UK signs accord with Central America to ensure continuity of trade deal

Key words: Association Agreement; tariffs; liberalisation.

On 18 July 2019 in Managua the United Kingdom signed an agreement with the Central American nations to guarantee that British companies and consumers would benefit from the same freedom of tariffs when it leaves the European Union as it enjoyed as a member of the EU. The trade deal signed in 2006 between Central America and the European Union was called the Association Agreement.

Commerce between the UK and the six countries of Central America (minus Belize) amounted to US$1.255 billion in 2018 with a balance in favour of the Central American countries. UK consumers will continue to benefit from low prices for goods imported from Central America, such as shrimps, coffee, fruit, vegetables and sugar, amongst others.

Central American consumers will continue to enjoy low tariffs on British products such as alcoholic drinks, medicines, machinery and cars.

The agreement also provides a framework for cooperation and development, especially in matters relating to the environment and human rights.

Despite the balance in favour of the Central American countries, the Agreement requires various market liberalisation measures to be implemented by the Central American governments and allows well-financed UK firms to compete with less well-financed Central American firms in many spheres of economic activity.

Guatemala offers El Salvador a port on the Atlantic Coast

Shortly after the inauguration of Alejandro Giammattei as the new Guatemalan President, he met with President Nayib Bukele of El Salvador and offered a deal of potentially great benefit to El Salvador: namely a port on the Atlantic coast of Guatemala. Lucy Goodman translated and summarised articles about the deal from La Prensa Gráfica (by Melissa Pacheco, 28.01.20) and El Economista (29.01.20), and Martin Mowforth added various commentaries on these for The Violence of Development website.

March 2020

Key words: El Salvador – Guatemala integration; Atlantic port; security cooperation; domestic flights.

El Salvador and Guatemala plan to eliminate the border initially for the passage of persons and later for freight. They have also re-defined flights between the two countries as ‘domestic flights’.

(Melissa Pacheco) The presidents share the announcements between themselves about the removal of the border for the transit of people and goods.

 

The Guatemalan president offered a concession to create a public-private partnership as the means to enable completion of a Salvadoran port on the Atlantic coast. Land from the Santo Tomás de Castilla National Port Company (Empornac) will be ceded to El Salvador for this purpose. The area to be ceded is known as El Arenal (or The Quicksand) and currently serves as a depot for containers. Last year (2019) Empornac carried out technical studies to determine the feasibility of constructing a pier to accommodate dredgers and cruise ships there.

“We have offered El Salvador something unprecedented in the history of Central American integration and today I want to announce it publicly because we’re going to explore, as soon as possible, the possibility of El Salvador having a port in the Guatemalan Atlantic. We will deliver this Project as a public-private partnership so that El Salvador can develop it. It is an offer that we have made to El Salvador, we consider it to be the right thing to do,” Giammattei announced at a press conference that took place at the Presidential House.

He added that he had spoken with the authorities of SICA (Sistema de la Integración Centroamericana / Central American Integration System) in order to receive the support of the institution in the implementation of the project. He also announced that he made a firm pledge to officially de-categorise flights between Guatemala and El Salvador to ‘domestic’. This comes as part of the initiatives to improve integration in the region.

The Guatemalan Minister of Economics, Antonio Malouf, confirmed that a legal-technical analysis for ceding the land of Empornac will be carried out.

“Basically, it would be our entry to the Atlantic. Our goods will have the power to go from the Atlantic and enter from the Atlantic. I believe what we’re doing is making a real union that is going to spread to other countries in Central America that will want to unite and do similar,” declared the Salvadoran President.

Apart from the possible construction of the Salvadoran port on the Guatemalan coast and the re-categorisation of flights, the leaders announced that in one month they hope to have removed the border for the passage of people and within three or four months the barriers for goods between the two countries.

“We have to sign papers where we can eliminate the customs on goods respecting that goods entering El Salvador and destined for Guatemala have already paid taxes in El Salvador and do not have to pay them in Guatemala and those that have entered Guatemala destined for El Salvador do not have to pay them in El Salvador. We believe it will take us about three months,” the Guatemalan president declared to the media.

The elimination of the borders for the passage of people also requires the implementation of a bi-national arrangement on security. “If someone passes from Guatemala to El Salvador evading an arrest warrant, they will not be evading anything because we are going to have the same approaches in both countries,” Bukele stated.

