News and Analysis • Volume 11 • Number 6 • October 2007
EU-Andean Trade Pact Underway
The European Union and the four members of the Andean Community launched negotiations for an Association Agreement in September.
The initial meeting focused on clarifying the expectations of both sides regarding the three pillars of the future agreement, i.e. development co-operation, political dialogue and trade liberalisation.
Bolivia will be the Andean lead country on co-operation. The issues covered in those discussions will include economic and social development, and poverty alleviation in particular; reinforcing social cohesion, with emphasis on the most underprivileged sectors; and ways to deal with asymmetries between the two sides, as well as within the Andean Community (CAN) itself. The political dialogue will address many of the same issues, with Ecuador as the Andean focal point. Peru will lead the trade talks, and Colombia will be in charge of the overall negotiations.
The EU and the CAN agreed to exchange initial proposals on tariff reduction modalities by mid-November. These will be discussed during the December round of the talks, which will attempt to define the objectives and methods for the negotiations. Parties are expected to submit initial market access offers in time for discussion at a meeting during the first quarter of 2008. Both sides hope that the negotiations can be completed within two years.
Asymmetries Will Be a Challenge
The EU made clear from the start that it would only negotiate with the Andean countries as bloc. However, disparity between the different parties’ economies is likely to present a major challenge in the trade negotiations. While it is more or less expected that all CAN countries will obtain longer implementation periods for tariff concessions, and perhaps other flexibilities as well, Bolivia and Ecuador are requesting special treatment due to the smaller size of their economies. In addition, Bolivia confirmed in September that it was not prepared to negotiate concessions contrary to its national interests in services, investment, intellectual property rights or public procurement.
With regard to the limitations sought by Bolivia, Europe’s chief negotiator Juan Aguiar Machado said the EU would take into account the problems and sensitivities of other CAN members. He added that Bolivia’s specific concerns would be addressed in the detailed negotiations that would follow the establishment of a broad framework that would apply to all parties.
Another hurdle facing the CAN is the determination of a common baseline tariff for the market access negotiations. While the Andean Community is a customs union on paper, the regime allows member countries to maintain numerous exceptions to the common external tariff they adopted in 1995. CAN countries are to meet on 15 November to try and come up with an average figure from which tariff reductions would start.
Venezuela Ponders CAN Re-entry
In related news, Venezuela is considering reintegrating the CAN, although it also intends to remain a member of Mercosur, which comprises Argentina, Brazil, Paraguay and Uruguay. In April 2006, President Chavez withdrew his country from the Andean Community, at least partly in protest to Colombia and Peru having negotiated free trade agreements with the United States (Bridges Year 10 No.3 page 18).
Venezuela’s economy dwarfs those of the current Andean Community members, and it reentry into the bloc could further exacerbate the asymmetries in the EU-CAN negotiations. It is likely, however, that Venezuela will only rejoin the group as an associate member, if it does so at all.