Discussant at the 5th Trade Policy Review of Costa Rica, Ambassador Mikael Anzén.
Vice minister, excellencies, ladies and gentlemen, colleges
It’s a great honor for me to be your discussant here today at the 5th Trade Policy Review of Costa Rica.
I would also like to welcome the distinguished delegation from San José, vice minister of Foreign Trade, Mr Duayner Salas Chaverri, and Costa Rica’s new ambassador to the WTO H. E. Gloria Abraham Peralata.
I like to thank the Chairperson H E Teehankee for inviting me as a discussant to this review, as such I will try not to repeat what we just heard.
To start off, being in Switzerland I couldn’t refrain from thinking of the saying that Costa Rica is sometimes referred to as “the Switzerland of Latin America”. I had to look that up and I found a journalist that has gone to the bottom with that saying. He noted rightly that there were a few similar points: Both countries can boast high life expectancy of their inhabitants, receive the vast majority of their electric power from hydroelectric sources, tourism sector is important, the area of the countries are roughly the same size: (51,000 and 41,000 square kilometers, respectively), access to universal medical care and maintain neutrality when it comes to international disputes.
But as a Swede I would like to spell out a word of caution, Sweden and Switzerland are often mixed up, so I hope we will not start to mix up Costa Rica and Sweden now.
TPR is part of WTO’s important transparency exercise, and this is a good moment to dig into more details on Costa Rica’s economy, trade policy and trade regime.
Going through the different reports, questions and talking to colleagues I realize that we talk about a rather well established and well-runned economy and trade nation in Central America. As such Costa Rica also aims to join the OECD.
Let me, Mr. chairperson pin-point a couple of observations on my behalf to set the scene for the further discussion.
On the Economic environment, Costa Rica has shown a positive development during the review period: GDP grew at a real average annual rate at 3,5%, which today is rather good number world-wide. But unemployment is still rather high, about 10%. Among the recent legislative changes to boot and stabilize the economy there is a new VAT law that entered into force 1 July, with a general rate of 13 %. (The Swedish VAT is 25%).
The most dynamic sector in the reviewed period was the financial and insurance service sector that grew at an average annual rate of 9,2 % (which is a quite remarkably number).
Concerning the Trade and investment regime, and coming from a trade dependent country like Sweden, – I note from my perspective many positive measures and incentives to promote an open and rule-based trade regime by Costa Rica. The country joined GATT in November 1990 and consequently is a WTO member since its start in 1995. As a WTO member Costa Rica has shown very supportive to the multilateral trading system. As already mentioned by the Chair, Costa Rica has ratified the Trade Facilitation Agreement.
Since the Buenos Aires ministerial meeting Costa Rica also joined the plurilateral initiatives on e-commerce, investment facilitation and MESMS. The country is a good friend: being a Friend of the system, Friend of e-commerce for developing countries and Friend of Anti-dumping Negotiations.
Some core numbers from the report: average tariff rate for industrial products is 5,6 % and 14,1 % for agricultural products, that makes a total tariff average of 7,2 %. We find tariff peaks at 1,5 % of the tariff lines. Among them: diary products 53,8 %, animal products 28,8 %, sugar 17,4% and clothing 14,8%. (This is a point where Costa Rica is not at all comparable to Switzerland, where tariff-peaks are much higher for diary [188 %] and animal products [127 %]).
Main markets for exports are the United States, the EU and the neighboring countries in the CACM (Guatemala, Nicaragua, Honduras and El Salvador). For imports we see the same countries, but we can also add China and Mexico. Costa Rican imports are mostly electric machines and apparatus, chemicals and mineral products. Exports are mainly precision instruments fruits and vegetables, tobacco and beverages. Much of the high-tech export-oriented sector are undertaken in the free trade zones, not subject to local taxes.
Overall there is a structural current account deficit of balance of payments, but a situation that is improving thanks to a net surplus in services exports.
Say Costa Rica and I think of a country for my next holiday trip. The tourism sector is also dynamic ones of the Costa Rican economy and is a locomotive for attracting foreign currency. The sector accounted for 6.3% of GDP and 13.2% of employment.
Outside the WTO I note that Costa Rica is also an active trade negotiating partner and has free trade agreements with the EFTA-countries, Colombia, the EU, Mexico, Peru and Singapore.
Some challenges ahead:
Overall in the economy there are signs of weakening economic activity with a lowing GDP growth as consequence. A weakening economy will also affect the trade. Combined with the fact that Costa Rica is still heavily dependent on one single trading partner. A strategy to lowering that risk would be to further expand the geographical base for trade.
One specific characteristic of Costa Rica is that there is no army – and consequently no public spending for military purposes. Although, the Public Sector remains significant in the economy and there are possible efficiency gains to be worked upon. One concrete example is government procurement procedures that could be more streamlined and a help doing it would be to join the Government Procurement Agreement.
Like Switzerland Costa Rica is mountainous, unlike Switzerland the road network and especially the rail road network is limited. In the Secretariat report there is one example of the need of widening the road between San José and the country's second largest port Caldera, but the approval has been pending for five years…
Most of the trade (81% in volume) is done by sea, but there is room for improvements for multi-modal transports.
Mr. Chairperson, I think I will stop here for the moment in order to let other delegations put their questions and reflections on the state of affairs in Costa Rica.
I think you will give me the floor again on Friday to comment upon what we will hear.
I thank you very much for your attention!