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Little progress in EU-Central America FTA talks

BRIDGES Weekly (Geneva) | 23 April 2008


A third round of free trade agreement negotiations between the European Union (EU) and Central America concluded last week with little progress on the thorniest issues, though officials said that they better understood each other’s interests and positions,

Johanna Hill, the Salvadorean vice-minister of the economy, stated that during the 14-18 April talks, negotiators exchanged proposals and counterproposals on goods and services trade, rules of origin, safeguards, and a programme for gradual tariff elimination. The contours of a potential agreement, however, are still uncertain.

For El Salvador, Guatemala, Honduras, Costa Rica, and Nicaragua, the agreement should lock in and improve preferential market access currently granted by the EU. Panama is participating in the talks as an observer. As part of the two-way agreement, the Central American countries will have to open their own markets to goods from the EU.

Under its Generalised System of Preferences Plus (GSP Plus) scheme, intended to reward and encourage efforts to combat drug production and trafficking, Brussels provides the Central American countries enhanced market access for around 7,200 products (200 more than the ’ordinary’ GSP). Roughly half of these enjoy duty free access while the rest are classified as ’sensitive’ and benefit from tariffs 3.5 percentage points below the standard most favoured nation (MFN) rate paid by countries that do not receive preferences.

Although Central America has benefited from this scheme, most of the region’s competitive exports, including beef, dairy products, and sugar, are considered ’sensitive’, and still face tariffs approaching 100 percent in some cases.

Roberto Echandi, Costa Rica’s chief negotiator, stated that Central America would push for the inclusion of all products that already receive duty-free treatment as well as those with export potential in the future.

Central American officials complained that the current EU tariff offer lacked ambition. The EU’s lead negotiator, Joao Aguiar Machado, said that at this point in the negotiations, ’securing’ existing preferential market access was not a fait accompli.

Products such as bananas and pineapples - key exports and potential ’deal breakers’ for the Central Americans, but highly sensitive for the EU - were absent from Brussels’ first market access offer.

The ’economic partnership agreement (EPA)’ under negotiation is similar to but distinct from the identically-named two-way trade agreements that the EU recently signed with several members of the African, Caribbean, and Pacific (ACP) group of countries. In fact, some ACP members are direct competitors with Central America in the EU market for products such as bananas; whether the Central Americans will get the same tariff treatment as the ACP countries for these crops remains an open issue.

Political issues were also contentious last week, as the EU demanded that Central American governments make a series of commitments regarding human rights and the proliferation of nuclear weapons. Nicaraguan Chancellor Manuel Coronel said that although Central American countries were not opposed to joining international agreements on either issue, the EU demands were an inappropriate attempt to interfere with their autonomy to legislate on the matter.

The EU denied that it constituted interference, arguing that since the GSP plus requires beneficiaries to ratify a series of labour, human rights, and environmental conventions, the EPAs should also ensure that other important international frameworks are ratified.

Most Central American countries have ratified the majority of the conventions required by the GSP Plus with the exception of El Salvador, where an International Labour Organization (ILO) convention on the right to organise has not yet entered into force.

Differences between the two regions on political, commercial and cooperation issues, hence, remain highly relevant and will most likely continue to represent an important challenge for negotiators trying to reach an agreement.

The ’fourth round’ will take place in Brussels, from 14-18 July.

ICTSD reporting; "Concluye III Ronda de negociación Centroamérica-UE", "Nicaragua objeta condiciones de Acuerdo con Unión Europea", CENTROAMÉRICA EN 7 DÍAS, No. 215, 14-20 Abril, 2008; "Stagno critica ’hipocresía’ de UE en tema de armas", LA NACIÓN, 10 de Abril, 2008.

 source: ICTSD