Page 1
WorldTrade
Organization
WT/TPR/S/234/Rev.1
15 October 2010
(105320)
Trade Policy Review Body
TRADE POLICY REVIEW
Report by the Secretariat
HONDURAS
Revision
This report, prepared for the Second Trade Policy Review of Honduras, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Honduras on its trade policies and practices.
Any technical questions arising from this report may be addressed to Mr Ricardo Barba (Tel.: 022 739 5088) or Mrs Eugenia Lizano (Tel.: 022 739 6578).
Document WT/TPR/G/234 contains the policy statement submitted by Honduras.
HondurasWT/TPR/S/234/Rev.1
Page 1
CONTENTS
Page
SUMMARYvii
(1)Economic Environmentvii
(2)Trade and Investment Policy Frameworkviii
(3)Measures Affecting Importsviii
(4)Other Measures Affecting Tradeix
(5)Sectoral Policiesx
I.Economic environment1
(1)Overview1
(2)Macroeconomic Development1
(3)Trade Performance and Investment4
(i)Trade in goods and services4
(ii)Foreign direct investment6
(4)Outlook8
II.TRADE AND INVESTMENT REGIME10
(1)General Framework10
(2)Trade Policy Objectives and Formulation11
(3)Trade Laws and Regulations12
(4)International Trade Relations12
(i)World Trade Organization (WTO)12
(ii)Preferential agreements16
(5)Investment Framework19
Annex II.1:Aid for Trade22
III.trade policies by measure28
(1)Introduction28
(i)Registration, documentation and procedures28
(ii)Customs valuation30
(iii)Rules of origin30
(iv)Tariffs31
(v)Tariff quotas37
(vi)Other charges affecting imports37
(vii)Import licensing, permits and other import requirements37
(viii)Import prohibitions40
(ix)Antidumping and countervailing measures40
(x)Safeguard measures42
(xi)Standards and technical regulations43
(xii)Sanitary and phytosanitary measures46
(2)Measures Affecting Exports49
(i)Registration, documentation and procedures49
(ii)Export taxes51
Page
(iii)Prohibitions, licensing and other restrictions51
(iv)Export subsidies and incentives52
(v)Financing, insurance, and guarantees54
(vi)Export promotion and marketing assistance54
(3)Other Measures Affecting Production and Trade55
(i)Incentives55
(ii)Competition policy and price controls56
(iii)Government procurement62
(iv)State trading and State enterprises65
(v)Traderelated investment measures65
(vi)Intellectual property rights65
IV.trade policies by sector70
(1)Agriculture70
(i)Main features70
(ii)Measures affecting imports74
(iii)Measures affecting exports76
(iv)Measures affecting production76
(2)Manufacturing Sector79
(i)Main features79
(ii)Maquila industry82
(3)Services84
(i)Main features84
(ii)Financial services87
(iii)Telecommunications94
(iv)Transport99
REFERENCES107
APPENDIX TABLES109
Page
CHARTS
IV.TRADE POLICIES BY SECTOR
IV.1MFN tariffs applied by Honduras in 2009, by ISIC major groups81
IV.2GDP share of the various service subsectors, 2003 and 200984
IV.3Trade in services, 2003 and 200886
TABLES
I.ECONOMIC ENVIRONMENT
I.1Main economic indicators, 200320092
I.2Balance of payments, 200320094
I.3Foreign direct investment flows, 200420097
II.TRADE AND INVESTMENT REGIME
II.1Main trade legislation, 201012
II.2Principal notifications submitted by Honduras pursuant to the WTO Agreements,
June 201013
II.3WTO dispute settlement cases to which Honduras is or has been a party, June 201014
ANNEX II.1: AID FOR TRADE
II.1SPS issues of interest to Honduran exporters23
II.2AidforTrade flows: CRS proxies25
II.3Support from donors26
III.TRADE POLICIES BY MEASURE
III.1Rules of origin, 201031
III.2Structure of MFN tariffs, 201032
III.3Summary of MFN tariffs, 201033
III.4Products for which the applied tariffs are higher than the bound tariffs, 201034
III.5Summary of preferential tariffs, 201035
III.6Products subject to import licensing, 201039
III.7Subsidies notified to the WTO53
III.8Activities of the CDPC, 2006200957
III.9Threshold values for the application of tendering procedures, 201063
IV.TRADE POLICIES BY SECTOR
IV.1Agriculture, selected indicators, 2003200970
IV.2Summary of agricultural measures73
IV.3Products subject to price bands, 201075
IV.4Main indicators relating to the maquila industry, 2003200982
IV.5Breakdown of gross production value of the maquila industry, 2003200983
IV.6Financial legislation, 200987
IV.7Trends in the commercial banking sector's net loan portfolio and
deposits received, 2003201091
IV.8Total premiums by segment, 2003200993
IV.9Insurance market, 2003200994
Page
