Malawi has opened up negotiations on the economic partnership agreement (EPA) with the European Union, which have been deadlocked since 2002.

The new round of negotiations may see President Joyce Banda’s administration change the status quo and sign the free trade agreement.

“We have opened up negotiations and consultations on EPAs. We can’t ignore the issue anymore like the previous administration, and President Banda will pay attention to this,” said the country’s trade minister John Bande.

A classroom block of a school in the capital Lilongwe. The government’s current position is that an EPA would have to push development. Credit: Mabvuto Banda/IPS

The EU extended the deadline for African, Caribbean and Pacific (ACP) countries, which includes Malawi, to negotiate the EPAs from 2014 to 2016.

President Bingu wa Mutharika, who died after a heart attack in April this year, had refused to sign the agreement, demanding that rural roads, health and education facilities be taken care of before signing an EPA.

Mutharika, a former U.N. trade expert, believed that the EPA would reinforce Malawi’s position as an exporter of low-value agriculture commodities, deprive government of policy space to use tariffs to protect livelihoods, and grow the manufacturing sector.

But the new administration is reviewing all the arguments against the EPA, shifting focus on what the country stands to gain from the agreement.

“We are reviewing our position on EPA because we want to also look at the potential benefits of signing the EPA, and development will still be at the heart of our negotiations because Malawi is facing supply-side constraints which have had an impact on our competitiveness,” Bande said.

This, he said, will form the basis of the final decision.

Malawi is negotiating an EPA under the Eastern and Southern African grouping which is negotiating in six clusters; development issues, market access, agriculture, trade in services, fisheries and trade- related issues.

President Banda is in Brussels this week attending the European Development Day. She is expected to discuss the future of the EPA with Karel De Gucht, the European commissioner for trade.

EU ambassador to Malawi Alexander Baum said that the meeting between President Banda and Commissioner De Gucht would be a political discussion on how to move forward.

“It seems the former administration did not understand the agreement and did not see any need to sign it…all her neighbours are benefiting from the European market and if the country is really to turn into a predominantly exporting country then this is the right opportunity,” Baum said.

Malawi, said Baum, takes about 0.01 percent of Europe’s goods, while Europe buys almost 30 percent of Malawian products.

Geoff Mkandawire, chairman of the National Working Group on Trade Policy, believes the EPA would be good for the sugar industry.

“Malawi is generally a lower-cost producer of agriculture products and goods, and access to EU markets would create a basis for further investments in the sugar industry,” Mkandawire said.

But the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), a grouping of the local private sector, does not see the EPAs in their current form as benefiting Malawi.

“EPAs are an important agent for development for ACP countries that leverage on trade with the EU. The downside is that the capacity of business in ACP countries is not strong enough to face the reality of opening the markets,” said Chancellor Kaferapanjira, CEO for MCCCI

He said the negotiations should recognise the differences in capacity with regard to trade, as well as the assistance needed to enable ACPs to effectively trade with the EU.

Several local civil society groups believe the EPA would have negative effects on Malawi’s trade with other countries in the region and undermine the regional integration processes.

If Malawi signs the agreement, it will be another major policy shift by President Banda, who has rolled back repressive legislation by her mercurial predecessor Mutharika and removed the Kwacha peg against the dollar since she took office.

P.J. Patterson, the former Jamaican prime minister, has had a long relationship with the European Union.

During his tenure as his country’s foreign minister, he served as president of the African, Caribbean and Pacific -European Union (ACP-EU) Ministerial Council and led negotiations for the ACP group with the EU. He also played a pivotal role in forging an agreement on the basic framework for the original Lome Convention that was signed in 1975.

So last week, when Patterson delivered the second Caribbean Academy for Law and Court Administration (CALCA) lecture on “International Law, World Trade Organization (WTO) – Interface with the Economic Partnership Agreement (EPA), it was clear that his words would resonate far beyond the Hall of Justice.

Ironically, the lecture was being held at the same time that the Caribbean Forum of African, Caribbean and Pacific States (CARIFORUM) and the EU convened the Second Meeting of the Trade and Development Committee (TDC) under the EPA, which both sides later described in a joint statement as “successful”.

