So Far the AA Is of No Use to Us

The author participated in the “side room” consultations in the negotiations resulting in the Central American Free Trade Agreement with the United States. He’s now involved in Central America’s negotiations for the signing of an association agreement with the European Union. Based on those experiences, he points to some of the problems faced in both processes.

Sinforiano Cáceres

The European Union (EU) started negotiations for an association agreement (AA) with the region’s countries in October 2007. To understand what has happened with those talks, we need to take a look at what happened with the trade agreement the Central American countries signed with the United States two years earlier, first known as CAFTA and later as DR-CAFTA due to the incorporation of the Dominican Republic. CAFTA went into effect for Nicaragua in April 2006.

To start with, the AA is more complex and broader than CAFTA, which is simply an agreement on trade, investments and services; the scope proposed to us for the AA simultaneously involved three pillars—political dialogue, cooperation and trade. In other words, these three issues were contained in a single negotiating process, which is a big difference and a comparative advantage relative to the negotiations engaged in with the United States. Europe proposed to contribute to the region’s sustainable development and integration based on these three pillars, but after seven rounds of negotiations, this comparative advantage started to fade. I’d like to share with you some of the reasons.

Preparing for the negotiations

As a representative of the National Federation of Cooperatives (FENACOOP), which is a member of a Central American civil society network known as the CID Initiative, or more formally the Mesoamerican Trade, Integration and Sustainable Development Initiative, we have been participating in the whole process, along with other civil society organizations from the Central American Integration System’s consultative group, which has chapters in each country. We have presented national and regional advocacy proposals throughout the negotiating process, during both Central America’s preparatory rounds and the official AA negotiation rounds.

We had the same problem with the AA as with CAFTA: five small countries forced to negotiate as a region with the European Union, a set of countries with much more economic, political, negotiating and pressuring capacity than our countries, which have been seeking integration for decades with few major results.

Our premise when the negotiations started was that the Europeans were better than the Americans, but we soon realized our mistake. We were thinking of the Europeans from the cooperation sector, the European solidarity movements we knew, rather than European businesspeople, who are just as tricky and self-serving as the American ones. That was our first surprise, but very soon the European businesspeople started gaining ground and imposing their own rhythm and way of negotiating.

During a meeting in Guadalajara in May 2004, the heads of state and government of Central America and the European Union agreed to undertake a process that would lead to an association agreement. The negotiations to reach this agreement would start after a joint evaluation of Central America’s economic integration process. The main indicators considered in this assessment were the institutional economic integration framework, the customs union, the regulatory trade framework and the reduction of non-tariff barriers to intra-regional trade.

That assessment recognized that a customs union and access to new markets do not constitute sufficient conditions for promoting the Central American countries’ development. It recognized the need for transformations of a different kind—economic as well as political and social—to generate a suitable platform for development. However, many of these important elements haven’t been included in the negotiations and the economic and commercial factors have acquired greater relevance. Equally, while both the European Union and Central America have recognized the importance of civil society’s participation in strengthening relations between them, their participation hasn’t been taken into account in assessing the Central American integration process.

The EU set two conditions for an agreement

On October 13, 2005, EU Trade Commissioner Peter Mandelson stated that “the EU has already indicated its readiness to negotiate the same type of agreement with the Andean Community and the countries of Central America. But we have asked that two conditions be dealt with before we launch these operations: first, we need to conclude the Doha Round in the WTO [World Trade Organization] and second, we need you to make more progress on your own integration before you engage with us.” The idea was that Central America be able to negotiate with a single voice.

The third meeting of the Ad-Hoc EU-Central America Joint Working Group was held on November 7 and 8 of that same year in the framework of the joint assessment of Central America’s economic integration process. Both parties agreed to review the further progress in its economic integration before the May 2006 Vienna Summit in order to decide when to start the AA negotiations.

Subordinating negotiations to the Doha Round….

Now let’s analyze what is implied by the two conditions the European Union set before starting the process, starting with subordinating negotiations to progress in the WTO’s September 2001 Development Round, known as the Doha Round because it was held in Doha, Qatar. In July 2004, the General Council on the Doha Work Program reached a framework agreement known as the “July 2004 package,” which established general lines for follow-up to the WTO negotiations. It also recognized developing countries’ right to specify sensitive and special products and to apply “special safeguard measures” as protection against price volatility caused by sudden increases in imports. Only developing countries would be able to employ these measures.

