Final Report

Ex-post evaluation of the
implementation of part IV of
the Association Agreement
(Trade Pillar) between the EU
and its Member States and
Central America
Final Report
September 2022
Prepared by consortium led by BKP Economic Advisors

September 2022
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 – Final Report
EUROPEAN COMMISSION
Directorate-General for Trade
Directorate D — The Americas, Agriculture and Food Safety
Unit D2, Latin America
European Commission
B-1049 Brussels
2
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the
EU and its Member States and Central America – Final Report
Ex-post evaluation of the

implementation of part IV of
the Association Agreement
(Trade Pillar) between the EU
and its Member States and
Central America
Final Report
September 2022
4
Ex post evaluation of the implementation of part IV of the Association
Agreement (Trade Pillar) between the EU and its Member States and
Central America – Final Report
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contained herein.
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Luxembourg: Publications Office of the European Union, 2022
ISBN: 978-92-76-56948-0
DOI: 10.2781/181033
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Directorate-General for Trade 2022

Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU
and its Member States and Central America – Final Report
ABSTRACT
Since 20131, the European Union (EU) has been implementing the Trade Pillar, i.e., the
Part IV of the Association Agreement (AA) with six countries of Central America, i.e., Costa
Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama. The European
Commission has commissioned an evaluation of the Trade Pillar’s (hereinafter EU-CA FTA)
implementation and impact. The evaluation analyses implementation of the EU-CA FTA in
2013-2019 (to focus on impacts of the trade agreement before the COVID-19 pandemic)
and in addition, considers data from 2009-2013 to compare trends before and after the
EU-CA FTA entry into force. It analyses the economic, social, environmental, and human
rights effects of the EU-CA FTA in the Parties to the Agreement and third countries. It also
comprises ten case studies to illustrate or add detail to broader findings.
This Final Report presents the analysis of impacts, as well as summaries of the case studies.
The evaluation methodology presented in the Inception Report was published in May 20212,
while a concise description of the Agreement, its institutions, and baseline situation in the
EU and CA has been provided in Annexes A-F accompanying this Report.
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.
2
Inception Report (May 2021): https://trade.ec.europa.eu/doclib/docs/2021/june/tradoc_159595.pdf
Annex A: https://trade.ec.europa.eu/doclib/docs/2021/june/tradoc_159596.pdf
Annex B (Consultation Strategy):
https://trade.ec.europa.eu/doclib/docs/2021/june/tradoc_159597.docx.pdf
Page vi
TABLE OF CONTENTS
ACRONYMS ..........................................................................................................................X
1 INTRODUCTION: EVALUATION CONTEXT, SCOPE AND OBJECTIVES .................................... 1
2 REVIEW OF THE EU-CA SUSTAINABILITY IMPACT ASSESSMENT ......................................... 3
2.1 Ex-post assessment of the ex-ante predicted effects of the EU-CA FTA ....................... 3
2.2 Assessment of implementation status of recommendations and flanking measures ...... 7
3 ECONOMIC ANALYSIS.................................................................................................. 11
3.1 Analysis of the evolution of trade in goods ............................................................ 11
3.1.1 Overview of the EU-Central America trade flows ........................................................ 11
3.1.2 Differentiate between pre-FTA zero-tariff traded goods and goods traded with tariffs...... 21
3.1.3 Preference utilisation rate and forgone duty savings of economic operators ................... 22
3.1.4 The use of Tariff Rate Quotas (TRQs)........................................................................ 25
3.1.5 Trade diversion, notably from intra-regional CA trade to trade with the EU .................... 28
3.1.6 The impact of implementation of the EU-CA FTA on NTMs ........................................... 30
3.1.7 Importance of the FTZ in Panama (Colon) - focused on most economically significant EU
exports 33
3.1.8 Investigation of impact on the EU-CA FTA on companies having started to export or
increased product range for exports ......................................................................... 36
3.1.9 Evolution of share of imports originating in the EU in the total imports of the six CA
countries and vice versa (at HS4 level - or at more disaggregate level) ........................ 38
3.1.10 Impact of the EU-CA FTA on the diversification of trade .............................................. 40
3.1.11 Comparison of inter-CA goods trade and bilateral EU-CA member goods trade............... 43
3.1.12 Impact of EU-CA FTA on trade facilitation in CA countries and engagement in global supply
and value chains .................................................................................................... 48
3.1.13 Contribution of EU-CA FTA to diversification of sources of supply of goods for EU and CA.
Compare goods imports from CA countries with imports from other third countries ........ 49
3.1.14 Impact of the Agreement on regions in CA6 countries ................................................. 52
3.2 Analysis of the evolution in trade in services ......................................................... 56
3.3 Analysis of the evolution of foreign direct investment (FDI)..................................... 59
3.3.1 Performance of overall bilateral FDI .......................................................................... 59
3.3.2 Performance of bilateral FDI at sector level ............................................................... 61
3.3.3 Impact of the Agreement on the Investment Climate .................................................. 62
3.3.4 Comparing the investment climate internationally ...................................................... 62
3.4 The economic impact of the EU-CA FTA ................................................................ 64
3.5 Analysis of impacts of customs provisions ............................................................. 68
3.5.1 Business awareness of the customs and trade-facilitation related measures of the trade
pillar 68
3.5.2 Rules of Origin ....................................................................................................... 69
3.5.3 Customs and trade facilitation ................................................................................. 72
3.6 Analysis of the implementation of the SPS Measures chapter .................................. 74
3.7 Analysis of the implementation of the Public Procurement chapter ........................... 77
3.8 Analysis of the implementation of other areas of the Trade Pillar ............................. 82
3.8.1 Technical Barriers to Trade ...................................................................................... 82
3.8.2 Competition .......................................................................................................... 83
3.8.3 Electronic commerce .............................................................................................. 84
3.8.4 Intellectual Property Rights ..................................................................................... 85
3.9 Analysis to what extent the implementation of the Trade Pillar has led to a greater
economic integration between the Central American partners .................................. 86
3.10 Analysis of the impact of the tariff concession granted by the EU for imports of bananas
....................................................................................................................... 91
3.10.1 The EU-CA pre-agreement relationship ..................................................................... 91
3.10.2 The EU banana regime............................................................................................ 91
3.10.3 Economic impact of the agreement........................................................................... 92
Page vii
3.10.4 Impact on the EU ORs and ACP banana producers ...................................................... 94

3.11 Analysis of the impact of the implementation of the Trade Pillar on SMEs.................. 95
3.12 Analysis of the impact of the implementation of the Trade Pillar on the budgets of the
EU and the partner countries............................................................................. 101
3.13 Analysis of the impact of the implementation of the Trade Pillar on EU Outermost
Regions (ORs) ................................................................................................. 102
3.14 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 ............................................................................ 110
3.15 Recommendations from the economic analysis .................................................... 111
4 SOCIAL ANALYSIS .................................................................................................... 112
4.1 Analysis of employment impacts, including of informal employment ....................... 112
4.2 Analysis of impacts on gender equality ............................................................... 123
4.3 Analysis of impacts on consumers, welfare, and poverty levels .............................. 126
4.4 Analysis of impacts on working conditions, social security coverage of workers and
enforcement mechanism (labour inspection) ....................................................... 131
4.5 Analysis of impacts on child labour..................................................................... 140
4.6 Analysis of impacts on forced labour .................................................................. 143
4.7 Analysis of impacts on freedom of association ..................................................... 146
4.8 Analysis of impacts on non-discrimination at work ............................................... 149
4.9 Analysis of impacts on the adoption and implementation of internationally recognised
instruments of responsible business conduct and Corporate Social Responsibility (CSR)
..................................................................................................................... 153
4.10 Recommendations from the social analysis: ........................................................ 157
5 ENVIRONMENTAL ANALYSIS ....................................................................................... 162
5.1 Environmental baselines ................................................................................... 163
5.1.1 Climate change .................................................................................................... 163
5.1.2 Biodiversity and ecosystems .................................................................................. 164
5.1.3 Other environmental indicators .............................................................................. 164
5.1.4 Overview of the baselines ..................................................................................... 165
5.2 Impact screening and scoping – results summarised ............................................ 165
5.3 Analysis of environmental impacts through the Agreement ................................... 167
5.3.1 Climate Change ................................................................................................... 167
5.4 Conclusions..................................................................................................... 192
5.4.1 Climate change .................................................................................................... 193
5.4.4 Impacts of the TSD Title and other governance practices on the environmental outcomes
197
5.5 Recommendations ........................................................................................... 197
6 ANALYSIS OF THE EFFECTS OF IMPLEMENTATION OF THE TRADE AND SUSTAINABLE
DEVELOPMENT (TSD) CHAPTER OF THE TRADE PILLAR .................................................. 200
6.1 Multilateral labour standards and agreements (Article 286) ................................... 200
6.2 Multilateral environmental standards and agreements (Article 287) ....................... 204
6.3 Domestic laws and policies to encourage high levels of labour protection (Articles 285
and 291) ........................................................................................................ 207
6.4 Domestic laws and policies to encourage high levels of environmental protection
(Article 285) ................................................................................................... 208
6.5 Promotion of best business practices related to Corporate Social Responsibility (CSR) /
Responsible Business Conduct (RBC) – Article 288 ............................................... 212
Page viii
6.6 Review of sustainability impacts (Article 293) ...................................................... 212

7 HUMAN RIGHTS ANALYSIS ......................................................................................... 213
7.1 Human rights in the EU trade policy and in the Agreement .................................... 213
7.2 Scope and approach......................................................................................... 214
7.3 Step 1: Human rights profiles of the Parties ........................................................ 216
7.4 Step 2: Screening and scoping .......................................................................... 216
7.5 Step 3: Detailed analysis of the EU-CA FTA’s impact on selected human rights ........ 226
7.5.1 The right to work and just and favourable conditions of work .................................... 226
7.5.2 Impact of the EU-CA FTA on indigenous peoples’ rights............................................. 239
7.5.3 Impacts for freedom of association (summary of findings from the case study) ............ 244
7.5.4 Impacts for child labour (summary of findings from the case study) ........................... 246
7.6 Step 4: Conclusions ......................................................................................... 248
7.6.1 Impact on the right to work and right to just and favourable conditions of work ........... 248
7.6.2 Impact on the indigenous peoples’ rights ................................................................ 249
7.7 Recommendations ........................................................................................... 250
8 INSTITUTIONS ......................................................................................................... 253
8.1 Institutions established by the EU-CA FTA ........................................................... 253
8.2 Institutions under the TSD Title ......................................................................... 257
8.2.1 Contact Points and TSD Board ............................................................................... 258
8.2.2 Advisory Groups .................................................................................................. 260
8.2.3 DAG-to-DAG and Civil Society Forum meetings ........................................................ 264
8.2.4 Follow-up by the Parties to the recommendations of the Advisory Groups ................... 264
8.2.5 Recommendations from TSD institutional analysis .................................................... 265
Page ix
ACRONYMS
AA Association Agreement ICESCR International Covenant on Economic, Social

ACP African, Caribbean, Pacific and Cultural Rights
BATIS Balanced Trade in Services ICMW International Convention on the Protection
CA Central America of the Rights of All Migrant Workers and
CAT Committee Against Torture Members of their Families
CCA Causal Chain Analysis ILO International Labour Organisation
CEDAW Convention on the Elimination of All Forms IPR Intellectual Property Rights
of Discrimination against Women ITC International Trade Centre
CGE Computable General Equilibrium JC Judgement Criterion
CITES Convention on International Trade in LDC Least Developed Country
Endangered Species LULUCF Land use, land use change and forestry
COP Conference of the Parties MFN Most-Favoured Nation
CPED Convention for the Protection of all Persons MSME Micro, Small, or Medium-sized Enterprise
from Enforced Disappearance NGO Non-Governmental Organisation
CPI Consumer Price Index NHRI National Human Rights Institution
CRC Committee on the Rights of the Child NTB Non-Tariff Barrier
CRPD Committee on the Rights of Persons with OECD Organisation for Economic Cooperation and
Disabilities Development
CSD Civil Society Dialogue OHCHR Office of the United Nations High
CSR Corporate Social Responsibility Commissioner for Human Rights
DG Directorate-General OR Outermost Region
ECLAC Economic Commission for Latin America RBC Responsible Business Conduct
and the Caribbean RoO Rules of Origin
EESC European Economic and Social Committee SDGs Sustainable Development Goals
EFTA European Free Trade Association SIA Sustainability Impact Assessment
EP European Parliament SICA Central American Integration System
EQ Evaluation Question SIECA Secretariat for Central American Economic
EU European Union Integration
EU-CA FTA Trade Pillar of the EU-Central America SME Small or Medium-sized Enterprise
Association Agreement SPS Sanitary and Phyto-Sanitary
FDI Foreign Direct Investment TBT Technical Barriers to Trade
FRA EU Agency for Fundamental Rights TISMOS Trade in Services data by mode of supply
FTA Free Trade Agreement ToR Terms of Reference
GATS General Agreement on Trade in Services TRIPS Trade-Related Aspects of Intellectual
GDP Gross Domestic Product Property Rights
GHG Greenhouse Gas TRQ Tariff Rate Quota
GIs Geographical Indications TSD Trade and Sustainable Development
GPA Government Procurement Agreement UN United Nations
GSIM Global Simulation UNCTAD United Nations Conference on Trade and
GSP Generalised Scheme of Preferences Development
GTAP Global Trade Analysis Project UNECE United Nations Economic Commission for
HRIA Human Rights Impact Assessment Europe
IACHR Inter-American Court of Human Rights UNHCR United Nations High Commissioner for
ICCPR International Covenant on Civil and Political Refugees
Rights WTO World Trade Organisation
Page x
1 INTRODUCTION: EVALUATION CONTEXT, SCOPE AND OBJECTIVES
Since 20133, the European Union (EU) has been implementing Part IV of the Association
Agreement (i.e., the Trade Pillar) with six countries of Central America, i.e., Costa Rica, El
Salvador, Guatemala, Honduras, Nicaragua, and Panama. The objectives of the Trade Pillar
(hereinafter “the EU-CA FTA” or “the Agreement”) have been outlined in Article 78 and are
as follows: 1) facilitating trade in goods and expansion and diversification of trade through
reduction of tariffs and non-tariff barriers, 2) liberalising trade in services, 3) creating
environment favourable to investment, 4) promoting free and undistorted competition, 5)
protecting effectively intellectual property rights, 6) opening gradually and reciprocally
public procurement markets, 7) promoting trade in a way that it contributes to sustainable
development, 8) promoting economic regional integration in CA, 9) establishing fair and
predictable dispute settlement mechanism. The EU-CA FTA is one of the first EU “new
generation” 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 seven years of implementation, this ex-post evaluation has been undertaken with the
objective of analysing the economic, social, environmental, and human rights (including
labour rights)4 impacts of the EU-CA FTA and, ultimately, of determining whether there is
a need to improve its implementation. To support the European Commission’s own
evaluation of the Agreement, the Directorate-General (DG) for Trade has awarded a
contract for 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” to
a consortium led by BKP Economic Advisors (BKP). The work started in January 2021 and
will continue until mid-2022.
In terms of the period covered, this evaluation includes the whole implementation period
of the EU-CA FTA since its start in 2013 (with all CA countries covered since January 2014)
up to 2019, also comparing, where appropriate, with a five-year period preceding the entry
into force of the Agreement (i.e., starting in 2009). Geographically, it primarily covers the
Parties to the Agreement, although some effects of the EU-CA FTA on selected third
countries are also analysed (e.g., Turkey and least developed countries – LDCs). Moreover,
some global effects (e.g., climate change) are also covered. Finally, as already mentioned,
the evaluation covers economic, social, environmental, and human 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 text of the Agreement, notably
those of the Trade and Sustainable Development (TSD) chapter.
The study covers EU-27 in its current (2021) composition of the Member States. Where
possible, data for EU27 is used in the analysis, however, in some cases, where only the
aggregate data is available, that data will refer to the EU in its composition in the reference
year, i.e., from 2009 until July 2013 EU27 (without Croatia yet), between 2013 and 2019,
EU28 (i.e., including the UK). Throughout the analysis, we indicate those differences,
where necessary. For a comparison, while CA6 exports to EU-27 were worth €2.7 billion in
2010, and €4.3 billion in 2019, regional CA exports to the UK were worth €0.3 billion in
2010 and €0.4 billion in 2019, i.e., ca. 10% (ITC, Trade Map).
The study approach is summarised in Figure 1-1.
3
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.
4
Whenever this report refers to human rights, this includes labour rights.
1
Figure 1-1. Overall evaluation approach
The four sustainability pillars (economic, social, environmental, and human rights) are
linked to each other via a causal-chain analysis as shown in Figure 1-2. The study is based
on two equally important elements: analysis (in blue) and consultations (in green). Based
on factors exogenous and endogenous to the EU-CA FTA, we create baselines for each of
the sustainability pillars. Based on changes in tariffs and other provisions in the Agreement,
we determine first the economic impact (based on both quantitative and qualitative data).
From the economic changes, we derive social and environmental effects – complemented
by qualitative analysis, including via consultations. The human rights analysis is based on
the economic, social, and environmental analysis as well as consultations.
Figure 1-2. Causal chain analysis
Source: Own compilation
2
2 REVIEW OF THE EU-CA SUSTAINABILITY IMPACT ASSESSMENT
2.1 Ex-post assessment of the ex-ante predicted effects of the EU-CA FTA
In 2009, the Trade Sustainability Impact Assessment (Trade SIA) was conducted. This was
an ex-ante assessment based on the econometric modelling, causal chain analysis and
deep engagement with key stakeholders to look at the economic, social, and environmental
effects. The final report of Ecorys was published on 18 September 2009.
It is important to state that a direct comparison between the 2009 Trade SIA and the
current ex-post modelling is difficult for a variety of reasons and also that for some of these
reasons, looking at the predicted versus materialised effects is challenging:
• The 2009 Trade SIA was an ex-ante assessment, based on the best possible knowledge
of the EU and CA partner country economies, and based on the econometric modelling,
keeping the structure of the involved economies fixed to look at potential effects.
• The 2009 Trade SIA was based on the best possible information from the negotiations
that were, at the time, still ongoing and not finalised. This means that the modelling
scenarios used were not identical to the final Agreement applied since 2013.
• The modelling scenarios (four scenarios in ex-ante SIA in 2009) were different from
the ex-post simulation:
o In terms of tariffs, because tariff liberalisation negotiations were not finalised
when the 2009 study was modelled, while for the 2021 ex-post evaluation the
exact level of liberalisation is known. The same applies for TRQs.
o The 2009 study modelled NTBs and partial regulatory coherence, while the CGE
model used in 2021 ex-post evaluation has not included the effect of regulatory
measures and alignment.
o Because of data limitations, El Salvador and Honduras could not be modelled
separately in the ex-ante SIA.
• At the time of the ex-ante Trade SIA, Panama had only an observer status to the
negotiations, so the Trade SIA also looked at the possibility of Panama not being part
of the EU-CA FTA.
• In the 2009 Trade SIA, two scenarios were identified to look at potential impacts:
assuming the conclusion of either a ‘comprehensive FTA’ or a ‘very comprehensive FTA’.
These two scenarios were analysed both from a short-run and long-run perspective
(the long-run included a dynamic investment effect, the short-run did not).
• From a broader perspective, it is also important to note that, at that time, the human
rights analysis was not yet a separate sustainability pillar, but part of the social
analysis. This separation was introduced after the Lisbon Treaty.
The following tables compare the main effects identified in the quantitative (Table 2-1) and
qualitative (Table 2-2) analysis undertaken in the Trade SIA with the observed effects in
this ex-post evaluation.
Table 2-1. Comparison of main quantitative impacts identified in the Trade SIA with
observed impacts in the ex-post evaluation
Measure Ex-ante Trade SIA Observed effects 2014- Analysis
predicted effects 2019
National The 2009 scenarios The modelling shows A direct comparison is
income predicted an increase effects that are also not possible, but the
(economic) between 0.1% (for positive for all CA partner reason for the lower ex-
Guatemala) to 1.5% (for countries but ranging from post number is that the
Panama) for the most 0.03% (El Salvador) to modelling only captures
modest scenario to 0.4% (Costa Rica). The tariff effects but not the
between 0.5% (Nicaragua) effect for the EU is changes in NTMs – these
and 3.5% (Costa Rica) in negligible, as predicted. are important effects
the very comprehensive that the 2009 study did
FTA. No relative effects for include. The direction of
the EU were predicted. GDP effects is confirmed
ex-post.
Wages Different effects per CA The ex-post modelling A direct comparison is
(social) country were predicted: shows: not possible, but the
skilled and unskilled
3

• CRI: between 0.2% to • CRI: 0.5% for SW and worker wage effects
2.8% for skilled (SW) 1.3% for USW were well predicted by
and 0.6% and 3.2% for • SLV: no wage effects the 2009 study (for the
unskilled workers (USW) • GTM: -0.1% for SW and countries with data)
• SLV: NA 0.1% for USW when compared with the
• GTM: between -0.2% to • HON: no effect for SW ex-post model findings.
0.2% for SW and 0.2% and 0.2% for USW Only Panama has fared
to 0.7% for USW • NIC: 0.2% for W and better than the range
• HON: NA 0.1% for USW predicted for skilled
• NIC: between 0.3% and • PAN: 0.3% for SW and workers. The wage
1.1% for SW and 0.5% no effect for USW effects for the EU were
and 1.3% for USW • EU: no wage effects indeed negligible.
• PAN: between -0.9% found
and 0.0% for SW and -
0.6% and 0.2% for USW
• EU: no wage effects for
SW and USW
Exports Different effects per CA The effects estimated by Given many factors
(economic) country were predicted: the ex-post evaluation influencing the overall
• CRI: between 6.7% modelling regarding the trade performance of
and 17.8% change in total export increase (i.e., each Party, it would be
total exports exports not only between more appropriate to
• SLV: between 2.4% the EU and CA): compare the estimated
and 4.3% change in • CRI: 0.5% increase change in bilateral trade
total exports • SLV: 0.4% increase flows, as these are more
• GTM: between 2.6% • GTM: 0.5% increase likely to be influenced by
and 4.8% change in • HON: 0.3% increase the Agreement (even if
total exports • NIC: 0.3% increase not the whole trade may
• HON: between 4.7% • PAN: 1.7% increase benefit from changes in
and 8.4% change in • EU: no significant relative tariff preferences and
total exports change in exports other terms of trade). In
• NIC: between 2.2% such a case, changes in
and 3.7% change in However, changes in bilateral exports
total exports bilateral (EU-CA) export estimated by the ex-post
• PAN: between -0.2% flows have been estimated evaluation (only
and 14.6% change in in the ex-post evaluation regarding tariff
total exports as higher than the total preferences, without
• EU: no export effects in ones: NTMs) are comparable
relative terms • CRI to EU (+7.4%) with the lower end of
• SLV to EU (+2.8%) SIA predictions, although
• GTM to EU (+2.6%) for Nicaragua and
Panama, these are
• HON to EU: (+1.6%)
higher. The comparison
• NIC to EU (+8.8%) of total exports suggests
• PAN to EU (+4.9%) that the effects modelled
EU to CRI (+10.8%) to SLV by the SIA might have
(+9.6%) to GTM been overestimated.
(+12.1%), to HON
(+11.2%), to NIC
(+6.1%), to PAN
(+23.4%).
CO2 Also, for CO2 emissions The economic model used While the ex-post
effects different effects per CA in the ex-post evaluation analysis does not
(environ- partner and EU were estimated the following measure the full extent
mental) predicted (for the scenario effects: of the FTA because it
with most CO2 emissions: focuses on tariffs only,
• CRI: a 0.2 Mt increase in • CRI: no CO2 effects we can conclude that the
CO2 emissions • SLV: a negligible ex-ante predictions on
• SLV: a 0.3 Mt increase decrease in CO2 CO2 emissions have
together with HON in emissions been fairly accurate and
CO2 emissions • GTM: a negligible – if anything – the actual
• GTM: a 0.1 Mt increase decrease in CO2 emissions have been
in CO2 emissions emissions lower than those that
were predicted ex-ante.
4

• HON: a 0.3 Mt increase • HON: a negligible
together with SLV in CO2 decrease in CO2
emissions emissions
• NIC: no CO2 effects • NIC: no CO2 effects
• PAN: a marginal • PAN: a 0.5 Mt decrease
decrease in CO2 in CO2 emissions
emissions • EU: a 0.2 Mt increase in
• EU: a 1.0 Mt increase in CO2 emissions
CO2 emissions In absolute terms, this
adds up to a drop of 0.5 Mt
In absolute terms, this of CO2, which is 0.0% of
adds up to an increase of global CO2 emissions.
1.3 Mt of CO2. In relative
terms, this amounts to a
0.0% increase in global
CO2 emissions.
Table 2-2. Comparison of main qualitative impacts identified in the Trade SIA with
observed impacts in the ex-post evaluation
Measure Ex-ante Trade SIA Observed effects 2014-2019
predicted effects
Economic The vegetables & fruits sector is The same ex-post conclusion is drawn; robust
impact expected to benefit most growth of the vegetables & fruits sector,
notably for Costa Rica and Panama.
Moreover, the economic modelling suggests
increase in the sugar sector across the
region.
Guatemala and Nicaragua will While for the region textiles trade increases,
become more competitive in textiles the effects did not materialise for Guatemala
and clothing (a declining sector in and Nicaragua. Panama is the country
Costa Rica and El Salvador) estimated to gain most in terms of trade and
output.
Panama’s sectoral effects concentrate Strong effects do occur in vegetables & fruits
in fruit & vegetables and financial and transport services, but also – not
services (incl. transport services) predicted – in textiles
Resource use is expected to change The ex-post effect is also that the vegetables
towards fruit & vegetables at expense & fruits sector grows strongly, and related to
of livestock and grains this is indeed an adjusted resource use
Foreign Direct Investments matter, The FDI effects have not been modelled in
especially for iron & steel in Panama, the ex-post setting, so it is not possible to
plastics and pottery in Guatemala and compare. But some overall FDI effects have
non-electrical machinery and iron & taken place.
steel in Nicaragua
Social Employment creation in all CA With sectoral variation, the ex-post analysis
impact partner countries except for Panama also points to job creation (via the indicator
(because of wage increases) of increased wages), notably in sugar sector
(across the region), fruits and vegetables
(mostly in Costa Rica and Panama) and in
textiles (Panama).
Wages go up on all CA partner Wages go up for all CA partner countries,
countries, except Panama. In the EU except for skilled workers in Guatemala (but
wages remain the same the effect is marginal). For Panama wages
remain stable or go up by a maximum of
0.3%
AA has the potential to improve While no direct link has been identified, there
labour standards through pressure on are some indirect positive effects (of the EU-
CA exporters CA FTA and more broadly, EU-CA trade),
e.g., international (incl. EU) buyers, such as
coffee brands requiring elimination of child
labour from coffee plantations. Moreover, the
EU-CA FTA (if assessed jointly with other
FTAs) encourages the use of sustainable
practices and adherence to certification
mechanisms. EU technical and financial
5
Measure Ex-ante Trade SIA Observed effects 2014-2019

predicted effects
assistance promoting e.g., CSR practices may
contribute to a wider respect of labour
standards or decent working conditions.
AA has the potential to encourage This is an effect that has not been witnessed
signing of and adherence to ILO strongly, due to the fact that the CA partner
conventions. countries already were in the GSP+ scheme
before the FTA, where the conditionality
required ratification and implementation of
the ILO fundamental conventions. Since the
EU-CA FTA entry into force, CA countries
have ratified several ILO technical or priority
conventions. While the EU-CA FTA has
created a positive momentum to respect
workers’ rights, e.g., in El Salvador, and
progress has been made in other countries,
measures taken, e.g., regarding child labour
or freedom of association predate the EU-CA
FTA and cannot be attributed to the
Agreement.
Inter-sectoral migration between The growth of especially vegetables & fruits
agricultural sectors (towards fruits & and sugar sectors has created employment in
vegetables, processed foods) will these sectors, with workers coming from
happen other sectors or other CA countries.
Moreover, some workers who have not
worked before may have undertaken work,
given that sectors exporting to the EU often
offer the only or one of a few job
opportunities in their areas. There is variation
across CA partner countries. For the EU the
effect is negligible.
Poverty levels are expected to There is evidence that – at regional level –
decrease overall (with variation the EU-CA FTA has indeed supported in
across sectors) poverty reduction, while there were many
other factors influencing the situation.
Environ- A small negative GHG/CO2 effect is Overall CO2 emissions have increased, and
mental expected so have emissions of other GHG. The
impact Agreement is only partially responsible for
this. Because the ex-post modelling only
looks at tariff effects, the CO2/GHG impact
may be underestimated.
Land use pressure could increase due There is limited evidence that land use
to mining, deforestation, and biofuels pressure has increased, especially because of
production growth of the vegetable & fruits sector
No large direct effects on The CA partner countries have experienced
deforestation and biodiversity are increases in deforestation and a worsening
expected biodiversity environment. The effect of the
Agreement on these trends is not entirely
clear, but it is expected to be limited.
The TSD chapter has the potential to A direct effect of the TSD chapter on signing
improve collaboration and stimulate and implementing MEAs is hard to find, but in
commitment to implementing MEAs the FTA implementation, attention for
sustainable development has increased.
More economic activity may lead to This result is confirmed, especially because in
more waste. some countries (e.g., Guatemala) a large
share of water consumption is used by
agriculture. Pesticides and fertilisers add to a
waste problem.
Based on the above analysis of the Ecorys (2009) Trade SIA and keeping in mind the
caveats in making this comparison, we conclude that the ex-ante predictions have been
made correctly. The direction of effects has been estimated correctly, with minor
exceptions, while for some variables, the size of the effect has been estimated too high
(CO2 emissions, exports) or too low. Also, some of the causal chain effects have been seen
6
correctly – for example regarding land use for vegetables & fruits, wastewater for
agriculture, and decreases in poverty levels.
2.2 Assessment of implementation status of recommendations and flanking

measures
In this section we will look at the main trade-related and non-trade-related policy
recommendations and flanking measures provided for in the Trade SIA, and how they have
been implemented, how effective they were and what can be learned for designing future
flanking measures. This information is summarised in Table 2-3.
Table 2-3. Trade- and non-trade related measures overview

Policy measures Implementation status Effectiveness
recommended by Trade SIA
Economic policy measures
Continue promoting regional Regional integration has been The AA and the regional
integration and regulatory included in the AA and has integration have been
convergence in CA been implemented as an mutually supportive, with
element of the AA. regional integration improving
market access and facilitating
trade flows, and the AA
showing commercial benefits
from regional integration.
However, regional integration
has moved forward at a
slower pace than expected.
Provision of technical The EU has provided technical While the AA has been
assistance and capacity assistance in various ways supported by technical
building in addressing NTMs, (e.g., through support for assistance and funds, regional
especially SPS, TBT and trade SIECA) while also addressing integration has also
facilitation NTMs in its committee experienced setbacks due to
structure under the AA. national considerations of CA6
members. The dialogue
mechanisms in the committee
structure have had limited
effectiveness.
Stimulate ongoing investment The AA has implemented this The AA has created legal
and business climate recommendation by its nature stability and encouraged
amelioration and by specific investment investment as shown by the
provisions. FDI (gravity) analysis.
Improve infrastructure and The degree to which This recommendation has not
promote port development infrastructure has been been actively implemented as
improved via the AA was it was outside the scope of
difficult to assess as the the AA. Some infrastructure
recommendation was very projects have been regionally
general. supported and the Port of
Colón has been indirectly
supported by the AA through
more trade
Support efforts facilitating The efforts for structural This recommendation has
structural adjustment across adjustment have come mostly been implemented to varying
sectors in the short-term from the CA6 countries, not degrees by national
resulting from the AA from the AA. governments.
Allow for phasing in of tariff This has been implemented This recommendation has
reductions at sector level over for sensitive products. For been implemented very
time, especially for those example, for bananas, the TIV effectively and has been very
sectors where social and has gradually increased as effective in smoothening out
environment impacts will be the tariff decreased (until the economic effects of
high 2020). (sensitive) trade
liberalisation.
Improve the taxation system to This has not been The effectiveness of this
widen and deepen its coverage implemented through or recommendation has been
linked to the AA. low as the remit on taxation
systems has been with
7

national governments,
separate from the AA.
Social policy measures
Include a sustainable Social and environmental The effectiveness of the
development chapter in the AA, issues have been addressed measures recommended in
including addressing social and in the AA: the Trade SIA and applied in
environmental issues related to the context of the EU-C AFTA
the trade part of the AA, - They have been included in has varied.
including: the TSD Title.
- An Article on reviewing, The EU-CA FTA belongs to the
- International labour monitoring, and assessing first EU trade agreements
standards (enforcement) impact of the EU-CA FTA with the TSD Title and
has been included into the through its implementation
- SMEs TSD Title. and meetings of the related
- There are provisions in the bodies, the Parties have
TSD Title related to emphasised the importance of
effective implementation of sustainable development (in
- Monitoring and evaluation the ILO fundamental its three dimensions) in the
systems conventions and these are context of trade relations:
discussed at the annual - The implementation of the
meetings of the TSD Board. TSD provisions has been
- Positive indirect effect on - There are no specific approached through
labour standards provisions in the TSD Title dialogue.
related to working - This evaluation represents a
- Working conditions conditions that would go comprehensive analysis of
beyond the ILO impacts of the EU-CA FTA
fundamental conventions on sustainable development
and a general reference to in its three dimensions.
decent work. Policies in this - The implementation of ILO
area have been adopted conventions ratified by the
nationally. Parties is being reviewed at
the annual TSD Board
meetings, with a reference
to observations of the ILO
monitoring bodies. Some
progress has been achieved
in CA, however, has been
uneven across countries
and conventions.
- Overall, regarding sectors
engaged in exports to the
EU, impacts of the EU-CA
FTA on labour standards
and working conditions are
rather limited, although
positive.
Promote social bi- and tripartite This has been implemented in The situation regarding social
dialogue the AA through provisions on dialogue (bipartite and
effective implementation of tripartite) varies across CA
the ILO fundamental countries and sectors, e.g., in
conventions, however, sectors engaged in exports to
remained in the national the EU, trade unions operate
domain and the level of its and negotiate collectively with
promotion depends on each employers in parts of the
government and social banana sector and sugar
partners. sector.
Continuously involve civil This has been implemented in Key stakeholders have been
society and key stakeholders in the AA, however, also engaged to a different extent
social policy issues remains a domestic matter. either by becoming members
One of the examples was of the Advisory Groups or by
establishment of the civil engaging in sectoral dialogues
society Advisory Groups regarding EU-CA trade.
under the TSD Title.
8

Support and provide technical TA projects have been set up While any focus on SMEs has
assistance to SMEs for SMEs (e.g., supporting been important and the AA
women-led enterprises or has helped improve the
related to organic coffee situation for SMEs, still many
promotion). challenges for SMEs have not
been overcome (and could
not have been through the
AA).
Provide regional policy support, This recommendation has not This recommendation has not
especially where negative been implemented because been effectively implemented.
social effects are expected to the national governments
be pronounced were in charge of addressing
negative social effects and it
was difficult to predict them
ex ante.
Devote special attention to The AA has given special Through its trade effects, the
poverty and vulnerable groups attention to poverty and AA has had the effect of
vulnerable groups. contributing to poverty
reduction. Through dialogue
the AA has had a small
positive effect on the situation
of vulnerable groups,
especially where ILO and UN
monitoring was used to
monitor progress.
Ensure a match between Through technical assistance While having played a
education skills and support for education, this supporting role, the AA was/is
development needs recommendation has been not the main tool to address
partially implemented. education; for which
education policy is more
suitable. Hence the AA has
not been effective beyond
supporting on clarifying
development needs and
effects.
Environmental policy measures
Include a Sustainable This has been implemented in The EU-CA FTA belongs to the
Development chapter in the the AA, following the first first EU trade agreements
AA, including: example set in the EU-Korea with the TSD Title and
FTA: through its implementation
and meetings of the related
bodies has emphasised
importance of sustainable
- MEAs - A link to MEAs has been development in the context of
included in the TSD chapter. trade relations.
- The regional dimension and - Implementation of TSD
economic integration are provisions has been
- Regional approaches mentioned in the EU-CA FTA approached through a
- Impact monitoring but not in the TSD Title (in dialogue.
mechanisms the latter only in Article 290 - The regional economic
- Environmental standards on trade in fish products). integration in CA has been
- Sector-specific issues (e.g., - An Article on reviewing, implemented through EU-
on forests, fishery, biofuels, monitoring, and assessing CA FTA provisions being
organic farming) impact of the EU-CA FTA outside TSD Title. Some
has been included into the progress has been achieved
TSD Title. in that area, however, the
- A reference to the pace was slower than
environmental standards expected.
has been included into the - This evaluation represents a
TSD Title. comprehensive analysis of
Sector-specific issues have impacts on the EU-CA FTA
been included into the TSD on sustainable development
Title through Articles on trade in its three dimensions.
in fish products, trade in
9

forest products and trade - Implementation on MEAs
favouring sustainable and related domestic
development (organic policies is reviewed
products). regularly at the TSD Board
meetings.
Create incentives for greener Part of this recommendation The effectiveness has been
production (incl. environmental (which does not specify how limited to tariff liberalisations.
services) to do so) has been
implemented.
Enhance dissemination of This has not been explicitly Indirectly, through trade,
innovative technologies implemented in the AA. innovation has been
disseminated
Create and improve monitoring The provision about the This recommendation has
mechanisms and ex-post sustainability review has been been effectively implemented.
evaluations included into the TSD Title,
however, monitoring, and ex-
post evaluation mechanisms,
which have been developed
outside the TSD Title, seem to
be operating mostly on the
EU side, as well as part of the
activity of civil society,
including Advisory Groups.
Continuously involve civil See above. See above.
society and key stakeholders in
environmental policy issues
and conservation efforts
Provide regional policy support, See above. See above.
especially where negative
environmental effects are
expected to be pronounced
Strengthen institutional While TA projects have been It is not clear what the
capacity for CA environmental organised, it is not clear to effectiveness of this
agencies and policy making this research team whether recommendation has been as
this has focused specifically it was not possible to verify if
on environmental agencies it has been implemented.
and policy making.
Address deforestation and In the AA, provisions on the This has been addressed
biodiversity loss environment have been through dialogue in the TSD
included. chapter.
Final general considerations
When assessing these policy recommendations and flanking measures, their degree of
implementation and effectiveness, we draw a few general conclusions (i.e., lessons learnt):
1. The more general the policy recommendations were, the more easily some element of
implementation could be found; and the harder it was to assess the effectiveness of
the recommendation. Policy recommendations should find a balance between being too
concrete and being too general; neither of which is recommended.
2. Some policy recommendations could be evaluated more easily because their
implementation and effectiveness were subject to a more easily verifiable metric. Policy
recommendations should also indicate how they could be measured (if possible).
3. Several policy recommendations have really been outside the scope of the AA without
making clear what actor would have to take up the recommendation.
4. It would be recommended, finally, to aim to combine and link up the different policy
recommendations and flanking measures into an overall approach that multiple
stakeholders have to buy in to and support – as part of jointly making the AA a success.
10
3 ECONOMIC ANALYSIS
In this Chapter, we look at the economic impact of the EU-CA FTA. We start with the
evolution of trade in goods, services, and the impact on foreign direct investment (FDI),
followed by specific analyses on the effect of different elements of the Agreement, like the
customs and trade facilitation-related provisions, the SPS and public procurement
chapters. We also look at the impact of the EU-CA FTA on regional economic integration in
CA partner countries, on the EU import of bananas, SMEs, budgets of the EU and CA partner
countries, EU Outermost Regions and EPA and LDC countries.
3.1 Analysis of the evolution of trade in goods
In this task, we first provide a description of goods sector trade, and the development of
trade in goods over time. As explained in the introduction, the use of trade statistics is
important to study the evolution of trade in goods, but it gives only a partial picture as
regards the effect of the Agreement itself.
3.1.1 Overview of the EU-Central America trade flows
EU imports
Collectively, EU imports from the CA6 have risen by 31% from €5.1 billion in 2010 to €6.7
billion in 2019. This can in part be attributed to the EU-CA FTA, with EU imports of fruits &
vegetables and sugar being the main contributors to this increase. As can be seen in Figure
3.1-1, EU imports from Costa Rica remained stable at around €3.0 billion, whilst fluctuating
slightly throughout the years. Similarly, also imports from El Salvador remained stable at
€0.2 billion. Yet EU imports originating from Guatemala almost doubled from €0.5 billion
prior to 2013 to about €1.0 billion later. This increase comes from increased imports in
vegetable oils (e.g., palm oil - €150 million), edible fruits (e.g., bananas, fresh fruits - €47
million) and rums and spirits (€16 million). One of the drivers for these increases has been
the tariff liberalisation agreed in the EU-CA FTA. On the other hand, imports from Honduras
see a decline to €0.6 billion in 2013 but increase again by over 50% to EU imports of
annually €1.1 billion after the Agreement. For Nicaragua no major change can be seen
through the years as imports remain around €0.2 billion, yet imports see a slight increase
in the years 2015-2017. EU imports from Panama spike in 2013 to €0.7 billion with a fall
in the consecutive year to €0.5 billion but from then on increasing to €0.8 billion in 2019.
This volatility in imports from Panama are a combination of increases in imports of bananas
(€63mln) and decrease in imports of vessels (€-89mln). Especially the latter product can
affect trade in a single year significantly.
Figure 3.1-1. EU total imports from and exports to CA partner countries
Source: Authors’ calculations based on UN Comtrade data
EU exports
Aggregate EU exports rise by 40% from €5.3 billion in 2010 to €7.4 billion in 2019 (see
Figure 3.1-1), mainly due to increases in exports of machinery, cars, medicines, and
medical equipment. These exports are driven by two factors. First, the EU-CA FTA
effectively liberalised tariffs for EU exports (while the CA partner countries already enjoyed
11
GSP+ and GSP preferential access). Second because non-tariff measures (e.g., customs
procedures, TBT regulations) decreased, facilitating trade. While EU total trade has
increased, the strong increase in EU exports to the CA6 has been facilitated by the EU-CA
FTA. But trends per country vary. EU exports to Costa Rica show an increase of 50% with
an average of €1.0 billion before 2013 and have since grown to €1.5 billion, mainly due to
rises in medicines and medical equipment and cars. Similarly, EU exports to El Salvador
increased from €0.6 billion prior to the start of the application of the Agreement to a peak
of €1.0 billion in 2018. Additionally, exports to Guatemala rose also by 50% from €0.9
billion in 2010, showing consecutive increases year by year, except 2016, to €1.3 billion in
2019. EU exports to Honduras see a decline in 2013, in line with the decrease observed in
imports, to €0.4 billion then an increase to €0.6 billion in the following years. Exports to
Nicaragua remain stable over time but see a slight increase between 2015 and 2017 of
20%, similar to imports. This is mainly due to a significant drop in exports of electrical
generators. Exports to Panama were peaking in 2013, at €2.9 billion, yet declined until
2016 to €2.1 billion, followed by a strong increase to €2.8 billion in 2017-2019.
EU export and import shares compared to other trading partners

When looking at the relative performance of the EU vis-à-vis other main trading partners
for CA6 countries, comparing the 2010-2013 pre-Agreement period to the 2014-2019 post-
Agreement period, we make the following observations based on Figure 3.1-2:
• The relative share of the EU in CA imports remains fairly stable across the 2010-2019
period. There is a slight increase in imports, but mostly for 2013 and 2014, after which
the EU share declines again marginally. This points to a small impact of the EU-CA FTA
on import shares, especially at the expense of China’s share. The import shares for the
US go from 52.6% to 53.4% when comparing 2010-2013 to 2014-2019, which could
be the result of the CAFTA-DR that entered into effect in January 2006 for all CA6
except Costa Rica. Meanwhile, China’s import shares declined from 28.1% on average
to 26.7%, which may not be surprising given that only Costa Rica of the CA6 countries
has an FTA with China that entered into effect in August 2011.
• The relative share of the EU in CA exports has grown from 21.7% to 24.4% from the
201-2013 to 2014-2019 period. This is a significant increase, solidifying the EU’s 2 nd
place in terms of export markets for CA6 countries after the US. The growing
importance of the EU as an export destination for CA6 countries comes at the expense
of the US (share drops from 71.4% to 70.5%) and China (share drops from 4.6% to
3.8%).
Figure 3.1-2. Relative EU share in CA imports/exports (pre-/post-Agreement, %)
28.0%
EU share in CA imports/exports (%)
24.0%
20.0%
16.0%
12.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EU share in CA imports EU share in CA exports

Average EU import share 2010-2013 Average EU import share 2014-2019
Average EU export share 2010-2013 Average EU export share 2014-2019
12
Bilateral trade balances

In terms of bilateral trade balances (Figure 3.1-3), the EU has had for most years, after
the implementation of the EU-CA FTA, although fluctuating, a trade surplus with Central
America. In fact, except for Costa Rica and Honduras, the EU has run trade surpluses with
all CA partner countries. Overall, the EU trade balance was negative (i.e., in deficit) in
2012 (€330 mln), but improved to a €787 mln surplus in 2019. Over time, the trade
balance with Costa Rica, while remaining negative, improved. Figure 3.1-3 supports the
observation that trade with El Salvador, Guatemala and Nicaragua has remained steady.
Panama and El Salvador have been the biggest contributors to the EU’s trade surplus.
Annual changes in EU exports to and imports from CA countries

To evaluate the observed changes in trade values shown in Figure 3.1-1 and 3.1-2, the
period was grouped into two categories: 2010-2013 and 2014-2019 to compare the period
before the Agreement with the period under review after the start of the application of the
FTA. Figure 3.1-4 compares the two periods to each other, indicating the change in average
trade (in absolute values and in percentage changes) in the period before and after the
EU-CA FTA.
Figure 3.1-3. EU trade balance with partner countries
The blue columns indicate the annual average trade flows in 2010-2013 (light blue)
compared to the average for 2014-2019 (dark blue), while the blue line shows the relative
change (%) between the 2010-2013 and 2014-2019 periods. In green we show the same
for imports.
The value of exports from the EU to the CA6 has gone up to all CA6 countries after the
start of the application of the EU-CA FTA except for a decrease in exports to Panama. This
rise is driven by a 31% increase in the number of products exported by the EU to the CA6
countries after the start of the application of the EU-CA FTA. We see that this increase is
especially strong in 2013, and less in the consecutive years. The reason for this effect is
most likely due to the fact that exporters in the EU and CA countries have already
anticipated the start of the EU-CA FTA and started to prepare by creating the distribution
infrastructures, which has led to increases in trade in 2013 and 2014, after which the rate
of increase in trade flattened. Businesses in interviews have confirmed the fact that in
anticipation of the EU-CA FTA, they have started to invest to be prepared for the
opportunities the FTA would come to provide. This pattern we see more often with trade
agreements (i.e., businesses anticipating) as well as for EU enlargement waves (e.g., in
2004 and 2007). Costa Rica and Guatemala experience the biggest average annual
increases comparing the pre- to post-application of the Agreement in absolute values (€0.3
billion). El Salvador and Honduras show a more median increase of above €0.1 billion.
13
Whilst Nicaragua has seen the biggest relative change with an export increase of 40%
between the pre- and post-FTA periods, which amounts to €0.1 billion in absolute terms.
Based on these statistics, we can conclude that the EU-CA FTA has had a positive impact
on EU exports to CA6 countries. While the evidence for Panama is mixed, we believe that
the EU-Panama exports were declining overall, and that the Agreement has in fact
mitigated the degree to which this decline has happened. This understanding is based on
the economic results of the effect of the EU-CA FTA that will be explained in more detail in
section 3.4.
Figure 3.1-4. Changes in EU trade with CA6 countries (2010-13 versus 2014-19, i.e.,
between pre- and post- implementation
3.6 74% 80%

EU exports/imports to CA6 countries (Euro, bn)
3.3
70%
Change in EU exports/imports (%, 2010-13 vs 2014-19)

3.0
2.7 60%
2.4
46% 50%
2.1
40%
1.8 37% 37% 40%
32%
1.5 28%
24% 30%
1.2
0.9 20%
11%
0.6
10%
0.3
- -5% 0%
Costa Rica El Salvador Guatemala Honduras Nicaragua Panama
-0.3
-8% -5% -10%
-0.6 -11%
EU exports average 2010-2013 EU exports average 2014-2019
-0.9 -20%
EU imports average 2010-2013 EU imports average 2014-2019
% Change in EU exports % Change in EU imports
For the EU, while bilateral imports from CA6 countries rise over time between 2010 and
2019 (see Figure 3.1-1), there is a decline in the post-implementation period relative to
the pre-implementation period in the case of EU’s imports from Costa Rica and El Salvador
(see Figure 3.1-4), with the EU’s imports from Costa Rica declining by 11% between the
two periods. This is driven by a 22% decline in the mean value of bilateral exports (from
€1.4 million in the pre-FTA period to €1.1 million afterwards) – for example in electrical
apparatus. EU imports from El Salvador see the smallest change in absolute as well as
relative terms (a value change of less than €0.1 billion (-8%)). EU imports from Guatemala
increase the most in relative terms (74%), because of significant increases in Guatemalan
exports of vegetable oils, bananas, rum and sugar. EU imports from Honduras and
Nicaragua also go up, but to a smaller extent than in Guatemala: by 28% and 37%
respectively. This is mainly due to the increased imports of crustaceans and coffee from
Honduras and vegetable and petroleum oils and footwear from Nicaragua. For Panama,
while most of the increase can be observed in 2018-2019, imports rise by 11% (an increase
of €62 million). The reason for the sudden change within the 2014-2019 time period relates
to the export of cruise ships that have a remarkably high individual value and that show
up in the more aggregate statistics.
EU28 main sectoral exports to and imports from CA partner countries

In this section, we look at main export and import patterns to and from CA partner
countries.
14
EU Exports to partner countries

In the summary Table 3.1-1, we report the top-3 EU exports that grow or decline while in
each of the country-specific descriptions, we look at the top-10 sectors in terms of value
traded. This shows a diversified picture, with – overall – increased export opportunities for
EU exporters in the period after the start of the application of the Agreement.
Table 3.1-1. Three main growing and declining EU exports to each CA country (%)
Sector name % % Change Sector name % % Change
Change 10-13 vs Change 10-13 vs
14-19 14-19 14-19 14-19
EU exports to Costa Rica
1. Medicaments 39% 62% 1. Electric generator +120% -72%
2. Vehicles 43% 132% 2. Petroleum oils --- -99%
3. Blood -99% 179% 3. Containers -64% -56%
EU exports to El Salvador
1. AC generators 4435% 1787% 1. Aeroplanes -13% -55%
2. Medicaments 21% 36% 2. Fertilizers -99% -82%
3. Aircraft and spacecraft 52% 424% 3. Extracts -45% -18%
EU exports to Guatemala
1. Aeroplanes --- 5022% 1. Fertilizers: --- -95%
2. Aluminium: plates 6286% 2944% 2. Fertilizers other --- -93%
3. Vaccines 370% 352% 3. Metal-rolling mills -99% -99%
EU exports to Honduras
1. Medicaments 89% 67% 1. Petroleum oils --- -68%
2. Iron or steel -67% 965% 2. Fire fighting -99% -69%
vehicle
3. Electrical converters -45% 1032% 3.Furnace accessory +10% -99%
EU exports to Nicaragua
1. Medicaments 326446% 62% 1. Electric motors --- -72%
2. AC generators --- 1919% 2. Fertilizers -99% -95%
3. Optical fibres 15% 4666% 3. Unused postage +282% -75%
EU exports to Panama
1. Aeroplanes 10874% 2195% 1. Cruise ships -93% -99%
2. Medicaments -16% 36% 2. Vessels --- -53%
3. Toxins 642% 570% 3. Railway coaches +1167% -42%
As previously indicated, bilateral trade between CA6 and the EU has increased, yet not all
sectors were impacted equally. As a collective of CA countries together, medicaments and
pharmaceuticals (e.g., medicaments, blood, vaccines) have seen the largest increase in
absolute value, between the 2010-2013 (the pre-Agreement period) and 2014-2019 (the
year of the start of the application of the Agreement Second, transport equipment, such
as aeroplanes or combustion engines have seen a strong increase in EU exports. On the
other hand, other vehicles such as helicopters and more significantly vessels or cruise ships
saw a strong decrease in bilateral trade to an amount of €500 million between the two
periods. However, due to the high costs of a cruise ship only a minor change in ordering
quantity will result in a big change in observed trade value and thus does not indicate any
trend changes. An observable trend is the increase of individual machinery parts and other
products required in further manufacturing steps, while raw material and agricultural
exports are lower in the 2014-2019 compared to 2010-2013.
Costa Rica
The main export products for the EU to Costa Rica are medicaments, vehicles, blood, and
toxins as shown in Figure 3.1-5. Of those, medicaments have seen the biggest increase in
average annual exports (€41.6 million) since the start of the application of the FTA, which
amounts to a relative increase of 62%. Other medical goods, such as blood and toxins
have also seen significant increases of €24.3 million and €23.4 million respectively.
However, the largest relative increases can be observed in goods needed for construction
such as ceramics and semi-finished steel products. Their exports increased by over 1000%
each. The Costa Rican housing market grew as economic activity increased overall. EU
exports of wind-powered electricity generators have seen a decrease compared to the
15
period prior to the start of the application of the EU-CA FTA by an amount of €15.4 million.
Also, the export of diesel-powered electricity generators and machinery parts declined by
€5.0 million and €8.9 million respectively. This is due to lower demand for them linked to
Costa Rican policy changes and due to increased US and Chinese competition. Vehicles
remain an important part of EU exports to Costa Rica. While the export of large cars
declined by €8.4 million, for vehicles not exceeding 3000cc and 1500cc exports grew by
€36.7 million and €7.4 million respectively.
Figure 3.1-5 Changes in EU exports to Costa Rica (2010-13 vs 2014-2019, € and %)

50 400%
EU export change 2010-2013 to 2014-2019 (in €
EU export change 2019-2013 to 2014-2019 (in %)

40 320%
30 240%
20 160%
10 80%
mln)
0 0%
-10 -80%
-20 -160%
Change 2010-2013 to 2014-2019 € Change 2010-2013 to 2014-2019 (in %)
El Salvador
The main export products for the EU to El Salvador are electric AC generators,
medicaments, aircrafts, and fishing vessels. Of those, electric AC generators have seen the
biggest increase in average annual exports, €19.5 million since the FTA has been applied,
which amounts to a relative increase of 1797%. This increase is the result of lower tariffs
and of trade diversion from Costa Rica. EU exports to El Salvador saw a significant increase
in medicaments of 36% on average annually, which equals €13.1 million. Moreover, other
aircrafts as well as aircraft parts have seen an increase of 424%, €4.8 million, and 805%,
€4.0 million, respectively. Yet aeroplanes exceeding 15 tonnes saw the biggest decrease
of EU exports to El Salvador by €19.4 million which accounts for a relative decrease of -
13%. This is explained by lower purchases of aircraft in the post-FTA period that show up
because of the significant price of an individual aircraft and cannot be directly attributed
to the Agreement. At the same time, parts and components for maintenance are still
required. Moreover, fertilizers see an almost 100% decline in exports (by €18.8 million),
similar to x-ray machines and electrical capacitors which both decrease by 95%. We are
still engaging with stakeholders to get more insights into the drivers behind these declines,
even if the changes in absolute values are small (€3.9 and €4.6 million respectively).
Guatemala
The main EU export products to Guatemala are aeroplanes, aluminium plates, vaccines,
medicaments, and food preparations. Of those, aeroplanes and other aircraft not exceeding
15 tonnes have seen the biggest increase in exports (by €43.1 million) since the start of
the FTA application. This amounts to a relative increase of 5022%. Medical goods (e.g.,
vaccines, medicaments) have increased by €16.1 million and €11.8 million respectively.
Also, EU exports of construction materials like aluminium plates increase by €28.9 million
(by 2944%) and so do exports of iron or steel parts (by €6.0 million or by 166%). By a
large margin, fertilizers have seen the largest decrease of EU exports to Guatemala.
16
Fertilizers containing nitrates and phosphates and those containing nitrogenous,

ammonium sulphate all see decreases to amounts of €13.9 million and €11.6 million
respectively, while potassic fertilizers show a comparatively minor increase of €6.2 million.
Honduras
The main EU export products to Honduras are medicaments, steel structures, electronic
converters and wind powered electric generators. Of those, medicaments have seen the
biggest increase in average annual export, amounting to €18.5 million, since the FTA
started being applied. Other medical products such as vaccines and toxins increased more
relatively by 101% and 1761% whilst the increase in absolute value remained relatively
small, €4.2 million, and €3.3 million respectively. Similarly, electric generators saw a
significant increase in exports as static converters exports increase by €7.1 million, wind-
powered generators by €4.8 million and diesel-powered generators by €3.5 million. This is
in part trade diversion from Costa Rica and increased market access for electrical
equipment because of the EU-CA FTA. The biggest decrease experienced by EU exports to
Honduras is €6.9 million, 68%, in petroleum oils on average after the start of the
application of the EU-CA FTA. While this sounds like a large relative change, in absolute
terms the decline is small and relates to declining oil prices. Furnace accessories showed
a close to 100% decrease of €2.8 million. Other significant changes were a decrease of
€2.9 million in fire fighting vehicles and vehicle parts of €2.7 million. The latter appear to
relate to a public procurement procedure where US producers have won the competitive
tender for fire fighting vehicles and replaced EU exports by US exports.
Nicaragua
The main export products for the EU to Nicaragua are electric AC generators, medicaments,
insulated electric conductors, connectors for optical fibres and x-rays machines. Of those,
medicaments have seen the biggest increase in average annual export, €10.2million, since
the FTA started being applied, which amounts to a relative increase of 62%. The largest
relative change can be seen by textiles which rose from a very minor EU export to
Nicaragua to one of the major exports, 182981% which equals €4.1 million. On the other
hand, fertilizer exports to have declined strongly. Fertilizers containing nitrogenous, urea,
whether or not in aqueous solution, those containing nitrogenous, ammonium sulphate and
those containing the two fertilizing elements nitrogen and phosphorus, other than nitrates
and phosphates all saw decreases of €4.0 million, €1.5 million, and €1.4 million
respectively. When looking into the reasons for this decline, we find that Russia has
significantly increased its market share in the Latin-American fertilizer market (post the
2014 sanctions from EU and US because of the Crimean crisis) at the expense of EU
exporters. This has also reduced prices for fertilizers significantly also depressing export
values. Other sectors that show a similar decrease are electric motors and generators parts
and AC generators not exceeding 375kVA of €4.2 million and €1.2 million respectively; for
which there appear to be significant intra-CA re-adjustments.
Panama
The main EU export products to Panama are aeroplanes, medicaments, toxins, and spirits.
Of those, aeroplanes exceeding 15,000kg have seen the biggest increase in average annual
export, €169.2 million, since the FTA started being applied, equalling a relative increase of
2195%. Moreover, medicaments (, toxins and blood have also seen a significant increase
of €63.3 million, €24.7 million, and €24.4 million respectively. However, changes in EU
exports to Panama are mostly influenced by changes in goods used in transportation. EU
exports of fishing vessels, motorboats for leisure and lifeboats increase while many others
transport-related exports decrease, such as tugs (by €10.5 million), dredgers (by €27.8
million), railway coaches (by €71.3 million) and vessels for transportation of goods and
people (by €91.0 million). The largest decrease, however, is for cruise ships, amounting to
a decrease of €402.4 million. The reason for these decreases is not related to the
Agreement, but rather to the timing of public procurement and purchases of vessels and
trains that are very bulky in nature and impact export values significantly in one year.
EU imports from partner countries

In the summary Table 3.1-2, we report the top-3 EU imports that grow or decline while in
each of the country-specific descriptions, we look at the top-10 sectors in terms of value
17
traded. This shows a diversified picture, with – overall – increased export opportunities for
CA exporters to the EU in the period after the start of the application of the Agreement.
Table 3.1-2. Three main growing and declining EU imports from each CA country (%)
%
%
% % Change
Change
Sector name Change Sector name Change 10-13
10-13 vs
14-19 14-19 vs 14-
14-19
19
EU imports from Costa Rica
1. Bananas 32% 39% 1. Electrical switches -99% -86%
2. Catheters, cannula etc. 435% 587% 2. Ethyl alcohol -98% -57%
3. Other surgical or dental 73% 149% 3. Medicaments -99% -85%
EU imports from El Salvador
1. Coffee 40% 32% 1. Jerseys -99% -66%
2. Parts of aircraft engines 27% 125% 2. Tunas, frozen -90% -99%
3. Undenatured alcohol 49% 257% 3. T-shirts -63% -66
EU imports from Guatemala
1. Palm oil 112% 674% 1. Jams and similar -99% -85%
2. Bananas 326% 658% 2. Paintings 10% -57%
3. Rum and other spirits 44% 117% 3. Vegetable oils -96% -12%
EU imports from Honduras
1. Crustaceans 35% 230% 1. Cashew nuts -69% -99%
2. Coffee 213% 83% 2. Garments -16% -1%
3. Pineapples 312% 569% 3. Sugars: raw cane -8% -64%
EU imports from Nicaragua
1. Crustaceans -15% 66% 1.Vegtable oils 13% -47%
2. Bananas 597% 35510% 2. Petroleum oils 2270% -99%
3. Groundnuts 75% 89% 3. Footwear -95% -74%
EU imports from Panama
1. Bananas 78% 48% 1. Vessels -52% -50%
2. Rubber 38% 519% 2. Petroleum oils -10% -55%
3. Motorboats -44% 175% 3. Pineapple -73% -60%
Costa Rica
The main export products for the Costa Rican economy are bananas, catheters, other
surgical or dental instruments and pineapples. Of those, bananas have seen the biggest
increase in value since the FTA started being applied: €224 million, amounting to a relative
increase of 40%. This is due to progressive liberalisation of the EU banana regime for CA6
banana exports (see section 3.10 for a detailed analysis). Moreover, catheters have
witnessed the largest relative increase (600%) which equals €104 million average annual
increase in EU imports after the start of the application of the FTA compared to 2010-2013,
driven by tariff liberalisation but also convergence on TBT standards. EU imports of
electrical apparatus (switches) from Costa Rica have declined by €1 billion (or 85%)
compared to pre-FTA EU import levels. This decrease is one of the main contributors to the
observed decrease in total EU imports by €400 million, originating from Costa Rica. The
reason for this decline – because there is not a clear change in 2013 – is likely due to
stronger global competition from China and other major electrical equipment producers
and because of diversion of resources to other types of electrical equipment. The overall
trade picture for Costa Rica remains relatively stable as agricultural products such as
bananas, coffee and other fruits remain the largest exports. Yet medical instruments as
well as machinery parts have grown in relative importance over time.
18
El Salvador
The main export products for El Salvador to the EU – coffee, engines and undenatured
ethyl alcohol. They have seen the biggest increases in import value from the EU since the
entry into force of the EU-CA FTA with increases of €6.9, €6.3 and €6.3 million respectively.
In contrast, rags and machine apparatus have witnessed a lesser increase in import value
yet show a strong percentage increase compared to the previous period of over 2,000%
each. Jerseys and T-shirts have both seen a near 70% decrease compared to pre-FTA
imports, which most notably for jerseys equates to a reduction in € 66 million. This
contrasts with the increased textile exports of Panama to the EU. This decline is the main
contributor to the observed decrease in total exports to the EU between 2010-2013 and
2014-2019.
Guatemala
The main export products from Guatemala to the EU are palm oil, banana, rum, petroleum
oils and peas. Out of these the biggest recorded increase in value since the entry into force
of the EU-CA FTA is for palm oil with an amount of €150 million. EU imports of jams from
Guatemala have declined by €0.2 billion (85%). Despite this decline, the overall EU imports
from Guatemala recorded an increase between 2010-2013 and 2014-2019. Similar to other
CA nations, exports in agricultural products such as bananas remain the largest EU imports
increasing by 658%. (by €47 million). Some agricultural products increase even more in
relative terms but the impact in absolute terms is limited (e.g., EU avocado imports from
Guatemala increase by 905,000% to €1.8 million). Yet exports in products manufactured
from these fruits and vegetables have declined, with jams and vegetable oils being an
example of this, hinting that downstream production either moved to another CA nation or
directly to the EU.
Honduras
As shown in Figure 3.1-6, rock lobsters have seen the biggest increases in value since the
start of the application of the EU-CA FTA (by €112.7 million), due to lower tariffs and
progress in SPS measures as part of the EU-CA FTA.
Figure 3.1-6. Average annual changes in EU imports from Honduras in € millions and %
120 1800%
€
EU import change 2010-2013 to 2014-2019 (in %)

1600%
100
EU import change 2010-2013 to 2014-2019
1400%
80 1200%
1000%
60
800%
40 600%
mln)
400%
20
200%
0 0%
-200%
-20
-400%
-40 -600%
Change 2010-2013 to 2014-2019 € Change 2010-2013 to 2014-2019 (in %)
Cashew nuts have seen a decline by €35.2 million decreasing almost 100% compared to
pre-FTA imports. The reason seems to be that Honduran nuts are no longer recorded as
being exported from Honduras to the EU, but rather as exported via Costa Rica to the EU.
The evidence lies in the increase in imports of nuts by Costa Rica from Honduras and an
19
increase in Costa Rican exports to the EU worth €28 million. Also, competition from
groundnuts from Nicaragua have become more competitive. Shrimp preparations and
jerseys also decreased near 100% after the start of the application of the FTA. These
individual decreases do not outweigh the overall increase in average annual imports from
Honduras of €240.3 million. In contrast to other CA partners, Honduras has also increased
exports in processed agricultural goods and not only in commodities. Moreover, some
commodities show a relatively strong decrease in EU imports from Honduras, such as
melons or raw sugars which illustrates more steps of the supply chain taking place in
Honduras before goods are exported.
Nicaragua
The main exports from Nicaragua to the EU are shrimps, bananas, groundnuts, lobsters,
and cigars. Out of these frozen shrimps have seen the biggest increase in value since the
start of the application of the EU-CA FTA, (by €27.6 million annually, amounting to 66 %).
For Nicaragua’s economy the fishing sector plays a significant role as also lobsters, both
frozen and unfrozen increased by €11.5 million and €1.9 million respectively. Tariff
liberalisation in the EU-CA FTA is a main driver for these exports, combined with SPS
clarifications provided as part of the SPS sub-committee dialogues. Additionally, for other
agricultural products, such as bananas, EU imports increased by 66%, whilst groundnuts
became a new major export product for Nicaragua and increased by €24.9 million, or
355,510%. On the other hand, vegetable and petroleum oils decreased most in Nicaragua’s
exports to the EU (by €7.1 million and €5.2 million respectively). For vegetables, this
seems to be driven by changing comparative advantages among the CA6 countries, while
oil price decreases explain most of the reduction in value of oil product exports. Another
sector that sees a decrease of Nicaragua’s exports to the EU is the textile sector as footwear
decreases by €3.8 million and trousers by €1.4 million. These are not large decreases.
They can be caused by increased competition from Panama’s textile exporters.
Panama
Bananas have seen the biggest increase in value because of the application of the EU-CA
FTA. Exports increased by €62.7 million (48%). Similarly, EU imports of motorboats,
tankers and petroleum oils. Vessels have recorded the biggest decrease in value of imports
by €90 million (50%) compared to pre-FTA period. This large decrease, in combination
with modest increases for other products, is one of the main reasons explaining the
smallest observed increase in EU imports (€6 million overall). On the other hand, when
looking at the 2018-2019 sub-period as a reference, Panama shows the largest increase
(€280 million) compared to the other partner countries. The overall trade picture for
Panama remains largely unchanged and except of the large decrease in exports of vessels
(HS890190), the shipping sector continues to perform strongly.
Conclusions
Regarding observed trade in goods patterns, our analysis concludes the following:
• EU imports from the CA6 have risen by 31% from €5.1 billion in 2010 to €6.7 billion in
2019, in part because of the increase in EU imports of fruits & vegetables and sugar.
• Aggregate EU exports to CA6 rise by 40% from €5.3 billion in 2010 to €7.4 billion in
2019 (except for Panama), mainly due to increases in exports of machinery, cars,
medicines, and medical equipment.
• The relative share of the EU in CA imports remains fairly stable across the 2010-2019
period. There is a minor increase in imports, but mostly for 2013 and 2014, after which
the EU share declines, again marginally. This points to a small impact of the EU-CA FTA
on import shares, especially at the expense of China’s import share.
• The relative share of the EU in CA exports has grown from 21.7% to 24.4% from the
201-2013 to 2014-2019 period. This is a significant increase, solidifying the EU’s 2 nd
place in terms of export markets for CA6 countries after the US.
• Some of the main EU exports to CA6 countries that benefit from the EU-CA FTA are
medicaments, motor vehicles, aircraft & spacecraft, and AC generators. The products
that decline most are fertilizers, petroleum oils, electric generators, and cruise ships.
• Some of the main EU imports from CA6 countries that benefit from the EU-CA FTA are
bananas, coffee, palm oil, and crustaceans. The products whose exports to the EU from
20
CA6 countries decline most are electrical switches, medicaments, jerseys, petroleum
oils and vessels.
3.1.2 Differentiate between pre-FTA zero-tariff traded goods and goods traded with tariffs
EU tariffs on CA-6 exports (EU imports)

Before the EU-CA FTA, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua were
part of the GSP+ scheme and Panama was part of the GSP scheme. This means that EU
already applied, under these arrangements, zero tariffs on an overwhelming majority of
imports from five of the six CA countries 5. Tables B2-2 to B2-7 in Annex B2 reports those
HS6 products on which EU tariffs were positive before the FTA and were reduced thereafter,
to zero, in most cases. In fact, the EU-CA FTA negotiations mattered for the CA6 countries
because their participation of the GSP scheme would otherwise expire soon after 2013 due
to the fact, the economic development of the CA countries meant they would no longer
qualify for GSP status.
Some of the tariff reductions are associated with a substantial increase in EU imports of a
particular products over time (comparing the 2010-2013 pre-FTA period to the 2014-2019
period when the EU-CA FTA was already applied). For instance:
• Imports of cucumbers and gherkins (fresh or chilled) from Costa Rica and Honduras go
up nearly 11 and 3 times, respectively.
• Imports of citrus fruit and oranges from El Salvador increase almost 14 times.
• Imports of fresh or dried lemons from Guatemala witness a 34-times-increase.
• Given the substantial, progressive reduction in banana tariffs, an increase in banana
imports has materialised. EU banana imports from the CA6 increase by 49% between
the time periods 2010-2013 and 2014-2019.
• This increase is also the case for sugar where TRQs provide substantial preferences and
have been filled: the corresponding increase in sugar imports is 19%.
On the other hand, other EU imports fall over time despite the decline in tariffs. This has
been particularly true for many EU imports from Nicaragua and Panama, except for prawns
and shrimps. The drop in exports occurs despite the fact Panama was in the GSP scheme
and not in GSP+ like the others, meaning that the FTA has improved Panamanian access
to the EU market comparatively more than the access for the other CA5 countries. While
for some sector exports, a strong link to the EU-CA FTA can be found (see above), overall,
however, the reported data does not provide statistically significant correlation between
tariff reduction in the wake of the EU-CA FTA and change in EU imports of the associated
products. This does not mean that the EU-CA FTA has not had a positive effect (see Figure
3.1-2), but it illustrates that many other factors have also impacted on the CA exports.
CA-6 tariffs on EU exports (CA imports)

In contrast to EU tariffs on CA-6 exports, tariffs imposed by the CA6 on EU exports were
non-zero on several commodities before the EU-CA FTA, and these were brought down,
mostly to zero, after the Agreement came into effect. Therefore, the largest effect of the
FTA on EU exports to these partners is expected for those goods for which import duties
were positive and then removed under the FTA. Although this theoretical expectation is
tested more thoroughly as part of the economic modelling, we also undertake a simple
correlation analysis to obtain a first indication of the FTA’s effect.
We correlate the percentage reduction in tariffs in the CA6 importing countries with the
percentage growth in average EU exports to a CA partner before and after the start of the
5
While five Central American countries (all except Panama) benefitted from the GSP+ arrangement before
the entry into force of the FTA and four were GSP+ beneficiaries prior to being removed from the scheme in
2016 (Costa Rica, El Salvador, Guatemala and Panama, while Honduras and Nicaragua were in standard
GSP in 2014-2015), the CGE model assumes the baseline, in which Costa Rica and Panama would have
graduated from the GSP/GSP+ and moved to trading with the EU on MFN terms if there had been no trade
agreement in place. Hence for them, the estimated impacts are larger as they compare MFN tariffs with
trade liberalisation under the FTA while the remaining four countries (Guatemala, El Salvador, Honduras and
Nicaragua) are modelled as continuing to be beneficiaries of GSP+ arrangement in the counterfactual
scenario, in line with the situation prior to 2014. Thus, the major difference for them is with respect to trade
in sugar and bananas.
21
application of the EU-CA FTA.6 We have done this for: (i) all HS6 products; (ii) HS6 products
with positive preference margins; and (iii) HS6 products with a positive preference margin
and an import value exceeding €1 million (average 2018-19)7. The detailed results are
shown in Figures B2-1 to B2-6 in Annex B2. The analysis shows that:
• For El Salvador and Nicaragua, positive preference margins are found that are positively
correlated with the growth of EU exports after the FTA in products, such as food
preparations and textiles.
• For Costa Rica and Guatemala, this positive correlation does not hold for high-value
exports.
• In the case of Honduras, tariff reductions are found to be negatively correlated with
export growth.
• If the analysis includes all HS6 products and not just those for which the tariffs are
reduced, then a change in tariffs is negatively correlated with EU export growth in all
CA countries except for Nicaragua, where the relationship is still positive.
From these findings we can conclude that: 1) In several cases the tariff liberalisations in
the EU-CA FTA have had an impact on how EU exports to CA6 countries have grown; 2)
But there is also ample evidence that other factors than the EU-CA FTA, like importer- and
product-specific demand factors, are as important as the magnitudes of pre- and post-FTA
tariffs in determining the outcome of preferential liberalization.
Conclusions
• Before the EU-CA FTA, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua
were part of the GSP+ scheme and Panama was part of the GSP scheme. This means
that EU already applied, under these arrangements, zero tariffs on an overwhelming
majority of imports from five of the six CA countries.
• In contrast to EU tariffs on CA6 exports, tariffs imposed by the CA6 on EU exports were
non-zero on several commodities before the EU-CA FTA, and these were brought down,
mostly to zero, after the Agreement came into effect.
• Some of the products where tariff reductions happen are associated with a substantial
increase in EU imports, like cucumbers and gherkins (fresh or chilled) from Costa Rica
and Honduras, citrus fruit and oranges from El Salvador, fresh or dried lemons from
Guatemala.
• Given the substantial, progressive reduction in banana tariffs, an increase in banana
imports has materialised (by 49%). A 19% increase is also the case for sugar where
TRQs provide substantial preferences and have been filled.
• EU exports where tariffs have been reduced have increased, like for food preparations
and textiles to El Salvador and Nicaragua.
3.1.3 Preference utilisation rate and forgone duty savings of economic operators
In this section, we consider trade data under different tariff regimes to examine the actual
utilisation of preferences made by EU and CA6 exporters under the EU-CA FTA while
accessing each other’s markets.
Note that while the CA6 countries were still eligible for GSP/GSP+ preferences during 2014-
15, they used these preferences along with those accorded under the EU-CA FTA. Table
3.1-3 thus reports the extent to which the CA6 countries utilised EU-CA FTA preferences
over time along with GSP/GSP+ preferences and exporting based on MFN tariffs, together
with the total value of imports eligible for preferential treatment. The analysis suggests
that Costa Rica, Guatemala, and Honduras (during 2014 and 2015) continued to avail their
GSP/GSP+ benefits even after the agreement was implemented.
6
The average of the 2012-13 period is taken for the pre-FTA time. The years taken for the period when the
FTA has been applied are: the average of the 2018-19 period for Costa Rica, El Salvador and Nicaragua; the
average period 2014-15 for Guatemala; the average 2015 and 2018 for Honduras; and 2015 for Panama.
7
(iii) is not carried out for Panama as import value with positive preference margins does not exceed €1
million for any HS6 product.
22
Table 3.1-3. Utilisation of different trading regimes by CA6 exporters

2014 2015 2016 2017 2018 2019
Costa Rica
Eligible imports (€m) 1474 1583 1703 1824 1804 1845
Used FTA preferences 84% 89% 95% 97% 96% 96%
Used GSP+ preferences 12% 7% 0% 0% 0% 0%
MFN 4% 4% 5% 3% 4% 4%
El Salvador
MFN 9% 18% 26% 10% 9% 10%
Guatemala
MFN 5% 5% 8% 5% 3% 4%
Honduras
MFN 7% 8% 9% 8% 9% 8%
Nicaragua
MFN 4% 6% 7% 8% 12% 7%
Panama
Used GSP preferences 3% 3% 0% 0% 0% 0%
MFN 19% 30% 38% 18% 17% 19%
Source: Eurostat data; own calculations
Figure 3.1-7 shows the preference utilisation rates (PURs) of CA6 exporters to the EU over
2014-19 (matching Table 3.1-3). Except for Panama, where the PUR was only 76% on
average over this period, the PURs of CA6 exporters have exceeded 85% and for Costa
Rica and Guatemala, 95%. Both, El Salvador, and Panama reported significant drops in
their PURs in 2015 and 2016 and rebounds thereafter.
Figure 3.1-7. PURs of CA6 exporters to the EU and EU exports to CA (%)

PURs CA6 exports to EU PURs EU exports to CA6
100% 60%
PURs for exports to CA6 (%)
PURs for expors to EU (%)
50%
80%
40%
60%
30%
40%
20%
20%
10%
0% 0%
CRI-EU SLV-EU GTM-EU HND-EU NIC-EU PAN-EU EU-CRI EU-SLV EU-GTM EU-HND EU-NIC EU-PAN
2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019
Figure 3.1-7 also shows the PURs of EU exporters to the CA6 for 2017, 2018 and 2019.
The reported data suggest a utilisation of preferences in exporting to Costa Rica of 60% in
2019 and 30% for Panama as well as a PUR over 50% in exporting to Honduras for 2017
and 2018. The remaining three CA6 importers witnessed a rise in PURs of EU exporters
over time, but the rates were less than a third in each case. The reasons provided by
companies during interviews for low PURs are that:
23
• The use of the Agreement is complex for smaller firms, so they prefer not to have any
administrative work, especially when exported quantities are small.
• For some exports MFN tariffs are already zero anyway, so there is no need to use the
Agreement.
• Some export markets in CA6 countries are too small in volume terms to do the effort
of using the Agreement.
Figure 3.1-7 again shows the PURs of EU exporters to the CA6 in 2019 and of CA exporters
to the EU in 2019, the shares of MFN zero trade in the utilised preferences, and the values
of the imports eligible for preferential treatment under the EU-CA FTA.
When we look at EU exporters to CA6 countries, except for Costa Rica, where the PUR was
60% (blue columns in the left Figure 3.1-8), less than 40% of EU exports to CA6 use the
preferences granted under the Agreement, with a PUR as low as 20% in the case of
Nicaragua. However, given that at least 20% of trade in the products for which EU
exporters are eligible for preferences across the CA6 countries attracts non-zero MFN
tariffs, the utilisation of preferences by EU exporters may be relatively more effective. A
disaggregated breakdown of PUR by broad product imports for each of the CA6, along with
actual usage and eligibility by value of imports is provided in Annex B2. It shows that there
is more uniformity in the utilisation of preferences across broad products by EU exporters
to the CA6, except for Nicaragua and Panama, where the PUR is generally low across
products. The stakeholders have provided us with some arguments as to why this is the
case (see above).
Figure 3.1-8. PURs, MFN zero trade and eligible exports (2019, % and € mln)
PURs, MFN zero trade and eligible EU exports to CA6 (2019) PURs, MFN zero trade and eligible CA6 exports to EU (2019)
100% 1600 100% 3000
PUR / Share MFN zero (%)
2500
PUR / Sharem MFN (%)
80% 80%
1200
Eligible CA6 exports (€

2000
Eligible EU exports (€
60% 60%
1500
800
40%
40% 1000
400 20%
20% 500
0% 0
0% 0 CRI-EU SLV-EU GTM-EU HND-EU NIC-EU PAN-EU
EU-CRI EU-SLV EU-GTM EU-HND EU-NIC EU-PAN
PUR (%) Share of MFN zero (%) €
PUR (%) Share of MFN zero (%) €
Figure 3.1-8 also shows the PURs of CA6 exporters to the EU in 2019, as well as the share
of MFN zero trade in the utilised preferences, and the value of EU imports eligible for
preferential treatment under the Agreement. Except for Panama where the PUR was 81%,
more than 90% of CA6 exports to the EU use the preferences granted under the
agreement, with the PUR as high as 96% for over €2.8 billion of exports from Costa Rica.
However, given that at least 90% of trade in the products for which CA6 exporters are
eligible for preferences in the EU attracts zero MFN tariffs, the utilisation of preferences
may be relatively less effective. A disaggregated breakdown of PUR by broad product
exports for each of the CA6, along with actual usage and eligibility by value of imports, is
provided in Annex B2. It shows that, except for a few manufacturing products, the CA6
countries use the preferences by far the most in exporting agricultural products to the EU
(e.g., a PUR of 99.5% for animal or vegetable fats and 99.3% for vegetable products for
Costa Rican exports to the EU in 2019).
Conclusions
The PURs of CA6 exporters to the EU have exceeded 85% (except for Panama, where the
PUR was 76% on average over the 2014-2019 period). In contrast, the PURs of EU
exporters to the CA6 for 2017, 2018 and 2019 were much lower: 60% for Costa Rica in
2019 and 30% for Panama; as well as over 50% for Honduras for 2017 and 2018. While
lower, EU exporters have used preferences according by the EU-CA FTA relatively
effectively, given that they cover 20-30% of trade on products where MFN tariffs are non-
zero. The reasons given for the lower PUR are that the use of the Agreement is complex
24
for smaller firms, who try to avoid administrative burdens; MFN tariffs are zero in any case;
and some of the CA6 export markets are too small in volume terms to use the Agreement.
3.1.4 The use of Tariff Rate Quotas (TRQs)
For some sensitive agricultural products, the Agreement provides for tariff rate quotas
(TRQs) which reduce or eliminate tariffs for a certain volume of imports (Annex B2, Table
B2-8). EU TRQs for imports from CA countries cover sugar, some vegetables (mushrooms,
garlic, manioc, sweetcorn), rice, beef, bulk rum, and rice products. TRQs on EU exports
cover cured hams and streaky bacon, powdered milk, whey, cheese, and swine meet
products. The aim of TRQs is to foster trade by reducing tariff barriers while avoiding too
much pressure from import competition for domestic producers by setting a maximum on
the quantity for which the preferential tariff applies. The evaluation therefore aims at
assessing to what extent TRQs have been used by traders without disrupting domestic
production. We first look at imports by the EU from the Central American partner countries,
and then at EU exports to the CA6 partners. In total there are eight TRQs on EU imports
from CA and five on EU exports. This is summarised in Table 3.1-4.
Table 3.1-4. The number of TRQs in the EU-CA FTA

EU imports from 8 8 8 8 8 8
EU exports to 5 5 5 5 5 5
Source : EU Commission TRQ report 2014-2019
The use of EU TRQs by partner country exporters

Few TRQs have been used by partner country exporters (Table 3.1-5). The only two product
categories where quotas have been reasonably filled consistently over time are sugar cane
products from Central America8, including Panama, and rum, excluding Panama. The
manioc starch TRQ was first used in 2018 with 13%. For other exports, TRQs were not
used sizeably (EU Commission, 2018).
Exports of sugar cane from CA countries except Panama substantially increased, up to the
quota in 2015, 2017 and 2019. For Panama, the utilisation rate for sugar is 69%. This
indicates, first, that the TRQ has led to more exports for sugar, i.e., it has been effective
for increasing trade; and second, it has also been binding, i.e., it has helped to avoid an
“uncontrolled” increase in EU sugar imports from Central America because out of quota
tariffs are prohibitively high.
Exports of rum from Central America excluding Panama had an initial utilisation rate of
30% in 2014 and 2015, but then grew to a 100% in 2018 and 2019 despite the annual
increase of the TRQ limit.
Table 3.1-5. The use of EU TRQs by exporters from Central America

Origin Product 2014 2015 2016 2017 2018 2019
Garlic 0% 0% NA 0% 0% 0%
Rice 0% 0% NA 0% 0% 0%
Bovine meat 0% 0% NA 0% 0% 0%
Central America
Mushroom 0% 0% NA 0% 0% 0%
Manioc starch 0% 0% NA 0% 13% 2%
Sweetcorn 0% 0% NA 0% 0% 0%
Central America Sugar 91% 100% NA 100% 96% 100%
except Panama Rum in container > 2 l 33% 29% NA 100% 100% 100%
Rum in container > 2 l 0% 100%
Panama
Sugar 69% 6.7%
Nicaragua Bovine meat 0%
Source : EU Commission TRQ report 2014-2019
8
Central American countries, notably Guatemala, note in this context the ongoing discussion in the Market
Access Sub-Committee (7-8 June 2018) regarding the way of recording the use of TRQs by CA (in
particular TRQ for sugar) and differences in this matter between the EU and CA resulting in diverging data
about the share of TRQ already used and the time of its exhaustion.
25
While this generally low utilisation could be interpreted as TRQs (except for those on rum
and sugar) being effective instruments for fostering trade, a range of causes needs to be
discussed first. We have gathered some elements, based on interviews with key
stakeholders and broader data research looking at other EU FTAs (e.g., the EU-Andean
FTA) at the same time. We find the following:
• The small size of partner countries’ exports points to the prevalence of SMEs in these
sectors. For them – as indicated in the interviews – the administrative requirements
outweigh the benefits of preferential (or zero) in-quota tariffs. They simply lack the
resources for compliance.
• Another factor is that while the TRQ is attractive, domestic supply constraints in CA6
markets have prevented the expansion of production and increase in exports (e.g.,
challenges in getting fresh produce to distribution hubs and ready for exports
sufficiently fast enough).
• Some interviewees mention that the US is an attractive alternative market for CA6
exports – one where the DC-CAFTA9 preferences apply – competing with the EU-CA
FTA. So, while a product is produced in a CA6 country, it is rather exported to the US
rather than the EU.
• Several companies and associations interviewed, complain about overly stringent SPS
rules that prevent ‘good produce’ from being exported to the EU, for example because
provisions on ‘equivalence have not been developed’
• When studying the EU-ANDEAN FTA, we also understand that the ANDEAN and CA6
regions are ‘competing’ with each other for access to the EU market. For example, while
the CA6 TRQs for garlic and sweetcorn are not used, the garlic TRQ is used by Peru and
the sweetcorn one by Ecuador.
Regarding some TRQ product categories where no exports are registered in the pre-
Agreement period, these can be considered as “bets” on export competitiveness in the
presence of the preferential market access offered under the Agreement’s TRQs. However,
in no single case exports in such product categories started, and the ‘bets’ have therefore
so far not paid off. This points to the need of more efforts needed to build the
competitiveness of producers to enable them to start exporting and making use of the
preferential access to the EU market offered under the TRQs.
So, while there is evidence that TRQs are not optimal because of their administrative
requirements and (perceived) complexity that prove particularly burdensome for SMEs,
there are other factors that turn out to be important drivers for underutilisation of several
of the TRQs for CA6 exports to the EU. We recommend looking at these and try to address
the causes so that the TRQs can be better used going forward.
The use of Central American country TRQs by EU exporters

The utilisation by EU exporters of TRQs offered by the Central American partner countries
varies considerably across time and product categories. As Table 3.1-6 highlights, an
increase in utilisation rates for most of the TRQs can be seen in 2018 followed by a decrease
for cured hams and cheese in 2019. These declines, however, can be explained as there is
no data available for 2019 for Nicaragua and Panama.
Table 3.1-6. TRQ utilisation rates of EU exports

Export
Product 2014 2015 2016 2017 2018 2019
destination
Cured hams and
bacon 22% 26% NA 34% 35% 12%10
Central
Whey 0% NA
America
Prepared Swine
meat 5% 5% NA 7% 10% 11%11
Costa Rica NA 0% 19%
Powdered Milk 27% 14% 91%
El Salvador NA 42% 59%
9
Panama is not Party to the US-CAFTA-DR and has a Trade Promotion Agreement with the US.
10
According to information provided by the Government of Panama, the usage of this TRQ was at 89.2%.
11
According to information provided by the Government of Panama, the usage of this TRQ was at 13.5%.
26
Export
Product 2014 2015 2016 2017 2018 2019
destination
Guatemala NA 5% 100%
Honduras NA 100% 92%
Nicaragua NA 0%
Panama NA 87% 74.6%*
Costa Rica NA 100% 90%
El Salvador NA 23% 14%
Guatemala NA 44% 62%
Cheese 28% 44% 56%
Honduras NA 50% 74%
Nicaragua NA 0%
Panama NA 79% 81.2%*
Source: EU Commission TRQ report 2014-2019, except *: Data provided by the Government of Panama
When looking at individual countries and the use of TRQs by EU exporters, Honduran
powdered milk imports reach almost 100% in the years 2018 and 2019 and the same
happens for Guatemala in 2019. EU exporters do not export powdered milk in 2018 to
Costa Rica and only use 19% of their TRQ in 2019. For cheese, Costa Rica sees its TRQ fill
completely in 2018, with Honduras and Guatemala also showing consecutive years of
increased utilization, to levels above 50% in 2019. Utilization rates of the cheese TRQ for
El Salvador are much more modest. Prepared swine meet has seen a slight increase in EU
exports to all partner countries after the Agreement, growing to 10% of the allowed TRQ.
On the other hand, the TRQ for whey has not been used. Although EU exports of these
products are higher in the post-Agreement period than before, they are volatile and do not
show a clearly upward trend. Although swine meat shows a slightly lower utilization rate
than in the first year after the Agreement started being applied, the volume traded
increases. However, as it increases less than the annual TRQ growth allows for, the TRQ
utilisation rate still drops.
From interviews with EU stakeholders on the issue of the limited use of TRQs provided for
by CA6 countries, the following factors became clear:
• The small size of partner countries’ markets makes the interest in exports, including
via TRQs, less attractive, especially for SMEs.
• EU exporters find the SPS regimes in CA fragmented and challenging to use. They raise
the issue of a fragmented regional market, for example regarding origin of animals,
which ought to be regional from an EU exporter perspective, and lack of regional
treatment of the EU as a pest- and disease-free area. In particular the CA6 regional
market does not allow products subject to SPS requirements to circulate freely.
• Due to the very volatile political climate and small market, EU exports to Nicaragua
declines, which shows in the unutilised nature of the Nicaraguan TRQs.
Conclusions
TRQs are provided for sensitive agricultural products, reducing, or eliminating tariffs for a
certain volume of imports. The aim of TRQs is to foster trade by reducing tariff barriers
while avoiding too much pressure from import competition for domestic producers by
setting a maximum on the quantity for which the preferential tariff applies. For TRQs
available for CA6 countries to export to the EU, only sugar cane products and rum had
their quotas filled consistently. This allowed for an increase of sugar exports to the EU by
69%. The reasons for the underutilisation of the TRQs for CA6 exporters are the large
share of SMEs in some sectors, who indicate that the use of the system is challenging;
domestic supply side constraints; attractive alternative markets like the US; strict SPS
rules; and competition from other regions that have TRQ access to the EU market. EU
exporters use TRQs to varying degrees: Honduran powdered milk imports reach almost
100% in the years 2018 and 2019 and the same happens for Guatemala in 2019. EU
exporters do not export powdered milk in 2018 to Costa Rica and only use 19% of their
TRQ in 2019. For cheese, Costa Rica sees its TRQ fill completely in 2018, with Honduras
and Guatemala also showing consecutive years of increased utilization, to levels above
50% in 2019. Other TRQ use is much more modest. EU exporters indicate that small size
of partner countries’ markets make the interest in exports, including via TRQs, less
27
attractive, especially for SMEs; SPS regimes in CA6 partners are fragmented; and some
markets are unattractive due to political volatility.
3.1.5 Trade diversion, notably from intra-regional CA trade to trade with the EU
In this section, we look at trade diversion for exports and imports and in value and volume
terms. The results are summarised in Table 3.1-7.
Trade diversion effects in value terms

In this section, we cover the issue of trade diversion. Trade diversion is the economic term
when – because of a trade agreement that changes relative market access (e.g. because
of tariff liberalisation) – trade patterns divert away from third country trading partners to
the parties in the agreement. In this specific situation, the EU-CA FTA effect could lead to
two types of trade diversion that we will investigate:
• Trade diversion from third countries towards EU-CA6 trade.
• Trade diversion from intra-CA trade towards EU-CA6 trade.
The effect of trade diversion can be measured both in value (i.e., in €) and in volume
(tonnes) terms. In order to look at both types of trade diversion, we look for each of the
CA6 countries how their exports/imports have evolved over time between 2010 and 2019.
We do this for: 1) Exports to the EU; 2) Exports to each of the five partner CA countries;
and 3) Exports to the Rest of the World (RoW). Because we look at total trade patterns
and trends (which means that the EU-CA FTA effect is part of the observed trade flows but
not the only effect we measure between 2010 and 2019) – split into the 2010-2013 pre-
FTA period and the 2014-2019 period when the FTA was applied, we can see if the
Agreement has – as measured by historical data – had a trade diverting effect or not. To
make our analysis clearer, we have indexed 2013 (the year of the start of the application
of the EU-CA FTA) as 100 so all differences in trade flows before and after can be viewed
more clearly.
To observe possible effects of trade diversion, we compare trade between the EU and CA6
with changes in intra CA trade, both for imports and exports.
Export values
When we investigate for each of the CA6 countries how exports have evolved between the
CA6 countries and vis-à-vis the EU and Rest of World, some interesting patterns emerge.
First of all, we note that – overall – there is a trend of rising exports after the start of the
application of the EU-CA FTA for the EU and CA6 countries. If we look more country-
specific, for example, at Costa Rica, we find that after 2013, trade with the other CA5
countries continues to increase, while trade with the EU drops between 2014 and 2015
after which it increases again. The largest decline occurs for Rest of World (e.g., trade with
the US and China). So, this is evidence that the EU-CA FTA has not created trade diversion
among the CA6 countries regionally for Costa Rica, neither with the EU, but to some extent
vis-à-vis the Rest of the World. When we look at Guatemala, exports to the EU continue
to grow most, followed by the CA5 regional partners, with trade growth to Rest of World
being slowest. This means that no export trade diversion is observed for Guatemala, but
trade with Rest of World grows least. A similar pattern is observed for Nicaragua. Panama
is a bit of an outlier as its exports are more volatile than for the other CA countries and
most significantly show the largest decrease for intra-CA trade as by 2019 almost all trade
partners except the EU and Guatemala are below 2013 levels. But also trade with Rest of
World decreases a lot. This means that evidence for trade diversion is inconclusive for
Panama. For the EU, trade with all CA6 countries increases except for with Panama, where
it remains stagnant. Trade growth with Rest of World is marginal. This points to a marginal
degree of trade creation with CA6 countries (except Panama) at the expensive more growth
with Rest of World.
Import values
When we look at the value of imports from 2010 to 2019 for the CA6 countries, we see
that they are mostly in line with observations made in the export section above as the
increased intra-regional exports also imply an increase in overall intra-regional imports.
28
For Costa Rica, import values from most trading partners increase, except for Panama in
(experiencing a decrease) and third countries not included in the FTA (remaining stable).
This points to some degree of trade diversion away from Panama in favour of imports from
the EU, El Salvador and Guatemala. For El Salvador, we see higher levels of imports from
all trading partners, except Panama. But the drop in Panamanian imports does not appear
to be a trade diversion, but rather a bulk product effect. For Guatemala, imports from all
origins continue to increase and no change in trend is observed. For Honduras, the same
can be said except that, imports from Panama peaked in 2013, but we much lower before
and after that year. Nicaragua shows little change in import value except for imports from
Honduras which quadruple compared to 2013, and a strong decline of imports from Panama
in the year 2018. This does not suggest (gradual) trade diversion effects. Yet imported
values by Panama do not show large fluctuations as their exported value as most trading
partners remain above 2013 levels, especially Honduras which saw very low levels of
exports to Panama in 2013. For the EU, less fluctuation is observed with overall higher
levels of import value after 2013 in line with expectations.
Trade diversion effects in volume terms

Because changes in trade values may be driven by price changes only and not reflect
underlying levels of production and exports or imports of physical goods, in this section,
we also look at trade in volume terms.
Export volumes
When we look at the exported volumes from 2010 to 2019 for the CA6 countries, less
consistent trends compared to value changes can be observed. Especially, when looking at
export volume changes to third party countries no significant changes are observed. Yet,
large spikes due to increased intra-regional trade in tonnes due to, for example, trade in
ships or massive quantities of ore, distort the overall picture. Export volumes from Costa
Rica to Panama almost double in 2014 compared to 2013 levels, to then drop to lower
levels than before the EU-CA FTA, recovering slowly to pre-2013 levels. Also exports to El
Salvador decline after 2013 but by 2019 have slowly recovered. These point to temporary
trade diversion effects. For Nicaragua, no clear pattern can be observed as the largest
fluctuations are seen in trade with Panama and otherwise export volume remains
unchanged, with the exception of Costa Rica where export volumes decline. This does point
to a limited degree of trade diversion. Similar, to its respective export value change, for
Panama also volume changes are the most volatile. Finally, for EU export volumes after
2013 point to a very small and temporary degree of trade diversion with El Salvador. For
the other trade partners export volumes increase.
Import volumes
When we look at the imported volumes from 2010 to 2019 for the CA6 countries a similar
picture emerges. Costa Rican imports in volume from El Salvador show a strong increase,
in 2019 to almost double the levels of 2010-2013, whilst those originating in Panama half
in 2016-2018, but recover partially in 2019. The data show a degree of trade diversion in
import volume terms for Nicaragua and Panama in favour of El Salvador mainly. For El
Salvador, no changes in trends for imported volumes from trade partners can be
observed, except for two countries. There is a very small decrease in imports from Costa
Rica, indicating a very small degree of trade diversion. Secondly, for imports from Panama,
there is a high level of fluctuation, but no trade diversion. For Guatemala, imported
volumes originating in the Rest of World and the EU increase most compared to prior levels.
Imports from Honduras fluctuate. For the EU, in import volumes, only for Panama there is
a small degree of trade diversion in favour of trade with Honduras and Guatemala. For all
other countries import volumes increase.
Table 3.1-7. Summary of trade diversion

CRI SLV GTM HND NIC PAN EU ROW
Export trade diversion (value terms)
CRI No No No No No No Yes
SLV No No No No No No No
GTM No No No No No No No
HND No No No No No No No
NIC No No No No No No No
29
CRI SLV GTM HND NIC PAN EU ROW

PAN No ?? No Yes ?? No Yes
EU No No No No No Yes Yes
Import trade diversion (value terms)
CRI No No No No Yes No No
SLV No No No No ?? No No
HND No No No No ?? No No
NIC No No No No ?? No No
PAN No No No No No No No
EU No No No No No No No
Export trade diversion (volume terms)
CRI Yes, t No No No Yes, t No No
SLV No No No No No No No
HND No No No No No No No
NIC Yes No No No No No No
PAN Yes No No Yes No Yes No
EU No Yes, t Yes, t No No No No
Import trade diversion (volume terms)
CRI No No No Yes Yes No No
SLV Yes, t No No No No No No
GTM No No ?? No No No No
HND No No No No ?? No No
NIC No No No No No No No
PAN No No No No No No No
EU No No No No No Yes No
Source: Authors’ calculations based on UN Comtrade data; Notes: “Yes” suggests a limited degree of trade
diversion; “Yes, t” suggests a temporary degree of trade diversion; “??” suggests large swings in trade, but not
attributable to trade diversion.
Conclusions
Summarising the analyses, for values and volumes and for imports and exports, in Table
3.1-7, we conclude that: 1) The overall level of trade diversion witnessed is non-existent
or very limited; 2) Even in cases of reported evidence on trade diversion, we find it to be
limited in magnitude and time; 3) When looking at trade diversion in export values, we see
most diversion towards the EU and CA6 region occur from the Rest of World. The EU-CA
FTA does not appear to have come at the expense of intra-regional trade; 4) The evidence
shows that despite the EU-CA FTA and possible trade diversion effects away from the CA6-
region, trade in values and volumes has – overall – steadily increased also intra-regionally,
except for Panama: Costa Rica has shown increases in trade in value terms with all trading
partners except for Rest of the World. In volume terms there is evidence for very small
trade diversion effects with El Salvador and Panama (exports) and Nicaragua and Panama
(imports); 5) The challenging country for the analysis is Panama, where the overall trade
changes are much more volatile. Trade between Panama and the other CA5 has decreased,
but this is also the case for Panama-EU trade.
3.1.6 The impact of implementation of the EU-CA FTA on NTMs12
Title I of the Agreement contains general principles, provisions and definitions aimed at
the expansion and diversification of trade in goods between the Parties, through reduction
or elimination of both tariff and non-tariff barriers; the facilitation of trade in goods through
provisions on customs and trade facilitation, standards, technical regulations, conformity
assessment procedures and sanitary and phytosanitary (SPS) measures; and promotion of
economic regional integration in the area of customs procedures, technical regulations and
SPS measures. Title II includes chapters on market access in goods; trade remedies;
customs and trade facilitation; technical barriers to trade (TBT) and SPS issues. Monitoring
and implementation in these areas is carried out by institutionally-set-up Sub-committees.
12
We continue engagement with stakeholders, including interviews and written requests for information
directed to exporters. If at any time before the end of the project we receive information about trade being
facilitated by solutions found at the Sub-committee meetings, we will include it into the Report.
30
The analysis in this section focuses in parallel on two channels through which the non-tariff
measures (NTMs) are notified, discussed, and addressed, i.e., the WTO notification system,
in particular related to the TBT and SPS Agreements, as well as Sub-committee meetings
and ongoing dialogue between the Parties and steps taken by them under the EU-CA FTA.
In interviews for this study, it was emphasised that regarding TBT measures and SPS, the
WTO notification system and work of the dedicated committees remain the main channel
for informing partner countries, including, respectively, the EU and CA, about planned
changes in legislation, in categories outlined in the WTO TBT and SPS Agreements. The
WTO system also provided the main channel to submit and address comments related to
the notified measures. In this context, Sub-committee meetings under the EU-CA FTA
provided an additional opportunity to raise concerns, receive focused clarifications and get
an update about the process. This arrangement has worked well on several occasions, e.g.,
the EU appreciated that its comments had been considered in CA regional technical
regulations on dairy products (cream), footwear labelling and alcoholic beverages (TBT
Sub-committee minutes, 26 May 2015).
Figure 3.1-9. NTM measures, CA6 and EU (avg. pre- vs post-FTA periods)
1200 2 0
1000
200
00
00 1 0
00
100
200
0
0
Source: WTO NTM database; own calculations
Given that there is no data about the total number of bilateral NTMs between the EU and
CA over the analysed period and also given the leading role of the WTO notification system,
for illustrative purposes, Figure 3.1-9 shows the number of final antidumping measures
(ADP), countervailing duties (CVD) and safeguards (SG) implemented, and the number of
SPS and TBT measures notified, by CA countries and the EU, averaged over 2010-2013
and 2014-2019, as per data from the WTO. The right-hand part of the Figure provides an
overview of TBT and SPS measures notified by each of the CA countries. Given that these
are multilateral NTMs, they may affect respectively, the EU and CA to a different extent
(compared to other partner countries), depending on the structure of their mutual trade
relations (some may be very relevant, if they relate to sectors involved in bilateral trade,
while some may be relevant to a limited extent). The increasing number may be
underpinned by several factors, one of them being an increasing transparency another one
(out of many) a need to modernise existing legislation or to introduce legislation (like in
the case of CA regional technical regulations) where there has been none so far. The
reasons are therefore likely not to be related to the EU-CA FTA (also given the multilateral
nature of measures) and an increasing number should not be interpreted either in relation
to the Agreement.
However, our interlocutors also acknowledged that in cases of more complex measures or
having a larger impact in bilateral trade relations, the EU and CA6 countries used Sub-
committee meetings to deliver presentations, provide tailored, additional information and
answer questions, e.g., in 2015, the EU delivered presentations about the Regulation on
pesticides and conformity assessment (TBT Sub-committee, minutes, 26 May 2015), in
2020 about the Regulation related to organic production and labelling of organic products
(TBT Sub-committee, minutes, 9 November 2020) and in 2021, about the Farm to Fork
strategy and labelling of food products (TBT Sub-committee minutes, 14 June 2021). On
the other hand, CA countries provided information and updates about products covered by
harmonised CA regional regulations, incl. food products, medicines, cosmetics, hygiene
products, veterinary medicines, and others (TBT Sub-committee, minutes, 2 June 2016).
In those cases, the objective of the Agreement was not to prevent the adoption of any
measures or their change, but provision of a framework for policy and technical discussion
31
to ensure that the Parties will understand the measures and will be able to apply them,
and therefore (depending on the type) that the measure will either facilitate trade between
the Parties or will have the least possible negative impact on it. Sometimes, presentations
were followed by other activities, such as workshops (e.g., on the EU Green Deal and Farm
to Fork Strategy). Regarding the latter, our CA interlocutors appreciated the opportunity
to participate in general workshops and stressed a need for more, incl. focused on sectors
and products, e.g., cacao, coffee, or honey, and for producers and exporters to guide them
through the new rules.
Likewise, discussions at the SPS Sub-committee were used inter alia to clarify the EU and
CA import requirements for certain products, as well as to provide information about the
EU TRACES system and its use (minutes, 17-18 June 2014; 27-28 May 2015). In this
context, e.g., Guatemala requested in 2019 and 2020 EU’s support in the application of
the TRACES system.
Also, Sub-committee meetings and discussions between technical experts outside sessions
provided an opportunity to seek bilateral solutions in the context of technical regulations
of a general applicability. Our EU interlocutors appreciated a constructive approach of CA
countries to look for such practical solutions, e.g., Costa Rica recognising the equivalence
of two EU norms with those used in Costa Rica regarding products used in firefighting, to
facilitate EU exports (TBT Sub-committee, minutes, 26 May 2015, 9 November 2020).
The Sub-committee meetings and discussions during the year focused moreover on market
access barriers, which might have been of a bilateral or multilateral nature and where the
framework provided by the EU-CA FTA enabled escalation of issues raised by the economic
operators on either side. Discussions followed with a varying level of success, e.g., in the
context of regionalisation, the EU requested Guatemala to lift measures applied to imports
from Germany in relation to the avian influenza, and Costa Rica to lift measures imposed
on imports from Italy in relation to African swine fever (SPS Sub-committee, minutes, 27-
28 May 2015). The latter was subsequently lifted and information about it was shared at
the Sub-committee meeting in 2016 (SPS Sub-committee, minutes, 13-17 June 2016). In
another case, the EU suggested removal from health certificates (for exports to CA) of an
indication of the EU Member State, where an animal was born and raised, given that the
EU is an entity with a harmonised legislation, offering the same health guarantee on the
whole territory. CA did not agree, however, with this argumentation 13 and the discussion
continued over the following two meetings (SPS Sub-committee, 18-19 June 2019; 13, 16-
17 November 2020; 31 May–2 June 2021). Likewise, a discussion between the EU and
Costa Rica regarding the tax for beer, which the EU considered as discriminatory has not
been concluded yet despite ongoing for most of the implementation period. In 2021, the
EU indicated, it would escalate the matter to the Association Committee (Market Access
Sub-committee, minutes, 7-8 June 2018; 21 June 2019; 20 and 23 November 2020; 10-
11 and 15 June 2021). Other matters recorded diverse progress. Our interlocutors noted,
however, that the unresolved issues are not that many, in particular if compared to
relations with other partner countries. One of such topics relates to maximum residue limits
(for chemicals) discussed at the SPS Sub-committee meetings in 2016 and 2019. The CA
countries have also raised the question of endocrine disruptors (SPS Sub-committee in
2015 and 2021).
Conclusions
In line with Articles 126 and 141 of the EU-CA FTA, where the Parties reiterate their existing
obligations and rights under WTO TBT and SPS Agreements, WTO notification system and
two WTO dedicated committees remained the main channels for the EU and CA to notify
and to comment on proposed legislative measures in both areas, while the Agreement
provided a complementary forum for discussion on these matters. When comparing the
pre- to the post-Agreement periods, the numbers of notifications went up. We cannot,
however, conclude that the EU-CA FTA is the cause for this increase, because these are
overall and not bilateral notifications that could also be the result of increased CA6 country
activity or awareness on how to use the procedures.
13
According to information shared by Guatemala, concerns were raised around the question, whether removal
of the detailed information may affect negatively application of the provisions related to rules of origin.
32
3.1.7 Importance of the FTZ in Panama (Colon) - focused on most economically significant
EU exports
The Colón Free Zone was founded in 1948, as an autonomous body of the Panamanian
state. Warehouses, ports, and traffic systems for all types of merchandise have been
constructed and refurbished on a regular basis to keep the zone on the cutting edge of
technology and ready to supply a wide range of high-quality services and products (Zona
libre de Colón, 2020).
The FTZ in Colón is the major port of EU exports for Panama as well as re-export to the
whole Central and Latin American region. Even though in value, Panama mainly imports
transportation or raw material goods, it is equally important to see which products are
mainly impacted by the EU-CA FTA in terms of tonnage and their respective maritime trade
flows. Almost all exports by the EU to Panama pass through Colón as it is Panama’s main
Port area towards the North Atlantic Ocean (Zona libre de Colón, 2020).
Impact of the FTZ in Colón on the EU-CA-FTA
Trends in trade flows through the FTZ in Colón 2010-2019