Giammattei referred to their intention to apply similar security sanctions, one of which was to standardise the criminal codes in both countries. In the language he used to explain this part of the agreement, Giammattei betrayed his profoundly hateful and hardline understanding of crime in society. “Standardising the penalties, the sanctions, the punishments, so that when they spray ‘Baygon’ here the cockroaches do not go there because they think that there they will find it easier, and when they spray ‘Baygon’ the cockroaches won’t come here, as the law will be the same for the two countries,” said the new president

Moreover, he said that they had been monitoring Bukele’s Territorial Control Plan (PCT), the main commitment of the Salvadoran Government to improve security conditions, and he (Giammattei) did not rule out implementing some of the same sanctions in Guatemala.

Aims and effects of CAFTA-DR, according to UNES

In March 2011 to mark the fifth anniversary of the signing of CAFTA-DR, UNES (the Salvadoran Ecological Unit) sent an open letter to Deputies of the Salvadoran Legislative Assembly demanding an evaluation of the trade agreement, whose effects they claimed included the following:

  • The 60,000 new jobs to be created each year, as promised by those who promoted the agreement, have not been realised; in fact unemployment is greater than it was five years before.
  • Small farmers and small businesses have not been able to export their goods to the US market; in fact the crisis experienced by the campesino sector and by small businesses has deepened.
  • Food cannot be bought cheaper than it was in 2006; in fact the price of basic foodstuffs is much more expensive; similarly with the price of medicines.
  • There is no greater stability or security for Central Americans who migrate to the USA; in fact the humiliation and deportations have increased.
  • The commercial deficit between El Salvador and the USA has widened; although exports from US, European and Korean TNCs in El Salvador have increased, imports from the USA have increased much more. Also, despite their stagnation, dependence on remittances from family members has grown.
  • Two mining TNCs have claims against the government of El Salvador in a foreign tribunal for US$170 million as compensation for the cancellation of their permits for gold and silver extraction in El Salvador.
  • Central American regional integration is experiencing greater difficulties now than it did in 2006 when CAFTA-DR came into force.
  • CAFTA-DR is particularly beneficial for transnational corporations that the European Union has also begun free trade treaty negotiations with the region; this is euphemistically called an ‘Agreement of Association’.

Source: Revista Ecotopia 272 (March 2011) ‘Organizaciones Sociales Demandan Evaluación y Denuncia del CAFTA-DR’, San Salvador: UNES.

Highlights of the trade pillar of the Association Agreement between Central America and the European Union

Mariah Jen 20 June 2011

The Association Agreement between the EU and Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama) marks an important step forward in the relationship between the two regions. The Parties have finalised the legal review of the Association Agreement which includes a comprehensive trade part. Once ratified, this agreement will open up markets on both sides, help establish a stable business and investment environment, increase benefits for citizens and will foster sustainable development. The Agreement is also meant to reinforce regional economic integration in Central America and the EU hopes for it to have a positive spill-over effect on the overall political integration process and contribute to the stability of the region. In 2010, bilateral trade in goods between Central America and the European Union was worth €12 billion.

Negotiations of the Association Agreement between the European Union and Central America were finalised in May 2010. The Agreement can enter into force once the legislative procedure involving the Council and the European Parliament has been concluded.

The Association Agreement consists of three pillars: political dialogue, cooperation and trade. The key elements of its trade pillar are presented below:

1. Substantially improved market access for EU exports to Central America

Tariff elimination – manufactured goods, fisheries and agriculture
The Agreement will largely eliminate tariffs for manufactured goods and fisheries with complete liberalisation at the end of the tariff phase-out period, generally within a ten-year period and with only a small amount (4 percent) of products after 15 years. Upon entry into force of the Agreement, Central America will liberalise 69% of its existing trade with the EU. Once the trade pillar of the Agreement is in force, EU exporters will save €87 million annually in customs duties.

In agriculture, tariffs on key agricultural products will be largely eliminated whilst “sensitive areas” for local markets are being respected. Panama, for example, is a main importer of European whiskeys to the region. 70% of its whiskey imports come from the EU and those will be liberalised on day one of the entry into force of the Agreement. All other Central American countries will liberalise this market after six years. Wine, another key product for the EU, will be fully liberalised at entry into force of the Agreement. EU exporters of wine and spirits can expect savings of €6 million annually in customs duties.

