EU and Central America Community negotiate new Agreement

The EU is the second most important trade (12% of total trade) and investment partner for the Central American sub-region after the US (46% of total trade).

Negotiations between the EU and the Central America Community for a comprehensive Association Agreement started last Friday in Brussels on the occasion of a high level meeting between the European Commission and Central America. The Association Agreement is envisaged as a comprehensive agreement, embracing the whole array of the multi-faceted relations of the EU with Central America. Its objective is to enhance the political dialogue between both regions, intensify and improve their cooperation in a vast variety of areas, as well as to enhance and facilitate bi-regional economic links, including trade and investments. The Agreement will be negotiated with Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. As soon as Panama takes the decision to join the economic integration process SIECA in Central America, it also will be fully involved in the negotiations. The EU is the second most important trade (12% of total trade) and investment partner for the Central American sub-region after the US (46% of total trade). Trade (exports and imports) between the sub-region and the EU represents some 0.4% of total EU external trade, with exports from Central America being mainly agricultural goods and imports from the EU predominantly industrialized goods. EU direct foreign investment in the Central American sub-region has grown from some EU140 million in 1994 to EU540m. in 1999. The San José Dialogue, which forms the cornerstone of EU-Central American relations, was launched at the ministerial meeting in San José over 20 years ago in 1984. Its main objective was to seek solutions to armed conflicts by means of dialogue and negotiation. Political support from the EU was backed up by a cooperation program in order to address the socio-economic causes of the crisis. The last San José Dialogue meeting took place in Luxembourg on 26 May 2005. Central American integration dates back to 1951 when the Organization of Central American States (ODECA) was founded. This was followed by the creation of the Central American Common Market (MCCA), the Central American Bank for Economic Integration (BCIE) and the Secretariat for Central American Economic Integration (SIECA) in 1960. In 1973, ODECA was suspended and progress in regional integration came to a standstill. Some 20 years later, in 1993, a new integration framework, the Central American Integration System (SICA), came into existence. SICA is made up of three Community Organs, the Central American Court of Justice (CCJ), the Central American Parliament (PARLACEN), and the Secretariat General of the Central American Integration System (SG-SICA). At the European Union-Latin America and the Caribbean Vienna Summit in May 2006, and based on the positive outcome of a joint assessment, the Heads of State and Government decided to launch negotiations of an Association Agreement between the EU and Central America, including a free trade area. On that occasion, Central America reaffirmed its commitment to enhance the economic regional integration, including the establishment of a customs union. On the basis of this decision, on December 6, 2006, the Commission adopted directives for the negotiation of the future Association Agreement. Cooperation with Central America currently takes place in the context of the 1993 Framework Cooperation Agreement, pending the entry into force of the new EU-Central America Political Dialogue and Cooperation Agreement. Historically, this cooperation has focused on human rights and democracy, integrated rural development, disaster prevention and reconstruction, social development and regional integration. The sub-region has traditionally received the largest share in both absolute and per capita terms of European Commission cooperation with the Latin American region. An average of EU145m. per annum has been granted over the period from 1995-2001. In addition to economic, financial and technical cooperation, other major initiatives have included the Regional Program for the Reconstruction of Central America (EU250m.) following Hurricane Mitch plus EU25m. for reconstruction in El Salvador, a program of support for the BCIE for the development of small and medium-sized enterprises and poverty reduction measures (EU120m.) plus considerable support for human rights and democracy, environmental conservation and food security, all of which are funded from specific budget lines. Since 1998, the EU has also provided some EU58m. through ECHO in humanitarian aid to Central America (mainly Nicaragua, Guatemala, Honduras and El Salvador) in response to catastrophes such as Hurricane Mitch, earthquakes in El Salvador and the drought. In 2001, a series of Memoranda of Understanding were signed between the European Commission and the six Central American countries establishing a five-year national and regional program of cooperation with an indicative allocation of EU655m. This funding includes EU75m. for sub-regional programs aimed at supporting the process of regional integration, including the incorporation of civil society therein and reduction of vulnerability to natural disasters. At country level, indicative allocations range from EU24m. for Panama to EU192.5m. for Nicaragua. The principal focal areas at national level include strengthening justice and the rule of law, poverty reduction and social development, decentralization and local development, education and economic competitiveness. The 1993 Framework Cooperation Agreement also foresees a Joint Committee and a Sub-Committee for Cooperation that meet at regular intervals. The Joint Committee meeting was held in Brussels on January 19, 2005. In addition to launching the joint assessment of regional economic integration through the establishment of an ad hoc Joint Working Group, discussions also focused on regional integration and security in Central America, the impact of the proposed EU Constitutional treaty on the EU's external relations, ongoing and future cooperation strategies and programs, the new Generalized System of Preferences that came into effect in 2005, and horizontal cooperation programs and activities aimed at promoting the involvement of civil society in regional development and integration. The author is head of the International Department at the Joseph Shem-Tov law firm.