MANAGING THE CHALLENGES OF WTO PARTICIPATION: CASE STUDY 5
Services Commitments: Case Studies from Belize and Costa Rica
J. P. Singh*
Opinions expressed in the case studies and any errors or omissions therein are the responsibility of their authors and not of the editors of this volume or of the institutions with which they are affiliated. The authors of the case studies wish to disassociate the institutions with which they are associated from opinions expressed in the case studies and from any errors or omission therein.
ON THIS PAGE:
> I. The problem in context
> II. The political economic context
> III. GATS commitments
> IV. Local and external players and their roles
> Civil society
> External agencies
> V. Challenges faced
> Knowledge of services agreement
> Co-ordination and technical capacity
> Balancing interests and sequencing liberalization
> VI. Lessons for others
> Prioritizing services
> Technical capacity
> National co-ordination
> VII. Perceptions about the WTO
I. The problem in context
Belize and Costa Rica made modest commitments in the General Agreement on Trade in Services (GATS) at the Uruguay Round and the Fourth (Telecommunications) and Fifth (Finance) protocols negotiated thereafter in 1997. Costa Rica’s commitments reflect status quo bindings of market liberalization, Belize’s commitments reflect less than that. This is not surprising: most developing countries used the provisions of GATS to commit a few sectors at levels which were already open and to the extent allowed by their domestic policy contexts.(1)
Belize and Costa Rica also present an interesting puzzle: why did these economies with vibrant service sub-sectors, in serious need of foreign investment in others, and with sizable service export surpluses, make low commitments? Borrowing a Costa Rican trade official’s words, why did they make ‘timid commitments’ in services?
The evidence that follows for the two countries confirms the essentially bottom-up nature of GATS: both countries choose particular sectors for commitment — at levels acceptable to domestic actors. Interestingly, they also exhibit significant policy differences: Costa Rica was positioning itself to take advantage of being a service-based export-led economy; Belize remains ambivalent about the role of services in general and GATS commitments in particular.
This chapter shows that GATS commitments as such present a static picture; the decision-making processes leading up to them reveal the dynamics behind thinking about the role of services in economies. After profiling the countries and their GATS commitments, this case study outlines the major players, the challenges they faced and the lessons to be learned from them.
II. The political economic context
Belize and Costa Rica exhibit significant similarities and contrasts. Both are small economies with similar service-sector characteristics (Tables 1 and 2). The percentage shares of workforce in services and of services in GDP, and the growth of services trade are particularly important. Much of the service-sector growth is due to the growth of tourism in each country. Both economies are in transition from being primarily agriculture-export driven to seeking diversification. In both countries, officials regularly cite the proximity to the United States and the ability to speak English as important competitive advantages. Of course, there are marked contrasts: Belize has a much smaller population with lower rates of higher education. Belize’s offshore financial and business registry services probably account for the second-largest export item; Costa Rica is concentrating on information technology for diversification.
|Total population (2003)||266, 440||3.96 million|
|Land area (km2)||22, 965||51, 000|
|Average annual per capita income||$3, 237 (2002)||$4, 193 (2003)|
|Share of services in GDP||59% (2003)||58.1% (1999)|
|Percentage of workforce in services||60% (2003)||63.7% (1999)|
Source: World Trade Organization, Trade Policy Report: Belize, 14 June 2004; World Trade Organization, Trade Policy Report: Costa Rica, 9 April 2001; US Department of State, Background Notes, available at http://www.state.gov/r/pa/ei/bgn, accessed 22 October 2004.
Balance of commercial services trade
Balance of merchandise trade
|Ratio of commercial service to merchandise exports||1992||1:1.06||1:2.27|
Source: International Trade Statistics 2003, WTO, and author’s calculations.
