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Colombia: September 1996

“ Members commended Colombia on the positive macroeconomic developments since the previous review in 1990 as well as the legislative, policy and institutional reforms, including the liberalization of the foreign trade, exchange and investment régimes.”

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Summary of Secretariat report
  > Summary of Government report

26 September 1996

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The Trade Policy Review Body of the World Trade Organization (WTO) conducted its first review of Colombia's trade policies on 25 and 26 September 1996. The text of the Chairman's concluding remarks is attached as a summary of the salient points which emerged during the two-day discussion.

The review enables the TPRB to conduct a collective examination of the full range of trade policies and practices of each WTO member country at regular periodic intervals to monitor significant trends and developments which may have an impact on the global trading system.

The review is based on two reports which are prepared respectively by the WTO Secretariat and the government under review and which cover all aspects of the country's trade policies, including: its domestic laws and regulations; the institutional framework; bilateral, regional and other preferential agreements; the wider economic needs and the external environment.

A record of the discussions and the Chairman's summing-up, together with these two reports, 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.

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), the Czech Republic (1996), Chile (1991), Colombia (1990 & 1996), Costa Rica (1995), Côte d'Ivoire (1995), the 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 & 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).

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Over the past two days, the Trade Policy Review Body has conducted the first review of Colombia's trade policies and practices under the WTO framework. These remarks, intended to summarize the salient points, are made on my own responsibility and do not substitute for the Body's collective evaluation and appreciation. Details of the discussion will be reflected in the minutes of the meeting.

The discussion developed under four main themes: (i) general issues concerning reforms; (ii) regional and multilateral issues; (iii) general trade issues; and (iv) sectoral issues.

General issues concerning reforms

Members commended Colombia on the positive macroeconomic developments since the previous review in 1990 as well as the legislative, policy and institutional reforms, including the liberalization of the foreign trade, exchange and investment régimes. These had been reflected in solid economic growth, a decline in the rate of inflation, strong capital inflows and improved public finances. Concern was expressed that recently, there appeared to have been some economic slowdown and slight increase in inflation. Questions were posed with respect to: the frequency of tax changes; the impact of the anti-inflationary Social Pact; possible increases in public expenditure arising from social spending under the Development Plan; fiscal and structural implications of the privatization programmes; the compatibility between constitutional provisions on expropriation and new laws guaranteeing investors' rights; the possible impact of oil revenues and oil-related investment on the economy, including the operation of the Oil Stabilization Fund; and the social costs of the adjustment programme. Questions were also posed on the stage of implementation of various legislative reforms.

The representative of Colombia began his response by indicating that the trade policy changes, begun in the 1990s, had taken place in the context of much wider changes in the Constitution and the rôle of the State, which were still continuing. He outlined changes in the management of trade policy and in macro-economic management, as well as the latest trends in economic indicators. He gave details of the Colombian Government's expectations for the period ahead, with a continued reduction in inflation and the fiscal deficit, non-traditional and petroleum exports were expected to continue growing while the growth of imports would slow down. The privatization programme was continuing, with electricity supply and CARBOCOL currently on the agenda.

The representative went on to provide details of the most recent changes in the investment régime, continuing the trend to greater openness; there were few incentives for investment other than a recent tax premium provision. He clarified that expropriation without compensation provisions contained in the 1991 Constitution had never been applied; a constitutional amendment had achieved first approval by Congress and would continue the process in the next legislature. Further legislative changes allowing for foreign investment in sectors such as legal and insurance services were under consideration. Land speculation and money laundering was the main target of restrictions on real estate purchases.

The representative emphasized that the Colombian Government was conscious of the need to maintain the stability of the real exchange rate and had taken steps to avoid any disruptive effects of large capital inflows. Measures had been taken to generate sufficient savings to ensure BOP stability and maintain a high rate of public and private investment. The new petroleum sources were expected to bring in new earnings for 10-20 years: the Petroleum Savings and Stabilization Fund, which was to invest abroad, was intended to promote prudent use of these earnings and avoid inflationary and other macroeconomic pressures. The "war tax" was intended to support anti-guerilla activity; it had been eliminated for investments made after 1995 and would be completely eliminated in 2001.

