REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Third Annual Report on the Implementation of Part IV of the Agreement establishing an Association between the European Union and its Member States, on the one hand, and Central America on the other
Date: 2017-04-05
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: Central America, activity report, association agreement (EU), liberalisation of trade, sustainable development, tariff preference, tariff quota, trade cooperation, trade relations, trade statistics

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 5.4.2017  COM(2017) 160 final   REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Third Annual Report on the Implementation of Part IV of the Agreement establishing an Association between the European Union and its Member States, on the one hand, and Central America on the other  
 
 
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Third Annual Report on the Implementation of Part IV of the Agreement establishing an 
Association between the European Union and its Member States, on the one hand, and 
Central America on the other 

1. 

Introduction 

2016 was the third year of implementation of the the Trade Pillar (Part IV) of the EU-Central 
America  Association  Agreement  which  establishes  an  Association  between  the  European 
Union and its Member States, on the one hand, and Central America on the other (hereinafter, 
“the  Agreement”)1.  Under  Article  13  of  Regulation  (EU)  No  20/2013  of  the  European 
Parliament and of the Council of 15 January 2013 implementing the bilateral safeguard clause 
and  the  stabilisation  mechanism  for  bananas  of  the  Agreement  establishing  an  Association 
between the European Union and its Member States, on the one hand, and Central America on 
the other2 (hereinafter, “the Regulation”), the Commission is to present an annual report to the 
European  Parliament  and  the  Council.  The  present  report  is  presented  following  this 
requirement.  

2. 

OVERALL ASSESSMENT: EVOLUTION OF TRADE 

2.1.  Methodology 

In  line  with  the  methodology  used  in  previous  reports  on  the  implementation  of  the 
Agreement3, EU imports are calculated on the basis of EUROSTAT data extracted in October 
2016 whereas EU exports to Central America are based on Central American statistics. Since 
Central American statistics are provided in US dollars these have been converted into Euros by 
applying the annual exchange rate used by EUROSTAT4. 

Naturally, the causes for the fluctuation of trade flows reflect a multitude of factors and cannot 
be  attributed  solely  to  the  existence  or  degree  of  advancement  in  the  implementation  of  the 
Agreement.   

2.2. 

Evolution of overall trade flows with Central America (goods) 

On  the  basis  of  the  statistics  presented  by  the  Secretariat  for  Central  American  Economic 
Integration  (SIECA),  from  2014  to  2015  trade  flows  on  the  one  hand  between  Central 
American  countries  and  the  rest  of  the  world  decreased  by  6%.  On  the  other  hand,  EU  trade 
flows with the rest of the world increased 3.6% during the same period (EUROSTAT). In the 
context  of  this  broader  pattern,  bilateral  trade  between  the  EU  and  Central  America  proved 
quite resilient: Total trade flow between the two regions decreased only moderately (by 0.7%) 

1  
2  
3  
4  

OJ L 346, 15.12.2012, p. 3. 
OJ L 17, 19.1.2013, p. 13. 
COM (2016) 73 final. 
The EUR/USD average exchange rates were 1.3281 in 2013, 1.3285 in 2014 and 1.1095 in 2015 

2 

 
 
                                                 
to €10.5 billion. The EU's trade balance with Central America presented a positive balance of 
€162 million in 2015 (after showing a deficit of €853 million the previous year).   

Trade flow between EU and Central America and annual growth  
(in million Euros - 2015) 

Country   

EU Exports(*) 

EU Imports(**) 