But while Patterson acknowledged that his remit did not oblige him to engage in a detailed examination of the EPA, he nonetheless pointed out some “startling differences” between the negotiating framework and outcomes, previously outlined for Lomé and EPA which was concluded in 2008.

While in most nations the application of the agreement is “currently provisional”, he said, even the least “sceptical person or most difficult juror to persuade” must by now realise that the determination of EU to create regional EPAs was for one single purpose.

“To dismantle the formidable arsenal of the ACP combined, to fragment its collective power and then defeat us one by one,” Patterson argued, adding “suffice it to be reminded that none of the other six ACP Groups, each negotiating separately, has yet concluded a comprehensive EPA to accord with the EU’s allotted time-frame.

“In all the other regions, limited Interim Agreements covering mainly trade in goods have been initialed and/or are still the subject of negotiation in efforts to conclude full EPAs,” he said, recalling earlier pronouncements that the EPA is a legally binding international treaty.

“It purports to be of indefinite duration. So too did the Sugar Protocol of 1975, which has now been abrogated unilaterally (by the EU). It seems to go well beyond the realms of trade and economic relations to encompass issues of shared sovereignty and areas of supranational governance,” Patterson said.

He said that storm clouds have begun to appear, making references to the rate and pace of tariff adjustments in the face of existing budgetary requirements and tight fiscal constraints; the absence of funding obligations as part of EPA that were reflected in the European Development Fund (EDF) as part of the Cotonou Agreement, and what he refers to as “an area of great potential – services” while asking the question “who will really qualify for access from the Caribbean?

“Link that to the requirement for EU firms to receive the same treatment as local or regional firms. The concept of proportionality has been thrown out of the window. Indeed, some are more equal than others. Inequality is evident – no visas are required for entry in most of our countries – while we need a Schengen Visa or UK Permit to step foot on European soil.”

Patterson said the Caribbean Community (CARICOM) will need to address without further delay “such issues as investment, competition policy and government procurement to avert the danger of undertaking obligations or conferring rights on others that do not yet exist within the Community but already fall within the framework of the EPA”.

The St. Kitts-Nevis government has already signalled its intention to seek an extension in implementing certain measures under the EPA.

Prime Minister Dr. Denzil Douglas, in a local radio interview last week, said his administration would be approaching the European authorities on the accord that allows for the removal of tariffs and import duties on goods traded between European and CARIFORUM countries.

St. Kitts and Nevis is among the eight Caribbean countries that have not yet removed tariffs from goods coming into the country from the EU under the agreement.

“We would always be mindful of our international obligations and in bilateral and multilateral situations involving the EPA,” Douglas said, adding, “What I would say is that before we can just simply and dramatically hurt ourselves, the appropriate economic analysis will have to be done.”

His International Trade, Industry and Commerce Minister Dr. Timothy Harris said recently that the government would have to deal with the loss of revenue as a result of the removal of the tariffs.

“Naturally we would be very concerned about the loss of revenue from the tariff that we would normally collect and we make sure as we implement these we find other ways to make up the shortfall in revenue,” Douglas said.

“We just can’t say we’re doing it and hurt ourselves without knowing how we are going to have the appropriate corrective measures introduced,” he said, adding that he does not contemplate introducing any new taxes to make up the shortfall.

According to the joint statement issued at the end of the CARIFORUM-EU meeting here over the weekend, the committee crafted a number of joint decisions for adoption by the Second Meeting of the Joint CARIFORUM-EU Council (JC), which will be held in Brussels on Oct. 26.

But the statement also noted that “while there was agreement on submitting certain items for endorsement by the JC, some issues will be subject to further negotiations as they were not resolved”.

The statement noted that with respect to development cooperation, CARIFORUM reiterated its commitment to regional cooperation and integration, and that projects have been identified with respect to 82 percent of resources under the Regional Indicative Programme of the 10th EDF.