In terms of politics, both are democratic countries with predominantly a two-party system. Both avoided the patterns of authoritarianism that plagued Latin America. Costa Rica’s more than fifty years of democratic decision-making confers considerable legitimacy on state instruments and their ability to define gradual change.(2) Belize gained independence from the United Kingdom in 1981, and the state’s role is neither clearly defined nor institutionalized; it exhibits the ‘highly personalistic’ leadership defining the Caribbean.(3)
The history of structural adjustment in Costa Rica during the 1980s may account for the differences in liberalization in the two economies. Officials note that the international choices made in the 1990s reflected the liberalization process that started with the economic crisis in 1982. By 1989, when Costa Rica joined GATT (General Agreement on Tariffs and Trade), these policies were in place and perceived to benefit the country. Accession to GATT went smoothly and Costa Rica was asked to make few concessions. Officials speak freely of the help received from the United States, especially under President Ronald Reagan, in exchange for their support in the fight against the Contras in Nicaragua. On GATT, Francisco Chacon, Vice-Minister of Foreign Trade (1994-8), says: ‘We were gaining a lot and paying very little’.
III. GATS commitments
At the Uruguay Round, Belize committed itself only to liberalizing a few medical services, including neurosurgery.(4) They are unbound for Mode of supply 4 (movement of natural persons) ‘except for senior managerial personnel and technical experts not available in the local labour market’.(5) ‘What drove us into GATS was a feeling that we were expected to become members and buy into the whole packet as it was a single undertaking. With no experience and national sensitivities about interaction at multilateral level we tried to identify sectors that were least problematic’, says Richard Reid, Senior Economist at the Trade Policy Unit in Belize’s Ministry of Foreign Trade.
Belize later made commitments in telecommunications negotiations that ended in 1997. Given that Belize Telecommunications Ltd (BTL) had a fifteen-year monopoly until 2002, the commitments are for limited liberalization in online information and database retrieval, electronic data interchange and online information or data processing. No commitments were made in sectors such as tourism and financial services, already liberalized enough to allow for commitments.
Costa Rica made status quo bindings but presented a more detailed schedule of specific commitments in four out of the twelve possible services and, later, for financial services — banking — in the Fifth Protocol.(6) The Uruguay Round commitments are limited to Mode 2 or consumption abroad in the following sectors: computer and related services (falling under business services in CPC), education services, social and health services, and tourism and travel-related services. A horizontal commitment is taken for commercial presence (Mode 3) under market access applying only to sectors listed in the schedule of specific commitments — in this case higher education and travel agencies and tour operators, and later to the commitments undertaken for banking under the Fifth Protocol. The banking bindings are for Mode 3 in market access and national treatment allowing affiliated companies or subsidiaries to provide customer deposits, transfer financial information and leasing services. Most-favoured-nation (MFN) exemptions are taken in professional, advertising and land transportation services allowing foreign professionals to practise in Costa Rica only if reciprocity agreements exist with their home countries, excluding countries in the Central American Common Market (El Salvador, Guatemala, Honduras and Nicaragua). Overall, the limited commitments reflect the degree to which the Costa Rican market was already open.
IV. Local and external players and their roles
Costa Rica’s is a presidential system of government. The constitution vests enormous power in the president, checked by informal consensus-building politics. The formal limits on presidential power on trade include working through the Ministry of Foreign Trade (COMEX) and ratifying trade treaties in the fifty-seven-member Legislative Assembly.(7) However, the Assembly can only approve or reject a trade treaty — ‘a permanent “fast track” in favour of the executive branch’.(8) The role of successive presidents in steering the Costa Rican economy is thus extremely important. State instruments overall reflect enormous legitimacy; ‘the state is a ship where the crew know where it is going’ — the economic crisis merely began to change this role ‘from participant to regulator’, says Roberto Echandi, special adjunct ambassador for US Trade Affairs at COMEX.
COMEX was formally created in October 1996 to reflect the increased importance of trade since economic reforms began in 1982.(9) It consolidated trade-related functions allocated earlier to various government departments, including the Ministry of Foreign Relations. However, COMEX undertakes extensive consultations with other ministries and government bodies involved in international trade policy, including agriculture, the central bank, tourism and transport. During the Uruguay Round there were thirty COMEX staff members, including ten negotiators. Key positions were occupied by well-respected technocrats, a legacy of the reform efforts begun earlier, notes Eduardo Lizano, former president of the Central Bank of Belize and a well-known intellectual.
