Almost unnoticed, a development has occurred in Africa’s negotiations for their Economic Partnership Agreements (EPA) with Europe that could result in increased levels of foreign investment in the Caribbean and Overseas Territories.
Although the Caribbean agreed its EPA with Europe at the end of 2007, not one full agreement with the regions of Africa and the Pacific has yet been completed. The nearest to being finalised is the EPA with the seven nation Southern African grouping, SADEC, where final agreement could possibly be reached by mid-2011. What SADEC wants is a “more cooperative approach” from Europe in areas such as competition policy, geographical indications and the ‘make or break’ issues of export taxes and the most-favoured nation (MFN) clause which requires ACP countries to extend to the EC on a line by line basis, any treatment they might negotiate with third parties.
For its part the Central African group (CEMAC) has said that it will restart its negotiation, dormant since February 2009, with the objective of completion by the end of 2011 if Europe makes specific commitments on development assistance.
Negotiations with the West African grouping, ECOWAS, are also slow. The situation has not been helped by the continuing suspension of Côte d’Ivoire after its disputed election or by Ghana, seeing little progress, seeking to sign an interim EPA this year in order to ensure its market access is maintained. However, West African trade ministers say they remain committed to concluding a comprehensive regional EPA, in part to safeguard the regional integration process.
The Eastern and Southern Africa (EAS) negotiations are also very slow. A consolidated joint EPA draft text containing already negotiated provisions exists, but a wide range of basic issues need addressing including the MFN clause, services, agriculture, development cooperation and export taxes with further meetings due to take place across 2011.
Lagging farthest behind are the negotiations with the Pacific. Some progress has been made with market access offers and texts, but there remain significant doubts about whether the EPA’s market access provisions will create truly beneficial outcomes for a region so remote from Europe. As a consequence, the Pacific’s emphasis is the development focus with resources being made available on a sustainable basis to support implementation and the private sector development.
In order to encourage progress and agreement Europe has been making offers not contained in the Caribbean EPA. One of these is on rules of origin which, if as allowed for, is requested by Cariforum, could enhance the region’s still contentious agreement.
Rules of origin in trade agreements in part determine through a process known as cumulation, which products from third nations qualify for tariff or quota free entry if included in a locally manufactured, processed or transformed product when exported between the signatory regions or nations.
What has been tabled in the African EPA negotiations significantly extends what Europe is prepared to accept by way of cumulation using inputs from third nations. Although this has not, nor will be formally extended to Cariforum, it appears that if the European Commission is requested by Cariforum to offer the same treatment, this is likely to be agreed by Europe.
In essence, what is on offer is a significant extension of possibilities for trade and investment as the Africa EPAs will provide for full cumulation.
Without going fully into the technical details, the texts allow under certain conditions EPA signatory nations to cumulate with other countries which have duty-free quota-free access to the EU market through the generalized system of preferences and on a case by case basis with countries linked to the EU by a free trade agreement for products which enter duty-free and quota-free. Significantly the texts allow African EPA signatory nations to use as originating, materials which are subject to MFN zero duty when imported into Europe; an offer which would appear to allow the Caribbean, global sourcing of all EU zero rated MFN imported products.
What this could mean practically for Cariforum, if a request to Europe is made and accepted, is the sourcing of inputs from Mercosur, Andean and Central American nations once the free trade aspects of their association agreements come into force.
If Cariforum acts, what is now on offer to Africa could offer new opportunities for Caribbean companies and external investors to make use of the region as a manufacturing or processing base for Europe utilising hemispheric inputs.
This could be especially important as the negotiation of Europe’s association agreements with Latin America are now advancing at a rapid pace, threatening to eclipse over a short period, the underutilised duty and quota free access that Cariforum nations have so long had with Europe.
On March 22 the EU and Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama) initialled a comprehensive association agreement that includes a range of gradually introduced free trade provisions that include many products that the Caribbean supplies to the EU market. On March 24 the EU, Colombia and Peru initialled a similar association agreement with a free trade component after a negotiation lasting for just one year.
It too allows access for many of the same products produced in the Caribbean.
And it is clear that despite difficulties, the all-but-announced collapse of the Doha Round is now acting as a spur for Europe to conclude as rapidly as possible an EU Mercosur association agreement. While specific problems remain in respect of Argentina and Paraguay’s readiness, European officials suggest that completion may be possible in 2012.
As this is being written leaders from the world’s five most important emerging economies – Brazil, Russia, India, China, and South Africa – are concluding what has become known as the BRICS summit. In a demonstration of how rapidly and dramatically the world is changing, they agreed to strengthen co-ordination and mutual cooperation on reform of the international currency system, commodity price fluctuations, climate change and sustainable development. They also signalled their intention to encourage the US and Europe to end their 65-year monopoly on the leadership of multilateral institutions.
Cariforum needs to function and above all to act on all of these developments if the Caribbean economy is not to be eclipsed.
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