IV.10Main legislation on telecommunications, 201095
IV.11Requirements for the provision of telecommunications services96
IV.12Telecommunications indicators, 2003200998
IV.13General freight movements, 20072008100
APPENDIX TABLES
I.ECONOMIC ENVIRONMENT
AI.1General merchandise exports and reexports (f.o.b.) by product, 20032009111
AI.2General merchandise imports (c.i.f.) by product, 20032009113
AI.3General merchandise exports and reexports (f.o.b.) by trading partner, 20032009 116
AI.4General merchandise imports (c.i.f.) by trading partner, 20032009117
II.TRADE AND INVESTMENT REGIME
AII.1Description of preferential trade agreements involving Honduras, 2010118
III.TRADE POLICIES BY MEASURE
AIII.1Main taxes on goods and services which may be applied to imports, October 2009121
IV.TRADE POLICIES BY SECTOR
AIV.1Agricultural support programmes, 2010124
AIV.2Summary of GATS commitments128
AIV.3Special domestic financial system requirements130
HondurasWT/TPR/S/234/Rev.1Page 1
SUMMARY
- The Honduran trade regime is relatively open, with an average tariff of 6percent in 2010, minimal use of nontariff barriers and an absence of contingency measures. Moreover, the procedures for drafting technical regulations and sanitary and phytosanitary measures have been much simplified in recent years. Since its first Trade Policy Review in 2003, Honduras has also made progress in other areas that affect production and trade; for example, it has adopted legislation on competition policy establishing the Commission for the Defence and Promotion of Competition, and has modernized the government procurement system. During the period under review Honduras concluded new preferential trade agreements, notably the Dominican RepublicCentral AmericaUnited States Free Trade Agreement (DRCAFTA), and the further integration of the Central American Common Market (CACM) continues to be its great priority. Honduras has maintained its traditional strategy of granting refunds to exporters, as well as tax concessions via free zones aimed at developing the manufacturing sector.
(1)Economic Environment
- Recent macroeconomic results have been positive for Honduras: the average annual rate of growth of real GDP was 4.5percent between 2003 and 2009 (higher than the 3.2 per cent recorded in 1992-2001); the average annual rate of inflation was 7 per cent; the fiscal deficit fell from 5 per cent of GDP in 2003 to 3 per cent in 2009; and the total external debt balance decreased from 71percent of GDP to 23 per cent. Despite these positive results, about one third of the population still live below the poverty threshold, and the economy continues to be fragile and exposed to external shocks. RealGDP is estimated to have fallen by 2.1per cent in 2009, mainly due to the difficult internal political situation and the global economic crisis, which substantially reduced exports and remittances from Honduran workers (which accounted for about 17 per cent of GDP in 2009).
- The Honduran economy is heavily dependent on international trade. The ratio of trade (exports and imports) to GDP is among the highest in the Central American region, with an annual average of 133 per cent during 20062008. The country's merchandise trade deficit quadrupled between 2003 and 2008 due, mainly because the nominal exchange rate remained fixed as from October 2005, which caused the real exchange rate to appreciate thereafter with a consequent loss of export competitiveness. The external current account deficit (as a percentage of GDP) rose from 7 per cent in 2003 to 13 per cent in 2008; it is estimated that this deficit fell to 4 per cent in 2009. To a large extent, the current account deficit has been financed by substantial inflows of remittances and foreign direct investment.
- Honduran external trade is characterized by limited diversification, in terms of products and trading partners. The country's main export products are those of the maquila industry, which accounted for 55percent of total merchandise exports in 2009, followed by exports of general goods (44percent), and other products (1 per cent). Almost 90 per cent of maquila exports are textile products and these also account for about 80per cent of total maquila industry imports. The United States is the destination for almost 80per cent of Honduran maquila industry exports, and the origin of 80 per cent of imports.
