WTO backs Panama’s complaint over Colombian tariff on textiles and clothes

Colombia’s neighbour Panama case which had been brought to the World Trade Organization in 2013 against Colombia’s tariff on textiles, clothes and shoes was backed by the WTO panel. Panama had complaint that the tariffs, which consisted of a fixed 10 percent and a variable component, breached the maximum allowable 35-40 percent tariff on those products.

Previously, Panama had lodged two complaints against its neighbor for which the first was settled by Colombia out of court in 2006, while the second dispute in 2009 was won by Panama.

The WTO dispute panel ruled against Colombia’s tariff on textiles, clothes and shoes on Friday, dismissing its argument that the measures were needed to fight -money laundering.

Colombia had argued that the imported goods constituted “illicit trade” because they were imported as artificially low prices in order to launder money, vindicating its use of a higher tariff than was permitted under its WTO agreement.

However, the WTO panel failed to demonstrate the tariff was either designed or necessary to fight money laundering, and because the tariff did not apply to imports from various countries or trade zones with special trade deals, it was illegally discriminating against Panama.