A call by three prominent Caribbean nationals for a renegotiating of the Cariforum-European Commission (EC) Economic Partnership Agreement (EPA) has been rebuffed by the Caribbean Regional Nego-tiating Machinery (CRNM).
The three signatories to a February 27, 2008 memorandum, ‘Problem areas in the EPA and the case for Content Review’ which they sent to the CARICOM Reflections Group on the EPA, were senior associates of the CRNM, Havelock Brewster and Norman Girvan, and former prime minister of St Lucia Professor Vaughan Lewis. They identified 19 areas of concern in the process and content of the EPA and some options which they feel might be available to the region.
However, the CRNM has dismissed the concerns raised as not accurately representing the text of the EPA. It also labelled the discussion as hypothetical. The negotiating body said that the issues the trio raised were replete with errors and innuendos; dismissed the hard work of regional officials and stakeholders in the consultative and coordination processes and the analyses of relevant issues; and they made little or no contribution to the objective of improving the regional negotiating process.
Renegotiating
In stating their case for renegotiating, the three said that adequate time and effort should be put into public explanation and discussion and a review of the provisions of the agreement before it is cast in stone from the legal point of view since few Caribbean people know about or understand it.
CARICOM, they said, should weigh the political costs and economic risks of seeking to change the EPA now against the longer-term costs of adopting it in its present form.
They said too that it would be politically difficult and economically risky to adopt a change in approach to the EPA at this stage but there may still be a ‘window of opportunity’ as the agreement has not yet been signed or given provisional application, nor has the EC sent formal notification to the WTO and the EU parliament has not assented.
They said it would be virtually impossible to change what has been agreed to if signed.
The CRNM explained that the aim of the Reflections Group meeting was to identify from the CARICOM external trade negotiating experience, particularly the most recent- Cariforum-EC EPA – any aspect of the processes used that could be improved in the context of external trade negotiations anticipated in the future.
The CRNM said that the longer the delay in signing the EPA, the greater the risk of major economic dislocation within Cariforum and the review, public explanation and discussions should not be an excuse for any unwarranted delay. Any amendment at this stage requires the consent of all the parties and reopening the negotiations will further delay the provision of its legal cover in the World Trade Organisation (WTO).
It would also heighten the risk of the application of the EPA preferential arrangements for Cariforum goods being challenged and discontinued.
The CRNM said that that at this stage the implementation of the EPA would nullify the need for amendment or alternatively identify aspects that might serve the agreement’s mutual objectives better, if amended. Built into the agreement are jointly agreed monitoring and review mechanisms so that any amendment would be better negotiated after the signing of the EPA.
Even before the completion of the legal scrub of the text of the EPA, the CRNM said that Cariforum member states, including its regional institutions, began their review and were planning the necessary public explanation and discussions as part of their preparations for its implementation.
Development component
One of the main contentions of Brewster, Girvan and Lewis was that the development component of the EPA has taken a back seat to the trade and investment liberalization component but the CRNM said that “the member states and their negotiators were never under any illusion that the Cotonou Agreement mandated that the EPA, by implication, in and of itself, must promote sustainable development.”
The EPA along with its development provisions could only be one element of a comprehensive approach to promote development. The EPA contains provisions that integrate it with the development cooperation obligations of the Cotonou Agreement and for support measures beyond Cotonou which strengthen the development component of the Cotonou Agreement in many ways, the CRNM said.
The trio argued that resource transfers for implementation were not part of the EPA and the resources provided by the European Development Fund (EDF) under the Cotonou Agreement, and when shared between 15 countries over the five-year period, were woefully inadequate.
They said that for a reciprocal trade agreement between partners of highly unequal levels of development to bring the poorer partners closer to the level of the richer, adequate resources must be transferred to them to build up their productive capabilities in infrastructure, human capital, and enterprise plant, equipment and technology.
On these points the CRNM said that the trio makes inappropriate comparison between the ‘social cohesion funds’ and ‘structural funds’ that the EU provides for countries acceding to the EC and the EDF under the Cotonou Agreement. The Cotonou Agreement is not a Cariforum-EU accession agreement and the EPA does not intend to make it so. In relation to the adequacy of EDF funds, the CRNM said that they neglected to identify that the EDF does not provide all the development funding that flows into the region from the international community, including funding from individual EU states.
The CRNM also noted that Cariforum Heads of Govern-ment, at the Montego Bay meeting, on October 4-5, 2007 with EU Trade and Development Commissioners Peter Mandelson and Louis Michel, were unable to persuade them to commit additional resources.
The three said the effect or potential effect of tariff elimination on items representing 82.7 percent of imports from the EC needs to be carefully evaluated with respect to government revenue, income, production and employment; and country by country.
Cumulation
In terms of market access they said that it does not automatically convert to ‘market presence’ since the Caribbean had duty free, quota free (DFQF) access to European markets for the majority of its exports since 1975 under the Lome accords but growth of non-traditional exports to EU markets has still been insignificant. Restrictive rules of origin and technical barriers to trade (TBT), including Sanitary and Phytosanitary Standards (SPS), they said, have not been satisfactorily addressed by the EPA and gave the example of the exclusion of a number of products including sugar-based products from ‘cumulation’ of value-added at least until 2015 which will inhibit the growth of regional sugar-based industries for export to Europe.
On rules of origin and non-tariff barriers, the CRNM said that the restriction on cumulation for certain sugar-containing products relates to a very specific list of items, such as the weight or size of the packaged product and/or according to the percentage of sugar contained and the restriction does not apply to all sugar-containing products. The EC has also agreed to review the list of products in two years with a view to reducing it.
