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TRADE POLICY REVIEW: HONDURAS
29 September and 1 October 2003

Concluding remarks by the Chairperson

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See also:
Press release: Further reforms would help to improve growth


This first Trade Policy Review of Honduras has shed considerable light on its trade and investment policies and practices, also contributing to a better understanding of the economic and institutional framework within which they are formulated and implemented. We owe this to the documentation prepared for the meeting, to the active participation of the Honduran delegation led by Dr. N˙˝ez, and to the constructive comments of the discussant and the Members.

Members expressed their support for Honduras' ongoing economic and institutional reform efforts, including trade and investment liberalization. Honduras has shown discipline in the conduct of monetary policy, and has become more closely integrated into the global economy. However, Members noted Honduras' large trade deficit and encouraged it to diversify its production and export base, including by taking further advantage of unilateral trade preferences offered by some trading partners.

Members noted with concern the modest rate of economic growth, partly the result of a series of external shocks. As a result, living standards have stagnated, and poverty continues to affect a large proportion of the population. To achieve faster growth, Members referred to the need to redress the fiscal imbalance, to improve regulatory transparency, and to persevere with efforts to restructure the economy. Reaching an agreement with the IMF was also considered important, as was support from the international community.

Members took note of Honduras' commitment to the multilateral trading system, and commended the steps it has taken to implement its WTO obligations. They welcomed Honduras statement that the multilateral trading system represents the main instrument to ensuring non-discriminatory access to foreign markets. Honduras was invited to complete its WTO notification commitments, in particular with respect to technical regulations, which Honduras engaged to do as soon as possible.

Noting Honduras' rapidly growing network of preferential trade agreements, Members expressed the view that these agreements should complement multilateral efforts. Some Members welcomed the growing integration within the Central American Common Market, including through the establishment of a customs union. They were worried, however, that the negotiation of independent free-trade agreements might be incompatible with a common market. A few Members also asked questions regarding Honduras' institutional capacity to negotiate and implement a number of agreements in parallel.

Members praised Honduras for its application of the WTO Agreement on Customs Valuation and efforts to modernize customs procedures, and sought further details on the latter. They commended Honduras for not using contingency measures, for its low applied average MFN tariff, and for binding the full tariff schedule. Honduras was encouraged to lower its bindings in the context of the Doha Development Agenda. Its use of a price-band system for certain agricultural imports gave rise to questions.

Interest was expressed on Honduras' application of other trade measures, including technical regulations, quantitative restrictions on imports and wood exports, and on "absorption agreements". The effects on trade of certain sanitary measures were of concern to some Members. Honduras' efforts to enhance transparency in government procurement were welcomed. Some Members noted that Honduras had adopted new intellectual property legislation and enhanced IPR protection, and considered that Honduras would benefit from adopting competition policy legislation.

Members recognized the important contribution that free trade zones (FTZs) had made to the generation of investment and employment in Honduras. However, attention was drawn to the impact on fiscal revenue and the possible economic distortions, which could arise from the FTZ Regime.

Members commended Honduras' efforts to liberalize and open its services sectors, but some referred to some market access impediments. Although reforms have been introduced, it was pointed out that the financial sector remained institutionally weak. Members also remarked on the reforms in the telecommunications and electricity sectors. Members observed that commitments under the GATS did not reflect the actual openness in services, in part as a result of unilateral liberalization. Honduras indicated that it was preparing a new, more ambitious schedule. This would improve the predictability of Honduras' legal framework.

Members also sought clarification on several specific issues, including:

  • trade policy formulation, the role of civil society, and environmental considerations; and

  • criteria for the authorization of foreign investment.

The delegation of Honduras provided written and oral answers to the questions posed during the Review and undertook to supply replies in writing to any outstanding issues. The replies provided made a considerable contribution to the review and Members clearly appreciated them.

This brings us to the conclusion of the first Review of Honduras. It has given Members a better understanding of the numerous reforms undertaken by Honduras in recent years, and of the challenges that lie ahead. I am heartened by Honduras' statement that it sees its closer integration in the world economy as an instrument to further its economic development.