Regional and multilateral issues

Members took note of the importance attached by Colombia to increased participation in regional trade agreements, including those with the Andean Group, the Group of Three and Chile, as well as its active involvement in the plans for the establishment of a Free Trade Area of the Americas. Colombia's interest in strengthening economic links with the Asia-Pacific region countries through PECC and APEC was also noted. Members sought Colombia's views on the prospects for open, outward-oriented and trade-creating regionalism as well as on the further development of relations with MERCOSUR in trade and investment. Some participants recalled that Colombia had yet to meet fully its WTO notification obligations relating to regional agreements.

Members welcomed the expansion of Colombia's multilateral commitments, particularly with respect to tariff bindings, and noted the erosion of preferential treatment as a result of the Uruguay Round. They asked for up-to-date information on Colombia's implementation of the WTO Agreements, particularly those with longer periods for implementation by developing countries. Some participants inquired about the prospects for Colombia's becoming a member of certain Plurilateral Agreements.

The representative of Colombia indicated that economic integration was a pillar of Colombia's model of outward-oriented economic development; it was seen as strongly complementary to unilateral liberalization. Closer relations with other Latin American countries - including the recent Andean-Mercosur framework agreement and an agreement with Chile, were seen by Colombia as steps on the way to the Free-Trade Area of the Americas and to further multilateral liberalization; in this context, he recalled that the Uruguay Round commitments were part of the overall framework that all countries now applied. The Cartagena Agreement had been notified to GATT under the provisions of the Enabling Clause; the agreement with Chile had similar status. The common external tariff (CET) applied since January 1995 was consistent with more open regionalism, obliging industry to become more competitive. While intra-regional growth had been strong, this was not at the expense of other trading partners. National exceptions to the Andean CET were being progressively eliminated and should disappear by the year 2000. The exclusion of agricultural products in the G3 Agreement was related to the sensitivity of these products, but the coverage was very low; this Agreement was concluded within the LAIA framework and had been notified to the WTO Committee on Trade and Development.

General trade issues

Members expressed their appreciation for Colombia's trade liberalization through tariff reductions and the elimination of virtually all quantitative or licensing measures. Information was sought on the current list of Colombia's exceptions to the Andean Group's Common External Tariff. Members sought clarification on many aspects of the pre-shipment inspection régime and procedures, the consistency of the customs valuation system with the WTO Agreement, standards, the differential rates of VAT and the consumption tax applicable to domestically produced and imported goods, safeguard and anti-dumping/countervailing measures, government procurement and SPS procedures.

Members noted that non-traditional exports had grown, partly because of support from export assistance schemes such as CERT and SIEX and inquired about any plans for their phase-out by 2003 in respect of manufactured items.

Several members appreciated the introduction of new and improved legislation on intellectual property; they also asked for details on its enforcement.

The representative of Colombia took note of the recognition by members of the progress Colombia had made in its unilateral trade reforms. He gave details of the operation of the PSI system, which was designed to facilitate trade and essentially targeted at goods most susceptible to under-invoicing; a new decree rectifying some procedures would be notified. Customs valuation was now consistent with WTO procedures, under Andean Group legislation. The Government was studying how to eliminate the differential VAT on small, imported vehicles. Details were given on the operation of the consumption tax on spirits and beer. Information was also given on conditions for acceptance of certificates of origin; the operation of the anti-dumping mechanism on spare parts and equipment; restrictions on the importation of second-hand goods, including vehicles and parts which, the representative said, had no commercial significance and were based on the relevant Andean Group Resolution. He noted that other restrictions were founded on Article XX of GATT 1994 and that the new, national information system on standards was based on international rules including those of the WTO. Gaps in Colombia's safeguards legislation had already been filled under the new Law 170. the representative provided details on new rules on government procurement; open tendering with national treatment on a reciprocal basis, was the general rule. Mining and telecommunications were also covered by the reciprocity principle, which applied to the treatment given by trading partners. Colombia was an observer in the Agreement on Government Procurement; however, no decision had yet been taken on its possible future membership.

The representative also provided further information on Colombia's export régime, including export-linked tax exemptions on imported materials and concessions on capital goods available to all enterprises under the Plan Vallejo, which had been duly notified to the WTO Committee on Subsidies. Colombia was working to bring its CERT rates into line with WTO provisions. There were no export licences except under CITES and goods subject to import restrictions in overseas markets.

