Dear Editor,
Professor Clive Thomas, in the most recent of several articles on the recently concluded Economic Partnership Agreement (EPA) between CARIFORUM (CARICOM plus the Dominican Republic) and the European Union (SN, February 3, 2008 “Guyana and the Wider World – Establishing SIDS and sabotaging it: Casualty of the EPA!”), has again sought to disparage that accord and to claim that the region acted against its own interests. There are, however, many contentious planks in Prof. Thomas’ analysis that are based on an incorrect reading of what has been negotiated.
The first of these is the notion that reciprocity in trade liberalization is something that the European Union imposed upon the Caribbean, and that this somehow violates the principles of the Cotonou Agreement and its predecessors. Your readers should be aware that the Cotonou Agreement of 2000 (Article 36 of Title II of the revised text), in setting the stage for the negotiation of EPAs, explicitly recognized the need for agreements that would be compatible with the rules of the World Trade Organization (WTO), and that there would be a progressive removal of barriers to trade among the parties. Thus, it would be untrue to suggest that reciprocity is an issue that was sprung upon the Caribbean overnight – it was in fact part of the commitments entered into by all of our governments. The move from the non-reciprocal preferential market access arrangement, which the Caribbean and the rest of the African, Caribbean & Pacific (ACP) group had enjoyed since 1975, was made necessary by the simple fact that the general WTO membership was no longer willing to approve the waivers under which those arrangements have operated. The long series of disputes over the EU’s banana regime, which the EU consistently lost, contributed in no small measure to this change of attitude. Even as recently as December of last year, the EU again lost another WTO challenge to the banana preferences granted to the ACP.
WTO rules require that, for a free trade area (FTA) to qualify as a legitimate arrangement, the parties must liberalize “substantially all trade” within a reasonable period (10 to 12 years). Once that is done, there would no longer be the need for ‘waivers’ from the basic “most-favoured-nation” rule, which enjoins all WTO members to treat each other equally in the application of customs duties and charges. The fact is that an FTA (or a customs union) is the only way of permanently locking in the preferences that WTO members extend to each other. The alternative that CARIFORUM faced was the so-called Generalized Scheme of Preferences (GSP), which is nowhere as valuable as full duty-free and quota-free access to the EU market, which excludes several products of export interest , and whose rules admit the exclusion of certain countries altogether on the basis of economic and sometimes political considerations.
Prof. Thomas raises the issue of reciprocity and liberalization between regions of vastly unequal development levels and capacities, and further, asserts that trade liberalization can only be valuable among countries of roughly equal size and level of development. The studies he quotes no doubt support his orientation but the literature on this subject is so vast, and arrives at so many different conclusions that it would be misleading to suggest that policy prescriptions are easy to arrive at. What is certain, however, is that no country – large or small – has any choice but to integrate itself into global supply chains. None of this is to say that small economies do not face unique challenges and vulnerabilities, particularly in relation to cost of production and external shocks. Nor is it meant to diminish in any way the value of sub-regional integration efforts among small economies, of which CARICOM is probably the best example.
But, in any event, the EPA is not about “unabashed support for reciprocity” as Prof. Thomas alleges. The commitments made by the Caribbean have been carefully tailored to suit its circumstances and have taken full account of the region’s vulnerabilities. It may not be known to your readers that, in their preparatory deliberations, as much (if not more) time was spent by Caribbean officials and their private sector counterparts in drawing up the list of products that would be excluded altogether from the EPA as was spent on fashioning their liberalization commitments. As a result, almost any product that one can think of that is of some importance to the region’s producers has been completely excluded from the agreement and will not be subject to tariff reduction.
While the region has committed to the liberalization of 82.7% of its EU imports in 15 years, this needs to be seen in the context of the actual impact of such reductions. To begin with, 51% of all imports from the EU were already duty-free and consist mainly of raw materials and other inputs for industry. Another 1.8% of imports attracted only very low or nuisance tariffs and could therefore be liberalized early. Apart from those zero-rated or very low tariffs, only 8.3% of imports from the EU will be liberalized by the end of 10 years. This clearly does not amount to “aggressive” or “up-front” liberalization.