Total flow 

Costa Rica 
Guatemala 
Honduras 
Nicaragua 
Panama 

El Salvador 

TOTAL 

1,312 
1,194 
592 
379 
1,278 

603 

5358 

23.1% 
22.3% 
29.1% 
54.2% 
8.2% 

29.8% 

22% 

2,250 
865 
1,015 
326 
555 

-40.4% 
25% 
20.5% 
14.5% 
26.1% 

195 

5.5% 

3562 
2059 
1606 
705 
1833 

798 

-35% 
23.3% 
24% 
32% 
13% 

23% 

5,196 

-16.8%  10,526 

-0.7% 

*Export data based on statistics reported by each country in the region 

**Import data based on EUROSTAT 

Source: EUROSTAT and SIECA    

2015 saw an overall increase of 22% in EU exports to Central America, according to Regional 
Central American statistics, whereas EU imports by value from Central America fell by 16.8%. 
However, overall positive trends should be noted in the trade flows between the EU and each 
individual Central American country, except Costa Rica, for which trade decreased from €3.77 
billion  to  €2.25  billion,  due  to  the  virtual  disappearence  of  office  and  telecomunication 
equipment manufactures exports by a large ITC multinational in the country. 

For a second year in a row, the relocation to South East Asia of its previously major exporter of 
IT components has had a significant negative impact on the total value of its exports to the EU. 
Imports into the EU from Costa Rica of office and telecomunication equipment decreased  by 
almost 94% in 2015. Total exports of IT equipments went down from €2,372 million in 2013 to 
only €147 million in 2015.  

Office and Telecom 
equipment 

2013 

2014 

2015 

2013-15 
 % change 

 2,372 

1,925 

147 

-93.8 % 

Breakdown of EU imports from Central America and their yearly evolution (in m Euros) 

Source: EUROSTAT and Directorate-General for Trade (DG TRADE) 

On  the  whole,  in  this  third  year  of  implementation  of  the  Agreement  -  and  discounting  the 
significant  decrease  in  exports  of  IT  components  from  Costa  Rica  –  EU  exports  and  EU 
imports to and from each of the six countries in the region have increased by over 20% in 8 of 

3 

 
 
 
 
 
  
the  12  export/import  combinations  possible.  This  is  reflected  in  total  trade  flows  which  have 
increased by more than 20% for 4 of the 6 countries (and above 10% for the fifth). Costa Rica 
still  being  the  outlier  in  2016  due  to  specific  and  endogenous  reasons  which  are  unlikely  to 
continue in future years.   

The concentration  of Central American exports to the EU to a number of key export products 
continues  even  though,  according  to  SIECA,5  the  number  of  products  exported  to  the  EU 
increased in 2015 by 5.3% compared to the previous year. It now covers 1615 products (6 digit 
tariff lines CA HS).  

The following were the main import sectors from Central America (by HS section) for 2015: 
vegetable products (51%); foodstuffs, beverages and tobacco (11.1%); optical and photographic 
instruments  (8.1%).  The  EU´s  main  exports  sectors  to  the  region  were:  machinery  and 
appliances  (23.8%),    products  of  the  chemical  or  allied  industries  (22.6%),  transportation 
equipment (14.3%). 

The  main  destinations  of  EU  exports  to  Central  America  in  2015  were  Costa  Rica  (25%) 
followed by Panamá and Guatemala (24% and 22% respectively). The most exported products 
in  2015  were  pharmaceuticals  (11%  of  EU  exports)  followed  by  motor  vehicles  (7%),  and 
articles made of steel (5%). 

At the same time, significant growth in Central American exports in 2015 was recorded for the 
following products6: 

  Optical and photographic instruments (HS 90) imports into the EU increased by 46% 

from € 284.8 million to €417 million. 

  Medical devices, EU imports rose by 32% (from € 194 million to € 257  million).  

  Coffee imports rose by 33% (from €702 million to €935 million). The region has been 
able  to  overcome  the  losses  caused  by  the  coffee  rust  epidemic  that  heavily  impacted 
Central America`s coffee production and exports in 2014. 

Guatemala increased its exports to the EU from € 691 million in 2014 to € 865 million in 2015. 
Some  of  the  exported  goods  that  have  shown  important  growth  are:  edible  fruit  and  nuts 
(HS08)  grew  up  to  €70  million  (over  130%  growth),  mineral  ores  (HS26)  grew  up  to    €69.2 
million (168% growth) and edible vegetables (HS07) up to €50.3 million (up 30%). 