The EPA already contains product-and sector-specific development provisions – sugar, rum, rice, bananas, non-traditionals, tourism, etc. – and the extent to which specific firms would be targeted will be determined during project formulation. Under the project that derived from the Declaration on Rum that is part of the Cotonou Agree-ment, specific firms have benefited in a variety of ways, including product development and environmental management.
The three said that Cariforum has committed to opening 75 per cent of its service sectors to EU service providers for More Develop-ed Countries and 65 per cent for Less Developed Countries
in respect of commercial presence which opens the way to displacement and/or acquisition of domestic firms by much larger and better endowed EU firms. The strategic implications need to be considered for the vulnerability to foreign decision-making and for the potential development of Caribbean-owned regional firms that are capable of going global. On these issues the CRNM noted that there would be no full and immediate reciprocity. There was instead asymmetry of obligations, and unprecedented and extended periods for phasing in the region’s obligations juxtaposed against the immediate liberalization obligations because the EU recognizes the difference in levels of development. There was careful evaluation by regional trade officials of the sensitivities to government revenue, income, production and employment, the CRNM said.
Needs test
Brewster, Girvan and Lewis said that the opening of 29 service sectors and nine professional services in the EU to Cariforum service providers was highly conditional and subjected to among other things an ‘economics needs test’ (ENT) in the EU member state, that is, if they manage to overcome all the barriers and their stay being limited to 90 days in a calendar year.
However, the CRNM said that the EPA provides for access by contractual service suppliers (CSS) in 29 sectors and independent professionals (IP) in 11 and not nine sectors without economic ceilings or quotas, as is the case in the WTO. In the WTO, the EC has not opened these sectors for all but CSS and IPs from Cariforum would be eligible for stays of up to six months in each state and not for 90 days.
Economic needs tests have been in practice in most countries for many years but several EU states did not include ENT requirements on the market access they granted to CSS and IPs from Cariforum in a wide range of sectors.
With regard to entertainers, the three said that many were already gaining entry to the EU to perform and the EPA provisions will now require them to have university certification or to be registered locally, but the CRNM denied these claims noting that article 83 (2) of the EPA excludes entertainment, fashion model and chef-de-cuisine services from university degree requirements.
The three claimed too that no commitment was made by the EC in respect of visa, immigration, work permit and residency regulations relating to service providers, which are very tight on the EU side and relatively relaxed in the Caribbean region because of tourism. Their views in this regard, the CRNM said, show that they confuse immigration issues with trade issues and do not understand the difference between a legally binding market access commitment in a trade agreement and the current discretionary access that Caribbean persons currently enjoy in various EU states.
Stating that the EPA provisions establish a precedent for upcoming trade agreements to be negotiated with the US and Canada, the three said that it might have been better for Cariforum, or at least CARICOM, to have negotiated an EPA limited to what was necessary for ‘WTO compatibility’. This should have had carefully calibrated import liberalization attuned to the development of local production capacities and with specific commitments for assistance targeted at key infrastructure inputs, firm-level technical support and the establishment of market presence in EU markets.
WTO-plus
Inclusion of WTO-plus areas in services, competition, public procurement, and investment, the trio said, could be deferred pending WTO agreement in these areas, or at least pending completion of the relevant Caribbean Single Market and Economy (CSME) regimes. They said that the inclusion of ‘WTO-plus’ commitments in the EPA in services, intellectual property, competition, public procurement, investment and e-commerce is not necessary to secure approval of the EPA under WTO rules, which require only WTO compatibility and will require Cariforum states to adopt legislation, regulations, practices, and policies that will be onerous in terms of money and scarce technical manpower.
Looking ahead, the trio said that a possible course of action was that CARICOM could signal to the EC that it has every intention of concluding an agreement that meets existing WTO rules and obligations, but that it cannot proceed to the signing and provisional application of the initialled EPA as there has been inadequate time for public consultation and official evaluation of its developmental impact and its implications for its own regional integration process.
And furthermore it should also indicate that in concluding a WTO-compatible agreement it is not prepared to include any WTO-plus provisions at this time, and until either agreement is reached in the WTO on these subjects, or the relevant CARICOM regimes are completed; whichever is earlier.
In this regard, the CRNM said that the three men do not appear to have any idea of the status of such negotiations in the WTO and noted that the EU’s market access commitments to Cariforum in the EPA is significantly more advantageous than what is available from Europe to other WTO members, or in any other EU trade agreement.
The CRNM said that the three assumed that the only reason for negotiating an EPA with services and investment was to secure approval of the EPA under the WTO regulations, which ignores the fact that Cariforum states have significant offensive market access interest in services and the EU is the world’s largest importer of services. Cariforum has determined that the mere tariff liberalization component of the EPA would not provide the necessary economic platform for the gradual integration of Cariforum economies into the global economy.
Noting that they implied that certain subjects need to be settled in the WTO, the CRNM said that the fact they are not settled in the WTO does not preclude their incorporation into bilateral agreements since countries can properly determine the extent to which they wish to make commitments, based on their assessed national interests. Moreover, Cariforum has already included some of these subjects in its bilateral agreements.
The proposed course of action for renegotiation by the three called for diplomatic and political actions from the Caribbean; mobilizing other ACP countries around collective positions; EU member states; the EU parliament; EU civil society and the Caribbean diaspora to bring pressure on the EC Trade Direc-torate and Trade Commissioner. In response, the CRNM said they were all tapped during the EPA negotiations.
The CRNM said that great care was taken to ensure that any commitments that pre-empt the CSME decision-making process were well understood and kept to a minimum. The EPA, the CRNM feels, strengthens the CSME when it is eventually established, as it serves to strengthen the smaller OECS integration process and promotes the evolution of the larger Caricom-DR economic relationship.
In addition, the CRNM said that the conduct of the consultative process allowed regional officials to further learn from experts in these subject areas in the real-world situation rather than the sometimes rarified academic environment.