Tariffs on dairy products will be entirely eliminated with the exception of milk-powder and cheese, for which the EU has obtained duty-free quotas. These quotas cover the currently traded quantities and will be increased on an annual basis.

Addressing obstacles to trade in goods
Tariff elimination is only of real benefit if technical or procedural obstacles to trade are also being tackled. The proposed Agreement will ensure more transparency and better cooperation in the areas of “standards” and market surveillance. The agreed provisions go beyond the WTO Agreement on Technical Barriers to Trade (TBT). The requirements for marking and permanent labelling have been simplified. The Parties agree to cooperate when drafting technical regulations, setting standards and establishing conformity assessments. Most importantly, the parties will promote the development of harmonised regulations and standards within each region with a view to facilitate the free movement of goods.

It has been agreed to move towards international standards in customs legislation and simplify their procedures. This will improve trading conditions, while at the same time maintain an effective customs control. Central America has not yet harmonised standards, but has agreed to promote the development of regional customs regulations. This will facilitate operations for traders and business both within and outside the region.

As regards sanitary and phytosanitary (SPS) barriers, the Agreement also goes beyond WTO SPS requirements in key areas such as the regionalisation of animal diseases and pests, and the transparency of SPS import requirements and procedures. It includes other useful trade facilitation tools such as the listing of establishments, exports can come from. Further improvements, e.g. in the field of animal welfare have been agreed. These will help strengthen capacity building in the Central American countries and hence facilitate their market access.

Improved market access to government procurement, services and investment
The services and establishment commitments obtained from Central America are significant and meet the EU’s key interests in telecommunication, environmental, financial and maritime services. Further commitments cover cross-border services, investment and non-service sectors as well as key personnel, graduate trainees and business service sellers. The Agreement also liberalises current payments and capital movements between the Parties. These sectors will benefit from an easier access and possibilities to expand onto all markets of the Central American countries.

The opening of Central America’s public procurement market varies in terms of levels of liberalisation, with Costa Rica and Panama opening their markets more significantly than the other countries covered by the Agreement.

2. Common rules to level the playing field

Intellectual property rights & Geographical Indications
Protection of intellectual property rights is an important part of the Agreement. It includes a chapter on the effective protection of intellectual, industrial and commercial property rights and other rights covered by the WTO Agreement on trade-related aspects of intellectual property rights (TRIPS). As a result, EU rights holders will profit from improved procedures to defend their rights more effectively in case of infringements.

The Central American countries have adopted new or amended their legislation to incorporate regional specialities, so-called ‘Geographical Indications’ (GI) in a manner similar to the EU. Additionally, over 200 geographical indications, such as Champagne, Parma ham and Scotch whisky, are also specifically protected on the Central American markets to the benefit of producers of GI products in the EU.

The Agreement also makes specific reference to the importance of promoting access to medicines as well as protecting the biological diversity.

More competition and enhanced transparency on subsidies
Once the Agreement enters into force, it ensures a level playing field for European operators by calling upon national governments to ban all types of anticompetitive practices including restrictive agreements, cartels and abuse of dominance. This will help guarantee a fair and reliable competition environment for European companies.

In an effort to increase transparency particularly on subsidies, the EU and Central American countries will regularly report on the subsidies given to companies that trade in goods and also exchange information about matters related to subsidies in services. The Agreement goes beyond existing WTO rules in setting up a platform to discuss subsidies in the services sector.

A transparent way to settle trade disputes
The Trade pillar of the Association Agreement between the EU and Central America includes an efficient and streamlined dispute settlement system in accordance with the principles that the EU considers to be most important such as transparency (open hearings and amicus curiae briefs) and sequencing (no right to impose retaliation until such time as non-compliance is verified). A mediation mechanism for non-tariff barriers is also foreseen.

3. Regional Integration

The Agreement responds to Central America’s commitment to strengthen regional economic integration in the region and thus facilitate the movement of EU goods within Central America. Regional rather than “national” regulations and using a single administrative document for customs declarations will considerably ease the administrative burden on European exporters. Customs procedures as well as customs itself are going to be harmonized. Eliminating double duties over time, an importer will have to pay a single duty for the region rather than at each country’s borders. The transition period for this elimination is 2 years.

Regional integration will also help reduce the current regulatory divergences between Central American countries in the services sectors, including maritime transport. Dairy products and processed pig products, for example, will see a harmonisation of sanitary and phytosanitary requirements within the region in the coming years so as to facilitate the free movement of goods in the region.

