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PRESS RELEASE
PRESS/TPRB/39
18 September 1996 Colombia's
liberalization process stimulates investment and leads to greater integration in the world
economy
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Colombia's market-opening measures, its
implementation of the Uruguay Round commitments and its six-year effort at sound
macro-economic management have created new investment opportunities and accelerated
Colombia's integration in the world economy. According to a WTO Secretariat report on
Colombia's trade policies and practices, Colombia's implementation of a major trade
liberalization programme has resulted in significantly lower tariffs, fewer non-tariff
measures and a number of market access commitments in professional and financial services.
Offers have also been made in telecommunications and maritime transport services.
The new WTO report and one prepared by the
government of Colombia will serve as the basis for two days of discussion on 25 and 26
September. Colombia's trade policies were last reviewed in 1990. Since then, Colombia's
economy has grown at an average annual rate of over 5 per cent. Inflation, curbed from
over 32 per cent in 1990 to just under 20 per cent in 1995, is expected to drop to 10 per
cent by 1998.
Although traditional exports such as coffee, oil and
coal, continue to influence the level of foreign exchange earnings, the Secretariat report
states that in recent years export growth has largely been based on non-traditional
exports. Although the United States is still Colombia's major trading partner,
imports from preferential suppliers from the region, mainly Andean Group partners
(Bolivia, Ecuador, Peru and Venezuela) have greatly expanded. Integration with the Andean
Group has advancedmore than with any other group or country in the region. The Group has
adopted a common external tariff and has suppressed barriers to virtually all
intra-regional trade. Colombia is also pursuing the intensification of regional trading
links though its membership of the G3 with Mexico and Venezuela, and of the Association of
Caribbean States. It is examining the possibility of establishing a formal trade agreement
with MERCOSUR and is also actively engaged in the negotiations to establish a Free Trade
Area for the Americas.
The report notes that preferential access of
Colombian exports to the region's markets as well as to the United States and the
European Union has improved. Apart from ordinary Generalized System of Preferences (GSP)
treatment, Colombian exports to the United States and the EU have benefitted since
the early 1990s from extended preferential schemes. At present, Colombia is concerned
about the possible withdrawal of trade preferences by the United States because of
the illicit drug trade.
Border protection is now mainly in the form of
tariffs, contained in the five-tier Common External Tariff (CET) of the Andean Group
which has rates of 0, 5, 10, 15 and 20 per cent. Within the CET, tariff
escalation still provides substantially higher effective protection for processing
industries than is evident from nominal rates. The report notes that with the exception of
"tariffied" agricultural items, WTO binding commitments cover the entire customs
tariff. Ceiling levels, generally at 35 per cent, contrast with the average applied rate
of 11.5 per cent.
Since the previous review, applied tariff protection
for the manufacturing sector has been reduced to 11.6 per cent, less than half
of the 1989 level, and import quotas have been eliminated. At present food
processing, textiles, clothing and footwear have the highest average levels of tariff
protection. Agriculture is supported by import licensing and variable levies;
production-related measures adopted since 1993 are designed to help small scale producers
and stimulate private sector participation in processing and marketing. The report states
that recent and substantial protection is provided for the automotive sector by
local-content and export performance requirements for the automotive sector. However,
these should be eliminated by the year 2000 under the transitional arrangements of the WTO
TRIMS Agreement.
Colombia has invoked the extended implementation
periods available in the WTO for developing countries in such areas as customs valuation,
export subsidies and Trade-related aspects of Intellectual Property Rights (TRIPS).
Following recent liberalization, financial services,
transport, telecommunications, tourism and retail trade have grown strongly. Certain
barriers or specific requirements on foreign investors or professionals remain in
force, for example in audiovisual productions and broadcasting. Progress in reducing
State participation in certain activities, especially in port facilities and
transportation, has been achieved through privatization or the granting of
concessions, as in telecommunications. In July 1995 Colombia's commitments under the
General Agreement on Trade in Services (GATS), covering most modes of supply for a number
of professional services, construction and engineering, were complemented with
undertakings in the financial sector. Exemptions to m.f.n. treatment relate to previous
obligations vis-à-vis Latin American and other partners. Initial offers have been
submitted in the negotiations on maritime transport and basic telecommunications services.
