At around 1.30am on the morning of Sunday, December 16, weary Caribbean and European negotiators finally initialled the text of an Economic Partnership Agreement (EPA) between Europe and Cariforum.
The final text is complex and daunting – it runs to well over a thousand pages – but it is comprehensive and sometimes innovative.
For the average reader a more accessible version of what was agreed and a good measure of the level of the Caribbean negotiators’ achievement is contained in a six-page note sent to the regional private sector by the Caribbean Regional Negotiating Machinery (CRNM).
In outline, the Caribbean EPA offers duty and quota-free treatment for all Cariforum goods entering Europe as of January 1, 2008, except for rice and sugar. In their case there will be a two-year transition period and increased quotas before they too have quota-free and duty-free status. In return Cariforum will remove tariffs from eighty per cent of EU imports into the region over a 15 year period, with sensitive goods receiving protection for up to 25 years or indefinitely.
In implementing this, Cariforum has a three-year moratorium and will during this period continue to charge customs duties on all items other than vehicles and gasoline for which a different phasing was agreed. Cariforum retained the right to maintain other duties and charges that make up an important part of government revenues for up to 10 years.
There is also extensive language on services industries that implicitly recognises how important such industries have become for the region and an unprecedented provision that allows Haiti and the Bahamas to be signatories to the full EPA while being granted extra time to complete their services offer.
In the European Union (EU), Cariforum investors will get national treatment and most favoured nation treatment.
The same applies in reverse. Public services and utilities and other sensitive sectors have not been opened to foreign participation and Cariforum maintained special reservations for small and medium enterprises in some sectors.
In the case of services, there are comprehensive rules in the EPA for the tourism sector, e-commerce, couriers, telecommunications, financial services and maritime transport. In the case of tourism, large firms will be prevented from behaving in an anti-competitive manner in order to safeguard the interests of the mainly small firms in the Caribbean.
The EPA also has special provisions for short-term visitors to Europe for business purposes.
In return for most of Europe opening immediately more than 90 per cent of its services sector, Cariforum is opening between 65 and 75 per cent with in its case the Dominican Republic opening more than 90 per cent. In the case of investment, the EC has liberalized almost all sectors for Cariforum firms, and has agreed to grant temporary access for Caribbean professionals in twenty-nine sectors. In an important concession not made before by Europe there are no quotas on the number of service suppliers that can enter the EU market. In addition, twenty-five European states will liberalise entertainment services. Again this is a first for any trade agreement with the EU and recognises and is complemented by an innovative protocol on cultural co-operation.
What all this means is that unlike every other region of the ACP, the Caribbean has remained true to it word and has achieved the only comprehensive EPA with Europe. This is astonishing for a region with countries at very different levels of development and capacity, to say nothing of the technical and cultural problems of incorporating the Dominican Republic when right up to the very end it was quite possible that its government might seek an arrangement of its own.
Moreover, the Caribbean EPA was achieved in the face of a very real threat that the region’s exports would be disadvantaged by the introduction of a European tariff regime on January 1, 2008. In this respect it is worth recording that this was no idle threat, as on December 20 customs and revenue authorities across Europe issued notices to importers listing ten of the more developed ACP nations and another twelve less developed nations that for technical reasons will now be subject to tariffs on their exports to Europe.
The turning point came when Caribbean Heads of Government met in Georgetown on December 7. There, faced with the real possibility that the region would be disadvantaged by the EC, the region’s political leadership agreed to return to negotiations with the EC on December 14 to conclude a full EPA based on changes to its trade in goods offer, in return for improved concessions in a number of areas. It was the moment when it was necessary, according to one Caribbean leader, “to accept convenience over principle.”
Europe’s negotiators too were prepared for compromise on this basis. Speaking a few days after the final EPA agreement had been reached, Richard Bernal, the region’s chief trade negotiator, told me that finishing on its own terms should be seen as an extraordinary confidence building accomplishment for the region. The Caribbean EPA was, he said, unique. No one else in the ACP had been able to achieve a full agreement. The region had been able to obtain duty-free and quota-free treatment for all goods; less than full reciprocity; an asymmetrical phase-in of up to twenty-five years; the exclusion of twenty per cent of products sensitive to the region; and comprehensive and sometimes ground-breaking language on services.
Europe, he said, had failed in its attempt to extract concessions. The Caribbean remained sovereign in important areas such as governance and taxation; the free circulation of goods in Caricom; government procurement; and the region’s right to retain import duties and charges. He concluded by noting that the banana, sugar, rice and rum industries were largely satisfied even if they not achieved all that they had wanted.
There remain, of course, doubters who do not share these views and justified concerns about the EPA’s development component and its delivery and funding. However, the reality is that at an economic level the EPA means that Cariforum, an abstract concept, has become one, and its governments and private sector now have between twelve to fifteen years to make the single market and economy function. In effect the EPA will drive integration if the region is not to cede economic control to Europe.
In another column I will reflect more on this and the lessons learnt; why success in the negotiating process should give the region greater confidence in the world; the dangerous longer-term implications of the lack of understanding shown throughout at the highest political levels of the European Commission; and the challenge and the change in thinking needed if the region is to take advantage of what has been agreed.
But for now I, like everyone else, will be stopping for Christmas but taking a moment to celebrate the remarkable achievement of Caribbean ministers and the region’s trade negotiating team in reaching agreement on a full EPA despite the many difficulties placed in their way.
Previous columns can be found at www.caribbean-council.org
(Editor’s note: There will be no column by David Jessop next week.)
