final inception report: ex-post evaluation of the ......ex post evaluation of the implementation of...
TRANSCRIPT
Prepared by BKP Economic Advisors 28 May 2021 The views expressed in the report are those of the consultant and do not present an official view of the European Commission
Ex-post evaluation of the implementation of part IV of the Association Agreement
(Trade Pillar) between the EU and its Member States and
Central America
Inception Report
28 May 2021
EUROPEAN COMMISSION
Directorate-General for Trade Directorate D mdash The Americas Agriculture and Food Safety Unit D2 Latin America
European Commission B-1049 Brussels
Ex-post evaluation of the implementation of part IV of the Association Agreement
(Trade Pillar) between the EU and its Member States and
Central America
Inception Report
28 May 2021
The information and views set out in this report are those of the authors and do not necessarily reflect the official opinion of the Commission The Commission does not guarantee the accuracy of the data included in this study Neither the Commission nor any person acting on the
Commissionrsquos behalf may be held responsible for the use which may be made of the information contained herein
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its
Member States and Central America ndash Inception Report
Directorate-General for Trade 2021
LEGAL NOTICE
This document has been prepared for the European Commission however it reflects the views only of the authors and the Commission cannot be held responsible for any use which may be made of the information contained therein
More information on the European Union is available on the Internet (httpwwweuropaeu)
Luxembourg Publications Office of the European Union 2021
ISBN [number] doi[number]
copy European Union 2021 Reproduction is authorised provided the source is acknowledged
Printed in [Country]
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Page 6
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Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page vii
ABSTRACT
Since 20131 the European Union (EU) has been implementing the Trade Pillar ie the
Part IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The European
Commission has now commissioned a consortium led by BKP Economic Advisors to
undertake an evaluation of the Trade Pillarrsquos (hereinafter EU-CA FTA) implementation and
impact The evaluation is undertaken over the period January 2021 to May 2022 and
analyses the economic social environmental and human rights (including labour rights)
effects which the EU-CA FTA has had since its entry into force in the Parties to the
Agreement and third countries In terms of evaluation criteria it will review the
effectiveness impact efficiency coherence and impact of the EU-CA FTA and its
implementation It will also comprise ten case studies to illustrate or add detail to broader
findings
This Inception Report presents the evaluation methodology a descriptive summary of the
Agreement and its implementation so far and a brief review of relevant studies on the EU-
CA FTA
1 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El Salvador since 1st October 2013 and with Guatemala since 1st December 2013
Page viii
TABLE OF CONTENTS
LIST OF BOXES TABLES AND FIGURES IX
ACRONYMS X
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES 1
2 EVALUATION FRAMEWORK 2
21 Intervention hypothesis of the Agreement (Task 1) 2
22 Evaluation Questions Judgement Criteria and Indicators 5
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2) 6
31 Analysis of economic effects (Task 10) 6 311 Task 101 Analysis of the evolution of trade in goods 6 312 Task 102 Analysis of the evolution in trade in services 8 313 Task 103 Analysis of the evolution of foreign direct investment (FDI) 8 314 Task 104 Presentation of overall economic impacts 9 315 Task 105 Determining the impact on implementation of the Trade Pillar of the various
institutional structures 9 316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated exportimport procedures for key stakeholders 10
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the Trade Pillar 10
318 Task 108 Analysis of the implementation of the Government Procurement chapter of the Trade Pillar 10
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar 10 3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has led to a
greater economic integration between the Central American partners 11 3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for imports of
bananas 11 3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on SMEs 11 3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers 11 3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on the
budgets of the EU and the partner countries 12 3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on EU
Outermost Regions (ORs) 12 3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on developing
countries in particular on LDCs and countries having an Economic Partnership Agreement (EPA) with the EU 12
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable development (Tasks 11 and 12) 13 321 Task 111 Analysis of the effects of implementation of the Trade and Sustainable
Development (TSD) chapter of the Trade Pillar 13 322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter 13 323 Task 113 Analysis of employment impacts 14 324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda (job
creation labour standards social protection and social dialogue) on working conditions
poverty reduction and enforcement 14 325 Task 115 Analysis of impacts on the informal economy and informal employment 15 326 Task 116 Analysis of impacts on gender inequality 16 327 Task 118 Analysis of impacts on the adoption and implementation of internationally
recognised instruments of responsible business conduct and Corporate Social Responsibility (CSR) 17
328 Task 117 Analysis of environmental impacts 18 3281 Activity 1 Fine-tuned methodology and impact screening and scoping 19 3282 Activity 2 Establishing the baselines for the impact areas 20 3283 Activity 3 Quantitative evaluation of impacts 20 3284 Activity 4 Qualitative evaluation of impacts 21
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page ix
3285 Activity 5 Answering of the evaluation questions and other concluding remarks 21 3286 Conclusions and recommendations 21
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human rights 21 3291 Human rights baseline 22 3292 Screening and scoping 22 3293 Detailed assessment 23 3294 Conclusions and recommendations 24
33 Concluding tasks 24
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3) 25
41 Methodological aspects 25
42 Substantive issues 25
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5) 29
51 Structure of the EU-CA FTA 29
52 Institutional set-up of the EU-CA FTA 31
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo priorities 33
54 Operational context of the implementation of the EU-CA FTA 35
6 CONSULTATIONS (TASKS 6 AND 7) 41
61 Consultation Strategy 41
62 Study Website and Electronic Communications 41
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13) 42
71 Case Study Selection 42
72 Case Studies ndash Summaries and Methodologies 43
8 STUDY WORK PLAN 43
LIST OF BOXES TABLES AND FIGURES Box 1 The use of the DPSIR framework in FTAs 20 Box 2 Expectations regarding inputs from stakeholders 41 Table 1 Methodological approaches and sources for the analyses of trade in goods 6 Table 2 Methodological approaches and sources for the analysis of trade in services 8 Table 3 Methodological approaches and sources for the analysis of bilateral FDI 8 Table 4 Overview of the EU FTAs launched and or concluded since 2012 36 Table 5 EU FTA in Latin America and participating countries 37 Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021) 39
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking 40 Table 8 List of proposed case studies 42 Figure 1 Overall evaluation approach 2 Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association
Agreement 3 Figure 3 Overview of the multi-pronged approach to human rights impact assessment 24
Page x
ACRONYMS
AA Association Agreement ACP African Caribbean Pacific BATIS Balanced Trade in Services CA Central America CCA Causal Chain Analysis CGE Computable General Equilibrium CPI Consumer Price Index CSD Civil Society Dialogue CSR Corporate Social Responsibility DAG Domestic Advisory Group DG Directorate-General ECLAC Economic Commission for Latin America
and the Caribbean EESC European Economic and Social Committee EFTA European Free Trade Association EP European Parliament EQ Evaluation Question EU European Union EU-CA FTA Trade Pillar of the EU-Central America
Association Agreement FDI Foreign Direct Investment FRA EU Agency for Fundamental Rights FTA Free Trade Agreement GATS General Agreement on Trade in Services GDP Gross Domestic Product GHG Greenhouse Gas GIs Geographical Indications GPA Government Procurement Agreement GSIM Global Simulation GSP Generalised Scheme of Preferences GTAP Global Trade Analysis Project HRIA Human Rights Impact Assessment ILO International Labour Organisation IPR Intellectual Property Rights ITC International Trade Centre
JC Judgement Criterion LDC Least Developed Country LULUCF Land use land use change and forestry MFN Most-Favoured Nation MSME Micro Small or Medium-sized Enterprise NGO Non-Governmental Organisation NTB Non-Tariff Barrier OECD Organisation for Economic Cooperation and
Development OHCHR Office of the United Nations High
Commissioner for Human Rights OR Outermost Region
RBC Responsible Business Conduct RoO Rules of Origin SDGs Sustainable Development Goals SIA Sustainability Impact Assessment SICA Central American Integration System SIECA Secretariat for Central American Economic
Integration SME Small or Medium-sized Enterprise SPS Sanitary and Phyto-Sanitary TBT Technical Barriers to Trade TISMOS Trade in Services data by mode of supply ToR Terms of Reference TRIPS Trade-Related Aspects of Intellectual
Property Rights TRQ Tariff Rate Quota TSD Trade and Sustainable Development UN United Nations UNCTAD United Nations Conference on Trade and
Development UNECE United Nations Economic Commission for
Europe WTO World Trade Organisation
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 1
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES
Since 20132 the European Union (EU) has been implementing the Trade Pillar ie Part
IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The Trade Pillar
(hereinafter EU-CA FTA) gradually opens markets on both sides increases the stability and
predictability of the trade and investment environment and aims at creating benefits for
consumers and fostering sustainable development Its objectives include also support for
regional economic integration in Central America This is also one of the first EU ldquonew
generationrdquo trade agreements characterised by its comprehensive scope that covers in
addition to liberalisation of trade in goods and services investment public procurement
competition intellectual property rights and trade and sustainable development
After several years of implementation an evaluation is undertaken with the objective of
analysing the economic social environmental and human rights (including labour rights)3
impacts of the implementation of the EU-CA FTA and ultimately of determining whether
there is a need to improve its implementation To support the European Commissionrsquos own
evaluation of the Agreement the Directorate-General (DG) for Trade has awarded a
contract for the ldquoEx-post evaluation of the implementation of part IV of the Association
Agreement (Trade Pillar) between the EU and its Member States and Central Americardquo to
a consortium led by BKP Economic Advisors (BKP) The evaluation is carried out by a team
involving experts from BKP Trade Impact BV Trinomics the Foundation Rural
Development Consult (CDR) the NL-investmentconsulting BV and the University of Costa
Rica The work started in January 2021 and will continue until May 2022
The scope of the evaluation can be delineated as follows in terms of the period covered
it includes the whole implementation period of the EU-CA FTA since the start of provisional
application in 2013 up to now also comparing where appropriate with a five-year period
preceding the entry into force of the Agreement (ie starting in 2008) Geographically it
primarily covers the Parties to the Agreement although some effects of the EU-CA FTA on
selected third countries are also analysed such as developing countries and particularly
least developed countries (LDCs) moreover some global effects (eg climate change)
will also be covered Regarding evaluation criteria effectiveness impact efficiency
coherence and relevance will be considered Finally as already mentioned in terms of
types of effects considered the evaluation will cover economic social environmental and
human rights (including labour rights) effects which the EU-CA FTA may have had either
as a result of the changes in trade it has brought about or through the implementation of
the provisions of the Agreement text itself notably those of the Trade and Sustainable
Development (TSD) chapter
Although most data to be considered for the evaluation are likely to refer to the world pre-
COVID-19 the pandemic will have an impact on the study First in terms of the evaluation
implementation it is likely to affect the consultation activities that may need to be carried
out online rather than in person Second in substantive terms it will be important to pay
attention to issues which are of a priority for stakeholders in the current circumstances
(eg by selecting case studies accordingly) and to consider that eg stakeholder views
might be affected by the current situation
This inception report is the first deliverable under the contract It comprises seven tasks
of the evaluation (as established in the Terms of Reference see Figure 1) focusing on the
presentation of the evaluation methodology and is structured as follows Chapter 2
2 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El-Salvador since 1st October 2013 and with Guatemala since 1st December 2013 3 Whenever this report refers to human rights this includes labour rights
Page 2
presents the evaluation framework with an intervention hypothesis (task 1) while Chapter
3 outlines the proposed methodology responding to the evaluation questions (task 2) and
Chapter 4 covers a brief review of relevant studies on the Agreement (task 3) Chapter 5
provides a descriptive summary of the EU-CA FTA and its implementation so far (task 5)
followed by outline of consultation activities in Chapter 6 (tasks 6 and 7) supported by the
consultation strategy provided in Annex B as well as a list with a preliminary selection of
case studies in Chapter 7 (task 13) The final part includes study work plan in Chapter 8
The draft outline of the interim and final evaluation reports is presented in Annex A7 Other
parts of the Annex provide further details on certain elements of the report
Figure 1 Overall evaluation approach
2 EVALUATION FRAMEWORK
21 Intervention hypothesis of the Agreement (Task 1)
An indicative intervention hypothesis developed by the Commission linked the operational
objectives (as listed in Article 78 of the EU-CA FTA) to specific and overall objectives set
out in Article 2 of the Agreement and its Recitals In line with Task 1 of the evaluation ToR
we have adapted the intervention logic developed by the Commission as follows
All 10 operational objectives listed in Article 78 of the Agreement have been included
Specific and overall objectives have been considered in the context of short-term and
medium-term outcomes as well as long-term impacts
Underlying assumptions have been identified and integrated into the intervention
hypothesis
The relationship between the evaluation questions (EQ) and the intervention hypothesis
has been specified
The updated version of the intervention hypothesis is presented in Figure 2 overleaf
The intervention hypothesis was also instrumental in developing the analytical framework
of the evaluation which brings together the evaluation questions of the ToR the associated
judgment criteria and indicators the data sources and the methodological tools with which
we will collect data The refined analytical framework is presented in the following sub-
section
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 3
Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association Agreement
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 5
Main assumptions (at the level of coherence)
Pillar IV and its implementation has been coherent with the EUrsquos trade and development
policies and in particular with the EUrsquos commitment to sustainable development in
trade policies as a contribution towards attainment of the SDGs (EQ8)
Main assumptions (at the level of efficiency)
The utilisation rate of the Trade Pillar is high (EQ5)
Implementation of the Trade Pillar does not lead to trade diversion (EQ5)
Costs associated with implementation of the Trade Pillar are proportionate to the
benefits it has generated (EQ6)
The distribution of both costs and benefits is proportionate among different
stakeholder groups and interests (EQ6)
Implementation of the Trade Pillar does not create unnecessary regulatory costs
(including administrative burden) (EQ7)
Main assumptions (at the level of effectiveness impact and relevance)
The implementation of the Trade Pillar does not create unintended negative
consequences (EQ3)
The positive impact of the Trade Pillar is inclusive and does not benefit only a limited
group of stakeholders (EQ6)
Implementation of the Trade Pillar has contributed to trade diversification (EQ5)
Provisions of the Trade Pillar continue to be relevant for strengthening trade relations
between the Parties and regional integration of Central America (EQ9)
22 Evaluation Questions Judgement Criteria and Indicators
The evaluation framework has been based on the evaluation questions listed in the ToR for
the study which are as follows
EffectivenessImpact
EQ 1 To what extent have the objectives as laid down in Article 78 of Part IV of the
Agreement been achieved
EQ 2 What are the factors influencing (either positively or negatively) the achievements
of the objectives specified in Article 78
EQ 3 Has implementation of the Trade Pillar had unintended (positive or negative)
consequences and if so which ones
EQ 4 What has been the impact of implementation of the Trade Pillar
Efficiency
EQ 5 To what extent has implementation of the Trade Pillar been efficient with respect
to achieving its objectives
EQ 6 To what extent are the costs associated with implementation of the Trade Pillar
proportionate to the benefits it has generated Is the distribution of both costs and
benefits proportionate among different stakeholder groups and interests
EQ 7 Are there unnecessary regulatory costs (including administrative burden)
Coherence
EQ 8 To what extent has implementation of the Trade Pillar been coherent with the
EUrsquos trade and development policies ndash and in particular with the EUrsquos commitment to
sustainable development in trade policies as a contribution towards attainment of the
SDGs
Relevance
EQ 9 To what extent do the provisions of the Trade Pillar continue to be relevant in
order to address the current trade needs and issues of the EU and Central America
Page 6
The framework provides the evaluation questions the judgement criteria for each of them
the analysis needed to substantiate findings and conclusions made in the evaluation report
and the sources through which data and information will be obtained The evaluation
framework also links evaluation questions and judgement criteria to the analytical tasks to
be performed according to the ToR Table 1-1 in Annex A1 presents this framework
It should be noted that methodological tools and indicators used are not shown in the table
but are explained in the next chapter
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2)
In this chapter we describe the methodologies and tools planned to be used in the
evaluation separately for each task The analysis will be concluded with recommendations
on how the implementation of the Agreement can be further improved for the benefit of
the EU and Central American partner countries It should be noted that the structure of
the presentation is in line with the tasks defined in the ToR to facilitate comparison and
compliance with ToR requirements However the order of findings will be guided by the
evaluation framework presented in chapter 2 To facilitate the link with the evaluation
framework for each task we indicate to which evaluation question respectively judgement
criterion it contributes
31 Analysis of economic effects (Task 10)
In 2010 the EU was Central Americarsquos second most important trade partner after the
United States (and after intra-regional Central American trade) The total value share of
the EU in Central American trade was 94 EU exports mainly went to Costa Rica (53)
Honduras (22) and Guatemala (12) In 2018 the EU was still Central Americarsquos second
trade partner after the United States but with a higher share of 122 of all Central
American trade (IMF 2019) In 2019 Central Americarsquos trade with the US (in both goods
and services) totalled USD 70 billion (ie EUR 678) (USTR) Trade in goods with the EU
reached EUR 12 billion in 2019 and trade in services EUR 82 billion in 2018 (European
Commission 2020a)
311 Task 101 Analysis of the evolution of trade in goods
Analysis under this task will seek to respond to the evaluation questions related to JC 1A1
1A2 and JC 41 The EU-CA FTA offers advantages in terms of market access for the EU
and Central American countries Some of the main elements of the Agreement regarding
goods exports from the EU to Central America are complete liberalisation of tariffs for
manufactured goods and fisheries at the end of the tariff phase-out period and immediate
liberalisation of 69 of EUrsquos exports to CA at the start of the agreement saving EUR87
million in duties annually Specific analyses to be carried out under Task 101 have been
summarised in Table 1 For each sub-task we present the specific analysis that needs to
be carried out and main methodological approach we suggest as well as relevant data
sources
Table 1 Methodological approaches and sources for the analyses of trade in goods
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
1 Goods showing the largest increase or decrease in total and bilateral trade flows
Using COMEXT statistics at different disaggregation levels the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing products
2 Development of trade in goods against previously applicable GSP+ and GSP tariffs
Taking COMEXT data as a basis to investigate whether the GSP status of a product has a bearing on how the EU-CA FTA has influenced the rate of growth in trade we will compare two groups of goods those for which tariffs were 0 under GSP versus those for which tariffs were greater than 0 under GSP+
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 7
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
3 Preference utilisation rates and forgone duty saving of economic operators of all Parties
Based on COMEXT data (for EU imports) and data provided by the Commission (for EU exports) a quantitative analysis will be undertaken to identify the key sectors and product categories where preferences are not fully used We propose to include up to 3 questions in the survey to identify factors that encourage discourage companies to use the Agreement
4 Use of tariff rate quotas (and the reasons for suboptimal use)
Data up to 2019 is already available in the Commissionrsquos annual implementation reports Updating the data is supposed to rely on similar sources as the Commissionrsquos annual reports Reasons for sub-optimal use of TRQs will be investigated during the consultations as this cannot be inferred through statistical analysis
5 Trade diversion in particular from interregional Central American trade towards the EU
First we aim to use COMEXTCOMTRADE data to analyse the evolution of merchandise trade flows over time (between the EU and the partners but also within the region in comparison to the rest of the world)
Second we aim to look at the CGE results that should be able to tell us the pure EU-CA FTA effect on intra-Central American trade flows
6 Impact of the Agreement in relation to the creation persistence reduction or removal of non-tariff measures (NTMs) that have a significant impact on EU-CA countriesrsquo trade in goods
We will use UNCTADrsquos NTM TRAINS database and classification for identification description and analysis of specific NTMs affecting trade relations between the EU and Central America We will also look at NTMs including market access barriers raised by the Parties in the sub-committee meetings and will complement the findings with stakeholder engagement
7 Analysis of the importance of Free Trade Zones in Panama (especially the FTZ in the Port of Colon)
Using trade statistics we can get a picture of the way trade flows entering Central America via the Port of Colon (for example) are distributed across Central American countries These patterns ndash at sector level ndash would tell us the most economically significant EU exports This
will be complemented by qualitative analysis
8 Investigation of whether new enterprises started to export or whether enterprises already exporting started to export new products
We expect to undertake this analysis by relying on available firm-level data as well as specific questions for SMEs in the targeted business survey the SME Panel questionnaire and other consultation activities directed towards SMEs Additionally for this sub-task we will try to get access to national databases containing firm-level panel data based on highly disaggregated customs information that include exports (imports) of products and their destinations
9 Analysis of the evolution of trade import shares originating in the EU in total imports of the six CA countries (and vice versa)
COMEXT and COMTRADE data will be used to carry out this analysis We will ensure that we specify the third countries in a clear way The EU and each of the Central American countries The United States Mexico and Canada but also Brazil Argentina
Paraguay and Uruguay (Mercosur) and China Other countries (Rest of World)
10 Analysis of the impact of the EU-CA FTA implementation on diversification of trade
The diversification of trade in goods will be evaluated according to two main dimensions 1 Diversification in the range of products traded between the EU and each of its partners 2 Diversification in the number of EU member states trading with the Central American partners
11 Comparison of the development of trade in goods between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
COMEXT and COMTRADE data will be used to carry out this analysis Regarding trade of the partner countries the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as the MERCOSUR countries The choice of the US can be explained by CAFTA-DR agreement that has been in place since 2006 between the US and Central America and the Dominican Republic
12 Investigation of whether the EU-CA FTA has facilitated trade with third countries including via the use of intermediate products
Use of GTAP data (since the Trade in Value Added ndash TiVA database only covers Costa Rica) to look at intermediate linkages and whether these have helped the competitiveness of the CA economies We will also look at the CGE modelled development of the real exchange rate as an indicator of what happened to CA economiesrsquo levels of competitiveness
13 Analysis of the degree to which implementation of the EU-CA FTA has contributed to diversification of sources of supply of goods
COMEXT and COMTRADE data will be used to carry out this analysis We will look at the inputs shares for specific products in CA from the EU and vice versa and compare the development of these shares to the shares for the same products from international trade partners
14 Identification of regions within the partner countries that have benefited most and of
regions having benefited least (including the identification of constraints)
We expect to rely mainly on a combination of mapping of the sectoral CGE effects per region with literature review and consultation activities to identify the regions that have most least benefited from the
agreement Social progress indexes are computed at municipal level in Costa Rica and at provincial level in Panama as well as for some regions in Guatemala and El Salvador but this is for 2017-2018 only
Page 8
312 Task 102 Analysis of the evolution in trade in services
Analysis in this task is linked to JC 1A3 Although the effects of trade agreements on EU
services trade with third countries are not easily quantifiable we will seek to use available
data to demonstrate the impact of the EU-CA FTA on EU services trade We will assess
whether the Agreement has led to an improvement or worsening of the structural
imbalance between the parties The EU posted a substantial services trade surplus of EUR
10 billion with all six Central American partners combined in 2013 but this surplus has
decreased to EUR200 million by 2017
Table 2 Methodological approaches and sources for the analysis of trade in services
Specific analysis to be carried out
Main methodological approach and sources
1 Services showing largest increase decrease in total and bilateral trade flows between individual CA countries and EU
We will identify sectors showing the biggest increase in total trade in services flows and in bilateral trade flows as well as those having performed worst This analysis will be conducted using time series trade statistics at different levels of disaggregation (from Eurostat OECD and UNCTAD) the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing sub-sectors Reasons for performance will be identified by a combination of sources including literature review and targeted consultations
2 Comparison of the development of
trade in services between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
The comparison of the development of bilateral trade in services between the EU and the individual Central American countries with the development of trade in services
for the EU and its Member States and for Costa Rica Guatemala El Salvador Honduras Nicaragua and Panama with a suitable reference group of countries will provide further evidence on the actual impact of the agreement of trade in services flows As is the case for trade in goods (Task 101) the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as MERCOSUR countries if possible The choice of the US matters because of the CAFTA-DR agreement that has been in place since 2006
3 Analyse trends in international financial capital flows and the evolution of key financial industry segments ndash with the GATS modes of supply as the basis
First we will analyse trends in international financial capital flows between the EU and the Central American countries as well as globally For this we will use available Eurostat OECD andor UNCTAD data as well as Central Bank data if available
Second in order to look at how sectors are performing (well or not so well) we will focus on a concise general ndash but sector level ndash analysis and what drivers we can identify for economic performance
Third we propose that the following case study (see Task 13) could be undertaken Evaluating financial industry segments such as banking insurance asset management sustainable investment ndash in Panama or Costa Rica
Data source suggestions The OECDrsquos Services Trade Restrictiveness Index The GATS Trade Restrictiveness Index which together establish the amount of ldquowaterrdquo in the partiesrsquo GATS
bindings that can be ldquosqueezedrdquo by a modernised Agreement Central Bank data on financial and insurance services economic activity and trade Global Investment Competitiveness Report (World Bank 2019) ISDB data from Eurostat BOP statistics
313 Task 103 Analysis of the evolution of foreign direct investment (FDI)
The analysis in this task will be linked to JC 1A5 Although the effects of trade agreements
on Foreign Direct Investment (FDI) with third countries are not easily quantifiable we will
seek to use available data to demonstrate the impact of the EU-CA FTA on FDI At a general
level this task will entail to assess what impact the EU-CA FTA has had on structural
balances or imbalances between the EU and its Central American partners
Table 3 Methodological approaches and sources for the analysis of bilateral FDI
Specific analysis to be carried out
Main methodological approach and sources
1 Largest increases decreases in FDI flows between individual CA countries and the EU
We will identify main changes in FDI flows over the past 10 years between the EU and Central American countries if possible at sector level This analysis will be conducted using the ITC investment map data UNCTAD investment data and ISDB data from Eurostat BOP statistics Data limitations are expected to be significant for this subtask Reasons for good or bad performance will be identified by a combination of sources including literature review and targeted consultations
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 9
Specific analysis to be carried out
Main methodological approach and sources
2 Comparison of the development of FDI flows between the signatory countries
The proposed methodology would examine the investment effect at both the extensive and intensive margins using the two-step Heckman (1979) estimation as implemented in Helpman et al (2008)
3 Analysis of the investment climate
and of the attractiveness to investment of the six CA countries
An analysis of the investment climate and of the attractiveness to investment of the six Central American countries taking into consideration the possible impact of the
existence of bilateral investment treaties or of double-taxation treaties will be undertaken We propose to review inter alia the evolution of the following indexes OECDrsquos Foreign Direct Investment Restrictiveness (FDIR) index Various FDI attractiveness and FDI confidence indexes ndash eg by AT Kearny and Ernst amp Young Global Investment Competitiveness Report (World Bank 2019) World Bank lsquoDoing Business Indicatorsrsquo ISDB data from Eurostat BOP statistics wwwinvestmentmaporg from the ITC
314 Task 104 Presentation of overall economic impacts
The analysis in this task is linked to JC 41 and will rely on the computable general
equilibrium (CGE) modelling undertaken by DG Trade The CGE model is the quantitative
cornerstonefoundation of the ex-post evaluation Important variables of interest for the
economic analysis will be those which are standard for a CGE analysis such as GDP and
trade flows (total bilateral and by sector) and sectoral output Based on the CGE modelling
results we will estimate the overall impact on the economy of the EU the partner countries
as well as third countries in particular LDCs The economic analysis will build further on
the modelling results We will report these in sufficient detail to highlight the economic
effects of the EU-CA FTA More details on the CGE model are provided in Annex A2
315 Task 105 Determining the impact on implementation of the Trade Pillar of the
various institutional structures
Our analysis under this task will seek to respond to evaluation questions No 1 and 5 (with
JC1A2 JC1A6 JC1A7 and JC1A9) ie how the operation of the institutional set up has
contributed to achieving the objectives of the EU-CA FTA outlined in Article 78 and how
effective and efficient the Association Committee (in trade configuration) six Sub-
committees and an ad hoc Working Group have been to date To determine this we will
analyse provisions of the EU-CA FTA referring to institutions and their operation in practice
In the first step we will analyse Articles 4-8 establishing the Association Council the
Association Committee and Sub-Committees and setting out their decision-making powers
This will be done jointly with Articles 345-346 setting out specific tasks of the Association
Council and the Association Committee acting in trade configuration including powers to
amend certain parts of the Agreement (within Trade Pillar) This will be followed by Articles
347-348 about Part IV coordinators and Sub-Committees established under EU-CA FTA and
will be complemented by the analysis of Articles 91 123 139 156 274 and 294 outlining
areas of responsibility of the individual Sub-committees4 and the Rules of Procedure of the
Association Council and the Association Committee (Decision No 12014 of the Association
Council) which also apply to Sub-Committees This will let us develop an understanding
about the mandate of each institution its decision-making powers including those related
to amending the EU-CA FTA and monitoring compliance by each Party frequency and
format of meetings relations with other institutions under the Agreement reporting and
escalation In this way we will establish an expectation regarding the role each institution
should have in implementation of the EU-CA FTA and achieving its objectives
4 Sub-committee on Market Access for Goods (Article 91) on Customs Trade Facilitation and Rules of Origin (Article 123) on Technical Barriers to Trade (TBT) (Article 139) on Sanitary and Phytosanitary Matters (SPS) (Article 156) on Intellectual Property (Article 274) Board on Trade and Sustainable Development (TSD) (Article 294) and Ad hoc Working Group on Government Procurement
Page 10
In the second step we will analyse the actual operation of all the above structures based
on available documents and engagement with the Parties as well as relevant stakeholders
We will take as the basis reports from Sub-committee and Association Committee meetings
and will complement them with the annual Commissionrsquos Implementation Reports and
other documents eg conclusions adopted by civil society representatives at the annual
meetings under the TSD chapter We will also determine whether formal decisions have
been taken by the Association Council or Committee and if so analyse the extent to which
they have contributed to implementation of the EU-CA FTA We will also look at concerns
raised by the Parties how they have been addressed and how much time it took to achieve
a satisfactory solution Based on findings from our analysis we will provide conclusions
and recommendations for the future notably for the TSD board
316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated
exportimport procedures for key stakeholders
Analysis in this task will be related to JC 1A2 Based on reviews of the Agreement text as
well as the work of the Sub-committee on ldquoCustoms Trade Facilitation and Rules of Originrdquo
we will analyse in a qualitative way which customs-related aspects have facilitated or
complicated bilateral trade like rules of origin management of TRQs agricultural safeguard
measures and approved exporter status We will seek to determine eg whether Article
304 par 1 provision (related to reimbursement of duties in CA Party of transit and their
payment in the CA Party of import) is applied in practice and if so how it is evaluated by
economic operators
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the
Trade Pillar
This task is also linked to JC 1A2 and the methodological aspects described above are also
valid for SPS related issues We see two subtasks under this request 1) An analysis to
what degree implementation of the SPS Chapter in the EU-CA FTA has facilitated agri-food
trade without lowering any partyrsquos SPS standards 2) The extent to which the capacity
building and technical assistance provided by the EU to Costa Rica El Salvador Guatemala
Honduras Nicaragua and Panama has had an effect (looking at what technical assistance
projects and funds were used)
318 Task 108 Analysis of the implementation of the Government Procurement
chapter of the Trade Pillar
The analysis in this rask is linked to JC 1A6 and will examine the impact of the opening of
the government procurement markets of the Parties using a multi-step approach 1)
Review of the recent and ongoing work of the Ad Hoc Working Group on Government
Procurement 2) A statistical analysis of the procurement value shares for EU business (if
possible) and SME participation which will be complemented by desk research and
anecdotal evidence of success stories of EU companies in Government procurement
markets of six CA countries and 3) Review of the level of compliance with the Agreement
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar
This task is related to JC 1A7 and 1A8 The methodological approach foreseen to analyse
other areas of the Agreement (like Technical Barriers to Trade e-commerce Competition
and protection of intellectual property rights (IPRs) including geographical indications)
Our approach focuses on 1) Statistical analysis compiling statistical descriptive analysis
on each issue prior to and after entry into force of the Agreement 2) Literature review
the analysis on the implementation and use of geographical indications in Central America
(eg Rivar 2020) 3) Case studies A specific case study on some of these other issues
could be carried out
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 11
3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has
led to a greater economic integration between the Central American partners
This task is linked to JC 1A4 The EU-CA FTA has been a mechanism that encourages
regional integration but it takes place within a much wider framework of regional
cooperation efforts between the CA countries with the EU-CA FTA being only one element
in this wider context This task focuses on the impact of the EU-CA FTA on regional
integration not on the overall trend or state of affairs regarding regional integration We
use three elements for our analysis 1) The statistical analyses that we have carried out in
Tasks 101 (trade in goods) 102 (trade in services) and 103 (FDI) help to shed light on
regional integration impact of the EU-CA FTA also 2) We look at the results of the CGE
analysis including at how the intra-regional trade patterns have changed because of the
EU-CA FTA 3) We investigate what progress has been made in terms of the different
elements for integration We will use EU and CA data sources to underpin our analyses
3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for
imports of bananas
This task is related to JC41 We envisage three types of analysis under this task in addition
to a possible case study 1) Descriptive statistical analysis based on trade in bananas since
2008 in order to capture developments before and after the entry into force of the EU-CA
FTA distinguishing bilateral trade in bananas EU banana imports from the non-LDC ACP
countries from LDCs and intra-EU imports from the Outermost Regions 2) A quantitative
impact analysis using a partial equilibrium model ndash the Global Simulation (GSIM) model
(Francois and Hall 2009) 3) A qualitative impact analysis causal chain analysis will be
applied to look at what the Agreementrsquos sector-level social and environmental effects have
been In this step we focus in the socialhuman rights pillars on how vulnerable groups
could be affected at sector level The qualitative sectoral environmental analysis will cover
the impact of the FTAs on land use and related issues water and waste management and
biodiversity and protection
3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on
SMEs
The analysis in this task is linked to JC 41 The ldquoSME-Testrdquo will be guided by the following
steps 1) Consultation of SME Stakeholders SMEs are a central element of the consultation
strategy and will be present at every stage of it 2) Identification of affected business
early on in the analysis we will identify whether and which SMEs (eg medium-sized) are
among the affected businesses 3) Identification of concrete stories as the Interim Report
progresses we will have sufficient information to identify 20 concrete stories from SMEs
as required by the Terms of Reference
3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers
This task will be approached in two parts the first one being dedicated to impacts on
consumer rights and the other one to welfare-related impacts of the EU-CA FTA which also
affect consumers in their purchasing decisions The analysis will be related to JC 42 and
evaluation questions No 18 and 6 In addition we will aim to determine to what extent
EU-CA FTA has contributed to attaining SDG 1 (no poverty) and 10 (reduced inequalities)
Regarding consumer rights in the first step we will refer to the literature according to
which consumers usually benefit from global trade and preferential trade agreements due
to lower prices of purchased goods and services (resulting from reduction of tariff and non-
tariff barriers) a wider variety of traded goods and services the related satisfaction of
diversified needs and preferences and higher quality of available goods and services
Page 12
In the second step we will consider impacts which the EU-CA FTA (might) have had for
consumers regarding availability safety sustainability traceability and quality of traded
goods and services as well as which impact its promotion (or consumersrsquo awareness of it)
may have on consumersrsquo knowledge regarding the market offer and their trust in it The
list of questions to test will be guided by the EU Better Regulation Tool Nr 32 related to
impacts on consumers We will also draw on other parts of the study analysing
implementation of provisions related to regulatory measures and standards eg TBT
SPS TSD dialogue and cooperation between the EU and partner countries and
transparency to outline what level of protection incl consumer protection and production
standards is provided by the EU-CA FTA We will also refer to the EU RAPEX database ie
the alert system for dangerous non-food products listing notifications of such products
originating from the EU and partner countries
The second part of our analysis will focus on impacts of the EU-CA FTA on welfare In the
first step based on literature review and statistical data including relevant indexes (eg
the share of population living below the poverty line) we will analyse trends in the reporting
period in the EU and Central America regarding situation of consumers from different
groups of the population incl incomes expenditures levels of poverty and inequality
income and price levels wages and other types of income and any changes in this context
In the following step we will use outcomes of the economic modelling to estimate impacts
on welfare and inequality resulting from EU-CA FTA implementation eg prices and wages
In this context we will also consider to what extent the Agreement helped to attain SDG
No 1 (No Poverty) and SDG No 10 (Reduced Inequality) This will be complemented by
stakeholder consultations and finished with conclusions and recommendations
3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on
the budgets of the EU and the partner countries
The analysis in this task is linked to JC 41 It will examine impact of the FTAs on the EU
budget (ie revenues forgone) and will largely result from the economic model We
anticipate that for the EU the foregone tariffs on imports from the partner countries will
be estimated based on the level of EU imports from the selected countries as a baseline
and the tariffs that would have applied to those imports
3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on
EU Outermost Regions (ORs)
This task is linked to JC 41 The impact on ORs will be assessed based on the trade
diversion and deflection identified in the CGE analysis A key limitation in the economic
modelling framework is however that the EU ORs are not established as a separate region
To meaningfully analyse the effect on the EUrsquos ORs we propose two elements 1) A
matching analysis for the EU and the six partner countries regarding products that matter
for ORsrsquo trade (to either partner countries or the EU) 2) Competition analysis between
ORs and CA partner countries for exporting to the EU The effects will be determined
qualitatively distinguishing if applicable the ORs which might be positively or negatively
affected by the Agreement
3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on
developing countries in particular on LDCs and countries having an Economic
Partnership Agreement (EPA) with the EU
This task is related to JC 41 Our approach to look at the EU-CA FTArsquos impact on developing
countries and LDCs will largely consist of the interpretation of the results of the economic
model simulations which has defined lsquoLDCsrsquo as a separate region This allows us to look at
the effect the EU-CA FTA has had on them We will also look closely at effects for countries
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 13
which are implementing an Economic Partnership Agreement (EPA) with the EU In terms
of the impact we will look first at an economic impact followed by effects on the other
sustainability pillars The former will include (i) a matching analysis for the EU and the six
partner countries regarding products that matter for LDCsrsquo trade (to either partner
countries or the EU) and (ii) competition analysis between LDCs and CA partner countries
for exporting to the EU We do not expect the effect to be significant for the LDCs because
the global impact of the EU-CA FTA is limited
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable
development (Tasks 11 and 12)
321 Task 111 Analysis of the effects of implementation of the Trade and
Sustainable Development (TSD) chapter of the Trade Pillar
This is one of the priority tasks linked to JC 1A1 In the first step we will divide provisions
of the TSD chapter into thematic blocks to identify areas for further analysis These include
commitments of the Parties to effectively implement in their laws and practice the eight
fundamental conventions of the International Labour Organization (ILO) as well as the
Multilateral Environmental Agreements to which they are Party the right of the Parties to
regulate sustainable management of natural resources promotion of trade supporting
sustainable development institutional provisions and dispute settlement mechanism
In the second step based on findings from the analysis of the actual situation in the EU
and partner countries carried out in Tasks 113-118 and documents outlining the
implementation of the TSD chapter (eg reports of international monitoring bodies
reports from meetings of the TSD Board and civil society advice to the Parties) we will
map activities undertaken by the Parties in areas covered by the TSD chapter in a break-
down prepared in the first step This will enable us to conclude to what extent the scope
of the TSD chapter has been covered and if actions taken by the Parties individually and in
cooperation activities have contributed to the implementation of TSD commitments and
attaining the objectives of the chapter and relevant SDGs (No 8 on decent work and
employment for all No 13 on combating climate change and No 14-15 on sustainable
use and protection of marine environment forests and biodiversity) Our analysis will be
complemented by stakeholder engagement5 We will conclude the analysis with
recommendations for the future incl any improvements in operation of institutions to
support compliance of the Parties with provisions of the TSD chapter
322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter
This is one of the priority tasks liked to JC 1A10 and evaluation questions No 1 5 and 8
In the first step we will analyse formal commitments of the Parties regarding the set up
and operation of the institutional mechanism ie Article 294 (Contact Points of the Parties
the TSD Board and civil society Advisory Groups) and Article 295 (Civil Society Forum)
In the second step we will analyse the establishment and operation of TSD institutions in
practice including their meetings activities undertaken between sessions cooperation and
5 When the Report refers to stakeholder engagement it means diverse activities foreseen in the stakeholder engagement programme outlined in detail in Annex B to this Report (Consultation Strategy) For each task stakeholder engagement activities will be tailored to the most relevant group of stakeholders methodology applied in the task and type of data which will be needed for the analysis For example in the analysis carried out with regard to TSD chapter the focus will be on targeted interviews with civil society members of the Advisory Groups in the EU and Central American countries as well as with Government and Commission representatives Further sources of information and activities will include targeted meetings eg DAG meetings and workshops with Central American countries CSD meetings with the European civil society and written positions submitted by civil society organisations As a complementary source we will use replies from online public survey
Page 14
dialogue between Governments and civil society The analysis will be based on reports
from meetings research studies recommendations from civil society to the Parties and
interviews with representatives of the Commission Governments from Central America
EU Delegations the EESC secretariat of the EU Advisory Group as well as civil society
representatives from the EU and Central American countries including members of their
Advisory Groups We will also evaluate effectiveness and efficiency of the institutional
mechanism and its role in the monitoring and implementation of the TSD chapter the
ability to address problems and to pursue cooperation and dialogue We will put an
emphasis on the evaluation of the TSD Board its ability to monitor compliance with the
commitments of the Parties effectiveness in choosing priorities and structuring the work
programme pursuing cooperation activities and resolving problems This part will also
analyse civil society capacity to exercise its mandate and monitoring implementation of
TSD chapter the quality of dialogue between Governments and civil society and the follow-
up to civil society recommendations In this context and in line with suggestions provided
by reviewed research studies we will also evaluate to what extent the discussion among
the civil society and between Governments and civil society focuses on substance
(compared to focusing on process) and whether the civil society has the means and
capacity to prepare for and to engage in such a discussion We will conclude the analysis
with recommendations for the future incl any improvements in operation of institutions
323 Task 113 Analysis of employment impacts
The analysis in this task will focus on impacts for employment levels and relate to JC 42
and evaluation questions 4 and 6 In the first step we will analyse trends in employment
and unemployment levels in the EU and partner countries for their whole economy and
across sectors over the reference period We will also identify factors influencing observed
trends including macroeconomic and labour policy measures applied by the Governments
investment in education and skills development migration from rural to urban areas and
across region and impacts of trade and investment including through trade agreements
In the second step the analysis will be focused on assessing quantitative impacts (direct
and indirect) of the EU-CA FTA on the number of jobs direct and indirect (for skilled and
un-skilled workers for the EU and partner countries across sectors) and be based on the
results of the economic modelling We will compare these results with the real-life data
and trends observed in the first step to conclude to what extent the reduction in trade
barriers and changes in output across sectors related to the implementation of the EU-CA
FTA have influenced demand for labour given the assumption of a fixed total employment
in the economy and full labour mobility between the sectors with workers leaving sectors
seen as less competitive and moving towards those having better prospects of growth and
working conditions including wages We will also draw a conclusion to what extent
observed trends in employment should be attributed to the EU-CA FTA and to what extent
to other factors incl macroeconomic environment global trends in commodity prices
domestic policy investment and trade agreements with other partners Stakeholder
consultations will help to verify our findings
324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda
(job creation labour standards social protection and social dialogue) on
working conditions poverty reduction and enforcement
This is one of the priority tasks Our analysis will seek to answer the evaluation questions
No 1 4 and 6 (JC 42) Given the broad scope of this task we will divide it into two parts
a) labour standards and social dialogue (the Decent Work Agenda) b) working conditions
including social security and health care coverage of workers and labour inspection
In the first step we will describe the situation in the EU and partner countries and changes
over time regarding the subject matter as well as factors influencing observed trends We
will focus on the following
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 15
Task 114 a) on labour standards will look at the implementation of the core labour
standards as enshrined in the fundamental ILO Conventions ratified by all Parties to
the EU-CA FTA and evaluated by the ILO monitoring bodies6 Regarding trends in child
labour occurrence the analysis will include eg the number of working children types
of activities and sectors involved the number of hours worked per week motives for
undertaking work and involvement in hazardous work Influencing factors will be
considered and their impact on job availability for adult household members the level
of generated income and the extent to which it covers family needs Regarding forced
labour the analysis will include types of activities and sectors involved and influencing
factors including criminal activity and the level of law enforcement On freedom of
association and the right to collective bargaining the analysis will cover conditions for
setting up joining and operation of trade unions and employer organisations and
functioning of social dialogue for the whole country and ndash if data is available ndash across
sectors including indicators such as the share of trade union members in the total
number of workers for the whole country and in a break-down by sector and changes
over time Regarding non-discrimination at work we will focus on groups of workers
which may be in a disadvantaged position on the labour market eg youth disabled
persons migrants or indigenous peoples (women will be analysed in Task 116) and
indicators such as labour participation rate and unemployment rate the share of each
group working informally or being in a situation of sub-employment (ie receiving a
wage below the minimum level despite working full time or having no opportunity to
work full time despite being ready to do so)
Task 114 b) on working conditions and labour inspection will include trends in job
quality indicators over time the average number of working hours per employee per
week the number or rate of fatal and non-fatal accidents at work social security and
health care cover of workers wage levels type of contract the number of labour
inspectors and inspections carried out at work places and the infrastructure and funds
being at the disposal of inspection services (we will consider in that context that all EU
Member States and five Central American countries except Nicaragua have ratified
the ILO convention No 81 on labour inspection)
In the second step based on economic modelling we will identify the sectors most affected
(positively or negatively) by the EU-CA FTA and using the analysis done in step one will
seek to determine if trends observed in the respect for labour standards and quality of
working conditions in individual sectors can be attributed to the operation of the Agreement
or rather to other factors In cases where any concerns related to labour standards eg
child labour incidence or low presence of trade unions are identified in sectors particularly
involved in trade with the EU notably in exports we may apply an in-depth analysis in a
dedicated case study We will also refer to the implementation of the TSD chapter to
establish whether policy dialogue cooperation activities and engagement with civil society
have also influenced the situation We will complement desk research with stakeholder
engagement
325 Task 115 Analysis of impacts on the informal economy and informal
employment
This is one of the priority tasks linked to evaluation questions No 1 and 8 (JC 42) We will
also aim to determine to what extent the Agreement has contributed to attaining objectives
of SDG No 1 (no poverty) and No 10 (reduced inequalities) In the first step we will
develop a description of the situation in the partner countries during the analysed period
concerning the size and structure of the informal economy and factors influencing its
6 These include conventions No 138 and 182 on elimination of child labour No 29 and 105 on prohibition of forced or compulsory labour No 87 and 98 on freedom of association and the right to collective bargaining and No 100 and 111 on equal pay for work of equal value and non-discrimination at work
Page 16
existence as well as its geographic pattern in Central America and each of the partner
countries separately We will aim to identify if there are links between the informal
economy and eg the economic structure and dynamic in certain regions and their
involvement in trade We will also report about steps taken by the Governments in a move
towards formal economy including dedicated national strategies adopted in Costa Rica and
Guatemala
In the second step based on the results of the economic modelling and trade statistics for
trade and investment flows between the EU and Central American countries an additional
literature review and stakeholder consultations we will aim to establish to what extent
trade and in particular the EU-CA FTA has contributed to the observed trends in each
partner country We will verify our findings in stakeholder consultations
326 Task 116 Analysis of impacts on gender inequality
The analysis in this task will seek to answer the evaluation questions No 1 4 and 6 (JC
42) We will also aim to determine to what extent EU-CA FTA implementation has helped
to attain SDG No 5 (gender equality) No 8 (decent work and economic growth) No 1
(no poverty) and No 10 (reduced inequalities) Work under this task will be guided by the
approach proposed in UNCTADrsquos Trade and Gender Toolbox (UNCTAD 2017) which
considers impacts on women in their roles as workers entrepreneurs traders and
consumers Complementary considerations regarding impacts for each of those groups will
be inspired by other literature (eg Fontana 2009) and methodological approaches (eg
European Institute for Gender Equality 2016)
In the first step we will analyse the situation in the Central American partner countries
regarding womenrsquos participation in the labour market economic activity as entrepreneurs
and traders (with a consideration of their access to assets and supporting measures) and
their position as consumers incl the level and type of income received and being at their
disposal Based on the available data we will also analyse gender inequalities before and
after the entry into force of the EU-CA FTA and measures applied by the countries and
provided by international donors to support an increased womenrsquos participation We will
also review reports of the ILO Committee of Experts regarding implementation of the two
ILO fundamental conventions on non-discrimination ie No 100 (equal pay for work of
equal value) and No 111 (non-discrimination at work) ratified by all CA partner countries
In the second step we will compare observed trends stemming from the real data with
outcomes of the economic modelling to determine to what extent they may be linked to
impacts of Agreement and to what extent they result from influence of other factors
Focusing on women as workers we will identify sectors important for them (based on
their shares in the total womenrsquos employment and a ratio of female and male workers
in each such sector) and compare observed trends in employment levels (in total and
across sectors) with the results of the modelling (changes in employment levels across
sectors) to determine whether the EU-CA FTA has contributed to changes reported in
the real life and if so to what extent In this context we will also consider impacts of
tariff reduction on public revenues and whether this might have had an impact on the
provision and quality of public services which in turn may have an effect on women and
their ability to participate in the labour market or to undertake an economic activity
For women as entrepreneurs if relevant data is available we will identify sectors of
their economic activity and compare trends in the actual operation of these sectors over
time (eg growth or decline) with outcomes of the economic modelling to determine if
the EU-CA FTA might have had an impact on output of these sectors and as a result
position of women as entrepreneurs
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 17
Moreover if more detailed data is available regarding sectors and groups of products or
services manufacturedprovided by women-led enterprises as well as their engagement
in international trade we should be able to say (again comparing the real-life data with
economic modelling) what impact the Agreement may have exercised on women as
traders and in this context on sales and exports of their products or services or their
competition with or the use of imports We will also consider whether the EU-CA FTA
provisions regarding eg tariff reduction SMEs TBT SPS might have had an impact
for women-led enterprises (given their size and sectors of operation)
Concerning the role of women as consumers we will look at real-life trends in income
and price levels and compare them with outcomes of the economic modelling to see
what impacts the EU-CA FTA might have had on welfare and price levels as well as the
availability and accessibility of goods and services
Our analysis will be complemented by engagement with stakeholders including women
organisations to identify barriers in their activity on one hand and facilitating measures on
the other and to gather more insights into impacts of the EU-CA FTA
327 Task 118 Analysis of impacts on the adoption and implementation of
internationally recognised instruments of responsible business conduct and
Corporate Social Responsibility (CSR)
Our analysis under this Task will seek to respond to the evaluation question No 1 (JC 42)
In the first step we will map CSRRBC practices in the Central American partner countries
in the analysed period including practices of European companies investing there or having
their suppliers and existing government initiatives promoting them eg National CSR
strategy and Law on CSR in Costa Rica National Plan on Social Responsibility and Human
Rights in Panama and dedicated centres or foundations promoting CSR in Guatemala
Honduras Nicaragua and El Salvador We will also use findings from a research carried
out for Task 111 identifying initiatives undertaken within the TSD Title incl EU projects
and regional events dedicated to CSR RBC and decent work in global supply chains We
will aim at a better understanding of the existing framework uptake of CSRRBC practices
by enterprises factors influencing it and CSRRBC presence in the EU relations with the
partner countries including technical assistance and cooperation projects
Based on this in the second step we will use outcomes of the economic modelling and
stakeholder consultations to verify whether indeed the EU-CA FTA through generated
trade and investment flows as well as specific provisions (such as those in TSD Title) might
have encouraged uptake of CSRRBC practices We will also seek to identify factors related
to market access which may encourage uptake of CSRRBC practices Legislative ones may
include eg non-financial reporting and obligatory due diligence in certain sectors or
activities requirements related to social and environmental aspects in public procurement
and non-legislative ones may focus on image and comparison with the main competitors
being part of supply chains where business partners require respect for certain labour and
environmental standards international instruments in CSR (OECD Guidelines for
Multinational Enterprises ILO Declaration on Multinational Enterprises and Social Policy
the UN Global Compact etc) requirements of sustainability and certification schemes or
consumer awareness and related choices
As an additional element of this analysis (subject to data availability) we may include into
this task examples of other schemes eg sustainability schemes or promotion of decent
work in global supply chains (notably of agricultural products) and their presence in trade
between Central America and the EU and impacts the EU-CA FTA might have had on their
use in bilateral trade relations
Page 18
328 Task 117 Analysis of environmental impacts
The main objective of the environmental analysis is to assess the environmental and
climate change effects of the EU-CA FTA as well as to provide answer to the evaluation
questions notably those on the effectiveness (No 1-4) (JC 43) and coherence of the
Agreement with other policies and the EUrsquos commitment to the SDGs and in particular
SDGs No 13-15 ie Climate Action Life below water and Life on Land (respectively) ie
evaluation question No 7 The main challenge is to isolate the EU-CA FTA induced effects
on the environmental performance in each country from general developments and trends
that occurred regardless of the EU-CA FTA This is particularly challenging as the
counterfactual environmental outcomes are unobservable for most of the environmental
impact areas
The overall approach is based on our detailed understanding of the dynamics through
which the EU-CA FTA may have created environmental impacts tailored towards the
specific circumstances for the Central American countries the requirements in the ToR
the TSD Chapter of the EU-CA FTA and the budget provided for this study The detailed
understanding is based on the study lsquothe methodology for assessing biodiversity impacts
of EU FTArsquo by IEEP Trinomics et al (2021) and the latest literature including an OECD
study (Garsous G 2019) on this matter and applies the following logic
1) identifying the components in the EU FTA with the Central American countries that may
have generated environmental effects (EU-CA FTA elements) Based on our extensive
recent experience on researching the dynamics through which FTAs may create
environmental impacts we conclude that the FTA contains (1) measures easing market
access for the signatories (referred to as tariff-based measures) and (2) several rules-
based measures (mostly by means of the provisions in the TSD Chapter referred to as
non-tariff-based measures) that may have resulted in environmental impacts in the
countries involved
2) then establishing how these elements could have created directly or indirectly intended
or unintended ndash environmental impacts (the impact channels) Any FTA is by
definition expected to create direct environmental impacts through the expected
expansion of economic activity which may lead to eg higher pollution and greenhouse
gas (hereafter GHG) emissions may put a strain on bio-resources and pressure on
vulnerable ecosystems as higher levels of output require more environmental input
(Copeland and Taylor 2014) Trade agreements also create indirect environmental
impacts through structural adjustments in the economies and so-called specific rules-
based trade measures including the provisions in the TSD Chapter Our approach
carefully considers four impact channels that are also distinguished by the SIA Handbook
(European Commission 2016a) to separate the way in which EU-CA FTA may have
created impacts on various areas of the environment The scale effect (the impact
created from increased production as a result of the trade agreement) the structural
effect (the dynamic effect of the EU-CA FTA on the growth and contraction in production
in different sectors) technology effects (impacts triggered through increased efficiencies
from increased competition or from a transfer in environmental goods and services) and
potentially the product effect (impact via changes in production standards and use of
goods in a country eg through strengthened environmental policies and environmental
regulation)
3) via these impact channels various areas of environmental performance (the impact
areas) may be impacted and are to be further analysed in this evaluation In this study
we distinguish the following impact areas 1) Climate change 2) Biodiversity and
ecosystems and 3) Other key environmental parameters
Research methods ndash For some impact areas there is more reliable information and data
and quantitative research methods available than for others To the extent possible the
quantitative analysis will build on the economic modelling results and as a result the
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 19
analysis will allow us to comment on the causal relation between environmental topics and
the EU-CA FTA Where quantitative research is not possible we will apply qualitative
methods The qualitative analysis may rely on the causal chain analysis method which
aims at identifying the root cause of observed changes Irrespective of whether a certain
impact will be assessed with more quantitative or qualitative research methods our
approach is designed to make intensive use of quantitative information eg compiling
quantitative statistics and analysing trends The following research methods are applied
per environmental area
For climate change we propose focusing on establishing the EU-CA FTArsquos impacts on
the major GHG emissions (eg carbon dioxide methane and nitrous oxide) and
potentially on the air pollutants (ozone precursor gases acidifying gases and primary
particulates)
For biodiversity and ecosystems we propose following the latest insights in assessing
biodiversity impacts of the EU-CA FTA based on the study for DG Environment on the
development of a methodology to assess the impact of trade liberalisation on
biodiversity (which has not been published yet) In case results of the biodiversity
analysis are also relevant for climate change (ie LULUCF emissions) the link between
these results and climate change will be explored
For other impact areas we propose developing baselines based on qualitative and where
possible quantitative data for each impact area and explore developments in
environmental performance since the entry into force of the EU-CA FTA In addition we
will discuss the (effectiveness of the) implementation of provisions enshrined in the TSD
Chapter in the EU-CA FTA per impact area
The above discussed approach is based on five activities They apply the logic of the
methodological stages7 as described in the methodological framework for assessing the
impact of EU FTAs on biodiversity (IEEP Trinomics et al 2021)
3281 Activity 1 Fine-tuned methodology and impact screening and scoping
Fine-tuning the methodology is part of this inception report (this document) and mainly
serves to define the exact scope and focus of this evaluation The environmental analysis
logically focusses on Central America and the EU (with an emphasis on Central America)
However within defining the geographic scope of this analysis one needs to differentiate
global (eg climate change) and other more local environmental impacts eg
(un)sustainable forest management practices We aim to cluster countries when
appropriate from the perspective of a certain regional environmental issue In this way we
can respond to the challenge of bringing focus to the analysis while balancing the available
resources and time Clustering should enable us to evaluate certain environmental issues
in a more targeted way enabling deep dives into specific issues Below we discuss in more
detail what this regional approach means in practice and how we aim to mitigate the risk
of overlooking certain impacts
Impact screening and scoping - The exact environmental topics on which quantitative and
qualitative analysis will be performed depend on the outcome of the impact and screening
and scoping exercise which seeks to identify issues which deserve to be analysed with an
extra depth As such this sub-activity aims to select the environmental impact categories
and sub-areas to be studied in other activities Impact screening and scoping is a
methodological tool to identify issues which should be prioritised in the evaluation and
helps to mitigate the risk of overlooking potential significant impacts In essence the
prioritisation is based on (i) screening the most prevailing existing environmental drivers
and pressures and (ii) screening the expected impacts caused by the EU-CA FTA (at a
7 The study by IEEP Trinomics et al (2021) identifies three stages Stage I) Preparatory stage Stage II) Method selection and impact logic and Stage III) Impact assessment and related conclusions
Page 20
sector level) by means of economic modelling results literature review stakeholder input
and political interest All information is transparently documented in the impact-screening
matrix During the impact screening and scoping exercise we will also develop three
context-setting documents (2-pages) one per environmental impact area to better
understand the background These documents will have a regional perspective and will be
directly used in the baseline development The output of this activity is included in the
Interim Report
3282 Activity 2 Establishing the baselines for the impact areas
The aim of this activity is to gain a brief understanding of the EUrsquos and partner countriesrsquo
status quo regarding their environmental governance and performance (eg trends) for
those environmental impact areas that have been identified as priority ones The output
will be a section in the evaluation with a short description (1 page) per prioritised impact
area outlining the governance (very brief) and the performance and exploring the main
developments trends and their cut-off points This will be done by analysing issues from
a DPSIR framework perspective (drivers ndash pressures ndash state ndash impact ndash responses) (see
Box 1) when appropriate8 This framework is often applied in environmental assessments and plays a central role in the study by IEEP Trinomics et al (2021) on the methodology
for assessing the impact of EU FTAs on biodiversity
Box 1 The use of the DPSIR framework in FTAs
The DPSIR framework allows to interpret certain environmental indicators by establishing a causal relation between indicators and their analysed effects In the case of an FTA trade liberalisation in goods services and investments can function as a driver of a change in different economic sectors causing changes in the amount of land- and other resource use or in their quality (eg pollutants and emissions impacting air water or soil quality) The changes in the quantity of land- and other resource may create pressures on biodiversity which lead to an impact in the state of and trends in biodiversity ecosystems and the services they provide As a response(s) certain new or existing measures can be taken to help to prevent negative impacts or to amplify positive ones
Source IEEP Trinomics et al (2021)
Three consecutive sub-tasks will be performed to operationalise the establishment of the
baselines 1) Literature review and data analysis to establish draft baselines 2) Interviews
with stakeholders to obtain additional input validate work and fine-tune results 3)
Triangulation of information (literature data and interviews) and establishment of final
baselines The output of this activity will be included in the Interim Report
3283 Activity 3 Quantitative evaluation of impacts9
The aim of this activity is to assess the quantitative estimates of the impacts of the EU-CA
FTA on GHG emissions and possibly air pollution and ndash potentially10 ndash on trade in
environmental goods and services and land use change As such the desired result is the
reporting of the quantitative estimates of the impacts of the EU-CA FTA on GHG emissions
and air quality in the EU Costa Rica El Salvador Honduras Guatemala Nicaragua and
Panama depending on data availability Ultimately it is global GHG emissions that
contribute to global warming for this reason we propose to estimate the global change in
GHG emissions resulting from the EU-CA FTA In this way we also consider the difference
in climate change impacts from trade creation and trade diversion The impacts on GHG
emissions will be decomposed in the most relevant key drivers where possible The
8 This implies that we will make use of the insights of the framework whenever relevant and appropriate in the light of the evaluationrsquos objective We will not identify every element (D P S I and R) for each environmental issue but focus on the most relevant elements for each of them
9 The focus depends on the results of the impact screening and scoping 10 Depending upon expected scale of impact available resources and data availability
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 21
preliminary finding of this activity will be included in the Interim Report and the final results
are to be presented in the Final Report
3284 Activity 4 Qualitative evaluation of impacts11
The aim of this task is to evaluate qualitatively the impacts of the EU-CA FTA on various
prioritised environmental impact areas focussing on those which are not assessed in the
quantitative analysis First a broad assessment is done based on desk research from a
regional perspective In addition approximately two case studies (as part of Task 13) will
be prepared in which the environmental impacts of the EU-CA FTA on certain areas will be
assessed based on in-depth qualitative analysis using causal chain analysis (CCA)
(European Commission 2016a) Depending on data availability we will aim to identify
trends developments and cause-effect relations between the EU-CA FTA and environment
By combining the existing environmental drivers and pressures (see Textbox 3282-1 for
more information) the economic results and effects of TSD provisions we naturally also
include potential unintended and unforeseen effects The preliminary finding of this activity
will be included in the Interim Report and the final results are to be presented in the Final
Report
3285 Activity 5 Answering of the evaluation questions and other concluding
remarks
The overall environmental analysis concludes with clearly commenting on the effect of the
EU-CA FTA on the performance the legislative framework and effective implementation in
each of the prioritised environmental impact areas In case no causal relation between the
EU-CA FTA and the performance of a certain environmental impact area is found it will
also be explicitly mentioned These concluding remarks together with the in-depth
analyses conducted in previous tasks will serve as the basis to answer the evaluation
questions related to the EU-CA FTArsquos environmental impacts under Task 14 in the Final
Report
3286 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative environmental effects that have emerged from tensions between the EU-CA FTA
on the one hand and elements of environment on the other Additional policy or legislative
measures can also be suggested to enhance positive impacts of the EU-CA FTA
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human
rights
In this section we present the approach envisaged for the analysis of the human rights12
impact of the EU-CA FTA in the EU and the CA partner countries
The evaluation will rely on the methodology of human rights impact assessments (United
Nations 2011 European Commission 2015) as well as on the experience from previous
studies and will include the following steps
Step 1 Human rights baseline
At this step a concise baseline analysis will be carried out Concise human rights
profiles will be prepared for each of the state-parties to the EU-CA FTA
Step 2 Screening and scoping
11 The focus depends on the results of the impact screening and scoping 12 Human rights in this analysis are defined as set out in the Charter of Fundamental Rights of the European
Union the core UN human rights conventions and relevant regional human rights treaties
Page 22
At this step based on various sources human rights will be screened and specific
human rights that may have been affected by the EU-CA FTA will be identified
Step 3 Detailed assessment of the selected human rights
At this step drawing upon findings from the previous stage of the analysis an in-depth
analysis of up to three selected rights will be carried out (both quantitative and
qualitative and depending on the degree of the impact)
Step 4 Policy recommendations and accompanying measures related to
human rights
At this step policy recommendations will be formulated as to how any tensions between
the EU-CA FTA and human rights obligations may be addressed and how a positive
impact on the enjoyment of human rights can be enhanced
Stakeholder inputs will be used throughout all four steps to verify and support findings as
well as to collect evidence on the impact and ensure meaningful participation
3291 Human rights baseline
At this stage a concise baseline analysis of the human rights situation in each state-party
will be carried out First an overview of international human rights obligations of all the
state-parties to the FTA (ratifications of core international and regional human rights
treaties core ILO Conventions and other treaties relevant for the analysis) will be
presented in a tabular manner Second human rights profiles will be prepared Human
rights profiles will consist of a summary of the baseline conditions for the enjoyment of the
relevant human rights in each of the state-parties to the FTA from five years before the
provisional application of the EU-CA FTA until 2019 Particular attention will be given to the
pre-existing conditions of stress and vulnerabilities with respect to human rights
highlighting the position of specific vulnerable groups
The human rights profiles aim to
Set the scene regarding the enjoyment of relevant human rights in the partner
countries and identify social and political developments that may have impacted the
human rights situation
Allow for a targeted assessment of the human rights impacts of the EU-CA FTA
The profiles are based on the analysis of international human rights obligations national
legislation and policy framework as well as implementation issues with respect to relevant
human rights The analysis reviews country specific reports of international organisations
(eg UN OECD ILO) EU Reports on Human Rights and Democracy in the World reviews
of reports of international human rights organisations (eg Human Rights Watch) a
review of academic literature media reports relevant indicators and local partner inputs
3292 Screening and scoping
The second step of the analysis focuses on identifying which human rights could have been
affected by the EU-CA FTA and in which way The EU-CA FTA will be scanned for provisions
that are most likely to have caused an impact on the enjoyment of human rights in state-
parties to the EU-CA FTA The cause-effect relationships between the trade and trade-
related measures in the FTA and human rights will be established based on multiple sources
(see the multi-pronged approach below) The focus of the screening will not only be on
specific trade measures originating from the FTA (the Trade Pillar) but also on the overall
effect of the measures under the broader Association Agreement
Based on the screening exercise and in line with the EC Guidelines for human rights impact
assessments (European Commission 2015 p5) we provide a focused overview of the
human rights affected by the EU-CA FTA specifying the following elements
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 23
Specific human rights affected by the FTA
Short note on the evidence of the impact with a reference to the sources of information
Whether the affected right is an absolute human right or not13
The kind of impact (direct or indirect)
The degree of the impact (major or minor)
Affected population groups (if applicablepossible)
The screening exercise will as much as possible reflect upon the affected individuals
andor groups of people especially indigenous people and women based on the results
generated by the economic analysis inputs from the stakeholders and literature review
We will also look at how the EU-CA FTA has impacted gender equality and labour rights14
3293 Detailed assessment
Depending on the outcome of the screening exercise a maximum of three human rights
will be selected for a detailed assessment
Applicable human rights laws will be scanned (based on the obligations of the state-parties
under international and regional human rights treaties) to provide a framework of
applicable and binding entitlements and duties related to the selected right(s) Insofar
possible national legislation will be scanned for any changes subsequent to the application
of the EU-CA FTA focusing in particular on the changes that affected the enjoyment of
each of the selected human rights (using baseline analysis to aid the impact assessment)
Then we will look at the particular measures and how they have enhanced or impaired the
enjoyment of the relevant rights and or have strengthened or weakened the ability of the
parties to fulfil or progressively realise their international human rights obligations
Particular attention will be given to impacts on vulnerable groups or groups of individuals
that are at risk of being marginalised (Danish Human Rights Institute 2016)
This assessment is intended to be both quantitative and qualitative in nature The
quantitative analysis is based on the results of the economic analysis and used to the
extent possible15 The qualitative analysis is based on various sources as well as
stakeholder consultations and close work with local partners Economic modelling results
already disentangle the impact of the EU-CA FTA from other impacts that could have
affected the enjoyment of a human right over time For qualitative analysis it is more
challenging to discern the FTA impact To address this challenge we use a multi-pronged
approach (ie a methodological cross-validation approach in order for one methodological
element to corroboratevalidate the other method) in examining the causal effects of the
FTA for each of the prioritised human rights16 (see Figure 3)
13 See Tool 28 of the European Commissionrsquos Better Regulation Toolbox (2017) available at httpseceuropaeuinfolawlaw-making-processplanning-and-proposing-lawbetter-regulation-why-and-howbetter-regulation-guidelines-and-toolboxbetter-regulation-toolbox_en
14 Although we expect some overlap on labour-related rights with the evaluation of social impacts there will be cross-references to ensure a holistic analysis Moreover taking into account the interrelated nature of human rights we reserve the right to address the rights of the workers from other relevant perspectives not covered in the social analysis (eg as related to vulnerable groups)
15 When relevant we will use human rights indicators to supplement the analysis 16 We use the same method also during the screening exercise but to a more a limited degree (eg not using
specific human rights indicators for each human right as it goes beyond the scope of this evaluation)
Page 24
Figure 3 Overview of the multi-pronged approach to human rights impact assessment
Thus in assessing the impact the EU-CA FTA has had on each human right we use the
economic modelling results (if applicable and appropriate) that already disentangle the FTA
impact from the overall effects and link economic findings (partially) to how the selected
human right has evolved in the EU and Central American partner countries because of the
EU-CA FTA If data from the economic analysis is not sufficient to support the analysis we
will make use of contextually relevant human rights indicators (United Nations 2012) from
the statistical databases of the ILO World Bank UN OECD andor other organisations to
investigate how the selected human rights have evolved over time We look at the
development of human rights from five years before the provisional application of the FTA
up to the most recent year for which the data is available comparing period before and
after the entry into force of the FTA looking for shocks (relatively sharp increases
decreases) around that time or structural breaks in a trendline to identify an EU-CA FTA
impact We also investigate whether other shocks have taken place that could explain
observed changes in human rights (eg changes in domestic laws) Based on a similar
practice used during the ex-post evaluation of the EU-Korea FTA we could also consider
including a set of control countries to the analysis to consider development of specific rights
in relative terms
All data findings will be supported and cross-validated through a review of relevant
literature looking for further evidence of impacts provisions of the EU-CA FTA the social
and political situation (eg legislative policy instruments adopted that could have affected
the enjoyment of relevant rights) and inputs from the stakeholders that can serve as
evidence of a link between how the human rights has evolved and the EU-CA FTA
3294 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative human rights effects that have emerged from tensions between the EU-CA FTA
on the one hand and statersquos human rights obligations on the other Additional policy or
legislative measures can also be suggested to enhance positive impacts of the EU-CA FTA
and to prevent or mitigate impacts of measures that have been identified as having caused
or contributed towards impaired enjoyment of human rights
33 Concluding tasks
Based on the various analyses undertaken including the case studies the evaluation team
will prepare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 25
A comprehensive review of the extent to which impacts identified in the Trade SIA of
the Association Agreement between the EU and Central America (Ecorys and Corporate
Solutions 2009) have actually materialised (Task 9)
Replies to the evaluation questions (Task 14) and
Conclusions and recommendations (Task 15)
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3)
The literature review aims at identifying sources data and main conclusions drawn from
the previous studies to make sure that the report is based on and further complements the
existing literature Annex A3-2 provides an overview of the literature considered so far in
a tabular structure To summarise the findings from the literature review so far the
following can be noted regarding methodologies and substantive issues
41 Methodological aspects
The economic effects of the EU-CA FTA have been analysed by the Sustainability Impact
Assessment (SIA) outsourced by the Commission (DG Trade) in 2009 before the launch
of the negotiations (ECORYS 2009) This ex-ante evaluation combined quantitative and
qualitative approaches the first one based on the Computable General Equilibrium (CGE)
and Causal Chain Analysis and the latter built on stakeholder interviews (ECORYS 2009)
The CGE model underpins SIA and the literature produced on the likely economic impact
of the agreement (ECORYS 2009 IIDE 2007 Lima et al 2009 Lima et al 2010 CEPR
2012) and the bulk of these studies is based on the assumptions on the likely structure of
the agreement as the negotiations were not concluded yet The 2009 SIA also assessed
the additional FDI impact by applying a gravity analysis approach (ECORYS 2009) The
first Commission annual activity report on the implementation of the EU-CA FTA builds its
assessment on the available Eurostat data and on the comparison between the region-to-
region trade flows before and after the treatyrsquos entry into force (Commission 2015) The
following activity reports (Commission 2016 2017a 2018a 2019d 2020a) illustrate the
evolution of trade on a yearly basis relying on the Eurostat and Central American statistics
thereby opting for a more descriptive approach
The main added value brought by this ex-post evaluation report consists of the CGE model
and its application to updated EU and CA statistics in order to isolate the strictly related
economic implications of the EU-CA FTA from other external factors influencing bilateral
trade thereby purifying the overall analysis and drawing more methodologically solid and
reliable conclusions The Commission (2021) modelling used for the ex-post evaluation
unlike the other studies focuses only on tariffs however which means that impacts of not
the entire EU-CA FTA are measured but only of the tariff component
Regarding assessment of non-economic effects the methodology tended to forecast
estimated general trends and usually does not make detailed projections It should also be
pointed out that predicting long-term socio-economic effects stemming from the AA proves
to be more challenging than estimating short-term trade impacts (European Parliament
2018) Regarding quantitative social and environmental variables the models have used
structured gravity approaches to estimate the effect of non-tariff measures (NTMs)
(ECORYS 2009) The main methodological constraints to calculate (non-quantifiable)
social environmental and human rights effects from a quantitative perspective are the
problem of attribution and the so-called counterfactual given that one cannot know what
would have happened in case the agreement was not in place
42 Substantive issues
In the 2009 SIA the literature review concluded that the potential economic impact of
the EU-CA FTA was expected to be positive The vast majority of literature sources agree
on the key role played by agricultural products in the Central American economy (Romero
Page 26
et al 2015 FAO 2020 OXFAM 2016 European Commission 2020 European Commission
2019 Zabalo et al 2019 Mejia et al 2018 Lima et al 2009 Lima et al 2010) The
raw material share accounts for up to 60 of the total CA export and combined with
natural-resource-based manufactures their cumulative share reaches 70 (Lima et al
2010 p 92) A study carried out in 2007 before the launch of the EU-CA negotiations
forecasted a negligible impact of the agreement on the EU GDP and overall welfare even
in case of a full liberalisation scenario (IIDE 2007 p 16) Also in terms of FDI the
estimated effects were marginal for the EU but more tangible for CA where the agreement
could lead to an increase of 1 of the CA economies GDP (CEPR 2012 p 27) However
some additional positive spill-overs were considered such as the impact on maritime
services that could help CA countries to better manage increased trade flows and at the
same time improving custom procedures (ECORYS 2009) On trade the report
highlighted trade value flow variations especially in CA with the impact on both EU export
and import value rather negligible (Ibid p 73)
The 2012 CEPR impact assessment argued that the EU-CA trade liberalisation triggered
overall positive effects especially when referred to key products both for the EU exports
to CA such as in agriculture products and goods originating from manufacturing activities
(eg cars and medication) and EU imports from CA primarily food products where the
FTA proposed to half tariff levels compared to the previous GSP level access in place (CEPR
2012 pp 10-11)
According to the SIA banana exports from CA to the EU were expected to benefit from
more advantageous market access conditions Regarding NTMs bilateral trade facilitation
and border-related barriers should be eased simplified and rationalised Consequently
trade costs were expected to decrease remarkably The econometric analysis showed that
the economic effects of the EU-CA FTA were not expected to be equally distributed among
the CA countries given the economic heterogeneity of the region (ECORYS 2009 Lima et
al 2009 CEPR 2012 European Parliament 2018) Vegetable fruits and nuts sector (VFN)
together with sugar cane showed the most promising results (IIDE 2007 p17) although
the positive effects were not equally shared among the CA members with Panama
benefitting the most Manufacturing production in CA was estimated to benefit from the
deal (+20) Electronic equipment would also take advantage of the FTA especially in El
Salvador Honduras and Costa Rica (CEPR 2012 p 31) Transport equipment insurance
services and other manufacturers were expected to decline
On the EU side the projections estimated that
Output in the sector of vegetables fruits and nuts as well as electronic equipment was
expected to decrease modestly (CEPR 2012 p 29)
The EU was estimated to increase output in grains other agriculture and additional
categories of primary food (ECORYS 2009 pp 44)
A limited price decrease for processed food grains and vegetables other agriculture
and beverages and tobacco was expected (Ibid p 44)
Overall in the EU literature in any scenario ranging from partial to full liberalisation an
increase of trade volume as result of the AA was projected (European Parliament 2018
p 43)
A study presented at the Twelfth Annual Conference of the Global Economic Analysis in
2009 and eventually incorporated in a 2010 publication on Latin America assessed the
likely effects of the EU-CA FTA for three scenarios full liberalisation partial liberalisation
excluding sensitive products on both sides (namely fruits and vegetables meat beverages
and tobacco other processed food) and liberalisation considering only fruits and vegetables
as sensitive in the EU (Lima et al 2009 p 1) The application of different models revealed
that the most economically advantageous scenario was the first one leading to an
expansion of exports in all signatory countries and positive effects on overall CA welfare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 27
The second scenario would lead to a smaller economic impact with a more modest trade
expansion (12) and some welfare losses Finally in the scenario foreseeing the EU
excluding only fruits and vegetables the ldquoresults for trade and product remain positive
but with smaller figuresrdquo (Lima et al 2009 p 1) In conclusion a deeper liberalisation
would favour both regions by enhancing exports by between 1 and 5 in all the CA
countries (Lima et al 2010)
The Commissionrsquos annual FTA implementation reports describe trade flows between the EU
and CA after the conclusion of the FTA and demonstrate an overall upward trend for certain
countries and for specific sectors Trade flows remained rather stable in 2014 increased
by 12 in 2015 decreased marginally by 07 in 2016 grew by 72 in 2017 by 66
in 2018 and by 7 in 2019 With the exception of 2017 the EU maintained surplus in
trade with CA (Commission 2015a 2016 2017a 2018a 2019d 2020a)
The Central American literature generally focused on the role played by agricultural exports
in CA domestic economies and on the potential impact generated from the EU-CA FTA on
export transformation and diversification (Zabalo et al 2019) The likely impact of the EU-
CA FTA varied among the countries and the industries considered (ECORYS 2009) A study
carried out in 2018 aiming at analysing the effects on Panamarsquos economy by adopting a
shift-share analysis model concluded that between 2013 and 2016 the Panamanian exports
(mainly transport equipment and agricultural products) to the EU showed a downward
trend by 32 for the selected years mainly due to the decrease of primary exports to
some EU countries including Germany Belgium Italy Greece Poland and Sweden (Mejia
et al 2018) Likewise the local press has highlighted both advantages and disadvantages
generated by the EU-CA FTA for the whole region (De Leograven 2006 Barquero 2016
Rodriguez 2017) While it was considered that tariff removal triggered by the Agreement
could boost banana exports to the EU therefore inducing positive externalities for the
whole region especially for Costa Rica excessive specialisation in agricultural products
and insufficient diversification of export destinations could cause negative effects for the
local economy (Barquero 2016 Rodriguez 2017) Finally the press flagged the pros and
cons of regional integration requirements posed by the EU to CA The EU request to
negotiate as a unified bloc and to speak with a single voice led to long sensitive and
complex domestic negotiations within CA which came only to a partially accepted joint
approach towards trade talks (De Leoacuten 2006) A comparison of estimated economic effects
of the Agreement has been provided in Annex A3-1
The social impact considerations were closely linked to the economic ones since the EU-
CA FTA effects on trade would also influence the levels of employment in the affected
sectors The employment changes triggered by the EU-CA FTA in the EU were expected to
be negligible owing to the relatively modest role played by CA in the EU trade with the
rest of the world As an additional consequence also the level of EU wages should not be
affected much by the Agreement (CEPR 2012 p 28) In CA more significant incentives
to reallocation between sectors caused by ldquopull-factorsrdquo were likely to occur where export-
oriented sectors would benefit most from the EU-CA FTA and where rises in wages were
expected Employment in textile industry in Nicaragua Guatemala Honduras and El
Salvador was expected to decline The full liberalization scenario (IIDE 2007 p 17) was
expected to lead to increases in wages while also prices would rise by 05 (CEPR 2012
p 28) In Nicaragua and Costa Rica wages were expected to rise by 02 and 13
respectively while Panamanian wages would drop marginally (ECORYS 2009 pp 75-77)
The implementation of the International Labour Organisation (ILO) conventions in the EU-
CA FTA legal framework would also have a positive impact on social issues in CA such as
elimination of child labour and force labour and reduction of gender inequality However
the literature underlines a general lack of analyses of the EU-CA FTA impact on poverty in
CA since its implementation (European Parliament 2018 (a) p 45) As described above
the effects were expected to vary among the CA countries with El Salvador Nicaragua
and Honduras experiencing a relatively more impactful drop in levels of poverty than in
Page 28
Costa Rica Finally likely consequences on poverty equality education health and gender
issues in the EU were found to be negligible unlike in CA where small and indirect effects
were expected in terms of investments in health incentives through innovation brought by
technology dissemination and an overall positive impact on inclusiveness driven by the
Agreement (ECORYS 2009 pp 76-80)
On the environmental aspects the literature contributions can be split into two main
groups featured by contrasting interpretations on the EU-CA FTA impact Ultimately the
effectiveness of the TSD chapter will depend on the willingness of the involved government
to implement the EU-CA FTA provisions (EPRS 2018)
On the one hand the SIA and other studies flagged the likely harmful repercussions on
greenhouse gas emissions (GHG) stemming from agriculture fishing trade and transport
activities resulting from the EU-CA FTA application having a limited impact on the EU share
of CO2 emissions and a more tangible effect on some CA countries such as El Salvador
Honduras and Costa Rica in the long run (Alianza por la Solidaridad 2019 FAO 2013)
Moreover the increased agricultural activities resulting from the economic effects of the
EU-CA FTA (eg coffee melon sugar cane and peanut production) factories activities (eg
production of biofuels in Guatemala) as well as factoriesrsquo waste and maritime transports
could pose a threat to biodiversity and deforestation which could constitute a serious issue
owing to a large share of local biodiversity concentrated in CA especially if waste would
not be adequately managed (ECORYS 2009 pp 81-83 Zabalo et al 2019 FAO 2013
Monserrat et al 2011 OXFAM 2016 Rosa Luxembourg Stiftung 2010 Ruerd 2018)
On the other hand a share of the existing literature emphasised the opportunities for CA
countries originating from the EU-CA FTA This would be the case of Costa Rica which
would improve the national environmental regulatory framework mainly in relation to the
use of agrochemicals with likely positive impact for the environment since pineapple
production plays an important role in local economy (Esquivel 2020) A FAO study argued
that international trade in coffee (in particular exports to the EU) has improved the overall
environmental sustainability in CA The EU being the largest consumer of coffee worldwide
its (increasing) requirements on the sustainability of the coffee chain benefited the
adoption of environmental standards by the sector As a consequence coffee producers
are now required to provide more extensive and detailed certifications proving they comply
with environmental standards Therefore they have been paying more attention to
environmental aspects than before (FAO 2020)
A 2017 study (CEPAL 2017) investigated the impact of a CO2 tax on CA GDP Overall the
estimations indicated a negative impact of a carbon tax on GDP and the extent to which it
was found to impact the various local economies depended on the amount of the tax itself
Indeed an average tax value of 69 USD per tCO2e was found to impact the GDP by 062
A range between 5 and 10 USD would be optimal for Honduras and Nicaragua whereas a
tax between 20 and 50 USD would be optimal for Costa Rica El Salvador Guatemala and
Panama (CEPAL 2017)
Finally regarding human rights the EU-CA-FTA impact is difficult to assess for the region
as a whole since the intra-regional development varies a lot and it is difficult to discern
whether the CA movement towards a better respect for international standards on labour
and social rights depends on the implementation of the Agreement (European Parliament
2018 p 44) For example several experts and policymakers argue in favour of a stronger
enforcement mechanism of the TSD chapter (EPRS 2018) Its provisions referring to the
ILO conventions do not ensure the same level of labour and human rights protection as
the GSP+ mechanism (EULAC 2011) Overall despite some positive developments the
implementation of the TSD provisions led to a limited impact on the key challenges in the
CA region such as child labour freedom of association social dialogue or unpaid overtime
(EPRS 2018) The CA Womenrsquos Network also reported insufficient participation of women
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 29
during the negotiation process and it highlighted the risks of women subordination if strong
provisions on gender equality are not put in place (CAWN 2007)
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5)
51 Structure of the EU-CA FTA
The Agreement was initially signed in June 2012 by the EU and Central American countries
and the EU-CA FTA started its provisional application in 2013 It is in a process of
amendment through the Protocol of Croatiarsquos Accession to the Association Agreement
between the European Union and Central America which was signed in November 2020
(Joint Communique 2020) It allows Croatia to formally become part of the Agreement and
provides for amendments to some parts of the EU-CA FTA to account for the accession of
Croatia (eg Appendix 3 to Annex I related to special treatment of bananas Annexes
related to trade in services such as the lists of commitments on establishment cross-
border supply of services and reservations regarding the temporary presence of natural
persons for business purposes and Annexes related to Government procurement including
the list of contracting authorities etc) (European Commission 2020b)
Key features of the Agreement (Trade Pillar) can be summarised as follows Title by Title
Title I of the Agreement contains general principles provisions and definitions and
in particular defines the objectives of the EU-CA FTA which can be summarised as follows
(a) the expansion and the diversification of trade in goods between the Parties through
the reduction or the elimination of tariff and non-tariff barriers to trade (b) the facilitation
of trade in goods through in particular the agreed provisions regarding customs and trade
facilitation standards technical regulations and conformity assessment procedures as well
as sanitary and phytosanitary measures (c) the liberalisation of trade in services in
conformity with Article V of GATS (d) the promotion of economic regional integration in
the area of customs procedures technical regulations and sanitary and phytosanitary
measures to facilitate the circulation of goods between and within the Parties (e) the
development of a climate conducive to increased investment flows the improvement of
the conditions of establishment between the Parties on the basis of the principle of non-
discrimination and the facilitation of trade and investment among the Parties through
current payments and capital movements related to direct investment (f) the effective
reciprocal and gradual opening of government procurement markets of the Parties (g) the
adequate and effective protection of intellectual property rights taking into consideration
the differences between the Parties and the promotion of technology transfer between the
regions(h) the promotion of free and undistorted competition in the economic and trade
relations between the Parties (i) the establishment of an effective fair and predictable
dispute settlement mechanism and (j) the promotion of international trade and investment
between the Parties in a way that contributes to the objective of sustainable development
through joint collaborative work (Article 78)
Title II covers trade in goods and comprises the following chapters (1) market access
for goods which lays down provisions on the elimination of customs duties elimination of
export and import restrictions and export taxes and provisions on agricultural subsidies
(this is complemented by Annex I outlining schedules for elimination of customs duties
Annex II which concerns the definition of the concept of originating products and methods
of administrative cooperation Annex IV - special provisions on administrative cooperation
and Annex V on management of administrative errors) (2) trade remedies which discusses
anti-dumping countervailing and multilateral safeguard measures bilateral safeguards
and the applicable procedures (3) customs and trade facilitation which increases
transparency and promotes the facilitation of trade by simplifying customs procedures and
the adoption of risk management systems for customs inspections (it is complemented by
Annex III on mutual administrative assistance in customs matters) (4) TBT - technical
barriers to trade aiming at facilitating trade by identifying preventing and eliminating
Page 30
unnecessary barriers related to development adoption and application of standards
technical regulations and conformity assessment procedures it also reaffirms rights and
obligations under the WTO TBT Agreement foresees cooperation in market surveillance
transparency through the notification procedures and approach to marking and labelling
avoiding unnecessary burdens while ensuring that all necessary and accurate information
is provided (5) sanitary and phytosanitary measures which aims at protecting human
animal or plant life or health while avoiding unjustified barriers to trade it reaffirms rights
and obligations under the WTO SPS Agreement recognises concepts standards and
recommendations adopted by relevant international organisations (World Organisation for
Animal Health and International Plant Protection Convention) and foresees exchange of
information and cooperation by the Parties incl in cases of emergency (it is complemented
by Annex VI identifying competent authorities Annex VII defining requirements and
provisions for approval of establishment of products of animal origin Annex VIII setting
out guidelines for conducting verifications and Annex IX with points of contact) (6)
exceptions related to goods
Title III covers trade in services establishment and electronic commerce and is
complemented by annexes that detail the Partiesrsquo commitments according to the four
modes of supply or provide information Annex X includes commitments on establishment
(Mode 3) Annex XI lists commitments on cross-border supply of services (Modes 1 and
2) Annex XII outlines reservations regarding temporary presence of natural persons for
business purposes (Mode 4) Annex XIII lists commitments of the Republics of the CA Party
regarding key personnel and graduate trainees Annex XIV lists their commitments on
business service sellers and Annex XV provides a list of the relevant enquiry points
Title IV concerns liberalisation of current payments and movement of capital and
stipulates that the Parties shall authorise payments and transfers on the current account
between the Parties as well as transactions and capital movements related to foreign direct
investment and related transactions including liquidation and repatriation of investments
and profits It also envisages exceptions such as circumstances where payments and
capital movements cause or threaten to cause serious difficulties for the operation of
exchange rate policy or monetary policy or the liquidity of the economy in which case
the Parties may temporarily adopt safeguard measures)
Title V covers government procurement and is complemented by Annex XVI which
details the commitments of Parties in this area (eg procuring entities covered coverage
of procurement contracts under the Agreement media used for tender procedures and key
features of the process for awarding procurement contracts) The Agreement provides for
the Parties to have non-discriminatory access to public procurement procedures within the
scope of covered procurement and outlines general principles and rules for procurement
procedures (eg publication of notices participation in tenders technical specifications
documentation timeline awarding contracts etc) ensuring transparency and cooperation
Title VI covers intellectual property It reaffirms the Partiesrsquo commitments to various
relevant multilateral agreements (eg WTO TRIPS Agreement Convention on Biological
Diversity and Paris Convention for the Protection of Industrial Property) foresees exchange
of information and cooperation between the Parties in relation to technology transfer and
sets standards on the protection of intellectual property rights (IPR) including trademarks
geographical indications copyright and related rights industrial designs plant varieties
and patents The list of geographical indications to be protected is provided in Annex XVII
The Title also addresses enforcement measures for cases of infringement of IPR
Title VII concerns trade and competition in the economies of the Parties Under this
Title the Parties commit to adoption or maintaining comprehensive competition laws and
having appropriately equipped competition authorities They also consider as incompatible
with the Agreement the most harmful anticompetitive practices such as restrictive
agreements concerted practices abuse of dominance and concentrations of companies
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 31
that significantly impede effective competition The Title also stipulates that with regard to
state enterprises and designated monopolies there is no discrimination in exercised by such
entities regarding conditions under which goods or services are purchased or sold
Title VIII relates to trade and sustainable development It includes commitments to
effectively implement the eight ILO Fundamental Conventions and key multilateral
environmental agreements to which EU Member States and CA countries are Parties In
addition the Title includes specific provisions in relation to various thematic areas such as
sustainable forest management sustainable fisheries and trade supporting sustainable
development It establishes civil society advisory groups as part of institutional structure
and foresees a regular dialogue between the Parties and civil society incl in a dedicated
Civil Society Forum The Title also provides a dedicated dispute settlement mechanism
with government consultations consideration of the matted by the TSD Board and a Group
of Experts to examine the matter and formulate recommendation
Title IX relates to regional economic integration between the Central American Parties
and includes provisions on circulation of goods in trade between the EU and CA within the
EU and CA region respectively once a product entered their customs territory and when
the applicable rules and standards are met In this context the Title provides rules related
to customs technical barriers to trade and sanitary and phytosanitary measures (Annex
XX provides a list of CA technical regulations in the process of harmonisation)
Title X covers dispute settlement and outlines the related procedures including the
establishment of a panel its ruling and compliance
Title XI establishes mediation mechanism for non-tariff measures incl the selection
of a mediator the applicable procedure and implementation of the agreed solution
Title XII contains provisions on transparency and administrative procedures Among
other things the Parties commit to (i) ensuring that their measures of general application
(eg laws regulations judicial decisions procedures and administrative rulings) relating
to matters covered by the EU-CA FTA are promptly published or otherwise made readily
available to interested persons and (ii) providing reasonable opportunities for those
interested to comment on proposed measures and taking into account relevant comments
The Parties also commit to establish Points of Contact for matters related to EU-CA FTA
Title XIII addresses tasks of the institutional bodies in matters related to trade
ie the Association Council the Association Committee and specialised Sub-committees
(for details please see section 52 on the institutional set up)
Title XIV defines general exceptions to the Agreement related to the Partiesrsquo balance of
payments and taxation
52 Institutional set-up of the EU-CA FTA
The Association Council the Association Committee six Sub-committees and an Ad hoc
Working Group on Government Procurement (the latter not envisaged by the EU-CA FTA
but set up by the Parties in 2016) oversee the implementation of the Agreement
The Association Council established pursuant to Article 4 supervises implementation of
the Association Agreement it is composed of representatives of the EU and each of the six
CA countries has a decision-making power (binding upon the Parties) in cases foreseen in
the Agreement examines all major issues and questions of common interest It meets at
Ministerial level (or through representatives) at regular intervals not exceeding two years
In line with Article 345 when meeting to discuss matters under EU-CA FTA the Council
has the power to amend Annexes and Appendixes related to trade incl tariff elimination
schedules and goods included there originating products and methods of administrative
Page 32
cooperation Annex XVI (Government Procurement) Annex XVIII (Protected GIs) Annex
XIX (in relation to Article 306 animals animal-based products plants and plant-based
products subject to SPS measures) and Annex XXI (Sub-committees)
The Association Committee set up pursuant to Article 6 is responsible for the general
implementation of the Agreement and assists in this context the Association Council It is
composed of representatives of the EU and the six CA countries at the senior officialsrsquo level
and shall meet once a year to review the implementation It takes decisions foreseen in
the Agreement or delegated by the Association Council When acting within part IV of the
Agreement the Association Committee supervises work of Sub-committees established by
this part and may set up new ones prevents and resolves conflicts (without prejudice to
provisions related to the Dispute Settlement and Mediation Mechanisms) and recommends
decisions for adoption by the Association Council
The Agreement has also established six specialised Sub-committees
Sub-committee on Market Access for Goods (Article 91) is responsible for monitoring
the correct implementation and administration of the Trade in Goods Chapter and serves
as a forum for consultations about interpretation and application of its provisions It
examines proposals provided by the Parties regarding accelerated liberalisation of trade in
goods and tariff reduction as well as inclusion of additional goods into liberalisation
schedules It may make recommendations to the Association Committee on matters within
its remit and take any issue as and when instructed by the Association Committee
Sub-committee on Customs Trade Facilitation and Rules of Origin acting in line
with Article 123 monitors implementation of the Chapter and Annex related to the concept
of origin and methods of administrative cooperation It provides a forum to discuss and
consult all matters related to customs incl customs procedures valuation nomenclature
cooperation tariff regimes mutual administrative assistance in customs matters as well
as rules of origin It pursues cooperation on development application and enforcement of
customs procedures mutual administrative assistance in customs matters administrative
cooperation and rules of origin It examines requests for amendments of rules of origin
and submits to the Association Committee results of the analysis with recommendations
It also aims to enhance cooperation on capability building and technical assistance
Sub-committee on Technical Barriers to Trade (TBT) acting in accordance with Article
139 provides forum to discuss and consult any matter related to the Chapter and monitors implementation and administration of this Chapter facilitating exchange of information
and cooperation and promptly addressing any issue that either Party raises related to the
development adoption application or enforcement of standards technical regulations
and conformity assessment procedures It aims at solving any problems within the remit
of the Chapter that would limit trade between the Parties It encourages direct interaction
between non-governmental actors such as standard bodies accreditors and certifiers It
facilitates the exchange of information about the work being done in non-governmental
regional and multilateral fora engaged in activities related to technical regulations stan-
dardisation and conformity assessment procedures and explores ways to facilitate trade
between the Parties The Sub-committee has also power to review the Chapter in the light
of developments under TBT Agreement and reports to the Association Committee about
implementation of the Chapter including cooperation activities
Sub-committee on Sanitary and Phytosanitary Matters (SPS) acting in line with
Article 156 monitors implementation of the Chapter provides a forum for discussion and
consultation on any matter arising under the Chapter and an opportunity to seek mutually
acceptable solutions It may also develop procedures or arrangements facilitating
implementation of the Chapter It acts as a forum for consultations related to any measure
proposed by the EU which may affect its trade with any of the CA Parties and a forum for
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 33
dispute settlement under the Chapter The Sub-committee is also responsible for
promoting cooperation on animal welfare between the Parties
Sub-committee on Intellectual Property Rights (IPR) (Article 274) monitors
implementation of Article 231 (transfer of technology) and part of the IP Chapter related
to GIs including facilitating discussion about protection of GIsrsquo and recommendations to
the Association Committee regarding amendments to Annex XVIII on GIs It promotes
technology transfer from the EU to the CA Parties and defines priority areas in which
initiatives shall be directed regarding technology transfer research and development and
building-up human capital Its responsibilities include also keeping a registry of the
programs activities or initiatives in progress in the field of intellectual property with
emphasis on transfer of technology
Board on Trade and Sustainable Development (TSD) established pursuant to Article
294 reports to the Association Committee and oversees the implementation the TSD Title
incl cooperative activities undertaken under Title VI (Economic and Trade Development)
of Part III of the Agreement The decisions and recommendations of the Board shall be
adopted by mutual agreement between the Parties and be provided to the public unless
the Board decides otherwise
While EU-CA FTA does not envisage a Sub-committee on Government Procurement the
Parties concluded that it would be useful to have a dedicated body to address matters in
this area They decided to create a temporary Working Group that met for the first time
in June 2016 (European Commission 2017a)
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo
priorities
The negotiations for an Association Agreement (AA) including a Trade Pillar between the
European Union (EU) and Central America (CA) started in 2007 We look at the bloc-to-
bloc trade and policy context the negotiation process and priorities from both sides
The region-to-region trade context
The CA group is composed by Costa Rica Guatemala El Salvador Honduras Nicaragua
and Panama and it is featured by internal economic and political dialogue which led to the
creation of the Central American Common Market (CACM) in the early 1960s Despite the
initial momentum the regional integration process has been stopped for decades due to
internal tensions and the effects of import-substitution trade strategies on local economic
growth (European Parliament 2012) Consequently the initial goal of setting up a custom
union failed and CACM succeeded only in establishing a free-trade area (Duran et al 2010)
The Central American integration efforts were revitalised through setting up of the Central
American Integration System (SICA) aimed at promoting democracy development peace
and freedom in the region (European Source Online 2016) SICA was formally established
on 13 December 1991 through the signature of the Protocol to the Charter of the
Organization of Central American States (ODECA) also known as the ldquoTegucigalpa
Protocolrdquo SICA established both a political and an economic institutional framework by
setting up the Central American Parliament and the Central American Bank for Economic
Development Despite these changes CACM remained the main forum for trade discussions
(European Parliament 2012)
The EU is one of the three most important CA trading partners It is challenging to draw
general and unified conclusions for the whole CA trade picture given its domestic
heterogeneity with Panama and Costa Rica being middle-income countries and Nicaragua
the poorest member (European Parliament 2018 p 18) The EU countriesrsquo share of import
from and export to CA accounted for 30 and 16 respectively in the mid-1980s Among
Page 34
the CA members Guatemala appeared as the most export dependent one while Panama
was the least trade-oriented country (CEPR 2012 pp 6-7) The role of agricultural
production within the respective economies differs widely between the two regions
Agricultural production is very important for CA especially in Honduras and El-Salvador
(38 of the national production) whilst it is relatively much less important in the EU (5)
The same complementarities can be found in manufacturing production (amounting to 18
of the EU production which is much higher than in CA particularly in Panama (4) and
Nicaragua (25) Services contribute to almost 23 of the EU Nicaraguan and Costa Rican
GDP while this share is only 53 for El Salvador (Ibid pp 6-7)
The negotiation process
The start of the economic and political dialogue between the EU and CA blocks dates back
to 1984 at the first conference of Foreign Ministers between the EU and CA countries in
Costa Rica In 1993 the EU and the CA countries signed a Framework Cooperation
Agreement which entered into force on 1st March 1999 (Acuerdo-marco de cooperacioacuten
1999) On the occasion of the EU-Latin America Summit held in May 2002 these countries
and the EU jointly expressed their willingness to reinforce their dialogue by concluding a
new Political Dialogue and Cooperation Agreement which was signed on 15th December
2003 in Rome (Acuerdo de Diaacutelogo Poliacutetico 2003)
The need to establish stronger trade relations even by setting up a free-trade area pushed
the EU and CA to explore the feasibility of an Association Agreement entailing also a specific
chapter on trade Such intention was clearly stated during the EU-Latin America summit of
Guadalajara (Mexico) in May 2004 (Declaration of Guadalajara 2004 p 8 point 52) and
one year later in May 2005 in the context of the EU-Central American Ministerial meeting
in Luxembourg On that occasion the parties launched a joint-assessment exercise on
regional economic integration and established an ad-hoc working party (Council of the
European Union XXI San Joseacute Dialogue Ministerial Meeting between the EU and Central
America 2005 p 2) Finally at the Vienna Summit of 2006 the parties opened the door
to an Association Agreement to create a free trade area (Council of the European Union
EU-Central American Summit 2006 pp 1-2 points 2 and 3) The summit also welcomed
the initiative of the Peace Building and Commission and Human Rights Council (Ibid p 2)
The green light for the beginning of the AA negotiations was given on 28th June 2007 in
Brussels (EU and the Central American Community start negotiations for a new Association
Agreement 2007) However the talks were temporarily suspended on 6th April 2009 and
then resumed a few days later on 24th April (Acuerdo de Asociacioacuten entre Centroameacuterica
y la Union Europea 2009) when the parties decided to re-initiate the negotiations
The negotiating partiesrsquo priorities
The negotiating strategy of the CA countries mainly pursued three goals
Strengthening their trade policy whose objective is to open up new markets for the
benefits of their local exporters The EU appears as a crucial partner for CA countries
as it ranks on top of the worldrsquos largest importers of agricultural products and the
relative share of developing countries has been rising over time in the EU trade balance
Reinforcing CA countriesrsquo export competitiveness and reducing costs of accessing the
EU market vis-agrave-vis competitors such as African-Caribbean and Pacific (ACP) countries
that benefit from preferential and better market access conditions
Attracting foreign direct investments in high value-added sectors where the EU applies
higher tariffs (Duran et al 2010 pp 96-99)
From the European side the main reasons driving towards the conclusion of the agreement
with CA are threefold
Promoting the developing countriesrsquo progressive integration into the world economy
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 35
Reaffirming the EUrsquos role in the world trade and in CA following the United States (US)
conclusion of the Dominican Republic Central American and the United States Free
Trade Agreement (CAFTA-DR) reaffirming the US role in the region
Better coordinating with partners on trade dossiers within the World Trade Organization
(WTO) and other international institutions (Ibid p 100)
The conclusion of the Agreement
The negotiation process delivered slow progress due to the inability of CA countries to
reach a unified position and owing to the delays in the regional integration (European
Source Online cit p3) The agreement was finally reached in May 2010 when the
negotiations were officially concluded during the Latin America-Caribbean and European
Union Summit in Madrid Following the legal scrubbing the European Commission reviewed
and approved the agreement prior to signature at the Meeting of the SICA Presidents in
Tegucigalpa Honduras on the 29th of June 2012 (European Commission Directorate
General for Trade 2012) The European Parliament finally endorsed the AA in December
2012 forecasting that the main gains for the European side would be in export of cars
machinery telecommunications chemical products and transports (European Parliament
2012 p 1) At the time of the AA signature in 2012 the EU-Central America trade in goods
accounted to EUR 149 billion and corresponded to 113 of the whole CA region trade
with the rest of the world (Griener and Membersrsquo Research Service 2014 p 5)
On that date the then EU Commissioner for Trade Karel De Gucht commented the
successful conclusion of the AA by stating that the ldquoregion-to-region deal will help establish
major business opportunities for both sides European exporters will save around EUR 90
million on customs per year and European service providers such as telecommunication
and transport will get greater market accessrdquo At the same time the agreement would
generate ldquospill-over effect on Central Americarsquos overall economic integration process and
contribute to the stability of the regionrdquo (European Commission Ibid p 1) The
Commission officially announced the provisional application of the FTA with Honduras
Panama and Nicaragua on 31st July 2013 with Costa Rica and El-Salvador on 1st October
2013 and with Guatemala on 1st December 2013
The trade provisions of the AA provisionally entered into force in 2013 as they fall within
the exclusive competences of the EU17 Once the entire text of the AA will be ratified by
the EU Member Statesrsquo parliaments the entire text will be legally binding and applicable
After joining the EU in 2013 Croatia is currently negotiating its accession to the AA
54 Operational context of the implementation of the EU-CA FTA
After having illustrated the main partiesrsquo priorities during the bloc-to-bloc negotiations this
chapter provides an overview of the broader context surrounding the negotiations and
implementation and describes the main regional actors as well as their respective trade
policy attitudes towards CA and Latin American countries (LAC) as a whole
Trade policy context the multilateral system and the global economy
Since the launch of the EU-CA negotiations the global trade policy context has undergone
deep changes The Doha Development Agenda stalemate due to incompatible views on
various issues at stake put great pressure on the global trading system The WTO
difficulties in reaching satisfying outcomes stem both from external causes such as the
decline of advanced economies regionalisation of trade and internal sources of tensions
17 Despite being considered as a bloc-to-bloc association agreement the incomplete CA regional economic integration and the failure in setting up a custom union among the CACM countries left unbalances and inconsistencies in accessing single CA countriesrsquo markets and different levels of external tariffs In light of these arguments CA cannot be considered as a fully integrated homogeneous and unified trade bloc
Page 36
embedded in unilateral tariff-cutting process (Baldwin 2016) Besides these tensions the
economic expansion of China and the ldquotrade warsrdquo between the US and China exploded as
of 2017 The recent stalemate of the WTO Appellate Body that halted the entire dispute
resolution process as well as the need to put sustainable development at the core of the
WTO agenda pushed the Commission to advance a new WTO reform proposal (European
Commission 2021) The WTO crisis led to a proliferation of bilateral FTAs and the EU
has been an active bilateral FTA actor globally (see Table 4
Table 4 Overview of the EU FTAs launched and or concluded since 2012
Start of Negotiations
Signatory CountryRegion
State of play of the agreement
Ratification
1999 Mercosur Concluded in 2019 Ongoing
2004 SADC Concluded in 2016 Entered into force in 2016
2007 Andean Community Concluded in 2010 Entered into force in 2013
2007 Ukraine Concluded in 2011 Provisionally applied since 2016 fully in force since 2017
2009 Singapore Concluded in 2019 Entered into force in 2019
2009 Canada Concluded in 2014 Provisionally applied since 2017
2010 Malaysia On hold na
2012 Moldova Concluded in 2013 Provisionally applied since 2014 fully in force in 2016
2012 Georgia Concluded in 2013 Provisionally applied since 2014 fully in force since 2016
2012 Vietnam Concluded in 2015 Entered into force in 2020
2012 Japan Concluded in 2018 Entered into force in 2019
2013 USA On hold na
2013 Morocco (DCFTA new) On hold na
2013 Thailand On hold na
2015 Philippines On hold na
2015 Tunisia (DCFTA new) Ongoing na
2016 Mexico (modernisation) Concluded in 2018 Ongoing
2016 Indonesia Ongoing na
2017 Chile (modernisation) Ongoing na
2018 Australia Ongoing na
2018 New Zealand Ongoing na
2019 United Kingdom Concluded in 2020 Ongoing
2020 ESA (extension) Ongoing na
Source compiled by the author
The EU trade and policy context
Trade picture
The EU maintains strong institutional dialogue with Central and Latin America
legitimised by historic cultural and linguistic ties with the region The EU Latin America
and the Caribbean (LAC) bilateral summits have been regularly held since 1999 gathering
33 members from the two counterparts In 2006 the EU-Latin America Parliamentary
Assembly (EuroLat) was set up and it was conceived as the parliamentary angle of the EU-
CA bilateral partnership (EPRS 2017 p 5)
From a trade perspective the EU-Central and Latin America (comprising Andean
Community CA Cariforum Mercosur Mexico and Chile) trade peaked at EUR 2287 billion
in 2014 before showing a downward trend and decreasing at EUR 2132 billion in 2015
corresponding to 61 of the whole EU trade that year (EPRS 2017 p 6) The EU total
share of LAC trade fluctuated around 14 and the EU remained the first investor in the
region in the last ten years (EEAS 2018) An analysis carried out by the European
Parliament in 2020 unveils that the EU-LAC trade in goods value grew by 22 from 2008
to 2018 (Tvevad 2020 p 18) According to the 2020 DG Trade Report (data from 2019)
on the Implementation of EU FTAs trade flows between the EU and CA showed a robust
growth Indeed trade in goods increased by 88 with respect to the 2018 performance
imports continued growing over the past five years and exports statistics indicated an
overall upward trend with the exception of 2016 (European Commission 2020a p 110)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 37
In 2010 the EU was the second CA trading partner behind the United States (US)
accounting for 94 of the regionrsquos overall trade with the rest of the world (European
Commission 2011 p 4) Among the main exporters to the EU Costa Rica ranked first
with 539 of the total CA exports to the EU Conversely the EU exports went primarily
to Costa Rica (363) Guatemala (281) and El Salvador (152) (Ibid p 4) The EU-
CA trade is marked by the supply of primary products to the EU (mainly agricultural
products such as coffee and bananas) in return for high-technology manufactures
especially machinery transport equipment chemicals and manufactured goods (Duran et
al 2010 pp 95-96 European Parliament 2012 p 9) The CA share in the EU trade was
modest accounting only for 05 of overall EU imports in 2011 and for 03 of the total
EU exports in 2011 (European Parliament 2012 p 8) In addition the EU applied tariffs
on various agricultural products imported from third countries The exclusion of both coffee
and bananas from the EU Generalized System of Preference (GSP) and the GSP+ schemes
prevented these products from benefitting from tariff-reduction from the European side
hampering their access to the EU market and leaving their prices to be influenced by world
trade fluctuations (Duran et al 2012 p 98) The 2019 data confirmed primary products
rank largely first among SITC products grouping exported from CA to the EU accounting
for 721 of the whole exports followed by manufactures with 27 (European
Commission 2019 p 4) Recent statistics highlight the main destination of EU export
continued to be Panama (up to 118 since 2018) whereas the main country of origin of
EU imports is Costa Rica with an increase by 63 from 2018 (European Commission 2020
p 112)
The previous EU trade policy strategy adopted in 2015 (ldquoTrade for Allrdquo) confirmed that
ldquothe FTAs with Peru Colombia Ecuador and Central America are creating new dynamics
for trade and investmentsrdquo (European Commission 2015 p 33) As set out by that trade
policy strategy the Commission should pursue three main priorities with regard to Latin
and Central America ldquo[Continuing] negotiations for an ambitious balanced and
comprehensive FTA with Mercosur ldquoRequesting negotiating directives to modernise the
FTAs with Mexico and Chilerdquo ldquoBe ready to consider investment agreements with key Latin
American countriesrdquo (Ibid p 33)
As evidence for the increasingly robust commitment in the region the EU negotiated trade
deals with 27 out of the 33 LAC countries to strengthen both bilateral and region-to-region
relations the EU actively engaged LAC by signing new and modernising older EU-LAC FTAs
(see Table 5)
Table 5 EU FTA in Latin America and participating countries
Agreement Countries Negotiation launch
Negotiations Conclusion
EU-Andean Countries Colombia Ecuador Peru 2007 2010
EU-Caribbean (CARIFORUM)
Antigua and Barbuda Bahamas Barbados Belize Dominica Grenada Guyana Jamaica Saint Lucia Saint Vincent and the Grenadines Saint Kitts and Nevis Suriname Trinidad and Tobago and the Dominican Republic
2002 2008
EU-Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
2012 2010
EU-Chile na 2017 na
EU-Mercosur Argentina Brazil Paraguay Uruguay 1999 2019
EU-Mexico na 2016 2018
Source Compiled by the author
Regarding civil society the trade chapter of the EU CA FTA did not receive a lot of public
attention and consequently has not been affected by a high level of politicisation within
the EU This might stem from the relatively lower importance of trade relations with CA for
the EU Likewise the agreement did not catch a lot of public attention either in CA where
Page 38
the media coverage mainly focused on the Central America Free Trade Agreement (CAFTA)
Nevertheless both the agreements were targeted by NGOs and trade unions sharing the
same criticism and concerns over biodiversity pharmaceutical product access and
exploitation of natural resources (European Parliament 2011 p 16)
Political Dialogue
To frame the most recent developments in the EU LAC political dialogue it is worthy to list
three key documents forging the EU foreign policy towards LAC
The European Parliament Resolution on the Political Relations with Latin
America passed in 2017 advocating for a stronger more coherent and reinforced
relations with this region by stressing the need to update and develop a more
comprehensive and ambitious EU strategy to address the emerging challenges linked
to fundamental freedoms human and social rights safety of minorities migration
issues corruption tax fraud and security (European Parliament 2017)
The Joint Communication adopted by the European Commission and the High
Representative for Foreign Affairs (HRVP) in 2019 titled ldquoEuropean Union Latin
America and the Caribbean joining forces for a common futurerdquo aimed at deepening
the EU-LAC relations in a fast-changing context by emphasizing four mutually important
priorities prosperity democracy resilience and effective global governance (European
Commission 2019)
The Council of the EU Conclusions of 13th May 2019 endorsing the strategy laid
out in the Joint Communication On that occasion the Council welcomed the four points
described above and added more areas for action such as to work more closely in the
multilateral framework consolidate economic and social resilience enhance shared
prosperity and assist in promoting structural reforms (Council of the EU 2019)
The 2020 EU 27 ndash Latin America Informal Meeting reaffirming the need to advance
bilateral region-to-region summit to strive for a stronger multilateral system identified
mainly in the United Nations and the World Health Organisation (WHO) especially in
the light of the COVID-19 pandemic outbreak (Federal Foreign Office 2020)
Within the framework of the AA the EU and CA agreed to cooperate on a wide range of
policy dossiers of mutual interest namely conventional weapon disarmament the
implementation of the Convention on the Prohibition of the Use Stockpiling Production
and Transfer of Anti-personnel Mines and on their Destruction as well as the Convention
on Certain Conventional Weapons and its protocol (European Parliament 2011 p 7)
On development cooperation the EC regional strategy 2014-2020 earmarked EUR 925
million funding for Latin America to be allocated in two components
Component 1 ldquoMultiannual Indicative Programme for continental activities with Latin
Americardquo accounting for EUR 805 million and devoted to Argentina Bolivia Brazil
Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico
Nicaragua Panama Paraguay Peru Uruguay and Venezuela
Component 2 ldquoMultiannual Indicative Programme for Sub-Regional Cooperation with
Central Americardquo funded with EUR 120 million focused on Central American countries
Costa Rica El Salvador Guatemala Honduras Nicaragua and Panama This component
included three areas for action ie support for regional economic integration support
for the Regional Security Strategy and support for Regional Climate Change Strategy
and the Central American Policy on Comprehensive Disaster Risk Management (EEAS
European Commission 2014)
The Central American trade policy context
Regional Context
Beside their membership in the Central American Common Market (CACM) and the WTO
the CA countries have been signing additional free trade agreements with other regional
and international partners since 2012
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 39
It should be also noted that Panama joined the Latin American Integration Association
(LAIA) in 2012 LAIA replaced the Latin America Free Trade Agreement (LAFTA) signed in
1960 and sought a deeper economic integration among the member states18 Also
Nicaragua applied for the LAIA membership in 2011 and its request was accepted by the
LAIA Council of Minister in August 2011 Nicaragua is currently advancing in fulfilling the
LAIA membership requirements No other CA countries are members of LAIA yet
Table 6 summarises bilateral FTAs and Preferential Trade Agreements (PTAs) signed by the
6 CA countries or being in force since 2011
Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021)
Costa Rica Guatemala El Salvador
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Colombia (signed in 2013 entered into force in 2016)
Mexico (signed in 2011 entered into force in 2013)
Peru (signed in 2011 entered into force in 2013)
Singapore (signed in 2010 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
Ecuador (PTA) (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs signed but not entered into force yet South Korea (signed in 2018) EFTA (signed in 2013)
FTAs signed but not entered into force yet EFTA (signed in 2013) Ecuador (signed in 2011) Peru (signed in 2011)
FTAs signed but not entered into force yet South Korea (signed in 2018)
Honduras Nicaragua Panama
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Peru (singed in 2015 entered into force in 2017)
Canada (signed in 2013 entered into force in 2014)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2014 entered into force in 2015)
Peru (signed in 2011 entered into force in 2012)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet Israel (signed in 2018) South Korea (signed in 2018) Colombia (signed in 2013) EFTA (signed in 2013) Trinidad amp Tobago (PTA)
(signed in 2013)
Source Compiled by the author
Other influential partners in CA
As illustrated by Table 7 three actors retain significant economic influence in CA and Latin
America as a whole the EU the US and China The following section will examine these
actors and their respective trade policies towards CA and Latin America by describing their
posture as well as the agreements in force
18 Argentina Bolivia Brazil Chile Colombia Cuba Ecuador Mexico Paraguay Panama Peru Uruguay Venezuela
Page 40
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking
SubregionCountry
EU total trade in goods (value in EUR billion)
Ranking of main trading partners for trade in goods
2016 2019
2016 2019 USA China EU19 USA China EU27
Andean Community 3 250 246 1 2 3 1 2 3
ACP ndash Caribbean 15 81 116 1 3 2 1 3 2
Central America 6 108 121 1 3 2 1 3 2
Chile 159 166 3 1 2 2 1 3
Mercosur 4 849 771 3 2 1 3 1 2
Mexico 538 618 1 2 3 1 2 3
Source EPRS 2017 p 6 and DG Trade statistics 2020
The US remains the key CA partner The US is the major source of Foreign Direct
Investments (FDI 273) and Official Development Aid allocating an annual average of
approximately USD 1600 million during the Trump Administration (2016-2020)
(Congressional Research Service 2021) Moreover the US rank on top of CA migrant
destinations (Belladonna 2019) The CA countries have been cultivating thorough relations
with the US as they represent the historical destination of over 40 of the regionrsquos
exports Furthermore the 2004 Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA) granted preferential market access conditions to the region (Office
of the US Trade Representative 2004 and Duran et al 2010 p 93) In light of the strong
power exerted by the US the EU trade strategy pursued a progressive rebalancing of the
US presence in the area to ensure better market access in the region (EPRS 2017 p 5)
The DR-CAFTA negotiations confirmed that labour standards sugar and textile products
treatment pharmaceutical data protection and sovereignty issues were the most
controversial and sensitive matters on the table Unlike the EU-CA AA it should be noted
that the DR-CAFTA does not build any common trade framework for all the signatories as
the US grants differentiated market access conditions to each single CA country (European
Parliament 2012 p 11)
In the last few years China has been playing a role of growing importance in CA and in
Latin America both from a political and trade viewpoint (European Commission 2020 p
15) In recent years China has reinforced its role as trading partner within CA As evidence
for this active involvement the 2000-2010 data already confirmed the Asiarsquos importance
(led by China) both in terms of imports and exports in Latin America and Caribbean20
Indeed the China share of the regionrsquos total exports by destination grew from 11 in
2000 to 83 in 2010 with regard to imports by destination the growth appears even
more remarkable moving from 18 in 2000 to 133 in 2010 (Kuwayama amp Rosales
2012 p 66) whilst the relative share of the US presence has shown a downward trend
(Ibid p 65) The monthly exports to Asia-Pacific21 region more-than-doubled from an
average value of USD 54 billion in 2006 to USD 162 billion in 2014 (Baacutercena Prado
Rosales Peacuterez 2015 p 23) After a slight decline experienced in 2016 a solid rebound
emerged in 2017 On average goods shipment from Asia-Pacific Latin America grew by
136 yearly between 2000 and 2016 (Scotiabank 2018 p 1)
Beside trade China has been recently advancing its Belt and Road Initiative (BRI) in
the region by concluding numerous Memoranda of Understanding (MoU) with various LA
19 Including the United Kingdom 20 Data refers to Argentina Bolivarian Republic of Venezuela Brazil Chile Colombia Costa Rica the Dominican
Republic Ecuador El-Salvador Guatemala Honduras Mexico Nicaragua Paraguay Peru Plurinational State of Bolivia
21 The Asia-Pacific region includes Australia Brunei Darussalam Cambodia China South Korea Philippines Hong Kong Japan Laos Thailand Taiwan Indonesia Malaysia Myanmar New Zealand Singapore and Vietnam
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 41
and CA countries To mention some Bolivia (2018) Costa Rica (2018) Chile (2018) and
Panama (2017)
6 CONSULTATIONS (TASKS 6 AND 7)
61 Consultation Strategy
The consultation strategy presented in the technical offer has been refined during the
Inception Phase (Task 6) and is outlined in Annex B Box 2 summarises our expectations
regarding the main inputs expected from stakeholders throughout the study
Box 2 Expectations regarding inputs from stakeholders
Inputs from stakeholders are expected at all stages of the study
The study team will welcome in particular Responses to the online public consultation Consultation with businesses (responses to the online business survey) Evidence of specific casesexamples on how the Agreement has affected economic performance
sustainable development and human rights both in Central America and in the EU Contributions will be particularly welcome in relation to the priority areas of analysis o Impact of the Agreement on trade diversification (in terms of goods and services traders regions
involved in trade etc) (see Task 101) o Impact on investment climate and investment flows (see Task 102) o Impact of the Agreement on SMEs (see Task 1012) o Effects of the implementation of the TSD chapter (see Task 111) o Performance of the institutions established under the TSD chapter (see Task 112) o Impacts of the Agreement on pillars of Decent Work Agenda working conditions labour standards
social protection other public policies and labour inspection (see Task 114) o Impacts on the informal economy and informal employment (see Task 115) o Environmental impacts (see Task 116) and o All of the case studies
Written contributions (positions) expressing views on how the Agreement has affected economic performance sustainable development and human rights across the parties in particular with regard to ndash but not restricted to ndash the analytical priority areas
Indication of relevant publications that focus on the impact of the Agreement in the partner countries Indication of actions taken by CA in areas covered by the TSD chapter (eg changes in policies action
plans strategies and legislation in the areas of labour environment and climate change ratification and implementation of international conventions in these areas and civil society engagement)
Written comments on the draft Inception Report draft Interim Report and draft Final Report Proposals for and comments on draft conclusions and recommendations of the report including how to
improve operation of the Agreement (if needed) Names of organisations or indication of vulnerable groups that may have been affected by the
Agreement in the partner countries as well as relevant contact details for the evaluation team to reach out to the most relevant additional stakeholders
62 Study Website and Electronic Communications
The establishment and continuous updating of a website as well as ongoing electronic
communications with stakeholders are one element of the consultation strategy During
the inception phase the website has been established and launched and an initial e-
communication will be sent out to identified stakeholders (Task 5) The website is available
at httpcentral-americafta-evaluationeu
Electronic communication with stakeholders will take place through email newsletters as
well as Twitter using an account for this ex-post evaluation (CaEvaluation) Twitter will
be used as well to present the (draft) findings at specific moments in the study interested
related work or articles highlights or relevant quotes from the consecutive study reports
and promote the various outreach activities such as workshops LinkedIn will be used to
complement twitter with the same objectives the account of LinkedIn to be used will be
Ex-Post Evaluation EU-Central America FTA Email and an electronic newsletter will be used
as complementary tools to reach specific stakeholders throughout the study to inform them
Page 42
of events to send questions receive feedback and make appointments for interviews the
email used will be central-americabkp-advisorscom
With the COVID-19 pandemic still in place and governments imposing new lockdowns and
travel restrictions a back-up plan is available in case a lot of the communication has to be
done online The meetings with the EU and CA stakeholders both government and civil
society in the near future will be held online For the second half of the year and beginning
of 2022 face-to-face meetings may also be an option The advantage of digital outreach
is linked to reduction of travel time and travel costs to the minimum and in addition digital
follow-up is easier The public consultation and online business survey are already being
prepared and planned with an indicative timeline of online availability between June and
September 2021 The workshops envisaged for Central America in November 2021 are
currently planned with options ranging from face-to-face meetings over hybrid solutions
to holding them entirely online In either case we will ensure they are as interactive as
possible thanks to the use of breakout rooms and platforms enabling participants to ask
questions and participate in polls online We will also ensure that participants will receive
sufficient information before workshops
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13)
71 Case Study Selection
As part of the evaluation ten case studies will be prepared Their purpose is to capture the
impact of implementation of the EU-CA FTA on sustainable development in its economic
social and environmental dimensions as well as on human rights (including labour rights)
They should complement the economic social environmental and human rights analysis
required under Tasks 10 11 and 12
Regarding the geographic coverage the ToR require two case studies focused on the EU
two horizontal case studies for the whole region of Central America and six dedicated to
each of the Central American countries
Table 1 provides a preliminary list of suggested case studies while their exact focus and
scope will be determined at the next stage of the study further to preliminary impact
analysis and identification of relevant information and data sources
Table 8 List of proposed case studies
No Case study topic Geographical focus Key impact areas
1 Impacts of the Trade Pillar on EU banana producers EU incl OR as well as ACP and LDCs due to preference erosion
Economic and Social
2 Trade in environmental goods and services (opportunities for the EU and partner countries)
EU CA partner countries22
Economic and Environmental
3 Impacts of the Trade Pillar on freedom of association in sectors involved in trade with the EU (the choice of sectors will be made further to the initial impact analysis)
CA partner countries notably Guatemala Honduras and El Salvador
Human rights and Social
4 The effects of the Trade Pillar on sustainable aquaculture in Honduras Nicaragua Costa Rica and El Salvador
Partner countries with a focus on Honduras Nicaragua Costa Rica El Salvador
Economic Social Human rights and Environmental
5 Opportunities created in services sector in particular the green energy sector in Costa Rica (the choice of the services sector will be reviewed based on the initial impact analysis)
CA partner countries Economic and Environmental
22 The ultimate selection of countries will depend on the outcome of the (environmental) impact screening and scoping exercise
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 43
No Case study topic Geographical focus Key impact areas
6 Impacts of the Trade Pillar on child labour and childrens rights
El Salvador Social and Human rights
7 Impacts of the Trade Pillar on the environment (eg forests and biodiversity) in Guatemala the case of palm oil
Guatemala Environmental
8 Impacts of the Trade Pillar on MSMES and sustainable agriculture in the coffee industry (organic coffee) in Honduras
Honduras Economic and Environmental
9 Impacts of the Trade Pillar on women and gender equality notably in agricultural value chains in sectors exporting to the EU (the sectors may include coffee ground nuts and banana however the final selection of sectors and scope will be made based on data availability and the initial impact analysis)
Nicaragua Social and Human rights
10 Implementation and effect of the FTZ in port of Colon including aspects related to direct transportation clause
Panama Economic
72 Case Studies ndash Summaries and Methodologies
Descriptions of case studies and planned methodologies have been provided in Annex A5
8 STUDY WORK PLAN
A detailed study schedule which sets out activities and deadlines for outputs indicated
throughout this Inception Report is outlined in the chart overleaf A detailed plan for the
consultation programme is provided in Annex A4 Annex A6 provides the risk management
approach for the evaluation
Page 44
Phase task deliverable
Inception phase
Kick-off meeting with Commission in Brussels 20
Task 1 Refine draft intervention logic diagram
Task 2 Define and develop the methodological approach
Task 3 Review existing studies amp reports on trade between the EU and CA (6 countries)
Task 5 Provide a concise description of the agreement
Task 6 Create a website dedicated to the evaluation
Task 7 Stakeholder consultation strategy
Task 13 Case study proposals
Inception reporting
Drafting of inception report
Draft Inception Report 22
Review meeting Commission ISG
Finalisation of the Inception Report
Inception Report
Interim phase
Task 4 Provide a concise summary
Task 8 Undertake consultation activities
Civil society dialogue in Brussels (budgeted under review meetings)
12-week online public consultation
Online survey for business users interests in both the EU MS and partners
Workshops in partner countries
Other targeted consultations
Task 9 Assess the EU-Central American TSIA
Task 10 Analyse economic effects
Task 11 Analyse effects of implementation on SD economic social environmental
Task 12 Analyse effects on Human Rights
Task 13 Conduct in-depth case studies based on field work
Interim reporting
Drafting of Interim Technical Report
Annexes Progress evaluation Quantitative tables 10-page stakeholder report CS reports
Draft Interim Technical Report 20
Review meeting Commission ISG
Finalisation of Interim Technical Report
Interim Technical Report `
Final phase
Task 13 Conduct in-depth case studies based on field work
Task 14 Reply to the evaluation questions
Task 15 Provide conclusions and recommendations
Tasks 1 45 9 and 10 - 15
Final reporting
Drafting of draft final report
Synthesis report
Executive Summary
Annexes
Draft final report 20
Review meeting Commission ISG
Finalisation of final report
Translation executive summaries (EN FR GE SP)
Final report 20
Possible exit meeting 20
Progress reports
The ToR speci fies 12 weeks for the survey we tentatively propose 16 weeks because the time schedule a l lows i t and i f the project s tarts in January the survey would fa l l in the hol iday season in EuropeCA which would not be conducive for responses
Key
Meeting with the European Commission
Concrete deliverable (eg Inception Report)
Key
Working on the evaluation and endpoints of work per task
Stakeholder consultation activities and meetings
MayAprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr
HOW TO OBTAIN EU PUBLICATIONS
Free publications
bull one copy
via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps
from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)
from the delegations in non-EU countries
(httpeeaseuropaeudelegationsindex_enhtm)
by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm)
or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
Priced subscriptions
bull via one of the sales agents of the Publications Office of the European Union
(httppublicationseuropaeuothersagentsindex_enhtm)
doi[number]
[Cata
logue n
um
ber]
EUROPEAN COMMISSION
Directorate-General for Trade Directorate D mdash The Americas Agriculture and Food Safety Unit D2 Latin America
European Commission B-1049 Brussels
Ex-post evaluation of the implementation of part IV of the Association Agreement
(Trade Pillar) between the EU and its Member States and
Central America
Inception Report
28 May 2021
The information and views set out in this report are those of the authors and do not necessarily reflect the official opinion of the Commission The Commission does not guarantee the accuracy of the data included in this study Neither the Commission nor any person acting on the
Commissionrsquos behalf may be held responsible for the use which may be made of the information contained herein
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its
Member States and Central America ndash Inception Report
Directorate-General for Trade 2021
LEGAL NOTICE
This document has been prepared for the European Commission however it reflects the views only of the authors and the Commission cannot be held responsible for any use which may be made of the information contained therein
More information on the European Union is available on the Internet (httpwwweuropaeu)
Luxembourg Publications Office of the European Union 2021
ISBN [number] doi[number]
copy European Union 2021 Reproduction is authorised provided the source is acknowledged
Printed in [Country]
PRINTED ON ELEMENTAL CHLORINE-FREE BLEACHED PAPER (ECF) PRINTED ON TOTALLY CHLORINE-FREE BLEACHED PAPER (TCF) PRINTED ON RECYCLED PAPER PRINTED ON PROCESS CHLORINE-FREE RECYCLED PAPER (PCF)
Europe Direct is a service to help you find answers
to your questions about the European Union
Freephone number ()
00 800 6 7 8 9 10 11
() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Page 6
Image(s) copy [artists name + ge ] Year Source [Fotoliacom] (unless otherwise specified)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page vii
ABSTRACT
Since 20131 the European Union (EU) has been implementing the Trade Pillar ie the
Part IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The European
Commission has now commissioned a consortium led by BKP Economic Advisors to
undertake an evaluation of the Trade Pillarrsquos (hereinafter EU-CA FTA) implementation and
impact The evaluation is undertaken over the period January 2021 to May 2022 and
analyses the economic social environmental and human rights (including labour rights)
effects which the EU-CA FTA has had since its entry into force in the Parties to the
Agreement and third countries In terms of evaluation criteria it will review the
effectiveness impact efficiency coherence and impact of the EU-CA FTA and its
implementation It will also comprise ten case studies to illustrate or add detail to broader
findings
This Inception Report presents the evaluation methodology a descriptive summary of the
Agreement and its implementation so far and a brief review of relevant studies on the EU-
CA FTA
1 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El Salvador since 1st October 2013 and with Guatemala since 1st December 2013
Page viii
TABLE OF CONTENTS
LIST OF BOXES TABLES AND FIGURES IX
ACRONYMS X
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES 1
2 EVALUATION FRAMEWORK 2
21 Intervention hypothesis of the Agreement (Task 1) 2
22 Evaluation Questions Judgement Criteria and Indicators 5
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2) 6
31 Analysis of economic effects (Task 10) 6 311 Task 101 Analysis of the evolution of trade in goods 6 312 Task 102 Analysis of the evolution in trade in services 8 313 Task 103 Analysis of the evolution of foreign direct investment (FDI) 8 314 Task 104 Presentation of overall economic impacts 9 315 Task 105 Determining the impact on implementation of the Trade Pillar of the various
institutional structures 9 316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated exportimport procedures for key stakeholders 10
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the Trade Pillar 10
318 Task 108 Analysis of the implementation of the Government Procurement chapter of the Trade Pillar 10
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar 10 3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has led to a
greater economic integration between the Central American partners 11 3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for imports of
bananas 11 3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on SMEs 11 3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers 11 3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on the
budgets of the EU and the partner countries 12 3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on EU
Outermost Regions (ORs) 12 3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on developing
countries in particular on LDCs and countries having an Economic Partnership Agreement (EPA) with the EU 12
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable development (Tasks 11 and 12) 13 321 Task 111 Analysis of the effects of implementation of the Trade and Sustainable
Development (TSD) chapter of the Trade Pillar 13 322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter 13 323 Task 113 Analysis of employment impacts 14 324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda (job
creation labour standards social protection and social dialogue) on working conditions
poverty reduction and enforcement 14 325 Task 115 Analysis of impacts on the informal economy and informal employment 15 326 Task 116 Analysis of impacts on gender inequality 16 327 Task 118 Analysis of impacts on the adoption and implementation of internationally
recognised instruments of responsible business conduct and Corporate Social Responsibility (CSR) 17
328 Task 117 Analysis of environmental impacts 18 3281 Activity 1 Fine-tuned methodology and impact screening and scoping 19 3282 Activity 2 Establishing the baselines for the impact areas 20 3283 Activity 3 Quantitative evaluation of impacts 20 3284 Activity 4 Qualitative evaluation of impacts 21
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page ix
3285 Activity 5 Answering of the evaluation questions and other concluding remarks 21 3286 Conclusions and recommendations 21
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human rights 21 3291 Human rights baseline 22 3292 Screening and scoping 22 3293 Detailed assessment 23 3294 Conclusions and recommendations 24
33 Concluding tasks 24
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3) 25
41 Methodological aspects 25
42 Substantive issues 25
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5) 29
51 Structure of the EU-CA FTA 29
52 Institutional set-up of the EU-CA FTA 31
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo priorities 33
54 Operational context of the implementation of the EU-CA FTA 35
6 CONSULTATIONS (TASKS 6 AND 7) 41
61 Consultation Strategy 41
62 Study Website and Electronic Communications 41
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13) 42
71 Case Study Selection 42
72 Case Studies ndash Summaries and Methodologies 43
8 STUDY WORK PLAN 43
LIST OF BOXES TABLES AND FIGURES Box 1 The use of the DPSIR framework in FTAs 20 Box 2 Expectations regarding inputs from stakeholders 41 Table 1 Methodological approaches and sources for the analyses of trade in goods 6 Table 2 Methodological approaches and sources for the analysis of trade in services 8 Table 3 Methodological approaches and sources for the analysis of bilateral FDI 8 Table 4 Overview of the EU FTAs launched and or concluded since 2012 36 Table 5 EU FTA in Latin America and participating countries 37 Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021) 39
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking 40 Table 8 List of proposed case studies 42 Figure 1 Overall evaluation approach 2 Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association
Agreement 3 Figure 3 Overview of the multi-pronged approach to human rights impact assessment 24
Page x
ACRONYMS
AA Association Agreement ACP African Caribbean Pacific BATIS Balanced Trade in Services CA Central America CCA Causal Chain Analysis CGE Computable General Equilibrium CPI Consumer Price Index CSD Civil Society Dialogue CSR Corporate Social Responsibility DAG Domestic Advisory Group DG Directorate-General ECLAC Economic Commission for Latin America
and the Caribbean EESC European Economic and Social Committee EFTA European Free Trade Association EP European Parliament EQ Evaluation Question EU European Union EU-CA FTA Trade Pillar of the EU-Central America
Association Agreement FDI Foreign Direct Investment FRA EU Agency for Fundamental Rights FTA Free Trade Agreement GATS General Agreement on Trade in Services GDP Gross Domestic Product GHG Greenhouse Gas GIs Geographical Indications GPA Government Procurement Agreement GSIM Global Simulation GSP Generalised Scheme of Preferences GTAP Global Trade Analysis Project HRIA Human Rights Impact Assessment ILO International Labour Organisation IPR Intellectual Property Rights ITC International Trade Centre
JC Judgement Criterion LDC Least Developed Country LULUCF Land use land use change and forestry MFN Most-Favoured Nation MSME Micro Small or Medium-sized Enterprise NGO Non-Governmental Organisation NTB Non-Tariff Barrier OECD Organisation for Economic Cooperation and
Development OHCHR Office of the United Nations High
Commissioner for Human Rights OR Outermost Region
RBC Responsible Business Conduct RoO Rules of Origin SDGs Sustainable Development Goals SIA Sustainability Impact Assessment SICA Central American Integration System SIECA Secretariat for Central American Economic
Integration SME Small or Medium-sized Enterprise SPS Sanitary and Phyto-Sanitary TBT Technical Barriers to Trade TISMOS Trade in Services data by mode of supply ToR Terms of Reference TRIPS Trade-Related Aspects of Intellectual
Property Rights TRQ Tariff Rate Quota TSD Trade and Sustainable Development UN United Nations UNCTAD United Nations Conference on Trade and
Development UNECE United Nations Economic Commission for
Europe WTO World Trade Organisation
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 1
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES
Since 20132 the European Union (EU) has been implementing the Trade Pillar ie Part
IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The Trade Pillar
(hereinafter EU-CA FTA) gradually opens markets on both sides increases the stability and
predictability of the trade and investment environment and aims at creating benefits for
consumers and fostering sustainable development Its objectives include also support for
regional economic integration in Central America This is also one of the first EU ldquonew
generationrdquo trade agreements characterised by its comprehensive scope that covers in
addition to liberalisation of trade in goods and services investment public procurement
competition intellectual property rights and trade and sustainable development
After several years of implementation an evaluation is undertaken with the objective of
analysing the economic social environmental and human rights (including labour rights)3
impacts of the implementation of the EU-CA FTA and ultimately of determining whether
there is a need to improve its implementation To support the European Commissionrsquos own
evaluation of the Agreement the Directorate-General (DG) for Trade has awarded a
contract for the ldquoEx-post evaluation of the implementation of part IV of the Association
Agreement (Trade Pillar) between the EU and its Member States and Central Americardquo to
a consortium led by BKP Economic Advisors (BKP) The evaluation is carried out by a team
involving experts from BKP Trade Impact BV Trinomics the Foundation Rural
Development Consult (CDR) the NL-investmentconsulting BV and the University of Costa
Rica The work started in January 2021 and will continue until May 2022
The scope of the evaluation can be delineated as follows in terms of the period covered
it includes the whole implementation period of the EU-CA FTA since the start of provisional
application in 2013 up to now also comparing where appropriate with a five-year period
preceding the entry into force of the Agreement (ie starting in 2008) Geographically it
primarily covers the Parties to the Agreement although some effects of the EU-CA FTA on
selected third countries are also analysed such as developing countries and particularly
least developed countries (LDCs) moreover some global effects (eg climate change)
will also be covered Regarding evaluation criteria effectiveness impact efficiency
coherence and relevance will be considered Finally as already mentioned in terms of
types of effects considered the evaluation will cover economic social environmental and
human rights (including labour rights) effects which the EU-CA FTA may have had either
as a result of the changes in trade it has brought about or through the implementation of
the provisions of the Agreement text itself notably those of the Trade and Sustainable
Development (TSD) chapter
Although most data to be considered for the evaluation are likely to refer to the world pre-
COVID-19 the pandemic will have an impact on the study First in terms of the evaluation
implementation it is likely to affect the consultation activities that may need to be carried
out online rather than in person Second in substantive terms it will be important to pay
attention to issues which are of a priority for stakeholders in the current circumstances
(eg by selecting case studies accordingly) and to consider that eg stakeholder views
might be affected by the current situation
This inception report is the first deliverable under the contract It comprises seven tasks
of the evaluation (as established in the Terms of Reference see Figure 1) focusing on the
presentation of the evaluation methodology and is structured as follows Chapter 2
2 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El-Salvador since 1st October 2013 and with Guatemala since 1st December 2013 3 Whenever this report refers to human rights this includes labour rights
Page 2
presents the evaluation framework with an intervention hypothesis (task 1) while Chapter
3 outlines the proposed methodology responding to the evaluation questions (task 2) and
Chapter 4 covers a brief review of relevant studies on the Agreement (task 3) Chapter 5
provides a descriptive summary of the EU-CA FTA and its implementation so far (task 5)
followed by outline of consultation activities in Chapter 6 (tasks 6 and 7) supported by the
consultation strategy provided in Annex B as well as a list with a preliminary selection of
case studies in Chapter 7 (task 13) The final part includes study work plan in Chapter 8
The draft outline of the interim and final evaluation reports is presented in Annex A7 Other
parts of the Annex provide further details on certain elements of the report
Figure 1 Overall evaluation approach
2 EVALUATION FRAMEWORK
21 Intervention hypothesis of the Agreement (Task 1)
An indicative intervention hypothesis developed by the Commission linked the operational
objectives (as listed in Article 78 of the EU-CA FTA) to specific and overall objectives set
out in Article 2 of the Agreement and its Recitals In line with Task 1 of the evaluation ToR
we have adapted the intervention logic developed by the Commission as follows
All 10 operational objectives listed in Article 78 of the Agreement have been included
Specific and overall objectives have been considered in the context of short-term and
medium-term outcomes as well as long-term impacts
Underlying assumptions have been identified and integrated into the intervention
hypothesis
The relationship between the evaluation questions (EQ) and the intervention hypothesis
has been specified
The updated version of the intervention hypothesis is presented in Figure 2 overleaf
The intervention hypothesis was also instrumental in developing the analytical framework
of the evaluation which brings together the evaluation questions of the ToR the associated
judgment criteria and indicators the data sources and the methodological tools with which
we will collect data The refined analytical framework is presented in the following sub-
section
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 3
Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association Agreement
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 5
Main assumptions (at the level of coherence)
Pillar IV and its implementation has been coherent with the EUrsquos trade and development
policies and in particular with the EUrsquos commitment to sustainable development in
trade policies as a contribution towards attainment of the SDGs (EQ8)
Main assumptions (at the level of efficiency)
The utilisation rate of the Trade Pillar is high (EQ5)
Implementation of the Trade Pillar does not lead to trade diversion (EQ5)
Costs associated with implementation of the Trade Pillar are proportionate to the
benefits it has generated (EQ6)
The distribution of both costs and benefits is proportionate among different
stakeholder groups and interests (EQ6)
Implementation of the Trade Pillar does not create unnecessary regulatory costs
(including administrative burden) (EQ7)
Main assumptions (at the level of effectiveness impact and relevance)
The implementation of the Trade Pillar does not create unintended negative
consequences (EQ3)
The positive impact of the Trade Pillar is inclusive and does not benefit only a limited
group of stakeholders (EQ6)
Implementation of the Trade Pillar has contributed to trade diversification (EQ5)
Provisions of the Trade Pillar continue to be relevant for strengthening trade relations
between the Parties and regional integration of Central America (EQ9)
22 Evaluation Questions Judgement Criteria and Indicators
The evaluation framework has been based on the evaluation questions listed in the ToR for
the study which are as follows
EffectivenessImpact
EQ 1 To what extent have the objectives as laid down in Article 78 of Part IV of the
Agreement been achieved
EQ 2 What are the factors influencing (either positively or negatively) the achievements
of the objectives specified in Article 78
EQ 3 Has implementation of the Trade Pillar had unintended (positive or negative)
consequences and if so which ones
EQ 4 What has been the impact of implementation of the Trade Pillar
Efficiency
EQ 5 To what extent has implementation of the Trade Pillar been efficient with respect
to achieving its objectives
EQ 6 To what extent are the costs associated with implementation of the Trade Pillar
proportionate to the benefits it has generated Is the distribution of both costs and
benefits proportionate among different stakeholder groups and interests
EQ 7 Are there unnecessary regulatory costs (including administrative burden)
Coherence
EQ 8 To what extent has implementation of the Trade Pillar been coherent with the
EUrsquos trade and development policies ndash and in particular with the EUrsquos commitment to
sustainable development in trade policies as a contribution towards attainment of the
SDGs
Relevance
EQ 9 To what extent do the provisions of the Trade Pillar continue to be relevant in
order to address the current trade needs and issues of the EU and Central America
Page 6
The framework provides the evaluation questions the judgement criteria for each of them
the analysis needed to substantiate findings and conclusions made in the evaluation report
and the sources through which data and information will be obtained The evaluation
framework also links evaluation questions and judgement criteria to the analytical tasks to
be performed according to the ToR Table 1-1 in Annex A1 presents this framework
It should be noted that methodological tools and indicators used are not shown in the table
but are explained in the next chapter
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2)
In this chapter we describe the methodologies and tools planned to be used in the
evaluation separately for each task The analysis will be concluded with recommendations
on how the implementation of the Agreement can be further improved for the benefit of
the EU and Central American partner countries It should be noted that the structure of
the presentation is in line with the tasks defined in the ToR to facilitate comparison and
compliance with ToR requirements However the order of findings will be guided by the
evaluation framework presented in chapter 2 To facilitate the link with the evaluation
framework for each task we indicate to which evaluation question respectively judgement
criterion it contributes
31 Analysis of economic effects (Task 10)
In 2010 the EU was Central Americarsquos second most important trade partner after the
United States (and after intra-regional Central American trade) The total value share of
the EU in Central American trade was 94 EU exports mainly went to Costa Rica (53)
Honduras (22) and Guatemala (12) In 2018 the EU was still Central Americarsquos second
trade partner after the United States but with a higher share of 122 of all Central
American trade (IMF 2019) In 2019 Central Americarsquos trade with the US (in both goods
and services) totalled USD 70 billion (ie EUR 678) (USTR) Trade in goods with the EU
reached EUR 12 billion in 2019 and trade in services EUR 82 billion in 2018 (European
Commission 2020a)
311 Task 101 Analysis of the evolution of trade in goods
Analysis under this task will seek to respond to the evaluation questions related to JC 1A1
1A2 and JC 41 The EU-CA FTA offers advantages in terms of market access for the EU
and Central American countries Some of the main elements of the Agreement regarding
goods exports from the EU to Central America are complete liberalisation of tariffs for
manufactured goods and fisheries at the end of the tariff phase-out period and immediate
liberalisation of 69 of EUrsquos exports to CA at the start of the agreement saving EUR87
million in duties annually Specific analyses to be carried out under Task 101 have been
summarised in Table 1 For each sub-task we present the specific analysis that needs to
be carried out and main methodological approach we suggest as well as relevant data
sources
Table 1 Methodological approaches and sources for the analyses of trade in goods
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
1 Goods showing the largest increase or decrease in total and bilateral trade flows
Using COMEXT statistics at different disaggregation levels the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing products
2 Development of trade in goods against previously applicable GSP+ and GSP tariffs
Taking COMEXT data as a basis to investigate whether the GSP status of a product has a bearing on how the EU-CA FTA has influenced the rate of growth in trade we will compare two groups of goods those for which tariffs were 0 under GSP versus those for which tariffs were greater than 0 under GSP+
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 7
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
3 Preference utilisation rates and forgone duty saving of economic operators of all Parties
Based on COMEXT data (for EU imports) and data provided by the Commission (for EU exports) a quantitative analysis will be undertaken to identify the key sectors and product categories where preferences are not fully used We propose to include up to 3 questions in the survey to identify factors that encourage discourage companies to use the Agreement
4 Use of tariff rate quotas (and the reasons for suboptimal use)
Data up to 2019 is already available in the Commissionrsquos annual implementation reports Updating the data is supposed to rely on similar sources as the Commissionrsquos annual reports Reasons for sub-optimal use of TRQs will be investigated during the consultations as this cannot be inferred through statistical analysis
5 Trade diversion in particular from interregional Central American trade towards the EU
First we aim to use COMEXTCOMTRADE data to analyse the evolution of merchandise trade flows over time (between the EU and the partners but also within the region in comparison to the rest of the world)
Second we aim to look at the CGE results that should be able to tell us the pure EU-CA FTA effect on intra-Central American trade flows
6 Impact of the Agreement in relation to the creation persistence reduction or removal of non-tariff measures (NTMs) that have a significant impact on EU-CA countriesrsquo trade in goods
We will use UNCTADrsquos NTM TRAINS database and classification for identification description and analysis of specific NTMs affecting trade relations between the EU and Central America We will also look at NTMs including market access barriers raised by the Parties in the sub-committee meetings and will complement the findings with stakeholder engagement
7 Analysis of the importance of Free Trade Zones in Panama (especially the FTZ in the Port of Colon)
Using trade statistics we can get a picture of the way trade flows entering Central America via the Port of Colon (for example) are distributed across Central American countries These patterns ndash at sector level ndash would tell us the most economically significant EU exports This
will be complemented by qualitative analysis
8 Investigation of whether new enterprises started to export or whether enterprises already exporting started to export new products
We expect to undertake this analysis by relying on available firm-level data as well as specific questions for SMEs in the targeted business survey the SME Panel questionnaire and other consultation activities directed towards SMEs Additionally for this sub-task we will try to get access to national databases containing firm-level panel data based on highly disaggregated customs information that include exports (imports) of products and their destinations
9 Analysis of the evolution of trade import shares originating in the EU in total imports of the six CA countries (and vice versa)
COMEXT and COMTRADE data will be used to carry out this analysis We will ensure that we specify the third countries in a clear way The EU and each of the Central American countries The United States Mexico and Canada but also Brazil Argentina
Paraguay and Uruguay (Mercosur) and China Other countries (Rest of World)
10 Analysis of the impact of the EU-CA FTA implementation on diversification of trade
The diversification of trade in goods will be evaluated according to two main dimensions 1 Diversification in the range of products traded between the EU and each of its partners 2 Diversification in the number of EU member states trading with the Central American partners
11 Comparison of the development of trade in goods between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
COMEXT and COMTRADE data will be used to carry out this analysis Regarding trade of the partner countries the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as the MERCOSUR countries The choice of the US can be explained by CAFTA-DR agreement that has been in place since 2006 between the US and Central America and the Dominican Republic
12 Investigation of whether the EU-CA FTA has facilitated trade with third countries including via the use of intermediate products
Use of GTAP data (since the Trade in Value Added ndash TiVA database only covers Costa Rica) to look at intermediate linkages and whether these have helped the competitiveness of the CA economies We will also look at the CGE modelled development of the real exchange rate as an indicator of what happened to CA economiesrsquo levels of competitiveness
13 Analysis of the degree to which implementation of the EU-CA FTA has contributed to diversification of sources of supply of goods
COMEXT and COMTRADE data will be used to carry out this analysis We will look at the inputs shares for specific products in CA from the EU and vice versa and compare the development of these shares to the shares for the same products from international trade partners
14 Identification of regions within the partner countries that have benefited most and of
regions having benefited least (including the identification of constraints)
We expect to rely mainly on a combination of mapping of the sectoral CGE effects per region with literature review and consultation activities to identify the regions that have most least benefited from the
agreement Social progress indexes are computed at municipal level in Costa Rica and at provincial level in Panama as well as for some regions in Guatemala and El Salvador but this is for 2017-2018 only
Page 8
312 Task 102 Analysis of the evolution in trade in services
Analysis in this task is linked to JC 1A3 Although the effects of trade agreements on EU
services trade with third countries are not easily quantifiable we will seek to use available
data to demonstrate the impact of the EU-CA FTA on EU services trade We will assess
whether the Agreement has led to an improvement or worsening of the structural
imbalance between the parties The EU posted a substantial services trade surplus of EUR
10 billion with all six Central American partners combined in 2013 but this surplus has
decreased to EUR200 million by 2017
Table 2 Methodological approaches and sources for the analysis of trade in services
Specific analysis to be carried out
Main methodological approach and sources
1 Services showing largest increase decrease in total and bilateral trade flows between individual CA countries and EU
We will identify sectors showing the biggest increase in total trade in services flows and in bilateral trade flows as well as those having performed worst This analysis will be conducted using time series trade statistics at different levels of disaggregation (from Eurostat OECD and UNCTAD) the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing sub-sectors Reasons for performance will be identified by a combination of sources including literature review and targeted consultations
2 Comparison of the development of
trade in services between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
The comparison of the development of bilateral trade in services between the EU and the individual Central American countries with the development of trade in services
for the EU and its Member States and for Costa Rica Guatemala El Salvador Honduras Nicaragua and Panama with a suitable reference group of countries will provide further evidence on the actual impact of the agreement of trade in services flows As is the case for trade in goods (Task 101) the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as MERCOSUR countries if possible The choice of the US matters because of the CAFTA-DR agreement that has been in place since 2006
3 Analyse trends in international financial capital flows and the evolution of key financial industry segments ndash with the GATS modes of supply as the basis
First we will analyse trends in international financial capital flows between the EU and the Central American countries as well as globally For this we will use available Eurostat OECD andor UNCTAD data as well as Central Bank data if available
Second in order to look at how sectors are performing (well or not so well) we will focus on a concise general ndash but sector level ndash analysis and what drivers we can identify for economic performance
Third we propose that the following case study (see Task 13) could be undertaken Evaluating financial industry segments such as banking insurance asset management sustainable investment ndash in Panama or Costa Rica
Data source suggestions The OECDrsquos Services Trade Restrictiveness Index The GATS Trade Restrictiveness Index which together establish the amount of ldquowaterrdquo in the partiesrsquo GATS
bindings that can be ldquosqueezedrdquo by a modernised Agreement Central Bank data on financial and insurance services economic activity and trade Global Investment Competitiveness Report (World Bank 2019) ISDB data from Eurostat BOP statistics
313 Task 103 Analysis of the evolution of foreign direct investment (FDI)
The analysis in this task will be linked to JC 1A5 Although the effects of trade agreements
on Foreign Direct Investment (FDI) with third countries are not easily quantifiable we will
seek to use available data to demonstrate the impact of the EU-CA FTA on FDI At a general
level this task will entail to assess what impact the EU-CA FTA has had on structural
balances or imbalances between the EU and its Central American partners
Table 3 Methodological approaches and sources for the analysis of bilateral FDI
Specific analysis to be carried out
Main methodological approach and sources
1 Largest increases decreases in FDI flows between individual CA countries and the EU
We will identify main changes in FDI flows over the past 10 years between the EU and Central American countries if possible at sector level This analysis will be conducted using the ITC investment map data UNCTAD investment data and ISDB data from Eurostat BOP statistics Data limitations are expected to be significant for this subtask Reasons for good or bad performance will be identified by a combination of sources including literature review and targeted consultations
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 9
Specific analysis to be carried out
Main methodological approach and sources
2 Comparison of the development of FDI flows between the signatory countries
The proposed methodology would examine the investment effect at both the extensive and intensive margins using the two-step Heckman (1979) estimation as implemented in Helpman et al (2008)
3 Analysis of the investment climate
and of the attractiveness to investment of the six CA countries
An analysis of the investment climate and of the attractiveness to investment of the six Central American countries taking into consideration the possible impact of the
existence of bilateral investment treaties or of double-taxation treaties will be undertaken We propose to review inter alia the evolution of the following indexes OECDrsquos Foreign Direct Investment Restrictiveness (FDIR) index Various FDI attractiveness and FDI confidence indexes ndash eg by AT Kearny and Ernst amp Young Global Investment Competitiveness Report (World Bank 2019) World Bank lsquoDoing Business Indicatorsrsquo ISDB data from Eurostat BOP statistics wwwinvestmentmaporg from the ITC
314 Task 104 Presentation of overall economic impacts
The analysis in this task is linked to JC 41 and will rely on the computable general
equilibrium (CGE) modelling undertaken by DG Trade The CGE model is the quantitative
cornerstonefoundation of the ex-post evaluation Important variables of interest for the
economic analysis will be those which are standard for a CGE analysis such as GDP and
trade flows (total bilateral and by sector) and sectoral output Based on the CGE modelling
results we will estimate the overall impact on the economy of the EU the partner countries
as well as third countries in particular LDCs The economic analysis will build further on
the modelling results We will report these in sufficient detail to highlight the economic
effects of the EU-CA FTA More details on the CGE model are provided in Annex A2
315 Task 105 Determining the impact on implementation of the Trade Pillar of the
various institutional structures
Our analysis under this task will seek to respond to evaluation questions No 1 and 5 (with
JC1A2 JC1A6 JC1A7 and JC1A9) ie how the operation of the institutional set up has
contributed to achieving the objectives of the EU-CA FTA outlined in Article 78 and how
effective and efficient the Association Committee (in trade configuration) six Sub-
committees and an ad hoc Working Group have been to date To determine this we will
analyse provisions of the EU-CA FTA referring to institutions and their operation in practice
In the first step we will analyse Articles 4-8 establishing the Association Council the
Association Committee and Sub-Committees and setting out their decision-making powers
This will be done jointly with Articles 345-346 setting out specific tasks of the Association
Council and the Association Committee acting in trade configuration including powers to
amend certain parts of the Agreement (within Trade Pillar) This will be followed by Articles
347-348 about Part IV coordinators and Sub-Committees established under EU-CA FTA and
will be complemented by the analysis of Articles 91 123 139 156 274 and 294 outlining
areas of responsibility of the individual Sub-committees4 and the Rules of Procedure of the
Association Council and the Association Committee (Decision No 12014 of the Association
Council) which also apply to Sub-Committees This will let us develop an understanding
about the mandate of each institution its decision-making powers including those related
to amending the EU-CA FTA and monitoring compliance by each Party frequency and
format of meetings relations with other institutions under the Agreement reporting and
escalation In this way we will establish an expectation regarding the role each institution
should have in implementation of the EU-CA FTA and achieving its objectives
4 Sub-committee on Market Access for Goods (Article 91) on Customs Trade Facilitation and Rules of Origin (Article 123) on Technical Barriers to Trade (TBT) (Article 139) on Sanitary and Phytosanitary Matters (SPS) (Article 156) on Intellectual Property (Article 274) Board on Trade and Sustainable Development (TSD) (Article 294) and Ad hoc Working Group on Government Procurement
Page 10
In the second step we will analyse the actual operation of all the above structures based
on available documents and engagement with the Parties as well as relevant stakeholders
We will take as the basis reports from Sub-committee and Association Committee meetings
and will complement them with the annual Commissionrsquos Implementation Reports and
other documents eg conclusions adopted by civil society representatives at the annual
meetings under the TSD chapter We will also determine whether formal decisions have
been taken by the Association Council or Committee and if so analyse the extent to which
they have contributed to implementation of the EU-CA FTA We will also look at concerns
raised by the Parties how they have been addressed and how much time it took to achieve
a satisfactory solution Based on findings from our analysis we will provide conclusions
and recommendations for the future notably for the TSD board
316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated
exportimport procedures for key stakeholders
Analysis in this task will be related to JC 1A2 Based on reviews of the Agreement text as
well as the work of the Sub-committee on ldquoCustoms Trade Facilitation and Rules of Originrdquo
we will analyse in a qualitative way which customs-related aspects have facilitated or
complicated bilateral trade like rules of origin management of TRQs agricultural safeguard
measures and approved exporter status We will seek to determine eg whether Article
304 par 1 provision (related to reimbursement of duties in CA Party of transit and their
payment in the CA Party of import) is applied in practice and if so how it is evaluated by
economic operators
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the
Trade Pillar
This task is also linked to JC 1A2 and the methodological aspects described above are also
valid for SPS related issues We see two subtasks under this request 1) An analysis to
what degree implementation of the SPS Chapter in the EU-CA FTA has facilitated agri-food
trade without lowering any partyrsquos SPS standards 2) The extent to which the capacity
building and technical assistance provided by the EU to Costa Rica El Salvador Guatemala
Honduras Nicaragua and Panama has had an effect (looking at what technical assistance
projects and funds were used)
318 Task 108 Analysis of the implementation of the Government Procurement
chapter of the Trade Pillar
The analysis in this rask is linked to JC 1A6 and will examine the impact of the opening of
the government procurement markets of the Parties using a multi-step approach 1)
Review of the recent and ongoing work of the Ad Hoc Working Group on Government
Procurement 2) A statistical analysis of the procurement value shares for EU business (if
possible) and SME participation which will be complemented by desk research and
anecdotal evidence of success stories of EU companies in Government procurement
markets of six CA countries and 3) Review of the level of compliance with the Agreement
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar
This task is related to JC 1A7 and 1A8 The methodological approach foreseen to analyse
other areas of the Agreement (like Technical Barriers to Trade e-commerce Competition
and protection of intellectual property rights (IPRs) including geographical indications)
Our approach focuses on 1) Statistical analysis compiling statistical descriptive analysis
on each issue prior to and after entry into force of the Agreement 2) Literature review
the analysis on the implementation and use of geographical indications in Central America
(eg Rivar 2020) 3) Case studies A specific case study on some of these other issues
could be carried out
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 11
3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has
led to a greater economic integration between the Central American partners
This task is linked to JC 1A4 The EU-CA FTA has been a mechanism that encourages
regional integration but it takes place within a much wider framework of regional
cooperation efforts between the CA countries with the EU-CA FTA being only one element
in this wider context This task focuses on the impact of the EU-CA FTA on regional
integration not on the overall trend or state of affairs regarding regional integration We
use three elements for our analysis 1) The statistical analyses that we have carried out in
Tasks 101 (trade in goods) 102 (trade in services) and 103 (FDI) help to shed light on
regional integration impact of the EU-CA FTA also 2) We look at the results of the CGE
analysis including at how the intra-regional trade patterns have changed because of the
EU-CA FTA 3) We investigate what progress has been made in terms of the different
elements for integration We will use EU and CA data sources to underpin our analyses
3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for
imports of bananas
This task is related to JC41 We envisage three types of analysis under this task in addition
to a possible case study 1) Descriptive statistical analysis based on trade in bananas since
2008 in order to capture developments before and after the entry into force of the EU-CA
FTA distinguishing bilateral trade in bananas EU banana imports from the non-LDC ACP
countries from LDCs and intra-EU imports from the Outermost Regions 2) A quantitative
impact analysis using a partial equilibrium model ndash the Global Simulation (GSIM) model
(Francois and Hall 2009) 3) A qualitative impact analysis causal chain analysis will be
applied to look at what the Agreementrsquos sector-level social and environmental effects have
been In this step we focus in the socialhuman rights pillars on how vulnerable groups
could be affected at sector level The qualitative sectoral environmental analysis will cover
the impact of the FTAs on land use and related issues water and waste management and
biodiversity and protection
3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on
SMEs
The analysis in this task is linked to JC 41 The ldquoSME-Testrdquo will be guided by the following
steps 1) Consultation of SME Stakeholders SMEs are a central element of the consultation
strategy and will be present at every stage of it 2) Identification of affected business
early on in the analysis we will identify whether and which SMEs (eg medium-sized) are
among the affected businesses 3) Identification of concrete stories as the Interim Report
progresses we will have sufficient information to identify 20 concrete stories from SMEs
as required by the Terms of Reference
3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers
This task will be approached in two parts the first one being dedicated to impacts on
consumer rights and the other one to welfare-related impacts of the EU-CA FTA which also
affect consumers in their purchasing decisions The analysis will be related to JC 42 and
evaluation questions No 18 and 6 In addition we will aim to determine to what extent
EU-CA FTA has contributed to attaining SDG 1 (no poverty) and 10 (reduced inequalities)
Regarding consumer rights in the first step we will refer to the literature according to
which consumers usually benefit from global trade and preferential trade agreements due
to lower prices of purchased goods and services (resulting from reduction of tariff and non-
tariff barriers) a wider variety of traded goods and services the related satisfaction of
diversified needs and preferences and higher quality of available goods and services
Page 12
In the second step we will consider impacts which the EU-CA FTA (might) have had for
consumers regarding availability safety sustainability traceability and quality of traded
goods and services as well as which impact its promotion (or consumersrsquo awareness of it)
may have on consumersrsquo knowledge regarding the market offer and their trust in it The
list of questions to test will be guided by the EU Better Regulation Tool Nr 32 related to
impacts on consumers We will also draw on other parts of the study analysing
implementation of provisions related to regulatory measures and standards eg TBT
SPS TSD dialogue and cooperation between the EU and partner countries and
transparency to outline what level of protection incl consumer protection and production
standards is provided by the EU-CA FTA We will also refer to the EU RAPEX database ie
the alert system for dangerous non-food products listing notifications of such products
originating from the EU and partner countries
The second part of our analysis will focus on impacts of the EU-CA FTA on welfare In the
first step based on literature review and statistical data including relevant indexes (eg
the share of population living below the poverty line) we will analyse trends in the reporting
period in the EU and Central America regarding situation of consumers from different
groups of the population incl incomes expenditures levels of poverty and inequality
income and price levels wages and other types of income and any changes in this context
In the following step we will use outcomes of the economic modelling to estimate impacts
on welfare and inequality resulting from EU-CA FTA implementation eg prices and wages
In this context we will also consider to what extent the Agreement helped to attain SDG
No 1 (No Poverty) and SDG No 10 (Reduced Inequality) This will be complemented by
stakeholder consultations and finished with conclusions and recommendations
3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on
the budgets of the EU and the partner countries
The analysis in this task is linked to JC 41 It will examine impact of the FTAs on the EU
budget (ie revenues forgone) and will largely result from the economic model We
anticipate that for the EU the foregone tariffs on imports from the partner countries will
be estimated based on the level of EU imports from the selected countries as a baseline
and the tariffs that would have applied to those imports
3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on
EU Outermost Regions (ORs)
This task is linked to JC 41 The impact on ORs will be assessed based on the trade
diversion and deflection identified in the CGE analysis A key limitation in the economic
modelling framework is however that the EU ORs are not established as a separate region
To meaningfully analyse the effect on the EUrsquos ORs we propose two elements 1) A
matching analysis for the EU and the six partner countries regarding products that matter
for ORsrsquo trade (to either partner countries or the EU) 2) Competition analysis between
ORs and CA partner countries for exporting to the EU The effects will be determined
qualitatively distinguishing if applicable the ORs which might be positively or negatively
affected by the Agreement
3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on
developing countries in particular on LDCs and countries having an Economic
Partnership Agreement (EPA) with the EU
This task is related to JC 41 Our approach to look at the EU-CA FTArsquos impact on developing
countries and LDCs will largely consist of the interpretation of the results of the economic
model simulations which has defined lsquoLDCsrsquo as a separate region This allows us to look at
the effect the EU-CA FTA has had on them We will also look closely at effects for countries
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 13
which are implementing an Economic Partnership Agreement (EPA) with the EU In terms
of the impact we will look first at an economic impact followed by effects on the other
sustainability pillars The former will include (i) a matching analysis for the EU and the six
partner countries regarding products that matter for LDCsrsquo trade (to either partner
countries or the EU) and (ii) competition analysis between LDCs and CA partner countries
for exporting to the EU We do not expect the effect to be significant for the LDCs because
the global impact of the EU-CA FTA is limited
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable
development (Tasks 11 and 12)
321 Task 111 Analysis of the effects of implementation of the Trade and
Sustainable Development (TSD) chapter of the Trade Pillar
This is one of the priority tasks linked to JC 1A1 In the first step we will divide provisions
of the TSD chapter into thematic blocks to identify areas for further analysis These include
commitments of the Parties to effectively implement in their laws and practice the eight
fundamental conventions of the International Labour Organization (ILO) as well as the
Multilateral Environmental Agreements to which they are Party the right of the Parties to
regulate sustainable management of natural resources promotion of trade supporting
sustainable development institutional provisions and dispute settlement mechanism
In the second step based on findings from the analysis of the actual situation in the EU
and partner countries carried out in Tasks 113-118 and documents outlining the
implementation of the TSD chapter (eg reports of international monitoring bodies
reports from meetings of the TSD Board and civil society advice to the Parties) we will
map activities undertaken by the Parties in areas covered by the TSD chapter in a break-
down prepared in the first step This will enable us to conclude to what extent the scope
of the TSD chapter has been covered and if actions taken by the Parties individually and in
cooperation activities have contributed to the implementation of TSD commitments and
attaining the objectives of the chapter and relevant SDGs (No 8 on decent work and
employment for all No 13 on combating climate change and No 14-15 on sustainable
use and protection of marine environment forests and biodiversity) Our analysis will be
complemented by stakeholder engagement5 We will conclude the analysis with
recommendations for the future incl any improvements in operation of institutions to
support compliance of the Parties with provisions of the TSD chapter
322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter
This is one of the priority tasks liked to JC 1A10 and evaluation questions No 1 5 and 8
In the first step we will analyse formal commitments of the Parties regarding the set up
and operation of the institutional mechanism ie Article 294 (Contact Points of the Parties
the TSD Board and civil society Advisory Groups) and Article 295 (Civil Society Forum)
In the second step we will analyse the establishment and operation of TSD institutions in
practice including their meetings activities undertaken between sessions cooperation and
5 When the Report refers to stakeholder engagement it means diverse activities foreseen in the stakeholder engagement programme outlined in detail in Annex B to this Report (Consultation Strategy) For each task stakeholder engagement activities will be tailored to the most relevant group of stakeholders methodology applied in the task and type of data which will be needed for the analysis For example in the analysis carried out with regard to TSD chapter the focus will be on targeted interviews with civil society members of the Advisory Groups in the EU and Central American countries as well as with Government and Commission representatives Further sources of information and activities will include targeted meetings eg DAG meetings and workshops with Central American countries CSD meetings with the European civil society and written positions submitted by civil society organisations As a complementary source we will use replies from online public survey
Page 14
dialogue between Governments and civil society The analysis will be based on reports
from meetings research studies recommendations from civil society to the Parties and
interviews with representatives of the Commission Governments from Central America
EU Delegations the EESC secretariat of the EU Advisory Group as well as civil society
representatives from the EU and Central American countries including members of their
Advisory Groups We will also evaluate effectiveness and efficiency of the institutional
mechanism and its role in the monitoring and implementation of the TSD chapter the
ability to address problems and to pursue cooperation and dialogue We will put an
emphasis on the evaluation of the TSD Board its ability to monitor compliance with the
commitments of the Parties effectiveness in choosing priorities and structuring the work
programme pursuing cooperation activities and resolving problems This part will also
analyse civil society capacity to exercise its mandate and monitoring implementation of
TSD chapter the quality of dialogue between Governments and civil society and the follow-
up to civil society recommendations In this context and in line with suggestions provided
by reviewed research studies we will also evaluate to what extent the discussion among
the civil society and between Governments and civil society focuses on substance
(compared to focusing on process) and whether the civil society has the means and
capacity to prepare for and to engage in such a discussion We will conclude the analysis
with recommendations for the future incl any improvements in operation of institutions
323 Task 113 Analysis of employment impacts
The analysis in this task will focus on impacts for employment levels and relate to JC 42
and evaluation questions 4 and 6 In the first step we will analyse trends in employment
and unemployment levels in the EU and partner countries for their whole economy and
across sectors over the reference period We will also identify factors influencing observed
trends including macroeconomic and labour policy measures applied by the Governments
investment in education and skills development migration from rural to urban areas and
across region and impacts of trade and investment including through trade agreements
In the second step the analysis will be focused on assessing quantitative impacts (direct
and indirect) of the EU-CA FTA on the number of jobs direct and indirect (for skilled and
un-skilled workers for the EU and partner countries across sectors) and be based on the
results of the economic modelling We will compare these results with the real-life data
and trends observed in the first step to conclude to what extent the reduction in trade
barriers and changes in output across sectors related to the implementation of the EU-CA
FTA have influenced demand for labour given the assumption of a fixed total employment
in the economy and full labour mobility between the sectors with workers leaving sectors
seen as less competitive and moving towards those having better prospects of growth and
working conditions including wages We will also draw a conclusion to what extent
observed trends in employment should be attributed to the EU-CA FTA and to what extent
to other factors incl macroeconomic environment global trends in commodity prices
domestic policy investment and trade agreements with other partners Stakeholder
consultations will help to verify our findings
324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda
(job creation labour standards social protection and social dialogue) on
working conditions poverty reduction and enforcement
This is one of the priority tasks Our analysis will seek to answer the evaluation questions
No 1 4 and 6 (JC 42) Given the broad scope of this task we will divide it into two parts
a) labour standards and social dialogue (the Decent Work Agenda) b) working conditions
including social security and health care coverage of workers and labour inspection
In the first step we will describe the situation in the EU and partner countries and changes
over time regarding the subject matter as well as factors influencing observed trends We
will focus on the following
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 15
