WORLD TRADE  
ORGANIZATION  WT/REG264/M/1/Rev.1* 
10 May 2011 
 (11-2402) 
Committee on Regional Trade Agreements 
Sixtieth Session    
 
 
 
CONSIDERATION OF THE BILATERAL PROTOCOL BETWEEN COSTA RICA AND 
PANAMA TO THE FREE TRADE TREATY BETWEEN CENTRAL AMERICA AND 
PANAMA, (GOODS AND SERVICES) 
 
Note on the Meeting of 14 March 2011  
 
Chairman:  Mr. A. Suescum (Panama) 
 
Revision  
 
 1. The 60th Session of the Committee on Regional Tr ade Agreements (hereinafter CRTA or the 
Committee) was convened in Airgram WT O/AIR/3692, dated 31 January 2011.  
2. Under Agenda Item B.IV of this session, the CRT A considered the Bilateral protocol between 
Costa Rica and Panama to the Free Trade Treaty between Central America and Panama (hereinafter 
the 'Agreement'), goods and services. 
3. The Chairman
 said that the Agreement had entered into force on 23 November 2008 with the 
tariff elimination programme taking e ffect as of 1 January 2009.  It had been notified to the WTO by 
the Parties on 7 April 2009 under Article XXIV:7( a) of the GATT 1994 and the Understanding on the 
Interpretation of Article XXIV of GATT 1994 as an Agreement establishing a free trade area 
(document WT/REG264/N/1) and under GATS Article  V:7(a) as an Agreement providing for the 
liberalization of trade in services within th e meaning of Article V of the GATS (document 
S/C/N/490).  The text of the Agreement was availabl e, together with its Annexes, on the Parties' 
official websites.  The factual presentation on the goods and services aspects (document WT/REG/264/1 and Corr.1 dated 7 and 18 January 2011, respectively) had been prepared by the 
Secretariat on its own responsibility in full cons ultation with the Parties, in accordance with 
paragraph 7(b) of the Transparency M echanism for Regional Trade Agreements 
(document WT/L/671).  In addition, written ques tions and replies on this Agreement had been 
distributed in document WT/REG264/2, dated 8 March 2011.  He proposed to organize the 
consideration of the Agreement by asking the Pa rties and other Members to give any general 
comments.  The Committee would then turn to  the specifics of the Agreement and use the 
Factual Presentation, document WT/REG264/1, to guide the debate.  He suggested going through the 
Factual Presentation section by section, and then  through the questions and replies document. 
4. The representative of Panama
 thanked the Secretariat for its work on the Factual Presentation, 
as well as other Members for their interest and qu estions.  He also expressed his appreciation to 
government officials in capital and in Geneva for th eir work.  He said that  the Free Trade Agreement 
(FTA) between Panama and Centra l America had been signed on 6 March 2002 and came into force 
together with a bilateral protocol signed by each Central American country.  The bilateral protocol 
between Costa Rica and Panama had been signe d on 7 August 2007, and had been implemented in 
                                                      