The representative of Colombia said that his Government applied Andean Group decisions on intellectual property rights, on an m.f.n. basis. Administrative and penal provisions existed to enforce these rules. Colombia was availing itself of the transitional provisions of the TRIPS Agreement to bring its legislation and practices fully into line.

Sectoral issues

Questions were raised on the compatibility with the Uruguay Round Agreement on Agriculture of measures currently in force in the agricultural sector, including marketing arrangements, reference prices, import licensing under the domestic absorption régime. Members also questioned whether the variable levies under the Andean Price Band System were legitimate, or could lead to violation of tariff bindings. Colombia was also asked when a procedure for implementation of tariff quotas would be implemented. More information was sought on the rôle of the Sectoral Competitiveness Agreements in agriculture.

Members asked questions about several aspects of Colombia's automotive policy, including local content and export performance requirements and restrictions on imports of used motor vehicles. It was recognized that the removal of past restrictions had led to substantial growth in trade in vehicles. Questions were raised on plans relating to the phase-out of existing measures under the provisions of the TRIMS agreement.

Clarification was requested on the régime affecting long-distance telecommunication services, including the area reserved for nationals, and for Colombia's active participation to the negotiation on basic telecoms was encouraged. Similar inquiries were made about recent deregulation in the financial sector and restrictions applied in professional, insurance and audiovisual.

The representative of Colombia gave extensive details of his country's agricultural policies: domestic absorption policies were designed to guarantee the acquisition of local production, not for self-sufficiency goals. These were less restrictive than increasing tariffs to ceiling bindings. Colombia believed that these measures were permitted under provisions of the TRIMS Agreement, including exceptions for developing countries, and that the procedures applied were compatible with the Agreements on Agriculture and on Import Licensing Procedures.

The representative stated that Colombia had fully met its market access commitments. Applied tariffs were normally below bound levels, including in quota levels. Of those products referred to by one Member, only butter and beans were subject to minimum access commitments but these were not covered by domestic absorption or import licensing provisions. For other products, domestic absorption requirements were not the reason for the lack of growth of imports, but also depended on supply and demand for particular products. In some cases imports substantially exceeded Colombia's access commitments. Both m.f.n. and preferential imports were counted against access commitments.

The representative gave details on the operation of the Andean Price Band System, which was designed to stabilize import costs despite fluctuations in international prices. In Colombia's view, the system was compatible with the WTO Agreement on Agriculture; it had resulted in applied tariff rates well below bound levels. The minimum reference prices for customs valuation purposes were covered by Colombia's reservation under Article 20 and Annex III of the Customs Valuation Agreement. The price band mechanism had helped to maintain incomes in poor sectors.

The representative of Colombia explained that SPS provisions were based on international standards and only applied after due notification to the WTO. Restrictions on imports of pork and ham from a European country related to the incidence of African Swine Pest in the exporting country; on evidence of the elimination of the disease, these had been lifted for all Andean countries.

Sectoral Competitiveness Agreements were designed to increase efficiency and competitiveness. These were being modified within the time-frame envisaged by the WTO Agreements. The Government had decided to reduce the rôle of the state agency, IDEMA, in purchases and stock management, leading to a greater rôle for the private sector in internal marketing.

On services, the representative stated that, while basic telecommunications was reserved to the State, the market for national long distance and international services was to be opened to two new operators from 1997: mobile telephony had also been opened up. Thus, the national monopoly for long-distance services had disappeared because of deliberate Government decision, not because of unauthorized call-back services. There were no limits on foreign participation in the establishing of companies to provide financial services; however, they were subject to the same prudential conditions as national companies. Colombia's offers in the area of financial services were linked to the offers of its major trade partners.

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Members welcomed the important steps taken in recent years by Colombia towards a more open and liberal economy, through constitutional, legislative and administrative reform, tariff simplification and reduction, and privatization programmes in a number of sectors. Concerns about certain sectors emerged clearly in the discussion, including agriculture, textiles, automobiles and some services. It was also emphasized that regional arrangements should be fully consistent with multilateral liberalization and rules under the WTO. Overall, however, the thrust of the discussion was supportive of the underlying direction of Colombia's economic and trade policies during a period of sharp transition. There was strong encouragement for the Colombian authorities to consolidate and build on the achievements of the past few years.

We look forward to receiving the written replies promised by Colombia in due time.