RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/TPR/G/180 
12 March 2007  
 
(07-1008) 
Trade Policy Review Body Original: Spanish 
   
 
  
 
TRADE POLICY REVIEW 
 
Report by 
 
COSTA RICA 
 
  
 
Pursuant to the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), the policy statement by Costa Rica is attached. 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Costa Rica. Costa Rica WT/TPR/G/180 
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 CONTENTS 
 
 
  Page 
I. INTRODUCTION 5 
II. ECONOMIC AND TRADE POLICY ENVIRONMENT 5 III. TRADE POLICY DEVELOPMENTS 2001-2006 6 
(i) Multilateral system 6 
(ii) Regional forums 8 
(iii) Negotiation of trade an d investment agreements 8 
IV. FUTURE POLICY  DIRECTIONS 10 
 
 
 Costa Rica WT/TPR/G/180 
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 I. INTRODUCTION 
1. Since its previous Trade Policy Review, Costa Ri ca has continued consolidating its strategy 
of integration into the global economy through active participation in bilateral, regional and 
multilateral trade negotiations, as well as through policies aimed at attracting foreign direct 
investment, particularly in services and high-tech activities. 
2. The success of this trade policy is reflected in the sustained growth of exports driven by the 
diversification of products and markets, as well as in increased foreign direct investment. 
3. It is planned to continue with this model ove r the next few years, with the aim of further 
increasing the volume of exports and consolidating markets important to Costa Rica, through active 
participation in the Doha Round ne gotiations and the negotiation and entry into force of new trade 
agreements with partners of key importance to th e Costa Rican economy.  The ultimate goal of this 
strategy is to support national de velopment policies which promote the generation of new sources of 
employment and improved living standards for the entire population. 
II. ECONOMIC AND TRADE POLICY ENVIRONMENT 
4. In recent years, the external sector has continue d to be one of the main engines of the Costa 
Rican economy.  In the period 2001-2006, exports grew at an average rate of 10.46 per cent, reaching 
a level of 17.9 per cent in 2006, and a record total of US$8.215 billion. 
5. Goods exports grew by an average of 10.46 per cent during the first five years of the present 
decade, driven primarily by industrial goods, whic h account for roughly 69 per cent of total exports.  
Some of the most important industr ial export products are integrated circuits and computer parts, 
medicines, textiles and medical devices.  At the sa me time, agricultural products account for 31 per 
cent of total Costa Rican exports, including bananas,  pineapples, melons and coffee in particular. 
6. Foreign trade in services has expanded over the l ast six years.  While services exports totalled 
US$1.9255 billion in 2001, the corresponding figure  for 2005 was US$2.5355,  an increase of 24 per 
cent over that period.  Tourism was the market leader, followed by transport, computer and 
information services and other business services.  The services sector's share of Costa Rican GDP in 
2005 was slightly more than 60 per cent, while it acc ounted for 64 per cent of total employment in the 
same year, reflecting the importance of this sector in the domestic economy. 
7. The policy to attract foreign direct investme nt has focussed on four specific areas:  the 
electronics industry, the medical devices sector, information technology-based services and tourism.  This strategy has generated a significant incr ease in employment opportunities together with 
substantial transfers of technol ogy and know-how, which has boosted productivity and the volume of 
remuneration in recent years. 
8. The increase in investment flows, which bega n to intensify at the end of the 1990s, has 
continued apace since that period.  Over the last si x years, Costa Rica has re corded an average annual 
growth rate of 4.5 per cent, reaching a level of 7.9 per cent in 2006.  In the latter year, Costa Rica 
achieved a historic record in attracting US$1.41 billion worth of foreign direct investment, more than 
double the inflow of the previous year.  This fi gure represents 6.4 of the gross domestic product. 
9. Despite the solid performance by the external sector of the economy, Costa Rica has been 
unable to achieve the desired fiscal balance.  Th e Government has endeavoured to stabilize public 
finances through expenditure control measures and refo rms to improve tax collection, which served to WT/TPR/G/180 Trade Policy Review 
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lower the deficit from 2003.  The public sector defic it in 2005 stood at 2.3 per cent of GDP and is 
expected to be roughly 0.5 per cent of GDP in 2006. 
10. However, the financial situation in the public  sector has not hampered the effectiveness of 
efforts to maintain stability.  With the aim of reduc ing the inflation rate, the exchange rate system of 
mini-devaluations was modified in October 2006 through the adoption of a system of exchange rate 
bands.  The annual rate of increase in consumer pr ices was successfully lowered from 14.6 per cent in 
2005 to 10.6 per cent in 2006, and it is expected to  continue falling more sharply in 2007 as a result of 
this change. 
III. TRADE POLICY DEVELOPMENTS 2001-2006 
11. The overarching objective of Costa Rica's tr ade policy is to promote, facilitate and 
consolidate the country's integration into the glob al economy in a manner cons istent with its domestic 
economic and social welfare objectives.  To that en d, a package of core strategies was implemented 
between 2001 and 2006 to guide and lend consistency to national policy in the quest for a larger 
presence on world markets. 
12. They consisted of improving and ensuring access for Costa Rican products to foreign 
markets;  safeguarding Costa Rica 's commercial interests against protectionism by other countries;  
establishing rules and procedures for the proper management of trade relations;  monitoring 
compliance with all obligations under trade or invest ment agreements signed by Costa Rica;  broadly 
linking all sectors in the country with export activities;  promoting Costa Rica's exportable supply abroad;  effecting the internal ch anges needed to develop a more efficient economy that fosters the 
growth of foreign trade;  and creating the c onditions necessary to attract domestic and foreign 
investment. 
13. In pursuit of these goals, the Government of Cost a Rica is applying in combination a package 
of instruments that include participation in the mu ltilateral system, deepening regional integration and 
negotiating trade and investment agreements. 
(i) Multilateral system 
 
