WT/REG313/2  
11 September  2013 
(13-4794) Page: 1/7 
Committee on Regional Trade Agreements  Original:  English/Spanish  
 
  FREE TRADE AGREEMENT BETWEEN PERU AND PANAMA  
(GOODS AND SERVICES)  
QUESTIONS AND REPLIES  
 The following communication, dated 2 September 2013, is being circulated at the request of 
the delegations of Peru and Panama.  
 
 This document reproduces the questions ad dressed to the Parties and the 
responses  submitted.  
 
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Questions from the Delegation of Australia  
 
Questions on goods  
1.1.  In relation to the Parties' tariff elimination schedule, both Parties provide that full 
implementation will be completed b y 2029 . Australia would appreciate if both Parties 
could elaborate the reason behind this extended tariff -phasing.  
The tariff elimination schedule agreed by the Parties reflects  the sensitivities expressed 
by the two Parties during the negotiating process.  
 
1.2.  Australia notes that 293 products from Panama and 131 products from Peru will be 
excluded from tariff elimination . Australia would appreciate if both Parties could 
elaborate the reason behind the exclusions.  
The tariff elimination schedule agreed by the Parties reflects  the sensitivities expressed 
by the two Parties during the negotiating process.  
 
Questions on general provisions on services  
 
General provisions on trade in services  
 
1.3.  With respect to the movement of natural persons (para 4.16), Australia no tes that 
both Panama's and Peru's commitments under Mode 4 are generally broader under the 
Agreement than under their respective GATS schedules . In the case of intra -company 
transferees, however, the requirements under the Agreement are stricter.  
 Could Pa nama and Peru please explain why they chose to introduce stricter 
requirements for intra -company transferees under the Agreement than under the GATS?  
 
Panama, for its part, did not choose  to apply stricter requirements for transfers between 
companies under  the Agreement than under the GATS.  
 
For example:  
 
Whereas the Agreement between Panama and Peru provide s that the natural person should 
have been employed at least one year in that position in the foreign company , outside of the WT/REG313/2  
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  territory of Panama,  within the three previous years, in the GATS schedule the requirement is only 
six months . The Agreement between Panama and Peru provides for a length of stay of one year 
with possible extension for the same categories, a commitm ent that was not made under 
the GATS. We do not therefore consider that the Agreement with Peru is stricter.  
 
Moreover, the scope of coverage of a positive list such as the GATS one is much more 
limited, since it only includes the sectors committed in the schedule, while the FTA covers th e 
entire services universe.  
 
Peru has not chosen  to apply stricter requirements than those laid down in the  GATS  either . 
 
In the Temporary Entry chapter of the Agreement with Panama, Peru assumes commitments 
in respect of all of the immigration requirement s applicable to  temporary entry of intra -company 
transferees . However, if we look at Peru's WTO commitments on Mode 4, the only bound 
commitments concern the quota of foreign workers ( a maximum of 20% of total employees 
of a service supplier may be foreign ers). There is no bound immigration requirement that applies 
to intra -company transferees . In that respect, the commitments under the Trade Agreement 
are deeper.  
 
Similarly, Peru's WTO commitments apply only to the servic es sectors that are included 
in Peru's schedule of commitments, while the intra -company transferee commitments in the 
bilateral agreement apply to all services sectors and to non -service s sectors.  
 
Sector -specific commitments – Panama  
 
1.4.  Table 4.2 clearly shows the significant improvements in  the level of commitments 
made by Panama on services in the Agreement in comparison to its GATS commitments . 
Australia supports ongoing liberalization of services trade and the reduction in gaps 
between commitments on services and actual levels of market o penness, and commends 
Panama on its efforts.  
 Could Panama please explain why it chose  not to make any commitments 
in health -related and social services under the Agreement, given it made partial 
commitments in health -related and social services in its GAT S schedule?  
 
The partial commitments in health -related and social services in Panama's GATS schedule 
concern investment, and do not include commitments in Mode 4  – as in the Agreement . 
On the other hand , in the Agreement with Peru, Panama does not list any  reservation s applying 
to health -related and social services (excluding professional services in the field of health), so that 
there is, in fact,  an improvement on the GATS . The reservation in Annex II on social services 
refers to measures introduced for r easons of public interest, and is not considered a  restriction.  
 
