The trade with the EU ends a two decade long dispute over banana tariffs, among other items. Banana exporters had protested against EU tariffs on banana exports designed to protect small growers in former European colonies in Africa and the Caribbean. Costa Rica was the first country to file a complaint in 1991 against the EU policy, starting the so-called “banana war”.
Trade barriers between the European Union (EU), Costa Rica and El Salvador will be lifted as of 1 October 2013, when the trade pillar of the EU–Central America Association Agreement enters into application with these countries.
The EU and Honduras, Nicaragua and Panama have been applying the Agreement since 1 August. Guatemala is finalizing procedures to allow for provisional application soon.
This ambitious trade partnership will open up new markets and simplify rules, boosting trade and investments in both regions. Central America’s economy is expected to grow by over €2.5 billion Euros a year once the agreement applies to the entire region.
“This is the first true region-to-region Association Agreement signed by the EU”, said EU Trade Commissioner Karel De Gucht.
“I am pleased Costa Rica and El Salvador can now benefit from the trade deal, which is an important step towards our goal of applying the agreement to the whole region. We are looking forward to Guatemala joining very soon. The agreement will be a major stimulus for the economic integration of Central America. Now it’s up to companies on both sides to take full advantage of the many opportunities the deal offers.”
The comprehensive trade part of the agreement sets out disciplines that go beyond those agreed in the multilateral trade framework, particularly in services, public procurement, intellectual property, sustainable development and technical barriers to trade. This will boost region-wide development, while at the same time providing for new market opportunities for European companies, exporters and investors.
A key aspect of the agreement is its system of consultation at different levels, such as the involvement of civil society. This will allow for open dialogue on specific trade concerns under the different chapters of the agreement. It also creates a transparent, non-discriminatory and predictable environment for business and investors and contains a bilateral dispute settlement mechanism.
The EU is the second largest trading partner for Costa Rica and El Salvador.
Trade flows between Costa Rica and the EU have been increasing continuously over the last 10 years, reaching €8.7bn in 2012. In the same year, EU Foreign Direct Investments amounted to €400m, mainly in the telecommunications, tourism, industry and transport sectors.
Costa Rica’s and El Salvador’s exports to the EU consist of industrial products (microchips, medical and optical instruments) as well as agricultural products (coffee, bananas, pineapples, sugar and fisheries). The EU exports mainly pharmaceutical products, petroleum oil, cars and machinery.
The Association Agreement between the EU and Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama) contains three pillars – political dialogue, development co-operation and trade.
These aim to support economic growth, democracy and political stability in Central America. Until all 28 EU Member States have ratified the agreement only the trade pillar will be provisionally applied allowing companies to already benefit from all the trade preferences set out in the agreement.