“E.P.A – Five years later!” By Mikael Barfod, E.U. Ambassador to Barbados & Eastern Caribbean
It has been five years since CARIFORUM and European Union (EU) member states came together in Barbados on 15 October 2008 to officially sign a trade and development agreement that would alter the way both regions do business together for years to come. The Economic Partnership Agreement or ‘the EPA’ as it is often called, replaced the old trading arrangements between the Caribbean and the EU. These previous arrangements were challenged by other countries and ruled incompatible with the guidelines of the World Trade Organization (WTO). What resulted was a reciprocal arrangement covering ‘substantially all trade’ between two very different regions.
The EPA has several objectives for Caribbean countries including improved market access to the EU for goods and services, cooperation in new trade-related areas, sustainable development, poverty reduction, regional integration, and integration of the region into the global trading system. Development co-operation is also an integral part of the EPA. This was an essential inclusion for the Caribbean that would help them to adjust to the new arrangements, take advantage of the new opportunities, successfully implement the agreement, and become more competitive and diversified in their product and service offerings.
The question therefore is – Five years after its signature, has the EPA fulfilled its mandate as a trade and development tool for the region?
Has the EPA improved the CARIFORUM countries’ capacity in trade policy and trade related issues?
At the outset, it was recognized that to be successful, the EPA had to recognize development cooperation as a crucial element in this new trade partnership, given the lack of capacity in the Caribbean region. Although the EPA identifies several cooperation priorities, they have to be translated into specific proposals. Proactive responses on the part of Caribbean administrations are unfortunately what have been lacking and what would ultimately benefit these countries.
There is a joint Declaration on development co-operation, as part of the EPA, through which the EU makes financial assistance available under the 10th European Development Fund (EDF). € 165 million went to assist the Caribbean in regional integration and EPA-related needs. € 46.5 million is directly assisting the Caribbean in implementing priorities areas which they’ve identified. These include the strengthening of Public Finance Management; the increased production and trade in agriculture and fisheries which meet the international standards; internationally recognized Regional Quality Infrastructure Institutions in CARIFORUM; and Institutional and Implementation Capacity.
The Declaration also addresses the collective commitment of EU Member States to increased trade-related assistance and support through the EU’s Aid-for-Trade Strategy – an annual amount of € 1 billion by 2010 in trade-related assistance. The EU is committed to ensuring that CARIFORUM countries benefit from an equitable share of the 50% of this Aid which is available for Africa, Caribbean and Pacific countries. In Barbados and the OECS member states, the United Kingdom (UK) and Germany have been very instrumental in this regard.
The UK through its Caribbean Aid for Trade and Regional Integration Trust Fund (CARTFund) has assisted Antigua and Barbuda, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines with the establishment of National EPA Implementation Units. Germany through GIZ (Deutsche Gesellschaft fur Internationale Zusammenarbeit) has an EPA Implementation Support Project. This has provided assistance for, among other things, facilitating dialogue for Mutual Recognition Agreements between the EU and the Caribbean for professional services; the establishment of the Caribbean Network of Services Coalitions; and the CARIFORUM EPA Implementation Network (CAFEIN) website.
Besides financial assistance, the asymmetric nature of the Agreement recognizes the capacity issues of the region. As such, trade liberalisation commitments are to be phased over time, with transition periods in some cases of up to 25 years. As a consequence, CARIFORUM countries have time to adjust, with changes and possible reforms spread over time. The conclusion therefore is that the EPA has improved the capacity of CARIFORUM countries in trade policy and other areas, and greater efforts will bring about even more results.
Does the EPA promote economic growth, increasing investment and improving private sector capacity and competitiveness in CARIFORUM?
Prior to the EPA, CARIFORUM countries had preferential access to EU markets for most of their goods under the Cotonou Agreement and its precursor Lomè Agreements. Even with this duty-free access, Caribbean exports to the EU did not develop into high-value products and the share of Caribbean exports in EU markets decreased. Market access to the EU market alone was not enough to improve competitiveness and diversify trade for the Caribbean. Since January 1, 2008, almost a year before the official signature of the EPA, goods from the 15 CARIFORUM member states entered the EU duty free and quota free. The EPA therefore offers the opportunity for businesses to move up the value chain, relying less on exports of traditional commodities like sugar and bananas. It also recognizes the challenges of the region in the goods sector and facilitates the development of service industries for which the region has greater capacity.
The EU not only recognizes this potential but has put €28.3 million into a Regional Private Sector Development Programme through the Caribbean Export Development Agency. Caribbean Export has been working successfully with a number of sectors to enhance their export and investment capacity. These include Agro-processing, Alternative Energy, Creative Industries, Financial Services, Health and Wellness, Light Manufacturing, Professional Services, Specialized Tourism, Specialty Foods, and Sports Tourism. There are many examples which this article does not permit of how the EPA through Caribbean Export and other regional agencies has promoted economic growth, increased investment and improved private sector capacity and competitiveness in CARIFORUM.
Has the EPA strengthened CARIFORUM – EU trade relations?
The EU is CARIFORUM’s second largest trading partner, after the United States (US). In 2011, trade between the two regions came to over €8 billion. This is arguably a relationship that is worth preserving and enhancing. Even with all of the challenges over the years, the Caribbean and the EU remain committed to the success of the EPA. Implementation has been a challenge for the Caribbean due to the global economic climate, limited and stretched resources and capacity, as well as the complex and extensive nature of the Agreement itself.