1.5.  Australia notes that Panama has made signi ficant GATS plus commitments 
in business services in the Agreement (para 4.34) . However, Panama has imposed 
a restriction on the hiring of foreign ar chitects and engineers that appears to be stricter 
than its GATS restriction (i.e. when a foreign professional is hired for less 
than 12 months, as opposed to more than 12 months under the GATS, a Panamanian 
professional must also be hired to be trained to  replace the foreigner at the end 
of the contract).  
 Could Panama explain why it chose to introduce a stricter restriction on the hiring 
of foreign architects and engineers under the Agreement compared to Panama's 
commitments in its GATS schedule?  
 
Panama has not chosen to introduce stricter requirements on the hiring of foreign architects 
and engineers under the Agreement compared to its commitments in its GATS schedule . Under the 
GATS, for engineers and architects to be able to work in Panama they have to meet the 
requirements laid down by the Technical Board of Engineers a nd Architects of Panama if, 
for example, there are no qualified  Panamanians that could provide the service . The Agreement 
with Peru includes a new possibility whereby the service may be performed provided Peru permits 
Panamanian engineers and architects to work in Peru, in conformity with the qualification 
requirements established by the two countries.  WT/REG313/2  
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Though apparently there has been a change in the wording with respect to the 12-month 
period, making it appear more restrictive than in the GATS schedule, this is not Panama's 
intention . When it comes to interpreting the Annexes, it is the measure (law) that prevails over all 
other elements . The law has not been amended  in this respect , and  it applies exactly as worded 
in Panama's GATS schedule.  
 
1.6.  Australia notes that in Mode 1 for banking an d other financial services, 
the coverage of activities seems broader in the GATS than in the Agreement (para  4.42).  
 Could Panama explain why it chose to  take a narrower approach on its 
commitments in the Agreement than under the GATS?  
 
Panama did not cho ose to take a narrower approach on its commitments in the Agreement 
than under the GATS . In the Agreement, since the list is a negat ive one, there is no m ention 
of restrictions to Mode 1 for banking services.  
 
Sector -specific commitments – Peru  
 
1.7.  Australia notes that, under the Agreement, Peru applies a nationality and local 
presence requirement to the staff of auditing companies, which is not included in Pe ru's 
GATS commitments (footnote 43).  
 Could Peru explain why they chose to introduce this restriction in the Agreement?  
 
This provision appears in the Internal Regulations of the  Board of Public Accountants 
of Lima.  
 
In the case of Peru's WTO commitments, it states that : "Accounting, auditing and 
bookkeeping services are regulated by all of the provisions of the Board of Public Accountants ." 
 
Domestic regulation  
 
1.8.  Australia is interested in the approach Panama and Peru took towards domestic 
regulation provis ions in the Agreement (para  4.68).  
 Could Panama and Peru explain its approach to inc orporate GATS Article VI.5 
into the Agreement?  
 
Article VI.5 was not incorporated.  
 
Sector specific provisions on trade in services  
Telecommunications  
 
1.9.  Australia notes tha t Panama and Peru have introduced a more detailed 
transparency provision in the Telecommunications chapter of the Agreement than is 
contained in either the GATS Annex on Telecommunications and the GATS Reference 
Paper (para  4.93).  
 Could Panama and Peru ex plain the implications of this transparency provision?  
 
Unlike Peru, Panama is not a party to the Reference Paper, and consequently, it has not 
assumed the transparency obligations in that Paper.  
 
 The transparency aspects of the Telecommunications chapter  of the Agreement are specific 
to telecommunications, which implies obligations additional to those contained in the Transparency 
chapter (publication and suppl y of information) . Indeed, the chapter on Telecommunications 
in the Agreement contains an articl e on transparency which calls for the publication of : 
(i) the frequencies bands allocated ; (ii) measures relating to public telecommunications networks 
and services, and the conditions for connecting terminal or other equipment to the public 
telecommunicat ions networks ; (iii) the requirements for granting a permit, registration or licence ; WT/REG313/2  
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  (iv) information on the bodies responsible for developing, amending and adopting measures 
relating to standards that affect access to and use of telecommunications servic es. 
 
Questions on investment  
 
1.10.   Paragraph  12.1.4 of the Agreement states that nothing in the Investment c hapter 
imposes an obligation on a Party to privatise an investment or stops a Party from 
designating a monopoly.  
 Could Panama and Peru explain why they thought this greater certainty language 
was necessary and explain what concerns it aims to address?  
 
Like all "greater certainty" clauses, this paragraph seeks to set out explicitly the 
understanding of the Parties with regard to the obligations under that  chapter.  
 
 In this particular case, the chapter on Investment does not require the Parties to privatise, 
nor does it stop them from designating a monopoly . Both Panama and Peru were clear in this 
understanding during and after the negotiations . However, i n order to avoid any different 
interpretation in the future, the understanding was mentioned explicitly.  
 
