Guatemala Scores Over Peru in Agriculture Duties Case

The WTO’s Appellate Body confirmed on Monday that Peru’s additional duties on certain agricultural imports from Guatemala violate global trade rules, in a case that brought to the fore the question of how free trade deals interact with WTO obligations.

The final ruling (DS457) confirmed the majority of an earlier panel’s findings, namely that Peru’s duties were inconsistent with various provisions under the WTO’s Agreement on Agriculture and the General Agreement on Tariffs and Trade (GATT) 1994.

WTO, FTA timing

In 2001, Peru established a price range system (PRS) that may result in the imposition of additional duties or rebates on certain types of imported rice, sugar, maize, and milk. When additional duties are applied, the combined PRS duties and import tariffs must not exceed the ceiling Lima has committed to at the global trade body.

Peru and Guatemala then signed a free trade agreement (FTA) in December 2011, which included the provision that Lima could keep its PRS in place, along with its amendments.

However, in April 2013 Guatemala filed a request for consultations on the subject, marking the first step in WTO dispute settlement proceedings, claiming that the PRS violated trade rules. The panel that was later established to hear the case granted a victory to Guatemala in November 2014. (See Bridges Weekly, 4 December 2014)

Meanwhile, Guatemala began its domestic procedures for ratifying the FTA with Peru in December 2013, later notifying Lima that Guatemala City had fulfilled the legal requirements in February 2014 for bringing the deal into force.

Peru, for its part, has not ratified the FTA. Though Lima maintained that the trade agreement should enter into force, it stated during the WTO panel hearings that the “it is not proceeding with the exchange of notifications at this time since the case brought by Guatemala has created uncertainty with regard to the existence of the balance negotiated.”