Nicaragua showed the highest percentage growth in trade flows (32% in 2015). This dynamism 
is marked by a strong increase of EU exports to the country (up 54%) as well as EU imports 
which showed a 14.5% increase from €285 million to €326.5 million. Increase of  EU exports 
to Nicaragua were particularly intense in the following headings: 141% in Electrical machinery 
(HS85) up to €87 million, 202% in Stamps and Printed Books (HS 49) up to €11 million, and 
63%  in  Rubber  (HS  40).  Similarly,  increases  of  imports  from  Nicaragua  were  significant,  in 
particular under the following headings Edible fruits and nuts (HS08) imports grew up to €6.5 

5 Sistema de Integración Económica de Centroamérica. 
6 Source: Eurostat/ DG-Trade. 

4 

 
 
                                                 
million,  coffee  up  to  €94  million  (up  47%)  and  oilseeds  (HS12)  from  €25  million  to  €35 
million (up 29%). 

Trade flows between Honduras and the EU also showed significant increase. EU exports grew 
mainly under the following headings: 88% in Electrical Machinery (HS85) up to €132 million, 
154%  in  Pharmaceutical  Products  (HS30)  and  98%  in  Chemical  Products  (HS38).  Total 
imports into the EU grew from € 841 million in 2014 to € 1.01 billion the following year. Some 
of  the  traditional  products  that  showed  the  highest  growth  were:  coffee  (HS09)  from  €447.3 
million  to  €607.5  million  (up  36%),  tobacco  (HS24)  up  56%  and  edible  vegetables  (HS07) 
which grew from €11.6 million to €19.3 million (up 66%).7 

EU imports from Panama increased 27% due to the growth in headings such as: tyres (HS4011) 
up  to  €  62.4  million  (up  72%),  Animal  Fodder  (HS23)  up  to  €  7.6  million  (123%)  or  more 
important transactions in the shipping industry, Ships and Boats (HS89) more than doubled up 
to € 201 million. The exports of coffee (HS09) – not a traditional commodity from Panama to 
the EU - also grew by 66% .  

Positive variations were also significant in EU exports to Costa Rica (up 23%) and  El Salvador 
(up 30%). In Costa Rica, the following headings saw particular vigour: 21% in Pharmaceutical 
Products  (HS30),  79%  in  Vehicles  (HS  87)  and  38%  in  Chemical  Products  (HS38).  In  El 
Salvador, the increases of 53% in Mecanical Machinery (HS84), 75% in Electrical Machinery 
(HS85) and 60% in Medical Devices (HS90) deserve special mention. 

2.3. 

Use of tariff preferences under the Agreement 

The use of the tariff preferences granted by the Agreement can be estimated by assessing the 
fraction  of  the  trade  flow  which  is  carried  out  within  the  framework  of  the  Agreement.  This 
requires  detailed  custom  clearance  data.  Central  America  has  informed  the  EU  that  the 
databases  managed  by  their  respective  Customs  authorities  are  not  currently  adapted  for  a 
regular  exchange  of  detailed  statistics  to  analyse  the  tariff  preference,  with  the  exception  of 
Costa Rica which provided the EU with such data. 

For 2015, Costa Rican statistics show that 16.6% of total EU exports to Costa Rica were made 
under the benefits provided by the Agreement and additionally 13.2% of tarriff lines were fully 
liberalized. In so far as EU imports originating from Central America are concerned, 53% of 
this flow (in value) was made under the aegis of the Agreement.  

2.4. 

Use of tariff rate quotas (TRQs) 

The Agreement provides for tariff rate quotas (TRQs) which grant the other party a preferential 
tariff  treatment  up  to  the  quota’s  quantitative  threshold.  Above  this  threshold,  imports  are 
subject to the applicable Most-Favoured Nation (MFN) tariff. 