Other investment paragraphs  
 
1.11.   How do Panama and Peru see the limitation in scope related to security interests 
in Paragraph 12.1.5 interacting with Art icle 21.2 on Essential Security?  
 We do not see any limitations in this respect : paragraph 12.1.5 clearly stipulates that 
nothing in that chapter imposes an obligation on a Party to protect investments made with capital 
or assets derived from illegal activ ities, and it will not be interpreted as preventing a Party from 
adopting or maintaining measures aimed at preserving the public order.  
 
 This paragraph does not limit or contradict Article 21.2, which explains that the Agreement 
does not prevent a Party f rom protecting its essential security interests.  
 
1.12.   Given the fact that Paragraph  12.6.9 covers the technology transfer performance 
requirement in subpara graph  12.6.1(f), could Panama and Peru explain why they saw a 
need to also specify in Paragraph 12.6.2 ( Paragraph 4.20 of the Factual Presentation 
refers) that requiring an investment to use a technology to meet generally applicable 
health, safety or environmental requirements is not considered a breach 
of subpara graph  12.6.1(f)?  
 Paragraph 12.6.2 is importa nt, in that it states that any regulatory requirement that applies 
to health, security or the environment that involves the use of any specific technology shall not be 
considered a performance requirement.  
 
 It fully ensures that a requirement of this kind  will not be considered a technology transfer 
requirement under Article 12.6.1(f).  
 
1.13.   Could Peru explain why for Peru an expropriation may be made for national 
security reasons (under subpara graph  12.10.1(b)) and how this interacts with 
Article  21.2 on Essen tial Security?  
 The Constitution of Peru provides the possibility of expropriation for national security 
reasons . This is why this mention is made in the Trade Agreement.  
 
 As regards interaction, Article 12.2 on Essential Security applies across the board  to the 
whole Agreement, including the chapter on Investment, while Art icle 12.10 on Expropriation 
and Compensation applies only to the disciplines of the chapter on Investment.  
 WT/REG313/2  
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  1.14.   Could Panama and Peru explain why they thought it was useful to add footnote 14 
to Annex  12.10 on Expropriation setting out for greater certainty that the list of public 
welfare objectives is non -exhaustive?  
 During the negotiations, Panama and Peru decided not to define objectively and expressly 
the concept and scope of the term " public welfare" applicable to th e two countries  as referred 
to in Annex 12.10 on Expropriation . The Parties therefore considered that  for greater certainty, 
i.e. in order to make it clear that  the legitimate public welfare objectives were not limited to pu blic 
health, security and environment only, there was a need to include footnote 14.  
 
Questions on safeguard mechanisms  
 
Global safeguards (para  3.4.2.1 ) 
 
1.15.   The Agreement does not confer any additional rights or obligations to the Parties 
with regard to acti ons taken under Article XIX of GATT 1994 and the WTO Agreement on 
Safeguards except that imports from the other Party can be excluded from the 
imposition of global safeguards if they are not a substantial cause of the serious injury 
or threat (Article 8.8) . 
How is "substantial cause " defined?  
 There is no definition of "substantial cause" in the section on Global Safeguard Measures . 
However, and without prejudice to Article 9 of the Agreement on Safeguards (Developing Country 
Members), it should be noted th at the provision on exclusion of imports from the other Party is 
optional, and  depends on the Party imposing the safeguard measure . It is up to the Party imposing 
the measure to determine whether or not the imports are a substantial cause of injury, us ing as 
a reference, for example, the definition of "substantial cause" in Article 8.7 of the section on 
Bilateral Safeguard Measures in the same chapter (a cause which is import ant and not less than 
any other  cause).  
 
1.16.   The DSM established under the Agreement do es not apply to matters related 
to global safeguards, except when a good is subject  simultaneously to a global 
and bilateral safeguard.  
 Australia is interested in how a global safeguard operates when a good is subject 
simultaneously to a bilateral safegua rd. 
 
 According to  paragraph  3 of Article 8.8 of the FTA (Global Safeguard Measures) , neither 
Party shall apply, in  respect of the same good and during the same period, a bilateral safeguard 
measure under  Section A of the Agreement (Bilateral Safeguard Mea sures) and a measure under 
Article XIX of the GATT 1994 and the WTO Agreement on Safeguard Measures . At the same time, 
paragraph  5 of Article 8.8 states that chapter 18 of the FTA (Settlement of Disputes) shall not 
apply to the section on Global Safeguard Measures ( Section B) except as provided in the 
above -mentioned para graph 3. In other words, if a Party were to simultaneously apply , to the 
same good , a bilateral safeguard measure and a global safeguard measure, that practice could be 
subject to the dispu te settlement provisions of the FTA, since it would be inconsistent with the 
obligations under para graph  3 of Article 8.8 (which prohibit s such simultaneous application ). 
 
