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Costa Rica Delays Customs Union

June 29, 2007

Costa Rican officials stated this week that the country has postponed work toward joining the Central American Customs Union until after its people vote on a controversial free-trade agreement with the United States in an upcoming referendum.

The Central American Free-Trade Agreement with the United States (CAFTA), which Costa Rican voters will approve or reject Oct. 7, has already been ratified by the other four countries that would make up the Customs Union.

The Customs Union seeks to turn Central America into a borderless zone, allowing goods to flow freely between countries. Nicaragua, Honduras, Guatemala and El Salvador have already made great strides toward this end – the latter removed the border between them in 2004 (TT, Nov. 19, 2004).

Such an arrangement would put Costa Rica in an awkward position in the event CAFTA is rejected, Tico trade officials said, as it would be the only country in the Customs Union without the trade agreement.

At issue last week was a protocol –signed by the other Central American countries – that furthered commercial cooperation between Customs Union members.

Foreign Trade Minister Marco Vinicio Ruíz said it was “prudence” that led the government to not sign the protocol, adding that in the event Costa Rica approves CAFTA in October, Costa Rica would “immediately” resume the integration process.

Costa Rica’s decision could affect Central America’s negotiations for a free trade agreement with the European Union, as Europe has made clear that it will only consider negotiating if Central American regional integration continues, specifically through the formation of the Customs Union (TT, July 14, 2006).

 

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