The Association Agreement grants eight TRQs to Central America on products that did not 
have any preferential access to the EU market prior to the entry into force of the Agreement. In 

7 Source: Eurostat 

5 

 
 
                                                 
2015, Central America used the available TRQs for products originating in Central America for 
only two categories (cane sugar and rum).  

n
i
g
i
r
O

Central America 

Central America 
except Panama 

s
t
c
u
d
o
r
P

Garlic 

Rice 

Bovine meat 

Mushroom 

Manioc starch 

Sweetcorn 

Sugar 

t
i
n
U

ton 

e
m
u
l
o
v

Q
R
T

t
r
o
p
m

I
U
E

550 

22,000 

10,450 

275 

5,000 

1,680 

n
o
i
t
a
s
i
l
i
t

U

e
t
a
r

0% 

0% 

0% 

0% 

0% 

0% 

0 

0 

0 

0 

0 

0 

159,000 

158,993 

100% 

Rum in container > 2 l 

Litre Pure Alcohol 

7,600 

2,187  28.8% 

TRQs granted by the EU to Central America – Utilisation in 2015 

In addition to TRQs, the EU also granted Central America a derogation to the rules of origin 
under specific quotas for 118 tariff lines. In the second year of application (2015) imports under 
these  quotas  remained  very  low.  Some  of  the  goods  that  benefitted  from  the  preferential 
treatment  were  tuna  loins  (Central  American  quota)  with  a  18%  utilization  rate,  briefs  and 
panties from Costa Rica with 27%, brassieres from Costa Rica with a utilization rate of 100% 
and pantyhoses from El Salavador with 14%. 

Central America granted the EU TRQs on four specific products. EU exporters made use of 
the  opportunities  offered  by  these  TRQs  in  2015,  although  there  continues  to  be  a  margin  of 
growth given that current utilisation rates remain under 50% in the best of cases: 

s
t
c
u
d
o
r
P

Cured hams 
Powdered milk 
Cheese 
Prepared swine meat 

e
s
a
e
r
c
n
i

)
n
t
(

)
n
t
(

e
l
m
a
a
u
t
u
n
o
l
u
n
o
Q
V
A
260 
45 
990 
1,240 
148 
95 
2,345  150  1,155 
51 
45 

990 

e
t
a
r
n
o
i
t
a
s
i
l
i
t

U
26% 
14%8 
44%9 
4.9% 

TRQs granted by Central America to the EU – Utilisation in 2015 

8 Average percentage based on available data per CA country. 

6 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 
 
 
 
 
 
 
 
 
 
 
2.5. 

Trade in Services  

At the time of writing, data for trade in services for 2015 was not available (the lag behind data 
for goods is well known), so figures for 2014 will be examined. These amounted to €5.9 billion 
(a decrease of 3% compared to 2013). In 2014, Panama remained the major trading partner in 
services (53% of total trade flow in services with the region) followed by Costa Rica (21%) and 
Guatemala (13%). 

Country 

Costa Rica 
El Salvador 
Guatemala 
Honduras 
Nicaragua 
Panama 
Total 

Credit 
631,3 
224,8 
874,9 
195,0 
204,7 
1456,4 
3587,1 

2013 
Debit 
499,3 
90,1 
202,5 
187,4 
48,7 
1580,1 
2608,1 

Total 
1130,6 
314,9 
1077,4 
382,4 
253,4 
3036,5 
6195,2 

Credit 
678,1 
231,7 
535,2 
160,3 
153,7 
1525,4 
3284,4 

2014 
Debit 
563,2 
83,4 
225,8 
89,6 
91,1 
1644,4 
2697,5 

Total 

1241,3 
315,1 
761,0 
249,9 
244,8 
3169,8 
5981,9 

% 

Total 
10% 
0% 
-29% 
-35% 
-3% 
4% 
-3% 

Trade in services between Central America and the EU in 2014 (In m Euros) 

Source: EUROSTAT 

Honduras  and  Nicaragua  –  under  €300  million  each  in  total  flows  -  saw  very  significant 
fluctuations  (in  percentage  terms)  of  their  trade  figures  from  2013  to  2014  seeing  a  dramatic 
fall on the debit side (-52%) in the case of Honduras and an almost doubling of the same (87%) 
in the case of Nicaragua.  

