13. EU’s LatAm Ambitions Dwindle

7 September 2009

Following political developments in Ecuador and Honduras, the EU may have to give up its ambition to conclude only region-to-region ‘association agreements' in Latin America.

Association agreements are broader than traditional free trade pacts, notably because they also contain development assistance commitments. When the European Union launched such negotiations with the Andean Community (CAN) and six Central American countries in 2007, it insisted that the two processes must be conducted between regional groupings rather than individual countries. The idea was that the pact would spur further regional integration, which would eventually lead to a larger market where EU goods could circulate freely.

However, only two out of four Andean states are still interested in concluding such deals with the EU, while the latter is not ready to engage with Honduras due to the coup that ousted the country's democratically elected president in June.

Ecuador Drops Out of EU-CAN Talks

While Colombia and Peru still hope to wrap up the talks in September, Ecuador has suspended its participation. In June, the government of Rafael Correa sent a letter to EU negotiators, laying out Ecuador's concerns about public procurement, investment, labour rights and social guarantees for migrant workers in the EU. According to Quito, the EU did not respond. Ecuador did not attend the July negotiating session, and will maintain the suspension for the foreseeable future. (Bolivia bowed out in 2007 over differences concerning intellectual property rights and services liberalisation.)

Ecuador is also upset over the EU's continued non-compliance with the WTO ruling that concluded that its tariffs on banana exports from Latin America were too high. "If the EU doesn't comply with the WTO, we won't continue to negotiate that trade agreement," President Correa said. "In the end we might lose a few dollars; however, we won't lose our dignity."

The decision left Colombia and Peru as the sole Andean participants in a fifth round of negotiations held in July. Although an estimated 30 to 50 percent of the tabled issues have yet to be resolved, officials said the talks achieved significant progress in several areas. For instance, the parties agreed to remove unnecessary technical barriers to trade, and to facilitate trade by promoting the exchange of information and simplifying certification processes.  Negotiators also agreed to strengthen institutions and make improvements to infrastructure, equipment and human resources, according to official information from Colombia's Ministry of Commerce. The next round of negotiations will take place in Brussels the week of 21 September.

Several non-governmental organisations closely following the talks disagree with the governments on the results they have claimed to achieve in sustainable development. They warn that the EU will not commit additional resources to help the Andean countries meet stricter labour and environmental standards. With only weak laws on the books, any free trade agreement would remain purely declarative, as the Andean governments would lack the enforcement mechanisms to compel the parties to implement it, the groups say.

Central American Talks Could Resume without Honduras

The European Union and six Central American countries - Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama - had hoped to finalise a region-to-region association agreement in July, but Brussels postponed the meeting amidst the confusion that followed the ousting of Honduran President, Manuel Zelaya, in late June.

Now, Spain is calling for a resumption of the negotiations. A decision could be made in mid-September with a view to concluding the treaty in time for its adoption at the EU-Latin America Summit in January. Spanish Vice President Maria Teresa Fernandez de Vega and Costa Rican President Oscar Arias said in August that the text could be finalised without the participation of Honduras, which could adhere to the pact once its political crisis is resolved.

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