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Growing sense that Caribbean-EC negotiations may be in trouble

Stabroek News, Guyana

The View From Europe

Growing sense that Caribbean-EC negotiations may be in trouble

By David Jessop

29 April 2007

A few days ago an influential political friend of the region asked about the current state of the negotiations between the Caribbean and the Europe for an Economic Partnership Agreement (EPA).

Providing an answer was a challenge. It seemed to require a score or more snapshots of a process that was becoming ever less predictable as fear about the negative impact of a bad or rushed deal has become apparent.

As is now well known, the negotiations and a legal text acceptable to World Trade Organisation (WTO) members has to be in place by the end of December 2007 when the present waiver exempting the trade provisions in the Cotonou Convention ends. Then, if the EC is to be believed, and no new agreement is in place the Caribbean and other regions of the ACP will lose their preferential trade access, making all ACP trade with Europe subject to the significantly less beneficial generalised scheme of preferences (GSP).

Practically this could mean that tariff free exports from the Caribbean to Europe would cease, some long term investors would disinvest, the EU would have contradicted its own legally binding commitments that the ACP should be no worse off as a result of the EPA negotiation and customs chaos would reign.

But as I noted to my contact, no one is giving up on achieving a full agreement; as yet. If a full EPA agreement is not possible, an alternative could be, one based on limited ambition for now, that involves agreeing to something simpler with a WTO compatible built-in agenda enabling the detail to be resolved by a future date.

Despite this there is a growing sense that the negotiations with the Caribbean at least may be in trouble and if no final agreement can be reached on a limited scope agreement by September, Europe might, with great reluctance, have to seek an extension to the existing waiver. If they did so it would be in the hope that in the two or so years it took for such an application to grind its way through the WTO, the present preferential regime would continue unchallenged and a better considered agreement could be successfully concluded.

There is, it is argued, a precedent for this in the form of the Caribbean Basin Initiative which grants preferential access for Caribbean exports to the US market. The WTO waiver on this expired in December 2005 but the US has so far continued, unchallenged, to maintain the regions preferential access while seeking an extension.

However life may not be that simple. Officials on both sides of the Atlantic recognise that a waiver extension would have to take into account the potentially contentious nature of the recently proposed EPA regime for sugar and rice and presumably bananas. They hint darkly that some of the region’s hemispheric neighbours and maybe others may seek advantage in their negotiations with Europe or in the Doha Round by bringing forward new complaints on any Cotonou waiver extension.

To understand this, it is necessary to know something of the nature of the proposal that Europe made on April 4 when it offered quota free and duty free market access to all remaining ACP products subject to tariffs and/or quotas.

The offer was aimed at sweetening the negotiations. It proposes making duty and quota free access available to all ACP nations immediately the EPA agreement comes into force on January 2008. However, the offer was qualified in respect of rice and sugar (there is no mention of bananas). Special transitional arrangements were proposed which are likely to be as contentious in Europe as they are in the ACP.

On sugar the basic proposal is that the protocol will continue until the end of September 2009 and that the guaranteed prices imposed from 2005 on will remain. During this phase more-developed non-protocol ACP sugar producing nations such as the Dominican Republic will be granted initial market access through what officials indicate is likely to be a relatively small quota. To keep existing more-developed ACP sugar protocol countries happy, they will be given a small uplift in access while the least developed ACP suppliers, mainly in Africa, will have transitional ’Everything But Arms’ quotas extended.

A second phase will run from October 2009 to the end of September 2015. Here the EC’s offer is less clear. There will be free access for all ACP sugar but with an ’automatic volume safeguard clause’. This would only apply to more developed ACP sugar producing nations including Guyana, Belize, the Dominican Republic, and Jamaica and is understood to mean something akin to a regional quota through an imposed ceiling. Just as significantly, a minimum price will be set to September 2012 but thereafter a new mechanism involving ’a price information system’, implying some form of managed market, would prevail.

Finally from October 2015 there will be a genuinely quota free and duty free regime for sugar subject to EPA safeguard clauses ’adjusted to take account of sugar’ but with it seems no guarantee on price.

Space does not permit a full description of the proposed approach on rice or the implications for bananas but even the most casual reader will realise that the sheer legal and technical complexity associated with all of this could throw the EPA negotiations into turmoil.

The matter is made even more complex as within Europe some EU Agriculture Ministers have raised serious concerns in Council about the EC’s offer on sugar and rice and the implications for the banana regime on the basis of: market disruption; absence of consultation; and incompatibility with the EU’s multilateral approach in the Doha Round. As a result eight nations and particularly France have made clear that they are far from happy with the proposal.

Why the EC has chosen to introduce the issue at a moment in the negotiations without full consultations when there are no more than five negotiating months left to resolve every other contentious and unresolved issue is a mystery.

Meanwhile there has been a notable failure to make progress in the Caribbean. At a particularly difficult meeting in Jamaica it became clear that the region’s offer on tariff reductions on goods and services is in trouble.

While all EC offers other than on rules of origin have been made, the region has yet to agree its offer on market access. This is because three Caribbean governments have not put forward tariff schedules while others are adamant that they want more than fifty per cent of their trade excluded. Why this should be revolves around pending elections, differences between negotiators and ministers and the unwillingness of finance ministers to accept trade ministers’ assurances that short term revenue losses are worth the long term gain. Worse it seems that the region’s services offer, described by one regional figure as ’puerile’, seems not to reflect Caribbean wishes to encourage the opening of the EU services market.

As I told my politician friend, none of this bodes well for concluding an agreement by December.