The constitutionally guaranteed monopolies in several service sectors, including wireless, insurance, energy, coal and oil, are of enormous significance. Thus Costa Rica did not sign the Fourth Protocol on telecommunications, although it held observer status. For finance, it liberalized banking but not insurance. The monopolies responsible for insurance and telecommunications are the National Insurance Institute (INS) and the Costa Rican Electricity and Telecom Institute (ICE).(10)
In sum, services trade in a multilateral context was important to Costa Rica by the 1990s in spite of the domestic obstacles. In the 1990s ‘there was consensus at some level that services is an area where Costa Rica can benefit … That’s translated into politicians who understand these types of activities. They incorporate this into their discourse’, says Anabel Gonzáles, Special Ambassador for US Trade Affairs in Costa Rica. Roberto Echandi adds, ‘Small is beautiful … We want to be perceived as a small country with a positive agenda. We understand the importance of rules to generate services and foreign direct investment.’
Belize is a parliamentary democracy with a bicameral legislature, the National Assembly, consisting of twenty-nine directly elected members of the House of Representatives and twelve appointed members of the Senate. While the economic crisis in Costa Rica served to institute economic reforms, Belize inherited a system of imperial preferences in commodity exports that did not face serious challenges until the late 1990s. It joined GATT in 1983. However, finding its feet securely on the ground after independence in 1981, combined with the lack of any economic crisis, meant that Belize was not an active participant in the Uruguay Round. ‘In 1994, we were sleeping. At that time, our minister didn’t tell us what was going on. Trade was divided into two-three ministries … agriculture and trade were at cross-purposes’, says Fred Hunter Sr, a former cabinet minister.
Belize created a Ministry of Foreign Trade in the mid-1990s, but it lacked technical expertise and resources. The Trade Policy Unit (TPU) carries out negotiations. During the Uruguay Round, there was only one staff member assigned for negotiations (there are now five). Richard Reid, who has been with the TPU since its inception, remembers that tariff bindings were the most important issue: ‘Everything else was going for what you can. We were still fighting to create a real ministry of foreign trade.’
Primary commodity producers — in sugar, citrus and bananas — hold tremendous political clout, with politicians responding to these preferences. Thus, Belize did not prioritize its services sector in the 1990s. Others note that this may still be the case. ‘Belize has yet to define what it wants to be’, says David Gomez, managing partner of Launchpad Consulting in Belize, who was deputy permanent representative at Belize’s Mission to the UN-WTO in Geneva in 2001-2. Furthermore, investment laws in Belize are not specific enough, giving politicians tremendous leeway and making the system clientelistic. Officials and industry representatives cite several instances of ministers making commitments internationally without technical input or consultations.
Industry back to top
In Costa Rica, the Uruguay Round and subsequent sectoral negotiations featured the rising prominence of COMEX, inter-ministerial co-ordination, entrenchment of an economic reform programme and consultations with parastatal bodies such as ICE and INS. However, direct consultations with industry on services matters were limited. Nevertheless, there were other important influences. The formation of the private Costa Rican Investment Board (CINDE) in 1982 is important. CINDE identifies the revealed comparative advantages, works closely with COMEX, and aggressively seeks to attract foreign direct investment (FDI). Its crowning achievement came in November 1996 when Intel announced that it was going to build a $300 million semiconductor plant in Costa Rica.(11) CINDE’s early identification and prioritization of electronics and service-related sectors contributed to success, says Edna Camacho, the director general of CINDE. According to Ronald Jiménez, the vice-president of CAMTIC (Costa Rican Chamber of Information and Communication Technologies), the software sector had begun to grow in Costa Rica in the late 1980s. At that time there were around twenty-five firms; now there are more than two hundred.
Meanwhile, the banking sector had also begun to grow incrementally since the early 1980s. COMEX officials met with the Costa Rican Banking Association (ABC) during the Fifth Protocol negotiations and see bankers as their foremost partners in arguing for services liberalization; for its part, the ABC views economic reform as slow.(12)
In Belize, no industry consultations were undertaken during the Uruguay Round. The telecommunications negotiations were different: the government was interested in eventually liberalizing but recognized BTL’s monopoly until 2002. Even a status quo binding with marginal liberalization in a few sub-sectors was then a good precedent. The Trade Ministry sent over the schedule of specific commitment to BTL officials to fill out. ‘The WTO commitments were a no-no to us. At that time, it didn’t occur to us that we wouldn’t get another fifteen-year licence’, says Robert Young, director of telecommunications, Public Utilities Commission, Belize, who formerly worked at BTL. However, it is unclear whether the limited liberalization bindings made in sub-categories reflected input from BTL, trade ministry officials or external agencies, according to Gilbert Canton (chairman) and Robert Young of the Public Utilities Commission, Belize.