Task 114 a) on labour standards will look at the implementation of the core labour
standards as enshrined in the fundamental ILO Conventions ratified by all Parties to
the EU-CA FTA and evaluated by the ILO monitoring bodies6 Regarding trends in child
labour occurrence the analysis will include eg the number of working children types
of activities and sectors involved the number of hours worked per week motives for
undertaking work and involvement in hazardous work Influencing factors will be
considered and their impact on job availability for adult household members the level
of generated income and the extent to which it covers family needs Regarding forced
labour the analysis will include types of activities and sectors involved and influencing
factors including criminal activity and the level of law enforcement On freedom of
association and the right to collective bargaining the analysis will cover conditions for
setting up joining and operation of trade unions and employer organisations and
functioning of social dialogue for the whole country and ndash if data is available ndash across
sectors including indicators such as the share of trade union members in the total
number of workers for the whole country and in a break-down by sector and changes
over time Regarding non-discrimination at work we will focus on groups of workers
which may be in a disadvantaged position on the labour market eg youth disabled
persons migrants or indigenous peoples (women will be analysed in Task 116) and
indicators such as labour participation rate and unemployment rate the share of each
group working informally or being in a situation of sub-employment (ie receiving a
wage below the minimum level despite working full time or having no opportunity to
work full time despite being ready to do so)
Task 114 b) on working conditions and labour inspection will include trends in job
quality indicators over time the average number of working hours per employee per
week the number or rate of fatal and non-fatal accidents at work social security and
health care cover of workers wage levels type of contract the number of labour
inspectors and inspections carried out at work places and the infrastructure and funds
being at the disposal of inspection services (we will consider in that context that all EU
Member States and five Central American countries except Nicaragua have ratified
the ILO convention No 81 on labour inspection)
In the second step based on economic modelling we will identify the sectors most affected
(positively or negatively) by the EU-CA FTA and using the analysis done in step one will
seek to determine if trends observed in the respect for labour standards and quality of
working conditions in individual sectors can be attributed to the operation of the Agreement
or rather to other factors In cases where any concerns related to labour standards eg
child labour incidence or low presence of trade unions are identified in sectors particularly
involved in trade with the EU notably in exports we may apply an in-depth analysis in a
dedicated case study We will also refer to the implementation of the TSD chapter to
establish whether policy dialogue cooperation activities and engagement with civil society
have also influenced the situation We will complement desk research with stakeholder
engagement
325 Task 115 Analysis of impacts on the informal economy and informal
employment
This is one of the priority tasks linked to evaluation questions No 1 and 8 (JC 42) We will
also aim to determine to what extent the Agreement has contributed to attaining objectives
of SDG No 1 (no poverty) and No 10 (reduced inequalities) In the first step we will
develop a description of the situation in the partner countries during the analysed period
concerning the size and structure of the informal economy and factors influencing its
6 These include conventions No 138 and 182 on elimination of child labour No 29 and 105 on prohibition of forced or compulsory labour No 87 and 98 on freedom of association and the right to collective bargaining and No 100 and 111 on equal pay for work of equal value and non-discrimination at work
Page 16
existence as well as its geographic pattern in Central America and each of the partner
countries separately We will aim to identify if there are links between the informal
economy and eg the economic structure and dynamic in certain regions and their
involvement in trade We will also report about steps taken by the Governments in a move
towards formal economy including dedicated national strategies adopted in Costa Rica and
Guatemala
In the second step based on the results of the economic modelling and trade statistics for
trade and investment flows between the EU and Central American countries an additional
literature review and stakeholder consultations we will aim to establish to what extent
trade and in particular the EU-CA FTA has contributed to the observed trends in each
partner country We will verify our findings in stakeholder consultations
326 Task 116 Analysis of impacts on gender inequality
The analysis in this task will seek to answer the evaluation questions No 1 4 and 6 (JC
42) We will also aim to determine to what extent EU-CA FTA implementation has helped
to attain SDG No 5 (gender equality) No 8 (decent work and economic growth) No 1
(no poverty) and No 10 (reduced inequalities) Work under this task will be guided by the
approach proposed in UNCTADrsquos Trade and Gender Toolbox (UNCTAD 2017) which
considers impacts on women in their roles as workers entrepreneurs traders and
consumers Complementary considerations regarding impacts for each of those groups will
be inspired by other literature (eg Fontana 2009) and methodological approaches (eg
European Institute for Gender Equality 2016)
In the first step we will analyse the situation in the Central American partner countries
regarding womenrsquos participation in the labour market economic activity as entrepreneurs
and traders (with a consideration of their access to assets and supporting measures) and
their position as consumers incl the level and type of income received and being at their
disposal Based on the available data we will also analyse gender inequalities before and
after the entry into force of the EU-CA FTA and measures applied by the countries and
provided by international donors to support an increased womenrsquos participation We will
also review reports of the ILO Committee of Experts regarding implementation of the two
ILO fundamental conventions on non-discrimination ie No 100 (equal pay for work of
equal value) and No 111 (non-discrimination at work) ratified by all CA partner countries
In the second step we will compare observed trends stemming from the real data with
outcomes of the economic modelling to determine to what extent they may be linked to
impacts of Agreement and to what extent they result from influence of other factors
Focusing on women as workers we will identify sectors important for them (based on
their shares in the total womenrsquos employment and a ratio of female and male workers
in each such sector) and compare observed trends in employment levels (in total and
across sectors) with the results of the modelling (changes in employment levels across
sectors) to determine whether the EU-CA FTA has contributed to changes reported in
the real life and if so to what extent In this context we will also consider impacts of
tariff reduction on public revenues and whether this might have had an impact on the
provision and quality of public services which in turn may have an effect on women and
their ability to participate in the labour market or to undertake an economic activity
For women as entrepreneurs if relevant data is available we will identify sectors of
their economic activity and compare trends in the actual operation of these sectors over
time (eg growth or decline) with outcomes of the economic modelling to determine if
the EU-CA FTA might have had an impact on output of these sectors and as a result
position of women as entrepreneurs
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 17
Moreover if more detailed data is available regarding sectors and groups of products or
services manufacturedprovided by women-led enterprises as well as their engagement
in international trade we should be able to say (again comparing the real-life data with
economic modelling) what impact the Agreement may have exercised on women as
traders and in this context on sales and exports of their products or services or their
competition with or the use of imports We will also consider whether the EU-CA FTA
provisions regarding eg tariff reduction SMEs TBT SPS might have had an impact
for women-led enterprises (given their size and sectors of operation)
Concerning the role of women as consumers we will look at real-life trends in income
and price levels and compare them with outcomes of the economic modelling to see
what impacts the EU-CA FTA might have had on welfare and price levels as well as the
availability and accessibility of goods and services
Our analysis will be complemented by engagement with stakeholders including women
organisations to identify barriers in their activity on one hand and facilitating measures on
the other and to gather more insights into impacts of the EU-CA FTA
327 Task 118 Analysis of impacts on the adoption and implementation of
internationally recognised instruments of responsible business conduct and
Corporate Social Responsibility (CSR)
Our analysis under this Task will seek to respond to the evaluation question No 1 (JC 42)
In the first step we will map CSRRBC practices in the Central American partner countries
in the analysed period including practices of European companies investing there or having
their suppliers and existing government initiatives promoting them eg National CSR
strategy and Law on CSR in Costa Rica National Plan on Social Responsibility and Human
Rights in Panama and dedicated centres or foundations promoting CSR in Guatemala
Honduras Nicaragua and El Salvador We will also use findings from a research carried
out for Task 111 identifying initiatives undertaken within the TSD Title incl EU projects
and regional events dedicated to CSR RBC and decent work in global supply chains We
will aim at a better understanding of the existing framework uptake of CSRRBC practices
by enterprises factors influencing it and CSRRBC presence in the EU relations with the
partner countries including technical assistance and cooperation projects
Based on this in the second step we will use outcomes of the economic modelling and
stakeholder consultations to verify whether indeed the EU-CA FTA through generated
trade and investment flows as well as specific provisions (such as those in TSD Title) might
have encouraged uptake of CSRRBC practices We will also seek to identify factors related
to market access which may encourage uptake of CSRRBC practices Legislative ones may
include eg non-financial reporting and obligatory due diligence in certain sectors or
activities requirements related to social and environmental aspects in public procurement
and non-legislative ones may focus on image and comparison with the main competitors
being part of supply chains where business partners require respect for certain labour and
environmental standards international instruments in CSR (OECD Guidelines for
Multinational Enterprises ILO Declaration on Multinational Enterprises and Social Policy
the UN Global Compact etc) requirements of sustainability and certification schemes or
consumer awareness and related choices
As an additional element of this analysis (subject to data availability) we may include into
this task examples of other schemes eg sustainability schemes or promotion of decent
work in global supply chains (notably of agricultural products) and their presence in trade
between Central America and the EU and impacts the EU-CA FTA might have had on their
use in bilateral trade relations
Page 18
328 Task 117 Analysis of environmental impacts
The main objective of the environmental analysis is to assess the environmental and
climate change effects of the EU-CA FTA as well as to provide answer to the evaluation
questions notably those on the effectiveness (No 1-4) (JC 43) and coherence of the
Agreement with other policies and the EUrsquos commitment to the SDGs and in particular
SDGs No 13-15 ie Climate Action Life below water and Life on Land (respectively) ie
evaluation question No 7 The main challenge is to isolate the EU-CA FTA induced effects
on the environmental performance in each country from general developments and trends
that occurred regardless of the EU-CA FTA This is particularly challenging as the
counterfactual environmental outcomes are unobservable for most of the environmental
impact areas
The overall approach is based on our detailed understanding of the dynamics through
which the EU-CA FTA may have created environmental impacts tailored towards the
specific circumstances for the Central American countries the requirements in the ToR
the TSD Chapter of the EU-CA FTA and the budget provided for this study The detailed
understanding is based on the study lsquothe methodology for assessing biodiversity impacts
of EU FTArsquo by IEEP Trinomics et al (2021) and the latest literature including an OECD
study (Garsous G 2019) on this matter and applies the following logic
1) identifying the components in the EU FTA with the Central American countries that may
have generated environmental effects (EU-CA FTA elements) Based on our extensive
recent experience on researching the dynamics through which FTAs may create
environmental impacts we conclude that the FTA contains (1) measures easing market
access for the signatories (referred to as tariff-based measures) and (2) several rules-
based measures (mostly by means of the provisions in the TSD Chapter referred to as
non-tariff-based measures) that may have resulted in environmental impacts in the
countries involved
2) then establishing how these elements could have created directly or indirectly intended
or unintended ndash environmental impacts (the impact channels) Any FTA is by
definition expected to create direct environmental impacts through the expected
expansion of economic activity which may lead to eg higher pollution and greenhouse
gas (hereafter GHG) emissions may put a strain on bio-resources and pressure on
vulnerable ecosystems as higher levels of output require more environmental input
(Copeland and Taylor 2014) Trade agreements also create indirect environmental
impacts through structural adjustments in the economies and so-called specific rules-
based trade measures including the provisions in the TSD Chapter Our approach
carefully considers four impact channels that are also distinguished by the SIA Handbook
(European Commission 2016a) to separate the way in which EU-CA FTA may have
created impacts on various areas of the environment The scale effect (the impact
created from increased production as a result of the trade agreement) the structural
effect (the dynamic effect of the EU-CA FTA on the growth and contraction in production
in different sectors) technology effects (impacts triggered through increased efficiencies
from increased competition or from a transfer in environmental goods and services) and
potentially the product effect (impact via changes in production standards and use of
goods in a country eg through strengthened environmental policies and environmental
regulation)
3) via these impact channels various areas of environmental performance (the impact
areas) may be impacted and are to be further analysed in this evaluation In this study
we distinguish the following impact areas 1) Climate change 2) Biodiversity and
ecosystems and 3) Other key environmental parameters
Research methods ndash For some impact areas there is more reliable information and data
and quantitative research methods available than for others To the extent possible the
quantitative analysis will build on the economic modelling results and as a result the
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 19
analysis will allow us to comment on the causal relation between environmental topics and
the EU-CA FTA Where quantitative research is not possible we will apply qualitative
methods The qualitative analysis may rely on the causal chain analysis method which
aims at identifying the root cause of observed changes Irrespective of whether a certain
impact will be assessed with more quantitative or qualitative research methods our
approach is designed to make intensive use of quantitative information eg compiling
quantitative statistics and analysing trends The following research methods are applied
per environmental area
For climate change we propose focusing on establishing the EU-CA FTArsquos impacts on
the major GHG emissions (eg carbon dioxide methane and nitrous oxide) and
potentially on the air pollutants (ozone precursor gases acidifying gases and primary
particulates)
For biodiversity and ecosystems we propose following the latest insights in assessing
biodiversity impacts of the EU-CA FTA based on the study for DG Environment on the
development of a methodology to assess the impact of trade liberalisation on
biodiversity (which has not been published yet) In case results of the biodiversity
analysis are also relevant for climate change (ie LULUCF emissions) the link between
these results and climate change will be explored
For other impact areas we propose developing baselines based on qualitative and where
possible quantitative data for each impact area and explore developments in
environmental performance since the entry into force of the EU-CA FTA In addition we
will discuss the (effectiveness of the) implementation of provisions enshrined in the TSD
Chapter in the EU-CA FTA per impact area
The above discussed approach is based on five activities They apply the logic of the
methodological stages7 as described in the methodological framework for assessing the
impact of EU FTAs on biodiversity (IEEP Trinomics et al 2021)
3281 Activity 1 Fine-tuned methodology and impact screening and scoping
Fine-tuning the methodology is part of this inception report (this document) and mainly
serves to define the exact scope and focus of this evaluation The environmental analysis
logically focusses on Central America and the EU (with an emphasis on Central America)
However within defining the geographic scope of this analysis one needs to differentiate
global (eg climate change) and other more local environmental impacts eg
(un)sustainable forest management practices We aim to cluster countries when
appropriate from the perspective of a certain regional environmental issue In this way we
can respond to the challenge of bringing focus to the analysis while balancing the available
resources and time Clustering should enable us to evaluate certain environmental issues
in a more targeted way enabling deep dives into specific issues Below we discuss in more
detail what this regional approach means in practice and how we aim to mitigate the risk
of overlooking certain impacts
Impact screening and scoping - The exact environmental topics on which quantitative and
qualitative analysis will be performed depend on the outcome of the impact and screening
and scoping exercise which seeks to identify issues which deserve to be analysed with an
extra depth As such this sub-activity aims to select the environmental impact categories
and sub-areas to be studied in other activities Impact screening and scoping is a
methodological tool to identify issues which should be prioritised in the evaluation and
helps to mitigate the risk of overlooking potential significant impacts In essence the
prioritisation is based on (i) screening the most prevailing existing environmental drivers
and pressures and (ii) screening the expected impacts caused by the EU-CA FTA (at a
7 The study by IEEP Trinomics et al (2021) identifies three stages Stage I) Preparatory stage Stage II) Method selection and impact logic and Stage III) Impact assessment and related conclusions
Page 20
sector level) by means of economic modelling results literature review stakeholder input
and political interest All information is transparently documented in the impact-screening
matrix During the impact screening and scoping exercise we will also develop three
context-setting documents (2-pages) one per environmental impact area to better
understand the background These documents will have a regional perspective and will be
directly used in the baseline development The output of this activity is included in the
Interim Report
3282 Activity 2 Establishing the baselines for the impact areas
The aim of this activity is to gain a brief understanding of the EUrsquos and partner countriesrsquo
status quo regarding their environmental governance and performance (eg trends) for
those environmental impact areas that have been identified as priority ones The output
will be a section in the evaluation with a short description (1 page) per prioritised impact
area outlining the governance (very brief) and the performance and exploring the main
developments trends and their cut-off points This will be done by analysing issues from
a DPSIR framework perspective (drivers ndash pressures ndash state ndash impact ndash responses) (see
Box 1) when appropriate8 This framework is often applied in environmental assessments and plays a central role in the study by IEEP Trinomics et al (2021) on the methodology
for assessing the impact of EU FTAs on biodiversity
Box 1 The use of the DPSIR framework in FTAs
The DPSIR framework allows to interpret certain environmental indicators by establishing a causal relation between indicators and their analysed effects In the case of an FTA trade liberalisation in goods services and investments can function as a driver of a change in different economic sectors causing changes in the amount of land- and other resource use or in their quality (eg pollutants and emissions impacting air water or soil quality) The changes in the quantity of land- and other resource may create pressures on biodiversity which lead to an impact in the state of and trends in biodiversity ecosystems and the services they provide As a response(s) certain new or existing measures can be taken to help to prevent negative impacts or to amplify positive ones
Source IEEP Trinomics et al (2021)
Three consecutive sub-tasks will be performed to operationalise the establishment of the
baselines 1) Literature review and data analysis to establish draft baselines 2) Interviews
with stakeholders to obtain additional input validate work and fine-tune results 3)
Triangulation of information (literature data and interviews) and establishment of final
baselines The output of this activity will be included in the Interim Report
3283 Activity 3 Quantitative evaluation of impacts9
The aim of this activity is to assess the quantitative estimates of the impacts of the EU-CA
FTA on GHG emissions and possibly air pollution and ndash potentially10 ndash on trade in
environmental goods and services and land use change As such the desired result is the
reporting of the quantitative estimates of the impacts of the EU-CA FTA on GHG emissions
and air quality in the EU Costa Rica El Salvador Honduras Guatemala Nicaragua and
Panama depending on data availability Ultimately it is global GHG emissions that
contribute to global warming for this reason we propose to estimate the global change in
GHG emissions resulting from the EU-CA FTA In this way we also consider the difference
in climate change impacts from trade creation and trade diversion The impacts on GHG
emissions will be decomposed in the most relevant key drivers where possible The
8 This implies that we will make use of the insights of the framework whenever relevant and appropriate in the light of the evaluationrsquos objective We will not identify every element (D P S I and R) for each environmental issue but focus on the most relevant elements for each of them
9 The focus depends on the results of the impact screening and scoping 10 Depending upon expected scale of impact available resources and data availability
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 21
preliminary finding of this activity will be included in the Interim Report and the final results
are to be presented in the Final Report
3284 Activity 4 Qualitative evaluation of impacts11
The aim of this task is to evaluate qualitatively the impacts of the EU-CA FTA on various
prioritised environmental impact areas focussing on those which are not assessed in the
quantitative analysis First a broad assessment is done based on desk research from a
regional perspective In addition approximately two case studies (as part of Task 13) will
be prepared in which the environmental impacts of the EU-CA FTA on certain areas will be
assessed based on in-depth qualitative analysis using causal chain analysis (CCA)
(European Commission 2016a) Depending on data availability we will aim to identify
trends developments and cause-effect relations between the EU-CA FTA and environment
By combining the existing environmental drivers and pressures (see Textbox 3282-1 for
more information) the economic results and effects of TSD provisions we naturally also
include potential unintended and unforeseen effects The preliminary finding of this activity
will be included in the Interim Report and the final results are to be presented in the Final
Report
3285 Activity 5 Answering of the evaluation questions and other concluding
remarks
The overall environmental analysis concludes with clearly commenting on the effect of the
EU-CA FTA on the performance the legislative framework and effective implementation in
each of the prioritised environmental impact areas In case no causal relation between the
EU-CA FTA and the performance of a certain environmental impact area is found it will
also be explicitly mentioned These concluding remarks together with the in-depth
analyses conducted in previous tasks will serve as the basis to answer the evaluation
questions related to the EU-CA FTArsquos environmental impacts under Task 14 in the Final
Report
3286 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative environmental effects that have emerged from tensions between the EU-CA FTA
on the one hand and elements of environment on the other Additional policy or legislative
measures can also be suggested to enhance positive impacts of the EU-CA FTA
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human
rights
In this section we present the approach envisaged for the analysis of the human rights12
impact of the EU-CA FTA in the EU and the CA partner countries
The evaluation will rely on the methodology of human rights impact assessments (United
Nations 2011 European Commission 2015) as well as on the experience from previous
studies and will include the following steps
Step 1 Human rights baseline
At this step a concise baseline analysis will be carried out Concise human rights
profiles will be prepared for each of the state-parties to the EU-CA FTA
Step 2 Screening and scoping
11 The focus depends on the results of the impact screening and scoping 12 Human rights in this analysis are defined as set out in the Charter of Fundamental Rights of the European
Union the core UN human rights conventions and relevant regional human rights treaties
Page 22
At this step based on various sources human rights will be screened and specific
human rights that may have been affected by the EU-CA FTA will be identified
Step 3 Detailed assessment of the selected human rights
At this step drawing upon findings from the previous stage of the analysis an in-depth
analysis of up to three selected rights will be carried out (both quantitative and
qualitative and depending on the degree of the impact)
Step 4 Policy recommendations and accompanying measures related to
human rights
At this step policy recommendations will be formulated as to how any tensions between
the EU-CA FTA and human rights obligations may be addressed and how a positive
impact on the enjoyment of human rights can be enhanced
Stakeholder inputs will be used throughout all four steps to verify and support findings as
well as to collect evidence on the impact and ensure meaningful participation
3291 Human rights baseline
At this stage a concise baseline analysis of the human rights situation in each state-party
will be carried out First an overview of international human rights obligations of all the
state-parties to the FTA (ratifications of core international and regional human rights
treaties core ILO Conventions and other treaties relevant for the analysis) will be
presented in a tabular manner Second human rights profiles will be prepared Human
rights profiles will consist of a summary of the baseline conditions for the enjoyment of the
relevant human rights in each of the state-parties to the FTA from five years before the
provisional application of the EU-CA FTA until 2019 Particular attention will be given to the
pre-existing conditions of stress and vulnerabilities with respect to human rights
highlighting the position of specific vulnerable groups
The human rights profiles aim to
Set the scene regarding the enjoyment of relevant human rights in the partner
countries and identify social and political developments that may have impacted the
human rights situation
Allow for a targeted assessment of the human rights impacts of the EU-CA FTA
The profiles are based on the analysis of international human rights obligations national
legislation and policy framework as well as implementation issues with respect to relevant
human rights The analysis reviews country specific reports of international organisations
(eg UN OECD ILO) EU Reports on Human Rights and Democracy in the World reviews
of reports of international human rights organisations (eg Human Rights Watch) a
review of academic literature media reports relevant indicators and local partner inputs
3292 Screening and scoping
The second step of the analysis focuses on identifying which human rights could have been
affected by the EU-CA FTA and in which way The EU-CA FTA will be scanned for provisions
that are most likely to have caused an impact on the enjoyment of human rights in state-
parties to the EU-CA FTA The cause-effect relationships between the trade and trade-
related measures in the FTA and human rights will be established based on multiple sources
(see the multi-pronged approach below) The focus of the screening will not only be on
specific trade measures originating from the FTA (the Trade Pillar) but also on the overall
effect of the measures under the broader Association Agreement
Based on the screening exercise and in line with the EC Guidelines for human rights impact
assessments (European Commission 2015 p5) we provide a focused overview of the
human rights affected by the EU-CA FTA specifying the following elements
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 23
Specific human rights affected by the FTA
Short note on the evidence of the impact with a reference to the sources of information
Whether the affected right is an absolute human right or not13
The kind of impact (direct or indirect)
The degree of the impact (major or minor)
Affected population groups (if applicablepossible)
The screening exercise will as much as possible reflect upon the affected individuals
andor groups of people especially indigenous people and women based on the results
generated by the economic analysis inputs from the stakeholders and literature review
We will also look at how the EU-CA FTA has impacted gender equality and labour rights14
3293 Detailed assessment
Depending on the outcome of the screening exercise a maximum of three human rights
will be selected for a detailed assessment
Applicable human rights laws will be scanned (based on the obligations of the state-parties
under international and regional human rights treaties) to provide a framework of
applicable and binding entitlements and duties related to the selected right(s) Insofar
possible national legislation will be scanned for any changes subsequent to the application
of the EU-CA FTA focusing in particular on the changes that affected the enjoyment of
each of the selected human rights (using baseline analysis to aid the impact assessment)
Then we will look at the particular measures and how they have enhanced or impaired the
enjoyment of the relevant rights and or have strengthened or weakened the ability of the
parties to fulfil or progressively realise their international human rights obligations
Particular attention will be given to impacts on vulnerable groups or groups of individuals
that are at risk of being marginalised (Danish Human Rights Institute 2016)
This assessment is intended to be both quantitative and qualitative in nature The
quantitative analysis is based on the results of the economic analysis and used to the
extent possible15 The qualitative analysis is based on various sources as well as
stakeholder consultations and close work with local partners Economic modelling results
already disentangle the impact of the EU-CA FTA from other impacts that could have
affected the enjoyment of a human right over time For qualitative analysis it is more
challenging to discern the FTA impact To address this challenge we use a multi-pronged
approach (ie a methodological cross-validation approach in order for one methodological
element to corroboratevalidate the other method) in examining the causal effects of the
FTA for each of the prioritised human rights16 (see Figure 3)
13 See Tool 28 of the European Commissionrsquos Better Regulation Toolbox (2017) available at httpseceuropaeuinfolawlaw-making-processplanning-and-proposing-lawbetter-regulation-why-and-howbetter-regulation-guidelines-and-toolboxbetter-regulation-toolbox_en
14 Although we expect some overlap on labour-related rights with the evaluation of social impacts there will be cross-references to ensure a holistic analysis Moreover taking into account the interrelated nature of human rights we reserve the right to address the rights of the workers from other relevant perspectives not covered in the social analysis (eg as related to vulnerable groups)
15 When relevant we will use human rights indicators to supplement the analysis 16 We use the same method also during the screening exercise but to a more a limited degree (eg not using
specific human rights indicators for each human right as it goes beyond the scope of this evaluation)
Page 24
Figure 3 Overview of the multi-pronged approach to human rights impact assessment
Thus in assessing the impact the EU-CA FTA has had on each human right we use the
economic modelling results (if applicable and appropriate) that already disentangle the FTA
impact from the overall effects and link economic findings (partially) to how the selected
human right has evolved in the EU and Central American partner countries because of the
EU-CA FTA If data from the economic analysis is not sufficient to support the analysis we
will make use of contextually relevant human rights indicators (United Nations 2012) from
the statistical databases of the ILO World Bank UN OECD andor other organisations to
investigate how the selected human rights have evolved over time We look at the
development of human rights from five years before the provisional application of the FTA
up to the most recent year for which the data is available comparing period before and
after the entry into force of the FTA looking for shocks (relatively sharp increases
decreases) around that time or structural breaks in a trendline to identify an EU-CA FTA
impact We also investigate whether other shocks have taken place that could explain
observed changes in human rights (eg changes in domestic laws) Based on a similar
practice used during the ex-post evaluation of the EU-Korea FTA we could also consider
including a set of control countries to the analysis to consider development of specific rights
in relative terms
All data findings will be supported and cross-validated through a review of relevant
literature looking for further evidence of impacts provisions of the EU-CA FTA the social
and political situation (eg legislative policy instruments adopted that could have affected
the enjoyment of relevant rights) and inputs from the stakeholders that can serve as
evidence of a link between how the human rights has evolved and the EU-CA FTA
3294 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative human rights effects that have emerged from tensions between the EU-CA FTA
on the one hand and statersquos human rights obligations on the other Additional policy or
legislative measures can also be suggested to enhance positive impacts of the EU-CA FTA
and to prevent or mitigate impacts of measures that have been identified as having caused
or contributed towards impaired enjoyment of human rights
33 Concluding tasks
Based on the various analyses undertaken including the case studies the evaluation team
will prepare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 25
A comprehensive review of the extent to which impacts identified in the Trade SIA of
the Association Agreement between the EU and Central America (Ecorys and Corporate
Solutions 2009) have actually materialised (Task 9)
Replies to the evaluation questions (Task 14) and
Conclusions and recommendations (Task 15)
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3)
The literature review aims at identifying sources data and main conclusions drawn from
the previous studies to make sure that the report is based on and further complements the
existing literature Annex A3-2 provides an overview of the literature considered so far in
a tabular structure To summarise the findings from the literature review so far the
following can be noted regarding methodologies and substantive issues
41 Methodological aspects
The economic effects of the EU-CA FTA have been analysed by the Sustainability Impact
Assessment (SIA) outsourced by the Commission (DG Trade) in 2009 before the launch
of the negotiations (ECORYS 2009) This ex-ante evaluation combined quantitative and
qualitative approaches the first one based on the Computable General Equilibrium (CGE)
and Causal Chain Analysis and the latter built on stakeholder interviews (ECORYS 2009)
The CGE model underpins SIA and the literature produced on the likely economic impact
of the agreement (ECORYS 2009 IIDE 2007 Lima et al 2009 Lima et al 2010 CEPR
2012) and the bulk of these studies is based on the assumptions on the likely structure of
the agreement as the negotiations were not concluded yet The 2009 SIA also assessed
the additional FDI impact by applying a gravity analysis approach (ECORYS 2009) The
first Commission annual activity report on the implementation of the EU-CA FTA builds its
assessment on the available Eurostat data and on the comparison between the region-to-
region trade flows before and after the treatyrsquos entry into force (Commission 2015) The
following activity reports (Commission 2016 2017a 2018a 2019d 2020a) illustrate the
evolution of trade on a yearly basis relying on the Eurostat and Central American statistics
thereby opting for a more descriptive approach
The main added value brought by this ex-post evaluation report consists of the CGE model
and its application to updated EU and CA statistics in order to isolate the strictly related
economic implications of the EU-CA FTA from other external factors influencing bilateral
trade thereby purifying the overall analysis and drawing more methodologically solid and
reliable conclusions The Commission (2021) modelling used for the ex-post evaluation
unlike the other studies focuses only on tariffs however which means that impacts of not
the entire EU-CA FTA are measured but only of the tariff component
Regarding assessment of non-economic effects the methodology tended to forecast
estimated general trends and usually does not make detailed projections It should also be
pointed out that predicting long-term socio-economic effects stemming from the AA proves
to be more challenging than estimating short-term trade impacts (European Parliament
2018) Regarding quantitative social and environmental variables the models have used
structured gravity approaches to estimate the effect of non-tariff measures (NTMs)
(ECORYS 2009) The main methodological constraints to calculate (non-quantifiable)
social environmental and human rights effects from a quantitative perspective are the
problem of attribution and the so-called counterfactual given that one cannot know what
would have happened in case the agreement was not in place
42 Substantive issues
In the 2009 SIA the literature review concluded that the potential economic impact of
the EU-CA FTA was expected to be positive The vast majority of literature sources agree
on the key role played by agricultural products in the Central American economy (Romero
Page 26
et al 2015 FAO 2020 OXFAM 2016 European Commission 2020 European Commission
2019 Zabalo et al 2019 Mejia et al 2018 Lima et al 2009 Lima et al 2010) The
raw material share accounts for up to 60 of the total CA export and combined with
natural-resource-based manufactures their cumulative share reaches 70 (Lima et al
2010 p 92) A study carried out in 2007 before the launch of the EU-CA negotiations
forecasted a negligible impact of the agreement on the EU GDP and overall welfare even
in case of a full liberalisation scenario (IIDE 2007 p 16) Also in terms of FDI the
estimated effects were marginal for the EU but more tangible for CA where the agreement
could lead to an increase of 1 of the CA economies GDP (CEPR 2012 p 27) However
some additional positive spill-overs were considered such as the impact on maritime
services that could help CA countries to better manage increased trade flows and at the
same time improving custom procedures (ECORYS 2009) On trade the report
highlighted trade value flow variations especially in CA with the impact on both EU export
and import value rather negligible (Ibid p 73)
The 2012 CEPR impact assessment argued that the EU-CA trade liberalisation triggered
overall positive effects especially when referred to key products both for the EU exports
to CA such as in agriculture products and goods originating from manufacturing activities
(eg cars and medication) and EU imports from CA primarily food products where the
FTA proposed to half tariff levels compared to the previous GSP level access in place (CEPR
2012 pp 10-11)
According to the SIA banana exports from CA to the EU were expected to benefit from
more advantageous market access conditions Regarding NTMs bilateral trade facilitation
and border-related barriers should be eased simplified and rationalised Consequently
trade costs were expected to decrease remarkably The econometric analysis showed that
the economic effects of the EU-CA FTA were not expected to be equally distributed among
the CA countries given the economic heterogeneity of the region (ECORYS 2009 Lima et
al 2009 CEPR 2012 European Parliament 2018) Vegetable fruits and nuts sector (VFN)
together with sugar cane showed the most promising results (IIDE 2007 p17) although
the positive effects were not equally shared among the CA members with Panama
benefitting the most Manufacturing production in CA was estimated to benefit from the
deal (+20) Electronic equipment would also take advantage of the FTA especially in El
Salvador Honduras and Costa Rica (CEPR 2012 p 31) Transport equipment insurance
services and other manufacturers were expected to decline
On the EU side the projections estimated that
Output in the sector of vegetables fruits and nuts as well as electronic equipment was
expected to decrease modestly (CEPR 2012 p 29)
The EU was estimated to increase output in grains other agriculture and additional
categories of primary food (ECORYS 2009 pp 44)
A limited price decrease for processed food grains and vegetables other agriculture
and beverages and tobacco was expected (Ibid p 44)
Overall in the EU literature in any scenario ranging from partial to full liberalisation an
increase of trade volume as result of the AA was projected (European Parliament 2018
p 43)
A study presented at the Twelfth Annual Conference of the Global Economic Analysis in
2009 and eventually incorporated in a 2010 publication on Latin America assessed the
likely effects of the EU-CA FTA for three scenarios full liberalisation partial liberalisation
excluding sensitive products on both sides (namely fruits and vegetables meat beverages
and tobacco other processed food) and liberalisation considering only fruits and vegetables
as sensitive in the EU (Lima et al 2009 p 1) The application of different models revealed
that the most economically advantageous scenario was the first one leading to an
expansion of exports in all signatory countries and positive effects on overall CA welfare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 27
The second scenario would lead to a smaller economic impact with a more modest trade
expansion (12) and some welfare losses Finally in the scenario foreseeing the EU
excluding only fruits and vegetables the ldquoresults for trade and product remain positive
but with smaller figuresrdquo (Lima et al 2009 p 1) In conclusion a deeper liberalisation
would favour both regions by enhancing exports by between 1 and 5 in all the CA
countries (Lima et al 2010)
The Commissionrsquos annual FTA implementation reports describe trade flows between the EU
and CA after the conclusion of the FTA and demonstrate an overall upward trend for certain
countries and for specific sectors Trade flows remained rather stable in 2014 increased
by 12 in 2015 decreased marginally by 07 in 2016 grew by 72 in 2017 by 66
in 2018 and by 7 in 2019 With the exception of 2017 the EU maintained surplus in
trade with CA (Commission 2015a 2016 2017a 2018a 2019d 2020a)
The Central American literature generally focused on the role played by agricultural exports
in CA domestic economies and on the potential impact generated from the EU-CA FTA on
export transformation and diversification (Zabalo et al 2019) The likely impact of the EU-
CA FTA varied among the countries and the industries considered (ECORYS 2009) A study
carried out in 2018 aiming at analysing the effects on Panamarsquos economy by adopting a
shift-share analysis model concluded that between 2013 and 2016 the Panamanian exports
(mainly transport equipment and agricultural products) to the EU showed a downward
trend by 32 for the selected years mainly due to the decrease of primary exports to
some EU countries including Germany Belgium Italy Greece Poland and Sweden (Mejia
et al 2018) Likewise the local press has highlighted both advantages and disadvantages
generated by the EU-CA FTA for the whole region (De Leograven 2006 Barquero 2016
Rodriguez 2017) While it was considered that tariff removal triggered by the Agreement
could boost banana exports to the EU therefore inducing positive externalities for the
whole region especially for Costa Rica excessive specialisation in agricultural products
and insufficient diversification of export destinations could cause negative effects for the
local economy (Barquero 2016 Rodriguez 2017) Finally the press flagged the pros and
cons of regional integration requirements posed by the EU to CA The EU request to
negotiate as a unified bloc and to speak with a single voice led to long sensitive and
complex domestic negotiations within CA which came only to a partially accepted joint
approach towards trade talks (De Leoacuten 2006) A comparison of estimated economic effects
of the Agreement has been provided in Annex A3-1
The social impact considerations were closely linked to the economic ones since the EU-
CA FTA effects on trade would also influence the levels of employment in the affected
sectors The employment changes triggered by the EU-CA FTA in the EU were expected to
be negligible owing to the relatively modest role played by CA in the EU trade with the
rest of the world As an additional consequence also the level of EU wages should not be
affected much by the Agreement (CEPR 2012 p 28) In CA more significant incentives
to reallocation between sectors caused by ldquopull-factorsrdquo were likely to occur where export-
oriented sectors would benefit most from the EU-CA FTA and where rises in wages were
expected Employment in textile industry in Nicaragua Guatemala Honduras and El
Salvador was expected to decline The full liberalization scenario (IIDE 2007 p 17) was
expected to lead to increases in wages while also prices would rise by 05 (CEPR 2012
p 28) In Nicaragua and Costa Rica wages were expected to rise by 02 and 13
respectively while Panamanian wages would drop marginally (ECORYS 2009 pp 75-77)
The implementation of the International Labour Organisation (ILO) conventions in the EU-
CA FTA legal framework would also have a positive impact on social issues in CA such as
elimination of child labour and force labour and reduction of gender inequality However
the literature underlines a general lack of analyses of the EU-CA FTA impact on poverty in
CA since its implementation (European Parliament 2018 (a) p 45) As described above
the effects were expected to vary among the CA countries with El Salvador Nicaragua
and Honduras experiencing a relatively more impactful drop in levels of poverty than in
Page 28
Costa Rica Finally likely consequences on poverty equality education health and gender
issues in the EU were found to be negligible unlike in CA where small and indirect effects
were expected in terms of investments in health incentives through innovation brought by
technology dissemination and an overall positive impact on inclusiveness driven by the
Agreement (ECORYS 2009 pp 76-80)
On the environmental aspects the literature contributions can be split into two main
groups featured by contrasting interpretations on the EU-CA FTA impact Ultimately the
effectiveness of the TSD chapter will depend on the willingness of the involved government
to implement the EU-CA FTA provisions (EPRS 2018)
On the one hand the SIA and other studies flagged the likely harmful repercussions on
greenhouse gas emissions (GHG) stemming from agriculture fishing trade and transport
activities resulting from the EU-CA FTA application having a limited impact on the EU share
of CO2 emissions and a more tangible effect on some CA countries such as El Salvador
Honduras and Costa Rica in the long run (Alianza por la Solidaridad 2019 FAO 2013)
Moreover the increased agricultural activities resulting from the economic effects of the
EU-CA FTA (eg coffee melon sugar cane and peanut production) factories activities (eg
production of biofuels in Guatemala) as well as factoriesrsquo waste and maritime transports
could pose a threat to biodiversity and deforestation which could constitute a serious issue
owing to a large share of local biodiversity concentrated in CA especially if waste would
not be adequately managed (ECORYS 2009 pp 81-83 Zabalo et al 2019 FAO 2013
Monserrat et al 2011 OXFAM 2016 Rosa Luxembourg Stiftung 2010 Ruerd 2018)
On the other hand a share of the existing literature emphasised the opportunities for CA
countries originating from the EU-CA FTA This would be the case of Costa Rica which
would improve the national environmental regulatory framework mainly in relation to the
use of agrochemicals with likely positive impact for the environment since pineapple
production plays an important role in local economy (Esquivel 2020) A FAO study argued
that international trade in coffee (in particular exports to the EU) has improved the overall
environmental sustainability in CA The EU being the largest consumer of coffee worldwide
its (increasing) requirements on the sustainability of the coffee chain benefited the
adoption of environmental standards by the sector As a consequence coffee producers
are now required to provide more extensive and detailed certifications proving they comply
with environmental standards Therefore they have been paying more attention to
environmental aspects than before (FAO 2020)
A 2017 study (CEPAL 2017) investigated the impact of a CO2 tax on CA GDP Overall the
estimations indicated a negative impact of a carbon tax on GDP and the extent to which it
was found to impact the various local economies depended on the amount of the tax itself
Indeed an average tax value of 69 USD per tCO2e was found to impact the GDP by 062
A range between 5 and 10 USD would be optimal for Honduras and Nicaragua whereas a
tax between 20 and 50 USD would be optimal for Costa Rica El Salvador Guatemala and
Panama (CEPAL 2017)
Finally regarding human rights the EU-CA-FTA impact is difficult to assess for the region
as a whole since the intra-regional development varies a lot and it is difficult to discern
whether the CA movement towards a better respect for international standards on labour
and social rights depends on the implementation of the Agreement (European Parliament
2018 p 44) For example several experts and policymakers argue in favour of a stronger
enforcement mechanism of the TSD chapter (EPRS 2018) Its provisions referring to the
ILO conventions do not ensure the same level of labour and human rights protection as
the GSP+ mechanism (EULAC 2011) Overall despite some positive developments the
implementation of the TSD provisions led to a limited impact on the key challenges in the
CA region such as child labour freedom of association social dialogue or unpaid overtime
(EPRS 2018) The CA Womenrsquos Network also reported insufficient participation of women
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 29
during the negotiation process and it highlighted the risks of women subordination if strong
provisions on gender equality are not put in place (CAWN 2007)
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5)
51 Structure of the EU-CA FTA
The Agreement was initially signed in June 2012 by the EU and Central American countries
and the EU-CA FTA started its provisional application in 2013 It is in a process of
amendment through the Protocol of Croatiarsquos Accession to the Association Agreement
between the European Union and Central America which was signed in November 2020
(Joint Communique 2020) It allows Croatia to formally become part of the Agreement and
provides for amendments to some parts of the EU-CA FTA to account for the accession of
Croatia (eg Appendix 3 to Annex I related to special treatment of bananas Annexes
related to trade in services such as the lists of commitments on establishment cross-
border supply of services and reservations regarding the temporary presence of natural
persons for business purposes and Annexes related to Government procurement including
the list of contracting authorities etc) (European Commission 2020b)
Key features of the Agreement (Trade Pillar) can be summarised as follows Title by Title
Title I of the Agreement contains general principles provisions and definitions and
in particular defines the objectives of the EU-CA FTA which can be summarised as follows
(a) the expansion and the diversification of trade in goods between the Parties through
the reduction or the elimination of tariff and non-tariff barriers to trade (b) the facilitation
of trade in goods through in particular the agreed provisions regarding customs and trade
facilitation standards technical regulations and conformity assessment procedures as well
as sanitary and phytosanitary measures (c) the liberalisation of trade in services in
conformity with Article V of GATS (d) the promotion of economic regional integration in
the area of customs procedures technical regulations and sanitary and phytosanitary
measures to facilitate the circulation of goods between and within the Parties (e) the
development of a climate conducive to increased investment flows the improvement of
the conditions of establishment between the Parties on the basis of the principle of non-
discrimination and the facilitation of trade and investment among the Parties through
current payments and capital movements related to direct investment (f) the effective
reciprocal and gradual opening of government procurement markets of the Parties (g) the
adequate and effective protection of intellectual property rights taking into consideration
the differences between the Parties and the promotion of technology transfer between the
regions(h) the promotion of free and undistorted competition in the economic and trade
relations between the Parties (i) the establishment of an effective fair and predictable
dispute settlement mechanism and (j) the promotion of international trade and investment
between the Parties in a way that contributes to the objective of sustainable development
through joint collaborative work (Article 78)
Title II covers trade in goods and comprises the following chapters (1) market access
for goods which lays down provisions on the elimination of customs duties elimination of
export and import restrictions and export taxes and provisions on agricultural subsidies
(this is complemented by Annex I outlining schedules for elimination of customs duties
Annex II which concerns the definition of the concept of originating products and methods
of administrative cooperation Annex IV - special provisions on administrative cooperation
and Annex V on management of administrative errors) (2) trade remedies which discusses
anti-dumping countervailing and multilateral safeguard measures bilateral safeguards
and the applicable procedures (3) customs and trade facilitation which increases
transparency and promotes the facilitation of trade by simplifying customs procedures and
the adoption of risk management systems for customs inspections (it is complemented by
Annex III on mutual administrative assistance in customs matters) (4) TBT - technical
barriers to trade aiming at facilitating trade by identifying preventing and eliminating
Page 30
unnecessary barriers related to development adoption and application of standards
technical regulations and conformity assessment procedures it also reaffirms rights and
obligations under the WTO TBT Agreement foresees cooperation in market surveillance
transparency through the notification procedures and approach to marking and labelling
avoiding unnecessary burdens while ensuring that all necessary and accurate information
is provided (5) sanitary and phytosanitary measures which aims at protecting human
animal or plant life or health while avoiding unjustified barriers to trade it reaffirms rights
and obligations under the WTO SPS Agreement recognises concepts standards and
recommendations adopted by relevant international organisations (World Organisation for
Animal Health and International Plant Protection Convention) and foresees exchange of
information and cooperation by the Parties incl in cases of emergency (it is complemented
by Annex VI identifying competent authorities Annex VII defining requirements and
provisions for approval of establishment of products of animal origin Annex VIII setting
out guidelines for conducting verifications and Annex IX with points of contact) (6)
exceptions related to goods
Title III covers trade in services establishment and electronic commerce and is
complemented by annexes that detail the Partiesrsquo commitments according to the four
modes of supply or provide information Annex X includes commitments on establishment
(Mode 3) Annex XI lists commitments on cross-border supply of services (Modes 1 and
2) Annex XII outlines reservations regarding temporary presence of natural persons for
business purposes (Mode 4) Annex XIII lists commitments of the Republics of the CA Party
regarding key personnel and graduate trainees Annex XIV lists their commitments on
business service sellers and Annex XV provides a list of the relevant enquiry points
Title IV concerns liberalisation of current payments and movement of capital and
stipulates that the Parties shall authorise payments and transfers on the current account
between the Parties as well as transactions and capital movements related to foreign direct
investment and related transactions including liquidation and repatriation of investments
and profits It also envisages exceptions such as circumstances where payments and
capital movements cause or threaten to cause serious difficulties for the operation of
exchange rate policy or monetary policy or the liquidity of the economy in which case
the Parties may temporarily adopt safeguard measures)
Title V covers government procurement and is complemented by Annex XVI which
details the commitments of Parties in this area (eg procuring entities covered coverage
of procurement contracts under the Agreement media used for tender procedures and key
features of the process for awarding procurement contracts) The Agreement provides for
the Parties to have non-discriminatory access to public procurement procedures within the
scope of covered procurement and outlines general principles and rules for procurement
procedures (eg publication of notices participation in tenders technical specifications
documentation timeline awarding contracts etc) ensuring transparency and cooperation
Title VI covers intellectual property It reaffirms the Partiesrsquo commitments to various
relevant multilateral agreements (eg WTO TRIPS Agreement Convention on Biological
Diversity and Paris Convention for the Protection of Industrial Property) foresees exchange
of information and cooperation between the Parties in relation to technology transfer and
sets standards on the protection of intellectual property rights (IPR) including trademarks
geographical indications copyright and related rights industrial designs plant varieties
and patents The list of geographical indications to be protected is provided in Annex XVII
The Title also addresses enforcement measures for cases of infringement of IPR
Title VII concerns trade and competition in the economies of the Parties Under this
Title the Parties commit to adoption or maintaining comprehensive competition laws and
having appropriately equipped competition authorities They also consider as incompatible
with the Agreement the most harmful anticompetitive practices such as restrictive
agreements concerted practices abuse of dominance and concentrations of companies
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 31
that significantly impede effective competition The Title also stipulates that with regard to
state enterprises and designated monopolies there is no discrimination in exercised by such
entities regarding conditions under which goods or services are purchased or sold
Title VIII relates to trade and sustainable development It includes commitments to
effectively implement the eight ILO Fundamental Conventions and key multilateral
environmental agreements to which EU Member States and CA countries are Parties In
addition the Title includes specific provisions in relation to various thematic areas such as
sustainable forest management sustainable fisheries and trade supporting sustainable
development It establishes civil society advisory groups as part of institutional structure
and foresees a regular dialogue between the Parties and civil society incl in a dedicated
Civil Society Forum The Title also provides a dedicated dispute settlement mechanism
with government consultations consideration of the matted by the TSD Board and a Group
of Experts to examine the matter and formulate recommendation
Title IX relates to regional economic integration between the Central American Parties
and includes provisions on circulation of goods in trade between the EU and CA within the
EU and CA region respectively once a product entered their customs territory and when
the applicable rules and standards are met In this context the Title provides rules related
to customs technical barriers to trade and sanitary and phytosanitary measures (Annex
XX provides a list of CA technical regulations in the process of harmonisation)
Title X covers dispute settlement and outlines the related procedures including the
establishment of a panel its ruling and compliance
Title XI establishes mediation mechanism for non-tariff measures incl the selection
of a mediator the applicable procedure and implementation of the agreed solution
Title XII contains provisions on transparency and administrative procedures Among
other things the Parties commit to (i) ensuring that their measures of general application
(eg laws regulations judicial decisions procedures and administrative rulings) relating
to matters covered by the EU-CA FTA are promptly published or otherwise made readily
available to interested persons and (ii) providing reasonable opportunities for those
interested to comment on proposed measures and taking into account relevant comments
The Parties also commit to establish Points of Contact for matters related to EU-CA FTA
Title XIII addresses tasks of the institutional bodies in matters related to trade
ie the Association Council the Association Committee and specialised Sub-committees
(for details please see section 52 on the institutional set up)
Title XIV defines general exceptions to the Agreement related to the Partiesrsquo balance of
payments and taxation
52 Institutional set-up of the EU-CA FTA
The Association Council the Association Committee six Sub-committees and an Ad hoc
Working Group on Government Procurement (the latter not envisaged by the EU-CA FTA
but set up by the Parties in 2016) oversee the implementation of the Agreement
The Association Council established pursuant to Article 4 supervises implementation of
the Association Agreement it is composed of representatives of the EU and each of the six
CA countries has a decision-making power (binding upon the Parties) in cases foreseen in
the Agreement examines all major issues and questions of common interest It meets at
Ministerial level (or through representatives) at regular intervals not exceeding two years
In line with Article 345 when meeting to discuss matters under EU-CA FTA the Council
has the power to amend Annexes and Appendixes related to trade incl tariff elimination
schedules and goods included there originating products and methods of administrative
Page 32
cooperation Annex XVI (Government Procurement) Annex XVIII (Protected GIs) Annex
XIX (in relation to Article 306 animals animal-based products plants and plant-based
products subject to SPS measures) and Annex XXI (Sub-committees)
The Association Committee set up pursuant to Article 6 is responsible for the general
implementation of the Agreement and assists in this context the Association Council It is
composed of representatives of the EU and the six CA countries at the senior officialsrsquo level
and shall meet once a year to review the implementation It takes decisions foreseen in
the Agreement or delegated by the Association Council When acting within part IV of the
Agreement the Association Committee supervises work of Sub-committees established by
this part and may set up new ones prevents and resolves conflicts (without prejudice to
provisions related to the Dispute Settlement and Mediation Mechanisms) and recommends
decisions for adoption by the Association Council
The Agreement has also established six specialised Sub-committees
Sub-committee on Market Access for Goods (Article 91) is responsible for monitoring
the correct implementation and administration of the Trade in Goods Chapter and serves
as a forum for consultations about interpretation and application of its provisions It
examines proposals provided by the Parties regarding accelerated liberalisation of trade in
goods and tariff reduction as well as inclusion of additional goods into liberalisation
schedules It may make recommendations to the Association Committee on matters within
its remit and take any issue as and when instructed by the Association Committee
Sub-committee on Customs Trade Facilitation and Rules of Origin acting in line
with Article 123 monitors implementation of the Chapter and Annex related to the concept
of origin and methods of administrative cooperation It provides a forum to discuss and
consult all matters related to customs incl customs procedures valuation nomenclature
cooperation tariff regimes mutual administrative assistance in customs matters as well
as rules of origin It pursues cooperation on development application and enforcement of
customs procedures mutual administrative assistance in customs matters administrative
cooperation and rules of origin It examines requests for amendments of rules of origin
and submits to the Association Committee results of the analysis with recommendations
It also aims to enhance cooperation on capability building and technical assistance
Sub-committee on Technical Barriers to Trade (TBT) acting in accordance with Article
139 provides forum to discuss and consult any matter related to the Chapter and monitors implementation and administration of this Chapter facilitating exchange of information
and cooperation and promptly addressing any issue that either Party raises related to the
development adoption application or enforcement of standards technical regulations
and conformity assessment procedures It aims at solving any problems within the remit
of the Chapter that would limit trade between the Parties It encourages direct interaction
between non-governmental actors such as standard bodies accreditors and certifiers It
facilitates the exchange of information about the work being done in non-governmental
regional and multilateral fora engaged in activities related to technical regulations stan-
dardisation and conformity assessment procedures and explores ways to facilitate trade
between the Parties The Sub-committee has also power to review the Chapter in the light
of developments under TBT Agreement and reports to the Association Committee about
implementation of the Chapter including cooperation activities
Sub-committee on Sanitary and Phytosanitary Matters (SPS) acting in line with
Article 156 monitors implementation of the Chapter provides a forum for discussion and
consultation on any matter arising under the Chapter and an opportunity to seek mutually
acceptable solutions It may also develop procedures or arrangements facilitating
implementation of the Chapter It acts as a forum for consultations related to any measure
proposed by the EU which may affect its trade with any of the CA Parties and a forum for
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 33
dispute settlement under the Chapter The Sub-committee is also responsible for
promoting cooperation on animal welfare between the Parties
Sub-committee on Intellectual Property Rights (IPR) (Article 274) monitors
implementation of Article 231 (transfer of technology) and part of the IP Chapter related
to GIs including facilitating discussion about protection of GIsrsquo and recommendations to
the Association Committee regarding amendments to Annex XVIII on GIs It promotes
technology transfer from the EU to the CA Parties and defines priority areas in which
initiatives shall be directed regarding technology transfer research and development and
building-up human capital Its responsibilities include also keeping a registry of the
programs activities or initiatives in progress in the field of intellectual property with
emphasis on transfer of technology
Board on Trade and Sustainable Development (TSD) established pursuant to Article
294 reports to the Association Committee and oversees the implementation the TSD Title
incl cooperative activities undertaken under Title VI (Economic and Trade Development)
of Part III of the Agreement The decisions and recommendations of the Board shall be
adopted by mutual agreement between the Parties and be provided to the public unless
the Board decides otherwise
While EU-CA FTA does not envisage a Sub-committee on Government Procurement the
Parties concluded that it would be useful to have a dedicated body to address matters in
this area They decided to create a temporary Working Group that met for the first time
in June 2016 (European Commission 2017a)
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo
priorities
The negotiations for an Association Agreement (AA) including a Trade Pillar between the
European Union (EU) and Central America (CA) started in 2007 We look at the bloc-to-
bloc trade and policy context the negotiation process and priorities from both sides
The region-to-region trade context
The CA group is composed by Costa Rica Guatemala El Salvador Honduras Nicaragua
and Panama and it is featured by internal economic and political dialogue which led to the
creation of the Central American Common Market (CACM) in the early 1960s Despite the
initial momentum the regional integration process has been stopped for decades due to
internal tensions and the effects of import-substitution trade strategies on local economic
growth (European Parliament 2012) Consequently the initial goal of setting up a custom
union failed and CACM succeeded only in establishing a free-trade area (Duran et al 2010)
The Central American integration efforts were revitalised through setting up of the Central
American Integration System (SICA) aimed at promoting democracy development peace
and freedom in the region (European Source Online 2016) SICA was formally established
on 13 December 1991 through the signature of the Protocol to the Charter of the
Organization of Central American States (ODECA) also known as the ldquoTegucigalpa
Protocolrdquo SICA established both a political and an economic institutional framework by
setting up the Central American Parliament and the Central American Bank for Economic
Development Despite these changes CACM remained the main forum for trade discussions
(European Parliament 2012)
The EU is one of the three most important CA trading partners It is challenging to draw
general and unified conclusions for the whole CA trade picture given its domestic
heterogeneity with Panama and Costa Rica being middle-income countries and Nicaragua
the poorest member (European Parliament 2018 p 18) The EU countriesrsquo share of import
from and export to CA accounted for 30 and 16 respectively in the mid-1980s Among
Page 34
the CA members Guatemala appeared as the most export dependent one while Panama
was the least trade-oriented country (CEPR 2012 pp 6-7) The role of agricultural
production within the respective economies differs widely between the two regions
Agricultural production is very important for CA especially in Honduras and El-Salvador
(38 of the national production) whilst it is relatively much less important in the EU (5)
The same complementarities can be found in manufacturing production (amounting to 18
of the EU production which is much higher than in CA particularly in Panama (4) and
Nicaragua (25) Services contribute to almost 23 of the EU Nicaraguan and Costa Rican
GDP while this share is only 53 for El Salvador (Ibid pp 6-7)
The negotiation process
The start of the economic and political dialogue between the EU and CA blocks dates back
to 1984 at the first conference of Foreign Ministers between the EU and CA countries in
Costa Rica In 1993 the EU and the CA countries signed a Framework Cooperation
Agreement which entered into force on 1st March 1999 (Acuerdo-marco de cooperacioacuten
1999) On the occasion of the EU-Latin America Summit held in May 2002 these countries
and the EU jointly expressed their willingness to reinforce their dialogue by concluding a
new Political Dialogue and Cooperation Agreement which was signed on 15th December
2003 in Rome (Acuerdo de Diaacutelogo Poliacutetico 2003)
The need to establish stronger trade relations even by setting up a free-trade area pushed
the EU and CA to explore the feasibility of an Association Agreement entailing also a specific
chapter on trade Such intention was clearly stated during the EU-Latin America summit of
Guadalajara (Mexico) in May 2004 (Declaration of Guadalajara 2004 p 8 point 52) and
one year later in May 2005 in the context of the EU-Central American Ministerial meeting
in Luxembourg On that occasion the parties launched a joint-assessment exercise on
regional economic integration and established an ad-hoc working party (Council of the
European Union XXI San Joseacute Dialogue Ministerial Meeting between the EU and Central
America 2005 p 2) Finally at the Vienna Summit of 2006 the parties opened the door
to an Association Agreement to create a free trade area (Council of the European Union
EU-Central American Summit 2006 pp 1-2 points 2 and 3) The summit also welcomed
the initiative of the Peace Building and Commission and Human Rights Council (Ibid p 2)
The green light for the beginning of the AA negotiations was given on 28th June 2007 in
Brussels (EU and the Central American Community start negotiations for a new Association
Agreement 2007) However the talks were temporarily suspended on 6th April 2009 and
then resumed a few days later on 24th April (Acuerdo de Asociacioacuten entre Centroameacuterica
y la Union Europea 2009) when the parties decided to re-initiate the negotiations
The negotiating partiesrsquo priorities
The negotiating strategy of the CA countries mainly pursued three goals
Strengthening their trade policy whose objective is to open up new markets for the
benefits of their local exporters The EU appears as a crucial partner for CA countries
as it ranks on top of the worldrsquos largest importers of agricultural products and the
relative share of developing countries has been rising over time in the EU trade balance
Reinforcing CA countriesrsquo export competitiveness and reducing costs of accessing the
EU market vis-agrave-vis competitors such as African-Caribbean and Pacific (ACP) countries
that benefit from preferential and better market access conditions
Attracting foreign direct investments in high value-added sectors where the EU applies
higher tariffs (Duran et al 2010 pp 96-99)
From the European side the main reasons driving towards the conclusion of the agreement
with CA are threefold
Promoting the developing countriesrsquo progressive integration into the world economy
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 35
Reaffirming the EUrsquos role in the world trade and in CA following the United States (US)
conclusion of the Dominican Republic Central American and the United States Free
Trade Agreement (CAFTA-DR) reaffirming the US role in the region
Better coordinating with partners on trade dossiers within the World Trade Organization
(WTO) and other international institutions (Ibid p 100)
The conclusion of the Agreement
The negotiation process delivered slow progress due to the inability of CA countries to
reach a unified position and owing to the delays in the regional integration (European
Source Online cit p3) The agreement was finally reached in May 2010 when the
negotiations were officially concluded during the Latin America-Caribbean and European
Union Summit in Madrid Following the legal scrubbing the European Commission reviewed
and approved the agreement prior to signature at the Meeting of the SICA Presidents in
Tegucigalpa Honduras on the 29th of June 2012 (European Commission Directorate
General for Trade 2012) The European Parliament finally endorsed the AA in December
2012 forecasting that the main gains for the European side would be in export of cars
machinery telecommunications chemical products and transports (European Parliament
2012 p 1) At the time of the AA signature in 2012 the EU-Central America trade in goods
accounted to EUR 149 billion and corresponded to 113 of the whole CA region trade
with the rest of the world (Griener and Membersrsquo Research Service 2014 p 5)
On that date the then EU Commissioner for Trade Karel De Gucht commented the
successful conclusion of the AA by stating that the ldquoregion-to-region deal will help establish
major business opportunities for both sides European exporters will save around EUR 90
million on customs per year and European service providers such as telecommunication
and transport will get greater market accessrdquo At the same time the agreement would
generate ldquospill-over effect on Central Americarsquos overall economic integration process and
contribute to the stability of the regionrdquo (European Commission Ibid p 1) The
Commission officially announced the provisional application of the FTA with Honduras
Panama and Nicaragua on 31st July 2013 with Costa Rica and El-Salvador on 1st October
2013 and with Guatemala on 1st December 2013
The trade provisions of the AA provisionally entered into force in 2013 as they fall within
the exclusive competences of the EU17 Once the entire text of the AA will be ratified by
the EU Member Statesrsquo parliaments the entire text will be legally binding and applicable
After joining the EU in 2013 Croatia is currently negotiating its accession to the AA
54 Operational context of the implementation of the EU-CA FTA
After having illustrated the main partiesrsquo priorities during the bloc-to-bloc negotiations this
chapter provides an overview of the broader context surrounding the negotiations and
implementation and describes the main regional actors as well as their respective trade
policy attitudes towards CA and Latin American countries (LAC) as a whole
Trade policy context the multilateral system and the global economy
Since the launch of the EU-CA negotiations the global trade policy context has undergone
deep changes The Doha Development Agenda stalemate due to incompatible views on
various issues at stake put great pressure on the global trading system The WTO
difficulties in reaching satisfying outcomes stem both from external causes such as the
decline of advanced economies regionalisation of trade and internal sources of tensions
17 Despite being considered as a bloc-to-bloc association agreement the incomplete CA regional economic integration and the failure in setting up a custom union among the CACM countries left unbalances and inconsistencies in accessing single CA countriesrsquo markets and different levels of external tariffs In light of these arguments CA cannot be considered as a fully integrated homogeneous and unified trade bloc
Page 36
embedded in unilateral tariff-cutting process (Baldwin 2016) Besides these tensions the
economic expansion of China and the ldquotrade warsrdquo between the US and China exploded as
of 2017 The recent stalemate of the WTO Appellate Body that halted the entire dispute
resolution process as well as the need to put sustainable development at the core of the
WTO agenda pushed the Commission to advance a new WTO reform proposal (European
Commission 2021) The WTO crisis led to a proliferation of bilateral FTAs and the EU
has been an active bilateral FTA actor globally (see Table 4
Table 4 Overview of the EU FTAs launched and or concluded since 2012
Start of Negotiations
Signatory CountryRegion
State of play of the agreement
Ratification
1999 Mercosur Concluded in 2019 Ongoing
2004 SADC Concluded in 2016 Entered into force in 2016
2007 Andean Community Concluded in 2010 Entered into force in 2013
2007 Ukraine Concluded in 2011 Provisionally applied since 2016 fully in force since 2017
2009 Singapore Concluded in 2019 Entered into force in 2019
2009 Canada Concluded in 2014 Provisionally applied since 2017
2010 Malaysia On hold na
2012 Moldova Concluded in 2013 Provisionally applied since 2014 fully in force in 2016
2012 Georgia Concluded in 2013 Provisionally applied since 2014 fully in force since 2016
2012 Vietnam Concluded in 2015 Entered into force in 2020
2012 Japan Concluded in 2018 Entered into force in 2019
2013 USA On hold na
2013 Morocco (DCFTA new) On hold na
2013 Thailand On hold na
2015 Philippines On hold na
2015 Tunisia (DCFTA new) Ongoing na
2016 Mexico (modernisation) Concluded in 2018 Ongoing
2016 Indonesia Ongoing na
2017 Chile (modernisation) Ongoing na
2018 Australia Ongoing na
2018 New Zealand Ongoing na
2019 United Kingdom Concluded in 2020 Ongoing
2020 ESA (extension) Ongoing na
Source compiled by the author
The EU trade and policy context
Trade picture
The EU maintains strong institutional dialogue with Central and Latin America
legitimised by historic cultural and linguistic ties with the region The EU Latin America
and the Caribbean (LAC) bilateral summits have been regularly held since 1999 gathering
33 members from the two counterparts In 2006 the EU-Latin America Parliamentary
Assembly (EuroLat) was set up and it was conceived as the parliamentary angle of the EU-
CA bilateral partnership (EPRS 2017 p 5)
From a trade perspective the EU-Central and Latin America (comprising Andean
Community CA Cariforum Mercosur Mexico and Chile) trade peaked at EUR 2287 billion
in 2014 before showing a downward trend and decreasing at EUR 2132 billion in 2015
corresponding to 61 of the whole EU trade that year (EPRS 2017 p 6) The EU total
share of LAC trade fluctuated around 14 and the EU remained the first investor in the
region in the last ten years (EEAS 2018) An analysis carried out by the European
Parliament in 2020 unveils that the EU-LAC trade in goods value grew by 22 from 2008
to 2018 (Tvevad 2020 p 18) According to the 2020 DG Trade Report (data from 2019)
on the Implementation of EU FTAs trade flows between the EU and CA showed a robust
growth Indeed trade in goods increased by 88 with respect to the 2018 performance
imports continued growing over the past five years and exports statistics indicated an
overall upward trend with the exception of 2016 (European Commission 2020a p 110)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 37
In 2010 the EU was the second CA trading partner behind the United States (US)
accounting for 94 of the regionrsquos overall trade with the rest of the world (European
Commission 2011 p 4) Among the main exporters to the EU Costa Rica ranked first
with 539 of the total CA exports to the EU Conversely the EU exports went primarily
to Costa Rica (363) Guatemala (281) and El Salvador (152) (Ibid p 4) The EU-
CA trade is marked by the supply of primary products to the EU (mainly agricultural
products such as coffee and bananas) in return for high-technology manufactures
especially machinery transport equipment chemicals and manufactured goods (Duran et
al 2010 pp 95-96 European Parliament 2012 p 9) The CA share in the EU trade was
modest accounting only for 05 of overall EU imports in 2011 and for 03 of the total
EU exports in 2011 (European Parliament 2012 p 8) In addition the EU applied tariffs
on various agricultural products imported from third countries The exclusion of both coffee
and bananas from the EU Generalized System of Preference (GSP) and the GSP+ schemes
prevented these products from benefitting from tariff-reduction from the European side
hampering their access to the EU market and leaving their prices to be influenced by world
trade fluctuations (Duran et al 2012 p 98) The 2019 data confirmed primary products
rank largely first among SITC products grouping exported from CA to the EU accounting
for 721 of the whole exports followed by manufactures with 27 (European
Commission 2019 p 4) Recent statistics highlight the main destination of EU export
continued to be Panama (up to 118 since 2018) whereas the main country of origin of
EU imports is Costa Rica with an increase by 63 from 2018 (European Commission 2020
p 112)
The previous EU trade policy strategy adopted in 2015 (ldquoTrade for Allrdquo) confirmed that
ldquothe FTAs with Peru Colombia Ecuador and Central America are creating new dynamics
for trade and investmentsrdquo (European Commission 2015 p 33) As set out by that trade
policy strategy the Commission should pursue three main priorities with regard to Latin
and Central America ldquo[Continuing] negotiations for an ambitious balanced and
comprehensive FTA with Mercosur ldquoRequesting negotiating directives to modernise the
FTAs with Mexico and Chilerdquo ldquoBe ready to consider investment agreements with key Latin
American countriesrdquo (Ibid p 33)
As evidence for the increasingly robust commitment in the region the EU negotiated trade
deals with 27 out of the 33 LAC countries to strengthen both bilateral and region-to-region
relations the EU actively engaged LAC by signing new and modernising older EU-LAC FTAs
(see Table 5)
Table 5 EU FTA in Latin America and participating countries
Agreement Countries Negotiation launch
Negotiations Conclusion
EU-Andean Countries Colombia Ecuador Peru 2007 2010
EU-Caribbean (CARIFORUM)
Antigua and Barbuda Bahamas Barbados Belize Dominica Grenada Guyana Jamaica Saint Lucia Saint Vincent and the Grenadines Saint Kitts and Nevis Suriname Trinidad and Tobago and the Dominican Republic
2002 2008
EU-Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
2012 2010
EU-Chile na 2017 na
EU-Mercosur Argentina Brazil Paraguay Uruguay 1999 2019
EU-Mexico na 2016 2018
Source Compiled by the author
Regarding civil society the trade chapter of the EU CA FTA did not receive a lot of public
attention and consequently has not been affected by a high level of politicisation within
the EU This might stem from the relatively lower importance of trade relations with CA for
the EU Likewise the agreement did not catch a lot of public attention either in CA where
Page 38
the media coverage mainly focused on the Central America Free Trade Agreement (CAFTA)
Nevertheless both the agreements were targeted by NGOs and trade unions sharing the
same criticism and concerns over biodiversity pharmaceutical product access and
exploitation of natural resources (European Parliament 2011 p 16)
Political Dialogue
To frame the most recent developments in the EU LAC political dialogue it is worthy to list
three key documents forging the EU foreign policy towards LAC
The European Parliament Resolution on the Political Relations with Latin
America passed in 2017 advocating for a stronger more coherent and reinforced
relations with this region by stressing the need to update and develop a more
comprehensive and ambitious EU strategy to address the emerging challenges linked
to fundamental freedoms human and social rights safety of minorities migration
issues corruption tax fraud and security (European Parliament 2017)
The Joint Communication adopted by the European Commission and the High
Representative for Foreign Affairs (HRVP) in 2019 titled ldquoEuropean Union Latin
America and the Caribbean joining forces for a common futurerdquo aimed at deepening
the EU-LAC relations in a fast-changing context by emphasizing four mutually important
priorities prosperity democracy resilience and effective global governance (European
Commission 2019)
The Council of the EU Conclusions of 13th May 2019 endorsing the strategy laid
out in the Joint Communication On that occasion the Council welcomed the four points
described above and added more areas for action such as to work more closely in the
multilateral framework consolidate economic and social resilience enhance shared
prosperity and assist in promoting structural reforms (Council of the EU 2019)
The 2020 EU 27 ndash Latin America Informal Meeting reaffirming the need to advance
bilateral region-to-region summit to strive for a stronger multilateral system identified
mainly in the United Nations and the World Health Organisation (WHO) especially in
the light of the COVID-19 pandemic outbreak (Federal Foreign Office 2020)
Within the framework of the AA the EU and CA agreed to cooperate on a wide range of
policy dossiers of mutual interest namely conventional weapon disarmament the
implementation of the Convention on the Prohibition of the Use Stockpiling Production
and Transfer of Anti-personnel Mines and on their Destruction as well as the Convention
on Certain Conventional Weapons and its protocol (European Parliament 2011 p 7)
On development cooperation the EC regional strategy 2014-2020 earmarked EUR 925
million funding for Latin America to be allocated in two components
Component 1 ldquoMultiannual Indicative Programme for continental activities with Latin
Americardquo accounting for EUR 805 million and devoted to Argentina Bolivia Brazil
Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico
Nicaragua Panama Paraguay Peru Uruguay and Venezuela
Component 2 ldquoMultiannual Indicative Programme for Sub-Regional Cooperation with
Central Americardquo funded with EUR 120 million focused on Central American countries
Costa Rica El Salvador Guatemala Honduras Nicaragua and Panama This component
included three areas for action ie support for regional economic integration support
for the Regional Security Strategy and support for Regional Climate Change Strategy
and the Central American Policy on Comprehensive Disaster Risk Management (EEAS
European Commission 2014)
The Central American trade policy context
Regional Context
Beside their membership in the Central American Common Market (CACM) and the WTO
the CA countries have been signing additional free trade agreements with other regional
and international partners since 2012
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 39
It should be also noted that Panama joined the Latin American Integration Association
(LAIA) in 2012 LAIA replaced the Latin America Free Trade Agreement (LAFTA) signed in
1960 and sought a deeper economic integration among the member states18 Also
Nicaragua applied for the LAIA membership in 2011 and its request was accepted by the
LAIA Council of Minister in August 2011 Nicaragua is currently advancing in fulfilling the
LAIA membership requirements No other CA countries are members of LAIA yet
Table 6 summarises bilateral FTAs and Preferential Trade Agreements (PTAs) signed by the
6 CA countries or being in force since 2011
Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021)
Costa Rica Guatemala El Salvador
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Colombia (signed in 2013 entered into force in 2016)
Mexico (signed in 2011 entered into force in 2013)
Peru (signed in 2011 entered into force in 2013)
Singapore (signed in 2010 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
Ecuador (PTA) (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs signed but not entered into force yet South Korea (signed in 2018) EFTA (signed in 2013)
FTAs signed but not entered into force yet EFTA (signed in 2013) Ecuador (signed in 2011) Peru (signed in 2011)
FTAs signed but not entered into force yet South Korea (signed in 2018)
Honduras Nicaragua Panama
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Peru (singed in 2015 entered into force in 2017)
Canada (signed in 2013 entered into force in 2014)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2014 entered into force in 2015)
Peru (signed in 2011 entered into force in 2012)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet Israel (signed in 2018) South Korea (signed in 2018) Colombia (signed in 2013) EFTA (signed in 2013) Trinidad amp Tobago (PTA)
(signed in 2013)
Source Compiled by the author
Other influential partners in CA
As illustrated by Table 7 three actors retain significant economic influence in CA and Latin
America as a whole the EU the US and China The following section will examine these
actors and their respective trade policies towards CA and Latin America by describing their
posture as well as the agreements in force
18 Argentina Bolivia Brazil Chile Colombia Cuba Ecuador Mexico Paraguay Panama Peru Uruguay Venezuela
Page 40
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking
SubregionCountry
EU total trade in goods (value in EUR billion)
Ranking of main trading partners for trade in goods
2016 2019
2016 2019 USA China EU19 USA China EU27
Andean Community 3 250 246 1 2 3 1 2 3
ACP ndash Caribbean 15 81 116 1 3 2 1 3 2
Central America 6 108 121 1 3 2 1 3 2
Chile 159 166 3 1 2 2 1 3
Mercosur 4 849 771 3 2 1 3 1 2
Mexico 538 618 1 2 3 1 2 3
Source EPRS 2017 p 6 and DG Trade statistics 2020
The US remains the key CA partner The US is the major source of Foreign Direct
Investments (FDI 273) and Official Development Aid allocating an annual average of
approximately USD 1600 million during the Trump Administration (2016-2020)
(Congressional Research Service 2021) Moreover the US rank on top of CA migrant
destinations (Belladonna 2019) The CA countries have been cultivating thorough relations
with the US as they represent the historical destination of over 40 of the regionrsquos
exports Furthermore the 2004 Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA) granted preferential market access conditions to the region (Office
of the US Trade Representative 2004 and Duran et al 2010 p 93) In light of the strong
power exerted by the US the EU trade strategy pursued a progressive rebalancing of the
US presence in the area to ensure better market access in the region (EPRS 2017 p 5)
The DR-CAFTA negotiations confirmed that labour standards sugar and textile products
treatment pharmaceutical data protection and sovereignty issues were the most
controversial and sensitive matters on the table Unlike the EU-CA AA it should be noted
that the DR-CAFTA does not build any common trade framework for all the signatories as
the US grants differentiated market access conditions to each single CA country (European
Parliament 2012 p 11)
In the last few years China has been playing a role of growing importance in CA and in
Latin America both from a political and trade viewpoint (European Commission 2020 p
15) In recent years China has reinforced its role as trading partner within CA As evidence
for this active involvement the 2000-2010 data already confirmed the Asiarsquos importance
(led by China) both in terms of imports and exports in Latin America and Caribbean20
Indeed the China share of the regionrsquos total exports by destination grew from 11 in
2000 to 83 in 2010 with regard to imports by destination the growth appears even
more remarkable moving from 18 in 2000 to 133 in 2010 (Kuwayama amp Rosales
2012 p 66) whilst the relative share of the US presence has shown a downward trend
(Ibid p 65) The monthly exports to Asia-Pacific21 region more-than-doubled from an
average value of USD 54 billion in 2006 to USD 162 billion in 2014 (Baacutercena Prado
Rosales Peacuterez 2015 p 23) After a slight decline experienced in 2016 a solid rebound
emerged in 2017 On average goods shipment from Asia-Pacific Latin America grew by
136 yearly between 2000 and 2016 (Scotiabank 2018 p 1)
Beside trade China has been recently advancing its Belt and Road Initiative (BRI) in
the region by concluding numerous Memoranda of Understanding (MoU) with various LA
19 Including the United Kingdom 20 Data refers to Argentina Bolivarian Republic of Venezuela Brazil Chile Colombia Costa Rica the Dominican
Republic Ecuador El-Salvador Guatemala Honduras Mexico Nicaragua Paraguay Peru Plurinational State of Bolivia
21 The Asia-Pacific region includes Australia Brunei Darussalam Cambodia China South Korea Philippines Hong Kong Japan Laos Thailand Taiwan Indonesia Malaysia Myanmar New Zealand Singapore and Vietnam
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 41
and CA countries To mention some Bolivia (2018) Costa Rica (2018) Chile (2018) and
Panama (2017)
6 CONSULTATIONS (TASKS 6 AND 7)
61 Consultation Strategy
The consultation strategy presented in the technical offer has been refined during the
Inception Phase (Task 6) and is outlined in Annex B Box 2 summarises our expectations
regarding the main inputs expected from stakeholders throughout the study
Box 2 Expectations regarding inputs from stakeholders
Inputs from stakeholders are expected at all stages of the study
The study team will welcome in particular Responses to the online public consultation Consultation with businesses (responses to the online business survey) Evidence of specific casesexamples on how the Agreement has affected economic performance
sustainable development and human rights both in Central America and in the EU Contributions will be particularly welcome in relation to the priority areas of analysis o Impact of the Agreement on trade diversification (in terms of goods and services traders regions
involved in trade etc) (see Task 101) o Impact on investment climate and investment flows (see Task 102) o Impact of the Agreement on SMEs (see Task 1012) o Effects of the implementation of the TSD chapter (see Task 111) o Performance of the institutions established under the TSD chapter (see Task 112) o Impacts of the Agreement on pillars of Decent Work Agenda working conditions labour standards
social protection other public policies and labour inspection (see Task 114) o Impacts on the informal economy and informal employment (see Task 115) o Environmental impacts (see Task 116) and o All of the case studies
Written contributions (positions) expressing views on how the Agreement has affected economic performance sustainable development and human rights across the parties in particular with regard to ndash but not restricted to ndash the analytical priority areas
Indication of relevant publications that focus on the impact of the Agreement in the partner countries Indication of actions taken by CA in areas covered by the TSD chapter (eg changes in policies action
plans strategies and legislation in the areas of labour environment and climate change ratification and implementation of international conventions in these areas and civil society engagement)
Written comments on the draft Inception Report draft Interim Report and draft Final Report Proposals for and comments on draft conclusions and recommendations of the report including how to
improve operation of the Agreement (if needed) Names of organisations or indication of vulnerable groups that may have been affected by the
Agreement in the partner countries as well as relevant contact details for the evaluation team to reach out to the most relevant additional stakeholders
62 Study Website and Electronic Communications
The establishment and continuous updating of a website as well as ongoing electronic
communications with stakeholders are one element of the consultation strategy During
the inception phase the website has been established and launched and an initial e-
communication will be sent out to identified stakeholders (Task 5) The website is available
at httpcentral-americafta-evaluationeu
Electronic communication with stakeholders will take place through email newsletters as
well as Twitter using an account for this ex-post evaluation (CaEvaluation) Twitter will
be used as well to present the (draft) findings at specific moments in the study interested
related work or articles highlights or relevant quotes from the consecutive study reports
and promote the various outreach activities such as workshops LinkedIn will be used to
complement twitter with the same objectives the account of LinkedIn to be used will be
Ex-Post Evaluation EU-Central America FTA Email and an electronic newsletter will be used
as complementary tools to reach specific stakeholders throughout the study to inform them
Page 42
of events to send questions receive feedback and make appointments for interviews the
email used will be central-americabkp-advisorscom
With the COVID-19 pandemic still in place and governments imposing new lockdowns and
travel restrictions a back-up plan is available in case a lot of the communication has to be
done online The meetings with the EU and CA stakeholders both government and civil
society in the near future will be held online For the second half of the year and beginning
of 2022 face-to-face meetings may also be an option The advantage of digital outreach
is linked to reduction of travel time and travel costs to the minimum and in addition digital
follow-up is easier The public consultation and online business survey are already being
prepared and planned with an indicative timeline of online availability between June and
September 2021 The workshops envisaged for Central America in November 2021 are
currently planned with options ranging from face-to-face meetings over hybrid solutions
to holding them entirely online In either case we will ensure they are as interactive as
possible thanks to the use of breakout rooms and platforms enabling participants to ask
questions and participate in polls online We will also ensure that participants will receive
sufficient information before workshops
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13)
71 Case Study Selection
As part of the evaluation ten case studies will be prepared Their purpose is to capture the
impact of implementation of the EU-CA FTA on sustainable development in its economic
social and environmental dimensions as well as on human rights (including labour rights)
They should complement the economic social environmental and human rights analysis
required under Tasks 10 11 and 12
Regarding the geographic coverage the ToR require two case studies focused on the EU
two horizontal case studies for the whole region of Central America and six dedicated to
each of the Central American countries
Table 1 provides a preliminary list of suggested case studies while their exact focus and
scope will be determined at the next stage of the study further to preliminary impact
analysis and identification of relevant information and data sources
Table 8 List of proposed case studies
No Case study topic Geographical focus Key impact areas
1 Impacts of the Trade Pillar on EU banana producers EU incl OR as well as ACP and LDCs due to preference erosion
Economic and Social
2 Trade in environmental goods and services (opportunities for the EU and partner countries)
EU CA partner countries22
Economic and Environmental
3 Impacts of the Trade Pillar on freedom of association in sectors involved in trade with the EU (the choice of sectors will be made further to the initial impact analysis)
CA partner countries notably Guatemala Honduras and El Salvador
Human rights and Social
4 The effects of the Trade Pillar on sustainable aquaculture in Honduras Nicaragua Costa Rica and El Salvador
Partner countries with a focus on Honduras Nicaragua Costa Rica El Salvador
Economic Social Human rights and Environmental
5 Opportunities created in services sector in particular the green energy sector in Costa Rica (the choice of the services sector will be reviewed based on the initial impact analysis)
CA partner countries Economic and Environmental
22 The ultimate selection of countries will depend on the outcome of the (environmental) impact screening and scoping exercise
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 43
No Case study topic Geographical focus Key impact areas
6 Impacts of the Trade Pillar on child labour and childrens rights
El Salvador Social and Human rights
7 Impacts of the Trade Pillar on the environment (eg forests and biodiversity) in Guatemala the case of palm oil
Guatemala Environmental
8 Impacts of the Trade Pillar on MSMES and sustainable agriculture in the coffee industry (organic coffee) in Honduras
Honduras Economic and Environmental
9 Impacts of the Trade Pillar on women and gender equality notably in agricultural value chains in sectors exporting to the EU (the sectors may include coffee ground nuts and banana however the final selection of sectors and scope will be made based on data availability and the initial impact analysis)
Nicaragua Social and Human rights
10 Implementation and effect of the FTZ in port of Colon including aspects related to direct transportation clause
Panama Economic
72 Case Studies ndash Summaries and Methodologies
Descriptions of case studies and planned methodologies have been provided in Annex A5
8 STUDY WORK PLAN
A detailed study schedule which sets out activities and deadlines for outputs indicated
throughout this Inception Report is outlined in the chart overleaf A detailed plan for the
consultation programme is provided in Annex A4 Annex A6 provides the risk management
approach for the evaluation
Page 44
Phase task deliverable
Inception phase
Kick-off meeting with Commission in Brussels 20
Task 1 Refine draft intervention logic diagram
Task 2 Define and develop the methodological approach
Task 3 Review existing studies amp reports on trade between the EU and CA (6 countries)
Task 5 Provide a concise description of the agreement
Task 6 Create a website dedicated to the evaluation
Task 7 Stakeholder consultation strategy
Task 13 Case study proposals
Inception reporting
Drafting of inception report
Draft Inception Report 22
Review meeting Commission ISG
Finalisation of the Inception Report
Inception Report
Interim phase
Task 4 Provide a concise summary
Task 8 Undertake consultation activities
Civil society dialogue in Brussels (budgeted under review meetings)
12-week online public consultation
Online survey for business users interests in both the EU MS and partners
Workshops in partner countries
Other targeted consultations
Task 9 Assess the EU-Central American TSIA
Task 10 Analyse economic effects
Task 11 Analyse effects of implementation on SD economic social environmental
Task 12 Analyse effects on Human Rights
Task 13 Conduct in-depth case studies based on field work
Interim reporting
Drafting of Interim Technical Report
Annexes Progress evaluation Quantitative tables 10-page stakeholder report CS reports
Draft Interim Technical Report 20
Review meeting Commission ISG
Finalisation of Interim Technical Report
Interim Technical Report `
Final phase
Task 13 Conduct in-depth case studies based on field work
Task 14 Reply to the evaluation questions
Task 15 Provide conclusions and recommendations
Tasks 1 45 9 and 10 - 15
Final reporting
Drafting of draft final report
Synthesis report
Executive Summary
Annexes
Draft final report 20
Review meeting Commission ISG
Finalisation of final report
Translation executive summaries (EN FR GE SP)
Final report 20
Possible exit meeting 20
Progress reports
The ToR speci fies 12 weeks for the survey we tentatively propose 16 weeks because the time schedule a l lows i t and i f the project s tarts in January the survey would fa l l in the hol iday season in EuropeCA which would not be conducive for responses
Key
Meeting with the European Commission
Concrete deliverable (eg Inception Report)
Key
Working on the evaluation and endpoints of work per task
Stakeholder consultation activities and meetings
MayAprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr
HOW TO OBTAIN EU PUBLICATIONS
Free publications
bull one copy
via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps
from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)
from the delegations in non-EU countries
(httpeeaseuropaeudelegationsindex_enhtm)
by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm)
or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
Priced subscriptions
bull via one of the sales agents of the Publications Office of the European Union
(httppublicationseuropaeuothersagentsindex_enhtm)
doi[number]
[Cata
logue n
um
ber]
Ex-post evaluation of the implementation of part IV of the Association Agreement
(Trade Pillar) between the EU and its Member States and
Central America
Inception Report
28 May 2021
The information and views set out in this report are those of the authors and do not necessarily reflect the official opinion of the Commission The Commission does not guarantee the accuracy of the data included in this study Neither the Commission nor any person acting on the
Commissionrsquos behalf may be held responsible for the use which may be made of the information contained herein
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its
Member States and Central America ndash Inception Report
Directorate-General for Trade 2021
LEGAL NOTICE
This document has been prepared for the European Commission however it reflects the views only of the authors and the Commission cannot be held responsible for any use which may be made of the information contained therein
More information on the European Union is available on the Internet (httpwwweuropaeu)
Luxembourg Publications Office of the European Union 2021
ISBN [number] doi[number]
copy European Union 2021 Reproduction is authorised provided the source is acknowledged
Printed in [Country]
PRINTED ON ELEMENTAL CHLORINE-FREE BLEACHED PAPER (ECF) PRINTED ON TOTALLY CHLORINE-FREE BLEACHED PAPER (TCF) PRINTED ON RECYCLED PAPER PRINTED ON PROCESS CHLORINE-FREE RECYCLED PAPER (PCF)
Europe Direct is a service to help you find answers
to your questions about the European Union
Freephone number ()
00 800 6 7 8 9 10 11
() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Page 6
Image(s) copy [artists name + ge ] Year Source [Fotoliacom] (unless otherwise specified)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page vii
ABSTRACT
Since 20131 the European Union (EU) has been implementing the Trade Pillar ie the
Part IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The European
Commission has now commissioned a consortium led by BKP Economic Advisors to
undertake an evaluation of the Trade Pillarrsquos (hereinafter EU-CA FTA) implementation and
impact The evaluation is undertaken over the period January 2021 to May 2022 and
analyses the economic social environmental and human rights (including labour rights)
effects which the EU-CA FTA has had since its entry into force in the Parties to the
Agreement and third countries In terms of evaluation criteria it will review the
effectiveness impact efficiency coherence and impact of the EU-CA FTA and its
implementation It will also comprise ten case studies to illustrate or add detail to broader
findings
This Inception Report presents the evaluation methodology a descriptive summary of the
Agreement and its implementation so far and a brief review of relevant studies on the EU-
CA FTA
1 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El Salvador since 1st October 2013 and with Guatemala since 1st December 2013
Page viii
TABLE OF CONTENTS
LIST OF BOXES TABLES AND FIGURES IX
ACRONYMS X
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES 1
2 EVALUATION FRAMEWORK 2
21 Intervention hypothesis of the Agreement (Task 1) 2
22 Evaluation Questions Judgement Criteria and Indicators 5
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2) 6
31 Analysis of economic effects (Task 10) 6 311 Task 101 Analysis of the evolution of trade in goods 6 312 Task 102 Analysis of the evolution in trade in services 8 313 Task 103 Analysis of the evolution of foreign direct investment (FDI) 8 314 Task 104 Presentation of overall economic impacts 9 315 Task 105 Determining the impact on implementation of the Trade Pillar of the various
institutional structures 9 316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated exportimport procedures for key stakeholders 10
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the Trade Pillar 10
318 Task 108 Analysis of the implementation of the Government Procurement chapter of the Trade Pillar 10
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar 10 3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has led to a
greater economic integration between the Central American partners 11 3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for imports of
bananas 11 3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on SMEs 11 3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers 11 3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on the
budgets of the EU and the partner countries 12 3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on EU
Outermost Regions (ORs) 12 3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on developing
countries in particular on LDCs and countries having an Economic Partnership Agreement (EPA) with the EU 12
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable development (Tasks 11 and 12) 13 321 Task 111 Analysis of the effects of implementation of the Trade and Sustainable
Development (TSD) chapter of the Trade Pillar 13 322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter 13 323 Task 113 Analysis of employment impacts 14 324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda (job
creation labour standards social protection and social dialogue) on working conditions
poverty reduction and enforcement 14 325 Task 115 Analysis of impacts on the informal economy and informal employment 15 326 Task 116 Analysis of impacts on gender inequality 16 327 Task 118 Analysis of impacts on the adoption and implementation of internationally
recognised instruments of responsible business conduct and Corporate Social Responsibility (CSR) 17
328 Task 117 Analysis of environmental impacts 18 3281 Activity 1 Fine-tuned methodology and impact screening and scoping 19 3282 Activity 2 Establishing the baselines for the impact areas 20 3283 Activity 3 Quantitative evaluation of impacts 20 3284 Activity 4 Qualitative evaluation of impacts 21
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page ix
3285 Activity 5 Answering of the evaluation questions and other concluding remarks 21 3286 Conclusions and recommendations 21
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human rights 21 3291 Human rights baseline 22 3292 Screening and scoping 22 3293 Detailed assessment 23 3294 Conclusions and recommendations 24
33 Concluding tasks 24
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3) 25
41 Methodological aspects 25
42 Substantive issues 25
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5) 29
51 Structure of the EU-CA FTA 29
52 Institutional set-up of the EU-CA FTA 31
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo priorities 33
54 Operational context of the implementation of the EU-CA FTA 35
6 CONSULTATIONS (TASKS 6 AND 7) 41
61 Consultation Strategy 41
62 Study Website and Electronic Communications 41
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13) 42
71 Case Study Selection 42
72 Case Studies ndash Summaries and Methodologies 43
8 STUDY WORK PLAN 43
LIST OF BOXES TABLES AND FIGURES Box 1 The use of the DPSIR framework in FTAs 20 Box 2 Expectations regarding inputs from stakeholders 41 Table 1 Methodological approaches and sources for the analyses of trade in goods 6 Table 2 Methodological approaches and sources for the analysis of trade in services 8 Table 3 Methodological approaches and sources for the analysis of bilateral FDI 8 Table 4 Overview of the EU FTAs launched and or concluded since 2012 36 Table 5 EU FTA in Latin America and participating countries 37 Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021) 39
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking 40 Table 8 List of proposed case studies 42 Figure 1 Overall evaluation approach 2 Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association
Agreement 3 Figure 3 Overview of the multi-pronged approach to human rights impact assessment 24
Page x
ACRONYMS
AA Association Agreement ACP African Caribbean Pacific BATIS Balanced Trade in Services CA Central America CCA Causal Chain Analysis CGE Computable General Equilibrium CPI Consumer Price Index CSD Civil Society Dialogue CSR Corporate Social Responsibility DAG Domestic Advisory Group DG Directorate-General ECLAC Economic Commission for Latin America
and the Caribbean EESC European Economic and Social Committee EFTA European Free Trade Association EP European Parliament EQ Evaluation Question EU European Union EU-CA FTA Trade Pillar of the EU-Central America
Association Agreement FDI Foreign Direct Investment FRA EU Agency for Fundamental Rights FTA Free Trade Agreement GATS General Agreement on Trade in Services GDP Gross Domestic Product GHG Greenhouse Gas GIs Geographical Indications GPA Government Procurement Agreement GSIM Global Simulation GSP Generalised Scheme of Preferences GTAP Global Trade Analysis Project HRIA Human Rights Impact Assessment ILO International Labour Organisation IPR Intellectual Property Rights ITC International Trade Centre
JC Judgement Criterion LDC Least Developed Country LULUCF Land use land use change and forestry MFN Most-Favoured Nation MSME Micro Small or Medium-sized Enterprise NGO Non-Governmental Organisation NTB Non-Tariff Barrier OECD Organisation for Economic Cooperation and
Development OHCHR Office of the United Nations High
Commissioner for Human Rights OR Outermost Region
RBC Responsible Business Conduct RoO Rules of Origin SDGs Sustainable Development Goals SIA Sustainability Impact Assessment SICA Central American Integration System SIECA Secretariat for Central American Economic
Integration SME Small or Medium-sized Enterprise SPS Sanitary and Phyto-Sanitary TBT Technical Barriers to Trade TISMOS Trade in Services data by mode of supply ToR Terms of Reference TRIPS Trade-Related Aspects of Intellectual
Property Rights TRQ Tariff Rate Quota TSD Trade and Sustainable Development UN United Nations UNCTAD United Nations Conference on Trade and
Development UNECE United Nations Economic Commission for
Europe WTO World Trade Organisation
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 1
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES
Since 20132 the European Union (EU) has been implementing the Trade Pillar ie Part
IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The Trade Pillar
(hereinafter EU-CA FTA) gradually opens markets on both sides increases the stability and
predictability of the trade and investment environment and aims at creating benefits for
consumers and fostering sustainable development Its objectives include also support for
regional economic integration in Central America This is also one of the first EU ldquonew
generationrdquo trade agreements characterised by its comprehensive scope that covers in
addition to liberalisation of trade in goods and services investment public procurement
competition intellectual property rights and trade and sustainable development
After several years of implementation an evaluation is undertaken with the objective of
analysing the economic social environmental and human rights (including labour rights)3
impacts of the implementation of the EU-CA FTA and ultimately of determining whether
there is a need to improve its implementation To support the European Commissionrsquos own
evaluation of the Agreement the Directorate-General (DG) for Trade has awarded a
contract for the ldquoEx-post evaluation of the implementation of part IV of the Association
Agreement (Trade Pillar) between the EU and its Member States and Central Americardquo to
a consortium led by BKP Economic Advisors (BKP) The evaluation is carried out by a team
involving experts from BKP Trade Impact BV Trinomics the Foundation Rural
Development Consult (CDR) the NL-investmentconsulting BV and the University of Costa
Rica The work started in January 2021 and will continue until May 2022
The scope of the evaluation can be delineated as follows in terms of the period covered
it includes the whole implementation period of the EU-CA FTA since the start of provisional
application in 2013 up to now also comparing where appropriate with a five-year period
preceding the entry into force of the Agreement (ie starting in 2008) Geographically it
primarily covers the Parties to the Agreement although some effects of the EU-CA FTA on
selected third countries are also analysed such as developing countries and particularly
least developed countries (LDCs) moreover some global effects (eg climate change)
will also be covered Regarding evaluation criteria effectiveness impact efficiency
coherence and relevance will be considered Finally as already mentioned in terms of
types of effects considered the evaluation will cover economic social environmental and
human rights (including labour rights) effects which the EU-CA FTA may have had either
as a result of the changes in trade it has brought about or through the implementation of
the provisions of the Agreement text itself notably those of the Trade and Sustainable
Development (TSD) chapter
Although most data to be considered for the evaluation are likely to refer to the world pre-
COVID-19 the pandemic will have an impact on the study First in terms of the evaluation
implementation it is likely to affect the consultation activities that may need to be carried
out online rather than in person Second in substantive terms it will be important to pay
attention to issues which are of a priority for stakeholders in the current circumstances
(eg by selecting case studies accordingly) and to consider that eg stakeholder views
might be affected by the current situation
This inception report is the first deliverable under the contract It comprises seven tasks
of the evaluation (as established in the Terms of Reference see Figure 1) focusing on the
presentation of the evaluation methodology and is structured as follows Chapter 2
2 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El-Salvador since 1st October 2013 and with Guatemala since 1st December 2013 3 Whenever this report refers to human rights this includes labour rights
Page 2
presents the evaluation framework with an intervention hypothesis (task 1) while Chapter
3 outlines the proposed methodology responding to the evaluation questions (task 2) and
Chapter 4 covers a brief review of relevant studies on the Agreement (task 3) Chapter 5
provides a descriptive summary of the EU-CA FTA and its implementation so far (task 5)
followed by outline of consultation activities in Chapter 6 (tasks 6 and 7) supported by the
consultation strategy provided in Annex B as well as a list with a preliminary selection of
case studies in Chapter 7 (task 13) The final part includes study work plan in Chapter 8
The draft outline of the interim and final evaluation reports is presented in Annex A7 Other
parts of the Annex provide further details on certain elements of the report
Figure 1 Overall evaluation approach
2 EVALUATION FRAMEWORK
21 Intervention hypothesis of the Agreement (Task 1)
An indicative intervention hypothesis developed by the Commission linked the operational
objectives (as listed in Article 78 of the EU-CA FTA) to specific and overall objectives set
out in Article 2 of the Agreement and its Recitals In line with Task 1 of the evaluation ToR
we have adapted the intervention logic developed by the Commission as follows
All 10 operational objectives listed in Article 78 of the Agreement have been included
Specific and overall objectives have been considered in the context of short-term and
medium-term outcomes as well as long-term impacts
Underlying assumptions have been identified and integrated into the intervention
hypothesis
The relationship between the evaluation questions (EQ) and the intervention hypothesis
has been specified
The updated version of the intervention hypothesis is presented in Figure 2 overleaf
The intervention hypothesis was also instrumental in developing the analytical framework
of the evaluation which brings together the evaluation questions of the ToR the associated
judgment criteria and indicators the data sources and the methodological tools with which
we will collect data The refined analytical framework is presented in the following sub-
section
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 3
Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association Agreement
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 5
Main assumptions (at the level of coherence)
Pillar IV and its implementation has been coherent with the EUrsquos trade and development
policies and in particular with the EUrsquos commitment to sustainable development in
trade policies as a contribution towards attainment of the SDGs (EQ8)
Main assumptions (at the level of efficiency)
The utilisation rate of the Trade Pillar is high (EQ5)
Implementation of the Trade Pillar does not lead to trade diversion (EQ5)
Costs associated with implementation of the Trade Pillar are proportionate to the
benefits it has generated (EQ6)
The distribution of both costs and benefits is proportionate among different
stakeholder groups and interests (EQ6)
Implementation of the Trade Pillar does not create unnecessary regulatory costs
(including administrative burden) (EQ7)
Main assumptions (at the level of effectiveness impact and relevance)
The implementation of the Trade Pillar does not create unintended negative
consequences (EQ3)
The positive impact of the Trade Pillar is inclusive and does not benefit only a limited
group of stakeholders (EQ6)
Implementation of the Trade Pillar has contributed to trade diversification (EQ5)
Provisions of the Trade Pillar continue to be relevant for strengthening trade relations
between the Parties and regional integration of Central America (EQ9)
22 Evaluation Questions Judgement Criteria and Indicators
The evaluation framework has been based on the evaluation questions listed in the ToR for
the study which are as follows
EffectivenessImpact
EQ 1 To what extent have the objectives as laid down in Article 78 of Part IV of the
Agreement been achieved
EQ 2 What are the factors influencing (either positively or negatively) the achievements
of the objectives specified in Article 78
EQ 3 Has implementation of the Trade Pillar had unintended (positive or negative)
consequences and if so which ones
EQ 4 What has been the impact of implementation of the Trade Pillar
Efficiency
EQ 5 To what extent has implementation of the Trade Pillar been efficient with respect
to achieving its objectives
EQ 6 To what extent are the costs associated with implementation of the Trade Pillar
proportionate to the benefits it has generated Is the distribution of both costs and
benefits proportionate among different stakeholder groups and interests
EQ 7 Are there unnecessary regulatory costs (including administrative burden)
Coherence
EQ 8 To what extent has implementation of the Trade Pillar been coherent with the
EUrsquos trade and development policies ndash and in particular with the EUrsquos commitment to
sustainable development in trade policies as a contribution towards attainment of the
SDGs
Relevance
EQ 9 To what extent do the provisions of the Trade Pillar continue to be relevant in
order to address the current trade needs and issues of the EU and Central America
Page 6
The framework provides the evaluation questions the judgement criteria for each of them
the analysis needed to substantiate findings and conclusions made in the evaluation report
and the sources through which data and information will be obtained The evaluation
framework also links evaluation questions and judgement criteria to the analytical tasks to
be performed according to the ToR Table 1-1 in Annex A1 presents this framework
It should be noted that methodological tools and indicators used are not shown in the table
but are explained in the next chapter
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2)
In this chapter we describe the methodologies and tools planned to be used in the
evaluation separately for each task The analysis will be concluded with recommendations
on how the implementation of the Agreement can be further improved for the benefit of
the EU and Central American partner countries It should be noted that the structure of
the presentation is in line with the tasks defined in the ToR to facilitate comparison and
compliance with ToR requirements However the order of findings will be guided by the
evaluation framework presented in chapter 2 To facilitate the link with the evaluation
framework for each task we indicate to which evaluation question respectively judgement
criterion it contributes
31 Analysis of economic effects (Task 10)
In 2010 the EU was Central Americarsquos second most important trade partner after the
United States (and after intra-regional Central American trade) The total value share of
the EU in Central American trade was 94 EU exports mainly went to Costa Rica (53)
Honduras (22) and Guatemala (12) In 2018 the EU was still Central Americarsquos second
trade partner after the United States but with a higher share of 122 of all Central
American trade (IMF 2019) In 2019 Central Americarsquos trade with the US (in both goods
and services) totalled USD 70 billion (ie EUR 678) (USTR) Trade in goods with the EU
reached EUR 12 billion in 2019 and trade in services EUR 82 billion in 2018 (European
Commission 2020a)
311 Task 101 Analysis of the evolution of trade in goods
Analysis under this task will seek to respond to the evaluation questions related to JC 1A1
1A2 and JC 41 The EU-CA FTA offers advantages in terms of market access for the EU
and Central American countries Some of the main elements of the Agreement regarding
goods exports from the EU to Central America are complete liberalisation of tariffs for
manufactured goods and fisheries at the end of the tariff phase-out period and immediate
liberalisation of 69 of EUrsquos exports to CA at the start of the agreement saving EUR87
million in duties annually Specific analyses to be carried out under Task 101 have been
summarised in Table 1 For each sub-task we present the specific analysis that needs to
be carried out and main methodological approach we suggest as well as relevant data
sources
Table 1 Methodological approaches and sources for the analyses of trade in goods
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
1 Goods showing the largest increase or decrease in total and bilateral trade flows
Using COMEXT statistics at different disaggregation levels the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing products
2 Development of trade in goods against previously applicable GSP+ and GSP tariffs
Taking COMEXT data as a basis to investigate whether the GSP status of a product has a bearing on how the EU-CA FTA has influenced the rate of growth in trade we will compare two groups of goods those for which tariffs were 0 under GSP versus those for which tariffs were greater than 0 under GSP+
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 7
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
3 Preference utilisation rates and forgone duty saving of economic operators of all Parties
Based on COMEXT data (for EU imports) and data provided by the Commission (for EU exports) a quantitative analysis will be undertaken to identify the key sectors and product categories where preferences are not fully used We propose to include up to 3 questions in the survey to identify factors that encourage discourage companies to use the Agreement
4 Use of tariff rate quotas (and the reasons for suboptimal use)
Data up to 2019 is already available in the Commissionrsquos annual implementation reports Updating the data is supposed to rely on similar sources as the Commissionrsquos annual reports Reasons for sub-optimal use of TRQs will be investigated during the consultations as this cannot be inferred through statistical analysis
5 Trade diversion in particular from interregional Central American trade towards the EU
First we aim to use COMEXTCOMTRADE data to analyse the evolution of merchandise trade flows over time (between the EU and the partners but also within the region in comparison to the rest of the world)
Second we aim to look at the CGE results that should be able to tell us the pure EU-CA FTA effect on intra-Central American trade flows
6 Impact of the Agreement in relation to the creation persistence reduction or removal of non-tariff measures (NTMs) that have a significant impact on EU-CA countriesrsquo trade in goods
We will use UNCTADrsquos NTM TRAINS database and classification for identification description and analysis of specific NTMs affecting trade relations between the EU and Central America We will also look at NTMs including market access barriers raised by the Parties in the sub-committee meetings and will complement the findings with stakeholder engagement
7 Analysis of the importance of Free Trade Zones in Panama (especially the FTZ in the Port of Colon)
Using trade statistics we can get a picture of the way trade flows entering Central America via the Port of Colon (for example) are distributed across Central American countries These patterns ndash at sector level ndash would tell us the most economically significant EU exports This
will be complemented by qualitative analysis
8 Investigation of whether new enterprises started to export or whether enterprises already exporting started to export new products
We expect to undertake this analysis by relying on available firm-level data as well as specific questions for SMEs in the targeted business survey the SME Panel questionnaire and other consultation activities directed towards SMEs Additionally for this sub-task we will try to get access to national databases containing firm-level panel data based on highly disaggregated customs information that include exports (imports) of products and their destinations
9 Analysis of the evolution of trade import shares originating in the EU in total imports of the six CA countries (and vice versa)
COMEXT and COMTRADE data will be used to carry out this analysis We will ensure that we specify the third countries in a clear way The EU and each of the Central American countries The United States Mexico and Canada but also Brazil Argentina
Paraguay and Uruguay (Mercosur) and China Other countries (Rest of World)
10 Analysis of the impact of the EU-CA FTA implementation on diversification of trade
The diversification of trade in goods will be evaluated according to two main dimensions 1 Diversification in the range of products traded between the EU and each of its partners 2 Diversification in the number of EU member states trading with the Central American partners
11 Comparison of the development of trade in goods between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
COMEXT and COMTRADE data will be used to carry out this analysis Regarding trade of the partner countries the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as the MERCOSUR countries The choice of the US can be explained by CAFTA-DR agreement that has been in place since 2006 between the US and Central America and the Dominican Republic
12 Investigation of whether the EU-CA FTA has facilitated trade with third countries including via the use of intermediate products
Use of GTAP data (since the Trade in Value Added ndash TiVA database only covers Costa Rica) to look at intermediate linkages and whether these have helped the competitiveness of the CA economies We will also look at the CGE modelled development of the real exchange rate as an indicator of what happened to CA economiesrsquo levels of competitiveness
13 Analysis of the degree to which implementation of the EU-CA FTA has contributed to diversification of sources of supply of goods
COMEXT and COMTRADE data will be used to carry out this analysis We will look at the inputs shares for specific products in CA from the EU and vice versa and compare the development of these shares to the shares for the same products from international trade partners
14 Identification of regions within the partner countries that have benefited most and of
regions having benefited least (including the identification of constraints)
We expect to rely mainly on a combination of mapping of the sectoral CGE effects per region with literature review and consultation activities to identify the regions that have most least benefited from the
agreement Social progress indexes are computed at municipal level in Costa Rica and at provincial level in Panama as well as for some regions in Guatemala and El Salvador but this is for 2017-2018 only
Page 8
312 Task 102 Analysis of the evolution in trade in services
Analysis in this task is linked to JC 1A3 Although the effects of trade agreements on EU
services trade with third countries are not easily quantifiable we will seek to use available
data to demonstrate the impact of the EU-CA FTA on EU services trade We will assess
whether the Agreement has led to an improvement or worsening of the structural
imbalance between the parties The EU posted a substantial services trade surplus of EUR
10 billion with all six Central American partners combined in 2013 but this surplus has
decreased to EUR200 million by 2017
Table 2 Methodological approaches and sources for the analysis of trade in services
Specific analysis to be carried out
Main methodological approach and sources
1 Services showing largest increase decrease in total and bilateral trade flows between individual CA countries and EU
We will identify sectors showing the biggest increase in total trade in services flows and in bilateral trade flows as well as those having performed worst This analysis will be conducted using time series trade statistics at different levels of disaggregation (from Eurostat OECD and UNCTAD) the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing sub-sectors Reasons for performance will be identified by a combination of sources including literature review and targeted consultations
2 Comparison of the development of
trade in services between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
The comparison of the development of bilateral trade in services between the EU and the individual Central American countries with the development of trade in services
for the EU and its Member States and for Costa Rica Guatemala El Salvador Honduras Nicaragua and Panama with a suitable reference group of countries will provide further evidence on the actual impact of the agreement of trade in services flows As is the case for trade in goods (Task 101) the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as MERCOSUR countries if possible The choice of the US matters because of the CAFTA-DR agreement that has been in place since 2006
3 Analyse trends in international financial capital flows and the evolution of key financial industry segments ndash with the GATS modes of supply as the basis
First we will analyse trends in international financial capital flows between the EU and the Central American countries as well as globally For this we will use available Eurostat OECD andor UNCTAD data as well as Central Bank data if available
Second in order to look at how sectors are performing (well or not so well) we will focus on a concise general ndash but sector level ndash analysis and what drivers we can identify for economic performance
Third we propose that the following case study (see Task 13) could be undertaken Evaluating financial industry segments such as banking insurance asset management sustainable investment ndash in Panama or Costa Rica
Data source suggestions The OECDrsquos Services Trade Restrictiveness Index The GATS Trade Restrictiveness Index which together establish the amount of ldquowaterrdquo in the partiesrsquo GATS
bindings that can be ldquosqueezedrdquo by a modernised Agreement Central Bank data on financial and insurance services economic activity and trade Global Investment Competitiveness Report (World Bank 2019) ISDB data from Eurostat BOP statistics
313 Task 103 Analysis of the evolution of foreign direct investment (FDI)
The analysis in this task will be linked to JC 1A5 Although the effects of trade agreements
on Foreign Direct Investment (FDI) with third countries are not easily quantifiable we will
seek to use available data to demonstrate the impact of the EU-CA FTA on FDI At a general
level this task will entail to assess what impact the EU-CA FTA has had on structural
balances or imbalances between the EU and its Central American partners
Table 3 Methodological approaches and sources for the analysis of bilateral FDI
Specific analysis to be carried out
Main methodological approach and sources
1 Largest increases decreases in FDI flows between individual CA countries and the EU
We will identify main changes in FDI flows over the past 10 years between the EU and Central American countries if possible at sector level This analysis will be conducted using the ITC investment map data UNCTAD investment data and ISDB data from Eurostat BOP statistics Data limitations are expected to be significant for this subtask Reasons for good or bad performance will be identified by a combination of sources including literature review and targeted consultations
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 9
Specific analysis to be carried out
Main methodological approach and sources
2 Comparison of the development of FDI flows between the signatory countries
The proposed methodology would examine the investment effect at both the extensive and intensive margins using the two-step Heckman (1979) estimation as implemented in Helpman et al (2008)
3 Analysis of the investment climate
and of the attractiveness to investment of the six CA countries
An analysis of the investment climate and of the attractiveness to investment of the six Central American countries taking into consideration the possible impact of the
existence of bilateral investment treaties or of double-taxation treaties will be undertaken We propose to review inter alia the evolution of the following indexes OECDrsquos Foreign Direct Investment Restrictiveness (FDIR) index Various FDI attractiveness and FDI confidence indexes ndash eg by AT Kearny and Ernst amp Young Global Investment Competitiveness Report (World Bank 2019) World Bank lsquoDoing Business Indicatorsrsquo ISDB data from Eurostat BOP statistics wwwinvestmentmaporg from the ITC
314 Task 104 Presentation of overall economic impacts
The analysis in this task is linked to JC 41 and will rely on the computable general
equilibrium (CGE) modelling undertaken by DG Trade The CGE model is the quantitative
cornerstonefoundation of the ex-post evaluation Important variables of interest for the
economic analysis will be those which are standard for a CGE analysis such as GDP and
trade flows (total bilateral and by sector) and sectoral output Based on the CGE modelling
results we will estimate the overall impact on the economy of the EU the partner countries
as well as third countries in particular LDCs The economic analysis will build further on
the modelling results We will report these in sufficient detail to highlight the economic
effects of the EU-CA FTA More details on the CGE model are provided in Annex A2
315 Task 105 Determining the impact on implementation of the Trade Pillar of the
various institutional structures
Our analysis under this task will seek to respond to evaluation questions No 1 and 5 (with
JC1A2 JC1A6 JC1A7 and JC1A9) ie how the operation of the institutional set up has
contributed to achieving the objectives of the EU-CA FTA outlined in Article 78 and how
effective and efficient the Association Committee (in trade configuration) six Sub-
committees and an ad hoc Working Group have been to date To determine this we will
analyse provisions of the EU-CA FTA referring to institutions and their operation in practice
In the first step we will analyse Articles 4-8 establishing the Association Council the
Association Committee and Sub-Committees and setting out their decision-making powers
This will be done jointly with Articles 345-346 setting out specific tasks of the Association
Council and the Association Committee acting in trade configuration including powers to
amend certain parts of the Agreement (within Trade Pillar) This will be followed by Articles
347-348 about Part IV coordinators and Sub-Committees established under EU-CA FTA and
will be complemented by the analysis of Articles 91 123 139 156 274 and 294 outlining
areas of responsibility of the individual Sub-committees4 and the Rules of Procedure of the
Association Council and the Association Committee (Decision No 12014 of the Association
Council) which also apply to Sub-Committees This will let us develop an understanding
about the mandate of each institution its decision-making powers including those related
to amending the EU-CA FTA and monitoring compliance by each Party frequency and
format of meetings relations with other institutions under the Agreement reporting and
escalation In this way we will establish an expectation regarding the role each institution
should have in implementation of the EU-CA FTA and achieving its objectives
4 Sub-committee on Market Access for Goods (Article 91) on Customs Trade Facilitation and Rules of Origin (Article 123) on Technical Barriers to Trade (TBT) (Article 139) on Sanitary and Phytosanitary Matters (SPS) (Article 156) on Intellectual Property (Article 274) Board on Trade and Sustainable Development (TSD) (Article 294) and Ad hoc Working Group on Government Procurement
Page 10
In the second step we will analyse the actual operation of all the above structures based
on available documents and engagement with the Parties as well as relevant stakeholders
We will take as the basis reports from Sub-committee and Association Committee meetings
and will complement them with the annual Commissionrsquos Implementation Reports and
other documents eg conclusions adopted by civil society representatives at the annual
meetings under the TSD chapter We will also determine whether formal decisions have
been taken by the Association Council or Committee and if so analyse the extent to which
they have contributed to implementation of the EU-CA FTA We will also look at concerns
raised by the Parties how they have been addressed and how much time it took to achieve
a satisfactory solution Based on findings from our analysis we will provide conclusions
and recommendations for the future notably for the TSD board
316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated
exportimport procedures for key stakeholders
Analysis in this task will be related to JC 1A2 Based on reviews of the Agreement text as
well as the work of the Sub-committee on ldquoCustoms Trade Facilitation and Rules of Originrdquo
we will analyse in a qualitative way which customs-related aspects have facilitated or
complicated bilateral trade like rules of origin management of TRQs agricultural safeguard
measures and approved exporter status We will seek to determine eg whether Article
304 par 1 provision (related to reimbursement of duties in CA Party of transit and their
payment in the CA Party of import) is applied in practice and if so how it is evaluated by
economic operators
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the
Trade Pillar
This task is also linked to JC 1A2 and the methodological aspects described above are also
valid for SPS related issues We see two subtasks under this request 1) An analysis to
what degree implementation of the SPS Chapter in the EU-CA FTA has facilitated agri-food
trade without lowering any partyrsquos SPS standards 2) The extent to which the capacity
building and technical assistance provided by the EU to Costa Rica El Salvador Guatemala
Honduras Nicaragua and Panama has had an effect (looking at what technical assistance
projects and funds were used)
318 Task 108 Analysis of the implementation of the Government Procurement
chapter of the Trade Pillar
The analysis in this rask is linked to JC 1A6 and will examine the impact of the opening of
the government procurement markets of the Parties using a multi-step approach 1)
Review of the recent and ongoing work of the Ad Hoc Working Group on Government
Procurement 2) A statistical analysis of the procurement value shares for EU business (if
possible) and SME participation which will be complemented by desk research and
anecdotal evidence of success stories of EU companies in Government procurement
markets of six CA countries and 3) Review of the level of compliance with the Agreement
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar
This task is related to JC 1A7 and 1A8 The methodological approach foreseen to analyse
other areas of the Agreement (like Technical Barriers to Trade e-commerce Competition
and protection of intellectual property rights (IPRs) including geographical indications)
Our approach focuses on 1) Statistical analysis compiling statistical descriptive analysis
on each issue prior to and after entry into force of the Agreement 2) Literature review
the analysis on the implementation and use of geographical indications in Central America
(eg Rivar 2020) 3) Case studies A specific case study on some of these other issues
could be carried out
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 11
3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has
led to a greater economic integration between the Central American partners
This task is linked to JC 1A4 The EU-CA FTA has been a mechanism that encourages
regional integration but it takes place within a much wider framework of regional
cooperation efforts between the CA countries with the EU-CA FTA being only one element
in this wider context This task focuses on the impact of the EU-CA FTA on regional
integration not on the overall trend or state of affairs regarding regional integration We
use three elements for our analysis 1) The statistical analyses that we have carried out in
Tasks 101 (trade in goods) 102 (trade in services) and 103 (FDI) help to shed light on
regional integration impact of the EU-CA FTA also 2) We look at the results of the CGE
analysis including at how the intra-regional trade patterns have changed because of the
EU-CA FTA 3) We investigate what progress has been made in terms of the different
elements for integration We will use EU and CA data sources to underpin our analyses
3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for
imports of bananas
This task is related to JC41 We envisage three types of analysis under this task in addition
to a possible case study 1) Descriptive statistical analysis based on trade in bananas since
2008 in order to capture developments before and after the entry into force of the EU-CA
FTA distinguishing bilateral trade in bananas EU banana imports from the non-LDC ACP
countries from LDCs and intra-EU imports from the Outermost Regions 2) A quantitative
impact analysis using a partial equilibrium model ndash the Global Simulation (GSIM) model
(Francois and Hall 2009) 3) A qualitative impact analysis causal chain analysis will be
applied to look at what the Agreementrsquos sector-level social and environmental effects have
been In this step we focus in the socialhuman rights pillars on how vulnerable groups
could be affected at sector level The qualitative sectoral environmental analysis will cover
the impact of the FTAs on land use and related issues water and waste management and
biodiversity and protection
3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on
SMEs
The analysis in this task is linked to JC 41 The ldquoSME-Testrdquo will be guided by the following
steps 1) Consultation of SME Stakeholders SMEs are a central element of the consultation
strategy and will be present at every stage of it 2) Identification of affected business
early on in the analysis we will identify whether and which SMEs (eg medium-sized) are
among the affected businesses 3) Identification of concrete stories as the Interim Report
progresses we will have sufficient information to identify 20 concrete stories from SMEs
as required by the Terms of Reference
3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers
This task will be approached in two parts the first one being dedicated to impacts on
consumer rights and the other one to welfare-related impacts of the EU-CA FTA which also
affect consumers in their purchasing decisions The analysis will be related to JC 42 and
evaluation questions No 18 and 6 In addition we will aim to determine to what extent
EU-CA FTA has contributed to attaining SDG 1 (no poverty) and 10 (reduced inequalities)
Regarding consumer rights in the first step we will refer to the literature according to
which consumers usually benefit from global trade and preferential trade agreements due
to lower prices of purchased goods and services (resulting from reduction of tariff and non-
tariff barriers) a wider variety of traded goods and services the related satisfaction of
diversified needs and preferences and higher quality of available goods and services
Page 12
In the second step we will consider impacts which the EU-CA FTA (might) have had for
consumers regarding availability safety sustainability traceability and quality of traded
goods and services as well as which impact its promotion (or consumersrsquo awareness of it)
may have on consumersrsquo knowledge regarding the market offer and their trust in it The
list of questions to test will be guided by the EU Better Regulation Tool Nr 32 related to
impacts on consumers We will also draw on other parts of the study analysing
implementation of provisions related to regulatory measures and standards eg TBT
SPS TSD dialogue and cooperation between the EU and partner countries and
transparency to outline what level of protection incl consumer protection and production
standards is provided by the EU-CA FTA We will also refer to the EU RAPEX database ie
the alert system for dangerous non-food products listing notifications of such products
originating from the EU and partner countries
The second part of our analysis will focus on impacts of the EU-CA FTA on welfare In the
first step based on literature review and statistical data including relevant indexes (eg
the share of population living below the poverty line) we will analyse trends in the reporting
period in the EU and Central America regarding situation of consumers from different
groups of the population incl incomes expenditures levels of poverty and inequality
income and price levels wages and other types of income and any changes in this context
In the following step we will use outcomes of the economic modelling to estimate impacts
on welfare and inequality resulting from EU-CA FTA implementation eg prices and wages
In this context we will also consider to what extent the Agreement helped to attain SDG
No 1 (No Poverty) and SDG No 10 (Reduced Inequality) This will be complemented by
stakeholder consultations and finished with conclusions and recommendations
3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on
the budgets of the EU and the partner countries
The analysis in this task is linked to JC 41 It will examine impact of the FTAs on the EU
budget (ie revenues forgone) and will largely result from the economic model We
anticipate that for the EU the foregone tariffs on imports from the partner countries will
be estimated based on the level of EU imports from the selected countries as a baseline
and the tariffs that would have applied to those imports
3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on
EU Outermost Regions (ORs)
This task is linked to JC 41 The impact on ORs will be assessed based on the trade
diversion and deflection identified in the CGE analysis A key limitation in the economic
modelling framework is however that the EU ORs are not established as a separate region
To meaningfully analyse the effect on the EUrsquos ORs we propose two elements 1) A
matching analysis for the EU and the six partner countries regarding products that matter
for ORsrsquo trade (to either partner countries or the EU) 2) Competition analysis between
ORs and CA partner countries for exporting to the EU The effects will be determined
qualitatively distinguishing if applicable the ORs which might be positively or negatively
affected by the Agreement
3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on
developing countries in particular on LDCs and countries having an Economic
Partnership Agreement (EPA) with the EU
This task is related to JC 41 Our approach to look at the EU-CA FTArsquos impact on developing
countries and LDCs will largely consist of the interpretation of the results of the economic
model simulations which has defined lsquoLDCsrsquo as a separate region This allows us to look at
the effect the EU-CA FTA has had on them We will also look closely at effects for countries
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 13
which are implementing an Economic Partnership Agreement (EPA) with the EU In terms
of the impact we will look first at an economic impact followed by effects on the other
sustainability pillars The former will include (i) a matching analysis for the EU and the six
partner countries regarding products that matter for LDCsrsquo trade (to either partner
countries or the EU) and (ii) competition analysis between LDCs and CA partner countries
for exporting to the EU We do not expect the effect to be significant for the LDCs because
the global impact of the EU-CA FTA is limited
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable
development (Tasks 11 and 12)
321 Task 111 Analysis of the effects of implementation of the Trade and
Sustainable Development (TSD) chapter of the Trade Pillar
This is one of the priority tasks linked to JC 1A1 In the first step we will divide provisions
of the TSD chapter into thematic blocks to identify areas for further analysis These include
commitments of the Parties to effectively implement in their laws and practice the eight
fundamental conventions of the International Labour Organization (ILO) as well as the
Multilateral Environmental Agreements to which they are Party the right of the Parties to
regulate sustainable management of natural resources promotion of trade supporting
sustainable development institutional provisions and dispute settlement mechanism
In the second step based on findings from the analysis of the actual situation in the EU
and partner countries carried out in Tasks 113-118 and documents outlining the
implementation of the TSD chapter (eg reports of international monitoring bodies
reports from meetings of the TSD Board and civil society advice to the Parties) we will
map activities undertaken by the Parties in areas covered by the TSD chapter in a break-
down prepared in the first step This will enable us to conclude to what extent the scope
of the TSD chapter has been covered and if actions taken by the Parties individually and in
cooperation activities have contributed to the implementation of TSD commitments and
attaining the objectives of the chapter and relevant SDGs (No 8 on decent work and
employment for all No 13 on combating climate change and No 14-15 on sustainable
use and protection of marine environment forests and biodiversity) Our analysis will be
complemented by stakeholder engagement5 We will conclude the analysis with
recommendations for the future incl any improvements in operation of institutions to
support compliance of the Parties with provisions of the TSD chapter
322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter
This is one of the priority tasks liked to JC 1A10 and evaluation questions No 1 5 and 8
In the first step we will analyse formal commitments of the Parties regarding the set up
and operation of the institutional mechanism ie Article 294 (Contact Points of the Parties
the TSD Board and civil society Advisory Groups) and Article 295 (Civil Society Forum)
In the second step we will analyse the establishment and operation of TSD institutions in
practice including their meetings activities undertaken between sessions cooperation and
5 When the Report refers to stakeholder engagement it means diverse activities foreseen in the stakeholder engagement programme outlined in detail in Annex B to this Report (Consultation Strategy) For each task stakeholder engagement activities will be tailored to the most relevant group of stakeholders methodology applied in the task and type of data which will be needed for the analysis For example in the analysis carried out with regard to TSD chapter the focus will be on targeted interviews with civil society members of the Advisory Groups in the EU and Central American countries as well as with Government and Commission representatives Further sources of information and activities will include targeted meetings eg DAG meetings and workshops with Central American countries CSD meetings with the European civil society and written positions submitted by civil society organisations As a complementary source we will use replies from online public survey
Page 14
dialogue between Governments and civil society The analysis will be based on reports
from meetings research studies recommendations from civil society to the Parties and
interviews with representatives of the Commission Governments from Central America
EU Delegations the EESC secretariat of the EU Advisory Group as well as civil society
representatives from the EU and Central American countries including members of their
Advisory Groups We will also evaluate effectiveness and efficiency of the institutional
mechanism and its role in the monitoring and implementation of the TSD chapter the
ability to address problems and to pursue cooperation and dialogue We will put an
emphasis on the evaluation of the TSD Board its ability to monitor compliance with the
commitments of the Parties effectiveness in choosing priorities and structuring the work
programme pursuing cooperation activities and resolving problems This part will also
analyse civil society capacity to exercise its mandate and monitoring implementation of
TSD chapter the quality of dialogue between Governments and civil society and the follow-
up to civil society recommendations In this context and in line with suggestions provided
by reviewed research studies we will also evaluate to what extent the discussion among
the civil society and between Governments and civil society focuses on substance
(compared to focusing on process) and whether the civil society has the means and
capacity to prepare for and to engage in such a discussion We will conclude the analysis
with recommendations for the future incl any improvements in operation of institutions
323 Task 113 Analysis of employment impacts
The analysis in this task will focus on impacts for employment levels and relate to JC 42
and evaluation questions 4 and 6 In the first step we will analyse trends in employment
and unemployment levels in the EU and partner countries for their whole economy and
across sectors over the reference period We will also identify factors influencing observed
trends including macroeconomic and labour policy measures applied by the Governments
investment in education and skills development migration from rural to urban areas and
across region and impacts of trade and investment including through trade agreements
In the second step the analysis will be focused on assessing quantitative impacts (direct
and indirect) of the EU-CA FTA on the number of jobs direct and indirect (for skilled and
un-skilled workers for the EU and partner countries across sectors) and be based on the
results of the economic modelling We will compare these results with the real-life data
and trends observed in the first step to conclude to what extent the reduction in trade
barriers and changes in output across sectors related to the implementation of the EU-CA
FTA have influenced demand for labour given the assumption of a fixed total employment
in the economy and full labour mobility between the sectors with workers leaving sectors
seen as less competitive and moving towards those having better prospects of growth and
working conditions including wages We will also draw a conclusion to what extent
observed trends in employment should be attributed to the EU-CA FTA and to what extent
to other factors incl macroeconomic environment global trends in commodity prices
domestic policy investment and trade agreements with other partners Stakeholder
consultations will help to verify our findings
324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda
(job creation labour standards social protection and social dialogue) on
working conditions poverty reduction and enforcement
This is one of the priority tasks Our analysis will seek to answer the evaluation questions
No 1 4 and 6 (JC 42) Given the broad scope of this task we will divide it into two parts
a) labour standards and social dialogue (the Decent Work Agenda) b) working conditions
including social security and health care coverage of workers and labour inspection
In the first step we will describe the situation in the EU and partner countries and changes
over time regarding the subject matter as well as factors influencing observed trends We
will focus on the following
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 15
Task 114 a) on labour standards will look at the implementation of the core labour
standards as enshrined in the fundamental ILO Conventions ratified by all Parties to
the EU-CA FTA and evaluated by the ILO monitoring bodies6 Regarding trends in child
labour occurrence the analysis will include eg the number of working children types
of activities and sectors involved the number of hours worked per week motives for
undertaking work and involvement in hazardous work Influencing factors will be
considered and their impact on job availability for adult household members the level
of generated income and the extent to which it covers family needs Regarding forced
labour the analysis will include types of activities and sectors involved and influencing
factors including criminal activity and the level of law enforcement On freedom of
association and the right to collective bargaining the analysis will cover conditions for
setting up joining and operation of trade unions and employer organisations and
functioning of social dialogue for the whole country and ndash if data is available ndash across
sectors including indicators such as the share of trade union members in the total
number of workers for the whole country and in a break-down by sector and changes
over time Regarding non-discrimination at work we will focus on groups of workers
which may be in a disadvantaged position on the labour market eg youth disabled
persons migrants or indigenous peoples (women will be analysed in Task 116) and
indicators such as labour participation rate and unemployment rate the share of each
group working informally or being in a situation of sub-employment (ie receiving a
wage below the minimum level despite working full time or having no opportunity to
work full time despite being ready to do so)
Task 114 b) on working conditions and labour inspection will include trends in job
quality indicators over time the average number of working hours per employee per
week the number or rate of fatal and non-fatal accidents at work social security and
health care cover of workers wage levels type of contract the number of labour
inspectors and inspections carried out at work places and the infrastructure and funds
being at the disposal of inspection services (we will consider in that context that all EU
Member States and five Central American countries except Nicaragua have ratified
the ILO convention No 81 on labour inspection)
In the second step based on economic modelling we will identify the sectors most affected
(positively or negatively) by the EU-CA FTA and using the analysis done in step one will
seek to determine if trends observed in the respect for labour standards and quality of
working conditions in individual sectors can be attributed to the operation of the Agreement
or rather to other factors In cases where any concerns related to labour standards eg
child labour incidence or low presence of trade unions are identified in sectors particularly
involved in trade with the EU notably in exports we may apply an in-depth analysis in a
dedicated case study We will also refer to the implementation of the TSD chapter to
establish whether policy dialogue cooperation activities and engagement with civil society
have also influenced the situation We will complement desk research with stakeholder
engagement
325 Task 115 Analysis of impacts on the informal economy and informal
employment
This is one of the priority tasks linked to evaluation questions No 1 and 8 (JC 42) We will
also aim to determine to what extent the Agreement has contributed to attaining objectives
of SDG No 1 (no poverty) and No 10 (reduced inequalities) In the first step we will
develop a description of the situation in the partner countries during the analysed period
concerning the size and structure of the informal economy and factors influencing its
6 These include conventions No 138 and 182 on elimination of child labour No 29 and 105 on prohibition of forced or compulsory labour No 87 and 98 on freedom of association and the right to collective bargaining and No 100 and 111 on equal pay for work of equal value and non-discrimination at work
Page 16
existence as well as its geographic pattern in Central America and each of the partner
countries separately We will aim to identify if there are links between the informal
economy and eg the economic structure and dynamic in certain regions and their
involvement in trade We will also report about steps taken by the Governments in a move
towards formal economy including dedicated national strategies adopted in Costa Rica and
Guatemala
In the second step based on the results of the economic modelling and trade statistics for
trade and investment flows between the EU and Central American countries an additional
literature review and stakeholder consultations we will aim to establish to what extent
trade and in particular the EU-CA FTA has contributed to the observed trends in each
partner country We will verify our findings in stakeholder consultations
326 Task 116 Analysis of impacts on gender inequality
The analysis in this task will seek to answer the evaluation questions No 1 4 and 6 (JC
42) We will also aim to determine to what extent EU-CA FTA implementation has helped
to attain SDG No 5 (gender equality) No 8 (decent work and economic growth) No 1
(no poverty) and No 10 (reduced inequalities) Work under this task will be guided by the
approach proposed in UNCTADrsquos Trade and Gender Toolbox (UNCTAD 2017) which
considers impacts on women in their roles as workers entrepreneurs traders and
consumers Complementary considerations regarding impacts for each of those groups will
be inspired by other literature (eg Fontana 2009) and methodological approaches (eg
European Institute for Gender Equality 2016)
In the first step we will analyse the situation in the Central American partner countries
regarding womenrsquos participation in the labour market economic activity as entrepreneurs
and traders (with a consideration of their access to assets and supporting measures) and
their position as consumers incl the level and type of income received and being at their
disposal Based on the available data we will also analyse gender inequalities before and
after the entry into force of the EU-CA FTA and measures applied by the countries and
provided by international donors to support an increased womenrsquos participation We will
also review reports of the ILO Committee of Experts regarding implementation of the two
ILO fundamental conventions on non-discrimination ie No 100 (equal pay for work of
equal value) and No 111 (non-discrimination at work) ratified by all CA partner countries
In the second step we will compare observed trends stemming from the real data with
outcomes of the economic modelling to determine to what extent they may be linked to
impacts of Agreement and to what extent they result from influence of other factors
Focusing on women as workers we will identify sectors important for them (based on
their shares in the total womenrsquos employment and a ratio of female and male workers
in each such sector) and compare observed trends in employment levels (in total and
across sectors) with the results of the modelling (changes in employment levels across
sectors) to determine whether the EU-CA FTA has contributed to changes reported in
the real life and if so to what extent In this context we will also consider impacts of
tariff reduction on public revenues and whether this might have had an impact on the
provision and quality of public services which in turn may have an effect on women and
their ability to participate in the labour market or to undertake an economic activity
For women as entrepreneurs if relevant data is available we will identify sectors of
their economic activity and compare trends in the actual operation of these sectors over
time (eg growth or decline) with outcomes of the economic modelling to determine if
the EU-CA FTA might have had an impact on output of these sectors and as a result
position of women as entrepreneurs
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 17
Moreover if more detailed data is available regarding sectors and groups of products or
services manufacturedprovided by women-led enterprises as well as their engagement
in international trade we should be able to say (again comparing the real-life data with
economic modelling) what impact the Agreement may have exercised on women as
traders and in this context on sales and exports of their products or services or their
competition with or the use of imports We will also consider whether the EU-CA FTA
provisions regarding eg tariff reduction SMEs TBT SPS might have had an impact
for women-led enterprises (given their size and sectors of operation)
Concerning the role of women as consumers we will look at real-life trends in income
and price levels and compare them with outcomes of the economic modelling to see
what impacts the EU-CA FTA might have had on welfare and price levels as well as the
availability and accessibility of goods and services
Our analysis will be complemented by engagement with stakeholders including women
organisations to identify barriers in their activity on one hand and facilitating measures on
the other and to gather more insights into impacts of the EU-CA FTA
327 Task 118 Analysis of impacts on the adoption and implementation of
internationally recognised instruments of responsible business conduct and
Corporate Social Responsibility (CSR)
Our analysis under this Task will seek to respond to the evaluation question No 1 (JC 42)
In the first step we will map CSRRBC practices in the Central American partner countries
in the analysed period including practices of European companies investing there or having
their suppliers and existing government initiatives promoting them eg National CSR
strategy and Law on CSR in Costa Rica National Plan on Social Responsibility and Human
Rights in Panama and dedicated centres or foundations promoting CSR in Guatemala
Honduras Nicaragua and El Salvador We will also use findings from a research carried
out for Task 111 identifying initiatives undertaken within the TSD Title incl EU projects
and regional events dedicated to CSR RBC and decent work in global supply chains We
will aim at a better understanding of the existing framework uptake of CSRRBC practices
by enterprises factors influencing it and CSRRBC presence in the EU relations with the
partner countries including technical assistance and cooperation projects
Based on this in the second step we will use outcomes of the economic modelling and
stakeholder consultations to verify whether indeed the EU-CA FTA through generated
trade and investment flows as well as specific provisions (such as those in TSD Title) might
have encouraged uptake of CSRRBC practices We will also seek to identify factors related
to market access which may encourage uptake of CSRRBC practices Legislative ones may
include eg non-financial reporting and obligatory due diligence in certain sectors or
activities requirements related to social and environmental aspects in public procurement
and non-legislative ones may focus on image and comparison with the main competitors
being part of supply chains where business partners require respect for certain labour and
environmental standards international instruments in CSR (OECD Guidelines for
Multinational Enterprises ILO Declaration on Multinational Enterprises and Social Policy
the UN Global Compact etc) requirements of sustainability and certification schemes or
consumer awareness and related choices
As an additional element of this analysis (subject to data availability) we may include into
this task examples of other schemes eg sustainability schemes or promotion of decent
work in global supply chains (notably of agricultural products) and their presence in trade
between Central America and the EU and impacts the EU-CA FTA might have had on their
use in bilateral trade relations
Page 18
328 Task 117 Analysis of environmental impacts
The main objective of the environmental analysis is to assess the environmental and
climate change effects of the EU-CA FTA as well as to provide answer to the evaluation
questions notably those on the effectiveness (No 1-4) (JC 43) and coherence of the
Agreement with other policies and the EUrsquos commitment to the SDGs and in particular
SDGs No 13-15 ie Climate Action Life below water and Life on Land (respectively) ie
evaluation question No 7 The main challenge is to isolate the EU-CA FTA induced effects
on the environmental performance in each country from general developments and trends
that occurred regardless of the EU-CA FTA This is particularly challenging as the
counterfactual environmental outcomes are unobservable for most of the environmental
impact areas
The overall approach is based on our detailed understanding of the dynamics through
which the EU-CA FTA may have created environmental impacts tailored towards the
specific circumstances for the Central American countries the requirements in the ToR
the TSD Chapter of the EU-CA FTA and the budget provided for this study The detailed
understanding is based on the study lsquothe methodology for assessing biodiversity impacts
of EU FTArsquo by IEEP Trinomics et al (2021) and the latest literature including an OECD
study (Garsous G 2019) on this matter and applies the following logic
1) identifying the components in the EU FTA with the Central American countries that may
have generated environmental effects (EU-CA FTA elements) Based on our extensive
recent experience on researching the dynamics through which FTAs may create
environmental impacts we conclude that the FTA contains (1) measures easing market
access for the signatories (referred to as tariff-based measures) and (2) several rules-
based measures (mostly by means of the provisions in the TSD Chapter referred to as
non-tariff-based measures) that may have resulted in environmental impacts in the
countries involved
2) then establishing how these elements could have created directly or indirectly intended
or unintended ndash environmental impacts (the impact channels) Any FTA is by
definition expected to create direct environmental impacts through the expected
expansion of economic activity which may lead to eg higher pollution and greenhouse
gas (hereafter GHG) emissions may put a strain on bio-resources and pressure on
vulnerable ecosystems as higher levels of output require more environmental input
(Copeland and Taylor 2014) Trade agreements also create indirect environmental
impacts through structural adjustments in the economies and so-called specific rules-
based trade measures including the provisions in the TSD Chapter Our approach
carefully considers four impact channels that are also distinguished by the SIA Handbook
(European Commission 2016a) to separate the way in which EU-CA FTA may have
created impacts on various areas of the environment The scale effect (the impact
created from increased production as a result of the trade agreement) the structural
effect (the dynamic effect of the EU-CA FTA on the growth and contraction in production
in different sectors) technology effects (impacts triggered through increased efficiencies
from increased competition or from a transfer in environmental goods and services) and
potentially the product effect (impact via changes in production standards and use of
goods in a country eg through strengthened environmental policies and environmental
regulation)
3) via these impact channels various areas of environmental performance (the impact
areas) may be impacted and are to be further analysed in this evaluation In this study
we distinguish the following impact areas 1) Climate change 2) Biodiversity and
ecosystems and 3) Other key environmental parameters
Research methods ndash For some impact areas there is more reliable information and data
and quantitative research methods available than for others To the extent possible the
quantitative analysis will build on the economic modelling results and as a result the
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 19
analysis will allow us to comment on the causal relation between environmental topics and
the EU-CA FTA Where quantitative research is not possible we will apply qualitative
methods The qualitative analysis may rely on the causal chain analysis method which
aims at identifying the root cause of observed changes Irrespective of whether a certain
impact will be assessed with more quantitative or qualitative research methods our
approach is designed to make intensive use of quantitative information eg compiling
quantitative statistics and analysing trends The following research methods are applied
per environmental area
For climate change we propose focusing on establishing the EU-CA FTArsquos impacts on
the major GHG emissions (eg carbon dioxide methane and nitrous oxide) and
potentially on the air pollutants (ozone precursor gases acidifying gases and primary
particulates)
For biodiversity and ecosystems we propose following the latest insights in assessing
biodiversity impacts of the EU-CA FTA based on the study for DG Environment on the
development of a methodology to assess the impact of trade liberalisation on
biodiversity (which has not been published yet) In case results of the biodiversity
analysis are also relevant for climate change (ie LULUCF emissions) the link between
these results and climate change will be explored
For other impact areas we propose developing baselines based on qualitative and where
possible quantitative data for each impact area and explore developments in
environmental performance since the entry into force of the EU-CA FTA In addition we
will discuss the (effectiveness of the) implementation of provisions enshrined in the TSD
Chapter in the EU-CA FTA per impact area
The above discussed approach is based on five activities They apply the logic of the
methodological stages7 as described in the methodological framework for assessing the
impact of EU FTAs on biodiversity (IEEP Trinomics et al 2021)
3281 Activity 1 Fine-tuned methodology and impact screening and scoping
Fine-tuning the methodology is part of this inception report (this document) and mainly
serves to define the exact scope and focus of this evaluation The environmental analysis
logically focusses on Central America and the EU (with an emphasis on Central America)
However within defining the geographic scope of this analysis one needs to differentiate
global (eg climate change) and other more local environmental impacts eg
(un)sustainable forest management practices We aim to cluster countries when
appropriate from the perspective of a certain regional environmental issue In this way we
can respond to the challenge of bringing focus to the analysis while balancing the available
resources and time Clustering should enable us to evaluate certain environmental issues
in a more targeted way enabling deep dives into specific issues Below we discuss in more
detail what this regional approach means in practice and how we aim to mitigate the risk
of overlooking certain impacts
Impact screening and scoping - The exact environmental topics on which quantitative and
qualitative analysis will be performed depend on the outcome of the impact and screening
and scoping exercise which seeks to identify issues which deserve to be analysed with an
extra depth As such this sub-activity aims to select the environmental impact categories
and sub-areas to be studied in other activities Impact screening and scoping is a
methodological tool to identify issues which should be prioritised in the evaluation and
helps to mitigate the risk of overlooking potential significant impacts In essence the
prioritisation is based on (i) screening the most prevailing existing environmental drivers
and pressures and (ii) screening the expected impacts caused by the EU-CA FTA (at a
7 The study by IEEP Trinomics et al (2021) identifies three stages Stage I) Preparatory stage Stage II) Method selection and impact logic and Stage III) Impact assessment and related conclusions
Page 20
sector level) by means of economic modelling results literature review stakeholder input
and political interest All information is transparently documented in the impact-screening
matrix During the impact screening and scoping exercise we will also develop three
context-setting documents (2-pages) one per environmental impact area to better
understand the background These documents will have a regional perspective and will be
directly used in the baseline development The output of this activity is included in the
Interim Report
3282 Activity 2 Establishing the baselines for the impact areas
The aim of this activity is to gain a brief understanding of the EUrsquos and partner countriesrsquo
status quo regarding their environmental governance and performance (eg trends) for
those environmental impact areas that have been identified as priority ones The output
will be a section in the evaluation with a short description (1 page) per prioritised impact
area outlining the governance (very brief) and the performance and exploring the main
developments trends and their cut-off points This will be done by analysing issues from
a DPSIR framework perspective (drivers ndash pressures ndash state ndash impact ndash responses) (see
Box 1) when appropriate8 This framework is often applied in environmental assessments and plays a central role in the study by IEEP Trinomics et al (2021) on the methodology
for assessing the impact of EU FTAs on biodiversity
Box 1 The use of the DPSIR framework in FTAs
The DPSIR framework allows to interpret certain environmental indicators by establishing a causal relation between indicators and their analysed effects In the case of an FTA trade liberalisation in goods services and investments can function as a driver of a change in different economic sectors causing changes in the amount of land- and other resource use or in their quality (eg pollutants and emissions impacting air water or soil quality) The changes in the quantity of land- and other resource may create pressures on biodiversity which lead to an impact in the state of and trends in biodiversity ecosystems and the services they provide As a response(s) certain new or existing measures can be taken to help to prevent negative impacts or to amplify positive ones
Source IEEP Trinomics et al (2021)
Three consecutive sub-tasks will be performed to operationalise the establishment of the
baselines 1) Literature review and data analysis to establish draft baselines 2) Interviews
with stakeholders to obtain additional input validate work and fine-tune results 3)
Triangulation of information (literature data and interviews) and establishment of final
baselines The output of this activity will be included in the Interim Report
3283 Activity 3 Quantitative evaluation of impacts9
The aim of this activity is to assess the quantitative estimates of the impacts of the EU-CA
FTA on GHG emissions and possibly air pollution and ndash potentially10 ndash on trade in
environmental goods and services and land use change As such the desired result is the
reporting of the quantitative estimates of the impacts of the EU-CA FTA on GHG emissions
and air quality in the EU Costa Rica El Salvador Honduras Guatemala Nicaragua and
Panama depending on data availability Ultimately it is global GHG emissions that
contribute to global warming for this reason we propose to estimate the global change in
GHG emissions resulting from the EU-CA FTA In this way we also consider the difference
in climate change impacts from trade creation and trade diversion The impacts on GHG
emissions will be decomposed in the most relevant key drivers where possible The
8 This implies that we will make use of the insights of the framework whenever relevant and appropriate in the light of the evaluationrsquos objective We will not identify every element (D P S I and R) for each environmental issue but focus on the most relevant elements for each of them
9 The focus depends on the results of the impact screening and scoping 10 Depending upon expected scale of impact available resources and data availability
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 21
preliminary finding of this activity will be included in the Interim Report and the final results
are to be presented in the Final Report
3284 Activity 4 Qualitative evaluation of impacts11
The aim of this task is to evaluate qualitatively the impacts of the EU-CA FTA on various
prioritised environmental impact areas focussing on those which are not assessed in the
quantitative analysis First a broad assessment is done based on desk research from a
regional perspective In addition approximately two case studies (as part of Task 13) will
be prepared in which the environmental impacts of the EU-CA FTA on certain areas will be
assessed based on in-depth qualitative analysis using causal chain analysis (CCA)
(European Commission 2016a) Depending on data availability we will aim to identify
trends developments and cause-effect relations between the EU-CA FTA and environment
By combining the existing environmental drivers and pressures (see Textbox 3282-1 for
more information) the economic results and effects of TSD provisions we naturally also
include potential unintended and unforeseen effects The preliminary finding of this activity
will be included in the Interim Report and the final results are to be presented in the Final
Report
3285 Activity 5 Answering of the evaluation questions and other concluding
remarks
The overall environmental analysis concludes with clearly commenting on the effect of the
EU-CA FTA on the performance the legislative framework and effective implementation in
each of the prioritised environmental impact areas In case no causal relation between the
EU-CA FTA and the performance of a certain environmental impact area is found it will
also be explicitly mentioned These concluding remarks together with the in-depth
analyses conducted in previous tasks will serve as the basis to answer the evaluation
questions related to the EU-CA FTArsquos environmental impacts under Task 14 in the Final
Report
3286 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative environmental effects that have emerged from tensions between the EU-CA FTA
on the one hand and elements of environment on the other Additional policy or legislative
measures can also be suggested to enhance positive impacts of the EU-CA FTA
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human
rights
In this section we present the approach envisaged for the analysis of the human rights12
impact of the EU-CA FTA in the EU and the CA partner countries
The evaluation will rely on the methodology of human rights impact assessments (United
Nations 2011 European Commission 2015) as well as on the experience from previous
studies and will include the following steps
Step 1 Human rights baseline
At this step a concise baseline analysis will be carried out Concise human rights
profiles will be prepared for each of the state-parties to the EU-CA FTA
Step 2 Screening and scoping
11 The focus depends on the results of the impact screening and scoping 12 Human rights in this analysis are defined as set out in the Charter of Fundamental Rights of the European
Union the core UN human rights conventions and relevant regional human rights treaties
Page 22
At this step based on various sources human rights will be screened and specific
human rights that may have been affected by the EU-CA FTA will be identified
Step 3 Detailed assessment of the selected human rights
At this step drawing upon findings from the previous stage of the analysis an in-depth
analysis of up to three selected rights will be carried out (both quantitative and
qualitative and depending on the degree of the impact)
Step 4 Policy recommendations and accompanying measures related to
human rights
At this step policy recommendations will be formulated as to how any tensions between
the EU-CA FTA and human rights obligations may be addressed and how a positive
impact on the enjoyment of human rights can be enhanced
Stakeholder inputs will be used throughout all four steps to verify and support findings as
well as to collect evidence on the impact and ensure meaningful participation
3291 Human rights baseline
At this stage a concise baseline analysis of the human rights situation in each state-party
will be carried out First an overview of international human rights obligations of all the
state-parties to the FTA (ratifications of core international and regional human rights
treaties core ILO Conventions and other treaties relevant for the analysis) will be
presented in a tabular manner Second human rights profiles will be prepared Human
rights profiles will consist of a summary of the baseline conditions for the enjoyment of the
relevant human rights in each of the state-parties to the FTA from five years before the
provisional application of the EU-CA FTA until 2019 Particular attention will be given to the
pre-existing conditions of stress and vulnerabilities with respect to human rights
highlighting the position of specific vulnerable groups
The human rights profiles aim to
Set the scene regarding the enjoyment of relevant human rights in the partner
countries and identify social and political developments that may have impacted the
human rights situation
Allow for a targeted assessment of the human rights impacts of the EU-CA FTA
The profiles are based on the analysis of international human rights obligations national
legislation and policy framework as well as implementation issues with respect to relevant
human rights The analysis reviews country specific reports of international organisations
(eg UN OECD ILO) EU Reports on Human Rights and Democracy in the World reviews
of reports of international human rights organisations (eg Human Rights Watch) a
review of academic literature media reports relevant indicators and local partner inputs
3292 Screening and scoping
The second step of the analysis focuses on identifying which human rights could have been
affected by the EU-CA FTA and in which way The EU-CA FTA will be scanned for provisions
that are most likely to have caused an impact on the enjoyment of human rights in state-
parties to the EU-CA FTA The cause-effect relationships between the trade and trade-
related measures in the FTA and human rights will be established based on multiple sources
(see the multi-pronged approach below) The focus of the screening will not only be on
specific trade measures originating from the FTA (the Trade Pillar) but also on the overall
effect of the measures under the broader Association Agreement
Based on the screening exercise and in line with the EC Guidelines for human rights impact
assessments (European Commission 2015 p5) we provide a focused overview of the
human rights affected by the EU-CA FTA specifying the following elements
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 23
Specific human rights affected by the FTA
Short note on the evidence of the impact with a reference to the sources of information
Whether the affected right is an absolute human right or not13
The kind of impact (direct or indirect)
The degree of the impact (major or minor)
Affected population groups (if applicablepossible)
The screening exercise will as much as possible reflect upon the affected individuals
andor groups of people especially indigenous people and women based on the results
generated by the economic analysis inputs from the stakeholders and literature review
We will also look at how the EU-CA FTA has impacted gender equality and labour rights14
3293 Detailed assessment
Depending on the outcome of the screening exercise a maximum of three human rights
will be selected for a detailed assessment
Applicable human rights laws will be scanned (based on the obligations of the state-parties
under international and regional human rights treaties) to provide a framework of
applicable and binding entitlements and duties related to the selected right(s) Insofar
possible national legislation will be scanned for any changes subsequent to the application
of the EU-CA FTA focusing in particular on the changes that affected the enjoyment of
each of the selected human rights (using baseline analysis to aid the impact assessment)
Then we will look at the particular measures and how they have enhanced or impaired the
enjoyment of the relevant rights and or have strengthened or weakened the ability of the
parties to fulfil or progressively realise their international human rights obligations
Particular attention will be given to impacts on vulnerable groups or groups of individuals
that are at risk of being marginalised (Danish Human Rights Institute 2016)
This assessment is intended to be both quantitative and qualitative in nature The
quantitative analysis is based on the results of the economic analysis and used to the
extent possible15 The qualitative analysis is based on various sources as well as
stakeholder consultations and close work with local partners Economic modelling results
already disentangle the impact of the EU-CA FTA from other impacts that could have
affected the enjoyment of a human right over time For qualitative analysis it is more
challenging to discern the FTA impact To address this challenge we use a multi-pronged
approach (ie a methodological cross-validation approach in order for one methodological
element to corroboratevalidate the other method) in examining the causal effects of the
FTA for each of the prioritised human rights16 (see Figure 3)
13 See Tool 28 of the European Commissionrsquos Better Regulation Toolbox (2017) available at httpseceuropaeuinfolawlaw-making-processplanning-and-proposing-lawbetter-regulation-why-and-howbetter-regulation-guidelines-and-toolboxbetter-regulation-toolbox_en
14 Although we expect some overlap on labour-related rights with the evaluation of social impacts there will be cross-references to ensure a holistic analysis Moreover taking into account the interrelated nature of human rights we reserve the right to address the rights of the workers from other relevant perspectives not covered in the social analysis (eg as related to vulnerable groups)
15 When relevant we will use human rights indicators to supplement the analysis 16 We use the same method also during the screening exercise but to a more a limited degree (eg not using
specific human rights indicators for each human right as it goes beyond the scope of this evaluation)
Page 24
Figure 3 Overview of the multi-pronged approach to human rights impact assessment
Thus in assessing the impact the EU-CA FTA has had on each human right we use the
economic modelling results (if applicable and appropriate) that already disentangle the FTA
impact from the overall effects and link economic findings (partially) to how the selected
human right has evolved in the EU and Central American partner countries because of the
EU-CA FTA If data from the economic analysis is not sufficient to support the analysis we
will make use of contextually relevant human rights indicators (United Nations 2012) from
the statistical databases of the ILO World Bank UN OECD andor other organisations to
investigate how the selected human rights have evolved over time We look at the
development of human rights from five years before the provisional application of the FTA
up to the most recent year for which the data is available comparing period before and
after the entry into force of the FTA looking for shocks (relatively sharp increases
decreases) around that time or structural breaks in a trendline to identify an EU-CA FTA
impact We also investigate whether other shocks have taken place that could explain
observed changes in human rights (eg changes in domestic laws) Based on a similar
practice used during the ex-post evaluation of the EU-Korea FTA we could also consider
including a set of control countries to the analysis to consider development of specific rights
in relative terms
All data findings will be supported and cross-validated through a review of relevant
literature looking for further evidence of impacts provisions of the EU-CA FTA the social
and political situation (eg legislative policy instruments adopted that could have affected
the enjoyment of relevant rights) and inputs from the stakeholders that can serve as
evidence of a link between how the human rights has evolved and the EU-CA FTA
3294 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative human rights effects that have emerged from tensions between the EU-CA FTA
on the one hand and statersquos human rights obligations on the other Additional policy or
legislative measures can also be suggested to enhance positive impacts of the EU-CA FTA
and to prevent or mitigate impacts of measures that have been identified as having caused
or contributed towards impaired enjoyment of human rights
33 Concluding tasks
Based on the various analyses undertaken including the case studies the evaluation team
will prepare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 25
A comprehensive review of the extent to which impacts identified in the Trade SIA of
the Association Agreement between the EU and Central America (Ecorys and Corporate
Solutions 2009) have actually materialised (Task 9)
Replies to the evaluation questions (Task 14) and
Conclusions and recommendations (Task 15)
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3)
The literature review aims at identifying sources data and main conclusions drawn from
the previous studies to make sure that the report is based on and further complements the
existing literature Annex A3-2 provides an overview of the literature considered so far in
a tabular structure To summarise the findings from the literature review so far the
following can be noted regarding methodologies and substantive issues
41 Methodological aspects
The economic effects of the EU-CA FTA have been analysed by the Sustainability Impact
Assessment (SIA) outsourced by the Commission (DG Trade) in 2009 before the launch
of the negotiations (ECORYS 2009) This ex-ante evaluation combined quantitative and
qualitative approaches the first one based on the Computable General Equilibrium (CGE)
and Causal Chain Analysis and the latter built on stakeholder interviews (ECORYS 2009)
The CGE model underpins SIA and the literature produced on the likely economic impact
of the agreement (ECORYS 2009 IIDE 2007 Lima et al 2009 Lima et al 2010 CEPR
2012) and the bulk of these studies is based on the assumptions on the likely structure of
the agreement as the negotiations were not concluded yet The 2009 SIA also assessed
the additional FDI impact by applying a gravity analysis approach (ECORYS 2009) The
first Commission annual activity report on the implementation of the EU-CA FTA builds its
assessment on the available Eurostat data and on the comparison between the region-to-
region trade flows before and after the treatyrsquos entry into force (Commission 2015) The
following activity reports (Commission 2016 2017a 2018a 2019d 2020a) illustrate the
evolution of trade on a yearly basis relying on the Eurostat and Central American statistics
thereby opting for a more descriptive approach
The main added value brought by this ex-post evaluation report consists of the CGE model
and its application to updated EU and CA statistics in order to isolate the strictly related
economic implications of the EU-CA FTA from other external factors influencing bilateral
trade thereby purifying the overall analysis and drawing more methodologically solid and
reliable conclusions The Commission (2021) modelling used for the ex-post evaluation
unlike the other studies focuses only on tariffs however which means that impacts of not
the entire EU-CA FTA are measured but only of the tariff component
Regarding assessment of non-economic effects the methodology tended to forecast
estimated general trends and usually does not make detailed projections It should also be
pointed out that predicting long-term socio-economic effects stemming from the AA proves
to be more challenging than estimating short-term trade impacts (European Parliament
2018) Regarding quantitative social and environmental variables the models have used
structured gravity approaches to estimate the effect of non-tariff measures (NTMs)
(ECORYS 2009) The main methodological constraints to calculate (non-quantifiable)
social environmental and human rights effects from a quantitative perspective are the
problem of attribution and the so-called counterfactual given that one cannot know what
would have happened in case the agreement was not in place
42 Substantive issues
In the 2009 SIA the literature review concluded that the potential economic impact of
the EU-CA FTA was expected to be positive The vast majority of literature sources agree
on the key role played by agricultural products in the Central American economy (Romero
Page 26
et al 2015 FAO 2020 OXFAM 2016 European Commission 2020 European Commission
2019 Zabalo et al 2019 Mejia et al 2018 Lima et al 2009 Lima et al 2010) The
raw material share accounts for up to 60 of the total CA export and combined with
natural-resource-based manufactures their cumulative share reaches 70 (Lima et al
2010 p 92) A study carried out in 2007 before the launch of the EU-CA negotiations
forecasted a negligible impact of the agreement on the EU GDP and overall welfare even
in case of a full liberalisation scenario (IIDE 2007 p 16) Also in terms of FDI the
estimated effects were marginal for the EU but more tangible for CA where the agreement
could lead to an increase of 1 of the CA economies GDP (CEPR 2012 p 27) However
some additional positive spill-overs were considered such as the impact on maritime
services that could help CA countries to better manage increased trade flows and at the
same time improving custom procedures (ECORYS 2009) On trade the report
highlighted trade value flow variations especially in CA with the impact on both EU export
and import value rather negligible (Ibid p 73)
The 2012 CEPR impact assessment argued that the EU-CA trade liberalisation triggered
overall positive effects especially when referred to key products both for the EU exports
to CA such as in agriculture products and goods originating from manufacturing activities
(eg cars and medication) and EU imports from CA primarily food products where the
FTA proposed to half tariff levels compared to the previous GSP level access in place (CEPR
2012 pp 10-11)
According to the SIA banana exports from CA to the EU were expected to benefit from
more advantageous market access conditions Regarding NTMs bilateral trade facilitation
and border-related barriers should be eased simplified and rationalised Consequently
trade costs were expected to decrease remarkably The econometric analysis showed that
the economic effects of the EU-CA FTA were not expected to be equally distributed among
the CA countries given the economic heterogeneity of the region (ECORYS 2009 Lima et
al 2009 CEPR 2012 European Parliament 2018) Vegetable fruits and nuts sector (VFN)
together with sugar cane showed the most promising results (IIDE 2007 p17) although
the positive effects were not equally shared among the CA members with Panama
benefitting the most Manufacturing production in CA was estimated to benefit from the
deal (+20) Electronic equipment would also take advantage of the FTA especially in El
Salvador Honduras and Costa Rica (CEPR 2012 p 31) Transport equipment insurance
services and other manufacturers were expected to decline
On the EU side the projections estimated that
Output in the sector of vegetables fruits and nuts as well as electronic equipment was
expected to decrease modestly (CEPR 2012 p 29)
The EU was estimated to increase output in grains other agriculture and additional
categories of primary food (ECORYS 2009 pp 44)
A limited price decrease for processed food grains and vegetables other agriculture
and beverages and tobacco was expected (Ibid p 44)
Overall in the EU literature in any scenario ranging from partial to full liberalisation an
increase of trade volume as result of the AA was projected (European Parliament 2018
p 43)
A study presented at the Twelfth Annual Conference of the Global Economic Analysis in
2009 and eventually incorporated in a 2010 publication on Latin America assessed the
likely effects of the EU-CA FTA for three scenarios full liberalisation partial liberalisation
excluding sensitive products on both sides (namely fruits and vegetables meat beverages
and tobacco other processed food) and liberalisation considering only fruits and vegetables
as sensitive in the EU (Lima et al 2009 p 1) The application of different models revealed
that the most economically advantageous scenario was the first one leading to an
expansion of exports in all signatory countries and positive effects on overall CA welfare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 27
The second scenario would lead to a smaller economic impact with a more modest trade
expansion (12) and some welfare losses Finally in the scenario foreseeing the EU
excluding only fruits and vegetables the ldquoresults for trade and product remain positive
but with smaller figuresrdquo (Lima et al 2009 p 1) In conclusion a deeper liberalisation
would favour both regions by enhancing exports by between 1 and 5 in all the CA
countries (Lima et al 2010)
The Commissionrsquos annual FTA implementation reports describe trade flows between the EU
and CA after the conclusion of the FTA and demonstrate an overall upward trend for certain
countries and for specific sectors Trade flows remained rather stable in 2014 increased
by 12 in 2015 decreased marginally by 07 in 2016 grew by 72 in 2017 by 66
in 2018 and by 7 in 2019 With the exception of 2017 the EU maintained surplus in
trade with CA (Commission 2015a 2016 2017a 2018a 2019d 2020a)
The Central American literature generally focused on the role played by agricultural exports
in CA domestic economies and on the potential impact generated from the EU-CA FTA on
export transformation and diversification (Zabalo et al 2019) The likely impact of the EU-
CA FTA varied among the countries and the industries considered (ECORYS 2009) A study
carried out in 2018 aiming at analysing the effects on Panamarsquos economy by adopting a
shift-share analysis model concluded that between 2013 and 2016 the Panamanian exports
(mainly transport equipment and agricultural products) to the EU showed a downward
trend by 32 for the selected years mainly due to the decrease of primary exports to
some EU countries including Germany Belgium Italy Greece Poland and Sweden (Mejia
et al 2018) Likewise the local press has highlighted both advantages and disadvantages
generated by the EU-CA FTA for the whole region (De Leograven 2006 Barquero 2016
Rodriguez 2017) While it was considered that tariff removal triggered by the Agreement
could boost banana exports to the EU therefore inducing positive externalities for the
whole region especially for Costa Rica excessive specialisation in agricultural products
and insufficient diversification of export destinations could cause negative effects for the
local economy (Barquero 2016 Rodriguez 2017) Finally the press flagged the pros and
cons of regional integration requirements posed by the EU to CA The EU request to
negotiate as a unified bloc and to speak with a single voice led to long sensitive and
complex domestic negotiations within CA which came only to a partially accepted joint
approach towards trade talks (De Leoacuten 2006) A comparison of estimated economic effects
of the Agreement has been provided in Annex A3-1
The social impact considerations were closely linked to the economic ones since the EU-
CA FTA effects on trade would also influence the levels of employment in the affected
sectors The employment changes triggered by the EU-CA FTA in the EU were expected to
be negligible owing to the relatively modest role played by CA in the EU trade with the
rest of the world As an additional consequence also the level of EU wages should not be
affected much by the Agreement (CEPR 2012 p 28) In CA more significant incentives
to reallocation between sectors caused by ldquopull-factorsrdquo were likely to occur where export-
oriented sectors would benefit most from the EU-CA FTA and where rises in wages were
expected Employment in textile industry in Nicaragua Guatemala Honduras and El
Salvador was expected to decline The full liberalization scenario (IIDE 2007 p 17) was
expected to lead to increases in wages while also prices would rise by 05 (CEPR 2012
p 28) In Nicaragua and Costa Rica wages were expected to rise by 02 and 13
respectively while Panamanian wages would drop marginally (ECORYS 2009 pp 75-77)
The implementation of the International Labour Organisation (ILO) conventions in the EU-
CA FTA legal framework would also have a positive impact on social issues in CA such as
elimination of child labour and force labour and reduction of gender inequality However
the literature underlines a general lack of analyses of the EU-CA FTA impact on poverty in
CA since its implementation (European Parliament 2018 (a) p 45) As described above
the effects were expected to vary among the CA countries with El Salvador Nicaragua
and Honduras experiencing a relatively more impactful drop in levels of poverty than in
Page 28
Costa Rica Finally likely consequences on poverty equality education health and gender
issues in the EU were found to be negligible unlike in CA where small and indirect effects
were expected in terms of investments in health incentives through innovation brought by
technology dissemination and an overall positive impact on inclusiveness driven by the
Agreement (ECORYS 2009 pp 76-80)
On the environmental aspects the literature contributions can be split into two main
groups featured by contrasting interpretations on the EU-CA FTA impact Ultimately the
effectiveness of the TSD chapter will depend on the willingness of the involved government
to implement the EU-CA FTA provisions (EPRS 2018)
On the one hand the SIA and other studies flagged the likely harmful repercussions on
greenhouse gas emissions (GHG) stemming from agriculture fishing trade and transport
activities resulting from the EU-CA FTA application having a limited impact on the EU share
of CO2 emissions and a more tangible effect on some CA countries such as El Salvador
Honduras and Costa Rica in the long run (Alianza por la Solidaridad 2019 FAO 2013)
Moreover the increased agricultural activities resulting from the economic effects of the
EU-CA FTA (eg coffee melon sugar cane and peanut production) factories activities (eg
production of biofuels in Guatemala) as well as factoriesrsquo waste and maritime transports
could pose a threat to biodiversity and deforestation which could constitute a serious issue
owing to a large share of local biodiversity concentrated in CA especially if waste would
not be adequately managed (ECORYS 2009 pp 81-83 Zabalo et al 2019 FAO 2013
Monserrat et al 2011 OXFAM 2016 Rosa Luxembourg Stiftung 2010 Ruerd 2018)
On the other hand a share of the existing literature emphasised the opportunities for CA
countries originating from the EU-CA FTA This would be the case of Costa Rica which
would improve the national environmental regulatory framework mainly in relation to the
use of agrochemicals with likely positive impact for the environment since pineapple
production plays an important role in local economy (Esquivel 2020) A FAO study argued
that international trade in coffee (in particular exports to the EU) has improved the overall
environmental sustainability in CA The EU being the largest consumer of coffee worldwide
its (increasing) requirements on the sustainability of the coffee chain benefited the
adoption of environmental standards by the sector As a consequence coffee producers
are now required to provide more extensive and detailed certifications proving they comply
with environmental standards Therefore they have been paying more attention to
environmental aspects than before (FAO 2020)
A 2017 study (CEPAL 2017) investigated the impact of a CO2 tax on CA GDP Overall the
estimations indicated a negative impact of a carbon tax on GDP and the extent to which it
was found to impact the various local economies depended on the amount of the tax itself
Indeed an average tax value of 69 USD per tCO2e was found to impact the GDP by 062
A range between 5 and 10 USD would be optimal for Honduras and Nicaragua whereas a
tax between 20 and 50 USD would be optimal for Costa Rica El Salvador Guatemala and
Panama (CEPAL 2017)
Finally regarding human rights the EU-CA-FTA impact is difficult to assess for the region
as a whole since the intra-regional development varies a lot and it is difficult to discern
whether the CA movement towards a better respect for international standards on labour
and social rights depends on the implementation of the Agreement (European Parliament
2018 p 44) For example several experts and policymakers argue in favour of a stronger
enforcement mechanism of the TSD chapter (EPRS 2018) Its provisions referring to the
ILO conventions do not ensure the same level of labour and human rights protection as
the GSP+ mechanism (EULAC 2011) Overall despite some positive developments the
implementation of the TSD provisions led to a limited impact on the key challenges in the
CA region such as child labour freedom of association social dialogue or unpaid overtime
(EPRS 2018) The CA Womenrsquos Network also reported insufficient participation of women
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 29
during the negotiation process and it highlighted the risks of women subordination if strong
provisions on gender equality are not put in place (CAWN 2007)
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5)
51 Structure of the EU-CA FTA
The Agreement was initially signed in June 2012 by the EU and Central American countries
and the EU-CA FTA started its provisional application in 2013 It is in a process of
amendment through the Protocol of Croatiarsquos Accession to the Association Agreement
between the European Union and Central America which was signed in November 2020
(Joint Communique 2020) It allows Croatia to formally become part of the Agreement and
provides for amendments to some parts of the EU-CA FTA to account for the accession of
Croatia (eg Appendix 3 to Annex I related to special treatment of bananas Annexes
related to trade in services such as the lists of commitments on establishment cross-
border supply of services and reservations regarding the temporary presence of natural
persons for business purposes and Annexes related to Government procurement including
the list of contracting authorities etc) (European Commission 2020b)
Key features of the Agreement (Trade Pillar) can be summarised as follows Title by Title
Title I of the Agreement contains general principles provisions and definitions and
in particular defines the objectives of the EU-CA FTA which can be summarised as follows
(a) the expansion and the diversification of trade in goods between the Parties through
the reduction or the elimination of tariff and non-tariff barriers to trade (b) the facilitation
of trade in goods through in particular the agreed provisions regarding customs and trade
facilitation standards technical regulations and conformity assessment procedures as well
as sanitary and phytosanitary measures (c) the liberalisation of trade in services in
conformity with Article V of GATS (d) the promotion of economic regional integration in
the area of customs procedures technical regulations and sanitary and phytosanitary
measures to facilitate the circulation of goods between and within the Parties (e) the
development of a climate conducive to increased investment flows the improvement of
the conditions of establishment between the Parties on the basis of the principle of non-
discrimination and the facilitation of trade and investment among the Parties through
current payments and capital movements related to direct investment (f) the effective
reciprocal and gradual opening of government procurement markets of the Parties (g) the
adequate and effective protection of intellectual property rights taking into consideration
the differences between the Parties and the promotion of technology transfer between the
regions(h) the promotion of free and undistorted competition in the economic and trade
relations between the Parties (i) the establishment of an effective fair and predictable
dispute settlement mechanism and (j) the promotion of international trade and investment
between the Parties in a way that contributes to the objective of sustainable development
through joint collaborative work (Article 78)
Title II covers trade in goods and comprises the following chapters (1) market access
for goods which lays down provisions on the elimination of customs duties elimination of
export and import restrictions and export taxes and provisions on agricultural subsidies
(this is complemented by Annex I outlining schedules for elimination of customs duties
Annex II which concerns the definition of the concept of originating products and methods
of administrative cooperation Annex IV - special provisions on administrative cooperation
and Annex V on management of administrative errors) (2) trade remedies which discusses
anti-dumping countervailing and multilateral safeguard measures bilateral safeguards
and the applicable procedures (3) customs and trade facilitation which increases
