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Costa Rica And Panama Sign FTA

by Mike Godfrey, Tax-News.com, Washington

08 August 2007


Costa Rican President Oscar Arias was yesterday scheduled to sign a free trade agreement with Panama which will reduce tariffs on most industrial and agricultural goods traded between the two countries over the next decade.

A.M. Costa Rica reported on Tuesday that Arias would sign the agreement in a ceremony to be held at the Hotel Real Intercontinental in Escazú late on Tuesday afternoon local time. The signing signals the formal conclusion to negotiations which ended in agreement between the two governments in June 2007. However, the treaty awaits ratification by the Costa Rican and Panamanian legislatures before it can enter into effect.

The agreement will result in the removal of tariffs on 93% of industrial and agroindustrial products, although barriers on certain industrial goods are not scheduled to phase out completely for eleven years, while some agricultural products will have schedules for reduction of duties as long as 16 years.

The agreement also opens up Costa Rica's monopolistic telecoms market to Panamanian operators, although the the Instituto Costarricence de Electricidad will be able to offer services in Panama.

While not nearly as controversial as the much-debated Central American and Dominican Republic Free Trade Agreement (CAFTA-DR) with the United States, the FTA with Panama nonetheless sparked demonstrations from anti-trade agreement protestors in Costa Rica.

Costa Rica is still the only signatory country not to have fully ratified CAFTA-DR, with the country seemingly split down the middle on the merits of the trade deal. A referendum on whether the treaty should be ratified is due in October, but the outcome is by no means certain.

Meanwhile, Panama is keen to open up its economy to more competition in goods. While not a party to CAFTA-DR, last month the Panamanian legislature ratified a separate bilateral free trade deal with the US. Governmental signing of the agreement took place two days before the expiration of President Bush's authority for "fast track" trade promotion at the end of June, meaning that the Congress must approve or reject the agreement without making changes. However, there is little indication yet as to when the US Congress will vote on the deal.


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