There is also no evidence that the tourism industry, the biggest service export sector in both Costa Rica and Belize, was consulted during the Uruguay Round negotiations. As explained later, this reflected the state of organization of the tourism industry in each country and the inability of various tourist service providers (hotels, restaurants, tour guides, transport operators, etc.) to view themselves as service exporters.(13) Even when they do so they may not seek foreign markets and may be protectionist towards their own. Both countries, however, have industry associations and government bodies that are involved in prioritizing tourism.
Civil society back to top
Civil society groups were not directly involved in GATS, but their indirect influence in democratic politics is important. In Costa Rica the state had to build a constituency for its economic reforms in the 1980s. While many of the structural adjustment reforms were top-down and dictated by external agencies, they were eventually accepted by society because of state efforts. GATT was prioritized in terms of the country’s international trade strategy, and officials shied away from using GATT to push reforms that were unpopular, except for tariff bindings in agriculture. This built early legitimacy for GATT instruments. Nonetheless, there is a twist to the story. Part of the welfare state had worked for Costa Rican society. This applies to ICE and INS, making liberalization in these areas impossible. The case of INS is interesting because it provides for a variety of public services beyond insurance. ‘INS is everyday life. It pays for firemen and other services’, says Eduardo Lizano. As for ICE, consumers viewed it as providing reasonably good services at low costs. ‘Costa Ricans reflect themselves in ICE’, says Johnny Rivera, a former ICE official who is now telecommunications manager for the Western Union call centre in Costa Rica.
The main bases of political support in Belize are the primary sectors; bananas alone employ nearly 10, 000 people. It may have hampered the ability of policy-makers in Belize to prioritize services early on. ‘Services may have been a new animal to some of them and at the end of the day they need to cater to local needs’, says Joseph Waight, a Ministry of Education advisor who was with the Ministry of Finance during the Uruguay Round. The legacy is that WTO is viewed in terms of agriculture and not services.
External agencies back to top
For services negotiations neither country received much external assistance. Nor were there any particular external pressures on them, at least during the Uruguay Round, to liberalize services.
V. Challenges faced
Services were new to the GATT agenda, and both countries made limited commitments, but there are differences in the ways in which the two countries responded.
Knowledge of services agreement back to top
Both countries viewed the Uruguay Round in terms of commodities rather than services. Both countries also knew that the idea of positive lists meant that maintaining the status quo or making token commitments was enough to sign on to GATS.
Without an in-depth knowledge of the domestic services market or the evolving services agreement, Belize opted for the least costly option, making limited commitments in medical services. Trade in preferential commodities was profitable and Belize’s efforts went into preserving these preferences. By the time of the telecommunications and financial services agreements, officials had better knowledge of GATS. Belize used the status quo binding in telecommunications to begin the process of reform in that sector. However, the knowledge of services sectors was not uniform; Belize did not make status quo bindings in already liberalized financial services.(14) Each of the following reasons was given by a different official interviewed:
- It was too early. We were just building regulatory capacity.
- There was a lack of supervisory capacity.
- When we think of financial services, we do not think of WTO at
- The Ministry of Foreign Trade didn’t even ask us.
- The Ministry of Foreign Trade asked us but it would have meant
undoing our fixed exchange rate system and opening the capital
- There were concerns about money laundering and the United States
was trying to prevent us from offering any kind of offshore
financial services at all.
- Vested interests in banking didn’t want the opening.
The real reason, according to Yvette Alvarez, former deputy governor of the Central Bank of Belize, was that most of the efforts of the bank were devoted to passing appropriate legislation for offshore banking and anti-money laundering. There was no political capital or time left to spend on crafting a WTO commitment.