Costa Rica's participation in the WTO 
 
14. Costa Rica has unwaveringly maintained its commitment to the multilateral trading system 
represented by the WTO.  This commitment has been re flected, in particular, in its active participation 
in the Doha Round and its interest  in a successful outcome to t hose negotiations.  Costa Rica has 
endorsed the goals of the work programme, and has accordingly upheld high levels of ambition on the 
main topics of the Round, particularly agriculture , market access for non-agricultural products and the 
strengthening of the WTO's rules and principles.  In this connection, it is hoped that Members will 
shortly adopt agreements that facilitate progr ess on the objectives of the Doha Round and the 
achievement of a successful outcome thereto. 
15. Costa Rica resolutely supports efforts to foster the inclusion of developing countries in the 
global economy.  In this connection, in the ma rket access negotiations concerning both agriculture 
and NAMA, it has adopted an approach based on th e importance of the export or offensive dimension 
of special and differential treatment.  Similarly, Costa Rica considers that the way in which trade 
contributes to development is rooted in the princi ple of non-discrimination, one of the fundamental 
principles of the multilateral trading system, and it has promoted respect for that principle. Costa Rica WT/TPR/G/180 
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 16. In the light of these objectives, Costa Rica has put forward a number of negotiating proposals 
and has participated actively in formal and inform al coalitions with other Members which share its 
interests.  Some of the topics that are of interest  to Costa Rica in the ongoing negotiations are outlined 
below. 
Agriculture negotiations 
 
