Such a decision would lose preferential treatment for products of a thousand tariff lines, the entity added, so it calls on the government to explore the opportunity to continue in the system, while long-term solutions such as the Free Trade Agreement (FTA) are achieved.
The reason for the change, according to the notice issued by Canada, states that Guatemala would no longer have access to the system of preferences, i.e. preferential tariffs, derived from the average per capita income level it registers, so the most-favoured-nation treatment must be applied to exports to that country, explained Enrique Lacs, former Minister of Economy and Business Manager.
Speaking of a country in – graduate – as Guatemala is mentioned, the term means that having exceeded a certain level of income and development it no longer needs the benefits of the system of preferences in whole or in part and from that such preferences are withdrawn in various products, the executive stressed.
However, in order to assess the scope of graduation being made to the country, through which it restricts preferences for access to that market, it is necessary to review the list of products that would be losing that benefit and compare them with the level they have so far.
In 2023, products of $1142 million were exported to Canada, and much of that was with the benefit mentioned, the manager said.
Meanwhile, Agexport states that producers of vegetables, ornamental plants, food, handmade items, clothing, glass products, beverages, and others, are at risk of losing Canada as a market if tariffs are changed when leaving that system.
It explained that products such as clothing, preserved fruit, ornamental plants, sweets, cardamom, among others, are part of the thousand tariff items that will be affected by the loss of the GSP benefit.
“Canada has been a good commercial partner and ally to promote and support Guatemalan SMEs and MSMEs so that they are competitive and enter that market, complying with the qualities and standards that are required,” Agexport stated.
The entity explained that the program, dedicated to developing economies, has given Guatemalan producers and SMEs the opportunity to enter that market with reduced tariff rates or free trade since 1970.
Lacs explained that there are different groups of products according to the application of tariffs, such as those mentioned with preferential rates, others with non-preferential percentages and also that Canada has several products to which, based on its own system, it no longer charges tariffs, particularly those that it does not produce, such as green coffee and unrefined sugar.
These have represented US$75 million and US$11.3 million, respectively, Lacs mentioned as an example.
Agexport has conducted studies that confirm the potential of this strategic market and with the Best Markets report, the potential of an additional US$400 million in strategic services and products was identified. The creative industries, contact center & BPO, ITO, health tourism and sustainable tourism are mentioned. Intervention requested
Agexport asks the government to explore the possibility of postponing the measure to exclude the country from the system of preferences.
“Canada is in the top 10 of Guatemala’s main commercial partners. However, after 23 years we find ourselves without having concluded a free trade agreement whose negotiation began in 2001, and since then they have been resumed and stagnated intermittently,” adds the Association of Exporters.
To this, Fanny D. Estrada, director of institutional relations of the entity, adds that there have been 5 governments in these 23 years that have passed without being able to finalize the FTA.
Regarding the impact that producers would have by excluding Guatemala from the system of tariff preferences, the executive mentioned that products such as peas would pay tariffs of 20%; sugarcane molasses, 37%; Brussels sprouts, 6%; Uncrushed and unpulverized cardamom, 46%, rum and others 3%, unrooted cuttings and grafts, 14%, however, he said that they would have to be reviewed in detail.
For this reason, the organization calls for the talks to be resumed because Guatemala requires a FTA with the idea of having a bilateral instrument that provides certainty in the long term in various aspects such as the generation of investment and development projects for the country.
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“Agexport has requested each year the restart of said negotiation and we are fully available to continue supporting the national authorities as well as the Government of Canada to reach the conclusion,” added D. Estrada.
For this reason, he proposes that, based on what is established in the SGP, the possibility of postponing the measure of withdrawing Guatemala from that system while a long-term solution is sought be explored.
But also to restart the negotiations of the Free Trade Agreement until achieving the best possible conditions for both countries.
Estrada added that it is necessary to achieve a rapprochement between the Guatemalan government and the Canadian government, showing the interest in maintaining the commercial relationship and the will to work together to reach a good agreement, is a way to reach a good agreement.
Government analyzes
The Vice Minister of Integration and Foreign Trade, of the Ministry of Economy, Héctor Marroquín indicated that they learned of the decision of the Canadian government this Friday, September 13. He explained that they need to clarify the scope of the decision to define the measures to be promoted and explain in this regard.
“That it be eliminated is a matter of concern, we do not have information and certainty at this time if that will happen or not and that is what we are finding out as a government with the Canadian counterpart,” said the official. If that is the situation, what will be sought is the suspension of the withdrawal measure for Guatemala and if that is not an option, the opportunity will be sought to be able to resume the negotiations of the FTA that were suspended several years ago.
Exports
Total exports from Guatemala to Canada in 2023 were US$142 million.
Among these, the main ones were coffee, clothing items, sugar, sugar molasses, fresh fruits, glass and its manufactures.
64.4% were products from the agricultural sector and 35.6% from the manufacturing sector.
Source: Economic Profile of Canada prepared by Mineco
System and conditions
Among Canada’s unilateral tariff preference programs is the General Preferential Tariff (GPT), which consists of tariff reductions or duty-free treatment for most goods imported from developing countries. It was established in 1974, as explained in the communication from the Government of Canada on its website.
Currently, tariff preferences are granted to 106 developing countries, and these cover more than 80% of the tariff items of goods, with the exception of most clothing and textile products, footwear, certain agricultural products and certain steel products, it adds.
Based on periodic reviews conducted by Canada, beneficiary countries can be excluded from the program when they meet one of the two criteria it has established as:
Two consecutive years of classification as an upper middle-income or high-income economy by the World Bank.
A minimum share of world exports of 1 percent for two consecutive years based on data from the World Trade Organization.
vxvc bv, former beneficiaries can request re-entry by demonstrating that they do not meet these two conditions.
This article has been translated after first appearing in Prensa Libre