As for Costa Rica, it made a thorough investigation of its services sector but also played it politically safe by committing to the status quo. However, as seen above, service exports were beginning to get politically prioritized.
The commitments in banking followed more than a decade of banking liberalization. The most significant move was the 1995 law that allowed banks to accept current-account deposits, now part of Costa Rica’s WTO commitment.(15) Eduardo Lizano comments that the pressures for this reform came from domestic banks and from USAID for helping the country to pay its national debt.
Co-ordination and technical capacity back to top
International trade policy involves co-ordinating several ministries and expertise to advance one’s interests effectively. GATS, in particular, demands inter-ministerial co-ordination and also the task of making myriad domestic producers realize that they are exporting services. National treatment and market access commitments across the four modes of supply make GATS even more a highly technical exercise.
During the Uruguay Round Belize started creating the Ministry of Foreign Trade and its Trade Policy Unit. The task of educating various service sectors that they are service exporters may have stood in the way of making commitments. For example, tourism officials admit that educating operators on GATS is difficult. It may be too daunting for small ministries to perform. TPU officials in Belize note that keeping up with all the international trade agreements with the European Union, the United States and CARICOM (Caribbean Community and Common Market) and with other countries keeps them busy, ‘they do not have time to do the type of “information and sensitization” needed to keep service providers attuned to GATS’, says Tracey Hutchinson, a trade economist at the TPU.
Calculating the impact and implications of commitments is hard, too. Officials note that these competencies did not exist at the CARICOM level either, which may have been ‘asked to commit to sectors where we don’t know what we’re committing away or committing to’, says Carla Barnett, chief executive officer of the Ministry of National Development and former Deputy Secretary General of CARICOM. Take the instance of tourism. Most of the data on the tourist industry earnings come from the 7% hotel tax levied by the Belize Tourism Board. These data are supplemented by a few surveys, but Belize does not systematically collect tourism data. The tourism industry accounts for about 18% of foreign direct investment and about 25% of employment, but these figures reflect the hotel sector data. Officials note that systematic data collection may even show that more than two-thirds of Belize’s GDP comes from tourism-related activities.(16)
Costa Rica named and empowered COMEX as its lead agency for trade matters towards the end of the Uruguay Round. ‘Our position was that we were new players and didn’t have knowledge or expertise and therefore we prioritized. In services, the ideas of positive lists allowed us to make commitments that were in our interest,’ says Francisco Chacon. While Costa Rica was careful, its schedule of commitments, as mentioned earlier, was far more detailed than was the case for Belize.
In Costa Rica the tourism sector is relatively open and growing, making it more difficult for industry operators to see the wisdom of committing to GATS (this holds for Belize, too). William Rodriguez, president of the Costa Rican Chamber of Tourism, admits: ‘First time I heard we have to be committed, my response was, “we’ve always been open”’ Costa Rica, did, however, make limited commitments in tourism during the Uruguay Round.
Balancing interests and sequencing liberalization back to top
There were two challenges to balancing domestic interests and sequencing services liberalization: moving beyond agriculture to prioritize services, and finding ways for liberalizing sectors that were historically private or state monopolies.
Belize’s strategy in telecommunications employed the GATS schedule in binding status quo but also allowed liberalization in three sub-sectors. By the mid-1990s the government of Belize was interested in liberalization but hamstrung by the BTL monopoly. Until 1987, BTL was a Cable and Wireless monopoly (as in other parts of the Caribbean). When making the commitments, the Director of Telecommunications, serving as the de facto regulator in the Ministry of Telecommunications, announced that telecommunications would be liberalized in 2002.(17) The commitments were followed by the Public Utilities Act of 1999, which allowed for a new regulator in anticipation of liberalization in 2002.(18)
Costa Rica’s commitments seemed to follow, rather than precede, domestic liberalization. At a macro level, structural adjustment was a top-down process and thus the case of these sectors might be unique.(19) In banking, the commitments reflected the domestic market. In telecommunications, even Costa Rica’s observer status at the WTO negotiations had to be justified to ICE. By the late 1990s, liberalization pressures for telecommunications continued to build. Multinationals, in particular, needed a suitable infrastructure, which included telecommunications. As telecommunications services became sophisticated, societal needs could not be met either. Nevertheless, legislation introduced by the government to liberalize telecommunications in 2000 had to be withdrawn because of opposition from ICE and sections of Costa Rican society. ‘Welfare state for Costa Rica worked even if import substitution industrialization didn’t. Everybody had a telephone and at low prices. ICE was identified with the welfare state. This wasn’t a failure of the state’, says Roberto Echandi.
