WORLD TRADE  
ORGANIZATION  WT/REG196/3 
9 May 2008 
 (08-2198) 
Committee on Regional Trade Agreements  
  
 
  
 
 
FACTUAL PRESENTATION 
 
Bilateral Protocol between 
El Salvador and Panama 
to the 
Free Trade Agreement between 
Central America and Panama 
 
Goods and Services 
 
Report by the Secretariat 
 
 
 
 This report, prepared for the considera tion of the Free Trade Agreement between 
Panama and El Salvador has been drawn up by the WTO Secretariat on its own responsibility and in full consultation with the Parties.  The report has been drawn up in 
accordance with the rules and procedures cont ained in the Decision on a Transparency 
Mechanism for Regional Trade Agreements (WT/L/671).  Any technical questions arising from this report may be addressed to Ms Maria Pillinini (Tel.:  +41 22 739 5244).  WT/REG196/3 
 Page iii 
 
 
  TABLE OF CONTENTS 
 
  Page 
 
I. TRADE ENVIRONMENT  1 
A. O VERVIEW  1 
B. T RADE IN GOODS  1 
C. T RADE IN SERVICES  5 
II. TREATY CHARAC TERISTIC ELEMENTS  9 
A. G ENERAL ASPECTS  9 
B. T RADE IN GOODS  11 
1. National treat ment and market access for goods  11 
(a) Import duties and charges and quantitative restrictions  11 
(b) Rules of origin  17 
(c) Export duties and charges and quantitative restrictions  19 
2. Provisions regulating trade in goods  20 
(a) Rules  20 
(b) Customs procedures  21 
(c) Safeguard measures  21 
(d) Unfair trading practices  23 
C. T RADE IN SERVICES  23 
1. Scope and definitions  23 
2. General provisions on trade in services  24 
(a) National and most-favoured-nation treatment and level of treatment  24 
(b) Performance requirements and quantitative restrictions  25 
(c) Other provisions relating to investment  25 
(d) Other provisions relating to cross-border trade in services  26 
(e) Denial of benefits  26 
(f) Reservations and exceptions  27 
(g) Committee on Investment and Cros s-Border Trade in Services  30 
(h) Temporary entry of business persons  30 
3. Provisions relating to specific sectors of trade in services  31 
(a) Financial services  31 
(b) Telecommunications  32 
4. Sectoral liberalization commitments  33 
(a) Panama  34 
(b) El Salvador  36 
D. C OMMON PROVISIONS GOVERNING TRADE IN GOODS AND IN SERVICES  38 
1. Competition policy  38 
2. Government procurement  38 
3. Intellectual property  39 
4. Transparency  39 
5. Institutional framework  39 
6. Dispute settlement  40 
7. Exceptions  43 
8. Relation to other agreements signed by the Parties  43 
ANNEX I 45 
ANNEX II 50 
ANNEX III  51  WT/REG196/3 
 Page 1 
 
 
  BILATERAL PROTOCOL BETWEEN PANAMA AND EL SALVADOR TO the 
FREE TRADE AGREEMENT BETWEEN CENTRAL AMERICA AND PANAMA 
(GOODS AND SERVICES) 
 
Factual Presentation by the Secretariat  
 
I. TRADE ENVIRONMENT 
A. OVERVIEW  
1. The links between Panama and El Salvador ma y be defined as "natural" inasmuch as they 
share geographical, linguistic and historical ties, among others.  Their economie s are similar in size, 
with Panama's gross domestic product (GDP) amoun ting to US$17,097 million in 2006 and that of 
El Salvador to US$18,306 million, although Panama , with a population of a little over 3 million, in 
2006 had a per capita GDP twice the size of that of  El Salvador, whose population in the same year 
stood at more or less 7 million.1 
2. As regards the size of their external sectors, in 2006 Panama was ranked 101st in the world as 
a goods importer and 135th as an exporter, with a 0.04 per cent share of world imports and a 0.01 per 
cent share of exports.  El Salvador, for its part, was in 86th place in the world for goods imports and 
105th place for exports, accounting for 0.06 per cent a nd 0.03 per cent of world imports and exports, 
respectively. 
3. In the matter of trade in services, in 2006 Panama's world ranking was 93rd for imports, with 
0.06 per cent of the total, and 63rd for exports, with 0.14 per cent of the total.  The corresponding 
figures for El Salvador were 0.06 per cent and 0.05 per cent, respectively, giving it a world ranking of 
97th for imports and 90th for exports.2 
B. TRADE IN GOODS  
4. Charts I.1 and I.2 below show developments in trade between the two countries and between 
them and the rest of the world.  It will be seen that  both Panama and El Salvad or have run a persistent 
trade deficit with the rest of the world, while in their bilateral trade relations El Salvador has had a 
persistent trade surplus with Panama. 
 
  
                                                     
 
1 The cumulative figures used in this section are taken from the WTO publications "International Trade 
Statistics 2007" and "Trade Profiles 2007".  They may therefore not coincide with the data provided by the national authorities. 
2 WTO Trade Profiles, 2007. WT/REG196/3 
Page 2  
 
  012345
2002 2003 2004 2005 2006020406080100US$ billion US$ millionChart I.1 – Panama:  Goods imports from and exports to the world and
El Salvador, 2002-2006
Source: Office of the Comptroller-General of the Republic of Panama .Imports from El Salvador
Exports to El SalvadorTotal Imports
Total ExportsLeft-hand scale: Right-hand scale:
 
 
 
 
01234567
2002 2003 2004 2005 2006020406080100120140US$ billion US$ millionChart I.2 – El Salvador:  Goods imports from and exports to the world and 
Panama, 2002-2006
Source: Central Reserve Bank of El Salvador.Imports from Panama Total ImportsLeft-hand scale: Right-hand scale:
Exports to Panama Total Exports
 
 
  WT/REG196/3 
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  5. Chart I.3 shows the composition of trade between the parties and their exports and imports to 
and from the rest of the world, on the basis of the division into sections of the different product 
categories under the Harmonized System (HS), using the arithmetic mean of trade flows between the 
years 2003 and 2005. 
6. Two categories of products – chemicals and wood pulp – made up 57.6 per cent of 
Panamanian imports from El Salvador, while mine ral products and prepared foods accounted for a 
further 17.5 per cent.  Salvadoran imports from Pa nama are concentrated in four sectors, namely 
prepared foods, live animals and animal products, wood pulp and chemicals, which together make up 
70.4 per cent of the total. 
7. Trade with the rest of the world was more dive rsified than bilateral trade except in the case of 
Panama's total exports, 77.1 per cen t of which were concentrated in only two categories of products – 
live animals and animal products, and vegetable products.3  Panama's total imports clearly showed 
greater diversification than its exports, since six rather than two component categories accounted for 
three-quarters of total imports, the most important being machinery, mineral products and chemicals, 
which together made up 46 per cent of imports.  El  Salvador's exports a nd imports both showed a 
similar trend.  Despite the prominence of prepar ed foods among exports, representing 20.9 per cent of 
the total, they were followed by five categori es of products – vegetable products, base metals, 
chemicals, textiles and wood pulp – which togeth er accounted for a little over 54 per cent of all 
exports.  El Salvador's overall im ports followed a similar pattern, in asmuch as only two categories – 
mineral products and machinery – exceeded 15 per cent of total imports, while a total of eight 
categories accounted for more than 5 per cent of total imports. 
                                                      
3 "Fish and crustaceans, molluscs and other aqua tic invertebrates" (HS Chapter 3) accounted for 
46.1 per cent of total exports to the rest of the world. WT/REG196/3 
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  Chart I.3
Panama and El Salvador :  Breakdown of mercha ndise trade by product,
2003-2005 average (percentages)
Panama:  Imports from El Salvador El Salvador:  Imports from Panama
Sources:       Vice Ministry of Foreign Trade (VICOMEX) Depart ment of Statistics, Office of the Comptroller
                      General of  the Republic of Panama.                      Central Reserve Bank of El Salvador, Balance of Payments Department.            Total:  9.9 millon dollars
Total:  3.625 billion dollars Total:  4.892 billion dollars
Total:  884.3 million dollars Total:  1.4028 billion dollarsPanama:  Exports to the rest of the world El Sa lvador:  Exports to the rest of the worldPanama:  Imports from the rest of the world El Salvador:  Imports from the rest of the world
Miscellaneous articles 2.2Pulp of wood
15.3
Chemicals 11.4Prepared foodstuffs
22.1Other 
2.8
Miscellaneous articles 2.0
Pulp of wood 4.6Other 
8.7 Mineral products
15.9
Chemicals 12.4
Pulp of wood 9.4Prepared foodstuffs 7.6Plastics 6.4Other
7.4
Mineral 
products
16.2Base metals  3.1Machinery
18.5
Vehicles and 
aircraft 10.7Chemicals 
11.6Textiles 4.0
Base metals 7.2
Prepared foodstuffs
20.9Plastics 4.9
Base metals 11.5Plastics 4.4
Vehicles and aircraft 7.3
Other
9.0Other
4.4
Vegetable products
25.5Vegetable products 
12.1Base metals 3.9
Prepared foodstuffs  
7.9
Textiles 9.6Plastics 6.3Mineral products 4.7Live animals and animal products 2.9 Chemicals  2.1
Machinery 4.7Machinery
15.7
Base metals 7.3Live animals and animal 
products 
 17.7
Live animals and animal products 3.4
Vegetable products  3.5Articles of stone, plaster, 
cement 9.7Animal or vegetable oils 4.1
Chemiclas 15.3
Prepared foodstuffs 
8.1Pulp of wood 4.1
Vegetable products
  5.3Textiles 4.8Base metals 8.0
Live animal and 
animal products
51.6Total:  51.1 millon dollarsOther
5.5
Prepared foodstuffs 
8.4Plastics 3.3
Mineral products
9.1Base metals 6.1
Machinery and 
mechanical
applicances 6.7Chemicals
37.9
Pulp of wood
19.7Animal or vegetable oils 3.3
 
  WT/REG196/3 
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  C. TRADE IN SERVICES  
8. In 2006, El Salvador's imports of commercial services amounted to US$1,458 billion, or 
0.06 per cent of the world total, while exports amounted to US$1,464 billion, or 0.05 per cent of the world total, placing El Salvador in 97
th position in the world as an importer of commercial services 
and in 90th position as an exporter.4  Imports of services in that year accounted for 19.1 per cent of 
El Salvador's total imports, while exports of services constituted 29.4 per cent of the total. 
9. Chart I.4 shows the evolution of Salvadoran  exports and imports of commercial services 
during the period 2000-2006.5  El Salvador's exports to the world increased by 115.2 per cent over this 
period, with a 33.3 per cent spike in 2006 compared w ith 2005.  Imports grew at a slower pace, with a 
59 per cent increase in value between 2000 and 2005.  As a result of this growth differential between 
exports and imports, the Salvadoran deficit declined considerably during the years in question, and in 
2006 El Salvador recorded a surplu s in its services trade balance. 
10. One reason for this divergence between export and import trends was the development of 
travel-related services, which tripled in valu e between 2000 and 2006, becoming the largest single 
component, at 57.9 per cent, of total services exports.  The second largest sector in 2005 was that of 
transport services, which accounted for 23.4 per cent of  the total and also grew substantially, by 
41.6 per cent, during the period 20 00-2006.  Another important sector is that of communications, 
which grew by 61.6 per cent during the period under consideration.  These three sectors accounted for 
90.6 per cent of Salvadoran services exports in 2006.  On the other hand, insurance services declined 
by 52.3 per cent between 2000 and 2006, and other business services by 28.4 per cent. 
 
                                                      
4 WTO, Trade Profiles, 2007. 
5 The data used for this chart follow the definition of  services in the balance of payments, which does 
not include all modes of supply. WT/REG196/3 
Page 6  
 
  0.00.20.40.60.81.01.21.41.6
2000 2001 2002 2003 2004 2005 20060.00.20.40.60.81.01.21.41.6
2000 2001 2002 2003 2004 2005 2006Chart I.4 - El Salvador:  Total commercial services trade, 2000-2006
Exports Imports
Transport services Insurance services Personal, cultural and recreational 
servicesTravel-related services Financial services
Communication services Computer and information servicesGovernment services
Source : Central Reserve Bank of El Salvador.Construction services Royalties and licence fees Other business servicesUS$ billion
 
 
11. The total inflow of foreign direct investment (F DI) into El Salvador from Panama and the rest 
of the world during the period 2002-2006 is shown in Chart I.5.  The total stock of FDI increased 
steadily during that period, with a spike of 22 per cent in 2006 compared with 2005;  in 2006, the 
stock of FDI amounted to US$4,465 billion, an in crease of 42.5 per cent over the 2002 level.  FDI 
from Panama more than doubled over the same period, particularly afte r 2005.  However, with a total 
value of US$222.6 million, it represented only 5 per cen t of total accumulated FDI in El Salvador in 
2006. 
  WT/REG196/3 
 Page 7 
 
 
  05001,0001,5002,0002,5003,0003,5004,0004,5005,000
By sector Panama By sector Panama By sector Panama By sector Panama By sector Panama US$ millionChart I.5 - El Salvador:  FDI from Panama by economic  sector, 2002-2006
Industry
Electricity Maquila Trade
Agriculture and fisheriesServices, construction, 
mining and quarryingCommunications Finance
Inter-company loans2002 2003 2004 2006 2005
 
 
12. In 2006, Panama's imports of commercial services amounted to US$1,631 billion, or 
0.06 per cent of world imports, while its exports of such services amounted to US$3,861 billion,  or 0.14 per cent of the world total.  In that year, Panama ranked 93
rd worldwide in terms of imports of 
commercial services and 63rd in terms of exports.  Exports of commercial services constitute a high 
proportion of Panama's foreign trade, accounting for 78.7 per cent of total exports in 2006, and 
25.1 per cent of total imports. 
13. Chart I.6 shows the evolution of Panama's co mmercial services exports  and imports in the 
period 2000-2005.  Both exports and imports grew by more than 50 per cent over that period, with 
slightly higher growth for exports (57.7 per cent compared with 51.6 per cent for imports).  Thus, 
Panama consolidated the surplus it ha d maintained throughout the period. 
14. The largest services sector is transport, which accounted for 56.5 per cent of total exports in 
2005.  It is followed by travel-related services, wi th 24.8 per cent of the total, and other business 
services, with 7.5 per cent.  Financial services we re the third largest sector between 2002 and 2004, 
although their value has decreased ove r the past two years.  Mention should also be made of the 
94.4 per cent growth in communication services between 2000 and 2005.  A similar trend is 
observable in respect of imports;  while the relative weight of travel services imports is lower (15.7 per cent of total imports), imports of ot her business services and of financial services each 
account for about 10 per cent of the total.  Fina ncial services imports grew by 332.7 per cent during 
the period under review.  Other sectors in which imports have risen significantly are transport, 
communication and travel services, with percentage increases of 54.9, 51.7 and 43.9, respectively. 
 