17. Costa Rica has been a proponent and active supporter of thoroughgoing agricultural reform 
for many years.  In this area, the aim has always  been to achieve for agri cultural products treatment 
similar to that received by industrial products, maki ng them subject to the same rules and conditions.  
With this aim, and as a member of the Cairns Gr oup, we have made sustained and serious efforts on 
the three negotiating pillars. 
18. Costa Rica's development goals are clearly linked to the opening up of markets and the 
achievement of a distortion-free trading system in  which agricultural products have access to new 
markets under better conditions.  It is a matter of pr iority for Costa Rica to make significant headway 
in reducing and disciplining domestic support and subsidies which distort production and trade in 
agricultural products.  Similarly, as a result of these negotiations, Costa Rica considers it essential to 
make substantial improvements in market access for ag ricultural products and, in particular, to ensure 
full compliance with the long-standi ng commitment to achieve the full est liberalization of trade in 
tropical agricultural products and alternative products, as was recognized in the Framework 
Agreement on modalities adopted in July  2004.  To that end, Costa Rica  has acted as coordinator for a 
group of developing countries, with the aim of sec uring fulfilment of the mandate for tropical and 
alternative products and in order to defend the basic principle of this Organization:  the most favoured 
nation principle.  Costa Rica will also seek to en sure compliance with the commitment adopted at the 
Hong Kong Ministerial Conference concerning the elimin ation of all forms of export subsidies, and it 
hopes that this commitment can become a rea lity very soon and  before the agreed date. 
NAMA 
19. Costa Rica is mindful of the fact that its future as a small country aspiring to development 
depends on its capacity to continue expanding the vol ume and sophistication of its industrial exports.  
This calls for greater market acces s with clearer rules.  Costa Rica supports an ambitious formula for 
reducing industrial tariffs, under which comm itments would be expressed entirely in ad valorem  
terms and all participants would bind all of their tariffs.  To this  end, Costa Rica continues to favour 
the adoption of a harmonizing, straightforward and single Swiss formula to be applied line by line to 
all participants, with two coefficients, one fo r developed countries and another for developing 
countries, which would serve substantially to reduce tariffs, eliminate tariff peaks and high tariffs and 
significantly improve market access. 
Services 
20. Costa Rica recognizes the importance of nego tiations on market access in services and the 
development of GATS rules.  In this connection, it submitted an initial offer and will in due course 
submit a revised offer as part of its contributi on to the successful outcome of these negotiations.  
Similarly, it hopes that those Members to which it has addressed particular requests in this area, 
especially developed Members, will give a satisfactory response to those requests. WT/TPR/G/180 Trade Policy Review 
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WTO Rules  
 
21. The aim of improving access to other markets must  be supplemented by full compliance with 
the commitment to clarify and improve the WTO's rul es, particularly its anti-dumping rules, so as to 
guarantee that these mechanisms do not undermine such  market access and are not used abusively and 
for protectionist purposes. 
Trade facilitation  
 
22. Costa Rica has actively supported the trade f acilitation negotiations because of the importance 
to its exporters and importe rs of regular, straightforward, fair, transparent and efficient cross-border 
procedures that can be used to take full advantage of the opportunities created by trade liberalization. 
Dispute Settlement Understanding review  
 
23. Costa Rica continues to regard the Dispute Settlement Understanding as the best guarantee for 
the protection of its interests, for safeguarding its rights and ensuring predictability and security in its 
trade relations.  Hence the importance to our country  of the negotiations on this review, in which it 
has taken an active part, having put forward proposal s and ideas to further the process.  Costa Rica 
considers that this review should serve to strengthe n the role of the Dispute Settlement Understanding 
as a guarantee of compliance with multilateral rules and commitments and to ensure the integrity and 
credibility of the multilateral system. 
(ii) Regional forums 
 
Central America 
 
24. The Central American countries are Costa Rica's third most important export market after the 
United States and the European Union.  In 2006, 14 pe r cent of Costa Rica's e xports were sent to the 
region, with a value of close to US$1.137 billion. 
25. During the period 2001-2006, work continued on the establishment of a Central American 
customs union.  Thus far, 94.9 per cent of ta riff lines have been successfully harmonized and 
substantial progress has been made in respect of sa nitary and phytosanitary registration, rules of 
origin, safeguards and unfair practices, and customs procedures and regulations.  In 2003, the Council 
of Ministers for Central American Economic In tegration approved the implementation of the 
mechanism for the settlement of Central American  trade disputes as well as the model rules of 
procedure and the code of conduct, which were modi fied by the same Council in 2006 with a view to 
improving their functioning.  Work is currently proceeding on the conclusion of an agreement on 
trade in services and investment. 
26. Costa Rica takes an active and constructive pa rt in all aspects of the negotiation of the 
customs union and considers it important to focu s efforts on the achievement of concrete and 
attainable goals, taking into account the reality of the countries of the region. 
(iii) Negotiation of trade and investment agreements 
 
