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Costa Rica sues El Salvador in CAFTA quarrel

May 13, 2014

Costa Rica announced on Monday it would sue El Salvador over a trade spat in the U.S.-Central America Free Trade Agreement (CAFTA-DR), according to a statement from the Foreign Trade Ministry (COMEX).

COMEX alleges that El Salvador misinterprets the CAFTA agreement by not applying preferential tariff terms to goods produced in and exported from Costa Rica. El Salvador, meanwhile, maintains that it only needs to wave tariffs on goods imported from the United States and not necessarily goods imported from other CAFTA nations.

“Costa Rica reaffirms its position to defend its national commercial interests, ensuring proper utilization and commitment to the fair administration of free trade agreements,” the statement read.

COMEX said the move has generated “legal uncertainty” in trade between the two Central American economies.

CAFTA members have been feuding over the tariffs since 2013. Costa Rica and El Salvador failed to come to an agreement last year, and an arbitration panel formed in April to resolve the dispute.

Costa Rica exported $309.5 million worth of goods to El Salvador in 2013, according to figures from COMEX. El Salvador is Costa Rica’s smallest Central American trading partner, making up just over 14 percent of the country’s exports to its Central American neighbors.

Costa Rica ratified CAFTA-DR, a free trade agreement with the United States, El Salvador, Honduras, Guatemala, Nicaragua and the Dominican Republic, in 2007. A national referendum at the time passed with 51 percent voting “yes” after a protracted national debate.

Costa Rica exports more than any other country besides the United States in the regional free trade agreement, according to a November 2013 World Bank report.

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