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EPA deadline a moving target - It’s October 31 or nothing, says EU

Jamaica Gleaner | August 29, 2008

EPA deadline a moving target - It’s October 31 or nothing, says EU

Dionne Rose, Business Reporter

A senior European Union diplomat in Kingston warned Wednesday that Caribbean countries that fail to sign a trade pact the region negotiated with EU by the October 31 deadline will lose preferential access for their product into the European market.

The EU would simply revert to the generalised system of preferences (GSP) for those countries, which would see their goods subject to significant tariffs, Carlo Pettinato, first secretary at the European Commission office here told the Financial Gleaner.

Member states of the Caribbean Community (Caricom) as well as the Dominican Republic nine months ago initialled an Economic Partnership Agreement (EPA), a broad-based pact that is supposed, over the next decade-and-a-half, to lead to reciprocal free trade in goods and services between the 27-member EU and the region.

Second thoughts

But since then, faced with criticism that they gave up too much and went too far in the negotiations, several Caribbean governments have been having second thoughts about the pact and a formal signing date for the agreement has become a moving target.

Regional leaders should have affixed their signatures to the agreement first in early, then late August.

The signing date then slipped to September 2 and then September 11 and now seems likely to move again as governments search for consensus on how to satisfy their critics without having to fully turn their backs on an agreement that was several years in the making.

Pettinato suggested that the region has little room to manoeuvre, maintaining the stance of European diplomats in the Caribbean that the EPA is a good agreement that should be put into operation.

While a short delay in signing would not be problematic any prolonged deferral would be consequential, he argued.

Said Pettinato: "A short delay will not be a problem but a long delay will be a problem because preferential regime towards the Caribbean will expire."

Initialled deal

The negotiators initialled the agreement in December with the understanding that the agreement had to come into force, even in a provisional manner, by the 31st of October.

"So, if this is not provisionally in force, the regime simply expires and we will not have a legal regime that allows us to grant the preferential market access to the Caribbean into the EU market."

The fall-back position in such a circumstance would be the GSP, which last December the Jamaican Prime Minister Bruce Golding said that would add about $5 billion in costs, in the form of tariffs, for the island’s goods entering the EU.

Agreement attacked

Caribbean intellectuals, trade union and political critics of the EPA have largely attacked the agreement on three fronts:

That by opening the region to reciprocal trade in areas of services such as government procurement, the regional exceeded the current regimes of the World Trade Organisation;

That the region’s obligations to open markets is legally binding while the EU’s promise in development and capacity-building assistance is not similarly obligatory; and that

The region boxed in itself, limiting its ability to expand south-south preferential regimes by agreeing to a most favoured nation (MFN) clause in the EPA. The MFN, on the face of it, obliges the Caribbean, on a line-by-line basis, to offer to the Europeans any treatment they might negotiate with third parties.

In Jamaica, the Opposition People’s National Party, which oversaw much of negotiation towards the agreement has been a particularly harsh critic of the MFN.

Regional trade officials accept the merit of the MFN, but argue two points: that the clause was a "deal-breaker" for the Europeans and that it is not as bad as it initially appears.

"There is merit to the argument on both sides, but what is the reality?," asked one Jamaican expert rhetorically. "The reality is that, there are certain things on both sides that are deal breakers. In other words if the Europeans did not get this we would not have an EPA concluded."

"ÉYou have to say, ’Is it (the MFN clause) likely to restrict you in reality?’ I don’t see us wanting to liberalise more with India, China or Brazil than we have done with Europe. Our desire would be less because they are more threatening."

These are the countries that that perhaps reach the threshold to trigger the MFN clause and compared to the Caribbean are global trade powers. In any event, experts say, there is possibility under the EPA to provide additional preferences to third parties "without enhancing the provisions to the EU".

"The agreement anticipates dialogue on this issue," said a senior Jamaican official.

Financial Gleaner sources also say that the GSP tariffs apart, there could be other dangers for the Caribbean if the negotiations were reopened. They might be forced to give up something to get what they want.

"If the Europeans were to agree to reopening the negotiationsÉ don’t think that you can re-open the agreement on the MFN only," said one official. "Once you re-open it everything is up for grabs again. Don’t believe that they would confine it to the MFN. So if you get any adjustments, there is going to be a price."

Meanwhile, Carl Greenidge, the deputy senior director of the Caribbean Regional Negotiating Machinery (CRNM) in a report from Caribbean said last week that regional states that do not sign would not be able to derail the implementation of the new trade deal.

"If one (CARICOM) country chooses not to sign at all, and they persuade the European Union that they don’t have the intention of signing, the regulation that the European Union passed on December 20 requires that that country be taken off the list," he said, explaining that the country would also be excluded from any of the institutional arrangements.

 source: Jamaica Gleaner