The  larger  markets  of  Panama,  Costa  Rica  and  Guatemala  saw  more  moderate  variations 
(generally under 10%) as did El Salvador. 

3. 

ACTIVITIES OF THE IMPLEMENTATION BODIES 

3.1. 

Sub-Committee on Technical Barriers to Trade (TBT) 

On 2 June 2016, the sub-committee on TBT reviewed the following topics via videoconference 
(VCR): 

  The EU raised specific trade concerns on onerous registration processes required to put 
products  on  the  market  in  in  Central  America,  and  lack  of  progress  towards  internal 
processes of technical harmonisation.  

  The EU presented a specific trade concern on the introduction of technical regulations 

(ice cream, fruit juices, and alcoholic beverages) by Panama. 

  The EU also expressed concern on "certificates of free sale" requested in Guatemala.   

Finally, Central America was invited to make further progress on the effective implementation 
of a series of region-wide technical regulations which are ready to be adopted to ensure follow 
up to Article 305 of the agreeement and to further regional economic integration. 

7 

 
 
3.2. 

Board on Trade and Sustainable Development 

From  14-16  June  2016,  the  EU  and  Central  America  held  the  meetings  of  the  institutions  in 
charge of monitoring the implementation of the Trade and Sustainable Development provisions 
of the Agreement (see part 4 below).  

3.3. 

Sub-Committee on Intellectual Property 

On 15 June 2016, the third meeting of the sub-committee on Intellectual Property Rights (IPR) 
took place to review in particular the following issues: 

  The protection and enforcement of IPR in Central America and especially Geographical 
Indications  (GIs),  as  well  as  studying  ways  in  which  to  streamline  registration 
procedures.  

  Possible  actions  to  foster  an  enabling  environment  for  potential  (essentially  privately 

owned) technology transfer. 

On  GIs,  the  EU  expressed  concerns  on  the  on-going  litigation  in  Guatemala  between 
"Parmigiano Reggiano" and "Prosciutto di Parma" and the local trademark "Parma", as well as 
on  the  publication  by  Honduras  of  a  list  of  alleged  generic  terms,  some  of  which  raised 
concerns with regard to their possible conflict with EU GIs protected via the Agreement. 

This  meeting  also  provided  the  opportunity  for  an  exchange  of  views  on  possible  working 
arrangements to facilitate the updating of the list of protected GIs.  

3.4. 

Sub-Committee on Sanitary and Phytosanitary Matters (SPS) 

In  the third meeting  of  this sub-committee, held on 14-15 June 2016, the EU highlighted the 
following: 

  The importance for Central America to fulfil procedures established in the Association 
Agreement to ensure that market access requests are handled in a timely and transparent 
manner, including the approval of lists of establishment and verifications; 

  The  importance  of  complying  with  standards,  guidelines  and  recommendations  of  the 

international standard setting organisations; 

  The  need  to  present  scientific  information  to  support  legislation  and  import 

requirements that deviate from international standards. 

  The need for Central American countries to continue with the process of implementing 
the provisions on regional economic integration which will facilitate trade relations. 

3.5. 

Sub-Committee on Customs Procedures, Trade Facilitation, and Rules of Origin 

Topics discussed on 13 and 14 June 2016 during this sub-committee included: 

  The fulfilment of Central America´s regional integration commitments in the area; and 

8 

 
 
  Draftingtwo explanatory notes in the area of rules of origin to solve practical problems 

encountered by Central America.  

The  Parties  worked  towards  agreement  on  the  common  interpretation  of  certain  aspects  of 
Annex II through Explanatory Notes on the filling out of EUR.1 movement certificates and the 
appropriate treatment of errors or minor mistakes. 

Moreover, the Parties agreed to update the classification system by the entry into force of the 
latest version of the WCO Harmonized System Nomenclature (HS 2012). The final list would 
be adopted by the Association Council by written procedure. 

Finally, Central America requested extending the possibility to cumulate tuna originating from 
Mexico  and  Chile.  The  EU  agreed  to  analyse  the  issue  subject  to  the  necessary  cooperation 
being in place between the countries. 

3.6. 

