measure applied by the government.  
 
Chapter 11 does not cover tax-related matters; these are covered by Chapter 21 
(Exceptions), more specifically by Article 21.06.   
1.6.  Chapter 10 on investment covers meas ures adopted or maintained by a Party in 
relation to: (i) the investors of the othe r Party for all matters relating to their 
investment; (ii) investments by investors of the other Pa rty; (iii) investments by 
investors of a Party in another Party wi th respect to performance requirements 
(Article 10.01.1).  
 As the scope of measures in relation to investment is specifie d in Chapter 10, does 
the Chapter cover those of subsidies and gr ants? Moreover, does this Chapter contain 
investment promotion and cooperation elements?   
It does not cover subsidies. See Article 10.09(5) of the Agreement which states that: 
5. Articles 10.02, 10.03 and 10.08 do not apply to: 
 
a. procurement by a Party or a State enterprise; or  
b. subsidies, grants or contributions provided by a Party … including government-supported 
loans, guarantees and insurance. WT/REG278/2 • WT/REG331/2 • WT/REG336/2 
 
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  Regarding the enquiry as to whether Chapter 10 (Investment) of the FTA contains 
investment promotion and cooperation elements, while there is no article on promotion, there are provisions on definitions, principles and obligations, and the dispute settlement mechanism. 
National and MFN treatment  
 
1.7.  Each Party shall accord to cross-border se rvices and service providers of the other 
Party treatment no less favourable than it a ccords, in like circumstances, to its own 
services and service providers (national treatment) and to services and service providers of any other non-Party (MFN treatment) (Article 11.03 and 11.04, 
respectively). Moreover, each Party shall ac cord to cross border services and service 
providers of the other Party the better of the two treatments (Article 11.05
).  
 With regard to financial services, each Party shall grant investors and financial 
institutions and their investments in financia l institutions of the other Party treatment 
no less favourable than that granted to it s own investors and financial institutions 
(national treatment) (Article 12.06) in respect of the establishment, purchase, 
expansion, administration, management, cond uct, operation, sale or other forms of 
disposal of like financial institutions and inve stments in like financial institutions in its 
territory. The treatment granted by a Party to like financial institutions and providers of 
financial services of the other Party, whether the same or di fferent from that granted to 
its own institutions, shall be national treatm ent if it affords equality of opportunity to 
compete (Article 12.06.4 and 5 ). Likewise, each Party shall grant investors, financial 
institutions and providers of cross-border fina ncial services of the other Party treatment 
no less favourable than that granted to those of the other Party or of a non-Party (MFN) 
(Article 12.07).    As regards investment, each Party shall accord to investors of the other Party 
treatment no less favourable than that it a ccords, in like circumstances, to its own 
investors and their investments (national trea tment) or to investors of a non-Party and 
their investments (MFN treatment) in re spect of the establishment, purchase, 
expansion, management, conduct, operation,  sale or other disposal of investments 
(Article 10.02 and 10.03, respectively). Each Party shall grant to investors of the other 
Party and their investments the better of the two forms of treatment. These provisions 
shall not apply to the non-conforming measur es set out in Annex I or to activities 
reserved for each Party in Annex III or to fu ture measures in Annex II. They shall not 
apply either to the treatment accorded with respect to the sectors set out in Annex IV.  
 Under this Agreement, if a Party accord s better MFN Treatment to the third-party 
in any case, shall such Party give the sa me Treatment to the other Party without 
condition? Will such MFN commitment be app lied to other Agreements enforced prior 
to this Agreement?  
 
The same treatment must be accorded in like circumstances, as stipulated in paragraph 2 of 
Article 10.03 (Most-Favoured Nation Treatment) with respect to the establishment, acquisition, 
expansion, management, conduct, operation, and sale or other disposition of investments. The 
same treatment shall also be granted provided the conditions set forth in the reservations for existing non-conforming measures and future measures and the MFN exceptions in Annex IV do not apply. 
GENERAL PROVISIONS OF THE AGREEMENT 
Government procurement  
 
1.8.  The aim of Chapter 16, which concerns government procurement, is to create and 
maintain a single government  procurement market. The Parties undertake to guarantee: 
(i) the participation of the ot her Party's suppliers on equal terms; (ii) transparency and 
non-discrimination; and (iii) the development of cooperatio n and technical assistance 
mechanisms in their government procur ement markets. Neither Honduras, nor 
Nicaragua or Guatemala are party to the WT O Agreement on Government Procurement. 
Panama is an observer in the Committee on  Government Procurement. It applied for 
accession to the GPA in 1997 but there has not been any development since 2001.  WT/REG278/2 • WT/REG331/2 • WT/REG336/2 
 
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   We noted in paragraph 5.27 of the Secretariat's Report indicating that only 
Panama is an observer in the WTO Agreem ent on Government Procurement (GPA) since 
1997 but there has not been any development since 2001. Neither Honduras, nor Nicaragua or Guatemala is party to GPA.  Do Honduras, Nicaragua and Guatemala 
consider requesting an observer status? If ye s, please indicate the plan of seeking the 
observer status under the WTO Agreement on Government Procurement? And if the Government Chapter begins in the next 18 months after the Agreement enters into 
force, whether this chapter will adop t GPA provision as a guideline?  
 