* In English and French only. WT/REG264/M/1/Rev.1 
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  two stages as described by the normative text and the Bilateral Protocol (2008), and the Tariff 
Reduction Program (2009).  The Agreement's main obj ectives were to enhance integration within the 
free trade area between Panama a nd Central America.  It covered not only trade in goods but also 
trade in services, investments, intellectual prope rty, government procurement, competition policies 
and established a dispute settlement mechanism.  Th e Bilateral Protocol described the tariff schedule 
for each Party as well as the commitments regarding domestic supports, import and export 
restrictions, rules of origin, international land fre ight transport, public procurement and services.  
With regard to the trade dynamics between the two Parties.  He said that Costa Rica was Panama's 
main export and import market in the region.  In 2010, imports from Costa Rica exceeded 
US$493 million, while exports to Costa Rica amounted to US$49.5 million. In addition, re-exports to 
Costa Rica from the Colon Free Processing Zone were about US$507.8 million in the same year.  
With the entry into force of the Agreement, 90%  of Panama's exports had become duty free.  
Agricultural and industrial products exempted from tariffs were bovine offals, yogurt and cheese, 
evaporated milk, poultry products, cocoa, juices and nectars, drugs, containers for beers and soft 
drinks, nationally produced lubricating oils, hats with inside diameter of up to 4 inches, shrimps, fish, 
yellow fin tuna, fishmeal, to name a few.  Panamani an exports to Costa Rica had increased in the case 
of beef, pork and dairy products, poultry products, paper towels, napkins, pant y stockings and socks, 
to name a few.  Under this Agreement, certain  sensitive agricultural and non-agricultural products 
were subject to longer phase-out periods and tari ff-quotas.  For a number of products, the amount of 
the tariff-quota would increase (e.g. pasteurized milk, powdered milk, tomato ketchup) while for 
others it would remain the same (por k products, refined palm oil, socks). 
5. Under this Agreement, trade in services was governed by principles of national treatment, 
most-favoured-nation and local presence.  Howeve r, Parties could schedule reservations on these 
principles as set out in the Annexes of non-conformi ng measures in the Protocol.  Regarding financial 
services, the Treaty included a review clause to moni tor trade in insurance a nd reinsurance with the 
possibility to broaden provisi ons on these services once a legal framework for such services was 
implemented in Costa Rica.  In 2009, new legislation in this area had come into force in this country, 
which had allowed Panama's investment in the Co sta Rican insurance market.  Under the Agreement 
Panama would also be able to provide telecommuni cations services in Costa Rica following a change 
in the legislation. Such a modification had occu rred recently when the monopoly of the Costa Rican 
telecommunications company had been eliminated.  So far at least one Panamanian company had 
invested in Costa Rica to compet e in that market.  Panama meanwhile would allow the Costa Rican 
Electricity Institute to provide telecommunications ser vices in its territory.  With regard to financial 
services, the Agreement consolidated the right of  Panamanian financial institutions to establish 
branches in Costa Rica.  The Agreement guaranteed that Costa Rica would provide the best possible 
treatment for the promotion of financial activiti es between the two markets while respecting each 
country's regulations.  He stressed that both Co sta Rica and Panama would ensure that the best 
possible treatment would be provided to financial services operators from both countries.  In the 
services chapter, there were also new regulations on international land freight transport.  Regarding 
investments, provisions in the Agreement aimed at  ensuring transparency and legal certainty for 
investors on both sides.  In the case that a disput e arose, national investors from each Party would be 
able to resort to an investor dispute settlement me chanism.  Finally, he men tioned that the Agreement 
included a number of horizontally applied provis ions such as the dispute settlement mechanism, 
which provided the institutional framework to solve any differences resulting fr om the application of 
measures and affecting the proper functioning of the Agreement.  Th e Agreement had also established 
rules on transparency to ensure the immediate pub lication of all laws, re gulations, procedures and 
administrative solutions referring to any aspect of  the Treaty.  He thanked the Committee for the 
opportunity to present the Agreement and was willing to answer any additional questions Members 
might have. 
 
