Region to Benefit from EPA Agreement

Jamaica and its CARIFORUM partners are set to benefit from one of the most comprehensive and complex trade agreements that the region has ever undertaken.
This opportunity is being presented in the form of the soon to be signed Economic Partnership Agreement (EPA), between the European Union and CARIFORUM countries.
Currently, the region is preparing not only to open its doors to Europe in a way that it never has before, but also to take full advantage of the 450 million high income consumers that the continent boasts.
Director General of the Caribbean Regional Negotiating Machinery, Dr. Richard Bernal says the region needs this agreement for a number of critical reasons, including the fact that the EU is a major, long-standing partner in trade.
“Furthermore, in some countries in the region, the development assistance from the EU represents the largest contribution of any of the multilateral and bilateral donors,” he points out.
“We also have many other political and cultural reasons for the long-standing and traditional friendship. Needless to say, we want to continue that relationship that took place since the colonial era, in the form of Lome Conventions and more recently the Cotonou Agreement,” Dr. Bernal says.
He was addressing a forum on the Agreement and its implications for the agricultural sector, which was recently hosted in Kingston by the Ministry of Agriculture. Dr. Bernal adds that the region is also interested in the relationship with the EU, not just because of the history between the two regions, but also because the deal is not merely a trade agreement.
“It is complemented by development assistance. That is not usual in today’s world. Most trade agreements come with no support for the less developed partners. With the EPA, there is a whole programme of development assistance, intended to facilitate and contribute to the adjustment which would be inevitable, once we enter the agreement,” he informs.
Furthermore, the negotiations for the EPA are critical to the region because of the significant potential it presents.
“You don’t negotiate trade agreements only to take care of your existing trade, you undertake them because of the potential for expanding and diversifying trade. Anything that you can produce competitively here can be sold in Europe. It’s therefore an enormous opportunity. We are not the only people trying to export to Europe, but if we negotiate a partnership agreement, it will give us preferential access compared to other countries and therefore an advantage in exporting to this market,” Dr. Bernal says.
Under the terms of the EPA, CARIFORUM is expected to have liberalised 61 per cent of EU imports in value by 2018; 83 per cent by 2023 and 90 per cent by 2033. Currently, some 52 per cent of the EU imports in value enter the CARIFORUM market duty and quota free with the main exclusions being agricultural and processed agricultural products as well as some chemicals, furniture and industrial products. Unlike the EPA, the old Lome and Cotonou agreements covers only trade in goods. However, today 70 per cent of the region’s Gross Domestic Product comes from services with tourism being the largest component.
“But it’s not the only component and this is where our comparative advantage lies, and this is where we are likely to gain, so we wanted an agreement which went beyond trade in goods to encompass services and investment as well. Europe is one of the main sources of investment and we are certainly seeing significant European investment here, even before the EPA, in the form of the Spanish hotels. This is a region that needs to expand services and needs investments,” Dr. Bernal emphasises.
Explaining why the initialing of the EPA is necessary, he said the waiver for the Cotonou Agreement ended on December 31, 2007, an agreement which had been voluntarily signed committing African, Caribbean and Pacific (ACP) countries to ending the waiver on December 31, and doing a new agreement (the EPA), which would come into effect in January 1 of this year.
“We did it voluntarily. Nobody forced us. We had several years notice about the ending of the Cotonou (agreement), and we started the negotiations nearly four years ago, so there is no undue rush. Nobody forced us to do an EPA, and nobody forced us to complete it on any given date. We knew this years ago and we were well prepared for it, and the four years of negotiations were not rushed in any way,” he points out.
Dr. Bernal stresses that the EPA is different from previous agreements because “in the past, what we really did was to make supplication to Europe, to say: ‘we need a better price, or we need a bigger quota, or we need development assistance’. That is no longer the platform, we have to negotiate. That means, this is a reciprocal agreement. We have to give something – we are not getting something for nothing, as in the past. This is required by the World Trade Organisation (WTO), not just because of the rules, but the atmosphere in the global community now is moving against preferential trade arrangements.”
He notes that, for example, the preferential arrangements for sugar and banana with the EU were “brought down” not by the EU or by developed countries, but rather, by other developing countries as they are not willing to accept any group of developing countries claiming an advantage over them.
“The only way you can get an advantage is to sign an agreement which is allowed within the WTO, for preferences among the members of that agreement, which is what we did with the EPA,” he asserts.
Although the agreement is intended to move the region toward reciprocal trade relationship with Europe, Dr. Bernal notes, in reality, it is an asymmetric agreement, meaning that CARIFORUM will provide Europe with much less than what CARIFORUM will get from Europe. “This is appropriate (as) they are the developed, industrialized partner in this arrangement,” Dr. Bernal notes.
