Statement by Ambassador Rita D. Hayes
Costa Rica Trade Policy Review
May 9, 2001

Opening Remarks:

Thank you, Mr. Chairman. The United States welcomes the delegation from San Jose for this, Costa Rica's second Trade Policy Review under the WTO. We appreciate the Secretariat's thorough and accurate report on Costa Rica's trade policy regime. We also commend the Government of Costa Rica for its detailed report. These reports represent an important analysis of Costa Rica's commercial policies, laws, regulations and practices. We have developed a number of questions based on those reports which we look forward to discussing with the Government of Costa Rica.

Bilateral relations between the United States and Costa Rica remain excellent, reflecting shared democratic values and traditions. The United States and Costa Rica have strong commercial ties which are being further strengthened. The United States now imports more than 50 percent of Costa Rica's exports, which in 2000 totaled 3.5 billion dollars. During the same time, U.S. exports to Costa Rica were 2.4 billion dollars. Many U.S. companies currently operate in Costa Rica, several of whom have made substantial new investment there in recent years.

In the 1980s the United States supported Costa Rican efforts to stabilize its economy and broaden and accelerate economic growth through policy reforms and trade liberalization with more than $1.1 billion in economic and development assistance programs. Starting in the mid-1980's, the US also launched the Caribbean Basin Initiative designed to encourage economic revitalization and export diversification in countries like Costa Rica. Costa Rica has been able to take advantage of the provisions of the Caribbean Basin Initiative for the duty free treatment for eligible articles, a centerpiece of our economic relationship ever since.

Costa Rica has become one of the most stable and robust democracies in Latin America and a model in certain areas. Its outward-oriented, export led development has allowed its Gross Domestic Product to grow at an average annual rate of near 5 percent since 1986. The reorientation of the economy to sectors, such as agriculture, which employ a large number of poor has reduced the number of poor in the process. Costa Rica's current development agenda focuses on continuing integration and promoting new foreign private investment, particularly in the area of high tech businesses.

Costa Rica used to be known principally as a producer of bananas and coffee. While these products are still critical to the Costa Rican economy, in recent years, the contribution of manufacturing and industrial production to GDP has overtaken agriculture. For the last five years, Costa Rica's trade in goods grew at 18 percent annually and the manufacturing sector became the engine of growth in exports with the share of agricultural exports falling from 68 percent in 1995 to only 31 percent in 1999.

Services have also been growing at an impressive rate. Costa Rica's trade in services grew at 52 percent annually over the last five years as the number of visitors increased from 700,000 in 1996 to over a million in 1999. Tourism now earns more foreign exchange than that earned from bananas and coffee combined. Costs Rica's economic growth strategy has also helped it become a leader in capitalizing on environmental protection. Today, with 27 percent of the country's land area now protected, Costa Rica's biodiversity has lead a boom in a very lucrative sector of growth in the field of ecotourism.

Costa Rica has also been taking steps towards future trade liberalization. In March 1998, Costa Rica and other Central American countries established a Trade and Investment Council with the United States. Costa Rica has also been an active participant in the negotiation of the hemispheric Free Trade Area of the Americas, a process that the Costa Rican Government chaired in preparation for the April 1998 Summit of the Americas in Santiago, Chile.

Costa Rica and the WTO:
Mr. Chairman, Costa Rica and the United States share a common commitment to the multilateral trading system. We appreciate the active role Costa Rica plays in the WTO. Costa Rica was one of the original supporters of the Information Technology Agreement and it is a leader in support of the expansion of the products covered by the ITA. Costa Rica has also supported the development of a trade facilitation agreement which recognizes the importance of a WTO rules-based border transaction environment for economic development. In addition, we appreciate the skillful leadership that Ambassador Saborio has provided as Chairman of the Working Group on Transparency in Government Procurement.

Turning to the built-in agenda negotiations, we are pleased with Costa Rica's support for the establishment of a fair and market-oriented system of agricultural trade, including the elimination of export subsidies. Costa Rica also recognizes the importance of the process of including further service sectors within the rules on market access and national treatment. We look forward to continuing to work closely with Costa Rica on WTO issues.

On-Going Matters of Concern:
Costa Rica's trade policies are generally oriented towards integrating the country into the global economy. However, we have serious concerns about Costa Rica's trade practices in a number of areas, with recent developments in some of these areas undermining the benefits of a liberal trading regime.

Costa Rica is a signatory of all major international agreements and conventions on trademarks, copyrights and patent protection and has approved laws for the purposes of bringing the country's legal framework into compliance with the TRIPS agreement. However, recent legislative actions have weakened enforcement capabilities and copyright enforcement efforts by Costa Rica authorities have continued to decline.

We are also seeing signs that Costa Rica is using sanitary and phytosanitary licensing procedures to restrict access for agricultural imports. It appears that permits are being denied for reasons other than sanitary concerns and, as such, would run contrary to commitments made by the Costa Rican Government.

Costa Rica's customs procedures have long been complex and bureaucratic. The general customs law passed in 1995 formalized reforms aimed at customs procedures and much of the processing is now electronic. In September 2000, Costa Rica adopted the provisions of the Customs Valuation Agreement. In spite of the progress that has been made, however, there remains a need for a quicker and more streamlined process.

The Secretariat's report notes Costa Rica has bound most of its tariff lines at a maximum ad -valorem rate of 45 percent. Closing the wide margin between applied and bound rates would further increase the predictability of market access conditions.

While much of Costa Rica's economy is in the hands of the private sector, state monopolies cover insurance, telecommunications, energy distribution, petroleum distribution and marketing, and railroad transportation. In addition, there are restrictions on the participation of foreign companies in some private sector activities, such as customs handling, medical services and other professions. This has led to a number of inefficiencies which are a drag on the economy. We encourage the Government to reduce or eliminate these monopolies through privatization and liberalization. Costa Rica has enacted laws and established a system to oversee government procurement. It is important that these laws are applied consistently in such sectors as telecommunications in order to attract more investment.

Conclusion:
Mr. Chairman, Costa Rica has made significant economic progress in recent years. It has adopted an export-oriented strategy that has been successful in increasing and diversifying its exports. It is encouraging to see a developing country, like Costa Rica, that is committed to following a trade policy to integrate further into the global economy obtain such promising results. We support Costa Rica in these efforts and look forward to continue to work closely with it towards further trade liberalization and integration.