‘Past performance is no guarantee of future results’ reads the ‘health warning’ on many financial products sold in the United Kingdom. It is an expression of caution that might usefully be applied to the Caribbean’s relationship with Europe.
As the region struggles to complete an Economic Partnership Agreement (EPA) it is about to test whether a Europe of twenty-seven states, where the majority have no historic perspective on the Caribbean, has any interest in the development of the region.
Unlike almost every other grouping in the ACP, the Caribbean is now very close to concluding a comprehensive EPA but requires about another four months to do so. It has made clear that it will not follow the route of others in the ACP and sign an interim agreement. Instead it will continue to negotiate in its own time for a comprehensive text. It has also begun to make clear at the highest political levels in Europe that there is every reason why it should be given the space to do so.
By the time this column appears in print, Caribbean heads of government will have finished their December 8 meeting in Georgetown, Guyana and should have made up their minds as to how they intend making their case in Europe.
Speaking privately to some of the participants involved in this crucial meeting it was clear that a number of alternative outcomes were possible.
At best they hoped that the region would remain steadfast in seeking a comprehensive EPA and that no Cariforum state would seek an interim trade in goods agreement or a mini-EPA. If unity prevailed it was likely that one head of government would write to all EU heads of government indicating the region’s commitment to achieving a full EPA within the first three to six months of 2008 if the GSP threat is waived.
At worst they envisaged a much less propitious outcome. If Caribbean heads were unable to reach any agreement or were to ask for more time for consultations this would almost certainly result in the Dominican Republic breaking away from Cariforum and finalising an agreement of their own before the year’s end. If this happens, concluding an EPA would, it was suggested, become more complex as the Caribbean’s tariff reduction schedules would need recalculating, probably compromising the Caribbean’s present market access offer. It was also felt likely that if the Dominican Republic did break away, regional sentiment would be so strong that DR/Caricom relations could break down irretrievably.
How this situation has been reached is not widely understood.
On November 23 in Uganda in the margins of the Commonwealth Heads of Government Conference, Caribbean leaders met with British Prime Minister Gordon Brown and his Development Secretary Douglas Alexander. There while urging Caribbean heads to try to achieve an agreement by the year’s end, the British Prime Minister agreed to use the UK’s good offices to explore the possibility that the EC and EU member states might suspend the introduction of GSP for a short period as the region was near to completion of a full EPA.
Then quite separately and before this approach was underway an exchange took place in Barbados on December 1 at which the region’s negotiators were able to make a comprehensive trade in goods offer to their European counterparts. This came very close to the magical figure that Europe has been insisting on to achieve coverage of substantially all trade.
However Europe’s res-ponse was unhelpful on this and a range of issues – about which more later – even reneging on some aspects of the services text that had already been agreed.
As a consequence Caribbean heads agreed to meet again for the third time in as many months to try to find a way forward.
In the region there is a belief at the highest levels that with compromise and flexibility achieving a full EPA is possible, and for this reason Europe should consider ‘stopping the clock’ on the application of GSP. In this respect it is argued that even if a challenge should arise at the WTO, adjudication would take significantly longer than the period required to complete a Cariforum EPA.
Documents from the region suggest that with political goodwill on the European side the remaining issues can be resolved.
Firstly it is recognised that agreement on tariff liberalisation is essential to the conclusion of any agreement. Cariforum has presented proposals in the vicinity of 85 per cent of total trade with Europe but the EC is objecting to the inclusion of some items among those to be excluded from liberalization that yield high government revenues (automobiles for example). Europe is also now objecting to the phasing of tariff reductions on certain items.
Secondly, Cariforum governments want ‘other duties and charges’ to remain in place for seven years and be phased out over the following three years.
These charges provide essential public services such as health and education. Cariforum argues that their removal other than in a gradual and phased manner, would pose significant economic, social and even political problems. Despite this Europe wants a brief moratorium followed by a short phase-out.
Thirdly, Most Favoured Nation (MFN) treatment remains a problem. In return for granting Cariforum any more favourable trade conditions it grants to any third party, the region should grant Europe similar MFN treatment in relation to developed countries or countries having 1 per cent or more of world trade.
In response the Caribbean has said that it is prepared to extend such treatment to the EU in relation to developed countries only.
Fourthly on services, the region is concerned that the EC lacks an appreciation of the disparity in levels of development within the region and the fledgling nature of its services sector. Europe is demanding sectoral coverage of 80 to 90 per cent while the region is prepared to offer between 75 and 65 per cent, depending on the development status of the nation concerned. There are also issues relating to services sectoral coverage and EU attempts to impose excessive conditions on the movement of Caribbean nationals wishing to provide services in Europe.
And fifthly, while it is acknowledged that Europe has gone some way towards meeting the region’s requests in respect of development, the volume and delivery of resources earmarked for EPA-related funding is considered insufficient. There is also concern about how EU member states will turn their aid for trade provisions into firm commitments for the Caribbean.
Some years ago a British minister faced with a crisis in relation to a meeting he was having with Caribbean ministers asked me bluntly: “What is up with these people?” I have since thought about this a lot and have concluded that his incomprehension arose from his absence of history and the lack of any perspective on what motivates regional thinking.
Like him it seems that Europe’s EPA negotiators have for the most part failed to understand the intense desire of the region and its people to possess their own future.
Let us hope that the political faith now being shown in Gordon Brown and his European colleagues does not mark a step into the dark.
Previous columns can be found at www.caribbean-council.org