Free trade agreements in force 
 
27. Free trade agreements with Canada, Chile, th e Dominican Republic and the countries of the 
Caribbean Community (CARICOM) were negotiated a nd put into effect by Costa Rica between 2001 Costa Rica WT/TPR/G/180 
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 and 2006.  Apart from Central America, a free trade agreement with Mexico h as been in force since 
1995, and a partial scope agreement with Panama since 1973.  In addition, a free trade agreement with 
the Dominican Republic, Central America and th e United States was concluded in 2004 and is 
expected to enter into force by the end of 2007. 
28. Costa Rica's exports to markets with which is has preferential agreements accounted for 
24 per cent of total exports in 2006, an increase of 17 per cent compared with the previous year, while 
the country's imports from those markets accounted fo r approximately 13.8 per cent of total imports.  
For the year in question, Costa Rica posted a positive trade balance of US$371 million with those 
trading partners. 
Free Trade Agreement between Costa Rica and Mexico 
 
29. The Agreement between Costa Rica and Mexico, which has been in force for 12 years, 
provides for duty free access for 98 per cent of goods in the countries' two-way trade.  Trade under 
this agreement has been very buoyant, with aver age growth rates of 15.6 per cent for exports and 
9.1 per cent for imports over the last five years.  Despite the continuous increase in exports, Costa 
Rica continues to have a negative balan ce in its trade relations with Mexico. 
Free Trade Agreement between Costa Rica and Chile 
 
30. The Free Trade Agreement with Chile entered into force in February 2002, becoming the 
second new-generation agreement for Costa Rica, whic h contains rules and disciplines applicable not 
only to trade in goods, but also to other areas such  as trade in services, investment and government 
procurement.  Trade with Chile has traditionally be en small and in deficit for Costa Rica.  In 2006 
Costa Rice exported products worth US$14.8 million to  Chile, including medicines, food preparations 
and aluminium sheet and strip.  Imports from Chile  amounted to US$214 million, mainly owing to the 
increase in imports of petroleum oils and copper wire. 
Free Trade Agreement between Central America and the Dominican Republic 
 
31. The Free Trade Agreement between Central America and the Dominican Republic entered 
into force for Costa Rica in March 2002 and provides duty free access for roughly 92 per cent of 
goods.  Costa Rican exports to that market have gr own by an average of 22.2 per cent during the years 
in which the agreement has been in force.  Exports totalled US$141. 5 million in 2006.  Import levels 
have behaved more erratically, having doubled between 2003 and 2004, before fa lling slightly in 2005 
and rising again in 2006, with a closing value of US$18.4 million. 
Free Trade Agreement between Costa Rica and Canada 
 
32. The Free Trade Agreement with Canada, a new-generation agreement and Costa Rica's first 
with a developed country, entered into force in November 2002.  Over the last four years, trade 
between the two countries has recorded high average gr owth rates, particularly in the case of exports, 
which have grown by an average of 27.1 per cent, compared with a rate of 6.1 per cent for imports. 
Free Trade and Preferential Exchange Ag reement between Costa Rica and Panama 
 
33. Under Costa Rica's Free Trade and Preferentia l Exchange Agreement with Panama, in force 
since 1973, tariff preferences of around 25 per cen t are granted on Harmonized System products.  WT/TPR/G/180 Trade Policy Review 
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Trade between the two countries amounted to appr oximately US$430 million in  2006, with a balance 
of US$105.5 million in favour of Costa Rica. 
34. In May 2001, Central America concluded ne gotiations on the normative aspects of the 
establishment of a free trade agre ement with Panama.  One year la ter, Costa Rica initiated bilateral 
market access negotiations, which were suspended th at same year, and it was not until 2006 that the 
countries resumed the negotiations, which are exp ected to conclude in the next few months. 
Free Trade Agreement with the Caribbean Community 
 