The report concludes that Colombia's autonomous
process of market-opening has been strengthened by the increased security of access
resulting from its extended commitments in the Uruguay Round. The opening of the economy
has created new investment opportunities, which should also be encouraged by improved
macroeconomic stability, solid growth and ongoing fiscal reforms. The expansion of
regional trade growth should continue as new agreements are forged. The report notes that
full implementation of Uruguay Round commitments should further strengthen the
liberalization process and Colombia's integration in the world economy.
Notes to Editors:
The WTO Secretariat's report, together with a report
prepared by Colombia, will be discussed by the WTO Trade Policy Review Body (TPRB) on 25
and 26 September 1996. The WTO's TPRB conducts a collective evaluation of the full range
of trade policies and practices of each WTO member at regular periodic intervals and
monitors significant trends and developments which may have an impact on the global
trading system.
Two reports, together with a report of the TPRB's
discussion and of the Chairman's summing up, will be published in due course as the
complete Trade Policy Review of Colombia and will be available from the WTO Secretariat,
Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
The reports cover development of all aspects of
Colombia's trade policies, including domestic laws and regulations, the institutional
framework, trade policies by measure and by sector. Since the WTO came into force, the
"new areas" of services trade and trade-related aspects of intellectual property
rights are also covered. Attached are the summary observations from the Secretariat and
government reports. Full reports will be available for journalists from the WTO
Secretariat on request.
Since December 1989, the following reports have been
completed: Argentina (1992), Australia (1989
& 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon
(1995), Canada (1990, 1992 & 1994), Chile (1991), Colombia (1990), Costa Rica (1995),
Côte d'Ivoire (1995), Czech Republic (1996), Dominican Republic (1996), Egypt (1992), the
European Communities (1991, 1993 & 1995), Finland (1992), Ghana (1992), Hong Kong
(1990 & 1994), Hungary (1991), Iceland (1994), India (1993), Indonesia (1991 and
1994), Israel (1994), Japan (1990, 1992 and 1995), Kenya (1993), Korea, Rep. of (1992),
Macau (1994), Malaysia (1993), Mauritius (1995), Mexico (1993), Morocco (1989 & 1996),
New Zealand (1990), Nigeria (1991), Norway (1991 & 1996), Pakistan (1995), Peru
(1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore
(1992 & 1996), Slovak Republic (1995), South Africa (1993), Sri Lanka (1995), Sweden
(1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Tunisia
(1994), Turkey (1994), the United States (1989, 1992 & 1994), Uganda (1995), Uruguay
(1992), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).
The
Secretariats report: summary Back to top
TRADE POLICY REVIEW BODY: COLOMBIA
Report by the Secretariat Summary Observations
The Economic Environment
Since the first Trade Policy Review of Colombia in
1990, sound macroeconomic management has contributed to the continuous growth of the
economy at average rates of over 5 per cent, although this may slow to
4 per cent in 1996. Progress has also been made, assisted by a Social Pact, in
reducing inflation from over 32 per cent in 1990 to 19.5 per cent in
1995, and the National Development Plan envisages a reduction to 10 per cent by
1998.
These results have been achieved despite the
potentially destabilizing effects on money supply of strong capital inflows. These inflows
were stimulated by, inter alia, the liberalization of the foreign exchange and
investment régimes, increased investment opportunities related to new oil discoveries and
privatization, and high interest rates. The inflows also resulted in a real appreciation
of the currency which has raised concerns about the competitiveness of Colombian exports,
but falling inflation and the application of the crawling band exchange rate system seems
to have reversed the appreciation in 1996. In July 1996, certain foreign direct
investment requirements were relaxed.
Since 1993, Colombia's current account and
merchandise trade balance has recorded a deficit. Faster import growth, mainly from
regional trading partners, stimulated by trade liberalization and the real appreciation of
the currency, has contributed an increasing share of trade in GDP. Although traditional
exports such as coffee, oil and coal, continue to influence the level of foreign exchange
earnings, in recent years export growth has largely been based on non-traditional exports,
which rose from 39 per cent in 1991 to reach some 53 per cent of the
total in 1995. Given the capital account situation, the current account deficit is seen as
manageable.