transparency and promotes the facilitation of trade by simplifying customs procedures and
the adoption of risk management systems for customs inspections (it is complemented by
Annex III on mutual administrative assistance in customs matters) (4) TBT - technical
barriers to trade aiming at facilitating trade by identifying preventing and eliminating
Page 30
unnecessary barriers related to development adoption and application of standards
technical regulations and conformity assessment procedures it also reaffirms rights and
obligations under the WTO TBT Agreement foresees cooperation in market surveillance
transparency through the notification procedures and approach to marking and labelling
avoiding unnecessary burdens while ensuring that all necessary and accurate information
is provided (5) sanitary and phytosanitary measures which aims at protecting human
animal or plant life or health while avoiding unjustified barriers to trade it reaffirms rights
and obligations under the WTO SPS Agreement recognises concepts standards and
recommendations adopted by relevant international organisations (World Organisation for
Animal Health and International Plant Protection Convention) and foresees exchange of
information and cooperation by the Parties incl in cases of emergency (it is complemented
by Annex VI identifying competent authorities Annex VII defining requirements and
provisions for approval of establishment of products of animal origin Annex VIII setting
out guidelines for conducting verifications and Annex IX with points of contact) (6)
exceptions related to goods
Title III covers trade in services establishment and electronic commerce and is
complemented by annexes that detail the Partiesrsquo commitments according to the four
modes of supply or provide information Annex X includes commitments on establishment
(Mode 3) Annex XI lists commitments on cross-border supply of services (Modes 1 and
2) Annex XII outlines reservations regarding temporary presence of natural persons for
business purposes (Mode 4) Annex XIII lists commitments of the Republics of the CA Party
regarding key personnel and graduate trainees Annex XIV lists their commitments on
business service sellers and Annex XV provides a list of the relevant enquiry points
Title IV concerns liberalisation of current payments and movement of capital and
stipulates that the Parties shall authorise payments and transfers on the current account
between the Parties as well as transactions and capital movements related to foreign direct
investment and related transactions including liquidation and repatriation of investments
and profits It also envisages exceptions such as circumstances where payments and
capital movements cause or threaten to cause serious difficulties for the operation of
exchange rate policy or monetary policy or the liquidity of the economy in which case
the Parties may temporarily adopt safeguard measures)
Title V covers government procurement and is complemented by Annex XVI which
details the commitments of Parties in this area (eg procuring entities covered coverage
of procurement contracts under the Agreement media used for tender procedures and key
features of the process for awarding procurement contracts) The Agreement provides for
the Parties to have non-discriminatory access to public procurement procedures within the
scope of covered procurement and outlines general principles and rules for procurement
procedures (eg publication of notices participation in tenders technical specifications
documentation timeline awarding contracts etc) ensuring transparency and cooperation
Title VI covers intellectual property It reaffirms the Partiesrsquo commitments to various
relevant multilateral agreements (eg WTO TRIPS Agreement Convention on Biological
Diversity and Paris Convention for the Protection of Industrial Property) foresees exchange
of information and cooperation between the Parties in relation to technology transfer and
sets standards on the protection of intellectual property rights (IPR) including trademarks
geographical indications copyright and related rights industrial designs plant varieties
and patents The list of geographical indications to be protected is provided in Annex XVII
The Title also addresses enforcement measures for cases of infringement of IPR
Title VII concerns trade and competition in the economies of the Parties Under this
Title the Parties commit to adoption or maintaining comprehensive competition laws and
having appropriately equipped competition authorities They also consider as incompatible
with the Agreement the most harmful anticompetitive practices such as restrictive
agreements concerted practices abuse of dominance and concentrations of companies
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 31
that significantly impede effective competition The Title also stipulates that with regard to
state enterprises and designated monopolies there is no discrimination in exercised by such
entities regarding conditions under which goods or services are purchased or sold
Title VIII relates to trade and sustainable development It includes commitments to
effectively implement the eight ILO Fundamental Conventions and key multilateral
environmental agreements to which EU Member States and CA countries are Parties In
addition the Title includes specific provisions in relation to various thematic areas such as
sustainable forest management sustainable fisheries and trade supporting sustainable
development It establishes civil society advisory groups as part of institutional structure
and foresees a regular dialogue between the Parties and civil society incl in a dedicated
Civil Society Forum The Title also provides a dedicated dispute settlement mechanism
with government consultations consideration of the matted by the TSD Board and a Group
of Experts to examine the matter and formulate recommendation
Title IX relates to regional economic integration between the Central American Parties
and includes provisions on circulation of goods in trade between the EU and CA within the
EU and CA region respectively once a product entered their customs territory and when
the applicable rules and standards are met In this context the Title provides rules related
to customs technical barriers to trade and sanitary and phytosanitary measures (Annex
XX provides a list of CA technical regulations in the process of harmonisation)
Title X covers dispute settlement and outlines the related procedures including the
establishment of a panel its ruling and compliance
Title XI establishes mediation mechanism for non-tariff measures incl the selection
of a mediator the applicable procedure and implementation of the agreed solution
Title XII contains provisions on transparency and administrative procedures Among
other things the Parties commit to (i) ensuring that their measures of general application
(eg laws regulations judicial decisions procedures and administrative rulings) relating
to matters covered by the EU-CA FTA are promptly published or otherwise made readily
available to interested persons and (ii) providing reasonable opportunities for those
interested to comment on proposed measures and taking into account relevant comments
The Parties also commit to establish Points of Contact for matters related to EU-CA FTA
Title XIII addresses tasks of the institutional bodies in matters related to trade
ie the Association Council the Association Committee and specialised Sub-committees
(for details please see section 52 on the institutional set up)
Title XIV defines general exceptions to the Agreement related to the Partiesrsquo balance of
payments and taxation
52 Institutional set-up of the EU-CA FTA
The Association Council the Association Committee six Sub-committees and an Ad hoc
Working Group on Government Procurement (the latter not envisaged by the EU-CA FTA
but set up by the Parties in 2016) oversee the implementation of the Agreement
The Association Council established pursuant to Article 4 supervises implementation of
the Association Agreement it is composed of representatives of the EU and each of the six
CA countries has a decision-making power (binding upon the Parties) in cases foreseen in
the Agreement examines all major issues and questions of common interest It meets at
Ministerial level (or through representatives) at regular intervals not exceeding two years
In line with Article 345 when meeting to discuss matters under EU-CA FTA the Council
has the power to amend Annexes and Appendixes related to trade incl tariff elimination
schedules and goods included there originating products and methods of administrative
Page 32
cooperation Annex XVI (Government Procurement) Annex XVIII (Protected GIs) Annex
XIX (in relation to Article 306 animals animal-based products plants and plant-based
products subject to SPS measures) and Annex XXI (Sub-committees)
The Association Committee set up pursuant to Article 6 is responsible for the general
implementation of the Agreement and assists in this context the Association Council It is
composed of representatives of the EU and the six CA countries at the senior officialsrsquo level
and shall meet once a year to review the implementation It takes decisions foreseen in
the Agreement or delegated by the Association Council When acting within part IV of the
Agreement the Association Committee supervises work of Sub-committees established by
this part and may set up new ones prevents and resolves conflicts (without prejudice to
provisions related to the Dispute Settlement and Mediation Mechanisms) and recommends
decisions for adoption by the Association Council
The Agreement has also established six specialised Sub-committees
Sub-committee on Market Access for Goods (Article 91) is responsible for monitoring
the correct implementation and administration of the Trade in Goods Chapter and serves
as a forum for consultations about interpretation and application of its provisions It
examines proposals provided by the Parties regarding accelerated liberalisation of trade in
goods and tariff reduction as well as inclusion of additional goods into liberalisation
schedules It may make recommendations to the Association Committee on matters within
its remit and take any issue as and when instructed by the Association Committee
Sub-committee on Customs Trade Facilitation and Rules of Origin acting in line
with Article 123 monitors implementation of the Chapter and Annex related to the concept
of origin and methods of administrative cooperation It provides a forum to discuss and
consult all matters related to customs incl customs procedures valuation nomenclature
cooperation tariff regimes mutual administrative assistance in customs matters as well
as rules of origin It pursues cooperation on development application and enforcement of
customs procedures mutual administrative assistance in customs matters administrative
cooperation and rules of origin It examines requests for amendments of rules of origin
and submits to the Association Committee results of the analysis with recommendations
It also aims to enhance cooperation on capability building and technical assistance
Sub-committee on Technical Barriers to Trade (TBT) acting in accordance with Article
139 provides forum to discuss and consult any matter related to the Chapter and monitors implementation and administration of this Chapter facilitating exchange of information
and cooperation and promptly addressing any issue that either Party raises related to the
development adoption application or enforcement of standards technical regulations
and conformity assessment procedures It aims at solving any problems within the remit
of the Chapter that would limit trade between the Parties It encourages direct interaction
between non-governmental actors such as standard bodies accreditors and certifiers It
facilitates the exchange of information about the work being done in non-governmental
regional and multilateral fora engaged in activities related to technical regulations stan-
dardisation and conformity assessment procedures and explores ways to facilitate trade
between the Parties The Sub-committee has also power to review the Chapter in the light
of developments under TBT Agreement and reports to the Association Committee about
implementation of the Chapter including cooperation activities
Sub-committee on Sanitary and Phytosanitary Matters (SPS) acting in line with
Article 156 monitors implementation of the Chapter provides a forum for discussion and
consultation on any matter arising under the Chapter and an opportunity to seek mutually
acceptable solutions It may also develop procedures or arrangements facilitating
implementation of the Chapter It acts as a forum for consultations related to any measure
proposed by the EU which may affect its trade with any of the CA Parties and a forum for
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 33
dispute settlement under the Chapter The Sub-committee is also responsible for
promoting cooperation on animal welfare between the Parties
Sub-committee on Intellectual Property Rights (IPR) (Article 274) monitors
implementation of Article 231 (transfer of technology) and part of the IP Chapter related
to GIs including facilitating discussion about protection of GIsrsquo and recommendations to
the Association Committee regarding amendments to Annex XVIII on GIs It promotes
technology transfer from the EU to the CA Parties and defines priority areas in which
initiatives shall be directed regarding technology transfer research and development and
building-up human capital Its responsibilities include also keeping a registry of the
programs activities or initiatives in progress in the field of intellectual property with
emphasis on transfer of technology
Board on Trade and Sustainable Development (TSD) established pursuant to Article
294 reports to the Association Committee and oversees the implementation the TSD Title
incl cooperative activities undertaken under Title VI (Economic and Trade Development)
of Part III of the Agreement The decisions and recommendations of the Board shall be
adopted by mutual agreement between the Parties and be provided to the public unless
the Board decides otherwise
While EU-CA FTA does not envisage a Sub-committee on Government Procurement the
Parties concluded that it would be useful to have a dedicated body to address matters in
this area They decided to create a temporary Working Group that met for the first time
in June 2016 (European Commission 2017a)
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo
priorities
The negotiations for an Association Agreement (AA) including a Trade Pillar between the
European Union (EU) and Central America (CA) started in 2007 We look at the bloc-to-
bloc trade and policy context the negotiation process and priorities from both sides
The region-to-region trade context
The CA group is composed by Costa Rica Guatemala El Salvador Honduras Nicaragua
and Panama and it is featured by internal economic and political dialogue which led to the
creation of the Central American Common Market (CACM) in the early 1960s Despite the
initial momentum the regional integration process has been stopped for decades due to
internal tensions and the effects of import-substitution trade strategies on local economic
growth (European Parliament 2012) Consequently the initial goal of setting up a custom
union failed and CACM succeeded only in establishing a free-trade area (Duran et al 2010)
The Central American integration efforts were revitalised through setting up of the Central
American Integration System (SICA) aimed at promoting democracy development peace
and freedom in the region (European Source Online 2016) SICA was formally established
on 13 December 1991 through the signature of the Protocol to the Charter of the
Organization of Central American States (ODECA) also known as the ldquoTegucigalpa
Protocolrdquo SICA established both a political and an economic institutional framework by
setting up the Central American Parliament and the Central American Bank for Economic
Development Despite these changes CACM remained the main forum for trade discussions
(European Parliament 2012)
The EU is one of the three most important CA trading partners It is challenging to draw
general and unified conclusions for the whole CA trade picture given its domestic
heterogeneity with Panama and Costa Rica being middle-income countries and Nicaragua
the poorest member (European Parliament 2018 p 18) The EU countriesrsquo share of import
from and export to CA accounted for 30 and 16 respectively in the mid-1980s Among
Page 34
the CA members Guatemala appeared as the most export dependent one while Panama
was the least trade-oriented country (CEPR 2012 pp 6-7) The role of agricultural
production within the respective economies differs widely between the two regions
Agricultural production is very important for CA especially in Honduras and El-Salvador
(38 of the national production) whilst it is relatively much less important in the EU (5)
The same complementarities can be found in manufacturing production (amounting to 18
of the EU production which is much higher than in CA particularly in Panama (4) and
Nicaragua (25) Services contribute to almost 23 of the EU Nicaraguan and Costa Rican
GDP while this share is only 53 for El Salvador (Ibid pp 6-7)
The negotiation process
The start of the economic and political dialogue between the EU and CA blocks dates back
to 1984 at the first conference of Foreign Ministers between the EU and CA countries in
Costa Rica In 1993 the EU and the CA countries signed a Framework Cooperation
Agreement which entered into force on 1st March 1999 (Acuerdo-marco de cooperacioacuten
1999) On the occasion of the EU-Latin America Summit held in May 2002 these countries
and the EU jointly expressed their willingness to reinforce their dialogue by concluding a
new Political Dialogue and Cooperation Agreement which was signed on 15th December
2003 in Rome (Acuerdo de Diaacutelogo Poliacutetico 2003)
The need to establish stronger trade relations even by setting up a free-trade area pushed
the EU and CA to explore the feasibility of an Association Agreement entailing also a specific
chapter on trade Such intention was clearly stated during the EU-Latin America summit of
Guadalajara (Mexico) in May 2004 (Declaration of Guadalajara 2004 p 8 point 52) and
one year later in May 2005 in the context of the EU-Central American Ministerial meeting
in Luxembourg On that occasion the parties launched a joint-assessment exercise on
regional economic integration and established an ad-hoc working party (Council of the
European Union XXI San Joseacute Dialogue Ministerial Meeting between the EU and Central
America 2005 p 2) Finally at the Vienna Summit of 2006 the parties opened the door
to an Association Agreement to create a free trade area (Council of the European Union
EU-Central American Summit 2006 pp 1-2 points 2 and 3) The summit also welcomed
the initiative of the Peace Building and Commission and Human Rights Council (Ibid p 2)
The green light for the beginning of the AA negotiations was given on 28th June 2007 in
Brussels (EU and the Central American Community start negotiations for a new Association
Agreement 2007) However the talks were temporarily suspended on 6th April 2009 and
then resumed a few days later on 24th April (Acuerdo de Asociacioacuten entre Centroameacuterica
y la Union Europea 2009) when the parties decided to re-initiate the negotiations
The negotiating partiesrsquo priorities
The negotiating strategy of the CA countries mainly pursued three goals
Strengthening their trade policy whose objective is to open up new markets for the
benefits of their local exporters The EU appears as a crucial partner for CA countries
as it ranks on top of the worldrsquos largest importers of agricultural products and the
relative share of developing countries has been rising over time in the EU trade balance
Reinforcing CA countriesrsquo export competitiveness and reducing costs of accessing the
EU market vis-agrave-vis competitors such as African-Caribbean and Pacific (ACP) countries
that benefit from preferential and better market access conditions
Attracting foreign direct investments in high value-added sectors where the EU applies
higher tariffs (Duran et al 2010 pp 96-99)
From the European side the main reasons driving towards the conclusion of the agreement
with CA are threefold
Promoting the developing countriesrsquo progressive integration into the world economy
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 35
Reaffirming the EUrsquos role in the world trade and in CA following the United States (US)
conclusion of the Dominican Republic Central American and the United States Free
Trade Agreement (CAFTA-DR) reaffirming the US role in the region
Better coordinating with partners on trade dossiers within the World Trade Organization
(WTO) and other international institutions (Ibid p 100)
The conclusion of the Agreement
The negotiation process delivered slow progress due to the inability of CA countries to
reach a unified position and owing to the delays in the regional integration (European
Source Online cit p3) The agreement was finally reached in May 2010 when the
negotiations were officially concluded during the Latin America-Caribbean and European
Union Summit in Madrid Following the legal scrubbing the European Commission reviewed
and approved the agreement prior to signature at the Meeting of the SICA Presidents in
Tegucigalpa Honduras on the 29th of June 2012 (European Commission Directorate
General for Trade 2012) The European Parliament finally endorsed the AA in December
2012 forecasting that the main gains for the European side would be in export of cars
machinery telecommunications chemical products and transports (European Parliament
2012 p 1) At the time of the AA signature in 2012 the EU-Central America trade in goods
accounted to EUR 149 billion and corresponded to 113 of the whole CA region trade
with the rest of the world (Griener and Membersrsquo Research Service 2014 p 5)
On that date the then EU Commissioner for Trade Karel De Gucht commented the
successful conclusion of the AA by stating that the ldquoregion-to-region deal will help establish
major business opportunities for both sides European exporters will save around EUR 90
million on customs per year and European service providers such as telecommunication
and transport will get greater market accessrdquo At the same time the agreement would
generate ldquospill-over effect on Central Americarsquos overall economic integration process and
contribute to the stability of the regionrdquo (European Commission Ibid p 1) The
Commission officially announced the provisional application of the FTA with Honduras
Panama and Nicaragua on 31st July 2013 with Costa Rica and El-Salvador on 1st October
2013 and with Guatemala on 1st December 2013
The trade provisions of the AA provisionally entered into force in 2013 as they fall within
the exclusive competences of the EU17 Once the entire text of the AA will be ratified by
the EU Member Statesrsquo parliaments the entire text will be legally binding and applicable
After joining the EU in 2013 Croatia is currently negotiating its accession to the AA
54 Operational context of the implementation of the EU-CA FTA
After having illustrated the main partiesrsquo priorities during the bloc-to-bloc negotiations this
chapter provides an overview of the broader context surrounding the negotiations and
implementation and describes the main regional actors as well as their respective trade
policy attitudes towards CA and Latin American countries (LAC) as a whole
Trade policy context the multilateral system and the global economy
Since the launch of the EU-CA negotiations the global trade policy context has undergone
deep changes The Doha Development Agenda stalemate due to incompatible views on
various issues at stake put great pressure on the global trading system The WTO
difficulties in reaching satisfying outcomes stem both from external causes such as the
decline of advanced economies regionalisation of trade and internal sources of tensions
17 Despite being considered as a bloc-to-bloc association agreement the incomplete CA regional economic integration and the failure in setting up a custom union among the CACM countries left unbalances and inconsistencies in accessing single CA countriesrsquo markets and different levels of external tariffs In light of these arguments CA cannot be considered as a fully integrated homogeneous and unified trade bloc
Page 36
embedded in unilateral tariff-cutting process (Baldwin 2016) Besides these tensions the
economic expansion of China and the ldquotrade warsrdquo between the US and China exploded as
of 2017 The recent stalemate of the WTO Appellate Body that halted the entire dispute
resolution process as well as the need to put sustainable development at the core of the
WTO agenda pushed the Commission to advance a new WTO reform proposal (European
Commission 2021) The WTO crisis led to a proliferation of bilateral FTAs and the EU
has been an active bilateral FTA actor globally (see Table 4
Table 4 Overview of the EU FTAs launched and or concluded since 2012
Start of Negotiations
Signatory CountryRegion
State of play of the agreement
Ratification
1999 Mercosur Concluded in 2019 Ongoing
2004 SADC Concluded in 2016 Entered into force in 2016
2007 Andean Community Concluded in 2010 Entered into force in 2013
2007 Ukraine Concluded in 2011 Provisionally applied since 2016 fully in force since 2017
2009 Singapore Concluded in 2019 Entered into force in 2019
2009 Canada Concluded in 2014 Provisionally applied since 2017
2010 Malaysia On hold na
2012 Moldova Concluded in 2013 Provisionally applied since 2014 fully in force in 2016
2012 Georgia Concluded in 2013 Provisionally applied since 2014 fully in force since 2016
2012 Vietnam Concluded in 2015 Entered into force in 2020
2012 Japan Concluded in 2018 Entered into force in 2019
2013 USA On hold na
2013 Morocco (DCFTA new) On hold na
2013 Thailand On hold na
2015 Philippines On hold na
2015 Tunisia (DCFTA new) Ongoing na
2016 Mexico (modernisation) Concluded in 2018 Ongoing
2016 Indonesia Ongoing na
2017 Chile (modernisation) Ongoing na
2018 Australia Ongoing na
2018 New Zealand Ongoing na
2019 United Kingdom Concluded in 2020 Ongoing
2020 ESA (extension) Ongoing na
Source compiled by the author
The EU trade and policy context
Trade picture
The EU maintains strong institutional dialogue with Central and Latin America
legitimised by historic cultural and linguistic ties with the region The EU Latin America
and the Caribbean (LAC) bilateral summits have been regularly held since 1999 gathering
33 members from the two counterparts In 2006 the EU-Latin America Parliamentary
Assembly (EuroLat) was set up and it was conceived as the parliamentary angle of the EU-
CA bilateral partnership (EPRS 2017 p 5)
From a trade perspective the EU-Central and Latin America (comprising Andean
Community CA Cariforum Mercosur Mexico and Chile) trade peaked at EUR 2287 billion
in 2014 before showing a downward trend and decreasing at EUR 2132 billion in 2015
corresponding to 61 of the whole EU trade that year (EPRS 2017 p 6) The EU total
share of LAC trade fluctuated around 14 and the EU remained the first investor in the
region in the last ten years (EEAS 2018) An analysis carried out by the European
Parliament in 2020 unveils that the EU-LAC trade in goods value grew by 22 from 2008
to 2018 (Tvevad 2020 p 18) According to the 2020 DG Trade Report (data from 2019)
on the Implementation of EU FTAs trade flows between the EU and CA showed a robust
growth Indeed trade in goods increased by 88 with respect to the 2018 performance
imports continued growing over the past five years and exports statistics indicated an
overall upward trend with the exception of 2016 (European Commission 2020a p 110)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 37
In 2010 the EU was the second CA trading partner behind the United States (US)
accounting for 94 of the regionrsquos overall trade with the rest of the world (European
Commission 2011 p 4) Among the main exporters to the EU Costa Rica ranked first
with 539 of the total CA exports to the EU Conversely the EU exports went primarily
to Costa Rica (363) Guatemala (281) and El Salvador (152) (Ibid p 4) The EU-
CA trade is marked by the supply of primary products to the EU (mainly agricultural
products such as coffee and bananas) in return for high-technology manufactures
especially machinery transport equipment chemicals and manufactured goods (Duran et
al 2010 pp 95-96 European Parliament 2012 p 9) The CA share in the EU trade was
modest accounting only for 05 of overall EU imports in 2011 and for 03 of the total
EU exports in 2011 (European Parliament 2012 p 8) In addition the EU applied tariffs
on various agricultural products imported from third countries The exclusion of both coffee
and bananas from the EU Generalized System of Preference (GSP) and the GSP+ schemes
prevented these products from benefitting from tariff-reduction from the European side
hampering their access to the EU market and leaving their prices to be influenced by world
trade fluctuations (Duran et al 2012 p 98) The 2019 data confirmed primary products
rank largely first among SITC products grouping exported from CA to the EU accounting
for 721 of the whole exports followed by manufactures with 27 (European
Commission 2019 p 4) Recent statistics highlight the main destination of EU export
continued to be Panama (up to 118 since 2018) whereas the main country of origin of
EU imports is Costa Rica with an increase by 63 from 2018 (European Commission 2020
p 112)
The previous EU trade policy strategy adopted in 2015 (ldquoTrade for Allrdquo) confirmed that
ldquothe FTAs with Peru Colombia Ecuador and Central America are creating new dynamics
for trade and investmentsrdquo (European Commission 2015 p 33) As set out by that trade
policy strategy the Commission should pursue three main priorities with regard to Latin
and Central America ldquo[Continuing] negotiations for an ambitious balanced and
comprehensive FTA with Mercosur ldquoRequesting negotiating directives to modernise the
FTAs with Mexico and Chilerdquo ldquoBe ready to consider investment agreements with key Latin
American countriesrdquo (Ibid p 33)
As evidence for the increasingly robust commitment in the region the EU negotiated trade
deals with 27 out of the 33 LAC countries to strengthen both bilateral and region-to-region
relations the EU actively engaged LAC by signing new and modernising older EU-LAC FTAs
(see Table 5)
Table 5 EU FTA in Latin America and participating countries
Agreement Countries Negotiation launch
Negotiations Conclusion
EU-Andean Countries Colombia Ecuador Peru 2007 2010
EU-Caribbean (CARIFORUM)
Antigua and Barbuda Bahamas Barbados Belize Dominica Grenada Guyana Jamaica Saint Lucia Saint Vincent and the Grenadines Saint Kitts and Nevis Suriname Trinidad and Tobago and the Dominican Republic
2002 2008
EU-Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
2012 2010
EU-Chile na 2017 na
EU-Mercosur Argentina Brazil Paraguay Uruguay 1999 2019
EU-Mexico na 2016 2018
Source Compiled by the author
Regarding civil society the trade chapter of the EU CA FTA did not receive a lot of public
attention and consequently has not been affected by a high level of politicisation within
the EU This might stem from the relatively lower importance of trade relations with CA for
the EU Likewise the agreement did not catch a lot of public attention either in CA where
Page 38
the media coverage mainly focused on the Central America Free Trade Agreement (CAFTA)
Nevertheless both the agreements were targeted by NGOs and trade unions sharing the
same criticism and concerns over biodiversity pharmaceutical product access and
exploitation of natural resources (European Parliament 2011 p 16)
Political Dialogue
To frame the most recent developments in the EU LAC political dialogue it is worthy to list
three key documents forging the EU foreign policy towards LAC
The European Parliament Resolution on the Political Relations with Latin
America passed in 2017 advocating for a stronger more coherent and reinforced
relations with this region by stressing the need to update and develop a more
comprehensive and ambitious EU strategy to address the emerging challenges linked
to fundamental freedoms human and social rights safety of minorities migration
issues corruption tax fraud and security (European Parliament 2017)
The Joint Communication adopted by the European Commission and the High
Representative for Foreign Affairs (HRVP) in 2019 titled ldquoEuropean Union Latin
America and the Caribbean joining forces for a common futurerdquo aimed at deepening
the EU-LAC relations in a fast-changing context by emphasizing four mutually important
priorities prosperity democracy resilience and effective global governance (European
Commission 2019)
The Council of the EU Conclusions of 13th May 2019 endorsing the strategy laid
out in the Joint Communication On that occasion the Council welcomed the four points
described above and added more areas for action such as to work more closely in the
multilateral framework consolidate economic and social resilience enhance shared
prosperity and assist in promoting structural reforms (Council of the EU 2019)
The 2020 EU 27 ndash Latin America Informal Meeting reaffirming the need to advance
bilateral region-to-region summit to strive for a stronger multilateral system identified
mainly in the United Nations and the World Health Organisation (WHO) especially in
the light of the COVID-19 pandemic outbreak (Federal Foreign Office 2020)
Within the framework of the AA the EU and CA agreed to cooperate on a wide range of
policy dossiers of mutual interest namely conventional weapon disarmament the
implementation of the Convention on the Prohibition of the Use Stockpiling Production
and Transfer of Anti-personnel Mines and on their Destruction as well as the Convention
on Certain Conventional Weapons and its protocol (European Parliament 2011 p 7)
On development cooperation the EC regional strategy 2014-2020 earmarked EUR 925
million funding for Latin America to be allocated in two components
Component 1 ldquoMultiannual Indicative Programme for continental activities with Latin
Americardquo accounting for EUR 805 million and devoted to Argentina Bolivia Brazil
Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico
Nicaragua Panama Paraguay Peru Uruguay and Venezuela
Component 2 ldquoMultiannual Indicative Programme for Sub-Regional Cooperation with
Central Americardquo funded with EUR 120 million focused on Central American countries
Costa Rica El Salvador Guatemala Honduras Nicaragua and Panama This component
included three areas for action ie support for regional economic integration support
for the Regional Security Strategy and support for Regional Climate Change Strategy
and the Central American Policy on Comprehensive Disaster Risk Management (EEAS
European Commission 2014)
The Central American trade policy context
Regional Context
Beside their membership in the Central American Common Market (CACM) and the WTO
the CA countries have been signing additional free trade agreements with other regional
and international partners since 2012
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 39
It should be also noted that Panama joined the Latin American Integration Association
(LAIA) in 2012 LAIA replaced the Latin America Free Trade Agreement (LAFTA) signed in
1960 and sought a deeper economic integration among the member states18 Also
Nicaragua applied for the LAIA membership in 2011 and its request was accepted by the
LAIA Council of Minister in August 2011 Nicaragua is currently advancing in fulfilling the
LAIA membership requirements No other CA countries are members of LAIA yet
Table 6 summarises bilateral FTAs and Preferential Trade Agreements (PTAs) signed by the
6 CA countries or being in force since 2011
Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021)
Costa Rica Guatemala El Salvador
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Colombia (signed in 2013 entered into force in 2016)
Mexico (signed in 2011 entered into force in 2013)
Peru (signed in 2011 entered into force in 2013)
Singapore (signed in 2010 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
Ecuador (PTA) (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs signed but not entered into force yet South Korea (signed in 2018) EFTA (signed in 2013)
FTAs signed but not entered into force yet EFTA (signed in 2013) Ecuador (signed in 2011) Peru (signed in 2011)
FTAs signed but not entered into force yet South Korea (signed in 2018)
Honduras Nicaragua Panama
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Peru (singed in 2015 entered into force in 2017)
Canada (signed in 2013 entered into force in 2014)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2014 entered into force in 2015)
Peru (signed in 2011 entered into force in 2012)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet Israel (signed in 2018) South Korea (signed in 2018) Colombia (signed in 2013) EFTA (signed in 2013) Trinidad amp Tobago (PTA)
(signed in 2013)
Source Compiled by the author
Other influential partners in CA
As illustrated by Table 7 three actors retain significant economic influence in CA and Latin
America as a whole the EU the US and China The following section will examine these
actors and their respective trade policies towards CA and Latin America by describing their
posture as well as the agreements in force
18 Argentina Bolivia Brazil Chile Colombia Cuba Ecuador Mexico Paraguay Panama Peru Uruguay Venezuela
Page 40
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking
SubregionCountry
EU total trade in goods (value in EUR billion)
Ranking of main trading partners for trade in goods
2016 2019
2016 2019 USA China EU19 USA China EU27
Andean Community 3 250 246 1 2 3 1 2 3
ACP ndash Caribbean 15 81 116 1 3 2 1 3 2
Central America 6 108 121 1 3 2 1 3 2
Chile 159 166 3 1 2 2 1 3
Mercosur 4 849 771 3 2 1 3 1 2
Mexico 538 618 1 2 3 1 2 3
Source EPRS 2017 p 6 and DG Trade statistics 2020
The US remains the key CA partner The US is the major source of Foreign Direct
Investments (FDI 273) and Official Development Aid allocating an annual average of
approximately USD 1600 million during the Trump Administration (2016-2020)
(Congressional Research Service 2021) Moreover the US rank on top of CA migrant
destinations (Belladonna 2019) The CA countries have been cultivating thorough relations
with the US as they represent the historical destination of over 40 of the regionrsquos
exports Furthermore the 2004 Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA) granted preferential market access conditions to the region (Office
of the US Trade Representative 2004 and Duran et al 2010 p 93) In light of the strong
power exerted by the US the EU trade strategy pursued a progressive rebalancing of the
US presence in the area to ensure better market access in the region (EPRS 2017 p 5)
The DR-CAFTA negotiations confirmed that labour standards sugar and textile products
treatment pharmaceutical data protection and sovereignty issues were the most
controversial and sensitive matters on the table Unlike the EU-CA AA it should be noted
that the DR-CAFTA does not build any common trade framework for all the signatories as
the US grants differentiated market access conditions to each single CA country (European
Parliament 2012 p 11)
In the last few years China has been playing a role of growing importance in CA and in
Latin America both from a political and trade viewpoint (European Commission 2020 p
15) In recent years China has reinforced its role as trading partner within CA As evidence
for this active involvement the 2000-2010 data already confirmed the Asiarsquos importance
(led by China) both in terms of imports and exports in Latin America and Caribbean20
Indeed the China share of the regionrsquos total exports by destination grew from 11 in
2000 to 83 in 2010 with regard to imports by destination the growth appears even
more remarkable moving from 18 in 2000 to 133 in 2010 (Kuwayama amp Rosales
2012 p 66) whilst the relative share of the US presence has shown a downward trend
(Ibid p 65) The monthly exports to Asia-Pacific21 region more-than-doubled from an
average value of USD 54 billion in 2006 to USD 162 billion in 2014 (Baacutercena Prado
Rosales Peacuterez 2015 p 23) After a slight decline experienced in 2016 a solid rebound
emerged in 2017 On average goods shipment from Asia-Pacific Latin America grew by
136 yearly between 2000 and 2016 (Scotiabank 2018 p 1)
Beside trade China has been recently advancing its Belt and Road Initiative (BRI) in
the region by concluding numerous Memoranda of Understanding (MoU) with various LA
19 Including the United Kingdom 20 Data refers to Argentina Bolivarian Republic of Venezuela Brazil Chile Colombia Costa Rica the Dominican
Republic Ecuador El-Salvador Guatemala Honduras Mexico Nicaragua Paraguay Peru Plurinational State of Bolivia
21 The Asia-Pacific region includes Australia Brunei Darussalam Cambodia China South Korea Philippines Hong Kong Japan Laos Thailand Taiwan Indonesia Malaysia Myanmar New Zealand Singapore and Vietnam
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 41
and CA countries To mention some Bolivia (2018) Costa Rica (2018) Chile (2018) and
Panama (2017)
6 CONSULTATIONS (TASKS 6 AND 7)
61 Consultation Strategy
The consultation strategy presented in the technical offer has been refined during the
Inception Phase (Task 6) and is outlined in Annex B Box 2 summarises our expectations
regarding the main inputs expected from stakeholders throughout the study
Box 2 Expectations regarding inputs from stakeholders
Inputs from stakeholders are expected at all stages of the study
The study team will welcome in particular Responses to the online public consultation Consultation with businesses (responses to the online business survey) Evidence of specific casesexamples on how the Agreement has affected economic performance
sustainable development and human rights both in Central America and in the EU Contributions will be particularly welcome in relation to the priority areas of analysis o Impact of the Agreement on trade diversification (in terms of goods and services traders regions
involved in trade etc) (see Task 101) o Impact on investment climate and investment flows (see Task 102) o Impact of the Agreement on SMEs (see Task 1012) o Effects of the implementation of the TSD chapter (see Task 111) o Performance of the institutions established under the TSD chapter (see Task 112) o Impacts of the Agreement on pillars of Decent Work Agenda working conditions labour standards
social protection other public policies and labour inspection (see Task 114) o Impacts on the informal economy and informal employment (see Task 115) o Environmental impacts (see Task 116) and o All of the case studies
Written contributions (positions) expressing views on how the Agreement has affected economic performance sustainable development and human rights across the parties in particular with regard to ndash but not restricted to ndash the analytical priority areas
Indication of relevant publications that focus on the impact of the Agreement in the partner countries Indication of actions taken by CA in areas covered by the TSD chapter (eg changes in policies action
plans strategies and legislation in the areas of labour environment and climate change ratification and implementation of international conventions in these areas and civil society engagement)
Written comments on the draft Inception Report draft Interim Report and draft Final Report Proposals for and comments on draft conclusions and recommendations of the report including how to
improve operation of the Agreement (if needed) Names of organisations or indication of vulnerable groups that may have been affected by the
Agreement in the partner countries as well as relevant contact details for the evaluation team to reach out to the most relevant additional stakeholders
62 Study Website and Electronic Communications
The establishment and continuous updating of a website as well as ongoing electronic
communications with stakeholders are one element of the consultation strategy During
the inception phase the website has been established and launched and an initial e-
communication will be sent out to identified stakeholders (Task 5) The website is available
at httpcentral-americafta-evaluationeu
Electronic communication with stakeholders will take place through email newsletters as
well as Twitter using an account for this ex-post evaluation (CaEvaluation) Twitter will
be used as well to present the (draft) findings at specific moments in the study interested
related work or articles highlights or relevant quotes from the consecutive study reports
and promote the various outreach activities such as workshops LinkedIn will be used to
complement twitter with the same objectives the account of LinkedIn to be used will be
Ex-Post Evaluation EU-Central America FTA Email and an electronic newsletter will be used
as complementary tools to reach specific stakeholders throughout the study to inform them
Page 42
of events to send questions receive feedback and make appointments for interviews the
email used will be central-americabkp-advisorscom
With the COVID-19 pandemic still in place and governments imposing new lockdowns and
travel restrictions a back-up plan is available in case a lot of the communication has to be
done online The meetings with the EU and CA stakeholders both government and civil
society in the near future will be held online For the second half of the year and beginning
of 2022 face-to-face meetings may also be an option The advantage of digital outreach
is linked to reduction of travel time and travel costs to the minimum and in addition digital
follow-up is easier The public consultation and online business survey are already being
prepared and planned with an indicative timeline of online availability between June and
September 2021 The workshops envisaged for Central America in November 2021 are
currently planned with options ranging from face-to-face meetings over hybrid solutions
to holding them entirely online In either case we will ensure they are as interactive as
possible thanks to the use of breakout rooms and platforms enabling participants to ask
questions and participate in polls online We will also ensure that participants will receive
sufficient information before workshops
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13)
71 Case Study Selection
As part of the evaluation ten case studies will be prepared Their purpose is to capture the
impact of implementation of the EU-CA FTA on sustainable development in its economic
social and environmental dimensions as well as on human rights (including labour rights)
They should complement the economic social environmental and human rights analysis
required under Tasks 10 11 and 12
Regarding the geographic coverage the ToR require two case studies focused on the EU
two horizontal case studies for the whole region of Central America and six dedicated to
each of the Central American countries
Table 1 provides a preliminary list of suggested case studies while their exact focus and
scope will be determined at the next stage of the study further to preliminary impact
analysis and identification of relevant information and data sources
Table 8 List of proposed case studies
No Case study topic Geographical focus Key impact areas
1 Impacts of the Trade Pillar on EU banana producers EU incl OR as well as ACP and LDCs due to preference erosion
Economic and Social
2 Trade in environmental goods and services (opportunities for the EU and partner countries)
EU CA partner countries22
Economic and Environmental
3 Impacts of the Trade Pillar on freedom of association in sectors involved in trade with the EU (the choice of sectors will be made further to the initial impact analysis)
CA partner countries notably Guatemala Honduras and El Salvador
Human rights and Social
4 The effects of the Trade Pillar on sustainable aquaculture in Honduras Nicaragua Costa Rica and El Salvador
Partner countries with a focus on Honduras Nicaragua Costa Rica El Salvador
Economic Social Human rights and Environmental
5 Opportunities created in services sector in particular the green energy sector in Costa Rica (the choice of the services sector will be reviewed based on the initial impact analysis)
CA partner countries Economic and Environmental
22 The ultimate selection of countries will depend on the outcome of the (environmental) impact screening and scoping exercise
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 43
No Case study topic Geographical focus Key impact areas
6 Impacts of the Trade Pillar on child labour and childrens rights
El Salvador Social and Human rights
7 Impacts of the Trade Pillar on the environment (eg forests and biodiversity) in Guatemala the case of palm oil
Guatemala Environmental
8 Impacts of the Trade Pillar on MSMES and sustainable agriculture in the coffee industry (organic coffee) in Honduras
Honduras Economic and Environmental
9 Impacts of the Trade Pillar on women and gender equality notably in agricultural value chains in sectors exporting to the EU (the sectors may include coffee ground nuts and banana however the final selection of sectors and scope will be made based on data availability and the initial impact analysis)
Nicaragua Social and Human rights
10 Implementation and effect of the FTZ in port of Colon including aspects related to direct transportation clause
Panama Economic
72 Case Studies ndash Summaries and Methodologies
Descriptions of case studies and planned methodologies have been provided in Annex A5
8 STUDY WORK PLAN
A detailed study schedule which sets out activities and deadlines for outputs indicated
throughout this Inception Report is outlined in the chart overleaf A detailed plan for the
consultation programme is provided in Annex A4 Annex A6 provides the risk management
approach for the evaluation
Page 44
Phase task deliverable
Inception phase
Kick-off meeting with Commission in Brussels 20
Task 1 Refine draft intervention logic diagram
Task 2 Define and develop the methodological approach
Task 3 Review existing studies amp reports on trade between the EU and CA (6 countries)
Task 5 Provide a concise description of the agreement
Task 6 Create a website dedicated to the evaluation
Task 7 Stakeholder consultation strategy
Task 13 Case study proposals
Inception reporting
Drafting of inception report
Draft Inception Report 22
Review meeting Commission ISG
Finalisation of the Inception Report
Inception Report
Interim phase
Task 4 Provide a concise summary
Task 8 Undertake consultation activities
Civil society dialogue in Brussels (budgeted under review meetings)
12-week online public consultation
Online survey for business users interests in both the EU MS and partners
Workshops in partner countries
Other targeted consultations
Task 9 Assess the EU-Central American TSIA
Task 10 Analyse economic effects
Task 11 Analyse effects of implementation on SD economic social environmental
Task 12 Analyse effects on Human Rights
Task 13 Conduct in-depth case studies based on field work
Interim reporting
Drafting of Interim Technical Report
Annexes Progress evaluation Quantitative tables 10-page stakeholder report CS reports
Draft Interim Technical Report 20
Review meeting Commission ISG
Finalisation of Interim Technical Report
Interim Technical Report `
Final phase
Task 13 Conduct in-depth case studies based on field work
Task 14 Reply to the evaluation questions
Task 15 Provide conclusions and recommendations
Tasks 1 45 9 and 10 - 15
Final reporting
Drafting of draft final report
Synthesis report
Executive Summary
Annexes
Draft final report 20
Review meeting Commission ISG
Finalisation of final report
Translation executive summaries (EN FR GE SP)
Final report 20
Possible exit meeting 20
Progress reports
The ToR speci fies 12 weeks for the survey we tentatively propose 16 weeks because the time schedule a l lows i t and i f the project s tarts in January the survey would fa l l in the hol iday season in EuropeCA which would not be conducive for responses
Key
Meeting with the European Commission
Concrete deliverable (eg Inception Report)
Key
Working on the evaluation and endpoints of work per task
Stakeholder consultation activities and meetings
MayAprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr
HOW TO OBTAIN EU PUBLICATIONS
Free publications
bull one copy
via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps
from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)
from the delegations in non-EU countries
(httpeeaseuropaeudelegationsindex_enhtm)
by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm)
or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
Priced subscriptions
bull via one of the sales agents of the Publications Office of the European Union
(httppublicationseuropaeuothersagentsindex_enhtm)
doi[number]
[Cata
logue n
um
ber]
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its
Member States and Central America ndash Inception Report
Directorate-General for Trade 2021
LEGAL NOTICE
This document has been prepared for the European Commission however it reflects the views only of the authors and the Commission cannot be held responsible for any use which may be made of the information contained therein
More information on the European Union is available on the Internet (httpwwweuropaeu)
Luxembourg Publications Office of the European Union 2021
ISBN [number] doi[number]
copy European Union 2021 Reproduction is authorised provided the source is acknowledged
Printed in [Country]
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Europe Direct is a service to help you find answers
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00 800 6 7 8 9 10 11
() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Page 6
Image(s) copy [artists name + ge ] Year Source [Fotoliacom] (unless otherwise specified)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page vii
ABSTRACT
Since 20131 the European Union (EU) has been implementing the Trade Pillar ie the
Part IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The European
Commission has now commissioned a consortium led by BKP Economic Advisors to
undertake an evaluation of the Trade Pillarrsquos (hereinafter EU-CA FTA) implementation and
impact The evaluation is undertaken over the period January 2021 to May 2022 and
analyses the economic social environmental and human rights (including labour rights)
effects which the EU-CA FTA has had since its entry into force in the Parties to the
Agreement and third countries In terms of evaluation criteria it will review the
effectiveness impact efficiency coherence and impact of the EU-CA FTA and its
implementation It will also comprise ten case studies to illustrate or add detail to broader
findings
This Inception Report presents the evaluation methodology a descriptive summary of the
Agreement and its implementation so far and a brief review of relevant studies on the EU-
CA FTA
1 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El Salvador since 1st October 2013 and with Guatemala since 1st December 2013
Page viii
TABLE OF CONTENTS
LIST OF BOXES TABLES AND FIGURES IX
ACRONYMS X
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES 1
2 EVALUATION FRAMEWORK 2
21 Intervention hypothesis of the Agreement (Task 1) 2
22 Evaluation Questions Judgement Criteria and Indicators 5
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2) 6
31 Analysis of economic effects (Task 10) 6 311 Task 101 Analysis of the evolution of trade in goods 6 312 Task 102 Analysis of the evolution in trade in services 8 313 Task 103 Analysis of the evolution of foreign direct investment (FDI) 8 314 Task 104 Presentation of overall economic impacts 9 315 Task 105 Determining the impact on implementation of the Trade Pillar of the various
institutional structures 9 316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated exportimport procedures for key stakeholders 10
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the Trade Pillar 10
318 Task 108 Analysis of the implementation of the Government Procurement chapter of the Trade Pillar 10
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar 10 3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has led to a
greater economic integration between the Central American partners 11 3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for imports of
bananas 11 3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on SMEs 11 3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers 11 3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on the
budgets of the EU and the partner countries 12 3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on EU
Outermost Regions (ORs) 12 3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on developing
countries in particular on LDCs and countries having an Economic Partnership Agreement (EPA) with the EU 12
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable development (Tasks 11 and 12) 13 321 Task 111 Analysis of the effects of implementation of the Trade and Sustainable
Development (TSD) chapter of the Trade Pillar 13 322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter 13 323 Task 113 Analysis of employment impacts 14 324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda (job
creation labour standards social protection and social dialogue) on working conditions
poverty reduction and enforcement 14 325 Task 115 Analysis of impacts on the informal economy and informal employment 15 326 Task 116 Analysis of impacts on gender inequality 16 327 Task 118 Analysis of impacts on the adoption and implementation of internationally
recognised instruments of responsible business conduct and Corporate Social Responsibility (CSR) 17
328 Task 117 Analysis of environmental impacts 18 3281 Activity 1 Fine-tuned methodology and impact screening and scoping 19 3282 Activity 2 Establishing the baselines for the impact areas 20 3283 Activity 3 Quantitative evaluation of impacts 20 3284 Activity 4 Qualitative evaluation of impacts 21
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page ix
3285 Activity 5 Answering of the evaluation questions and other concluding remarks 21 3286 Conclusions and recommendations 21
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human rights 21 3291 Human rights baseline 22 3292 Screening and scoping 22 3293 Detailed assessment 23 3294 Conclusions and recommendations 24
33 Concluding tasks 24
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3) 25
41 Methodological aspects 25
42 Substantive issues 25
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5) 29
51 Structure of the EU-CA FTA 29
52 Institutional set-up of the EU-CA FTA 31
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo priorities 33
54 Operational context of the implementation of the EU-CA FTA 35
6 CONSULTATIONS (TASKS 6 AND 7) 41
61 Consultation Strategy 41
62 Study Website and Electronic Communications 41
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13) 42
71 Case Study Selection 42
72 Case Studies ndash Summaries and Methodologies 43
8 STUDY WORK PLAN 43
LIST OF BOXES TABLES AND FIGURES Box 1 The use of the DPSIR framework in FTAs 20 Box 2 Expectations regarding inputs from stakeholders 41 Table 1 Methodological approaches and sources for the analyses of trade in goods 6 Table 2 Methodological approaches and sources for the analysis of trade in services 8 Table 3 Methodological approaches and sources for the analysis of bilateral FDI 8 Table 4 Overview of the EU FTAs launched and or concluded since 2012 36 Table 5 EU FTA in Latin America and participating countries 37 Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021) 39
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking 40 Table 8 List of proposed case studies 42 Figure 1 Overall evaluation approach 2 Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association
Agreement 3 Figure 3 Overview of the multi-pronged approach to human rights impact assessment 24
Page x
ACRONYMS
AA Association Agreement ACP African Caribbean Pacific BATIS Balanced Trade in Services CA Central America CCA Causal Chain Analysis CGE Computable General Equilibrium CPI Consumer Price Index CSD Civil Society Dialogue CSR Corporate Social Responsibility DAG Domestic Advisory Group DG Directorate-General ECLAC Economic Commission for Latin America
and the Caribbean EESC European Economic and Social Committee EFTA European Free Trade Association EP European Parliament EQ Evaluation Question EU European Union EU-CA FTA Trade Pillar of the EU-Central America
Association Agreement FDI Foreign Direct Investment FRA EU Agency for Fundamental Rights FTA Free Trade Agreement GATS General Agreement on Trade in Services GDP Gross Domestic Product GHG Greenhouse Gas GIs Geographical Indications GPA Government Procurement Agreement GSIM Global Simulation GSP Generalised Scheme of Preferences GTAP Global Trade Analysis Project HRIA Human Rights Impact Assessment ILO International Labour Organisation IPR Intellectual Property Rights ITC International Trade Centre
JC Judgement Criterion LDC Least Developed Country LULUCF Land use land use change and forestry MFN Most-Favoured Nation MSME Micro Small or Medium-sized Enterprise NGO Non-Governmental Organisation NTB Non-Tariff Barrier OECD Organisation for Economic Cooperation and
Development OHCHR Office of the United Nations High
Commissioner for Human Rights OR Outermost Region
RBC Responsible Business Conduct RoO Rules of Origin SDGs Sustainable Development Goals SIA Sustainability Impact Assessment SICA Central American Integration System SIECA Secretariat for Central American Economic
Integration SME Small or Medium-sized Enterprise SPS Sanitary and Phyto-Sanitary TBT Technical Barriers to Trade TISMOS Trade in Services data by mode of supply ToR Terms of Reference TRIPS Trade-Related Aspects of Intellectual
Property Rights TRQ Tariff Rate Quota TSD Trade and Sustainable Development UN United Nations UNCTAD United Nations Conference on Trade and
Development UNECE United Nations Economic Commission for
Europe WTO World Trade Organisation
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 1
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES
Since 20132 the European Union (EU) has been implementing the Trade Pillar ie Part
IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The Trade Pillar
(hereinafter EU-CA FTA) gradually opens markets on both sides increases the stability and
predictability of the trade and investment environment and aims at creating benefits for
consumers and fostering sustainable development Its objectives include also support for
regional economic integration in Central America This is also one of the first EU ldquonew
generationrdquo trade agreements characterised by its comprehensive scope that covers in
addition to liberalisation of trade in goods and services investment public procurement
competition intellectual property rights and trade and sustainable development
After several years of implementation an evaluation is undertaken with the objective of
analysing the economic social environmental and human rights (including labour rights)3
impacts of the implementation of the EU-CA FTA and ultimately of determining whether
there is a need to improve its implementation To support the European Commissionrsquos own
evaluation of the Agreement the Directorate-General (DG) for Trade has awarded a
contract for the ldquoEx-post evaluation of the implementation of part IV of the Association
Agreement (Trade Pillar) between the EU and its Member States and Central Americardquo to
a consortium led by BKP Economic Advisors (BKP) The evaluation is carried out by a team
involving experts from BKP Trade Impact BV Trinomics the Foundation Rural
Development Consult (CDR) the NL-investmentconsulting BV and the University of Costa
Rica The work started in January 2021 and will continue until May 2022
The scope of the evaluation can be delineated as follows in terms of the period covered
it includes the whole implementation period of the EU-CA FTA since the start of provisional
application in 2013 up to now also comparing where appropriate with a five-year period
preceding the entry into force of the Agreement (ie starting in 2008) Geographically it
primarily covers the Parties to the Agreement although some effects of the EU-CA FTA on
selected third countries are also analysed such as developing countries and particularly
least developed countries (LDCs) moreover some global effects (eg climate change)
will also be covered Regarding evaluation criteria effectiveness impact efficiency
coherence and relevance will be considered Finally as already mentioned in terms of
types of effects considered the evaluation will cover economic social environmental and
human rights (including labour rights) effects which the EU-CA FTA may have had either
as a result of the changes in trade it has brought about or through the implementation of
the provisions of the Agreement text itself notably those of the Trade and Sustainable
Development (TSD) chapter
Although most data to be considered for the evaluation are likely to refer to the world pre-
COVID-19 the pandemic will have an impact on the study First in terms of the evaluation
implementation it is likely to affect the consultation activities that may need to be carried
out online rather than in person Second in substantive terms it will be important to pay
attention to issues which are of a priority for stakeholders in the current circumstances
(eg by selecting case studies accordingly) and to consider that eg stakeholder views
might be affected by the current situation
This inception report is the first deliverable under the contract It comprises seven tasks
of the evaluation (as established in the Terms of Reference see Figure 1) focusing on the
presentation of the evaluation methodology and is structured as follows Chapter 2
2 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El-Salvador since 1st October 2013 and with Guatemala since 1st December 2013 3 Whenever this report refers to human rights this includes labour rights
Page 2
presents the evaluation framework with an intervention hypothesis (task 1) while Chapter
3 outlines the proposed methodology responding to the evaluation questions (task 2) and
Chapter 4 covers a brief review of relevant studies on the Agreement (task 3) Chapter 5
provides a descriptive summary of the EU-CA FTA and its implementation so far (task 5)
followed by outline of consultation activities in Chapter 6 (tasks 6 and 7) supported by the
consultation strategy provided in Annex B as well as a list with a preliminary selection of
case studies in Chapter 7 (task 13) The final part includes study work plan in Chapter 8
The draft outline of the interim and final evaluation reports is presented in Annex A7 Other
parts of the Annex provide further details on certain elements of the report
Figure 1 Overall evaluation approach
2 EVALUATION FRAMEWORK
21 Intervention hypothesis of the Agreement (Task 1)
An indicative intervention hypothesis developed by the Commission linked the operational
objectives (as listed in Article 78 of the EU-CA FTA) to specific and overall objectives set
out in Article 2 of the Agreement and its Recitals In line with Task 1 of the evaluation ToR
we have adapted the intervention logic developed by the Commission as follows
All 10 operational objectives listed in Article 78 of the Agreement have been included
Specific and overall objectives have been considered in the context of short-term and
medium-term outcomes as well as long-term impacts
Underlying assumptions have been identified and integrated into the intervention
hypothesis
The relationship between the evaluation questions (EQ) and the intervention hypothesis
has been specified
The updated version of the intervention hypothesis is presented in Figure 2 overleaf
The intervention hypothesis was also instrumental in developing the analytical framework
of the evaluation which brings together the evaluation questions of the ToR the associated
judgment criteria and indicators the data sources and the methodological tools with which
we will collect data The refined analytical framework is presented in the following sub-
section
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 3
Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association Agreement
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 5
Main assumptions (at the level of coherence)
Pillar IV and its implementation has been coherent with the EUrsquos trade and development
policies and in particular with the EUrsquos commitment to sustainable development in
trade policies as a contribution towards attainment of the SDGs (EQ8)
Main assumptions (at the level of efficiency)
The utilisation rate of the Trade Pillar is high (EQ5)
Implementation of the Trade Pillar does not lead to trade diversion (EQ5)
Costs associated with implementation of the Trade Pillar are proportionate to the
benefits it has generated (EQ6)
The distribution of both costs and benefits is proportionate among different
stakeholder groups and interests (EQ6)
Implementation of the Trade Pillar does not create unnecessary regulatory costs
(including administrative burden) (EQ7)
Main assumptions (at the level of effectiveness impact and relevance)
The implementation of the Trade Pillar does not create unintended negative
consequences (EQ3)
The positive impact of the Trade Pillar is inclusive and does not benefit only a limited
group of stakeholders (EQ6)
Implementation of the Trade Pillar has contributed to trade diversification (EQ5)
Provisions of the Trade Pillar continue to be relevant for strengthening trade relations
between the Parties and regional integration of Central America (EQ9)
22 Evaluation Questions Judgement Criteria and Indicators
The evaluation framework has been based on the evaluation questions listed in the ToR for
the study which are as follows
EffectivenessImpact
EQ 1 To what extent have the objectives as laid down in Article 78 of Part IV of the
Agreement been achieved
EQ 2 What are the factors influencing (either positively or negatively) the achievements
of the objectives specified in Article 78
EQ 3 Has implementation of the Trade Pillar had unintended (positive or negative)
consequences and if so which ones
EQ 4 What has been the impact of implementation of the Trade Pillar
Efficiency
EQ 5 To what extent has implementation of the Trade Pillar been efficient with respect
to achieving its objectives
EQ 6 To what extent are the costs associated with implementation of the Trade Pillar
proportionate to the benefits it has generated Is the distribution of both costs and
benefits proportionate among different stakeholder groups and interests
EQ 7 Are there unnecessary regulatory costs (including administrative burden)
Coherence
EQ 8 To what extent has implementation of the Trade Pillar been coherent with the
EUrsquos trade and development policies ndash and in particular with the EUrsquos commitment to
sustainable development in trade policies as a contribution towards attainment of the
SDGs
Relevance
EQ 9 To what extent do the provisions of the Trade Pillar continue to be relevant in
order to address the current trade needs and issues of the EU and Central America
Page 6
The framework provides the evaluation questions the judgement criteria for each of them
the analysis needed to substantiate findings and conclusions made in the evaluation report
and the sources through which data and information will be obtained The evaluation
framework also links evaluation questions and judgement criteria to the analytical tasks to
be performed according to the ToR Table 1-1 in Annex A1 presents this framework
It should be noted that methodological tools and indicators used are not shown in the table
but are explained in the next chapter
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2)
In this chapter we describe the methodologies and tools planned to be used in the
evaluation separately for each task The analysis will be concluded with recommendations
on how the implementation of the Agreement can be further improved for the benefit of
the EU and Central American partner countries It should be noted that the structure of
the presentation is in line with the tasks defined in the ToR to facilitate comparison and
compliance with ToR requirements However the order of findings will be guided by the
evaluation framework presented in chapter 2 To facilitate the link with the evaluation
framework for each task we indicate to which evaluation question respectively judgement
criterion it contributes
31 Analysis of economic effects (Task 10)
In 2010 the EU was Central Americarsquos second most important trade partner after the
United States (and after intra-regional Central American trade) The total value share of
the EU in Central American trade was 94 EU exports mainly went to Costa Rica (53)
Honduras (22) and Guatemala (12) In 2018 the EU was still Central Americarsquos second
trade partner after the United States but with a higher share of 122 of all Central
American trade (IMF 2019) In 2019 Central Americarsquos trade with the US (in both goods
and services) totalled USD 70 billion (ie EUR 678) (USTR) Trade in goods with the EU
reached EUR 12 billion in 2019 and trade in services EUR 82 billion in 2018 (European
Commission 2020a)
311 Task 101 Analysis of the evolution of trade in goods
Analysis under this task will seek to respond to the evaluation questions related to JC 1A1
1A2 and JC 41 The EU-CA FTA offers advantages in terms of market access for the EU
and Central American countries Some of the main elements of the Agreement regarding
goods exports from the EU to Central America are complete liberalisation of tariffs for
manufactured goods and fisheries at the end of the tariff phase-out period and immediate
liberalisation of 69 of EUrsquos exports to CA at the start of the agreement saving EUR87
million in duties annually Specific analyses to be carried out under Task 101 have been
summarised in Table 1 For each sub-task we present the specific analysis that needs to
be carried out and main methodological approach we suggest as well as relevant data
sources
Table 1 Methodological approaches and sources for the analyses of trade in goods
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
1 Goods showing the largest increase or decrease in total and bilateral trade flows
Using COMEXT statistics at different disaggregation levels the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing products
2 Development of trade in goods against previously applicable GSP+ and GSP tariffs
Taking COMEXT data as a basis to investigate whether the GSP status of a product has a bearing on how the EU-CA FTA has influenced the rate of growth in trade we will compare two groups of goods those for which tariffs were 0 under GSP versus those for which tariffs were greater than 0 under GSP+
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 7
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
3 Preference utilisation rates and forgone duty saving of economic operators of all Parties
Based on COMEXT data (for EU imports) and data provided by the Commission (for EU exports) a quantitative analysis will be undertaken to identify the key sectors and product categories where preferences are not fully used We propose to include up to 3 questions in the survey to identify factors that encourage discourage companies to use the Agreement
4 Use of tariff rate quotas (and the reasons for suboptimal use)
Data up to 2019 is already available in the Commissionrsquos annual implementation reports Updating the data is supposed to rely on similar sources as the Commissionrsquos annual reports Reasons for sub-optimal use of TRQs will be investigated during the consultations as this cannot be inferred through statistical analysis
5 Trade diversion in particular from interregional Central American trade towards the EU
First we aim to use COMEXTCOMTRADE data to analyse the evolution of merchandise trade flows over time (between the EU and the partners but also within the region in comparison to the rest of the world)
Second we aim to look at the CGE results that should be able to tell us the pure EU-CA FTA effect on intra-Central American trade flows
6 Impact of the Agreement in relation to the creation persistence reduction or removal of non-tariff measures (NTMs) that have a significant impact on EU-CA countriesrsquo trade in goods
We will use UNCTADrsquos NTM TRAINS database and classification for identification description and analysis of specific NTMs affecting trade relations between the EU and Central America We will also look at NTMs including market access barriers raised by the Parties in the sub-committee meetings and will complement the findings with stakeholder engagement
7 Analysis of the importance of Free Trade Zones in Panama (especially the FTZ in the Port of Colon)
Using trade statistics we can get a picture of the way trade flows entering Central America via the Port of Colon (for example) are distributed across Central American countries These patterns ndash at sector level ndash would tell us the most economically significant EU exports This
will be complemented by qualitative analysis
8 Investigation of whether new enterprises started to export or whether enterprises already exporting started to export new products
We expect to undertake this analysis by relying on available firm-level data as well as specific questions for SMEs in the targeted business survey the SME Panel questionnaire and other consultation activities directed towards SMEs Additionally for this sub-task we will try to get access to national databases containing firm-level panel data based on highly disaggregated customs information that include exports (imports) of products and their destinations
9 Analysis of the evolution of trade import shares originating in the EU in total imports of the six CA countries (and vice versa)
COMEXT and COMTRADE data will be used to carry out this analysis We will ensure that we specify the third countries in a clear way The EU and each of the Central American countries The United States Mexico and Canada but also Brazil Argentina
Paraguay and Uruguay (Mercosur) and China Other countries (Rest of World)
10 Analysis of the impact of the EU-CA FTA implementation on diversification of trade
The diversification of trade in goods will be evaluated according to two main dimensions 1 Diversification in the range of products traded between the EU and each of its partners 2 Diversification in the number of EU member states trading with the Central American partners
11 Comparison of the development of trade in goods between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
COMEXT and COMTRADE data will be used to carry out this analysis Regarding trade of the partner countries the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as the MERCOSUR countries The choice of the US can be explained by CAFTA-DR agreement that has been in place since 2006 between the US and Central America and the Dominican Republic
12 Investigation of whether the EU-CA FTA has facilitated trade with third countries including via the use of intermediate products
Use of GTAP data (since the Trade in Value Added ndash TiVA database only covers Costa Rica) to look at intermediate linkages and whether these have helped the competitiveness of the CA economies We will also look at the CGE modelled development of the real exchange rate as an indicator of what happened to CA economiesrsquo levels of competitiveness
13 Analysis of the degree to which implementation of the EU-CA FTA has contributed to diversification of sources of supply of goods
COMEXT and COMTRADE data will be used to carry out this analysis We will look at the inputs shares for specific products in CA from the EU and vice versa and compare the development of these shares to the shares for the same products from international trade partners
14 Identification of regions within the partner countries that have benefited most and of
regions having benefited least (including the identification of constraints)
We expect to rely mainly on a combination of mapping of the sectoral CGE effects per region with literature review and consultation activities to identify the regions that have most least benefited from the
agreement Social progress indexes are computed at municipal level in Costa Rica and at provincial level in Panama as well as for some regions in Guatemala and El Salvador but this is for 2017-2018 only
Page 8
312 Task 102 Analysis of the evolution in trade in services
Analysis in this task is linked to JC 1A3 Although the effects of trade agreements on EU
services trade with third countries are not easily quantifiable we will seek to use available
data to demonstrate the impact of the EU-CA FTA on EU services trade We will assess
whether the Agreement has led to an improvement or worsening of the structural
imbalance between the parties The EU posted a substantial services trade surplus of EUR
10 billion with all six Central American partners combined in 2013 but this surplus has
decreased to EUR200 million by 2017
Table 2 Methodological approaches and sources for the analysis of trade in services
Specific analysis to be carried out
Main methodological approach and sources
1 Services showing largest increase decrease in total and bilateral trade flows between individual CA countries and EU
We will identify sectors showing the biggest increase in total trade in services flows and in bilateral trade flows as well as those having performed worst This analysis will be conducted using time series trade statistics at different levels of disaggregation (from Eurostat OECD and UNCTAD) the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing sub-sectors Reasons for performance will be identified by a combination of sources including literature review and targeted consultations
2 Comparison of the development of
trade in services between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
The comparison of the development of bilateral trade in services between the EU and the individual Central American countries with the development of trade in services
for the EU and its Member States and for Costa Rica Guatemala El Salvador Honduras Nicaragua and Panama with a suitable reference group of countries will provide further evidence on the actual impact of the agreement of trade in services flows As is the case for trade in goods (Task 101) the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as MERCOSUR countries if possible The choice of the US matters because of the CAFTA-DR agreement that has been in place since 2006
3 Analyse trends in international financial capital flows and the evolution of key financial industry segments ndash with the GATS modes of supply as the basis
First we will analyse trends in international financial capital flows between the EU and the Central American countries as well as globally For this we will use available Eurostat OECD andor UNCTAD data as well as Central Bank data if available
Second in order to look at how sectors are performing (well or not so well) we will focus on a concise general ndash but sector level ndash analysis and what drivers we can identify for economic performance
Third we propose that the following case study (see Task 13) could be undertaken Evaluating financial industry segments such as banking insurance asset management sustainable investment ndash in Panama or Costa Rica
Data source suggestions The OECDrsquos Services Trade Restrictiveness Index The GATS Trade Restrictiveness Index which together establish the amount of ldquowaterrdquo in the partiesrsquo GATS
bindings that can be ldquosqueezedrdquo by a modernised Agreement Central Bank data on financial and insurance services economic activity and trade Global Investment Competitiveness Report (World Bank 2019) ISDB data from Eurostat BOP statistics
313 Task 103 Analysis of the evolution of foreign direct investment (FDI)
The analysis in this task will be linked to JC 1A5 Although the effects of trade agreements
on Foreign Direct Investment (FDI) with third countries are not easily quantifiable we will
seek to use available data to demonstrate the impact of the EU-CA FTA on FDI At a general
level this task will entail to assess what impact the EU-CA FTA has had on structural
balances or imbalances between the EU and its Central American partners
Table 3 Methodological approaches and sources for the analysis of bilateral FDI
Specific analysis to be carried out
Main methodological approach and sources
1 Largest increases decreases in FDI flows between individual CA countries and the EU
We will identify main changes in FDI flows over the past 10 years between the EU and Central American countries if possible at sector level This analysis will be conducted using the ITC investment map data UNCTAD investment data and ISDB data from Eurostat BOP statistics Data limitations are expected to be significant for this subtask Reasons for good or bad performance will be identified by a combination of sources including literature review and targeted consultations
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 9
Specific analysis to be carried out
Main methodological approach and sources
2 Comparison of the development of FDI flows between the signatory countries
The proposed methodology would examine the investment effect at both the extensive and intensive margins using the two-step Heckman (1979) estimation as implemented in Helpman et al (2008)
3 Analysis of the investment climate
and of the attractiveness to investment of the six CA countries
An analysis of the investment climate and of the attractiveness to investment of the six Central American countries taking into consideration the possible impact of the
existence of bilateral investment treaties or of double-taxation treaties will be undertaken We propose to review inter alia the evolution of the following indexes OECDrsquos Foreign Direct Investment Restrictiveness (FDIR) index Various FDI attractiveness and FDI confidence indexes ndash eg by AT Kearny and Ernst amp Young Global Investment Competitiveness Report (World Bank 2019) World Bank lsquoDoing Business Indicatorsrsquo ISDB data from Eurostat BOP statistics wwwinvestmentmaporg from the ITC
314 Task 104 Presentation of overall economic impacts
The analysis in this task is linked to JC 41 and will rely on the computable general
equilibrium (CGE) modelling undertaken by DG Trade The CGE model is the quantitative
cornerstonefoundation of the ex-post evaluation Important variables of interest for the
economic analysis will be those which are standard for a CGE analysis such as GDP and
trade flows (total bilateral and by sector) and sectoral output Based on the CGE modelling
results we will estimate the overall impact on the economy of the EU the partner countries
as well as third countries in particular LDCs The economic analysis will build further on
the modelling results We will report these in sufficient detail to highlight the economic
effects of the EU-CA FTA More details on the CGE model are provided in Annex A2
315 Task 105 Determining the impact on implementation of the Trade Pillar of the
various institutional structures
Our analysis under this task will seek to respond to evaluation questions No 1 and 5 (with
JC1A2 JC1A6 JC1A7 and JC1A9) ie how the operation of the institutional set up has
contributed to achieving the objectives of the EU-CA FTA outlined in Article 78 and how
effective and efficient the Association Committee (in trade configuration) six Sub-
committees and an ad hoc Working Group have been to date To determine this we will
analyse provisions of the EU-CA FTA referring to institutions and their operation in practice
In the first step we will analyse Articles 4-8 establishing the Association Council the
Association Committee and Sub-Committees and setting out their decision-making powers
This will be done jointly with Articles 345-346 setting out specific tasks of the Association
Council and the Association Committee acting in trade configuration including powers to
amend certain parts of the Agreement (within Trade Pillar) This will be followed by Articles
347-348 about Part IV coordinators and Sub-Committees established under EU-CA FTA and
will be complemented by the analysis of Articles 91 123 139 156 274 and 294 outlining
areas of responsibility of the individual Sub-committees4 and the Rules of Procedure of the
Association Council and the Association Committee (Decision No 12014 of the Association
Council) which also apply to Sub-Committees This will let us develop an understanding
about the mandate of each institution its decision-making powers including those related
to amending the EU-CA FTA and monitoring compliance by each Party frequency and
format of meetings relations with other institutions under the Agreement reporting and
escalation In this way we will establish an expectation regarding the role each institution
should have in implementation of the EU-CA FTA and achieving its objectives
4 Sub-committee on Market Access for Goods (Article 91) on Customs Trade Facilitation and Rules of Origin (Article 123) on Technical Barriers to Trade (TBT) (Article 139) on Sanitary and Phytosanitary Matters (SPS) (Article 156) on Intellectual Property (Article 274) Board on Trade and Sustainable Development (TSD) (Article 294) and Ad hoc Working Group on Government Procurement
Page 10
In the second step we will analyse the actual operation of all the above structures based
on available documents and engagement with the Parties as well as relevant stakeholders
We will take as the basis reports from Sub-committee and Association Committee meetings
and will complement them with the annual Commissionrsquos Implementation Reports and
other documents eg conclusions adopted by civil society representatives at the annual
meetings under the TSD chapter We will also determine whether formal decisions have
been taken by the Association Council or Committee and if so analyse the extent to which
they have contributed to implementation of the EU-CA FTA We will also look at concerns
raised by the Parties how they have been addressed and how much time it took to achieve
a satisfactory solution Based on findings from our analysis we will provide conclusions
and recommendations for the future notably for the TSD board
316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated
exportimport procedures for key stakeholders
Analysis in this task will be related to JC 1A2 Based on reviews of the Agreement text as
well as the work of the Sub-committee on ldquoCustoms Trade Facilitation and Rules of Originrdquo
we will analyse in a qualitative way which customs-related aspects have facilitated or
complicated bilateral trade like rules of origin management of TRQs agricultural safeguard
measures and approved exporter status We will seek to determine eg whether Article
304 par 1 provision (related to reimbursement of duties in CA Party of transit and their
payment in the CA Party of import) is applied in practice and if so how it is evaluated by
economic operators
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the
Trade Pillar
This task is also linked to JC 1A2 and the methodological aspects described above are also
valid for SPS related issues We see two subtasks under this request 1) An analysis to
what degree implementation of the SPS Chapter in the EU-CA FTA has facilitated agri-food
trade without lowering any partyrsquos SPS standards 2) The extent to which the capacity
building and technical assistance provided by the EU to Costa Rica El Salvador Guatemala
Honduras Nicaragua and Panama has had an effect (looking at what technical assistance
projects and funds were used)
318 Task 108 Analysis of the implementation of the Government Procurement
chapter of the Trade Pillar
The analysis in this rask is linked to JC 1A6 and will examine the impact of the opening of
the government procurement markets of the Parties using a multi-step approach 1)
Review of the recent and ongoing work of the Ad Hoc Working Group on Government
Procurement 2) A statistical analysis of the procurement value shares for EU business (if
possible) and SME participation which will be complemented by desk research and
anecdotal evidence of success stories of EU companies in Government procurement
markets of six CA countries and 3) Review of the level of compliance with the Agreement
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar
This task is related to JC 1A7 and 1A8 The methodological approach foreseen to analyse
other areas of the Agreement (like Technical Barriers to Trade e-commerce Competition
and protection of intellectual property rights (IPRs) including geographical indications)
Our approach focuses on 1) Statistical analysis compiling statistical descriptive analysis
on each issue prior to and after entry into force of the Agreement 2) Literature review
the analysis on the implementation and use of geographical indications in Central America
(eg Rivar 2020) 3) Case studies A specific case study on some of these other issues
could be carried out
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 11
3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has
led to a greater economic integration between the Central American partners
This task is linked to JC 1A4 The EU-CA FTA has been a mechanism that encourages
regional integration but it takes place within a much wider framework of regional
cooperation efforts between the CA countries with the EU-CA FTA being only one element
in this wider context This task focuses on the impact of the EU-CA FTA on regional
integration not on the overall trend or state of affairs regarding regional integration We
use three elements for our analysis 1) The statistical analyses that we have carried out in
Tasks 101 (trade in goods) 102 (trade in services) and 103 (FDI) help to shed light on
regional integration impact of the EU-CA FTA also 2) We look at the results of the CGE
analysis including at how the intra-regional trade patterns have changed because of the
EU-CA FTA 3) We investigate what progress has been made in terms of the different
elements for integration We will use EU and CA data sources to underpin our analyses
3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for
imports of bananas
This task is related to JC41 We envisage three types of analysis under this task in addition
to a possible case study 1) Descriptive statistical analysis based on trade in bananas since
2008 in order to capture developments before and after the entry into force of the EU-CA
FTA distinguishing bilateral trade in bananas EU banana imports from the non-LDC ACP
countries from LDCs and intra-EU imports from the Outermost Regions 2) A quantitative
impact analysis using a partial equilibrium model ndash the Global Simulation (GSIM) model
(Francois and Hall 2009) 3) A qualitative impact analysis causal chain analysis will be
applied to look at what the Agreementrsquos sector-level social and environmental effects have
been In this step we focus in the socialhuman rights pillars on how vulnerable groups
could be affected at sector level The qualitative sectoral environmental analysis will cover
the impact of the FTAs on land use and related issues water and waste management and
biodiversity and protection
3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on
SMEs
The analysis in this task is linked to JC 41 The ldquoSME-Testrdquo will be guided by the following
steps 1) Consultation of SME Stakeholders SMEs are a central element of the consultation
strategy and will be present at every stage of it 2) Identification of affected business
early on in the analysis we will identify whether and which SMEs (eg medium-sized) are
among the affected businesses 3) Identification of concrete stories as the Interim Report
progresses we will have sufficient information to identify 20 concrete stories from SMEs
as required by the Terms of Reference
3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers
This task will be approached in two parts the first one being dedicated to impacts on
consumer rights and the other one to welfare-related impacts of the EU-CA FTA which also
affect consumers in their purchasing decisions The analysis will be related to JC 42 and
evaluation questions No 18 and 6 In addition we will aim to determine to what extent
EU-CA FTA has contributed to attaining SDG 1 (no poverty) and 10 (reduced inequalities)
Regarding consumer rights in the first step we will refer to the literature according to
which consumers usually benefit from global trade and preferential trade agreements due
to lower prices of purchased goods and services (resulting from reduction of tariff and non-
tariff barriers) a wider variety of traded goods and services the related satisfaction of
diversified needs and preferences and higher quality of available goods and services
Page 12
In the second step we will consider impacts which the EU-CA FTA (might) have had for
consumers regarding availability safety sustainability traceability and quality of traded
goods and services as well as which impact its promotion (or consumersrsquo awareness of it)
may have on consumersrsquo knowledge regarding the market offer and their trust in it The
list of questions to test will be guided by the EU Better Regulation Tool Nr 32 related to
impacts on consumers We will also draw on other parts of the study analysing
implementation of provisions related to regulatory measures and standards eg TBT
SPS TSD dialogue and cooperation between the EU and partner countries and
transparency to outline what level of protection incl consumer protection and production
standards is provided by the EU-CA FTA We will also refer to the EU RAPEX database ie
the alert system for dangerous non-food products listing notifications of such products
originating from the EU and partner countries
The second part of our analysis will focus on impacts of the EU-CA FTA on welfare In the
first step based on literature review and statistical data including relevant indexes (eg
the share of population living below the poverty line) we will analyse trends in the reporting
period in the EU and Central America regarding situation of consumers from different
groups of the population incl incomes expenditures levels of poverty and inequality
income and price levels wages and other types of income and any changes in this context
In the following step we will use outcomes of the economic modelling to estimate impacts
on welfare and inequality resulting from EU-CA FTA implementation eg prices and wages
In this context we will also consider to what extent the Agreement helped to attain SDG
No 1 (No Poverty) and SDG No 10 (Reduced Inequality) This will be complemented by
stakeholder consultations and finished with conclusions and recommendations
3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on
the budgets of the EU and the partner countries
The analysis in this task is linked to JC 41 It will examine impact of the FTAs on the EU
budget (ie revenues forgone) and will largely result from the economic model We
anticipate that for the EU the foregone tariffs on imports from the partner countries will
be estimated based on the level of EU imports from the selected countries as a baseline
and the tariffs that would have applied to those imports
3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on
EU Outermost Regions (ORs)
This task is linked to JC 41 The impact on ORs will be assessed based on the trade
diversion and deflection identified in the CGE analysis A key limitation in the economic
modelling framework is however that the EU ORs are not established as a separate region
To meaningfully analyse the effect on the EUrsquos ORs we propose two elements 1) A
matching analysis for the EU and the six partner countries regarding products that matter
for ORsrsquo trade (to either partner countries or the EU) 2) Competition analysis between
ORs and CA partner countries for exporting to the EU The effects will be determined
qualitatively distinguishing if applicable the ORs which might be positively or negatively
affected by the Agreement
3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on
developing countries in particular on LDCs and countries having an Economic
Partnership Agreement (EPA) with the EU
This task is related to JC 41 Our approach to look at the EU-CA FTArsquos impact on developing
countries and LDCs will largely consist of the interpretation of the results of the economic
model simulations which has defined lsquoLDCsrsquo as a separate region This allows us to look at
the effect the EU-CA FTA has had on them We will also look closely at effects for countries
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 13
which are implementing an Economic Partnership Agreement (EPA) with the EU In terms
of the impact we will look first at an economic impact followed by effects on the other
sustainability pillars The former will include (i) a matching analysis for the EU and the six
partner countries regarding products that matter for LDCsrsquo trade (to either partner
countries or the EU) and (ii) competition analysis between LDCs and CA partner countries
for exporting to the EU We do not expect the effect to be significant for the LDCs because
the global impact of the EU-CA FTA is limited
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable
development (Tasks 11 and 12)
321 Task 111 Analysis of the effects of implementation of the Trade and
Sustainable Development (TSD) chapter of the Trade Pillar
This is one of the priority tasks linked to JC 1A1 In the first step we will divide provisions
of the TSD chapter into thematic blocks to identify areas for further analysis These include
commitments of the Parties to effectively implement in their laws and practice the eight
fundamental conventions of the International Labour Organization (ILO) as well as the
Multilateral Environmental Agreements to which they are Party the right of the Parties to
regulate sustainable management of natural resources promotion of trade supporting
sustainable development institutional provisions and dispute settlement mechanism
In the second step based on findings from the analysis of the actual situation in the EU
and partner countries carried out in Tasks 113-118 and documents outlining the
implementation of the TSD chapter (eg reports of international monitoring bodies
reports from meetings of the TSD Board and civil society advice to the Parties) we will
map activities undertaken by the Parties in areas covered by the TSD chapter in a break-
down prepared in the first step This will enable us to conclude to what extent the scope
of the TSD chapter has been covered and if actions taken by the Parties individually and in
cooperation activities have contributed to the implementation of TSD commitments and
attaining the objectives of the chapter and relevant SDGs (No 8 on decent work and
employment for all No 13 on combating climate change and No 14-15 on sustainable
use and protection of marine environment forests and biodiversity) Our analysis will be
complemented by stakeholder engagement5 We will conclude the analysis with
recommendations for the future incl any improvements in operation of institutions to
support compliance of the Parties with provisions of the TSD chapter
322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter
This is one of the priority tasks liked to JC 1A10 and evaluation questions No 1 5 and 8
In the first step we will analyse formal commitments of the Parties regarding the set up
and operation of the institutional mechanism ie Article 294 (Contact Points of the Parties
the TSD Board and civil society Advisory Groups) and Article 295 (Civil Society Forum)
In the second step we will analyse the establishment and operation of TSD institutions in
practice including their meetings activities undertaken between sessions cooperation and
5 When the Report refers to stakeholder engagement it means diverse activities foreseen in the stakeholder engagement programme outlined in detail in Annex B to this Report (Consultation Strategy) For each task stakeholder engagement activities will be tailored to the most relevant group of stakeholders methodology applied in the task and type of data which will be needed for the analysis For example in the analysis carried out with regard to TSD chapter the focus will be on targeted interviews with civil society members of the Advisory Groups in the EU and Central American countries as well as with Government and Commission representatives Further sources of information and activities will include targeted meetings eg DAG meetings and workshops with Central American countries CSD meetings with the European civil society and written positions submitted by civil society organisations As a complementary source we will use replies from online public survey
Page 14
dialogue between Governments and civil society The analysis will be based on reports
from meetings research studies recommendations from civil society to the Parties and
interviews with representatives of the Commission Governments from Central America
EU Delegations the EESC secretariat of the EU Advisory Group as well as civil society
representatives from the EU and Central American countries including members of their
Advisory Groups We will also evaluate effectiveness and efficiency of the institutional
mechanism and its role in the monitoring and implementation of the TSD chapter the
ability to address problems and to pursue cooperation and dialogue We will put an
emphasis on the evaluation of the TSD Board its ability to monitor compliance with the
commitments of the Parties effectiveness in choosing priorities and structuring the work
programme pursuing cooperation activities and resolving problems This part will also
analyse civil society capacity to exercise its mandate and monitoring implementation of
TSD chapter the quality of dialogue between Governments and civil society and the follow-
up to civil society recommendations In this context and in line with suggestions provided
by reviewed research studies we will also evaluate to what extent the discussion among
the civil society and between Governments and civil society focuses on substance
(compared to focusing on process) and whether the civil society has the means and
capacity to prepare for and to engage in such a discussion We will conclude the analysis
with recommendations for the future incl any improvements in operation of institutions
323 Task 113 Analysis of employment impacts
The analysis in this task will focus on impacts for employment levels and relate to JC 42
and evaluation questions 4 and 6 In the first step we will analyse trends in employment
and unemployment levels in the EU and partner countries for their whole economy and
across sectors over the reference period We will also identify factors influencing observed
trends including macroeconomic and labour policy measures applied by the Governments
investment in education and skills development migration from rural to urban areas and
across region and impacts of trade and investment including through trade agreements
In the second step the analysis will be focused on assessing quantitative impacts (direct
and indirect) of the EU-CA FTA on the number of jobs direct and indirect (for skilled and
un-skilled workers for the EU and partner countries across sectors) and be based on the
results of the economic modelling We will compare these results with the real-life data
and trends observed in the first step to conclude to what extent the reduction in trade
barriers and changes in output across sectors related to the implementation of the EU-CA
FTA have influenced demand for labour given the assumption of a fixed total employment
in the economy and full labour mobility between the sectors with workers leaving sectors
seen as less competitive and moving towards those having better prospects of growth and
working conditions including wages We will also draw a conclusion to what extent
observed trends in employment should be attributed to the EU-CA FTA and to what extent
to other factors incl macroeconomic environment global trends in commodity prices
domestic policy investment and trade agreements with other partners Stakeholder
consultations will help to verify our findings
324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda
(job creation labour standards social protection and social dialogue) on
working conditions poverty reduction and enforcement
This is one of the priority tasks Our analysis will seek to answer the evaluation questions
No 1 4 and 6 (JC 42) Given the broad scope of this task we will divide it into two parts
a) labour standards and social dialogue (the Decent Work Agenda) b) working conditions
including social security and health care coverage of workers and labour inspection
In the first step we will describe the situation in the EU and partner countries and changes
over time regarding the subject matter as well as factors influencing observed trends We
will focus on the following
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 15
Task 114 a) on labour standards will look at the implementation of the core labour
standards as enshrined in the fundamental ILO Conventions ratified by all Parties to
the EU-CA FTA and evaluated by the ILO monitoring bodies6 Regarding trends in child
labour occurrence the analysis will include eg the number of working children types
of activities and sectors involved the number of hours worked per week motives for
undertaking work and involvement in hazardous work Influencing factors will be
considered and their impact on job availability for adult household members the level
of generated income and the extent to which it covers family needs Regarding forced
labour the analysis will include types of activities and sectors involved and influencing
factors including criminal activity and the level of law enforcement On freedom of
association and the right to collective bargaining the analysis will cover conditions for
setting up joining and operation of trade unions and employer organisations and
functioning of social dialogue for the whole country and ndash if data is available ndash across
sectors including indicators such as the share of trade union members in the total
number of workers for the whole country and in a break-down by sector and changes
over time Regarding non-discrimination at work we will focus on groups of workers
which may be in a disadvantaged position on the labour market eg youth disabled
persons migrants or indigenous peoples (women will be analysed in Task 116) and
indicators such as labour participation rate and unemployment rate the share of each
group working informally or being in a situation of sub-employment (ie receiving a
wage below the minimum level despite working full time or having no opportunity to
work full time despite being ready to do so)
Task 114 b) on working conditions and labour inspection will include trends in job
quality indicators over time the average number of working hours per employee per
week the number or rate of fatal and non-fatal accidents at work social security and
health care cover of workers wage levels type of contract the number of labour
inspectors and inspections carried out at work places and the infrastructure and funds
being at the disposal of inspection services (we will consider in that context that all EU
Member States and five Central American countries except Nicaragua have ratified
the ILO convention No 81 on labour inspection)
In the second step based on economic modelling we will identify the sectors most affected
(positively or negatively) by the EU-CA FTA and using the analysis done in step one will
seek to determine if trends observed in the respect for labour standards and quality of
working conditions in individual sectors can be attributed to the operation of the Agreement
or rather to other factors In cases where any concerns related to labour standards eg
child labour incidence or low presence of trade unions are identified in sectors particularly
involved in trade with the EU notably in exports we may apply an in-depth analysis in a
dedicated case study We will also refer to the implementation of the TSD chapter to
establish whether policy dialogue cooperation activities and engagement with civil society
have also influenced the situation We will complement desk research with stakeholder
engagement
325 Task 115 Analysis of impacts on the informal economy and informal
employment
This is one of the priority tasks linked to evaluation questions No 1 and 8 (JC 42) We will
also aim to determine to what extent the Agreement has contributed to attaining objectives
of SDG No 1 (no poverty) and No 10 (reduced inequalities) In the first step we will
develop a description of the situation in the partner countries during the analysed period
concerning the size and structure of the informal economy and factors influencing its
6 These include conventions No 138 and 182 on elimination of child labour No 29 and 105 on prohibition of forced or compulsory labour No 87 and 98 on freedom of association and the right to collective bargaining and No 100 and 111 on equal pay for work of equal value and non-discrimination at work
Page 16
existence as well as its geographic pattern in Central America and each of the partner
countries separately We will aim to identify if there are links between the informal
economy and eg the economic structure and dynamic in certain regions and their
involvement in trade We will also report about steps taken by the Governments in a move
towards formal economy including dedicated national strategies adopted in Costa Rica and
Guatemala
In the second step based on the results of the economic modelling and trade statistics for
trade and investment flows between the EU and Central American countries an additional
literature review and stakeholder consultations we will aim to establish to what extent
trade and in particular the EU-CA FTA has contributed to the observed trends in each
partner country We will verify our findings in stakeholder consultations
326 Task 116 Analysis of impacts on gender inequality
The analysis in this task will seek to answer the evaluation questions No 1 4 and 6 (JC
42) We will also aim to determine to what extent EU-CA FTA implementation has helped
to attain SDG No 5 (gender equality) No 8 (decent work and economic growth) No 1
(no poverty) and No 10 (reduced inequalities) Work under this task will be guided by the
approach proposed in UNCTADrsquos Trade and Gender Toolbox (UNCTAD 2017) which
considers impacts on women in their roles as workers entrepreneurs traders and
consumers Complementary considerations regarding impacts for each of those groups will
be inspired by other literature (eg Fontana 2009) and methodological approaches (eg
European Institute for Gender Equality 2016)
In the first step we will analyse the situation in the Central American partner countries
regarding womenrsquos participation in the labour market economic activity as entrepreneurs
and traders (with a consideration of their access to assets and supporting measures) and
their position as consumers incl the level and type of income received and being at their
disposal Based on the available data we will also analyse gender inequalities before and
after the entry into force of the EU-CA FTA and measures applied by the countries and
provided by international donors to support an increased womenrsquos participation We will
also review reports of the ILO Committee of Experts regarding implementation of the two
ILO fundamental conventions on non-discrimination ie No 100 (equal pay for work of
equal value) and No 111 (non-discrimination at work) ratified by all CA partner countries
In the second step we will compare observed trends stemming from the real data with
outcomes of the economic modelling to determine to what extent they may be linked to
impacts of Agreement and to what extent they result from influence of other factors
Focusing on women as workers we will identify sectors important for them (based on
their shares in the total womenrsquos employment and a ratio of female and male workers
in each such sector) and compare observed trends in employment levels (in total and
across sectors) with the results of the modelling (changes in employment levels across
sectors) to determine whether the EU-CA FTA has contributed to changes reported in
the real life and if so to what extent In this context we will also consider impacts of
tariff reduction on public revenues and whether this might have had an impact on the
provision and quality of public services which in turn may have an effect on women and
their ability to participate in the labour market or to undertake an economic activity
For women as entrepreneurs if relevant data is available we will identify sectors of
their economic activity and compare trends in the actual operation of these sectors over
time (eg growth or decline) with outcomes of the economic modelling to determine if
the EU-CA FTA might have had an impact on output of these sectors and as a result
position of women as entrepreneurs
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 17
Moreover if more detailed data is available regarding sectors and groups of products or
services manufacturedprovided by women-led enterprises as well as their engagement
in international trade we should be able to say (again comparing the real-life data with
economic modelling) what impact the Agreement may have exercised on women as
traders and in this context on sales and exports of their products or services or their
competition with or the use of imports We will also consider whether the EU-CA FTA
provisions regarding eg tariff reduction SMEs TBT SPS might have had an impact
for women-led enterprises (given their size and sectors of operation)
Concerning the role of women as consumers we will look at real-life trends in income
and price levels and compare them with outcomes of the economic modelling to see
what impacts the EU-CA FTA might have had on welfare and price levels as well as the
availability and accessibility of goods and services
Our analysis will be complemented by engagement with stakeholders including women
organisations to identify barriers in their activity on one hand and facilitating measures on
the other and to gather more insights into impacts of the EU-CA FTA
327 Task 118 Analysis of impacts on the adoption and implementation of
internationally recognised instruments of responsible business conduct and
Corporate Social Responsibility (CSR)
Our analysis under this Task will seek to respond to the evaluation question No 1 (JC 42)
In the first step we will map CSRRBC practices in the Central American partner countries
in the analysed period including practices of European companies investing there or having
their suppliers and existing government initiatives promoting them eg National CSR
strategy and Law on CSR in Costa Rica National Plan on Social Responsibility and Human
Rights in Panama and dedicated centres or foundations promoting CSR in Guatemala
Honduras Nicaragua and El Salvador We will also use findings from a research carried
out for Task 111 identifying initiatives undertaken within the TSD Title incl EU projects
and regional events dedicated to CSR RBC and decent work in global supply chains We
will aim at a better understanding of the existing framework uptake of CSRRBC practices
by enterprises factors influencing it and CSRRBC presence in the EU relations with the
partner countries including technical assistance and cooperation projects
Based on this in the second step we will use outcomes of the economic modelling and
stakeholder consultations to verify whether indeed the EU-CA FTA through generated
trade and investment flows as well as specific provisions (such as those in TSD Title) might
have encouraged uptake of CSRRBC practices We will also seek to identify factors related
to market access which may encourage uptake of CSRRBC practices Legislative ones may
include eg non-financial reporting and obligatory due diligence in certain sectors or
activities requirements related to social and environmental aspects in public procurement
and non-legislative ones may focus on image and comparison with the main competitors
being part of supply chains where business partners require respect for certain labour and
environmental standards international instruments in CSR (OECD Guidelines for
Multinational Enterprises ILO Declaration on Multinational Enterprises and Social Policy
the UN Global Compact etc) requirements of sustainability and certification schemes or
consumer awareness and related choices
As an additional element of this analysis (subject to data availability) we may include into
this task examples of other schemes eg sustainability schemes or promotion of decent
work in global supply chains (notably of agricultural products) and their presence in trade
between Central America and the EU and impacts the EU-CA FTA might have had on their
use in bilateral trade relations
Page 18
328 Task 117 Analysis of environmental impacts
The main objective of the environmental analysis is to assess the environmental and
climate change effects of the EU-CA FTA as well as to provide answer to the evaluation
questions notably those on the effectiveness (No 1-4) (JC 43) and coherence of the
Agreement with other policies and the EUrsquos commitment to the SDGs and in particular
SDGs No 13-15 ie Climate Action Life below water and Life on Land (respectively) ie
evaluation question No 7 The main challenge is to isolate the EU-CA FTA induced effects
on the environmental performance in each country from general developments and trends
that occurred regardless of the EU-CA FTA This is particularly challenging as the
counterfactual environmental outcomes are unobservable for most of the environmental
impact areas
The overall approach is based on our detailed understanding of the dynamics through
which the EU-CA FTA may have created environmental impacts tailored towards the
specific circumstances for the Central American countries the requirements in the ToR
the TSD Chapter of the EU-CA FTA and the budget provided for this study The detailed
understanding is based on the study lsquothe methodology for assessing biodiversity impacts
of EU FTArsquo by IEEP Trinomics et al (2021) and the latest literature including an OECD
study (Garsous G 2019) on this matter and applies the following logic
1) identifying the components in the EU FTA with the Central American countries that may
have generated environmental effects (EU-CA FTA elements) Based on our extensive
recent experience on researching the dynamics through which FTAs may create
environmental impacts we conclude that the FTA contains (1) measures easing market
access for the signatories (referred to as tariff-based measures) and (2) several rules-
based measures (mostly by means of the provisions in the TSD Chapter referred to as
non-tariff-based measures) that may have resulted in environmental impacts in the
countries involved
2) then establishing how these elements could have created directly or indirectly intended
or unintended ndash environmental impacts (the impact channels) Any FTA is by
definition expected to create direct environmental impacts through the expected
expansion of economic activity which may lead to eg higher pollution and greenhouse
gas (hereafter GHG) emissions may put a strain on bio-resources and pressure on
vulnerable ecosystems as higher levels of output require more environmental input
(Copeland and Taylor 2014) Trade agreements also create indirect environmental
impacts through structural adjustments in the economies and so-called specific rules-
based trade measures including the provisions in the TSD Chapter Our approach
carefully considers four impact channels that are also distinguished by the SIA Handbook
(European Commission 2016a) to separate the way in which EU-CA FTA may have
created impacts on various areas of the environment The scale effect (the impact
created from increased production as a result of the trade agreement) the structural
effect (the dynamic effect of the EU-CA FTA on the growth and contraction in production
in different sectors) technology effects (impacts triggered through increased efficiencies
from increased competition or from a transfer in environmental goods and services) and
potentially the product effect (impact via changes in production standards and use of
goods in a country eg through strengthened environmental policies and environmental
regulation)
3) via these impact channels various areas of environmental performance (the impact
areas) may be impacted and are to be further analysed in this evaluation In this study
we distinguish the following impact areas 1) Climate change 2) Biodiversity and
ecosystems and 3) Other key environmental parameters
Research methods ndash For some impact areas there is more reliable information and data
and quantitative research methods available than for others To the extent possible the
quantitative analysis will build on the economic modelling results and as a result the
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 19
analysis will allow us to comment on the causal relation between environmental topics and
the EU-CA FTA Where quantitative research is not possible we will apply qualitative
methods The qualitative analysis may rely on the causal chain analysis method which
aims at identifying the root cause of observed changes Irrespective of whether a certain
impact will be assessed with more quantitative or qualitative research methods our
approach is designed to make intensive use of quantitative information eg compiling
quantitative statistics and analysing trends The following research methods are applied
per environmental area
For climate change we propose focusing on establishing the EU-CA FTArsquos impacts on
the major GHG emissions (eg carbon dioxide methane and nitrous oxide) and
potentially on the air pollutants (ozone precursor gases acidifying gases and primary
particulates)
For biodiversity and ecosystems we propose following the latest insights in assessing
biodiversity impacts of the EU-CA FTA based on the study for DG Environment on the
development of a methodology to assess the impact of trade liberalisation on
biodiversity (which has not been published yet) In case results of the biodiversity
analysis are also relevant for climate change (ie LULUCF emissions) the link between
these results and climate change will be explored
For other impact areas we propose developing baselines based on qualitative and where
possible quantitative data for each impact area and explore developments in
environmental performance since the entry into force of the EU-CA FTA In addition we
will discuss the (effectiveness of the) implementation of provisions enshrined in the TSD
Chapter in the EU-CA FTA per impact area
The above discussed approach is based on five activities They apply the logic of the
methodological stages7 as described in the methodological framework for assessing the
impact of EU FTAs on biodiversity (IEEP Trinomics et al 2021)
3281 Activity 1 Fine-tuned methodology and impact screening and scoping
Fine-tuning the methodology is part of this inception report (this document) and mainly
serves to define the exact scope and focus of this evaluation The environmental analysis
logically focusses on Central America and the EU (with an emphasis on Central America)
However within defining the geographic scope of this analysis one needs to differentiate
global (eg climate change) and other more local environmental impacts eg
(un)sustainable forest management practices We aim to cluster countries when
appropriate from the perspective of a certain regional environmental issue In this way we
can respond to the challenge of bringing focus to the analysis while balancing the available
resources and time Clustering should enable us to evaluate certain environmental issues
in a more targeted way enabling deep dives into specific issues Below we discuss in more
detail what this regional approach means in practice and how we aim to mitigate the risk
of overlooking certain impacts
Impact screening and scoping - The exact environmental topics on which quantitative and
qualitative analysis will be performed depend on the outcome of the impact and screening
and scoping exercise which seeks to identify issues which deserve to be analysed with an
extra depth As such this sub-activity aims to select the environmental impact categories
and sub-areas to be studied in other activities Impact screening and scoping is a
methodological tool to identify issues which should be prioritised in the evaluation and
helps to mitigate the risk of overlooking potential significant impacts In essence the
prioritisation is based on (i) screening the most prevailing existing environmental drivers
and pressures and (ii) screening the expected impacts caused by the EU-CA FTA (at a
7 The study by IEEP Trinomics et al (2021) identifies three stages Stage I) Preparatory stage Stage II) Method selection and impact logic and Stage III) Impact assessment and related conclusions
Page 20
sector level) by means of economic modelling results literature review stakeholder input
and political interest All information is transparently documented in the impact-screening
matrix During the impact screening and scoping exercise we will also develop three
context-setting documents (2-pages) one per environmental impact area to better
understand the background These documents will have a regional perspective and will be
directly used in the baseline development The output of this activity is included in the
Interim Report
3282 Activity 2 Establishing the baselines for the impact areas
The aim of this activity is to gain a brief understanding of the EUrsquos and partner countriesrsquo
status quo regarding their environmental governance and performance (eg trends) for
those environmental impact areas that have been identified as priority ones The output
will be a section in the evaluation with a short description (1 page) per prioritised impact
area outlining the governance (very brief) and the performance and exploring the main
developments trends and their cut-off points This will be done by analysing issues from
a DPSIR framework perspective (drivers ndash pressures ndash state ndash impact ndash responses) (see
Box 1) when appropriate8 This framework is often applied in environmental assessments and plays a central role in the study by IEEP Trinomics et al (2021) on the methodology
for assessing the impact of EU FTAs on biodiversity
Box 1 The use of the DPSIR framework in FTAs
The DPSIR framework allows to interpret certain environmental indicators by establishing a causal relation between indicators and their analysed effects In the case of an FTA trade liberalisation in goods services and investments can function as a driver of a change in different economic sectors causing changes in the amount of land- and other resource use or in their quality (eg pollutants and emissions impacting air water or soil quality) The changes in the quantity of land- and other resource may create pressures on biodiversity which lead to an impact in the state of and trends in biodiversity ecosystems and the services they provide As a response(s) certain new or existing measures can be taken to help to prevent negative impacts or to amplify positive ones
Source IEEP Trinomics et al (2021)
Three consecutive sub-tasks will be performed to operationalise the establishment of the
baselines 1) Literature review and data analysis to establish draft baselines 2) Interviews
with stakeholders to obtain additional input validate work and fine-tune results 3)
Triangulation of information (literature data and interviews) and establishment of final
baselines The output of this activity will be included in the Interim Report
3283 Activity 3 Quantitative evaluation of impacts9
The aim of this activity is to assess the quantitative estimates of the impacts of the EU-CA
FTA on GHG emissions and possibly air pollution and ndash potentially10 ndash on trade in
environmental goods and services and land use change As such the desired result is the
reporting of the quantitative estimates of the impacts of the EU-CA FTA on GHG emissions
and air quality in the EU Costa Rica El Salvador Honduras Guatemala Nicaragua and
Panama depending on data availability Ultimately it is global GHG emissions that
contribute to global warming for this reason we propose to estimate the global change in
GHG emissions resulting from the EU-CA FTA In this way we also consider the difference
in climate change impacts from trade creation and trade diversion The impacts on GHG
emissions will be decomposed in the most relevant key drivers where possible The
8 This implies that we will make use of the insights of the framework whenever relevant and appropriate in the light of the evaluationrsquos objective We will not identify every element (D P S I and R) for each environmental issue but focus on the most relevant elements for each of them
9 The focus depends on the results of the impact screening and scoping 10 Depending upon expected scale of impact available resources and data availability
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 21
preliminary finding of this activity will be included in the Interim Report and the final results
are to be presented in the Final Report
3284 Activity 4 Qualitative evaluation of impacts11
The aim of this task is to evaluate qualitatively the impacts of the EU-CA FTA on various
prioritised environmental impact areas focussing on those which are not assessed in the
quantitative analysis First a broad assessment is done based on desk research from a
regional perspective In addition approximately two case studies (as part of Task 13) will
be prepared in which the environmental impacts of the EU-CA FTA on certain areas will be
assessed based on in-depth qualitative analysis using causal chain analysis (CCA)
(European Commission 2016a) Depending on data availability we will aim to identify
trends developments and cause-effect relations between the EU-CA FTA and environment
By combining the existing environmental drivers and pressures (see Textbox 3282-1 for
more information) the economic results and effects of TSD provisions we naturally also
include potential unintended and unforeseen effects The preliminary finding of this activity
will be included in the Interim Report and the final results are to be presented in the Final
Report
3285 Activity 5 Answering of the evaluation questions and other concluding
remarks
The overall environmental analysis concludes with clearly commenting on the effect of the
EU-CA FTA on the performance the legislative framework and effective implementation in
each of the prioritised environmental impact areas In case no causal relation between the
EU-CA FTA and the performance of a certain environmental impact area is found it will
also be explicitly mentioned These concluding remarks together with the in-depth
analyses conducted in previous tasks will serve as the basis to answer the evaluation
questions related to the EU-CA FTArsquos environmental impacts under Task 14 in the Final
Report
3286 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative environmental effects that have emerged from tensions between the EU-CA FTA
on the one hand and elements of environment on the other Additional policy or legislative
measures can also be suggested to enhance positive impacts of the EU-CA FTA
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human
rights
In this section we present the approach envisaged for the analysis of the human rights12
impact of the EU-CA FTA in the EU and the CA partner countries
The evaluation will rely on the methodology of human rights impact assessments (United
Nations 2011 European Commission 2015) as well as on the experience from previous
studies and will include the following steps
Step 1 Human rights baseline
At this step a concise baseline analysis will be carried out Concise human rights
profiles will be prepared for each of the state-parties to the EU-CA FTA
Step 2 Screening and scoping
11 The focus depends on the results of the impact screening and scoping 12 Human rights in this analysis are defined as set out in the Charter of Fundamental Rights of the European
Union the core UN human rights conventions and relevant regional human rights treaties
Page 22
At this step based on various sources human rights will be screened and specific
human rights that may have been affected by the EU-CA FTA will be identified
Step 3 Detailed assessment of the selected human rights
At this step drawing upon findings from the previous stage of the analysis an in-depth
analysis of up to three selected rights will be carried out (both quantitative and
qualitative and depending on the degree of the impact)
Step 4 Policy recommendations and accompanying measures related to
human rights
At this step policy recommendations will be formulated as to how any tensions between
the EU-CA FTA and human rights obligations may be addressed and how a positive
impact on the enjoyment of human rights can be enhanced
Stakeholder inputs will be used throughout all four steps to verify and support findings as
well as to collect evidence on the impact and ensure meaningful participation
3291 Human rights baseline
At this stage a concise baseline analysis of the human rights situation in each state-party
will be carried out First an overview of international human rights obligations of all the
state-parties to the FTA (ratifications of core international and regional human rights
treaties core ILO Conventions and other treaties relevant for the analysis) will be
presented in a tabular manner Second human rights profiles will be prepared Human
rights profiles will consist of a summary of the baseline conditions for the enjoyment of the
relevant human rights in each of the state-parties to the FTA from five years before the
provisional application of the EU-CA FTA until 2019 Particular attention will be given to the
pre-existing conditions of stress and vulnerabilities with respect to human rights
highlighting the position of specific vulnerable groups
The human rights profiles aim to
Set the scene regarding the enjoyment of relevant human rights in the partner
countries and identify social and political developments that may have impacted the
human rights situation
Allow for a targeted assessment of the human rights impacts of the EU-CA FTA
The profiles are based on the analysis of international human rights obligations national
legislation and policy framework as well as implementation issues with respect to relevant
human rights The analysis reviews country specific reports of international organisations
(eg UN OECD ILO) EU Reports on Human Rights and Democracy in the World reviews
of reports of international human rights organisations (eg Human Rights Watch) a
review of academic literature media reports relevant indicators and local partner inputs
3292 Screening and scoping
The second step of the analysis focuses on identifying which human rights could have been
affected by the EU-CA FTA and in which way The EU-CA FTA will be scanned for provisions
that are most likely to have caused an impact on the enjoyment of human rights in state-
parties to the EU-CA FTA The cause-effect relationships between the trade and trade-
related measures in the FTA and human rights will be established based on multiple sources
(see the multi-pronged approach below) The focus of the screening will not only be on
specific trade measures originating from the FTA (the Trade Pillar) but also on the overall
effect of the measures under the broader Association Agreement
Based on the screening exercise and in line with the EC Guidelines for human rights impact
assessments (European Commission 2015 p5) we provide a focused overview of the
human rights affected by the EU-CA FTA specifying the following elements
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 23
Specific human rights affected by the FTA
Short note on the evidence of the impact with a reference to the sources of information
Whether the affected right is an absolute human right or not13
The kind of impact (direct or indirect)
The degree of the impact (major or minor)
Affected population groups (if applicablepossible)
The screening exercise will as much as possible reflect upon the affected individuals
andor groups of people especially indigenous people and women based on the results
generated by the economic analysis inputs from the stakeholders and literature review
We will also look at how the EU-CA FTA has impacted gender equality and labour rights14
3293 Detailed assessment
Depending on the outcome of the screening exercise a maximum of three human rights
will be selected for a detailed assessment
Applicable human rights laws will be scanned (based on the obligations of the state-parties
under international and regional human rights treaties) to provide a framework of
applicable and binding entitlements and duties related to the selected right(s) Insofar
possible national legislation will be scanned for any changes subsequent to the application
of the EU-CA FTA focusing in particular on the changes that affected the enjoyment of
each of the selected human rights (using baseline analysis to aid the impact assessment)
Then we will look at the particular measures and how they have enhanced or impaired the
enjoyment of the relevant rights and or have strengthened or weakened the ability of the
parties to fulfil or progressively realise their international human rights obligations
Particular attention will be given to impacts on vulnerable groups or groups of individuals
that are at risk of being marginalised (Danish Human Rights Institute 2016)
This assessment is intended to be both quantitative and qualitative in nature The
quantitative analysis is based on the results of the economic analysis and used to the
extent possible15 The qualitative analysis is based on various sources as well as
stakeholder consultations and close work with local partners Economic modelling results
already disentangle the impact of the EU-CA FTA from other impacts that could have
affected the enjoyment of a human right over time For qualitative analysis it is more
challenging to discern the FTA impact To address this challenge we use a multi-pronged
approach (ie a methodological cross-validation approach in order for one methodological
element to corroboratevalidate the other method) in examining the causal effects of the
FTA for each of the prioritised human rights16 (see Figure 3)
13 See Tool 28 of the European Commissionrsquos Better Regulation Toolbox (2017) available at httpseceuropaeuinfolawlaw-making-processplanning-and-proposing-lawbetter-regulation-why-and-howbetter-regulation-guidelines-and-toolboxbetter-regulation-toolbox_en
14 Although we expect some overlap on labour-related rights with the evaluation of social impacts there will be cross-references to ensure a holistic analysis Moreover taking into account the interrelated nature of human rights we reserve the right to address the rights of the workers from other relevant perspectives not covered in the social analysis (eg as related to vulnerable groups)
15 When relevant we will use human rights indicators to supplement the analysis 16 We use the same method also during the screening exercise but to a more a limited degree (eg not using
specific human rights indicators for each human right as it goes beyond the scope of this evaluation)
Page 24
Figure 3 Overview of the multi-pronged approach to human rights impact assessment
Thus in assessing the impact the EU-CA FTA has had on each human right we use the
economic modelling results (if applicable and appropriate) that already disentangle the FTA
impact from the overall effects and link economic findings (partially) to how the selected
human right has evolved in the EU and Central American partner countries because of the
EU-CA FTA If data from the economic analysis is not sufficient to support the analysis we
will make use of contextually relevant human rights indicators (United Nations 2012) from
the statistical databases of the ILO World Bank UN OECD andor other organisations to
investigate how the selected human rights have evolved over time We look at the
development of human rights from five years before the provisional application of the FTA
up to the most recent year for which the data is available comparing period before and
after the entry into force of the FTA looking for shocks (relatively sharp increases
decreases) around that time or structural breaks in a trendline to identify an EU-CA FTA
impact We also investigate whether other shocks have taken place that could explain
observed changes in human rights (eg changes in domestic laws) Based on a similar
practice used during the ex-post evaluation of the EU-Korea FTA we could also consider
including a set of control countries to the analysis to consider development of specific rights
in relative terms
All data findings will be supported and cross-validated through a review of relevant
literature looking for further evidence of impacts provisions of the EU-CA FTA the social
and political situation (eg legislative policy instruments adopted that could have affected
the enjoyment of relevant rights) and inputs from the stakeholders that can serve as
evidence of a link between how the human rights has evolved and the EU-CA FTA
3294 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative human rights effects that have emerged from tensions between the EU-CA FTA
on the one hand and statersquos human rights obligations on the other Additional policy or
legislative measures can also be suggested to enhance positive impacts of the EU-CA FTA
and to prevent or mitigate impacts of measures that have been identified as having caused
or contributed towards impaired enjoyment of human rights
33 Concluding tasks
Based on the various analyses undertaken including the case studies the evaluation team
will prepare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 25
A comprehensive review of the extent to which impacts identified in the Trade SIA of
the Association Agreement between the EU and Central America (Ecorys and Corporate
Solutions 2009) have actually materialised (Task 9)
Replies to the evaluation questions (Task 14) and
Conclusions and recommendations (Task 15)
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3)
The literature review aims at identifying sources data and main conclusions drawn from
the previous studies to make sure that the report is based on and further complements the
existing literature Annex A3-2 provides an overview of the literature considered so far in
a tabular structure To summarise the findings from the literature review so far the
following can be noted regarding methodologies and substantive issues
41 Methodological aspects
The economic effects of the EU-CA FTA have been analysed by the Sustainability Impact
Assessment (SIA) outsourced by the Commission (DG Trade) in 2009 before the launch
of the negotiations (ECORYS 2009) This ex-ante evaluation combined quantitative and
qualitative approaches the first one based on the Computable General Equilibrium (CGE)
and Causal Chain Analysis and the latter built on stakeholder interviews (ECORYS 2009)
The CGE model underpins SIA and the literature produced on the likely economic impact
of the agreement (ECORYS 2009 IIDE 2007 Lima et al 2009 Lima et al 2010 CEPR
2012) and the bulk of these studies is based on the assumptions on the likely structure of
the agreement as the negotiations were not concluded yet The 2009 SIA also assessed
the additional FDI impact by applying a gravity analysis approach (ECORYS 2009) The
first Commission annual activity report on the implementation of the EU-CA FTA builds its
assessment on the available Eurostat data and on the comparison between the region-to-
region trade flows before and after the treatyrsquos entry into force (Commission 2015) The
following activity reports (Commission 2016 2017a 2018a 2019d 2020a) illustrate the
evolution of trade on a yearly basis relying on the Eurostat and Central American statistics
thereby opting for a more descriptive approach
The main added value brought by this ex-post evaluation report consists of the CGE model
and its application to updated EU and CA statistics in order to isolate the strictly related
economic implications of the EU-CA FTA from other external factors influencing bilateral
trade thereby purifying the overall analysis and drawing more methodologically solid and
reliable conclusions The Commission (2021) modelling used for the ex-post evaluation
unlike the other studies focuses only on tariffs however which means that impacts of not
the entire EU-CA FTA are measured but only of the tariff component
Regarding assessment of non-economic effects the methodology tended to forecast
estimated general trends and usually does not make detailed projections It should also be
pointed out that predicting long-term socio-economic effects stemming from the AA proves
to be more challenging than estimating short-term trade impacts (European Parliament
2018) Regarding quantitative social and environmental variables the models have used
structured gravity approaches to estimate the effect of non-tariff measures (NTMs)
(ECORYS 2009) The main methodological constraints to calculate (non-quantifiable)
social environmental and human rights effects from a quantitative perspective are the
problem of attribution and the so-called counterfactual given that one cannot know what
would have happened in case the agreement was not in place
42 Substantive issues
In the 2009 SIA the literature review concluded that the potential economic impact of
the EU-CA FTA was expected to be positive The vast majority of literature sources agree
on the key role played by agricultural products in the Central American economy (Romero
Page 26
et al 2015 FAO 2020 OXFAM 2016 European Commission 2020 European Commission
2019 Zabalo et al 2019 Mejia et al 2018 Lima et al 2009 Lima et al 2010) The
raw material share accounts for up to 60 of the total CA export and combined with
natural-resource-based manufactures their cumulative share reaches 70 (Lima et al
2010 p 92) A study carried out in 2007 before the launch of the EU-CA negotiations
forecasted a negligible impact of the agreement on the EU GDP and overall welfare even
in case of a full liberalisation scenario (IIDE 2007 p 16) Also in terms of FDI the
estimated effects were marginal for the EU but more tangible for CA where the agreement
could lead to an increase of 1 of the CA economies GDP (CEPR 2012 p 27) However
some additional positive spill-overs were considered such as the impact on maritime
services that could help CA countries to better manage increased trade flows and at the
same time improving custom procedures (ECORYS 2009) On trade the report
highlighted trade value flow variations especially in CA with the impact on both EU export
and import value rather negligible (Ibid p 73)
The 2012 CEPR impact assessment argued that the EU-CA trade liberalisation triggered
overall positive effects especially when referred to key products both for the EU exports
to CA such as in agriculture products and goods originating from manufacturing activities
(eg cars and medication) and EU imports from CA primarily food products where the
FTA proposed to half tariff levels compared to the previous GSP level access in place (CEPR
2012 pp 10-11)
According to the SIA banana exports from CA to the EU were expected to benefit from
more advantageous market access conditions Regarding NTMs bilateral trade facilitation
and border-related barriers should be eased simplified and rationalised Consequently
trade costs were expected to decrease remarkably The econometric analysis showed that
the economic effects of the EU-CA FTA were not expected to be equally distributed among
the CA countries given the economic heterogeneity of the region (ECORYS 2009 Lima et
al 2009 CEPR 2012 European Parliament 2018) Vegetable fruits and nuts sector (VFN)
together with sugar cane showed the most promising results (IIDE 2007 p17) although
the positive effects were not equally shared among the CA members with Panama
benefitting the most Manufacturing production in CA was estimated to benefit from the
deal (+20) Electronic equipment would also take advantage of the FTA especially in El
Salvador Honduras and Costa Rica (CEPR 2012 p 31) Transport equipment insurance
services and other manufacturers were expected to decline
On the EU side the projections estimated that
Output in the sector of vegetables fruits and nuts as well as electronic equipment was
expected to decrease modestly (CEPR 2012 p 29)
The EU was estimated to increase output in grains other agriculture and additional
categories of primary food (ECORYS 2009 pp 44)
A limited price decrease for processed food grains and vegetables other agriculture
and beverages and tobacco was expected (Ibid p 44)
Overall in the EU literature in any scenario ranging from partial to full liberalisation an
increase of trade volume as result of the AA was projected (European Parliament 2018
p 43)
A study presented at the Twelfth Annual Conference of the Global Economic Analysis in
2009 and eventually incorporated in a 2010 publication on Latin America assessed the
likely effects of the EU-CA FTA for three scenarios full liberalisation partial liberalisation
excluding sensitive products on both sides (namely fruits and vegetables meat beverages
and tobacco other processed food) and liberalisation considering only fruits and vegetables
as sensitive in the EU (Lima et al 2009 p 1) The application of different models revealed
that the most economically advantageous scenario was the first one leading to an
expansion of exports in all signatory countries and positive effects on overall CA welfare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 27
The second scenario would lead to a smaller economic impact with a more modest trade
expansion (12) and some welfare losses Finally in the scenario foreseeing the EU
excluding only fruits and vegetables the ldquoresults for trade and product remain positive
but with smaller figuresrdquo (Lima et al 2009 p 1) In conclusion a deeper liberalisation
would favour both regions by enhancing exports by between 1 and 5 in all the CA
countries (Lima et al 2010)
The Commissionrsquos annual FTA implementation reports describe trade flows between the EU
and CA after the conclusion of the FTA and demonstrate an overall upward trend for certain
countries and for specific sectors Trade flows remained rather stable in 2014 increased
by 12 in 2015 decreased marginally by 07 in 2016 grew by 72 in 2017 by 66
in 2018 and by 7 in 2019 With the exception of 2017 the EU maintained surplus in
trade with CA (Commission 2015a 2016 2017a 2018a 2019d 2020a)
The Central American literature generally focused on the role played by agricultural exports
in CA domestic economies and on the potential impact generated from the EU-CA FTA on
export transformation and diversification (Zabalo et al 2019) The likely impact of the EU-
CA FTA varied among the countries and the industries considered (ECORYS 2009) A study
carried out in 2018 aiming at analysing the effects on Panamarsquos economy by adopting a
shift-share analysis model concluded that between 2013 and 2016 the Panamanian exports
(mainly transport equipment and agricultural products) to the EU showed a downward
trend by 32 for the selected years mainly due to the decrease of primary exports to
some EU countries including Germany Belgium Italy Greece Poland and Sweden (Mejia
et al 2018) Likewise the local press has highlighted both advantages and disadvantages
generated by the EU-CA FTA for the whole region (De Leograven 2006 Barquero 2016
Rodriguez 2017) While it was considered that tariff removal triggered by the Agreement
could boost banana exports to the EU therefore inducing positive externalities for the
whole region especially for Costa Rica excessive specialisation in agricultural products
and insufficient diversification of export destinations could cause negative effects for the
local economy (Barquero 2016 Rodriguez 2017) Finally the press flagged the pros and
cons of regional integration requirements posed by the EU to CA The EU request to
negotiate as a unified bloc and to speak with a single voice led to long sensitive and
complex domestic negotiations within CA which came only to a partially accepted joint
approach towards trade talks (De Leoacuten 2006) A comparison of estimated economic effects
of the Agreement has been provided in Annex A3-1
The social impact considerations were closely linked to the economic ones since the EU-
CA FTA effects on trade would also influence the levels of employment in the affected
sectors The employment changes triggered by the EU-CA FTA in the EU were expected to
be negligible owing to the relatively modest role played by CA in the EU trade with the
rest of the world As an additional consequence also the level of EU wages should not be
affected much by the Agreement (CEPR 2012 p 28) In CA more significant incentives
to reallocation between sectors caused by ldquopull-factorsrdquo were likely to occur where export-
oriented sectors would benefit most from the EU-CA FTA and where rises in wages were
expected Employment in textile industry in Nicaragua Guatemala Honduras and El
Salvador was expected to decline The full liberalization scenario (IIDE 2007 p 17) was
expected to lead to increases in wages while also prices would rise by 05 (CEPR 2012
p 28) In Nicaragua and Costa Rica wages were expected to rise by 02 and 13
respectively while Panamanian wages would drop marginally (ECORYS 2009 pp 75-77)
The implementation of the International Labour Organisation (ILO) conventions in the EU-
CA FTA legal framework would also have a positive impact on social issues in CA such as
elimination of child labour and force labour and reduction of gender inequality However
the literature underlines a general lack of analyses of the EU-CA FTA impact on poverty in
CA since its implementation (European Parliament 2018 (a) p 45) As described above
the effects were expected to vary among the CA countries with El Salvador Nicaragua
and Honduras experiencing a relatively more impactful drop in levels of poverty than in
Page 28
Costa Rica Finally likely consequences on poverty equality education health and gender
issues in the EU were found to be negligible unlike in CA where small and indirect effects
were expected in terms of investments in health incentives through innovation brought by
technology dissemination and an overall positive impact on inclusiveness driven by the
Agreement (ECORYS 2009 pp 76-80)
On the environmental aspects the literature contributions can be split into two main
groups featured by contrasting interpretations on the EU-CA FTA impact Ultimately the
effectiveness of the TSD chapter will depend on the willingness of the involved government
to implement the EU-CA FTA provisions (EPRS 2018)
On the one hand the SIA and other studies flagged the likely harmful repercussions on
greenhouse gas emissions (GHG) stemming from agriculture fishing trade and transport
activities resulting from the EU-CA FTA application having a limited impact on the EU share
of CO2 emissions and a more tangible effect on some CA countries such as El Salvador
Honduras and Costa Rica in the long run (Alianza por la Solidaridad 2019 FAO 2013)
Moreover the increased agricultural activities resulting from the economic effects of the
EU-CA FTA (eg coffee melon sugar cane and peanut production) factories activities (eg
production of biofuels in Guatemala) as well as factoriesrsquo waste and maritime transports
could pose a threat to biodiversity and deforestation which could constitute a serious issue
owing to a large share of local biodiversity concentrated in CA especially if waste would
not be adequately managed (ECORYS 2009 pp 81-83 Zabalo et al 2019 FAO 2013
Monserrat et al 2011 OXFAM 2016 Rosa Luxembourg Stiftung 2010 Ruerd 2018)
On the other hand a share of the existing literature emphasised the opportunities for CA
countries originating from the EU-CA FTA This would be the case of Costa Rica which
would improve the national environmental regulatory framework mainly in relation to the
use of agrochemicals with likely positive impact for the environment since pineapple
production plays an important role in local economy (Esquivel 2020) A FAO study argued
that international trade in coffee (in particular exports to the EU) has improved the overall
environmental sustainability in CA The EU being the largest consumer of coffee worldwide
its (increasing) requirements on the sustainability of the coffee chain benefited the
adoption of environmental standards by the sector As a consequence coffee producers
are now required to provide more extensive and detailed certifications proving they comply
with environmental standards Therefore they have been paying more attention to
environmental aspects than before (FAO 2020)
A 2017 study (CEPAL 2017) investigated the impact of a CO2 tax on CA GDP Overall the
estimations indicated a negative impact of a carbon tax on GDP and the extent to which it
was found to impact the various local economies depended on the amount of the tax itself
Indeed an average tax value of 69 USD per tCO2e was found to impact the GDP by 062
A range between 5 and 10 USD would be optimal for Honduras and Nicaragua whereas a
tax between 20 and 50 USD would be optimal for Costa Rica El Salvador Guatemala and
Panama (CEPAL 2017)
Finally regarding human rights the EU-CA-FTA impact is difficult to assess for the region
as a whole since the intra-regional development varies a lot and it is difficult to discern
whether the CA movement towards a better respect for international standards on labour
and social rights depends on the implementation of the Agreement (European Parliament
2018 p 44) For example several experts and policymakers argue in favour of a stronger
enforcement mechanism of the TSD chapter (EPRS 2018) Its provisions referring to the
ILO conventions do not ensure the same level of labour and human rights protection as
the GSP+ mechanism (EULAC 2011) Overall despite some positive developments the
implementation of the TSD provisions led to a limited impact on the key challenges in the
CA region such as child labour freedom of association social dialogue or unpaid overtime
(EPRS 2018) The CA Womenrsquos Network also reported insufficient participation of women
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 29
during the negotiation process and it highlighted the risks of women subordination if strong
provisions on gender equality are not put in place (CAWN 2007)
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5)
51 Structure of the EU-CA FTA
The Agreement was initially signed in June 2012 by the EU and Central American countries
and the EU-CA FTA started its provisional application in 2013 It is in a process of
amendment through the Protocol of Croatiarsquos Accession to the Association Agreement
between the European Union and Central America which was signed in November 2020
(Joint Communique 2020) It allows Croatia to formally become part of the Agreement and
provides for amendments to some parts of the EU-CA FTA to account for the accession of
Croatia (eg Appendix 3 to Annex I related to special treatment of bananas Annexes
related to trade in services such as the lists of commitments on establishment cross-
border supply of services and reservations regarding the temporary presence of natural
persons for business purposes and Annexes related to Government procurement including
the list of contracting authorities etc) (European Commission 2020b)
Key features of the Agreement (Trade Pillar) can be summarised as follows Title by Title
Title I of the Agreement contains general principles provisions and definitions and
in particular defines the objectives of the EU-CA FTA which can be summarised as follows
(a) the expansion and the diversification of trade in goods between the Parties through
the reduction or the elimination of tariff and non-tariff barriers to trade (b) the facilitation
of trade in goods through in particular the agreed provisions regarding customs and trade
facilitation standards technical regulations and conformity assessment procedures as well
as sanitary and phytosanitary measures (c) the liberalisation of trade in services in
conformity with Article V of GATS (d) the promotion of economic regional integration in
the area of customs procedures technical regulations and sanitary and phytosanitary
measures to facilitate the circulation of goods between and within the Parties (e) the
development of a climate conducive to increased investment flows the improvement of
the conditions of establishment between the Parties on the basis of the principle of non-
discrimination and the facilitation of trade and investment among the Parties through
current payments and capital movements related to direct investment (f) the effective
reciprocal and gradual opening of government procurement markets of the Parties (g) the
adequate and effective protection of intellectual property rights taking into consideration
the differences between the Parties and the promotion of technology transfer between the
regions(h) the promotion of free and undistorted competition in the economic and trade
relations between the Parties (i) the establishment of an effective fair and predictable
dispute settlement mechanism and (j) the promotion of international trade and investment
between the Parties in a way that contributes to the objective of sustainable development
through joint collaborative work (Article 78)
Title II covers trade in goods and comprises the following chapters (1) market access
for goods which lays down provisions on the elimination of customs duties elimination of
export and import restrictions and export taxes and provisions on agricultural subsidies
(this is complemented by Annex I outlining schedules for elimination of customs duties
Annex II which concerns the definition of the concept of originating products and methods
of administrative cooperation Annex IV - special provisions on administrative cooperation
and Annex V on management of administrative errors) (2) trade remedies which discusses
anti-dumping countervailing and multilateral safeguard measures bilateral safeguards
and the applicable procedures (3) customs and trade facilitation which increases
transparency and promotes the facilitation of trade by simplifying customs procedures and
the adoption of risk management systems for customs inspections (it is complemented by
Annex III on mutual administrative assistance in customs matters) (4) TBT - technical
barriers to trade aiming at facilitating trade by identifying preventing and eliminating
Page 30
unnecessary barriers related to development adoption and application of standards
technical regulations and conformity assessment procedures it also reaffirms rights and
obligations under the WTO TBT Agreement foresees cooperation in market surveillance
transparency through the notification procedures and approach to marking and labelling
avoiding unnecessary burdens while ensuring that all necessary and accurate information
is provided (5) sanitary and phytosanitary measures which aims at protecting human
animal or plant life or health while avoiding unjustified barriers to trade it reaffirms rights
and obligations under the WTO SPS Agreement recognises concepts standards and
recommendations adopted by relevant international organisations (World Organisation for
Animal Health and International Plant Protection Convention) and foresees exchange of
information and cooperation by the Parties incl in cases of emergency (it is complemented
by Annex VI identifying competent authorities Annex VII defining requirements and
provisions for approval of establishment of products of animal origin Annex VIII setting
out guidelines for conducting verifications and Annex IX with points of contact) (6)
exceptions related to goods
Title III covers trade in services establishment and electronic commerce and is
complemented by annexes that detail the Partiesrsquo commitments according to the four
modes of supply or provide information Annex X includes commitments on establishment
(Mode 3) Annex XI lists commitments on cross-border supply of services (Modes 1 and
2) Annex XII outlines reservations regarding temporary presence of natural persons for
business purposes (Mode 4) Annex XIII lists commitments of the Republics of the CA Party
regarding key personnel and graduate trainees Annex XIV lists their commitments on
business service sellers and Annex XV provides a list of the relevant enquiry points
Title IV concerns liberalisation of current payments and movement of capital and
stipulates that the Parties shall authorise payments and transfers on the current account
between the Parties as well as transactions and capital movements related to foreign direct
investment and related transactions including liquidation and repatriation of investments
and profits It also envisages exceptions such as circumstances where payments and
capital movements cause or threaten to cause serious difficulties for the operation of
exchange rate policy or monetary policy or the liquidity of the economy in which case
the Parties may temporarily adopt safeguard measures)
Title V covers government procurement and is complemented by Annex XVI which
details the commitments of Parties in this area (eg procuring entities covered coverage
of procurement contracts under the Agreement media used for tender procedures and key
features of the process for awarding procurement contracts) The Agreement provides for
the Parties to have non-discriminatory access to public procurement procedures within the
scope of covered procurement and outlines general principles and rules for procurement
procedures (eg publication of notices participation in tenders technical specifications
documentation timeline awarding contracts etc) ensuring transparency and cooperation
Title VI covers intellectual property It reaffirms the Partiesrsquo commitments to various
relevant multilateral agreements (eg WTO TRIPS Agreement Convention on Biological
Diversity and Paris Convention for the Protection of Industrial Property) foresees exchange
of information and cooperation between the Parties in relation to technology transfer and
sets standards on the protection of intellectual property rights (IPR) including trademarks
geographical indications copyright and related rights industrial designs plant varieties
and patents The list of geographical indications to be protected is provided in Annex XVII
The Title also addresses enforcement measures for cases of infringement of IPR
Title VII concerns trade and competition in the economies of the Parties Under this
Title the Parties commit to adoption or maintaining comprehensive competition laws and
having appropriately equipped competition authorities They also consider as incompatible
with the Agreement the most harmful anticompetitive practices such as restrictive
agreements concerted practices abuse of dominance and concentrations of companies
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 31
that significantly impede effective competition The Title also stipulates that with regard to
state enterprises and designated monopolies there is no discrimination in exercised by such
entities regarding conditions under which goods or services are purchased or sold
Title VIII relates to trade and sustainable development It includes commitments to
effectively implement the eight ILO Fundamental Conventions and key multilateral
environmental agreements to which EU Member States and CA countries are Parties In
addition the Title includes specific provisions in relation to various thematic areas such as
sustainable forest management sustainable fisheries and trade supporting sustainable
development It establishes civil society advisory groups as part of institutional structure
and foresees a regular dialogue between the Parties and civil society incl in a dedicated
Civil Society Forum The Title also provides a dedicated dispute settlement mechanism
with government consultations consideration of the matted by the TSD Board and a Group
of Experts to examine the matter and formulate recommendation
Title IX relates to regional economic integration between the Central American Parties
and includes provisions on circulation of goods in trade between the EU and CA within the
EU and CA region respectively once a product entered their customs territory and when
the applicable rules and standards are met In this context the Title provides rules related
to customs technical barriers to trade and sanitary and phytosanitary measures (Annex
XX provides a list of CA technical regulations in the process of harmonisation)
Title X covers dispute settlement and outlines the related procedures including the
establishment of a panel its ruling and compliance
Title XI establishes mediation mechanism for non-tariff measures incl the selection
of a mediator the applicable procedure and implementation of the agreed solution
Title XII contains provisions on transparency and administrative procedures Among
other things the Parties commit to (i) ensuring that their measures of general application
(eg laws regulations judicial decisions procedures and administrative rulings) relating
to matters covered by the EU-CA FTA are promptly published or otherwise made readily
available to interested persons and (ii) providing reasonable opportunities for those
interested to comment on proposed measures and taking into account relevant comments
The Parties also commit to establish Points of Contact for matters related to EU-CA FTA
Title XIII addresses tasks of the institutional bodies in matters related to trade
ie the Association Council the Association Committee and specialised Sub-committees
(for details please see section 52 on the institutional set up)
Title XIV defines general exceptions to the Agreement related to the Partiesrsquo balance of
payments and taxation
52 Institutional set-up of the EU-CA FTA
The Association Council the Association Committee six Sub-committees and an Ad hoc
Working Group on Government Procurement (the latter not envisaged by the EU-CA FTA
but set up by the Parties in 2016) oversee the implementation of the Agreement
The Association Council established pursuant to Article 4 supervises implementation of
the Association Agreement it is composed of representatives of the EU and each of the six
CA countries has a decision-making power (binding upon the Parties) in cases foreseen in
the Agreement examines all major issues and questions of common interest It meets at
Ministerial level (or through representatives) at regular intervals not exceeding two years
In line with Article 345 when meeting to discuss matters under EU-CA FTA the Council
has the power to amend Annexes and Appendixes related to trade incl tariff elimination
schedules and goods included there originating products and methods of administrative
Page 32
cooperation Annex XVI (Government Procurement) Annex XVIII (Protected GIs) Annex
XIX (in relation to Article 306 animals animal-based products plants and plant-based
products subject to SPS measures) and Annex XXI (Sub-committees)
The Association Committee set up pursuant to Article 6 is responsible for the general
implementation of the Agreement and assists in this context the Association Council It is
composed of representatives of the EU and the six CA countries at the senior officialsrsquo level
and shall meet once a year to review the implementation It takes decisions foreseen in
the Agreement or delegated by the Association Council When acting within part IV of the
Agreement the Association Committee supervises work of Sub-committees established by
this part and may set up new ones prevents and resolves conflicts (without prejudice to
provisions related to the Dispute Settlement and Mediation Mechanisms) and recommends
decisions for adoption by the Association Council
The Agreement has also established six specialised Sub-committees
Sub-committee on Market Access for Goods (Article 91) is responsible for monitoring
the correct implementation and administration of the Trade in Goods Chapter and serves
as a forum for consultations about interpretation and application of its provisions It
examines proposals provided by the Parties regarding accelerated liberalisation of trade in
goods and tariff reduction as well as inclusion of additional goods into liberalisation
schedules It may make recommendations to the Association Committee on matters within
its remit and take any issue as and when instructed by the Association Committee
Sub-committee on Customs Trade Facilitation and Rules of Origin acting in line
with Article 123 monitors implementation of the Chapter and Annex related to the concept
of origin and methods of administrative cooperation It provides a forum to discuss and
consult all matters related to customs incl customs procedures valuation nomenclature
cooperation tariff regimes mutual administrative assistance in customs matters as well
as rules of origin It pursues cooperation on development application and enforcement of
customs procedures mutual administrative assistance in customs matters administrative
cooperation and rules of origin It examines requests for amendments of rules of origin
and submits to the Association Committee results of the analysis with recommendations
It also aims to enhance cooperation on capability building and technical assistance
Sub-committee on Technical Barriers to Trade (TBT) acting in accordance with Article
139 provides forum to discuss and consult any matter related to the Chapter and monitors implementation and administration of this Chapter facilitating exchange of information
and cooperation and promptly addressing any issue that either Party raises related to the
development adoption application or enforcement of standards technical regulations
and conformity assessment procedures It aims at solving any problems within the remit
of the Chapter that would limit trade between the Parties It encourages direct interaction
between non-governmental actors such as standard bodies accreditors and certifiers It
facilitates the exchange of information about the work being done in non-governmental
regional and multilateral fora engaged in activities related to technical regulations stan-
dardisation and conformity assessment procedures and explores ways to facilitate trade
between the Parties The Sub-committee has also power to review the Chapter in the light
of developments under TBT Agreement and reports to the Association Committee about
implementation of the Chapter including cooperation activities
Sub-committee on Sanitary and Phytosanitary Matters (SPS) acting in line with
Article 156 monitors implementation of the Chapter provides a forum for discussion and
consultation on any matter arising under the Chapter and an opportunity to seek mutually
acceptable solutions It may also develop procedures or arrangements facilitating
implementation of the Chapter It acts as a forum for consultations related to any measure
proposed by the EU which may affect its trade with any of the CA Parties and a forum for
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 33
dispute settlement under the Chapter The Sub-committee is also responsible for
promoting cooperation on animal welfare between the Parties
Sub-committee on Intellectual Property Rights (IPR) (Article 274) monitors
implementation of Article 231 (transfer of technology) and part of the IP Chapter related
to GIs including facilitating discussion about protection of GIsrsquo and recommendations to
the Association Committee regarding amendments to Annex XVIII on GIs It promotes
technology transfer from the EU to the CA Parties and defines priority areas in which
initiatives shall be directed regarding technology transfer research and development and
building-up human capital Its responsibilities include also keeping a registry of the
programs activities or initiatives in progress in the field of intellectual property with
emphasis on transfer of technology
Board on Trade and Sustainable Development (TSD) established pursuant to Article
294 reports to the Association Committee and oversees the implementation the TSD Title
incl cooperative activities undertaken under Title VI (Economic and Trade Development)
of Part III of the Agreement The decisions and recommendations of the Board shall be
adopted by mutual agreement between the Parties and be provided to the public unless
the Board decides otherwise
While EU-CA FTA does not envisage a Sub-committee on Government Procurement the
Parties concluded that it would be useful to have a dedicated body to address matters in
this area They decided to create a temporary Working Group that met for the first time
in June 2016 (European Commission 2017a)
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo
priorities
The negotiations for an Association Agreement (AA) including a Trade Pillar between the
European Union (EU) and Central America (CA) started in 2007 We look at the bloc-to-
bloc trade and policy context the negotiation process and priorities from both sides
The region-to-region trade context
The CA group is composed by Costa Rica Guatemala El Salvador Honduras Nicaragua
and Panama and it is featured by internal economic and political dialogue which led to the
creation of the Central American Common Market (CACM) in the early 1960s Despite the
initial momentum the regional integration process has been stopped for decades due to
internal tensions and the effects of import-substitution trade strategies on local economic
growth (European Parliament 2012) Consequently the initial goal of setting up a custom
union failed and CACM succeeded only in establishing a free-trade area (Duran et al 2010)
The Central American integration efforts were revitalised through setting up of the Central
American Integration System (SICA) aimed at promoting democracy development peace
and freedom in the region (European Source Online 2016) SICA was formally established
on 13 December 1991 through the signature of the Protocol to the Charter of the
Organization of Central American States (ODECA) also known as the ldquoTegucigalpa
Protocolrdquo SICA established both a political and an economic institutional framework by
setting up the Central American Parliament and the Central American Bank for Economic
Development Despite these changes CACM remained the main forum for trade discussions
(European Parliament 2012)
The EU is one of the three most important CA trading partners It is challenging to draw
general and unified conclusions for the whole CA trade picture given its domestic
heterogeneity with Panama and Costa Rica being middle-income countries and Nicaragua
the poorest member (European Parliament 2018 p 18) The EU countriesrsquo share of import
from and export to CA accounted for 30 and 16 respectively in the mid-1980s Among
Page 34
the CA members Guatemala appeared as the most export dependent one while Panama
was the least trade-oriented country (CEPR 2012 pp 6-7) The role of agricultural
production within the respective economies differs widely between the two regions
Agricultural production is very important for CA especially in Honduras and El-Salvador
(38 of the national production) whilst it is relatively much less important in the EU (5)
The same complementarities can be found in manufacturing production (amounting to 18
of the EU production which is much higher than in CA particularly in Panama (4) and
Nicaragua (25) Services contribute to almost 23 of the EU Nicaraguan and Costa Rican
GDP while this share is only 53 for El Salvador (Ibid pp 6-7)
The negotiation process
The start of the economic and political dialogue between the EU and CA blocks dates back
to 1984 at the first conference of Foreign Ministers between the EU and CA countries in
Costa Rica In 1993 the EU and the CA countries signed a Framework Cooperation
Agreement which entered into force on 1st March 1999 (Acuerdo-marco de cooperacioacuten
1999) On the occasion of the EU-Latin America Summit held in May 2002 these countries
and the EU jointly expressed their willingness to reinforce their dialogue by concluding a
new Political Dialogue and Cooperation Agreement which was signed on 15th December
2003 in Rome (Acuerdo de Diaacutelogo Poliacutetico 2003)
The need to establish stronger trade relations even by setting up a free-trade area pushed
the EU and CA to explore the feasibility of an Association Agreement entailing also a specific
chapter on trade Such intention was clearly stated during the EU-Latin America summit of
Guadalajara (Mexico) in May 2004 (Declaration of Guadalajara 2004 p 8 point 52) and
one year later in May 2005 in the context of the EU-Central American Ministerial meeting
in Luxembourg On that occasion the parties launched a joint-assessment exercise on
regional economic integration and established an ad-hoc working party (Council of the
European Union XXI San Joseacute Dialogue Ministerial Meeting between the EU and Central
America 2005 p 2) Finally at the Vienna Summit of 2006 the parties opened the door
to an Association Agreement to create a free trade area (Council of the European Union
EU-Central American Summit 2006 pp 1-2 points 2 and 3) The summit also welcomed
the initiative of the Peace Building and Commission and Human Rights Council (Ibid p 2)
The green light for the beginning of the AA negotiations was given on 28th June 2007 in
Brussels (EU and the Central American Community start negotiations for a new Association
Agreement 2007) However the talks were temporarily suspended on 6th April 2009 and
then resumed a few days later on 24th April (Acuerdo de Asociacioacuten entre Centroameacuterica
y la Union Europea 2009) when the parties decided to re-initiate the negotiations
The negotiating partiesrsquo priorities
The negotiating strategy of the CA countries mainly pursued three goals
Strengthening their trade policy whose objective is to open up new markets for the
benefits of their local exporters The EU appears as a crucial partner for CA countries
as it ranks on top of the worldrsquos largest importers of agricultural products and the
relative share of developing countries has been rising over time in the EU trade balance
Reinforcing CA countriesrsquo export competitiveness and reducing costs of accessing the
EU market vis-agrave-vis competitors such as African-Caribbean and Pacific (ACP) countries
that benefit from preferential and better market access conditions
Attracting foreign direct investments in high value-added sectors where the EU applies
higher tariffs (Duran et al 2010 pp 96-99)
From the European side the main reasons driving towards the conclusion of the agreement
with CA are threefold
Promoting the developing countriesrsquo progressive integration into the world economy
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 35
Reaffirming the EUrsquos role in the world trade and in CA following the United States (US)
conclusion of the Dominican Republic Central American and the United States Free
Trade Agreement (CAFTA-DR) reaffirming the US role in the region
Better coordinating with partners on trade dossiers within the World Trade Organization
(WTO) and other international institutions (Ibid p 100)
The conclusion of the Agreement
The negotiation process delivered slow progress due to the inability of CA countries to
reach a unified position and owing to the delays in the regional integration (European
Source Online cit p3) The agreement was finally reached in May 2010 when the
negotiations were officially concluded during the Latin America-Caribbean and European
Union Summit in Madrid Following the legal scrubbing the European Commission reviewed
and approved the agreement prior to signature at the Meeting of the SICA Presidents in
Tegucigalpa Honduras on the 29th of June 2012 (European Commission Directorate
General for Trade 2012) The European Parliament finally endorsed the AA in December
2012 forecasting that the main gains for the European side would be in export of cars
machinery telecommunications chemical products and transports (European Parliament
2012 p 1) At the time of the AA signature in 2012 the EU-Central America trade in goods
accounted to EUR 149 billion and corresponded to 113 of the whole CA region trade
with the rest of the world (Griener and Membersrsquo Research Service 2014 p 5)
On that date the then EU Commissioner for Trade Karel De Gucht commented the
successful conclusion of the AA by stating that the ldquoregion-to-region deal will help establish
major business opportunities for both sides European exporters will save around EUR 90
million on customs per year and European service providers such as telecommunication
and transport will get greater market accessrdquo At the same time the agreement would
generate ldquospill-over effect on Central Americarsquos overall economic integration process and
contribute to the stability of the regionrdquo (European Commission Ibid p 1) The
Commission officially announced the provisional application of the FTA with Honduras
Panama and Nicaragua on 31st July 2013 with Costa Rica and El-Salvador on 1st October
2013 and with Guatemala on 1st December 2013
The trade provisions of the AA provisionally entered into force in 2013 as they fall within
the exclusive competences of the EU17 Once the entire text of the AA will be ratified by
the EU Member Statesrsquo parliaments the entire text will be legally binding and applicable
After joining the EU in 2013 Croatia is currently negotiating its accession to the AA
54 Operational context of the implementation of the EU-CA FTA
After having illustrated the main partiesrsquo priorities during the bloc-to-bloc negotiations this
chapter provides an overview of the broader context surrounding the negotiations and
implementation and describes the main regional actors as well as their respective trade
policy attitudes towards CA and Latin American countries (LAC) as a whole
Trade policy context the multilateral system and the global economy
Since the launch of the EU-CA negotiations the global trade policy context has undergone
deep changes The Doha Development Agenda stalemate due to incompatible views on
various issues at stake put great pressure on the global trading system The WTO
difficulties in reaching satisfying outcomes stem both from external causes such as the
decline of advanced economies regionalisation of trade and internal sources of tensions
17 Despite being considered as a bloc-to-bloc association agreement the incomplete CA regional economic integration and the failure in setting up a custom union among the CACM countries left unbalances and inconsistencies in accessing single CA countriesrsquo markets and different levels of external tariffs In light of these arguments CA cannot be considered as a fully integrated homogeneous and unified trade bloc
Page 36
embedded in unilateral tariff-cutting process (Baldwin 2016) Besides these tensions the
economic expansion of China and the ldquotrade warsrdquo between the US and China exploded as
of 2017 The recent stalemate of the WTO Appellate Body that halted the entire dispute
resolution process as well as the need to put sustainable development at the core of the
WTO agenda pushed the Commission to advance a new WTO reform proposal (European
Commission 2021) The WTO crisis led to a proliferation of bilateral FTAs and the EU
has been an active bilateral FTA actor globally (see Table 4
Table 4 Overview of the EU FTAs launched and or concluded since 2012
Start of Negotiations
Signatory CountryRegion
State of play of the agreement
Ratification
1999 Mercosur Concluded in 2019 Ongoing
2004 SADC Concluded in 2016 Entered into force in 2016
2007 Andean Community Concluded in 2010 Entered into force in 2013
2007 Ukraine Concluded in 2011 Provisionally applied since 2016 fully in force since 2017
2009 Singapore Concluded in 2019 Entered into force in 2019
2009 Canada Concluded in 2014 Provisionally applied since 2017
2010 Malaysia On hold na
2012 Moldova Concluded in 2013 Provisionally applied since 2014 fully in force in 2016
2012 Georgia Concluded in 2013 Provisionally applied since 2014 fully in force since 2016
2012 Vietnam Concluded in 2015 Entered into force in 2020
2012 Japan Concluded in 2018 Entered into force in 2019
2013 USA On hold na
2013 Morocco (DCFTA new) On hold na
2013 Thailand On hold na
2015 Philippines On hold na
2015 Tunisia (DCFTA new) Ongoing na
2016 Mexico (modernisation) Concluded in 2018 Ongoing
2016 Indonesia Ongoing na
2017 Chile (modernisation) Ongoing na
2018 Australia Ongoing na
2018 New Zealand Ongoing na
2019 United Kingdom Concluded in 2020 Ongoing
2020 ESA (extension) Ongoing na
Source compiled by the author
The EU trade and policy context
Trade picture
The EU maintains strong institutional dialogue with Central and Latin America
legitimised by historic cultural and linguistic ties with the region The EU Latin America
and the Caribbean (LAC) bilateral summits have been regularly held since 1999 gathering
33 members from the two counterparts In 2006 the EU-Latin America Parliamentary
Assembly (EuroLat) was set up and it was conceived as the parliamentary angle of the EU-
CA bilateral partnership (EPRS 2017 p 5)
From a trade perspective the EU-Central and Latin America (comprising Andean
Community CA Cariforum Mercosur Mexico and Chile) trade peaked at EUR 2287 billion
in 2014 before showing a downward trend and decreasing at EUR 2132 billion in 2015
corresponding to 61 of the whole EU trade that year (EPRS 2017 p 6) The EU total
share of LAC trade fluctuated around 14 and the EU remained the first investor in the
region in the last ten years (EEAS 2018) An analysis carried out by the European
Parliament in 2020 unveils that the EU-LAC trade in goods value grew by 22 from 2008
to 2018 (Tvevad 2020 p 18) According to the 2020 DG Trade Report (data from 2019)
on the Implementation of EU FTAs trade flows between the EU and CA showed a robust
growth Indeed trade in goods increased by 88 with respect to the 2018 performance
imports continued growing over the past five years and exports statistics indicated an
overall upward trend with the exception of 2016 (European Commission 2020a p 110)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 37
In 2010 the EU was the second CA trading partner behind the United States (US)
accounting for 94 of the regionrsquos overall trade with the rest of the world (European
Commission 2011 p 4) Among the main exporters to the EU Costa Rica ranked first
with 539 of the total CA exports to the EU Conversely the EU exports went primarily
to Costa Rica (363) Guatemala (281) and El Salvador (152) (Ibid p 4) The EU-
CA trade is marked by the supply of primary products to the EU (mainly agricultural
products such as coffee and bananas) in return for high-technology manufactures
especially machinery transport equipment chemicals and manufactured goods (Duran et
al 2010 pp 95-96 European Parliament 2012 p 9) The CA share in the EU trade was
modest accounting only for 05 of overall EU imports in 2011 and for 03 of the total
EU exports in 2011 (European Parliament 2012 p 8) In addition the EU applied tariffs
on various agricultural products imported from third countries The exclusion of both coffee
and bananas from the EU Generalized System of Preference (GSP) and the GSP+ schemes
prevented these products from benefitting from tariff-reduction from the European side
hampering their access to the EU market and leaving their prices to be influenced by world
trade fluctuations (Duran et al 2012 p 98) The 2019 data confirmed primary products
rank largely first among SITC products grouping exported from CA to the EU accounting
for 721 of the whole exports followed by manufactures with 27 (European
Commission 2019 p 4) Recent statistics highlight the main destination of EU export
continued to be Panama (up to 118 since 2018) whereas the main country of origin of
EU imports is Costa Rica with an increase by 63 from 2018 (European Commission 2020
p 112)
The previous EU trade policy strategy adopted in 2015 (ldquoTrade for Allrdquo) confirmed that
ldquothe FTAs with Peru Colombia Ecuador and Central America are creating new dynamics
for trade and investmentsrdquo (European Commission 2015 p 33) As set out by that trade
policy strategy the Commission should pursue three main priorities with regard to Latin
and Central America ldquo[Continuing] negotiations for an ambitious balanced and
comprehensive FTA with Mercosur ldquoRequesting negotiating directives to modernise the
FTAs with Mexico and Chilerdquo ldquoBe ready to consider investment agreements with key Latin
American countriesrdquo (Ibid p 33)
As evidence for the increasingly robust commitment in the region the EU negotiated trade
deals with 27 out of the 33 LAC countries to strengthen both bilateral and region-to-region
relations the EU actively engaged LAC by signing new and modernising older EU-LAC FTAs
(see Table 5)
Table 5 EU FTA in Latin America and participating countries
Agreement Countries Negotiation launch
Negotiations Conclusion
EU-Andean Countries Colombia Ecuador Peru 2007 2010
EU-Caribbean (CARIFORUM)
Antigua and Barbuda Bahamas Barbados Belize Dominica Grenada Guyana Jamaica Saint Lucia Saint Vincent and the Grenadines Saint Kitts and Nevis Suriname Trinidad and Tobago and the Dominican Republic
2002 2008
EU-Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
2012 2010
EU-Chile na 2017 na
EU-Mercosur Argentina Brazil Paraguay Uruguay 1999 2019
EU-Mexico na 2016 2018
Source Compiled by the author
Regarding civil society the trade chapter of the EU CA FTA did not receive a lot of public
attention and consequently has not been affected by a high level of politicisation within
the EU This might stem from the relatively lower importance of trade relations with CA for
the EU Likewise the agreement did not catch a lot of public attention either in CA where
Page 38
the media coverage mainly focused on the Central America Free Trade Agreement (CAFTA)
Nevertheless both the agreements were targeted by NGOs and trade unions sharing the
same criticism and concerns over biodiversity pharmaceutical product access and
exploitation of natural resources (European Parliament 2011 p 16)
Political Dialogue
To frame the most recent developments in the EU LAC political dialogue it is worthy to list
three key documents forging the EU foreign policy towards LAC
The European Parliament Resolution on the Political Relations with Latin
America passed in 2017 advocating for a stronger more coherent and reinforced
relations with this region by stressing the need to update and develop a more
comprehensive and ambitious EU strategy to address the emerging challenges linked
to fundamental freedoms human and social rights safety of minorities migration
issues corruption tax fraud and security (European Parliament 2017)
The Joint Communication adopted by the European Commission and the High
Representative for Foreign Affairs (HRVP) in 2019 titled ldquoEuropean Union Latin
America and the Caribbean joining forces for a common futurerdquo aimed at deepening
the EU-LAC relations in a fast-changing context by emphasizing four mutually important
priorities prosperity democracy resilience and effective global governance (European
Commission 2019)
The Council of the EU Conclusions of 13th May 2019 endorsing the strategy laid
out in the Joint Communication On that occasion the Council welcomed the four points
described above and added more areas for action such as to work more closely in the
multilateral framework consolidate economic and social resilience enhance shared
prosperity and assist in promoting structural reforms (Council of the EU 2019)
The 2020 EU 27 ndash Latin America Informal Meeting reaffirming the need to advance
bilateral region-to-region summit to strive for a stronger multilateral system identified
mainly in the United Nations and the World Health Organisation (WHO) especially in
the light of the COVID-19 pandemic outbreak (Federal Foreign Office 2020)
Within the framework of the AA the EU and CA agreed to cooperate on a wide range of
policy dossiers of mutual interest namely conventional weapon disarmament the
implementation of the Convention on the Prohibition of the Use Stockpiling Production
and Transfer of Anti-personnel Mines and on their Destruction as well as the Convention
on Certain Conventional Weapons and its protocol (European Parliament 2011 p 7)
On development cooperation the EC regional strategy 2014-2020 earmarked EUR 925
million funding for Latin America to be allocated in two components
Component 1 ldquoMultiannual Indicative Programme for continental activities with Latin
Americardquo accounting for EUR 805 million and devoted to Argentina Bolivia Brazil
Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico
Nicaragua Panama Paraguay Peru Uruguay and Venezuela
Component 2 ldquoMultiannual Indicative Programme for Sub-Regional Cooperation with
Central Americardquo funded with EUR 120 million focused on Central American countries
Costa Rica El Salvador Guatemala Honduras Nicaragua and Panama This component
included three areas for action ie support for regional economic integration support
for the Regional Security Strategy and support for Regional Climate Change Strategy
and the Central American Policy on Comprehensive Disaster Risk Management (EEAS
European Commission 2014)
The Central American trade policy context
Regional Context
Beside their membership in the Central American Common Market (CACM) and the WTO
the CA countries have been signing additional free trade agreements with other regional
and international partners since 2012
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 39
It should be also noted that Panama joined the Latin American Integration Association
(LAIA) in 2012 LAIA replaced the Latin America Free Trade Agreement (LAFTA) signed in
1960 and sought a deeper economic integration among the member states18 Also
Nicaragua applied for the LAIA membership in 2011 and its request was accepted by the
LAIA Council of Minister in August 2011 Nicaragua is currently advancing in fulfilling the
LAIA membership requirements No other CA countries are members of LAIA yet
Table 6 summarises bilateral FTAs and Preferential Trade Agreements (PTAs) signed by the
6 CA countries or being in force since 2011
Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021)
Costa Rica Guatemala El Salvador
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Colombia (signed in 2013 entered into force in 2016)
Mexico (signed in 2011 entered into force in 2013)
Peru (signed in 2011 entered into force in 2013)
Singapore (signed in 2010 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
Ecuador (PTA) (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs signed but not entered into force yet South Korea (signed in 2018) EFTA (signed in 2013)
FTAs signed but not entered into force yet EFTA (signed in 2013) Ecuador (signed in 2011) Peru (signed in 2011)
FTAs signed but not entered into force yet South Korea (signed in 2018)
Honduras Nicaragua Panama
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Peru (singed in 2015 entered into force in 2017)
Canada (signed in 2013 entered into force in 2014)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2014 entered into force in 2015)
Peru (signed in 2011 entered into force in 2012)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet Israel (signed in 2018) South Korea (signed in 2018) Colombia (signed in 2013) EFTA (signed in 2013) Trinidad amp Tobago (PTA)
(signed in 2013)
Source Compiled by the author
Other influential partners in CA
As illustrated by Table 7 three actors retain significant economic influence in CA and Latin
America as a whole the EU the US and China The following section will examine these
actors and their respective trade policies towards CA and Latin America by describing their
posture as well as the agreements in force
18 Argentina Bolivia Brazil Chile Colombia Cuba Ecuador Mexico Paraguay Panama Peru Uruguay Venezuela
Page 40
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking
SubregionCountry
EU total trade in goods (value in EUR billion)
Ranking of main trading partners for trade in goods
2016 2019
2016 2019 USA China EU19 USA China EU27
Andean Community 3 250 246 1 2 3 1 2 3
ACP ndash Caribbean 15 81 116 1 3 2 1 3 2
Central America 6 108 121 1 3 2 1 3 2
Chile 159 166 3 1 2 2 1 3
Mercosur 4 849 771 3 2 1 3 1 2
Mexico 538 618 1 2 3 1 2 3
Source EPRS 2017 p 6 and DG Trade statistics 2020
The US remains the key CA partner The US is the major source of Foreign Direct
Investments (FDI 273) and Official Development Aid allocating an annual average of
approximately USD 1600 million during the Trump Administration (2016-2020)
(Congressional Research Service 2021) Moreover the US rank on top of CA migrant
destinations (Belladonna 2019) The CA countries have been cultivating thorough relations
with the US as they represent the historical destination of over 40 of the regionrsquos
exports Furthermore the 2004 Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA) granted preferential market access conditions to the region (Office
of the US Trade Representative 2004 and Duran et al 2010 p 93) In light of the strong
power exerted by the US the EU trade strategy pursued a progressive rebalancing of the
US presence in the area to ensure better market access in the region (EPRS 2017 p 5)
The DR-CAFTA negotiations confirmed that labour standards sugar and textile products
treatment pharmaceutical data protection and sovereignty issues were the most
controversial and sensitive matters on the table Unlike the EU-CA AA it should be noted
that the DR-CAFTA does not build any common trade framework for all the signatories as
the US grants differentiated market access conditions to each single CA country (European
Parliament 2012 p 11)
In the last few years China has been playing a role of growing importance in CA and in
Latin America both from a political and trade viewpoint (European Commission 2020 p
15) In recent years China has reinforced its role as trading partner within CA As evidence
for this active involvement the 2000-2010 data already confirmed the Asiarsquos importance
(led by China) both in terms of imports and exports in Latin America and Caribbean20
Indeed the China share of the regionrsquos total exports by destination grew from 11 in
2000 to 83 in 2010 with regard to imports by destination the growth appears even
more remarkable moving from 18 in 2000 to 133 in 2010 (Kuwayama amp Rosales
2012 p 66) whilst the relative share of the US presence has shown a downward trend
(Ibid p 65) The monthly exports to Asia-Pacific21 region more-than-doubled from an
average value of USD 54 billion in 2006 to USD 162 billion in 2014 (Baacutercena Prado
Rosales Peacuterez 2015 p 23) After a slight decline experienced in 2016 a solid rebound
emerged in 2017 On average goods shipment from Asia-Pacific Latin America grew by
136 yearly between 2000 and 2016 (Scotiabank 2018 p 1)
Beside trade China has been recently advancing its Belt and Road Initiative (BRI) in
the region by concluding numerous Memoranda of Understanding (MoU) with various LA
19 Including the United Kingdom 20 Data refers to Argentina Bolivarian Republic of Venezuela Brazil Chile Colombia Costa Rica the Dominican
Republic Ecuador El-Salvador Guatemala Honduras Mexico Nicaragua Paraguay Peru Plurinational State of Bolivia
21 The Asia-Pacific region includes Australia Brunei Darussalam Cambodia China South Korea Philippines Hong Kong Japan Laos Thailand Taiwan Indonesia Malaysia Myanmar New Zealand Singapore and Vietnam
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 41
and CA countries To mention some Bolivia (2018) Costa Rica (2018) Chile (2018) and
Panama (2017)
6 CONSULTATIONS (TASKS 6 AND 7)
61 Consultation Strategy
The consultation strategy presented in the technical offer has been refined during the
Inception Phase (Task 6) and is outlined in Annex B Box 2 summarises our expectations
regarding the main inputs expected from stakeholders throughout the study
Box 2 Expectations regarding inputs from stakeholders
Inputs from stakeholders are expected at all stages of the study
The study team will welcome in particular Responses to the online public consultation Consultation with businesses (responses to the online business survey) Evidence of specific casesexamples on how the Agreement has affected economic performance
sustainable development and human rights both in Central America and in the EU Contributions will be particularly welcome in relation to the priority areas of analysis o Impact of the Agreement on trade diversification (in terms of goods and services traders regions
involved in trade etc) (see Task 101) o Impact on investment climate and investment flows (see Task 102) o Impact of the Agreement on SMEs (see Task 1012) o Effects of the implementation of the TSD chapter (see Task 111) o Performance of the institutions established under the TSD chapter (see Task 112) o Impacts of the Agreement on pillars of Decent Work Agenda working conditions labour standards
social protection other public policies and labour inspection (see Task 114) o Impacts on the informal economy and informal employment (see Task 115) o Environmental impacts (see Task 116) and o All of the case studies
Written contributions (positions) expressing views on how the Agreement has affected economic performance sustainable development and human rights across the parties in particular with regard to ndash but not restricted to ndash the analytical priority areas
Indication of relevant publications that focus on the impact of the Agreement in the partner countries Indication of actions taken by CA in areas covered by the TSD chapter (eg changes in policies action
plans strategies and legislation in the areas of labour environment and climate change ratification and implementation of international conventions in these areas and civil society engagement)
Written comments on the draft Inception Report draft Interim Report and draft Final Report Proposals for and comments on draft conclusions and recommendations of the report including how to
improve operation of the Agreement (if needed) Names of organisations or indication of vulnerable groups that may have been affected by the
Agreement in the partner countries as well as relevant contact details for the evaluation team to reach out to the most relevant additional stakeholders
62 Study Website and Electronic Communications
The establishment and continuous updating of a website as well as ongoing electronic
communications with stakeholders are one element of the consultation strategy During
the inception phase the website has been established and launched and an initial e-
communication will be sent out to identified stakeholders (Task 5) The website is available
at httpcentral-americafta-evaluationeu
Electronic communication with stakeholders will take place through email newsletters as
well as Twitter using an account for this ex-post evaluation (CaEvaluation) Twitter will
be used as well to present the (draft) findings at specific moments in the study interested
related work or articles highlights or relevant quotes from the consecutive study reports
and promote the various outreach activities such as workshops LinkedIn will be used to
complement twitter with the same objectives the account of LinkedIn to be used will be
Ex-Post Evaluation EU-Central America FTA Email and an electronic newsletter will be used
as complementary tools to reach specific stakeholders throughout the study to inform them
Page 42
of events to send questions receive feedback and make appointments for interviews the
email used will be central-americabkp-advisorscom
With the COVID-19 pandemic still in place and governments imposing new lockdowns and
travel restrictions a back-up plan is available in case a lot of the communication has to be
done online The meetings with the EU and CA stakeholders both government and civil
society in the near future will be held online For the second half of the year and beginning
of 2022 face-to-face meetings may also be an option The advantage of digital outreach
is linked to reduction of travel time and travel costs to the minimum and in addition digital
follow-up is easier The public consultation and online business survey are already being
prepared and planned with an indicative timeline of online availability between June and
September 2021 The workshops envisaged for Central America in November 2021 are
currently planned with options ranging from face-to-face meetings over hybrid solutions
to holding them entirely online In either case we will ensure they are as interactive as
possible thanks to the use of breakout rooms and platforms enabling participants to ask
questions and participate in polls online We will also ensure that participants will receive
sufficient information before workshops
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13)
71 Case Study Selection
As part of the evaluation ten case studies will be prepared Their purpose is to capture the
impact of implementation of the EU-CA FTA on sustainable development in its economic
social and environmental dimensions as well as on human rights (including labour rights)
They should complement the economic social environmental and human rights analysis
required under Tasks 10 11 and 12
Regarding the geographic coverage the ToR require two case studies focused on the EU
two horizontal case studies for the whole region of Central America and six dedicated to
each of the Central American countries
Table 1 provides a preliminary list of suggested case studies while their exact focus and
scope will be determined at the next stage of the study further to preliminary impact
analysis and identification of relevant information and data sources
Table 8 List of proposed case studies
No Case study topic Geographical focus Key impact areas
1 Impacts of the Trade Pillar on EU banana producers EU incl OR as well as ACP and LDCs due to preference erosion
Economic and Social
2 Trade in environmental goods and services (opportunities for the EU and partner countries)
EU CA partner countries22
Economic and Environmental
3 Impacts of the Trade Pillar on freedom of association in sectors involved in trade with the EU (the choice of sectors will be made further to the initial impact analysis)
CA partner countries notably Guatemala Honduras and El Salvador
Human rights and Social
4 The effects of the Trade Pillar on sustainable aquaculture in Honduras Nicaragua Costa Rica and El Salvador
Partner countries with a focus on Honduras Nicaragua Costa Rica El Salvador
Economic Social Human rights and Environmental
5 Opportunities created in services sector in particular the green energy sector in Costa Rica (the choice of the services sector will be reviewed based on the initial impact analysis)
CA partner countries Economic and Environmental
22 The ultimate selection of countries will depend on the outcome of the (environmental) impact screening and scoping exercise
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 43
No Case study topic Geographical focus Key impact areas
6 Impacts of the Trade Pillar on child labour and childrens rights
El Salvador Social and Human rights
7 Impacts of the Trade Pillar on the environment (eg forests and biodiversity) in Guatemala the case of palm oil
Guatemala Environmental
8 Impacts of the Trade Pillar on MSMES and sustainable agriculture in the coffee industry (organic coffee) in Honduras
Honduras Economic and Environmental
9 Impacts of the Trade Pillar on women and gender equality notably in agricultural value chains in sectors exporting to the EU (the sectors may include coffee ground nuts and banana however the final selection of sectors and scope will be made based on data availability and the initial impact analysis)
Nicaragua Social and Human rights
10 Implementation and effect of the FTZ in port of Colon including aspects related to direct transportation clause
Panama Economic
72 Case Studies ndash Summaries and Methodologies
Descriptions of case studies and planned methodologies have been provided in Annex A5
8 STUDY WORK PLAN
A detailed study schedule which sets out activities and deadlines for outputs indicated
throughout this Inception Report is outlined in the chart overleaf A detailed plan for the
consultation programme is provided in Annex A4 Annex A6 provides the risk management
approach for the evaluation
Page 44
Phase task deliverable
Inception phase
Kick-off meeting with Commission in Brussels 20
Task 1 Refine draft intervention logic diagram
Task 2 Define and develop the methodological approach
Task 3 Review existing studies amp reports on trade between the EU and CA (6 countries)
Task 5 Provide a concise description of the agreement
Task 6 Create a website dedicated to the evaluation
Task 7 Stakeholder consultation strategy
Task 13 Case study proposals
Inception reporting
Drafting of inception report
Draft Inception Report 22
Review meeting Commission ISG
Finalisation of the Inception Report
Inception Report
Interim phase
Task 4 Provide a concise summary
Task 8 Undertake consultation activities
Civil society dialogue in Brussels (budgeted under review meetings)
12-week online public consultation
Online survey for business users interests in both the EU MS and partners
Workshops in partner countries
Other targeted consultations
Task 9 Assess the EU-Central American TSIA
Task 10 Analyse economic effects
Task 11 Analyse effects of implementation on SD economic social environmental
Task 12 Analyse effects on Human Rights
Task 13 Conduct in-depth case studies based on field work
Interim reporting
Drafting of Interim Technical Report
Annexes Progress evaluation Quantitative tables 10-page stakeholder report CS reports
Draft Interim Technical Report 20
Review meeting Commission ISG
Finalisation of Interim Technical Report
Interim Technical Report `
Final phase
Task 13 Conduct in-depth case studies based on field work
Task 14 Reply to the evaluation questions
Task 15 Provide conclusions and recommendations
Tasks 1 45 9 and 10 - 15
Final reporting
Drafting of draft final report
Synthesis report
Executive Summary
Annexes
Draft final report 20
Review meeting Commission ISG
Finalisation of final report
Translation executive summaries (EN FR GE SP)
Final report 20
Possible exit meeting 20
Progress reports
The ToR speci fies 12 weeks for the survey we tentatively propose 16 weeks because the time schedule a l lows i t and i f the project s tarts in January the survey would fa l l in the hol iday season in EuropeCA which would not be conducive for responses
Key
Meeting with the European Commission
Concrete deliverable (eg Inception Report)
Key
Working on the evaluation and endpoints of work per task
Stakeholder consultation activities and meetings
MayAprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr
HOW TO OBTAIN EU PUBLICATIONS
Free publications
bull one copy
via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps
from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)
from the delegations in non-EU countries
(httpeeaseuropaeudelegationsindex_enhtm)
by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm)
or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
Priced subscriptions
bull via one of the sales agents of the Publications Office of the European Union
(httppublicationseuropaeuothersagentsindex_enhtm)
doi[number]
[Cata
logue n
um
ber]
Page 6
Image(s) copy [artists name + ge ] Year Source [Fotoliacom] (unless otherwise specified)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page vii
ABSTRACT
Since 20131 the European Union (EU) has been implementing the Trade Pillar ie the
Part IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The European
Commission has now commissioned a consortium led by BKP Economic Advisors to
undertake an evaluation of the Trade Pillarrsquos (hereinafter EU-CA FTA) implementation and
impact The evaluation is undertaken over the period January 2021 to May 2022 and
analyses the economic social environmental and human rights (including labour rights)
effects which the EU-CA FTA has had since its entry into force in the Parties to the
Agreement and third countries In terms of evaluation criteria it will review the
effectiveness impact efficiency coherence and impact of the EU-CA FTA and its
implementation It will also comprise ten case studies to illustrate or add detail to broader
findings
This Inception Report presents the evaluation methodology a descriptive summary of the
Agreement and its implementation so far and a brief review of relevant studies on the EU-
CA FTA
1 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El Salvador since 1st October 2013 and with Guatemala since 1st December 2013
Page viii
TABLE OF CONTENTS
LIST OF BOXES TABLES AND FIGURES IX
ACRONYMS X
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES 1
2 EVALUATION FRAMEWORK 2
21 Intervention hypothesis of the Agreement (Task 1) 2
22 Evaluation Questions Judgement Criteria and Indicators 5
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2) 6
31 Analysis of economic effects (Task 10) 6 311 Task 101 Analysis of the evolution of trade in goods 6 312 Task 102 Analysis of the evolution in trade in services 8 313 Task 103 Analysis of the evolution of foreign direct investment (FDI) 8 314 Task 104 Presentation of overall economic impacts 9 315 Task 105 Determining the impact on implementation of the Trade Pillar of the various
institutional structures 9 316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated exportimport procedures for key stakeholders 10
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the Trade Pillar 10
318 Task 108 Analysis of the implementation of the Government Procurement chapter of the Trade Pillar 10
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar 10 3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has led to a
greater economic integration between the Central American partners 11 3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for imports of
bananas 11 3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on SMEs 11 3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers 11 3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on the
budgets of the EU and the partner countries 12 3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on EU
Outermost Regions (ORs) 12 3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on developing
countries in particular on LDCs and countries having an Economic Partnership Agreement (EPA) with the EU 12
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable development (Tasks 11 and 12) 13 321 Task 111 Analysis of the effects of implementation of the Trade and Sustainable
Development (TSD) chapter of the Trade Pillar 13 322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter 13 323 Task 113 Analysis of employment impacts 14 324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda (job
creation labour standards social protection and social dialogue) on working conditions
poverty reduction and enforcement 14 325 Task 115 Analysis of impacts on the informal economy and informal employment 15 326 Task 116 Analysis of impacts on gender inequality 16 327 Task 118 Analysis of impacts on the adoption and implementation of internationally
recognised instruments of responsible business conduct and Corporate Social Responsibility (CSR) 17
328 Task 117 Analysis of environmental impacts 18 3281 Activity 1 Fine-tuned methodology and impact screening and scoping 19 3282 Activity 2 Establishing the baselines for the impact areas 20 3283 Activity 3 Quantitative evaluation of impacts 20 3284 Activity 4 Qualitative evaluation of impacts 21
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page ix
3285 Activity 5 Answering of the evaluation questions and other concluding remarks 21 3286 Conclusions and recommendations 21
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human rights 21 3291 Human rights baseline 22 3292 Screening and scoping 22 3293 Detailed assessment 23 3294 Conclusions and recommendations 24
33 Concluding tasks 24
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3) 25
41 Methodological aspects 25
42 Substantive issues 25
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5) 29
51 Structure of the EU-CA FTA 29
52 Institutional set-up of the EU-CA FTA 31
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo priorities 33
