Joseph Francois, Badri Narayanan Gopalakrishnan, Hanna Norberg, Guido Porto, Terrie Walmsley
A Sustainability Impact Assessment (SIA) of a possible agreement between the European Union and the signatory countries of the Andean Community was concluded in 2009. Since then, the agreement has taken final form. They do not cover the full Andean Community, but rather just Colombia and Peru. As we now know the structure of the final agreement, this report updates the economic impact assessment in the original SIAs, based on the form of the final agreement, the actual countries covered in the current agreement, and availability of more recent data. Once agreed tariff reductions are implemented as stipulated in the agreement, European firms will be able to export most agricultural, industrial and fishery products duty-free to Peru and Colombia. While the majority of products will benefit from tariff-free access after ten years of entry into force of the agreement, full liberalization will be achieved over a somewhat longer period (up to 17 years). The agreement also provides for more secure market access for services, reductions in non-tariff measures for agricultural and industrial goods, and improved trade facilitation measures.
These are summarized in the report. The EU-Peru and Colombia Free Trade Agreements are estimated to yield positive impacts on the GDP of both partner economies, although the gains to the EU are estimated to be very small, (2.3 billion €, which corresponds to less than 0.05 per cent of
GDP). This reflects the relative size of the economies involved. The relative gains are shown to be greatest for Colombia, where GDP is expected to increase by around 0.4% (around € 500 million) as a result of the agreement. For Peru, GDP is expected to increase by between 0.2% and 0.25% (around € 200 million). Looking at the estimated effects of bilateral trade, the EU’s exports to Colombia and Peru will increase by 63% (€2.5 billion) and 48% (€ 2 billion) respectively. Meanwhile, the
FTA would lead to an increase in the EU’s imports from Colombia by 11% (€ 390 million) and Peru by 15% (€ 340 million). The results of this study also indicate that poverty rates are estimated to be reduced slightly. This follows from small, though positive, gains in wages for partner countries.