Andean Community: Advances and Prospects
Presentation by the Andean Community Secretary General, Ambassador Allan Wagner Tizón, at the Forum “Central America and other International Integration Experiences”

• Legal heritage and supranational status. Among the principles of the legal system established by the Treaty creating the Court of Justice (1984) is the supranational status of the Andean Community, which means that in the event of a conflict, Community provisions supersede national law. Furthermore, Community provisions are legally binding and enforceable as of the moment of their publication in the Andean Community’s Official Gazette.
   

• Institutional heritage. The reform enacted by the Trujillo Protocol (1996) established the Andean Integration System (SAI) in order to ensure better coordination among the decision-making bodies (Presidential Council, Andean Council of Foreign Ministers, and Commission), the executive body (General Secretariat), the Andean Court of Justice, the Andean Parliament, the advisory councils and social conventions, and the financial institutions like the Andean Development Corporation and the Latin American Reserve Fund.
   

• Consolidation of the Free Trade Area and prospects for the Customs Union. A free trade area has existed between four of the five Andean countries since 1993 and Peru, the fifth, will become fully incorporated in December 2005. In addition to eliminating tariffs, Andean provisions have been approved to reduce non-tariff barriers to free trade, such as the competition and anti-dumping rules; intellectual property rights; animal and plant health provisions; the Andean System of Standardization, Accreditation, Testing, Certification, Technical Regulations, and Metrology; the rules of origin; and customs procedures. Work is underway on a flexible External Tariff for the five Member Countries that will be put into use starting in May 2005.
   

• Exponential growth of intra-Community trade over the nineties. The advances toward forming a free trade area and the Customs Union spurred heavy growth of intra-Community exports starting in the nineties. Between 1992-2003, intra-Community trade showed growth of 10.6% a year, while trade with third countries climbed at a rate of only 3.9%. In recent years, the sluggish growth of the Andean economies and the political transitions effected in some of the countries slowed the growth of intra-Community trade, but our estimates show that in 2004 trade will return to its maximum historical levels.
   

• Steps toward building the Common Market. A number of important decisions have been approved in recent years with a view toward moving ahead with the building of a common market. Significant advances can be seen in the area of the free circulation of people. Decision 503 stipulates that Andean citizens may travel through four of the five Andean countries using only their identification document and as of January 1, 2005, will be able to do so in Venezuela also. Decision 545, for its part, establishes a common framework for emigration for working purposes.

• Political cooperation and social development. In compliance with the political agenda, steps have been taken toward building a democratic heritage, from the declaration of the Andean Foreign Ministers in 1978 upholding democracy and non-intervention in Nicaragua, to the Additional Protocol “Andean Community Commitment to Democracy” of 1998; and toward the defense and promotion of human rights by furthering the exercise of human rights through the Andean Charter of Human Rights signed on July 26, 2002 in Guayaquil.

  The Andean Community also possesses shared elements that allow it to take a common position in the war against drugs: Decision 505 “Andean Cooperation Plan for the Control of Illegal Drugs and Related Offenses” of June 2001 and the “Lima Commitment – Andean Charter for Peace and Security and the Limitation and Control of the Expenditure on Foreign Defense” adopted on June 17, 2002, which resulted in the approval at the recent Quito Presidential Summit of July 2004, of the Common External Security Policy and the Declaration of the Andean Peace Zone, making the Andean Community one of the most progressive integration groups in these areas.

  The most important advance made with regard to social development is the recent adoption of the Comprehensive Social Development Plan, the culmination of a year-and-a-half of efforts by national development authorities and the broad participation of all population sectors. The aim of this Plan is to build on national policies in this area, reinforcing them through the mechanisms offered by integration, in order to help overcome poverty, exclusion, and inequality, within the framework of the United Nations Millennium Goals.

  Insofar as the participation of civil society in the Andean Social Agenda is concerned, the approval of the Protocol of Substitution of the Simón Rodríguez Convention should be underscored. This instrument creates a tripartite and equal mechanism for the discussion of sociolabor issues by the business and labor sectors and the government. It has been ratified by Peru and Ecuador and is pending ratification by the Congresses of the rest of the Member countries. Attention should also be drawn to the formation of the Working Committee on the Rights of Indigenous Peoples (Decision 524), to be established shortly, and the recent establishment of the Andean Advisory Council of Municipal Authorities (Decision 585).

   

• Negotiations with third countries. The Common Foreign Policy has made it possible to coordinate or harmonize positions among Member countries in international forums and negotiations with third countries or blocs.

  The Andean Community has spoken with a single voice in the FTAA, giving transparency and technical support to the negotiations. In their negotiations with the United States, the Andean countries, through joint action, played a key role in the renewal and broadening of the ATPA or ATPDEA, despite the fact that these were granted unilaterally. Similarly, the Andean countries in the process of signing Free Trade Agreements with the United States are making efforts to coordinate in order to obtain better results on issues of common interest.

  In the case of the European Union, a new Political Dialogue and Cooperation Agreement was signed in December 2003, covering a wide range of issues. This agreement paves the way for the signing of a future Association Agreement encompassing free trade between the two blocs. The subregional countries also joined forces recently to guarantee the extension of the Andean GSP under terms that deepen their preferential access to the European Union.

  As regards MERCOSUR, an Economic Complementarity Agreement was signed in December 2003 with Ecuador, Colombia, and Venezuela, completing the agreements signed previously with Peru (ACE No 58, 2003) and Bolivia (ACE No 36, 1996). This agreement is part of a broader cooperation and physical integration initiative and will lay the groundwork for the future formation of a South American community.