- The maquila industry excluded, the main exports are still coffee, bananas, and crustaceans; agricultural products account for about two thirds of general goods exports. Nearly three quarters of the country's total imports (excluding maquila) consist of manufactured products, particularly machinery and transport equipment. Since the entry into force of the DRCAFTA, the United States has consolidated its position as the main market for Honduran exports, absorbing about 40percent of general goods exports. Due to the intensification of the CACM's integration efforts, since 2007 El Salvador, Guatemala, Nicaragua, and Costa Rica have together ranked second as a destination for Honduran exports, relegating the European market to thirdplace. The United States has also consolidated its position as the main source of imports of general goods into Honduras, with more than one third of the total.
- Honduras is a net importer of services, with an average annual deficit of about US$240 million during 20032009. Total income from services (mainly travel services) increased from US$591 million in 2003 to US$896 million in 2009, while total expenditure on services (largely transport and travel services) rose from US$753 million to over US$1.089 billion.
(2)Trade and Investment Policy Framework
- Honduras is a founding Member of the WTO and attaches great importance to its participation in the multilateral trading system. It regards this system as a fundamental guarantee of nondiscrimination and the nonutilization of unilateral trade measures. Honduras grants at least MFN treatment to all WTO Members. It has participated actively in the Doha Development Agenda (DDA), making proposals both individually and collectively with other Members. Honduran interest in the DDA is focused on issues relating to agriculture.
- Honduras has accepted the Fifth Protocol to the General Agreement on Trade in Services (GATS). Although Honduras did not participate in the negotiations on basic telecommunications and has not signed the Fourth Protocol to the GATS, it adhered to the Basic Telecommunications Reference Paper in 2005 and unilaterally submitted new specific commitments in that subsector. None of its trade practices has been challenged under the WTO's dispute settlement mechanism. On the other hand, Honduras has been a complainant in six cases, two of them initiated during the review period, and has participated in other cases as a third party.
- Preferential agreements have been converted into increasingly important elements of Honduran trade liberalization. In addition to participating in the CACM, Honduras hasfreetrade agreements with Chile, Colombia, United States, Mexico, Panama, Dominican Republic, and Chinese Taipei. TheDRCAFTA entered into force during the review period, as did the agreements with Colombia, Panama, and Chinese Taipei. Moreover, in May 2010 Honduras and the other members of the CACM completed negotiations on the Association Agreement with the European Union. Honduras has also signed agreements with countries that participate in the Latin American Integration Association (LAIA), notably a Partial Scope Agreement with Venezuela, and together with the other members of the CACM is negotiating freetrade agreements with Canada and CARICOM.
- Honduran investment legislation guarantees national treatment for foreign investors; however, in order to invest in some sectors prior authorization is required from the Government. Prior authorization is also needed, for reasons of public interest, for foreign investment in agricultural and agroindustrial activity that exceeds certain limits, in financial services and insurance, and in educational services provided by the private sector. Honduras has signed several bilateral agreements on the promotion and reciprocal protection of investments; it has not signed any doubletaxation agreements.
(3)Measures Affecting Imports
- Since its last Review, Honduras has not made any significant changes in its import regime. Honduran customs procedures are governed by the Central American Customs Code, its regulations, and the National Customs Law. Honduras has adopted measures to modernize customs through the introduction of authorized economic operators (AEO) and the adoption of a new automated system for the administration of customs procedures, which has made it possible not only to reduce clearance times but also to increase revenue. Honduras reserved the right to apply minimum values to imports of several categories of goods until the WTO exemptions expired in 2003. Honduras uses reference prices where there is reasonable doubt concerning the value declared.
- The average MFN rate applied was 6per cent in 2009, almost the same as that recorded in the last Honduran Review (6.1percent in 2003). Agricultural products (WTOdefinition) were subject to an average tariff of 11.1 per cent, while the average tariff for nonagricultural products was 5.1 per cent. The price band system continues to be applied for certain staple grains. The tariff rates range from 0 to 164 per cent, but most are less than 40per cent. All tariffs are bound: about 85per cent of all tariff lines are bound at 35per cent, with less than 1 per cent at higher levels and the rest at levels below 35 per cent. The Secretariat has identified seven tariff lines on which the applied rate is higher than the corresponding bound rate.
