Comprehensive Association Agreement between Central America and the European Union

The EU issued a press release about what one might call the EU equivalent of the CAFTA agreement between the US and Central America. It has been approved but not yet ratified by everyone.

While a comparision with CAFTA will take ages (CAFTA is huge and full of things that don't exactly fit the idea of free), it looks like the same sort of agreement. That is, it is a document that sets an initial baseline and plans to move toward free in the future. Here is how it is characterized in the press release.

The Association Agreement consists of three pillars: political dialogue, cooperation and trade. The Agreement is a comprehensive tool that provides with all the means needed for an integrated relation, going from political dialogue to cooperation and trade. The different parts of the Association Agreement complement each other. That is the most important added value of this instrument. It is not only a trade agreement and it goes far beyond traditional agreements as it creates interdependence between the various parts of the Agreement.

Unlike CAFTA, Panama is included and the Dominical Republic is not. I would expect the inclusion of Panama is a big difference because of the Panama Canal.

How this will all play out is an unknown right now. Clearly, the EU hopes it will increase sales to Central America and decrease costs of imports from Central America. On the Nicaragua/Central America end, it is possible that some imports from the EU will displace imports from the US or products from the EU that are currently imported into the US and then exported here.

Thinking on my consumption list, I don't buy that many BMWs :-) but maybe it will decrease the price of the olive oil I buy. It certainly could increase the market share of car manufacturers such as Renault and Peugeot who both have a small presence here.