Prior to the Agreement the port of Colón had an essential role as Europe’s gateway into
Latin America as it offered tax free distribution possibilities. 75% of all containers reaching
Colón are for transhipment thus do not destine for Panama. Moreover, goods imported by
the FTZ may also be processed within the FTZ and exported at a higher value due to the
added processes or other value adding activities. Even in cases where goods are taken out
of the FTZ into Panama’s hinterland, it is the case that after further manufacturing also
those products will be exported through the FTZ. However, alternative ports have become
more attractive as the barriers to trade are lowered and the transhipment rate for EU goods
is expected to be lower when companies choose to directly send containers to the
destination country. A first indication of the declining share of the EU exports to the FTZ
can be seen by the continuous decline in share of trade flows originating in the EU of the
FTZ as shown in Figure 3.1-10.
In absolute value, a different pattern can be observed. Although the overall import value
in € billion declines, for the FTZ as a collective, the EU import share increases. This
observation can mainly be attributed to the overall slight increase in EU exports to Panama
as shown in the section on trade flows. Furthermore, this may also be caused by a shift in
products that are imported by the FTZ as more higher value products, such as technologies
take priority over bulk cargos, such as petroleum oil, which have a lower value per tonne
compared to, for example, manufactured electrical parts.
Figure 3.1-10. FTZ Colón imports and share originating in the EU (‘000 tonnes, € bln)
a) Volumes (‘000 tonnes) b) Values (€ bln)
Source: Authors’ calculations based on COMEXT & Georgia Tech Panama Logistics Innovation & Research Center
database.
Prior to the EU-CA FTA, the largest group of imported goods in volume were petroleum,
with 234,000 tonnes and cargo vessels, 104,000 tonnes as well as cruise ships. Moreover,
raw materials, such as iron or steal, as well as ceramics made up a large part of the total
33
tonnage. As discussed in the section on trade flows, there has been a large decrease in
vessel and cruise ships imported by Panama (typically from countries, such as France),
which is mainly due to no significant imports in these two products further to the start of
the EU-CA FTA application. As vessels have a long-life span, there may be no demand to
replace the current fleet after such brief time. On the other hand, a significant increase in
ceramic goods is observable as well as gypsum, concrete and other materials that are
required for construction works, such as parts made of steel, due to which the overall raw
material imports of steel and other iron ore alloys are reduced.
The top 3 imported products by value from the FTZ prior to 2013 were organic chemicals,
pharmaceuticals and electric machinery, sound recorders and TV, articles of apparel (not
knitted or croched) with the same produts also being the main re-exports. In the period
after the start of the application of the EU-CA FTA, electrical equipment,, pharamcutical,
as well as chemical products remain amongst the most imported and re-exported ones.
Additionally the share of nuclear reactors, machinery and parts is significant. Nuclear
reactors mostly orginiate in the US or China, however, not the EU. Yet, for 2014-2019 the
FTZ still tranships 75% of the imported products with the main countries being Costa Rica,
Colombia, the US or Guatemala in addition to other ports in Panama. Prior to the start of
the application the largest re-exporting nations also included Puerto Rico and Venezuela
(Georgia Tech Panama Logistics Innovation and Research Center, 2020).
Modelling analysis impacting the FTZ in Colón 2013-2019

The modelling analysis shows that trade between the EU and CA has increased both ways:
CA exports to the EU increase by €729 mln while EU exports to CA increase by €1.1 bn.
The most important export increases from CA to the EU are in vegetables and fruits (€312
mln), sugar (€143 mln), textiles (€96 mln), processed foods (€80 mln) and machinery
(€24 mln). The most important export increase from the EU to CA countries are in
manufactured goods (€303 mln), chemicals (€213 mln), motor vehicles (€105 mln),
textiles (€104 mln) and electrical equipment (€90 mln).
As explained before, the majority share of container activities in the terminal at the CFZ is
related to regional trans-shipments (confirming the fact that the Port is a gateway for the
global trade to Latin America).
As an overall trend, Panamanian imports from the EU through the CFZ decline between
2010 and 2019 as shown in Figure 3.1-10. But from Figure 3.1-11 it is also clear that unlike
dropping relative import shares for China, the US and Mexico, the EU-4 share of CFZ
imports increases by 3% points from 7% to 10%14. From
2010-2013, the pre-Agreement period, the EU share in CFZ imports is 11.9% on average.
For the 2014-2019 period, while the Agreement was applied, the EU share is 13.4% on
average. This is 1.5% points higher than before 2013.
This implies that, while the overall trend shows an erosion of the market share of CFZ in
general, the decline in trade with the EU has been slower than in trade with other regions.
Hence the market share of trade with the EU4 has increased. Through interviews and
literature research, we have come to understand the following reasons for this effect:
• The Agreement is the largest positive trade shock in the 2014-2019 period that applies
to the bilateral EU-CA relationship and not to other third countries that can explain the
fact that EU-Panama trade has declined more slowly than Panama’s trade with other
regions.
• Panama’s Free Zones are either concentrated on the Atlantic or on the Pacific sides of
the Panama Canal. The reason CFZ is relatively most impacted by the Agreement is
due to the fact it is the Free Zone on the Atlantic side of the Panama Canal where trade
with the Eastern hemisphere (i.e., the EU) is concentrated and thus where the positive
effects of the Agreement would accrue (unlike the Pacific free zones that are more
impacted by trade with China).
14
EU-4 are the four top-EU countries in CFZs top-10 traders: Belgium, Germany, Italy and France. These are
the only countries provided for in the CFZ statistics.
34
So, while the overall trade trend for the CFZ has been negative, the positive effect of the
EU-CA FTA has been that this decline has been limited / slowed down by boosting EU-
Panama trade through the CFZ.
Outlook
The Colón Free Zone is an important aspect of Panama's economy since it allows products
to be reallocated to other Central American countries as well as South and North America.
Because of factory closures in supply sources in Asia, North America, and Europe as a
result of the COVID-19 epidemic, supply chains have been temporarily disrupted. The
current situation has impacted product progressions to the free zone, as well as interest in
the local business sectors of Central America, South America, and the Caribbean, requiring
an examination of the current working model to identify the necessary changes prior to
the introduction of new market elements (Gomez-Rudy, 2020). The study by Gomez-Rudy
(2020) illustrates the conduct of verifiable and late business development. The results
show a 40.2% drop in the annual value of tarde between 2012 and 2019, and a 40.9%
decline in the first four months of 2020.
Figure 3.1-11. Import shares main exporters to CFZ (2012 and 2019; %)
Other
Mexico
Vietnam
US
EU-4
Singapore
China
0% 10% 20% 30% 40% 50%

Country shares of imports into CFZ (%)
Share 2019 Share 2012
Source: INEC (2021)
Colon Free Trade Zone, plans 2019-2024 (Zona Libre De Colón Plan Quinquenal, 2019)
The FTZ in Colon plans to be the world's first cargo gathering and distribution hub, with
high efficiency and technology. To balance the incentives and activities offered to users of
other Special Economic Zones, a bill will be created to change the Colon Free Zone's
Organic Law. Then the next goal is to develop various marketing and communication
strategies to increase sales from the Colon Free Zone, all of which will benefit employment
in the Province of Colón and generate export earnings for national profit. The FTZ will take
the necessary steps to promote the simplification, automation, and improvement of the
digital paperwork processes of government entities participating in the Single Window of
Procedures, to improve transparency, efficiency, and speed in the provision of
comprehensive services, thereby assisting trade. The Single Window is part of the Customs
Union Roadmap (2015-2024).
Conclusions
Because of the Panama Canal, Free Trade Zones are very important for economic
development in Panama: it contributes 8.5% to Panama’s GDP and employs 18,000
persons. Trade in goods, including trade in goods with the EU, through the CFZ has declined
from 120,000 tonnes in 2010 to 110,000 tonnes in 2019. In volume terms, the EU share
of CFZ imports has dropped, but in value terms it has increased. This suggests that the
quantity of EU imports has declined relatively, but their value has gone up. When
comparing the EU performance between 2012 and 2019, we see that the EU-4’s import
share has gone up from 7% to 10% in that period, while the shares for China and the US
have dropped. One of the reasons for this is the EU-CA FTA that has boosted trade between
the EU and CA partner countries, slowing the relative decline of trade via the CFZ more
than is the case for other regions. CFZ is the main re-export hub in CA and has seen CA
partner countries to the Agreement increase their relative shares. The main products
35
traded via CFZ are electrical machinery, pharmaceuticals, machinery and mechanical
equipment, chemicals, footwear, and textiles. CFZ has seen increased competition from
other regional ports (e.g., Santo Tomás, Barrios).
3.1.8 Investigation of impact on the EU-CA FTA on companies having started to export or
increased product range for exports
There is very little publicly available data regarding the number of companies from each
CA country exporting to the EU, including the new exporters and likewise the new products
traded by existing exporters. Below, we present an analysis based on limited data available
(mostly from Costa Rica). As outlined in Table 3.1-8), the number of companies from Costa
Rica exporting annually to the EU in the analysed period does not reflect any pattern which
could be easily attributed to the operation of the Agreement. Moreover, the number is
relatively stable over the years (except for 2016) and for most of the analysed period
varies around 550-570, with peaks in 2012 and 2018. The absolute number of new
exporters varies as well from one year to the other, however, it remains relatively stable
as a share of the total, at around 20%-25%, again without a pattern which could be linked
to the EU-CA FTA. In total, in the period between 2010 and 2019, at least 1,200 companies
started exporting to the EU (noting that data is missing for 2017), out of which, slightly
over half (666) since the Agreement’s entry into force, i.e., on average 133 annually since
2014 (not counting 2017, for which we have no data). The number of new products has
been included into Costa Rican reports only very recently and for 2019, there were 314 of
them. Regarding exporters from other CA countries, 163 companies exported to the EU
from Honduras in 2020 (we did not find comparable data for previous years) (Secretaría
de Desarrollo Económico, Honduras, 2021) and 218 from El Salvador (out of 2,067
exporting from this country to the world) (Banco Central de Reserva, El Salvador, 2020).
Table 3.1-8. Number of new exporters from Costa Rica exporting to the EU 2010-2019
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
All companies
526 548 598 571 570 556 474 n.d. 584 573
exporting to EU
New companies
114 140 167 113 140 109 132 n.d. 162 123
exporting to EU
Share of new in
21.6 25.5 25.5 19.8 24.6 19.6 27.8 n.d. 27.7 21.5
the total (in%)
No. of new prod
n.d. n.d. n.d. n.d. n.d. n.d. n.d. n.d. n.d. 314
exported to EU
Source: Ministerio de Comercio Exterior, Costa Rica, Informe de labores (2011-2017, 2019-2021)
Table 3.1-9. Total number of exporters, Costa Rica, El Salvador, & Honduras (2002-2018)
2002 2008 2009 2013 2014 2015 2016 2017 2018
Costa Rica 2,330 3,385 2,829 4,071 4,023 3,919 3,772 3,772 3,700
El Salvador 2,170 2,549 2,559 2,598 2,624 2,412 2,316 2,210 2,500
Honduras 2,151 1,887 2,347 2,138 2,123 2,125 2,033 2,085 2,000
Source: CEPAL (2019a): El desempeño de empresas exportadoras según su tamaño
A comparison of the above data with the evolution of the total number of exporters (to the
world) from Costa Rica, El Salvador, and Honduras over the analysed period (Table 3.1-
9), based on a study by CEPAL (2019) shows that the total number of exporters in Costa
Rica displays a similar trend, with a peak around 2012-2013 and a fall afterwards, which
may mean that export activity was more influenced by macroeconomic developments than
the entry into force of the EU-CA FTA. Moreover, while the total number of exporters (to
the world) continued to fall in 2018, the number of companies exporting to the EU
increased in that year. The share of companies exporting to the EU in the total number of
exporters is also higher in Costa Rica (14% in the first three years, with a fall to 12.6% in
2016 and increase to 15.8% in 2018) compared to El Salvador (10.5%) and Honduras
(8.1%). This relatively weaker performance by Salvadorean exporters and a perceived
underutilisation of the EU-CA FTA prompted the Central Bank in El Salvador to conduct a
study to find out what kind of challenges may prevent companies exporting to other parts
of the world from becoming new exporters onto the EU market. The results of a survey
36
suggest that the lack of knowledge about the EU-CA FTA is one of the main reasons (54%
of respondents did not know the Agreement while only 28% did not know the trade
agreement with the US). In addition, 53% of respondents (mainly SMEs) highlighted
insufficient information about the requirements of the EU market. The elements, which in
their view were missing, and which would help them included a database of potential EU
buyers, increasingly user-friendly information about the EU regulations, training for future
exporters to the EU and advisory services, which would guide them step by step in
navigating through the EU procedures and preparation for exporting. They also complained
about the lack of transparency and the lack of engaging private sector in El Salvador in
discussions about the Agreement from the stage of negotiations. Other barriers included
access to funding, high costs of freight and insurance, the lack of funds to participate in
trade missions to the EU or trade fairs, high level of bureaucracy and high costs related to
the shipment of samples to a potential EU buyer, the lack of an identified distributor in the
EU, the complexity of the paperwork, high level of international competition in the EU
market and an inability to use the preferences, which, according to the Bank, may suggest
a need for an in-depth training in the rules of origin, among others (Banco Central de
Reserva, El Salvador, 2020).
Additionally, the CEPAL study (2019), based on an older set of data, preceding the EU-CA
FTA entry into force analyses performance of new exporters from Central America selling
their products to the world (i.e., not only to the EU). Accordingly, in the analysed period
(2006-2012), new exporters accounted every year for 29%-38% among SMEs in Costa
Rica and 1.9%-5.9% among large enterprises, in El Salvador, the shares were like 36%-
43% and 2.1%-4.3% and in Guatemala, 31%-34% and 2.0%-7.5% respectively. At the
same time, every year, between 27% and 34% of exporting SMEs from Costa Rica stopped
to export the following year. This may suggest a lower rotation among those who export
to the EU from Costa Rica compared to the total of exporters from that country, however,
there is a need to bear in mind that data for companies exporting to the EU represent a
mix covering large companies and SMEs, with the rotation being lower among the latter.
The rate of survival on the international market, i.e., the share of companies that continue
to export over time (to the world, i.e., not only to the EU), in Costa Rica was at 76.7%
among large enterprises after the first year, decreasing to 54.3% after three years and
39.1% after five years. For El Salvador, the corresponding shares were: 71.7%, 42.4%
and 19.5%, which suggests an overall stronger performance of Costa Rican exporters.
Among SMEs, 48.5% continued to export beyond the first year from Costa Rica, falling to
32.1% after three years and 23.6% after five years. For El Salvador, the shares were like
40.4%, 18.6% and 7.2%, which again suggests a strength or a better preparation of Costa
Rican companies (CEPAL, 2019a).
Regarding EU exporters trading with Central America, EUROSTAT provides partial data for
17 EU Member States (Table 3.1-10) and exports to CA and the Caribbean. Accordingly,
while data preceding the entry into force of the Agreement is available only for Luxembourg
and Czechia, overall, the picture regarding the number of exporting enterprises is quite
clear: the number of exporters from all 17 covered Member States trading with Central
America has been increasing systematically every year. In most cases, this trend has
continued to 2019, in a few cases, however, (Austria, Belgium, Czechia, and Spain) the
numbers started declining in 2016 or 2017. For Czechia and Luxembourg is also clear that
the increase has already started prior to the entry into force of the EU-CA FTA. For the
remaining countries, it is difficult to say (due to the lack of data) to what extent the
Agreement has played a role in the growth, although it has probably contributed to it. The
available data does not include separate figures for new exporters, however, as a
minimum, the number of new exporters would correspond to the difference between the
number of exporting enterprises in the case of a growth in the consecutive years (that
number would most likely be higher, given that each year some enterprises cease to export
and nevertheless, the total number of exporting companies continues to grow). For
example, for Spain in the years of increase, the minimum number of new exporters would
equal 862 (in 2015), 679 (2016), 11 (2017).
37
Table 3.1-10. Number of EU companies exporting to CA and the Caribbean 2012-2019

2012 2013 2014 2015 2016 2017 2018 2019
Austria : : 983 1,076 1,106 1,138 1,090 1,072
Belgium : : 1,569 1,614 1,709 1,663 1,469 1,504
Cyprus : : 49 58 75 60 : 57
Czechia 810 909 960 1,079 1,161 1,227 1,172 1,103
Denmark : : : : 974 980 1,017 1,074
France : : : : : 7,908 8,861 9,086
Germany : : : 11,188 11,586 11,902 12,035 12,514
Latvia : : 135 : : 120 : 95
Lithuania : : 109 134 141 142 148 166
Luxembourg 77 109 120 130 119 134 115 134
Netherlands : : 5,318 4,797 5,283 6,225 6,293 6,104
Poland : : 1,208 1,339 1,545 1,667 : 1,831
Portugal : : 1,061 1,250 1,395 1,455 1,545 1,641
Romania : : 249 271 296 322 339 355
Slovakia : : 209 : : : 288 293
Slovenia : : 182 186 212 219 220 221
Spain : : 17,767 18,629 19,308 19,319 18,858 18,357
Source: EUROSTAT: Trade by partner country and enterprise size class:
https://appsso.eurostat.ec.europa.eu/nui/show.do
Conclusions
For Costa Rica, the limited data suggest a varying annual number and a relatively stable
(20%-25%) share of companies exporting in a given year for the first time, in the total
number of companies exporting to the EU. Also, the total number of companies exporting
to the EU has remained relatively stable, ca. 550-570 for most of the analysed period. The
share of enterprises exporting to the EU in the total number of exporters is higher in Costa
Rica (14%-15% since the Agreement’s entry into force) compared to figures for El Salvador
(10.5%) and Honduras (8.1%). While only partial data is available regarding EU companies
exporting to Central America the figures for 17 Member States show a systematic increase
in the number of exporters every year, for most EU MS over the whole period, since the
EU-CA FTA entry into force until 2019, and for a few, a fall since 2016-2017.
3.1.9 Evolution of share of imports originating in the EU in the total imports of the six CA
countries and vice versa (at HS4 level - or at more disaggregate level)
In this section, the evolution of how imports from the EU as a share of CA imports have
developed from 2010 to 2019 and how the EU share in CA exports has evolved is analysed.
As before, the 2009-2013 period highlights developments before the Agreement started
being applied and the 2014-2019 period shows the trend while the Agreement was in place.
The analysis covers the following elements:
• Evolution of the total (aggregate) import share of the EU in CA imports
• Evolution of the total (aggregate) export share of the EU in CA exports
• Evolution of the top-10 CA imported products and the share of the EU in that top-10
• Evolution of the top-10 CA exported products and the share of the EU in that top-10
• Any products where the change in the EU’s import or export share has been very
significant
In Table 3.1-11, we show the trends for the 2010-2019 period. The aggregate import share
of the EU in CA imports has gone up from 7.2% (on average) for the 2010-2013 period to
8.3% (on average) for the 2014-2019 period. This shows that CA imports from the EU
were relatively higher after the Agreement started being applied. But we also see that the
EU’s import share started to rise already in 2012 and 2013, while after 2015 the share
started to decline marginally. The pre-Agreement rise could come from companies
anticipating the coming of the Agreement. In terms of the EU share in overall CA exports,
we see that that has gone up from 12.6% (on average) in the 2010-2013 period to 14.0%
(on average) in 2019 which amounts to an 11.1% increase in bilateral CA exports. So
overall we can conclude that CA exports to the EU have benefited from the Agreement.
38
Regarding imports from the EU, we can conclude that they also benefitted but to a lesser
extent than exports.
When we look deeper (at HS4 level) into what products are the major drivers for these
overall changes in the EU’s import and export shares, Table 3.1-12 (import shares) and
Table 3.1-13 (export shares) show that:
• In terms of the EU import share (Figure 3.1-12), large sectoral drivers for a higher EU
share in CA imports come from medicaments, cruise ships, human/animal blood for
therapeutic use and cars. The EU’s share decreased in petroleum oils and aircraft.
• In terms of the EU share in CA exports (Figure 3.1-13), the share of machinery exports
has decreased significantly, while the EU share of bananas, medical instruments, palm
oil, crustaceans, and melons has increased a lot. The Agreement has liberalised tariffs
for agricultural products for CA and in machinery for the EU, which can be part of the
explanation for these findings.
Table 3.1-11. EU share in total CA imports and exports (2010 – 2019, %)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EU share in total
6.8 6.3 7.2 8.4 8.3 8.7 8.3 8.5 8.1 8.0
CA imports
EU share in total
12.8 12.1 12.9 12.7 11.9 11.8 12.3 16.8 17.9 13.5
CA exports
Table 3.1-12. EU share in CA imports for top-10 and selected products (2010-2013 and
2014-2019)
Change in
Change import
EU import EU import import share
value between
Product (HS4) share 2010- share 2014- between
periods
2013 (%) 2019 (%) periods (%
(Euro mln)
point)
1. Medicaments 8.9 9.7 0.9 95.0
2. Motor cars 3.9 3.9 0.1 27.4
3. Perfumes, toilet waters 3.4 2.8 -0.6 -11.7
4. Petroleum oils 2.5 1.3 -1.2 -46.4
5. Aircraft n.e.c. 2.3 1.5 -0.8 -33.1
6. Ethyl alcohol 2.3 2.0 -0.3 -1.8
7. Cruise ships 2.2 3.3 1.1 75.3
8. Human/animal blood 1.5 2.6 1.1 65.8
for therapeutic use
9. Fertilizers 1.5 0.6 -0.9 -39.9
10. Telephone sets 1.4 0.7 -0.7 -32.8
Source: Authors’ calculations based on UN Comtrade data.
Table 3.1-13. EU share in CA exports for top-10 and selected products (2010-2013 and
2014-2019)
Change in
Change export
EU export EU export export share
value between
Product (HS4) share 2010- share 2014- between
periods
2013 (%) 2019 (%) periods (%
(Euro mln)
point)
1. Machinery (parts & 21.3 3.0 -18.3 - 1.038
accessories)
2. Coffee 17.1 13.9 -3.2 -131
3. Bananas 12.1 17.3 5.2 362
4. Dates, figs, a.o. 8.8 9.6 0.8 79
5. Electronic integrated 6.3 2.5 -3.8 -205
circuits
6. Cruise ships 3.4 1.1 -2.3 -126
7. Crustaceans 2.2 3.2 1.0 70
8. Melons 2.0 2.3 0.3 27
9. Medical instruments 1.9 7.2 5.3 330
and appliances
10. Palm oil 1.6 5.7 4.1 257
39
Conclusions
From the above analysis we can conclude that the main changes – at product-level – that explain
the increase in the EU share of CA imports are medicaments, cruise ships, cars and human/animal
blood for therapeutic use. Vice versa, the main product level changes that drive the increase in the
EU share of CA exports (from 12.6% to 14.0%) are bananas, medical equipment, palm oil, but also
dates & figs, crustaceans, ferro-alloys, and pneumatic tyres.
3.1.10 Impact of the EU-CA FTA on the diversification of trade
While the Agreement does not explicitly include the diversification in the composition of
trade between the EU and CA partners among its objectives, such diversification matters
because currently trade is concentrated both in terms of products exported and companies
exporting. The evaluation therefore assesses if, and to what extent, the EU-CA FTA has
contributed to diversification of exports, and does so in two ways:
• By looking at observed trends in the composition of exports and imports between the
EU and CA countries at HS4 level to determine: 1) the degree to which the palette of
goods traded has broadened and; 2) has become less concentrated around a few key
products or not.
• By looking at the economic modelling results that have isolated the effect of the
Agreement on imports and exports to see whether bilateral trade has become more or
less concentrated around key products. This level of analysis is done at the model
sector level, which is more aggregated than HS4.
Analysis of observed trends in the composition of EU-CA and CA-EU trade
Changes in the number of products traded between the EU and CA

When counting the total number of products exported (at HS6 level of detail) from 2010 –
2019, we can see what the impact of the Agreement has been. If exports have diversified,
the number of products that constitute CA exports to the EU since 2014 should increase
over time.15 Figure 3.1-12 shows the change in the number of products exported from CA
to the EU and the number of products imported each year from 2010-2019. We see that
on average the number of exported and imported products goes up. The average number
of products exported by the CA6 to the EU goes up from 298 in the pre-FTA period to 372
on average in the 2014-2019 period. CA6 imports from the EU have gone up from 1302 to
1868 between 2010 and 2019. These significant increases suggest trade diversification in
the composition of bilateral trade since the implementation of the EU-CA FTA. Examples of
products that have started to be produced and exported from CA6 countries to the EU are:
types of alkaloids, articles of apparel, automatic goods-vending machines, edible offal of
bovine animals, and engravings, prints and lithographs.
Figure 3.1-12. Total number of products traded between the EU and CA (2010-2019)
Products exported by CA Products imported by CA
1200 000 000 20000
1000 2 00 000
1 000
00 2000 000
12000
00 1 00 000
000
00 1000 2000
200 00 000
1000
0 0
0 0
2010 2011 2012 201 201 201 201 201 201 2019 2010 2011 2012 201 201 201 201 201 201 2019
Changes in the concentration of CA imports and exports to the EU (2010-2019)

A second way to analyse the diversification of trade is by looking at the degree to which
exports and imports are concentrated in value terms and how this level of concentration
has evolved over time. We use the Herfindahl-Hirschman Index (HHI) which we apply at
15
The advantage of this approach, for example when compared to counting new products exported, is that it
also considers product-level exports that are discontinued.
40
HS4 level (i.e., for 1215 product categories). 16 The HHI considers the differences in relative
importance of the exported or imported products. Figure 3.1-13 depicts the change of the
HHI from 2010 to 2019. The blue dotted horizontal line shows the average value of the
HHI for the CA exports and the orange dotted horizontal line the average value of the HHI
for the CA imports.
Figure 3.1-13 shows the following:

• EU exports to the CA region are more diversified than CA exports to the EU. This is
expected because the EU is a much larger economy with a more diverse export base
that is reflected in CA imports from the EU.
• Overall, the HHI of CA exports to the EU has declined between 2010 and 2019 from
0.11 in 2010-2013 to 0.08 in 2014-2019 (blue dotted line). This implies that the
concentration of CA exports to the EU has decreased after the start of the application
of the Agreement, which is an indication that CA exports to the EU have diversified.
• Overall, the HHI of CA imports from the EU, already very low, has not changed between
2010 and 2019 (0.02 in both 2010-2013 and 2014-2019), which means no further
diversification has occurred between the two periods.
Figure 3.1-13. HHI of bilateral trade between the EU and the CA region (2010-2019)
Figure 3.1-14. HHI index for all CA countries (2010-2019)

a) HHI for CA exports to the EU
0.50
HHI index for CA countries (exports)
0.40
0.30
0.20
0.10
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Costa Rica El Salvador Guatemala
Honduras Nicaragua Panama
16
The HHI ranges from zero to one. A score of one means that only one product or sector accounts for a
country’s total exports, whereas a value approaching zero would mean that a country exports a multitude of
products, each at small volumes, i.e., has a highly diversified export structure.
41
b) HHI for CA imports from the EU
0.10
HHI index for CA countries

0.08
(imports) 0.06
0.04
0.02
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

CA region (overall)
The overall change in concentration of exports to the EU and imports from the EU is driven
by the respective changes in concentration of trade by the individual CA countries. The
country-level changes in exports are shown in Figure 3.1-14a and imports in Figure 3.1-
14b. The Figures show that:
• At CA country level, like for the CA region as a whole, the HHI drops between the 2010-
2013 and 2014-2019, with the largest drop happening around the start of the EU-CA
FTA (2011 – 2014). After 2014 the HHI stabilises at a lower level (although the HHI
rises marginally between 2015 and 2017).
• The HHI started to decline before the EU-CA FTA entered into force. This is an indication
that some degree of export diversification may have already started to happen in
anticipation of the Agreement.
• The HHI is the highest for Honduras (driven by Honduran coffee), however which the
country has diversified its exports to some extent between 2010 and 2019).
• Also, for Panama there is a peak in export concentration in 2017 (driven by a spike in
that year in banana exports to the EU).
• Guatemala has the lowest HHI, indicating that the country’s exports to the EU are
relatively more diversified.
• As was the case for the CA region as a whole, the import concentration has not changed
much between 2010 and 2019 for the individual CA countries, with the exception of El
Salvador and Panama.
• For El Salvador, the import concentration spiked in 2012 and again (to a lesser extent)
in 2014, after which concentration decreased. The reason for the spikes was the import
of aircraft in both years.
• For Panama, the HHI has been relatively high compared to the other CA countries
(except El Salvador in the 2010-2014 period). The reason is that Panamanian imports
from the EU were concentrated around cruise ship imports in 2013, aircraft imports in
2019 and medicaments across the 2010-2019 period.
Impact of the EU-CA FTA on the composition of EU-CA trade
It is important to note that the above analysis is based on overall witnessed changes in
the EU-CA trade patterns between 2010 and 2019. This means that changes can be the
result of many factors, of which the EU-CA FTA is one. To address this issue, we also look
at the economic modelling results and see how – at a more aggregate level – bilateral
trade between the EU and the CA region (and individual countries) has been impacted.
We compare the 2013 situation (pre-Agreement) with the 2019 (post-Agreement) one
based on the simulation done by DG Trade. Figure 3.1-15 shows how the HHI has changed
between 2013 and 2019 for each of the CA countries and for both exports to the EU and
imports from the EU.
From Figure 3.1-15, we can conclude the following:
42
• The HHI for CA exports to the EU is much higher than the HHI for EU exports to CA –
as explained before.
• The impact of the Agreement has been that between 2013 and 2019 the export
concentration has dropped in all CA countries, especially in Nicaragua (by 9.6%) and
Panama (by 7.3%).
• The impact of the Agreement has been that between 2013 and 2019, the import
concentration has also dropped in all CA countries, especially in Guatemala (by 6.8%)
and El Salvador (by 6.3%).
• Therefore, the Agreement has contributed to a decrease in export and import
concentration. This means that CA countries have become less dependent on a limited
number of export products over time and also have become less focused on importing
a narrow number of imports from the EU.
Figure 3.1-15. HHI Index for EU-CA imports and exports (2013 and 2019)
0.40
0.35
0.30
HH Index
0.25
0.20
0.15
0.10
0.05
Exports to the EU HHI 2013 Exports to the EU HHI 2019

Imports from the EU HHI 2013 Imports from the EU HHI 2019
Conclusions
While not an objective of the Agreement, diversification in the composition of trade
between the EU and CA6 partners matters because currently trade is concentrated both in
terms of products exported and companies exporting. A reduction in those concentrations,
makes participating economies less dependent on a few products or companies and more
resilient. When counting the total number of products exported and imported, we see that
both have gone up between the 2010-2013 and 2014-2019 periods, suggesting trade
diversification in the composition of bilateral trade since the implementation of the EU-CA
FTA. Using the Herfindahl-Hirschman Index (HHI), as a measure of concentration of
exports and imports, we find that: 1) EU exports to the CA region are more diversified than
CA exports to the EU; 2) The HHI of CA exports to the EU has declined between 2010 and
2019 from 0.11 in 2010-2013 to 0.08 in 2014-2019 and the HHI of CA imports from the
EU (already very low) has not declined further. (blue dotted line). This implies that the
concentration of CA exports to the EU has decreased after the start of the application of
the Agreement, which is an indication that CA exports to the EU have diversified; 3) Also
at country level, the HHI drops in the post-FTA period compared to the period prior to the
start of the application of the Agreement.
3.1.11 Comparison of inter-CA goods trade and bilateral EU-CA member goods trade
Any FTA makes trade between the FTA Parties relatively more attractive for traders than
trade with third countries. A part of the additional trade between the Parties is therefore
diverted from trade with non-Parties (trade diversion – see section 3.1.5), while another
part is a genuine trade creation 17 which would have not taken place in the absence of the
FTA. We look at the top-3 products to focus on the most important products trade and the
top-10 to cover the majority of traded products in total value.
17
The concepts of trade creation and trade diversion as used by Viner (1950) should not be confused with the
concept of trade diversification which we analyse here. The former is about trade creation in case of an FTA
encouraging trade with the most efficient producers and trade diversion if trade is shifted to less than the
most efficient producers (with ensuing welfare effects). The latter focuses on how trade by partner country
and by product is diversified, i.e., reduced in concentration at its trading base.
43
As a result, the EU-CA FTA has the following effects (see Figure 3.1-16):
• Imports by the CA6 from different trading partners has become more diversified, except
with Mercosur (where the share of top-10 and top-3 products in 2010-2013 is lower
than in 2014-2019).
• Compared to pre-FTA period, the percentage of top-10 as well as top-3 imports of the
respective partners has decreased in relative percentage, whilst only increasing for the
US in absolute value.
• There is no change in the number of trading partners before and after the FTA. Both,
before and after, CA6 imported goods from 227 partners and exported to 224 partners.
Figure 3.1-16. Trade diversification of the top-10 and top-3 imported products by the CA6
from their respective trade partners
Diversification of trade with the US

The average annual US export to the CA in the years prior to the FTA was €22 billion.
Thereof, the top-3 goods accounted for over 34% of total exports; 1) petroleum oils €6
billion, 2) electronics €940 million, 3) cereals €415 million. In Figure 3.1-17 we show the
evolution of the product concentration (measured by the HHI) from the US to CA6 (blue
bars) and CA6 to the US (orange bars) between 2010 and 2019.
Figure 3.1-17. HHI for US-CA6 trade (2010-2019)

0
02
01
0
2010 2011 2012 201 201 201 201 201 201 2019
Source: Authors’ calculations based on UN Comtrade database
The overall top-10 goods accounted for 42% of total exports. After the FTA, cereals became
the second largest export by the US to CA as well as petroleum gases and oilcake
accounting for a significant trade value. Out of €24.6 billion the US top-3 continue to
account for 32% of exports with the top-10 for 40%, thus a slight increase in
44
diversification. For CA exports to the US, the top-3 products make up 24% of total exports
and the top-10 43% in 2014-2019. Prior in 2010-2013, electronic circuits have been the
main export which led to 31% of total exports from CA to the US being held by the top-3
goods and 57% by the top-10, thus over time trade diversified. When we look at the HHI
(see Figure 3.1-17), we find that the degree of diversification has not changed for either
imports or exports.
Figure 3.1-18. Highest CA imports and exports from and to the USA (€ billion)
Diversification of CA trade with Mercosur

The average annual Mercosur export to the CA prior to the FTA was €2.4 billion. Here by
the top-3 goods accounted for 9% of total exports: 1) cereals €110 million, 2) medicaments
€5 million, 3) odoriferous substances €5 million. Overall, the top-10 goods exported by
Mercosur were equal to 18% of total exports. Between 2014 and 2019, trade decreased to
€2.2 billion. Oil, as well as vehicle products show a significant increase in value exported,
thus the top-4 goods have a collective value of €120 million (13%) and the top-10 for
24%, thus noticeably less diversification. A similar picture arises for CA exports to Mercosur
as in 2010-2013, 48% of export was held by the top-3 products, with 40% coming from
electronic circuits. On average, €240.0 million were exported on average in 2010-2013 and
only €185.9 million in 2014-2019 leading to an overall more diversified trade picture. In
2014-2019 the top3 products for export made up 24% and the top-10, 43% of total
exported.
Figure 3.1-19. Highest CA imports and exports from and to Mercosur (€ million)
Diversification of CA trade with China

The average annual export by China to CA prior to the FTA was €11.7 billion. The top-3
products accounting for 29% of total exports: 1) vessels, €1.8 billion, 2) petroleum, €1.2
billion, 3) footwear, €370 million, in total the top-10 accounted for 37% of total exports
originating in China to CA. After 2013, there has been a big decrease in petroleum exported
from China (with a parallel increase in CA imports from Mercosur). although this may be
unrelated to the FTA, a clear shift and diversification between the countries of origin where
CA imports from is observed. Imports originating in China rose to €12.5 billion with the
top-3 products only accounting for 15% and the top-10, for 24% which is also attributed
45
to the reduction in petroleum imports. CA exports to China have become more diversified,
yet not to the same extent as with other trading partners. In 2014-2019 the top-3 products
accounted for 51% of total exports to China whilst in 2010-2013 they made up 76% as
exports of electronic circuits were worth €0.8 billion, equalling 66% of exports.
Figure 3.1-20. Highest CA and exports from and to China (€ billion)
Source: Authors’ calculations based UN Comtrade data
Intra-CA goods trade

Regional trade diversity shows a slight increase. The total intra-CA trade increases by €2.9
billion between 2013 and 2019 as shown by Table 3.1-14, which equates to an overall 30%
increase as shown by Table 3.1-15. Exports by Costa Rica show a moderate overall
increase, but mainly exports to Guatemala and Panama seem to benefit. These are exports
of food preparations and medicaments. Costa Rica’s imports remain mostly unchanged.
For El Salvador, the largest changes in bilateral exports are to Guatemala and Honduras.
Also, most imports come from these countries. These changes are driven by paper, plastics
and knitted/crocheted fabrics mainly. Overall, El Salvadorean imports from the region rise
faster than its exports to the region. Similarly, Guatemala also shows a strong increase
in intra-CA trade with imports and exports increasing both by €0.9 billion. Imports from El
Salvador go up by €0.3 billion because of imports of plastics mainly. Although slightly less
in absolute trade value, imports of Honduras increase by 300% for goods exported to El
Salvador (€0.3 billion) and Nicaragua (€0.3 billion). Important products traded are textiles,
soaps and related articles. For Nicaragua, exports to all CA countries go up, mostly to
Honduras (€0.1 billion). The regional effects for Panama stand out. Total Panamanian
regional exports decrease by €0.3 billion, mostly to Honduras, while exports to Guatemala
go up. At the same time, between 2013 and 2019, Panamanian imports go up by €0.2
billion. One of the main explanations for these results is the fact that the relative share of
Panama as throughput hub for regional trade (both on the Atlantic side of the Panama
Canal via the Port of Colón and on the Pacific side) has eroded over the 2013-2019 period,
offsetting the trade creation from FTAs and overall trade growth. Some of these trade flows
have been taken over by the Guatemalan ports of Puerto Barrios and Puerto Santo Tomas.
Table 3.1-14. Changes in intra-CA goods trade between 2013 & 2019 (€ billion)
Imports | Exports CRI SLV GTM HND NIC PAN Total exports
Costa Rica 0.00 0.05 0.23 0.09 0.02 0.11 0.50
El Salvador 0.05 0.00 0.30 0.26 0.11 0.02 0.74
Guatemala 0.07 0.44 0.00 0.24 0.12 0.03 0.90
Honduras 0.01 0.33 0.13 0.00 0.34 0.02 0.82
Nicaragua 0.01 0.10 0.05 0.10 0.00 0.01 0.27
Panama -0.09 -0.04 0.17 -0.30 -0.05 0.00 -0.30
Total imports 0.06 0.88 0.88 0.38 0.54 0.19 2.93
46
Table 3.1-15. Changes in intra-CA goods trade (% change)

Imports | Exports CRI SLV GTM HND NIC PAN Total exports
Costa Rica 24% 58% 36% 6% 26% 30%
El Salvador 29% 54% 44% 42% 19% 44%
Guatemala 24% 56% 40% 35% 18% 41%
Honduras 10% 86% 44% 297% 275% 93%
Nicaragua 10% 49% 63% 102% 49% 51%
Panama -33% -36% 41% -93% -60% -25%
Total imports 6% 52% 50% 21% 46% 26% 36%
When comparing the statistical results with the economic model predictions (Table 3.1-16
some differences become apparent. The model compares 2013 and 2019. Overall, the
model predicts a negative impact of the EU-CA FTA on inter-CA trade. Costa Rica sees
almost 2% lower imports from all other CA countries whilst actual exports of other CA
countries to Costa Rica increased by 30%. The estimate changes for El Salvador,
Guatemala, Honduras, and Nicaragua follow a similar pattern as the model predicts slight
increases, however, the magnitude shown by the statistical analysis is much larger. For
Panama, the model predicts lower trade and also shows that in comparison to other CA
countries, Panama will face the strongest decline in inter-CA trade– which seems in line
with the observed statistics for 2013-2019. But what is important to note is that the model
only considers changes directly resulting from tariff changes in the EU-CA FTA thus lower
magnitudes of changes are to be expected than from the statistical analysis. The latter,
however, does not differentiate between the EU-CA FTA and other factors and only
considers observable trade changes. Thus, the model correctly predicted lower trade in the
case of Panama as well as overall increases for the other countries except Costa Rica where
there is a larger discrepancy.
Table 3.1-16. Changes in intra-CA goods trade economic model estimates (% change)
Imports | Exports CRI SLV GTM HND NIC PAN
Costa Rica 0.4% 0.3% 0.2% 0.4% -0.3%
El Salvador -2.3% -0.4% -0.7% -1.3% -0.8%
Guatemala -2.4% -0.4% -0.7% -1.4% -1.1%
Honduras -2.4% -0.2% -0.2% -1.2% -0.1%
Nicaragua -1.5% 0.4% 0.5% 0.2% 0.6%
Panama -3.8% -1.8% -1.7% -1.7% -2.0%
Source: European Commission DG TRADE CGE modelling results.
Conclusions
When looking at a comparison of inter-CA goods trade and trade with the EU, and US and
China, we find that: 1) Imports by the CA6 from different trading partners has become
more diversified, except with Mercosur (where the share of top-10 and top-3 products in
2010-2013 is lower than in 2014-2019); 2) Compared to pre-FTA period, the percentage
of top-10 as well as top-3 imports of the respective partners has decreased in relative
percentage, whilst only increasing for the US in absolute value; 3) There is no change in
the number of trading partners before and after the FTA. Both, before and after, CA6
imported goods from 227 partners and exported to 224 partners; 4) Further evidence of
the HHI for trade with the US points to no change and thus no diversification in terms of
trade with the US. For Mercosur, on average, €240 million are exported on average in
2010-2013 and only €186 million in 2014-2019, leading to an overall more diversified trade
picture. Regarding China, a clear shift and diversification between the countries of origin
where CA6 imports from is observed. Also, CA6 exports to China have become more
diversified, yet not to the same extent as with other trading partners.
The model predicts a negative impact of the EU-CA FTA on intra-CA trade. Costa Rica sees
almost 2% lower imports from all other CA countries whilst actual exports of other CA
countries to Costa Rica increased by 30%. The estimate changes for El Salvador,
47
Guatemala, Honduras, and Nicaragua follow a similar pattern as the model predicts slight
increases, however, the magnitude shown by the statistical analysis is much larger.
3.1.12 Impact of EU-CA FTA on trade facilitation in CA countries and engagement in global
supply and value chains
A global value chain (GVC) is where the different stages of production of a final good are
located across different countries. A GVC is the result of ongoing production fragmentation
to capture comparative advantages and scale economies. A product that is “GVC-based” is
one that is produced in a country and at least one other international location. Typically,
agricultural products are not GVC based, while electronics or cars – with many parts and
components – are.
Statistical analysis of trade facilitation and GVC trade

Total CA6 exports of GVC-based products18 decrease marginally from €60.0 billion in the
pre-FTA period to €57.7 billion in the post-FTA period. This suggests that CA6 countries'
integration in global supply chains has decreased marginally between 2010 and 2019. This
total marginal decline was true for all CA6 countries, except for Costa Rica, which saw its
total GVC-exports rise from €12.6 billion before the start of the application of the
Agreement to €28.1 billion thereafter (see Figure 3.1-21).
Figure 3.1-21. CA6 GVC exports by country and product (in € mln pre- and post FTA)
Source: UN Comtrade; own calculations

Note: The HS 6-digit products are classified as GVC-products following Sturgeon and Memedovic (2010) and the
World Bank WITS classification (https://wits.worldbank.org/referencedata.html). Pre = Avg. 2010-2013; Post =
Avg. 20114-2019.
At the sector level, CA6 GVC-trade is dominated by apparel and electronics (see Figure
3.1-21), though the countries witnessed a significant rise and fall in these exports,
respectively, between the pre- and post-FTA periods.
Economic modelling of the EU-CA FTA: trade facilitation and GVC trade
In this section, we consider results from economic analysis as well as data on CA6 exports
and imports of GVC-based products to the entire world and bilaterally to and from the EU
before and after the agreement to assess whether the implementation of the FTA was
associated with trade facilitation in CA countries and greater engagement in global supply
and value chains.
Results from the economic modelling analysis suggest that the EU-CA FTA has facilitated
trade for all CA6 countries. In Table 3.1-17 this is illustrated both for the change in EU-CA
bilateral exports and the change in total CA6 country and EU exports as a result of the EU-
CA FTA. For example, the increase in total bilateral (agricultural and manufacturing)
18
The HS 6-digit products are classified as GVC-products following Sturgeon and Memedovic (2010) and the
World Bank WITS classification (https://wits.worldbank.org/referencedata.html).
48
exports for Costa Rica to the EU amounts to €92.3 + €310.6 = €402.9 million. For
Guatemala, the total export increase amounts to €68.1 million.
What we also derive from Table 3.1-17 is that in bilateral exports, both GVC and non-GVC
exports have increased (e.g., for Nicaragua by €5.9 million and €42.7 million respectively).
But non-GVC exports, based on the modelling, appear to have increased relatively more
for all CA6 countries, but not for the EU. This result can be explained by the fact that the
Agreement has led to significantly more exports of bananas, sugar and other – mainly –
agricultural products from CA6 countries to the EU and these exports are non-GVC. GVC-
related exports – like automotive and machinery – are those the EU exports more to CA6.
Table 3.1-17. EU-CA FTA induced bilateral and total export changes for CA6 & EU (€ mln)
Bilateral exports Total exports
GVC exports Non-GVC GVC exports Non-GVC
(€ mln) exports (€ mln) (€ mln) exports (€ mln)
Costa Rica 92.3 310.6 -75.6 278.0
El Salvador 0.2 18.3 -0.8 23.2
Guatemala 2.5 38.4 1.8 66.3
Honduras 4.1 16.5 4.0 28.4
Nicaragua 5.9 42.7 -17.9 38.3
Panama 52.9 161.5 50.1 180.0
EU 995.6 134.7 905.0 -157.7
Source: European Commission DG TRADE CGE modelling results (2021).
Hence for the EU, the effect of the EU-CA FTA is that it increases GVC related exports. The
explanation for the relatively high increase in GVC exports for Costa Rica to the EU is that
Costa Rica also increasingly exports medicaments, which are GVC exports. When we look
at total exports, except for Costa Rica and Nicaragua, we see the same picture, except
with different size effects. For Costa Rica and Nicaragua, total GVC exports decline. This
points to a stronger decline in GVC exports to third countries than GVC exports to the EU
can increase – i.e., a significant amount of GVC trade diversion.
Conclusions
We find that overall trade increases for the CA6 region and also that the EU-CA FTA has a
trade facilitating effect. When we look at GVC trade, we find that overall GVC trade for the
CA6 regions has marginally declined, but also that the (much smaller) EU-CA FTA effect
has increased the integration of the CA6 in global value chains – at least in bilateral value
chains with the EU. For all other countries, except for Costa Rica and Nicaragua, that level
of integration has also increased with third countries.
3.1.13 Contribution of EU-CA FTA to diversification of sources of supply of goods for EU

and CA. Compare goods imports from CA countries with imports from other third
countries
Overall trade effects
Figure 3.1-22. EU import and export partner comparison

2010 2019 2010 2019
00 00
00
00 00
€
€
00
00 00
00
200 200
100
0 0
2010 2011 2012 201 201 201 201 201 201 2019 2010 2011 2012 201 201 201 201 201 201 2019
49
Even though trade has increased after the EU-CA FTA between the EU and CA6 (EU imports
from CA6 from €5.1 billion in 2010 to €6.7 billion in 2019, it remains relatively small
compared to EU trade with other countries. In total annual EU trade approximates €2.1
trillion for exports and €1.8 trillion in imports. As such, the changes in trade between the
EU and CA6 are negligible, as shown in Figure 3.1-22. The two main trading countries
throughout the years remain the US and China, which together make up for over 30% of
EU exports, as well as imports. Yet trade of the EU is diverse as the Rest of the World
makes up the remaining 70% and no single country accounts for over 10%. So overall,
there does not seem to be evidence that for the EU diversification of sources of supply has
occurred.
When looking at the CA6 side, we note that CA6 imports from the EU have increased from
€5.3 billion in 2010 to €7.5 billion in 2019. The EU’s share in CA6 imports is much higher
than the CA6 share in the EU’s imports as shown above. The EU-CA FTA, as shown in Figure
3.1-23, has not meaningfully diversified CA6 import sources, but did contribute marginally
to increasing the EU share in CA6 exports, diversifying its exports.
Figure 3.1-23. CA6 import and export partner comparison

2010 2019 2010 2019
0
0 0
2
0
20
€
0
1
20
10
10
0 0
2010 2011 2012 201 201 201 201 201 201 2019 2010 2011 2012 201 201 201 201 201 201 2019
Bananas, coffee, and sugar

When looking at individual products where imports by the EU from CA6 nations increase
the most, such as bananas, coffee or sugar, imports from other regions still outweigh those
of CA6 (see Table 3.1-18). We also find that both the value and quantity of the EU's imports
of these products from the CA6 in its the respective total imports increase on average in
the post-FTA period compared to the pre-FTA period, alluding to a likely trade creation
effect in these products. For example, EU coffee imports originating in CA are still small
compared to those from the Mercosur region, as Brazil accounts for 31% of the EU total
coffee imports. Honduras accounts for almost 7% in 2019, which is slightly lower than in
2010-2013, but because coffee demand in the EU has risen, exports in absolute terms from
Honduras did rise as well. For sugar, since 2017, the EU has become a net importer with
most imports coming from ACP and LDC countries. The marginal increase in sugar exports
to the EU from CA6 increase supply diversification, but the data below show that the export
quantities are not significant enough to create large trade diversions from other regions.
For bananas, we refer to section 3.10 for a more extensive analysis. The share of the EU’s
imports of palm oil from Guatemala increases a lot in the period after the EU-CA FTA, whilst
EU overall palm oil consumption remains at a similar level. Although Guatemala has been
able to gain market share, this has come mainly from Indonesia and Malaysia reducing
overall levels of production. Since Guatemala is only a small supplier (see Case Study on
Palm Oil from Guatemala), this leads to a marginal increase in diversion in sources of
supply. Changes in trade patterns between the EU and the US or China cannot be compared
with those of CA6. Not only due to the economic size, but also the type of products: there
is no direct competition between the nations. Even though if similar products are imported
by the EU, such as textiles, exports from CA6 to the EU which see a strong increase for
Nicaragua, cannot be compared with China given the difference in scale.
50
Table 3.1-18. CA6 exports of selected agricultural products over time

Coffee Sugar Bananas Palm oil
Value Qty Value Qty Value Qty Value Qty
Year
(€M) (mt) (€M) (mt) (€M) (mt) (€M) (mt)
2010 0.50 0.31 0.01 0.02 0.18 0.17 0.84 0.82
2011 0.49 0.33 0.01 0.02 0.15 0.15 0.86 0.85
2012 0.53 0.34 0.00 0.01 0.19 0.17 0.84 0.83
2013 0.57 0.34 0.01 0.03 0.19 0.18 0.83 0.83
2014 0.55 0.33 0.01 0.03 0.19 0.18 0.86 0.86
2015 0.57 0.34 0.01 0.04 0.17 0.18 0.86 0.86
2016 0.59 0.34 0.01 0.04 0.18 0.19 0.88 0.88
2017 0.59 0.37 0.01 0.04 0.23 0.22 0.90 0.89
2018 0.63 0.39 0.01 0.02 0.25 0.25 0.89 0.88
2019 0.63 0.36 0.01 0.04 0.89 0.89
Pre-FTA
0.52 0.33 0.006 0.02 0.18 0.17 0.84 0.83
avg.
Post-
0.59 0.35 0.012 0.04 0.21 0.20 0.88 0.88
FTA avg.
Table 3.1-19 reports the ratio of value to quantity (in €'000s/metric tonnes) for the EU's
imports of these commodities from the CA6 and the rest of the world (ROW) as a proxy for
the quality associated with these imports. Coffee imported from the CA6 is of a higher
quality based on the proxy measure used and the quality of these imports may have further
improved after the implementation of the FTA. In contrast, the quality of sugar imports
from the CA6 are of lower quality compared to the EU's global sugar imports. For bananas
and palm oil, there is not much difference in the quality of the imports from CA6 and ROW.
Table 3.1-19. Quality composition of EU imports of select agri-products (CA6 vs ROW)

Coffee Sugar Bananas Palm oil
Year ROW CA6 ROW CA6 ROW CA6 ROW CA6
2010 1.99 4.31 0.53 0.12 0.51 0.55 0.56 0.64
2011 2.81 5.52 0.59 0.23 0.53 0.52 0.73 0.80
2012 2.56 5.66 0.64 0.34 0.53 0.61 0.77 0.79
2013 2.02 5.26 0.63 0.27 0.55 0.58 0.63 0.63
2014 2.17 5.54 0.60 0.20 0.54 0.57 0.62 0.61
2015 2.42 6.22 0.60 0.19 0.59 0.57 0.58 0.58
2016 2.26 6.16 0.61 0.19 0.59 0.56 0.57 0.61
2017 2.42 5.97 0.63 0.21 0.59 0.64 0.64 0.72
2018 2.13 5.70 0.60 0.22 0.68 0.68 0.58 0.60
2019 1.97 6.11 0.58 0.20 0.49 0.51
Pre-FTA
2.345 5.186 0.600 0.239 0.529 0.564 0.674 0.713
avg.
Post-FTA
2.230 5.949 0.603 0.203 0.598 0.602 0.581 0.606
avg.
Conclusions
We find that there has been no impact on the sources of supply overall. There has been a
marginal effect on diversification of sources of supply if we look at specific products where
the EU-CA FTA has had a relatively large impact. First, on coffee, the increasing share of
Honduran coffee in EU coffee imports has led to some supply diversification for EU imports.
The share of EU imports of palm oil from Guatemala increases significantly in the period
51
after the EU-CA FTA, whilst EU overall palm oil consumption remains constant. Although
Guatemala has been able to gain market share, this has come mainly from Indonesia and
Malaysia reducing overall levels of production. For sugar, the marginal increase in the share
of sugar from CA6 in EU sugar imports adds to a marginal degree of supply diversification,
but not large enough to create trade diversion from other regions.
3.1.14 Impact of the Agreement on regions in CA6 countries
The Central American partner countries are not impacted equally by the EU-CA FTA. Neither
are the regions within the six CA countries. Looking at the economic modelling results, it
is possible to get an idea of regional effects, while complementing these findings with
stakeholder consultations. In this section, we analyse for each of the six CA countries:
• The regional effects
• The impact on the rural-urban divide
• The impact on the capital vs. rest of the country
• The impact on already productive areas and spatial inequity.
The economic modelling generates sector specific effects of the EU-CA FTA in terms of
production and employment (positively or negatively) for each of the CA partner nations
that have occurred from the start of the application of the Agreement since 2013. By
analysing these sectoral effects and combining them with the knowledge of where each of
the sectors are geographically located in each of the respective partner countries, regional
effects can be inferred.
In the maps that are shown below per country, the sectoral effects are added up at regional
levels to a range from 1 – 5, which signify:
• A small negative/no effect (1 = very light green)
• A mixed effect of positively and negatively affected sectors (2 = darker green)
• A more positive effect (3 = light blue)
• A positive effect (4 = darker blue); and
• A very significant positive effects (5 = very dark blue) at regional levels.
Costa Rica
For Costa Rica the sectors that experience the
highest relative increases in production due
to the Agreement are vegetables and fruits
(+7.2%; €149.2 mln) and sugar cane
(+6.4%, €35.6 mln). Employment in these
sectors goes up by 7.8%-8.8% and 7.9%-
9.0% in the two sectors respectively. From
the statistical analysis an increase in trade of
pineapples as well as bananas can be
observed which to a large extent grow in the
northern regions of Alajuela, Heredia, Limón,
and Puntarenas. This means most economic
benefits are concentrated there. Sugar
production/employment are concentrated in
the Guanacaste and San José (Central)
regions. In addition, for these products, the
port in Puerto Limón (Limón region) is the
most used for exports from Costa Rica.
Yet, most products leave to the Port of Colón in Panama before being shipped to the EU.
This is also the case for processed foods – originating mainly from the San José and Alajuela
regions. On the contrary the largest production decreases are seen in electronics (-2.4%,
€-21.4 mln), pharmaceuticals (-2.0%, €-6.2 mln) and manufactured products (-1.9%,
Euro -68.9 mln). The service sector is not much impacted in relative terms (-0.1%) but
more in absolute terms (€-55.6 mln). Most production of electronics, pharmaceuticals, and
manufacturing are concentrated in the San José region, close to the capital where
international companies own factories which require the labour force that is typically found
near big cities, while services sectors are spread across the economy, but also relatively
52
concentrated in the Puntarenas and Guanacaste regions. This means that the EU-CA FTA
is benefiting rural more than urban areas, but the Costa Rican capital, San José, only
marginally less than the rest of the country.
El Salvador
According to the economic modelling, El Salvador is expected to see the largest increase
in production in sugar (+2.3%, €15 mln). Employment in the sector goes up by 2.9% for
both skilled and unskilled workers. Most of the production of sugar is concentrated in the
regions of San Salvador, La Libertad, Sonsonate, Santa Ana, La Paz, San Vicente, Usulután,
and San Miguel. The economic analysis, furthermore, implies no large decrease for any
sectoral production levels of El Salvador, with the possible exception of machinery (-0.4%,
Euro 900k) and non-ferrous metals (-0.4%, €600k). Also employment in these sectors
declines marginally. The machinery sector is concentrated around San Salvador, while non-
ferrous metals mining is concentrated in the provinces of San Miguel, Morazán, Cabañas,
Cuscatlán, and Chalatenango. This means that the EU-CA FTA is benefiting rural more than
urban areas. Like in Costa Rica, the capital area also benefits but relatively less than sugar
provinces. Sugar production becomes more efficient and spatial inequity is reduced.
Source: Ministry of Agriculture and Farming (2019)
Guatemala
For Guatemala the modelling highlights only one sector that experiences a significant
increase in production, namely the sugar cane sector (by 1.5%; €36.5 mln), which is
located in the Pacific Lowlands (Escuintla, Retalhuleu, Suchitepéquez, Jutiapa, Santa Rosa)
and thus the most positive economic benefits accrue at the Pacific coast.19 Employment in
the sugar sector goes up by 1.8% to 1.9%. The key ports of Puerto Barrios and Puerto
Santo Tomas (in the region of Izabal) are, however, not located near these production
regions on the west coast. These east coast ports, where produce is transported to, are
crucial for the EU bound goods. Most vessels leave straight to Europe with port calls along
the route in Florida. The largest relative
decrease in production, with a decline of 2.0%
(€12.4 mln) is in motor vehicle production (-
2.0% in employment). But services also
19
Centro Guatemalteco de Investigación y Capacitación de la Caña de Azúcar (2017), Eventos históricos y
logros, p. 10, https://cengicana.org/files/20170425172313941.pdf
53
decline.20 For motor vehicles, the biggest production plant is owned by Toyota close to
Guatemala City, where also other manufacturers have set up shop. This is also the region
where most service sectors are located (although these are also spread across other
regions). This means that the EU-CA FTA is benefiting rural more than urban areas. With
services declining, the inequality between the capital on the one hand and rest of the
country on the other, is decreasing, and so is the urban-rural divide. The FTA strengthens
less productive areas and reduces spatial inequity.
Honduras
The most significant sectoral
production change in Honduras
because of the EU-CA FTA is the
sugar cane sector, where output
increases by 4.3% (€26.6 mln).
Employment in the sector goes
up by 5.2% for unskilled and
5.3% for skilled workers. Sugar
production in Honduras is
concentrated in the Cortés and
the Santa Bárbara regions in the
west of the country. The east
coast port of Honduras, La Ceiba
is the exporting hub, but the port
is not very big, and most goods are not exported directly to Europe, but first to other,
larger, Central American ports, such as those in Guatemala or Panama. Services and
manufacturing sectors decline, but only marginally. This means that the EU-CA FTA is
benefiting rural more than urban areas. With services and manufacturing marginally
declining, the inequality between the capital on the one hand and rest of the country on
the other, is decreasing, and so is the urban-rural divide.
Nicaragua
For Nicaragua the largest sector-level production increase is also in the sugar sector. That
sector increases output by 11.7% (€62.4 mln) and is concentrated in the Pacific region
(Chinandega, Managua, and Rivas). This leads
to around 15% more employment in the sector.
However, because Nicaragua is expected to see
a moderate decline in production of electrical
equipment (by 2% or €15.8 mln), as well as a
1.6% decline (€2.3 mln) in non-ferrous metals
and a very small (0.2%, €19.3 mln) decline in
services, small negative effects occur mainly in
and around Managua, the capital of Nicaragua,
as well as Puerto Corinto. In these declining
sectors also employment decreases by 2% for
electrical equipment and 1.5% in non-ferrous
metals. Because Nicaragua’s largest ports are
all situated on the Pacific coast, most products
for exports to the EU are transported to Costa
Rica or Panama to be shipped from the Ports of Limón or Colón respectively. This means
that the EU-CA FTA is benefiting rural more than urban areas. While services are not
impacted, the fact that increased exports are shipped from ports on the Pacific coast to
Costa Rica or Panama leads to more service activities in those ports. The sectoral
production and employment effects also suggest a declining inequality between the capital
on the one hand and rest of the country on the other.
20
Guatemala City (USAID (2016). Zonas de medios de vida y sus descripciones.
https://fews.net/sites/default/files/documents/reports/Guatemala%20Perfiles%20de%20Medios%20de%20
Vida%202016%20web.pdf
54
Panama
For Panama, the
largest relative
increase in
production is in the
vegetables and fruits
sector (14% or €32.0
mln) leading to over
16% more
employment in the
sector. Most of these
are tropical fruits
such as bananas,
mangos or pineapples which are all tropical fruits growing mainly in the La Chorrera region
but also scattered across the whole country due to the favourable climate overall (i.e.,
Darién, Boca del Toro, Los Santos, Veraguas, Coclé, Chiriquí, Herrera, Panamá Oeste,
Panamá, and Colón). Additionally, textile manufacturing is expected to see an increase in
production of 2.9%, which amounts to €93.0 mln (and a linked employment increase of
3.4% for unskilled and 3.0% for skilled workers). Textiles are produced in a labour-
intensive way. This is why we find most textile factories in the vicinity of Panama City
because of the availability of abundant labour. But there is also textile production in Coclé,
Veraguas, Chiriquí, Los Santos, Colón, and Bocas del Toro. On the other hand, the
modelling results also show that services will decline marginally (by 0.1% or €82.8 mln).
Also, machinery production, electrical equipment and other manufactured products decline
by 2.0%, 1.6% and 1.5% respectively, which has a negative effect on production and
employment in and around Panama City (employment in the sectors declines by 1.7%,
0.8% and 0.4% respectively). Thus, while increased economic textile activity is expected
around the metropolitan Panamanian capital, service sectors and some manufacturing
sectors see production decreases. A combined effect of the Agreement on Panama,
Nicaragua, Honduras, Costa Rica, and other CA countries is also that the Port of Colón and
the Panama Canal benefit from increased trade (or a lower rate of decline in trade), which
is also what the economic modelling shows in the increase in transport services by 1.0%
(€67.9 mln). So, even though the Port of Panama City is directed towards the Pacific Ocean,
due to the Panama Canal, direct shipping to the EU is possible via the Port of Colón.
Vegetable oils, in Panama’s case mostly palm oil, see an increase in production by 1.6%
(€2.0 mln), which are grown close to the area of Colón which is – as said – also one of
Panama’s largest port cities, allowing for direct export to the EU. This means that the EU-
CA FTA is benefiting both rural and urban areas. While some services are negatively
impacted, other sectors (e.g., textiles) grow, there is no evidence that inequality between
the capital on the one hand and rest of the country on the other would increase or decrease.
The FTA does strengthen productive sectors and marginal decrease spatial inequality.
Conclusions
We find that the EU-CA FTA has had regional effects. In all CA6 countries those regions
with especially banana, sugar and vegetables & fruits production, employment and
economic activity has gone up. This does lead to regionally concentrated effects in terms
of output and employment. Except for San José, the capital of Costa Rica, and to a lesser
extent San Salvador, the EU-CA FTA has also led to a reduction in the inequality between
capitals in CA6 countries and the rest of the country. The EU-CA FTA has enhanced the
comparative advantage of competitive sectors and because of the spatial distribution, this
has decreased spatial inequality. For Guatemala and Panama, an additional element is that
increased trade with the EU (both imports and exports) also has given a boost to the ports
(in Panama the Port of Colón and in Guatemala the Puerto Barrios and Puerto Sant Tomas)
trading directly with Europe, with service activities increasing in those ports. For Nicaragua
this leads to the Pacific provinces benefitting most from the EU-CA FTA.
Conclusions and recommendations related to the evolution of trade in goods:
The EU-CA FTA is associated with an increase in members’ bilateral and overall exports, with the
main benefits accruing to sectors where the respective Party has a comparative advantage (fruit
and vegetables and sugar in the CA6 countries; machinery, vehicles, and medicines in the EU).
55
The positive effects have been observed at both the intensive and extensive margins and the FTA
has also been associated with an increase in diversification. However, the CA6 countries did not
report any increase in their exports of GVC-based products in the aftermath of the FTA, which
points to the need for their enhanced integration in regional value-chains in the Americas. In
contrast, the FTA has been associated with positive distributional effects – except for two capitals
(San José, and San Salvador) the EU-CA FTA has led to a reduction in the inequality between
capitals and the rest of the country and a reduction in the urban-rural divide.
This said, the utilisation rates of preferences accorded under the FTA have been much higher for
CA exporters accessing the EU markets than vice-versa, which suggests that reducing the
administrative burden for small EU firms in particular may help improve their preference
utilisation.
The use of TRQs, notably for CA exports to the EU of such products, as rum or sugar, seems to
have fulfilled its role. On one hand, the reduced tariff rates within TRQs limit have opened access
to the EU market for CA exports, on the other hand, this has been done (through setting the TRQs
size) in a controlled way taking into account the situation on the EU market and interests of EU
sugar producers and producers of like products competing with imports. Regarding EU exports,
TRQs have been used in a less consistent way, which may be due to the size of the CA countries
markets, differences in national regulations, access to information and other factors.
Our analysis further suggests that market access barriers were not used to invalidate the tariff
preferences provided by the Agreement. Though the members raised a number of issues over
time, these typically concern very specific products with a limited potential impact on bilateral EU-
CA6 trade. Stakeholder consultations have confirmed that the implementation of the Agreement
and the flow of goods between members are not affected by major problems. Moreover, several
issues were solved through discussions in the relevant Sub-committees and follow-up.
3.2 Analysis of the evolution in trade in services
Title III of the EU-CA FTA covers trade in services, establishment, and electronic
commerce, and is complemented by Annexes X to XV that detail the Parties’ commitments
according to the four modes of supply or provide additional information to the provisions
in the main text of the Agreement. While these commitments do not constitute any further
liberalisation of services sectors for the partners, they increase the level of “binding” above
the level of openness bound in the WTO General Agreement on Trade in Services (GATS),
thereby reducing legal and regulatory uncertainty for services traders and investors
regarding potential policy reversal (i.e., adding future restrictions to market access). Thus,
the Agreement is expected to have a positive impact on services trade between the Parties.
Unfortunately, the economic model does not capture services liberalisation directly; it only
captures the Agreement’s impact on services sectors emanating from overall
macroeconomic changes resulting from tariff liberalization of the agriculture and
manufacturing sectors. To address this shortcoming, in this section, we review the
performance of services trade, including at the disaggregated sector-level, between the EU
and CA partner countries over the period 2008-2019 (i.e., before and after the entry into
force of the Agreement). The statistical analysis that follows is based on the updated
version of the OECD-WTO Balanced Trade in Services (BaTiS) database released in January
2021, which provides bilateral services trade data by aggregate21 sector until 2019
(Liberatore and Wettstein, 2021). It should be noted that the values reported in BaTiS do
not always coincide with data published by the European Commission or the partner
countries. These differences in data reflect the general paucity of services trade statistics.
We use BaTiS throughout the study as it is the only database providing bilateral services
trade data by sector covering all countries of interest with an aligned methodological
approach and set of sector definitions.
Services trade is important for the CA partner countries and constituted 40% of their total
trade with the EU in 2019. The US is the most important services trading partner of the CA
countries, accounting for 34% of these countries' commercial22 services exports in 2013
21
More granular ways of categorizing services exist, such as in the UN’s Central Product Classification (CPC)
and in the WTO’s MTN.GNS/W/120 Services Sectoral Classification List. However, statistics on bilateral trade
in services are not available at the level of granularity provided by these two alternative categorization
schemes.
22
Commercial services are all services except for government services.
56
and 2019 and over 43% of their imports. The EU is the second most important services
trading partner of the CA partner countries. It accounts for a fifth of CA6 commercial
services exports and 17% of such imports and its importance in these countries'
commercial services trade partner distribution increased only slightly over time. Notably,
the geographical distribution of CA6 commercial services trade did not change much over
time (see Figure 3.2-1). This said, CA partner countries’ commercial services exports
(imports) to (from) the EU registered a 73.4% (61.5%) increase from €3.3 (€1.5) billion
on average over 2010-13 to €5.7 (€2.5) billion on average over 2014-2019. However, CA-
EU bilateral trade in commercial services accounted for only 0.6% of total extra-EU exports
and 0.3% of total extra-EU imports in 2019, though it was far more important for the CA
partner countries the other way around (with shares of 21.3% and 17.7% in total CA
partner countries’ commercial services exports and imports in 2019; see Figure 3.2-2).
Meanwhile, intra-CA services trade contributed 5% of commercial services exports and 8%
of commercial services imports, though the value of this trade increased by 81.4% for
exports and 47.9% for imports of commercial services in the post-FTA period (avg. 2014-
2019) relative to the pre-FTA period (avg. 2010-201323).
Both total and bilateral (to the EU) CA partner countries’ commercial services exports are
concentrated in travel; transport; other business; manufacturing; ICT; and financial
services and the share of each of these sectors in total CA commercial services exports
increased, on average, in the six years after the start of the FTA application compared to
the four years before the Agreement. Meanwhile, both total and bilateral (from the EU) CA
partner countries’ commercial services imports are dominated by transport and travel
services, though the share of almost all sectors in total and bilateral CA commercial
services import value increased, on average, after the FTA (Figure 3.2-3).
Figure 3.2-1. Geographical distribution of CA6 commercial services trade
000 2 000
0000
20000
2 000
20000 1 000
€
1 000
10000
10000
000
000
0 0
200 2009 2010 2011 2012 201 201 201 201 201 201 2019 200 2009 2010 2011 2012 201 201 201 201 201 201 2019
Source: OECD-WTO BaTiS; own calculations
Figure 3.2-2. Importance of CA6-EU commercial services trade for the partners
23
We do not include 2008 and 2009 in the pre-FTA period as all countries were adversely affected by the GFC
during these years, which results in more pronounced differences between the pre- and post-FTA periods in
any comparative analysis. For the sake of completeness, however, we report all data from 2008 to 2019.
57
Services trade between the EU and each of the CA6 partner countries over 2008-2019 is
reported in Tables B2-9 and B2-10 in Annex B2, for EU exports and imports, respectively.
Panama was by far the largest recipient and source of EU services exports (€2.7 billion in
2019) and imports (€1.7 billion in 2019) amongst the CA partner countries, followed by
Costa Rica, Guatemala, El Salvador, Honduras, and Nicaragua. Costa Rica (52.8%) and
Panama (65.7%) have also shown the largest increase, as destination and source countries
amongst the CA partner countries, for the EU’s bilateral services exports and imports,
respectively, in the post-FTA period compared to the pre-FTA period.
Figure 3.2-3. Sectoral distribution of total and bilateral CA6 commercial services trade
€ €
0000 000
2 000 000
20000 000
1 000 000
€
€
10000 2000
000 1000
0 0
2010 1 201 19 2010 1 201 19 2010 1 201 19 2010 1 201 19

Note: SA - Manufacturing services on physical inputs; SB - Maintenance and repair services; SC – Transport; SD
– Travel; SE – Construction; SF - Insurance and pension services; SG - Financial services; SH - Charges for the
use of intellectual property; SI – Telecommunications, computer and information services; SJ - Other business
services; SK - Personal, cultural, and recreational services.
Barring Panama where other business services (OBS) are a more important destination
sector than ICT and showed a 125% increase in value in the post-FTA period relative to
the pre-FTA period, EU exports to the CA partner countries are geared most towards
transport, travel, financial and ICT services; OBS are additionally important as a
destination sector in Costa Rica. The EU’s services export distribution in the CA countries
is very concentrated with transport and travel services exports accounting for roughly two-
thirds of the EU’s bilateral services exports. Notably, the share of transport and financial
services in total services exports has declined in all CA partner countries in the post-FTA
period. In contrast, the shares of travel, ICT and OBS services have increased and in some
instances the rise has been significant and well, in excess of the increase for the EU’s total
services exports to that country. The sole exception to this trend is the EU’s insurance and
pension services exports to El Salvador which witnessed an 11% decline in the post-FTA
period relative to the pre-FTA period.
Travel, transport, ICT and OBS dominate the EU’s services import distribution from the CA
partner countries. Again, the distribution is extremely concentrated with the EU’s imports
in these sectors accounting for 90% and more of its total services imports from its Central
American partners. Except for El Salvador where the share of travel services imports in
total services increased in the post-FTA period, for all other CA partner countries, the EU’s
import shares of transport and travel services have witnessed declines in the post-FTA
period. In contrast, the EU’s imports of ICT and OBS have risen from all CA partner
countries in the post-FTA period and in some instances, the growth has been significant.
For instance, the EU’s ICT services imports from Honduras and Nicaragua increased by
145% in the post-FTA period while those from El Salvador increased by 120%; similarly,
the EU’s OBS services imports from Panama witnessed a 180% increase.
Thus, the CA6 countries seem to be exporting more ICT and OBS services to the EU after
the FTA and also running a surplus in some cases, which is an interesting development.
Overall, most CA6 countries have witnessed a rise in their exports to the EU in the post-
FTA period in all sectors. One exception is Guatemala, which saw its exports of transport,
construction and IP charges register considerable declining in the post-FTA period.
58
This analysis does not include trends in international financial capital flows between the EU
and CA, evolution of key banking, insurance, asset management, investment banking and
sustainable investments yet as we are awaiting information/data on this from the partner
countries further to our request.
Conclusions and recommendations related to trade in services:
The economic modelling analysis does not capture services liberalisation directly, but only
indirectly through the FTA’s impact on agricultural and manufacturing sectors. Though the FTA
does not provide for an actual opening up of services sectors but rather an improvement in the
level of “binding”, there was an increase in the value of EU-CA6 bilateral services trade after the
start of EU-CA FTA implementation.
Unlike in other areas covered by the EU-CA FTA, the Parties did not use an opportunity of a regular
dialogue to further facilitate trade in services. There is no dedicated Sub-committee on Trade in
Services under the Agreement and discussions on trade in services took place in the Association
Committee only on an ad hoc basis. Discussion of issues related to trade in services in the Sub-
committee on Market Access has also been limited. Moreover, there are no other agreements
between the EU and CA that would be dedicated to trade in services.
Given the Agreement’s objective to progressively liberalise services trade, greater focus on ways
to develop bilateral trade in services is recommended. This could be done, inter alia, by
establishing a dedicated sub-committee and a more regular discussion on trade in services in the
Market Access Committee, whenever market access barriers related to trade in services or an
insufficient information about market access requirements are identified.
3.3 Analysis of the evolution of foreign direct investment (FDI)
The provisions regarding investment are covered in the Agreement’s Title IV (particularly
Chapter 2, “Establishment”), with market access and national treatment commitments in
the Parties’ respective schedules in Annex X of the Agreement with regard to establishment
and Annex XI on cross-border supply of services. These commitments, like those for trade
in services, are expected to have a positive impact on bilateral FDI between the Parties.
We review the evolution of bilateral FDI flows since 2013 when the Agreement started
being applied. To the extent data is available, we also look at FDI flows prior to the
application of the Agreement, i.e., between 2008 and 2012. Unfortunately, the analysis is
complicated by the fact that statistics on foreign investment have serious shortcomings,
even more than those for trade in services, including conceptual differences across sources
(which leads to widely differing data on investments provided by different sources) and the
lack of disaggregation. In particular, FDI data at sectoral level is available only to a very
limited extent.
3.3.1 Performance of overall bilateral FDI
EU investment in the CA partner countries

EU foreign investment in the CA partner countries has shown (as it is quite usual for FDI)
a high degree of volatility, which is also consistent with the differences in the size and
economic development of the host countries (Figure 3.3-1 below). In 2009-2012, i.e.,
before the Agreement started being applied, Panama, in 2009, received the highest
amount of EU FDI in stocks of €4,175 million (32% of the total FDI received by the
country), whereas Costa Rica received €1,671 million (18% of total received) in 2009.
Honduras received €1,403 million (33% of total received) in 2009, while Guatemala
received €814 million (35% of total received). For these CA countries, EU FDI flows were
gradually and steadily growing in the period of 2009-2012. In contrast, EU FDI stock
remained flat in the period of 2009-2012 for El Salvador which received €668 million
(12% of total received) in 2009 and €683 million (10% of total received) in 2012.
Nicaragua received €16 million (3% of total received) in 2009 and €56 million (7% of
total received) in 2012. See also Table B2-11 in Annex B2). Clearly, the EU FDI stocks into
CA partner countries show that FDI positions from 2009-2012 remained rather steady and
unchanged prior to the start of the application of the Agreement.
59
As Figure 3.3-1 also illustrates, after the start of the application of the Agreement (2014-
2019), EU FDI flows continued to increase for all CA partner countries, notably for Panama
and Costa Rica. Panama continued to receive the highest amount of EU FDI of €10,331
million (20% of total received) in 2019, whereas Costa Rica received €9,594 million (25%
of total received) by 2019. The average growth in FDI between the 2008-2013 and 2014-
2019 periods for these countries was 149% and 70% respectively. Because investments
are related to long-term stability and legal predictability, and because in 2013 investment
flows changed, this can in part be attributed to the EU-CA FTA. Also, for Guatemala EU
FDI stock increased to €3,395 million (22% of total received) in 2019. For El Salvador
FDI increased from €671 million (11% of total received) in 2013 to €1,050 million (12% of
total received) in 2019. In contrast, while the average of the 2014-2019 period is 39%
higher than in the 2008-2013 period, pre-FTA, Honduras’ EU FDI stock dropped from
€3,558 million (47% of total received) in 2013 to €1,739 million (11% of total received) in
2019. When analysing drivers for this decline between 2017 and 2018, we conclude that
political instability following the 2017 disputed elections, that also resulted in wide-spread
protests, has been a major contributor. Similarly, but to a lesser extent, EU FDI stock into
Nicaragua dropped to €602 million (20% of total received) in 2019, although they
rebounded from an even sharper drop of as low as €232 million (10% of total received) in
2016 as shown in Figure 3.3-1 below. Also, for Nicaragua, we cannot find FTA-related
factors that explain this decline which may suggest influence of other factors, such as wider
business environment issues.
The share of EU FDI in total FDI inflows of the CA partner countries has fluctuated over
time. The EU was and remains one of the top-2 investors in the region (see Table 3.3-1),
with both the EU and US being far ahead of the no. 3 investor, China. For Honduras the
share of EU FDI stock increased from 32.6% in 2009 to 47.2% in 2013 to then decrease
to 11.9% in 2019. In Panama the share of EU FDI stock decreased from 35.2% (2009) to
31.8% (2012) and continued to drop from 30.1% (2013) to 20.1% (2019) (See Table B2-
11 and Table B2-12 in Annex B2). Regarding Costa Rica, the share of EU FDI stock slightly
decreased from 18.8% (2009) to 18% (2012), whereas it increased from 21.1% to 24.9%
between 2013 and 2019 (See Table B2-11 in Annex B2). Regarding El Salvador, the share
of EU in the country’s FDI stock has remained stable (12.1% in 2009 and 11.7% in 2019).
Figure 3.3-1. EU FDI in CA partner countries, pre- and post-2013 (€ mln)

10000
9000
€
000
000
000
000
000
000
2000
1000
0
200 2009 2010 2011 2012 201 201 201 201 201 201 2019
200 201 201 2019
Source: Author’s calculations based on IMF CDIS and UNCTAD.
Table 3.3-1. Top investing partners’ ranking in CA (2009, 2013, 2019)

Country 2009 2013 2019
Panama USA, EU, China EU, USA, China EU, USA, China
Costa Rica USA, EU, China USA, EU, China USA, EU, China
60
Country 2009 2013 2019

Honduras EU, USA, China EU, USA, China USA, EU, China
Nicaragua USA, EU, China EU, USA, China EU, USA, China
Guatemala EU, USA, China USA, EU, China USA, EU, China
El Salvador USA, EU, China USA, EU, China USA, EU, China
Source: EU Direct Investments Abroad (Eurostat Data), CDIS IMF, Investment Agencies and central banks.
For Guatemala, while FDI increased in absolute terms, the share of EU FDI stock dropped
marginally from 25% in 2012 to 22.2% in 2013, where it stabilised (See Table B2-11 and
Table B2-12 in Annex B2). For Nicaragua, the share of EU FDI stock in the country
dropped from 42.7% (2013) to 20.5% (2019) (See Table B2-12 in Annex B2).
Seen from the EU’s perspective, the share of EU FDI in the CA partner countries in total
EU FDI outward stock has been negligible – less than 0.3%. This share has remained flat
throughout the reporting period (Figure B2-10 in Annex B2).
CA partner countries outward FDI positions into the EU

The outward FDI stock from CA partner countries into the EU have been gradually
increasing over the reporting period, although they remained at a low level (Table B2-15
in Annex B2). Honduras’ outward FDI into the EU was unreported from 2009 until 2013
but reached €16 million in 2019. Also, Guatemala’s outward FDI into the EU was
unreported from 2009 until 2013 but reached €2 million in 2019. Panama had by far the
largest outward FDI into the EU, which increased from €691 million in 2009 to €9,008
million in 2019, whereas Costa Rica’s outward FDI fell from €136 million in 2009 to €105
million in 2019). Nicaragua’s outward FDI into the EU increased from €28 million in 2010
to €116 million in 2019, whereas El Salvador’s outward FDI into the EU increased from
€686 million in 2008 to €1,267 million in 2019. Furthermore, Figure B2-11 in Annex B2
illustrates the particular position of Panama, while more recent data show that the CA
partner countries' FDI stock into the EU have stabilized at a rather low level.
3.3.2 Performance of bilateral FDI at sector level
Data for sectoral FDI (in total or from the EU) is only partially available for some CA partner
countries. Also, the definitions of the sectors differ per CA partner country, which makes a
comparative analysis difficult. However, based on the limited data available, a general
trend among the CA partner countries was the steady flows and positions of the
manufacturing and services sectors. In countries such as Panama and Costa Rica, the
sectors that stood out were information technology and finance. This is based on
aggregated and annual FDI sectoral data for each CA partner country from official sources
of investment statistics: the statistics provided by the Central Banks, those provided by
the Investment Promotion Agencies of the respective country or by the relevant ministry.
However, this remains non-specific to EU sectoral investment.
The sectoral data for Guatemala shows that EU FDI flows went in particular into the
services sector, increasing from €-9.3 (2013) to €54 million (2020) and the manufacturing
sector, which remained almost constant from €17 million (2013) to €16 million (2020). In
contrast, EU FDI flows in financial services dropped from €5 million (2013) to €2 million
(2020). Regarding Costa Rica, EU FDI flows went mainly into manufacturing and increased
from €40 million (2008) to €71 million (2019) and real estate which however decreased
from €71 million (2008) to €42 million (2019). EU FDI flows into services fluctuated from
€46 million (2008) with a peak of €482 million (2016) while dropping to €57 million (2018).
Regarding Honduras, most FDI flows went into services increasing from €503 million
(2008) to €642 million (2018) and into manufacturing increasing from €182 million (2008)
to €396 million (2018). Regarding Nicaragua, FDI flows went mainly into services,
however, dropping from €305 million (2008) to €163 million (2018), and into other sectors,
which increased from €0 (2008) to €158 million (2018). EU FDI flows increased from €83
million (2008) to €287 million (2017) but then sharply dropped to €-16 million (2018). El
Salvador's EU FDI flows went mainly into information and communication, which steeply
61
increased from €85 million (2012) to a peak of €270 million (2014), after which, it declined
to €47 million (2019). Other major sectors such as electricity saw a gradual increase from
€21 million (2012) to €88 million (2019), with a peak of €103 million (2017). EU FDI flows
steeply dipped in the industry sector from €97 million to €-46 million (2019). Regarding
Panama, FDI flows in construction steadily increased from €500 million (2009) to €1,795
million (2018). FDI in wholesale and retail trade distinctly increased from €2,807 million
(2009) to €14,144 million (2018) while hitting its peak of €17,110 million (2017). Another
sector which visibly increased was financial services with net flows of €2,807 million (2009)
to €14,144 million (2018). Details are provided in Tables B2-18 to B2-23 in Annex B2.
From these sectoral FDI data, it is challenging to draw overall conclusions, but EU sectoral
investments have concentrated mostly in services and manufacturing sectors where the
EU itself is competitive (unlike agricultural sectors). Investments have also had a country-
specific angle. For example, the strong regional position of Panama regarding wholesale
and retail trade, linked to the Port of Colón and Panama Canal as well as financial services
has helped fuel EU FDI in those sectors.
3.3.3 Impact of the Agreement on the Investment Climate
The Agreement’s provisions on investment (Chapter 2 of Title III) are focused on the
establishment and offer market access and national treatment schedules as contained in
Annex VII and in Title IV regarding current payments and capital movements (Articles 204
ff). Consequently, the Agreement does not contain any specific provisions for the increase
and liberalisation of bilateral FDI flows.
However, when looking at the fact that FDI flows have been higher in the 2014-2019 period
(compared to the 2010-2013 years) and when looking at sector specific FDI in services
and manufacturing, indeed, a small positive effect from the Agreement can be witnessed.
When talking to business stakeholders, they do not refer to specific provisions when
thinking of the positive effect of the Agreement on investments, but instead focus on the
overall increased levels of predictability and the fact that the Agreement creates a stable
and legally transparent framework that helps overall for the investment climate. For
example, this was the case for machinery investments (manufacturing) and financial
services (services). In that sense, the Agreement has had a limited positive effect, while
recognising that domestic (political) stability in the CA partner countries has a much
stronger effect on investments than the Agreement (as illustrated by the drop in
investments in Honduras in the period after the disputed 2017 elections). These findings
are also confirmed by the results of the online consultations received from business which
largely stated that they did not use the Agreement’s provisions to boost investments but
did appreciate the legal framework that was created.
3.3.4 Comparing the investment climate internationally
Measuring the (perception of) the investment climate of a country is largely based on
compiling and assessing a whole set of indicators, which are considered to be important
for investors and which have an impact on their investment decisions. We base ourselves
for this section on a combination of literature and stakeholder consultations. The World
Bank Ease of Doing Business reports are generally considered to provide a useful indication
of the investment climate in a particular country and as compared to the rest of the world. 24
During the reporting period, the rankings of the CA partner countries show different trends.
Whereas Costa Rica, El Salvador and to lesser extent Nicaragua climbed up significantly
in the rankings, the rankings of Guatemala, Honduras and Panama actually dropped in
the most recent years.
A second useful source are the detailed reports of the US State Department regarding
restrictions and obstacles for foreign investors and their investments for each CA partner
country.25 These reports highlight several problem issues for each CA country (see Annex
24
See Annex B3 Investment climate CA – EU27 overview BITs and DTAs
25
US Department of State (2019), 2019 Investment Climate Statements:
https://www.state.gov/reports/2019-investment-climate-statements/
62
B2 for the detailed summary per CA partner country). To a varying degree they are
applicable to all CA partner countries and can be summarized as follows:
● Widespread corruption in the executive, administrative and judicial branches
● Limitations regarding ownership of land and in specific sectors
● Dominant position of State-Owned Enterprises in the utility sector, and transport
● Non-transparent rule making
● Weak and inefficient judicial systems
On the positive side, it is to note that all CA partner countries have, more or less, the same
approach towards attracting foreign investors. In particular, CA partner countries have:
● No screening systems for FDI
● No restrictions on transfer of capital abroad
● No limitations on foreign participation or control in domestic companies
● Created several Free Trade Zones offering investment incentives and other benefits.
Another indicator for a stable and attractive investment climate is the existence of bilateral
investment treaties (BITs) and double taxation agreements (DTAs) which promote and
protect foreign investments and provide access to international arbitration. At least one
study has shown that the conclusion of BITs on average increases FDI flows by 35%.26
As far as the CA partner countries are concerned, the following picture emerges.
Guatemala has signed in total 23 BITs, of which 7 are with EU Member States, 5 of those
BITs are in force. Panama has signed in total 25 BITs, of which 9 BITs are with EU Member
States, 8 of those BITs are in force. El Salvador has signed in total 23 BITs, of which 7
BITs are with EU Member States which are all in force. Costa Rica has signed in total 22
BITs, of which 15 are in force; 7 BITs are with EU Member States, 5 of which are in force.
Honduras has signed in total 12 BITs of which 4 BITs are with EU Member States which
are all in force. Nicaragua has signed in total 21 BITs of which 10 BITs are with EU Member
States, 7 of those BITs are in force. The Netherlands, Germany, Spain, France, and Czech
Republic are the main BIT partner countries as far the EU Member States are concerned.
As regards the DTAs, Panama has 15 in force, 8 of which are with EU Member States.
Costa Rica has 4 DTAs in force, of which 2 are with EU Member States; El Salvador has
1 DTA with Spain in force and the other CA partner countries none. Spain, Germany,
and the Netherlands are the main DTA partner countries among EU Member States.
The Agreement does not contain any specific provisions for the promotion and protection
of FDI, and only a few BITs and DTAs have been concluded between CA partner countries
and EU Member States. Accordingly, a fragmented picture in this respect exists. This
situation could be improved by concluding a CA-EU BIT and expand the network of DTAs
in order to cover all EU Member States. This would probably improve the investment
climate (or at least its perception) and thus stimulate FDI flows into CA partner countries.
Conclusions and recommendations related to foreign direct investment:

• The available data on FDI flows indicates that Panama and Costa Rica saw a steady and
gradual increase of EU FDI flows, in particular in the services and manufacturing sectors.
• Also, FDI flows for Guatemala increased, while the FDI development for the other CA
partner countries remained rather flat.
• Compared to the period before the start of the application of the Agreement, it seems that
the Agreement has had a small positive impact on the EU FDI flows. The EU remains the
second largest investor (behind the US) in most CA partner countries, while it is the most
important investor in Panama & Nicaragua
• China’s FDI flows remain negligible so far.
• In general, the share of EU FDI flows into the CA partner countries of the total EU FDI flows
is about 0.3%, while the CA partner country outward FDI into the EU remained negligible.
• When comparing the investment climate internationally, it appears according to the
international rankings (Annex B3) that most CA partner countries have experiences
deteriorations in their levels of competitiveness, except Costa Rica and El Salvador.
26
See CPB – The Netherlands Bureau for Economic Policy Analysis, The Regional Impact of BITs on FDI (2015),
https://www.cpb.nl/sites/default/files/publicaties/download/cpb-discussion-paper-298-regional-impact-
bilateral-investment-treaties-foreign-direct-investment.pdf
63
• Considering the lack of available FDI data, it is recommended to develop common

standards for the collection and dissemination of FDI data, in particular at the
sectoral level. This will enable better analysis of the FDI flows and identification of any
bottlenecks.
3.4 The economic impact of the EU-CA FTA27
In addition to the descriptive year-to-year statistical analysis, simulations based on an

economic model allow us to analyse the impact of the EU-CA FTA on the Parties’ economic
and trade performance. This is possible by comparing the observed situation in 2014-2019
(i.e., the world with the Agreement in place) with a hypothetical situation without the EU-
CA FTA. The hypothetical (counterfactual) scenario assumes that in a situation without the
Agreement, out of the six CA partner countries, Costa Rica and Panama would trade with
the EU on MFN terms, as both countries would have graduated from the GSP preferential
tariff scheme after having reached the upper-middle income country status. The remaining
four countries (El Salvador, Guatemala, Honduras, and Nicaragua) would stay in the GSP
scheme and benefit from preferential access to the EU market. Therefore, the difference
between the situation with and without an Agreement is larger for Costa Rica and Panama
and this reflects a greater impact of the Agreement for them, and more substantial changes
estimated by the model. However, as explained in detail in Annex A to the Inception Report
and further down in this Report, in the introduction to the social part of the analysis, the
model assumes a simplified reality, e.g., with a full, fixed employment which means that
changes in trade flows and output cause workers’ flows between the sectors. This may not
fully reflect the reality with existing market imperfections. For details on the modelling
approach and the applied method, we refer to the Inception Report. 28 Since the model only
considers the effect of tariff liberalisation – and not the effects of non-tariff measures
resulting from the Agreement – the estimated impact of the EU-CA FTA is concentrated in
the sectors of goods and less in those of services and the overall positive effects are likely
to be underestimated.
Overall Gross Domestic Product (GDP) effects

The results show that the EU-CA FTA has led to increases in the total GDP for the Central
American countries and the EU. For Central America, they vary between 0.04% and 0.2%,
ranging from €11 mln for El Salvador up to €122 mln for Costa Rica. EU GDP has gone up
by €297 mln each year (as depicted in Figure 3.4-1). The rise in GDP stems from the fact
that each of the countries can specialise in those sectors and products where they have a
comparative advantage.
Figure 3.4-1. Changes in GDP in EU and CA partner countries

0.3% 350
0.2%
297 300
0.2% 0.2%
Change in GDP (%)
250
Change in GDP (€
0.2% 200
0.1% 150
0.1%
122
0.05% 100
0.04% 0.04%
0.1%
56 50
24 29 0.0%
0.0% 12 11 0
Costa Rica Nicaragua Panama Honduras Guatemala El Salvador EU27
Change GDP (%) €

Overall (bilateral and total) trade effects
27
All results in this section are in 2014 USD.
28
Inception Report: https://trade.ec.europa.eu/doclib/docs/2021/june/tradoc_159595.pdf
Annex to the Inception Report: https://trade.ec.europa.eu/doclib/docs/2021/june/tradoc_159596.pdf
64
The economic modelling results show that the Agreement has led to increases in bilateral
trade between the Parties, in both directions (Figure 3.4-2). For Costa Rica and Nicaragua,
exports to the EU increased more than imports from the EU in absolute terms. For example,
Costa Rican exports to the EU increased by €368 million, while imports went up by €173
million. For Guatemala, Honduras, Panama, and El Salvador, the opposite is true. Adding
up all six CA countries, total CA exports to the EU went up by €734 million, while imports
rose by €1.2 billion.
In order to see whether the Agreement’s positive impact on bilateral trade has come at the
expense of trade with third countries (i.e., trade diversion), Figure 3.4-3 shows the effect
of the EU-CA FTA tariff liberalisation on total exports of the EU and each of the CA partner
countries. In absolute terms, EU total exports increased most as a result of the Agreement
(by €800 million), followed by total exports for Panama and Costa Rica. More moderate
increases in exports are reported by Guatemala, Honduras, El Salvador, and Nicaragua.
In relative terms, Panama’s exports increase most (by 1.6%) compared to a situation
without the EU-CA FTA. When comparing Figures 3.4-2 and 3.4-3, we see that indeed trade
diversion takes place. For example, EU exports to CA partner countries increase by €1.2
billion, while total EU exports go up by €800 million. This implies a degree of trade diversion
of €400 million away from other countries and/or the EU internal market. Also, for Costa
Rica there is a significant amount of trade diversion towards the EU.
Figure 3.4-2. Changes in EU trade with each of the CA partner countries (€ mln, %)
1400.0 25.0%
Change in bilateral exports/impots (%)

1,204
1200.0
Change in bilateral exports/imports (€
20.0%
1000.0
734 15.0%
800.0
679
600.0
10.0%
368
400.0
238
173 180 5.0%
200.0
64 83
19 42 20 47 24
0.0 0.0%
Costa Rica El Salvador Guatemala Honduras Nicaragua Panama EU
€ € Exports to EU (%) Imports from EU (%)
Sectoral bilateral trade effects

In addition to aggregate impacts, the Agreement’s impacts at sector level for each of the
Parties to the EU-CA FTA are also measured. Because the model looks at tariff liberalisation
only, the calculated impact on services sectors stems only from macroeconomic
readjustment processes. As a result, the impact on services sectors is generally small in
the simulations, and similar across services sectors. Figure 3.4-4 shows the largest
changes in CA partner country exports to the EU.
• Among Costa Rica’s sectors, the Agreement leads to the highest increases in exports
to the EU for fruit and vegetables (an increase in €263 million or 21%), processed food
(€50 million, 68%), sugar products (€31.5 million, 705%), as well as chemicals, and
machinery. Only other agricultural and manufactures and pharmaceuticals show a small
decrease while services decrease moderately by €31 million.
• In Guatemala, the largest increases in exports to the EU are calculated for sugar (an
increase in €32 million or 190%) and a slight increase in other agricultural products of
7.8%. Changes in other sectors remain small yet positive.
65
Figure 3.4-3: Changes in total exports in the EU and partner countries (€ mln, %).
900
800 1.6%
800
1.4%
700
Change in total exports/imports (€
Change in total exports/imports (%)

1.2%
600
1.0%
500
407
0.8%
400 347 336
300 0.6%
253
200 0.4%
118
80 76 0.2%
100
37 37
28 24 19 33
0 0.0%
Costa Rica El Salvador Guatemala Honduras Nicaragua Panama EU27
€ € Exports (% change) Imports (% change)
Source: European Commission DG TRADE CGE modelling results.
Figure 3.4-4: Changes in bilateral sector exports from CA partner countries to EU (€ mln)
250
200
150
Exports (€
100
50
Sectors and bilateral countries
• For El Salvador the main increase in exports can be seen for sugar (€18.6 million,
224%). Additionally, vegetable oils increase by 187%, however, the changes in
percentage are not reflected in a significant increase in value traded
• Similarly, sugar is also showing the largest increase for Honduras (€17.3 million,
257%). Processed food exports increase moderately (€4.1 million, 7%).
• For Nicaragua bilateral trade effects of the Agreement are even more concentrated:
virtually all gains, in absolute terms, are concentrated in two sectors: sugar (€43.3
million, 582%) and processed food (€6 million, 5.3%).
• In Panama, the effects of the FTA are more distributed amongst multiple sectors as
well as being larger in absolute terms compared to the previously mentioned partner
countries. The biggest increase is in manufactured goods (€89.2 million, 99%), with the
second largest being fruit and vegetables (€45 million, 745%) followed by other
agricultural goods (€24.4 million, 51%) and processed foods (€18.2 million, 41%).
Notably, Panama sees the largest increase in services compared to the other partner
66
countries. Transport services, although small in percentage shows a moderate increase

in absolute terms.
EU sectors benefitting most in the form of increased exports to Panama whereby several
types of manufactures products (“other manufactures”, an increase of €224 million or 48%
compared to no Agreement), chemicals (€137million, 47%), and machinery (€50 million,
28%) see the largest increase. Manufacturers and chemicals, as well as motor vehicles are
also expected to have benefitted substantially as they also see rising imports by Costa Rica
and Guatemala. EU export increases to Nicaragua, El Salvador and Honduras are much
more limited. For El Salvador, the highest effects are in textiles (€16.4million, 83%). For
Honduras, the sector increasing EU exports most is electrical equipment (€22million, 34%)
whilst similarly to El Salvador there are other sectors that show strong percentage increase,
as these sectors are still small in value. Virtually all EU goods sectors benefit from the
Agreement through increased exports to the Central American partner countries.
Conversely, as explained above, services sectors are expected to have seen a negative
impact of the Agreement in the form of small declines in bilateral trade (to the tune of
about 1%, compared the absence of the Agreement) because only tariffs are modelled
whilst service sectors benefit most from NTM reductions. Accordingly, activities and exports
shift towards the relatively more competitive goods sectors.
Figure 3.4-5. Sectoral change in production for the Central American countries (€ mln)
200 0
1 00
100 0
00
€
00
00
100 0
1 00
200 0
Sectoral production effects

When looking at the effects of the EU-CA FTA on production at sector level, we find that
for the CA countries, vegetables & fruits (€184 mln), sugar (€176 mln), textiles (€65 mln),
transport services (€61 mln) and processed foods (€28 mln) have experienced the largest
increases in output (Figure 3.4-5). Declines have been observed for services (-€194 mln)
and other manufactures (-€96 mln) sectors. The services effects are due to macroeconomic
resource readjustment, and not because of a negative effect of the EU-CA FTA.
For the EU, the model estimates an increase in output for manufactured products (+€346
million), chemicals (+€187 million), and motor vehicles (+€88 million), with a few other
sectors recording more limited growth. On the other hand, sugar sector (-€259 million)
and fruits and vegetables (-€215 million) are estimated to record reduction in output, while
these changes are limited in relative terms, corresponding to 0.9% and 0.3%, respectively.
67
Figure 3.4-6. Sectoral change in production for the EU (€ mln)

400
346
300
187
200
Change in production (€
88
100 68 62
49 43 41
33 32
14 14 9 5 1 1
0
Chemicals
Other crops
Cars
Pharmaceuticals
Non-ferrous metals
Transport services
Vegetables & fruits
Services
Electrical equipment
Processed food
Primary
Agriculture
Sugar
Textiles
Transport equipment
Machinery
Electronics
Paper
Manufactures
Rubber & plastics
Vegetable oils
Beverages & Tobacco
-4 -11 -14
-29
-100
-200
-215
-300 -259
Sectors
Conclusions and recommendations regarding the EU-CA FTA economic impact:
The ex-post EU-CA FTA effects can be isolated using an economic model. While the model only
looks at tariff liberalisation, and thus only partially captures the effects of the FTA, the results
show a positive impact of the Agreement for all Parties on their GDP and exports, both bilateral
and overall. At the sector-level, the impacts are varied; generally, sectors where a Party has a
comparative advantage (such as manufactures, machinery and chemicals in the EU; fruits and
vegetables, sugar and textiles in the CA6 countries) benefit from the Agreement through increased
bilateral exports, and vice versa.
Going forward, one obvious recommendation is to improve the scope of the CGE analysis by adding
to the simulation of impacts related to tariff liberalisation, a simulation of the liberalisation of non-
tariff barriers and services trade.
3.5 Analysis of impacts of customs provisions
While trade liberalisation via tariff reductions stimulates trade, it is important to ensure
that the benefits from tariff liberalisation are not undone by the existence of non-tariff
measures, including in the form of customs barriers. In this section, we therefore look at
business awareness of the functioning of the measures included in the trade Pillar, including
functioning of administrative cooperation, rules of origin (including the lack of flexible rules
on direct transport of on accounting segregation), management of TRQs and approved
exporter status.
3.5.1 Business awareness of the customs and trade-facilitation related measures of the
trade pillar
In our interviews with private sector stakeholders, we have found out that their awareness
of the customs and trade facilitation measures in the Agreement was limited (more so for
SMEs), but also improving. In conducting the interviews, we noted that there may be an
issue with selection bias because we have interviewed those associations and companies
engaged in trade and investment which favours some degree of knowledge or
understanding of customs and trade-facilitation related measures.
EU Member State (EU MS) bilateral Chambers of Commerce are focused on supporting
businesses in their attempts to export/import product. As such they are directly involved
in ‘translating’ the customs and trade facilitation measures in the Agreement to companies
to help them to do business. That is why the presence of a bilateral Chamber of Commerce
in Central American countries is a positive indication on how aware businesses are of the
68
relevant provisions in the EU-CA FTA. Based on Table 3.5-1, while a number of awareness
raising activities have been undertaken, there is considerable variation that makes us
cautious in assessment: while for Costa Rica and Panama the commercial presence of
Chambers of Commerce is broader, it covers only part of the EU MS. In the other four
Central American countries, few EU MS Chambers are present.
Table 3.5-1. Presence of EU MS Chambers of Commerce in CA countries

Costa El
EUMS Guatemala Honduras Nicaragua Panama
Rica Salvador
Austria X X X X X √
Belgium √ √ √ √ √ √
Bulgaria X X X X X X
Croatia X X X X X X
Cyprus X X X X X X
Czechia X X X X X X
Denmark X X X X X X
Estonia X X X X X X
Finland √ X √ X √ √
France √ √ √ X √ √
Germany √ √ √ √ √ √
Greece √ X X X X X
Hungary X X X X X X
Ireland X X X X X X
Italy √ X √ X X X
Latvia √ X X X X √
Lithuania X X X X X X
Luxembourg √ √ √ √ √ √
Malta X X X X X X
Netherlands √ √ √ √ √ √
Poland √ X X X X X
Portugal X X X X X √
Romania √ X X X X X
Slovakia X X X X X X
Slovenia X X X X X X
Spain X √ X √ √ √
Sweden √ √ √ √ √ √
3.5.2 Rules of Origin
Rules of Origin (RoO) ensure that only products that are (sufficiently) produced in the
Parties to the Agreement or – more generally – that comply with the RoO provisions in the
Agreement – benefit from the preferential market access provided for by the Agreement.
In this case, it means that the RoO provided for in the EU-CA FTA guide what products are
eligible to preferential tariffs. RoO are provided in Annex II of the Agreement and can be
summarised as follows. A product originates in the EU or Central America if it is:
• Wholly obtained in the EU or Central America.
• Manufactured in the EU or Central American partners using non-originating materials,
provided such materials have been sufficiently worked or processed in compliance with
the product specific rules set out in Appendix 2 of the Agreement. For certain products
there are some alternative product-specific rules as provided for in Appendix 2A of the
Agreement.
To assess the effectiveness of the EU-CA FTA RoO requires an analysis of two elements:
• The extent to which exporters have complied with RoO, respectively customs
authorities identified potential issues of fraud or non-compliance with the rules. We
address this issue through a review of verifications of origin and reported abuse or non-
compliance with the rules of origin; and
• The extent to which RoO or their implementation have facilitated trade and not
functioned as a barrier to trade. This is addressed through a review of the “strictness”
of rules and the ease with which they are administered as seen by stakeholders.
69
Verifications of the RoO and RoO compliance

Based on information obtained from the different stakeholders interviewed for the study,
the level of non-compliance with RoO in trade between the EU and CA has been rather low.
Requests for verifications of origin by customs authorities were related to the clarification
of the authenticity of the proof of origin, the origin of the product and the description of
the production process, as well as random checks. Information about the eventual
treatment of imports for which verification was sought is not available.
The EU and CA partner countries, in the Customs Sub-committee meetings on Customs,

Trade Facilitation and Rules of Origin have discussed several issues regarding RoO
compliance. These have – in the years since the start of the implementation of the
Agreement – been addressed with the exception of the issues of direct transport and
accounting segregation. Looking at the way both Parties have engaged to resolve any
differences, as shown in the annual Sub-Committee meetings on Market Access and
Customs, Trade Facilitation and Trade, we conclude that verification of origin is not used
as a non-tariff barrier by the Parties to the Agreement.
“Strictness” of rules of origin and their implementation

Based on our interviews with stakeholders so far, the strictness with which the RoO have
been implemented between 2013 and 2019, both in Central American countries and in the
EU, have not caused much reason to complain, with some exceptions. These are:
• Movement certificate EUR.1
• Cumulation of Origin (which is continuously being clarified and addressed)
• Direct transport and non-alteration (which are still being discussed)
• Accounting segregation (which is still being discussed)
Movement certificate EUR.1

To establish the proof of originating status, as defined in Annex II, Title IV, Article 14, a
movement certificate EUR.1 is required as per Article 14(a), or an invoice declaration made
out in the exporting country in accordance with the provisions of Title IV. Since the start
of the application of the Agreement, the EUR.1 certificate has been discussed several times
to ensure its correct practical application.
• During the 2015 meeting of the Sub-Committee on Customs Procedures and Trade
Facilitation and Rules of Origin, the filling in instructions were discussed and decided
upon; and so was the issue of multiple EUR.1 versions in circulation. These issues were
agreed upon during the 2018 Sub-Committee. Subsequently, a Decision of the
Association Council regarding Explanatory Notes to Articles 15, 16, 19, 20 and 30 of
Annex II of the EU-CA Agreement was prepared for a signature by the Association
Council in 2020 and was adopted in December 2020.
• In the 2019 Sub-Committee, the issue of retrospective EUR.1 certificates was
discussed, the problem being that the date of the Bill of Lading was earlier than the
date of endorsement of EUR.1, suggesting the latter was issued a posteriori. The Parties
indicated that the date of the Bill of Lading is not the determining factor for when actual
exportation has been realised or insured. Parties agreed to resolve the issue.
Our analysis of the Sub-committee meetings shows that the issues with the EUR.1
certificate have been gradually resolved. This makes it clearer and more predictable for
stakeholders to use the Agreement and benefit from it. We are currently conducting
interviews with stakeholders to see to what extent these measures have been felt by them.
Cumulation of origin
The Agreement allows for cumulation of origin not only between CA partner countries and
the EU but also – under certain conditions – for materials originating in Bolivia, Colombia,
Ecuador, Peru (Annex II, Art. 3 sub 3) further processed in CA and upon agreement by CA
and the EU, with Mexico, South-American or Caribbean countries (Annex II, Art. 3 sub 7).
This may also apply for products with header ex 1604 for Chile and Mexico (Appendix 2A,
Note 1). In order for products referred to in these paragraphs to acquire originating status,
70
the countries have to allow – among others – for adequate administrative cooperation
procedures (see next section).
We found that at each Sub-committee of the Customs, Trade Facilitation and Rules of
Origin, the issue of cumulation of origin has been discussed and outstanding issues
resolved. For example:
• The issue of cumulation of origin in relation to the (former) GSP status of Central
America and Andean countries was discussed over a few meetings (Sub-Committee
meeting of 2016). Subsequently, Central American countries notified the Sub-
committee about the administrative cooperation agreements with Ecuador and
Colombia and informed about the letter to be signed by SIECA with the Andean
Community confirming the existing adequate administrative cooperation enabling both
regions to apply the cumulation mechanism (Sub-committee meeting, minutes, 4-6
June 2018, 18-19 June 2019).
• Coverage of needed procedures related to administrative cooperation in order to allow
countries mentioned in Article 3 sub 3 and sub 7 to be eligible for cumulation of
preferences. See the next section for more details.
Direct transport
At the 2016 meeting of the Sub-Committee on Customs Procedures and Trade Facilitation
and Rules of Origin, the EU informed that transport must be done directly between the
Parties with limited exceptions (Annex II, Article 12). In 2018, the EU explained its proposal
to replace the rule on direct transport with the concept of ‘non-alteration’, but this was
found to be not possible because the Association Council cannot make changes to the
articles of the rules of origin. During the November 2020 6th meeting of the EU-CA Sub-
committee on Customs, Trade Facilitation and Rules of Origin, the CA countries instead
made a proposal to clarify the interpretation of Article 12 through an explanatory note. The
EU made it clear that while an explanatory note could provide an interpretation of the rules
for direct transport, it could not change those rules as the EU had initially proposed. At the
meeting in 2021, the EU and CA agreed to look for options within the mandate of the
Association Council (given that the Council cannot amend the RoO Articles) (minutes, 7-14
June 2021). This issue is still under discussion in Customs, Trade Facilitation and Rules of
Origin Sub-committee.
The fact this issue has not been resolved by 2020 between the EU and CA partners,
according to our analysis, has not impacted the ease with which trade between the EU and
CA countries is taking place. So far, the agreed text has been implemented.
Accounting segregation
A trade facilitation measure allowing the common storage of fungible originating and non-
originating materials, without the originating materials losing their originating status, is
not provided for in the EU-CA Association Agreement. Other EU agreements typically allow
for this common storage of fungible materials.
Regarding the issue of accounting segregation, at the 2019 Sub-committee meeting on

