Peru: EU free trade agreement
President Ollanta Humala’s continued global travels designed to build Peru’s presence in the international arena and establish new trade partnerships appear to be paying off. In June, Peru’s minister for foreign trade, Jose Luis Silva Martinot, joined EU delegates in signing a new free trade agreement (FTA) designed to gradually eliminate trade barriers between the EU, Peru and Colombia.
EU trade ministers approved Peru’s initial application for the new trade agreement in March 2011, and in May 2012, the EU’s 27 member states voiced support for its ratification. Now that the deal has been signed, Peru and EU members will still have to wait for the approval of the European Parliament before the FTA can be implemented.
The European Parliament is expected to vote on the matter when it meets in September. At the moment, signs point to the FTA’s imminent approval, as all of the most prominent EU political parties appear in favour of the accord. It is hoped the FTA will come into effect by the end of the year.
News of the FTA signing comes at a time when trade between Peru and the EU is growing with impressive speed. From January to October 2011, Peru exported €5.5bn worth of goods to the EU, up 34% over the same period in 2010, a record-breaking sum for the trade partners.
Peru’s exports to the EU consist primarily of fuel and mining products, which accounted for €3.75bn of total exports to the region in 2011. Agricultural products are another important export from Peru to the EU, accounting for almost €2bn in trade in 2011.
The EU currently maintains a trade deficit in its relationship with Peru, exporting €2.8bn worth of goods in 2011, compared with imports of €6.4bn. Europe’s main exports to Peru include machinery and transportation equipment.
The FTA will do little in practice to change the economics of Peru and the EU’s trade relationship from Peru’s perspective, as the country currently benefits from low to zero tariffs on most of its exports to Europe. The current arrangement is scheduled to expire in 2013, however, meaning the FTA will establish a more long-term trade accord.
As a result of the new accord, Peru is expected to work to expand its agricultural exports to Europe through the development of new “eco-trade” production chains for organic bananas and chestnuts.
Hans Allden, the EU’s ambassador to Peru, told local press the deal represents an “historic event” for its signers. Allden also emphasised the EU’s newfound interest in Peru. “I think that interest is growing,” he said. “We are waking up to Latin America.”
Angela Merkel, Germany’s chancellor, expressed her support for the deal, telling international press, “particularly in a situation where some European countries are having economic difficulties, an FTA with Colombia and Peru is a good sign to promote growth”.
Given a common language and deep cultural links, Spain in particular stands to benefit from the new agreement with two of Latin America’s most rapidly expanding economies. This may be one reason Merkel argued for the FTA to pass through the approval process as quickly as possible.
Not everyone speaks so favourably of the deal, however. Some non-governmental organisations (NGOs) are highly opposed to the accord, claiming it does not include sufficient measures to ensure the enforcement of labour and environmental laws.
The European branches of the International Office for Human Rights Action on Colombia (OIDHACO), Grupo Sur (a chemicals construction group in Costa Rica) and Alop (an organisation comprised of more than 20 NGOs from across Latin America) have all voiced their disapproval.
“With this decision, the EU Council seems to be ignoring the heated debate surrounding the agreement,” Vincent Vallies, a spokesman for OIDHACO, told local press. Human rights and labour laws are particularly a concern in Colombia, where violence against trade union leaders is still common.
In regards to these concerns, the European Parliament’s international commerce division has proposed establishing a system of checks and balances. These will be designed to ensure workers’ rights and environmental laws are respected under the FTA.