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This second Trade Policy Review of El Salvador has contributed
considerably to achieving a better understanding of its trade and
investment policies, as well as of the context within which they have
been formulated and implemented. We owe this in considerable measure
to the active participation of the Salvadoran delegation, led by
Minister Lacayo, Deputy-Minister Ayala and Ambassador Lima.
At
the outset, allow me to underline the support of Members for El
Salvador's ongoing modernization efforts, and their acknowledgement of
the progress made by El Salvador since the end of civil strife a
decade ago. Members commended El Salvador for its successful efforts
to restructure and stabilize its economy, including autonomous,
regional and multilateral initiatives to liberalize trade and
investment.
Economic
growth has been steady but modest, in part due to the effect of
natural disasters, and poverty alleviation remains a major challenge.
To achieve higher growth rates, Members suggested that further efforts
be made to increase investment. The adoption of the U.S. dollar as
domestic currency was seen as a step in this direction. Salvadorans
living abroad may further foster investment through their remittances.
El
Salvador was encouraged to diversify its export base, both in terms of
markets and products, to achieve a closer and more balanced
integration in the world economy. Members noted that exports were now
dominated by a handful of products, notably clothing, from Export
Processing Zones (EPZ). In contrast, traditional agricultural exports
had lost ground, and the reversal of this trend was seen as important.
Members
praised El Salvador for its generally open trade regime, the steps
taken to implement its WTO obligations, and its active participation
in the multilateral trading system. Members took note of El Salvador's
growing engagement in preferential trade agreements, and expressed
their hope that those agreements would complement multilateral
liberalization efforts. Concerns were voiced about El Salvador's
administrative capacity to participate effectively and simultaneously
in several regional initiatives.
El
Salvador was commended for its efforts in the areas of trade
facilitation and its application of the WTO Agreement on Customs
Valuation. Some Members sought clarification on aspects of customs
administration and the use of minimum and reference prices. El
Salvador was invited to make additional notifications to WTO on import
licensing to enhance transparency.
Members
praised El Salvador's low tariffs and the full binding commitments it
has made. Nevertheless, El Salvador was encouraged to reduce
tariff rates and tariff escalation, and increase predictability by
closing the gap between applied and bound tariffs in the context of
the Doha Development Agenda. Points were raised on the administration
of tariff quotas and the consistency of “under supply quotas” with
WTO principles.
Some
Members expressed concern about the trade effects of certain sanitary
measures, and the mandatory use of standards in government
procurement. However, Members welcomed El Salvador's new law on
government procurement, and requested further details on this regime.
One Member suggested that El Salvador accede to the plurilateral
Agreement on Government Procurement.
On
sectoral policies, the maquila industry attracted particular
attention. Members recognized that EPZs have played an important role
in fostering El Salvador's integration into the world economy,
generating jobs and attracting investment. However, they also pointed
to the structural distortions EPZs create, their limited linkages to
the domestic economy, and the export subsidies they convey. These
features, which may be necessary at this stage, may undermine future
growth prospects. Some Members raised the issues of the phasing out
the EPZ regime and of bringing this regime into compliance with WTO
rules once the transition period granted by Ministers in Doha expires.
Members
commended El Salvador's liberalization and opening of its services
sector, particularly in the areas of financial services,
telecommunications, as was well in electricity. It was noted that, in
part as a result, commitments under the GATS did not reflect the
actual openness in the sector. Expanding its multilateral commitments
during the current services negotiations would enhance the
predictability of El Salvador's trade and investment regime.
Members
also sought further clarification on a number of specific areas,
including:
-
import
regime for sugar;
-
regulatory
framework in telecommunications;
-
ratification
of the Information Technology Agreement; and
-
protection
of intellectual property rights.
The
delegation of El Salvador provided written and oral answers to the
questions posed during the Review. The replies provided have made a
major contribution to this Review, and were clearly appreciated by
Members.
This
brings us to the conclusion of our second Review of El Salvador. It is
clear that El Salvador has made great strides towards building an
efficient, market-based economy in a relatively short period of time
and from a particularly difficult starting-point. I am particularly
encouraged by El Salvador's stated conviction that trade
liberalization is central to its development strategy. I am convinced
that, as a small economy, El Salvador has still much to gain from
pursuing this strategy multilaterally. Strengthening the multilateral
trading system during the ongoing Doha Development Agenda would
provide a more solid basis on which to anchor the further domestic
reforms required to achieve the higher growth rates and living
standard El Salvador seeks and which I am convinced will be
achieved.
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