4. An agreement for sustainable development

Further economic development through trade
Thanks to this Agreement Central American countries will benefit from liberalised access to the European markets in numerous sectors. This entails important economic and social benefits in Central America with gains in national income for Central America as a whole expected to amount at € 2.6 billion. The change in national income is estimated to vary from 0.5% in Nicaragua to 3.5% for Costa Rica in the long run due to the Agreement. In addition, the Agreement is expected to have an overall poverty-reducing effect across the Central American region.

According to an independent Trade Sustainability Impact Assessment commissioned by the EU, the Agreement is expected to contribute to large sectoral gains in the fruits, vegetables, and nuts (FVN) sector, especially for Panama and Costa Rica. Guatemala and Nicaragua are expected to become more competitive in the textiles and clothing sector for example, while El Salvador and Honduras will see an increase in their export of transport equipment.

By granting Central American countries immediate and fully liberalised access to European markets in industrial goods and fisheries, the Agreement will help exporters from these countries to move up the value-added chain. When fully enacted, the reduced costs of trade will have a beneficial impact on growth and jobs in all Central American countries.

Sustainable development
An overarching objective of the Association Agreement is to contribute to sustainable development in both Central America and the European Union, taking due account of the differences and specificities of each region. This objective is embedded in all the sections of the Agreement and finds a specific expression in the trade part through a chapter addressing the interrelation between trade and social and environmental policies. The chapter reflects the Parties’ commitments as regards internationally recognised core labour standards and multilateral agreements addressing environmental issues of international concern. It recognises the right and the responsibility of the Parties to adopt social and environmental regulations in the pursuit of legitimate objectives, and puts much emphasis on the effective enforcement of domestic labour and environmental laws. The Parties also undertake to encourage and promote trade and marketing schemes based on sustainability criteria, and to work towards a sustainable management of sensitive natural resources.

An important element in the overall structure of the Association Agreement is the role of civil society in the follow-up. A Joint Consultative Committee is foreseen and, specifically in the trade area, consultation of civil society stakeholders at domestic level goes hand in hand with a “Bi-regional Civil Society Dialogue Forum” to facilitate exchanges across the Atlantic regarding sustainable development aspects of the trade relations. Should divergences between the Parties arise in the implementation of this chapter’s provisions, recourse to an impartial panel of experts is possible under conditions of transparency.

Cooperation in trade areas
Both Parties have agreed to improve cooperation in areas such as competition, customs, intellectual property or technical barriers to trade. Enhanced cooperation in the production of organic products or the promotion of sustainable development have also been agreed.

Trade flows
In 2010, EU was Central America’s second trade partner after the US (and intra-regional trade), representing almost 9.4% of the trade flows.

In 2010, the main exporters from Central America to the EU were Costa Rica (53.9%), Honduras (21.6%) followed by Guatemala (12%). Exports consisted mainly of coffee, bananas, pineapples and microchips. EU’s exports to Central America went first to Costa Rica (36.3%) then Guatemala (28.1%) and El Salvador (15.2%) and were mainly medicines, petroleum oil and vehicles.


For more information
Text of the Association Agreement: http://trade.ec.europa.eu/doclib/press/index.cfm?id=689
More details on the benefits of the Association Agreement: http://trade.ec.europa.eu/doclib/press/index.cfm?id=687


From http://www.iewy.com/28673-highlights-of-the-trade-pillar-of-the-association-agreement-between-central-america-and-the-european-union.html

Another way is possible: fair trade, cooperation and solidarity with ALBA in Nicaragua

3While the Euro zone plunges into meltdown and the governor of the Bank of England predicts the worst crisis in the UK since the depression, innovative new ideas based on relationships of solidarity between countries are being successfully put into practice in the countries of the Bolivarian Alliance for the Peoples of our America (ALBA).

Trade between these countries is being turned into a tool to combat poverty, rather than the enrichment of powerful countries at the expense of the systematic impoverishment of poorer countries. Membership of ALBA has played a key role in the success of Nicaragua in rebuilding its economy, and infrastructure and implementing social programmes that have contributed to reducing high levels of poverty.

Nick Hoskyns from London has worked in Nicaragua since 1997 with rural cooperatives and is now quality manager for ALBANISA, an ALBA food social enterprise. He talks to David McKnight, from the Wales Nicaragua Solidarity Campaign. .