  WT/REG196/3 
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  0.00.51.01.52.02.53.03.5
2000 2001 2002 2003 2004 20050.00.51.01.52.02.53.03.5
2000 2001 2002 2003 2004 2005Chart  I.6 - Panama:  Total commercial services trade, 2000-2005
Exports ImportsUS$ billion
Transport services Insurance services Other business services
Travel-related ervices Financial services
Communication services Computer and information servicesPersonal, cultural and recreational 
services
Construction services Royalties and licence fees Government services
 
15. Chart I.7 presents FDI in Panama in terms of both accumulated value (volume) and annual 
current value, by branch of economic activity betw een 2001 and 2005.  In volume terms FDI grew by 
39.6 per cent over that period, to reach levels of  US$10.2 billion in 2005.  The chart makes it clear 
that, traditionally, three branches of activity have  attracted between 67 per cent and 78 per cent of 
total FDI and that in 2005 81.7 per cent of FDI fl ows were concentrated in transport, storage and 
communications.  The flow chart shows that in so me years during the period concerned there was 
disinvestment in the sectors of manufacturing industry;   financial intermediation;  community, social 
and personal activities;  and, above all, other activities. 
  WT/REG196/3 
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  0123456789101112
2001 2002 2003 2004 2005Chart  I.7 - Panama:  FDI by branch of economic activity, 2001-2005
                   Volume                                                                         Flows
Manufacturing industry
Financial intermediation
Source:  Office of the Comptroller General of the Republic of Panama.Wholesale and retail trade
Transport, storage and communications
Other activitiesElectricity, gas and water supply
Community, social and personal activitiesReal estate activitiesUS$ billion                                                                                                           US$ thous and
 2001 2002 2003 2004 2005 
 316.3 -75.9 3.1 41.4 -61.6 
 94.8 150.0 126.1 264.8 416.1 
 78.8 53.3 120.7 289.7 786.3 
 -56.9 -184.8 311.8 427.5 291.5 
 19.0 0.8 0.1 23.6 140.1 
 82.9 78.9 76.6 3.8 79.8 
 -1.5 0.1 12.8 0.3 6.1 
 -66.4 76.1 166.4 -32.1 -696.3 
Total 467.1 98.4 817.6 1,019.0 962.2 
 
 
II. TREATY CHARACTERISTIC ELEMENTS 
A. GENERAL ASPECTS  
16. The Free Trade Agreement between Panama and El Salvador (hereinafter the Agreement) fits 
into the framework of the Agreement between th e countries of Central America and Panama, which 
was signed on 6 March 2002 by the respective Governments.6  In order for the Treaty to enter into 
force between Panama and each Central American country, the countries concerned are to exchange 
instruments of ratification which must contain – in  a bilateral protocol – at least the following 
elements:  tariff reduction programme;  specific rul es of origin;  reservations and restrictions in 
respect of services and investment;  and import and export restrictions.  Unless otherwise stipulated, 
the Agreement applies on a bilateral basis between Panama and each of the Central American countries, and entered into force between Panama and El Salvador (hereinafter the Parties) on 
11 April 2003.  On 24 February 2005, the Parties notified to the WTO the aspects relating to trade in 
services and trade in goods, respectively, in the fo rm of an agreement liberalizing trade between the 
                                                     
 
6 The countries of Central America are the Republics of Costa Rica, El Salvador, Guatemala, Honduras 
and Nicaragua. WT/REG196/3 
Page 10  
 
  Parties of the kind referred to in Article V, paragr aphs 1 and 3, of the GATS, and in the form of an 
agreement establishing a free trad e area within the meaning of Article XXIV of the GATT 1994.
7 
17. The Agreement comprises 22 chapters with annexes,  divided into eight parts, together with a 
Bilateral Protocol between the Pa rties which contains the annexes on matters agreed bilaterally 
between them.  The structure of the Agre ement is as set forth in Table II.1: 
Table II.1 
Free Trade Agreement between the Governments of Central America and the Government of the Republic of Panama 
Table of Contents  
Preamble  
Part One General Aspects 
Chapter 1  Initial Provisions 
Chapter 2  General Definitions 
Part Two Trade in Goods 
Chapter 3 National Treatment and Market Access for Goods 
Chapter 4   Rules of Origin 
Chapter 5 Customs Procedures 
Chapter 6   Safeguard Measures 
Chapter 7 Unfair Trading Practices 
Part Three Technical Barriers to Trade 
Chapter 8   Sanitary a nd Phytosanitary Measures 
Chapter 9  Standards-related Measures, Metr ology and Approval Procedures 
Part Four Investment, Serv ices and Related Matters 
Chapter 10   Investment 
Chapter 11   Cross-Border Trad e in Services 
Chapter 12 Financial Services 
Chapter 13   Telecommunications 
Chapter 14   Temporary Entry of Business Persons 
Part Five Competition Policy 
Chapter 15 Competition Policy, Monopolies and State Enterprises  
Part Six Government Procurement 
Chapter 16  Government Procurement 
Part Seven Intellectual Property 
Chapter 17 Intellectual Property 
Part Eight  Administrative and Institutional Provisions 
Chapter 18   Transparency  
Chapter 19 Administration of the Agreement  
Chapter 20   Dispute Settlement 
Chapter 21   Exceptions 
Chapter22   Final Provisions 
Source : Free Trade Agreement between Panama and El Salvador. 
18. The goods trade aspects are dealt with in Part Two (Chapters 3-7) and Part Three (Chapters 8 
and 9), while the services trade aspects are contained in Part Four (Chapters 10-14).  Parts Five to 
Seven contain provisions on competition policy, gov ernment procurement and intellectual property, 
respectively. 
19. The Agreement provides no specific time-limit fo r implementation, so that the liberalization 
of both goods and services becomes effective from th e date of its entry into force.  However, a 
ten-year transition period is prescribed for fi nalization of the goods liberalization process. 
20. Chapter 2 lays down general defi nitions applicable to the Agre ement as a whole, whether they 
be of general application (Artic le 2.01) or country-specific (Ar ticle 2.02).  Those of general 
                                                      
7 WTO documents WT/REG196/N/1 of 18 March 2005 and S/C/N/325 of 5 April 2005.  The Council 
for Trade in Services referred th e Agreement for examination by the Committee on Regional Trade Agreements 
on 24 June 2005 (S/C/M/79) and the Council for Trade in Goods adopted the terms of reference for its 
examination on 15 June 2005 (WT/REG196/2).  The text  of the Agreement was circulated to WTO Members on 
5 May 2005 as document WT/REG/196/1 and is also available, together with its Annexes, at the official web 
sites of the Parties:  http://www.vicomex.gob.pa/tlc _centroamerica.html and http://www.minec.gob.sv/datco.  WT/REG196/3 
 Page 11 
 
 
  application include the terms "substantial business activities", defined on the basis of a number of 
objective criteria8;  "measure", defined as any law, regulati on, procedure, requirement, provision or 
practice;  "person of a Party", defined as a national or an enterprise of a Party.  Furthermore, the 
country-specific definition of a "national" is taken to encompass permanent residents of both 
El Salvador and Panama in their respective territories. 
B. TRADE IN GOODS  
1. National treatment and market access for goods 
(a) Import duties and charges and quantitative restrictions 
(i) General provisions 
21. The provisions relating to the liberalization of go ods imports are contained in Chapter 3 of the 
Agreement.  Article 3.03 provides that the Parties shall accord national treatment to each other in 
accordance with Article III of the GATT 1994, that is , that they shall afford to the goods of the other 
Party treatment no less favourable than the most favourable treatment accorded to like goods of 
national origin. 
22. Under Article 3.04, the Parties undertake to e ffect the total and definitive elimination of 
tariffs, fees and charges on imported goods, other than  those set out in Annex 3.04 (Tariff Elimination 
Programme).  Nor may the Parties increase or create  new tariffs above the levels specified in that 
programme or adopt, maintain or modify a custom s tariff on goods excluded therefrom.  Article 3.11 
extends that prohibition to customs processing fees and consular fees.  The base rate for establishing the Tariff Elimination Programme is defined at ta riff line level for El Salvador and Panama (in 
Annex 3.04 of the Bilateral Protocol).  In add ition, paragraph 3 of Article 3.04 of the Agreement 
provides that the customs duties applied to imports of  originating goods shall be the lesser of either 
the duties established under the Tariff Elimination Programme or the MFN applied customs duty. 
23. Under Articles 3.05 and 3.06, the Parties authorize duty-free temporary admission for certain 
goods imported from the other Party, regardless of origin, including inter alia  goods intended for 
display and goods of no commercial value.  Nor ma y re-entered goods be subject to any customs duty 
(Article 3.07). 
24. Customs valuation matters are governed by the WTO Customs Valuation Agreement, with the 
proviso that those countries which have negotiate d reservations before the WTO under Annex III of 
the Agreement on Implementation of Article VI I of the GATT 1994 shall fully implement the 
Customs Valuation Agreement after the lapse of two years from the date of entry into force of this 
Free Trade Agreement.
9  Customs processing fees and consular fees are also eliminated, as are tariff 
and non-tariff restrictions on impor ts and exports (Article 3.08). 
25. Under Article 3.10, the Parties undertake not to  adopt or maintain any restriction on the 
importation of any good from the other Party, except in accordance with Article XI of the 
GATT 1994, and they understand that import price requirements are prohibited, except as permitted 
for enforcement of countervailing and anti-dumping or ders and undertakings.  If a Party maintains a 
restriction or prohibition on imports from a third country, it may not prevent the other Party from 
                                                      
8 See Section C.2.e below. 
9 El Salvador has entered reservations based on paragraphs 3 and 4 (reservations regarding Article 4 
and Article 5.2 of the Customs Valuation Agreement, resp ectively) of Annex III to the Agreement.  Panama has 
invoked paragraph 3. WT/REG196/3 
Page 12  
 
  importing goods from that country.  The goods de scribed in Annex 3.10 are exempted from that 
prohibition.
10 
26. The Parties agree not to maintain or adopt any duty on the export of goods to the other Party, 
unless the same duty is applied to the same good when destined for domestic consumption 
(Article 3.14). 
(ii) General tariff liberalization 
27. The "negative list" method is used for tariff liber alization between the Parties, inasmuch as all 
tariffs not covered by the Tariff Elimination Programme  are to be abolished.  In practice, however, the 
Programme encompasses the entire tariff universe, so  that it includes the process of liberalization 
applicable to all products, regardless of the tariff elimination date. 
28. Both Parties classify products in six different  categories, applying different liberalization 
timetables to the products contained in each categor y.  The range extends from category A, in which 
all products remain duty-free from the entry into fo rce of the Agreement, to category C, in which 
tariffs are to be liberalized ten years after its en try into force.  A seventh category covers products 
excluded from the liberalization process.  Finally, Panama includes an additional category in the 
programme, which comprises products subject to an import ban.  Box II.1 below summarizes the 
Tariff Elimination Programme and its scope of application in terms of tariff lines. 
Box II.1 
Tariff Elimination Programme 
Category  Tariff Elimination Schedule  
A Elimination of customs tariffs upon entry into force of the Agreement. 
B3 Tariff elimination in 4 stages;  duty-free on 1 January 2006. 
B Tariff elimination in 6 stages;  duty-free on 1 January 2008. 
B6 Tariff elimination in 7 stages;  duty-free on 1 January 2009. 
B7 Tariff elimination in 8 stages;  duty-free on 1 January 2010. 
C Tariff elimination in 9 stages;  duty-free on 1 January 2013. 
Exclusion Tariff headings excluded;  MFN duty applicable. 
Prohibition Tariff headings subject to import prohibition (only in the case of Panama). 
 
Percentage of tariff lines in each category 
Category  Panama  El Salvador  
A 79.30% 80.87% 
B3 0.09% 0.03% 
B 1.32% 1.08% 
B6 0.26% 0.12% 
B7 0.05% 0.02% 
C 1.42% 1.20% 
Exclusiona 17.46% 16.68% 
Prohibition 0.09% 0.00% 
Total 100.0% 100.0% 
   
a This category includes tariff headings which Panama treats as restricted.  
29. Chart II.1 below shows total tariff  elimination under the Agreement.11  In the year of entry 
into force of the Agreement (2003), 88.7 per cen t of trade from Panama, corresponding to 81.4 per 
cent of liberalized lines, could enter El Salvador dut y free.  The figures for Panama were 81.3 per cent 
and 79.5 per cent, respectively.  Both countries supple mented their liberalization of tariff lines, by an 
                                                      
10 See the tables in Annex II for a list of the products included in Annex 3.10. 
11 The 2003 figures also include zero per cent MFN tariffs.  WT/REG196/3 
 Page 13 
 
 
  additional 3 per cent in the case of Panama and by 2. 4 per cent in the case of El Salvador, but this is 
reflected very differently in trade flows, since the 3 per cent of tariff lines to be liberalized by Panama 
relates to 13.7 per cent of the volume of imports fro m El Salvador, while the 2.4 per cent liberalized 
by El Salvador represents an additional 1.8 per cen t of trade from Panama.  As a result, the final 
liberalization figures in terms of tariff lines will be  similar for both countries (82.6 per cent of tariff 
lines liberalized by Panama, and 83.7 per cent by El Sa lvador).  Nevertheless, they will differ slightly 
in terms of trade flows (94.8 per cent of imports fro m El Salvador liberalized in Panama and 90.5 per 
cent in the other direction). 
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Chart II.1
Total tariff elimination under the El Salvador-Panama FTA
Panama El Salvador
Source: WTO Secretariat estimates, based on data provided by the Parties.Trade
Tariff lines
MFN 2003 FTA 2003 FTA 2008 FTA 2013No tariff
eliminationTrade
Tariff lines
 
(iii) Tariff liberalization by Panama 
30. Chart II.2 shows Panama's tariff elimination sched ule.  Prior to the entry into force of the 
Agreement, the number of duty-free tariff lines in Panama represented 4.44 per cent of the tariff 
universe.12  The tariff lines liberalized upon entry into force amounted to 74.9 per cent of total tariff 
lines, with a tariff of less than 10 per cent on approx imately two thirds of the liberalized lines, and a 
tariff of between 10 and 20 per cent on one third of  those lines.  At the same time, 22 tariff lines 
subject to duties of over 20 per cent were made duty free in 2003.  Under the Tariff Elimination 
Programme, 116 additional lines will have been liberali zed in 2008, most of them with duties of less 
than 10 per cent.  By then, 98.1 per cent of the lib eralization provided for in the Agreement will have 
                                                      
12 Panama's tariff line universe comprises 8,560 lines. WT/REG196/3 
Page 14  
 
  been put into effect.  In 2009, a further 19 lines w ill be liberalized, and it will not be until 2013 that 
liberalization will be completed, when the last 111 lines become duty free, most of them having duties 
of between 10 and 20 per cent. 
Chart II.2
Panama:  Tariff elimination under the Panama-El Salvador FTA 
0 1000 2000 3000 4000 5000 6000 7000 8000200320062008200920102013Year of liberalization
Number of duty-free tariff lines (cumulative)
Base tariff = 0% 0%< Base tariff <=10% 10%< Base tariff <=20% Base tariff >20%
 
 
31. Table II.2 shows the composition of the 8-digit tariff line liberalization undertaken by 
Panama, classified by HS section and by year of liber alization.  It will be seen that some sectors were 
liberalized at the entry into force of the Agreement, such as footwear, articles of stone, natural pearls 
or optical and photographic instruments and apparatus.   In 2008, liberalization was concentrated on 
the sections comprising plastics, wood pulp and misce llaneous articles;  in 2009, many chemicals are 
to be liberalized, while in 2013 the focus will be  on vegetable products, foodstuffs, chemicals and 
wood pulp.  Finally, it can be seen which sectors s till have the largest number of non-liberalized tariff 
lines, these being animals and animal products, foods tuffs, vehicles and boats and, in particular, 
textiles, with 1,127 tariff lines still subject to duti es, which means that only 11 per cent of the tariff 
lines in this section have been liberalized. 
Table II.2a 
Panama:  Products schedul ed for duty elimination 
HS section and description Year of duty elimination under the 
Panama-El Salvador  FTA 
  0% 
MFN
in 
2003 
2003 
2006 
2008 
2009 
2010 
2013 
No elimination 
Total 
I Live animals and animal products 13 214     9 140 376 
II Vegetable products 47 310  8  2 36 15 418 
III Animal or vegetable fats  and oils  37  2   5 24 68 
IV Prepared foodstuffs;  beverages, spirits 7 412 1 6 5 2 14 93 540 
V Mineral products 27 150  1   8  186 
VI Products of the chemical or allied industries 96 1,090  4 14  22  1,226 
VII Plastics and articles thereof;  rubber 3 403  13     419 
VIII Raw hides and skins, leather, furskins and articles 
thereof  118  8     126 
IX Wood and articles of wood 1 162  4     167 
X Pulp of wood 24 366  19   13  422 
XI Textiles and textile artic les 3 122  1    1,127 1,253 
Table II.2 (cont'd) Note: Not including prohibited or restricted  lines, i.e. 8 and 12 lines, respectively. 
Source : WTO Secretariat estimates based on data provided by the Panamanian authorities.  WT/REG196/3 
 Page 15 
 
 
  HS section and description Year of duty elimination under the 
Panama-El Salvador  FTA 
  0% 
MFN
in 
2003 
2003 
2006 
2008 
2009 
2010 
2013 
No elimination 
Total 
XII Footwear, headgear, umbrellas  164       164 
XIII Articles of stone, plaster, cement  292       292 
XIV Natural or cultured pearls 23 42       65 
XV Base metals and articles of  base metal 8 904 6 2     920 
XVI Machinery and mechanical appliances 87 928  3     1,018 
XVII Vehicles, aircraft, ships and boats 19 165  1   4 83 272 
XVIII Optical and photographic instruments and 
apparatus 15 285       300 
XIX Arms and ammunition  19      5 19 
XX Miscellaneous manufactured articles  243  37    3 280 
XXI Works of art 4 5       9 
Total 377 6,431 7 109 19 4 111 1,482 8,540 
a Since the MFN tariffs duty free in 2003 were counted separately , the total number of tariff lines by year of duty elimination  may 
not coincide with the total number of tariff lines by category of elimination. 
Note: Not including restricted or prohibited lines , that is, 12 and 8 tariff lines, respectively. 
Source : WTO Secretariat estimates, based on data provided by the Panamanian authorities. 
(iv) Tariff liberalization by El Salvador  
32. Chart II.3 shows the tariff cuts granted by El Salvador.  Compared to Panama, El Salvador 
exempted a higher percentage of tariff lines (47.1 pe r cent) from MFN duties, which together with the 
34.3 per cent of lines already liberalized in respect of  Panama amounted to a total of 81.4 per cent of 
duty-free lines.13  Of the 34.3 per cent of liberalized lines,  58.2 per cent were subject to tariffs of 
below 10 per cent, 39.8 per cent had tariffs of betw een 10 and 20 per cent, and 2 per cent had a higher 
tariff.  Of the 62 additional tariff lines to be liberalized in 2008, bringing the total scheduled 
liberalization to 98.5 per cent in that year, 22 lin es were subject to a tariff of below 20 per cent, 
39 had tariffs of between 10 and 20 per cent, and one had a tariff higher than 20 per cent.  After 2008, 
75 additional lines will be liberalized (all lines will be  liberalized in 2013 apart from eight which are 
to be liberalized between 2009 and 2010), 54 of wh ich were subject to a tariff of between 10 per cent 
and 20 per cent, one to a higher tariff and the re mainder to a tariff of less than 10 per cent. 
 
 
                                                      
13 El Salvador's tariff line universe comprises 5,991 lines. WT/REG196/3 
Page 16  
 
  Chart II.3 
El Salvador:  Tariff elimination under the El Salvador-Panama FTA
0 1000 2000 3000 4000 5000 6000200320062008200920102013Year of liberalization
Number of duty-free tariff lines (cumulative)
Base tariff = 0% 0%< Base tariff <=10% 10%< Base tariff <=20% Base tariff >20%
Source:  WTO Secretariat estimates, based on data provided by the Salvadoran authorities. 
 