Customs, Trade Facilitation and Rules of Origin, El Salvador raised the issue of the lack of
a rule on accounting segregation that in turn would enable the use of the 15% tolerance
levels provided for in Note 1, Appendix 2A, Annex II of the Agreement. The EU proposed
to extend the quota on tuna loins to include canned tuna for an amount equivalent to the
15% tolerance, while at the same time removing the 15% tolerance. CA agreed to consider
the proposal. The EU also mentioned that the issue of accounting segregation will have to
be considered in any future update of the Agreement. This issue is still under discussion in
Customs, Trade Facilitation and Rules of Origin Sub-committee.
Administrative cooperation
Administrative Cooperation (AC) is a key concept in the Agreement. Article 83(1) on the
elimination of customs duties reads: “Each Party shall eliminate customs duties on goods
originating in the other Party in accordance with the Schedules set out in Annex I
(Elimination of Customs Duties).” For the purpose of this Article “originating” is defined as
qualifying under the Rules of Origin (RoO) set out in Annex II. RoO in Annex II consists of
the definition of the concept of ‘Originating Products’ and ‘Methods of Administrative
71
Cooperation’. Similar references to AC are found in Article 304 (Customs Procedures), and
Annex II Art. 3 sub 4(c) and sub 9(d) on cumulation of origin (see section above on RoO),
The arrangements for AC (Annex II, Title V) are specified in Articles 29 – 33 and capture
administrative cooperation, verification of proofs of origin, dispute settlement, penalties,
and free zones.
Throughout the Sub-committee meetings on Customs, Trade Facilitation and Rules of

Origin, the element of administrative cooperation has been covered because of the link to
product origin and cumulation of origin with a wide range of countries, including the Andean
countries, Mexico, and Chile. On each occasion when CA countries wanted to ask for
cumulation of origin, the administrative cooperation had to be in order first. A new
administrative cooperation agreement also had to be struck with the Andean Community
because the previous agreement stemmed from the time when (some) countries were part
of GSP (European Commission, 2020).29 Subsequently, Central American countries notified
the Sub-committee about the administrative cooperation agreements with Ecuador and
Colombia and informed about the letter to be signed by SIECA with the Andean Community
confirming the existing adequate administrative cooperation enabling both regions to apply
the cumulation mechanism (Sub-committee, minutes, 4-6 June 2018, 18-19 June 2019).
The efforts in administrative cooperation have, according to our analysis, contributed to

simplification of the export/import procedures for key stakeholders. Not directly via the
administrative cooperation elements, but indirectly because of what the existence of an
administrative cooperation agreement allows – e.g., in terms of cumulation of origin.
Approved exporter status

Annex II, Article 20 of the Agreement establishes that the “competent public authorities of
the exporting Party may authorise any exporter, hereinafter referred to as ‘approved
exporter’, who makes frequent shipments of products under this Agreement to make out
invoice declarations irrespective of the value of the products concerned.” We find, based
on limited evidence, that some CA countries have granted approved exporter status to a
limited degree only.
3.5.3 Customs and trade facilitation
The EU has worked with the Central American region, through SIECA, on the ‘Proyecto
Integración Económica Regional y Centroamericana' (INTEC). This project, launched in
2017, has focused on: 1) Modernisation and convergence of the Regional Regulatory
Framework; 2) Facilitation of regional trade and infrastructure through development and
implementation of the Central American Trade Platform (PDCC – Plataforma Digital de
Comercio Centroamericana); and 3) Strengthen trade capacities in CA for a better benefit
of the Association Agreement.
Single administrative document (DUCA)

The single administrative document for customs declarations (Article 304(3) of the
Agreement) was a key step towards the implementation of the EU-CA FTA and CA
integration. After having discussed progress on the issue for several years at the Sub-
committee meetings, at the 5th EU-CA Sub-committee on Customs, Trade Facilitation and
Rules of Origin in Guatemala (2019), Guatemala reported that the ‘Declaración Única
Centroamericana’ (DUCA) had entered into forced on May 7, 2019. This meant that the CA
countries fully met the commitment related to Article 304(3) of the Agreement. The effect
of this document has been that customs procedures have been harmonised. We are
discussing with stakeholders whether they have noted the difference with the pre-2019
situation.
29
Commission Staff Working Document (2020), “Report from the Commission to the European Parliament, the
Council, the European Economic and Social Committee and the Committee of the Regions on Implementation
of EU Trade Agreements 1 January 2019 – 31 December 2019.
72
Authorised Economic Operator status

At the 2016 Sub-committee on Customs, Trade Facilitation and Rules of Origin, the CA
countries informed the EU of changes made to the CA customs legislation (Section XIII of
Chapter VII, Title II of RECAUCA – Reglamento del Código Aduanero Uniforme
Centroamericano). The goal was to guarantee a better level of security in the supply chain
and also improve access to the AEO programme.
In addition, at CA country level, various initiatives have been taken up to promote the use
of the AEO scheme to facilitate trade30:
• 19 December 2019: Costa Rica and Colombia signed an agreement aiming at the
mutual recognition of trade operators that have obtained the AEO certification in either
of the two countries31.
• 25 April 2019: CA (Costa Rica, El Salvador, Guatemala, and Panama) signed an
agreement aiming at the mutual recognition of trade operators that have obtained the
AEO certification in either of the four countries.
• 6 September 2018: Guatemala qualified three companies as AEO.
• 17 April 2018: Mexico and Costa Rica signed an agreement aiming at the mutual
recognition of trade operators that have obtained the AEO certification in either of the
two countries.
• 25 April 2018: Costa Rica streamlined export of Agricultural Products by announcing
that AEO companies will have access to faster foreign trade procedures.
• 12 January 2017: Local companies with AEO certification will have priority in customs
and are able to conduct processes in less time and at less cost in Panama.
• 20 July 2016: The first regional CA congress on AEOs was held in Guatemala.
• 18 May 2016: Companies that are certified as AEOs are able to reduce paperwork and
given priority at customs offices in Panama.
• 29 January 2015: Companies that are certified as AEOs are able to reduce paperwork
and have priority at customs offices in Guatemala.
• 9 October 2014: In Nicaragua, the AEO programme will be implemented in 2015.
• 6 October 2014: Launch of a pilot scheme for certifying companies as AEO in order to
speed up processes at customs offices.
So far, especially Panama, Costa Rica and Guatemala have started to use the AEO scheme,
Costa Rica even in the form of a mutual recognition agreement with a third party. Other
Central American partner countries have used AEO schemes in more limited ways. For
example, Honduras only launched the AEO programme in Jun 2021. Also, in El Salvador,
concerns have been raised about the AEO status (August 2, 2016) where employers have
pointed to limitations on the certificate, reducing its efficiency. 32
In the various meetings of the Sub-committee on Customs and Trade Facilitation, the EU
has provided information about how the scheme works in the EU. Apart from Costa Rica,
Panama and Guatemala, who have been more active, AEO schemes have not played a
major role in the implementation of the Agreement so far.
The effective use of AEO schemes could be an important element in simplifying trade
between the Parties.
Conclusions and recommendations related to customs provisions:
Customs issues seem to have posed few problems in the implementation of the EU-CA FTA. The
administration of customs rules by the customs authorities is mostly in line with the Agreement’s
provisions. Moreover, where issues have been raised at the Sub-committee on Customs, Trade
Facilitation and Rules of Origin, progress has mostly been made.
This said, two areas for improvement include a stronger focus on raising awareness of businesses
of the customs and trade-facilitation related-measures of the Agreement; and clarifying application
30
https://www.centralamericadata.com/en/search?q1=content_en_le:%22Authorized+Economic+Operator%22
31
Ministerio de Hacienda, Costa Rica, Programa OEA Costa Rica: https://www.hacienda.go.cr/contenido/408-
programa-oea-costa-rica
32
https://www.centralamericadata.com/en/article/home/El_Salvador_Concerns_About_Authorized_Economic_Ope
rator_Status
73
of the direct transport rule. While additional measures aiming at ensuring higher awareness of and
more transparency towards businesses, and a more detailed guidance regarding application of
certain EU-CA FTA provisions will be of use for all traders, they should benefit in particular small
businesses for whom the administrative burden is usually higher than for other economic operators
According to CA stakeholders, despite the issuance of Explanatory Notes, customs authorities of
some EU Member States still make mistakes when filling in the movement certificate EUR.1, e.g.,
by indicating bilateral trade (i.e., between a given EU MS and an individual CA country), instead
of trade between the EU and CA as a region. This increases administrative obstacles for traders.
Therefore, we recommend further promotion by the European Commission and CA governments
of Explanatory Notes for EUR.1 among the EU and CA customs authorities to ensure a consistent
use of the movement certificate in EU-CA trade, in line with the guidance provided by the Notes.
3.6 Analysis of the implementation of the SPS Measures chapter
This section analyses the developments in respect of sanitary and phytosanitary matters
over the period 2013-2018. It appears that, for most issues described hereafter, several
and joint efforts were made but very few recommended solutions had been agreed and
implemented. This apparent lack of progress possibly emanates from the SPS Sub-
Committee having no mandate to change substantive standards and regulations. Moreover,
in the absence of multilaterally agreed standards, or of trade dispute rulings, bilateral
treaties such as the EU-CA FTA can hardly make much headway. However, as outlined
below, the Agreement offers practical ways to facilitate trade in products subject to SPS
measures. One example of it (discussed further down in detail) is the approval of trade in
animal products through the approval of establishment lists. It constitutes a meaningful
contribution to trade facilitation, as in the absence of approval of lists of exporting
establishments, the health authorities need to carry out inspections and approve each of
the establishments individually.
The SPS provisions of the EU-CA FTA are contained in Title II (Trade in Goods), Articles
145-157 and, under Title IX on Regional Economic Integration, Article 306. Their main
purpose is the harmonisation of the Parties’ SPS measures, to remove or to avoid any
unjustified trade barriers (Art.145, with a reference to Art.3 of the WTO/SPS Agreement).
The mandate and the tasks of the SPS Sub-Committee on Sanitary and Phytosanitary
Matters are found in Articles 150-156 (see Annex to this Report). As under all SPS
agreements, in case of serious risks to human, animal or plant life or health, the recourse
to emergency measures remains available to all Parties, at all times, barring “unnecessary
disruptions to trade” (Art.153.2).
The Sub-Committee meeting records show that this treaty text is dynamic. It favours
progressive market integration by way of mutual recognition of standards over and beyond
EU-CA FTA and WTO obligations in respect of most-favoured nation and of national
treatment. For SPS matters, this includes the use of a single import certificate, a single list
of establishments, a single sanitary import check and a single fee for products imported
from the EU Party into the CA Party (Art.306.1(b)).
The Parties have not yet started to develop provisions on equivalence through the SPS-
Subcommittee, as foreseen in Article 150. In this process, it is worth noting that importing
Parties “should not be required to grant a more favourable treatment to products imported
from the exporting Party than the treatment given by the exporting Party in its intra-
regional trade.” (Art.306/5) This being said, the EU-CA FTA foresees no explicit right to
market access based on equivalence.
Disputes arising under these SPS provisions are to be settled in technical consultations in
the SPS Sub-Committee. Nonetheless, recourse to the Dispute Settlement Understanding
(DSU) of the WTO is not precluded for “redress of a violation of an obligation under the
WTO Understanding on the Rules and Procedures Governing Dispute Settlement”
(Art.326/1). Conveniently, the national agencies dealing with SPS trade concerns are often
the same as those in charge of WTO/SPS matters (Enquiry Points in EU-CA FTA-Annex XV).
74
The analysis of three main SPS issues that have arisen under the Agreement, and especially
its procedural provisions, shows how both Parties have endeavoured to stand by their
above-described treaty commitments.
Dealing with import authorisation requirements

Over the first five years, the timeliness, transparency, and unclear standards in CA partner
countries have been repeatedly criticised, especially by the EU Party. For instance, the SPS
Sub-committee 2019 discussed all pending requests for the authorisation of importation of
products of animal and vegetal origin separately, with each CA country, with proposals to
improve and streamline communications with each contact point (especially when that
contact point was in another local agency). However, the Agreement does not oblige the
CA region to act as a single Party in relation to SPS requirements. Therefore, while smooth
handling of requests, and improved communication and coordination within each country
and (when relevant) between CA countries is and will remain important for EU-CA trade,
each CA country preserves its right to regulate and to establish the SPS requirements that
it considers appropriate, according to the level of adequate protection defined.
At the same meeting, the EU demanded that CA import requirements exclude attestations
‘born and raised’ in export health certificates from the EU Member States, arguing that the
EU is a single entity with harmonised legislation on animal and public health. CA countries
responded that they did not always agree with the health status claims of individual EU
Member States.
Related issues of concern to both sides are the timely approval of lists of establishments
(recognising the harmonised EU rules and procedures in this respect), and the verifications
each Party has the right to conduct, in conformity with Article 148 and at its own costs, for
all or part of the other Party's authorities' control system. So far, the CA countries had not
conducted such verification missions. But the SPS Sub-Committee agreed that the EU
would provide the link pointing to the information related to the audits planned, and to
those that had been made since 1998. This information is regularly updated and available
online.33
Prelisting
The principles for the approval of establishments allowed for exporting animal products to
another Party (where such products are authorised), without previous individual
inspections (pre-listing), are laid down in Article 147. First, not all EU-listed establishments
of animal products were already eligible to export products covered by the prelisting
procedure. The 2020 SPS Subcommittee meeting noted some progress in Guatemala and
Nicaragua, and follow-ups in Honduras. Secondly, the EU noted that CA countries had not
yet finalised regional certificates for the approval of their own establishments. The CA
Parties agreed to harmonise their procedures, which would also facilitate EU exports.
Another issue is the automatic recognition by CA countries of the EU regionalisation policy

for animal diseases, including inspections in Member States. Guatemala informed the EU
on its inspection of genetic material in the Czech Republic. Also, the records of the meetings
under the EU-CA FTA show a few specific problems in respect of regionalisation, e.g., the
issue and ongoing discussions on African Swine Fever (ASF).
Compliance with international standards

According to Article 149, SPS measures linked to animal and plant health shall recognise
the concept of pest- or disease-free areas and areas of low pest or disease prevalence,
incl. for the treatment of outbreaks and re-infestations. Direct references to the WTO/SPS
Agreement and to the OIE and the IPPC clarify where the principal competence for
standard-setting lies. For instance, Parties recognise the principle of compartmentalisation
of the OIE, as well as the pest-free production places and sites of the IPPC (Art.149.7).
In the EU-CA FTA, the exporting and importing Parties are to cooperate closely for the
determination of such areas, based on the relevant international standards, guidelines, or
33
https://ec.europa.eu/food/horizontal-topics/official-controls-and-enforcement/health-and-food-audits-and-analysis_en.
75
recommendations (Art.149.3). The SPS Sub-Committee will make its recommendations in

accordance with international procedures.
Compliance with these standards and procedures aims to ensure free circulation of animal
and plant products within the limitations necessary for the prevention and treatment of
animal and plant diseases and of pesticides contained in agri-foodstuffs. In the SPS Sub-
Committee, all Parties participated actively in these efforts. For instance, the 2019
Association Committee noted discussions around fruit fly incidence in mango exports, the
issue of the EU with maximum residue levels (MRL), like those for Cadmium and Ocratoxin-
A (OTA) in cocoa powder. CA countries expressed concerns related to EU policy of revision
of the MRL and its deviation from the parameters agreed in the Codex Alimentarius, incl.
the economic effects this may have on exports of CA agricultural products to the EU.
Also, the EU’s right to benefit from intra-CA free circulation SPS policies seems not to have
materialised. On their part, CA countries raised concerns, at the 2020 SPS Sub-Committee
meeting, with respect to the preferential trade impact of the EU’s Green Deal and Farm to
Fork strategies. The Parties have just started to discuss these issues and agreed to
continue exchanging information on the progress of the strategy and on resulting
regulations. Also noteworthy in this context is the announcement of Guatemala and El
Salvador to “join forces to better engage in Codex work”. 34 After several years of intensive
discussions, the 14th session of the Codex Committee on Contaminants in Food (CCCF14)
recommended for adoption by the Codex Alimentarius Commission new maximum levels
(MLs) for cadmium in chocolate.35
The Parties also agreed to hold technical workshops on the information exchange at the
SPS Sub-Committee, as well as in several other fora during the first five years, e.g., for
TRACES. The Parties noted the crucial importance of technical assistance. The cornerstone
for this institutional cooperation is the Action Plan agreed at the 2015 Sub-Committee
meeting. Increasing direct cooperation between different technical agencies would benefit
from the experiences made under other bilateral agreements both by the EU and the CA
states. This also goes for contacts with the help of hotlines in case of specific shipments.
SPS-related barriers to trade and SPS standards

According to Article 145.2, SPS measures must not create unjustified trade barriers. This
is an upfront condition and a priority for the whole SPS chapter of the EU-CA FTA. SPS
measures could, however, still be described as “unjustified” by the Party expressing specific
concerns. The SPS Sub-Committee offers in this context an opportunity for a dialogue to
address the “irritants” and looking for solutions without litigation.
The role of capacity building and technical assistance

Before the entering into force of the EU-CA FTA, most of the EU cooperation efforts were
geared towards strengthening the regional cooperation mechanism (Central American
Integration System, SICA). Since 2011, twelve projects have been implemented in relation
to production and trade capabilities in CA6, five of which regional and seven projects
carried out in Costa Rica (1), Guatemala (3) and Nicaragua (3). Analysis of the results of
the twelve projects, none of them directly related to the FTA, is still pending. So are the
results of the EU-sponsored Regional Coffee Disease Prevention project – of particular
interest for the SPS Committee.
Conclusions and recommendations related to SPS measures:
The SPS provisions of the EU-CA FTA appear as a dynamic, up-to-date standard treaty text,
like those found in most EU and other regional trade agreements.
34
Cf. Codex Alimentarius News and Events dated 9 April 2021 (http://www.fao.org/fao-who-
codexalimentarius/news-and-events/news-details/en/c/1393534/)
35
Ibid dated 13 May 2021. These levels were proposed by Ecuador and seconded by El Salvador. However, the
EU reserved its position on the MLs for cadmium in chocolate, “because these products are important
contributors to the exposure of EU consumers and in particular of EU children, for which the mean dietary
exposure could exceed the tolerable weekly intake established by the European Food Safety Authority by
about twofold” (cf. http://www.fao.org/fao-who-codexalimentarius/news-and-events/news-
details/en/c/1399078/).
76
Despite limitations, such as: 1) the SPS Sub-Committee having no mandate to change
substantive standards and regulations; 2) in the absence of multilateral standards, the EU-
CA FTA not being able to make much headway; 3) a relatively short time since the application of
the EU-CA FTA started; and 4) the market shares for many agri-food products concerned being
relatively small, provisions of the Agreement regarding practical measures have been used to
facilitate trade between the EU and CA, e.g., the approval of trade in products of animal
origin through pre-listing (approval of lists of establishments).
Some problems remain, especially those involving international standards, and dissenting
views about their interpretation by the SPS Sub-Committee. This includes, e.g., concerns raised
by CA countries around the EU revision of MRL. On several “trade irritants” identified by the EU,
incl. measures Linked to Animal and Plant Health, the Parties continue to fail finding a solution.
Nonetheless, technical assistance has started to show a way forward for some of these problems
and it is recommended that continued technical assistance be provided to ensure that exporters
of products covered by SPS requirements can keep benefitting from the preferences offered by
the Agreement.
3.7 Analysis of the implementation of the Public Procurement chapter
In this section, we look at the coverage of public procurement in the EU-CA FTA and assess
the extent to which the implementation of the Agreement may have improved access for
suppliers to the public procurement markets in the EU and CA partner countries, and
facilitated participation, especially of SMEs, in the procurement process. We also examine
the extent to which the provisions on public procurement in the Agreement have been
implemented.
The analysis in this section has been significantly constrained by the availability of data on
procurement by CA countries and the extent of foreign participation therein, including by
EU suppliers. Four of the six CA countries have responded to our queries in this regard.
And in those cases, the information provided is not sufficient to unequivocally determine
whether the EU-CA FTA can be associated with an increase in the award of procurement
contracts by partner country governments to EU firms.
Title V of the Agreement covers public procurement and is complemented by Annex XVI,
which details the commitments of the Parties in this area (including on the coverage of
procuring entities and goods and services under the Agreement; the 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 (e.g., publication of notices, participation
in tenders, technical specifications, documentation, timeline, awarding contracts etc.)
ensuring transparency and cooperation. Institutionally, the Working Group on Public
Procurement addresses issues on this subject.
It is a standard practice for Government contracts above a certain threshold value to be

subject to internationally competitive bidding, including under the auspices of a trade
agreement. Table 3.7-1 provides a snapshot of the threshold values for central and sub-
central public procurement covered under the Agreement in Appendix I of Annex XVI. The
threshold values are consistent with those in the WTO Agreement on Government
Procurement (GPA). At the same time, certain products are excluded from coverage
according to Parties’ market access schedules’ commitments. These include food products,
beverages, and tobacco; textiles, apparel, and leather products; arms and ammunition (for
Honduras); food products, beverages, and tobacco; textiles, apparel, and leather products;
pharmaceuticals and medical equipment; transport equipment (Panama’s Ministries of
Education, Health, Internal Security, Justice, and the President); and products in HS
Chapters 27-29, 38-40, 82, 84-87, 89-90, 94 (in the case of the EU).
77
Table 3.7-1: Threshold values (in SDRs) for central and sub-central government entities
covered under the Agreement
Central Costa El
Guatemala Honduras** Nicaragua Panama EU
govt. Rica Salvador
Goods 130,000 130,000* 130,000* 260,000 130,000* 130,000 130,000
Services 130,000 130,000* 130,000* 260,000 130,000* 130,000 130,000
Construction
5 million 5 million* 5 million* 6 million 5 million* 5 million 5 million
services
Sub-central
govt.
Goods 355,000 355,000# 355,000# 490,000 355,000# 355,000 355,000
Services 355,000 355,000# 355,000# 490,000 355,000# 355,000 355,000
Construction
5 million 5 million# 5 million# 6 million 5 million# 5 million 5 million
services
Source: Annex XVI, Appendix I of the FTA
Note: SDR or Special Drawing Rights is the accounting unit used by the IMF. Threshold values are also expressed
in SDRs in the WTO’s GPA. * - or SDR 260,000 and 6 million SDR (5.95 million for El Salvador) for the three-year
period after the entry into force of the Agreement; # - or SDR 490,000 (SDR 482,800 for El Salvador) and 6
million (5.95 million for El Salvador) for the three-year period after the entry into force of the Agreement;** -
threshold values reduced to SDR 130,00 (SDR 355,000) and 5 million three years after the entry into force of the
FTA for covered central (sub-central) government entities.
The EU’s public procurement market accounts for more than 14% of GDP36. The estimated
value of tenders published in the European Tenders Electronic Daily (TED)37 in 2019 was
€437 billion. The number of tenders published was about 3.4 million. Both values are
substantially higher than their corresponding values in the first half of the decade. During
this period, EUs’ public procurement was concentrated in construction, medical equipment,
sewage and other environmental services, and transport equipment. While in 2012-2013,
the award of EU's public contracts was concentrated in furniture (50% share of the total)
and transport services, the leading sectors in 2018-19 included environmental services
(60.4% share of the total); postal, courier, and telecom services (12.2%); transport
equipment (7.3%) and business services (5.6%).
The analysis of TED data shows that the share of the CA partner countries in the EU’s total
procurement was very small across the analysed period. In fact, the value of EU public
contracts awarded to the CA partner countries declined from the period average of €8
million (almost all of which was awarded to Costa Rica) in the pre-FTA period (avg. 2010-
2013) to an average €1 million thereafter (€0.5 million to Costa Rica and €0.4 million to El
Salvador; avg. 2014-2019). While this is an overall trend that cannot simply be attributed
to the EU-CA FTA, the Agreement may not have encouraged the access of CA partner
countries to EU public procurement markets in the analysed period.
Sector-wise, in the pre-FTA period (avg. 2012-2013), the EU public contracts to the CA
countries were awarded in community, social and personal services (41.7% share of the
total); medical equipment, pharma and cosmetics (32.8%), and electrical machinery
(23.3%) while after the start of application of the Agreement, in printed matter (59% share
of the total); maintenance and repair services (20%) and medical equipment, pharma and
cosmetics (10.7%) (avg. 2018-2019; see Table 3.7-2). Table 3.7-2 shows participation of
suppliers from the CA partner countries in the EU TED.
Regarding public procurement policies in the CA partner countries, three aspects are
important to consider: (1) Establishment of legal frameworks in the six countries; (2)
Changes in public procurement strategies during the covered period (2013-19); and (3)
The business environment in which public procurement has operated and possibly become
more accessible to private agents from CA countries and the EU. The three are reviewed
against the backdrop of Title VI, Art. 58 on Cooperation and Technical Assistance.
36
European Commission 2019: Single Market Scoreboard. Public Procurement:
https://ec.europa.eu/internal_market/scoreboard/_docs/2019/performance_per_policy_area/public_procure
ment_en.pdf
37
TED is the online version of the Supplement to the Official Journal of the EU, dedicated to European public
procurement. All public tenders above specified contract values must be published in the Supplement, which
is available exclusively electronically on the TED website. The threshold values for tenders published in the
TED are as follows: public works (€5.35 million); service contracts (€139,000); supplies contracts (€139,000);
supplies and services in the sectors of water, energy and transport (€428,000). For more detailed information
see http://ec.europa.eu/growth/single-market/publicprocurement/rules-implementation/#t1.
78
Most of the CA partner countries established, as shown in Table 3.7-3, legal frameworks
for public procurement before the Agreement was adopted. Over the last decade, Honduras
adopted a new framework whereas Guatemala proceeded with several legal and regulatory
revisions. There is no evidence that, during the 2010s, SICA (Central American Integration
System) played a preponderant role in harmonisation, neither in legislative nor in strategic
policy terms. The OECD (2017, 2020) reports public policy emphasis on greening and SME
priorities – throughout the decade – for Costa Rica and El Salvador, whereas Honduras and
Nicaragua appear have these abandoned.
Table 3.7-2: EU public contracts awarded to suppliers from the CA6

Avg. 2012-2013 Avg. 2018-2019
Value Value
CPV code Share (%) CPV code Share (%)
(€) (€)
9 25,310.0 1.2 3 471.0 0.0
31 487,096.9 23.3 22 729,509.5 59.0
32 19,346.7 0.9 30 64,406.2 5.2
33 685,174.0 32.8 33 132,604.2 10.7
50 316.9 0.0 44 56,291.4 4.5
98 871,152.5 41.7 50 247,500.0 20.0
66 6,676.4 0.5
Total 2,088,396.9 100 1,237,458.7 100
Source: TED online database; own calculations
Note: CPV code descriptions are as follows: 3 (Agriculture, forestry and fishing products); 9 (Petroleum products,
fuel); 22 (Printed matter and related products); 30 (Office and computing machinery, equipment); 31 (Electrical
machinery, apparatus, equipment and consumables; lighting); 32 (Radio, television, communication,
telecommunication and related equipment); 33 (Medical equip, pharma & cosmetics); 44 (Construction structures
and materials; auxiliary products to construction (except electric apparatus)); 50 (Maintenance & repair services);
66 (Financial & insurance services); 98 (Other community, social and personal services)
Table 3.7-3: Legal framework, support and size of public procurement and business
environment of CA partner countries
Costa El
Relevant aspects Guatemala Honduras Nicaragua Panama
Rica Salvador
Establishment of legal 1997
2006 2000 2014 2000 2007
framework (revised)
Support to innovative
No No No No No n.d.
goods & service
Support to responsible
No No No No No n.d.
business codes
Establishment of digital
2012 2017 2015 2019 2011 2006
platform
GDP share public
3.1 3.9 6.5 4.0 10.4 n.d.
procurement (%, 2011)
Doing business (2012,
121 112 97 128 118 61
ranking)
Doing business (2019,
74 91 96 133 142 86
ranking)
Sources: OECD, Emerging Policy Issues: Measures Affecting Trade in public procurement Processes (2017);
OECD, Government at a Glance, Latin America and the Caribbean (2020); World Bank, Doing Business Reports
2013 and 2020 for CA-6 countries.
For almost all CA partner countries, digital platforms for public procurement operations
were introduced after the Agreement came into force, with Nicaragua already well
positioned at the start of the last decade. The share of public procurement in national GDP
is noticeably higher for Nicaragua, which can be partly explained by the larger role of the
public sector in a relatively small national economy.
79
Further to our requests, we have only recently received some information from Costa Rica,
Guatemala, Honduras and Nicaragua about public procurement, incl. statements that some
types of information which had been requested are not recorded/reported there. We
provide an analysis of the available information below with the caveat that it does not
always include the share of the value of procurement (at all levels of government) covered
by the EU-CA FTA, incl. the share awarded to EU businesses, an analysis of the participation
of SMEs in procurement tenders and the use of procurement procedures and an assessment
of the sectors that may have benefitted most from increased access to public procurement
markets in Central America.
Costa Rica
There are no studies conducted or information available related to market liberalisation
under the Trade Pillar. Data for the total value of public procurement was provided only for
the 2011 to 2015 period (see Table 3.7-3), and there is no specific data that suggests such
contracts were awarded using internationally competitive bidding. Also, there is no specific
data on contracts awarded to EU suppliers, since the system (SICOP 38) was used by a
reduced number of entities at the beginning. However, the data provided shows around
212 EU providers between 2014 and 2021 (74 were SMEs or microentrepreneurs), from
which 157 participated in procedures, and 108 were awarded contracts (58 were SMEs or
microentrepreneurs, 54% from the total).
Table 3.7-3: Public procurement in Costa Rica by groups in SDR39 (2011-2015)

Groups 2011 2012 2013 2014 2015
Group 1: Central Government (Supreme
78.6 96.6 328.6 321.5 102.5
Powers, Ministries, Ombudsman's Office)
Group 2: Sub central level
80.0 88.0 95.1 112.0 109.5
(Municipalities)
Group 3, List A: Autonomous Institutions 20.8 33.6 30.6 24.1 31.9
Group 3, List B: Autonomous Institutions 759,845 441,516 423,973 312,681 390,298
Total 760,025 441,735 424,428 313,130 390,542
Source: SICOP database
Due to the strategic importance of public procurement in Costa Rica (12.5% of GDP by
2018), the country started to reform its PP regulatory framework, aligning it with OECD
practices, such as the Public Procurement Law (draft finalised by August 2020)40. Since
Costa Rica is an OECD member, some OECD studies provide further information on the
Public Procurement System 41, and have also provided resources that feed the reform.
There is, however, no available information on the compliance of the Public Procurement
Chapter in the FTA.
El Salvador
El Salvador adopted important reforms in the last two years in matters of public contracting
incl. the incorporation of the use of technologies in the Public Administration Procurement
and Contracting Law and the possibility of offering the use of e-procurement42.
Guatemala
The government procurement market in Guatemala is based on what is regulated in the
Procurement Law (Decree 57-92, article 1). There is no specification about market
liberalization after the FTA, and the data provided includes the total value of procurement
for the last two years (2020 and 2021) (see Table 3.7-4).
38
Integrated System for Public Procurement in Costa Rica.
39
Government procurement thresholds and values are normally reported in Special Drawing Rights, which are
the accounting identity of the IMF.
40
Ref: https://www.oecd.org/governance/public-procurement/publications/Towards-a-new-vision-for-Costa-
Rica’s-public-procurement-system.pdf
41
Referenced documents, besides the one already cited were: https://www.oecd.org/governance/public-
procurement/costa-rica-public-procurement-system.pdf and https://www.oecd.org/gov/public-
procurement/country-projects/public-procurement-in-costa-rica/OECD-costa-rica-webinar-slides.pdf
42
Ref.: https://www.comprasal.gob.sv/comprasalweb/marco-normativo/1548
80
Table 3.7-4. Public procurement in Guatemala by category (2020-2021, € million)

Category 2020 2021
Food and seeds 53.8 45.7
Computing and telecommunications 82.4 142.8
Construction and related materials 1000.2 524.8
Electricity and air conditioning 274.9 182.3
Cleaning, fumigation and related materials 36.9 18.1
Furniture and office furniture 25.3 18.1
Other types of good and services 718.3 417.6
Office supplies (paper, pens, etc.) and library articles 22.2 21.1
Publicity, campaigns and fences 9.2 13.7
Health and hospital supplies 735.1 313.5
Safety and armaments 30.5 12.9
Insurances, bonds and bank services 118.3 74.7
Textiles, clothing and shoes 21.8 11.5
Transport, spare parts and gas 188.3 66.2
Total 3317.2 1862.9
The national procurement system is called Guatecompras, and it does not provide
categorization for international or national procurement, SMEs identification in the
providers' list43. Provided responses state that the improvements in the procedures after
the FTA include 1) the implementation of the electronic offer to improve transparency in
different acquisition modalities (under the responsibility of executing units of each entity),
which increased in use after the pandemic; and 2) the increase in the use of non-
conformities as an administrative procedure (regulated in the Article 35, Decree 57-92 of
the Procurement Law). No data or further information was provided on the compliance of
the Public Procurement Chapter in the FTA or further data sources or studies on public
procurement. Also, while there is theoretically a level playing field between foreign and
local providers, the documentation requirements to be listed as an approved public sector
provider and thus be able to submit offers for tenders are so detailed that in practice only
a local company (which could be the junior, local partner of a foreign bidder) can complete
them.
Honduras
Public procurement data for Honduras is managed by ONCAE44, and uses a national
procurement system called Honducompras. The system cannot provide information for
international procurement market evolution since it only includes national provider's data.
Information for national procurement is not disaggregated by year and includes a lump
sum for the period between 2005 and 2021. Although it is possible to disaggregate by
year, the system does not provide a categorisation by enterprise size to identify SME
national providers. There was no information provided on possible effects related to the
Trade Pillar over national procurement processes, nor information about compliance with
the Public Procurement chapter in the FTA. Data source links provided include the website
for open procurement45 and the procurement system site46.
Nicaragua
The public procurement market in Nicaragua covers most central government institutions
and does not include sub-central level ones (Municipalities). The system used for public
procurement is called SISCAE. It consists of a unified procurement portal, but it does not
provide statistical information or aggregated data to show the evolution of procurement
43
There was a module to categorize the providers, but it was disabled by the Economy Ministry.
44
Oficina Normativa de Contratación y Adquisiciones, Normative Office of Procurement and Adquisitions by its
name in Spanish.
45
Ref.: https://www.contratacionesabiertas.gob.hn/
46
Ref.: https://honducompras.gob.hn/
81
over the years47, or to isolate the influence of the Trade Pillar over such procedures. There
was no data provided on the total value of public procurement, data of contracts awarded
using internationally competitive bidding, specific data on EU providers 48, or their
classification as SMEs49. No specific evidence was provided regarding the Public
Procurement Procedures improvement in relation with the Trade Pillar. Still, the
Procurement system (SISCAE) and Procurement Laws in Nicaragua aim at procedural
transparency by fomenting competitive processes in contract-awarding and easing the
process to any provider (by publishing the Annual Contracts Plan, pre-specifications, and
calls); trade agreements help to strengthen national legislation regarding this process too.
There was no specific evidence regarding the level at which the Government is complying
with the Public Procurement chapter in the FTA. However, there are support processes for
the entire procurement system, such as technical assistance, administrative normative,
standard conditions established (with contracts models), all to promote transparent
competition and strengthen procurement management.
Conclusions and recommendations related to public procurement:
While data were unavailable to assess the impact of the Agreement on CA6 public procurement
markets, the Agreement’s effectiveness in terms of increasing participation of CA6 firms in the EU’s
government procurement market has so far been limited.
For almost all CA partner countries, digital platforms for public procurement operations were
introduced after the Agreement started being applied. An obvious recommendation relates to the
need for CA6 countries to provide data to assess the impact of the FTA on their government
procurement markets. Availability of granular data would also enable promoting green procurement
between the FTA members. Moreover, a lot remains to be done in the area of transparency and
facilitation of access of suppliers to each other’s government procurement markets.
For CA6 suppliers, such measures could include exposure to procurement websites providing specific
information and guidance for suppliers on the kind of opportunities available under the Agreement;
setting up a single point of access (for public procurement) at the regional level in CA, in line with
Article 212 of the Agreement, and training to economic operators on how to use the online systems,
including technical assistance by the EU to CA6 suppliers.
3.8 Analysis of the implementation of other areas of the Trade Pillar
This Agreement is one of the new generation FTAs concluded by the EU. Besides
preferential market access for goods and services, it also contains a set of trade rules on
non-tariff measures, competition, and intellectual property rights. In terms of reciprocal
trade liberalisation, some trade and investment-related rules go beyond the Parties’ rules
and disciplines under the relevant WTO provisions. Among these “WTO Plus” rules and
commitments. In this Interim Report we already looked at the impact of implementation
of the EU-CA FTA on NTMs in general (Section 3.1.6). This section looks at a few
implementation issues in relation to technical barriers to trade (TBT), certain intellectual
property rights (IPRs), competition, and e-commerce.
3.8.1 Technical Barriers to Trade
Provisions on TBTs are addressed in Chapter 4 of the Agreement (Articles 125-139).

Concrete issues seemed to increase during the latter part of the implementation period. A
few examples are provided in Box 3.8-1 below. The main EU concern, according to the
minutes from meetings especially of the TBT and Market Access Subcommittees, appear
to be (i) the onerous registration processes required to put products on the market in CA,
and (ii) the pace of progress in regional harmonisation of technical regulations, in line with
Article 305 of the Agreement. The CA partners expressed particular interest, in respect of
possible trade impacts, in the EU’s Green Deal and Farm to Fork strategy. The process
47
Entities publish all their procurement procedures in the form of documents, but the information is not
structured/aggregated. The annual Procurement Plan and Purchasing orders are structured for the period
between 2016 and mid-2019, but there was no specific data provided.
48
Nicaragua does not have a registration procedure for Foreign Providers (non-resident).
49
The system does not classify the providers within enterprise size or status.
82
engaged all Parties and confirm that the Sub-committee meetings offer an appropriate
forum for addressing issues with a potentially negative impact on trade. In the EU’s view,
this process also contributes to regional economic integration.
Box 3.8-1. Examples of non-tariff concerns raised by the Parties

Issues raised by the EU
• For all CA countries (i) based on a single regional registration for products, developing
technical regulations at the regional level, (ii) written replies to the EU’s written comments
submitted in the framework of the TBT WTO notification procedure, (iii) labelling e.g., of
alcoholic drinks, cream (dairy), and footwear (raised in 2014, closed positively in 2015)
• In Costa Rica, technical regulations (tyres and electrical installations) (2014-2015)
• In Panama, technical regulations (ice cream, fruit juices, and alcoholic beverages)
(raised by the EU in 2015, discussion continued until 2021 and has not been concluded yet)
• “certificates of free sale” requested in Guatemala (raised by the EU in 2015-2016; in 2018,
Guatemala informed in 2017, it had become Party to the 1961 Hague Convention Abolishing
the Requirement of Legalisation for Foreign Public Documents)
Issues raised (and answers provided) by the CA6
• New EU import regulations for Palm oil (raised in 2019)50. CA asked the EU to consider the
environmental conditions under which palm oil is produced in the region, for the calculation
of indirect land use change, and compare it to production areas in other regions of the world.
Likewise, CA requested the EU to respond to the comments sent in public consultation prior
to the adoption of the delegated act.
• EU 2019/677 concerning the non-renewal of chlorothalonil (raised 2019). CA expressed
concern regarding the EU notification of the non-renewal of authorization for the use of
chlorothalonil. It was indicated that chlorothalonil is a substance extensively studied in the
framework of the Codex Alimentarius, within which maximum residue limits have been
established for its use in the production of different commodities. CA also requested
clarification as to whether the non-renewal of chlorothalonil implies a change in tolerances
for specific products.
• CA explained that there is no regional regulation to recognize medicinal natural products
(included in Annex XX), and CA has no harmonised legislation to register products by groups
or families of products, based on Article 305, par. 3.
• One pending Regional Technical Regulation (RTCA) was adopted on 30/4/2020 and
implemented as of 1/7/2021 (Annex XX, 2.e – Buenas Practicas de manufactura); other
RTCAs were being processed.
Source: Compiled by the contractor from minutes of meetings of the Trade Committee, Sub-committee on Market
Access, Sub-committee on TBTs, 2014-2021
Even though some issues remained on the agenda for several years, cooperation between
the Parties in the relevant Sub-committees seems to be functioning, although progress
made is limited. Two examples are worth noting here. First, the EU explained in depth its
procedures required to negotiate bilateral agreements on equivalence for Regulation (EU)
2018/848, establishing the new rules on organic production and labelling of organic
products, applicable as of January 2022. Second, Costa Rica detailed the relevant
procedures for recognition of equivalence, e.g., for fire protection products. Obviously,
technical assistance, collaboration and regional integration are key requirements here, as
shown by the Parties’ undertaking expressed in Article 134, “to carry out joint actions [...]
strengthening their cooperation in the field of standards, technical regulations, metrology,
accreditation and conformity assessment with a view to increasing mutual understanding
of their respective systems and, in areas of common interest, explore trade facilitation
initiatives which lead to the convergence of their regulatory requirements.”
3.8.2 Competition
The EU-CA Agreement has clear provisions on competition (Title VII, Articles 277 – 283)
that cover the establishment of general principles, cooperation and transparency through
exchange of information and consultations, and technical assistance, as well as establishing
the obligation on the Parties to have competition laws and authorities in place, and to apply
50
Directive 2009/28/CE on the promotion of the use of energy from renewable sources. Delegated Regulation C
(2019) 2055 final supplementing Directive (EU) 2018/2001 regarding the determination of high risk materials
of indirect land use for which there is a significant expansion of land production area with a high carbon stock
and certification of biofuels, bio liquids and biomass fuels with low risk of land use change.
83
‘competition laws in a transparent, timely and non-discriminatory manner, respecting the

principle of due process and Rights of defence’. Some technical assistance projects were
organised related to competition, like EU support aimed at advancing economic integration
in Central America, the provision of technical inputs on a regional competition policy, as
well as elaboration of common and state-of-the-art competition policies. the initiatives and
proposals have, initially not been picked up actively by CA governments and divergent
competition policies and different levels of strength of competition agencies remain. On
the positive, in March 202, the regulation about competition in CA entered into force – and
important milestone regarding regional competition policy 51.
When asked if they had come across anti-competitive practices in the EU or CA,
stakeholders shared two main views:
• Several EU trade associations shared their experience that some markets in Nicaragua
and Guatemala were having cartelised market structures, inhibiting competition and an
equal level playing field. Vested interests ensure this situation would continue.
• CA6 stakeholders, on the other hand, indicate that monopsonistic power from the side
of EU buyers (e.g., large supermarket chains) put significant pressures on prices of
export goods (e.g., bananas, fruits).
Given the lack of a dedicated Sub-committee on competition, discussions in this area are
held in the Association Committee meetings. The Association Committee reported in 2019
that a draft competition law in Guatemala was being prepared in its Legislative Assembly.
At the same meeting, CA countries also indicated work on the CA Competition Regulation
to comply “in time” with the commitment of the EU-CA FTA (due on 1/12/20). In 2020,
they informed that a proposal for a Regional Competition Regulation was waiting for
approval by the CA Ministers of Trade. The EU emphasised the importance of a regional
competition authority and respective competition law. 52 In March 2021, the regulation
about competition in CA entered into force (which includes provisions about regional
cooperation and promotion). Each CA6 member state will have to implement the regulation
and to comply with it including making laws from each country to implement it. The
records, and the statistics at our disposal don’t show any visible effects on trade between
the Parties or domestically.
3.8.3 Electronic commerce
Electronic commerce is covered by chapter 6 of Title III (Articles 201-202) and in addition
cooperation and technical assistance related to e-commerce have been addressed in Article
161 in chapter 1 of Title III. The Parties agree to promote e-commerce in trade relations
between them and recognise a need for e-commerce to be compatible with international
standards of data protection. They also agree not to impose customs duties on deliveries
by electronic means. The Parties have also agreed to maintain a dialogue on regulatory
aspects related to e-commerce, such as certificates of electronic signature, treatment of
unsolicited electronic commercial communications, protection of consumers in the context
of e-commerce and other relevant matters. Given the lack of a dedicated Sub-committee
on services, e-commerce and establishment, aspects related to these areas are discussed
at the Association Committee meetings. However, the meeting records do not include any
reference to discussions on e-commerce to-date. We have no statistics either on bilateral
trade between the Parties using e-commerce, therefore at this stage it is difficult to assess
51
The RECAC (Red de Coordinación de Agencias de Competencia) helped discussion on competition policy issues,
but it is not the competent entity to carry out proposals at the level of the Central American Economic
Integration Subsystem. Pursuant to Article 38 of the Protocol to the General Treaty on Central American
Economic Integration (Guatemala Protocol), the Council of Ministers for Economic Integration (COMIECO)
has this type of authority. The proposals suggested by RECAC exceed the powers of COMIECO itself, so they
could not be carried out under the institutional framework of Central American integration. As a result of this,
a Technical Competition Group, made up of the Central American trade authorities and in coordination with
the respective competition authorities, proceeded to prepare the Central American Competition Regulations,
which gave rise to the Central American Competition Committee. With the formation of said Committee, the
process of institutional consolidation and cooperation and coordination in legal matters began, among the
region's competition authorities.
52 Source: MEETINGS OF THE ASSOCIATION COMMITTEE: (i) Antigua, Guatemala, June 27, 2019 [working
translation], Section 4.2 (ii) Sixth Meeting (Virtual), 26 November 2020, Section 6 (i)
84
the extent to which the provisions have been implemented and the impact of the EU-CA
FTA on the use of e-commerce in trade between Parties, notably on its promotion.
3.8.4 Intellectual Property Rights
Intellectual Property Rights are covered by Title VI of Part IV of the Agreement, which
includes inter alia copyright and related rights, trademarks, geographical indications,
industrial designs, plant varieties, patents, and technology transfer. The Parties also
commit to ensure effective implementation of the WTO Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS Agreement). Given that discussions of the
dedicated Sub-committee focused mostly on geographical indications (GIs), the following
part of the analysis will also focus on this part of Title VI.
Regarding protection of GIs, our analysis of trade flows for agri-food products shows that
a quantification of the trade impact related to GIs is not possible at this stage because
customs data does not distinguish between GI and non-GI trade for the same HC code.
This data issue is not likely to be resolved soon. All Parties share, however, a view about
the importance of GIs and their protection. The original decision covered 116 EU GIs
recognised by the CA relating to wine, cheeses, beer, meat products and spirits, as well as
nine CA GIs. In June 2022, the Parties agreed to add to the list, eleven new GIs from CA,
including six coffee types from Costa Rica, and El Salvador, a shrimp species from El
Salvador, a spirit drink, a fruit, a vegetable, and a filled flatbread, all of them also from El
Salvador. Other CA countries are also considering applications for additional GIs to be
protected on the EU market53, pursuant to Annex XVIII of the Agreement. The existence
(or not) of (a) trade in GI protected products in the EU and CA markets and (b) of potential
benefits of their protection under the EU-CA Association Agreement have nevertheless
emerged as an issue in several cases.
The EU monitors the situation on the ground in CA with the support of Embassies of EU
Member States and business associations operating in Central America and works closely
with the relevant CA authorities to ensure that the EU GIs are adequately protected. While
some EU GIs have Spanish or Italian names also used in the CA countries, there were no
homonym claims. Parmigiano Reggiano is the only EU GI where Guatemala finalised the
process but does not recognise the term “Parmigiano” as protected, but as generic,
including its translation into Spanish. The process in Guatemala exhausted all judicial
procedures, incl. an action before the Constitutional Court, initiated by the Consorzio del
Formaggio Parmigiano-Reggiano, however, the Constitutional Court did not rule on the
substance, but refused the claim of the producer to challenge the administrative decision
at the Constitutional Court. The EU expressed concerns about the publication in 2016 by
Honduras of a list of generic names affecting EU GIs (the list was withdrawn in 2019). The
EU also questioned the use of GI “Queso Manchego” in Costa Rica which is covered by
grand-fathering provisions allowing for established prior users to continue using the term.
Further evidence was requested to proof continuous and prior use of the term by a number
of producers, which is covered as an exemption by the agreement. In this case, Costa Rica
argued that the commercialisation had occurred before the entry into force of the
Agreement, and that the labels were therefore adequate. However, the Parties also
discussed possibilities to adapt labels to avoid any confusion and some adaptation of labels
took place
Some CA countries faced problems in the adaptation of their regulations, namely in respect
of the collection of fees and legal representation requirements. While the EU claims that
no fees for additional GIs to be protected under the agreement should be claimed on a
reciprocal basis, Central American countries, so far, could not agree to exempt EU GIs on
reciprocal basis from these fees. A GI workshop (IP Key) was held in Costa Rica in 2019.
Then, the parties continued work on a text clarifying the internal procedures for future
incorporation of GI in the respective CA countries and the EU. Major progress was achieved
53
European Commission (23 June 2022), The EU protects 11 new geographical indications from Central
America: https://agriculture.ec.europa.eu/news/eu-protects-11-new-geographical-indications-central-
america-2022-06-23_en
85
in 2021, but the exercise could not yet be finalised due to the outstanding issues of
agreeing on the fees and legal representation by the Commission of rights’ holders.
Conclusions and recommendations related to other areas of the EU-CA FTA (e-
commerce, competition, TBT and IPR:
The existing evidence confirms that the Sub-committees play an increasingly useful role in
addressing specific issues, such as trade concerns, and exchange of information, as well as in
stimulating policy dialogue and finding general solutions. However, it is to note that in order to
support implementation of the whole Agreement for the benefit of the economic operators of all
Parties, discussions at Sub-committees should cover the whole chapter in each case.
In that context, we note that while other Sub-Committees have a mandate covering in each case
the whole scope of the chapter and monitoring its implementation, in the case of the IPR Sub-
Committee, the Agreement envisages following implementation only of provisions related to GIs
(other parts of the chapter are not mentioned but are not explicitly excluded either). We therefore
recommend that the Parties allow discussions at the IPR Sub-Committee meetings about other
aspects of the IPR Title being of importance for their trade and investment relations, going beyond
GIs.
Information exchange suggests CA interest in standard harmonisation with their main trading
partners. Thus, the EU could support further development of domestic and regional regulations in
areas relevant for the EU-CA trade. Likewise, the Parties may exchange best practice and discuss
adequate solutions for highly relevant and rapidly evolving topics like competition and e-
commerce. When relevant and requested, the EU could provide technical assistance to its CA6
partners on these subjects.
3.9 Analysis to what extent the implementation of the Trade Pillar has led to a
greater economic integration between the Central American partners
The EU-CA FTA that has been applied since 2013 has come in parallel to ongoing regional
integration efforts of the CA partner countries via the Central American Customs Union
(CACU). For this reason, it is difficult to disentangle the effects of the EU-CA FTA that could
lead to trade diversion away from the Central America region from the effects of deeper
regional integration via the CACU. Also, it is difficult to disentangle the regulatory (e.g.,
SPS), customs and trade facilitation measures taken. Nonetheless, we look in this section
at the following elements:
• Overall process of regional integration in Central America
• Intra-Central American trade statistics analysis from 2010 – 2019
• Elements in support of regional integration covered in the Agreement.
Overall process of regional integration in Central America

The Central American region has long worked on economic, social, and political integration.
• The creation of the Central American Common Market (CACM) in 1960 that led to intra-
regional trade and scale economies for companies with regional operations. In the
1990s, under CACM, the Central American Integration (SICA) system was adopted.
• The 1993 signing of the Guatemala Protocol that included the start of the new Central
American Free Trade Zone by El Salvador, Guatemala, Honduras, and Nicaragua – and
later Costa Rica – was the next step. The CAFTZ members were committed to reduce
intra-regional trade tariffs. The Guatemala protocol also established SIECA.
• In 2014, Guatemala and Honduras – later joined by El Salvador – established a single
customs territory based on the legal instruments of the CA Economic Integration.
The CA countries are advancing towards more trade free of tariffs and non-tariff barriers
(import tariffs, rules of origin, customs administration, technical regulations, SPS
measures), have established a Customs Union Roadmap 2015-2024 (1. Trade Facilitation;
2. Regulatory modernisation and convergence; 3. Institutional Development), a dispute
settlement procedure and the Central American Trade Facilitation Strategy, linked to the
Central American Strategy to Facilitate Commerce and Competitiveness – ECFCC). Despite
these positive steps, some stakeholders have shared their concerns about the lack of
political will and alignment to move politically on these challenging files. Especially decisive
steps towards a Central American Customs Union seem unlikely.
86
Intra-Central American trade analysis 2010 – 2019

One way to investigate more closely the degree of regional integration in CA, is by looking
at the trade statistics for the region and looking at the drivers behind these trade trends.
Table 3.9-1 shows the compound annual growth rate (CAGR) for 2010 – 2019 for bilateral
intra-regional trade in Central America (and with the EU). From the Table it becomes clear
that with the exception of Panama, the Central American region has seen a significant
increase in trade between 2010 and 2019. Nicaraguan exports to Honduras, for example,
increased by a CAGR of 17.6%. In this Table we also see that CA countries’ trade with the
EU has increased. One explanation for why Panama is lagging in its exports to the other
CA-5 could be the weaker degree of regional integration of Panama compared to the other
countries. For example, in TBTs, while the CA countries adopted 21 out of the 23 RTCAs
(regional technical regulations), Panama has still 5 RCTAs pending approval.
Table 3.9-1. Bilateral intra-regional trade in Central America (CAGR, 2010-2019, %)

To Costa El Guatemala Honduras Nicaragua Panama EU
From Rica Salvador
Costa Rica 4.0 7.5 4.8 4.0 4.9 0.5
El Salvador 8.2 6.7 7.6 7.7 3.2 0.7
Guatemala 4.1 6.7 5.3 7.1 2.0 10.8
Honduras 2.5 8.2 7.0 17.2 4.4 6.1
Nicaragua 8.4 7.7 8.1 17.6 16.0 8.7
Panama -0.4 -10.3 6.6 -12.4 -9.0 2.2
EU 6.3 6.6 6.0 5.6 5.7 0.8 3.7
Source: UN Comtrade
Elements in support of regional integration covered in the Agreement

In the EU-CA FTA, Title IX, Articles 303-307 cover the elements of Regional Economic
Integration. Article 303 states clearly that “The Parties underline the importance of the
region-to-region dimension and recognise the significance of regional economic integration
in the context of this Agreement. They, accordingly, reaffirm their will to strengthen and
deepen their respective regional economic integration processes, within the applicable
frameworks.” This general commitment is then translated into different sub-elements,
notably: adoption of simplified customs procedures (Article 304), technical barriers to trade
(Article 305), sanitary and phytosanitary measures (Article 306) and their implementation
(Article 307).
In the framework of the EU-CA FTA, the EU has worked with the CA partner countries and
SIECA on the ‘Proyecto Integración Económica Regional y Centroamericana' (INTEC) to
modernise and converge regional regulatory frameworks, to facilitate regional trade, and
strengthen trade capacities. From interviews with business stakeholders, we gathered that
particular value could be reaped from further regulatory alignment and border procedures.
Adoption of simplified customs procedures

In the EU-CA FTA, Article 304 specifies the agreement on customs procedures. It contains
four sub-articles:
(1) In the area of customs, no later than two years as from the entry into force of the
Agreement, the customs authority of the Republic of the CA Party of first entry shall
grant a reimbursement of the duty paid when such goods are exported into another
Republic of the CA Party. Such goods shall be subject to the customs duty in the
Republic of the CA Party of import.
(2) The Parties shall endeavour to put into place a mechanism that will ensure that goods
originating in Central America or in the European Union in accordance with Annex II to
this Agreement, entering their respective territory and having been cleared at customs
of import, may no longer be subject to customs duties or charges having an equivalent
effect or to quantitative restrictions or measures having an equivalent effect.
(3) The Parties agree that their respective customs legislation and procedures shall provide
for the use of a single administrative document or electronic equivalent in the EU Party
and in the CA Party, respectively, for the purposes of establishing customs declarations
at import and export. The CA Party commits to achieving this objective three years
after the entry into force of this Agreement.
87
(4) The Parties shall also ensure that customs legislation, procedures and customs related
requirements at import applicable to goods originating in Central America or in the
European Union are harmonised at regional level. The CA Party commits to achieving
this objective at the latest five years after the entry into force of this Agreement.
In the Customs Sub-committee, the EU has raised issues aimed at implementing Article
304 at each meeting, with results, despite a slow start54:
• On 25 June 2015, the CA partner countries signed an agreement (COMIECO-COSEFIN
Resolution No. 01-201555) to reimburse double charging of tariffs on products entering
from the EU to the region; the agreement entered into force on 1 December 2015. This
cancels the practice that goods entering the CA region from the EU pay tariffs at CA
country borders when being transported to another country. This fulfils the requirement
set out in Article 304(1).
• The single administrative document for customs declarations was a second key step
towards the implementation of the EU-CA FTA and CA integration. In 2018, Guatemala
reported that the ‘Declaración Única Centroamericana’ (DUCA) had entered into force
on 7 May 2019. This meant that the CA countries met the commitment related to Article
304(3) of the Agreement. The effect of this document has been that customs
procedures have been harmonised.
• Another important measure was related to adopting the procedure for the issuance of
substitute movement certificates EUR.1, applicable for goods originating in the EU, sent
to a CA country, and then re-exported to one or more Central American countries. This
aspect constitutes an important commitment in terms of trade in originating goods that
was implemented by the countries of the Central American region.
In addition to the above steps forward towards implementation of Article 304 of the EU-CA
FTA, there have also been steps backwards in the process and other issues have not been
clarified yet:
• Not directly linked to the EU-CA FTA, but still relevant for further regional integration
in the area of customs, was the decision of then President of El Salvador, Sánchez
Cerén (in May 2017) to veto reforms to the customs simplification law that set out
concrete measures to streamline foreign trade.
• When looking at the SPS area on the adoption of the simplified customs procedures it
can be seen in the SPS and Customs Sub-committee and RoO that although facilitating
mechanisms such as rules of origin are applied, there are still uncertainties with regard
to the safety procedures required and under which clause issues such as animal
breeding fall.
From interviews conducted with stakeholders, we understand that the first measure has
not been very visible to the business community, but it has had the effect of more detailed
cooperation between the CA partner country’s customs authorities that has set in motion
other dialogues for further collaboration. Because the DUCA only entered into force in May
2019, the evidence of its impact is still limited.
We can conclude that – despite delays in the timeline – the adoption of simplified customs
procedures has supported Central American regional integration.
Harmonisation of regulatory measures, especially SPS standards

This section looks at whether the sanitary and phytosanitary matters over the period 2013-
2018 have positively impacted on Central American regional integration. The SPS
provisions of the EU-CA FTA are found under Title II (Trade in Goods), Articles 145-157
and, under Title IX on Regional Economic Integration, Article 306. Their main purpose is
the harmonisation of the Parties’ SPS measures, to remove or to avoid any unjustified
trade barriers (Art.145, with a reference to Art. 3 of the WTO SPS Agreement) in support
of regional integration. For most SPS issues, several efforts were made but only a few
recommended solutions have been agreed and implemented to date, with the exception of
the removal of some procedural obstacles to issuing some import authorisations; the
approval of the Sanitary and Phytosanitary Directive for the Facilitation of Trade of Central
54
https://www.centralamericadata.com/en/article/home/Is_Central_Interested_in_an_Agreement_with_the_European_Union
55
https://www.sica.int/documentos/resolucion-de-comieco-cosefin-no-01-2015_1_101138.html
88
American Shipments and Merchandise, which was even updated in 2018; and the adoption
of uniform formats of the phytosanitary and sanitary certificates. Moreover, the approval
of trade in animal products through the approval of establishment lists constitutes a
meaningful contribution, because in the absence of it, the health authorities would need to
inspect and approve each of the establishments individually. In the period going beyond
the analysis in this study (October 2020), sanitary and phytosanitary certificates were
approved by the Council of Ministers for Economic Integration (COMIECO) and entered into
force in June 2021. Information covered by those certificates will be made available
through the digital platform for Central American trade (SIECA, 2021).
Dealing with import authorisation requirements

From an EU perspective, the import authorisation requirements of CA partner countries
have been unclear in terms of standards and transparency. As a consequence of the fact
that some CA partner countries import requirements include the attestations ‘born and
raised’ in export health certificates from EU Member States, intra-regional barriers exist
between CA countries that ask for this attestation and those that do not, depending on the
EU Member State. This issue has not been resolved to date. However, the Agreement does
not oblige the CA region to act as a single Party in relation to SPS requirements. Therefore,
while smooth handling of requests, and improved communication and coordination within
each country and (when relevant) between CA countries is and will remain important for
the EU-CA trade, each CA country preserves its right to regulate and to establish the SPS
requirements that it considers appropriate, according to the level of adequate protection
defined. Further contentious issues are the timely approval of lists of establishments
(recognising the harmonised EU rules and procedures in this respect), and the verifications
each Party has the right to conduct. On these issues, while they are being discussed, not
much progress has been made and CA regional integration has not been furthered. From
interviews conducted with stakeholders, delays in granting regional importing
requirements were an issue of concern.
Prelisting and regional certificates for approval of establishments

The principles for the approval of establishments allowed for exporting animal products to
another Party (where such products are authorised), without previous individual
inspections (pre-listing). Discussions at the SPS Sub-committee show that because CA
partner countries had not yet finalised the creation of regional certificates for the approval
of their own establishments, this aspect of the EU-CA FTA – that could meaningfully
contribute to regional integration in Central America – has not yet contributed to regional
integration.
Compliance with international standards

In the EU-CA FTA, the exporting and importing Parties agreed to cooperate closely for the
determination of pest- or disease-free areas and areas of low pest or disease prevalence,
based on the relevant international standards, guidelines, or recommendations (Article
149.3). The goal is to ensure free circulation of animal and plant products within the
limitations necessary for the prevention and treatment of animal and plant diseases and of
pesticides contained in agri-foodstuffs. Despite active participation of the Parties, on
various issues (e.g., the Xylella fastidiosa aerobic bacterium, EU maximum residue levels),
limited progress has been made. The EU’s right to benefit from intra-CA free circulation
SPS policies seems not to have materialised in practice, with different SPS policies being
applied, instead of the principle of regionalisation leading to further alignment in CA partner
country SPS policies. Discussions continue, for example on the Trade and Control Expert
System (TRACES). That said, the Agreement does not establish the obligation of the CA
countries to adopt a regional mechanism with a single regional sanitary or phytosanitary
authority, as is the case in the EU. CA has adopted some regional SPS instruments, but
each CA country preserves the right to regulate and to define its own level of adequate
protection, of the acceptable risk and of the necessary measures. Thus, while intraregional
trade volumes may have increased, the local markets remain relatively fragmented, and
there remain a number of constraints for EU exporters willing to export to the region
through a single base. For example, for cosmetics, a phytosanitary license is required in
every country of the region for each product, while one could imagine that a common
licensing scheme could be adopted at the regional level, thus permitting easier exports
89
throughout the region. On the positive side, El Salvador, but also Nicaragua and Costa
Rica, have started to use TRACES more intensely. While the challenges in the SPS area are
many and progress has been limited, they do not appear to have posed unreasonable and
unsurmountable barriers to bilateral trade in goods. For example, trade in livestock animals
has risen by 20% in the period after the Agreement, despite possible SPS concerns.
Implementation of other areas of the Trade Pillar

There are other elements in the EU-CA FTA that impact on regional integration, notably:
technical barriers to trade, competition, and secure trade. These are concisely covered in
this section.
Technical Barriers to Trade

Technical Barriers to Trade (TBT) are covered in the Agreement under Title IX (Regional
Economic Integration), Article 305. While also challenging, progress has been made that
has been supportive of regional economic integration:
• The region has harmonised regional import requirements on food, medicinal products
for human use, natural products, cosmetic products, hygiene products, pesticides for
domestic use, veterinary medicinal products, animal feed, botanical pesticides for
agricultural use, as well as procedures for their recognition. Products that are registered
in one CA partner country will also be recognised in other CA countries (except
Panama). This recognition is not (yet) automatic, however.
• CA countries indicate that the region has not regulations nor a technical definition of
‘registration by groups or families of products’. CA countries decided that the current
individualised registration procedures are adequate. This does not comply with the EU-
CA FTA. The CA countries have indicated that the concept of family of products does
not exist under the regional or national regulations of each CA country. In this sense,
it has been requested that the EU indicate what they understand by product family
registration, in order to analyse the need to adopt or not regulations for this purpose.
• Regarding Article (305(4), the status of adoption of technical regulations included in
Annex XX has been improving year after year. The latest state of play is that of the 23
RTCAs included in Annex XX, 21 are in force throughout the region, with the exception
of Panama where 5 RCTAs are pending approval; and that two RTCAs are still pending.
Based on the above evidence of steps taken, we can conclude that in the area of TBT some
progress has been made that also supports regional economic integration.
Secure trade
As explained before, Mexico and Costa Rica signed an agreement aiming at the mutual
recognition of trade operators that have obtained the AEO certification in either of the two
countries. This is an interesting development because the AEO system, also encourage in
the bilateral EU-CA trade relationship is in this way reducing regional (secure trade)
barriers by having individual countries converge on a common standard, effectively
reducing barriers between themselves regionally at the same time. The AEO certification
can therefore also function as an engine for further regional integration – at least for a
subset of AEO-certified firms.
Conclusions and recommendations related to CA6 economic integration:
The EU-CA FTA should be placed in the context of efforts to strengthen regional integration via
CACM (1960), CAFTZ (1993), the single customs territory of the Northern Triangle, and the
Customs Union Roadmap 2015-2014. Except for Panama, intra-regional trade grew significantly
between 2010 and 2019; the former can be explained by Panama being relatively less integrated
and the relative decline of Panama as a throughput hub.
The INTEC project (between EU and CA partner countries) is considered important by stakeholders
to drive regulatory and customs procedure convergence. On the adoption of simplified customs
procedures, CA partners agreed to reimburse double charging of tariffs from the EU to the region
and the single administrative document for customs declarations entered into force. While TBT
progress has supported regional integration via harmonised regional import requirements and
approval of 21 out of 23 RCTAs (except for Panama), the alignment of SPS regulatory measures
has been limited (outstanding issues include different import authorisation requirements, lack of
regional certificates for approval of establishments, and alignment on international standards).
90
Meanwhile, CA partner country alignment with the AEO secure trade scheme is also supporting
regional integration by acting as a common standard and CA partner countries have also agreed
to adopt common provisions to prevent monopolistic activities and promote competition. Going
forward, greater progress on simplification of CA6 SPS measures and regulatory harmonisation of
services trade across CA6 countries could facilitate more rapid economic integration within the
region.
3.10 Analysis of the impact of the tariff concession granted by the EU for imports
of bananas
Bananas are one of the most important export products of the Central American countries,
especially for Costa Rica and Panama. The EU-CA FTA has granted market access to CA
bananas progressively, which means that the Agreement is expected to impact on the
sector. In section, we look at: 1) The pre-FTA situation in the CA banana sector; 2) The
economic effect of the Agreement, including the operation of the bilateral safeguard clause
and the stabilisation mechanism; 3) The sustainability (social, environmental, human
rights) effects; and 4) The effect of the Agreement on the EUs Outermost Regions. Further
analysis is included in an accompanying case study, see Annex H-3.
3.10.1 The EU-CA pre-agreement relationship
In 2012, one year before the Agreement entered into force, the EU imported 18.8% of its
bananas from CA partner countries. 51.6% came from the Andean countries, 13.0% from
ACP countries and 15.3% from the EU itself (see Figure 3.10-1). Over 99% of EU
production comes from the ORs. The bulk of CA partner country exports came from Costa
Rica (15.4%) and Panama (3.2%).
3.10.2 The EU banana regime
The EU banana regime has evolved from 1993 to what it is today. Between 1993 and 1999,
the regime applicable to all EU Member States was introduced. It was based on a
combination of tariffs and trigger import values (TIVs) and led to preferential trade (Cali
et. al., 2010). From 1999 to 2005, bilateral agreements helped to develop the new regime
and the transition to a new ‘tariff only’ regime started. From 2006 a new tariff of €176 was
in place, down from an MFN tariff of €680 per metric tonne (that had been put in place to
keep ACP country preference margins high). The Geneva Agreement, signed in 2009,
committed the EU to cut tariffs on bananas further from €176 per tonne to €114 per tonne
by 2017 (Cali et. al., 2010). The EU’s EPA agreements with the ACP countries and FTAs
with the Andean and Central America are a consolidation of this this new regime (Cali et
al., 2010).
Figure 3.10-1. Main suppliers for EU banana consumption (2012 and 2019, % shares)
91
Source: Eurostat (2021)
For the CA partner countries in the EU-CA FTA, the following is agreed:
1. Import tariffs on bananas will come down from €145 per metric tonne in 2010 to €75
per metric tonne from 1 January 2020 onwards.
2. Trigger import volumes (TIVs) are imposed in 2010 and then gradually increased for
each of the six CA partner countries, until they cease to exist on 1 January 2020. It
allows to establish certain procedures in order to avoid serious harm to the EU banana
sector if bananas from these countries are exported in such big quantities that they
threaten the stability and are a serious threat to the EU industry (European
Commission, 2015). Once the TIVs are reached, there is no direct impact on duties,
but the European Commission will have to assess the impact of the increased imports
on the EU banana market and decide on whether to trigger the banana stabilisation
mechanism or not (please refer to case study No. 6 for details).
3.10.3 Economic impact of the agreement
Figure 3.10-2. EU-CA banana trade in value (2009-2019, € and % shares of total)
000 0
000
0
000
000
0
000 2
20
2000
1
10
1000
0 0
2010 2011 2012 201 201 201 201 201 201 2019
Source: Trade Map (2021)
Figure 3.10-2 shows the evolution of the banana trade between the EU and CA since 2010
(in value terms). While total exports of bananas from CA countries have grown (in green
in Figure 3.10-2), so has the share of exports destined for the EU (from 37.3% of CA
exports going to the EU in the 2010-13 to 38.4% in 2014-2020). This marks an increase
of 2.8% in the share of CA bananas going to the EU as part of total CA banana exports. EU
banana imports from the world (in blue in Figure 3.10-2) have gone up by 31.1% between
92
2010 and 2019 (as also shown by Eurostat data).56 However, the share of EU imports
coming from CA countries has increased sharply since 2014 (from 17.5% in the 2010-2013
pre-Agreement period to 20.5% on average in the 2014-2019 period). That is an increase
of 17.2% when comparing the pre- and post-Agreement periods (Trade Map, 2021).
When we look at the evolution of the share of CA banana exports in EU banana imports (in
volume terms), illustrated in Figure 3.10-3, we see that the CA share in EU imports of
bananas has gone up from 18.8% (2012) to 26.3% (2019). This has not come at the
expense of ACP countries but rather from Andean and EU (including OR) import shares 57.
The impact on EU-CA banana trade stems from the lowering of the import tariffs to
progressively improve market access for CA countries combined with the gradual increase
of the TIV. Based on this information (used export volumes and applied tariffs), we can
calculate how much would have been exported if instead of the EU-CA FTA tariffs the –
less favourable – MFN tariffs were applicable. The results from this counterfactual analysis
(methodology described in Box 4-1 in case study No. 6) are shown in in Figure 3.10-4 and
suggest that in 2014, 214,500 tonnes less of bananas would have been exported to the
EU, with this gap increasing to 544,600 tonnes of bananas in 2019. This counterfactual
analysis provides strong evidence of the positive effect of the EU-CA FTA on banana exports
from CA to the EU. The gains have also been split out per CA partner country, with Costa
Rica and Guatemala benefitting the most.
Figure 3.10-3. Main suppliers for EU banana imports in volume (2012-2019, % shares)
100
0
1 2 9 9
1 9 2
20 1 0 1 1 2 1 1
1 1 2 1 9
0
2012 201 201 201 201 201 201 2019
Source: Trade Map (2021)
The trigger volumes for specific CA countries were exceeded in 2015-2019 by Guatemala
and in 2016-2019 by Nicaragua. However, because there was no indication of a possible
threat to or a disruption in the EU market and the overall quota limit for the region as a
whole was not exceeded, the temporary suspension of the preferential customs duty has
not been applied.
56
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/key_policies/documents/bananas-
market-situation-2019-11-24.pdf [accessed 30 December 2021]
57
Since the EU banana market has grown over time, while Andean and EU (including OR) exporters have lost
market share in relative terms, the decrease in their overall volumes were small or non-existent.
93
Figure 3.10-4. CA banana exports to the EU under EU-CA FTA and MFN tariffs (2014-2019)
CA country banana exports to EU ('000 tonnes)
1600
1200
800
400
0
2014 2015 2016 2017 2018 2019
Trade gains CRI Trade gains GTM
Trade gains HND Trade gains NIC
Trade gains PAN Actual regional exports to the EU
Regional exports to the EU if MFN tariffs would have applied
Source: Own calculations based on FTA implementation reports, Trademap (2021) and Eurostat (2021).
3.10.4 Impact on the EU ORs and ACP banana producers
ACP banana producers

The ACP banana import share has risen from 13.0% in 2012 to 14.9% in 2019, despite
stronger preferential access for CA banana producers to the EU market. This is equivalent
to an increase of 50.3% from 550,120 tonnes in 2012 to 826,909 tonnes in 2019. The
impact of the EU-CA FTA on ACP countries seems to be negligible. When we look at the
different countries, we see divergence, however. The Dominican Republic, Ivory Coast,
Belize, Angola, and Ghana experience strong levels of export growth, while exports of
Suriname and Cameroon decline.
Outermost Region banana producers

Almost all EU banana production (and thus intra-EU banana trade) comes from OR, such
as the Canary Islands (Spain), Madeira and Azores (Portugal) and Guadeloupe and
Martinique (France), which in combination with Cyprus and Greece account in 2012 for
15.3%. This share has decreased from 15.3% in 2012 to 11.3% in 2019, from 648,000 to
624,000 tonnes. In 2019, demand for bananas was responsible for around 37,000 jobs in
the EU, including EU outermost regions (Michail, 2017).
The Trade SIA of 2009 (Ecorys, 2009) and Solbes (2011) have predicted that there would
be an impact on OR producers, mainly in sugar and banana due to the amendment or
removal of tariff duties on imports to the EU markets from third countries, such as Central
America. A more recent study on the impact of FTAs for ORs (in 2018) finds that one of
the most important challenges for the ORs is that “certain sectors are in danger, like that
of the banana, which faces trade agreements of the EU with Latin America” (Hammoud et.
al., 2018). While OR banana producers receive financial support from POSEI to an amount
of €279 million annually and while they can benefit from rural development programmes,
which can be used to improve their competitiveness, the competitive challenge from CA
banana producers is considerable. The Canary Islands banana producer association,
ASPROCAN considers there to be an unequal playing field in that OR producers have to
meet the very demanding EU standards for banana production, while countries such as the
CA (or the Andean) partner countries “do not have to follow the same social, environmental
and sanitary regulations” (Fresh Plaza, 2019) creating stiff price-competition 58.
The association also stressed the importance to maintain the ORs in the banana market
since they provide a more sustainable eco-friendly approach due to the organisation of
banana farms (comprised mainly of small family farms of 1 to 13 ha on average) compared
with the big multinational corporations mainly present in Latin American countries (Fresh
58
That said, the banana variety of the Canary Islands distinguishes from the common variety of bananas coming
from the CA6 and some consumers prefer either type of banana for its characteristics.
94
Plaza, 2019). Countries exporting bananas to the EU have to meet EU SPS requirements,
while OR need to fully comply with all the phytosanitary EU legislation, which offers some
competitive advantage to CA relative to banana producers in ORs, which also suffered from
adverse weather conditions, especially in Guadeloupe and Martinique.
Conclusions and recommendations related to trade in bananas:
Bananas are one of the most important export products of CA countries, especially Costa Rica and
Panama, but also increasingly Guatemala and Nicaragua. As part of the Agreement, tariffs on CA
banana imports dropped from €145 per m.t. in 2010 to €75 per m.t. in 2020. In parallel, a
transitory banana stabilisation mechanism and bilateral safeguard clause were agreed upon until
1 January 2020.
As a result of the Agreement, the share of CA exports destined for the EU increased and so did
the share of EU imports from CA (from 18.8% to 26.3%), even as the overall volume of the EU’s
banana market grew over time. The increase in CA share has not come at the expense of ACP
countries, but rather eats into the Andean and EU (including Outermost Regions) shares. The
Agreement has led to an increase of 544,600 tonnes in CA exports to the EU, with Costa Rica and
Guatemala benefitting most from the increased market access. Despite Nicaragua and Guatemala
exceeding the TIVs for several years, the EU did not invoke the bilateral safeguard clause because
the exceeded amounts were small in absolute terms and the regional TIV was not exceeded.
While the FTA has clearly improved CA6 market access for bananas into the EU, the situation on
the EU market regarding import of bananas may benefit from a closer monitoring, in particular
the impact of increased imports from different partner countries, including CA, on the trade
flows of the Outermost Regions to the rest of the EU.
3.11 Analysis of the impact of the implementation of the Trade Pillar on SMEs 59
The analysis in this section starts with a reference to new SME exporters and continues
with an overview of challenges faced by SMEs in the EU-CA trade, profiles of individual
SMEs and their feedback. Information in this section is based on interviews, online
consultations from this study and publications outlining results of dedicated surveys
conducted among exporting SMEs. Moreover, Annex B1 provides information about the
overall participation of CA SMEs in international trade.
New exporters and new exported products

As outlined in the section 3.1.8, there is little data available regarding new exporters from
Central America trading with the EU and the existing data does not provide a division
between MSMEs and large enterprises. Furthermore, data on SME participation in
international trade provides a break-down into destination markets by the value of exports
(not by number of companies). Therefore, it is not possible to analyse trends in the number
of SMEs engaged in trade with the EU. In general, CA SMEs export mainly to the US and
other CA countries, while the EU individual Member States come only afterwards and
include Belgium, the Netherlands (which, however, may indicate just the entry ports to the
EU), Spain and Italy. Statistics usually do not provide a distinction of products exported by
SMEs to the EU and to the world, however, in cases where such a distinction is available,
goods exported to the EU include agricultural products, processed foods and some
industrial goods, e.g., plastics (the overall trade performance of CA SMEs, including exports
to the EU is discussed in detail in Annex B1). On the EU side, EUROSTAT provides partial
data for 16 EU Member States and their MSMEs exports to Central America and the
Caribbean (Table B1-2 in Annex B1 provides details regarding their number in a break-
down by category, i.e., micro, small and medium-sized).
Overall, for 16 EU MS, for which data is available, the number of MSMEs engaged in trade
with CA has increased since the beginning of the EU-CA FTA application. Table B1-2 in
Annex B1 shows that in many cases the number of MSMEs engaged in trade with CA is
comparable across all three business categories (micro, small and medium-sized). While
59
We continue engagement with stakeholders, including interviews and written requests for information
directed to exporters. If at any time before the end of the project we receive information about additional
companies exporting to the EU or CA respectively and its experience in using the EU-CA FTA, we will
include it into the Report.
95
(due to the lack of data for the period prior to 2014) it is difficult to say to what extent the
Agreement has played a role in the growth, it has probably contributed to it.
Challenges in international trade (including EU-CA trade) faced by SMEs

The available literature and interviews conducted for this study confirm that MSMEs face
challenges in the EU-CA trade. Below, we provide a summary of findings.
Costa Rica
In a survey conducted by EU-LAC Foundation among SME exporters from Latin America in
2015-2016, including Costa Rica, the latter emphasised the proximity (in a broad sense)
as an important factor in the ease to export. Many Costa Rican SMEs started to export to
CA, followed by the US and compared to that, the geographic distance to the EU, transport
costs and logistics (at the time only one airline provided direct flights between the EU and
Costa Rica) were considered as a challenge. Surveyed exporters highlighted also difference
in technical norms and standards with the EU, considered the EU customers as being more
demanding than the US ones (with more emphasis on quality and innovation) and thought
that cultural and linguistic diversity in the EU made it difficult to navigate in the EU market
and meet expectations of EU customers. Moreover, macroeconomic considerations played
an important role at the time of the survey as well, including the economic slow-down and
resulting decrease in demand in the EU, and fluctuations in the exchange rate, being
difficult for exporting SMEs, notably in case of long-term contracts. SMEs exporting food
products highlighted the high number and level of complexity of EU regulations relevant
for the sector and a strong competition in the EU market from other exporters of fruits,
nuts, and other food products. They also pointed to a limited support from public
institutions (EU-LAC Foundation, 2017).
El Salvador
The perceived underutilisation of the EU-CA FTA by enterprises from El Salvador has
prompt the Central Bank to conduct in 2019 a survey with 155 exporters, 51 of whom had
already exported to the EU (in the whole sample, micro-enterprises account for 28%, small
ones for 34% and medium-sized for 8%, i.e., jointly for 70%). According to the results,
53% of respondents, mostly MSMEs, highlighted insufficient information about
requirements in the EU market (compared to this, large enterprises did not report
information gaps). At the same time, 50% of medium-sized enterprises, 31% of large ones
and 21% of micro, were aware of or had access to export support programmes offered by
public institutions (Banco Central de Reserva, El Salvador, 2020). Since 2019 the EU has
been making continuous progress in creating a comprehensive set of practical, user-
friendly information on how to use the free trade agreements, notably by the rolling out of
the Access2Markets portal in October 2020. El Salvador has also carried out different
dissemination and promotion actions since the start of the implementation of the
Agreement. This includes information available on the platform 60 related to the regulatory
framework that contains all EU-CA FTA provisions; educational material (explanatory
document, guide for SMEs, technical sheets, explanatory videos); topics related to the
administration of the Agreement (Tariff Elimination Program, Council Decisions, Tariff
Quota Administration) and exporting services; as well as information on the website of the
Center for Import and Export Procedures (CIEX) 61, which is the competent authority to
certify the origin of goods under the EU-CA FTA. Regarding practical aspects related to
exports, MSMEs who have already exported to the EU saw major difficulties in access to
funding and high costs of freight and insurance, followed by administrative procedures and
paperwork. Also, the identification of a distributor in the destination market and standards
and certificates relevant for exported products mattered. They mentioned also differences
in interpretation of rules by customs officials at different entry points, the lack of funds to
participate in trade missions to the EU or trade fairs, and high costs related to the shipment
of samples to a potential EU buyer. The export structure that relates to agriculture and
food products was also reflected in concerns about high transport costs of perishable goods
requiring additional payment for cool storage space, strong competition in the EU market
and low prices offered by EU customers, while stressed was an ease of exporting originating
agricultural products (Banco Central de Reserva, El Salvador, 2020).
60
http://infotrade.minec.gob.sv/
61
https://www.ciexelsalvador.gob.sv/ciexelsalvador/boletines-infociex/
96
Guatemala
In an interview for this study, representatives of business associations stressed the
importance of the EU market, second to the US only. According to their information, in the
textile sector, some companies are used to export to the EU, thanks to previous experience
under the GSP scheme, others have started after the EU-CA FTA’s entry into force. For the
former, the Agreement does not change much in terms of applicable rules, however, EU-
CA FTA has provided a lot more certainty. SMEs face the challenge of rules of origin (RoO)
in the textile and garment sector in exports to the EU. However, the rules are less
cumbersome than those applicable for the US market. Transport costs represent another
challenge and therefore, Guatemalan SMEs export to the EU products with a higher value-
added, as cheaper products cannot compete in the EU with products of other suppliers who
do not face the same transport costs. Regarding awareness raising, seminars have been
organised to familiarise companies with rules applicable under the EU-CA FTA. In the
agricultural sector, the representatives acknowledge difficulties faced by SMEs when they
try to export on their own. Therefore, establishing cooperatives and joining efforts seems
to be a better solution. Rules for exporting agricultural products to the EU are quite strict
and therefore difficult for SMEs to comply with. Additionally, some EU buyers require that
products be certified, and this means an additional, high cost for a producer, paid from
own sources, as there is no dedicated Government support helping in such a preparation
for export activity. Regarding sugar exports, establishment of a regional TRQ has been
suboptimal, as the CA countries push each other out of the market.
Honduras
According to an interview conducted for this study with the Commercial Missions’ section
of the Chamber of Commerce and Industries of Cortés, one of the chambers with the
largest membership in the country, access of SMEs to international markets is limited.
SMEs have limited production capacities, not going beyond the demand on the domestic
market, which makes it difficult to enter international trade. Moreover, entry requirements
for the EU, as well as certifications, require significant investments by SMEs. On the other
hand, the flexibility of SMEs to innovate and diversify traditional products helps them to
sustain over time in competitive markets. Barriers existing in the country and highlighted
during this interview include the length and complexity of national procedures (that also
pertain to permits to operate formally). This means that enterprises have a long way to go
domestically before they can take advantage of measures facilitating international trade,
such as online DUCA. Moreover, there is a lack of tailored export support programmes for
SMEs, adapted to requirements of the EU market, which will help the SME exporters to
navigate through EU-relevant procedures. In this situation, support for exporting SMEs
often comes from private investment (support for participation in trade missions, technical
support, etc.). According to our interlocutor, while some SMEs have been able to take
advantage of the Agreement, the majority have not. One of the solutions that can be
considered in this context given barriers that are difficult to tackle by individual enterprises,
is joining efforts in a similar way as coffee producers do, who form cooperatives.
Nicaragua
According to an interview with CONIMYPIME, the Nicaraguan MSME Council, conducted for
the purpose of this study, Nicaraguan SMEs have not taken enough advantage of the EU-
CA FTA. For them, the US-CAFTA-DR continues to be more attractive, since it relates to a
large market that is closer and, according to CONIMYPIME, easier to access than the EU.
Moreover, while expectations accompanying EU-CA FTA have been high, the Agreement
has not brought about much difference in terms of market access, and it seems that its
implementation attracts less interest recently. Also, limited resources have been
earmarked to strengthen and support SMEs, which are best placed to face the challenges
of using the Agreement. Others are still not aware of details and opportunities offered by
the EU-CA FTA, as well as the way of using them. Challenges in implementation include
the fact that the EU-CA FTA has been designed for a region, and in certain cases it is still
difficult to identify procedures for each country in Central America and rules applicable to
exports. This Agreement requires a lot of commercial associations in the CA region. Further
efforts are needed to support SMEs in exports to the EU, both in terms of awareness raising,
as well as other forms of assistance, e.g., training, tailored advisory services or access to
funds.
97
Panama
According to a reply submitted in online consultations for this study (business survey), the
EU-CA FTA has provided opportunities for enterprises, including MSMEs, opening access to
the EU market and establishing rules of bilateral trade. However, there is a need for
practical support for MSMEs, in particular those led by women, and guidance on how to
export to the EU and navigate through all relevant procedures. According to the author,
to-date, not much of progress has been achieved in helping those enterprises to position
themselves on the EU market. Moreover, MSMEs require overall support in strengthening
their capacity to operate on the market, including product development and quality
improvement.
European Union
In an interview for this study a business association representative admitted that given a
high level of competition on the EU market, SMEs may look for other markets to export
their products, and trade agreements incl. the EU-CA FTA open such opportunities. That
said, given a challenging regulatory environment in Central America, and often complex
and lengthy procedures, SMEs may find the overall costs and effort quite high to explore
that market. Moreover, SMEs in the EU, as elsewhere have limited resources and therefore
need institutional support in learning about opportunities provided by the Agreement and
its use in practice, including matchmaking with potential buyers overseas. In this context,
based on the analysis in other parts of the Report it is to note that the EU and CA have
made progress in dialogue and cooperation to remove progressively obstacles for EU
exports to CA, including through adoption of regional technical regulations in CA,
addressing EU comments and concerns in individual cases, recognising the equivalence of
EU norms in certain areas, organising meetings between suppliers and buyers from the EU
and CA, and providing bespoke information.
Exporting enterprises62
Below, we provide examples of SMEs from Central America, exporting to the EU and their
experience in this context, including benefits and challenges. It is interesting to note that
SMEs (and not just big producers) are also active in the agri-food sector and try to benefit
from the agreement.
Costa Rica
TROPIFOODS is an SME based in the province of Alajuela, directly employing 45 persons
and indirectly 100. It was established in 1989 cultivating roots and vegetables. In 2014, it
received the license to use the national brand “Esencial Costa Rica” designed to promote
the country and its products, and the values of excellence, sustainability, innovation, links
to Costa Rica and social progress. In 2015, it participated in trade fair for fresh products
in Berlin and was persuaded to extend its offer to include orange sweet potato. The latter
had been identified by the national support programme Descubre (Discover) as a product
to diversify agricultural production and exports from Costa Rica. The company was also
advised to engage five more small producers, provide them with capability building and to
agree purchase of their sweet potatoes for exports. It created a separate brand FreshCo
and under this brand, it managed to export the first consignment of 69 tonnes of sweet
potatoes to France in 2020. The company has also been certified by Global GAP. It partners
the yuca research institute in Cali (Colombia). It has in its offer yuca (cassava), taro root,
ginger, pumpkin, and fruits, such as pineapple, mango, and papaya 63 (PROCOMER, 2020).
COMAPE S.A is a family business based in the Sarapiquí area (locally known by its brand
“Da Vida-Ecofriendly64”) producing black pepper and since recently exporting it to
Germany. It has about 5 ha of black pepper and has entered into a partnership at the local
level with at least three more producers to collect a greater volume of product for export
purposes. The company collaborates with women and in this context, the owner highlights
the importance of certifications that help to differentiate the product in the market, such
62
This part has been based on interviews and information available from other sources. It will be further
developed based on additional information requested from described enterprises.
63
Ref: https://tropifoods.com/en/about-us
64
More on their products at: http://www.davidasana.com/
98
as the “Women-Owned” certification awarded by Women's Business Enterprise National

Council. It opened the doors to markets interested in supporting women-led enterprises.
In 2019, it decided to explore the export opportunities, and received a lot of support from
PROCOMER, a national export promotion agency65, thanks to which it learned about the
export process, and began to participate in exchanges with external buyers, getting in
touch also with the current German buyer. The first consignment was shipped in April 2021
(half a tonne of pepper). However, when the product arrived in the EU, it had a too high
level of humidity, and the buyer was ready to pay only 50% of the total value. For COMAPE,
this was devastating since it still had to pay the local suppliers and it had also incurred
high costs of the certification of three producers for about US$850 each. Thanks to help
from PROCOMER, the company managed to negotiate different terms for the following
transaction, including laboratory product testing, reducing the size of using a different type
of packaging, and applying different terms of payment. The challenges mentioned by the
company owner in exporting to the EU include difficulties to identify a potential buyer, a
small capacity of one company encouraging alliances with other producers, high costs of
certificates, transport, and export permits, and a challenge of negotiating the right terms
of transaction, where the support of an export promotion agency may be essential.
PURA VIDA MELONS is an SME based in the province of Guancanaste, focused on melon
cultivation for exports, cultivation of rice and livestock. Two years after being set up in
2014, it exported 95% of its melon production, i.e., 460 tonnes to the EU. At the same
time, it extended its area by 50 ha and planned further growth by around 25% in the future
(La República, July 2016). The company has been certified by Global GAP 66.
MELONES DE LA PENÍNSULA (MELOPEN) is a Costa Rican family business founded in 1991,

located on the Guanacaste Peninsula in Costa Rica. It is currently dedicated to the
production and export of melons (40%) and watermelons (60%). It also carries out local
production and marketing of other products, such as rice, conventional fruits, and
vegetables (butternut squash, pomegranate, dragon fruit, and avocados). The company
uses precision farming for all its production. They use drones for fumigation, pest, and
weed management, satellite images for plantation management and field sensors for
irrigation management, fertilisation efficiency, and water management in greenhouses.
They started as exporters in 1996, and in the process, different markets have opened in
the US, UK, the Netherlands, Italy, Kuwait, and Russia. Exports to Europe began in mid-
2019, becoming one of the first companies to export organic melons and watermelons to
this destination. Although the company claims to have only a basic knowledge of the EU-
CA FTA, they do state that Melopen has been a beneficiary of tariff preferences it offers.
For the company, the activity in Costa Rica has faced plenty of changes in recent years,
going from exporting more than 600 containers per season to only 230 containers in 2021,
and reducing the European market only to the Netherlands. The company considers this
reduction is due to a competitiveness issue in the country, where production costs are very
high compared to other countries in the region. Even with this disadvantage, the company
continues to lead a sustainable green revolution, working on a significant reduction in the
use of agrochemicals and synthetic fertilizers in all its plantations (60% achieved in the
last three years, with an increase in yield), and 100% reduction of soil fumigants.
Guatemala
The REBEL BONNY67, a natural cosmetics SME was founded in 2017 and formalised (legally
established, registered) with the support of Agexport in Guatemala and the EU. The
business owner explains on her own blog the steps followed to become certified as an
artisanal company of natural cosmetics so that her experience can help other
entrepreneurs. Among some challenges to export, the SME owner mentions a) different
existing export certificates for Europe, and the legislation and requirements for natural
cosmetic products that are different in each EU country, so at the beginning, exports might
be difficult and costly b) the formalisation and certification of companies of this type takes
time, money, and effort, but it is worth it to differentiate the product and guarantee its
65
COMAPE owner and founder was awarded with a Women Exporter Prize held by PROCOMER in 2021,
because of her efforts to export to the EU.
66
Ref: http://www.puravidamelons.com/empresa/
67
Ref: https://rebelbonny.com/
99
quality formally. Among other aspects, the importance of supporting and mentoring
institutions for SMEs stands out, first thinking about the most basic requirements of the
operation of an enterprise (such as legal permits) and encouraging them to grow and
commercialise inside and outside the country.
Honduras
The CAFÉ FINCA LAS TAPIAS68 is a family-run business dedicated to specialty coffees in
Siguatepeque. They began planting coffee in 2015, and have farms dedicated to organic
coffee that already have their fourth harvest. Setting up a formal company was difficult
since the legal and standard national processes are tedious and take too much time in
Honduras (only the export permit took about a year). The company is looking for potential
international buyers, through websites or any contact that comes their way. They managed
to contact a potential buyer in Germany interested in specialty coffee to whom they will
send a sample during this harvest. According to the company, the obstacle that SMEs like
Finca Las Tapias face in exports is the lack of a tailored support from the local authorities.
In the coffee sector, large companies always have an advantage to export due to the
volume produced. For small companies, differentiation of quality in the cup is the key. It
is key that the Government makes available support institutions for SMEs to export (those
that currently exist, focus more on the large companies). The promotion of events where
there are exchanges with buyers interested in micro-lots is key in these cases because it
is the amount SMEs can produce. It is important to consider that certifications are
expensive for SMEs, and most of the time a dealbreaker because it’s not supported by a
financial entity.
INTERBAI AGROINDUSTRIAL is a family business that began operations in the Copan Valley
in 2006, producing and commercialising fresh organic sweet potatoes to Europe and
Canada. In 2014, the company moved its operations to the Central Valley in Comayagua
and began its reorientation to add value to its product and other roots or fruits to produce
non-traditional flours. The company is part of the AyR Group, next to other three
companies: SEMIG S.A. de C.V, producer of organic sweet potatoes; Portsam, dedicated
to the commercialisation of flour for the animal feed industry; and MelyFoods, producer of
dehydrated food for pets. Interbai Agroindustrial currently produces sweet potato flour
(orange and purple, organic, and conventional), organic cassava flour, and organic banana
for export. In the European market, they began to export sweet potato flour to France in
2022. One of the aspects mentioned by the company about its exports to Europe is that
the specific benefits of the EU-CA FTA are unknown. Also, that the success of exports to
the European markets is related to the companies' efforts and strong investment in quality
processes, certification and, search for markets/buyers, which are not within everyone's
reach. In the future, the company hopes to continue diversifying its products with a wide
range of non-traditional flours such as ginger, pumpkin, banana, potato, and malanga.
Conclusions and recommendations related to impacts for SMEs:

The available data suggests that an increasing number of MSMEs from the EU is engaged in trade
with CA. However, the lack of detailed data from the period preceding the EU-CA FTA’s entry into
force does not allow for drawing a precise conclusion, as to what extent the Agreement has
contributed to that growth.
While comparable data is not available for Central American countries, partial evidence suggests
presence of SMEs in trade with the EU in agriculture and food processing, but also in other sectors,
such as textiles and garment, or cosmetics, to name a few. They are also present in services
sectors, e.g., tourism, healthcare, and beauty.
However, Central American SMEs face numerous challenges when exporting to the EU, including
high transport and insurance cost, high costs of shipping samples to potential buyers and a
difficulty to identify the latter, as well as suitable distribution channels. They find EU customers
demanding and the diversity of culture and languages difficult to navigate through. Moreover, the
regulatory requirements and paperwork are thought to be another challenge. There are also
sector-specific challenges, such as the rules of origin in textiles and garments or certifications for
agricultural products.
68 More on their company at: www.cafefincalastapias.com
100
The successful SMEs acknowledge the benefits from access to the EU market and the related wider
customer audience and expansion opportunities. On the other hand, they admit that CA SMEs
exporting to the EU face a double challenge, where the usual challenges related to exporting come
on the top of difficulties created by the domestic business environment in CA, including access to
funding, cumbersome procedures related to setting up and managing a formal enterprise, and
getting all permits and licenses.
Finally, despite ongoing efforts by the EU, the Governments and export promoting agencies, as
well as business associations, the Agreement remains relatively little known to CA6 companies,
and there is still an existing demand for capability building activities and advisory services for CA6
SMEs willing to export to the EU, adapted to requirements of the EU market.
3.12 Analysis of the impact of the implementation of the Trade Pillar on the
budgets of the EU and the partner countries
The analysis of the Agreement’s impact on the EU and CA partner governments’ budgets
can best be done with the economic modelling. Two effects need to be distinguished here.
• First, there will be a direct negative effect in tariff revenues foregone due to the agreed
tariff cuts. These are calculated explicitly in the ex-post economic assessment.
• Second, a (usually positive) effect on government revenue stems from the overall
changes in the economy brought about by the Agreement, measured e.g., by changes
in economic welfare. Typically, changes in other government revenues (apart from
border taxes) are roughly proportional to changes in economic welfare.
Figure 3.12-1. Changes in welfare and tariff revenues caused by the EU-CA FTA in EU and
CA partner countries
600 30.0%
€
500 25.0%
400 20.0%
300 15.0%
200 10.0%
mln)
100 5.0%
0 0.0%
-100 EU27 Costa Rica El Salvador Guatemala Honduras Nicaragua Panama -5.0%
-200 -10.0%
-300 -15.0%
€
€
Change in tariff revenues (%)
When looking at Figure 3.12-1, it becomes clear that Guatemala was impacted relatively
the most by the tariff revenue loss, with a fall in revenues by 14%. Other CA partners were
also affected, with Costa Rica’s tariff revenue falling by 10% and Panama’s as well as
Honduras’ declining by 7%. Yet the total welfare change remains positive for all FTA
partners as the increase in economic activity for producers and lower prices for consumers
outweigh any negative tariff revenue effect (graphically this is shown by comparing the
positive blue welfare effect to the negative orange tariff revenue loss). This is also
illustrated in section 3.4 where the increase in GDP for all CA partner countries is shown,
which supports the claim of increased economic activity, resulting in more production and
higher wages. For the EU there is only a comparatively small loss in tariff revenue (0.6%),
whilst welfare is €312 million higher each year. For Costa Rica the negative tariff revenue
effect (even if it amounts to 12.2% of its total revenues) is also much smaller than the
positive overall welfare gains from the EU-CA FTA.
101
Conclusions and recommendations related to impacts on budgets:
Tariff revenue losses are relatively largest for Guatemala (14.0% of total tariff revenues) and
Costa Rica (12.2%), while they are largest in absolute terms for the EU (€196 mln) and Panama
(€114 mln). Despite tariff revenue losses, total welfare changes are positive for all FTA partners
as the increase in economic activity for producers and lower prices for consumers outweigh any
negative tariff revenue effect. More efficient collection of taxes like the VAT and more equitable
distribution of the proceeds amongst a wider section of the population through public spending on
health, education, infrastructure and employment generation is likely to accentuate the positive
welfare effects.
3.13 Analysis of the impact of the implementation of the Trade Pillar on EU

Outermost Regions (ORs)
Currently, the EU’s nine Outermost Regions (ORs) are divided into five French overseas
departments (Martinique, Mayotte, Guadeloupe, French Guyana and Réunion); one French
overseas community (Saint Martin); two Portuguese autonomous regions (Madeira and the
Azores) and one Spanish autonomous community (Canary Islands). The distance from the
ORS to the national capital varies from 1,548 km from Azores to Lisbon being the closest
OR to 9,921 km from Réunion to Paris, the furthest OR (Kołodziejski, 2021). The funds
allocated from 2014 to 2020 to ORs add up to a total of 13.3 € billion and include the
European Agricultural Fund for Rural Development (EAFRD), the European Maritime and
Fisheries Fund (EMFF), the European Regional Development Fund (ERDF), the European
Social Fund Plus (ESF+) and the Programme of Options Specifically relating to remoteness
and insularity (POSEI) (Kołodziejski, 2021). While some of the ORs have diversified their
economies towards sectors such as construction and public works, wood, and mining
industry, most of the ORs remain highly dependent on the hospitality, tourism, and cruise
sector. Moreover, these regions face competition from surrounding countries, which
produce similar goods at lower cost with lower health, safety, and environmental
standards.
Table 3.13-1 shows the value of exports to the EU and the six Central American countries
for eight ORs69. Exports to the Central American partner countries from the ORs are not of
importance in absolute terms (except, to a certain extent, for Canary Islands). The same
is true for most ORs’ imports, except for Guadeloupe, which sources 0.5% of imports from
CA partner countries, Martinique (0.6%) and French Guyana (0.3%). Comparing the value
of OR exports to the EU and to the rest of the world over time does not indicate any impact
of the Agreement on them, with the potential exception of Guadeloupe and French Guiana:
all other ORs’ exports to the EU outperformed their exports to the rest of the world
consistently before and after the Agreement (or, in the case of Martinique, consistently
underperformed), which indicates no loss in (relative) export competitiveness for them
after the Agreement entered into force. For French Guyana, although the pattern of trade
over time is in line with the expectation that it was affected by preference erosion, the
specific trade structure (mostly related to space technology, which is not driven by tariff
changes) shows that the Agreement has had no overall impact. This leaves Guadeloupe as
the only OR whose exports to the EU might have been negatively affected – although this
has been more than offset by Guadeloupe’s exports to the rest of the world.
The limited trade volume between the partner countries in Central America and the ORs,
may seem to have a relatively small impact on ORs. The same can be said about the effects
on trade the Agreement has in the EU, which have been modest, as calculated by the CGE
model. However, the CGE model does not treat the ORs as a region of its own, which adds
some limitations in the analysis of these already small size economies.
Because of this, to estimate the potential impact of the Agreement on the ORs on the
sector/product level, the model uses a matching analysis between the Central America
country exports and the ORs. This is because, as a result of preference erosion or an
increase in competitive pressure, the effects for the ORs would probably be negative in
69
The French Statistical Service does not provide data for Saint Martin; accordingly, it is excluded from the
analysis.
102
sectors where partner countries from Central America are expanding their export. This is
in the scenario that ORs and Central American countries will be competing for exports to
the EU. Even considering the small shares of imports by the ORs from Central American
countries, as well as the effect of the Agreement on EU-trade, the impact on OR imports
cannot be neglected, as for small-size economies, like the ORs, any small change becomes
very relevant for the local economy. The economic dependence of the ORs on a few
products and their small size are expressly recognised in Article 349 TFEU which justifies
their special status.
Their performance during that period is visible in the table 3.13-1. The main exports, with
those that possibly had to deal with stronger Central American competition, as well as
those that according to the CGE model results saw a strong increase in Central American
exports are sugar in Guadeloupe and Réunion, tropical fruits in Guadeloupe. Pleasure boats
and other types of vessels in Guadeloupe, Martinique and Madeira, aeroplanes in French
Guyana, Martinique and Canary Islands and fish in Réunion, Canary Islands, Azores, and
Madeira face some degree of competition. Where OR exports to the EU have decreased,
these have been compensated by increased exports to third countries.
Table 3.13-1. Value of ORs’ exports/imports to/from the EU and Central American partner
countries for eight ORs (€ million)
Av 07-13 Av 14-19 Trend (%) Trend CAGR 07-13 CAGR 14-19 Change
(1) (2) (3) (4) (5) (6) (7) (8)
Azores 88.0 96.2 9.4%
CA6 .. .. .. .. ..
EU 50.6 61.0 20.4% 17.7% 4.7%
ROW 37.4 35.3 -5.6% 15.2% 0.4%
Canary Islands 2,176.9 2,526.9 16.1%
CA6 12.3 5.2 .. .. ..
EU 392.5 279.1 -28.9% -2.6% -5.6%
ROW 1,772.1 2,242.6 26.6% 7.1% -5.3%
Guadeloupe 29.3 55.0 87.6%
CA6 .. .. .. .. ..
EU 13.7 23.3 69.7% 5.5% 20.9%
ROW 15.6 31.7 103.2% 11.4% 18.8%
Guiana 505.1 554.0 9.7%
CA6 .. .. .. .. ..
EU 140.5 136.0 -3.2% 41.7% -37.1%
ROW 364.6 418.0 14.7% 4.3% -24.2%
Madeira 114.4 267.2 133.5%
CA6 .. .. .. .. ..
EU 73.5 165.0 124.4% 11.3% -9.2%
ROW 40.9 102.2 149.9% 18.1% -1.0%
Martinique 36.4 52.2 43.4%
CA6 .. .. .. .. ..
EU 8.9 6.0 -32.3% -11.6% -6.8%
ROW 27.5 46.2 67.7% 3.9% 3.2%
Mayotte 0.0 4.9 ..
CA6 0.0 0.0 .. .. ..
EU .. 0.5 .. .. ..
ROW .. 4.4 .. .. ..
Réunion 174.4 155.0 -11.1%
CA6 .. .. .. .. ..
EU 51.4 64.0 24.5% 9.6% 2.5%
ROW 123.0 91.0 -26.0% 5.1% -5.6%
TOTAL 949.8 1,187.1 0.0
Note: Trade values with EU exclude France for Guadeloupe, Guiana, Martinique, Mayotte, and Reunion; Spain for
Canary Islands; and Portugal for Azores and Madeira.
Source: Compiled by the authors from Foreign Trade Statistics of France
(http://lekiosque.finances.gouv.fr/portail_default.asp), Foreign Trade Statistics of Spain
(http://datacomex.comercio.es/), National Institute of Statistics of Portugal
(https://ine.pt/xportal/xmain?xpid=INE/xpqid=ine_base_dados) and the World Bank World Integrated Trade
Solution (WITS) database (https://wits.worldbank.org/default.aspx?lang=en).
Table 3.13-2 shows the main OR exports, highlighting those that may have faced stronger
competition from CA partner countries in the EU market resulting from preferential
treatment for the CA countries from the EU-CA FTA.
Guadeloupe: For the potential impact of the Agreement on the sugar sector in
Guadeloupe, see the analysis below. Regarding tropical fruits and recreation boats
103
(yachts), these account for relatively small shares of Guadeloupe’s exports to the EU, and
both have sharply increased in value after the entry into force of the Agreement, although
tropical fruits experienced a slight decrease after 2015-2016. Yacht exports to the EU
experienced a steep decrease after 2017-2018. So, for these products, there is no
correlation to the start of the application of the Agreement in 2013.
French Guyana: The French Guyana exports of aircraft and spacecraft represent over
80% of total exports. The exports of aircraft and spacecraft from the French Guyana to the
EU decreased slightly in 2014-2017 but sharply increased afterwards (2018-2019). On
average they have slightly increased with no clear change in trend discernible since the
entry into force of the Agreement.
Martinique: The exports of recreation boats from Martinique to the EU slightly increased
until 2016 to then experience a slight decrease in 2019, similar to the exports of Martinique
of aircraft and spacecraft that came from a high point in 2007 and decreased until 2013.
After 2013, exports steadily increased again. This suggests that for these products the EU-
CA FTA has not had a negative impact, but possibly, as the timing suggests, a positive one,
although other factors like consumer preferences, access to materials, labour skills and
costs may also have had a bearing on the changing trends over time.
Table 3.13-2. Top OR export sectors/products to the EU, 2010-2019

OR Export sectors
Guadeloupe Sugar (more than 40% of total exports), waste, tropical fruits, yachts,
perfumes, spirits
French Guiana Aircraft & Spacecraft (more than 80% of total exports), other equipment,
machinery, and motor vehicle
Martinique Waste (more than 80% of total exports), yachts, aircraft & spacecraft,
spirits, machinery, motor vehicles
Mayotte Electrical equipment (about 38% of total export), motors, meat, jewellery –
due to very low exports strong fluctuations from year to year
La Réunion Sugar (about 80% of total exports), spirits, waste, canned fish, car parts
Canary Vegetables (about 19% of total exports), aircraft & spacecraft, vehicles,
Islands machinery, essential oils, fish and crustaceans
Azores Animals (about 32% of total exports), fish and crustaceans, dairy products,
processed food and beverages, meat and fish preparations, machinery
Madeira Processed food and beverages (about 9% of total exports), transport
equipment, boats, alcoholic beverages; animals, fish and crustaceans
Source: UN Comtrade; own analysis
Canary Islands: The exports of aircraft and spacecraft and fish and crustaceans from the
Canary Islands to the EU experienced a slight decrease over three years after the
Agreement’s entry into force (2014-2016) and then a steadily increase (2017-2019). It is
therefore difficult to attribute these changes in exports to the Agreement.
Azores: Exports of fish and crustaceans dropped in the initial years after the Agreement
entered into force (2014-2015) but have since rebounded until 2019 where it reached
exports’ value of 28.8 million. The exports of fish and crustaceans experienced their first
decrease before the Agreement’s entry into force, therefore there is no effect that could
be attributed to the Agreement.
Madeira: The pattern of Madeira’s fish exports to the EU resembles that of the Azores.
Also, for Madeira, no discernible effect can be seen from the Agreement.
La Réunion: The potential impact of the Agreement on the sugar sector in La Réunion is
discussed in the analysis below. Regarding preparations derived from fish or the fishing
activities, a pattern is observed with an increase in exports one year and a decrease the
following year. That leads us to the conclusion that there is no clear evidence of an adverse
effect for La Réunion.
104
Potential impact of the Agreement on sugar sector in Guadeloupe and La Réunion

