EU-Central America
Consider Free Trade
Agreement In Fall
By Stephen Flanagan
Jackson
Another step will be
taken this Fall down the
long road to a proposed,
final trade agreement
and increased
cooperation between the
European Union and
Central America.
The new impetus is on a
comprehensive agreement
which covers a vast
spectrum of the
multifaceted relations
between the EU and
Central America.
Objectives include
improvement of political
dialogue between the two
regions, an increase and
improvement of
cooperation in a wide
array of areas, and an
enhancement of
bi-regional economic
links, including trade
and investments. The
European Commission
recently approved an aid
package of approximately
840 million Euros for
the years 2007 to 2013
to help Central America
address the most
important challenges.
“ The start of
negotiations between
September and October
mark a decisive step in
the very fruitful EU and
Central America
relations,” said Benita
Ferrero-Waldner, the
European Commissioner
for External Relations
and European
Neighborhood Policy in
late June at a Brussels
conference.
Ferrero-Waldner
continued, “ The EU
cooperation with Central
America is just one of
the ways in which the
European Commission is
helping the countries of
the region to cope with
the dual challenge of
regional integration and
social cohesion. In
order to meet this
objective, we have just
adopted new-co-operation
strategies that increase
aid for the region by
25% over previous
periods. This is a
powerful symbol of our
solidarity with Central
America.”
The first round this
Fall is set to include
El Salvador, Guatemala,
Honduras, and Nicaragua.
At a related regional
summit in Belize, Tony
Saca, the president of
Salvador, said Panama
and Costa Rica could
participate in the talks
at a later date. Saca
said these two countries
inclusion is contingent
on Panama joining the
System of Central
America Integration, and
Costa Rica ratifying
CAFTA, the free trade
agreement between
Central America and the
United States.
Manuel Zelaya, president
of Honduras, added that
Central America is
counting on the EU to
set new tariffs for
bananas, forcing the
27-nation bloc to change
a system that provides
preferential conditions
for banana producers
from African and
Caribbean countries,
mainly former British
and French colonies.
The EU is the second
most important trade and
investment partner for
the Central America
sub-region after the
United States. Twelve
percent of CA total
trade is with EU and 46%
is with the US. Exports
and imports between CA
and the EU represent .4%
of total EU external
trade. Exports from
Central America are
primarily agricultural
goods, and imports from
the EU mainly
industrialized goods.
Direct foreign
investment from EU in
Central America has
increased over the last
twelve years.
Supporters of the
proposed agreement see
it as a key to fostering
stability, progress, and
economic and sustainable
development in Central
America to the benefit
of all its citizens. The
proposed trade agreement
is touted as an aid to
placing Central America
in the world economy by
developing larger and
more stable economies
which are in a position
to attract more
investment.
Detractors of the
proposed EU-CA agreement
see it merely as another
example of how trade and
investment agreements
between rich and poor
countries undermine
development. A recent
OXFAM report said “the
quiet advance of trade
and investment
agreements threatens to
deny developing
countries a favorable
foothold in the global
economy.”
Free trade agreements
can impose radical
tariff liberalization,
threatening the
livelihoods of small
farmers and local
businesses, and
preventing governments
from using tariff policy
to promote
manufacturing, caution
critics. The overall
effect of changes in
trade rules is to
undermine economic
governance by
transferring power from
governments to largely
unaccountable
multinational firms,
robbing developing
countries of the tools
they need to develop
their economies and gain
a positive role in
global markets, warn the
critics.
However, the process of
reinforced regional
integration is expected
to march onward.
The process of Central
America integration has
overcome prolonged
internal conflict,
natural disasters, and
commodity market
fluctuations and has
recently gained
momentum. Proponents
claim that the process
of regional economic
integration represents
both a formidable
challenge and an
essential requirement
for the sustainable
development of Central
America.
Although macro-economic
fundamentals such as
budget and current
account deficits and
inflation are globally
under control, the
general weakness of the
state in Central
America, low tax
revenues, and the lack
of redistributive state
policies have, with the
lone exception of Costa
Rica, slowed the
development of social
cohesion. Related
security matters are
also raising concerns in
Central America.
Although not a major
drug producer, Central
America is an important
transit route for South
America drugs en route
to the US and to Europe.
Central America has
experienced a growing
wave of illegal
trafficking and violent
crime. Youth gangs known
as “maras” are
overwhelming Honduras,
El Salvador, and
Guatemala. No trade or
economic agreements will
be complete unless these
concerns are also
addressed with viable
solutions.
“Frankly, I believe that
the battle (for a EU-CA
trade treaty) is going
to be difficult,”
commented Nicaragua
president Daniel Ortega.
“The EU comes to the
table to negotiate more
‘duro’ (difficult) than
the US.”
The process of Central
America integration
dates back to 1951 when
the Organization of
Central American States
(ODECA) was established.
Economic integration
has, since the 1960s,
been one of the main
pillars of the
integration process in
Central America and is
considered an essential
requirement for the
sustainable development
of the region.
Historically,
co-operation between the
EU and Central America
has focused on human
rights and democracy,
integrated rural
development, disaster
prevention and
reconstruction, social
development, and
regional integration.
The background logic to
a EU-Central America
pact is clear. As soon
as the US signed NAFTA,
the EU followed suit and
made its own bilateral
trade deal with Mexico.
Now that the US has
signed CAFTA, here comes
an EU proposal for the
same Latin American
countries.
(Stephen Flanagan
Jackson is associate
editor of
LatinAmericanPost.com.
Contact [email protected]) |
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