33. Table II.3 shows the composition of the 8-digit tariff line liberalization process undertaken by 
El Salvador, classified by HS section and by year of liberalization.  The sectoral breakdown reflects 
major similarities with the Panamanian liberalizati on process, inasmuch as footwear, articles of stone, 
natural pearls and optical and photographic instrume nts and apparatus are the sectors to be liberalized 
upon the entry into force of the Agreement.  In 2008, liberalization is to concentrate on vegetable 
products, plastics and wood pulp, while in 2013 the ma in focus will be on vegetable products.  Again, 
most of the non-liberalized lines are in the textiles se ctor, although a substantial number also relate to 
animals and animal products, prepared foodstuffs and vehicles.  The table also shows which sectors 
still have a large number of non-liberalized tariff lines, these being animals and animal products, 
prepared foodstuffs, vehicles and, in particular, as  in the case of Panama, textiles, where 781 tariff 
lines remain to be liberalized out of a total of 891 lines in the entire section. 
Table II.3a 
El Salvador:  Products scheduled for duty elimination 
HS section and description Year of duty elimination under the 
Panama-El Salvador FTA 
 0% 
MFN 
in 
2003 
2003 
2006 
2008 
2009 
2010 
2013 
No elimination 
Total 
I Live animals and animal products 34 145     6 78 263 
II Vegetable products 91 204  10  1 35 22 363 
III Animal or vegetable fats  and oils 19 10  2   1 20 52 
IV Prepared foodstuffs;  beverages, spirits 27 174  3 1  7 45 257 
V Mineral products 82 77  1   5   165 
VI Products of the chemical or allied industries 701 171  4 6  5   887 
VII Plastics and articles thereof, rubber 134 167  7       308 
VIII Raw hides and skins, leather, furskins and 
articles thereof 19 58  4       81 
IX Wood and articles of wood 25 61  1       87 
X Pulp of wood 114 61  10   7   192 
XI Textiles and textile articles 105 18  1     767 891 
XII Footwear, headgear, umbrellas 2 61         63 
XIII Articles of stone, plaster, cement 71 89         160 
XIV Natural or cultured pearls 14 39         53 
Table 11.3 (cont'd)  WT/REG196/3 
 Page 17 
 
 
  HS section and description Year of duty elimination under the 
Panama-El Salvador FTA 
 0% 
MFN 
in 
2003 
2003 
2006 
2008 
2009 
2010 
2013 
No elimination 
Total 
XV Base metals and articles of base metal 435 235 2 3       675 
XVI Machinery and mechanical appliances 712 188  3       903 
XVII Vehicles, aircraft, ships and boats 63 56  2   1 46 168 
XVIII Optical and photographic instruments and 
apparatus 152 92         244 
XIX Arms and ammunition   17         17 
XX Miscellaneous manufactured articles 22 120  11       153 
XXI Works of art   9         9 
Total 2,822 2,052 2 62 7 1 67 978 5,991 
a Since the MFN tariffs duty free in 2003 were counted separate ly, the total number of tariff lines by year of duty 
elimination may not coincide with the total numbe r of tariff lines by category of elimination. 
Source : WTO Secretariat estimates, based on data provided by the Salvadoran authorities. 
(b) Rules of origin 
34. The provisions relating to rules of origin are contained in Chapter 4 of the Agreement and in 
Chapter 5 as regards customs procedures related to rul es of origin.  Article 4.01 contains definitions 
concerning rules of origin and Articles 4.02-4.14 deal with the substan tive aspects.  The basic 
requirements for a good to be considered originating (Article 4.03) are the following: 
(a) That it is wholly obtained or produced entirely in the territory of one or more of the 
Parties14; 
(b) that it is produced in the territory of one  or more of the Parties exclusively from 
originating materials as defined in this Chapter; 
(c) that it is produced in the territory of one or more of the Parties from non-originating 
materials that undergo a change in tariff classification, comply with a regional value content or other requirements, as set out in Annex 4.03, and the good satisfies all 
other applicable provisions of the Chapter; 
(d) that it is produced in the territory of one or more of the Parties, but  one or more of the 
non-originating materials that are used in the production of the good do not undergo a change in tariff classification for one of the three reasons described in Article 4.03(d), 
provided that the regional value content (RVC ) is not less than 30 per cent, unless a 
different value is specified  in the specific rules. 
35. Rather than being of general scope, the rules of  origin provided for in the Agreement take the 
form of a list (reproduced in Annex 4.03) of specifi c criteria that must be fulfilled by non-originating 
materials in order for a final product to acquire the status of originating product.
15 
                                                      
14 This concept is defined in Article 4.01 and in ge neral refers to mineral goods, vegetable goods and 
animals extracted, harvested, raised and obtained in the territory or on vessels of th e Parties, as well as goods 
and waste derived from production in  the territory of the Parties. 
15 The specific rules contained in Annex 4.03 are ap plicable to trade between the Central American 
countries and Panama, while the specific rules set out in the supplement to Annex 4.03 of the Bilateral Protocol 
between Panama and El Salvador only relate to trade between Panama and El Salvador.  Moreover, section D of Annex 4.03 includes a list of products for which rules of origin have not yet been negotiated but which are not 
excluded from the Agreement. WT/REG196/3 
Page 18  
 
  36. Generally speaking, specific rules of origin are detailed on the basis of Harmonized System 
headings (at the four digit level), although in a number of cases rules are specified for subheadings 
(six digits) especially in certain chapters rela ting to vegetable products, fats and oils, prepared 
foodstuffs, chemicals, wood pulp, textiles, base  metals, machinery, optical apparatus and 
miscellaneous articles.  In the vast majority of cases, the product acquires originating status if the 
working or processing carried out in the territory of the Parties results in a change of tariff heading 
(CTH), although a change in tariff chapter (CTC) is  the predominant rule for agricultural products 
(HS Chapters 1-24), as well as for certain minerals , raw hides and skins, wood pulp and articles of 
stone and cement.  In some cases, particularly coffee and tea, footwear, base metals, machinery, 
optical apparatus, rules requiring a change of tariff subheading (CTS) are also not infrequent. 
37. As an alternative rule is some cases, ther e is the possibility of a minimum regional value 
content (RVC) requirement, normally between 30 per cent and 45 per cent, which may be sufficient to 
confer originating status (plastics, base metals , vehicles, prepared foodstuffs and miscellaneous 
products) or which may supplement a change in  tariff classification (machinery and optical 
apparatus).
16  Another type of specific rule that may be used as an alternative to a change in tariff 
classification for certain chapters relating to animal  and vegetable products is  that the products have 
been obtained in one or more of the Parties. 
38. A product obtained exclusively as a result of the operations referred to in Article 4.04 will not 
acquire originating status even if it meets the re quired change of tariff classification criterion.   
39. Article 4.06 provides for full accumulation between  the Central American countries that have 
ratified the Agreement and Panama, on condition that a specific rule of origin is common to all the 
Parties, or where the same rule of origin a nd the same tariff elimination programme for a good are 
common to a group of no fewer than three countries.  In practice, paragraphs 1 and 2 of Article 4.06 
empower El Salvador and Panama to accumulate only between themselves;  accumulation may take 
place in a process which is initiated in Panama and c oncludes in El Salvador (or vice versa.).  Under 
the terms of paragraph 4(b) of Article 4.06, accumulation with Pana ma will not be possible until two 
Central American countries have ratified the Agr eement with Panama.  Furthermore, the Parties 
undertook to examine, two years after the entry into force of the Agreement, the possibility that materials of Panamanian origin can be accumulate d for the purpose of complying with the rules of 
origin in effect among the Central American countries;  up to April 2008, the Parties had not agreed to 
a meeting for this purpose.  If a good does not meet the change of tariff classification requirements 
prescribed in Annex 4.03, it may still be considered as originating if the value of all non-originating 
materials does not exceed 10 per cent of the value of  the good, calculated on the basis of Article 4.07 
(Article 4.08)
17 
40. According to Article 4.14, originating goods sh all not lose their originating status provided 
that transit through third countries is justified for geographical reasons or reasons related to 
international transport requirements, that the good has not been entered for consumption or placed on 
the market of the country of transit, or that it h as remained under customs control during transit.  The 
origin of fungible goods shall be determined in accordance with one of the three inventory 
management methods described in Article 4.09.18  Sets or assortments of goods shall qualify as 
originating provided that each of the goods cont ained therein complies with the corresponding rules 
                                                      
16 RCV = [(TV – VNM)/TV]*100, where TV = Transaction value of the good and VMN = Transaction 
value of non-originating materials.  The details of this calculation are set out in Article 4.07. 
17 This rule does not apply to non-originating materials of goods classified in HS Chapters 1-27 unless 
the material in question is included in a subheading other than that of the good in which it is to be incorporated.  
For goods classified in HS Chapters 50 -63 the 10 per cent refers to the wei ght of the fibres and yarns compared 
to the weight of the good produced. 
18 The methods are:  First-in-first-out;  last-in-first-out;  and method of averages.  WT/REG196/3 
 Page 19 
 
 
  (Article 4.10).  Accessories, spare parts and tools accompanying goods shall be disregarded in 
determining whether the good has undergone a change  in tariff classification, subject to conditions, 
but shall be taken into account in calculating th e regional value content (RVC) (Article 4.11).  
Articles 4.12 and 4.13 lay down requirements for cont ainers and packing and packaging materials.  
The customs procedures relating to the rules of origin are described in Section B.2.b below. 
Box II.2 
Rules of Origin:  Summary of basic characteristics  
No rules of origin of general scope 
Specific criteria for each product: 
- Goods wholly obtained or produced in the case of agricultural products; 
- the most common rule is CTH alth ough CTC and CTS are also used ; 
- in some cases, the RVC (between 30% and 45%) is used in co mbination with a change of tariff 
classification.  In a few cases, the RVC is used by itself to confer originating status. 
Some flexibility in the CTC requirement for unassembled goods and goods accompanied by parts. 
Full accumulation. 
No principle of absorption. 
De minimis rule:  non-originating ma terials may account for up to 10 per cent of the total value (or of the 
total weight in the case of textile products) of the good. 
The processing of goods in third countries is not permitted. 
Direct transhipment and shipment permitted in certain cases. 
Source:  Text of the Agreement and Bilateral Protocol 
(c) Export duties and charges and quantitative restrictions 
41. Article 3.09 requires the Parties to establish the treatment of domestic support for agricultural 
goods and export subsidy programmes in Annex 3.09 .  In the Annex, the Parties undertake to 
eliminate and not to reintroduce export subsidies for agricultural and non-agricultural products in their 
mutual trade.  They also undertake to cooperate w ithin the framework of the WTO in order to achieve 
the maximum possible reduction of domestic support  and not to apply domestic support measures to 
agriculture above their de minimus level, in accordance with the provisions of Article 6, 
paragraph 4(b), of the WTO Agreement on Agriculture.19 
42. Under Article 3.10, the Parties undertake not to ad opt or maintain any restriction on exports to 
the other Party, except in accord ance with Article XI of the GATT 1994, and they understand that 
export price requirements are prohibited.  If a Party maintains a restriction or prohibition on imports from a third country, it may not prevent the other Party from re-exporting goods to that country.  The goods described in Annex 3.10 are exempted from that prohibition.
20 
                                                      
19 When product-specific domestic su pport does not exceed 10 per cent of the total value of production 
of a basic agricultural product during the relevant year and non-product-specific domestic support does not exceed 10 per cent of the valu e of total agricultural production.  The Parties define domestic support as any 
agricultural subsidy not contingent upon export performance, which may affect production decisions, which 
may be applied to maintain the prices of agricultural products, or which may increas e the income of producers 
and/or improve the conditions of production and/or marketing. 
20 See the tables in Annex II for a list of the products included in Annex 3.10. WT/REG196/3 
Page 20  
 
  2. Provisions regulating trade in goods 
(a) Rules 
(i) Sanitary and Phytosanitary Measures 
43. Sanitary and phytosanitary measures are provided for in Chapter 8 of the Agreement, which is 
based on the Agreement on the Application of Sanitary and Phytosanitary Measures 
(SPS Agreement).  The rights and obligations applicab le to the Parties are set out in Articles 8.03 and 
8.04, respectively, which permit them to apply san itary measures where necessary to protect human 
and animal life and health or to preserve plant hea lth, provided that they ar e applied to the extent 
necessary to achieve an appropriate level of prot ection, that they do not constitute a disguised 
restriction on trade or create unnecessary obstacles to tr ade, that they are based on scientific principles 
and conform to international criteria, and that they  do not discriminate between goods of a Party or 
non-Party and goods of the other Party. 
44. The Parties undertake to base procedures for c ontrol, inspection and approval of sanitary and 
phytosanitary measures on international and/or scien tifically demonstrable standards and to establish 
harmonized sanitary and phytosanitary systems for sampling, diagnosis, inspection and certification, 
as well as to accept their sanitary and phytosanitary measures as equivalent to the fullest extent 
possible (Articles 8.05 and 8.06). 
45. The procedures and principles necessary for risk assessment and determination of the 
appropriate level of sanitary and phytosanitary protec tion are dealt with in Article 8.07, under which a 
Party is permitted to adopt provisiona l measures in the event that it conc ludes in the context of a risk 
assessment that the scientific information is insuffici ent.  According to Article 8.08, a Party wishing 
to declare an area free from pests or diseases sh all provide the necessary information to the other 
Party, which shall be responsible for establishing whet her the description is accurate.  In Article 8.09, 
the Parties undertake to apply the provisions of An nex C to the SPS Agreement relating to control, 
inspection and approval procedures. 
46. Article 8.10 lays down transparency guidelines wh ereby each Party is required to notify to the 
other Party any proposal, modification or adoptio n of a sanitary or phytosanitary measure.  The 
Parties also agree to provide mutual techni cal cooperation in this field (Article 8.12). 
47. To deal with SPS matters, a Committee on Sanitary and Phytosanitary Measures is 
established under Article 8.11.  Its functions are to:  (a) promote the facilities needed for the training and specialization of technical staff;  (b) promote active participation by the Parties in international 
organizations;  and (c) establish and update a roster of  qualified specialists in the fields of food safety, 
plant health and animal health for the purposes of Article 19.07 (Groups of Experts) (Art.8.11). 
(ii) Standards-related measures 
48. Chapter 9 deals with standards-related measur es, metrology and approval procedures.  The 
Parties declare that the provisions of this Ch apter shall apply in addition to those of the 
WTO Agreement on Technical Barriers to Trade (TBT ).  The Parties guarantee the right of each of 
them to adopt standards-related measures, appr oval procedures and metrology-related measures, as 
well as technical regulations and applicable conf ormity assessment procedures, provided that such 
measures do not create an unnecessary obstacle to trade and are applied on the basis of international 
standards, and provided that MFN treatment is accord ed to goods of the other Party.  Risk assessment 
must also be carried out with due regard for international standards and available scientific 
information, as well as related technology a nd end uses of the product (Article 9.05).  WT/REG196/3 
 Page 21 
 
 
  49. The Parties undertake to make compatible th eir respective standards-related and metrology-
related measures, and to treat technical regulations  as equivalent when the importing Party determines 
that the technical regulations of the other Part y are in line with its objectives (Article 9.06). 
50. Article 9.07 deals with conformity assessment pr ocedures.  Each Party is required to apply 
MFN treatment to the procedures applicable to the other Party.  At the same time, the Parties are 
urged to finalize mutual recognition agreements a nd to accept the results of assessment procedures 
conducted by competent bodies of the other Part y, which shall be accredited under the same 
conditions as their own bodies.  MFN treatment also  applies to approval procedures (Article 9.08). 
51. Articles 9.10 and 9.11 establish criteria for no tification and designation of enquiry points, 
respectively.  Under Article 9.13, the Parti es guarantee technical cooperation between the bodies 
responsible for standardization and metrology. 
52. A Committee on Standardization, Metrology and Approval Procedures is set up under 
Article 9.12 to promote and facilitate coopera tion between the Parties in this field. 
(b) Customs procedures 
53. Chapter 5 of the Agreement is concerned w ith customs procedures, including procedures 
relating to the origin of goods (Articles 5.02-5.12) .  These articles provide for the establishment of a 
single form for both the certificate of origin and the declaration of origin, responsibility for which lies 
with the exporter, and which shall remain valid for one year.  Articles 5.03 and 5.04 give details of 
obligations regarding importation and exportation, respectively, including the documents to be presented by importers and exporters .  The Agreement provides for the possibility of claiming a duty 
refund within a year of the date of importation, in  respect of goods for which no claim for preferential 
treatment was made at the time of importation.  The goods covered by Article 5.5 are exempted from 
these obligations. 
54. Articles 5.08 to 5.11 establish the process for ve rifying the origin of  goods, which covers 
visits by the importing Party to the exporting Party,  notification of relevant determinations, cases and 
circumstances in which advance rulings may be give n, review and appeal procedures and applicable 
penalties, which may reach the level of criminal  penalties.  The Parties undertake to implement 
uniform regulations regarding the interpretation, a pplication and administration of Chapters 3, 4 and 
5;  the Uniform Regulations were agreed and came into effect between El Salvador and Panama from the date of entry into force of the Agreement. 
55. Article 5.13 defines the areas of cooperati on between the Parties, which include inter alia  the 
notification of a range of measures and rulings, as well as the exchange of customs information. 
56. Goods re-exported from a free zone of a Party sh all be considered to originate in a third 
country and the treatment, preferential or otherwise, granted to that third country by the importing Party shall be applied to them, subject to complia nce with the conditions set out in Article 5.14. 
57. Other provisions relate to invoicing by a third-country operator (Article 5.06) and 
confidentiality (Article 5.07). 
(c) Safeguard measures 
58. Details of safeguard measures and the provisions a pplicable to them are given in Chapter 6 of 
the Agreement.  Such measures are divided into tw o categories, bilateral and global, as described in 
points (i) and (ii) below. WT/REG196/3 
Page 22  
 