Had these commitments been complied with they would unquestionably be responding to an aspiration long awaited by developing countries. And most importantly, such compliance would have changed the rules of the game and the way bilateral free trade agreements such as CAFTA and the AA are negotiated. In the past, such agreements have incorporated trade liberalization on agricultural and agroindustrial lines independent of the parties’ degree of asymmetry or development and without taking into account our countries’ level of food dependence.

But the commitments have not been complied with. The European Union and the United States maintain subsidies and protectionist measures for their products on the multilateral WTO level, which affects access to their markets by products from Central America. In contrast, both the EU and the United States use bilateral agreements such as CAFTA and the AA to pressure underdeveloped countries to reduce their tariffs to zero and open up their markets. The EU and USA have used the free trade agreements as their most effective tool for getting countries to renounce the preferential conditions established in the WTO regarding their condition as developing or less advanced countries. The WTO negotiations are currently suspended and Doha’s great potential has been indefinitely frozen. All this reveals the rich countries’ double standards and double discourse.

As Oxfam International points out, suspension of the Doha Round has meant the rich countries will continue receiving the largest part of the international trade pie. They will be able to maintain their dumping practices, leaving small countries with only the most limited possibilities of defending themselves, except before the courts. It also means that developing countries are denied greater access to the North’s markets and that the EU and USA will turn to bilateral trade agreements to open a way to the developing countries’ markets.

We can conclude that the freezing of Doha reveals quite clearly the lack of political will in the rich countries to support the struggle against the causes of poverty undermining the future of the Central American countries or to attack the causes of food insecurity. What we have experienced is that everything agreed with the WTO wasn’t worth the paper it was written on.

…and more progress on
Central American integration

Now let’s look at the second condition imposed on us: satisfactory progress in Central American integration. They laid out the need to intensify the Central American integration process and create an institutional framework that would allow Central America to negotiate as a bloc, establishing a customs union and reducing non-tariff barriers to intra-regional trade. The Europeans’ express interest here is the creation of broad, less fragmented markets so their products can circulate more freely in our region.

Central America’s governments insist that they want to progress on a customs union, but most analysts of the issue don’t consider integration viable in the short term. The political will hasn’t been evident in recent years, and what integration has been achieved has responded to exogenous rather than endogenous factors, such as the conditions imposed by the United States when CAFTA was being negotiated, or those proposed by the European Union at the start of the AA negotiations.

This second condition involved an evaluation of how Central American integration was progressing. The Europeans wanted a clear analysis of the process. They wanted the AA to facilitate regional integration and contribute to substantial progress toward it. But the European Union report concluded that the results so far were very modest, that there’s stagnation and no political desire. In other words, they discovered what we already knew. However, they continued the negotiations, which indicated to us that this second condition was more a political strategy than a real concern to achieve an equitable and just agreement adjusted to our reality.

Two more “minimum” conditions
reveal the EU’s true colors

After this, they required two “minimum” conditions for as long as the negotiations lasted. One was that the Central American governments sign pending bilateral and multilateral agreements on investments and services. And the other was that we develop a jurisdictional mechanism to guarantee that European products can circulate freely throughout Central America; this involves both abolishing non-tariff barriers and rapidly regionalizing and standardizing sanitary and phyto-sanitary regulations and measures so that when a European product arrives in one Central American country, it will be able to circulate freely throughout the region.

When we found out about these two “minimum” conditions we started to see their true colors and realized that the priority of the AA was trade, that the commercial pillar was the main one of the agreement’s touted three pillars. They weren’t really interested in Central America’s sustainable development or regional integration, but only legal security for their investments and guarantees for their trade interests. It’s unfair: they ask us to remove our tariffs, but only discuss their own tariffs with the WTO. They won’t discuss the issue of subsidizing their farmers with us, because they say they discuss that with the WTO.

In light of this, we began to understand how similar the business world is throughout the developed world. And we realized that the AA is based on both the European Union’s competitiveness strategy, presented in the document “Global Europe: competing in the world,” and on the European Economic Recovery Plan. In these two frameworks, the negotiations with us seek to satisfy only the European Union’s interests, prioritizing the commercial side over political dialogue and cooperation components, thus distorting the objectives of supporting regional integration and sustainable human development preached at the beginning.

