Time running out on European trade pacts

Jamaica Gleaner | October 15, 2006

Time running out on European trade pacts

David Jessop, Contributor

Ambition is a word much loved by trade negotiators. It denotes not just the scope of any trade agreement but also encompasses the extent to which there is the political will to achieve an arrangement that matches aspirations.

It is the word that is now on the lips of European and Caribbean trade negotiators involved in trying to achieve an economic partnership agreement (EPA) between Europe and the Caribbean.

In part, this is because it is recognised on both sides of the Atlantic that time is running out.

If there is to be an asymmetrical free trade agreement covering substantially all trade in goods and services between Europe and the region, this must come into force by the end of 2007, when the World Trade Organisation (WTO) waiver on the Cotonou Convention expires.

Principal matters

Unfortunately, the principal matters to be resolved are increasing in complexity rather than decreasing. While negotiators on both sides declare themselves sanguine, and that this is normal in a trade negotiation, the reality is that when European and Caribbean Ministers meet in Brussels in November, there will be an urgent need to reach an understanding on what is achievable.

Specifically, ministers will have to find ways to reconcile the European Commission’s overoptimistic views of the scope of an agreement with a region in which fragmented nationalism, unequal development and personal animosities continue to limit the ambition of an EPA.

To understand this it is necessary to know that earlier unresolved difficulties centring on the development component of an EPA, financial additionality, the trade coverage of the agreement and the nations that will be included - the so-called geometry of the Caribbean - have now been joined at EC insistence by other contentious issues.

These include conditionalities relating to governance and a relatively aggressive European posture on the opening of the financial services, transport and utilities sectors.

At the most recent EC/Cariforum EPA negotiating session held in the Dominican Republic (DR) in late September, some progress was made.

Development chapter

Europe agreed to a development chapter in the text. A transitional period of up to 25 years was discussed. Both sides submitted texts and schedules to one another, these were in part considered and progress was made in other areas.

Despite this, there is a sense many of the big issues remain unresolved.

As far as the development component is concerned, the direct language used earlier this year by the Barbados Foreign Minister, Dame Billie Miller, may have won few high level friends in Europe, but resulted in recognition that for the Caribbean, the development aspects of an EPA are fundamental and have to parallel the pace and scope of market opening. Language recognising this will now appear in the final text although quite what kind of commitments this will result in remains a contentious issue between Europe’s trade and development commissioners.

In this respect, the text is being negotiated against a background of significant divisions between Europe’s member states and the European Commission over the latter’s appalling record when it comes to the disbursement of European development funds.

As a result, EU member states are beginning to talk in private about the possibility of any financial additionality that there may be for an EPA, being delivered through coordinated bilateral programmes supported by individual EU states. This development, which is still far from being agreed at an all-EU level, would not only tend to benefit Africa, but might also have the effect of requiring a wholly new range of Caribbean bilateral initiatives with Europe.

The question of the geometry

Just as contentious is the question of the geometry of a regional EPA. The relationship between CARICOM and the Dominican Republic in an EPA remains unresolved; there is a lack of clarity about how to accommodate Haiti although a CARICOM member; the Bahamas although also a member is likely to remain outside an EPA; and the OECS nations continue to argue for something close to permanent special and differential treatment in an agreement with Europe.

The consequence of these hard-to-reconcile regional political realities is that positions on both sides of the Atlantic remain far apart. In particular, CARICOM politicians avoid addressing the question of the relationship with the Dominican Republic within an EPA - largely because there is no political consensus between Anglophone Caribbean states as to how to proceed - while the EC continues to seek the full integration of the DR into a one-size-fits all agreement.

More recently, the introduction of conditionalities relating to governance has emerged as having the potential to derail the process.

Caribbean negotiators have had to reject proposals from Europe that sought to place conditionalities on the availability development assistance if the region did not fully comply with OECD financial services initiatives.

Although the Caribbean has made it clear that to do so would destroy the independent Caribbean’s financial services industry, the EC has reserved the right to reintroduce these issues into negotiations at a later stage.

Scope of the arrangement

Another difficult issue relates to the scope of the arrangement. Trade agreements normally relate to ’substantially all trade’ meaning the exclusion of around 10 per cent or less of all commercial exchanges between the parties involved. CARICOM has yet to reach a consensus on how to address this sensitive issue but there are signs that the coverage under discussion in the region is substantially lower.

What this by no mean exhaustive list of challenges suggests is that as each day passes and such issues remain unresolved, the challenge to the negotiating timetable becomes more acute.

The consequence is that in the end, the Caribbean’s EPA with Europe may be a very different document to that initially envisaged and most certainly to that to be agreed with African states that seem not to be taking so robust an approach with the EC over market access and other issues.

Emerging view

The result is that there is now a view emerging among some of those close to the negotiations that the Caribbean may reach a stage next year when it becomes apparent that the ambition of negotiators on both sides may have to be limited if present differences cannot be resolved politically. If this were to happen, they argue, this could result in a WTO-compatible text being produced that left certain issues unresolved, but with a commitment to their conclusion within a given time frame.

While such a limited scope agreement is not being countenanced as yet by trade negotiators, it could become a real possibility if the region is unable to achieve a political consensus on how to move forward and have Europe understand that aspects of its ambition are unrealistic.

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

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source: Jamaica Gleaner