La Réunion is the European Union’s most important producer of cane sugar, followed by
Guadeloupe. These two regions together make up almost 100% (around 80% and 20%
respectively) of the EU cane sugar-production. The importance of sugar production for the
industry of La Réunion is best illustrated by the fact that half of the region’s agricultural
area is made up out of sugar cane and around 95% of the sugar cane production is intended
for the EU. It is the most important of the region’s exports, and Bagasse (a co product
from sugar and a renewable energy source) represents 10% of the island’s total electricity
production. The sugar industry in La Réunion provides ca. 18,300 direct and indirect jobs.
OR stakeholders voiced their concern that preferential Central American sugar exports
have become a threat to the EU’s own sugar industry, including local producers in La
Réunion and Guadeloupe. Their concern is also related to the reform of the Sugar Common
Market Organisation that entered into force in 2017, which they suggest may have further
exacerbated any adverse effects of increased preferential imports to the EU from CA.
Sugar exports from the French Antilles (mainly Guadeloupe) have declined from around
€12.1 mln in 2007 to €2.1 mln in 2014, and after an increase to €21.1 mln in 2017, they
went down to €8.8 mln in 2019. This translates to a decline from 91,000 tonnes in 2007
to 35,000 tonnes in 2013 and then stabilisation reaching 47,000 tonnes in 2018. The
volatility indicates that factors other than trade preferences in the form of TRQs to CA may
have influenced export performance, so a clear correlation cannot be drawn between the
decline in exports and the implementation of preferences under the EU-CA6 FTA.
Figure 3.13-1. Exports of sugar from ORs and Central American partner countries to the
EU (2009-2017 in ‘000 tonnes)
250
Exports to EU ('000 tonnes)
200
150
100
50
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Central America Antilles Reunion
Source: Authors’ calculations based on COMEXT database and FranceAgriMer (2020, 41).
La Réunion’s sugar exports have remained stable (or increased marginally between 2009
(157,000 tonnes) and 2017 (200,000 tonnes) with a small dip in 2014 of 159,000 tonnes)
but dropped sharply in 2018 (to 125,000 tonnes). With the one-year dip in 2014, the EU-
CA FTA does not appear to have significantly impacted Réunion’s sugar exports to the EU
(Figure 3.13-1). When looking at the drop in sugar exports to the EU in 2018, we find that
this is also related to another policy change that took effect on 30 September 2017: the
end of sugar production quotas in the EU. 70
Based on a combined data for French ORs, cane sugar production dropped from 495,000
tonnes in 2014-2015, 555,000 tonnes in 2015-2016 and 548,000 tonnes in 2016-2017 to
244,000 tonnes in 2017-2018, 193,000 tonnes in 2018-2019 and 203,000 tonnes in 2019-
2020 (France AgriMer, 2020). The relatively stable production following the EU-CA FTA
entry into force followed by a sharp decline in 2017-2018 does not seem to be justified
only by effects of the EU-CA FTA, but also by the change in the EU policy, or a combination
of both and other factors.
70
https://ec.europa.eu/commission/presscorner/detail/en/MEMO_17_3488 [accessed 30 December 2021]
105
At the same time, on the Central American side, regional sugar exports to the EU have
grown sharply in 2013. Starting at around 4,400 tonnes in 2009 exports rose to 135,000
tonnes in 2013 and then gradually to 178,000 tonnes in 2019 (COMEXT, 2021). The EU-
CA FTA has clearly had a positive effect on regional sugar exports to the EU.
So, while CA sugar exports to the EU have increased because of the EU-CA FTA, this has
not had a negative overall effect on Guadeloupe or La Réunion’s sugar exports to the EU.
Figure 3.13-2. EU sugar imports from CA against quotas (‘000 tonnes) and TRQ utilisation
rates (%)
200 102%
180
160 97%
EU sugar imports from CA ('000 tonnes)
140
TRQ utilization rates (%)

120 92%
100
80 87%
60
40 82%
20
0 77%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EU sugar imports from CA TRQ utilization rates (%)
Source: Authors’ calculations based on European Commission Reports and CIRCABC TRQ database
Sugar cane (HS 1701) and sugar in processed products are covered by EU TRQs for the CA
countries. The utilisation rates of TRQs are measured by grouping all CA countries as a
whole, excluding Panama, which has a separate TRQ for 12,000 tonnes of raw sugar
equivalent with an annual growth rate of 360 tonnes. Our analysis, based on Figure 3.13-
2, shows that CA countries have actively used the sugar TRQs: in 2013 the utilisation rate
of the sugar TRQ for CA (agreed for 150,000 tonnes of raw sugar equivalent with an annual
growth rate of 4,500 tonnes) was exhausted to 88%, in 2015 to 91% and in 2018 to 96%.
In 2016, 2017, and 2019, the utilisation rate reached 100%.
There is one – more detailed – aspect that requires further analysis: while speciality sugars
(brown cane sugar intended for direct consumption) may only account for around 1.5% of
the EU sugar market (it is estimated for 250,000-300,000 tonnes annually compared to
17.2 million tonnes of white sugar), they form a highly lucrative market segment. La
Réunion benefits from this, according to its Sugar Association, as 45% of the region’s sugar
production is made up of speciality sugars (around 70,000 tonnes are exported to the EU).
The Association also reports that a major challenge for the cane sugar producers in the EU
is the increase in imports of speciality sugars from the CA countries. The export of specialty
sugars from CA to the EU was almost non-existent in 2013 (pre-FTA) and increased to
33,800 tonnes in 2019 from 13,300 tonnes in 2014 and 1,600 tonnes in 2013. Figure 3.13-
3 shows EU specialty sugar imports from Réunion start declining after 2015, while the
imports from CA partners rise from 2013 onwards.
106
Figure 3.13-3. EU27 specialty sugar imports from ORs and Central American partners,
2009 to 2019 (‘000 tonnes)
80
70
Exports to EU ('000 tonnes) 60
50
40
30
20
10
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Central America Antilles Reunion
Source: Authors’ calculations based on COMEXT database and FranceAgriMer (2020, 41)
In this context, it is to note that similar concerns have been expressed by La Réunion in
relation to the EU FTA with the Andean countries and their exports of specialty sugar to
the EU. Before the entry into force of the EU agreements with the Andean countries and
CA, exports from ORs represented 40% of EU market in specialty sugar, the rest being
held by Mauritius (28%), Eswatini, Belize, Malawi and Zambia (32% in total). According to
data provided by sugar producers from La Réunion, the Andean countries have now 13%
and CA 11% in the EU market in specialty sugar. According to the same data, the share in
specialty sugar held by ORs decreased from 40% (90,000 tonnes) in 2010-2012 to 30%
(76,000 tonnes) in 2017-2019, the share of ACP countries 138,000 tonnes in 2010-2012
(60% of the market) to 122,000 tonnes in 2017-2019 (47% of the market) and the
combined share of the Andean and Central American countries increased from nil to 24%
(62,000 tonnes) in the same period. At the same time, it has been estimated that the EU
market in specialty sugar increased from 228,000 tonnes to 260,000 tonnes (i.e., by
32,000), which means that approximately half of exports from Latin America (or exports
comparable to those from CA) could be absorbed by an increase in the EU market, with no
side effect for the other exporters.
Based on the above, we note that the overall sugar production and exports from ORs,
notably La Réunion, are likely to have been affected by the EU policy on abolition of sugar
quotas, exports to the EU from other countries and potentially other factors, such as global
demand and prices. Regarding the production and exports of specialty sugar, increased
exports from the Andean countries (notably Colombia) and CA may have played an even
more important role, given the relatively small, albeit increasing, size of the EU market for
specialty sugar. Moreover, the efforts of OR sugar producers in becoming more sustainable,
to the point of banning herbicides and other plant application products that are banned in
EU soil but allowed for imported products, suggests that the competitiveness of ORs such
as La Réunion and Guadeloupe may have declined for specialty sugars.
Finally, to have a more comprehensive picture of the EU market for sugar and examine the
impact of the FTA on the EU’s ORs in greater detail, we present below related data and
analysis for both raw cane sugar (HS170111, HS170113 and HS170114) and raw beet
sugar (HS170112) sourced from the Eurostat database. We note that regarding the whole
sugar market, although the share of sugar imported from CA increased in volume terms in
the EU market between 2012 and 2019 from 0.6% to 3.6%, during the same period, EU
sugar producers (including ORs) also increased their market predominance from 63% to
107
71.2% (Figure 3.13-4 below)71. On the other hand, the share of imports from the rest of
world (ROW) decreased from 24.2% in 2012 to 15.1% in 2019, and the share of ACP
countries, from 12.2% to 9.5%. This means a dynamic between more market players and
the fact that increased imports from CA may not necessarily push exporters from OR out
of the market at the time when shares of other importers decrease more substantially.
This would apply more to cane sugar in general, while specific considerations (as outlined
above) may relate to specialty sugar.
Figure 3.13-4. Shares (%) by origin of sugar (HS17) imported by the EU in 2012 and
2019 (in volume). This includes, both raw cane sugar and raw beet sugar
Source: Eurostat database; own calculations
We have also identified trends in EU imports of raw beet sugar and raw cane sugar over
2010-19, with a break-down into pre- and post-EU-CA FTA periods, as well as after the
introduced EU policy change in 2017.
Based on this, we note that EU import of raw beet sugar (HS170112) was almost evenly
divided between intra-EU and ROW exporters over 2010-2019, with the share of ACP,
Andean and CA6 exporters being virtually zero. The change in sugar policy in 2017 did not
seem to alter this pattern, though the share of French exporters in the EU's total imports
of raw beet sugar nearly halved from 25.8% during 2014-17 to 13.9% during 2018-19,
while the share of the rest of the EU went up from 24.1% to 36.2% (see Table 3.13-3).
Table 3.13-3. Origin of raw beet sugar EU imports (quantity shares in %)

EU excl.
Year ACP Andean CA ROW Intra EU France
FR
2010 0.000 0.000 0.000 49.5 50.5 22.5 28.1
2011 0.000 0.000 0.000 49.9 50.1 26.7 23.4
2012 0.007 0.006 0.000 50.4 49.6 30.7 18.9
2013 0.000 0.003 0.000 49.8 50.2 26.2 24.0
2014 0.000 0.002 0.000 50.2 49.8 29.2 20.6
2015 0.000 0.002 0.000 49.8 50.2 28.8 21.4
2016 0.000 0.004 0.000 50.2 49.7 21.8 28.0
2017 0.004 0.003 0.000 50.2 49.8 23.2 26.5
2018 0.020 0.004 0.000 49.9 50.1 13.1 36.9
2019 0.000 0.004 0.000 49.8 50.2 14.7 35.5
Pre vs post sugar
policy change
Avg. 2014-17 0.0 0.0 0.0 50.1 49.9 25.8 24.1
Avg. 2018-19 0.0 0.0 0.0 49.8 50.1 13.9 36.2
71
Intra-EU trade takes place under single market rules and is thus subject to very different conditions compared
to extra-EU trade which is subject to tariffs and TRQs. However, we include intra-EU trade in this analysis as
intra-EU also includes the ORs for which region-specific data was not available from the Eurostat database
which is the source of data for this analysis.
108
EU import share of raw cane sugar (HS170111, HS170113 and HS170114) from the CA6
increased from 1.6% in the pre-FTA period to 5.5% in the post-FTA period, alluding to a
positive impact of the Agreement. The increase in this share came at the expense of ROW
exporters (esp. MERCOSUR) as the shares of ACP, Andean and EU (incl. French and ORs
therein) exporters also increased in the post-FTA period (see Table 3.13-4). Meanwhile,
the change in sugar policy in 2017 seems to have had a positive impact on the EU's raw
cane sugar imports sourced from the CA6, intra-EU (incl. ORs) and ROW as the respective
shares increased in 2018-2019 relative to 2014-2017. in contrast, the change in sugar
policy seems to have negatively affected the EU's raw cane sugar imports from the ACP
countries 72. Within the EU, non-French EU exporters may have benefitted even more than
the French exporters from this change in policy.
Table 3.13-4. Origin of raw cane sugar (HS170111, HS170113 and HS170114)
imported by the EU (quantity shares in %, 2010-2019)
EU
Year ACP Andean CA ROW All EU France
excl. FR
2010 36.2 0.1 0.5 49.0 14.3 5.1 9.2
2011 34.3 0.1 1.6 50.3 13.7 3.9 9.8
2012 45.2 0.2 0.6 42.2 11.9 3.9 8.0
2013 46.5 0.2 3.8 36.7 12.7 4.0 8.7
2014 57.7 1.3 3.6 24.9 12.5 6.2 6.4
2015 60.1 0.9 5.4 19.9 13.8 6.2 7.7
2016 43.8 1.6 6.1 34.0 14.4 6.2 8.2
2017 48.6 1.9 5.6 30.5 13.3 5.4 8.0
2018 41.3 1.7 8.1 29.2 19.8 7.4 12.4
2019 45.1 1.2 4.5 31.4 17.9 7.6 10.3
Pre vs post-FTA
Avg. 2010-13 40.5 0.2 1.6 44.5 13.1 4.2 8.9
Avg. 2014-19 49.4 1.4 5.5 28.3 15.3 6.5 8.8
Pre vs post sugar
policy change
Avg. 2014-17 52.5 1.4 5.2 27.3 13.5 6.0 7.6
Avg. 2018-19 43.2 1.4 6.3 30.3 18.8 7.5 11.4
The share of raw beet sugar in total EU imports of raw beet and raw cane sugar was 18.6%
on average over 2010-19 with a peak share of 25.1% in 2015. The change in sugar policy
seems to have dampened this share to 16.9% on average over 2018-2019 (compared to
20.2% on average over 2014-2017 i.e., before the policy change). The change was even
more significant for intra-EU trade where the respective shares declined from 48.0% to
34.6% and within that for France in particular, where the respective shares declined from
51.6% to 27.1% (Eurostat database). Therefore, there is no evidence for EU raw sugar
cane production facing competition from EU raw beet producers on the basis of this
analysis.
In summary, Guadeloupe and Réunion may have competed with the increase of sugar
imports from CA (and the Andean) countries and the shift towards specialty sugar trade in
exports from Latin America may have had an impact on production and exports from ORs.
In a broader perspective, regarding the overall production and trade in sugar, there are
other factors to consider. In the same period, market shares of other countries exporting
cane sugar to the EU have been changing (especially, ACP and MERCOSUR) and the
available evidence suggests that the share of France (including ORs) in exports of cane
sugar to the EU has increased after the policy change in 2017. Therefore, while sugar
production and exports from ORs, in particular of specialty sugar, require a longer-term
monitoring, this should not be restricted to comparison with CA exports and effects of the
72
ACP countries found they could get better prices by supplying rapidly growing domestic markets or selling to
China and thus they had difficulty in securing cane sugar supplies within the EU FTAs and TRQs.
109
EU-CA FTA, but should include analysis of the size of the EU market (which has increased,
also for specialty sugar), the share of cane sugar in it, and imports from other FTA partners
(including the Andean countries and ACP) and other countries. Likewise, sustainability
practices applied by ORs, and other countries should be taken into consideration, including
adherence to the relevant certification schemes.
Conclusions and recommendations related to impacts for Outermost Regions:
Comparing OR exports to the EU with CA exports to the EU, we do not find an overall negative
impact of the EU-CA FTA. This may show that the Agreement does not have a negative overall
competitiveness effect, but the fact that ORs are not considered as a region on their own may
require more specific analysis.
This assessment holds at the product-level (i.e., recreational boats, aircraft and spacecraft, fish
and fishing activities, crustaceans), with two exceptions: banana and sugar. There is also a need
to consider that due to the small size of the ORs’ economies even a minor change in trade flows
may result in a significant impact for them.
While overall sugar exports from Guadeloupe and La Réunion are not significantly impacted by
the Agreement, high-value specialty sugar exports – a sub-sector – are affected by competing
exports from CA countries. While the negative effect of the EU-CA FTA on specialty sugars is not
large (they constitute 1.5% of the total EU sugar market), the effect of the EU-CA FTA combined
with other factors (e.g., other FTAs, changes in the EU sugar quota system and pressure for more
sustainable agriculture) and their consequences for the competitiveness of OR specialty sugar
producers would need to be assessed further.
3.14 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
The starting point for the analysis of the impact of the Agreement on the Least Developed
Countries (LDC) and the Economic Partnership Agreement (EPA) partners is the economic
modelling analysis, where LDC and EPA countries are separated.
The overall impact of the Agreement on these countries is negligible for the total exports,
GDP change, total imports, wages for skilled workers, and CO2 emissions as shown in
Figure 3.14-1. In this Figure, we compare the LDC and EPA countries with Nicaragua and
Honduras, two of the least impacted CA partner countries to show the relative difference
in the effect of the Agreement.
Figure 3.14-1. Changes in GDP, trade, wages, and CO2 emissions for LDC and EPA countries
(compared to Nicaragua and Honduras)
0.4%
0.3%
Relative changes (%)
0.2%
0.1%
0.0% LDC EPA Nicaragua Honduras

-0.1%
-0.2%
-0.3%
-0.4%
GDP Exports Imports Unskilled wages Skilled wages CO2 emissions
At a sector level, both LDC and EPA countries are also barely impacted. Some very marginal
effects can, however, be identified:
110
• Marginal decreases in total exports of fruits and vegetables (of -0.1% and -0.2% for
LDC and EPA countries respectively). These small losses in exports only lead to
negligible declines in total production (0.0% and -0.04% respectively) and in total
employment (0.0% and -0.1% respectively) because part of the negative effects from
the Agreement are offset by more economic activities vis-à-vis other regions than the
EU and the CA partner countries.
• LDC countries also registered a marginal decrease in the total exports of the sugar
sector (-1.1%), leading to a negligible decrease in total production (-0.04%) and total
employment (-0.1%).
Conclusions and recommendations related to impacts for developing countries:
There has been a negligible impact of the Agreement on LDCs and EPAs at the economy-wide
level. The sector level effects are also negligible, except for a marginally negative impact on fruits
and vegetables production and exports for both LDC and EPA, and a marginally negative impact
on sugar production for LDC.
3.15 Recommendations from the economic analysis
• Based on stakeholder engagement, we recommend adaptations in working methods of

the EU-CA FTA institutions to support implementation of the Agreement and improve
the pace of reaction to the identified needs. For example, some decision-making powers
could be delegated from the Association Council to the Association Committee and more
work could be done between the annual meetings to speed up the decision-making
process, given that it took several years, e.g., to agree and adopt an Accession Protocol
for Croatia or prepare and adopt Explanatory Notes regarding movement certificate.
• Given the Agreement’s objective to progressively liberalise services trade, greater
focus on ways to develop bilateral trade in services is recommended. This could be done,
inter alia, by establishing a dedicated Sub-committee on Services and holding more
regular discussions on services in the Market Access Sub-committee.
• Considering the lack of available FDI data, it is recommended to develop common
standards for the collection and dissemination of FDI data, in particular at the sectoral
level. This will allow for better analysis of the FDI flows and identification of any
bottlenecks.
• In the area related to customs and trade facilitation, two areas for improvement
include a stronger focus on raising awareness of businesses of the customs and trade-
facilitation related-measures of the Agreement and addressing the current
implementation of direct transport rule to facilitate bilateral exports, especially for
smaller traders.
• Moreover, based on stakeholder engagement, we recommend further promotion of
Explanatory Notes for EUR.1 among the EU and CA customs authorities to ensure a
consistent use of the movement certificate in the EU-CA trade.
• In the SPS area, technical assistance has started to show a way forward for some of
the encountered problems, therefore it is recommended that it continues to be provided
to ensure that exporters of products covered by SPS requirements can keep benefitting
from the preferences offered by the Agreement.
• Regarding public procurement, to better use and assess the use of provisions of the
EU-CA FTA, CA6 countries should collect and process the relevant data, which currently
is the case only to some extent.
• Moreover, the Parties should do more regarding transparency and facilitating access of
suppliers to each other’s public procurement markets. For CA6 suppliers, such
measures, which may be supported by EU technical assistance could include exposure
to procurement websites providing specific information and guidance for suppliers on
the kind of opportunities available under the Agreement, setting up of a pan-CA public
procurement single window, as well as training of economic operators on how to use
the online systems.
111
• To support implementation of the whole Agreement for the benefit of the economic
operators of all Parties, discussions at Sub-committees should cover the whole chapter
in each case.
• Although the Agreement envisages that the IPR Sub-committee will follow
implementation of provisions on GIs only (other parts of the chapter are not mentioned,
but are not explicitly excluded either), we recommend that the Parties allow also
discussions about other aspects of the IPR Title that are of importance to their trade
and investment relations.
• The Parties may exchange best practice and discuss adequate solutions for highly
relevant and rapidly evolving topics like competition and e-commerce. When relevant
and requested, the EU could provide technical assistance to its CA6 partners on these
subjects.
• Regarding SMEs, the CA governments, in cooperation with export promoting agencies,
the EU and other relevant bodies (e.g., providing export finance) should continue
support for SMEs in the context of EU-CA trade. While a lot of efforts have already been
invested in it, there is still a need to raise awareness of businesses regarding the EU-
CA FTA and its provisions, as well as their practical application in the context of the
requirements of the EU market.
• Likewise, CA governments should provide (jointly with relevant partners, such as export
promoting agencies and the EU) support for SMEs meeting the identified needs. These
include facilitated access to funding, advice in setting up and management of a formal
enterprise, and provision of targeted training for SMEs, incl. on requirements of the EU
market for certain products, product development and (where relevant) conditions to
obtain certificates. Moreover, SMEs need support in identifying potential buyers, which
may be facilitated by the EU, the Chambers of Commerce of the EU Member States, the
export promotion agencies, and other partners, such as International Trade Centre.
• The situation on the EU sugar market, notably regarding specialty sugar, may benefit
from a closer monitoring, in particular the impact of increased imports from different
partner countries, including CA, on the trade flows of the Outermost Regions to
the rest of the EU.
4 SOCIAL ANALYSIS
4.1 Analysis of employment impacts, including of informal employment73
The analysis of the EU-CA FTA employment effects is guided by the results of the economic
modelling, which estimates the impact of tariff reductions (or binding of tariff rates,
compared to the situation without the Agreement in place) introduced by the Agreement,
on production levels and jobs in individual sectors of the Parties’ economies. In addition to
the results of the economic modelling, we refer to data outlining trends in the number of
jobs (creation or reduction) across sectors in the EU and Central America during the
analysed period to state whether the EU-CA FTA may have influenced those trends. This in
turn helps to assess whether the employment changes triggered by the EU-CA FTA (e.g.,
job creation and income generation in exporting sectors) have contributed to attaining SDG
No. 1 (no poverty) and SDG No. 8 (full and productive employment and decent work for
all). Data based on modelling results and trade statistics is for EU27, unless indicated
otherwise. Complete modelling results can be found in Table C2-1 Annex C-2, while
supporting evidence related to the employment situation in the EU and Central America
has been provided in Annex C-1.
The economic model assumes a simplified situation on the labour market which may be far
from the reality in the EU or Central American countries respectively and therefore, the
outcomes should be interpreted with some caution. For example, the model assumes fixed
employment, and therefore no changes in the overall level of employment can be simulated
73
We suggest merging the sections related to impacts for employment and informal employment given large
overlaps between the two.
112
by the model.74 As a result, any job creation in growing sectors is compensated by a

corresponding move of workers away from other sectors (and therefore employment
reduction there). It means that the model can only calculate relative employment shifts
between sectors while holding overall employment constant. Moreover, the model focuses
only on tariff reduction, while changes in non-tariff measures have not been modelled and
their influence on output, trade and employment has not been estimated. Several other
factors which influence employment in the EU and Central America and their exporting
sectors are not modelled. These include changes in the size of the domestic market and
internal consumption, changes in the used technology, which may increase productivity
but not employment, or may even reduce the number of jobs (e.g., mechanisation of the
sugarcane harvest instead of manual sugarcane cutting), international commodity prices
(e.g., for sugar or coffee), weather conditions and other factors (e.g., the coffee leaf rust)
influencing harvest, and employment. These interact with the impact of the EU-CA FTA in
the economic reality recorded on the ground and have an impact on employment. However,
it is also important to note that those factors would influence the situation also without the
Agreement being in place and the model has as an objective to isolate the effects of the
Agreement only. This in turn means that estimations provided by the model reflect impacts
of the Agreement and should be seen more as guidelines regarding the selection of sectors
affected, and the direction and scale of impact, rather than a precise reflection of the
complexities of the real situation, fully aligned with the real-life statistics.
Regarding analysis of impacts for informal employment, the Terms of Reference for this
project have selected this task as one of the priorities. In this part, the analysis seeks to
determine what impact the Agreement may have had on informal employment 75 in the CA
countries, with a focus on sectors exposed to tariff liberalisation and the nature of jobs
created or lost there. It builds on findings related to impacts for employment. In this part
of the analysis, we follow the ILO definition (see footnote) regarding informal employment
to distinguish formal and informal jobs. However, we acknowledge that the situation is not
always very clear, and it happens that the same sector or employer engages both, formal
and informal workers. Likewise, certain jobs may have characteristics of both categories
and, e.g., despite having a contract (which would suggest a formal job), the worker does
not receive the minimum wage or social security contributions are not paid, both of which
are usually attributed to informal employment.
As outlined in Annex C-1, the governments of the Central American countries have taken
steps to address informality in employment and in economic activity (informal enterprises)
and different studies conducted by domestic institutions and international partners, e.g.,
the ILO have provided evidence regarding the scale and characteristics of the informality
of employment, its reasons, and possible measures which could reduce it. Despite such
efforts, informality in employment has remained the same over the analysed period and
there was no visible reduction in its level. However, this refers to the overall situation in
CA countries, not necessarily related to effects of the EU-CA FTA. The following text
presents the situation in sectors benefitting from tariff reduction in access to the EU market
regarding the number of jobs (creation or destruction), their nature (formal or not) and
the role played by exports to the EU in those sectors. Our analysis also presents impacts
for the EU.
Employment effects on the EU have been identified only for two sectors, i.e., fruits and
vegetables (employment reduction of -0.3%) and sugar (-0.9%). The corresponding
increases in exporting industry sectors are split across several sectors and are so small in
each of them (below 0.1%; see the economic modelling tables related to changes in
production and exports in Annex B-3) that they are not captured here. Therefore, the
74
Instead, the model simulates overall changes in the labour market through effects on overall wages.
75
According to a definition used by the ILO, informal economy is understood as enterprises and workers not
covered or insufficiently covered by formal arrangements and includes also self-employed. Informal sector
means enterprises which have not been registered and usually do not comply either with the domestic
legislation related to payment of taxes, and social security contributions, working conditions, e.g., minimum
wages or health and safety at work and others. Informal employment relates to situations where a person is
not offered a written contract, social security contributions (e.g., to a pension scheme or health care) are
not paid, wages are usually low and there are no protections related, e.g., to unemployment, or accidents at
work. (ILO, 2015a)
113
above-mentioned shift of workers is not visible in this case. However, as indicated in the
introductory part of this section, the model assumes fixed employment, therefore an
employment increase in a few industrial sectors is balanced with a theoretical outflow of
workers in other sectors, in this case, fruits and vegetables and sugar. The real
employment situation in these sectors will be influenced by several factors, incl. the EU
policy related to these sectors and their attractiveness for workers, compared to conditions
offered by other sectors.
Regarding fruits and vegetables, the small relative contraction should be seen in
comparison with the total employment in the sector in the EU, which in 2016 amounted to
873,000 full-time equivalent jobs (i.e., 9.0% out of 9.7 million employed in total in
agriculture in the EU in 2016) (EUROSTAT 2018; European Parliament 2019). Hence –
keeping in mind the limitations and assumptions of the model made above – some 2,600
jobs may have moved to other sectors as a result of the Agreement.
The EU sugar industry employed around 30,000 persons in 2018 (European Parliament,
2018b). Hence, the estimated shift of workers away from the sector would be comparable
to 270 jobs. This would happen in the context of an employment decrease in the sector
since 2006. In consultations for this study, EU sugar producers highlighted that increasing
sugar imports from CA (and likewise, imports from other countries) are likely to contribute
to the cumulated negative impact for the EU sugar sector caused by low prices, decreasing
consumption and Brexit. The EU sugar producers highlight in this context that the size of
TRQs for CA sugar in the access to the EU market has not been reduced after the UK had
left the EU, despite the fact that the EU internal market is now comprised of 27 instead of
28 Member States and is smaller than at the time of negotiations of the Agreement, and
this means that the impact of TRQs (which have not been adjusted downwards) is relatively
bigger (the same applies to imports from other partner countries, where TRQs might have
been preserved). They also stressed a need for trade partners, including CA, to meet or to
continue meeting their commitments on trade and sustainability.
Costa Rica
For Costa Rica, the economic model estimates an employment increase in the fruits and
vegetables sector, which includes bananas and pineapples (+7.8% for unskilled workers
and +8.8% for skilled ones), the sugar sector (+7.9% for unskilled workers and +9.0%
for skilled ones), other crops, incl. coffee (+1.2% for skilled workers) and processed food
(+1.0% also for skilled ones). On the other hand, job reductions or a theoretical shift of
workers towards the growing sectors of between 2.0% and 3.2% are estimated in a few
industrial sectors (see full results in Annex C-2).
Employment in the banana sector remained the same between 2011 and 2019, providing
40,000 direct and 100,000 indirect 76 jobs. The jobs are permanent, given that cultivation
and harvest of bananas take place during the whole year (CORBANA, n.d.). Moreover,
according to sector representatives, wages are above the minimum wage and payment of
social security contributions was well-regulated in the sector already prior to the entry into
force of the Agreement. Workers also enjoy other benefits, e.g., paid holidays (CORBANA,
interview and written information provided for the study). This suggests a formal nature
for jobs in the sector77. Between 2011 and 2019, exports to the EU increased by 72% in
volume and their share in the total banana exports from Costa Rica (in volume) increased
from 31% to 43% (FAO, 2011; Swissinfo, 2021; ITC Trade Map). The entry into force of
the EU-CA FTA did not mark any noticeable change in the growth trend that started a few
years earlier (volumes larger than in 2014 were already exported in 2008 and 2010) (ITC
Trade Map). Given a large and increasing EU share in total Costa Rican banana exports, it
is likely that the EU-CA trade helped to maintain jobs in the sector and that those jobs are
formal.
76
Direct jobs are understood as those generated (in a company or a sector) by core activities. Indirect jobs are
defined as employment generated in upstream industries (e.g., supplying inputs), as well as in the services
sectors supporting operation of a company or a sector, e.g., transport and financial services.
77
In concluding whether the jobs are formal or not, we refer either to the explicit statements in information
sources or base our own conclusions on the main characteristics of the jobs by comparing them with the ILO
definition of informal employment provided in a footnote at the beginning of this section.
114
The pineapple sector offers formal employment. The number of direct jobs in the sector
increased from 17,500 in 2005 to 31,500 in 2015, i.e., by 80%. Moreover, in 2015, the
sector also provided 120,000 indirect jobs (CANAPEP, 2017 and 2017a). According to other
sources, the number of both, direct and indirect jobs was lower in 2021 than in 2015, with
28,000 direct and 105,000 indirect jobs 78. Given that the volume of annual exports to the
EU increased between 2005 and 2019 by 110% (while the EU share in total pineapple
exports from Costa Rica decreased from 44.7% in 2005 to 38% in 2019, also in volume)
(ITC, Trade Map), it is likely that exports to the EU contributed to creation of formal jobs.
In this context, it is worth noting that jobs in the pineapple sector are often the only ones
available or one of very few job opportunities for low skilled workers in the cultivation area,
and that therefore these jobs may have contributed to poverty reduction. Moreover, the
Huertar Atlántica (Caribé) region covering the Limón province (with 76% of the total
banana and 31% of pineapple production) has the lowest informality rate among the Costa
Rican planification regions (ca. 43%, while others reach up to 53%) (Mora Guerrero, 2020).
The coffee sector provided 200,000 jobs in 2002 accounting for 28% of employment in
rural areas (Varangis et al, 2002). In 2012, it was estimated that around 190,000 seasonal
workers are needed at the time of harvest to collect the coffee. These included women
(around 30% of the total) (FAO, 2012) and indigenous peoples (ngäbe-buglé) from
Panama, among others. According to the literature, in most cases these workers were
registered, received health care services and the agreed payment and the work was well-
organised, with coffee plantations hiring every year the same people and often organising
transport for them (IOM, 2011). This would suggest the likelihood of formal employment,
at least for that group of workers. According to the more recent data from El Instituto del
Café de Costa Rica (ICAFÉ), most of the coffee production in Costa Rica (between 82% and
86%) is exported and therefore, also employment in the sector depends on international
trade. Moreover, ca. 14% of the total employment is permanent and related to plantation
maintenance and around 86% is related to coffee collection, with a peak in demand over
two months (December and January) every year. The total employment fluctuates each
year and in the last few years, it varied between 80,193 in 2018 and 95,403 in 2019, with
figures for 2020 and 2021 being between those two (information provided by Costa Rica).
This would suggest a decrease over the last decade. Given that exports to the EU remained
relatively stable over the analysed period having a share (in volume) between 29.5% in
the total coffee exports from Costa Rica (in 2011) and 34.6% in 2019 (ITC, Trade Map), it
is likely that they have helped to maintain jobs in the coffee sector in Costa Rica against
unfavourable conditions, such as low coffee prices in international markets and coffee leaf
rust affecting CA plantations, and at least part of the jobs supported seems to be formal.
The entry into force of the EU-CA FTA did not mark any change of trend in coffee exports
from Costa Rica to the EU, due to the fact that Cost Rica mostly exports non-roasted coffee
(with the MFN rate at 0%) and given that the start of the implementation of the Agreement
coincided with the coffee leaf rust in the CA region decreasing exports in 2013-2014 (higher
volumes were recorded in 2012 and previous years).
In the sugar sector, 7,078 sugar producers provide 58,000 jobs in total, including 2,400
for women79. Moreover, some sources refer to job losses over the last few years due to
increased sugar imports. In this context, while the economic modelling suggests a
substantial employment increase in the sugar sector in Costa Rica thanks to the EU-CA
FTA, considerate should be borne in mind that sugar exports to the EU represent a very
limited part of all Costa Rican exports in this sector, rising from 1% in 2010 to 3.3% in
2019 in volume. Total exports fluctuated over the analysed period without a clear trend,
and the volume in 2019 was higher by 16% than in 2010.80 The entry into force of the EU-
CA FTA did not mark any particular change in trend, with exports to the EU being higher
in 2014, and followed by a substantial fall in 2015-2016, and another increase since 2017
(ITC, Trade Map). Sugar may also be contained in other exported products, but it is difficult
78
Piña de Costa Rica (14 June 2021), Sector Piñero; 28 mil empleos directos:
https://www.pinadecostarica.com/2021/06/sector-pinero-28-mil-empleos-directos
79
LAICA (no date), Cosechamos progreso: https://laica.cr/
80
According to EU data, the value of sugar imports from Costa Rica in 2016-2019 was limited, varying
between €10 million in 2016 and €4 million in 2019 (European Commission, 2021a).
115
to quantify it. Therefore, while exports to the EU have been very limited, they may have
helped to temper other negative effects for the Costa Rican sugar sector and limit job loss.
Regarding industrial sectors, we note that the economic model assumes only changes in
tariffs, without acknowledging the role of EU-CA FTA in the reduction of non-tariff
measures. The modelling indicates either an outflow of workers or a more limited growth
of employment in some sectors (such as medical equipment) as a result of the Agreement.
If non-tariff measures had been included, the model may have provided more positive
outcomes (for example, for the medical equipment sector), where tariffs may play a less
important role but where products need to meet high technical, quality and production
standards. Indeed, the real-life data indicates that in the medical equipment sector, the
number of jobs increased between 2000 and 2015 to 17,500 and further to 26,000 in
201981. According to the literature, those jobs are formal. Over the same period, exports
in medical equipment in total and to the EU kept increasing. Therefore, one can conclude
that exports to the EU have contributed to formal employment creation in this sector
(crhoy.com, July 2020; Semanario Universidad, January 2019; ILO, 2016).
El Salvador
In a geographic break-down, the rate of informality varies from 56% in the region of San
Salvador and 61% in La Libertad up to 82% in Chalatenago and 89% in Morazán (ILO,
2020). A study by the Central Reserve Bank of El Salvador in 2019 provides data, according
to which almost all (92.6%) exporting enterprises were based in two regions: San Salvador
and La Libertad (Banco de Reserva de El Salvador, 2019). This may suggest that developed
economic activity and engagement in international trade may be among factors playing a
role in reduction of informality in the country.
The economic modelling estimates an employment increase in the sugar sector of +2.9%
for skilled and unskilled workers. The sector provided 48,000 direct jobs in 2012 (Central
America, Data, Jan 2012), and 50,000 direct and 200,000 indirect ones in 2019. It was
also estimated that among direct jobs, around 40,000 were temporary, related to the
harvest and the remaining 10,000 were permanent (elsalvador.com, Nov 2019; Mira,
2019). According to information shared with the study team by trade unions and business
sector representatives, jobs in the sugar sector in El Salvador are formal in sugar mills, as
foreseen in the collective agreements negotiated between trade unions and employers
(sugar mills). Other trade union representatives signalled possible differences between
jobs in sugar mills and the rest of the sector (composed of around 7,000 producers) and
this may also include differences between jobs in sugar production and temporary workers
hired for the harvest. Exports to the EU may have contributed to maintaining or creating
jobs, all (or part) of them being formal, while the share of sugar exports to the EU in total
exports of the sector from El Salvador is rather limited, changing from 18.4% in 2011 to
8.5% in 2019 in volume (increasing to 13.6% in 2020). Sugar exports to the EU increased
substantially in 2014 with the entry into force of the EU-CA FTA, and fluctuated later and
over the analysed period, with the annual volume exported to the EU in 2019 representing
an 89% increase compared to 2011 and a 37.1% fall compared to 2014 (ITC, Trade Map).
The coffee sector, for which the economic model estimates a limited employment increase
provides a fluctuating number of jobs, which is related to the situation in the international
coffee market and falls in coffee prices pushing many small producers out of the market,
weather conditions, the lack of access to funding and events, such as the coffee leaf rust
which heavily affected the sector in Central America. All this forced several coffee producers
to look for alternative cultivations and caused a neglect in the care for coffee plantations.
While in 2002, the coffee sector provided 160,000 jobs accounting for 17% of jobs in rural
areas (Varangis et al, 2002) and at the beginning of the last decade 100,000 direct and
400,000 indirect jobs helping to reduce poverty in rural areas (Asturias, Zepeda, Feb
2020), more recently, for reasons mentioned above and not related to the EU-CA FTA, the
number of jobs decreased from 86,500 in 2012-2013 (Gobierno de El Salvador, 2016a) to
47,756 in 2018-2019 (El Mundo, April 2020). Likewise, coffee exports, both to the EU and
the world have decreased substantially, first in 2012 and then in 2014 (most likely, due to
81
The employment in the life sciences sector, which is broader than medical equipment, increased over the
same period from 19,328 in 2015 to 29,812 in 2019 (CINDE, Informe de resultados, 2019).
116
the coffee leaf rust) and while in the last few years, exports to the EU have partly
recovered, they did not even get to the level from 2012 (the volume exported to the EU in
2019 represented only 27.4% of that from 2011). Given a decreasing but still substantial
share of exports to the EU in total coffee exports from El Salvador (40.2% in 2011 and
31.5% in 2019, in volume) (ITC, Trade Map), it is likely that they supported jobs in the
sector against unfavourable production conditions and low prices on the international
market. Exports to the EU will have helped to maintain probably a mix of formal and
informal jobs, given the large number of temporary jobs for workers hired for the harvest
season. (ITC, Trade Map).
While the economic model does not indicate employment changes in the fisheries sector,
it is worth mentioning due to the role of trade with the EU for the sector. The share of
exports to the EU in the total exports of the fisheries sector from El Salvador remained
stable between 66.3% in 2011 (in volume) and 66.8% in 2019, while in the same period
the annual volume exported to the EU increased by 20% (ITC, Trade Map). However,
exports to the EU fluctuated both prior to and after the entry into force of the Agreement,
with some years displaying higher values than in 2019. In 2007, the fisheries sector
provided 36,486 jobs (industrial and artisanal fishing) (OSPESCA et al, 2009), while the
tuna sub-sector (according to partial data for one industrial group active in that sub-sector)
employed 1,400 workers, out of whom 88% had a formal permanent contract in 2018 and
around 84% were covered by collective agreements (Hawkins, 2018). These two elements
suggest that over 80% of workers in that particular industrial group were likely to have
formal jobs. Moreover, in an interview for this study, sector representatives emphasised
that around 75%-80% of fish products coming from the same industrial group are exported
to Europe. As a result, the Agreement with its preferences and business certainty is
essential for the existence of the processing plant and local employment. Based on the
above, one can conclude that given a high EU share in the total exports in the fisheries
sector, and given that the volume of exports to the EU has been higher in every subsequent
year since entry into force of the Agreement in 2011, trade with the EU contributed to
maintaining or creating jobs in the sector, and that jobs related to the tuna sub-sector,
supported by trade with the EU, are formal.
Guatemala
The economic model estimates an employment increase related to the EU-CA FTA in the
sugar sector (+1.8% for unskilled workers and +1.9% for skilled ones), and a more limited
one in fruits and vegetables, including bananas, other crops (coffee) and transport. At the
same time, a few sectors record slower growth (or the theoretical shift of workers) (see
Annex C-2).
The sugar sector is situated mainly in four southern departments Suchitepéquez, Escuintla
Retalhuleu y Santa Rosa. It provided, according to different sources, 425,000 jobs in 2014-
2015 (Cabezas Badilla, 2015; CNV, ICAES, 2016), 82,000 direct jobs and 410,000 indirect
ones (492,000 in total) in 2016-2017 (ABG, 2017), and 56,000 direct jobs and 280,000
indirect ones, i.e., 336,000 in total in 2019, which may suggest a decrease, but also
fluctuations over time, depending on the harvest (ASAZGUA, no date; República, Nov
2019). In a survey conducted in 2014-2015 among workers from two groups, those who
work at the harvest and transport workers in the sugar sector, 100% of the former had a
written contract (73% among transport workers) and all surveyed were covered by social
security contributions. These two elements taken together suggest a formal job (Cabezas
Badilla, 2015; CNV Internationaal, ICAES, 2016). There are also results of annual surveys
conducted since 2003, by an external company in sugar mills in Guatemala. Seven mills
(out of the eleven currently operating) have participated in all or most of the surveys and
therefore, the available data is comparable over time. Each year, surveys cover over 1,000
workers (e.g., in 2016-2021, the number varied between 1,100 and 1,212). In the harvest
of 2020-2021, the mills employed in total 14,088 sugarcane cutters, including cutters from
other regions of Guatemala, employed temporarily for the harvest. According to outcomes
of the survey, the situation regarding contracts has improved over time, e.g., while during
the harvest of 2009-2010, 63% of cutters had a written contract (according to information
from human resources departments), that number increased to 75% in 2012-2013 and
further to 100% in 2014-2015 and has been maintained until 2020-2021 (the latest data
117
available). Moreover, according to the human resources departments, sugar mills pay to
cutters (in addition to wages), social security contributions and benefits (the latter, at the
end of the contract). The jobs comply therefore with the requirements related to formal
employment (Explico, 2009-2021). According to views expressed in the interviews for this
study, working conditions offered by sugar mills may be different than those offered by
other sugar producers. However, as indicated in the section on working conditions, the
sector has developed a manual outlining its labour policy and since 2016-2017, it has
shared it with suppliers, obliging them to implement it. The manual foresees a written
contract with each worker, payment of at least the minimum wage, and payment of social
security contributions, which means that if it is implemented, an increasing number of jobs
in the sector will be likely to become formal (Azúcar de Guatemala, 2021 and 2019; and
info shared by sector representatives). Given the changing number of jobs in the sector
from one year to the other, it is not easy to draw conclusions about the impact of the
Agreement. It is also important to note that many jobs in the sector, notably those related
to harvest, are temporary and therefore their number will depend on the harvest, which in
turn every year is influenced by several factors. Moreover, while exports to the EU may
have contributed to maintaining or creating jobs in the sector (and these jobs are formal,
at least as regards sugarcane cutters in sugar mills), it needs to be considered that
(according to the ITC Trade Map) sugar exports to the EU account for a small share,
increasing from 5.3% in 2011 to 6.5% in 2019 of the total volume of Guatemalan sugar
exports, while the annual volume exported to the EU increased by 80% in the same period.
In the banana sector, independent producers provided 27,600 formal jobs in 2014
(Cámara del Agro, July 2014). The whole sector accounted for 180,000 direct and indirect
jobs in 2019 (Gobierno de Guatemala, Jun 2019a) in eight departments Escuintla, el Sur
de San Marcos, Suchitepéquez, Retalhuleu, Izabal, Alta Verapaz, Zacapa y Santa Rosa.
Some authors (Cooper, Quesada, no date) suggest that working conditions in the sector
are different between the southern provinces and the remaining three, i.e., Izabal, Alta
Verapaz, and Zacapa (being better in the latter). This has been confirmed by other sources
(Anner, 2021), according to which workers are unionised in the northern province of Izabal,
get higher wages, and negotiate collective agreements. However, due to lower production
costs, which includes lower wages, employment and exports are growing at pace in the
south. Therefore, exports to the EU with the share in total Guatemalan banana exports (in
volume) growing from 2.9% in 2011 to 7.0% in 2019 and the annual volume increasing
by 317% (ITC, Trade Map) may have contributed to job creation (although limited, given
the scale of trade). However, the nature of jobs created thanks to trade with the EU (i.e.,
whether formal or not) and their quality would probably depend on the province (north
compared to south) and employer (multinational compared to nationally owned).
The coffee sector provides a fluctuating number of jobs out of which three quarters are
temporary, with workers being hired for the harvest season, and around one quarter being
permanent. The number of jobs has been changing every year, from around 470,000 in
2009-2010 to 504,000 in 2012-2013, with a subsequent fall to 405,000 due to the coffee
leaf rust in 2013-2014 and an increase to 500,000 in 2019. The jobs are reported as being
formal (Guzman Silva, 2016; Prensa Libre, July 2019). The share of coffee exports to the
EU (in volume) in total Guatemalan coffee exports decreased from 29.4% in 2011 to 21.2%
in 2019. However, the level of exports to both the EU and the world was volatile over the
period under review (probably due to coffee leaf rust), decreasing in 2013-2015 before
bouncing back in 2016 but without reaching previous levels. In this context, exports to the
EU might have played a role in maintaining and creating formal jobs in the sector, given
their share in the total exports, even though they have not recovered to the same extent
as exports to other destinations.
For the palm oil sector, the economic model estimates no employment changes. However,
exports to the EU may have contributed to job creation in the sector, given that they
account for an increasing share (52.2%% in 2019 compared to 4.7% in 2011) in growing
total Guatemalan exports in this sector (in terms of volume), while total palm oil exports
from Guatemala have also increased in the analysed period. The annual volume of palm
oil exports to the EU increased by over 4,000% in that period (or forty times) (ITC, Trade
Map). As explained in the case study (No.1), the increase in palm oil exports to the EU
118
may be due to tariff preferences and more certainty for economic operators provided by
the Agreement, however, other factors may have also played a role. The palm oil sector
provided 28,000 direct and 140,000 indirect jobs in 2018. The oil producing African palm
has been cultivated in departments of Petén, Izabal, Alta Verapaz, Escuintla, and San
Marcos (Quiroz, Achterberg, Arnould, 2021). As indicated in the section related to working
conditions, workers who are permanent and / or are directly employed by the plantations
have formal jobs with written contracts and social security contributions, while sub-
contracted workers and temporary ones have jobs with all characteristics of informal
employment. Therefore, exports to the EU are likely to have contributed to creation of both
formal and informal jobs in the sector.
Honduras
The economic model estimates an employment increase of +5.2% for unskilled workers
and +5.3% for skilled ones in the sugar sector and a more limited one for vegetables and
fruits, incl. melons and bananas and processed food incl. fisheries. The corresponding shifts
away from other sectors are outlined in Annex C-2. While feedback received from
stakeholders, e.g., in online consultations, regarding impacts of the EU-CA FTA on
employment is very limited (anecdotal), we have received information about increasing
numbers of workers in one large company operating in the agroindustry sector in
Honduras. This increase in numbers employed was attributed to the growth of exports to
the EU.
The sugar sector provides 200,000 jobs, accounting for 40% of employment opportunities
in rural areas where sugarcane is cultivated (APAH, 2019). Information provided by COHEP
(Consejo Hondureño de Empresa Privada) to the ILO in 2020 and shared for this study
suggests that jobs are likely to be formal at least in four sugar mills, given operation of
trade unions and negotiation of collective agreements on behalf of workers. Moreover,
based on information provided by sugar sector business representatives, in sugar mills,
workers receive contracts (or equivalents) and payslips, in line with national legislation.
Also, according to the same information, along the supply chain in parts controlled by sugar
mills, such as sugar cane cutting, transport, agricultural field work, and sugar and molasses
production, employers comply with national labour legislation. Sugar exports to the EU
accounted for 15.8% in volume in 2011 and 11% in 2019 of the total sugar exports from
Honduras. They fluctuated over the analysed period with a peak in 2013-2014 and a
subsequent fall in the following years, with the same trend for total sugar exports (ITC,
Trade Map). Hence, exports to the EU may have contributed to maintaining jobs in the
sector, while those jobs seem to be formal, at least in sugar mills and parts of the supply
chain controlled by them.
The sector of aquaculture (tilapia and shrimps) forms part of the processed food sector,
for which the economic model estimates employment increase of 0.3% for skilled workers
and 0.1% for unskilled ones. The aquaculture sector provided in total 93,000 direct and
indirect jobs in 2007, out of which 24,000 were dedicated to shrimps, in Choluteca and
Valle (UNDP, 2012). In 2012, there were 31,500 direct jobs in the sector (FAO, 2015b)
Exports of frozen shrimps to the EU accounted for 15.3% of total Honduran exports in this
product in 2012 and 8.6% in 2018, with higher values in the meantime (e.g., 17.9% in
2014). Over the analysed period, exports to the rest of the world increased significantly,
which means that the EU share, even if not falling significantly in volume, decreases in
relative terms (ITC, Trade Map). The nature of jobs in the sector (formal or not) is not
clear, however, exports to the EU are likely to have contributed to their creation or
maintenance.
The coffee sector has been selected for this analysis based on trade statistics and the role
which exports to the EU play in the overall coffee exports from Honduras. The economic
model does not estimate meaningful employment changes which could be attributed to
tariff reductions in the Agreement (the change is of around 0.1%). However, evidence from
stakeholder engagement suggests positive impacts of exports to the EU for the sector. In
2002, the coffee sector provided 300,000 jobs accounting for 26% of jobs in rural areas
(Varangis et al, 2002). In 2015-2016, it supported livelihoods of 122,000 families, 50%-
60% of them being small producers (UNDP, 2018). Producers also employ permanent and
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temporary workers. Jobs in large plantations, cooperatives and intermediary and exporting
enterprises differ in their characteristics from the rest of the sector, e.g., administrative
staff have written contracts and social security cover, while at small plantations even
permanent workers have informal jobs, without written contracts and social security
contributions. However, with a job for the same employer during the whole year and
receiving monthly wages, they still have greater economic stability than temporary workers
hired only for the harvest season or single tasks. Temporary workers have informal jobs
without written contracts and are not covered by social security schemes. Moreover, small
plantations usually provide informal jobs for owner’s family. In such cases, family members
do not receive wages, but work for the total household’s income (ILO, 2020a). In 2019,
the whole sector provided one million jobs (El País, February 2019). The economic model
does not estimate changes for the coffee sector (only a minimal shift away of workers).
The role of the EU as a destination market for exports of coffee from Honduras increased
until 2017, when it reached a 68.0% share in the total exports (in volume), with the annual
exported volume increasing by 88% compared to 2011. Since then, the annual volume
exported to the EU decreased and with it, the EU’s share in total Honduran coffee exports
(45.8% in 2019 compared to 68% in 2017) (ITC, Trade Map). Trade with the EU was
therefore supporting both formal and informal employment in the coffee sector in Honduras
particular in the period until 2017, while since then some of Honduras’s coffee exports
have shifted to other markets.
The melon sector forms part of the fruits and vegetables sector, for which the economic
model estimates an employment increase in Honduras of 0.2% for skilled workers and
0.1% for unskilled ones. In 2012, the melon sector provided 25,000 jobs in the south of
Honduras. While workers had short-term contracts for up to six months, the literature
suggests they were not covered by social security schemes, and 85% of women working
in the sector received wages below the minimum level envisaged in the legislation. The
jobs in this sector, even if theoretically formal (due to signed contracts), therefore had
characteristics of informal jobs or at least precarious employment (ILRF, COSIBAH, 2012).
Reports about the lack of respect for working conditions as required in domestic legislation
(including non-payment of the minimum wage and social security contributions) have
continued over the analysed period; the latest available data are from 2019 (Foxvog,
Rosazza, 2020; Banana Link, 2019a). In 2017, the number of jobs in the sector was
estimated at 70,000 (both direct and indirect) (Revista summa, December 2017),
concentrated in Valle and Choluteca in the southern part of Honduras. Exports to the EU
accounted for 7.2% of total melon exports from Honduras in 2010, 15.2% in 2018 and
8.6% in 2019 in terms of volume, with annual exports to the EU increasing over the
analysed period, and exports in 2018 representing an increase of 144% compared to 2010,
and exports in 2019 being lower and representing an increase of just 46.8% compared to
2010. Total exports have also been increasing over the analysed period (ITC, Trade Map).
Exports to the EU may therefore have contributed to employment support or creation in
the sector. At the same time, any such jobs supported or created may have been informal
or even where nominally formal, may have been of low quality.
Nicaragua
The economic model estimates an employment increase in the sugar sector of +15.1% for
unskilled workers and +14.7% for skilled ones. Moreover, a more limited job increase is
estimated for fruits and vegetables (+0.4% and +0.1%), processed food, incl. fisheries
(+0.5% and +0.2%) and chemicals (+0.5% and +0.1%). On the other hand, a few sectors
record a slower growth or a theoretical shift of workers in the range of -1.0% to -2.1%
due to the EU-CA FTA (see Annex C-2).
The number of jobs in the sugar sector was estimated to be 120,000 in 2010 and 120,000-
135,000 in 2011, incl. both direct and indirect jobs (Notipellas, Nov 2010; América
economía, Sept 2011, La Voz del Sandinismo, Nov 2011). In 2019, the number of direct
jobs was estimated at 36,000 and indirect jobs at 120,000 (el19digital.com, Nov 2019).
This means an increase of 30% compared to 2010. The sugar sector offers direct jobs to
37,500 workers while 135,000 are subcontracted (Quiroz, Kuepper, Rijk, Achterberg,
2021). The sugar sector is growing in Chinandega, León, Managua, Carazo, and Rivas
departments. According to information shared by sector representatives for this study, jobs
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are formal at least in sugar mills. In volume terms, exports to the EU equalled 1.9% of
total Nicaraguan sugar exports in 2010 and 7.8% in 2019 (ITC, Trade Map). Hence, the
EU-CA FTA may have contributed to the creation of formal jobs (at least in sugar mills),
but the degree of formality of employment in the remaining part of the sector may be
different.
The economic model suggests an employment increase in processed food, which includes
fishery products such as shrimps. In 2013, the whole fisheries sector provided 50,000
direct jobs (SICA, 2013) while shrimps accounted for 15,000, mainly in the department of
Chinandega (El Nuevo Diario, December 2013). In 2020, employment in the shrimp sub-
sector was estimated at 11,000 (around 30% of the total fisheries sector), which may
suggest a decrease in the overall level of employment in the sector compared to previous
years. However, at the same time production and exports have been increasing (therefore,
the figures should be analysed with some caution) (el19digital.com, May 2020). Exports to
the EU accounted for 32.6% of total exports of crustaceans (shrimps and lobster) from
Nicaragua in 2010 and 42.4% in 2019 in terms of volume, while annual exports to the EU
were increasing over the analysed period and were higher in 2019 by 150% compared to
2010 (ITC, Trade Map). Trade with the EU may therefore have contributed to job creation
in the shrimp (and lobster) sector, but the nature of those jobs (formal or not) is not clear.
The coffee sector accounted for 280,000 jobs in 2004 (Shuman, 2005), 332,000 in 2016
(Forum del Café, 2016) and 350,000 in 2019. Some sources speak about formal jobs in
the sector, but do not explain what proportion of total jobs in the sector this covers (Siles
Martínez, Robleto Tinoco, 2018). Coffee cultivation takes place mainly in the northern part
of the country in the provinces of Matagalpa, Jinotega, Estelí, and Nueva Segovia
(Solidaridad, 2016). While the economic model estimates job reduction in the sector due
to the EU-CA FTA, the available data suggests an employment increase. Moreover, the
annual volume exported to the EU is currently higher than at the beginning of the analysed
period; a temporary fall in the volume of exports to the EU resulted from the coffee leaf
rust in Central America and was not related to the Agreement. Among a list of potential
risks to jobs, sector representatives highlight low international coffee prices established
globally, the socio-economic crisis in Nicaragua and recent reforms raising taxes. At the
same time, businesses in the coffee sector suffer from the lack of access to finance
(swissinfo.ch, August 2019). The share of exports to the EU in total coffee exports from
Nicaragua was 31.6% in 2010 and 27.5% in 2019 in volume, while the annual volume
exported to the EU increased over time (ITC, Trade Map).
Panama
Modelling of the impact of the EU-CA FTA indicates an employment increase related to the
fruits and vegetables sector (+16.5% for unskilled workers and 16.1% for skilled ones),
textiles sector (+3.4% and +3.0%), vegetable oils sector (+2.1% and +1.7%), transport
sector (+1.3% and +1.0%) and rubber and plastics sector (+1.3% and +0.9%). On the
other hand, beverages and tobacco, electrical equipment, machinery, and motor vehicles
record a potential slower growth or a theoretical shift of workers in the region of -0.9% to
-1.9%. Exports in fruits and vegetables to the EU (bananas, pineapples, melons, and
watermelons) accounted for 77% of total Panamanian exports in the sector (in volume) in
2010 and 90% in 2018 (ITC, Trade Map), with an increase in volume at the beginning of
the analysed period and stable figures later. Given the large EU share in exports, the
Agreement is likely to have contributed to maintaining or creating jobs in the sector. For
Panama, we did not manage to identify data similar to other countries related to the nature
of employment and the number of jobs in sectors involved in exports to the EU. The
literature reviewed to date provides only data related to employment in the whole sector
of agriculture. Regarding sectors such as banana, melon or pineapple, available data relate
only to economic indicators, such as production or exports, but not to employment.
Conclusions and recommendations related to impacts for employment:

In this section, based on the economic modelling, we analyse employment effects of the EU-CA
FTA resulting from tariff reductions in trade between the Parties. The model estimates changes
based on a comparison of two scenarios: 1) with the Agreement in place, 2) the situation which
would have been observed in 2019, if the Agreement had not been concluded, i.e., Costa Rica
and Panama trading with the EU on MFN terms (the countries would have graduated from the GSP
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scheme having achieved the upper middle-income country status) and the remaining four
countries being in GSP+ scheme with a preferential access to the EU market. However, as
indicated in the introduction to this section, the model includes certain simplifications, e.g., fixed
employment or estimating changes based only on tariff reductions, without considering non-tariff
measures.
Likewise, there are several other factors, not captured by the model, which influence employment
in the EU and CA and their exporting sectors, notably agriculture. These include changes in the
size of the domestic market and internal consumption, international prices for commodities (e.g.,
for sugar or coffee), weather conditions and other factors (e.g., the coffee leaf rust) influencing
harvest, etc. These interact with the impact of the EU-CA FTA in the economic reality recorded on
the ground and have an impact on employment. However, it is also important to note that those
factors would influence the situation also without the Agreement being in place and the model has
as an objective to isolate the effects of the Agreement only. This in turn means that estimations
provided by the model reflect impacts of the Agreement and should be seen more as guidelines
regarding the selection of sectors affected, and the direction and scale of impact, rather than a
precise reflection of the complexities of the real situation, fully aligned with the real-life statistics.
The economic model estimates an employment increase in the CA countries in sectors, such as
fruits and vegetables (+8.0% for Costa Rica and +16.0% for Panama), and sugar (from around
2.0% in Guatemala over 3.0% in El Salvador, and 5.0% in Honduras, to 8.0%-9.0% in Costa Rica
and 15.0% in Nicaragua). Other sectors include textiles (ca. +3.0% in Panama), coffee (up to
+1.0% in Costa Rica), processed food (+1.0% in Costa Rica), fisheries (+0.1% in El Salvador)
and vegetable oils and fats (ca. +2.0% in Panama).
The real-life data related to the number of jobs in the analysed sectors confirms some of the
above findings (and in some cases, like in the medical equipment in Costa Rica indicates better
outcomes than suggested by the economic model), although, as indicated above, one needs to
bear in mind that the EU-CA FTA is only one of the factors influencing the situation. Accordingly,
exports to the EU have contributed to job creation and maintaining, e.g., in the banana, pineapple
and medical equipment sectors in Costa Rica, sugar and tuna sectors in El Salvador, banana and
palm oil in Guatemala, coffee and melon in Honduras, sugar, shrimps and coffee in Nicaragua,
and fruits and vegetables in Panama. On the other hand, it also suggests that exports to the EU,
while falling in some cases over time, might have nevertheless helped to caution negative effects
of other factors in sectors, such as coffee, where developments, such as low international coffee
prices, coffee leaf rust and the lack of support and access to finance have affected many small
producers in Central America.
It is also important that jobs that might have been created or maintained thanks to the Agreement
are mainly in rural areas, in agriculture, and often represent the only one or one of the few income
generation opportunities for low-skilled workers, thus contributing to poverty reduction. Overall,
while incomplete data related to the number of workers in CA exporting sectors over time does
not allow for very precise conclusions, nevertheless, based on the available evidence, one can say
that the Agreement has contributed to attaining SDG No. 1 (no poverty) and SDG No. 8 (full and
productive employment and decent work for all).
At the same time, however, job quality and its nature (formal or not) matters as well and has an
impact on workers’ welfare (e.g., through wage levels and social security contributions), economic
stability (through the type of contract), and health (through the respect or lack thereof regarding
health and safety at work conditions).
The available evidence suggests that exports to the EU are likely to have contributed to creation
or maintaining of formal jobs in sectors, such as banana, pineapple, coffee and medical equipment
in Costa Rica, tuna and (at least partly) sugar in El Salvador, coffee and (at least partly) sugar,
palm oil and banana in Guatemala, and coffee and (at least partly) sugar in Honduras and
Nicaragua. However, as outlined in this section and section on working conditions, in sectors, such
as coffee (e.g., in El Salvador and Honduras), sugar (across the region), or palm oil (e.g., in
Guatemala) there are different job categories, including permanent workers, directly employed
by companies, including sugar mills, and sub-contracted and temporary ones hired for the harvest
season. Accordingly, (while the situation may vary across CA countries and sectors), jobs are
likely to be both, formal and informal, depending on the category. In such cases, exports to the
EU may have contributed to maintaining or creating both, formal and informal jobs.
Moreover, while diverse factors influence informality levels in the scale of provinces and the whole
countries, the available (limited) evidence suggests that lower levels of informal employment are
in provinces exposed to international trade and export activity. These include, e.g., the Huertar
Atlántica (Caribé) region in Costa Rica covering the Limón province with 76% of the total banana
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and 31% of pineapple production, which has the lowest informality level among the Costa Rican
regions (around 43%, while others reach up to 53%). In El Salvador, the lowest informality levels
are in the regions of San Salvador (56%) and La Libertad (61%), compared to 82% in Chalatenago
and 89% in Morazán. At the same time, 92.6% exporting enterprises in the country were based
in 2019 in two regions with the lowest informality levels, i.e., San Salvador and La Libertad.
The estimated employment changes for the EU reflect the increasing import competition from CA,
with a limited shift of jobs from the fruits and vegetables (-0.3%) and sugar sectors (-0.9%)
towards industry, against the background of a job reduction in the EU agriculture since 2008.
Moving forward, the CA governments and the EU should continue to support job generation in the
exporting and accompanying sectors, including through technical assistance to address challenges
faced by exporters, in particular SMEs, such as access to finance, product development, meeting
standards of the destination market, and identifying potential buyers. Likewise, CA governments
should continue efforts facilitating establishment and management of formal enterprises.
Moreover, as the analysis suggests (developed further in the section on working conditions) jobs
in the exporting sectors are both formal and informal and of different quality, which has a direct
impact on the welfare of workers and their households. To address the problem of informality and
job quality, employers in the exporting sectors will need to ensure (and governments through
labour inspection services verify and enforce) that at least the minimum conditions granted by
the domestic legislation are observed for all jobs. These include payment of minimum wage and
social security contributions and other relevant benefits, signing a contract (and if this is not
required by the law, then at least handing over to workers payslips), and observance of health
and safety at work conditions, including provision of personal protective equipment and training.
Evidence provided by stakeholder engagement also suggests that (against the background of poor
enforcement of the domestic labour legislation and alleged low job quality) sector associations
(e.g., in the pineapple sector in Costa Rica, coffee and sugar sectors in Guatemala) have adopted
labour policies applicable for the whole sector or certain parts thereof. In such cases, sector
associations should ensure (e.g., through contracting external auditors or cooperation with labour
inspection services) monitoring of implementation of those policies and a regular (e.g., annual)
reporting.
Moreover, in some sectors, there are already existing monitoring mechanisms (complementary to
work of inspection services) checking compliance with the domestic legislation in exporting sectors
or parts thereof. For example, there is an annual audit (through an external company) of the
situation in sugar mills in Guatemala and a regular compliance check in the pineapple sector in
Costa Rica, in plantations, members of CANAPEP (Cámara Nacional de Productores y Exportadores
de Piña). We recommend that for transparency, results of such monitoring (or audits) should be
published, e.g., on websites of sector associations and included in the annual corporate reporting.
Right now, while texts of labour policies are published, in many cases, there is no evidence publicly
available from their implementation, e.g., there is no reference to them in sectoral corporate
reports, which raises a question about their application and effectiveness. There are also cases
(e.g., in the sugar sector in Guatemala), where external audits take place, but their results are
not published, even though they provide useful information about the nature of jobs (formal or
not) and their quality in the sector (in sugar mills). Reports from such audits were shared with
the study team for the purpose of this analysis.
This would also help to address the issue of data availability, its accuracy and relevance timewise
(how recent it is) regarding the number of workers in exporting sectors over time, the job nature
(formal or not) and the job quality, and would provide a sector overview, complementing data
that may be available for individual employers (e.g., plantations or sugar mills).
4.2 Analysis of impacts on gender equality
In this section, we summarise findings from case study No. 8. It has been prepared under
the social and human rights part of the analysis and its findings fall within both areas. It
analyses the effects of the Agreement for women as workers, entrepreneurs, and traders.
It also seeks to determine whether the EU-CA FTA has contributed to attaining SDG No. 5
(gender equality). The methodological approach is guided by UNCTAD’s Trade and Gender
Toolbox (UNCTAD 2017). The case study starts with a reference to women’s rights in
international human rights law. It then presents the situation of women in each of the six
Central American countries and follows with the impact analysis, again in a break-down by
country, and with a focus on sectors affected by the EU-CA FTA. Trends observed in
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women’s participation in the labour market, their entrepreneurship and participation in

trade in the analysed period are discussed in detail in Annex C-1.
All CA countries have ratified the main international legal instruments related to women’s
rights, such as the International Convention on the Elimination of All Forms of
Discrimination against Women (CEDAW), the ILO fundamental conventions No. 100 (Equal
Remuneration) and 111 (Discrimination in Employment and Occupation) and Convention
of Belém do Pará (the latter being part of Inter-American human rights system). They have
also included their principles in national legislation, while in some cases, such as in relation
to the principle of equal pay for work of equal value, the relevant monitoring body (the ILO
Committee of Experts in this case) noted a need (across the CA region) to amend the
legislation to fully reflect this principle, instead of addressing the more limited notion of
equal pay for similar or identical work (CEACR, 2021).
The CA countries have adopted a diversity of policy frameworks, either focusing on gender
equality or including it (and women’s empowerment) as one of the dimensions of wider
documents, such as employment policies or policies of transition to formal economy. They
have also adopted other measures facilitating women’s access to education and vocational
training, access to the labour market (e.g., through providing childcare facilities) and
marking companies promoting gender equality (e.g., Costa Rica’s “Seal of Equality”)
(INAMU, no date). As a result of those and other factors, women’s participation in the
labour market in the analysed period increased in four CA countries, while it fell in El
Salvador and Guatemala. Challenges faced by women in access to the labour market
(which may vary between countries and groups of women) include the level of completed
education, insufficient childcare and other care facilities, traditional division of
responsibilities between men and women, notably related to family and household, and (in
some countries of the region) the security level.
From the point of view of impacts of the Agreement, men are more likely to be affected
(both positively and negatively) given the prevailing employment structure. In CA, women
work predominantly in services sectors (70%-85% of economically active women work in
services, depending on the country), for which the characteristics of the economic model
(limited to tariff reductions) do not allow for an estimation of impacts of the EU-CA FTA.
On the other hand, CA agriculture (benefitting from EU tariff reductions) provides jobs for
3.2% to 12.0% of economically active women (depending on the country), and women
represent a minority (from 10% to 30%) of workers in individual sub-sectors. Thus, while
the EU-CA FTA may have contributed to job creation or maintenance for women as well as
men, they represent a minority of workers benefitting from tariff reduction. (The sugar
sector may be mentioned specifically in this context, given the size of the estimated
employment increase and at the same time a very limited, almost nil, women’s presence
in the sector, occupying mostly administrative roles and some technical jobs, e.g., in
laboratories.)
There are also gains in a limited number of industrial sectors, e.g., medical equipment
(women represent 54% of workers in this sector in Costa Rica), processed food, including
fisheries (women represent 86% of workers in one industrial group in the tuna sector in El
Salvador) and textiles (in Panama), while others may face an outward shift of workers
(e.g., textile and garment sector in Guatemala where women represent 46% of workers).
Evidence suggests that exports to the EU and the preferences offered by the Agreement
play a key role in maintaining both jobs in the tuna sector in El Salvador, as well as income
generation for women who are often the family breadwinners following the emigration of
men. As a result of its exports to the EU, working conditions in the medical equipment
sector in Costa Rica have also improved.
Regarding effects for women as entrepreneurs, the available data suggests that women
manage mostly businesses operating in services sectors, for which – again – the economic
model does not estimate direct effects. However, women own and also manage businesses
in sectors and products benefitting from output increases thanks to the EU-CA FTA that
include fruits and vegetables (e.g., pineapples), sugar, and coffee. Women producers have
also participated in EU-funded projects supporting development of entrepreneurial skills,
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finance management, health and safety at work practices, respect for labour and
environmental standards, product certification, and preparation for exporting.
However, to enable women entrepreneurs to benefit even more from preferences under
the EU-CA FTA, there is a need for further efforts. In this context, interviewed stakeholders
pointed to a need for on-going training and advisory services. These include support for
product development and quality, business management, identifying potential buyers
(without intermediaries) and understanding requirements of destination markets.
Moreover, women-led, and other SMEs alike should receive support in identifying products
that can be competitive on the EU market. Some CA interlocutors pointed in this context
to organic products as a potential CA speciality, noting that these are already exported to
the EU, including by women-led CA enterprises, e.g., banana, coffee, and pepper.
In this context, some CA interlocutors highlighted the benefit of financial and technical
assistance provided by the EU and other international partners. At the same time, they
also stressed a need to further develop national programmes and capacities of support to
SMEs and exporters, including women in their roles of entrepreneurs and traders. Also,
both, the existing female exporters from Costa Rica and some business associations from
other CA countries (e.g., from Honduras) provided an example of the Costa Rican export
promotion agency (PROCOMER) as a model to follow, in terms of the range of provided
services, and engagement in supporting exporters. In other countries of the region, e.g.,
in Guatemala, sector associations also play an important role in building capacity of future
exporters. Moreover, e.g., in Guatemala and Panama, there are networks (e.g., female
Committee of Exporters within Guatemalan AGEXPORT) and initiatives (e.g., Mujer
Emprende Export in Panama) supporting women’s participation in exports.
While data related to women exporters is limited, there is some evidence (e.g., in Costa
Rica and older data from Nicaragua) of women-led businesses from CA exporting to the EU
products benefitting from trade preferences, such as fruits and vegetables or processed
food. There is a need for a more systematic data collection regarding women exporters
and their performance. Also in this case, PROCOMER has collected data providing evidence
about products exported by women-led enterprises and their destination markets.
Overall, the EU-CA FTA, supported by financial and technical assistance, has provided
opportunities for job creation, business development and exports which may facilitate
progress towards gender equality and attainment of SDG No. 5. However, further efforts
are needed to support women in their roles as workers, entrepreneurs, and traders.
Recommendations related to gender equality and case study on impacts for women:
As part of their efforts to ensure a greater gender equality and a more effective implementation
of the TSD provisions and ILO Conventions No. 100 and 111, CA governments in cooperation with
private sector should continue efforts to ensure an equal access of women to education, vocational
training, job opportunities, professional development and career progression to managerial
positions. Additional measures should include creating an enabling environment, including by
providing childcare facilities and ensuring safety at the workplace and on the way to it.
Implementation of the ILO Conventions No. 100 and 111 should also continue to be discussed at
the TSD Board meetings and could feature in the agenda of dedicated events, such as EU-CA
seminars facilitating exchange of best practice and discussion of common challenges.
Moreover, given the reported violence and sexual harassment affecting women in some CA
countries in different sectors, including those exporting to the EU, CA government may consider
ratification and implementation of the ILO Convention No. 190 addressing violence and
harassment at the workplace, in work-related occasions (such as training), in accommodation
provided by employer and during commuting to work. We note in this context that El Salvador is
the first CA country that has ratified this convention. The convention has also been ratified so far
(by July 2022) by three EU Member States (Greece, Italy, and Spain). Moreover, the proposal to
ratify this convention by Costa Rica was submitted to the Legislative Assembly in June 2021 and
the relevant proceedings are ongoing. The convention was also discussed by the Tripartite
Commission on Labour Relations and Freedom of Association in Guatemala.
Considering the limited availability of data on female employment, entrepreneurship, and

presence in international trade, we recommend a more frequent and more systematic collection
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of sex-disaggregated data, starting with sub-sectors participating in international trade and thus
likely to be affected by the FTAs. Such data could be collected by national institutes of statistics,
sectoral business associations, export promotion agencies, civil society, or research institutes,
depending on the available capacities and specificity of the sector. Their availability will enable a
closer monitoring of impacts of the Agreement for women and guide policy decisions which may
need to be taken to ensure that trade and gender equality reinforce each other.
While a lot of initiatives have already been undertaken and delivered in this area, women-led
SMEs still need support from the CA governments, as well as relevant public and private sector
institutions, such as financial institutions, business associations, and export promotion agencies
to get access to funding and strengthen operational capabilities, such as product development
and marketing, knowledge of the requirements of the EU market (and other destination markets),
and identification of potential buyers.
Moreover, given a high level of competition on the EU market, women-led enterprises and other
SMEs alike may wish to find a niche as an area of specialisation and in this context, exports of
organic products have been suggested by different stakeholders as a possible option. Our
interlocutors, e.g., from Nicaragua and Honduras suggested this could be one of the topics for
cooperation and more in-depth discussion with the EU, including EU support for establishing
business association for organic products and provision of capability building activities related to
EU requirements for organic products, adherence to certification schemes and support in finding
potential buyers. Such activities would be in line with Article 288 of the EU-CA FTA (TSD Title),
where the Parties recognise the value of cooperation in areas facilitating and promoting trade in
products that respond to sustainability considerations, including organic products. This would also
build on discussion on organic products held at the TSD Board meeting in 2021.
4.3 Analysis of impacts on consumers, welfare, and poverty levels
This section analyses to what extent the Agreement has contributed to the attainment of
SDG 1 (no poverty) and to elements of SDG 12 (sustainable consumption and production),
such as consumer safety, through its impacts on consumers, welfare and poverty levels in
the EU and Central American countries. Annex C-1 presents the situation in CA regarding
national trends in poverty and extreme poverty levels in the analysed period, incomes and
expenditures, and factors influencing them, including government policies. The analysis is
based on results of the economic modelling supported by complementary evidence.
Regarding the availability and affordability of traded goods and services for consumers in
all Parties, both the economic modelling results and trade statistics indicate the benefit of
tariff reductions granted by the Agreement.
Regarding impacts related to availability of goods and consumer welfare, imports to the
EU from CA countries include many products benefitting from EU tariff reductions, such as
vegetables, fruits and nuts, sugar, and fishery products. These are likely to have benefitted
EU consumers, as they make available products which are not grown or manufactured in
the EU or are grown in quantities not satisfying fully EU demand (e.g., fruit and
vegetables). They therefore have a positive impact on prices for EU consumers, as well as
improving choice, diversity, and continuity/reliability of supply of available goods. Their
impacts on producers or growers of like products (e.g., Outermost Regions) are discussed
in other sections of this report and in the case study on trade in bananas. Other imported
goods, such as machinery and medical equipment may have a positive impact for
consumers, depending on their type, e.g., medical equipment from Costa Rica may be used
in health care services.
Likewise, goods exported from the EU to Central America may create positive effects for
consumers, and these may be direct or indirect depending on the type of the product. For
example, pharmaceuticals will support medical treatment, and transport equipment may
either be purchased as a product (if these are passenger cars) or for the supply of a service,
(if it is used as a means of public transport, e.g., aircrafts sold by the EU to El Salvador
and Panama). Other EU exports (e.g., machinery and equipment) which are not used
directly by consumers may still have positive effects for society, if they are used for local
production of other goods or supply of services that lower prices or improve diversity,
quality or safety for end-users. Machinery and equipment imported from the EU may have
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a doubly positive impact for workers (who are in any case also consumers), if used by local
industry (e.g., food processing) to support production for both the domestic and export
markets, with positive effects for jobs and income as well as consumption.
Table 4.3-1. Estimated changes in wages & welfare, EU and CA resulting from EU-CA FTA
Wage &
welfare Costa El
Guatemala Honduras Nicaragua Panama EU
changes Rica Salvador
(in %)
Unskilled
1.3% 0.0% 0.1% 0.2% 0.1% 0.0% 0.0%
workers
Skilled
0.5% 0.0% -0.1% 0.0% 0.2% 0.3% +0.0%
workers
Welfare 0.4% +0.0% +0.0% +0.0% 0.3% 0.1% +0.0%
Source: European Commission, economic model
Regarding the affordability of goods and services and EU-CA FTA effects on the purchasing
power of consumers and poverty reduction, the economic model provides estimates related
to wages and welfare, which have been outlined in Table 4.3-1. Accordingly, the biggest
effect is estimated for Costa Rica, with a wage increase for unskilled workers by +1.3%
and +0.5% for skilled ones and welfare increasing by 0.4%, while changes for other CA
countries are more limited. In this context we note (based on data from Annex C-1) that
for countries where data was available, there is evidence of wages being lower in
agriculture than in any other sector, and equally wages in rural areas being much lower
than in urban ones. Seen from this perspective, the Agreement – by supporting exports in
agricultural products, by creating the conditions for a modest wage increase (notably for
unskilled workers), and by preserving or creating jobs in rural areas – may have
contributed to poverty reduction. The scale of such an effect would be limited and would
depend on job quality, including whether the job is permanent or temporary, formal, or
informal, and whether jobs in exporting enterprises/plantations are of a better quality than
elsewhere in the sector.
Trends in poverty and extreme poverty levels in CA countries over time, factors influencing
them, and steps taken by the CA governments to address the situation, have been analysed
in detail in Annex C-1. Indeed, while country-wide changes in poverty and extreme poverty
levels have been very limited in the analysed period (except for Panama and El Salvador82),
there were changes in the situation of individual departments within each country. This
may confirm previous conclusions that the EU-CA FTA might have had positive effects for
employment and poverty reduction, but if so, such effects are likely to have been limited.
Moreover, the EU-CA FTA is only one among many factors influencing the situation. In
Costa Rica poverty decreased from 29.0% in 2010 to 26.9% in 2017 in the region of Huetar
Atlántica (Caribé), which covers the province of Limón, hosting 76% of the banana
cultivation and 31% of pineapple production (CORBANA, no date; La Nación, Nov 2017).
Likewise, poverty decreased in El Salvador (across departments), with the lowest levels of
poverty being recorded in San Salvador (27% in 2005 and 16.6% in 2019), and in La
Libertad (28.2% in 2005 and 21.1% in 2019), i.e., the two departments which together
host almost all the exporting enterprises in the country (IIDH, 2008). Poverty also
decreased in Guatemala between 2011 and 2018 in provinces cultivating sugar, coffee,
82
The poverty rate in Costa Rica was at 21.2% in 2010 and 21% in 2019, with extreme poverty being at 5.8%
in both years (INEC, Costa Rica, 2010 and 2019). In El Salvador, the poverty rate decreased from 37.8% in
2009 to 22.8% in 2019 and extreme poverty from 12.0% to 4.5% in the same period (DIGESTYC, 2009 and
2019). In Guatemala, the poverty rate decreased only slightly from 51.0% in 2006 to 49.3% in 2019 (INE,
Guatemala, 2014; World Bank, 2021). In Honduras, the poverty rate remained at practically the same level
over the analysed period, decreasing from 60% in 2010 to 59.3% in 2019, while the extreme poverty
decreased from 39.1% in 2010 to 36.7% in 2019 (INE, Honduras, 2012-2019). Likewise in Nicaragua, the
poverty rate remained almost the same, with 44.7% in 2009 and 44.4% in 2019. The extreme poverty fell
from 9.7% in 2009 to 8.9% in 2019 (FIDEG, 2010; FIDEG, 2020). In Panama, the poverty rate decreased
from 27.6% in 2011 to 21.5% in 2019 and the extreme poverty was reduced from 11.5% to 10.0%
(Ministerio de Economía y Finanzas, 2020).
127
fruits (including bananas) and palm oil, except the provinces of Alta Verapaz and Izabal.
In this context, it is worth noting that southern provinces of the country hosting these
cultivations displayed overall lower poverty levels in 2018 than central or northern part
(except Petén). While there might have been several factors contributing to poverty
reduction, export activity, incl. exports to the EU may also have played a role in this process
(República, November 2019, Prensa Libre, November 2015; Guzman Silva, 2016; case
study on palm oil and Annex C-1). In an interview for this study, stakeholders from
Guatemala were of the view that there were no noticeable changes in poverty levels and
workers’ welfare in agriculture or in rural areas that could be easily attributed to the EU-
CA FTA. However, they observed that the Agreement with the EU offers opportunities which
should be made more accessible to a larger part of the economy. In this context, they
would see a role for the Government of Guatemala and the EU, with technical and financial
assistance to support MSMEs and cooperatives, so that they also can be involved (to a
larger extent) in exports. The interviewees also stressed a need for an enhanced social
dialogue about wages and other elements of working conditions in Guatemala (and other
Central American countries), in order to ensure that workers can benefit (on a more equal
footing with businesses) from international trade and export revenues and can have decent
jobs– which would help to reduce poverty. Indeed, the EU has provided technical and
financial assistance to support private sector development in CA, economic growth, and
poverty reduction. One of those projects (ADESEP), with a budget of €2.4 million was
completed in 2021, while another one (DINAMICA II) will run until 2025, with a budget of
€12.3million. There are also several other projects in this area with a regional focus, as
well as others that support individual countries. For example, a dedicated part of DINAMICA
II is for El Salvador (€6 million), and there is a project in Guatemala supporting
competitiveness and development of commercial capacity of MSMEs and cooperatives in a
number of value chains, which will run until 2022 with a budget of €25 million (info. shared
by the Commission).
Along the same line, in online consultations for this study, stakeholders highlighted an
unequal division of gains from the Agreement on the Central American side, benefitting
well-established large companies while the states see their revenues reduced (due to the
tariff reduction on imports from the EU) and not compensated by another type of income.
(We note in this context that according to information provided by CA governments, e.g.,
Costa Rica, income generated thanks to collection of taxes imposed on imports from the
EU, e.g., VAT, should also be taken into consideration and in the case of Costa Rica, these
have generated income outweighing the loss of tariff revenues.) Moreover, stakeholders in
online consultations for this study argue that even before the current pandemic an average
citizen of Guatemala, could not see any tangible benefits from the Agreement. In this
situation, the lack of prospects for a better life in such countries drives outward migration,
and remittances remain an important source of income for their societies. Regarding areas
to improve in the future, stakeholders pointed to a need for a better access to the EU
market for Central American MSMEs and cooperatives, incl. those employing indigenous
peoples.
Another element of impact related to the affordability of goods is linked to prices of

purchased products and an analysis of whether the Agreement has influenced them. For
goods imported by the EU, some prices (e.g., for goods for which tariffs have been reduced)
may have (at least theoretically) become cheaper and therefore more affordable for
consumers, including less affluent groups. Moreover, irrespectively of the EU-CA FTA, there
are factors influencing prices of goods imported from Central America which may drive the
prices further down, increasing the affordability effect for EU consumers. For example,
prices of some fruits (e.g., bananas) are kept low by retailers. A similar effect has been
created by the international coffee market which has lowered coffee prices internationally,
including for EU customers. Likewise, in an interview for this study, representatives of the
sugar sector provided information about low prices. On the opposing side of these
developments are the income levels for Central American producers, which are affected
negatively. In this context, Costa Rican banana producers (CORBANA) claimed (during the
annual meeting under the TSD chapter, and at a workshop in 2016) observance of high
social and environmental standards in banana production. At the same time, they drew
attention to unfair price setting practices applied by some retail chains in Europe (e.g., one
128
of the German retailers setting price trends for others paid €13.5 for a box of bananas in
2018 and then lowered the price every consecutive year up to €11.3 in 2021) (Banana
Link, November 2020). Low prices established by some powerful European buyers make it
difficult for Costa Rican and other banana producers to cover the higher production costs
which result from respect for social and environmental standards, incl. those related to
certification schemes. Banana producers speak in this context of a need for a shared
responsibility between producers and retailers for sustainable practices and sustainable
development. This was echoed by the representative of the Costa Rican Government at
the Market Access Sub-committee meeting in 2020. Nevertheless, in information provided
for this study, representatives of the Costa Rican banana sector indicated that wages in
the sector in Costa Rica are higher than the minimum wage, by 30%-35% for field workers
and by 18%-25% for workers in packaging units. Workers also enjoy other benefits, such
as paid holidays. Moreover, as prices are set by independent economic operators or
markets, the Agreement as such does not have a direct impact on them, apart from the
fact that tariff liberalisation makes them more affordable in importing countries. That said,
there is a role to be played by EU consumers and retailers: they must take better account
of the needs of producers and workers by adapting selling and buying practices, including
in relation to certified products.
As for the impact on prices of products imported to CA and consumers’ purchasing power,
given the main types of EU exports (i.e., motor vehicles, machinery, and equipment), when
compared to the types of products and services which account for the largest share in an
average household basket in Central America (for details, see Annex C-1), it is unlikely
that tariff reductions for EU products have changed the cost of normal household
expenditures. Imports from the EU are therefore unlikely to have had direct effects on the
purchasing power of the majority of the population in these countries.
Regarding impacts for consumption patterns, consumer safety, and product safety, for the
period 2005-2021, there are no alerts for Costa Rica, El Salvador, Honduras, Nicaragua,
and Panama in the EU RAPEX83 system reporting unsafe non-food products from third
countries. Moreover, there are only two entries (from 2008 and 2010) for Guatemala, i.e.,
from the time preceding the Agreement’s entry into force. One was related to candles
shaped like cakes, with small, easily detachable parts which could be swallowed if someone
mistook them for food. The other one was related to a fabric not complying with the REACH
Regulation in relation to the chemicals used for its production. This confirms that non-food
products from Central America are not likely to represent a risk for the EU consumers, from
the product and consumer safety point of view. Moreover, the policy dialogue taking part
in dedicated Sub-committees, e.g., on technical standards, as well as technical assistance
for the private sector may have helped to meet the EU requirements.
Regarding food safety, Table 4.3-2 below provides an overview of the number of
notifications made in the EU RASFF system 84 of food products originating in CA and
considered as unsafe during the analysed period. The total number of such products tended
to decrease over the period, although there are single years with higher numbers. In order
to illustrate the types of risks and affected products, we provide here examples from the
last two years, for which more detailed descriptions are available. For 2020-2021, there
are 30 entries for Costa Rica, all from 2021, including 23 on paraffin found on fresh
cassava/yuca roots and seven on non-authorised additives in fresh pineapples. Some of
them have remained undecided, while the rest haven been considered as not serious risks.
There is one entry for El Salvador (from 2020) regarding incorrect temperature of frozen
tuna, considered as not a serious risk. Moreover, there are three entries for Guatemala (all
from 2021), one is related to border rejection of novel food 85, one to an incorrect import
declaration for frozen tuna and one (considered as serious) related to a bacteria (vibrio
vulnificus) found in frozen raw shrimps (the bacteria is considered as a deadly human
83
European Commission, Rapid alert system for dangerous non-food products: https://ec.europa.eu/
consumers/consumers_safety/safety_products/rapex/alerts/?event=main.listNotifications&lng=en
84
EU RASFF: https://ec.europa.eu/food/safety/rasff-food-and-feed-safety-alerts_en
85
Novel Food is defined as food that had not been consumed to a significant degree by humans in the EU before
15 May 1997, when the first Regulation on novel food came into force. 'Novel Food' can be newly developed,
innovative food, food produced using new technologies and production processes, as well as food which is or
has been traditionally eaten outside of the EU: https://ec.europa.eu/food/safety/novel-food_en
129
pathogen which may cause sea-food related death and belongs to the same family as
bacteria causing cholera). There are seven notifications for Honduras (from 2020 and
2021), two of them considered as serious (one about pesticides in sweet potatoes and the
other about salmonella related to melons). Others (not serious or undecided) related to
pesticide residues in aubergines, sardines without a sanitary certificate, and unauthorised
additives. There are five entries for Nicaragua (from 2021) considered as serious and
related to aflatoxin (toxins produced by mould) in peanuts. There are also two entries for
Panama (from 2020), both serious, one related to mercury in fish products and the other
about a dietary product sold online. For comparison, there are 218 entries for products
originating in Brazil (for 2020-2021), many of them classified as serious. Therefore, while
the descriptive sample with an indication of the risk level is limited in time (covering only
2020 and 2021) and there were cases of serious risk related to imports of food products
from four countries of Central America (all except Costa Rica and El Salvador), the number
of those cases was very limited. Moreover, as indicated in the table 4.3-2, also the overall
number of notifications over time (2008-2019) has been limited.
Table 4.3-2. The number of notifications of CA products in the EU RASFF system

Country 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total
Costa Rica 4 4 6 2 2 9 7 2 4 1 41
El Salvador 1 4 1 1 7
Guatemala 3 1 6 2 1 1 1 15
Honduras 3 1 1 1 2 2 10
Nicaragua 8 2 5 2 5 5 1 3 4 2 5 2 44
Panama 4 8 1 4 3 1 1 2 7 2 4 3 40
Total 19 19 14 14 12 16 10 7 17 9 10 10 157
Source: EU RASFF system: https://ec.europa.eu/food/safety/rasff-food-and-feed-safety-alerts_en
Conclusions and recommendations related to impacts for consumers, welfare

and poverty levels:
The EU-CA FTA has created positive effects for consumers related to a larger availability and
accessibility of products and services traded between the EU and CA, while risks related to
potentially unsafe products (food and non-food) have been potentially decreased.
It has also contributed to a limited increase in welfare, with the most pronounced effect being
estimated for Costa Rica (+0.4%) and more limited ones for Nicaragua (+0.3%), Panama
(+0.1%) and other countries. Likewise, the wage increase resulting from the EU-CA FTA has been
the most pronounced for Costa Rica (+1.3% for unskilled workers and +0.5% for skilled ones)
with more limited effects in other countries, e.g., Honduras (+0.2% and 0.0%), Nicaragua
(+0.1% and +0.2%) and Panama (0.0% and +0.3%). An even limited wage and employment
increase in agriculture, in rural areas, where wages are lower than in the rest of the country and
economy and the poverty levels are usually higher, might have contributed to poverty reduction,
even if very limited in scale.
Indeed, while the poverty and extreme poverty levels decreased only in a limited way over the
analysed period in most of CA (except El Salvador and Panama), provinces hosting exporting
sectors have recorded poverty reduction and display overall lower poverty levels than the rest of
the country, although there may be other factors also contributing to this trend, including trade
with other partners. For example, in Costa Rica poverty decreased from 29.0% in 2010 to 26.9%
in 2017 in the region of Huetar Atlántica (Caribé), which covers the province of Limón hosting
76.0% of the banana cultivation and 31% of pineapple production. Likewise, poverty decreased
in El Salvador (across departments) keeping the lowest level in San Salvador (27.0% in 2005 and
16.6% in 2019) and La Libertad (28.2% in 2005 and 21.1% in 2019), i.e., two departments
hosting almost all exporting enterprises in the country. Poverty decreased also in Guatemala
between 2011 and 2018 in provinces cultivating sugar, coffee, fruits (including bananas), and
palm oil, except the provinces of Alta Verapaz and Izabal. The southern provinces of the country
hosting these cultivations displayed overall lower poverty levels in 2018 than central or northern
part (except Petén).
On the other hand, there is some way to go yet to address price levels of products imported to
the EU from CA. While prices for some of them (e.g., bananas and coffee) have been set at a low
level, benefitting EU consumers, this may have negative impacts on CA producers and their ability
130
to cover production costs and to pay decent wages to workers. Therefore, the EU buyers (retailers
and consumers alike) may be encouraged to play their role by adjusting their purchasing practices.
Likewise, products exported by the EU to CA benefitting from tariff preferences, such as motor
vehicles and machinery may be more accessible for individual consumers (e.g., passenger cars)
and businesses, including vehicles used by self-employed and other enterprises as means of
transport for income generation. Moreover, when used in production processes, the machinery
and equipment may help to extend an offer of high-quality goods, safe for consumers and other
users.
Moreover, the application of border controls regarding compliance with technical and sanitary and
phytosanitary standards helped to ensure that products not meeting them will not be placed on
the market. On the other hand, awareness raising related to market requirements of the Parties,
and policy discussions in Sub-committees addressing market access barriers (see the economic
part of the analysis) have facilitated trade in complying products and helped to increase diversity
of goods available to the EU and CA consumers and business users.
Overall, the analysis suggests that the Agreement has contributed to the attainment of SDG 1 (no
poverty) and elements of SDG 12 (sustainable consumption and production), such as consumer
safety in the EU and Central American countries.
Regarding recommendations, we acknowledge, as in all sections of the social part of the analysis,
that the situation varies between the CA countries, regions, and sectors, and that some policies
and measures, such as the support to SMEs, employment creation, export diversification, poverty
reduction, and labour inspections ensuring enforcement of the domestic labour legislation have
been applied to a diverse extent across the region. However, as it goes beyond the scope of this
study to formulate separate detailed recommendations for each topic for each country, Party to
the EU-CA FTA (except in cases where concrete examples are based on findings from the analysis),
we often refer to the CA region or the EU, as a whole.
With the above in mind, recommendations related to this section are as follows: further poverty
reduction may be achieved by an increasing volume and diversification of CA exports accompanied
by job creation in exporting and cooperating sectors in CA. Equally, the use of EU imports in
machinery and equipment to CA should help to diversify production for the domestic market and
exports and help to generate additional employment. At the same time, to increase positive effects
for welfare of CA workers, CA employers should ensure (and labour inspection verify) that at least
the minimum quality criteria set out by the national legislation are observed in the newly created
and existing jobs. Likewise, CA governments in cooperation with public and private sector partners
should support establishment and operation of formal SMEs, and support their inclusion in value
chains, including those producing for exports. The support may include facilitated access to
finance, training in business management and product development, advice on membership in
business associations and networks, and on requirements of destination markets, support in
participation in fairs and trade missions and identifying customers and business partners.
4.4 Analysis of impacts on working conditions, social security coverage of

workers and enforcement mechanism (labour inspection)
The Terms of Reference for this project have selected this task as one of priorities. The
analysis in this section seeks to determine if the Agreement had an impact on working
conditions86 in CA countries, notably in sectors involved in trade with the EU. In addition,
we focus on the domestic enforcement mechanism, notably on work of the labour
inspection services, to assess whether the policy dialogue with the EU in the TSD Board as
well as technical and financial assistance contributed to any changes in this area.
In our work on this section, we faced a challenge of data availability which is reflected in
an uneven coverage of countries and sectors. As a starting point, we tried to identify data
for those sectors which are important for CA exports to the EU and for which the economic
model suggests impacts resulting from the EU-CA FTA (those sectors have been discussed
in the section on impacts for employment). Publicly available data on working conditions
in those sectors is very fragmented. Most publications are from early 2000s and 2010s
(which means they present data falling outside the analysed period), while others present
aggregated data for the agricultural sector. A few research reports identified to date and
86
The Terms of Reference mention in this context type and duration of labour contracts, wage levels and
wage disparity within sectors, provision of training, occupational safety and health, the incidence of
accidents at work, and the adequacy of the labour inspection system.
131
relevant for this study provide a comprehensive analysis of various elements, such as work
contracts, working hours, wages, or social security coverage. Yet even these usually cover
only a part of the relevant sector, focusing either on one region or on chosen companies.
Moreover, only some aspects are quantified; for other aspects, the reports describe the
existing situation in a qualitative way. As a result, a comparison of trends in working
conditions over time based on such reports may be very difficult. Finally, these are one-off
research projects usually providing a snapshot of the situation in the sector at the time of
drafting the report, which also means that it is difficult to capture any changes over time.
In stakeholder engagement, this data was complemented by information received from
sector representatives from CA, i.e., trade unions and business associations.
Costa Rica87
In the banana sector, jobs are permanent, given that cultivation and the harvesting of
bananas take place during the whole year (CORBANA, n.d.). According to information
provided by sector representatives, despite low prices paid by European buyers, workers
in the banana sector receive wages by 30-35% higher than the minimum wage (for field
workers) and 18-25% for workers in packaging units. Moreover, social security
contributions are paid for workers (this was well-regulated in the sector already prior to
the entry into force of the Agreement), wages have been higher than in the banana sector
elsewhere in the region and workers enjoy other benefits, e.g., 12 days of paid holidays
and in some places also accommodation, with water and electricity free of charge.
Employers contribute also with the equivalent of 3% of wages to solidarity organisations
from which workers may take loans on convenient terms (CORBANA, interview and written
info. provided for the study).
The literature provides diverging information about working conditions in the pineapple
sector, notably about wage levels. Some authors (Guevara, Guevara, Arce, 2017) report
wages as being the second highest in a comparable agricultural activity and in 2012-2016
systematically higher than the established minimum wage (e.g., in 2016, €375.9 per
month compared to €353.5). Others (Carazo, Aravena, 2016) suggest lower levels, at most
equalling the minimum wage (depending on the company, from €302.4 to €324.7, while
sub-contracted workers earned monthly €220.5, with the minimum wage being reported
as €324.7). All, however, agree that jobs in the sector are formal and most workers have
written permanent contracts signed directly with the employing company. They are
covered by social security schemes and receive protective equipment as part of health and
safety at work. Different conditions of employment have been reported in the case of sub-
contracted workers (e.g., lower salaries, verbal contracts for up to three months and cases
of no payment of social contributions despite deducting them from wages), as well as illegal
migrant workers (who as a vulnerable group require particular attention)88. In general, the
sector is likely to employ a high number of migrants from Nicaragua, either living in Costa
Rica or commuting daily across the border. The authors also agree that the sector has
developed in poor rural areas where there are not many other job opportunities for low
skilled workers and where the wage of a pineapple sector’s worker often represents the
only family income. As for enforcement, e.g., in 2016-2017 the labour inspection realised
173 visits in the pineapple and banana plantations in the regions of Huetar Norte and
Caribé, providing teach-in sessions for 10,000 workers and checks on the respect for labour
rights. Out of 79 enterprises that did not comply with labour rights, 51 later addressed the
87
Costa Rica has taken several steps to improve the occupational health and safety in agriculture. These
include update of the relevant regulations, training delivered for labour inspectors, trade unions and
workers, development of information materials, and others (information provided by the Government of
Costa Rica; https://www.cso.go.cr/divulgacion/agricultura/)
88
However, the literature does not indicate the scale of employing illegal migrants and offering them precarious
working conditions (i.e., if these are isolated cases or a wider phenomenon), nor trends, i.e., their number
increases or decreases over time. On the other hand, in materials provided for this study, sector
representatives informed that 43 plantations, members of CANAPEP (National Chamber of Producers and
Exporters of Pineapple) covering 82% of pineapple production in Costa Rica do not hire migrants with an
irregular status and that all workers contracted by them are covered by social security scheme and insured
against accidents at work. Moreover, the sector has a manual of good practices for sustainable pineapple
production including rules on health and safety at work and compliance with national labour legislation,
among others. The manual is updated every two years. Training regarding good practices is provided to
every plantation and them there is verification of their application, with a minimum compliance
requirement of 70% (reportedly, an average compliance rate is at 97%) (info. provided by CANAPEP).
132
identified shortcomings, while others did not, and these cases were passed to judicial
proceedings (MTSS, 2017).
In the medical equipment sector, working conditions have been improving since 2000
thanks to two factors: competition for skilled workers in Costa Rican export processing
zones where this industry is based, and in addition, strict process quality requirements in
the main destination markets (the EU and the US). In this context, job security increased
and by 2012, 90% of workers had formal jobs with written permanent contracts. Moreover,
wages have been raised (at the beginning of the analysed period, from 2005 to 2011, they
increased by 88%). More attention has also been paid to health and safety at work, due to
process quality requirements (ISO 13845 quality management system) and regulations of
the EU and the US regarding manufacturing methods for medical equipment. These are
subject to frequent inspections by EU and US auditors checking compliance. Finally, with
the sector’s move higher up the value chain, skills development programmes for the labour
force have been prepared by the sector and educational institutions (ILO, 2016). Given the
impact of the requirements imposed by the destination markets on job quality in the sector,
one can conclude that increasing exports to the EU have played a role in it.
El Salvador
According to information shared with the study team by trade unions and business sector
representatives, all jobs in sugar mills in the sugar sector in El Salvador are formal, as
foreseen in the collective agreements negotiated by trade unions and employers. There
are four types of jobs: 1) formal temporary for the sugar cane harvest, 2) temporary for
the maintenance work, 3) permanent for continuous work (e.g., in administration) and 4)
occasional for specific tasks. Moreover, working conditions have been improving, with days
of rest being remunerated, and more attention being paid to personal protective equipment
(and health and safety at work more generally), rest during the day and other elements.
Also, unlike in other countries in the region, the sugar cane harvest remains largely manual
in El Salvador in order to maintain jobs that are vital for local communities and which,
while helping to generate income, also play a role in reducing emigration and criminality.
In the tuna sector, 88% of workers surveyed in 2018 in one industrial group had formal
permanent contracts. However, in interviews they mentioned some practices applied in
their company which affect job quality, such as a high threshold for completed work
required in order to receive a minimum wage, as well as a pressure to continue work
beyond the agreed working time without additional payment (Hawkins, 2018). While there
is no indication about the role of the EU-CA FTA in setting the working conditions in the
sector, certainly the structure of the industrial group, its operations in the EU and the
engagement of trade unions from EU-based branches (as we further outline in the section
on freedom of association) had a positive impact on shaping industrial relations between
the employer and workers. In an interview for this study a trade union representative
stated that working conditions have improved in the sector.
Guatemala
The literature presents diverging views about working conditions in the sugar sector. There
is, however, a need to note in this context that some of the available studies are based on
surveys conducted in the first few years after the entry into force of the Agreement and
therefore present historic data for comparison of trends over time, while they do not
necessarily reflect the current situation in the sector. The audits which have been
conducted in sugar mills since 2003 provide an overview of the situation until 2021,
however, this is limited to sugar mills (we did not identify recent comparable data regarding
working conditions in the rest of the sector). At the same time, according to views
expressed in interviews for this study and literature, working conditions offered by sugar
mills may differ from those offered by other sugar producers, which means that the
situation over time and in different parts of the sector has not been the same89. In a 2014-
2015 survey conducted among sugarcane cutters and transport workers in the sugar
89
Literature speaks in this context, e.g., about long working hours (up to 10-12), low wages, incl. below the
minimum wage, the lack of personal protective equipment, negative health impacts, poor housing conditions for
temporary workers and poor or no facilities for rest during the day. The studies originate from 2014-2015 and
2016 (Verité, 2017; Quiroz, Kuepper, Rijk, Achterberg, 2021).
133
sector, 100% of the former had a written contract (73% among transport workers) and all
surveyed were covered by social security contributions, suggesting a formal job with a
basic quality (Cabezas Badilla, 2015; CNV Internationaal, ICAES, 2016). There are also
results of external audits (2009-2021) and labour inspections (2021), which shed some
light on the working conditions in the sector. Since 2003, annual surveys have been
conducted by an external company in sugar mills in Guatemala. Seven mills (out of eleven
currently operating) have participated in all or most surveys and therefore, the available
data is comparable over time. Each year, surveys cover over 1,000 sugarcane cutters (e.g.,
in 2016-2021, the number varied between 1,100 and 1,212). In the harvest of 2020-2021,
the mills employed in total 14,088 sugarcane cutters, incl. cutters from other regions of
Guatemala, employed temporarily for the harvest. According to results of the survey, the
situation regarding job contracts has improved over time, e.g., while during the 2009-2010
harvest, 63% of cutters had a written contract (according to information from sugar mills
human resources departments), that number increased to 75% in 2012-2013 and further
to 100% in 2014-2015 and has been maintained until 2020-2021 (the latest data
available). Moreover, according to the human resources departments, sugar mills pay to
cutters (in addition to wages), social security contributions and benefits (the latter, at the
end of the contract). In 2020-2021, an average wage was estimated to be 42% over the
minimum wage established by the national legislation. Moreover, according to sugar mills,
sugarcane cutters receive water, and have three breaks a day (20 minutes each) protected
from the sun (Explico, 2009-2021). According to information provided by the Ministry of
Labour, in September 2021, labour inspections 90 were conducted in 19 enterprises of the
sugar sector in the departments of Escuintla and Santa Rosa. Out of these, 13 complied
with legislation related to written contracts, payment of at least minimum wage and social
security, as well as other benefits. The remaining six enterprises were requested to take
remedy actions91 and five of them did so. Moreover, there were inspections checking
respect for health and safety at work (info. provided by the Ministry of Labour). Moreover,
the sector has developed a manual outlining its labour policy, and since the 2016-2017
harvest it has been shared with suppliers obliging them to implement it, with a verification
mechanism checking compliance. The manual foresees a written contract with each worker,
payment of at least the minimum wage, payment of social security contributions, and other
elements. In an interview for this study, it was emphasised that labour and CSR policies
introduced by Guatemalan companies represented an element of their overall strategy and
were not related specifically to the EU-CA FTA (Azúcar de Guatemala, 2021 and 2019;
information shared by sector representatives). In public consultations for this study, trade
union representatives expressed frustration that respect for labour standards and working
conditions in the Guatemalan exporting sectors, notably at large plantations in the sugar
sector, banana, and palm oil sounds like utopia (rather than reality), and that the EU
tolerates this state of affairs. In their view, other policies developed by the private sector
and promoted as a contribution to the attainment of SDGs are more like part of a marketing
strategy for big companies and are more of a window dressing exercise rather than an
accurate depiction of reality. Overall, given that some measures such as labour policies
started to be implemented prior to entry into force of the EU-CA FTA and given that the
available evidence does not allow to draw more precise conclusions, the most likely
conclusion is that there was no direct impact of the EU-CA FTA on working conditions in
the sector. That said, the EU side has discussed challenges and sustainability questions
related to agriculture with the government of Guatemala and with business
representatives. As noted in the sections on forced labour and CSR as well as below (palm
oil sector), there are EU-CA cooperation activities which aim to include human rights and
better employment practices in agricultural sectors, including sugar.92
90
Moreover, the capacity of labour inspection services has been strengthened with recruitment of additional
inspectors (with the total number increasing from 172 in 2020 to 182 in 2022) and with purchase of 28
additional vehicles to be used in inspections (information provided by the Ministry of Labour).
91
The information shared with the study team does not specify the type of shortcomings identified by labour
inspectors, which had to be remedied.
92
Labour inspections may also play a role in ensuring compliance with the national legislation. In this context,
we note that in 2016, labour inspections were carried out in the benefit of 419,245 workers in Guatemala, and
in cases of non-compliance, labour inspectors submitted 3,596 cases to courts. The labour inspection report for
the year 2016 does not provide a break-down by sector of intervention, therefore, it is difficult to judge to what
extent the exporting sectors were also covered by inspections (we note that out of 30,701 complaints, 22,614
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The palm oil sector creates fewer jobs than other cultivations. As an effect, fewer low-
skilled workers can find jobs on palm plantations compared to other cultivations and this
has created a kind of competition for the available jobs within the local communities, as
well as between local workers and workers migrating from other places. This situation has
been exploited by the intermediaries, who can get away with providing poor working
conditions and can use threats of firing workers safe in the knowledge that it would be
easy to find a replacement. The situation is particularly difficult in regions where other
cultivations have been replaced by oil producing African palm, and therefore people who
had employment either on other plantations or on their own farms are often left without a
job. According to a 2016 survey, a small percentage of workers, mainly highly qualified
ones, may get permanent jobs in the sector being contracted directly by plantations. Other
workers who were employed directly also received written contracts and in addition to their
salaries received financial benefits envisaged by the legislation, social security coverage
and holidays. Most workers, however, who were hired by intermediaries had only verbal,
short-term contracts, did not receive benefits and were not covered by social security.
Wages were low and, depending on the employer, may have been equal to or below the
minimum wage. Moreover, wages were paid either by time of work or tasks, while the
latter sometimes meant a need to work longer or harder to get the minimum wage
(compared to being paid per day of work without thresholds to achieve). Some workers
indicated that when a plantation receives a sustainability certificate, wages and health and
safety at work improve, e.g., personal protective equipment is distributed to workers
(Verité, 2016). According to information provided by the Ministry of Labour, labour
inspections were conducted in April 2021 in four enterprises operating in the palm oil sector
in the department of Petén. Each inspection focused on labour rights and health and safety
at work standards. The visited enterprises employ in total 1,296 workers. Inspections found
that the visited enterprises complied with the national legislation regarding written
contracts, payment of at least minimum wages and social security contributions, as well
as other applicable benefits. Regarding health and safety at work, inspectors requested to
ensure that workers wear masks and that other measures are taken to avoid infections.
Also, employers should not take any steps against workers for demanding such measures
and should not publish any personal data regarding workers (info. provided by the Ministry
of Labour). While the available evidence does not indicate any direct influence of the EU-
CA FTA on working conditions in the sector, there have been cooperation activities which
may bring about some results in the future. These include, e.g., a project financed by the
EU and implemented by the ILO (REFRAME) which focuses on improving employment
practices. As an outcome of this project, two manuals have been prepared outlining policy
to respect human rights in the palm oil and sugar sectors in Guatemala, both adopted and
presented in 2020 (info. shared by the Commission and business representatives from
Guatemala).
According to the information provided by the Ministry of Labour, in 2021, labour inspections
were conducted in 73 enterprises in the coffee sector. Out of those, 38 complied with the
national legislation regarding working conditions, and eight did not have the obligation to
meet some of the conditions. The remaining 27 were requested to take remedy measures
and out of these, 21 did so. No information was provided regarding the remaining six, i.e.,
whether any steps were taken by them or by the labour inspection (e.g., imposing penalties
or referring the matter to the court). There was no information either regarding the type
or seriousness of non-compliance which had to be remedied (information provided by the
Ministry of Labour).
Honduras
The coffee sector provides income for around 120,000 producers and offers jobs during
the harvest time to temporary workers migrating from other departments of the country,
Nicaragua, and Guatemala. In small plantations, the whole owner’s family participates in
maintenance work and harvest, working informally as non-paid family members, incl. the
were in Guatemala City). The report of labour inspection for 2019 provides details regarding aspects that were
checked during inspections in agriculture (e.g., child labour, forced labour, payment of minimum wage and
other benefits), however, does not provide statistics regarding cases of compliance and non-compliance. These
visits covered companies employing 49,922 workers (Ministerio de Trabajo y Previsión Social, Guatemala, 2016
and 2019).
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youth. Permanent workers are employed mainly in large plantations. In other plantations,
permanent workers also sometimes support owners in maintenance work during the whole
year. They typically do not have written work contracts and are not covered by social
security schemes, but they work for the same employer over the whole year and receive
monthly wages, which increases their economic stability compared to temporary workers
hired only for the harvest or for single tasks. The monthly wage of permanent workers
often is lower than the minimum wage (€220 compared to €229 in 2018-2019).
Administrative workers in cooperatives, intermediary and exporting enterprises usually
have contracts and social security cover envisaged by the legislation. Temporary workers
hired for the harvest earn up to a minimum wage (certified plantations have to pay at least
the minimum wage). The daily pay oscillates between €7.92 and €14.1 depending on the
amount of harvested coffee. The monthly wage, in turn, depends on the daily pay and the
number of working days in a month. Temporary workers are not covered by social security
schemes. In some cases, workers that migrate from other regions or countries work long
hours, including the weekend, to increase their income. In their case, plantation owners
provide accommodation, some also food, and cover costs of transport and compensation
for accidents at work. None of those workers is covered by the social security scheme.
Moreover, ILO research (ILO, 2020a) states that working conditions in the coffee sector in
Honduras have remained practically the same over the last ten years. In 2020, the ILO
provided proposals for addressing questions related to health and safety at work in the
sector, as part of a project financed by the EU and aiming at addressing health and safety
related problems (e.g., reducing the number of work-related fatal and non-fatal accidents)
in chosen value chains. In Latin America, it focuses on the coffee sector (ILO, 2020a). In
addition, as outlined in the CSR section, in a survey of 659 small-holder coffee producers
from Honduras published in 2020, the majority (400) had at least one certificate, i.e., Fair-
Trade, Fair-Trade organic, Rainforest Alliance, Common Code for the Coffee Community,
UTZ, Nespresso, or Starbucks. The analysis of their performance compared to non-certified
plantations showed that the best social scores had coffee producers from Honduras certified
by Rainforest Alliance and particularly good outcomes were for elimination of child labour
and improvement on health and safety at work (WWU Münster, INCAE, 2020). This shows
that certification schemes, in particular if they provide support for small-scale farmers to
adjust their practices, may bring about a change in working conditions, and the same may
be true for assistance projects.
According to information provided by sector representatives (APAH), in the sugar sector,

