RESTRICTED
WORLD TRADE WT/TPR/S/18
26August 1996
ORGANIZATION(96-3346)
TRADE POLICY REVIEW
COLOMBIA
Report bytheSecretariat
This report, prepared forthesecond Trade Policy Review ofColombia, hasbeen
drawn upbytheWTO Secretariat onitsownresponsibility. TheSecretariat has,as
required bytheAgreement establishing theTrade Policy Review Mechanism (Annex 3
oftheMarrakesh Agreement Establishing theWorld Trade Organization), sought
clarification from theGovernment ofNorway onitstrade policies andpractices.
Document WT/TPR/G/18 contains the policy statement submitted bythe
Government ofColombia.
Note: Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body onColombia.Colombia WT/TPR/S/18
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS x
(1) TheEconomic Environment x
(2) Trade Policy Features andTrends x
(i) International economic integration x
(ii) Trade policy developments xi
(3) Sectoral Policy Developments xii
(4) Trade Policies andForeign Trading Partners xiv
I. THE ECONOMIC ENVIRONMENT 1
(1) Introduction 1
(2) Recent Economic Developments 1
(i) Composition andgrowth ofGDP andemployment 1
(ii) Prices 4
(iii) Exchange ratedevelopments 5
(iv) Public finance 7
(v) Balance ofpayments 9
(vi) Policies regarding external borrowing 11
(3) Developments inMerchandise Trade 12
(i) Composition oftrade 12
(ii) Direction oftrade 12
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 17
(1) Introduction 17
(2) General Framework 17
(3) Structure ofTrade Policy Formulation 18
(i) Legislative andExecutive branches ofGovernment 18
(ii) Advisory bodies 19
(4) Trade Policy Objectives 19
(i) General trade policy objectives 19
(ii) Sectoral trade policy objectives 20
(iii) TheUruguay Round 20WT/TPR/S/18 Trade Policy Review
Page iv
Page
(5) Trade Laws andRegulations 21
(6) Trade Agreements andArrangements 22
(i) Multilateral agreements 22
(ii) Regional agreements 24
(iii) Bilateral agreements 29
(7) Trade Disputes andConsultations 29
(i) Dispute Settlement under GATT 1947 29
(ii) Dispute Settlement under GATT 1994 32
(iii) Disputes outside GATT/WTO 32
III. FOREIGN INVESTMENT AND TRADE 34
(1) Introduction 34
(2) Framework forForeign Direct Investment 34
(3) Trends andPatterns inForeign Investment 37
IV. TRADE POLICIES AND PRACTICES BYMEASURE 40
(1) Overview 40
(2) Measures Directly Affecting Imports 40
(i) Registration anddocumentation 40
(ii) Tariffs 42
(iii) Tariff quotas 48
(iv) Variable import levies andtheAndean Price Band system 49
(v) Import surcharges andsurtaxes 51
(vi) Other levies andcharges 51
(vii) Preshipment inspection 54
(viii) Customs valuation 54
(ix) Reference andminimum import prices 55
(x) Import prohibitions 57
(xi) Import licensing 58
(xii) State trading 60
(xiii) Countertrade 64
(xiv) Standards andother technical requirements 65
(xv) Government procurement 68
(xvi) Local-content requirements 69
(xvii) Rules oforigin 70
(xviii) Anti-dumping andcountervailing dutyactions 71
(xix) Safeguard actions 72
(xx) Other measures 74Colombia WT/TPR/S/18
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Page
(3) Measures Directly Affecting Exports 75
(i) Registration anddocumentation 75
(ii) Export taxes, charges andlevies 75
(iii) Minimum prices 76
(iv) Export prohibitions 76
(v) Export licensing 76
(vi) Voluntary restraints, surveillance, retention schemes andsimilar measures 77
(vii) Export subsidies 78
(viii) Duty andtaxconcessions 81
(ix) Export finance 81
