Caribbean & Central America - March 2017 (ISSN 1741-4458)

Panamanian and Colombian private sector representatives recently called on their respective governments, led by Presidents Juan Carlos Varela and Juan Manuel Santos, to resolve the bilateral trade dispute which has been ongoing since 2013. This stems from a tariff levied by President Santos on textiles, clothes, and shoes from Panama’s Colón Free Trade Zone (FTZ) which at the time he claimed was necessary to combat money laundering.

The call by the private sector representatives from both countries on 22 February came 13 days after the World Trade Organization (WTO) revealed that the Varela government had requested US$210m in trade sanctions against Colombia. In June 2016, the WTO found that the tariffs imposed by Colombia were higher than allowed by WTO rules and were not necessary to combat money laundering. Issued in response to a complaint filed by Panama back in June 2013, the WTO ruling gave Colombia until January 2017 to make the adjustments. The dispute concerns a compound tariff first imposed by Colombia in January 2013 on imports of textiles, apparel, and footwear, consisting of a 10% ad valorem component and a specific component, which varies according to the import value and customs classification of the merchandise.

In November 2016, Colombia adopted two decrees that affect the tariff and customs regime for the importation of textiles and footwear. However, a WTO press release dated 9 February notes that Panama’s latest complaint claims that far from bringing the measure into conformity with Colombia's WTO obligations, the changes perpetuate the nullification and impairment of benefits accruing to Panama directly or indirectly under the GATT 1994 – a reference to the General Agreement on Tariffs and Trade, a founding agreement of the WTO.

The announcement by the WTO regarding Panama’s request for sanctions came the same day that Panama’s minister for trade & industry (Mici) Augusto Arosemena met his Colombian counterpart, María Claudia Lacouture, in the Colombian city of Cartagena de Indias, in order to discuss the trade dispute. The two agreed to implement an action plan that would lead to a solution of the dispute, promising to create and engage in a constant dialogue, in order to overcome difficulties and “strengthen the commercial relationship” between the two countries, as they have been “historically important partners”.

Yet indicative of Panama’s less than conciliatory stance, on 22 February the executive’s cabinet council approved an increase on tariffs on various products such as coffee, wood, paper towels, and aluminium among other things from countries with which Panama does not have a free trade agreement (FTA) in place. The measures – which Areosemena said were in Panama’s best interests – will take effect as of 15 March 2017. Colombia and Panama signed an FTA in September 2013 but it has yet to be ratified by the legislatures.

• Colón Free Trade Zone

A report published by Panama’s national statistics institute (INEC) on 15 February revealed that total trade in the Colón Free Trade Zone reached US$19.66bn in 2016, down 9.6% on the previous year. This follows declines of 9.5% in 2015/2014, 12.4% in 2014/2013, and 10.2% in 2013/2012.