Domestic and Foreign Market Access

Overview: Trade Policy and Business Environment

The Republic of Honduras is a lower-middle income country facing major challenges, with more than two thirds of the country’s population living in poverty, and around 46 per cent in extreme poverty. Honduras was ranked 78th out of 132 countries in the World Economic Forum (WEF) Enabling Trade Index (2012), which measures institutions, policies and services to facilitate trade in countries. The Honduran trade regime is very open. Globally the country’s exports are facing very good access to external markets. In turn the country is open to receiving imports; however, owing to a poor business environment (in particular, cumbersome and time-consuming bureaucratic regulations) and weak performance in key trade enabling infrastructure services, foreign trade activities are significantly hampered. The implementation of numerous free trade agreements in recent years is considered to have led to some modernization and liberalization of country’s trade and investment regimes (World Bank 2012; WEF 2012)

WTO, 2012, Trade Profile (Honduras)

INDICATOR, UNITS RANK/132 SCORE
Domestic Market Access The pillar assesses the level and complexity of a country’s tariff protection as a result of its trade policy. This component includes the effective trade-weighted average tariff applied by a country, the share of goods imported duty free and the complexity of the tariff regime, measured through tariff variance, the prevalence of tariff peaks and specific tariffs, and the number of distinct tariffs. 17 5.66
Foreign Market Access The pillar assesses tariff barriers faced by a country’s exporters in destination markets. It includes the average tariffs faced by the country as well as the margin of preference in destination markets negotiated through bilateral or regional trade agreements or granted in the form of trade preferences. 27 3.59
Tariff rate (%) This indicator is calculated as a trade-weighted average of all the applied tariff rates, including preferential rates that a country applies to the rest of the world. The weights are the trade patterns of the importing country’s reference group (2012 data). An applied tariff is a customs duty that is levied on imports of merchandise goods. 60 4.56
Complexity of tariffs , index 1-7 (best) This indicator is calculated as the average of the following indicators: Tariff dispersion, Specific tariffs and Number of distinct tariffs. See description of each individual indicator for more details. Prior to averaging, values for each indicator were transformed to a 1–7 score, using the min-max method. 22 6.63
Tariffs dispersion (standard deviation) This indicator reflects differences in tariffs across product categories in a country’s tariff structure. The variance is calculated across all the tariffs on imported merchandise goods, at the 6-digit level of the Harmonized Schedule. 24 6.69
Tariffs peaks (%) This indicator is the ratio of the number of tariff lines exceeding three times the average domestic tariff (across all products) to the MFN (most-favoured nation) tariff schedule. The tariff schedule is equal to the total number of tariff lines for each country. These tariffs are revised on a yearly basis. 43 0.78
Specific tariffs (%) This indicator is the ratio of the number of Harmonized System (HS) tariff lines, with at least one specific tariff, to the total number of HS tariff lines. A specific tariff is a tariff rate charged on fixed amount per quantity (as opposed to ad valorem) 1 0.00
Number of distinct tariffs This indicator reflects the number of distinct tariff rates applied by a country to its imports across all sectors. 40 12.00
Share of duty-free imports (%) Share of trade, excluding petroleum, that is imported free of tariff duties, taking into account MFN tariffs and preferential agreements. Tariff data is from 2013 or most recent year available and imports data is from 2012 33 69.42
Tariffs faced (%) This indicator is calculated as the trade-weighted average of the applied tariff rates, including preferential rates that the rest of the world applies to each country. The weights are the trade patterns of the importing country’s reference group (2012 data). A tariff is a customs duty that is levied by the destination country on imports of merchandise goods 65 5.41
Index of margin of preference in destination markets, 0-100 (best) This indicator measures the percentage by which particular imports from one country are subject to lower tariffs than the MFN rate. It is calculated as the average of two components: 1) the trade-weighted average difference between the MFN tariff and the most advantageous preferential duty (advantage score), and 2) the ratio of the advantage score to the trade-weighted average MFN tariff level. This allows capturing both the absolute and the relative margin of preference. 9 62.67
Source : World Economic Forum, Global Enabling Trade Report 2014

Trade Policy and Market Access

 The Honduran trade regime is relatively open, with an average tariff rate of around 6 per cent in 2012 (relatively stable at this rate for over 10 years), modest use of non-tariff barriers and no use of contingency measures. Agricultural products are subject to an average tariff of 10.5 per cent, while the average tariff for non agricultural products was 5.0 per cent. The dairy products fall under comparably high average applied tariff of 22.5 per cent and some animal products come under high maximum tariff of 165 per cent. Honduras not only has free trade agreements with Colombia, Mexico, Chile, Taiwan and Panama, but also participates in the Central American Common Market (CACM) to which Guatemala, El Salvador, Nicaragua and Costa Rica are other members. As a member of CACM, Honduras applies a common external tariff (CET) on most items at a maximum of 15 per cent with some exceptions. The CACM also concluded free trade agreements with the United States and the Dominican Republic (CAFTA-DR) in 2004 and entered into a free trade agreement with the EU in 2011. The implementation of these free trade agreements has led to modernization and liberalization of the country’s trade and investment regimes. (WTO, 2012).

WTO, 2012, Trade Profile (Honduras)

Bertelsmann Stiftung, 2012, Honduras Country Profile

Standard Compliance and Other Relevant Import/Export Restrictions

 With regards to sanitary and phytosanitary measures (SPS), the lack of capacity to meet various standards had hindered the development of exports. For example, in the livestock industry classical swine fever in the region is a significant constraint on exporters of pork. In March 2010 the Standards and Trade Development Facility began a new project aimed at improving the operation of the National SPS Committee in Honduras (WTO 2010). Moreover, with respect to technical regulation and standards, Honduras joins the International Organization for Standardization (ISO) and the Pan American Commission for Technical Standards (COPANT). The CAFTA-DR provides that the regulations of trading partners shall be accepted as equivalent. Honduras refers to international standards when preparing or applying its standardization measures, insofar as they effectively or adequately help achieving its legitimate objectives.

WTO, 2010, Trade Policy Review (Honduras)