As capitalism needed colonialism,
neoliberalism needs neocolonialism

After seven rounds of hearing the European business sector’s negotiators express their arguments and seeing their true nature, we concluded that just as capitalism needed colonialism, so does neoliberalism need neocolonialism. Both CAFTA and the AA are neoliberal instruments that legalize illicit enrichment, because that’s precisely what unfair competition and dumping are. CAFTA and the AA are legal and commercial instruments that ensure illegal economic and political interests, even though signing these agreements effectively makes them legal. Legal, but not fair, because we already know the two things don’t always go hand in hand.

Central America was obliged to negotiate as a bloc in the CAFTA negotiations, without being an integrated region. And it’s the same now. That effectively meant negotiating without a regional strategy, regional priorities or regional logic and interests. What existed in both CAFTA and the AA are interest groups: the sugar group, the coffee group, the ethanol group… It was these economic groups, rather than the Central American region, that negotiated in CAFTA, and it’s the same story again now with the AA.

Both the United States and Europe gave their negotiators a mandate to establish priorities, what was negotiable and what wasn’t, as well as rules governing the negotiations. On the Central American side, we went to both CAFTA and the AA with no negotiation mandate. The Central American governments’ negotiators weren’t aware of any limits and have negotiated at the whim of the economic groups. It was and has continued to be a mistake that will cost us very dearly to have accepted negotiations on unequal terms and not attempted to have them treat us as small countries with fragile economies dependent on the agricultural sector.

The pig producers in Nicaragua are currently protesting because they say a business linked to the government is bankrupting them by importing pork from the United States. But all that’s being imported is the quota the United States has the right to sell in Nicaragua. It was established in CAFTA and negotiated by Nicaragua. Nicaragua is obliged to respect that quota, independent of the governing party.

We’re going to see similar complaints from dairy and other producers. And in 2010, we’ll start seeing the problems CAFTA is going to cause to food sovereignty and security in Nicaragua and Central America in general. The rice quota negotiated in CAFTA is very high and is already wreaking havoc among national growers. For example, Honduras’ 25,000 rice growers have already been reduced to 2,500. The whole world sounds the alarm when the “human flu” makes you ill, while this other, more violent disease kills and goes unnoticed.

Civil society’s participation
and lessons learned

In terms of civil society participation, we’ve been subjected to the will and discretion of the public officials in the government negotiation teams in both CAFTA and the AA. It has been harder for us to participate in the AA than in CAFTA because there has been less information. However, I think the civil society organizations have been more mature, more coherent and more pro-active in the AA than we were in CAFTA. On the trade side of things, we managed to incorporate proposals quite successfully, especially on regulations related to the origin of coffee, regulations for special procedures for organic products and the issue of handicrafts. We have also made proposals on sustainable development and social and economic cohesion, as well as other issues they haven’t wanted to discuss yet.

The civil society networks have points of agreement on key and sensitive issues. We haven’t viewed the AA in the same radical way we did CAFTA. It has helped us understand that we have to work on these processes in a more harmonious and inclusive way, not discrediting each other. I think we learned how much we lose by going our separate ways.

Central American civil society has shown an important level of maturity in all of the AA rounds, and for the first time our networks had concrete proposals on the different issues and even proposals for the wording of the texts. And for the third round, when the government of Nicaragua gave us a copy of its official document titled the “Common Economic and Financial Fund,” it did so to ask for our backing, and to get us in the CID Initiative to advocate its proposal with other Central American and European networks. We responded with a proposal for mechanisms, projects, priorities and policies we believed had to be incorporated, including figures to back it up. But as the Europeans ratcheted up the pressure, information became more and more restricted and the consultations with us became increasingly formal and less real.

Like the United States with CAFTA, Europe told us it was aware of the asymmetries between the regions, but that this would be negotiated during the final round before the signing. The difference was that the United States told us this right from the beginning and Europe told us at the end. The problem is that inequalities have to be recognized from the outset, in all issues and areas. The fundamental issue of asymmetries never appeared and the differentiated special treatment never materialized. Nor did non-reciprocity in favor of the small countries’ trade interests—as established by the WTO. What dominated in both processes was imposition.