For the time being, Honduras, Guatemala and Nicaragua have no plans to accede to the 
Agreement on Government Procurement or to become observers, so that Chapter 16 of the FTA 
with Panama will be governed only by the FTA itself. 
 Technical Barriers to Trade  
 1.9.  Paragraphs 3.50-3.55: The issue of  metrology as well as the reference to 
metrological organizations are mentioned se veral times under the Technical Barriers to 
Trade (TBT) chapter.  
In general, the TBT chapter concerns mainly about the issues of technical 
regulation and standards. Is there any partic ular reason why the issue of metrology is 
specifically emphasized in the TBT chapter of this FTA?  
 
The mention of the word "metrology" in paragraphs 3.50 to 3.55 has no particular 
significance beyond highlighting the provisions of the Central American Regulations on 
Standardization Measures, Metrology and Authorization Procedures (Resolution 37-99, 
COMIECO XIII).  
Metrology is also seen as helping to facilitate trade between the Parties, making trade 
negotiations more reliable: from the legal metrology point of view, for example, frequent net content measurements for given products enhance consumer protection. 
National and MFN treatment  
 
1.10.  Paragraph 4.12: Each Party shall a ccord to cross-border services and service 
providers of the other Party treatment no less favourable than it accords, in like 
circumstances, to its own services and serv ice providers (national treatment) and to 
services and service provider s of any other non-Party (MFN treatment) (Article 11.03 
and 11.04, respectively). Moreov er, each Party shall accord to cross-border services and 
service providers of the other Party the better of the two treatments (Article 11.05).  
It would be appreciated if you would kind ly clarify what does "the better of the 
two treatments" in paragraph 4.12 imply?  And is there any example for such 
circumstance?   
The phrase "the better of two treatments" in  Article 11.05 means that if in any given 
situation it were possible for the Parties to agr ee to choose between the two options provided for 
in Article 11.03 (NT) and 11.04 (MFN), they could select the one which in their view was better suited to that situation. For the moment, we do not have any specific example of such a situation, 
but the point is that the Parties will simultaneously grant each other favourable treatment.  
 1.11.  Chapter 10 investment covers measur es adopted or maintained by a party in 
relation to (i) the investors of the othe r Party for all matters relating to their 
investment; (ii) investments by investors of the other Pa rty; (iii) investments by 
investors of a Party in another Party wi th respect to performance requirements 
(Article 10.01.1).  
 Thailand wishes to comment on paragrap h 4.5 (iii) of the Factual Presentation 
as follows:   WT/REG278/2 • WT/REG331/2 • WT/REG336/2 
 
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  a. In paragraph 4.5 (iii) only investments by investors of a party in another Party 
with respect to performance requirements  are cited while Article 10.1.1 (c) of 
the Agreement prescribes scope of application of Article 10.07 (performance requirements) and Article 10.15 (investment and environment). Therefore, 
investments by investors of a Party in another Party with respect to 
environment should also be added into (iii) of 4.5; 
b. Article 10.1.1 (c) of the Agreement spec ifies that the Agreement applies to "all 
investments" while the Factual Paper presents that it only applies to 
investments made by investors of the othe r Party. In this connection, Thailand 
would like to seek clarification on the implication of such wording in 
Article 10.1.1 (c), particularly, how would the scope of application with 
respect to performance requirements an d environment be differentiated from 
Article 10.1.1 (b). A few examples to demonstrate the differences would be 
appreciated.  
a. Article 10.01 (Scope and Coverage) is clear as to the coverage of this chapter: 
Article 10.01.1(c) plainly only refers to Article 10.07, and not to Article 10.15.  
Article 10.01 does not distinguish between types of investment: this is clear from the 
assertion that Chapter 10 applies to investments of investors of the Parties, in other words the 
signatories of the Agreement. More specifically, it applies to the measures adopted or maintained by a Party to the Agreement relating to: 
b. the investors of the other Party in all matters relating to their investment; 
c. investments of investors of the other Party in the territory of the Party; and 
d. all investments of the investors of a Party in the territory of the other Party in relation 
to performance requirements as per Article 10.07 of the Agreement. 
__________