Can you explain what ALBA is?

ALBA is made up of Venezuela, Cuba, Nicaragua, Bolivia, Ecuador, the Dominican Republic, Antigua and Barbados, St Vincent and the Grenadines. It was set up to counteract the free trade agreements promoted by the western world; in Latin America it was ALCA (the Free Trade Area of the Americas). ALBA is everything that ALCA and the free trade agreements are not. Free trade agreements only talk about economics, only talk about trade, ALBA is all about the poor, solidarity, Latin American peoples coming together to resolve their problems.

ALBA means ‘daybreak’, hope, it’s the first rays of the sun. In a country like Nicaragua that has always had people against it – it’s always been a struggle, within ALBA you have a group of countries willing to understand revolution and in a very practical sense willing to support you and help you. I think it’s also important to understand it’s a real southern initiative.

How does ALBA differ from other trading blocs like the European Union for instance?

The difference is that ALBA is about giving and supporting and solidarity. It’s about how countries help each other to develop and it’s about how poor Latin American countries work together to resolve their problems. When ALBA countries get together, it’s not a negotiation of who gets most and who gives least, it’s the complete opposite, it’s what can they do, how can I help you?

…in the European Union when you hear that countries go to negotiate they are mandated to get the best possible deal for their country.

ALBA is an incredible space for innovation, putting ideas into practice within a politically, socially, clear model for the poor and the disadvantaged. I just feel that ALBA is talking sense when I listen to the debates around the bailouts of the banks at the European Union, “what are we going to do with Italy, Spain and Greece, these countries that are bringing the whole European Union down?” It’s all about economics, it’s all about money, whereas ALBA works within a framework which talks about solidarity, which talks about social development, which talks about the health of people, the education of people, for everyone not just those that can afford it.’

21I think ALBA is going to provide an alternative for us in the western world. From what I can see we are pretty lost, we haven’t really got any ideas of where we are going. It can’t be about bailing out bankers and their bonuses. So for me, ALBA really does provide that framework.’

How does the fair trade agreement [between Nicaragua] and Venezuela work?

Venezuela sells its oil to Nicaragua and Nicaragua pays the market price but 50% of the value of the oil is on payment terms of 25 years at 2% interest. Nicaragua invests this money in infrastructural projects – roads, energy – and long-term development. The other 50%, that Nicaragua has to pay in 90 days, Venezuela said to Nicaragua ‘you can pay me back in cash or if you’ve got anything that Venezuela needs then we’ll take your products’. So Nicaragua is now selling very large amounts of products to Venezuela under that fair trade agreement. The major product is meat and livestock, then there’s coffee and beans then there’s milk, cooking oil and sugar. The priority is given to the small farmers organised into cooperatives.

The principle is making sure that the farmers can produce at a price which works for them but also making sure that consumers get a good quality product at a fair price. Fair trade within ALBA is making an enormous difference to both peoples.

In 2008 Nicaraguan exports to Venezuela totalled $27 million. That went up to well over $250 million in 2010 and we are heading for way over $350 million in 2011. Venezuela has now become the second most important destination for Nicaraguan exports. The first of course is the US. So the importance of the US to the Nicaraguan economy can’t be minimised but this is a very different trading agreement.

What are the benefits of ALBA for Nicaragua?

It’s an integrated approach with lots of different programmes, very specific, very concrete, that benefit the Nicaraguan population. There was Miracle Operation, where every Nicaraguan who had eye problems such as a cataract has had a free operation here in Nicaragua or they’ve been flown to Venezuela or Cuba. People who thought they were never going to have full vision again, have had their sight given back to them. And that’s a successful programme right through all the ALBA countries.

Then there’s the solidarity bonus, where employees who earn less than C$5000 (£150) get a solidarity bonus which is just a top up or a bond, now worth C$700 a month, this is particularly important for low paid women workers.

Electricity was an enormous problem in Nicaragua – we used to have eight hours power cuts a day – we were trying to run our sesame and coffee plants and you never knew when the energy was going to be cut off and now we have got energy production funded through ALBA.

…it is an integrated approach coming from so many different angles. Poverty has gone down 7%. Exports are growing at around 30% ay year. The economy is growing at 4% whereas in the West it is stagnating. So ALBA is working for people directly and it’s also working for the economy as a whole – for big businesses, for medium businesses, for small businesses and for individual families. It really feels like Nicaragua is on the move.