Trade Policy Features and Trends
International economic integration
The implementation of the major trade liberalization
programme (Apertura), initiated at the time of the first Trade Policy Review, has
accelerated Colombia's integration in the world economy. The structure of tariffs has been
rationalized and the rates lowered significantly to a simple average of
11.5 per cent. The coverage of non-tariff measures has been further reduced and
now focuses on a few sectors subject to specific domestic or sub-regional policy
objectives; balance-of-payments measures were eliminated in 1992. Apart from a few
anti-dumping cases, no safeguard actions have been taken against imports from WTO
partners.
Although the United States is still Colombia's
major trading partner, imports from preferential suppliers from the region, mainly Andean
Group partners, have greatly expanded. Integration with the Andean Group has advanced more
than with any other group or country in the region; the Group has adopted a common
external tariff and barriers to virtually all intra-regional trade have been suppressed.
Colombia is also pursuing the intensification of regional trading links though its
membership of the G3 with Mexico and Venezuela, and of the Association of Caribbean
States, and is examining the possibility of establishing a formal trade agreement with
MERCOSUR. It is also actively engaged in the negotiations to establish a Free Trade Area
for the Americas.
Preferential access of Colombian exports to the
region's markets as well as to the United States and the European Union has improved.
Apart from ordinary GSP treatment, since the early 1990s Colombian exports to the
United States and the EU benefit from extended preferential schemes. The possible
withdrawal of ATPA preferences by the United States, related to the drugs issue, is
of concern to Colombia.
Trade policy developments
Since the previous Trade Policy Review, Colombia has
adopted a new Constitution, implemented its unilateral market opening
programme (Apertura) and expanded trade commitments both at regional and multilateral
level. In modernizing the political system, greater regional decentralization was
introduced. Overall trade policy responsibilities were entrusted to a new Ministry of
Foreign Trade, and the Central Bank (the Bank of the Republic) became fully independent.
New or amended legislation was adopted in areas such as customs valuation, preshipment
inspection, anti-dumping, safeguards and intellectual property rights to meet obligations
undertaken in regional or multilateral fora, but implementing regulations remain to
be introduced in a number of areas. Colombia has invoked the extended implementation
periods available for developing countries in such areas as customs valuation, export
subsidies, and TRIPS.
Border protection now relies mainly on tariffs,
contained in the five-tier Common External Tariff (CET) of the Andean Group, with
rates of 0, 5, 10, 15 and 20 per cent. Within the CET, tariff escalation still
provides substantially higher effective protection for processing industries than is
evident from nominal rates. WTO binding commitments cover the entire customs tariff,
generally at a ceiling level of 35 per cent (against the average applied rate of
11.5 per cent), except for "tariffied" agricultural items. Provisions
for tariff exemptions, for example on imported inputs, have been rationalized, eliminating
many general exemptions, but the value of exempt imports has significantly increased.
Remaining sector- or product-specific measures
affecting imports include variable import levies, domestic absorption contracts,
differential levels of value-added tax on domestic products and imports, reference prices,
restrictive import licensing (maintained mainly in connection with health, environmental,
or security reasons), certain import prohibitions and local or sub-regional content
requirements. State involvement in production and trading operations is being reduced.
Since late 1993, compulsory standards have applied in a non-discriminatory manner; work on
mutual recognition or harmonization of standards has been initiated with certain countries
in the region. New government procurement legislation, concluded in 1993, gives equal
treatment to local suppliers and companies from countries granting reciprocal treatment
and eliminated a 25 per cent surcharge on offers by the latter.
Export taxes are levied on coffee, crude oil, gas,
coal and ferro-nickel. Although no export prohibitions are in force, export restraints
based on international or bilateral arrangements continue to affect coffee and textiles.