(x) Export insurance andguarantees 81
(xi) Export promotion andmarketing assistance 82
(xii) Export performance requirements 82
(xiii) Free-trade zones andexport-processing zones 82
(4) Measures Affecting Production andTrade 84
(i) Adjustment assistance 84
(ii) Assistance forresearch anddevelopment (R&D) 85
(iii) Production assistance, taxconcessions 85
(iv) Pricing andmarketing arrangements 86
(v) Regional assistance 88
(vi) Competition policy 88
(vii) Enforcement ofintellectual property rights 89
(viii) Other measures 92
V. TRADE POLICIES AND PRACTICES BYSECTOR 94
(1) Overview 94
(2) Agriculture 99
(i) Coffee 111
(ii) Bananas 114
(iii) Other 115
(3) Mining andEnergy 116
(i) Mining, other thanenergy 117
(ii) Energy 117
(4) Manufacturing 121
(i) Textiles andclothing 123
(ii) Carassembly industry 125WT/TPR/S/18 Trade Policy Review
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Page
(5) Services 128
(i) Banking, finance andinsurance 131
(ii) Telecommunications 132
(iii) Transport 133
(iv) Tourism 135
(v) Broadcasting 135
Annex V.I Conditions governing trade inservices inColombia 136
REFERENCES 142
APPENDIX TABLES 145Colombia WT/TPR/S/18
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CHARTS
Page
I. THE ECONOMIC ENVIRONMENT
I.1 Trade ingoods andnon-factor services, 1980-94 3
I.2 Developments inrealpercapita income andpopulation growth, 1989-95 4
I.3 Exchange ratedevelopments, 1990-95 6
I.4 Colombia 'sposition inreciprocal credit arrangements, 1990-94 7
I.5 Merchandise trade bysector, 1989 and1994 13
I.6 Merchandise trade bypartner, 1989 and1994 14
I.7 Colombia 'sforeign trade withLatin America, 1991-95 15
I.8 Colombia 'strade balance withLatin America, 1991-94 16
III. FOREIGN INVESTMENT AND TRADE
III.1 Inward stock andnetinflows offoreign direct investment, 1990-95 38
III.2 FDIoutflows andoutward stock, 1983-94 39
IV. TRADE POLICIES AND PRACTICES BYMEASURE
IV.1 Average tariff levels andfiscal revenue from imports, 1989-96 43
IV.2 Distribution ofm.f.n. advalorem tariff rates, 1988 and1996 45
IV.3 Tariff exempt imports, 1990-95 47
IV.4 Structure offiscal revenue from indirect taxes, 1989-95 53
IV.5 Imports bysector oforigin, 1990-September 1995 61
V. TRADE POLICIES AND PRACTICES BYSECTOR
V.1 Average tariffs byISIC classification, 1996 95
V.2 Export subsidization ofselected sectors, 1993 97
V.3 Traditional andnon-traditional merchandise exports, 1991-95 98
V.4 Agriculture: production andassistance 100
V.5 Coffee production andtrade, 1990-95 113
V.6 Crude oilproduction andworld price developments, 1990-95 120
V.7 Carmarket developments, 1991-95 126
V.8 Value added andtrade inservices 129WT/TPR/S/18 Trade Policy Review
Page viii
TABLES
Page
I. THE ECONOMIC ENVIRONMENT
I.1 Economic developments, 1989-95 2
I.2 Structure oftheColombian economy, 1989-1995 3
I.3 Balance ofpayments, 1989-95 10
I.4 External debt, 1989-1995 (June) 11
IV. TRADE POLICIES AND PRACTICES BYMEASURE
IV.1 Method forthecalculation ofthevariable import levy(Andean
Price Band System) 50
IV.2 Structure ofcharges onimports ofselected products, 1996 53
IV.3 Andean Price Band: floor andceiling prices, 1995 to1997 55
IV.4 Criteria forimport licence approval 59
IV.5 State enterprises inColombia, 1996 62
IV.6 Threshold values forselecting public tender procedures 69
IV.7 Anti-dumping andcountervailing cases, 1992-96 73
V. TRADE POLICIES AND PRACTICES BYSECTOR
V.1 Main features oftheColombian tariff schedule, 1996 96