What does Nicaragua contribute to ALBA?

It is very important for Venezuela to have a secure market for its oil. Also Nicaragua provides a great ally within Central America that speaks out on international issues in favour of the ALBA countries. Nicaragua is out there at the United Nations giving a clear, strong voice – an independent opinion from any lobbying from Western countries.

The cooperative movement in Nicaragua has been identified as a possible model for the whole of ALBA. I’ve personally been privileged to have been involved in an interchange between the Cuban and Nicaraguan cooperative movements, Cuba is looking at the cooperatives in Nicaragua as a model for them in the development of their economy. So that’s a great privilege for Nicaragua and Nicaragua is just there, chomping at the bit to help and give something back to any of the ALBA countries. And I truly believe that in the future, Nicaragua is going to provide a real model for the other ALBA countries of how to work in a way that is inclusive, incorporating large companies, medium-sized companies but without compromising commitments to the small farmers and the cooperatives. I think that’s going to be a valuable example for the rest of ALBA.

What’s the future for ALBA?

The thing to understand about ALBA is that it’s about doing and it’s about achieving. So in Nicaragua where you had power cuts, it was decided to invest in energy so there were no more have power cuts. They decided that all disadvantaged children should get at least one good meal a day, that’s happening. Because of the rains and the hurricanes it was decided that everyone should have a roof, ALBA Plan Techo [Roof Plan] provides 12 large corrugated iron sheets to each family that needs it.

ALBA is a group of countries that’s there to develop and to make a difference for the poor and disadvantaged. And, in Nicaragua it’s successful. This is real and it’s working and it’s developing.


Source: NSC website

Nicaragua exporting beans and cattle to Venezuela

From Nicaragua Network Hotline 09.06.09

Two hundred and fifty small farmers in the Department of Carazo planted 870 acres of black beans, all for export to Venezuela, and the national cattle industry will export 1,100 head of cattle there as well this month, part of the Ortega government’s efforts to find new markets under the Bolivarian Alternative for Our Americas (ALBA) cooperative fair trade agreement. The black beans were planted under contract with Nicaragua Food, Inc. (ALBALINISA), which made a commitment to purchase all that was produced. The cattle shipment was part of an agreement to export 5,500 head to Venezuela.

Small farmers received 80 pounds of seed and 200 pounds of fertilizer and technical assistance which enabled them to produce 1,437 pounds of beans per acre cultivated. The Ministry of Agriculture and Forestry (MAGFOR) now plans to expand the program to 17,400 acres, all for export under ALBA to Venezuela.

Nicaragua’s cattle industry has generated US$11 million under ALBA, according to National Assembly Deputy Douglas Aleman. That is expected to rise by the end of the year. Aleman also said that 6,000 tons of beef will be shipped to Venezuela in July as part of the ALBA agreements. He said that he expected that in the coming weeks a second accord will be signed to raise the amount of beef exported to Venezuela to 12,000 tons.

Aleman also said during a celebration of International Milk Day and the Week of the Child, that the proposed Law for the Promotion of the Dairy Sector will, among other things, establish that all children under 12 years old should have a glass of milk a day in school. Promoted by the dairy industry and the government, the law is expected to easily pass the National Assembly.

Nicaragua has benefited most from CAFTA

From Nicaragua News 12th April 2011

Even though the members of the Sandinista Party voted against the free trade agreement with the United States known as DR-CAFTA when the agreement came before the Nicaraguan National Assembly in 2006, the current Sandinista government of President Daniel Ortega said on Apr. 5 that Nicaragua was the country in Central America that had benefited most from the agreement. Speaking at a gathering celebrating the fifth anniversary of the agreement, Economy Minister Orlando Solorzano said that it “is an important instrument for the economic and social development of the country.” Alvaro Baltodano, presidential delegate for investment, said that the growth in Nicaraguan exports and in investment in the country has been the highest in the region. Exports to the United States have increased by 70.5% under CAFTA if free trade zone exports are included, reaching US$2.012 billion. Baltodano said that while the results of CAFTA have been good, “we must search for reforms that permit us to raise the level of competitiveness of our industries in a way that is not based on the sacrifice of the labor conditions [of our workers].”