in sugar mills, workers receive the minimum wage and other benefits, as well as payslips.
The maximum working hours foreseen by the legislation are respected and workers have
time for rest in shaded areas during the day and are provided with water and isotonic
drinks. Moreover, there is access to first aid and medical personnel for workers and their
families. There is also investment in health and safety at work, and BONSUCRO certificates
may be used as a proof that conditions required by legislation are met. Sector
representatives did not make any reference to the EU-CA FTA as a factor contributing to
these practices. That said, sector representatives from the whole CA region admitted that
overall, to be able to export to markets such as the EU or the US, there is a need to make
an effort in the sustainability area. Therefore, the EU-CA FTA may have played a role jointly
with other FTAs encouraging either maintaining already existing practices or even
enhancing them.
The melon sector provides temporary jobs in short cycles, during the whole year, including
during the harvest. These often represent the only or one of the very few job opportunities
for low skilled workers in rural areas and provide income to cover the expenditures of the
whole family (El Heraldo, January 2015). The results of a 2012 survey carried out among
workers of the sector in the south of Honduras suggest that most workers had short-term
contracts of six months or less and were not covered by social security schemes. Moreover,
85% of them received wages below the minimum envisaged in the legislation (while the
day minimum wage was of €5.2, resulting in a monthly wage of €114-€155.8, depending
on the number of paid days in a month, the workers used to receive only €88), usually
worked long hours (12 to 14 hours a day) and 69% worked extra hours and over the
weekend and festive days without an additional payment. Only half of them had breaks for
a meal, and only 30% worked in places with basic facilities, such as drinking water or
136
toilets. Also, despite being exposed to chemicals, only half of them received personal
protective equipment and a training in how to use it. Moreover, even if inspections
identified any shortcomings, the companies did not choose to remedy them, preferring to
pay penalties instead (ILRF, COSIBAH, 2012). Reports of the lack of respect for working
conditions envisaged in the domestic legislation, such as non-payment of the minimum
wage, social security contributions, and benefits (vacations, and 13 th and 14th wage), the
lack of protective equipment and training related to health and safety at work, and gender-
based violence and discrimination, such as forced pregnancy tests before hiring women in
packing units of the fruit companies have continued and the latest available are from 2019
(Foxvog, Rosazza, 2020; Banana Link, 2019a). While the available evidence does not
provide an exhaustive analysis of practices applied by each company in the sector and
therefore, there is a possibility that some may vary from the overall picture, it suggests
the lack of impact of the Agreement on working conditions, including on practices of
multinationals operating there. It also suggests weakness of the domestic enforcement
mechanisms and the inability to effectively mandate a need to remedy the situation.
Nicaragua
In the sugar sector, in 2015, workers earned on average more than the minimum monthly
wage established by the legislation (€91.1), with the salary of a cutter being between
€140.2 and €228. Moreover, workers employed directly by the companies earned on
average €170, while sub-contracted workers earned €154 per month. In 2013, the cost of
a basic basket of goods and services was estimated at €39993. Given that wages were
calculated per tonne of cut sugarcane, workers were tempted to work long hours, incl. over
weekend, however, only 40% to 65% of surveyed workers effectively received money for
extra hours. While the companies usually provided personal protective equipment and
training in how to use it, this practice was applied more frequently to directly employed
workers compared to sub-contracted ones. Moreover, depending on the company, workers
had one or two breaks for rest during the day. However, 26% declared that they received
no breaks for rest at all. Workers also reported a varying access to drinking water during
the day, mostly insufficient compared to the number of hours worked in high temperatures
(Fairfood International, 2015). According to another source, formally employed sugarcane
workers (we assume this refers to those directly employed by the companies) have 20-
minute breaks per two hours worked, with working days of no more than 12 hours (Quiroz,
Kuepper, Rijk, Achterberg, 2021). In this context we note that six years elapsed between
the two studies and therefore working conditions might have changed in the meantime. A
2017-2018 survey conducted in a narrow part of the sector (one sugar mill with suppliers)
also suggests a difference in working conditions between permanent staff and workers
directly employed by the mill on the one hand, and other workers, including temporary
ones and those employed by sugar suppliers, on the other. Staff directly employed by the
mill had written contracts and payslips, received protective equipment, and had other
benefits, such as paid holidays. Others did not have written contracts, but often received
payslips, and most (80%) had protective equipment. Regarding benefits, 40% of
permanent staff working for suppliers declared not having holidays. There were also
changes in work organisation, the most important being an increasing harvest
mechanisation, with 83% of suppliers applying full mechanisation and 17% having 75% of
harvest mechanised. This means a substantial decrease in the number of jobs for
temporary workers (i.e., sugarcane cutters), but also the reduction of jobs with the worst
working conditions. Also, given bad practices applied by intermediaries, the mill analysed
in the 2017-2018 survey decided to eliminate intermediaries from the organisation of work,
and to employ workers directly. Employing workers directly allows for more influence on
and better monitoring of working conditions (GAP consultores, 2018). According to
information provided by sector representatives for this study, based on Social Security Law
No. 539 of 2005, social security contributions are paid for workers employed by sugar mills,
while in some mills this practice started even before entry into force of the law. Wages
paid by sugar mills are overall much higher than the minimum wage: in the case of a low-
93
According to information provided by sugar sector representatives, the cost of the basic basket in Nicaragua
is estimated for a family of at least five persons. The basket includes food (e.g., meat, dairy products, the
basic vegetables, sugar, rice, oil, and flour-based products, such as bread or pasta), utilities (the rent for
accommodation, electricity, water, and gas), basic cosmetics and hygiene products, and clothing, and
footwear, for adults and children.
137
skilled agricultural worker, the wage is 2.2 times higher than the minimum wage, and for
a sugar cane cutter it is 3.1 times greater than the minimum wage, while the average for
the whole company (sugar mill Monte Rosa, provided as an example) is 2.7 times the
minimum wage. There are also systems of implementation of health and safety at work
provisions to prevent accidents at work and occupational diseases, e.g., purchase and
review of personal protective equipment, awareness raising among staff, plans for
emergencies, marking of equipment needed in such situations, and monitoring of work
(CNPA, 2022). Based on information provided by the sector (suggesting no impact of the
Agreement on sustainability practices) and the timeline of certain practices predating the
EU-CA FTA (e.g., the law on social security), one can conclude that at least regarding
working conditions in sugar mills, the Agreement cannot be considered as a decisive factor
triggering changes or certain behaviours. On the other hand, sugar sector representatives
from the whole CA region admitted that overall, to be able to export to markets, such as
the EU or the US, there is a need to make an effort in the sustainability area. Therefore,
the EU-CA FTA may have played a role jointly with other FTAs in encouraging either
maintaining already existing practices or enhancing them.
In the coffee sector, a 2016 survey indicated that workers usually received at least the
minimum wage established for agriculture, however, this was too low to satisfy basic needs
or provide a decent level of life. Moreover, despite efforts in the sector to improve working
conditions, they were still unsatisfactory at non-certified farms. Other factors influencing
wages included the low productivity of workers, lack of access to technologies which would
improve the quality of coffee produced and the coffee leaf rust which affected the sector
in 2012-2013. While Nicaragua had enough workers to assist harvest in the coffee sector,
these often migrated to Costa Rica and Honduras to receive better wages. This in turn
forced coffee producers in Nicaragua to increase wages and improve plantation facilities to
attract workers. There were also examples of good practices implemented by cooperatives
to employ women during the harvest so as to improve gender equality and to help create
additional income generation opportunities outside the harvest season, such as a small
shop with food products run by women. Cooperatives encouraged employing the same
workers each season to increase productivity and economic stability for workers and
producers alike (Solidaridad, 2016).
Panama
In the banana sector, based on a 2017 law, workers can benefit from an earlier retirement,
provided they have completed 58 years of age in the case of men and 54 in the case of
women, have worked for at least 18 years in the sector and provided 216 contributions to
the social security scheme. This acknowledges that work in the sector has negative impacts
on health and decreases the physical ability to work (Ministerio de Trabajo y Desarrollo
Laboral, July 2018). In 2021, a new law established an obligation for employers in the
sector to buy life-insurance and insurance against accidents at work for workers in order
to secure household income in case of negative work-related health impacts or fatal
accidents. Moreover, the law envisages health checks to be conducted every three months
for workers exposed to chemicals (Ministerio de la Presidencia, September 2021).
However, according to information provided by workers to the National Assembly in 2021,
some companies in the sector do not respect the existing legislation nor workers’ rights
and workers end up working for many years without being covered by social security and
while being exposed to health-related risks. According to them, they receive only short-
term contracts of two to eight months, sometimes up to one year and a half, after which
they are fired and forced to look for a new job. Even if they manage to find one within the
banana sector, short-term contracts and periods of a break between consecutive contracts
may prevent them from being covered by social security or cause breaks in their cover
(Asamblea Nacional, February 2021).
Regarding working conditions in the Panama Canal territory, the Government has provided
the following information for this study. The Panama Canal Authority has been established
by the Constitution of Panama as an autonomous legal entity, while rules of its operation
have been outlined in a dedicated law of 1997. The Authority has its own labour regime,
in which labour conflicts between workers of the Panama Canal and its Administration are
addressed by mechanisms established by the 1997 law. Arbitration has been foreseen in
138
this context as the final stage of a conflict resolution mechanism. The labour inspection of
Panama does not have a mandate to operate in the Panama Canal territory, given that the
inspection services have been established to ensure enforcement of the Labour Code which
does not apply in the territory under the Panama Canal Authority. The latter has the power
to set up its own employment rules, which should – as a minimum – correspond to the
rules applicable in Panama on 31 December 1999, i.e., on the day when the Panama Canal
Zone ceased to be a territory under the US jurisdiction. This also means that the Labour
Code does not apply to the Panama Canal workers, and that everything that is related to
working conditions and freedom of association is either directly prescribed by the 1997 law
or is determined by the Panama Canal Authority.
Conclusions and recommendations related to impacts for working conditions:
In this section, we analyse impact of the EU-CA FTA on working conditions in CA, notably in sectors
involved in trade with the EU. The available evidence suggests a diversity of working conditions
depending on the sector, employer (e.g., sugar mills compared to small producers in the sugar
sector) and sometimes also job category (e.g., permanent, directly hired workers compared to
temporary and sub-contracted ones). According to the literature, job quality shortcomings, e.g.,
related to wage levels, the lack of paid social security contributions and health and safety at work,
including the lack of personal protective equipment are reported more frequently in the case of
temporary or subcontracted workers, and workers hired by small producers (e.g., in the sugar
sector outside sugar mills, in the melon sector in Honduras, in the palm oil sector in Guatemala,
although not all shortcomings are reported in each of those sectors). On the other end of the scale
are permanent jobs, including in sectors, such as medical equipment in Costa Rica. In the latter,
trade with the EU and competition for skilled workers have contributed to creation of decent
working conditions, including permanent contracts, wage increase, respect for health and safety
at work and skills development programmes. Also, according to information provided by sector
representatives, working conditions in sugar mills meet requirements of the legislation, and so do
working conditions in the banana sector (although there may be differences within some countries,
like Guatemala) and in the pineapple sector in Costa Rica. It is also possible that other sectors or
their parts (e.g., the tuna sector in El Salvador, coffee in Costa Rica or parts of the palm oil sector
in Guatemala) comply with the existing legislation, however, the information and data available
to the study team are not complete and therefore, it is not possible to draw precise conclusions
in those cases.
In this context, the reports and interviews with stakeholders indicate a few reasons which have
triggered improvement of working conditions in the exporting sectors in CA, and these include the
shortage of local labour supply due to the emigration for harvest to the neighbouring countries,
the plantation becoming part of a certification scheme (e.g., in palm oil), cooperation with trade
unions and the overall momentum for improvement in working conditions in the country (e.g., in
El Salvador and in its tuna sector) and labour inspections (e.g., in the pineapple and banana sector
in Costa Rica, and the sugar, palm oil and coffee sectors in Guatemala). Moreover, while
representatives of some sectors, e.g., sugar sector suggest that applied practices were not
triggered by the EU-CA FTA as a decisive factor, they also admit that the ability to export to
markets, such as the EU or the US requires some efforts in the sustainability area. Therefore, the
Agreement might have played a role jointly with other FTAs in encouraging compliance with
national legislation and improvement in working conditions. On the other hand, in some sectors
(e.g., melon in Honduras), there seems to be no improvement over time and impunity of the
companies in the sector violating workers’ rights and preferring to pay penalties without
remedying the situation. Also, the conditions in the coffee sector in Honduras have been reported
as not having changed over the last ten years (however, other reports related to certified coffee
plantations in Honduras provide evidence of improved working conditions, notably regarding
health and safety at work). This shows a positive influence of the certification schemes and
commercial factors on employers’ practices, while the impact of the Agreement as a policy
framework seems to be limited, as does the insufficient capacity of the CA authorities to address
the problems. However, as mentioned in the case of El Salvador and medical equipment sector in
Costa Rica, there are examples, where trade with the EU and the Agreement have contributed to
improvement in working conditions.
Another aspect is related to labour inspections and their role in enforcement of domestic labour
legislation. While these are within the powers of national institutions, labour inspection has been
frequently discussed at the TSD Board meetings (see Annex C-1) and the CA countries (most
recently Guatemala) have strengthened capacities (human and technical) of labour inspection
services over the period under review. Moreover, the EU has funded some activities, such as
development of sector policies to respect human rights in the sugar and palm oil sector in
Guatemala and a project to help to address health and safety at work issues in the coffee sector
139
in Honduras. However, as these activities have been very recent (2020), there is a need for time
for them to bring about changes on the ground yet. In this context, the EU and CA should also
consider a possibility of technical assistance, implemented, e.g., in cooperation with the ILO,
aiming to further strengthen capability of inspection services and their operation in the CA
exporting sectors. This may be supported by the ILO Governing Body decision of March 2022 to
adopt guidelines for inspection services94 which will accompany two ILO conventions on inspection
services (No. 81 and 129).
It is also to note that in June 2022, the ILO International Conference (i.e., the supreme ILO
decision making body) decided to include health and safety at work into the ILO 1998 Declaration
on Fundamental Principles and Rights at Work, and to add two related conventions (No. 155 and
187) to the list of the ILO fundamental conventions. This in turn means that all ILO Members are
obliged to respect the newly added principles it in the same way as the core labour standards
enshrined in the remaining ILO fundamental conventions95. While this decision does not
automatically change any existing rights and obligations under the implemented trade
agreements, it may nevertheless provide a good justification for enhancing the EU-CA dialogue
and cooperation on health and safety at work and dedicating to it, e.g., a side event accompanying
the annual TSD Board meeting. It could include exchange of good practices applied by CA and EU
companies in different exporting sectors (or more specifically, in agriculture) and a discussion
about remaining challenges.
There have been different initiatives coordinated by SICA (some together in cooperation with the
International Organisation for Migration) regarding different aspects of migration in the CA region.
As indicated throughout different sections of the social analysis in this Report, workers migrate
between CA countries seeking employment in sectors exporting to the EU, including at the time
of harvest. Therefore, to the extent this has not been addressed yet in the CA regional economic
integration, the CA countries could discuss the ways of addressing movement of workers among
them and their enjoyment of workers’ rights established in the national legislation of the hosting
country, such as payment of at least minimum wages or social security contributions. The already
existing best practice from different sectors could be shared between the CA countries and
relevant sector associations (e.g., migrant workers are employed in the coffee and the pineapple
sectors in Costa Rica). The EU could also support such discussions sharing experience from the
solutions adopted within the Internal Market.
In an interview for this study, stakeholders from Guatemala stressed a need for an enhanced
social dialogue about wages and other elements of working conditions in Guatemala (and other
Central American countries) to ensure that workers can also benefit (on a more equal footing with
businesses) from international trade and export revenues, enjoy in practice the right to establish
and to join trade unions and to bargain collectively and to have decent jobs, which would help to
reduce poverty.
4.5 Analysis of impacts on child labour
The Terms of Reference for this project have selected this task as one of priorities. In this
section, we summarise findings from case study No. 9. It has been prepared jointly under
the social and human rights analysis and its findings are considered in both those parts.
The analysis aims to establish if the Agreement has influenced progress by the Parties
towards meeting their commitment reiterated in the TSD chapter to effectively implement
in their law and practice the ILO fundamental conventions, including conventions No. 138
and 182 related to the elimination of child labour, including its worst forms. Further details
regarding the overall situation in Central America and measures taken to-date to eliminate
child labour, are provided in Annex C-1.
Like in other sections of the study, also here we note that many actions taken either by
the Central American governments or the private sector (e.g., to eliminate child labour)
are usually driven by several factors, most of which are not related to the EU-CA FTA.
Therefore, while the analysis describes the situation in sectors engaged in exports to the
EU, this is not to suggest that observed changes have been influenced by the Agreement.
That said, where this was possible, based on information provided by sector
94
ILO (17 March 2022), Labour inspections to be strengthened following ILO Governing Body decision:
https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_839865/lang--en/index.htm
95
ILO (10 June 2022), International Labour Conference adds safety and health to Fundamental Principles and
Rights at Work: https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_848132/lang--
en/index.htm
140
representatives or on other evidence, we have signalled potential links to the Agreement

or, more generally, exports to the EU. The analysis in the case study focused specifically
on the situation in and actions taken by El Salvador, Guatemala, and Honduras, while the
situation and trends in most relevant sectors in the remaining countries of the CA region
have also been taken into account, as well as other activities outlined in Annex C-1.
The available evidence suggests that the Central American countries have taken steps to
eliminate child labour. These include having in place legislative and policy frameworks, and
other measures, such as financial support to poor families, initiatives encouraging school
attendance, awareness raising campaigns, and cooperation with private sector and
international partners to eliminate child labour, including from sectors involved in exports
to the EU and other partner countries. Indeed, while recent data is not available for all CA
countries, the figures in Table 4.5-1 suggest that except for Nicaragua, the number and
share of children of 5-17 years of age involved in an economic activity and in child labour
decreased. Also, the efforts of Costa Rica should be highlighted, which has by far the lowest
level in the CA region of children engaged in an economic activity or in child labour, and
yet, in the analysed period, managed to further reduce the scale of this phenomenon. Also,
a substantial reduction in child labour has been recorded in El Salvador.
Table 4.5-1. The number and share of children aged 5-17 engaged in economic activity and
in child labour in CA
No. of working children (5-17 Share of working children (5-
years of age) 17 years of age)
At the At the
beginning of The latest beginning of The latest
Country Difference
the analysed data available the analysed data available
period period
47,40096
(2011) 19,65298
Costa Rica 16,16097 (5- (5-17 years) -27,748 4.6% 2.0%
14 years, (2019)
2011)
188,884 93,283 n.d. 6.5%
El Salvador -95,601
(2009) (2019) (2009) (2019)
846,640 790,243 20.3% 18.2%
Guatemala -56,397
(2011) (2014) (2011) (2014)
412,122 364,765 15.6% 14.8%
Honduras -47,357
(2010) (2019) (2010) (2019)
323,832 396,118 18.9%
Nicaragua +72,286 n.d.
(2010) (2012) (2010)
71,992 7.5%
Panama n.d. n.d. n.d.
(2016) (2016)
Source: multiple sources, all have been provided in Annex C-1 in the section dedicated to child labour
Moreover, there are examples of measures applied by the private sector (such as clauses
in contracts with suppliers prohibiting the use of child labour, verification of the age of
recruited workers (based on ID), provision of education and leisure time facilities for
children at plantations, so that they can spend time safely while their parents work),
awareness raising campaigns and cooperation with ministries and other institutions to
reduce and eliminate child labour from sectors involved in trade, e.g., sugar and coffee.
96
Children and adolescents aged 5-17 years engaged in an economic activity in 2011, based on data from
Household Survey 2011. ILO and MTSS (2012), Magnitud y características del trabajo infantil
y adolescente en Costa Rica - Informe 2011: https://www.ilo.org/wcmsp5/groups/public/---americas/---ro-
lima/---sro-san_jose/documents/publication/wcms_193858.pdf
97
Children aged 5-14 years, i.e., below the minimum age of admission to employment engaged in child labour
(the same source as above).
98
AmaliaRueda.com (14 June 2020), Trabajo infantil en Costa Rica disminuyó 36% en los últimos tres años,
según Ministerio de Trabajo: https://www.ameliarueda.com/nota/trabajo-infantil-costarica-disminuyo-
ultimos-3-anos-ministerio-trabajo
141
The evidence provided by sector representatives and other sources suggests that progress
has been made by CA countries in eliminating child labour in particular from the sugar
sector and sugar mills’ activities. Information from audits (inspections) and ILO and US
Department of Labour reports suggest that child labour has been eliminated from the sector
in El Salvador, Guatemala, Honduras, and Panama, while the sector in Nicaragua has also
taken similar steps (the latter is confirmed in the literature, but data is not available).
Likewise, sector representatives of, e.g., the banana sector in Costa Rica informed that
labour inspections had not identified any cases of child labour in the sector’s operations.
Many actions have also been taken in the coffee sector, in particular in Guatemala and
Honduras and there is evidence confirming the number of children participating in activities
aiming at child labour prevention and reduction, such as pre-school and school education.
However, these activities and the resulting changes cannot be attributed to the EU-CA FTA,
as they predate the entry into force of the Agreement (notably in the sugar sector in El
Salvador and Guatemala) and are related to trade with the US and Canada. Likewise, the
zero tolerance for child labour policy applied by international buyers, the well-known
multinational brands sourcing in Central America in the coffee and sugar sectors played a
role. Those companies have their own monitoring mechanisms and over the last decade
have exerted pressure on Central America to reduce and eliminate child labour in exporting
sectors, including coffee and sugar. There are also cooperation activities supporting these
efforts.
Against this background, exports to the EU, notably in the sugar sector, have a relatively
small share in total exports from CA countries, which means that commercial factors may
in this case have only a limited (but increasing) leverage. That said, sugar sector
representatives admitted in a discussion for this study that exports to markets such as the
US or the EU are considered as being linked to certain sustainability requirements, and
that the sector needs to meet them in order to be competitive. Hence, while the EU-CA
FTA’s role on its own as an influencing factor would be rather limited, its importance (and
the EU’s) would increase if the importance of the EU market were considered jointly with
other markets.
As noted above, the available evidence does not highlight the role of the EU-CA FTA,
although the significance of the FTA may also be hidden partly behind the actions taken by
international buyers. These may have a global sourcing policy for the whole brand, and
this may also cover supplies to the EU, using the preferences offered by the EU-CA FTA.
Also, as suggested by coffee sector representatives from Honduras, and sugar sector
representatives from Nicaragua, exports (including those made to the EU) have
encouraged adherence to certification schemes, some of which prohibit the use of child
labour. In addition, the ongoing policy dialogue under the TSD Title, at the TSD Board
meetings, which includes reporting progress on eliminating child labour, might have
contributed to keeping the matter on the priority list for Central America.
Overall, progress made in the elimination of child labour has brought the CA countries
closer to meeting the SDG 8.7 and their commitments under the TSD Title.
Recommendations related to child labour, including the case study:
As already demonstrated by the examples of sugar and coffee sectors in CA, a need to meet
expectations of international buyers (such as big coffee brands or multinationals in the beverages
sector) provided a leverage for CA producers to eliminate child labour from their operations. This
expectation, although not directly related to the EU-CA FTA is likely to remain in place and be
extended to more products and sectors, notably those involved in international trade. Also,
banana sector representatives from Costa Rica informed about no cases of child labour identified
by labour inspections in the sector’s operations.
In this context it will be important that international corporate buyers and private consumers are
ready to pay decent prices for purchased products to enable CA producers to cover costs, incl.
wages meeting requirements of the national legislation in CA or being above that level. This will
provide decent job opportunities for adults and decrease a need for child labour as a support for
the household budget, in sectors and regions, where child labour still exists.
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Also, further job creation related to the Agreement will remain important providing work for adults
and decreasing demand for child labour. Finally, certification schemes may play a supporting role,
including those that require elimination of child labour from business’ operations.
Moreover, as outlined in Annex C-1 and the case study, CA countries have taken steps to eliminate
child labour, and in particular Costa Rica (which has by far the lowest rate of child labour in the
region) and El Salvador have made progress in this area. While the current situation and therefore
the remaining challenges vary between the CA countries, there will be a need to continue and
enhance efforts to reduce and eliminate child labour, also from other sectors, not related to
international trade, such as construction and informal sector, including domestic work. Likewise,
there is a need for further efforts to prevent engagement and to withdraw children from the worst
forms of child labour, including sexual exploitation, illicit activities, and human trafficking. This
will require further development of enforcement capacities of labour inspection, police, and other
relevant bodies, as well as judiciary and the system of support to victims. Actions in these areas
will contribute to a more effective implementation of the ILO Conventions No. 138 (minimum age
of admission to work) and 182 (worst forms of child labour) and to meeting commitments of the
Parties under the TSD Title. In this context, TSD Board meetings or dedicated events may support
exchange of experience and best practice, and discussion about common challenges.
Moreover, to address the challenge of child labour more effectively, there is a need to have data
regarding its scale and incidence. Such data is usually collected by institutes of statistics in
dedicated child labour surveys or as part of the annual household survey. However, in some CA
countries the latest and comprehensive data is not available. For example, in Nicaragua, the last
child labour survey was conducted in 2012 and there is no more recent data. In Guatemala99, a
child labour survey was conducted in 2014 and likewise, there is no recent detailed data.
Therefore, these countries in particular should plan, in cooperation with the ILO, if needed,
dedicated child labour surveys (where they were not conducted in the last few years) or include
modules on child labour into the annual households’ survey. On the other hand, Guatemala has
elaborated a detailed risk profile of the country, estimating the risk of child labour for all
departments.
4.6 Analysis of impacts on forced labour
This task has been identified by the ToR for the study as one of the priorities. The analysis
seeks to determine if there are links between the EU-CA FTA and cases of forced labour in
Central America. The situation in CA in this context, as well as steps taken by the CA
governments to tackle forced labour have been outlined in Annex C-1.
We note in this context of the difficulty of analysing the occurrence of forced labour, given
that the available literature does not provide an estimation of the scale of this phenomenon
and in most instances states only that forced labour cases have been detected in certain
sectors or regions of a country, without quantifying them 100. This makes it difficult to
capture any trends over time and establish links between them and the Agreement.
Moreover, there are diverse approaches to defining forced labour and distinguishing it from
informal work or precarious working conditions. While ILO Convention No. 29 provides a
definition of forced labour, and there are sometimes clearly identified cases of it (e.g.,
including taking away the documents (ID) of the victim, not paying or paying very little for
the work done, imposing limits on freedom of movement, enforcing long working hours,
and applying any type of violence or threat), there are also cases reported in the literature
where the border line between precarious working conditions and forced labour is blurred
and which are difficult to classify precisely. For example, the IOM research (IOM, 2011-
2011c) speaks about forced labour referring to working conditions, which are defined by
the ILO as typical for informal work, e.g., the lack of written contract, no payment of social
security contributions, wages below the minimum established by national legislation and
long working hours (ILO, 2015a). To avoid any confusion, in our analysis below, we will
stick to the ILO definition of forced labour and classify as such only clear cases matching
that definition, across countries and sectors (this means that only those CA countries and
sectors where such cases were identified at any time during the analysed period have been
99
In Guatemala, there is some data regarding child labour from a 2018 census, however, as it relates to the
age group 7-14 years (not 5-17 years as the child labour survey), a comparison over time is not possible.
Moreover, no detailed figures are available.
100
The Global Slavery Index provides an estimation of the total number of persons living in conditions of a
modern slavery in a country, however, it does not provide a break-down by sectors or forms of forced
labour.
143
considered below). All other examples, which may be classified as informal work (in line
with the ILO definition) or precarious working conditions will be reported in other sections
of the analysis.
El Salvador
Research conducted in the sugar sector in 2013-2014 did not identify any clear cases of
forced labour, such as retention of identity documents or debt bondage (UL, 2015).
Guatemala
In research carried out at the beginning of the analysed period (2009-2011), including
interviews with 372 workers in the coffee sector from departments of Huehuetenango,
Quiche, San Marcos, Solola, and Quetzaltenango, forced labour-related evidence was
collected (e.g., physical confinement in the workplace during the working hours, verbal
abuse and threats of a penalty for non-compliance, induced indebtedness, false promises
about the terms of work, withholding and non-payment of wages, and retention of identity
documents). Moreover, there was evidence of financial penalties, threats of dismissal from
the current job and prevention of future employment (blacklisting), threats about being
deprived of food, long working hours, and very low wages (Verité, 2012). According to
another study and interviews with workers at the coffee plantations, intermediaries used
to keep identity documents of hired workers, preventing them from leaving the job before
the end of the harvest. Likewise, wages were withheld until the end of the harvest and
until then workers became indebted towards the employer buying food in a store at the
plantation. Moreover, many workers were brought to the plantation by an intermediary,
sometimes a long distance from home, and did not have either money or a means of
transport by which to return home on their own (Danwatch, 2014). In 2016, the National
Association of Coffee Producers (ANACAFE) developed a labour policy outlined in a manual
for coffee producers in the country that explains all ILO core labour standards and their
practical application in the coffee sector. Regarding the abolition of forced labour, it
provided a list of non-accepted practices, such as retention of identity documents or wages,
imposing long working hours exceeding 12 a day, application of penalties to workers, and
others (Anacafé, 2016). However, there is no information about how this policy has been
implemented and monitored, e.g., there is no reference to this policy in corporate reports
from 2017-2018 and 2018-2019.
In a 2016 research study related to the sugar sector, visits were realised to departments
producing sugar, i.e., Retalhuleu, Suchitepéquez, and Escuintla, and workers’ communities
of origin in Quetzaltenango, Quiche, Retalhuleu, San Marcos, Sololá, and Suchitepéquez.
The results provided evidence of misleading information shared with workers at the time
of recruitment, including promises of work at a coffee plantation while workers were in fact
taken to a faraway sugar mill instead and were obliged to undertake work to which they
had not given consent. There was also a common practice to recruit workers through
intermediaries who did not disclose information about employers or location of places of
future work. Around 60% of surveyed workers were deceived regarding working conditions,
such as working hours, payment, and the difficulty of work at the plantation. Around 40%
of surveyed workers received wages lower than promised, or the plantation paid less than
the full amount owed to them. Around a quarter of workers also reported retention of their
identity documents by recruiters. Moreover, workers were put in a situation of debt towards
the recruiter or the employer and were not allowed to leave the plantation before paying
their debt back. On average, they reported earnings, after deductions, around one third of
the minimum wage. (Verité, 2017). Another study (UL, 2015a) provides evidence of forced
overtime, with workers being requested to work longer than eight hours a day and in the
last month of the harvest, for seven days a week, without a day of rest. Moreover, workers
who refused to do the extra time faced verbal abuse or a risk of being put on a blacklist
and excluded from hiring in the following season. In an audit carried out at the time of
harvest in 2019-2020 with a survey of 1,212 workers in eight out of 12 active sugar mills,
there were no identified cases of retention of identity documents of sugar cane cutters
(Explico, 2020). Moreover, according to information provided by the Ministry of Labour, in
July 2021, labour inspectors conducted inspections in 19 enterprises in the sugar sector in
the departments Escuintla and Santa Rosa focusing on forced labour and labour
exploitation. According to the results, inspectors did not identify any person (whether adult
144
or minor) who would work there in the conditions of either forced labour or labour
exploitation (info. provided by the Ministry of Labour). The sector has developed a manual
outlining its labour policy, and since the 2016-2017 harvest it has been shared with
suppliers obliging them to implement it, with a verification mechanism in order to check
compliance. The manual foresees a written contract with a worker, payment of at least the
minimum wage, payment of social security contributions, and other elements (Azúcar de
Guatemala, 2021; 2019; and info shared by sector representatives).
For a 2013 study of the palm oil sector, interviews were conducted in the Guatemala City
and departments of Alta Verapaz, Petén, Escuintla, Retalhuleu, and San Marcos. The results
provide evidence of misleading or vague information being shared with workers at the time
of recruitment, which in particular affected migrant workers. Moreover, workers often
received false promises regarding working hours and wages, and faced false deductions,
e.g., related to social security contributions, which in reality have never been paid. Workers
also reported being in debt with recruiters or companies running plantation food stores
where they were obliged to buy food, sometimes at inflated prices. There were also cases
of retention of wages and identity documents and threats towards workers and NGO
employees who raised complaints against plantations, including threats of dismissal,
blacklisting and potential accidents (Verité, 2016). Some NGOs, such as CONDEG (Consejo
Nacional de Desplazados de Guatemala), combat the practice of forced labour at palm oil
plantations, taking care of workers affected by it and holding the companies to account
(OHCHR, 2019a). In 2018, a policy on Business and Human Rights following the UN Guiding
Principles and a manual on implementing them in agriculture were adopted by Cámara del
Agro, and the palm oil sector adopted a policy on respect for human rights in the sector in
2020 (in a project funded by the EU) (info shared by business representatives from
Guatemala).
Honduras
Research conducted in the sugar sector in 2013-2015 did not identify clear cases of forced
labour, such as retention of identity documents or debt bondage (UL, 2015b).
Panama
Panamanian nationals and migrants from Central America, including indigenous peoples,
may become victims of forced labour in agriculture, construction, mining, restaurants, and
other sectors, often with the use of debt bondage, false promises, and abuse of their
irregular immigration status (US Dep. of State, 2019f).
Conclusions related to forced labour:
The available evidence suggests that the legal and policy frameworks related to the fight against
forced labour and human trafficking are largely in place in Central America, including ratification
by Costa Rica and Panama of the 2014 Protocol to the ILO Convention No. 29 (Annex C-1).
However, while the situation in each country and its advancement in this area is different, as
outlined in Annex C-1, there are still actions to take, which depending on the country may include
training for police and other enforcement agencies, reducing backlog in courts, better support to
victims of human trafficking and forced labour, and addressing other challenges, such as the
security situation in the countries, corruption, and weaknesses of the state institutions, including
the labour inspection.
Research conducted until 2016 across different sectors in CA (as outlined in this section) provides
evidence of forced labour cases, incl. retention of identity documents and wages, verbal threats
and false information related to employment and working conditions.
More recently, some sector associations (e.g., in the coffee, sugar and palm oil sectors in
Guatemala) have developed and introduced labour and human rights policies promoting respect
for workers’ rights and decent working conditions. However, there is no evidence regarding their
implementation and results thereof, either due to the lack of reporting or the recent adoption.
Private sector representatives from Guatemala also mentioned that the new policies had been
developed independently from the EU-CA FTA. Separately, audits carried out in the sugar sector
in Guatemala in 2019-2020 did not identify, e.g., retention of documents of workers hired for the
harvest. Likewise, labour inspections conducted in the sugar sector in Guatemala in 2021 did not
identify persons (either adult or minor) who would work in conditions of forced labour or labour
exploitation.
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While the lack of quantified, comprehensive data makes it difficult to estimate any trend over the
analysed period in the number of cases of forced labour in some of the Central American sectors
engaged in trade with the EU, there seems to be no direct link between the Agreement and forced
labour and no direct impact of the Agreement on the latter, given that the phenomenon predated
the EU-CA FTA and measures developed recently were applied independently from the Agreement.
4.7 Analysis of impacts on freedom of association
The Terms of Reference for this project have selected this task as one of the study
priorities. In this section, we summarise findings from case study No. 7. It was prepared
jointly under the social and human rights part of the analysis and its findings feedback to
both those parts (the findings have also been replicated in Chapter 6). The analysis aims
to establish if the Agreement has encouraged the Parties to meet their commitment
reiterated in the TSD chapter to effectively implement in their law and practice the ILO
fundamental conventions, including conventions No. 87 (freedom of association and
protection of the rights to organise) and 98 (right to organise and collective bargaining).
In this context, we analyse the overall situation regarding establishment and operation of
trade unions (and employers’ associations), and conditions for establishment and operation
of trade unions in exporting sectors. Further details regarding the overall situation on
freedom of association have been provided in Annex C-1.
The analysis of the national legislation related to freedom of association and the right to
collective bargaining, as well as related observations of the ILO monitoring bodies suggests
for El Salvador, Guatemala and Honduras, a need for further legislative alignment with the
ILO conventions No. 87 and 98. Also, based on cases brought to the ILO Committee on
Freedom of Association, implementation and enforcement of the domestic legislation
requires strengthening, and so does ensuring free trade union establishment and operation
in practice. There is also some potential for further progress, such as the position of
business (COHEP) in Honduras agreeing for some changes in the domestic legislation,
recommended by the ILO.
Evidence provided for this study by sector representatives, both business and trade unions
offers useful insights and complements information from other sources. Based on this, a
few observations can be made. In the banana sector, in five CA countries (all except El
Salvador that does not produce bananas for exports to the EU), trade unions operate at
least in part of the sector and negotiate collective agreements. However, even in this case,
parts of the sector (e.g., in southern provinces of Guatemala) are not unionised and
working conditions are substantially worse there than in other areas. Moreover, there is an
observed shift of some firms towards the south of Guatemala, apparently in search for
lower production costs, which are related inter alia to much lower wages101. Interviewed
sector representatives from CA were of the view that many aspects related to working
conditions and freedom of association in the banana sector predate the EU-CA FTA or have
been influenced by domestic factors, and therefore do not result from or should not be
linked to the implementation of the Agreement.
In the sugar sector, evidence provided by sector representatives, both trade unions and
business, suggests that in Costa Rica, El Salvador, Honduras, Nicaragua and Panama trade
unions exist, operate, and negotiate collective agreements in all or at least, in some sugar
mills. The situation is much more challenging in Guatemala 102, where only one trade union
exists and faces difficulties in its work. Moreover, there is evidence (written and provided
101
On the other hand, according to information provided by the Ministry of Labour and labour inspection, there
are activities aiming at improving social dialogue in the country. For example, in 2021, there were 60
roundtables with employers and workers, 13 of which finished with outcomes satisfactory for all
participants. There were also seven roundtables (in 2021 and 2022) with representatives of the banana
sector from the northern department of Izabal (information provided by the Ministry of Labour).
102
We note the statement of Guatemala shared for this study that the country respects the legislation related to
freedom of association and that this is also the case of sugar mills and the palm oil sector. According to
that statement, workers are free to choose if they wish to exercise the right to organise or not and in which
form. Moreover, according to information provided by the Ministry of Labour, since 2010 until the end of
2021, 169 trade unions have been registered in agriculture (information provided by the ministry of
Labour).
146
in interviews for this study) suggesting that working conditions and freedom of trade union
operation provided in sugar mills differ from the situation in the rest of the sector
(represented by a large group of small and medium-sized sugar producers of up to 7,000,
e.g., in El Salvador). In the latter, jobs are often informal and of a lower quality and no
evidence has been available that would confirm trade unions’ existence in that part of the
sector. Also in this case, one cannot consider the EU-CA FTA as a decisive factor influencing
the situation in the sector (e.g., in Nicaragua, trade unions in the sugar sector started
operating and negotiating collective agreements in 1950s, i.e., long before the entry into
force of the Agreement). However, sector representatives have also stated that exports to
markets such as that of the EU may require compliance with certain sustainability
standards and may therefore encourage adherence to certification schemes, which include
- among others - respect for workers’ rights and freedom of association.
There have also been positive developments, which according to trade union
representatives were clearly related to the Agreement. In El Salvador, the entry into force
of the EU-CA FTA created a momentum for improvement in working conditions, workers’
awareness raising, social dialogue and provision of training, with the government playing
the role of a mediator between trade unions and employers. That positive trend stopped,
however, around two years ago103. In El Salvador’s tuna sector, positive changes in social
dialogue and working conditions were introduced in a response to a coordinated action
from the European and CA trade unions and a case brought to the ILO (further details
about the sector are provided in the case study).
Finally, Guatemalan stakeholders suggested that the EU in cooperation with the ILO could
support work of the Tripartite Commission on Labour Relations and Freedom of Association
to make it more effective as a national mechanism providing foundations for social dialogue
and possible changes in legislation and practice in the future 104.
As stated above, the situation in CA regarding freedom of association is different in each

country of the region, it also varies between sectors and has been changing over time,
with improvements noted, e.g., in El Salvador. However, our analysis in the case study
focused in particular on El Salvador, Guatemala and Honduras suggests that there are still
parts of the region and sectors where, based on existing evidence, further work is needed
to overcome the overall climate of hostility against trade unions and to raise awareness of
workers and employers regarding the right to organise and to collective bargaining and
their use in practice. In some of them (e.g., palm oil in Guatemala) trade unions do not
exist (due to a hostile environment) or face serious challenges which include threats and
physical and verbal violence against trade union members, who also risk losing their jobs
or being blacklisted and not being able to find new ones. Some studies (e.g., ASIES, 2021)
also suggest a lack of workers’ awareness regarding trade union activity (e.g., in the sugar
sector in Guatemala) and their related rights.
The situation is also challenging in some other exporting sectors, e.g., melon in Honduras,
with very little progress over time, and with some companies blocking trade union activity
or backtracking from previous commitments. Overall multinationals seem to be more
willing to accept trade union activity and to bargain collectively. Nevertheless, some
multinationals, including examples of companies having operations in the EU or trading
with the EU and operating in Central America, follow the “race to the bottom” and do not
respect domestic legislation related to working conditions and freedom of association in
the hosting CA countries, preferring in some cases to pay penalties rather than to comply.
103
There have been new developments in El Salvador since the interview, which are described in detail in the
case study. They include, e.g., ratification of five ILO conventions and reactivation of the Higher Labour
Council, while further work is needed regarding, e.g., renewal of trade union credentials of election of trade
unions’ and employers’ representatives to tripartite consultative bodies.
104
According to information provided by the Ministry of Labour, since 2018 until early 2022, the National
Tripartite Committee held 45 meetings, including discussions about legislative reforms (e.g., a new Penal
Code, amendments to the Labour Code and a new Procedural Code on Labour and Social Security), and the
consideration of the ILO Convention No. 190 (Violence and Harassment) and the related Recommendation.
Its Sub-committee for Legislation and Labour Policy has met 27 times and discussions included, e.g.,
position in the follow-up to comments of the ILO Committee of Experts regarding implementation by
Guatemala of the Convention No. 87 and 98, as well as regarding the closure of the case No. 3250
considered by the Committee on Freedom of Association.
147
There is also a role to play for international buyers and certification mechanisms, present
in trade relations between the EU and CA. For example, the case of withdrawing certificates
in the melon sector in Honduras further to the evidence of non-compliance provided by
trade unions (and following an investigation) means that different certification mechanisms
may be leveraged in CA exports to the EU in order to diversify suppliers and to encourage
respect for workers’ rights. There is also evidence suggesting positive effects of support
and capacity building of CA trade unions by their European and US counterparts, which
should be continued.
Recommendations related to freedom of association, including case study:
As noted in the case study, the situation regarding freedom of association and the right to
collective bargaining is different in each CA country and varies between sectors. The more detailed
analysis concluded that while there have been positive developments, El Salvador, Guatemala,
and Honduras should undertake further work to improve their legislation and practice. To move
closer to meeting their commitments under the TSD Title (Article 286 in part regarding freedom
of association and the right to collective bargaining), these countries should further align their
laws with the ILO fundamental conventions No. 87 and 98 and ensure their effective
implementation and enforcement in practice. To that end, their governments, in a tripartite
dialogue with social partners should review the ILO recommendations (see the case study for
details) and consider how to address them. A few chosen priority areas for action could be then
discussed regularly at the TSD Board meetings or dedicated events to consider progress achieved
and the remaining challenges. Such discussions and events could also benefit from exchanges
with other CA partners regarding examples of best practice and ways of addressing challenges.
For example, in Honduras, employers’ representatives (COHEP) have presented their position
supporting some changes in the Labour Code (Articles 472, 475, 510 and 541) requested by the
ILO Committee of Experts and suggested tripartite dialogue to discuss them, ideally with the ILO
assistance. Building on it, the government, employers, and workers should discuss in the
Economic and Social Committee amendments to the Labour Code to align it with the ILO
conventions No. 87 and 98. Also in Honduras, there is a need to strengthen the capacity, including
by an adequate budget allocation., and to improve work of the Committee on Anti-Union Violence.
This can be achieved with an ILO technical assistance and learning from other countries’ similar
experience.
The Guatemalan stakeholders, business, and trade unions’ representatives alike, emphasised the
importance of the Tripartite Commission on Labour Relations and Freedom of Association. In this
context, the EU could consider a proposal from the Guatemalan trade unions to provide financial
and technical assistance, in cooperation with the ILO, for the Tripartite Commission to facilitate
its operation, and technical support to its trade union members to help them analyse legislative
proposals put forward by the government or employers’ representatives.
In El Salvador, according to information provided by a trade union representative for this study,
the EU-CA FTA’s entry into force created a positive momentum for social dialogue and contributed
to improved working conditions and climate for freedom of association. Reportedly, that positive
trend started being reversed in the last couple of years and should be reinvigorated, in cooperation
of the government and the social partners. There have been further developments in the country
since the interview and while progress has been made, further work is needed to improve relations
between the government and social partners, and conditions for a free operation of the latter.
Regarding trade unions’ operation in practice, the available evidence, and interviews with sector
representatives from CA countries confirm that trade unions’ presence plays an important role in
ensuring respect for workers’ rights and decent working conditions (e.g., through collective
agreements), as demonstrated by the banana and parts of the sugar sector (sugar mills) in CA.
This in turn helps to reduce poverty and support sustainable development. Therefore, private
sector and CA governments should create conditions for a free trade union operation, where this
is not the case yet, and where situation in certain sectors or CA countries lags behind the rest of
the region (e.g., in the sugar sector in Guatemala, where only one trade union operates facing
serious challenges, while in other countries trade unions are active in some or all sugar mills).
Equally other sectors, such as palm oil in Guatemala or melon in Honduras do not offer conditions
for a free trade union establishment and operation. In this context, it will be important to see if
the implementation of human rights guidelines in the palm oil sector in Guatemala will bring about
any changes regarding compliance with labour standards.
148
Moreover, in cooperation with the ILO or trade unions from other countries, including the EU,
training or awareness raising campaigns for CA workers should be organised regarding their rights
to organise, but also other vital aspects (e.g., health and safety at work), where this has not been
the case yet, to enable a free and informed decision of workers whether to organise.
4.8 Analysis of impacts on non-discrimination at work
section, the analysis aims to establish if the Agreement has had any impacts for the groups
of workers that are vulnerable and likely to face challenges or be discriminated on the
labour market, such as youth, indigenous peoples, and migrant workers. The situation of
women has been discussed in section 4.2. The analysis builds on findings from the
baselines summarised below (see also Annex C-1), presenting the employment situation
of vulnerable groups of workers, including sectors where they work. This is combined with
the results of the economic modelling showing which sectors have been affected by the
Agreement.
Given that data related notably to indigenous peoples and migrant workers are not
collected and published very regularly, e.g., regarding sectors of their employment, we
have used all data identified to date, while noting that some of the available reports may
already be a few years, and sometimes even more than a decade, old. In such cases, we
use the data related to the shares of individual sectors in the total employment as proxies,
assuming (in line with the overall changes in employment over the analysed period) that
those shares might have changed slightly (by a few percentage points at most) over the
analysed period, but not substantially, therefore, even older data may be used to provide
orientation regarding the break-down of employment by sectors and therefore potential
impacts of the Agreement for certain groups of workers.
Costa Rica
In Costa Rica, 61.3% of young people (18-24 years of age) were economically active in
2009 (INEC, Costa Rica, 2009). In 2014, 68% of them were employed in the services
sector, 18% in industry and 14% in the primary sector, mainly in agriculture and fisheries
(INEC, Costa Rica, 2015). In 2019, according to data provided for a broader group (15-24
years of age), the participation rate was at 48.1%, while the unemployment rate was at
34% (INEC, Costa Rica, 2019c), with 28% of young men being unemployed and 37.1% of
young women (crhoy.com, September 2021).
According to a 2008 survey conducted among workers in Costa Rica, 197,460 persons were
born in other countries. These included Nicaragua, El Salvador, Panama, Honduras,
Guatemala, the US, Mexico, the Caribbean, Canada, Colombia, and other countries (INEC,
Costa Rica, 2008). Also, in 2008, 18.4% of foreign workers in Costa Rica were employed
in agriculture, 15.4% in construction, 12.9% in wholesale and retail trade, 9.3% in hotels
and restaurants, 9.0% in industry and mining, and 34.9% in all remaining services sectors
together (there was no data provided in a more detailed break-down) (INEC, Costa Rica,
2008a). In 2014-2015, it was estimated that immigrant workers from Nicaragua employed
in agriculture, construction and domestic service represented around 60% of all temporary
workers in Costa Rica. The share of foreign nationals in Costa Rica increased from 7.9% in
2000 to 8.8% in 2015, however, decreased if compared to 1990 (13.5%). In 2013-2015,
actions were taken to regularise foreign workers employed in the construction, agriculture,
and domestic service sectors (SICREMI, 2015, 2017).
As discussed in the section 3.1 (impacts for employment) and 3.2 (impacts for women),
positive impacts of the EU-CA FTA are estimated for agriculture, mainly for the sugar and
fruits and vegetables sectors. This would suggest possible positive effects for up to 14%
of young people and around 18% of foreign nationals working in agriculture at the
beginning of the analysed period, notably those employed in one of the undertakings
engaged in the market-oriented production, incl. for exports, as well as others looking for
a job in the sector. At the same time, the economic model estimates negative impacts for
industry, i.e., an outward shift of workers or a slower growth of the sector which may have
affected to a different degree 18% of young people and 9.0% of foreign nationals working
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there at the beginning of the analysed period. Given that the economic model estimates
only changes related to tariff reduction and thus is not able to quantify precisely changes
in the services sectors, we do not analyse those sectors based on the model. However, the
real-life data related to trade in services between the EU and CA countries, as well as
employment in services data provided in Annex C-1 suggest an overall employment
increase in Costa Rican services over the analysed period. There is also a need to note that
not all services sectors are exposed in the same way to direct effects of international trade
(e.g., domestic service, personal and social services, education, or health care depend
more on the macroeconomic changes in the country and the state of public finances)105.
El Salvador
In El Salvador, 44.3% of young people (16-24 years of age) were economically active in
2009 and 14% of this age group were unemployed. In a break-down by sector, 29.3%
worked in the wholesale and retail trade, hotels, and restaurants, followed by agriculture
and fisheries (28.5%), industry (14.5%), domestic service (5.8%), construction (5.5%),
social, community and health care services (4.3%), real estate and financial services
(4.1%), storage, transport, and communication (3.7%), public administration (2.7%) and
education (1.2%) (DIGESTYC, 2009). By 2019, the rate of economic activity increased to
49.2% and the unemployment rate slightly decreased to 13.4% (while for persons of 25-
59 years of age, it was 4.6%). In a break-down by sector, 34.8% of young people worked
in the wholesale and retail trade, hotels, and restaurants (increase compared to 2009),
followed by agriculture and fisheries (20.6%, less than in 2009), industry (14.9%),
domestic service (4.9%), construction (7.2%, increase compared to 2009), social,
community and health care services (4.5%), real estate and financial services (5.6%,
increase compared to 2009), storage, transport, and communication (3.9%), public
administration (1.9%) and education (0.7%) (DIGESTYC, 2019).
According to the 2007 census, 75.2% of indigenous peoples worked in primary sectors
(incl. subsistence agriculture), 17.7% in industry and 7.2% in services (IFAD, 2017a).
The share of foreign nationals in the population of El Salvador decreased from 0.9% in
1990 to 0.7% in 2013 (SICREMI, 2015 and 2017). Regarding break-down by sector of the
economic activity, so far, we have identified only partial data. For example, the surveyed
Nicaraguan immigrants coming to El Salvador around the year 2010 worked in the sector
of trade, hotels, and restaurants (39.6%), agriculture and fisheries, incl. coffee and sugar
sector (19.7%), social, personal and community services (18.5%), construction (10.8%),
manufacturing industry (incl. textiles) (6.1%) and transport, storage, and communication
(4.0%) (DIGESTYC, 2012).
The economic modelling estimates an employment increase in the sugar sector and, to a
limited extent, in the coffee sector. This suggests positive impacts, e.g., for ca. 20% of
Nicaraguan migrant workers employed in agriculture, incl. in these two sectors. Regarding
effects for young people and the indigenous population employed or looking for a job in
agriculture, these will depend on the sub-sector of their employment and type of
undertaking, with positive effects for those linked to the sugar and coffee sectors and
market-oriented plantations. For industry, the model estimates limited outflow of workers
or a slower growth (except for electronics and paper sectors), which means potential
limited negative impacts for 6.1% of migrant workers, 17.7% of indigenous peoples and
up to 15.0% of young people working in the sector.
Guatemala
In Guatemala, 67.3% of the indigenous population were economically active in 2012.
Out of these, 99% worked, which means an unemployment rate of 1.0% (INE, Guatemala,
2012). By 2019, the economic activity rate decreased to 59.9%, while the unemployment
rate remained the same (1.0%) (INE, Guatemala, 2019). In a break-down by broad
economic sectors indigenous persons worked in 2015 in agriculture (52.4%), followed by
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A similar observation is also true for other CA countries, while the profile of their trade in services with the
EU and its dynamic varies between countries, and so does the share of services in the total employment,
while generally, there is an overall trend towards increase of employment in services sectors.
150
trade (19.7%), manufacturing industry and construction (17%), public administration

(4.2%), services (1.0%) and other activities (5.8%) (INE, Guatemala, 2015) 106.
In 2012, 95.1% of economically active young people (15-24 years of age) worked and
4.9% were unemployed (INE, Guatemala, 2012). By 2019, the employment rate increased
to 96.5%, which means an unemployment rate of 3.5% (INE, Guatemala, 2019a).
According to the 2002 census, 49,966 foreign nationals lived in Guatemala, out of which
nationals of other Central American countries represented 49%. These included 12,484
from El Salvador, 5,604 from Nicaragua, 5,977 from Honduras, 761 from Costa Rica, 600
from Belize and 197 from Panama. Migrants from the region often settled in Guatemala
with an irregular migration status, making them vulnerable in the labour market. Most of
them were employed in domestic services, agriculture, and construction. Immigrants from
other countries were usually with a regular status and included nationals from Mexico, the
US, the Republic of Korea, China, Spain, Germany, Colombia, and Cuba (IOM, 2013a).
The economic modelling estimates positive employments effects for agriculture, notably
the sugar sector, with limited (but positive) effects also for the fruits and vegetables and
coffee sectors. This means potential positive impacts for up to half of the indigenous
population, in particular those who either own or work as hired workers at market-oriented
plantations in the above-mentioned sectors. Likewise, positive effects would be expected
for young people and foreign workers employed in these sectors, although the lack of
detailed data regarding their employment in a break-down by sector makes it impossible
to draw more precise conclusions (in general, around 30% of working age population in
Guatemala work in agriculture as a whole). The economic model also estimates limited
negative impacts in industry, i.e., an outward shift of workers or a slower growth, which
may have affected 17% of indigenous population and (due to the lack of detailed data) an
undefined share of young people and foreign workers (with the overall share of industry in
employment decreasing from 13.7% to 11.5% in the whole country over the analysed
period).
Honduras
In Honduras, 43.3% of young people (12-30 years of age) worked in 2012. Regarding
sectors of economic activity, agriculture and fisheries accounted for 40.7%, followed by
wholesale and retail trade and hotels and restaurants (20.5%), manufacturing industry,
construction and personal, social and community services (18.3%). In 2019, 48.3% of
young people worked. Out of these, 33.1% worked in agriculture and fisheries (which
means a decrease compared to 2012), 24.8% in wholesale and retail trade, hotels and
restaurants (an increase compared to 2012), and 19.3% in manufacturing and construction
(also an increase compared to 2012) (INE, Honduras, 2012-2019).
According to the 2013 population census, 37,912 foreign nationals lived in Honduras
(21.9% of them were from El Salvador, 21.3% from the US, 18.9% from Nicaragua, 13.5%
from Guatemala, and the rest from Colombia, Costa Rica, Spain, China, and other
countries). Among those who worked (11,890 persons), 26.0% were from Nicaragua,
followed by El Salvador (19.7%), Guatemala (13.4%) and the US (9.6%). Immigrants from
Central America were employed mainly as workers in agriculture (between 19.3% and
25.9% of each national group) and in services (between 16.1% and 19.5%) and those
from the US worked as professionals and scientists (28.8%), and directors and managers
(19.1%) (IOM, 2020).
The economic model estimates positive employment impacts for the sugar sector and more
limited for the fruits and vegetables sector, which means potential positive effects for
between 33.1% and 40.7% of young working people (depending on the sub-sector of
employment in agriculture and the type of undertaking, i.e., whether it is subsistence
farming or market-oriented plantations) and 20%-25% of immigrant workers from Central
America, also depending on the sub-sector. There are also some limited negative
employment impacts for the industrial sectors; however, due to the aggregated data, it is
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Outcomes of the 2018 census did not provide details regarding sectors of activity of the indigenous peoples.
151
not possible to conclude how many young people this may affect (overall, around 13% of
the working population in Honduras were employed in industry in the analysed period).
Nicaragua
In Nicaragua, 53.6% of young persons (15-30 years of age) were economically active in
2009. The unemployment rate was of 12.5% (INIDE, Nicaragua, 2009). Close to one third
(29.7%) of young workers were employed in agriculture, mainly in small farms. This was
followed by wholesale and retail trade (19.1%), manufacturing industry, including textiles
and electronics (14.7%), transport and telecommunication (12.5%), public administration
(3.8%), education (3.8%), other community services (3.4%), hotels and restaurants
(3.2%), real estate (2.3%), health and social services (2.1%), financial services (1.3%),
fisheries (0.9%) and mining (0.2%) (Garcia Osorio, 2011).
According to the 2005 population census (the latest one), 34,693 persons originating from
other countries lived in Nicaragua. Out of these, 44.5% were from Honduras, 38.7% from
Costa Rica, 11.6% from Canada and the US (jointly), 5% from Europe, 3.9% from South
America and 3.3% from Antilles (IOM, 2013). In 2010, there were ca. 40,100 migrants in
Nicaragua (0.7% of the population) originating in Honduras, Costa Rica, El Salvador,
Guatemala, the US, Mexico, Cuba, Spain, Panama, and Russia (World Bank, 2011).
The indigenous peoples have been estimated to represent 5%-10% of the population.
According to data from the early 2000s, in the Autonomous Regions of Atlántico Norte and
Atlántico Sur, 30% of the indigenous population worked in agriculture, 22.3% in services,
12.5% in fisheries, 11.7% in trade, 17.6% in households, 9.3% in education, 6.5% in
public administration and the remaining 17.6% in other sectors. However, this data was
not representative for other departments in Nicaragua and the remaining groups of
indigenous peoples (IFAD, 2017).
The economic model estimates positive employment effects for agriculture, notably the
sugar sector, and more limited in the fruits and vegetables sector. This means potentially
positive impacts for up to one third young workers (notably those employed on market-
oriented farms) and up to 30% of the indigenous peoples in the Autonomous Regions.
However, the latter might have been engaged mainly in traditional subsistence farming
and therefore might have been less exposed to the effects of a trade agreement. As for
industry, the model estimates negative effects for some sectors, which may have affected
14.7% of young workers.
Panama
Regarding young people (15-24 years of age), the rate of economic activity for the group
of 15-19 years of age was at 32.6% in 2009 (INEC, Panama, 2009). Until 2019, it fell to
27.9% (INEC, Panama, 2018-2019b). For the group of 20-24 years of age, the rate of
economic activity was at 68.8% in 2009. In 2019, it fell slightly to 68.3% (INEC, Panama,
2009 and 2018-2019b). The unemployment rate among young people was at 15.2% in
2009 and it increased to 18.1% in 2019 (INEC, Panama, 2009a and 2019a). Regarding
sectors of economic activity, in 2007, 26.3% of young people worked in wholesale and
retail trade, followed by construction (12.1%), industry (8.8%), agriculture (8.8%), public
sector (8.6%), real estate and business services (7.0%), restaurants and hotels (6.6%),
and transport, storage and communication (5.5 %) (CNC, Panama, 2011).
In Panama, 71.7% of the indigenous population were economically active in 2009, while
1% were unemployed (INEC, Panama, 2008-2009). Until 2019, the economic activity rate
increased to 79.0% and the unemployment rate decreased to 0.8% (INEC, Panama, 2018-
2019). Regarding sectors of economic activity, 72.8% of the indigenous population worked
in agriculture and fisheries in 2009, followed by industry (17.5%), wholesale and retail
trade (3.6%), education (3.3%), personal, social and community services (2.3%), and
construction (1.3%) (INEC, Panama, 2008-2009a). In 2019, agriculture and fisheries
accounted for 66.0% of the total employment of the indigenous population, followed by
industry (15.6%) and services (18.2%) (INEC, Panama, 2018-2019a).
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In 2010, 108,819 working age immigrants (15-64 years) lived in Panama originating in
Colombia, China, Nicaragua, Venezuela, and the Dominican Republic. The rate of economic
activity among them was at 62.4% and the unemployment rate at 5.2%. Almost one third
of them (29.4%) worked in services sector, 15.8% as directors and managers, 14.8% as
low-skilled workers, 12.0% in professional and scientific occupations and around 10% as
workers in crafts and industry (CNC, Panama, 2016).
The economic model estimates positive employment effects in agriculture, notably in fruits
and vegetables, and vegetable oils and fats, and more limited for the coffee sector. This
means potential positive impacts for two thirds, up to three quarters of the indigenous
population, depending on the sub-sector of their employment and the type of undertaking
(subsistence compared to market-oriented farms). Moreover, some of the Panamanian
indigenous peoples employed in agriculture work in the coffee sector in Costa Rica, moving
there temporarily every year for the harvest, which means that their economic situation
depends more on the estimates for Costa Rica. Likewise, positive impacts might have been
generated for up to 8.8% of young people (working in agriculture) and 14.8% of foreign
low-skilled workers. The economic model estimates also mixed results for industry, with
positive impacts for the textile sector, processed food, chemicals and rubber and plastics,
and negative ones of a different scale for the remaining ones. This means potential impacts
for 15.5%-17.5% of the indigenous workers, 8.8% of young working persons and up to
10% of foreign nationals working in Panama.
Conclusions and recommendations regarding non-discrimination at work:
The estimated employment effects for indigenous peoples, young workers and foreign nationals
vary between these three groups, countries of residency and sectors, with no uniform pattern.
There are potential positive impacts for large groups of indigenous and immigrant workers (largely
originating in other CA countries) due to their engagement in agriculture; however, the exact
scale of effects depends on the sub-sector of their employment and the type of undertaking, i.e.,
subsistence farming compared to market-oriented farms or plantations. Moreover, type of the job
(formal or not; permanent or temporary, for the harvest season) will also play a role. There are
cases of immigrant workers (e.g., indigenous peoples from Panama working in the coffee sector
in Costa Rica) who are contracted every year by the same plantations offering jobs with a package
including registration and health care services. There are also immigrant workers from Nicaragua
working in the pineapple sector in Costa Rica, and according to sector representatives (CANAPEP),
all workers employed by the members of the association are insured against accidents at work
and also contributions for social security are paid on their behalf.
To the extent this has not been addressed yet in the CA regional economic integration, the CA
countries could discuss the ways of addressing movement of workers among them, e.g., for the
harvest season, and their enjoyment of workers’ rights established in the national legislation of
the hosting country, such as payment of at least minimum wages or social security contributions.
The EU could support such discussions sharing also experience from solutions adopted within the
Internal Market.
The share of young workers in agriculture varies between countries, and in their case, the sub-
sector and type of undertaking will also play a role in estimating the exact effects.
The model also estimates mostly negative, although relatively limited, effects for industry (with
some exceptions, such as the textile sector in Panama, where the effects are estimated as
positive), and may potentially also affect workers from the three vulnerable groups, although
again, the scale of the impact will depend on the sub-sector, and the share of industry in their
overall employment. It also needs to be kept in mind that due to the limitations of the economic
model assuming fixed employment, some of the theoretically negative impact on the industrial
sectors may just reflect the hypothetical outflow of workers towards agriculture, where the
employment is estimated to increase, and which therefore (with the assumed fixed employment)
needs to be compensated by an outflow from elsewhere in the economy.
4.9 Analysis of impacts on the adoption and implementation of internationally

recognised instruments of responsible business conduct and Corporate
Social Responsibility (CSR)
The analysis in this section seeks to determine whether the Agreement had an impact on
the uptake in Central America of CSR/RBC practices, incl. adherence to and implementation
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of international instruments in this area 107. Annex C-1 provides in this context an overview
of activities undertaken in each of the Central American countries incl. national frameworks
such as policies and action plans and measures promoting CSR/RBC among the society.
There are also examples of good practices in this area pursued by CA companies and
CSR/RBC policy being integrated in their overall corporate strategy. To complement that
picture, below, we provide examples of adherence to international CSR/RBC instruments
and sustainability schemes in sectors engaged in trade with the EU, as well as EU actions
taken in the context of the Agreement to further promote CSR/RBC activities in CA.
CSR/RBC practices and adherence to voluntary sustainability schemes in CA

sectors exporting to the EU
As mentioned above, CSR/RBC practices are followed and promoted by some business
associations in CA representing sectors involved in exports to the EU, e.g., banana sector
in Costa Rica, with actions incl. reduced use of water, recycling, monitoring the use of
chemicals, and the respect for minimum wage and freedom of association, as well as
support to local communities, e.g., school children, providing housing for workers and
supporting sport events (CORBANA, no date). In the sugar sector in Guatemala, a
dedicated foundation delivers projects benefitting local communities (e.g., studies to
supply drinking water, training for women, and support for youth). Moreover, the sector
association has developed manuals to be shared with suppliers guiding them in respect for
labour and environmental standards in their operations (ASAZGUA, no date).
Other examples include policy on Business and Human Rights (e.g., National Action Plan
on Business and Human Rights in Honduras) following the UN Guiding Principles in this
area. In 2014, such a policy was adopted by CACIF the coordinating committee of business
associations in Guatemala, followed by Cámara del Agro which in 2018, adopted a manual
with good practices implementing the UN Guiding Principles in the agricultural sector in
this country. In 2020, the sugar and palm oil sectors in Guatemala adopted (in a project
funded by the EU) policy on respect for human rights in both these sectors. In 2021, this
was followed by the banana sector in Guatemala, with a possibility of other sectors (coffee,
dairy, and livestock) joining (information shared by business representatives from
Guatemala).
Moreover, associations and individual companies operating in exporting sectors adhere to

international certification schemes, e.g., the Global G.A.P., Rainforest Alliance, ETI (Ethical
Trading Initiative), Carbon Clear and ISO norms (environment protection, carbon neutrality
and process quality). The banana sector in Costa Rica promotes environmental
certifications, e.g., regarding carbon neutrality (in 2021, 53% of banana plantations had
such a certificate) (El corporativo, April 2021).
According to a survey conducted in 2017 among producers in the pineapple sector in Costa
Rica, 70% of small producers and 100% of big ones had a Global G.A.P. certification incl.
respect for health and safety at work and workers’ welfare, animal welfare, environment
(incl. biodiversity) and food safety and traceability, while 4% of small producers and 17%
of big ones adhered to the environmental standard ISO14001. Moreover, 7% of small
producers and 29% of big ones were certified by the Rainforest Alliance promoting forest
protection, responsible land use, climate resilience, respect for human rights (incl. core
labour standards) and supporting livelihoods. Also, 4% of small producers and 13% of big
ones had a Social Accountability (SA8000) standard certificate prohibiting the use of child
labour and forced labour and promoting respect for freedom of association and the health
and safety at work norms, among others. (CANAPEP, 2017c). According to another study,
published in 2021, in the Guatemalan banana sector, plantations have certificates of the
Rainforest Alliance, Global G.A.P. and SA8000 (Anner, 2021). In El Salvador, an industrial
group in the tuna sector is certified according to SA8000 (info, database of the scheme).
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At the time of writing, Costa Rica is the only OECD member among the CA countries and the only CA country
adhering to the OECD Guidelines for Multinational Enterprises. Companies in other CA countries follow the UN
Global Compact and the ISO 26000 standards. There are also National Plans on Business and Human Rights
following the UN Guiding Principles in this area (see Annex C-1 for details).
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The coffee sector in Costa Rica also adhered to certification schemes and in 2011-2012,
produced 4% of global Rainforest Alliance-certified coffee, 6% of Fair-Trade volumes and
0.2% of UTZ Certified coffee. At the time, 24% of Costa Rica’s total coffee production was
certified as Fair-Trade, while 13% had Rainforest Alliance certificates making Costa Rica
one of the countries with the highest share of certified national production. The coffee
sector in Guatemala, had overall 13% of production certified and provided 7% of the global
Rainforest Alliance-certified coffee and 2% of UTZ certified (IFAMA, 2016). In a survey of
1900 small-holder coffee producers in Colombia, Honduras (659 farms) and Costa Rica
(503 farms surveyed) published in 2020, the majority (400 in Honduras and 364 in Costa
Rica) had at least one certificate, i.e., Fair-Trade, Fair-Trade organic, Rainforest Alliance,
UTZ, Common Code for the Coffee Community, Nespresso, or Starbucks. The analysis of
their performance compared to non-certified plantations showed that the best social scores
had coffee producers from Honduras certified by Rainforest Alliance (a smaller difference
between certified and non-certified group was reported for Costa Rica) and particularly
good outcomes were for elimination of child labour and improvement on health and safety
at work. The best scores in economic indicators were also recorded by producers from
Honduras certified by Rainforest Alliance, with positive outcomes for access to finance,
increase in income and productivity and poverty reduction. In environmental indicators,
the Fair-Trade organic certified producers from Honduras were best. In addition, it comes
as no surprise, that the effects were visible when standards of the certification scheme
were high and the effort to adjust to them was accompanied by a lot of investment and
external support (WWU Münster, INCAE, 2020).
Moreover, in Guatemala, according to sector representatives, 60% of cultivated palm oil

area had a certificate of either the Roundtable on Sustainable Palm Oil (54% of cultivated
area) or International Sustainability and Carbon Certification (6%) in 2021 (information
shared by GREPALMA, 2022). In this context we note that workers in the palm oil sector
in Guatemala surveyed in 2016 indicated that when a plantation receives a sustainability
certificate, wages and health and safety at work improve, e.g., personal protective
equipment is distributed to workers (Verité, 2016).
In Annex C-1, we have provided a table with an overview of certification schemes and CA
sectors adhering to their standards.
While there are benefits from an increasing certification of companies and plantations,
according to trade unions and workers from exporting sectors in CA, the application of
certification schemes requires improvement, as there are examples of their abuse by
companies, e.g., keeping the certificate or a reference to it despite changes in the
company’s structure or despite the certificate being awarded only to some branches or
suppliers of a large company. Moreover, they criticised the low frequency of audit visits
and the fact that they are announced to the company well in advance giving the latter an
opportunity to arrange everything in a way enabling it to pass the audit successfully. This
included the management instructing workers what they should tell the auditors about the
working conditions in the company, supervisors being present at interviews with workers
or the company distributing new personal protective equipment to workers shortly before
the inspection. According to trade unions, some of the certified companies do not comply
with the national labour legislation or the requirements of the certification scheme in their
daily operations. In their view, the European consumers should demand more detailed and
frequent checks, and request, e.g., information if workers have a real possibility to organise
in certified companies (Anner, 2021; Banana Link, December 2020; FESTAGRO, Jul 2020).
In different sectors, e.g., banana and coffee, organic production is pursued as part of the
sector and there is an increasing interest in organic production in CA. For example, in an
interview for this study, representatives of FENAGH (La Federación Nacional de Agricultores
y Ganaderos de Honduras) referred to challenges faced by agricultural producers from
Honduras in access to the EU market, including the need to meet high standards, and
difficulties with access to funding and identification of potential customers. In their view,
given the high level of competition in the EU market, producers from Honduras may be
able to compete in niche or speciality products, such as organic products, e.g., organic
cacao. However, they would need support from the EU, including access to funding, training
155
in cultivation of organic products and requirements of the EU market, and help in

identifying potential buyers. Moreover, the EU could support creation of a professional
association of producers of organic products in Honduras, which could support its members
in agricultural practices, achieving compliance with requirements for organic products in
the EU market, marketing of their products in Europe, and other aspects.
In an interview for this study, a representative of the Government of Nicaragua, suggested

that implementing the TSD Title, the Parties should focus more on practical dimension of
it, i.e., discussions and activities exploring how trade can contribute to sustainable
development. He mentioned support for organic products as one of proposals for future
discussions and cooperation between the EU and CA. In his view, there is a need to identify
barriers faced by producers of sustainable, including organic, products from Central
America in access to the EU market and look for ways to reduce and eliminate those
barriers. Such barriers may include access to funding, but also knowledge about how to
meet the criteria for certification of organic products and requirements in access to the EU
market. Exports of organic products from Nicaragua, such as coffee and cacao, could
contribute to environmental protection and social development, involving women and
supporting families.
EU (assistance) activities and impact of the EU-CA FTA

While it is difficult to estimate how much the EU-CA FTA has contributed to encouraging
further certification and better standards (given that the beginning of certified production
precedes the Agreement), information provided e.g., by stakeholders from El Salvador
confirms that companies from that country often face concrete requirements regarding
CSR practices when they intend to start exporting to the EU and get in touch with potential
buyers. Equally, representatives of the coffee sector from Honduras informed that exports,
including to the EU encouraged increase in the share of certified coffee being exported.
This would suggest that at least in some cases expectations of EU buyers may have
contributed to raising awareness of the CSR requirements and potentially also to their
application in practice. The literature about the tuna sector in El Salvador and one industrial
group suggests that the priority of image and the CSR policy for the group could be used
by trade unions to convey a message to the EU buyers (such as big retailers) to exert
pressure on the group to respect trade unions’ rights and working conditions (Hawkins,
2018).
The EU has also contributed to information and best practice sharing through assistance
projects. For example, Costa Rica and Panama are beneficiaries of the EU funded project
on CSR practices in Latin America and the Caribbean that has been implemented jointly
with the ILO, OECD, and the Office of the UN High Commissioner for Human Rights, over
four years (2019-2022). The project has three components, each is implemented by one
partner organisation. Under the OHCHR component of this project, the countries receive
support in the development and implementation of National Action Plans on Business and
Human Rights and due diligence, as well as in exchange of good practice (OHCHR, 2019).
In the part of the same project led by the ILO, a publication has been prepared to guide
the approach to child labour in the context of business management in Costa Rica (ILO,
June 2021). The OECD component of this project envisages regional studies to describe
priority sectors, conditions for due diligence and related risks and supports the private
sector to develop capacities for application of the OECD due diligence instruments. This
includes due diligence in value chains of agricultural products and in financial services in
Costa Rica, and in extractive industries and financial services in Panama (OECD, 2019).
The EU also provided funds for a 2016 study in Honduras outlining CSR practices applied
by enterprises in that country. It provides an overview of practices of 27 companies from
sectors including banking, sugar, coffee, food and beverages, hotels and restaurants, and
others, in areas incl. education, culture, health, sports, environmental protection, support
to local communities, elderly people and small-scale farmers (ANDI, 2016).
There are also cooperation initiatives with a regional dimension, for the whole of Central
America. The Parties discussed during the TSD Board’s meetings, proposals for cooperation
activities, including promotion of decent work in production chains and promotion of trade
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in products that include environmental and social sustainability in their production model
(TSD Board, 2014). Further discussions focused also on promoting trade in products that
respond to sustainability considerations, e.g., fair, and ethical trade, eco-labelling, organic
production, CSR, and accountability, including through training and communication with
the productive sectors (TSD Board, 2015). Moreover, the Parties organised regional CSR
events, e.g., on Global Value Chains and Sustainable Development held in Costa Rica in
May 2017 and another one, in May 2018 in Guatemala under the title Decent Work,
Corporate Responsibility and the EU-CA Association Agreement Contributing to Sustainable
Economic Growth (TSD Board, 2018). Under the Regional Economic Integration Project of
Central America (INTEC), there was an initiative aiming to strengthen competitiveness,
export capacity and the uptake of CSR in SMEs in Central America (TSD Board, 2019) and
within the Connecting Central America project, the 48 beneficiary companies have a CSR
Plan to be implemented in 2021 (TSD Board, 2021).
Conclusions and recommendations related to CSR practices:
The available information outlined in this section and in Annex C-1 suggests that in all CA
countries, there are dedicated institutions promoting CSR/RBC practices and most of those
countries have a national framework (e.g., a National Action Plan on Business and Human Rights
or a National CSR Policy) in this area. Moreover, in sectors engaged in exports to the EU, business
associations and individual companies (although not all of them) promote and apply CSR/RBC
practices, adhere to international standards (e.g., the UN Global Compact or ISO 26000) or follow
requirements of diverse certification schemes, such as Global GAP, Rainforest Alliance, SA8000,
ISO14001, Roundtable on Sustainable Palm Oil, and International Sustainability and Carbon
Certification (e.g., in the coffee sector, banana, palm oil or pineapple).
According to stakeholders, some companies intending to start exporting to the EU also face
requirements of EU buyers related to CSR/RBC practices, and equally, there is a consideration
that exports to the EU encourage adherence to certification schemes (e.g., in the coffee sector in
Honduras the share of certified coffee in the total exports has increased). Moreover, there is an
interest in CA in pursuing organic production, which may be competitive on the EU market.
Given the insufficient data available regarding working conditions in CA exporting sectors, as well
as compliance with national legislation and international standards, such as the ILO fundamental
conventions, the EU could consider with CA governments, private sector representatives and trade
unions, whether reports from audits under certification schemes can be used as a complementary
source of information. In such a case, it would be useful, if sector associations could publish such
summary reports about their certified members (even very short ones) on their websites, and do
it at regular intervals, e.g., annually, or when audits are carried out, if they are less frequent.
It could also be explored whether there is a possibility of a dialogue with certification organisations
to get a picture of certified companies and plantation and their performance, as well as about
those where certificates have been withdrawn.
The EU has been supporting promotion and application of CRS/RBC practices through assistance
projects and awareness raising events. This all suggests that the EU-CA FTA may have encouraged
the use of CSR/RBC practices, either through projects or private sector requirements, i.e.,
commercial contacts of EU buyers with CA businesses. This activity should be continued, along
with a possible support for producers of organic products in CA.
4.10 Recommendations from the social analysis:
Impacts for employment and informal work, and poverty reduction

• CA governments, in cooperation with business associations, export promoting agencies
and other partners, including the EU, should continue to support job generation in the
exporting and accompanying sectors, including through technical assistance to address
challenges faced by exporters, in particular SMEs, such as access to finance, product
development, meeting standards of the destination market, and identifying potential
buyers. Likewise, CA governments should continue efforts facilitating establishment and
management of formal enterprises.
• In cases where sector associations (e.g., in the pineapple, coffee and sugar sectors)
have adopted labour policies applicable for the whole sector or certain parts thereof,
they should ensure (e.g., through contracting external auditors or cooperation with
157
labour inspection services) monitoring of implementation of those policies and regular

(e.g., annual) reporting. There are already cases of compliance checks, e.g., annual
external audits in sugar mills in Guatemala and compliance surveys in the pineapple
sector in Costa Rica. In the case of Guatemala, each audit ends with a report, some of
which were shared with the study team for this analysis. We recommend that for
transparency, results of such monitoring (or audits) should be published, e.g., on
websites of sector associations and included in the annual corporate reporting.
• Such monitoring and reporting would also help to address the issue of data availability,
its accuracy and relevance timewise (how recent it is) regarding the number of workers
in exporting sectors over time, the job nature (formal or not) and job quality, and would
provide a sector overview, complementing data which may be available for individual
employers (e.g., plantations or sugar mills).
Impacts for women (gender equality)
• As part of their efforts to ensure a greater gender equality and a more effective
implementation of the TSD provisions and ILO Conventions No. 100 and 111, CA
governments in cooperation with the private sector should continue efforts to ensure an
equal access of women to education, vocational training, job opportunities, professional
development, and career progression to managerial positions. Additional measures
should include creating an enabling environment, incl. by providing childcare facilities
and ensuring safety at the workplace and on the way to it. Implementation of the ILO
Conventions No. 100 and 111 should also continue to be discussed at the TSD Board
meetings and could feature in the agenda of dedicated events, such as EU-CA seminars
facilitating exchange of best practice and discussion of common challenges.
• Moreover, given the reported violence and sexual harassment affecting women in some
CA countries in different sectors, incl. those exporting to the EU, CA governments may
consider ratification and implementation of the ILO Convention No. 190 addressing
violence and harassment at the workplace, in work-related occasions, in accommodation
provided by employer and during commuting to work. We note in this context that El
Salvador is the first CA country that has ratified this convention. The convention has
also been ratified so far (by July 2022) by three EU Member States (Greece, Italy, and
Spain). Moreover, the proposal to ratify this convention by Costa Rica was submitted to
the Legislative Assembly in June 2021 and the relevant proceedings are ongoing. The
convention was also discussed by the Tripartite Commission on Labour Relations and
Freedom of Association in Guatemala.
• Considering the limited availability of data on female employment, entrepreneurship,
and presence in international trade, we recommend a more frequent and more
systematic collection of sex-disaggregated data, starting with sub-sectors participating
in international trade and thus likely to be affected by the FTAs. Such data could be
collected by national institutes of statistics, sectoral business associations, export
promotion agencies, civil society, or research institutes, depending on the available
capacities and specificity of the sector. Their availability will enable a closer monitoring
of impacts of the Agreement for women and guide policy decisions which may need to
be taken to ensure that trade and gender equality reinforce each other.
• While a lot of initiatives have already been undertaken and delivered in this area,
women-led SMEs still need support from the CA governments, as well as relevant public
and private sector institutions, such as financial institutions, business associations, and
export promoting agencies to get access to funding and strengthen operational
capabilities, such as product development and marketing, knowledge of requirements
of the EU market (and other destination markets), and identification of potential buyers.
• Moreover, given a high level of competition on the EU market, women-led enterprises
and other SMEs alike may wish to find a niche as an area of specialisation and in this
context, exports of organic products have been suggested by different CA stakeholders
as a possible option. In their view, this could be one of the topics for cooperation and
more in-depth discussion with the EU, including EU support for establishing business
association for organic products and provision of capability building activities related to
EU requirements for organic products, adherence to certification schemes and support
in finding potential buyers. Such activities would be in line with Article 288 of the EU-
CA FTA, where the Parties recognise the value of cooperation in areas facilitating and
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promoting trade in products that respond to sustainability considerations, incl. organic

products. This would also build on discussion on organic products held at the TSD Board
meeting in 2021.
Impacts for job quality (working conditions) and enforcement (labour inspection)
• Regarding job quality in the exporting sectors, the situation varies between sectors and
countries, with some already complying with the domestic labour legislation, while there
are compliance gaps in others. In the former, employers will need to continue to comply,
in the latter, they will need to address the shortcomings and ensure that at least the
minimum conditions granted by the domestic legislation are observed for all jobs, such
as payment of minimum wage and social security contributions and other relevant
benefits, signing a contract (and if this is not required by the law, then at least handing
over to workers payslips), and observance of health and safety at work conditions,
including provision of personal protective equipment and training. The governments,
through labour inspection services, should verify the compliance and enforce it.
• There have been initiatives coordinated by SICA (some together in cooperation with the
International Organisation for Migration - IOM) regarding different aspects of migration
in the CA region. As indicated throughout different sections of the social analysis in this
Report, workers migrate between CA countries seeking employment in sectors exporting
to the EU, including at the time of harvest. Therefore, to the extent this has not been
addressed yet in the CA regional economic integration, the CA countries could discuss
the ways of addressing movement of workers among them and their enjoyment of
workers’ rights established in the national legislation of the hosting country, such as
payment of at least minimum wages or social security contributions. The already
existing best practice from different sectors could be shared between the CA countries
and relevant sector associations (e.g., migrant workers are employed in the coffee and
the pineapple sectors in Costa Rica). The EU could also support such discussions sharing
experience from the solutions adopted within the Internal Market.
• Given the importance of some challenges related to working conditions, including health
and safety at work and the relative weakness of CA labour inspection services, the EU
and CA governments should consider a possibility of technical assistance, implemented,
e.g., in cooperation with the ILO, aiming to further strengthen capability of inspection
services and their operation in the CA exporting sectors. This may be supported by the
ILO Governing Body decision of March 2022 adopting new guidelines for inspection
services which accompany two ILO conventions on inspection services (No. 81 and 129).
• Moreover, further to the June 2022 decision of the ILO International Conference (i.e.,
the supreme ILO decision making body) of including health and safety at work into the
ILO 1998 Declaration on Fundamental Principles and Rights at Work and adding two
related conventions (No. 155 and 187) to the list of ILO fundamental conventions, all
ILO Members are obliged to respect it in the same way as the other core labour
standards enshrined in the ILO fundamental conventions. While this does not
automatically change any of the rights and obligations under implemented trade
agreements, it may nevertheless provide a good justification for enhancing EU-CA
dialogue and cooperation on health and safety at work and dedicating to it, e.g., a side
event accompanying the annual TSD Board meeting, in line with Article 286, paragraph
5 of the EU-CA FTA. It could include exchange of good practices applied by CA and EU
companies in different exporting sectors (or more specifically, in agriculture) and a
discussion about remaining challenges. We also note that the Convention No. 155 has
been ratified by El Salvador and 16 EU Member States, while the Convention No. 187
has been ratified by 15 EU Member States.
Impacts for labour standards (child labour)
• In the context of CA commitments under ILO conventions No. 138 and 182, it will be
important that international corporate buyers and private consumers, while expecting
from CA producers respect for the ILO standards, are ready to pay decent prices for
purchased (agricultural) products to enable CA producers to cover costs, incl. wages
meeting requirements of the national legislation in CA or being above that level. This
will provide decent job opportunities for adults and decrease a need for child labour as
a support for the household budget in sectors and regions, where child labour incidence
is still the case. We note in this context that the situation regarding child labour varies
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between CA countries and sectors. For example, child labour has been eliminated from
CA sugar sector, and in some other countries and sectors (e.g., banana in Costa Rica),
sector associations have informed that there is no use of child labour in operations in
the sector, as confirmed by labour inspections. We also note efforts to eliminate child
labour in the coffee sector, e.g., in Guatemala and Honduras.
• Also, further job creation related to the EU-CA FTA will remain important providing work
for adults and decreasing demand for child labour in the CA geographic areas and
sectors, where this is still the case. Finally, there will be a need to continue activities to
promote school attendance for children of parents working at plantations, arrange child-
care facilities, and pursue awareness raising among families and communities of working
children. The business sector will also need to continue application of targeted
measures, such as checking workers’ age. Certification schemes may play a supportive
role, including those that require elimination of child labour from business’ operations.
• Moreover, as outlined in Annex C-1 and the case study, CA countries have taken steps
to eliminate child labour, and in particular Costa Rica (which has by far the lowest rate
of child labour in the region) and El Salvador have made substantial progress in this
area. While the current situation and therefore the remaining challenges vary between
the CA countries, there will be a need to continue and enhance efforts to reduce and
eliminate child labour also from other sectors, not related to international trade, such
as construction and informal sector, including domestic work. Likewise, there is a need
for further efforts to prevent engagement and to withdraw children from the worst forms
of child labour, including sexual exploitation, illicit activities, and human trafficking. This
will require further development of enforcement capacities of labour inspection, police,
and other relevant bodies, judiciary, and the system of support to victims. Actions in
these areas will contribute to a more effective implementation of the ILO Conventions
No. 138 (minimum age of admission to work) and 182 (worst forms of child labour) and
to meeting commitments of the Parties under the TSD Title. In this context, TSD Board
meetings or dedicated events may support exchange of experience and best practice,
and discussion about common challenges.
• Moreover, to address the challenge of child labour more effectively, there is a need to
have data regarding its scale and incidence. Such data is usually collected by institutes
of statistics in dedicated child labour surveys or as part of the annual household survey.
However, in some CA countries the latest and comprehensive data is not available. For
example, in Nicaragua, the last child labour survey was conducted in 2012 and there is
no more recent data. In Guatemala108, a child labour survey was conducted in 2014 and
likewise, there is no recent detailed data. Therefore, in particular those CA countries
should plan, in cooperation with the ILO, if needed, dedicated child labour surveys or
include modules on child labour into the annual household survey. On the other hand,
Guatemala has elaborated a detailed risk profile of the country, estimating the risk of
child labour for all departments.
Impacts for labour standards (freedom of association)
• As noted in the case study, the situation regarding freedom of association and the right
to collective bargaining is different in each CA country and varies between sectors. The
more detailed analysis concluded that while there have been positive developments, El
Salvador, Guatemala, and Honduras should undertake further work to improve their
legislation and practice. To move closer to meeting their commitments under the TSD
Title (Article 286 in part regarding freedom of association and the right to collective
bargaining), these countries should further align their laws with the ILO fundamental
conventions No. 87 and 98 and ensure their effective implementation and enforcement
in practice. To that end, their governments, in a tripartite dialogue with social partners
should review the ILO recommendations and consider how to address them. A few
chosen priority areas for action could be then discussed regularly at the TSD Board
meetings or dedicated events to consider progress achieved and the remaining
108
In Guatemala, there is some data regarding child labour from a 2018 census, however, as it relates to the
age group 7-14 years (not 5-17 years as the child labour survey), a comparison over time is not possible.
Moreover, no detailed figures are available.
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challenges. Such discussions and events could also benefit from exchanges with other
CA partners regarding examples of best practice and ways of addressing challenges.
• For example, in Honduras, employers’ representatives (COHEP) have presented their
position supporting some changes in the Labour Code (Articles 472, 475, 510 and 541)
requested by the ILO Committee of Experts and suggested tripartite dialogue to discuss
them, ideally with the ILO assistance. Building on it, the government, employers, and
workers should discuss in a tripartite forum, e.g., in the Economic and Social Committee
amendments to the Labour Code to align it with the ILO conventions No. 87 and 98.
Also in Honduras, there is a need to strengthen the capacity, including by an adequate
budget allocation, and to improve work of the Committee on Anti-Union Violence. This
can be achieved with an ILO technical assistance and learning from other countries’
similar experience.
• The Guatemalan stakeholders, business, and trade unions’ representatives alike,
emphasised the importance of the Tripartite Commission on Labour Relations and
Freedom of Association. In this context, the EU could consider a proposal from the
Guatemalan trade unions to provide financial and technical assistance, in cooperation
with the ILO, for the Tripartite Commission to facilitate its operation. The EU could also
consider technical support to the Tripartite Commission’s trade union members to help
them analyse legislative proposals put forward by the government or employers’
representatives.
• In El Salvador, according to information provided by a trade union representative for
this study, the EU-CA FTA’s entry into force created a positive momentum for social
dialogue and contributed to improved working conditions and climate for freedom of
association. Reportedly, that positive trend started being reversed in the last couple of
years and should be reinvigorated, in cooperation of the government and the social
partners. There have been further developments in the country since the interview and
while progress has been made, further work is needed to improve relations between the
government and social partners, and conditions for a free operation of the latter.
• Regarding trade unions’ operation in practice, the available evidence, and interviews
with sector representatives from CA countries confirm that trade unions’ presence plays
an important role in ensuring respect for workers’ rights and decent working conditions
(e.g., through collective agreements), as demonstrated by the banana and parts of the
sugar sector (sugar mills) in CA. This in turn helps to reduce poverty and support
sustainable development. Therefore, private sector and CA governments should create
conditions for a free trade union operation, where this is not the case yet, and where
situation in certain sectors or CA countries lags behind the rest of the region (e.g., in
the sugar sector in Guatemala, where only one trade union operates facing serious
challenges, while in other countries trade unions are active in some or all sugar mills).
• Equally other sectors, such as palm oil in Guatemala or melon in Honduras do not offer
conditions for a free trade union establishment and operation. In this context, it will be
important to see if the implementation of human rights guidelines in the palm oil sector
in Guatemala will bring about any changes regarding compliance with labour standards.
• Moreover, in cooperation with the ILO or trade unions from other countries, including
the EU, training or awareness raising campaigns for CA workers should be organised
regarding their rights to organise, but also other vital aspects (e.g., health and safety
at work), where this has not been the case yet, to enable a free and informed decision
of workers whether to organise.
Impacts related to non-discrimination
• To the extent this has not been addressed yet in the CA regional economic integration,
the CA countries could discuss the ways of addressing movement of workers among
them, e.g., for the harvest season, and their enjoyment of workers’ rights established
in the national legislation of the hosting country, such as payment of at least minimum
wages or social security contributions. The EU could support such discussions sharing
also experience from solutions adopted within the Internal Market.
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Impacts for uptake of CSR practices and adherence to certification schemes

• Given the insufficient data available regarding working conditions in CA exporting
sectors, and compliance with national legislation and international standards, such as
the ILO fundamental conventions, the EU could consider with CA governments, private
sector representatives and trade unions, whether reports from audits under certification
schemes can be used as a complementary source of information. In such a case, it
would be useful, if sector associations could publish such summary reports about their
certified members on their websites, and do it at regular intervals, e.g., annually, or
when audits are carried out, if they are less frequent.
• It could also be explored whether there is a possibility of a dialogue with certification
organisations to get a picture of certified companies and plantation in the CA exporting
sectors and their performance, as well as about those where certificates have been
withdrawn.
• The EU should continue providing assistance projects and engage in other cooperation
activities with CA countries aiming at promotion and the use in practice of CSR activities
in particular in sectors involved in exports to the EU.
• Moreover, as signalled by several stakeholders, given a high level of competition on the
EU market, women-led enterprises and other SMEs alike may wish to find a niche as an
area of specialisation and in this context, exports of organic products, including coffee
and cacao, have been suggested as a possible option. Our interlocutors, e.g., from
Nicaragua and Honduras suggested this could be one of the topics for cooperation and
more in-depth discussion with the EU, including EU support for establishing business
association for organic products and provision of capability building activities related to
requirements for organic products, adherence to certification schemes and support in
finding potential buyers.
5 ENVIRONMENTAL ANALYSIS
By means of the Agreement, the EU and the Central American countries confirmed their
commitments to the sustainable development agenda at the time of signing the
Agreement. Since then, preventing environmental degradation and climate change have
assumed a more central role in the EU policies, including EU trade policy.
Since the signature of the Agreement, major achievements have been made with respect
to environmental policies. Achievements include the ratification of the Paris Agreement in
2016, the adoption of the European Green Deal in 2019 109 and the EU Biodiversity Strategy
for 2030110 in 2020. Under the EC’s strategy for 2019-2024, implementation of the Green
Deal is a top priority.111 As such, policies have been drafted to deliver the ambitious targets
from the Green Deal, such as the Fit for 55 policy package. In addition, diplomacy and
trade policy are identified as a means to promote and enforce sustainable development
across the globe and to support the EU’s green transition.
Meanwhile, environmental objectives have also gained a more prominent and integral role
in the EU’s 2021 “Open, Sustainable and Assertive Trade Policy.” 112 Finally, the EU’s
environmental footprint in third countries through its imports has become a key policy topic
since studies identified the role of EU consumption in (embedded) deforestation. As a
result, the EC proposed a regulation on deforestation free products in 2021, which puts in
place the ambition to prevent environmental degradation in third countries driven by EU
109
Communication from the Commission to the European Parliament, the Council, the European Economic and
Social Committee and the Committee of the Regions. The European Green Deal, COM/2019/640 final, 11
December 2019; for more information, see https://ec.europa.eu/info/strategy/priorities-2019-
2024/european-green-deal_en.
110
Social Committee and the Committee of the Regions. EU Biodiversity Strategy for 2030. Bringing nature
back into our lives, COM(2020) 380 final, 20 May 2020.
111
See https://ec.europa.eu/info/strategy_en
112
Social Committee and the Committee of the Regions. Trade Policy Review – An Open, Sustainable and
Assertive Trade Policy, COM(2021) 66 final, 18 February 2021.
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consumption. Various EU strategies refer to the importance of this regulation, such as the
EU Trade Policy and the Farm to Fork Strategy.
Against the background of these developments, a transparent, evidence-based evaluation

of the environmental effects of the Agreement between the EU and the Central American
countries is very relevant; it can inform the EC on the alignment of existing trade
agreements with these renewed policies.
This section presents the results of the environmental evaluation of the Agreement,
covering three environmental areas of climate change, biodiversity and ecosystems and
other environmental indicators, such as water. The Agreement may create an impact on
the environment in two ways; 1) trade related impacts (e.g. tariff preference impacts), as
the Agreement will have an effect on production levels in certain sectors and for certain
products, and 2) governance impacts (mostly by means of the provisions in the TSD Title),
as the Agreement may have an effect on the countries environmental policies related to
those sectors, and products, and the overarching national environmental policies and
strategies.
We note that the main challenge is to isolate the Agreement’s induced effects on the
environmental performance in each country from general developments and trends that
occurred regardless of the Agreement. This is particularly challenging as the counterfactual
environmental outcomes are unobservable for most of the environmental impact areas.
Notable is also the lack of sufficient and reliable data, making it difficult to draw robust
conclusions.
The environmental analysis starts with brief summaries of the environmental performance
baselines in the partner countries (section 5.1) and the results of impact screening and
scoping (section 5.2). Section 5.3 presents the analysis, followed by the conclusions
(section 5.4) and recommendations (section 5.5).
5.1 Environmental baselines
The baselines serve to better understand the partner countries’ status quo regarding their
environmental performance (e.g., trends) and governance practices in the period 2008-
2019, and, most importantly, to inform the impact screening and scoping exercise (see
subsequent section 5.2). This will be done by analysing issues from a DPSIR framework
perspective113 (drivers – pressures – state – impact – responses) as this framework
supports establishing the causal relation between environmental developments and policy
interventions. In the case of an FTA, such as the EU-CA FTA, trade liberalisation in goods,
services and investments can function as a driver for change in different economic sectors,
causing changes in the amount of land and resource use or in their quality (e.g., pollutants
and emissions affecting air, water, or soil quality). The changes in the quantity of land-
and other resource use may create environmental pressures which lead to an impact in the
state of the environment and the services it provides. As a response, certain new or existing
measures can be taken to help to prevent negative impacts or to amplify positive ones
(IEEP, Trinomics et al., 2021).
The baselines do not link the discussed drivers, pressures, and impacts to the EU-CA FTA.
The potential relation between the selected environmental impacts and the Agreement is
studied in section 5.3, analysis of the environmental impacts. Below we summarise the
performance baseline, for the full analysis of the performance and governance baseline see
Annexes D1 and D2.
Performance baselines
5.1.1 Climate change

As a result of geographical conditions, such as long coast lines with lowland areas, the
Central American countries are relatively vulnerable to the impacts of climate change. The
113
The DPSIR framework is applied based on the project team’s vision on the relevance of the framework in
the context of this project. It may therefore deviate from (academic) literature using the DPSIR framework.
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Climate Risk Index (CRI), which analyses the extent to which different countries have
already been affected by climate related extreme weather events, ranks four out of the
six Central American countries among the first quartile of countries most
vulnerable to climate change globally, based on the average CRI between 2000-2019.
These are Guatemala, El Salvador, Nicaragua, and Honduras.
Regarding the evolution of greenhouse gas emission (GHG), the figures and data show that
EU27 GHG emissions are higher than GHG emissions in Central America (also when
corrected for the population differences). The available data also demonstrates that Costa
Rica, El Salvador, Nicaragua and the EU27 achieved emission reductions over the past
years.
In the Central American countries, CH4 and N2O emissions account for relatively high
shares of total GHG emissions compared to the EU27, which is explained by the relative
size of the agricultural sector compared to the industrial sector and because of lower energy
use. LULUCF emissions account for a significant share in most Central American countries.
Both Costa Rica and the EU27 achieved negative LULUCF emissions, which significantly
lowered their net CO2 emissions.
5.1.2 Biodiversity and ecosystems

Central America is part of the third largest biodiversity hotspot (i.e., Mesoamerican
biodiversity hotspot) in the world and holds many endemic and rare species. Despite its
importance, the biodiversity of this region has experienced significant damage in terms of
its extent and quality of its various ecosystems, as well as decline in terms of species
extinction and ecosystem loss. Threats to Central America’s biological diversity and natural
resources include invasive species, over-exploitation of resources, contamination, and
pollution, as well as habitat loss, fragmentation, and degradation.
In Central America, only five of the terrestrial ecoregions are considered ‘Relatively Stable’
and nearly 50% of the terrestrial ecoregions have the conservation status of ‘Critically
Endangered’. Of the freshwater ecosystems, comprised of coastal/subtropical coastal as
well as upland rivers, 30% are considered ‘Critically endangered’. Most Central American
countries, except Panama and Costa Rica, are not meeting the Aichi Target 11 on protected
coastal and marine areas.114 Yet, all partner countries, except El Salvador, meet the Aichi
Target 11 on protected terrestrial areas. In 2021 El Salvador, the government established
a greater consolidation of the Natural Protected Areas, expanding to 72 thousand ha (31
thousand of which are terrestrial, and 41 thousand are marine) (Gobierno de El Salvador,
2022).
In particular, deforestation, driven largely by mining, agricultural expansion, illegal logging

and livestock production, is one of the key drivers of species loss. Guatemala, Honduras,
and Nicaragua performed significantly worse than Costa Rica, El Salvador, and Panama in
terms of tree cover loss and humid primary forests loss between 2002 and 2020.
5.1.3 Other environmental indicators

The water use, and water quality challenges that face each of the six Central American
countries in this study are different, in part driven by the externalities of agricultural
practices and related poor wastewater management. These issues are in general
compounded by poor climatic or geological conditions, such as the poor soils in Nicaragua
or the increasing incidence of violent climatic events, such as flooding. Annex D1 provides
a detailed description of these challenges for each of the Central American countries in this
study.
114
Aichi Targets are objectives under the Convention on Biological Diversity; Aichi Target 11 stipulates the
following: “By 2020, at least 17 per cent of terrestrial and inland water, and 10 per cent of coastal and
marine areas, especially areas of particular importance for biodiversity and ecosystem services, are
conserved through effectively and equitably managed, ecologically representative and well connected
systems of protected areas and other effective area-based conservation measures, and integrated into the
wider landscapes and seascapes.”
164
Air pollution also is a considerable problem in Central America and is largely driven by
the burning of fossil fuels to meet domestic energy demand and the energy needs of the
transport sector (especially in urban environments). These sources of air pollution are
aggravated by weak fuel standards, energy inefficiency in terms of appliances used in the
domestic and transportation sectors, and by the common practice of burning agricultural
and municipal waste in open air. Though air quality has improved in the region over the
past few decades, apart from Panama, the entire population of this region is exposed to
unsafe levels of PM 2.5.
5.1.4 Overview of the baselines

The detailed baselines described in Annex D1 and D2, and summarised above, have been
used to set the scene, and to inform the impact screening and scoping exercise. Table 5-1
schematically summarises the key results, following the DPSIR framework as applied in
the study by IEEP and Trinomics et al. (2021) 115.
Table 5-1 Non-exhaustive list of drivers, pressures, impacts and responses across
environmental impact areas
Environmental Drivers Pressures Impacts Responses
impact area
Climate change Increased GHG Temperature & Floods, droughts, National Determined
emissions from activities sea level rise, invasive species, Contributions (NDC),
such as agriculture, increased diseases Disaster Risks
industrial, and energy frequency of Management, among
production extreme weather others
events
Biodiversity and ecosystems
Terrestrial and Mining, (illegal) logging, Habitat Species under Regional and national
freshwater agricultural production, degradation and different threat levels environmental
urbanisation, climate habitat loss of extinction and legislation and
change, invasive species extinction policies, biodiversity
species, among others strategies, protected
Marine Aquaculture, commercial Habitat Species under areas
fishing, industry and degradation and different threat levels
agriculture, invasive habitat loss of extinction and
species, climate change, species extinction
among others
Other environmental parameters
Water Agriculture, Water pollution, Loss of biodiversity, Regional and national
hydroelectric power soil depletion, lack reduced productivity of water legislation and
generation, of access to clean land and policies
urbanisation, drinking water, eutrophication of
transportation water scarcity water bodies
(Panama), climate
change
Air quality Energy consumption for
Water pollution, Reduced productivity National air quality
residential heating and
soil depletion, acid of land, climate strategies, regulatory
cooking, transport rain effects (as change, frameworks including
sector, industry particle matter can eutrophication, impact standards for
be carried over on animal and human different pollutants
long distances), health monitoring
global warming
Waste Weak waste governance, Pollution caused Degradation of Waste management
management and fishing industry, cruise by antifouling habitats, impact on plans, Circular
circular economy ship tourism, shipping paints in ships, animal and human Economy
industry discharge of health programmes, private
ballast water, and sector initiatives
oil spills, leading
to water and soil
pollution.
5.2 Impact screening and scoping – results summarised
Based on the performance and governance baselines, and the impact screening and
scoping exercise (see Annexes D1-D3 for details), the following priority areas for
115
See https://ec.europa.eu/environment/publications/methodology-assessing-impacts-trade-agreements-
biodiversity-and-ecosystems_en
165
environmental impacts (both positive and negative) have been identified (in random
order). Justification for the selection can be found in the Annex D2.
Priority Description Country Respective

area section
The impact through the fruits and vegetables sector is identified Central Land use analysis
as a potential priority impact for the following reasons: America section
• Environmental pressures in the agriculture sector in the
entire Central America region have been present.
Potential
• Economic modelling results show an increase in output for impacts of
the sector ‘fruits and vegetables’, for Panama and Costa
the
Fruits and vegetable sector impact
Rica.
• The literature review highlights the role of increased fruit Agreement’s
and vegetable production on biodiversity loss, ecosystem
degradation and water pollution.
tariff
• The Agreement may have promoted improving reductions
environmental frameworks and multilateral commitments in
relation to agrochemicals (e.g., through the effective
on land use
implementation of the Rotterdam and Stockholm change5.3.2.1,
Conventions, water use analysis
• There is also a potential impact of the Agreement on section 5.3.3.1,
sustainable and organic products and schemes such as eco- and the
labelling. environmental
impacts of Banana
production are
discussed in case
study No. 6.
The impact through the sugar sector is identified as a priority Central Land use analysis
area for the following reasons: America section 5.3.2.1,
Sugar sector impact
• For Costa Rica, Guatemala, El Salvador, Honduras, and and water use
Nicaragua, the output of ‘sugar’ products has risen analysis section
considerably, including raw materials like sugar cane to 5.3.3.1.
produce biofuels, such as ethanol.
• Through literature we find an impact of sugar cultivation on
and land conversion from forest to agriculture lands, leading
to biodiversity loss. Sugar cultivation is also linked to severe
water stress, aquifer pollution, and soil degradation.
The impact of the Agreement through the fishing (e.g., shrimp) Costa Case study No. 4
sector
sector on water/riparian areas and biodiversity is identified as a Rica, El on sustainable

priority area: Salvador, aquaculture
• Sources point to aquaculture (including shrimp farming) in Honduras,
relation to various environmental pressures in the region and
and specifically the Gulf of Fonseca, which includes, El Nicaragua
Fishing
impact
Salvador, Honduras, and Nicaragua. In the Gulf, riparian

degradation, and increased biodiversity loss, as well as
(mangrove) ecosystem degradation are widely reported.
In addition, the impact of the Agreement on GHG emissions in the EU and the Central
American partner countries is analysed (section 5.3.1), which is relevant for all trade
agreements. The potential impact of the Agreement on increased maritime activity (related
to marine ecosystem health) is assessed in section 5.3.3 - other environmental indicators),
though less detailed than the priority areas. This is supported by the prominent role of the
Panama Canal in international trade, and the economic modelling results which show a
positive impact on the Panamanian transport sector. Finally, based on our impact screening
and requests from different departments of the European Commission, the following
environmental case studies will be constructed:
• Case study on Trade in environmental goods and services (opportunities for the
EU and partner countries) between the EU and Central American partner countries
(section 5.3.3.3 and case study No. 2),
• Case study on renewable energy sector in Costa Rica (section 5.3.3.4 and case study
No. 3),
• Case study on the impacts of the Trade Pillar on the environment (e.g., forests and
biodiversity) in Guatemala, the case of palm oil (section 5.3.2.5 and case study No.
1),
• Case study on the impacts of the Trade Pillar on MSMES and sustainable agriculture in
the coffee industry (organic coffee) in Honduras (section 5.3.2.3 and case study
No. 5).
166
5.3 Analysis of environmental impacts through the Agreement
5.3.1 Climate Change
5.3.1.1 Impact on gross greenhouse gas emissions
Estimated impact on gross greenhouse gas emissions

