Domestic and Foreign Market Access

Overview: Trade Policy and Business Environment

The Republic of Nicaragua is classified as a lower middle income country with active participation in the Central American regional integration process; and its trade policy is largely determined in the context of regional integration and its international agreements. Nicaragua was ranked 82nd 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. Although Nicaragua is in relatively unfavourable positions in border administration, transport and communications infrastructure and business environment, belonging to the bottom 30 per cent of the global rankings, the country has a strong competitive position in market access (ranked 5th) thanks to the regional integration efforts that has made Nicaragua’s exporters enjoy very low barriers to trade.

WEF, 2012, Global Enabling Trade Report
WTO, 2012, Tariff profile (Nicaragua)
WTO, 2012, Trade Policy Review (Nicaragua)

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. 6 5.98
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. 30 3.50
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. 51 4.12
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. 31 6.57
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. 33 6.97
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. 57 1.28
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 17 83.54
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 46 5.30
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. 21 55.08
Source : World Economic Forum, Global Enabling Trade Report 2014

Trade Policy and Market Access

 The tariff policy of Nicaragua is in line with the framework of the Central American Common Market (CACM) of which Costa Rica, El Salvador, Guatemala and Honduras are also members. Nicaragua applies the Central American Tariff System (SAC) and the corresponding Import Duties (DAI). Nicaragua’s average applied MFN tariff is 6.2 per cent and tariff structure has mixed escalation in a way that semi-manufactured goods have a lower average applied rate than raw materials, while final-manufactured goods have the highest average applied rate. One of the important trade arrangements is the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), which has created new economic opportunities and market access especially in the textile and apparel industries that came into effect in 2006. Thanks to CAFTA-DR tariff preferences levels, Nicaragua is allowed to enter the U.S. market with respect to duty free apparel made of certain cotton and man-made fibres. As such, Nicaragua focuses on stabilising supply in the market and fostering its integration in the world economy that includes a new free trade agreement between the EU, Honduras, Nicaragua and Panama which took effect in 2013.

European Commission, 2013, Press Release

WTO, 2012, Trade Policy Review (Nicaragua)

U.S, Congressional Research Service, 2012, The Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR): Developments in Trade and Investment

Standard Compliance and Other Relevant Import/Export Restrictions

 The National Commission on Technical Standardization and Quality is the coordinating body and highest authority at national level in the area of standardization. Nicaragua participates in the activities of international and regional standard organizations. It follows the CACM framework for the development of Central American technical regulations, in which technical regulations harmonized at CACM level (foodstuffs, medicines, hygiene products and cosmetics) are applied by the member countries, except Costa Rica. Nicaragua also has begun the process leading to the signature of a Multilateral Recognition Agreement on testing laboratories with the Inter American Accreditation Cooperation. Moreover, the Ministry of Agriculture and Forestry, through its Directorate General of Agricultural and Livestock Protection and Health, is the institution responsible for sanitary and phytosanitary measures related with the production, import and export of seed, plants, animals and their products, while the Ministry of Health is in charge of sanitary measures applied to food imports. Nicaragua applies the Central American Regulations on Sanitary and Phytosanitary Measures and Procedures. Since the signing of CAFTA-DR in 2005, the government has closely worked with the US Department of Agriculture’s Foreign Agricultural Service, under CAFTA-DR Sanitary and Phytosanitary Trade Capacity Building Program, aiming to build Nicaraguan capacity and improve its agricultural trade. The programme has helped Nicaragua’s increasing export volumes to the U.S. by meeting requirements for exporting to the states.

OECD, 2011, Aid for Trade Case Story (United States)

USAID, 2011, Update on SPS Capacity Building Central American-Dominican Republic Free Trade Agreement

WTO, 2012, Trade Policy Review (Nicaragua)