• A recognized institutional system. The Andean alliance today has a recognized legal heritage in several spheres that gives stability to the integration process by permitting the existence of trade flows and long-term policies that remain stable over time, despite changes in each country’s individual policies.
   

• The quality of intra-Community trade: If one considers only manufactures with a high added value, –by removing some products with little processing from the ISIC Classification-- 58% of the exports to the Andean market have a high added value, while the figure is only 13% in the case of those going to third markets. The high added value of intra-Community exports is reflected in larger investments in production and better-paid jobs.
   

• Platform effect: There is evidence that the Andean market serves as an initial platform for an experience in learning by the subregion’s entrepreneurs and their projection toward larger and more demanding markets, consolidating the Community area as an instrument for the growth and development of small and medium-size enterprises.
   

• Movement toward new dimensions for cooperation. The process has opened the way, especially in recent years, to cooperation issues that go beyond mere economic and trade aspects to present themselves as a scenario for the political harmonization of the Member countries’ joint tasks on matters of common interest.

• Loss of competitiveness and presence in world trade. As a result of its loss of competitiveness compared with other developing countries, the Andean subregion, viewed as a whole, has been losing ground in international trade. The Andean Community, which in the fifties accounted for 3% of world trade, now represents less than 1%.
   

• National and territorial disparities. Neither trade instruments like preferential treatment, nor financial cooperation instruments have been able to offset the economic disparities that exist among the Member countries. These are also reflected in the weak participation of the Andean territories as a whole in the dynamics of trade among the Member countries themselves. The concentration of intra-Community export flows in a small group of regions or provinces within each country is evidence of this.
   

• Poverty, exclusion, and inequality. According to recent figures published by ECLAC, between 49% (Venezuela) and 63% (Bolivia) of the population of our region lives below the poverty line. In the rural areas, the situation is even more dramatic, for up to 80% of the people in some of the countries are poor. The indigent population or people living in extreme poverty –who subsist on one dollar a day or less-- account for between 19% (Venezuela) and 37% (Bolivia) of the urban population and between 35% (Colombia) and 63% (Bolivia) of the rural population of the subregion. These indicators point emphatically to the existence of a critical social and economic problem with obvious political implications.
   

• Little influence in international relations. Despite their efforts to coordinate when negotiating with third parties, as mentioned above, our countries have not drawn on all of their strengths to play a more influential role in international affairs at both the bilateral and multilateral levels.

• The notion of development has been recovered for the integration process, with an outlook of competitiveness and social inclusion. This is reflected in the decision to hold a special Andean Presidential Summit on December 7, 2004 in Peru, in order to reflect on a development model that would center on the potentials of the Andean peoples. This would include a territorial development strategy, the idea of a “Sustainable State” capable of upholding social policies in the long term within an environment of economic growth and the reinforcement of social cohesion and democratic governance, and the striving for equitable international economic relations.
   

• The Andean Community has been strengthened by maintaining the Andean legal system and Community harmony in trade negotiations with third countries. Community provisions are to prevail in the reciprocal relations among Member countries over their commitments to third parties. And during the negotiations, the commitment had been made to exchange information and carry out mutual consultations in order to safeguard the interests of the Andean partners.
   

• It has been decided to deepen Andean trade integration by perfecting the Andean free trade area and moving toward the common market, which includes defining a flexible common external tariff before May 10, 2005.
   

• It has also been decided to deepen the relationship between the CAN and the other Latin American countries in all spheres, thereby ratifying that Latin American integration is one of the core objectives of the Cartagena Agreement. Relations with MERCOSUR are considered a priority, with a view toward achieving South American integration. It has also been agreed to take steps toward entering into an association with Mexico and signing a free trade agreement with Central America, as well as the CAN’s participation in the infrastructure projects provided for in the Pueblo-Panama Plan, so that they can be coordinated with those of the IIRSA program.

• The technical and regulatory support the Member countries need for their international trade negotiations with third countries, through a Special Support Program for International Trade Negotiations.
   

• An agenda to complete the customs union in aspects on which consensuses can be reached among the countries and to move toward more advanced forms of integration.
   

• A step toward perfecting the free trade area in aspects that are still pending and which are directly related to technical standardization and the development and management of the customs systems.
   

• Actions in areas and sectors that are of key importance for the development of the enlarged market and its conversion into a common platform, such as the development of exports, promotion of tourism, and boosting of foreign direct investment.

• Development of a competitiveness program to incorporate vision and added value from the vantage point of the integration process in areas such as: the competitive development of SMEs; the competitive promotion of city-regions; technological innovation; and the incorporation of a growing number of citizens in the opportunities for development offered by the information society and the FTAs.
   

• Promotion of rural development and the improved competitiveness of the Member countries’ agricultural and agribusiness sectors, in order to move toward an increasing world trade presence by boosting productivity, improving the living conditions of the rural inhabitants, and making sustainable use of natural resources.
   

• Promotion of sustainable development in areas such as: the region’s biodiversity strategy, now in effect, environmental management, and the Andean strategy to prevent and deal with natural disasters.
   

• Advancement of a great physical integration program designed to resolve the problem of international highway transportation that has become a veritable Achilles heel for the integration process, while, at the same time, pledging a firm commitment to integration and border development within the framework of the IIRSA program, whose scope we will try to match up with the realistic goals that the Puebla-Panama Plan has set itself.

• Recognizes the asymmetries produced by the differing degrees of development among the countries.
   

• Establishes a temporary dispute settlement system, with a view toward the approval of a definitive system; and
   

• Provides for trade to be extended to take in services and incorporate elements of physical integration and infrastructure, as well as of financial, scientific, and technological cooperation.