BizCLIR

Honduras has basic international trade conventions in place, as well as a regional integration commitment and several free trade agreements. It became a member of the World Trade Organization (WTO) in 1995 and is a charter member of the General Treaty on Central American Economic Integration, now in its fourth decade of application. Honduras is committed to a functional customs union. It has free trade agreements with Mexico, Chile, and the Dominican Republic. Most of its exports enter the United States, Europe, and Japan duty-free under GSPs unilaterally established by those destination markets.

The customs rules and practices of Honduras, including sanitary and phytosanitary controls, and the effectiveness of the Honduran customs agency are reviewed in detail in the “Flow of Goods and Services” section.

In general, Honduras’s laws and practices regarding international trade have not developed to take into account recent events in the area. Thus, the country has not overhauled its laws to incorporate recent rules into an effective, functioning national regime for international trade. The advent of CAFTA could act as an incentive to such reforms.

Honduras’s lack of legal and administrative structures for application of countervailing duties illustrates the country’s current framework for international trade law. The WTO sets standards for appropriate trade in goods, permitting recipient countries to impose tariffs to offset improper competitive advantages that imports may have gained through subsidies in the country of origin or through dumping at prices below those prevailing in their home market. A member nation must implement the WTO standards by establishing a national regime of laws and administrative procedures. Although the WTO sets the standards and provides a review process by which an affected nation can challenge their application by a given country in a given case, it has no original enforcement mechanisms. If a given country does not promulgate laws and institute administrative procedures by which it may impose countervailing duties, imports of goods to that country will never suffer countervailing duties, no matter how obvious a subsidy or dumping may be in the case of a given imported good.

Countervailing duties imposed by national administrative processes frequently provide the basis for negotiations between the exporting country and the importing country, leading to reduced countervailing duties on several products going in both directions and achieving benefits for both countries.

To participate in this negotiating process, however, each country must have its own national system of trade laws, or it will have no countervailing duties from which to negotiate. In such a one-sided situation, exporters from the country without a trade-law system must suffer countervailing duties against their products without any hope for negotiated relief, while subsidized and dumped goods from the other country continue to penetrate their market immune to such tariffs.

Honduras and other Central American countries lack effective systems for applying countervailing duties and other WTO standards to imported goods. A viable system requires administrative staff to conduct economic studies and to resolve requests for countervailing duties by deciding whether a subsidy or dumping exists, whether it significantly injures national production, and if so, what the proper level of any countervailing duty might be. Such systems are expensive but essential to full participation by any country’s exporters, importers, and national producers within the international marketplace.

To remedy this situation, the Central American countries, already advanced in their attempts to create a common market and a customs union, could join together to create a regional administration, which might administer requests for countervailing duties from any one of the region’s countries.