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World Trade Indicators 2009/10
Costa Rica Trade Brief
Trade Policy External Environment
Overall, Costa Rica has been improving access to its According to the Market Access TTRI3 (including
market (particularly with respect to goods) since 1995, preferences), on which it is ranked 45th (out of 125),
when it joined the Central American Common Market Costa Rica’s exports enjoy relatively low tariffs barriers
and agreed to standardize its import tariffs.1 Its highly (1.8 percent), especially when compared to its LAC
open trade policy is reflected in the latest MFN Tariff and upper-middle-income comparators (2.0 and 2.7
Trade Restrictiveness Index (TTRI)2, on which it is percent, respectively). The 2008 rest of the world
ranked 16th out of 125 countries and scores 3.5 simple average applied tariff (including preferences) on
percent. When compared to the trade regime of an Costa Rica’s exports is 9.8 percent, compared to 5.6
average Latin America and Caribbean (LAC) or upper- percent in 2007. But, when the country’s trade flows
middle-income country (with TTRIs of 7.8 and 6.2 are taken into account, the tariff is 1.4 percent, with
percent, respectively), Costa Rica’s trade regime is very agricultural exports facing 3.6 percent and
liberal. Although its tariffs on agricultural products are manufactured exports 0.5 percent tariffs.
much higher than those in manufactured goods (9.4
and 3.0 percent, respectively), they are still lower than The Dominican Republic-Central America-United States
the regional or income group averages. The 2008 Free Trade Agreement (CAFTA), which was signed in
simple average MFN applied tariff is low at 6.4 2004, went into effect for Costa Rica at the start of
percent, as is the simple average applied tariff 2009.4 In addition, negotiations with China on a
including preferences. Costa Rica decreased its comprehensive FTA began in November 2008 on the
maximum tariff (excluding alcohol and tobacco) to occasion of the Chinese President’s visit to Costa
93.5 percent in 2008 from 112.5 percent the year Rica.5 Finally, negotiations with Singapore on a
before. The trade policy space, as measured by the comprehensive FTA began in March 2009. The first
wedge between bound and applied tariffs (the round of negotiations took place in April and the
overhang), fell slightly to 36.4 percent in 2007. second round in August 2009. The real effective
Regarding the extent of its commitment to trade exchange rate of the Costa Rican currency, the colón,
liberalization in services, Costa Rica ranked 138th out appreciated 5.3 percent over the course of 2008,
of 148 countries according to the GATS Commitment making exporters less competitive abroad.
Index. Restrictions remain in several services sectors
as the government still retains monopoly rights on Behind the Border Constraints
insurance and energy distribution. However the
passage of framework legislation over the course of Costa Rica ranked 121st in the Ease of Doing Business
2008 to permit the liberalization of telecom and index in 2009, which compares the business
insurance markets represents a major step forward. environment of 183 countries. Trade facilitation, port
inefficiency, limited capacity, and poor-quality
roadways are significant constraints to the country’s
trade activity. The Logistics Performance Index, a
measure of the ease of trade facilitation, rates Costa
Rica at 2.55 on a scale from 1 to 5 with 5 being the
Unless otherwise indicated, all data are as of August 2009 highest performance. This is compared with 2.57 for
and are drawn from the World Trade Indicators 2009/10 the LAC region and 2.85 for countries in the upper-
Database. The database, Country Trade Briefs and middle-income group. It ranked 72nd in the world and
Trade-at-a-Glance Tables, are available at 15th in the LAC region (with Chile leading the regional
http://www.worldbank .org/wti. group). The area in which it performed the best was
If using information from this brief, please provide the domestic transportation costs and it needs most
following source citation: World Bank. 2010. ―Costa Rica improvement in increasing the quality of transport,
Trade Brief.‖ World Trade Indicators 2009/10: Country Trade information technology (IT) infrastructure and logistic
Briefs. Washington, DC: World Bank. Available at competence. In this context, in July 2009, the World
http://www.worldbank.org/wti. Bank proposed three general actions to improve
World Trade Indicators 2009/10 Costa Rica Trade Brief
logistics performance in response to the factors that constant. It is weighted by import values and import
are causing the main problems.6 These included demand elasticities of trading partners.
reorganizing ports, improving private sector 4. Office of the United States Trade Representative,
involvement, and strengthening public institutions. 2009.
5. Council on Hemispheric Affairs, 2009.
6. World Bank, 2009a; 2009b.
Trade Outcomes 7. All quarterly data is from IMF, 2009.
Costa Rica’s real growth (in constant 2000 U.S. 8. EIU, 2009.
dollars) in total trade of goods and services decelerated 9. Dow Jones Newswires, 2009.
slightly to 7.3 percent in 2007, and continued to slow
down in 2008, reaching 2.1 percent. This was due to a
drop in the growth rate of Costa Rica’s real exports, References
which grew by 10 percent in 2007, but then slowed, Council on Hemispheric Affairs. May 2009. ―China
shrinking by 0.9 percent in 2008. Imports of goods Courts Costa Rica; Expands its Presence in
and services grew by 5.5 percent in 2008. Both exports Washington’s Backyard.‖ .
The nominal growth rate of the U.S. dollar value of Dow Jones Newswires. August 5, 2009. ―Costa Rica Jul
total trade shrank from 14.8 percent in 2007 to an 2008–09 Coffee Exports Down 46% To 71,964 Bags.‖
estimated 11.7 percent in 2008. Export growth is .
percent in nominal U.S. dollar terms in the last Economist Intelligence Unit (EIU). 2008. Country Profile
quarter.7 Costa Rica’s top exports include 2008: Costa Rica. EIU.
microcircuits, bananas, coffee, machine parts, and International Monetary Fund (IMF). August 2009.
medical instruments. Tourism also accounts for an International Financial Statistics (Country Tables).
important share of trade. The country’s main export IMF. July 2009. .
markets are the United States, China (to which over 90 Office of the United States Trade Representative. 2009.
percent are microcircuits), the Netherlands, and 2009 National Trade Estimate Report on Foreign Trade
Guatemala.8 Due to decreases in forecast demand, Barriers. July 24, 2009 .
first quarter year-on-year. Coffee exports in particular World Trade Organization (WTO). 2007. Trade Policy
have slumped, having fallen by 46 percent in July 2009 Review Body—Trade Policy Review—Report by the
over their 2008 value.9 Nominal imports grew by an Secretariat—Costa Rica—Revision. August 2. WTO,
estimated 14.1 percent in 2008. They are expected to Geneva.
fall by 6.9 percent in 2009, although in the first quarter ———. July 15, 2009. ―Report to the TPRB from the
they plummeted. FDI inflows accounted for 7.2 Director-General on the Financial and Economic
percent of GDP in 2007. Crisis and Trade-Related Developments.‖ WTO,
Geneva. August 6, 2009. .
World Bank, July 2009a. ―Macro-Monitoring Statistics.‖
1. Office of the United States Trade Representative, World Bank, Washington, DC.
2009. ———. July 1, 2009b. Costa Rica Competitiveness Diagnostic
2. TTRI calculates the equivalent uniform tariff that and Recommendations (Vol. and Vol. 2). Washington,
would keep domestic welfare constant. It is weighted by DC: World Bank.
import shares and import demand elasticity.
3. MA-TTRI calculates the equivalent uniform tariff of
trading partners that would keep their level of imports