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  6. The representative of Costa Rica  welcomed the opportunity to present the FTA between 
Panama and Central America and its bilateral protoc ol that covered trade in goods and services.  She 
said that the provisions in this Agreement were b ased on the fundamental principles of the multilateral 
trading system, namely, national treatment, most-f avoured-nation and transparency.  The Agreement 
aimed at strengthening trade linkages between the Parties by expanding the coverage of preferential 
access for goods and services, and establishing a legal framework to ensure the elimination of trade 
barriers and distortions.  Regarding trade flows be tween the Parties, she said that Panama ranked 
fourth as a destination for Costa Rican exports and stressed that historically her country had had a close business relationship with Panama.  Followi ng the Free Trade and Preferential Trade Agreement 
between Panama and Costa Rica in 1973, preferenti al access to the Panamanian market had been 
provided for a limited number of goods.  Despite th e narrow scope of that agreement, trade between 
the two Parties had been dynamic in recent year s.  Between 2000 and 2010 exports to Panama had 
increased by 243%, from US$129 million to US$442.9 million.  Main exports included medicines, food preparations, electrical conductors, hygiene pro ducts and baby diapers, disinfectants and steel 
bars.  Panama was the main buyer of cement additiv es, disinfectants and bottle caps, to name a few.  
On the other hand, imports had increased by  156.3% from US$91.1 million to US$233.5 million 
during the same period.  Panama was one of Cost a Rica's largest suppliers for products such as 
medicines, tuna, processed cheese, evaporated milk , and aluminium receptacles.  The Agreement had 
helped to remove trade barriers, facilitate the m ovement of goods between the Parties, promote fair 
competition, reaffirm international commitments re garding intellectual property and create effective 
procedures for the implementation and enforcemen t of its provisions as well as for its joint 
administration and dispute settlement. 
7. She highlighted some aspects of the Agreement th at in her view were the most relevant and 
which showed its compatibility with Article V of GATS and GATT XXIV.  With regard to tariff cuts, 
preferential access had been granted on almost all tariff lines.  Following the Agreement's 
implementation, 90.5% of tariff lines had become  duty free. For 7.8% of tariff lines, gradual 
elimination was foreseen within three to 17 years.  Only 1.7% of tariffs had been excluded from tariff 
preferences. In terms of trade, 84% of imports from Panama had been liberalized following the entry 
into force of the Treaty.  Tariff lines excluded fro m trade liberalization accounted for only 1.4% of 
trade flows.  Among the provisions relating to tr ade in goods, Panama and Costa Rica had committed 
to adopt or maintain - apart from exceptions listed in  the Agreement - only restrictions on exports and 
imports that were in line with Article XI of GATT 1994.  As regards standards, both countries 
confirmed their rights and obligations under WTO ag reements.  As for technical barriers, specific 
provisions had been established on rights and obliga tions, compatibility and equivalence, metrology, 
risk assessment, and conformity assessment, among other areas.  Based on the Sanitary and Phytosanitary (SPS) Agreement, the Treaty also defi ned the regulatory framework to facilitate trade in 
agricultural products, preserve plants, and protect hu man and animal health.  She also highlighted the 
fact that phytosanitary measures had to be based on scientific information, risk analysis and 
international standards.  Reference for this in cluded the World Animal Health Organization, the 
Codex Alimentarius and the Intern ational Plant Protection Convention.   Under the Agreement, Parties 
could also apply bilateral safe guard measures during a transition period as well as global safeguards, 
with the obligation of compensation in both cases.  A dditionally, Parties were committed to maintain 
and ensure fair, timely, transparent and effici ent implementation of safeguard measures.  The 
Agreement reaffirmed WTO rules on unfair trade pr actices.  Additionally, it established regulations 
regarding deadlines for the immediate terminatio n and initiation of investigations, as well as the 
duration and application of anti-dumping measures. With regard to subsidies and domestic support, 
the Parties followed WTO rules and committed to rem ove all export subsidies at the entry into force 
of the Agreement, keeping only those which were in line with Article 27.4 of the Subsidies and 
Countervailing Measures Agreement.  As for pub lic procurement, the Parties guaranteed the 
application of national treatment,  non-discrimination and transparency principles.  They had agreed 
upon wide coverage of public entities in both countr ies, with very specific exclusions.  As for 
services, the Agreement contained disciplines on inv estment, cross-border trade in services, financial WT/REG264/M/1/Rev.1 
Page 4  
 
  services, telecommunications, and the temporary en try of business people.  The liberalization of 
services had been established on the basis of the pr inciples of national treatment, MFN and the right 
to provide the service without local presence.  This  chapter had been negotiated using a negative list 
approach, without excluding any sector.  This met hod had allowed a high level of transparency and 
predictability as reservations could simply be cons ulted in Annexes.  Panama and Costa Rica were 
fully committed to the multilateral system and this  Agreement, which was built on the basis of WTO 
rules, promoted both economic growth and the effe ctive participation of countries in the multilateral 
trading system.  Finally, she thanked the Committee for the opportunity to present the Agreement and 
welcomed any questions that might arise. 
8. The representative of the United States
 expressed his appreciation for the Parties' and 
Secretariat's work.  He commended Costa Rica and Panama for the overall level of tariff elimination 
in the Agreement.  He also remarked that both Cost a Rica and Panama were parties to agreements that 
had not yet been notified to the WTO and appreci ated the response in th e Q&A document in which 
both Parties had expressed their intention to notif y the remaining agreements.  He added that non-
notified agreements impacted Members' ability to fully understand RTAs and their implications for 
the multilateral trading system. 
9. The representative of the European Union  encouraged the Parties to notify non-notified 
agreements as soon as possible and welcomed an y further information regarding this issue. 
10. The representative of Panama  confirmed that Panama would notify pending agreements over 
the course of 2011.  
11. The Chairman  said that the consideration of the goods and services aspects of the Bilateral 
Protocol between Costa Rica and Panama to th e Free Trade Treaty between Central America and 
Panama had allowed the Committee to clarify a number of questions and oral discussion of the Agreement could be concluded in accordance with pa ragraph 11 of the Transparency Mechanism.  If 
any delegations wished to ask follow-up questions they were invited to forward submissions in 
writing to the Secretariat by 22 March 2011  and the Parties were asked to submit replies  in writing by 
no later than 5 April 2011.  In accordance with pa ragraph 13 of the Transparency Mechanism all 
written submissions, as well as minutes of this m eeting would be circulated promptly, in all 
WTO official languages, and would be  made available on the WTO website. 
12. The Committee took note
 of the comments made. 
__________