WTO Publishes Trade Policy Review Of Guatemala

by Mike Godfrey, Tax-News.com, Washington

05 February 2009

The World Trade Organization on Wednesday published the conclusions of its second Trade Policy Review of Guatemala.

The WTO observed that:

"Since its last review in 2002, Guatemala has continued to place trade liberalization at the core of its development strategy, taking measures such as the streamlining of customs procedures, lowering tariffs, and adopting new government procurement and intellectual property rights legislation; these measures have helped expand trade and investment, according to a WTO Secretariat report on the trade policies and practices of Guatemala."

It further suggested that:

"Throughout the period under review, Guatemala has maintained macroeconomic stability and growth, even though it is forecast that a slow-down in growth will be seen to have occurred in 2008. Economic expansion needs to be sustained and increased in order to achieve the improvements in living standards Guatemala seeks and this in turn means keeping up the ongoing efforts designed to achieve greater efficiency in the domestic market, including stronger competition policies, as well as the regulatory framework, in sectors such as telecommunications, financial services and maritime transport."

"Guatemala’s efficiency and fiscal situation could also be improved by making better use of economic policies that do not have a distorting effect and do not favour some groups to the detriment of others."

With regard to the issue of market access for goods, the WTO review stated that:

"Guatemala’s trade regime is essentially an open one and market access improved during the period under review. The average rate of MFN (most favoured nation) duty applied fell from 7.0% in 2001 to 5.9% in 2008. The average duty on agricultural products (9.9%) is still relatively higher than that on other products (5.3%). Guatemala bound all its tariffs at an average of 42.7%."

In this respect, the WTO suggested, the predictability of Guatemala’s trade regime could be improved by lowering bound rates to close the gap between bound and applied tariffs.

The Organization noted that Guatemala has continued with the process of reforming its customs, adopting the new Central American regulations on customs procedures and valuation and taking steps to improve the functioning of its customs services. During the period under review, Guatemala ceased to apply minimum customs values when the waiver granted by the WTO expired.

Commenting on measures in place in the country affecting exports, the WTO revealed that:

"Guatemala has notified to the WTO three fiscal concession regimes as including export subsidies. These regimes concern the maquila industry, free zones, and the free trade and industrial zone. Guatemala has undertaken to phase out these subsidies before the end of 2015. It considers that the programmes notified have had a positive impact on the country, generating close to 40 per cent of its exports of goods."

"There is, however, no cost-benefit analysis that takes into account the fiscal burden and the distortions which these programmes may cause. It would therefore be useful to undertake such an analysis with a view to developing a concrete strategy that would allow the costs of transition to a subsidy-free regime to be kept to a minimum."

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