35. On 9 August 2005, the Legislative Assembly approved on second reading the Free Trade 
Agreement between Costa Rica and the Caribbean  Community (CARICOM), a trade agreement 
between Costa Rica and 12 CARICOM countries, na mely:  Antigua and Bar buda, Barbados, Belize, 
Dominica, Grenada, Guyana , Jamaica, St. Kitts and Nevis, St. Lu cia, St. Vincent and the Grenadines, 
Suriname and Trinidad and Tobago. 
36. The Agreement entered into force on 15 Novemb er 2005 with respect to Trinidad and Tobago 
and in 2006 with respect to Guya na and Barbados.  Adoption of th e Agreement is still pending in the 
other CARICOM countries. 
37. While it is too early to evaluate the agreemen t with CARICOM, which moreover is valid only 
for Trinidad and Tobago, Guyana and Barbados, it is important to note that exports to the Trinidadian 
market increased by 34 per cent between 2005 and 2006, with a closing value in 2006 of around 
US$27 million. 
38. The agreement with CARICOM provides for immediate duty-free access for approximately 
90 per cent of goods in two-way trade.  Costa Rica grants special and differential treatment to the 
smaller economies of CARICOM by allowing duty-fr ee access for their products on a non-reciprocal 
basis. 
Agreements on the Promotion and Reciprocal Protection of Investments 
 39. Costa Rica has continued with the negotiati on, conclusion and legislative approval of 
agreements on the promotion and reciprocal protection of investments.  These agreements are designed to protect and encourage foreign investme nt through a series of substantive and procedural 
guarantees for investors.  In this context, 13 agr eements are in force between Costa Rica and the 
following countries:  Argentina, Canada, Chile, Chin a, Czech Republic, France, Germany, Korea, the 
Netherlands, Paraguay, Spain, Switzerland and Venezuel a.  At the same time, legislative approval is 
pending for the agreements with Ecuador, Bolivia, Finland, Belgium and Luxembourg. 
IV. FUTURE POLICY DIRECTIONS 
40. Costa Rica will continue the process of inte lligent integration into the global economy over 
the next few years, by identifying important challe nges to be met as a way of generating income to 
enable the population to attain higher standards of  living and social welfare.  Creating quality, well 
paid jobs, enhancing local producers' involvement in foreign trade by promoting production linkages, 
continuing to attract high quality foreign dir ect investment, safeguarding the environmental 
sustainability of economic development and increasing the added value of exports are just some of 
these challenges. 
41. With a view to meeting the challenges, Costa Rica has drawn up a short, medium and long 
term foreign trade strategy focusing on five main priorities;  trade negotiations, export promotion, Costa Rica WT/TPR/G/180 
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 investment promotion, administration of trade agreements and relations with civil society 
organizations. 
42. Costa Rica will continue to seek better market ac cess conditions for its products and services 
through trade negotiations with key economic partners.  Particular atte ntion will be paid to the Doha 
Round multilateral trade negotiation efforts, the co mmencement of negotiati ons in 2007 for the 
conclusion of an association agreement between Central America and the European Union, and 
consolidation of the process of customs uni on with the Central American countries. 
43. Export promotion is a key component of the po licy of integration into the global economy.  
Given the satisfactory results achieved thus far, the Government aims to achieve sustained export 
growth with a view to meeting the target of US$18 billion by 2010. 
44. In the area of investment promotion, the count ry's primary objective will be to continue to 
establish national and foreign companies with high added value, in order to promote the 
diversification of production and the development of new products that will contribute to the transfer 
of know-how and technology and stimulate the proc ess of production linkage.  The medium term goal 
is to achieve annual investment of US$1.5 billion. 
45. As the trade negotiations with other trading pa rtners draw to a close, the issue of the 
administration of trade agreements will become incr easingly important.  Hence, one of the main goals 
is to ensure due compliance with all obligations under all treaties, agreements and other trade and 
investment instruments, whether bilate ral, regional or multilateral in nature. 
46. Finally, it is extremely important to promote and maintain a continuous dialogue with the 
organizations representative of Costa Rican society, in  order to explain the im port and benefits to the 
national development strategy of the linkage with foreign trade, as well as to ascertain and address 
their points of view. 
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