Assistance to non-traditional exports is still
provided through the tax reimbursement certificate mechanism (CERT); the
SIEX mechanism for duty-free access of machinery for export production; and a
transport subsidy covering freight and transhipment fees for destinations to which
Colombia does not maintain a direct cargo route. The use of the CERT and SIEX mechanisms
has been reduced and, in accordance with WTO provisions, Colombia is to eliminate export
subsidies for manufactures by the year 2003 and progressively cut budgetary outlays for
exports of agricultural products. Certain Colombian exports (cut flowers,
PVC films, disposable syringes and aluminium hollow sections) have been, or remain
subject to, anti-dumping or countervailing measures in some foreign markets.
Since 1991, finance, insurance and promotion
facilities for exports have been extended. The free-trade-zone régime has been revised;
the administration of the zones has been privatized and their coverage expanded to include
tourism-related activities.
Support to domestic production, including small and
medium-size firms, is now limited to ensuring finance for modernization, training,
technology transfer, development and environmental projects. Research and development is
supported through fiscal incentives. Trade-related regional assistance is extended through
the establishment of free zones, special customs régimes, preferential loans and
guaranteed intervention prices for agriculture. Other agricultural assistance
includes various low-cost loan schemes and debt relief for small producers. Since 1995,
the negotiation of sectoral "competitiveness agreements" has been encouraged;
these involve the creation of vertically-linked industries and are, inter alia, aimed
at strengthening co-operation within sectors. Consumer price controls were eliminated in
1991, except for essential medicines and certain public services; however, minimum
guaranteed prices exist for a limited range of agricultural products and intervention
prices are set on an ad hoc, temporary basis for regional assistance.
The legal framework for the protection of
intellectual property rights has been substantially reinforced through accession to
international treaties and recent Andean Group Decisions. Since 1992, legislative and
institutional changes have been introduced in the area of competition policy; a number of
investigations on mergers have been carried out. Colombia has also increased its emphasis
on environmentally sustainable development.
Sectoral Policy Developments
Agriculture
The agricultural sector enjoys protection under the
Constitution and its revitalization, partly for social reasons, forms part of the
Government's development plans. Liberalization under the Apertura programme has led to the
reduction of average nominal tariff protection for the sector, as defined in terms of the
Uruguay Round, to an average of 10.7 per cent, less then one third of its
1989 level, as well as the relaxing of import restrictions; this, combined with low
world commodity prices in the early 1990s, the high level of domestic lending rates and
adverse climatic conditions, has led to the decline in domestic production of certain
import-competing crops.
As a response to this critical situation, under a
new framework law of 1993, a range of measures has been adopted or strengthened, mainly to
support small producers. Production-related measures currently include subsidized loans
and land sales, debt recovery or support, price support and stabilization mechanisms,
marketing arrangements and modernization subsidies. Policy guidelines are focused on ways
to stimulate the participation of the private sector in processing and marketing
operations, as well as the negotiation of intra-sectoral competitiveness agreements.
A system of variable import levies was introduced in
1991 and, subsequently, applied at sub-regional level under the Andean Price Band System;
however, the authorities provided information to the Secretariat to show that the levies
did not breach Uruguay Round binding commitments in 1995. Prior import licensing,
conditioned by self-sufficiency principles and domestic absorption requirements, has not
yet been "tariffied". A procedure for the allocation of quotas for items subject
to tariff quotas under the Uruguay Round Agreement on Agriculture has yet to be
implemented.
Agricultural exports absorb a large part of the CERT
outlays. In compliance with commitments in the context of the Association of Coffee
Producing Countries, exports of coffee have been voluntarily restrained on two occasions.
Prior authorization is required for exports of rice and sugar. Since 1994, banana exports
to the EU have been subject to tariff quotas; the basis for allocation of this quota was
modified in 1996.
Manufacturing
Since the previous review, applied tariff protection
for the manufacturing sector has been reduced to 11.6 per cent, less than half
of the 1989 level, and import quotas have been eliminated. At present food
processing, textiles, clothing and footwear have the highest average levels of tariff
protection. Subsidy components of the CERT and SIEX schemes which have been notified to
the WTO, assist exports. The recent rise in interest rates and appreciation of the
exchange rate as well as smuggling of clothing, household appliances and cigarettes
have impeded the modernization and growth of these manufacturing sectors.
