Colombia/Panama: the WTO decides on apparel-related conflict

By

Matthieu Guinebault

Published
Feb 11, 2016

The World Trade Organisation has declared a series of specific duties, applied on textile, apparel and footwear imports, to be illegal. Colombia intends to appeal against the complaint, originally submitted by Panama.

The complaint focused on the fact that Colombia is applying a systematic 10% duty on imported goods, to which another variable tax is added, in defiance of WTO regulations. This leads taxation to exceed the 35-40% ceiling agreed to by the WTO and Colombia.

Through this fiscal device Colombia intended to fight against illegal imports, that seek to bypass customs to circumvent basic taxation. However, WTO investigators have failed to obtain clear evidence that the fiscal device is indeed targeted at fighting customs evasion, and is not merely a protectionist measure.

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In the end, such duties are mostly part of the Colombian state's strategy aimed, over the course of many years, at relocating production. This happens chiefly in the textile industry, where the government estimated that the laws passed in 2013 would have previously allowed a 20% reduction in apparel and footwear imports.