54 Operational context of the implementation of the EU-CA FTA 35
6 CONSULTATIONS (TASKS 6 AND 7) 41
61 Consultation Strategy 41
62 Study Website and Electronic Communications 41
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13) 42
71 Case Study Selection 42
72 Case Studies ndash Summaries and Methodologies 43
8 STUDY WORK PLAN 43
LIST OF BOXES TABLES AND FIGURES Box 1 The use of the DPSIR framework in FTAs 20 Box 2 Expectations regarding inputs from stakeholders 41 Table 1 Methodological approaches and sources for the analyses of trade in goods 6 Table 2 Methodological approaches and sources for the analysis of trade in services 8 Table 3 Methodological approaches and sources for the analysis of bilateral FDI 8 Table 4 Overview of the EU FTAs launched and or concluded since 2012 36 Table 5 EU FTA in Latin America and participating countries 37 Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021) 39
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking 40 Table 8 List of proposed case studies 42 Figure 1 Overall evaluation approach 2 Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association
Agreement 3 Figure 3 Overview of the multi-pronged approach to human rights impact assessment 24
Page x
ACRONYMS
AA Association Agreement ACP African Caribbean Pacific BATIS Balanced Trade in Services CA Central America CCA Causal Chain Analysis CGE Computable General Equilibrium CPI Consumer Price Index CSD Civil Society Dialogue CSR Corporate Social Responsibility DAG Domestic Advisory Group DG Directorate-General ECLAC Economic Commission for Latin America
and the Caribbean EESC European Economic and Social Committee EFTA European Free Trade Association EP European Parliament EQ Evaluation Question EU European Union EU-CA FTA Trade Pillar of the EU-Central America
Association Agreement FDI Foreign Direct Investment FRA EU Agency for Fundamental Rights FTA Free Trade Agreement GATS General Agreement on Trade in Services GDP Gross Domestic Product GHG Greenhouse Gas GIs Geographical Indications GPA Government Procurement Agreement GSIM Global Simulation GSP Generalised Scheme of Preferences GTAP Global Trade Analysis Project HRIA Human Rights Impact Assessment ILO International Labour Organisation IPR Intellectual Property Rights ITC International Trade Centre
JC Judgement Criterion LDC Least Developed Country LULUCF Land use land use change and forestry MFN Most-Favoured Nation MSME Micro Small or Medium-sized Enterprise NGO Non-Governmental Organisation NTB Non-Tariff Barrier OECD Organisation for Economic Cooperation and
Development OHCHR Office of the United Nations High
Commissioner for Human Rights OR Outermost Region
RBC Responsible Business Conduct RoO Rules of Origin SDGs Sustainable Development Goals SIA Sustainability Impact Assessment SICA Central American Integration System SIECA Secretariat for Central American Economic
Integration SME Small or Medium-sized Enterprise SPS Sanitary and Phyto-Sanitary TBT Technical Barriers to Trade TISMOS Trade in Services data by mode of supply ToR Terms of Reference TRIPS Trade-Related Aspects of Intellectual
Property Rights TRQ Tariff Rate Quota TSD Trade and Sustainable Development UN United Nations UNCTAD United Nations Conference on Trade and
Development UNECE United Nations Economic Commission for
Europe WTO World Trade Organisation
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 1
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES
Since 20132 the European Union (EU) has been implementing the Trade Pillar ie Part
IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The Trade Pillar
(hereinafter EU-CA FTA) gradually opens markets on both sides increases the stability and
predictability of the trade and investment environment and aims at creating benefits for
consumers and fostering sustainable development Its objectives include also support for
regional economic integration in Central America This is also one of the first EU ldquonew
generationrdquo trade agreements characterised by its comprehensive scope that covers in
addition to liberalisation of trade in goods and services investment public procurement
competition intellectual property rights and trade and sustainable development
After several years of implementation an evaluation is undertaken with the objective of
analysing the economic social environmental and human rights (including labour rights)3
impacts of the implementation of the EU-CA FTA and ultimately of determining whether
there is a need to improve its implementation To support the European Commissionrsquos own
evaluation of the Agreement the Directorate-General (DG) for Trade has awarded a
contract for the ldquoEx-post evaluation of the implementation of part IV of the Association
Agreement (Trade Pillar) between the EU and its Member States and Central Americardquo to
a consortium led by BKP Economic Advisors (BKP) The evaluation is carried out by a team
involving experts from BKP Trade Impact BV Trinomics the Foundation Rural
Development Consult (CDR) the NL-investmentconsulting BV and the University of Costa
Rica The work started in January 2021 and will continue until May 2022
The scope of the evaluation can be delineated as follows in terms of the period covered
it includes the whole implementation period of the EU-CA FTA since the start of provisional
application in 2013 up to now also comparing where appropriate with a five-year period
preceding the entry into force of the Agreement (ie starting in 2008) Geographically it
primarily covers the Parties to the Agreement although some effects of the EU-CA FTA on
selected third countries are also analysed such as developing countries and particularly
least developed countries (LDCs) moreover some global effects (eg climate change)
will also be covered Regarding evaluation criteria effectiveness impact efficiency
coherence and relevance will be considered Finally as already mentioned in terms of
types of effects considered the evaluation will cover economic social environmental and
human rights (including labour rights) effects which the EU-CA FTA may have had either
as a result of the changes in trade it has brought about or through the implementation of
the provisions of the Agreement text itself notably those of the Trade and Sustainable
Development (TSD) chapter
Although most data to be considered for the evaluation are likely to refer to the world pre-
COVID-19 the pandemic will have an impact on the study First in terms of the evaluation
implementation it is likely to affect the consultation activities that may need to be carried
out online rather than in person Second in substantive terms it will be important to pay
attention to issues which are of a priority for stakeholders in the current circumstances
(eg by selecting case studies accordingly) and to consider that eg stakeholder views
might be affected by the current situation
This inception report is the first deliverable under the contract It comprises seven tasks
of the evaluation (as established in the Terms of Reference see Figure 1) focusing on the
presentation of the evaluation methodology and is structured as follows Chapter 2
2 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El-Salvador since 1st October 2013 and with Guatemala since 1st December 2013 3 Whenever this report refers to human rights this includes labour rights
Page 2
presents the evaluation framework with an intervention hypothesis (task 1) while Chapter
3 outlines the proposed methodology responding to the evaluation questions (task 2) and
Chapter 4 covers a brief review of relevant studies on the Agreement (task 3) Chapter 5
provides a descriptive summary of the EU-CA FTA and its implementation so far (task 5)
followed by outline of consultation activities in Chapter 6 (tasks 6 and 7) supported by the
consultation strategy provided in Annex B as well as a list with a preliminary selection of
case studies in Chapter 7 (task 13) The final part includes study work plan in Chapter 8
The draft outline of the interim and final evaluation reports is presented in Annex A7 Other
parts of the Annex provide further details on certain elements of the report
Figure 1 Overall evaluation approach
2 EVALUATION FRAMEWORK
21 Intervention hypothesis of the Agreement (Task 1)
An indicative intervention hypothesis developed by the Commission linked the operational
objectives (as listed in Article 78 of the EU-CA FTA) to specific and overall objectives set
out in Article 2 of the Agreement and its Recitals In line with Task 1 of the evaluation ToR
we have adapted the intervention logic developed by the Commission as follows
All 10 operational objectives listed in Article 78 of the Agreement have been included
Specific and overall objectives have been considered in the context of short-term and
medium-term outcomes as well as long-term impacts
Underlying assumptions have been identified and integrated into the intervention
hypothesis
The relationship between the evaluation questions (EQ) and the intervention hypothesis
has been specified
The updated version of the intervention hypothesis is presented in Figure 2 overleaf
The intervention hypothesis was also instrumental in developing the analytical framework
of the evaluation which brings together the evaluation questions of the ToR the associated
judgment criteria and indicators the data sources and the methodological tools with which
we will collect data The refined analytical framework is presented in the following sub-
section
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 3
Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association Agreement
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 5
Main assumptions (at the level of coherence)
Pillar IV and its implementation has been coherent with the EUrsquos trade and development
policies and in particular with the EUrsquos commitment to sustainable development in
trade policies as a contribution towards attainment of the SDGs (EQ8)
Main assumptions (at the level of efficiency)
The utilisation rate of the Trade Pillar is high (EQ5)
Implementation of the Trade Pillar does not lead to trade diversion (EQ5)
Costs associated with implementation of the Trade Pillar are proportionate to the
benefits it has generated (EQ6)
The distribution of both costs and benefits is proportionate among different
stakeholder groups and interests (EQ6)
Implementation of the Trade Pillar does not create unnecessary regulatory costs
(including administrative burden) (EQ7)
Main assumptions (at the level of effectiveness impact and relevance)
The implementation of the Trade Pillar does not create unintended negative
consequences (EQ3)
The positive impact of the Trade Pillar is inclusive and does not benefit only a limited
group of stakeholders (EQ6)
Implementation of the Trade Pillar has contributed to trade diversification (EQ5)
Provisions of the Trade Pillar continue to be relevant for strengthening trade relations
between the Parties and regional integration of Central America (EQ9)
22 Evaluation Questions Judgement Criteria and Indicators
The evaluation framework has been based on the evaluation questions listed in the ToR for
the study which are as follows
EffectivenessImpact
EQ 1 To what extent have the objectives as laid down in Article 78 of Part IV of the
Agreement been achieved
EQ 2 What are the factors influencing (either positively or negatively) the achievements
of the objectives specified in Article 78
EQ 3 Has implementation of the Trade Pillar had unintended (positive or negative)
consequences and if so which ones
EQ 4 What has been the impact of implementation of the Trade Pillar
Efficiency
EQ 5 To what extent has implementation of the Trade Pillar been efficient with respect
to achieving its objectives
EQ 6 To what extent are the costs associated with implementation of the Trade Pillar
proportionate to the benefits it has generated Is the distribution of both costs and
benefits proportionate among different stakeholder groups and interests
EQ 7 Are there unnecessary regulatory costs (including administrative burden)
Coherence
EQ 8 To what extent has implementation of the Trade Pillar been coherent with the
EUrsquos trade and development policies ndash and in particular with the EUrsquos commitment to
sustainable development in trade policies as a contribution towards attainment of the
SDGs
Relevance
EQ 9 To what extent do the provisions of the Trade Pillar continue to be relevant in
order to address the current trade needs and issues of the EU and Central America
Page 6
The framework provides the evaluation questions the judgement criteria for each of them
the analysis needed to substantiate findings and conclusions made in the evaluation report
and the sources through which data and information will be obtained The evaluation
framework also links evaluation questions and judgement criteria to the analytical tasks to
be performed according to the ToR Table 1-1 in Annex A1 presents this framework
It should be noted that methodological tools and indicators used are not shown in the table
but are explained in the next chapter
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2)
In this chapter we describe the methodologies and tools planned to be used in the
evaluation separately for each task The analysis will be concluded with recommendations
on how the implementation of the Agreement can be further improved for the benefit of
the EU and Central American partner countries It should be noted that the structure of
the presentation is in line with the tasks defined in the ToR to facilitate comparison and
compliance with ToR requirements However the order of findings will be guided by the
evaluation framework presented in chapter 2 To facilitate the link with the evaluation
framework for each task we indicate to which evaluation question respectively judgement
criterion it contributes
31 Analysis of economic effects (Task 10)
In 2010 the EU was Central Americarsquos second most important trade partner after the
United States (and after intra-regional Central American trade) The total value share of
the EU in Central American trade was 94 EU exports mainly went to Costa Rica (53)
Honduras (22) and Guatemala (12) In 2018 the EU was still Central Americarsquos second
trade partner after the United States but with a higher share of 122 of all Central
American trade (IMF 2019) In 2019 Central Americarsquos trade with the US (in both goods
and services) totalled USD 70 billion (ie EUR 678) (USTR) Trade in goods with the EU
reached EUR 12 billion in 2019 and trade in services EUR 82 billion in 2018 (European
Commission 2020a)
311 Task 101 Analysis of the evolution of trade in goods
Analysis under this task will seek to respond to the evaluation questions related to JC 1A1
1A2 and JC 41 The EU-CA FTA offers advantages in terms of market access for the EU
and Central American countries Some of the main elements of the Agreement regarding
goods exports from the EU to Central America are complete liberalisation of tariffs for
manufactured goods and fisheries at the end of the tariff phase-out period and immediate
liberalisation of 69 of EUrsquos exports to CA at the start of the agreement saving EUR87
million in duties annually Specific analyses to be carried out under Task 101 have been
summarised in Table 1 For each sub-task we present the specific analysis that needs to
be carried out and main methodological approach we suggest as well as relevant data
sources
Table 1 Methodological approaches and sources for the analyses of trade in goods
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
1 Goods showing the largest increase or decrease in total and bilateral trade flows
Using COMEXT statistics at different disaggregation levels the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing products
2 Development of trade in goods against previously applicable GSP+ and GSP tariffs
Taking COMEXT data as a basis to investigate whether the GSP status of a product has a bearing on how the EU-CA FTA has influenced the rate of growth in trade we will compare two groups of goods those for which tariffs were 0 under GSP versus those for which tariffs were greater than 0 under GSP+
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 7
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
3 Preference utilisation rates and forgone duty saving of economic operators of all Parties
Based on COMEXT data (for EU imports) and data provided by the Commission (for EU exports) a quantitative analysis will be undertaken to identify the key sectors and product categories where preferences are not fully used We propose to include up to 3 questions in the survey to identify factors that encourage discourage companies to use the Agreement
4 Use of tariff rate quotas (and the reasons for suboptimal use)
Data up to 2019 is already available in the Commissionrsquos annual implementation reports Updating the data is supposed to rely on similar sources as the Commissionrsquos annual reports Reasons for sub-optimal use of TRQs will be investigated during the consultations as this cannot be inferred through statistical analysis
5 Trade diversion in particular from interregional Central American trade towards the EU
First we aim to use COMEXTCOMTRADE data to analyse the evolution of merchandise trade flows over time (between the EU and the partners but also within the region in comparison to the rest of the world)
Second we aim to look at the CGE results that should be able to tell us the pure EU-CA FTA effect on intra-Central American trade flows
6 Impact of the Agreement in relation to the creation persistence reduction or removal of non-tariff measures (NTMs) that have a significant impact on EU-CA countriesrsquo trade in goods
We will use UNCTADrsquos NTM TRAINS database and classification for identification description and analysis of specific NTMs affecting trade relations between the EU and Central America We will also look at NTMs including market access barriers raised by the Parties in the sub-committee meetings and will complement the findings with stakeholder engagement
7 Analysis of the importance of Free Trade Zones in Panama (especially the FTZ in the Port of Colon)
Using trade statistics we can get a picture of the way trade flows entering Central America via the Port of Colon (for example) are distributed across Central American countries These patterns ndash at sector level ndash would tell us the most economically significant EU exports This
will be complemented by qualitative analysis
8 Investigation of whether new enterprises started to export or whether enterprises already exporting started to export new products
We expect to undertake this analysis by relying on available firm-level data as well as specific questions for SMEs in the targeted business survey the SME Panel questionnaire and other consultation activities directed towards SMEs Additionally for this sub-task we will try to get access to national databases containing firm-level panel data based on highly disaggregated customs information that include exports (imports) of products and their destinations
9 Analysis of the evolution of trade import shares originating in the EU in total imports of the six CA countries (and vice versa)
COMEXT and COMTRADE data will be used to carry out this analysis We will ensure that we specify the third countries in a clear way The EU and each of the Central American countries The United States Mexico and Canada but also Brazil Argentina
Paraguay and Uruguay (Mercosur) and China Other countries (Rest of World)
10 Analysis of the impact of the EU-CA FTA implementation on diversification of trade
The diversification of trade in goods will be evaluated according to two main dimensions 1 Diversification in the range of products traded between the EU and each of its partners 2 Diversification in the number of EU member states trading with the Central American partners
11 Comparison of the development of trade in goods between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
COMEXT and COMTRADE data will be used to carry out this analysis Regarding trade of the partner countries the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as the MERCOSUR countries The choice of the US can be explained by CAFTA-DR agreement that has been in place since 2006 between the US and Central America and the Dominican Republic
12 Investigation of whether the EU-CA FTA has facilitated trade with third countries including via the use of intermediate products
Use of GTAP data (since the Trade in Value Added ndash TiVA database only covers Costa Rica) to look at intermediate linkages and whether these have helped the competitiveness of the CA economies We will also look at the CGE modelled development of the real exchange rate as an indicator of what happened to CA economiesrsquo levels of competitiveness
13 Analysis of the degree to which implementation of the EU-CA FTA has contributed to diversification of sources of supply of goods
COMEXT and COMTRADE data will be used to carry out this analysis We will look at the inputs shares for specific products in CA from the EU and vice versa and compare the development of these shares to the shares for the same products from international trade partners
14 Identification of regions within the partner countries that have benefited most and of
regions having benefited least (including the identification of constraints)
We expect to rely mainly on a combination of mapping of the sectoral CGE effects per region with literature review and consultation activities to identify the regions that have most least benefited from the
agreement Social progress indexes are computed at municipal level in Costa Rica and at provincial level in Panama as well as for some regions in Guatemala and El Salvador but this is for 2017-2018 only
Page 8
312 Task 102 Analysis of the evolution in trade in services
Analysis in this task is linked to JC 1A3 Although the effects of trade agreements on EU
services trade with third countries are not easily quantifiable we will seek to use available
data to demonstrate the impact of the EU-CA FTA on EU services trade We will assess
whether the Agreement has led to an improvement or worsening of the structural
imbalance between the parties The EU posted a substantial services trade surplus of EUR
10 billion with all six Central American partners combined in 2013 but this surplus has
decreased to EUR200 million by 2017
Table 2 Methodological approaches and sources for the analysis of trade in services
Specific analysis to be carried out
Main methodological approach and sources
1 Services showing largest increase decrease in total and bilateral trade flows between individual CA countries and EU
We will identify sectors showing the biggest increase in total trade in services flows and in bilateral trade flows as well as those having performed worst This analysis will be conducted using time series trade statistics at different levels of disaggregation (from Eurostat OECD and UNCTAD) the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing sub-sectors Reasons for performance will be identified by a combination of sources including literature review and targeted consultations
2 Comparison of the development of
trade in services between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
The comparison of the development of bilateral trade in services between the EU and the individual Central American countries with the development of trade in services
for the EU and its Member States and for Costa Rica Guatemala El Salvador Honduras Nicaragua and Panama with a suitable reference group of countries will provide further evidence on the actual impact of the agreement of trade in services flows As is the case for trade in goods (Task 101) the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as MERCOSUR countries if possible The choice of the US matters because of the CAFTA-DR agreement that has been in place since 2006
3 Analyse trends in international financial capital flows and the evolution of key financial industry segments ndash with the GATS modes of supply as the basis
First we will analyse trends in international financial capital flows between the EU and the Central American countries as well as globally For this we will use available Eurostat OECD andor UNCTAD data as well as Central Bank data if available
Second in order to look at how sectors are performing (well or not so well) we will focus on a concise general ndash but sector level ndash analysis and what drivers we can identify for economic performance
Third we propose that the following case study (see Task 13) could be undertaken Evaluating financial industry segments such as banking insurance asset management sustainable investment ndash in Panama or Costa Rica
Data source suggestions The OECDrsquos Services Trade Restrictiveness Index The GATS Trade Restrictiveness Index which together establish the amount of ldquowaterrdquo in the partiesrsquo GATS
bindings that can be ldquosqueezedrdquo by a modernised Agreement Central Bank data on financial and insurance services economic activity and trade Global Investment Competitiveness Report (World Bank 2019) ISDB data from Eurostat BOP statistics
313 Task 103 Analysis of the evolution of foreign direct investment (FDI)
The analysis in this task will be linked to JC 1A5 Although the effects of trade agreements
on Foreign Direct Investment (FDI) with third countries are not easily quantifiable we will
seek to use available data to demonstrate the impact of the EU-CA FTA on FDI At a general
level this task will entail to assess what impact the EU-CA FTA has had on structural
balances or imbalances between the EU and its Central American partners
Table 3 Methodological approaches and sources for the analysis of bilateral FDI
Specific analysis to be carried out
Main methodological approach and sources
1 Largest increases decreases in FDI flows between individual CA countries and the EU
We will identify main changes in FDI flows over the past 10 years between the EU and Central American countries if possible at sector level This analysis will be conducted using the ITC investment map data UNCTAD investment data and ISDB data from Eurostat BOP statistics Data limitations are expected to be significant for this subtask Reasons for good or bad performance will be identified by a combination of sources including literature review and targeted consultations
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 9
Specific analysis to be carried out
Main methodological approach and sources
2 Comparison of the development of FDI flows between the signatory countries
The proposed methodology would examine the investment effect at both the extensive and intensive margins using the two-step Heckman (1979) estimation as implemented in Helpman et al (2008)
3 Analysis of the investment climate
and of the attractiveness to investment of the six CA countries
An analysis of the investment climate and of the attractiveness to investment of the six Central American countries taking into consideration the possible impact of the
existence of bilateral investment treaties or of double-taxation treaties will be undertaken We propose to review inter alia the evolution of the following indexes OECDrsquos Foreign Direct Investment Restrictiveness (FDIR) index Various FDI attractiveness and FDI confidence indexes ndash eg by AT Kearny and Ernst amp Young Global Investment Competitiveness Report (World Bank 2019) World Bank lsquoDoing Business Indicatorsrsquo ISDB data from Eurostat BOP statistics wwwinvestmentmaporg from the ITC
314 Task 104 Presentation of overall economic impacts
The analysis in this task is linked to JC 41 and will rely on the computable general
equilibrium (CGE) modelling undertaken by DG Trade The CGE model is the quantitative
cornerstonefoundation of the ex-post evaluation Important variables of interest for the
economic analysis will be those which are standard for a CGE analysis such as GDP and
trade flows (total bilateral and by sector) and sectoral output Based on the CGE modelling
results we will estimate the overall impact on the economy of the EU the partner countries
as well as third countries in particular LDCs The economic analysis will build further on
the modelling results We will report these in sufficient detail to highlight the economic
effects of the EU-CA FTA More details on the CGE model are provided in Annex A2
315 Task 105 Determining the impact on implementation of the Trade Pillar of the
various institutional structures
Our analysis under this task will seek to respond to evaluation questions No 1 and 5 (with
JC1A2 JC1A6 JC1A7 and JC1A9) ie how the operation of the institutional set up has
contributed to achieving the objectives of the EU-CA FTA outlined in Article 78 and how
effective and efficient the Association Committee (in trade configuration) six Sub-
committees and an ad hoc Working Group have been to date To determine this we will
analyse provisions of the EU-CA FTA referring to institutions and their operation in practice
In the first step we will analyse Articles 4-8 establishing the Association Council the
Association Committee and Sub-Committees and setting out their decision-making powers
This will be done jointly with Articles 345-346 setting out specific tasks of the Association
Council and the Association Committee acting in trade configuration including powers to
amend certain parts of the Agreement (within Trade Pillar) This will be followed by Articles
347-348 about Part IV coordinators and Sub-Committees established under EU-CA FTA and
will be complemented by the analysis of Articles 91 123 139 156 274 and 294 outlining
areas of responsibility of the individual Sub-committees4 and the Rules of Procedure of the
Association Council and the Association Committee (Decision No 12014 of the Association
Council) which also apply to Sub-Committees This will let us develop an understanding
about the mandate of each institution its decision-making powers including those related
to amending the EU-CA FTA and monitoring compliance by each Party frequency and
format of meetings relations with other institutions under the Agreement reporting and
escalation In this way we will establish an expectation regarding the role each institution
should have in implementation of the EU-CA FTA and achieving its objectives
4 Sub-committee on Market Access for Goods (Article 91) on Customs Trade Facilitation and Rules of Origin (Article 123) on Technical Barriers to Trade (TBT) (Article 139) on Sanitary and Phytosanitary Matters (SPS) (Article 156) on Intellectual Property (Article 274) Board on Trade and Sustainable Development (TSD) (Article 294) and Ad hoc Working Group on Government Procurement
Page 10
In the second step we will analyse the actual operation of all the above structures based
on available documents and engagement with the Parties as well as relevant stakeholders
We will take as the basis reports from Sub-committee and Association Committee meetings
and will complement them with the annual Commissionrsquos Implementation Reports and
other documents eg conclusions adopted by civil society representatives at the annual
meetings under the TSD chapter We will also determine whether formal decisions have
been taken by the Association Council or Committee and if so analyse the extent to which
they have contributed to implementation of the EU-CA FTA We will also look at concerns
raised by the Parties how they have been addressed and how much time it took to achieve
a satisfactory solution Based on findings from our analysis we will provide conclusions
and recommendations for the future notably for the TSD board
316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated
exportimport procedures for key stakeholders
Analysis in this task will be related to JC 1A2 Based on reviews of the Agreement text as
well as the work of the Sub-committee on ldquoCustoms Trade Facilitation and Rules of Originrdquo
we will analyse in a qualitative way which customs-related aspects have facilitated or
complicated bilateral trade like rules of origin management of TRQs agricultural safeguard
measures and approved exporter status We will seek to determine eg whether Article
304 par 1 provision (related to reimbursement of duties in CA Party of transit and their
payment in the CA Party of import) is applied in practice and if so how it is evaluated by
economic operators
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the
Trade Pillar
This task is also linked to JC 1A2 and the methodological aspects described above are also
valid for SPS related issues We see two subtasks under this request 1) An analysis to
what degree implementation of the SPS Chapter in the EU-CA FTA has facilitated agri-food
trade without lowering any partyrsquos SPS standards 2) The extent to which the capacity
building and technical assistance provided by the EU to Costa Rica El Salvador Guatemala
Honduras Nicaragua and Panama has had an effect (looking at what technical assistance
projects and funds were used)
318 Task 108 Analysis of the implementation of the Government Procurement
chapter of the Trade Pillar
The analysis in this rask is linked to JC 1A6 and will examine the impact of the opening of
the government procurement markets of the Parties using a multi-step approach 1)
Review of the recent and ongoing work of the Ad Hoc Working Group on Government
Procurement 2) A statistical analysis of the procurement value shares for EU business (if
possible) and SME participation which will be complemented by desk research and
anecdotal evidence of success stories of EU companies in Government procurement
markets of six CA countries and 3) Review of the level of compliance with the Agreement
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar
This task is related to JC 1A7 and 1A8 The methodological approach foreseen to analyse
other areas of the Agreement (like Technical Barriers to Trade e-commerce Competition
and protection of intellectual property rights (IPRs) including geographical indications)
Our approach focuses on 1) Statistical analysis compiling statistical descriptive analysis
on each issue prior to and after entry into force of the Agreement 2) Literature review
the analysis on the implementation and use of geographical indications in Central America
(eg Rivar 2020) 3) Case studies A specific case study on some of these other issues
could be carried out
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 11
3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has
led to a greater economic integration between the Central American partners
This task is linked to JC 1A4 The EU-CA FTA has been a mechanism that encourages
regional integration but it takes place within a much wider framework of regional
cooperation efforts between the CA countries with the EU-CA FTA being only one element
in this wider context This task focuses on the impact of the EU-CA FTA on regional
integration not on the overall trend or state of affairs regarding regional integration We
use three elements for our analysis 1) The statistical analyses that we have carried out in
Tasks 101 (trade in goods) 102 (trade in services) and 103 (FDI) help to shed light on
regional integration impact of the EU-CA FTA also 2) We look at the results of the CGE
analysis including at how the intra-regional trade patterns have changed because of the
EU-CA FTA 3) We investigate what progress has been made in terms of the different
elements for integration We will use EU and CA data sources to underpin our analyses
3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for
imports of bananas
This task is related to JC41 We envisage three types of analysis under this task in addition
to a possible case study 1) Descriptive statistical analysis based on trade in bananas since
2008 in order to capture developments before and after the entry into force of the EU-CA
FTA distinguishing bilateral trade in bananas EU banana imports from the non-LDC ACP
countries from LDCs and intra-EU imports from the Outermost Regions 2) A quantitative
impact analysis using a partial equilibrium model ndash the Global Simulation (GSIM) model
(Francois and Hall 2009) 3) A qualitative impact analysis causal chain analysis will be
applied to look at what the Agreementrsquos sector-level social and environmental effects have
been In this step we focus in the socialhuman rights pillars on how vulnerable groups
could be affected at sector level The qualitative sectoral environmental analysis will cover
the impact of the FTAs on land use and related issues water and waste management and
biodiversity and protection
3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on
SMEs
The analysis in this task is linked to JC 41 The ldquoSME-Testrdquo will be guided by the following
steps 1) Consultation of SME Stakeholders SMEs are a central element of the consultation
strategy and will be present at every stage of it 2) Identification of affected business
early on in the analysis we will identify whether and which SMEs (eg medium-sized) are
among the affected businesses 3) Identification of concrete stories as the Interim Report
progresses we will have sufficient information to identify 20 concrete stories from SMEs
as required by the Terms of Reference
3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers
This task will be approached in two parts the first one being dedicated to impacts on
consumer rights and the other one to welfare-related impacts of the EU-CA FTA which also
affect consumers in their purchasing decisions The analysis will be related to JC 42 and
evaluation questions No 18 and 6 In addition we will aim to determine to what extent
EU-CA FTA has contributed to attaining SDG 1 (no poverty) and 10 (reduced inequalities)
Regarding consumer rights in the first step we will refer to the literature according to
which consumers usually benefit from global trade and preferential trade agreements due
to lower prices of purchased goods and services (resulting from reduction of tariff and non-
tariff barriers) a wider variety of traded goods and services the related satisfaction of
diversified needs and preferences and higher quality of available goods and services
Page 12
In the second step we will consider impacts which the EU-CA FTA (might) have had for
consumers regarding availability safety sustainability traceability and quality of traded
goods and services as well as which impact its promotion (or consumersrsquo awareness of it)
may have on consumersrsquo knowledge regarding the market offer and their trust in it The
list of questions to test will be guided by the EU Better Regulation Tool Nr 32 related to
impacts on consumers We will also draw on other parts of the study analysing
implementation of provisions related to regulatory measures and standards eg TBT
SPS TSD dialogue and cooperation between the EU and partner countries and
transparency to outline what level of protection incl consumer protection and production
standards is provided by the EU-CA FTA We will also refer to the EU RAPEX database ie
the alert system for dangerous non-food products listing notifications of such products
originating from the EU and partner countries
The second part of our analysis will focus on impacts of the EU-CA FTA on welfare In the
first step based on literature review and statistical data including relevant indexes (eg
the share of population living below the poverty line) we will analyse trends in the reporting
period in the EU and Central America regarding situation of consumers from different
groups of the population incl incomes expenditures levels of poverty and inequality
income and price levels wages and other types of income and any changes in this context
In the following step we will use outcomes of the economic modelling to estimate impacts
on welfare and inequality resulting from EU-CA FTA implementation eg prices and wages
In this context we will also consider to what extent the Agreement helped to attain SDG
No 1 (No Poverty) and SDG No 10 (Reduced Inequality) This will be complemented by
stakeholder consultations and finished with conclusions and recommendations
3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on
the budgets of the EU and the partner countries
The analysis in this task is linked to JC 41 It will examine impact of the FTAs on the EU
budget (ie revenues forgone) and will largely result from the economic model We
anticipate that for the EU the foregone tariffs on imports from the partner countries will
be estimated based on the level of EU imports from the selected countries as a baseline
and the tariffs that would have applied to those imports
3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on
EU Outermost Regions (ORs)
This task is linked to JC 41 The impact on ORs will be assessed based on the trade
diversion and deflection identified in the CGE analysis A key limitation in the economic
modelling framework is however that the EU ORs are not established as a separate region
To meaningfully analyse the effect on the EUrsquos ORs we propose two elements 1) A
matching analysis for the EU and the six partner countries regarding products that matter
for ORsrsquo trade (to either partner countries or the EU) 2) Competition analysis between
ORs and CA partner countries for exporting to the EU The effects will be determined
qualitatively distinguishing if applicable the ORs which might be positively or negatively
affected by the Agreement
3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on
developing countries in particular on LDCs and countries having an Economic
Partnership Agreement (EPA) with the EU
This task is related to JC 41 Our approach to look at the EU-CA FTArsquos impact on developing
countries and LDCs will largely consist of the interpretation of the results of the economic
model simulations which has defined lsquoLDCsrsquo as a separate region This allows us to look at
the effect the EU-CA FTA has had on them We will also look closely at effects for countries
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 13
which are implementing an Economic Partnership Agreement (EPA) with the EU In terms
of the impact we will look first at an economic impact followed by effects on the other
sustainability pillars The former will include (i) a matching analysis for the EU and the six
partner countries regarding products that matter for LDCsrsquo trade (to either partner
countries or the EU) and (ii) competition analysis between LDCs and CA partner countries
for exporting to the EU We do not expect the effect to be significant for the LDCs because
the global impact of the EU-CA FTA is limited
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable
development (Tasks 11 and 12)
321 Task 111 Analysis of the effects of implementation of the Trade and
Sustainable Development (TSD) chapter of the Trade Pillar
This is one of the priority tasks linked to JC 1A1 In the first step we will divide provisions
of the TSD chapter into thematic blocks to identify areas for further analysis These include
commitments of the Parties to effectively implement in their laws and practice the eight
fundamental conventions of the International Labour Organization (ILO) as well as the
Multilateral Environmental Agreements to which they are Party the right of the Parties to
regulate sustainable management of natural resources promotion of trade supporting
sustainable development institutional provisions and dispute settlement mechanism
In the second step based on findings from the analysis of the actual situation in the EU
and partner countries carried out in Tasks 113-118 and documents outlining the
implementation of the TSD chapter (eg reports of international monitoring bodies
reports from meetings of the TSD Board and civil society advice to the Parties) we will
map activities undertaken by the Parties in areas covered by the TSD chapter in a break-
down prepared in the first step This will enable us to conclude to what extent the scope
of the TSD chapter has been covered and if actions taken by the Parties individually and in
cooperation activities have contributed to the implementation of TSD commitments and
attaining the objectives of the chapter and relevant SDGs (No 8 on decent work and
employment for all No 13 on combating climate change and No 14-15 on sustainable
use and protection of marine environment forests and biodiversity) Our analysis will be
complemented by stakeholder engagement5 We will conclude the analysis with
recommendations for the future incl any improvements in operation of institutions to
support compliance of the Parties with provisions of the TSD chapter
322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter
This is one of the priority tasks liked to JC 1A10 and evaluation questions No 1 5 and 8
In the first step we will analyse formal commitments of the Parties regarding the set up
and operation of the institutional mechanism ie Article 294 (Contact Points of the Parties
the TSD Board and civil society Advisory Groups) and Article 295 (Civil Society Forum)
In the second step we will analyse the establishment and operation of TSD institutions in
practice including their meetings activities undertaken between sessions cooperation and
5 When the Report refers to stakeholder engagement it means diverse activities foreseen in the stakeholder engagement programme outlined in detail in Annex B to this Report (Consultation Strategy) For each task stakeholder engagement activities will be tailored to the most relevant group of stakeholders methodology applied in the task and type of data which will be needed for the analysis For example in the analysis carried out with regard to TSD chapter the focus will be on targeted interviews with civil society members of the Advisory Groups in the EU and Central American countries as well as with Government and Commission representatives Further sources of information and activities will include targeted meetings eg DAG meetings and workshops with Central American countries CSD meetings with the European civil society and written positions submitted by civil society organisations As a complementary source we will use replies from online public survey
Page 14
dialogue between Governments and civil society The analysis will be based on reports
from meetings research studies recommendations from civil society to the Parties and
interviews with representatives of the Commission Governments from Central America
EU Delegations the EESC secretariat of the EU Advisory Group as well as civil society
representatives from the EU and Central American countries including members of their
Advisory Groups We will also evaluate effectiveness and efficiency of the institutional
mechanism and its role in the monitoring and implementation of the TSD chapter the
ability to address problems and to pursue cooperation and dialogue We will put an
emphasis on the evaluation of the TSD Board its ability to monitor compliance with the
commitments of the Parties effectiveness in choosing priorities and structuring the work
programme pursuing cooperation activities and resolving problems This part will also
analyse civil society capacity to exercise its mandate and monitoring implementation of
TSD chapter the quality of dialogue between Governments and civil society and the follow-
up to civil society recommendations In this context and in line with suggestions provided
by reviewed research studies we will also evaluate to what extent the discussion among
the civil society and between Governments and civil society focuses on substance
(compared to focusing on process) and whether the civil society has the means and
capacity to prepare for and to engage in such a discussion We will conclude the analysis
with recommendations for the future incl any improvements in operation of institutions
323 Task 113 Analysis of employment impacts
The analysis in this task will focus on impacts for employment levels and relate to JC 42
and evaluation questions 4 and 6 In the first step we will analyse trends in employment
and unemployment levels in the EU and partner countries for their whole economy and
across sectors over the reference period We will also identify factors influencing observed
trends including macroeconomic and labour policy measures applied by the Governments
investment in education and skills development migration from rural to urban areas and
across region and impacts of trade and investment including through trade agreements
In the second step the analysis will be focused on assessing quantitative impacts (direct
and indirect) of the EU-CA FTA on the number of jobs direct and indirect (for skilled and
un-skilled workers for the EU and partner countries across sectors) and be based on the
results of the economic modelling We will compare these results with the real-life data
and trends observed in the first step to conclude to what extent the reduction in trade
barriers and changes in output across sectors related to the implementation of the EU-CA
FTA have influenced demand for labour given the assumption of a fixed total employment
in the economy and full labour mobility between the sectors with workers leaving sectors
seen as less competitive and moving towards those having better prospects of growth and
working conditions including wages We will also draw a conclusion to what extent
observed trends in employment should be attributed to the EU-CA FTA and to what extent
to other factors incl macroeconomic environment global trends in commodity prices
domestic policy investment and trade agreements with other partners Stakeholder
consultations will help to verify our findings
324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda
(job creation labour standards social protection and social dialogue) on
working conditions poverty reduction and enforcement
This is one of the priority tasks Our analysis will seek to answer the evaluation questions
No 1 4 and 6 (JC 42) Given the broad scope of this task we will divide it into two parts
a) labour standards and social dialogue (the Decent Work Agenda) b) working conditions
including social security and health care coverage of workers and labour inspection
In the first step we will describe the situation in the EU and partner countries and changes
over time regarding the subject matter as well as factors influencing observed trends We
will focus on the following
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 15
Task 114 a) on labour standards will look at the implementation of the core labour
standards as enshrined in the fundamental ILO Conventions ratified by all Parties to
the EU-CA FTA and evaluated by the ILO monitoring bodies6 Regarding trends in child
labour occurrence the analysis will include eg the number of working children types
of activities and sectors involved the number of hours worked per week motives for
undertaking work and involvement in hazardous work Influencing factors will be
considered and their impact on job availability for adult household members the level
of generated income and the extent to which it covers family needs Regarding forced
labour the analysis will include types of activities and sectors involved and influencing
factors including criminal activity and the level of law enforcement On freedom of
association and the right to collective bargaining the analysis will cover conditions for
setting up joining and operation of trade unions and employer organisations and
functioning of social dialogue for the whole country and ndash if data is available ndash across
sectors including indicators such as the share of trade union members in the total
number of workers for the whole country and in a break-down by sector and changes
over time Regarding non-discrimination at work we will focus on groups of workers
which may be in a disadvantaged position on the labour market eg youth disabled
persons migrants or indigenous peoples (women will be analysed in Task 116) and
indicators such as labour participation rate and unemployment rate the share of each
group working informally or being in a situation of sub-employment (ie receiving a
wage below the minimum level despite working full time or having no opportunity to
work full time despite being ready to do so)
Task 114 b) on working conditions and labour inspection will include trends in job
quality indicators over time the average number of working hours per employee per
week the number or rate of fatal and non-fatal accidents at work social security and
health care cover of workers wage levels type of contract the number of labour
inspectors and inspections carried out at work places and the infrastructure and funds
being at the disposal of inspection services (we will consider in that context that all EU
Member States and five Central American countries except Nicaragua have ratified
the ILO convention No 81 on labour inspection)
In the second step based on economic modelling we will identify the sectors most affected
(positively or negatively) by the EU-CA FTA and using the analysis done in step one will
seek to determine if trends observed in the respect for labour standards and quality of
working conditions in individual sectors can be attributed to the operation of the Agreement
or rather to other factors In cases where any concerns related to labour standards eg
child labour incidence or low presence of trade unions are identified in sectors particularly
involved in trade with the EU notably in exports we may apply an in-depth analysis in a
dedicated case study We will also refer to the implementation of the TSD chapter to
establish whether policy dialogue cooperation activities and engagement with civil society
have also influenced the situation We will complement desk research with stakeholder
engagement
325 Task 115 Analysis of impacts on the informal economy and informal
employment
This is one of the priority tasks linked to evaluation questions No 1 and 8 (JC 42) We will
also aim to determine to what extent the Agreement has contributed to attaining objectives
of SDG No 1 (no poverty) and No 10 (reduced inequalities) In the first step we will
develop a description of the situation in the partner countries during the analysed period
concerning the size and structure of the informal economy and factors influencing its
6 These include conventions No 138 and 182 on elimination of child labour No 29 and 105 on prohibition of forced or compulsory labour No 87 and 98 on freedom of association and the right to collective bargaining and No 100 and 111 on equal pay for work of equal value and non-discrimination at work
Page 16
existence as well as its geographic pattern in Central America and each of the partner
countries separately We will aim to identify if there are links between the informal
economy and eg the economic structure and dynamic in certain regions and their
involvement in trade We will also report about steps taken by the Governments in a move
towards formal economy including dedicated national strategies adopted in Costa Rica and
Guatemala
In the second step based on the results of the economic modelling and trade statistics for
trade and investment flows between the EU and Central American countries an additional
literature review and stakeholder consultations we will aim to establish to what extent
trade and in particular the EU-CA FTA has contributed to the observed trends in each
partner country We will verify our findings in stakeholder consultations
326 Task 116 Analysis of impacts on gender inequality
The analysis in this task will seek to answer the evaluation questions No 1 4 and 6 (JC
42) We will also aim to determine to what extent EU-CA FTA implementation has helped
to attain SDG No 5 (gender equality) No 8 (decent work and economic growth) No 1
(no poverty) and No 10 (reduced inequalities) Work under this task will be guided by the
approach proposed in UNCTADrsquos Trade and Gender Toolbox (UNCTAD 2017) which
considers impacts on women in their roles as workers entrepreneurs traders and
consumers Complementary considerations regarding impacts for each of those groups will
be inspired by other literature (eg Fontana 2009) and methodological approaches (eg
European Institute for Gender Equality 2016)
In the first step we will analyse the situation in the Central American partner countries
regarding womenrsquos participation in the labour market economic activity as entrepreneurs
and traders (with a consideration of their access to assets and supporting measures) and
their position as consumers incl the level and type of income received and being at their
disposal Based on the available data we will also analyse gender inequalities before and
after the entry into force of the EU-CA FTA and measures applied by the countries and
provided by international donors to support an increased womenrsquos participation We will
also review reports of the ILO Committee of Experts regarding implementation of the two
ILO fundamental conventions on non-discrimination ie No 100 (equal pay for work of
equal value) and No 111 (non-discrimination at work) ratified by all CA partner countries
In the second step we will compare observed trends stemming from the real data with
outcomes of the economic modelling to determine to what extent they may be linked to
impacts of Agreement and to what extent they result from influence of other factors
Focusing on women as workers we will identify sectors important for them (based on
their shares in the total womenrsquos employment and a ratio of female and male workers
in each such sector) and compare observed trends in employment levels (in total and
across sectors) with the results of the modelling (changes in employment levels across
sectors) to determine whether the EU-CA FTA has contributed to changes reported in
the real life and if so to what extent In this context we will also consider impacts of
tariff reduction on public revenues and whether this might have had an impact on the
provision and quality of public services which in turn may have an effect on women and
their ability to participate in the labour market or to undertake an economic activity
For women as entrepreneurs if relevant data is available we will identify sectors of
their economic activity and compare trends in the actual operation of these sectors over
time (eg growth or decline) with outcomes of the economic modelling to determine if
the EU-CA FTA might have had an impact on output of these sectors and as a result
position of women as entrepreneurs
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 17
Moreover if more detailed data is available regarding sectors and groups of products or
services manufacturedprovided by women-led enterprises as well as their engagement
in international trade we should be able to say (again comparing the real-life data with
economic modelling) what impact the Agreement may have exercised on women as
traders and in this context on sales and exports of their products or services or their
competition with or the use of imports We will also consider whether the EU-CA FTA
provisions regarding eg tariff reduction SMEs TBT SPS might have had an impact
for women-led enterprises (given their size and sectors of operation)
Concerning the role of women as consumers we will look at real-life trends in income
and price levels and compare them with outcomes of the economic modelling to see
what impacts the EU-CA FTA might have had on welfare and price levels as well as the
availability and accessibility of goods and services
Our analysis will be complemented by engagement with stakeholders including women
organisations to identify barriers in their activity on one hand and facilitating measures on
the other and to gather more insights into impacts of the EU-CA FTA
327 Task 118 Analysis of impacts on the adoption and implementation of
internationally recognised instruments of responsible business conduct and
Corporate Social Responsibility (CSR)
Our analysis under this Task will seek to respond to the evaluation question No 1 (JC 42)
In the first step we will map CSRRBC practices in the Central American partner countries
in the analysed period including practices of European companies investing there or having
their suppliers and existing government initiatives promoting them eg National CSR
strategy and Law on CSR in Costa Rica National Plan on Social Responsibility and Human
Rights in Panama and dedicated centres or foundations promoting CSR in Guatemala
Honduras Nicaragua and El Salvador We will also use findings from a research carried
out for Task 111 identifying initiatives undertaken within the TSD Title incl EU projects
and regional events dedicated to CSR RBC and decent work in global supply chains We
will aim at a better understanding of the existing framework uptake of CSRRBC practices
by enterprises factors influencing it and CSRRBC presence in the EU relations with the
partner countries including technical assistance and cooperation projects
Based on this in the second step we will use outcomes of the economic modelling and
stakeholder consultations to verify whether indeed the EU-CA FTA through generated
trade and investment flows as well as specific provisions (such as those in TSD Title) might
have encouraged uptake of CSRRBC practices We will also seek to identify factors related
to market access which may encourage uptake of CSRRBC practices Legislative ones may
include eg non-financial reporting and obligatory due diligence in certain sectors or
activities requirements related to social and environmental aspects in public procurement
and non-legislative ones may focus on image and comparison with the main competitors
being part of supply chains where business partners require respect for certain labour and
environmental standards international instruments in CSR (OECD Guidelines for
Multinational Enterprises ILO Declaration on Multinational Enterprises and Social Policy
the UN Global Compact etc) requirements of sustainability and certification schemes or
consumer awareness and related choices
As an additional element of this analysis (subject to data availability) we may include into
this task examples of other schemes eg sustainability schemes or promotion of decent
work in global supply chains (notably of agricultural products) and their presence in trade
between Central America and the EU and impacts the EU-CA FTA might have had on their
use in bilateral trade relations
Page 18
328 Task 117 Analysis of environmental impacts
The main objective of the environmental analysis is to assess the environmental and
climate change effects of the EU-CA FTA as well as to provide answer to the evaluation
questions notably those on the effectiveness (No 1-4) (JC 43) and coherence of the
Agreement with other policies and the EUrsquos commitment to the SDGs and in particular
SDGs No 13-15 ie Climate Action Life below water and Life on Land (respectively) ie
evaluation question No 7 The main challenge is to isolate the EU-CA FTA induced effects
on the environmental performance in each country from general developments and trends
that occurred regardless of the EU-CA FTA This is particularly challenging as the
counterfactual environmental outcomes are unobservable for most of the environmental
impact areas
The overall approach is based on our detailed understanding of the dynamics through
which the EU-CA FTA may have created environmental impacts tailored towards the
specific circumstances for the Central American countries the requirements in the ToR
the TSD Chapter of the EU-CA FTA and the budget provided for this study The detailed
understanding is based on the study lsquothe methodology for assessing biodiversity impacts
of EU FTArsquo by IEEP Trinomics et al (2021) and the latest literature including an OECD
study (Garsous G 2019) on this matter and applies the following logic
1) identifying the components in the EU FTA with the Central American countries that may
have generated environmental effects (EU-CA FTA elements) Based on our extensive
recent experience on researching the dynamics through which FTAs may create
environmental impacts we conclude that the FTA contains (1) measures easing market
access for the signatories (referred to as tariff-based measures) and (2) several rules-
based measures (mostly by means of the provisions in the TSD Chapter referred to as
non-tariff-based measures) that may have resulted in environmental impacts in the
countries involved
2) then establishing how these elements could have created directly or indirectly intended
or unintended ndash environmental impacts (the impact channels) Any FTA is by
definition expected to create direct environmental impacts through the expected
expansion of economic activity which may lead to eg higher pollution and greenhouse
gas (hereafter GHG) emissions may put a strain on bio-resources and pressure on
vulnerable ecosystems as higher levels of output require more environmental input
(Copeland and Taylor 2014) Trade agreements also create indirect environmental
impacts through structural adjustments in the economies and so-called specific rules-
based trade measures including the provisions in the TSD Chapter Our approach
carefully considers four impact channels that are also distinguished by the SIA Handbook
(European Commission 2016a) to separate the way in which EU-CA FTA may have
created impacts on various areas of the environment The scale effect (the impact
created from increased production as a result of the trade agreement) the structural
effect (the dynamic effect of the EU-CA FTA on the growth and contraction in production
in different sectors) technology effects (impacts triggered through increased efficiencies
from increased competition or from a transfer in environmental goods and services) and
potentially the product effect (impact via changes in production standards and use of
goods in a country eg through strengthened environmental policies and environmental
regulation)
3) via these impact channels various areas of environmental performance (the impact
areas) may be impacted and are to be further analysed in this evaluation In this study
we distinguish the following impact areas 1) Climate change 2) Biodiversity and
ecosystems and 3) Other key environmental parameters
Research methods ndash For some impact areas there is more reliable information and data
and quantitative research methods available than for others To the extent possible the
quantitative analysis will build on the economic modelling results and as a result the
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 19
analysis will allow us to comment on the causal relation between environmental topics and
the EU-CA FTA Where quantitative research is not possible we will apply qualitative
methods The qualitative analysis may rely on the causal chain analysis method which
aims at identifying the root cause of observed changes Irrespective of whether a certain
impact will be assessed with more quantitative or qualitative research methods our
approach is designed to make intensive use of quantitative information eg compiling
quantitative statistics and analysing trends The following research methods are applied
per environmental area
For climate change we propose focusing on establishing the EU-CA FTArsquos impacts on
the major GHG emissions (eg carbon dioxide methane and nitrous oxide) and
potentially on the air pollutants (ozone precursor gases acidifying gases and primary
particulates)
For biodiversity and ecosystems we propose following the latest insights in assessing
biodiversity impacts of the EU-CA FTA based on the study for DG Environment on the
development of a methodology to assess the impact of trade liberalisation on
biodiversity (which has not been published yet) In case results of the biodiversity
analysis are also relevant for climate change (ie LULUCF emissions) the link between
these results and climate change will be explored
For other impact areas we propose developing baselines based on qualitative and where
possible quantitative data for each impact area and explore developments in
environmental performance since the entry into force of the EU-CA FTA In addition we
will discuss the (effectiveness of the) implementation of provisions enshrined in the TSD
Chapter in the EU-CA FTA per impact area
The above discussed approach is based on five activities They apply the logic of the
methodological stages7 as described in the methodological framework for assessing the
impact of EU FTAs on biodiversity (IEEP Trinomics et al 2021)
3281 Activity 1 Fine-tuned methodology and impact screening and scoping
Fine-tuning the methodology is part of this inception report (this document) and mainly
serves to define the exact scope and focus of this evaluation The environmental analysis
logically focusses on Central America and the EU (with an emphasis on Central America)
However within defining the geographic scope of this analysis one needs to differentiate
global (eg climate change) and other more local environmental impacts eg
(un)sustainable forest management practices We aim to cluster countries when
appropriate from the perspective of a certain regional environmental issue In this way we
can respond to the challenge of bringing focus to the analysis while balancing the available
resources and time Clustering should enable us to evaluate certain environmental issues
in a more targeted way enabling deep dives into specific issues Below we discuss in more
detail what this regional approach means in practice and how we aim to mitigate the risk
of overlooking certain impacts
Impact screening and scoping - The exact environmental topics on which quantitative and
qualitative analysis will be performed depend on the outcome of the impact and screening
and scoping exercise which seeks to identify issues which deserve to be analysed with an
extra depth As such this sub-activity aims to select the environmental impact categories
and sub-areas to be studied in other activities Impact screening and scoping is a
methodological tool to identify issues which should be prioritised in the evaluation and
helps to mitigate the risk of overlooking potential significant impacts In essence the
prioritisation is based on (i) screening the most prevailing existing environmental drivers
and pressures and (ii) screening the expected impacts caused by the EU-CA FTA (at a
7 The study by IEEP Trinomics et al (2021) identifies three stages Stage I) Preparatory stage Stage II) Method selection and impact logic and Stage III) Impact assessment and related conclusions
Page 20
sector level) by means of economic modelling results literature review stakeholder input
and political interest All information is transparently documented in the impact-screening
matrix During the impact screening and scoping exercise we will also develop three
context-setting documents (2-pages) one per environmental impact area to better
understand the background These documents will have a regional perspective and will be
directly used in the baseline development The output of this activity is included in the
Interim Report
3282 Activity 2 Establishing the baselines for the impact areas
The aim of this activity is to gain a brief understanding of the EUrsquos and partner countriesrsquo
status quo regarding their environmental governance and performance (eg trends) for
those environmental impact areas that have been identified as priority ones The output
will be a section in the evaluation with a short description (1 page) per prioritised impact
area outlining the governance (very brief) and the performance and exploring the main
developments trends and their cut-off points This will be done by analysing issues from
a DPSIR framework perspective (drivers ndash pressures ndash state ndash impact ndash responses) (see
Box 1) when appropriate8 This framework is often applied in environmental assessments and plays a central role in the study by IEEP Trinomics et al (2021) on the methodology
for assessing the impact of EU FTAs on biodiversity
Box 1 The use of the DPSIR framework in FTAs
The DPSIR framework allows to interpret certain environmental indicators by establishing a causal relation between indicators and their analysed effects In the case of an FTA trade liberalisation in goods services and investments can function as a driver of a change in different economic sectors causing changes in the amount of land- and other resource use or in their quality (eg pollutants and emissions impacting air water or soil quality) The changes in the quantity of land- and other resource may create pressures on biodiversity which lead to an impact in the state of and trends in biodiversity ecosystems and the services they provide As a response(s) certain new or existing measures can be taken to help to prevent negative impacts or to amplify positive ones
Source IEEP Trinomics et al (2021)
Three consecutive sub-tasks will be performed to operationalise the establishment of the
baselines 1) Literature review and data analysis to establish draft baselines 2) Interviews
with stakeholders to obtain additional input validate work and fine-tune results 3)
Triangulation of information (literature data and interviews) and establishment of final
baselines The output of this activity will be included in the Interim Report
3283 Activity 3 Quantitative evaluation of impacts9
The aim of this activity is to assess the quantitative estimates of the impacts of the EU-CA
FTA on GHG emissions and possibly air pollution and ndash potentially10 ndash on trade in
environmental goods and services and land use change As such the desired result is the
reporting of the quantitative estimates of the impacts of the EU-CA FTA on GHG emissions
and air quality in the EU Costa Rica El Salvador Honduras Guatemala Nicaragua and
Panama depending on data availability Ultimately it is global GHG emissions that
contribute to global warming for this reason we propose to estimate the global change in
GHG emissions resulting from the EU-CA FTA In this way we also consider the difference
in climate change impacts from trade creation and trade diversion The impacts on GHG
emissions will be decomposed in the most relevant key drivers where possible The
8 This implies that we will make use of the insights of the framework whenever relevant and appropriate in the light of the evaluationrsquos objective We will not identify every element (D P S I and R) for each environmental issue but focus on the most relevant elements for each of them
9 The focus depends on the results of the impact screening and scoping 10 Depending upon expected scale of impact available resources and data availability
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 21
preliminary finding of this activity will be included in the Interim Report and the final results
are to be presented in the Final Report
3284 Activity 4 Qualitative evaluation of impacts11
The aim of this task is to evaluate qualitatively the impacts of the EU-CA FTA on various
prioritised environmental impact areas focussing on those which are not assessed in the
quantitative analysis First a broad assessment is done based on desk research from a
regional perspective In addition approximately two case studies (as part of Task 13) will
be prepared in which the environmental impacts of the EU-CA FTA on certain areas will be
assessed based on in-depth qualitative analysis using causal chain analysis (CCA)
(European Commission 2016a) Depending on data availability we will aim to identify
trends developments and cause-effect relations between the EU-CA FTA and environment
By combining the existing environmental drivers and pressures (see Textbox 3282-1 for
more information) the economic results and effects of TSD provisions we naturally also
include potential unintended and unforeseen effects The preliminary finding of this activity
will be included in the Interim Report and the final results are to be presented in the Final
Report
3285 Activity 5 Answering of the evaluation questions and other concluding
remarks
The overall environmental analysis concludes with clearly commenting on the effect of the
EU-CA FTA on the performance the legislative framework and effective implementation in
each of the prioritised environmental impact areas In case no causal relation between the
EU-CA FTA and the performance of a certain environmental impact area is found it will
also be explicitly mentioned These concluding remarks together with the in-depth
analyses conducted in previous tasks will serve as the basis to answer the evaluation
questions related to the EU-CA FTArsquos environmental impacts under Task 14 in the Final
Report
3286 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative environmental effects that have emerged from tensions between the EU-CA FTA
on the one hand and elements of environment on the other Additional policy or legislative
measures can also be suggested to enhance positive impacts of the EU-CA FTA
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human
rights
In this section we present the approach envisaged for the analysis of the human rights12
impact of the EU-CA FTA in the EU and the CA partner countries
The evaluation will rely on the methodology of human rights impact assessments (United
Nations 2011 European Commission 2015) as well as on the experience from previous
studies and will include the following steps
Step 1 Human rights baseline
At this step a concise baseline analysis will be carried out Concise human rights
profiles will be prepared for each of the state-parties to the EU-CA FTA
Step 2 Screening and scoping
11 The focus depends on the results of the impact screening and scoping 12 Human rights in this analysis are defined as set out in the Charter of Fundamental Rights of the European
Union the core UN human rights conventions and relevant regional human rights treaties
Page 22
At this step based on various sources human rights will be screened and specific
human rights that may have been affected by the EU-CA FTA will be identified
Step 3 Detailed assessment of the selected human rights
At this step drawing upon findings from the previous stage of the analysis an in-depth
analysis of up to three selected rights will be carried out (both quantitative and
qualitative and depending on the degree of the impact)
Step 4 Policy recommendations and accompanying measures related to
human rights
At this step policy recommendations will be formulated as to how any tensions between
the EU-CA FTA and human rights obligations may be addressed and how a positive
impact on the enjoyment of human rights can be enhanced
Stakeholder inputs will be used throughout all four steps to verify and support findings as
well as to collect evidence on the impact and ensure meaningful participation
3291 Human rights baseline
At this stage a concise baseline analysis of the human rights situation in each state-party
will be carried out First an overview of international human rights obligations of all the
state-parties to the FTA (ratifications of core international and regional human rights
treaties core ILO Conventions and other treaties relevant for the analysis) will be
presented in a tabular manner Second human rights profiles will be prepared Human
rights profiles will consist of a summary of the baseline conditions for the enjoyment of the
relevant human rights in each of the state-parties to the FTA from five years before the
provisional application of the EU-CA FTA until 2019 Particular attention will be given to the
pre-existing conditions of stress and vulnerabilities with respect to human rights
highlighting the position of specific vulnerable groups
The human rights profiles aim to
Set the scene regarding the enjoyment of relevant human rights in the partner
countries and identify social and political developments that may have impacted the
human rights situation
Allow for a targeted assessment of the human rights impacts of the EU-CA FTA
The profiles are based on the analysis of international human rights obligations national
legislation and policy framework as well as implementation issues with respect to relevant
human rights The analysis reviews country specific reports of international organisations
(eg UN OECD ILO) EU Reports on Human Rights and Democracy in the World reviews
of reports of international human rights organisations (eg Human Rights Watch) a
review of academic literature media reports relevant indicators and local partner inputs
3292 Screening and scoping
The second step of the analysis focuses on identifying which human rights could have been
affected by the EU-CA FTA and in which way The EU-CA FTA will be scanned for provisions
that are most likely to have caused an impact on the enjoyment of human rights in state-
parties to the EU-CA FTA The cause-effect relationships between the trade and trade-
related measures in the FTA and human rights will be established based on multiple sources
(see the multi-pronged approach below) The focus of the screening will not only be on
specific trade measures originating from the FTA (the Trade Pillar) but also on the overall
effect of the measures under the broader Association Agreement
Based on the screening exercise and in line with the EC Guidelines for human rights impact
assessments (European Commission 2015 p5) we provide a focused overview of the
human rights affected by the EU-CA FTA specifying the following elements
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 23
Specific human rights affected by the FTA
Short note on the evidence of the impact with a reference to the sources of information
Whether the affected right is an absolute human right or not13
The kind of impact (direct or indirect)
The degree of the impact (major or minor)
Affected population groups (if applicablepossible)
The screening exercise will as much as possible reflect upon the affected individuals
andor groups of people especially indigenous people and women based on the results
generated by the economic analysis inputs from the stakeholders and literature review
We will also look at how the EU-CA FTA has impacted gender equality and labour rights14
3293 Detailed assessment
Depending on the outcome of the screening exercise a maximum of three human rights
will be selected for a detailed assessment
Applicable human rights laws will be scanned (based on the obligations of the state-parties
under international and regional human rights treaties) to provide a framework of
applicable and binding entitlements and duties related to the selected right(s) Insofar
possible national legislation will be scanned for any changes subsequent to the application
of the EU-CA FTA focusing in particular on the changes that affected the enjoyment of
each of the selected human rights (using baseline analysis to aid the impact assessment)
Then we will look at the particular measures and how they have enhanced or impaired the
enjoyment of the relevant rights and or have strengthened or weakened the ability of the
parties to fulfil or progressively realise their international human rights obligations
Particular attention will be given to impacts on vulnerable groups or groups of individuals
that are at risk of being marginalised (Danish Human Rights Institute 2016)
This assessment is intended to be both quantitative and qualitative in nature The
quantitative analysis is based on the results of the economic analysis and used to the
extent possible15 The qualitative analysis is based on various sources as well as
stakeholder consultations and close work with local partners Economic modelling results
already disentangle the impact of the EU-CA FTA from other impacts that could have
affected the enjoyment of a human right over time For qualitative analysis it is more
challenging to discern the FTA impact To address this challenge we use a multi-pronged
approach (ie a methodological cross-validation approach in order for one methodological
element to corroboratevalidate the other method) in examining the causal effects of the
FTA for each of the prioritised human rights16 (see Figure 3)
13 See Tool 28 of the European Commissionrsquos Better Regulation Toolbox (2017) available at httpseceuropaeuinfolawlaw-making-processplanning-and-proposing-lawbetter-regulation-why-and-howbetter-regulation-guidelines-and-toolboxbetter-regulation-toolbox_en
14 Although we expect some overlap on labour-related rights with the evaluation of social impacts there will be cross-references to ensure a holistic analysis Moreover taking into account the interrelated nature of human rights we reserve the right to address the rights of the workers from other relevant perspectives not covered in the social analysis (eg as related to vulnerable groups)
15 When relevant we will use human rights indicators to supplement the analysis 16 We use the same method also during the screening exercise but to a more a limited degree (eg not using
specific human rights indicators for each human right as it goes beyond the scope of this evaluation)
Page 24
Figure 3 Overview of the multi-pronged approach to human rights impact assessment
Thus in assessing the impact the EU-CA FTA has had on each human right we use the
economic modelling results (if applicable and appropriate) that already disentangle the FTA
impact from the overall effects and link economic findings (partially) to how the selected
human right has evolved in the EU and Central American partner countries because of the
EU-CA FTA If data from the economic analysis is not sufficient to support the analysis we
will make use of contextually relevant human rights indicators (United Nations 2012) from
the statistical databases of the ILO World Bank UN OECD andor other organisations to
investigate how the selected human rights have evolved over time We look at the
development of human rights from five years before the provisional application of the FTA
up to the most recent year for which the data is available comparing period before and
after the entry into force of the FTA looking for shocks (relatively sharp increases
decreases) around that time or structural breaks in a trendline to identify an EU-CA FTA
impact We also investigate whether other shocks have taken place that could explain
observed changes in human rights (eg changes in domestic laws) Based on a similar
practice used during the ex-post evaluation of the EU-Korea FTA we could also consider
including a set of control countries to the analysis to consider development of specific rights
in relative terms
All data findings will be supported and cross-validated through a review of relevant
literature looking for further evidence of impacts provisions of the EU-CA FTA the social
and political situation (eg legislative policy instruments adopted that could have affected
the enjoyment of relevant rights) and inputs from the stakeholders that can serve as
evidence of a link between how the human rights has evolved and the EU-CA FTA
3294 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative human rights effects that have emerged from tensions between the EU-CA FTA
on the one hand and statersquos human rights obligations on the other Additional policy or
legislative measures can also be suggested to enhance positive impacts of the EU-CA FTA
and to prevent or mitigate impacts of measures that have been identified as having caused
or contributed towards impaired enjoyment of human rights
33 Concluding tasks
Based on the various analyses undertaken including the case studies the evaluation team
will prepare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 25
A comprehensive review of the extent to which impacts identified in the Trade SIA of
the Association Agreement between the EU and Central America (Ecorys and Corporate
Solutions 2009) have actually materialised (Task 9)
Replies to the evaluation questions (Task 14) and
Conclusions and recommendations (Task 15)
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3)
The literature review aims at identifying sources data and main conclusions drawn from
the previous studies to make sure that the report is based on and further complements the
existing literature Annex A3-2 provides an overview of the literature considered so far in
a tabular structure To summarise the findings from the literature review so far the
following can be noted regarding methodologies and substantive issues
41 Methodological aspects
The economic effects of the EU-CA FTA have been analysed by the Sustainability Impact
Assessment (SIA) outsourced by the Commission (DG Trade) in 2009 before the launch
of the negotiations (ECORYS 2009) This ex-ante evaluation combined quantitative and
qualitative approaches the first one based on the Computable General Equilibrium (CGE)
and Causal Chain Analysis and the latter built on stakeholder interviews (ECORYS 2009)
The CGE model underpins SIA and the literature produced on the likely economic impact
of the agreement (ECORYS 2009 IIDE 2007 Lima et al 2009 Lima et al 2010 CEPR
2012) and the bulk of these studies is based on the assumptions on the likely structure of
the agreement as the negotiations were not concluded yet The 2009 SIA also assessed
the additional FDI impact by applying a gravity analysis approach (ECORYS 2009) The
first Commission annual activity report on the implementation of the EU-CA FTA builds its
assessment on the available Eurostat data and on the comparison between the region-to-
region trade flows before and after the treatyrsquos entry into force (Commission 2015) The
following activity reports (Commission 2016 2017a 2018a 2019d 2020a) illustrate the
evolution of trade on a yearly basis relying on the Eurostat and Central American statistics
thereby opting for a more descriptive approach
The main added value brought by this ex-post evaluation report consists of the CGE model
and its application to updated EU and CA statistics in order to isolate the strictly related
economic implications of the EU-CA FTA from other external factors influencing bilateral
trade thereby purifying the overall analysis and drawing more methodologically solid and
reliable conclusions The Commission (2021) modelling used for the ex-post evaluation
unlike the other studies focuses only on tariffs however which means that impacts of not
the entire EU-CA FTA are measured but only of the tariff component
Regarding assessment of non-economic effects the methodology tended to forecast
estimated general trends and usually does not make detailed projections It should also be
pointed out that predicting long-term socio-economic effects stemming from the AA proves
to be more challenging than estimating short-term trade impacts (European Parliament
2018) Regarding quantitative social and environmental variables the models have used
structured gravity approaches to estimate the effect of non-tariff measures (NTMs)
(ECORYS 2009) The main methodological constraints to calculate (non-quantifiable)
social environmental and human rights effects from a quantitative perspective are the
problem of attribution and the so-called counterfactual given that one cannot know what
would have happened in case the agreement was not in place
42 Substantive issues
In the 2009 SIA the literature review concluded that the potential economic impact of
the EU-CA FTA was expected to be positive The vast majority of literature sources agree
on the key role played by agricultural products in the Central American economy (Romero
Page 26
et al 2015 FAO 2020 OXFAM 2016 European Commission 2020 European Commission
2019 Zabalo et al 2019 Mejia et al 2018 Lima et al 2009 Lima et al 2010) The
raw material share accounts for up to 60 of the total CA export and combined with
natural-resource-based manufactures their cumulative share reaches 70 (Lima et al
2010 p 92) A study carried out in 2007 before the launch of the EU-CA negotiations
forecasted a negligible impact of the agreement on the EU GDP and overall welfare even
in case of a full liberalisation scenario (IIDE 2007 p 16) Also in terms of FDI the
estimated effects were marginal for the EU but more tangible for CA where the agreement
could lead to an increase of 1 of the CA economies GDP (CEPR 2012 p 27) However
some additional positive spill-overs were considered such as the impact on maritime
services that could help CA countries to better manage increased trade flows and at the
same time improving custom procedures (ECORYS 2009) On trade the report
highlighted trade value flow variations especially in CA with the impact on both EU export
and import value rather negligible (Ibid p 73)
The 2012 CEPR impact assessment argued that the EU-CA trade liberalisation triggered
overall positive effects especially when referred to key products both for the EU exports
to CA such as in agriculture products and goods originating from manufacturing activities
(eg cars and medication) and EU imports from CA primarily food products where the
FTA proposed to half tariff levels compared to the previous GSP level access in place (CEPR
2012 pp 10-11)
According to the SIA banana exports from CA to the EU were expected to benefit from
more advantageous market access conditions Regarding NTMs bilateral trade facilitation
and border-related barriers should be eased simplified and rationalised Consequently
trade costs were expected to decrease remarkably The econometric analysis showed that
the economic effects of the EU-CA FTA were not expected to be equally distributed among
the CA countries given the economic heterogeneity of the region (ECORYS 2009 Lima et
al 2009 CEPR 2012 European Parliament 2018) Vegetable fruits and nuts sector (VFN)
together with sugar cane showed the most promising results (IIDE 2007 p17) although
the positive effects were not equally shared among the CA members with Panama
benefitting the most Manufacturing production in CA was estimated to benefit from the
deal (+20) Electronic equipment would also take advantage of the FTA especially in El
Salvador Honduras and Costa Rica (CEPR 2012 p 31) Transport equipment insurance
services and other manufacturers were expected to decline
On the EU side the projections estimated that
Output in the sector of vegetables fruits and nuts as well as electronic equipment was
expected to decrease modestly (CEPR 2012 p 29)
The EU was estimated to increase output in grains other agriculture and additional
categories of primary food (ECORYS 2009 pp 44)
A limited price decrease for processed food grains and vegetables other agriculture
and beverages and tobacco was expected (Ibid p 44)
Overall in the EU literature in any scenario ranging from partial to full liberalisation an
increase of trade volume as result of the AA was projected (European Parliament 2018
p 43)
A study presented at the Twelfth Annual Conference of the Global Economic Analysis in
2009 and eventually incorporated in a 2010 publication on Latin America assessed the
likely effects of the EU-CA FTA for three scenarios full liberalisation partial liberalisation
excluding sensitive products on both sides (namely fruits and vegetables meat beverages
and tobacco other processed food) and liberalisation considering only fruits and vegetables
as sensitive in the EU (Lima et al 2009 p 1) The application of different models revealed
that the most economically advantageous scenario was the first one leading to an
expansion of exports in all signatory countries and positive effects on overall CA welfare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 27
The second scenario would lead to a smaller economic impact with a more modest trade
expansion (12) and some welfare losses Finally in the scenario foreseeing the EU
excluding only fruits and vegetables the ldquoresults for trade and product remain positive
but with smaller figuresrdquo (Lima et al 2009 p 1) In conclusion a deeper liberalisation
would favour both regions by enhancing exports by between 1 and 5 in all the CA
countries (Lima et al 2010)
The Commissionrsquos annual FTA implementation reports describe trade flows between the EU
and CA after the conclusion of the FTA and demonstrate an overall upward trend for certain
countries and for specific sectors Trade flows remained rather stable in 2014 increased
by 12 in 2015 decreased marginally by 07 in 2016 grew by 72 in 2017 by 66
in 2018 and by 7 in 2019 With the exception of 2017 the EU maintained surplus in
trade with CA (Commission 2015a 2016 2017a 2018a 2019d 2020a)
The Central American literature generally focused on the role played by agricultural exports
in CA domestic economies and on the potential impact generated from the EU-CA FTA on
export transformation and diversification (Zabalo et al 2019) The likely impact of the EU-
CA FTA varied among the countries and the industries considered (ECORYS 2009) A study
carried out in 2018 aiming at analysing the effects on Panamarsquos economy by adopting a
shift-share analysis model concluded that between 2013 and 2016 the Panamanian exports
(mainly transport equipment and agricultural products) to the EU showed a downward
trend by 32 for the selected years mainly due to the decrease of primary exports to
some EU countries including Germany Belgium Italy Greece Poland and Sweden (Mejia
et al 2018) Likewise the local press has highlighted both advantages and disadvantages
generated by the EU-CA FTA for the whole region (De Leograven 2006 Barquero 2016
Rodriguez 2017) While it was considered that tariff removal triggered by the Agreement
could boost banana exports to the EU therefore inducing positive externalities for the
whole region especially for Costa Rica excessive specialisation in agricultural products
and insufficient diversification of export destinations could cause negative effects for the
local economy (Barquero 2016 Rodriguez 2017) Finally the press flagged the pros and
cons of regional integration requirements posed by the EU to CA The EU request to
negotiate as a unified bloc and to speak with a single voice led to long sensitive and
complex domestic negotiations within CA which came only to a partially accepted joint
approach towards trade talks (De Leoacuten 2006) A comparison of estimated economic effects
of the Agreement has been provided in Annex A3-1
The social impact considerations were closely linked to the economic ones since the EU-
CA FTA effects on trade would also influence the levels of employment in the affected
sectors The employment changes triggered by the EU-CA FTA in the EU were expected to
be negligible owing to the relatively modest role played by CA in the EU trade with the
rest of the world As an additional consequence also the level of EU wages should not be
affected much by the Agreement (CEPR 2012 p 28) In CA more significant incentives
to reallocation between sectors caused by ldquopull-factorsrdquo were likely to occur where export-
oriented sectors would benefit most from the EU-CA FTA and where rises in wages were
expected Employment in textile industry in Nicaragua Guatemala Honduras and El
Salvador was expected to decline The full liberalization scenario (IIDE 2007 p 17) was
expected to lead to increases in wages while also prices would rise by 05 (CEPR 2012
p 28) In Nicaragua and Costa Rica wages were expected to rise by 02 and 13
respectively while Panamanian wages would drop marginally (ECORYS 2009 pp 75-77)
The implementation of the International Labour Organisation (ILO) conventions in the EU-
CA FTA legal framework would also have a positive impact on social issues in CA such as
elimination of child labour and force labour and reduction of gender inequality However
the literature underlines a general lack of analyses of the EU-CA FTA impact on poverty in
CA since its implementation (European Parliament 2018 (a) p 45) As described above
the effects were expected to vary among the CA countries with El Salvador Nicaragua
and Honduras experiencing a relatively more impactful drop in levels of poverty than in
Page 28
Costa Rica Finally likely consequences on poverty equality education health and gender
issues in the EU were found to be negligible unlike in CA where small and indirect effects
were expected in terms of investments in health incentives through innovation brought by
technology dissemination and an overall positive impact on inclusiveness driven by the
Agreement (ECORYS 2009 pp 76-80)
On the environmental aspects the literature contributions can be split into two main
groups featured by contrasting interpretations on the EU-CA FTA impact Ultimately the
effectiveness of the TSD chapter will depend on the willingness of the involved government
to implement the EU-CA FTA provisions (EPRS 2018)
On the one hand the SIA and other studies flagged the likely harmful repercussions on
greenhouse gas emissions (GHG) stemming from agriculture fishing trade and transport
activities resulting from the EU-CA FTA application having a limited impact on the EU share
of CO2 emissions and a more tangible effect on some CA countries such as El Salvador
Honduras and Costa Rica in the long run (Alianza por la Solidaridad 2019 FAO 2013)
Moreover the increased agricultural activities resulting from the economic effects of the
EU-CA FTA (eg coffee melon sugar cane and peanut production) factories activities (eg
production of biofuels in Guatemala) as well as factoriesrsquo waste and maritime transports
could pose a threat to biodiversity and deforestation which could constitute a serious issue
owing to a large share of local biodiversity concentrated in CA especially if waste would
not be adequately managed (ECORYS 2009 pp 81-83 Zabalo et al 2019 FAO 2013
Monserrat et al 2011 OXFAM 2016 Rosa Luxembourg Stiftung 2010 Ruerd 2018)
On the other hand a share of the existing literature emphasised the opportunities for CA
countries originating from the EU-CA FTA This would be the case of Costa Rica which
would improve the national environmental regulatory framework mainly in relation to the
use of agrochemicals with likely positive impact for the environment since pineapple
production plays an important role in local economy (Esquivel 2020) A FAO study argued
that international trade in coffee (in particular exports to the EU) has improved the overall
environmental sustainability in CA The EU being the largest consumer of coffee worldwide
its (increasing) requirements on the sustainability of the coffee chain benefited the
adoption of environmental standards by the sector As a consequence coffee producers
are now required to provide more extensive and detailed certifications proving they comply
with environmental standards Therefore they have been paying more attention to
environmental aspects than before (FAO 2020)
A 2017 study (CEPAL 2017) investigated the impact of a CO2 tax on CA GDP Overall the
estimations indicated a negative impact of a carbon tax on GDP and the extent to which it
was found to impact the various local economies depended on the amount of the tax itself
Indeed an average tax value of 69 USD per tCO2e was found to impact the GDP by 062
A range between 5 and 10 USD would be optimal for Honduras and Nicaragua whereas a
tax between 20 and 50 USD would be optimal for Costa Rica El Salvador Guatemala and
Panama (CEPAL 2017)
Finally regarding human rights the EU-CA-FTA impact is difficult to assess for the region
as a whole since the intra-regional development varies a lot and it is difficult to discern
whether the CA movement towards a better respect for international standards on labour
and social rights depends on the implementation of the Agreement (European Parliament
2018 p 44) For example several experts and policymakers argue in favour of a stronger
enforcement mechanism of the TSD chapter (EPRS 2018) Its provisions referring to the
ILO conventions do not ensure the same level of labour and human rights protection as
the GSP+ mechanism (EULAC 2011) Overall despite some positive developments the
implementation of the TSD provisions led to a limited impact on the key challenges in the
CA region such as child labour freedom of association social dialogue or unpaid overtime
(EPRS 2018) The CA Womenrsquos Network also reported insufficient participation of women
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 29
during the negotiation process and it highlighted the risks of women subordination if strong
provisions on gender equality are not put in place (CAWN 2007)
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5)
51 Structure of the EU-CA FTA
The Agreement was initially signed in June 2012 by the EU and Central American countries
and the EU-CA FTA started its provisional application in 2013 It is in a process of
amendment through the Protocol of Croatiarsquos Accession to the Association Agreement
between the European Union and Central America which was signed in November 2020
(Joint Communique 2020) It allows Croatia to formally become part of the Agreement and
provides for amendments to some parts of the EU-CA FTA to account for the accession of
Croatia (eg Appendix 3 to Annex I related to special treatment of bananas Annexes
related to trade in services such as the lists of commitments on establishment cross-
border supply of services and reservations regarding the temporary presence of natural
persons for business purposes and Annexes related to Government procurement including
the list of contracting authorities etc) (European Commission 2020b)
Key features of the Agreement (Trade Pillar) can be summarised as follows Title by Title
Title I of the Agreement contains general principles provisions and definitions and
in particular defines the objectives of the EU-CA FTA which can be summarised as follows
(a) the expansion and the diversification of trade in goods between the Parties through
the reduction or the elimination of tariff and non-tariff barriers to trade (b) the facilitation
of trade in goods through in particular the agreed provisions regarding customs and trade
facilitation standards technical regulations and conformity assessment procedures as well
as sanitary and phytosanitary measures (c) the liberalisation of trade in services in
conformity with Article V of GATS (d) the promotion of economic regional integration in
the area of customs procedures technical regulations and sanitary and phytosanitary
measures to facilitate the circulation of goods between and within the Parties (e) the
development of a climate conducive to increased investment flows the improvement of
the conditions of establishment between the Parties on the basis of the principle of non-
discrimination and the facilitation of trade and investment among the Parties through
current payments and capital movements related to direct investment (f) the effective
reciprocal and gradual opening of government procurement markets of the Parties (g) the
adequate and effective protection of intellectual property rights taking into consideration
the differences between the Parties and the promotion of technology transfer between the
regions(h) the promotion of free and undistorted competition in the economic and trade
relations between the Parties (i) the establishment of an effective fair and predictable
dispute settlement mechanism and (j) the promotion of international trade and investment
between the Parties in a way that contributes to the objective of sustainable development
through joint collaborative work (Article 78)
Title II covers trade in goods and comprises the following chapters (1) market access
for goods which lays down provisions on the elimination of customs duties elimination of
export and import restrictions and export taxes and provisions on agricultural subsidies
(this is complemented by Annex I outlining schedules for elimination of customs duties
Annex II which concerns the definition of the concept of originating products and methods
of administrative cooperation Annex IV - special provisions on administrative cooperation
and Annex V on management of administrative errors) (2) trade remedies which discusses
anti-dumping countervailing and multilateral safeguard measures bilateral safeguards
and the applicable procedures (3) customs and trade facilitation which increases
transparency and promotes the facilitation of trade by simplifying customs procedures and
the adoption of risk management systems for customs inspections (it is complemented by
Annex III on mutual administrative assistance in customs matters) (4) TBT - technical
barriers to trade aiming at facilitating trade by identifying preventing and eliminating
Page 30
unnecessary barriers related to development adoption and application of standards
technical regulations and conformity assessment procedures it also reaffirms rights and
obligations under the WTO TBT Agreement foresees cooperation in market surveillance
transparency through the notification procedures and approach to marking and labelling
avoiding unnecessary burdens while ensuring that all necessary and accurate information
is provided (5) sanitary and phytosanitary measures which aims at protecting human
animal or plant life or health while avoiding unjustified barriers to trade it reaffirms rights
and obligations under the WTO SPS Agreement recognises concepts standards and
recommendations adopted by relevant international organisations (World Organisation for
Animal Health and International Plant Protection Convention) and foresees exchange of
information and cooperation by the Parties incl in cases of emergency (it is complemented
by Annex VI identifying competent authorities Annex VII defining requirements and
provisions for approval of establishment of products of animal origin Annex VIII setting
out guidelines for conducting verifications and Annex IX with points of contact) (6)
exceptions related to goods
Title III covers trade in services establishment and electronic commerce and is
complemented by annexes that detail the Partiesrsquo commitments according to the four
modes of supply or provide information Annex X includes commitments on establishment
(Mode 3) Annex XI lists commitments on cross-border supply of services (Modes 1 and
2) Annex XII outlines reservations regarding temporary presence of natural persons for
business purposes (Mode 4) Annex XIII lists commitments of the Republics of the CA Party
regarding key personnel and graduate trainees Annex XIV lists their commitments on
business service sellers and Annex XV provides a list of the relevant enquiry points
Title IV concerns liberalisation of current payments and movement of capital and
stipulates that the Parties shall authorise payments and transfers on the current account
between the Parties as well as transactions and capital movements related to foreign direct
investment and related transactions including liquidation and repatriation of investments
and profits It also envisages exceptions such as circumstances where payments and
capital movements cause or threaten to cause serious difficulties for the operation of
exchange rate policy or monetary policy or the liquidity of the economy in which case
the Parties may temporarily adopt safeguard measures)
Title V covers government procurement and is complemented by Annex XVI which
details the commitments of Parties in this area (eg procuring entities covered coverage
of procurement contracts under the Agreement media used for tender procedures and key
features of the process for awarding procurement contracts) The Agreement provides for
the Parties to have non-discriminatory access to public procurement procedures within the
scope of covered procurement and outlines general principles and rules for procurement
procedures (eg publication of notices participation in tenders technical specifications
documentation timeline awarding contracts etc) ensuring transparency and cooperation
Title VI covers intellectual property It reaffirms the Partiesrsquo commitments to various
relevant multilateral agreements (eg WTO TRIPS Agreement Convention on Biological
Diversity and Paris Convention for the Protection of Industrial Property) foresees exchange
of information and cooperation between the Parties in relation to technology transfer and
sets standards on the protection of intellectual property rights (IPR) including trademarks
geographical indications copyright and related rights industrial designs plant varieties
and patents The list of geographical indications to be protected is provided in Annex XVII
The Title also addresses enforcement measures for cases of infringement of IPR
Title VII concerns trade and competition in the economies of the Parties Under this
Title the Parties commit to adoption or maintaining comprehensive competition laws and
having appropriately equipped competition authorities They also consider as incompatible
with the Agreement the most harmful anticompetitive practices such as restrictive
agreements concerted practices abuse of dominance and concentrations of companies
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 31
that significantly impede effective competition The Title also stipulates that with regard to
state enterprises and designated monopolies there is no discrimination in exercised by such
entities regarding conditions under which goods or services are purchased or sold
Title VIII relates to trade and sustainable development It includes commitments to
effectively implement the eight ILO Fundamental Conventions and key multilateral
environmental agreements to which EU Member States and CA countries are Parties In
addition the Title includes specific provisions in relation to various thematic areas such as
sustainable forest management sustainable fisheries and trade supporting sustainable
development It establishes civil society advisory groups as part of institutional structure
and foresees a regular dialogue between the Parties and civil society incl in a dedicated
Civil Society Forum The Title also provides a dedicated dispute settlement mechanism
with government consultations consideration of the matted by the TSD Board and a Group
of Experts to examine the matter and formulate recommendation
Title IX relates to regional economic integration between the Central American Parties
and includes provisions on circulation of goods in trade between the EU and CA within the
EU and CA region respectively once a product entered their customs territory and when
the applicable rules and standards are met In this context the Title provides rules related
to customs technical barriers to trade and sanitary and phytosanitary measures (Annex
XX provides a list of CA technical regulations in the process of harmonisation)
Title X covers dispute settlement and outlines the related procedures including the
establishment of a panel its ruling and compliance
Title XI establishes mediation mechanism for non-tariff measures incl the selection
of a mediator the applicable procedure and implementation of the agreed solution
Title XII contains provisions on transparency and administrative procedures Among
other things the Parties commit to (i) ensuring that their measures of general application
(eg laws regulations judicial decisions procedures and administrative rulings) relating
to matters covered by the EU-CA FTA are promptly published or otherwise made readily
available to interested persons and (ii) providing reasonable opportunities for those
interested to comment on proposed measures and taking into account relevant comments
The Parties also commit to establish Points of Contact for matters related to EU-CA FTA
Title XIII addresses tasks of the institutional bodies in matters related to trade
ie the Association Council the Association Committee and specialised Sub-committees
(for details please see section 52 on the institutional set up)
Title XIV defines general exceptions to the Agreement related to the Partiesrsquo balance of
payments and taxation
52 Institutional set-up of the EU-CA FTA
The Association Council the Association Committee six Sub-committees and an Ad hoc
Working Group on Government Procurement (the latter not envisaged by the EU-CA FTA
but set up by the Parties in 2016) oversee the implementation of the Agreement
The Association Council established pursuant to Article 4 supervises implementation of
the Association Agreement it is composed of representatives of the EU and each of the six
CA countries has a decision-making power (binding upon the Parties) in cases foreseen in
the Agreement examines all major issues and questions of common interest It meets at
Ministerial level (or through representatives) at regular intervals not exceeding two years
In line with Article 345 when meeting to discuss matters under EU-CA FTA the Council
has the power to amend Annexes and Appendixes related to trade incl tariff elimination
schedules and goods included there originating products and methods of administrative
Page 32
cooperation Annex XVI (Government Procurement) Annex XVIII (Protected GIs) Annex
XIX (in relation to Article 306 animals animal-based products plants and plant-based
products subject to SPS measures) and Annex XXI (Sub-committees)
The Association Committee set up pursuant to Article 6 is responsible for the general
implementation of the Agreement and assists in this context the Association Council It is
composed of representatives of the EU and the six CA countries at the senior officialsrsquo level
and shall meet once a year to review the implementation It takes decisions foreseen in
the Agreement or delegated by the Association Council When acting within part IV of the
Agreement the Association Committee supervises work of Sub-committees established by
this part and may set up new ones prevents and resolves conflicts (without prejudice to
provisions related to the Dispute Settlement and Mediation Mechanisms) and recommends
decisions for adoption by the Association Council
The Agreement has also established six specialised Sub-committees
Sub-committee on Market Access for Goods (Article 91) is responsible for monitoring
the correct implementation and administration of the Trade in Goods Chapter and serves
as a forum for consultations about interpretation and application of its provisions It
examines proposals provided by the Parties regarding accelerated liberalisation of trade in
goods and tariff reduction as well as inclusion of additional goods into liberalisation
schedules It may make recommendations to the Association Committee on matters within
its remit and take any issue as and when instructed by the Association Committee
Sub-committee on Customs Trade Facilitation and Rules of Origin acting in line
with Article 123 monitors implementation of the Chapter and Annex related to the concept
of origin and methods of administrative cooperation It provides a forum to discuss and
consult all matters related to customs incl customs procedures valuation nomenclature
cooperation tariff regimes mutual administrative assistance in customs matters as well
as rules of origin It pursues cooperation on development application and enforcement of
customs procedures mutual administrative assistance in customs matters administrative
cooperation and rules of origin It examines requests for amendments of rules of origin
and submits to the Association Committee results of the analysis with recommendations
It also aims to enhance cooperation on capability building and technical assistance
Sub-committee on Technical Barriers to Trade (TBT) acting in accordance with Article
139 provides forum to discuss and consult any matter related to the Chapter and monitors implementation and administration of this Chapter facilitating exchange of information
and cooperation and promptly addressing any issue that either Party raises related to the
development adoption application or enforcement of standards technical regulations
and conformity assessment procedures It aims at solving any problems within the remit
of the Chapter that would limit trade between the Parties It encourages direct interaction
between non-governmental actors such as standard bodies accreditors and certifiers It
facilitates the exchange of information about the work being done in non-governmental
regional and multilateral fora engaged in activities related to technical regulations stan-
dardisation and conformity assessment procedures and explores ways to facilitate trade
between the Parties The Sub-committee has also power to review the Chapter in the light
of developments under TBT Agreement and reports to the Association Committee about
implementation of the Chapter including cooperation activities
Sub-committee on Sanitary and Phytosanitary Matters (SPS) acting in line with
Article 156 monitors implementation of the Chapter provides a forum for discussion and
consultation on any matter arising under the Chapter and an opportunity to seek mutually
acceptable solutions It may also develop procedures or arrangements facilitating
implementation of the Chapter It acts as a forum for consultations related to any measure
proposed by the EU which may affect its trade with any of the CA Parties and a forum for
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 33
dispute settlement under the Chapter The Sub-committee is also responsible for
promoting cooperation on animal welfare between the Parties
Sub-committee on Intellectual Property Rights (IPR) (Article 274) monitors
implementation of Article 231 (transfer of technology) and part of the IP Chapter related
to GIs including facilitating discussion about protection of GIsrsquo and recommendations to
the Association Committee regarding amendments to Annex XVIII on GIs It promotes
technology transfer from the EU to the CA Parties and defines priority areas in which
initiatives shall be directed regarding technology transfer research and development and
building-up human capital Its responsibilities include also keeping a registry of the
programs activities or initiatives in progress in the field of intellectual property with
emphasis on transfer of technology
Board on Trade and Sustainable Development (TSD) established pursuant to Article
294 reports to the Association Committee and oversees the implementation the TSD Title
incl cooperative activities undertaken under Title VI (Economic and Trade Development)
of Part III of the Agreement The decisions and recommendations of the Board shall be
adopted by mutual agreement between the Parties and be provided to the public unless
the Board decides otherwise
While EU-CA FTA does not envisage a Sub-committee on Government Procurement the
Parties concluded that it would be useful to have a dedicated body to address matters in
this area They decided to create a temporary Working Group that met for the first time
in June 2016 (European Commission 2017a)
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo
priorities
The negotiations for an Association Agreement (AA) including a Trade Pillar between the
European Union (EU) and Central America (CA) started in 2007 We look at the bloc-to-
bloc trade and policy context the negotiation process and priorities from both sides
The region-to-region trade context
The CA group is composed by Costa Rica Guatemala El Salvador Honduras Nicaragua
and Panama and it is featured by internal economic and political dialogue which led to the
creation of the Central American Common Market (CACM) in the early 1960s Despite the
initial momentum the regional integration process has been stopped for decades due to
internal tensions and the effects of import-substitution trade strategies on local economic
growth (European Parliament 2012) Consequently the initial goal of setting up a custom
union failed and CACM succeeded only in establishing a free-trade area (Duran et al 2010)
The Central American integration efforts were revitalised through setting up of the Central
American Integration System (SICA) aimed at promoting democracy development peace
and freedom in the region (European Source Online 2016) SICA was formally established
on 13 December 1991 through the signature of the Protocol to the Charter of the
Organization of Central American States (ODECA) also known as the ldquoTegucigalpa
Protocolrdquo SICA established both a political and an economic institutional framework by
setting up the Central American Parliament and the Central American Bank for Economic
Development Despite these changes CACM remained the main forum for trade discussions
(European Parliament 2012)
The EU is one of the three most important CA trading partners It is challenging to draw
general and unified conclusions for the whole CA trade picture given its domestic
heterogeneity with Panama and Costa Rica being middle-income countries and Nicaragua
the poorest member (European Parliament 2018 p 18) The EU countriesrsquo share of import
from and export to CA accounted for 30 and 16 respectively in the mid-1980s Among
Page 34
the CA members Guatemala appeared as the most export dependent one while Panama
was the least trade-oriented country (CEPR 2012 pp 6-7) The role of agricultural
production within the respective economies differs widely between the two regions
Agricultural production is very important for CA especially in Honduras and El-Salvador
(38 of the national production) whilst it is relatively much less important in the EU (5)
The same complementarities can be found in manufacturing production (amounting to 18
of the EU production which is much higher than in CA particularly in Panama (4) and
Nicaragua (25) Services contribute to almost 23 of the EU Nicaraguan and Costa Rican
GDP while this share is only 53 for El Salvador (Ibid pp 6-7)
The negotiation process
The start of the economic and political dialogue between the EU and CA blocks dates back
to 1984 at the first conference of Foreign Ministers between the EU and CA countries in
Costa Rica In 1993 the EU and the CA countries signed a Framework Cooperation
Agreement which entered into force on 1st March 1999 (Acuerdo-marco de cooperacioacuten
1999) On the occasion of the EU-Latin America Summit held in May 2002 these countries
and the EU jointly expressed their willingness to reinforce their dialogue by concluding a
new Political Dialogue and Cooperation Agreement which was signed on 15th December
2003 in Rome (Acuerdo de Diaacutelogo Poliacutetico 2003)
The need to establish stronger trade relations even by setting up a free-trade area pushed
the EU and CA to explore the feasibility of an Association Agreement entailing also a specific
chapter on trade Such intention was clearly stated during the EU-Latin America summit of
Guadalajara (Mexico) in May 2004 (Declaration of Guadalajara 2004 p 8 point 52) and
one year later in May 2005 in the context of the EU-Central American Ministerial meeting
in Luxembourg On that occasion the parties launched a joint-assessment exercise on
regional economic integration and established an ad-hoc working party (Council of the
European Union XXI San Joseacute Dialogue Ministerial Meeting between the EU and Central
America 2005 p 2) Finally at the Vienna Summit of 2006 the parties opened the door
to an Association Agreement to create a free trade area (Council of the European Union
EU-Central American Summit 2006 pp 1-2 points 2 and 3) The summit also welcomed
the initiative of the Peace Building and Commission and Human Rights Council (Ibid p 2)
The green light for the beginning of the AA negotiations was given on 28th June 2007 in
Brussels (EU and the Central American Community start negotiations for a new Association
Agreement 2007) However the talks were temporarily suspended on 6th April 2009 and
then resumed a few days later on 24th April (Acuerdo de Asociacioacuten entre Centroameacuterica
y la Union Europea 2009) when the parties decided to re-initiate the negotiations
The negotiating partiesrsquo priorities
The negotiating strategy of the CA countries mainly pursued three goals
Strengthening their trade policy whose objective is to open up new markets for the
benefits of their local exporters The EU appears as a crucial partner for CA countries
as it ranks on top of the worldrsquos largest importers of agricultural products and the
relative share of developing countries has been rising over time in the EU trade balance
Reinforcing CA countriesrsquo export competitiveness and reducing costs of accessing the
EU market vis-agrave-vis competitors such as African-Caribbean and Pacific (ACP) countries
that benefit from preferential and better market access conditions
Attracting foreign direct investments in high value-added sectors where the EU applies
higher tariffs (Duran et al 2010 pp 96-99)
From the European side the main reasons driving towards the conclusion of the agreement
with CA are threefold
Promoting the developing countriesrsquo progressive integration into the world economy
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 35
Reaffirming the EUrsquos role in the world trade and in CA following the United States (US)
conclusion of the Dominican Republic Central American and the United States Free
Trade Agreement (CAFTA-DR) reaffirming the US role in the region
Better coordinating with partners on trade dossiers within the World Trade Organization
(WTO) and other international institutions (Ibid p 100)
The conclusion of the Agreement
The negotiation process delivered slow progress due to the inability of CA countries to
reach a unified position and owing to the delays in the regional integration (European
Source Online cit p3) The agreement was finally reached in May 2010 when the
negotiations were officially concluded during the Latin America-Caribbean and European
Union Summit in Madrid Following the legal scrubbing the European Commission reviewed
and approved the agreement prior to signature at the Meeting of the SICA Presidents in
Tegucigalpa Honduras on the 29th of June 2012 (European Commission Directorate
General for Trade 2012) The European Parliament finally endorsed the AA in December
2012 forecasting that the main gains for the European side would be in export of cars
machinery telecommunications chemical products and transports (European Parliament
2012 p 1) At the time of the AA signature in 2012 the EU-Central America trade in goods
accounted to EUR 149 billion and corresponded to 113 of the whole CA region trade
with the rest of the world (Griener and Membersrsquo Research Service 2014 p 5)
On that date the then EU Commissioner for Trade Karel De Gucht commented the
successful conclusion of the AA by stating that the ldquoregion-to-region deal will help establish
major business opportunities for both sides European exporters will save around EUR 90
million on customs per year and European service providers such as telecommunication
and transport will get greater market accessrdquo At the same time the agreement would
generate ldquospill-over effect on Central Americarsquos overall economic integration process and
contribute to the stability of the regionrdquo (European Commission Ibid p 1) The
Commission officially announced the provisional application of the FTA with Honduras
Panama and Nicaragua on 31st July 2013 with Costa Rica and El-Salvador on 1st October
2013 and with Guatemala on 1st December 2013
The trade provisions of the AA provisionally entered into force in 2013 as they fall within
the exclusive competences of the EU17 Once the entire text of the AA will be ratified by
the EU Member Statesrsquo parliaments the entire text will be legally binding and applicable
After joining the EU in 2013 Croatia is currently negotiating its accession to the AA
54 Operational context of the implementation of the EU-CA FTA
After having illustrated the main partiesrsquo priorities during the bloc-to-bloc negotiations this
chapter provides an overview of the broader context surrounding the negotiations and
implementation and describes the main regional actors as well as their respective trade
policy attitudes towards CA and Latin American countries (LAC) as a whole
Trade policy context the multilateral system and the global economy
Since the launch of the EU-CA negotiations the global trade policy context has undergone
deep changes The Doha Development Agenda stalemate due to incompatible views on
various issues at stake put great pressure on the global trading system The WTO
difficulties in reaching satisfying outcomes stem both from external causes such as the
decline of advanced economies regionalisation of trade and internal sources of tensions
17 Despite being considered as a bloc-to-bloc association agreement the incomplete CA regional economic integration and the failure in setting up a custom union among the CACM countries left unbalances and inconsistencies in accessing single CA countriesrsquo markets and different levels of external tariffs In light of these arguments CA cannot be considered as a fully integrated homogeneous and unified trade bloc
Page 36
embedded in unilateral tariff-cutting process (Baldwin 2016) Besides these tensions the
economic expansion of China and the ldquotrade warsrdquo between the US and China exploded as
of 2017 The recent stalemate of the WTO Appellate Body that halted the entire dispute
resolution process as well as the need to put sustainable development at the core of the
WTO agenda pushed the Commission to advance a new WTO reform proposal (European
Commission 2021) The WTO crisis led to a proliferation of bilateral FTAs and the EU
has been an active bilateral FTA actor globally (see Table 4
Table 4 Overview of the EU FTAs launched and or concluded since 2012
Start of Negotiations
Signatory CountryRegion
State of play of the agreement
Ratification
1999 Mercosur Concluded in 2019 Ongoing
2004 SADC Concluded in 2016 Entered into force in 2016
2007 Andean Community Concluded in 2010 Entered into force in 2013
2007 Ukraine Concluded in 2011 Provisionally applied since 2016 fully in force since 2017
2009 Singapore Concluded in 2019 Entered into force in 2019
2009 Canada Concluded in 2014 Provisionally applied since 2017
2010 Malaysia On hold na
2012 Moldova Concluded in 2013 Provisionally applied since 2014 fully in force in 2016
2012 Georgia Concluded in 2013 Provisionally applied since 2014 fully in force since 2016
2012 Vietnam Concluded in 2015 Entered into force in 2020
2012 Japan Concluded in 2018 Entered into force in 2019
2013 USA On hold na
2013 Morocco (DCFTA new) On hold na
2013 Thailand On hold na
2015 Philippines On hold na
2015 Tunisia (DCFTA new) Ongoing na
2016 Mexico (modernisation) Concluded in 2018 Ongoing
2016 Indonesia Ongoing na
2017 Chile (modernisation) Ongoing na
2018 Australia Ongoing na
2018 New Zealand Ongoing na
2019 United Kingdom Concluded in 2020 Ongoing
2020 ESA (extension) Ongoing na
Source compiled by the author
The EU trade and policy context
Trade picture
The EU maintains strong institutional dialogue with Central and Latin America
legitimised by historic cultural and linguistic ties with the region The EU Latin America
and the Caribbean (LAC) bilateral summits have been regularly held since 1999 gathering
33 members from the two counterparts In 2006 the EU-Latin America Parliamentary
Assembly (EuroLat) was set up and it was conceived as the parliamentary angle of the EU-
CA bilateral partnership (EPRS 2017 p 5)
From a trade perspective the EU-Central and Latin America (comprising Andean
Community CA Cariforum Mercosur Mexico and Chile) trade peaked at EUR 2287 billion
in 2014 before showing a downward trend and decreasing at EUR 2132 billion in 2015
corresponding to 61 of the whole EU trade that year (EPRS 2017 p 6) The EU total
share of LAC trade fluctuated around 14 and the EU remained the first investor in the
region in the last ten years (EEAS 2018) An analysis carried out by the European
Parliament in 2020 unveils that the EU-LAC trade in goods value grew by 22 from 2008
to 2018 (Tvevad 2020 p 18) According to the 2020 DG Trade Report (data from 2019)
on the Implementation of EU FTAs trade flows between the EU and CA showed a robust
growth Indeed trade in goods increased by 88 with respect to the 2018 performance
imports continued growing over the past five years and exports statistics indicated an
overall upward trend with the exception of 2016 (European Commission 2020a p 110)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 37
In 2010 the EU was the second CA trading partner behind the United States (US)
accounting for 94 of the regionrsquos overall trade with the rest of the world (European
Commission 2011 p 4) Among the main exporters to the EU Costa Rica ranked first
with 539 of the total CA exports to the EU Conversely the EU exports went primarily
to Costa Rica (363) Guatemala (281) and El Salvador (152) (Ibid p 4) The EU-
CA trade is marked by the supply of primary products to the EU (mainly agricultural
products such as coffee and bananas) in return for high-technology manufactures
especially machinery transport equipment chemicals and manufactured goods (Duran et
al 2010 pp 95-96 European Parliament 2012 p 9) The CA share in the EU trade was
modest accounting only for 05 of overall EU imports in 2011 and for 03 of the total
EU exports in 2011 (European Parliament 2012 p 8) In addition the EU applied tariffs
on various agricultural products imported from third countries The exclusion of both coffee
and bananas from the EU Generalized System of Preference (GSP) and the GSP+ schemes
prevented these products from benefitting from tariff-reduction from the European side
hampering their access to the EU market and leaving their prices to be influenced by world
trade fluctuations (Duran et al 2012 p 98) The 2019 data confirmed primary products
rank largely first among SITC products grouping exported from CA to the EU accounting
for 721 of the whole exports followed by manufactures with 27 (European
Commission 2019 p 4) Recent statistics highlight the main destination of EU export
continued to be Panama (up to 118 since 2018) whereas the main country of origin of
EU imports is Costa Rica with an increase by 63 from 2018 (European Commission 2020
p 112)
The previous EU trade policy strategy adopted in 2015 (ldquoTrade for Allrdquo) confirmed that
ldquothe FTAs with Peru Colombia Ecuador and Central America are creating new dynamics
for trade and investmentsrdquo (European Commission 2015 p 33) As set out by that trade
policy strategy the Commission should pursue three main priorities with regard to Latin
and Central America ldquo[Continuing] negotiations for an ambitious balanced and
comprehensive FTA with Mercosur ldquoRequesting negotiating directives to modernise the
FTAs with Mexico and Chilerdquo ldquoBe ready to consider investment agreements with key Latin
American countriesrdquo (Ibid p 33)
As evidence for the increasingly robust commitment in the region the EU negotiated trade
deals with 27 out of the 33 LAC countries to strengthen both bilateral and region-to-region
relations the EU actively engaged LAC by signing new and modernising older EU-LAC FTAs
(see Table 5)
Table 5 EU FTA in Latin America and participating countries
Agreement Countries Negotiation launch
Negotiations Conclusion
EU-Andean Countries Colombia Ecuador Peru 2007 2010
EU-Caribbean (CARIFORUM)
Antigua and Barbuda Bahamas Barbados Belize Dominica Grenada Guyana Jamaica Saint Lucia Saint Vincent and the Grenadines Saint Kitts and Nevis Suriname Trinidad and Tobago and the Dominican Republic
2002 2008
EU-Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
2012 2010
EU-Chile na 2017 na
EU-Mercosur Argentina Brazil Paraguay Uruguay 1999 2019
EU-Mexico na 2016 2018
Source Compiled by the author
Regarding civil society the trade chapter of the EU CA FTA did not receive a lot of public
attention and consequently has not been affected by a high level of politicisation within
the EU This might stem from the relatively lower importance of trade relations with CA for
the EU Likewise the agreement did not catch a lot of public attention either in CA where
Page 38
the media coverage mainly focused on the Central America Free Trade Agreement (CAFTA)
Nevertheless both the agreements were targeted by NGOs and trade unions sharing the
same criticism and concerns over biodiversity pharmaceutical product access and
exploitation of natural resources (European Parliament 2011 p 16)
Political Dialogue
To frame the most recent developments in the EU LAC political dialogue it is worthy to list
three key documents forging the EU foreign policy towards LAC
The European Parliament Resolution on the Political Relations with Latin
America passed in 2017 advocating for a stronger more coherent and reinforced
relations with this region by stressing the need to update and develop a more
comprehensive and ambitious EU strategy to address the emerging challenges linked
to fundamental freedoms human and social rights safety of minorities migration
issues corruption tax fraud and security (European Parliament 2017)
The Joint Communication adopted by the European Commission and the High
Representative for Foreign Affairs (HRVP) in 2019 titled ldquoEuropean Union Latin
America and the Caribbean joining forces for a common futurerdquo aimed at deepening
the EU-LAC relations in a fast-changing context by emphasizing four mutually important
priorities prosperity democracy resilience and effective global governance (European
Commission 2019)
The Council of the EU Conclusions of 13th May 2019 endorsing the strategy laid
out in the Joint Communication On that occasion the Council welcomed the four points
described above and added more areas for action such as to work more closely in the
multilateral framework consolidate economic and social resilience enhance shared
prosperity and assist in promoting structural reforms (Council of the EU 2019)
The 2020 EU 27 ndash Latin America Informal Meeting reaffirming the need to advance
bilateral region-to-region summit to strive for a stronger multilateral system identified
mainly in the United Nations and the World Health Organisation (WHO) especially in
the light of the COVID-19 pandemic outbreak (Federal Foreign Office 2020)
Within the framework of the AA the EU and CA agreed to cooperate on a wide range of
policy dossiers of mutual interest namely conventional weapon disarmament the
implementation of the Convention on the Prohibition of the Use Stockpiling Production
and Transfer of Anti-personnel Mines and on their Destruction as well as the Convention
on Certain Conventional Weapons and its protocol (European Parliament 2011 p 7)
On development cooperation the EC regional strategy 2014-2020 earmarked EUR 925
million funding for Latin America to be allocated in two components
Component 1 ldquoMultiannual Indicative Programme for continental activities with Latin
Americardquo accounting for EUR 805 million and devoted to Argentina Bolivia Brazil
Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico
Nicaragua Panama Paraguay Peru Uruguay and Venezuela
Component 2 ldquoMultiannual Indicative Programme for Sub-Regional Cooperation with
Central Americardquo funded with EUR 120 million focused on Central American countries
Costa Rica El Salvador Guatemala Honduras Nicaragua and Panama This component
included three areas for action ie support for regional economic integration support
for the Regional Security Strategy and support for Regional Climate Change Strategy
and the Central American Policy on Comprehensive Disaster Risk Management (EEAS
European Commission 2014)
The Central American trade policy context
Regional Context
Beside their membership in the Central American Common Market (CACM) and the WTO
the CA countries have been signing additional free trade agreements with other regional
and international partners since 2012
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 39
It should be also noted that Panama joined the Latin American Integration Association
(LAIA) in 2012 LAIA replaced the Latin America Free Trade Agreement (LAFTA) signed in
1960 and sought a deeper economic integration among the member states18 Also
Nicaragua applied for the LAIA membership in 2011 and its request was accepted by the
LAIA Council of Minister in August 2011 Nicaragua is currently advancing in fulfilling the
LAIA membership requirements No other CA countries are members of LAIA yet
Table 6 summarises bilateral FTAs and Preferential Trade Agreements (PTAs) signed by the
6 CA countries or being in force since 2011
Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021)
Costa Rica Guatemala El Salvador
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Colombia (signed in 2013 entered into force in 2016)
Mexico (signed in 2011 entered into force in 2013)
Peru (signed in 2011 entered into force in 2013)
Singapore (signed in 2010 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
Ecuador (PTA) (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs signed but not entered into force yet South Korea (signed in 2018) EFTA (signed in 2013)
FTAs signed but not entered into force yet EFTA (signed in 2013) Ecuador (signed in 2011) Peru (signed in 2011)
FTAs signed but not entered into force yet South Korea (signed in 2018)
Honduras Nicaragua Panama
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Peru (singed in 2015 entered into force in 2017)
Canada (signed in 2013 entered into force in 2014)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2014 entered into force in 2015)
Peru (signed in 2011 entered into force in 2012)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet Israel (signed in 2018) South Korea (signed in 2018) Colombia (signed in 2013) EFTA (signed in 2013) Trinidad amp Tobago (PTA)
(signed in 2013)
Source Compiled by the author
Other influential partners in CA
As illustrated by Table 7 three actors retain significant economic influence in CA and Latin
America as a whole the EU the US and China The following section will examine these
actors and their respective trade policies towards CA and Latin America by describing their
posture as well as the agreements in force
18 Argentina Bolivia Brazil Chile Colombia Cuba Ecuador Mexico Paraguay Panama Peru Uruguay Venezuela
Page 40
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking
SubregionCountry
EU total trade in goods (value in EUR billion)
Ranking of main trading partners for trade in goods
2016 2019
2016 2019 USA China EU19 USA China EU27
Andean Community 3 250 246 1 2 3 1 2 3
ACP ndash Caribbean 15 81 116 1 3 2 1 3 2
Central America 6 108 121 1 3 2 1 3 2
Chile 159 166 3 1 2 2 1 3
Mercosur 4 849 771 3 2 1 3 1 2
Mexico 538 618 1 2 3 1 2 3
Source EPRS 2017 p 6 and DG Trade statistics 2020
The US remains the key CA partner The US is the major source of Foreign Direct
Investments (FDI 273) and Official Development Aid allocating an annual average of
approximately USD 1600 million during the Trump Administration (2016-2020)
(Congressional Research Service 2021) Moreover the US rank on top of CA migrant
destinations (Belladonna 2019) The CA countries have been cultivating thorough relations
with the US as they represent the historical destination of over 40 of the regionrsquos
exports Furthermore the 2004 Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA) granted preferential market access conditions to the region (Office
of the US Trade Representative 2004 and Duran et al 2010 p 93) In light of the strong
power exerted by the US the EU trade strategy pursued a progressive rebalancing of the
US presence in the area to ensure better market access in the region (EPRS 2017 p 5)
The DR-CAFTA negotiations confirmed that labour standards sugar and textile products
treatment pharmaceutical data protection and sovereignty issues were the most
controversial and sensitive matters on the table Unlike the EU-CA AA it should be noted
that the DR-CAFTA does not build any common trade framework for all the signatories as
the US grants differentiated market access conditions to each single CA country (European
Parliament 2012 p 11)
In the last few years China has been playing a role of growing importance in CA and in
Latin America both from a political and trade viewpoint (European Commission 2020 p
15) In recent years China has reinforced its role as trading partner within CA As evidence
for this active involvement the 2000-2010 data already confirmed the Asiarsquos importance
(led by China) both in terms of imports and exports in Latin America and Caribbean20
Indeed the China share of the regionrsquos total exports by destination grew from 11 in
2000 to 83 in 2010 with regard to imports by destination the growth appears even
more remarkable moving from 18 in 2000 to 133 in 2010 (Kuwayama amp Rosales
2012 p 66) whilst the relative share of the US presence has shown a downward trend
(Ibid p 65) The monthly exports to Asia-Pacific21 region more-than-doubled from an
average value of USD 54 billion in 2006 to USD 162 billion in 2014 (Baacutercena Prado
Rosales Peacuterez 2015 p 23) After a slight decline experienced in 2016 a solid rebound
emerged in 2017 On average goods shipment from Asia-Pacific Latin America grew by
136 yearly between 2000 and 2016 (Scotiabank 2018 p 1)
Beside trade China has been recently advancing its Belt and Road Initiative (BRI) in
the region by concluding numerous Memoranda of Understanding (MoU) with various LA
19 Including the United Kingdom 20 Data refers to Argentina Bolivarian Republic of Venezuela Brazil Chile Colombia Costa Rica the Dominican
Republic Ecuador El-Salvador Guatemala Honduras Mexico Nicaragua Paraguay Peru Plurinational State of Bolivia
21 The Asia-Pacific region includes Australia Brunei Darussalam Cambodia China South Korea Philippines Hong Kong Japan Laos Thailand Taiwan Indonesia Malaysia Myanmar New Zealand Singapore and Vietnam
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 41
and CA countries To mention some Bolivia (2018) Costa Rica (2018) Chile (2018) and
Panama (2017)
6 CONSULTATIONS (TASKS 6 AND 7)
61 Consultation Strategy
The consultation strategy presented in the technical offer has been refined during the
Inception Phase (Task 6) and is outlined in Annex B Box 2 summarises our expectations
regarding the main inputs expected from stakeholders throughout the study
Box 2 Expectations regarding inputs from stakeholders
Inputs from stakeholders are expected at all stages of the study
The study team will welcome in particular Responses to the online public consultation Consultation with businesses (responses to the online business survey) Evidence of specific casesexamples on how the Agreement has affected economic performance
sustainable development and human rights both in Central America and in the EU Contributions will be particularly welcome in relation to the priority areas of analysis o Impact of the Agreement on trade diversification (in terms of goods and services traders regions
involved in trade etc) (see Task 101) o Impact on investment climate and investment flows (see Task 102) o Impact of the Agreement on SMEs (see Task 1012) o Effects of the implementation of the TSD chapter (see Task 111) o Performance of the institutions established under the TSD chapter (see Task 112) o Impacts of the Agreement on pillars of Decent Work Agenda working conditions labour standards
social protection other public policies and labour inspection (see Task 114) o Impacts on the informal economy and informal employment (see Task 115) o Environmental impacts (see Task 116) and o All of the case studies
Written contributions (positions) expressing views on how the Agreement has affected economic performance sustainable development and human rights across the parties in particular with regard to ndash but not restricted to ndash the analytical priority areas
Indication of relevant publications that focus on the impact of the Agreement in the partner countries Indication of actions taken by CA in areas covered by the TSD chapter (eg changes in policies action
plans strategies and legislation in the areas of labour environment and climate change ratification and implementation of international conventions in these areas and civil society engagement)
Written comments on the draft Inception Report draft Interim Report and draft Final Report Proposals for and comments on draft conclusions and recommendations of the report including how to
improve operation of the Agreement (if needed) Names of organisations or indication of vulnerable groups that may have been affected by the
Agreement in the partner countries as well as relevant contact details for the evaluation team to reach out to the most relevant additional stakeholders
62 Study Website and Electronic Communications
The establishment and continuous updating of a website as well as ongoing electronic
communications with stakeholders are one element of the consultation strategy During
the inception phase the website has been established and launched and an initial e-
communication will be sent out to identified stakeholders (Task 5) The website is available
at httpcentral-americafta-evaluationeu
Electronic communication with stakeholders will take place through email newsletters as
well as Twitter using an account for this ex-post evaluation (CaEvaluation) Twitter will
be used as well to present the (draft) findings at specific moments in the study interested
related work or articles highlights or relevant quotes from the consecutive study reports
and promote the various outreach activities such as workshops LinkedIn will be used to
complement twitter with the same objectives the account of LinkedIn to be used will be
Ex-Post Evaluation EU-Central America FTA Email and an electronic newsletter will be used
as complementary tools to reach specific stakeholders throughout the study to inform them
Page 42
of events to send questions receive feedback and make appointments for interviews the
email used will be central-americabkp-advisorscom
With the COVID-19 pandemic still in place and governments imposing new lockdowns and
travel restrictions a back-up plan is available in case a lot of the communication has to be
done online The meetings with the EU and CA stakeholders both government and civil
society in the near future will be held online For the second half of the year and beginning
of 2022 face-to-face meetings may also be an option The advantage of digital outreach
is linked to reduction of travel time and travel costs to the minimum and in addition digital
follow-up is easier The public consultation and online business survey are already being
prepared and planned with an indicative timeline of online availability between June and
September 2021 The workshops envisaged for Central America in November 2021 are
currently planned with options ranging from face-to-face meetings over hybrid solutions
to holding them entirely online In either case we will ensure they are as interactive as
possible thanks to the use of breakout rooms and platforms enabling participants to ask
questions and participate in polls online We will also ensure that participants will receive
sufficient information before workshops
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13)
71 Case Study Selection
As part of the evaluation ten case studies will be prepared Their purpose is to capture the
impact of implementation of the EU-CA FTA on sustainable development in its economic
social and environmental dimensions as well as on human rights (including labour rights)
They should complement the economic social environmental and human rights analysis
required under Tasks 10 11 and 12
Regarding the geographic coverage the ToR require two case studies focused on the EU
two horizontal case studies for the whole region of Central America and six dedicated to
each of the Central American countries
Table 1 provides a preliminary list of suggested case studies while their exact focus and
scope will be determined at the next stage of the study further to preliminary impact
analysis and identification of relevant information and data sources
Table 8 List of proposed case studies
No Case study topic Geographical focus Key impact areas
1 Impacts of the Trade Pillar on EU banana producers EU incl OR as well as ACP and LDCs due to preference erosion
Economic and Social
2 Trade in environmental goods and services (opportunities for the EU and partner countries)
EU CA partner countries22
Economic and Environmental
3 Impacts of the Trade Pillar on freedom of association in sectors involved in trade with the EU (the choice of sectors will be made further to the initial impact analysis)
CA partner countries notably Guatemala Honduras and El Salvador
Human rights and Social
4 The effects of the Trade Pillar on sustainable aquaculture in Honduras Nicaragua Costa Rica and El Salvador
Partner countries with a focus on Honduras Nicaragua Costa Rica El Salvador
Economic Social Human rights and Environmental
5 Opportunities created in services sector in particular the green energy sector in Costa Rica (the choice of the services sector will be reviewed based on the initial impact analysis)
CA partner countries Economic and Environmental
22 The ultimate selection of countries will depend on the outcome of the (environmental) impact screening and scoping exercise
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 43
No Case study topic Geographical focus Key impact areas
6 Impacts of the Trade Pillar on child labour and childrens rights
El Salvador Social and Human rights
7 Impacts of the Trade Pillar on the environment (eg forests and biodiversity) in Guatemala the case of palm oil
Guatemala Environmental
8 Impacts of the Trade Pillar on MSMES and sustainable agriculture in the coffee industry (organic coffee) in Honduras
Honduras Economic and Environmental
9 Impacts of the Trade Pillar on women and gender equality notably in agricultural value chains in sectors exporting to the EU (the sectors may include coffee ground nuts and banana however the final selection of sectors and scope will be made based on data availability and the initial impact analysis)
Nicaragua Social and Human rights
10 Implementation and effect of the FTZ in port of Colon including aspects related to direct transportation clause
Panama Economic
72 Case Studies ndash Summaries and Methodologies
Descriptions of case studies and planned methodologies have been provided in Annex A5
8 STUDY WORK PLAN
A detailed study schedule which sets out activities and deadlines for outputs indicated
throughout this Inception Report is outlined in the chart overleaf A detailed plan for the
consultation programme is provided in Annex A4 Annex A6 provides the risk management
approach for the evaluation
Page 44
Phase task deliverable
Inception phase
Kick-off meeting with Commission in Brussels 20
Task 1 Refine draft intervention logic diagram
Task 2 Define and develop the methodological approach
Task 3 Review existing studies amp reports on trade between the EU and CA (6 countries)
Task 5 Provide a concise description of the agreement
Task 6 Create a website dedicated to the evaluation
Task 7 Stakeholder consultation strategy
Task 13 Case study proposals
Inception reporting
Drafting of inception report
Draft Inception Report 22
Review meeting Commission ISG
Finalisation of the Inception Report
Inception Report
Interim phase
Task 4 Provide a concise summary
Task 8 Undertake consultation activities
Civil society dialogue in Brussels (budgeted under review meetings)
12-week online public consultation
Online survey for business users interests in both the EU MS and partners
Workshops in partner countries
Other targeted consultations
Task 9 Assess the EU-Central American TSIA
Task 10 Analyse economic effects
Task 11 Analyse effects of implementation on SD economic social environmental
Task 12 Analyse effects on Human Rights
Task 13 Conduct in-depth case studies based on field work
Interim reporting
Drafting of Interim Technical Report
Annexes Progress evaluation Quantitative tables 10-page stakeholder report CS reports
Draft Interim Technical Report 20
Review meeting Commission ISG
Finalisation of Interim Technical Report
Interim Technical Report `
Final phase
Task 13 Conduct in-depth case studies based on field work
Task 14 Reply to the evaluation questions
Task 15 Provide conclusions and recommendations
Tasks 1 45 9 and 10 - 15
Final reporting
Drafting of draft final report
Synthesis report
Executive Summary
Annexes
Draft final report 20
Review meeting Commission ISG
Finalisation of final report
Translation executive summaries (EN FR GE SP)
Final report 20
Possible exit meeting 20
Progress reports
The ToR speci fies 12 weeks for the survey we tentatively propose 16 weeks because the time schedule a l lows i t and i f the project s tarts in January the survey would fa l l in the hol iday season in EuropeCA which would not be conducive for responses
Key
Meeting with the European Commission
Concrete deliverable (eg Inception Report)
Key
Working on the evaluation and endpoints of work per task
Stakeholder consultation activities and meetings
MayAprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr
HOW TO OBTAIN EU PUBLICATIONS
Free publications
bull one copy
via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps
from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)
from the delegations in non-EU countries
(httpeeaseuropaeudelegationsindex_enhtm)
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doi[number]
[Cata
logue n
um
ber]
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page vii
ABSTRACT
Since 20131 the European Union (EU) has been implementing the Trade Pillar ie the
Part IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The European
Commission has now commissioned a consortium led by BKP Economic Advisors to
undertake an evaluation of the Trade Pillarrsquos (hereinafter EU-CA FTA) implementation and
impact The evaluation is undertaken over the period January 2021 to May 2022 and
analyses the economic social environmental and human rights (including labour rights)
effects which the EU-CA FTA has had since its entry into force in the Parties to the
Agreement and third countries In terms of evaluation criteria it will review the
effectiveness impact efficiency coherence and impact of the EU-CA FTA and its
implementation It will also comprise ten case studies to illustrate or add detail to broader
findings
This Inception Report presents the evaluation methodology a descriptive summary of the
Agreement and its implementation so far and a brief review of relevant studies on the EU-
CA FTA
1 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El Salvador since 1st October 2013 and with Guatemala since 1st December 2013
Page viii
TABLE OF CONTENTS
LIST OF BOXES TABLES AND FIGURES IX
ACRONYMS X
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES 1
2 EVALUATION FRAMEWORK 2
21 Intervention hypothesis of the Agreement (Task 1) 2
22 Evaluation Questions Judgement Criteria and Indicators 5
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2) 6
31 Analysis of economic effects (Task 10) 6 311 Task 101 Analysis of the evolution of trade in goods 6 312 Task 102 Analysis of the evolution in trade in services 8 313 Task 103 Analysis of the evolution of foreign direct investment (FDI) 8 314 Task 104 Presentation of overall economic impacts 9 315 Task 105 Determining the impact on implementation of the Trade Pillar of the various
institutional structures 9 316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated exportimport procedures for key stakeholders 10
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the Trade Pillar 10
318 Task 108 Analysis of the implementation of the Government Procurement chapter of the Trade Pillar 10
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar 10 3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has led to a
greater economic integration between the Central American partners 11 3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for imports of
bananas 11 3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on SMEs 11 3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers 11 3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on the
budgets of the EU and the partner countries 12 3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on EU
Outermost Regions (ORs) 12 3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on developing
countries in particular on LDCs and countries having an Economic Partnership Agreement (EPA) with the EU 12
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable development (Tasks 11 and 12) 13 321 Task 111 Analysis of the effects of implementation of the Trade and Sustainable
Development (TSD) chapter of the Trade Pillar 13 322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter 13 323 Task 113 Analysis of employment impacts 14 324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda (job
creation labour standards social protection and social dialogue) on working conditions
poverty reduction and enforcement 14 325 Task 115 Analysis of impacts on the informal economy and informal employment 15 326 Task 116 Analysis of impacts on gender inequality 16 327 Task 118 Analysis of impacts on the adoption and implementation of internationally
recognised instruments of responsible business conduct and Corporate Social Responsibility (CSR) 17
328 Task 117 Analysis of environmental impacts 18 3281 Activity 1 Fine-tuned methodology and impact screening and scoping 19 3282 Activity 2 Establishing the baselines for the impact areas 20 3283 Activity 3 Quantitative evaluation of impacts 20 3284 Activity 4 Qualitative evaluation of impacts 21
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page ix
3285 Activity 5 Answering of the evaluation questions and other concluding remarks 21 3286 Conclusions and recommendations 21
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human rights 21 3291 Human rights baseline 22 3292 Screening and scoping 22 3293 Detailed assessment 23 3294 Conclusions and recommendations 24
33 Concluding tasks 24
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3) 25
41 Methodological aspects 25
42 Substantive issues 25
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5) 29
51 Structure of the EU-CA FTA 29
52 Institutional set-up of the EU-CA FTA 31
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo priorities 33
54 Operational context of the implementation of the EU-CA FTA 35
6 CONSULTATIONS (TASKS 6 AND 7) 41
61 Consultation Strategy 41
62 Study Website and Electronic Communications 41
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13) 42
71 Case Study Selection 42
72 Case Studies ndash Summaries and Methodologies 43
8 STUDY WORK PLAN 43
LIST OF BOXES TABLES AND FIGURES Box 1 The use of the DPSIR framework in FTAs 20 Box 2 Expectations regarding inputs from stakeholders 41 Table 1 Methodological approaches and sources for the analyses of trade in goods 6 Table 2 Methodological approaches and sources for the analysis of trade in services 8 Table 3 Methodological approaches and sources for the analysis of bilateral FDI 8 Table 4 Overview of the EU FTAs launched and or concluded since 2012 36 Table 5 EU FTA in Latin America and participating countries 37 Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021) 39
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking 40 Table 8 List of proposed case studies 42 Figure 1 Overall evaluation approach 2 Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association
Agreement 3 Figure 3 Overview of the multi-pronged approach to human rights impact assessment 24
Page x
ACRONYMS
AA Association Agreement ACP African Caribbean Pacific BATIS Balanced Trade in Services CA Central America CCA Causal Chain Analysis CGE Computable General Equilibrium CPI Consumer Price Index CSD Civil Society Dialogue CSR Corporate Social Responsibility DAG Domestic Advisory Group DG Directorate-General ECLAC Economic Commission for Latin America
and the Caribbean EESC European Economic and Social Committee EFTA European Free Trade Association EP European Parliament EQ Evaluation Question EU European Union EU-CA FTA Trade Pillar of the EU-Central America
Association Agreement FDI Foreign Direct Investment FRA EU Agency for Fundamental Rights FTA Free Trade Agreement GATS General Agreement on Trade in Services GDP Gross Domestic Product GHG Greenhouse Gas GIs Geographical Indications GPA Government Procurement Agreement GSIM Global Simulation GSP Generalised Scheme of Preferences GTAP Global Trade Analysis Project HRIA Human Rights Impact Assessment ILO International Labour Organisation IPR Intellectual Property Rights ITC International Trade Centre
JC Judgement Criterion LDC Least Developed Country LULUCF Land use land use change and forestry MFN Most-Favoured Nation MSME Micro Small or Medium-sized Enterprise NGO Non-Governmental Organisation NTB Non-Tariff Barrier OECD Organisation for Economic Cooperation and
Development OHCHR Office of the United Nations High
Commissioner for Human Rights OR Outermost Region
RBC Responsible Business Conduct RoO Rules of Origin SDGs Sustainable Development Goals SIA Sustainability Impact Assessment SICA Central American Integration System SIECA Secretariat for Central American Economic
Integration SME Small or Medium-sized Enterprise SPS Sanitary and Phyto-Sanitary TBT Technical Barriers to Trade TISMOS Trade in Services data by mode of supply ToR Terms of Reference TRIPS Trade-Related Aspects of Intellectual
Property Rights TRQ Tariff Rate Quota TSD Trade and Sustainable Development UN United Nations UNCTAD United Nations Conference on Trade and
Development UNECE United Nations Economic Commission for
Europe WTO World Trade Organisation
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 1
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES
Since 20132 the European Union (EU) has been implementing the Trade Pillar ie Part
IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The Trade Pillar
(hereinafter EU-CA FTA) gradually opens markets on both sides increases the stability and
predictability of the trade and investment environment and aims at creating benefits for
consumers and fostering sustainable development Its objectives include also support for
regional economic integration in Central America This is also one of the first EU ldquonew
generationrdquo trade agreements characterised by its comprehensive scope that covers in
addition to liberalisation of trade in goods and services investment public procurement
competition intellectual property rights and trade and sustainable development
After several years of implementation an evaluation is undertaken with the objective of
analysing the economic social environmental and human rights (including labour rights)3
impacts of the implementation of the EU-CA FTA and ultimately of determining whether
there is a need to improve its implementation To support the European Commissionrsquos own
evaluation of the Agreement the Directorate-General (DG) for Trade has awarded a
contract for the ldquoEx-post evaluation of the implementation of part IV of the Association
Agreement (Trade Pillar) between the EU and its Member States and Central Americardquo to
a consortium led by BKP Economic Advisors (BKP) The evaluation is carried out by a team
involving experts from BKP Trade Impact BV Trinomics the Foundation Rural
Development Consult (CDR) the NL-investmentconsulting BV and the University of Costa
Rica The work started in January 2021 and will continue until May 2022
The scope of the evaluation can be delineated as follows in terms of the period covered
it includes the whole implementation period of the EU-CA FTA since the start of provisional
application in 2013 up to now also comparing where appropriate with a five-year period
preceding the entry into force of the Agreement (ie starting in 2008) Geographically it
primarily covers the Parties to the Agreement although some effects of the EU-CA FTA on
selected third countries are also analysed such as developing countries and particularly
least developed countries (LDCs) moreover some global effects (eg climate change)
will also be covered Regarding evaluation criteria effectiveness impact efficiency
coherence and relevance will be considered Finally as already mentioned in terms of
types of effects considered the evaluation will cover economic social environmental and
human rights (including labour rights) effects which the EU-CA FTA may have had either
as a result of the changes in trade it has brought about or through the implementation of
the provisions of the Agreement text itself notably those of the Trade and Sustainable
Development (TSD) chapter
Although most data to be considered for the evaluation are likely to refer to the world pre-
COVID-19 the pandemic will have an impact on the study First in terms of the evaluation
implementation it is likely to affect the consultation activities that may need to be carried
out online rather than in person Second in substantive terms it will be important to pay
attention to issues which are of a priority for stakeholders in the current circumstances
(eg by selecting case studies accordingly) and to consider that eg stakeholder views
might be affected by the current situation
This inception report is the first deliverable under the contract It comprises seven tasks
of the evaluation (as established in the Terms of Reference see Figure 1) focusing on the
presentation of the evaluation methodology and is structured as follows Chapter 2
2 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El-Salvador since 1st October 2013 and with Guatemala since 1st December 2013 3 Whenever this report refers to human rights this includes labour rights
Page 2
presents the evaluation framework with an intervention hypothesis (task 1) while Chapter
3 outlines the proposed methodology responding to the evaluation questions (task 2) and
Chapter 4 covers a brief review of relevant studies on the Agreement (task 3) Chapter 5
provides a descriptive summary of the EU-CA FTA and its implementation so far (task 5)
followed by outline of consultation activities in Chapter 6 (tasks 6 and 7) supported by the
consultation strategy provided in Annex B as well as a list with a preliminary selection of
case studies in Chapter 7 (task 13) The final part includes study work plan in Chapter 8
The draft outline of the interim and final evaluation reports is presented in Annex A7 Other
parts of the Annex provide further details on certain elements of the report
Figure 1 Overall evaluation approach
2 EVALUATION FRAMEWORK
21 Intervention hypothesis of the Agreement (Task 1)
An indicative intervention hypothesis developed by the Commission linked the operational
objectives (as listed in Article 78 of the EU-CA FTA) to specific and overall objectives set
out in Article 2 of the Agreement and its Recitals In line with Task 1 of the evaluation ToR
we have adapted the intervention logic developed by the Commission as follows
All 10 operational objectives listed in Article 78 of the Agreement have been included
Specific and overall objectives have been considered in the context of short-term and
medium-term outcomes as well as long-term impacts
Underlying assumptions have been identified and integrated into the intervention
hypothesis
The relationship between the evaluation questions (EQ) and the intervention hypothesis
has been specified
The updated version of the intervention hypothesis is presented in Figure 2 overleaf
The intervention hypothesis was also instrumental in developing the analytical framework
of the evaluation which brings together the evaluation questions of the ToR the associated
judgment criteria and indicators the data sources and the methodological tools with which
we will collect data The refined analytical framework is presented in the following sub-
section
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 3
Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association Agreement
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 5
Main assumptions (at the level of coherence)
Pillar IV and its implementation has been coherent with the EUrsquos trade and development
policies and in particular with the EUrsquos commitment to sustainable development in
trade policies as a contribution towards attainment of the SDGs (EQ8)
Main assumptions (at the level of efficiency)
The utilisation rate of the Trade Pillar is high (EQ5)
Implementation of the Trade Pillar does not lead to trade diversion (EQ5)
Costs associated with implementation of the Trade Pillar are proportionate to the
benefits it has generated (EQ6)
The distribution of both costs and benefits is proportionate among different
stakeholder groups and interests (EQ6)
Implementation of the Trade Pillar does not create unnecessary regulatory costs
(including administrative burden) (EQ7)
Main assumptions (at the level of effectiveness impact and relevance)
The implementation of the Trade Pillar does not create unintended negative
consequences (EQ3)
The positive impact of the Trade Pillar is inclusive and does not benefit only a limited
group of stakeholders (EQ6)
Implementation of the Trade Pillar has contributed to trade diversification (EQ5)
Provisions of the Trade Pillar continue to be relevant for strengthening trade relations
between the Parties and regional integration of Central America (EQ9)
22 Evaluation Questions Judgement Criteria and Indicators
The evaluation framework has been based on the evaluation questions listed in the ToR for
the study which are as follows
EffectivenessImpact
EQ 1 To what extent have the objectives as laid down in Article 78 of Part IV of the
Agreement been achieved
EQ 2 What are the factors influencing (either positively or negatively) the achievements
of the objectives specified in Article 78
EQ 3 Has implementation of the Trade Pillar had unintended (positive or negative)
consequences and if so which ones
EQ 4 What has been the impact of implementation of the Trade Pillar
Efficiency
EQ 5 To what extent has implementation of the Trade Pillar been efficient with respect
to achieving its objectives
EQ 6 To what extent are the costs associated with implementation of the Trade Pillar
proportionate to the benefits it has generated Is the distribution of both costs and
benefits proportionate among different stakeholder groups and interests
EQ 7 Are there unnecessary regulatory costs (including administrative burden)
Coherence
EQ 8 To what extent has implementation of the Trade Pillar been coherent with the
EUrsquos trade and development policies ndash and in particular with the EUrsquos commitment to
sustainable development in trade policies as a contribution towards attainment of the
SDGs
Relevance
EQ 9 To what extent do the provisions of the Trade Pillar continue to be relevant in
order to address the current trade needs and issues of the EU and Central America
Page 6
The framework provides the evaluation questions the judgement criteria for each of them
the analysis needed to substantiate findings and conclusions made in the evaluation report
and the sources through which data and information will be obtained The evaluation
framework also links evaluation questions and judgement criteria to the analytical tasks to
be performed according to the ToR Table 1-1 in Annex A1 presents this framework
It should be noted that methodological tools and indicators used are not shown in the table
but are explained in the next chapter
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2)
In this chapter we describe the methodologies and tools planned to be used in the
evaluation separately for each task The analysis will be concluded with recommendations
on how the implementation of the Agreement can be further improved for the benefit of
the EU and Central American partner countries It should be noted that the structure of
the presentation is in line with the tasks defined in the ToR to facilitate comparison and
compliance with ToR requirements However the order of findings will be guided by the
evaluation framework presented in chapter 2 To facilitate the link with the evaluation
framework for each task we indicate to which evaluation question respectively judgement
criterion it contributes
31 Analysis of economic effects (Task 10)
In 2010 the EU was Central Americarsquos second most important trade partner after the
United States (and after intra-regional Central American trade) The total value share of
the EU in Central American trade was 94 EU exports mainly went to Costa Rica (53)
Honduras (22) and Guatemala (12) In 2018 the EU was still Central Americarsquos second
trade partner after the United States but with a higher share of 122 of all Central
American trade (IMF 2019) In 2019 Central Americarsquos trade with the US (in both goods
and services) totalled USD 70 billion (ie EUR 678) (USTR) Trade in goods with the EU
reached EUR 12 billion in 2019 and trade in services EUR 82 billion in 2018 (European
Commission 2020a)
311 Task 101 Analysis of the evolution of trade in goods
Analysis under this task will seek to respond to the evaluation questions related to JC 1A1
1A2 and JC 41 The EU-CA FTA offers advantages in terms of market access for the EU
and Central American countries Some of the main elements of the Agreement regarding
goods exports from the EU to Central America are complete liberalisation of tariffs for
manufactured goods and fisheries at the end of the tariff phase-out period and immediate
liberalisation of 69 of EUrsquos exports to CA at the start of the agreement saving EUR87
million in duties annually Specific analyses to be carried out under Task 101 have been
summarised in Table 1 For each sub-task we present the specific analysis that needs to
be carried out and main methodological approach we suggest as well as relevant data
sources
Table 1 Methodological approaches and sources for the analyses of trade in goods
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
1 Goods showing the largest increase or decrease in total and bilateral trade flows
Using COMEXT statistics at different disaggregation levels the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing products
2 Development of trade in goods against previously applicable GSP+ and GSP tariffs
Taking COMEXT data as a basis to investigate whether the GSP status of a product has a bearing on how the EU-CA FTA has influenced the rate of growth in trade we will compare two groups of goods those for which tariffs were 0 under GSP versus those for which tariffs were greater than 0 under GSP+
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 7
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
3 Preference utilisation rates and forgone duty saving of economic operators of all Parties
Based on COMEXT data (for EU imports) and data provided by the Commission (for EU exports) a quantitative analysis will be undertaken to identify the key sectors and product categories where preferences are not fully used We propose to include up to 3 questions in the survey to identify factors that encourage discourage companies to use the Agreement
4 Use of tariff rate quotas (and the reasons for suboptimal use)
Data up to 2019 is already available in the Commissionrsquos annual implementation reports Updating the data is supposed to rely on similar sources as the Commissionrsquos annual reports Reasons for sub-optimal use of TRQs will be investigated during the consultations as this cannot be inferred through statistical analysis
5 Trade diversion in particular from interregional Central American trade towards the EU
First we aim to use COMEXTCOMTRADE data to analyse the evolution of merchandise trade flows over time (between the EU and the partners but also within the region in comparison to the rest of the world)
Second we aim to look at the CGE results that should be able to tell us the pure EU-CA FTA effect on intra-Central American trade flows
6 Impact of the Agreement in relation to the creation persistence reduction or removal of non-tariff measures (NTMs) that have a significant impact on EU-CA countriesrsquo trade in goods
We will use UNCTADrsquos NTM TRAINS database and classification for identification description and analysis of specific NTMs affecting trade relations between the EU and Central America We will also look at NTMs including market access barriers raised by the Parties in the sub-committee meetings and will complement the findings with stakeholder engagement
7 Analysis of the importance of Free Trade Zones in Panama (especially the FTZ in the Port of Colon)
Using trade statistics we can get a picture of the way trade flows entering Central America via the Port of Colon (for example) are distributed across Central American countries These patterns ndash at sector level ndash would tell us the most economically significant EU exports This
will be complemented by qualitative analysis
8 Investigation of whether new enterprises started to export or whether enterprises already exporting started to export new products
We expect to undertake this analysis by relying on available firm-level data as well as specific questions for SMEs in the targeted business survey the SME Panel questionnaire and other consultation activities directed towards SMEs Additionally for this sub-task we will try to get access to national databases containing firm-level panel data based on highly disaggregated customs information that include exports (imports) of products and their destinations
9 Analysis of the evolution of trade import shares originating in the EU in total imports of the six CA countries (and vice versa)
COMEXT and COMTRADE data will be used to carry out this analysis We will ensure that we specify the third countries in a clear way The EU and each of the Central American countries The United States Mexico and Canada but also Brazil Argentina
Paraguay and Uruguay (Mercosur) and China Other countries (Rest of World)
10 Analysis of the impact of the EU-CA FTA implementation on diversification of trade
The diversification of trade in goods will be evaluated according to two main dimensions 1 Diversification in the range of products traded between the EU and each of its partners 2 Diversification in the number of EU member states trading with the Central American partners
11 Comparison of the development of trade in goods between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
COMEXT and COMTRADE data will be used to carry out this analysis Regarding trade of the partner countries the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as the MERCOSUR countries The choice of the US can be explained by CAFTA-DR agreement that has been in place since 2006 between the US and Central America and the Dominican Republic
12 Investigation of whether the EU-CA FTA has facilitated trade with third countries including via the use of intermediate products
Use of GTAP data (since the Trade in Value Added ndash TiVA database only covers Costa Rica) to look at intermediate linkages and whether these have helped the competitiveness of the CA economies We will also look at the CGE modelled development of the real exchange rate as an indicator of what happened to CA economiesrsquo levels of competitiveness
13 Analysis of the degree to which implementation of the EU-CA FTA has contributed to diversification of sources of supply of goods
COMEXT and COMTRADE data will be used to carry out this analysis We will look at the inputs shares for specific products in CA from the EU and vice versa and compare the development of these shares to the shares for the same products from international trade partners
14 Identification of regions within the partner countries that have benefited most and of
regions having benefited least (including the identification of constraints)
We expect to rely mainly on a combination of mapping of the sectoral CGE effects per region with literature review and consultation activities to identify the regions that have most least benefited from the
agreement Social progress indexes are computed at municipal level in Costa Rica and at provincial level in Panama as well as for some regions in Guatemala and El Salvador but this is for 2017-2018 only
Page 8
312 Task 102 Analysis of the evolution in trade in services
Analysis in this task is linked to JC 1A3 Although the effects of trade agreements on EU
services trade with third countries are not easily quantifiable we will seek to use available
data to demonstrate the impact of the EU-CA FTA on EU services trade We will assess
whether the Agreement has led to an improvement or worsening of the structural
imbalance between the parties The EU posted a substantial services trade surplus of EUR
10 billion with all six Central American partners combined in 2013 but this surplus has
decreased to EUR200 million by 2017
Table 2 Methodological approaches and sources for the analysis of trade in services
Specific analysis to be carried out
Main methodological approach and sources
1 Services showing largest increase decrease in total and bilateral trade flows between individual CA countries and EU
We will identify sectors showing the biggest increase in total trade in services flows and in bilateral trade flows as well as those having performed worst This analysis will be conducted using time series trade statistics at different levels of disaggregation (from Eurostat OECD and UNCTAD) the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing sub-sectors Reasons for performance will be identified by a combination of sources including literature review and targeted consultations
2 Comparison of the development of
trade in services between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
The comparison of the development of bilateral trade in services between the EU and the individual Central American countries with the development of trade in services
for the EU and its Member States and for Costa Rica Guatemala El Salvador Honduras Nicaragua and Panama with a suitable reference group of countries will provide further evidence on the actual impact of the agreement of trade in services flows As is the case for trade in goods (Task 101) the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as MERCOSUR countries if possible The choice of the US matters because of the CAFTA-DR agreement that has been in place since 2006
3 Analyse trends in international financial capital flows and the evolution of key financial industry segments ndash with the GATS modes of supply as the basis
First we will analyse trends in international financial capital flows between the EU and the Central American countries as well as globally For this we will use available Eurostat OECD andor UNCTAD data as well as Central Bank data if available
Second in order to look at how sectors are performing (well or not so well) we will focus on a concise general ndash but sector level ndash analysis and what drivers we can identify for economic performance
Third we propose that the following case study (see Task 13) could be undertaken Evaluating financial industry segments such as banking insurance asset management sustainable investment ndash in Panama or Costa Rica
Data source suggestions The OECDrsquos Services Trade Restrictiveness Index The GATS Trade Restrictiveness Index which together establish the amount of ldquowaterrdquo in the partiesrsquo GATS
bindings that can be ldquosqueezedrdquo by a modernised Agreement Central Bank data on financial and insurance services economic activity and trade Global Investment Competitiveness Report (World Bank 2019) ISDB data from Eurostat BOP statistics
313 Task 103 Analysis of the evolution of foreign direct investment (FDI)
The analysis in this task will be linked to JC 1A5 Although the effects of trade agreements
on Foreign Direct Investment (FDI) with third countries are not easily quantifiable we will
seek to use available data to demonstrate the impact of the EU-CA FTA on FDI At a general
level this task will entail to assess what impact the EU-CA FTA has had on structural
balances or imbalances between the EU and its Central American partners
Table 3 Methodological approaches and sources for the analysis of bilateral FDI
Specific analysis to be carried out
Main methodological approach and sources
1 Largest increases decreases in FDI flows between individual CA countries and the EU
We will identify main changes in FDI flows over the past 10 years between the EU and Central American countries if possible at sector level This analysis will be conducted using the ITC investment map data UNCTAD investment data and ISDB data from Eurostat BOP statistics Data limitations are expected to be significant for this subtask Reasons for good or bad performance will be identified by a combination of sources including literature review and targeted consultations
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 9
Specific analysis to be carried out
Main methodological approach and sources
2 Comparison of the development of FDI flows between the signatory countries
The proposed methodology would examine the investment effect at both the extensive and intensive margins using the two-step Heckman (1979) estimation as implemented in Helpman et al (2008)
3 Analysis of the investment climate
and of the attractiveness to investment of the six CA countries
An analysis of the investment climate and of the attractiveness to investment of the six Central American countries taking into consideration the possible impact of the
existence of bilateral investment treaties or of double-taxation treaties will be undertaken We propose to review inter alia the evolution of the following indexes OECDrsquos Foreign Direct Investment Restrictiveness (FDIR) index Various FDI attractiveness and FDI confidence indexes ndash eg by AT Kearny and Ernst amp Young Global Investment Competitiveness Report (World Bank 2019) World Bank lsquoDoing Business Indicatorsrsquo ISDB data from Eurostat BOP statistics wwwinvestmentmaporg from the ITC
314 Task 104 Presentation of overall economic impacts
The analysis in this task is linked to JC 41 and will rely on the computable general
equilibrium (CGE) modelling undertaken by DG Trade The CGE model is the quantitative
cornerstonefoundation of the ex-post evaluation Important variables of interest for the
economic analysis will be those which are standard for a CGE analysis such as GDP and
trade flows (total bilateral and by sector) and sectoral output Based on the CGE modelling
results we will estimate the overall impact on the economy of the EU the partner countries
as well as third countries in particular LDCs The economic analysis will build further on
the modelling results We will report these in sufficient detail to highlight the economic
effects of the EU-CA FTA More details on the CGE model are provided in Annex A2
315 Task 105 Determining the impact on implementation of the Trade Pillar of the
various institutional structures
Our analysis under this task will seek to respond to evaluation questions No 1 and 5 (with
JC1A2 JC1A6 JC1A7 and JC1A9) ie how the operation of the institutional set up has
contributed to achieving the objectives of the EU-CA FTA outlined in Article 78 and how
effective and efficient the Association Committee (in trade configuration) six Sub-
committees and an ad hoc Working Group have been to date To determine this we will
analyse provisions of the EU-CA FTA referring to institutions and their operation in practice
In the first step we will analyse Articles 4-8 establishing the Association Council the
Association Committee and Sub-Committees and setting out their decision-making powers
This will be done jointly with Articles 345-346 setting out specific tasks of the Association
Council and the Association Committee acting in trade configuration including powers to
amend certain parts of the Agreement (within Trade Pillar) This will be followed by Articles
347-348 about Part IV coordinators and Sub-Committees established under EU-CA FTA and
will be complemented by the analysis of Articles 91 123 139 156 274 and 294 outlining
areas of responsibility of the individual Sub-committees4 and the Rules of Procedure of the
Association Council and the Association Committee (Decision No 12014 of the Association
Council) which also apply to Sub-Committees This will let us develop an understanding
about the mandate of each institution its decision-making powers including those related
to amending the EU-CA FTA and monitoring compliance by each Party frequency and
format of meetings relations with other institutions under the Agreement reporting and
escalation In this way we will establish an expectation regarding the role each institution
should have in implementation of the EU-CA FTA and achieving its objectives
4 Sub-committee on Market Access for Goods (Article 91) on Customs Trade Facilitation and Rules of Origin (Article 123) on Technical Barriers to Trade (TBT) (Article 139) on Sanitary and Phytosanitary Matters (SPS) (Article 156) on Intellectual Property (Article 274) Board on Trade and Sustainable Development (TSD) (Article 294) and Ad hoc Working Group on Government Procurement
Page 10
In the second step we will analyse the actual operation of all the above structures based
on available documents and engagement with the Parties as well as relevant stakeholders
We will take as the basis reports from Sub-committee and Association Committee meetings
and will complement them with the annual Commissionrsquos Implementation Reports and
other documents eg conclusions adopted by civil society representatives at the annual
meetings under the TSD chapter We will also determine whether formal decisions have
been taken by the Association Council or Committee and if so analyse the extent to which
they have contributed to implementation of the EU-CA FTA We will also look at concerns
raised by the Parties how they have been addressed and how much time it took to achieve
a satisfactory solution Based on findings from our analysis we will provide conclusions
and recommendations for the future notably for the TSD board
316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated
exportimport procedures for key stakeholders
Analysis in this task will be related to JC 1A2 Based on reviews of the Agreement text as
well as the work of the Sub-committee on ldquoCustoms Trade Facilitation and Rules of Originrdquo
we will analyse in a qualitative way which customs-related aspects have facilitated or
complicated bilateral trade like rules of origin management of TRQs agricultural safeguard
measures and approved exporter status We will seek to determine eg whether Article
304 par 1 provision (related to reimbursement of duties in CA Party of transit and their
payment in the CA Party of import) is applied in practice and if so how it is evaluated by
economic operators
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the
Trade Pillar
This task is also linked to JC 1A2 and the methodological aspects described above are also
valid for SPS related issues We see two subtasks under this request 1) An analysis to
what degree implementation of the SPS Chapter in the EU-CA FTA has facilitated agri-food
trade without lowering any partyrsquos SPS standards 2) The extent to which the capacity
building and technical assistance provided by the EU to Costa Rica El Salvador Guatemala
Honduras Nicaragua and Panama has had an effect (looking at what technical assistance
projects and funds were used)
318 Task 108 Analysis of the implementation of the Government Procurement
chapter of the Trade Pillar
The analysis in this rask is linked to JC 1A6 and will examine the impact of the opening of
the government procurement markets of the Parties using a multi-step approach 1)
Review of the recent and ongoing work of the Ad Hoc Working Group on Government
Procurement 2) A statistical analysis of the procurement value shares for EU business (if
possible) and SME participation which will be complemented by desk research and
anecdotal evidence of success stories of EU companies in Government procurement
markets of six CA countries and 3) Review of the level of compliance with the Agreement
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar
This task is related to JC 1A7 and 1A8 The methodological approach foreseen to analyse
other areas of the Agreement (like Technical Barriers to Trade e-commerce Competition
and protection of intellectual property rights (IPRs) including geographical indications)
Our approach focuses on 1) Statistical analysis compiling statistical descriptive analysis
on each issue prior to and after entry into force of the Agreement 2) Literature review
the analysis on the implementation and use of geographical indications in Central America
(eg Rivar 2020) 3) Case studies A specific case study on some of these other issues
could be carried out
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 11
3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has
led to a greater economic integration between the Central American partners
This task is linked to JC 1A4 The EU-CA FTA has been a mechanism that encourages
regional integration but it takes place within a much wider framework of regional
cooperation efforts between the CA countries with the EU-CA FTA being only one element
in this wider context This task focuses on the impact of the EU-CA FTA on regional
integration not on the overall trend or state of affairs regarding regional integration We
use three elements for our analysis 1) The statistical analyses that we have carried out in
Tasks 101 (trade in goods) 102 (trade in services) and 103 (FDI) help to shed light on
regional integration impact of the EU-CA FTA also 2) We look at the results of the CGE
analysis including at how the intra-regional trade patterns have changed because of the
EU-CA FTA 3) We investigate what progress has been made in terms of the different
elements for integration We will use EU and CA data sources to underpin our analyses
3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for
imports of bananas
This task is related to JC41 We envisage three types of analysis under this task in addition
to a possible case study 1) Descriptive statistical analysis based on trade in bananas since
2008 in order to capture developments before and after the entry into force of the EU-CA
FTA distinguishing bilateral trade in bananas EU banana imports from the non-LDC ACP
countries from LDCs and intra-EU imports from the Outermost Regions 2) A quantitative
impact analysis using a partial equilibrium model ndash the Global Simulation (GSIM) model
(Francois and Hall 2009) 3) A qualitative impact analysis causal chain analysis will be
applied to look at what the Agreementrsquos sector-level social and environmental effects have
been In this step we focus in the socialhuman rights pillars on how vulnerable groups
could be affected at sector level The qualitative sectoral environmental analysis will cover
the impact of the FTAs on land use and related issues water and waste management and
biodiversity and protection
3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on
SMEs
The analysis in this task is linked to JC 41 The ldquoSME-Testrdquo will be guided by the following
steps 1) Consultation of SME Stakeholders SMEs are a central element of the consultation
strategy and will be present at every stage of it 2) Identification of affected business
early on in the analysis we will identify whether and which SMEs (eg medium-sized) are
among the affected businesses 3) Identification of concrete stories as the Interim Report
progresses we will have sufficient information to identify 20 concrete stories from SMEs
as required by the Terms of Reference
3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers
This task will be approached in two parts the first one being dedicated to impacts on
consumer rights and the other one to welfare-related impacts of the EU-CA FTA which also
affect consumers in their purchasing decisions The analysis will be related to JC 42 and
evaluation questions No 18 and 6 In addition we will aim to determine to what extent
EU-CA FTA has contributed to attaining SDG 1 (no poverty) and 10 (reduced inequalities)
Regarding consumer rights in the first step we will refer to the literature according to
which consumers usually benefit from global trade and preferential trade agreements due
to lower prices of purchased goods and services (resulting from reduction of tariff and non-
tariff barriers) a wider variety of traded goods and services the related satisfaction of
diversified needs and preferences and higher quality of available goods and services
Page 12
In the second step we will consider impacts which the EU-CA FTA (might) have had for
consumers regarding availability safety sustainability traceability and quality of traded
goods and services as well as which impact its promotion (or consumersrsquo awareness of it)
may have on consumersrsquo knowledge regarding the market offer and their trust in it The
list of questions to test will be guided by the EU Better Regulation Tool Nr 32 related to
impacts on consumers We will also draw on other parts of the study analysing
implementation of provisions related to regulatory measures and standards eg TBT
SPS TSD dialogue and cooperation between the EU and partner countries and
transparency to outline what level of protection incl consumer protection and production
standards is provided by the EU-CA FTA We will also refer to the EU RAPEX database ie
the alert system for dangerous non-food products listing notifications of such products
originating from the EU and partner countries
The second part of our analysis will focus on impacts of the EU-CA FTA on welfare In the
first step based on literature review and statistical data including relevant indexes (eg
the share of population living below the poverty line) we will analyse trends in the reporting
period in the EU and Central America regarding situation of consumers from different
groups of the population incl incomes expenditures levels of poverty and inequality
income and price levels wages and other types of income and any changes in this context
In the following step we will use outcomes of the economic modelling to estimate impacts
on welfare and inequality resulting from EU-CA FTA implementation eg prices and wages
In this context we will also consider to what extent the Agreement helped to attain SDG
No 1 (No Poverty) and SDG No 10 (Reduced Inequality) This will be complemented by
stakeholder consultations and finished with conclusions and recommendations
3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on
the budgets of the EU and the partner countries
The analysis in this task is linked to JC 41 It will examine impact of the FTAs on the EU
budget (ie revenues forgone) and will largely result from the economic model We
anticipate that for the EU the foregone tariffs on imports from the partner countries will
be estimated based on the level of EU imports from the selected countries as a baseline
and the tariffs that would have applied to those imports
3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on
EU Outermost Regions (ORs)
This task is linked to JC 41 The impact on ORs will be assessed based on the trade
diversion and deflection identified in the CGE analysis A key limitation in the economic
modelling framework is however that the EU ORs are not established as a separate region
To meaningfully analyse the effect on the EUrsquos ORs we propose two elements 1) A
matching analysis for the EU and the six partner countries regarding products that matter
for ORsrsquo trade (to either partner countries or the EU) 2) Competition analysis between
ORs and CA partner countries for exporting to the EU The effects will be determined
qualitatively distinguishing if applicable the ORs which might be positively or negatively
affected by the Agreement
3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on
developing countries in particular on LDCs and countries having an Economic
Partnership Agreement (EPA) with the EU
This task is related to JC 41 Our approach to look at the EU-CA FTArsquos impact on developing
countries and LDCs will largely consist of the interpretation of the results of the economic
model simulations which has defined lsquoLDCsrsquo as a separate region This allows us to look at
the effect the EU-CA FTA has had on them We will also look closely at effects for countries
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 13
which are implementing an Economic Partnership Agreement (EPA) with the EU In terms
of the impact we will look first at an economic impact followed by effects on the other
sustainability pillars The former will include (i) a matching analysis for the EU and the six
partner countries regarding products that matter for LDCsrsquo trade (to either partner
countries or the EU) and (ii) competition analysis between LDCs and CA partner countries
for exporting to the EU We do not expect the effect to be significant for the LDCs because
the global impact of the EU-CA FTA is limited
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable
development (Tasks 11 and 12)
321 Task 111 Analysis of the effects of implementation of the Trade and
Sustainable Development (TSD) chapter of the Trade Pillar
This is one of the priority tasks linked to JC 1A1 In the first step we will divide provisions
of the TSD chapter into thematic blocks to identify areas for further analysis These include
commitments of the Parties to effectively implement in their laws and practice the eight
fundamental conventions of the International Labour Organization (ILO) as well as the
Multilateral Environmental Agreements to which they are Party the right of the Parties to
regulate sustainable management of natural resources promotion of trade supporting
sustainable development institutional provisions and dispute settlement mechanism
In the second step based on findings from the analysis of the actual situation in the EU
and partner countries carried out in Tasks 113-118 and documents outlining the
implementation of the TSD chapter (eg reports of international monitoring bodies
reports from meetings of the TSD Board and civil society advice to the Parties) we will
map activities undertaken by the Parties in areas covered by the TSD chapter in a break-
down prepared in the first step This will enable us to conclude to what extent the scope
of the TSD chapter has been covered and if actions taken by the Parties individually and in
cooperation activities have contributed to the implementation of TSD commitments and
attaining the objectives of the chapter and relevant SDGs (No 8 on decent work and
employment for all No 13 on combating climate change and No 14-15 on sustainable
use and protection of marine environment forests and biodiversity) Our analysis will be
complemented by stakeholder engagement5 We will conclude the analysis with
recommendations for the future incl any improvements in operation of institutions to
support compliance of the Parties with provisions of the TSD chapter
322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter
This is one of the priority tasks liked to JC 1A10 and evaluation questions No 1 5 and 8
In the first step we will analyse formal commitments of the Parties regarding the set up
and operation of the institutional mechanism ie Article 294 (Contact Points of the Parties
the TSD Board and civil society Advisory Groups) and Article 295 (Civil Society Forum)
In the second step we will analyse the establishment and operation of TSD institutions in
practice including their meetings activities undertaken between sessions cooperation and
5 When the Report refers to stakeholder engagement it means diverse activities foreseen in the stakeholder engagement programme outlined in detail in Annex B to this Report (Consultation Strategy) For each task stakeholder engagement activities will be tailored to the most relevant group of stakeholders methodology applied in the task and type of data which will be needed for the analysis For example in the analysis carried out with regard to TSD chapter the focus will be on targeted interviews with civil society members of the Advisory Groups in the EU and Central American countries as well as with Government and Commission representatives Further sources of information and activities will include targeted meetings eg DAG meetings and workshops with Central American countries CSD meetings with the European civil society and written positions submitted by civil society organisations As a complementary source we will use replies from online public survey
Page 14
dialogue between Governments and civil society The analysis will be based on reports
from meetings research studies recommendations from civil society to the Parties and
interviews with representatives of the Commission Governments from Central America
EU Delegations the EESC secretariat of the EU Advisory Group as well as civil society
representatives from the EU and Central American countries including members of their
Advisory Groups We will also evaluate effectiveness and efficiency of the institutional
mechanism and its role in the monitoring and implementation of the TSD chapter the
ability to address problems and to pursue cooperation and dialogue We will put an
emphasis on the evaluation of the TSD Board its ability to monitor compliance with the
commitments of the Parties effectiveness in choosing priorities and structuring the work
programme pursuing cooperation activities and resolving problems This part will also
analyse civil society capacity to exercise its mandate and monitoring implementation of
TSD chapter the quality of dialogue between Governments and civil society and the follow-
up to civil society recommendations In this context and in line with suggestions provided
by reviewed research studies we will also evaluate to what extent the discussion among
the civil society and between Governments and civil society focuses on substance
(compared to focusing on process) and whether the civil society has the means and
capacity to prepare for and to engage in such a discussion We will conclude the analysis
with recommendations for the future incl any improvements in operation of institutions
323 Task 113 Analysis of employment impacts
The analysis in this task will focus on impacts for employment levels and relate to JC 42
and evaluation questions 4 and 6 In the first step we will analyse trends in employment
and unemployment levels in the EU and partner countries for their whole economy and
across sectors over the reference period We will also identify factors influencing observed
trends including macroeconomic and labour policy measures applied by the Governments
investment in education and skills development migration from rural to urban areas and
across region and impacts of trade and investment including through trade agreements
In the second step the analysis will be focused on assessing quantitative impacts (direct
and indirect) of the EU-CA FTA on the number of jobs direct and indirect (for skilled and
un-skilled workers for the EU and partner countries across sectors) and be based on the
results of the economic modelling We will compare these results with the real-life data
and trends observed in the first step to conclude to what extent the reduction in trade
barriers and changes in output across sectors related to the implementation of the EU-CA
FTA have influenced demand for labour given the assumption of a fixed total employment
in the economy and full labour mobility between the sectors with workers leaving sectors
seen as less competitive and moving towards those having better prospects of growth and
working conditions including wages We will also draw a conclusion to what extent
observed trends in employment should be attributed to the EU-CA FTA and to what extent
to other factors incl macroeconomic environment global trends in commodity prices
domestic policy investment and trade agreements with other partners Stakeholder
consultations will help to verify our findings
324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda
(job creation labour standards social protection and social dialogue) on
working conditions poverty reduction and enforcement
This is one of the priority tasks Our analysis will seek to answer the evaluation questions
No 1 4 and 6 (JC 42) Given the broad scope of this task we will divide it into two parts
a) labour standards and social dialogue (the Decent Work Agenda) b) working conditions
including social security and health care coverage of workers and labour inspection
In the first step we will describe the situation in the EU and partner countries and changes
over time regarding the subject matter as well as factors influencing observed trends We
will focus on the following
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 15
Task 114 a) on labour standards will look at the implementation of the core labour
standards as enshrined in the fundamental ILO Conventions ratified by all Parties to
the EU-CA FTA and evaluated by the ILO monitoring bodies6 Regarding trends in child
labour occurrence the analysis will include eg the number of working children types
of activities and sectors involved the number of hours worked per week motives for
undertaking work and involvement in hazardous work Influencing factors will be
considered and their impact on job availability for adult household members the level
of generated income and the extent to which it covers family needs Regarding forced
labour the analysis will include types of activities and sectors involved and influencing
factors including criminal activity and the level of law enforcement On freedom of
association and the right to collective bargaining the analysis will cover conditions for
setting up joining and operation of trade unions and employer organisations and
functioning of social dialogue for the whole country and ndash if data is available ndash across
sectors including indicators such as the share of trade union members in the total
number of workers for the whole country and in a break-down by sector and changes
over time Regarding non-discrimination at work we will focus on groups of workers
which may be in a disadvantaged position on the labour market eg youth disabled
persons migrants or indigenous peoples (women will be analysed in Task 116) and
indicators such as labour participation rate and unemployment rate the share of each
group working informally or being in a situation of sub-employment (ie receiving a
wage below the minimum level despite working full time or having no opportunity to
work full time despite being ready to do so)
Task 114 b) on working conditions and labour inspection will include trends in job
quality indicators over time the average number of working hours per employee per
week the number or rate of fatal and non-fatal accidents at work social security and
health care cover of workers wage levels type of contract the number of labour
inspectors and inspections carried out at work places and the infrastructure and funds
being at the disposal of inspection services (we will consider in that context that all EU
Member States and five Central American countries except Nicaragua have ratified
the ILO convention No 81 on labour inspection)
In the second step based on economic modelling we will identify the sectors most affected
(positively or negatively) by the EU-CA FTA and using the analysis done in step one will
seek to determine if trends observed in the respect for labour standards and quality of
working conditions in individual sectors can be attributed to the operation of the Agreement
or rather to other factors In cases where any concerns related to labour standards eg
child labour incidence or low presence of trade unions are identified in sectors particularly
involved in trade with the EU notably in exports we may apply an in-depth analysis in a
dedicated case study We will also refer to the implementation of the TSD chapter to
establish whether policy dialogue cooperation activities and engagement with civil society
have also influenced the situation We will complement desk research with stakeholder
engagement
325 Task 115 Analysis of impacts on the informal economy and informal
employment
This is one of the priority tasks linked to evaluation questions No 1 and 8 (JC 42) We will
also aim to determine to what extent the Agreement has contributed to attaining objectives
of SDG No 1 (no poverty) and No 10 (reduced inequalities) In the first step we will
develop a description of the situation in the partner countries during the analysed period
concerning the size and structure of the informal economy and factors influencing its
6 These include conventions No 138 and 182 on elimination of child labour No 29 and 105 on prohibition of forced or compulsory labour No 87 and 98 on freedom of association and the right to collective bargaining and No 100 and 111 on equal pay for work of equal value and non-discrimination at work
Page 16
existence as well as its geographic pattern in Central America and each of the partner
countries separately We will aim to identify if there are links between the informal
economy and eg the economic structure and dynamic in certain regions and their
involvement in trade We will also report about steps taken by the Governments in a move
towards formal economy including dedicated national strategies adopted in Costa Rica and
Guatemala
In the second step based on the results of the economic modelling and trade statistics for
trade and investment flows between the EU and Central American countries an additional
literature review and stakeholder consultations we will aim to establish to what extent
trade and in particular the EU-CA FTA has contributed to the observed trends in each
partner country We will verify our findings in stakeholder consultations
326 Task 116 Analysis of impacts on gender inequality
The analysis in this task will seek to answer the evaluation questions No 1 4 and 6 (JC
42) We will also aim to determine to what extent EU-CA FTA implementation has helped
to attain SDG No 5 (gender equality) No 8 (decent work and economic growth) No 1
(no poverty) and No 10 (reduced inequalities) Work under this task will be guided by the
approach proposed in UNCTADrsquos Trade and Gender Toolbox (UNCTAD 2017) which
considers impacts on women in their roles as workers entrepreneurs traders and
consumers Complementary considerations regarding impacts for each of those groups will
be inspired by other literature (eg Fontana 2009) and methodological approaches (eg
European Institute for Gender Equality 2016)
In the first step we will analyse the situation in the Central American partner countries
regarding womenrsquos participation in the labour market economic activity as entrepreneurs
and traders (with a consideration of their access to assets and supporting measures) and
their position as consumers incl the level and type of income received and being at their
disposal Based on the available data we will also analyse gender inequalities before and
after the entry into force of the EU-CA FTA and measures applied by the countries and
provided by international donors to support an increased womenrsquos participation We will
also review reports of the ILO Committee of Experts regarding implementation of the two
ILO fundamental conventions on non-discrimination ie No 100 (equal pay for work of
equal value) and No 111 (non-discrimination at work) ratified by all CA partner countries
In the second step we will compare observed trends stemming from the real data with
outcomes of the economic modelling to determine to what extent they may be linked to
impacts of Agreement and to what extent they result from influence of other factors
Focusing on women as workers we will identify sectors important for them (based on
their shares in the total womenrsquos employment and a ratio of female and male workers
in each such sector) and compare observed trends in employment levels (in total and
across sectors) with the results of the modelling (changes in employment levels across
sectors) to determine whether the EU-CA FTA has contributed to changes reported in
the real life and if so to what extent In this context we will also consider impacts of
tariff reduction on public revenues and whether this might have had an impact on the
provision and quality of public services which in turn may have an effect on women and
their ability to participate in the labour market or to undertake an economic activity
For women as entrepreneurs if relevant data is available we will identify sectors of
their economic activity and compare trends in the actual operation of these sectors over
time (eg growth or decline) with outcomes of the economic modelling to determine if
the EU-CA FTA might have had an impact on output of these sectors and as a result
position of women as entrepreneurs
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 17
Moreover if more detailed data is available regarding sectors and groups of products or
services manufacturedprovided by women-led enterprises as well as their engagement
in international trade we should be able to say (again comparing the real-life data with
economic modelling) what impact the Agreement may have exercised on women as
traders and in this context on sales and exports of their products or services or their
competition with or the use of imports We will also consider whether the EU-CA FTA
provisions regarding eg tariff reduction SMEs TBT SPS might have had an impact
for women-led enterprises (given their size and sectors of operation)
Concerning the role of women as consumers we will look at real-life trends in income
and price levels and compare them with outcomes of the economic modelling to see
what impacts the EU-CA FTA might have had on welfare and price levels as well as the