While analysing the causal relationship between the Agreement’s effect and environmental
developments is challenging in the absence of a counterfactual (i.e., what would have
happened if the Agreement would not have been signed), the CGE output allows for
quantitative analysis of the causal effect of the Agreement on gross greenhouse gases
(GHGs). In theory, the Agreement may have generated impacts on GHG emissions through
three different channels:
• Scale effect: the impact resulting from the overall change in production due to the
Agreement;
• Composition effect: the impact resulting from the change in production due to the
Agreement, considering the sectoral output changes and sectoral GHG emissions (and
emission intensities); and
• Technology effect: the impact resulting from the exchange of technologies and
production methods with (e.g.) different efficiencies resulting in a change of emissions
per unit of production.
The economic modelling calculates the changes in CO2 emissions resulting from the EU-CA
Agreement. The CO2 estimates presented in this section are directly taken from the
economic modelling. For the other GHG, the methodology explained in Textbox 5-1 below
allows identifying the scale and composition effects. The technology effect will be discussed
qualitatively, in section 5.3.1.2.
Textbox 5-1 Methodology applied for other GHG (CH4, NO2 and F-gas) emissions analysis
The bullets below summarise the main steps that have been taken to estimate the tariff
reduction induced gross GHG emissions (for CH4, NO2 and F-gas).
• Step 1: Extract data on 2014 GHG emissions from GTAP/EDGAR (emissions are based on the
EDGAR database but using the GTAP sector definition so that they can be matched with the
output change at sector level).
• Step 2: Extract data on GHG emissions from other sources for more recent years. Data was
extracted from ClimateWatch.
• Step 3: Estimate 2019 emissions per country, per GHG. The 2019 emissions have been
estimated by taking the growth rate per GHG per country between 2014 and2017, based on
ClimateWatch data. This growth rate has been applied on the 2014 GHG emissions from GTAP
(step 1) to estimate the GHG emissions in 2019 (at sector level). This calculation results in
the estimated 2019 emissions with the Agreement. We note that this estimation only considers
historical GHG growth rate between 2014 and 2017, following a business-as-usual trajectory.
• Step 4: Estimate the 2019 GHG emissions that would have been produced without the
Agreement. This has been done by multiplying the 2019 emissions with the Agreement (per
GHG, per country, per sector), with (100% - % output change resulting from the Agreement).
• Step 5: Deduct the 2019 GHG emissions that would have been produced without the
Agreement (per GHG, per country, per sector) from the 2019 emissions with the Agreement,
which results in the tariff reduction-induced change in gross GHG emissions.
Scale effect
Based on the overall change in economic activities – without considering differences in

output change between sectors and differences between emission intensities per region –
the tariff reduction-induced change in gross GHG emissions is expected to follow the tariff
reduction-induced change in economic activity. This corresponds with the estimated impact
of the Agreement on GDP resulting from tariff reductions, which is what is estimated by
the economic modelling. This implies the following changes in annual GHG emissions:
+0.2% in Costa Rica, +0.04% in El Salvador, +0.04% in Guatemala, +0.05% in Honduras,
167
+0.2% in Nicaragua, +0.1% in Panama, +0.0017% in the EU27, and -0.0001% in the rest
of the world (percentages are relative to total yearly emissions per country/region).
Composition effect – correction for sectoral output changes and emission
The scale effect alone is not very informative, as it does not consider sectoral changes,
differences in emissions intensities and technology effects. For that reason, the
composition effect is estimated, which does take output changes at sector level and
emission intensities into account. Figure 5-1 and Figure 5-2 show the tariff reduction-
induced change in gross GHG emissions in 2019 per country. It is noted that the underlying
composition analysis is based on a more disaggregated analysis (22 sectors, as per the
CGE results). These results have been aggregated to allow visualisation.
Impact in Central America partner countries

Figure 5-1 shows that, according to our estimates, the tariff reductions resulted in lower
gross CO2 emissions in 2019 in all Central American countries. In Costa Rica, the decrease
is mainly the result of decreased CO2 emissions in the sector utility and services, followed
by a decrease in paper, chemicals, plastics and rubber, though there was a slight increase
in the agriculture, fishing, and forestry sectors. Similarly, in El Salvador, Honduras,
Nicaragua and Panama, the Agreement resulted in lower CO2 emissions within the utility
and services sectors. In Guatemala, the decrease in CO2 emissions was primarily driven
by the paper, chemicals, plastics, and rubber sector. It is noted that the estimations of
induced gross CO2 emissions presented in Figure 5-1 from the sector agriculture, fishing
and forestry do not include LULUCF emissions.
The tariff reduction-induced economic impacts only caused methane (CH4) emissions to
slightly change across Central American countries. The largest Agreement- tariff reduction
induced impact on CH4 emissions occurred in Nicaragua, which can be explained by the
relatively high impact of the Agreement tariff-reduction on the economic output of the
subsectors included under the aggregated sector agriculture and forestry in this country.
In Costa Rica, Guatemala and Honduras, the Agreement tariff-reduction induced CH4
emissions are only slightly negative, and in El Salvador and Panama slightly positive.
Nitrous oxide (N2O) emissions largest Agreement- tariff reduction induced change took
place in Costa Rica, which was dominated by the agricultural sector.
To conclude, according to our estimates on the difference between GHG emissions in the
situation with and without the Agreement in 2019, the economic changes associated with
the Agreement-tariff reductions resulted in increased gross GHG emissions in Costa Rica
(CO2 emissions -0.02 Mtonne CO2eq, other GHGs +0.02 Mtonne CO2eq) and in decreased
gross GHG emissions in El Salvador (CO2 emissions –0.01 Mtonne CO2eq, other GHGs
+0.00 Mtonne CO2eq), Guatemala (CO2 emissions –0.04 Mtonne CO2eq, other GHGs +0.00
Mtonne CO2eq), Honduras (CO2 emissions –0.04 Mtonne CO2eq, other GHGs -0.00 Mtonne
CO2eq), Nicaragua (CO2 emissions –0.01 Mtonne CO2eq, other GHGs -0.03 Mtonne CO2eq),
and Panama (CO2 emissions –0.51 Mtonne CO2eq, other GHGs +0.01 Mtonne CO2eq).
168
Figure 5-1: Tariff reduction-induced GHG emissions in 2019 at sector level in Central
American countries, in Mtonne CO2 (eq)
Source: Trinomics (2021), based on GTAP and ClimateWatch
Impact in the EU and globally

The Agreement- tariff reductions resulted in an increase of EU27 gross GHG emissions (as
shown in Figure 5-2). CO2 emissions have increased in all sectors, except in sectors
agriculture and forestry, and fossil fuel extraction. The increase in gross GHG emissions in
the EU27 is predominantly driven by the Agreement-tariff reduction induced increase in
CO2 emissions (0.17 Mtonne CO2eq). The rise in CO2 emissions can be attributed to
increased economic activity in the sectors petroleum and chemical products, mineral
products, utility and services, and transport and construction. CH4 emissions increased by
0.01 Mtonne, while N2O emissions decreased by 0.06 Mtonne.
On a global level, it is estimated that the Agreement- tariff reductions resulted in a

decrease of global gross GHG emissions (CO 2 emissions -0.16 Mtonne CO2eq, other GHGs -
0.01 Mtonne CO2eq). This is the result of the combination of decreased economic activity in
the Rest of the World (see section 0), combined with differences in emission intensities.
The sectors which contribute most to the tariff reduction-induced changes in gross GHG
emissions are utility and services (driven by the Agreement-induced changes in the
electricity and gas sectors), agriculture and forestry (driven by the Agreement-induced
changes in the vegetables fruits and nuts sector).
169
Figure 5-2: Tariff reduction-induced emissions in 2019 at sector level in the EU28, Rest
of the World, and World (total), in ktonnes CO2 (eq)
Source: Trinomics (2021), based on GTAP and Climate Watch
Total effect
Figure 5-3: Percentage change in emissions resulting from the Agreement compared to
total emissions in Central America Countries
170
Figure 5-4: Percentage change in emissions resulting from the Agreement compared to
total emissions in the EU 27 and RoW
Figure 5-3 and Figure 5-4 show the tariff reduction-induced change in gross GHG emissions
in 2019 (compared to total gross GHG emissions per country in 2019). The net effect refers
to the percentage change between what gross GHG emissions would have been in 2019
without the FTA- tariff reductions induced output change and gross GHG emissions in 2019
with the FTA-tariff reductions induced output change.
Table 5-2 summarises the results of the Agreement-tariff reduction-induced changes in

gross GHG emissions in 2019. It is noted that LULUCF emissions are not covered in this
analysis.
Table 5-2 Tariff reduction-induced emissions116 in 2019 (Mtonne CO2 eq.)
Country / Region CO2 CH4 N2O F-gas Total
Costa Rica -0.02 - - - 0.01
El Salvador -0.01 - - - -0.01
Guatemala -0.04 - - - -0.04
Honduras -0.04 - - - -0.04
Nicaragua -0.01 -0.03 - - -0.04
Panama -0.5 - 0.01 - -0.5
European Union (27) 0.2 - -0.06 - 0.1
ROW 0.3 0.04 - 0.01 0.3
Total -0.2 0.01 -0.03 0.02 -0.2
5.3.1.2 Other climate change related impacts – governance and production standards
Other pathways through which the Agreement may have impacted climate change
performance in the Central American countries is through its impact on legislation and on
production standards.
As discussed in the environmental governance baselines (Annex D1), all countries have
made significant steps when it comes to climate change policies over the period of the
Agreement. The key driver for this was the Paris Agreement (PA), which was signed in
2015 and entered into force in 2016. All countries involved in the EU-Central American
Trade Agreement are signatories of the PA. The EU, Costa Rica, Honduras, and Panama
ratified the PA in 2016 and El Salvador, Guatemala and Nicaragua in 2017. In response to
the PA, the EU published the EU Green Deal in 2019 aiming to reach climate neutrality in
116
Only (absolute) values >0.01 are reported.
171
2050. The European Commission’s proposal Fit For 55, which translates the Green Deal
into concrete policies and actions, was published in 2021.
Costa Rica implemented various climate policies during the period of the Agreement,
including an initiative on low-carbon coffee production and a national strategy which aims
for Costa Rica to be climate neutral by 2050, like the EU. El Salvador published an
environmental strategy of adaptation to and mitigation of climate change in 2015, with a
special focus on sectors in the agriculture, forestry and aquaculture. Guatemala integrated
climate targets in its developing plan ‘K´atun (Our Guatemala) 2032’ and in its national
long-term strategy. Honduras developed a GHG emission inventory system and a climate
adaptation strategy in 2016. Nicaragua launched a national policy for mitigation of and
adaptation to climate change. In 2015, Panama updated its general law on environment,
i.e., Ley 41 from 1998, which for the first time in the country’s history included a chapter
on climate change.
With respect to the link between these developments and the Agreement’s TSD Title, it
seems very unlikely that the Parties would not have implemented these policies in absence
of the Agreement, even though the TSD Title facilitates expressing potential concerns about
climate change governance. The observation that the TSD Title did not impact climate
governance was not challenged in stakeholder interactions. As a result, the Agreement’s
TSD Title does not seem to have directly contributed to improved climate change
governance.
Another pathway through which the Agreement may generate climate relevant impacts is
through the penetration of products with lower environmental and climate footprints on
the Central American market, or by improving the environmental and climate performance
of production processes in Central America (the technology effect). Even though no
indication of the latter was found in this research, the case study No. 2 on environmental
goods shows that the share of environmental goods within the EU’s exports to the
Central American countries has increased over the analysed period. This increased
share is remarkable, as the share of environmental goods in the EU’s export to the rest of
the world decreased over the same period. Although this does not prove a causal link
between the increased share and the Agreement, it is considered as a positive trend from
an environmental perspective.
To assess the Agreement’s potential impact on biodiversity and ecosystems, we analyse a

number of sub-impact areas: (1) land use change impacts, and specifically deforestation
that may have been caused by changes in agricultural production, (2) the Agreement’s
environmental impact on oil palm production in Guatemala, (3) the impact of the
Agreement on organic coffee in Honduras, (4) the Agreement’s effects and impacts on
governance of natural resources through the TSD Title.
5.3.2.1 Potential impacts of the Agreement’s tariff reductions on land use change
Estimating the land-use changes117 due to tariff reductions induced by the EU-Central
America Free Trade Agreement (FTA) is a complex task, unavoidably requiring the use of
certain assumptions. All assumptions are based on the best available data, and the
methodology follows the same approach used for the estimation of land use change in the
ex-post evaluation of the Trade Agreement between the EU, Colombia, Ecuador and Peru,
except for the spatial analysis. This section explains the methodological steps and
summarises the key results.
117
In this analysis, land use change refers to any change in land cover associated with the expansion or
contraction of the area used for different crops. Net land use change can be positive, meaning there has
been an overall gain in crops area, or negative, meaning an overall loss of crops area. In this analysis, land
use change is not the same as deforestation (conversion of forest to other land uses, such as agriculture
and infrastructure)
172
Estimation of the hectares of land used
a. Methodology
In this section, we briefly present the methodology followed to estimate the hectares of
land used in the Central American countries corresponding; we do this by calculating the
Agreement-tariff reduction induced output change in the agricultural sector. This
methodology uses the results of the economic model as inputs to estimate the extent to
which the FTA-tariff reduction induced output change resulted in land-use change. The
economic modelling results are used because they provide the most (and only) reliable
estimate of FTA-tariff reduction induced changes by calculating the difference between the
actual observed situation and the modelled (hypothetical) situation without the Agreement.
As such, the results of the economic model show the Agreement-tariff reduction induced
economic changes in 2019. For our analysis, we assume that these economic changes in
the agricultural sector are directly associated with land-use change. In order to translate
the economic modelling results into hectares of land used, the following steps in the
analysis are applied (as shown in Figure 5-5). The methodological steps are explained in
detail in the methodology Annex D3.
Figure 5-5 Overview step 1: Estimating the hectares of land corresponding with the Agreement- tariff
reduction induced output change in the agricultural sector
Results
Our analysis found that the Agreement-tariff reduction resulted in a net increase
(considering all crops affected by the Agreement) of 8,000 ha of cropland area in the
Central American countries, compared with the hypothetical situation without an
Agreement. Figure 5-6 presents the results by country. It is shown that Costa Rica
experienced the largest Agreement-tariff induced increase (4,000 ha) followed by Panama
(3,000 ha). To a lesser extent, the Agreement-tariff reduction resulted in an increase of
cropland in Nicaragua (400 ha), Guatemala (400 ha) and El Salvador (200 ha). In contrast,
our estimations show that in Honduras, the Agreement-tariff reduction resulted in a net
decrease in cropland area (considering all crops affected by the Agreement) of 500 ha.
Figure 5-6 Estimated total Agreement-tariff reduction induced output change per
country (thousand ha)
Source: Trinomics (2021) based on CGE modelling results and FAOSTAT
173
Table 5-3 shows the results of the estimated Agreement-tariff reduction induced output
change per sector. Accordingly, despite the net result (increase or decrease) in cropland
area per country, the Agreement-tariff reduction impact on cropland area varied across
sectors. As shown in Table 5-3, the Fruits & Vegetables (F&V) sector is associated with the
largest Agreement-tariff induced increase in terms of hectares of land (8,000 ha). This
induced increase (considering all crops affected by the Agreement) was primarily driven
by the increase in the cropland area in Costa Rica and Panama. Bananas, pineapples,
watermelons, and melons were found to be the main products (experiencing tariff
reductions) behind the cropland change attributed to the F&V sector in these two
countries.118 The second-largest net increase in cropland area induced by the Agreement-
tariff reduction change was found in the Sugar sector, in which the trade of sugar cane
products (e.g., sugar raw centrifugal) was associated to this output change in most CA
countries. On the other hand, the largest net decrease in cropland driven by the
Agreement-tariff reduction occurred in the Vegetable oils sector. This decrease of cropland
was driven by the negative FTA-tariff induced output changes resulting from the economic
modelling for these countries.
Table 5-3 Estimated Agreement-tariff reduction induced output change per sector
Sector FTA-tariff reduction induced output change (thousand ha)
CR SV GT HN NI PA Total
1 Fruits & Vegetables 6 0.1 2 8
2 Vegetable oils -3 -0.4 -0.8 1 -3
3 Sugar 0.4 0.3 0.6 0.6 0.4 2
4 Other crops 0.4 0.5
5 Other agriculture -0.3 -0.3
Total 4 0.3 0.4 -0.5 0.4 3 8
Source: Trinomics (2021) based on CGE modelling results and FAOSTAT
Based on our results, the Agreement-tariff reduction is likely associated with an increase
in cropland in Costa Rica, El Salvador, Guatemala, Nicaragua, and Panama. In the next
sections, the focus will be given to these countries to estimate to what extent the induced
change led to deforestation.
5.3.2.1.1.1 Estimation of deforestation due to agricultural activities in 2012-2019

The relation between output change in the agricultural sector and deforestation is not
given. The first step to assess to what extent the FTA-tariff reduction induced use of land
could be associated to deforestation in Costa Rica, El Salvador, Guatemala, Nicaragua, and
Panama were to extract data on observed tree cover loss 119 from Global Forest Watch data
(GFW, 2021).
Table 5-4 shows the observed tree cover loss per country between 2012 and 2019, the
share of tree cover loss due to commercial agriculture activities resulting in permanent
deforestation120, and the multiplication of these numbers to show the estimated amount of
deforested areas due to commercial agriculture.
As shown in Table 5-4, the largest deforested area due to commodity-driven agriculture
between 2012 and 2019 was in Nicaragua (with nearly 100 thousand ha). Guatemala is in
the second place (with over 78 thousand ha deforested). In all these countries, other
drivers such as shifting agriculture (small and medium-scale agriculture), forestry, wildfire
and urbanization were dominant causes of tree cover loss (GFW, 2021). The difference
between the data reported for deforestation caused by shifting agriculture and commodity-
118
Other products that were found to have a notable effect on land use change in the CA6 countries but that
were excluded from the analysis as they did not experience tariff reduction are: coffee (green), cocoa
beans, coconuts, natural rubber and paddy rice.
119
Tree cover loss is defined by GFW as stand level replacement of vegetation greater than five meters. Tree
cover loss includes change in both, natural and planted forest and does not need to be human caused.
Deforestation, on the other hand, refers to permanent removal of natural forest cover.
120
Commodity-driven deforestation is defined by GFW as large-scale deforestation linked primarily to
commercial agricultural expansion.
174
driven agriculture is that the latter represent permanent deforestation, while tree cover
affected by the former often regrow (Ibid).
Table 5-4 Role of commercial agriculture in tree cover loss between 2012 and 2019
Country Observed tree Deforested area due to % Tree cover loss
cover loss commodity-driven (1) caused by commodity-
(2012-2019) agriculture (2012-2019) driven agriculture
(thousand ha) (thousand ha) (2012-2019)
Costa Rica 92 0.7 0.7%
El Salvador 25 0.2 0.9%
Guatemala 675 78 11.6%
Nicaragua 692 100 14.4%
Panama 166 6 3.5%
Source: Trinomics based on Global Forest Watch data (2021).(1) Commodity driven forestation is defined by
GFW as: Large-scale deforestation linked primarily to commercial agricultural expansion.
5.3.2.1.1.2 Share of deforestation due to agricultural activities resulting from cropland

In parallel to the results of the previous step, we conducted a desk-research to determine
the shares of agricultural deforestation loss that was caused by a) crops and b) livestock
grazing. Based on the best available literature, the share of deforestation caused by
livestock and cropland expansion in the Central American countries are shown in Table 5-5
Table 5-5 Share of deforestation resulting from cropland and livestock grazing
Country % Deforestation caused by % Deforestation caused by
livestock cropland
Costa Rica 68% 32%
El Salvador 67% 33%
Guatemala 55% 45%
Nicaragua 76% 24%
Panama 72% 28%
Source: Trinomics based on Global Forest Watch data (2021), Obando, G. (2020), GCI (2018), FAO (n.d)
As shown in Table 5-5, in all Central American countries, livestock is reported to be the
main driver for permanent deforestation within agriculture activities.
5.3.2.1.1.3 Cropland change resulting in deforestation

Based on the previous results, we estimated the percentage of new cropland resulting in
deforestation in each country. For this calculation, we used the net change of land use
(area of cropland) in each of the countries between 2012 and 2018 based on FAO data.
Land use increased in Costa Rica, Guatemala and Panama, as shown in Table 5-6 As no
net cropland increase has been observed over the last years in El Salvador and Nicaragua,
cropland change cannot be associated to deforestation in that country.
The percentage of new cropland resulting in deforestation is the division of the result of
multiplying the observed tree cover loss, the percentage of tree cover loss caused by
commodity-driven agriculture and the percentage of deforestation caused by cropland
expansion over the total net change of cropland area (i.e., are associated to new crops).
The result of this calculation shows that between 2012 and 2018, the share of cropland
expansion resulting in deforestation was highest in Panama (21%), followed by Guatemala
(9%) and Costa Rica (1%), as shown in Table 5-6.
Table 5-6 Estimation of share of cropland change resulting in deforestation (2012-2018)
Country Net change of total cropland area % Cropland expansion
(2012-2018) resulting in deforestation
(thousand ha)
Costa Rica 22 1%
El Salvador -45 -
Guatemala 287 11%
Nicaragua -155 -
Panama 6 21%
Source: Trinomics based on Global Forest Watch data (2021) and FAOSTAT
175
5.3.2.1.1.4 Deforestation resulting from FTA-induced changes in agricultural output

The final step is to multiply the Agreement-tariff reduction induced land-use change by the
estimated share of cropland expansion resulting in deforestation. As shown in Table 5-7
the Agreement -tariff reduction can be associated to the deforestation of 700 ha in total.
Panama experienced the largest estimated Agreement-tariff reduction induced
deforestation. This impact is mainly explained by the high share of cropland expansion
resulting in deforestation in Panama, as presented in Table 5-6Table 5-6 (21%), combined
with the higher Agreement-tariff reduction induced land use change in Panama compared
to the other countries (3,000 ha). Compared to the total net change of cropland area in
Panama between 2012 and 2018, the Agreement-tariff reduction induced deforestation is
about 11%, as shown in Table 5-7.
Table 5-7 Estimated shares of cropland expansion resulting in deforestation for the three
countries
Country Agreement-tariff Agreement-tariff % of net change of
reduction induced land reduction induced cropland resulting from
use change (thousand deforestation the Agreement
ha) (thousand ha)
Costa Rica 4 0.03 0.2%
El Salvador 0.3 - -
Guatemala 0.4 0.04 0.02%
Honduras -0.5 - -
Nicaragua 0.4 - -
Panama 3 0.7 11%
Total 8 0.7 -
Source Trinomics (2021) based on Global Forest Watch data (2021) and FAOSTAT
Scope of this analysis and potential deforestation outside our scope
The results presented in Table 5-7 must be interpreted with caution and a number of
limitations should be borne in mind:
• In this analysis, land use change refers to any change in land cover associated with
the expansion or contraction of the area used for different crops. Net land use
change can be positive, meaning there has been an overall gain in the crops area,
or negative, meaning an overall loss of crops area. In this analysis, land use change
is not the same as deforestation (conversion of forest to other land uses, such as
agriculture and infrastructure).
• The results only consider deforestation associated with tariff reductions. This implies
that the effects of non-tariff related measures on deforestation are not analysed
(e.g., additional economic activity, promotion of sustainable practices).
• Only deforestation associated with products that experience tariff-changes as a
result of the Agreement is included. Therefore, deforestation related to other
products traditionally linked with deforestation that did not experience tariff-
changes (such as coffee and cacao beans) is not covered, as it is not possible to
establish a direct link with the Agreement-induced output effects.
• Only deforestation associated with the Agreement-tariff reduction induced output
changes on agriculture-related sectors is considered. The Agreement-tariff
reduction effects on other sectors and its impact on deforestation is out of the scope
of the analysis (e.g., the impact on deforestation of the Agreement-tariff reduction
induced output change on the textiles sector in Panama).
• The estimated Agreement-tariff reduction induced deforestation is the result of the
aggregation of the (positive and negative) effect of different crops on land use. This
means that positive Agreement-tariff reduction induced deforestation of certain
sector may still be related with negative effects in certain crops (outweighed by
other positive impacts).
• To account for improvements in crop yields, the values used in our analysis (in
tonnes/hectares) are the average yield values during the period of implementation
of the Agreement.
• The results are based on the economic modelling results. As a result, the findings
have to be seen in light of the limitations of the CGE economic results. Outside the
CGE scope, other deforestation may have occurred.
176
Summary of results of the land use quantitative analysis
Based on our analysis, the following conclusions are drawn regarding the Agreement-tariff
reduction induced land use and associated deforestation in the Central American countries:
• For Costa Rica, the Agreement-tariff reduction induced output can be associated
with an increase in cropland areas of 4,000 ha (considering all crops produced). It
is estimated that this total increase resulted in 30 ha of land being permanently
deforested. This means that the Agreement-tariff reduction induced output may be
associated with roughly 6% of the total deforested area due to commodity-driven
agriculture in Costa Rica between 2012 and 2018.
• For El Salvador, there is no evidence to conclude that the Agreement-tariff
reduction induced output change in the agricultural sector can be associated with
permanent deforestation. Our estimations showed that the Agreement-tariff
reduction resulted in a net increase in cropland area of 300 ha in that country
(mainly associated with land-use change in the sugar sector). However, over the
last years, no net cropland increase has been observed in El Salvador, and only
0.9% of deforestation can be attributed to commodity-driven agriculture. Therefore,
it is unlikely that the Agreement-tariff reduction induced output change resulted in
permanent deforestation in El Salvador.
• For Guatemala, the Agreement-tariff reduction induced output resulted in an
increase in cropland areas of 400 ha (considering all crops produced). The
Agreement-tariff reduction induced cropland changes in this country mainly
occurred within the sugar sector. It is estimated that the cropland increase resulted
in 40 ha of land being permanently deforested. This means that the Agreement-
tariff reduction induced output may be associated to roughly 0.07% of the total
deforested area due to commodity-driven agriculture in Guatemala between 2012
and 2018.
• For Honduras, there is no evidence to conclude that the Agreement-tariff reduction
induced output change in the agricultural sector resulted in permanent
deforestation. Our estimations showed that the Agreement-tariff reduction resulted
in a net decrease in cropland area of 500 ha (mainly associated with land-use
change in the vegetable oils sector). Despite this net decrease, cropland area for
specific sectors increased (in particular the sugar and F&V sectors) which could have
resulted in deforestation. As 23% of deforestation can be attributed to commodity-
driven agriculture in Honduras over the past years, it is plausible that the
Agreement induced output change in the agricultural sector resulted to some extent
in permanent deforestation. Additional research would be needed to confirm the
overall effect of the Agreement-tariff reduction induced output change in Honduras.
• For Nicaragua, there is no evidence to conclude that the Agreement-tariff
reduction induced output change in the agricultural sector is associated with
permanent deforestation. Our estimations showed that the Agreement-tariff
reduction resulted in a net increase in cropland area of 400 ha in that country
(mainly associated with land-use change in the sugar sector). However, over the
last years, no net cropland increase has been observed in Nicaragua. Therefore, it
is unlikely that the Agreement-tariff reduction induced output change resulted in
permanent deforestation in Nicaragua.
• For Panama, the Agreement-tariff reduction induced output resulted in an increase
in cropland areas of 3,000 ha (considering all crops produced). This was mainly
driven by bananas and soybeans crops. It is estimated that the cropland increase
resulted in 700 hectares of land being permanently deforested. This means that the
Agreement-tariff reduction induced output may be associated with 4% of the total
deforested area due to commodity-driven agriculture in Panama between 2012 and
2018.
5.3.2.2 Qualitative analysis of key crops

To complement the quantitative analysis on tariff reduction induced land use change and
deforestation, the impact of the Agreement on land use change and deforestation through
production changes in key crops is explored qualitatively in this section. In the quantitative
land use change analysis as specified above, there is specific reference to certain crops as
those are associated with land use change and deforestation. These crops are, among
others: sugar cane, pineapples, and oil palm. Additional qualitative information on land use
177
change and deforestation for those crops is provided below aiming to complement the land
use change analysis and give further insights to the complex dynamics of land use change
and deforestation related to certain crops. Although it is difficult to single out individual
crops responsible for land-use change, some trends can be identified. Note that certain
relevant crops mentioned in section 5.3.2.1 such as bananas, melons and soy are not
included in this analysis due to limited available information regarding associated land use
change and deforestation.
5.3.2.2.1.1 Sugar cane in Guatemala, El Salvador and Nicaragua

Sugar cane is an important crop to the entire Central America’s economy, though there
are countries, such as Nicaragua and Guatemala, that have particular high production and
export shares in the region. Guatemalan sugar cane represents 1% of global exports,
making Guatemala the 4th largest exporter in all of Latin America, while Nicaragua
represents 0.3% of global trade, and is the 9 th largest exporter of sugar in Latin America
(Quiroz et. al, 2021).
In terms of CA-EU exports over the analysed period, sugar cane was the only crop in
Guatemala, that experienced a significant increase in production (1.5%; €36.5 million),
while in Nicaragua, sugar was also the crop associated with the largest sector-level
production increase (11.7%; €62.4 million). More information on these trends is provided
in sections 3.1.13 and 3.13. The Agreement has not been credited as the principal driver
for the increase in Guatemalan sugar production by the Guatemalan Sugar Association
(Asazgua, 2022). Based on the economic modelling results, the Agreement is associated
with high increases in sugar production in Nicaragua (€43.3 million, 582%) and Guatemala
(€32 million or 190%). This is explained by the tariffs for sugar, which would have been
substantially higher in the absence of the Agreement.
Other countries, such as El Salvador, also represent an important share of exports to the
EU, with the country experiencing an €18.6 million, or 224%, increase in sugar exports
following entry into force of the Agreement therefore, this analysis will mainly focus on the
environmental impacts of sugar production in these three countries. Under the Agreement,
the Central American countries benefit from tariff rate quotas (TRQs), which grant them a
preferential treatment compared to the most-favoured nation (MFN) tariff. CA countries,
other than Panama, have reached a 100% utilisation rate of this TRQ in 2015 (EC, 2017),
and in 2019, per the economic analysis of this study (see section 3.1.4 for more detailed
information).
However, the impacts of increasing production and exports of sugarcane from Central
America to the EU are not without their potential environmental consequences. Next, an
overview of the environmental impacts that sugar production has historically had in Central
America is provided, focusing on land-use change, deforestation and water usage/quality
in Guatemala, Nicaragua and El Salvador.
With respect to land-use change, land dedicated to the cultivation of sugar cane has
significantly increased in the last decade in Central America. Neither direct nor indirect
land-use change related to sugar production are sufficiently documented in Central
America.121
In Guatemala, the land dedicated to sugar cane rose from 188,000 ha in 2003 to 278,000
ha in 2014, representing a 48% increase in just over 10 years (GCI, 2018), and to further
121
The difference between direct and indirect land-use change concerns the timing and purpose that a given
land-type changed to fulfill a different purpose. Direct land-use change concerns land that has been deliberately
altered to fit a new purpose by changing its land type within a relatively short time-frame, whereas indirect
land-use change tends to establish a less clear link between the original and new land type, because it was
altered several times before arriving to its new state, and because the time period it has taken to change land
types is relatively longer. There are no universally agreed-upon definitions for the time period that separates
these varieties of land-use change. The issue, however, is that the differentiation between direct and indirect
land-use change is that it blurs the complexity of land-use change dynamics; forests can first be converted to
pastureland for cattle raising for years, and finally become cropland for sugar production. Not every study will
partition these two related concepts, so when a land-use change study is outlined in this analysis, it often
concerns direct land-use change, as indirect land-use change is more difficult to research.
178
rose to 294,000 ha in 2015 (Santos Perez & Leon, 2016); other sources that cover
Agreement’s implementation find that the area of harvested sugar decreased from 261,000
ha in 2013 to 251,000 ha in 2020 (FAO Stat, 2021). Regarding the period after the entry
into force of the Agreement, sugar-cane cultivation rose between 2013 and 2014 (the first
year of the agreement’s implementation in Guatemala) by 7% (Ibid). While the information
provided for this source only partially overlaps with the implementation period of the
Agreement, this data provides a useful overview of recent trends in the absence of more
recent information. Sugar cane is often associated with soil erosion due to its dependency
on intense agrochemical applications. Under the FAO classification for soil erosion (PNUMA-
UNESCO 1981 classification), from 2008 to 2015, 31.6% of the soils are considered to
have a high degree of erosion (50-200 T/ha/year), while 12.2% are considered to reach a
very high degree of erosion (>200 t/ha/year). Over 40% of sugarcane soils experience a
high or very high degree of erosion (Santos Perez & Leon, 2016). Nonetheless, regional
potential erosion maps have shown that at the Guatemalan south coast, specifically in the
area of sugarcane cultivation, erosion is in the null/low category (1 to 10 t/ha/year) (UIE
& IARNA, 2022). One review of regional mangrove loss between 1990-2016 found that
sugar cane expansion was among the land-cover types that least contributed to mangrove
loss (Rodríguez & Ramírez, 2018). Sugarcane currently (as of 2020), occupies 2.97% of
land cover in Guatemala (324,000 ha), which is a reduction from the land cover occupied
by sugar in 2015, which represented 3.3% (360,000 ha) of all land cover (Gobierno de
Guatemala, 2021). This implies that less land was used for sugar cultivation, but this does
not necessarily mean that sugar did not expand into other land types (forests,
pastures…etc.). Yet, with respect to deforestation, Guatemala can attribute 21 ha of its
forest cover loss to sugarcane plantations from 2001-2014 (GCI, 2018), which is rather
insignificant compared to the palm-driven deforestation during the same period, which
amounts to 833 ha (GCI, 2018). This is in line with the figures outlined in the palm oil
analysis (see case study No. 1). The monoculture of sugarcane and directly led to forest
degradation, especially in communities, such as in the city of Tiquisate 122 in Guatemala,
which, as a result of intensive agriculture (including sugarcane plantations), has lost nearly
all of its forest cover (Diario Responsable, 2020). The local forest degradation in Tiquisate
is not comparable, however, to the deforestation.
In El Salvador, the land for sugar production was estimated to be 62,000 ha in 2010,
while during the period of implementation of the Agreement, this increased to 68 thousand
ha in 2013, and further to 79,000 ha in 2016 (Fonseca et. al, 2018); other analyses confirm
similar values, finding that 2016 sugarcane production area rose to 81,000 ha (Mira, 2019).
FAO figures indicate an increase of land cultivation for sugar production, from 77,000 ha
in 2013, to 83,000 ha in 2020 (FAO Stat, 2021). Sugar cane expansion in El Salvador has
impacted fragile ecosystems, such as salted forests, in the south and east of the country.
The loss of forest in El Salvador is of particular importance as only 25% of the country is
covered by permanent forest, which is the lowest forest cover in the entire Central
American region (Ibid). Sugar cane growing practices in the country also contribute to
forest degradation as burning fields at the end of the harvest is a common practice in
Salvadorian sugarcane plantations. This has led to the spread of forest fires due to
uncontrolled burning (Foneseca et. al, 2018). However, (as of 2011) the Government has
implemented an initiative to reduce this practice by establishing green harvest zones that
prohibit burning, and this initiative was related to 12% of the country’s sugarcane
plantations (10,000 ha) in 2018, which is a considerable increase from the initial 3,500 ha
in 2011 (Ibid). El Salvador’s Ministry of the Environment also introduced a strategy to
mitigate sugarcane production externalities by transitioning from field-burning to
mechanized harvesting, which they estimate can mitigate 5.4 million tonnes CO 2 Eq; the
Salvadorian Sugar Agroindustry has committed to replacing burning practices by 3% of the
total sugar production each year (from 2017) until all sugar plantations apply mechanized
harvesting (NDC El Salvador, 2021). The industry has committed to implementing
mechanized harvesting in 35% of all sugar plantations by 2025 (28 thousand ha) (Ibid).
Expansion of sugarcane has also contributed to indirect land-use change through the
displacement of cattle ranching, which, in turn, has led to the loss of forestland to allow
space for cattle ranching in otherwise natural landscapes (GCI, 2018). FAO figures indicate
122
Tiquisate is a city in Guatemala that has a population of 60,000 inhabitants
179
that, during the Agreement, land area dedicated to sugar production increased from 68,000
ha to 78,000 ha (FAO Stat, 2021). Lastly, probability models conducted by the Nicaraguan
government indicate strong and positive relationships between sugarcane expansion and
deforestation; Yet these models cannot provide a complete, quantifiable number of
hectares of forest that have been lost and/or displaced due to said land-use change. Based
on a geo-statistical analysis of causes of deforestation in Nicaragua, the government found
out that sugar production has the second-highest probability of directly causing
deforestation (second only to cacao production) of all major crops produced in the country
(Marena Gobierno de Nicaragua, 2019). While these results are probabilities, and not
measurable hectares of land-use change, and are reported during a time period that
overlaps by only three years with implementation of the Agreement, it provides a useful
indication of land-use change dynamics in the country.
It is acknowledged that most of the analysis provided in this section barely covers the
Agreement’s implementation period; this is due to lacking information that overlaps with
the 2014-2019 study period. That said, the same study cites sugarcane plantations as one
of the main causes (along with palm plantations) for deforestation in the north and south
of Guatemala (Ibid). The International Confederation of European Sugar Beet Growers
(CIBE) found that across Guatemala, El Salvador and Nicaragua, there are more than 4,300
km2 of sugar plantations located in departments that already suffer from forest
degradation (CIBE, 2021); however, the extent of the said forest degradation is not clear.
Based on a 2021 EU Parliament study123, the same organization adds that non-EU countries
benefiting from EU-market access have an advantage compared to EU producers in that
non-EU producers can use cheaper, unauthorised, agrochemicals in the production of sugar
(e.g., DDT) (CIBE, 2021), despite the registration of chemical inputs at the National
Registry and Control of Toxic Substances Commission (CNPA, 2022). The loss of forestland
along riverbanks, has been cited as a key driver of drying rivers in Escuintla, Guatemala
(PBI, 2021). The impacts of deforestation are particularly well documented in El Salvador,
where land clearing to increase sugar production capacity in forested areas, such as in
Jiquilisco and Tecoluca, has been particularly prevalent in the country (Weller, 2015).
In short, in the Central American countries, sugar production is not the main driver of
deforestation. It only represents a fraction of a percent of total land-use change compared
to the cultivation of other crops, such as palm. Stakeholder contributions, such as those
from the International Confederation of European Sugar Beet Growers, suggest that
Central American countries exporting sugar benefit economically from the Agreement as
they have access to a new market that cannot monitor its use of toxic pesticides, many of
which are banned in the EU. The estimates from the quantitative land-use change analysis
on tariff reduction-induced land-use change suggest a causal relation between land use
change due to sugar production and the Agreement. Overall, however, the extent to which
this trend poses a significant threat to the forestland of the various CA countries outlined
in this section remains unknown; lacking information on precise deforestation figures due
to changes in the dynamics of individual crops is a challenge for all crops analysed in this
section of the report.
5.3.2.2.1.2 Palm Oil in Central America and particularly in Guatemala

This section briefly outlines the effect of land use change and deforestation in oil palm
plantations on the wider environment in Guatemala. While oil palm is grown throughout
the region, there is insufficient literature that covers general environmental impacts of
palm production at the Central American level. For a more comprehensive analysis of this
issue in Guatemala, please refer to the full environmental case study on palm oil
production. In short, the case study concludes that since the start of the implementation
of the Agreement, an increase in land conversion in the northern departments of Petén,
Alta Verapaz and Izabal due to the expansion of oil palm is reported. The expansion of
palm oil production in Guatemala is at the expense of different land use types (mostly
grains and pastures as well as cash crops like old banana plantations) and in some cases
converted forests area into oil palm production sites.
123
See EU Parliament (2021) The use of pesticides in developing countries and their impact on health and the
right to food. https://www.europarl.europa.eu/thinktank/en/document/EXPO_STU(2021)653622
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5.3.2.2.1.3 Pineapple in Costa Rica

Although pineapples are grown throughout the Central American region, Costa Rica is by
far the largest producer of the crop in the entire region. The country is the largest grower
and exporter of pineapples, holding more than 50% of the global market. 44% of Costa
Rican pineapples are exported to the EU, while 53% are exported to the United States
(Alvarado, 2021). The economic analysis of this report also cited vegetables and fruits to
be the sector that experienced the greatest export growth following the Agreement
(+7.2%; €149.2 million), of which pineapple and banana are highlighted as the main crops
responsible for the said increase in Costa Rica. The crop is associated with various
environmental impacts (discussed in detail, below), especially as it concerns land use
change, deforestation, and declining water quality.
With respect to land-use change and deforestation, Costa Rica has expanded its
pineapple production (in ha) over the last few decades. Yet, there are varying estimations
of the changes in the area harvested with pineapple. According to Gonzalez Gamboa
(2019), between 2000 and 2017, the area dedicated to pineapple production has grown
from 13,000 ha to 67,000 ha. According to data by the Agricultural Sector Secretariat
(SEPSA), the pineapple cropland area in Costa Rica increased from 43,000 ha to 45,000
ha between 2016 and 2017 but decreased to 40,000 in 2019 (Sepsa, 2020b); which is in
line with FAO figures (FAO Stat, 2021). The representation for Costa Rican Pineapple
growers found that the Agreement led to more competitive prices, which allowed for the
expansion of pineapple production to increase from 10,000 ha to 42,000 ha in 2013
(CANAPEP, 2022); this increase, however, is likely not associated with the Agreement as
2013 was the first year of the Agreement’s implementation. The same representatives
found, however, that the area dedicated to pineapple production has remained stable at
40 thousand ha since 2015, indicating that any increase in production and trade has been
a result of improved land-use efficiency. Valverde Diaz et al. (2018) conclude that the area
dedicated to pineapple production in Costa Rica between 2014 and 2018 has grown by 4%,
which is the highest increase of any crop in terms of production land expansion other than
tomatoes (Valverde Diaz et. al, 2018). Given the lower tariff for pineapples under the
Agreement than in the situation without the Agreement, it is likely that the Agreement has
contributed to this increase. More recently, a 2017 satellite analysis cited in the Costa
Rican government’s “State of the Nation” 2019 report found that 3,900 ha of pineapple
plantations are within ‘Wild Protected Areas’, while 16,300 ha are within wetlands
(Gonzalez Gamboa, 2019)124. This indicates that out of 67,000 ha of pineapple land, more
than 30% are either in protected and/or critical ecosystems. The majority of pineapple
plantations that directly conflict with wetland ecosystems are in the South-Pacific (8,900
ha), followed by the North Central region (4,600 ha) (Ibid).
Between 2000 and 2015, 5,600 ha of forest cover was lost to pineapple cultivation,
according to the Costa Rican government's National Territorial Information System
(Agencia EFE, 2017). The removal of forestland for the monocropping of pineapples and
their unshaded growth, contributes to soil degradation, loss of biodiversity, and surface
water contaminations due to the inevitable run-off from poorer soils (Pia Gamboa, 2014).
The Costa Rican President of the National Front of Sectors Affected by Pineapple Production
(FRENASAPP) found that part of what renders this illegal expansion of pineapple into
forestland so difficult to monitor is that pineapple growers work at night to dig up forests
and wetlands. This renders it difficult to easily see through imagery how and why
ecosystems are disappearing, and even more difficult to prevent illegal expansion (Ibid).
In response to this, the Costa Rican Government asserts that there is not sufficient
evidence to back up FRENASAPP’s statement. There are, however, a number of examples
in which pineapple producers have been able to maintain forestland in the midst of their
pineapple plantation through sustainable production techniques, such as agroforestry.
124
After the publication of this report, the Ministry of Environment and Energy mentioned in a local media outlet
that an incorrect interpretation was made of the number of hectares (16,300) of pineapple cultivation that
were allegedly found on wetland land. According to the Ministry, “what the study indicates is that these ca.
16 thousand hectares correspond to the sum of the "conflict zones" where the areas of pineapple crops
overlap (…). The conflict zone is defined as the geographical area that is vulnerable and its provision of
ecosystem services may be compromised (pineapple area is considered as area of indirect conflict)”. See:
El Norte Hoy (2020)
181
Compañía Agropecuaria Las Brisas, a Costa Rican Pineapple producer operating on 400
hectares of land, has won the Rainforest Alliance recognition for 10 years of commitment
to sustainable agriculture (Canapep, 2018). CANAPEP (National Chamber for Pineapple
Producers and Exporters), claims that its members “promote” the use of ecological
corridors so as to maintain the balance of ecosystem dynamics, particularly in terms of the
migration of fauna (Trigueros, 2022). In addition, CANAPEP published (and regularly
updates) the Technical Manual for the Sustainable Production of Pineapple, which allows
verifying the degree of compliance in five areas: environmental control, social
responsibility, occupational health, personnel training, and operational control (CANAPEP,
2022). Similarly, the Costa Rican Government issued the Handbook of good agricultural
practices for the sustainable production of pineapple cultivation in 2019 (MAG-SFE et. al,
2019). As indicated by the MAG during the consultation activities for this study, some of
the sustainability certification labels and standards currently used by pineapples producers
in Costa Rica include GLOBAL G.A.P., RAINFOREST, CARBON CLEAR, TESCO, ETI (Ethical
Trading Initiative), among others.
5.3.2.3 Summary of the case study on organic coffee in Honduras

Honduras has been and continues to be one of the largest coffee producing countries in
the world. The CA6 share of 13% in 2012 dropped to 8% (a.o. because of a major pest in
2013) and then went back up to 13% in 2019. Honduras provided 30.9% of the EU’s
consumption of organic coffee in 2018.
Our analysis shows that the EU-CA FTA has supported coffee exports from Honduras (and
the other CA5 countries) to the EU and organic coffee exports as part of those (going up
by 3.9%). This has supported (organic) coffee production in Honduras. The EU and its
consumers are the second-largest organic coffee market globally (after the US) and
through consumption have supported the organic coffee transition. Between 2014 and
2018, EU organic retail sales have grown by 12% on average annually, reaching €41 billion
in sales in 2018. Apart from tariffs, also non-tariff measures (e.g., time it takes to set up
a company, costs of certification, and finding international buyers) play a role.
For Honduras, the coffee sector is also socially very important, providing income for around
120.000 families and up to 300.000 rural workers, mostly working in family-businesses
(SMEs). Geographically it is important to note that coffee remains one of the few crops
adaptable to the mountainous territory prevalent in Honduras. This makes the crop an
important one to reduce poverty in Honduras, especially for people living in those regions.
OHS and the large informal economy are challenges for the sector, although there are
efforts to improve the situation, e.g., through adherence to certification schemes and the
ILO project funded by the EU.
The net growth of Honduran coffee exports because of an increase in bilateral exports to
the EU has a positive impact on employment and poverty reduction, indirectly affecting the
right to an adequate standard of living. This is particularly important because of the
premium price paid for organic coffees, especially those of high quality. But the coffee
sector also faces significant human rights challenges, especially in the areas of child labour
and inadequate enforcement of labour rights. According to information provided for this
study, there have been efforts mad e to eliminate child labour from the sector, e.g.,
through securing decent working conditions for adults, awareness raising campaign and
other measures.
Coffee production has a significant environmental impact on the water and soil quality in
natural ecosystems in Honduras. The use of agrochemicals has negative environmental
effects, although this is not the case for organic coffee given the strict anti-agrochemicals
regulations that need to be adhered to in order to qualify for the ‘organic’ label. Water use
combined with climate change are threatening the sustainability of Honduran (organic)
coffee production.
182
5.3.2.4 Summary of the case study on aquaculture

Aquaculture, specifically in terms of shrimp and tilapia production, is a key industry in
Central America, particularly in Costa Rica, El Salvador, Honduras, and Nicaragua (CA4) 125.
CA4 aquaculture production represent just under 1% of total, global. It is likely that the
Agreement had a positive impact on the export of shrimp and tilapia to the EU as in absence
of the Agreement both products would have experience higher trade tariffs. This indicates
that these four countries considerably benefited from more favourable terms of trade as a
result of the Agreement. From 2010-2018, aquaculture in the four countries increased its
share of production in the wider fishery sector from 40.7% to 50.4%.
The aquaculture industry has important socio-economic, health, and environmental

implications. Common problems with tilapia production are related to nutrient and effluent
build-ups and overall environmental degradation due to the site's location. The destruction
and loss of mangrove ecosystems has been one of the main concerns associated with
shrimp production. One study in the Gulf of Fonseca suggests that the area occupied by
this activity has increased 100-fold over the last twenty-five years, at an estimated growth
rate of almost 1.3 thousand ha/year. The area occupied by mangrove forests, however,
shows a decreasing trend, from 107 thousand ha in 1985 to 79 thousand ha in 2011. Yet,
there is no available information about mangrove deforestation in the period of the
Agreement. International environmental regulations for the aquaculture sector have been
increasing over the past two decades. CA4 countries signed many international
environmental agreements such as the CITES 126 and CBD127 conventions. Large-scale
aquaculture producers who export to the EU must also fulfill many environmental and
labor/social requirements. Therefore, there is an overall trend for large-scale aquaculture
producers to certify their production chain and introduce more sustainable practices.
Overall, however, the analysis reveals that CA4 benefited from improved terms of trade as
a direct result of the Agreement due to the removal of tariff rates on shrimp and Tilapia;
given the increase in exports of these products, especially those exported from Honduras,
there is likely a positive trade impact for the CA4 as a result of the Agreement. However,
the increase in production also further drove the environmental pressures associated with
aquaculture in the region. At the same time, there has been a growing number of farms
with sustainability certifications in recent years. Overall, however, a clear environmental
impact (positive or negative) cannot be established due to lacking information and direct
causality.
5.3.2.5 Summary Case study on the environmental impact of palm oil production in Guatemala
Guatemalan palm oil production has boomed since the Agreement entered into force in
2013. In 2010, palm oil production was estimated at 200,000 tonnes, whereas this figure
reached 700,000 tonnes in 2018. Globally, Guatemala is the most efficient producer of
palm oil. While the average production level per hectare of palm oil is around four tonnes,
Guatemala produces an average of seven tonnes of palm oil per hectare. The reason for
Guatemala’s high palm production efficiency lies in its limited availability of land -
Guatemala is not only a small country relative to the largest, global palm-producers
(Malaysia and Indonesia), but also has limited suitable land for palm production (Prensa
Libre, 2013). As a result, farmers have no choice but to be as efficient as possible with the
amount of oil palm they can produce in a single hectare.
The palm oil sector in Guatemala experiences a high degree of self-regulation through
certification schemes that renders the palm oil compliant with international demands and
standards for sustainable palm oil. Currently, 53% of palm oil hectares are accredited with
sustainable certifications (i.e., RSPO 128 and/or ISCC certification schemes). Between 50%
and 80% of certified palm in Guatemala is exported to the EU.
125
(CA4) in this section refers to Costa Rica, El Salvador, Honduras, and Nicaragua. Case study No. 4 presents
the data and resources used for the four countries analysed.
126
Convention on International Trade in Endangered Species of Wild Flora and Fauna
127
Convention on Biological Diversity
128
RSPO (Roundtable for Sustainable Palm Oil), ISCC (International Sustainability and Carbon Certification)
183
Available literature details various threats to Guatemala’s environment associated with

palm oil production, including threats to water systems and quality, deforestation and
forest degradation and pressures related to agrochemical use (the full analysis can be
found in case study No. 1). Though best practices in e.g., pest management are
implemented by large palm oil producers in Guatemala, there have been several reports
of palm plantations diverting rivers to feed palm irrigation systems, as well as
eutrophication in key, aquatic ecosystems due to the run-off of nutrient-rich water, which
has negatively affected species of fauna and flora in these riparian ecosystems.
Deforestation is also a notable threat associated with the global palm production; however,
the analysis of recent, comprehensive studies reveals, that there is relatively little to no
direct deforestation related to palm oil production in Guatemala. However, the dynamics
of land use change are complex, and the investigations and research into deforestation
related to palm oil expansion in Guatemala included in this case study do not consider the
relationship between indirect deforestation (and land-use change), forest degradation and
palm oil expansion.
Although the results of this case study cannot be directly linked to the Agreement (as the
economic modelling results did not show a significant tariff-induced output change), it is
likely that there has been a positive impact from the Agreement as sustainability
certifications have risen in Guatemala to comply with the EU standards and demand for
sustainable palm oil. Yet, this study concludes that there is no literature available that links
the effects of the Agreement with the palm oil sector in Guatemala. More resources should
be made available to monitor the environmental and social impacts of palm oil production
in Guatemala, particularly biodiversity, soil, and water quality, and strengthen national
capacity to enforce environmental and social laws and regulations.
5.3.2.6 Impacts on governance related to natural resources

The development of the governance baselines (Annex D2) and the review of the TSD Title
(chapter 6) confirmed that all partner countries have ratified the Multilateral Environmental
Agreements (MEAs) listed under the TSD Title. During the annual TSD Board meetings, the
EU and the partner countries presented their progress on the implementation of those
MEAs. The Central American countries reported particular progress in the implementation
of the CITES, CBD, the implementation of the Basel Convention, Rotterdam Convention
Montreal Protocol and ratification of the Minamata Convention on Mercury. At the same
time, the EU urged them to take further action on implementation measures, indicating
that the reported progress does not always meet the EU standards.
The TSD Board meetings are perceived by the EU and the partner countries as relevant
meetings to exchange information on climate and environment policies, and to raise certain
environmental issues, as illustrated by the paraquat issue between the EU and Guatemala.
In addition, organic agricultural production in the EU and in CA countries has been an
important point of discussion, and both the EU and the CA countries are interested to
further explore collaboration on this issue. Lastly, the CA partners indicated that the ‘trade
favouring sustainable development provision’ in the TSD title supported agricultural
producers in Central America in reducing their environmental footprint.
As per the CBD, the six partner countries are required to submit their National Biodiversity
Strategies and Action Plans (NBSAPs) to collect information on implementation measures
and their effectiveness in meeting the objectives of the Convention. All CA partner
countries submitted their sixth national report under the CBD. In the governance baselines
(see Annex D1), the main take-aways of those NBSAPs are included for all the six CA
partner countries, and below we discuss the results for Panama and Honduras., Panama’s
NBSAP includes 24 goals and targets and out of these, only four are ‘On-track to achieve
target’, whereas the remaining 20 goals and targets are either classed as ‘unknown’ or at
an ‘insufficient rate.’ These latter goals include, amongst others, the restoration of 15% of
degraded areas, incorporation of the environment as a subject within formal education
training and improvement of the resilience of 25% of identified vulnerable ecosystems.
Most of the monitoring systems are also either inexistant or partial. Honduras also
includes an evaluation of its biodiversity targets in the sixth 6 th National Report on
Biodiversity (2018). In total, 13 of their biodiversity related goals are classed as “no
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significant progress/insufficient/furthering away from goal”, the latter description meaning

that the situation is worsening and four of the goals are considered “insufficient/on-track”,
and the remaining three goals are classed as “on-track/will surpass target.” (Ibid) Some
of the targets that the country is finding itself further away from achieving relative to the
baseline include excess nutrient contamination, successful control and eradication of
invasive species and restoration of 15% of degraded ecosystems/improve the resilience of
these ecosystems.
The performance baseline (Annex D1) showed that both Guatemala and Nicaragua
experienced the highest percentage of tree cover loss (equivalent to a 21% and 20%
respectively) between 2002 and 2020129. Both countries have taken action to reduce the
loss of their forests: in Guatemala the PROBOSQUE forest initiative programme was
implemented, which oversees the management, protection, and restoration of forests at
the national level, and represents an important element of the country’s biodiversity
strategy. Nicaragua is working on the government REDD+ programme (Reducing
Emissions from Deforestation and Forest Degradation) to allow local communities to
engage in formal discussions with government actors and has diversified the
commercialisation of forest products.

5.3.3.1 Water
Estimating the water consumption due to tariff reductions induced by the EU-CA FTA is a
complex task, unavoidably requiring the use of certain assumptions. All of them are based
on the best available data, and the methodology follows the same approach as used for
the estimation of land use change described in section 5.3.2.1. The methodological steps
are explained in the methodology Annex D3.
Results
Our analysis found that the Agreement-tariff reduction resulted in a net increase
(considering all crops affected by the Agreement) of around 47 million of m 3 of blue water
consumption in the Central American countries, compared with the hypothetical situation
without an Agreement.
Figure 5-7 Estimated total Agreement-tariff reduction induced (blue) water use per
country in 2019 (thousand m3)
129
Global Forest Watch (2021)
185
Table 5-8 Estimated Agreement-tariff reduction induced output change per sector (in
terms of water consumption)
Sector Agreement-tariff reduction induced output change (thousand m3)
CR SV GT HN NI PA Total
1 Fruits & Vegetables 14 973 6 91 14 73 4 756 19 913
2 Vegetable oils 0 -1 0 28 27
3 Sugar 4 906 9 225 5 969 2 407 4 794 -20 27 280
4 Other crops 2 1 2 5
Total 19 879 9 233 6 060 2 421 4 867 4 766 47 225
Source: Trinomics (2021) based on Mekonnen, M.M. and Hoekstra, A.Y. (2010)
Figure 5-7 presents our results by country, which show that Costa Rica experienced the
largest Agreement-tariff induced increase in water consumption (ca. 20 million m 3 of water
consumed), followed by El Salvador (ca. 9 million m3).
Table 5-8 shows the results of the estimated Agreement-tariff reduction induced blue water
consumption per sector. The Sugar sector, which includes the trade of sugar cane products
(e.g., sugar raw centrifugal), is associated with the largest Agreement-tariff induced
increase of blue water consumption (ca. 27 million m3). This induced increase (considering
all crops affected by the Agreement within this sector) was primarily driven by the increase
in blue water consumption by the sugar sector in El Salvador (for context, agriculture
accounts for 68% of consumptive water in El Salvador, and similarly 69% of consumptive
water in Costa Rica) as presented in Annex D1. El Salvador particularly suffers from water
insecurity due to the degradation of soil quality from intensive agriculture, which has
rendered the soils impenetrable to refill aquifers. Agricultural run-off into river systems has
also rendered surface water untreatable with conventional methods (e.g., chlorification)
(Gies, 2018). The second-largest net increase in water consumption induced by the
Agreement-tariff reduction change was found in the Fruits & Vegetables (F&V) sector (ca.
20 million m3). Bananas and pineapples were found to be the main products (experiencing
tariff reductions) behind the increase in blue water consumption attributed to the F&V
sector in Costa Rica and Panama.130 Compared to the net increase, the net decrease in
blue water consumption (driven by the combination of the negative Agreement-tariff
induced output changes resulting from the economic model for these countries, and the
increase of production of products with lower blue water footprints) is negligible.
The ultimate impact of the volumes of blue water used depend largely on the region where
the products are produced and the local water availability, as well as how efficient water
resources allocation is on the scale of a catchment or river basin (Hoekstra et. al, 2011).
Therefore, detailed data about the origin of the Agreement exports to the EU would be
needed to assess if and to what extent the water resources of specific producing areas in
the Central American countries show levels of water scarcity and thus are being negatively
impacted by the Agreement. Current data constraints do not allow to establish a causal
link with the Agreement in greater detail.
Scope of this analysis and potential water use outside our scope
The results presented in Table 5-8 must be interpreted with caution and a number of
limitations should be borne in mind:
• The results only consider blue water consumption, impact on green and grey water
consumption is out of the scope of our analysis. 131
• Only blue water consumption associated with the effect of tariff reductions is
considered. This means that the effects of non-tariff measures on water
130
Other products that were found to have a notable effect on blue water consumption in the CA6 countries but
that were excluded from the analysis as they did not experience tariff reduction are: coffee (green) and
cocoa beans
131
The green water footprint refers to consumption of green water resources (rainwater in so far as it does
not become run-off). The grey water footprint refers to pollution and is defined as the volume of freshwater
that is required to assimilate the load of pollutants given natural background concentrations and existing
ambient water quality standards.
186
consumption are excluded from the analysis (e.g., promotion of sustainable

practices, certification schemes).
• Only water use associated with products that experience tariff-changes as a result
of the Agreement are included. Therefore, we do not cover water use related to
other products traditionally linked with high water footprints that did not experience
tariff-changes (such as coffee and cacao beans), as it is not possible to establish a
direct link with the Agreement-induced output effects.
• Only water use associated with the Agreement-tariff reduction induced output
change on agriculture-related sectors is considered. The Agreement-tariff reduction
effects on other sectors and its impact on water is out of the scope of our analysis.
(e.g., water used as a result of the Agreement-tariff reduction induced output
change on the textiles sector in Panama).
• The estimated Agreement-tariff reduction induced water use is the result of the
aggregation of the (positive and negative) effect of different crops on blue water
consumption. This means that positive Agreement-tariff reduction induced water
consumption by certain sector may still be related with negative effects in certain
crops (outweighed by other positive impacts).
• The results are based on the economic modelling results. As a result, the findings
have to be seen in light of the limitations of the economic results.
5.3.3.2 Water qualitative analysis of key crops

This section focuses on the qualitative impacts of the water consumption of key crops in
CA to complement the quantitative water analysis as specified above. These key crops are:
sugar cane, palm oil, pineapples and banana. We provide below additional qualitative
information on water consumption for those crops.
5.3.3.2.1.1 Water impacts associated with palm oil production in Guatemala
This section briefly outlines the impact of water consumption in oil palm plantations in
Guatemala. For a more comprehensive analysis of wider environmental impacts associated
with this crop in Guatemala, please refer to the full environmental impact of palm oil
production in case study No. 1. In short, the case study finds that palm production in
Guatemala is linked to high water demand and consequently to multiple water issues
including the damming and altering of rivers, as well as inefficient irrigation practices. It is
likely that these changes in water availability have had a negative effect on the (aquatic)
ecosystems and the availability of water. Water pollution due to the use of agrochemicals
is also a serious environmental pressure associated with palm oil production. Additional
research would be needed to confirm whether the Agreement-tariff reduction induced palm
oil production aggravated (or alleviated) these pressures on water resources in Guatemala.
5.3.3.2.1.2 Water impacts associated with sugar cane production
One of the most significant environmental impacts of sugar production in CA is its water
footprint. For instance, 50% of irrigation water in Guatemala is reserved for sugar
production and officials in the country have maintained that reduction of river levels is
related to sugar and sugar-ethanol production (Fradejas et. al, 2008). However,
Guatemalan sugar production is 38% more efficient compared to the global average (209
m3/tonne), meaning that each tonne of Guatemalan sugar uses 38% less water compared
to the global average for the same quantity (Tax Marroquin & Guerra Noriega, 2019).
Another analysis found that Guatemalan sugar production is 47% more efficient in terms
of the water footprint (ICC, 2020) 132. In order to obtain a sufficient water supply during
the dry season, sugar plantations in Guatemala have been known to not only divert rivers
toward their irrigation channels, but also pump groundwater from underground reservoirs,
which contributes to desertification and limits water access to communities (Diario
responsible, 2020). It should be noted, however, that improvements in resource efficiency
and thus reduction of the water footprint associated to sugar cane has been reported in
Guatemala (Asazgua, 2022). Compared to the global average, Guatemala uses about half
as much water per tonne of sugar cane produced (Santos Perez & Leon, 2016). The
132
The 47% figure differs slightly from the economic analysis conducted for the water footprint of each crop so as to ensure
that all figures originate from the same source.
187
economic analysis, however, revealed that El Salvador was associated with the highest
amount of water used for the production of sugar cane.
Water contamination is also an important concern in sugar plantations in CA, including

Nicaragua (Alfano et. al, 2017). CIBE has found that environmental norms are not
effectively applied, which has allowed sugarcane producers to use toxic pesticides that
have been banned in Europe (CIBE, 2021). On this point, the National Committee of Sugar
Producers of Nicaragua asserts that all agricultural inputs are registered at the National
Registry and Control of Toxic Substances Commission (CNPA, 2022). For the other CA
countries, However, studies have found that nearly 70-80 agrochemicals used in in El
Salvador and Guatemala have been banned under the respective Stockholm and Rotterdam
Conventions (de Benito Ruiz & Moreno, 2017).
In terms of water governance concerning river management, recent improvements have
been reported (Asazgua, 2022). An ICC analysis conducted in 2021 found that, compared
to historic data, the flow rate of rivers has improved in the 13 river systems of Guatemala’s
Southern Coast (no data was found for other river systems in different parts of the country)
(ICC, 2021). In addition, steps have also been taken in individual plantations in Nicaragua
to assess the soil humidity and use the minimum amount of water (CNPA, 2022).
Information about the extent (and achievements in terms of water saved) of the realization
of these studies across the country is not available. Nicaraguan sugar plantations have also
adopted wastewater recycling techniques, which lowers the environmental impact of
agrochemical applications (Ibid).
In short, while there are a number of issues related to agrochemical pollution in water
sources in CA countries driven by the sugar sector, recent data suggests that considerable
efforts have been made to improve nutrient recycling and reduce the associated water
footprint. Since the estimates from the quantitative analysis on tariff reduction-induced
water use (5.3.3.2) suggest a causal relation between blue water consumption by the sugar
sector and the Agreement (resulting in a total increase of blue water consumption by the
sugar sector of 30 million m3 as a result of the Agreement), it is plausible that the
Agreement increased to some extent current pressures on water resources driven by the
sugar sector in CA. Additional research would be needed to confirm the overall effect of
the Agreement consumption in CA.
5.3.3.2.1.3 Water impacts associated with banana production in Costa Rica
The environmental impacts related to water use in banana production are discussed in
detail in the Banana case study No. 6. In short, the study finds that compared to other
crops, bananas production in Central America is not particularly water intensive. However,
runoff of agrochemical applications pollutes rivers, lakes, and eventually the ground water,
in particular as much of this water is poorly treated once it has been used (BASIC, 2015).
In Costa Rica, analyses of chemical contamination in major aquatic ecosystems, such as in
the Suerte River Basin, have also found high concentrations of banana-specific pesticides
in the water, which the researchers warned could pose a major threat to the fauna and
flora of these ecosystems (Diepens et al. 2014; Arias-Andrés et al. 2016). It is important
to note that it is not necessarily the case that there is a causal link between the Agreement
and the environmental impacts of banana production.
5.3.3.2.1.4 Water impacts associated with pineapple production in Costa Rica
The main issues concerning water with respect to pineapple production are associated with
the run-off of harmful agrochemicals into natural, aquatic ecosystems and drinking-water
sources, as well as the diversion of riparian ecosystems to meet production demands.
However, first-hand accounts of site visits in plantations operated by PIDENCO (which
controls 50% of Costa Rican pineapple production) have found that the irrigation systems
that are sourced directly from nearby rivers channel untreated runoff back into natural
streams and rivers (Brown et. al, 2021).
In terms of water pollution due to the use of agrochemicals, poor drainage and treatment
have been found to exacerbate the reach and negative impact of herbicides from pineapple
plantations in CA countries. In Costa Rica, for instance, agrochemicals found in water
188
bodies include Bromacil, Diluron and Tridamefón, some of which have only recently been
banned in the country but that, in contrast, have been traditionally associated with asthma,
miscarriages and cancer (Mowforth, 2014). For their toxicity and potential negative effects,
most of these agrochemicals are banned in the EU, such as Paraquat (Ibid). As a result of
the water pollution with these substances, the availability of drinking water in villages in
the proximity to pineapple plantations is limited. Tests conducted by government of Costa
Rica on groundwater contamination find that villages in proximity to pineapple plantations
do not have safe water to drink as a result of the contamination by chemical agents used
in pineapple plantations (Alonso, 2020).
To alleviate the potential negative effects of pineapple crops on water resources, the
government of Costa Rica has put in place a variety of measures and enforce related laws
and regulations to protect water bodies. For instance, the Handbook of good agricultural
practices for the sustainable production of pineapple cultivation published in 2019 describes
a series of water management practices aimed at preventing the contamination of aquifers
driven by pineapple cultivation (MAG-SFE et. al, 2019). In addition, Costa Rica regulates
discharges into aquifers through the Wastewater Discharge and Reuse Regulation No.
33601 (MINAE-ES, 2017). Despite these efforts, some authors have reported that not all
producers are complying with the established mandates (Alonso, 2020). Similarly, scholars
have noted that the diversion of rivers to feed irrigation systems can be interpreted as a
violation of Costa Rican Law 779, Article 78 which states that, “any water concession issued
should include clauses pertaining to the conservation of water and prevention of
contamination” (Brown et. al, 2021). Currently, the Costa Rican pineapple producers are
also obliged to implement a wastewater treatment system so that the quantity and quality
of untreated water complies with the parameters of their discharge location (rivers), or if
they are re-used (for irrigation) (CANAPEP, 2022); 100% of CANAPEP members comply
with these regulations (Ibid).
5.3.3.3 Case study on the environmental effects through the Agreement’s impact on trade in
environmental goods and services
Environmental Goods and Services (EGS) are goods and services that should play an active
or passive role in positively contributing to a country’s environmental and climate goals,
such as solar PV panels. In the light of the Agreement, EGS are relevant when it comes to
the extent to which the Agreement contributed to greening of the economy. Trade in EGS
plays a prominent role in the global debate on greening trade flows and provisions.
Amongst others, the WTO called for the liberalisation of the EGS market to stimulate the
production and use of environment friendly products. At a global level, no agreement has
been reached on the exact definition of EGS. Key technical challenges in defining EGS
include the treatment of dual-use goods (goods or components that can be used in both
regular products as well as in environmental goods), process and production methods, and
general classification issues. In addition to the more technical challenges, political
challenges are present too. For instance, countries disagree on the strictness of the
definition, as a stricter definition may hinder economic development of certain countries.
In 2018, the United Nations Environment Programme (UNEP) published a detailed report
on Trade in Environmentally Sound Technologies, which includes a specific list of EGS 133.
In the absence of a common globally accepted list of EGS, the UNEP list of EGS was used
to explore the impact of the Agreement on trade in EGS and their related environmental
impacts.
The analysis shows that, since the start of the implementation of the Agreement, global
EU imports and exports of environmental goods (EG) increased (the complete analysis can
be found in Annex H). However, global EU exports and imports of non-EG goods rose faster
and hence the relative importance of EG decreased over time in the global EU trade. With
respect to trade of EG between the EU and the Central American countries, EU EG exports
rose significantly and at a higher rate than non-EG exports; the average share of EG
exports increased from 6.6% in 2010-2013 to 7.1% in 2014-2019. The causal link between
133
The report can be found and downloaded on the UNEP website:
https://wedocs.unep.org/bitstream/handle/20.500.11822/27595/TradeEnvTech.pdf?sequence=1&isAllowed
=y
189
the Agreement and this relative shift towards EG has not been studied. Despite the decline
in the EG share in global EU trade, which shows that the trend in EU-CA trade is not in line
with the global trend, the higher share of EU-CA EG trade may also be associated with
shifting demand in the Central American countries.
Regarding the environmental effects of these increases in relative and absolute trade in
EG, it is concluded that this shift in trade alone (thus ignoring other effects) is likely to be
related to a lower environmental footprint per product, thereby contributing to greening of
the economy (for instance by using smaller amounts of natural resources per unit of
product). Yet, it cannot be concluded that this resulted in absolute positive environmental
outcomes for various reasons. Firstly, if the environmental benefits of decreased
environmental footprints do not outweigh the environmental costs of more trade and use
of products (as EG usually also have negative footprints), the absolute effect is still
negative. Secondly, recent scholarly literature has also indicated that the environmental
externalities arising from an EGS agreement do not necessarily benefit the environment
on its own, finding that EGS agreements need to be accompanied by other policies at
various levels to account for increasing CO2 emissions that follow the implementation of an
EGS agreement (Hu et al. 2020). In sum, from an environmental perspective, increased
trade in EG is regarded as positive relative to increased trade in non-EG.
Box 5-2 The role of EU-CA FTA and environmental impacts related to the Panama Canal
The Panama Canal is a vital waterway for global trade. The canal bisects North and South America,
thereby connecting the Pacific Ocean and Atlantic Ocean. Vessels that use the canal prevent a
detour around the southern tip of South America, which shortens their voyage by about 15
thousand kilometres, corresponding to roughly 22 days. The Canal is mostly used for shipments
between Asia and the East coast of the USA, which accounted for 45% of the total volume of trade
through the Canal in fiscal year 2020. The second most important route is intra USA trade (8%),
followed by trade between Europe and South America (6%). Trade between Europe and Central
America only accounted for 1% in 2020 (Panama Canal, 2021).
The maritime sector in general is related to various environmental impacts. These include among
others damaging vulnerable maritime ecosystems through e.g., the discharge of ballast water and
physical damage by ships’ hulls (e.g., grounding); air pollution and global warming (O’Brien,
2009). Besides, recent studies have shown that the movement of vessels negatively affect marine
giants (e.g., whales, basking sharks, and whale sharks) that need to spend time at the surface
breathing or basking, and have a long-range ocean movement (Erbe et al., 2019). With regards
to GHG emissions, shipping is a relatively CO2 efficient mode of freight transport in terms of CO2
emissions per kilometre. On the other hand, the share of shipping emissions in total global GHG
emissions is increasing: in 2012 shipping emissions accounted for 2.76% of global GHG emissions
and in 2018 for 2.89% (International Maritime Organization, 2020). According to Transport &
Environment (T&E, n.d.), this share is expected to continue to grow in the absence of additional
action in the sector. T&E argues that shipping emissions may reach 10% of total global GHG
emissions by 2050 under a business-as-usual scenario in the maritime sector if other sectors adopt
their practises to keep global warming below 2℃.
In addition to these general impacts of the global maritime sector, the Panama Canal has been
related to various specific environmental impacts in Panama. In a recent study on the long-term
impacts of large tropical river dam projects, Salgado et al. (2020) found that Gatun Lake basin (a
major component of the Panama Canal), which was a swamp-based ecosystem a century ago, has
become more saline due to salt intrusions, species invasion and deforestation. Moreover, the
concerns about the Canal’s impact on water scarcity has been growing over the years. On average,
a vessel requires 189 million litres of water in the Canal’s lock systems (which are used to
overcome the differences in altitude levels), which is roughly equal to 75 Olympic-size swimming
pools (BBC, 2020). Longer and more severe periods of droughts and temperature rise caused by
climate change have had a negative impact on water levels in the Canal’s basin in recent years.
In 2019 for instance, rainfall was 20% below the historical average (Wired, 2020). It is expected
that climate change will put more pressure on the water availability in the Canal’s region. In
response to these environmental challenges, in 2016 the Panama Canal launched the Green
Connection Program that promotes GHG reduction by recognizing vessels that comply with the
highest environmental performance standards (GreenRoute, n.d.). Moreover, it has been reported
that the expanded Panama Canal features 18 innovative water-savings basins that reuse 60% of
the water used per lockage, saving 7% more water than the original locks (Ibid).
It seems unlikely that the Agreement has contributed substantially to the environmental impacts
related to the shipments in the Panama Canal. The main reason for this is that shipments between
190
the EU and the entire Central American region represent only 1% of the total shipments in the
Panama Canal. In addition, only a proportion of the Agreement-induced goods traded between the
EU and the Central American countries crosses the Panama Canal as ports on the Atlantic coast
may also be used. Based on this, combined with the economic modelling results on the Agreement-
induced changes in production and trade, it seems likely that the contribution of the Agreement
to the intensification of the environmental pressures related to the Panama Canal were marginal.
In fact, other trade agreements, which cover trade flows that have a more significant role in the
trade flows through the Panama Canal (e.g., trade between the EU and South America), may have
had a larger impact on the shipments through and the corresponding environmental impact of the
Panama Canal than the Agreement with the Central American countries.
5.3.3.4 Case study on opportunities created in services sector, in particular the green energy
sector in Costa Rica
Costa Rica’s standing with regard to renewable energy is rooted in the policies crafted after
1949, based on electricity generation from natural sources. The case study on opportunities
created in services sector, in particular the green energy sector in Costa Rica aimed at (a)
providing an overview of Costa Rica’s sector in the regional and national context, (b)
identifying trends in its trade with the EU in renewables under the impact of the Agreement,
and (c) highlighting key challenges in the transition towards a decarbonised economy by
mid-21st century, in the context of the Agreement.
The case study showed that the sector of renewable energy in Costa Rica is marked by
three characteristics. For seven decades, electricity generation is primarily based on
hydroelectric sources, gradually complemented by geothermal sources and onshore wind
energy. Combined, they have allowed the country to virtually eliminate hydrocarbons for
electricity generation and obtain a trade equilibrium in the regional energy market.
Photovoltaics started to play a minor though slowly expanding role. Second, the electricity
market is heavily regulated and dominated by public companies, with a regionally based
assignation of monopolistic providers to individual consumers. Third, renewable energy is
not yet being consumed voluminously in the transport sector, in spite of introduction of
(state and private) electric vehicles and some hydrogen driven public transport vehicles.
Nonetheless, the transport sector accounts for more than half of the growth in the national
greenhouse emissions since 1990, making it a prime target for future decarbonisation
policies.
Regarding the effects of the Agreement, the analysis showed that, although not controlled
for other causative factors, the impact has been mixed in the sector of renewable energy
merchandise. Costa Rica has been able to increase its exports to the EU from € 2.2 million
to € 21.6 million, whereas its imports from the EU have shown a more volatile level with
an average of € 82 million, and stagnant. This would warrant a more bespoke approach in
bilateral trade relations, involving EU-inputs in the subsectors off-shore wind energy and
hydrogen-cum-alcohols derivatives production. For such trade policy, an enabling
environment in Costa Rica – both in further elaboration of a long-term renewables strategy
and the involvement of competent state institutions – is a key factor in achieving its climate
goals. However, viewed beyond the evaluation period (2010-2019), such strategic trade
and energy cooperation might well result in mutual benefits to both parties in the medium
and long term.
5.3.3.5 Governmental impacts related to Water and Waste Management

Since the start of the implementation of the Agreement, several environmental initiatives,
which have come in the form policies, strategies and legislation, have been implemented
affecting broader environmental indicators, including water quality and quantity, and waste
management in the region.
Costa Rica’s 2016 low-carbon coffee production strategy obliges producers to measure
and make public to consumers the water footprint of their production. Guatemala’s 2014
‘K’ atun (Our Guatemala) plan sets a vast and ambitious agenda to tackle several
environmental challenges, including the improved management of water through more
participatory management techniques that engage the public. Panama recently updated
(2019) General Law on Environment provides several clauses that prohibit any
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unauthorised (by the Ministry of the Environment) activity that interferes with the quality
of the water or that alters any natural channels (rivers, streams); legal priority to the
protection of aquatic systems that productivity and biological diversity is also prescribed in
the update to the country’s legal environmental framework. Despite recent progress
reported by Central American countries in the implementation of various, international,
environmental conventions (CITES, CBD, Basel Convention, for instance), EU authorities
have indicated that the progress does not yet meet EU standards (TSD Board, 2019).
In terms of waste initiatives, Costa Rica’s Policy for Sustainable Consumption and
Production provides a national strategy for the replacement of single use plastics (at-source
waste prevention), using compostable alternatives (TSD Board, 2018). The country’s
Decarbonization Plan (2019) also provides detailed initiatives to improve waste
management practices, such as through its 7 th “Decarbonization axis: Development of an
integrated system of maximum efficiency and low greenhouse gas emissions waste
management based on the separation, reuse, revaluation and final disposal.” 134 El
Salvador’s recent structural changes to its Ministry of Environment and Natural Resources
(MARN) to better comply with the COP decisions has allowed the MARN and Directorate-
General of Customs to improve communication and information exchange between
institutions, which has prevented illicit trafficking of hazardous waste and has allowed the
country to better comply with international conventions, such as the Basel Convention.
The extent to which the passing of these initiatives was related to the implementation of
the Agreement cannot be established, and there is no indication of a causal link between
the Agreement and the passing of the aforementioned environmental initiatives. Therefore,
this section makes no clear, distinct relationship between the passing of these initiatives
and the implementation of the Agreement in the CA region.
5.4 Conclusions
This section presents a summary of the analyses of the Agreement’s impact on climate
change, biodiversity and ecosystems and other environmental indicators and provides
conclusions on the impact of the Agreement on the environment in the respective partner
countries. To guide the reader in its interpretation of the environmental impacts, an impact
matrix is used, as presented in the table below.
It is noted that the size of an impact is relative to the impacts that can be created by trade
agreements (see also the introduction of section 5). As such, a significant positive impact
could relate to (for example) regional effective afforestation programmes set up by sectors
in a partner country that are normally associated with deforestation practices, as a result
of the Agreement. And if through the Agreement, those sectors managed to reduce or halt
the deforestation rate (as identified in the baseline), we speak of a moderate or marginal
positive impact (respectively). Likewise, a significant negative environmental impact would
in this case mean a significant increase in deforestation associated with these sectors that
experienced a trade preference under the Agreement. Note that this classification does not
refer to the impact relative to other policies or developments affecting a certain
environmental impact area.
Table 5-9 Scoring matrix
Classification
Signification positive environmental impact
Moderate positive environmental impact
Marginal positive environmental impact
No/neglectable environmental impact
Marginal negative environmental impact
Moderate negative environmental impact
Signification negative environmental impact
134
Full Plan can be found here
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Irrespective of the environmental impact area (within or outside the scope of this
environmental analysis), it is noted that increased economic activity as a result of the
Agreement goes hand in hand with intensifying pre-existing environmental pressures in
the respective area. Even though it is challenging – if not impossible – to identify the direct
causal link between environmental developments and the Agreement, it is very likely that
any agreement with the central objective to foster economic development intensifies a
number of pre-existing environmental threats to a certain extent. At the same time,
agreements aiming to promote sustainable development may mitigate negative
environmental impacts to a different extent and may even contribute to certain positive
environmental developments if they lead to improved production standards or shifts
towards more sustainable products. For agreements to have an overall positive
environmental impact, the positive effects related to efficiency gains should outweigh the
negative effects related to volume increases.
It is important to note that the environmental analysis presented in this report suffers from
lack of available and reliable data that allow the direct association of the Agreement with
environmental impacts, making it difficult to draw robust conclusions. Lastly, it is noted
that impacts until the end of 2019 / early 2020 are covered by this analysis, whereas the
Agreement may create significant environmental impacts in the future.
5.4.1 Climate change

The impacts of the Agreement on climate change since the implementation of the
Agreement until 2020 have been analysed by means of an analysis of the tariff reduction-
induced change in global GHG emissions and by exploring the impacts of the Agreement’s
TSD title on governance and production standards.
The Agreement’s tariff reductions are estimated (by the economic modelling results) to
have caused higher production in 2020, compared to the level of production that would be
accomplished in the absence of the Agreement, in which case Costa Rica and Panama
would have had significantly higher tariffs (MFN) and the other Central American countries
moderately higher tariffs (for some products). Based on the analysis on these production
changes combined with country and sector specific GHG emission data, it is estimated that
GHG emissions in 2019 would have been marginally lower in the Central American
countries, all else equal (i.e., only considering tariff changes). This is also the case for EU
GHG emissions. Globally however, it is estimated that GHG emissions would have been
slightly higher in the absence of the Agreement as the Agreement’s tariff changes triggered
production shifts from the Rest of the World to the EU (and to a lesser extent to Central
America) in sectors in which the emission intensities in the EU are lower than in the Rest
of the World. This can be explained by the fact that an item produced in the EU may be
produced with lower GHG emissions than the same item in a different country.
For various reasons, the tariff reduction-induced impact on gross GHG emissions does not
capture the full picture on the Agreement’s impact on climate change. First, it only
considers tariff reduction-induced impacts, whereas the Agreement affects GHG emissions
through other mechanisms, such as non-tariff measures affecting trade, production, and
emission levels. Secondly, this analysis does not cover international transport emissions.
Estimating transport emissions is not possible without having a detailed understanding of
the impact of the Agreement on global trade flows and the corresponding differences in
transport emissions. Thirdly, the Agreement may trigger changes in climate governance in
Central America, for instance through stronger legislation to comply with provisions in the
TSD title, or with softer legislation to attracting investments. Fourthly, the analysis only
compares the difference in GHG emissions with and without tariff liberalisation in a single
year (2020). Due to data limitations, the impact of non-tariff measures on trade,
production and corresponding GHG emissions has not been identified. The impact of the
Agreement on climate governance is neutral – no evidence has been found for direct links
between policy changes in Central America. Nevertheless, it is deemed positive (but not
related to the Agreement) that all signatories of the Agreement ratified the Paris
Agreement and started to integrate climate policies into their national strategies.
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To conclude, it is estimated that the Agreement’s tariff reductions increased GHG emissions
in Costa Rica, the EU and rest of the world, but decreased GHG emissions in El Salvador,
Guatemala, Honduras, Nicaragua and Panama. This resulted in a marginal global decrease
in GHG emissions (of by 0.2 Mtonne CO2-eq.) in 2019 resulting from the Agreement’s tariff
reductions. The TSD Title cannot be related to improved or stricter climate policies in
Central America. The impact of the Agreement on trade, production and corresponding
GHG emissions through non-tariff measures has not been analysed in this study.

The impact of the Agreement on biodiversity and ecosystems has been analysed through
(1) a quantitative analysis on the impact of tariff reductions for agricultural crops on land
use change and deforestation in the Central America, (2) complemented with a qualitative
analysis on the relation between land use change and key crops in Central America, and
the case study on palm oil production in Guatemala, (3) the environmental part of the case
study on banana production in Central America, (4) the case study on shrimp farming in
Honduras and lastly (5) the Agreement’s effects on sustainability of governance related to
biodiversity.
The Agreement is likely to have caused land use change due to cropland expansion
through the Agreement’s impact on the production of agricultural crops in Central America.
Based on the quantitative land use change analysis 135, it is estimated that the Agreement’s
tariff reductions for agricultural crops triggered 4,000 ha of land use change in Costa Rica
and 3,000 ha in Panama. The estimates for the other Central American countries are a
factor of 10 lower. The main reason for this is that the differences between tariffs under
the Agreement and in the hypothetical situation without the Agreement are relatively big
in Costa Rica and Panama, compared to the other Central American countries. As a result,
the Agreement’s tariffs likely have a much larger impact on agricultural production in
Panama and Costa Rica than in the other countries.
With respect to deforestation, it is estimated that the tariff reduction induced land use
change is more likely to have led to deforestation in Panama (700 ha permanent
deforestation) than in Costa Rica (40 ha permanent deforestation), as the share of cropland
expansion resulting in permanent deforestation is significantly higher in Panama than in
Costa Rica (over the period of the implementation of the Agreement). The results are
building on the economic modelling results.136 As such, any effect not shown in the
economic modelling results has not been analysed in the deforestation analysis, such as
non-tariff measures. Due to these methodological considerations, we cannot refute that
the Agreement is related to deforestation in the six CA partner countries.
With regard to key products and their relationship with land use change and deforestation,
it is concluded that the Agreement is likely to have contributed to land use change through
its impact on sugar cane production in Central America, which does not allow us to refute
the possibility of (in)direct deforestation. Concerning palm oil, it is unlikely that the
Agreement has contributed to direct deforestation in the Central American countries,
whereas indirect deforestation cannot be refuted. It is likely, however, that the Agreement
contributed to land use change and even direct deforestation due to its impact on
pineapple production in Costa Rica, partially due to the rapid increase in land for pineapple
cultivation that shortly followed the implementation of the Agreement between 2014 and
2017. The variations in pineapple cultivation area in Costa Rica over the period of the
Agreement’s implementation have been related to expansion of plantations in sensitive
ecosystems and protected areas. Given the Agreement’s impact on production in the fruits
and vegetables sector in Costa Rica (in which pineapples are a key crop), it is likely that
the Agreement contributed to land use conversion in this way.
In short, it is concluded that the Agreement is likely to have contributed to land use
conversion through increased production of agricultural crops. It is likely that this land use
conversion is related with forest degradation, although no firm conclusions can be drawn
135
This analysis is based on the results of the economic modelling exercise. Please refer to Annex D3 for the
methodological considerations.
136
Please refer to Annex D3 for the methodological considerations.
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on this matter due to data limitations. At the same time, it is estimated that most land use
conversion did not lead in permanent deforestation. As such, it is concluded that the impact
of the Agreement on land use change and deforestation is moderately negative.
The Agreement had a positive impact on the exports of Guatemalan palm oil to the EU.
To comply with the EU standards and EU demand for sustainable palm oil, the number of
certified palm plantation increased during the period of the Agreement’s implementation.
As such, this study concludes that the Agreement had a moderate positive environmental
impact on sustainable production practices, which is further supported by examples from
the Palm Grower Association of Guatemala in e.g. best pest management practices. In
addition, literature review on direct deforestation reveals that the deforestation associated
with the expansion of oil palm farms in the period of the Agreement seems to be relatively
low.
That being said, available literature details various threats to Guatemala’s environment
associated with palm oil production, including threats to water systems and quality, indirect
deforestation and forest degradation and pressures related to agrochemical use. This
makes it likely that the Agreement further intensified those environmental pressures and
therefore this study concludes that the Agreement also had a moderate negative
environmental impact. As a result of limited data on all the above-mentioned
environmental issues, this study does not conclude about the general sustainability of the
Guatemalan palm oil sector, as for instance indirect land use changes, and deforestation
could have had important negative impacts on country’s biodiversity.
As a result of the Agreement, the share of CA banana exports destined for the EU rose
significantly. As such, this study concludes the Agreement further intensified the pre-
existing environmental pressures associated with the production of bananas and had a
significant negative impact on the biodiversity and ecosystems of the CA countries. Those
environmental pressures are mainly linked crops’ reliance on high agrochemical use, and
the related impacts that these agrochemicals have on water and soil quality in natural
ecosystems. The study does acknowledge that the banana sector in Costa Rica is working
towards more sustainable production practices.
The case study on aquaculture in Costa Rica, Honduras, El Salvador, Nicaragua (CA4)
concludes that the Tilapia and Shrimp sector in the CA4 benefited from improved terms of
trade as a direct result of the Agreement. Given the increase in exports of these products,
especially those exported from Honduras, there was likely a positive trade impact for the
CA4 as a result of the Agreement. However, the increase in production also likely further
drove the environmental pressures of production (e.g., nutrient and effluent build-ups and
overall environmental degradation). As such, this case study concludes that there was a
marginal negative environmental impact. At the same time, an increasing number of farms
have received sustainability certifications in recent years, showing a marginal positive
environmental impact. Overall, however, a clear environmental impact cannot be
established due to lacking information and direct causality.
All in all, the Agreement had a very marginal negative impact on biodiversity and
ecosystems of the Central American countries: it is likely that the Agreement caused land
use change due to cropland expansion in Central America, in particular in Costa Rica and
Panama. With respect to deforestation, tariff reduction induced land use change is more
likely to have led to deforestation in Panama than in Costa Rica. Qualitative analyses on
key crops like sugar cane from Central America and pineapples from Costa Rica, confirmed
that it is likely that Agreement contributed to land use change and even deforestation. At
the same time, palm oil production in Guatemala is not linked to significant contribution to
deforestation. However, this study does not conclude that palm oil production in Guatemala
is sustainable as various other environmental threats are associated with palm oil
production in Guatemala. Regarding the environmental impacts on banana production, it
is concluded that the Agreement intensified the pre-existing environmental pressures
associated with the production of bananas.
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Concerning the impact of the Agreement on greening of the economy, conclusions are
based on the analysis on trade in environmental goods (see case study 5.3.3.4), greening
the energy sector in Costa Rica (see 5.3.3.4) and the gathered information on sustainable
value chains (see conclusions on impact on biodiversity and ecosystems).
Over the period of the FTA, the share of environmental goods (EGs) in EU exports to the
Central American countries increased from 6.6% between 2010-2013 to 7.1% in 2014-
2019. This increase is particularly remarkable as the share of EG in global EU exports fell
from 6.3% in 2010 to 5.4% in 2019.
As this report uses the rather narrow definition of environmental goods from UNEP, it can
be safely concluded that the increased share of EG in EU exports to the Central American
countries on itself contributed to greening of the economy through its positive effect on
lowering environmental footprints of products used in Central American countries.
However, this does not necessarily imply that the overall environmental footprint of EU
products exported to Central America have improved over the period of the Agreement, as
differences between environmental footprints within non-EGs have not been considered.
The fact that the increased share of EG exports outperformed the trend in global EU exports
significantly, hints at a link between the Agreement and the uptake of trade in EGS. It is
unlikely that the Agreement is the direct cause for the entire increase, which also may be
explained by other (global) trends, such as increased demand for environmental goods in
the Central American countries. It is likely that various factors have driven this increased
share in EG exports from the EU to Central America and that the Agreement is responsible
for a small proportion of this increase. To generate absolute positive environmental
impacts, trade in EGs should replace trade in non-EGs, which has not been the case over
the period of the Agreement.
With respect to the Agreement’s contribution to greening of the economy through the
potential uptake of trade in organic and/or certified agricultural products, it is
concluded that some positive trends are identified in e.g. palm oil planation certification in
Guatemala and a general interest of the Central American countries to increase organic
production practices.
In short, it is likely that the Agreement contributed to increased absolute and relative
exports of environmental goods from the EU to the Central American countries and
increased production of sustainable agricultural goods within the Central American
countries, which is deemed positive for greening the economy. It cannot be concluded that
these impacts improved the overall environmental performance, as the environmental
footprints of non-EG goods have not been taken into account, which may have changed
due to production shifts. EGs and other sustainable products should replace non-EGs to
generate actual positive on ground environmental impacts, which has not occurred.
With respect to water, the impact of the Agreement has been analysed through (1) a
quantitative analysis of the impact of tariff reductions for agricultural crops on water
consumption (2) complemented with a qualitative analysis on the relation between key
crops and potential impacts on water resources. Further, the effect on water resources is
also partly analysed as part of the case study on palm oil production in Guatemala, and
the case study on banana production in Central America. The focus of the analysis was the
agriculture-related sectors, as agriculture is the most water-intensive economic sector in
all the CA countries. Based on the quantitative water analysis, it is estimated in 2019 the
Agreement’s tariff reductions for agricultural crops resulted in a net increase of blue water
consumption (considering all crops affected by the Agreement) of around 47 million m 3 in
the Central American countries, compared with the hypothetical situation without an
Agreement. Costa Rica experienced the largest tariff-reduction induced increase (ca. 20
million m3), followed by El Salvador (ca. 9 million m 3). With regards to key sectors and
their relationship with impacts on water use, it is concluded that the Agreement is likely to
have contributed to the increase on water consumption through its impact on the sugar
196
sector, mainly in El Salvador, and in the fruits and vegetables sector, primarily in Costa
Rica. Since the ultimate impact of the increase in blue water consumption depend largely
on the region where the goods are produced and the local water availability (as it was
found some producer regions suffer from water scarcity in the CA countries), detailed data
about the origin of the Agreement exports to the EU would be needed to assess to what
extent the Agreement-induced water consumption had a negative effect (i.e., marginally
or moderately). Current data constraints do not allow to establish a causal link with the
Agreement in greater detail. This subsection concludes that there is a marginal positive
impact on greening the economy and a marginal negative impact on water use in Central
America.
Concerning the impact of the Agreement in creating opportunities to greening the energy
sector in Costa Rica, the analysis showed that over the period of the Agreement, Costa
Rica has been able to increase its exports of renewable energy merchandise to the EU from
€ 2.2 million to € 21.6 million. Yet, Costa Rica’s imports from the EU have shown a more
volatile level with an average of € 82 million, and stagnant. It is not clear to what extent
the Agreement is the direct cause for the entire increase (which also may be explained by
other trends), and how this increase impacted the sector locally. However, these results
would warrant a more bespoke approach in bilateral trade relations, involving EU-inputs in
the subsectors off-shore wind energy and hydrogen-cum-alcohols derivatives production.
Furthermore, the impact of the Agreement on recent developments in the renewable
energy sector in Costa Rica is neutral – no evidence has been found for direct links between
sectoral local changes and the Agreement. As such, it is concluded that based on the
increased EU imports, the impact of the Agreement on creating opportunities to greening
the energy sector in Costa Rica is none to marginally positive.
5.4.4 Impacts of the TSD Title and other governance practices on the environmental
outcomes
The potential impacts of the TSD title and other governance practices are discussed for
environmental areas of climate change (section 5.3.1.2), biodiversity and ecosystems
(section 5.3.2.5.6) and other environmental indicators (section 5.3.3.5). Based on those
sections, it is concluded that the TSD title had a neutral to marginally positive impact on
the environment of the partner countries. The Central American countries reported
particular progress in the implementation of the CITES, CBD, the Basel Convention,
Rotterdam Convention, Montreal Protocol and ratification of the Minamata Convention on
Mercury. At the same time, the EU urged the partner countries to take further action on
some of the implementation measures.
The TSD Board meetings are perceived by the EU and the CA partner countries as relevant
meetings to exchange information on climate and environment and social issues. In
addition, organic agricultural production in the EU and in Central American countries has
been an important point of discussion, and both the EU and the Central American countries
are interested in further exploring collaboration on this issue.
Lastly, the Central American partners indicated that the ‘trade favouring sustainable
development provision’ in the TSD title supported agricultural producers in Central America
in reducing their environmental footprint. Concrete examples of initiatives directly linked
with the implementation of the TSD have not been provided.
5.5 Recommendations
Since 2012, the year in which the Agreement was signed, global efforts and ambitions to
limit global warming and to combat environmental degradation have accelerated
enormously. After years of negotiations at different Conferences of the Parties without
breakthroughs, a milestone was achieved in 2015 when the Paris Agreement was signed.
Since then, governments all around the globe have launched regional and national climate
policies. In 2019, the EU published the European Green Deal, through which tackling
climate change and environmental degradation became the EU’s top priority. In 2021, the
197
European Commission published the Fit For 55 policy package which includes concrete
policies and actions targeted to meet the objectives of the Green Deal.
Given the weight that climate and environmental objectives now have – as top priority –
the objectives of the Green Deal have landed across all Directorates General of the
European Commission. Consequently, the Green Deal’s climate and environmental
objectives have also been integrated in a broad range of EU strategies, including those that
were previously less rigidly related to climate and environmental objectives, such as DG
Trade’s new EU Trade Policy. The new EU trade policy puts more emphasis and focus on
achieving environmental objectives, for instance through the promotion (and
implementation) of sustainable value chains and improving corresponding due diligence,
than ever before. At the same time, other countries have not been idle, including the
Central American countries which also signed and ratified the Paris Agreement. Many
Central American countries published new long-term strategies, often involving references
to climate and environmental objectives.
Based on these developments and restructuring of priorities since the implementation of

the Agreement, the most prevailing environmental pressures in the Central American
countries, and the identified environmental impacts of the Agreement thus far, the
following recommendations have been formulated to improve the environmental
performance of the Agreement:
1. Increase efforts to unlock the potential of the TSD Title’s environmental

components and align the prioritisation of actions within the Agreement with the
EU’s policy objectives. The Agreement leaves room to promote the improvement of
environmental performance (e.g., implementation of MEAs, trade in forest and fish
products) of the respective partner countries, without renegotiating. The environmental
performance of the Agreement is highly affected by the extent to which it is prioritised and
being followed up on during the implementation of the Agreement. It is considered as a
missed opportunity that the room to create positive environmental impacts through the
TSD chapter has only been marginally tapped. Significant progress can be achieved if the
potential of the existing TSD title is unlocked.
There are various concrete actions that can be taken in the TSD setting. To start with,
allocating more resources to TSD implementation (both in terms of human and
financial resources). Second, it is recommended to turn the TSD title in a pro-active tool,
rather than a reactive measure that serves to make sure that partner countries do not
cross the lower limit with regards to environmental performance. Third, efforts could be
intensified to engage with environmental stakeholders (such as NGOs) in the context
of TSD implementation and to enable them to voice potential concerns. Note that Domestic
Advisory Groups are also tasked to voice potential concerns, and that the Commission is
encouraging the members to do so. However, in practice is seems challenging for DAGs to
advance environmental issues thus far. Fourth, it could be further explored to facilitate
targeted environmental (sub)meetings, workshops and focussed dialogues in
which environmental ministries participate (instead of the ministries responsible for trade)
to discuss (technical) environmental matters with the relevant counter parts. Related to
this, it is recommended that DG Environment and other relevant DGs of the European
Commission, also follow-up actions discussed in those (sub)meetings. Fifth, it is
recommended to identify environmental priorities so that progress towards these
targets can be monitored and reflected upon. Identified environmental priority areas of
this study are sugar cane, bananas, pineapples, and to a lesser extent oil palm. Related to
this, it is recommended to identify a concrete action list after TSD board meetings to
ensure that issues mentioned in TSD board meetings are further followed-up on. Progress
on concrete actions should be presented too.
2: Improve monitoring and tracking of environmental performance in the Central

American Countries. High quality data on environmental performance in the Central
American countries is very scarce. As a result, little can be concluded on the impacts of
the Agreement on certain environmental issues, including potential forest degradation,
indirect land use change and water quality. In addition, it is unknown if and to what extent
the increased share of production of environmentally certified products actually generated
198
positive environmental impacts in Central America in the absence of data. Moreover, claims
on issues related to banana exports cannot be validated in the absence of adequate data.
It is therefore recommended to intensify efforts to improve monitoring of

environmental performance and tracking of environmental indicators in particular in the
six CA partner countries. Ideally, information on environmental performance would also be
made public. In particular in environmental and climate areas that have a central role in
the new EU strategies, it is essential to understand the environmental performance on the
ground in the EU’s trading partners to be able to understand the impact of Agreements on
the ground and to ultimately adapt and implement policies which are in line with the EU
strategies. Concrete steps to consider for the Commission include enhanced technical
support for developing environmental tracking systems and to use the monitoring
results in the TSD setting. In other words, if negative developments that may affect TSD
commitments are discovered based on environmental monitoring, it is recommended to
act on it within the TSD setting. An example of improved monitoring efforts includes
Agricultural Monitoring in the Americas 137, an initiative that collects data on agricultural
production through satellite imagery and other tools to provide expert guidance to partner
organisations and bodies, which include various research groups, governmental bodies
(ministries), and the private sector.
3: Intensify the focus on the mitigation of negative environmental effects related

to the agricultural sector. Considering the Agreement’s relatively large impact through
tariff liberalisation on production in the agricultural sector in the Central American
countries, which is found to be likely related to various environmental impacts, it is
recommended to intensify efforts to mitigate negative impacts through the agricultural
sector. This would involve enhanced efforts to reduce pesticide, agrochemical, and
water use and to step up the efforts to reach deforestation free agriculture.
Concrete actions could involve developing sustainable partnerships, supporting
certification (combined with improved monitoring on the ground) and intensifying the
reduction of (agricultural) food and water waste enabling a more efficient supply chain
for agricultural products, which may lower the pressure on natural resources.
Also, knowledge exchange and sharing best practises between the EU and the Central
American countries, and among the Central American countries themselves, could be
supported in the TSD setting to increase overall efficiency of the crops traded. For instance,
pineapple yield in Costa Rica was more than three times higher than in El Salvador. 138
More stringent regulation concerning the environmental footprints of environmental

products imported to the EU can also be considered. The combination of both increased
efforts and support for sustainable production and more stringent (enforcement of)
standards could accelerate improving the environmental performance in the agricultural
sector in the Central American countries, thereby lowering the environmental footprint of
imported EU products and possibly generating positive environmental effects through the
Agreement.
The relevance of these steps is confirmed by new EU policies. The new EU deforestation
regulation aims to solely import deforestation free products. It cannot be guaranteed that
imports of Central American (agricultural) products under the Agreement are not
associated with deforestation. As such, two sided efforts (more on ground technical support
in Central America, combined with stricter regulation) are required to reach EU policy
objectives. Efforts to reduce pesticide use which should be intensified in the spirit of the
new EU agricultural Farm to Fork Strategy, which aims to reduce the use of chemical
pesticides by 50% and fertilisers by 20% within the EU by 2030.
4: Further engage with partner countries and seek to lower environmental

footprints of key agricultural products, like palm oil, sugar cane, pineapples,
coffee and bananas. The palm oil sector in Guatemala is aware of environmental issues
associated with the production of oil palm and is developing and implementing measures
137
https://www.agamericas.org/
138
https://www.fao.org/faostat/en/#data/QCL
199
to make their production more sustainable. Given this awareness, it is recommended to

engage further with the palm oil sector to see where additional improvements in the
production process are possible. As said before, it is important to improve the monitoring
of soil, water and forest quality. In this study, no detailed information on these indicators
has been identified. In absence of this data, it is impossible to conclude about the
effectiveness of certification schemes like the RSPO, and in general the sustainability of
palm oil production in Guatemala. Complaints on different levels of environmental
performance between sugar cane from the Central American countries and the EU’s
outermost regions have been raised by the EU sector. In the absence of data, these claims
cannot be validated. Yet, efforts to improve environmental performance of the sector is
relevant, given the production rates of sugar cane in Central America and the related
environmental pressures, such as deforestation.
5: Support the Central American countries in their efforts to decarbonise their

economies. The case study on renewable energy in Costa Rica revealed that Costa Rican
off-shore wind energy sector is still in early stages of development and might well benefit
from overseas (i.e., EU-) expertise and inputs in a wide range of modalities. The EU could
engage here with the Costa Rica (and other partner countries) to discuss best practices
and lessons learned. This will help the partner countries to fulfil the ambitions in their
national climate mitigation strategies.
6 ANALYSIS OF THE EFFECTS OF IMPLEMENTATION OF THE TRADE AND

