In the next two weeks European and Caribbean ministers and their trade negotiators are going to have to explain clearly to business in particular where the negotiating process for an Economic Partnership Agreement (EPA) with the region has reached and what happens next.
This will not be easy as the outcome of these complex negotiations is still mired in uncertainty. So much so that few outside of the negotiations are fully aware of what the impact of either negotiating success or failure will mean.
As a result, businesses large and small in the region and in Europe could be left struggling to understand whether or not their current deals are viable. Concern about this was reflected in a recent warning note from the Confederation of British Industry which in part stated: “Companies heavily involved in importing from ACP countries risk tariff increases as of 1 January.
If you feel you may be affected by these increases you can learn more about the tariff treatment of imports under Cotonou and GSP from the Commission website.”
Paradoxically, there is also little understanding of the implications of negotiating success as few have seen either the full EPA text or know the content of the all important tariff schedules that set out which goods or services will be subject to liberalisation, the phasing of tariff reductions and which products are on the still-to-be-agreed exclusions list.
In consequence a problem not widely recognised is the potential disruption to trade if there is no clarity emerging from a final negotiating session later this month, that will attempt to bridge the wide gaps that still exist between the Caribbean and European positions on some key issues.
So uncertain is the outcome that it is possible to envisage a number of quite different scenarios.
The first is failure. This would occur if both sides are unable to agree either to a full EPA or a minimal trade in goods (as opposed to services) agreement. If there is no agreement, EC and Caribbean negotiators – but not all EU or Caribbean member states – believe that Europe will have no legal option other than to impose on Caribbean imports into Europe its Generalised Scheme of Preferences (GSP). If this happens, tariffs will be levied on products that at present enter the EU duty free, and everyone from agricultural producers to manufacturers will be disadvantaged.
If this occurs a blame game that will be to no one’s advantage will most probably ensue on both sides of the Atlantic. In the region this will have unpredictable consequences for political and economic integration, the Caribbean’s future relationship with Europe and the coherence of the negotiating process.
Scenario two is the exact opposite. It is concluding successfully a comprehensive EPA agreement with a mutually acceptable market access schedule and transition periods, agreement to complete negotiations on certain issues at a later date and a significant additional development package for delivery through a regional mechanism.
An alternative, also requiring agreement on tariff liberalisation, would be a WTO compatible goods only trade agreement.
In theory there are also other scenarios. Some believe that if the EC is convinced that the negotiations might be concluded if more time was available Europe would not impose the GSP.
They believe instead, Europe would leave for a short while the Cotonou Convention’s trade provisions without a WTO waiver while negotiating differences are overcome.
This political stop-the-clock solution is based on a belief that Europe’s member states would not want to disadvantage so many developing countries.
However, this may be wishful thinking if the EC can demonstrate success in other ACP regions. The Pacific has already signed an interim agreement on trade in goods, and two African groupings consisting mainly of least developed countries may also sign. If this happens the Caribbean may find itself isolated.
Each of these possibilities has an understandable outcome for politicians, trade negotiators and for those in the private sector who have been actively involved. However, this is not the case when it comes to smaller enterprises.
In part the reasons why so little detailed commentary has been coming from Caribbean governments has been because of the escalating number of negotiating encounters, the rapid pace at which concessions are being made and the need for these to be reconciled with national economic policies.
This has not been helped by the EC in the last month adopting a significantly more aggressive negotiating stance that quite literally is taking the negotiations into the unknown.
This would appear to be because its Trade Directorate has become concerned about the precedent that will be created in other bilateral and bi-regional negotiations with much larger developing countries if, for instance, they do not restrict the amount of Caribbean trade to be excluded from the EPA to no more than fifteen per cent. As a consequence an increasingly aggressive, mercantilist and less developmental approach has been adopted by European negotiators.
The result of all of this is that there is still worryingly little public understanding of who will be potential winners and losers either from an agreement, some interim measure or no agreement at all.
As this is being written informal discussions at a political and technical level continue. These are largely focused on exploring whether significant differences can be overcome on the volume of trade to be excluded; sugar; the Caribbean services offer; and a number of other almost as difficult issues.
A final make-or-break negotiating session is expected in the Caribbean at the end of November.
Previous columns can be found at www.caribbean-council.org