Inside U.S. Trade
January 25, 2004
_____
U.S., Costa Rica Strike Deal In FTA Negotiations
The U.S. and Costa Rica today (Jan. 25) announced that they have
concluded talks that would bring Costa Rica into a Central American
Free
Trade Agreement (CAFTA) that was concluded late last year between the
U.S. and four other Central American countries. An agreement was
reached
after negotiators were able to resolve contentious fights over
agricultural and services market access issues, although Costa Rica
was
left empty handed on textiles after its push to secure more flexible
market access provisions were rebuffed, and the U.S. secured less
favorable market openings in Costa Rica's insurance market than it was
seeking.
On textiles, a senior U.S. trade official said Costa Rica's demands
for
tariff-preference levels (TPL) for wool and cotton had been rejected.
The official said market access rules for Costa Rica had to fit within
the "overall textile framework" created in last month's agreement, in
which only Nicaragua was given a TPL that U.S. officials defended as
necessary given the lower level of development in that country
compared
to the other FTA signatories.
TPLs for wool and cotton would have allowed Costa Rica to incorporate
a
certain amount of third-country wool and cotton into apparel and have
that apparel receive the benefits of the FTA.
In the fight over market access for U.S. service providers, Costa Rica
appears to have fought off demands from the U.S. to increase the pace
at
which it would liberalize its state monopoly on insurance. The U.S.
official said the deal would open some types of insurance to U.S.
firms
immediately, but others will be opened much more gradually. The
official
said U.S. firms would first be allowed to access Costa Rica's market
from the U.S., and then later be allowed to establish themselves in
that
country.
A press <http://www.insidetrade.com/secure/pdf5/wto2004_0428.pdf>
release from the U.S. Trade Representative's Office notes that the
"vast
majority" of Costa Rica's market will be open by January 1, 2008 with
the "full opening of the sector by January 1, 2011."
Costa Rica had been pressing for a five-year grace period before U.S.
firms could sell life insurance and had asked to delay market openings
for property and casualty insurance, such as fire insurance, until
2012.
U.S. industry had been pressing for transition periods no longer than
three years (Inside U.S. Trade, Jan. 23, p. 1).
In another contentious services area, Costa Rica agreed to liberalize
its state telecom monopoly in three sectors - private network
services,
Internet services, and wireless services - to U.S. firms. However,
those
openings will be delayed for private network services and Internet
services until a regulatory framework is created in Costa Rica by
2006.
Wireless services will then be liberalized the following year.
The structure of this deal is little changed from the one on the table
in December when Costa Rica left the negotiations (Inside U.S. Trade,
Dec. 19, p. 1).
Costa Rica had long maintained that the degree to which it could
liberalize its state insurance and telecommunications monopolies
largely
depended on what the U.S. would offer on textiles and agriculture.
In agriculture, the U.S. agreed to Costa Rican demands to exclude U.S.
exports of potatoes and onions from tariff elimination. Instead, these
products will be subjected to a tariff-rate quota that expands
annually
but does so without any tariff reductions, according to a senior U.S.
trade official.
An identical framework was included in the deal signed last month
between the U.S., El Salvador, Honduras, Guatemala and Nicaragua for
exports of U.S. white corn, a commodity deemed extremely sensitive by
the Central Americans.
However, Costa Rica was unable to secure a similar arrangement for
rice,
a product the Costa Ricans had considered most sensitive. The deal
struck today will result in eventual tariff-elimination on U.S. rice
exports but tariff cuts will be spread over a 20-year period and will
be
done in a non-linear fashion, a U.S. official said. Over that 20-year
period, a quota for two types of U.S. rice will expand annually, he
said.
The U.S. had previously told Costa Rica that a deal to exclude some
products from tariff elimination was acceptable but that rice could
not
be one of those products as it is of significant export interest to
the
U.S.
The principle of excluding products from tariff elimination was
enshrined in the agreement struck last month at the behest of the
U.S.,
which offered to exclude from tariff elimination a product of interest
from Central America in return for the Central Americans agreeing to
drop their demands for tariff reductions for sugar and instead accept
expanded TRQ access that increases annually.
On sugar, Costa Rica will receive 11,000 tons of additional market
access for raw sugar, the U.S. official said. That amount is on top of
the 15,796 tons of access Costa Rica is allotted under the Uruguay
Round
TRQ. Costa Rica has also been given 2,000 tons of access for organic
sugar, a niche market Costa Rica had been keen on accessing in the
U.S.,
he said.
The talks between the U.S. and Costa Rica were the second held this
month following the December stalemate. The most recent and final
round
of negotiations began on Jan. 19 and ran well beyond the Jan. 23
deadline by which the two sides had been hoping to conclude.
A senior U.S. official said work on the overall CAFTA could continue
until the end of March on a number of services related issues.
Countries
still have to agree on the non-confirming measures, or exceptions,
they
will list in their services annexes that demarcate areas where
countries
exclude foreign competition within sectors they have agreed to
liberalize.
A deadline for the end of March has been set for the completion of
this
"list it or lose it" process, she said. However, that deadline would
not
delay possible congressional action on the CAFTA given that USTR has
yet
to notify Congress of its intent to sign the deal, said the official.
Once this notification happens, 90 days must pass before the agreement
can be signed.
Another U.S. official declined to speculate on when USTR might notify
its intent to sign the agreement, and did not comment on when language
implementing the agreement could be put to a vote. He said it is
"premature to speculate" on such issues given the just concluded talks
with Costa Rica and the recently started market access talks with the
Dominican Republic on docking that country into the CAFTA. The
administration is hoping to conclude those talks in March.
USTR, however, is working to make the CAFTA text public by the end of
this week, he said.