availability and accessibility of goods and services
Our analysis will be complemented by engagement with stakeholders including women
organisations to identify barriers in their activity on one hand and facilitating measures on
the other and to gather more insights into impacts of the EU-CA FTA
327 Task 118 Analysis of impacts on the adoption and implementation of
internationally recognised instruments of responsible business conduct and
Corporate Social Responsibility (CSR)
Our analysis under this Task will seek to respond to the evaluation question No 1 (JC 42)
In the first step we will map CSRRBC practices in the Central American partner countries
in the analysed period including practices of European companies investing there or having
their suppliers and existing government initiatives promoting them eg National CSR
strategy and Law on CSR in Costa Rica National Plan on Social Responsibility and Human
Rights in Panama and dedicated centres or foundations promoting CSR in Guatemala
Honduras Nicaragua and El Salvador We will also use findings from a research carried
out for Task 111 identifying initiatives undertaken within the TSD Title incl EU projects
and regional events dedicated to CSR RBC and decent work in global supply chains We
will aim at a better understanding of the existing framework uptake of CSRRBC practices
by enterprises factors influencing it and CSRRBC presence in the EU relations with the
partner countries including technical assistance and cooperation projects
Based on this in the second step we will use outcomes of the economic modelling and
stakeholder consultations to verify whether indeed the EU-CA FTA through generated
trade and investment flows as well as specific provisions (such as those in TSD Title) might
have encouraged uptake of CSRRBC practices We will also seek to identify factors related
to market access which may encourage uptake of CSRRBC practices Legislative ones may
include eg non-financial reporting and obligatory due diligence in certain sectors or
activities requirements related to social and environmental aspects in public procurement
and non-legislative ones may focus on image and comparison with the main competitors
being part of supply chains where business partners require respect for certain labour and
environmental standards international instruments in CSR (OECD Guidelines for
Multinational Enterprises ILO Declaration on Multinational Enterprises and Social Policy
the UN Global Compact etc) requirements of sustainability and certification schemes or
consumer awareness and related choices
As an additional element of this analysis (subject to data availability) we may include into
this task examples of other schemes eg sustainability schemes or promotion of decent
work in global supply chains (notably of agricultural products) and their presence in trade
between Central America and the EU and impacts the EU-CA FTA might have had on their
use in bilateral trade relations
Page 18
328 Task 117 Analysis of environmental impacts
The main objective of the environmental analysis is to assess the environmental and
climate change effects of the EU-CA FTA as well as to provide answer to the evaluation
questions notably those on the effectiveness (No 1-4) (JC 43) and coherence of the
Agreement with other policies and the EUrsquos commitment to the SDGs and in particular
SDGs No 13-15 ie Climate Action Life below water and Life on Land (respectively) ie
evaluation question No 7 The main challenge is to isolate the EU-CA FTA induced effects
on the environmental performance in each country from general developments and trends
that occurred regardless of the EU-CA FTA This is particularly challenging as the
counterfactual environmental outcomes are unobservable for most of the environmental
impact areas
The overall approach is based on our detailed understanding of the dynamics through
which the EU-CA FTA may have created environmental impacts tailored towards the
specific circumstances for the Central American countries the requirements in the ToR
the TSD Chapter of the EU-CA FTA and the budget provided for this study The detailed
understanding is based on the study lsquothe methodology for assessing biodiversity impacts
of EU FTArsquo by IEEP Trinomics et al (2021) and the latest literature including an OECD
study (Garsous G 2019) on this matter and applies the following logic
1) identifying the components in the EU FTA with the Central American countries that may
have generated environmental effects (EU-CA FTA elements) Based on our extensive
recent experience on researching the dynamics through which FTAs may create
environmental impacts we conclude that the FTA contains (1) measures easing market
access for the signatories (referred to as tariff-based measures) and (2) several rules-
based measures (mostly by means of the provisions in the TSD Chapter referred to as
non-tariff-based measures) that may have resulted in environmental impacts in the
countries involved
2) then establishing how these elements could have created directly or indirectly intended
or unintended ndash environmental impacts (the impact channels) Any FTA is by
definition expected to create direct environmental impacts through the expected
expansion of economic activity which may lead to eg higher pollution and greenhouse
gas (hereafter GHG) emissions may put a strain on bio-resources and pressure on
vulnerable ecosystems as higher levels of output require more environmental input
(Copeland and Taylor 2014) Trade agreements also create indirect environmental
impacts through structural adjustments in the economies and so-called specific rules-
based trade measures including the provisions in the TSD Chapter Our approach
carefully considers four impact channels that are also distinguished by the SIA Handbook
(European Commission 2016a) to separate the way in which EU-CA FTA may have
created impacts on various areas of the environment The scale effect (the impact
created from increased production as a result of the trade agreement) the structural
effect (the dynamic effect of the EU-CA FTA on the growth and contraction in production
in different sectors) technology effects (impacts triggered through increased efficiencies
from increased competition or from a transfer in environmental goods and services) and
potentially the product effect (impact via changes in production standards and use of
goods in a country eg through strengthened environmental policies and environmental
regulation)
3) via these impact channels various areas of environmental performance (the impact
areas) may be impacted and are to be further analysed in this evaluation In this study
we distinguish the following impact areas 1) Climate change 2) Biodiversity and
ecosystems and 3) Other key environmental parameters
Research methods ndash For some impact areas there is more reliable information and data
and quantitative research methods available than for others To the extent possible the
quantitative analysis will build on the economic modelling results and as a result the
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 19
analysis will allow us to comment on the causal relation between environmental topics and
the EU-CA FTA Where quantitative research is not possible we will apply qualitative
methods The qualitative analysis may rely on the causal chain analysis method which
aims at identifying the root cause of observed changes Irrespective of whether a certain
impact will be assessed with more quantitative or qualitative research methods our
approach is designed to make intensive use of quantitative information eg compiling
quantitative statistics and analysing trends The following research methods are applied
per environmental area
For climate change we propose focusing on establishing the EU-CA FTArsquos impacts on
the major GHG emissions (eg carbon dioxide methane and nitrous oxide) and
potentially on the air pollutants (ozone precursor gases acidifying gases and primary
particulates)
For biodiversity and ecosystems we propose following the latest insights in assessing
biodiversity impacts of the EU-CA FTA based on the study for DG Environment on the
development of a methodology to assess the impact of trade liberalisation on
biodiversity (which has not been published yet) In case results of the biodiversity
analysis are also relevant for climate change (ie LULUCF emissions) the link between
these results and climate change will be explored
For other impact areas we propose developing baselines based on qualitative and where
possible quantitative data for each impact area and explore developments in
environmental performance since the entry into force of the EU-CA FTA In addition we
will discuss the (effectiveness of the) implementation of provisions enshrined in the TSD
Chapter in the EU-CA FTA per impact area
The above discussed approach is based on five activities They apply the logic of the
methodological stages7 as described in the methodological framework for assessing the
impact of EU FTAs on biodiversity (IEEP Trinomics et al 2021)
3281 Activity 1 Fine-tuned methodology and impact screening and scoping
Fine-tuning the methodology is part of this inception report (this document) and mainly
serves to define the exact scope and focus of this evaluation The environmental analysis
logically focusses on Central America and the EU (with an emphasis on Central America)
However within defining the geographic scope of this analysis one needs to differentiate
global (eg climate change) and other more local environmental impacts eg
(un)sustainable forest management practices We aim to cluster countries when
appropriate from the perspective of a certain regional environmental issue In this way we
can respond to the challenge of bringing focus to the analysis while balancing the available
resources and time Clustering should enable us to evaluate certain environmental issues
in a more targeted way enabling deep dives into specific issues Below we discuss in more
detail what this regional approach means in practice and how we aim to mitigate the risk
of overlooking certain impacts
Impact screening and scoping - The exact environmental topics on which quantitative and
qualitative analysis will be performed depend on the outcome of the impact and screening
and scoping exercise which seeks to identify issues which deserve to be analysed with an
extra depth As such this sub-activity aims to select the environmental impact categories
and sub-areas to be studied in other activities Impact screening and scoping is a
methodological tool to identify issues which should be prioritised in the evaluation and
helps to mitigate the risk of overlooking potential significant impacts In essence the
prioritisation is based on (i) screening the most prevailing existing environmental drivers
and pressures and (ii) screening the expected impacts caused by the EU-CA FTA (at a
7 The study by IEEP Trinomics et al (2021) identifies three stages Stage I) Preparatory stage Stage II) Method selection and impact logic and Stage III) Impact assessment and related conclusions
Page 20
sector level) by means of economic modelling results literature review stakeholder input
and political interest All information is transparently documented in the impact-screening
matrix During the impact screening and scoping exercise we will also develop three
context-setting documents (2-pages) one per environmental impact area to better
understand the background These documents will have a regional perspective and will be
directly used in the baseline development The output of this activity is included in the
Interim Report
3282 Activity 2 Establishing the baselines for the impact areas
The aim of this activity is to gain a brief understanding of the EUrsquos and partner countriesrsquo
status quo regarding their environmental governance and performance (eg trends) for
those environmental impact areas that have been identified as priority ones The output
will be a section in the evaluation with a short description (1 page) per prioritised impact
area outlining the governance (very brief) and the performance and exploring the main
developments trends and their cut-off points This will be done by analysing issues from
a DPSIR framework perspective (drivers ndash pressures ndash state ndash impact ndash responses) (see
Box 1) when appropriate8 This framework is often applied in environmental assessments and plays a central role in the study by IEEP Trinomics et al (2021) on the methodology
for assessing the impact of EU FTAs on biodiversity
Box 1 The use of the DPSIR framework in FTAs
The DPSIR framework allows to interpret certain environmental indicators by establishing a causal relation between indicators and their analysed effects In the case of an FTA trade liberalisation in goods services and investments can function as a driver of a change in different economic sectors causing changes in the amount of land- and other resource use or in their quality (eg pollutants and emissions impacting air water or soil quality) The changes in the quantity of land- and other resource may create pressures on biodiversity which lead to an impact in the state of and trends in biodiversity ecosystems and the services they provide As a response(s) certain new or existing measures can be taken to help to prevent negative impacts or to amplify positive ones
Source IEEP Trinomics et al (2021)
Three consecutive sub-tasks will be performed to operationalise the establishment of the
baselines 1) Literature review and data analysis to establish draft baselines 2) Interviews
with stakeholders to obtain additional input validate work and fine-tune results 3)
Triangulation of information (literature data and interviews) and establishment of final
baselines The output of this activity will be included in the Interim Report
3283 Activity 3 Quantitative evaluation of impacts9
The aim of this activity is to assess the quantitative estimates of the impacts of the EU-CA
FTA on GHG emissions and possibly air pollution and ndash potentially10 ndash on trade in
environmental goods and services and land use change As such the desired result is the
reporting of the quantitative estimates of the impacts of the EU-CA FTA on GHG emissions
and air quality in the EU Costa Rica El Salvador Honduras Guatemala Nicaragua and
Panama depending on data availability Ultimately it is global GHG emissions that
contribute to global warming for this reason we propose to estimate the global change in
GHG emissions resulting from the EU-CA FTA In this way we also consider the difference
in climate change impacts from trade creation and trade diversion The impacts on GHG
emissions will be decomposed in the most relevant key drivers where possible The
8 This implies that we will make use of the insights of the framework whenever relevant and appropriate in the light of the evaluationrsquos objective We will not identify every element (D P S I and R) for each environmental issue but focus on the most relevant elements for each of them
9 The focus depends on the results of the impact screening and scoping 10 Depending upon expected scale of impact available resources and data availability
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 21
preliminary finding of this activity will be included in the Interim Report and the final results
are to be presented in the Final Report
3284 Activity 4 Qualitative evaluation of impacts11
The aim of this task is to evaluate qualitatively the impacts of the EU-CA FTA on various
prioritised environmental impact areas focussing on those which are not assessed in the
quantitative analysis First a broad assessment is done based on desk research from a
regional perspective In addition approximately two case studies (as part of Task 13) will
be prepared in which the environmental impacts of the EU-CA FTA on certain areas will be
assessed based on in-depth qualitative analysis using causal chain analysis (CCA)
(European Commission 2016a) Depending on data availability we will aim to identify
trends developments and cause-effect relations between the EU-CA FTA and environment
By combining the existing environmental drivers and pressures (see Textbox 3282-1 for
more information) the economic results and effects of TSD provisions we naturally also
include potential unintended and unforeseen effects The preliminary finding of this activity
will be included in the Interim Report and the final results are to be presented in the Final
Report
3285 Activity 5 Answering of the evaluation questions and other concluding
remarks
The overall environmental analysis concludes with clearly commenting on the effect of the
EU-CA FTA on the performance the legislative framework and effective implementation in
each of the prioritised environmental impact areas In case no causal relation between the
EU-CA FTA and the performance of a certain environmental impact area is found it will
also be explicitly mentioned These concluding remarks together with the in-depth
analyses conducted in previous tasks will serve as the basis to answer the evaluation
questions related to the EU-CA FTArsquos environmental impacts under Task 14 in the Final
Report
3286 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative environmental effects that have emerged from tensions between the EU-CA FTA
on the one hand and elements of environment on the other Additional policy or legislative
measures can also be suggested to enhance positive impacts of the EU-CA FTA
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human
rights
In this section we present the approach envisaged for the analysis of the human rights12
impact of the EU-CA FTA in the EU and the CA partner countries
The evaluation will rely on the methodology of human rights impact assessments (United
Nations 2011 European Commission 2015) as well as on the experience from previous
studies and will include the following steps
Step 1 Human rights baseline
At this step a concise baseline analysis will be carried out Concise human rights
profiles will be prepared for each of the state-parties to the EU-CA FTA
Step 2 Screening and scoping
11 The focus depends on the results of the impact screening and scoping 12 Human rights in this analysis are defined as set out in the Charter of Fundamental Rights of the European
Union the core UN human rights conventions and relevant regional human rights treaties
Page 22
At this step based on various sources human rights will be screened and specific
human rights that may have been affected by the EU-CA FTA will be identified
Step 3 Detailed assessment of the selected human rights
At this step drawing upon findings from the previous stage of the analysis an in-depth
analysis of up to three selected rights will be carried out (both quantitative and
qualitative and depending on the degree of the impact)
Step 4 Policy recommendations and accompanying measures related to
human rights
At this step policy recommendations will be formulated as to how any tensions between
the EU-CA FTA and human rights obligations may be addressed and how a positive
impact on the enjoyment of human rights can be enhanced
Stakeholder inputs will be used throughout all four steps to verify and support findings as
well as to collect evidence on the impact and ensure meaningful participation
3291 Human rights baseline
At this stage a concise baseline analysis of the human rights situation in each state-party
will be carried out First an overview of international human rights obligations of all the
state-parties to the FTA (ratifications of core international and regional human rights
treaties core ILO Conventions and other treaties relevant for the analysis) will be
presented in a tabular manner Second human rights profiles will be prepared Human
rights profiles will consist of a summary of the baseline conditions for the enjoyment of the
relevant human rights in each of the state-parties to the FTA from five years before the
provisional application of the EU-CA FTA until 2019 Particular attention will be given to the
pre-existing conditions of stress and vulnerabilities with respect to human rights
highlighting the position of specific vulnerable groups
The human rights profiles aim to
Set the scene regarding the enjoyment of relevant human rights in the partner
countries and identify social and political developments that may have impacted the
human rights situation
Allow for a targeted assessment of the human rights impacts of the EU-CA FTA
The profiles are based on the analysis of international human rights obligations national
legislation and policy framework as well as implementation issues with respect to relevant
human rights The analysis reviews country specific reports of international organisations
(eg UN OECD ILO) EU Reports on Human Rights and Democracy in the World reviews
of reports of international human rights organisations (eg Human Rights Watch) a
review of academic literature media reports relevant indicators and local partner inputs
3292 Screening and scoping
The second step of the analysis focuses on identifying which human rights could have been
affected by the EU-CA FTA and in which way The EU-CA FTA will be scanned for provisions
that are most likely to have caused an impact on the enjoyment of human rights in state-
parties to the EU-CA FTA The cause-effect relationships between the trade and trade-
related measures in the FTA and human rights will be established based on multiple sources
(see the multi-pronged approach below) The focus of the screening will not only be on
specific trade measures originating from the FTA (the Trade Pillar) but also on the overall
effect of the measures under the broader Association Agreement
Based on the screening exercise and in line with the EC Guidelines for human rights impact
assessments (European Commission 2015 p5) we provide a focused overview of the
human rights affected by the EU-CA FTA specifying the following elements
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 23
Specific human rights affected by the FTA
Short note on the evidence of the impact with a reference to the sources of information
Whether the affected right is an absolute human right or not13
The kind of impact (direct or indirect)
The degree of the impact (major or minor)
Affected population groups (if applicablepossible)
The screening exercise will as much as possible reflect upon the affected individuals
andor groups of people especially indigenous people and women based on the results
generated by the economic analysis inputs from the stakeholders and literature review
We will also look at how the EU-CA FTA has impacted gender equality and labour rights14
3293 Detailed assessment
Depending on the outcome of the screening exercise a maximum of three human rights
will be selected for a detailed assessment
Applicable human rights laws will be scanned (based on the obligations of the state-parties
under international and regional human rights treaties) to provide a framework of
applicable and binding entitlements and duties related to the selected right(s) Insofar
possible national legislation will be scanned for any changes subsequent to the application
of the EU-CA FTA focusing in particular on the changes that affected the enjoyment of
each of the selected human rights (using baseline analysis to aid the impact assessment)
Then we will look at the particular measures and how they have enhanced or impaired the
enjoyment of the relevant rights and or have strengthened or weakened the ability of the
parties to fulfil or progressively realise their international human rights obligations
Particular attention will be given to impacts on vulnerable groups or groups of individuals
that are at risk of being marginalised (Danish Human Rights Institute 2016)
This assessment is intended to be both quantitative and qualitative in nature The
quantitative analysis is based on the results of the economic analysis and used to the
extent possible15 The qualitative analysis is based on various sources as well as
stakeholder consultations and close work with local partners Economic modelling results
already disentangle the impact of the EU-CA FTA from other impacts that could have
affected the enjoyment of a human right over time For qualitative analysis it is more
challenging to discern the FTA impact To address this challenge we use a multi-pronged
approach (ie a methodological cross-validation approach in order for one methodological
element to corroboratevalidate the other method) in examining the causal effects of the
FTA for each of the prioritised human rights16 (see Figure 3)
13 See Tool 28 of the European Commissionrsquos Better Regulation Toolbox (2017) available at httpseceuropaeuinfolawlaw-making-processplanning-and-proposing-lawbetter-regulation-why-and-howbetter-regulation-guidelines-and-toolboxbetter-regulation-toolbox_en
14 Although we expect some overlap on labour-related rights with the evaluation of social impacts there will be cross-references to ensure a holistic analysis Moreover taking into account the interrelated nature of human rights we reserve the right to address the rights of the workers from other relevant perspectives not covered in the social analysis (eg as related to vulnerable groups)
15 When relevant we will use human rights indicators to supplement the analysis 16 We use the same method also during the screening exercise but to a more a limited degree (eg not using
specific human rights indicators for each human right as it goes beyond the scope of this evaluation)
Page 24
Figure 3 Overview of the multi-pronged approach to human rights impact assessment
Thus in assessing the impact the EU-CA FTA has had on each human right we use the
economic modelling results (if applicable and appropriate) that already disentangle the FTA
impact from the overall effects and link economic findings (partially) to how the selected
human right has evolved in the EU and Central American partner countries because of the
EU-CA FTA If data from the economic analysis is not sufficient to support the analysis we
will make use of contextually relevant human rights indicators (United Nations 2012) from
the statistical databases of the ILO World Bank UN OECD andor other organisations to
investigate how the selected human rights have evolved over time We look at the
development of human rights from five years before the provisional application of the FTA
up to the most recent year for which the data is available comparing period before and
after the entry into force of the FTA looking for shocks (relatively sharp increases
decreases) around that time or structural breaks in a trendline to identify an EU-CA FTA
impact We also investigate whether other shocks have taken place that could explain
observed changes in human rights (eg changes in domestic laws) Based on a similar
practice used during the ex-post evaluation of the EU-Korea FTA we could also consider
including a set of control countries to the analysis to consider development of specific rights
in relative terms
All data findings will be supported and cross-validated through a review of relevant
literature looking for further evidence of impacts provisions of the EU-CA FTA the social
and political situation (eg legislative policy instruments adopted that could have affected
the enjoyment of relevant rights) and inputs from the stakeholders that can serve as
evidence of a link between how the human rights has evolved and the EU-CA FTA
3294 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative human rights effects that have emerged from tensions between the EU-CA FTA
on the one hand and statersquos human rights obligations on the other Additional policy or
legislative measures can also be suggested to enhance positive impacts of the EU-CA FTA
and to prevent or mitigate impacts of measures that have been identified as having caused
or contributed towards impaired enjoyment of human rights
33 Concluding tasks
Based on the various analyses undertaken including the case studies the evaluation team
will prepare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 25
A comprehensive review of the extent to which impacts identified in the Trade SIA of
the Association Agreement between the EU and Central America (Ecorys and Corporate
Solutions 2009) have actually materialised (Task 9)
Replies to the evaluation questions (Task 14) and
Conclusions and recommendations (Task 15)
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3)
The literature review aims at identifying sources data and main conclusions drawn from
the previous studies to make sure that the report is based on and further complements the
existing literature Annex A3-2 provides an overview of the literature considered so far in
a tabular structure To summarise the findings from the literature review so far the
following can be noted regarding methodologies and substantive issues
41 Methodological aspects
The economic effects of the EU-CA FTA have been analysed by the Sustainability Impact
Assessment (SIA) outsourced by the Commission (DG Trade) in 2009 before the launch
of the negotiations (ECORYS 2009) This ex-ante evaluation combined quantitative and
qualitative approaches the first one based on the Computable General Equilibrium (CGE)
and Causal Chain Analysis and the latter built on stakeholder interviews (ECORYS 2009)
The CGE model underpins SIA and the literature produced on the likely economic impact
of the agreement (ECORYS 2009 IIDE 2007 Lima et al 2009 Lima et al 2010 CEPR
2012) and the bulk of these studies is based on the assumptions on the likely structure of
the agreement as the negotiations were not concluded yet The 2009 SIA also assessed
the additional FDI impact by applying a gravity analysis approach (ECORYS 2009) The
first Commission annual activity report on the implementation of the EU-CA FTA builds its
assessment on the available Eurostat data and on the comparison between the region-to-
region trade flows before and after the treatyrsquos entry into force (Commission 2015) The
following activity reports (Commission 2016 2017a 2018a 2019d 2020a) illustrate the
evolution of trade on a yearly basis relying on the Eurostat and Central American statistics
thereby opting for a more descriptive approach
The main added value brought by this ex-post evaluation report consists of the CGE model
and its application to updated EU and CA statistics in order to isolate the strictly related
economic implications of the EU-CA FTA from other external factors influencing bilateral
trade thereby purifying the overall analysis and drawing more methodologically solid and
reliable conclusions The Commission (2021) modelling used for the ex-post evaluation
unlike the other studies focuses only on tariffs however which means that impacts of not
the entire EU-CA FTA are measured but only of the tariff component
Regarding assessment of non-economic effects the methodology tended to forecast
estimated general trends and usually does not make detailed projections It should also be
pointed out that predicting long-term socio-economic effects stemming from the AA proves
to be more challenging than estimating short-term trade impacts (European Parliament
2018) Regarding quantitative social and environmental variables the models have used
structured gravity approaches to estimate the effect of non-tariff measures (NTMs)
(ECORYS 2009) The main methodological constraints to calculate (non-quantifiable)
social environmental and human rights effects from a quantitative perspective are the
problem of attribution and the so-called counterfactual given that one cannot know what
would have happened in case the agreement was not in place
42 Substantive issues
In the 2009 SIA the literature review concluded that the potential economic impact of
the EU-CA FTA was expected to be positive The vast majority of literature sources agree
on the key role played by agricultural products in the Central American economy (Romero
Page 26
et al 2015 FAO 2020 OXFAM 2016 European Commission 2020 European Commission
2019 Zabalo et al 2019 Mejia et al 2018 Lima et al 2009 Lima et al 2010) The
raw material share accounts for up to 60 of the total CA export and combined with
natural-resource-based manufactures their cumulative share reaches 70 (Lima et al
2010 p 92) A study carried out in 2007 before the launch of the EU-CA negotiations
forecasted a negligible impact of the agreement on the EU GDP and overall welfare even
in case of a full liberalisation scenario (IIDE 2007 p 16) Also in terms of FDI the
estimated effects were marginal for the EU but more tangible for CA where the agreement
could lead to an increase of 1 of the CA economies GDP (CEPR 2012 p 27) However
some additional positive spill-overs were considered such as the impact on maritime
services that could help CA countries to better manage increased trade flows and at the
same time improving custom procedures (ECORYS 2009) On trade the report
highlighted trade value flow variations especially in CA with the impact on both EU export
and import value rather negligible (Ibid p 73)
The 2012 CEPR impact assessment argued that the EU-CA trade liberalisation triggered
overall positive effects especially when referred to key products both for the EU exports
to CA such as in agriculture products and goods originating from manufacturing activities
(eg cars and medication) and EU imports from CA primarily food products where the
FTA proposed to half tariff levels compared to the previous GSP level access in place (CEPR
2012 pp 10-11)
According to the SIA banana exports from CA to the EU were expected to benefit from
more advantageous market access conditions Regarding NTMs bilateral trade facilitation
and border-related barriers should be eased simplified and rationalised Consequently
trade costs were expected to decrease remarkably The econometric analysis showed that
the economic effects of the EU-CA FTA were not expected to be equally distributed among
the CA countries given the economic heterogeneity of the region (ECORYS 2009 Lima et
al 2009 CEPR 2012 European Parliament 2018) Vegetable fruits and nuts sector (VFN)
together with sugar cane showed the most promising results (IIDE 2007 p17) although
the positive effects were not equally shared among the CA members with Panama
benefitting the most Manufacturing production in CA was estimated to benefit from the
deal (+20) Electronic equipment would also take advantage of the FTA especially in El
Salvador Honduras and Costa Rica (CEPR 2012 p 31) Transport equipment insurance
services and other manufacturers were expected to decline
On the EU side the projections estimated that
Output in the sector of vegetables fruits and nuts as well as electronic equipment was
expected to decrease modestly (CEPR 2012 p 29)
The EU was estimated to increase output in grains other agriculture and additional
categories of primary food (ECORYS 2009 pp 44)
A limited price decrease for processed food grains and vegetables other agriculture
and beverages and tobacco was expected (Ibid p 44)
Overall in the EU literature in any scenario ranging from partial to full liberalisation an
increase of trade volume as result of the AA was projected (European Parliament 2018
p 43)
A study presented at the Twelfth Annual Conference of the Global Economic Analysis in
2009 and eventually incorporated in a 2010 publication on Latin America assessed the
likely effects of the EU-CA FTA for three scenarios full liberalisation partial liberalisation
excluding sensitive products on both sides (namely fruits and vegetables meat beverages
and tobacco other processed food) and liberalisation considering only fruits and vegetables
as sensitive in the EU (Lima et al 2009 p 1) The application of different models revealed
that the most economically advantageous scenario was the first one leading to an
expansion of exports in all signatory countries and positive effects on overall CA welfare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 27
The second scenario would lead to a smaller economic impact with a more modest trade
expansion (12) and some welfare losses Finally in the scenario foreseeing the EU
excluding only fruits and vegetables the ldquoresults for trade and product remain positive
but with smaller figuresrdquo (Lima et al 2009 p 1) In conclusion a deeper liberalisation
would favour both regions by enhancing exports by between 1 and 5 in all the CA
countries (Lima et al 2010)
The Commissionrsquos annual FTA implementation reports describe trade flows between the EU
and CA after the conclusion of the FTA and demonstrate an overall upward trend for certain
countries and for specific sectors Trade flows remained rather stable in 2014 increased
by 12 in 2015 decreased marginally by 07 in 2016 grew by 72 in 2017 by 66
in 2018 and by 7 in 2019 With the exception of 2017 the EU maintained surplus in
trade with CA (Commission 2015a 2016 2017a 2018a 2019d 2020a)
The Central American literature generally focused on the role played by agricultural exports
in CA domestic economies and on the potential impact generated from the EU-CA FTA on
export transformation and diversification (Zabalo et al 2019) The likely impact of the EU-
CA FTA varied among the countries and the industries considered (ECORYS 2009) A study
carried out in 2018 aiming at analysing the effects on Panamarsquos economy by adopting a
shift-share analysis model concluded that between 2013 and 2016 the Panamanian exports
(mainly transport equipment and agricultural products) to the EU showed a downward
trend by 32 for the selected years mainly due to the decrease of primary exports to
some EU countries including Germany Belgium Italy Greece Poland and Sweden (Mejia
et al 2018) Likewise the local press has highlighted both advantages and disadvantages
generated by the EU-CA FTA for the whole region (De Leograven 2006 Barquero 2016
Rodriguez 2017) While it was considered that tariff removal triggered by the Agreement
could boost banana exports to the EU therefore inducing positive externalities for the
whole region especially for Costa Rica excessive specialisation in agricultural products
and insufficient diversification of export destinations could cause negative effects for the
local economy (Barquero 2016 Rodriguez 2017) Finally the press flagged the pros and
cons of regional integration requirements posed by the EU to CA The EU request to
negotiate as a unified bloc and to speak with a single voice led to long sensitive and
complex domestic negotiations within CA which came only to a partially accepted joint
approach towards trade talks (De Leoacuten 2006) A comparison of estimated economic effects
of the Agreement has been provided in Annex A3-1
The social impact considerations were closely linked to the economic ones since the EU-
CA FTA effects on trade would also influence the levels of employment in the affected
sectors The employment changes triggered by the EU-CA FTA in the EU were expected to
be negligible owing to the relatively modest role played by CA in the EU trade with the
rest of the world As an additional consequence also the level of EU wages should not be
affected much by the Agreement (CEPR 2012 p 28) In CA more significant incentives
to reallocation between sectors caused by ldquopull-factorsrdquo were likely to occur where export-
oriented sectors would benefit most from the EU-CA FTA and where rises in wages were
expected Employment in textile industry in Nicaragua Guatemala Honduras and El
Salvador was expected to decline The full liberalization scenario (IIDE 2007 p 17) was
expected to lead to increases in wages while also prices would rise by 05 (CEPR 2012
p 28) In Nicaragua and Costa Rica wages were expected to rise by 02 and 13
respectively while Panamanian wages would drop marginally (ECORYS 2009 pp 75-77)
The implementation of the International Labour Organisation (ILO) conventions in the EU-
CA FTA legal framework would also have a positive impact on social issues in CA such as
elimination of child labour and force labour and reduction of gender inequality However
the literature underlines a general lack of analyses of the EU-CA FTA impact on poverty in
CA since its implementation (European Parliament 2018 (a) p 45) As described above
the effects were expected to vary among the CA countries with El Salvador Nicaragua
and Honduras experiencing a relatively more impactful drop in levels of poverty than in
Page 28
Costa Rica Finally likely consequences on poverty equality education health and gender
issues in the EU were found to be negligible unlike in CA where small and indirect effects
were expected in terms of investments in health incentives through innovation brought by
technology dissemination and an overall positive impact on inclusiveness driven by the
Agreement (ECORYS 2009 pp 76-80)
On the environmental aspects the literature contributions can be split into two main
groups featured by contrasting interpretations on the EU-CA FTA impact Ultimately the
effectiveness of the TSD chapter will depend on the willingness of the involved government
to implement the EU-CA FTA provisions (EPRS 2018)
On the one hand the SIA and other studies flagged the likely harmful repercussions on
greenhouse gas emissions (GHG) stemming from agriculture fishing trade and transport
activities resulting from the EU-CA FTA application having a limited impact on the EU share
of CO2 emissions and a more tangible effect on some CA countries such as El Salvador
Honduras and Costa Rica in the long run (Alianza por la Solidaridad 2019 FAO 2013)
Moreover the increased agricultural activities resulting from the economic effects of the
EU-CA FTA (eg coffee melon sugar cane and peanut production) factories activities (eg
production of biofuels in Guatemala) as well as factoriesrsquo waste and maritime transports
could pose a threat to biodiversity and deforestation which could constitute a serious issue
owing to a large share of local biodiversity concentrated in CA especially if waste would
not be adequately managed (ECORYS 2009 pp 81-83 Zabalo et al 2019 FAO 2013
Monserrat et al 2011 OXFAM 2016 Rosa Luxembourg Stiftung 2010 Ruerd 2018)
On the other hand a share of the existing literature emphasised the opportunities for CA
countries originating from the EU-CA FTA This would be the case of Costa Rica which
would improve the national environmental regulatory framework mainly in relation to the
use of agrochemicals with likely positive impact for the environment since pineapple
production plays an important role in local economy (Esquivel 2020) A FAO study argued
that international trade in coffee (in particular exports to the EU) has improved the overall
environmental sustainability in CA The EU being the largest consumer of coffee worldwide
its (increasing) requirements on the sustainability of the coffee chain benefited the
adoption of environmental standards by the sector As a consequence coffee producers
are now required to provide more extensive and detailed certifications proving they comply
with environmental standards Therefore they have been paying more attention to
environmental aspects than before (FAO 2020)
A 2017 study (CEPAL 2017) investigated the impact of a CO2 tax on CA GDP Overall the
estimations indicated a negative impact of a carbon tax on GDP and the extent to which it
was found to impact the various local economies depended on the amount of the tax itself
Indeed an average tax value of 69 USD per tCO2e was found to impact the GDP by 062
A range between 5 and 10 USD would be optimal for Honduras and Nicaragua whereas a
tax between 20 and 50 USD would be optimal for Costa Rica El Salvador Guatemala and
Panama (CEPAL 2017)
Finally regarding human rights the EU-CA-FTA impact is difficult to assess for the region
as a whole since the intra-regional development varies a lot and it is difficult to discern
whether the CA movement towards a better respect for international standards on labour
and social rights depends on the implementation of the Agreement (European Parliament
2018 p 44) For example several experts and policymakers argue in favour of a stronger
enforcement mechanism of the TSD chapter (EPRS 2018) Its provisions referring to the
ILO conventions do not ensure the same level of labour and human rights protection as
the GSP+ mechanism (EULAC 2011) Overall despite some positive developments the
implementation of the TSD provisions led to a limited impact on the key challenges in the
CA region such as child labour freedom of association social dialogue or unpaid overtime
(EPRS 2018) The CA Womenrsquos Network also reported insufficient participation of women
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 29
during the negotiation process and it highlighted the risks of women subordination if strong
provisions on gender equality are not put in place (CAWN 2007)
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5)
51 Structure of the EU-CA FTA
The Agreement was initially signed in June 2012 by the EU and Central American countries
and the EU-CA FTA started its provisional application in 2013 It is in a process of
amendment through the Protocol of Croatiarsquos Accession to the Association Agreement
between the European Union and Central America which was signed in November 2020
(Joint Communique 2020) It allows Croatia to formally become part of the Agreement and
provides for amendments to some parts of the EU-CA FTA to account for the accession of
Croatia (eg Appendix 3 to Annex I related to special treatment of bananas Annexes
related to trade in services such as the lists of commitments on establishment cross-
border supply of services and reservations regarding the temporary presence of natural
persons for business purposes and Annexes related to Government procurement including
the list of contracting authorities etc) (European Commission 2020b)
Key features of the Agreement (Trade Pillar) can be summarised as follows Title by Title
Title I of the Agreement contains general principles provisions and definitions and
in particular defines the objectives of the EU-CA FTA which can be summarised as follows
(a) the expansion and the diversification of trade in goods between the Parties through
the reduction or the elimination of tariff and non-tariff barriers to trade (b) the facilitation
of trade in goods through in particular the agreed provisions regarding customs and trade
facilitation standards technical regulations and conformity assessment procedures as well
as sanitary and phytosanitary measures (c) the liberalisation of trade in services in
conformity with Article V of GATS (d) the promotion of economic regional integration in
the area of customs procedures technical regulations and sanitary and phytosanitary
measures to facilitate the circulation of goods between and within the Parties (e) the
development of a climate conducive to increased investment flows the improvement of
the conditions of establishment between the Parties on the basis of the principle of non-
discrimination and the facilitation of trade and investment among the Parties through
current payments and capital movements related to direct investment (f) the effective
reciprocal and gradual opening of government procurement markets of the Parties (g) the
adequate and effective protection of intellectual property rights taking into consideration
the differences between the Parties and the promotion of technology transfer between the
regions(h) the promotion of free and undistorted competition in the economic and trade
relations between the Parties (i) the establishment of an effective fair and predictable
dispute settlement mechanism and (j) the promotion of international trade and investment
between the Parties in a way that contributes to the objective of sustainable development
through joint collaborative work (Article 78)
Title II covers trade in goods and comprises the following chapters (1) market access
for goods which lays down provisions on the elimination of customs duties elimination of
export and import restrictions and export taxes and provisions on agricultural subsidies
(this is complemented by Annex I outlining schedules for elimination of customs duties
Annex II which concerns the definition of the concept of originating products and methods
of administrative cooperation Annex IV - special provisions on administrative cooperation
and Annex V on management of administrative errors) (2) trade remedies which discusses
anti-dumping countervailing and multilateral safeguard measures bilateral safeguards
and the applicable procedures (3) customs and trade facilitation which increases
transparency and promotes the facilitation of trade by simplifying customs procedures and
the adoption of risk management systems for customs inspections (it is complemented by
Annex III on mutual administrative assistance in customs matters) (4) TBT - technical
barriers to trade aiming at facilitating trade by identifying preventing and eliminating
Page 30
unnecessary barriers related to development adoption and application of standards
technical regulations and conformity assessment procedures it also reaffirms rights and
obligations under the WTO TBT Agreement foresees cooperation in market surveillance
transparency through the notification procedures and approach to marking and labelling
avoiding unnecessary burdens while ensuring that all necessary and accurate information
is provided (5) sanitary and phytosanitary measures which aims at protecting human
animal or plant life or health while avoiding unjustified barriers to trade it reaffirms rights
and obligations under the WTO SPS Agreement recognises concepts standards and
recommendations adopted by relevant international organisations (World Organisation for
Animal Health and International Plant Protection Convention) and foresees exchange of
information and cooperation by the Parties incl in cases of emergency (it is complemented
by Annex VI identifying competent authorities Annex VII defining requirements and
provisions for approval of establishment of products of animal origin Annex VIII setting
out guidelines for conducting verifications and Annex IX with points of contact) (6)
exceptions related to goods
Title III covers trade in services establishment and electronic commerce and is
complemented by annexes that detail the Partiesrsquo commitments according to the four
modes of supply or provide information Annex X includes commitments on establishment
(Mode 3) Annex XI lists commitments on cross-border supply of services (Modes 1 and
2) Annex XII outlines reservations regarding temporary presence of natural persons for
business purposes (Mode 4) Annex XIII lists commitments of the Republics of the CA Party
regarding key personnel and graduate trainees Annex XIV lists their commitments on
business service sellers and Annex XV provides a list of the relevant enquiry points
Title IV concerns liberalisation of current payments and movement of capital and
stipulates that the Parties shall authorise payments and transfers on the current account
between the Parties as well as transactions and capital movements related to foreign direct
investment and related transactions including liquidation and repatriation of investments
and profits It also envisages exceptions such as circumstances where payments and
capital movements cause or threaten to cause serious difficulties for the operation of
exchange rate policy or monetary policy or the liquidity of the economy in which case
the Parties may temporarily adopt safeguard measures)
Title V covers government procurement and is complemented by Annex XVI which
details the commitments of Parties in this area (eg procuring entities covered coverage
of procurement contracts under the Agreement media used for tender procedures and key
features of the process for awarding procurement contracts) The Agreement provides for
the Parties to have non-discriminatory access to public procurement procedures within the
scope of covered procurement and outlines general principles and rules for procurement
procedures (eg publication of notices participation in tenders technical specifications
documentation timeline awarding contracts etc) ensuring transparency and cooperation
Title VI covers intellectual property It reaffirms the Partiesrsquo commitments to various
relevant multilateral agreements (eg WTO TRIPS Agreement Convention on Biological
Diversity and Paris Convention for the Protection of Industrial Property) foresees exchange
of information and cooperation between the Parties in relation to technology transfer and
sets standards on the protection of intellectual property rights (IPR) including trademarks
geographical indications copyright and related rights industrial designs plant varieties
and patents The list of geographical indications to be protected is provided in Annex XVII
The Title also addresses enforcement measures for cases of infringement of IPR
Title VII concerns trade and competition in the economies of the Parties Under this
Title the Parties commit to adoption or maintaining comprehensive competition laws and
having appropriately equipped competition authorities They also consider as incompatible
with the Agreement the most harmful anticompetitive practices such as restrictive
agreements concerted practices abuse of dominance and concentrations of companies
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 31
that significantly impede effective competition The Title also stipulates that with regard to
state enterprises and designated monopolies there is no discrimination in exercised by such
entities regarding conditions under which goods or services are purchased or sold
Title VIII relates to trade and sustainable development It includes commitments to
effectively implement the eight ILO Fundamental Conventions and key multilateral
environmental agreements to which EU Member States and CA countries are Parties In
addition the Title includes specific provisions in relation to various thematic areas such as
sustainable forest management sustainable fisheries and trade supporting sustainable
development It establishes civil society advisory groups as part of institutional structure
and foresees a regular dialogue between the Parties and civil society incl in a dedicated
Civil Society Forum The Title also provides a dedicated dispute settlement mechanism
with government consultations consideration of the matted by the TSD Board and a Group
of Experts to examine the matter and formulate recommendation
Title IX relates to regional economic integration between the Central American Parties
and includes provisions on circulation of goods in trade between the EU and CA within the
EU and CA region respectively once a product entered their customs territory and when
the applicable rules and standards are met In this context the Title provides rules related
to customs technical barriers to trade and sanitary and phytosanitary measures (Annex
XX provides a list of CA technical regulations in the process of harmonisation)
Title X covers dispute settlement and outlines the related procedures including the
establishment of a panel its ruling and compliance
Title XI establishes mediation mechanism for non-tariff measures incl the selection
of a mediator the applicable procedure and implementation of the agreed solution
Title XII contains provisions on transparency and administrative procedures Among
other things the Parties commit to (i) ensuring that their measures of general application
(eg laws regulations judicial decisions procedures and administrative rulings) relating
to matters covered by the EU-CA FTA are promptly published or otherwise made readily
available to interested persons and (ii) providing reasonable opportunities for those
interested to comment on proposed measures and taking into account relevant comments
The Parties also commit to establish Points of Contact for matters related to EU-CA FTA
Title XIII addresses tasks of the institutional bodies in matters related to trade
ie the Association Council the Association Committee and specialised Sub-committees
(for details please see section 52 on the institutional set up)
Title XIV defines general exceptions to the Agreement related to the Partiesrsquo balance of
payments and taxation
52 Institutional set-up of the EU-CA FTA
The Association Council the Association Committee six Sub-committees and an Ad hoc
Working Group on Government Procurement (the latter not envisaged by the EU-CA FTA
but set up by the Parties in 2016) oversee the implementation of the Agreement
The Association Council established pursuant to Article 4 supervises implementation of
the Association Agreement it is composed of representatives of the EU and each of the six
CA countries has a decision-making power (binding upon the Parties) in cases foreseen in
the Agreement examines all major issues and questions of common interest It meets at
Ministerial level (or through representatives) at regular intervals not exceeding two years
In line with Article 345 when meeting to discuss matters under EU-CA FTA the Council
has the power to amend Annexes and Appendixes related to trade incl tariff elimination
schedules and goods included there originating products and methods of administrative
Page 32
cooperation Annex XVI (Government Procurement) Annex XVIII (Protected GIs) Annex
XIX (in relation to Article 306 animals animal-based products plants and plant-based
products subject to SPS measures) and Annex XXI (Sub-committees)
The Association Committee set up pursuant to Article 6 is responsible for the general
implementation of the Agreement and assists in this context the Association Council It is
composed of representatives of the EU and the six CA countries at the senior officialsrsquo level
and shall meet once a year to review the implementation It takes decisions foreseen in
the Agreement or delegated by the Association Council When acting within part IV of the
Agreement the Association Committee supervises work of Sub-committees established by
this part and may set up new ones prevents and resolves conflicts (without prejudice to
provisions related to the Dispute Settlement and Mediation Mechanisms) and recommends
decisions for adoption by the Association Council
The Agreement has also established six specialised Sub-committees
Sub-committee on Market Access for Goods (Article 91) is responsible for monitoring
the correct implementation and administration of the Trade in Goods Chapter and serves
as a forum for consultations about interpretation and application of its provisions It
examines proposals provided by the Parties regarding accelerated liberalisation of trade in
goods and tariff reduction as well as inclusion of additional goods into liberalisation
schedules It may make recommendations to the Association Committee on matters within
its remit and take any issue as and when instructed by the Association Committee
Sub-committee on Customs Trade Facilitation and Rules of Origin acting in line
with Article 123 monitors implementation of the Chapter and Annex related to the concept
of origin and methods of administrative cooperation It provides a forum to discuss and
consult all matters related to customs incl customs procedures valuation nomenclature
cooperation tariff regimes mutual administrative assistance in customs matters as well
as rules of origin It pursues cooperation on development application and enforcement of
customs procedures mutual administrative assistance in customs matters administrative
cooperation and rules of origin It examines requests for amendments of rules of origin
and submits to the Association Committee results of the analysis with recommendations
It also aims to enhance cooperation on capability building and technical assistance
Sub-committee on Technical Barriers to Trade (TBT) acting in accordance with Article
139 provides forum to discuss and consult any matter related to the Chapter and monitors implementation and administration of this Chapter facilitating exchange of information
and cooperation and promptly addressing any issue that either Party raises related to the
development adoption application or enforcement of standards technical regulations
and conformity assessment procedures It aims at solving any problems within the remit
of the Chapter that would limit trade between the Parties It encourages direct interaction
between non-governmental actors such as standard bodies accreditors and certifiers It
facilitates the exchange of information about the work being done in non-governmental
regional and multilateral fora engaged in activities related to technical regulations stan-
dardisation and conformity assessment procedures and explores ways to facilitate trade
between the Parties The Sub-committee has also power to review the Chapter in the light
of developments under TBT Agreement and reports to the Association Committee about
implementation of the Chapter including cooperation activities
Sub-committee on Sanitary and Phytosanitary Matters (SPS) acting in line with
Article 156 monitors implementation of the Chapter provides a forum for discussion and
consultation on any matter arising under the Chapter and an opportunity to seek mutually
acceptable solutions It may also develop procedures or arrangements facilitating
implementation of the Chapter It acts as a forum for consultations related to any measure
proposed by the EU which may affect its trade with any of the CA Parties and a forum for
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 33
dispute settlement under the Chapter The Sub-committee is also responsible for
promoting cooperation on animal welfare between the Parties
Sub-committee on Intellectual Property Rights (IPR) (Article 274) monitors
implementation of Article 231 (transfer of technology) and part of the IP Chapter related
to GIs including facilitating discussion about protection of GIsrsquo and recommendations to
the Association Committee regarding amendments to Annex XVIII on GIs It promotes
technology transfer from the EU to the CA Parties and defines priority areas in which
initiatives shall be directed regarding technology transfer research and development and
building-up human capital Its responsibilities include also keeping a registry of the
programs activities or initiatives in progress in the field of intellectual property with
emphasis on transfer of technology
Board on Trade and Sustainable Development (TSD) established pursuant to Article
294 reports to the Association Committee and oversees the implementation the TSD Title
incl cooperative activities undertaken under Title VI (Economic and Trade Development)
of Part III of the Agreement The decisions and recommendations of the Board shall be
adopted by mutual agreement between the Parties and be provided to the public unless
the Board decides otherwise
While EU-CA FTA does not envisage a Sub-committee on Government Procurement the
Parties concluded that it would be useful to have a dedicated body to address matters in
this area They decided to create a temporary Working Group that met for the first time
in June 2016 (European Commission 2017a)
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo
priorities
The negotiations for an Association Agreement (AA) including a Trade Pillar between the
European Union (EU) and Central America (CA) started in 2007 We look at the bloc-to-
bloc trade and policy context the negotiation process and priorities from both sides
The region-to-region trade context
The CA group is composed by Costa Rica Guatemala El Salvador Honduras Nicaragua
and Panama and it is featured by internal economic and political dialogue which led to the
creation of the Central American Common Market (CACM) in the early 1960s Despite the
initial momentum the regional integration process has been stopped for decades due to
internal tensions and the effects of import-substitution trade strategies on local economic
growth (European Parliament 2012) Consequently the initial goal of setting up a custom
union failed and CACM succeeded only in establishing a free-trade area (Duran et al 2010)
The Central American integration efforts were revitalised through setting up of the Central
American Integration System (SICA) aimed at promoting democracy development peace
and freedom in the region (European Source Online 2016) SICA was formally established
on 13 December 1991 through the signature of the Protocol to the Charter of the
Organization of Central American States (ODECA) also known as the ldquoTegucigalpa
Protocolrdquo SICA established both a political and an economic institutional framework by
setting up the Central American Parliament and the Central American Bank for Economic
Development Despite these changes CACM remained the main forum for trade discussions
(European Parliament 2012)
The EU is one of the three most important CA trading partners It is challenging to draw
general and unified conclusions for the whole CA trade picture given its domestic
heterogeneity with Panama and Costa Rica being middle-income countries and Nicaragua
the poorest member (European Parliament 2018 p 18) The EU countriesrsquo share of import
from and export to CA accounted for 30 and 16 respectively in the mid-1980s Among
Page 34
the CA members Guatemala appeared as the most export dependent one while Panama
was the least trade-oriented country (CEPR 2012 pp 6-7) The role of agricultural
production within the respective economies differs widely between the two regions
Agricultural production is very important for CA especially in Honduras and El-Salvador
(38 of the national production) whilst it is relatively much less important in the EU (5)
The same complementarities can be found in manufacturing production (amounting to 18
of the EU production which is much higher than in CA particularly in Panama (4) and
Nicaragua (25) Services contribute to almost 23 of the EU Nicaraguan and Costa Rican
GDP while this share is only 53 for El Salvador (Ibid pp 6-7)
The negotiation process
The start of the economic and political dialogue between the EU and CA blocks dates back
to 1984 at the first conference of Foreign Ministers between the EU and CA countries in
Costa Rica In 1993 the EU and the CA countries signed a Framework Cooperation
Agreement which entered into force on 1st March 1999 (Acuerdo-marco de cooperacioacuten
1999) On the occasion of the EU-Latin America Summit held in May 2002 these countries
and the EU jointly expressed their willingness to reinforce their dialogue by concluding a
new Political Dialogue and Cooperation Agreement which was signed on 15th December
2003 in Rome (Acuerdo de Diaacutelogo Poliacutetico 2003)
The need to establish stronger trade relations even by setting up a free-trade area pushed
the EU and CA to explore the feasibility of an Association Agreement entailing also a specific
chapter on trade Such intention was clearly stated during the EU-Latin America summit of
Guadalajara (Mexico) in May 2004 (Declaration of Guadalajara 2004 p 8 point 52) and
one year later in May 2005 in the context of the EU-Central American Ministerial meeting
in Luxembourg On that occasion the parties launched a joint-assessment exercise on
regional economic integration and established an ad-hoc working party (Council of the
European Union XXI San Joseacute Dialogue Ministerial Meeting between the EU and Central
America 2005 p 2) Finally at the Vienna Summit of 2006 the parties opened the door
to an Association Agreement to create a free trade area (Council of the European Union
EU-Central American Summit 2006 pp 1-2 points 2 and 3) The summit also welcomed
the initiative of the Peace Building and Commission and Human Rights Council (Ibid p 2)
The green light for the beginning of the AA negotiations was given on 28th June 2007 in
Brussels (EU and the Central American Community start negotiations for a new Association
Agreement 2007) However the talks were temporarily suspended on 6th April 2009 and
then resumed a few days later on 24th April (Acuerdo de Asociacioacuten entre Centroameacuterica
y la Union Europea 2009) when the parties decided to re-initiate the negotiations
The negotiating partiesrsquo priorities
The negotiating strategy of the CA countries mainly pursued three goals
Strengthening their trade policy whose objective is to open up new markets for the
benefits of their local exporters The EU appears as a crucial partner for CA countries
as it ranks on top of the worldrsquos largest importers of agricultural products and the
relative share of developing countries has been rising over time in the EU trade balance
Reinforcing CA countriesrsquo export competitiveness and reducing costs of accessing the
EU market vis-agrave-vis competitors such as African-Caribbean and Pacific (ACP) countries
that benefit from preferential and better market access conditions
Attracting foreign direct investments in high value-added sectors where the EU applies
higher tariffs (Duran et al 2010 pp 96-99)
From the European side the main reasons driving towards the conclusion of the agreement
with CA are threefold
Promoting the developing countriesrsquo progressive integration into the world economy
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 35
Reaffirming the EUrsquos role in the world trade and in CA following the United States (US)
conclusion of the Dominican Republic Central American and the United States Free
Trade Agreement (CAFTA-DR) reaffirming the US role in the region
Better coordinating with partners on trade dossiers within the World Trade Organization
(WTO) and other international institutions (Ibid p 100)
The conclusion of the Agreement
The negotiation process delivered slow progress due to the inability of CA countries to
reach a unified position and owing to the delays in the regional integration (European
Source Online cit p3) The agreement was finally reached in May 2010 when the
negotiations were officially concluded during the Latin America-Caribbean and European
Union Summit in Madrid Following the legal scrubbing the European Commission reviewed
and approved the agreement prior to signature at the Meeting of the SICA Presidents in
Tegucigalpa Honduras on the 29th of June 2012 (European Commission Directorate
General for Trade 2012) The European Parliament finally endorsed the AA in December
2012 forecasting that the main gains for the European side would be in export of cars
machinery telecommunications chemical products and transports (European Parliament
2012 p 1) At the time of the AA signature in 2012 the EU-Central America trade in goods
accounted to EUR 149 billion and corresponded to 113 of the whole CA region trade
with the rest of the world (Griener and Membersrsquo Research Service 2014 p 5)
On that date the then EU Commissioner for Trade Karel De Gucht commented the
successful conclusion of the AA by stating that the ldquoregion-to-region deal will help establish
major business opportunities for both sides European exporters will save around EUR 90
million on customs per year and European service providers such as telecommunication
and transport will get greater market accessrdquo At the same time the agreement would
generate ldquospill-over effect on Central Americarsquos overall economic integration process and
contribute to the stability of the regionrdquo (European Commission Ibid p 1) The
Commission officially announced the provisional application of the FTA with Honduras
Panama and Nicaragua on 31st July 2013 with Costa Rica and El-Salvador on 1st October
2013 and with Guatemala on 1st December 2013
The trade provisions of the AA provisionally entered into force in 2013 as they fall within
the exclusive competences of the EU17 Once the entire text of the AA will be ratified by
the EU Member Statesrsquo parliaments the entire text will be legally binding and applicable
After joining the EU in 2013 Croatia is currently negotiating its accession to the AA
54 Operational context of the implementation of the EU-CA FTA
After having illustrated the main partiesrsquo priorities during the bloc-to-bloc negotiations this
chapter provides an overview of the broader context surrounding the negotiations and
implementation and describes the main regional actors as well as their respective trade
policy attitudes towards CA and Latin American countries (LAC) as a whole
Trade policy context the multilateral system and the global economy
Since the launch of the EU-CA negotiations the global trade policy context has undergone
deep changes The Doha Development Agenda stalemate due to incompatible views on
various issues at stake put great pressure on the global trading system The WTO
difficulties in reaching satisfying outcomes stem both from external causes such as the
decline of advanced economies regionalisation of trade and internal sources of tensions
17 Despite being considered as a bloc-to-bloc association agreement the incomplete CA regional economic integration and the failure in setting up a custom union among the CACM countries left unbalances and inconsistencies in accessing single CA countriesrsquo markets and different levels of external tariffs In light of these arguments CA cannot be considered as a fully integrated homogeneous and unified trade bloc
Page 36
embedded in unilateral tariff-cutting process (Baldwin 2016) Besides these tensions the
economic expansion of China and the ldquotrade warsrdquo between the US and China exploded as
of 2017 The recent stalemate of the WTO Appellate Body that halted the entire dispute
resolution process as well as the need to put sustainable development at the core of the
WTO agenda pushed the Commission to advance a new WTO reform proposal (European
Commission 2021) The WTO crisis led to a proliferation of bilateral FTAs and the EU
has been an active bilateral FTA actor globally (see Table 4
Table 4 Overview of the EU FTAs launched and or concluded since 2012
Start of Negotiations
Signatory CountryRegion
State of play of the agreement
Ratification
1999 Mercosur Concluded in 2019 Ongoing
2004 SADC Concluded in 2016 Entered into force in 2016
2007 Andean Community Concluded in 2010 Entered into force in 2013
2007 Ukraine Concluded in 2011 Provisionally applied since 2016 fully in force since 2017
2009 Singapore Concluded in 2019 Entered into force in 2019
2009 Canada Concluded in 2014 Provisionally applied since 2017
2010 Malaysia On hold na
2012 Moldova Concluded in 2013 Provisionally applied since 2014 fully in force in 2016
2012 Georgia Concluded in 2013 Provisionally applied since 2014 fully in force since 2016
2012 Vietnam Concluded in 2015 Entered into force in 2020
2012 Japan Concluded in 2018 Entered into force in 2019
2013 USA On hold na
2013 Morocco (DCFTA new) On hold na
2013 Thailand On hold na
2015 Philippines On hold na
2015 Tunisia (DCFTA new) Ongoing na
2016 Mexico (modernisation) Concluded in 2018 Ongoing
2016 Indonesia Ongoing na
2017 Chile (modernisation) Ongoing na
2018 Australia Ongoing na
2018 New Zealand Ongoing na
2019 United Kingdom Concluded in 2020 Ongoing
2020 ESA (extension) Ongoing na
Source compiled by the author
The EU trade and policy context
Trade picture
The EU maintains strong institutional dialogue with Central and Latin America
legitimised by historic cultural and linguistic ties with the region The EU Latin America
and the Caribbean (LAC) bilateral summits have been regularly held since 1999 gathering
33 members from the two counterparts In 2006 the EU-Latin America Parliamentary
Assembly (EuroLat) was set up and it was conceived as the parliamentary angle of the EU-
CA bilateral partnership (EPRS 2017 p 5)
From a trade perspective the EU-Central and Latin America (comprising Andean
Community CA Cariforum Mercosur Mexico and Chile) trade peaked at EUR 2287 billion
in 2014 before showing a downward trend and decreasing at EUR 2132 billion in 2015
corresponding to 61 of the whole EU trade that year (EPRS 2017 p 6) The EU total
share of LAC trade fluctuated around 14 and the EU remained the first investor in the
region in the last ten years (EEAS 2018) An analysis carried out by the European
Parliament in 2020 unveils that the EU-LAC trade in goods value grew by 22 from 2008
to 2018 (Tvevad 2020 p 18) According to the 2020 DG Trade Report (data from 2019)
on the Implementation of EU FTAs trade flows between the EU and CA showed a robust
growth Indeed trade in goods increased by 88 with respect to the 2018 performance
imports continued growing over the past five years and exports statistics indicated an
overall upward trend with the exception of 2016 (European Commission 2020a p 110)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 37
In 2010 the EU was the second CA trading partner behind the United States (US)
accounting for 94 of the regionrsquos overall trade with the rest of the world (European
Commission 2011 p 4) Among the main exporters to the EU Costa Rica ranked first
with 539 of the total CA exports to the EU Conversely the EU exports went primarily
to Costa Rica (363) Guatemala (281) and El Salvador (152) (Ibid p 4) The EU-
CA trade is marked by the supply of primary products to the EU (mainly agricultural
products such as coffee and bananas) in return for high-technology manufactures
especially machinery transport equipment chemicals and manufactured goods (Duran et
al 2010 pp 95-96 European Parliament 2012 p 9) The CA share in the EU trade was
modest accounting only for 05 of overall EU imports in 2011 and for 03 of the total
EU exports in 2011 (European Parliament 2012 p 8) In addition the EU applied tariffs
on various agricultural products imported from third countries The exclusion of both coffee
and bananas from the EU Generalized System of Preference (GSP) and the GSP+ schemes
prevented these products from benefitting from tariff-reduction from the European side
hampering their access to the EU market and leaving their prices to be influenced by world
trade fluctuations (Duran et al 2012 p 98) The 2019 data confirmed primary products
rank largely first among SITC products grouping exported from CA to the EU accounting
for 721 of the whole exports followed by manufactures with 27 (European
Commission 2019 p 4) Recent statistics highlight the main destination of EU export
continued to be Panama (up to 118 since 2018) whereas the main country of origin of
EU imports is Costa Rica with an increase by 63 from 2018 (European Commission 2020
p 112)
The previous EU trade policy strategy adopted in 2015 (ldquoTrade for Allrdquo) confirmed that
ldquothe FTAs with Peru Colombia Ecuador and Central America are creating new dynamics
for trade and investmentsrdquo (European Commission 2015 p 33) As set out by that trade
policy strategy the Commission should pursue three main priorities with regard to Latin
and Central America ldquo[Continuing] negotiations for an ambitious balanced and
comprehensive FTA with Mercosur ldquoRequesting negotiating directives to modernise the
FTAs with Mexico and Chilerdquo ldquoBe ready to consider investment agreements with key Latin
American countriesrdquo (Ibid p 33)
As evidence for the increasingly robust commitment in the region the EU negotiated trade
deals with 27 out of the 33 LAC countries to strengthen both bilateral and region-to-region
relations the EU actively engaged LAC by signing new and modernising older EU-LAC FTAs
(see Table 5)
Table 5 EU FTA in Latin America and participating countries
Agreement Countries Negotiation launch
Negotiations Conclusion
EU-Andean Countries Colombia Ecuador Peru 2007 2010
EU-Caribbean (CARIFORUM)
Antigua and Barbuda Bahamas Barbados Belize Dominica Grenada Guyana Jamaica Saint Lucia Saint Vincent and the Grenadines Saint Kitts and Nevis Suriname Trinidad and Tobago and the Dominican Republic
2002 2008
EU-Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
2012 2010
EU-Chile na 2017 na
EU-Mercosur Argentina Brazil Paraguay Uruguay 1999 2019
EU-Mexico na 2016 2018
Source Compiled by the author
Regarding civil society the trade chapter of the EU CA FTA did not receive a lot of public
attention and consequently has not been affected by a high level of politicisation within
the EU This might stem from the relatively lower importance of trade relations with CA for
the EU Likewise the agreement did not catch a lot of public attention either in CA where
Page 38
the media coverage mainly focused on the Central America Free Trade Agreement (CAFTA)
Nevertheless both the agreements were targeted by NGOs and trade unions sharing the
same criticism and concerns over biodiversity pharmaceutical product access and
exploitation of natural resources (European Parliament 2011 p 16)
Political Dialogue
To frame the most recent developments in the EU LAC political dialogue it is worthy to list
three key documents forging the EU foreign policy towards LAC
The European Parliament Resolution on the Political Relations with Latin
America passed in 2017 advocating for a stronger more coherent and reinforced
relations with this region by stressing the need to update and develop a more
comprehensive and ambitious EU strategy to address the emerging challenges linked
to fundamental freedoms human and social rights safety of minorities migration
issues corruption tax fraud and security (European Parliament 2017)
The Joint Communication adopted by the European Commission and the High
Representative for Foreign Affairs (HRVP) in 2019 titled ldquoEuropean Union Latin
America and the Caribbean joining forces for a common futurerdquo aimed at deepening
the EU-LAC relations in a fast-changing context by emphasizing four mutually important
priorities prosperity democracy resilience and effective global governance (European
Commission 2019)
The Council of the EU Conclusions of 13th May 2019 endorsing the strategy laid
out in the Joint Communication On that occasion the Council welcomed the four points
described above and added more areas for action such as to work more closely in the
multilateral framework consolidate economic and social resilience enhance shared
prosperity and assist in promoting structural reforms (Council of the EU 2019)
The 2020 EU 27 ndash Latin America Informal Meeting reaffirming the need to advance
bilateral region-to-region summit to strive for a stronger multilateral system identified
mainly in the United Nations and the World Health Organisation (WHO) especially in
the light of the COVID-19 pandemic outbreak (Federal Foreign Office 2020)
Within the framework of the AA the EU and CA agreed to cooperate on a wide range of
policy dossiers of mutual interest namely conventional weapon disarmament the
implementation of the Convention on the Prohibition of the Use Stockpiling Production
and Transfer of Anti-personnel Mines and on their Destruction as well as the Convention
on Certain Conventional Weapons and its protocol (European Parliament 2011 p 7)
On development cooperation the EC regional strategy 2014-2020 earmarked EUR 925
million funding for Latin America to be allocated in two components
Component 1 ldquoMultiannual Indicative Programme for continental activities with Latin
Americardquo accounting for EUR 805 million and devoted to Argentina Bolivia Brazil
Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico
Nicaragua Panama Paraguay Peru Uruguay and Venezuela
Component 2 ldquoMultiannual Indicative Programme for Sub-Regional Cooperation with
Central Americardquo funded with EUR 120 million focused on Central American countries
Costa Rica El Salvador Guatemala Honduras Nicaragua and Panama This component
included three areas for action ie support for regional economic integration support
for the Regional Security Strategy and support for Regional Climate Change Strategy
and the Central American Policy on Comprehensive Disaster Risk Management (EEAS
European Commission 2014)
The Central American trade policy context
Regional Context
Beside their membership in the Central American Common Market (CACM) and the WTO
the CA countries have been signing additional free trade agreements with other regional
and international partners since 2012
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 39
It should be also noted that Panama joined the Latin American Integration Association
(LAIA) in 2012 LAIA replaced the Latin America Free Trade Agreement (LAFTA) signed in
1960 and sought a deeper economic integration among the member states18 Also
Nicaragua applied for the LAIA membership in 2011 and its request was accepted by the
LAIA Council of Minister in August 2011 Nicaragua is currently advancing in fulfilling the
LAIA membership requirements No other CA countries are members of LAIA yet
Table 6 summarises bilateral FTAs and Preferential Trade Agreements (PTAs) signed by the
6 CA countries or being in force since 2011
Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021)
Costa Rica Guatemala El Salvador
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Colombia (signed in 2013 entered into force in 2016)
Mexico (signed in 2011 entered into force in 2013)
Peru (signed in 2011 entered into force in 2013)
Singapore (signed in 2010 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
Ecuador (PTA) (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs signed but not entered into force yet South Korea (signed in 2018) EFTA (signed in 2013)
FTAs signed but not entered into force yet EFTA (signed in 2013) Ecuador (signed in 2011) Peru (signed in 2011)
FTAs signed but not entered into force yet South Korea (signed in 2018)
Honduras Nicaragua Panama
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Peru (singed in 2015 entered into force in 2017)
Canada (signed in 2013 entered into force in 2014)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2014 entered into force in 2015)
Peru (signed in 2011 entered into force in 2012)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet Israel (signed in 2018) South Korea (signed in 2018) Colombia (signed in 2013) EFTA (signed in 2013) Trinidad amp Tobago (PTA)
(signed in 2013)
Source Compiled by the author
Other influential partners in CA
As illustrated by Table 7 three actors retain significant economic influence in CA and Latin
America as a whole the EU the US and China The following section will examine these
actors and their respective trade policies towards CA and Latin America by describing their
posture as well as the agreements in force
18 Argentina Bolivia Brazil Chile Colombia Cuba Ecuador Mexico Paraguay Panama Peru Uruguay Venezuela
Page 40
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking
SubregionCountry
EU total trade in goods (value in EUR billion)
Ranking of main trading partners for trade in goods
2016 2019
2016 2019 USA China EU19 USA China EU27
Andean Community 3 250 246 1 2 3 1 2 3
ACP ndash Caribbean 15 81 116 1 3 2 1 3 2
Central America 6 108 121 1 3 2 1 3 2
Chile 159 166 3 1 2 2 1 3
Mercosur 4 849 771 3 2 1 3 1 2
Mexico 538 618 1 2 3 1 2 3
Source EPRS 2017 p 6 and DG Trade statistics 2020
The US remains the key CA partner The US is the major source of Foreign Direct
Investments (FDI 273) and Official Development Aid allocating an annual average of
approximately USD 1600 million during the Trump Administration (2016-2020)
(Congressional Research Service 2021) Moreover the US rank on top of CA migrant
destinations (Belladonna 2019) The CA countries have been cultivating thorough relations
with the US as they represent the historical destination of over 40 of the regionrsquos
exports Furthermore the 2004 Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA) granted preferential market access conditions to the region (Office
of the US Trade Representative 2004 and Duran et al 2010 p 93) In light of the strong
power exerted by the US the EU trade strategy pursued a progressive rebalancing of the
US presence in the area to ensure better market access in the region (EPRS 2017 p 5)
The DR-CAFTA negotiations confirmed that labour standards sugar and textile products
treatment pharmaceutical data protection and sovereignty issues were the most
controversial and sensitive matters on the table Unlike the EU-CA AA it should be noted
that the DR-CAFTA does not build any common trade framework for all the signatories as
the US grants differentiated market access conditions to each single CA country (European
Parliament 2012 p 11)
In the last few years China has been playing a role of growing importance in CA and in
Latin America both from a political and trade viewpoint (European Commission 2020 p
15) In recent years China has reinforced its role as trading partner within CA As evidence
for this active involvement the 2000-2010 data already confirmed the Asiarsquos importance
(led by China) both in terms of imports and exports in Latin America and Caribbean20
Indeed the China share of the regionrsquos total exports by destination grew from 11 in
2000 to 83 in 2010 with regard to imports by destination the growth appears even
more remarkable moving from 18 in 2000 to 133 in 2010 (Kuwayama amp Rosales
2012 p 66) whilst the relative share of the US presence has shown a downward trend
(Ibid p 65) The monthly exports to Asia-Pacific21 region more-than-doubled from an
average value of USD 54 billion in 2006 to USD 162 billion in 2014 (Baacutercena Prado
Rosales Peacuterez 2015 p 23) After a slight decline experienced in 2016 a solid rebound
emerged in 2017 On average goods shipment from Asia-Pacific Latin America grew by
136 yearly between 2000 and 2016 (Scotiabank 2018 p 1)
Beside trade China has been recently advancing its Belt and Road Initiative (BRI) in
the region by concluding numerous Memoranda of Understanding (MoU) with various LA
19 Including the United Kingdom 20 Data refers to Argentina Bolivarian Republic of Venezuela Brazil Chile Colombia Costa Rica the Dominican
Republic Ecuador El-Salvador Guatemala Honduras Mexico Nicaragua Paraguay Peru Plurinational State of Bolivia
21 The Asia-Pacific region includes Australia Brunei Darussalam Cambodia China South Korea Philippines Hong Kong Japan Laos Thailand Taiwan Indonesia Malaysia Myanmar New Zealand Singapore and Vietnam
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 41
and CA countries To mention some Bolivia (2018) Costa Rica (2018) Chile (2018) and
Panama (2017)
6 CONSULTATIONS (TASKS 6 AND 7)
61 Consultation Strategy
The consultation strategy presented in the technical offer has been refined during the
Inception Phase (Task 6) and is outlined in Annex B Box 2 summarises our expectations
regarding the main inputs expected from stakeholders throughout the study
Box 2 Expectations regarding inputs from stakeholders
Inputs from stakeholders are expected at all stages of the study
The study team will welcome in particular Responses to the online public consultation Consultation with businesses (responses to the online business survey) Evidence of specific casesexamples on how the Agreement has affected economic performance
sustainable development and human rights both in Central America and in the EU Contributions will be particularly welcome in relation to the priority areas of analysis o Impact of the Agreement on trade diversification (in terms of goods and services traders regions
involved in trade etc) (see Task 101) o Impact on investment climate and investment flows (see Task 102) o Impact of the Agreement on SMEs (see Task 1012) o Effects of the implementation of the TSD chapter (see Task 111) o Performance of the institutions established under the TSD chapter (see Task 112) o Impacts of the Agreement on pillars of Decent Work Agenda working conditions labour standards
social protection other public policies and labour inspection (see Task 114) o Impacts on the informal economy and informal employment (see Task 115) o Environmental impacts (see Task 116) and o All of the case studies
Written contributions (positions) expressing views on how the Agreement has affected economic performance sustainable development and human rights across the parties in particular with regard to ndash but not restricted to ndash the analytical priority areas
Indication of relevant publications that focus on the impact of the Agreement in the partner countries Indication of actions taken by CA in areas covered by the TSD chapter (eg changes in policies action
plans strategies and legislation in the areas of labour environment and climate change ratification and implementation of international conventions in these areas and civil society engagement)
Written comments on the draft Inception Report draft Interim Report and draft Final Report Proposals for and comments on draft conclusions and recommendations of the report including how to
improve operation of the Agreement (if needed) Names of organisations or indication of vulnerable groups that may have been affected by the
Agreement in the partner countries as well as relevant contact details for the evaluation team to reach out to the most relevant additional stakeholders
62 Study Website and Electronic Communications
The establishment and continuous updating of a website as well as ongoing electronic
communications with stakeholders are one element of the consultation strategy During
the inception phase the website has been established and launched and an initial e-
communication will be sent out to identified stakeholders (Task 5) The website is available
at httpcentral-americafta-evaluationeu
Electronic communication with stakeholders will take place through email newsletters as
well as Twitter using an account for this ex-post evaluation (CaEvaluation) Twitter will
be used as well to present the (draft) findings at specific moments in the study interested
related work or articles highlights or relevant quotes from the consecutive study reports
and promote the various outreach activities such as workshops LinkedIn will be used to
complement twitter with the same objectives the account of LinkedIn to be used will be
Ex-Post Evaluation EU-Central America FTA Email and an electronic newsletter will be used
as complementary tools to reach specific stakeholders throughout the study to inform them
Page 42
of events to send questions receive feedback and make appointments for interviews the
email used will be central-americabkp-advisorscom
With the COVID-19 pandemic still in place and governments imposing new lockdowns and
travel restrictions a back-up plan is available in case a lot of the communication has to be
done online The meetings with the EU and CA stakeholders both government and civil
society in the near future will be held online For the second half of the year and beginning
of 2022 face-to-face meetings may also be an option The advantage of digital outreach
is linked to reduction of travel time and travel costs to the minimum and in addition digital
follow-up is easier The public consultation and online business survey are already being
prepared and planned with an indicative timeline of online availability between June and
September 2021 The workshops envisaged for Central America in November 2021 are
currently planned with options ranging from face-to-face meetings over hybrid solutions
to holding them entirely online In either case we will ensure they are as interactive as
possible thanks to the use of breakout rooms and platforms enabling participants to ask
questions and participate in polls online We will also ensure that participants will receive
sufficient information before workshops
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13)
71 Case Study Selection
As part of the evaluation ten case studies will be prepared Their purpose is to capture the
impact of implementation of the EU-CA FTA on sustainable development in its economic
social and environmental dimensions as well as on human rights (including labour rights)
They should complement the economic social environmental and human rights analysis
required under Tasks 10 11 and 12
Regarding the geographic coverage the ToR require two case studies focused on the EU
two horizontal case studies for the whole region of Central America and six dedicated to
each of the Central American countries
Table 1 provides a preliminary list of suggested case studies while their exact focus and
scope will be determined at the next stage of the study further to preliminary impact
analysis and identification of relevant information and data sources
Table 8 List of proposed case studies
No Case study topic Geographical focus Key impact areas
1 Impacts of the Trade Pillar on EU banana producers EU incl OR as well as ACP and LDCs due to preference erosion
Economic and Social
2 Trade in environmental goods and services (opportunities for the EU and partner countries)
EU CA partner countries22
Economic and Environmental
3 Impacts of the Trade Pillar on freedom of association in sectors involved in trade with the EU (the choice of sectors will be made further to the initial impact analysis)
CA partner countries notably Guatemala Honduras and El Salvador
Human rights and Social
4 The effects of the Trade Pillar on sustainable aquaculture in Honduras Nicaragua Costa Rica and El Salvador
Partner countries with a focus on Honduras Nicaragua Costa Rica El Salvador
Economic Social Human rights and Environmental
5 Opportunities created in services sector in particular the green energy sector in Costa Rica (the choice of the services sector will be reviewed based on the initial impact analysis)
CA partner countries Economic and Environmental
22 The ultimate selection of countries will depend on the outcome of the (environmental) impact screening and scoping exercise
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 43
No Case study topic Geographical focus Key impact areas
6 Impacts of the Trade Pillar on child labour and childrens rights
El Salvador Social and Human rights
7 Impacts of the Trade Pillar on the environment (eg forests and biodiversity) in Guatemala the case of palm oil
Guatemala Environmental
8 Impacts of the Trade Pillar on MSMES and sustainable agriculture in the coffee industry (organic coffee) in Honduras
Honduras Economic and Environmental
9 Impacts of the Trade Pillar on women and gender equality notably in agricultural value chains in sectors exporting to the EU (the sectors may include coffee ground nuts and banana however the final selection of sectors and scope will be made based on data availability and the initial impact analysis)
Nicaragua Social and Human rights
10 Implementation and effect of the FTZ in port of Colon including aspects related to direct transportation clause
Panama Economic
72 Case Studies ndash Summaries and Methodologies
Descriptions of case studies and planned methodologies have been provided in Annex A5
8 STUDY WORK PLAN
A detailed study schedule which sets out activities and deadlines for outputs indicated
throughout this Inception Report is outlined in the chart overleaf A detailed plan for the
consultation programme is provided in Annex A4 Annex A6 provides the risk management
approach for the evaluation
Page 44
Phase task deliverable
Inception phase
Kick-off meeting with Commission in Brussels 20
Task 1 Refine draft intervention logic diagram
Task 2 Define and develop the methodological approach
Task 3 Review existing studies amp reports on trade between the EU and CA (6 countries)
Task 5 Provide a concise description of the agreement
Task 6 Create a website dedicated to the evaluation
Task 7 Stakeholder consultation strategy
Task 13 Case study proposals
Inception reporting
Drafting of inception report
Draft Inception Report 22
Review meeting Commission ISG
Finalisation of the Inception Report
Inception Report
Interim phase
Task 4 Provide a concise summary
Task 8 Undertake consultation activities
Civil society dialogue in Brussels (budgeted under review meetings)
12-week online public consultation
Online survey for business users interests in both the EU MS and partners
Workshops in partner countries
Other targeted consultations
Task 9 Assess the EU-Central American TSIA
Task 10 Analyse economic effects
Task 11 Analyse effects of implementation on SD economic social environmental
Task 12 Analyse effects on Human Rights
Task 13 Conduct in-depth case studies based on field work
Interim reporting
Drafting of Interim Technical Report
Annexes Progress evaluation Quantitative tables 10-page stakeholder report CS reports
Draft Interim Technical Report 20
Review meeting Commission ISG
Finalisation of Interim Technical Report
Interim Technical Report `
Final phase
Task 13 Conduct in-depth case studies based on field work
Task 14 Reply to the evaluation questions
Task 15 Provide conclusions and recommendations
Tasks 1 45 9 and 10 - 15
Final reporting
Drafting of draft final report
Synthesis report
Executive Summary
Annexes
Draft final report 20
Review meeting Commission ISG
Finalisation of final report
Translation executive summaries (EN FR GE SP)
Final report 20
Possible exit meeting 20
Progress reports
The ToR speci fies 12 weeks for the survey we tentatively propose 16 weeks because the time schedule a l lows i t and i f the project s tarts in January the survey would fa l l in the hol iday season in EuropeCA which would not be conducive for responses
Key
Meeting with the European Commission
Concrete deliverable (eg Inception Report)
Key
Working on the evaluation and endpoints of work per task
Stakeholder consultation activities and meetings
MayAprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr
HOW TO OBTAIN EU PUBLICATIONS
Free publications
bull one copy
via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps
from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)
from the delegations in non-EU countries
(httpeeaseuropaeudelegationsindex_enhtm)
by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm)
or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
Priced subscriptions
bull via one of the sales agents of the Publications Office of the European Union
(httppublicationseuropaeuothersagentsindex_enhtm)
doi[number]
[Cata
logue n
um
ber]
Page viii
TABLE OF CONTENTS
LIST OF BOXES TABLES AND FIGURES IX
ACRONYMS X
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES 1
2 EVALUATION FRAMEWORK 2
21 Intervention hypothesis of the Agreement (Task 1) 2
22 Evaluation Questions Judgement Criteria and Indicators 5
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2) 6
31 Analysis of economic effects (Task 10) 6 311 Task 101 Analysis of the evolution of trade in goods 6 312 Task 102 Analysis of the evolution in trade in services 8 313 Task 103 Analysis of the evolution of foreign direct investment (FDI) 8 314 Task 104 Presentation of overall economic impacts 9 315 Task 105 Determining the impact on implementation of the Trade Pillar of the various
institutional structures 9 316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated exportimport procedures for key stakeholders 10
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the Trade Pillar 10
318 Task 108 Analysis of the implementation of the Government Procurement chapter of the Trade Pillar 10
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar 10 3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has led to a
greater economic integration between the Central American partners 11 3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for imports of
bananas 11 3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on SMEs 11 3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers 11 3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on the
budgets of the EU and the partner countries 12 3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on EU
Outermost Regions (ORs) 12 3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on developing
countries in particular on LDCs and countries having an Economic Partnership Agreement (EPA) with the EU 12
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable development (Tasks 11 and 12) 13 321 Task 111 Analysis of the effects of implementation of the Trade and Sustainable
Development (TSD) chapter of the Trade Pillar 13 322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter 13 323 Task 113 Analysis of employment impacts 14 324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda (job
creation labour standards social protection and social dialogue) on working conditions
poverty reduction and enforcement 14 325 Task 115 Analysis of impacts on the informal economy and informal employment 15 326 Task 116 Analysis of impacts on gender inequality 16 327 Task 118 Analysis of impacts on the adoption and implementation of internationally
recognised instruments of responsible business conduct and Corporate Social Responsibility (CSR) 17
328 Task 117 Analysis of environmental impacts 18 3281 Activity 1 Fine-tuned methodology and impact screening and scoping 19 3282 Activity 2 Establishing the baselines for the impact areas 20 3283 Activity 3 Quantitative evaluation of impacts 20 3284 Activity 4 Qualitative evaluation of impacts 21
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page ix
3285 Activity 5 Answering of the evaluation questions and other concluding remarks 21 3286 Conclusions and recommendations 21
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human rights 21 3291 Human rights baseline 22 3292 Screening and scoping 22 3293 Detailed assessment 23 3294 Conclusions and recommendations 24
33 Concluding tasks 24
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3) 25
41 Methodological aspects 25
42 Substantive issues 25
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5) 29
51 Structure of the EU-CA FTA 29
52 Institutional set-up of the EU-CA FTA 31
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo priorities 33
54 Operational context of the implementation of the EU-CA FTA 35
6 CONSULTATIONS (TASKS 6 AND 7) 41
61 Consultation Strategy 41
62 Study Website and Electronic Communications 41
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13) 42
71 Case Study Selection 42
72 Case Studies ndash Summaries and Methodologies 43
8 STUDY WORK PLAN 43
LIST OF BOXES TABLES AND FIGURES Box 1 The use of the DPSIR framework in FTAs 20 Box 2 Expectations regarding inputs from stakeholders 41 Table 1 Methodological approaches and sources for the analyses of trade in goods 6 Table 2 Methodological approaches and sources for the analysis of trade in services 8 Table 3 Methodological approaches and sources for the analysis of bilateral FDI 8 Table 4 Overview of the EU FTAs launched and or concluded since 2012 36 Table 5 EU FTA in Latin America and participating countries 37 Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021) 39
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking 40 Table 8 List of proposed case studies 42 Figure 1 Overall evaluation approach 2 Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association
Agreement 3 Figure 3 Overview of the multi-pronged approach to human rights impact assessment 24
Page x
ACRONYMS
AA Association Agreement ACP African Caribbean Pacific BATIS Balanced Trade in Services CA Central America CCA Causal Chain Analysis CGE Computable General Equilibrium CPI Consumer Price Index CSD Civil Society Dialogue CSR Corporate Social Responsibility DAG Domestic Advisory Group DG Directorate-General ECLAC Economic Commission for Latin America
and the Caribbean EESC European Economic and Social Committee EFTA European Free Trade Association EP European Parliament EQ Evaluation Question EU European Union EU-CA FTA Trade Pillar of the EU-Central America
Association Agreement FDI Foreign Direct Investment FRA EU Agency for Fundamental Rights FTA Free Trade Agreement GATS General Agreement on Trade in Services GDP Gross Domestic Product GHG Greenhouse Gas GIs Geographical Indications GPA Government Procurement Agreement GSIM Global Simulation GSP Generalised Scheme of Preferences GTAP Global Trade Analysis Project HRIA Human Rights Impact Assessment ILO International Labour Organisation IPR Intellectual Property Rights ITC International Trade Centre
JC Judgement Criterion LDC Least Developed Country LULUCF Land use land use change and forestry MFN Most-Favoured Nation MSME Micro Small or Medium-sized Enterprise NGO Non-Governmental Organisation NTB Non-Tariff Barrier OECD Organisation for Economic Cooperation and
Development OHCHR Office of the United Nations High
Commissioner for Human Rights OR Outermost Region
RBC Responsible Business Conduct RoO Rules of Origin SDGs Sustainable Development Goals SIA Sustainability Impact Assessment SICA Central American Integration System SIECA Secretariat for Central American Economic
Integration SME Small or Medium-sized Enterprise SPS Sanitary and Phyto-Sanitary TBT Technical Barriers to Trade TISMOS Trade in Services data by mode of supply ToR Terms of Reference TRIPS Trade-Related Aspects of Intellectual
Property Rights TRQ Tariff Rate Quota TSD Trade and Sustainable Development UN United Nations UNCTAD United Nations Conference on Trade and
Development UNECE United Nations Economic Commission for
Europe WTO World Trade Organisation
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 1
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES
Since 20132 the European Union (EU) has been implementing the Trade Pillar ie Part
IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The Trade Pillar
(hereinafter EU-CA FTA) gradually opens markets on both sides increases the stability and
predictability of the trade and investment environment and aims at creating benefits for
consumers and fostering sustainable development Its objectives include also support for
regional economic integration in Central America This is also one of the first EU ldquonew
generationrdquo trade agreements characterised by its comprehensive scope that covers in
addition to liberalisation of trade in goods and services investment public procurement
competition intellectual property rights and trade and sustainable development
After several years of implementation an evaluation is undertaken with the objective of
analysing the economic social environmental and human rights (including labour rights)3
impacts of the implementation of the EU-CA FTA and ultimately of determining whether
there is a need to improve its implementation To support the European Commissionrsquos own
evaluation of the Agreement the Directorate-General (DG) for Trade has awarded a
contract for the ldquoEx-post evaluation of the implementation of part IV of the Association
Agreement (Trade Pillar) between the EU and its Member States and Central Americardquo to
a consortium led by BKP Economic Advisors (BKP) The evaluation is carried out by a team
involving experts from BKP Trade Impact BV Trinomics the Foundation Rural
Development Consult (CDR) the NL-investmentconsulting BV and the University of Costa
Rica The work started in January 2021 and will continue until May 2022
The scope of the evaluation can be delineated as follows in terms of the period covered
it includes the whole implementation period of the EU-CA FTA since the start of provisional
application in 2013 up to now also comparing where appropriate with a five-year period
preceding the entry into force of the Agreement (ie starting in 2008) Geographically it
primarily covers the Parties to the Agreement although some effects of the EU-CA FTA on
selected third countries are also analysed such as developing countries and particularly
least developed countries (LDCs) moreover some global effects (eg climate change)
will also be covered Regarding evaluation criteria effectiveness impact efficiency
coherence and relevance will be considered Finally as already mentioned in terms of
types of effects considered the evaluation will cover economic social environmental and
human rights (including labour rights) effects which the EU-CA FTA may have had either
as a result of the changes in trade it has brought about or through the implementation of
the provisions of the Agreement text itself notably those of the Trade and Sustainable
Development (TSD) chapter
Although most data to be considered for the evaluation are likely to refer to the world pre-
COVID-19 the pandemic will have an impact on the study First in terms of the evaluation
implementation it is likely to affect the consultation activities that may need to be carried
out online rather than in person Second in substantive terms it will be important to pay
attention to issues which are of a priority for stakeholders in the current circumstances
(eg by selecting case studies accordingly) and to consider that eg stakeholder views
might be affected by the current situation
This inception report is the first deliverable under the contract It comprises seven tasks
of the evaluation (as established in the Terms of Reference see Figure 1) focusing on the
presentation of the evaluation methodology and is structured as follows Chapter 2
2 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El-Salvador since 1st October 2013 and with Guatemala since 1st December 2013 3 Whenever this report refers to human rights this includes labour rights
Page 2
presents the evaluation framework with an intervention hypothesis (task 1) while Chapter
3 outlines the proposed methodology responding to the evaluation questions (task 2) and
Chapter 4 covers a brief review of relevant studies on the Agreement (task 3) Chapter 5
provides a descriptive summary of the EU-CA FTA and its implementation so far (task 5)
followed by outline of consultation activities in Chapter 6 (tasks 6 and 7) supported by the
consultation strategy provided in Annex B as well as a list with a preliminary selection of
case studies in Chapter 7 (task 13) The final part includes study work plan in Chapter 8
The draft outline of the interim and final evaluation reports is presented in Annex A7 Other
parts of the Annex provide further details on certain elements of the report
Figure 1 Overall evaluation approach
2 EVALUATION FRAMEWORK
21 Intervention hypothesis of the Agreement (Task 1)
An indicative intervention hypothesis developed by the Commission linked the operational
objectives (as listed in Article 78 of the EU-CA FTA) to specific and overall objectives set
out in Article 2 of the Agreement and its Recitals In line with Task 1 of the evaluation ToR
we have adapted the intervention logic developed by the Commission as follows
All 10 operational objectives listed in Article 78 of the Agreement have been included
Specific and overall objectives have been considered in the context of short-term and
medium-term outcomes as well as long-term impacts
Underlying assumptions have been identified and integrated into the intervention
hypothesis
The relationship between the evaluation questions (EQ) and the intervention hypothesis
has been specified
The updated version of the intervention hypothesis is presented in Figure 2 overleaf
The intervention hypothesis was also instrumental in developing the analytical framework
of the evaluation which brings together the evaluation questions of the ToR the associated
judgment criteria and indicators the data sources and the methodological tools with which
we will collect data The refined analytical framework is presented in the following sub-
section
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 3
Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association Agreement
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 5
Main assumptions (at the level of coherence)
Pillar IV and its implementation has been coherent with the EUrsquos trade and development
policies and in particular with the EUrsquos commitment to sustainable development in
trade policies as a contribution towards attainment of the SDGs (EQ8)
Main assumptions (at the level of efficiency)
The utilisation rate of the Trade Pillar is high (EQ5)
Implementation of the Trade Pillar does not lead to trade diversion (EQ5)
Costs associated with implementation of the Trade Pillar are proportionate to the
benefits it has generated (EQ6)
The distribution of both costs and benefits is proportionate among different
stakeholder groups and interests (EQ6)
Implementation of the Trade Pillar does not create unnecessary regulatory costs
(including administrative burden) (EQ7)
Main assumptions (at the level of effectiveness impact and relevance)
The implementation of the Trade Pillar does not create unintended negative
consequences (EQ3)
The positive impact of the Trade Pillar is inclusive and does not benefit only a limited
group of stakeholders (EQ6)
Implementation of the Trade Pillar has contributed to trade diversification (EQ5)
Provisions of the Trade Pillar continue to be relevant for strengthening trade relations
between the Parties and regional integration of Central America (EQ9)
22 Evaluation Questions Judgement Criteria and Indicators
The evaluation framework has been based on the evaluation questions listed in the ToR for
the study which are as follows
EffectivenessImpact
EQ 1 To what extent have the objectives as laid down in Article 78 of Part IV of the
Agreement been achieved
EQ 2 What are the factors influencing (either positively or negatively) the achievements
of the objectives specified in Article 78
EQ 3 Has implementation of the Trade Pillar had unintended (positive or negative)
consequences and if so which ones
EQ 4 What has been the impact of implementation of the Trade Pillar
Efficiency
EQ 5 To what extent has implementation of the Trade Pillar been efficient with respect
to achieving its objectives
EQ 6 To what extent are the costs associated with implementation of the Trade Pillar
proportionate to the benefits it has generated Is the distribution of both costs and
benefits proportionate among different stakeholder groups and interests
EQ 7 Are there unnecessary regulatory costs (including administrative burden)
Coherence
EQ 8 To what extent has implementation of the Trade Pillar been coherent with the
EUrsquos trade and development policies ndash and in particular with the EUrsquos commitment to
sustainable development in trade policies as a contribution towards attainment of the
SDGs
Relevance
EQ 9 To what extent do the provisions of the Trade Pillar continue to be relevant in
order to address the current trade needs and issues of the EU and Central America
Page 6
The framework provides the evaluation questions the judgement criteria for each of them
the analysis needed to substantiate findings and conclusions made in the evaluation report
and the sources through which data and information will be obtained The evaluation
framework also links evaluation questions and judgement criteria to the analytical tasks to
be performed according to the ToR Table 1-1 in Annex A1 presents this framework
It should be noted that methodological tools and indicators used are not shown in the table
but are explained in the next chapter
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2)
In this chapter we describe the methodologies and tools planned to be used in the
evaluation separately for each task The analysis will be concluded with recommendations
on how the implementation of the Agreement can be further improved for the benefit of
the EU and Central American partner countries It should be noted that the structure of
the presentation is in line with the tasks defined in the ToR to facilitate comparison and
compliance with ToR requirements However the order of findings will be guided by the
evaluation framework presented in chapter 2 To facilitate the link with the evaluation
framework for each task we indicate to which evaluation question respectively judgement
criterion it contributes
31 Analysis of economic effects (Task 10)
In 2010 the EU was Central Americarsquos second most important trade partner after the
United States (and after intra-regional Central American trade) The total value share of
the EU in Central American trade was 94 EU exports mainly went to Costa Rica (53)
Honduras (22) and Guatemala (12) In 2018 the EU was still Central Americarsquos second
trade partner after the United States but with a higher share of 122 of all Central
American trade (IMF 2019) In 2019 Central Americarsquos trade with the US (in both goods
and services) totalled USD 70 billion (ie EUR 678) (USTR) Trade in goods with the EU
reached EUR 12 billion in 2019 and trade in services EUR 82 billion in 2018 (European
Commission 2020a)
311 Task 101 Analysis of the evolution of trade in goods
Analysis under this task will seek to respond to the evaluation questions related to JC 1A1
1A2 and JC 41 The EU-CA FTA offers advantages in terms of market access for the EU
and Central American countries Some of the main elements of the Agreement regarding
goods exports from the EU to Central America are complete liberalisation of tariffs for
manufactured goods and fisheries at the end of the tariff phase-out period and immediate
liberalisation of 69 of EUrsquos exports to CA at the start of the agreement saving EUR87
million in duties annually Specific analyses to be carried out under Task 101 have been
summarised in Table 1 For each sub-task we present the specific analysis that needs to
be carried out and main methodological approach we suggest as well as relevant data
sources
Table 1 Methodological approaches and sources for the analyses of trade in goods
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
1 Goods showing the largest increase or decrease in total and bilateral trade flows
Using COMEXT statistics at different disaggregation levels the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing products
2 Development of trade in goods against previously applicable GSP+ and GSP tariffs
Taking COMEXT data as a basis to investigate whether the GSP status of a product has a bearing on how the EU-CA FTA has influenced the rate of growth in trade we will compare two groups of goods those for which tariffs were 0 under GSP versus those for which tariffs were greater than 0 under GSP+
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 7
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
3 Preference utilisation rates and forgone duty saving of economic operators of all Parties
Based on COMEXT data (for EU imports) and data provided by the Commission (for EU exports) a quantitative analysis will be undertaken to identify the key sectors and product categories where preferences are not fully used We propose to include up to 3 questions in the survey to identify factors that encourage discourage companies to use the Agreement
4 Use of tariff rate quotas (and the reasons for suboptimal use)
Data up to 2019 is already available in the Commissionrsquos annual implementation reports Updating the data is supposed to rely on similar sources as the Commissionrsquos annual reports Reasons for sub-optimal use of TRQs will be investigated during the consultations as this cannot be inferred through statistical analysis
5 Trade diversion in particular from interregional Central American trade towards the EU
First we aim to use COMEXTCOMTRADE data to analyse the evolution of merchandise trade flows over time (between the EU and the partners but also within the region in comparison to the rest of the world)
Second we aim to look at the CGE results that should be able to tell us the pure EU-CA FTA effect on intra-Central American trade flows
6 Impact of the Agreement in relation to the creation persistence reduction or removal of non-tariff measures (NTMs) that have a significant impact on EU-CA countriesrsquo trade in goods
We will use UNCTADrsquos NTM TRAINS database and classification for identification description and analysis of specific NTMs affecting trade relations between the EU and Central America We will also look at NTMs including market access barriers raised by the Parties in the sub-committee meetings and will complement the findings with stakeholder engagement
7 Analysis of the importance of Free Trade Zones in Panama (especially the FTZ in the Port of Colon)
Using trade statistics we can get a picture of the way trade flows entering Central America via the Port of Colon (for example) are distributed across Central American countries These patterns ndash at sector level ndash would tell us the most economically significant EU exports This
will be complemented by qualitative analysis
8 Investigation of whether new enterprises started to export or whether enterprises already exporting started to export new products
We expect to undertake this analysis by relying on available firm-level data as well as specific questions for SMEs in the targeted business survey the SME Panel questionnaire and other consultation activities directed towards SMEs Additionally for this sub-task we will try to get access to national databases containing firm-level panel data based on highly disaggregated customs information that include exports (imports) of products and their destinations
9 Analysis of the evolution of trade import shares originating in the EU in total imports of the six CA countries (and vice versa)
COMEXT and COMTRADE data will be used to carry out this analysis We will ensure that we specify the third countries in a clear way The EU and each of the Central American countries The United States Mexico and Canada but also Brazil Argentina
Paraguay and Uruguay (Mercosur) and China Other countries (Rest of World)
10 Analysis of the impact of the EU-CA FTA implementation on diversification of trade
The diversification of trade in goods will be evaluated according to two main dimensions 1 Diversification in the range of products traded between the EU and each of its partners 2 Diversification in the number of EU member states trading with the Central American partners
11 Comparison of the development of trade in goods between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
COMEXT and COMTRADE data will be used to carry out this analysis Regarding trade of the partner countries the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as the MERCOSUR countries The choice of the US can be explained by CAFTA-DR agreement that has been in place since 2006 between the US and Central America and the Dominican Republic
12 Investigation of whether the EU-CA FTA has facilitated trade with third countries including via the use of intermediate products
Use of GTAP data (since the Trade in Value Added ndash TiVA database only covers Costa Rica) to look at intermediate linkages and whether these have helped the competitiveness of the CA economies We will also look at the CGE modelled development of the real exchange rate as an indicator of what happened to CA economiesrsquo levels of competitiveness
13 Analysis of the degree to which implementation of the EU-CA FTA has contributed to diversification of sources of supply of goods
COMEXT and COMTRADE data will be used to carry out this analysis We will look at the inputs shares for specific products in CA from the EU and vice versa and compare the development of these shares to the shares for the same products from international trade partners
14 Identification of regions within the partner countries that have benefited most and of
regions having benefited least (including the identification of constraints)
We expect to rely mainly on a combination of mapping of the sectoral CGE effects per region with literature review and consultation activities to identify the regions that have most least benefited from the
agreement Social progress indexes are computed at municipal level in Costa Rica and at provincial level in Panama as well as for some regions in Guatemala and El Salvador but this is for 2017-2018 only
Page 8
312 Task 102 Analysis of the evolution in trade in services
Analysis in this task is linked to JC 1A3 Although the effects of trade agreements on EU
services trade with third countries are not easily quantifiable we will seek to use available
data to demonstrate the impact of the EU-CA FTA on EU services trade We will assess
whether the Agreement has led to an improvement or worsening of the structural
imbalance between the parties The EU posted a substantial services trade surplus of EUR
10 billion with all six Central American partners combined in 2013 but this surplus has
decreased to EUR200 million by 2017
Table 2 Methodological approaches and sources for the analysis of trade in services
Specific analysis to be carried out
Main methodological approach and sources
1 Services showing largest increase decrease in total and bilateral trade flows between individual CA countries and EU
We will identify sectors showing the biggest increase in total trade in services flows and in bilateral trade flows as well as those having performed worst This analysis will be conducted using time series trade statistics at different levels of disaggregation (from Eurostat OECD and UNCTAD) the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing sub-sectors Reasons for performance will be identified by a combination of sources including literature review and targeted consultations
2 Comparison of the development of
trade in services between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
The comparison of the development of bilateral trade in services between the EU and the individual Central American countries with the development of trade in services
for the EU and its Member States and for Costa Rica Guatemala El Salvador Honduras Nicaragua and Panama with a suitable reference group of countries will provide further evidence on the actual impact of the agreement of trade in services flows As is the case for trade in goods (Task 101) the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as MERCOSUR countries if possible The choice of the US matters because of the CAFTA-DR agreement that has been in place since 2006
3 Analyse trends in international financial capital flows and the evolution of key financial industry segments ndash with the GATS modes of supply as the basis
First we will analyse trends in international financial capital flows between the EU and the Central American countries as well as globally For this we will use available Eurostat OECD andor UNCTAD data as well as Central Bank data if available
Second in order to look at how sectors are performing (well or not so well) we will focus on a concise general ndash but sector level ndash analysis and what drivers we can identify for economic performance
Third we propose that the following case study (see Task 13) could be undertaken Evaluating financial industry segments such as banking insurance asset management sustainable investment ndash in Panama or Costa Rica
Data source suggestions The OECDrsquos Services Trade Restrictiveness Index The GATS Trade Restrictiveness Index which together establish the amount of ldquowaterrdquo in the partiesrsquo GATS
bindings that can be ldquosqueezedrdquo by a modernised Agreement Central Bank data on financial and insurance services economic activity and trade Global Investment Competitiveness Report (World Bank 2019) ISDB data from Eurostat BOP statistics
313 Task 103 Analysis of the evolution of foreign direct investment (FDI)
The analysis in this task will be linked to JC 1A5 Although the effects of trade agreements
on Foreign Direct Investment (FDI) with third countries are not easily quantifiable we will
seek to use available data to demonstrate the impact of the EU-CA FTA on FDI At a general
level this task will entail to assess what impact the EU-CA FTA has had on structural
balances or imbalances between the EU and its Central American partners
Table 3 Methodological approaches and sources for the analysis of bilateral FDI
Specific analysis to be carried out
Main methodological approach and sources
1 Largest increases decreases in FDI flows between individual CA countries and the EU
We will identify main changes in FDI flows over the past 10 years between the EU and Central American countries if possible at sector level This analysis will be conducted using the ITC investment map data UNCTAD investment data and ISDB data from Eurostat BOP statistics Data limitations are expected to be significant for this subtask Reasons for good or bad performance will be identified by a combination of sources including literature review and targeted consultations
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 9
Specific analysis to be carried out
Main methodological approach and sources
2 Comparison of the development of FDI flows between the signatory countries
The proposed methodology would examine the investment effect at both the extensive and intensive margins using the two-step Heckman (1979) estimation as implemented in Helpman et al (2008)
3 Analysis of the investment climate
and of the attractiveness to investment of the six CA countries
An analysis of the investment climate and of the attractiveness to investment of the six Central American countries taking into consideration the possible impact of the
existence of bilateral investment treaties or of double-taxation treaties will be undertaken We propose to review inter alia the evolution of the following indexes OECDrsquos Foreign Direct Investment Restrictiveness (FDIR) index Various FDI attractiveness and FDI confidence indexes ndash eg by AT Kearny and Ernst amp Young Global Investment Competitiveness Report (World Bank 2019) World Bank lsquoDoing Business Indicatorsrsquo ISDB data from Eurostat BOP statistics wwwinvestmentmaporg from the ITC
314 Task 104 Presentation of overall economic impacts
The analysis in this task is linked to JC 41 and will rely on the computable general
equilibrium (CGE) modelling undertaken by DG Trade The CGE model is the quantitative
cornerstonefoundation of the ex-post evaluation Important variables of interest for the
economic analysis will be those which are standard for a CGE analysis such as GDP and
trade flows (total bilateral and by sector) and sectoral output Based on the CGE modelling
results we will estimate the overall impact on the economy of the EU the partner countries
as well as third countries in particular LDCs The economic analysis will build further on
the modelling results We will report these in sufficient detail to highlight the economic
effects of the EU-CA FTA More details on the CGE model are provided in Annex A2
315 Task 105 Determining the impact on implementation of the Trade Pillar of the
various institutional structures
Our analysis under this task will seek to respond to evaluation questions No 1 and 5 (with
JC1A2 JC1A6 JC1A7 and JC1A9) ie how the operation of the institutional set up has
contributed to achieving the objectives of the EU-CA FTA outlined in Article 78 and how
effective and efficient the Association Committee (in trade configuration) six Sub-
committees and an ad hoc Working Group have been to date To determine this we will
analyse provisions of the EU-CA FTA referring to institutions and their operation in practice
In the first step we will analyse Articles 4-8 establishing the Association Council the
Association Committee and Sub-Committees and setting out their decision-making powers
This will be done jointly with Articles 345-346 setting out specific tasks of the Association
Council and the Association Committee acting in trade configuration including powers to
amend certain parts of the Agreement (within Trade Pillar) This will be followed by Articles
347-348 about Part IV coordinators and Sub-Committees established under EU-CA FTA and
will be complemented by the analysis of Articles 91 123 139 156 274 and 294 outlining
areas of responsibility of the individual Sub-committees4 and the Rules of Procedure of the
Association Council and the Association Committee (Decision No 12014 of the Association
Council) which also apply to Sub-Committees This will let us develop an understanding
about the mandate of each institution its decision-making powers including those related
to amending the EU-CA FTA and monitoring compliance by each Party frequency and
format of meetings relations with other institutions under the Agreement reporting and
escalation In this way we will establish an expectation regarding the role each institution
should have in implementation of the EU-CA FTA and achieving its objectives
4 Sub-committee on Market Access for Goods (Article 91) on Customs Trade Facilitation and Rules of Origin (Article 123) on Technical Barriers to Trade (TBT) (Article 139) on Sanitary and Phytosanitary Matters (SPS) (Article 156) on Intellectual Property (Article 274) Board on Trade and Sustainable Development (TSD) (Article 294) and Ad hoc Working Group on Government Procurement
Page 10
In the second step we will analyse the actual operation of all the above structures based
on available documents and engagement with the Parties as well as relevant stakeholders
We will take as the basis reports from Sub-committee and Association Committee meetings
and will complement them with the annual Commissionrsquos Implementation Reports and
other documents eg conclusions adopted by civil society representatives at the annual
meetings under the TSD chapter We will also determine whether formal decisions have
been taken by the Association Council or Committee and if so analyse the extent to which
they have contributed to implementation of the EU-CA FTA We will also look at concerns
raised by the Parties how they have been addressed and how much time it took to achieve
a satisfactory solution Based on findings from our analysis we will provide conclusions
and recommendations for the future notably for the TSD board
316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated
exportimport procedures for key stakeholders
Analysis in this task will be related to JC 1A2 Based on reviews of the Agreement text as
well as the work of the Sub-committee on ldquoCustoms Trade Facilitation and Rules of Originrdquo
we will analyse in a qualitative way which customs-related aspects have facilitated or
complicated bilateral trade like rules of origin management of TRQs agricultural safeguard
measures and approved exporter status We will seek to determine eg whether Article
304 par 1 provision (related to reimbursement of duties in CA Party of transit and their
payment in the CA Party of import) is applied in practice and if so how it is evaluated by
economic operators
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the
Trade Pillar
This task is also linked to JC 1A2 and the methodological aspects described above are also
valid for SPS related issues We see two subtasks under this request 1) An analysis to
what degree implementation of the SPS Chapter in the EU-CA FTA has facilitated agri-food
trade without lowering any partyrsquos SPS standards 2) The extent to which the capacity
building and technical assistance provided by the EU to Costa Rica El Salvador Guatemala
Honduras Nicaragua and Panama has had an effect (looking at what technical assistance
projects and funds were used)
318 Task 108 Analysis of the implementation of the Government Procurement
chapter of the Trade Pillar
The analysis in this rask is linked to JC 1A6 and will examine the impact of the opening of
the government procurement markets of the Parties using a multi-step approach 1)
Review of the recent and ongoing work of the Ad Hoc Working Group on Government
Procurement 2) A statistical analysis of the procurement value shares for EU business (if
possible) and SME participation which will be complemented by desk research and
anecdotal evidence of success stories of EU companies in Government procurement
markets of six CA countries and 3) Review of the level of compliance with the Agreement
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar
This task is related to JC 1A7 and 1A8 The methodological approach foreseen to analyse
other areas of the Agreement (like Technical Barriers to Trade e-commerce Competition
and protection of intellectual property rights (IPRs) including geographical indications)
Our approach focuses on 1) Statistical analysis compiling statistical descriptive analysis
on each issue prior to and after entry into force of the Agreement 2) Literature review
the analysis on the implementation and use of geographical indications in Central America
(eg Rivar 2020) 3) Case studies A specific case study on some of these other issues
could be carried out
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 11
3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has
led to a greater economic integration between the Central American partners
This task is linked to JC 1A4 The EU-CA FTA has been a mechanism that encourages
regional integration but it takes place within a much wider framework of regional
cooperation efforts between the CA countries with the EU-CA FTA being only one element
in this wider context This task focuses on the impact of the EU-CA FTA on regional
integration not on the overall trend or state of affairs regarding regional integration We
use three elements for our analysis 1) The statistical analyses that we have carried out in
Tasks 101 (trade in goods) 102 (trade in services) and 103 (FDI) help to shed light on
regional integration impact of the EU-CA FTA also 2) We look at the results of the CGE
analysis including at how the intra-regional trade patterns have changed because of the
EU-CA FTA 3) We investigate what progress has been made in terms of the different
elements for integration We will use EU and CA data sources to underpin our analyses
3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for
imports of bananas
This task is related to JC41 We envisage three types of analysis under this task in addition
to a possible case study 1) Descriptive statistical analysis based on trade in bananas since
2008 in order to capture developments before and after the entry into force of the EU-CA
FTA distinguishing bilateral trade in bananas EU banana imports from the non-LDC ACP
countries from LDCs and intra-EU imports from the Outermost Regions 2) A quantitative
impact analysis using a partial equilibrium model ndash the Global Simulation (GSIM) model
(Francois and Hall 2009) 3) A qualitative impact analysis causal chain analysis will be
applied to look at what the Agreementrsquos sector-level social and environmental effects have
been In this step we focus in the socialhuman rights pillars on how vulnerable groups
could be affected at sector level The qualitative sectoral environmental analysis will cover
the impact of the FTAs on land use and related issues water and waste management and
biodiversity and protection
3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on
SMEs
The analysis in this task is linked to JC 41 The ldquoSME-Testrdquo will be guided by the following
steps 1) Consultation of SME Stakeholders SMEs are a central element of the consultation
strategy and will be present at every stage of it 2) Identification of affected business
early on in the analysis we will identify whether and which SMEs (eg medium-sized) are
among the affected businesses 3) Identification of concrete stories as the Interim Report
progresses we will have sufficient information to identify 20 concrete stories from SMEs
as required by the Terms of Reference
3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers
This task will be approached in two parts the first one being dedicated to impacts on
consumer rights and the other one to welfare-related impacts of the EU-CA FTA which also
affect consumers in their purchasing decisions The analysis will be related to JC 42 and
evaluation questions No 18 and 6 In addition we will aim to determine to what extent
EU-CA FTA has contributed to attaining SDG 1 (no poverty) and 10 (reduced inequalities)
Regarding consumer rights in the first step we will refer to the literature according to
which consumers usually benefit from global trade and preferential trade agreements due
to lower prices of purchased goods and services (resulting from reduction of tariff and non-
tariff barriers) a wider variety of traded goods and services the related satisfaction of
diversified needs and preferences and higher quality of available goods and services
Page 12
In the second step we will consider impacts which the EU-CA FTA (might) have had for
consumers regarding availability safety sustainability traceability and quality of traded
goods and services as well as which impact its promotion (or consumersrsquo awareness of it)
may have on consumersrsquo knowledge regarding the market offer and their trust in it The
list of questions to test will be guided by the EU Better Regulation Tool Nr 32 related to
impacts on consumers We will also draw on other parts of the study analysing
implementation of provisions related to regulatory measures and standards eg TBT
SPS TSD dialogue and cooperation between the EU and partner countries and
transparency to outline what level of protection incl consumer protection and production
standards is provided by the EU-CA FTA We will also refer to the EU RAPEX database ie
the alert system for dangerous non-food products listing notifications of such products
originating from the EU and partner countries
The second part of our analysis will focus on impacts of the EU-CA FTA on welfare In the
first step based on literature review and statistical data including relevant indexes (eg
the share of population living below the poverty line) we will analyse trends in the reporting
period in the EU and Central America regarding situation of consumers from different
groups of the population incl incomes expenditures levels of poverty and inequality
income and price levels wages and other types of income and any changes in this context
In the following step we will use outcomes of the economic modelling to estimate impacts
on welfare and inequality resulting from EU-CA FTA implementation eg prices and wages
In this context we will also consider to what extent the Agreement helped to attain SDG
No 1 (No Poverty) and SDG No 10 (Reduced Inequality) This will be complemented by
stakeholder consultations and finished with conclusions and recommendations
3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on
the budgets of the EU and the partner countries
The analysis in this task is linked to JC 41 It will examine impact of the FTAs on the EU
budget (ie revenues forgone) and will largely result from the economic model We
anticipate that for the EU the foregone tariffs on imports from the partner countries will
be estimated based on the level of EU imports from the selected countries as a baseline
and the tariffs that would have applied to those imports
3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on
EU Outermost Regions (ORs)
This task is linked to JC 41 The impact on ORs will be assessed based on the trade
diversion and deflection identified in the CGE analysis A key limitation in the economic
modelling framework is however that the EU ORs are not established as a separate region
To meaningfully analyse the effect on the EUrsquos ORs we propose two elements 1) A
matching analysis for the EU and the six partner countries regarding products that matter
for ORsrsquo trade (to either partner countries or the EU) 2) Competition analysis between
ORs and CA partner countries for exporting to the EU The effects will be determined
qualitatively distinguishing if applicable the ORs which might be positively or negatively
affected by the Agreement
3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on
developing countries in particular on LDCs and countries having an Economic
Partnership Agreement (EPA) with the EU
This task is related to JC 41 Our approach to look at the EU-CA FTArsquos impact on developing
countries and LDCs will largely consist of the interpretation of the results of the economic
model simulations which has defined lsquoLDCsrsquo as a separate region This allows us to look at
the effect the EU-CA FTA has had on them We will also look closely at effects for countries
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 13
which are implementing an Economic Partnership Agreement (EPA) with the EU In terms
of the impact we will look first at an economic impact followed by effects on the other
sustainability pillars The former will include (i) a matching analysis for the EU and the six
partner countries regarding products that matter for LDCsrsquo trade (to either partner
countries or the EU) and (ii) competition analysis between LDCs and CA partner countries
for exporting to the EU We do not expect the effect to be significant for the LDCs because
the global impact of the EU-CA FTA is limited
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable
development (Tasks 11 and 12)
321 Task 111 Analysis of the effects of implementation of the Trade and
Sustainable Development (TSD) chapter of the Trade Pillar
This is one of the priority tasks linked to JC 1A1 In the first step we will divide provisions
of the TSD chapter into thematic blocks to identify areas for further analysis These include
commitments of the Parties to effectively implement in their laws and practice the eight
fundamental conventions of the International Labour Organization (ILO) as well as the
Multilateral Environmental Agreements to which they are Party the right of the Parties to
regulate sustainable management of natural resources promotion of trade supporting
sustainable development institutional provisions and dispute settlement mechanism
In the second step based on findings from the analysis of the actual situation in the EU
and partner countries carried out in Tasks 113-118 and documents outlining the
implementation of the TSD chapter (eg reports of international monitoring bodies
reports from meetings of the TSD Board and civil society advice to the Parties) we will
map activities undertaken by the Parties in areas covered by the TSD chapter in a break-
down prepared in the first step This will enable us to conclude to what extent the scope
of the TSD chapter has been covered and if actions taken by the Parties individually and in
cooperation activities have contributed to the implementation of TSD commitments and
attaining the objectives of the chapter and relevant SDGs (No 8 on decent work and
employment for all No 13 on combating climate change and No 14-15 on sustainable
use and protection of marine environment forests and biodiversity) Our analysis will be
complemented by stakeholder engagement5 We will conclude the analysis with
recommendations for the future incl any improvements in operation of institutions to
support compliance of the Parties with provisions of the TSD chapter
322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter
This is one of the priority tasks liked to JC 1A10 and evaluation questions No 1 5 and 8
In the first step we will analyse formal commitments of the Parties regarding the set up
and operation of the institutional mechanism ie Article 294 (Contact Points of the Parties
the TSD Board and civil society Advisory Groups) and Article 295 (Civil Society Forum)
In the second step we will analyse the establishment and operation of TSD institutions in
practice including their meetings activities undertaken between sessions cooperation and
5 When the Report refers to stakeholder engagement it means diverse activities foreseen in the stakeholder engagement programme outlined in detail in Annex B to this Report (Consultation Strategy) For each task stakeholder engagement activities will be tailored to the most relevant group of stakeholders methodology applied in the task and type of data which will be needed for the analysis For example in the analysis carried out with regard to TSD chapter the focus will be on targeted interviews with civil society members of the Advisory Groups in the EU and Central American countries as well as with Government and Commission representatives Further sources of information and activities will include targeted meetings eg DAG meetings and workshops with Central American countries CSD meetings with the European civil society and written positions submitted by civil society organisations As a complementary source we will use replies from online public survey
Page 14
dialogue between Governments and civil society The analysis will be based on reports
from meetings research studies recommendations from civil society to the Parties and
interviews with representatives of the Commission Governments from Central America
EU Delegations the EESC secretariat of the EU Advisory Group as well as civil society
representatives from the EU and Central American countries including members of their
Advisory Groups We will also evaluate effectiveness and efficiency of the institutional
mechanism and its role in the monitoring and implementation of the TSD chapter the
ability to address problems and to pursue cooperation and dialogue We will put an
emphasis on the evaluation of the TSD Board its ability to monitor compliance with the
commitments of the Parties effectiveness in choosing priorities and structuring the work
programme pursuing cooperation activities and resolving problems This part will also
analyse civil society capacity to exercise its mandate and monitoring implementation of
TSD chapter the quality of dialogue between Governments and civil society and the follow-
up to civil society recommendations In this context and in line with suggestions provided
by reviewed research studies we will also evaluate to what extent the discussion among
the civil society and between Governments and civil society focuses on substance
(compared to focusing on process) and whether the civil society has the means and
capacity to prepare for and to engage in such a discussion We will conclude the analysis
with recommendations for the future incl any improvements in operation of institutions
323 Task 113 Analysis of employment impacts
The analysis in this task will focus on impacts for employment levels and relate to JC 42
and evaluation questions 4 and 6 In the first step we will analyse trends in employment
and unemployment levels in the EU and partner countries for their whole economy and
across sectors over the reference period We will also identify factors influencing observed
trends including macroeconomic and labour policy measures applied by the Governments
investment in education and skills development migration from rural to urban areas and
across region and impacts of trade and investment including through trade agreements
In the second step the analysis will be focused on assessing quantitative impacts (direct
and indirect) of the EU-CA FTA on the number of jobs direct and indirect (for skilled and
un-skilled workers for the EU and partner countries across sectors) and be based on the
results of the economic modelling We will compare these results with the real-life data
and trends observed in the first step to conclude to what extent the reduction in trade
barriers and changes in output across sectors related to the implementation of the EU-CA
FTA have influenced demand for labour given the assumption of a fixed total employment
in the economy and full labour mobility between the sectors with workers leaving sectors
seen as less competitive and moving towards those having better prospects of growth and
working conditions including wages We will also draw a conclusion to what extent
observed trends in employment should be attributed to the EU-CA FTA and to what extent
to other factors incl macroeconomic environment global trends in commodity prices
domestic policy investment and trade agreements with other partners Stakeholder
consultations will help to verify our findings
324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda
(job creation labour standards social protection and social dialogue) on
working conditions poverty reduction and enforcement
This is one of the priority tasks Our analysis will seek to answer the evaluation questions
No 1 4 and 6 (JC 42) Given the broad scope of this task we will divide it into two parts
a) labour standards and social dialogue (the Decent Work Agenda) b) working conditions
including social security and health care coverage of workers and labour inspection
In the first step we will describe the situation in the EU and partner countries and changes
over time regarding the subject matter as well as factors influencing observed trends We
will focus on the following
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 15
Task 114 a) on labour standards will look at the implementation of the core labour
standards as enshrined in the fundamental ILO Conventions ratified by all Parties to
the EU-CA FTA and evaluated by the ILO monitoring bodies6 Regarding trends in child
labour occurrence the analysis will include eg the number of working children types
of activities and sectors involved the number of hours worked per week motives for
undertaking work and involvement in hazardous work Influencing factors will be
considered and their impact on job availability for adult household members the level
of generated income and the extent to which it covers family needs Regarding forced
labour the analysis will include types of activities and sectors involved and influencing
factors including criminal activity and the level of law enforcement On freedom of
association and the right to collective bargaining the analysis will cover conditions for
setting up joining and operation of trade unions and employer organisations and
functioning of social dialogue for the whole country and ndash if data is available ndash across
sectors including indicators such as the share of trade union members in the total
number of workers for the whole country and in a break-down by sector and changes
over time Regarding non-discrimination at work we will focus on groups of workers
which may be in a disadvantaged position on the labour market eg youth disabled
persons migrants or indigenous peoples (women will be analysed in Task 116) and
indicators such as labour participation rate and unemployment rate the share of each
group working informally or being in a situation of sub-employment (ie receiving a
wage below the minimum level despite working full time or having no opportunity to
work full time despite being ready to do so)
Task 114 b) on working conditions and labour inspection will include trends in job
quality indicators over time the average number of working hours per employee per
week the number or rate of fatal and non-fatal accidents at work social security and
health care cover of workers wage levels type of contract the number of labour
inspectors and inspections carried out at work places and the infrastructure and funds
being at the disposal of inspection services (we will consider in that context that all EU
Member States and five Central American countries except Nicaragua have ratified
the ILO convention No 81 on labour inspection)
In the second step based on economic modelling we will identify the sectors most affected
(positively or negatively) by the EU-CA FTA and using the analysis done in step one will
seek to determine if trends observed in the respect for labour standards and quality of
working conditions in individual sectors can be attributed to the operation of the Agreement
or rather to other factors In cases where any concerns related to labour standards eg
child labour incidence or low presence of trade unions are identified in sectors particularly
involved in trade with the EU notably in exports we may apply an in-depth analysis in a
dedicated case study We will also refer to the implementation of the TSD chapter to
establish whether policy dialogue cooperation activities and engagement with civil society
have also influenced the situation We will complement desk research with stakeholder
engagement
325 Task 115 Analysis of impacts on the informal economy and informal
employment
This is one of the priority tasks linked to evaluation questions No 1 and 8 (JC 42) We will
also aim to determine to what extent the Agreement has contributed to attaining objectives
of SDG No 1 (no poverty) and No 10 (reduced inequalities) In the first step we will
develop a description of the situation in the partner countries during the analysed period
concerning the size and structure of the informal economy and factors influencing its
6 These include conventions No 138 and 182 on elimination of child labour No 29 and 105 on prohibition of forced or compulsory labour No 87 and 98 on freedom of association and the right to collective bargaining and No 100 and 111 on equal pay for work of equal value and non-discrimination at work
Page 16
existence as well as its geographic pattern in Central America and each of the partner
countries separately We will aim to identify if there are links between the informal
economy and eg the economic structure and dynamic in certain regions and their
involvement in trade We will also report about steps taken by the Governments in a move
towards formal economy including dedicated national strategies adopted in Costa Rica and
Guatemala
In the second step based on the results of the economic modelling and trade statistics for
trade and investment flows between the EU and Central American countries an additional
literature review and stakeholder consultations we will aim to establish to what extent
trade and in particular the EU-CA FTA has contributed to the observed trends in each
partner country We will verify our findings in stakeholder consultations
326 Task 116 Analysis of impacts on gender inequality
The analysis in this task will seek to answer the evaluation questions No 1 4 and 6 (JC
42) We will also aim to determine to what extent EU-CA FTA implementation has helped
to attain SDG No 5 (gender equality) No 8 (decent work and economic growth) No 1
(no poverty) and No 10 (reduced inequalities) Work under this task will be guided by the
approach proposed in UNCTADrsquos Trade and Gender Toolbox (UNCTAD 2017) which
considers impacts on women in their roles as workers entrepreneurs traders and
consumers Complementary considerations regarding impacts for each of those groups will
be inspired by other literature (eg Fontana 2009) and methodological approaches (eg
European Institute for Gender Equality 2016)
In the first step we will analyse the situation in the Central American partner countries
regarding womenrsquos participation in the labour market economic activity as entrepreneurs
and traders (with a consideration of their access to assets and supporting measures) and
their position as consumers incl the level and type of income received and being at their
disposal Based on the available data we will also analyse gender inequalities before and
after the entry into force of the EU-CA FTA and measures applied by the countries and
provided by international donors to support an increased womenrsquos participation We will
also review reports of the ILO Committee of Experts regarding implementation of the two
ILO fundamental conventions on non-discrimination ie No 100 (equal pay for work of
equal value) and No 111 (non-discrimination at work) ratified by all CA partner countries
In the second step we will compare observed trends stemming from the real data with
outcomes of the economic modelling to determine to what extent they may be linked to
impacts of Agreement and to what extent they result from influence of other factors
Focusing on women as workers we will identify sectors important for them (based on
their shares in the total womenrsquos employment and a ratio of female and male workers
in each such sector) and compare observed trends in employment levels (in total and
across sectors) with the results of the modelling (changes in employment levels across
sectors) to determine whether the EU-CA FTA has contributed to changes reported in
the real life and if so to what extent In this context we will also consider impacts of
tariff reduction on public revenues and whether this might have had an impact on the
provision and quality of public services which in turn may have an effect on women and
their ability to participate in the labour market or to undertake an economic activity
For women as entrepreneurs if relevant data is available we will identify sectors of
their economic activity and compare trends in the actual operation of these sectors over
time (eg growth or decline) with outcomes of the economic modelling to determine if
the EU-CA FTA might have had an impact on output of these sectors and as a result
position of women as entrepreneurs
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 17
Moreover if more detailed data is available regarding sectors and groups of products or
services manufacturedprovided by women-led enterprises as well as their engagement
in international trade we should be able to say (again comparing the real-life data with
economic modelling) what impact the Agreement may have exercised on women as
traders and in this context on sales and exports of their products or services or their
competition with or the use of imports We will also consider whether the EU-CA FTA
provisions regarding eg tariff reduction SMEs TBT SPS might have had an impact
for women-led enterprises (given their size and sectors of operation)
Concerning the role of women as consumers we will look at real-life trends in income
and price levels and compare them with outcomes of the economic modelling to see
what impacts the EU-CA FTA might have had on welfare and price levels as well as the
availability and accessibility of goods and services
Our analysis will be complemented by engagement with stakeholders including women
organisations to identify barriers in their activity on one hand and facilitating measures on
the other and to gather more insights into impacts of the EU-CA FTA
327 Task 118 Analysis of impacts on the adoption and implementation of
internationally recognised instruments of responsible business conduct and
Corporate Social Responsibility (CSR)
Our analysis under this Task will seek to respond to the evaluation question No 1 (JC 42)
In the first step we will map CSRRBC practices in the Central American partner countries
in the analysed period including practices of European companies investing there or having
their suppliers and existing government initiatives promoting them eg National CSR
strategy and Law on CSR in Costa Rica National Plan on Social Responsibility and Human
Rights in Panama and dedicated centres or foundations promoting CSR in Guatemala
Honduras Nicaragua and El Salvador We will also use findings from a research carried
out for Task 111 identifying initiatives undertaken within the TSD Title incl EU projects
and regional events dedicated to CSR RBC and decent work in global supply chains We
will aim at a better understanding of the existing framework uptake of CSRRBC practices
by enterprises factors influencing it and CSRRBC presence in the EU relations with the
partner countries including technical assistance and cooperation projects
Based on this in the second step we will use outcomes of the economic modelling and
stakeholder consultations to verify whether indeed the EU-CA FTA through generated
trade and investment flows as well as specific provisions (such as those in TSD Title) might
have encouraged uptake of CSRRBC practices We will also seek to identify factors related
to market access which may encourage uptake of CSRRBC practices Legislative ones may
include eg non-financial reporting and obligatory due diligence in certain sectors or
activities requirements related to social and environmental aspects in public procurement
and non-legislative ones may focus on image and comparison with the main competitors
being part of supply chains where business partners require respect for certain labour and
environmental standards international instruments in CSR (OECD Guidelines for
Multinational Enterprises ILO Declaration on Multinational Enterprises and Social Policy
the UN Global Compact etc) requirements of sustainability and certification schemes or
consumer awareness and related choices
As an additional element of this analysis (subject to data availability) we may include into
this task examples of other schemes eg sustainability schemes or promotion of decent
work in global supply chains (notably of agricultural products) and their presence in trade
between Central America and the EU and impacts the EU-CA FTA might have had on their
use in bilateral trade relations
Page 18
328 Task 117 Analysis of environmental impacts
The main objective of the environmental analysis is to assess the environmental and
climate change effects of the EU-CA FTA as well as to provide answer to the evaluation
questions notably those on the effectiveness (No 1-4) (JC 43) and coherence of the
Agreement with other policies and the EUrsquos commitment to the SDGs and in particular
SDGs No 13-15 ie Climate Action Life below water and Life on Land (respectively) ie
evaluation question No 7 The main challenge is to isolate the EU-CA FTA induced effects
on the environmental performance in each country from general developments and trends
that occurred regardless of the EU-CA FTA This is particularly challenging as the
counterfactual environmental outcomes are unobservable for most of the environmental
impact areas
The overall approach is based on our detailed understanding of the dynamics through
which the EU-CA FTA may have created environmental impacts tailored towards the
specific circumstances for the Central American countries the requirements in the ToR
the TSD Chapter of the EU-CA FTA and the budget provided for this study The detailed
understanding is based on the study lsquothe methodology for assessing biodiversity impacts
of EU FTArsquo by IEEP Trinomics et al (2021) and the latest literature including an OECD
study (Garsous G 2019) on this matter and applies the following logic
1) identifying the components in the EU FTA with the Central American countries that may
have generated environmental effects (EU-CA FTA elements) Based on our extensive
recent experience on researching the dynamics through which FTAs may create
environmental impacts we conclude that the FTA contains (1) measures easing market
access for the signatories (referred to as tariff-based measures) and (2) several rules-
based measures (mostly by means of the provisions in the TSD Chapter referred to as
non-tariff-based measures) that may have resulted in environmental impacts in the
countries involved
2) then establishing how these elements could have created directly or indirectly intended
or unintended ndash environmental impacts (the impact channels) Any FTA is by
definition expected to create direct environmental impacts through the expected
expansion of economic activity which may lead to eg higher pollution and greenhouse
gas (hereafter GHG) emissions may put a strain on bio-resources and pressure on
vulnerable ecosystems as higher levels of output require more environmental input
(Copeland and Taylor 2014) Trade agreements also create indirect environmental
impacts through structural adjustments in the economies and so-called specific rules-
based trade measures including the provisions in the TSD Chapter Our approach
carefully considers four impact channels that are also distinguished by the SIA Handbook
(European Commission 2016a) to separate the way in which EU-CA FTA may have
created impacts on various areas of the environment The scale effect (the impact
created from increased production as a result of the trade agreement) the structural
effect (the dynamic effect of the EU-CA FTA on the growth and contraction in production
in different sectors) technology effects (impacts triggered through increased efficiencies
from increased competition or from a transfer in environmental goods and services) and
potentially the product effect (impact via changes in production standards and use of
goods in a country eg through strengthened environmental policies and environmental
regulation)
3) via these impact channels various areas of environmental performance (the impact
areas) may be impacted and are to be further analysed in this evaluation In this study
we distinguish the following impact areas 1) Climate change 2) Biodiversity and
ecosystems and 3) Other key environmental parameters
Research methods ndash For some impact areas there is more reliable information and data
and quantitative research methods available than for others To the extent possible the
quantitative analysis will build on the economic modelling results and as a result the
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 19
analysis will allow us to comment on the causal relation between environmental topics and
the EU-CA FTA Where quantitative research is not possible we will apply qualitative
methods The qualitative analysis may rely on the causal chain analysis method which
aims at identifying the root cause of observed changes Irrespective of whether a certain
impact will be assessed with more quantitative or qualitative research methods our
approach is designed to make intensive use of quantitative information eg compiling
quantitative statistics and analysing trends The following research methods are applied
per environmental area
For climate change we propose focusing on establishing the EU-CA FTArsquos impacts on
the major GHG emissions (eg carbon dioxide methane and nitrous oxide) and
potentially on the air pollutants (ozone precursor gases acidifying gases and primary
particulates)
For biodiversity and ecosystems we propose following the latest insights in assessing
biodiversity impacts of the EU-CA FTA based on the study for DG Environment on the
development of a methodology to assess the impact of trade liberalisation on
biodiversity (which has not been published yet) In case results of the biodiversity
analysis are also relevant for climate change (ie LULUCF emissions) the link between
these results and climate change will be explored
For other impact areas we propose developing baselines based on qualitative and where
possible quantitative data for each impact area and explore developments in
environmental performance since the entry into force of the EU-CA FTA In addition we
will discuss the (effectiveness of the) implementation of provisions enshrined in the TSD
Chapter in the EU-CA FTA per impact area
The above discussed approach is based on five activities They apply the logic of the
methodological stages7 as described in the methodological framework for assessing the
impact of EU FTAs on biodiversity (IEEP Trinomics et al 2021)
3281 Activity 1 Fine-tuned methodology and impact screening and scoping
Fine-tuning the methodology is part of this inception report (this document) and mainly
serves to define the exact scope and focus of this evaluation The environmental analysis
logically focusses on Central America and the EU (with an emphasis on Central America)
However within defining the geographic scope of this analysis one needs to differentiate
global (eg climate change) and other more local environmental impacts eg
(un)sustainable forest management practices We aim to cluster countries when
appropriate from the perspective of a certain regional environmental issue In this way we
can respond to the challenge of bringing focus to the analysis while balancing the available
resources and time Clustering should enable us to evaluate certain environmental issues
in a more targeted way enabling deep dives into specific issues Below we discuss in more
detail what this regional approach means in practice and how we aim to mitigate the risk
of overlooking certain impacts
Impact screening and scoping - The exact environmental topics on which quantitative and
qualitative analysis will be performed depend on the outcome of the impact and screening
and scoping exercise which seeks to identify issues which deserve to be analysed with an
extra depth As such this sub-activity aims to select the environmental impact categories
and sub-areas to be studied in other activities Impact screening and scoping is a
methodological tool to identify issues which should be prioritised in the evaluation and
helps to mitigate the risk of overlooking potential significant impacts In essence the
prioritisation is based on (i) screening the most prevailing existing environmental drivers
and pressures and (ii) screening the expected impacts caused by the EU-CA FTA (at a
7 The study by IEEP Trinomics et al (2021) identifies three stages Stage I) Preparatory stage Stage II) Method selection and impact logic and Stage III) Impact assessment and related conclusions
Page 20
sector level) by means of economic modelling results literature review stakeholder input
and political interest All information is transparently documented in the impact-screening
matrix During the impact screening and scoping exercise we will also develop three
context-setting documents (2-pages) one per environmental impact area to better
understand the background These documents will have a regional perspective and will be
directly used in the baseline development The output of this activity is included in the
Interim Report
3282 Activity 2 Establishing the baselines for the impact areas
The aim of this activity is to gain a brief understanding of the EUrsquos and partner countriesrsquo
status quo regarding their environmental governance and performance (eg trends) for
those environmental impact areas that have been identified as priority ones The output
will be a section in the evaluation with a short description (1 page) per prioritised impact
area outlining the governance (very brief) and the performance and exploring the main
developments trends and their cut-off points This will be done by analysing issues from
a DPSIR framework perspective (drivers ndash pressures ndash state ndash impact ndash responses) (see
Box 1) when appropriate8 This framework is often applied in environmental assessments and plays a central role in the study by IEEP Trinomics et al (2021) on the methodology
for assessing the impact of EU FTAs on biodiversity
Box 1 The use of the DPSIR framework in FTAs
The DPSIR framework allows to interpret certain environmental indicators by establishing a causal relation between indicators and their analysed effects In the case of an FTA trade liberalisation in goods services and investments can function as a driver of a change in different economic sectors causing changes in the amount of land- and other resource use or in their quality (eg pollutants and emissions impacting air water or soil quality) The changes in the quantity of land- and other resource may create pressures on biodiversity which lead to an impact in the state of and trends in biodiversity ecosystems and the services they provide As a response(s) certain new or existing measures can be taken to help to prevent negative impacts or to amplify positive ones
Source IEEP Trinomics et al (2021)
Three consecutive sub-tasks will be performed to operationalise the establishment of the
baselines 1) Literature review and data analysis to establish draft baselines 2) Interviews
with stakeholders to obtain additional input validate work and fine-tune results 3)
Triangulation of information (literature data and interviews) and establishment of final
baselines The output of this activity will be included in the Interim Report
3283 Activity 3 Quantitative evaluation of impacts9
The aim of this activity is to assess the quantitative estimates of the impacts of the EU-CA
FTA on GHG emissions and possibly air pollution and ndash potentially10 ndash on trade in
environmental goods and services and land use change As such the desired result is the
reporting of the quantitative estimates of the impacts of the EU-CA FTA on GHG emissions
and air quality in the EU Costa Rica El Salvador Honduras Guatemala Nicaragua and
Panama depending on data availability Ultimately it is global GHG emissions that
contribute to global warming for this reason we propose to estimate the global change in
GHG emissions resulting from the EU-CA FTA In this way we also consider the difference
in climate change impacts from trade creation and trade diversion The impacts on GHG
emissions will be decomposed in the most relevant key drivers where possible The
8 This implies that we will make use of the insights of the framework whenever relevant and appropriate in the light of the evaluationrsquos objective We will not identify every element (D P S I and R) for each environmental issue but focus on the most relevant elements for each of them
9 The focus depends on the results of the impact screening and scoping 10 Depending upon expected scale of impact available resources and data availability
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 21
preliminary finding of this activity will be included in the Interim Report and the final results
are to be presented in the Final Report
3284 Activity 4 Qualitative evaluation of impacts11
The aim of this task is to evaluate qualitatively the impacts of the EU-CA FTA on various
prioritised environmental impact areas focussing on those which are not assessed in the
quantitative analysis First a broad assessment is done based on desk research from a
regional perspective In addition approximately two case studies (as part of Task 13) will
be prepared in which the environmental impacts of the EU-CA FTA on certain areas will be
assessed based on in-depth qualitative analysis using causal chain analysis (CCA)
(European Commission 2016a) Depending on data availability we will aim to identify
trends developments and cause-effect relations between the EU-CA FTA and environment
By combining the existing environmental drivers and pressures (see Textbox 3282-1 for
more information) the economic results and effects of TSD provisions we naturally also
include potential unintended and unforeseen effects The preliminary finding of this activity
will be included in the Interim Report and the final results are to be presented in the Final
Report
3285 Activity 5 Answering of the evaluation questions and other concluding
remarks
The overall environmental analysis concludes with clearly commenting on the effect of the
EU-CA FTA on the performance the legislative framework and effective implementation in
each of the prioritised environmental impact areas In case no causal relation between the
EU-CA FTA and the performance of a certain environmental impact area is found it will
also be explicitly mentioned These concluding remarks together with the in-depth
analyses conducted in previous tasks will serve as the basis to answer the evaluation
questions related to the EU-CA FTArsquos environmental impacts under Task 14 in the Final
Report
3286 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative environmental effects that have emerged from tensions between the EU-CA FTA
on the one hand and elements of environment on the other Additional policy or legislative
measures can also be suggested to enhance positive impacts of the EU-CA FTA
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human
rights
In this section we present the approach envisaged for the analysis of the human rights12
impact of the EU-CA FTA in the EU and the CA partner countries
The evaluation will rely on the methodology of human rights impact assessments (United
Nations 2011 European Commission 2015) as well as on the experience from previous
studies and will include the following steps
Step 1 Human rights baseline
At this step a concise baseline analysis will be carried out Concise human rights
profiles will be prepared for each of the state-parties to the EU-CA FTA
Step 2 Screening and scoping
11 The focus depends on the results of the impact screening and scoping 12 Human rights in this analysis are defined as set out in the Charter of Fundamental Rights of the European
Union the core UN human rights conventions and relevant regional human rights treaties
Page 22
At this step based on various sources human rights will be screened and specific
human rights that may have been affected by the EU-CA FTA will be identified
Step 3 Detailed assessment of the selected human rights
At this step drawing upon findings from the previous stage of the analysis an in-depth
analysis of up to three selected rights will be carried out (both quantitative and
qualitative and depending on the degree of the impact)
Step 4 Policy recommendations and accompanying measures related to
human rights
At this step policy recommendations will be formulated as to how any tensions between
the EU-CA FTA and human rights obligations may be addressed and how a positive
impact on the enjoyment of human rights can be enhanced
Stakeholder inputs will be used throughout all four steps to verify and support findings as
well as to collect evidence on the impact and ensure meaningful participation
3291 Human rights baseline
At this stage a concise baseline analysis of the human rights situation in each state-party
will be carried out First an overview of international human rights obligations of all the
state-parties to the FTA (ratifications of core international and regional human rights
treaties core ILO Conventions and other treaties relevant for the analysis) will be
presented in a tabular manner Second human rights profiles will be prepared Human
rights profiles will consist of a summary of the baseline conditions for the enjoyment of the
relevant human rights in each of the state-parties to the FTA from five years before the
provisional application of the EU-CA FTA until 2019 Particular attention will be given to the
pre-existing conditions of stress and vulnerabilities with respect to human rights
highlighting the position of specific vulnerable groups
The human rights profiles aim to
Set the scene regarding the enjoyment of relevant human rights in the partner
countries and identify social and political developments that may have impacted the
human rights situation
Allow for a targeted assessment of the human rights impacts of the EU-CA FTA
The profiles are based on the analysis of international human rights obligations national
legislation and policy framework as well as implementation issues with respect to relevant
human rights The analysis reviews country specific reports of international organisations
(eg UN OECD ILO) EU Reports on Human Rights and Democracy in the World reviews
of reports of international human rights organisations (eg Human Rights Watch) a
review of academic literature media reports relevant indicators and local partner inputs
3292 Screening and scoping
The second step of the analysis focuses on identifying which human rights could have been
affected by the EU-CA FTA and in which way The EU-CA FTA will be scanned for provisions
that are most likely to have caused an impact on the enjoyment of human rights in state-
parties to the EU-CA FTA The cause-effect relationships between the trade and trade-
related measures in the FTA and human rights will be established based on multiple sources
(see the multi-pronged approach below) The focus of the screening will not only be on
specific trade measures originating from the FTA (the Trade Pillar) but also on the overall
effect of the measures under the broader Association Agreement
Based on the screening exercise and in line with the EC Guidelines for human rights impact
assessments (European Commission 2015 p5) we provide a focused overview of the
human rights affected by the EU-CA FTA specifying the following elements
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 23
Specific human rights affected by the FTA
Short note on the evidence of the impact with a reference to the sources of information
Whether the affected right is an absolute human right or not13
The kind of impact (direct or indirect)
The degree of the impact (major or minor)
Affected population groups (if applicablepossible)
The screening exercise will as much as possible reflect upon the affected individuals
andor groups of people especially indigenous people and women based on the results
generated by the economic analysis inputs from the stakeholders and literature review
We will also look at how the EU-CA FTA has impacted gender equality and labour rights14
3293 Detailed assessment
Depending on the outcome of the screening exercise a maximum of three human rights
will be selected for a detailed assessment
Applicable human rights laws will be scanned (based on the obligations of the state-parties
under international and regional human rights treaties) to provide a framework of
applicable and binding entitlements and duties related to the selected right(s) Insofar
possible national legislation will be scanned for any changes subsequent to the application
of the EU-CA FTA focusing in particular on the changes that affected the enjoyment of
each of the selected human rights (using baseline analysis to aid the impact assessment)
Then we will look at the particular measures and how they have enhanced or impaired the
enjoyment of the relevant rights and or have strengthened or weakened the ability of the
parties to fulfil or progressively realise their international human rights obligations
Particular attention will be given to impacts on vulnerable groups or groups of individuals
that are at risk of being marginalised (Danish Human Rights Institute 2016)
This assessment is intended to be both quantitative and qualitative in nature The
quantitative analysis is based on the results of the economic analysis and used to the
extent possible15 The qualitative analysis is based on various sources as well as
stakeholder consultations and close work with local partners Economic modelling results
already disentangle the impact of the EU-CA FTA from other impacts that could have
affected the enjoyment of a human right over time For qualitative analysis it is more
challenging to discern the FTA impact To address this challenge we use a multi-pronged
approach (ie a methodological cross-validation approach in order for one methodological
element to corroboratevalidate the other method) in examining the causal effects of the
FTA for each of the prioritised human rights16 (see Figure 3)
13 See Tool 28 of the European Commissionrsquos Better Regulation Toolbox (2017) available at httpseceuropaeuinfolawlaw-making-processplanning-and-proposing-lawbetter-regulation-why-and-howbetter-regulation-guidelines-and-toolboxbetter-regulation-toolbox_en
14 Although we expect some overlap on labour-related rights with the evaluation of social impacts there will be cross-references to ensure a holistic analysis Moreover taking into account the interrelated nature of human rights we reserve the right to address the rights of the workers from other relevant perspectives not covered in the social analysis (eg as related to vulnerable groups)
15 When relevant we will use human rights indicators to supplement the analysis 16 We use the same method also during the screening exercise but to a more a limited degree (eg not using
specific human rights indicators for each human right as it goes beyond the scope of this evaluation)
Page 24
Figure 3 Overview of the multi-pronged approach to human rights impact assessment
Thus in assessing the impact the EU-CA FTA has had on each human right we use the
economic modelling results (if applicable and appropriate) that already disentangle the FTA
impact from the overall effects and link economic findings (partially) to how the selected
human right has evolved in the EU and Central American partner countries because of the
EU-CA FTA If data from the economic analysis is not sufficient to support the analysis we
will make use of contextually relevant human rights indicators (United Nations 2012) from
the statistical databases of the ILO World Bank UN OECD andor other organisations to
investigate how the selected human rights have evolved over time We look at the
development of human rights from five years before the provisional application of the FTA
up to the most recent year for which the data is available comparing period before and
after the entry into force of the FTA looking for shocks (relatively sharp increases
decreases) around that time or structural breaks in a trendline to identify an EU-CA FTA
impact We also investigate whether other shocks have taken place that could explain
observed changes in human rights (eg changes in domestic laws) Based on a similar
practice used during the ex-post evaluation of the EU-Korea FTA we could also consider
including a set of control countries to the analysis to consider development of specific rights
in relative terms
All data findings will be supported and cross-validated through a review of relevant
literature looking for further evidence of impacts provisions of the EU-CA FTA the social
and political situation (eg legislative policy instruments adopted that could have affected
the enjoyment of relevant rights) and inputs from the stakeholders that can serve as
evidence of a link between how the human rights has evolved and the EU-CA FTA
3294 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative human rights effects that have emerged from tensions between the EU-CA FTA
on the one hand and statersquos human rights obligations on the other Additional policy or
legislative measures can also be suggested to enhance positive impacts of the EU-CA FTA
and to prevent or mitigate impacts of measures that have been identified as having caused
or contributed towards impaired enjoyment of human rights
33 Concluding tasks
Based on the various analyses undertaken including the case studies the evaluation team
will prepare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 25
A comprehensive review of the extent to which impacts identified in the Trade SIA of
the Association Agreement between the EU and Central America (Ecorys and Corporate
Solutions 2009) have actually materialised (Task 9)
Replies to the evaluation questions (Task 14) and
Conclusions and recommendations (Task 15)
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3)
The literature review aims at identifying sources data and main conclusions drawn from
the previous studies to make sure that the report is based on and further complements the
existing literature Annex A3-2 provides an overview of the literature considered so far in
a tabular structure To summarise the findings from the literature review so far the
following can be noted regarding methodologies and substantive issues
41 Methodological aspects
The economic effects of the EU-CA FTA have been analysed by the Sustainability Impact
Assessment (SIA) outsourced by the Commission (DG Trade) in 2009 before the launch
of the negotiations (ECORYS 2009) This ex-ante evaluation combined quantitative and
qualitative approaches the first one based on the Computable General Equilibrium (CGE)
and Causal Chain Analysis and the latter built on stakeholder interviews (ECORYS 2009)
The CGE model underpins SIA and the literature produced on the likely economic impact
of the agreement (ECORYS 2009 IIDE 2007 Lima et al 2009 Lima et al 2010 CEPR
2012) and the bulk of these studies is based on the assumptions on the likely structure of
the agreement as the negotiations were not concluded yet The 2009 SIA also assessed
the additional FDI impact by applying a gravity analysis approach (ECORYS 2009) The
first Commission annual activity report on the implementation of the EU-CA FTA builds its
assessment on the available Eurostat data and on the comparison between the region-to-
region trade flows before and after the treatyrsquos entry into force (Commission 2015) The
following activity reports (Commission 2016 2017a 2018a 2019d 2020a) illustrate the
evolution of trade on a yearly basis relying on the Eurostat and Central American statistics
thereby opting for a more descriptive approach
The main added value brought by this ex-post evaluation report consists of the CGE model
and its application to updated EU and CA statistics in order to isolate the strictly related
economic implications of the EU-CA FTA from other external factors influencing bilateral
trade thereby purifying the overall analysis and drawing more methodologically solid and
reliable conclusions The Commission (2021) modelling used for the ex-post evaluation
unlike the other studies focuses only on tariffs however which means that impacts of not
the entire EU-CA FTA are measured but only of the tariff component
Regarding assessment of non-economic effects the methodology tended to forecast
estimated general trends and usually does not make detailed projections It should also be
pointed out that predicting long-term socio-economic effects stemming from the AA proves
to be more challenging than estimating short-term trade impacts (European Parliament
2018) Regarding quantitative social and environmental variables the models have used
structured gravity approaches to estimate the effect of non-tariff measures (NTMs)
(ECORYS 2009) The main methodological constraints to calculate (non-quantifiable)
social environmental and human rights effects from a quantitative perspective are the
problem of attribution and the so-called counterfactual given that one cannot know what
would have happened in case the agreement was not in place
42 Substantive issues
In the 2009 SIA the literature review concluded that the potential economic impact of
the EU-CA FTA was expected to be positive The vast majority of literature sources agree
on the key role played by agricultural products in the Central American economy (Romero
Page 26
et al 2015 FAO 2020 OXFAM 2016 European Commission 2020 European Commission
2019 Zabalo et al 2019 Mejia et al 2018 Lima et al 2009 Lima et al 2010) The
raw material share accounts for up to 60 of the total CA export and combined with
natural-resource-based manufactures their cumulative share reaches 70 (Lima et al
2010 p 92) A study carried out in 2007 before the launch of the EU-CA negotiations
forecasted a negligible impact of the agreement on the EU GDP and overall welfare even
in case of a full liberalisation scenario (IIDE 2007 p 16) Also in terms of FDI the
estimated effects were marginal for the EU but more tangible for CA where the agreement
could lead to an increase of 1 of the CA economies GDP (CEPR 2012 p 27) However
some additional positive spill-overs were considered such as the impact on maritime
services that could help CA countries to better manage increased trade flows and at the
same time improving custom procedures (ECORYS 2009) On trade the report
highlighted trade value flow variations especially in CA with the impact on both EU export
and import value rather negligible (Ibid p 73)
The 2012 CEPR impact assessment argued that the EU-CA trade liberalisation triggered
overall positive effects especially when referred to key products both for the EU exports
to CA such as in agriculture products and goods originating from manufacturing activities
(eg cars and medication) and EU imports from CA primarily food products where the
FTA proposed to half tariff levels compared to the previous GSP level access in place (CEPR
2012 pp 10-11)
According to the SIA banana exports from CA to the EU were expected to benefit from
more advantageous market access conditions Regarding NTMs bilateral trade facilitation
and border-related barriers should be eased simplified and rationalised Consequently
trade costs were expected to decrease remarkably The econometric analysis showed that
the economic effects of the EU-CA FTA were not expected to be equally distributed among
the CA countries given the economic heterogeneity of the region (ECORYS 2009 Lima et
al 2009 CEPR 2012 European Parliament 2018) Vegetable fruits and nuts sector (VFN)
together with sugar cane showed the most promising results (IIDE 2007 p17) although
the positive effects were not equally shared among the CA members with Panama
benefitting the most Manufacturing production in CA was estimated to benefit from the
deal (+20) Electronic equipment would also take advantage of the FTA especially in El
Salvador Honduras and Costa Rica (CEPR 2012 p 31) Transport equipment insurance
services and other manufacturers were expected to decline
On the EU side the projections estimated that
Output in the sector of vegetables fruits and nuts as well as electronic equipment was
expected to decrease modestly (CEPR 2012 p 29)
The EU was estimated to increase output in grains other agriculture and additional
categories of primary food (ECORYS 2009 pp 44)
A limited price decrease for processed food grains and vegetables other agriculture
and beverages and tobacco was expected (Ibid p 44)
Overall in the EU literature in any scenario ranging from partial to full liberalisation an
increase of trade volume as result of the AA was projected (European Parliament 2018
p 43)
A study presented at the Twelfth Annual Conference of the Global Economic Analysis in
2009 and eventually incorporated in a 2010 publication on Latin America assessed the
likely effects of the EU-CA FTA for three scenarios full liberalisation partial liberalisation
excluding sensitive products on both sides (namely fruits and vegetables meat beverages
and tobacco other processed food) and liberalisation considering only fruits and vegetables
as sensitive in the EU (Lima et al 2009 p 1) The application of different models revealed
that the most economically advantageous scenario was the first one leading to an
expansion of exports in all signatory countries and positive effects on overall CA welfare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 27
The second scenario would lead to a smaller economic impact with a more modest trade
expansion (12) and some welfare losses Finally in the scenario foreseeing the EU
excluding only fruits and vegetables the ldquoresults for trade and product remain positive
but with smaller figuresrdquo (Lima et al 2009 p 1) In conclusion a deeper liberalisation
would favour both regions by enhancing exports by between 1 and 5 in all the CA
countries (Lima et al 2010)
The Commissionrsquos annual FTA implementation reports describe trade flows between the EU
and CA after the conclusion of the FTA and demonstrate an overall upward trend for certain
countries and for specific sectors Trade flows remained rather stable in 2014 increased
by 12 in 2015 decreased marginally by 07 in 2016 grew by 72 in 2017 by 66
in 2018 and by 7 in 2019 With the exception of 2017 the EU maintained surplus in
trade with CA (Commission 2015a 2016 2017a 2018a 2019d 2020a)
The Central American literature generally focused on the role played by agricultural exports
in CA domestic economies and on the potential impact generated from the EU-CA FTA on
export transformation and diversification (Zabalo et al 2019) The likely impact of the EU-
CA FTA varied among the countries and the industries considered (ECORYS 2009) A study
carried out in 2018 aiming at analysing the effects on Panamarsquos economy by adopting a
shift-share analysis model concluded that between 2013 and 2016 the Panamanian exports
(mainly transport equipment and agricultural products) to the EU showed a downward
trend by 32 for the selected years mainly due to the decrease of primary exports to
some EU countries including Germany Belgium Italy Greece Poland and Sweden (Mejia
et al 2018) Likewise the local press has highlighted both advantages and disadvantages
generated by the EU-CA FTA for the whole region (De Leograven 2006 Barquero 2016
Rodriguez 2017) While it was considered that tariff removal triggered by the Agreement
could boost banana exports to the EU therefore inducing positive externalities for the
whole region especially for Costa Rica excessive specialisation in agricultural products
and insufficient diversification of export destinations could cause negative effects for the
local economy (Barquero 2016 Rodriguez 2017) Finally the press flagged the pros and
cons of regional integration requirements posed by the EU to CA The EU request to
negotiate as a unified bloc and to speak with a single voice led to long sensitive and
complex domestic negotiations within CA which came only to a partially accepted joint
approach towards trade talks (De Leoacuten 2006) A comparison of estimated economic effects
of the Agreement has been provided in Annex A3-1
The social impact considerations were closely linked to the economic ones since the EU-
CA FTA effects on trade would also influence the levels of employment in the affected
sectors The employment changes triggered by the EU-CA FTA in the EU were expected to
be negligible owing to the relatively modest role played by CA in the EU trade with the
rest of the world As an additional consequence also the level of EU wages should not be
affected much by the Agreement (CEPR 2012 p 28) In CA more significant incentives
to reallocation between sectors caused by ldquopull-factorsrdquo were likely to occur where export-
oriented sectors would benefit most from the EU-CA FTA and where rises in wages were
expected Employment in textile industry in Nicaragua Guatemala Honduras and El
Salvador was expected to decline The full liberalization scenario (IIDE 2007 p 17) was
expected to lead to increases in wages while also prices would rise by 05 (CEPR 2012
p 28) In Nicaragua and Costa Rica wages were expected to rise by 02 and 13
respectively while Panamanian wages would drop marginally (ECORYS 2009 pp 75-77)
The implementation of the International Labour Organisation (ILO) conventions in the EU-
CA FTA legal framework would also have a positive impact on social issues in CA such as
elimination of child labour and force labour and reduction of gender inequality However
the literature underlines a general lack of analyses of the EU-CA FTA impact on poverty in
CA since its implementation (European Parliament 2018 (a) p 45) As described above
the effects were expected to vary among the CA countries with El Salvador Nicaragua
and Honduras experiencing a relatively more impactful drop in levels of poverty than in
Page 28
Costa Rica Finally likely consequences on poverty equality education health and gender
issues in the EU were found to be negligible unlike in CA where small and indirect effects
were expected in terms of investments in health incentives through innovation brought by
technology dissemination and an overall positive impact on inclusiveness driven by the
Agreement (ECORYS 2009 pp 76-80)
On the environmental aspects the literature contributions can be split into two main
groups featured by contrasting interpretations on the EU-CA FTA impact Ultimately the
effectiveness of the TSD chapter will depend on the willingness of the involved government
to implement the EU-CA FTA provisions (EPRS 2018)
On the one hand the SIA and other studies flagged the likely harmful repercussions on
greenhouse gas emissions (GHG) stemming from agriculture fishing trade and transport
activities resulting from the EU-CA FTA application having a limited impact on the EU share
of CO2 emissions and a more tangible effect on some CA countries such as El Salvador
Honduras and Costa Rica in the long run (Alianza por la Solidaridad 2019 FAO 2013)
Moreover the increased agricultural activities resulting from the economic effects of the
EU-CA FTA (eg coffee melon sugar cane and peanut production) factories activities (eg
production of biofuels in Guatemala) as well as factoriesrsquo waste and maritime transports
could pose a threat to biodiversity and deforestation which could constitute a serious issue
owing to a large share of local biodiversity concentrated in CA especially if waste would
not be adequately managed (ECORYS 2009 pp 81-83 Zabalo et al 2019 FAO 2013
Monserrat et al 2011 OXFAM 2016 Rosa Luxembourg Stiftung 2010 Ruerd 2018)
On the other hand a share of the existing literature emphasised the opportunities for CA
countries originating from the EU-CA FTA This would be the case of Costa Rica which
would improve the national environmental regulatory framework mainly in relation to the
use of agrochemicals with likely positive impact for the environment since pineapple
production plays an important role in local economy (Esquivel 2020) A FAO study argued
that international trade in coffee (in particular exports to the EU) has improved the overall
environmental sustainability in CA The EU being the largest consumer of coffee worldwide
its (increasing) requirements on the sustainability of the coffee chain benefited the
adoption of environmental standards by the sector As a consequence coffee producers
are now required to provide more extensive and detailed certifications proving they comply
with environmental standards Therefore they have been paying more attention to
environmental aspects than before (FAO 2020)
A 2017 study (CEPAL 2017) investigated the impact of a CO2 tax on CA GDP Overall the
estimations indicated a negative impact of a carbon tax on GDP and the extent to which it
was found to impact the various local economies depended on the amount of the tax itself
Indeed an average tax value of 69 USD per tCO2e was found to impact the GDP by 062
A range between 5 and 10 USD would be optimal for Honduras and Nicaragua whereas a
tax between 20 and 50 USD would be optimal for Costa Rica El Salvador Guatemala and
Panama (CEPAL 2017)
Finally regarding human rights the EU-CA-FTA impact is difficult to assess for the region
as a whole since the intra-regional development varies a lot and it is difficult to discern
whether the CA movement towards a better respect for international standards on labour
and social rights depends on the implementation of the Agreement (European Parliament
2018 p 44) For example several experts and policymakers argue in favour of a stronger
enforcement mechanism of the TSD chapter (EPRS 2018) Its provisions referring to the
ILO conventions do not ensure the same level of labour and human rights protection as
the GSP+ mechanism (EULAC 2011) Overall despite some positive developments the
implementation of the TSD provisions led to a limited impact on the key challenges in the
CA region such as child labour freedom of association social dialogue or unpaid overtime
(EPRS 2018) The CA Womenrsquos Network also reported insufficient participation of women
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 29
during the negotiation process and it highlighted the risks of women subordination if strong
provisions on gender equality are not put in place (CAWN 2007)
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5)
51 Structure of the EU-CA FTA
The Agreement was initially signed in June 2012 by the EU and Central American countries
and the EU-CA FTA started its provisional application in 2013 It is in a process of
amendment through the Protocol of Croatiarsquos Accession to the Association Agreement
between the European Union and Central America which was signed in November 2020
(Joint Communique 2020) It allows Croatia to formally become part of the Agreement and
provides for amendments to some parts of the EU-CA FTA to account for the accession of
Croatia (eg Appendix 3 to Annex I related to special treatment of bananas Annexes
related to trade in services such as the lists of commitments on establishment cross-
border supply of services and reservations regarding the temporary presence of natural
persons for business purposes and Annexes related to Government procurement including
the list of contracting authorities etc) (European Commission 2020b)
Key features of the Agreement (Trade Pillar) can be summarised as follows Title by Title
Title I of the Agreement contains general principles provisions and definitions and
in particular defines the objectives of the EU-CA FTA which can be summarised as follows
(a) the expansion and the diversification of trade in goods between the Parties through
the reduction or the elimination of tariff and non-tariff barriers to trade (b) the facilitation
of trade in goods through in particular the agreed provisions regarding customs and trade
facilitation standards technical regulations and conformity assessment procedures as well
as sanitary and phytosanitary measures (c) the liberalisation of trade in services in
conformity with Article V of GATS (d) the promotion of economic regional integration in
the area of customs procedures technical regulations and sanitary and phytosanitary
measures to facilitate the circulation of goods between and within the Parties (e) the
development of a climate conducive to increased investment flows the improvement of
the conditions of establishment between the Parties on the basis of the principle of non-
discrimination and the facilitation of trade and investment among the Parties through
current payments and capital movements related to direct investment (f) the effective
reciprocal and gradual opening of government procurement markets of the Parties (g) the
adequate and effective protection of intellectual property rights taking into consideration
the differences between the Parties and the promotion of technology transfer between the
regions(h) the promotion of free and undistorted competition in the economic and trade
relations between the Parties (i) the establishment of an effective fair and predictable
dispute settlement mechanism and (j) the promotion of international trade and investment
between the Parties in a way that contributes to the objective of sustainable development
through joint collaborative work (Article 78)
Title II covers trade in goods and comprises the following chapters (1) market access
for goods which lays down provisions on the elimination of customs duties elimination of
export and import restrictions and export taxes and provisions on agricultural subsidies
(this is complemented by Annex I outlining schedules for elimination of customs duties
Annex II which concerns the definition of the concept of originating products and methods
of administrative cooperation Annex IV - special provisions on administrative cooperation
and Annex V on management of administrative errors) (2) trade remedies which discusses
anti-dumping countervailing and multilateral safeguard measures bilateral safeguards
and the applicable procedures (3) customs and trade facilitation which increases
transparency and promotes the facilitation of trade by simplifying customs procedures and
the adoption of risk management systems for customs inspections (it is complemented by
Annex III on mutual administrative assistance in customs matters) (4) TBT - technical
barriers to trade aiming at facilitating trade by identifying preventing and eliminating
Page 30
unnecessary barriers related to development adoption and application of standards
technical regulations and conformity assessment procedures it also reaffirms rights and
obligations under the WTO TBT Agreement foresees cooperation in market surveillance
transparency through the notification procedures and approach to marking and labelling
avoiding unnecessary burdens while ensuring that all necessary and accurate information
is provided (5) sanitary and phytosanitary measures which aims at protecting human
animal or plant life or health while avoiding unjustified barriers to trade it reaffirms rights
and obligations under the WTO SPS Agreement recognises concepts standards and
recommendations adopted by relevant international organisations (World Organisation for
Animal Health and International Plant Protection Convention) and foresees exchange of
information and cooperation by the Parties incl in cases of emergency (it is complemented
by Annex VI identifying competent authorities Annex VII defining requirements and
provisions for approval of establishment of products of animal origin Annex VIII setting
out guidelines for conducting verifications and Annex IX with points of contact) (6)
exceptions related to goods
Title III covers trade in services establishment and electronic commerce and is
complemented by annexes that detail the Partiesrsquo commitments according to the four
modes of supply or provide information Annex X includes commitments on establishment
(Mode 3) Annex XI lists commitments on cross-border supply of services (Modes 1 and
2) Annex XII outlines reservations regarding temporary presence of natural persons for
business purposes (Mode 4) Annex XIII lists commitments of the Republics of the CA Party
regarding key personnel and graduate trainees Annex XIV lists their commitments on
business service sellers and Annex XV provides a list of the relevant enquiry points
Title IV concerns liberalisation of current payments and movement of capital and
stipulates that the Parties shall authorise payments and transfers on the current account
between the Parties as well as transactions and capital movements related to foreign direct
investment and related transactions including liquidation and repatriation of investments
and profits It also envisages exceptions such as circumstances where payments and
capital movements cause or threaten to cause serious difficulties for the operation of
exchange rate policy or monetary policy or the liquidity of the economy in which case
the Parties may temporarily adopt safeguard measures)
Title V covers government procurement and is complemented by Annex XVI which
details the commitments of Parties in this area (eg procuring entities covered coverage
of procurement contracts under the Agreement media used for tender procedures and key
features of the process for awarding procurement contracts) The Agreement provides for
the Parties to have non-discriminatory access to public procurement procedures within the
scope of covered procurement and outlines general principles and rules for procurement
procedures (eg publication of notices participation in tenders technical specifications
documentation timeline awarding contracts etc) ensuring transparency and cooperation
Title VI covers intellectual property It reaffirms the Partiesrsquo commitments to various
relevant multilateral agreements (eg WTO TRIPS Agreement Convention on Biological
Diversity and Paris Convention for the Protection of Industrial Property) foresees exchange
of information and cooperation between the Parties in relation to technology transfer and
sets standards on the protection of intellectual property rights (IPR) including trademarks
geographical indications copyright and related rights industrial designs plant varieties
and patents The list of geographical indications to be protected is provided in Annex XVII
The Title also addresses enforcement measures for cases of infringement of IPR
Title VII concerns trade and competition in the economies of the Parties Under this
Title the Parties commit to adoption or maintaining comprehensive competition laws and
having appropriately equipped competition authorities They also consider as incompatible
with the Agreement the most harmful anticompetitive practices such as restrictive
agreements concerted practices abuse of dominance and concentrations of companies
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 31
that significantly impede effective competition The Title also stipulates that with regard to
state enterprises and designated monopolies there is no discrimination in exercised by such
entities regarding conditions under which goods or services are purchased or sold
Title VIII relates to trade and sustainable development It includes commitments to
effectively implement the eight ILO Fundamental Conventions and key multilateral
environmental agreements to which EU Member States and CA countries are Parties In
addition the Title includes specific provisions in relation to various thematic areas such as
sustainable forest management sustainable fisheries and trade supporting sustainable
development It establishes civil society advisory groups as part of institutional structure
and foresees a regular dialogue between the Parties and civil society incl in a dedicated
Civil Society Forum The Title also provides a dedicated dispute settlement mechanism
with government consultations consideration of the matted by the TSD Board and a Group
of Experts to examine the matter and formulate recommendation
Title IX relates to regional economic integration between the Central American Parties
and includes provisions on circulation of goods in trade between the EU and CA within the
EU and CA region respectively once a product entered their customs territory and when
the applicable rules and standards are met In this context the Title provides rules related
to customs technical barriers to trade and sanitary and phytosanitary measures (Annex
XX provides a list of CA technical regulations in the process of harmonisation)
Title X covers dispute settlement and outlines the related procedures including the
establishment of a panel its ruling and compliance
Title XI establishes mediation mechanism for non-tariff measures incl the selection
of a mediator the applicable procedure and implementation of the agreed solution
Title XII contains provisions on transparency and administrative procedures Among
other things the Parties commit to (i) ensuring that their measures of general application
(eg laws regulations judicial decisions procedures and administrative rulings) relating
to matters covered by the EU-CA FTA are promptly published or otherwise made readily
available to interested persons and (ii) providing reasonable opportunities for those
interested to comment on proposed measures and taking into account relevant comments
The Parties also commit to establish Points of Contact for matters related to EU-CA FTA
Title XIII addresses tasks of the institutional bodies in matters related to trade
ie the Association Council the Association Committee and specialised Sub-committees
(for details please see section 52 on the institutional set up)
Title XIV defines general exceptions to the Agreement related to the Partiesrsquo balance of
payments and taxation
52 Institutional set-up of the EU-CA FTA
The Association Council the Association Committee six Sub-committees and an Ad hoc
Working Group on Government Procurement (the latter not envisaged by the EU-CA FTA
but set up by the Parties in 2016) oversee the implementation of the Agreement
The Association Council established pursuant to Article 4 supervises implementation of
the Association Agreement it is composed of representatives of the EU and each of the six
CA countries has a decision-making power (binding upon the Parties) in cases foreseen in
the Agreement examines all major issues and questions of common interest It meets at
Ministerial level (or through representatives) at regular intervals not exceeding two years
In line with Article 345 when meeting to discuss matters under EU-CA FTA the Council
has the power to amend Annexes and Appendixes related to trade incl tariff elimination
schedules and goods included there originating products and methods of administrative
Page 32
cooperation Annex XVI (Government Procurement) Annex XVIII (Protected GIs) Annex
XIX (in relation to Article 306 animals animal-based products plants and plant-based
products subject to SPS measures) and Annex XXI (Sub-committees)
The Association Committee set up pursuant to Article 6 is responsible for the general
implementation of the Agreement and assists in this context the Association Council It is
composed of representatives of the EU and the six CA countries at the senior officialsrsquo level
and shall meet once a year to review the implementation It takes decisions foreseen in
the Agreement or delegated by the Association Council When acting within part IV of the
Agreement the Association Committee supervises work of Sub-committees established by
this part and may set up new ones prevents and resolves conflicts (without prejudice to
provisions related to the Dispute Settlement and Mediation Mechanisms) and recommends
decisions for adoption by the Association Council
The Agreement has also established six specialised Sub-committees
Sub-committee on Market Access for Goods (Article 91) is responsible for monitoring
the correct implementation and administration of the Trade in Goods Chapter and serves
as a forum for consultations about interpretation and application of its provisions It
examines proposals provided by the Parties regarding accelerated liberalisation of trade in
goods and tariff reduction as well as inclusion of additional goods into liberalisation
schedules It may make recommendations to the Association Committee on matters within
its remit and take any issue as and when instructed by the Association Committee
Sub-committee on Customs Trade Facilitation and Rules of Origin acting in line
with Article 123 monitors implementation of the Chapter and Annex related to the concept
of origin and methods of administrative cooperation It provides a forum to discuss and
consult all matters related to customs incl customs procedures valuation nomenclature
cooperation tariff regimes mutual administrative assistance in customs matters as well
as rules of origin It pursues cooperation on development application and enforcement of
customs procedures mutual administrative assistance in customs matters administrative
cooperation and rules of origin It examines requests for amendments of rules of origin
and submits to the Association Committee results of the analysis with recommendations
It also aims to enhance cooperation on capability building and technical assistance
Sub-committee on Technical Barriers to Trade (TBT) acting in accordance with Article
139 provides forum to discuss and consult any matter related to the Chapter and monitors implementation and administration of this Chapter facilitating exchange of information
and cooperation and promptly addressing any issue that either Party raises related to the
development adoption application or enforcement of standards technical regulations
and conformity assessment procedures It aims at solving any problems within the remit
of the Chapter that would limit trade between the Parties It encourages direct interaction
between non-governmental actors such as standard bodies accreditors and certifiers It
