The JeanMonnet/Robert Schuman Paper Series
The Jean Monnet/Robert Schuman Paper Series is produced by the Jean Monnet Chair of the University of Miami, in cooperation with the Miami-Florida European Union Center of Excellence, a partnership with Florida International University (FIU).
These monographic papers analyze ongoing developments within the European Union as well as recent trends which influence the EU’s relationship with the rest of the world. Broad themes include, but are not limited to:
♦ EU Enlargement
♦ The Evolution of the Constitutional Process
♦ The EU as a Global Player
♦ Comparative Regionalism
♦ The Trans-Atlantic Agenda
♦ EU-Latin American Relations
♦ Economic issues
♦ Governance
♦ The EU and its Citizens
♦ EU Law
As the process of European integration evolves further, the Jean Monnet/Robert Schuman Papers is intended to provide current analyses on a wide range of issues relevant to the EU. The overall purpose of the monographic papers is to contribute to a better understanding of the unique nature of the EU and the significance of its role in the world.
Miami - Florida European Union Center Jean Monnet Chair Staff
University of Miami Joaquín Roy (Director)
1000 Memorial Drive Astrid Boening (Associate Director)
101 Ferré Building María Lorca (Associate Editor) Coral Gables, FL 33124-2231 Maxime Larive (ResearchAssistant) Phone: 305-284-3266
Fax: (305) 284 4406
Web: www.miami.edu/eucenter Florida International University
Rebecca Friedman (FIU, Co-Director)
Inter-American Jean Monnet Chair Editorial Board:
Carlos Hakansson, Universidad de Piura, Perú
Finn Laursen, Dalhousie University, Halifax, Canada
Michel Levi-Coral, Universidad Andina Simón Bolívar, Quito, Ecuador
José Luis Martínez-Estay¸ Universidad de los Andes, Santiago de Chile, Chile Félix Peña, Universidad Nacional de Tres de Febrero, Buenos Aires, Argentina Stephan Sberro, Instituto Tecnológico Autónomo de México
Eric Tremolada, Universidad del Externado de Colombia, Bogotá, Colombia
International Jean Monnet Chair Editorial Advisors: Francesc Granell, University of Barcelona, Spain Ramūnas Vilpišauskas, Vilnius University, Lithuania
Economic Relations between the European Union and Central America: Building a Bi-Regional Association
Fernando Rueda-Junquera♦
Introduction
Unlike the United States, the European Union (EU) did traditionally not have motivations to privilege its relations with Central America.1 The economic, political and geostrategic interests in the region are modest, as compared with those existing in other groups of less developed countries (LDCs) such as the so-called African, Caribbean and Pacific countries (ACP countries) and the Southern and Oriental Mediterranean countries (MEDA countries). Nevertheless, the threat of an internationalization of the Central American conflict after the victory of the Sandinista Front in Nicaragua in 1979, was able to attract EU’s attention towards the region and encourage a greater involvement in it. The EU took the initiative in institutionalizing a political dialogue –the San José Dialogue–,2 which has facilitated the signing of three multilateral cooperation agreements between the two regions in 1985, 1993 and 2003.
The subscription of the last Political Dialogue and Cooperation Agreement in 2003 opened the possibility of strengthening the bi-regional relations, which had been losing dynamism since the end of the Central American conflict. The chosen way has been the negotiation of an Association Agreement (AA), including –in addition to political dialogue and cooperation – the establishment of a bi-regional free trade area. The results of this negotiation initiated in 2007, will condition the future of the relations between both regions.
This paper aims at assessing the bi-regional economic relations in the context of the aforementioned negotiation. With this purpose, the paper is divided into four sections. The first two ones present respectively, the state of the trade and financial relations. After that, the third section analyzes the background to the negotiation of the AA and the major negotiation issues. The fourth and last section provides the main conclusions drawn from that analysis.
Trade Relations
The three multilateral cooperation agreements signed by the EU with Central America have contained the reciprocal recognition of the most-favored-nation (MFN) clause. However, this has not implied the extension to the Central American countries of the tariff advantages granted by the EU to other LDCs more privileged by historical and geostrategic links, such as the ACP and MEDA countries. The MFN treatment involves the signatory countries’ commitment to give to each other the most favorable tariff terms negotiated with any single trading partner, except when such terms are result of an agreement setting up a customs union or are given only to certain countries –as it has happened until recently, to the
♦ Fernando Rueda-Junquera is Professor of International Economics and Vice-Dean of International Relations in the School of Business and Economic Sciences at the University of Burgos. He received his doctoral and master’s degrees in Economics from the University of London, and a master’s degree in Planning, Development, and Public Policy from the United Nations Economic Commission for Latin America and the Caribbean. Rueda-Junquera has worked as a consultant for the European Commission and for the Spanish Ministry of Foreign Affairs. His most recent publications have focused on topics related to Latin American economies and processes of regional integration in Latin America. He teaches postgraduate classes related to his research agenda in the Inter-University Institute of Iberoamerican Studies at the University of Salamanca and at the Ortega y Gasset Research University Institute in Madrid.
1 Throughtout this paper Central America is regarded as the region comprising the five member countries of the Central
American Common Market, i.e. Costa Rica, El Salvador, Guatemala, Honduras y Nicaragua.
2 The San José Dialogue takes place between the EU and the six countries of the Central American isthmus (the five members of the Central American Common Market and Panama).
ACP and MEDA countries3– in compliance with the regulations established by the World Trade
Organization (WTO).
The Central American countries have not had access to special trade preferences other than those offered by the EU to all LDCs under its Generalized System of Preferences (GSP).This trade arrangement comprises a general regime and several special regimes, being intended to facilitate access of LDC exports to the EU market. The general regime provides tariff preferences for exports of manufactured and semi-manufactured goods, while the special regimes broaden the product coverage for specific beneficiary countries. Central America enjoys the general regime since 1971 and one of the special regimes since January 1, 1992, specifically the one supporting the struggle against the production and trafficking of drugs (known as GSP-Drugs). This special regime allowed to incorporate into the GSP a group of agricultural products –most of them, non-traditional products– regarded as substitute crops replacing coca.
In the last 2005 GSP renewal, the EU has simplified its format for the decade 2006-2015 including only three regimes: the general one and two special ones –the incentive arrangement for sustainable development and good governance (known as GSP+) and the Everything But Arms (EBA) arrangement4–. The GSP+ came into force on July 1, 2005, whereas the rest of regimes did it on January
1, 2006.5 The GSP+ has replaced the GSP-Drugs, maintaining its product coverage. The GSP+ beneficiary countries are bound to ratify and implement international conventions in the fields of human rights, core labor standards, environmental protection and good governance, as a demonstration of their
firm commitment to these issues.
Bi-regional trade relations have taken place under the described framework. After doubling their value in 2000 with respect to the recorded one in the first half of the 1990s, these trade relations have tended to stagnate in the present decade. As Table 1 shows, EU imports from Central America increased from €1,845 million in 1995 to €4,312 million in 2000 and since then, they kept an average value of
€4,337 million in the 2000-2007 period. Similarly, EU exports to Central America expanded from €1,742 million in 1995 to €3,721 million in 2000, maintaining an average value of €4,064 million in the 2000-
2007 period.
The bi-regional trade balance was unfavorable to the EU in the aforementioned period, except in
2001 and 2007. Nevertheless, the average amount of the EU’s trade deficit was very small, just €273 million. This slight deficit represents almost the half of the value of the EU’s trade surplus in 2007 (€539 million).
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