  59. The administrative procedures governing applica tion of the two types of safeguard measure 
are set out in Article 6.04 which calls for the consiste nt, transparent, fair and impartial application of 
safeguard measure procedures.  It is provided that th e responsibility for determining injury or threat of 
injury shall lie with the investigating author ity of each Party, as designated in Annex 6.01.
21  T h e  
investigating authorities have the capacity to initi ate proceedings for the application of safeguard 
measures, either ex officio or at the request  of entities empowered for that purpose under the 
legislation of each Party, and provided that the proportion of the domestic industry producing the good subject to the measure is higher than 25 per cent .  The remainder of the Article deals with the 
applicable requirements concerning the contents of  a petition, consultations, notification of rulings, 
public hearings, treatment of confidential informat ion, evidence of injury or threat thereof and 
deliberation and report, where it is established that , except in regard to global safeguard measures 
involving perishable goods, before making an affirm ative determination the investigating authority 
shall hold a public hearing at which all interested pa rties will be given an opportunity to express their 
views. 
60. Lastly, Article 6.05 makes it clear that the Pa rties may not request the establishment of an 
arbitral panel regarding any safeguard measure that has simply been proposed. 
61. As at April 2008, none of the Parties has app lied safeguard measures on the basis of that 
agreement. 
(i) Bilateral safeguard measures 
62. Bilateral safeguard measures are provided for in Ar ticle 6.02, in which the Parties affirm that 
the investigating authority shall conform to the provisions of Article XIX of the GATT 1994 and the 
WTO Agreement on Safeguards. 
63. A Party may impose bilateral safeguard measures on goods originating in the other Party if 
the importation of such goods causes or threatens to cause serious injury to the domestic industry.
22  
Such measures may only be taken during the period of  tariff reduction applicable to the originating 
good in question, although pursuant to paragraph 5,  if the exporting Party so agrees, they may be 
extended beyond that period.  The measures may cons ist of the suspension of reductions provided for 
in the tariff elimination programme or an increase in the rate of duty up to the level of the applied 
MFN rate of duty.  The measures may be extended for a maximum period of two years, extendable for 
one additional year, during which the duty shall be gradually reduced to the level that applies under 
the tariff elimination programme.  Two safeguard me asures may be applied to the same good, subject 
to conditions. 
64. The Article also provides for the application of provisional safeguard measures in critical 
circumstances and for a maximum duration of 120 days. 
65. The Party imposing the measure must offer mutu ally agreed compensation in the form of 
concessions having substantia lly equivalent trade effects or equiva lent to the value of the additional 
duties.  If the Parties fail to reach  agreement, the Party targeted by the measure shall be free to impose 
tariff measures having substantially  equivalent trade effects. 
                                                      
21 For El Salvador, the investigating authority is the technical unit responsible for investigating 
situations that may warrant safeguard measures, reporting to the Ministry of the Economy or its successor;  for Panama it is the Commission for Free Competition and Consumer Affairs. 
22 Both serious injury and threat of serious injury are defined as in the WTO Agreement on Safeguards.  WT/REG196/3 
 Page 23 
 
 
  (ii) Global safeguard measures 
66. Global safeguard measures are described in Article  6.03.  The Parties reaffirm their rights and 
obligations under Article XIX of the GATT 1994 and the WTO Agreement on Safeguards, except 
those regarding compensation or retaliation and exclusion from a safeguard measure.  A Party 
applying a measure of this type shall exclude from its application imports of goods from the other 
Party, unless they account for a substantial share of total imports and the imports from the other Party 
contribute significantly to the serious injury or threat thereof caused by total imports.23  The Party 
applying a global measure must provide the other Party with mutually agreed trade liberalizing 
compensation in the form of concessions having substan tially equivalent trade effects or equivalent to 
the value of the additional duties expected to result from the measure or, if no agreement is reached, 
the Party whose good is targeted by the measu re may impose measures having trade effects 
substantially equivalent to those of the safeguard measure taken. 
67. No Party may apply a global measure that imposes restrictions on a good without notifying 
the Commission, and without providing adequate oppor tunity for prior consultation with the other 
Party. 
(d) Unfair trading practices 
68. Chapter 7 of the Agreement contains provisions on unfair trading practices.  In this Chapter, 
the Parties confirm their rights and obligations under Articles VI and XVI of the GATT 1994, the Agreement on Implementation of Article VI of the GATT 1994 and the Agreement on Subsidies and 
Countervailing Measures, which are WTO agreements.  Accordingly, the Parties undertake to ensure 
that their legislation is in conformity with  the commitments assumed under these Agreements 
(Article 7.01). 
69. It is also established that the duration of inv estigations into unfair trading practices shall not 
exceed 18 months (Article 7.02).  No new investiga tion of the same product from the same Party shall 
be initiated within a period of 12 months, unless the domestic industry accounts for at least 50 per 
cent of the total production of the like product produc ed by the domestic industry (Article 7.03). 
70. Definitive anti-dumping duties shall be termin ated within a period of not more than 
60 months from the date of imposition a nd may not be extended (Article 7.04). 
71. Under the terms of Article 7.06, the Parties ag ree to cooperate within the framework of the 
Free Trade Area of the Americas (FTAA) and the WT O in proposing reforms to reduce the impact of 
measures of this kind and to clarify the definition of  some related concepts.  As at April 2008, this 
requirement has not been fulfilled, inasmuch as the Agreement has not entered into force for all the 
Parties. 
72. As at April 2008, none of the measures provided for in this Chapter has been applied. 
C. T
RADE IN SERVICES  
1. Scope and definitions 
73. Part Four of the Agreement contains specific pr ovisions on trade in services.  It is divided into 
five chapters, namely:  Chapter 10 – Investment;  Chapter 11 – Cross-Border Trade in Services;  
Chapter 12 – Financial Services;  Chapter 13 – Telecommunications;  and Chapter 14 – Temporary 
                                                      
23 The determination of substantial share and signifi cant contribution to injury or threat thereof is 
provided for in Article 6.03(3). WT/REG196/3 
Page 24  
 
  Entry of Business Persons.  Chapter 11 covers cr oss-border supply, consumption abroad and the 
presence of natural persons (modes of supply 1, 2 and 4) for all services sectors except financial services, which are dealt with in Chapter 12
24, and air services, including domestic and international, 
scheduled and non-scheduled air transport services,  as well as related services in support of air 
services.25  Nor does Chapter 11 cover subsidies or government services.26  Chapter 10 on investment 
covers investments by investors of the other Part y in all sectors except financial services, government 
services and economic activities reserved for each Pa rty, which are listed in Annex III to the 
Agreement.  Chapter 12 applies to the four modes of  supply of financial services.  Lastly, Chapters 13 
and 14 contain additional provisions on telecommuni cations and temporary entry of business persons. 
74. Chapter 10 covers measures taken at all levels of government.27  The relevant definitions for 
these chapters are divided between general definiti ons applicable to the Agreement as a whole, as 
described above, and definitions specific to indivi dual chapters.  "Investment" (Article 10.40) means 
any kind of goods or rights acquired or used fo r the purpose of obtaining an economic profit, and 
including, inter alia , an enterprise, shares in an  enterprise, real estate or other property, tangible or 
intangible28;  "Investor of a Party" means a national or an enterprise of a Party that is making, has 
made or seeks to make an investment in the territory of the other Party29;  "investment of an investor 
of a Party" means an investment owned or controlled directly by an investor of such Party.30  
"Enterprise" is defined in Article 2.1 as any entity constituted or organized under  the applicable law of 
a Party, whether or not for profit, and whether privately owned or government-owned.  "Service provider" is defined in Article 11.01 as a person that provides or seeks to provide a cross-border 
service. 
2. General provisions on trade in services 
75. The Agreement covers all the services sectors, except for those mentioned above.  As the 
Agreement takes a "negative list" approach, all the provisions of the chapters concerned apply to all 
sectors and all modes, unless otherwise specified.  Likewise, the principles of national and most-favoured-nation treatment (together  with performance requirements and nationality restrictions on 
executive positions for investments and requirements of local presence for cross-border trade) are of 
general application unless the non-conforming measur e in question falls within the scope of the 
reservations under each chapter, as described below. 
(a) National and most-favoured-nation tr eatment and level of treatment 
76. The Parties undertake to accord to investment s and services, as well as to investors and 
service providers, treatment no less favourable than that accorded to investme nts, services, investors 
and service providers of their own or any third country (Articles 10.02, 10.03, 11.03 and 11.04).  
                                                     
 
24 See Section 3(a) below on financial services. 
25 The following air services are in cluded in the scope of  the Agreement as they are in the GATS:  
aircraft repair and maintenance services during the peri od in which an aircraft is withdrawn from service, 
specialty air services and com puterized reservation systems. 
26 The definition of government services contained in Chapter 11 is applicable only to Chapter 11. 
27 However, the Parties maintain reservations with rega rd to measures taken at local or municipal level. 
28 The definition of investment in the Chapter on financial services differs form the one contained in 
Chapter 10 in that the former includes loans granted by providers of cross-border services other than loans to 
financial institutions. 
29 As explained earlier, the term "national of a Party", in the case of Panama and El Salvador, is taken 
to refer to permanent residents.  However, for the purpos es of Chapter 14, the definition of "national" excludes 
permanent residents. 
30 An investment is understood to be owned by an investor when the latter has more than 50 per cent 
ownership of the registered capital, and it is under the investor's direct control when the latter has the power to 
appoint a majority of the directors or legally manage its operations.  WT/REG196/3 
 Page 25 
 
 
  Moreover, the Parties offer whichever is the better of the treatment granted under the principles of 
national treatment or most-favoured-nati on treatment (Articles 10.04 and 11.05). 
77. At the same time, with regard to cross-border  trade in services, no Party may require a service 
provider to establish an office or be resident in its territory in order to be entitled to provide a service 
(Article 11.06). 
78. The Parties offer non-discriminatory treatment to  investors in the event of losses caused by 
armed conflict or civil strife (Article 10.05) and treatment for investments in accordance with international law (Article 10.06). 
(b) Performance requirements and quantitative restrictions 
79. The Agreement contains no article on market  access akin to Article XVI of the GATS, 
although it does contain provisions on quantitative restrictions and performance requirements.  
Quantitative restrictions are defined in Article 11.01 as non-discriminatory measures which place 
limitations on the number of service providers or operations by service pr oviders, either in the form of 
a quota or an economic needs test, or by any other quantitative means.  The Parties are required to 
establish procedures for notifying quantitative restricti ons, as well as for consultations with a view to 
further liberalization of such restrictions (Article 11.12).  According to Article 11.09, each Party shall 
set out in Annex V its non-discriminatory quantitative  restrictions, which shall be examined every two 
years.  As at April 2008, there has been no change in that regard. 
80. The Agreement does contain a series of provisi ons concerning the prohibition of performance 
requirements and quantitative restrictions.  Ar ticle 10.07 prohibits imposing requirements or 
conditioning the receipt of an advantage, in connec tion with investments by investors of the other 
Party, on a set of performance requirements.  There is a prohibition on requirements concerning 
regional value content and the use of domestic products, and requirement s which relate the volume of 
imports to that of exports or to foreign exchange inflows.  Nor may the Parties require investments to 
be linked to the export of a given level of goods or services.  Some  of these prohibitions do not apply 
to goods and services under export pr omotion and foreign aid progra mmes, government procurement 
and requirements concerning the contents of a good required to qualify it for a preferential tariff.  
Moreover, the Parties reserve the right to cond ition the granting of advantages on compliance with 
requirements related to the location of productio n, the provision of a given service, training or 
employment of workers, construction of partic ular facilities, or the conduct of research and 
development activities in their respective territories.  They also reserve the right to maintain or 
establish criteria necessary to secure compliance with laws, to protect human, animal or plant life or 
health, and to preserve natural r esources, provided that such measures do not constitute a disguised 
restriction and are not applied in an arbitrary or unjustifiable manner.  Moreover, a number of requirements are listed which are not prohibited as  such but which could be considered by the 
Committee at the request of a Party which deems th at they adversely affect trade or constitute a 
significant barrier to investment. 
(c) Other provisions relating to investment 
81. The Parties undertake that no enterprise of a Party that is an investment of the other Party may 
lay down nationality requirements for senior manage ment positions in that enterprise, although a 
Party may require that the majority of the members of the governing body or board of directors be nationals of that Party, provided that the requireme nt does not materially impair the ability of the 
investor to exercise control over its investment (Article 10.08). 
82. The Parties agree to eliminate any restriction on transfers relating to an investment of an 
investor of one Party in the territory of the other Pa rty, and to permit transfers to be made in a freely WT/REG196/3 
Page 26  
 
  convertible currency.  No Party may require its invest ors to transfer, or penalize its investors that fail 
to transfer, any amounts derived from investments in the other Party (Article 10.10).  However, the 
Parties may prevent a transfer in cases of bankruptcy, insolvency or protection of the rights of creditors, criminal offences or final rulings, failure to comply with the requirement to submit reports 
or enforcement of laws on issuing, trading or dealing in securities. 
83. Under the terms of Article 10.11, the Parties ma y expropriate or nationalize an investment of 
an investor, provided that this is done in the public interest or for reasons of public order, pursuant to 
Annex 10.11, on a non-discriminatory basis, in acco rdance with the principle of legality, with 
guarantees as to whichever of national or most favour ed treatment is better and subject to the payment 
of compensation as described in the remainder of the Article. 
84. In Article 10.15, the Parties reaffirm their right  to adopt or maintain any measure designed to 
ensure that investment activity complies with environm ental legislation, provided that such measure is 
consistent with the rest of the chapter. 
85. Section B of Chapter 10 (Articles 10.16 to 10.39) provides for a m echanism whereby an 
investor, on its own behalf or on behalf of an enterp rise, may submit to arbitration a claim that a Party 
has violated an obligation under Section A of Chapte r 10, provided that no more than three years have 
elapsed from the date on which the investor acqui red or should have acquired knowledge of the 
alleged violation.  The choice of this mechanism by the investor or enterprise shall be to the exclusion 
of any other arbitration mechanism, although prior to consenting to this mechanism, the Parties may 
exhaust administrative remedies.  Where a tribunal makes a final award, it may award only monetary 
damages and any applicable interest, or restitution of property, which may be paid in the form of 
monetary damages together with any applicable interest.
31 
(d) Other provisions relating to cross-border trade in services 
86. Each Party is required to ensure that any me asure relating to requirements and procedures for 
granting permits, authorizations, licences or certifi cates to nationals of the other Party does not 
constitute an unnecessary barrier to cross-border services (Article 11.07). 
87. The Parties undertake not to require the provision of any confidential information, the 
disclosure of which may create an obstacle to the obs ervance of laws or may be harmful to the public 
interest or the interests of enterprises (Article 11.14). 
88. Annex 11.16 provides guarantees for full freed om of transit through the territories of the 
Parties for inland transportation of freight from one Pa rty to any other Party with no collection of any 
charges for services other than t hose specified in Appendix 11.16(6), as well as the elimination of any 
documentation other than that required by the "Re gulations on the International Inland Customs 
Transit Regime, Declaration Form and Instructions".32 
(e) Denial of benefits 
89. The Agreement provides for the denial of benef its both in the Chapter on investment and in 
the Chapter on cross-border trade in services (Articl es 10.14 and 11.10, respectively).  Subject to prior 
notification and consultation in accordance with Articles 18.04 and 20.06, a Party may deny the 
                                                      
31 This mechanism does not apply to the matters refe rred to in Annex 10.39;  as none of the Parties 
maintains relevant exclusions, Annex 10.39 has not been used. 
32 Local freight transport by vehicle or cabotage, freight and passenger transport by rail and passenger 
transport are excluded.  Two years afte r the Agreement has come into force, consideration shall be given to the 
possibility of achieving broader coverage.  WT/REG196/3 
 Page 27 
 
 
  benefits of those Chapters to investors and service pr oviders of the other Party, be they enterprises or 
services carried out by enterprises, if it is determ ined that those enterprises are not owned or 
controlled by investors or service providers of the Pa rty concerned, in accordance with its legislation, 
and that they are not undertaking "substantial bus iness activities".  The term "substantial business 
activities" is defined in Article 2.01, which states th at an enterprise is considered to be engaging in 
substantial business activities if:  (a) it is registered as  an income tax payer in the territory of a Party;  
(b) it has a payroll duly registered with the correspondi ng authority of a Party;  or (c) it has permanent 
premises, facilities or offices in a Party, which are not restricted to receiving notifications. 
(f) Reservations and exceptions 
90. The reservations and exceptions applicable to investment and cross-border trade in services 
are set out in Chapters 10.09 and 11.08 respectively, and in additional provision s of both chapters, as 
described below.  The Parties reserve the right to maintain measures that do not conform, in the case 
of investment, with the principles of nationa l and most-favoured-nation treatment, as well as 
restrictions regarding performance requirement s and nationality of senior management and 
executives.  As far as cross-border trade is concerne d, the reservation relates to conformity with the 
principles of national and most-favoured-nation treat ment and local presence.  Such reservations 
apply to measures maintained by governments at na tional level, provided that they are included in 
Annex I, and those maintained by governments at local or municipal level, as well as any amendment 
to such measures, provided that the amendment in  question does not decrease the conformity of the 
measure.  They also cover any future measure to be  applied by the Parties in the sectors or subsectors 
listed in Annex II and, as far as investment is  concerned, to the measures concerning economic 
activities included in Annex III, to which no provi sion of Chapter 10 is applicable.  Thus, the 
measures specified in Annexes I and III remain bound,  but not the sectors covered by Annex II.  In 
any event, it is stipulated that, in the case of inv estment, an investor of the other Party may not be 
requested to sell or dispose of its investment by r eason of its nationality, even if the investment was 
made in a sector covered by Annex II.33  Table II.5 below sets out a description of the reservations 
contained in each Annex.  
Table II.4 
Annexes regarding investment and services:  Summary of provisions 
Investment and cross-bo rder trade in services : 
Annex I:   For the sectors described, one or more of the ob ligations set out in the articles referred to in the 
Annex (national treatment, local presence, performance requirements, senior management, governing bodies 
and board of directors, most-favoured-n ation treatment), are not applicable, either to investment or to services, 
as the case may be. 
Annex II:   For the sectors described, the Parties reserve the right to apply future meas ures that do not conform 
with the obligations contained in the articles menti oned (national treatment, local presence, performance 
requirements, senior management, governing bodies and boards of directors, most-favoured-nation), in respect 
of either investment or services, as the case may be. 
Annex III:   Chapter 10 does not apply to the economic activities described therein.  No references under 
services. 
 
