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UPDATE 1-Costa Rica to suspend tariff benefits for Panamanian products amid trade dispute

(Adds reaction from Panamanian authorities)

SAN JOSE, Sept 29 (Reuters) - Costa Rica will suspend tariff benefits for Panamanian products, the country's foreign trade ministry said on Thursday, marking another step in a trade dispute that started in 2020 and is the subject of a World Trade Organization (WTO) lawsuit.

Costa Rica suspended tariff benefits for its southern neighbor after Panamanian authorities failed to comply with a 2021 ruling regulating tomato trade between both parties, according to a statement published by the ministry, which did not specify the items affected or when the suspension would be enacted.

"I hope they understand … we are ready to go all the way," Costa Rican Trade Minister Manuel Tovar told lawmakers on Wednesday.

"Taxing products that arrive through free trade as a retaliatory measure is an example of what we are willing to do," he added.

Costa Rica and Panama entered a Free Trade Agreement (FTA) in 2008.

Panama blocked the entry of products from Costa Rica for sanitary reasons, Panama's Commerce and Industries Minister Federico Alfaro said in a statement published late on Thursday in response to Costa Rica's suspension of tariff benefits.

"International norms prohibit these unilateral actions and we will not hesitate to exercise our rights in case they apply them," he added.

Panama is the fifth largest market for Costa Rican products by value, according to government statistics.

Costa Rica's imports from Panama totaled $221 million and exports amounted to $603 million in 2021. (Reporting by Alvaro Murillo; Additional reporting by Valentine Hilaire; Editing by Chris Reese and Subhranshu Sahu)

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