facilitates the exchange of information about the work being done in non-governmental
regional and multilateral fora engaged in activities related to technical regulations stan-
dardisation and conformity assessment procedures and explores ways to facilitate trade
between the Parties The Sub-committee has also power to review the Chapter in the light
of developments under TBT Agreement and reports to the Association Committee about
implementation of the Chapter including cooperation activities
Sub-committee on Sanitary and Phytosanitary Matters (SPS) acting in line with
Article 156 monitors implementation of the Chapter provides a forum for discussion and
consultation on any matter arising under the Chapter and an opportunity to seek mutually
acceptable solutions It may also develop procedures or arrangements facilitating
implementation of the Chapter It acts as a forum for consultations related to any measure
proposed by the EU which may affect its trade with any of the CA Parties and a forum for
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 33
dispute settlement under the Chapter The Sub-committee is also responsible for
promoting cooperation on animal welfare between the Parties
Sub-committee on Intellectual Property Rights (IPR) (Article 274) monitors
implementation of Article 231 (transfer of technology) and part of the IP Chapter related
to GIs including facilitating discussion about protection of GIsrsquo and recommendations to
the Association Committee regarding amendments to Annex XVIII on GIs It promotes
technology transfer from the EU to the CA Parties and defines priority areas in which
initiatives shall be directed regarding technology transfer research and development and
building-up human capital Its responsibilities include also keeping a registry of the
programs activities or initiatives in progress in the field of intellectual property with
emphasis on transfer of technology
Board on Trade and Sustainable Development (TSD) established pursuant to Article
294 reports to the Association Committee and oversees the implementation the TSD Title
incl cooperative activities undertaken under Title VI (Economic and Trade Development)
of Part III of the Agreement The decisions and recommendations of the Board shall be
adopted by mutual agreement between the Parties and be provided to the public unless
the Board decides otherwise
While EU-CA FTA does not envisage a Sub-committee on Government Procurement the
Parties concluded that it would be useful to have a dedicated body to address matters in
this area They decided to create a temporary Working Group that met for the first time
in June 2016 (European Commission 2017a)
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo
priorities
The negotiations for an Association Agreement (AA) including a Trade Pillar between the
European Union (EU) and Central America (CA) started in 2007 We look at the bloc-to-
bloc trade and policy context the negotiation process and priorities from both sides
The region-to-region trade context
The CA group is composed by Costa Rica Guatemala El Salvador Honduras Nicaragua
and Panama and it is featured by internal economic and political dialogue which led to the
creation of the Central American Common Market (CACM) in the early 1960s Despite the
initial momentum the regional integration process has been stopped for decades due to
internal tensions and the effects of import-substitution trade strategies on local economic
growth (European Parliament 2012) Consequently the initial goal of setting up a custom
union failed and CACM succeeded only in establishing a free-trade area (Duran et al 2010)
The Central American integration efforts were revitalised through setting up of the Central
American Integration System (SICA) aimed at promoting democracy development peace
and freedom in the region (European Source Online 2016) SICA was formally established
on 13 December 1991 through the signature of the Protocol to the Charter of the
Organization of Central American States (ODECA) also known as the ldquoTegucigalpa
Protocolrdquo SICA established both a political and an economic institutional framework by
setting up the Central American Parliament and the Central American Bank for Economic
Development Despite these changes CACM remained the main forum for trade discussions
(European Parliament 2012)
The EU is one of the three most important CA trading partners It is challenging to draw
general and unified conclusions for the whole CA trade picture given its domestic
heterogeneity with Panama and Costa Rica being middle-income countries and Nicaragua
the poorest member (European Parliament 2018 p 18) The EU countriesrsquo share of import
from and export to CA accounted for 30 and 16 respectively in the mid-1980s Among
Page 34
the CA members Guatemala appeared as the most export dependent one while Panama
was the least trade-oriented country (CEPR 2012 pp 6-7) The role of agricultural
production within the respective economies differs widely between the two regions
Agricultural production is very important for CA especially in Honduras and El-Salvador
(38 of the national production) whilst it is relatively much less important in the EU (5)
The same complementarities can be found in manufacturing production (amounting to 18
of the EU production which is much higher than in CA particularly in Panama (4) and
Nicaragua (25) Services contribute to almost 23 of the EU Nicaraguan and Costa Rican
GDP while this share is only 53 for El Salvador (Ibid pp 6-7)
The negotiation process
The start of the economic and political dialogue between the EU and CA blocks dates back
to 1984 at the first conference of Foreign Ministers between the EU and CA countries in
Costa Rica In 1993 the EU and the CA countries signed a Framework Cooperation
Agreement which entered into force on 1st March 1999 (Acuerdo-marco de cooperacioacuten
1999) On the occasion of the EU-Latin America Summit held in May 2002 these countries
and the EU jointly expressed their willingness to reinforce their dialogue by concluding a
new Political Dialogue and Cooperation Agreement which was signed on 15th December
2003 in Rome (Acuerdo de Diaacutelogo Poliacutetico 2003)
The need to establish stronger trade relations even by setting up a free-trade area pushed
the EU and CA to explore the feasibility of an Association Agreement entailing also a specific
chapter on trade Such intention was clearly stated during the EU-Latin America summit of
Guadalajara (Mexico) in May 2004 (Declaration of Guadalajara 2004 p 8 point 52) and
one year later in May 2005 in the context of the EU-Central American Ministerial meeting
in Luxembourg On that occasion the parties launched a joint-assessment exercise on
regional economic integration and established an ad-hoc working party (Council of the
European Union XXI San Joseacute Dialogue Ministerial Meeting between the EU and Central
America 2005 p 2) Finally at the Vienna Summit of 2006 the parties opened the door
to an Association Agreement to create a free trade area (Council of the European Union
EU-Central American Summit 2006 pp 1-2 points 2 and 3) The summit also welcomed
the initiative of the Peace Building and Commission and Human Rights Council (Ibid p 2)
The green light for the beginning of the AA negotiations was given on 28th June 2007 in
Brussels (EU and the Central American Community start negotiations for a new Association
Agreement 2007) However the talks were temporarily suspended on 6th April 2009 and
then resumed a few days later on 24th April (Acuerdo de Asociacioacuten entre Centroameacuterica
y la Union Europea 2009) when the parties decided to re-initiate the negotiations
The negotiating partiesrsquo priorities
The negotiating strategy of the CA countries mainly pursued three goals
Strengthening their trade policy whose objective is to open up new markets for the
benefits of their local exporters The EU appears as a crucial partner for CA countries
as it ranks on top of the worldrsquos largest importers of agricultural products and the
relative share of developing countries has been rising over time in the EU trade balance
Reinforcing CA countriesrsquo export competitiveness and reducing costs of accessing the
EU market vis-agrave-vis competitors such as African-Caribbean and Pacific (ACP) countries
that benefit from preferential and better market access conditions
Attracting foreign direct investments in high value-added sectors where the EU applies
higher tariffs (Duran et al 2010 pp 96-99)
From the European side the main reasons driving towards the conclusion of the agreement
with CA are threefold
Promoting the developing countriesrsquo progressive integration into the world economy
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 35
Reaffirming the EUrsquos role in the world trade and in CA following the United States (US)
conclusion of the Dominican Republic Central American and the United States Free
Trade Agreement (CAFTA-DR) reaffirming the US role in the region
Better coordinating with partners on trade dossiers within the World Trade Organization
(WTO) and other international institutions (Ibid p 100)
The conclusion of the Agreement
The negotiation process delivered slow progress due to the inability of CA countries to
reach a unified position and owing to the delays in the regional integration (European
Source Online cit p3) The agreement was finally reached in May 2010 when the
negotiations were officially concluded during the Latin America-Caribbean and European
Union Summit in Madrid Following the legal scrubbing the European Commission reviewed
and approved the agreement prior to signature at the Meeting of the SICA Presidents in
Tegucigalpa Honduras on the 29th of June 2012 (European Commission Directorate
General for Trade 2012) The European Parliament finally endorsed the AA in December
2012 forecasting that the main gains for the European side would be in export of cars
machinery telecommunications chemical products and transports (European Parliament
2012 p 1) At the time of the AA signature in 2012 the EU-Central America trade in goods
accounted to EUR 149 billion and corresponded to 113 of the whole CA region trade
with the rest of the world (Griener and Membersrsquo Research Service 2014 p 5)
On that date the then EU Commissioner for Trade Karel De Gucht commented the
successful conclusion of the AA by stating that the ldquoregion-to-region deal will help establish
major business opportunities for both sides European exporters will save around EUR 90
million on customs per year and European service providers such as telecommunication
and transport will get greater market accessrdquo At the same time the agreement would
generate ldquospill-over effect on Central Americarsquos overall economic integration process and
contribute to the stability of the regionrdquo (European Commission Ibid p 1) The
Commission officially announced the provisional application of the FTA with Honduras
Panama and Nicaragua on 31st July 2013 with Costa Rica and El-Salvador on 1st October
2013 and with Guatemala on 1st December 2013
The trade provisions of the AA provisionally entered into force in 2013 as they fall within
the exclusive competences of the EU17 Once the entire text of the AA will be ratified by
the EU Member Statesrsquo parliaments the entire text will be legally binding and applicable
After joining the EU in 2013 Croatia is currently negotiating its accession to the AA
54 Operational context of the implementation of the EU-CA FTA
After having illustrated the main partiesrsquo priorities during the bloc-to-bloc negotiations this
chapter provides an overview of the broader context surrounding the negotiations and
implementation and describes the main regional actors as well as their respective trade
policy attitudes towards CA and Latin American countries (LAC) as a whole
Trade policy context the multilateral system and the global economy
Since the launch of the EU-CA negotiations the global trade policy context has undergone
deep changes The Doha Development Agenda stalemate due to incompatible views on
various issues at stake put great pressure on the global trading system The WTO
difficulties in reaching satisfying outcomes stem both from external causes such as the
decline of advanced economies regionalisation of trade and internal sources of tensions
17 Despite being considered as a bloc-to-bloc association agreement the incomplete CA regional economic integration and the failure in setting up a custom union among the CACM countries left unbalances and inconsistencies in accessing single CA countriesrsquo markets and different levels of external tariffs In light of these arguments CA cannot be considered as a fully integrated homogeneous and unified trade bloc
Page 36
embedded in unilateral tariff-cutting process (Baldwin 2016) Besides these tensions the
economic expansion of China and the ldquotrade warsrdquo between the US and China exploded as
of 2017 The recent stalemate of the WTO Appellate Body that halted the entire dispute
resolution process as well as the need to put sustainable development at the core of the
WTO agenda pushed the Commission to advance a new WTO reform proposal (European
Commission 2021) The WTO crisis led to a proliferation of bilateral FTAs and the EU
has been an active bilateral FTA actor globally (see Table 4
Table 4 Overview of the EU FTAs launched and or concluded since 2012
Start of Negotiations
Signatory CountryRegion
State of play of the agreement
Ratification
1999 Mercosur Concluded in 2019 Ongoing
2004 SADC Concluded in 2016 Entered into force in 2016
2007 Andean Community Concluded in 2010 Entered into force in 2013
2007 Ukraine Concluded in 2011 Provisionally applied since 2016 fully in force since 2017
2009 Singapore Concluded in 2019 Entered into force in 2019
2009 Canada Concluded in 2014 Provisionally applied since 2017
2010 Malaysia On hold na
2012 Moldova Concluded in 2013 Provisionally applied since 2014 fully in force in 2016
2012 Georgia Concluded in 2013 Provisionally applied since 2014 fully in force since 2016
2012 Vietnam Concluded in 2015 Entered into force in 2020
2012 Japan Concluded in 2018 Entered into force in 2019
2013 USA On hold na
2013 Morocco (DCFTA new) On hold na
2013 Thailand On hold na
2015 Philippines On hold na
2015 Tunisia (DCFTA new) Ongoing na
2016 Mexico (modernisation) Concluded in 2018 Ongoing
2016 Indonesia Ongoing na
2017 Chile (modernisation) Ongoing na
2018 Australia Ongoing na
2018 New Zealand Ongoing na
2019 United Kingdom Concluded in 2020 Ongoing
2020 ESA (extension) Ongoing na
Source compiled by the author
The EU trade and policy context
Trade picture
The EU maintains strong institutional dialogue with Central and Latin America
legitimised by historic cultural and linguistic ties with the region The EU Latin America
and the Caribbean (LAC) bilateral summits have been regularly held since 1999 gathering
33 members from the two counterparts In 2006 the EU-Latin America Parliamentary
Assembly (EuroLat) was set up and it was conceived as the parliamentary angle of the EU-
CA bilateral partnership (EPRS 2017 p 5)
From a trade perspective the EU-Central and Latin America (comprising Andean
Community CA Cariforum Mercosur Mexico and Chile) trade peaked at EUR 2287 billion
in 2014 before showing a downward trend and decreasing at EUR 2132 billion in 2015
corresponding to 61 of the whole EU trade that year (EPRS 2017 p 6) The EU total
share of LAC trade fluctuated around 14 and the EU remained the first investor in the
region in the last ten years (EEAS 2018) An analysis carried out by the European
Parliament in 2020 unveils that the EU-LAC trade in goods value grew by 22 from 2008
to 2018 (Tvevad 2020 p 18) According to the 2020 DG Trade Report (data from 2019)
on the Implementation of EU FTAs trade flows between the EU and CA showed a robust
growth Indeed trade in goods increased by 88 with respect to the 2018 performance
imports continued growing over the past five years and exports statistics indicated an
overall upward trend with the exception of 2016 (European Commission 2020a p 110)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 37
In 2010 the EU was the second CA trading partner behind the United States (US)
accounting for 94 of the regionrsquos overall trade with the rest of the world (European
Commission 2011 p 4) Among the main exporters to the EU Costa Rica ranked first
with 539 of the total CA exports to the EU Conversely the EU exports went primarily
to Costa Rica (363) Guatemala (281) and El Salvador (152) (Ibid p 4) The EU-
CA trade is marked by the supply of primary products to the EU (mainly agricultural
products such as coffee and bananas) in return for high-technology manufactures
especially machinery transport equipment chemicals and manufactured goods (Duran et
al 2010 pp 95-96 European Parliament 2012 p 9) The CA share in the EU trade was
modest accounting only for 05 of overall EU imports in 2011 and for 03 of the total
EU exports in 2011 (European Parliament 2012 p 8) In addition the EU applied tariffs
on various agricultural products imported from third countries The exclusion of both coffee
and bananas from the EU Generalized System of Preference (GSP) and the GSP+ schemes
prevented these products from benefitting from tariff-reduction from the European side
hampering their access to the EU market and leaving their prices to be influenced by world
trade fluctuations (Duran et al 2012 p 98) The 2019 data confirmed primary products
rank largely first among SITC products grouping exported from CA to the EU accounting
for 721 of the whole exports followed by manufactures with 27 (European
Commission 2019 p 4) Recent statistics highlight the main destination of EU export
continued to be Panama (up to 118 since 2018) whereas the main country of origin of
EU imports is Costa Rica with an increase by 63 from 2018 (European Commission 2020
p 112)
The previous EU trade policy strategy adopted in 2015 (ldquoTrade for Allrdquo) confirmed that
ldquothe FTAs with Peru Colombia Ecuador and Central America are creating new dynamics
for trade and investmentsrdquo (European Commission 2015 p 33) As set out by that trade
policy strategy the Commission should pursue three main priorities with regard to Latin
and Central America ldquo[Continuing] negotiations for an ambitious balanced and
comprehensive FTA with Mercosur ldquoRequesting negotiating directives to modernise the
FTAs with Mexico and Chilerdquo ldquoBe ready to consider investment agreements with key Latin
American countriesrdquo (Ibid p 33)
As evidence for the increasingly robust commitment in the region the EU negotiated trade
deals with 27 out of the 33 LAC countries to strengthen both bilateral and region-to-region
relations the EU actively engaged LAC by signing new and modernising older EU-LAC FTAs
(see Table 5)
Table 5 EU FTA in Latin America and participating countries
Agreement Countries Negotiation launch
Negotiations Conclusion
EU-Andean Countries Colombia Ecuador Peru 2007 2010
EU-Caribbean (CARIFORUM)
Antigua and Barbuda Bahamas Barbados Belize Dominica Grenada Guyana Jamaica Saint Lucia Saint Vincent and the Grenadines Saint Kitts and Nevis Suriname Trinidad and Tobago and the Dominican Republic
2002 2008
EU-Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
2012 2010
EU-Chile na 2017 na
EU-Mercosur Argentina Brazil Paraguay Uruguay 1999 2019
EU-Mexico na 2016 2018
Source Compiled by the author
Regarding civil society the trade chapter of the EU CA FTA did not receive a lot of public
attention and consequently has not been affected by a high level of politicisation within
the EU This might stem from the relatively lower importance of trade relations with CA for
the EU Likewise the agreement did not catch a lot of public attention either in CA where
Page 38
the media coverage mainly focused on the Central America Free Trade Agreement (CAFTA)
Nevertheless both the agreements were targeted by NGOs and trade unions sharing the
same criticism and concerns over biodiversity pharmaceutical product access and
exploitation of natural resources (European Parliament 2011 p 16)
Political Dialogue
To frame the most recent developments in the EU LAC political dialogue it is worthy to list
three key documents forging the EU foreign policy towards LAC
The European Parliament Resolution on the Political Relations with Latin
America passed in 2017 advocating for a stronger more coherent and reinforced
relations with this region by stressing the need to update and develop a more
comprehensive and ambitious EU strategy to address the emerging challenges linked
to fundamental freedoms human and social rights safety of minorities migration
issues corruption tax fraud and security (European Parliament 2017)
The Joint Communication adopted by the European Commission and the High
Representative for Foreign Affairs (HRVP) in 2019 titled ldquoEuropean Union Latin
America and the Caribbean joining forces for a common futurerdquo aimed at deepening
the EU-LAC relations in a fast-changing context by emphasizing four mutually important
priorities prosperity democracy resilience and effective global governance (European
Commission 2019)
The Council of the EU Conclusions of 13th May 2019 endorsing the strategy laid
out in the Joint Communication On that occasion the Council welcomed the four points
described above and added more areas for action such as to work more closely in the
multilateral framework consolidate economic and social resilience enhance shared
prosperity and assist in promoting structural reforms (Council of the EU 2019)
The 2020 EU 27 ndash Latin America Informal Meeting reaffirming the need to advance
bilateral region-to-region summit to strive for a stronger multilateral system identified
mainly in the United Nations and the World Health Organisation (WHO) especially in
the light of the COVID-19 pandemic outbreak (Federal Foreign Office 2020)
Within the framework of the AA the EU and CA agreed to cooperate on a wide range of
policy dossiers of mutual interest namely conventional weapon disarmament the
implementation of the Convention on the Prohibition of the Use Stockpiling Production
and Transfer of Anti-personnel Mines and on their Destruction as well as the Convention
on Certain Conventional Weapons and its protocol (European Parliament 2011 p 7)
On development cooperation the EC regional strategy 2014-2020 earmarked EUR 925
million funding for Latin America to be allocated in two components
Component 1 ldquoMultiannual Indicative Programme for continental activities with Latin
Americardquo accounting for EUR 805 million and devoted to Argentina Bolivia Brazil
Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico
Nicaragua Panama Paraguay Peru Uruguay and Venezuela
Component 2 ldquoMultiannual Indicative Programme for Sub-Regional Cooperation with
Central Americardquo funded with EUR 120 million focused on Central American countries
Costa Rica El Salvador Guatemala Honduras Nicaragua and Panama This component
included three areas for action ie support for regional economic integration support
for the Regional Security Strategy and support for Regional Climate Change Strategy
and the Central American Policy on Comprehensive Disaster Risk Management (EEAS
European Commission 2014)
The Central American trade policy context
Regional Context
Beside their membership in the Central American Common Market (CACM) and the WTO
the CA countries have been signing additional free trade agreements with other regional
and international partners since 2012
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 39
It should be also noted that Panama joined the Latin American Integration Association
(LAIA) in 2012 LAIA replaced the Latin America Free Trade Agreement (LAFTA) signed in
1960 and sought a deeper economic integration among the member states18 Also
Nicaragua applied for the LAIA membership in 2011 and its request was accepted by the
LAIA Council of Minister in August 2011 Nicaragua is currently advancing in fulfilling the
LAIA membership requirements No other CA countries are members of LAIA yet
Table 6 summarises bilateral FTAs and Preferential Trade Agreements (PTAs) signed by the
6 CA countries or being in force since 2011
Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021)
Costa Rica Guatemala El Salvador
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Colombia (signed in 2013 entered into force in 2016)
Mexico (signed in 2011 entered into force in 2013)
Peru (signed in 2011 entered into force in 2013)
Singapore (signed in 2010 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
Ecuador (PTA) (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs signed but not entered into force yet South Korea (signed in 2018) EFTA (signed in 2013)
FTAs signed but not entered into force yet EFTA (signed in 2013) Ecuador (signed in 2011) Peru (signed in 2011)
FTAs signed but not entered into force yet South Korea (signed in 2018)
Honduras Nicaragua Panama
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Peru (singed in 2015 entered into force in 2017)
Canada (signed in 2013 entered into force in 2014)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2014 entered into force in 2015)
Peru (signed in 2011 entered into force in 2012)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet Israel (signed in 2018) South Korea (signed in 2018) Colombia (signed in 2013) EFTA (signed in 2013) Trinidad amp Tobago (PTA)
(signed in 2013)
Source Compiled by the author
Other influential partners in CA
As illustrated by Table 7 three actors retain significant economic influence in CA and Latin
America as a whole the EU the US and China The following section will examine these
actors and their respective trade policies towards CA and Latin America by describing their
posture as well as the agreements in force
18 Argentina Bolivia Brazil Chile Colombia Cuba Ecuador Mexico Paraguay Panama Peru Uruguay Venezuela
Page 40
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking
SubregionCountry
EU total trade in goods (value in EUR billion)
Ranking of main trading partners for trade in goods
2016 2019
2016 2019 USA China EU19 USA China EU27
Andean Community 3 250 246 1 2 3 1 2 3
ACP ndash Caribbean 15 81 116 1 3 2 1 3 2
Central America 6 108 121 1 3 2 1 3 2
Chile 159 166 3 1 2 2 1 3
Mercosur 4 849 771 3 2 1 3 1 2
Mexico 538 618 1 2 3 1 2 3
Source EPRS 2017 p 6 and DG Trade statistics 2020
The US remains the key CA partner The US is the major source of Foreign Direct
Investments (FDI 273) and Official Development Aid allocating an annual average of
approximately USD 1600 million during the Trump Administration (2016-2020)
(Congressional Research Service 2021) Moreover the US rank on top of CA migrant
destinations (Belladonna 2019) The CA countries have been cultivating thorough relations
with the US as they represent the historical destination of over 40 of the regionrsquos
exports Furthermore the 2004 Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA) granted preferential market access conditions to the region (Office
of the US Trade Representative 2004 and Duran et al 2010 p 93) In light of the strong
power exerted by the US the EU trade strategy pursued a progressive rebalancing of the
US presence in the area to ensure better market access in the region (EPRS 2017 p 5)
The DR-CAFTA negotiations confirmed that labour standards sugar and textile products
treatment pharmaceutical data protection and sovereignty issues were the most
controversial and sensitive matters on the table Unlike the EU-CA AA it should be noted
that the DR-CAFTA does not build any common trade framework for all the signatories as
the US grants differentiated market access conditions to each single CA country (European
Parliament 2012 p 11)
In the last few years China has been playing a role of growing importance in CA and in
Latin America both from a political and trade viewpoint (European Commission 2020 p
15) In recent years China has reinforced its role as trading partner within CA As evidence
for this active involvement the 2000-2010 data already confirmed the Asiarsquos importance
(led by China) both in terms of imports and exports in Latin America and Caribbean20
Indeed the China share of the regionrsquos total exports by destination grew from 11 in
2000 to 83 in 2010 with regard to imports by destination the growth appears even
more remarkable moving from 18 in 2000 to 133 in 2010 (Kuwayama amp Rosales
2012 p 66) whilst the relative share of the US presence has shown a downward trend
(Ibid p 65) The monthly exports to Asia-Pacific21 region more-than-doubled from an
average value of USD 54 billion in 2006 to USD 162 billion in 2014 (Baacutercena Prado
Rosales Peacuterez 2015 p 23) After a slight decline experienced in 2016 a solid rebound
emerged in 2017 On average goods shipment from Asia-Pacific Latin America grew by
136 yearly between 2000 and 2016 (Scotiabank 2018 p 1)
Beside trade China has been recently advancing its Belt and Road Initiative (BRI) in
the region by concluding numerous Memoranda of Understanding (MoU) with various LA
19 Including the United Kingdom 20 Data refers to Argentina Bolivarian Republic of Venezuela Brazil Chile Colombia Costa Rica the Dominican
Republic Ecuador El-Salvador Guatemala Honduras Mexico Nicaragua Paraguay Peru Plurinational State of Bolivia
21 The Asia-Pacific region includes Australia Brunei Darussalam Cambodia China South Korea Philippines Hong Kong Japan Laos Thailand Taiwan Indonesia Malaysia Myanmar New Zealand Singapore and Vietnam
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 41
and CA countries To mention some Bolivia (2018) Costa Rica (2018) Chile (2018) and
Panama (2017)
6 CONSULTATIONS (TASKS 6 AND 7)
61 Consultation Strategy
The consultation strategy presented in the technical offer has been refined during the
Inception Phase (Task 6) and is outlined in Annex B Box 2 summarises our expectations
regarding the main inputs expected from stakeholders throughout the study
Box 2 Expectations regarding inputs from stakeholders
Inputs from stakeholders are expected at all stages of the study
The study team will welcome in particular Responses to the online public consultation Consultation with businesses (responses to the online business survey) Evidence of specific casesexamples on how the Agreement has affected economic performance
sustainable development and human rights both in Central America and in the EU Contributions will be particularly welcome in relation to the priority areas of analysis o Impact of the Agreement on trade diversification (in terms of goods and services traders regions
involved in trade etc) (see Task 101) o Impact on investment climate and investment flows (see Task 102) o Impact of the Agreement on SMEs (see Task 1012) o Effects of the implementation of the TSD chapter (see Task 111) o Performance of the institutions established under the TSD chapter (see Task 112) o Impacts of the Agreement on pillars of Decent Work Agenda working conditions labour standards
social protection other public policies and labour inspection (see Task 114) o Impacts on the informal economy and informal employment (see Task 115) o Environmental impacts (see Task 116) and o All of the case studies
Written contributions (positions) expressing views on how the Agreement has affected economic performance sustainable development and human rights across the parties in particular with regard to ndash but not restricted to ndash the analytical priority areas
Indication of relevant publications that focus on the impact of the Agreement in the partner countries Indication of actions taken by CA in areas covered by the TSD chapter (eg changes in policies action
plans strategies and legislation in the areas of labour environment and climate change ratification and implementation of international conventions in these areas and civil society engagement)
Written comments on the draft Inception Report draft Interim Report and draft Final Report Proposals for and comments on draft conclusions and recommendations of the report including how to
improve operation of the Agreement (if needed) Names of organisations or indication of vulnerable groups that may have been affected by the
Agreement in the partner countries as well as relevant contact details for the evaluation team to reach out to the most relevant additional stakeholders
62 Study Website and Electronic Communications
The establishment and continuous updating of a website as well as ongoing electronic
communications with stakeholders are one element of the consultation strategy During
the inception phase the website has been established and launched and an initial e-
communication will be sent out to identified stakeholders (Task 5) The website is available
at httpcentral-americafta-evaluationeu
Electronic communication with stakeholders will take place through email newsletters as
well as Twitter using an account for this ex-post evaluation (CaEvaluation) Twitter will
be used as well to present the (draft) findings at specific moments in the study interested
related work or articles highlights or relevant quotes from the consecutive study reports
and promote the various outreach activities such as workshops LinkedIn will be used to
complement twitter with the same objectives the account of LinkedIn to be used will be
Ex-Post Evaluation EU-Central America FTA Email and an electronic newsletter will be used
as complementary tools to reach specific stakeholders throughout the study to inform them
Page 42
of events to send questions receive feedback and make appointments for interviews the
email used will be central-americabkp-advisorscom
With the COVID-19 pandemic still in place and governments imposing new lockdowns and
travel restrictions a back-up plan is available in case a lot of the communication has to be
done online The meetings with the EU and CA stakeholders both government and civil
society in the near future will be held online For the second half of the year and beginning
of 2022 face-to-face meetings may also be an option The advantage of digital outreach
is linked to reduction of travel time and travel costs to the minimum and in addition digital
follow-up is easier The public consultation and online business survey are already being
prepared and planned with an indicative timeline of online availability between June and
September 2021 The workshops envisaged for Central America in November 2021 are
currently planned with options ranging from face-to-face meetings over hybrid solutions
to holding them entirely online In either case we will ensure they are as interactive as
possible thanks to the use of breakout rooms and platforms enabling participants to ask
questions and participate in polls online We will also ensure that participants will receive
sufficient information before workshops
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13)
71 Case Study Selection
As part of the evaluation ten case studies will be prepared Their purpose is to capture the
impact of implementation of the EU-CA FTA on sustainable development in its economic
social and environmental dimensions as well as on human rights (including labour rights)
They should complement the economic social environmental and human rights analysis
required under Tasks 10 11 and 12
Regarding the geographic coverage the ToR require two case studies focused on the EU
two horizontal case studies for the whole region of Central America and six dedicated to
each of the Central American countries
Table 1 provides a preliminary list of suggested case studies while their exact focus and
scope will be determined at the next stage of the study further to preliminary impact
analysis and identification of relevant information and data sources
Table 8 List of proposed case studies
No Case study topic Geographical focus Key impact areas
1 Impacts of the Trade Pillar on EU banana producers EU incl OR as well as ACP and LDCs due to preference erosion
Economic and Social
2 Trade in environmental goods and services (opportunities for the EU and partner countries)
EU CA partner countries22
Economic and Environmental
3 Impacts of the Trade Pillar on freedom of association in sectors involved in trade with the EU (the choice of sectors will be made further to the initial impact analysis)
CA partner countries notably Guatemala Honduras and El Salvador
Human rights and Social
4 The effects of the Trade Pillar on sustainable aquaculture in Honduras Nicaragua Costa Rica and El Salvador
Partner countries with a focus on Honduras Nicaragua Costa Rica El Salvador
Economic Social Human rights and Environmental
5 Opportunities created in services sector in particular the green energy sector in Costa Rica (the choice of the services sector will be reviewed based on the initial impact analysis)
CA partner countries Economic and Environmental
22 The ultimate selection of countries will depend on the outcome of the (environmental) impact screening and scoping exercise
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 43
No Case study topic Geographical focus Key impact areas
6 Impacts of the Trade Pillar on child labour and childrens rights
El Salvador Social and Human rights
7 Impacts of the Trade Pillar on the environment (eg forests and biodiversity) in Guatemala the case of palm oil
Guatemala Environmental
8 Impacts of the Trade Pillar on MSMES and sustainable agriculture in the coffee industry (organic coffee) in Honduras
Honduras Economic and Environmental
9 Impacts of the Trade Pillar on women and gender equality notably in agricultural value chains in sectors exporting to the EU (the sectors may include coffee ground nuts and banana however the final selection of sectors and scope will be made based on data availability and the initial impact analysis)
Nicaragua Social and Human rights
10 Implementation and effect of the FTZ in port of Colon including aspects related to direct transportation clause
Panama Economic
72 Case Studies ndash Summaries and Methodologies
Descriptions of case studies and planned methodologies have been provided in Annex A5
8 STUDY WORK PLAN
A detailed study schedule which sets out activities and deadlines for outputs indicated
throughout this Inception Report is outlined in the chart overleaf A detailed plan for the
consultation programme is provided in Annex A4 Annex A6 provides the risk management
approach for the evaluation
Page 44
Phase task deliverable
Inception phase
Kick-off meeting with Commission in Brussels 20
Task 1 Refine draft intervention logic diagram
Task 2 Define and develop the methodological approach
Task 3 Review existing studies amp reports on trade between the EU and CA (6 countries)
Task 5 Provide a concise description of the agreement
Task 6 Create a website dedicated to the evaluation
Task 7 Stakeholder consultation strategy
Task 13 Case study proposals
Inception reporting
Drafting of inception report
Draft Inception Report 22
Review meeting Commission ISG
Finalisation of the Inception Report
Inception Report
Interim phase
Task 4 Provide a concise summary
Task 8 Undertake consultation activities
Civil society dialogue in Brussels (budgeted under review meetings)
12-week online public consultation
Online survey for business users interests in both the EU MS and partners
Workshops in partner countries
Other targeted consultations
Task 9 Assess the EU-Central American TSIA
Task 10 Analyse economic effects
Task 11 Analyse effects of implementation on SD economic social environmental
Task 12 Analyse effects on Human Rights
Task 13 Conduct in-depth case studies based on field work
Interim reporting
Drafting of Interim Technical Report
Annexes Progress evaluation Quantitative tables 10-page stakeholder report CS reports
Draft Interim Technical Report 20
Review meeting Commission ISG
Finalisation of Interim Technical Report
Interim Technical Report `
Final phase
Task 13 Conduct in-depth case studies based on field work
Task 14 Reply to the evaluation questions
Task 15 Provide conclusions and recommendations
Tasks 1 45 9 and 10 - 15
Final reporting
Drafting of draft final report
Synthesis report
Executive Summary
Annexes
Draft final report 20
Review meeting Commission ISG
Finalisation of final report
Translation executive summaries (EN FR GE SP)
Final report 20
Possible exit meeting 20
Progress reports
The ToR speci fies 12 weeks for the survey we tentatively propose 16 weeks because the time schedule a l lows i t and i f the project s tarts in January the survey would fa l l in the hol iday season in EuropeCA which would not be conducive for responses
Key
Meeting with the European Commission
Concrete deliverable (eg Inception Report)
Key
Working on the evaluation and endpoints of work per task
Stakeholder consultation activities and meetings
MayAprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr
HOW TO OBTAIN EU PUBLICATIONS
Free publications
bull one copy
via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps
from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)
from the delegations in non-EU countries
(httpeeaseuropaeudelegationsindex_enhtm)
by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm)
or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
Priced subscriptions
bull via one of the sales agents of the Publications Office of the European Union
(httppublicationseuropaeuothersagentsindex_enhtm)
doi[number]
[Cata
logue n
um
ber]
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page ix
3285 Activity 5 Answering of the evaluation questions and other concluding remarks 21 3286 Conclusions and recommendations 21
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human rights 21 3291 Human rights baseline 22 3292 Screening and scoping 22 3293 Detailed assessment 23 3294 Conclusions and recommendations 24
33 Concluding tasks 24
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3) 25
41 Methodological aspects 25
42 Substantive issues 25
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5) 29
51 Structure of the EU-CA FTA 29
52 Institutional set-up of the EU-CA FTA 31
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo priorities 33
54 Operational context of the implementation of the EU-CA FTA 35
6 CONSULTATIONS (TASKS 6 AND 7) 41
61 Consultation Strategy 41
62 Study Website and Electronic Communications 41
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13) 42
71 Case Study Selection 42
72 Case Studies ndash Summaries and Methodologies 43
8 STUDY WORK PLAN 43
LIST OF BOXES TABLES AND FIGURES Box 1 The use of the DPSIR framework in FTAs 20 Box 2 Expectations regarding inputs from stakeholders 41 Table 1 Methodological approaches and sources for the analyses of trade in goods 6 Table 2 Methodological approaches and sources for the analysis of trade in services 8 Table 3 Methodological approaches and sources for the analysis of bilateral FDI 8 Table 4 Overview of the EU FTAs launched and or concluded since 2012 36 Table 5 EU FTA in Latin America and participating countries 37 Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021) 39
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking 40 Table 8 List of proposed case studies 42 Figure 1 Overall evaluation approach 2 Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association
Agreement 3 Figure 3 Overview of the multi-pronged approach to human rights impact assessment 24
Page x
ACRONYMS
AA Association Agreement ACP African Caribbean Pacific BATIS Balanced Trade in Services CA Central America CCA Causal Chain Analysis CGE Computable General Equilibrium CPI Consumer Price Index CSD Civil Society Dialogue CSR Corporate Social Responsibility DAG Domestic Advisory Group DG Directorate-General ECLAC Economic Commission for Latin America
and the Caribbean EESC European Economic and Social Committee EFTA European Free Trade Association EP European Parliament EQ Evaluation Question EU European Union EU-CA FTA Trade Pillar of the EU-Central America
Association Agreement FDI Foreign Direct Investment FRA EU Agency for Fundamental Rights FTA Free Trade Agreement GATS General Agreement on Trade in Services GDP Gross Domestic Product GHG Greenhouse Gas GIs Geographical Indications GPA Government Procurement Agreement GSIM Global Simulation GSP Generalised Scheme of Preferences GTAP Global Trade Analysis Project HRIA Human Rights Impact Assessment ILO International Labour Organisation IPR Intellectual Property Rights ITC International Trade Centre
JC Judgement Criterion LDC Least Developed Country LULUCF Land use land use change and forestry MFN Most-Favoured Nation MSME Micro Small or Medium-sized Enterprise NGO Non-Governmental Organisation NTB Non-Tariff Barrier OECD Organisation for Economic Cooperation and
Development OHCHR Office of the United Nations High
Commissioner for Human Rights OR Outermost Region
RBC Responsible Business Conduct RoO Rules of Origin SDGs Sustainable Development Goals SIA Sustainability Impact Assessment SICA Central American Integration System SIECA Secretariat for Central American Economic
Integration SME Small or Medium-sized Enterprise SPS Sanitary and Phyto-Sanitary TBT Technical Barriers to Trade TISMOS Trade in Services data by mode of supply ToR Terms of Reference TRIPS Trade-Related Aspects of Intellectual
Property Rights TRQ Tariff Rate Quota TSD Trade and Sustainable Development UN United Nations UNCTAD United Nations Conference on Trade and
Development UNECE United Nations Economic Commission for
Europe WTO World Trade Organisation
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 1
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES
Since 20132 the European Union (EU) has been implementing the Trade Pillar ie Part
IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The Trade Pillar
(hereinafter EU-CA FTA) gradually opens markets on both sides increases the stability and
predictability of the trade and investment environment and aims at creating benefits for
consumers and fostering sustainable development Its objectives include also support for
regional economic integration in Central America This is also one of the first EU ldquonew
generationrdquo trade agreements characterised by its comprehensive scope that covers in
addition to liberalisation of trade in goods and services investment public procurement
competition intellectual property rights and trade and sustainable development
After several years of implementation an evaluation is undertaken with the objective of
analysing the economic social environmental and human rights (including labour rights)3
impacts of the implementation of the EU-CA FTA and ultimately of determining whether
there is a need to improve its implementation To support the European Commissionrsquos own
evaluation of the Agreement the Directorate-General (DG) for Trade has awarded a
contract for the ldquoEx-post evaluation of the implementation of part IV of the Association
Agreement (Trade Pillar) between the EU and its Member States and Central Americardquo to
a consortium led by BKP Economic Advisors (BKP) The evaluation is carried out by a team
involving experts from BKP Trade Impact BV Trinomics the Foundation Rural
Development Consult (CDR) the NL-investmentconsulting BV and the University of Costa
Rica The work started in January 2021 and will continue until May 2022
The scope of the evaluation can be delineated as follows in terms of the period covered
it includes the whole implementation period of the EU-CA FTA since the start of provisional
application in 2013 up to now also comparing where appropriate with a five-year period
preceding the entry into force of the Agreement (ie starting in 2008) Geographically it
primarily covers the Parties to the Agreement although some effects of the EU-CA FTA on
selected third countries are also analysed such as developing countries and particularly
least developed countries (LDCs) moreover some global effects (eg climate change)
will also be covered Regarding evaluation criteria effectiveness impact efficiency
coherence and relevance will be considered Finally as already mentioned in terms of
types of effects considered the evaluation will cover economic social environmental and
human rights (including labour rights) effects which the EU-CA FTA may have had either
as a result of the changes in trade it has brought about or through the implementation of
the provisions of the Agreement text itself notably those of the Trade and Sustainable
Development (TSD) chapter
Although most data to be considered for the evaluation are likely to refer to the world pre-
COVID-19 the pandemic will have an impact on the study First in terms of the evaluation
implementation it is likely to affect the consultation activities that may need to be carried
out online rather than in person Second in substantive terms it will be important to pay
attention to issues which are of a priority for stakeholders in the current circumstances
(eg by selecting case studies accordingly) and to consider that eg stakeholder views
might be affected by the current situation
This inception report is the first deliverable under the contract It comprises seven tasks
of the evaluation (as established in the Terms of Reference see Figure 1) focusing on the
presentation of the evaluation methodology and is structured as follows Chapter 2
2 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El-Salvador since 1st October 2013 and with Guatemala since 1st December 2013 3 Whenever this report refers to human rights this includes labour rights
Page 2
presents the evaluation framework with an intervention hypothesis (task 1) while Chapter
3 outlines the proposed methodology responding to the evaluation questions (task 2) and
Chapter 4 covers a brief review of relevant studies on the Agreement (task 3) Chapter 5
provides a descriptive summary of the EU-CA FTA and its implementation so far (task 5)
followed by outline of consultation activities in Chapter 6 (tasks 6 and 7) supported by the
consultation strategy provided in Annex B as well as a list with a preliminary selection of
case studies in Chapter 7 (task 13) The final part includes study work plan in Chapter 8
The draft outline of the interim and final evaluation reports is presented in Annex A7 Other
parts of the Annex provide further details on certain elements of the report
Figure 1 Overall evaluation approach
2 EVALUATION FRAMEWORK
21 Intervention hypothesis of the Agreement (Task 1)
An indicative intervention hypothesis developed by the Commission linked the operational
objectives (as listed in Article 78 of the EU-CA FTA) to specific and overall objectives set
out in Article 2 of the Agreement and its Recitals In line with Task 1 of the evaluation ToR
we have adapted the intervention logic developed by the Commission as follows
All 10 operational objectives listed in Article 78 of the Agreement have been included
Specific and overall objectives have been considered in the context of short-term and
medium-term outcomes as well as long-term impacts
Underlying assumptions have been identified and integrated into the intervention
hypothesis
The relationship between the evaluation questions (EQ) and the intervention hypothesis
has been specified
The updated version of the intervention hypothesis is presented in Figure 2 overleaf
The intervention hypothesis was also instrumental in developing the analytical framework
of the evaluation which brings together the evaluation questions of the ToR the associated
judgment criteria and indicators the data sources and the methodological tools with which
we will collect data The refined analytical framework is presented in the following sub-
section
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 3
Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association Agreement
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 5
Main assumptions (at the level of coherence)
Pillar IV and its implementation has been coherent with the EUrsquos trade and development
policies and in particular with the EUrsquos commitment to sustainable development in
trade policies as a contribution towards attainment of the SDGs (EQ8)
Main assumptions (at the level of efficiency)
The utilisation rate of the Trade Pillar is high (EQ5)
Implementation of the Trade Pillar does not lead to trade diversion (EQ5)
Costs associated with implementation of the Trade Pillar are proportionate to the
benefits it has generated (EQ6)
The distribution of both costs and benefits is proportionate among different
stakeholder groups and interests (EQ6)
Implementation of the Trade Pillar does not create unnecessary regulatory costs
(including administrative burden) (EQ7)
Main assumptions (at the level of effectiveness impact and relevance)
The implementation of the Trade Pillar does not create unintended negative
consequences (EQ3)
The positive impact of the Trade Pillar is inclusive and does not benefit only a limited
group of stakeholders (EQ6)
Implementation of the Trade Pillar has contributed to trade diversification (EQ5)
Provisions of the Trade Pillar continue to be relevant for strengthening trade relations
between the Parties and regional integration of Central America (EQ9)
22 Evaluation Questions Judgement Criteria and Indicators
The evaluation framework has been based on the evaluation questions listed in the ToR for
the study which are as follows
EffectivenessImpact
EQ 1 To what extent have the objectives as laid down in Article 78 of Part IV of the
Agreement been achieved
EQ 2 What are the factors influencing (either positively or negatively) the achievements
of the objectives specified in Article 78
EQ 3 Has implementation of the Trade Pillar had unintended (positive or negative)
consequences and if so which ones
EQ 4 What has been the impact of implementation of the Trade Pillar
Efficiency
EQ 5 To what extent has implementation of the Trade Pillar been efficient with respect
to achieving its objectives
EQ 6 To what extent are the costs associated with implementation of the Trade Pillar
proportionate to the benefits it has generated Is the distribution of both costs and
benefits proportionate among different stakeholder groups and interests
EQ 7 Are there unnecessary regulatory costs (including administrative burden)
Coherence
EQ 8 To what extent has implementation of the Trade Pillar been coherent with the
EUrsquos trade and development policies ndash and in particular with the EUrsquos commitment to
sustainable development in trade policies as a contribution towards attainment of the
SDGs
Relevance
EQ 9 To what extent do the provisions of the Trade Pillar continue to be relevant in
order to address the current trade needs and issues of the EU and Central America
Page 6
The framework provides the evaluation questions the judgement criteria for each of them
the analysis needed to substantiate findings and conclusions made in the evaluation report
and the sources through which data and information will be obtained The evaluation
framework also links evaluation questions and judgement criteria to the analytical tasks to
be performed according to the ToR Table 1-1 in Annex A1 presents this framework
It should be noted that methodological tools and indicators used are not shown in the table
but are explained in the next chapter
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2)
In this chapter we describe the methodologies and tools planned to be used in the
evaluation separately for each task The analysis will be concluded with recommendations
on how the implementation of the Agreement can be further improved for the benefit of
the EU and Central American partner countries It should be noted that the structure of
the presentation is in line with the tasks defined in the ToR to facilitate comparison and
compliance with ToR requirements However the order of findings will be guided by the
evaluation framework presented in chapter 2 To facilitate the link with the evaluation
framework for each task we indicate to which evaluation question respectively judgement
criterion it contributes
31 Analysis of economic effects (Task 10)
In 2010 the EU was Central Americarsquos second most important trade partner after the
United States (and after intra-regional Central American trade) The total value share of
the EU in Central American trade was 94 EU exports mainly went to Costa Rica (53)
Honduras (22) and Guatemala (12) In 2018 the EU was still Central Americarsquos second
trade partner after the United States but with a higher share of 122 of all Central
American trade (IMF 2019) In 2019 Central Americarsquos trade with the US (in both goods
and services) totalled USD 70 billion (ie EUR 678) (USTR) Trade in goods with the EU
reached EUR 12 billion in 2019 and trade in services EUR 82 billion in 2018 (European
Commission 2020a)
311 Task 101 Analysis of the evolution of trade in goods
Analysis under this task will seek to respond to the evaluation questions related to JC 1A1
1A2 and JC 41 The EU-CA FTA offers advantages in terms of market access for the EU
and Central American countries Some of the main elements of the Agreement regarding
goods exports from the EU to Central America are complete liberalisation of tariffs for
manufactured goods and fisheries at the end of the tariff phase-out period and immediate
liberalisation of 69 of EUrsquos exports to CA at the start of the agreement saving EUR87
million in duties annually Specific analyses to be carried out under Task 101 have been
summarised in Table 1 For each sub-task we present the specific analysis that needs to
be carried out and main methodological approach we suggest as well as relevant data
sources
Table 1 Methodological approaches and sources for the analyses of trade in goods
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
1 Goods showing the largest increase or decrease in total and bilateral trade flows
Using COMEXT statistics at different disaggregation levels the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing products
2 Development of trade in goods against previously applicable GSP+ and GSP tariffs
Taking COMEXT data as a basis to investigate whether the GSP status of a product has a bearing on how the EU-CA FTA has influenced the rate of growth in trade we will compare two groups of goods those for which tariffs were 0 under GSP versus those for which tariffs were greater than 0 under GSP+
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 7
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
3 Preference utilisation rates and forgone duty saving of economic operators of all Parties
Based on COMEXT data (for EU imports) and data provided by the Commission (for EU exports) a quantitative analysis will be undertaken to identify the key sectors and product categories where preferences are not fully used We propose to include up to 3 questions in the survey to identify factors that encourage discourage companies to use the Agreement
4 Use of tariff rate quotas (and the reasons for suboptimal use)
Data up to 2019 is already available in the Commissionrsquos annual implementation reports Updating the data is supposed to rely on similar sources as the Commissionrsquos annual reports Reasons for sub-optimal use of TRQs will be investigated during the consultations as this cannot be inferred through statistical analysis
5 Trade diversion in particular from interregional Central American trade towards the EU
First we aim to use COMEXTCOMTRADE data to analyse the evolution of merchandise trade flows over time (between the EU and the partners but also within the region in comparison to the rest of the world)
Second we aim to look at the CGE results that should be able to tell us the pure EU-CA FTA effect on intra-Central American trade flows
6 Impact of the Agreement in relation to the creation persistence reduction or removal of non-tariff measures (NTMs) that have a significant impact on EU-CA countriesrsquo trade in goods
We will use UNCTADrsquos NTM TRAINS database and classification for identification description and analysis of specific NTMs affecting trade relations between the EU and Central America We will also look at NTMs including market access barriers raised by the Parties in the sub-committee meetings and will complement the findings with stakeholder engagement
7 Analysis of the importance of Free Trade Zones in Panama (especially the FTZ in the Port of Colon)
Using trade statistics we can get a picture of the way trade flows entering Central America via the Port of Colon (for example) are distributed across Central American countries These patterns ndash at sector level ndash would tell us the most economically significant EU exports This
will be complemented by qualitative analysis
8 Investigation of whether new enterprises started to export or whether enterprises already exporting started to export new products
We expect to undertake this analysis by relying on available firm-level data as well as specific questions for SMEs in the targeted business survey the SME Panel questionnaire and other consultation activities directed towards SMEs Additionally for this sub-task we will try to get access to national databases containing firm-level panel data based on highly disaggregated customs information that include exports (imports) of products and their destinations
9 Analysis of the evolution of trade import shares originating in the EU in total imports of the six CA countries (and vice versa)
COMEXT and COMTRADE data will be used to carry out this analysis We will ensure that we specify the third countries in a clear way The EU and each of the Central American countries The United States Mexico and Canada but also Brazil Argentina
Paraguay and Uruguay (Mercosur) and China Other countries (Rest of World)
10 Analysis of the impact of the EU-CA FTA implementation on diversification of trade
The diversification of trade in goods will be evaluated according to two main dimensions 1 Diversification in the range of products traded between the EU and each of its partners 2 Diversification in the number of EU member states trading with the Central American partners
11 Comparison of the development of trade in goods between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
COMEXT and COMTRADE data will be used to carry out this analysis Regarding trade of the partner countries the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as the MERCOSUR countries The choice of the US can be explained by CAFTA-DR agreement that has been in place since 2006 between the US and Central America and the Dominican Republic
12 Investigation of whether the EU-CA FTA has facilitated trade with third countries including via the use of intermediate products
Use of GTAP data (since the Trade in Value Added ndash TiVA database only covers Costa Rica) to look at intermediate linkages and whether these have helped the competitiveness of the CA economies We will also look at the CGE modelled development of the real exchange rate as an indicator of what happened to CA economiesrsquo levels of competitiveness
13 Analysis of the degree to which implementation of the EU-CA FTA has contributed to diversification of sources of supply of goods
COMEXT and COMTRADE data will be used to carry out this analysis We will look at the inputs shares for specific products in CA from the EU and vice versa and compare the development of these shares to the shares for the same products from international trade partners
14 Identification of regions within the partner countries that have benefited most and of
regions having benefited least (including the identification of constraints)
We expect to rely mainly on a combination of mapping of the sectoral CGE effects per region with literature review and consultation activities to identify the regions that have most least benefited from the
agreement Social progress indexes are computed at municipal level in Costa Rica and at provincial level in Panama as well as for some regions in Guatemala and El Salvador but this is for 2017-2018 only
Page 8
312 Task 102 Analysis of the evolution in trade in services
Analysis in this task is linked to JC 1A3 Although the effects of trade agreements on EU
services trade with third countries are not easily quantifiable we will seek to use available
data to demonstrate the impact of the EU-CA FTA on EU services trade We will assess
whether the Agreement has led to an improvement or worsening of the structural
imbalance between the parties The EU posted a substantial services trade surplus of EUR
10 billion with all six Central American partners combined in 2013 but this surplus has
decreased to EUR200 million by 2017
Table 2 Methodological approaches and sources for the analysis of trade in services
Specific analysis to be carried out
Main methodological approach and sources
1 Services showing largest increase decrease in total and bilateral trade flows between individual CA countries and EU
We will identify sectors showing the biggest increase in total trade in services flows and in bilateral trade flows as well as those having performed worst This analysis will be conducted using time series trade statistics at different levels of disaggregation (from Eurostat OECD and UNCTAD) the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing sub-sectors Reasons for performance will be identified by a combination of sources including literature review and targeted consultations
2 Comparison of the development of
trade in services between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
The comparison of the development of bilateral trade in services between the EU and the individual Central American countries with the development of trade in services
for the EU and its Member States and for Costa Rica Guatemala El Salvador Honduras Nicaragua and Panama with a suitable reference group of countries will provide further evidence on the actual impact of the agreement of trade in services flows As is the case for trade in goods (Task 101) the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as MERCOSUR countries if possible The choice of the US matters because of the CAFTA-DR agreement that has been in place since 2006
3 Analyse trends in international financial capital flows and the evolution of key financial industry segments ndash with the GATS modes of supply as the basis
First we will analyse trends in international financial capital flows between the EU and the Central American countries as well as globally For this we will use available Eurostat OECD andor UNCTAD data as well as Central Bank data if available
Second in order to look at how sectors are performing (well or not so well) we will focus on a concise general ndash but sector level ndash analysis and what drivers we can identify for economic performance
Third we propose that the following case study (see Task 13) could be undertaken Evaluating financial industry segments such as banking insurance asset management sustainable investment ndash in Panama or Costa Rica
Data source suggestions The OECDrsquos Services Trade Restrictiveness Index The GATS Trade Restrictiveness Index which together establish the amount of ldquowaterrdquo in the partiesrsquo GATS
bindings that can be ldquosqueezedrdquo by a modernised Agreement Central Bank data on financial and insurance services economic activity and trade Global Investment Competitiveness Report (World Bank 2019) ISDB data from Eurostat BOP statistics
313 Task 103 Analysis of the evolution of foreign direct investment (FDI)
The analysis in this task will be linked to JC 1A5 Although the effects of trade agreements
on Foreign Direct Investment (FDI) with third countries are not easily quantifiable we will
seek to use available data to demonstrate the impact of the EU-CA FTA on FDI At a general
level this task will entail to assess what impact the EU-CA FTA has had on structural
balances or imbalances between the EU and its Central American partners
Table 3 Methodological approaches and sources for the analysis of bilateral FDI
Specific analysis to be carried out
Main methodological approach and sources
1 Largest increases decreases in FDI flows between individual CA countries and the EU
We will identify main changes in FDI flows over the past 10 years between the EU and Central American countries if possible at sector level This analysis will be conducted using the ITC investment map data UNCTAD investment data and ISDB data from Eurostat BOP statistics Data limitations are expected to be significant for this subtask Reasons for good or bad performance will be identified by a combination of sources including literature review and targeted consultations
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 9
Specific analysis to be carried out
Main methodological approach and sources
2 Comparison of the development of FDI flows between the signatory countries
The proposed methodology would examine the investment effect at both the extensive and intensive margins using the two-step Heckman (1979) estimation as implemented in Helpman et al (2008)
3 Analysis of the investment climate
and of the attractiveness to investment of the six CA countries
An analysis of the investment climate and of the attractiveness to investment of the six Central American countries taking into consideration the possible impact of the
existence of bilateral investment treaties or of double-taxation treaties will be undertaken We propose to review inter alia the evolution of the following indexes OECDrsquos Foreign Direct Investment Restrictiveness (FDIR) index Various FDI attractiveness and FDI confidence indexes ndash eg by AT Kearny and Ernst amp Young Global Investment Competitiveness Report (World Bank 2019) World Bank lsquoDoing Business Indicatorsrsquo ISDB data from Eurostat BOP statistics wwwinvestmentmaporg from the ITC
314 Task 104 Presentation of overall economic impacts
The analysis in this task is linked to JC 41 and will rely on the computable general
equilibrium (CGE) modelling undertaken by DG Trade The CGE model is the quantitative
cornerstonefoundation of the ex-post evaluation Important variables of interest for the
economic analysis will be those which are standard for a CGE analysis such as GDP and
trade flows (total bilateral and by sector) and sectoral output Based on the CGE modelling
results we will estimate the overall impact on the economy of the EU the partner countries
as well as third countries in particular LDCs The economic analysis will build further on
the modelling results We will report these in sufficient detail to highlight the economic
effects of the EU-CA FTA More details on the CGE model are provided in Annex A2
315 Task 105 Determining the impact on implementation of the Trade Pillar of the
various institutional structures
Our analysis under this task will seek to respond to evaluation questions No 1 and 5 (with
JC1A2 JC1A6 JC1A7 and JC1A9) ie how the operation of the institutional set up has
contributed to achieving the objectives of the EU-CA FTA outlined in Article 78 and how
effective and efficient the Association Committee (in trade configuration) six Sub-
committees and an ad hoc Working Group have been to date To determine this we will
analyse provisions of the EU-CA FTA referring to institutions and their operation in practice
In the first step we will analyse Articles 4-8 establishing the Association Council the
Association Committee and Sub-Committees and setting out their decision-making powers
This will be done jointly with Articles 345-346 setting out specific tasks of the Association
Council and the Association Committee acting in trade configuration including powers to
amend certain parts of the Agreement (within Trade Pillar) This will be followed by Articles
347-348 about Part IV coordinators and Sub-Committees established under EU-CA FTA and
will be complemented by the analysis of Articles 91 123 139 156 274 and 294 outlining
areas of responsibility of the individual Sub-committees4 and the Rules of Procedure of the
Association Council and the Association Committee (Decision No 12014 of the Association
Council) which also apply to Sub-Committees This will let us develop an understanding
about the mandate of each institution its decision-making powers including those related
to amending the EU-CA FTA and monitoring compliance by each Party frequency and
format of meetings relations with other institutions under the Agreement reporting and
escalation In this way we will establish an expectation regarding the role each institution
should have in implementation of the EU-CA FTA and achieving its objectives
4 Sub-committee on Market Access for Goods (Article 91) on Customs Trade Facilitation and Rules of Origin (Article 123) on Technical Barriers to Trade (TBT) (Article 139) on Sanitary and Phytosanitary Matters (SPS) (Article 156) on Intellectual Property (Article 274) Board on Trade and Sustainable Development (TSD) (Article 294) and Ad hoc Working Group on Government Procurement
Page 10
In the second step we will analyse the actual operation of all the above structures based
on available documents and engagement with the Parties as well as relevant stakeholders
We will take as the basis reports from Sub-committee and Association Committee meetings
and will complement them with the annual Commissionrsquos Implementation Reports and
other documents eg conclusions adopted by civil society representatives at the annual
meetings under the TSD chapter We will also determine whether formal decisions have
been taken by the Association Council or Committee and if so analyse the extent to which
they have contributed to implementation of the EU-CA FTA We will also look at concerns
raised by the Parties how they have been addressed and how much time it took to achieve
a satisfactory solution Based on findings from our analysis we will provide conclusions
and recommendations for the future notably for the TSD board
316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated
exportimport procedures for key stakeholders
Analysis in this task will be related to JC 1A2 Based on reviews of the Agreement text as
well as the work of the Sub-committee on ldquoCustoms Trade Facilitation and Rules of Originrdquo
we will analyse in a qualitative way which customs-related aspects have facilitated or
complicated bilateral trade like rules of origin management of TRQs agricultural safeguard
measures and approved exporter status We will seek to determine eg whether Article
304 par 1 provision (related to reimbursement of duties in CA Party of transit and their
payment in the CA Party of import) is applied in practice and if so how it is evaluated by
economic operators
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the
Trade Pillar
This task is also linked to JC 1A2 and the methodological aspects described above are also
valid for SPS related issues We see two subtasks under this request 1) An analysis to
what degree implementation of the SPS Chapter in the EU-CA FTA has facilitated agri-food
trade without lowering any partyrsquos SPS standards 2) The extent to which the capacity
building and technical assistance provided by the EU to Costa Rica El Salvador Guatemala
Honduras Nicaragua and Panama has had an effect (looking at what technical assistance
projects and funds were used)
318 Task 108 Analysis of the implementation of the Government Procurement
chapter of the Trade Pillar
The analysis in this rask is linked to JC 1A6 and will examine the impact of the opening of
the government procurement markets of the Parties using a multi-step approach 1)
Review of the recent and ongoing work of the Ad Hoc Working Group on Government
Procurement 2) A statistical analysis of the procurement value shares for EU business (if
possible) and SME participation which will be complemented by desk research and
anecdotal evidence of success stories of EU companies in Government procurement
markets of six CA countries and 3) Review of the level of compliance with the Agreement
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar
This task is related to JC 1A7 and 1A8 The methodological approach foreseen to analyse
other areas of the Agreement (like Technical Barriers to Trade e-commerce Competition
and protection of intellectual property rights (IPRs) including geographical indications)
Our approach focuses on 1) Statistical analysis compiling statistical descriptive analysis
on each issue prior to and after entry into force of the Agreement 2) Literature review
the analysis on the implementation and use of geographical indications in Central America
(eg Rivar 2020) 3) Case studies A specific case study on some of these other issues
could be carried out
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 11
3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has
led to a greater economic integration between the Central American partners
This task is linked to JC 1A4 The EU-CA FTA has been a mechanism that encourages
regional integration but it takes place within a much wider framework of regional
cooperation efforts between the CA countries with the EU-CA FTA being only one element
in this wider context This task focuses on the impact of the EU-CA FTA on regional
integration not on the overall trend or state of affairs regarding regional integration We
use three elements for our analysis 1) The statistical analyses that we have carried out in
Tasks 101 (trade in goods) 102 (trade in services) and 103 (FDI) help to shed light on
regional integration impact of the EU-CA FTA also 2) We look at the results of the CGE
analysis including at how the intra-regional trade patterns have changed because of the
EU-CA FTA 3) We investigate what progress has been made in terms of the different
elements for integration We will use EU and CA data sources to underpin our analyses
3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for
imports of bananas
This task is related to JC41 We envisage three types of analysis under this task in addition
to a possible case study 1) Descriptive statistical analysis based on trade in bananas since
2008 in order to capture developments before and after the entry into force of the EU-CA
FTA distinguishing bilateral trade in bananas EU banana imports from the non-LDC ACP
countries from LDCs and intra-EU imports from the Outermost Regions 2) A quantitative
impact analysis using a partial equilibrium model ndash the Global Simulation (GSIM) model
(Francois and Hall 2009) 3) A qualitative impact analysis causal chain analysis will be
applied to look at what the Agreementrsquos sector-level social and environmental effects have
been In this step we focus in the socialhuman rights pillars on how vulnerable groups
could be affected at sector level The qualitative sectoral environmental analysis will cover
the impact of the FTAs on land use and related issues water and waste management and
biodiversity and protection
3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on
SMEs
The analysis in this task is linked to JC 41 The ldquoSME-Testrdquo will be guided by the following
steps 1) Consultation of SME Stakeholders SMEs are a central element of the consultation
strategy and will be present at every stage of it 2) Identification of affected business
early on in the analysis we will identify whether and which SMEs (eg medium-sized) are
among the affected businesses 3) Identification of concrete stories as the Interim Report
progresses we will have sufficient information to identify 20 concrete stories from SMEs
as required by the Terms of Reference
3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers
This task will be approached in two parts the first one being dedicated to impacts on
consumer rights and the other one to welfare-related impacts of the EU-CA FTA which also
affect consumers in their purchasing decisions The analysis will be related to JC 42 and
evaluation questions No 18 and 6 In addition we will aim to determine to what extent
EU-CA FTA has contributed to attaining SDG 1 (no poverty) and 10 (reduced inequalities)
Regarding consumer rights in the first step we will refer to the literature according to
which consumers usually benefit from global trade and preferential trade agreements due
to lower prices of purchased goods and services (resulting from reduction of tariff and non-
tariff barriers) a wider variety of traded goods and services the related satisfaction of
diversified needs and preferences and higher quality of available goods and services
Page 12
In the second step we will consider impacts which the EU-CA FTA (might) have had for
consumers regarding availability safety sustainability traceability and quality of traded
goods and services as well as which impact its promotion (or consumersrsquo awareness of it)
may have on consumersrsquo knowledge regarding the market offer and their trust in it The
list of questions to test will be guided by the EU Better Regulation Tool Nr 32 related to
impacts on consumers We will also draw on other parts of the study analysing
implementation of provisions related to regulatory measures and standards eg TBT
SPS TSD dialogue and cooperation between the EU and partner countries and
transparency to outline what level of protection incl consumer protection and production
standards is provided by the EU-CA FTA We will also refer to the EU RAPEX database ie
the alert system for dangerous non-food products listing notifications of such products
originating from the EU and partner countries
The second part of our analysis will focus on impacts of the EU-CA FTA on welfare In the
first step based on literature review and statistical data including relevant indexes (eg
the share of population living below the poverty line) we will analyse trends in the reporting
period in the EU and Central America regarding situation of consumers from different
groups of the population incl incomes expenditures levels of poverty and inequality
income and price levels wages and other types of income and any changes in this context
In the following step we will use outcomes of the economic modelling to estimate impacts
on welfare and inequality resulting from EU-CA FTA implementation eg prices and wages
In this context we will also consider to what extent the Agreement helped to attain SDG
No 1 (No Poverty) and SDG No 10 (Reduced Inequality) This will be complemented by
stakeholder consultations and finished with conclusions and recommendations
3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on
the budgets of the EU and the partner countries
The analysis in this task is linked to JC 41 It will examine impact of the FTAs on the EU
budget (ie revenues forgone) and will largely result from the economic model We
anticipate that for the EU the foregone tariffs on imports from the partner countries will
be estimated based on the level of EU imports from the selected countries as a baseline
and the tariffs that would have applied to those imports
3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on
EU Outermost Regions (ORs)
This task is linked to JC 41 The impact on ORs will be assessed based on the trade
diversion and deflection identified in the CGE analysis A key limitation in the economic
modelling framework is however that the EU ORs are not established as a separate region
To meaningfully analyse the effect on the EUrsquos ORs we propose two elements 1) A
matching analysis for the EU and the six partner countries regarding products that matter
for ORsrsquo trade (to either partner countries or the EU) 2) Competition analysis between
ORs and CA partner countries for exporting to the EU The effects will be determined
qualitatively distinguishing if applicable the ORs which might be positively or negatively
affected by the Agreement
3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on
developing countries in particular on LDCs and countries having an Economic
Partnership Agreement (EPA) with the EU
This task is related to JC 41 Our approach to look at the EU-CA FTArsquos impact on developing
countries and LDCs will largely consist of the interpretation of the results of the economic
model simulations which has defined lsquoLDCsrsquo as a separate region This allows us to look at
the effect the EU-CA FTA has had on them We will also look closely at effects for countries
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 13
which are implementing an Economic Partnership Agreement (EPA) with the EU In terms
of the impact we will look first at an economic impact followed by effects on the other
sustainability pillars The former will include (i) a matching analysis for the EU and the six
partner countries regarding products that matter for LDCsrsquo trade (to either partner
countries or the EU) and (ii) competition analysis between LDCs and CA partner countries
for exporting to the EU We do not expect the effect to be significant for the LDCs because
the global impact of the EU-CA FTA is limited
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable
development (Tasks 11 and 12)
321 Task 111 Analysis of the effects of implementation of the Trade and
Sustainable Development (TSD) chapter of the Trade Pillar
This is one of the priority tasks linked to JC 1A1 In the first step we will divide provisions
of the TSD chapter into thematic blocks to identify areas for further analysis These include
commitments of the Parties to effectively implement in their laws and practice the eight
fundamental conventions of the International Labour Organization (ILO) as well as the
Multilateral Environmental Agreements to which they are Party the right of the Parties to
regulate sustainable management of natural resources promotion of trade supporting
sustainable development institutional provisions and dispute settlement mechanism
In the second step based on findings from the analysis of the actual situation in the EU
and partner countries carried out in Tasks 113-118 and documents outlining the
implementation of the TSD chapter (eg reports of international monitoring bodies
reports from meetings of the TSD Board and civil society advice to the Parties) we will
map activities undertaken by the Parties in areas covered by the TSD chapter in a break-
down prepared in the first step This will enable us to conclude to what extent the scope
of the TSD chapter has been covered and if actions taken by the Parties individually and in
cooperation activities have contributed to the implementation of TSD commitments and
attaining the objectives of the chapter and relevant SDGs (No 8 on decent work and
employment for all No 13 on combating climate change and No 14-15 on sustainable
use and protection of marine environment forests and biodiversity) Our analysis will be
complemented by stakeholder engagement5 We will conclude the analysis with
recommendations for the future incl any improvements in operation of institutions to
support compliance of the Parties with provisions of the TSD chapter
322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter
This is one of the priority tasks liked to JC 1A10 and evaluation questions No 1 5 and 8
In the first step we will analyse formal commitments of the Parties regarding the set up
and operation of the institutional mechanism ie Article 294 (Contact Points of the Parties
the TSD Board and civil society Advisory Groups) and Article 295 (Civil Society Forum)
In the second step we will analyse the establishment and operation of TSD institutions in
practice including their meetings activities undertaken between sessions cooperation and
5 When the Report refers to stakeholder engagement it means diverse activities foreseen in the stakeholder engagement programme outlined in detail in Annex B to this Report (Consultation Strategy) For each task stakeholder engagement activities will be tailored to the most relevant group of stakeholders methodology applied in the task and type of data which will be needed for the analysis For example in the analysis carried out with regard to TSD chapter the focus will be on targeted interviews with civil society members of the Advisory Groups in the EU and Central American countries as well as with Government and Commission representatives Further sources of information and activities will include targeted meetings eg DAG meetings and workshops with Central American countries CSD meetings with the European civil society and written positions submitted by civil society organisations As a complementary source we will use replies from online public survey
Page 14
dialogue between Governments and civil society The analysis will be based on reports
from meetings research studies recommendations from civil society to the Parties and
interviews with representatives of the Commission Governments from Central America
EU Delegations the EESC secretariat of the EU Advisory Group as well as civil society
representatives from the EU and Central American countries including members of their
Advisory Groups We will also evaluate effectiveness and efficiency of the institutional
mechanism and its role in the monitoring and implementation of the TSD chapter the
ability to address problems and to pursue cooperation and dialogue We will put an
emphasis on the evaluation of the TSD Board its ability to monitor compliance with the
commitments of the Parties effectiveness in choosing priorities and structuring the work
programme pursuing cooperation activities and resolving problems This part will also
analyse civil society capacity to exercise its mandate and monitoring implementation of
TSD chapter the quality of dialogue between Governments and civil society and the follow-
up to civil society recommendations In this context and in line with suggestions provided
by reviewed research studies we will also evaluate to what extent the discussion among
the civil society and between Governments and civil society focuses on substance
(compared to focusing on process) and whether the civil society has the means and
capacity to prepare for and to engage in such a discussion We will conclude the analysis
with recommendations for the future incl any improvements in operation of institutions
323 Task 113 Analysis of employment impacts
The analysis in this task will focus on impacts for employment levels and relate to JC 42
and evaluation questions 4 and 6 In the first step we will analyse trends in employment
and unemployment levels in the EU and partner countries for their whole economy and
across sectors over the reference period We will also identify factors influencing observed
trends including macroeconomic and labour policy measures applied by the Governments
investment in education and skills development migration from rural to urban areas and
across region and impacts of trade and investment including through trade agreements
In the second step the analysis will be focused on assessing quantitative impacts (direct
and indirect) of the EU-CA FTA on the number of jobs direct and indirect (for skilled and
un-skilled workers for the EU and partner countries across sectors) and be based on the
results of the economic modelling We will compare these results with the real-life data
and trends observed in the first step to conclude to what extent the reduction in trade
barriers and changes in output across sectors related to the implementation of the EU-CA
FTA have influenced demand for labour given the assumption of a fixed total employment
in the economy and full labour mobility between the sectors with workers leaving sectors
seen as less competitive and moving towards those having better prospects of growth and
working conditions including wages We will also draw a conclusion to what extent
observed trends in employment should be attributed to the EU-CA FTA and to what extent
to other factors incl macroeconomic environment global trends in commodity prices
domestic policy investment and trade agreements with other partners Stakeholder
consultations will help to verify our findings
324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda
(job creation labour standards social protection and social dialogue) on
working conditions poverty reduction and enforcement
This is one of the priority tasks Our analysis will seek to answer the evaluation questions
No 1 4 and 6 (JC 42) Given the broad scope of this task we will divide it into two parts
a) labour standards and social dialogue (the Decent Work Agenda) b) working conditions
including social security and health care coverage of workers and labour inspection
In the first step we will describe the situation in the EU and partner countries and changes
over time regarding the subject matter as well as factors influencing observed trends We
will focus on the following
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 15
Task 114 a) on labour standards will look at the implementation of the core labour
standards as enshrined in the fundamental ILO Conventions ratified by all Parties to
the EU-CA FTA and evaluated by the ILO monitoring bodies6 Regarding trends in child
labour occurrence the analysis will include eg the number of working children types
of activities and sectors involved the number of hours worked per week motives for
undertaking work and involvement in hazardous work Influencing factors will be
considered and their impact on job availability for adult household members the level
of generated income and the extent to which it covers family needs Regarding forced
labour the analysis will include types of activities and sectors involved and influencing
factors including criminal activity and the level of law enforcement On freedom of
association and the right to collective bargaining the analysis will cover conditions for
setting up joining and operation of trade unions and employer organisations and
functioning of social dialogue for the whole country and ndash if data is available ndash across
sectors including indicators such as the share of trade union members in the total
number of workers for the whole country and in a break-down by sector and changes
over time Regarding non-discrimination at work we will focus on groups of workers
which may be in a disadvantaged position on the labour market eg youth disabled
persons migrants or indigenous peoples (women will be analysed in Task 116) and
indicators such as labour participation rate and unemployment rate the share of each
group working informally or being in a situation of sub-employment (ie receiving a
wage below the minimum level despite working full time or having no opportunity to
work full time despite being ready to do so)
Task 114 b) on working conditions and labour inspection will include trends in job
quality indicators over time the average number of working hours per employee per
week the number or rate of fatal and non-fatal accidents at work social security and
health care cover of workers wage levels type of contract the number of labour
inspectors and inspections carried out at work places and the infrastructure and funds
being at the disposal of inspection services (we will consider in that context that all EU
Member States and five Central American countries except Nicaragua have ratified
the ILO convention No 81 on labour inspection)
In the second step based on economic modelling we will identify the sectors most affected
(positively or negatively) by the EU-CA FTA and using the analysis done in step one will
seek to determine if trends observed in the respect for labour standards and quality of
working conditions in individual sectors can be attributed to the operation of the Agreement
or rather to other factors In cases where any concerns related to labour standards eg
child labour incidence or low presence of trade unions are identified in sectors particularly
involved in trade with the EU notably in exports we may apply an in-depth analysis in a
dedicated case study We will also refer to the implementation of the TSD chapter to
establish whether policy dialogue cooperation activities and engagement with civil society
have also influenced the situation We will complement desk research with stakeholder
engagement
325 Task 115 Analysis of impacts on the informal economy and informal
employment
This is one of the priority tasks linked to evaluation questions No 1 and 8 (JC 42) We will
also aim to determine to what extent the Agreement has contributed to attaining objectives
of SDG No 1 (no poverty) and No 10 (reduced inequalities) In the first step we will
develop a description of the situation in the partner countries during the analysed period
concerning the size and structure of the informal economy and factors influencing its
6 These include conventions No 138 and 182 on elimination of child labour No 29 and 105 on prohibition of forced or compulsory labour No 87 and 98 on freedom of association and the right to collective bargaining and No 100 and 111 on equal pay for work of equal value and non-discrimination at work
Page 16
existence as well as its geographic pattern in Central America and each of the partner
countries separately We will aim to identify if there are links between the informal
economy and eg the economic structure and dynamic in certain regions and their
involvement in trade We will also report about steps taken by the Governments in a move
towards formal economy including dedicated national strategies adopted in Costa Rica and
Guatemala
In the second step based on the results of the economic modelling and trade statistics for
trade and investment flows between the EU and Central American countries an additional
literature review and stakeholder consultations we will aim to establish to what extent
trade and in particular the EU-CA FTA has contributed to the observed trends in each
partner country We will verify our findings in stakeholder consultations
326 Task 116 Analysis of impacts on gender inequality
The analysis in this task will seek to answer the evaluation questions No 1 4 and 6 (JC
42) We will also aim to determine to what extent EU-CA FTA implementation has helped
to attain SDG No 5 (gender equality) No 8 (decent work and economic growth) No 1
(no poverty) and No 10 (reduced inequalities) Work under this task will be guided by the
approach proposed in UNCTADrsquos Trade and Gender Toolbox (UNCTAD 2017) which
considers impacts on women in their roles as workers entrepreneurs traders and
consumers Complementary considerations regarding impacts for each of those groups will
be inspired by other literature (eg Fontana 2009) and methodological approaches (eg
European Institute for Gender Equality 2016)
In the first step we will analyse the situation in the Central American partner countries
regarding womenrsquos participation in the labour market economic activity as entrepreneurs
and traders (with a consideration of their access to assets and supporting measures) and
their position as consumers incl the level and type of income received and being at their
disposal Based on the available data we will also analyse gender inequalities before and
after the entry into force of the EU-CA FTA and measures applied by the countries and
provided by international donors to support an increased womenrsquos participation We will
also review reports of the ILO Committee of Experts regarding implementation of the two
ILO fundamental conventions on non-discrimination ie No 100 (equal pay for work of
equal value) and No 111 (non-discrimination at work) ratified by all CA partner countries
In the second step we will compare observed trends stemming from the real data with
outcomes of the economic modelling to determine to what extent they may be linked to
impacts of Agreement and to what extent they result from influence of other factors
Focusing on women as workers we will identify sectors important for them (based on
their shares in the total womenrsquos employment and a ratio of female and male workers
in each such sector) and compare observed trends in employment levels (in total and
across sectors) with the results of the modelling (changes in employment levels across
sectors) to determine whether the EU-CA FTA has contributed to changes reported in
the real life and if so to what extent In this context we will also consider impacts of
tariff reduction on public revenues and whether this might have had an impact on the
provision and quality of public services which in turn may have an effect on women and
their ability to participate in the labour market or to undertake an economic activity
For women as entrepreneurs if relevant data is available we will identify sectors of
their economic activity and compare trends in the actual operation of these sectors over
time (eg growth or decline) with outcomes of the economic modelling to determine if
the EU-CA FTA might have had an impact on output of these sectors and as a result
position of women as entrepreneurs
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 17
Moreover if more detailed data is available regarding sectors and groups of products or
services manufacturedprovided by women-led enterprises as well as their engagement
in international trade we should be able to say (again comparing the real-life data with
economic modelling) what impact the Agreement may have exercised on women as
traders and in this context on sales and exports of their products or services or their
competition with or the use of imports We will also consider whether the EU-CA FTA
provisions regarding eg tariff reduction SMEs TBT SPS might have had an impact
for women-led enterprises (given their size and sectors of operation)
Concerning the role of women as consumers we will look at real-life trends in income
and price levels and compare them with outcomes of the economic modelling to see
what impacts the EU-CA FTA might have had on welfare and price levels as well as the
availability and accessibility of goods and services
Our analysis will be complemented by engagement with stakeholders including women
organisations to identify barriers in their activity on one hand and facilitating measures on
the other and to gather more insights into impacts of the EU-CA FTA
327 Task 118 Analysis of impacts on the adoption and implementation of
internationally recognised instruments of responsible business conduct and
Corporate Social Responsibility (CSR)
Our analysis under this Task will seek to respond to the evaluation question No 1 (JC 42)
In the first step we will map CSRRBC practices in the Central American partner countries
in the analysed period including practices of European companies investing there or having
their suppliers and existing government initiatives promoting them eg National CSR
strategy and Law on CSR in Costa Rica National Plan on Social Responsibility and Human
Rights in Panama and dedicated centres or foundations promoting CSR in Guatemala
Honduras Nicaragua and El Salvador We will also use findings from a research carried
out for Task 111 identifying initiatives undertaken within the TSD Title incl EU projects
and regional events dedicated to CSR RBC and decent work in global supply chains We
will aim at a better understanding of the existing framework uptake of CSRRBC practices
by enterprises factors influencing it and CSRRBC presence in the EU relations with the
partner countries including technical assistance and cooperation projects
Based on this in the second step we will use outcomes of the economic modelling and
stakeholder consultations to verify whether indeed the EU-CA FTA through generated
trade and investment flows as well as specific provisions (such as those in TSD Title) might
have encouraged uptake of CSRRBC practices We will also seek to identify factors related
to market access which may encourage uptake of CSRRBC practices Legislative ones may
include eg non-financial reporting and obligatory due diligence in certain sectors or
activities requirements related to social and environmental aspects in public procurement
and non-legislative ones may focus on image and comparison with the main competitors
being part of supply chains where business partners require respect for certain labour and
environmental standards international instruments in CSR (OECD Guidelines for
Multinational Enterprises ILO Declaration on Multinational Enterprises and Social Policy
the UN Global Compact etc) requirements of sustainability and certification schemes or
consumer awareness and related choices
As an additional element of this analysis (subject to data availability) we may include into
this task examples of other schemes eg sustainability schemes or promotion of decent
work in global supply chains (notably of agricultural products) and their presence in trade
between Central America and the EU and impacts the EU-CA FTA might have had on their
use in bilateral trade relations
Page 18
328 Task 117 Analysis of environmental impacts
The main objective of the environmental analysis is to assess the environmental and
climate change effects of the EU-CA FTA as well as to provide answer to the evaluation
questions notably those on the effectiveness (No 1-4) (JC 43) and coherence of the
Agreement with other policies and the EUrsquos commitment to the SDGs and in particular
SDGs No 13-15 ie Climate Action Life below water and Life on Land (respectively) ie
evaluation question No 7 The main challenge is to isolate the EU-CA FTA induced effects
on the environmental performance in each country from general developments and trends
that occurred regardless of the EU-CA FTA This is particularly challenging as the
counterfactual environmental outcomes are unobservable for most of the environmental
impact areas
The overall approach is based on our detailed understanding of the dynamics through
which the EU-CA FTA may have created environmental impacts tailored towards the
specific circumstances for the Central American countries the requirements in the ToR
the TSD Chapter of the EU-CA FTA and the budget provided for this study The detailed
understanding is based on the study lsquothe methodology for assessing biodiversity impacts
of EU FTArsquo by IEEP Trinomics et al (2021) and the latest literature including an OECD
study (Garsous G 2019) on this matter and applies the following logic
1) identifying the components in the EU FTA with the Central American countries that may
have generated environmental effects (EU-CA FTA elements) Based on our extensive
recent experience on researching the dynamics through which FTAs may create
environmental impacts we conclude that the FTA contains (1) measures easing market
access for the signatories (referred to as tariff-based measures) and (2) several rules-
based measures (mostly by means of the provisions in the TSD Chapter referred to as
non-tariff-based measures) that may have resulted in environmental impacts in the
countries involved
2) then establishing how these elements could have created directly or indirectly intended
or unintended ndash environmental impacts (the impact channels) Any FTA is by
definition expected to create direct environmental impacts through the expected
expansion of economic activity which may lead to eg higher pollution and greenhouse
gas (hereafter GHG) emissions may put a strain on bio-resources and pressure on
vulnerable ecosystems as higher levels of output require more environmental input
(Copeland and Taylor 2014) Trade agreements also create indirect environmental
impacts through structural adjustments in the economies and so-called specific rules-
based trade measures including the provisions in the TSD Chapter Our approach
carefully considers four impact channels that are also distinguished by the SIA Handbook
(European Commission 2016a) to separate the way in which EU-CA FTA may have
created impacts on various areas of the environment The scale effect (the impact
created from increased production as a result of the trade agreement) the structural
effect (the dynamic effect of the EU-CA FTA on the growth and contraction in production
in different sectors) technology effects (impacts triggered through increased efficiencies
from increased competition or from a transfer in environmental goods and services) and
potentially the product effect (impact via changes in production standards and use of
goods in a country eg through strengthened environmental policies and environmental
regulation)
3) via these impact channels various areas of environmental performance (the impact
areas) may be impacted and are to be further analysed in this evaluation In this study
we distinguish the following impact areas 1) Climate change 2) Biodiversity and
ecosystems and 3) Other key environmental parameters
Research methods ndash For some impact areas there is more reliable information and data
and quantitative research methods available than for others To the extent possible the
quantitative analysis will build on the economic modelling results and as a result the
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 19
analysis will allow us to comment on the causal relation between environmental topics and
the EU-CA FTA Where quantitative research is not possible we will apply qualitative
methods The qualitative analysis may rely on the causal chain analysis method which
aims at identifying the root cause of observed changes Irrespective of whether a certain
impact will be assessed with more quantitative or qualitative research methods our
approach is designed to make intensive use of quantitative information eg compiling
quantitative statistics and analysing trends The following research methods are applied
per environmental area
For climate change we propose focusing on establishing the EU-CA FTArsquos impacts on
the major GHG emissions (eg carbon dioxide methane and nitrous oxide) and
potentially on the air pollutants (ozone precursor gases acidifying gases and primary
particulates)
For biodiversity and ecosystems we propose following the latest insights in assessing
biodiversity impacts of the EU-CA FTA based on the study for DG Environment on the
development of a methodology to assess the impact of trade liberalisation on
biodiversity (which has not been published yet) In case results of the biodiversity
analysis are also relevant for climate change (ie LULUCF emissions) the link between
these results and climate change will be explored
For other impact areas we propose developing baselines based on qualitative and where
possible quantitative data for each impact area and explore developments in
environmental performance since the entry into force of the EU-CA FTA In addition we
will discuss the (effectiveness of the) implementation of provisions enshrined in the TSD
Chapter in the EU-CA FTA per impact area
The above discussed approach is based on five activities They apply the logic of the
methodological stages7 as described in the methodological framework for assessing the
impact of EU FTAs on biodiversity (IEEP Trinomics et al 2021)
3281 Activity 1 Fine-tuned methodology and impact screening and scoping
Fine-tuning the methodology is part of this inception report (this document) and mainly
serves to define the exact scope and focus of this evaluation The environmental analysis
logically focusses on Central America and the EU (with an emphasis on Central America)
However within defining the geographic scope of this analysis one needs to differentiate
global (eg climate change) and other more local environmental impacts eg
(un)sustainable forest management practices We aim to cluster countries when
appropriate from the perspective of a certain regional environmental issue In this way we
can respond to the challenge of bringing focus to the analysis while balancing the available
resources and time Clustering should enable us to evaluate certain environmental issues
in a more targeted way enabling deep dives into specific issues Below we discuss in more
detail what this regional approach means in practice and how we aim to mitigate the risk
of overlooking certain impacts
Impact screening and scoping - The exact environmental topics on which quantitative and
qualitative analysis will be performed depend on the outcome of the impact and screening
and scoping exercise which seeks to identify issues which deserve to be analysed with an
extra depth As such this sub-activity aims to select the environmental impact categories
and sub-areas to be studied in other activities Impact screening and scoping is a
methodological tool to identify issues which should be prioritised in the evaluation and
helps to mitigate the risk of overlooking potential significant impacts In essence the
prioritisation is based on (i) screening the most prevailing existing environmental drivers
and pressures and (ii) screening the expected impacts caused by the EU-CA FTA (at a
7 The study by IEEP Trinomics et al (2021) identifies three stages Stage I) Preparatory stage Stage II) Method selection and impact logic and Stage III) Impact assessment and related conclusions
Page 20
sector level) by means of economic modelling results literature review stakeholder input
and political interest All information is transparently documented in the impact-screening
matrix During the impact screening and scoping exercise we will also develop three
context-setting documents (2-pages) one per environmental impact area to better
understand the background These documents will have a regional perspective and will be
directly used in the baseline development The output of this activity is included in the
Interim Report
3282 Activity 2 Establishing the baselines for the impact areas
The aim of this activity is to gain a brief understanding of the EUrsquos and partner countriesrsquo
status quo regarding their environmental governance and performance (eg trends) for
those environmental impact areas that have been identified as priority ones The output
will be a section in the evaluation with a short description (1 page) per prioritised impact
area outlining the governance (very brief) and the performance and exploring the main
developments trends and their cut-off points This will be done by analysing issues from
a DPSIR framework perspective (drivers ndash pressures ndash state ndash impact ndash responses) (see
Box 1) when appropriate8 This framework is often applied in environmental assessments and plays a central role in the study by IEEP Trinomics et al (2021) on the methodology
for assessing the impact of EU FTAs on biodiversity
Box 1 The use of the DPSIR framework in FTAs
The DPSIR framework allows to interpret certain environmental indicators by establishing a causal relation between indicators and their analysed effects In the case of an FTA trade liberalisation in goods services and investments can function as a driver of a change in different economic sectors causing changes in the amount of land- and other resource use or in their quality (eg pollutants and emissions impacting air water or soil quality) The changes in the quantity of land- and other resource may create pressures on biodiversity which lead to an impact in the state of and trends in biodiversity ecosystems and the services they provide As a response(s) certain new or existing measures can be taken to help to prevent negative impacts or to amplify positive ones
Source IEEP Trinomics et al (2021)
Three consecutive sub-tasks will be performed to operationalise the establishment of the
baselines 1) Literature review and data analysis to establish draft baselines 2) Interviews
with stakeholders to obtain additional input validate work and fine-tune results 3)
Triangulation of information (literature data and interviews) and establishment of final
baselines The output of this activity will be included in the Interim Report
3283 Activity 3 Quantitative evaluation of impacts9
The aim of this activity is to assess the quantitative estimates of the impacts of the EU-CA
FTA on GHG emissions and possibly air pollution and ndash potentially10 ndash on trade in
environmental goods and services and land use change As such the desired result is the
reporting of the quantitative estimates of the impacts of the EU-CA FTA on GHG emissions
and air quality in the EU Costa Rica El Salvador Honduras Guatemala Nicaragua and
Panama depending on data availability Ultimately it is global GHG emissions that
contribute to global warming for this reason we propose to estimate the global change in
GHG emissions resulting from the EU-CA FTA In this way we also consider the difference
in climate change impacts from trade creation and trade diversion The impacts on GHG
emissions will be decomposed in the most relevant key drivers where possible The
8 This implies that we will make use of the insights of the framework whenever relevant and appropriate in the light of the evaluationrsquos objective We will not identify every element (D P S I and R) for each environmental issue but focus on the most relevant elements for each of them
9 The focus depends on the results of the impact screening and scoping 10 Depending upon expected scale of impact available resources and data availability
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 21
preliminary finding of this activity will be included in the Interim Report and the final results
are to be presented in the Final Report
3284 Activity 4 Qualitative evaluation of impacts11
The aim of this task is to evaluate qualitatively the impacts of the EU-CA FTA on various
prioritised environmental impact areas focussing on those which are not assessed in the
quantitative analysis First a broad assessment is done based on desk research from a
regional perspective In addition approximately two case studies (as part of Task 13) will
be prepared in which the environmental impacts of the EU-CA FTA on certain areas will be
assessed based on in-depth qualitative analysis using causal chain analysis (CCA)
(European Commission 2016a) Depending on data availability we will aim to identify
trends developments and cause-effect relations between the EU-CA FTA and environment
By combining the existing environmental drivers and pressures (see Textbox 3282-1 for
more information) the economic results and effects of TSD provisions we naturally also
include potential unintended and unforeseen effects The preliminary finding of this activity
will be included in the Interim Report and the final results are to be presented in the Final
Report
3285 Activity 5 Answering of the evaluation questions and other concluding
remarks
The overall environmental analysis concludes with clearly commenting on the effect of the
EU-CA FTA on the performance the legislative framework and effective implementation in
each of the prioritised environmental impact areas In case no causal relation between the
EU-CA FTA and the performance of a certain environmental impact area is found it will
also be explicitly mentioned These concluding remarks together with the in-depth
analyses conducted in previous tasks will serve as the basis to answer the evaluation
questions related to the EU-CA FTArsquos environmental impacts under Task 14 in the Final
Report
3286 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative environmental effects that have emerged from tensions between the EU-CA FTA
on the one hand and elements of environment on the other Additional policy or legislative
measures can also be suggested to enhance positive impacts of the EU-CA FTA
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human
rights
In this section we present the approach envisaged for the analysis of the human rights12
impact of the EU-CA FTA in the EU and the CA partner countries
The evaluation will rely on the methodology of human rights impact assessments (United
Nations 2011 European Commission 2015) as well as on the experience from previous
studies and will include the following steps
Step 1 Human rights baseline
At this step a concise baseline analysis will be carried out Concise human rights
profiles will be prepared for each of the state-parties to the EU-CA FTA
Step 2 Screening and scoping
11 The focus depends on the results of the impact screening and scoping 12 Human rights in this analysis are defined as set out in the Charter of Fundamental Rights of the European
Union the core UN human rights conventions and relevant regional human rights treaties
Page 22
At this step based on various sources human rights will be screened and specific
human rights that may have been affected by the EU-CA FTA will be identified
Step 3 Detailed assessment of the selected human rights
At this step drawing upon findings from the previous stage of the analysis an in-depth
analysis of up to three selected rights will be carried out (both quantitative and
qualitative and depending on the degree of the impact)
Step 4 Policy recommendations and accompanying measures related to
human rights
At this step policy recommendations will be formulated as to how any tensions between
the EU-CA FTA and human rights obligations may be addressed and how a positive
impact on the enjoyment of human rights can be enhanced
Stakeholder inputs will be used throughout all four steps to verify and support findings as
well as to collect evidence on the impact and ensure meaningful participation
3291 Human rights baseline
At this stage a concise baseline analysis of the human rights situation in each state-party
will be carried out First an overview of international human rights obligations of all the
state-parties to the FTA (ratifications of core international and regional human rights
treaties core ILO Conventions and other treaties relevant for the analysis) will be
presented in a tabular manner Second human rights profiles will be prepared Human
rights profiles will consist of a summary of the baseline conditions for the enjoyment of the
relevant human rights in each of the state-parties to the FTA from five years before the
provisional application of the EU-CA FTA until 2019 Particular attention will be given to the
pre-existing conditions of stress and vulnerabilities with respect to human rights
highlighting the position of specific vulnerable groups
The human rights profiles aim to
Set the scene regarding the enjoyment of relevant human rights in the partner
countries and identify social and political developments that may have impacted the
human rights situation
Allow for a targeted assessment of the human rights impacts of the EU-CA FTA
The profiles are based on the analysis of international human rights obligations national
legislation and policy framework as well as implementation issues with respect to relevant
human rights The analysis reviews country specific reports of international organisations
(eg UN OECD ILO) EU Reports on Human Rights and Democracy in the World reviews
of reports of international human rights organisations (eg Human Rights Watch) a
review of academic literature media reports relevant indicators and local partner inputs
3292 Screening and scoping
The second step of the analysis focuses on identifying which human rights could have been
affected by the EU-CA FTA and in which way The EU-CA FTA will be scanned for provisions
that are most likely to have caused an impact on the enjoyment of human rights in state-
parties to the EU-CA FTA The cause-effect relationships between the trade and trade-
related measures in the FTA and human rights will be established based on multiple sources
(see the multi-pronged approach below) The focus of the screening will not only be on
specific trade measures originating from the FTA (the Trade Pillar) but also on the overall
effect of the measures under the broader Association Agreement
Based on the screening exercise and in line with the EC Guidelines for human rights impact
assessments (European Commission 2015 p5) we provide a focused overview of the
human rights affected by the EU-CA FTA specifying the following elements
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 23
Specific human rights affected by the FTA
Short note on the evidence of the impact with a reference to the sources of information
Whether the affected right is an absolute human right or not13
The kind of impact (direct or indirect)
The degree of the impact (major or minor)
Affected population groups (if applicablepossible)
The screening exercise will as much as possible reflect upon the affected individuals
andor groups of people especially indigenous people and women based on the results
generated by the economic analysis inputs from the stakeholders and literature review
We will also look at how the EU-CA FTA has impacted gender equality and labour rights14
3293 Detailed assessment
Depending on the outcome of the screening exercise a maximum of three human rights
will be selected for a detailed assessment
Applicable human rights laws will be scanned (based on the obligations of the state-parties
under international and regional human rights treaties) to provide a framework of
applicable and binding entitlements and duties related to the selected right(s) Insofar
possible national legislation will be scanned for any changes subsequent to the application
of the EU-CA FTA focusing in particular on the changes that affected the enjoyment of
each of the selected human rights (using baseline analysis to aid the impact assessment)
Then we will look at the particular measures and how they have enhanced or impaired the
enjoyment of the relevant rights and or have strengthened or weakened the ability of the
parties to fulfil or progressively realise their international human rights obligations
Particular attention will be given to impacts on vulnerable groups or groups of individuals
that are at risk of being marginalised (Danish Human Rights Institute 2016)
This assessment is intended to be both quantitative and qualitative in nature The
quantitative analysis is based on the results of the economic analysis and used to the
extent possible15 The qualitative analysis is based on various sources as well as
stakeholder consultations and close work with local partners Economic modelling results
already disentangle the impact of the EU-CA FTA from other impacts that could have
affected the enjoyment of a human right over time For qualitative analysis it is more
challenging to discern the FTA impact To address this challenge we use a multi-pronged
approach (ie a methodological cross-validation approach in order for one methodological
element to corroboratevalidate the other method) in examining the causal effects of the
FTA for each of the prioritised human rights16 (see Figure 3)
13 See Tool 28 of the European Commissionrsquos Better Regulation Toolbox (2017) available at httpseceuropaeuinfolawlaw-making-processplanning-and-proposing-lawbetter-regulation-why-and-howbetter-regulation-guidelines-and-toolboxbetter-regulation-toolbox_en
14 Although we expect some overlap on labour-related rights with the evaluation of social impacts there will be cross-references to ensure a holistic analysis Moreover taking into account the interrelated nature of human rights we reserve the right to address the rights of the workers from other relevant perspectives not covered in the social analysis (eg as related to vulnerable groups)
15 When relevant we will use human rights indicators to supplement the analysis 16 We use the same method also during the screening exercise but to a more a limited degree (eg not using
specific human rights indicators for each human right as it goes beyond the scope of this evaluation)
Page 24
Figure 3 Overview of the multi-pronged approach to human rights impact assessment
Thus in assessing the impact the EU-CA FTA has had on each human right we use the
economic modelling results (if applicable and appropriate) that already disentangle the FTA
impact from the overall effects and link economic findings (partially) to how the selected
human right has evolved in the EU and Central American partner countries because of the
EU-CA FTA If data from the economic analysis is not sufficient to support the analysis we
will make use of contextually relevant human rights indicators (United Nations 2012) from
the statistical databases of the ILO World Bank UN OECD andor other organisations to
investigate how the selected human rights have evolved over time We look at the
development of human rights from five years before the provisional application of the FTA
up to the most recent year for which the data is available comparing period before and
after the entry into force of the FTA looking for shocks (relatively sharp increases
decreases) around that time or structural breaks in a trendline to identify an EU-CA FTA
impact We also investigate whether other shocks have taken place that could explain
observed changes in human rights (eg changes in domestic laws) Based on a similar
practice used during the ex-post evaluation of the EU-Korea FTA we could also consider
including a set of control countries to the analysis to consider development of specific rights
in relative terms
All data findings will be supported and cross-validated through a review of relevant
literature looking for further evidence of impacts provisions of the EU-CA FTA the social
and political situation (eg legislative policy instruments adopted that could have affected
the enjoyment of relevant rights) and inputs from the stakeholders that can serve as
evidence of a link between how the human rights has evolved and the EU-CA FTA
3294 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative human rights effects that have emerged from tensions between the EU-CA FTA
on the one hand and statersquos human rights obligations on the other Additional policy or
legislative measures can also be suggested to enhance positive impacts of the EU-CA FTA
and to prevent or mitigate impacts of measures that have been identified as having caused
or contributed towards impaired enjoyment of human rights
33 Concluding tasks
Based on the various analyses undertaken including the case studies the evaluation team
will prepare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 25
A comprehensive review of the extent to which impacts identified in the Trade SIA of
the Association Agreement between the EU and Central America (Ecorys and Corporate
Solutions 2009) have actually materialised (Task 9)
Replies to the evaluation questions (Task 14) and
Conclusions and recommendations (Task 15)
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3)
The literature review aims at identifying sources data and main conclusions drawn from
the previous studies to make sure that the report is based on and further complements the
existing literature Annex A3-2 provides an overview of the literature considered so far in
a tabular structure To summarise the findings from the literature review so far the
following can be noted regarding methodologies and substantive issues
41 Methodological aspects
The economic effects of the EU-CA FTA have been analysed by the Sustainability Impact
Assessment (SIA) outsourced by the Commission (DG Trade) in 2009 before the launch
of the negotiations (ECORYS 2009) This ex-ante evaluation combined quantitative and
qualitative approaches the first one based on the Computable General Equilibrium (CGE)
and Causal Chain Analysis and the latter built on stakeholder interviews (ECORYS 2009)
The CGE model underpins SIA and the literature produced on the likely economic impact
of the agreement (ECORYS 2009 IIDE 2007 Lima et al 2009 Lima et al 2010 CEPR
2012) and the bulk of these studies is based on the assumptions on the likely structure of
the agreement as the negotiations were not concluded yet The 2009 SIA also assessed
the additional FDI impact by applying a gravity analysis approach (ECORYS 2009) The
first Commission annual activity report on the implementation of the EU-CA FTA builds its
assessment on the available Eurostat data and on the comparison between the region-to-
region trade flows before and after the treatyrsquos entry into force (Commission 2015) The
following activity reports (Commission 2016 2017a 2018a 2019d 2020a) illustrate the
evolution of trade on a yearly basis relying on the Eurostat and Central American statistics
thereby opting for a more descriptive approach
The main added value brought by this ex-post evaluation report consists of the CGE model
and its application to updated EU and CA statistics in order to isolate the strictly related
economic implications of the EU-CA FTA from other external factors influencing bilateral
trade thereby purifying the overall analysis and drawing more methodologically solid and
reliable conclusions The Commission (2021) modelling used for the ex-post evaluation
unlike the other studies focuses only on tariffs however which means that impacts of not
the entire EU-CA FTA are measured but only of the tariff component
Regarding assessment of non-economic effects the methodology tended to forecast
estimated general trends and usually does not make detailed projections It should also be
pointed out that predicting long-term socio-economic effects stemming from the AA proves
to be more challenging than estimating short-term trade impacts (European Parliament
2018) Regarding quantitative social and environmental variables the models have used
structured gravity approaches to estimate the effect of non-tariff measures (NTMs)
(ECORYS 2009) The main methodological constraints to calculate (non-quantifiable)
social environmental and human rights effects from a quantitative perspective are the
problem of attribution and the so-called counterfactual given that one cannot know what
would have happened in case the agreement was not in place
42 Substantive issues
In the 2009 SIA the literature review concluded that the potential economic impact of
the EU-CA FTA was expected to be positive The vast majority of literature sources agree
on the key role played by agricultural products in the Central American economy (Romero
Page 26
et al 2015 FAO 2020 OXFAM 2016 European Commission 2020 European Commission
2019 Zabalo et al 2019 Mejia et al 2018 Lima et al 2009 Lima et al 2010) The
raw material share accounts for up to 60 of the total CA export and combined with
natural-resource-based manufactures their cumulative share reaches 70 (Lima et al
2010 p 92) A study carried out in 2007 before the launch of the EU-CA negotiations
forecasted a negligible impact of the agreement on the EU GDP and overall welfare even
in case of a full liberalisation scenario (IIDE 2007 p 16) Also in terms of FDI the
estimated effects were marginal for the EU but more tangible for CA where the agreement
could lead to an increase of 1 of the CA economies GDP (CEPR 2012 p 27) However
some additional positive spill-overs were considered such as the impact on maritime
services that could help CA countries to better manage increased trade flows and at the
same time improving custom procedures (ECORYS 2009) On trade the report
highlighted trade value flow variations especially in CA with the impact on both EU export
and import value rather negligible (Ibid p 73)
The 2012 CEPR impact assessment argued that the EU-CA trade liberalisation triggered
overall positive effects especially when referred to key products both for the EU exports
to CA such as in agriculture products and goods originating from manufacturing activities
(eg cars and medication) and EU imports from CA primarily food products where the
FTA proposed to half tariff levels compared to the previous GSP level access in place (CEPR
2012 pp 10-11)
According to the SIA banana exports from CA to the EU were expected to benefit from
more advantageous market access conditions Regarding NTMs bilateral trade facilitation
and border-related barriers should be eased simplified and rationalised Consequently
trade costs were expected to decrease remarkably The econometric analysis showed that
the economic effects of the EU-CA FTA were not expected to be equally distributed among
the CA countries given the economic heterogeneity of the region (ECORYS 2009 Lima et
al 2009 CEPR 2012 European Parliament 2018) Vegetable fruits and nuts sector (VFN)
together with sugar cane showed the most promising results (IIDE 2007 p17) although
the positive effects were not equally shared among the CA members with Panama
benefitting the most Manufacturing production in CA was estimated to benefit from the
deal (+20) Electronic equipment would also take advantage of the FTA especially in El
Salvador Honduras and Costa Rica (CEPR 2012 p 31) Transport equipment insurance
services and other manufacturers were expected to decline
On the EU side the projections estimated that
Output in the sector of vegetables fruits and nuts as well as electronic equipment was
expected to decrease modestly (CEPR 2012 p 29)
The EU was estimated to increase output in grains other agriculture and additional
categories of primary food (ECORYS 2009 pp 44)
A limited price decrease for processed food grains and vegetables other agriculture
and beverages and tobacco was expected (Ibid p 44)
Overall in the EU literature in any scenario ranging from partial to full liberalisation an
increase of trade volume as result of the AA was projected (European Parliament 2018
p 43)
A study presented at the Twelfth Annual Conference of the Global Economic Analysis in
2009 and eventually incorporated in a 2010 publication on Latin America assessed the
likely effects of the EU-CA FTA for three scenarios full liberalisation partial liberalisation
excluding sensitive products on both sides (namely fruits and vegetables meat beverages
and tobacco other processed food) and liberalisation considering only fruits and vegetables
as sensitive in the EU (Lima et al 2009 p 1) The application of different models revealed
that the most economically advantageous scenario was the first one leading to an
expansion of exports in all signatory countries and positive effects on overall CA welfare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 27
The second scenario would lead to a smaller economic impact with a more modest trade
expansion (12) and some welfare losses Finally in the scenario foreseeing the EU
excluding only fruits and vegetables the ldquoresults for trade and product remain positive
but with smaller figuresrdquo (Lima et al 2009 p 1) In conclusion a deeper liberalisation
would favour both regions by enhancing exports by between 1 and 5 in all the CA
countries (Lima et al 2010)
The Commissionrsquos annual FTA implementation reports describe trade flows between the EU
and CA after the conclusion of the FTA and demonstrate an overall upward trend for certain
countries and for specific sectors Trade flows remained rather stable in 2014 increased
by 12 in 2015 decreased marginally by 07 in 2016 grew by 72 in 2017 by 66
in 2018 and by 7 in 2019 With the exception of 2017 the EU maintained surplus in
trade with CA (Commission 2015a 2016 2017a 2018a 2019d 2020a)
The Central American literature generally focused on the role played by agricultural exports
in CA domestic economies and on the potential impact generated from the EU-CA FTA on
export transformation and diversification (Zabalo et al 2019) The likely impact of the EU-
CA FTA varied among the countries and the industries considered (ECORYS 2009) A study
carried out in 2018 aiming at analysing the effects on Panamarsquos economy by adopting a
shift-share analysis model concluded that between 2013 and 2016 the Panamanian exports
(mainly transport equipment and agricultural products) to the EU showed a downward
trend by 32 for the selected years mainly due to the decrease of primary exports to
some EU countries including Germany Belgium Italy Greece Poland and Sweden (Mejia
et al 2018) Likewise the local press has highlighted both advantages and disadvantages
generated by the EU-CA FTA for the whole region (De Leograven 2006 Barquero 2016
Rodriguez 2017) While it was considered that tariff removal triggered by the Agreement
could boost banana exports to the EU therefore inducing positive externalities for the
whole region especially for Costa Rica excessive specialisation in agricultural products
and insufficient diversification of export destinations could cause negative effects for the
local economy (Barquero 2016 Rodriguez 2017) Finally the press flagged the pros and
cons of regional integration requirements posed by the EU to CA The EU request to
negotiate as a unified bloc and to speak with a single voice led to long sensitive and
complex domestic negotiations within CA which came only to a partially accepted joint
approach towards trade talks (De Leoacuten 2006) A comparison of estimated economic effects
of the Agreement has been provided in Annex A3-1
The social impact considerations were closely linked to the economic ones since the EU-
CA FTA effects on trade would also influence the levels of employment in the affected
sectors The employment changes triggered by the EU-CA FTA in the EU were expected to
be negligible owing to the relatively modest role played by CA in the EU trade with the
rest of the world As an additional consequence also the level of EU wages should not be
affected much by the Agreement (CEPR 2012 p 28) In CA more significant incentives
to reallocation between sectors caused by ldquopull-factorsrdquo were likely to occur where export-
oriented sectors would benefit most from the EU-CA FTA and where rises in wages were
expected Employment in textile industry in Nicaragua Guatemala Honduras and El
Salvador was expected to decline The full liberalization scenario (IIDE 2007 p 17) was
expected to lead to increases in wages while also prices would rise by 05 (CEPR 2012
p 28) In Nicaragua and Costa Rica wages were expected to rise by 02 and 13
respectively while Panamanian wages would drop marginally (ECORYS 2009 pp 75-77)
The implementation of the International Labour Organisation (ILO) conventions in the EU-
CA FTA legal framework would also have a positive impact on social issues in CA such as
elimination of child labour and force labour and reduction of gender inequality However
the literature underlines a general lack of analyses of the EU-CA FTA impact on poverty in
CA since its implementation (European Parliament 2018 (a) p 45) As described above
the effects were expected to vary among the CA countries with El Salvador Nicaragua
and Honduras experiencing a relatively more impactful drop in levels of poverty than in
Page 28
Costa Rica Finally likely consequences on poverty equality education health and gender
issues in the EU were found to be negligible unlike in CA where small and indirect effects
were expected in terms of investments in health incentives through innovation brought by
technology dissemination and an overall positive impact on inclusiveness driven by the
Agreement (ECORYS 2009 pp 76-80)
On the environmental aspects the literature contributions can be split into two main
groups featured by contrasting interpretations on the EU-CA FTA impact Ultimately the
effectiveness of the TSD chapter will depend on the willingness of the involved government
to implement the EU-CA FTA provisions (EPRS 2018)
On the one hand the SIA and other studies flagged the likely harmful repercussions on
greenhouse gas emissions (GHG) stemming from agriculture fishing trade and transport
activities resulting from the EU-CA FTA application having a limited impact on the EU share
of CO2 emissions and a more tangible effect on some CA countries such as El Salvador
Honduras and Costa Rica in the long run (Alianza por la Solidaridad 2019 FAO 2013)
Moreover the increased agricultural activities resulting from the economic effects of the
EU-CA FTA (eg coffee melon sugar cane and peanut production) factories activities (eg
production of biofuels in Guatemala) as well as factoriesrsquo waste and maritime transports
could pose a threat to biodiversity and deforestation which could constitute a serious issue
owing to a large share of local biodiversity concentrated in CA especially if waste would
not be adequately managed (ECORYS 2009 pp 81-83 Zabalo et al 2019 FAO 2013
Monserrat et al 2011 OXFAM 2016 Rosa Luxembourg Stiftung 2010 Ruerd 2018)
On the other hand a share of the existing literature emphasised the opportunities for CA
countries originating from the EU-CA FTA This would be the case of Costa Rica which
would improve the national environmental regulatory framework mainly in relation to the
use of agrochemicals with likely positive impact for the environment since pineapple
production plays an important role in local economy (Esquivel 2020) A FAO study argued
that international trade in coffee (in particular exports to the EU) has improved the overall
environmental sustainability in CA The EU being the largest consumer of coffee worldwide
its (increasing) requirements on the sustainability of the coffee chain benefited the
adoption of environmental standards by the sector As a consequence coffee producers
are now required to provide more extensive and detailed certifications proving they comply
with environmental standards Therefore they have been paying more attention to
environmental aspects than before (FAO 2020)
A 2017 study (CEPAL 2017) investigated the impact of a CO2 tax on CA GDP Overall the
estimations indicated a negative impact of a carbon tax on GDP and the extent to which it
was found to impact the various local economies depended on the amount of the tax itself
Indeed an average tax value of 69 USD per tCO2e was found to impact the GDP by 062
A range between 5 and 10 USD would be optimal for Honduras and Nicaragua whereas a
tax between 20 and 50 USD would be optimal for Costa Rica El Salvador Guatemala and
Panama (CEPAL 2017)
Finally regarding human rights the EU-CA-FTA impact is difficult to assess for the region
as a whole since the intra-regional development varies a lot and it is difficult to discern
whether the CA movement towards a better respect for international standards on labour
and social rights depends on the implementation of the Agreement (European Parliament
2018 p 44) For example several experts and policymakers argue in favour of a stronger
enforcement mechanism of the TSD chapter (EPRS 2018) Its provisions referring to the
ILO conventions do not ensure the same level of labour and human rights protection as
the GSP+ mechanism (EULAC 2011) Overall despite some positive developments the
implementation of the TSD provisions led to a limited impact on the key challenges in the
CA region such as child labour freedom of association social dialogue or unpaid overtime
(EPRS 2018) The CA Womenrsquos Network also reported insufficient participation of women
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 29
during the negotiation process and it highlighted the risks of women subordination if strong
provisions on gender equality are not put in place (CAWN 2007)
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5)
51 Structure of the EU-CA FTA
The Agreement was initially signed in June 2012 by the EU and Central American countries
and the EU-CA FTA started its provisional application in 2013 It is in a process of
amendment through the Protocol of Croatiarsquos Accession to the Association Agreement
between the European Union and Central America which was signed in November 2020
(Joint Communique 2020) It allows Croatia to formally become part of the Agreement and
provides for amendments to some parts of the EU-CA FTA to account for the accession of
Croatia (eg Appendix 3 to Annex I related to special treatment of bananas Annexes
related to trade in services such as the lists of commitments on establishment cross-
border supply of services and reservations regarding the temporary presence of natural
persons for business purposes and Annexes related to Government procurement including
the list of contracting authorities etc) (European Commission 2020b)
Key features of the Agreement (Trade Pillar) can be summarised as follows Title by Title
Title I of the Agreement contains general principles provisions and definitions and
in particular defines the objectives of the EU-CA FTA which can be summarised as follows
(a) the expansion and the diversification of trade in goods between the Parties through
the reduction or the elimination of tariff and non-tariff barriers to trade (b) the facilitation
of trade in goods through in particular the agreed provisions regarding customs and trade
facilitation standards technical regulations and conformity assessment procedures as well
as sanitary and phytosanitary measures (c) the liberalisation of trade in services in
conformity with Article V of GATS (d) the promotion of economic regional integration in
the area of customs procedures technical regulations and sanitary and phytosanitary
measures to facilitate the circulation of goods between and within the Parties (e) the
development of a climate conducive to increased investment flows the improvement of
the conditions of establishment between the Parties on the basis of the principle of non-
discrimination and the facilitation of trade and investment among the Parties through
current payments and capital movements related to direct investment (f) the effective
reciprocal and gradual opening of government procurement markets of the Parties (g) the
adequate and effective protection of intellectual property rights taking into consideration
the differences between the Parties and the promotion of technology transfer between the
regions(h) the promotion of free and undistorted competition in the economic and trade
relations between the Parties (i) the establishment of an effective fair and predictable
dispute settlement mechanism and (j) the promotion of international trade and investment
between the Parties in a way that contributes to the objective of sustainable development
through joint collaborative work (Article 78)
Title II covers trade in goods and comprises the following chapters (1) market access
for goods which lays down provisions on the elimination of customs duties elimination of
export and import restrictions and export taxes and provisions on agricultural subsidies
(this is complemented by Annex I outlining schedules for elimination of customs duties
Annex II which concerns the definition of the concept of originating products and methods
of administrative cooperation Annex IV - special provisions on administrative cooperation
and Annex V on management of administrative errors) (2) trade remedies which discusses
anti-dumping countervailing and multilateral safeguard measures bilateral safeguards
and the applicable procedures (3) customs and trade facilitation which increases
transparency and promotes the facilitation of trade by simplifying customs procedures and
the adoption of risk management systems for customs inspections (it is complemented by
Annex III on mutual administrative assistance in customs matters) (4) TBT - technical
barriers to trade aiming at facilitating trade by identifying preventing and eliminating
Page 30
unnecessary barriers related to development adoption and application of standards
technical regulations and conformity assessment procedures it also reaffirms rights and
obligations under the WTO TBT Agreement foresees cooperation in market surveillance
transparency through the notification procedures and approach to marking and labelling
avoiding unnecessary burdens while ensuring that all necessary and accurate information
is provided (5) sanitary and phytosanitary measures which aims at protecting human
animal or plant life or health while avoiding unjustified barriers to trade it reaffirms rights
and obligations under the WTO SPS Agreement recognises concepts standards and
recommendations adopted by relevant international organisations (World Organisation for
Animal Health and International Plant Protection Convention) and foresees exchange of
information and cooperation by the Parties incl in cases of emergency (it is complemented
by Annex VI identifying competent authorities Annex VII defining requirements and
provisions for approval of establishment of products of animal origin Annex VIII setting
out guidelines for conducting verifications and Annex IX with points of contact) (6)
exceptions related to goods
Title III covers trade in services establishment and electronic commerce and is
complemented by annexes that detail the Partiesrsquo commitments according to the four
modes of supply or provide information Annex X includes commitments on establishment
(Mode 3) Annex XI lists commitments on cross-border supply of services (Modes 1 and
2) Annex XII outlines reservations regarding temporary presence of natural persons for
business purposes (Mode 4) Annex XIII lists commitments of the Republics of the CA Party
regarding key personnel and graduate trainees Annex XIV lists their commitments on
business service sellers and Annex XV provides a list of the relevant enquiry points
Title IV concerns liberalisation of current payments and movement of capital and
stipulates that the Parties shall authorise payments and transfers on the current account
between the Parties as well as transactions and capital movements related to foreign direct
investment and related transactions including liquidation and repatriation of investments
and profits It also envisages exceptions such as circumstances where payments and
capital movements cause or threaten to cause serious difficulties for the operation of
exchange rate policy or monetary policy or the liquidity of the economy in which case
the Parties may temporarily adopt safeguard measures)
Title V covers government procurement and is complemented by Annex XVI which
details the commitments of Parties in this area (eg procuring entities covered coverage
of procurement contracts under the Agreement media used for tender procedures and key
features of the process for awarding procurement contracts) The Agreement provides for
the Parties to have non-discriminatory access to public procurement procedures within the
scope of covered procurement and outlines general principles and rules for procurement
procedures (eg publication of notices participation in tenders technical specifications
documentation timeline awarding contracts etc) ensuring transparency and cooperation
Title VI covers intellectual property It reaffirms the Partiesrsquo commitments to various
relevant multilateral agreements (eg WTO TRIPS Agreement Convention on Biological
Diversity and Paris Convention for the Protection of Industrial Property) foresees exchange
of information and cooperation between the Parties in relation to technology transfer and
sets standards on the protection of intellectual property rights (IPR) including trademarks
geographical indications copyright and related rights industrial designs plant varieties
and patents The list of geographical indications to be protected is provided in Annex XVII
The Title also addresses enforcement measures for cases of infringement of IPR
Title VII concerns trade and competition in the economies of the Parties Under this
Title the Parties commit to adoption or maintaining comprehensive competition laws and
having appropriately equipped competition authorities They also consider as incompatible
with the Agreement the most harmful anticompetitive practices such as restrictive
agreements concerted practices abuse of dominance and concentrations of companies
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 31
that significantly impede effective competition The Title also stipulates that with regard to
state enterprises and designated monopolies there is no discrimination in exercised by such
entities regarding conditions under which goods or services are purchased or sold
Title VIII relates to trade and sustainable development It includes commitments to
effectively implement the eight ILO Fundamental Conventions and key multilateral
environmental agreements to which EU Member States and CA countries are Parties In
addition the Title includes specific provisions in relation to various thematic areas such as
sustainable forest management sustainable fisheries and trade supporting sustainable
development It establishes civil society advisory groups as part of institutional structure
and foresees a regular dialogue between the Parties and civil society incl in a dedicated
Civil Society Forum The Title also provides a dedicated dispute settlement mechanism
with government consultations consideration of the matted by the TSD Board and a Group
of Experts to examine the matter and formulate recommendation
Title IX relates to regional economic integration between the Central American Parties
and includes provisions on circulation of goods in trade between the EU and CA within the
EU and CA region respectively once a product entered their customs territory and when
the applicable rules and standards are met In this context the Title provides rules related
to customs technical barriers to trade and sanitary and phytosanitary measures (Annex
XX provides a list of CA technical regulations in the process of harmonisation)
Title X covers dispute settlement and outlines the related procedures including the
establishment of a panel its ruling and compliance
Title XI establishes mediation mechanism for non-tariff measures incl the selection
of a mediator the applicable procedure and implementation of the agreed solution
Title XII contains provisions on transparency and administrative procedures Among
other things the Parties commit to (i) ensuring that their measures of general application
(eg laws regulations judicial decisions procedures and administrative rulings) relating
to matters covered by the EU-CA FTA are promptly published or otherwise made readily
available to interested persons and (ii) providing reasonable opportunities for those
interested to comment on proposed measures and taking into account relevant comments
The Parties also commit to establish Points of Contact for matters related to EU-CA FTA
Title XIII addresses tasks of the institutional bodies in matters related to trade
ie the Association Council the Association Committee and specialised Sub-committees
(for details please see section 52 on the institutional set up)
Title XIV defines general exceptions to the Agreement related to the Partiesrsquo balance of
payments and taxation
52 Institutional set-up of the EU-CA FTA
The Association Council the Association Committee six Sub-committees and an Ad hoc
Working Group on Government Procurement (the latter not envisaged by the EU-CA FTA
but set up by the Parties in 2016) oversee the implementation of the Agreement
The Association Council established pursuant to Article 4 supervises implementation of
the Association Agreement it is composed of representatives of the EU and each of the six
CA countries has a decision-making power (binding upon the Parties) in cases foreseen in
the Agreement examines all major issues and questions of common interest It meets at
Ministerial level (or through representatives) at regular intervals not exceeding two years
In line with Article 345 when meeting to discuss matters under EU-CA FTA the Council
has the power to amend Annexes and Appendixes related to trade incl tariff elimination
schedules and goods included there originating products and methods of administrative
Page 32
cooperation Annex XVI (Government Procurement) Annex XVIII (Protected GIs) Annex
XIX (in relation to Article 306 animals animal-based products plants and plant-based
products subject to SPS measures) and Annex XXI (Sub-committees)
The Association Committee set up pursuant to Article 6 is responsible for the general
implementation of the Agreement and assists in this context the Association Council It is
composed of representatives of the EU and the six CA countries at the senior officialsrsquo level
and shall meet once a year to review the implementation It takes decisions foreseen in
the Agreement or delegated by the Association Council When acting within part IV of the
Agreement the Association Committee supervises work of Sub-committees established by
this part and may set up new ones prevents and resolves conflicts (without prejudice to
provisions related to the Dispute Settlement and Mediation Mechanisms) and recommends
decisions for adoption by the Association Council
The Agreement has also established six specialised Sub-committees
Sub-committee on Market Access for Goods (Article 91) is responsible for monitoring
the correct implementation and administration of the Trade in Goods Chapter and serves
as a forum for consultations about interpretation and application of its provisions It
examines proposals provided by the Parties regarding accelerated liberalisation of trade in
goods and tariff reduction as well as inclusion of additional goods into liberalisation
schedules It may make recommendations to the Association Committee on matters within
its remit and take any issue as and when instructed by the Association Committee
Sub-committee on Customs Trade Facilitation and Rules of Origin acting in line
with Article 123 monitors implementation of the Chapter and Annex related to the concept
of origin and methods of administrative cooperation It provides a forum to discuss and
consult all matters related to customs incl customs procedures valuation nomenclature
cooperation tariff regimes mutual administrative assistance in customs matters as well
as rules of origin It pursues cooperation on development application and enforcement of
customs procedures mutual administrative assistance in customs matters administrative
cooperation and rules of origin It examines requests for amendments of rules of origin
and submits to the Association Committee results of the analysis with recommendations
It also aims to enhance cooperation on capability building and technical assistance
Sub-committee on Technical Barriers to Trade (TBT) acting in accordance with Article
139 provides forum to discuss and consult any matter related to the Chapter and monitors implementation and administration of this Chapter facilitating exchange of information
and cooperation and promptly addressing any issue that either Party raises related to the
development adoption application or enforcement of standards technical regulations
and conformity assessment procedures It aims at solving any problems within the remit
of the Chapter that would limit trade between the Parties It encourages direct interaction
between non-governmental actors such as standard bodies accreditors and certifiers It
facilitates the exchange of information about the work being done in non-governmental
regional and multilateral fora engaged in activities related to technical regulations stan-
dardisation and conformity assessment procedures and explores ways to facilitate trade
between the Parties The Sub-committee has also power to review the Chapter in the light
of developments under TBT Agreement and reports to the Association Committee about
implementation of the Chapter including cooperation activities
Sub-committee on Sanitary and Phytosanitary Matters (SPS) acting in line with
Article 156 monitors implementation of the Chapter provides a forum for discussion and
consultation on any matter arising under the Chapter and an opportunity to seek mutually
acceptable solutions It may also develop procedures or arrangements facilitating
implementation of the Chapter It acts as a forum for consultations related to any measure
proposed by the EU which may affect its trade with any of the CA Parties and a forum for
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 33
dispute settlement under the Chapter The Sub-committee is also responsible for
promoting cooperation on animal welfare between the Parties
Sub-committee on Intellectual Property Rights (IPR) (Article 274) monitors
implementation of Article 231 (transfer of technology) and part of the IP Chapter related
to GIs including facilitating discussion about protection of GIsrsquo and recommendations to
the Association Committee regarding amendments to Annex XVIII on GIs It promotes
technology transfer from the EU to the CA Parties and defines priority areas in which
initiatives shall be directed regarding technology transfer research and development and
building-up human capital Its responsibilities include also keeping a registry of the
programs activities or initiatives in progress in the field of intellectual property with
emphasis on transfer of technology
Board on Trade and Sustainable Development (TSD) established pursuant to Article
294 reports to the Association Committee and oversees the implementation the TSD Title
incl cooperative activities undertaken under Title VI (Economic and Trade Development)
of Part III of the Agreement The decisions and recommendations of the Board shall be
adopted by mutual agreement between the Parties and be provided to the public unless
the Board decides otherwise
While EU-CA FTA does not envisage a Sub-committee on Government Procurement the
Parties concluded that it would be useful to have a dedicated body to address matters in
this area They decided to create a temporary Working Group that met for the first time
in June 2016 (European Commission 2017a)
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo
priorities
The negotiations for an Association Agreement (AA) including a Trade Pillar between the
European Union (EU) and Central America (CA) started in 2007 We look at the bloc-to-
bloc trade and policy context the negotiation process and priorities from both sides
The region-to-region trade context
The CA group is composed by Costa Rica Guatemala El Salvador Honduras Nicaragua
and Panama and it is featured by internal economic and political dialogue which led to the
creation of the Central American Common Market (CACM) in the early 1960s Despite the
initial momentum the regional integration process has been stopped for decades due to
internal tensions and the effects of import-substitution trade strategies on local economic
growth (European Parliament 2012) Consequently the initial goal of setting up a custom
union failed and CACM succeeded only in establishing a free-trade area (Duran et al 2010)
The Central American integration efforts were revitalised through setting up of the Central
American Integration System (SICA) aimed at promoting democracy development peace
and freedom in the region (European Source Online 2016) SICA was formally established
on 13 December 1991 through the signature of the Protocol to the Charter of the
Organization of Central American States (ODECA) also known as the ldquoTegucigalpa
Protocolrdquo SICA established both a political and an economic institutional framework by
setting up the Central American Parliament and the Central American Bank for Economic
Development Despite these changes CACM remained the main forum for trade discussions
(European Parliament 2012)
The EU is one of the three most important CA trading partners It is challenging to draw
general and unified conclusions for the whole CA trade picture given its domestic
heterogeneity with Panama and Costa Rica being middle-income countries and Nicaragua
the poorest member (European Parliament 2018 p 18) The EU countriesrsquo share of import
from and export to CA accounted for 30 and 16 respectively in the mid-1980s Among
Page 34
the CA members Guatemala appeared as the most export dependent one while Panama
was the least trade-oriented country (CEPR 2012 pp 6-7) The role of agricultural
production within the respective economies differs widely between the two regions
Agricultural production is very important for CA especially in Honduras and El-Salvador
(38 of the national production) whilst it is relatively much less important in the EU (5)
The same complementarities can be found in manufacturing production (amounting to 18
of the EU production which is much higher than in CA particularly in Panama (4) and
Nicaragua (25) Services contribute to almost 23 of the EU Nicaraguan and Costa Rican
GDP while this share is only 53 for El Salvador (Ibid pp 6-7)
The negotiation process
The start of the economic and political dialogue between the EU and CA blocks dates back
to 1984 at the first conference of Foreign Ministers between the EU and CA countries in
Costa Rica In 1993 the EU and the CA countries signed a Framework Cooperation
Agreement which entered into force on 1st March 1999 (Acuerdo-marco de cooperacioacuten
1999) On the occasion of the EU-Latin America Summit held in May 2002 these countries
and the EU jointly expressed their willingness to reinforce their dialogue by concluding a
new Political Dialogue and Cooperation Agreement which was signed on 15th December
2003 in Rome (Acuerdo de Diaacutelogo Poliacutetico 2003)
The need to establish stronger trade relations even by setting up a free-trade area pushed
the EU and CA to explore the feasibility of an Association Agreement entailing also a specific
chapter on trade Such intention was clearly stated during the EU-Latin America summit of
Guadalajara (Mexico) in May 2004 (Declaration of Guadalajara 2004 p 8 point 52) and
one year later in May 2005 in the context of the EU-Central American Ministerial meeting
in Luxembourg On that occasion the parties launched a joint-assessment exercise on
regional economic integration and established an ad-hoc working party (Council of the
European Union XXI San Joseacute Dialogue Ministerial Meeting between the EU and Central
America 2005 p 2) Finally at the Vienna Summit of 2006 the parties opened the door
to an Association Agreement to create a free trade area (Council of the European Union
EU-Central American Summit 2006 pp 1-2 points 2 and 3) The summit also welcomed
the initiative of the Peace Building and Commission and Human Rights Council (Ibid p 2)
The green light for the beginning of the AA negotiations was given on 28th June 2007 in
Brussels (EU and the Central American Community start negotiations for a new Association
Agreement 2007) However the talks were temporarily suspended on 6th April 2009 and
then resumed a few days later on 24th April (Acuerdo de Asociacioacuten entre Centroameacuterica
y la Union Europea 2009) when the parties decided to re-initiate the negotiations
The negotiating partiesrsquo priorities
The negotiating strategy of the CA countries mainly pursued three goals
Strengthening their trade policy whose objective is to open up new markets for the
benefits of their local exporters The EU appears as a crucial partner for CA countries
as it ranks on top of the worldrsquos largest importers of agricultural products and the
relative share of developing countries has been rising over time in the EU trade balance
Reinforcing CA countriesrsquo export competitiveness and reducing costs of accessing the
EU market vis-agrave-vis competitors such as African-Caribbean and Pacific (ACP) countries
that benefit from preferential and better market access conditions
Attracting foreign direct investments in high value-added sectors where the EU applies
higher tariffs (Duran et al 2010 pp 96-99)
From the European side the main reasons driving towards the conclusion of the agreement
with CA are threefold
Promoting the developing countriesrsquo progressive integration into the world economy
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 35
Reaffirming the EUrsquos role in the world trade and in CA following the United States (US)
conclusion of the Dominican Republic Central American and the United States Free
Trade Agreement (CAFTA-DR) reaffirming the US role in the region
Better coordinating with partners on trade dossiers within the World Trade Organization
(WTO) and other international institutions (Ibid p 100)
The conclusion of the Agreement
The negotiation process delivered slow progress due to the inability of CA countries to
reach a unified position and owing to the delays in the regional integration (European
Source Online cit p3) The agreement was finally reached in May 2010 when the
negotiations were officially concluded during the Latin America-Caribbean and European
Union Summit in Madrid Following the legal scrubbing the European Commission reviewed
and approved the agreement prior to signature at the Meeting of the SICA Presidents in
Tegucigalpa Honduras on the 29th of June 2012 (European Commission Directorate
General for Trade 2012) The European Parliament finally endorsed the AA in December
2012 forecasting that the main gains for the European side would be in export of cars
machinery telecommunications chemical products and transports (European Parliament
2012 p 1) At the time of the AA signature in 2012 the EU-Central America trade in goods
accounted to EUR 149 billion and corresponded to 113 of the whole CA region trade
with the rest of the world (Griener and Membersrsquo Research Service 2014 p 5)
On that date the then EU Commissioner for Trade Karel De Gucht commented the
successful conclusion of the AA by stating that the ldquoregion-to-region deal will help establish
major business opportunities for both sides European exporters will save around EUR 90
million on customs per year and European service providers such as telecommunication
and transport will get greater market accessrdquo At the same time the agreement would
generate ldquospill-over effect on Central Americarsquos overall economic integration process and
contribute to the stability of the regionrdquo (European Commission Ibid p 1) The
Commission officially announced the provisional application of the FTA with Honduras
Panama and Nicaragua on 31st July 2013 with Costa Rica and El-Salvador on 1st October
2013 and with Guatemala on 1st December 2013
The trade provisions of the AA provisionally entered into force in 2013 as they fall within
the exclusive competences of the EU17 Once the entire text of the AA will be ratified by
the EU Member Statesrsquo parliaments the entire text will be legally binding and applicable
After joining the EU in 2013 Croatia is currently negotiating its accession to the AA
54 Operational context of the implementation of the EU-CA FTA
After having illustrated the main partiesrsquo priorities during the bloc-to-bloc negotiations this
chapter provides an overview of the broader context surrounding the negotiations and
implementation and describes the main regional actors as well as their respective trade
policy attitudes towards CA and Latin American countries (LAC) as a whole
Trade policy context the multilateral system and the global economy
Since the launch of the EU-CA negotiations the global trade policy context has undergone
deep changes The Doha Development Agenda stalemate due to incompatible views on
various issues at stake put great pressure on the global trading system The WTO
difficulties in reaching satisfying outcomes stem both from external causes such as the
decline of advanced economies regionalisation of trade and internal sources of tensions
17 Despite being considered as a bloc-to-bloc association agreement the incomplete CA regional economic integration and the failure in setting up a custom union among the CACM countries left unbalances and inconsistencies in accessing single CA countriesrsquo markets and different levels of external tariffs In light of these arguments CA cannot be considered as a fully integrated homogeneous and unified trade bloc
Page 36
embedded in unilateral tariff-cutting process (Baldwin 2016) Besides these tensions the
economic expansion of China and the ldquotrade warsrdquo between the US and China exploded as
of 2017 The recent stalemate of the WTO Appellate Body that halted the entire dispute
resolution process as well as the need to put sustainable development at the core of the
WTO agenda pushed the Commission to advance a new WTO reform proposal (European
Commission 2021) The WTO crisis led to a proliferation of bilateral FTAs and the EU
has been an active bilateral FTA actor globally (see Table 4
Table 4 Overview of the EU FTAs launched and or concluded since 2012
Start of Negotiations
Signatory CountryRegion
State of play of the agreement
Ratification
1999 Mercosur Concluded in 2019 Ongoing
2004 SADC Concluded in 2016 Entered into force in 2016
2007 Andean Community Concluded in 2010 Entered into force in 2013
2007 Ukraine Concluded in 2011 Provisionally applied since 2016 fully in force since 2017
2009 Singapore Concluded in 2019 Entered into force in 2019
2009 Canada Concluded in 2014 Provisionally applied since 2017
2010 Malaysia On hold na
2012 Moldova Concluded in 2013 Provisionally applied since 2014 fully in force in 2016
2012 Georgia Concluded in 2013 Provisionally applied since 2014 fully in force since 2016
2012 Vietnam Concluded in 2015 Entered into force in 2020
2012 Japan Concluded in 2018 Entered into force in 2019
2013 USA On hold na
2013 Morocco (DCFTA new) On hold na
2013 Thailand On hold na
2015 Philippines On hold na
2015 Tunisia (DCFTA new) Ongoing na
2016 Mexico (modernisation) Concluded in 2018 Ongoing
2016 Indonesia Ongoing na
2017 Chile (modernisation) Ongoing na
2018 Australia Ongoing na
2018 New Zealand Ongoing na
2019 United Kingdom Concluded in 2020 Ongoing
2020 ESA (extension) Ongoing na
Source compiled by the author
The EU trade and policy context
Trade picture
The EU maintains strong institutional dialogue with Central and Latin America
legitimised by historic cultural and linguistic ties with the region The EU Latin America
and the Caribbean (LAC) bilateral summits have been regularly held since 1999 gathering
33 members from the two counterparts In 2006 the EU-Latin America Parliamentary
Assembly (EuroLat) was set up and it was conceived as the parliamentary angle of the EU-
CA bilateral partnership (EPRS 2017 p 5)
From a trade perspective the EU-Central and Latin America (comprising Andean
Community CA Cariforum Mercosur Mexico and Chile) trade peaked at EUR 2287 billion
in 2014 before showing a downward trend and decreasing at EUR 2132 billion in 2015
corresponding to 61 of the whole EU trade that year (EPRS 2017 p 6) The EU total
share of LAC trade fluctuated around 14 and the EU remained the first investor in the
region in the last ten years (EEAS 2018) An analysis carried out by the European
Parliament in 2020 unveils that the EU-LAC trade in goods value grew by 22 from 2008
to 2018 (Tvevad 2020 p 18) According to the 2020 DG Trade Report (data from 2019)
on the Implementation of EU FTAs trade flows between the EU and CA showed a robust
growth Indeed trade in goods increased by 88 with respect to the 2018 performance
imports continued growing over the past five years and exports statistics indicated an
overall upward trend with the exception of 2016 (European Commission 2020a p 110)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 37
In 2010 the EU was the second CA trading partner behind the United States (US)
accounting for 94 of the regionrsquos overall trade with the rest of the world (European
Commission 2011 p 4) Among the main exporters to the EU Costa Rica ranked first
with 539 of the total CA exports to the EU Conversely the EU exports went primarily
to Costa Rica (363) Guatemala (281) and El Salvador (152) (Ibid p 4) The EU-
CA trade is marked by the supply of primary products to the EU (mainly agricultural
products such as coffee and bananas) in return for high-technology manufactures
especially machinery transport equipment chemicals and manufactured goods (Duran et
al 2010 pp 95-96 European Parliament 2012 p 9) The CA share in the EU trade was
modest accounting only for 05 of overall EU imports in 2011 and for 03 of the total
EU exports in 2011 (European Parliament 2012 p 8) In addition the EU applied tariffs
on various agricultural products imported from third countries The exclusion of both coffee
and bananas from the EU Generalized System of Preference (GSP) and the GSP+ schemes
prevented these products from benefitting from tariff-reduction from the European side
hampering their access to the EU market and leaving their prices to be influenced by world
trade fluctuations (Duran et al 2012 p 98) The 2019 data confirmed primary products
rank largely first among SITC products grouping exported from CA to the EU accounting
for 721 of the whole exports followed by manufactures with 27 (European
Commission 2019 p 4) Recent statistics highlight the main destination of EU export
continued to be Panama (up to 118 since 2018) whereas the main country of origin of
EU imports is Costa Rica with an increase by 63 from 2018 (European Commission 2020
p 112)
The previous EU trade policy strategy adopted in 2015 (ldquoTrade for Allrdquo) confirmed that
ldquothe FTAs with Peru Colombia Ecuador and Central America are creating new dynamics
for trade and investmentsrdquo (European Commission 2015 p 33) As set out by that trade
policy strategy the Commission should pursue three main priorities with regard to Latin
and Central America ldquo[Continuing] negotiations for an ambitious balanced and
comprehensive FTA with Mercosur ldquoRequesting negotiating directives to modernise the
FTAs with Mexico and Chilerdquo ldquoBe ready to consider investment agreements with key Latin
American countriesrdquo (Ibid p 33)
As evidence for the increasingly robust commitment in the region the EU negotiated trade
deals with 27 out of the 33 LAC countries to strengthen both bilateral and region-to-region
relations the EU actively engaged LAC by signing new and modernising older EU-LAC FTAs
(see Table 5)
Table 5 EU FTA in Latin America and participating countries
Agreement Countries Negotiation launch
Negotiations Conclusion
EU-Andean Countries Colombia Ecuador Peru 2007 2010
EU-Caribbean (CARIFORUM)
Antigua and Barbuda Bahamas Barbados Belize Dominica Grenada Guyana Jamaica Saint Lucia Saint Vincent and the Grenadines Saint Kitts and Nevis Suriname Trinidad and Tobago and the Dominican Republic
2002 2008
EU-Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
2012 2010
EU-Chile na 2017 na
EU-Mercosur Argentina Brazil Paraguay Uruguay 1999 2019
EU-Mexico na 2016 2018
Source Compiled by the author
Regarding civil society the trade chapter of the EU CA FTA did not receive a lot of public
attention and consequently has not been affected by a high level of politicisation within
the EU This might stem from the relatively lower importance of trade relations with CA for
the EU Likewise the agreement did not catch a lot of public attention either in CA where
Page 38
the media coverage mainly focused on the Central America Free Trade Agreement (CAFTA)
Nevertheless both the agreements were targeted by NGOs and trade unions sharing the
same criticism and concerns over biodiversity pharmaceutical product access and
exploitation of natural resources (European Parliament 2011 p 16)
Political Dialogue
To frame the most recent developments in the EU LAC political dialogue it is worthy to list
three key documents forging the EU foreign policy towards LAC
The European Parliament Resolution on the Political Relations with Latin
America passed in 2017 advocating for a stronger more coherent and reinforced
relations with this region by stressing the need to update and develop a more
comprehensive and ambitious EU strategy to address the emerging challenges linked
to fundamental freedoms human and social rights safety of minorities migration
issues corruption tax fraud and security (European Parliament 2017)
The Joint Communication adopted by the European Commission and the High
Representative for Foreign Affairs (HRVP) in 2019 titled ldquoEuropean Union Latin
America and the Caribbean joining forces for a common futurerdquo aimed at deepening
the EU-LAC relations in a fast-changing context by emphasizing four mutually important
priorities prosperity democracy resilience and effective global governance (European
Commission 2019)
The Council of the EU Conclusions of 13th May 2019 endorsing the strategy laid
out in the Joint Communication On that occasion the Council welcomed the four points
described above and added more areas for action such as to work more closely in the
multilateral framework consolidate economic and social resilience enhance shared
prosperity and assist in promoting structural reforms (Council of the EU 2019)
The 2020 EU 27 ndash Latin America Informal Meeting reaffirming the need to advance
bilateral region-to-region summit to strive for a stronger multilateral system identified
mainly in the United Nations and the World Health Organisation (WHO) especially in
the light of the COVID-19 pandemic outbreak (Federal Foreign Office 2020)
Within the framework of the AA the EU and CA agreed to cooperate on a wide range of
policy dossiers of mutual interest namely conventional weapon disarmament the
implementation of the Convention on the Prohibition of the Use Stockpiling Production
and Transfer of Anti-personnel Mines and on their Destruction as well as the Convention
on Certain Conventional Weapons and its protocol (European Parliament 2011 p 7)
On development cooperation the EC regional strategy 2014-2020 earmarked EUR 925
million funding for Latin America to be allocated in two components
Component 1 ldquoMultiannual Indicative Programme for continental activities with Latin
Americardquo accounting for EUR 805 million and devoted to Argentina Bolivia Brazil
Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico
Nicaragua Panama Paraguay Peru Uruguay and Venezuela
Component 2 ldquoMultiannual Indicative Programme for Sub-Regional Cooperation with
Central Americardquo funded with EUR 120 million focused on Central American countries
Costa Rica El Salvador Guatemala Honduras Nicaragua and Panama This component
included three areas for action ie support for regional economic integration support
for the Regional Security Strategy and support for Regional Climate Change Strategy
and the Central American Policy on Comprehensive Disaster Risk Management (EEAS
European Commission 2014)
The Central American trade policy context
Regional Context
Beside their membership in the Central American Common Market (CACM) and the WTO
the CA countries have been signing additional free trade agreements with other regional
and international partners since 2012
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 39
It should be also noted that Panama joined the Latin American Integration Association
(LAIA) in 2012 LAIA replaced the Latin America Free Trade Agreement (LAFTA) signed in
1960 and sought a deeper economic integration among the member states18 Also
Nicaragua applied for the LAIA membership in 2011 and its request was accepted by the
LAIA Council of Minister in August 2011 Nicaragua is currently advancing in fulfilling the
LAIA membership requirements No other CA countries are members of LAIA yet
Table 6 summarises bilateral FTAs and Preferential Trade Agreements (PTAs) signed by the
6 CA countries or being in force since 2011
Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021)
Costa Rica Guatemala El Salvador
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Colombia (signed in 2013 entered into force in 2016)
Mexico (signed in 2011 entered into force in 2013)
Peru (signed in 2011 entered into force in 2013)
Singapore (signed in 2010 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
Ecuador (PTA) (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs signed but not entered into force yet South Korea (signed in 2018) EFTA (signed in 2013)
FTAs signed but not entered into force yet EFTA (signed in 2013) Ecuador (signed in 2011) Peru (signed in 2011)
FTAs signed but not entered into force yet South Korea (signed in 2018)
Honduras Nicaragua Panama
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Peru (singed in 2015 entered into force in 2017)
Canada (signed in 2013 entered into force in 2014)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2014 entered into force in 2015)
Peru (signed in 2011 entered into force in 2012)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet Israel (signed in 2018) South Korea (signed in 2018) Colombia (signed in 2013) EFTA (signed in 2013) Trinidad amp Tobago (PTA)
(signed in 2013)
Source Compiled by the author
Other influential partners in CA
As illustrated by Table 7 three actors retain significant economic influence in CA and Latin
America as a whole the EU the US and China The following section will examine these
actors and their respective trade policies towards CA and Latin America by describing their
posture as well as the agreements in force
18 Argentina Bolivia Brazil Chile Colombia Cuba Ecuador Mexico Paraguay Panama Peru Uruguay Venezuela
Page 40
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking
SubregionCountry
EU total trade in goods (value in EUR billion)
Ranking of main trading partners for trade in goods
2016 2019
2016 2019 USA China EU19 USA China EU27
Andean Community 3 250 246 1 2 3 1 2 3
ACP ndash Caribbean 15 81 116 1 3 2 1 3 2
Central America 6 108 121 1 3 2 1 3 2
Chile 159 166 3 1 2 2 1 3
Mercosur 4 849 771 3 2 1 3 1 2
Mexico 538 618 1 2 3 1 2 3
Source EPRS 2017 p 6 and DG Trade statistics 2020
The US remains the key CA partner The US is the major source of Foreign Direct
Investments (FDI 273) and Official Development Aid allocating an annual average of
approximately USD 1600 million during the Trump Administration (2016-2020)
(Congressional Research Service 2021) Moreover the US rank on top of CA migrant
destinations (Belladonna 2019) The CA countries have been cultivating thorough relations
with the US as they represent the historical destination of over 40 of the regionrsquos
exports Furthermore the 2004 Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA) granted preferential market access conditions to the region (Office
of the US Trade Representative 2004 and Duran et al 2010 p 93) In light of the strong
power exerted by the US the EU trade strategy pursued a progressive rebalancing of the
US presence in the area to ensure better market access in the region (EPRS 2017 p 5)
The DR-CAFTA negotiations confirmed that labour standards sugar and textile products
treatment pharmaceutical data protection and sovereignty issues were the most
controversial and sensitive matters on the table Unlike the EU-CA AA it should be noted
that the DR-CAFTA does not build any common trade framework for all the signatories as
the US grants differentiated market access conditions to each single CA country (European
Parliament 2012 p 11)
In the last few years China has been playing a role of growing importance in CA and in
Latin America both from a political and trade viewpoint (European Commission 2020 p
15) In recent years China has reinforced its role as trading partner within CA As evidence
for this active involvement the 2000-2010 data already confirmed the Asiarsquos importance
(led by China) both in terms of imports and exports in Latin America and Caribbean20
Indeed the China share of the regionrsquos total exports by destination grew from 11 in
2000 to 83 in 2010 with regard to imports by destination the growth appears even
more remarkable moving from 18 in 2000 to 133 in 2010 (Kuwayama amp Rosales
2012 p 66) whilst the relative share of the US presence has shown a downward trend
(Ibid p 65) The monthly exports to Asia-Pacific21 region more-than-doubled from an
average value of USD 54 billion in 2006 to USD 162 billion in 2014 (Baacutercena Prado
Rosales Peacuterez 2015 p 23) After a slight decline experienced in 2016 a solid rebound
emerged in 2017 On average goods shipment from Asia-Pacific Latin America grew by
136 yearly between 2000 and 2016 (Scotiabank 2018 p 1)
Beside trade China has been recently advancing its Belt and Road Initiative (BRI) in
the region by concluding numerous Memoranda of Understanding (MoU) with various LA
19 Including the United Kingdom 20 Data refers to Argentina Bolivarian Republic of Venezuela Brazil Chile Colombia Costa Rica the Dominican
Republic Ecuador El-Salvador Guatemala Honduras Mexico Nicaragua Paraguay Peru Plurinational State of Bolivia
21 The Asia-Pacific region includes Australia Brunei Darussalam Cambodia China South Korea Philippines Hong Kong Japan Laos Thailand Taiwan Indonesia Malaysia Myanmar New Zealand Singapore and Vietnam
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 41
and CA countries To mention some Bolivia (2018) Costa Rica (2018) Chile (2018) and
Panama (2017)
6 CONSULTATIONS (TASKS 6 AND 7)
61 Consultation Strategy
The consultation strategy presented in the technical offer has been refined during the
Inception Phase (Task 6) and is outlined in Annex B Box 2 summarises our expectations
regarding the main inputs expected from stakeholders throughout the study
Box 2 Expectations regarding inputs from stakeholders
Inputs from stakeholders are expected at all stages of the study
The study team will welcome in particular Responses to the online public consultation Consultation with businesses (responses to the online business survey) Evidence of specific casesexamples on how the Agreement has affected economic performance
sustainable development and human rights both in Central America and in the EU Contributions will be particularly welcome in relation to the priority areas of analysis o Impact of the Agreement on trade diversification (in terms of goods and services traders regions
involved in trade etc) (see Task 101) o Impact on investment climate and investment flows (see Task 102) o Impact of the Agreement on SMEs (see Task 1012) o Effects of the implementation of the TSD chapter (see Task 111) o Performance of the institutions established under the TSD chapter (see Task 112) o Impacts of the Agreement on pillars of Decent Work Agenda working conditions labour standards
social protection other public policies and labour inspection (see Task 114) o Impacts on the informal economy and informal employment (see Task 115) o Environmental impacts (see Task 116) and o All of the case studies
Written contributions (positions) expressing views on how the Agreement has affected economic performance sustainable development and human rights across the parties in particular with regard to ndash but not restricted to ndash the analytical priority areas
Indication of relevant publications that focus on the impact of the Agreement in the partner countries Indication of actions taken by CA in areas covered by the TSD chapter (eg changes in policies action
plans strategies and legislation in the areas of labour environment and climate change ratification and implementation of international conventions in these areas and civil society engagement)
Written comments on the draft Inception Report draft Interim Report and draft Final Report Proposals for and comments on draft conclusions and recommendations of the report including how to
improve operation of the Agreement (if needed) Names of organisations or indication of vulnerable groups that may have been affected by the
Agreement in the partner countries as well as relevant contact details for the evaluation team to reach out to the most relevant additional stakeholders
62 Study Website and Electronic Communications
The establishment and continuous updating of a website as well as ongoing electronic
communications with stakeholders are one element of the consultation strategy During
the inception phase the website has been established and launched and an initial e-
communication will be sent out to identified stakeholders (Task 5) The website is available
at httpcentral-americafta-evaluationeu
Electronic communication with stakeholders will take place through email newsletters as
well as Twitter using an account for this ex-post evaluation (CaEvaluation) Twitter will
be used as well to present the (draft) findings at specific moments in the study interested
related work or articles highlights or relevant quotes from the consecutive study reports
and promote the various outreach activities such as workshops LinkedIn will be used to
complement twitter with the same objectives the account of LinkedIn to be used will be
Ex-Post Evaluation EU-Central America FTA Email and an electronic newsletter will be used
as complementary tools to reach specific stakeholders throughout the study to inform them
Page 42
of events to send questions receive feedback and make appointments for interviews the
email used will be central-americabkp-advisorscom
With the COVID-19 pandemic still in place and governments imposing new lockdowns and
travel restrictions a back-up plan is available in case a lot of the communication has to be
done online The meetings with the EU and CA stakeholders both government and civil
society in the near future will be held online For the second half of the year and beginning
of 2022 face-to-face meetings may also be an option The advantage of digital outreach
is linked to reduction of travel time and travel costs to the minimum and in addition digital
follow-up is easier The public consultation and online business survey are already being
prepared and planned with an indicative timeline of online availability between June and
September 2021 The workshops envisaged for Central America in November 2021 are
currently planned with options ranging from face-to-face meetings over hybrid solutions
to holding them entirely online In either case we will ensure they are as interactive as
possible thanks to the use of breakout rooms and platforms enabling participants to ask
questions and participate in polls online We will also ensure that participants will receive
sufficient information before workshops
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13)
71 Case Study Selection
As part of the evaluation ten case studies will be prepared Their purpose is to capture the
impact of implementation of the EU-CA FTA on sustainable development in its economic
social and environmental dimensions as well as on human rights (including labour rights)
They should complement the economic social environmental and human rights analysis
required under Tasks 10 11 and 12
Regarding the geographic coverage the ToR require two case studies focused on the EU
two horizontal case studies for the whole region of Central America and six dedicated to
each of the Central American countries
Table 1 provides a preliminary list of suggested case studies while their exact focus and
scope will be determined at the next stage of the study further to preliminary impact
analysis and identification of relevant information and data sources
Table 8 List of proposed case studies
No Case study topic Geographical focus Key impact areas
1 Impacts of the Trade Pillar on EU banana producers EU incl OR as well as ACP and LDCs due to preference erosion
Economic and Social
2 Trade in environmental goods and services (opportunities for the EU and partner countries)
EU CA partner countries22
Economic and Environmental
3 Impacts of the Trade Pillar on freedom of association in sectors involved in trade with the EU (the choice of sectors will be made further to the initial impact analysis)
CA partner countries notably Guatemala Honduras and El Salvador
Human rights and Social
4 The effects of the Trade Pillar on sustainable aquaculture in Honduras Nicaragua Costa Rica and El Salvador
Partner countries with a focus on Honduras Nicaragua Costa Rica El Salvador
Economic Social Human rights and Environmental
5 Opportunities created in services sector in particular the green energy sector in Costa Rica (the choice of the services sector will be reviewed based on the initial impact analysis)
CA partner countries Economic and Environmental
22 The ultimate selection of countries will depend on the outcome of the (environmental) impact screening and scoping exercise
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 43
No Case study topic Geographical focus Key impact areas
6 Impacts of the Trade Pillar on child labour and childrens rights
El Salvador Social and Human rights
7 Impacts of the Trade Pillar on the environment (eg forests and biodiversity) in Guatemala the case of palm oil
Guatemala Environmental
8 Impacts of the Trade Pillar on MSMES and sustainable agriculture in the coffee industry (organic coffee) in Honduras
Honduras Economic and Environmental
9 Impacts of the Trade Pillar on women and gender equality notably in agricultural value chains in sectors exporting to the EU (the sectors may include coffee ground nuts and banana however the final selection of sectors and scope will be made based on data availability and the initial impact analysis)
Nicaragua Social and Human rights
10 Implementation and effect of the FTZ in port of Colon including aspects related to direct transportation clause
Panama Economic
72 Case Studies ndash Summaries and Methodologies
Descriptions of case studies and planned methodologies have been provided in Annex A5
8 STUDY WORK PLAN
A detailed study schedule which sets out activities and deadlines for outputs indicated
throughout this Inception Report is outlined in the chart overleaf A detailed plan for the
consultation programme is provided in Annex A4 Annex A6 provides the risk management
approach for the evaluation
Page 44
Phase task deliverable
Inception phase
Kick-off meeting with Commission in Brussels 20
Task 1 Refine draft intervention logic diagram
Task 2 Define and develop the methodological approach
Task 3 Review existing studies amp reports on trade between the EU and CA (6 countries)
Task 5 Provide a concise description of the agreement
Task 6 Create a website dedicated to the evaluation
Task 7 Stakeholder consultation strategy
Task 13 Case study proposals
Inception reporting
Drafting of inception report
Draft Inception Report 22
Review meeting Commission ISG
Finalisation of the Inception Report
Inception Report
Interim phase
Task 4 Provide a concise summary
Task 8 Undertake consultation activities
Civil society dialogue in Brussels (budgeted under review meetings)
12-week online public consultation
Online survey for business users interests in both the EU MS and partners
Workshops in partner countries
Other targeted consultations
Task 9 Assess the EU-Central American TSIA
Task 10 Analyse economic effects
Task 11 Analyse effects of implementation on SD economic social environmental
Task 12 Analyse effects on Human Rights
Task 13 Conduct in-depth case studies based on field work
Interim reporting
Drafting of Interim Technical Report
Annexes Progress evaluation Quantitative tables 10-page stakeholder report CS reports
Draft Interim Technical Report 20
Review meeting Commission ISG
Finalisation of Interim Technical Report
Interim Technical Report `
Final phase
Task 13 Conduct in-depth case studies based on field work
Task 14 Reply to the evaluation questions
Task 15 Provide conclusions and recommendations
Tasks 1 45 9 and 10 - 15
Final reporting
Drafting of draft final report
Synthesis report
Executive Summary
Annexes
Draft final report 20
Review meeting Commission ISG
Finalisation of final report
Translation executive summaries (EN FR GE SP)
Final report 20
Possible exit meeting 20
Progress reports
The ToR speci fies 12 weeks for the survey we tentatively propose 16 weeks because the time schedule a l lows i t and i f the project s tarts in January the survey would fa l l in the hol iday season in EuropeCA which would not be conducive for responses
Key
Meeting with the European Commission
Concrete deliverable (eg Inception Report)
Key
Working on the evaluation and endpoints of work per task
Stakeholder consultation activities and meetings
MayAprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr
HOW TO OBTAIN EU PUBLICATIONS
Free publications
bull one copy
via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps
from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)
from the delegations in non-EU countries
(httpeeaseuropaeudelegationsindex_enhtm)
by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm)
or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
Priced subscriptions
bull via one of the sales agents of the Publications Office of the European Union
(httppublicationseuropaeuothersagentsindex_enhtm)
doi[number]
[Cata
logue n
um
ber]
Page x
ACRONYMS
AA Association Agreement ACP African Caribbean Pacific BATIS Balanced Trade in Services CA Central America CCA Causal Chain Analysis CGE Computable General Equilibrium CPI Consumer Price Index CSD Civil Society Dialogue CSR Corporate Social Responsibility DAG Domestic Advisory Group DG Directorate-General ECLAC Economic Commission for Latin America
and the Caribbean EESC European Economic and Social Committee EFTA European Free Trade Association EP European Parliament EQ Evaluation Question EU European Union EU-CA FTA Trade Pillar of the EU-Central America
Association Agreement FDI Foreign Direct Investment FRA EU Agency for Fundamental Rights FTA Free Trade Agreement GATS General Agreement on Trade in Services GDP Gross Domestic Product GHG Greenhouse Gas GIs Geographical Indications GPA Government Procurement Agreement GSIM Global Simulation GSP Generalised Scheme of Preferences GTAP Global Trade Analysis Project HRIA Human Rights Impact Assessment ILO International Labour Organisation IPR Intellectual Property Rights ITC International Trade Centre
JC Judgement Criterion LDC Least Developed Country LULUCF Land use land use change and forestry MFN Most-Favoured Nation MSME Micro Small or Medium-sized Enterprise NGO Non-Governmental Organisation NTB Non-Tariff Barrier OECD Organisation for Economic Cooperation and
Development OHCHR Office of the United Nations High
Commissioner for Human Rights OR Outermost Region
RBC Responsible Business Conduct RoO Rules of Origin SDGs Sustainable Development Goals SIA Sustainability Impact Assessment SICA Central American Integration System SIECA Secretariat for Central American Economic
Integration SME Small or Medium-sized Enterprise SPS Sanitary and Phyto-Sanitary TBT Technical Barriers to Trade TISMOS Trade in Services data by mode of supply ToR Terms of Reference TRIPS Trade-Related Aspects of Intellectual
Property Rights TRQ Tariff Rate Quota TSD Trade and Sustainable Development UN United Nations UNCTAD United Nations Conference on Trade and
Development UNECE United Nations Economic Commission for
Europe WTO World Trade Organisation
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 1
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES
Since 20132 the European Union (EU) has been implementing the Trade Pillar ie Part
IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The Trade Pillar
(hereinafter EU-CA FTA) gradually opens markets on both sides increases the stability and
predictability of the trade and investment environment and aims at creating benefits for
consumers and fostering sustainable development Its objectives include also support for
regional economic integration in Central America This is also one of the first EU ldquonew
generationrdquo trade agreements characterised by its comprehensive scope that covers in
addition to liberalisation of trade in goods and services investment public procurement
competition intellectual property rights and trade and sustainable development
After several years of implementation an evaluation is undertaken with the objective of
analysing the economic social environmental and human rights (including labour rights)3
impacts of the implementation of the EU-CA FTA and ultimately of determining whether
there is a need to improve its implementation To support the European Commissionrsquos own
evaluation of the Agreement the Directorate-General (DG) for Trade has awarded a
contract for the ldquoEx-post evaluation of the implementation of part IV of the Association
Agreement (Trade Pillar) between the EU and its Member States and Central Americardquo to
a consortium led by BKP Economic Advisors (BKP) The evaluation is carried out by a team
involving experts from BKP Trade Impact BV Trinomics the Foundation Rural
Development Consult (CDR) the NL-investmentconsulting BV and the University of Costa
Rica The work started in January 2021 and will continue until May 2022
The scope of the evaluation can be delineated as follows in terms of the period covered
it includes the whole implementation period of the EU-CA FTA since the start of provisional
application in 2013 up to now also comparing where appropriate with a five-year period
preceding the entry into force of the Agreement (ie starting in 2008) Geographically it
primarily covers the Parties to the Agreement although some effects of the EU-CA FTA on
selected third countries are also analysed such as developing countries and particularly
least developed countries (LDCs) moreover some global effects (eg climate change)
will also be covered Regarding evaluation criteria effectiveness impact efficiency
coherence and relevance will be considered Finally as already mentioned in terms of
types of effects considered the evaluation will cover economic social environmental and
human rights (including labour rights) effects which the EU-CA FTA may have had either
as a result of the changes in trade it has brought about or through the implementation of
the provisions of the Agreement text itself notably those of the Trade and Sustainable
Development (TSD) chapter
Although most data to be considered for the evaluation are likely to refer to the world pre-
COVID-19 the pandemic will have an impact on the study First in terms of the evaluation
implementation it is likely to affect the consultation activities that may need to be carried
out online rather than in person Second in substantive terms it will be important to pay
attention to issues which are of a priority for stakeholders in the current circumstances
(eg by selecting case studies accordingly) and to consider that eg stakeholder views
might be affected by the current situation
This inception report is the first deliverable under the contract It comprises seven tasks
of the evaluation (as established in the Terms of Reference see Figure 1) focusing on the
presentation of the evaluation methodology and is structured as follows Chapter 2
2 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El-Salvador since 1st October 2013 and with Guatemala since 1st December 2013 3 Whenever this report refers to human rights this includes labour rights
Page 2
presents the evaluation framework with an intervention hypothesis (task 1) while Chapter
3 outlines the proposed methodology responding to the evaluation questions (task 2) and
Chapter 4 covers a brief review of relevant studies on the Agreement (task 3) Chapter 5
provides a descriptive summary of the EU-CA FTA and its implementation so far (task 5)
followed by outline of consultation activities in Chapter 6 (tasks 6 and 7) supported by the
consultation strategy provided in Annex B as well as a list with a preliminary selection of
case studies in Chapter 7 (task 13) The final part includes study work plan in Chapter 8
The draft outline of the interim and final evaluation reports is presented in Annex A7 Other
parts of the Annex provide further details on certain elements of the report
Figure 1 Overall evaluation approach
2 EVALUATION FRAMEWORK
21 Intervention hypothesis of the Agreement (Task 1)
An indicative intervention hypothesis developed by the Commission linked the operational
objectives (as listed in Article 78 of the EU-CA FTA) to specific and overall objectives set
out in Article 2 of the Agreement and its Recitals In line with Task 1 of the evaluation ToR
we have adapted the intervention logic developed by the Commission as follows
All 10 operational objectives listed in Article 78 of the Agreement have been included
Specific and overall objectives have been considered in the context of short-term and
medium-term outcomes as well as long-term impacts
Underlying assumptions have been identified and integrated into the intervention
hypothesis
The relationship between the evaluation questions (EQ) and the intervention hypothesis
has been specified
The updated version of the intervention hypothesis is presented in Figure 2 overleaf
The intervention hypothesis was also instrumental in developing the analytical framework
of the evaluation which brings together the evaluation questions of the ToR the associated
judgment criteria and indicators the data sources and the methodological tools with which
we will collect data The refined analytical framework is presented in the following sub-
section
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 3
Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association Agreement
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 5
Main assumptions (at the level of coherence)
Pillar IV and its implementation has been coherent with the EUrsquos trade and development
policies and in particular with the EUrsquos commitment to sustainable development in
trade policies as a contribution towards attainment of the SDGs (EQ8)
Main assumptions (at the level of efficiency)
The utilisation rate of the Trade Pillar is high (EQ5)
Implementation of the Trade Pillar does not lead to trade diversion (EQ5)
Costs associated with implementation of the Trade Pillar are proportionate to the
benefits it has generated (EQ6)
The distribution of both costs and benefits is proportionate among different
stakeholder groups and interests (EQ6)
Implementation of the Trade Pillar does not create unnecessary regulatory costs
(including administrative burden) (EQ7)
Main assumptions (at the level of effectiveness impact and relevance)
The implementation of the Trade Pillar does not create unintended negative
consequences (EQ3)
The positive impact of the Trade Pillar is inclusive and does not benefit only a limited
group of stakeholders (EQ6)
Implementation of the Trade Pillar has contributed to trade diversification (EQ5)
Provisions of the Trade Pillar continue to be relevant for strengthening trade relations
between the Parties and regional integration of Central America (EQ9)
22 Evaluation Questions Judgement Criteria and Indicators
The evaluation framework has been based on the evaluation questions listed in the ToR for
the study which are as follows
EffectivenessImpact
EQ 1 To what extent have the objectives as laid down in Article 78 of Part IV of the
Agreement been achieved
EQ 2 What are the factors influencing (either positively or negatively) the achievements
of the objectives specified in Article 78
EQ 3 Has implementation of the Trade Pillar had unintended (positive or negative)
consequences and if so which ones
EQ 4 What has been the impact of implementation of the Trade Pillar
Efficiency
EQ 5 To what extent has implementation of the Trade Pillar been efficient with respect
to achieving its objectives
EQ 6 To what extent are the costs associated with implementation of the Trade Pillar
proportionate to the benefits it has generated Is the distribution of both costs and
benefits proportionate among different stakeholder groups and interests
EQ 7 Are there unnecessary regulatory costs (including administrative burden)
Coherence
EQ 8 To what extent has implementation of the Trade Pillar been coherent with the
EUrsquos trade and development policies ndash and in particular with the EUrsquos commitment to
sustainable development in trade policies as a contribution towards attainment of the
SDGs
Relevance
EQ 9 To what extent do the provisions of the Trade Pillar continue to be relevant in
order to address the current trade needs and issues of the EU and Central America
Page 6
The framework provides the evaluation questions the judgement criteria for each of them
the analysis needed to substantiate findings and conclusions made in the evaluation report
and the sources through which data and information will be obtained The evaluation
framework also links evaluation questions and judgement criteria to the analytical tasks to
be performed according to the ToR Table 1-1 in Annex A1 presents this framework
It should be noted that methodological tools and indicators used are not shown in the table
but are explained in the next chapter
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2)
In this chapter we describe the methodologies and tools planned to be used in the
evaluation separately for each task The analysis will be concluded with recommendations
on how the implementation of the Agreement can be further improved for the benefit of
the EU and Central American partner countries It should be noted that the structure of
the presentation is in line with the tasks defined in the ToR to facilitate comparison and
compliance with ToR requirements However the order of findings will be guided by the
evaluation framework presented in chapter 2 To facilitate the link with the evaluation
framework for each task we indicate to which evaluation question respectively judgement
criterion it contributes
31 Analysis of economic effects (Task 10)
In 2010 the EU was Central Americarsquos second most important trade partner after the
United States (and after intra-regional Central American trade) The total value share of
the EU in Central American trade was 94 EU exports mainly went to Costa Rica (53)
Honduras (22) and Guatemala (12) In 2018 the EU was still Central Americarsquos second
trade partner after the United States but with a higher share of 122 of all Central
American trade (IMF 2019) In 2019 Central Americarsquos trade with the US (in both goods
and services) totalled USD 70 billion (ie EUR 678) (USTR) Trade in goods with the EU
reached EUR 12 billion in 2019 and trade in services EUR 82 billion in 2018 (European
Commission 2020a)
311 Task 101 Analysis of the evolution of trade in goods
Analysis under this task will seek to respond to the evaluation questions related to JC 1A1
1A2 and JC 41 The EU-CA FTA offers advantages in terms of market access for the EU
and Central American countries Some of the main elements of the Agreement regarding
goods exports from the EU to Central America are complete liberalisation of tariffs for
manufactured goods and fisheries at the end of the tariff phase-out period and immediate
liberalisation of 69 of EUrsquos exports to CA at the start of the agreement saving EUR87
million in duties annually Specific analyses to be carried out under Task 101 have been
summarised in Table 1 For each sub-task we present the specific analysis that needs to
be carried out and main methodological approach we suggest as well as relevant data
sources
Table 1 Methodological approaches and sources for the analyses of trade in goods
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
1 Goods showing the largest increase or decrease in total and bilateral trade flows
Using COMEXT statistics at different disaggregation levels the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing products
2 Development of trade in goods against previously applicable GSP+ and GSP tariffs
Taking COMEXT data as a basis to investigate whether the GSP status of a product has a bearing on how the EU-CA FTA has influenced the rate of growth in trade we will compare two groups of goods those for which tariffs were 0 under GSP versus those for which tariffs were greater than 0 under GSP+
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 7
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
3 Preference utilisation rates and forgone duty saving of economic operators of all Parties
Based on COMEXT data (for EU imports) and data provided by the Commission (for EU exports) a quantitative analysis will be undertaken to identify the key sectors and product categories where preferences are not fully used We propose to include up to 3 questions in the survey to identify factors that encourage discourage companies to use the Agreement
4 Use of tariff rate quotas (and the reasons for suboptimal use)
Data up to 2019 is already available in the Commissionrsquos annual implementation reports Updating the data is supposed to rely on similar sources as the Commissionrsquos annual reports Reasons for sub-optimal use of TRQs will be investigated during the consultations as this cannot be inferred through statistical analysis
5 Trade diversion in particular from interregional Central American trade towards the EU
First we aim to use COMEXTCOMTRADE data to analyse the evolution of merchandise trade flows over time (between the EU and the partners but also within the region in comparison to the rest of the world)
Second we aim to look at the CGE results that should be able to tell us the pure EU-CA FTA effect on intra-Central American trade flows
6 Impact of the Agreement in relation to the creation persistence reduction or removal of non-tariff measures (NTMs) that have a significant impact on EU-CA countriesrsquo trade in goods
We will use UNCTADrsquos NTM TRAINS database and classification for identification description and analysis of specific NTMs affecting trade relations between the EU and Central America We will also look at NTMs including market access barriers raised by the Parties in the sub-committee meetings and will complement the findings with stakeholder engagement
7 Analysis of the importance of Free Trade Zones in Panama (especially the FTZ in the Port of Colon)
Using trade statistics we can get a picture of the way trade flows entering Central America via the Port of Colon (for example) are distributed across Central American countries These patterns ndash at sector level ndash would tell us the most economically significant EU exports This
will be complemented by qualitative analysis
8 Investigation of whether new enterprises started to export or whether enterprises already exporting started to export new products
We expect to undertake this analysis by relying on available firm-level data as well as specific questions for SMEs in the targeted business survey the SME Panel questionnaire and other consultation activities directed towards SMEs Additionally for this sub-task we will try to get access to national databases containing firm-level panel data based on highly disaggregated customs information that include exports (imports) of products and their destinations
9 Analysis of the evolution of trade import shares originating in the EU in total imports of the six CA countries (and vice versa)
COMEXT and COMTRADE data will be used to carry out this analysis We will ensure that we specify the third countries in a clear way The EU and each of the Central American countries The United States Mexico and Canada but also Brazil Argentina
Paraguay and Uruguay (Mercosur) and China Other countries (Rest of World)
10 Analysis of the impact of the EU-CA FTA implementation on diversification of trade
The diversification of trade in goods will be evaluated according to two main dimensions 1 Diversification in the range of products traded between the EU and each of its partners 2 Diversification in the number of EU member states trading with the Central American partners
11 Comparison of the development of trade in goods between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
COMEXT and COMTRADE data will be used to carry out this analysis Regarding trade of the partner countries the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as the MERCOSUR countries The choice of the US can be explained by CAFTA-DR agreement that has been in place since 2006 between the US and Central America and the Dominican Republic
12 Investigation of whether the EU-CA FTA has facilitated trade with third countries including via the use of intermediate products
Use of GTAP data (since the Trade in Value Added ndash TiVA database only covers Costa Rica) to look at intermediate linkages and whether these have helped the competitiveness of the CA economies We will also look at the CGE modelled development of the real exchange rate as an indicator of what happened to CA economiesrsquo levels of competitiveness
13 Analysis of the degree to which implementation of the EU-CA FTA has contributed to diversification of sources of supply of goods
COMEXT and COMTRADE data will be used to carry out this analysis We will look at the inputs shares for specific products in CA from the EU and vice versa and compare the development of these shares to the shares for the same products from international trade partners
14 Identification of regions within the partner countries that have benefited most and of
regions having benefited least (including the identification of constraints)
We expect to rely mainly on a combination of mapping of the sectoral CGE effects per region with literature review and consultation activities to identify the regions that have most least benefited from the
agreement Social progress indexes are computed at municipal level in Costa Rica and at provincial level in Panama as well as for some regions in Guatemala and El Salvador but this is for 2017-2018 only
Page 8
312 Task 102 Analysis of the evolution in trade in services
Analysis in this task is linked to JC 1A3 Although the effects of trade agreements on EU
services trade with third countries are not easily quantifiable we will seek to use available
data to demonstrate the impact of the EU-CA FTA on EU services trade We will assess
whether the Agreement has led to an improvement or worsening of the structural
imbalance between the parties The EU posted a substantial services trade surplus of EUR
10 billion with all six Central American partners combined in 2013 but this surplus has
decreased to EUR200 million by 2017
Table 2 Methodological approaches and sources for the analysis of trade in services
Specific analysis to be carried out
Main methodological approach and sources
1 Services showing largest increase decrease in total and bilateral trade flows between individual CA countries and EU
We will identify sectors showing the biggest increase in total trade in services flows and in bilateral trade flows as well as those having performed worst This analysis will be conducted using time series trade statistics at different levels of disaggregation (from Eurostat OECD and UNCTAD) the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing sub-sectors Reasons for performance will be identified by a combination of sources including literature review and targeted consultations
2 Comparison of the development of