Another contentious assertion made by Prof. Thomas is that the Caribbean should not have negotiated issues that have not been settled in the WTO. He then goes on to list 15 items on which, he claims, there is ‘fundamental disagreement’ in the WTO between developing and developed countries, such as Investment and Government Procurement.
The fact that an issue, such as investment, has not been the subject of a multilateral approach in the WTO is no reason for any country to refuse to address it in bilateral negotiations. Several Caribbean countries already have bilateral investment treaties (BITs) with EU member states, the USA and others. These generally provide for the protection of investors’ rights in relation to the host state as well as a course of action for the settlement of disputes, guarantees against expropriation without fair compensation, and guarantees of their ability to repatriate their investments and returns from such investments etc. Providing guarantees of this sort is regarded as a powerful attraction to international investment. In the WTO, on the other hand, while investment is dealt with as part of other substantive areas, such as services, there has never been a comprehensive agreement of the type that covers trade in goods. The resistance to negotiating comprehensive WTO rules on investment had to do with the fears of many countries that new obligations would be imposed on them even while the adjustment to the Uruguay Round agreements of 1994 was still taking place. There were also objections to some proposals being made by the proponents of a multilateral investment agreement. This did not mean that the objectors would eschew any bilateral investment treaties or refuse to incorporate such rules into free trade agreements which they negotiated.
In the EPA, we have provided for basic rules covering the behaviour of investors, and the responsibilities of the countries (EU and CARIFORUM) in that regard. These commitments require that the countries take action to prevent investors from engaging in corrupt practices, ensure that they observe core ILO labour standards, ensure that they do not violate the labour or environmental standards contained in international agreements to which the countries are signatory, and that they establish and maintain local community liaison processes especially in projects involving extensive natural resource-based activities. I am sure that Prof. Thomas would agree that these provisions are nothing extraordinary since they simply reinforce obligations that our countries have already undertaken, both in national law and in the context of various international conventions.
On the issue of Government Procurement, about which there has been a considerable amount of misinformation, it must be made clear that, in accordance with the mandates
received, there has been no commitment given in respect of access by the European Union to the procurement processes of our governments. Neither has there been any commitment for CARIFORUM governments to open up their markets to each other. The EPA provisions on Government Procurement relate only to transparency, i.e. the publication of information on proposed contracts, and this only in relation to contracts exceeding Euro 164,753 for goods and services, and Euro 6,909,014 for works. The fact is that, even in respect of transparency, CARIFORUM’s commitments have been confined to the barest minimum.
Running through Prof. Thomas’ articles has been an assertion that the commitments made under the EPA somehow prejudice the autonomy of the CARICOM Single Market and Economy (CSME). This is not so. In every aspect of the agreement, the negotiators, guided by officials of the member states, have ensured that CARIFORUM’s commitments did not exceed those that the CSME countries either have made or are willing to make among themselves. In fact, the agreement requires that CARIFORUM countries shall not give to the EU any preference or advantage that they do not extend among themselves.
It is also claimed that the EPA has had the effect of sabotaging the efforts of the group of Small Island Developing States (SIDS) in upholding the “principle of non-reciprocity” for themselves in the WTO. Nothing could be further from the truth. First of all, the Small Economies Group, as it is known in the WTO, has never set out to deny the principle of reciprocity, which is at the heart of the multilateral system. Instead, it has argued consistently that, due to the special circumstances of its members, there should be certain flexibilities granted to them in relation to tariff reduction and in some other respects. There is nothing in the EPA that would prejudice the positions that Caribbean states and others have been taking as part of the Small Economies Group. On the contrary, much as we have advocated in that context, CARIFORUM has achieved gradualism in the making of its tariff reduction commitments and has been able to shelter its most sensitive products, thereby providing it with the space needed for adjustment.
The EPA is not a “perfect” agreement but it is a balanced one. As in any negotiation, there had to be compromises and this took place on both sides. It contains safeguards as well as institutional mechanisms for addressing problematic issues that may arise in the course of implementation. It also contains many innovative features that are of benefit to the Caribbean and it is up to us as a region to take full advantage of its provisions.
Yours faithfully,
H. E. Dr. the Hon Richard L. Bernal, OJ
Director-General
Caribbean Regional Negotiating
Machinery Office