In a meeting on Apr. 8, Francisco Campbell, Nicaragua’s ambassador to the United States, told the Nicaragua Network that it has been Nicaragua’s participation in both CAFTA and ALBA (the Bolivarian Alliance for Our Americas) that has helped Nicaragua’s economy achieve the stability and growth noted in recent years. In exchange for oil, Nicaraguan sends agricultural products to Venezuela and this keeps demand for those products high and prices stable for farmers. Thus, subsidized US farm products have not caused the damage to Nicaragua’s agricultural sector that they have caused in other countries.

Speaking at the same Managua gathering, US Ambassador to Nicaragua Robert Callahan emphasized the positive achievement of a growth in exports of 71% in five years. At a press conference after the ceremonies were over, Callahan was asked about the dueling opposition and Sandinista marches on Apr. 2, when police prevented opposition marchers from following their route and there were injured among the police and marchers. He answered by saying that “Nicaraguans who want to demonstrate…, to march should have the opportunity to do it without fear, without intimidation and it is the obligation of the government and the police to protect and guarantee this right.” But when a reporter with Channel 4’s Multinoticias, a Sandinista outlet, asked Callahan about “crimes committed by US and European forces in the bombing of Libya,” he lost his composure and responded by saying, “I want to say something; with pleasure I respond to the questions of journalists, real journalists. You are an employee of the government; you are not a journalist. I’m tired of this. It’s just a provocation; you are not a journalist.”


Sources: La Prensa, Apr. 5, 9, 2011; Radio La Primerisima, Apr. 5, 2011.

Criticisms of the EU’s Economic Partnership Agreements (EPAs)

EPAs lead to:

  • Significant declines in government revenue due to the elimination of import taxes on goods produced in the European Union; this is likely to result in less budget funding for social and human development.
  • Closures of local manufacturing ventures, especially small and medium-sized enterprises (SMEs) due to competition from cheap subsidised imports.
  • Delivery of basic social services (the provision of health, education and other social services) to non-national private sector operators under the promotion of the privatisation of public services; in turn this is likely to lead to reduced access to these services for lower income groups.
  • Declines in inter-regional trade due to ‘trade diversion’; countries lose their markets in neighbouring countries.
  • Opening up to European competition for all government tenders; local companies which gain their income from government contracts will have to compete with EU companies.
  • Repatriation of profits gained by EU companies to Europe (rather than re-invested within the region) due to ‘investment protection’ clauses.
  • Dumping of cheap EU agricultural surpluses (e.g., dairy products, cereals, beef) which threatens the small-scale farming sector; in turn, this is likely to lead to the collapse of rural economies and rural out-migration.
  • Losses and collapse of local retail sectors in both goods and services because of entry into the local market of European operators.
  • Capital flight from the country because of investment measures that prohibit restrictions on the repatriation of profits.
  • Dispossession of indigenous land owners and lost livelihoods to give way to operations of European tourism, mining and other investors.

Adapted from: Nancy Kachingwe (February 2006) ‘Between a rock and a hard place – Africa faces no-win situation in trade deal with Europe’, Southern and Eastern African Trade Information and Negotiations Institute (SEATINI) bulletin.

North American Free Trade Agreement (NAFTA)

The following was extracted from the text of Ch.7 in the process of editing down to 100,000 words forPluto.

The NAFTA Agreement came into force on 1st January 1994 and lifted restrictions on trade between the USA, Canada and Mexico over a period of fifteen years, although some specific production sectors were excluded. Broadly its goals were to eliminate barriers to trade, to facilitate cross-border movement of goods and services, to promote fair competition between the three nations, to increase investment opportunities and to provide protection of intellectual property rights within each nation.[1] NAFTA was promoted to increase jobs, raise living standards and improve environmental conditions in the three countries.[2]

These have been the oft-stated goals of most free trade treaties between nations until the more recent Association Agreement between the European Union and Central America. The Bolivarian Alliance for the Peoples of our America (ALBA) also offers a different model of trade between its participating countries. (For both these cases, see later sub-sections.)

Proponents and opponents of NAFTA continue to prosecute their cause regardless of the other’s arguments. For instance, former President of Mexico, Carlos Salinas de Gortari who negotiated NAFTA is reported as saying in 2002 that “The level of trade and type of products that crossed the borders silenced even the most ardent critics.”[3] The corporate lobbyists and government officials who he was addressing probably agreed with him, and certainly trade across the borders increased substantially. Those who hold a different view of the effects of NAFTA – the Mexican farmers, the utility workers and many other groups of workers who in the same year protested vehemently against the agreement – were certainly not silenced.