Table II.4 (cont'd) 
 
                                                      
33 In Article 11.11, the Parties undertake, through negotiations arranged by the Commission, to secure 
the elimination of the reservations scheduled in accordan ce with Article 11.08 (1) and (2), with regard to cross-
border trade in services.  As at Apr il 2008, no such negotiations have been held.  The Parties are required to 
establish procedures fo 
r notifying such consultations, together with any ame ndments to the measures referred to in Article 
11.08 (Article 11.12). WT/REG196/3 
Page 28  
 
   
Annex IV:   For the sectors described therein (for the two coun tries, aviation, fisheries or maritime affairs), no 
MFN treatment is applied in case of signing of existing or future international treaties. 
 
Annex V :  Description of quantitative restrictions maintained by the Parties in respect of services. 
 
Financial services : 
 
Annex VI 
 
 Section A:   The measures contained in this Annex are not covered by the articles referred to (right of 
establishment, cross-border trade, national treatme nt, MFN treatment, new financial services and data 
processing, and senior management, and governing bodies and boards of directors). 
 
 Section B:   Future measures in the area of financial serv ices to which the articles referred to shall not 
apply (right of establishment, cross-border trade, national treatment, MFN treatment, new financial services 
and data processing, and senior management, governing bodies and boards of directors). 
  Section C:   Specific commitments of the parties. 
 
Source:   Annexes to the Agreement. 
91. Nor does the most-favoured-nation principle appl y to investments under treaties in force or 
signed since the entry into force of the Agreement, in the sectors of aviation, fisheries or maritime 
affairs, including salvage (Annex IV). 
92. The Parties also reserve the right not to apply national treatment in the context of measures 
requiring special formalities related to the establis hment of investments by investors of the other 
Party, provided that such measures do not materially  impair the protection afforded by the Chapter on 
investment (Article 10.12).  Nor may the Partie s apply national treatment and most-favoured-nation 
treatment principles in order to require an investor  of the other Party to provide information about 
itself or its investment.  Similarly, the most-f avoured-nation principle does not extend to the 
recognition of higher education qualif ications, although the Parties are required to afford each other 
an opportunity to demonstrate that qualifications obtained in the othe r Party should also be recognized 
(Annex 11.13).34  In the area of cross-border trade in servi ces, the Parties reserve the right to adopt 
measures constituting non-discriminat ory quantitative restrictions, on condition that they are included 
in Annex V (Article 11.09). 
93. Finally, with regard to investment, the pr inciples of national and most-favoured-nation 
treatment and the prohibition of nationality requirements for senior executives do not apply to government procurement or subsidies.
35 
94. Tables II.5 and II.6 below list the reservations ma intained by Panama and El Salvador, and 
give details of the type of obligation under wh ich non conforming measures are maintained (or the 
right to adopt such measures is reserved) together with details of the sector affected, the mode of 
supply (whether cross-border trade in services, includi ng modes 1, 2 and 4 or investment, mode 3) and 
their location in the Agreement. 
                                                      
34 Moreover, the basis for the mutual recognition of qualifications is set out in Annex 11.13. 
35 As explained previously, government procurement and subsidies are excluded from the application 
of the whole of Chapter 11.  WT/REG196/3 
 Page 29 
 
 
  Table II.5 
Panama:  Summary of non-conforming measures contained in Annexes I and II 
Sector/Subsector Obligations Mode of supply Annex/Page 
All sectors NT I Annex I-1/2  
All sectors NT I Annex I-3  
All sectors  NT I Annex I-4  
All sectors NT I/CBTS Annex I-5  
Artistic/Musical Activities and Artists NT I/CBTS Annex I-6  
Tourism/Travel Agencies NT I/CBTS Annex I-7  
Communications/Radio and Televi sion Programme Broadcasting 
Services NT I/CBTS Annex I-8/9  
Communications/Telecommunication Services NT I Annex I-10  
Education NT CBTS Annex I-11  
Electrical Power NT I Annex I-12  
Crude Oil and Natural Gas NT/LP/PR I/CBTS  Annex I-13  
Mining/Extraction of Non-Metallic and Metallic Minerals (other than 
precious metal ores), alluvial precious metal ores, non-alluvial precious metal ores, energy minerals (other than hydrocarbons) and reserve minerals NT/PR I/CBTS
 Annex I-14/15  
Exploration and exploitation of non-metallic minerals used as 
construction materials, refractory cer amic and metallurgical materials  NT I  Annex I-16  
Fisheries/Fish and Other Fisheries Products NT/LP/PR I/CBTS  Annex I-17/18  
Fishery-Related Activities  LP/PR I/CBTS  Annex I-19  
Security Services/Private Se curity Agencies NT I/CBTS  Annex I-20  
Advertising Services/Advertising Activities  NT/PR I/CBTS  Annex I-21  
Maritime Transport/Pilots NT CBTS  Annex I-22  
Maritime Transport NT/LP/PR I/CBTS  Annex I-23  
Transport/Air Transport NT I  Annex I-24  
Air Transport Auxiliary Services NT CBTS  Annex I-25  
All sectors NT/MNF/LP I/CBTS Annex II-1  
Business Services/Professional Services NT/MFN/LP CBTS Annex II-2/6  
Questions Relating to Minorities NT/MFM/LP/PR/SMBD I/CBTS Annex II-7  
All sectors NT/MFN/LP/PR/SMBD I/CBTS Annex II-8  
All sectors NT/MFN/LP/PR/SMBD I/CBTS Annex II-9/10  
Communications/Domestic Postal and Telegraph Activities  NT/LP I/CBTS Annex II-11  
Questions Relating to Indigenous Populations NT/MFN/LP/PR/SMBD I/CBTS Annex II-12  
Transport Services/Road Transport Services NT/MFN/LP/PR/SMBD I/CBTS Annex II-13  
Existing measures not in conformity with obligations in respect of: 
NT: National Treatment 
LP: Local Presence 
PR: Performance Requirements 
SMBD: Senior Management and Boards of Directors MFN: Most-favoured-nation Treatment 
Source: Free Trade Agreement between Panama and El Salvador, Annexes I and II. 
Table II.6 
El Salvador:  Summary of non-conforming  measures contained in Annexes I and II 
Sector/Subsector Obligations Mode of Supply Annex-Page 
All sectors NT/MFN I Annex I-1  
All sectors NT/MFN I Annex I-2  
Cooperative production associations NT I Annex I-3  
Fisheries NT/MFN/LP I/CBTS Annex I-4  
Fisheries/Aquaculture LP CBTS Annex I-5  
Communication Services/Audiovisual Services NT/MFN/PR I/CBTS Annex I-6  
Communication Services/Audiovisual Services NT CBTS Annex I-7  
Communication Services/Audiovisual Services NT I Annex I-8  
Distribution Services/Intermediary Services, Commercial Wholesale 
and Retail Services NT/LP I/CBTS Annex I-9  
Recreational, cultural and sporting services (other than audiovisual 
services)/Entertainment services (including theatre, live bands and circus services) NT/ CBTS 
Annex I-10  
Recreational, cultural and sporting services (other than audiovisual 
services)/Entertainment services (including theatre, live bands and circus services) NT CBTS 
Annex I-11  
Recreational, cultural and sporting services (other than audiovisual 
services)/Entertainment services (including theatre, live bands and circus services) NT/PR I/CBTS 
Annex I-12  
Transport Services/Maritime Transport Services NT/LP CBTS  Annex I-13  
Air Transport Services/Specialty Air Services NT/PR I/CBTS  Annex I-14  
  Table II.6 (cont'd) WT/REG196/3 
Page 30  
 
  Sector/Subsector Obligations Mode of Supply Annex-Page 
Air Transport Services/Supporting Services for Air Transport NT/MFN CBTS  Annex I-15  
Business Services/Professional Services NT/MFN/LP CBTS Annex II-1  
Business Services/Professional Services MT/MFN/PR/SMBD I Annex II-2  
Communication Services/Audiovisual Services NT/MFN/LP CBTS Annex II-3  
Construction Services/Construction Work NT/MFN/LP/PR/SMBD I/CBTS Annex II-4  
Transport Services/Road Transport Services NT/MFN/LP/PR/SMBD I/CBTS Annex II-5  
Minority-Related Issues NT/MFN/LP/PR/SMBD I/CBTS Annex II-6  
All sectors NT/MFN/LP/PR/SMBD I/CBTS Annex II-7  
Issues Related to Indigenous Populations NT/MFN/LP/PR/SMBD I/CBTS Annex II-8  
Existing measures not in conformity with obligations in respect of: 
MFN: Most-favoured-nation Treatment 
NT: National Treatment LP: Local Presence 
PR: Performance Requirements 
SMBD: Senior Management and Boards of Directors  
Source: Free Trade Agreement between Panama and El Salvador, Annexes I and II. 
(g) Committee on Investment and Cross-Border Trade in Services 
95. Article 11.15 provides for the establishment of the Committee on Investment and Cross-
Border Trade in Services, the functions of wh ich include supervising the implementation of 
Chapters 10 and 11 and discussing, examining and cooperating on issues related to investment and 
cross-border trade in services. 
(h) Temporary entry of business persons 
96. Chapter 14 contains provisions relating to  the temporary entry of business persons.36  T h e  
Parties recognize the desirability of facilitating tem porary entry in accordance with the principle of 
reciprocity (Article 14.02).  The temporary entry of business persons is therefore permitted except in 
the cases defined in Article 14.04.  The Parties agre e to exchange information on measures applied in 
this regard and they undertake to prepare a c onsolidated document regarding the requirements for 
temporary entry (Article 14.05);  as at April 2008, th e consolidated document has not been prepared.  
The consultations provided for in Article 20.6 may not  be initiated as a result of a refusal to grant 
temporary entry, unless the matter involves a recurrent  practice and the affected person has exhausted 
all administrative remedies. 
97. Annex 14.04 lays down the conditi ons applicable to the entry of  business visitors, traders and 
investors and to intra-company transferees.  Th ese conditions are summarized in Table II.8 below: 
                                                      
36 "Business person" means a national who is engaged in trade in goods, the provision of services or the 
conduct of investment activities.  "National" in the context of Chapter 14 does not include permanent residents, 
who are therefore excluded from the benefits of this Chapter.  WT/REG196/3 
 Page 31 
 
 
  Table II.7 
Conditions for the temporary entry of business persons 
Category Requirements Prohibitions Residence 
Business visitors -  Engagement in any activity referred to in 
Appendix 14.04(A)(1) with supporting documentationa 
- Proof of citizenship 
- Evidence that the ac tivity in question is international in 
scope and that the business person is not seeking to enter the labour market 
- Compliance with existing immigration measures, as 
listed in Appendix 14.04(A)(3) 
Traders and investors -  Employment in a supervisory or executive capacity, or 
one that involves specialized knowledge 
- Intention to carry on substantial trade 
- Intention to establish, develop, administer or provide 
advice or key technical services for the operation of an 
investment to which a substantial amount of capital has been or is in the process of being committed 
- Compliance with existing immigration measures, as 
listed in Appendix 14.04(A)(3) 
Intra-company transferees - Intention to carry out management or executive 
functions in the enterprise 
- Previous continuous employment for one year within 
the three years preceding th e date of the application 
- Compliance with existing immigration measures, as 
listed in Appendix 14.04(A)(3) No Party may: 
Require prior approval 
procedures, petitions, 
labour certifications 
tests or other 
procedures of similar 
effect; 
Impose or maintain 
any numerical 
restriction on 
temporary entry In Panama: 
Temporary residence 
renewable as long as 
the conditions under 
which it was granted are maintained.
b 
In El Salvador: 
90 days with possible 
extension for a 
further 90 days and 
further extendable by a one-year temporary 
residence permit 
which may be renewed provided the conditions under 
which it was granted 
are maintained. 
a See Annex III. 
b Under each of the categories listed in Annex 14.04, visas or temporary residence permits shall be granted with 
differing periods of validity and possible renewal.  Visas for business visitors  are valid for 30 days, extendable up 
to 60 days.  In the case of intra-company transferees, temporary visitors' visas are available for one year, renewable 
for further periods of equal duration.  In the case of i nvestors, once the investment has been made, they may opt 
for an immigration visa or a residence permit.  
Source : Text of the Agreement, Chapter 14. 
98. Paragraphs 1 and 2 of Article  14.04 establish the grounds for denying temporary entry to 
business persons.  In addition, the temporary entry of business persons is also subject to existing 
immigration measures, as described in Sections A, B and C of Annex 14.04. 
3. Provisions relating to specific sectors of trade in services 
(a) Financial services 
99. The provisions relating to trade in financial servi ces are set out in Chapter 12.  According to 
the definitions contained in Article 12.01, "financial  service" means any service of a financial nature, 
including banking, insurance, reinsurance and an y service related or auxiliary to a service of a 
financial nature.  The remaining definitions of Ch apter 12 replicate those of Chapters 10 and 11, 
except that a loan granted by a provider of services,  other than a loan to a financial institution, is 
considered an investment in the field of financial services. 
100. As in the case of investment and cross-border trade in services, liberalization in financial 
services is effected on the basis of a "negative list" .  Chapter 12 covers the four modes of supply 
defined in the GATS, that is, the three modes of supply of Chapter 11 and investments under Chapter 10, although liberalization differs by mode .  Thus, in Article 12.06, each Party guarantees 
national treatment for investors of the other Party,  and its investments (mode 3).  As regards cross-
border trade in services, national treatment is restri cted to those services for which authorization has WT/REG196/3 
Page 32  
 
  been granted, which is only gu aranteed (Article 12.05) for the consumption of a service in the 
territory of one Party by a consumer of the other Party (mode 2).  Even so, the Parties agree not to increase the degree of non-conformity of their measures relating to cross-border trade in services, except with regard to the measures provided for in Section B of Annex VI of each Party.  
Most-favoured-nation treatment (Article 12.07) is in fact granted in respect of both investments and 
cross-border trade.  In Article 12.04, the Par ties likewise guarantee the right of establishment 
(mode 3) under conditions no less favourable th an those granted to their own investors. 
101. Each Party shall permit financial institutions of  the other Party to provide any new financial 
service that they permit their own institutions to  provide, in accordance with most-favoured-nation 
treatment and national treatment  principles (Article 12.13).
37  Moreover, any type of restriction on 
grounds of nationality is prohibited in respect of the senior management and governing bodies or 
boards of directors of financia l institutions (Article 12.14). 
102. The Parties reserve the right to maintain exis ting measures that are not in conformity with 
Articles 12.04, 12.05, 12.06, 12.07, 12.13 and 12.14, provided that they are included in section A of Annex VI, and to adopt or maintain measures not in conformity with those articles, in accordance 
with the provisions of section B of the same Annex. 
103. In Article 12.09, the Parties reserve the right  to adopt or maintain prudential measures.  
Furthermore, pursuant to paragraph 3 of the Annex on Financial Services to the GATS, each Party is 
given the possibility of recognizing, where appropria te, the prudential measures of the other Party, 
when it has recognized the prudential measures of non- Parties (Article 12.08).  The provisions of this 
Chapter do not apply to the activities of monetary authorities, activities that form part of public 
retirement plans or statutory social security systems,  or other activities that have the Party's guarantee 
or use financial resources of the Party (Article 12.02). 
104. The provisions on transfers in the Chapter on investment apply mutatis mutandis  to the 
Chapter on financial services (Article 12.17).  Ot her provisions of that Chapter specify the 
transparency requirements which the Parties unde rtake to fulfil (Article 12.10), as well as the 
additional procedures regarding cons ultations and dispute settlement in  the financial services sector, 
which partly modify the provisions of Chapter 20 (Articles 12.12 and 12.18).  Thus, where a Party 
suspends benefits in response to a measure affec ting the financial services sector in any way, it may 
suspend benefits only in that sector.  This Chapte r incorporates Section B of Chapter 10 on disputes 
between an investor and a Party, in addition to other provisions specifically relating to financial 
investment disputes (Article 12.19). 
105. The denial of benefits under this Chapter is provided for in the same way as in Chapter 11, 
but does not extend to financial investments (Article 12.16). 
106. Lastly, a Committee on Financial Services is esta blished.  Its functions include overseeing the 
application of this Chapter, taking part in dis pute settlement procedures and facilitating the exchange 
of information (Article 12.11). 
(b) Telecommunications 
107. Chapter 13 of the Agreement contains specific provisions on telecommunications.  The 
Chapter applies to:  measures re lating to access to and use of public telecommunications transport 
                                                     