trade in services between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
The comparison of the development of bilateral trade in services between the EU and the individual Central American countries with the development of trade in services
for the EU and its Member States and for Costa Rica Guatemala El Salvador Honduras Nicaragua and Panama with a suitable reference group of countries will provide further evidence on the actual impact of the agreement of trade in services flows As is the case for trade in goods (Task 101) the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as MERCOSUR countries if possible The choice of the US matters because of the CAFTA-DR agreement that has been in place since 2006
3 Analyse trends in international financial capital flows and the evolution of key financial industry segments ndash with the GATS modes of supply as the basis
First we will analyse trends in international financial capital flows between the EU and the Central American countries as well as globally For this we will use available Eurostat OECD andor UNCTAD data as well as Central Bank data if available
Second in order to look at how sectors are performing (well or not so well) we will focus on a concise general ndash but sector level ndash analysis and what drivers we can identify for economic performance
Third we propose that the following case study (see Task 13) could be undertaken Evaluating financial industry segments such as banking insurance asset management sustainable investment ndash in Panama or Costa Rica
Data source suggestions The OECDrsquos Services Trade Restrictiveness Index The GATS Trade Restrictiveness Index which together establish the amount of ldquowaterrdquo in the partiesrsquo GATS
bindings that can be ldquosqueezedrdquo by a modernised Agreement Central Bank data on financial and insurance services economic activity and trade Global Investment Competitiveness Report (World Bank 2019) ISDB data from Eurostat BOP statistics
313 Task 103 Analysis of the evolution of foreign direct investment (FDI)
The analysis in this task will be linked to JC 1A5 Although the effects of trade agreements
on Foreign Direct Investment (FDI) with third countries are not easily quantifiable we will
seek to use available data to demonstrate the impact of the EU-CA FTA on FDI At a general
level this task will entail to assess what impact the EU-CA FTA has had on structural
balances or imbalances between the EU and its Central American partners
Table 3 Methodological approaches and sources for the analysis of bilateral FDI
Specific analysis to be carried out
Main methodological approach and sources
1 Largest increases decreases in FDI flows between individual CA countries and the EU
We will identify main changes in FDI flows over the past 10 years between the EU and Central American countries if possible at sector level This analysis will be conducted using the ITC investment map data UNCTAD investment data and ISDB data from Eurostat BOP statistics Data limitations are expected to be significant for this subtask Reasons for good or bad performance will be identified by a combination of sources including literature review and targeted consultations
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 9
Specific analysis to be carried out
Main methodological approach and sources
2 Comparison of the development of FDI flows between the signatory countries
The proposed methodology would examine the investment effect at both the extensive and intensive margins using the two-step Heckman (1979) estimation as implemented in Helpman et al (2008)
3 Analysis of the investment climate
and of the attractiveness to investment of the six CA countries
An analysis of the investment climate and of the attractiveness to investment of the six Central American countries taking into consideration the possible impact of the
existence of bilateral investment treaties or of double-taxation treaties will be undertaken We propose to review inter alia the evolution of the following indexes OECDrsquos Foreign Direct Investment Restrictiveness (FDIR) index Various FDI attractiveness and FDI confidence indexes ndash eg by AT Kearny and Ernst amp Young Global Investment Competitiveness Report (World Bank 2019) World Bank lsquoDoing Business Indicatorsrsquo ISDB data from Eurostat BOP statistics wwwinvestmentmaporg from the ITC
314 Task 104 Presentation of overall economic impacts
The analysis in this task is linked to JC 41 and will rely on the computable general
equilibrium (CGE) modelling undertaken by DG Trade The CGE model is the quantitative
cornerstonefoundation of the ex-post evaluation Important variables of interest for the
economic analysis will be those which are standard for a CGE analysis such as GDP and
trade flows (total bilateral and by sector) and sectoral output Based on the CGE modelling
results we will estimate the overall impact on the economy of the EU the partner countries
as well as third countries in particular LDCs The economic analysis will build further on
the modelling results We will report these in sufficient detail to highlight the economic
effects of the EU-CA FTA More details on the CGE model are provided in Annex A2
315 Task 105 Determining the impact on implementation of the Trade Pillar of the
various institutional structures
Our analysis under this task will seek to respond to evaluation questions No 1 and 5 (with
JC1A2 JC1A6 JC1A7 and JC1A9) ie how the operation of the institutional set up has
contributed to achieving the objectives of the EU-CA FTA outlined in Article 78 and how
effective and efficient the Association Committee (in trade configuration) six Sub-
committees and an ad hoc Working Group have been to date To determine this we will
analyse provisions of the EU-CA FTA referring to institutions and their operation in practice
In the first step we will analyse Articles 4-8 establishing the Association Council the
Association Committee and Sub-Committees and setting out their decision-making powers
This will be done jointly with Articles 345-346 setting out specific tasks of the Association
Council and the Association Committee acting in trade configuration including powers to
amend certain parts of the Agreement (within Trade Pillar) This will be followed by Articles
347-348 about Part IV coordinators and Sub-Committees established under EU-CA FTA and
will be complemented by the analysis of Articles 91 123 139 156 274 and 294 outlining
areas of responsibility of the individual Sub-committees4 and the Rules of Procedure of the
Association Council and the Association Committee (Decision No 12014 of the Association
Council) which also apply to Sub-Committees This will let us develop an understanding
about the mandate of each institution its decision-making powers including those related
to amending the EU-CA FTA and monitoring compliance by each Party frequency and
format of meetings relations with other institutions under the Agreement reporting and
escalation In this way we will establish an expectation regarding the role each institution
should have in implementation of the EU-CA FTA and achieving its objectives
4 Sub-committee on Market Access for Goods (Article 91) on Customs Trade Facilitation and Rules of Origin (Article 123) on Technical Barriers to Trade (TBT) (Article 139) on Sanitary and Phytosanitary Matters (SPS) (Article 156) on Intellectual Property (Article 274) Board on Trade and Sustainable Development (TSD) (Article 294) and Ad hoc Working Group on Government Procurement
Page 10
In the second step we will analyse the actual operation of all the above structures based
on available documents and engagement with the Parties as well as relevant stakeholders
We will take as the basis reports from Sub-committee and Association Committee meetings
and will complement them with the annual Commissionrsquos Implementation Reports and
other documents eg conclusions adopted by civil society representatives at the annual
meetings under the TSD chapter We will also determine whether formal decisions have
been taken by the Association Council or Committee and if so analyse the extent to which
they have contributed to implementation of the EU-CA FTA We will also look at concerns
raised by the Parties how they have been addressed and how much time it took to achieve
a satisfactory solution Based on findings from our analysis we will provide conclusions
and recommendations for the future notably for the TSD board
316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated
exportimport procedures for key stakeholders
Analysis in this task will be related to JC 1A2 Based on reviews of the Agreement text as
well as the work of the Sub-committee on ldquoCustoms Trade Facilitation and Rules of Originrdquo
we will analyse in a qualitative way which customs-related aspects have facilitated or
complicated bilateral trade like rules of origin management of TRQs agricultural safeguard
measures and approved exporter status We will seek to determine eg whether Article
304 par 1 provision (related to reimbursement of duties in CA Party of transit and their
payment in the CA Party of import) is applied in practice and if so how it is evaluated by
economic operators
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the
Trade Pillar
This task is also linked to JC 1A2 and the methodological aspects described above are also
valid for SPS related issues We see two subtasks under this request 1) An analysis to
what degree implementation of the SPS Chapter in the EU-CA FTA has facilitated agri-food
trade without lowering any partyrsquos SPS standards 2) The extent to which the capacity
building and technical assistance provided by the EU to Costa Rica El Salvador Guatemala
Honduras Nicaragua and Panama has had an effect (looking at what technical assistance
projects and funds were used)
318 Task 108 Analysis of the implementation of the Government Procurement
chapter of the Trade Pillar
The analysis in this rask is linked to JC 1A6 and will examine the impact of the opening of
the government procurement markets of the Parties using a multi-step approach 1)
Review of the recent and ongoing work of the Ad Hoc Working Group on Government
Procurement 2) A statistical analysis of the procurement value shares for EU business (if
possible) and SME participation which will be complemented by desk research and
anecdotal evidence of success stories of EU companies in Government procurement
markets of six CA countries and 3) Review of the level of compliance with the Agreement
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar
This task is related to JC 1A7 and 1A8 The methodological approach foreseen to analyse
other areas of the Agreement (like Technical Barriers to Trade e-commerce Competition
and protection of intellectual property rights (IPRs) including geographical indications)
Our approach focuses on 1) Statistical analysis compiling statistical descriptive analysis
on each issue prior to and after entry into force of the Agreement 2) Literature review
the analysis on the implementation and use of geographical indications in Central America
(eg Rivar 2020) 3) Case studies A specific case study on some of these other issues
could be carried out
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 11
3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has
led to a greater economic integration between the Central American partners
This task is linked to JC 1A4 The EU-CA FTA has been a mechanism that encourages
regional integration but it takes place within a much wider framework of regional
cooperation efforts between the CA countries with the EU-CA FTA being only one element
in this wider context This task focuses on the impact of the EU-CA FTA on regional
integration not on the overall trend or state of affairs regarding regional integration We
use three elements for our analysis 1) The statistical analyses that we have carried out in
Tasks 101 (trade in goods) 102 (trade in services) and 103 (FDI) help to shed light on
regional integration impact of the EU-CA FTA also 2) We look at the results of the CGE
analysis including at how the intra-regional trade patterns have changed because of the
EU-CA FTA 3) We investigate what progress has been made in terms of the different
elements for integration We will use EU and CA data sources to underpin our analyses
3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for
imports of bananas
This task is related to JC41 We envisage three types of analysis under this task in addition
to a possible case study 1) Descriptive statistical analysis based on trade in bananas since
2008 in order to capture developments before and after the entry into force of the EU-CA
FTA distinguishing bilateral trade in bananas EU banana imports from the non-LDC ACP
countries from LDCs and intra-EU imports from the Outermost Regions 2) A quantitative
impact analysis using a partial equilibrium model ndash the Global Simulation (GSIM) model
(Francois and Hall 2009) 3) A qualitative impact analysis causal chain analysis will be
applied to look at what the Agreementrsquos sector-level social and environmental effects have
been In this step we focus in the socialhuman rights pillars on how vulnerable groups
could be affected at sector level The qualitative sectoral environmental analysis will cover
the impact of the FTAs on land use and related issues water and waste management and
biodiversity and protection
3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on
SMEs
The analysis in this task is linked to JC 41 The ldquoSME-Testrdquo will be guided by the following
steps 1) Consultation of SME Stakeholders SMEs are a central element of the consultation
strategy and will be present at every stage of it 2) Identification of affected business
early on in the analysis we will identify whether and which SMEs (eg medium-sized) are
among the affected businesses 3) Identification of concrete stories as the Interim Report
progresses we will have sufficient information to identify 20 concrete stories from SMEs
as required by the Terms of Reference
3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers
This task will be approached in two parts the first one being dedicated to impacts on
consumer rights and the other one to welfare-related impacts of the EU-CA FTA which also
affect consumers in their purchasing decisions The analysis will be related to JC 42 and
evaluation questions No 18 and 6 In addition we will aim to determine to what extent
EU-CA FTA has contributed to attaining SDG 1 (no poverty) and 10 (reduced inequalities)
Regarding consumer rights in the first step we will refer to the literature according to
which consumers usually benefit from global trade and preferential trade agreements due
to lower prices of purchased goods and services (resulting from reduction of tariff and non-
tariff barriers) a wider variety of traded goods and services the related satisfaction of
diversified needs and preferences and higher quality of available goods and services
Page 12
In the second step we will consider impacts which the EU-CA FTA (might) have had for
consumers regarding availability safety sustainability traceability and quality of traded
goods and services as well as which impact its promotion (or consumersrsquo awareness of it)
may have on consumersrsquo knowledge regarding the market offer and their trust in it The
list of questions to test will be guided by the EU Better Regulation Tool Nr 32 related to
impacts on consumers We will also draw on other parts of the study analysing
implementation of provisions related to regulatory measures and standards eg TBT
SPS TSD dialogue and cooperation between the EU and partner countries and
transparency to outline what level of protection incl consumer protection and production
standards is provided by the EU-CA FTA We will also refer to the EU RAPEX database ie
the alert system for dangerous non-food products listing notifications of such products
originating from the EU and partner countries
The second part of our analysis will focus on impacts of the EU-CA FTA on welfare In the
first step based on literature review and statistical data including relevant indexes (eg
the share of population living below the poverty line) we will analyse trends in the reporting
period in the EU and Central America regarding situation of consumers from different
groups of the population incl incomes expenditures levels of poverty and inequality
income and price levels wages and other types of income and any changes in this context
In the following step we will use outcomes of the economic modelling to estimate impacts
on welfare and inequality resulting from EU-CA FTA implementation eg prices and wages
In this context we will also consider to what extent the Agreement helped to attain SDG
No 1 (No Poverty) and SDG No 10 (Reduced Inequality) This will be complemented by
stakeholder consultations and finished with conclusions and recommendations
3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on
the budgets of the EU and the partner countries
The analysis in this task is linked to JC 41 It will examine impact of the FTAs on the EU
budget (ie revenues forgone) and will largely result from the economic model We
anticipate that for the EU the foregone tariffs on imports from the partner countries will
be estimated based on the level of EU imports from the selected countries as a baseline
and the tariffs that would have applied to those imports
3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on
EU Outermost Regions (ORs)
This task is linked to JC 41 The impact on ORs will be assessed based on the trade
diversion and deflection identified in the CGE analysis A key limitation in the economic
modelling framework is however that the EU ORs are not established as a separate region
To meaningfully analyse the effect on the EUrsquos ORs we propose two elements 1) A
matching analysis for the EU and the six partner countries regarding products that matter
for ORsrsquo trade (to either partner countries or the EU) 2) Competition analysis between
ORs and CA partner countries for exporting to the EU The effects will be determined
qualitatively distinguishing if applicable the ORs which might be positively or negatively
affected by the Agreement
3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on
developing countries in particular on LDCs and countries having an Economic
Partnership Agreement (EPA) with the EU
This task is related to JC 41 Our approach to look at the EU-CA FTArsquos impact on developing
countries and LDCs will largely consist of the interpretation of the results of the economic
model simulations which has defined lsquoLDCsrsquo as a separate region This allows us to look at
the effect the EU-CA FTA has had on them We will also look closely at effects for countries
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 13
which are implementing an Economic Partnership Agreement (EPA) with the EU In terms
of the impact we will look first at an economic impact followed by effects on the other
sustainability pillars The former will include (i) a matching analysis for the EU and the six
partner countries regarding products that matter for LDCsrsquo trade (to either partner
countries or the EU) and (ii) competition analysis between LDCs and CA partner countries
for exporting to the EU We do not expect the effect to be significant for the LDCs because
the global impact of the EU-CA FTA is limited
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable
development (Tasks 11 and 12)
321 Task 111 Analysis of the effects of implementation of the Trade and
Sustainable Development (TSD) chapter of the Trade Pillar
This is one of the priority tasks linked to JC 1A1 In the first step we will divide provisions
of the TSD chapter into thematic blocks to identify areas for further analysis These include
commitments of the Parties to effectively implement in their laws and practice the eight
fundamental conventions of the International Labour Organization (ILO) as well as the
Multilateral Environmental Agreements to which they are Party the right of the Parties to
regulate sustainable management of natural resources promotion of trade supporting
sustainable development institutional provisions and dispute settlement mechanism
In the second step based on findings from the analysis of the actual situation in the EU
and partner countries carried out in Tasks 113-118 and documents outlining the
implementation of the TSD chapter (eg reports of international monitoring bodies
reports from meetings of the TSD Board and civil society advice to the Parties) we will
map activities undertaken by the Parties in areas covered by the TSD chapter in a break-
down prepared in the first step This will enable us to conclude to what extent the scope
of the TSD chapter has been covered and if actions taken by the Parties individually and in
cooperation activities have contributed to the implementation of TSD commitments and
attaining the objectives of the chapter and relevant SDGs (No 8 on decent work and
employment for all No 13 on combating climate change and No 14-15 on sustainable
use and protection of marine environment forests and biodiversity) Our analysis will be
complemented by stakeholder engagement5 We will conclude the analysis with
recommendations for the future incl any improvements in operation of institutions to
support compliance of the Parties with provisions of the TSD chapter
322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter
This is one of the priority tasks liked to JC 1A10 and evaluation questions No 1 5 and 8
In the first step we will analyse formal commitments of the Parties regarding the set up
and operation of the institutional mechanism ie Article 294 (Contact Points of the Parties
the TSD Board and civil society Advisory Groups) and Article 295 (Civil Society Forum)
In the second step we will analyse the establishment and operation of TSD institutions in
practice including their meetings activities undertaken between sessions cooperation and
5 When the Report refers to stakeholder engagement it means diverse activities foreseen in the stakeholder engagement programme outlined in detail in Annex B to this Report (Consultation Strategy) For each task stakeholder engagement activities will be tailored to the most relevant group of stakeholders methodology applied in the task and type of data which will be needed for the analysis For example in the analysis carried out with regard to TSD chapter the focus will be on targeted interviews with civil society members of the Advisory Groups in the EU and Central American countries as well as with Government and Commission representatives Further sources of information and activities will include targeted meetings eg DAG meetings and workshops with Central American countries CSD meetings with the European civil society and written positions submitted by civil society organisations As a complementary source we will use replies from online public survey
Page 14
dialogue between Governments and civil society The analysis will be based on reports
from meetings research studies recommendations from civil society to the Parties and
interviews with representatives of the Commission Governments from Central America
EU Delegations the EESC secretariat of the EU Advisory Group as well as civil society
representatives from the EU and Central American countries including members of their
Advisory Groups We will also evaluate effectiveness and efficiency of the institutional
mechanism and its role in the monitoring and implementation of the TSD chapter the
ability to address problems and to pursue cooperation and dialogue We will put an
emphasis on the evaluation of the TSD Board its ability to monitor compliance with the
commitments of the Parties effectiveness in choosing priorities and structuring the work
programme pursuing cooperation activities and resolving problems This part will also
analyse civil society capacity to exercise its mandate and monitoring implementation of
TSD chapter the quality of dialogue between Governments and civil society and the follow-
up to civil society recommendations In this context and in line with suggestions provided
by reviewed research studies we will also evaluate to what extent the discussion among
the civil society and between Governments and civil society focuses on substance
(compared to focusing on process) and whether the civil society has the means and
capacity to prepare for and to engage in such a discussion We will conclude the analysis
with recommendations for the future incl any improvements in operation of institutions
323 Task 113 Analysis of employment impacts
The analysis in this task will focus on impacts for employment levels and relate to JC 42
and evaluation questions 4 and 6 In the first step we will analyse trends in employment
and unemployment levels in the EU and partner countries for their whole economy and
across sectors over the reference period We will also identify factors influencing observed
trends including macroeconomic and labour policy measures applied by the Governments
investment in education and skills development migration from rural to urban areas and
across region and impacts of trade and investment including through trade agreements
In the second step the analysis will be focused on assessing quantitative impacts (direct
and indirect) of the EU-CA FTA on the number of jobs direct and indirect (for skilled and
un-skilled workers for the EU and partner countries across sectors) and be based on the
results of the economic modelling We will compare these results with the real-life data
and trends observed in the first step to conclude to what extent the reduction in trade
barriers and changes in output across sectors related to the implementation of the EU-CA
FTA have influenced demand for labour given the assumption of a fixed total employment
in the economy and full labour mobility between the sectors with workers leaving sectors
seen as less competitive and moving towards those having better prospects of growth and
working conditions including wages We will also draw a conclusion to what extent
observed trends in employment should be attributed to the EU-CA FTA and to what extent
to other factors incl macroeconomic environment global trends in commodity prices
domestic policy investment and trade agreements with other partners Stakeholder
consultations will help to verify our findings
324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda
(job creation labour standards social protection and social dialogue) on
working conditions poverty reduction and enforcement
This is one of the priority tasks Our analysis will seek to answer the evaluation questions
No 1 4 and 6 (JC 42) Given the broad scope of this task we will divide it into two parts
a) labour standards and social dialogue (the Decent Work Agenda) b) working conditions
including social security and health care coverage of workers and labour inspection
In the first step we will describe the situation in the EU and partner countries and changes
over time regarding the subject matter as well as factors influencing observed trends We
will focus on the following
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 15
Task 114 a) on labour standards will look at the implementation of the core labour
standards as enshrined in the fundamental ILO Conventions ratified by all Parties to
the EU-CA FTA and evaluated by the ILO monitoring bodies6 Regarding trends in child
labour occurrence the analysis will include eg the number of working children types
of activities and sectors involved the number of hours worked per week motives for
undertaking work and involvement in hazardous work Influencing factors will be
considered and their impact on job availability for adult household members the level
of generated income and the extent to which it covers family needs Regarding forced
labour the analysis will include types of activities and sectors involved and influencing
factors including criminal activity and the level of law enforcement On freedom of
association and the right to collective bargaining the analysis will cover conditions for
setting up joining and operation of trade unions and employer organisations and
functioning of social dialogue for the whole country and ndash if data is available ndash across
sectors including indicators such as the share of trade union members in the total
number of workers for the whole country and in a break-down by sector and changes
over time Regarding non-discrimination at work we will focus on groups of workers
which may be in a disadvantaged position on the labour market eg youth disabled
persons migrants or indigenous peoples (women will be analysed in Task 116) and
indicators such as labour participation rate and unemployment rate the share of each
group working informally or being in a situation of sub-employment (ie receiving a
wage below the minimum level despite working full time or having no opportunity to
work full time despite being ready to do so)
Task 114 b) on working conditions and labour inspection will include trends in job
quality indicators over time the average number of working hours per employee per
week the number or rate of fatal and non-fatal accidents at work social security and
health care cover of workers wage levels type of contract the number of labour
inspectors and inspections carried out at work places and the infrastructure and funds
being at the disposal of inspection services (we will consider in that context that all EU
Member States and five Central American countries except Nicaragua have ratified
the ILO convention No 81 on labour inspection)
In the second step based on economic modelling we will identify the sectors most affected
(positively or negatively) by the EU-CA FTA and using the analysis done in step one will
seek to determine if trends observed in the respect for labour standards and quality of
working conditions in individual sectors can be attributed to the operation of the Agreement
or rather to other factors In cases where any concerns related to labour standards eg
child labour incidence or low presence of trade unions are identified in sectors particularly
involved in trade with the EU notably in exports we may apply an in-depth analysis in a
dedicated case study We will also refer to the implementation of the TSD chapter to
establish whether policy dialogue cooperation activities and engagement with civil society
have also influenced the situation We will complement desk research with stakeholder
engagement
325 Task 115 Analysis of impacts on the informal economy and informal
employment
This is one of the priority tasks linked to evaluation questions No 1 and 8 (JC 42) We will
also aim to determine to what extent the Agreement has contributed to attaining objectives
of SDG No 1 (no poverty) and No 10 (reduced inequalities) In the first step we will
develop a description of the situation in the partner countries during the analysed period
concerning the size and structure of the informal economy and factors influencing its
6 These include conventions No 138 and 182 on elimination of child labour No 29 and 105 on prohibition of forced or compulsory labour No 87 and 98 on freedom of association and the right to collective bargaining and No 100 and 111 on equal pay for work of equal value and non-discrimination at work
Page 16
existence as well as its geographic pattern in Central America and each of the partner
countries separately We will aim to identify if there are links between the informal
economy and eg the economic structure and dynamic in certain regions and their
involvement in trade We will also report about steps taken by the Governments in a move
towards formal economy including dedicated national strategies adopted in Costa Rica and
Guatemala
In the second step based on the results of the economic modelling and trade statistics for
trade and investment flows between the EU and Central American countries an additional
literature review and stakeholder consultations we will aim to establish to what extent
trade and in particular the EU-CA FTA has contributed to the observed trends in each
partner country We will verify our findings in stakeholder consultations
326 Task 116 Analysis of impacts on gender inequality
The analysis in this task will seek to answer the evaluation questions No 1 4 and 6 (JC
42) We will also aim to determine to what extent EU-CA FTA implementation has helped
to attain SDG No 5 (gender equality) No 8 (decent work and economic growth) No 1
(no poverty) and No 10 (reduced inequalities) Work under this task will be guided by the
approach proposed in UNCTADrsquos Trade and Gender Toolbox (UNCTAD 2017) which
considers impacts on women in their roles as workers entrepreneurs traders and
consumers Complementary considerations regarding impacts for each of those groups will
be inspired by other literature (eg Fontana 2009) and methodological approaches (eg
European Institute for Gender Equality 2016)
In the first step we will analyse the situation in the Central American partner countries
regarding womenrsquos participation in the labour market economic activity as entrepreneurs
and traders (with a consideration of their access to assets and supporting measures) and
their position as consumers incl the level and type of income received and being at their
disposal Based on the available data we will also analyse gender inequalities before and
after the entry into force of the EU-CA FTA and measures applied by the countries and
provided by international donors to support an increased womenrsquos participation We will
also review reports of the ILO Committee of Experts regarding implementation of the two
ILO fundamental conventions on non-discrimination ie No 100 (equal pay for work of
equal value) and No 111 (non-discrimination at work) ratified by all CA partner countries
In the second step we will compare observed trends stemming from the real data with
outcomes of the economic modelling to determine to what extent they may be linked to
impacts of Agreement and to what extent they result from influence of other factors
Focusing on women as workers we will identify sectors important for them (based on
their shares in the total womenrsquos employment and a ratio of female and male workers
in each such sector) and compare observed trends in employment levels (in total and
across sectors) with the results of the modelling (changes in employment levels across
sectors) to determine whether the EU-CA FTA has contributed to changes reported in
the real life and if so to what extent In this context we will also consider impacts of
tariff reduction on public revenues and whether this might have had an impact on the
provision and quality of public services which in turn may have an effect on women and
their ability to participate in the labour market or to undertake an economic activity
For women as entrepreneurs if relevant data is available we will identify sectors of
their economic activity and compare trends in the actual operation of these sectors over
time (eg growth or decline) with outcomes of the economic modelling to determine if
the EU-CA FTA might have had an impact on output of these sectors and as a result
position of women as entrepreneurs
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 17
Moreover if more detailed data is available regarding sectors and groups of products or
services manufacturedprovided by women-led enterprises as well as their engagement
in international trade we should be able to say (again comparing the real-life data with
economic modelling) what impact the Agreement may have exercised on women as
traders and in this context on sales and exports of their products or services or their
competition with or the use of imports We will also consider whether the EU-CA FTA
provisions regarding eg tariff reduction SMEs TBT SPS might have had an impact
for women-led enterprises (given their size and sectors of operation)
Concerning the role of women as consumers we will look at real-life trends in income
and price levels and compare them with outcomes of the economic modelling to see
what impacts the EU-CA FTA might have had on welfare and price levels as well as the
availability and accessibility of goods and services
Our analysis will be complemented by engagement with stakeholders including women
organisations to identify barriers in their activity on one hand and facilitating measures on
the other and to gather more insights into impacts of the EU-CA FTA
327 Task 118 Analysis of impacts on the adoption and implementation of
internationally recognised instruments of responsible business conduct and
Corporate Social Responsibility (CSR)
Our analysis under this Task will seek to respond to the evaluation question No 1 (JC 42)
In the first step we will map CSRRBC practices in the Central American partner countries
in the analysed period including practices of European companies investing there or having
their suppliers and existing government initiatives promoting them eg National CSR
strategy and Law on CSR in Costa Rica National Plan on Social Responsibility and Human
Rights in Panama and dedicated centres or foundations promoting CSR in Guatemala
Honduras Nicaragua and El Salvador We will also use findings from a research carried
out for Task 111 identifying initiatives undertaken within the TSD Title incl EU projects
and regional events dedicated to CSR RBC and decent work in global supply chains We
will aim at a better understanding of the existing framework uptake of CSRRBC practices
by enterprises factors influencing it and CSRRBC presence in the EU relations with the
partner countries including technical assistance and cooperation projects
Based on this in the second step we will use outcomes of the economic modelling and
stakeholder consultations to verify whether indeed the EU-CA FTA through generated
trade and investment flows as well as specific provisions (such as those in TSD Title) might
have encouraged uptake of CSRRBC practices We will also seek to identify factors related
to market access which may encourage uptake of CSRRBC practices Legislative ones may
include eg non-financial reporting and obligatory due diligence in certain sectors or
activities requirements related to social and environmental aspects in public procurement
and non-legislative ones may focus on image and comparison with the main competitors
being part of supply chains where business partners require respect for certain labour and
environmental standards international instruments in CSR (OECD Guidelines for
Multinational Enterprises ILO Declaration on Multinational Enterprises and Social Policy
the UN Global Compact etc) requirements of sustainability and certification schemes or
consumer awareness and related choices
As an additional element of this analysis (subject to data availability) we may include into
this task examples of other schemes eg sustainability schemes or promotion of decent
work in global supply chains (notably of agricultural products) and their presence in trade
between Central America and the EU and impacts the EU-CA FTA might have had on their
use in bilateral trade relations
Page 18
328 Task 117 Analysis of environmental impacts
The main objective of the environmental analysis is to assess the environmental and
climate change effects of the EU-CA FTA as well as to provide answer to the evaluation
questions notably those on the effectiveness (No 1-4) (JC 43) and coherence of the
Agreement with other policies and the EUrsquos commitment to the SDGs and in particular
SDGs No 13-15 ie Climate Action Life below water and Life on Land (respectively) ie
evaluation question No 7 The main challenge is to isolate the EU-CA FTA induced effects
on the environmental performance in each country from general developments and trends
that occurred regardless of the EU-CA FTA This is particularly challenging as the
counterfactual environmental outcomes are unobservable for most of the environmental
impact areas
The overall approach is based on our detailed understanding of the dynamics through
which the EU-CA FTA may have created environmental impacts tailored towards the
specific circumstances for the Central American countries the requirements in the ToR
the TSD Chapter of the EU-CA FTA and the budget provided for this study The detailed
understanding is based on the study lsquothe methodology for assessing biodiversity impacts
of EU FTArsquo by IEEP Trinomics et al (2021) and the latest literature including an OECD
study (Garsous G 2019) on this matter and applies the following logic
1) identifying the components in the EU FTA with the Central American countries that may
have generated environmental effects (EU-CA FTA elements) Based on our extensive
recent experience on researching the dynamics through which FTAs may create
environmental impacts we conclude that the FTA contains (1) measures easing market
access for the signatories (referred to as tariff-based measures) and (2) several rules-
based measures (mostly by means of the provisions in the TSD Chapter referred to as
non-tariff-based measures) that may have resulted in environmental impacts in the
countries involved
2) then establishing how these elements could have created directly or indirectly intended
or unintended ndash environmental impacts (the impact channels) Any FTA is by
definition expected to create direct environmental impacts through the expected
expansion of economic activity which may lead to eg higher pollution and greenhouse
gas (hereafter GHG) emissions may put a strain on bio-resources and pressure on
vulnerable ecosystems as higher levels of output require more environmental input
(Copeland and Taylor 2014) Trade agreements also create indirect environmental
impacts through structural adjustments in the economies and so-called specific rules-
based trade measures including the provisions in the TSD Chapter Our approach
carefully considers four impact channels that are also distinguished by the SIA Handbook
(European Commission 2016a) to separate the way in which EU-CA FTA may have
created impacts on various areas of the environment The scale effect (the impact
created from increased production as a result of the trade agreement) the structural
effect (the dynamic effect of the EU-CA FTA on the growth and contraction in production
in different sectors) technology effects (impacts triggered through increased efficiencies
from increased competition or from a transfer in environmental goods and services) and
potentially the product effect (impact via changes in production standards and use of
goods in a country eg through strengthened environmental policies and environmental
regulation)
3) via these impact channels various areas of environmental performance (the impact
areas) may be impacted and are to be further analysed in this evaluation In this study
we distinguish the following impact areas 1) Climate change 2) Biodiversity and
ecosystems and 3) Other key environmental parameters
Research methods ndash For some impact areas there is more reliable information and data
and quantitative research methods available than for others To the extent possible the
quantitative analysis will build on the economic modelling results and as a result the
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 19
analysis will allow us to comment on the causal relation between environmental topics and
the EU-CA FTA Where quantitative research is not possible we will apply qualitative
methods The qualitative analysis may rely on the causal chain analysis method which
aims at identifying the root cause of observed changes Irrespective of whether a certain
impact will be assessed with more quantitative or qualitative research methods our
approach is designed to make intensive use of quantitative information eg compiling
quantitative statistics and analysing trends The following research methods are applied
per environmental area
For climate change we propose focusing on establishing the EU-CA FTArsquos impacts on
the major GHG emissions (eg carbon dioxide methane and nitrous oxide) and
potentially on the air pollutants (ozone precursor gases acidifying gases and primary
particulates)
For biodiversity and ecosystems we propose following the latest insights in assessing
biodiversity impacts of the EU-CA FTA based on the study for DG Environment on the
development of a methodology to assess the impact of trade liberalisation on
biodiversity (which has not been published yet) In case results of the biodiversity
analysis are also relevant for climate change (ie LULUCF emissions) the link between
these results and climate change will be explored
For other impact areas we propose developing baselines based on qualitative and where
possible quantitative data for each impact area and explore developments in
environmental performance since the entry into force of the EU-CA FTA In addition we
will discuss the (effectiveness of the) implementation of provisions enshrined in the TSD
Chapter in the EU-CA FTA per impact area
The above discussed approach is based on five activities They apply the logic of the
methodological stages7 as described in the methodological framework for assessing the
impact of EU FTAs on biodiversity (IEEP Trinomics et al 2021)
3281 Activity 1 Fine-tuned methodology and impact screening and scoping
Fine-tuning the methodology is part of this inception report (this document) and mainly
serves to define the exact scope and focus of this evaluation The environmental analysis
logically focusses on Central America and the EU (with an emphasis on Central America)
However within defining the geographic scope of this analysis one needs to differentiate
global (eg climate change) and other more local environmental impacts eg
(un)sustainable forest management practices We aim to cluster countries when
appropriate from the perspective of a certain regional environmental issue In this way we
can respond to the challenge of bringing focus to the analysis while balancing the available
resources and time Clustering should enable us to evaluate certain environmental issues
in a more targeted way enabling deep dives into specific issues Below we discuss in more
detail what this regional approach means in practice and how we aim to mitigate the risk
of overlooking certain impacts
Impact screening and scoping - The exact environmental topics on which quantitative and
qualitative analysis will be performed depend on the outcome of the impact and screening
and scoping exercise which seeks to identify issues which deserve to be analysed with an
extra depth As such this sub-activity aims to select the environmental impact categories
and sub-areas to be studied in other activities Impact screening and scoping is a
methodological tool to identify issues which should be prioritised in the evaluation and
helps to mitigate the risk of overlooking potential significant impacts In essence the
prioritisation is based on (i) screening the most prevailing existing environmental drivers
and pressures and (ii) screening the expected impacts caused by the EU-CA FTA (at a
7 The study by IEEP Trinomics et al (2021) identifies three stages Stage I) Preparatory stage Stage II) Method selection and impact logic and Stage III) Impact assessment and related conclusions
Page 20
sector level) by means of economic modelling results literature review stakeholder input
and political interest All information is transparently documented in the impact-screening
matrix During the impact screening and scoping exercise we will also develop three
context-setting documents (2-pages) one per environmental impact area to better
understand the background These documents will have a regional perspective and will be
directly used in the baseline development The output of this activity is included in the
Interim Report
3282 Activity 2 Establishing the baselines for the impact areas
The aim of this activity is to gain a brief understanding of the EUrsquos and partner countriesrsquo
status quo regarding their environmental governance and performance (eg trends) for
those environmental impact areas that have been identified as priority ones The output
will be a section in the evaluation with a short description (1 page) per prioritised impact
area outlining the governance (very brief) and the performance and exploring the main
developments trends and their cut-off points This will be done by analysing issues from
a DPSIR framework perspective (drivers ndash pressures ndash state ndash impact ndash responses) (see
Box 1) when appropriate8 This framework is often applied in environmental assessments and plays a central role in the study by IEEP Trinomics et al (2021) on the methodology
for assessing the impact of EU FTAs on biodiversity
Box 1 The use of the DPSIR framework in FTAs
The DPSIR framework allows to interpret certain environmental indicators by establishing a causal relation between indicators and their analysed effects In the case of an FTA trade liberalisation in goods services and investments can function as a driver of a change in different economic sectors causing changes in the amount of land- and other resource use or in their quality (eg pollutants and emissions impacting air water or soil quality) The changes in the quantity of land- and other resource may create pressures on biodiversity which lead to an impact in the state of and trends in biodiversity ecosystems and the services they provide As a response(s) certain new or existing measures can be taken to help to prevent negative impacts or to amplify positive ones
Source IEEP Trinomics et al (2021)
Three consecutive sub-tasks will be performed to operationalise the establishment of the
baselines 1) Literature review and data analysis to establish draft baselines 2) Interviews
with stakeholders to obtain additional input validate work and fine-tune results 3)
Triangulation of information (literature data and interviews) and establishment of final
baselines The output of this activity will be included in the Interim Report
3283 Activity 3 Quantitative evaluation of impacts9
The aim of this activity is to assess the quantitative estimates of the impacts of the EU-CA
FTA on GHG emissions and possibly air pollution and ndash potentially10 ndash on trade in
environmental goods and services and land use change As such the desired result is the
reporting of the quantitative estimates of the impacts of the EU-CA FTA on GHG emissions
and air quality in the EU Costa Rica El Salvador Honduras Guatemala Nicaragua and
Panama depending on data availability Ultimately it is global GHG emissions that
contribute to global warming for this reason we propose to estimate the global change in
GHG emissions resulting from the EU-CA FTA In this way we also consider the difference
in climate change impacts from trade creation and trade diversion The impacts on GHG
emissions will be decomposed in the most relevant key drivers where possible The
8 This implies that we will make use of the insights of the framework whenever relevant and appropriate in the light of the evaluationrsquos objective We will not identify every element (D P S I and R) for each environmental issue but focus on the most relevant elements for each of them
9 The focus depends on the results of the impact screening and scoping 10 Depending upon expected scale of impact available resources and data availability
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 21
preliminary finding of this activity will be included in the Interim Report and the final results
are to be presented in the Final Report
3284 Activity 4 Qualitative evaluation of impacts11
The aim of this task is to evaluate qualitatively the impacts of the EU-CA FTA on various
prioritised environmental impact areas focussing on those which are not assessed in the
quantitative analysis First a broad assessment is done based on desk research from a
regional perspective In addition approximately two case studies (as part of Task 13) will
be prepared in which the environmental impacts of the EU-CA FTA on certain areas will be
assessed based on in-depth qualitative analysis using causal chain analysis (CCA)
(European Commission 2016a) Depending on data availability we will aim to identify
trends developments and cause-effect relations between the EU-CA FTA and environment
By combining the existing environmental drivers and pressures (see Textbox 3282-1 for
more information) the economic results and effects of TSD provisions we naturally also
include potential unintended and unforeseen effects The preliminary finding of this activity
will be included in the Interim Report and the final results are to be presented in the Final
Report
3285 Activity 5 Answering of the evaluation questions and other concluding
remarks
The overall environmental analysis concludes with clearly commenting on the effect of the
EU-CA FTA on the performance the legislative framework and effective implementation in
each of the prioritised environmental impact areas In case no causal relation between the
EU-CA FTA and the performance of a certain environmental impact area is found it will
also be explicitly mentioned These concluding remarks together with the in-depth
analyses conducted in previous tasks will serve as the basis to answer the evaluation
questions related to the EU-CA FTArsquos environmental impacts under Task 14 in the Final
Report
3286 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative environmental effects that have emerged from tensions between the EU-CA FTA
on the one hand and elements of environment on the other Additional policy or legislative
measures can also be suggested to enhance positive impacts of the EU-CA FTA
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human
rights
In this section we present the approach envisaged for the analysis of the human rights12
impact of the EU-CA FTA in the EU and the CA partner countries
The evaluation will rely on the methodology of human rights impact assessments (United
Nations 2011 European Commission 2015) as well as on the experience from previous
studies and will include the following steps
Step 1 Human rights baseline
At this step a concise baseline analysis will be carried out Concise human rights
profiles will be prepared for each of the state-parties to the EU-CA FTA
Step 2 Screening and scoping
11 The focus depends on the results of the impact screening and scoping 12 Human rights in this analysis are defined as set out in the Charter of Fundamental Rights of the European
Union the core UN human rights conventions and relevant regional human rights treaties
Page 22
At this step based on various sources human rights will be screened and specific
human rights that may have been affected by the EU-CA FTA will be identified
Step 3 Detailed assessment of the selected human rights
At this step drawing upon findings from the previous stage of the analysis an in-depth
analysis of up to three selected rights will be carried out (both quantitative and
qualitative and depending on the degree of the impact)
Step 4 Policy recommendations and accompanying measures related to
human rights
At this step policy recommendations will be formulated as to how any tensions between
the EU-CA FTA and human rights obligations may be addressed and how a positive
impact on the enjoyment of human rights can be enhanced
Stakeholder inputs will be used throughout all four steps to verify and support findings as
well as to collect evidence on the impact and ensure meaningful participation
3291 Human rights baseline
At this stage a concise baseline analysis of the human rights situation in each state-party
will be carried out First an overview of international human rights obligations of all the
state-parties to the FTA (ratifications of core international and regional human rights
treaties core ILO Conventions and other treaties relevant for the analysis) will be
presented in a tabular manner Second human rights profiles will be prepared Human
rights profiles will consist of a summary of the baseline conditions for the enjoyment of the
relevant human rights in each of the state-parties to the FTA from five years before the
provisional application of the EU-CA FTA until 2019 Particular attention will be given to the
pre-existing conditions of stress and vulnerabilities with respect to human rights
highlighting the position of specific vulnerable groups
The human rights profiles aim to
Set the scene regarding the enjoyment of relevant human rights in the partner
countries and identify social and political developments that may have impacted the
human rights situation
Allow for a targeted assessment of the human rights impacts of the EU-CA FTA
The profiles are based on the analysis of international human rights obligations national
legislation and policy framework as well as implementation issues with respect to relevant
human rights The analysis reviews country specific reports of international organisations
(eg UN OECD ILO) EU Reports on Human Rights and Democracy in the World reviews
of reports of international human rights organisations (eg Human Rights Watch) a
review of academic literature media reports relevant indicators and local partner inputs
3292 Screening and scoping
The second step of the analysis focuses on identifying which human rights could have been
affected by the EU-CA FTA and in which way The EU-CA FTA will be scanned for provisions
that are most likely to have caused an impact on the enjoyment of human rights in state-
parties to the EU-CA FTA The cause-effect relationships between the trade and trade-
related measures in the FTA and human rights will be established based on multiple sources
(see the multi-pronged approach below) The focus of the screening will not only be on
specific trade measures originating from the FTA (the Trade Pillar) but also on the overall
effect of the measures under the broader Association Agreement
Based on the screening exercise and in line with the EC Guidelines for human rights impact
assessments (European Commission 2015 p5) we provide a focused overview of the
human rights affected by the EU-CA FTA specifying the following elements
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 23
Specific human rights affected by the FTA
Short note on the evidence of the impact with a reference to the sources of information
Whether the affected right is an absolute human right or not13
The kind of impact (direct or indirect)
The degree of the impact (major or minor)
Affected population groups (if applicablepossible)
The screening exercise will as much as possible reflect upon the affected individuals
andor groups of people especially indigenous people and women based on the results
generated by the economic analysis inputs from the stakeholders and literature review
We will also look at how the EU-CA FTA has impacted gender equality and labour rights14
3293 Detailed assessment
Depending on the outcome of the screening exercise a maximum of three human rights
will be selected for a detailed assessment
Applicable human rights laws will be scanned (based on the obligations of the state-parties
under international and regional human rights treaties) to provide a framework of
applicable and binding entitlements and duties related to the selected right(s) Insofar
possible national legislation will be scanned for any changes subsequent to the application
of the EU-CA FTA focusing in particular on the changes that affected the enjoyment of
each of the selected human rights (using baseline analysis to aid the impact assessment)
Then we will look at the particular measures and how they have enhanced or impaired the
enjoyment of the relevant rights and or have strengthened or weakened the ability of the
parties to fulfil or progressively realise their international human rights obligations
Particular attention will be given to impacts on vulnerable groups or groups of individuals
that are at risk of being marginalised (Danish Human Rights Institute 2016)
This assessment is intended to be both quantitative and qualitative in nature The
quantitative analysis is based on the results of the economic analysis and used to the
extent possible15 The qualitative analysis is based on various sources as well as
stakeholder consultations and close work with local partners Economic modelling results
already disentangle the impact of the EU-CA FTA from other impacts that could have
affected the enjoyment of a human right over time For qualitative analysis it is more
challenging to discern the FTA impact To address this challenge we use a multi-pronged
approach (ie a methodological cross-validation approach in order for one methodological
element to corroboratevalidate the other method) in examining the causal effects of the
FTA for each of the prioritised human rights16 (see Figure 3)
13 See Tool 28 of the European Commissionrsquos Better Regulation Toolbox (2017) available at httpseceuropaeuinfolawlaw-making-processplanning-and-proposing-lawbetter-regulation-why-and-howbetter-regulation-guidelines-and-toolboxbetter-regulation-toolbox_en
14 Although we expect some overlap on labour-related rights with the evaluation of social impacts there will be cross-references to ensure a holistic analysis Moreover taking into account the interrelated nature of human rights we reserve the right to address the rights of the workers from other relevant perspectives not covered in the social analysis (eg as related to vulnerable groups)
15 When relevant we will use human rights indicators to supplement the analysis 16 We use the same method also during the screening exercise but to a more a limited degree (eg not using
specific human rights indicators for each human right as it goes beyond the scope of this evaluation)
Page 24
Figure 3 Overview of the multi-pronged approach to human rights impact assessment
Thus in assessing the impact the EU-CA FTA has had on each human right we use the
economic modelling results (if applicable and appropriate) that already disentangle the FTA
impact from the overall effects and link economic findings (partially) to how the selected
human right has evolved in the EU and Central American partner countries because of the
EU-CA FTA If data from the economic analysis is not sufficient to support the analysis we
will make use of contextually relevant human rights indicators (United Nations 2012) from
the statistical databases of the ILO World Bank UN OECD andor other organisations to
investigate how the selected human rights have evolved over time We look at the
development of human rights from five years before the provisional application of the FTA
up to the most recent year for which the data is available comparing period before and
after the entry into force of the FTA looking for shocks (relatively sharp increases
decreases) around that time or structural breaks in a trendline to identify an EU-CA FTA
impact We also investigate whether other shocks have taken place that could explain
observed changes in human rights (eg changes in domestic laws) Based on a similar
practice used during the ex-post evaluation of the EU-Korea FTA we could also consider
including a set of control countries to the analysis to consider development of specific rights
in relative terms
All data findings will be supported and cross-validated through a review of relevant
literature looking for further evidence of impacts provisions of the EU-CA FTA the social
and political situation (eg legislative policy instruments adopted that could have affected
the enjoyment of relevant rights) and inputs from the stakeholders that can serve as
evidence of a link between how the human rights has evolved and the EU-CA FTA
3294 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative human rights effects that have emerged from tensions between the EU-CA FTA
on the one hand and statersquos human rights obligations on the other Additional policy or
legislative measures can also be suggested to enhance positive impacts of the EU-CA FTA
and to prevent or mitigate impacts of measures that have been identified as having caused
or contributed towards impaired enjoyment of human rights
33 Concluding tasks
Based on the various analyses undertaken including the case studies the evaluation team
will prepare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 25
A comprehensive review of the extent to which impacts identified in the Trade SIA of
the Association Agreement between the EU and Central America (Ecorys and Corporate
Solutions 2009) have actually materialised (Task 9)
Replies to the evaluation questions (Task 14) and
Conclusions and recommendations (Task 15)
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3)
The literature review aims at identifying sources data and main conclusions drawn from
the previous studies to make sure that the report is based on and further complements the
existing literature Annex A3-2 provides an overview of the literature considered so far in
a tabular structure To summarise the findings from the literature review so far the
following can be noted regarding methodologies and substantive issues
41 Methodological aspects
The economic effects of the EU-CA FTA have been analysed by the Sustainability Impact
Assessment (SIA) outsourced by the Commission (DG Trade) in 2009 before the launch
of the negotiations (ECORYS 2009) This ex-ante evaluation combined quantitative and
qualitative approaches the first one based on the Computable General Equilibrium (CGE)
and Causal Chain Analysis and the latter built on stakeholder interviews (ECORYS 2009)
The CGE model underpins SIA and the literature produced on the likely economic impact
of the agreement (ECORYS 2009 IIDE 2007 Lima et al 2009 Lima et al 2010 CEPR
2012) and the bulk of these studies is based on the assumptions on the likely structure of
the agreement as the negotiations were not concluded yet The 2009 SIA also assessed
the additional FDI impact by applying a gravity analysis approach (ECORYS 2009) The
first Commission annual activity report on the implementation of the EU-CA FTA builds its
assessment on the available Eurostat data and on the comparison between the region-to-
region trade flows before and after the treatyrsquos entry into force (Commission 2015) The
following activity reports (Commission 2016 2017a 2018a 2019d 2020a) illustrate the
evolution of trade on a yearly basis relying on the Eurostat and Central American statistics
thereby opting for a more descriptive approach
The main added value brought by this ex-post evaluation report consists of the CGE model
and its application to updated EU and CA statistics in order to isolate the strictly related
economic implications of the EU-CA FTA from other external factors influencing bilateral
trade thereby purifying the overall analysis and drawing more methodologically solid and
reliable conclusions The Commission (2021) modelling used for the ex-post evaluation
unlike the other studies focuses only on tariffs however which means that impacts of not
the entire EU-CA FTA are measured but only of the tariff component
Regarding assessment of non-economic effects the methodology tended to forecast
estimated general trends and usually does not make detailed projections It should also be
pointed out that predicting long-term socio-economic effects stemming from the AA proves
to be more challenging than estimating short-term trade impacts (European Parliament
2018) Regarding quantitative social and environmental variables the models have used
structured gravity approaches to estimate the effect of non-tariff measures (NTMs)
(ECORYS 2009) The main methodological constraints to calculate (non-quantifiable)
social environmental and human rights effects from a quantitative perspective are the
problem of attribution and the so-called counterfactual given that one cannot know what
would have happened in case the agreement was not in place
42 Substantive issues
In the 2009 SIA the literature review concluded that the potential economic impact of
the EU-CA FTA was expected to be positive The vast majority of literature sources agree
on the key role played by agricultural products in the Central American economy (Romero
Page 26
et al 2015 FAO 2020 OXFAM 2016 European Commission 2020 European Commission
2019 Zabalo et al 2019 Mejia et al 2018 Lima et al 2009 Lima et al 2010) The
raw material share accounts for up to 60 of the total CA export and combined with
natural-resource-based manufactures their cumulative share reaches 70 (Lima et al
2010 p 92) A study carried out in 2007 before the launch of the EU-CA negotiations
forecasted a negligible impact of the agreement on the EU GDP and overall welfare even
in case of a full liberalisation scenario (IIDE 2007 p 16) Also in terms of FDI the
estimated effects were marginal for the EU but more tangible for CA where the agreement
could lead to an increase of 1 of the CA economies GDP (CEPR 2012 p 27) However
some additional positive spill-overs were considered such as the impact on maritime
services that could help CA countries to better manage increased trade flows and at the
same time improving custom procedures (ECORYS 2009) On trade the report
highlighted trade value flow variations especially in CA with the impact on both EU export
and import value rather negligible (Ibid p 73)
The 2012 CEPR impact assessment argued that the EU-CA trade liberalisation triggered
overall positive effects especially when referred to key products both for the EU exports
to CA such as in agriculture products and goods originating from manufacturing activities
(eg cars and medication) and EU imports from CA primarily food products where the
FTA proposed to half tariff levels compared to the previous GSP level access in place (CEPR
2012 pp 10-11)
According to the SIA banana exports from CA to the EU were expected to benefit from
more advantageous market access conditions Regarding NTMs bilateral trade facilitation
and border-related barriers should be eased simplified and rationalised Consequently
trade costs were expected to decrease remarkably The econometric analysis showed that
the economic effects of the EU-CA FTA were not expected to be equally distributed among
the CA countries given the economic heterogeneity of the region (ECORYS 2009 Lima et
al 2009 CEPR 2012 European Parliament 2018) Vegetable fruits and nuts sector (VFN)
together with sugar cane showed the most promising results (IIDE 2007 p17) although
the positive effects were not equally shared among the CA members with Panama
benefitting the most Manufacturing production in CA was estimated to benefit from the
deal (+20) Electronic equipment would also take advantage of the FTA especially in El
Salvador Honduras and Costa Rica (CEPR 2012 p 31) Transport equipment insurance
services and other manufacturers were expected to decline
On the EU side the projections estimated that
Output in the sector of vegetables fruits and nuts as well as electronic equipment was
expected to decrease modestly (CEPR 2012 p 29)
The EU was estimated to increase output in grains other agriculture and additional
categories of primary food (ECORYS 2009 pp 44)
A limited price decrease for processed food grains and vegetables other agriculture
and beverages and tobacco was expected (Ibid p 44)
Overall in the EU literature in any scenario ranging from partial to full liberalisation an
increase of trade volume as result of the AA was projected (European Parliament 2018
p 43)
A study presented at the Twelfth Annual Conference of the Global Economic Analysis in
2009 and eventually incorporated in a 2010 publication on Latin America assessed the
likely effects of the EU-CA FTA for three scenarios full liberalisation partial liberalisation
excluding sensitive products on both sides (namely fruits and vegetables meat beverages
and tobacco other processed food) and liberalisation considering only fruits and vegetables
as sensitive in the EU (Lima et al 2009 p 1) The application of different models revealed
that the most economically advantageous scenario was the first one leading to an
expansion of exports in all signatory countries and positive effects on overall CA welfare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 27
The second scenario would lead to a smaller economic impact with a more modest trade
expansion (12) and some welfare losses Finally in the scenario foreseeing the EU
excluding only fruits and vegetables the ldquoresults for trade and product remain positive
but with smaller figuresrdquo (Lima et al 2009 p 1) In conclusion a deeper liberalisation
would favour both regions by enhancing exports by between 1 and 5 in all the CA
countries (Lima et al 2010)
The Commissionrsquos annual FTA implementation reports describe trade flows between the EU
and CA after the conclusion of the FTA and demonstrate an overall upward trend for certain
countries and for specific sectors Trade flows remained rather stable in 2014 increased
by 12 in 2015 decreased marginally by 07 in 2016 grew by 72 in 2017 by 66
in 2018 and by 7 in 2019 With the exception of 2017 the EU maintained surplus in
trade with CA (Commission 2015a 2016 2017a 2018a 2019d 2020a)
The Central American literature generally focused on the role played by agricultural exports
in CA domestic economies and on the potential impact generated from the EU-CA FTA on
export transformation and diversification (Zabalo et al 2019) The likely impact of the EU-
CA FTA varied among the countries and the industries considered (ECORYS 2009) A study
carried out in 2018 aiming at analysing the effects on Panamarsquos economy by adopting a
shift-share analysis model concluded that between 2013 and 2016 the Panamanian exports
(mainly transport equipment and agricultural products) to the EU showed a downward
trend by 32 for the selected years mainly due to the decrease of primary exports to
some EU countries including Germany Belgium Italy Greece Poland and Sweden (Mejia
et al 2018) Likewise the local press has highlighted both advantages and disadvantages
generated by the EU-CA FTA for the whole region (De Leograven 2006 Barquero 2016
Rodriguez 2017) While it was considered that tariff removal triggered by the Agreement
could boost banana exports to the EU therefore inducing positive externalities for the
whole region especially for Costa Rica excessive specialisation in agricultural products
and insufficient diversification of export destinations could cause negative effects for the
local economy (Barquero 2016 Rodriguez 2017) Finally the press flagged the pros and
cons of regional integration requirements posed by the EU to CA The EU request to
negotiate as a unified bloc and to speak with a single voice led to long sensitive and
complex domestic negotiations within CA which came only to a partially accepted joint
approach towards trade talks (De Leoacuten 2006) A comparison of estimated economic effects
of the Agreement has been provided in Annex A3-1
The social impact considerations were closely linked to the economic ones since the EU-
CA FTA effects on trade would also influence the levels of employment in the affected
sectors The employment changes triggered by the EU-CA FTA in the EU were expected to
be negligible owing to the relatively modest role played by CA in the EU trade with the
rest of the world As an additional consequence also the level of EU wages should not be
affected much by the Agreement (CEPR 2012 p 28) In CA more significant incentives
to reallocation between sectors caused by ldquopull-factorsrdquo were likely to occur where export-
oriented sectors would benefit most from the EU-CA FTA and where rises in wages were
expected Employment in textile industry in Nicaragua Guatemala Honduras and El
Salvador was expected to decline The full liberalization scenario (IIDE 2007 p 17) was
expected to lead to increases in wages while also prices would rise by 05 (CEPR 2012
p 28) In Nicaragua and Costa Rica wages were expected to rise by 02 and 13
respectively while Panamanian wages would drop marginally (ECORYS 2009 pp 75-77)
The implementation of the International Labour Organisation (ILO) conventions in the EU-
CA FTA legal framework would also have a positive impact on social issues in CA such as
elimination of child labour and force labour and reduction of gender inequality However
the literature underlines a general lack of analyses of the EU-CA FTA impact on poverty in
CA since its implementation (European Parliament 2018 (a) p 45) As described above
the effects were expected to vary among the CA countries with El Salvador Nicaragua
and Honduras experiencing a relatively more impactful drop in levels of poverty than in
Page 28
Costa Rica Finally likely consequences on poverty equality education health and gender
issues in the EU were found to be negligible unlike in CA where small and indirect effects
were expected in terms of investments in health incentives through innovation brought by
technology dissemination and an overall positive impact on inclusiveness driven by the
Agreement (ECORYS 2009 pp 76-80)
On the environmental aspects the literature contributions can be split into two main
groups featured by contrasting interpretations on the EU-CA FTA impact Ultimately the
effectiveness of the TSD chapter will depend on the willingness of the involved government
to implement the EU-CA FTA provisions (EPRS 2018)
On the one hand the SIA and other studies flagged the likely harmful repercussions on
greenhouse gas emissions (GHG) stemming from agriculture fishing trade and transport
activities resulting from the EU-CA FTA application having a limited impact on the EU share
of CO2 emissions and a more tangible effect on some CA countries such as El Salvador
Honduras and Costa Rica in the long run (Alianza por la Solidaridad 2019 FAO 2013)
Moreover the increased agricultural activities resulting from the economic effects of the
EU-CA FTA (eg coffee melon sugar cane and peanut production) factories activities (eg
production of biofuels in Guatemala) as well as factoriesrsquo waste and maritime transports
could pose a threat to biodiversity and deforestation which could constitute a serious issue
owing to a large share of local biodiversity concentrated in CA especially if waste would
not be adequately managed (ECORYS 2009 pp 81-83 Zabalo et al 2019 FAO 2013
Monserrat et al 2011 OXFAM 2016 Rosa Luxembourg Stiftung 2010 Ruerd 2018)
On the other hand a share of the existing literature emphasised the opportunities for CA
countries originating from the EU-CA FTA This would be the case of Costa Rica which
would improve the national environmental regulatory framework mainly in relation to the
use of agrochemicals with likely positive impact for the environment since pineapple
production plays an important role in local economy (Esquivel 2020) A FAO study argued
that international trade in coffee (in particular exports to the EU) has improved the overall
environmental sustainability in CA The EU being the largest consumer of coffee worldwide
its (increasing) requirements on the sustainability of the coffee chain benefited the
adoption of environmental standards by the sector As a consequence coffee producers
are now required to provide more extensive and detailed certifications proving they comply
with environmental standards Therefore they have been paying more attention to
environmental aspects than before (FAO 2020)
A 2017 study (CEPAL 2017) investigated the impact of a CO2 tax on CA GDP Overall the
estimations indicated a negative impact of a carbon tax on GDP and the extent to which it
was found to impact the various local economies depended on the amount of the tax itself
Indeed an average tax value of 69 USD per tCO2e was found to impact the GDP by 062
A range between 5 and 10 USD would be optimal for Honduras and Nicaragua whereas a
tax between 20 and 50 USD would be optimal for Costa Rica El Salvador Guatemala and
Panama (CEPAL 2017)
Finally regarding human rights the EU-CA-FTA impact is difficult to assess for the region
as a whole since the intra-regional development varies a lot and it is difficult to discern
whether the CA movement towards a better respect for international standards on labour
and social rights depends on the implementation of the Agreement (European Parliament
2018 p 44) For example several experts and policymakers argue in favour of a stronger
enforcement mechanism of the TSD chapter (EPRS 2018) Its provisions referring to the
ILO conventions do not ensure the same level of labour and human rights protection as
the GSP+ mechanism (EULAC 2011) Overall despite some positive developments the
implementation of the TSD provisions led to a limited impact on the key challenges in the
CA region such as child labour freedom of association social dialogue or unpaid overtime
(EPRS 2018) The CA Womenrsquos Network also reported insufficient participation of women
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 29
during the negotiation process and it highlighted the risks of women subordination if strong
provisions on gender equality are not put in place (CAWN 2007)
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5)
51 Structure of the EU-CA FTA
The Agreement was initially signed in June 2012 by the EU and Central American countries
and the EU-CA FTA started its provisional application in 2013 It is in a process of
amendment through the Protocol of Croatiarsquos Accession to the Association Agreement
between the European Union and Central America which was signed in November 2020
(Joint Communique 2020) It allows Croatia to formally become part of the Agreement and
provides for amendments to some parts of the EU-CA FTA to account for the accession of
Croatia (eg Appendix 3 to Annex I related to special treatment of bananas Annexes
related to trade in services such as the lists of commitments on establishment cross-
border supply of services and reservations regarding the temporary presence of natural
persons for business purposes and Annexes related to Government procurement including
the list of contracting authorities etc) (European Commission 2020b)
Key features of the Agreement (Trade Pillar) can be summarised as follows Title by Title
Title I of the Agreement contains general principles provisions and definitions and
in particular defines the objectives of the EU-CA FTA which can be summarised as follows
(a) the expansion and the diversification of trade in goods between the Parties through
the reduction or the elimination of tariff and non-tariff barriers to trade (b) the facilitation
of trade in goods through in particular the agreed provisions regarding customs and trade
facilitation standards technical regulations and conformity assessment procedures as well
as sanitary and phytosanitary measures (c) the liberalisation of trade in services in
conformity with Article V of GATS (d) the promotion of economic regional integration in
the area of customs procedures technical regulations and sanitary and phytosanitary
measures to facilitate the circulation of goods between and within the Parties (e) the
development of a climate conducive to increased investment flows the improvement of
the conditions of establishment between the Parties on the basis of the principle of non-
discrimination and the facilitation of trade and investment among the Parties through
current payments and capital movements related to direct investment (f) the effective
reciprocal and gradual opening of government procurement markets of the Parties (g) the
adequate and effective protection of intellectual property rights taking into consideration
the differences between the Parties and the promotion of technology transfer between the
regions(h) the promotion of free and undistorted competition in the economic and trade
relations between the Parties (i) the establishment of an effective fair and predictable
dispute settlement mechanism and (j) the promotion of international trade and investment
between the Parties in a way that contributes to the objective of sustainable development
through joint collaborative work (Article 78)
Title II covers trade in goods and comprises the following chapters (1) market access
for goods which lays down provisions on the elimination of customs duties elimination of
export and import restrictions and export taxes and provisions on agricultural subsidies
(this is complemented by Annex I outlining schedules for elimination of customs duties
Annex II which concerns the definition of the concept of originating products and methods
of administrative cooperation Annex IV - special provisions on administrative cooperation
and Annex V on management of administrative errors) (2) trade remedies which discusses
anti-dumping countervailing and multilateral safeguard measures bilateral safeguards
and the applicable procedures (3) customs and trade facilitation which increases
transparency and promotes the facilitation of trade by simplifying customs procedures and
the adoption of risk management systems for customs inspections (it is complemented by
Annex III on mutual administrative assistance in customs matters) (4) TBT - technical
barriers to trade aiming at facilitating trade by identifying preventing and eliminating
Page 30
unnecessary barriers related to development adoption and application of standards
technical regulations and conformity assessment procedures it also reaffirms rights and
obligations under the WTO TBT Agreement foresees cooperation in market surveillance
transparency through the notification procedures and approach to marking and labelling
avoiding unnecessary burdens while ensuring that all necessary and accurate information
is provided (5) sanitary and phytosanitary measures which aims at protecting human
animal or plant life or health while avoiding unjustified barriers to trade it reaffirms rights
and obligations under the WTO SPS Agreement recognises concepts standards and
recommendations adopted by relevant international organisations (World Organisation for
Animal Health and International Plant Protection Convention) and foresees exchange of
information and cooperation by the Parties incl in cases of emergency (it is complemented
by Annex VI identifying competent authorities Annex VII defining requirements and
provisions for approval of establishment of products of animal origin Annex VIII setting
out guidelines for conducting verifications and Annex IX with points of contact) (6)
exceptions related to goods
Title III covers trade in services establishment and electronic commerce and is
complemented by annexes that detail the Partiesrsquo commitments according to the four
modes of supply or provide information Annex X includes commitments on establishment
(Mode 3) Annex XI lists commitments on cross-border supply of services (Modes 1 and
2) Annex XII outlines reservations regarding temporary presence of natural persons for
business purposes (Mode 4) Annex XIII lists commitments of the Republics of the CA Party
regarding key personnel and graduate trainees Annex XIV lists their commitments on
business service sellers and Annex XV provides a list of the relevant enquiry points
Title IV concerns liberalisation of current payments and movement of capital and
stipulates that the Parties shall authorise payments and transfers on the current account
between the Parties as well as transactions and capital movements related to foreign direct
investment and related transactions including liquidation and repatriation of investments
and profits It also envisages exceptions such as circumstances where payments and
capital movements cause or threaten to cause serious difficulties for the operation of
exchange rate policy or monetary policy or the liquidity of the economy in which case
the Parties may temporarily adopt safeguard measures)
Title V covers government procurement and is complemented by Annex XVI which
details the commitments of Parties in this area (eg procuring entities covered coverage
of procurement contracts under the Agreement media used for tender procedures and key
features of the process for awarding procurement contracts) The Agreement provides for
the Parties to have non-discriminatory access to public procurement procedures within the
scope of covered procurement and outlines general principles and rules for procurement
procedures (eg publication of notices participation in tenders technical specifications
documentation timeline awarding contracts etc) ensuring transparency and cooperation
Title VI covers intellectual property It reaffirms the Partiesrsquo commitments to various
relevant multilateral agreements (eg WTO TRIPS Agreement Convention on Biological
Diversity and Paris Convention for the Protection of Industrial Property) foresees exchange
of information and cooperation between the Parties in relation to technology transfer and
sets standards on the protection of intellectual property rights (IPR) including trademarks
geographical indications copyright and related rights industrial designs plant varieties
and patents The list of geographical indications to be protected is provided in Annex XVII
The Title also addresses enforcement measures for cases of infringement of IPR
Title VII concerns trade and competition in the economies of the Parties Under this
Title the Parties commit to adoption or maintaining comprehensive competition laws and
having appropriately equipped competition authorities They also consider as incompatible
with the Agreement the most harmful anticompetitive practices such as restrictive
agreements concerted practices abuse of dominance and concentrations of companies
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 31
that significantly impede effective competition The Title also stipulates that with regard to
state enterprises and designated monopolies there is no discrimination in exercised by such
entities regarding conditions under which goods or services are purchased or sold
Title VIII relates to trade and sustainable development It includes commitments to
effectively implement the eight ILO Fundamental Conventions and key multilateral
environmental agreements to which EU Member States and CA countries are Parties In
addition the Title includes specific provisions in relation to various thematic areas such as
sustainable forest management sustainable fisheries and trade supporting sustainable
development It establishes civil society advisory groups as part of institutional structure
and foresees a regular dialogue between the Parties and civil society incl in a dedicated
Civil Society Forum The Title also provides a dedicated dispute settlement mechanism
with government consultations consideration of the matted by the TSD Board and a Group
of Experts to examine the matter and formulate recommendation
Title IX relates to regional economic integration between the Central American Parties
and includes provisions on circulation of goods in trade between the EU and CA within the
EU and CA region respectively once a product entered their customs territory and when
the applicable rules and standards are met In this context the Title provides rules related
to customs technical barriers to trade and sanitary and phytosanitary measures (Annex
XX provides a list of CA technical regulations in the process of harmonisation)
Title X covers dispute settlement and outlines the related procedures including the
establishment of a panel its ruling and compliance
Title XI establishes mediation mechanism for non-tariff measures incl the selection
of a mediator the applicable procedure and implementation of the agreed solution
Title XII contains provisions on transparency and administrative procedures Among
other things the Parties commit to (i) ensuring that their measures of general application
(eg laws regulations judicial decisions procedures and administrative rulings) relating
to matters covered by the EU-CA FTA are promptly published or otherwise made readily
available to interested persons and (ii) providing reasonable opportunities for those
interested to comment on proposed measures and taking into account relevant comments
The Parties also commit to establish Points of Contact for matters related to EU-CA FTA
Title XIII addresses tasks of the institutional bodies in matters related to trade
ie the Association Council the Association Committee and specialised Sub-committees
(for details please see section 52 on the institutional set up)
Title XIV defines general exceptions to the Agreement related to the Partiesrsquo balance of
payments and taxation
52 Institutional set-up of the EU-CA FTA
The Association Council the Association Committee six Sub-committees and an Ad hoc
Working Group on Government Procurement (the latter not envisaged by the EU-CA FTA
but set up by the Parties in 2016) oversee the implementation of the Agreement
The Association Council established pursuant to Article 4 supervises implementation of
the Association Agreement it is composed of representatives of the EU and each of the six
CA countries has a decision-making power (binding upon the Parties) in cases foreseen in
the Agreement examines all major issues and questions of common interest It meets at
Ministerial level (or through representatives) at regular intervals not exceeding two years
In line with Article 345 when meeting to discuss matters under EU-CA FTA the Council
has the power to amend Annexes and Appendixes related to trade incl tariff elimination
schedules and goods included there originating products and methods of administrative
Page 32
cooperation Annex XVI (Government Procurement) Annex XVIII (Protected GIs) Annex
XIX (in relation to Article 306 animals animal-based products plants and plant-based
products subject to SPS measures) and Annex XXI (Sub-committees)
The Association Committee set up pursuant to Article 6 is responsible for the general
implementation of the Agreement and assists in this context the Association Council It is
composed of representatives of the EU and the six CA countries at the senior officialsrsquo level
and shall meet once a year to review the implementation It takes decisions foreseen in
the Agreement or delegated by the Association Council When acting within part IV of the
Agreement the Association Committee supervises work of Sub-committees established by
this part and may set up new ones prevents and resolves conflicts (without prejudice to
provisions related to the Dispute Settlement and Mediation Mechanisms) and recommends
decisions for adoption by the Association Council
The Agreement has also established six specialised Sub-committees
Sub-committee on Market Access for Goods (Article 91) is responsible for monitoring
the correct implementation and administration of the Trade in Goods Chapter and serves
as a forum for consultations about interpretation and application of its provisions It
examines proposals provided by the Parties regarding accelerated liberalisation of trade in
goods and tariff reduction as well as inclusion of additional goods into liberalisation
schedules It may make recommendations to the Association Committee on matters within
its remit and take any issue as and when instructed by the Association Committee
Sub-committee on Customs Trade Facilitation and Rules of Origin acting in line
with Article 123 monitors implementation of the Chapter and Annex related to the concept
of origin and methods of administrative cooperation It provides a forum to discuss and
consult all matters related to customs incl customs procedures valuation nomenclature
cooperation tariff regimes mutual administrative assistance in customs matters as well
as rules of origin It pursues cooperation on development application and enforcement of
customs procedures mutual administrative assistance in customs matters administrative
cooperation and rules of origin It examines requests for amendments of rules of origin
and submits to the Association Committee results of the analysis with recommendations
It also aims to enhance cooperation on capability building and technical assistance
Sub-committee on Technical Barriers to Trade (TBT) acting in accordance with Article
139 provides forum to discuss and consult any matter related to the Chapter and monitors implementation and administration of this Chapter facilitating exchange of information
and cooperation and promptly addressing any issue that either Party raises related to the
development adoption application or enforcement of standards technical regulations
and conformity assessment procedures It aims at solving any problems within the remit
of the Chapter that would limit trade between the Parties It encourages direct interaction
between non-governmental actors such as standard bodies accreditors and certifiers It
facilitates the exchange of information about the work being done in non-governmental
regional and multilateral fora engaged in activities related to technical regulations stan-
dardisation and conformity assessment procedures and explores ways to facilitate trade
between the Parties The Sub-committee has also power to review the Chapter in the light
of developments under TBT Agreement and reports to the Association Committee about
implementation of the Chapter including cooperation activities
Sub-committee on Sanitary and Phytosanitary Matters (SPS) acting in line with
Article 156 monitors implementation of the Chapter provides a forum for discussion and
consultation on any matter arising under the Chapter and an opportunity to seek mutually
acceptable solutions It may also develop procedures or arrangements facilitating
implementation of the Chapter It acts as a forum for consultations related to any measure
proposed by the EU which may affect its trade with any of the CA Parties and a forum for
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 33
dispute settlement under the Chapter The Sub-committee is also responsible for
promoting cooperation on animal welfare between the Parties
Sub-committee on Intellectual Property Rights (IPR) (Article 274) monitors
implementation of Article 231 (transfer of technology) and part of the IP Chapter related
to GIs including facilitating discussion about protection of GIsrsquo and recommendations to
the Association Committee regarding amendments to Annex XVIII on GIs It promotes
technology transfer from the EU to the CA Parties and defines priority areas in which
initiatives shall be directed regarding technology transfer research and development and
building-up human capital Its responsibilities include also keeping a registry of the
programs activities or initiatives in progress in the field of intellectual property with
emphasis on transfer of technology
Board on Trade and Sustainable Development (TSD) established pursuant to Article
294 reports to the Association Committee and oversees the implementation the TSD Title
incl cooperative activities undertaken under Title VI (Economic and Trade Development)
of Part III of the Agreement The decisions and recommendations of the Board shall be
adopted by mutual agreement between the Parties and be provided to the public unless
the Board decides otherwise
While EU-CA FTA does not envisage a Sub-committee on Government Procurement the
Parties concluded that it would be useful to have a dedicated body to address matters in
this area They decided to create a temporary Working Group that met for the first time
in June 2016 (European Commission 2017a)
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo
priorities
The negotiations for an Association Agreement (AA) including a Trade Pillar between the
European Union (EU) and Central America (CA) started in 2007 We look at the bloc-to-
bloc trade and policy context the negotiation process and priorities from both sides
The region-to-region trade context
The CA group is composed by Costa Rica Guatemala El Salvador Honduras Nicaragua
and Panama and it is featured by internal economic and political dialogue which led to the
creation of the Central American Common Market (CACM) in the early 1960s Despite the
initial momentum the regional integration process has been stopped for decades due to
internal tensions and the effects of import-substitution trade strategies on local economic
growth (European Parliament 2012) Consequently the initial goal of setting up a custom
union failed and CACM succeeded only in establishing a free-trade area (Duran et al 2010)
The Central American integration efforts were revitalised through setting up of the Central
American Integration System (SICA) aimed at promoting democracy development peace
and freedom in the region (European Source Online 2016) SICA was formally established
on 13 December 1991 through the signature of the Protocol to the Charter of the
Organization of Central American States (ODECA) also known as the ldquoTegucigalpa
Protocolrdquo SICA established both a political and an economic institutional framework by
setting up the Central American Parliament and the Central American Bank for Economic
Development Despite these changes CACM remained the main forum for trade discussions
(European Parliament 2012)
The EU is one of the three most important CA trading partners It is challenging to draw
general and unified conclusions for the whole CA trade picture given its domestic
heterogeneity with Panama and Costa Rica being middle-income countries and Nicaragua
the poorest member (European Parliament 2018 p 18) The EU countriesrsquo share of import
from and export to CA accounted for 30 and 16 respectively in the mid-1980s Among
Page 34
the CA members Guatemala appeared as the most export dependent one while Panama
was the least trade-oriented country (CEPR 2012 pp 6-7) The role of agricultural
production within the respective economies differs widely between the two regions
Agricultural production is very important for CA especially in Honduras and El-Salvador
(38 of the national production) whilst it is relatively much less important in the EU (5)
The same complementarities can be found in manufacturing production (amounting to 18
of the EU production which is much higher than in CA particularly in Panama (4) and
Nicaragua (25) Services contribute to almost 23 of the EU Nicaraguan and Costa Rican
GDP while this share is only 53 for El Salvador (Ibid pp 6-7)
The negotiation process
The start of the economic and political dialogue between the EU and CA blocks dates back
to 1984 at the first conference of Foreign Ministers between the EU and CA countries in
Costa Rica In 1993 the EU and the CA countries signed a Framework Cooperation
Agreement which entered into force on 1st March 1999 (Acuerdo-marco de cooperacioacuten
1999) On the occasion of the EU-Latin America Summit held in May 2002 these countries
and the EU jointly expressed their willingness to reinforce their dialogue by concluding a
new Political Dialogue and Cooperation Agreement which was signed on 15th December
2003 in Rome (Acuerdo de Diaacutelogo Poliacutetico 2003)
The need to establish stronger trade relations even by setting up a free-trade area pushed
the EU and CA to explore the feasibility of an Association Agreement entailing also a specific
chapter on trade Such intention was clearly stated during the EU-Latin America summit of
Guadalajara (Mexico) in May 2004 (Declaration of Guadalajara 2004 p 8 point 52) and
one year later in May 2005 in the context of the EU-Central American Ministerial meeting
in Luxembourg On that occasion the parties launched a joint-assessment exercise on
regional economic integration and established an ad-hoc working party (Council of the
European Union XXI San Joseacute Dialogue Ministerial Meeting between the EU and Central
America 2005 p 2) Finally at the Vienna Summit of 2006 the parties opened the door
to an Association Agreement to create a free trade area (Council of the European Union
EU-Central American Summit 2006 pp 1-2 points 2 and 3) The summit also welcomed
the initiative of the Peace Building and Commission and Human Rights Council (Ibid p 2)
The green light for the beginning of the AA negotiations was given on 28th June 2007 in
Brussels (EU and the Central American Community start negotiations for a new Association
Agreement 2007) However the talks were temporarily suspended on 6th April 2009 and
then resumed a few days later on 24th April (Acuerdo de Asociacioacuten entre Centroameacuterica
y la Union Europea 2009) when the parties decided to re-initiate the negotiations
The negotiating partiesrsquo priorities
The negotiating strategy of the CA countries mainly pursued three goals
Strengthening their trade policy whose objective is to open up new markets for the
benefits of their local exporters The EU appears as a crucial partner for CA countries
as it ranks on top of the worldrsquos largest importers of agricultural products and the
relative share of developing countries has been rising over time in the EU trade balance
Reinforcing CA countriesrsquo export competitiveness and reducing costs of accessing the
EU market vis-agrave-vis competitors such as African-Caribbean and Pacific (ACP) countries
that benefit from preferential and better market access conditions
Attracting foreign direct investments in high value-added sectors where the EU applies
higher tariffs (Duran et al 2010 pp 96-99)
From the European side the main reasons driving towards the conclusion of the agreement
with CA are threefold
Promoting the developing countriesrsquo progressive integration into the world economy
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 35
Reaffirming the EUrsquos role in the world trade and in CA following the United States (US)
conclusion of the Dominican Republic Central American and the United States Free
Trade Agreement (CAFTA-DR) reaffirming the US role in the region
Better coordinating with partners on trade dossiers within the World Trade Organization
(WTO) and other international institutions (Ibid p 100)
The conclusion of the Agreement
The negotiation process delivered slow progress due to the inability of CA countries to
reach a unified position and owing to the delays in the regional integration (European
Source Online cit p3) The agreement was finally reached in May 2010 when the
negotiations were officially concluded during the Latin America-Caribbean and European
Union Summit in Madrid Following the legal scrubbing the European Commission reviewed
and approved the agreement prior to signature at the Meeting of the SICA Presidents in
Tegucigalpa Honduras on the 29th of June 2012 (European Commission Directorate
General for Trade 2012) The European Parliament finally endorsed the AA in December
2012 forecasting that the main gains for the European side would be in export of cars
machinery telecommunications chemical products and transports (European Parliament
2012 p 1) At the time of the AA signature in 2012 the EU-Central America trade in goods
accounted to EUR 149 billion and corresponded to 113 of the whole CA region trade
with the rest of the world (Griener and Membersrsquo Research Service 2014 p 5)
On that date the then EU Commissioner for Trade Karel De Gucht commented the
successful conclusion of the AA by stating that the ldquoregion-to-region deal will help establish
major business opportunities for both sides European exporters will save around EUR 90
million on customs per year and European service providers such as telecommunication
and transport will get greater market accessrdquo At the same time the agreement would
generate ldquospill-over effect on Central Americarsquos overall economic integration process and
contribute to the stability of the regionrdquo (European Commission Ibid p 1) The
Commission officially announced the provisional application of the FTA with Honduras
Panama and Nicaragua on 31st July 2013 with Costa Rica and El-Salvador on 1st October
2013 and with Guatemala on 1st December 2013
The trade provisions of the AA provisionally entered into force in 2013 as they fall within
the exclusive competences of the EU17 Once the entire text of the AA will be ratified by
the EU Member Statesrsquo parliaments the entire text will be legally binding and applicable
After joining the EU in 2013 Croatia is currently negotiating its accession to the AA
54 Operational context of the implementation of the EU-CA FTA
After having illustrated the main partiesrsquo priorities during the bloc-to-bloc negotiations this
chapter provides an overview of the broader context surrounding the negotiations and
implementation and describes the main regional actors as well as their respective trade
policy attitudes towards CA and Latin American countries (LAC) as a whole
Trade policy context the multilateral system and the global economy
Since the launch of the EU-CA negotiations the global trade policy context has undergone
deep changes The Doha Development Agenda stalemate due to incompatible views on
various issues at stake put great pressure on the global trading system The WTO
difficulties in reaching satisfying outcomes stem both from external causes such as the
decline of advanced economies regionalisation of trade and internal sources of tensions
17 Despite being considered as a bloc-to-bloc association agreement the incomplete CA regional economic integration and the failure in setting up a custom union among the CACM countries left unbalances and inconsistencies in accessing single CA countriesrsquo markets and different levels of external tariffs In light of these arguments CA cannot be considered as a fully integrated homogeneous and unified trade bloc
Page 36
embedded in unilateral tariff-cutting process (Baldwin 2016) Besides these tensions the
economic expansion of China and the ldquotrade warsrdquo between the US and China exploded as
of 2017 The recent stalemate of the WTO Appellate Body that halted the entire dispute
resolution process as well as the need to put sustainable development at the core of the
WTO agenda pushed the Commission to advance a new WTO reform proposal (European
Commission 2021) The WTO crisis led to a proliferation of bilateral FTAs and the EU
has been an active bilateral FTA actor globally (see Table 4
Table 4 Overview of the EU FTAs launched and or concluded since 2012
Start of Negotiations
Signatory CountryRegion
State of play of the agreement
Ratification
1999 Mercosur Concluded in 2019 Ongoing
2004 SADC Concluded in 2016 Entered into force in 2016
2007 Andean Community Concluded in 2010 Entered into force in 2013
2007 Ukraine Concluded in 2011 Provisionally applied since 2016 fully in force since 2017
2009 Singapore Concluded in 2019 Entered into force in 2019
2009 Canada Concluded in 2014 Provisionally applied since 2017
2010 Malaysia On hold na
2012 Moldova Concluded in 2013 Provisionally applied since 2014 fully in force in 2016
2012 Georgia Concluded in 2013 Provisionally applied since 2014 fully in force since 2016
2012 Vietnam Concluded in 2015 Entered into force in 2020
2012 Japan Concluded in 2018 Entered into force in 2019
2013 USA On hold na
2013 Morocco (DCFTA new) On hold na
2013 Thailand On hold na
2015 Philippines On hold na
2015 Tunisia (DCFTA new) Ongoing na
2016 Mexico (modernisation) Concluded in 2018 Ongoing
2016 Indonesia Ongoing na
2017 Chile (modernisation) Ongoing na
2018 Australia Ongoing na
2018 New Zealand Ongoing na
2019 United Kingdom Concluded in 2020 Ongoing
2020 ESA (extension) Ongoing na
Source compiled by the author
The EU trade and policy context
Trade picture
The EU maintains strong institutional dialogue with Central and Latin America
legitimised by historic cultural and linguistic ties with the region The EU Latin America
and the Caribbean (LAC) bilateral summits have been regularly held since 1999 gathering
33 members from the two counterparts In 2006 the EU-Latin America Parliamentary
Assembly (EuroLat) was set up and it was conceived as the parliamentary angle of the EU-
CA bilateral partnership (EPRS 2017 p 5)
From a trade perspective the EU-Central and Latin America (comprising Andean
Community CA Cariforum Mercosur Mexico and Chile) trade peaked at EUR 2287 billion
in 2014 before showing a downward trend and decreasing at EUR 2132 billion in 2015
corresponding to 61 of the whole EU trade that year (EPRS 2017 p 6) The EU total
share of LAC trade fluctuated around 14 and the EU remained the first investor in the
region in the last ten years (EEAS 2018) An analysis carried out by the European
Parliament in 2020 unveils that the EU-LAC trade in goods value grew by 22 from 2008
to 2018 (Tvevad 2020 p 18) According to the 2020 DG Trade Report (data from 2019)
on the Implementation of EU FTAs trade flows between the EU and CA showed a robust
growth Indeed trade in goods increased by 88 with respect to the 2018 performance
imports continued growing over the past five years and exports statistics indicated an
overall upward trend with the exception of 2016 (European Commission 2020a p 110)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 37
In 2010 the EU was the second CA trading partner behind the United States (US)
accounting for 94 of the regionrsquos overall trade with the rest of the world (European
Commission 2011 p 4) Among the main exporters to the EU Costa Rica ranked first
with 539 of the total CA exports to the EU Conversely the EU exports went primarily
to Costa Rica (363) Guatemala (281) and El Salvador (152) (Ibid p 4) The EU-
CA trade is marked by the supply of primary products to the EU (mainly agricultural
products such as coffee and bananas) in return for high-technology manufactures
especially machinery transport equipment chemicals and manufactured goods (Duran et
al 2010 pp 95-96 European Parliament 2012 p 9) The CA share in the EU trade was
modest accounting only for 05 of overall EU imports in 2011 and for 03 of the total
EU exports in 2011 (European Parliament 2012 p 8) In addition the EU applied tariffs
on various agricultural products imported from third countries The exclusion of both coffee
and bananas from the EU Generalized System of Preference (GSP) and the GSP+ schemes
prevented these products from benefitting from tariff-reduction from the European side
hampering their access to the EU market and leaving their prices to be influenced by world
trade fluctuations (Duran et al 2012 p 98) The 2019 data confirmed primary products
rank largely first among SITC products grouping exported from CA to the EU accounting
for 721 of the whole exports followed by manufactures with 27 (European
Commission 2019 p 4) Recent statistics highlight the main destination of EU export
continued to be Panama (up to 118 since 2018) whereas the main country of origin of
EU imports is Costa Rica with an increase by 63 from 2018 (European Commission 2020
p 112)
The previous EU trade policy strategy adopted in 2015 (ldquoTrade for Allrdquo) confirmed that
ldquothe FTAs with Peru Colombia Ecuador and Central America are creating new dynamics
for trade and investmentsrdquo (European Commission 2015 p 33) As set out by that trade
policy strategy the Commission should pursue three main priorities with regard to Latin
and Central America ldquo[Continuing] negotiations for an ambitious balanced and
comprehensive FTA with Mercosur ldquoRequesting negotiating directives to modernise the
FTAs with Mexico and Chilerdquo ldquoBe ready to consider investment agreements with key Latin
American countriesrdquo (Ibid p 33)
As evidence for the increasingly robust commitment in the region the EU negotiated trade
deals with 27 out of the 33 LAC countries to strengthen both bilateral and region-to-region
relations the EU actively engaged LAC by signing new and modernising older EU-LAC FTAs
(see Table 5)
Table 5 EU FTA in Latin America and participating countries
Agreement Countries Negotiation launch
Negotiations Conclusion
EU-Andean Countries Colombia Ecuador Peru 2007 2010
EU-Caribbean (CARIFORUM)
Antigua and Barbuda Bahamas Barbados Belize Dominica Grenada Guyana Jamaica Saint Lucia Saint Vincent and the Grenadines Saint Kitts and Nevis Suriname Trinidad and Tobago and the Dominican Republic
2002 2008
EU-Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
2012 2010
EU-Chile na 2017 na
EU-Mercosur Argentina Brazil Paraguay Uruguay 1999 2019
EU-Mexico na 2016 2018
Source Compiled by the author
Regarding civil society the trade chapter of the EU CA FTA did not receive a lot of public
attention and consequently has not been affected by a high level of politicisation within
the EU This might stem from the relatively lower importance of trade relations with CA for
the EU Likewise the agreement did not catch a lot of public attention either in CA where
Page 38
the media coverage mainly focused on the Central America Free Trade Agreement (CAFTA)
Nevertheless both the agreements were targeted by NGOs and trade unions sharing the
same criticism and concerns over biodiversity pharmaceutical product access and
exploitation of natural resources (European Parliament 2011 p 16)
Political Dialogue
To frame the most recent developments in the EU LAC political dialogue it is worthy to list
three key documents forging the EU foreign policy towards LAC
The European Parliament Resolution on the Political Relations with Latin
America passed in 2017 advocating for a stronger more coherent and reinforced
relations with this region by stressing the need to update and develop a more
comprehensive and ambitious EU strategy to address the emerging challenges linked
to fundamental freedoms human and social rights safety of minorities migration
issues corruption tax fraud and security (European Parliament 2017)
The Joint Communication adopted by the European Commission and the High
Representative for Foreign Affairs (HRVP) in 2019 titled ldquoEuropean Union Latin
America and the Caribbean joining forces for a common futurerdquo aimed at deepening
the EU-LAC relations in a fast-changing context by emphasizing four mutually important
priorities prosperity democracy resilience and effective global governance (European
Commission 2019)
The Council of the EU Conclusions of 13th May 2019 endorsing the strategy laid
out in the Joint Communication On that occasion the Council welcomed the four points
described above and added more areas for action such as to work more closely in the
multilateral framework consolidate economic and social resilience enhance shared
prosperity and assist in promoting structural reforms (Council of the EU 2019)
The 2020 EU 27 ndash Latin America Informal Meeting reaffirming the need to advance
bilateral region-to-region summit to strive for a stronger multilateral system identified
mainly in the United Nations and the World Health Organisation (WHO) especially in
the light of the COVID-19 pandemic outbreak (Federal Foreign Office 2020)
Within the framework of the AA the EU and CA agreed to cooperate on a wide range of
policy dossiers of mutual interest namely conventional weapon disarmament the
implementation of the Convention on the Prohibition of the Use Stockpiling Production
and Transfer of Anti-personnel Mines and on their Destruction as well as the Convention
on Certain Conventional Weapons and its protocol (European Parliament 2011 p 7)
On development cooperation the EC regional strategy 2014-2020 earmarked EUR 925
million funding for Latin America to be allocated in two components
Component 1 ldquoMultiannual Indicative Programme for continental activities with Latin
Americardquo accounting for EUR 805 million and devoted to Argentina Bolivia Brazil
Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico
Nicaragua Panama Paraguay Peru Uruguay and Venezuela
Component 2 ldquoMultiannual Indicative Programme for Sub-Regional Cooperation with
Central Americardquo funded with EUR 120 million focused on Central American countries
Costa Rica El Salvador Guatemala Honduras Nicaragua and Panama This component
included three areas for action ie support for regional economic integration support
for the Regional Security Strategy and support for Regional Climate Change Strategy
and the Central American Policy on Comprehensive Disaster Risk Management (EEAS
European Commission 2014)
The Central American trade policy context
Regional Context
Beside their membership in the Central American Common Market (CACM) and the WTO
the CA countries have been signing additional free trade agreements with other regional
and international partners since 2012
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 39
It should be also noted that Panama joined the Latin American Integration Association
(LAIA) in 2012 LAIA replaced the Latin America Free Trade Agreement (LAFTA) signed in
1960 and sought a deeper economic integration among the member states18 Also
Nicaragua applied for the LAIA membership in 2011 and its request was accepted by the
LAIA Council of Minister in August 2011 Nicaragua is currently advancing in fulfilling the
LAIA membership requirements No other CA countries are members of LAIA yet
Table 6 summarises bilateral FTAs and Preferential Trade Agreements (PTAs) signed by the
6 CA countries or being in force since 2011
Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021)
Costa Rica Guatemala El Salvador
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Colombia (signed in 2013 entered into force in 2016)
Mexico (signed in 2011 entered into force in 2013)
Peru (signed in 2011 entered into force in 2013)
Singapore (signed in 2010 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
Ecuador (PTA) (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs signed but not entered into force yet South Korea (signed in 2018) EFTA (signed in 2013)
FTAs signed but not entered into force yet EFTA (signed in 2013) Ecuador (signed in 2011) Peru (signed in 2011)
FTAs signed but not entered into force yet South Korea (signed in 2018)
Honduras Nicaragua Panama
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Peru (singed in 2015 entered into force in 2017)
Canada (signed in 2013 entered into force in 2014)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2014 entered into force in 2015)
Peru (signed in 2011 entered into force in 2012)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet Israel (signed in 2018) South Korea (signed in 2018) Colombia (signed in 2013) EFTA (signed in 2013) Trinidad amp Tobago (PTA)
(signed in 2013)
Source Compiled by the author
Other influential partners in CA
As illustrated by Table 7 three actors retain significant economic influence in CA and Latin
America as a whole the EU the US and China The following section will examine these
actors and their respective trade policies towards CA and Latin America by describing their
posture as well as the agreements in force
18 Argentina Bolivia Brazil Chile Colombia Cuba Ecuador Mexico Paraguay Panama Peru Uruguay Venezuela
Page 40
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking
SubregionCountry
EU total trade in goods (value in EUR billion)
Ranking of main trading partners for trade in goods
2016 2019
2016 2019 USA China EU19 USA China EU27
Andean Community 3 250 246 1 2 3 1 2 3
ACP ndash Caribbean 15 81 116 1 3 2 1 3 2
Central America 6 108 121 1 3 2 1 3 2
Chile 159 166 3 1 2 2 1 3
Mercosur 4 849 771 3 2 1 3 1 2
Mexico 538 618 1 2 3 1 2 3
Source EPRS 2017 p 6 and DG Trade statistics 2020
The US remains the key CA partner The US is the major source of Foreign Direct
Investments (FDI 273) and Official Development Aid allocating an annual average of
approximately USD 1600 million during the Trump Administration (2016-2020)
(Congressional Research Service 2021) Moreover the US rank on top of CA migrant
destinations (Belladonna 2019) The CA countries have been cultivating thorough relations
with the US as they represent the historical destination of over 40 of the regionrsquos
exports Furthermore the 2004 Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA) granted preferential market access conditions to the region (Office
of the US Trade Representative 2004 and Duran et al 2010 p 93) In light of the strong
power exerted by the US the EU trade strategy pursued a progressive rebalancing of the
US presence in the area to ensure better market access in the region (EPRS 2017 p 5)
The DR-CAFTA negotiations confirmed that labour standards sugar and textile products
treatment pharmaceutical data protection and sovereignty issues were the most
controversial and sensitive matters on the table Unlike the EU-CA AA it should be noted
that the DR-CAFTA does not build any common trade framework for all the signatories as
the US grants differentiated market access conditions to each single CA country (European
Parliament 2012 p 11)
In the last few years China has been playing a role of growing importance in CA and in
Latin America both from a political and trade viewpoint (European Commission 2020 p
15) In recent years China has reinforced its role as trading partner within CA As evidence
for this active involvement the 2000-2010 data already confirmed the Asiarsquos importance
(led by China) both in terms of imports and exports in Latin America and Caribbean20
Indeed the China share of the regionrsquos total exports by destination grew from 11 in
2000 to 83 in 2010 with regard to imports by destination the growth appears even
more remarkable moving from 18 in 2000 to 133 in 2010 (Kuwayama amp Rosales
2012 p 66) whilst the relative share of the US presence has shown a downward trend
(Ibid p 65) The monthly exports to Asia-Pacific21 region more-than-doubled from an
average value of USD 54 billion in 2006 to USD 162 billion in 2014 (Baacutercena Prado
Rosales Peacuterez 2015 p 23) After a slight decline experienced in 2016 a solid rebound
emerged in 2017 On average goods shipment from Asia-Pacific Latin America grew by
136 yearly between 2000 and 2016 (Scotiabank 2018 p 1)
Beside trade China has been recently advancing its Belt and Road Initiative (BRI) in
the region by concluding numerous Memoranda of Understanding (MoU) with various LA
19 Including the United Kingdom 20 Data refers to Argentina Bolivarian Republic of Venezuela Brazil Chile Colombia Costa Rica the Dominican
Republic Ecuador El-Salvador Guatemala Honduras Mexico Nicaragua Paraguay Peru Plurinational State of Bolivia
21 The Asia-Pacific region includes Australia Brunei Darussalam Cambodia China South Korea Philippines Hong Kong Japan Laos Thailand Taiwan Indonesia Malaysia Myanmar New Zealand Singapore and Vietnam
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 41
and CA countries To mention some Bolivia (2018) Costa Rica (2018) Chile (2018) and
Panama (2017)
6 CONSULTATIONS (TASKS 6 AND 7)
61 Consultation Strategy
The consultation strategy presented in the technical offer has been refined during the
Inception Phase (Task 6) and is outlined in Annex B Box 2 summarises our expectations
regarding the main inputs expected from stakeholders throughout the study
Box 2 Expectations regarding inputs from stakeholders
Inputs from stakeholders are expected at all stages of the study
The study team will welcome in particular Responses to the online public consultation Consultation with businesses (responses to the online business survey) Evidence of specific casesexamples on how the Agreement has affected economic performance
sustainable development and human rights both in Central America and in the EU Contributions will be particularly welcome in relation to the priority areas of analysis o Impact of the Agreement on trade diversification (in terms of goods and services traders regions
involved in trade etc) (see Task 101) o Impact on investment climate and investment flows (see Task 102) o Impact of the Agreement on SMEs (see Task 1012) o Effects of the implementation of the TSD chapter (see Task 111) o Performance of the institutions established under the TSD chapter (see Task 112) o Impacts of the Agreement on pillars of Decent Work Agenda working conditions labour standards
social protection other public policies and labour inspection (see Task 114) o Impacts on the informal economy and informal employment (see Task 115) o Environmental impacts (see Task 116) and o All of the case studies
Written contributions (positions) expressing views on how the Agreement has affected economic performance sustainable development and human rights across the parties in particular with regard to ndash but not restricted to ndash the analytical priority areas
Indication of relevant publications that focus on the impact of the Agreement in the partner countries Indication of actions taken by CA in areas covered by the TSD chapter (eg changes in policies action
plans strategies and legislation in the areas of labour environment and climate change ratification and implementation of international conventions in these areas and civil society engagement)
Written comments on the draft Inception Report draft Interim Report and draft Final Report Proposals for and comments on draft conclusions and recommendations of the report including how to
improve operation of the Agreement (if needed) Names of organisations or indication of vulnerable groups that may have been affected by the
Agreement in the partner countries as well as relevant contact details for the evaluation team to reach out to the most relevant additional stakeholders
62 Study Website and Electronic Communications
The establishment and continuous updating of a website as well as ongoing electronic
communications with stakeholders are one element of the consultation strategy During
the inception phase the website has been established and launched and an initial e-
communication will be sent out to identified stakeholders (Task 5) The website is available
at httpcentral-americafta-evaluationeu
Electronic communication with stakeholders will take place through email newsletters as
well as Twitter using an account for this ex-post evaluation (CaEvaluation) Twitter will
be used as well to present the (draft) findings at specific moments in the study interested
related work or articles highlights or relevant quotes from the consecutive study reports
and promote the various outreach activities such as workshops LinkedIn will be used to
complement twitter with the same objectives the account of LinkedIn to be used will be
Ex-Post Evaluation EU-Central America FTA Email and an electronic newsletter will be used
as complementary tools to reach specific stakeholders throughout the study to inform them
Page 42
of events to send questions receive feedback and make appointments for interviews the
email used will be central-americabkp-advisorscom
With the COVID-19 pandemic still in place and governments imposing new lockdowns and
travel restrictions a back-up plan is available in case a lot of the communication has to be
done online The meetings with the EU and CA stakeholders both government and civil
society in the near future will be held online For the second half of the year and beginning
of 2022 face-to-face meetings may also be an option The advantage of digital outreach
is linked to reduction of travel time and travel costs to the minimum and in addition digital
follow-up is easier The public consultation and online business survey are already being
prepared and planned with an indicative timeline of online availability between June and
September 2021 The workshops envisaged for Central America in November 2021 are
currently planned with options ranging from face-to-face meetings over hybrid solutions
to holding them entirely online In either case we will ensure they are as interactive as
possible thanks to the use of breakout rooms and platforms enabling participants to ask
questions and participate in polls online We will also ensure that participants will receive
sufficient information before workshops
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13)
71 Case Study Selection
As part of the evaluation ten case studies will be prepared Their purpose is to capture the
impact of implementation of the EU-CA FTA on sustainable development in its economic
social and environmental dimensions as well as on human rights (including labour rights)
They should complement the economic social environmental and human rights analysis
required under Tasks 10 11 and 12
Regarding the geographic coverage the ToR require two case studies focused on the EU
two horizontal case studies for the whole region of Central America and six dedicated to
each of the Central American countries
Table 1 provides a preliminary list of suggested case studies while their exact focus and
scope will be determined at the next stage of the study further to preliminary impact
analysis and identification of relevant information and data sources
Table 8 List of proposed case studies
No Case study topic Geographical focus Key impact areas
1 Impacts of the Trade Pillar on EU banana producers EU incl OR as well as ACP and LDCs due to preference erosion
Economic and Social
2 Trade in environmental goods and services (opportunities for the EU and partner countries)
EU CA partner countries22
Economic and Environmental
3 Impacts of the Trade Pillar on freedom of association in sectors involved in trade with the EU (the choice of sectors will be made further to the initial impact analysis)
CA partner countries notably Guatemala Honduras and El Salvador
Human rights and Social
4 The effects of the Trade Pillar on sustainable aquaculture in Honduras Nicaragua Costa Rica and El Salvador
Partner countries with a focus on Honduras Nicaragua Costa Rica El Salvador
Economic Social Human rights and Environmental
5 Opportunities created in services sector in particular the green energy sector in Costa Rica (the choice of the services sector will be reviewed based on the initial impact analysis)
CA partner countries Economic and Environmental
22 The ultimate selection of countries will depend on the outcome of the (environmental) impact screening and scoping exercise
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 43
No Case study topic Geographical focus Key impact areas
6 Impacts of the Trade Pillar on child labour and childrens rights
El Salvador Social and Human rights
7 Impacts of the Trade Pillar on the environment (eg forests and biodiversity) in Guatemala the case of palm oil
Guatemala Environmental
8 Impacts of the Trade Pillar on MSMES and sustainable agriculture in the coffee industry (organic coffee) in Honduras
Honduras Economic and Environmental
9 Impacts of the Trade Pillar on women and gender equality notably in agricultural value chains in sectors exporting to the EU (the sectors may include coffee ground nuts and banana however the final selection of sectors and scope will be made based on data availability and the initial impact analysis)
Nicaragua Social and Human rights
10 Implementation and effect of the FTZ in port of Colon including aspects related to direct transportation clause
Panama Economic
72 Case Studies ndash Summaries and Methodologies
Descriptions of case studies and planned methodologies have been provided in Annex A5
8 STUDY WORK PLAN
A detailed study schedule which sets out activities and deadlines for outputs indicated
throughout this Inception Report is outlined in the chart overleaf A detailed plan for the
consultation programme is provided in Annex A4 Annex A6 provides the risk management
approach for the evaluation
Page 44
Phase task deliverable
Inception phase
Kick-off meeting with Commission in Brussels 20
Task 1 Refine draft intervention logic diagram
Task 2 Define and develop the methodological approach
Task 3 Review existing studies amp reports on trade between the EU and CA (6 countries)
Task 5 Provide a concise description of the agreement
Task 6 Create a website dedicated to the evaluation
Task 7 Stakeholder consultation strategy
Task 13 Case study proposals
Inception reporting
Drafting of inception report
Draft Inception Report 22
Review meeting Commission ISG
Finalisation of the Inception Report
Inception Report
Interim phase
Task 4 Provide a concise summary
Task 8 Undertake consultation activities
Civil society dialogue in Brussels (budgeted under review meetings)
12-week online public consultation
Online survey for business users interests in both the EU MS and partners
Workshops in partner countries
Other targeted consultations
Task 9 Assess the EU-Central American TSIA
Task 10 Analyse economic effects
Task 11 Analyse effects of implementation on SD economic social environmental
Task 12 Analyse effects on Human Rights
Task 13 Conduct in-depth case studies based on field work
Interim reporting
Drafting of Interim Technical Report
Annexes Progress evaluation Quantitative tables 10-page stakeholder report CS reports
Draft Interim Technical Report 20
Review meeting Commission ISG
Finalisation of Interim Technical Report
Interim Technical Report `
Final phase
Task 13 Conduct in-depth case studies based on field work
Task 14 Reply to the evaluation questions
Task 15 Provide conclusions and recommendations
Tasks 1 45 9 and 10 - 15
Final reporting
Drafting of draft final report
Synthesis report
Executive Summary
Annexes
Draft final report 20
Review meeting Commission ISG
Finalisation of final report
Translation executive summaries (EN FR GE SP)
Final report 20
Possible exit meeting 20
Progress reports
The ToR speci fies 12 weeks for the survey we tentatively propose 16 weeks because the time schedule a l lows i t and i f the project s tarts in January the survey would fa l l in the hol iday season in EuropeCA which would not be conducive for responses
Key
Meeting with the European Commission
Concrete deliverable (eg Inception Report)
Key
Working on the evaluation and endpoints of work per task
Stakeholder consultation activities and meetings
MayAprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr
HOW TO OBTAIN EU PUBLICATIONS
Free publications
bull one copy
via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps
from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)
from the delegations in non-EU countries
(httpeeaseuropaeudelegationsindex_enhtm)
by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm)
or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
Priced subscriptions
bull via one of the sales agents of the Publications Office of the European Union
(httppublicationseuropaeuothersagentsindex_enhtm)
doi[number]
[Cata
logue n
um
ber]
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 1
1 INTRODUCTION EVALUATION CONTEXT SCOPE AND OBJECTIVES
Since 20132 the European Union (EU) has been implementing the Trade Pillar ie Part
IV of the Association Agreement (AA) with six countries of Central America ie Costa
Rica El Salvador Guatemala Honduras Nicaragua and Panama The Trade Pillar
(hereinafter EU-CA FTA) gradually opens markets on both sides increases the stability and
predictability of the trade and investment environment and aims at creating benefits for
consumers and fostering sustainable development Its objectives include also support for
regional economic integration in Central America This is also one of the first EU ldquonew
generationrdquo trade agreements characterised by its comprehensive scope that covers in
addition to liberalisation of trade in goods and services investment public procurement
competition intellectual property rights and trade and sustainable development
After several years of implementation an evaluation is undertaken with the objective of
analysing the economic social environmental and human rights (including labour rights)3
impacts of the implementation of the EU-CA FTA and ultimately of determining whether
there is a need to improve its implementation To support the European Commissionrsquos own
evaluation of the Agreement the Directorate-General (DG) for Trade has awarded a
contract for the ldquoEx-post evaluation of the implementation of part IV of the Association
Agreement (Trade Pillar) between the EU and its Member States and Central Americardquo to
a consortium led by BKP Economic Advisors (BKP) The evaluation is carried out by a team
involving experts from BKP Trade Impact BV Trinomics the Foundation Rural
Development Consult (CDR) the NL-investmentconsulting BV and the University of Costa
Rica The work started in January 2021 and will continue until May 2022
The scope of the evaluation can be delineated as follows in terms of the period covered
it includes the whole implementation period of the EU-CA FTA since the start of provisional
application in 2013 up to now also comparing where appropriate with a five-year period
preceding the entry into force of the Agreement (ie starting in 2008) Geographically it
primarily covers the Parties to the Agreement although some effects of the EU-CA FTA on
selected third countries are also analysed such as developing countries and particularly
least developed countries (LDCs) moreover some global effects (eg climate change)
will also be covered Regarding evaluation criteria effectiveness impact efficiency
coherence and relevance will be considered Finally as already mentioned in terms of
types of effects considered the evaluation will cover economic social environmental and
human rights (including labour rights) effects which the EU-CA FTA may have had either
as a result of the changes in trade it has brought about or through the implementation of
the provisions of the Agreement text itself notably those of the Trade and Sustainable
Development (TSD) chapter
Although most data to be considered for the evaluation are likely to refer to the world pre-
COVID-19 the pandemic will have an impact on the study First in terms of the evaluation
implementation it is likely to affect the consultation activities that may need to be carried
out online rather than in person Second in substantive terms it will be important to pay
attention to issues which are of a priority for stakeholders in the current circumstances
(eg by selecting case studies accordingly) and to consider that eg stakeholder views
might be affected by the current situation
This inception report is the first deliverable under the contract It comprises seven tasks
of the evaluation (as established in the Terms of Reference see Figure 1) focusing on the
presentation of the evaluation methodology and is structured as follows Chapter 2
2 The Trade Pillar of the Association Agreement has been implemented in relations with Honduras Panama and Nicaragua since 1st August 2013 with Costa Rica and El-Salvador since 1st October 2013 and with Guatemala since 1st December 2013 3 Whenever this report refers to human rights this includes labour rights
Page 2
presents the evaluation framework with an intervention hypothesis (task 1) while Chapter
3 outlines the proposed methodology responding to the evaluation questions (task 2) and
Chapter 4 covers a brief review of relevant studies on the Agreement (task 3) Chapter 5
provides a descriptive summary of the EU-CA FTA and its implementation so far (task 5)
followed by outline of consultation activities in Chapter 6 (tasks 6 and 7) supported by the
consultation strategy provided in Annex B as well as a list with a preliminary selection of
case studies in Chapter 7 (task 13) The final part includes study work plan in Chapter 8
The draft outline of the interim and final evaluation reports is presented in Annex A7 Other
parts of the Annex provide further details on certain elements of the report
Figure 1 Overall evaluation approach
2 EVALUATION FRAMEWORK
21 Intervention hypothesis of the Agreement (Task 1)
An indicative intervention hypothesis developed by the Commission linked the operational
objectives (as listed in Article 78 of the EU-CA FTA) to specific and overall objectives set
out in Article 2 of the Agreement and its Recitals In line with Task 1 of the evaluation ToR
we have adapted the intervention logic developed by the Commission as follows
All 10 operational objectives listed in Article 78 of the Agreement have been included
Specific and overall objectives have been considered in the context of short-term and
medium-term outcomes as well as long-term impacts
Underlying assumptions have been identified and integrated into the intervention
hypothesis
The relationship between the evaluation questions (EQ) and the intervention hypothesis
has been specified
The updated version of the intervention hypothesis is presented in Figure 2 overleaf
The intervention hypothesis was also instrumental in developing the analytical framework
of the evaluation which brings together the evaluation questions of the ToR the associated
judgment criteria and indicators the data sources and the methodological tools with which
we will collect data The refined analytical framework is presented in the following sub-
section
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 3
Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association Agreement
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 5
Main assumptions (at the level of coherence)
Pillar IV and its implementation has been coherent with the EUrsquos trade and development
policies and in particular with the EUrsquos commitment to sustainable development in
trade policies as a contribution towards attainment of the SDGs (EQ8)
Main assumptions (at the level of efficiency)
The utilisation rate of the Trade Pillar is high (EQ5)
Implementation of the Trade Pillar does not lead to trade diversion (EQ5)
Costs associated with implementation of the Trade Pillar are proportionate to the
benefits it has generated (EQ6)
The distribution of both costs and benefits is proportionate among different
stakeholder groups and interests (EQ6)
Implementation of the Trade Pillar does not create unnecessary regulatory costs
(including administrative burden) (EQ7)
Main assumptions (at the level of effectiveness impact and relevance)
The implementation of the Trade Pillar does not create unintended negative
consequences (EQ3)
The positive impact of the Trade Pillar is inclusive and does not benefit only a limited
group of stakeholders (EQ6)
Implementation of the Trade Pillar has contributed to trade diversification (EQ5)
Provisions of the Trade Pillar continue to be relevant for strengthening trade relations
between the Parties and regional integration of Central America (EQ9)
22 Evaluation Questions Judgement Criteria and Indicators
The evaluation framework has been based on the evaluation questions listed in the ToR for
the study which are as follows
EffectivenessImpact
EQ 1 To what extent have the objectives as laid down in Article 78 of Part IV of the
Agreement been achieved
EQ 2 What are the factors influencing (either positively or negatively) the achievements
of the objectives specified in Article 78
EQ 3 Has implementation of the Trade Pillar had unintended (positive or negative)
consequences and if so which ones
EQ 4 What has been the impact of implementation of the Trade Pillar
Efficiency
EQ 5 To what extent has implementation of the Trade Pillar been efficient with respect
to achieving its objectives
EQ 6 To what extent are the costs associated with implementation of the Trade Pillar
proportionate to the benefits it has generated Is the distribution of both costs and
benefits proportionate among different stakeholder groups and interests
EQ 7 Are there unnecessary regulatory costs (including administrative burden)
Coherence
EQ 8 To what extent has implementation of the Trade Pillar been coherent with the
EUrsquos trade and development policies ndash and in particular with the EUrsquos commitment to
sustainable development in trade policies as a contribution towards attainment of the
SDGs
Relevance
EQ 9 To what extent do the provisions of the Trade Pillar continue to be relevant in
order to address the current trade needs and issues of the EU and Central America
Page 6
The framework provides the evaluation questions the judgement criteria for each of them
the analysis needed to substantiate findings and conclusions made in the evaluation report
and the sources through which data and information will be obtained The evaluation
framework also links evaluation questions and judgement criteria to the analytical tasks to
be performed according to the ToR Table 1-1 in Annex A1 presents this framework
It should be noted that methodological tools and indicators used are not shown in the table
but are explained in the next chapter
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2)
In this chapter we describe the methodologies and tools planned to be used in the
evaluation separately for each task The analysis will be concluded with recommendations
on how the implementation of the Agreement can be further improved for the benefit of
the EU and Central American partner countries It should be noted that the structure of
the presentation is in line with the tasks defined in the ToR to facilitate comparison and
compliance with ToR requirements However the order of findings will be guided by the
evaluation framework presented in chapter 2 To facilitate the link with the evaluation
framework for each task we indicate to which evaluation question respectively judgement
criterion it contributes
31 Analysis of economic effects (Task 10)
In 2010 the EU was Central Americarsquos second most important trade partner after the
United States (and after intra-regional Central American trade) The total value share of
the EU in Central American trade was 94 EU exports mainly went to Costa Rica (53)
Honduras (22) and Guatemala (12) In 2018 the EU was still Central Americarsquos second
trade partner after the United States but with a higher share of 122 of all Central
American trade (IMF 2019) In 2019 Central Americarsquos trade with the US (in both goods
and services) totalled USD 70 billion (ie EUR 678) (USTR) Trade in goods with the EU
reached EUR 12 billion in 2019 and trade in services EUR 82 billion in 2018 (European
Commission 2020a)
311 Task 101 Analysis of the evolution of trade in goods
Analysis under this task will seek to respond to the evaluation questions related to JC 1A1
1A2 and JC 41 The EU-CA FTA offers advantages in terms of market access for the EU
and Central American countries Some of the main elements of the Agreement regarding
goods exports from the EU to Central America are complete liberalisation of tariffs for
manufactured goods and fisheries at the end of the tariff phase-out period and immediate
liberalisation of 69 of EUrsquos exports to CA at the start of the agreement saving EUR87
million in duties annually Specific analyses to be carried out under Task 101 have been
summarised in Table 1 For each sub-task we present the specific analysis that needs to
be carried out and main methodological approach we suggest as well as relevant data
sources
Table 1 Methodological approaches and sources for the analyses of trade in goods
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
1 Goods showing the largest increase or decrease in total and bilateral trade flows
Using COMEXT statistics at different disaggregation levels the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing products
2 Development of trade in goods against previously applicable GSP+ and GSP tariffs
Taking COMEXT data as a basis to investigate whether the GSP status of a product has a bearing on how the EU-CA FTA has influenced the rate of growth in trade we will compare two groups of goods those for which tariffs were 0 under GSP versus those for which tariffs were greater than 0 under GSP+
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 7
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
3 Preference utilisation rates and forgone duty saving of economic operators of all Parties
Based on COMEXT data (for EU imports) and data provided by the Commission (for EU exports) a quantitative analysis will be undertaken to identify the key sectors and product categories where preferences are not fully used We propose to include up to 3 questions in the survey to identify factors that encourage discourage companies to use the Agreement
4 Use of tariff rate quotas (and the reasons for suboptimal use)
Data up to 2019 is already available in the Commissionrsquos annual implementation reports Updating the data is supposed to rely on similar sources as the Commissionrsquos annual reports Reasons for sub-optimal use of TRQs will be investigated during the consultations as this cannot be inferred through statistical analysis
5 Trade diversion in particular from interregional Central American trade towards the EU
First we aim to use COMEXTCOMTRADE data to analyse the evolution of merchandise trade flows over time (between the EU and the partners but also within the region in comparison to the rest of the world)
Second we aim to look at the CGE results that should be able to tell us the pure EU-CA FTA effect on intra-Central American trade flows
6 Impact of the Agreement in relation to the creation persistence reduction or removal of non-tariff measures (NTMs) that have a significant impact on EU-CA countriesrsquo trade in goods
We will use UNCTADrsquos NTM TRAINS database and classification for identification description and analysis of specific NTMs affecting trade relations between the EU and Central America We will also look at NTMs including market access barriers raised by the Parties in the sub-committee meetings and will complement the findings with stakeholder engagement
7 Analysis of the importance of Free Trade Zones in Panama (especially the FTZ in the Port of Colon)
Using trade statistics we can get a picture of the way trade flows entering Central America via the Port of Colon (for example) are distributed across Central American countries These patterns ndash at sector level ndash would tell us the most economically significant EU exports This
will be complemented by qualitative analysis
8 Investigation of whether new enterprises started to export or whether enterprises already exporting started to export new products
We expect to undertake this analysis by relying on available firm-level data as well as specific questions for SMEs in the targeted business survey the SME Panel questionnaire and other consultation activities directed towards SMEs Additionally for this sub-task we will try to get access to national databases containing firm-level panel data based on highly disaggregated customs information that include exports (imports) of products and their destinations
9 Analysis of the evolution of trade import shares originating in the EU in total imports of the six CA countries (and vice versa)
COMEXT and COMTRADE data will be used to carry out this analysis We will ensure that we specify the third countries in a clear way The EU and each of the Central American countries The United States Mexico and Canada but also Brazil Argentina
Paraguay and Uruguay (Mercosur) and China Other countries (Rest of World)
10 Analysis of the impact of the EU-CA FTA implementation on diversification of trade
The diversification of trade in goods will be evaluated according to two main dimensions 1 Diversification in the range of products traded between the EU and each of its partners 2 Diversification in the number of EU member states trading with the Central American partners
11 Comparison of the development of trade in goods between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
COMEXT and COMTRADE data will be used to carry out this analysis Regarding trade of the partner countries the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as the MERCOSUR countries The choice of the US can be explained by CAFTA-DR agreement that has been in place since 2006 between the US and Central America and the Dominican Republic
12 Investigation of whether the EU-CA FTA has facilitated trade with third countries including via the use of intermediate products
Use of GTAP data (since the Trade in Value Added ndash TiVA database only covers Costa Rica) to look at intermediate linkages and whether these have helped the competitiveness of the CA economies We will also look at the CGE modelled development of the real exchange rate as an indicator of what happened to CA economiesrsquo levels of competitiveness
13 Analysis of the degree to which implementation of the EU-CA FTA has contributed to diversification of sources of supply of goods
COMEXT and COMTRADE data will be used to carry out this analysis We will look at the inputs shares for specific products in CA from the EU and vice versa and compare the development of these shares to the shares for the same products from international trade partners
14 Identification of regions within the partner countries that have benefited most and of
regions having benefited least (including the identification of constraints)
We expect to rely mainly on a combination of mapping of the sectoral CGE effects per region with literature review and consultation activities to identify the regions that have most least benefited from the
agreement Social progress indexes are computed at municipal level in Costa Rica and at provincial level in Panama as well as for some regions in Guatemala and El Salvador but this is for 2017-2018 only
Page 8
312 Task 102 Analysis of the evolution in trade in services
Analysis in this task is linked to JC 1A3 Although the effects of trade agreements on EU
services trade with third countries are not easily quantifiable we will seek to use available
data to demonstrate the impact of the EU-CA FTA on EU services trade We will assess
whether the Agreement has led to an improvement or worsening of the structural
imbalance between the parties The EU posted a substantial services trade surplus of EUR
10 billion with all six Central American partners combined in 2013 but this surplus has
decreased to EUR200 million by 2017
Table 2 Methodological approaches and sources for the analysis of trade in services
Specific analysis to be carried out
Main methodological approach and sources
1 Services showing largest increase decrease in total and bilateral trade flows between individual CA countries and EU
We will identify sectors showing the biggest increase in total trade in services flows and in bilateral trade flows as well as those having performed worst This analysis will be conducted using time series trade statistics at different levels of disaggregation (from Eurostat OECD and UNCTAD) the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing sub-sectors Reasons for performance will be identified by a combination of sources including literature review and targeted consultations
2 Comparison of the development of
trade in services between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
The comparison of the development of bilateral trade in services between the EU and the individual Central American countries with the development of trade in services
for the EU and its Member States and for Costa Rica Guatemala El Salvador Honduras Nicaragua and Panama with a suitable reference group of countries will provide further evidence on the actual impact of the agreement of trade in services flows As is the case for trade in goods (Task 101) the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as MERCOSUR countries if possible The choice of the US matters because of the CAFTA-DR agreement that has been in place since 2006
3 Analyse trends in international financial capital flows and the evolution of key financial industry segments ndash with the GATS modes of supply as the basis
First we will analyse trends in international financial capital flows between the EU and the Central American countries as well as globally For this we will use available Eurostat OECD andor UNCTAD data as well as Central Bank data if available
Second in order to look at how sectors are performing (well or not so well) we will focus on a concise general ndash but sector level ndash analysis and what drivers we can identify for economic performance
Third we propose that the following case study (see Task 13) could be undertaken Evaluating financial industry segments such as banking insurance asset management sustainable investment ndash in Panama or Costa Rica
Data source suggestions The OECDrsquos Services Trade Restrictiveness Index The GATS Trade Restrictiveness Index which together establish the amount of ldquowaterrdquo in the partiesrsquo GATS
bindings that can be ldquosqueezedrdquo by a modernised Agreement Central Bank data on financial and insurance services economic activity and trade Global Investment Competitiveness Report (World Bank 2019) ISDB data from Eurostat BOP statistics
313 Task 103 Analysis of the evolution of foreign direct investment (FDI)
The analysis in this task will be linked to JC 1A5 Although the effects of trade agreements
on Foreign Direct Investment (FDI) with third countries are not easily quantifiable we will
seek to use available data to demonstrate the impact of the EU-CA FTA on FDI At a general
level this task will entail to assess what impact the EU-CA FTA has had on structural
balances or imbalances between the EU and its Central American partners
Table 3 Methodological approaches and sources for the analysis of bilateral FDI
Specific analysis to be carried out
Main methodological approach and sources
1 Largest increases decreases in FDI flows between individual CA countries and the EU
We will identify main changes in FDI flows over the past 10 years between the EU and Central American countries if possible at sector level This analysis will be conducted using the ITC investment map data UNCTAD investment data and ISDB data from Eurostat BOP statistics Data limitations are expected to be significant for this subtask Reasons for good or bad performance will be identified by a combination of sources including literature review and targeted consultations
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 9
Specific analysis to be carried out
Main methodological approach and sources
2 Comparison of the development of FDI flows between the signatory countries
The proposed methodology would examine the investment effect at both the extensive and intensive margins using the two-step Heckman (1979) estimation as implemented in Helpman et al (2008)
3 Analysis of the investment climate
and of the attractiveness to investment of the six CA countries
An analysis of the investment climate and of the attractiveness to investment of the six Central American countries taking into consideration the possible impact of the
existence of bilateral investment treaties or of double-taxation treaties will be undertaken We propose to review inter alia the evolution of the following indexes OECDrsquos Foreign Direct Investment Restrictiveness (FDIR) index Various FDI attractiveness and FDI confidence indexes ndash eg by AT Kearny and Ernst amp Young Global Investment Competitiveness Report (World Bank 2019) World Bank lsquoDoing Business Indicatorsrsquo ISDB data from Eurostat BOP statistics wwwinvestmentmaporg from the ITC
314 Task 104 Presentation of overall economic impacts
The analysis in this task is linked to JC 41 and will rely on the computable general
equilibrium (CGE) modelling undertaken by DG Trade The CGE model is the quantitative
cornerstonefoundation of the ex-post evaluation Important variables of interest for the
economic analysis will be those which are standard for a CGE analysis such as GDP and
trade flows (total bilateral and by sector) and sectoral output Based on the CGE modelling
results we will estimate the overall impact on the economy of the EU the partner countries
as well as third countries in particular LDCs The economic analysis will build further on
the modelling results We will report these in sufficient detail to highlight the economic
effects of the EU-CA FTA More details on the CGE model are provided in Annex A2
315 Task 105 Determining the impact on implementation of the Trade Pillar of the
various institutional structures
Our analysis under this task will seek to respond to evaluation questions No 1 and 5 (with
JC1A2 JC1A6 JC1A7 and JC1A9) ie how the operation of the institutional set up has
contributed to achieving the objectives of the EU-CA FTA outlined in Article 78 and how
effective and efficient the Association Committee (in trade configuration) six Sub-
committees and an ad hoc Working Group have been to date To determine this we will
analyse provisions of the EU-CA FTA referring to institutions and their operation in practice
In the first step we will analyse Articles 4-8 establishing the Association Council the
Association Committee and Sub-Committees and setting out their decision-making powers
This will be done jointly with Articles 345-346 setting out specific tasks of the Association
Council and the Association Committee acting in trade configuration including powers to
amend certain parts of the Agreement (within Trade Pillar) This will be followed by Articles
347-348 about Part IV coordinators and Sub-Committees established under EU-CA FTA and
will be complemented by the analysis of Articles 91 123 139 156 274 and 294 outlining
areas of responsibility of the individual Sub-committees4 and the Rules of Procedure of the
Association Council and the Association Committee (Decision No 12014 of the Association
Council) which also apply to Sub-Committees This will let us develop an understanding
about the mandate of each institution its decision-making powers including those related
to amending the EU-CA FTA and monitoring compliance by each Party frequency and
format of meetings relations with other institutions under the Agreement reporting and
escalation In this way we will establish an expectation regarding the role each institution
should have in implementation of the EU-CA FTA and achieving its objectives
4 Sub-committee on Market Access for Goods (Article 91) on Customs Trade Facilitation and Rules of Origin (Article 123) on Technical Barriers to Trade (TBT) (Article 139) on Sanitary and Phytosanitary Matters (SPS) (Article 156) on Intellectual Property (Article 274) Board on Trade and Sustainable Development (TSD) (Article 294) and Ad hoc Working Group on Government Procurement
Page 10
In the second step we will analyse the actual operation of all the above structures based
on available documents and engagement with the Parties as well as relevant stakeholders
We will take as the basis reports from Sub-committee and Association Committee meetings
and will complement them with the annual Commissionrsquos Implementation Reports and
other documents eg conclusions adopted by civil society representatives at the annual
meetings under the TSD chapter We will also determine whether formal decisions have
been taken by the Association Council or Committee and if so analyse the extent to which
they have contributed to implementation of the EU-CA FTA We will also look at concerns
raised by the Parties how they have been addressed and how much time it took to achieve
a satisfactory solution Based on findings from our analysis we will provide conclusions
and recommendations for the future notably for the TSD board
316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated
exportimport procedures for key stakeholders
Analysis in this task will be related to JC 1A2 Based on reviews of the Agreement text as
well as the work of the Sub-committee on ldquoCustoms Trade Facilitation and Rules of Originrdquo
we will analyse in a qualitative way which customs-related aspects have facilitated or
complicated bilateral trade like rules of origin management of TRQs agricultural safeguard
measures and approved exporter status We will seek to determine eg whether Article
304 par 1 provision (related to reimbursement of duties in CA Party of transit and their
payment in the CA Party of import) is applied in practice and if so how it is evaluated by
economic operators
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the
Trade Pillar
This task is also linked to JC 1A2 and the methodological aspects described above are also
valid for SPS related issues We see two subtasks under this request 1) An analysis to
what degree implementation of the SPS Chapter in the EU-CA FTA has facilitated agri-food
trade without lowering any partyrsquos SPS standards 2) The extent to which the capacity
building and technical assistance provided by the EU to Costa Rica El Salvador Guatemala
Honduras Nicaragua and Panama has had an effect (looking at what technical assistance
projects and funds were used)
318 Task 108 Analysis of the implementation of the Government Procurement
chapter of the Trade Pillar
The analysis in this rask is linked to JC 1A6 and will examine the impact of the opening of
the government procurement markets of the Parties using a multi-step approach 1)
Review of the recent and ongoing work of the Ad Hoc Working Group on Government
Procurement 2) A statistical analysis of the procurement value shares for EU business (if
possible) and SME participation which will be complemented by desk research and
anecdotal evidence of success stories of EU companies in Government procurement
markets of six CA countries and 3) Review of the level of compliance with the Agreement
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar
This task is related to JC 1A7 and 1A8 The methodological approach foreseen to analyse
other areas of the Agreement (like Technical Barriers to Trade e-commerce Competition
and protection of intellectual property rights (IPRs) including geographical indications)
Our approach focuses on 1) Statistical analysis compiling statistical descriptive analysis
on each issue prior to and after entry into force of the Agreement 2) Literature review
the analysis on the implementation and use of geographical indications in Central America
(eg Rivar 2020) 3) Case studies A specific case study on some of these other issues
could be carried out
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 11
3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has
led to a greater economic integration between the Central American partners
This task is linked to JC 1A4 The EU-CA FTA has been a mechanism that encourages
regional integration but it takes place within a much wider framework of regional
cooperation efforts between the CA countries with the EU-CA FTA being only one element
in this wider context This task focuses on the impact of the EU-CA FTA on regional
integration not on the overall trend or state of affairs regarding regional integration We
use three elements for our analysis 1) The statistical analyses that we have carried out in
Tasks 101 (trade in goods) 102 (trade in services) and 103 (FDI) help to shed light on
regional integration impact of the EU-CA FTA also 2) We look at the results of the CGE
analysis including at how the intra-regional trade patterns have changed because of the
EU-CA FTA 3) We investigate what progress has been made in terms of the different
elements for integration We will use EU and CA data sources to underpin our analyses
3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for
imports of bananas
This task is related to JC41 We envisage three types of analysis under this task in addition
to a possible case study 1) Descriptive statistical analysis based on trade in bananas since
2008 in order to capture developments before and after the entry into force of the EU-CA
FTA distinguishing bilateral trade in bananas EU banana imports from the non-LDC ACP
countries from LDCs and intra-EU imports from the Outermost Regions 2) A quantitative
impact analysis using a partial equilibrium model ndash the Global Simulation (GSIM) model
(Francois and Hall 2009) 3) A qualitative impact analysis causal chain analysis will be
applied to look at what the Agreementrsquos sector-level social and environmental effects have
been In this step we focus in the socialhuman rights pillars on how vulnerable groups
could be affected at sector level The qualitative sectoral environmental analysis will cover
the impact of the FTAs on land use and related issues water and waste management and
biodiversity and protection
3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on
SMEs
The analysis in this task is linked to JC 41 The ldquoSME-Testrdquo will be guided by the following
steps 1) Consultation of SME Stakeholders SMEs are a central element of the consultation
strategy and will be present at every stage of it 2) Identification of affected business
early on in the analysis we will identify whether and which SMEs (eg medium-sized) are
among the affected businesses 3) Identification of concrete stories as the Interim Report
progresses we will have sufficient information to identify 20 concrete stories from SMEs
as required by the Terms of Reference
3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers
This task will be approached in two parts the first one being dedicated to impacts on
consumer rights and the other one to welfare-related impacts of the EU-CA FTA which also
affect consumers in their purchasing decisions The analysis will be related to JC 42 and
evaluation questions No 18 and 6 In addition we will aim to determine to what extent
EU-CA FTA has contributed to attaining SDG 1 (no poverty) and 10 (reduced inequalities)
Regarding consumer rights in the first step we will refer to the literature according to
which consumers usually benefit from global trade and preferential trade agreements due
to lower prices of purchased goods and services (resulting from reduction of tariff and non-
tariff barriers) a wider variety of traded goods and services the related satisfaction of
diversified needs and preferences and higher quality of available goods and services
Page 12
In the second step we will consider impacts which the EU-CA FTA (might) have had for
consumers regarding availability safety sustainability traceability and quality of traded
goods and services as well as which impact its promotion (or consumersrsquo awareness of it)
may have on consumersrsquo knowledge regarding the market offer and their trust in it The
list of questions to test will be guided by the EU Better Regulation Tool Nr 32 related to
impacts on consumers We will also draw on other parts of the study analysing
implementation of provisions related to regulatory measures and standards eg TBT
SPS TSD dialogue and cooperation between the EU and partner countries and
transparency to outline what level of protection incl consumer protection and production
standards is provided by the EU-CA FTA We will also refer to the EU RAPEX database ie
the alert system for dangerous non-food products listing notifications of such products
originating from the EU and partner countries
The second part of our analysis will focus on impacts of the EU-CA FTA on welfare In the
first step based on literature review and statistical data including relevant indexes (eg
the share of population living below the poverty line) we will analyse trends in the reporting
period in the EU and Central America regarding situation of consumers from different
groups of the population incl incomes expenditures levels of poverty and inequality
income and price levels wages and other types of income and any changes in this context
In the following step we will use outcomes of the economic modelling to estimate impacts
on welfare and inequality resulting from EU-CA FTA implementation eg prices and wages
In this context we will also consider to what extent the Agreement helped to attain SDG
No 1 (No Poverty) and SDG No 10 (Reduced Inequality) This will be complemented by
stakeholder consultations and finished with conclusions and recommendations
3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on
the budgets of the EU and the partner countries
The analysis in this task is linked to JC 41 It will examine impact of the FTAs on the EU
budget (ie revenues forgone) and will largely result from the economic model We
anticipate that for the EU the foregone tariffs on imports from the partner countries will
be estimated based on the level of EU imports from the selected countries as a baseline
and the tariffs that would have applied to those imports
3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on
EU Outermost Regions (ORs)
This task is linked to JC 41 The impact on ORs will be assessed based on the trade
diversion and deflection identified in the CGE analysis A key limitation in the economic
modelling framework is however that the EU ORs are not established as a separate region
To meaningfully analyse the effect on the EUrsquos ORs we propose two elements 1) A
matching analysis for the EU and the six partner countries regarding products that matter
for ORsrsquo trade (to either partner countries or the EU) 2) Competition analysis between
ORs and CA partner countries for exporting to the EU The effects will be determined
qualitatively distinguishing if applicable the ORs which might be positively or negatively
affected by the Agreement
3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on
developing countries in particular on LDCs and countries having an Economic
Partnership Agreement (EPA) with the EU
This task is related to JC 41 Our approach to look at the EU-CA FTArsquos impact on developing
countries and LDCs will largely consist of the interpretation of the results of the economic
model simulations which has defined lsquoLDCsrsquo as a separate region This allows us to look at
the effect the EU-CA FTA has had on them We will also look closely at effects for countries
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 13
which are implementing an Economic Partnership Agreement (EPA) with the EU In terms
of the impact we will look first at an economic impact followed by effects on the other
sustainability pillars The former will include (i) a matching analysis for the EU and the six
partner countries regarding products that matter for LDCsrsquo trade (to either partner
countries or the EU) and (ii) competition analysis between LDCs and CA partner countries
for exporting to the EU We do not expect the effect to be significant for the LDCs because
the global impact of the EU-CA FTA is limited
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable
development (Tasks 11 and 12)
321 Task 111 Analysis of the effects of implementation of the Trade and
Sustainable Development (TSD) chapter of the Trade Pillar
This is one of the priority tasks linked to JC 1A1 In the first step we will divide provisions
of the TSD chapter into thematic blocks to identify areas for further analysis These include
commitments of the Parties to effectively implement in their laws and practice the eight
fundamental conventions of the International Labour Organization (ILO) as well as the
Multilateral Environmental Agreements to which they are Party the right of the Parties to
regulate sustainable management of natural resources promotion of trade supporting
sustainable development institutional provisions and dispute settlement mechanism
In the second step based on findings from the analysis of the actual situation in the EU
and partner countries carried out in Tasks 113-118 and documents outlining the
implementation of the TSD chapter (eg reports of international monitoring bodies
reports from meetings of the TSD Board and civil society advice to the Parties) we will
map activities undertaken by the Parties in areas covered by the TSD chapter in a break-
down prepared in the first step This will enable us to conclude to what extent the scope
of the TSD chapter has been covered and if actions taken by the Parties individually and in
cooperation activities have contributed to the implementation of TSD commitments and
attaining the objectives of the chapter and relevant SDGs (No 8 on decent work and
employment for all No 13 on combating climate change and No 14-15 on sustainable
use and protection of marine environment forests and biodiversity) Our analysis will be
complemented by stakeholder engagement5 We will conclude the analysis with
recommendations for the future incl any improvements in operation of institutions to
support compliance of the Parties with provisions of the TSD chapter
322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter
This is one of the priority tasks liked to JC 1A10 and evaluation questions No 1 5 and 8
In the first step we will analyse formal commitments of the Parties regarding the set up
and operation of the institutional mechanism ie Article 294 (Contact Points of the Parties
the TSD Board and civil society Advisory Groups) and Article 295 (Civil Society Forum)
In the second step we will analyse the establishment and operation of TSD institutions in
practice including their meetings activities undertaken between sessions cooperation and
5 When the Report refers to stakeholder engagement it means diverse activities foreseen in the stakeholder engagement programme outlined in detail in Annex B to this Report (Consultation Strategy) For each task stakeholder engagement activities will be tailored to the most relevant group of stakeholders methodology applied in the task and type of data which will be needed for the analysis For example in the analysis carried out with regard to TSD chapter the focus will be on targeted interviews with civil society members of the Advisory Groups in the EU and Central American countries as well as with Government and Commission representatives Further sources of information and activities will include targeted meetings eg DAG meetings and workshops with Central American countries CSD meetings with the European civil society and written positions submitted by civil society organisations As a complementary source we will use replies from online public survey
Page 14
dialogue between Governments and civil society The analysis will be based on reports
from meetings research studies recommendations from civil society to the Parties and
interviews with representatives of the Commission Governments from Central America
EU Delegations the EESC secretariat of the EU Advisory Group as well as civil society
representatives from the EU and Central American countries including members of their
Advisory Groups We will also evaluate effectiveness and efficiency of the institutional
mechanism and its role in the monitoring and implementation of the TSD chapter the
ability to address problems and to pursue cooperation and dialogue We will put an
emphasis on the evaluation of the TSD Board its ability to monitor compliance with the
commitments of the Parties effectiveness in choosing priorities and structuring the work
programme pursuing cooperation activities and resolving problems This part will also
analyse civil society capacity to exercise its mandate and monitoring implementation of
TSD chapter the quality of dialogue between Governments and civil society and the follow-
up to civil society recommendations In this context and in line with suggestions provided
by reviewed research studies we will also evaluate to what extent the discussion among
the civil society and between Governments and civil society focuses on substance
(compared to focusing on process) and whether the civil society has the means and
capacity to prepare for and to engage in such a discussion We will conclude the analysis
with recommendations for the future incl any improvements in operation of institutions
323 Task 113 Analysis of employment impacts
The analysis in this task will focus on impacts for employment levels and relate to JC 42
and evaluation questions 4 and 6 In the first step we will analyse trends in employment
and unemployment levels in the EU and partner countries for their whole economy and
across sectors over the reference period We will also identify factors influencing observed
trends including macroeconomic and labour policy measures applied by the Governments
investment in education and skills development migration from rural to urban areas and
across region and impacts of trade and investment including through trade agreements
In the second step the analysis will be focused on assessing quantitative impacts (direct
and indirect) of the EU-CA FTA on the number of jobs direct and indirect (for skilled and
un-skilled workers for the EU and partner countries across sectors) and be based on the
results of the economic modelling We will compare these results with the real-life data
and trends observed in the first step to conclude to what extent the reduction in trade
barriers and changes in output across sectors related to the implementation of the EU-CA
FTA have influenced demand for labour given the assumption of a fixed total employment
in the economy and full labour mobility between the sectors with workers leaving sectors
seen as less competitive and moving towards those having better prospects of growth and
working conditions including wages We will also draw a conclusion to what extent
observed trends in employment should be attributed to the EU-CA FTA and to what extent
to other factors incl macroeconomic environment global trends in commodity prices
domestic policy investment and trade agreements with other partners Stakeholder
consultations will help to verify our findings
324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda
(job creation labour standards social protection and social dialogue) on
working conditions poverty reduction and enforcement
This is one of the priority tasks Our analysis will seek to answer the evaluation questions
No 1 4 and 6 (JC 42) Given the broad scope of this task we will divide it into two parts
a) labour standards and social dialogue (the Decent Work Agenda) b) working conditions
including social security and health care coverage of workers and labour inspection
In the first step we will describe the situation in the EU and partner countries and changes
over time regarding the subject matter as well as factors influencing observed trends We
will focus on the following
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 15
Task 114 a) on labour standards will look at the implementation of the core labour
standards as enshrined in the fundamental ILO Conventions ratified by all Parties to
the EU-CA FTA and evaluated by the ILO monitoring bodies6 Regarding trends in child
labour occurrence the analysis will include eg the number of working children types
of activities and sectors involved the number of hours worked per week motives for
undertaking work and involvement in hazardous work Influencing factors will be
considered and their impact on job availability for adult household members the level
of generated income and the extent to which it covers family needs Regarding forced
labour the analysis will include types of activities and sectors involved and influencing
factors including criminal activity and the level of law enforcement On freedom of
association and the right to collective bargaining the analysis will cover conditions for
setting up joining and operation of trade unions and employer organisations and
functioning of social dialogue for the whole country and ndash if data is available ndash across
sectors including indicators such as the share of trade union members in the total
number of workers for the whole country and in a break-down by sector and changes
over time Regarding non-discrimination at work we will focus on groups of workers
which may be in a disadvantaged position on the labour market eg youth disabled
persons migrants or indigenous peoples (women will be analysed in Task 116) and
indicators such as labour participation rate and unemployment rate the share of each
group working informally or being in a situation of sub-employment (ie receiving a
wage below the minimum level despite working full time or having no opportunity to
work full time despite being ready to do so)
Task 114 b) on working conditions and labour inspection will include trends in job
quality indicators over time the average number of working hours per employee per
week the number or rate of fatal and non-fatal accidents at work social security and
health care cover of workers wage levels type of contract the number of labour
inspectors and inspections carried out at work places and the infrastructure and funds
being at the disposal of inspection services (we will consider in that context that all EU
Member States and five Central American countries except Nicaragua have ratified
the ILO convention No 81 on labour inspection)
In the second step based on economic modelling we will identify the sectors most affected
(positively or negatively) by the EU-CA FTA and using the analysis done in step one will
seek to determine if trends observed in the respect for labour standards and quality of
working conditions in individual sectors can be attributed to the operation of the Agreement
or rather to other factors In cases where any concerns related to labour standards eg
child labour incidence or low presence of trade unions are identified in sectors particularly
involved in trade with the EU notably in exports we may apply an in-depth analysis in a
dedicated case study We will also refer to the implementation of the TSD chapter to
establish whether policy dialogue cooperation activities and engagement with civil society
have also influenced the situation We will complement desk research with stakeholder
engagement
325 Task 115 Analysis of impacts on the informal economy and informal
employment
This is one of the priority tasks linked to evaluation questions No 1 and 8 (JC 42) We will
also aim to determine to what extent the Agreement has contributed to attaining objectives
of SDG No 1 (no poverty) and No 10 (reduced inequalities) In the first step we will
develop a description of the situation in the partner countries during the analysed period
concerning the size and structure of the informal economy and factors influencing its
6 These include conventions No 138 and 182 on elimination of child labour No 29 and 105 on prohibition of forced or compulsory labour No 87 and 98 on freedom of association and the right to collective bargaining and No 100 and 111 on equal pay for work of equal value and non-discrimination at work
Page 16
existence as well as its geographic pattern in Central America and each of the partner
countries separately We will aim to identify if there are links between the informal
economy and eg the economic structure and dynamic in certain regions and their
involvement in trade We will also report about steps taken by the Governments in a move
towards formal economy including dedicated national strategies adopted in Costa Rica and
Guatemala
In the second step based on the results of the economic modelling and trade statistics for
trade and investment flows between the EU and Central American countries an additional
literature review and stakeholder consultations we will aim to establish to what extent
trade and in particular the EU-CA FTA has contributed to the observed trends in each
partner country We will verify our findings in stakeholder consultations
326 Task 116 Analysis of impacts on gender inequality
The analysis in this task will seek to answer the evaluation questions No 1 4 and 6 (JC
42) We will also aim to determine to what extent EU-CA FTA implementation has helped
to attain SDG No 5 (gender equality) No 8 (decent work and economic growth) No 1
(no poverty) and No 10 (reduced inequalities) Work under this task will be guided by the
approach proposed in UNCTADrsquos Trade and Gender Toolbox (UNCTAD 2017) which
considers impacts on women in their roles as workers entrepreneurs traders and
consumers Complementary considerations regarding impacts for each of those groups will
be inspired by other literature (eg Fontana 2009) and methodological approaches (eg
European Institute for Gender Equality 2016)
In the first step we will analyse the situation in the Central American partner countries
regarding womenrsquos participation in the labour market economic activity as entrepreneurs
and traders (with a consideration of their access to assets and supporting measures) and
their position as consumers incl the level and type of income received and being at their
disposal Based on the available data we will also analyse gender inequalities before and
after the entry into force of the EU-CA FTA and measures applied by the countries and
provided by international donors to support an increased womenrsquos participation We will
also review reports of the ILO Committee of Experts regarding implementation of the two
ILO fundamental conventions on non-discrimination ie No 100 (equal pay for work of
equal value) and No 111 (non-discrimination at work) ratified by all CA partner countries
In the second step we will compare observed trends stemming from the real data with
outcomes of the economic modelling to determine to what extent they may be linked to
impacts of Agreement and to what extent they result from influence of other factors
Focusing on women as workers we will identify sectors important for them (based on
their shares in the total womenrsquos employment and a ratio of female and male workers
in each such sector) and compare observed trends in employment levels (in total and
across sectors) with the results of the modelling (changes in employment levels across
sectors) to determine whether the EU-CA FTA has contributed to changes reported in
the real life and if so to what extent In this context we will also consider impacts of
tariff reduction on public revenues and whether this might have had an impact on the
provision and quality of public services which in turn may have an effect on women and
their ability to participate in the labour market or to undertake an economic activity
For women as entrepreneurs if relevant data is available we will identify sectors of
their economic activity and compare trends in the actual operation of these sectors over
time (eg growth or decline) with outcomes of the economic modelling to determine if
the EU-CA FTA might have had an impact on output of these sectors and as a result
position of women as entrepreneurs
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 17
Moreover if more detailed data is available regarding sectors and groups of products or
services manufacturedprovided by women-led enterprises as well as their engagement
in international trade we should be able to say (again comparing the real-life data with
economic modelling) what impact the Agreement may have exercised on women as
traders and in this context on sales and exports of their products or services or their
competition with or the use of imports We will also consider whether the EU-CA FTA
provisions regarding eg tariff reduction SMEs TBT SPS might have had an impact
for women-led enterprises (given their size and sectors of operation)
Concerning the role of women as consumers we will look at real-life trends in income
and price levels and compare them with outcomes of the economic modelling to see
what impacts the EU-CA FTA might have had on welfare and price levels as well as the
availability and accessibility of goods and services
Our analysis will be complemented by engagement with stakeholders including women
organisations to identify barriers in their activity on one hand and facilitating measures on
the other and to gather more insights into impacts of the EU-CA FTA
327 Task 118 Analysis of impacts on the adoption and implementation of
internationally recognised instruments of responsible business conduct and
Corporate Social Responsibility (CSR)
Our analysis under this Task will seek to respond to the evaluation question No 1 (JC 42)
In the first step we will map CSRRBC practices in the Central American partner countries
in the analysed period including practices of European companies investing there or having
their suppliers and existing government initiatives promoting them eg National CSR
strategy and Law on CSR in Costa Rica National Plan on Social Responsibility and Human
Rights in Panama and dedicated centres or foundations promoting CSR in Guatemala
Honduras Nicaragua and El Salvador We will also use findings from a research carried
out for Task 111 identifying initiatives undertaken within the TSD Title incl EU projects
and regional events dedicated to CSR RBC and decent work in global supply chains We
will aim at a better understanding of the existing framework uptake of CSRRBC practices
by enterprises factors influencing it and CSRRBC presence in the EU relations with the
partner countries including technical assistance and cooperation projects
Based on this in the second step we will use outcomes of the economic modelling and
stakeholder consultations to verify whether indeed the EU-CA FTA through generated
trade and investment flows as well as specific provisions (such as those in TSD Title) might
have encouraged uptake of CSRRBC practices We will also seek to identify factors related
to market access which may encourage uptake of CSRRBC practices Legislative ones may
include eg non-financial reporting and obligatory due diligence in certain sectors or
activities requirements related to social and environmental aspects in public procurement
and non-legislative ones may focus on image and comparison with the main competitors
being part of supply chains where business partners require respect for certain labour and
environmental standards international instruments in CSR (OECD Guidelines for
Multinational Enterprises ILO Declaration on Multinational Enterprises and Social Policy
the UN Global Compact etc) requirements of sustainability and certification schemes or
consumer awareness and related choices
As an additional element of this analysis (subject to data availability) we may include into
this task examples of other schemes eg sustainability schemes or promotion of decent
work in global supply chains (notably of agricultural products) and their presence in trade
between Central America and the EU and impacts the EU-CA FTA might have had on their
use in bilateral trade relations
Page 18
328 Task 117 Analysis of environmental impacts
The main objective of the environmental analysis is to assess the environmental and
climate change effects of the EU-CA FTA as well as to provide answer to the evaluation
questions notably those on the effectiveness (No 1-4) (JC 43) and coherence of the
Agreement with other policies and the EUrsquos commitment to the SDGs and in particular
SDGs No 13-15 ie Climate Action Life below water and Life on Land (respectively) ie
evaluation question No 7 The main challenge is to isolate the EU-CA FTA induced effects
on the environmental performance in each country from general developments and trends
that occurred regardless of the EU-CA FTA This is particularly challenging as the
counterfactual environmental outcomes are unobservable for most of the environmental
impact areas
The overall approach is based on our detailed understanding of the dynamics through
which the EU-CA FTA may have created environmental impacts tailored towards the
specific circumstances for the Central American countries the requirements in the ToR
the TSD Chapter of the EU-CA FTA and the budget provided for this study The detailed
understanding is based on the study lsquothe methodology for assessing biodiversity impacts
of EU FTArsquo by IEEP Trinomics et al (2021) and the latest literature including an OECD
study (Garsous G 2019) on this matter and applies the following logic
1) identifying the components in the EU FTA with the Central American countries that may
have generated environmental effects (EU-CA FTA elements) Based on our extensive
recent experience on researching the dynamics through which FTAs may create
environmental impacts we conclude that the FTA contains (1) measures easing market
access for the signatories (referred to as tariff-based measures) and (2) several rules-
based measures (mostly by means of the provisions in the TSD Chapter referred to as
non-tariff-based measures) that may have resulted in environmental impacts in the
countries involved
2) then establishing how these elements could have created directly or indirectly intended
or unintended ndash environmental impacts (the impact channels) Any FTA is by
definition expected to create direct environmental impacts through the expected
expansion of economic activity which may lead to eg higher pollution and greenhouse
gas (hereafter GHG) emissions may put a strain on bio-resources and pressure on
vulnerable ecosystems as higher levels of output require more environmental input
(Copeland and Taylor 2014) Trade agreements also create indirect environmental
impacts through structural adjustments in the economies and so-called specific rules-
based trade measures including the provisions in the TSD Chapter Our approach
carefully considers four impact channels that are also distinguished by the SIA Handbook
(European Commission 2016a) to separate the way in which EU-CA FTA may have
created impacts on various areas of the environment The scale effect (the impact
created from increased production as a result of the trade agreement) the structural
effect (the dynamic effect of the EU-CA FTA on the growth and contraction in production
in different sectors) technology effects (impacts triggered through increased efficiencies
from increased competition or from a transfer in environmental goods and services) and
potentially the product effect (impact via changes in production standards and use of
goods in a country eg through strengthened environmental policies and environmental
regulation)
3) via these impact channels various areas of environmental performance (the impact
areas) may be impacted and are to be further analysed in this evaluation In this study
we distinguish the following impact areas 1) Climate change 2) Biodiversity and
ecosystems and 3) Other key environmental parameters
Research methods ndash For some impact areas there is more reliable information and data
and quantitative research methods available than for others To the extent possible the
quantitative analysis will build on the economic modelling results and as a result the
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 19
analysis will allow us to comment on the causal relation between environmental topics and
the EU-CA FTA Where quantitative research is not possible we will apply qualitative
methods The qualitative analysis may rely on the causal chain analysis method which
aims at identifying the root cause of observed changes Irrespective of whether a certain
impact will be assessed with more quantitative or qualitative research methods our
approach is designed to make intensive use of quantitative information eg compiling
quantitative statistics and analysing trends The following research methods are applied
per environmental area
For climate change we propose focusing on establishing the EU-CA FTArsquos impacts on
the major GHG emissions (eg carbon dioxide methane and nitrous oxide) and
potentially on the air pollutants (ozone precursor gases acidifying gases and primary
particulates)
For biodiversity and ecosystems we propose following the latest insights in assessing
biodiversity impacts of the EU-CA FTA based on the study for DG Environment on the
development of a methodology to assess the impact of trade liberalisation on
biodiversity (which has not been published yet) In case results of the biodiversity
analysis are also relevant for climate change (ie LULUCF emissions) the link between
these results and climate change will be explored
For other impact areas we propose developing baselines based on qualitative and where
possible quantitative data for each impact area and explore developments in
environmental performance since the entry into force of the EU-CA FTA In addition we
will discuss the (effectiveness of the) implementation of provisions enshrined in the TSD
Chapter in the EU-CA FTA per impact area
The above discussed approach is based on five activities They apply the logic of the
methodological stages7 as described in the methodological framework for assessing the
impact of EU FTAs on biodiversity (IEEP Trinomics et al 2021)
3281 Activity 1 Fine-tuned methodology and impact screening and scoping
Fine-tuning the methodology is part of this inception report (this document) and mainly
serves to define the exact scope and focus of this evaluation The environmental analysis
logically focusses on Central America and the EU (with an emphasis on Central America)
However within defining the geographic scope of this analysis one needs to differentiate
global (eg climate change) and other more local environmental impacts eg
(un)sustainable forest management practices We aim to cluster countries when
appropriate from the perspective of a certain regional environmental issue In this way we
can respond to the challenge of bringing focus to the analysis while balancing the available
resources and time Clustering should enable us to evaluate certain environmental issues
in a more targeted way enabling deep dives into specific issues Below we discuss in more
detail what this regional approach means in practice and how we aim to mitigate the risk
of overlooking certain impacts
Impact screening and scoping - The exact environmental topics on which quantitative and
qualitative analysis will be performed depend on the outcome of the impact and screening
and scoping exercise which seeks to identify issues which deserve to be analysed with an
extra depth As such this sub-activity aims to select the environmental impact categories
and sub-areas to be studied in other activities Impact screening and scoping is a
methodological tool to identify issues which should be prioritised in the evaluation and
helps to mitigate the risk of overlooking potential significant impacts In essence the
prioritisation is based on (i) screening the most prevailing existing environmental drivers
and pressures and (ii) screening the expected impacts caused by the EU-CA FTA (at a
7 The study by IEEP Trinomics et al (2021) identifies three stages Stage I) Preparatory stage Stage II) Method selection and impact logic and Stage III) Impact assessment and related conclusions
Page 20
sector level) by means of economic modelling results literature review stakeholder input
and political interest All information is transparently documented in the impact-screening
matrix During the impact screening and scoping exercise we will also develop three
context-setting documents (2-pages) one per environmental impact area to better
understand the background These documents will have a regional perspective and will be
directly used in the baseline development The output of this activity is included in the
Interim Report
3282 Activity 2 Establishing the baselines for the impact areas
The aim of this activity is to gain a brief understanding of the EUrsquos and partner countriesrsquo
status quo regarding their environmental governance and performance (eg trends) for
those environmental impact areas that have been identified as priority ones The output
will be a section in the evaluation with a short description (1 page) per prioritised impact
area outlining the governance (very brief) and the performance and exploring the main
developments trends and their cut-off points This will be done by analysing issues from
a DPSIR framework perspective (drivers ndash pressures ndash state ndash impact ndash responses) (see
Box 1) when appropriate8 This framework is often applied in environmental assessments and plays a central role in the study by IEEP Trinomics et al (2021) on the methodology
for assessing the impact of EU FTAs on biodiversity
Box 1 The use of the DPSIR framework in FTAs
The DPSIR framework allows to interpret certain environmental indicators by establishing a causal relation between indicators and their analysed effects In the case of an FTA trade liberalisation in goods services and investments can function as a driver of a change in different economic sectors causing changes in the amount of land- and other resource use or in their quality (eg pollutants and emissions impacting air water or soil quality) The changes in the quantity of land- and other resource may create pressures on biodiversity which lead to an impact in the state of and trends in biodiversity ecosystems and the services they provide As a response(s) certain new or existing measures can be taken to help to prevent negative impacts or to amplify positive ones
Source IEEP Trinomics et al (2021)
Three consecutive sub-tasks will be performed to operationalise the establishment of the
baselines 1) Literature review and data analysis to establish draft baselines 2) Interviews
with stakeholders to obtain additional input validate work and fine-tune results 3)
Triangulation of information (literature data and interviews) and establishment of final
baselines The output of this activity will be included in the Interim Report
3283 Activity 3 Quantitative evaluation of impacts9
The aim of this activity is to assess the quantitative estimates of the impacts of the EU-CA
FTA on GHG emissions and possibly air pollution and ndash potentially10 ndash on trade in
environmental goods and services and land use change As such the desired result is the
reporting of the quantitative estimates of the impacts of the EU-CA FTA on GHG emissions
and air quality in the EU Costa Rica El Salvador Honduras Guatemala Nicaragua and
Panama depending on data availability Ultimately it is global GHG emissions that
contribute to global warming for this reason we propose to estimate the global change in
GHG emissions resulting from the EU-CA FTA In this way we also consider the difference
in climate change impacts from trade creation and trade diversion The impacts on GHG
emissions will be decomposed in the most relevant key drivers where possible The
8 This implies that we will make use of the insights of the framework whenever relevant and appropriate in the light of the evaluationrsquos objective We will not identify every element (D P S I and R) for each environmental issue but focus on the most relevant elements for each of them
9 The focus depends on the results of the impact screening and scoping 10 Depending upon expected scale of impact available resources and data availability
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 21
preliminary finding of this activity will be included in the Interim Report and the final results
are to be presented in the Final Report
3284 Activity 4 Qualitative evaluation of impacts11
The aim of this task is to evaluate qualitatively the impacts of the EU-CA FTA on various
prioritised environmental impact areas focussing on those which are not assessed in the
quantitative analysis First a broad assessment is done based on desk research from a
regional perspective In addition approximately two case studies (as part of Task 13) will
be prepared in which the environmental impacts of the EU-CA FTA on certain areas will be
assessed based on in-depth qualitative analysis using causal chain analysis (CCA)
(European Commission 2016a) Depending on data availability we will aim to identify
trends developments and cause-effect relations between the EU-CA FTA and environment
By combining the existing environmental drivers and pressures (see Textbox 3282-1 for
more information) the economic results and effects of TSD provisions we naturally also
include potential unintended and unforeseen effects The preliminary finding of this activity
will be included in the Interim Report and the final results are to be presented in the Final
Report
3285 Activity 5 Answering of the evaluation questions and other concluding
remarks
The overall environmental analysis concludes with clearly commenting on the effect of the
EU-CA FTA on the performance the legislative framework and effective implementation in
each of the prioritised environmental impact areas In case no causal relation between the
EU-CA FTA and the performance of a certain environmental impact area is found it will
also be explicitly mentioned These concluding remarks together with the in-depth
analyses conducted in previous tasks will serve as the basis to answer the evaluation
questions related to the EU-CA FTArsquos environmental impacts under Task 14 in the Final
Report
3286 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative environmental effects that have emerged from tensions between the EU-CA FTA
on the one hand and elements of environment on the other Additional policy or legislative
measures can also be suggested to enhance positive impacts of the EU-CA FTA
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human
rights
In this section we present the approach envisaged for the analysis of the human rights12
impact of the EU-CA FTA in the EU and the CA partner countries
The evaluation will rely on the methodology of human rights impact assessments (United
Nations 2011 European Commission 2015) as well as on the experience from previous
studies and will include the following steps
Step 1 Human rights baseline
At this step a concise baseline analysis will be carried out Concise human rights
profiles will be prepared for each of the state-parties to the EU-CA FTA
Step 2 Screening and scoping
11 The focus depends on the results of the impact screening and scoping 12 Human rights in this analysis are defined as set out in the Charter of Fundamental Rights of the European
Union the core UN human rights conventions and relevant regional human rights treaties
Page 22
At this step based on various sources human rights will be screened and specific
human rights that may have been affected by the EU-CA FTA will be identified
Step 3 Detailed assessment of the selected human rights
At this step drawing upon findings from the previous stage of the analysis an in-depth
analysis of up to three selected rights will be carried out (both quantitative and
qualitative and depending on the degree of the impact)
Step 4 Policy recommendations and accompanying measures related to
human rights
At this step policy recommendations will be formulated as to how any tensions between
the EU-CA FTA and human rights obligations may be addressed and how a positive
impact on the enjoyment of human rights can be enhanced
Stakeholder inputs will be used throughout all four steps to verify and support findings as
well as to collect evidence on the impact and ensure meaningful participation
3291 Human rights baseline
At this stage a concise baseline analysis of the human rights situation in each state-party
will be carried out First an overview of international human rights obligations of all the
state-parties to the FTA (ratifications of core international and regional human rights
treaties core ILO Conventions and other treaties relevant for the analysis) will be
presented in a tabular manner Second human rights profiles will be prepared Human
rights profiles will consist of a summary of the baseline conditions for the enjoyment of the
relevant human rights in each of the state-parties to the FTA from five years before the
provisional application of the EU-CA FTA until 2019 Particular attention will be given to the
pre-existing conditions of stress and vulnerabilities with respect to human rights
highlighting the position of specific vulnerable groups
The human rights profiles aim to
Set the scene regarding the enjoyment of relevant human rights in the partner
countries and identify social and political developments that may have impacted the
human rights situation
Allow for a targeted assessment of the human rights impacts of the EU-CA FTA
The profiles are based on the analysis of international human rights obligations national
legislation and policy framework as well as implementation issues with respect to relevant
human rights The analysis reviews country specific reports of international organisations
(eg UN OECD ILO) EU Reports on Human Rights and Democracy in the World reviews
of reports of international human rights organisations (eg Human Rights Watch) a
review of academic literature media reports relevant indicators and local partner inputs
3292 Screening and scoping
The second step of the analysis focuses on identifying which human rights could have been
affected by the EU-CA FTA and in which way The EU-CA FTA will be scanned for provisions
that are most likely to have caused an impact on the enjoyment of human rights in state-
parties to the EU-CA FTA The cause-effect relationships between the trade and trade-
related measures in the FTA and human rights will be established based on multiple sources
(see the multi-pronged approach below) The focus of the screening will not only be on
specific trade measures originating from the FTA (the Trade Pillar) but also on the overall
effect of the measures under the broader Association Agreement
Based on the screening exercise and in line with the EC Guidelines for human rights impact
assessments (European Commission 2015 p5) we provide a focused overview of the
human rights affected by the EU-CA FTA specifying the following elements
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 23
Specific human rights affected by the FTA
Short note on the evidence of the impact with a reference to the sources of information
Whether the affected right is an absolute human right or not13
The kind of impact (direct or indirect)
The degree of the impact (major or minor)
Affected population groups (if applicablepossible)
The screening exercise will as much as possible reflect upon the affected individuals
andor groups of people especially indigenous people and women based on the results
generated by the economic analysis inputs from the stakeholders and literature review
We will also look at how the EU-CA FTA has impacted gender equality and labour rights14
3293 Detailed assessment
Depending on the outcome of the screening exercise a maximum of three human rights
will be selected for a detailed assessment
Applicable human rights laws will be scanned (based on the obligations of the state-parties
under international and regional human rights treaties) to provide a framework of
applicable and binding entitlements and duties related to the selected right(s) Insofar
possible national legislation will be scanned for any changes subsequent to the application
of the EU-CA FTA focusing in particular on the changes that affected the enjoyment of
each of the selected human rights (using baseline analysis to aid the impact assessment)
Then we will look at the particular measures and how they have enhanced or impaired the
enjoyment of the relevant rights and or have strengthened or weakened the ability of the
parties to fulfil or progressively realise their international human rights obligations
Particular attention will be given to impacts on vulnerable groups or groups of individuals
that are at risk of being marginalised (Danish Human Rights Institute 2016)
This assessment is intended to be both quantitative and qualitative in nature The
quantitative analysis is based on the results of the economic analysis and used to the
extent possible15 The qualitative analysis is based on various sources as well as
stakeholder consultations and close work with local partners Economic modelling results
already disentangle the impact of the EU-CA FTA from other impacts that could have
affected the enjoyment of a human right over time For qualitative analysis it is more
challenging to discern the FTA impact To address this challenge we use a multi-pronged
approach (ie a methodological cross-validation approach in order for one methodological
element to corroboratevalidate the other method) in examining the causal effects of the
FTA for each of the prioritised human rights16 (see Figure 3)
13 See Tool 28 of the European Commissionrsquos Better Regulation Toolbox (2017) available at httpseceuropaeuinfolawlaw-making-processplanning-and-proposing-lawbetter-regulation-why-and-howbetter-regulation-guidelines-and-toolboxbetter-regulation-toolbox_en
14 Although we expect some overlap on labour-related rights with the evaluation of social impacts there will be cross-references to ensure a holistic analysis Moreover taking into account the interrelated nature of human rights we reserve the right to address the rights of the workers from other relevant perspectives not covered in the social analysis (eg as related to vulnerable groups)
15 When relevant we will use human rights indicators to supplement the analysis 16 We use the same method also during the screening exercise but to a more a limited degree (eg not using
specific human rights indicators for each human right as it goes beyond the scope of this evaluation)
Page 24
Figure 3 Overview of the multi-pronged approach to human rights impact assessment
Thus in assessing the impact the EU-CA FTA has had on each human right we use the
economic modelling results (if applicable and appropriate) that already disentangle the FTA
impact from the overall effects and link economic findings (partially) to how the selected
human right has evolved in the EU and Central American partner countries because of the
EU-CA FTA If data from the economic analysis is not sufficient to support the analysis we
will make use of contextually relevant human rights indicators (United Nations 2012) from
the statistical databases of the ILO World Bank UN OECD andor other organisations to
investigate how the selected human rights have evolved over time We look at the
development of human rights from five years before the provisional application of the FTA
up to the most recent year for which the data is available comparing period before and
after the entry into force of the FTA looking for shocks (relatively sharp increases
decreases) around that time or structural breaks in a trendline to identify an EU-CA FTA
impact We also investigate whether other shocks have taken place that could explain
observed changes in human rights (eg changes in domestic laws) Based on a similar
practice used during the ex-post evaluation of the EU-Korea FTA we could also consider
including a set of control countries to the analysis to consider development of specific rights
in relative terms
All data findings will be supported and cross-validated through a review of relevant
literature looking for further evidence of impacts provisions of the EU-CA FTA the social
and political situation (eg legislative policy instruments adopted that could have affected
the enjoyment of relevant rights) and inputs from the stakeholders that can serve as
evidence of a link between how the human rights has evolved and the EU-CA FTA
3294 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative human rights effects that have emerged from tensions between the EU-CA FTA
on the one hand and statersquos human rights obligations on the other Additional policy or
legislative measures can also be suggested to enhance positive impacts of the EU-CA FTA
and to prevent or mitigate impacts of measures that have been identified as having caused
or contributed towards impaired enjoyment of human rights
33 Concluding tasks
Based on the various analyses undertaken including the case studies the evaluation team
will prepare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 25
A comprehensive review of the extent to which impacts identified in the Trade SIA of
the Association Agreement between the EU and Central America (Ecorys and Corporate
Solutions 2009) have actually materialised (Task 9)
Replies to the evaluation questions (Task 14) and
Conclusions and recommendations (Task 15)
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3)
The literature review aims at identifying sources data and main conclusions drawn from
the previous studies to make sure that the report is based on and further complements the
existing literature Annex A3-2 provides an overview of the literature considered so far in
a tabular structure To summarise the findings from the literature review so far the
following can be noted regarding methodologies and substantive issues
41 Methodological aspects
The economic effects of the EU-CA FTA have been analysed by the Sustainability Impact
Assessment (SIA) outsourced by the Commission (DG Trade) in 2009 before the launch
of the negotiations (ECORYS 2009) This ex-ante evaluation combined quantitative and
qualitative approaches the first one based on the Computable General Equilibrium (CGE)
and Causal Chain Analysis and the latter built on stakeholder interviews (ECORYS 2009)
The CGE model underpins SIA and the literature produced on the likely economic impact
of the agreement (ECORYS 2009 IIDE 2007 Lima et al 2009 Lima et al 2010 CEPR
2012) and the bulk of these studies is based on the assumptions on the likely structure of
the agreement as the negotiations were not concluded yet The 2009 SIA also assessed
the additional FDI impact by applying a gravity analysis approach (ECORYS 2009) The
first Commission annual activity report on the implementation of the EU-CA FTA builds its
assessment on the available Eurostat data and on the comparison between the region-to-
region trade flows before and after the treatyrsquos entry into force (Commission 2015) The
following activity reports (Commission 2016 2017a 2018a 2019d 2020a) illustrate the
evolution of trade on a yearly basis relying on the Eurostat and Central American statistics
thereby opting for a more descriptive approach
The main added value brought by this ex-post evaluation report consists of the CGE model
and its application to updated EU and CA statistics in order to isolate the strictly related
economic implications of the EU-CA FTA from other external factors influencing bilateral
trade thereby purifying the overall analysis and drawing more methodologically solid and
reliable conclusions The Commission (2021) modelling used for the ex-post evaluation
unlike the other studies focuses only on tariffs however which means that impacts of not
the entire EU-CA FTA are measured but only of the tariff component
Regarding assessment of non-economic effects the methodology tended to forecast
estimated general trends and usually does not make detailed projections It should also be
