Hope diminishing for new Caribbean-EU trade agreement

Jamaica Gleaner | September 30, 2007

Hope diminishing for new Caribbean-EU trade agreement - MoBay meeting planned

David Jessop

As September draws to a close, the likelihood diminishes that an economic partnership agreement (EPA) is achievable this year between the European Union and the Caribbean.

The technical discussions between European and Caribbean trade negotiators have run out of time with many vital matters of principle and detail unresolved, both within the region and with Europe. As a consequence, the Caribbean’s trade relationship with Europe may be in jeopardy.

If the words of Europe’s Trade Commissioner Peter Mandelson are to be believed and no agreement is in place by December 31, the European Commission will impose tariffs on all previously tariff-free Caribbean exports to Europe.

In what might be the last chance to avoid a serious confrontation, Caribbean heads of government are likely to meet with Mandelson and his colleague, Louis Michel, the Development Commissioner, in Montego Bay, Jamaica, from October 3-5.

This approach appears to be unique. In most trade negotiations, the final and political part of the process is assigned to ministers rather than heads of government.

Such meetings usually involve small numbers meeting with their counterparts to broker compromises in areas where there are textual disagreements over detail.

Originally, the meeting was meant to be a relatively informal, involving Prime Ministers Owen Arthur of Barbados, Prime Minister Ralph Gonsalves of St. Vincent and Prime Minister Bruce Golding of Jamaica, plus the European commissioners.

It was felt that this might result in finding solutions in areas of difficulty and address the question of what happens if agreement before the year’s end is not possible. As such, it was not seen not as a means to resolve all outstanding issues but an opportunity to chart a political way forward.

However, in recent days the meeting has become a special CARICOM Heads of Government meeting and as such, some in the region believe, one with a less certain outcome.

None of which has been helped by Europe’s unloved Trade Commissioner telling European governments and the media that the Caribbean EPA is on course to be completed on time while continuing to threaten that failure will result in Europe imposing GSP tariffs when the WTO waiver on the Cotonou Convention expires on December 31.

Realistically, it is hard to see how the outstanding issues can be resolved easily without a significant level of compromise and a change of tone by Europe.

In recent months the negotiations have become more aggressively mercantilist and less developmental in approach despite the EC’s public rhetoric.

To make matters worse the European Commission has decided to take the inflammatory step of denouncing the sugar protocol while still negotiating the detail of a new regime.

A sample of the issues still outstanding in the EPA negotiations suggests that a final agreement even with both sides prepared to compromise is still six months away.

IMPOSSIBLE CARIBBEAN OFFER

To date it has proved impossible to complete the Caribbean’s market access offer - a fundamental pre-requisite if there is to be a trade agreement - as at least two countries have yet to provide the required information. Officials note that this in part depends on achieving agreement with European negotiators on the proportion of trade that will be excluded from the EPA.

Here it seems that unless the EC is prepared to agree to this being 20 per cent there will be no movement.

In this context it is pointed out that Europe has failed to understand that some Caribbean nations continue to find it hard to quantify the value of an EPA.

While the income arising from market access for sugar, bananas and other exports under the Cotonou Convention is plain, being offered intangible gains that are meant to result from market opportunity has little appeal to nations reliant on duties and charges for funding their national budget.

Just as complicated is the question of where sugar will fall in the EPA and what the text might say.

In this regard Caribbean producers made known in September their bottom line on quotas and prices in response to the European market offer of April this year. These negotiations continue separately, but how their outcome is to be incorporated into the EPA text and how long this process might take has yet to be addressed.

So much so that despite the EC’s insistence that new arrangements on sugar have to fall within each regional EPA a view is emerging that the offer of a regional stand alone agreement on sugar might ease the EPA negotiating processes.

There are also complications over other issues. Is the Bahamas in or out of the agreement? The consensus is that it is out, yet CARICOM has yet to be formally notified that this is so.

Caribbean governments are adamant they will not agree to the liberalisation of government procurement, or European proposed conditionalities relating to governance of tax regimes or to the EC approach to Most Favoured Nation treatment.

Rules of origin problems

There are also still problems outstanding on rules of origin. And the services negotiations are deadlocked over the EC’s unwillingness to consider a substantive text on tourism.

All of which scarcely touches on a further vital aspect of the negotiation: the development component of the EPA and funding for transitional programmes.

European member states make clear that any EPA related support will not flow through the slow disbursing mechanisms of the European Development Fund. Instead such sums are meant to come from bilateral commitments under Europe’s Aid for Trade provision which appears to mean that European states will commit their money to Africa rather than the Caribbean or the Pacific.

In the real world all of this argues for delay, yet to date Europe has been adamant that this is not possible. Indeed so brutal has Europe’s approach been that many senior figures in the region have been left wondering what European Commissioners’ political fall back position is. Disadvantaging economically seventy plus developing nations across the ACP they wryly note, is unlikely to be amenable to spin.

For this reason some in the region wonder if what may emerge in Montego Bay are EC offers of financial additionality, a deal on sugar and an agreement to recognise textually the need to defer negotiations on certain issues.

In all of this the Caribbean is not blameless. However, it is hard not to conclude that the whole EPA process has been profoundly misjudged in tone and delivery by Europe. The approach seems to have been to take the sound proposition of gradual trade liberalisation as a development tool and turn it into a trade negotiation of the kind that Europe might have with China in order not to compromise the EU’s global trade strategy.

December 17 was the date set for Ministers and officials to sign the Caribbean EPA in Barbados. Barring some extraordinary sea change in Europe’s approach this now seems most unlikely.

David Jessop is director of the Caribbean Council. Email: david.jessop@caribbean-council.org

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source: Jamaica Gleaner