 
37 "New financial service" means a financial service not provided in the territory of a Party that is 
provided in the territory of the other Party and includes any new form of delivery of a financial service or sale of 
a financial product that is not sold in the territory of the first Party.  WT/REG196/3 
 Page 33 
 
 
  networks or services38;  measures relating to the provision of enhanced or value-added services39;  and 
standards-related measures concerning the att achment of terminal equipment to public 
telecommunications transport networks. 
108. Regarding access to and use of public telecomm unications transport networks and services, 
Article 13.04 is based on paragr aph 5 of the GATS Annex on Telecommunications, in that it is 
guaranteed that persons of the ot her Party have access to and use of any public telecommunications 
transport network or service offered in its terr itory or across its borders, on reasonable and non-
discriminatory terms and conditions.40  In addition, without prejudice to the legislation in force, the 
Parties shall ensure that the pricing of public telecommunications transport services reflects economic 
costs directly related to providing the services, w ithout preventing cross-subsidization between public 
telecommunications transport services. 
109. As regards the conditions for the provision of enhanced or value-added services, pursuant to 
Article 13.05, each Party shall ensure that a ny licensing, permit, concession, registration or 
notification procedures relating to the provision of enhanced or value-added services are transparent 
and non-discriminatory41, that applications filed thereunder ar e processed expeditiously, and that the 
information required under such pro cedures conforms to the current le gal requirements.  Moreover, it 
is provided that no Party may require a provi der of enhanced or value-added services inter alia  to 
provide those services to the public generally or to cost-justify its rates. 
110. According to Article 13.06, each Party shall en sure that its standards-related measures 
concerning the attachment of terminal or other e quipment to the public telecommunications transport 
networks are adopted or maintained only to resolve a limited number of situations.  In addition, its 
conformity assessment procedures shall be transparen t and non-discriminatory and the Parties agree to 
mutual recognition of conformity assessment procedur es, subject to the right to review the accuracy 
and completeness of tests. 
111. In Article 13.07, the Parties establish a set of  commitments based on good intentions clauses 
in order to prevent monopolies, principal providers or dominant operators from using their position of 
power to engage in anti-competitive practices.  Other articles of the Chapter contain additional 
provisions relating to transparency (Article 13. 08) and technical coopera tion and consultations 
(Article 13.11). 
4. Sectoral liberalization commitments 
112. As this Agreement follows a "negative list" appr oach, liberalization covers all sectors, subject 
to the provisions relating to investments and cross- border trade mentioned above, except those sectors 
for which current or future restrictions are d escribed in the Annexes of each of the Parties. 
                                                      
38 "Telecommunications service" does not include distribution by cable, broadcasting or any other kind 
of electromagnetic distribution of radio and television programmes.  "Public telecommunications transport 
service" means any telecommunications service required by a Party to be offered to the public generally. 
39 Enhanced or value-added services are services employing computer processing applications that:  
(a) act on certain aspects of the information transmitted to the user;  (b) provide a customer with additional, 
different or restructured information;  or (c) in volve user interaction with stored information. 
40 It is specified that the term "non-discriminatory"  refers to "terms and conditions no less favourable 
than those accorded to any other customer or user of like public telecommunications transport networks or 
services in like circumstances". 
41 The definition of "non-discriminatory" contained in  Article 13.04 applies for the purposes of this 
Article. WT/REG196/3 
Page 34  
 
  (a) Panama 
113. Under this Agreement, Panama considerably extends its GATS commitments, particularly 
with regard to the number of sectors liberalized , since its commitments under the GATS only cover a 
limited number of sectors, although further commitments are also made for some of the sectors already covered by the GATS.
42  It should be stressed that the Agreement does not include the labour 
market, which stands outside its scope. 
114. With regard to measures of ge neral application, Panama mainta ins the restriction contained in 
the GATS that at least 90 per cent of the employees of  any foreign investor must be Panamanian or 
must have resided in the country for ten years,  and maintains the prohibition on the acquisition of 
property for foreign government s and of properties located less than 10 km. from the border. 
115. In business services, Panama liberalizes resear ch and development services, real estate 
services and a large number of other business services subsectors. 
116. In communication services, Panama's foreign postal activities are subject to the measures in 
force two years after the Agreement's entry into fo rce.  In telecommunications the coverage of the 
GATS is extended to several subsectors, such as telephone services, and cross-border trade is 
liberalized, although restrictions are maintained on foreign government investments.  In 2003, Panama 
also liberalized basic telecommunication services, while personal communication services are to be liberalized in 2008.  Finally, investment and trad e in the paid radio and te levision public services is 
permitted, except by foreign governments. 
117. The coverage of the GATS with regard to c onstruction services is extended, since Panama 
reserves the right to adopt future measures on residency or local presence requirements in all modes 
of supply. 
118. With regard to distribution services, Panama r estricts retail trade investment to Panamanians 
(with restrictions even for naturalized  Panamanians), except in certain cases.
43  Furthermore, the State 
reserves the operation of the electricity transmission services. 
119. In education services, Panama liberalizes the s ubsectors of higher and adult education and 
allows investment in all subsectors, subject to the so le restriction that the history of Panama and civic 
education must be taught by Panamanians.44 
120. Under the GATS, Panama includes commitments  for a limited number of environmental 
services subsectors, while it liberali zes the entire sector under the Agreem ent.  The same is true of 
health and social services, since its commitmen ts under the GATS are limited to hospital services. 
121. In financial services, the liberalization pr ocess differs between insurance and banking 
services.  Panama authorizes Salvadoran insuran ce companies to cover property and persons in 
Panama's territory, pursuant to the legislation in force in Panama.  With regard to reinsurance, 
companies must have two general agents, who must  both be resident in Panama and one of whom 
must be of Panamanian nationality.  This same re quirement also applies to financial intermediation 
services.  With regard to mutual funds, the guarantee must be constituted by an insurance policy or be 
issued by a bank of the country in which the funds or securities are held.  If that country is Panama, a 
                                                      
42 The Agreement goes further than th e GATS in many respects, as described in the rest of this section, 
although it does not include a GATS-type consolidated provision prohibiting quantitative restrictions. 
43 In Panama, retail trade is understood to mean selli ng to consumers, representing or acting as an agent 
for production or trading companies or any other activity  classified by law as pertaining to such trade. 
44 It should be noted that a number of exceptions are listed in Article 10.01, including education and 
public training.  WT/REG196/3 
 Page 35 
 
 
  guarantee in securities of the State of Panama is also permitted.  Finally, Panama  reserves the right to 
adopt any measure concerning pension funds. 
122. In tourism services, the coverage of the hotel and restaurant subsector (partial commitments 
made under the GATS) and the tourist guide subsect or (not included in the GATS) is extended. 
123. Panama's mode 2 commitments under the GATS are confined to certain recreational services, 
whereas the entire sector is libera lized under the Agreement, with the exception of games of luck and 
chance, which may only be operated by the Stat e, and artistic activities, for which there is a 
requirement that every time a Salvadoran music artist is hired, Panamanian music artists must be hired on the same conditions. 
124. Panama undertakes commitments for all transpor t services, for which its only commitment 
under the GATS is for "aircraft repair and mainte nance".  However, Pana ma imposes a series of 
requirements in the various subsectors.
45  For maritime transport, for example, only a Panamanian 
may be a pilot's apprentice and priority is given to  Panamanians in recruitment by shipowners.  In 
addition, at least one of the representatives of staff recruitment and placement agencies must be a Panamanian national.  With regard to other me ans of transport, foreigners are prohibited from 
operating international public air transport servi ces under the Panamanian flag and their equity 
participation may not exceed 49 per cent.  Furthe rmore, the staff of Panamanian enterprises and 
aircraft must be Panamanian.  For road transpor t, Panama reserves the right to implement future 
measures and imposes a Panamanian nationality rest riction on domestic cabotage carriers within 
Panama.
46 
125. The Agreement also includes a number of reser vations in respect of investment and cross-
border trade in certain non-service activity sectors, su ch as the extraction of certain minerals, fishing 
and oil and natural gas.  For electrical power, in addition to the restriction on transmission mentioned above, there is also a limitation on foreign investment. 
126. With regard to the Panama Canal, which is  not covered by the GATS but which does form 
part of the Agreement except as regards government procurement, Panama maintains the restrictions 
on both investment and cross-border trade in  services and may adopt future measures.
47  Another 
restriction gives preference to Panamanians over fore igners in recruitment for posts within the Canal 
Authority. 
127. Other reservations allow Panama to adopt an y future measures, including on matters relating 
to minorities, and to deny El Salvador any rights or  preferences granted to indigenous populations.  In 
the case of agricultural settlements, at least 20 per cen t of families must be Panamanian.  Furthermore, 
Panama reserves the right to impose limitations on the privatization of State enterprises.  In addition, 
foreigners are prohibited from acquiring a majority stake in public service companies. 
                                                      
45 In Annex IV, Panama reserves the right not to accord most-favoured-nation tr eatment to El Salvador 
under all agreements regarding aviation and maritime matters in force or signed after the date of this 
Agreement's entry into force. 
46 International freight transportation (except cabotage) is not affected by this reservation. 
47 Although the degree of coverage in terms of disciplines is similar to that under the GATS, 
two differences should be noted:  (a) within the framewo rk of the WTO there is no chapter on investment, and 
only the GATS disciplines relating to mode 3 apply;  an d (b) in the FTA a "negative list" approach is adopted 
which, in view of the sensitive nature of the issue, fo rced Panama to create a future measures reservation in 
Annex II, which provides for the freedom to legislate. WT/REG196/3 
Page 36  
 
  (b) El Salvador 
128. In the case of El Salvador, the difference in lib eralization compared to the commitments made 
under the GATS is even more noteworthy, particular ly in terms of the number of sectors covered. 
129. With regard to measures of general applicati on, El Salvador withdr aws a series of general 
investment requirements applicable  to Panamanian companies, such  as the obligation to maintain a 
permanent representative in El Salvador and the limitations under its schedule of GATS commitments 
on the proportion of profits and payments for rights to use foreign trademarks and patents which may 
be remitted abroad.  Furthermore, for all modes of  supply, the compulsory withholding of 20 per cent 
of income (other than dividends) obtained within its  territory is lifted.  The nationality restrictions 
prohibiting foreigners from making up more than 10 per cent of a company's employees are also 
lifted, and foreigners are no longer prohibited from purchasing rural property.
48  However, foreign 
investment in small-scale trade, industry and provision of services is prohibited. 
130. In the Agreement, El Salvador liberalizes the business services sector49 and limits the practice 
of aquaculture to permanent residents of El Salvador .  On the whole, this marks a major step forward 
in relation to business services compared to the GA TS, where El Salvador includes commitments in 
only a few business services sectors, many  of which are not bound under mode 1.50 
131. With regard to communication services, El Salvador does not maintain reservations for 
telecommunication services, wher eas under the GATS, basic telecommunications are subject to a 
number of limitations for mode 3 a nd only partial commitments, if any, are made for value-added 
services.  The other reservations in the communications sector are focused on audiovisual services:  49 per cent foreign participation in the share capital of legal persons is set as the maximum qualifying 
limit for the granting of radio or television broadcas ting licences.  El Salvador also reserves the right 
to adopt measures to restrict cross-border trade and investment in network services necessary for the 
transmission of television signals, although as at April 2008, no measures to that end have been 
adopted.  Furthermore, nationalit y conditions are imposed on commerc ial advertisements, and radio 
presenters and broadcasters must be Salvadoran.  Fi nally, El Salvador does not include any limitations 
for express delivery services, for which no co mmitments were undertaken under the GATS. 
132. In its schedule of specific commitments under the GATS, El Salvador has no commitments 
for construction services or related engineering ser vices, or for distribution services or education 
services.  In the Agreement, no restrictions are pl aced on education services.  However, the possibility 
of adopting or maintaining any measures to restrict  the supply of construction services is maintained, 
while with regard to distribution services, nationality  restrictions are included for the organizers of 
commercial centres or establishments in seaports.  There is also a quantitative restriction on the 
construction of petroleum storage depots and servi ce stations, which affects both construction and 
distribution services. 
133. El Salvador liberalizes environmental services, social and health services and tourism and 
travel-related services, all without restrictions;  th is marks a major step forward in relation to the 
GATS, which includes only a mode 3 commitment for a few subsectors of environmental services, 
                                                     
 
48 With regard to the purchase of rural property, El Salvador has entered a reservation contingent on 
whether or not Salvadorans are allowed to buy such property in Panama.  As no measure exists in Panama 
prohibiting the purchase of rural property by foreigners , the reservation in question does not apply to Panama. 
49 No measures were adopted con cerning the right to limit invest ment in accounting, auditing and 
bookkeeping and corporation tax review services durin g the two years following the Agreement's entry into 
force. 
50 Business services commitments under the GATS relate to:  some subsectors of legal services, 
accounting and auditing services, tax a dvisory services, architectural serv ices, engineering services, data 
processing services, leasing or rental services for means of transport withou t operators, and advertising services.  WT/REG196/3 
 Page 37 
 
 
  while no commitments are made for social and h ealth services and there are no mode 1 bindings for 
tourism services. 
134. Recreational, cultural and sporting services, for which there are also no commitments under 
the GATS, are liberalized for all subsectors excep t the entertainment services subsector, for which 
restrictions are imposed on artists and circuses concerning licences, payment, duration and national 
presence. 
135. With regard to transport services, El Salv ador has no commitments under the GATS except 
for aircraft maintenance and repair, which means th at the Agreement marks a step forward in relation 
to the GATS, although some restrictions are mainta ined in a number of areas, such as in maritime and 
road transport.51  For maritime transport services, El Salvador reserves coastal trade and navigation 
between Salvadoran ports for Panamanian vessels wh ich meet certain nationality requirements.  For 
air transport services, the principle of reciprocity wi th Panama is applied in the granting of licences, 
for both specialized air services and supporting servi ces for air transport.  For road transport, 
El Salvador reserves the right to implement fu ture measures and imposes a Salvadoran nationality 
restriction on domestic cabotage carriers within El Salvador. 
136. In financial services, El Salvador allows the ac quisition of more than 49 per cent of the shares 
in banks incorporated in El Salvador by Pana manian natural persons, Pa namanian legal persons, 
provided that the majority of their shareholders ar e Panamanian, and Panamanian banks, provided that 
they are classified by internationally recognized risk rating companies and that Panama exercises 
prudential regulation and superv ision in accordance with relevant international practices.52  
El Salvador imposes similar authorization requirement s with regard to the acquisition by Panamanian 
natural and legal persons and Panamanian insurance and reinsurance companies of more than 25 per 
cent of the shares in insurance companies incorporated in El Salvador, although classification by 
international risk rating companies is not require d.  These improvements in treatment reflect the 
granting to Panamanian banks and companies of simila r treatment to that granted to Central American 
banks and companies, in addition to exempti ng banks from the requirement to obtain top-tier 
classification by risk rating companies.  Under reservations, exchange houses are required to be 
incorporated as Salvadoran joint stock compan ies, shares in which may only be owned by 
Salvadorans, and Panamanians are required to have r esided in El Salvador for at least three years in 
order to become directors or administrators of stoc k exchanges or brokerage houses.  El Salvador also 
reserves the right to maintain or adopt future me asures concerning the registration of securities for 
trading on the Salvadoran securities market, as well as concerning pension funds. 
137. With regard to non-service activity sectors, El Salvador only includes reservations for 
fisheries, a sector in which the most-favoured-nati on principle will not be applied after the entry into 
force of agreements with third-party countries, a nd in which nationality restrictions are imposed for 
artisanal, coastal and deep-sea fishing for certain species. 
138. Other reservations allow El Salvador, in th e same way as Panama, to adopt any future 
measures on minority-related issues and to deny Pa nama any rights or preferences granted to 
                                                      