He explains that CARIFORUM cannot afford to wait on the African countries as they are in a different situation, as these countries already have the Everything But Arms initiative with the EU, which gives them duty free quota free access, because most of them are Least Developed Countries (LDCS). “So what we are negotiating to get, they already have, so if they never sign an EPA, they are almost in the same position as we were in terms of goods. So (there is) no point in trying to have an alliance with a group of countries whose situation is fundamentally different and better than ours,” he says.
The Director General argues that the region must also recognize that having been the first to complete an EPA, in essence, “finishing first,” CARIFORUM is able to gain advantages. He says a common misconception is that if CARIFORUM countries had waited, they would have received a better deal. This, he says, is not necessarily so as, “in negotiations, you have to seek to capitalize on the period where you have the maximum leverage. Europe was anxious to conclude an EPA with anybody, (so) that those who finished first got advantages.”
As a result, he points out that the countries are able to extract concessions in the agreement. For example, he says, no other agreement to date has provided an adjustment period as long as 25 years, but CARIFORUM countries were able to get that from the Europe.
In his Sectoral Debate presentation in the House of Representatives June 25, Minister of Foreign Affairs and Foreign Trade, Dr. Kenneth Baugh stressed the importance of “finishing first” and urged Jamaica and the region on the whole, to make every effort to be first in line with projects to take advantage of assistance under the EPA. Emphasising that growth in a highly open developing country, such as Jamaica, is driven by exports, Dr. Bernal says that while maintaining the competitiveness and diverseness of its exports, the country and the region must seek new exports.
“When you negotiate a trade agreement you look not only at what you are trading now, you look ten or fifteen years down the road. (For example) if you think you are going to export higher education, as many of the eastern Caribbean countries are doing through offshore universities, then you need to put in place the requirements in the agreement relating to movement of persons, market access for higher education, intellectual property rights, and others, to capitalize on that opportunity,” he explains.
Also, as imports are liberalised and exports restructured, a period of adjustment with the EPA should be expected, Dr. Bernal notes. “We want to make sure that this is at a pace which is conducive to us, a pace which is not disruptive, and one that we can cope with, and therefore what we want is any extended adjustment period that is as long and as gradual as possible,” he says.
Dr. Bernal says that CARIFORUM countries will be phasing the liberalization of its market over periods of up to 25 years and will receive development aid to help to defray the cost of implementation of the agreement, as well as to strengthen institutional capacity, both in the public and private sectors. Some of the obligations agreed to are conditional on the availability of technical assistance.
Turning to components of the EPA and how they relate to increased exports, diversified export adjustments and other development goals, Dr. Bernal highlights export opportunities. “The growth process in a small highly open developing economy like ours is largely driven by export. In this regard, we sought to ensure increased and diversified exports by providing more stable guaranteed market access to Europe. We have increased our market access to the maximum point. We will have duty free, quota free for all goods. Most of that tripped in immediately on the first of this year. There are some aspects which will be phased in over the next two or three years, and they relate to rice, sugar and banana,” he outlines.
He adds that the fact that this market is now open to the region, will stimulate increased exports. It will also seek to promote new exports, because there are some areas now accessible, where there was no market access before.
Speaking specifically to market access for services, he says this sector is the fastest growing component of global trade, which is growing up to three times faster than domestic production. He points out that CARIFORUM countries now have unprecedented market access to Europe, which will see that continent liberalising 90 per cent of its services sector to the region.
“On our side, we will liberalise for our more developed countries, 75 per cent (of the market), and for less developed countries, 65 per cent. In most of these service sectors, they were already liberalized or they are areas in which we are not providing any services and are not likely to provide services. In addition, some of them need to be liberalized, because we will get cheaper services, which will facilitate more competitive production and will also benefit consumers,” the Director General elaborates. Dr. Bernal notes the special agricultural arrangements which have seen additional quota in a number of areas, such as sugar, which is allowed 60,000 tonnes, 30,000 which will go to CARICOM special agricultural arrangements. “We had some recent benefits, (and) some of these things were not in the agreement, but come because of the goodwill that has been generated by completing the EPA, such as the ability to reallocate the sugar quota among CARICOM countries,” he says, adding that the rice quota has been increased by 70 per cent, while banana has been allowed a preferential arrangement.
The agreement also seeks to provide standardized rules for investment. “This is important because if you have a common economic space in CARIFORUM, you have to have consistent rules. What we had before was some countries had bilateral agreements (but) no two agreements were the same. By standardizing the rules, we are making it more attractive, because a firm coming here is looking at the whole CARIFORUM market,” he explains.
Dr. Bernal stresses that the EPA is not an aid agreement, that it is a trade agreement, complemented and supported by development assistance.
In regards to governance, he notes that in every trade agreement there are monitoring institutional arrangements in which both sides are represented and that this is so with the EPA, where there are various ministerial and technical meetings to monitor the implementation of the agreement and to make minor adjustments that may be necessary.
The European Commission and CARIFORUM initialed the EPA in Barbados on December 16 of last year and the agreement is to be ratified shortly. CARIFORUM consists of CARICOM countries, Cuba and the Dominican Republic.