Caribbean & Central America - August 2008 (ISSN 1741-4458)

The Cariforum participating states (Caricom countries plus the Dominican Republic) are on the brink of signing an Economic Partnership Agreement (EPA) with the European Union (EU). However the deal remains controversial, with some countries threatening to delay the signing process.

The Cariforum-EU negotiations are part of a wider effort incorporating the 78-member African, Caribbean, and Pacific (ACP) group of countries to implement Article 37 the 2000 Cotonou Agreement which commits the signatories to reaching WTO compatible trading arrangements. One of six ACP regions negotiating with the EU, Cariforum comprises Antigua & Barbuda, The Bahamas, Barbados, Belize, Dominica, the Dominican Republic, Grenada, Guyana, Haiti, Jamaica, St Kitts & Nevis, St Lucia, St Vincent & the Grenadines, Suriname, and Trinidad & Tobago.

The EPA is intended, in the words of Cariforum, to “support and promote such objectives as sustained growth, enhancement of the Caribbean's role in the international community, facilitation of Caribbean structural transformation, and the adjustment of Caribbean economies in a manner and at a pace conducive to economic and social development".

For Cariforum, one of the key requirements is that the EPA must be more than just a Free Trade Agreement (FTA) - it must recognise “the centrality of development". Nevertheless, Cariforum also recognises that “the development dimension [...] must [...] transcend notions of asymmetry [...] If market access opportunities are to be seized by the Caribbean, supply-side constraints must be overcome."

An “Information Paper" describing the agreement, issued in July, also emphasises the centrality of development to the EPA; in the first paragraph, it states: “This is a new kind of free-trade agreement as sustainable development is the presiding principle governing the whole agreement." It adds that the parties to the agreement retain the right to determine their own level of environmental protection and social regulation, although this freedom is qualified by “the affirmation of a shared ambition to legislate for high standards and to implement them".

In an attempt to provide balance, the agreement includes an undertaking not to lower social or environmental standards in order to derive trade or investment benefits while on the other hand affirming that labour standards cannot be used for “protectionist trade purposes".

Cariforum liberalisation commitments cover 61.1% of imports from the EU in value over 10 years; 82.7% over 15 years (84.7% of tariff lines) and 86.9% over 25 years (90.2% of tariff lines). The main exclusions and long phase-in periods for sensitive products include agricultural products, fishery products, food preparations, beverages, ethanol, rum, vegetable oils, chemicals, furniture, and apparel. For agricultural products, most sectors have been excluded from liberalisation or subject to long transition periods (20 years or more).

The EU has agreed to phase out export subsidies on all agricultural products for which Cariforum has agreed to eliminate customs duties.

EU liberalisation commitments are based upon the introduction of a Duty and Quota Free Access (DFQF) regime from 1 January 2008. Rice will be DFQF from 31 December 2009, with quotas of 187,000 tonnes in 2008 and 250,000 tonnes in 2009 compared with the former quota of 125,000 tonnes. For sugar, access will be DFQF from 1 October 2009. For now the Sugar Protocol remains in force which allows 60,000 of sugar imports at zero duty. Between 1 October 2009 and 30 September 2012, sugar imports from the Caribbean will be subject to a minimum price of 90% of the EU reference price.

Meanwhile the Most Favoured Nation (MFN) clause in the agreement is intentionally asymmetric. The EU agrees to give ACP countries any additional benefits that it might concede in later negotiations with any third parties. The ACP countries will only have to extend to the EU any more favourable terms they may subsequently grant to “a major trading country".

On the fraught question of bananas, a joint declaration is included at the end of the agreement which acknowledges the importance of the sector for several Cariforum countries, and which recognises the benefits of substantial tariff preferences as well as setting out potential uses of funds to help the Cariforum banana industry adjust to new challenges.

As regards services, the EU has committed to opening its market to Cariforum service suppliers and investors, including allowing short-term business visitors, sellers of goods, investors, and graduate trainees, although in some sectors, EU Member States retain the right to apply economic needs tests.

Companies with a contract to provide services in 29 sectors will be able to send certain types of employees to the EU to provide these services for up to six months at a time. Skilled self-employed service providers operating in 11 sectors will also be able to enter the EU for six month period to provide services.

Objections
The Cariforum-EU EPA was initialled on 16 December 2007, and it is intended that the Cariforum countries will sign the agreement on 2 September. However, the agreement is between individual countries and the EU and some Cariforum members have increasingly shown signs of wavering. For example, Guyana, has announced a period of public consultations, with its president Bharrat Jagdeo, one of the stronger critics of the deal. Another sceptic is Sir Ronald Sanders, a former Antiguan ambassador to the UK and trade negotiator.

A recent report on EPAs in general, commissioned by France's President Nicolas Sarkozy in his capacity as rotating president of the EU, has lent weight to the objectors' case. The report by Christiane Taubira, a member of the French national assembly, is - in the words of Ronal Sanders - “a devastating indictment of the tactics - pressure, paternalism, and threats - employed by the [EU] Commission to impose its point of view and interests".

The main objections to the Cariforum-EU EPA include the following:

*The development component in the EPA is subordinate to trade liberalisation.

*The EPA agenda includes investment, competition policy, and public procurement, yet these are issues that remain controversial at the World Trade Organization (WTO) and are far from settled. It is thus not acceptable for the EU to impose its wishes in this area on Cariforum. Sanders says: “Their implementation outside of a global framework in which special consideration is given to small, developing countries, will be a disaster for local companies and could lead to a re-colonization of Caribbean economies."

*The market access in services granted to Cariforum companies is undermined by the fact that visa policy is determined by individual EU countries, not by the EU Commission.

*Each of the Cariforum countries will sign an individual agreement with the EU. Therefore, once signed, any disputes under the EPA will be between tiny individual Caribbean countries and the might of the EU. Sanders says: “The EU would roll over them like a juggernaut."

*The EPA, through the Most Favoured Nation clause, will define Cariforum's external trade policy with all other trading partners.

*Under the EPA there will be 336 identified areas for implementation, alongside the 300 outstanding areas for implementation under the Caricom Single Market and Economy (CSME). In his speech to the opening ceremony of the Caricom heads of government conference on 1 July, Guyana's President Jagdeo asked: “Do we have the capacity to implement them? In case of conflict which one takes priority?"

Jagdeo's view is that the EPA should involve only what is necessary to reach a WTO-compatible agreement, as required by Cotonou. In other words, it should be a goods-only agreement.

The objectors have also seized on comments made recently by former chief economist at the World Bank, Joseph Stiglitz. In Ghana on 8 July, he advised the Ghanaian government to “take a cold hard look" at the EPA agreement being negotiated with the EU. Stiglitz's main point was that the EPA would not provide enough opportunities for businesses in less-developed countries (LDCs) “to develop to levels where they can compete favourably with their counterparts in the EU" - a point that, he added, is critical to a country such as Ghana.

The Prime Minister of Antigua & Barbuda, Baldwin Spencer, is due to host the signing ceremony, and he has been trying to encourage the waverers by holding out hopes of some renegotiation of the terms after the agreement has been inked. Speaking on 8 August, he said: “The opportunity presents itself even at the point at which we decide to sign, to be able to continue the process of dialogue that will allow for adjustments and revisions to be made."

The other tactic being used is straightforward peer pressure. Henry Gill, the director-general of the Caribbean Regional Negotiating Committee (CRNM), emphasised on 4 August that although there are individual agreements between the Cariforum countries and the EU, the way the documentation has been prepared means that if one country doesn't sign then “the likelihood is that it will hold up the whole agreement".