51 In Annex IV, El Salvador reserves the right not to accord most-favoured-nation treatment to Panama 
under all agreements regarding aviation and maritime matters in force or signed after the date of this 
Agreement's entry into force. 
52 In addition, Panamanian banks must fulfil a series  of requirements listed in paragraph 2 of section 
C-SV-2 of Annex VI. WT/REG196/3 
Page 38  
 
  indigenous populations.  Furthermore, El Salvador reserves the right to impose limitations on the 
privatization of State enterprises.
53 
D. COMMON PROVISIONS GOVERNING TRADE IN GOODS AND IN SERVICES  
1. Competition policy 
139. Chapter 15 of the Agreement contains the pr ovisions on competition policy and those relating 
to monopolies and State enterprises. 
140. As regards competition policy, the Parties inte nd to cooperate in establishing mechanisms to 
facilitate and promote the development of competiti on policies and ensure the application of rules 
governing free competition.  The Parties set themselves a period of two years in which to examine the possibility of elaborating on the content of Chapter 15.  As at April 2008, the Chapter has not been 
extended. 
141. Under Article 15.03, the Parties may designate or maintain monopolies or State enterprises, 
although a Party designating a new monopoly is required to endeavour to introduce in the operation of 
the monopoly such conditions as will minimize any impa irment of benefits, and to notify the other 
Party of the designation.  Except in the case of procurement by government agencies of goods or 
services for non-commercial purposes, the Parties must  ensure, within the lim its of their respective 
legislation, that monopolies and State enterprises ac t in a manner consistent with the Agreement, do 
not discriminate between investors and service providers and are not used to engage in 
anticompetitive practices. 
2. Government procurement
54 
142. Government procurement aspects are addressed in  Chapter 16, which came into effect in 
October 2004, that is, 18 months after the entry in to force of the Agreement.   This Chapter covers 
government procurement of goods, p ublic works and services, subject to the Annexes to Chapters 11 
(Cross-Border Trade) and 12 (Financial Services) an d with the exception of subsidies accorded by the 
Parties or State enterprises and government services or functions.55  A Party may deny the benefits 
accruing under this Chapter to a service provider of the other Party, where it determines that the 
provider has no substantial business activity in the terr itory of the other Party and, in accordance with 
the law of that other Party, is owned or cont rolled by persons of a non Party (Article 16.06). 
143. In Article 16.03, the Parties undertake to appl y measures relating to government procurement 
that are non-discriminatory and non-arbitrary and that provide for transparency and equal access among the Parties.  Each Party accords to goods, services and suppliers of the other Party national 
treatment for any government contracting procedure ot her than direct contrac ting (Article 16.04).  The 
Parties agree to implement appeal procedures permitting review of administrative decisions affecting 
government procurement for suppliers of the other Party (Article 16.07).  Neither Party may demand 
compensation from the other in cases where privatization occurs (Article 16.09). 
                                                     
 
53 "State enterprise" means an enterprise that is  owned or controlled by the State and includes any 
enterprise established after the date on which this Agreem ent enters into force for the sole purpose of selling or 
disposing of shares in, or the assets of, an  existing governmental enterprise or entity. 
54 N e i t h e r  P a n a m a  n o r  E l  S a l v a d o r  i s  p a r t y  t o  the WTO Agreement on Government Procurement, 
although Panama is in the process of acceding thereto. 
55 Annex 16.02 lists forms of government procurement that are excluded from the scope of this 
Chapter.  Article 16.08 provides for their potential modification.  As at April 2008, no progress has been made 
regarding this Article.  The Chapter does not apply to government procurement by the Panama Canal Authority.  WT/REG196/3 
 Page 39 
 
 
  144. A Committee on Government Procurement is est ablished under Article 16.11.  Its functions 
include review and expansion of cont ent in this sphere.  This Chapte r takes precedence in the event of 
inconsistency with any other provision of the Agreement and is not subject to Chapter 20 
(Dispute Settlement) (Articles 16.13 and 16.14). 
145. Other provisions cover the use of informati on technology (Article 16.10), and cooperation 
and technical assistance (Article 16.12). 
3. Intellectual property 
146. Intellectual property matters are governed by Chapter 17 of the Agreement, in which the 
Parties confirm their rights and obligations unde r the Agreement on Trade-Related Aspects of 
Intellectual Property Rights (TRIPS).  A Committe e on Intellectual Propert y is established under 
Article 17.05.  Its main function is to seek th e most suitable means of implementing rights and 
obligations under the TRIPS Agreement. 
4. Transparency 
147. Pursuant to Chapter 18, the Parties agree to  implement a number of measures to ensure 
transparency in the administration of th e Agreement.  Such measures comprise, inter alia , the 
establishment of contact points, the exchange of in formation, and the provisi on of safeguards in terms 
of hearings, legality and due process respecting matters56 that may affect the operation of the 
Agreement, as well as the procedures to be fo llowed for the adoption of measures of general 
application and review and appeal by the Par ties of administrative decisions relating to the 
Agreement. 
5. Institutional framework 
148. In addition to the Articles establishing bodi es concerned with the various spheres of 
implementation, the institutional framework is la id down in Chapter 19 of the Agreement, which 
comprises two Sections.  The first provides for th e establishment of the Administrative Commission, 
Sub-Commission and Secretariat of the Agreemen t;  the second covers ma tters relating to the 
committees, sub-committees and groups of experts. 
149. The functions of the Administrative Commission of the Agreement, established at ministerial 
level, encompass monitoring and evaluating implemen tation of the Agreement, resolving disputes, 
and supervising the work of committees establishe d under the Agreement.  It is empowered to 
establish ad hoc committees and groups of experts,  and to modify concessions relating to goods, 
services, and government procurement.  All of the Commission's decisions must be adopted by consensus (Article 19.01).  The Administrative Sub-Commission of the Agreement, established under 
Article 19.02, is responsible for preparing the technical dossiers necessary for decision-making, 
following up on the decisions of the Commission, which lays down the procedures of the Sub–Commission, and for helping to oversee the work of the committees, sub-committees and groups of 
experts.  Article 19.03 provides, moreover, that th e Commission shall establish a Secretariat tasked – 
inter alia , and in addition to other functions assigned by the Commission – with providing support for 
the Commission and the Sub-Commission, assisting arb itral panels in the settlement of disputes, and 
dealing with such notifications and communications as are provided for in Chapter 18.
57 
                                                      
56 Laws, regulations, procedures and administrative rulings of general application. 
57 The Administrative Commission of the Agreement must be in operation before the Secretariat is able 
to function.  National sections have nevertheless already been established, such as the Directorate of Trade WT/REG196/3 
Page 40  
 
  150. The committees, sub-committees and groups of experts are governed by section B of the 
Chapter.  Each committee has a sphere of competence involving the monitoring of implementation of the Agreement, assistance in the decision-maki ng process, and forwarding to the Commission of 
proposals for modifications and review of measures wh ich, in its view, may be  inconsistent with the 
Agreement (Article 19.05).  In addition, the committees may establish their own procedures and 
create permanent sub-committees, which have the same functions as the committees with respect to 
the matters referred to them.  No sub-committee has been set up as at April 2008.  Lastly, not only the 
Commission but also the committees and the sub- committees may establish groups of experts to 
handle technical matters. 
6. Dispute settlement 
151. Procedures governing the settlement of disputes are laid down in Chapter 20.  They are 
applicable to the settlement of any dispute regardin g application of the Agre ement, wherever a Party 
considers that an actual or proposed measure of the other Party might be incons istent with obligations 
under the Agreement or, in the case of trade in goods, wherever technical barriers to trade or cross-
border trade in services may cause nullification or impairment of benefits expected.  Any dispute 
arising under the Agreement or the WTO Agreement may be heard by either forum at the discretion of 
the complaining Party, although once an arbitral  panel has been establis hed, the forum selected 
excludes recourse to any other. 
152. The Agreement provides that the Parties are to cons ult prior to the establishment of an arbitral 
panel, for which they may call on the committees an d sub-committees, and, failing agreement, on the 
Commission, in accordance with the procedures se t forth in Articles 20.06 and 20.07, as well as 
Article 19.04(4-5).  Thirty days after the Commissi on has convened, or if no such meeting has taken 
place, the Party that requested the meeting of th e Commission may request the establishment of an 
arbitral panel (Article 20.08).  In the event that  more than one Party requested the meeting and a 
single Party requests the establishment of an arbitral  panel, all Parties must be duly informed and 
given the possibility of participating as complain ing Parties.  Details concerning the roster of 
panellists, their qualifications, and the composition a nd establishment of the arbitral panel are set out 
in Articles 20.09 20.12.  Any Party has the right to be  heard by the arbitral panel and to submit written 
comments.
58 
153. No later than 90 days following its establishment,  the arbitral panel is required to issue its 
initial report, on which the disputing Parties ma y make comments.  Within the next 30 days, 
notification must be given of the final report, wh ich the Parties are required to implement within a 
period of six months following the notification.  The report contains a finding of consistency or 
inconsistency of the measure, in which latter case the measure must be revoked, and the level of 
nullification or impairment;  it may suggest the adju stments considered necessary.  If the Parties fail 
to notify the Commission of satisfactory implementation of the final report, it is for the arbitral panel 
to determine whether the Party complained against ha s complied with the report.  If the arbitral panel 
finds that the Party complained against has not complied with, or revoked a measure inconsistent 
with, the Agreement, or the Parties fail to r each agreement in the case of a measure causing 
nullification or impairment of benefits under th e Agreement, the complaining Party may suspend 
benefits of equivalent effect to  those which it has ceased to receive , in accordance with Article 20.18. 
                                                                                                                                                                     
Treaty Administration in the case of El Salvador, a nd the Directorate-General for the Administration of 
International Trade Treaties in the case of Panama. 
58 A Party entitled to participate as a complaining Party which decides to abstain from doing so may 
participate as a third Party, provided that it notifies its  intention within the relevant time period.  A Party that 
decides to participate neither as a complaining Party nor as a third Party foregoes its right to institute proceedings regarding the same matter, other than in the event of a significant change in economic 
circumstances.  WT/REG196/3 
 Page 41 
 
 
  154. Article 20.20 stipulates that private parties of one Party have no right of action against the 
other Party, and Article 20.21 encourages the Pa rties to promote alternative means for dispute 
settlement, in that it provides for the establishmen t, at the Commission's behest, of an Advisory 
Committee on Private Disputes to examine matters relating to the resolution of disputes among private parties.  As at April 2008, the Committee has not been established. 
155. Article 20.19 of the Agreement stipulates that  the Commission shall endeavour to agree on a 
non-binding interpretation, where a Party so requests,  on questions of interpretation in a judicial or 
administrative proceeding.  Failing consensus with in the Commission, any Party may interpret the 
situation according to its own views. 
 
 WT/REG196/3 
Page 42  
 
  
 Outline of dis pute settlement procedures (Chapter 20 ) 
Consultations 
(Article 3.2-6) 
Within 30 days of 
the request for consultations 
(15 days in urgent 
cases) Request for a meeting of the 
Commission within 10 days of 
delivery of the request 
(Articles 20.07 and 19.04) 
Within 
10 days of the request for the 
establishment 
of an arbitral 
panelRequest for the establishment 
of an arbitral panel (Article Within 30 days of 
the meeting of the Commission (15 
da
ys in ur gent 
Establishment of the arbitral 
panel (Article 20.08-20.10)   Within 15 days of 
the panel request (15 days after the 
notification of other 
Parties, as 
appropriate)  Model Rules of Procedure for 
the arbitral panel 
(Article 20.12) 
Initial report ( Article 20.15)  Within 90 days of 
the establishment of 
the arbitral panel Information and technical 
advice (Article 20.14) 
Comments by the Parties 
(Article 20.15)  Within 14 days of 
the issue of the 
initial report 
Notification of the final report 
to the Parties 
(Article 20.16)  Within 30 days of 
the issue of the 
initial report  
Implementation of the report
(Article 20.17 )Within 6 months 
of notification of Determination by the arbitral 
panel as to whether the Party 
complained against has 
complied with the final re port Failure to 
comply  
Suspension of benefits 
(Article 20.18)  
Request for the establishment 
of an arbitral panel if the 
Party complained against 
considers that the level of 
suspension of benefits is 
excessive, or if the final report 
has not yet been implemented 
(Article 20.18) Communication by the Parties 
of implementation of the final 
report 
(Article 20.18) 
Report of the arbitral panel
(Article 20.18) Within 60 days of the establishment 
of the arbitral panel 
(30 days following the panel request if the panellists are 
the same) Request for consultations 
(Article 20.06) Notification of the other Party 
and other Parties to the 
Agreement, which may take 
part in the consultations  Within 10 days of 
disclosure of the 
request for 
consultations  
Notification of the other Party 
and other Parties having 
requested a meeting of the 
Commission, which may join 
in the request  
Presence of third Parties 
(Article 20.13)  
Publication of the report 
(Article 20.16) Within 15 days 
of notification 
of the Parties 
Within 15 days of 
expiry of the term 
specified in the 
final report 15 days 
following expiry of the term specified 
in the final 
report 
Once the benefits have 
been suspended  WT/REG196/3 
 Page 43 
 
 
  7. Exceptions 
156. The exceptions applicable to matters concerni ng trade in goods and trade in services are set 
forth in Chapter 21.  Article XX of the GATT 19 94 (General Exceptions) is incorporated in the 
Agreement for the purposes of trade in goods59,  and Article XIV, subparagr aphs (a), (b) and (c), of 
the GATS forms part of the Agreemen t for the purposes of trade in services.60 
157. Article 21.03 specifies the exceptions on nationa l security grounds, which are derived from 
the security exceptions contained in Article XXI of the GATT 1994.  The exceptions relating to 
balance of-payments difficulties are set forth in  Article 21.04.  Measures applied under such 
exceptions shall avoid unnecessary damage to the interests of the other Party;  not be more burdensome than necessary;  be temporary and be phased out gradually;  be consistent with the 
outcomes of consultations with the International Monetary Fund (IMF);  and be applied on a most 
favoured-nation or national treatment basis, whichever may be more favourable.  A Party may maintain a measure that gives priority to its ow n services, provided that the measure is not being 
applied for protectionist purposes, in which case it must be consistent with the IMF provisions.  
Restrictions on transfers must be consistent with  Article VIII(3) of the IMF Articles of Agreement 
where they are imposed on payments for current inte rnational transactions, cons istent with Article VI 
of the IMF Articles of Agreement and apply only in conjunction with meas ures imposed on current 
international transactions, and may not take the fo rm of tariff surcharges, quotas, licences or similar 
measures. 
158. The exception concerning disclosure of info rmation (Article 21.05) reiterates that no 
information may be furnished which might run counter, inter alia , to the financial interests of 
individuals or financial institutions. 
159. Lastly, Article 21.06 stipulates that nothing in the Agreement shall apply to taxation measures 
or affect the rights and obligations of the Par ties under any tax convention.  In the event of 
inconsistency between the Agreement and any such conve ntion, the latter shall prevail to the extent of 
the inconsistency.  However, the national treatment  provisions shall apply to taxation measures to the 
same extent as does Article III of the GATT 1994;  taxation measures are also subject to the export 
tax provisions. 
8. Relation to other agreements signed by the Parties 
160. Table II.8 lists all the Regional Trade Agreemen ts (RTAs) in effect to which Panama and 
El Salvador are Parties, regardless of whethe r or not the WTO has been notified thereof. 
                                                     
 
59 Part Two (Trade in Goods), Pa rt Three (Technical Barriers to Trade), and Chapters 15 (Competition 
Policy, Monopolies and State Enterprises)  and 16 (Government Procurement), to the extent that they affect trade 
in goods. 
60 Chapters 10-14 (Investment, Cross-Border Trade in Services, Telecommunications, and Temporary 
Entry of Business Persons, respectively), Parts Two and Thre e, and Chapters 15 and 16, to the extent that they 
affect trade in services. WT/REG196/3 
Page 44  
 
  Table II.8 
Panama and El Salvador:  Participation in RTAs  (in effect, whether or not notified), April 2008 
Notification to GATT/WTO Partner/ 
Agreement Date of entry into 
force Type of agreement 
Year WTO provision 
PANAMAa 
Singapore 24.07.06 Goods & Services 2007 GATT Art. XXIV & GATS Art. V 
Chile 07.03.08 Goods & Services 2009 GATT Art. XXIV & GATS Art. V 
Chinese Taipei  01.01.04 Goods Not notified 
Colombia 18.01.95 Goods Not notified 
Dominican Republic  08.06.87 Goods Not notified 
Costa Rica 16.01.74 Goods Not notified 
Guatemala 25.04.74 Goods Not notified 
Honduras 14.02.74 Goods Not notified 
Mexico 24.04.86 Goods Not notified 
Nicaragua Not available  Goods Not notified 
EL SALVADOR  
Chile 01.06.02 Goods & Services 2004 GATT Art. XXIV & GATS Art. V 
Mexico 15.03.01 Goods & Services 2006 GATT Art. XXIV & GATS Art. V 
CAFTA-DR 01.03.06 Goods & Services 2006 GATT Art. XXIV & GATS Art. V 
CACM 12.10.61 Goods 1961 GATT Art. XXIV 
Colombia Not available Goods Not notified 
Venezuela Not available  Goods Not notified 
Dominican Republic Not available  Goods Not notified 
a  Information on RTAs prior to the date of Panama's accession was provided during the WTO accession process and is 
contained in document WT/ACC/ PAN/19 and in the Report by the Secretaria t relating to the Trade Policy Review of 
Panama (WT/TPR/S/186). 
CACM:  Central American Common Market 
CAFTA-DR: Central America-Dominican Republic-United States 
 