Sub-Committee on Market Access for Goods 

On 13 June 2016, during the meeting of this sub-committee, the Parties reviewed commitments 
taken during previous meetings and discussed issues of EU interest, notably: 

  Costa Rica´s commitment to review its excise duty system for beers; 

  The commitment taken by Costa Rica to remove tax discrimination for spirits as of 1 

October 2017 (as stipulated in the Agreement); 

  Nicaragua charging a fee for the scanning of goods at border checkpoints; 

  Honduras’ import licensing system for the importation of onions. 

The EU and Central America agreed that access to reliable, updated and detailed statistics was 
essential for trade policy and committed to continue exchanging statistics at the regional level. 

3.7. 

Ad hoc meeting on Government Procurement 

The  Parties  agreed  to  create  a  temporary  technical  ad  hoc  working  group  on  Government 
Procurement  that  met  for  the  first  time  on  16  June  2016.  While  the  Agreement  does  not 
establish  a  sub-committee  on  this  topic,  it  has  become  clear  that  it  is  suitable  to  address 
government procurement under the agreement. Parties exchanged information on legislation in 
different  Central  American  countries  and  their  conformity  with  the  provisions  of  the 
Agreement. The EU stressed in particular practices recently adopted by Panamanian authorities 
that  needed  revision  in  light  of  the  Agreement.  As  provisions  of  its  law  on  government 
procurement  were  currently  under  review,  the  EU  urged  Panama  to  introduce  the  necessary 
changes to its legislation. 

3.8. 

Association Committee 

On 23 June 2016, the Association Committee held its third meeting to review the work carried 
out by the different subcommittees and to discuss other trade related issues.  

9 

 
 
The  EU  explained  the  importance  of  full  GI  protection  in  Central  America  and  expressed 
concerns in regard to  recent practices in Guatemala and Honduras. Moreover, the EU recalled 
Central  America´s  commitments  to  make  their  best  endeavours  in  the  implementation  of 
internationally  agreed  standards  as  regards,  inter  alia,  financial  services,  the  fight  against 
money  laundering,  terrorism  financing,  and  tax  evasion.  The  EU  presented  its  iniatiatives  on 
corporate taxation (PAN-EU list, BEPS) and invited Central America to work jointly on these 
issues.  

The EU also urged Costa Rica to put an end to tax discrimination currently applied to beer and 
as agreed in their Joint Declaration, as well as Panama to comply with the Agreement´s chapter 
on government procurement.  

As regards regional economic integration, Central America explained that the fulfilment of the 
commitments  taken  towards  the  EU  was  followed  very  closely  by  Central  American  Trade 
ministers in their meetings as COMIECO in the framework of SIECA. The EU insisted on the 
importance of implementing certain technical regulations as soon as possible, 

As regards amendments to the Agreement resulting from the accession of Croatia to the EU, the 
Parties recognised that, despite some progress, there was still a gap between the approaches as 
regards  the  methodology  to  assess  possible  compensation  following  Croatia’s  accession.  The 
EU urged Central America to adopt a constructive approach, especially given that the EU had 
already  concluded  discusions  with  all  other  preferential  partners  of  the  EU  in  Latin  America 
with satisfactory solutions for both parties. It was agreed to continue the dialogue with a view 
to finding an agreement as soon as possible. 

FULFILLMENT  OF  OBLIGATIONS  ON  TRADE  AND  SUSTAINABLE 

4. 
DEVELOPMENT 

4.1 

Institutional Aspects 

The third meeting of the Board on Trade and Sustainable Development was held in Honduras 
on 15-16 June 2016.  

The Board exchanged information on labour and environmental issues including topics such as 
social  dialogue,  non-discrmination,  responsible  value  chains,  circular  economy,  and  wildlife 
trade. The "Trade for All" Communication was highlighted by the EU, with its values agenda 
being of particular relevance to the TSD Board. 

