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In response to Panama’s ban on Milk and more, Costa Rica calls for trade dispute consultations

Updated: Jan 23, 2021

This week, Costa Rica—invoking the World Trade Organization (WTO)’s Understanding on Rules and Procedures Governing the Settlement of Disputes (commonly dubbed “DSU”)—has called for trade dispute consultations with its Central American neighbor Panama which it says has opted to “restrict or prohibit” Costa Rican milk and other food imports.

According to Costa Rica’s request for consultation (RfC), Panama, without giving prior notice, communicated last July its refusal to renew “the sanitary approval that allowed various Costa Rican plants to export” milk and an assortment of meat products. Five months earlier, the Panamanian authorities had likewise informed of their decision to no longer accept Costa Rican strawberries based on phytosanitary considerations. In January and October 2019, similar phytosanitary citations were employed against the importation of fresh pineapples, plantains and bananas originating from Costa Rica.

These matters along with those raised last year represent the primary issues to be addressed in the requested dispute consultations.

Within the WTO framework and, specifically, Article 4 of the DSU, consultations are the first step in resolving trade disputes. The agreement specifies that each “Member undertakes to accord sympathetic consideration to and afford adequate opportunity for consultation regarding any representation made by another Member concerning measures affecting the operation of any covered agreement taken within the territory of the former.”

In accordance with the DSU agreement, Panama has 10 days (unless the parties mutually agree otherwise) within which to respond to the RfC, and is expected to enter into “good faith” consultations within 30 days of having received the request. If it fails to do so, Costa Rica would be within its rights to write to the Chairman of the WTO’s Dispute Settlement Body to request the establishment of a panel to adjudicate the matter.

The trade dispute is set in a backdrop of increased protectionists sentiments. For instance, shortly after his May 2019 victory, Panamanian President Laurentino Cortizo had expressed his desire to review trade agreements with the United States and Central American economies. Costa Rica, for its part, was recently in the news for having raised tariffs on Brazilian sugar.

While some restrictions date back to 2019, the 2020 economic backdrop cannot be overlooked. Unemployment in Costa Rica and Panama is estimated by the International Monetary Fund (IMF) to have climbed to 22% and 10.9%, respectively. Total exports of goods and services have also declined sharply, with Costa Rica seeing a decline of about 16% and Panama of more than 26%. It is no secret that during times of economic fallouts, the political pressure towards protectionism can heighten.

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