Source:  WTO Secretariat  
  WT/REG196/3 
 Page 45 
 
 
  ANNEX I 
 
Indicators of Tariff Liberalization Unde r the Panama-El Salvador Agreement  
 161. A comparison between the scheduled elimination of tariffs for each country's imports from 
the other and the MFN applied duties, broken down into agricultural and industrial products, is shown 
in Tables A.1 (Panama) and A.2 (El Salvador). 
162. In 2003, Panama had a variable MFN tariff structure.  Its (unweighted) average MFN tariff 
was 8.9 per cent, with a lower average for industria l products than for agricultural products (7.9 per 
cent and 14.5 per cent respectively).  When the Ag reement entered into force, 4.4 per cent of 
Panamanian tariff lines were already duty free.  At the time, Salvadoran agricultural exports enjoyed a 
preference margin of 56 per cent in relation to the applied MFN tariff when entering Panama, while 
the preference margin for industrial products was 77 per cent. 
Table AI.1 – Panama:  Indicators  of MFN applied tariffs and ta riffs applied to El Salvador 
ALL PRODUCTS WTO agricultural products WTO industrial products 
Average tariff 
applied Average tariff 
applied Average tariff 
applied 
Origin of 
goods Year 
Total
(%) To lines 
with 
positive 
tariffsa 
(%) Percentage 
of duty-
free tariff 
lines 
(%) Total 
(%) To lines 
with 
positive 
tariffsa 
(%) Percentage 
of duty-
free tariff 
lines 
(%) Total 
(%) To lines 
with 
positive 
tariffsa 
(%)  
Percentage 
of duty-
free tariff 
lines 
(%) 
MFN 2003 8.9 9.3 4.4 14.5 15.3 5.0 7.9 8.2 4.2 
El Salvador 2003 2.5 12.2 79.7 6.3 23.2 73.0 1.8 9.3 80.9 
 2004 2.4 11.9 79.7 6.2 22.8 73.0 1.7 9.1 80.9 
 2005 2.4 11.7 79.7 6.0 22.4 73.0 1.7 8.8 80.9 
 2006 2.3 11.4 79.8 5.9 22.1 73.1 1.6 8.6 81.0 
 2007 2.3 11.2 79.8 5.8 21.6 73.1 1.6 8.4 81.0 
 2008 2.2 11.6 81.1 5.7 22.2 74.3 1.6 8.8 82.3 
 2009 2.2 11.6 81.3 5.6 22.2 74.6 1.5 8.8 82.5 
 2010 2.2 11.6 81.3 5.6 22.2 74.9 1.5 8.7 82.5 
 2011 2.1 11.5 81.3 5.5 21.9 74.9 1.5 8.7 82.5 
 2012 2.1 11.4 81.3 5.4 21.6 74.9 1.5 8.6 82.5 
 2013 2.1 12.2 82.6 5.4 26.5 79.7 1.5 8.9 83.1 
a Excludes duty-free tariff lines 
Note: Not including prohibited lines (8) or restricted lines (12). 
Source : WTO Secretariat estimates, based on data provided by the Panamanian authorities. 
163. El Salvador also had a variable MFN tariff structure.  Its (unweighted) average MFN tariff 
was 7.4 per cent.  As in the case of Panama, there w as a lower average for indust rial products than for 
agricultural products (6.7 per cent and 12 per cent r espectively).  Upon the entry into force of the 
Agreement, 47.1 per cent of Salvadoran tariff lines we re already duty free.  At the time, Panamanian 
agricultural products enjoyed a preference margin of  51.7 per cent in relation to imports admitted on 
an MFN basis, while the preference margin for industrial products was 50.7 per cent. WT/REG196/3 
Page 46  
 
  Table AI.2 – El Salvador:  Indicators of MFN applied tariffs and tari ffs applied to Panama 
ALL PRODUCTS WTO agricultural products WTO industrial products 
Average tariff 
applied Average tariff 
applied Average tariff 
applied 
Origin of 
goods Year 
Total 
(%) To lines 
with 
positive 
tariffsa 
(%) Percentage 
of duty-free 
tariff lines  
(%) Total
(%) To lines 
with 
positive 
tariffsa 
(%) Percentage 
of duty-free 
tariff lines 
(%) Total
(%) To lines 
with 
positive 
tariffsa 
(%) Percentage 
of duty-free 
tariff lines 
(%) 
MFN 2003 7.4 14.1 47.1 12.0 15.9 24.5 6.7 13.6 51.2 
Panama  2003 3.7 19.8 81.4 5.8 22. 2 72.7 3.3 19.2 82.6 
 2004 3.7 19.6 81.4 5.7 21.7 72.7 3.3 19.0 82.6 
 2005 3.6 19.4 81.4 5.6 21.3 72.7 3.3 18.9 82.6 
 2006 3.6 19.2 81.4 5.5 20.8 72.7 3.3 18.8 82.7 
 2007 3.5 19.0 81.4 5.4 20.4 72.7 3.2 18.6 82.7 
 2008 3.5 19.9 82.4 5.2 21.3 75.4 3.2 19.5 83.6 
 2009 3.5 19.9 82.5 5.1 21.0 75.5 3.2 19.7 83.7 
 2010 3.5 19.9 82.6 5.1 20.9 75.7 3.2 19.6 83.7 
 2011 3.5 19.8 82.6 5.0 20.5 75.7 3.2 19.6 83.7 
 2012 3.4 19.7 82.6 4.9 20.2 75.7 3.2 19.6 83.7 
 2013 3.4 20.9 83.7 4.9 25.9 81.2 3.2 20.0 84.0 
a Excludes duty-free tariff lines 
Source : WTO Secretariat estimates, based on data provided by the Salvadoran authorities. 
164. Mutual market access conditions for each country's top 25 exports in the 2000-2002 period 
are presented in Tables AI.3 and AI.4, together w ith an indication of the year in which duty-free 
treatment will be granted.  The code and product descr iption are given at the six-digit level.  The table 
also shows the number of tariff lines covered by the products concerned. 
165. Table AI.3 shows the market access opportunities in  Panama for El Salvador's top 25 exports, 
which account for 50.4 per cent of total Salvador an exports and cover 111 tariff lines in Panama.  
Most of these have enjoyed duty-free treatment sinc e the entry into force of the Agreement, including 
a number of lines that already benefited from MFN tr eatment.  Five of the 25 products, however, are 
excluded from the tariff elimination programme, notably coffee and sugar, which are two of 
El Salvador's three main exports, jointly accounting fo r 17.8 per cent of its total exports.  The rest are 
due to gain duty-free entry into the Pa namanian market between 2006 and 2013.  WT/REG196/3 
 Page 47 
 
 
  Table AI.3 – Panama: Market access opportunities  under the FTA for El Salvador's top 25 exports 
El Salvador's top 25 exports in 2000-2002 Conditions of access to Panama's import market  
MFN  Duty-free in:  
Number of tariff 
lines  HS code and product description  Percentage 
of total 
exports (%)  Average 
applied 
MFN 
tariff 
(%) Duty-
free With 
positive 
duties 2003  2006  2008  2009  2013  
090111 Coffee, not roasted, not 
decaffeinated  13.7  15.0   1 not liberalized 
271000 Petroleum oils and oils obtained 
from bituminous minerals, other than 
crude; preparations not elsewhere 
specified or included, containing by weight 70 % or more of petroleum oils or 
of oils obtained from bituminous 
minerals  5.2  6.5  11  10  10     
170111 Cane sugar, not  containing added 
flavouring or colouring matter   4.1  152.0   1 not liberalized 
210690 Food preparations not elsewhere 
specified or included, other than protein 
concentrates and textured protein 
substances  2.7  6.7  1  15  15     
300490 Medicaments, other  2.7  3.0  2  3  3     
481810 Toilet paper  1.9  15   1      1 
170490 Sugar confectionery, not 
containing cocoa, other than chewing gum  1.9  13   5    5  
630260 Toilet linen and kitchen linen, of 
terry towelling or similar terry fabrics, of cotton  1.5  10   2 not liberalized 
220210 Waters, containing added sugar 
or other sweetening matter or flavoured  1.4  15   2      2 
340220 Preparations of organic surface-
active agents (other th an soap) for retail 
sale  1.4  9   7  3   4  
481910 Cartons, boxes and cases, of 
corrugated paper or paperboard  1.3  15   1   1   
030613 Shrimps and prawns  1.2  15   1  1     
340119 Soap and organic surface-active 
preparations, not for toilet use   1.2  15   5    5  
190410 Prepared foods obtained by the 
swelling or roasting of cereals or cereal 
products  1.1  13   7  7     
610910 T-shirts, singlets and other vests, 
knitted or crocheted  1.0  10   2 not liberalized 
481920 Folding cartons, boxes and cases, 
of non-corrugated pa per or paperboard  1.0  10.3   3  3     
760720 Aluminium foil of a thickness not 
exceeding 0.2 mm, backed  0.9  4.0   3  3     
760429 Aluminium alloy bars, rods and 
profiles, excluding hollow profiles  0.8  7.0   3  3     
610831 Nightdresses and pyjamas of 
cotton  0.8  15   2 not liberalized 
720917 Flat-rolled products of iron or 
non-alloy steel, of a width of 600 mm or 
more, cold-rolled (cold-reduced), not 
clad, plated or coated, of a thickness of 0.5 mm or more but not exceeding 1 mm  0.8  1   1  1     
300420 Medicaments containing 
antibiotics other than penicillin  0.8  2.5  1  1  1     
841821 Refrigerators, compression-type  0.8  7.7   3  3     
640399 Footwear, other  0.7  11.7   9  9     
Table AI.3 (cont'd) 
 WT/REG196/3 
Page 48  
 
  El Salvador's top 25 exports in 2000-2002 Conditions of access to Panama's import market  
MFN  Duty-free in:  
Number of tariff 
lines  HS code and product description  Percentage 
of total 
exports (%)  Average 
applied 
MFN 
tariff 
(%) Duty-
free With 
positive 
duties 2003  2006  2008  2009  2013  
380810 Insecticides 0.7 9.2 2 4 4     
721420 Other bars and rods of iron or 
non-alloy steel, not further worked than 
forged, hot-rolled, hot-drawn or hot-extruded, but including those twisted 
after rolling,  containing indentations, 
ribs, grooves or other deformations 0.7 10.0  2 2     
Total 50.3  17 94 66 2 1 14 3 
Source: WTO Secretariat estimates, based on data provided by the Panamanian authorities and data obtained from the 
United Nations Statistics Di vision (UNSD), COMTRADE. 
166. Table AI.4 shows the market access opportunities in  El Salvador for Panama's top 25 exports, 
which account for over 75.8 per cent of total Pa namanian exports and cover 71 tariff lines in 
El Salvador.  All except two products (correspondi ng to five tariff lines in El Salvador), which 
together account for 3.5 per cent of total Panamani an exports, have enjoyed duty-free treatment since 
2003.  This treatment is largely a result of the Agreement's bilateral elim ination programme, since 
only three products already benefited fr om MFN duty-free treatment in 2003. 
Table AI.4 – El Salvador:  Market access opport unities under the FTA for Panama's top 25 exports 
Panama's top 25 exports in 2000-2002 Conditions of  access to El Salvador's import market 
  MFN Duty-free in: 
Number of tariff 
lines  
HS code and product description Percentage 
of total 
exports 
(%) Average 
applied 
MFN 
tariff 
(%) Duty-
free With 
positive 
duties 2003 2013 
080300 Bananas, including plantains, fres h or dried  15.7  15.0   4  4  
030613 Shrimps and prawns, not preserved or prepared  7.7  10.0   3  3  
271000 Petroleum oils and oils obtained from  
bituminous  minerals, other than crude;  preparations not  
elsewhere  specified or included, containing by weight 
70% or more of petroleum oils or of oils obtained from 
bituminous minerals  6.3  4.5   15  15  
030410 Fish fillets and other fish meat, fresh or chilled  6.2  15.0   1  1  
030342 Yellowfin tunas  6.2  0.0  1    
030219 Fish, fresh or chilled, excluding fish fillets and 
other fish meat of heading 03.04. and trout and Pacific 
salmon  5.0  10.0   1  1  
010210 Live bovine pure-bred breeding animals  2.7  0.0  1    
240210 Cigars, cheroots and cigarillos, containing 
tobacco  2.6  20.0   1  1  
030559 Fish, dried, salted or in  brine, not smoked, other 
than cod  2.5  15.0   1  1  
080719 Melons, other than watermelons  2.3  15.0   1  1  
170111 Cane sugar, not cont aining added flavouring or 
colouring matter  2.0  40.0   1 not liberalized 
160520 Shrimps and prawns, prepared or preserved  1.6  15.0   1  1  
090111 Coffee, not roasted, not decaffeinat ed  1.5  13.8   4 not liberalized 
   Table AI.4 (cont'd)  WT/REG196/3 
 Page 49 
 
 
  Panama's top 25 exports in 2000-2002 Conditions of  access to El Salvador's import market 
  MFN Duty-free in: 
Number of tariff 
lines 
HS code and product description Percentage 
of total 
exports 
(%) Average 
applied 
MFN 
tariff 
(%) Duty-
free With 
positive 
duties 2003 2013 
020130 Meat of bovine anim als, fresh or chilled, 
boneless  1.5  15.0   1  1  
960390 Mechanical floor sweepers, feather dusters, other cleaning items  1.4  10.0  1  2  2  
030379 Other fish, excluding livers and roes, frozen  1.3  10.0   1  1  
300390 Other medicaments  1.2  0.0  6    
030611 Rock lobster and other sea crawfish, frozen  1.2  10.0   4  4  
080711 Watermelons  1.1  15.0   1  1  
030623 Shrimps and prawns, not frozen  1.1  5.0  1  1  1  
030269 Other fish, excluding livers and roes, not frozen  1.1  15.0   8  8  
300490 Other medicaments  1.0  5.0   6  6  
210390 Sauces and preparations therefor;  mixed condiments and mixed seasonings;  other  0.9  15.0   1  1  
760200 Aluminium waste and scrap  0.9  0.0  1    
230120 Flours, meals and pellets, of fish or of 
crustaceans, molluscs or other aquatic i nvertebrates  0.8  2.5  1  1  1  
Total  75.8   12  59  54  0 
Source : WTO Secretariat estimates, based on data provided by the Salvadoran Authorities and data obtained from the 
United Nations Statistics Di vision (UNSD), COMTRADE. WT/REG196/3 
Page 50  
 
  ANNEX II 
 
Table AII.1 
List of products to which El Salvador m ay apply import prohibitions or restrictions 
(a) Used and retreaded tyres, of tariff heading 40.12; 
(b) used vehicles other than railway or tramway rolling-st ock, and parts and accessories thereof, of Chapter 87; 
(c) used worn clothing and other worn arti cles, of tariff headings 63.09 and 63.10;  and 
(d) sacks and bags of a kind used for the packing of goods, of jute or of other te xtile bast fibres, of tariff subheading 6305. 10 
 
Table AII.2 
List of products to which Panama may apply ex port and import prohibitions or restrictions 
Imports 
HS Code 96 Tariff description 
1301.90.20 Cannabis resin and other narcotics 
1302.11.10 Opium gum 1302.11.90 Other 
1302.19.20 Extracts and tinctures of cannabis 
1302.19.30 Concentrates of poppy straw and other narcotics 2903.46.10 Bromochlorodifluoromethane 2903.46.20 Bromotrifluoromethane 
2903.46.30 Dibromotetrafluoroethanes 
3601.00.00 Propellent powders 3602.00.00 Prepared explosives, other than propellent powders 
4004.00.00 Waste, parings and scrap of rubber (other than hard rubber) and powders and granules obtained therefrom 
4012.10  Retreaded pneumatic tyres 4012.20  Used pneumatic tyres 
4907.00.52 Official lottery tick ets or coupons in circulation 
6201 to 6217 Used clothing 6401 to 6402 Used footwear 
8701 to 8716 Used vehicles 
8710.00.00 Tanks and other armoured fighting vehicles, motorised, whether or not f itted with weapons, and parts of such  
vehicles 
8906.00.10 Warships, of any sort 
8908.00.10 For war 9301.00.00 Military weapons, other than revolve rs, pistols and the arms of heading 93.07 
9305.90.10  Of military weapons 
9306.30.10 For military weapons and parts thereof 9306.90.10 Other projectiles, grenades a nd munitions of war and parts thereof 
9307.00.10 Arms of heading 9307 for military use 
9504.10.11 Which distribute prizes in cash 
9504.30.10 Which distribute prizes in cash 9504.90.11 Operated by coins and which pay prizes in cash 
 
Exports 
Wood, in logs, of any species from the natural forest, pursuant to Resolution No. J.D. – 006-92 
  WT/REG196/3 
 Page 51 
 
 
  ANNEX III 
 
Table C.1 
Activities for which business visitors may be granted entry 
 
Research and design 
 
Technical, scientific and statistical resear chers conducting independent research or rese arch for an enterprise located in the 
territory of the other Party. 
 
Growth, manufacture and production 
 
Purchasing and production management  personnel conducting commercial transactions for an enterprise located in the territory 
of the other Party. 
 
Marketing 
 
Market researchers and analysts conducting research independently or for an enterprise located in the territory of the other 
Party. 
 
Trade fair and promotional pers onnel attending a trade convention. 
 
Sales 
 
Sales representatives and agents taking orde rs or negotiating contracts for goods or services for an enterprise located in the 
territory of the other Party but not delivering goods or providing services. 
 
Buyers purchasing for an enterprise located  in the territory of the other Party. 
 
After-sales service 
 
Installers, repair and maintenance personne l, and supervisors, possessing specialized technical knowledge essential to a seller 's 
contractual obligation, performing services or training workers to perform services, pursuant to a warranty or other service 
contract incidental to the sale of commercial or industrial equipment or machinery, including computer software, purchased 
from an enterprise located outside the te rritory of the Party into which temporary entry is sought, during the life of the warr anty 
or service agreement. 
 
General service 
 
Consultants engaging in a business activity i nvolving the cross-border provision of services. 
 
Management and supervisory person nel engaging in a commercial transaction for an  enterprise located in  the territory of the 
other Party. 
 
Financial services personnel engaging in comm ercial transactions for an enterprise lo cated in the territory of the other Party.   In 
the case of Panama and Honduras, this category shall be define d as:  specialized professional personnel providing advice in the  
area of financial services for an enterprise es tablished in the territory  of the other Party. 
 
Public relations and advertising personnel consulting with business associates, or at tending or participating in conventions. 
 
Tourism personnel (tour and travel agents, tour guides or tour operators) attending or participa ting in conventions or conducti ng 
a tour that has begun in the territory of the other Party. 
 
 
__________