V.2 Developments innon-coffee cropoutput, 1990-1995 101
V.3 Imports bysector, 1990 and1994 102
V.4 Exports bysector, 1990 and1994 103
V.5 Estimated border protection for"marker" products through import
levies andtariffs 106
V.6 Coffee: Operational stages oftheAPPC Retention Scheme,
1994 and1995 114
V.7 Energy pricing inColombia andtheregion, 1994 118
V.8 Manufacturing inColombia, 1989-92 122
V.9 Main financial sector operators, June 1995 132Colombia WT/TPR/S/18
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APPENDIX TABLES
Page
AII.1 Policy responsibilities intheareaofservices 147
AII.2 Terms ofparticipation inregional agreements, 1996 150
AV.1 Tariff rates forColombia, byISIC category, 1996 153
AV.2 Tariff escalation andtariff ranges, 1996 157WT/TPR/S/18 Trade Policy Review
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SUMMARY OBSERVATIONS
(1) TheEconomic Environment
1. Since thefirstTrade Policy Review of
Colombia in1990, sound macroeconomic
management hascontributed tothecontinuous
growth oftheeconomy ataverage ratesofover
5percent,although thismayslowto4percent
in1996. Progress hasalsobeenmade, assisted
byaSocial Pact, inreducing inflation fromover
32percentin1990 to19.5percentin1995,
andtheNational Development Planenvisages
areduction to10percentby1998.
2. Theseresultshavebeenachieveddespite
thepotentially destabilizing effects onmoney
supply ofstrong capital inflows. These inflows
werestimulated by,interalia,theliberalization
oftheforeign exchange andinvestment régimes,
increased investment opportunities related to
newoildiscoveries andprivatization, andhigh
interest rates. Theinflows alsoresulted ina
realappreciation ofthecurrency which has
raised concerns about thecompetitiveness of
Colombian exports, butfalling inflation andthe
application ofthecrawling bandexchange rate
system seems tohavereversed theappreciation
in1996. InJuly1996, certain foreign direct
investment requirements wererelaxed.
3. Since1993,Colombia'scurrentaccount
andmerchandise trade balance hasrecorded
adeficit. Faster import growth, mainly from
regional trading partners, stimulated bytrade
liberalization andtherealappreciation ofthe
currency, hascontributed anincreasing share
oftrade inGDP. Although traditional exports
such ascoffee, oilandcoal, continue to
influence thelevelofforeign exchange earnings,
inrecent years export growth haslargely been
based onnon-traditional exports, which rose
from 39percent in1991 toreach some
53percentofthetotal in1995. Given the
capital account situation, thecurrent account
deficit isseenasmanageable.(2) Trade Policy Features andTrends
(i) International economic integration
4. Theimplementation ofthemajor trade
liberalization programme (Apertura), initiated
atthetimeofthefirstTrade Policy Review, has
accelerated Colombia 'sintegration intheworld
economy. Thestructure oftariffs hasbeen
rationalized andtherateslowered significantly
toasimple average of11.5percent. The
coverageofnon-tariffmeasureshasbeenfurther
reduced andnowfocuses onafewsectors
subject tospecific domestic orsub-regional
policyobjectives;balance-of-paymentsmeasures
were eliminated in1992. Apart from afew
anti-dumping cases, nosafeguard actions have
beentaken against imports fromWTOpartners.
5. Although theUnited States isstill
Colombia'smajortradingpartner,importsfrom
preferential suppliers fromtheregion, mainly
Andean Group partners, havegreatly expanded.