Recent policies for the automotive sector, allowing
for some deregulation and flexibility, have contributed to improving trade and assembly
performance. Nevertheless, substantial protection measures remain in force; these include
a peak tariff of 35 per cent for completely-built-up (CBU) motor vehicles,
differential VAT rates, import prohibitions on used parts and vehicles, and export
performance requirements. The combination of the high rate on CBU vehicles and
concessional entry at 3 per cent on parts and components for assemblers meeting
local-content requirements implies substantial effective protection for domestic value
added. However, both local-content and export-performance requirements should be
eliminated by the year 2000 under the transitional arrangements of the WTO TRIMS
Agreement. Since 1995, exports to the United States of underwear and wool suits for
women and girls have been subject to "special access" restraint agreements, due
to expire by the end of 1997.
Mining and Energy
Direct State involvement remains in the production
of mining and energy products; however, privatization is under way and joint-venture or
association agreements with private investors are favoured. Domestic prices for fuels and
propane are based on world prices, and other fuels are to be progressively priced on this
basis. In the meantime, the price of motor fuels remains substantially lower than
international prices, and despite increases, energy prices are among the lowest in
Latin America. Colombia is not an OPEC member.
Services
Following recent liberalization, financial services,
transport, telecommunications, tourism and retail trade have grown strongly. Certain
barriers or specific requirements on foreign investors or professionals remain in
force, for example in audiovisual productions and broadcasting. Progress in reducing
State participation in certain activities has been achieved through
privatization (e.g., ports and transportation) or the granting of
concessions, as in telecommunications.
In July 1995 Colombia's commitments under the
General Agreement on Trade in Services, covering most modes of supply for a number of
professional services, construction and engineering, were complemented with undertakings
in the financial sector; exemptions to m.f.n. treatment relate to previous obligations
vis-à-vis Latin American and other partners. Initial offers have been submitted in
the negotiations on maritime transport and basic telecommunications services.
Trade Policies and Foreign Trading Partners
The autonomous process of market-opening which has
continued since the last review, has been strengthened by the increased security of access
resulting from Colombia's extended commitments in the Uruguay Round. The opening of the
economy has created new investment opportunities, which should also be encouraged by
improved macroeconomic stability, solid growth and ongoing fiscal reforms. The expansion
of regional trade growth should continue as new agreements are forged, although Colombia
is also looking for trade opportunities beyond the region. Full implementation of Uruguay
Round commitments should further strengthen the liberalization process and Colombia's
integration in the world economy.
Government
report Back to top
TRADE POLICY REVIEW BODY: COLOMBIA
Report by the Government
Since its trade policy was last reviewed in 1990,
Colombia has undergone radical changes both at the political and economic levels.
The major transformation took place in 1991 with the
adoption of a new Political Constitution, which, with some revisions, had been in force
since 1886. In developing these new institutions, Congress adopted Law 7 of 1991, which
provided for the institutional reorganization of the external sector, through the creation
of the Ministry of Foreign Trade and the establishment of the Superior Council of Foreign
Trade, the supreme inter-ministerial body of the sector which is presided by the President
of Colombia.
Far-reaching reforms were adopted in the financial
sector. These reforms were undertaken with the aim of establishing a more competitive
environment and reducing State participation in the assignment of credit and investment by
financial institutions. The privatization process of financial institutions was initiated,
and restrictions on foreign capital were eliminated.
In the labour sector, restrictions on labour
mobility, which contributed to increased frictional unemployment, were abolished.
Likewise, the scope of rights and obligations of employers and workers was clearly
defined, particularly with regard to labour liabilities.
The Constitution of 1991 gave the Central Bank
independence in conducting the country's monetary, exchange and credit policies, and
assigned it the primary task of maintaining currency purchasing power.
An exchange reform was undertaken which eliminated
the Central Bank monopoly on the purchase and sale of foreign currency and the strict
exchange control prevalent since 1967. A flexible and free exchange system was thus
created, with autonomy in the management of international payments. As for the exchange
rate mechanism, an administered regime gave way to one of a managed exchange rate band
with an intervention capacity.
