EU has reservations over San José’s request for more

Date: 06/02/1997

By Elizabeth Wise

JUST months after they were granted a raft of trade concessions by the EU, the nations of Central America want more.

When the foreign ministers of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama gather in Brussels later this month, they will ask their counterparts from Ireland, the Netherlands and Luxembourg - the EU troika - to extend the privileges now given to their agricultural exporters to the industrial sector in 1999.

Since 1 January, the Union has allowed farm produce from the six Central American countries it calls the 'San José partners' to enter EU markets at reduced import tariffs.

This concession - which makes the imports practically duty-free - gives the San José countries the same benefits the Union gives to the Andean Pact group of South American nations.

But even though the San José group's industrial exports are tiny (farm goods make up 85&percent; of EU imports from Central America), and tariff allowances would cost the Union much less than the current concessions given for farm goods, EU officials are reluctant to talk about extending the privilege.

After pouring nearly 200 million ecu of aid into the region annually in the past few years - almost the highest per capita amount given to any region in the world - the Union will seem inconsistent if it refuses such a small allowance.

But there is more to it than that. Acknowledging the low cost of granting industrial concessions, one Commission official admitted: “It is more a question of principle.”

EU officials are anxiously awaiting a ruling from the World Trade Organisation, scheduled for April, on a challenge to the Union's banana import regime mounted by Guatemala, Honduras and Panama.

The three countries maintain that the Union, through prohibitively high tariffs (850 ecu per tonne), blocks imports of most Central American bananas. If they win, the Union could be forced to alter its four-year-old import regime.

“We hope it will not go too far. We would have liked to have had an accord with all the Central American countries,” said one EU official. “We need to find a formula, a compromise.”

Central American governments talk about wanting more regular commercial relations with the EU. But if they want a commitment to trade liberalisation, they are likely to be disappointed.

France and Spain, who along with the UK are the strongest defendants of the current Union banana regime, are also the nations which would most oppose any sort of trade accord with Central America.

The EU and San José ministers will not argue over this when they meet on 25-26 February - both sides say they plan to use the meeting to “congratulate ourselves for accomplishing the agricultural concessions”.

But when their assistants begin to debate the industrial concessions, they will surely try to avoid the banana connection.

Instead, Union officials will argue that two-way trade liberalisation would be bad for the San José partners. New WTO trade rules allow lopsided benefits, but only for a decade or so, after which the Central Americans would be invaded by Europe's more efficient producers.

“Their commercial situation is not comparable to that of Mexico or South American countries,” said one.

San José countries are currently allowed to block European imports, which gives the group a trade surplus of some 300 million ecu over the Union.

That leaves a sour taste in the mouths of some EU officials. But they insist that neither the slight surplus nor the banana fight have clouded political relations between the two groups.

When EU and San José ministers met last March in Florence, they signed a 'solemn declaration' pledging “to continue the political and economic dialogue” aimed at helping the six countries finally to close the chapter of decades of dictatorship and civil war.

A cooperation agreement with the six Central American states as a bloc (which still needs to be ratified by Guatemala) is designed to set that pledge in stone and, insist Union officials, Europe's moral support and financial aid are helping that promise come true.

“Since 1984, when war burned in every corner of the region, they have said that EU aid has been essential for their progress,” said one. “It makes the Union feel proud of its position.”