- The Central American Regulations on Unfair Trade Practices and on Safeguard Measures, adopted by Honduras in 2007, constitute the relevant legal framework for these measures. Honduras did not apply antidumping or countervailing duties or safeguard measures during the review period.
- Since its last Review, Honduras has taken steps to make the formulation and application of technical regulations and sanitary and phytosanitary measures more transparent. Honduras guarantees the application of sanitary regimes and technical regulations that do not constitute technical barriers to trade and are intended to ensure the quality and safety of products and services, and has continued with the process of harmonization of sanitary and phytosanitary measures at Central American level.
(4)Other Measures Affecting Trade
- Honduras has notified the WTO of three subsidy programmes under which it grants tariff and tax concessions. It may maintain these programmes until its per capita gross national product (GNP) reaches US$1,000 in constant 1990 dollars for threeconsecutive years. Exporters are still entitled to refunds under the drawback system.
- Honduras has notified the WTO that between 2004 and 2008 there were no subsidies for exports of agricultural products. However, one enterprise continues to benefit from the (now suspended) Agricultural Export Zones (ZADE) regime, established in 2001, and exports 100 per cent of its production. The ZADE are intended to promote exclusively exportoriented agricultural production, through the establishment of "agricultural export enterprises". The enterprises included in this regime are exempt from the payment of all customs duties and other internal taxes on the goods they import and/or export; these enterprises are also exempt from the payment of income tax. Honduras does not tax exports; coffee is subject to an export levy.
- In addition to incentives for promoting exports, Honduras has support programmes for exporters. These are intended to improve competitiveness and access to international marketsand are aimed primarily at agroindustrial products. Despite the emphasis placed by Honduras on promoting exports and supporting the small exporter, the country has no official export financing or insurance programmes.
- A major change in Honduran trade policy since its last Review in 2003 has been the adoption of legislation on competition policy and the establishment of institutions for its implementation. This is an important initiative since there is a high degree of concentration in the Honduran market. The legal framework for government procurement has not changed substantially since 2003 and the same procurement procedures are still in place. The Honduran government procurement system has mechanisms designed to favour domestic enterprises and goods.
- Mainly due to the entry into force of the DRCAFTA, the Honduran legal framework for intellectual property rights has been amended, primarily with a view to providing greater protection. Honduras has changed the terms of protection while modernizing the institutions responsible for administering intellectual property law and training their staff, with a view to facilitating and streamlining the registration procedure.
(5)Sectoral Policies
- The agriculture sector's share of GDPdeclined during the review period and its growth was erratic. Nevertheless, it continues to be of great importance for the development of the Honduran economy, absorbing about one third of the economically active population and generating more than 50percent of the foreign currency earned from merchandise exports, maquila excluded. Honduras therefore considers it necessary to maintain protection and offers this sector greater tariff protection than other sectors. Ithas retained the price band system and the "absorption agreements", which permit the importation of certain grains with tariff preferences if the processors also purchase a specific percentage of the national production of these grains. The country has a number of agricultural support programmes that have been notified to the WTO. Despite the measures to promote the sector, it continues to be characterized by low productivity and modest rates of growth.
- The manufacturing sector's share of GDP, like that of agriculture, declined during the review period. The sector's tariff protection is below the average applied
MFNrate. Honduras also maintains the (abovementioned) special export regimes (maquila) and support for export marketing to promote the development of the manufacturing sector. - In 2009, the services sector contributed about 53 per cent of GDP(48.1per cent in 2003). The main subsectors in terms of their contribution to total value added, and in descending order of importance, were financial services, trade, and communications. The composition of the sector has changed since 2003 when the main subsectors were trade and financial services. Honduras is a net importer of services. Exports of telecommunications services increased as a result of the entry into the domestic market of a fourth mobile telephony operator at the end of 2008.
- Honduras has made limited commitments in services. Its Schedule of Specific Commitments under the GATSincludes commitments in only four of the twelve categories. Honduras made specific commitments in business services, financial services, travel and tourism services, and transport services. In 2005, Honduras made commitments with respect to communications services under Article XXI of the GATS. Honduras' commitments do not reflect the present situation, which is more liberal. Foreign capital plays an important part in the Honduran financial sector. Moreover, in the telecommunications sector, mobile telephony is mostly controlled by foreign enterprises. For fixed telephony, there continues to be a single State operator, which has granted concessions to suboperators for domestic telephony but maintains exclusive control over international telephony.