VI. Lessons for others
Costa Rica has both a positive view of the WTO and a proactive services strategy. Belize is beginning to identify its service priorities but has limited resources and perceives the WTO negatively. What can be learned from contrasting the two experiences?
Prioritizing services back to top
Costa Rica is widely perceived as a success story in terms of using international trade to its advantage. ‘Our country is convinced that active participation in the multilateral system of trade generates very important benefits for all its members, not only through trade liberalization, but also in establishing a system of rights and obligations based not on political or economic power, but in clear and fair rules, that are supported by an effective system of problem resolution’, noted Tomas Dueñas, the Costa Rican Foreign Trade Minister,(20) on the occasion of the visit of WTO Director General Mike Moore to Costa Rica on 28 August 2001.
Several pillars of Costa Rican strategy are identifiable; while embedded in successful workings of constitutionalism and democratic politics, they offer insights for countries looking to diversify their economic portfolios. First, Costa Rican officials speak of globalization as hubs and spokes in which the United States is a hub and countries such as Costa Rica the spokes. Roberto Echandi notes that Mexico first worked this out with regard to NAFTA (North American Free Trade Agreement). Second, COMEX and CINDE identified key sectors for prioritization by tracking revealed comparative advantage rather than an extensive scientific study. Currently, the foyer of CINDE’s main office near San José displays pictures emphasizing three sectors: electronics, medical devices and services. Third, Costa Rica made limited commitments, but the early prioritization of services allowed for identification of both the strengths and inefficiencies in sub-sectors. Fourth, while there is no consensus whether Costa Rica uses international commitments to usher domestic reform or vice versa, it is undeniable that the Costa Rican elite thinks hard about ways to embed the reform process in society and takes international obligations seriously. Costa Rica submitted its initial offer for services at the Doha Round in April 2004.(21)
It is unfair to contrast Belize with Costa Rica when it lags far behind in resources and educational advantages. Its TPU, for example, has only five staff members. But Belize seems to be moving in the same direction as Costa Rica, albeit in timid and often ambiguous ways. Yvonne L. Hyde, the Belize ambassador in Brussels, says: ‘We have a saying in the Caribbean: “one step forward and two steps backwards”’ There is talk of services prioritization, but it lacks teeth. ‘People in Belize are afraid of change. It is not lack of education. Costa Rica would embrace it much more than we do’, says Ambassador Hyde. Eamon Courtney, Minister of Foreign Trade and Investment, noted at the country’s Trade Policy Review in Geneva on 12 July 2004, ‘Tourism, information technology, non-traditional agriculture and financial services are but just a few of the options we are exercising to harness the intelligence and industry of the Belizean people. We are therefore alarmed by the continuous machinations of some to shift the rules to maintain their advantages.’ A step forward, but not without expressing caution about the system of preferences.
The political machinery remains beholden to agricultural interests; economic diversification is difficult. ‘Services are important to our economy. What’s lacking from the highest offices of our government is an understanding that services are tradable’, says Tracey Hutchinson of the TPU.
Belize, like Costa Rica, created institutions (such as the investment promotion agency Beltraide) to promote investment and diversification, but services are yet to receive political and economic priority in terms of resources. Belize does not have an initial offer in services at the Doha Round and is waiting for CARICOM to frame a common position.
Technical capacity back to top
In Costa Rica, COMEX’s Gonzales notes that the most effective way for the WTO to utilize its resources for capacity building and to help small economies use the multilateral system effectively might be to send twenty to thirty graduates each year to the United States or other places with well-known higher education institutions to study international trade law and how the multilateral system works. They attribute their success to such education and to the subsequent appointment of technocrats to trade policy and diplomacy positions. They note that WTO technical capacity-building often falls victim to letting countries admit that they lack capacities rather than taking a serious inventory of how best to utilize their resources.