There have also been far-reaching reforms in the
public sector, both as regards its functioning and its orientation. These include fiscal
decentralization, privatization and concession programs in infrastructure works and public
services, and social security reform. The basis for decentralization is a gradual
augmentation in the transfer of resources and responsibilities to the departments and
municipalities - entities into which the national territory is divided - so as to meet the
population's basic needs more efficiently and promptly.
The purpose of privatizing public sector assets is
to free Government resources tied up in activities that could be carried out more
efficiently by the private sector and to transfer them to sectors where Government
intervention is essential, for example, education, health, justice and security.
In the area of social security, the State's monopoly
on the supply of health services and pensions has been abolished, leaving the way open for
the worker to freely choose any institution supplying these services.
Since 1991, new rules to modernize the legal
framework for foreign investment in Colombia have been adopted. The principles underlying
these changes are equal treatment for domestic and foreign investors resulting in the
elimination of prior authorization for investment in Colombia; universality under which
foreign investment is allowed in practically all sectors of the economy; and stability of
the exchange regime at the time the investment is made, which continues in effect for that
particular investment even if changes are made to the system in the future. Specific
authorization requirements must be met for investments in the financial sector and mining
and oil ventures.
Foreign Trade Policy
As regards the trade environment, between 1990 and
1991 the foreign trade regime was reformed in order to open up the Colombian economy to
foreign competition and prepare it to achieve higher levels of competitiveness and
international interaction.
This process implied such radical changes as the
unilateral reduction of tariffs, from an average figure of 44 per cent to around 11 per
cent today, simplification of the tariff structure by reducing the 14 levels to only five,
the abolition of almost all quantitative restrictions, moving away from the situation in
1990 when over 60 per cent of tariff headings required import licenses, to the current
situation where only 2 per cent need licenses for national security or environmental
reasons. In addition, import and export formalities have been simplified.
Another relevant element of Colombia's foreign trade
policy in the present decade is the strengthening of the integration agreement with
countries in the Andean region, creating the Andean Community, which includes a common
external tariff and the harmonization of legislation which goes beyond that of the
commercial arena.
Just as important is the establishment of commercial
agreements with other countries in Latin America, with Chile on the one hand and Mexico
and Venezuela on the other (Group of Three, G-3), and the eventual formation of free trade
areas.
The creation of more favourable conditions for the
development of trade and investment with Central America, the commercial opening towards
the Caricom countries, the will to achieve a free trade agreement with the Mercosur
countries and the widening of commercial relations in the American continent through the
negotiation of a Free Trade Area of the Americas (FTAA), are also elements worth noting.
Relationship with the Multilateral Trading System
In the multilateral trade front, Colombia played a
dynamic role in the Uruguay Round negotiations, becoming a founding member of the World
Trade Organization. It likewise took on tariff commitments with regard to the totality of
its goods tariff, and specific market access commitments in a wide range of the services
sector.
With regard to its participation in the Dispute
Settlement System, it is worth noting that since its accession to the GATT, Colombia has
never been the object of any claim.
Its participation in Dispute Settlement Proceedings
has been limited to its role as a claimant in 1992 and 1993, in controversies concerning
the European Communities banana import regime. At present, Colombia is participating as a
third party in the third panel relating to bananas. In 1993 it was one of the claimants in
a procedure against the United States for measures which affected the import of tobacco.
Finally, in 1992, Colombia participated as a third interested party in the panel brought
against the United States with regard to restrictions on tuna imports.
Barely two years after the establishment of the
World Trade Organization, we have perceived the benefits which may derive from a rule
based system and more precise disciplines, as well as from a strengthened dispute
settlement mechanism which can guarantee the effective functioning of the multilateral
trading system.
Colombia shares and supports the multilateral
disciplines established in the Marrakesh Agreement and consequently has amended its
domestic legislation where necessary, making use of the periods granted to developing
countries for this purpose, therefore limiting its discretionary authority in formulating
sectoral policies appropriate to its economy's level of development. Nevertheless, it is
confident that the benefits of the system will be shared, and that this can be achieved if
the supply of exports from developing countries such as Colombia is treated in the same
way as products and services from developed countries. Back to top |
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