European and US interests

In our evaluation, we defined CAFTA as WTO “plus”: what was agreed in the WTO plus something else. Now we’re saying Europe achieved a CAFTA “plus,” because although the negotiation terms are similar, the Europeans are getting more out of Central America than the Americans did. This is true not so much in trade matters, but rather in investments, services and intellectual property, which are the strong points of European capital’s presence in the region. They wanted more than they got in the multilateral WTO world and in less time, with greater pressure and more advantages than those established in the more dragged-out, complex WTO rhythm.

We aren’t certain that the capitals involved in the AA and CAFTA are in collusion, although it’s possible because capital is global now. What we can see is a dispute over Central America, because there’s room here for low-cost investments with very favorable or flexible labor and environmental standards.

There’s also a dispute over the biodiversity resources. With NAFTA, the United States “cut off” the Mesoamerican Biological Corridor in Mexico, leaving a territory below Mexico that is now in dispute between Europe and the United States. We’ve seen the transnationals competing for our biodiversity resources in both the CAFTA and AA negotiating processes. There’s also greater competition between Europe and the United States in certain commercial categories. An intense struggle for the Central American dairy and pork market can be envisaged, for example, but those interests are weaker than the greater interests being played out here.

Central America couldn’t maintain
the appearance of a region

In neither CAFTA nor the AA did we manage to maintain the appearance of a region. In CAFTA it was Costa Rica that hit the discordant note, saying it wasn’t going to sign, although it did in the end. In the AA, it was Nicaragua, although it soon returned to the fold again. But those conflicts amounted to nothing more than points of interest that broke up the monotony of the negotiations, because they didn’t change any trends. What the European Union and the United States have achieved with CAFTA and the AA is the establishment of rules of the game for the new relationship, and the setting of agendas and priorities in political, cooperation and commercial matters.

The seventh round, held in Tegucigalpa, revealed both truths and points of agreement. When Nicaragua left the table, the immediate reaction of the four remaining Central American countries was to continue negotiating without it and propose to the European Union that the process not be delayed. Honduras’ trade negotiator, Melvin Redondo, who was also the spokesperson for that round, explained in a meeting with the business sector that the decision by the four countries was to lament Nicaragua’s absence, not share its position and just continue with the process, leaving open the possibility of Nicaragua rejoining. When Redondo told Europe that they would negotiate as four countries plus Panama, the European Union responded by reminding them that the mandate was to negotiate with all six countries. EU negotiating chief Stefano Sannino regretted Nicaragua’s position, considering that Nicaragua had decided to “dramatize” the negotiations, but hoped it would rejoin.

Civil society will not
participate after the signing

A key aspect revealed in this seventh round was the agreement between Central American and European business¬people and negotiators over civil society’s non-participation in events following the signing of the AA. Meetings between the Central American business sector and the Central American and European negotiators revealed common concerns over future civil society monitoring of environmental and labor issues, even though the AA’s political and cooperation areas expressed that non-compliance with the environmental and labor criteria would have negative repercussions on the commercial area.

In response to civil society’s concerns, Sannino stated clearly and categorically that “we’re not willing to place ourselves in the hands of environmental and labor NGOs. Their role isn’t to monitor; that’s the work of governments.”

What happened to discussion
of the substantive issues?

After seven rounds of negotiations, Central America still hasn’t discussed any of the substantive issues with Europe and we’re quickly moving toward the final round in Brussels in July 2009. The same happened with the United States. By the final hours of the last round in Washington to sign the CAFTA agreement, Central America still hadn’t discussed the issues that were the most sensitive and substantive for the region.

These substantive issues were poverty reduction, sustainable human development, social and economic cohesion, food security and a common economic fund. The idea was to discuss all of this in the last round, sitting around the table with no previous documents. This gives some idea of our negotiators’ irresponsibility in failing to realize that they’re contributing to macabre games they are going to lose. To direct this negotiating process in every way we possibly can, we’re insisting that Central America be given a period of time before the signing to reach agreement on these sensitive issues.

The issue of sustainable development wasn’t dealt with in the agreement’s three main pillars, even though official Europe-Latin America summits have gone on and on with all that nice rhetoric we already know about this agreement being for sustainable development. The Central American governments have also shown a notorious lack of interest and political desire to really apply their minds to this issue. Seeing this, the Europeans made it clear that for them sustainable development is limited to labor and environmental standards. In short, this issue has been treated with disdain, despite the fact that the European Parliament’s negotiating mandate talks of sustainable development. There’s a stark difference between what they say and what they do.