While officials in Belize admit to the need for capacity building, they are not convinced that the one-week or three-month courses that the WTO offers are particularly helpful. They have participated in sixty-three WTO capacity-building programmes since 1998. While appreciating WTO efforts, Courtney noted in Geneva that ‘attachments of experienced experts to national governments would be very effective in providing direct capacity building’. Clearly, both Belize and Costa Rica are arguing for long-term solutions to capacity building.
National co-ordination back to top
Belize emerged from the 1990s convinced of the need for domestic consultations. The National Trade Negotiation Commission (NTNC) was set up in 2002 to bring together the private sector, civil society and government representatives. A Trade Technical Team (TTT), composed of representatives from various ministries, advises the NTNC.(22) The discussions in the NTNC, however, are reactive rather than proactive in framing negotiation and development strategies; government officials and industry representatives note that services have not come up in NTNC discussions, which focus mostly on the threats to the system of agricultural preferences.
Costa Rica continues to deepen its processes of domestic consultations; the vaunted system of state persuasion in Costa Rica can be interpreted as the state’s ability to set the broad outlines of economic strategies, themselves a result of formal and informal consultations. The recently concluded Central American Free Trade Agreement (CAFTA) negotiations featured industry and society representatives sitting in rooms, the so-called cuarto junto, next to Costa Rica’s negotiators for up-to-date consultations.
VII. Perceptions about the WTO
Belize has not seen tangible benefits from participation in the WTO. While officials admit that isolation is not an option and would send the wrong signal to the international community, they point to losses that they attribute to the WTO. Referring to the threats to the system of preferences at the WTO, Orla K. Coleman, a junior economist at the TPU, says, ‘sugar will leave a bad taste’.
Costa Rican perceptions are the opposite. Its growth and diversification through trade (it currently exports more than 3, 500 products) are attributed to the multilateral system in which the WTO is a key actor. Costa Rica has used the dispute settlement procedure effectively, resulting in rulings in its favour. Most Costa Ricans, therefore, have no difficulty in favouring the international trading system and its system of rules. As a proxy, the following numbers from a recent poll on CAFTA are instructive.(23)
- Nearly half of Costa Rican adults (43%) consider themselves as
knowing ‘a lot’ or ‘something’ about the commercial free trade
agreement that Central America negotiated with the United States.
- Two-thirds of those interviewed (66%) assume that CAFTA will bring benefits to the country.
Former minister Chacon says that the debates on trade in Costa Rica are pragmatic and not academic, in spite of the opposition to trade in some sections.(24) Costa Rica uses such pragmatism to its advantage: ‘If you’re small, think hard to be constructive to be taken seriously. If you’re destructive, who cares?’ says COMEX’s Echandi.
1.- Rudolf Adlung et al. (2002), ‘The GATS: Key Features and Actors’, in Bernard Hoekman et al., eds., Development, Trade, and the WTO, Washington, DC: World Bank, p. 262. back to text
2.- ‘Costa Rica largely fits the democratic stereotype. One of the hallmarks of the Costa Rican political system is its emphasis on consultation and persuasion; impatient external agencies tended to feel this approach hamstrung reform’ (1990), ‘The Politics of Adjustment in Small Democracies: Costa Rica, the Dominican Republic, and Jamaica’, in Joan M. Nelson, ed., Economic Crisis and Policy Choice: The Politics of Adjustment in the Third World, Princeton, NJ: Princeton University Press, p. 208. back to text
3.- Jacqueline Anne Braveboy-Wagner (1993), ‘English-speaking Caribbean’, in Joel Kreiger, ed., The Oxford Companion to World Politics, New York: Oxford University Press. back to text
4.- GATS follows the United Nations Central Product Classification (CPC) system that lists eleven service sectors and a twelfth miscellaneous category. Neurosurgery falls under the sub-category of business services listed under professional services. back to text
5.- WTO document S/DCS/W/BLZ. 24 Jan. 2003. back to text
6.- WTO document GATS/SC/22/Suppl.1. 26 Feb. 1998. back to text
7.- For an excellent review see Roberto Echandi (1997), ‘The Uruguay Round Agreements: Constitutional and Legal Aspects of their Implementation in Costa Rica’, in John H. Jackson and Alan O. Sykes, eds., Implementing the Uruguay Round, Oxford: Clarendon Press. back to text
