News and Analysis • Volume 13 • Number 2 • June 2009

15 - Europe Scrambles to Finalise Latin American Agreements

Any hope of a region-to-region Association Agreement between the European Union and the Andean Community seems to be definitely shattered. The race is on for concluding a similar pact with Central American countries in July, but the deadline may well slip.

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Of the four the Andean countries, only Peru and Colombia are still pursuing full-scale ‘association agreements’, as the EU’s trade pacts with developing countries are called. The agreements consist of three pillars, one on trade, another on development co-operation and financing, and a third on political dialogue.

Bolivia, an original party to the talks, has boycotted the negotiations since 2007 in protest over the EU’s stance on intellectual property rights and the privatisation of services. In May, President Evo Morales reconfirmed that his country would negotiate “neither the privatisation of our natural resources, nor the privatisation of basic services, nor allow patents on living organisms.” Mr Morales added that differences in these areas were so profound that it would be impossible for Bolivia, Peru and Colombia to develop a common negotiating position vis-à-vis the EU.

Now, Ecuador’s participation in the negotiations appears in doubt as well. Although the country did attend talks on the pact in early May, two weeks later President Rafael Correa said in a weekly radio address that Ecuador was ‘very concerned’ about the direction the negotiations were taking: “The European Union can give [the deal] whatever pretty name it wants, but we are headed toward a free trade agreement, and we will not accept that.”

Ecuador’s foreign minister Fander Falconi and chief trade negotiator Mentor Villagomez said that the country would participate in discussions on intellectual property, financial services, government procurement, competition and access to agricultural markets only as an observer. This did not mean that Ecuador was abandoning the negotiations, the officials assured, but rather that it needed more time to judge whether an eventual agreement would be in line with the new constitution adopted in September 2008. The principle had been accepted by the EU, as well as Peru and Colombia, they added.

The latter two countries are still keen to push forward in the talks, but concerns remain over intellectual property issues, including the EU’s insistence on a ‘data exclusivity’ period of up to 11 years, during which health authorities cannot release confidential clinical trial data to generics manufacturers. Progress could also be frustrated by European concerns over labour and human rights violations in Colombia. “There is no disagreement on the objectives. We all want better judicial procedures, fewer killings and a government with clean hands,” said Rupert Schlegelmilch, the EU’s chief negotiator for the Andean nations. “The Colombian government is taking on board [our] recommendations,” he added. “It is certainly still a bad situation, but it is improving.”

The talks were slated to conclude in June, but many think that September is a more realistic possibility.

After Snags, Central American Pact Is (Almost) Back on Track

Neither has it been plain sailing for region-to-region negotiations between the EU and Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama, collectively referred to as CAFTA countries because all six are party to the US-Central American Free Trade Agreement.

In April, the seventh round of the talks ended in disarray when Nicaragua walked out due to lack of support for its proposal to establish an economic and financial fund of -60 billion, nine-tenths of which would be financed by the EU. European negotiators said the amount was far too large, and the other five parties agreed. However, the EU said it was ready to contribute financially within the resources already allocated to Central America in its development budget. On 25 April, the EU announced the establishment of a bi-regional working group on a financial mechanism for regional development.

Negotiations resumed in May with a focus on trade liberalisation commitments after two years of discussions mostly centred on other aspects of the pact. The EU called for the CAFTA countries to open their markets to industrial and agricultural products considered ‘highly sensitive’. Although negotiators have been tight-lipped about the details, it is thought that the EU is particularly interested in duty-free access for its dairy and pork products, as well as olive oil, protected by geographical indications. Other items on the EU wish list include lower duties for pharmaceuticals and cars.

However, Central American sources predict that services liberalisation could prove the real stumbling block in the negotiations. The EU is known to have high ambitions in opening up sensitive sectors, such as telecommunications and financial services.

EU External Relations Commissioner Benita Ferrero-Waldner said in May that she hoped the next round of talks, scheduled for 6-10 July, would be the last. Her Nicaraguan colleague, Valdrak Jaentschke Whitaker, countered that a good deal would be preferable to a quick one.

Warning on Health Impacts

A study on the agreement’s impacts on access to essential medicines, published by European and Andean civil society groups in May, found that five million Colombians and more than six million Peruvians would lose access to affordable medicines by 2030 unless public health budgets were increased by US$280 million and US$250 million respectively.

Together, the EU’s proposals on patent protection and data exclusivity would increase the prices of medicines by up to 34 percent, the groups said. They also castigated the EU for adopting a more aggressive approach to IP protection by developing country FTA partners than the US.