However, Caribbean Governments have shown good will to their commitment to implementing the EPA. In Barbados and the OECS member states, EPA coordinators have been appointed and Implementation Units have been established and are functioning extremely well. The countries have also started to reduce their tariffs on EU imports or have made preparations to do so.
Although, the governments have shown ownership of the EPA, and rightly so, given their obligations to implement, it is the private sector which stands to benefit from the Agreement. As such an essential measure of success is the businesses which have been able to begin exporting or expand existing exports to the EU, as well as EU trade and investment in the region. This then translates into economic growth and job creation. This aspect has been admittedly slow but promising.
Success stories, however, can be found throughout the region. Just last year, Banks Beer a Barbadian product was launched in the UK market through a UK independent brewing and pub retailing business (Marstons PLC) and was established within one of the UK’s supermarket chains (Tesco’s). This resulted in them entering the top 100 Premium Bands at 75 after only 4 months. Even with the strengthened trade relations between CARIFROUM and the EU through the EPA, there are many more untapped opportunities which point to a promising future for Caribbean – EU trade.
Does the EPA promote regional integration, economic cooperation and good governance?
The EPA in its very nature is a region to region agreement. Regional Integration as expected remains a priority for the EU and is promoted wherever possible throughout the EPA. The EPA promotes the Caribbean’s own regional economic integration. CARIFORUM states have committed to offering each other the same preferences they give the EU, thereby strengthening their own systems such as the Organization of Eastern Caribbean States (OECS), CARICOM Single Market and Economy (CSME), and CARICOM – Dominican Republic relations. Throughout the agreement specific measures support this, such as common CARIFORUM commitments in trade in goods and services; customs; standardization and accreditation; as well as various investment provisions and other common undertakings.
Since last year, the EU is providing substantial financial assistance to several regional bodies including the CSME (€ 27.5 million); the OECS (€ 8.6 million); the Caribbean Public Health Agency (€ 1.5 million); and the Caribbean Regional Information and Translation Institute (€ 2 million). These bodies will help the region to implement the EPA and thereby to export more and to attract more investment from overseas. Caribbean regional integration (CARICOM/OECS) has therefore largely benefitted from the EPA through, among other things, substantial financial assistance to regional bodies, and the creation of enabling rules.
Will the EPA ensure the gradual integration of the CARIFORUM countries into the world economy?
As the EPA attempts to build a regional market in CARIFORUM, the result will be an even larger market than the 15 individual smaller markets that existed before. This makes CARIFORUM more attractive to traders and investors as an integrated market with opportunities for growth and security for their investments. The eventual harmonization of the external tariffs of all the CARIFORUM countries will facilitate local businesses creating economies of scale which were not possible within their own individual countries. The creation of this regional market and larger businesses are what will put the region on the map as a global player.
Just recently as part of ANUGA, one of largest trade fairs for the food and beverage industry, four companies have been selected for the prestigious Taste13 awards. The four Caribbean brands – Baron Foods Ltd. (St. Lucia) – ‘Banana Ketchup’; Beverages Caribbean Inc. (Barbados) – ‘Tiger Malt’; 10 Saints Brewery Ltd. (Barbados)- 10 Saints Beer; and Marie Sharp’s Habanerno Sauces (Belize) – Fresh Fruits Flavors – are part of the Caribbean Kitchen Pavilion supported by Caribbean Export in partnership with GIZ to attend ANUGA in Germany. With 6,700 exhibitors from about 100 countries, there were over 1200 products that entered the competition this year and 53 making the final selection. There are many more examples like Caribbean Kitchen Pavilion which proves that there is demand for the offerings of a regional market. The EPA facilitates such initiatives which will further integrate CARIFORUM into the global economy.
Has the EPA reduced and eradicated poverty?
Poverty reduction and eventual elimination seems an unlikely objective for a trade agreement. It is no secret that the global economic and financial crisis has adversely affected the Caribbean, as well as it has the EU. However, with sustainable development as an overarching principle of the EPA, the comprehensive focus on the development needs of the Caribbean region is what makes this objective a possibility. Some of the elements of the EPA which facilitate reducing and eradicating poverty include – the removal of obstacles to trade and investment to help create enhanced economic opportunities and wealth generation in the Caribbean; the asymmetrical obligations for CARIFORUM countries to ensure that they do not have the same burden as the EU in undertaking commitments; transition periods to allow CARIFORUM commitments to phase in over time; improved “rules of origin” to promote value added processing in the Caribbean region; and addressing key sustainable development issues, such as eco-innovation, social issues and the environment.
The irony is that as countries seek solutions to their lingering financial and economic woes, other priorities have taken precedence over the implementation of the trade aspects of the agreement. So, although the EPA has not eradicated poverty throughout CARIFORUM, it has contributed to this objective and could contribute much more to growth and poverty reduction if fully implemented.
In conclusion, EU Trade Commissioner Karel de Gucht, in a recent speech on the EPA noted that EPAs are the most generous trade partnerships the EU has ever offered to any trading partner. The Caribbean EPA continues to provide for CARIFORUM countries full free access to the EU, asymmetrical obligations, flexibility in implementation and provisions tailor-made to their development needs. The EU remains committed to provide tailored development support in order to help its Caribbean partners fully implement the EPA. After five years, this commitment remains the same.