8.- Ibid., p. 411. Another important feature is that laws afford equal protection to foreign firms and citizens making national treatment a permanent feature. Service liberalizations are thus about market access and not national treatment. Based on an interview with Echandi. back to text
9.- The economic crisis followed the breakdown of the import substitution industrialization strategy, falls in coffee prices and hikes in oil prices. In 1981, the colón was drastically devalued, wages dropped, and inflation rose above 18%. A string of loans was obtained from the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD) and the United States. back to text
10.- They were kept informed by COMEX during the telecommunication and banking negotiations. Based on interviews with Jaime Coghi, a counsellor at the Costa Rican permanent mission to the WTO. back to text
11.- ‘In the late 1980s, CINDE had explicitly decided to follow a strategy of attraction, marketing itself to a specific group of potential investors, rather than spreading its fairly limited resources across a hodgepodge of ambiguous leads.’ Debora Spar (1998), Attracting High-Technology Investment: Intel’s Costa Rican Plant, Foreign Investment Advisory Service Occasional Paper 11, Washington, DC: World Bank, p. 8. back to text
12.- Based on interviews with COMEX officials and Jorge Monge, the president of ABC. Monge identified infrastructure — roads, telecommunications, airports — and education as sectors where change over the last twenty years has been slow. back to text
13.- Based on interviews with William Rodriguez, president, Costa Rican National Chamber of Tourism (CANTUR), and Andrew Godoy, executive director, Belize Tourist Industry Association. CANTUR and BTIA are industry associations. back to text
14.- Belize provides a variety of offshore services: trusts, mutual funds, international insurance, international business corporations registry, international banking, offshore investment schemes. The offshore services began to develop in 1990. By the end of the decade, concerns were being raised about money laundering and tax evasion and, more recently, terrorism financing. In 2000, the OECD blacklisted Belize for its financial services sector. back to text
15.- The controversial new banking law was ushered in by President Figueres. His father, José Figueres Ferrer — also known as Don Pepe — had ushered in state monopolies and import substitution industrialization after the Revolution of 1948. The son was alternatively considered a traitor or as best positioned to carry out this reform. back to text
16.- Tourism data drawn from interviews with Tracy Traeger, Director, and Evan Tillett, Deputy Director for Finance and Tourism, Belize Tourism Board. back to text
17.- Neville D. Samuels (2000), ‘Low Teledensity and Limited Access to Telecommunications in Belize: A Problem of Diffusion’, Master’s thesis, Communication, Culture and Technology Program, Georgetown University. back to text
18.- The telecommunications market opened in 2002 when Intelco started providing network services to government and mobile services everywhere. An August 2004 exposé showed that the government used social security to fund the development of Intelco, a firm in which the Prime Minister had a share. back to text
19.- COMEX officials insist that domestic liberalization needs to precede and has preceded international commitments. Others disagree. Commenting on insurance and telecommunication commitments made in the recently concluded Central American Free Trade Agreement (CAFTA), Eduardo Lizano says: ‘I am grateful that the Americans pushed us on insurance and telecommunications. We were worried that insurance and telecommunications would be excluded until Zoellick [US Trade Representative Robert Zoellick] came to Costa Rica.’ The context for COMEX officials’ comments might be the concentrated opposition to CAFTA among trade unions and students. back to text
20.- Mr Dueñas’ comments were translated by Laura Stein of Georgetown University. back to text
21.- WTO document TN/S/O/CRI of 21 April 2004. back to text
22.- WTO, Trade Policy Review: Belize, report by the Secretariat. WT/TPR/S/134, 14 June 2004, p. 17. back to text
23.- Costa Rica, Public Opinion #97: CID-Gallup. Made available to the author at COMEX. Conducted 17-22 April 2004. back to text
24.- Graffiti on the walls of San José, especially around the University of Costa Rica, reads ‘No TLC’ meaning ‘no tratado de libre comercio’ (no free trade treaty), referring to CAFTA. back to text
* Communication, Culture and Technology Program, Georgetown University, Washington, DC.