SUSTAINABLE DEVELOPMENT (TSD) CHAPTER OF THE TRADE PILLAR
This section has been classified by the ToR for the study as one of priorities. It corresponds
to Task 11.1 and contributes to a response to the question to what extent the TSD Title of
the Agreement has supported sustainable development in the Parties, and whether actions
taken by the Parties have helped to attain the Sustainable Development Goals, in particular
SDGs No. 8 and 13-15.139 Given that the scope of the TSD chapter largely overlaps with
the general part of the social, environmental and human rights analysis, findings which
follow below should be considered jointly with information provided in baselines (Annexes
C-1, D-1, D-2 and E-1) and chapters 3, 4 and 6 of this Report. Aiming to avoid repetitions,
we have outlined below either new elements not covered elsewhere in the Report or
provided short summaries of the analysis done in other parts. The structure of this chapter
follows, to the extent possible, the structure of the TSD chapter and refers to its provisions.
6.1 Multilateral labour standards and agreements (Article 286)
In Article 286, the Parties commit to the effective implementation in law and practice of
the eight ILO fundamental conventions (already ratified by all CA countries and EU Member
States), as well as to an exchange of information regarding their situation and
advancement in ratification of other ILO priority conventions. Below, we outline progress
achieved in this regard by EU Member States and Central American partners.
In the analysed period, EU Member States have progressed with ratification of the ILO
conventions, with the Maritime Labour Convention reaching 25 ratifications out of 27
countries. Council Decisions of January 2014 authorised Member States to ratify Chemicals
Convention No. 170 (nine ratifications by EU Member States by November 2021) and
Domestic Workers Convention No. 189 (eight ratifications by the EU Member States by
November 2021). The Work in Fishing Convention No. 188 was transposed into an EU
Directive of December 2016 and has been actively promoted among the Member States
(seven ratifications by November 2021). Further to Council Decisions of 2015 authorising
the EU Member States to ratify the 2014 Protocol to Convention No. 29 on forced labour,
19 EU Member States have ratified it by November 2021. Similarly, a high number of EU
Member States have ratified priority conventions (27 regarding Convention No. 81 on
139
SDG No. 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment
and decent work for all, SDG No. 13: Take urgent action to combat climate change and its impacts; SDG
No. 14: Conserve and sustainably use the oceans, seas and marine resources for sustainable development;
SDG No. 15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage
forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss.
200
labour inspection and Convention No. 144 on tripartite consultations, 26 regarding No. 122
on employment policy and 21 regarding No. 129 on labour inspection in agriculture). The
EU Member States have also continued to ratify other ILO up-to-date conventions, e.g.,
Promotional Framework for Occupational Safety and Health No. 187 (15 ratifications by
November 2021) and the latest Violence and Harassment Convention No. 190 (two
ratifications by EU Member States by November 2021) (ILO NORMLEX) 140.
Costa Rica ratified in 2019 Convention on Workers with Family Responsibilities No. 156
and in 2014, Domestic Workers Convention No. 189, as well as in 2020, Protocol to the
Convention No. 29 on Forced Labour. El Salvador ratified in 2013, Nursing Personnel
Convention No. 149. Moreover, in June 2022, it ratified Convention No. 102 (Social
Security, minimum standards), No. 148 (Working Environment, air pollution, noise, and
vibration), No. 154 (Collective Bargaining), No. 183 (Maternity Protection) and No. 190
(Violence and Harassment). Guatemala ratified in 2017, Part-Time Work Convention No.
175. Honduras ratified in 2016, Maritime Labour Convention. Nicaragua ratified in 2013,
Maritime Labour Convention and Domestic Workers Convention No. 189. Panama ratified
in 2016, Protocol to the Convention No. 29 on Forced Labour and in 2015, Convention No.
144 on Tripartite Consultations, as well as Domestic Workers Convention No. 189 (ibidem).
In March 2022, it ratified the ILO priority Convention No. 129 on labour inspection in
agriculture and Maternity Protection Convention No. 183. Moreover, the Government
submitted in September 2021 to the National Assembly a proposal to ratify the Convention
No. 190 (Violence and Harassment Convention). It has passed to the third reading in the
National Assembly with a view of being ratified.
Regarding the implementation of the ILO fundamental conventions, steps taken by Central
American countries in the analysed period have been outlined in detail in Annex C-1 and
sections 4.5-4.8, while here we provide a summary. In the Annex C-1, we have also
provided detailed statistics in each thematic area141.
The Central American countries have taken steps to eliminate child labour (see Annex C-
1 and section 4.5 in this Report) and in most cases have recorded progress (see Table 6.1.
below).
Steps taken by the Governments include having in place legislative and policy frameworks
(e.g., Political Constitution, Labour Code and Childhood and Adolescence Code, roadmaps
towards becoming a country free of child labour, the national development plans, national
policies on childhood and adolescence and participation in the Central American Regional
Child Labour Initiative supported by the ILO and ECLAC), and other measures, such as
financial support to poor families, initiatives encouraging school attendance, job creation
for adults, and cooperation with international partners and private sector to eliminate child
labour from sectors involved in international trade, e.g., sugar and coffee. While there is
still a long way to go for most of them (see Table 4.5.1 in section 4.5 on child labour) and
the lack of the latest data makes it difficult to evaluate progress over the whole analysed
period for Guatemala, Nicaragua and Panama, steps taken to-date helped the CA countries
to come closer to meeting the commitment of Article 286 of TSD Title and SDG No. 8.7
(i.e., “Take immediate and effective measures to secure the prohibition and elimination of
the worst forms of child labour, including recruitment and use of child soldiers, and by
2025 end child labour in all its forms”).
Moreover, there are examples of measures applied by the private sector, such as clauses
in contracts with suppliers prohibiting the use of child labour, participation in certification
schemes, verification of the age of recruited workers (based on ID), provision of education
and leisure time facilities for children at coffee or sugar plantations, so that children can
spend time safely while their parents work, awareness raising campaigns and cooperation
with ministries and other institutions. While data related to individual sectors is
140
ILO NORMLEX database: https://www.ilo.org/dyn/normlex/en/f?p=1000:12000:::NO:::
141
For the sake of the reasonable length and readability of the following overviews related to the core labour
standards, we have not provided references to the literature (as they would be quite many), however, all
references have been provided in the corresponding parts of Annex C-1 and sections 3.5-3.8, which have
been just summarised here.
201
fragmented, there is evidence, e.g., for the sugar sector in El Salvador and Panama,
confirming respectively, in El Salvador, a substantial reduction and in Panama practically
the elimination of child labour from the sector. Moreover, while we did not manage to
identify quantitative data, there has been a decrease in child labour incidence in the coffee
sector in Guatemala and Honduras. There is also evidence suggesting an important role
being played by international trade partners (e.g., the US142 and Canada143), certification
schemes and international buyers, such as well-known coffee brands, or multinationals in
beverages sector (buying sugar) that have their own monitoring mechanisms and over the
last decade exerted pressure on Central America to reduce and eliminate child labour in
sectors of relevance for them. The ongoing policy dialogue at the TSD Board meetings,
including CA reporting progress on eliminating child labour and the insistence of the EU
side on implementation of the ILO fundamental conventions, incl. No. 138 and 182, might
have also contributed to keeping the matter on the priority list for Central America.
Regarding forced labour (see details in Annex C-1 and section 4.6 in this Report), in the
analysed period, the CA countries ensured that legal and policy frameworks related to the
fight against forced labour and human trafficking are largely in place. This includes
ratification by Costa Rica and Panama of the 2014 Protocol to the ILO Convention No. 29,
adoption by Costa Rica, El Salvador, Honduras, Nicaragua, and Panama of dedicated laws
addressing human trafficking, adoption by Guatemala of a national policy and (also by
Honduras and Panama) action plans in this area, establishment of inter-agency bodies to
combat human trafficking, and specialised units in the police and judiciary. In some cases,
the legal framework is complemented by the Political Constitution, the Labour Code, and
the Penal Code. The countries have also taken steps to implement their commitments in
practice, however, this will need to be strengthened. While the situation in each of the CA
countries is different (see Annex C-1), most have made progress, in prosecuting traffickers
and providing support to victims. Regarding further required efforts, the most common
include a need to increase the number of investigations, prosecutions and convictions of
traffickers, more means to be dedicated to support to victims and identification of victims
and groups vulnerable to trafficking, delivery of training to the police, judiciary and labour
inspection and actions against fraudulent recruitment intermediaries.
Research conducted until 2016 across different sectors in CA provides evidence of forced
labour cases, incl. retention of identity documents and wages, verbal threats and false
information related to employment and working conditions. More recently, some sector
associations (e.g., in the coffee, sugar and palm oil sectors in Guatemala) have developed
and introduced labour and human rights policies promoting respect for workers’ rights and
decent working conditions. Some of them (e.g., in the palm oil and sugar sector), have
been developed as part of an EU-funded project144. Moreover, companies in diverse sectors
across the region adhere to certification schemes e.g., to the Rainforest Alliance and Social
Accountability (SA8000) standard prohibiting the use of forced labour (both are used, e.g.,
in the pineapple sector in Costa Rica and banana sector in Guatemala, while the Rainforest
Alliance also certifies coffee producers from Honduras, Guatemala and Costa Rica, among
others).
142
The US (e.g., Department for Labor) have been funding assistance projects to eliminate child labour, e.g., one
launched in 2021 (until 2026) with a budget of USD8.4 million, addressing child labour and forced labour in
El Salvador, Guatemala, and Honduras. Other projects in CA related e.g., to strengthening labour law
enforcement (launched in 2019), addressing child labour, and forced labour in the coffee supply chain in
Honduras (launched in 2017, with a budget of USD 2.0 million), reducing child labour in El Salvador through
supporting women in income generation (launched in 2017), awareness raising and policy engagement to
reduce child labour in Panama (launched in 2016), promoting youth employment in safe conditions in El
Salvador and Honduras (launched in 2015), and others: https://www.dol.gov/agencies/ilab/projects-print
143
Further to a report by the Human Rights Watch in 2004 about child labour in the sugarcane sector in El
Salvador, Canada, the second biggest market (after the US) for sugar from El Salvador threatened to stop
buying sugar if child labour is not addressed. This triggered an action from the industry. According to available
data, child labour in the sugar cane sector in El Salvador fell from 12,000 in 2004 to 3,470 in 2009 and
further to 700 in 2013-2014, i.e., by 92% in ten years (IPS, April 2015).
144
In 2020, in a project funded by the EU and implemented by the ILO (called REFRAME) focusing on improving
employment practices the sugar and palm oil sectors, Guatemala adopted policy on respect for human rights
in both these sectors. In 2021, this was followed by the banana sector in Guatemala, with a possibility of
other sectors (coffee, dairy, and livestock) joining (info shared by business representatives from Guatemala).
202
Regarding freedom of association and the right to collective bargaining (see details
in Annex C-1 and in section 4.7 of this Report), the general information about the situation
and trends in Central American countries in the analysed period suggests an overall climate
of hostility against trade unions, while the recent developments (e.g., signing in 2019 two
collective agreements in the banana and pineapple sectors in Costa Rica, being the first
ones in around 30 years, as described below, or adoption in 2017 and 2021 of special laws
for the banana sector in Panama improving workers’ rights) or situation in some sectors
may diverge from the overall picture and equally, the general approach to trade unions
varies between countries and even between regions within one country. For example, the
Costa Rican procedural law reform of 2016 made it possible to reinstate workers affected
by an unfair dismissal due to trade union activity and the improved attitude to trade unions
enabled signing in 2019 the first two (in over 30 years) collective bargaining agreements
in the banana and pineapple sectors with a multinational owning plantations. Moreover,
trade unions are present in the banana sector in Guatemala in the northern province of
Izabal and negotiate collective agreements with multinationals and their subsidiaries. This
is contrasted by a situation in the same sector in the southern provinces of Guatemala,
where there are no trade unions and working conditions, including wages, are much worse.
In general, the situation in the banana sector across the region seems to be better than in
other sectors. Reportedly, trade unions are present in the banana sector also in Panama,
Honduras, and Nicaragua and are able to negotiate collective agreements. They also enjoy
support, including capability building, from their European and the US counterparts. In the
sugar sector, in Costa Rica, El Salvador, Honduras, Nicaragua and Panama, trade unions
operate in all or in some sugar mills (in Guatemala, in one) and are able to negotiate
collectively. There are also cases (like the tuna sector in El Salvador, described in detail in
section 4.7 of this Report) which suggest that a coordinated action of trade unions from
Europe and Central America, in cooperation with international partners (such as the ILO)
and ideally also with European buyers may bring about positive changes (in this case, an
agreement on trade union operation in the enterprise), even though it may be difficult to
ensure that they are sustainable and the company does not backtrack from previously
expressed commitments. On the other hand, available reports about the palm oil sector
in Guatemala do not mention existence of trade unions in the sector, however, provide
information about intimidation of workers who tried to organise or complain about working
conditions or violation of workers’ rights. There is evidence of threats and murders, and
the related fear of workers to lose their job or to suffer reprisals from the plantation or
intermediary. There was also a case in the melon sector in Honduras, where setting up a
trade union triggered a violent reaction by the employer, who fired and blacklisted union
leaders and launched an anti-union campaign, with physical and verbal threats against
union members, including an attack on the local Secretary General of the union. Workers
were also pressed to leave the trade union and to join company-controlled unions.
Subsequently, further to a trade unions’ complaint the company was removed from two
certification schemes (for further details, see section 4.7). Finally, there are no trade
unions, e.g., in the coffee sector in Honduras, although (at least theoretically), there is
freedom to establish them.
In the policy, institutional and legislative space, while the Political Constitution and the
Labour Code in each country largely cover aspects related to freedom of association and
the right to collective bargaining, the ILO Committee of Experts has requested from all CA
countries changes to align the domestic legislation with conventions No. 87 and 98.
Requested changes relate, e.g., to the right to strike or an excessive requirement to
establish a trade union or an employer organisation. In practice, while, e.g., in Costa Rica
the share of trade union members in the total number of workers is higher than in other
countries in the region (15.2%), the ILO Committee of Experts noticed an increasing trend
of signing agreements with non-unionised workers which may undermine the role of trade
unions. While there has been some progress, e.g., in Guatemala further to the 2012
workers’ complaint to the ILO under Article 26 of the ILO Constitution requesting
establishment of a Commission of Inquiry for a serious violation of the Convention No. 87,
there is a long way to go yet at the national level and even more so in sectors. Interviewed
stakeholders from Guatemala (trade unions and business associations) emphasised the
importance of the Tripartite Commission on Labour Relations and Freedom of Association
and the need to use it as a forum for social dialogue, and trade unions suggested that the
203
EU could support that Commission with financial and technical assistance, ideally in a
cooperation with the ILO. In other countries of the region, the situation is also difficult, as
confirmed, e.g., by a discussion on El Salvador as an individual case in the ILO Committee
on the Application of Standards regarding the priority Convention No. 144 on Tripartite
Consultations in 2021 and 2022 when the Committee urged the Government to refrain
from interfering in setting up and in activities of independent workers’ and employers’
organisations. In 2021, it decided as well to include the case in a special paragraph of its
2021 report which is a procedural measure to highlight the gravity of the case. (CAS, 2021)
Over the analysed period, the TSD Board meetings also provided an opportunity for a
regular dialogue about actions taken by the Parties to implement the ILO fundamental
conventions in law and practice, e.g., the situation in Guatemala (further to the 2012
workers’ complaint) was discussed in 2015-2019 when the country provided information
about the actions taken and next steps (TSD Board, 2015, 2016, 2017, 2018, 2019).
Panama and El Salvador informed about legislative work to facilitate freedom of association
and collective bargaining in the public sector, although information based on the ILO
Committee of Experts reports suggests a lack of real progress in El Salvador (a legislative
proposal was submitted to the National Assembly, however, nothing has happened since
2016). The EU side took the opportunity of these discussions to insist on the need to
effectively implement the ILO fundamental conventions, as envisaged by the TSD Title,
and raised questions also raised by the ILO Committee of Experts, including in relation to
non-compliance of the national legislation with the ILO fundamental conventions No. 87
and 98 (e.g., in the case of Nicaragua and provisions of the Labour Code imposing
limitations on the exercise of the right to strike (TSD Board, 2016, 2019 and 2020).
Regarding non-discrimination, CA countries have also taken steps145 to ensure that their
laws and policies provide for equal rights for diverse groups in the society, while their
implementation and enforcement may require further work. This included an action plan
for integrated migration policy adopted by Costa Rica and measures taken to regularise
foreign workers employed in construction, agriculture, and domestic service. Costa Rica
has also adopted an action plan for national policy towards a society free from racism,
racial discrimination, and xenophobia. El Salvador has adopted a policy for indigenous
peoples, as well as youth and adult continuing education policy. Also, all countries have
adopted national policies and action plans for equality between women and men in training,
and employment, as well as addressing women’s human rights. Guatemala has also
adopted documents focusing on integration of indigenous women into the economy and
promotion of their social inclusion and Panama included also aspects related to women in
conditions of socioeconomic vulnerability. Regarding the applicable legislation, the ILO
Committee of Experts directed to most of CA countries a request to align domestic laws
with the ILO Convention No. 100 to reflect the principle of equal pay for work of equal
value and not only for equal or identical work.
In the context of implementation of Article 286, in conclusions and recommendations to

the Parties shared at the Civil Society Dialogue Forum in 2020, civil society representatives
urged them to respond promptly to the comments and complaints raised by civil society
concerning, e.g., infringements and to make proposals to remedy precarious situations in
the areas of fundamental labour rights, such as freedom of association and trade union
activity, collective bargaining, social dialogue and labour market discrimination; and to
work to eliminate forced labour and to achieve the effective abolition of child labour. At the
Civil Society Dialogue meetings in 2015 and 2016, civil society representatives reiterated
a need for the Parties to take steps to fulfil the commitments to effectively implement the
ILO fundamental conventions in law and in practice and inform civil society representatives
about progress made in this respect.
6.2 Multilateral environmental standards and agreements (Article 287)
Similar to Article 286 for core labour standards, in Article 287 the Parties commit to the
effective implementation of a number of multilateral environmental agreements (MEAs).
This section summarises the corresponding activities undertaken by the Parties in the
145
Conclusions of the ILO Committee of Experts regarding alignment of CA legislation with conventions No. 100
and 111 have been presented in Annex C-1 (sections on non-discrimination and on gender equality).
204
analysed period, about which they have reported in meetings of the TSD Board, primarily
based on meeting minutes146 and interviews with the EU and the CA partner countries. At
TSD Board meetings, the partner countries select their own topics for reporting, within the
scope of the jointly agreed agenda items (e.g., the MEAs listed in TSD Title). As such one
should be aware that the information discussed below shows a rather positive picture about
the effective implementation of the MEAs in Central American countries. At the Board
Meeting of 2021, the EU highlighted the importance of effective implementation of MEAs
in Central America and urged the partner countries to take further action, as the situation
regarding the implementation of the MEAs remains unsatisfactory. It is difficult to assess
what effect the Agreement has had on the Parties’ ratification and effective implementation
of MEAs; no direct causal link has been identified. Developments with respect to MEAs are
further described in the Environmental Governance baselines in Annex D1.
In the period analysed, all Central American countries reported on their progress in
implementation of the Convention on International Trade in Endangered Species of Wild
Fauna and Flora (CITES)147, the Convention on Biological Diversity, the implementation of
the Rotterdam Convention on the Prior Informed Consent Procedure for certain hazardous
Chemicals and Pesticides in international trade 148, and ratification of the Minamata
Convention on Mercury (TSD Board meeting, 2015-2020). In 2015, the Central American
countries highlighted their common interest in attaining the objectives of the United
Nations Framework Convention on Climate Change (UNFCCC) given the region’s
vulnerability to climate change (TSD Board meeting, 2015).
During the TSD Board meeting in 2015, the parties agreed on the following issues (as part
of the positive agenda, i.e., cooperation activities):
1) Exchanging information and best practices on trade-related environmental

regulations in particular the Montreal Protocol, the Basel Convention on the Control
of Transboundary Movements of Hazardous Wastes and their Disposal, the
Rotterdam Convention on the Prior Informed Consent Procedure for Certain
Hazardous Chemicals and Pesticides in International Trade and CITES;
2) Promoting trade and investment in environmental technologies and services, such
as renewable energy and energy efficiency technologies, in particular by deepening
knowledge on global value chains linked to green technologies;
3) Promoting trade in sustainable products (as part of fair and ethical trade schemes,
eco-labelling, organic production, corporate social responsibility);
4) Promoting sustainable tourism, payment for environmental services schemes and
carbon markets, in particular deepen the understanding of the European emission
trading scheme (ETS).
At the 2020 TSD Board meeting, it was mentioned that information exchange on climate
policies and environment has been perceived as very useful by the partner countries.
In the analysed period, the EU notably reported on its accession to CITES in 2015 upon
adoption of the Gaborone Amendment, which now also allows regional economic
integration organisations to become a Party to the Convention. In 2017, the Minamata
Convention on Mercury149 was ratified by the EU. Moreover, the Euroclima+ programme
for Latin America150 was discussed at the TSD Board meeting in 2018, as it can be of
relevance to support the objectives of the TSD Title.
For the years reviewed, Costa Rica reported on progress in the implementation of the
Montreal Protocol and CITES. The country also reported progress on its implementation of
146
Progress with respect to MEAs not discussed in the TSD Board meetings have not been analysed yet.
147
All Central American partner countries accepted the Gaborone amendment to CITES which entered into force
in November 2013, the EU automatically adopted the amendment as it became a party in April 2015.
148
All Central American partner countries and the EU have ratified the Rotterdam Convention on the Prior
Informed Consent Procedure for certain hazardous Chemicals and Pesticides in international trade
149
The Minamata Convention on Mercury is an international treaty designed to protect human health and the
environment from anthropogenic emissions and releases of mercury and mercury compounds.
150
The programme supports subregional activities or activities of groups of countries on climate change
mitigation and adaptation.
205
the Basel Convention, notably by developing regulations that set high standards for the
handling of transboundary movement of waste and strengthening local controls and
capacities to its effect (TSD Board, 2019). In 2018, Costa Rica signed the Regional
Agreement on Access to Information, Public Participation and Access to Justice in
Environmental Affairs in Latin America and the Caribbean (TSD Board, 2019)151. In 2019,
Costa Rica further progressed in the implementation of the Paris Agreement, launching a
Decarbonisation Plan, which sets out a roadmap for five sectors: energy, waste,
agriculture, industry, and biodiversity, with the objective of achieving net-zero emissions
economy by 2050 (TSD Board meeting, 2019) (see also section on National Policies). Costa
Rica reported about the ongoing negotiations of the Agreement on Climate Change, Trade
and Sustainability (ACCTS) along with Fiji, Iceland, New Zeeland, Norway and Switzerland
(TSD Board, 2020 and 2021).
El Salvador reported progress in relation to the Paris Agreement, CITES, the Basel
Convention and the Stockholm Convention on Persistent Organic Pollutants and expressed
its readiness to report on progress on other MEAs at the request of the EU (TSD Board,
2018, 2019, 2020). In the analysed period, El Salvador has undergone structural
framework changes, adapting its Ministry of the Environment and Natural Resources
(MARN) to best comply with Conference of the Parties (COP) decisions. This change has
enabled MARN and the Directorate-General of Customs to strengthen communication and
information exchange mechanisms between the two institutions to prevent the illicit
trafficking of hazardous waste and waste, and control of their export, as part of the
implementation of the Basel Convention. Regarding the Stockholm Convention, El Salvador
developed a National Implementation Plan as well as a regulation for the transport and
final disposal of waste and environmental monitoring of works (TSD Board, 2019, 2020).
At the 2018 TSD Board meeting, Guatemala presented its implementation of the UNFCCC
consistent with Paris Agreement commitments. In addition, it provided information on the
current legal framework in the country and on the National Climate Change Fund.
Guatemala also reported on progress on climate change and sustainable development
goals as set out in its revised national development plan, the K’atun 2032 Plan152 (TSD
Board, 2019). At the 2016 TSD Board meeting, Guatemala reiterated its opposition to the
inclusion of paraquat dichloride153 in the Rotterdam Convention. A follow-up discussion
between the EU and Guatemala was announced during the 2020 TSD Board meeting (TSD
Board, 2020). Interview information confirmed that TSD Board meetings serve as an
important platform to raise certain discussion points – as was the case with the paraquat
issue.
Honduras reported on progress in the implementation of the Basel, Stockholm and

Minamata Conventions, the Montreal Protocol and CITES (TSD Board, 2019). To comply
with those international instruments, the country has strengthened its institutional and
technical capacity and inter-institutional coordination. Regarding the Paris Agreement, it
reported on a change of its energy mix, aimed at generation of 60% from renewable energy
and 40% from fossil fuels by 2022. This change has led to a reduction of emissions of 2.4
million tons of CO2 per year (TSD Board, 2016, 2018, 2019). Moreover, Honduras was the
first country in the Americas to enter into FLEGT 154 Voluntary Partner Agreement (VPA)
negotiations with the EU in 2018 and signed the VPA in 2021. At the 2018 TSD Board
meeting, the country underlined the importance of the VPA in the fight against
deforestation and climate change.
In 2018, Nicaragua reported on progress towards ratification of the Kigali Amendment 155
to the Montreal Protocol and the 1995 Amendment to the Basel Convention 156. It also
151
In addition, Guatemala, Panama, and Nicaragua signed the Agreement
(https://www.cepal.org/en/escazuagreement).
152
https://observatorioplanificacion.cepal.org/es/planes/plan-nacional-de-desarrollo-katun-nuestra-guatemala-
2032
153
Paraquat is a toxic compound used as an herbicide in diluted form.
154
Forest Law Enforcement, Governance and Trade. For more information see:
https://www.euflegt.efi.int/what-is-flegt
155
https://treaties.un.org/Pages/ViewDetails.aspx?src=IND&mtdsg_no=XXVII-2-f&chapter=27&clang=_en
156
https://treaties.un.org/Pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXVII-3-a&chapter=27&clang=_en
206
progressed on the United Nations Framework Convention on Climate Change (TSD Board,
2019). Nicaragua highlighted the launch of its National Policy for Mitigation and Adaptation
to Climate Change and the creation of a National Response System to Climate Change.
Furthermore, Nicaragua also reported on the approval, in 2020, of the Nagoya Protocol to
the Convention on Biological Diversity (TSD Board, 2020).
At the TSD Board meeting in 2018, Panama informed about its progress on the Cartagena
Protocol via the reactivation of the National Committee for Biosafety for Genetically
Modified Organisms as well as work related to the National Biodiversity Strategy and Action
Plan 2018-2050. It also described progress in the implementation of CITES. Panama
reported its compliance with the Paris Agreement, being the first country in the Americas
to submit its Nationally Determined Contribution (NDC) (Ibid.) The European Commission
flagged an issue related to illegal unreported and unregulated (IUU) fishing in Panama 157
and mentioned that the Maritime and Fisheries Department (DG MARE) engaged in bilateral
talks with Panama (TSD Board, 2020).

the Parties shared at the Civil Society Dialogue Forum in 2016, civil society representatives
reiterated a need for the Parties to take steps to fulfil the commitments to effectively
implement the Multilateral Environmental Agreements in law and in practice. At the same
meeting and in 2015, they also emphasised a need to promote and adopt measures related
to mitigation of and adaptation to climate change, which support producers of agricultural
products and promote trade and responsible management of natural.
6.3 Domestic laws and policies to encourage high levels of labour protection
(Articles 285 and 291)
In line with the commitments made in Articles 286 and 287, and notwithstanding the right
of the Parties to regulate, in Article 285 the Parties strive to ensure that “laws and policies
provide for and encourage high levels of environmental and labour protection appropriate
to their social, environmental and economic conditions.” Article 291 further specifies that
“The Parties recognise that it is inappropriate to encourage trade or investment by lowering
the levels of protection afforded in domestic environmental and labour laws. (...) A Party
shall not fail to effectively enforce its labour and environmental legislation in a manner
affecting trade or investment between the Parties.”
Regarding policies and legislation regulating working conditions, labour inspection and the
move from informal towards formal economy, i.e., elements related to decent work, steps
taken by Central American countries in the analysed period have been outlined in detail in
Annex C-1, and sections 4.1 and 4.4 of this Report, while here we provide a summary.
Regarding informal employment, the available data suggest that despite steps taken by
the Central American governments, the rates of informal employment remained practically
the same over the analysed period and in Costa Rica, even increased. The informality level
across the whole economy is high (at around 70% in Guatemala, Honduras, and Nicaragua
and 50% in Costa Rica, with a lack of comparable data for Panama and El Salvador as data
for these two countries exclude agriculture, where the informality level belongs to the
highest). In a break-down by sector, in particular regarding sectors engaged in exports to
the EU, the situation is uneven and based on partial data. The available evidence suggests
formal jobs in sectors, such as banana, pineapple, coffee, and medical equipment in Costa
Rica, coffee in Guatemala, tuna in El Salvador, and sugarcane, and coffee in Nicaragua. In
other sectors, notably those where, like in the sugar sector (across the region), coffee
(e.g., in El Salvador and Honduras) or palm oil (e.g., in Guatemala) there are different job
categories, incl. permanent workers, directly employed by companies, as well as sub-
contracted and temporary ones, jobs are likely to be both, formal and informal, depending
on the category, with formal jobs being offered to permanent and directly employed
workers and informal jobs being more common for temporary and sub-contracted workers.
Moreover, there is a potential for changes in the job quality (e.g., with attempts, such as
the new labour policy manual in the sugar sector in Guatemala obliging suppliers to agree
157
For more information see https://ec.europa.eu/commission/presscorner/detail/en/QANDA_19_6756
207
and sign a written contract with each worker and pay social security contributions for them,
thus formalising the job). Also, while little data is available regarding informal employment
levels in a break-down by departments (regions) in Central American countries, in some
cases, such as in Costa Rica and El Salvador, the evidence suggests that exposure to
international trade and exports incl. to the EU, may have played a role in keeping
informality at a lower level in a few departments than in other parts of the country.
Regarding working conditions, the picture is mixed across the region with cases of
progress, and lack thereof, as well as worsening of the situation. This relates to such
indicators like sub-employment (i.e., part-time work despite being ready to take a full-
time job), the share of workers having social security coverage and the number of labour
inspectors and labour inspections at workplaces. Given an overall high level of informality
in Central America, there is a related large share of workers not covered by social security.
The existing coverage is particularly low in Honduras and Nicaragua, with only around 20%
of workers being covered by different type of insurance, such as pension, access to health
care or insurance in case of an accident at work. Moreover, the available evidence suggests
that jobs of temporary or sub-contracted workers, which are created in agriculture, mainly
for the harvest season, are of a low quality. In addition, in these job categories workers’
rights envisaged in the domestic legislation are often not respected. This relates, e.g., to
the minimum wage, payment of social security contributions and health and safety at work
(distribution of personal protective equipment and provision of a related training). On the
other hand, the available information sources indicate a few reasons which have triggered
improvement of working conditions, and these include shortage of local labour supply due
to the emigration for harvest to the neighbouring countries, the plantation becoming part
of a certification scheme (e.g., in the Guatemalan palm oil sector) and labour inspections
(e.g., in the pineapple and banana sector in Costa Rica). In some sectors (e.g., melon
sector in Honduras) covered by reporting over the whole analysed period, there seems to
be no improvement over time and impunity of the companies in the sector violating
workers’ rights and preferring to pay penalties without remedying the situation. Also, the
conditions in the coffee sector in Honduras have been reported as not changing over the
last ten years. That said, there are also reports related to certified coffee plantations in
Honduras that provide evidence of improved working conditions, notably regarding health
and safety at work. In this context, it is to note that the EU has funded some activities,
such as development of sector policies to respect human rights in the sugar and palm oil
sector in Guatemala and a project to help to address health and safety at work issues in
the coffee sector in Honduras. However, as these activities have been very recent (2020),
there is a need for time for them to bring about changes on the ground yet. Another
element is related to labour inspections. While these are within the powers of domestic
institutions, labour inspection has been frequently discussed at the TSD Board meetings
regarding the measures taken to provide a legislative basis for the operation of inspection
services, and the recruitment and training of inspectors to strengthen the capacity and
capability of inspection services (see Annex C-1).
In the context of implementation of Articles 285 and 291 of the TSD Title, in conclusions
and recommendations to the Parties shared at the Civil Society Dialogue Forum in 2020,
civil society representatives appealed to the Parties to include the various sectors of society
– in particular workers and employers – in the debate on the social protection measures
that should be established and to enhance public services to meet the basic needs of all
citizens. They emphasised that it is crucial that social protection systems are adequately
funded and that funds are used transparently.
6.4 Domestic laws and policies to encourage high levels of environmental

protection (Article 285)
In this section, the influence of the Agreement on the Parties’ environmental policies is
discussed by means of interview results and the TSD Board meeting minutes.
Developments with respect to domestic environmental policies over the period 2012 to
2020 are also described in the Environmental Governance Baseline section – Annex D1.
208
During the TSD Board meeting in 2020, the Central American partners indicated that the
‘trade favouring sustainable development provision’ in the TSD title supported agricultural
producers in Central America in reducing their environmental footprint, demonstrated by
several inspiring examples. In 2017, an event on ‘Global Value Chains and Sustainable
Development’ was organised in Costa Rica to balance the environmental agenda with
labour priorities and to maintain a continuous dialogue between the EU and the Central
American countries on these issues. This event was perceived by the partner countries as
successful as it had a positive impact on regional cooperation to strengthening sustainable
global value chains (TSD Board, 2018).
At the TSD Board meeting in 2021, special attention was given to prospects for organic
agricultural production in the EU and in Central American countries. The EU mentioned that
the demand for organic agricultural products is growing in the EU market. The Central
American presentations showed interesting developments in organic value chains for
several agricultural export products, generating employment opportunities in a sustainable
fashion and benefits for the environment. All Parties expressed an interest to continue the
dialogue on this matter and to go beyond the reporting efforts (Stakeholder consultation).
In the analysed period, the EU announced the European Green Deal,158 which is the
European new growth strategy towards a climate neutral Europe by 2050. The EU Green
Deal proposes two action plans to 1) boost the efficient use of resources, by moving to a
clean and circular economy and 2) restore biodiversity and cut pollution.
The new EU Directive on Single Use Plastics (Directive 2019/904) was presented as well
as the EU’s 2050 vision for climate change (TSD Board, 2019). Additionally, a study by the
International Trade Centre (ITC) on the European Union market for sustainable products
was discussed at the 2019 TSD Board meeting. With the 2030 Biodiversity Strategy, the
EU commits to strengthen its work on biodiversity conservation. Key elements of the new
strategy include targets to establish at least 30% of protected land and 30% of protected
sea in Europe (European Commission, 2019). In 2021, the EU informed about the adoption
of the European Climate Law in April 2021, incorporating into EU law the objectives of
climate neutrality by 2050 and reduction of greenhouse gas emissions of 55% by 2050.
The EU informed also about a series of legislative actions to implement the European Green
Deal’s objectives, e.g., an emissions trading system, a carbon border adjustment
mechanism and a strengthened approach to land use and forestry (TSD Board meeting,
2021).
In 2014, the EU, together with 16 other members of the WTO, launched negotiations on
the Environmental Goods Agreement (EGA), aiming to liberalise trade in environmental
goods and services (European Commission, 2016). In the TSD Board meeting in 2015,
both the EU and Costa Rica stressed the importance of this Agreement in the fight against
climate change and other environmental issues. They invited other parties to join as well.
Talks at the WTO continued until December 2016 (the last report available) however, the
Parties were not able to close gaps between their positions. At that time, 18 participants
engaged in EGA negotiations representing 46 WTO members (including all EU Member
States)159.
During the analysed period, Central American countries significantly progressed on

national policies in relation to climate change, and the use of pesticides. Many of them also
revised their legal frameworks to adhere to international policies and frameworks. A more
detailed account is presented below:
Costa Rica worked on climate change initiatives in agriculture through an initiative called
"Towards a Low-Carbon Coffee Sector" in 2015 and was the first country to implement
Nationally Appropriate Mitigation Actions (ΝΑΜΑ).160 Costa Rica intended to use the project
to transform coffee production in the country. At the 2020 virtual TSD Board meeting,
158
See for more information https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en
159
WTO (December 2016), Progress made on Environmental Goods Agreement, setting stage for further talks:
https://www.wto.org/english/news_e/news16_e/ega_04dec16_e.htm
160
Carbon Neutral agricultural project- For more information see https://www.namacafe.org/
209
Costa Rica underlined the urgency of launching a green post-COVID-19 recovery plan, to
promote the green, blue, and orange economy161. Costa Rica highlighted the publication of
the first report on the State of the Environment and the strengthening of the environmental
information system, through which the country has further developed statistical
information related to the state of the environment and natural resources (TSD Board,
2020). The first report on the State of the Environment was published in 2018 and will
improve policy decision making as well as environmental protection.
In 2018, Costa Rica developed a policy for sustainable consumption and production as well
as a national strategy for the replacement of single use plastics by renewable and
compostable alternatives (TSD Board, 2018) and in 2019 it launched a Decarbonization
Plan, which sets out a five-sector roadmap addressing the following sectors: energy, waste,
agriculture, industry, and biodiversity. The short, medium, and long-term targets of this
Plan aim to achieve the objective of being a net-zero emissions economy by 2050 (TSD
Board, 2019). In 2021, Costa Rica completed its domestic procedures for ratification of the
OECD Convention and successfully finalised the accession process to the OECD that began
in April 2015.162
In the analysed period, El Salvador continued to strengthen the agricultural sector and
the industry to better cope with the effects of climate change through the Environmental
Strategy of Adaptation to and Mitigation of Climate Change in the Agriculture, Forestry and
Aquaculture Sectors (TSD Board, 2015). At the TSD Board meeting in 2018, El Salvador
presented its draft Law on Climate Change. The country also aims to promote renewable
energy and reported progress in green public procurement for renewables (TSD Board,
2018). Interview information revealed that policy updates by the EU regarding the
European Green Deal and its Farm to Fork strategy are perceived as helpful by the
government of El Salvador. However, capacity building activities are required to enable the
adoption of such measures in El Salvador. In general, the TSD Board meetings put forward
the discussion on environmental policies and help El Salvador’s Government to recognise
the relevance of (international) environmental polices (including standards) and to trigger
discussions within the Ministry for Environment. As such, the representatives of the
government of El Salvador concluded that it has been positive to include environmental
restoration and protection measures in the Agreement.
Guatemala reported on its progress on mitigating climate change, which is addressed in

the administrative structure of the Ministry of Environment and Natural Resources. The
country’s climate actions are incorporated in the overarching development policy ‘K´atun
(Our Guatemala) 2032 Plan’ and are consistent with the Sustainable Development Goals.
Guatemala also focuses on changing its national energy mix by increasing the share of
renewable energy (TSD Board meeting, 2019). In the same year, Guatemala launched the
National Long-Term Strategy on Development with low greenhouse gas emissions, aimed
at efficient, inclusive, and participatory economic development. Guatemala updated its
national emission reduction targets and focused on renewable energy; agriculture (based
on principles of climate adaptation and under financial coverage schemes of climatic risks);
marine-coastal areas (with strategic protected areas and low infrastructure and
encouraging tourism and artisanal fishing activities); and integrated solid waste
management sectors (TSD Board, 2020). Moreover, the National Climate Change Action
Plan and the National Government Plan set out Climate commitments (TSD Board, 2020).
Honduras made progress on the implementation of its chemical policy agenda. It

developed a National Plan for Mercury and a National Action Plan (NAP) for artisanal and
small-scale gold mining in 2018. Honduras also implemented the Environmentally Sound
Mercury Management Project which aims to reduce mercury releases from pilot mining
communities and provide risk assessment of mercury in at-risk populations. Honduras also
revised its regulatory framework, developing a Regulation on Occupational Health and
Safety in Mining Operations, a Regulatory Instruction for Mercury, a Regulation on artisanal
161
The green economy covers the low-carbon and resource efficient processes, valuing ecosystem services;
blue economy focused in protecting natural capital in oceans and coastal areas; orange economy focuses on
creative goods and services, values innovation and high-skill jobs.
162
https://www.oecd.org/newsroom/oecd-welcomes-costa-rica-as-its-38th-member.htm
210
and small-scale gold mining and specific instructions for tariff codes for products containing
mercury (TSD Board, 2018, 2019, 2020). Honduras developed technical regulations such
as the PCB (polychlorinated biphenyl) Regulation and proposed regulation on potentially
contaminated sites in its implementation of the National Chemical Emergency Plan and the
National Stockholm Implementation Plan (ibid).
In 2016, Honduras developed a Greenhouse Gas Inventory as well as a National Adaptation

Programme, Climate Change Scenarios, and the Municipal Adaptation and Mitigation Plan
of the Municipality of La Ceiba (TSD Board, 2020). Furthermore, Honduras aims to restore
one million hectares of forest land over a period of 10 years as part of the National
Programme for Recovery of Ecosystem Assets and Services. Honduras reported progress
on increasing organic production, which went from 5,000 hectares in 2006 to more than
56,000 hectares in 2020.
Nicaragua highlighted the launch of its National Policy for Mitigation and Adaptation to
Climate Change (see also the Environmental Governance Baseline section - Annex D1) and
the creation of a National Response System to Climate Change. To this end, it established
a strategic national framework of reference to develop a set of guidelines and actions to
mitigate climate change and face the challenges of climate adaptation. It also reported on
progress on policy measures inter alia related to agro-ecological production, development
of forest plantations, and reduction of extensive livestock practices (TSD Board, 2016,
2017, 2019).
At the TSD Board meeting in 2020, both Nicaragua and Honduras highlighted the
Agreement’s positive impacts on trade and sustainability efforts. There remain several
challenges to fully implement the TSD Tile: for instance, it is challenging for small farm
holders to comply with the European standards. In this context, dialogue between the EU
and the partner countries, as well as technical cooperation is essential to keep progressing
on implementation of the provisions on Trade Favouring Sustainable Development in the
TSD Title. An example of those projects related to TSD Title of the Agreement is the AGRO-
INNOVA163 program to improve climate change mitigation and adaptation technologies for
small-scale producer of basic crops and livestock in the Central American Dry Corridor.
Panama has also undergone structural framework and legislative changes throughout the
analysed period, exemplified by its updated (2015) General Law on Environment164, which
for the first time, includes a chapter on climate change. The General Law on Environment
has five main axes of action in environmental matters: New Model of Management,
Ecotourism in Protected Areas, Water Resources, the Alliance for Reforestation of One
Million ha and Climate Change (TSD Board meeting, 2018). Panama is also currently
drafting a National Climate Change Plan for the Infrastructure sector that includes medium-
and long-term mitigation and adaptation strategies, e.g., for buildings, ports, waste and
transportation (TSD Board meeting, 2020). Panama aims to achieve its NDC of the energy
generation subsector through the National Energy Plan and for Land Use and Land Use
Change through the Alliance for Reforestation of One Million ha 165 (TSD Board meeting,
2018). In addition, there has been progress on the development of Panama’s Energy
Transition Agenda which, among others, has contributed to the establishment of the
National Council on Energy Transition (Panamá América, 2022). In the forestry sector, the
National Forest Restoration Program launched in 2020 aims to restore 50.000 ha of forest
(MiAmbiente, 2021). In terms of COVID-19 response measures, Panama’s environmental
advisory board had proposed an economic reactivation plan for sustainable development
based on strategic actions, such as issuance of green bonds and measures to promote the
transition towards a circular economy (TSD Board meeting, 2020). At the same time,
interview data reveals that investments in light of this green recovery cannot guarantee to
be without environmental and social costs as neither institutional capacity nor legal
framework is sufficient to prevent harmful environmental and social investments
(Stakeholder info).
163
https://knowledge4policy.ec.europa.eu/projects-activities/agroinnova_en
164
https://www.gacetaoficial.gob.pa/pdfTemp/27749_B/50251.pdf.
165
http://www.alianzaporelmillon.org/
211
6.5 Promotion of best business practices related to Corporate Social

Responsibility (CSR) / Responsible Business Conduct (RBC) – Article 288
The available information outlined in section 3.9 of this Report and in Annex C-1 suggests
that all Central American countries have taken numerous steps in the analysed period to
promote CSR/RBC. In all of them, there are dedicated institutions promoting CSR/RBC
practices and most of those countries have a national framework (e.g., a National Action
Plan) in this area. Moreover, in sectors engaged in exports to the EU, business associations
and individual companies (although not all of them) promote and apply CSR/RBC practices
or follow requirements of diverse certification schemes (e.g., in the coffee, banana, palm
oil or pineapple sector). In this context, reports from the analysis of effectiveness of diverse
certification schemes in the coffee sector in a few Latin American countries suggest that
coffee producers from Honduras are best as regards changes in social indicators compared
to non-certified plantations. Costa Rica (as the only CA country next to Honduras
participating in the study) reported smaller differences between certified and non-certified
plantations. Also, according to stakeholders, some companies intending to start exporting
to the EU face requirements of EU buyers related to CSR/RBC practices, which may further
encourage their uptake. Finally, the EU has been supporting promotion and application of
CRS/RBC practices through assistance projects and awareness raising events, in individual
countries or sectors, as well as in the regional dimension.

the Parties shared at the Civil Society Dialogue Forum meeting in 2020, civil society
representatives reiterated the importance of the Parties to the Agreement to implement
the fundamental ILO conventions and to promote and bolster the UN Guiding Principles on
Business and Human Rights.
Also in 2020, they called on the Parties to boost awareness-raising mechanisms and
activities, as well as to promote the concept of human rights due diligence, with the aim
of increasing the ability of socio-economic players to apply the UN Guiding Principles on
Business and Human Rights. Another civil society request related to promoting and driving
forward, in dialogue with the various stakeholders, national action plans and public policies
that put into practice the UN Guiding Principles on Business and Human Rights and ensure
the implementation of the ILO fundamental conventions.
Moreover, in 2020 civil society considered as necessary to promote trade in goods and
services conducive to sustainable development by supporting fair trade initiatives and
fostering cooperation between Central American and EU customs administrations and
regulatory authorities in order to address technical barriers to such trade. This should
include efforts to facilitate the registration processes necessary for placing products on the
market and for making progress on technical harmonisation processes within both regions
6.6 Review of sustainability impacts (Article 293)
In Article 293, the Parties commit to jointly reviewing, monitoring, and assessing the
contribution of Part IV of this Agreement, including cooperation activities under Article 302,
to sustainable development.

the Parties shared at the Civil Society Dialogue Forum meeting in 2019, the civil society
representatives took note of the fact that the Commission had started the ex-post
evaluation of the Association Agreement and, as regards the evaluation of the TSD Title,
the Advisory Group members asked to be considered as the main channel for consulting
the productive, labour and civil society sectors in line with the ToR of the evaluation, so as
to establish a continuous and structured dialogue with the Advisory Groups on both sides
at all stages of the process. With this in mind, the Advisory Groups, acting jointly and on
their own initiative, are defining quantitative and qualitative criteria to support this process.
In 2020, the Advisory Groups, requested to be kept informed about the terms of reference
and the EU's ex-post work to evaluate the Agreement with regard to the TSD chapter. In
212
their view, the Advisory Groups should be regarded as the primary mechanism for
consulting the productive, labour, and civil society sectors in their various forms of
representation, from the very start of this evaluation process, so as to establish an ongoing
and structured dialogue with the AGs of both Parties at every stage of the process.
7 HUMAN RIGHTS ANALYSIS
This section provides an analysis of the impact of the EU-CA FTA on human rights.166
7.1 Human rights in the EU trade policy and in the Agreement
Human rights are placed at the centre of the EU’s trade agenda. This is laid down in the
European Treaties (Art. 3(5),167 Art. 21(1)168 and (3)169 TEU and Art. 207 TFEU170) and is
further developed in policy documents of the European Commission. 171 Furthermore,
Article 21(3) TEU requires the EU to respect human rights in its external action (Bartels,
2014).
The overarching objective of the EU to include protection of human rights in its external
action is also reflected in the provisions of the EU-CA AA. A core part of the EU-CA AA is
its ‘human rights’ clause.172 This is set out in two parts of the Agreement. Article 1(1), in
Part I of the Agreement, contains an ‘essential elements’ clause:
Respect for democratic principles and fundamental human rights, as laid down in the Universal
Declaration of Human Rights, and for the rule of law, underpins the internal and international
policies of both Parties and constitutes an essential element of this Agreement.
And Article 355, in Part V of the Agreement, provides for the enforcement of this – and
other – essential elements clauses. This is an example of a so-called ‘non-execution clause’.
It provides that a Party may adopt ‘appropriate measures’, in accordance with international
law, if the other Party violates an essential element of the Agreement. In Mugraby, the EU
Court of Justice considered the question whether the EU has an obligation to trigger a non-
execution clause in the event of violations of an essential elements clause by the other
Party. Both the General Court and, on appeal, the Grand Chamber, agreed that an
enforcement clause equivalent to Article 355 of the EU-CA AA gave the EU (and by
implication the other Party as well) a right to take enforcement action but did not impose
any obligation to take such action.173
But it is possible that the EU might be legally required to trigger a non-execution clause in
order to suspend obligations under an agreement if this is necessary to prevent the EU
166
In line with the Tool No.28 of the Better Regulation “Toolbox” and the EC Guidelines on the analysis of
human rights impacts in impact assessment for trade-related policy initiatives, “human rights” in this
analysis are defined as set out in the Charter of Fundamental Rights of the European Union, core UN human
rights treaties and relevant regional human rights treaties.
167
Article 3(5) TEU lays down the commitment to contribute to the protection of human rights in its relations
with the wider world: “In its relations with the wider world, the Union shall uphold and promote its values and
interests and contribute to the protection of its citizens. It shall contribute to peace, security, the sustainable
development of the Earth, solidarity and mutual respect among peoples, free and fair trade, eradication of
poverty and the protection of human rights, in particular the rights of the child, as well as to the strict
observance and the development of international law, including respect for the principles of the United Nations
Charter”.
168
Article 21(1) TEU mandates that the EU is guided by the values of human rights in its external policies: “The
Union’s action on the international scene shall be guided by the principles which have inspired its own creation,
development and enlargement, and which it seeks to advance in the wider world: democracy, the rule of law,
the universality and indivisibility of human rights and fundamental principles of the UN Charter and
international law”.
169
Art. 21(3) TEU requires the EU to ensure “consistency between different areas of its external action and
between these and its other policies”.
170
Art. 207(1) TFEU provides that the EU’s trade relations and agreements “shall be conducted in the context of
the principles and objectives of the Union’s external action”.
171
See e.g. “Trade for All” Strategy from 2015 (COM(2015) 497 final), but also the new strategy “Trade Policy
Review – an Open, Sustainable and assertive Trade Policy launched in February 2021 (COM(2021 66 final).
172
Human rights clauses are analysed in detail in Lorand Bartels, Human Rights Conditionality in the EU’s
International Agreements (Oxford University Press, 2005).
173
Case T-292/09, Mugraby [2011] ECR II-255 (General Court, Order, 6 September 2011); Case C-581/11 P,
Mugraby ECLI:EU:C:2012:466 (Grand Chamber, Order, 12 July 2012).
213
from itself being implicated in human rights violations occurring in the other country. Since
the 2009 Lisbon Treaty, which introduced Articles 3(5) and 21(3) to the Treaty on European
Union, the EU has come under concrete legal obligations to ensure that it respects human
rights norms in its external action (Bartels, 2014). Consistently with Mugraby, this does
not mean that the EU needs to enforce human rights obligations of other countries. The
EU must ensure, however, that it does not contribute to human rights violations in other
countries.174 The EU has no positive obligation to improve human rights in other countries,
but it has a negative obligation not to contribute to a deterioration of human rights in other
countries.
Next to the human rights clause, Title XIII of the EU-CA FTA – the TSD Chapter – contains
a separate set of provisions on labour and environmental standards (Articles 286 and 287)
which overlap in certain respects with the human rights obligations set out in Article 1(1).
This is particularly the case in relation to core labour standards, which are also human
rights within the meaning of Article 1(1) (Bartels, 2013). In these provisions, the Parties
re-affirm existing obligations under other legal instruments (e.g., fundamental ILO
Conventions) but do not commit, separately, to perform those obligations in this
Agreement. For example, Article 286, on minimum labour standards, states that:
(1) … the Parties reaffirm their will to promote the development of macroeconomic policies in
a way that is conducive to full and productive employment and decent work for all, including
men, women and young people, with full respect for fundamental principles and rights at work
under conditions of equity, equality, security and dignity.
The Parties, in accordance with their obligations as members of the ILO, reaffirm their
commitments to respect, promote, and realise in good faith and in accordance with the ILO
Constitution, the principles concerning the fundamental rights which are the subject of the
fundamental ILO Conventions, …
(2) Parties reaffirm their commitment to effectively implement in their laws and practice the
fundamental ILO Conventions contained in the ILO Declaration of Fundamental Principles and
Rights at Work of 1998, …
Furthermore, Article 291, (the so-called ‘non-regression clause’) requires the Parties not
to lower the levels of protection afforded in domestic environmental and labour laws, or to
waive or derogate from its labour or environmental legislation to encourage trade or
investment, referring to both the legal framework and implementation of the existing laws
– de jure and de facto protection (Orbie, van den Putte, and Martens, 2017).
7.2 Scope and approach
The scope of this analysis is defined in Task 12 of the Terms of Reference: to analyse,
using a variety of analytical tools, the impact of the implementation of the Trade Pillar (Part
IV) of the EU-Central American Association Agreement (EU-CA FTA) on human rights,
taking ‘a rights-based approach founded upon the specific legal obligations of the Parties
to the Agreement.’ It mentions several legal instruments, and, where relevant, customary
international law as a benchmark against which the impact of the implementation of the
Trade Pillar should be measured. Article 1(1) of the Agreement establishes the Universal
Declaration of Human Rights (UDHR) as a specific legal instrument binding on the Parties
within this Agreement (Bartels, 2005). The evaluation considers the human rights
obligations of the Parties set out in Article 1(1) of the Agreement (i.e., obligations under
the UDHR) as a standard against which the analysis is performed, supplementing the rights
set out in the UDHR with references to the Charter of Fundamental Rights of the EU, core
international human rights treaties, relevant regional human rights instruments, and where
relevant, domestic, and customary international law.
It is beyond the scope of the evaluation to consider whether the Parties to the Agreement
are complying with the essential elements clause, which is contained in Part I of the
Agreement, or whether action should be taken under the non-execution clause, which is
174
As per rules set out in the Articles on the Responsibility of States for Internationally Wrongful Acts
(ARSIWA) annexed to the UNGA Res. 56/83, Un Doc. A/Res./56/83, 12 Dec. 2001.
214
contained in Part V of the Agreement. Implementation of the specific provisions of the TSD
Chapter are covered in the analysis under Task 11.1 of the Terms of Reference (Chapter 6
above).
Relying on the recognised methodology (UN, 2011; European Commission, 2015), the
analysis entails several steps and focuses on the specific human rights that may have been
affected by trade and trade-related measures of the EU-CA FTA and the ability of the state
parties to fulfil or progressively realise their human rights obligations. To address the
challenge of isolating the EU-CA FTA impact from other factors that could have affected
the enjoyment of a human right over time, a multi-pronged approach is applied for each
of the prioritised human rights: the impact of the EU-CA FTA is analysed based on the legal
provisions, results of the economic modelling, analysis of the pre-existing vulnerabilities
regarding human rights, literature review, relevant indicators, expert opinions, stakeholder
inputs, and corroborating and cross-validating the findings of each of the method. Figure
7-1. summarises the approach to the analysis in a schematic way.
Figure 7-1. Methodology of the human rights analysis
Source: own compilation
The causal chain analysis (DG Trade, Handbook) specifies that starting from trade
measures and economic effects (e.g., more production in some sectors, more exports or
imports in volume or value terms) as well as social and environmental impacts (e.g., effects
for wages, employment, poverty, and CO2 emissions) likely effects on each of the
sustainability pillars, including human rights, need to be determined. The causal chain
analysis starts from pre-existing vulnerabilities regarding human rights determined in step
1 of the analysis. Then, in step 2, relying on trade measures included in the trade
agreement and vulnerabilities determined in step 1 of the analysis, various sources of
information (literature review, economic analysis results, stakeholder and local expert
inputs, statistical information, human rights indicators) are used to identify what specific
rights could have been affected by the EU-CA FTA. At this stage, economic model results
that already disentangle the impact of the Agreement, are used, together with other
relevant economic data from the economic analysis. Step 3 represents the detailed
analysis of pre-selected human rights and a focused analysis of pre-selected case studies
approved by the European Commission. For a large part of the analysis, data is not or only
partially available, which is why we avail to qualitative assessments and extensive
interviews. Stakeholder consultations are of particular importance for the human rights
analysis and all steps of the analysis are adjusted based on the feedback received during
215
interviews with various stakeholders. In step 4, conclusions of the analysis are provided,
together with policy recommendations, also taking into account recommendations provided
by various stakeholders. Along all the steps of the analysis (horizontally), we focus (to the
degree possible) on how the EU-CA FTA could have affected vulnerable population groups.
Altogether, this multi-pronged causal chain approach of quantitative, statistical, qualitative
and interview data, provides for the best-possible analysis given the existing data
limitations.
The analysis focuses primarily on the impact of the EU-CA FTA on human rights in CA6
countries. Due to the asymmetry in the economic size between the EU and the CA partner
countries, the results of the economic modelling show that the EU-CA FTA has had a
significantly larger relative economic impact on CA partner countries than on the EU. This
also implies that the impacts on human rights (via causal chain analysis originating in the
economic effects) accrue primarily in the CA6 countries and not in the EU.
The following sections present the results of the various steps of the analysis: 7.2 entails
the analysis of human rights-related provisions in the EU-CA AA. Human rights profiles of
the Parties are provided in Annex E1. Section 7.4 presents the results of the screening and
scoping exercise, which aims at establishing the cause-effect relationship between the EU-
CA FTA and human rights. Section 7.5 contains a detailed assessment of selected rights.
Finally, section 7.6 concludes the analysis and provides policy recommendations.
7.3 Step 1: Human rights profiles of the Parties
Human rights profiles have been prepared for each of the partner countries in Central
America and the EU. The profiles constitute Step 1 of the analysis and contain (1)
international legal obligations of the Parties regarding human rights, (2) a summary of the
respective national human rights framework, and (3) a summary of implementation issues.
Particular attention is given to the position of specific vulnerable groups. For a clear
overview, obligations of all partner countries – in terms of international human rights treaty
ratifications – are presented in one table (Table E1-1 in Annex E1). Detailed human rights
profiles can be found in Annex E1.
The human rights profiles aim to (1) establish the international human rights obligations
and set the scene regarding the enjoyment of the relevant human rights in the partner
countries, identifying conditions of stress and vulnerability over the evaluation period (from
2009 till 2019); and (2) allow for a targeted assessment of the human rights impacts of
the EU-CA FTA. Potential links to the Agreement are not included in the profiles. The
analysis is based on literature review and relevant indicators.
7.4 Step 2: Screening and scoping
Using a multi-pronged approach, the screening and scoping exercise is aimed at identifying
specific human rights for a detailed assessment of the effect of the Trade Pillar. The human
rights presented in country Tables are defined as set out in the Universal Declaration of
Human Rights (binding on the Parties to the Agreement via the human rights clause) with
references to other relevant human rights instruments (the International Covenant on Civil
and Political Rights, the International Covenant on Economic, Social and Cultural Rights,
ILO fundamental Conventions and other international and regional treaties and protocols).
Results of the screening exercise are presented per country/partner to the Agreement.
Each table lists, as per EC Guidelines (European Commission, 2015): (1) specific rights
that are likely to have been affected as a result of the Trade Pillar; (2) references to these
rights in the legal text of the EU-CA FTA; (3) a short description of the possible impact
from the activities under the Trade Pillar, assessed based on the evidence from relevant
statistical data, results of the economic modelling, literature review, expert opinions and
preliminary stakeholder consultations; (4) kind of impact – directly or indirectly attributed
to the measures under the Trade Pillar; (5) scale of the impact – minor or major; (6)
population groups affected by the Trade Pillar. Note that the rights for which no evidence
was found regarding the impact of the Trade Pillar, are not presented in the country Tables.
216
In line with the economic modelling results that focus specifically on the impact of the EU-
CA FTA, the overall impact on human rights is also considered to be minor. Only at sector
level, we identify a minor/major impact for selected human rights. Whether an impact is
major, or minor is based on the ‘causal chain’ methodology, linking social, human rights
and environmental effects to economic changes in the production structure. In the case of
Central America, given the baseline scenario assuming that Costa Rica and Panama would
have graduated from their GSP arrangements in case there was no trade agreement in
place while the other four (Honduras, El Salvador, Nicaragua, and Guatemala) would have
continued their access to the EU market under GSP+, the EU-CA FTA effect is much more
substantial for Costa Rica and Panama (that would trade with the EU otherwise under MFN
terms) than for the remaining four countries. This in turn has also an impact on the scale
of the effect for human rights. Moreover, pre-existing vulnerability, and availability of
effective mechanisms to mitigate even small shocks are considered in evaluating the
minor/major degree of the impact.
The country tables below present an overview of the rights selected as likely to have been
affected by (trade) measures under the EU-CA FTA.
217
Ex post evaluation of the implementation of part IV of the Association Agreement (Trade Pillar) between the EU and its Member States and Central America – Final Report
Costa Rica
Human Right/ References Possible impact Kind of Scale of Population
normative framework in the EU-CA impact impact groups affected
FTA
Freedom from discrimination TSD Chapter, Gender pay gap: 7.8% (2019)a) Direct Minor Migrant workers
- UDHR, Art. 2 Art. 286 Migrants: 521,000 (2020)b) (highest number of migrants in CA) Indigenous
- ICCPR, Art. 26
- ILO Conventions 100 & 111 Indigenous peoples: 2.4% of the total populationc) peoples
- Protocol of San Salvador, Art. 3 Increased competition could prompt companies to use temporary contracts as a means to Women
cut costs, affecting the rights of vulnerable population groups. Law prohibits discrimination
and government generally effectively enforces related laws. Incidents of violations are
reported in the literature, pointing to vulnerability of migrant workers in agricultural sectors
(Lorio, 2015) and indigenous peoples (Bananalink, 2021).
Right to work, to free choice TSD Chapter, Results of the econometric analysis show that due to the EU-CA FTA, employment increased Direct Minor Workers in
of employment, right to just Art. 286 by 8-9% in the vegetables, fruit and nuts (VFN) and sugar sectors and decreased by 2-3% overall, affected sectors
and favourable conditions of in such sectors as manufacture of pharmaceuticals, rubber and plastic products, electronic possibly
work Title II, Ch. 1, products and electrical equipment, and services, affecting workers employed in these major in
- UDHR, Art.23, 24 Art. 83 sectors.d) sectors
- ICESCR, Art. 6 & 7
- Protocol of San Salvador, Art. 6 & 7 Increased competition could prompt companies not to rely on international standards
- CFR, Art. 15 & 31 Title III, regarding working conditions in order to save costs (e.g., overtime, wages and safe working
- CEDAW, Art. 11 Establishment conditions). Literature review and stakeholder inputs point to both negative and positive
- CRPD, Art. 27 Chapter changes in the agricultural sectors and fisheries (Lorio, 2015; Oxfam, 2016; Surcos, 2015;
Alfaro & Webb, 2019; CNV Internationaal, 2021a).
Right to freedom of see above The freedom of association and the right to collective bargaining could come under pressure Direct Minor Workers in
association, incl. the right to from increased levels of foreign and domestic competition that forces companies to cut costs banana and
form and join trade unions in order to remain in business. Challenges in organising in the pineapple and banana sectors pineapple
- UDHR, Art. 20 have been reported over the evaluation period (Oxfam, 2016a; Oxfam, 2018; Bananalink, sectors
- ICCPR, Art. 21, 22
- CFR, Art. 12 2021; Alfaro & Webb, 2019). However, due to reforms and active work of trade unions in
- ILO Conventions 87& 98 this sector (e.g., Sndicato de Trabajadores de Plantaciones Agrícolas (SITRAP)), situation has
- ACHR, Art. 15, 16 improved (see also related sections in social analysis).
- Protocol of San Salvador, Art. 8
Right to water Title II, Ch. 1, Econometric analysis shows increase in production in such water-intensive sectors as sugar Indirect Minor Affected
- ICESCR, Art. 11 Art. 83 and vegetables and fruitd) which could affect water availability and water quality. Literature overall, communities
- CESCR General Comment No. 15
review points to cases of contamination of rivers, aquifers, wells that have been attributed possibly
Title III, to the expansion of pineapple sector and its extensive use of agrochemicals (CIDH, 2015). major in
Establishment Link to the FTA is studied in detail in the environmental analysis. specific
Chapter areas
Sources: a) Statistics of ILO (2020) b) statistics of United Nations, Department of Economic and Social Affairs, Population Division (2020); c) IWGIA, 2021; d) Results of the econometric analysis; e) Global
Slavery Index 2016 & 2018.
El Salvador
FTA
Freedom from discrimination TSD Chapter, Gender pay gap: 4.6% (2019)a) Direct Minor Women
Art. 286 Migrants: 42,800 (2020)b) Indigenous
Indigenous peoples: 0.2% of the total populationc) peoples
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FTA
- UDHR, Art. 2 Increased competition could prompt companies to use temporary contracts as a means to Persons with
- ICCPR, Art. 26
- ILO Conventions 100 & 111 cut costs, affecting the rights of vulnerable population groups. Discrimination in employment disabilities
- Protocol of San Salvador, Art. 3 is prohibited by law in El Salvador, but rights of vulnerable peoples regarding discrimination
are not effectively protected by the government. Literature review and stakeholder
consultations indicate vulnerability of women, indigenous peoples and persons with
disabilities (Organización de Mujeres Salvadoreñas por la Paz, 2016 & 2017). Due to the
limited overall impact of the FTA, however, no major impact is likely.
Right to work, to free choice TSD Chapter, Results of the economic modelling show that because of the EU-CA FTA, employment Direct Minor Workers in
of employment, right to just Art. 286 increased in the sugar sector by 2.9%. However, data on the number of jobs in 2019 (50,000) affected sectors
and favourable conditions of and 2012 (48,000), in combination with the data on the share of sugar exports to the EU
work Title II, Ch. 1, over the evaluation period, does not suggest a major impact of the FTA in this sector.
- UDHR, Art.23, 24 Art. 83 Employment changes in other sectors are negligible (from -0.3% to 0.1%)d)
- Protocol of San Salvador, Art. 6 & 7
- CFR, Art. 15 & 31 Title III,
- CEDAW, Art. 11 Establishment
- CRPD, Art. 27 Chapter
Freedom from slavery and see above Due to increased competitive pressure and the need to cut costs, companies could turn to Direct Minor Children
forced labour (incl. child forced labour practices.
labour) Estimated number of people living in modern slavery has decreased from 18,100 in 2016 to
absolute right 16,000 in 2018.e) The official rate of child labour in 2020 was 6.6% (Ministerio de Economia,
- UDHR, Art.4
2021). Some stakeholders report incidences of child labour in the coffee, maize and fishing
- ICCPR, Art. 8
- ILO Conventions 29 & 105 sectors (Naciones Unidas, 2016; ILO & DIGESTYC, 2015; United Nations, 2016e & 2018b;
- CFR, Art. 5 US Department of State, 2019; TeleSUR, 2015). Economic results do not suggest a major
impact of the Agreement.
- ACHR, Art. 6
association, incl. the right to from increased levels of foreign and domestic competition that forces companies to cut costs affected sectors
form and join trade unions in order to remain in business. Pre-existing situation regarding freedom of association is
- UDHR, Art. 20 vulnerable in El Salvador. ITUC reports pressure to refrain from creating unions on
- CFR, Art. 12 agricultural workers (ITUC, 2020). There are six active cases regarding freedom of
- ILO Conventions 87 & 98 association at the ILO.f) Employment changes established by the economic modelling,
- ACHR, Art. 15, 16 however, do not suggest a major impact of the EU-CA FTA (see above).
Right to water Title II, Ch. 1, Econometric analysis indicates a minor increase in production in such water-intensive sector Indirect Minor Affected
- ICESCR, Art. 11 Art. 83 as sugar (+2.3%) which could affect water availability and water quality.d) El Salvador is part overall, communities
of the Dry Corridor, a region in Central America that suffers from intense irregular droughts possibly
Title III, so even minor shocks may cause a major impact, especially locally. Some stakeholders report major in
Establishment lack of environmental assessment practice and that fumigation and use of pesticides affect specific
Chapter water quality of communities adjacent to production sites (Alianza por la Solidaridad, 2020). areas
Link to the FTA is studied in detail in the environmental analysis.
Right to the enjoyment of Title II, Ch. 1, Economic activities that pollute environment and water could have an impact on human Indirect Minor Communities
the highest attainable Art. 83 health. Sugarcane production is characterised by high use of pesticides and toxic fumes from overall, adjacent to
standard of physical and cane burning. Some stakeholders report that air and water quality have been very unhealthy possibly production sites/
mental health major in plantations
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FTA
- UDHR, Art. 25 Title III, for communities living in proximity to production sites (Guevara, 2019). Impact of the FTA specific
- ICESCR, Art. 12, CESCR GC No. 14
- CFR, Art. 35 Establishment on pollution levels is studied in the environmental analysis. areas
- Protocol of San Salvador, Art. 10 Chapter
- CEDAW, Art. 11,12
- CRPD, Art. 25
- CRC, Art. 24
- ICMW, Art. 28
- CERD, Art. 5
- Belém do Pará Convention, Art. 4
Sources: a) Statistics of ILO (2020) b) statistics of United Nations, Department of Economic and Social Affairs, Population Division (2020); c) Minority Rights Group International (2017); d) Results of the
econometric analysis; e) Global Slavery Index 2016 & 2018; f) ILO country profile information.
Guatemala
normative framework in the EU-CA impact impact groups
FTA affected
Freedom from discrimination TSD Chapter, Gender pay gap: 12% (2019)a) Direct Minor Indigenous
- UDHR, Art. 2 Art. 286 Migrants: 84,300 (2020)b) peoples
- ICCPR, Art. 26
- ILO Conventions 100 & 111 Indigenous peoples: 45% of the total populationc) Migrant
- Protocol of San Salvador, Art. 3 Increased competition could prompt companies to use temporary contracts as a means to workers
cut costs, affecting the rights of vulnerable population groups. Law explicitly prohibits Women
discrimination in Guatemala, but it has not been effectively enforced. Literature review and
stakeholder consultations indicate vulnerability of indigenous peoples, migrant workers and
women (Romero & Orantes, 2018; IACHR, 2015; CIDH, 2020; ATRAHDOM, 2015). Due to
the limited overall impact of the FTA, however, no major impact is likely.
of employment, right to just Art. 286 increased in the sugar sector by almost 2% and decreased in the motor vehicle sector by overall, affected
and favourable conditions of 2%, affecting workers from these sectors.d) possibly sectors
work Title II, Ch. 1, Increased competition could prompt companies not to rely on international standards major in
- UDHR, Art.23, 24 Art. 83 regarding working conditions in order to save costs. Advocacy groups estimate that palm oil &
- Protocol of San Salvador, Art. 6 & 7 majority of workers in rural areas who engage in daylong employment in the agricultural sugar
- CFR, Art. 15 & 31 Title III, sector do not receive minimum wages, overtime pay, benefits, or social security allocations sectors
- CEDAW, Art. 11 Establishment required by law (OISS, 2018; Yagenova, 2019). Particular vulnerability has been identified
- CRPD, Art. 27 Chapter for the workers in the sugar sector and palm oil sector (CNV Internationaal 2021; 2021a).
Numerous cases of chronic renal disease have been reported amongst sugarcane workers
(Winkler, 2018; CNV Internationaal, 2021).
Freedom from slavery and see above Due to increased competitive pressure and the need to cut costs, companies could turn to Direct Minor Indigenous
forced labour (incl. child forced labour practices. overall, peoples
labour) Estimated number of people living in modern slavery has decreased substantially from possibly Migrant
absolute right 138,100 in 2016 to 47,000 in 2018.e) The official rate of child labour in 2017 was 9.3% major in workers
- UDHR, Art.4
(ENEI, 2017). Indigenous children account for more than half of child laborers (ENEI, 2019), palm oil & Women
- ICCPR, Art. 8
- ILO Conventions 29 & 105 most working in agriculture. Stakeholders report that child labour and forced labour in the sugar Children
- CFR, Art. 5 palm oil and sugar sectors are of particular concern (Hertzler, 2017; ActionAid, 2020; CNV sectors
Internationaal, 2021; 2021a). Vulnerability for forced labour has also been identified for
- ACHR, Art. 6
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normative framework in the EU-CA impact impact groups
FTA affected
indigenous peoples, migrant workers, women and informal workers (CNV Internationaal
2021; 2021a), but direct link to the Agreement could not have been identified.
association, incl. the right to from increased levels of foreign and domestic competition that forces companies to cut overall, affected
form and join trade unions costs in order to remain in business. possibly sectors
- UDHR, Art. 20 Stakeholders report threats and violence against trade unionists and labour activists. Anti- major in
- CFR, Art. 12 trade union practice is common (company-supported unions are created to counter legally palm oil &
- ILO Conventions 87 & 98 established unions, blacklisting of union organisers, deliberate failure to register unionised sugar
- ACHR, Art. 15, 16 workers for certain government benefits) (REDLG, 2019; ITUC, 2019; US Department of sectors
State, 2020c). Only one trade union has been reported in the sugarcane industry (Labardor
et al, 2017; CNV Internationaal, 2021). There are 10 active cases against Guatemala at
the ILO Freedom of Association Committee.f)
Right to water Title II, Ch. 1, Economic modelling shows increase in production in such water-intensive/polluting sectors Indirect Minor Affected
- ICESCR, Art. 11 Art. 83 as sugar and palm oil which could affect water availability and water quality.d) Guatemala overall, communities
is part of the Dry Corridor, a region in Central America that suffers from intense irregular possibly
Title III, droughts. Some stakeholders report that agro-industrial activities caused by monocultures, major in
Establishment especially sugarcane and palm oil, have had detrimental effects for water access and water specific
Chapter quality of the poorest peasant communities (PBI Guatemala, 2020; Cabanas, 2017; Oxfam, areas
2017; Naciones Unidas, 2019; CNV Internationaal, 2021). Link to the FTA is studied in
detail in the environmental analysis.
Indigenous peoples’ Title II, Ch. 1, Guatemalan legislation does not adequately regulate indigenous people’s rights to land or Indirect Minor Indigenous
collective rights (land rights, Art. 83 their right to FPIC (IACHR, 2015). Increased production of goods that require vast land as overall, peoples
right to food, right to FPIC) Title III, a resource could result in large scale agriculture in indigenous territories and affect their possibly Peoples of
- UNDRIP, Arts. 3, 19, 25 & 26 Establishment rights. Some stakeholders report related violations in the palm oil and sugar sectors major in Mayan descent
- ILO Convention No. 169175
- Jurisprudence of IACHR176 Chapter (Yagenova, 2020; CNV International 2021; Xiloj Cuin, 2020). agriculture
the highest attainable Art. 83 health. Sugarcane production is characterised by high use of pesticides and toxic fumes overall, adjacent to
standard of physical and from cane burning. It has been reported that air and water quality have been very possibly production
mental health Title III, unhealthy for communities living in proximity to production sites (Moreno Alcojor et al, major in sites/
- UDHR, Art. 25 Establishment 2019; Source International, 2018; CNV Internationaal, 2021). Impact of the FTA on specific plantations
- ICESCR, Art. 12, CESCR GC No. 14 Chapter pollution levels is studied in the environmental analysis. areas
- CFR, Art. 35
- CEDAW, Art. 11,12
- CRPD, Art. 25
- CRC, Art. 24
- ICMW, Art. 28
- CERD, Art. 5
175
Other international human rights instruments, including the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights, and the International
Convention on the Elimination of All Forms of Racial Discrimination have implicit references to indigenous peoples’ rights to lands, territories and resources.
176
The Constitutional Court in Guatemala has declared that international human rights treaties and the jurisprudence of the Inter-American Court of Human Rights, must be considered an integral part of the
Constitution, by way of recognition of the Constitutionality block doctrine that was developed by the Inter-American Court of Human Rights.
221
Slavery Index 2016 & 2018; f) ILO country profile information.
Honduras
FTA
Freedom from discrimination TSD Chapter, Gender pay gap: 13.7% (2019)a) Direct Minor Indigenous
- ICCPR, Art. 26
- ILO Conventions 100 & 111 Indigenous peoples: 9% of the total populationc) Garífuna &
- Protocol of San Salvador, Art. 3 Increased competition could prompt companies to use temporary contracts as a means to persons of
cut costs, affecting the rights of vulnerable population groups. Law explicitly prohibits African descent
discrimination in Honduras, but it has not been effectively enforced. Literature review and Women
stakeholder consultations indicate vulnerability of indigenous peoples, garífuna, persons of Persons with
African descent, women and persons with disabilities (CEPAL & UNFPA, 2020; CIDH, 2015a; disabilities
Fundación Friedrich Ebert, 2016). Due to the limited overall impact of the FTA, however, no
major impact is likely.
of employment, right to just Art. 286 increased in the sugar sector by approximately 5%. Employment changes in other sectors overall, various sectors
and favourable conditions of are very minor (from 0.1% to -0.7%).d) possibly
work Title II, Ch. 1, Increased competition could prompt companies not to rely on international standards major in
- UDHR, Art.23, 24 Art. 83 regarding working conditions in order to save costs (e.g. overtime, wages and safe working sugar &
- Protocol of San Salvador, Art. 6 & 7 conditions). Some stakeholders report violations with respect to women (CIDH, 2015) and coffee
- CFR, Art. 15 & 31 Title III, workers in the coffee and palm oil sectors (Fundación para la Paz y la Democracia, 2019; sector
- CEDAW, Art. 11 Establishment CNV Internationaal, 2021a).
Freedom from slavery and See above Due to increased competitive pressure and the need to cut costs, companies could turn to Direct Minor Indigenous
forced labour (incl. child forced labour practices. Estimated number of people living in modern slavery has increased overall, peoples
labour) from 23.800 people in 2016 to 30.000 in 2018.e) Honduras has the highest levels of child possibly Garífuna &
absolute right labour in Central America (10.8% in 2017, with 67% of them working in rural areas).g These major in persons of
- UDHR, Art.4
areas coincide with where Garifuna communities reside and are prevalent in agricultural sugar & African descent
- ICCPR, Art. 8
- ILO Conventions 29 & 105 sectors, sugar cane plantations, fishing, shrimp and lobster supply chains, which include coffee Women
- CFR, Art. 5 family-level artisanal and larger scale operations (OIT, 2017; Agencia EFE, 2020; Zepeda sector Children
Maradiaga, 2019; El Heraldo, 2019; CNV Internationaal, 2021a). No direct link between
- ACHR, Art. 6
forced labour and the Agreement could have been identified.
association, incl. the right to from increased levels of foreign and domestic competition that forces companies to cut costs overall, affected sectors
form and join trade unions in order to remain in business. possibly
- UDHR, Art. 20 Unions have raised concerns about the use of temporary contracts and part-time major in
- CFR, Art. 12 employment, suggesting that employers used these mechanisms to prevent unionisation and sugar &
- ILO Conventions 87 & 98 avoid providing full benefits (ITUC, 2020; Red contra la Violencia Antisindical, 2019). There coffee
- ACHR, Art. 15, 16 are five active cases against Honduras at the ILO Freedom of Association Committee. f) sector
Indigenous peoples’ Title II, Ch. 1, Increased production of goods that require vast land as a resource could result in large scale Indirect Minor Indigenous
collective rights (land rights, Art. 83 agriculture in indigenous territories and lack of consultation with indigenous communities. overall, peoples
right to food, right to FPIC) Results of the econometric analysis and trade data on exports of some products (palm oil possibly
- UNDRIP, Arts. 3, 19, 25 & 26 and sugar) show increase in production that require land as a resource,d) which could affect major in
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FTA
- ILO Convention No. 169177 Title III, rights of indigenous peoples to lands and their right to FPIC. Some violations have been sugar &
- Jurisprudence of IACHR
Establishment reported in the palm oil and banana sectors (IACHR, 2019). palm oil
Chapter sectors
Right to water Title II, Ch. 1, Econometric analysis shows increase in bilateral trade of vegetable oils (e.g. palm oil) Indirect Minor Indigenous
- ICESCR, Art. 11 Art. 83 between the EU and Honduras. Palm oil production affects water availability and water overall, peoples
quality. Honduras is part of the Dry Corridor associated with intense irregular droughts. possibly Garífuna
Title III, Stakeholders report water issues linked to palm oil production (Guevara & Frazier, 2019; major in Rural
Establishment Escobar, 2018). Link to the FTA is studied in detail in the environmental analysis. palm oil communities
Chapter sector
Sources: a) Statistics of ILO (2020) b) statistics of United Nations, Department of Economic and Social Affairs, Population Division (2020); c) Minority Rights Group International (2017); d) Results of the
econometric analysis; e) Global Slavery Index 2016 & 2018; f) ILO country profile information; g) US Department of State, the 2019 Report on Child Labour in Honduras.
Nicaragua
FTA
Freedom from discrimination TSD Chapter, Gender pay gap: 20% (2020)a) Direct Minor Ind. peoples
- UDHR, Art. 2 Art. 286 Migrants: 42,200 migrants (2020).b) Persons of
- ICCPR, Art. 26
- ILO Conventions 100 & 111 Indigenous peoples: 3.5% of the total populationc) African descent
cut costs, affecting the rights of vulnerable population groups. Law explicitly prohibits
discrimination in Nicaragua, but it has not been effectively enforced. Literature review and
stakeholder consultations indicate vulnerability of women and indigenous women (Banco
Interamericano de Desarrollo, 2020). Due to the limited overall impact of the FTA, however,
no major impact is likely.
of employment, right to just Art. 286 increased in the sugar sector by approximately 15% and decreased in the manufacture of overall, affected sectors
and favourable conditions of electric equipment (by approximately 2%). Employment changes in other sectors are very possibl
work Title II, Ch. 1, minor (from 0.4% to -1.6%). d) However, based on the share of sugar exports to the EU in y major
- UDHR, Art.23, 24 Art. 83 total sugar exports from Nicaragua, the estimated employment increase seems to be an in
- Protocol of San Salvador, Art. 6 & 7 overestimation. sugar
- CFR, Art. 15 & 31 Title III, Increased competition could prompt companies not to rely on international standards sector
- CEDAW, Art. 11 Establishment regarding working conditions in order to save costs. Stakeholders report numerous labour
- CRPD, Art. 27
Chapter rights violations: salaries below minimum wage, dependent on meters or tons of cane cut
and not on hours worked; excessively long hours, no overtime pay, no social security (CNV
Internationaal, 2021).
Freedom from slavery and see above Due to increased competitive pressure and the need to cut costs, companies could turn to Direct Minor Workers in
forced labour (incl. child forced labour practices. Estimated number of people living in modern slavery decreased from affected sectors
labour) 24.600 persons in 2016 to 16.000 persons in 2018.e) Child labour statistics is available only
absolute right for 2012 (47.7%) (US Department of State, 2019a). Child labour is reportedly common in
177
Other international human rights instruments, including the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights, and the
International Convention on the Elimination of All Forms of Racial Discrimination have implicit references to indigenous peoples’ rights to lands, territories and resources.
223

FTA
- UDHR, Art.4 the dairy, banana tobacco, palm oil, coffee, rice and sugarcane sectors (Nicaragua Investiga,
- ICCPR, Art. 8
- ILO Conventions 29 & 105 2020; US Department of State, 2020f; Es Global, 2018; Lorio, 2015; La Isla Foundation,
- CFR, Art. 5 2015). Stakeholders indicated however that child labour ‘is generally not a problem’.
- ICESCR, Art. 6, CESCR GC No. 18 Nicaraguan Sugar Agroindustry stated that there is no form of labour exploitation present in
- ACHR, Art. 6
the sugar sector, including forced labour and child labour (on file).
form and join trade unions in order to remain in business. Enjoyment of the right to freedom of association is
- UDHR, Art. 20 deteriorating because of repercussions against protesting workers and increasing obstacles
- CFR, Art. 12 to union registration and operation which are linked to political situation in the country
- ILO Conventions 87 & 98 (Ergon, 2019, ITUC, 2017).
- ACHR, Art. 15, 16
Right to water Title II, Ch. 1, Economic modelling shows increase in production in such water-intensive sector as sugar d) Indirect Minor Indigenous
- ICESCR, Art. 11 Art. 83 which could affect water availability and water quality. Nicaragua is part of the Dry Corridor, overall, peoples
a region that suffers from intense irregular droughts. Some stakeholders state that intensive possibl affected
Title III, use of pesticides and fertilisers in sugar cultivation salinise the fertile soil and pollute water y major communities
Establishment resources, including groundwater (Alianza por la Solidaridad, 2020). Diversion of rivers has in
Chapter been reported. It is also reported that communities have to buy water for their consumption. specific
Rural communities denounce that they cannot fish because of contaminated rivers, lagoons areas
and lakes (Alianza por la Solidaridad, 2015; ONGAWA, 2015). Nicaraguan Sugar Agroindustry
stated that water that is not used in the mills goes either into the Pacific Ocean or the Lake
of Nicaragua, and efforts are made to optimise the use of water and protect water resources
(on file). Link to the FTA is studied in detail in the environmental analysis.
the highest attainable Art. 83 health. Sugarcane production is characterised by high use of pesticides and toxic fumes from overall, adjacent to
standard of physical and cane burning. It has been reported that air and water quality have been very unhealthy for possibl production sites/
mental health Title III, communities living in proximity to production sites (CNV Internationaal, 2021). Impact of the y major plantations
- UDHR, Art. 25 Establishment FTA on pollution levels is studied in the environmental analysis. in
- ICESCR, Art. 12, CESCR GC No. 14 Chapter specific
- CFR, Art. 35
- Protocol of San Salvador, Art. 10 areas
- CEDAW, Art. 11,12
- CRPD, Art. 25
- CRC, Art. 24
- ICMW, Art. 28
- CERD, Art. 5
Sources: a) WEF, the Global Gender Gap Index (2020) b) statistics of United Nations, Department of Economic and Social Affair s, Population Division (2020); c) Minority Rights Group International (2017); d)
Results of the econometric analysis; e) Global Slavery Index 2016 & 2018.
224
Panama
FTA
Freedom from discrimination TSD Chapter, Gender pay gap: 9.8% (2019)a) Direct Minor Indigenous
- ICCPR, Art. 26
- ILO Conventions 100 & 111 Indigenous peoples: 12% of the total populationc) Migrants
cut costs, affecting the rights of vulnerable population groups. Despite legal protections,
discrimination in employment occurred. Literature review and stakeholder consultations
indicate vulnerability for migrant workers, indigenous peoples and women (MITRADEL, 2016;
Iniciativa de Paridad de Género Panama, 2018; US Department of State, 2020e).
Right to work, to free choice TSD Chapter, Results of the economic modelling show that because of the EU-CA FTA, employment Direct Minor Indigenous
of employment, right to just Art. 286 increased in sectors vegetables and fruit (16%), vegetable oil (2%) and textiles (3%). overall, peoples
and favourable conditions of Employment changes in other sectors are very minor (from 1.7% to -1.9%).d) possibl Migrants
work Title II, Ch. 1, Increased competition could prompt companies not to rely on international standards y major Women
- UDHR, Art.23, 24 Art. 83 regarding working conditions in order to save costs. Labour violations have been reported in in some
- Protocol of San Salvador, Art. 6 & 7 the coffee sector (Lorenzo, 2016). sectors
- CFR, Art. 15 & 31 Title III,
- CEDAW, Art. 11 Establishment
form and join trade unions in order to remain in business. Freedom of association is reported to have been violated with
- UDHR, Art. 20 respect to the workers of the Panama Canal Authority (IACHR, 2020). There are four active
- CFR, Art. 12 cases against Panama at the ILO Freedom of Association Committee.f)
- ILO Conventions 87 & 98
- ACHR, Art. 15, 16
Right to water Title II, Ch. 1, Economic modelling shows increase in production in such water-intensive sector as Indirect Minor Affected
- ICESCR, Art. 11 Art. 83 vegetables and fruit (e.g. pineapples) which could affect water availability and water quality. overall, communities
Some stakeholders report issues linked to the impact of agriculture on water (Rodríguez et possibl
Title III, al, 2018; Garcimartín, 2020). Link to the FTA is studied in detail in the environmental y major
Establishment analysis. in some
Chapter areas
Slavery Index 2016 & 2018; f) ILO country profile information.
225
Based on the screening and scoping results and in line with the Terms of Reference, the
following four human rights (issues) are selected for further analysis are:
- The right to work and the right to just and favourable conditions of work (for
Costa Rica, Guatemala, Honduras, Nicaragua and Panama);
- Indigenous peoples’ rights (in Guatemala and Honduras)
- Freedom of association in sectors involved in trade with the EU (for Guatemala,
Honduras and El Salvador) – presented as a separate case study (No. 7), with a
summary of findings provided in the social analysis (section 4.7) and below, in section
7.5.3;
- Child labour and children’s rights (in El Salvador, Guatemala and Honduras) –
presented as a separate case study (No. 9) with a summary of findings provided in the
social analysis (section 4.5) and below, in section 7.5.4.
Further impacts that could stem from water use and pollution issues (that are related to
human rights like the right to water and right to health) are reported in the environmental
section of the report to avoid duplication.
7.5 Step 3: Detailed analysis of the EU-CA FTA’s impact on selected human rights
7.5.1 The right to work and just and favourable conditions of work
International legal framework

The right to work is a fundamental right recognised in various international legal
instruments. The Universal Declaration of Human Rights recognises the right to work in
Article 23, which states:
(1) Everyone has the right to work, to free choice of employment, to just and favourable
conditions of work and to protection against unemployment.
(2) Everyone, without any discrimination, has the right to equal pay for equal work.
(3) Everyone who works has the right to just and favourable remuneration ensuring for himself
and his family an existence worthy of human dignity, and supplemented, if necessary, by
other means of social protection.
(4) Everyone has the right to form and to join trade unions for the protection of his interests.
The International Covenant on Economic, Social and Cultural Rights (ICESCR) covers the
right to work more comprehensively than any other instrument. Article 6(1) states:
The States Parties to the present Covenant recognize the right to work, which includes the right
of everyone to the opportunity to gain his living by work which he freely chooses or accepts and
will take appropriate steps to safeguard this right.
General Comment No. 18 of the Committee on Economic, Social and Cultural Rights
(CESCR) states that “the right to work, as guaranteed in the ICESCR, affirms the obligation
of States parties to assure individuals their right to freely chosen or accepted work,
including the right not to be deprived of work unfairly”. ILO Convention No. 122 concerning
employment policy addresses “full, productive and freely chosen employment”. As such, in
a broad sense, the right to work implies the right to enter employment and to earn a living
from work in one’s own choice and the right to protection from unemployment. In
progressively realising this right, states have an obligation to ensure appropriate measures
to develop an enabling environment for productive employment opportunities: “stimulating
economic growth and development, raising levels of living, meeting manpower
requirements and overcoming unemployment and underemployment” (Article 1(1) ILO
Convention No. 122). Paragraph 37 of CESCR General Comment No. 18 states that the
ICESCR “clearly imposes a duty on each State party to take whatever steps are necessary
to ensure that everyone is protected from unemployment and insecurity in employment…”
At a universal level, the right to work is also recognised in Article 11 (1)(a) of the
Convention on the Elimination of All Forms of Discrimination against Women (CEDAW),
Article 27 of the Convention on the Rights of Persons with Disabilities (CRPD), Article 5(e)(i)
of the International Convention on the Elimination of All Forms of Racial Discrimination
(ICERD). At the regional level, the right to work is recognised in the Additional Protocol to
the American Convention on Human Rights in the Area of Economic, Social and Cultural
226
Rights (Protocol of San Salvador) (Article 6) and the EU Charter of Fundamental Rights
(Article 15).
In this analysis, the right to work is looked at from two points of view (1) stemming from
the normative content of the right to work, as the right to employment and the right to
protection against unemployment, and (2) stemming from the state obligation to
undertake continuous efforts to ensure full employment (increasing employment for its
citizens).
Closely connected to this right is the right to just and favourable conditions of work. Article
7 of the ICESCR states:
The States Parties to the present Covenant recognize the right of everyone to the enjoyment of
just and favourable conditions of work which ensure, in particular:
(a) Remuneration which provides all workers, as a minimum, with:
(i) fair wages and equal remuneration for work of equal value without distinction of any
kind, in particular women being guaranteed conditions of work not inferior to those
enjoyed by men, with equal pay for equal work;
(ii) a decent living for themselves and their families in accordance with the provisions
of the present Covenant;
(b) Safe and healthy working conditions;
(c) Equal opportunity for everyone to be promoted in his employment to an appropriate higher
level, subject to no considerations other than those of seniority and competence;
(d) Rest, leisure and reasonable limitation of working hours and periodic holidays with pay,
as well as remuneration for public holidays.
CESCR General Comment No. 23 further clarifies the normative content of the right to just
and favourable conditions of work and states that the list of fundamental elements stated
in Article 7 is non-exhaustive, also including such elements as freedom from harassment,
violence, paid parental leave, paternity, and others.
Next to that, the right to just and favourable conditions of work is also recognised in other
international and regional human rights treaties (provisions of CEDAW, CRPD, ICERD, the
Protocol of San Salvador and the EU Charter cited above) as well as in the ILO instruments,
e.g., Promotional Framework for Occupational Safety and Health Convention, 2006 (No.
187), the Occupational Safety and Health Convention, 1981 (No. 155), and its Protocol of
2002, and the Occupational Health Services Convention, 1985 (No. 161).
The analysis in this study looks at various elements of the right to just and favourable
conditions of work, depending on data availability and evidence from stakeholders.
All States-Parties to the Agreement have ratified the ICESCR and most of the other treaties
containing provisions regarding the right to work and the right to just and favourable
conditions of work (See ratification overview in Table E1-1, Table E1-2, and Table E1-3 in
Annex E1) and, therefore, accept their legal obligations with respect to these rights.
References to the right to work and right to just and favourable conditions of
work in the EU-CA FTA
Under Article 284, in the TSD Chapter of the Trade Pillar (Title VIII), the Parties “reaffirm
their commitment to achieving sustainable development”. In Article 286, with reference to
the 2006 Ministerial Declaration of the UN Economic and Social Council on Full Employment
and Decent Work, the Parties “recognise that full and productive employment and decent
work for all, which encompass social protection, fundamental principles and rights at work
and social dialogue, are key elements of sustainable development for all countries, and
therefore, a priority objective of international cooperation” and “reaffirm their will to
promote the development of macroeconomic policies in a way that is conductive to full and
productive employment and decent work for all, including men, women and young people,
with full respect for fundamental principles and rights at work under conditions of equity,
equality, security and dignity”.
227
National framework and implementation issues prior to the EU-CA FTA

In this section, national frameworks regarding the right to work and the right to just and
favourable conditions of work are presented to illustrate what mechanisms of protection
are available at the national level regarding these rights and what implementation issues
have been there prior to the EU-CA FTA. This information is relevant to provide insights
into baseline conditions of the enjoyment of the relevant rights in Central America and pre-
existing conditions of stress and vulnerability in relation to these rights (in line with the
Terms of Reference for Task 12).
Costa Rica
The Constitution of Costa Rica recognises the right to work in Article 56, which says that
the State shall guarantee “an honest and useful, duly remunerated occupation” and “the
right to free election of [a] job”. The Labour Code further regulates the rights and
obligations of employees and employers, including labour contracts, collective bargaining
agreements, salary and other labour aspects. It was updated in 2016 by the so-called
Labour Procedural Reform, reinforcing guarantees at the individual and collective levels
and on the right to strike. Article 74 of the Constitution and Article 11 of the Labour Code
state that rights acquired through work cannot be waived. Discrimination and harassment
at work is covered by the legislation adopted in 1995 - Costa Rica's Law against Workplace
Harassment and Discrimination (Ley contra el hostigamiento laboral y la discriminación).
The Ombudsman's Office (Defensoría de los Habitantes) has a Labour Affairs Directorate
that oversees, processes, and investigates labour-related complaints in the Costa Rican
public sector (Defensoría de los Habitantes de Costa Rica, not dated). Complaints from
both private and public sectors can be made to the Ministry of Labour and Social Security
(Ministerio de Trabajo y Seguridad Social, not dated). Next to that, there are also other
institutions and organisations that watch over the protection of labour rights of specific
population groups, e.g., the National Women's Institute (INAMU), the National Children's
Board (PANI), the National Council for Persons with Disabilities (CONAPDIS).
The national framework of Costa Rica indicates that it has strong institutions and a working
legislative order regarding labour rights, which is also confirmed in its ITUC rating (rating
2 – repeated violations of labour rights). 178 Issues regarding the right to work and just and
favourable conditions of work in the country before the EU-CA FTA included large number
of persons working in the informal economy, low labour participation rate of women, wage
disparities between men and women, the concentration of women in low-paid jobs,
precarious situation of migrant workers, low wages received by the indigenous population,
violations of worker’s rights in agricultural sectors, and unequal access to the labour
market, affecting vulnerable population groups negatively (United Nations, 2009; 2009a;
2014 & 2014e).
El Salvador
The Constitution of El Salvador recognises the right to work in Articles 2 and 37. Elements
related to the right to just and favourable conditions of work are covered in Articles 38-45
of the Constitution. The Labour Code further regulates labour-related matters. The legal
framework of El Salvador includes provisions for vacations, weekly rest, maximum working
hours (44 hours a week), and overtime. Compulsory overtime is prohibited by law.
Occupational safety and health standards are set by the Ministry of Labour. The minimum
wage is determined by sector.
The Ombudsman’s Office (Procuraduria para la Defensa de los Derechos Humanos) is

working together with various national institutions to promote labour rights in general and
labour related issues that concern specific vulnerable groups in particular. It oversees,
processes, and investigates complaints related to various topics, including labour rights.
While the legal framework contains a number of important guarantees regarding the right
to work and the right to just and favourable conditions of work, various organisations report
that the implementation of labour standards has not been effective in El Salvador (United
178
ITUC Global Rights Index evaluates the degree of respect for workers’ rights on a scale from 1 to 5+, with
1 being the best rating and 5+ the worst rating.
228
Nations, 2014; US Department of State, 2016). Prior to the application of the EU-CA FTA,
issues regarding the right to work and just and favourable conditions of work included high
level of unemployment and large number of people working in the informal sector,
disparities between minimum wages for the various sectors of economic activity, especially
in the agricultural and textile sectors, wide gender pay gap, and the lack of social security
for agricultural workers (United Nations, 2014).
Guatemala
The Constitution of Guatemala recognises the right to work in Articles 101 and 102. Article
102 (a) provides for the “right to free choice of work and the satisfactory economic
conditions that guarantee a dignified existence for the worker and his [or her] family”. The
Labour Code of Guatemala further regulates labour-related matters. The Guatemalan legal
framework includes provisions for labour rights, such as proof of contracts, 179 minimum
wage,180 severance pay,181 vacations,182 weekend/public holiday work compensation, 183
weekly rest,184 parental leave, health, and safety conditions,185 and social security. 186
However, the Labour Code does not explicitly prohibit forced labour and omits agricultural
workers from important legal protections, increasing their vulnerability to labour
exploitation. For example, agricultural workers are provided with less vacation time than
workers in other sectors; the Labour Code does not require written employment contracts
for workers in the agricultural sector; and labour law allows for up to 30 percent of
agricultural workers’ wages to be paid in the form of food and supplies (CODECA, 2013).
Under the Labour Code, the General Labour Inspectorate is responsible for ensuring that
employers respect laws and collective bargaining agreements covering conditions of work
and benefits. However, its work has been characterised as ineffective. One of the reasons
for that are limited budgetary resources (Verite, 2014). The 2019 ITUC Global Rights Index
Report marks Guatemala as one of the world’s ten worst countries for workers (ITUC,
2020).
Prior to the start of the application of the EU-CA FTA, issues regarding the right to work
and just and favourable conditions of work in Guatemala included salaries below the legally
established minimum wage (for 50.1% of workers); the lack of monitoring of labour
practices due to inadequate budgetary allocations to the Labour Inspectorate; poor working
conditions in the agro-industry; disadvantaged situation of women on the labour market;
pay gap between men and women; and a high share of informal sector of the economy
(United Nations, 2012). Many of the issues have been linked to poor labour law compliance
from producers and to the lack of enforcement by the Labour Inspectorate (Verite, 2014).
Working conditions in the sugar sector have been flagged as particularly alarming due to
numerous cases of chronic renal disease reported amongst sugarcane workers (Winkler,
2018; Laux et al, 2015). The prevalence of chronic renal disease in Guatemala remains
understudied, but sugarcane production processes when workers face recurring
dehydration and heat stress appears to play a role. Some scientists have hypothesised that
exposure to pesticides may increase the risk for this condition as well (Shapiro, 2015; Laux
et al, 2015).
Honduras
In Honduras, the right to work is regulated by Article 127 of the Constitution, which states:
“every person has the right to work under equitable and satisfactory working conditions,
to choose his occupation freely and to give it up, and to protection against unemployment”.
The 1959 Labour Code (amended in 2015) further regulates labour-related matters. Other
major legislation on employment in labour include the Labour Inspection Act (Decree No.
178-2016, Social Security Act (Agreement No. 003-JD-2005), the Law on Equal
Opportunities for Women (2000), and General Regulations of Preventive Measures for Work
179
§27, 28 and 32 of the Labour Code
180
§103 of the Labour Code
181
Article 102 (o) of the Guatemalan Constitution and §82 of the Labour Code
182
Article 102 (i) of the Guatemalan Constitution and §130 of the Labour Code
183
Article 102(h) of the Guatemalan Constitution and §126 & 127 of the Labour Code
184
§128 & 120 of the Labour Code
185
§197 of the Labour Code
186
Decree No. 974 of the Social Security Law
229
Accidents and Professional Diseases (Agreement No. STSS-053-04). The Ministry of Labour
and Social Security (STSS) is responsible for labour inspection. It has eighteen regional
offices reporting to regional headquarters (Secretaría de Trabajo y Seguridad Social, not
dated). Its work is characterised as ineffective due to insufficient number of inspectors and
insufficient funding.
The National Human Rights Institution (CONADEH) is responsible for ensuring protection
of humans’ rights in the country, including the right to work, by receiving and investigating
complaints or denunciations of violations (CONADEH, 2019). There are also several
organisations that have a role in the oversight of the protection of the right to work of
specific population groups: e.g., the National Women's Institute (INAM) and the Directorate
of Indigenous and Afro-Honduran Peoples (DINAFROH). The 2019 ITUC Global Rights Index
Report stated that trade union members were killed in Honduras and its ITUC rating states
that there are no guarantees of workers’ rights in the country (ITUC, 2020).
The right to work and just and favourable conditions of work in Honduras is particularly
relevant in the context of high level of informality, especially for women, unequal working
conditions of women; low labour participation rate of women; low wages; unequal access
to the labour market, affecting in particular vulnerable population groups; and weak
enforcement of labour laws due to weak mechanism of labour inspections (United Nations,
2010 & 2015a).
Nicaragua
In Nicaragua, the right to work is regulated by provisions in the Constitution of Nicaragua
(1987), the Labour Code (Código del Trabajo) (1996), the Minimum Wages Act No. 625
(2007), the Family Code (Law No. 870), the 1982 Social Security Law, the Law of Labour
Inspection (Law No. 664, 2008), the General Law of Health and Safety at Work (Law No.
618, 2007), and the Penal Code (Law No. 641, 2008). Overall, legislation is considered to
be largely in line with international standards: there are provisions on minimum wage,187
regular pay,188 overtime pay,189 written employment contracts,190 job stability,191
vacations,192 severance pay,193 weekend/public holiday work compensation,194 weekly
rest,195 parental leave, health and safety conditions,196 and others. However, there is no
provision in the law that requires an employer to make premium payment to night workers.
Additionally, no provision could be identified in these laws that would require an employer
to provide compensatory rest days for working on weekly rest days or public holidays,
especially when workers have been paid at a premium rate for working on these days.
Compliance with labour laws is ensured by the labour inspection system, the General
Directorate of Labour Inspection. The Directorate may impose fines, depending on the
seriousness of offence committed by the employer. The Procuraduría para la Defensa de
los Derechos Humanos (PDDH) supports state institutions and civil society in the
promotion, education, dissemination and protection of human rights, including labour
rights. The Maria Elena Cuadra Working and Unemployed Women’s Movement (MEC) have
promoted protection of women’s labour rights within the Free Trade Zones in Nicaragua.
The work of most civil society organisations in Nicaragua has been severely limited over
the past 3 years (IACHR, 2020).
Prior to the start of the application of the EU-CA FTA, issues related to the right to work
and just and favourable conditions of work included high levels of informality
(approximately 70% of workers), the lack of social protection, poor working conditions,
187
§82 of the Constitution of Nicaragua; §85 of the Labour Code 1996; §2, 4 & 8 of the Minimum Wages Act No.
625 of 2007; §57 of the Law No. 664 of 2008 on Labour Inspection
188
§86 & 146 of the Labour Code 1996
189
§82(5) of the Constitution of Nicaragua; §49, 51-63 & 169 of the Labour Code 1996
190
§19-25 of the Labour Code 1996
191
192
193
194
§65 & 68 of the Labour Code 1996
195
196
§101 (d) & 103 of the Labour Code 1996; §18 of the General Law of Health and Safety at Work No. 618 of
2007
230
and low wages (United Nations, 2014d). The majority of workers in the agro-export and
textile industries did not earn a living wage (Hoebink, 2014). Agricultural workers,
particularly those in the sugar sector, worked 7 days a week, more than 10 hours a day
(La Isla Foundation, 2013). As in Guatemala, chronic kidney disease has been common
among sugarcane workers (CIEL, not dated).
Panama
Labour-related provisions are enshrined in Chapter 3 of the Constitution of Panama
(Articles 64 – 79). Article 64, in particular, states that “work is a right and duty of the
individual and accordingly the state is obliged to devise economic policies to promote full
employment…” Articles 65-79 cover the minimum wage, non-discrimination in assigning
minimum wage, the right to form and join trade unions, the right to strike (with special
restrictions for public service workers), the right to weekly rest and paid vacation. Article
70 establishes a 48-hour working week and sets the minimum age for work at 14 years of
age during day hours and 16 years of age during night hours. Dangerous (“unhealthy”)
work is not permitted for children under 14. Article 71 guarantees special protection of
pregnant women at work. Unfair dismissal without compensation is not permitted under
Article 74. Free professional education of workers is established in Article 75 and is further
regulated by the Labour Code.
The Labour Code of Panama (Ley No. 44, Código del Trabajo) regulates employment
relationships in detail. It was adopted in 1971 and later on updated in 1995. Article 31 of
the Labour Code, in line with provisions laid down in the Constitution, states that the
maximum number of working hours per week on a day shift is 48 per week (maximum 8
per day) and 42 hours on a night shift (7 and a half hours per day), extra hours can be
worked at a limit of three per day or nine per week (Article 36). Article 107 provides for
parental leave at six weeks before and eight weeks after birth, with the salary being
covered partially by the employer and partially by the social security system. Article 117
of the Labour Code specifies conditions for exceptions from the minimum working age of
14 years: minors from 12 to 15 years are allowed to work in agriculture if engaged in light
work and if it is after school hours (Article 119). They are also allowed to work in domestic
labour (Article 123). Since 2017, the Decree No. 27 (Ley No. 27) establishes paid paternity
leave of up to three working days after birth of a child. The minimum wage depends on
the type of activity and size of the business.
The National Human Rights Institution of Panama, the Defensoría del Pueblo, was set up
by the Law No. 7 (1997) and has a mandate to protect and promote human rights, including
the right to work, as stated in Chapter 9 of the Constitution (Articles 129 & 130). The 2019
ITUC Global Rights Index has given Panama a 4 rating, which means that it has systematic
violations of labour rights (ITUC, 2020).
Before the start of the application of the EU-CA FTA, issues related to the right to work
included gender discrimination at work, especially disproportionate discrimination of
indigenous and peasant women as workers; wage gap between men and women in the
labour market; violations of the right to freedom of association; and limitations to the right
to strike for workers in the public sector (United Nations, 2010a).
The right to work and the right to just and favourable conditions of work after
the start of the application of the EU-CA FTA
For the analysis of the impact of the EU-CA FTA on the right to work and the right to just
and working conditions of work, key human rights indicators can be: the unemployment
rate (Figure 7-2), labour participation rate (Figure 7-3), informal employment rate (Figure
7-4, ratio of total weekly hours worked (Figure 7-5)197 - as per list of human rights
197
The unemployment rate indicates “the inability of an economy to generate employment for those persons
who want to work but are not doing so, even though they are available for employment and actively
seeking work” (ILO, not dated). The labour force participation rate shows the number of persons of working
age that are working. The informal employment rate indicates the share of population engaged in work
relationship that is not subject to national labour legislation, which usually means engagement in low
231
indicators recommended for the analysis of these rights in Human Rights Indicators. A
Guide to Measurement and Implementation (United Nations, 2012a).
Chart %)
Figure 7-2. Unemployment rate (2009-2019, Title
14
12
Unemployment rate (%)
10
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: Statista.com; INEC Panama
Chart Title %)
Figure 7-3. Labour participation rate (2009-2019,
80
75
Labour participation rate (%)
70
65
60
55
50
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: World Bank; Statista.com
Figure 7-4. Informal employment rate (2009-2019, %)

Chart Title
100
90
Informal Employment rate (%)
80
70
60
50
40
30
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Costa Rica El Salvador Guatemala Nicaragua Honduras Panama

Source: Statista.com; FIDEG Nicaragua; INEC Panama
quality jobs without social safety nets (e.g., unemployment insurance), without guarantees of paid annual
leave, sick leave, or other important employment benefits, and often without a written employment
contract. The ratio of total weekly hours worked shows the average number of hours that are worked per
week.
232
Figure 7-5. Ratio of weekly hours worked to population aged 15-64 (ILO modelled
estimates) (2010-2019, %)
30
Ratio of weekly hours worked to

29
population aged 15-64 (%)