IntegrationwiththeAndeanGrouphasadvanced
more thanwithanyother group orcountry in
theregion; theGroup hasadopted acommon
external tariff andbarriers tovirtually all
intra-regional trade have been suppressed.
Colombia isalsopursuing theintensification of
regional trading linksthough itsmembership of
theG3withMexico andVenezuela, andofthe
Association ofCaribbean States, and is
examiningthepossibilityofestablishingaformal
trade agreement withMERCOSUR. Itisalso
actively engaged inthenegotiations toestablish
aFreeTrade AreafortheAmericas.
6. PreferentialaccessofColombianexports
totheregion 'smarkets aswellastothe
United States andtheEuropean Union has
improved. Apart fromordinary GSPtreatment,
since theearly 1990s Colombian exports tothe
United States andtheEUbenefit fromextended
preferential schemes. Thepossible withdrawalColombia WT/TPR/S/18
Page xi
ofATPA preferences bytheUnited States,
related tothedrugs issue, isofconcern to
Colombia.
(ii) Trade policy developments
7. SincethepreviousTradePolicyReview,
Colombia hasadopted anewConstitution,
implemented itsunilateral market opening
programme (Apertura) andexpanded trade
commitments bothatregional andmultilateral
level. Inmodernizing thepolitical system,
greaterregionaldecentralizationwas
introduced.Overalltradepolicyresponsibilities
were entrusted toanewMinistry ofForeign
Trade, andtheCentral Bank (theBank ofthe
Republic) became fullyindependent. Newor
amended legislation wasadopted inareas such
ascustoms valuation, preshipment inspection,
anti-dumping, safeguards and intellectual
property rights tomeetobligations undertaken
inregional ormultilateral fora, but
implementing regulations remain tobe
introduced inanumber ofareas. Colombia has
invoked theextended implementation periods
available fordeveloping countries insuchareas
ascustoms valuation, export subsidies, and
TRIPS.
8. Border protection nowrelies mainly on
tariffs, contained inthefive-tier Common
ExternalTariff(CET)oftheAndeanGroup,with
rates of0,5,10,15and20percent. Within
theCET, tariff escalation still provides
substantially higher effective protection for
processing industries than isevident from
nominalrates.WTObindingcommitmentscover
theentire customs tariff, generally ataceiling
levelof35percent(against theaverage applied
rateof11.5percent), except for"tariffied"
agricultural items. Provisions fortariff
exemptions, forexample onimported inputs,
have been rationalized, eliminating many
general exemptions, butthevalue ofexempt
imports hassignificantly increased.
9. Remaining sector- orproduct-specific
measures affecting imports include variableimport levies, domestic absorption contracts,
differentiallevelsofvalue-addedtaxondomestic
products and imports, reference prices,
restrictive import licensing (maintained mainly
inconnection withhealth, environmental, or
security reasons), certain import prohibitions
andlocalorsub-regional content requirements.
State involvement inproduction andtrading
operations isbeing reduced. Since late1993,
compulsory standards have applied ina
non-discriminatory manner; work onmutual
recognition orharmonization ofstandards has
been initiated with certain countries inthe
region. New government procurement
legislation, concluded in1993, gives equal
treatment tolocalsuppliers andcompanies from
countries granting reciprocal treatment and
eliminated a25percentsurcharge onoffers by
thelatter.
10. Export taxesarelevied oncoffee, crude
oil,gas,coalandferro-nickel. Although no
exportprohibitionsareinforce,exportrestraints
basedoninternationalorbilateralarrangements
continue toaffect coffee andtextiles.