1.17.   A global safeguard measure may only be applied to the extent necessary 
to prevent or  remedy serious injury.  
 If, as suggested by this report, it is possible to apply both a global and bilateral 
safeguard on a good, how is the remedy determined?  
 
a. For example, what is the standard for determining injury : serious injury 
or substantial cause of serious injury?  
 Under para graph  3 of Article 8.8 of the Agreement (Global Safeguard Measures), it is not 
possible to apply simultaneously, in respect of the same goo d and during the same period, 
a bilateral safeguard measure under Section A of the Agre ement (Bilateral Safeguard Measures) 
and a  measure under Article XIX of the GATT 1994 and the WTO Agreement on Safeguards.  WT/REG313/2  
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1.18.   How do authorities decide which mechanism is triggered and applied?  
 Should  investigations be initiated for the application of a  bilateral safeguard measure on  the 
one hand , and a global safeguard measure on the other, the Party initiating the investigations 
would have to comply, in both cases, with the provisions o f Section A of chapter 8 
of the Agreement (Bilateral Safeguard Measures ) and with Article XIX of the GATT 1994 and 
the WTO Agreement on Safeguards.  
 
 Thus, it w ould only be able to apply a bilateral safeguard measure if, as a result of 
the reduction or elimination of a customs tariff under the FTA, an originating good were being 
imported under such circumstances  as to constitute a substantial  cause of serious injury or threat 
of injury to the domestic industry . Likewise, it would only be able to apply a global safeguard 
measure if, as a result of unforeseen developments and of the effect of obligations under 
the GATT, a product is being imported under  such circumstances  as to cause or threaten to cause 
serious injury to domestic  producers.  
 
 The independent decision of each Party as to the mechanism activated and applied will 
depend on the results of the investigations conducted and the particular circumstances of each 
case, bearing in mind that a bilateral safeguard measure and a global safeguard measure may not 
be applied in respect of the same good and during the same period.  
 
Questions from the Delegation of the European Union  
 
Regulatory provisions on trade in goods  
Other regulations  
Cooperation mechanism in trade remedies  
 
1.19.   According to para graph 3.73, the Parties agree to establish a cooperation 
mechanism between their inve stigating authorities in the areas of anti -dumping, 
countervailing and safeguard measures (Article 8.10).  
 Could the Parties give additional information on how this provision has been 
implemented since now, indicating which cooperation mechanism has been established 
and on which occasions?  
 
 In Article 8.10 of the FTA, Peru and Panama agreed to establish a cooperation mechanism 
between their investigating authorities. According to that article, cooperation between the Parties 
could include, inter alia , the exchange of available non -confidential information on trade defence 
investigations they have conducted in respect of imports originating in or coming from 
third countries; technical assistance in trade defence; and the exchange of information to improve 
understanding of the chapter of the FTA on Trade Defence and of the Parties' t rade 
defence  systems.  
 
 To date , the investigating authorities of Peru and Panama have not made use of this 
cooperation mechanism in the framework of the FTA.  
 
General provisions  of the Agreement  
Relationship with other agreements concluded by the Parties  
 
1.20.   According to para graph 5.20 of the Factual Pres entation (and with reference 
to Article  1.3 of the Agreement), the Parties affirm their existing rights and obligations 
with respe ct to each other under the WTO Agreement and other agreements to which 
they are party. Furthermore, they also indicate that in the event of any inconsistency 
with these agreements, the Agreement will prevail, unless specified otherwise.  
a. Could the Parties c larify how this provision respects the general principles 
of international law?  
 Through this provision, the two countries  are seeking to reaffirm their full respect for their 
international trade commitments, in particular their WTO commitments.  
 WT/REG313/2  
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   The prov ision is fully consistent with the rules of international law as set forth 
in Article  30(4)(a) of the Vienna Convention on the Law of Treaties of 1969. That article states that 
in relations between States Parties to two treaties , the later treaty shall pre vail where there is any 
incompatibility.  
 
b. How the Parties can assure that it will no t potentially reduce Peru's 
and Panama's commitments towards the EU (as well as towards the WTO) 
in case the Peru -Panama Agreement would be contrary to those?  
The FTA betwe en Peru and Panama was negotiated in conformity with Article XXIV 
of the GATT  1994 and Article V of the GATS. It is therefore difficult to see how  there could be any 
infringement of the rights of the EU or any other WTO Member.  
 
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