pointed out that predicting long-term socio-economic effects stemming from the AA proves
to be more challenging than estimating short-term trade impacts (European Parliament
2018) Regarding quantitative social and environmental variables the models have used
structured gravity approaches to estimate the effect of non-tariff measures (NTMs)
(ECORYS 2009) The main methodological constraints to calculate (non-quantifiable)
social environmental and human rights effects from a quantitative perspective are the
problem of attribution and the so-called counterfactual given that one cannot know what
would have happened in case the agreement was not in place
42 Substantive issues
In the 2009 SIA the literature review concluded that the potential economic impact of
the EU-CA FTA was expected to be positive The vast majority of literature sources agree
on the key role played by agricultural products in the Central American economy (Romero
Page 26
et al 2015 FAO 2020 OXFAM 2016 European Commission 2020 European Commission
2019 Zabalo et al 2019 Mejia et al 2018 Lima et al 2009 Lima et al 2010) The
raw material share accounts for up to 60 of the total CA export and combined with
natural-resource-based manufactures their cumulative share reaches 70 (Lima et al
2010 p 92) A study carried out in 2007 before the launch of the EU-CA negotiations
forecasted a negligible impact of the agreement on the EU GDP and overall welfare even
in case of a full liberalisation scenario (IIDE 2007 p 16) Also in terms of FDI the
estimated effects were marginal for the EU but more tangible for CA where the agreement
could lead to an increase of 1 of the CA economies GDP (CEPR 2012 p 27) However
some additional positive spill-overs were considered such as the impact on maritime
services that could help CA countries to better manage increased trade flows and at the
same time improving custom procedures (ECORYS 2009) On trade the report
highlighted trade value flow variations especially in CA with the impact on both EU export
and import value rather negligible (Ibid p 73)
The 2012 CEPR impact assessment argued that the EU-CA trade liberalisation triggered
overall positive effects especially when referred to key products both for the EU exports
to CA such as in agriculture products and goods originating from manufacturing activities
(eg cars and medication) and EU imports from CA primarily food products where the
FTA proposed to half tariff levels compared to the previous GSP level access in place (CEPR
2012 pp 10-11)
According to the SIA banana exports from CA to the EU were expected to benefit from
more advantageous market access conditions Regarding NTMs bilateral trade facilitation
and border-related barriers should be eased simplified and rationalised Consequently
trade costs were expected to decrease remarkably The econometric analysis showed that
the economic effects of the EU-CA FTA were not expected to be equally distributed among
the CA countries given the economic heterogeneity of the region (ECORYS 2009 Lima et
al 2009 CEPR 2012 European Parliament 2018) Vegetable fruits and nuts sector (VFN)
together with sugar cane showed the most promising results (IIDE 2007 p17) although
the positive effects were not equally shared among the CA members with Panama
benefitting the most Manufacturing production in CA was estimated to benefit from the
deal (+20) Electronic equipment would also take advantage of the FTA especially in El
Salvador Honduras and Costa Rica (CEPR 2012 p 31) Transport equipment insurance
services and other manufacturers were expected to decline
On the EU side the projections estimated that
Output in the sector of vegetables fruits and nuts as well as electronic equipment was
expected to decrease modestly (CEPR 2012 p 29)
The EU was estimated to increase output in grains other agriculture and additional
categories of primary food (ECORYS 2009 pp 44)
A limited price decrease for processed food grains and vegetables other agriculture
and beverages and tobacco was expected (Ibid p 44)
Overall in the EU literature in any scenario ranging from partial to full liberalisation an
increase of trade volume as result of the AA was projected (European Parliament 2018
p 43)
A study presented at the Twelfth Annual Conference of the Global Economic Analysis in
2009 and eventually incorporated in a 2010 publication on Latin America assessed the
likely effects of the EU-CA FTA for three scenarios full liberalisation partial liberalisation
excluding sensitive products on both sides (namely fruits and vegetables meat beverages
and tobacco other processed food) and liberalisation considering only fruits and vegetables
as sensitive in the EU (Lima et al 2009 p 1) The application of different models revealed
that the most economically advantageous scenario was the first one leading to an
expansion of exports in all signatory countries and positive effects on overall CA welfare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 27
The second scenario would lead to a smaller economic impact with a more modest trade
expansion (12) and some welfare losses Finally in the scenario foreseeing the EU
excluding only fruits and vegetables the ldquoresults for trade and product remain positive
but with smaller figuresrdquo (Lima et al 2009 p 1) In conclusion a deeper liberalisation
would favour both regions by enhancing exports by between 1 and 5 in all the CA
countries (Lima et al 2010)
The Commissionrsquos annual FTA implementation reports describe trade flows between the EU
and CA after the conclusion of the FTA and demonstrate an overall upward trend for certain
countries and for specific sectors Trade flows remained rather stable in 2014 increased
by 12 in 2015 decreased marginally by 07 in 2016 grew by 72 in 2017 by 66
in 2018 and by 7 in 2019 With the exception of 2017 the EU maintained surplus in
trade with CA (Commission 2015a 2016 2017a 2018a 2019d 2020a)
The Central American literature generally focused on the role played by agricultural exports
in CA domestic economies and on the potential impact generated from the EU-CA FTA on
export transformation and diversification (Zabalo et al 2019) The likely impact of the EU-
CA FTA varied among the countries and the industries considered (ECORYS 2009) A study
carried out in 2018 aiming at analysing the effects on Panamarsquos economy by adopting a
shift-share analysis model concluded that between 2013 and 2016 the Panamanian exports
(mainly transport equipment and agricultural products) to the EU showed a downward
trend by 32 for the selected years mainly due to the decrease of primary exports to
some EU countries including Germany Belgium Italy Greece Poland and Sweden (Mejia
et al 2018) Likewise the local press has highlighted both advantages and disadvantages
generated by the EU-CA FTA for the whole region (De Leograven 2006 Barquero 2016
Rodriguez 2017) While it was considered that tariff removal triggered by the Agreement
could boost banana exports to the EU therefore inducing positive externalities for the
whole region especially for Costa Rica excessive specialisation in agricultural products
and insufficient diversification of export destinations could cause negative effects for the
local economy (Barquero 2016 Rodriguez 2017) Finally the press flagged the pros and
cons of regional integration requirements posed by the EU to CA The EU request to
negotiate as a unified bloc and to speak with a single voice led to long sensitive and
complex domestic negotiations within CA which came only to a partially accepted joint
approach towards trade talks (De Leoacuten 2006) A comparison of estimated economic effects
of the Agreement has been provided in Annex A3-1
The social impact considerations were closely linked to the economic ones since the EU-
CA FTA effects on trade would also influence the levels of employment in the affected
sectors The employment changes triggered by the EU-CA FTA in the EU were expected to
be negligible owing to the relatively modest role played by CA in the EU trade with the
rest of the world As an additional consequence also the level of EU wages should not be
affected much by the Agreement (CEPR 2012 p 28) In CA more significant incentives
to reallocation between sectors caused by ldquopull-factorsrdquo were likely to occur where export-
oriented sectors would benefit most from the EU-CA FTA and where rises in wages were
expected Employment in textile industry in Nicaragua Guatemala Honduras and El
Salvador was expected to decline The full liberalization scenario (IIDE 2007 p 17) was
expected to lead to increases in wages while also prices would rise by 05 (CEPR 2012
p 28) In Nicaragua and Costa Rica wages were expected to rise by 02 and 13
respectively while Panamanian wages would drop marginally (ECORYS 2009 pp 75-77)
The implementation of the International Labour Organisation (ILO) conventions in the EU-
CA FTA legal framework would also have a positive impact on social issues in CA such as
elimination of child labour and force labour and reduction of gender inequality However
the literature underlines a general lack of analyses of the EU-CA FTA impact on poverty in
CA since its implementation (European Parliament 2018 (a) p 45) As described above
the effects were expected to vary among the CA countries with El Salvador Nicaragua
and Honduras experiencing a relatively more impactful drop in levels of poverty than in
Page 28
Costa Rica Finally likely consequences on poverty equality education health and gender
issues in the EU were found to be negligible unlike in CA where small and indirect effects
were expected in terms of investments in health incentives through innovation brought by
technology dissemination and an overall positive impact on inclusiveness driven by the
Agreement (ECORYS 2009 pp 76-80)
On the environmental aspects the literature contributions can be split into two main
groups featured by contrasting interpretations on the EU-CA FTA impact Ultimately the
effectiveness of the TSD chapter will depend on the willingness of the involved government
to implement the EU-CA FTA provisions (EPRS 2018)
On the one hand the SIA and other studies flagged the likely harmful repercussions on
greenhouse gas emissions (GHG) stemming from agriculture fishing trade and transport
activities resulting from the EU-CA FTA application having a limited impact on the EU share
of CO2 emissions and a more tangible effect on some CA countries such as El Salvador
Honduras and Costa Rica in the long run (Alianza por la Solidaridad 2019 FAO 2013)
Moreover the increased agricultural activities resulting from the economic effects of the
EU-CA FTA (eg coffee melon sugar cane and peanut production) factories activities (eg
production of biofuels in Guatemala) as well as factoriesrsquo waste and maritime transports
could pose a threat to biodiversity and deforestation which could constitute a serious issue
owing to a large share of local biodiversity concentrated in CA especially if waste would
not be adequately managed (ECORYS 2009 pp 81-83 Zabalo et al 2019 FAO 2013
Monserrat et al 2011 OXFAM 2016 Rosa Luxembourg Stiftung 2010 Ruerd 2018)
On the other hand a share of the existing literature emphasised the opportunities for CA
countries originating from the EU-CA FTA This would be the case of Costa Rica which
would improve the national environmental regulatory framework mainly in relation to the
use of agrochemicals with likely positive impact for the environment since pineapple
production plays an important role in local economy (Esquivel 2020) A FAO study argued
that international trade in coffee (in particular exports to the EU) has improved the overall
environmental sustainability in CA The EU being the largest consumer of coffee worldwide
its (increasing) requirements on the sustainability of the coffee chain benefited the
adoption of environmental standards by the sector As a consequence coffee producers
are now required to provide more extensive and detailed certifications proving they comply
with environmental standards Therefore they have been paying more attention to
environmental aspects than before (FAO 2020)
A 2017 study (CEPAL 2017) investigated the impact of a CO2 tax on CA GDP Overall the
estimations indicated a negative impact of a carbon tax on GDP and the extent to which it
was found to impact the various local economies depended on the amount of the tax itself
Indeed an average tax value of 69 USD per tCO2e was found to impact the GDP by 062
A range between 5 and 10 USD would be optimal for Honduras and Nicaragua whereas a
tax between 20 and 50 USD would be optimal for Costa Rica El Salvador Guatemala and
Panama (CEPAL 2017)
Finally regarding human rights the EU-CA-FTA impact is difficult to assess for the region
as a whole since the intra-regional development varies a lot and it is difficult to discern
whether the CA movement towards a better respect for international standards on labour
and social rights depends on the implementation of the Agreement (European Parliament
2018 p 44) For example several experts and policymakers argue in favour of a stronger
enforcement mechanism of the TSD chapter (EPRS 2018) Its provisions referring to the
ILO conventions do not ensure the same level of labour and human rights protection as
the GSP+ mechanism (EULAC 2011) Overall despite some positive developments the
implementation of the TSD provisions led to a limited impact on the key challenges in the
CA region such as child labour freedom of association social dialogue or unpaid overtime
(EPRS 2018) The CA Womenrsquos Network also reported insufficient participation of women
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 29
during the negotiation process and it highlighted the risks of women subordination if strong
provisions on gender equality are not put in place (CAWN 2007)
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5)
51 Structure of the EU-CA FTA
The Agreement was initially signed in June 2012 by the EU and Central American countries
and the EU-CA FTA started its provisional application in 2013 It is in a process of
amendment through the Protocol of Croatiarsquos Accession to the Association Agreement
between the European Union and Central America which was signed in November 2020
(Joint Communique 2020) It allows Croatia to formally become part of the Agreement and
provides for amendments to some parts of the EU-CA FTA to account for the accession of
Croatia (eg Appendix 3 to Annex I related to special treatment of bananas Annexes
related to trade in services such as the lists of commitments on establishment cross-
border supply of services and reservations regarding the temporary presence of natural
persons for business purposes and Annexes related to Government procurement including
the list of contracting authorities etc) (European Commission 2020b)
Key features of the Agreement (Trade Pillar) can be summarised as follows Title by Title
Title I of the Agreement contains general principles provisions and definitions and
in particular defines the objectives of the EU-CA FTA which can be summarised as follows
(a) the expansion and the diversification of trade in goods between the Parties through
the reduction or the elimination of tariff and non-tariff barriers to trade (b) the facilitation
of trade in goods through in particular the agreed provisions regarding customs and trade
facilitation standards technical regulations and conformity assessment procedures as well
as sanitary and phytosanitary measures (c) the liberalisation of trade in services in
conformity with Article V of GATS (d) the promotion of economic regional integration in
the area of customs procedures technical regulations and sanitary and phytosanitary
measures to facilitate the circulation of goods between and within the Parties (e) the
development of a climate conducive to increased investment flows the improvement of
the conditions of establishment between the Parties on the basis of the principle of non-
discrimination and the facilitation of trade and investment among the Parties through
current payments and capital movements related to direct investment (f) the effective
reciprocal and gradual opening of government procurement markets of the Parties (g) the
adequate and effective protection of intellectual property rights taking into consideration
the differences between the Parties and the promotion of technology transfer between the
regions(h) the promotion of free and undistorted competition in the economic and trade
relations between the Parties (i) the establishment of an effective fair and predictable
dispute settlement mechanism and (j) the promotion of international trade and investment
between the Parties in a way that contributes to the objective of sustainable development
through joint collaborative work (Article 78)
Title II covers trade in goods and comprises the following chapters (1) market access
for goods which lays down provisions on the elimination of customs duties elimination of
export and import restrictions and export taxes and provisions on agricultural subsidies
(this is complemented by Annex I outlining schedules for elimination of customs duties
Annex II which concerns the definition of the concept of originating products and methods
of administrative cooperation Annex IV - special provisions on administrative cooperation
and Annex V on management of administrative errors) (2) trade remedies which discusses
anti-dumping countervailing and multilateral safeguard measures bilateral safeguards
and the applicable procedures (3) customs and trade facilitation which increases
transparency and promotes the facilitation of trade by simplifying customs procedures and
the adoption of risk management systems for customs inspections (it is complemented by
Annex III on mutual administrative assistance in customs matters) (4) TBT - technical
barriers to trade aiming at facilitating trade by identifying preventing and eliminating
Page 30
unnecessary barriers related to development adoption and application of standards
technical regulations and conformity assessment procedures it also reaffirms rights and
obligations under the WTO TBT Agreement foresees cooperation in market surveillance
transparency through the notification procedures and approach to marking and labelling
avoiding unnecessary burdens while ensuring that all necessary and accurate information
is provided (5) sanitary and phytosanitary measures which aims at protecting human
animal or plant life or health while avoiding unjustified barriers to trade it reaffirms rights
and obligations under the WTO SPS Agreement recognises concepts standards and
recommendations adopted by relevant international organisations (World Organisation for
Animal Health and International Plant Protection Convention) and foresees exchange of
information and cooperation by the Parties incl in cases of emergency (it is complemented
by Annex VI identifying competent authorities Annex VII defining requirements and
provisions for approval of establishment of products of animal origin Annex VIII setting
out guidelines for conducting verifications and Annex IX with points of contact) (6)
exceptions related to goods
Title III covers trade in services establishment and electronic commerce and is
complemented by annexes that detail the Partiesrsquo commitments according to the four
modes of supply or provide information Annex X includes commitments on establishment
(Mode 3) Annex XI lists commitments on cross-border supply of services (Modes 1 and
2) Annex XII outlines reservations regarding temporary presence of natural persons for
business purposes (Mode 4) Annex XIII lists commitments of the Republics of the CA Party
regarding key personnel and graduate trainees Annex XIV lists their commitments on
business service sellers and Annex XV provides a list of the relevant enquiry points
Title IV concerns liberalisation of current payments and movement of capital and
stipulates that the Parties shall authorise payments and transfers on the current account
between the Parties as well as transactions and capital movements related to foreign direct
investment and related transactions including liquidation and repatriation of investments
and profits It also envisages exceptions such as circumstances where payments and
capital movements cause or threaten to cause serious difficulties for the operation of
exchange rate policy or monetary policy or the liquidity of the economy in which case
the Parties may temporarily adopt safeguard measures)
Title V covers government procurement and is complemented by Annex XVI which
details the commitments of Parties in this area (eg procuring entities covered coverage
of procurement contracts under the Agreement media used for tender procedures and key
features of the process for awarding procurement contracts) The Agreement provides for
the Parties to have non-discriminatory access to public procurement procedures within the
scope of covered procurement and outlines general principles and rules for procurement
procedures (eg publication of notices participation in tenders technical specifications
documentation timeline awarding contracts etc) ensuring transparency and cooperation
Title VI covers intellectual property It reaffirms the Partiesrsquo commitments to various
relevant multilateral agreements (eg WTO TRIPS Agreement Convention on Biological
Diversity and Paris Convention for the Protection of Industrial Property) foresees exchange
of information and cooperation between the Parties in relation to technology transfer and
sets standards on the protection of intellectual property rights (IPR) including trademarks
geographical indications copyright and related rights industrial designs plant varieties
and patents The list of geographical indications to be protected is provided in Annex XVII
The Title also addresses enforcement measures for cases of infringement of IPR
Title VII concerns trade and competition in the economies of the Parties Under this
Title the Parties commit to adoption or maintaining comprehensive competition laws and
having appropriately equipped competition authorities They also consider as incompatible
with the Agreement the most harmful anticompetitive practices such as restrictive
agreements concerted practices abuse of dominance and concentrations of companies
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 31
that significantly impede effective competition The Title also stipulates that with regard to
state enterprises and designated monopolies there is no discrimination in exercised by such
entities regarding conditions under which goods or services are purchased or sold
Title VIII relates to trade and sustainable development It includes commitments to
effectively implement the eight ILO Fundamental Conventions and key multilateral
environmental agreements to which EU Member States and CA countries are Parties In
addition the Title includes specific provisions in relation to various thematic areas such as
sustainable forest management sustainable fisheries and trade supporting sustainable
development It establishes civil society advisory groups as part of institutional structure
and foresees a regular dialogue between the Parties and civil society incl in a dedicated
Civil Society Forum The Title also provides a dedicated dispute settlement mechanism
with government consultations consideration of the matted by the TSD Board and a Group
of Experts to examine the matter and formulate recommendation
Title IX relates to regional economic integration between the Central American Parties
and includes provisions on circulation of goods in trade between the EU and CA within the
EU and CA region respectively once a product entered their customs territory and when
the applicable rules and standards are met In this context the Title provides rules related
to customs technical barriers to trade and sanitary and phytosanitary measures (Annex
XX provides a list of CA technical regulations in the process of harmonisation)
Title X covers dispute settlement and outlines the related procedures including the
establishment of a panel its ruling and compliance
Title XI establishes mediation mechanism for non-tariff measures incl the selection
of a mediator the applicable procedure and implementation of the agreed solution
Title XII contains provisions on transparency and administrative procedures Among
other things the Parties commit to (i) ensuring that their measures of general application
(eg laws regulations judicial decisions procedures and administrative rulings) relating
to matters covered by the EU-CA FTA are promptly published or otherwise made readily
available to interested persons and (ii) providing reasonable opportunities for those
interested to comment on proposed measures and taking into account relevant comments
The Parties also commit to establish Points of Contact for matters related to EU-CA FTA
Title XIII addresses tasks of the institutional bodies in matters related to trade
ie the Association Council the Association Committee and specialised Sub-committees
(for details please see section 52 on the institutional set up)
Title XIV defines general exceptions to the Agreement related to the Partiesrsquo balance of
payments and taxation
52 Institutional set-up of the EU-CA FTA
The Association Council the Association Committee six Sub-committees and an Ad hoc
Working Group on Government Procurement (the latter not envisaged by the EU-CA FTA
but set up by the Parties in 2016) oversee the implementation of the Agreement
The Association Council established pursuant to Article 4 supervises implementation of
the Association Agreement it is composed of representatives of the EU and each of the six
CA countries has a decision-making power (binding upon the Parties) in cases foreseen in
the Agreement examines all major issues and questions of common interest It meets at
Ministerial level (or through representatives) at regular intervals not exceeding two years
In line with Article 345 when meeting to discuss matters under EU-CA FTA the Council
has the power to amend Annexes and Appendixes related to trade incl tariff elimination
schedules and goods included there originating products and methods of administrative
Page 32
cooperation Annex XVI (Government Procurement) Annex XVIII (Protected GIs) Annex
XIX (in relation to Article 306 animals animal-based products plants and plant-based
products subject to SPS measures) and Annex XXI (Sub-committees)
The Association Committee set up pursuant to Article 6 is responsible for the general
implementation of the Agreement and assists in this context the Association Council It is
composed of representatives of the EU and the six CA countries at the senior officialsrsquo level
and shall meet once a year to review the implementation It takes decisions foreseen in
the Agreement or delegated by the Association Council When acting within part IV of the
Agreement the Association Committee supervises work of Sub-committees established by
this part and may set up new ones prevents and resolves conflicts (without prejudice to
provisions related to the Dispute Settlement and Mediation Mechanisms) and recommends
decisions for adoption by the Association Council
The Agreement has also established six specialised Sub-committees
Sub-committee on Market Access for Goods (Article 91) is responsible for monitoring
the correct implementation and administration of the Trade in Goods Chapter and serves
as a forum for consultations about interpretation and application of its provisions It
examines proposals provided by the Parties regarding accelerated liberalisation of trade in
goods and tariff reduction as well as inclusion of additional goods into liberalisation
schedules It may make recommendations to the Association Committee on matters within
its remit and take any issue as and when instructed by the Association Committee
Sub-committee on Customs Trade Facilitation and Rules of Origin acting in line
with Article 123 monitors implementation of the Chapter and Annex related to the concept
of origin and methods of administrative cooperation It provides a forum to discuss and
consult all matters related to customs incl customs procedures valuation nomenclature
cooperation tariff regimes mutual administrative assistance in customs matters as well
as rules of origin It pursues cooperation on development application and enforcement of
customs procedures mutual administrative assistance in customs matters administrative
cooperation and rules of origin It examines requests for amendments of rules of origin
and submits to the Association Committee results of the analysis with recommendations
It also aims to enhance cooperation on capability building and technical assistance
Sub-committee on Technical Barriers to Trade (TBT) acting in accordance with Article
139 provides forum to discuss and consult any matter related to the Chapter and monitors implementation and administration of this Chapter facilitating exchange of information
and cooperation and promptly addressing any issue that either Party raises related to the
development adoption application or enforcement of standards technical regulations
and conformity assessment procedures It aims at solving any problems within the remit
of the Chapter that would limit trade between the Parties It encourages direct interaction
between non-governmental actors such as standard bodies accreditors and certifiers It
facilitates the exchange of information about the work being done in non-governmental
regional and multilateral fora engaged in activities related to technical regulations stan-
dardisation and conformity assessment procedures and explores ways to facilitate trade
between the Parties The Sub-committee has also power to review the Chapter in the light
of developments under TBT Agreement and reports to the Association Committee about
implementation of the Chapter including cooperation activities
Sub-committee on Sanitary and Phytosanitary Matters (SPS) acting in line with
Article 156 monitors implementation of the Chapter provides a forum for discussion and
consultation on any matter arising under the Chapter and an opportunity to seek mutually
acceptable solutions It may also develop procedures or arrangements facilitating
implementation of the Chapter It acts as a forum for consultations related to any measure
proposed by the EU which may affect its trade with any of the CA Parties and a forum for
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 33
dispute settlement under the Chapter The Sub-committee is also responsible for
promoting cooperation on animal welfare between the Parties
Sub-committee on Intellectual Property Rights (IPR) (Article 274) monitors
implementation of Article 231 (transfer of technology) and part of the IP Chapter related
to GIs including facilitating discussion about protection of GIsrsquo and recommendations to
the Association Committee regarding amendments to Annex XVIII on GIs It promotes
technology transfer from the EU to the CA Parties and defines priority areas in which
initiatives shall be directed regarding technology transfer research and development and
building-up human capital Its responsibilities include also keeping a registry of the
programs activities or initiatives in progress in the field of intellectual property with
emphasis on transfer of technology
Board on Trade and Sustainable Development (TSD) established pursuant to Article
294 reports to the Association Committee and oversees the implementation the TSD Title
incl cooperative activities undertaken under Title VI (Economic and Trade Development)
of Part III of the Agreement The decisions and recommendations of the Board shall be
adopted by mutual agreement between the Parties and be provided to the public unless
the Board decides otherwise
While EU-CA FTA does not envisage a Sub-committee on Government Procurement the
Parties concluded that it would be useful to have a dedicated body to address matters in
this area They decided to create a temporary Working Group that met for the first time
in June 2016 (European Commission 2017a)
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo
priorities
The negotiations for an Association Agreement (AA) including a Trade Pillar between the
European Union (EU) and Central America (CA) started in 2007 We look at the bloc-to-
bloc trade and policy context the negotiation process and priorities from both sides
The region-to-region trade context
The CA group is composed by Costa Rica Guatemala El Salvador Honduras Nicaragua
and Panama and it is featured by internal economic and political dialogue which led to the
creation of the Central American Common Market (CACM) in the early 1960s Despite the
initial momentum the regional integration process has been stopped for decades due to
internal tensions and the effects of import-substitution trade strategies on local economic
growth (European Parliament 2012) Consequently the initial goal of setting up a custom
union failed and CACM succeeded only in establishing a free-trade area (Duran et al 2010)
The Central American integration efforts were revitalised through setting up of the Central
American Integration System (SICA) aimed at promoting democracy development peace
and freedom in the region (European Source Online 2016) SICA was formally established
on 13 December 1991 through the signature of the Protocol to the Charter of the
Organization of Central American States (ODECA) also known as the ldquoTegucigalpa
Protocolrdquo SICA established both a political and an economic institutional framework by
setting up the Central American Parliament and the Central American Bank for Economic
Development Despite these changes CACM remained the main forum for trade discussions
(European Parliament 2012)
The EU is one of the three most important CA trading partners It is challenging to draw
general and unified conclusions for the whole CA trade picture given its domestic
heterogeneity with Panama and Costa Rica being middle-income countries and Nicaragua
the poorest member (European Parliament 2018 p 18) The EU countriesrsquo share of import
from and export to CA accounted for 30 and 16 respectively in the mid-1980s Among
Page 34
the CA members Guatemala appeared as the most export dependent one while Panama
was the least trade-oriented country (CEPR 2012 pp 6-7) The role of agricultural
production within the respective economies differs widely between the two regions
Agricultural production is very important for CA especially in Honduras and El-Salvador
(38 of the national production) whilst it is relatively much less important in the EU (5)
The same complementarities can be found in manufacturing production (amounting to 18
of the EU production which is much higher than in CA particularly in Panama (4) and
Nicaragua (25) Services contribute to almost 23 of the EU Nicaraguan and Costa Rican
GDP while this share is only 53 for El Salvador (Ibid pp 6-7)
The negotiation process
The start of the economic and political dialogue between the EU and CA blocks dates back
to 1984 at the first conference of Foreign Ministers between the EU and CA countries in
Costa Rica In 1993 the EU and the CA countries signed a Framework Cooperation
Agreement which entered into force on 1st March 1999 (Acuerdo-marco de cooperacioacuten
1999) On the occasion of the EU-Latin America Summit held in May 2002 these countries
and the EU jointly expressed their willingness to reinforce their dialogue by concluding a
new Political Dialogue and Cooperation Agreement which was signed on 15th December
2003 in Rome (Acuerdo de Diaacutelogo Poliacutetico 2003)
The need to establish stronger trade relations even by setting up a free-trade area pushed
the EU and CA to explore the feasibility of an Association Agreement entailing also a specific
chapter on trade Such intention was clearly stated during the EU-Latin America summit of
Guadalajara (Mexico) in May 2004 (Declaration of Guadalajara 2004 p 8 point 52) and
one year later in May 2005 in the context of the EU-Central American Ministerial meeting
in Luxembourg On that occasion the parties launched a joint-assessment exercise on
regional economic integration and established an ad-hoc working party (Council of the
European Union XXI San Joseacute Dialogue Ministerial Meeting between the EU and Central
America 2005 p 2) Finally at the Vienna Summit of 2006 the parties opened the door
to an Association Agreement to create a free trade area (Council of the European Union
EU-Central American Summit 2006 pp 1-2 points 2 and 3) The summit also welcomed
the initiative of the Peace Building and Commission and Human Rights Council (Ibid p 2)
The green light for the beginning of the AA negotiations was given on 28th June 2007 in
Brussels (EU and the Central American Community start negotiations for a new Association
Agreement 2007) However the talks were temporarily suspended on 6th April 2009 and
then resumed a few days later on 24th April (Acuerdo de Asociacioacuten entre Centroameacuterica
y la Union Europea 2009) when the parties decided to re-initiate the negotiations
The negotiating partiesrsquo priorities
The negotiating strategy of the CA countries mainly pursued three goals
Strengthening their trade policy whose objective is to open up new markets for the
benefits of their local exporters The EU appears as a crucial partner for CA countries
as it ranks on top of the worldrsquos largest importers of agricultural products and the
relative share of developing countries has been rising over time in the EU trade balance
Reinforcing CA countriesrsquo export competitiveness and reducing costs of accessing the
EU market vis-agrave-vis competitors such as African-Caribbean and Pacific (ACP) countries
that benefit from preferential and better market access conditions
Attracting foreign direct investments in high value-added sectors where the EU applies
higher tariffs (Duran et al 2010 pp 96-99)
From the European side the main reasons driving towards the conclusion of the agreement
with CA are threefold
Promoting the developing countriesrsquo progressive integration into the world economy
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 35
Reaffirming the EUrsquos role in the world trade and in CA following the United States (US)
conclusion of the Dominican Republic Central American and the United States Free
Trade Agreement (CAFTA-DR) reaffirming the US role in the region
Better coordinating with partners on trade dossiers within the World Trade Organization
(WTO) and other international institutions (Ibid p 100)
The conclusion of the Agreement
The negotiation process delivered slow progress due to the inability of CA countries to
reach a unified position and owing to the delays in the regional integration (European
Source Online cit p3) The agreement was finally reached in May 2010 when the
negotiations were officially concluded during the Latin America-Caribbean and European
Union Summit in Madrid Following the legal scrubbing the European Commission reviewed
and approved the agreement prior to signature at the Meeting of the SICA Presidents in
Tegucigalpa Honduras on the 29th of June 2012 (European Commission Directorate
General for Trade 2012) The European Parliament finally endorsed the AA in December
2012 forecasting that the main gains for the European side would be in export of cars
machinery telecommunications chemical products and transports (European Parliament
2012 p 1) At the time of the AA signature in 2012 the EU-Central America trade in goods
accounted to EUR 149 billion and corresponded to 113 of the whole CA region trade
with the rest of the world (Griener and Membersrsquo Research Service 2014 p 5)
On that date the then EU Commissioner for Trade Karel De Gucht commented the
successful conclusion of the AA by stating that the ldquoregion-to-region deal will help establish
major business opportunities for both sides European exporters will save around EUR 90
million on customs per year and European service providers such as telecommunication
and transport will get greater market accessrdquo At the same time the agreement would
generate ldquospill-over effect on Central Americarsquos overall economic integration process and
contribute to the stability of the regionrdquo (European Commission Ibid p 1) The
Commission officially announced the provisional application of the FTA with Honduras
Panama and Nicaragua on 31st July 2013 with Costa Rica and El-Salvador on 1st October
2013 and with Guatemala on 1st December 2013
The trade provisions of the AA provisionally entered into force in 2013 as they fall within
the exclusive competences of the EU17 Once the entire text of the AA will be ratified by
the EU Member Statesrsquo parliaments the entire text will be legally binding and applicable
After joining the EU in 2013 Croatia is currently negotiating its accession to the AA
54 Operational context of the implementation of the EU-CA FTA
After having illustrated the main partiesrsquo priorities during the bloc-to-bloc negotiations this
chapter provides an overview of the broader context surrounding the negotiations and
implementation and describes the main regional actors as well as their respective trade
policy attitudes towards CA and Latin American countries (LAC) as a whole
Trade policy context the multilateral system and the global economy
Since the launch of the EU-CA negotiations the global trade policy context has undergone
deep changes The Doha Development Agenda stalemate due to incompatible views on
various issues at stake put great pressure on the global trading system The WTO
difficulties in reaching satisfying outcomes stem both from external causes such as the
decline of advanced economies regionalisation of trade and internal sources of tensions
17 Despite being considered as a bloc-to-bloc association agreement the incomplete CA regional economic integration and the failure in setting up a custom union among the CACM countries left unbalances and inconsistencies in accessing single CA countriesrsquo markets and different levels of external tariffs In light of these arguments CA cannot be considered as a fully integrated homogeneous and unified trade bloc
Page 36
embedded in unilateral tariff-cutting process (Baldwin 2016) Besides these tensions the
economic expansion of China and the ldquotrade warsrdquo between the US and China exploded as
of 2017 The recent stalemate of the WTO Appellate Body that halted the entire dispute
resolution process as well as the need to put sustainable development at the core of the
WTO agenda pushed the Commission to advance a new WTO reform proposal (European
Commission 2021) The WTO crisis led to a proliferation of bilateral FTAs and the EU
has been an active bilateral FTA actor globally (see Table 4
Table 4 Overview of the EU FTAs launched and or concluded since 2012
Start of Negotiations
Signatory CountryRegion
State of play of the agreement
Ratification
1999 Mercosur Concluded in 2019 Ongoing
2004 SADC Concluded in 2016 Entered into force in 2016
2007 Andean Community Concluded in 2010 Entered into force in 2013
2007 Ukraine Concluded in 2011 Provisionally applied since 2016 fully in force since 2017
2009 Singapore Concluded in 2019 Entered into force in 2019
2009 Canada Concluded in 2014 Provisionally applied since 2017
2010 Malaysia On hold na
2012 Moldova Concluded in 2013 Provisionally applied since 2014 fully in force in 2016
2012 Georgia Concluded in 2013 Provisionally applied since 2014 fully in force since 2016
2012 Vietnam Concluded in 2015 Entered into force in 2020
2012 Japan Concluded in 2018 Entered into force in 2019
2013 USA On hold na
2013 Morocco (DCFTA new) On hold na
2013 Thailand On hold na
2015 Philippines On hold na
2015 Tunisia (DCFTA new) Ongoing na
2016 Mexico (modernisation) Concluded in 2018 Ongoing
2016 Indonesia Ongoing na
2017 Chile (modernisation) Ongoing na
2018 Australia Ongoing na
2018 New Zealand Ongoing na
2019 United Kingdom Concluded in 2020 Ongoing
2020 ESA (extension) Ongoing na
Source compiled by the author
The EU trade and policy context
Trade picture
The EU maintains strong institutional dialogue with Central and Latin America
legitimised by historic cultural and linguistic ties with the region The EU Latin America
and the Caribbean (LAC) bilateral summits have been regularly held since 1999 gathering
33 members from the two counterparts In 2006 the EU-Latin America Parliamentary
Assembly (EuroLat) was set up and it was conceived as the parliamentary angle of the EU-
CA bilateral partnership (EPRS 2017 p 5)
From a trade perspective the EU-Central and Latin America (comprising Andean
Community CA Cariforum Mercosur Mexico and Chile) trade peaked at EUR 2287 billion
in 2014 before showing a downward trend and decreasing at EUR 2132 billion in 2015
corresponding to 61 of the whole EU trade that year (EPRS 2017 p 6) The EU total
share of LAC trade fluctuated around 14 and the EU remained the first investor in the
region in the last ten years (EEAS 2018) An analysis carried out by the European
Parliament in 2020 unveils that the EU-LAC trade in goods value grew by 22 from 2008
to 2018 (Tvevad 2020 p 18) According to the 2020 DG Trade Report (data from 2019)
on the Implementation of EU FTAs trade flows between the EU and CA showed a robust
growth Indeed trade in goods increased by 88 with respect to the 2018 performance
imports continued growing over the past five years and exports statistics indicated an
overall upward trend with the exception of 2016 (European Commission 2020a p 110)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 37
In 2010 the EU was the second CA trading partner behind the United States (US)
accounting for 94 of the regionrsquos overall trade with the rest of the world (European
Commission 2011 p 4) Among the main exporters to the EU Costa Rica ranked first
with 539 of the total CA exports to the EU Conversely the EU exports went primarily
to Costa Rica (363) Guatemala (281) and El Salvador (152) (Ibid p 4) The EU-
CA trade is marked by the supply of primary products to the EU (mainly agricultural
products such as coffee and bananas) in return for high-technology manufactures
especially machinery transport equipment chemicals and manufactured goods (Duran et
al 2010 pp 95-96 European Parliament 2012 p 9) The CA share in the EU trade was
modest accounting only for 05 of overall EU imports in 2011 and for 03 of the total
EU exports in 2011 (European Parliament 2012 p 8) In addition the EU applied tariffs
on various agricultural products imported from third countries The exclusion of both coffee
and bananas from the EU Generalized System of Preference (GSP) and the GSP+ schemes
prevented these products from benefitting from tariff-reduction from the European side
hampering their access to the EU market and leaving their prices to be influenced by world
trade fluctuations (Duran et al 2012 p 98) The 2019 data confirmed primary products
rank largely first among SITC products grouping exported from CA to the EU accounting
for 721 of the whole exports followed by manufactures with 27 (European
Commission 2019 p 4) Recent statistics highlight the main destination of EU export
continued to be Panama (up to 118 since 2018) whereas the main country of origin of
EU imports is Costa Rica with an increase by 63 from 2018 (European Commission 2020
p 112)
The previous EU trade policy strategy adopted in 2015 (ldquoTrade for Allrdquo) confirmed that
ldquothe FTAs with Peru Colombia Ecuador and Central America are creating new dynamics
for trade and investmentsrdquo (European Commission 2015 p 33) As set out by that trade
policy strategy the Commission should pursue three main priorities with regard to Latin
and Central America ldquo[Continuing] negotiations for an ambitious balanced and
comprehensive FTA with Mercosur ldquoRequesting negotiating directives to modernise the
FTAs with Mexico and Chilerdquo ldquoBe ready to consider investment agreements with key Latin
American countriesrdquo (Ibid p 33)
As evidence for the increasingly robust commitment in the region the EU negotiated trade
deals with 27 out of the 33 LAC countries to strengthen both bilateral and region-to-region
relations the EU actively engaged LAC by signing new and modernising older EU-LAC FTAs
(see Table 5)
Table 5 EU FTA in Latin America and participating countries
Agreement Countries Negotiation launch
Negotiations Conclusion
EU-Andean Countries Colombia Ecuador Peru 2007 2010
EU-Caribbean (CARIFORUM)
Antigua and Barbuda Bahamas Barbados Belize Dominica Grenada Guyana Jamaica Saint Lucia Saint Vincent and the Grenadines Saint Kitts and Nevis Suriname Trinidad and Tobago and the Dominican Republic
2002 2008
EU-Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
2012 2010
EU-Chile na 2017 na
EU-Mercosur Argentina Brazil Paraguay Uruguay 1999 2019
EU-Mexico na 2016 2018
Source Compiled by the author
Regarding civil society the trade chapter of the EU CA FTA did not receive a lot of public
attention and consequently has not been affected by a high level of politicisation within
the EU This might stem from the relatively lower importance of trade relations with CA for
the EU Likewise the agreement did not catch a lot of public attention either in CA where
Page 38
the media coverage mainly focused on the Central America Free Trade Agreement (CAFTA)
Nevertheless both the agreements were targeted by NGOs and trade unions sharing the
same criticism and concerns over biodiversity pharmaceutical product access and
exploitation of natural resources (European Parliament 2011 p 16)
Political Dialogue
To frame the most recent developments in the EU LAC political dialogue it is worthy to list
three key documents forging the EU foreign policy towards LAC
The European Parliament Resolution on the Political Relations with Latin
America passed in 2017 advocating for a stronger more coherent and reinforced
relations with this region by stressing the need to update and develop a more
comprehensive and ambitious EU strategy to address the emerging challenges linked
to fundamental freedoms human and social rights safety of minorities migration
issues corruption tax fraud and security (European Parliament 2017)
The Joint Communication adopted by the European Commission and the High
Representative for Foreign Affairs (HRVP) in 2019 titled ldquoEuropean Union Latin
America and the Caribbean joining forces for a common futurerdquo aimed at deepening
the EU-LAC relations in a fast-changing context by emphasizing four mutually important
priorities prosperity democracy resilience and effective global governance (European
Commission 2019)
The Council of the EU Conclusions of 13th May 2019 endorsing the strategy laid
out in the Joint Communication On that occasion the Council welcomed the four points
described above and added more areas for action such as to work more closely in the
multilateral framework consolidate economic and social resilience enhance shared
prosperity and assist in promoting structural reforms (Council of the EU 2019)
The 2020 EU 27 ndash Latin America Informal Meeting reaffirming the need to advance
bilateral region-to-region summit to strive for a stronger multilateral system identified
mainly in the United Nations and the World Health Organisation (WHO) especially in
the light of the COVID-19 pandemic outbreak (Federal Foreign Office 2020)
Within the framework of the AA the EU and CA agreed to cooperate on a wide range of
policy dossiers of mutual interest namely conventional weapon disarmament the
implementation of the Convention on the Prohibition of the Use Stockpiling Production
and Transfer of Anti-personnel Mines and on their Destruction as well as the Convention
on Certain Conventional Weapons and its protocol (European Parliament 2011 p 7)
On development cooperation the EC regional strategy 2014-2020 earmarked EUR 925
million funding for Latin America to be allocated in two components
Component 1 ldquoMultiannual Indicative Programme for continental activities with Latin
Americardquo accounting for EUR 805 million and devoted to Argentina Bolivia Brazil
Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico
Nicaragua Panama Paraguay Peru Uruguay and Venezuela
Component 2 ldquoMultiannual Indicative Programme for Sub-Regional Cooperation with
Central Americardquo funded with EUR 120 million focused on Central American countries
Costa Rica El Salvador Guatemala Honduras Nicaragua and Panama This component
included three areas for action ie support for regional economic integration support
for the Regional Security Strategy and support for Regional Climate Change Strategy
and the Central American Policy on Comprehensive Disaster Risk Management (EEAS
European Commission 2014)
The Central American trade policy context
Regional Context
Beside their membership in the Central American Common Market (CACM) and the WTO
the CA countries have been signing additional free trade agreements with other regional
and international partners since 2012
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 39
It should be also noted that Panama joined the Latin American Integration Association
(LAIA) in 2012 LAIA replaced the Latin America Free Trade Agreement (LAFTA) signed in
1960 and sought a deeper economic integration among the member states18 Also
Nicaragua applied for the LAIA membership in 2011 and its request was accepted by the
LAIA Council of Minister in August 2011 Nicaragua is currently advancing in fulfilling the
LAIA membership requirements No other CA countries are members of LAIA yet
Table 6 summarises bilateral FTAs and Preferential Trade Agreements (PTAs) signed by the
6 CA countries or being in force since 2011
Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021)
Costa Rica Guatemala El Salvador
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Colombia (signed in 2013 entered into force in 2016)
Mexico (signed in 2011 entered into force in 2013)
Peru (signed in 2011 entered into force in 2013)
Singapore (signed in 2010 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
Ecuador (PTA) (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs signed but not entered into force yet South Korea (signed in 2018) EFTA (signed in 2013)
FTAs signed but not entered into force yet EFTA (signed in 2013) Ecuador (signed in 2011) Peru (signed in 2011)
FTAs signed but not entered into force yet South Korea (signed in 2018)
Honduras Nicaragua Panama
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Peru (singed in 2015 entered into force in 2017)
Canada (signed in 2013 entered into force in 2014)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2014 entered into force in 2015)
Peru (signed in 2011 entered into force in 2012)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet Israel (signed in 2018) South Korea (signed in 2018) Colombia (signed in 2013) EFTA (signed in 2013) Trinidad amp Tobago (PTA)
(signed in 2013)
Source Compiled by the author
Other influential partners in CA
As illustrated by Table 7 three actors retain significant economic influence in CA and Latin
America as a whole the EU the US and China The following section will examine these
actors and their respective trade policies towards CA and Latin America by describing their
posture as well as the agreements in force
18 Argentina Bolivia Brazil Chile Colombia Cuba Ecuador Mexico Paraguay Panama Peru Uruguay Venezuela
Page 40
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking
SubregionCountry
EU total trade in goods (value in EUR billion)
Ranking of main trading partners for trade in goods
2016 2019
2016 2019 USA China EU19 USA China EU27
Andean Community 3 250 246 1 2 3 1 2 3
ACP ndash Caribbean 15 81 116 1 3 2 1 3 2
Central America 6 108 121 1 3 2 1 3 2
Chile 159 166 3 1 2 2 1 3
Mercosur 4 849 771 3 2 1 3 1 2
Mexico 538 618 1 2 3 1 2 3
Source EPRS 2017 p 6 and DG Trade statistics 2020
The US remains the key CA partner The US is the major source of Foreign Direct
Investments (FDI 273) and Official Development Aid allocating an annual average of
approximately USD 1600 million during the Trump Administration (2016-2020)
(Congressional Research Service 2021) Moreover the US rank on top of CA migrant
destinations (Belladonna 2019) The CA countries have been cultivating thorough relations
with the US as they represent the historical destination of over 40 of the regionrsquos
exports Furthermore the 2004 Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA) granted preferential market access conditions to the region (Office
of the US Trade Representative 2004 and Duran et al 2010 p 93) In light of the strong
power exerted by the US the EU trade strategy pursued a progressive rebalancing of the
US presence in the area to ensure better market access in the region (EPRS 2017 p 5)
The DR-CAFTA negotiations confirmed that labour standards sugar and textile products
treatment pharmaceutical data protection and sovereignty issues were the most
controversial and sensitive matters on the table Unlike the EU-CA AA it should be noted
that the DR-CAFTA does not build any common trade framework for all the signatories as
the US grants differentiated market access conditions to each single CA country (European
Parliament 2012 p 11)
In the last few years China has been playing a role of growing importance in CA and in
Latin America both from a political and trade viewpoint (European Commission 2020 p
15) In recent years China has reinforced its role as trading partner within CA As evidence
for this active involvement the 2000-2010 data already confirmed the Asiarsquos importance
(led by China) both in terms of imports and exports in Latin America and Caribbean20
Indeed the China share of the regionrsquos total exports by destination grew from 11 in
2000 to 83 in 2010 with regard to imports by destination the growth appears even
more remarkable moving from 18 in 2000 to 133 in 2010 (Kuwayama amp Rosales
2012 p 66) whilst the relative share of the US presence has shown a downward trend
(Ibid p 65) The monthly exports to Asia-Pacific21 region more-than-doubled from an
average value of USD 54 billion in 2006 to USD 162 billion in 2014 (Baacutercena Prado
Rosales Peacuterez 2015 p 23) After a slight decline experienced in 2016 a solid rebound
emerged in 2017 On average goods shipment from Asia-Pacific Latin America grew by
136 yearly between 2000 and 2016 (Scotiabank 2018 p 1)
Beside trade China has been recently advancing its Belt and Road Initiative (BRI) in
the region by concluding numerous Memoranda of Understanding (MoU) with various LA
19 Including the United Kingdom 20 Data refers to Argentina Bolivarian Republic of Venezuela Brazil Chile Colombia Costa Rica the Dominican
Republic Ecuador El-Salvador Guatemala Honduras Mexico Nicaragua Paraguay Peru Plurinational State of Bolivia
21 The Asia-Pacific region includes Australia Brunei Darussalam Cambodia China South Korea Philippines Hong Kong Japan Laos Thailand Taiwan Indonesia Malaysia Myanmar New Zealand Singapore and Vietnam
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 41
and CA countries To mention some Bolivia (2018) Costa Rica (2018) Chile (2018) and
Panama (2017)
6 CONSULTATIONS (TASKS 6 AND 7)
61 Consultation Strategy
The consultation strategy presented in the technical offer has been refined during the
Inception Phase (Task 6) and is outlined in Annex B Box 2 summarises our expectations
regarding the main inputs expected from stakeholders throughout the study
Box 2 Expectations regarding inputs from stakeholders
Inputs from stakeholders are expected at all stages of the study
The study team will welcome in particular Responses to the online public consultation Consultation with businesses (responses to the online business survey) Evidence of specific casesexamples on how the Agreement has affected economic performance
sustainable development and human rights both in Central America and in the EU Contributions will be particularly welcome in relation to the priority areas of analysis o Impact of the Agreement on trade diversification (in terms of goods and services traders regions
involved in trade etc) (see Task 101) o Impact on investment climate and investment flows (see Task 102) o Impact of the Agreement on SMEs (see Task 1012) o Effects of the implementation of the TSD chapter (see Task 111) o Performance of the institutions established under the TSD chapter (see Task 112) o Impacts of the Agreement on pillars of Decent Work Agenda working conditions labour standards
social protection other public policies and labour inspection (see Task 114) o Impacts on the informal economy and informal employment (see Task 115) o Environmental impacts (see Task 116) and o All of the case studies
Written contributions (positions) expressing views on how the Agreement has affected economic performance sustainable development and human rights across the parties in particular with regard to ndash but not restricted to ndash the analytical priority areas
Indication of relevant publications that focus on the impact of the Agreement in the partner countries Indication of actions taken by CA in areas covered by the TSD chapter (eg changes in policies action
plans strategies and legislation in the areas of labour environment and climate change ratification and implementation of international conventions in these areas and civil society engagement)
Written comments on the draft Inception Report draft Interim Report and draft Final Report Proposals for and comments on draft conclusions and recommendations of the report including how to
improve operation of the Agreement (if needed) Names of organisations or indication of vulnerable groups that may have been affected by the
Agreement in the partner countries as well as relevant contact details for the evaluation team to reach out to the most relevant additional stakeholders
62 Study Website and Electronic Communications
The establishment and continuous updating of a website as well as ongoing electronic
communications with stakeholders are one element of the consultation strategy During
the inception phase the website has been established and launched and an initial e-
communication will be sent out to identified stakeholders (Task 5) The website is available
at httpcentral-americafta-evaluationeu
Electronic communication with stakeholders will take place through email newsletters as
well as Twitter using an account for this ex-post evaluation (CaEvaluation) Twitter will
be used as well to present the (draft) findings at specific moments in the study interested
related work or articles highlights or relevant quotes from the consecutive study reports
and promote the various outreach activities such as workshops LinkedIn will be used to
complement twitter with the same objectives the account of LinkedIn to be used will be
Ex-Post Evaluation EU-Central America FTA Email and an electronic newsletter will be used
as complementary tools to reach specific stakeholders throughout the study to inform them
Page 42
of events to send questions receive feedback and make appointments for interviews the
email used will be central-americabkp-advisorscom
With the COVID-19 pandemic still in place and governments imposing new lockdowns and
travel restrictions a back-up plan is available in case a lot of the communication has to be
done online The meetings with the EU and CA stakeholders both government and civil
society in the near future will be held online For the second half of the year and beginning
of 2022 face-to-face meetings may also be an option The advantage of digital outreach
is linked to reduction of travel time and travel costs to the minimum and in addition digital
follow-up is easier The public consultation and online business survey are already being
prepared and planned with an indicative timeline of online availability between June and
September 2021 The workshops envisaged for Central America in November 2021 are
currently planned with options ranging from face-to-face meetings over hybrid solutions
to holding them entirely online In either case we will ensure they are as interactive as
possible thanks to the use of breakout rooms and platforms enabling participants to ask
questions and participate in polls online We will also ensure that participants will receive
sufficient information before workshops
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13)
71 Case Study Selection
As part of the evaluation ten case studies will be prepared Their purpose is to capture the
impact of implementation of the EU-CA FTA on sustainable development in its economic
social and environmental dimensions as well as on human rights (including labour rights)
They should complement the economic social environmental and human rights analysis
required under Tasks 10 11 and 12
Regarding the geographic coverage the ToR require two case studies focused on the EU
two horizontal case studies for the whole region of Central America and six dedicated to
each of the Central American countries
Table 1 provides a preliminary list of suggested case studies while their exact focus and
scope will be determined at the next stage of the study further to preliminary impact
analysis and identification of relevant information and data sources
Table 8 List of proposed case studies
No Case study topic Geographical focus Key impact areas
1 Impacts of the Trade Pillar on EU banana producers EU incl OR as well as ACP and LDCs due to preference erosion
Economic and Social
2 Trade in environmental goods and services (opportunities for the EU and partner countries)
EU CA partner countries22
Economic and Environmental
3 Impacts of the Trade Pillar on freedom of association in sectors involved in trade with the EU (the choice of sectors will be made further to the initial impact analysis)
CA partner countries notably Guatemala Honduras and El Salvador
Human rights and Social
4 The effects of the Trade Pillar on sustainable aquaculture in Honduras Nicaragua Costa Rica and El Salvador
Partner countries with a focus on Honduras Nicaragua Costa Rica El Salvador
Economic Social Human rights and Environmental
5 Opportunities created in services sector in particular the green energy sector in Costa Rica (the choice of the services sector will be reviewed based on the initial impact analysis)
CA partner countries Economic and Environmental
22 The ultimate selection of countries will depend on the outcome of the (environmental) impact screening and scoping exercise
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 43
No Case study topic Geographical focus Key impact areas
6 Impacts of the Trade Pillar on child labour and childrens rights
El Salvador Social and Human rights
7 Impacts of the Trade Pillar on the environment (eg forests and biodiversity) in Guatemala the case of palm oil
Guatemala Environmental
8 Impacts of the Trade Pillar on MSMES and sustainable agriculture in the coffee industry (organic coffee) in Honduras
Honduras Economic and Environmental
9 Impacts of the Trade Pillar on women and gender equality notably in agricultural value chains in sectors exporting to the EU (the sectors may include coffee ground nuts and banana however the final selection of sectors and scope will be made based on data availability and the initial impact analysis)
Nicaragua Social and Human rights
10 Implementation and effect of the FTZ in port of Colon including aspects related to direct transportation clause
Panama Economic
72 Case Studies ndash Summaries and Methodologies
Descriptions of case studies and planned methodologies have been provided in Annex A5
8 STUDY WORK PLAN
A detailed study schedule which sets out activities and deadlines for outputs indicated
throughout this Inception Report is outlined in the chart overleaf A detailed plan for the
consultation programme is provided in Annex A4 Annex A6 provides the risk management
approach for the evaluation
Page 44
Phase task deliverable
Inception phase
Kick-off meeting with Commission in Brussels 20
Task 1 Refine draft intervention logic diagram
Task 2 Define and develop the methodological approach
Task 3 Review existing studies amp reports on trade between the EU and CA (6 countries)
Task 5 Provide a concise description of the agreement
Task 6 Create a website dedicated to the evaluation
Task 7 Stakeholder consultation strategy
Task 13 Case study proposals
Inception reporting
Drafting of inception report
Draft Inception Report 22
Review meeting Commission ISG
Finalisation of the Inception Report
Inception Report
Interim phase
Task 4 Provide a concise summary
Task 8 Undertake consultation activities
Civil society dialogue in Brussels (budgeted under review meetings)
12-week online public consultation
Online survey for business users interests in both the EU MS and partners
Workshops in partner countries
Other targeted consultations
Task 9 Assess the EU-Central American TSIA
Task 10 Analyse economic effects
Task 11 Analyse effects of implementation on SD economic social environmental
Task 12 Analyse effects on Human Rights
Task 13 Conduct in-depth case studies based on field work
Interim reporting
Drafting of Interim Technical Report
Annexes Progress evaluation Quantitative tables 10-page stakeholder report CS reports
Draft Interim Technical Report 20
Review meeting Commission ISG
Finalisation of Interim Technical Report
Interim Technical Report `
Final phase
Task 13 Conduct in-depth case studies based on field work
Task 14 Reply to the evaluation questions
Task 15 Provide conclusions and recommendations
Tasks 1 45 9 and 10 - 15
Final reporting
Drafting of draft final report
Synthesis report
Executive Summary
Annexes
Draft final report 20
Review meeting Commission ISG
Finalisation of final report
Translation executive summaries (EN FR GE SP)
Final report 20
Possible exit meeting 20
Progress reports
The ToR speci fies 12 weeks for the survey we tentatively propose 16 weeks because the time schedule a l lows i t and i f the project s tarts in January the survey would fa l l in the hol iday season in EuropeCA which would not be conducive for responses
Key
Meeting with the European Commission
Concrete deliverable (eg Inception Report)
Key
Working on the evaluation and endpoints of work per task
Stakeholder consultation activities and meetings
MayAprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr
HOW TO OBTAIN EU PUBLICATIONS
Free publications
bull one copy
via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps
from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm)
from the delegations in non-EU countries
(httpeeaseuropaeudelegationsindex_enhtm)
by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm)
or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
Priced subscriptions
bull via one of the sales agents of the Publications Office of the European Union
(httppublicationseuropaeuothersagentsindex_enhtm)
doi[number]
[Cata
logue n
um
ber]
Page 2
presents the evaluation framework with an intervention hypothesis (task 1) while Chapter
3 outlines the proposed methodology responding to the evaluation questions (task 2) and
Chapter 4 covers a brief review of relevant studies on the Agreement (task 3) Chapter 5
provides a descriptive summary of the EU-CA FTA and its implementation so far (task 5)
followed by outline of consultation activities in Chapter 6 (tasks 6 and 7) supported by the
consultation strategy provided in Annex B as well as a list with a preliminary selection of
case studies in Chapter 7 (task 13) The final part includes study work plan in Chapter 8
The draft outline of the interim and final evaluation reports is presented in Annex A7 Other
parts of the Annex provide further details on certain elements of the report
Figure 1 Overall evaluation approach
2 EVALUATION FRAMEWORK
21 Intervention hypothesis of the Agreement (Task 1)
An indicative intervention hypothesis developed by the Commission linked the operational
objectives (as listed in Article 78 of the EU-CA FTA) to specific and overall objectives set
out in Article 2 of the Agreement and its Recitals In line with Task 1 of the evaluation ToR
we have adapted the intervention logic developed by the Commission as follows
All 10 operational objectives listed in Article 78 of the Agreement have been included
Specific and overall objectives have been considered in the context of short-term and
medium-term outcomes as well as long-term impacts
Underlying assumptions have been identified and integrated into the intervention
hypothesis
The relationship between the evaluation questions (EQ) and the intervention hypothesis
has been specified
The updated version of the intervention hypothesis is presented in Figure 2 overleaf
The intervention hypothesis was also instrumental in developing the analytical framework
of the evaluation which brings together the evaluation questions of the ToR the associated
judgment criteria and indicators the data sources and the methodological tools with which
we will collect data The refined analytical framework is presented in the following sub-
section
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 3
Figure 2 Intervention hypothesis of the Trade Pillar of the EU-Central America Association Agreement
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 5
Main assumptions (at the level of coherence)
Pillar IV and its implementation has been coherent with the EUrsquos trade and development
policies and in particular with the EUrsquos commitment to sustainable development in
trade policies as a contribution towards attainment of the SDGs (EQ8)
Main assumptions (at the level of efficiency)
The utilisation rate of the Trade Pillar is high (EQ5)
Implementation of the Trade Pillar does not lead to trade diversion (EQ5)
Costs associated with implementation of the Trade Pillar are proportionate to the
benefits it has generated (EQ6)
The distribution of both costs and benefits is proportionate among different
stakeholder groups and interests (EQ6)
Implementation of the Trade Pillar does not create unnecessary regulatory costs
(including administrative burden) (EQ7)
Main assumptions (at the level of effectiveness impact and relevance)
The implementation of the Trade Pillar does not create unintended negative
consequences (EQ3)
The positive impact of the Trade Pillar is inclusive and does not benefit only a limited
group of stakeholders (EQ6)
Implementation of the Trade Pillar has contributed to trade diversification (EQ5)
Provisions of the Trade Pillar continue to be relevant for strengthening trade relations
between the Parties and regional integration of Central America (EQ9)
22 Evaluation Questions Judgement Criteria and Indicators
The evaluation framework has been based on the evaluation questions listed in the ToR for
the study which are as follows
EffectivenessImpact
EQ 1 To what extent have the objectives as laid down in Article 78 of Part IV of the
Agreement been achieved
EQ 2 What are the factors influencing (either positively or negatively) the achievements
of the objectives specified in Article 78
EQ 3 Has implementation of the Trade Pillar had unintended (positive or negative)
consequences and if so which ones
EQ 4 What has been the impact of implementation of the Trade Pillar
Efficiency
EQ 5 To what extent has implementation of the Trade Pillar been efficient with respect
to achieving its objectives
EQ 6 To what extent are the costs associated with implementation of the Trade Pillar
proportionate to the benefits it has generated Is the distribution of both costs and
benefits proportionate among different stakeholder groups and interests
EQ 7 Are there unnecessary regulatory costs (including administrative burden)
Coherence
EQ 8 To what extent has implementation of the Trade Pillar been coherent with the
EUrsquos trade and development policies ndash and in particular with the EUrsquos commitment to
sustainable development in trade policies as a contribution towards attainment of the
SDGs
Relevance
EQ 9 To what extent do the provisions of the Trade Pillar continue to be relevant in
order to address the current trade needs and issues of the EU and Central America
Page 6
The framework provides the evaluation questions the judgement criteria for each of them
the analysis needed to substantiate findings and conclusions made in the evaluation report
and the sources through which data and information will be obtained The evaluation
framework also links evaluation questions and judgement criteria to the analytical tasks to
be performed according to the ToR Table 1-1 in Annex A1 presents this framework
It should be noted that methodological tools and indicators used are not shown in the table
but are explained in the next chapter
3 OVERALL EVALUATION METHODOLOGY AND TOOLS (TASK 2)
In this chapter we describe the methodologies and tools planned to be used in the
evaluation separately for each task The analysis will be concluded with recommendations
on how the implementation of the Agreement can be further improved for the benefit of
the EU and Central American partner countries It should be noted that the structure of
the presentation is in line with the tasks defined in the ToR to facilitate comparison and
compliance with ToR requirements However the order of findings will be guided by the
evaluation framework presented in chapter 2 To facilitate the link with the evaluation
framework for each task we indicate to which evaluation question respectively judgement
criterion it contributes
31 Analysis of economic effects (Task 10)
In 2010 the EU was Central Americarsquos second most important trade partner after the
United States (and after intra-regional Central American trade) The total value share of
the EU in Central American trade was 94 EU exports mainly went to Costa Rica (53)
Honduras (22) and Guatemala (12) In 2018 the EU was still Central Americarsquos second
trade partner after the United States but with a higher share of 122 of all Central
American trade (IMF 2019) In 2019 Central Americarsquos trade with the US (in both goods
and services) totalled USD 70 billion (ie EUR 678) (USTR) Trade in goods with the EU
reached EUR 12 billion in 2019 and trade in services EUR 82 billion in 2018 (European
Commission 2020a)
311 Task 101 Analysis of the evolution of trade in goods
Analysis under this task will seek to respond to the evaluation questions related to JC 1A1
1A2 and JC 41 The EU-CA FTA offers advantages in terms of market access for the EU
and Central American countries Some of the main elements of the Agreement regarding
goods exports from the EU to Central America are complete liberalisation of tariffs for
manufactured goods and fisheries at the end of the tariff phase-out period and immediate
liberalisation of 69 of EUrsquos exports to CA at the start of the agreement saving EUR87
million in duties annually Specific analyses to be carried out under Task 101 have been
summarised in Table 1 For each sub-task we present the specific analysis that needs to
be carried out and main methodological approach we suggest as well as relevant data
sources
Table 1 Methodological approaches and sources for the analyses of trade in goods
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
1 Goods showing the largest increase or decrease in total and bilateral trade flows
Using COMEXT statistics at different disaggregation levels the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing products
2 Development of trade in goods against previously applicable GSP+ and GSP tariffs
Taking COMEXT data as a basis to investigate whether the GSP status of a product has a bearing on how the EU-CA FTA has influenced the rate of growth in trade we will compare two groups of goods those for which tariffs were 0 under GSP versus those for which tariffs were greater than 0 under GSP+
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 7
Specific analysis to be carried out (numbers refer to bullet points in ToR)
Main methodological approach and sources
3 Preference utilisation rates and forgone duty saving of economic operators of all Parties
Based on COMEXT data (for EU imports) and data provided by the Commission (for EU exports) a quantitative analysis will be undertaken to identify the key sectors and product categories where preferences are not fully used We propose to include up to 3 questions in the survey to identify factors that encourage discourage companies to use the Agreement
4 Use of tariff rate quotas (and the reasons for suboptimal use)
Data up to 2019 is already available in the Commissionrsquos annual implementation reports Updating the data is supposed to rely on similar sources as the Commissionrsquos annual reports Reasons for sub-optimal use of TRQs will be investigated during the consultations as this cannot be inferred through statistical analysis
5 Trade diversion in particular from interregional Central American trade towards the EU
First we aim to use COMEXTCOMTRADE data to analyse the evolution of merchandise trade flows over time (between the EU and the partners but also within the region in comparison to the rest of the world)
Second we aim to look at the CGE results that should be able to tell us the pure EU-CA FTA effect on intra-Central American trade flows
6 Impact of the Agreement in relation to the creation persistence reduction or removal of non-tariff measures (NTMs) that have a significant impact on EU-CA countriesrsquo trade in goods
We will use UNCTADrsquos NTM TRAINS database and classification for identification description and analysis of specific NTMs affecting trade relations between the EU and Central America We will also look at NTMs including market access barriers raised by the Parties in the sub-committee meetings and will complement the findings with stakeholder engagement
7 Analysis of the importance of Free Trade Zones in Panama (especially the FTZ in the Port of Colon)
Using trade statistics we can get a picture of the way trade flows entering Central America via the Port of Colon (for example) are distributed across Central American countries These patterns ndash at sector level ndash would tell us the most economically significant EU exports This
will be complemented by qualitative analysis
8 Investigation of whether new enterprises started to export or whether enterprises already exporting started to export new products
We expect to undertake this analysis by relying on available firm-level data as well as specific questions for SMEs in the targeted business survey the SME Panel questionnaire and other consultation activities directed towards SMEs Additionally for this sub-task we will try to get access to national databases containing firm-level panel data based on highly disaggregated customs information that include exports (imports) of products and their destinations
9 Analysis of the evolution of trade import shares originating in the EU in total imports of the six CA countries (and vice versa)
COMEXT and COMTRADE data will be used to carry out this analysis We will ensure that we specify the third countries in a clear way The EU and each of the Central American countries The United States Mexico and Canada but also Brazil Argentina
Paraguay and Uruguay (Mercosur) and China Other countries (Rest of World)
10 Analysis of the impact of the EU-CA FTA implementation on diversification of trade
The diversification of trade in goods will be evaluated according to two main dimensions 1 Diversification in the range of products traded between the EU and each of its partners 2 Diversification in the number of EU member states trading with the Central American partners
11 Comparison of the development of trade in goods between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
COMEXT and COMTRADE data will be used to carry out this analysis Regarding trade of the partner countries the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as the MERCOSUR countries The choice of the US can be explained by CAFTA-DR agreement that has been in place since 2006 between the US and Central America and the Dominican Republic
12 Investigation of whether the EU-CA FTA has facilitated trade with third countries including via the use of intermediate products
Use of GTAP data (since the Trade in Value Added ndash TiVA database only covers Costa Rica) to look at intermediate linkages and whether these have helped the competitiveness of the CA economies We will also look at the CGE modelled development of the real exchange rate as an indicator of what happened to CA economiesrsquo levels of competitiveness
13 Analysis of the degree to which implementation of the EU-CA FTA has contributed to diversification of sources of supply of goods
COMEXT and COMTRADE data will be used to carry out this analysis We will look at the inputs shares for specific products in CA from the EU and vice versa and compare the development of these shares to the shares for the same products from international trade partners
14 Identification of regions within the partner countries that have benefited most and of
regions having benefited least (including the identification of constraints)
We expect to rely mainly on a combination of mapping of the sectoral CGE effects per region with literature review and consultation activities to identify the regions that have most least benefited from the
agreement Social progress indexes are computed at municipal level in Costa Rica and at provincial level in Panama as well as for some regions in Guatemala and El Salvador but this is for 2017-2018 only
Page 8
312 Task 102 Analysis of the evolution in trade in services
Analysis in this task is linked to JC 1A3 Although the effects of trade agreements on EU
services trade with third countries are not easily quantifiable we will seek to use available
data to demonstrate the impact of the EU-CA FTA on EU services trade We will assess
whether the Agreement has led to an improvement or worsening of the structural
imbalance between the parties The EU posted a substantial services trade surplus of EUR
10 billion with all six Central American partners combined in 2013 but this surplus has
decreased to EUR200 million by 2017
Table 2 Methodological approaches and sources for the analysis of trade in services
Specific analysis to be carried out
Main methodological approach and sources
1 Services showing largest increase decrease in total and bilateral trade flows between individual CA countries and EU
We will identify sectors showing the biggest increase in total trade in services flows and in bilateral trade flows as well as those having performed worst This analysis will be conducted using time series trade statistics at different levels of disaggregation (from Eurostat OECD and UNCTAD) the analysis will start at a fairly high level of aggregation and will be disaggregated for sectors of interest to identify the bestworst performing sub-sectors Reasons for performance will be identified by a combination of sources including literature review and targeted consultations
2 Comparison of the development of
trade in services between the signatory countries with the EUrsquos trade development and a suitable reference group of countries
The comparison of the development of bilateral trade in services between the EU and the individual Central American countries with the development of trade in services
for the EU and its Member States and for Costa Rica Guatemala El Salvador Honduras Nicaragua and Panama with a suitable reference group of countries will provide further evidence on the actual impact of the agreement of trade in services flows As is the case for trade in goods (Task 101) the reference group of countries is likely to include the US (Canada Mexico ndash USMCA) and China as well as MERCOSUR countries if possible The choice of the US matters because of the CAFTA-DR agreement that has been in place since 2006
3 Analyse trends in international financial capital flows and the evolution of key financial industry segments ndash with the GATS modes of supply as the basis
First we will analyse trends in international financial capital flows between the EU and the Central American countries as well as globally For this we will use available Eurostat OECD andor UNCTAD data as well as Central Bank data if available
Second in order to look at how sectors are performing (well or not so well) we will focus on a concise general ndash but sector level ndash analysis and what drivers we can identify for economic performance
Third we propose that the following case study (see Task 13) could be undertaken Evaluating financial industry segments such as banking insurance asset management sustainable investment ndash in Panama or Costa Rica
Data source suggestions The OECDrsquos Services Trade Restrictiveness Index The GATS Trade Restrictiveness Index which together establish the amount of ldquowaterrdquo in the partiesrsquo GATS
bindings that can be ldquosqueezedrdquo by a modernised Agreement Central Bank data on financial and insurance services economic activity and trade Global Investment Competitiveness Report (World Bank 2019) ISDB data from Eurostat BOP statistics
313 Task 103 Analysis of the evolution of foreign direct investment (FDI)
The analysis in this task will be linked to JC 1A5 Although the effects of trade agreements
on Foreign Direct Investment (FDI) with third countries are not easily quantifiable we will
seek to use available data to demonstrate the impact of the EU-CA FTA on FDI At a general
level this task will entail to assess what impact the EU-CA FTA has had on structural
balances or imbalances between the EU and its Central American partners
Table 3 Methodological approaches and sources for the analysis of bilateral FDI
Specific analysis to be carried out
Main methodological approach and sources
1 Largest increases decreases in FDI flows between individual CA countries and the EU
We will identify main changes in FDI flows over the past 10 years between the EU and Central American countries if possible at sector level This analysis will be conducted using the ITC investment map data UNCTAD investment data and ISDB data from Eurostat BOP statistics Data limitations are expected to be significant for this subtask Reasons for good or bad performance will be identified by a combination of sources including literature review and targeted consultations
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 9
Specific analysis to be carried out
Main methodological approach and sources
2 Comparison of the development of FDI flows between the signatory countries
The proposed methodology would examine the investment effect at both the extensive and intensive margins using the two-step Heckman (1979) estimation as implemented in Helpman et al (2008)
3 Analysis of the investment climate
and of the attractiveness to investment of the six CA countries
An analysis of the investment climate and of the attractiveness to investment of the six Central American countries taking into consideration the possible impact of the
existence of bilateral investment treaties or of double-taxation treaties will be undertaken We propose to review inter alia the evolution of the following indexes OECDrsquos Foreign Direct Investment Restrictiveness (FDIR) index Various FDI attractiveness and FDI confidence indexes ndash eg by AT Kearny and Ernst amp Young Global Investment Competitiveness Report (World Bank 2019) World Bank lsquoDoing Business Indicatorsrsquo ISDB data from Eurostat BOP statistics wwwinvestmentmaporg from the ITC
314 Task 104 Presentation of overall economic impacts
The analysis in this task is linked to JC 41 and will rely on the computable general
equilibrium (CGE) modelling undertaken by DG Trade The CGE model is the quantitative
cornerstonefoundation of the ex-post evaluation Important variables of interest for the
economic analysis will be those which are standard for a CGE analysis such as GDP and
trade flows (total bilateral and by sector) and sectoral output Based on the CGE modelling
results we will estimate the overall impact on the economy of the EU the partner countries
as well as third countries in particular LDCs The economic analysis will build further on
the modelling results We will report these in sufficient detail to highlight the economic
effects of the EU-CA FTA More details on the CGE model are provided in Annex A2
315 Task 105 Determining the impact on implementation of the Trade Pillar of the
various institutional structures
Our analysis under this task will seek to respond to evaluation questions No 1 and 5 (with
JC1A2 JC1A6 JC1A7 and JC1A9) ie how the operation of the institutional set up has
contributed to achieving the objectives of the EU-CA FTA outlined in Article 78 and how
effective and efficient the Association Committee (in trade configuration) six Sub-
committees and an ad hoc Working Group have been to date To determine this we will
analyse provisions of the EU-CA FTA referring to institutions and their operation in practice
In the first step we will analyse Articles 4-8 establishing the Association Council the
Association Committee and Sub-Committees and setting out their decision-making powers
This will be done jointly with Articles 345-346 setting out specific tasks of the Association
Council and the Association Committee acting in trade configuration including powers to
amend certain parts of the Agreement (within Trade Pillar) This will be followed by Articles
347-348 about Part IV coordinators and Sub-Committees established under EU-CA FTA and
will be complemented by the analysis of Articles 91 123 139 156 274 and 294 outlining
areas of responsibility of the individual Sub-committees4 and the Rules of Procedure of the
Association Council and the Association Committee (Decision No 12014 of the Association
Council) which also apply to Sub-Committees This will let us develop an understanding
about the mandate of each institution its decision-making powers including those related
to amending the EU-CA FTA and monitoring compliance by each Party frequency and
format of meetings relations with other institutions under the Agreement reporting and
escalation In this way we will establish an expectation regarding the role each institution
should have in implementation of the EU-CA FTA and achieving its objectives
4 Sub-committee on Market Access for Goods (Article 91) on Customs Trade Facilitation and Rules of Origin (Article 123) on Technical Barriers to Trade (TBT) (Article 139) on Sanitary and Phytosanitary Matters (SPS) (Article 156) on Intellectual Property (Article 274) Board on Trade and Sustainable Development (TSD) (Article 294) and Ad hoc Working Group on Government Procurement
Page 10
In the second step we will analyse the actual operation of all the above structures based
on available documents and engagement with the Parties as well as relevant stakeholders
We will take as the basis reports from Sub-committee and Association Committee meetings
and will complement them with the annual Commissionrsquos Implementation Reports and
other documents eg conclusions adopted by civil society representatives at the annual
meetings under the TSD chapter We will also determine whether formal decisions have
been taken by the Association Council or Committee and if so analyse the extent to which
they have contributed to implementation of the EU-CA FTA We will also look at concerns
raised by the Parties how they have been addressed and how much time it took to achieve
a satisfactory solution Based on findings from our analysis we will provide conclusions
and recommendations for the future notably for the TSD board
316 Task 106 Analysis to what extent the implementation of the customs and trade
facilitation-related provisions of the Trade Pillar have simplified or complicated
exportimport procedures for key stakeholders
Analysis in this task will be related to JC 1A2 Based on reviews of the Agreement text as
well as the work of the Sub-committee on ldquoCustoms Trade Facilitation and Rules of Originrdquo
we will analyse in a qualitative way which customs-related aspects have facilitated or
complicated bilateral trade like rules of origin management of TRQs agricultural safeguard
measures and approved exporter status We will seek to determine eg whether Article
304 par 1 provision (related to reimbursement of duties in CA Party of transit and their
payment in the CA Party of import) is applied in practice and if so how it is evaluated by
economic operators
317 Task 107 Analysis of the implementation of the SPS Measures chapter of the
Trade Pillar
This task is also linked to JC 1A2 and the methodological aspects described above are also
valid for SPS related issues We see two subtasks under this request 1) An analysis to
what degree implementation of the SPS Chapter in the EU-CA FTA has facilitated agri-food
trade without lowering any partyrsquos SPS standards 2) The extent to which the capacity
building and technical assistance provided by the EU to Costa Rica El Salvador Guatemala
Honduras Nicaragua and Panama has had an effect (looking at what technical assistance
projects and funds were used)
318 Task 108 Analysis of the implementation of the Government Procurement
chapter of the Trade Pillar
The analysis in this rask is linked to JC 1A6 and will examine the impact of the opening of
the government procurement markets of the Parties using a multi-step approach 1)
Review of the recent and ongoing work of the Ad Hoc Working Group on Government
Procurement 2) A statistical analysis of the procurement value shares for EU business (if
possible) and SME participation which will be complemented by desk research and
anecdotal evidence of success stories of EU companies in Government procurement
markets of six CA countries and 3) Review of the level of compliance with the Agreement
319 Task 109 Analysis of the implementation of other areas of the Trade Pillar
This task is related to JC 1A7 and 1A8 The methodological approach foreseen to analyse
other areas of the Agreement (like Technical Barriers to Trade e-commerce Competition
and protection of intellectual property rights (IPRs) including geographical indications)
Our approach focuses on 1) Statistical analysis compiling statistical descriptive analysis
on each issue prior to and after entry into force of the Agreement 2) Literature review
the analysis on the implementation and use of geographical indications in Central America
(eg Rivar 2020) 3) Case studies A specific case study on some of these other issues
could be carried out
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 11
3110 Task 1010 Analysis to what extent the implementation of the Trade Pillar has
led to a greater economic integration between the Central American partners
This task is linked to JC 1A4 The EU-CA FTA has been a mechanism that encourages
regional integration but it takes place within a much wider framework of regional
cooperation efforts between the CA countries with the EU-CA FTA being only one element
in this wider context This task focuses on the impact of the EU-CA FTA on regional
integration not on the overall trend or state of affairs regarding regional integration We
use three elements for our analysis 1) The statistical analyses that we have carried out in
Tasks 101 (trade in goods) 102 (trade in services) and 103 (FDI) help to shed light on
regional integration impact of the EU-CA FTA also 2) We look at the results of the CGE
analysis including at how the intra-regional trade patterns have changed because of the
EU-CA FTA 3) We investigate what progress has been made in terms of the different
elements for integration We will use EU and CA data sources to underpin our analyses
3111 Task 1011 Analysis of the impact of the tariff concession granted by the EU for
imports of bananas
This task is related to JC41 We envisage three types of analysis under this task in addition
to a possible case study 1) Descriptive statistical analysis based on trade in bananas since
2008 in order to capture developments before and after the entry into force of the EU-CA
FTA distinguishing bilateral trade in bananas EU banana imports from the non-LDC ACP
countries from LDCs and intra-EU imports from the Outermost Regions 2) A quantitative
impact analysis using a partial equilibrium model ndash the Global Simulation (GSIM) model
(Francois and Hall 2009) 3) A qualitative impact analysis causal chain analysis will be
applied to look at what the Agreementrsquos sector-level social and environmental effects have
been In this step we focus in the socialhuman rights pillars on how vulnerable groups
could be affected at sector level The qualitative sectoral environmental analysis will cover
the impact of the FTAs on land use and related issues water and waste management and
biodiversity and protection
3112 Task 1012 Analysis of the impact of the implementation of the Trade Pillar on
SMEs
The analysis in this task is linked to JC 41 The ldquoSME-Testrdquo will be guided by the following
steps 1) Consultation of SME Stakeholders SMEs are a central element of the consultation
strategy and will be present at every stage of it 2) Identification of affected business
early on in the analysis we will identify whether and which SMEs (eg medium-sized) are
among the affected businesses 3) Identification of concrete stories as the Interim Report
progresses we will have sufficient information to identify 20 concrete stories from SMEs
as required by the Terms of Reference
3113 Task 1013 Analysis of the impact of the implementation of the Trade Pillar on
consumers
This task will be approached in two parts the first one being dedicated to impacts on
consumer rights and the other one to welfare-related impacts of the EU-CA FTA which also
affect consumers in their purchasing decisions The analysis will be related to JC 42 and
evaluation questions No 18 and 6 In addition we will aim to determine to what extent
EU-CA FTA has contributed to attaining SDG 1 (no poverty) and 10 (reduced inequalities)
Regarding consumer rights in the first step we will refer to the literature according to
which consumers usually benefit from global trade and preferential trade agreements due
to lower prices of purchased goods and services (resulting from reduction of tariff and non-
tariff barriers) a wider variety of traded goods and services the related satisfaction of
diversified needs and preferences and higher quality of available goods and services
Page 12
In the second step we will consider impacts which the EU-CA FTA (might) have had for
consumers regarding availability safety sustainability traceability and quality of traded
goods and services as well as which impact its promotion (or consumersrsquo awareness of it)
may have on consumersrsquo knowledge regarding the market offer and their trust in it The
list of questions to test will be guided by the EU Better Regulation Tool Nr 32 related to
impacts on consumers We will also draw on other parts of the study analysing
implementation of provisions related to regulatory measures and standards eg TBT
SPS TSD dialogue and cooperation between the EU and partner countries and
transparency to outline what level of protection incl consumer protection and production
standards is provided by the EU-CA FTA We will also refer to the EU RAPEX database ie
the alert system for dangerous non-food products listing notifications of such products
originating from the EU and partner countries
The second part of our analysis will focus on impacts of the EU-CA FTA on welfare In the
first step based on literature review and statistical data including relevant indexes (eg
the share of population living below the poverty line) we will analyse trends in the reporting
period in the EU and Central America regarding situation of consumers from different
groups of the population incl incomes expenditures levels of poverty and inequality
income and price levels wages and other types of income and any changes in this context
In the following step we will use outcomes of the economic modelling to estimate impacts
on welfare and inequality resulting from EU-CA FTA implementation eg prices and wages
In this context we will also consider to what extent the Agreement helped to attain SDG
No 1 (No Poverty) and SDG No 10 (Reduced Inequality) This will be complemented by
stakeholder consultations and finished with conclusions and recommendations
3114 Task 1014 Analysis of the impact of the implementation of the Trade Pillar on
the budgets of the EU and the partner countries
The analysis in this task is linked to JC 41 It will examine impact of the FTAs on the EU
budget (ie revenues forgone) and will largely result from the economic model We
anticipate that for the EU the foregone tariffs on imports from the partner countries will
be estimated based on the level of EU imports from the selected countries as a baseline
and the tariffs that would have applied to those imports
3115 Task 1015 Analysis of the impact of the implementation of the Trade Pillar on
EU Outermost Regions (ORs)
This task is linked to JC 41 The impact on ORs will be assessed based on the trade
diversion and deflection identified in the CGE analysis A key limitation in the economic
modelling framework is however that the EU ORs are not established as a separate region
To meaningfully analyse the effect on the EUrsquos ORs we propose two elements 1) A
matching analysis for the EU and the six partner countries regarding products that matter
for ORsrsquo trade (to either partner countries or the EU) 2) Competition analysis between
ORs and CA partner countries for exporting to the EU The effects will be determined
qualitatively distinguishing if applicable the ORs which might be positively or negatively
affected by the Agreement
3116 Task 1016 Analysis of the impact of the implementation of the Trade Pillar on
developing countries in particular on LDCs and countries having an Economic
Partnership Agreement (EPA) with the EU
This task is related to JC 41 Our approach to look at the EU-CA FTArsquos impact on developing
countries and LDCs will largely consist of the interpretation of the results of the economic
model simulations which has defined lsquoLDCsrsquo as a separate region This allows us to look at
the effect the EU-CA FTA has had on them We will also look closely at effects for countries
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 13
which are implementing an Economic Partnership Agreement (EPA) with the EU In terms
of the impact we will look first at an economic impact followed by effects on the other
sustainability pillars The former will include (i) a matching analysis for the EU and the six
partner countries regarding products that matter for LDCsrsquo trade (to either partner
countries or the EU) and (ii) competition analysis between LDCs and CA partner countries
for exporting to the EU We do not expect the effect to be significant for the LDCs because
the global impact of the EU-CA FTA is limited
32 Analysis of effects of the Trade Pillarrsquos implementation on sustainable
development (Tasks 11 and 12)
321 Task 111 Analysis of the effects of implementation of the Trade and
Sustainable Development (TSD) chapter of the Trade Pillar
This is one of the priority tasks linked to JC 1A1 In the first step we will divide provisions
of the TSD chapter into thematic blocks to identify areas for further analysis These include
commitments of the Parties to effectively implement in their laws and practice the eight
fundamental conventions of the International Labour Organization (ILO) as well as the
Multilateral Environmental Agreements to which they are Party the right of the Parties to
regulate sustainable management of natural resources promotion of trade supporting
sustainable development institutional provisions and dispute settlement mechanism
In the second step based on findings from the analysis of the actual situation in the EU
and partner countries carried out in Tasks 113-118 and documents outlining the
implementation of the TSD chapter (eg reports of international monitoring bodies
reports from meetings of the TSD Board and civil society advice to the Parties) we will
map activities undertaken by the Parties in areas covered by the TSD chapter in a break-
down prepared in the first step This will enable us to conclude to what extent the scope
of the TSD chapter has been covered and if actions taken by the Parties individually and in
cooperation activities have contributed to the implementation of TSD commitments and
attaining the objectives of the chapter and relevant SDGs (No 8 on decent work and
employment for all No 13 on combating climate change and No 14-15 on sustainable
use and protection of marine environment forests and biodiversity) Our analysis will be
complemented by stakeholder engagement5 We will conclude the analysis with
recommendations for the future incl any improvements in operation of institutions to
support compliance of the Parties with provisions of the TSD chapter
322 Task 112 Analysis of impact of the on implementation of the Trade Pillar of the
institutional structure established by or resulting from the TSD chapter
This is one of the priority tasks liked to JC 1A10 and evaluation questions No 1 5 and 8
In the first step we will analyse formal commitments of the Parties regarding the set up
and operation of the institutional mechanism ie Article 294 (Contact Points of the Parties
the TSD Board and civil society Advisory Groups) and Article 295 (Civil Society Forum)
In the second step we will analyse the establishment and operation of TSD institutions in
practice including their meetings activities undertaken between sessions cooperation and
5 When the Report refers to stakeholder engagement it means diverse activities foreseen in the stakeholder engagement programme outlined in detail in Annex B to this Report (Consultation Strategy) For each task stakeholder engagement activities will be tailored to the most relevant group of stakeholders methodology applied in the task and type of data which will be needed for the analysis For example in the analysis carried out with regard to TSD chapter the focus will be on targeted interviews with civil society members of the Advisory Groups in the EU and Central American countries as well as with Government and Commission representatives Further sources of information and activities will include targeted meetings eg DAG meetings and workshops with Central American countries CSD meetings with the European civil society and written positions submitted by civil society organisations As a complementary source we will use replies from online public survey
Page 14
dialogue between Governments and civil society The analysis will be based on reports
from meetings research studies recommendations from civil society to the Parties and
interviews with representatives of the Commission Governments from Central America
EU Delegations the EESC secretariat of the EU Advisory Group as well as civil society
representatives from the EU and Central American countries including members of their
Advisory Groups We will also evaluate effectiveness and efficiency of the institutional
mechanism and its role in the monitoring and implementation of the TSD chapter the
ability to address problems and to pursue cooperation and dialogue We will put an
emphasis on the evaluation of the TSD Board its ability to monitor compliance with the
commitments of the Parties effectiveness in choosing priorities and structuring the work
programme pursuing cooperation activities and resolving problems This part will also
analyse civil society capacity to exercise its mandate and monitoring implementation of
TSD chapter the quality of dialogue between Governments and civil society and the follow-
up to civil society recommendations In this context and in line with suggestions provided
by reviewed research studies we will also evaluate to what extent the discussion among
the civil society and between Governments and civil society focuses on substance
(compared to focusing on process) and whether the civil society has the means and
capacity to prepare for and to engage in such a discussion We will conclude the analysis
with recommendations for the future incl any improvements in operation of institutions
323 Task 113 Analysis of employment impacts
The analysis in this task will focus on impacts for employment levels and relate to JC 42
and evaluation questions 4 and 6 In the first step we will analyse trends in employment
and unemployment levels in the EU and partner countries for their whole economy and
across sectors over the reference period We will also identify factors influencing observed
trends including macroeconomic and labour policy measures applied by the Governments
investment in education and skills development migration from rural to urban areas and
across region and impacts of trade and investment including through trade agreements
In the second step the analysis will be focused on assessing quantitative impacts (direct
and indirect) of the EU-CA FTA on the number of jobs direct and indirect (for skilled and
un-skilled workers for the EU and partner countries across sectors) and be based on the
results of the economic modelling We will compare these results with the real-life data
and trends observed in the first step to conclude to what extent the reduction in trade
barriers and changes in output across sectors related to the implementation of the EU-CA
FTA have influenced demand for labour given the assumption of a fixed total employment
in the economy and full labour mobility between the sectors with workers leaving sectors
seen as less competitive and moving towards those having better prospects of growth and
working conditions including wages We will also draw a conclusion to what extent
observed trends in employment should be attributed to the EU-CA FTA and to what extent
to other factors incl macroeconomic environment global trends in commodity prices
domestic policy investment and trade agreements with other partners Stakeholder
consultations will help to verify our findings
324 Task 114 Analysis of impacts on the four pillars of the Decent Work Agenda
(job creation labour standards social protection and social dialogue) on
working conditions poverty reduction and enforcement
This is one of the priority tasks Our analysis will seek to answer the evaluation questions
No 1 4 and 6 (JC 42) Given the broad scope of this task we will divide it into two parts
a) labour standards and social dialogue (the Decent Work Agenda) b) working conditions
including social security and health care coverage of workers and labour inspection
In the first step we will describe the situation in the EU and partner countries and changes
over time regarding the subject matter as well as factors influencing observed trends We
will focus on the following
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 15
Task 114 a) on labour standards will look at the implementation of the core labour
standards as enshrined in the fundamental ILO Conventions ratified by all Parties to
the EU-CA FTA and evaluated by the ILO monitoring bodies6 Regarding trends in child
labour occurrence the analysis will include eg the number of working children types
of activities and sectors involved the number of hours worked per week motives for
undertaking work and involvement in hazardous work Influencing factors will be
considered and their impact on job availability for adult household members the level
of generated income and the extent to which it covers family needs Regarding forced
labour the analysis will include types of activities and sectors involved and influencing
factors including criminal activity and the level of law enforcement On freedom of
association and the right to collective bargaining the analysis will cover conditions for
setting up joining and operation of trade unions and employer organisations and
functioning of social dialogue for the whole country and ndash if data is available ndash across
sectors including indicators such as the share of trade union members in the total
number of workers for the whole country and in a break-down by sector and changes
over time Regarding non-discrimination at work we will focus on groups of workers
which may be in a disadvantaged position on the labour market eg youth disabled
persons migrants or indigenous peoples (women will be analysed in Task 116) and
indicators such as labour participation rate and unemployment rate the share of each
group working informally or being in a situation of sub-employment (ie receiving a
wage below the minimum level despite working full time or having no opportunity to
work full time despite being ready to do so)
Task 114 b) on working conditions and labour inspection will include trends in job
quality indicators over time the average number of working hours per employee per
week the number or rate of fatal and non-fatal accidents at work social security and
health care cover of workers wage levels type of contract the number of labour
inspectors and inspections carried out at work places and the infrastructure and funds
being at the disposal of inspection services (we will consider in that context that all EU
Member States and five Central American countries except Nicaragua have ratified
the ILO convention No 81 on labour inspection)
In the second step based on economic modelling we will identify the sectors most affected
(positively or negatively) by the EU-CA FTA and using the analysis done in step one will
seek to determine if trends observed in the respect for labour standards and quality of
working conditions in individual sectors can be attributed to the operation of the Agreement
or rather to other factors In cases where any concerns related to labour standards eg
child labour incidence or low presence of trade unions are identified in sectors particularly
involved in trade with the EU notably in exports we may apply an in-depth analysis in a
dedicated case study We will also refer to the implementation of the TSD chapter to
establish whether policy dialogue cooperation activities and engagement with civil society
have also influenced the situation We will complement desk research with stakeholder
engagement
325 Task 115 Analysis of impacts on the informal economy and informal
employment
This is one of the priority tasks linked to evaluation questions No 1 and 8 (JC 42) We will
also aim to determine to what extent the Agreement has contributed to attaining objectives
of SDG No 1 (no poverty) and No 10 (reduced inequalities) In the first step we will
develop a description of the situation in the partner countries during the analysed period
concerning the size and structure of the informal economy and factors influencing its
6 These include conventions No 138 and 182 on elimination of child labour No 29 and 105 on prohibition of forced or compulsory labour No 87 and 98 on freedom of association and the right to collective bargaining and No 100 and 111 on equal pay for work of equal value and non-discrimination at work
Page 16
existence as well as its geographic pattern in Central America and each of the partner
countries separately We will aim to identify if there are links between the informal
economy and eg the economic structure and dynamic in certain regions and their
involvement in trade We will also report about steps taken by the Governments in a move
towards formal economy including dedicated national strategies adopted in Costa Rica and
Guatemala
In the second step based on the results of the economic modelling and trade statistics for
trade and investment flows between the EU and Central American countries an additional
literature review and stakeholder consultations we will aim to establish to what extent
trade and in particular the EU-CA FTA has contributed to the observed trends in each
partner country We will verify our findings in stakeholder consultations
326 Task 116 Analysis of impacts on gender inequality
The analysis in this task will seek to answer the evaluation questions No 1 4 and 6 (JC
42) We will also aim to determine to what extent EU-CA FTA implementation has helped
to attain SDG No 5 (gender equality) No 8 (decent work and economic growth) No 1
(no poverty) and No 10 (reduced inequalities) Work under this task will be guided by the
approach proposed in UNCTADrsquos Trade and Gender Toolbox (UNCTAD 2017) which
considers impacts on women in their roles as workers entrepreneurs traders and
consumers Complementary considerations regarding impacts for each of those groups will
be inspired by other literature (eg Fontana 2009) and methodological approaches (eg
European Institute for Gender Equality 2016)
In the first step we will analyse the situation in the Central American partner countries
regarding womenrsquos participation in the labour market economic activity as entrepreneurs
and traders (with a consideration of their access to assets and supporting measures) and
their position as consumers incl the level and type of income received and being at their
disposal Based on the available data we will also analyse gender inequalities before and
after the entry into force of the EU-CA FTA and measures applied by the countries and
provided by international donors to support an increased womenrsquos participation We will
also review reports of the ILO Committee of Experts regarding implementation of the two
ILO fundamental conventions on non-discrimination ie No 100 (equal pay for work of
equal value) and No 111 (non-discrimination at work) ratified by all CA partner countries
In the second step we will compare observed trends stemming from the real data with
outcomes of the economic modelling to determine to what extent they may be linked to
impacts of Agreement and to what extent they result from influence of other factors
Focusing on women as workers we will identify sectors important for them (based on
their shares in the total womenrsquos employment and a ratio of female and male workers
in each such sector) and compare observed trends in employment levels (in total and
across sectors) with the results of the modelling (changes in employment levels across
sectors) to determine whether the EU-CA FTA has contributed to changes reported in
the real life and if so to what extent In this context we will also consider impacts of
tariff reduction on public revenues and whether this might have had an impact on the
provision and quality of public services which in turn may have an effect on women and
their ability to participate in the labour market or to undertake an economic activity
For women as entrepreneurs if relevant data is available we will identify sectors of
their economic activity and compare trends in the actual operation of these sectors over
time (eg growth or decline) with outcomes of the economic modelling to determine if
the EU-CA FTA might have had an impact on output of these sectors and as a result
position of women as entrepreneurs
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 17
Moreover if more detailed data is available regarding sectors and groups of products or
services manufacturedprovided by women-led enterprises as well as their engagement
in international trade we should be able to say (again comparing the real-life data with
economic modelling) what impact the Agreement may have exercised on women as
traders and in this context on sales and exports of their products or services or their
competition with or the use of imports We will also consider whether the EU-CA FTA
provisions regarding eg tariff reduction SMEs TBT SPS might have had an impact
for women-led enterprises (given their size and sectors of operation)
Concerning the role of women as consumers we will look at real-life trends in income
and price levels and compare them with outcomes of the economic modelling to see
what impacts the EU-CA FTA might have had on welfare and price levels as well as the
availability and accessibility of goods and services
Our analysis will be complemented by engagement with stakeholders including women
organisations to identify barriers in their activity on one hand and facilitating measures on
the other and to gather more insights into impacts of the EU-CA FTA
327 Task 118 Analysis of impacts on the adoption and implementation of
internationally recognised instruments of responsible business conduct and
Corporate Social Responsibility (CSR)
Our analysis under this Task will seek to respond to the evaluation question No 1 (JC 42)
In the first step we will map CSRRBC practices in the Central American partner countries
in the analysed period including practices of European companies investing there or having
their suppliers and existing government initiatives promoting them eg National CSR
strategy and Law on CSR in Costa Rica National Plan on Social Responsibility and Human
Rights in Panama and dedicated centres or foundations promoting CSR in Guatemala
Honduras Nicaragua and El Salvador We will also use findings from a research carried
out for Task 111 identifying initiatives undertaken within the TSD Title incl EU projects
and regional events dedicated to CSR RBC and decent work in global supply chains We
will aim at a better understanding of the existing framework uptake of CSRRBC practices
by enterprises factors influencing it and CSRRBC presence in the EU relations with the
partner countries including technical assistance and cooperation projects
Based on this in the second step we will use outcomes of the economic modelling and
stakeholder consultations to verify whether indeed the EU-CA FTA through generated
trade and investment flows as well as specific provisions (such as those in TSD Title) might
have encouraged uptake of CSRRBC practices We will also seek to identify factors related
to market access which may encourage uptake of CSRRBC practices Legislative ones may
include eg non-financial reporting and obligatory due diligence in certain sectors or
activities requirements related to social and environmental aspects in public procurement
and non-legislative ones may focus on image and comparison with the main competitors
being part of supply chains where business partners require respect for certain labour and
environmental standards international instruments in CSR (OECD Guidelines for
Multinational Enterprises ILO Declaration on Multinational Enterprises and Social Policy
the UN Global Compact etc) requirements of sustainability and certification schemes or
consumer awareness and related choices
As an additional element of this analysis (subject to data availability) we may include into
this task examples of other schemes eg sustainability schemes or promotion of decent
work in global supply chains (notably of agricultural products) and their presence in trade
between Central America and the EU and impacts the EU-CA FTA might have had on their
use in bilateral trade relations
Page 18
328 Task 117 Analysis of environmental impacts
The main objective of the environmental analysis is to assess the environmental and
climate change effects of the EU-CA FTA as well as to provide answer to the evaluation
questions notably those on the effectiveness (No 1-4) (JC 43) and coherence of the
Agreement with other policies and the EUrsquos commitment to the SDGs and in particular
SDGs No 13-15 ie Climate Action Life below water and Life on Land (respectively) ie
evaluation question No 7 The main challenge is to isolate the EU-CA FTA induced effects
on the environmental performance in each country from general developments and trends
that occurred regardless of the EU-CA FTA This is particularly challenging as the
counterfactual environmental outcomes are unobservable for most of the environmental
impact areas
The overall approach is based on our detailed understanding of the dynamics through
which the EU-CA FTA may have created environmental impacts tailored towards the
specific circumstances for the Central American countries the requirements in the ToR
the TSD Chapter of the EU-CA FTA and the budget provided for this study The detailed
understanding is based on the study lsquothe methodology for assessing biodiversity impacts
of EU FTArsquo by IEEP Trinomics et al (2021) and the latest literature including an OECD
study (Garsous G 2019) on this matter and applies the following logic
1) identifying the components in the EU FTA with the Central American countries that may
have generated environmental effects (EU-CA FTA elements) Based on our extensive
recent experience on researching the dynamics through which FTAs may create
environmental impacts we conclude that the FTA contains (1) measures easing market
access for the signatories (referred to as tariff-based measures) and (2) several rules-
based measures (mostly by means of the provisions in the TSD Chapter referred to as
non-tariff-based measures) that may have resulted in environmental impacts in the
countries involved
2) then establishing how these elements could have created directly or indirectly intended
or unintended ndash environmental impacts (the impact channels) Any FTA is by
definition expected to create direct environmental impacts through the expected
expansion of economic activity which may lead to eg higher pollution and greenhouse
gas (hereafter GHG) emissions may put a strain on bio-resources and pressure on
vulnerable ecosystems as higher levels of output require more environmental input
(Copeland and Taylor 2014) Trade agreements also create indirect environmental
impacts through structural adjustments in the economies and so-called specific rules-
based trade measures including the provisions in the TSD Chapter Our approach
carefully considers four impact channels that are also distinguished by the SIA Handbook
(European Commission 2016a) to separate the way in which EU-CA FTA may have
created impacts on various areas of the environment The scale effect (the impact
created from increased production as a result of the trade agreement) the structural
effect (the dynamic effect of the EU-CA FTA on the growth and contraction in production
in different sectors) technology effects (impacts triggered through increased efficiencies
from increased competition or from a transfer in environmental goods and services) and
potentially the product effect (impact via changes in production standards and use of
goods in a country eg through strengthened environmental policies and environmental
regulation)
3) via these impact channels various areas of environmental performance (the impact
areas) may be impacted and are to be further analysed in this evaluation In this study
we distinguish the following impact areas 1) Climate change 2) Biodiversity and
ecosystems and 3) Other key environmental parameters
Research methods ndash For some impact areas there is more reliable information and data
and quantitative research methods available than for others To the extent possible the
quantitative analysis will build on the economic modelling results and as a result the
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 19
analysis will allow us to comment on the causal relation between environmental topics and
the EU-CA FTA Where quantitative research is not possible we will apply qualitative
methods The qualitative analysis may rely on the causal chain analysis method which
aims at identifying the root cause of observed changes Irrespective of whether a certain
impact will be assessed with more quantitative or qualitative research methods our
approach is designed to make intensive use of quantitative information eg compiling
quantitative statistics and analysing trends The following research methods are applied
per environmental area
For climate change we propose focusing on establishing the EU-CA FTArsquos impacts on
the major GHG emissions (eg carbon dioxide methane and nitrous oxide) and
potentially on the air pollutants (ozone precursor gases acidifying gases and primary
particulates)
For biodiversity and ecosystems we propose following the latest insights in assessing
biodiversity impacts of the EU-CA FTA based on the study for DG Environment on the
development of a methodology to assess the impact of trade liberalisation on
biodiversity (which has not been published yet) In case results of the biodiversity
analysis are also relevant for climate change (ie LULUCF emissions) the link between
these results and climate change will be explored
For other impact areas we propose developing baselines based on qualitative and where
possible quantitative data for each impact area and explore developments in
environmental performance since the entry into force of the EU-CA FTA In addition we
will discuss the (effectiveness of the) implementation of provisions enshrined in the TSD
Chapter in the EU-CA FTA per impact area
The above discussed approach is based on five activities They apply the logic of the
methodological stages7 as described in the methodological framework for assessing the
impact of EU FTAs on biodiversity (IEEP Trinomics et al 2021)
3281 Activity 1 Fine-tuned methodology and impact screening and scoping
Fine-tuning the methodology is part of this inception report (this document) and mainly
serves to define the exact scope and focus of this evaluation The environmental analysis
logically focusses on Central America and the EU (with an emphasis on Central America)
However within defining the geographic scope of this analysis one needs to differentiate
global (eg climate change) and other more local environmental impacts eg
(un)sustainable forest management practices We aim to cluster countries when
appropriate from the perspective of a certain regional environmental issue In this way we
can respond to the challenge of bringing focus to the analysis while balancing the available
resources and time Clustering should enable us to evaluate certain environmental issues
in a more targeted way enabling deep dives into specific issues Below we discuss in more
detail what this regional approach means in practice and how we aim to mitigate the risk
of overlooking certain impacts
Impact screening and scoping - The exact environmental topics on which quantitative and
qualitative analysis will be performed depend on the outcome of the impact and screening
and scoping exercise which seeks to identify issues which deserve to be analysed with an
extra depth As such this sub-activity aims to select the environmental impact categories
and sub-areas to be studied in other activities Impact screening and scoping is a
methodological tool to identify issues which should be prioritised in the evaluation and
helps to mitigate the risk of overlooking potential significant impacts In essence the
prioritisation is based on (i) screening the most prevailing existing environmental drivers
and pressures and (ii) screening the expected impacts caused by the EU-CA FTA (at a
7 The study by IEEP Trinomics et al (2021) identifies three stages Stage I) Preparatory stage Stage II) Method selection and impact logic and Stage III) Impact assessment and related conclusions
Page 20
sector level) by means of economic modelling results literature review stakeholder input
and political interest All information is transparently documented in the impact-screening
matrix During the impact screening and scoping exercise we will also develop three
context-setting documents (2-pages) one per environmental impact area to better
understand the background These documents will have a regional perspective and will be
directly used in the baseline development The output of this activity is included in the
Interim Report
3282 Activity 2 Establishing the baselines for the impact areas
The aim of this activity is to gain a brief understanding of the EUrsquos and partner countriesrsquo
status quo regarding their environmental governance and performance (eg trends) for
those environmental impact areas that have been identified as priority ones The output
will be a section in the evaluation with a short description (1 page) per prioritised impact
area outlining the governance (very brief) and the performance and exploring the main
developments trends and their cut-off points This will be done by analysing issues from
a DPSIR framework perspective (drivers ndash pressures ndash state ndash impact ndash responses) (see
Box 1) when appropriate8 This framework is often applied in environmental assessments and plays a central role in the study by IEEP Trinomics et al (2021) on the methodology
for assessing the impact of EU FTAs on biodiversity
Box 1 The use of the DPSIR framework in FTAs
The DPSIR framework allows to interpret certain environmental indicators by establishing a causal relation between indicators and their analysed effects In the case of an FTA trade liberalisation in goods services and investments can function as a driver of a change in different economic sectors causing changes in the amount of land- and other resource use or in their quality (eg pollutants and emissions impacting air water or soil quality) The changes in the quantity of land- and other resource may create pressures on biodiversity which lead to an impact in the state of and trends in biodiversity ecosystems and the services they provide As a response(s) certain new or existing measures can be taken to help to prevent negative impacts or to amplify positive ones
Source IEEP Trinomics et al (2021)
Three consecutive sub-tasks will be performed to operationalise the establishment of the
baselines 1) Literature review and data analysis to establish draft baselines 2) Interviews
with stakeholders to obtain additional input validate work and fine-tune results 3)
Triangulation of information (literature data and interviews) and establishment of final
baselines The output of this activity will be included in the Interim Report
3283 Activity 3 Quantitative evaluation of impacts9
The aim of this activity is to assess the quantitative estimates of the impacts of the EU-CA
FTA on GHG emissions and possibly air pollution and ndash potentially10 ndash on trade in
environmental goods and services and land use change As such the desired result is the
reporting of the quantitative estimates of the impacts of the EU-CA FTA on GHG emissions
and air quality in the EU Costa Rica El Salvador Honduras Guatemala Nicaragua and
Panama depending on data availability Ultimately it is global GHG emissions that
contribute to global warming for this reason we propose to estimate the global change in
GHG emissions resulting from the EU-CA FTA In this way we also consider the difference
in climate change impacts from trade creation and trade diversion The impacts on GHG
emissions will be decomposed in the most relevant key drivers where possible The
8 This implies that we will make use of the insights of the framework whenever relevant and appropriate in the light of the evaluationrsquos objective We will not identify every element (D P S I and R) for each environmental issue but focus on the most relevant elements for each of them
9 The focus depends on the results of the impact screening and scoping 10 Depending upon expected scale of impact available resources and data availability
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 21
preliminary finding of this activity will be included in the Interim Report and the final results
are to be presented in the Final Report
3284 Activity 4 Qualitative evaluation of impacts11
The aim of this task is to evaluate qualitatively the impacts of the EU-CA FTA on various
prioritised environmental impact areas focussing on those which are not assessed in the
quantitative analysis First a broad assessment is done based on desk research from a
regional perspective In addition approximately two case studies (as part of Task 13) will
be prepared in which the environmental impacts of the EU-CA FTA on certain areas will be
assessed based on in-depth qualitative analysis using causal chain analysis (CCA)
(European Commission 2016a) Depending on data availability we will aim to identify
trends developments and cause-effect relations between the EU-CA FTA and environment
By combining the existing environmental drivers and pressures (see Textbox 3282-1 for
more information) the economic results and effects of TSD provisions we naturally also
include potential unintended and unforeseen effects The preliminary finding of this activity
will be included in the Interim Report and the final results are to be presented in the Final
Report
3285 Activity 5 Answering of the evaluation questions and other concluding
remarks
The overall environmental analysis concludes with clearly commenting on the effect of the
EU-CA FTA on the performance the legislative framework and effective implementation in
each of the prioritised environmental impact areas In case no causal relation between the
EU-CA FTA and the performance of a certain environmental impact area is found it will
also be explicitly mentioned These concluding remarks together with the in-depth
analyses conducted in previous tasks will serve as the basis to answer the evaluation
questions related to the EU-CA FTArsquos environmental impacts under Task 14 in the Final
Report
3286 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative environmental effects that have emerged from tensions between the EU-CA FTA
on the one hand and elements of environment on the other Additional policy or legislative
measures can also be suggested to enhance positive impacts of the EU-CA FTA
329 Task 12 Analysis of impacts of the implementation of Trade Pillar on human
rights
In this section we present the approach envisaged for the analysis of the human rights12
impact of the EU-CA FTA in the EU and the CA partner countries
The evaluation will rely on the methodology of human rights impact assessments (United
Nations 2011 European Commission 2015) as well as on the experience from previous
studies and will include the following steps
Step 1 Human rights baseline
At this step a concise baseline analysis will be carried out Concise human rights
profiles will be prepared for each of the state-parties to the EU-CA FTA
Step 2 Screening and scoping
11 The focus depends on the results of the impact screening and scoping 12 Human rights in this analysis are defined as set out in the Charter of Fundamental Rights of the European
Union the core UN human rights conventions and relevant regional human rights treaties
Page 22
At this step based on various sources human rights will be screened and specific
human rights that may have been affected by the EU-CA FTA will be identified
Step 3 Detailed assessment of the selected human rights
At this step drawing upon findings from the previous stage of the analysis an in-depth
analysis of up to three selected rights will be carried out (both quantitative and
qualitative and depending on the degree of the impact)
Step 4 Policy recommendations and accompanying measures related to
human rights
At this step policy recommendations will be formulated as to how any tensions between
the EU-CA FTA and human rights obligations may be addressed and how a positive
impact on the enjoyment of human rights can be enhanced
Stakeholder inputs will be used throughout all four steps to verify and support findings as
well as to collect evidence on the impact and ensure meaningful participation
3291 Human rights baseline
At this stage a concise baseline analysis of the human rights situation in each state-party
will be carried out First an overview of international human rights obligations of all the
state-parties to the FTA (ratifications of core international and regional human rights
treaties core ILO Conventions and other treaties relevant for the analysis) will be
presented in a tabular manner Second human rights profiles will be prepared Human
rights profiles will consist of a summary of the baseline conditions for the enjoyment of the
relevant human rights in each of the state-parties to the FTA from five years before the
provisional application of the EU-CA FTA until 2019 Particular attention will be given to the
pre-existing conditions of stress and vulnerabilities with respect to human rights
highlighting the position of specific vulnerable groups
The human rights profiles aim to
Set the scene regarding the enjoyment of relevant human rights in the partner
countries and identify social and political developments that may have impacted the
human rights situation
Allow for a targeted assessment of the human rights impacts of the EU-CA FTA
The profiles are based on the analysis of international human rights obligations national
legislation and policy framework as well as implementation issues with respect to relevant
human rights The analysis reviews country specific reports of international organisations
(eg UN OECD ILO) EU Reports on Human Rights and Democracy in the World reviews
of reports of international human rights organisations (eg Human Rights Watch) a
review of academic literature media reports relevant indicators and local partner inputs
3292 Screening and scoping
The second step of the analysis focuses on identifying which human rights could have been
affected by the EU-CA FTA and in which way The EU-CA FTA will be scanned for provisions
that are most likely to have caused an impact on the enjoyment of human rights in state-
parties to the EU-CA FTA The cause-effect relationships between the trade and trade-
related measures in the FTA and human rights will be established based on multiple sources
(see the multi-pronged approach below) The focus of the screening will not only be on
specific trade measures originating from the FTA (the Trade Pillar) but also on the overall
effect of the measures under the broader Association Agreement
Based on the screening exercise and in line with the EC Guidelines for human rights impact
assessments (European Commission 2015 p5) we provide a focused overview of the
human rights affected by the EU-CA FTA specifying the following elements
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 23
Specific human rights affected by the FTA
Short note on the evidence of the impact with a reference to the sources of information
Whether the affected right is an absolute human right or not13
The kind of impact (direct or indirect)
The degree of the impact (major or minor)
Affected population groups (if applicablepossible)
The screening exercise will as much as possible reflect upon the affected individuals
andor groups of people especially indigenous people and women based on the results
generated by the economic analysis inputs from the stakeholders and literature review
We will also look at how the EU-CA FTA has impacted gender equality and labour rights14
3293 Detailed assessment
Depending on the outcome of the screening exercise a maximum of three human rights
will be selected for a detailed assessment
Applicable human rights laws will be scanned (based on the obligations of the state-parties
under international and regional human rights treaties) to provide a framework of
applicable and binding entitlements and duties related to the selected right(s) Insofar
possible national legislation will be scanned for any changes subsequent to the application
of the EU-CA FTA focusing in particular on the changes that affected the enjoyment of
each of the selected human rights (using baseline analysis to aid the impact assessment)
Then we will look at the particular measures and how they have enhanced or impaired the
enjoyment of the relevant rights and or have strengthened or weakened the ability of the
parties to fulfil or progressively realise their international human rights obligations
Particular attention will be given to impacts on vulnerable groups or groups of individuals
that are at risk of being marginalised (Danish Human Rights Institute 2016)
This assessment is intended to be both quantitative and qualitative in nature The
quantitative analysis is based on the results of the economic analysis and used to the
extent possible15 The qualitative analysis is based on various sources as well as
stakeholder consultations and close work with local partners Economic modelling results
already disentangle the impact of the EU-CA FTA from other impacts that could have
affected the enjoyment of a human right over time For qualitative analysis it is more
challenging to discern the FTA impact To address this challenge we use a multi-pronged
approach (ie a methodological cross-validation approach in order for one methodological
element to corroboratevalidate the other method) in examining the causal effects of the
FTA for each of the prioritised human rights16 (see Figure 3)
13 See Tool 28 of the European Commissionrsquos Better Regulation Toolbox (2017) available at httpseceuropaeuinfolawlaw-making-processplanning-and-proposing-lawbetter-regulation-why-and-howbetter-regulation-guidelines-and-toolboxbetter-regulation-toolbox_en
14 Although we expect some overlap on labour-related rights with the evaluation of social impacts there will be cross-references to ensure a holistic analysis Moreover taking into account the interrelated nature of human rights we reserve the right to address the rights of the workers from other relevant perspectives not covered in the social analysis (eg as related to vulnerable groups)
15 When relevant we will use human rights indicators to supplement the analysis 16 We use the same method also during the screening exercise but to a more a limited degree (eg not using
specific human rights indicators for each human right as it goes beyond the scope of this evaluation)
Page 24
Figure 3 Overview of the multi-pronged approach to human rights impact assessment
Thus in assessing the impact the EU-CA FTA has had on each human right we use the
economic modelling results (if applicable and appropriate) that already disentangle the FTA
impact from the overall effects and link economic findings (partially) to how the selected
human right has evolved in the EU and Central American partner countries because of the
EU-CA FTA If data from the economic analysis is not sufficient to support the analysis we
will make use of contextually relevant human rights indicators (United Nations 2012) from
the statistical databases of the ILO World Bank UN OECD andor other organisations to
investigate how the selected human rights have evolved over time We look at the
development of human rights from five years before the provisional application of the FTA
up to the most recent year for which the data is available comparing period before and
after the entry into force of the FTA looking for shocks (relatively sharp increases
decreases) around that time or structural breaks in a trendline to identify an EU-CA FTA
impact We also investigate whether other shocks have taken place that could explain
observed changes in human rights (eg changes in domestic laws) Based on a similar
practice used during the ex-post evaluation of the EU-Korea FTA we could also consider
including a set of control countries to the analysis to consider development of specific rights
in relative terms
All data findings will be supported and cross-validated through a review of relevant
literature looking for further evidence of impacts provisions of the EU-CA FTA the social
and political situation (eg legislative policy instruments adopted that could have affected
the enjoyment of relevant rights) and inputs from the stakeholders that can serve as
evidence of a link between how the human rights has evolved and the EU-CA FTA
3294 Conclusions and recommendations
Based on the results of the analysis policy recommendations will be formulated to mitigate
negative human rights effects that have emerged from tensions between the EU-CA FTA
on the one hand and statersquos human rights obligations on the other Additional policy or
legislative measures can also be suggested to enhance positive impacts of the EU-CA FTA
and to prevent or mitigate impacts of measures that have been identified as having caused
or contributed towards impaired enjoyment of human rights
33 Concluding tasks
Based on the various analyses undertaken including the case studies the evaluation team
will prepare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 25
A comprehensive review of the extent to which impacts identified in the Trade SIA of
the Association Agreement between the EU and Central America (Ecorys and Corporate
Solutions 2009) have actually materialised (Task 9)
Replies to the evaluation questions (Task 14) and
Conclusions and recommendations (Task 15)
4 REVIEW OF STUDIES AND REPORTS ABOUT EU-CA TRADE (TASK 3)
The literature review aims at identifying sources data and main conclusions drawn from
the previous studies to make sure that the report is based on and further complements the
existing literature Annex A3-2 provides an overview of the literature considered so far in
a tabular structure To summarise the findings from the literature review so far the
following can be noted regarding methodologies and substantive issues
41 Methodological aspects
The economic effects of the EU-CA FTA have been analysed by the Sustainability Impact
Assessment (SIA) outsourced by the Commission (DG Trade) in 2009 before the launch
of the negotiations (ECORYS 2009) This ex-ante evaluation combined quantitative and
qualitative approaches the first one based on the Computable General Equilibrium (CGE)
and Causal Chain Analysis and the latter built on stakeholder interviews (ECORYS 2009)
The CGE model underpins SIA and the literature produced on the likely economic impact
of the agreement (ECORYS 2009 IIDE 2007 Lima et al 2009 Lima et al 2010 CEPR
2012) and the bulk of these studies is based on the assumptions on the likely structure of
the agreement as the negotiations were not concluded yet The 2009 SIA also assessed
the additional FDI impact by applying a gravity analysis approach (ECORYS 2009) The
first Commission annual activity report on the implementation of the EU-CA FTA builds its
assessment on the available Eurostat data and on the comparison between the region-to-
region trade flows before and after the treatyrsquos entry into force (Commission 2015) The
following activity reports (Commission 2016 2017a 2018a 2019d 2020a) illustrate the
evolution of trade on a yearly basis relying on the Eurostat and Central American statistics
thereby opting for a more descriptive approach
The main added value brought by this ex-post evaluation report consists of the CGE model
and its application to updated EU and CA statistics in order to isolate the strictly related
economic implications of the EU-CA FTA from other external factors influencing bilateral
trade thereby purifying the overall analysis and drawing more methodologically solid and
reliable conclusions The Commission (2021) modelling used for the ex-post evaluation
unlike the other studies focuses only on tariffs however which means that impacts of not
the entire EU-CA FTA are measured but only of the tariff component
Regarding assessment of non-economic effects the methodology tended to forecast
estimated general trends and usually does not make detailed projections It should also be
pointed out that predicting long-term socio-economic effects stemming from the AA proves
to be more challenging than estimating short-term trade impacts (European Parliament
2018) Regarding quantitative social and environmental variables the models have used
structured gravity approaches to estimate the effect of non-tariff measures (NTMs)
(ECORYS 2009) The main methodological constraints to calculate (non-quantifiable)
social environmental and human rights effects from a quantitative perspective are the
problem of attribution and the so-called counterfactual given that one cannot know what
would have happened in case the agreement was not in place
42 Substantive issues
In the 2009 SIA the literature review concluded that the potential economic impact of
the EU-CA FTA was expected to be positive The vast majority of literature sources agree
on the key role played by agricultural products in the Central American economy (Romero
Page 26
et al 2015 FAO 2020 OXFAM 2016 European Commission 2020 European Commission
2019 Zabalo et al 2019 Mejia et al 2018 Lima et al 2009 Lima et al 2010) The
raw material share accounts for up to 60 of the total CA export and combined with
natural-resource-based manufactures their cumulative share reaches 70 (Lima et al
2010 p 92) A study carried out in 2007 before the launch of the EU-CA negotiations
forecasted a negligible impact of the agreement on the EU GDP and overall welfare even
in case of a full liberalisation scenario (IIDE 2007 p 16) Also in terms of FDI the
estimated effects were marginal for the EU but more tangible for CA where the agreement
could lead to an increase of 1 of the CA economies GDP (CEPR 2012 p 27) However
some additional positive spill-overs were considered such as the impact on maritime
services that could help CA countries to better manage increased trade flows and at the
same time improving custom procedures (ECORYS 2009) On trade the report
highlighted trade value flow variations especially in CA with the impact on both EU export
and import value rather negligible (Ibid p 73)
The 2012 CEPR impact assessment argued that the EU-CA trade liberalisation triggered
overall positive effects especially when referred to key products both for the EU exports
to CA such as in agriculture products and goods originating from manufacturing activities
(eg cars and medication) and EU imports from CA primarily food products where the
FTA proposed to half tariff levels compared to the previous GSP level access in place (CEPR
2012 pp 10-11)
According to the SIA banana exports from CA to the EU were expected to benefit from
more advantageous market access conditions Regarding NTMs bilateral trade facilitation
and border-related barriers should be eased simplified and rationalised Consequently
trade costs were expected to decrease remarkably The econometric analysis showed that
the economic effects of the EU-CA FTA were not expected to be equally distributed among
the CA countries given the economic heterogeneity of the region (ECORYS 2009 Lima et
al 2009 CEPR 2012 European Parliament 2018) Vegetable fruits and nuts sector (VFN)
together with sugar cane showed the most promising results (IIDE 2007 p17) although
the positive effects were not equally shared among the CA members with Panama
benefitting the most Manufacturing production in CA was estimated to benefit from the
deal (+20) Electronic equipment would also take advantage of the FTA especially in El
Salvador Honduras and Costa Rica (CEPR 2012 p 31) Transport equipment insurance
services and other manufacturers were expected to decline
On the EU side the projections estimated that
Output in the sector of vegetables fruits and nuts as well as electronic equipment was
expected to decrease modestly (CEPR 2012 p 29)
The EU was estimated to increase output in grains other agriculture and additional
categories of primary food (ECORYS 2009 pp 44)
A limited price decrease for processed food grains and vegetables other agriculture
and beverages and tobacco was expected (Ibid p 44)
Overall in the EU literature in any scenario ranging from partial to full liberalisation an
increase of trade volume as result of the AA was projected (European Parliament 2018
p 43)
A study presented at the Twelfth Annual Conference of the Global Economic Analysis in
2009 and eventually incorporated in a 2010 publication on Latin America assessed the
likely effects of the EU-CA FTA for three scenarios full liberalisation partial liberalisation
excluding sensitive products on both sides (namely fruits and vegetables meat beverages
and tobacco other processed food) and liberalisation considering only fruits and vegetables
as sensitive in the EU (Lima et al 2009 p 1) The application of different models revealed
that the most economically advantageous scenario was the first one leading to an
expansion of exports in all signatory countries and positive effects on overall CA welfare
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 27
The second scenario would lead to a smaller economic impact with a more modest trade
expansion (12) and some welfare losses Finally in the scenario foreseeing the EU
excluding only fruits and vegetables the ldquoresults for trade and product remain positive
but with smaller figuresrdquo (Lima et al 2009 p 1) In conclusion a deeper liberalisation
would favour both regions by enhancing exports by between 1 and 5 in all the CA
countries (Lima et al 2010)
The Commissionrsquos annual FTA implementation reports describe trade flows between the EU
and CA after the conclusion of the FTA and demonstrate an overall upward trend for certain
countries and for specific sectors Trade flows remained rather stable in 2014 increased
by 12 in 2015 decreased marginally by 07 in 2016 grew by 72 in 2017 by 66
in 2018 and by 7 in 2019 With the exception of 2017 the EU maintained surplus in
trade with CA (Commission 2015a 2016 2017a 2018a 2019d 2020a)
The Central American literature generally focused on the role played by agricultural exports
in CA domestic economies and on the potential impact generated from the EU-CA FTA on
export transformation and diversification (Zabalo et al 2019) The likely impact of the EU-
CA FTA varied among the countries and the industries considered (ECORYS 2009) A study
carried out in 2018 aiming at analysing the effects on Panamarsquos economy by adopting a
shift-share analysis model concluded that between 2013 and 2016 the Panamanian exports
(mainly transport equipment and agricultural products) to the EU showed a downward
trend by 32 for the selected years mainly due to the decrease of primary exports to
some EU countries including Germany Belgium Italy Greece Poland and Sweden (Mejia
et al 2018) Likewise the local press has highlighted both advantages and disadvantages
generated by the EU-CA FTA for the whole region (De Leograven 2006 Barquero 2016
Rodriguez 2017) While it was considered that tariff removal triggered by the Agreement
could boost banana exports to the EU therefore inducing positive externalities for the
whole region especially for Costa Rica excessive specialisation in agricultural products
and insufficient diversification of export destinations could cause negative effects for the
local economy (Barquero 2016 Rodriguez 2017) Finally the press flagged the pros and
cons of regional integration requirements posed by the EU to CA The EU request to
negotiate as a unified bloc and to speak with a single voice led to long sensitive and
complex domestic negotiations within CA which came only to a partially accepted joint
approach towards trade talks (De Leoacuten 2006) A comparison of estimated economic effects
of the Agreement has been provided in Annex A3-1
The social impact considerations were closely linked to the economic ones since the EU-
CA FTA effects on trade would also influence the levels of employment in the affected
sectors The employment changes triggered by the EU-CA FTA in the EU were expected to
be negligible owing to the relatively modest role played by CA in the EU trade with the
rest of the world As an additional consequence also the level of EU wages should not be
affected much by the Agreement (CEPR 2012 p 28) In CA more significant incentives
to reallocation between sectors caused by ldquopull-factorsrdquo were likely to occur where export-
oriented sectors would benefit most from the EU-CA FTA and where rises in wages were
expected Employment in textile industry in Nicaragua Guatemala Honduras and El
Salvador was expected to decline The full liberalization scenario (IIDE 2007 p 17) was
expected to lead to increases in wages while also prices would rise by 05 (CEPR 2012
p 28) In Nicaragua and Costa Rica wages were expected to rise by 02 and 13
respectively while Panamanian wages would drop marginally (ECORYS 2009 pp 75-77)
The implementation of the International Labour Organisation (ILO) conventions in the EU-
CA FTA legal framework would also have a positive impact on social issues in CA such as
elimination of child labour and force labour and reduction of gender inequality However
the literature underlines a general lack of analyses of the EU-CA FTA impact on poverty in
CA since its implementation (European Parliament 2018 (a) p 45) As described above
the effects were expected to vary among the CA countries with El Salvador Nicaragua
and Honduras experiencing a relatively more impactful drop in levels of poverty than in
Page 28
Costa Rica Finally likely consequences on poverty equality education health and gender
issues in the EU were found to be negligible unlike in CA where small and indirect effects
were expected in terms of investments in health incentives through innovation brought by
technology dissemination and an overall positive impact on inclusiveness driven by the
Agreement (ECORYS 2009 pp 76-80)
On the environmental aspects the literature contributions can be split into two main
groups featured by contrasting interpretations on the EU-CA FTA impact Ultimately the
effectiveness of the TSD chapter will depend on the willingness of the involved government
to implement the EU-CA FTA provisions (EPRS 2018)
On the one hand the SIA and other studies flagged the likely harmful repercussions on
greenhouse gas emissions (GHG) stemming from agriculture fishing trade and transport
activities resulting from the EU-CA FTA application having a limited impact on the EU share
of CO2 emissions and a more tangible effect on some CA countries such as El Salvador
Honduras and Costa Rica in the long run (Alianza por la Solidaridad 2019 FAO 2013)
Moreover the increased agricultural activities resulting from the economic effects of the
EU-CA FTA (eg coffee melon sugar cane and peanut production) factories activities (eg
production of biofuels in Guatemala) as well as factoriesrsquo waste and maritime transports
could pose a threat to biodiversity and deforestation which could constitute a serious issue
owing to a large share of local biodiversity concentrated in CA especially if waste would
not be adequately managed (ECORYS 2009 pp 81-83 Zabalo et al 2019 FAO 2013
Monserrat et al 2011 OXFAM 2016 Rosa Luxembourg Stiftung 2010 Ruerd 2018)
On the other hand a share of the existing literature emphasised the opportunities for CA
countries originating from the EU-CA FTA This would be the case of Costa Rica which
would improve the national environmental regulatory framework mainly in relation to the
use of agrochemicals with likely positive impact for the environment since pineapple
production plays an important role in local economy (Esquivel 2020) A FAO study argued
that international trade in coffee (in particular exports to the EU) has improved the overall
environmental sustainability in CA The EU being the largest consumer of coffee worldwide
its (increasing) requirements on the sustainability of the coffee chain benefited the
adoption of environmental standards by the sector As a consequence coffee producers
are now required to provide more extensive and detailed certifications proving they comply
with environmental standards Therefore they have been paying more attention to
environmental aspects than before (FAO 2020)
A 2017 study (CEPAL 2017) investigated the impact of a CO2 tax on CA GDP Overall the
estimations indicated a negative impact of a carbon tax on GDP and the extent to which it
was found to impact the various local economies depended on the amount of the tax itself
Indeed an average tax value of 69 USD per tCO2e was found to impact the GDP by 062
A range between 5 and 10 USD would be optimal for Honduras and Nicaragua whereas a
tax between 20 and 50 USD would be optimal for Costa Rica El Salvador Guatemala and
Panama (CEPAL 2017)
Finally regarding human rights the EU-CA-FTA impact is difficult to assess for the region
as a whole since the intra-regional development varies a lot and it is difficult to discern
whether the CA movement towards a better respect for international standards on labour
and social rights depends on the implementation of the Agreement (European Parliament
2018 p 44) For example several experts and policymakers argue in favour of a stronger
enforcement mechanism of the TSD chapter (EPRS 2018) Its provisions referring to the
ILO conventions do not ensure the same level of labour and human rights protection as
the GSP+ mechanism (EULAC 2011) Overall despite some positive developments the
implementation of the TSD provisions led to a limited impact on the key challenges in the
CA region such as child labour freedom of association social dialogue or unpaid overtime
(EPRS 2018) The CA Womenrsquos Network also reported insufficient participation of women
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 29
during the negotiation process and it highlighted the risks of women subordination if strong
provisions on gender equality are not put in place (CAWN 2007)
5 DESCRIPTION OF THE EU-EU-CA FTA (TASK 5)
51 Structure of the EU-CA FTA
The Agreement was initially signed in June 2012 by the EU and Central American countries
and the EU-CA FTA started its provisional application in 2013 It is in a process of
amendment through the Protocol of Croatiarsquos Accession to the Association Agreement
between the European Union and Central America which was signed in November 2020
(Joint Communique 2020) It allows Croatia to formally become part of the Agreement and
provides for amendments to some parts of the EU-CA FTA to account for the accession of
Croatia (eg Appendix 3 to Annex I related to special treatment of bananas Annexes
related to trade in services such as the lists of commitments on establishment cross-
border supply of services and reservations regarding the temporary presence of natural
persons for business purposes and Annexes related to Government procurement including
the list of contracting authorities etc) (European Commission 2020b)
Key features of the Agreement (Trade Pillar) can be summarised as follows Title by Title
Title I of the Agreement contains general principles provisions and definitions and
in particular defines the objectives of the EU-CA FTA which can be summarised as follows
(a) the expansion and the diversification of trade in goods between the Parties through
the reduction or the elimination of tariff and non-tariff barriers to trade (b) the facilitation
of trade in goods through in particular the agreed provisions regarding customs and trade
facilitation standards technical regulations and conformity assessment procedures as well
as sanitary and phytosanitary measures (c) the liberalisation of trade in services in
conformity with Article V of GATS (d) the promotion of economic regional integration in
the area of customs procedures technical regulations and sanitary and phytosanitary
measures to facilitate the circulation of goods between and within the Parties (e) the
development of a climate conducive to increased investment flows the improvement of
the conditions of establishment between the Parties on the basis of the principle of non-
discrimination and the facilitation of trade and investment among the Parties through
current payments and capital movements related to direct investment (f) the effective
reciprocal and gradual opening of government procurement markets of the Parties (g) the
adequate and effective protection of intellectual property rights taking into consideration
the differences between the Parties and the promotion of technology transfer between the
regions(h) the promotion of free and undistorted competition in the economic and trade
relations between the Parties (i) the establishment of an effective fair and predictable
dispute settlement mechanism and (j) the promotion of international trade and investment
between the Parties in a way that contributes to the objective of sustainable development
through joint collaborative work (Article 78)
Title II covers trade in goods and comprises the following chapters (1) market access
for goods which lays down provisions on the elimination of customs duties elimination of
export and import restrictions and export taxes and provisions on agricultural subsidies
(this is complemented by Annex I outlining schedules for elimination of customs duties
Annex II which concerns the definition of the concept of originating products and methods
of administrative cooperation Annex IV - special provisions on administrative cooperation
and Annex V on management of administrative errors) (2) trade remedies which discusses
anti-dumping countervailing and multilateral safeguard measures bilateral safeguards
and the applicable procedures (3) customs and trade facilitation which increases
transparency and promotes the facilitation of trade by simplifying customs procedures and
the adoption of risk management systems for customs inspections (it is complemented by
Annex III on mutual administrative assistance in customs matters) (4) TBT - technical
barriers to trade aiming at facilitating trade by identifying preventing and eliminating
Page 30
unnecessary barriers related to development adoption and application of standards
technical regulations and conformity assessment procedures it also reaffirms rights and
obligations under the WTO TBT Agreement foresees cooperation in market surveillance
transparency through the notification procedures and approach to marking and labelling
avoiding unnecessary burdens while ensuring that all necessary and accurate information
is provided (5) sanitary and phytosanitary measures which aims at protecting human
animal or plant life or health while avoiding unjustified barriers to trade it reaffirms rights
and obligations under the WTO SPS Agreement recognises concepts standards and
recommendations adopted by relevant international organisations (World Organisation for
Animal Health and International Plant Protection Convention) and foresees exchange of
information and cooperation by the Parties incl in cases of emergency (it is complemented
by Annex VI identifying competent authorities Annex VII defining requirements and
provisions for approval of establishment of products of animal origin Annex VIII setting
out guidelines for conducting verifications and Annex IX with points of contact) (6)
exceptions related to goods
Title III covers trade in services establishment and electronic commerce and is
complemented by annexes that detail the Partiesrsquo commitments according to the four
modes of supply or provide information Annex X includes commitments on establishment
(Mode 3) Annex XI lists commitments on cross-border supply of services (Modes 1 and
2) Annex XII outlines reservations regarding temporary presence of natural persons for
business purposes (Mode 4) Annex XIII lists commitments of the Republics of the CA Party
regarding key personnel and graduate trainees Annex XIV lists their commitments on
business service sellers and Annex XV provides a list of the relevant enquiry points
Title IV concerns liberalisation of current payments and movement of capital and
stipulates that the Parties shall authorise payments and transfers on the current account
between the Parties as well as transactions and capital movements related to foreign direct
investment and related transactions including liquidation and repatriation of investments
and profits It also envisages exceptions such as circumstances where payments and
capital movements cause or threaten to cause serious difficulties for the operation of
exchange rate policy or monetary policy or the liquidity of the economy in which case
the Parties may temporarily adopt safeguard measures)
Title V covers government procurement and is complemented by Annex XVI which
details the commitments of Parties in this area (eg procuring entities covered coverage
of procurement contracts under the Agreement media used for tender procedures and key
features of the process for awarding procurement contracts) The Agreement provides for
the Parties to have non-discriminatory access to public procurement procedures within the
scope of covered procurement and outlines general principles and rules for procurement
procedures (eg publication of notices participation in tenders technical specifications
documentation timeline awarding contracts etc) ensuring transparency and cooperation
Title VI covers intellectual property It reaffirms the Partiesrsquo commitments to various
relevant multilateral agreements (eg WTO TRIPS Agreement Convention on Biological
Diversity and Paris Convention for the Protection of Industrial Property) foresees exchange
of information and cooperation between the Parties in relation to technology transfer and
sets standards on the protection of intellectual property rights (IPR) including trademarks
geographical indications copyright and related rights industrial designs plant varieties
and patents The list of geographical indications to be protected is provided in Annex XVII
The Title also addresses enforcement measures for cases of infringement of IPR
Title VII concerns trade and competition in the economies of the Parties Under this
Title the Parties commit to adoption or maintaining comprehensive competition laws and
having appropriately equipped competition authorities They also consider as incompatible
with the Agreement the most harmful anticompetitive practices such as restrictive
agreements concerted practices abuse of dominance and concentrations of companies
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 31
that significantly impede effective competition The Title also stipulates that with regard to
state enterprises and designated monopolies there is no discrimination in exercised by such
entities regarding conditions under which goods or services are purchased or sold
Title VIII relates to trade and sustainable development It includes commitments to
effectively implement the eight ILO Fundamental Conventions and key multilateral
environmental agreements to which EU Member States and CA countries are Parties In
addition the Title includes specific provisions in relation to various thematic areas such as
sustainable forest management sustainable fisheries and trade supporting sustainable
development It establishes civil society advisory groups as part of institutional structure
and foresees a regular dialogue between the Parties and civil society incl in a dedicated
Civil Society Forum The Title also provides a dedicated dispute settlement mechanism
with government consultations consideration of the matted by the TSD Board and a Group
of Experts to examine the matter and formulate recommendation
Title IX relates to regional economic integration between the Central American Parties
and includes provisions on circulation of goods in trade between the EU and CA within the
EU and CA region respectively once a product entered their customs territory and when
the applicable rules and standards are met In this context the Title provides rules related
to customs technical barriers to trade and sanitary and phytosanitary measures (Annex
XX provides a list of CA technical regulations in the process of harmonisation)
Title X covers dispute settlement and outlines the related procedures including the
establishment of a panel its ruling and compliance
Title XI establishes mediation mechanism for non-tariff measures incl the selection
of a mediator the applicable procedure and implementation of the agreed solution
Title XII contains provisions on transparency and administrative procedures Among
other things the Parties commit to (i) ensuring that their measures of general application
(eg laws regulations judicial decisions procedures and administrative rulings) relating
to matters covered by the EU-CA FTA are promptly published or otherwise made readily
available to interested persons and (ii) providing reasonable opportunities for those
interested to comment on proposed measures and taking into account relevant comments
The Parties also commit to establish Points of Contact for matters related to EU-CA FTA
Title XIII addresses tasks of the institutional bodies in matters related to trade
ie the Association Council the Association Committee and specialised Sub-committees
(for details please see section 52 on the institutional set up)
Title XIV defines general exceptions to the Agreement related to the Partiesrsquo balance of
payments and taxation
52 Institutional set-up of the EU-CA FTA
The Association Council the Association Committee six Sub-committees and an Ad hoc
Working Group on Government Procurement (the latter not envisaged by the EU-CA FTA
but set up by the Parties in 2016) oversee the implementation of the Agreement
The Association Council established pursuant to Article 4 supervises implementation of
the Association Agreement it is composed of representatives of the EU and each of the six
CA countries has a decision-making power (binding upon the Parties) in cases foreseen in
the Agreement examines all major issues and questions of common interest It meets at
Ministerial level (or through representatives) at regular intervals not exceeding two years
In line with Article 345 when meeting to discuss matters under EU-CA FTA the Council
has the power to amend Annexes and Appendixes related to trade incl tariff elimination
schedules and goods included there originating products and methods of administrative
Page 32
cooperation Annex XVI (Government Procurement) Annex XVIII (Protected GIs) Annex
XIX (in relation to Article 306 animals animal-based products plants and plant-based
products subject to SPS measures) and Annex XXI (Sub-committees)
The Association Committee set up pursuant to Article 6 is responsible for the general
implementation of the Agreement and assists in this context the Association Council It is
composed of representatives of the EU and the six CA countries at the senior officialsrsquo level
and shall meet once a year to review the implementation It takes decisions foreseen in
the Agreement or delegated by the Association Council When acting within part IV of the
Agreement the Association Committee supervises work of Sub-committees established by
this part and may set up new ones prevents and resolves conflicts (without prejudice to
provisions related to the Dispute Settlement and Mediation Mechanisms) and recommends
decisions for adoption by the Association Council
The Agreement has also established six specialised Sub-committees
Sub-committee on Market Access for Goods (Article 91) is responsible for monitoring
the correct implementation and administration of the Trade in Goods Chapter and serves
as a forum for consultations about interpretation and application of its provisions It
examines proposals provided by the Parties regarding accelerated liberalisation of trade in
goods and tariff reduction as well as inclusion of additional goods into liberalisation
schedules It may make recommendations to the Association Committee on matters within
its remit and take any issue as and when instructed by the Association Committee
Sub-committee on Customs Trade Facilitation and Rules of Origin acting in line
with Article 123 monitors implementation of the Chapter and Annex related to the concept
of origin and methods of administrative cooperation It provides a forum to discuss and
consult all matters related to customs incl customs procedures valuation nomenclature
cooperation tariff regimes mutual administrative assistance in customs matters as well
as rules of origin It pursues cooperation on development application and enforcement of
customs procedures mutual administrative assistance in customs matters administrative
cooperation and rules of origin It examines requests for amendments of rules of origin
and submits to the Association Committee results of the analysis with recommendations
It also aims to enhance cooperation on capability building and technical assistance
Sub-committee on Technical Barriers to Trade (TBT) acting in accordance with Article
139 provides forum to discuss and consult any matter related to the Chapter and monitors implementation and administration of this Chapter facilitating exchange of information
and cooperation and promptly addressing any issue that either Party raises related to the
development adoption application or enforcement of standards technical regulations
and conformity assessment procedures It aims at solving any problems within the remit
of the Chapter that would limit trade between the Parties It encourages direct interaction
between non-governmental actors such as standard bodies accreditors and certifiers It
facilitates the exchange of information about the work being done in non-governmental
regional and multilateral fora engaged in activities related to technical regulations stan-
dardisation and conformity assessment procedures and explores ways to facilitate trade
between the Parties The Sub-committee has also power to review the Chapter in the light
of developments under TBT Agreement and reports to the Association Committee about
implementation of the Chapter including cooperation activities
Sub-committee on Sanitary and Phytosanitary Matters (SPS) acting in line with
Article 156 monitors implementation of the Chapter provides a forum for discussion and
consultation on any matter arising under the Chapter and an opportunity to seek mutually
acceptable solutions It may also develop procedures or arrangements facilitating
implementation of the Chapter It acts as a forum for consultations related to any measure
proposed by the EU which may affect its trade with any of the CA Parties and a forum for
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 33
dispute settlement under the Chapter The Sub-committee is also responsible for
promoting cooperation on animal welfare between the Parties
Sub-committee on Intellectual Property Rights (IPR) (Article 274) monitors
implementation of Article 231 (transfer of technology) and part of the IP Chapter related
to GIs including facilitating discussion about protection of GIsrsquo and recommendations to
the Association Committee regarding amendments to Annex XVIII on GIs It promotes
technology transfer from the EU to the CA Parties and defines priority areas in which
initiatives shall be directed regarding technology transfer research and development and
building-up human capital Its responsibilities include also keeping a registry of the
programs activities or initiatives in progress in the field of intellectual property with
emphasis on transfer of technology
Board on Trade and Sustainable Development (TSD) established pursuant to Article
294 reports to the Association Committee and oversees the implementation the TSD Title
incl cooperative activities undertaken under Title VI (Economic and Trade Development)
of Part III of the Agreement The decisions and recommendations of the Board shall be
adopted by mutual agreement between the Parties and be provided to the public unless
the Board decides otherwise
While EU-CA FTA does not envisage a Sub-committee on Government Procurement the
Parties concluded that it would be useful to have a dedicated body to address matters in
this area They decided to create a temporary Working Group that met for the first time
in June 2016 (European Commission 2017a)
53 Economic and political context of the EU-CA FTA negotiations and Partiesrsquo
priorities
The negotiations for an Association Agreement (AA) including a Trade Pillar between the
European Union (EU) and Central America (CA) started in 2007 We look at the bloc-to-
bloc trade and policy context the negotiation process and priorities from both sides
The region-to-region trade context
The CA group is composed by Costa Rica Guatemala El Salvador Honduras Nicaragua
and Panama and it is featured by internal economic and political dialogue which led to the
creation of the Central American Common Market (CACM) in the early 1960s Despite the
initial momentum the regional integration process has been stopped for decades due to
internal tensions and the effects of import-substitution trade strategies on local economic
growth (European Parliament 2012) Consequently the initial goal of setting up a custom
union failed and CACM succeeded only in establishing a free-trade area (Duran et al 2010)
The Central American integration efforts were revitalised through setting up of the Central
American Integration System (SICA) aimed at promoting democracy development peace
and freedom in the region (European Source Online 2016) SICA was formally established
on 13 December 1991 through the signature of the Protocol to the Charter of the
Organization of Central American States (ODECA) also known as the ldquoTegucigalpa
Protocolrdquo SICA established both a political and an economic institutional framework by
setting up the Central American Parliament and the Central American Bank for Economic
Development Despite these changes CACM remained the main forum for trade discussions
(European Parliament 2012)
The EU is one of the three most important CA trading partners It is challenging to draw
general and unified conclusions for the whole CA trade picture given its domestic
heterogeneity with Panama and Costa Rica being middle-income countries and Nicaragua
the poorest member (European Parliament 2018 p 18) The EU countriesrsquo share of import
from and export to CA accounted for 30 and 16 respectively in the mid-1980s Among
Page 34
the CA members Guatemala appeared as the most export dependent one while Panama
was the least trade-oriented country (CEPR 2012 pp 6-7) The role of agricultural
production within the respective economies differs widely between the two regions
Agricultural production is very important for CA especially in Honduras and El-Salvador
(38 of the national production) whilst it is relatively much less important in the EU (5)
The same complementarities can be found in manufacturing production (amounting to 18
of the EU production which is much higher than in CA particularly in Panama (4) and
Nicaragua (25) Services contribute to almost 23 of the EU Nicaraguan and Costa Rican
GDP while this share is only 53 for El Salvador (Ibid pp 6-7)
The negotiation process
The start of the economic and political dialogue between the EU and CA blocks dates back
to 1984 at the first conference of Foreign Ministers between the EU and CA countries in
Costa Rica In 1993 the EU and the CA countries signed a Framework Cooperation
Agreement which entered into force on 1st March 1999 (Acuerdo-marco de cooperacioacuten
1999) On the occasion of the EU-Latin America Summit held in May 2002 these countries
and the EU jointly expressed their willingness to reinforce their dialogue by concluding a
new Political Dialogue and Cooperation Agreement which was signed on 15th December
2003 in Rome (Acuerdo de Diaacutelogo Poliacutetico 2003)
The need to establish stronger trade relations even by setting up a free-trade area pushed
the EU and CA to explore the feasibility of an Association Agreement entailing also a specific
chapter on trade Such intention was clearly stated during the EU-Latin America summit of
Guadalajara (Mexico) in May 2004 (Declaration of Guadalajara 2004 p 8 point 52) and
one year later in May 2005 in the context of the EU-Central American Ministerial meeting
in Luxembourg On that occasion the parties launched a joint-assessment exercise on
regional economic integration and established an ad-hoc working party (Council of the
European Union XXI San Joseacute Dialogue Ministerial Meeting between the EU and Central
America 2005 p 2) Finally at the Vienna Summit of 2006 the parties opened the door
to an Association Agreement to create a free trade area (Council of the European Union
EU-Central American Summit 2006 pp 1-2 points 2 and 3) The summit also welcomed
the initiative of the Peace Building and Commission and Human Rights Council (Ibid p 2)
The green light for the beginning of the AA negotiations was given on 28th June 2007 in
Brussels (EU and the Central American Community start negotiations for a new Association
Agreement 2007) However the talks were temporarily suspended on 6th April 2009 and
then resumed a few days later on 24th April (Acuerdo de Asociacioacuten entre Centroameacuterica
y la Union Europea 2009) when the parties decided to re-initiate the negotiations
The negotiating partiesrsquo priorities
The negotiating strategy of the CA countries mainly pursued three goals
Strengthening their trade policy whose objective is to open up new markets for the
benefits of their local exporters The EU appears as a crucial partner for CA countries
as it ranks on top of the worldrsquos largest importers of agricultural products and the
relative share of developing countries has been rising over time in the EU trade balance
Reinforcing CA countriesrsquo export competitiveness and reducing costs of accessing the
EU market vis-agrave-vis competitors such as African-Caribbean and Pacific (ACP) countries
that benefit from preferential and better market access conditions
Attracting foreign direct investments in high value-added sectors where the EU applies
higher tariffs (Duran et al 2010 pp 96-99)
From the European side the main reasons driving towards the conclusion of the agreement
with CA are threefold
Promoting the developing countriesrsquo progressive integration into the world economy
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 35
Reaffirming the EUrsquos role in the world trade and in CA following the United States (US)
conclusion of the Dominican Republic Central American and the United States Free
Trade Agreement (CAFTA-DR) reaffirming the US role in the region
Better coordinating with partners on trade dossiers within the World Trade Organization
(WTO) and other international institutions (Ibid p 100)
The conclusion of the Agreement
The negotiation process delivered slow progress due to the inability of CA countries to
reach a unified position and owing to the delays in the regional integration (European
Source Online cit p3) The agreement was finally reached in May 2010 when the
negotiations were officially concluded during the Latin America-Caribbean and European
Union Summit in Madrid Following the legal scrubbing the European Commission reviewed
and approved the agreement prior to signature at the Meeting of the SICA Presidents in
Tegucigalpa Honduras on the 29th of June 2012 (European Commission Directorate
General for Trade 2012) The European Parliament finally endorsed the AA in December
2012 forecasting that the main gains for the European side would be in export of cars
machinery telecommunications chemical products and transports (European Parliament
2012 p 1) At the time of the AA signature in 2012 the EU-Central America trade in goods
accounted to EUR 149 billion and corresponded to 113 of the whole CA region trade
with the rest of the world (Griener and Membersrsquo Research Service 2014 p 5)
On that date the then EU Commissioner for Trade Karel De Gucht commented the
successful conclusion of the AA by stating that the ldquoregion-to-region deal will help establish
major business opportunities for both sides European exporters will save around EUR 90
million on customs per year and European service providers such as telecommunication
and transport will get greater market accessrdquo At the same time the agreement would
generate ldquospill-over effect on Central Americarsquos overall economic integration process and
contribute to the stability of the regionrdquo (European Commission Ibid p 1) The
Commission officially announced the provisional application of the FTA with Honduras
Panama and Nicaragua on 31st July 2013 with Costa Rica and El-Salvador on 1st October
2013 and with Guatemala on 1st December 2013
The trade provisions of the AA provisionally entered into force in 2013 as they fall within
the exclusive competences of the EU17 Once the entire text of the AA will be ratified by
the EU Member Statesrsquo parliaments the entire text will be legally binding and applicable
After joining the EU in 2013 Croatia is currently negotiating its accession to the AA
54 Operational context of the implementation of the EU-CA FTA
After having illustrated the main partiesrsquo priorities during the bloc-to-bloc negotiations this
chapter provides an overview of the broader context surrounding the negotiations and
implementation and describes the main regional actors as well as their respective trade
policy attitudes towards CA and Latin American countries (LAC) as a whole
Trade policy context the multilateral system and the global economy
Since the launch of the EU-CA negotiations the global trade policy context has undergone
deep changes The Doha Development Agenda stalemate due to incompatible views on
various issues at stake put great pressure on the global trading system The WTO
difficulties in reaching satisfying outcomes stem both from external causes such as the
decline of advanced economies regionalisation of trade and internal sources of tensions
17 Despite being considered as a bloc-to-bloc association agreement the incomplete CA regional economic integration and the failure in setting up a custom union among the CACM countries left unbalances and inconsistencies in accessing single CA countriesrsquo markets and different levels of external tariffs In light of these arguments CA cannot be considered as a fully integrated homogeneous and unified trade bloc
Page 36
embedded in unilateral tariff-cutting process (Baldwin 2016) Besides these tensions the
economic expansion of China and the ldquotrade warsrdquo between the US and China exploded as
of 2017 The recent stalemate of the WTO Appellate Body that halted the entire dispute
resolution process as well as the need to put sustainable development at the core of the
WTO agenda pushed the Commission to advance a new WTO reform proposal (European
Commission 2021) The WTO crisis led to a proliferation of bilateral FTAs and the EU
has been an active bilateral FTA actor globally (see Table 4
Table 4 Overview of the EU FTAs launched and or concluded since 2012
Start of Negotiations
Signatory CountryRegion
State of play of the agreement
Ratification
1999 Mercosur Concluded in 2019 Ongoing
2004 SADC Concluded in 2016 Entered into force in 2016
2007 Andean Community Concluded in 2010 Entered into force in 2013
2007 Ukraine Concluded in 2011 Provisionally applied since 2016 fully in force since 2017
2009 Singapore Concluded in 2019 Entered into force in 2019
2009 Canada Concluded in 2014 Provisionally applied since 2017
2010 Malaysia On hold na
2012 Moldova Concluded in 2013 Provisionally applied since 2014 fully in force in 2016
2012 Georgia Concluded in 2013 Provisionally applied since 2014 fully in force since 2016
2012 Vietnam Concluded in 2015 Entered into force in 2020
2012 Japan Concluded in 2018 Entered into force in 2019
2013 USA On hold na
2013 Morocco (DCFTA new) On hold na
2013 Thailand On hold na
2015 Philippines On hold na
2015 Tunisia (DCFTA new) Ongoing na
2016 Mexico (modernisation) Concluded in 2018 Ongoing
2016 Indonesia Ongoing na
2017 Chile (modernisation) Ongoing na
2018 Australia Ongoing na
2018 New Zealand Ongoing na
2019 United Kingdom Concluded in 2020 Ongoing
2020 ESA (extension) Ongoing na
Source compiled by the author
The EU trade and policy context
Trade picture
The EU maintains strong institutional dialogue with Central and Latin America
legitimised by historic cultural and linguistic ties with the region The EU Latin America
and the Caribbean (LAC) bilateral summits have been regularly held since 1999 gathering
33 members from the two counterparts In 2006 the EU-Latin America Parliamentary
Assembly (EuroLat) was set up and it was conceived as the parliamentary angle of the EU-
CA bilateral partnership (EPRS 2017 p 5)
From a trade perspective the EU-Central and Latin America (comprising Andean
Community CA Cariforum Mercosur Mexico and Chile) trade peaked at EUR 2287 billion
in 2014 before showing a downward trend and decreasing at EUR 2132 billion in 2015
corresponding to 61 of the whole EU trade that year (EPRS 2017 p 6) The EU total
share of LAC trade fluctuated around 14 and the EU remained the first investor in the
region in the last ten years (EEAS 2018) An analysis carried out by the European
Parliament in 2020 unveils that the EU-LAC trade in goods value grew by 22 from 2008
to 2018 (Tvevad 2020 p 18) According to the 2020 DG Trade Report (data from 2019)
on the Implementation of EU FTAs trade flows between the EU and CA showed a robust
growth Indeed trade in goods increased by 88 with respect to the 2018 performance
imports continued growing over the past five years and exports statistics indicated an
overall upward trend with the exception of 2016 (European Commission 2020a p 110)
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 37
In 2010 the EU was the second CA trading partner behind the United States (US)
accounting for 94 of the regionrsquos overall trade with the rest of the world (European
Commission 2011 p 4) Among the main exporters to the EU Costa Rica ranked first
with 539 of the total CA exports to the EU Conversely the EU exports went primarily
to Costa Rica (363) Guatemala (281) and El Salvador (152) (Ibid p 4) The EU-
CA trade is marked by the supply of primary products to the EU (mainly agricultural
products such as coffee and bananas) in return for high-technology manufactures
especially machinery transport equipment chemicals and manufactured goods (Duran et
al 2010 pp 95-96 European Parliament 2012 p 9) The CA share in the EU trade was
modest accounting only for 05 of overall EU imports in 2011 and for 03 of the total
EU exports in 2011 (European Parliament 2012 p 8) In addition the EU applied tariffs
on various agricultural products imported from third countries The exclusion of both coffee
and bananas from the EU Generalized System of Preference (GSP) and the GSP+ schemes
prevented these products from benefitting from tariff-reduction from the European side
hampering their access to the EU market and leaving their prices to be influenced by world
trade fluctuations (Duran et al 2012 p 98) The 2019 data confirmed primary products
rank largely first among SITC products grouping exported from CA to the EU accounting
for 721 of the whole exports followed by manufactures with 27 (European
Commission 2019 p 4) Recent statistics highlight the main destination of EU export
continued to be Panama (up to 118 since 2018) whereas the main country of origin of
EU imports is Costa Rica with an increase by 63 from 2018 (European Commission 2020
p 112)
The previous EU trade policy strategy adopted in 2015 (ldquoTrade for Allrdquo) confirmed that
ldquothe FTAs with Peru Colombia Ecuador and Central America are creating new dynamics
for trade and investmentsrdquo (European Commission 2015 p 33) As set out by that trade
policy strategy the Commission should pursue three main priorities with regard to Latin
and Central America ldquo[Continuing] negotiations for an ambitious balanced and
comprehensive FTA with Mercosur ldquoRequesting negotiating directives to modernise the
FTAs with Mexico and Chilerdquo ldquoBe ready to consider investment agreements with key Latin
American countriesrdquo (Ibid p 33)
As evidence for the increasingly robust commitment in the region the EU negotiated trade
deals with 27 out of the 33 LAC countries to strengthen both bilateral and region-to-region
relations the EU actively engaged LAC by signing new and modernising older EU-LAC FTAs
(see Table 5)
Table 5 EU FTA in Latin America and participating countries
Agreement Countries Negotiation launch
Negotiations Conclusion
EU-Andean Countries Colombia Ecuador Peru 2007 2010
EU-Caribbean (CARIFORUM)
Antigua and Barbuda Bahamas Barbados Belize Dominica Grenada Guyana Jamaica Saint Lucia Saint Vincent and the Grenadines Saint Kitts and Nevis Suriname Trinidad and Tobago and the Dominican Republic
2002 2008
EU-Central America Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
2012 2010
EU-Chile na 2017 na
EU-Mercosur Argentina Brazil Paraguay Uruguay 1999 2019
EU-Mexico na 2016 2018
Source Compiled by the author
Regarding civil society the trade chapter of the EU CA FTA did not receive a lot of public
attention and consequently has not been affected by a high level of politicisation within
the EU This might stem from the relatively lower importance of trade relations with CA for
the EU Likewise the agreement did not catch a lot of public attention either in CA where
Page 38
the media coverage mainly focused on the Central America Free Trade Agreement (CAFTA)
Nevertheless both the agreements were targeted by NGOs and trade unions sharing the
same criticism and concerns over biodiversity pharmaceutical product access and
exploitation of natural resources (European Parliament 2011 p 16)
Political Dialogue
To frame the most recent developments in the EU LAC political dialogue it is worthy to list
three key documents forging the EU foreign policy towards LAC
The European Parliament Resolution on the Political Relations with Latin
America passed in 2017 advocating for a stronger more coherent and reinforced
relations with this region by stressing the need to update and develop a more
comprehensive and ambitious EU strategy to address the emerging challenges linked
to fundamental freedoms human and social rights safety of minorities migration
issues corruption tax fraud and security (European Parliament 2017)
The Joint Communication adopted by the European Commission and the High
Representative for Foreign Affairs (HRVP) in 2019 titled ldquoEuropean Union Latin
America and the Caribbean joining forces for a common futurerdquo aimed at deepening
the EU-LAC relations in a fast-changing context by emphasizing four mutually important
priorities prosperity democracy resilience and effective global governance (European
Commission 2019)
The Council of the EU Conclusions of 13th May 2019 endorsing the strategy laid
out in the Joint Communication On that occasion the Council welcomed the four points
described above and added more areas for action such as to work more closely in the
multilateral framework consolidate economic and social resilience enhance shared
prosperity and assist in promoting structural reforms (Council of the EU 2019)
The 2020 EU 27 ndash Latin America Informal Meeting reaffirming the need to advance
bilateral region-to-region summit to strive for a stronger multilateral system identified
mainly in the United Nations and the World Health Organisation (WHO) especially in
the light of the COVID-19 pandemic outbreak (Federal Foreign Office 2020)
Within the framework of the AA the EU and CA agreed to cooperate on a wide range of
policy dossiers of mutual interest namely conventional weapon disarmament the
implementation of the Convention on the Prohibition of the Use Stockpiling Production
and Transfer of Anti-personnel Mines and on their Destruction as well as the Convention
on Certain Conventional Weapons and its protocol (European Parliament 2011 p 7)
On development cooperation the EC regional strategy 2014-2020 earmarked EUR 925
million funding for Latin America to be allocated in two components
Component 1 ldquoMultiannual Indicative Programme for continental activities with Latin
Americardquo accounting for EUR 805 million and devoted to Argentina Bolivia Brazil
Chile Colombia Costa Rica Cuba Ecuador El Salvador Guatemala Honduras Mexico
Nicaragua Panama Paraguay Peru Uruguay and Venezuela
Component 2 ldquoMultiannual Indicative Programme for Sub-Regional Cooperation with
Central Americardquo funded with EUR 120 million focused on Central American countries
Costa Rica El Salvador Guatemala Honduras Nicaragua and Panama This component
included three areas for action ie support for regional economic integration support
for the Regional Security Strategy and support for Regional Climate Change Strategy
and the Central American Policy on Comprehensive Disaster Risk Management (EEAS
European Commission 2014)
The Central American trade policy context
Regional Context
Beside their membership in the Central American Common Market (CACM) and the WTO
the CA countries have been signing additional free trade agreements with other regional
and international partners since 2012
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 39
It should be also noted that Panama joined the Latin American Integration Association
(LAIA) in 2012 LAIA replaced the Latin America Free Trade Agreement (LAFTA) signed in
1960 and sought a deeper economic integration among the member states18 Also
Nicaragua applied for the LAIA membership in 2011 and its request was accepted by the
LAIA Council of Minister in August 2011 Nicaragua is currently advancing in fulfilling the
LAIA membership requirements No other CA countries are members of LAIA yet
Table 6 summarises bilateral FTAs and Preferential Trade Agreements (PTAs) signed by the
6 CA countries or being in force since 2011
Table 6 Overview of the CA bilateral FTA and PTAs network (2011 - 2021)
Costa Rica Guatemala El Salvador
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Colombia (signed in 2013 entered into force in 2016)
Mexico (signed in 2011 entered into force in 2013)
Peru (signed in 2011 entered into force in 2013)
Singapore (signed in 2010 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
Ecuador (PTA) (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs signed but not entered into force yet South Korea (signed in 2018) EFTA (signed in 2013)
FTAs signed but not entered into force yet EFTA (signed in 2013) Ecuador (signed in 2011) Peru (signed in 2011)
FTAs signed but not entered into force yet South Korea (signed in 2018)
Honduras Nicaragua Panama
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Peru (singed in 2015 entered into force in 2017)
Canada (signed in 2013 entered into force in 2014)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2011 entered into force in 2013)
FTAs entered into force United Kingdom (signed in
2019 entered into force in 2021)
Mexico (signed in 2014 entered into force in 2015)
Peru (signed in 2011 entered into force in 2012)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet South Korea (signed in 2018)
FTA signed but not entered into force yet Israel (signed in 2018) South Korea (signed in 2018) Colombia (signed in 2013) EFTA (signed in 2013) Trinidad amp Tobago (PTA)
(signed in 2013)
Source Compiled by the author
Other influential partners in CA
As illustrated by Table 7 three actors retain significant economic influence in CA and Latin
America as a whole the EU the US and China The following section will examine these
actors and their respective trade policies towards CA and Latin America by describing their
posture as well as the agreements in force
18 Argentina Bolivia Brazil Chile Colombia Cuba Ecuador Mexico Paraguay Panama Peru Uruguay Venezuela
Page 40
Table 7 EU total trade in goods with LAC and LAC top trading partnersrsquo ranking
SubregionCountry
EU total trade in goods (value in EUR billion)
Ranking of main trading partners for trade in goods
2016 2019
2016 2019 USA China EU19 USA China EU27
Andean Community 3 250 246 1 2 3 1 2 3
ACP ndash Caribbean 15 81 116 1 3 2 1 3 2
Central America 6 108 121 1 3 2 1 3 2
Chile 159 166 3 1 2 2 1 3
Mercosur 4 849 771 3 2 1 3 1 2
Mexico 538 618 1 2 3 1 2 3
Source EPRS 2017 p 6 and DG Trade statistics 2020
The US remains the key CA partner The US is the major source of Foreign Direct
Investments (FDI 273) and Official Development Aid allocating an annual average of
approximately USD 1600 million during the Trump Administration (2016-2020)
(Congressional Research Service 2021) Moreover the US rank on top of CA migrant
destinations (Belladonna 2019) The CA countries have been cultivating thorough relations
with the US as they represent the historical destination of over 40 of the regionrsquos
exports Furthermore the 2004 Dominican Republic - Central America Free Trade
Agreement (DR-CAFTA) granted preferential market access conditions to the region (Office
of the US Trade Representative 2004 and Duran et al 2010 p 93) In light of the strong
power exerted by the US the EU trade strategy pursued a progressive rebalancing of the
US presence in the area to ensure better market access in the region (EPRS 2017 p 5)
The DR-CAFTA negotiations confirmed that labour standards sugar and textile products
treatment pharmaceutical data protection and sovereignty issues were the most
controversial and sensitive matters on the table Unlike the EU-CA AA it should be noted
that the DR-CAFTA does not build any common trade framework for all the signatories as
the US grants differentiated market access conditions to each single CA country (European
Parliament 2012 p 11)
In the last few years China has been playing a role of growing importance in CA and in
Latin America both from a political and trade viewpoint (European Commission 2020 p
15) In recent years China has reinforced its role as trading partner within CA As evidence
for this active involvement the 2000-2010 data already confirmed the Asiarsquos importance
(led by China) both in terms of imports and exports in Latin America and Caribbean20
Indeed the China share of the regionrsquos total exports by destination grew from 11 in
2000 to 83 in 2010 with regard to imports by destination the growth appears even
more remarkable moving from 18 in 2000 to 133 in 2010 (Kuwayama amp Rosales
2012 p 66) whilst the relative share of the US presence has shown a downward trend
(Ibid p 65) The monthly exports to Asia-Pacific21 region more-than-doubled from an
average value of USD 54 billion in 2006 to USD 162 billion in 2014 (Baacutercena Prado
Rosales Peacuterez 2015 p 23) After a slight decline experienced in 2016 a solid rebound
emerged in 2017 On average goods shipment from Asia-Pacific Latin America grew by
136 yearly between 2000 and 2016 (Scotiabank 2018 p 1)
Beside trade China has been recently advancing its Belt and Road Initiative (BRI) in
the region by concluding numerous Memoranda of Understanding (MoU) with various LA
19 Including the United Kingdom 20 Data refers to Argentina Bolivarian Republic of Venezuela Brazil Chile Colombia Costa Rica the Dominican
Republic Ecuador El-Salvador Guatemala Honduras Mexico Nicaragua Paraguay Peru Plurinational State of Bolivia
21 The Asia-Pacific region includes Australia Brunei Darussalam Cambodia China South Korea Philippines Hong Kong Japan Laos Thailand Taiwan Indonesia Malaysia Myanmar New Zealand Singapore and Vietnam
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 41
and CA countries To mention some Bolivia (2018) Costa Rica (2018) Chile (2018) and
Panama (2017)
6 CONSULTATIONS (TASKS 6 AND 7)
61 Consultation Strategy
The consultation strategy presented in the technical offer has been refined during the
Inception Phase (Task 6) and is outlined in Annex B Box 2 summarises our expectations
regarding the main inputs expected from stakeholders throughout the study
Box 2 Expectations regarding inputs from stakeholders
Inputs from stakeholders are expected at all stages of the study
The study team will welcome in particular Responses to the online public consultation Consultation with businesses (responses to the online business survey) Evidence of specific casesexamples on how the Agreement has affected economic performance
sustainable development and human rights both in Central America and in the EU Contributions will be particularly welcome in relation to the priority areas of analysis o Impact of the Agreement on trade diversification (in terms of goods and services traders regions
involved in trade etc) (see Task 101) o Impact on investment climate and investment flows (see Task 102) o Impact of the Agreement on SMEs (see Task 1012) o Effects of the implementation of the TSD chapter (see Task 111) o Performance of the institutions established under the TSD chapter (see Task 112) o Impacts of the Agreement on pillars of Decent Work Agenda working conditions labour standards
social protection other public policies and labour inspection (see Task 114) o Impacts on the informal economy and informal employment (see Task 115) o Environmental impacts (see Task 116) and o All of the case studies
Written contributions (positions) expressing views on how the Agreement has affected economic performance sustainable development and human rights across the parties in particular with regard to ndash but not restricted to ndash the analytical priority areas
Indication of relevant publications that focus on the impact of the Agreement in the partner countries Indication of actions taken by CA in areas covered by the TSD chapter (eg changes in policies action
plans strategies and legislation in the areas of labour environment and climate change ratification and implementation of international conventions in these areas and civil society engagement)
Written comments on the draft Inception Report draft Interim Report and draft Final Report Proposals for and comments on draft conclusions and recommendations of the report including how to
improve operation of the Agreement (if needed) Names of organisations or indication of vulnerable groups that may have been affected by the
Agreement in the partner countries as well as relevant contact details for the evaluation team to reach out to the most relevant additional stakeholders
62 Study Website and Electronic Communications
The establishment and continuous updating of a website as well as ongoing electronic
communications with stakeholders are one element of the consultation strategy During
the inception phase the website has been established and launched and an initial e-
communication will be sent out to identified stakeholders (Task 5) The website is available
at httpcentral-americafta-evaluationeu
Electronic communication with stakeholders will take place through email newsletters as
well as Twitter using an account for this ex-post evaluation (CaEvaluation) Twitter will
be used as well to present the (draft) findings at specific moments in the study interested
related work or articles highlights or relevant quotes from the consecutive study reports
and promote the various outreach activities such as workshops LinkedIn will be used to
complement twitter with the same objectives the account of LinkedIn to be used will be
Ex-Post Evaluation EU-Central America FTA Email and an electronic newsletter will be used
as complementary tools to reach specific stakeholders throughout the study to inform them
Page 42
of events to send questions receive feedback and make appointments for interviews the
email used will be central-americabkp-advisorscom
With the COVID-19 pandemic still in place and governments imposing new lockdowns and
travel restrictions a back-up plan is available in case a lot of the communication has to be
done online The meetings with the EU and CA stakeholders both government and civil
society in the near future will be held online For the second half of the year and beginning
of 2022 face-to-face meetings may also be an option The advantage of digital outreach
is linked to reduction of travel time and travel costs to the minimum and in addition digital
follow-up is easier The public consultation and online business survey are already being
prepared and planned with an indicative timeline of online availability between June and
September 2021 The workshops envisaged for Central America in November 2021 are
currently planned with options ranging from face-to-face meetings over hybrid solutions
to holding them entirely online In either case we will ensure they are as interactive as
possible thanks to the use of breakout rooms and platforms enabling participants to ask
questions and participate in polls online We will also ensure that participants will receive
sufficient information before workshops
7 CASE STUDY SELECTION AND METHODOLOGY (TASK 13)
71 Case Study Selection
As part of the evaluation ten case studies will be prepared Their purpose is to capture the
impact of implementation of the EU-CA FTA on sustainable development in its economic
social and environmental dimensions as well as on human rights (including labour rights)
They should complement the economic social environmental and human rights analysis
required under Tasks 10 11 and 12
Regarding the geographic coverage the ToR require two case studies focused on the EU
two horizontal case studies for the whole region of Central America and six dedicated to
each of the Central American countries
Table 1 provides a preliminary list of suggested case studies while their exact focus and
scope will be determined at the next stage of the study further to preliminary impact
analysis and identification of relevant information and data sources
Table 8 List of proposed case studies
No Case study topic Geographical focus Key impact areas
1 Impacts of the Trade Pillar on EU banana producers EU incl OR as well as ACP and LDCs due to preference erosion
Economic and Social
2 Trade in environmental goods and services (opportunities for the EU and partner countries)
EU CA partner countries22
Economic and Environmental
3 Impacts of the Trade Pillar on freedom of association in sectors involved in trade with the EU (the choice of sectors will be made further to the initial impact analysis)
CA partner countries notably Guatemala Honduras and El Salvador
Human rights and Social
4 The effects of the Trade Pillar on sustainable aquaculture in Honduras Nicaragua Costa Rica and El Salvador
Partner countries with a focus on Honduras Nicaragua Costa Rica El Salvador
Economic Social Human rights and Environmental
5 Opportunities created in services sector in particular the green energy sector in Costa Rica (the choice of the services sector will be reviewed based on the initial impact analysis)
CA partner countries Economic and Environmental
22 The ultimate selection of countries will depend on the outcome of the (environmental) impact screening and scoping exercise
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America ndash Inception Report
Page 43
No Case study topic Geographical focus Key impact areas
6 Impacts of the Trade Pillar on child labour and childrens rights
El Salvador Social and Human rights
7 Impacts of the Trade Pillar on the environment (eg forests and biodiversity) in Guatemala the case of palm oil
Guatemala Environmental
8 Impacts of the Trade Pillar on MSMES and sustainable agriculture in the coffee industry (organic coffee) in Honduras
Honduras Economic and Environmental
9 Impacts of the Trade Pillar on women and gender equality notably in agricultural value chains in sectors exporting to the EU (the sectors may include coffee ground nuts and banana however the final selection of sectors and scope will be made based on data availability and the initial impact analysis)
Nicaragua Social and Human rights
10 Implementation and effect of the FTZ in port of Colon including aspects related to direct transportation clause
Panama Economic
72 Case Studies ndash Summaries and Methodologies
Descriptions of case studies and planned methodologies have been provided in Annex A5
8 STUDY WORK PLAN
A detailed study schedule which sets out activities and deadlines for outputs indicated
throughout this Inception Report is outlined in the chart overleaf A detailed plan for the
consultation programme is provided in Annex A4 Annex A6 provides the risk management
approach for the evaluation
Page 44
Phase task deliverable
Inception phase
Kick-off meeting with Commission in Brussels 20
Task 1 Refine draft intervention logic diagram
Task 2 Define and develop the methodological approach
Task 3 Review existing studies amp reports on trade between the EU and CA (6 countries)
Task 5 Provide a concise description of the agreement
Task 6 Create a website dedicated to the evaluation
Task 7 Stakeholder consultation strategy
Task 13 Case study proposals
Inception reporting
Drafting of inception report
Draft Inception Report 22
Review meeting Commission ISG
Finalisation of the Inception Report
Inception Report
Interim phase
Task 4 Provide a concise summary
Task 8 Undertake consultation activities
Civil society dialogue in Brussels (budgeted under review meetings)
12-week online public consultation
Online survey for business users interests in both the EU MS and partners
Workshops in partner countries
Other targeted consultations
Task 9 Assess the EU-Central American TSIA
Task 10 Analyse economic effects
Task 11 Analyse effects of implementation on SD economic social environmental
Task 12 Analyse effects on Human Rights
Task 13 Conduct in-depth case studies based on field work
Interim reporting
Drafting of Interim Technical Report
Annexes Progress evaluation Quantitative tables 10-page stakeholder report CS reports
Draft Interim Technical Report 20
Review meeting Commission ISG
Finalisation of Interim Technical Report
Interim Technical Report `
Final phase
Task 13 Conduct in-depth case studies based on field work
Task 14 Reply to the evaluation questions
Task 15 Provide conclusions and recommendations
Tasks 1 45 9 and 10 - 15
Final reporting
Drafting of draft final report
Synthesis report
Executive Summary
Annexes
Draft final report 20
Review meeting Commission ISG
Finalisation of final report
Translation executive summaries (EN FR GE SP)
Final report 20
Possible exit meeting 20
Progress reports
The ToR speci fies 12 weeks for the survey we tentatively propose 16 weeks because the time schedule a l lows i t and i f the project s tarts in January the survey would fa l l in the hol iday season in EuropeCA which would not be conducive for responses
Key
Meeting with the European Commission
Concrete deliverable (eg Inception Report)
Key
Working on the evaluation and endpoints of work per task
Stakeholder consultation activities and meetings
MayAprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr
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