EU Trade Deals With Latin America Marginalise EPA

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By David Jessop

CaribWorldNews, LONDON, England, Tues. Nov. 30, 2010: Who will breathe life into the Economic Partnership Agreement (EPA) with Europe: Government, the private sector, regional institutions?

Signed in 2008, the EPA – a reciprocal trade agreement with development dimensions – seems somehow to belong to another age.  It was negotiated against the background of wide spread acceptance that freer trade and the market would bring growth and eventually prosperity for all.  However, agreement  on its text was followed in rapid order by the near collapse of the global banking system, the recession and a sense that each Caribbean nation was on its own and that regional economic integration had become, at least for the time being, an unattainable aspiration.

At the time, the EPA played to a political divide unresolved since the 1960s; of what the best and most relevant model for Caribbean economic development should be. In doing so it translated pre-existing ideological disputes into a pro and anti-EPA crusade that required the taking of sides rather than recognising that the agreement and its accompanying measures involved many shades of grey.

What came next was a period in which virtually nothing practical happened so that now something close to EPA fatigue has set in.
With hindsight, it could be argued that the idea of a Caribbean EPA was flawed from the outset, not because of what in good faith was negotiated, but because of the absence of a single market and economy and the impracticable vehicle chosen for its delivery: Cariforum.  The consequence was that the EPA sought to impose a single trade mechanism on separated sovereignties at different levels of economic development, with different needs, economic aspirations and geo-political objectives.

Irrespective, the EPA exists. More importantly, since its signing the world has moved on. Europe has agreed to open its markets to Central America, the Andean countries and before long to the nations of Mercosur that have the size, the will and the wherewithal to rapidly take advantage of the EU market in ways that will eclipse many of the Caribbean export industries that hitherto have depended on the EU market.

Unfortunately, the time driven component of EPA implementation and the competitive challenge that further European trade liberalisation presents is a matter that the Caribbean has largely not recognised.

It suggests that like or loathe the EPA, the competition yet to come from Latin America makes what is on offer financially from Europe to the Caribbean in the way of support for reform, structural change and integration, worth using as rapidly as possible if regional economies are not to go into decline or become solely tourism based.

To even begin to achieve this, the many practical unresolved problems surrounding EPA governance require rapid resolution.

There is still no agreement on the regional institutional vehicle to manage the agreement on a Cariforum wide basis in a manner that satisfies the Dominican Republic. There are an extraordinarily wide range of institutions intended to govern the EPA at all levels that have yet to come fully into being. Their number and potential complexity do not augur well for the delivery of what is meant to be an efficient trade and development mechanism. There is to date no agreement on the implementation of the road maps that rank Cariforum`s priorities. More generally, the time scale in which both the European Commission and Caricom operate in relation to the delivery of development assistance remains poor and few EU member states are prepared to provide bilateral assistance.

More fundamentally, the EPA`s success depends to a great extent on delivery by a Caribbean private sector that for the most part cannot see where it offers demonstrable advantage. It also depends on the region having much stronger Caribbean private sector institutions genuinely able to foster pan-Caribbean thinking about investment  or accessing export markets in Europe or perhaps more realistically the US, Canada and Latin America.

The saving grace in the short term few European companies have shown an interest in taking advantage of the access that the EPA provides to much of the Caribbean market. This is because almost all nations are regarded as being too small, their business environment too complicated and because there are much easier and more competitive places to do business around the world.

What all of this suggests is a need for a different approach that seeks through more flexible institutions such as Caribbean Export or the private sector mechanisms of the Caribbean Development Bank creative ways to translate private sector needs into action.

It is therefore particularly good that Europe has recently agreed that Caribbean Export will manage a large part of the funding for EPA implementation through a regional private sector development programme that will have total funding of US$37m (Euro28m).  This will involve the creation of a regional investment and export strategy and its implementation; a regional trade and market intelligence system; increasing private sector awareness of bilateral, regional, and international trade agreements; and help with identifying export opportunities in the French, British and Dutch Territories in the region.

Caribbean Export will also seek to help strengthen niche sectors that might benefit from the provisions of the EPA; provide financial support to export ready firms; and help develop the capacity of business support organisations to allow them to provide a wider range and quality of services.
Practically this should mean support for those industries that can use the EPA such as tourism, the emerging regional and national services alliances, value added agriculture, or for example the movie industry.

Time is short. European trade negotiations with Latin American nations threaten to marginalise the Caribbean`s economic relationship with Europe. The irony is that a practical response to these measures would have been necessary even if the EPA did not exist.

David Jessop is the Director of the Caribbean Council and can be contacted at david.jessop@caribbean-council.org. Previous columns can be found at www.caribbean-council.org.

 

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