Social cohesion isn’t just any old issue

Nor has there been any interest in addressing the issue of social cohesion, let alone how to strengthen the sectors of the social economy. These sectors in essence represent the democratization of the economy in Central America given that we generate more employment and guarantee food security.

We believe that Central America didn’t address the issue of social cohesion because it’s in crisis in our countries, expressed in people’s uncertainty over employment, their current reality and their future, as well as in their lack of confidence in the executive, legislative and judicial branches and in institutions in general. While it is essential to deal with these issues in detail, the Central American negotiators opted not to do so, leaving social cohesion ignored as if it were just any old issue.

We took the European authorities at their word when they said during one of the summits that neither integration nor development is possible without social cohesion. We told them we had to define social cohesion because the concept was different in Europe and Central America. Over there they’re talking about the welfare state, while over here we’re talking about a state of survival. A poor person over there isn’t the same as a poor person over here, because the poverty levels are so different.

Social and economic cohesion is defined as a society’s capacity to ensure the welfare of all its members, minimizing disparities and avoiding polarization through access to health, education, work and resources for achieving development, even for the most vulnerable sectors. A society with cohesion fights poverty and exclusion. There’s a clear, direct link between economic development and social cohesion.

Social cohesion avoids societies polarized by inequitable resource distribution. We told them that while they said there’s no social cohesion without development, social cohesion necessarily involves reducing poverty; guaranteeing food security; turning our countries into self-sufficient producers and potential agroindustrial exporters; promoting development without continuing to deteriorate the environment; and strengthening the social economy of the small, medium and cooperative and self-managing sectors... And we reminded them that all these issues had been absent during the different rounds.

The dangers of subordinating cooperation
and political dialogue to trade concerns

Following the abrupt withdrawal of the Nicaraguan negotiators in the seventh round, the other four Central American governments expressed their willingness to sign the agreement, even at the expense of integration. The fate of integration mustn’t be left in the hands of technocrats and traders who don’t want organized civil society’s active participation or an informed population. If that happens, the agreement’s commercial area will become the priority of bilateral relations, subordinating cooperation and political dialogue.

If things stay the way they are, the “cooperation” in the AA will be something that just facilitates European businesses. And to top it off, the Common Economic Financial Fund being proposed by the Central American governments will be used to promote European investment in Central America and Central America’s purchase of industrial machinery and products from Europe. The mechanisms for implementing this fund will be those of the private banking sector, which up to now has applied criteria that deny us access to credits. In other words, the fund is more of the same, if not worse, because it gives more to the same old people and less to us, the lead players in the social economy.

We need the cooperation fund for the development of the AA’s support of economic and political democratization and Central America’s sustainable human development, supporting the social economy sector and helping strengthen its institutionality, increasing the capacities of associative and cooperative businesses to recover the added value of our primary production and increase our income.

If the AA doesn’t favor that then it’s of no use to us, because the fund being proposed by the Central American governments doesn’t prioritize the region’s development. It rather attracts foreign investors, regardless of why they are coming, which is a similar goal to that of CAFTA.

Going to Brussels with a
denunciation and certain hopes

We’d like to think that Nicaragua’s tactic of suddenly abandoning the negotiations was aimed at imposing a period of reflection before the signing, at making the negotiating calendar more flexible. We hope it was a delaying tactic to wage a last battle over the financial economic fund and the other more sensitive issues affecting the region’s most impoverished people that haven’t been discussed.

The representatives of Central American civil society who have participated in this process agree with the Nicaraguan government that the cooperation fund for development is essential for fostering the region’s social economy and that the issue of sustainable development must continue to be addressed. Achieving this necessarily involves a campaign aimed at European civil society to decode what has happened so far in the process, expressing things quite plainly so they take note and realize we’re facing a process that is destroying rather than supporting us; dismantling and disintegrating rather than developing us. We need to let them know that all the central issues—food security, social cohesion, funds for the social economy, sustainable development—have so far been excluded from the talks.

We’re going to Brussels with that denunciation and with certain hopes. We’re going with the hope that Nicaragua, Honduras and President Mauricio Funes’ new government in El Salvador will achieve a Central American consensus not to conclude the negotiations unless civil society’s proposals are incorporated, because these proposals are crucial for our economic life and the lives of our people.

Sinforiano Cáceres is president of the Nicaraguan Federation of Cooperatives and a member of the CID Initiative.

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