At the same time as the trade in products increased across the borders, the migration of Mexicans northwards also increased. It was explicitly stated by various protagonists of the treaty (including former US President Gerald Ford) that NAFTA would stem the migration of Mexicans northwards. In fact, as Jeff Faux reports, between 1990 and 2000, “the number of Mexican-born residents in the United States increased by more than 80 per cent.”[4]

NAFTA reduced import tariffs on a number of agricultural products which allowed the import of heavily subsidised US crops to be sold at a price less than the costs of production in Mexico. Mexico had previously used the tariffs to protect its farmers from cheaper, subsidised US exports. Timothy Wise (Director of the Research and Policy Programme at Tufts University) states that the effect of this was 2.3 million people leaving agriculture and heading to the cities and the USA.[5]

In manufacturing industry, before NAFTA Mexico’s laws required car manufacturers such as Ford, Chrysler, General Motors and Volkswagen to buy some of their components from Mexican producers. NAFTA prohibited such laws and car manufacturers supplied their assembly lines with parts from their own subsidiary companies, often from other countries. The result was that “Mexican auto-parts workers lost their jobs by the thousands.”[6]

Regarding NAFTA’s effects on the environment and environmental standards, Kevin Gallagher[7] of Tufts University’s Global Development and Environment Institute has examined the opposing arguments that NAFTA’s effect of increasing incomes would lead to environmental improvements against the idea that free trade would automatically worsen environmental conditions in Third World countries. In summary, he found that by all indicators, Mexico’s environmental institutions were “unable to keep up with the demands of the economic transformations occurring in the country.”[8] Spending on the environment fell, plant-level environmental inspections declined, and NAFTA’s environmental ‘side’ agreement was unable to match up to Mexico’s environmental problems. Gallagher warned that “trade-led growth without the proper environmental policies in place will not automatically lead to environmental improvements.”[9]

A further point of concern for objectors was the loss of national sovereignty. Salvadoran economist Raúl Moreno explains that under NAFTA “national governments which implement policies that limit the ability of private corporations to make profits – such as environmental laws or taxation regimes – can be sued before international tribunals.”[10] This became one of the major objections to later free trade treaties involving Central America.

The issue of communal land ownership by indigenous peoples is also pertinent to later trade treaties that involved Central American countries. Article 27 of the Mexican constitution granted indigenous peoples and landless campesinos communal land ownership. Before Mexico could join the NAFTA, it had to re-write Article 27 to facilitate the privatisation of communal lands. This ensured that indigenous peoples and campesinos swelled the ranks of objectors to NAFTA and was an important factor prompting the start of the Zapatista war against the Mexican state, on the same day as NAFTA came into force.

Even though NAFTA did not directly involve any of the seven Central American nations, the brief summary of its effects and arguments given above explains the strength of feeling of much of Central American civil society against free trade treaties which were later to involve their own nations. NAFTA alerted many sectors of civil society to the threats that they would face if similar treaties between their own countries and the USA were to be agreed.


[1] NAFTA and Inter-American Affairs website (2004) ‘Chapter One: Objectives’, www.mac.doc.gov/
[2] Public Citizen website, ‘North American Free Trade Agreement (NAFTA)’, www.citizen.org/trade/nafta/
[3] Jeff Faux (2003) ‘How NAFTA Failed Mexico’, The American Prospect, http://prospect.org/article/how-nafta-failed-mexico
[4] Ibid.
[5] Timothy Wise (January/February 2011) ‘Mexico: The Cost of US Dumping’, NACLA Report on the Americas, pp.47-8.
[6] David Bacon (September 2008) ‘Displaced People: NAFTA’s Most Important Product’, NACLA Report on the Americas, http://nacla.org/node/4980
[7] Kevin Gallagher (June 2004) ‘Economic Integration and the Environment in Mexico: Lessons for Future Trade Agreements’, Working Group on Development and Environment in the Americas, Discussion Paper No.6.
[8] Ibid., p.13.
[9] Ibid., p.17.
[10] Raúl Moreno (autumn 2005) ‘Avoiding free-fall’, Interact, Progressio, p.21.

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Cartoon reproduced here by kind permission of Semanario Universidad (San José, Costa Rica) and by the cartoonist Luis Demetrio ‘Mecho’ Calvo Solís.