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CARIBBEAN: Jury Still Out on Trade Pact with Europe

Peter Richards

BRIDGETOWN, Barbados, May 13 2010 (IPS) - A year and a half after Caribbean leaders inked a controversial and sweeping free trade pact with the European Union, concerns are emerging that the region is lagging in accessing some of its benefits.

Under the economic partnership agreement (EPA), the European Union allows Caribbean Forum (CARIFORUM) countries duty-free and quota-free access to its markets, with CARIFORUM agreeing to open 80 percent of its market to the Europeans. It covers trade in goods and services, investment, trade-related issues like innovation and intellectual property, and development cooperation.

CARIFORUM comprises the 15-member Caribbean Community plus the Dominican Republic.

When it was finally signed in October 2008, many Caribbean economists, civil society groups and others expressed fears that the deal would leave small regional businesses unable to compete with massive European firms and would also lock the region into an agreement that will lose its relevance as world conditions change.

“We expected that the EPA would serve as a useful precedent for the region in its negotiations with other partners,” said Valeriano Diaz, head of the EU delegation to Barbados and the Eastern Caribbean, speaking at a two-day seminar of business leaders and government officials here late last month to informally assess progress.

“But we also know that there were those who did not believe that the EPA would be in the Caribbean’s best interest,” he acknowledged.

The Shridath Ramphal Centre for International Trade Law, Policy and Services at the University of the West Indies said the seminar was opportune “now that the dust has settled” on an agreement “that gave rise to a good deal of controversy”.

According to Malcolm Spence, a senior official at the Office of Trade Negotiations at the Guyana-based CARICOM Secretariat, the failure thus far to form key EPA institutions like the Joint CARIFORUM-EC Ministerial Council, which oversees the implementation of the agreement, “has significantly hampered CARIFORUM’s ability to maximise the various features of the EPA”.

“In the area of innovation this would have involved, for example, pressing the EC at the Trade and Development Committee to promote the use of its incentives for technology transfer,” he said. “And, perhaps because of the temporary halt in the erosion of preferential treatment, CARIFORUM enterprises and institutions have been complacent about preparing for the operation of the institutions of the agreement.”

However, he added that a CARIFORUM-EU Business Forum has met and work is being done to establish the mutual recognition agreements among professional bodies that would allow their members access to those service markets liberalised by the European Community.

In addition, CARIFORUM universities have met collectively to determine how they can prepare to facilitate the implementation of the EPA.

Errol Humphrey, a consultant with the Barbados Ministry of Foreign Affairs and Foreign Trade, said that while the EPA is not a “miracle cure” for the region, it is expected to facilitate economic restructuring and growth by helping the CARIFORUM countries “to move towards more value-added economic activity and to develop a greater capacity to compete internationally in service exports”.

“The essential element going forward is ‘partnership’ because the attainment of the region’s EPA implementation goals is much more likely if the parties are able to cooperate in a genuine economic partnership, based on CARIFORUM’s development priorities,” he argued.

A trade and development specialist with the Trinidad and Tobago Manufacturers Association (TTMA), Mahindra Ramesh Ramdeen, noted that one “silver lining” emerging from the EPA is that sovereign national businesses are preparing themselves to better compete in global markets.

He said the CARIFORUM negotiators – who in some instances had been severely criticised over the agreement – “must be commended for the flexibilities in place in the agreement allowing for regional manufacturers to build their competitive strategies and competence to trade without a protective tariff barrier”.

“For the Caribbean, not only does this enhance the supply chain linkages with the EU, but it also provides an opportunity for manufacturers to utilise high quality and cheaper sources of raw materials to be incorporated into their production process. This has the potential to reduce the cost of manufacturing and increase the quality of products manufactured in a developing region,” he said.

Last December, the EU announced the launch of a 15-million-dollar support programme within the first six months of this year aimed at enhancing the competitiveness of regional exports.

Professor Anthony Clayton of the University of the West Indies Institute for Sustainable Development said that the EPA has come at a time when the changing global environment provides both opportunities and existential challenges for the Caribbean.

It must adjust to the loss of preferential terms of trade and increasing competition from emerging economies, adapt to climate change and growing resource shortages, while simultaneously contending with trans-national organized crime, rising homicide rates and increased trafficking in illegal narcotics and firearms, he noted.

And “many of the Caribbean nations must do so from a basis of weak state capacity, heavy indebtedness and a legacy of divisive politics”, Clayton warned.

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