11. Assistance tonon-traditional exports is
stillprovided through thetaxreimbursement
certificatemechanism(CERT); the
SIEX mechanism forduty-free access of
machinery forexport production; anda
transport subsidy covering freight and
transhipment feesfordestinations towhich
Colombia does notmaintain adirect cargo
route. TheuseoftheCERT andSIEX
mechanisms has been reduced and, in
accordance withWTO provisions, Colombia is
toeliminate export subsidies formanufactures
bytheyear 2003 and progressively cut
budgetary outlays forexports ofagricultural
products. Certain Colombian exports (cut
flowers, PVCfilms, disposable syringes and
aluminium hollow sections) have been, or
remainsubjectto,anti-dumpingor
countervailing measures insome foreign
markets.WT/TPR/S/18 Trade Policy Review
Page xii
12. Since 1991, finance, insurance and
promotion facilities forexports have been
extended. Thefree-trade-zone régime hasbeen
revised; theadministration ofthezones has
beenprivatized andtheircoverage expanded to
include tourism-related activities.
13. Support todomestic production,
including small andmedium-size firms, isnow
limited toensuring finance formodernization,
training, technology transfer, development and
environmental projects. Research and
development issupported through fiscal
incentives. Trade-related regional assistance
isextended through theestablishment offree
zones, special customs régimes, preferential
loans andguaranteed intervention prices for
agriculture. Other agricultural assistance
includes various low-cost loanschemes anddebt
relief forsmall producers. Since 1995, the
negotiation ofsectoral "competitiveness
agreements"hasbeenencouraged;theseinvolve
thecreation ofvertically-linked industries and
are, interalia, aimed atstrengthening
co-operation within sectors. Consumer price
controls were eliminated in1991, except for
essential medicines andcertain public services;
however, minimum guaranteed prices existfor
alimited range ofagricultural products and
intervention prices aresetonanadhoc,
temporary basis forregional assistance.
14. Thelegalframework fortheprotection
ofintellectual property rights has been
substantially reinforced through accession to
international treaties andrecent Andean Group
Decisions. Since 1992, legislative and
institutional changes havebeenintroduced in
theareaofcompetition policy; anumber of
investigationsonmergershavebeencarriedout.
Colombia hasalsoincreased itsemphasis on
environmentally sustainable development.(3) Sectoral Policy Developments
Agriculture
15. Theagriculturalsectorenjoysprotection
under theConstitution anditsrevitalization,
partly forsocial reasons, forms partofthe
Government'sdevelopmentplans.Liberalization
under theApertura programme hasledtothe
reduction ofaverage nominal tariff protection
forthesector, asdefined interms ofthe
UruguayRound,toanaverageof10.7percent,
lessthenonethirdofits1989 level, aswellas
therelaxing ofimport restrictions; this,
combined withlowworld commodity prices in
theearly 1990s, thehigh level ofdomestic
lending rates andadverse climatic conditions,
hasledtothedecline indomestic production
ofcertain import-competing crops.
16. Asaresponse tothiscritical situation,
under anewframework lawof1993, arange
ofmeasures hasbeenadopted orstrengthened,
mainlytosupportsmallproducers.
Production-related measures currently include
subsidized loans andlandsales, debtrecovery
orsupport, price support andstabilization
mechanisms, marketing arrangements and
modernization subsidies. Policy guidelines are
focused onways tostimulate theparticipation
oftheprivatesectorinprocessingandmarketing
operations, aswell asthenegotiation of
intra-sectoral competitiveness agreements.
17. Asystem ofvariable import levies was
introduced in1991 and,subsequently, applied
atsub-regional levelunder theAndean Price
BandSystem; however, theauthorities provided
information totheSecretariat toshow thatthe
levies didnotbreach Uruguay Round binding
commitments in1995. Prior import licensing,
conditioned byself-sufficiency principles and
domestic absorption requirements, hasnotyet
been"tariffied". Aprocedure fortheallocation
ofquotas foritems subject totariffquotas under
theUruguay Round Agreement onAgriculture
hasyettobeimplemented.Colombia WT/TPR/S/18
Page xiii
18. Agriculturalexportsabsorbalargepart
oftheCERT outlays. Incompliance with
commitments inthecontext oftheAssociation
ofCoffee Producing Countries, exports ofcoffee
have been voluntarily restrained ontwo
occasions. Prior authorization isrequired for
exports ofriceandsugar. Since 1994, banana
exports totheEUhavebeensubject totariff
quotas; thebasis forallocation ofthisquota
wasmodified in1996.