28
27
26
25
24
23
22
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: ILO
The choice of indicators also depends on data availability. For example, data for the
incidence of fatal and non-fatal occupational injuries indicators is incomplete for Costa Rica
and Panama and is not available for other countries. So, this indicator has not been
included in the overview.198
For Nicaragua, data availability is an issue for all human rights indicators. For this reason,
when data is available for other countries but not (or partially) for Nicaragua, it is still
included in the overview.
This data illustrates the overall trend and evolution of labour-related variables between
2009 and 2019. The red dotted vertical line marks the moment the Agreement started to
be applied. To the extent possible, data from the period of 2009-2013 is provided to
compare with the data from the period of 2014-2019. This allows us to analyse if there has
been a structural change in the pre-FTA compared with the post-FTA data. Because this
provides some insights, but does not isolate the effect of the Agreement, we combine this
analysis with data available from the economic modelling conducted by the European
Commission which disentangles the impact of the EU-CA FTA.
Costa Rica
The legislative order and institutional framework of Costa Rica provide a sufficient safety
net for workers in the country overall.
In the period after the start of the application of the EU-CA FTA, several reforms have been
conducted. In 2015, the Labour Law Reform Act was adopted to strengthen the labour
rights situation in the country, and in 2016, the Labour Procedural Reform was passed to
reinforce guarantees at the individual and collective levels. Multiple periodic plans and
strategies aimed at strengthening the right to work have been adopted over the evaluation
period (for example, the 2014-2018 National Strategy on Employment and Production
(Estrategia Nacional de Empleo y Producción) and the 2019-2022 National Strategy for
Growth, Employment and Welfare (Estrategia Nacional de Crecimiento, Empleo y
Bienestar). In 2020, a controversial Law No. 9808 was passed on the legal certainty
regarding the right to strike. It has caused a lot of criticism because it proposed restrictions
to this right (Madrigal, 2020; CIVICUS, 2020).
198
Similar situation when data was incomplete or not available also refers to such indicators as e.g., the SDG
indicator 1.3.1 – Proportion of population covered by social protection systems, the SDG Indicator 8.8.1 –
Non-fatal occupational injuries per 100.000 workers, the SDG Indicator 8.8.2 – Fatal occupational injuries
per 100.000 workers.
233
The literature review of issues after the start of the application of the EU-CA FTA Finds
multiple complaints related to non-compliance with labour rights in agriculture, especially
at the northern border of the country: allegations of unlawful labour relations, the lack of
social security and health insurance coverage, and poor working conditions (UCR, 2021;
Alfaro & Webb, 2019; Bosque, 2020). Across all sectors, illegal suspension or modification
of labour contracts have been reported, particularly affecting persons engaged in the
informal economy (Mora, 2020).
When looking at human rights indicators, Figures 7-2 to 5 for Costa Rica show that since
the start of the application of the EU-CA FTA (2013), the unemployment rate, labour
participation rate, rate of informal employment and ratio of hours worked have not changed
much overall. Some global impacts (e.g., economic slowdown of 2016) can be noticed
based on the figures.
Results of the economic modelling conducted by the European Commission indicate that
only sectoral impacts regarding the right to work and right to just and favourable conditions
can be established. Employment has increased in the vegetables and fruit sector (+7.8%
and +8.8% for unskilled and skilled workers respectively) and the sugar sector (+7.9%
and +9% respectively). A decrease in employment has been recorded in the manufacturing
sector (-2.0% for both skilled and unskilled workers) and in services and electronics and
electric equipment (-3.2% and -2.2% for unskilled and skilled workers respectively).
Results of the social analysis show that based on statistical data regarding the number of
workers engaged in work in the sectors that experience decline in employment as a result
of the EU-CA FTA is marginal. This suggests a limited impact of the EU-CA FTA on
employment and, consequently, the right to work and just and conditions of work in these
sectors.
Multiple stakeholders interviewed for this study stated that in general it is difficult to assess
the impact of the EU-CA FTA because Costa Rica has many FTAs and it is not possible to
isolate the impact of each of them (e.g., Defensoría de los Derechos Humanos, PANI).
Defensoría de los Derechos Humanos stated that wages and working conditions are not so
much an issue that can be related to the FTA but to the implementation of the legislation
in general, because working conditions and wages in exporting agricultural companies tend
to be better than in agricultural companies that work for the domestic market. El Patronato
Nacional de la Infancia (PANI) stated that economic development is important for the
human rights of people because if they have enough economic resources, their human
rights are positively affected as well. Overall, PANI noticed that the human rights situation
in Costa Rica improved since 2014, however the position of vulnerable groups has not
improved substantially. A representative of Poder Judicial de Costa Rica stated that there
has been an overall positive impact from the agreement on the right to just and favourable
conditions of work and labour rights in general, noting the certificate system that does not
allow export of contaminated fruits exposed to heavy chemicals which are also harmful to
workers working on those farms.
El Salvador
National legislation regarding the right to work and right to just and favourable conditions
of work is largely in line with international standards. In the period after the start of the
application of the EU-CA FTA, several periodic plans/programmes have been adopted to
strengthen these rights (e.g., the 2014-2019 National Policy on Decent Work, Young People
with an employment and employability programme (United Nations, 2019)).
A literature review of issues after the start of the application of the EU-CA FTA points to
multiple complaints of non-compliance with labour rights and hazardous working conditions
in the textile sector, difficult working conditions in the fisheries, multiple overtime and
wage violations in the agricultural sector (United Nations, 2019; US Department of State,
2020). These violations are linked to ineffective implementation of labour standards by the
government, insufficient number of labour inspectors and insufficient fines for non-
compliance (US Department of State, 2020). The large share of informal workers continues
to be a matter of concern (United Nations, 2019).
234
When looking at human rights indicators, Figures 7-2 to 5 for El Salvador show that since
the start of the application of the EU-CA FTA (2013), the unemployment rate, the labour
participation rate and the rate of informal employment have not changed much. The ratio
of hours worked for the population aged 15-64 did not change after the EU-CA FTA has
come into force but has increased by 1% since 2018. It is unlikely that these changes
happened due to the EU-CA FTA.
Results of the economic modelling indicate that employment has increased in the sugar
sector (+2.9% for both unskilled and skilled workers). However, data on the number of
jobs in 2019 (50,000) and 2012 (48,000), in combination with the data on the share of
sugar exports to the EU over the evaluation period, do not suggest a major impact of the
FTA in this sector. In other sectors, only negligible changes in employment have been
identified (from -0.3% to 0.1%).
Interviews carried out for the study show that the EU-CA FTA has had a positive impact on
the workers in the tuna sector. Grupo Calvo stated that the sector exports approximately
70-85% of its products to the European Union, so without the FTA, the workers would have
most likely lost their jobs. Both Grupo Calvo and the Movimiento de Unidad Sindical y
Gremial de El Salvador (MUSYGES) thought that labour conditions in this sector have
improved. The sector is located in the la Unión area where it is the main source of
employment for the local population, mostly women. Federación Sindical FUSS noted a
difficult situation regarding labour rights prior to the application of the EU-CA FTA and
expressed disappointment that when the FTA was about to be implemented, there were a
lot of initiatives carried out in order to improve labour situation in the country, a trend that
has diminished over time. For example, one interviewee stated that training on health and
safety at work was provided, as well as training on technical issues and how to prevent
diseases. Later, however, old practices were re-instated and thus training did not bring
about real improvements. Multiple stakeholders stated that the situation regarding
workers’ rights is directly linked to the anti-union culture in the country. Several
interviewees noted no improvement regarding formal jobs – pointing out that most jobs in
the coffee sector are informal. In the sugar sector, trade union representatives stressed
that there is a difference in the employment situation and working conditions between
workers directly employed by sugar mills and those working for sugar producers (e.g.,
sugar cane cutters working not for a mill but small sugar producers). MUSYGES said that
workers from plantations have very poor working conditions, do not have social security,
do not build up pensions and do not have policies to support them in case of accidents at
work. Burning sugarcane and the unregulated use of agrochemicals put workers’ health at
risk (and health of the communities adjacent to the production sites). Most of these
developments, however, FUSS links to the political situation in the country rather than to
the EU-CA FTA.
Guatemala
While overall, the legislative framework regarding the right to work and right to just and
favourable conditions of work is in line with international standards, the lack of legal
protections for agricultural workers increases their vulnerability to labour exploitation.
In the period after the start of the application of the EU-CA FTA, several reforms have been
conducted: in 2017 the Labour Code was amended to operationalise an adequate
procedure for administrative complaints on labour violations and the National Policy for
Decent Work 2017-2032 was adopted with the aim to gradually decrease informality,
underemployment and unemployment rates and the percentage of workers living in
extreme poverty but vulnerability of agricultural workers has not been addressed as such.
Issues identified in Guatemala before the start of the application of the EU-CA FTA continue
to be the matter of concern. The literature review confirms that a particularly serious
situation remains in the sugar sector where labour statutes have not been fully enforced,
especially the ones that relate to acceptable conditions of work with respect to minimum
wages, hours of work, and occupational health and safety. Advocacy groups estimate that
the vast majority of workers in rural areas who engage in day-long employment in the
sugar sector, do not receive the wages, benefits, or social security allocations required by
235
the law (OISS, 2018). Workers are subjected to forced overtime, due in large part to quotas
and a productivity-based payment system. To meet the quota, workers feel compelled to
work extra hours, sometimes bringing family members, including children, to help with the
work. Because of having to work beyond the maximum allowed hours per day, workers
received less than the minimum wage for the day and did not receive the required overtime
pay (Yagenova, 2019). There have also been reports of deceptive recruitment (deception
about the nature and location of jobs and employers, conditions of work, the content or
legality of work contracts, housing and living conditions, and wages and earnings); coercive
recruitment (confiscation of documents and debt bondage); and exploitation (excessive
working days and hours, poor living conditions, hazardous work, low salaries, a lack of
respect for labour laws and contracts, and wage manipulation) (Verite, 2017).
When looking at human rights indicators, Figures 7-2 to 5 for Guatemala show that since
the start of the application of the EU-CA FTA (2013), the unemployment rate has been
lower in the 2014-2019 period after the start of the application of the Agreement than in
the four years before (19.5% lower). The labour participation rate has not changed much,
but the rate of informal employment was 2.1% lower in the 2014-2019 period after the
EU-CA FTA was applied (70.2% compared to 72.3%). The ratio of hours worked for the
population aged 15-64 did not show a clear trend after the EU-CA FTA has come into force.
It is unlikely that these changes happened due to the EU-CA FTA. This can also be explained
by the fact that economic preferences which Guatemala enjoyed under the GSP+ system
were marginally changed with the start of the application of the EU-CA FTA.
employment has increased in the sugar sector (+2.0% for both unskilled and skilled
workers). In other sectors, only negligible changes in employment have been identified.
Interviews carried out for the project confirm conclusions on a serious pre-existing situation
regarding working conditions in agriculture (e.g., Sindicatos Glolbales Guatemala,
Movimiento Sindical Guatemalteco, Movimiento Sindical Internacional, Comisión Nacional
Tripartita de Libertad Sindical, Central General de Trabajadores de Guatemala (SGTG)).
Consejo Nacional de Desplazados de Guatemala (CONDEG) pointed out weak
implementation of existing legislation, impunity (companies do not pay fines that have
been imposed on them), and ineffective enforcement due to insufficient number of
inspectors and lack of infrastructure and financial resources that can aid their work (no
transport to reach plantations, no phones, or laptops). Several stakeholders stressed that
working conditions in Guatemala continued to be a matter of concern after the EU-CA FTA
came into force (CONDEG, CONGCOOP). Poor working conditions have been reported (in
particular, lack of health coverage, salaries below minimum wage, temporary contracts,
and long working hours) in agricultural sectors, especially in the palm oil and sugar sectors.
The International Confederation of European Beet Growers (CIBE) and Association of
European Sugar Manufacturers (CEFS) referred to the studies performed by the ILO and
the Guatemalan Farmers Association (CODECA) and noted that workers do not have social
security and work in conditions dangerous for health which is reflected in the increased
incidence of the acute chronic kidney disease. Several trade unions also stated that the
number of kidney disease cases has been increasing among workers in the sugar sector,
especially in the south-west of the country. Coordinación de ONG y Cooperativas
(CONGCOOP) stated that challenges with labour rights and human rights in general were
more linked to the priorities of the government rather than to any FTA. La Asociación
Estoreña para el Desarrollo Integral (AEPDI) Defensoría Q’eqchi’ noted that EU-CA FTA,
like other FTAs, generate employment but because of the existing problems with working
conditions, it is ‘employment in slavery’. AEPDI Defensoría Q’eqchi’ expressed particular
concern regarding the working conditions of indigenous peoples in the palm oil sector,
stating that their concern is also linked to the fact that there is no freedom of association
in this sector, “it is not possible to form a union”. Other stakeholders also confirmed that
in coffee and palm oil sectors it is prohibited to organise.
Stakeholders that represent the producers of sugar, coffee, palm oil and bananas (e.g.,
GREPALMA, Camara del Agro, APIB, ANACAFE) stated that they followed certification
schemes and that human rights plans have been introduced specifically to address human
236
rights issues (including working conditions) in these sectors. Sugar producers noted that
exports to the EU constitute a very small share of all the sugar production in the country
and that exports to the EU are not even in the top 5 countries (Associación de Azucareros
del Istmo Centroamericano (AICA)). Next to that, Asociación de Azucareros de Guatemala
(ASAZGUA) stated that sugar mills’ workers have mandatory social security coverage and
have access to medical clinics, and sugar mills “operate with a robust epidemiological
surveillance system” (on file). So, according to Guatemalan producers, the impact of the
Agreement in the sugar sector is very limited.
Trade Union Confederation CNV Internationaal pointed to deficiencies in labour inspection

and certification systems. Companies tell workers what to say to inspectors from private
certification programmes (also published in Anner, 2021) and stated that “there is
manipulation of data and evidence. For example, when accidents occur on the work floor
on in plantations, usually the company makes that evidence disappear.”
Honduras
In the period after the start of the application of the EU-CA FTA, the Honduran government
has adopted policy instruments to promote employment. For example, the 2017-2028
National Employment Policy of Honduras (Ministry of Labour and Social Security of
Honduras, 2017b) was adopted to promote economic growth in an inclusive manner
through promotion of decent and productive employment for all Hondurans. Despite these
measures, informality levels remain high (World Bank, 2020). Scarce number of labour
inspectors has been named as one of the main reasons for state incapacity to duly comply
with the monitoring of the respect of this right and all its components (FES, 2016;
Baquedano, 2021). Low wages that do not allow for a decent standard of living continue
to be reported, especially in the private sector (Rodríguez, 2021; Pérez, 2021). These
issues are primarily linked to ineffective domestic legislation, the lack of enforcement of
existing laws and regulations, corruption, and high level of criminal activity.
When looking at human rights indicators, Figures 7-2 to 5 for Honduras show that since
the start of the application of the EU-CA FTA (2013), the unemployment rate rose much
faster. The labour participation rate has increased significantly too (by 6.2 percentage
points) and so did the rate of informal employment (by 7.2 percentage points). The ratio
of hours worked to population aged 15 to 64 has increased by 4%. If this information is
combined with the results of the economic modelling conducted by the European
Commission, it can be seen that the majority of these visible trends cannot have been
caused by the Agreement. The econometric analysis indicates that employment has
increased in the sugar sector (+5.0% for both skilled and unskilled workers) while in other
sectors, only negligible changes have been found. Like for Guatemala, this can also be
explained by the fact that economic preferences which Honduras enjoyed under the GSP+
system were marginally changed with the start of the application of the EU-CA FTA.
Stakeholders in Honduras interviewed for this project acknowledged the difficult overall
pre-existing human rights situation in the country and issues related to the right to work
and the right to just and favourable conditions of work (e.g., CDH, Universidad Nacional
Autónoma de Honduras (UNAH), Centro de Investigación y Promoción de los Derechos
Humanos (CIPRODEH)). Referring to the overall impact of the EU-CA FTA, the Center for
Human Development (CDH) noted that it is difficult to separate the impact of the FTA from
the broader context related to human rights in the country, but actions carried out by the
EU under the European Instrument for Democracy and Human Rights (EIDHR) have been
very relevant and had a clear positive effect. Regarding the right to work and right to just
and favourable conditions of work, several stakeholders stated that it is difficult to separate
the impact of the FTA from other developments, but working conditions remained difficult,
especially for the workers from the sugar sector. The UNAH representative said that the
university has been working with producers on various projects and their observation was
that jobs have been created both in the formal and in the informal sectors, but no tangible
improvement has been observed regarding respect for workers’ rights.
CDH appreciated support programs to promote decent employment delivered by the EU

Delegation but said that because there is no monitoring of implementation, they have
237
remained rather ineffective. Many jobs remain informal, social security is only available for
workers in the formal sectors and outsourcing allows companies have no direct
responsibility for how workers are treated on the farms. Because of the anti-union culture
in Honduras, workers’ rights remain neglected, and companies are closed to initiatives that
promote labour rights.
CNV Internationaal pointed out a particularly vulnerable situation regarding working

conditions in the sugar sector and weak implementation of existing legislation (CNV
Internationaal, 2021).
Nicaragua
The literature review indicates that in the period following the EU-CA FTA entry into force
“70% of employed persons remained in informal work with no social protection and with
income that did not meet their basic needs” (United Nations, 2019i). Deficiencies in the
legal framework affect labour rights violations. For example, the law that regulates job
stability in Nicaragua (the Labour Code) lacks an administrative process that allows labour
inspectors to hear and resolve employers’ requests for just-cause dismissals.
Looking at human rights indicators, Figures 7-2 to 5 show that the unemployment rate was
lower in the 2014-2019 period compared to the 2009-2013 period prior to the start of the
application of the EU-CA FTA. Informal employment was lower after 2013, but also the
labour participation rate has declined (however, based on supplementary data from the
social part of the analysis based on national statistics from Nicaragua and data from 2019,
we can conclude that in fact, both, the labour participation rate and informal employment
increased compared to 2009-2013). The ratio of hours worked to population aged 15 to 64
has slightly increased.
employment has increased significantly in the sugar sector (+15.0% for both unskilled and
skilled workers). A minor decrease in employment is recorded in the electrical equipment
sector and in the other transport equipment sector. In other sectors, only negligible
changes in employment have been identified. Due to vulnerable situation in the sugar
sector regarding working conditions prior to the start of the application of the EU-CA FTA,
it is possible that a minor impact could have materialised as a result of the increase in
employment in this sector. However, the estimated employment increase in the sugar
sector seems to be an overestimation due to a low share of exports to the EU in total sugar
exports from Nicaragua.
Nicaraguan stakeholders interviewed for this project indicated that it was difficult to
separate the impact of the Agreement but that they thought that tangible improvements
come from the changes at the national level. An example of the progress made in the
export processing zones has been provide where quite solid tripartite and bipartite systems
had been established. Trade unions in such zones were also able to drive up the wages for
the workers. Overall, stakeholders from Nicaragua were very difficult to reach due to the
political situation in the country at the time of writing of the report. A representative of the
International Trade Union Confederation (ITUC) interviewed for this study reported that
because of the political climate in the country, it is very difficult to know the real situation
on the ground, but the example of trade unions’ work shows that trade union activity and
social dialogue can improve the rights of workers and productivity of employers.
The Central American Isthmus Sugar Growers’ Association (AICA) stated that sugar
production in Nicaragua had changed, and that 95% of cane cutting is now mechanised.
Moreover, according to them, chronic kidney disease is common not only among sugar
workers but also workers in other sectors (such as construction, mining, transportation,
and others), and it is no longer a problem in Nicaragua because the producers are
implementing the regulations regarding mandatory shade, water, and rest for all workers
(20-minute rest for each hour worked). The Nicaraguan Sugar Agroindustry noted that all
workers at sugar mills are formally employed, have written contracts and do not work more
than 8 hours a day (on file). It was not possible to verify this information with workers’
representatives from the sugar sector in Nicaragua.
238
Panama
After the start of the application of the EU-CA FTA, various social policies have been
implemented by the government of Panama in order to integrate minorities into the labour
market (in the framework of the 2015-2019 Youth Strategic Plan) (United Nations, 2020).
Executive Decree No. 20 of 2019 allows persons applying for refugee status to apply for a
work permit while their case is pending the decision of the National Commission (United
Nations, 2020).
Despite these measures, intersectional discrimination still occurs, which disproportionally

affects indigenous women facing multiple forms of discrimination based on their gender,
ethnicity, and social status in respect of employment and wages; restrictions regarding the
right to strike and freedom of assembly and association for Panama Canal workers remain
(United Nations, 2020). The National Confederation of United Independent Unions
(CONUSI) stated that “the Panama Canal Authority does not recognise being under the
supervision of the Inspection Directorate of the Ministry of Labour” (CEACR, 2021). CONUSI
also noted that the labour rights of migrant workers are not respected. In particular,
CONUSI states that migrant workers tend to be employed under less favourable conditions
than Panamanian workers and are often dismissed without valid reason (CEACR, 2021).
These issues are primarily linked to the national mechanisms of application of human rights
and not to the EU-CA FTA.
The human rights indicators in Figures 7-2 to 4 show that unemployment was higher in the
post-Agreement period from 2014-2019. A positive difference between the pre- and post-
Agreement periods is that the labour force participation rate was 2.6% higher in 2014-
2019 than in 2009-2013.
employment has increased in the vegetables and fruit sector (+16% for both skilled and
unskilled workers), in the vegetable oil sector (+2% for both unskilled and skilled workers),
in the textile sector (+3% for both skilled and unskilled workers), and in the transport
sector (+1% for both categories of workers). This is the result of significant tariff
liberalisations in these sectors because of the EU-CA FTA compared to a situation without
an Agreement and Panama graduating from GSP+ arrangement. In other sectors, only
negligible changes in employment have been identified. The EU-CA FTA has had a positive
impact on the right to work for the workers from these affected sectors. Service sector
output and employment decline due a relative increase in attractiveness of the agricultural
and textile sectors due to tariff liberalisations. Because real wages rise in Panama,
especially for skilled workers, it can be inferred that the impact of EU-CA FTA is to draw
workers away from low-skilled manufacturing and services jobs to better paid employment
in growing sectors.
Interviews with stakeholders showed that largely the situation related to working
conditions has improved over the years. However, the position of vulnerable groups in
employment has not improved. MODETEAB, for example, stated that they perceived that
the impact of the EU-CA FTA on working conditions of indigenous peoples has been
negative. MODETEAB mentioned that wages are particularly low for indigenous peoples in
the coffee and pineapple sectors and are not proportionate to working hours. The position
of women in these sectors was also characterised as very difficult as they continued to
suffer from harassment and sexual abuse.
7.5.2 Impact of the EU-CA FTA on indigenous peoples’ rights
The legal text of the Trade Pillar does not contain provisions pertaining to the protection
of indigenous peoples’ rights (in particular land rights and the right to free, prior and
informed consent). However, overall protection of human rights is relevant under the
human rights clause, which constitutes a core part of the Agreement. And in line with this
clause, the EU has a negative obligation to avoid contributing to human rights violations in
other countries (see legal analysis above). Next to that, Chapter 1 (National treatment and
market access for goods) of the EU-CA FTA includes commitments of the Parties to
liberalise markets (to increase agricultural production). The fact is that agricultural
239
production requires vast amounts of land as a resource, and this may affect the rights of
indigenous peoples. Based on the screening and scoping results and preliminary analysis,
indigenous rights are analysed in the context of the EU-CA FTA and its impact in Guatemala
and Honduras.
Indigenous peoples in Guatemala account for 45% of the total population. In Honduras,
the share of the indigenous peoples is much lower, standing at 9% of the total population.
However, the existing vulnerability and insufficient legal protection of their rights create a
particular vulnerability of this population group to even minor shocks.
International framework
The rights of indigenous peoples are recognised in declarations passed by the United
Nations – the 2007 UN Declaration of the Rights of Indigenous Peoples (UNDRIP) and the
American Declaration of the Rights and Duties of Man (1948). As declarations, they are
not binding on states, however the International Law Association said that the UNDRIP
“includes several key provisions which correspond to existing State obligations under
customary international law” (ILA Resolution No. 5/2012). The Covenant on Civil and
Political Rights (ICCPR) (Article 27, HRC Comment No. 23), the UN Convention on the
Elimination of All Forms of Racial Discrimination (ICERD) (1966) (Article 5(d) (v) and
General Recommendation XXIII) and ILO Convention No. 169 on Indigenous and Tribal
Peoples (1989) also contain provisions regarding the rights of the indigenous peoples.
The European Convention on Human Rights (ECHR) and the EU Charter of Fundamental
Rights (CFR) do not explicitly refer to the rights of indigenous peoples except for provisions
on the prohibition of discrimination based on the ground of association with a national
minority (Article 14 ECHR and Article 21 CFR). Similarly, Article 2 of the Treaty on European
Union states: the “Union is funded on the value of respect for human dignity […], equality
[…] and respect for human rights, including the rights of persons belonging to minorities”.
EU legislation has evolved by incorporating indigenous peoples’ rights in the European
Parliament Resolution on “violation of the rights of indigenous peoples in the world,
including land grabbing”.199
The American Convention on Human Rights (ACHR) does not explicitly address the rights
of indigenous peoples. The jurisprudence of the Inter-American human rights system,
however, has developed progressive laws that recognise the collective rights of indigenous
peoples. Thus, in Sawhoyamaxa Indigenous Community v. Paraguay, the Inter-American
Commission on Human Rights argued in front of the Inter-American Court of Human Rights
that by violating Article 21 of the ACHR, which refers to the right to own property, Paraguay
deprived the members of the Sawhoyamaxa Community “not only of the material
possession of their lands but also from the fundamental basis to develop their culture, their
spiritual live, their integrity and their economic survival”. In Mayagna (Sumo) Awas Tingni
community v. Nicaragua the IACHR argued that there is a “customary international law
norm which affirms the rights of indigenous peoples to their traditional lands”.
All States-Parties to the Agreement have ratified the ICCPR and ICERD (See ratification
overview in Tables E1-1, E1-2 and E1-3 in Annex E1) and only few states ratified ILO
Convention No. 169 (Costa Rica, Honduras, Guatemala, Nicaragua, Denmark, Luxembourg,
the Netherlands and Spain). As relevant for this analysis, both Guatemala and Honduras
ratified Convention No. 169, the ACHR and other relevant international human rights
instruments and therefore accept their legal obligations with respect to the rights of
indigenous peoples.
National framework and implementation issues prior to the EU-CA FTA

In this section, national frameworks regarding the rights of indigenous peoples are
presented to illustrate baseline conditions for the enjoyment of the relevant rights in
Guatemala and Honduras and what implementation issues have been there prior to the
EU-CA FTA. This information is relevant to provide insights into baseline conditions of the
enjoyment of the relevant rights in Central America and pre-existing conditions of stress
199
European Parliament resolution of 3 July 2018 on violation of the rights of indigenous peoples in the world,
including land grabbing (2017/2206(INI)), OJ C 118, 8.4.2020, p.15-31.
240
and vulnerability in relation to indigenous peoples living in their territories (in line with
Task 12 of the Terms of Reference).
Guatemala
Guatemala does not have legal instruments that put the indigenous peoples and
communities in a position to be able to channel their demands for rights to ancestral lands
and territories based on their ancestral occupation (United Nations, 2018h, 2019l &
2019m). While the 1985 Constitution of Guatemala has two provisions that are relevant to
indigenous property rights and that set forth obligations related to the collective or
community nature of indigenous lands and territories, and the special protection they
require, there is a failure to adopt specific legislation that stipulates mechanisms and allows
for effectively ensuring respect for and the guarantee of the right to collective property. In
addition, there are numerous provisions contrary to the constitutional duties in
Guatemala’s domestic law in such key legal texts as the Civil Code, which does not include
any article that refers to this form of property, 200 and also bodies of law that contain
provisions incompatible with that obligation such as the Mining Code or the Law on
Hydrocarbons (Amnistía Internacional, 2015; Villatoro, 2017).
The right to consultation and prior, free, and informed consent is not reflected in the
domestic legal order of Guatemala (Contreras, 2020). It should be noted that the
Constitutional Court has recognised the consultation as a fundamental right that must be
respected (Asociación de Abogados y Notarios Mayas de Guatemala Nim Ajpu, 2019), and
that this right is part of the core principles in the Constitution. 201
After the signing of the Peace Accords (particularly the Agreement on Identity and Rights
of Indigenous Peoples and the Agreement on Socioeconomic Aspects and Agrarian
Situation), a process of institutional reform took place in Guatemala in various areas
recognising the ethnic-cultural differences of the Guatemalan population (PNUD, 2016).
Several state offices were established, such as the Academy of Maya Languages of
Guatemala, the Secretariat for the Defence of Indigenous Women DEMI, the Presidential
Commission against Discrimination and Racism CODISRA, the Guatemalan Indigenous
Development Fund, the Office of the Ombudsman for Indigenous Persons and Communities
in the Office of the Human Rights Ombudsperson, and the Secretariat for Indigenous Affairs
within the Attorney General’s Office. In addition, many of the government ministries have
“indigenous venues”, such as the General Bureau of Bilingual Intercultural Education.
Similarly, FONTIERRAS, was created to focus on regularising the inconclusive proceedings
for the adjudication of state lands; ensuring access to the land by purchasing and leasing
from communities; and agrarian debt. Most of these institutions have been characterised
as ineffective, due to the lack of participation and input of the indigenous peoples and their
representatives, the lack of capacity for decision making, and the insufficient economic and
human resources Sieder, 2008).
Honduras
The 1982 Constitution refers to the rights of indigenous peoples in Article 346, which states
that “it is the duty of the State to dictate measures to protect the rights and interests of
the indigenous communities existing in the country, especially the lands and forests where
they are settled”. Secondary legislation also includes provisions that refer to the protection
of their rights, e.g., Articles 93 and 100 of the Property Law (Decree No. 82-2004) and the
Articles 11 and 45 of the Forestry, Protected Areas and Wildlife Law (Decree No. 156-
2007), which refer to the right of indigenous and Afro-Honduran peoples to the lands they
traditionally own in an inalienable, unseizable and imprescriptible manner. One of the main
objectives of the 2016-2022 Public Policy against Racism and Racial Discrimination for
Integral Development of Indigenous and Afro-Honduran Peoples (P-PIAH) is to promote
the exercise of human rights of peoples and to maintain their identity and diversity, as well
as their participation in the social, economic, political, cultural and environmental spheres
200
This was deemed unconstitutional by the Constitutional Court. See: https://aizenstatd.com/sentencia-
resuelve-que-la-ausencia-de-ley-sobre-propiedad-indigena-contraviene-la-constitucion/
201
Constitutional Court of Guatemala Expediente 1072–2011 (2011, November 24) reiterates the superiority of
ILO C169 over domestic law. In Expediente 1179–2005 (Constitutional Court of Guatemala 2007, May 8),
the Court implores Congress to pass legislation detailing how consultations should proceed.
241
of life (Secretaría de Estado en los Despachos de Desarrollo e Inclusión Social, 2016).The

1993 Law for the Creation of the Honduran Forestry Development Corporation
(COHDEFOR) provides for the participation of indigenous communities in the processes of
protection and use of natural resources (ILO, 2020). In addition, Article 95 of the Property
Law establishes that before authorising any project that intends to conduct activities on
the territories of indigenous peoples, the state must inform and consult with them on the
benefits and damages that may arise from the exploitation of natural resources.
The Agrarian Reform Law of 1962 set up the National Agrarian Institute (Instituto Nacional
Agrario - INA), one of its functions is to protect the rights of ethnic communities and tribes,
especially with respect to the possession of communal lands. The INA is also in charge of
granting land titles to indigenous peoples and certifying their possession (FAO, not dated;
Del Cid, 2012).
A draft law on Consultation for Indigenous and Afro-Honduran Peoples was introduced in
2016, which led to the formation of an Inter-Institutional Technical Commission for Free,
Prior and Informed Consultation (FPIC). However, eventually, this draft law was not
approved (ILO, 2021).
The rights of indigenous peoples (land rights and right to FPIC) after the entry
into force of the EU-CA FTA
The economic results do not allow us to distil the impact of the EU-CA FTA on the rights of
the indigenous peoples from other developments impacting their rights. They can only be
used as an indication whether there has been an impact in a sector that – in turn – is likely
to have caused an impact on the lands of indigenous peoples because production in this
sector requires land as a resource. That is why, the analysis to the degree possible, relies
on the results of the economic modelling and is mainly qualitative in nature (based on
stakeholder interviews).
Guatemala
Issues regarding protection of the rights of indigenous peoples existed also prior to the
start of the application of the EU-CA FTA. The situation continues to be vulnerable and is
marked by issues regarding the recognition of historic rights to the land; the lack of legal
certainty and guarantees such as titling, delimitation, and demarcation; long-standing legal
actions relating to the land (Alonso-Fradejas, 2012); inconclusive and inefficient
adjudication procedures that have resulted in debts for the communities; involuntary losses
of lands due to causes associated with the armed conflict (Labrador et al, 2017); evictions
and forced displacements associated with development projects, including single-crop
agriculture (sugar, cardamom, palm oil) (Labrador et al, 2017; Yagenova, 2020); and the
impact on the enjoyment of their rights due to the creation of protected natural areas
(Raymundo & Aracely, 2015). However, Guatemalan sugar producers state that the
expansion of sugar production did not come at the expense of indigenous peoples but
reconversion of farming and agricultural activities (on file).
With regard to free, prior, and informed consent and consultation, the national framework
analysis found out that despite recognition of consultation of the indigenous peoples as a
fundamental right by the Constitutional Court, it is not reflected in the legislation. Reports
state that Guatemala does not have effective procedures in place that would allow
consultation with the indigenous communities and results of the community consultations
convened by the communities are not being recognised (Constanza, 2015; Xiloj Cuin,
2020; Laplante & Nolin, 2014; Due Process of Law Foundation, 2015).
Thus, the literature review suggests a strong pre-existing vulnerability in Guatemala

regarding indigenous peoples’ rights due to the lack of domestic mechanisms that can
ensure protection of their rights, historic reasons, causes associated with the armed conflict
and growth of agricultural projects. Only one of these reasons for the vulnerable position
of indigenous communities is being attributed to production: growing single crop
agricultural products.
242
Economic modelling results show that, because of trade with the EU, total output in the
sugar sector in Guatemala, a sector requiring vast land resources to grow sugarcane, has
increased by 1.5% (see economic analysis). This increased production could come from
more sugar production per hectare, or from increasing the amount of land used for sugar
production, or a combination of both.
Additional environmental analysis of the land use has found that FTA-tariff reduction
induced output resulted in a minor increase in cropland areas of 400 ha (all crops
produced). Based on the analysis of general trends regarding land use, the environmental
analysis concluded that change in land use in Guatemala is likely to have stemmed from
the production of palm oil. This analysis does not suggest that this limited increase in land
use affected lands of indigenous peoples and no direct evidence has been identified.
However, at the same time, a possible limited impact of the EU-CA FTA on land rights of
the indigenous peoples cannot be excluded, especially given serious pre-existing conditions
regarding national protection of their rights. The lack of national mechanisms of protection
means that in case of violations, existing pressure on their rights may have intensified.
Interviewees noted that the practice of carrying out impact assessments and following
consultation processes with indigenous peoples have improved a little when it related to
projects on hydroelectric plants and mining but in projects related to agriculture, no
consultations and no impact assessments have been carried out. Some stakeholders said
that although there are provisions on consultation with indigenous population at the
municipal level, they had not been widely used.
Several stakeholders noted that evictions of indigenous peoples were carried out in the
department of Alta Verapaz where there is a strong presence of sugarcane monoculture
companies, palm oil companies and companies working in mining and construction of
hydroelectric plants. Many of them were of the view that the situation has not improved
since the start of the application of the EU-CA FTA. CNV Internationaal stated that land
grabbing in Guatemala had increased with the expansion of the palm oil sector, also after
the EU-CA FTA had entered into force.
Honduras
The situation regarding the rights of indigenous peoples in Honduras is similar to that in
Guatemala. Already before the start of the application of the EU-CA FTA, the rights of this
vulnerable group have been at risk due to forced displacement of indigenous populations,
land grabbing and expansion of development projects onto their lands without prior
consultation (ACNUR, 2016 & 2017).
Although Honduras has a stronger legislative basis as presented in the national framework
above, violations of indigenous peoples’ rights are linked to the presence of organised
crime groups in these territories and weak implementation of existing laws (IPMG, 2020;
ACNUR, 2017). The INA's program for access to collective lands, for example, does not
function adequately to provide a timely response to requests for titling, expansion or
regulation of territories and land conflicts (ACNUR, 2017). Indigenous peoples’ and afro-
descendants’ right to free, prior and informed consent is reported to have been violated as
their lands get appropriated for private enterprise development (a.o. palm oil and banana
farms) (IACHR, 2019; Del Sid, 2012; SEDINAFROH, 2013; EFE, 2021; ILO, 2021). Recent
development of the so-called Employment and Economic Development Zones (ZEDE) is of
particular concern for indigenous communities (Torres, 2020).
In the framework of the EU-CA AA, some specific programmes have been prepared - the
2014-2020 Multi-annual Indicative Programme and the 2014-2017 and 2016-2018 EU
Roadmaps for engagement with civil society - which included actions aimed at the needs
of indigenous peoples, e.g., support of family farming (European Commission, 2014;
European Commission, 2014; 2017). In 2021 a Voluntary Partnership Agreement has been
signed between the EU and Honduras with the objective to improve forest governance, the
sustainable use of forests and ensuring that timber exported to the EU complies with the
domestic leal requirements of Honduras (FAO, 2021).
243
The literature review suggests pre-existing vulnerability regarding indigenous peoples’

rights in Honduras due to the weak implementation of existing laws, the lack of effective
mechanism to protect their rights, weak national institutions, high level of criminality and
violence, and growing private enterprise development related to energy, extraction,
tourism, agro-industry and infrastructure (United Nations, 2019h). Only one of these
reasons for the vulnerable position of indigenous communities is being attributed to
production: growing development projects.
Economic modelling results show that, because of trade with the EU, total output in the
sugar sector in Honduras, a sector requiring vast land resources to grow sugarcane, has
increased by 4.3%.
Additional environmental analysis of the land use has found that FTA-tariff reduction
induced minor decreases in land use in Honduras (-500 ha for all crops produced).
However, based on the analysis of general trends (not isolating the impact of the
Agreement), environmental analysis concluded that despite a decrease, cropland for
specific sectors increased (for sugar and fruits and vegetables sectors). This means that
that it is still possible that the Agreement could have contributed to the change in land use
because of development of commodity driven agriculture in Honduras over the past years.
In other words, while no direct evidence has been found regarding the impact of the
Agreement on the indigenous peoples’ land rights, it cannot be excluded that land grabbing
may have occurred in relation to commercial activities that have benefited from the FTA.
This impact seems to be rather limited, judging by the limited increase in production,
indicated by the economic modelling.
Stakeholders had mixed views on the impact of the EU-CA FTA on the rights of indigenous
peoples. The Ministry of Environment stated that respect for indigenous peoples’ rights has
increased over the last years due to political pressure from the EU. Other stakeholders,
e.g., CDH and CIPRODEH, noted that international standards regarding indigenous peoples’
rights are not respected in Honduras and the country has had a very long history of
violations of the rights of indigenous peoples. Stakeholders noted that the impact needs to
be contextualised and that they are not sure if land grabbing and disrespect of indigenous
peoples’ rights can be attributed to the FTA.
7.5.3 Impacts for freedom of association (summary of findings from the case study)
The Terms of Reference for this project have selected this task as one of the study
priorities. In this section, we summarise findings from case study No. 7. It was prepared
jointly under the social and human rights part of the analysis and its findings feedback to
both those parts (the findings have also been replicated in Chapter 4). The analysis aims
to establish if the Agreement has encouraged the Parties to meet their commitment
reiterated in the TSD chapter to effectively implement in their law and practice the ILO
fundamental conventions, including conventions No. 87 (freedom of association and
protection of the rights to organise) and 98 (right to organise and collective bargaining).
In this context, we analyse the overall situation regarding establishment and operation of
trade unions (and employers’ associations), and conditions for establishment and operation
of trade unions in exporting sectors. Further details regarding the overall situation on
freedom of association have been provided in Annex C-1.
The analysis of the national legislation related to freedom of association and the right to
collective bargaining, as well as related observations of the ILO monitoring bodies suggests
for El Salvador, Guatemala and Honduras, a need for further legislative alignment with the
ILO conventions No. 87 and 98. Also, based on cases brought to the ILO Committee on
Freedom of Association, implementation and enforcement of the domestic legislation
requires strengthening, and so does ensuring free trade union establishment and operation
in practice. There is also some potential for further progress, such as the position of
business (COHEP) in Honduras agreeing for some changes in the domestic legislation,
recommended by the ILO.
244
Evidence provided for this study by sector representatives, both business and trade unions
offers useful insights and complements information from other sources. Based on this, a
few observations can be made. In the banana sector, in five CA countries (all except El
Salvador that does not produce bananas for exports to the EU), trade unions operate at
least in part of the sector and negotiate collective agreements. However, even in this case,
parts of the sector (e.g., in southern provinces of Guatemala) are not unionised and
working conditions are substantially worse there than in other areas. Moreover, there is an
observed shift of some firms towards the south of Guatemala, apparently in search for
lower production costs, which are related inter alia to much lower wages202. Interviewed
sector representatives from CA were of the view that many aspects related to working
conditions and freedom of association in the banana sector predate the EU-CA FTA or have
been influenced by domestic factors, and therefore do not result from or should not be
linked to the implementation of the Agreement.
In the sugar sector, evidence provided by sector representatives, both trade unions and
business, suggests that in Costa Rica, El Salvador, Honduras, Nicaragua and Panama trade
unions exist, operate, and negotiate collective agreements in all or at least, in some sugar
mills. The situation is much more challenging in Guatemala 203, where only one trade union
exists and faces difficulties in its work. Moreover, there is evidence (written and provided
in interviews for this study) suggesting that working conditions and freedom of trade union
operation provided in sugar mills differ from the situation in the rest of the sector
(represented by a large group of small and medium-sized sugar producers of up to 7,000,
e.g., in El Salvador). In the latter, jobs are often informal and of a lower quality and no
evidence has been available that would confirm trade unions’ existence in that part of the
sector. Also in this case, one cannot consider the EU-CA FTA as a decisive factor influencing
the situation in the sector (e.g., in Nicaragua, trade unions in the sugar sector started
operating and negotiating collective agreements in 1950s, i.e., long before the entry into
force of the Agreement). However, sector representatives have also stated that exports to
markets such as that of the EU may require compliance with certain sustainability
standards and may therefore encourage adherence to certification schemes, which include
- among others - respect for workers’ rights and freedom of association.
There have also been positive developments, which according to trade union
representatives were clearly related to the Agreement. In El Salvador, the entry into force
of the EU-CA FTA created a momentum for improvement in working conditions, workers’
awareness raising, social dialogue and provision of training, with the government playing
the role of a mediator between trade unions and employers. That positive trend stopped,
however, around two years ago204. In El Salvador’s tuna sector, positive changes in social
dialogue and working conditions were introduced in a response to a coordinated action
from the European and CA trade unions and a case brought to the ILO (further details
about the sector are provided in the case study).
Finally, Guatemalan stakeholders suggested that the EU in cooperation with the ILO could
support work of the Tripartite Commission on Labour Relations and Freedom of Association
202
On the other hand, according to information provided by the Ministry of Labour and labour inspection, there
are activities aiming at improving social dialogue in the country. For example, in 2021, there were 60
roundtables with employers and workers, 13 of which finished with outcomes satisfactory for all
participants. There were also seven roundtables (in 2021 and 2022) with representatives of the banana
sector from the northern department of Izabal (information provided by the Ministry of Labour).
203
We note the statement of Guatemala shared for this study that the country respects the legislation related to
freedom of association and that this is also the case of sugar mills and the palm oil sector. Therefore,
workers are free to choose if they wish to exercise the right to organise or not and in which form.
Moreover, according to information provided by the Ministry of Labour, since 2010 until the end of 2021,
169 trade unions have been registered in agriculture (information provided by the ministry of Labour).
204
There have been new developments in El Salvador since the interview, which are described in detail in the
case study. They include, e.g., ratification of five ILO conventions and reactivation of the High Labour
Council, while further work is needed regarding, e.g., renewal of trade union credentials of election of trade
unions’ and employers’ representatives to tripartite consultative bodies.
245
to make it more effective as a national mechanism providing foundations for social dialogue
and possible changes in legislation and practice in the future 205.
As stated above, the situation in CA regarding freedom of association is different in each

country of the region, it also varies between sectors and has been changing over time,
with improvements noted, e.g., in El Salvador. However, our analysis in the case study
focused in particular on El Salvador, Guatemala and Honduras suggests that there are still
parts of the region and sectors where, based on existing evidence, further work is needed
to overcome the overall climate of hostility against trade unions and to raise awareness of
workers and employers regarding the right to organise and to collective bargaining and
their use in practice. In some of them (e.g., palm oil in Guatemala) trade unions do not
exist (due to a hostile environment) or face serious challenges which include threats and
physical and verbal violence against trade union members, who also risk losing their jobs
or being blacklisted and not being able to find new ones. Some studies (e.g., ASIES, 2021)
also suggest a lack of workers’ awareness regarding trade union activity (e.g., in the sugar
sector in Guatemala) and their related rights.
The situation is also challenging in some other exporting sectors, e.g., melon in Honduras,
with very little progress over time, and with some companies blocking trade union activity
or backtracking from previous commitments. Overall multinationals seem to be more
willing to accept trade union activity and to bargain collectively. Nevertheless, some
multinationals, including examples of companies having operations in the EU or trading
with the EU and operating in Central America, follow the “race to the bottom” and do not
respect domestic legislation related to working conditions and freedom of association in
the hosting CA countries, preferring in some cases to pay penalties rather than to comply.
There is also a role to play for international buyers and certification mechanisms, present
in trade relations between the EU and CA. For example, the case of withdrawing certificates
in the melon sector in Honduras further to the evidence of non-compliance provided by
trade unions (and following an investigation) means that different certification mechanisms
may be leveraged in CA exports to the EU in order to diversify suppliers and to encourage
respect for workers’ rights. There is also evidence suggesting positive effects of support
and capacity building of CA trade unions by their European and US counterparts, which
should be continued.
7.5.4 Impacts for child labour (summary of findings from the case study)
section, we summarise findings from case study No. 9. It has been prepared jointly under
the social and human rights analysis and its findings are considered in both those parts.
The analysis aims to establish if the Agreement has influenced progress by the Parties
towards meeting their commitment reiterated in the TSD chapter to effectively implement
in their law and practice the ILO fundamental conventions, including conventions No. 138
and 182 related to the elimination of child labour, including its worst forms. Further details
regarding the overall situation in Central America and measures taken to-date to eliminate
child labour, are provided in Annex C-1.
Like in other sections of the study, also here we note that many actions taken either by
the Central American governments or the private sector (e.g., to eliminate child labour)
are usually driven by several factors, most of which are not related to the EU-CA FTA.
Therefore, while the analysis describes the situation in sectors engaged in exports to the
EU, this is not to suggest that observed changes have been influenced by the Agreement.
That said, where this was possible, based on information provided by sector
205
According to information provided by the Ministry of Labour, since 2018 until early 2022, the National
Tripartite Committee held 45 meetings, including discussions about legislative reforms (e.g., a new Penal
Code, amendments to the Labour Code and a new Procedural Code on Labour and Social Security), and the
consideration of the ILO Convention No. 190 (Violence and Harassment) and the related Recommendation.
Its Sub-committee for Legislation and Labour Policy has met 27 times and discussions included, e.g.,
position in the follow-up to comments of the ILO Committee of Experts regarding implementation by
Guatemala of the Convention No. 87 and 98, as well as regarding the closure of the case No. 3250
considered by the Committee on Freedom of Association.
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representatives or on other evidence, we have signalled potential links to the Agreement

or, more generally, exports to the EU. The analysis in the case study focused specifically
on the situation in and actions taken by El Salvador, Guatemala, and Honduras, while the
situation and trends in most relevant sectors in the remaining countries of the CA region
have also been taken into account, as well as other activities outlined in Annex C-1.
The available evidence suggests that the Central American countries have taken steps to
eliminate child labour. These include having in place legislative and policy frameworks, and
other measures, such as financial support to poor families, initiatives encouraging school
attendance, awareness raising campaigns, and cooperation with private sector and
international partners to eliminate child labour, including from sectors involved in exports
to the EU and other partner countries. Indeed, while recent data is not available for all CA
countries, the figures (see section 4.5) suggest that except for Nicaragua, the number and
share of children of 5-17 years of age involved in an economic activity and in child labour
decreased. Also, the efforts of Costa Rica should be highlighted, which has by far the lowest
level in the CA region of children engaged in an economic activity or in child labour, and
yet, in the analysed period, managed to further reduce the scale of this phenomenon. Also,
a substantial reduction in child labour has been recorded in El Salvador.
Moreover, there are examples of measures applied by the private sector (such as clauses
in contracts with suppliers prohibiting the use of child labour, verification of the age of
recruited workers (based on ID), provision of education and leisure time facilities for
children at plantations, so that they can spend time safely while their parents work),
awareness raising campaigns and cooperation with ministries and other institutions to
reduce and eliminate child labour from sectors involved in trade, e.g., sugar and coffee.
The evidence provided by sector representatives and other sources suggests that progress
has been made by CA countries in eliminating child labour in particular from the sugar
sector and sugar mills’ activities. Information from audits (inspections) and ILO and US
Department of Labour reports suggest that child labour has been eliminated from the sector
in El Salvador, Guatemala, Honduras, and Panama, while the sector in Nicaragua has also
taken similar steps (the latter is confirmed in the literature, but data is not available).
Likewise, sector representatives of, e.g., banana sector in Costa Rica informed that labour
inspections had not identified any cases of child labour in the sector’s operations.
Many actions have also been taken in the coffee sector, in particular in Guatemala and
Honduras and there is evidence confirming the number of children participating in activities
aiming at child labour prevention and reduction, such as pre-school and school education.
However, these activities and the resulting changes cannot be attributed to the EU-CA FTA,
as they predate the entry into force of the Agreement (notably in the sugar sector in El
Salvador and Guatemala) and are related to trade with the US and Canada. Likewise, the
zero tolerance for child labour policy applied by international buyers, the well-known
multinational brands sourcing in Central America in the coffee and sugar sectors played a
role. Those companies have their own monitoring mechanisms and over the last decade
have exerted pressure on Central America to reduce and eliminate child labour in exporting
sectors, including coffee and sugar. There are also cooperation activities supporting these
efforts.
Against this background, exports to the EU, notably in the sugar sector, have a relatively
small share in total exports from CA countries, which means that commercial factors may
in this case have only a limited (but increasing) leverage. That said, sugar sector
representatives admitted in a discussion for this study that exports to markets such as the
US or the EU are considered as being linked to certain sustainability requirements, and
that the sector needs to meet them in order to be competitive. Hence, while the EU-CA
FTA’s role on its own as an influencing factor would be rather limited, its importance (and
the EU’s) would increase if the importance of the EU market were considered jointly with
other markets.
247
As noted above, the available evidence does not highlight the role of the EU-CA FTA,
although the significance of the FTA may also be hidden partly behind the actions taken by
international buyers. These may have a global sourcing policy for the whole brand, and
this may also cover supplies to the EU, using the preferences offered by the EU-CA FTA.
Also, as suggested by coffee sector representatives from Honduras, and sugar sector
representatives from Nicaragua, exports (including those made to the EU) have
encouraged adherence to certification schemes, some of which prohibit the use of child
labour. In addition, the ongoing policy dialogue under the TSD Title, at the TSD Board
meetings, which includes reporting progress on eliminating child labour, might have
contributed to keeping the matter on the priority list for Central America.
Overall, progress made in the elimination of child labour has brought the CA countries
closer to meeting the SDG 8.7 and their commitments under the TSD Title.
7.6 Step 4: Conclusions
This section presents a summary of the analyses of the impact of the EU-CA FTA on the
right to work and right to just and favourable conditions of work, indigenous peoples’
rights, the case study on the freedom of association and case study on child labour.
In the trade context, it is important that economic growth goes hand in hand with social
development and is not achieved at the expense of labour and human rights. As a result
of increased economic activity under the FTA, it is possible that pre-existing vulnerabilities
regarding human rights may be intensified to a certain extent. Promotion of sustainable
development and respect for human rights may mitigate negative impacts and contribute
to positive developments.
The impact of the EU-CA FTA on human rights has been analysed in line with the overall
methodology and using a multi-pronged approach. It is important to note that this analysis
is limited by the lack of available and reliable data, making it difficult to draw robust
conclusions.
7.6.1 Impact on the right to work and right to just and favourable conditions of work
The serious situation regarding pre-existing vulnerabilities related to these rights has been
identified for Guatemala, Honduras, and Nicaragua. Many issues are connected to
insufficient protection under the law and ineffective implementation rather than to the
Agreement. However, the overall high level of informality, poor working conditions and
unfair practices in economic sectors related to trade with the EU (e.g., sugar, fruits, and
vegetables) raise concern as they may be intensified by increased economic activity. The
literature review provides a good overview of the pre-existing and current issues and in
some instances points to specific issues in sectors that are relevant for economic activity
under the Agreement. For example, many reports point to a serious pre-existing situation
in the sugar sector due to the different position of workers in sugar mills compared to the
situation of workers employed by other sugar producers (the latter reportedly not enjoying
full rights and benefits) and due to different working conditions for permanent workers and
temporary workers employed for the time of harvest, as well as a heavy production process
that affects health of workers in Guatemala, Honduras, and Nicaragua. However, it is not
possible to isolate the effect of the FTA.
Analysis of human rights indicators allows to assess the situation before the start of the
application of the FTA and after it has come into force. But it is not possible to determine
a direct causal link between the Agreement and human rights developments in Central
American countries. Available data based on indicators, such as the unemployment rate,
labour participation rate, informal employment rate and the ratio of hours worked does not
point to a clear impact of the Agreement on any of them, if values for the whole economy
and whole labour force are considered (labour-related data at the sector level has been
analysed in the part related to social impacts). Data for many of the relevant indicators
that could be used to broaden the analysis is not available or is partial and available only
for part of the sector, or one year instead of the whole period under review. This concerns,
e.g., data regarding wages in various sectors, accidents at work per economic sector,
248
complaints on harassment or violence at work, and others (in line with how the right is
defined under the international human rights instruments).
Economic modelling is the only method that allows us to disentangle the impact of the
Agreement from other effects. Economic results suggest that the impact of the Agreement
(based on the calculations related to tariffs but not to non-tariff measures as they are not
included in the modelling) is more pronounced for Costa Rica and Panama (at sector level)
and is more limited for other Central American states. This is expected due to the fact that,
Guatemala, El Salvador, Honduras and Nicaragua are modelled as GSP+ beneficiaries in
the counterfactual scenario without the Agreement being in place. The difference between
the two scenarios is limited, as under GSP+ these countries would enjoy significant market
access to the EU. For Costa Rica and Panama, the EU-CA FTA is compared to one to trading
on of MFN terms (without the Agreement in place, both countries would have graduated
from GSP+), where tariff preferences would be much smaller, i.e., the gains from the EU-
CA FTA much larger.
As a result of the Agreement, positive effects for employment in sugar sector have been
estimated for Guatemala, El Salvador, Honduras, and Nicaragua, with negligible changes
in other sectors. Likewise, positive impacts are estimated in the sugar sector in Costa Rica.
In addition, positive impacts are estimated by the model in employment and production in
the vegetables and fruit sector (Costa Rica and Panama), textiles (Panama) and transport
(Panama). Based on this, it can be said that the EU-CA FTA may have had a minor role in
strengthening the ability of Costa Rica and Panama to progressively realise their human
rights obligations regarding the right to work (increasing employment for their citizens).
Regarding the impact of the EU-CA FTA on the right to just and favourable conditions of
work, stakeholders from various Central American countries found it difficult to attribute a
clear impact to the EU-CA FTA, but they did not consider that the FTA had a significant
impact in either direction. Costa Rican stakeholders perceived the impact of the Agreement
on working conditions to be overall somewhat positive (especially pointing out the value
added of obligatory certification of products and political and consumer pressure to improve
working conditions) but did not notice specific improvements for the related rights of
vulnerable population groups. Interviewees from El Salvador noted a positive impact on
working conditions in the tuna sector but stressed that difficult situation regarding working
conditions continued for the temporary workers employed for the time of harvest in the
sugar sector. Some stakeholders expressed disappointment that when the FTA was about
to come into force, multiple initiatives were introduced but not further developed
thereafter. Stakeholders from Guatemala stressed that working conditions in the sugar
sector and in the palm oil sector continued to be a matter of concern. Interviewees from
Honduras and Panama stated that the Agreement did not bring any improvements in the
working conditions of the workers. Honduran stakeholders noted that projects carried out
by the EU Delegation have been useful but not very effective to reach their objective.
Due to the particularly vulnerable situation in the sugar sector regarding working conditions
before the FTA and the production process of sugar, a very minor negative impact
(proportionate to the results identified by the economic modelling and the share of exports
to the EU in the total sugar exports) cannot be excluded in Guatemala, Honduras, and
Nicaragua. Changes for El Salvador have been negligible.
Overall, while economic modelling estimates that jobs have been created and minor
changes have been noted by stakeholders, the EU-CA FTA is assessed to not have changed
significantly the situation regarding the right to work and the right to just and favourable
conditions of work in Central American countries.
7.6.2 Impact on the indigenous peoples’ rights
A serious situation regarding pre-existing vulnerabilities related to indigenous peoples’

rights has been identified for Guatemala and Honduras. The Guatemalan legal framework
does not provide adequate protection of indigenous peoples’ rights. Although Honduras has
249
a stronger legislative basis, indigenous peoples face violations of their rights and existing
laws are not effectively enforced to ensure their protection.
Data for relevant human rights indicators is not available which substantially limits the
analysis of the pre-FTA and post-FTA entry into force periods regarding lands occupied by
indigenous peoples. Stakeholder consultations did not provide direct evidence of violations
stemming from the Agreement but have found out that land rights of indigenous peoples
continue to be a matter of concern, both in Guatemala and in Honduras.
Economic results suggest a minor increase in the production of sugar which requires vast
land as a resource (1.5% increase in Guatemala and 4.3% increase in production in
Honduras). Additional environmental analysis found that the Agreement-tariff reduction
induced land changes that have resulted in a net increase (not only sugar, but all crops
affected by the Agreement) of cropland area by 400 ha in Guatemala and a net decrease
of cropland area in Honduras (by 500 ha). Following the general trends of deforestation
and cropland development, the analysis concluded that even though no direct evidence
was found linking land use to the EU-CA FTA, the impact of the Agreement on land use
cannot be excluded. For the human rights analysis, it means that it is difficult to establish
a direct link between land use and lands occupied by indigenous populations. No direct
evidence of the impact has been found, including stakeholder consultations. However, it
cannot be excluded that minor impact may have occurred (proportionate to economic
changes under the Agreement in the sugar and palm oil sectors), 206 especially because of
high vulnerability of the indigenous peoples’ rights due to the lack of adequate mechanisms
of protection and ineffective implementation.
7.7 Recommendations
In line with the European Treaties, protection of human rights is one of the EU’s overarching
objectives in its external action and is placed at the centre of the EU trade agenda. The
EU-CA FTA belongs to the so-called “new-generation” FTAs that have widened the scope
of the Agreement from strictly trade-related matters to include fundamental rights in its
human rights clause and the TSD Chapter (with provisions on labour rights). Most recently,
the European Commission expressed its commitment to advancing the protection of human
rights through due diligence in legislative proposal for a Directive on Corporate
Sustainability Due Diligence.
Taking into account relevance of human rights in trade, the following recommendations
have been formulated:
Complete the ratification of the EU-CA Association Agreement to enable the entry
into force of the remaining pillars of the Agreement.
- Parts I and V of the Agreement establish enforceable human rights obligations. In line
with the provisions of the Agreement, Parties have positive obligations to ensure that
democratic principles and human rights specified in the human rights clause are
respected within their jurisdiction. Issues identified in the baseline analysis of human
rights situation in Central America as well as the possible minor impact of the
Agreement on indigenous peoples’ rights are relevant under the human rights clause
of this Agreement.
Enhance implementation of the TSD Chapter of the Agreement, in particular

implementation of labour standards in Central American countries, especially in
the agricultural sector.
- Parties to the Agreement should continue dialogue under the TSD Chapter. Ongoing
efforts should be continued with more emphasis on actions that need to be taken by
the governments of the Central American states to put their national legal frameworks
fully in line with international standards (regarding respect for minimum wages, social
security coverage, formal contracts, paid overtime, paid holiday and rest time,
occupational safety, right to collective bargaining) and to effectively implement labour
laws by increasing the number of labour inspectors, by increasing financial and human
206
See also palm oil case study in the environmental analysis.
250
resources, by providing training for labour inspectors. Based on the information

provided by stakeholders, trade union membership has a tangible positive impact on
working conditions and protection of workers’ rights. Enabling trade union membership
at sector level is important to move towards improved protection of workers’ rights
overall. To that end, the CA governments should review the recommendations provided
by the relevant UN monitoring bodies and the ILO and consider how to address them.
Specific priority areas for action could be then discussed regularly at the TSD Board
meetings or dedicated events to consider progress achieved and the remaining
challenges.
- The Parties should continue cooperation (in addition to the existing cooperation with
the ILO and the UN bodies), and, depending on the specific needs, this may include
capacity building of labour inspection services (including for inspections in rural areas
and special units that address forced labour and child labour), extension of certification
programmes, carrying out awareness raising campaigns on labour-related issues,
health and safety at work programmes and other relevant initiatives.
- Concerning private certification programmes, based on feedback from stakeholders, a
specific recommendation refers to the inspectors from private certification programmes
to carry out inspections at unannounced moments and outside the workplace to avoid
interference from other parties and to be able to fully evaluate the state of compliance
with the domestic legislation and international standards.
-
o The EU needs to continue to promote effective compliance of labour laws in CA
countries by boosting technical assistance and capacity-building projects (e.g.,
regarding best practices on labour inspections); by continuing to provide
funding; and by strengthening dialogue under the TSD chapter on concrete
issues that matter for the implementation of the Agreement: Clearly define the
topics of cooperation and specific projects based on the needs of each of the
states and provide a detailed description of the progress and state specific
challenges for further progress in the FTA implementation reports. Current
reports provide a very general description that does not allow visibility on how
the cooperation evolves. General oversight of all the human rights-related
projects should be considered to coordinate actions and make sure that all the
projects have specific aims and multiple projects have a common goal.
o Continue and enhance engagement with human rights stakeholders on labour
rights (e.g., through civil society Advisory Groups under the TSD Title) to
identify areas where further policy dialogue and capacity-building projects are
most relevant.
o To ensure effective impact of this assistance on sustainable development in
general and human rights (notably labour rights) in particular, it is important to
coordinate between various EU instruments and projects carried out by the EU
Delegations on the ground. Stakeholders have indicated that ad-hoc or sporadic
projects do not tend to be effective in achieving their goals. That is why it is
useful if specific targets (driven by identified needs) and projects are
coordinated to ensure that they complement each other and have tangible
results. Learning from this evaluation experience of the lack of data related to
human rights (which are only partially provided by the ILO), introduce human
rights (labour rights) performance indicator scorecards to follow progress on
human rights (labour rights) and related specific issues (concrete list of issues,
concrete list of actions and concrete outcomes to achieve). In this way, states
will have an additional incentive to collect data (in cooperation with relevant
agencies, e.g., the ILO), and progress will be visible based on the data presented
in the implementation reports. This will also increase transparency on the
outcome indicators (e.g., child labour rate, trade union density rate, the number
of trade unions, the number of trade union members, the number of non-fatal
accidents at work, the number of fatal accidents at work, the number of people
covered by social security, the number of people with formal contracts). With
regard to the social analysis, we note that there are some existing monitoring
mechanisms in the CA countries, however, results from that monitoring are not
published. Moreover, other types of data mentioned above should be collected
by either the institutes of statistics (e.g., through the child labour survey) or
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other state agencies (e.g., data on workers covered by social protection

mechanisms or data related to accidents at work). This may require capacity
building of those institutions, and an improved implementation and enforcement
of the legislation (e.g., obliging employers to report accidents at work and the
state institutions to publish summary reports at regular intervals).
Strengthen focus on vulnerable groups.

Because Central American states have a high number of indigenous populations, especially
in Guatemala, it is essential that economic activities under the Agreement are carried out
with special attention to vulnerable population groups. The lack of national legal
mechanisms of protection of their rights or inefficient implementation of the relevant
legislation do not provide necessary safety nets in case of possible violations. While no
direct evidence of the impact of the Agreement has been identified in this analysis, it cannot
be excluded that actions under the Agreement could have had a minor impact on the rights
of indigenous peoples. Therefore, in line with Articles 284 and 288 of the TSD Title, the
Parties should continue and enhance the promotion and use of international instruments
and good practices related to Business and Human Rights and Corporate Social
Responsibility (CSR) to mitigate the effects of business activities on social and
environmental aspects, incl. those relevant for the indigenous peoples. As indicated in the
section dedicated to the CSR analysis in this Report, some companies in the CA countries
already pursue CSR practices related to the reduced use of water, recycling, monitoring
use of chemicals, respect of minimum wage, providing housing for workers and others (see
analysis on CSR). Such practices should ideally be extended on the whole sectors exporting
to the EU. Next to that, Parties should carry out capacity-building projects aimed at
protection of indigenous peoples’ rights, in particular land rights and right to free prior and
informed consent, in line with the ILO Convention No. 169.
Regarding other vulnerable population groups, it can be seen from the analysis in the child
labour case study, that the Parties should intensify actions to address child labour in
Honduras and Guatemala, using a positive example of El Salvador.
Improve monitoring of the implementation of human rights in Central American

countries.
Data on human rights indicators is very scarce for most of the countries in Central America.
This limits the analysis of the impact of the Agreement and does not allow to get insights
into key elements relevant for the analysis of rights under evaluation (e.g., accidents at
work, minimum wage, etc.) or to validate claims related to specific human rights issues for
specific vulnerable groups.
Therefore, it is recommended, to the extent possible, that more data should be collected
on various aspects of labour rights, not yet provided for by the ILO, disaggregated by
sector and vulnerable population groups. It is recommended that data is collected
systematically to reflect various indicators at regular intervals. While data collection
requires time and resources, it is essential for the Parties and other stakeholders alike to
be able to analyse trends and understand the situation regarding human rights on the
ground. To save costs, data can be collected at relevant intervals, e.g., annually, biennially,
or at a different frequency. Technical support from the EU in cooperation with the ILO
should be considered to develop the capacity and tools to collect the data. Collaboration
projects with national institutes of statistics could be contemplated.
Capacity-building projects need to be following a flexible planning that allows for an agile
response to changing human rights situations.
In line with Article 293 of the TSD Title, the Parties should commit to a more regular review
of impacts of the EU-CA FTA on the three dimensions of sustainable development. To
ensure continuous feedback and dialogue between all the stakeholders, it may be useful
to shorten the period of evaluation from every five years to every three years. Many
projects and initiatives shared by companies working in Central America for this study are
dated in 2020 and 2021 (e.g., Action plans on human rights for workers in various sectors),
when the evaluation has already started. If the period of evaluation is shorter, pressure to
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address issues under the Agreement is likely to increase to bring tangible results.
Moreover, the collection of similar data sets at regular intervals should allow for capturing
trends and enable supporting or mitigating reactions, when needed.
8 INSTITUTIONS
8.1 Institutions established by the EU-CA FTA
In this section, we analyse and evaluate (based on interviews with representatives of the
Commission and Central American Governments) the operation of the institutional set-up
responsible for the EU-CA FTA management, checking if decisions required by the
Agreement have been taken to ensure compliance, and if the institutions provided the right
framework for other functions, such as information sharing between the Parties, updates
related to new policies and legislation, discussion about practical application of certain
provisions of the Agreement and the ability to address and resolve problems raised by the
Parties. We also report about cooperation activities and technical assistance provided by
the EU. A more detailed analysis related to the mandate of each body established by the
EU-CA FTA and outcomes of meetings has been provided in Annex A-2.
Association Committee
Our interlocutors stressed the importance of the role of coordinators tasked to prepare
Association Committee meetings and maintain the overview of the implementation of the
Agreement. While the network is active in the run-up to the meetings, it would be useful
to maintain regular exchanges during the year to ensure follow-up to discussions and a
closer monitoring of how the Parties implement their commitments. In this context, the
Presidency pro tempore on the CA side has an important role to play as a leader and CA
coordinator, and partner for the European Commission. However, given that the term of
the Presidency is only of six months, it would be good to set up a cooperation mechanism
on the CA side (comparable with a Troika of EU Presidencies) to facilitate information flow
and work during the year. Moreover, a more detailed monitoring of commitments should
be introduced with a reporting complementing the EU annual FTA implementation reports.
In this context, it is important to review implementation of commitments enshrined in the
EU-CA FTA, ensure follow-up to discussions at the Committee and Sub-committee meetings
and take actions further to concerns raised by stakeholders.
Regarding formal decision-making powers, it was acknowledged that all required decisions
have been taken by the Association Council, however, in some cases the procedures took
a long time to complete (e.g., seven years to approve the Protocol on Croatia’s accession
to the Agreement). Seen from this perspective, it would have been helpful if the Association
Council had delegated some powers to the Association Committee to simplify and shorten
a bit the process.
The Association Committee is considered to have played well its role as a forum to take
stock of discussions in other bodies, review overall trade relations between the Parties and
exchange information about other aspects (e.g., developments at the WTO). Likewise, it
turned out to provide a sufficient cover for policy areas not having its own Sub-committee,
such as trade in services, investment, and competition, given a relatively limited agenda
in each of those until now. On the other hand, the Association Committee has not been
used as a forum to address and solve problems, which would provide an escalation route
for matters not resolved at the Sub-committee meetings and an alternative way to dispute
settlement under the FTA or WTO proceedings, both of which would be resource-intensive
and time-consuming. While there have been not too many issues and some have been
resolved by the Sub-Committees or the Parties acting bilaterally, a few remain, where no
progress has been made over a longer time.
Technical Barriers to Trade (TBT) Sub-committee

The TBT Sub-Committee meets annually and while the activity increases in the run-up to
the annual meetings to prepare them, contacts are maintained between the EU and CA
sides during the year to ensure follow-up or address new issues which may emerge in the
meantime. It was emphasised that in such cases diverse opportunities are used, with e-
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mails and videoconferences, but also through engagement on the ground (EU Delegations
addressing market access barriers with hosting countries), WTO TBT Committee or bilateral
discussions at different levels. It was also appreciated that CA countries looked for practical
solutions to issues raised by the EU and while progress in addressing and resolving issues
(including market access barriers) depends on the individual case, in some, a full or partial
solution has been identified and applied (e.g., recently, Costa Rica has recognised the EU
standards on fire equipment as equivalent).
The Parties have also used the Sub-Committee meetings as an opportunity to exchange
information about progress in application of legislative measures (e.g., harmonisation of
technical regulations in Central America) and new policies or legislative instruments, where
also the EU side shared updates about initiatives in areas being of interest for CA countries,
such as organic products, sustainability, or pesticides. Overall, the Parties considered the
Sub-Committee as a useful forum to manage the TBT chapter of the Agreement. Regarding
the programme for the future, the EU side suggested it may be useful to focus on regional
regulatory harmonisation in Central America and extending it to more product groups.
Sanitary and phytosanitary measures (SPS) Sub-committee

The Sub-Committee meets annually and while the pace of activity increases in the run -up
to the meeting, technical contacts are maintained during the whole year to support trade
flows. The Parties exchange information and seek advice regarding new legislation, and
practical aspects related to implementation of the SPS Chapter, incl. certificates, audits,
and other questions which should not wait until the annual meeting. In the run up to the
Sub-Committee meeting, all Parties cooperate in setting up the agenda and preparatory
work. Discussed subjects usually reflect the structure of the Chapter, as well as interests
and concerns of the Parties (e.g., maximum residue levels, pesticides, regionalisation, or
pre-listing of establishments). On the EU side, coordination and exchange of information
also includes Member States and their representatives in the Council Working Groups.
In an interview for this study, it was emphasised that regarding SPS measures, the WTO
notification system and work of the dedicated committees remain the main channel for
informing partner countries, including, respectively, the EU and CA, about planned changes
in legislation, in categories outlined in the WTO SPS Agreement. WTO system also provides
the main channel to submit and address comments related to the notified measures. In
this context, Sub-committee meetings provide an additional opportunity to raise concerns,
receive focused clarifications and get an update about the process. Our interlocutors also
acknowledged that in case of more complex measures or having a larger impact on bilateral
trade, the EU and CA countries use SPS Sub-committee meetings to deliver presentations,
provide tailored, additional information and answer questions, e.g., EU on pesticides and
the Farm to Fork strategy and labelling of food and CA countries on harmonised CA regional
regulations. The objective is to help the other Party understand and be able to apply the
measure, so that it does not become a trade obstacle. This arrangement has worked well
on several occasions and likewise, there is a constructive and cooperative approach to
discussions and solving problems on issues raised by the Parties. That said, while some
issues have been addressed successfully and solved fully or partly, others remain. It was
also considered that while overall, there are no major problems in implementation of the
Chapter, more transparency and information about import requirements in CA countries
and practical aspects would be useful and likewise, progress in regional harmonisation of
requirements in CA would facilitate EU-CA trade and access to the regional market for EU
exporters, who currently need to satisfy requirements established by domestic legislation
of individual CA partner countries.
Sub-committee on Customs, Trade Facilitation, and the Rules of origin

While the main work happens in the run-up and during the annual meeting, the Parties
remain in touch during the year, through e-mail exchange and videoconferences. The CA
side coordinates its position, which is then shared with the Commission.
Given the remit of the Sub-committee and the chapter and its close links with the daily
operation of the economic operators and trade flows, it is important to have communication
tools enabling timely and effective dialogue with those applying the Agreement in practice.
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For example, in Costa Rica, the Ministry of Trade, the export promoting agency and the
customs agency provide continuous advice regarding the rules of origin and the movement
certificate EUR.1, with a support function provided through a dedicated website, phone and
social media.
The Sub-committee is considered as providing adequate space for exchange of information

about the relevant legislation and requesting clarifications. Moreover, given presence of
the Ministries of Trade and customs agencies, it offers an opportunity to discuss practical
aspects of the implementation of the chapter, challenges faced by companies and ways to
address them. It is also considered useful that based on concrete cases, solutions are
sought aiming to resolve wider problems which those cases represent. However, it was
also acknowledged that the Sub-committee should act with more resolve and at a higher
pace taking timely decisions and actions to address problems when they emerge given
impact, they may have on bilateral trade flows. While the solution and its feasibility always
depend on the problem, there was a view that it took a long time to prepare and agree the
Explanatory Notes about the movement certificate EUR.1. Regarding areas to focus on in
the future, our interlocutors mentioned application of the movement certificate (and the
need to ensure that customs authorities in the EU Member States follow the Explanatory
Notes, which is not always the case yet), direct transport clause and cumulation.
Sub-committee on Intellectual Property Rights

According to the Agreement, the IPR Sub-committee covers only Geographic Indications
(GIs), however, while other parts of the IPR chapter are not mentioned in its remit, they
are not explicitly excluded either. Therefore, while discussions to-date focused mostly on
GIs, our interlocutors suggested it would be good for the Parties to extend the agenda to
cover also other IPR aspects falling within the remit of the chapter. This could potentially
facilitate coordination or integration in CA, also regarding IPR.
Overall, it was considered that the Sub-committee provides a good forum for a discussion
and exchange of information, including expression of interest in registration of new GIs. In
meetings and outside sessions, discussions are result-oriented, including bilateral ones,
regarding registration of new GIs (e.g., between the EU and Costa Rica and El Salvador,
respectively). Implementation of this chapter and preparation for Sub-committee meetings
also involves EU Member States. Moreover, discussions at the Sub-committee provide an
opportunity to raise concerns. In past cases (e.g., Queso Manchego in Costa Rica), the
Parties were looking for constructive solutions, incl. e.g., the logo change and adaptation
of labelling to avoid a confusion among consumers. The chapter implementation and Sub-
committee meetings offer as well, possibilities for cooperation, and the EU has provided a
dedicated programme (IP Key Latin America) supporting organisation of seminars, e.g.,
one already held, on GIs, and another one planned in 2022. There was a view that it would
be good if discussions are focused (as this may be a way to achieve concrete results) and
there is a need to ensure a follow-up to actions agreed bilaterally or during the Sub-
committee meetings.
Sub-committee on Market Access

The Sub-committee has a broad remit, and while discussions cover mainly trade in goods,
also other aspects related to market access (e.g., trade in services or procurement) are
raised. The preparation for meetings involves consultations with business representatives
and EU Member States (on the EU side), and the analysis of market access issues proposed
for the agenda. Engagement between the Parties follows also outside meetings. While some
problems have been solved, other issues have been discussed for several years and so far,
there was no attempt to escalate the matters to the Association Committee in its capacity
of a body to which the Parties direct issues related to implementation and interpretation of
the Agreement (Article 346.2 b).
Moving forward, the Parties can consider putting on the agenda also more positive aspects,
such as communication of resolved barriers, information about reforms or other measures
which help to prevent or remove market access barriers, measures applied by the Parties
to facilitate trade during the COVID-19 pandemic, progress in CA regional integration and
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other initiatives and cooperation projects, all having an objective to facilitate trade and to
prevent emergence of new or to remove (or reduce) the existing barriers.
Ad Hoc Group for Public Procurement

The Group was established in 2016 and has been holding annual meetings since then. The
main work follows in the run up to the meeting and given a different dynamic of the public
procurement provisions (compared e.g., to rules of origin or other aspects which matter in
a daily operation of businesses of all Parties), there was no need for more frequent contacts
between the Parties. There is also less engagement with private sector, at least on the CA
side, given a low level of participation of CA companies in public procurement procedures
in the EU and the lack of monitoring of CA exporters if their goods are used in contracts
with public entities. However, there are cases of companies signalling problems, e.g., with
imports of EU products involved in public procurement procedures.
Our CA interlocutors considered as useful workshops and other occasions where Parties
could exchange information about their public procurement system and its elements. In
their view, it was good to hear, e.g., about EU practices and learn from them. On the other
hand, there was still work to do regarding the single point of access on the CA side (portal
with information about public procurement in CA countries). Moreover, there was a view
that it would be useful to have a roadmap or a workplan setting out steps the Ad Hoc Group
and the Parties should take to implement the chapter.
Summary of activities of the remaining bodies under EU-CA FTA, based on minutes from
meetings, has been provided in Annex A-2.
Recommendations from the institutional analysis
• Based on stakeholder engagement, we recommend adaptations in working methods of

the EU-CA FTA institutions to support implementation of the Agreement and improve
the pace of reaction to the identified needs. For example, some decision-making powers
could be delegated from the Association Council to the Association Committee and
more work could be done between the annual meetings to speed up the decision-making
process, given that it took several years, e.g., to agree and adopt an Accession Protocol
for Croatia or prepare and adopt Explanatory Notes regarding movement certificate.
• Given some issues have remained not resolved at the Sub-committee level for several
years, the Parties should consider in such cases escalation to the Association Committee
in its capacity conferred by the Article 346.2 b).
• Likewise, while the focus will remain on preparation for and holding the annual meetings
of all bodies established under the Agreement, the Parties should dedicate some
time during the year to review and follow-up the takeaway actions from the meetings,
and issues raised by stakeholders to improve implementation of the Agreement, speed
up reactions to issues raised and thus ensure higher effectiveness of the structures.
• The Parties should also ensure at regular intervals an agenda item at Sub-committee
and Ad Hoc Group meetings to discuss the existing provisions of the Agreement in each
chapter to check and ensure compliance, incl. provisions on chapter-based reviews.
• For a smooth Agreement management, the CA countries should consider adaptations in
working arrangements for the Presidency pro tempore, e.g., each time the current
and the upcoming Presidency working closely together and coordinating work with the
Commission.
• To facilitate EU-CA trade, it is recommended that TBT Sub-committee continues the
discussion about regional regulatory harmonisation in CA and that regional regulations
are extended onto more groups of products.
• It is recommended that the SPS Sub-committee discusses at the next meetings ways
to increase transparency in providing user-friendly information for exporters regarding
import requirements for products being subject to SPS measures.
• To facilitate trade flows and the use of preferences, the Sub-committee on Customs,
Trade Facilitation and Rules of Origin should continue discussing (with a view of
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finding practical solutions) the application of the movement certificate (and the need to
ensure that customs authorities in the EU Member States and CA alike follow the
Explanatory Notes, which is not always the case yet, e.g., marking trade as EU-CA, not
bilaterally between the participating countries), direct transport clause and cumulation.
• To support implementation of the whole Agreement for the benefit of the economic
operators of all Parties, discussions at Sub-committees should cover the whole chapter.
In that context, although the Agreement envisages that the IPR Sub-committee will
follow implementation of provisions on GIs only (other parts of the chapter are not
mentioned, but are not explicitly excluded either), we recommend that the Parties allow
discussions about other aspects of the IPR Title being of importance for their trade and
investment relations.
• Regarding the Market Access Sub-committee, while the main focus will remain on
the removal of barriers flagged by business representatives, the Parties should consider
putting on the agenda also more positive aspects, such as communication of resolved
barriers, information about reforms or other measures which help to prevent or remove
market access barriers, measures applied by the Parties to facilitate trade during the
COVID-19 pandemic, progress in CA regional integration and other initiatives, including
cooperation projects, all with an objective to facilitate trade and to prevent emergence
of new or to remove (or reduce) the existing barriers. Such examples and discussions
could also support mutual learning in adopting measures that meet policy objectives,
but do not constitute obstacles to trade.
• Moreover, given that market access barriers are in many cases easier to discuss and
address when information about them is accompanied by a thorough analysis, business
representatives, including individual companies, business associations, and other actors
should continue and enhance efforts to gather all relevant evidence when the market
access barriers are flagged to the Commission or CA governments, as this is likely to
facilitate the process towards their resolution.
• The Ad Hoc Group on Public Procurement can consider organising side events or
focused sessions within its meetings where Parties could exchange information about
their public procurement systems and their operation in practice and learn from each
other. The Parties will also need to pursue work on the single point of access on the CA
side (portal with information about public procurement in CA countries). Moreover, the
Group can consider developing workplan setting out steps the Ad Hoc Group and the
Parties should take to continue implementing the chapter.
8.2 Institutions under the TSD Title
The Terms of Reference for this project have classified this task as one of the priorities. In
it, we will seek to determine the impact of the institutions established by the TSD Title on
the implementation of its provisions and achieving the objectives of the EU-CA FTA. Aimed
at contributing to sustainable development in the Parties and attainment of the SDGs, in
particular SDGs No. 8 and 13-15,207 the institutional mechanism under the TSD Title
consists of the following components:
• Contact points designated by the Parties in their administrations for trade-related
aspects of sustainable development, as well as the Board on Trade and Sustainable
Development comprising high level representatives from each Party, to oversee the
implementation of the Title, including cooperation activities (Article 294).
• Civil society Advisory Groups on trade and sustainable development mandated to
express views and make recommendations and advising the Parties on how to better
achieve the objectives of the TSD Title (Article 294). The Parties shall convene new or
consult existing Advisory Groups. They shall comprise independent organisations in a
balanced composition of economic, social, and environmental stakeholders.
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SDG No. 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment
and decent work for all, SDG No. 13: Take urgent action to combat climate change and its impacts; SDG
No. 14: Conserve and sustainably use the oceans, seas and marine resources for sustainable development;
SDG No. 15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage
forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss.
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• Annual (unless otherwise agreed by the Parties) meetings of the Civil Society
Dialogue Forum between the TSD Board and civil society to pursue dialogue about
sustainable development aspects of trade relations between the Parties and the Title’s
implementation (Article 295).
• A specific dispute settlement mechanism for the TSD Title (Articles 296 to 301).
8.2.1 Contact Points and TSD Board208
The Parties have established their contact points. For the EU, it is based in the European
Commission, DG TRADE, in the unit responsible for bilateral relations on TSD and GSP. In
partner countries, they are in the Ministries responsible for trade. Moreover, within each
Party, there is a mechanism of coordination of preparations for annual meetings under the
TSD Title and implementation of the latter, between (for the EU) DG TRADE, DG EMPL, DG
ENV, DG CLIMA, and DG INTPA, as well as other DGs which may be relevant for discussed
topics, while in the partner countries, coordination takes place between the Ministries for
Trade and the Ministries for Labour and Environment, respectively. In addition, on the CA
side, the country holding for six months the Presidency pro tempore plays a role of a leader
and coordinator, consulting positions before presenting them to the EU side (in addition,
contact points on the CA side, have coordination meetings before meeting in the TSD Board
with the EU). Both, the Commission, and the representatives of the CA countries consider
the institution of Contact Points as useful, supporting preparations for the TSD Board
meetings, information flow and (on the CA side) coordination within the region.
The TSD Board209 held its first meeting in 2014, in Nicaragua and since then, has been
meeting annually (except in 2017), in venues alternating between Brussels and CA or (as
in 2020 and 2021), virtually. In this context, Central American representatives stressed
benefits from holding meetings virtually as they provided an opportunity for participation
of a broader representation of CA governments and all ministries relevant for the TSD Title.
Conversely, the participation in meetings held in person had to be limited for budgetary
reasons. Given that some of our interlocutors have participated in several meetings, some
from the beginning of the implementation of the TSD Title, they provided an assessment
of the evolution of the Agreement and all the Parties. In a joint view (shared also by civil
society representatives), there was a positive dynamic developing over the first few years
of the implementation until the meeting in 2019 in Guatemala. It has been affected by the
pandemic and its impacts on meetings and other activities. However, there are also ideas
of how that dynamic may be regained. In that context, some of our interlocutors were of
the view that one meeting a year is not sufficient to keep the dialogue and ensure follow-
up. They suggested an additional meeting to be held virtually, a few months after the
annual one to discuss follow-up. Along the same line, others thought it would be good to
avoid a rhythm of preparation for just one meeting a year, with a long time of no or low
joint activity in between.
In 2014, the Association Council adopted a Decision related to its Rules of procedure and
those of the Association Committee (Decision 1/2014), the latter applying also to work of
the TSD Board. Moreover, the Association Council adopted a Decision (4/2014) establishing
a list of experts for the Panel of Experts, which is part of the dispute settlement mechanism
under the TSD Title. In this way, the framework for operation of the TSD institutions has
been established.
TSD Board meetings have provided an opportunity for the Parties to exchange information
about actions taken to implement provisions of the TSD Title, including ratification and
implementation of international conventions in areas covering labour, environment and
climate change, adoption of new laws and policy documents, and capacity and capability
development of the domestic institutions, including inspection services. The Parties also
discussed cooperation activities and opportunities for technical assistance. Moreover, they
208
To-date, we held interviews with representatives of the European Commission and of the Governments of
Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. There was also an e-mail exchange with the
Government of Panama, however, without a follow-up from their side.
209
Information related to meetings of the TSD Board is based on minutes from the meetings, and interviews
with representatives of the Parties participating in meetings, including persons nominated as contact points.
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provided regular updates regarding establishment and operation of their Advisory Groups.
In this context, given a delay in setting up the Advisory Groups, at the 2015 meeting,
Panama, El Salvador, and Honduras informed about being in the process of establishing
them and committed to inform the Board once these are set up (TSD Board, 2015). In
2019, the Board reviewed written recommendations provided by the Advisory Groups and
noted progress in their organisation and coordination. The Board also highlighted financial
support provided by the EU enabling civil society’s participation in the annual meeting,
including the Civil Society Dialogue Forum. CA countries also stressed the importance of
setting up domestic dialogue with their Advisory Groups, including on recommendations.
In 2020, the EU drew the CA countries’ attention to the declaration adopted by Advisory
Groups. The CA Parties were of the view that the dialogue between the Parties and the
Advisory Groups was good and covered different aspects of the TSD Title and the Civil
Society Dialogue Forum provided a platform for a dialogue (TSD Board, 2020). Likewise,
in 2021, the Board reviewed a note submitted by the Advisory Groups and repeated largely
views expressed in 2020 about the importance of the dialogue with civil society and
commitment of the Parties to strengthen dialogue with their own Advisory Groups (TSD
Board, 2021). The Board has also provided a space to discuss challenges related to
implementation and measures taken to address them, e.g., in 2015-2019, Guatemala
reported about progress achieved in implementation of the ILO recommendations related
to conventions No. 87 and 98 further to 2012 workers’ complaint under Article 26 of the
ILO Constitution requesting establishment of the Commission of Inquiry (TSD Board, 2015,
2016, 2017, 2018, 2019).
Proposals for change / improvement in the operation of the TSD Board
In the interviews for this study, while there was a consideration that monitoring and the
related exchange of information are useful and important, most of our interlocutors were
of the view that the formula of the TSD Board meetings requires a reform, for the benefit
of all Parties. There were several opinions that discussions should become more focused
and instead of having a similar overview of all conventions and policy areas each year,
there should be a choice of a particular aspect, for a more in-depth approach. These may
include specific challenges that need to be addressed, as well as areas, where the Parties
could exchange examples of good practice (e.g., a reference was made to discussion at
the 2021 TSD Board meeting on organic agriculture, it was also raised that given that the
EU has so many trade agreements with a TSD chapter, more information should be shared
with other Parties about how certain provisions, incl. dialogue with civil society are
implemented in relations with other countries; likewise, it would be of interest to hear from
Central America about their experience in implementing labour and environment related
provisions and cooperation with partners, such as the US or Canada). There was also an
idea that the TSD Board should have its own, small budget that would be used to provide
funding for cooperation activities. TSD Board meetings should be accompanied by such an
activity or even sometimes replaced by it, ideally by an activity that would bring together
the government representatives from all Parties and civil society (Advisory Groups, and if
needed or useful, also others). This formula (e.g., having a seminar dedicated to a topic
of joint interest) would support dialogue with civil society on topics falling within the scope
of the Title, contribute to capability building and help to focus discussion and efforts on
concrete problems or goals. The idea of additional activities goes very much in line with a
proposal put forward by the EU Advisory Group and shared with the TSD Board 210,
according to which the Parties should promote seminars on decent work, to be held either
in the EU or a Central American country, where employers, trade unions and academic
experts in labour relations could discuss different aspects covered by the decent work
concept (job creation, rights at work, social dialogue and social protection), with invitations
extended to other civil society representatives. For a better outcome and follow-up of such
events, ideally representatives of all the Parties should be invited as well and actively
participate, so that outcomes of the discussion and any agreed steps forward are shared
among all key stakeholders playing a role in the implementation of the EU-CA FTA. The EU
Advisory Group provided also other suggestions of cooperation activities and best practice
210
Proposals: 1) decent work and compliance with ILO standards, 2) CSR practices and 3) business
opportunities and challenges, shared with the TSD Board in 2018 by the EU DAG for the EU-CA FTA:
https://www.eesc.europa.eu/en/sections-other-bodies/other/eu-central-america-domestic-advisory-group
259
sharing. These include a more regular discussion about social and environmental impacts
of business operations in particular in sectors supported by the EU-CA FTA, which may
include CA sectors exporting agricultural products to the EU. Another proposal focuses on
best practice sharing in CSR practices and sustainable production methods between CA
and EU businesses from a range of sectors, with an emphasis on knowledge sharing,
capability building and access to technology for MSMEs. This could also include guidance
on the sustainable use of plant protection products.
Along the same line, in interviews for this study, there was an appreciation of regional
workshops (Global Value Chains and Sustainable Development held in Costa Rica in May
2017 and another one, in May 2018 in Guatemala under the title Decent Work, Corporate
Responsibility and the EU-CA Association Agreement Contributing to Sustainable Economic
Growth) and the expectation that the EU would organise and support financially more of
them, as well as capability building211, activities for the government representatives, e.g.,
in relation to the new requirements of the EU Green Deal. It was appreciated that general
workshops explaining the Green Deal policy and its particular aspects had been organised
(e.g., on Farm to Fork Strategy), however, there was a need for more, incl. focused on
sectors and products, e.g., cacao, coffee or honey, and for representatives of producers
and exporters. Other ideas for topics included, e.g., organic production, or aspects related
to value chains, to combine trade with sustainable development.
Another aspect, which was raised unanimously by members of the Advisory Groups from
the EU and Central America, relates to a need to improve the dialogue between the TSD
Board and the Advisory Groups. In this context, civil society emphasises that the annual
Civil Society Dialogue Forum (discussed further down) does not provide an adequate space
for this type of a conversation, given that there are also other civil society representatives
participating in it, discussion is not structured (as everyone may raise any issue being of
interest for them), and the formula of statements and questions and answers cannot be
considered as a genuine conversation. Moreover, the Forum does not recognise the specific
role granted by the TSD Title to the Advisory Groups. As possible options, there were ideas
ranging from a meeting between all TSD Board members and all Advisory Group members
participating in the annual meeting, over other options, such as limited representations or
participation only of the Chairs or the Advisory Groups or choosing three or more members
(in total) each originating from a different Group, representing jointly the EU and Central
America civil society in a meeting with the Board. There was also an interest in similar
solutions adopted under other EU agreements, such as with Korea (where in 2014, the EU
and Korea DAG Chairs participated for the first time in the first agenda item of the TSD
Committee meeting to provide information about activities of both DAGs and raise issues
of concern with the Parties) and (apparently) with Canada. In any case, such meetings
should take place as part of the annual meeting and either be held as the first agenda item
of the TSD Board meeting or be a separate meeting preceding the meeting of the Board
and providing inputs to it, including advice from Advisory Groups.
8.2.2 Advisory Groups212
EU: The Advisory Group (AG) was established in October 2014 further to a call for interest
launched by DG TRADE. The AG representatives participated in the first joint meeting in
2014 in Managua, and all other meetings since then. The European Economic and Social
Committee (EESC) assumed the role of the AG’s secretariat. Separately, the EESC as an
institution representing the EU civil society provides three out of 12 members of the Group.
The AG has been renewed approximately every two and a half years, to align the term with
the EESC mandate. It has a balanced composition of business associations, trade unions
211
Capacity-building in the context of this section may mean additional personnel or resource put at the
disposal of the Advisory Groups or the government, e.g., a technical secretariat supporting their work and
organisation of meetings or additional funding to be provided by the EU or the governments. Capability-
building means training and similar activities helping members of the Advisory Groups or others to enhance
their technical expertise in areas related to the TSD Title to be able to better fulfil their mandate.
212
Information provided in this section is based on interviews with members of the Advisory Groups from the
EU, Costa Rica, El Salvador, Guatemala, and Panama, written information from the Group representing
Honduras and an interview with Government representative from Nicaragua, complemented by minutes
from annual meetings under TSD Title.
260
and NGOs. It is managed by the Chair, elected by all members for the whole term on a
rotating basis, and two Vice-Chairs representing the remaining two sub-groups, to ensure
that all interests are represented in the work of the Group. The EU AG has also adopted its
rules of procedure.213 It meets twice a year to discuss the implementation of the TSD Title
internally and with the Commission, and to prepare the annual joint meetings with the civil
society from CA and with the TSD Board. Since the Advisory Group’s establishment, the
Commission and the EESC have been supporting its operation, providing the secretariat,
funds for travel, meeting venues and other elements of logistics. Thanks to this and to its
early establishment, the EU Advisory Group has been able to monitor the implementation
of the TSD Title, convey concerns of the civil society to the Commission, participate in all
annual meetings (Civil Society Dialogue Forum and DAG-to-DAG meetings), and coordinate
work with Central American counterparts.
Interviewed members of the EU Advisory Group appreciated the positive dynamic, which
was developing until the meeting in Guatemala in 2019 and was affected by the pandemic.
There was a recognition of an important role being played by the Presidency (the Chair
and the Vice-Chairs of the Advisory Group) and its impact on the work of the whole Group.
In the past, the Presidency used to hold regular meetings among themselves and with the
Advisory Group’s secretariat to plan work and then, each member of the Presidency had a
task to organise the work of their sub-group (business, trade unions and NGOs), share
information with the members and coordinate their inputs into the work and positions of
the whole Advisory Group. Now, there was a feeling of much less activity, which may be
due to the pandemic, but also the new term of the Group and the availability of the
Presidency and members, having other commitments. There was a feeling as well that two
meetings of the Advisory Group a year are not sufficient to prepare for the annual series
of meetings (DAG-to-DAG, Civil Society Dialogue Forum and a technical workshop, if it is
held), ensure monitoring and follow-up and in addition, virtual meetings impose certain
limits and reduce the dynamic of a discussion, e.g., if participants cannot see each other,
or if questions can only be asked via chat. Moreover, virtual meetings are shorter and there
is no opportunity for side discussions. That said, the Advisory Group members, including
those who are also members of other EU DAGs appreciated a more harmonious work of
this Group and its readiness for a compromise, which becomes important, e.g., at the time
of preparation for annual meetings. They appreciated cooperation from the Commission
and its readiness to come twice a year to the Group’s meetings to share updates and to
meet outside that cycle, e.g., if the Advisory Group’s Chair requests such a meeting. Given,
however, that there are only two AG’s meetings a year, it would be very useful, if the
Commission could share updates with the AG also in the meantime if there are important
new developments. Equally useful, would be information from the Commission about the
ongoing cooperation projects with Central America. The members also observed that their
Central American counterparts may need support in their work, in form of a secretariat, in
the same way as the EU Group relies on services provided by the EESC. In that context,
they said that the EU could provide funding for it, however, if this was supposed to be
controversial, then the EU could support financially the existing regional structures in
Central America and those structures could provide a secretariat to the Central American
Advisory Groups.
Costa Rica: Representatives of the Costa Rican Advisory Group have participated in joint
meetings, incl. Civil Society Dialogue Forums and meetings of Advisory Groups since 2014
and for some time, have also played an informal role of a regional coordinator for Central
America helping to pursue dialogue and preparations for joint meetings, as well as work
on joint declarations and recommendations to the Parties. The Advisory Group brings
together numerous representatives of the private sector, with the main exporting sectors
being involved, as well as trade unions, NGOs, and academia. According to representatives
of the Costa Rican Advisory Group, while there were meetings with the Government prior
to the annual meetings under TSD Title, there is no continuous dialogue yet. Moreover, as
the Group is composed of three sub-groups having their interlocutors in three different
ministries, more efforts and some changes may be needed to ensure inclusivity of the work
and dialogue. Also, there is a need for a better definition of what is expected from the
213
EU Advisory Group: https://www.eesc.europa.eu/en/sections-other-bodies/other/eu-central-america-
domestic-advisory-group
261
Group in the domestic dialogue and how the Group should operate in practice, e.g., who
and when should convene the meetings, what the Group should deliver, etc. Like other
civil society representatives, the Group has also mentioned a need for a dialogue between
the TSD Board and the Advisory Groups and expressed the view that the Civil Society
Dialogue Forum does not provide a space for a structured discussion. Regarding work on
the CA side, the coordination is difficult given that each Presidency remains in the role only
for six months. Finally, while the ideal scenario would be to receive financial support from
the government and not to rely on the EU funding, the representatives of the Advisory
Group acknowledged that as the Group does not have a formal mandate in the light of
Costa Rican law, it may be difficult for the Government to provide funding for it from public
money. According to information shared by the government, there is a regular dialogue
between the government and the Advisory Group, with meetings taking place (in Costa
Rica) before the annual meetings of the TSD Board, while afterwards, the government
shares with the AG a report or a joint statement from the TSD Board meeting, for
information. Each sub-group from the Advisory Group has its official contact point in the
corresponding Ministry, i.e., the business sub-group in the Ministry for External Trade, the
trade unions’ sub-group in the Ministry of Labour and NGOs and academia in the Ministry
of Environment. Meetings between the Advisory Group and the government
representatives take place upon request of any side. In such meetings, the government
discusses with the AG, e.g., agenda of the TSD Board, as well as planned interventions.
The interviewed government representatives were of the view that the dynamic of a
dialogue and cooperation with the AG would be better, if there were more opportunities
for cooperation and discussions, e.g., workshops or other activities within the TSD Title
bringing together all Parties and their Advisory Groups.
El Salvador: The Advisory Group was established in 2015 (TSD Board 2015, 2016) and
its representative participated for the first time in a joint meeting under the TSD Title in
2016, as well as in preparations for that meeting. According to information shared by the
Advisory Group, it had been set up further to a call for interest launched by the Ministry of
Economy. In 2019, there was one meeting with the Government representatives, but
otherwise there have been no other meetings, and no dialogue (this has been confirmed
by all three sub-groups in a joint written reply sent to the study team). The Group said
there was an impression that it had been created and existed only to meet the obligation
under the TSD Title, with no further practical meaning. The Advisory Group has not been
informed about the positions of the Ministries of Labour and Environment, and there was
no awareness about discussions at the TSD Board meetings. That said, the Advisory Group
would like to play its role and be considered a real partner of the government to promote
trade and sustainable development, monitor implementation of commitments and provide
advice. The Advisory Group members think that the EU should encourage the government
of El Salvador to engage actively and in a good faith with the Advisory Group and based
on a discussion about the role which the Advisory Group could play domestically to be an
advocate of the TSD, there should be a roadmap or a workplan developed outlining actions
that the Group could take. The Advisory Group would also like to receive a training or
participate in another activity to learn more about the EU policies, such as Green Deal, the
related requirements, their meaning for partner countries and trade and how the Advisory
Group could play its role in this context. Moreover, the Advisory Group would like to get
information about the assessment on how El Salvador (and other countries) have complied
with their commitments under the TSD Title and therefore if the commitments remain valid
and if the same can be said about the approach to complying with them. According to
information received from the Government, it was a challenge to establish the Group, and
it took time to set it up due to the lack of clarity what its mandate would be and hence
which organisations should form its part. Information received from the EU helped a bit in
this context and the Government, after receiving the rules of procedure of the EU Advisory
Group (as an example), shared them with the Advisory Group from El Salvador to consider,
but the organisation of the Group and its work has been left to its members. The
government informed it has not been easy to engage initially with the civil society.
According to the Government, there have been, however, two to three meetings with the
Advisory Group a year, including prior to annual meetings.
262
Guatemala: The Advisory Group was established further to a request of the Government
to the civil society organisations to suggest their representatives. The Group has three
sub-groups (employers, workers, and NGOs), in a balanced composition and its
representatives have participated in joint meetings since 2014 or 2015. The Advisory Group
does not have fixed meetings during the year, however, there is usually more activity
before the annual meetings under the EU-CA FTA. Likewise, there is no pre-determined
calendar of meetings with the government, but as the latter is open to a discussion with
civil society, meetings are held upon a request of the Advisory Group, without any problem
or delay. There were also attempts to establish a workplan and regular meetings. Also in
this case, there is more dynamic in the period preceding annual meetings. However, there
are some elements, which could be improved, e.g., there is no appointed contact person
from the Ministry of Environment, which means a difficulty to discuss environment-related
aspects of the Title. In addition, the Group has also emphasised a double challenge across
the region, first, to have an operational Group and pursue a dialogue with the government
of own country and second, to have a regular dialogue and cooperation within Central
America, among the Advisory Groups. In the view of the members of the Group, it will be
important in this context to secure continuity and enhancement of technical and financial
assistance (granted by the EU) for members of the CA Advisory Groups, incl. continuation
of the support provided under a TSD project facilitating civil society participation. Members
of the Group have also pointed to a positive dynamic until 2019, which has been affected
by the pandemic, in terms of work of the Advisory Group, dialogue with the government
and within the region. The above information was largely echoed by the interviewed
government representatives who confirmed that meetings with the Advisory Group were
taking place when necessary, including prior to the annual meetings. Moreover, the
government informed about the intention to improve that dialogue and having an
agreement of the Group to try and hold meetings quarterly, to discuss implementation of
the TSD Title and thus be better prepared for the annual meetings.
Honduras: COHEP representatives who are members of the Honduran Advisory Group
informed that there are no meetings of the Group and there is no information available
regarding which organisations form its part. Each organisation registers its membership
separately by informing about it the Secretariat for Economic Development (the equivalent
of the Ministry of Economy) in Honduras. There are no meetings either with the government
representatives and no information is shared with the civil society regarding outcomes of
the TSD Board meetings. The members of the Advisory Group in Honduras were appointed
in 2015 and coordinated (together with the EU Advisory Group) preparations for the 2016
joint meeting in Tegucigalpa. The interviewed government representative acknowledged
that the beginning had not been easy given the lack of clarity regarding the mandate of
the Group. This has changed over time. The Group has representatives of the business
sector, trade unions, NGOs, and local authorities.
Nicaragua: According to information provided by the Government representative, it had

chosen to use for EU-CA FTA the existing Advisory Group established in the framework of
the trade agreement with the US. The same Group also provides advice in questions related
to FTA negotiations (e.g., with Korea). The Group hosted the first joint meeting, including
the Civil Society Dialogue Forum, in 2014. According to the government, there is no firm
calendar of meetings with the Advisory Group, however, there are discussions before
meetings of the TSD Board. According to other sources, the Group became less active, and
members of the Nicaraguan Advisory Group were not present at least at the two further
meetings in 2015 and 2016. The Group has representatives of the business sector, trade
unions, NGOs, and local authorities.
Panama: The Advisory Group was established in 2015, however, its representatives did
not participate in the following joint meeting in 2016. Moreover, so far, we did not find any
evidence about the activity of this Group. Members of other Advisory Groups told us that
this Group does not exist or at least does not engage in any activity (similar views were
expressed about the Group from Nicaragua). This has been confirmed to a certain extent
by a new member of the Panamanian Advisory Group who has become a member by taking
a role in an organisation belonging to the Group. However, the person told us that there
263
had been no activity since the beginning of 2021, no meetings or information shared, no
engagement with the new member and no introduction to the Group.
In online consultations for this study, stakeholders emphasised the overall low civil society
participation in the implementation of the Agreement on the Central American side, the
lack of support (including the lack of funding) from the Central American governments and
an apparent attitude of treating engagement with the civil society as an imposed
requirement, and a “box to tick off” rather than a genuine partner for a dialogue. They also
highlighted that in the Advisory Groups, there is practically no representation of the
indigenous population, rural communities, and small producers, while the main exporting
sectors and large companies are represented.
8.2.3 DAG-to-DAG and Civil Society Forum meetings
The annual meetings include (on the civil society side) meetings of representatives of the
Advisory Groups, workshops, and the Civil Society Dialogue Forum. Meetings of members
of the Advisory Groups have taken place since the first meeting in Nicaragua and include
an overview of the situation in the EU and Central America regarding implementation of
the TSD Title and a discussion on a joint declaration with recommendations to the Parties.
Our interlocutors did not share much information about those meetings, stressed, however,
a spirit of a compromise and willingness from all participants to find a solution acceptable
to all. This ensured that the Advisory Groups could agree joint declarations at all annual
meetings, while in some cases, they took a decision that the declaration from the previous
year was still valid, and they just reiterated it.
The Civil Society Dialogue Forum meetings have taken place every year (except 2017) as
part of the annual meetings and have brought together representatives of the TSD Board,
Advisory Groups and other civil society representatives who have registered, as the Forum
is opened to all civil society organisations established in one of the Parties (not in third
countries). In interviews conducted for this study, some interlocutors said that the Forum
is important from the point of view of transparency and dialogue with civil society, as it
provides space for the TSD Board and Advisory Groups to present outcomes of their
discussions, and for civil society to ask questions and express concerns. However, due to
a relatively limited time and frequency (only one meeting a year) and the number of
participants and questions raised, there is often a possibility only to touch the surface of a
problem and some questions and requests remain without an answer. In general, the
Forum and its meetings received a lot of criticism, from civil society and the Governments
alike. According to the views expressed, the formula of the meeting had flaws, including
the structure (joint statements followed by Q&A time) and rules related to participation
meaning that, upon registration, any civil society representative could take part in the
meeting and take floor (some stakeholders complained that there was no balanced
allocation of time to different sub-groups, such as business, trade unions and NGOs). As a
result, there was no genuine, in-depth dialogue about implementation of the TSD Title, as
any civil society representative was able to raise any subject of own interest (and some
spoke about issues falling outside the TSD Title, incl. about diverse aspects of the situation
in the CA countries). In addition, points raised during the Forum often remained in a
vacuum, not being followed-up by the Parties, as there was no clarity in the EU-CA FTA or
elsewhere about the mandate the Forum has and hence how it can contribute to the
implementation of the TSD Title, and whether civil society opinions, notably of the Advisory
Groups, commit the Parties to any action.
8.2.4 Follow-up by the Parties to the recommendations of the Advisory Groups
Advisory Groups’ members expressed dissatisfaction with the lack of further actions by the
Parties to the recommendations provided by the Groups at the occasion of the annual
meetings (the recommendations are usually prepared in the run-up to those meetings and
adopted at the joint meeting of the Advisory Groups and later read out at the Civil Society
Dialogue Forum meeting). While there was a lot of hope when the TSD Board members
announced in 2016 at the Civil Society Dialogue Forum a commitment to discuss at the
TSD Board meetings the follow-up to the recommendations, and the Board reportedly
264
reviewed the recommendations at the last few meetings, members of the Advisory Groups
have asked for further actions to be taken to address their recommendations. The Parties
are also considering holding a regional seminar on labour-related aspects in early 2022,
which would respond to Advisory Groups’ request to hold seminars related to decent work.
Our civil society interlocutors stressed that the lack of further actions by the Parties in the
follow-up to the recommendations discourages people from investing time and energy in
work on the TSD Title. The government representatives, on the other hand, observed that
recommendations of the Advisory Groups were sometimes general, lacking a necessary
level of detail and, either there was no precise addressee of their requests, or they were
directed to the whole region, while in most cases, the Central American countries don’t
have harmonised policies or legislation in areas, such as labour, environment, or support
to MSMEs. In these areas, each country has its autonomy, and the level of advancement
is different between the countries, which means that different actions may be needed in
each of them. Moreover, each country has its own political agenda and policy priorities,
hence, recommendations from civil society should ideally consider what may be feasible
given the government’s work programme.
8.2.5 Recommendations from TSD institutional analysis
TSD Board
• To keep the momentum in implementation of the TSD Title, the Parties should consider
an additional, virtual meeting to be held around half a year after the annual one to
discuss progress in implementing takeaway actions from the TSD Board meeting, and
follow up to the civil society recommendations, as well as planning for the following
annual meeting and potential accompanying activities.
• There is a need to reform the organisation of TSD Board meetings, given that majority
of our interlocutors considered the current practice (long reporting by each Party about
steps taken on any matter covered by the TSD Title) as repetitive and requiring change.
One idea would be to focus discussions at the Board each time on a concrete topic (e.g.,
one from labour and one from the environment-related aspects) and have a more in-
depth discussion. Another proposal, put forward by the Parties, would be to accompany
or replace the TSD Board meetings by focused events bringing together representatives
of the Parties, the Advisory Groups, and (if appropriate) other stakeholders to discuss
chosen aspects from within the TSD area. This could include best practice sharing and
consideration of common challenges, or discussion about practical dimension of trade
supporting sustainable development (e.g., through promotion of organic production).
Such meetings and discussion would also facilitate dialogue between the governments
and Advisory Groups. Likewise, the events could serve capability building purposes,
e.g., when a new TSD-relevant legislation or policy is adopted, to explain it.
• Dialogue with representatives of the civil society Advisory Groups can be organised, as
suggested, as part of the TSD Board meetings, in line with the Rules of Procedure of the
Association Committee used also by the Board, which in Article 10.4 (Agendas for
meetings) provide that: “The Chairperson of the session of the Association Committee
may, upon agreement, invite observers on an ad-hoc basis to attend its meetings or
experts in order to provide information on specific subjects”. Accordingly, Chairpersons
or other members of the EU and CA Advisory Groups could participate in a dedicated
agenda item of the TSD Board to provide information about AG activities, and interests
and concerns of the EU and CA civil society, as a contribution to discussion of the Board.
• Alternatively, if there is no possibility for Advisory Groups’ representatives to take part
in the TSD Board meetings, the Advisory Groups should extend an invitation to the TSD
representatives of the Parties to join a dedicated agenda item during the DAG-to-DAG
meeting for a discussion about aspects from within the TSD chapter being of interest or
a concern to civil society. Such a discussion could also include a point on the follow-up
to civil society recommendations from the previous year and serve as an input to further
considerations of the Parties during the TSD Board meeting.
Advisory Groups
• CA governments should meet regularly (e.g., 2-3 times a year) with their respective
Advisory Groups to discuss implementation of the TSD Title and activities that should
265
be undertaken to promote trade and sustainable development in practice and to ensure

compliance with TSD provisions. Discussions should take place in the run-up to the TSD
Board meetings to give the civil society an opportunity to provide inputs, and later in
the year, to discuss follow-up, including with regard to civil society recommendations.
In cases where there is no clarity about it yet, there should be a discussion about the
role of the Advisory Group in the domestic context, as an intermediary and connection
to wider civil society in issues related to trade and sustainable development. Moreover,
where this has not been done yet, the Advisory Group should adopt Rules of procedure
including frequency of meetings, membership, the election and mandate of the Chair,
decision-making process and other relevant aspects.
• As explained by CA Advisory Groups, there are currently no prospects for funding from
the CA governments for civil society’s activities. In this situation, the EU should continue
providing support through the dedicated project whose first edition is coming to the end
in 2022. The project should foresee funding for capability building activities, on topics
which are new or complex and essential for work of the Groups and civil society activity
in the TSD context. This may include new EU policies related to trade and sustainable
development (e.g., European Green Deal) or Due Diligence Directive (when adopted),
as well as best practice sharing and events or other cooperation activities, including also
government representatives (such as mentioned in the part on TSD Board).
• The Advisory Groups may require technical support in organising their activities. This
may include a technical secretariat financed by the EU, and provided through regional
institutions in CA. Such a secretariat could play an administrative role but could also
support CA Advisory Groups in carrying out their activities and preparation for annual
meetings, e.g., by collecting information and data on chosen topics and analysing them.
The secretariat could also coordinate information flow between CA Advisory Groups and
facilitate preparations for annual meetings, e.g., supporting preparation of documents
and exchange of views.
Annual meetings (DAG-to-DAG and Civil Society Dialogue Forum)
• Further to criticism, there is a need for a discussion including the governments and the
Advisory Groups about how to define the composition, mandate, and organisation of the
Civil Society Dialogue Forum to improve its role in implementation of the TSD Title.
While broad civil society participation may reflect inclusive character of those meetings,
on the other hand a too broad spectrum of aspects raised and the applied formula
(statements and Q&A) mean that there is no structured, continuous, and genuine
dialogue between the participants, which would change anything or move any aspects
forward, and no follow-up to discussions.
Follow-up to recommendations of civil society
• Advisory Groups should consider formulating at least part of their recommendations in
a more focused and operational way, advocating concrete actions, and directing them
to concrete addressees, e.g., one government. This would help to evaluate later if the
recommended action has been taken, e.g., under the EU Agreement with the Andean
countries, civil society recommended ratification of a certain convention or consultation
with civil society of the new National Action Plan on Business and Human Rights. Such
concrete actions, which were also feasible for the government and fell within the wider
policy pursued by the authorities were indeed taken (while civil society advice might
have been one of many contributing factors).
• On the other hand, government representatives should acknowledge the advisory role
of the civil society in the context of TSD Title, engage in a dialogue, consult activities
and follow-up recommendations. It is likely that the more regular the dialogue will be
and the more concrete and detailed discussion and consultations between government
and civil society (and therefore, the better orientation of civil society in government’s
plans and more trust between the interlocutors), the more tailored and concrete the
recommendations will become, given expertise of civil society in many areas related to
trade and sustainable development.
266
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Directorate-General for Trade 2022

3.10.4 Impact on the EU ORs and ACP banana producers ...................................................... 94

6.6 Review of sustainability impacts (Article 293) ...................................................... 212

AA Association Agreement ICESCR International Covenant on Economic, Social

1 INTRODUCTION: EVALUATION CONTEXT, SCOPE AND OBJECTIVES

The study approach is summarised in Figure 1-1.

Figure 1-1. Overall evaluation approach

Figure 1-2. Causal chain analysis

Source: Own compilation

2 REVIEW OF THE EU-CA SUSTAINABILITY IMPACT ASSESSMENT

Measure Ex-ante Trade SIA Observed effects 2014- Analysis

Measure Ex-ante Trade SIA Observed effects 2014- Analysis

Measure Ex-ante Trade SIA Observed effects 2014-2019

2.2 Assessment of implementation status of recommendations and flanking

Table 2-3. Trade- and non-trade related measures overview

Policy measures Implementation status Effectiveness

Policy measures Implementation status Effectiveness

Policy measures Implementation status Effectiveness

Final general considerations

3.1 Analysis of the evolution of trade in goods

3.1.1 Overview of the EU-Central America trade flows

Figure 3.1-1. EU total imports from and exports to CA partner countries

Source: Authors’ calculations based on UN Comtrade data

EU export and import shares compared to other trading partners

Figure 3.1-2. Relative EU share in CA imports/exports (pre-/post-Agreement, %)

EU share in CA imports EU share in CA exports

Source: Authors’ calculations based on UN Comtrade data

Bilateral trade balances

Annual changes in EU exports to and imports from CA countries

Figure 3.1-3. EU trade balance with partner countries

Source: Authors’ calculations based on UN Comtrade data

3.6 74% 80%

Change in EU exports/imports (%, 2010-13 vs 2014-19)

Source: Authors’ calculations based on UN Comtrade data

EU28 main sectoral exports to and imports from CA partner countries

EU Exports to partner countries

Figure 3.1-5 Changes in EU exports to Costa Rica (2010-13 vs 2014-2019, € and %)

EU export change 2019-2013 to 2014-2019 (in %)

Change 2010-2013 to 2014-2019 € Change 2010-2013 to 2014-2019 (in %)

Source: Authors’ calculations based on UN Comtrade data

Fertilizers containing nitrates and phosphates and those containing nitrogenous,

EU imports from partner countries

EU import change 2010-2013 to 2014-2019 (in %)

Change 2010-2013 to 2014-2019 € Change 2010-2013 to 2014-2019 (in %)

Source: Authors’ calculations based on UN Comtrade data

EU tariffs on CA-6 exports (EU imports)

CA-6 tariffs on EU exports (CA imports)

Table 3.1-3. Utilisation of different trading regimes by CA6 exporters

Figure 3.1-7. PURs of CA6 exporters to the EU and EU exports to CA (%)

Source: Eurostat data; own calculations

Eligible CA6 exports (€

Source: Eurostat data; own calculations

3.1.4 The use of Tariff Rate Quotas (TRQs)

Table 3.1-4. The number of TRQs in the EU-CA FTA

The use of EU TRQs by partner country exporters