A meeting of the Civil Society Dialogue Forum – comprising representatives of EU and Central 
American  civil  society  –  was  held  on  17  June  2016.  Civil  society  representatives  from  all 
Central  American  countries  except  Panama  and  from  the  EU  were  present.  A  workshop  on 
Trade  Schemes  and  Practices  for  Sustainable  Development  and  a  meeting  of  advisory  group 
members  from  both  regions  were  also  held.  Civil  society  representatives  presented  a  joint 
declaration to the Board, to which the Board committed to respond at a later stage. For further 
information  see  http://www.eesc.europa.eu/?i=portal.en.events-and-activities-3rd-eu-central-
america.   

10 

 
 
  4.2 Implementation of International Labour Organization (ILO) Conventions 

During the meeting of the Board on Trade and Sustainable Development, the Parties reported 
on  their  implementation  of  ILO  conventions,  and  on  recent  legislative  developments.  El 
Salvador and Guatemala responded to questions raised by the EU regarding ILO Convention on 
freedom  of  association,  respectively  discussed  as  serious  case  and  extremely  serious  and 
urgents case in the International Labour Conference the preceding week.  

It  was  noted  that  El  Salvador  and  Guatemala  were  discussed  in  the  ILO  Supervisory 
mechanisms  in  June  2016  regarding  their  implementation  of  Convention  87  on  Freedom  of 
Association  and  the  Right  to  Organise,  on  cases  of  violence  and  murders  of  workers 
representatives. The EU will continue  monitoring  the situation and promote  cooperation with 
the ILO in this regard. 

4.3. Implementation of multilateral environmental agreements 

During the Board meeting, Parties also exchanged views on environmental issues and i.a. Costa 
Rica  described  its  strategy  of  using  its  ambitious  low-carbon  targets  to  drive  innovation  in 
productive  sectors  such  as  coffee  and  livestock.  The  EU  flagged  developments  including  the 
Circular Economy package and Wildlife Trade Action Plan.  

Central American parties and the EU noted that they had cooperated on a number of issues in 
the CITES Conference of the Parties held in September 2016, including through EU support to 
a proposal from Guatemala and three other CITES members to regulate trade in all Dalbergia 
(rosewood) species. 

4.4. Development of a positive agenda for trade and sustainable development 

Discussions continued on on the development of a positive agenda, with some divergent views 
on  the  main  focus  of  such  activities.  A  proposal  to  organise  an  event  on  responsible  global 
value chains in early 2017 received general support.   

5. 

IMPLEMENTATION  OF  REGULATION  (STABILIZATION  MECHANISM 
FOR BANANAS) 

The  Agreement  provides  a  preferential  customs  duty  on  bananas  for  each  Central  American 
country  under  heading  0803.00.19  (fresh  bananas)  since  the  date  of  entry  of  the  Agreement 
until  the  year  2020  (indicated  in  a  tariff  reduction  table  by  year  and  country).    This  special 
treatment is based on a stabilisation clause that sets out an annual trigger volume for imports 
from the countries of Central America during the transition period. 

If as a result of the reduction of customs duties the level of imports of bananas be such as to 
cause or threaten to cause serious injury to the EU banana sector, the Regulation establishes the 
appropriate procedures to be adopted to avoid serious harm to this  sector. The Commission has 
been monitoring the evolution of imports of bananas from Central American countries (as per 
Articles 3 and 13 of the Regulation) to assess whether the conditions set out in the Regulation 
are met so as to initiate a safeguard investigation or introduce prior surveillance measures.  

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Whilst  banana  imports  from  Guatemala  did  exceed  their  trigger  level  by  27%  in  2015,  the 
Commission  did  not  initiate,  nor  received  requests  to  initiate,  any  safeguard  investigation  or 
introduction of prior surveillance measures.  These imports were not considered to threaten the 
EU banana sector. At the same time, the other Central American countries did not come near to 
reaching their trigger levels under the stabilisation mechanism. In fact, at the end of 2015 the 
overall  total  volume  that  had  benefitted  from  preferential  treatment  in  Central  America  was 
only 65% of the established threshold.  