Manufacturing
19. Since theprevious review, applied tariff
protection forthemanufacturing sector has
beenreduced to11.6percent, lessthanhalf
ofthe1989 level, andimport quotas havebeen
eliminated. Atpresent foodprocessing, textiles,
clothing andfootwear havethehighest average
levels oftariffprotection. Subsidy components
oftheCERT andSIEXschemes which havebeen
notified totheWTO, assist exports. Therecent
riseininterest rates andappreciation ofthe
exchange rateaswellassmuggling ofclothing,
household appliances andcigarettes have
impeded themodernization andgrowth ofthese
manufacturing sectors.
20. Recent policies fortheautomotive
sector, allowing forsome deregulation and
flexibility, havecontributed toimproving trade
andassembly performance. Nevertheless,
substantialprotectionmeasuresremaininforce;
these include apeaktariff of35percentfor
completely-built-up (CBU) motor vehicles,
differential VATrates, import prohibitions on
usedpartsandvehicles,andexportperformance
requirements. Thecombination ofthehighrate
onCBU vehicles andconcessional entry at
3percent onparts and components for
assemblers meeting local-content requirements
implies substantial effective protection for
domestic value added. However, both
local-contentandexport-performance
requirements should beeliminated bytheyear
2000under thetransitional arrangements ofthe
WTO TRIMS Agreement. Since 1995, exports
totheUnitedStatesofunderwearandwoolsuitsforwomen andgirls have been subject to
"special access" restraint agreements, dueto
expire bytheendof1997.
Mining andEnergy
21. Direct Stateinvolvement remains inthe
production ofmining andenergy products;
however, privatization isunder way and
joint-venture orassociation agreements with
private investors arefavoured. Domestic prices
forfuelsandpropanearebasedonworldprices,
andother fuelsaretobeprogressively priced
onthisbasis. Inthemeantime, theprice of
motor fuels remains substantially lower than
international prices, anddespite increases,
energy prices areamong thelowest in
Latin America. Colombia isnotanOPEC
member.
Services
22. Followingrecentliberalization,financial
services,transport,telecommunications,tourism
andretail trade havegrown strongly. Certain
barriers orspecific requirements onforeign
investors orprofessionals remain inforce, for
example inaudiovisual productions and
broadcasting. Progress inreducing State
participation incertain activities hasbeen
achieved through privatization (e.g., portsand
transportation) orthegranting ofconcessions,
asintelecommunications.
23. InJuly1995Colombia 'scommitments
under theGeneral Agreement onTrade in
Services, covering mostmodes ofsupply fora
number ofprofessional services, construction
andengineering, were complemented with
undertakings inthefinancial sector; exemptions
tom.f.n.treatmentrelatetopreviousobligations
vis-à-vis Latin American andother partners.
Initial offers have been submitted inthe
negotiations onmaritime transport andbasic
telecommunications services.WT/TPR/S/18 Trade Policy Review
Page xiv
(4) Trade Policies andForeign Trading
Partners
24. Theautonomousprocessof
market-opening which hascontinued since the
lastreview, hasbeen strengthened bythe
increased security ofaccess resulting from
Colombia 'sextended commitments inthe
Uruguay Round. Theopening oftheeconomy
hascreatednewinvestmentopportunities,whichshould also beencouraged byimproved
macroeconomic stability, solid growth and
ongoing fiscal reforms. Theexpansion of
regional trade growth should continue asnew
agreements areforged, although Colombia is
alsolooking fortrade opportunities beyond the
region. Fullimplementation ofUruguay Round
commitments should further strengthen the
liberalization process and Colombia 's
integration intheworld economy.