In a little over ten days time, ministers from the Caribbean will meet in Bonn with their counterparts from across Europe and the ACP. There they will discuss informally, progress in the negotiations for an Economic Partnership Agreement (EPA).They will have to address some inconvenient truths.
In the last few weeks it has become clear that if the Caribbean’s private sector is not to be disadvantaged, all of the region’s governments and Europe will have to reach agreement by July at the very latest on schedules of tariff liberalisation for goods and most probably services if the negotiations are to succeed.
Under the terms of the EU/ACP Cotonou Convention, ACP companies and industries are presently able to export the majority of products like ethanol, canned goods or hot pepper sauce, quota and duty free to Europe. But what seems to be little understood is that if the Caribbean’s offers are not complete and agreed in time to have an EPA legally in place by the year’s end, then Europe’s existing preferential trade arrangements with the Caribbean will cease.
As matters stand, the World Trade Organisation (WTO) waiver for the trade arrangements the region enjoys with Europe under the Cotonou Convention ends on December 31, 2007. If no other WTO compatible agreement is in place the only option legally available under WTO rules is a reversion to the Generalised Scheme of Preferences (GSP).
Under this arrangement all ACP countries that are not classified as least developed – in the Caribbean only Haiti is an LDC – will end up with worse market access arrangements with Europe than for instance the nations of Central America or North Africa. What this means at a practical level is that if the negotiating deadlines are missed, all trade between the Caribbean and Europe will be severely disrupted and Caribbean exporters, traders and investors will face chaos as trade relationships that have always been tariff free suddenly become subject to tariffs.
While there are some in the ACP who believe that the solution would be to somehow extend the existing WTO waiver, a recent internal European document makes clear that this is not feasible and if attempted would derail the EPA negotiations.
Trade liberalisation is of course not all of what an EPA is about. As a recent note sent to EU member states observes, rapid progress is required on a number of fronts if the overall development objectives and content are to be delivered.
The document is revealing about the extent to which Europe has recognised the difficulties faced in achieving agreement. In a Caribbean context it notes that while a timetable to conclude the negotiation by September 2007 has been agreed, incorporating the diverse needs of the Caribbean into a single region to region agreement is a challenge. Despite this senior trade officials remain optimistic in private and note that a detailed and strongly development oriented text has been developed and is under active discussion.
The working paper makes clear that Europe’s member states now have to play a role collectively in helping to accelerate progress and encouraging realism across the ACP on key issues. It also calls on European nations to accept differentiation with EPA regions; in other words recognise that for a region such as the Caribbean there will be the need to recognise that Trinidad and the OECS have to be treated differently. It also seeks EU member states support for reaching agreement on market access offers for goods – especially sugar – and in services and asks for a “collective response to ACP expectations on development finance.” It identifies four key issues from a European perspective that have to be agreed if the end of 2007 deadline is to be met. These relate to market access; rules of origin; services; and investment and other trade provisions. On market access the discussion document notes that Europe’s offer aims as far as possible at a full duty free and quota free regime. While recognising that sugar remains a sensitive product within Europe it states that it is the EC’s intention to review the sugar protocol with the aim of integrating it into EPAs in a manner that retains “such benefits as it can.”
The document also addresses the coverage of the EPA. It makes clear that Europe is prepared to achieve an asymmetrical agreement with long transition periods for sensitive ACP products and lower degrees of market opening than the EU has agreed in other bilateral free trade agreements. It recognises the sensitivity of market opening when it comes to services and that the EPA’s negotiating focus will be on sectors such as banking, telecommunications and transport as well as on some ACP regions (the Caribbean and Pacific) entering the EU services market.
In private, some EU capitals acknowledge the services negotiation may be the most difficult area in which to achieve agreement given that Europe has still not resolved its own differences over the nature of inter-European services competition.
The working paper also addresses the question of development finance, noting that ACP requests for additional development co-operation linked to EPAs have not diminished. It observes that although the EC believes that revenue tariff losses will be offset or compensated for “by long transitions times, economic growth and fiscal reforms,” the EC remains “committed to making a significant contribution to absorbing any observed net impact on ACP government finances in the context of fiscal reforms.”
In a clear plea to Europe’s member states to provide additional funding for EPA implementation in the context of the EU’s Euro 2 billion Aid for Trade programmes the paper notes that EU Council support will have a decisive influence on the outcome of the EPA negotiation. An acceptable solution, it suggests, will require the engagement of all EU member states and should not be overshadowed by member states broader concern about the effectiveness of existing development co-operation programmes.
In the last few months, the Caribbean has reconciled many of its previous differences between governments and officials over the EPA negotiations. Now, in a peculiarly symmetrical way it is Europe’s member states who for the most part note that the European Commission has kept them in the dark about the detail of the negotiating process, that are having to come to terms with and agree what is being negotiated on their behalf.
What is clear is that both sides now recognise they must move rapidly towards agreement if the Caribbean and the other regions of the ACP are not to find themselves disadvantaged at the year’s end.
Previous columns can be found at www.caribbean-council.org