Country 
GUATEMALA 
HONDURAS 
NICARAGUA 
PANAMA 
COSTA RICA 
EL SALVADOR 
TOTAL 

Used Volume 
79 068 834 
4 440 601 
8 389 294 
207 829 771 
927 260 997 
0 
1 226 989 497 

Trigger Level 
62 500 000 
62 500 000 
12 500 000 
468 750 000 
1 281 250 000 
2 500 000 
1 890 000 000 

% 
127 
7 
67 
44 
72 
0 
65 

2015 import of bananas under the stabilisation mechanism (in kg) 

6. 

CONCLUSION 

After three years since it came into force, the implementation process is advancing steadily and 
the institutional framework under the Agreement is working well. 

Despite negative global trends in the Central American trade environment, EU trade flows with 
Central America proved to be fairly dynamic. The relocation of a major regional exporter (IT 
components) in Central America has continued to have a strong negative impact – as it did in 
2014  –  although  the  remaining  exports  from  Central  America  to  the  EU  grew  on  average  by 
13.8% in 2015, with the notable contribution of the recovery in exports by the coffee industry, 
which grew 34% compared to the previous year. EU exports to Central America have kept pace 
with this level of growth, increasing by a robust 22% over 2015. 

Despite this solid growth, the usage of existing preferences remains rather low for EU exports 
to Central America, but is noticeably better for EU imports from Central America. It is possible 
that  further  communication  efforts  in  the  EU  are  necessary  to  increase  the  knowledge  of  the 
benefits  that  the  Agreement  provides  to  EU  exporters.  The  Commission  continues  to  be 
engaged  in  actions  aimed  at  increasing  the  awareness  of  economic  operators  as  regards  the 
opportunities presented by the Agreement. Member States action would also be relevant.  

Given  that  the  tariff  rate  quotas  remain  largely  under-utilised  there  remains  evident 
opportunites for economic operators to develop trade relations further.  

As regards the bananas stabilization mechanism, total imports from Central America remained 
stable  overall  and  well  below  the  cumulated  trigger  levels.  Although  banana  imports  from 
Guatemala  exceeded  the  trigger  level,  it  was  deemed  unnecessary  to  consider  initiating  any 
suspension of preferential customs duties, as it was not considered to destabilise the EU market. 

12 

 
 
 
In terms of trade in services, for 2014, flows between the two regions decreased marginally to € 
5.9  billion.  Panama,  Costa  Rica  and  Guatemala  continue  to  be  the  most  important  trading 
partners in this economic area. However, the trade series is still too limited to be able to assess 
the impact of the Agreement on the trade flow in services. 

A priority for the EU will be to continue maintaining and enhancing the positive cooperation 
established  with  Central  America  with 
the  correct 
implementation  of  the  Agreement  by  all  relevant  actors.  Economic  operators,  consumers  and 
civil society from both regions will thereby be able to take full advantage of the opportunities 
provided by the Agreement and build upon these further consolidating a mutually advantageous 
relationship.  

the  common  aim  of  achieving 

The  correct  functioning  of  the  institutions  under  the  Agreement  is  crucial  to  its  proper 
implementation. They provide the forum in which to engage in discussion and seek acceptable 
solutions for all Parties on issues ranging from compliance with commitments made under the 
different  Titles  of  the  Agreement  (such  as  Trade  and  Sustainable  Development,  Public 
Procurement  and  others)  to  market  access  issues  and  generally  help  to  tackle implementation 
challenges in a structured and mutually agreed manner. 

In  this  regard,  more  recent  efforts  have  focused  on  cooperation  on  labour  issues  and 
environment  standards,  with  a  broader  view  in  terms  of  civil  society  participation,  social 
dialogue, circular economy and value chains  - all of these in line with the EU’s current trade 
policy.10 

The  Commission  will  continue  to  engage  in  the  process  of  implementation  with  Central 
America and to address any concerns related to the implementation of the Agreement as raised 
by firmes, citizens or other stakeholders. The Commission equally calls upon the EU Member 
States and the European Parliament to continue to actively contribute in this process.   

10 See “Trade for All” policy document (http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf) 

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