But CARIFORUM also warned that the action of the EU in the area of differentiation impacts on the region’s capacity to implement the EPA.

The statement said that while the EU “took note” of the CARIFORUM concerns, there was agreement that the upcoming JC would allow for “an opportunity to exchange views on the implications of differentiation for the region’s economic development and its capacity to implement the EPA”.

But as Patterson warned, what has become evident is that within CARIFORUM there is the need to create “the range of skills necessary to engage in the proper interpretation of the EPA, the enforcement of the provisions, the settling of disputes which are bound to arise”.

When Europe signed an Economic Partnership Agreement (EPA) with the Caribbean Forum countries in 2008, the intention was to boost trade and services between the two regions.

But four years later, the Caribbean, particularly the private sector, is failing to take full advantage of many benefits of the deal, according to a new report by the Guyana-based Caribbean Community (CARICOM) Secretariat EPA Implementation Unit.

The unit just completed a review of the legal framework governing investment flows between CARIFORUM, which includes the 15-member CARICOM grouping and the Dominican Republic, and the EU to evaluate their consistency with commitments in international agreements.

“Having a better appreciation of the realities in states is crucial to making decisions to ensure that the benefits to be derived under the agreement are obtained,” said the unit’s trade in services and investment specialist, S.H. Allyson Francis.

But while some of the unit’s findings were encouraging, they were tempered by stark assessments with respect to the EPA.

“Of note, the report underscored that there is little awareness of EPA/foreign direct investment (FDI) tied advantages among the private sector in CARIFORUM states and within the EU,” the report said.

Speaking at the second CARIFORUM-EU Business Forum here on Thursday, the head of the European Union delegation to Barbados and the Eastern Caribbean, Valeriano Diaz, said he was surprised that the private sector in the region was not yet in a position to take full advantage of the EPA.

“Let me state clearly that ownership of the EPA in the Caribbean does not belong to the European Union; it is the purview of regional governments. They have to ensure that the legislative and other frameworks are in place so that the private sector, entrepreneurs and others can reap the benefits which the EPA offers,” Diaz said.

He said the private sector also has to get on board “instead of passively standing on the sidelines.

“It is perplexing, to say the least, when I hear via the media some businesspersons lamenting that they do not know much about the EPA. We live in the information age and given the time since the signature of the agreement, this kind of defeatist attitude is difficult to understand.

“Businesspeople who are interested in penetrating extra-regional markets should be aware of what legislation needs to be in place in their countries so that they can lobby government to have such legislation enacted in a timely manner.

“They need also to know the necessary requirements which will assist them in accessing elements of the EPA, which are beneficial to their enterprise,” Diaz added.

But at least one regional private sector grouping has shown its commitment to take advantage of the accord.

The Trinidad and Tobago Chamber of Industry and Commerce has just completed a two-week trade mission to Europe as a follow up to an earlier study done “to ascertain the reasons hindering the private sector from trading under the EPA”.

The study revealed that there was a deficiency in awareness of the EPA and its provisions as well as little knowledge of the EU markets. It recommended that the Chamber undertake more sector-specific trade missions to Europe with the aim of seeking strategic partnerships for the business community and obtaining market intelligence.

At the end of the Mar. 7 trade mission, the Trinidad and Tobago private sector said that initial feedback indicates “there are approximately 41 business leads with which local companies will have immediate following up, and the Chamber will take an active role in also following up with these companies so that we can measure the tangible benefits of this mission.”

It said that throughout the trade mission it promoted Trinidad and Tobago as a gateway to the rest of the Caribbean and Latin America.

“No doubt, we are quite a small economy compared to the markets that we visited and while we hold incredible natural advantages – geographic location, natural resources, climate and environment – we must continue to seek ways to enhance our competitiveness and productivity in order to take advantage of the opportunities provided by the EPA.”

Ironically, even though the EPA agreement was signed in 2008, the Trinidad and Tobago parliament has not ratified the accord. The private sector group here said it was urging the government “to push the laying of the bill on the Parliamentary agenda”.

Earlier this week, the European Union provided more than 100 million dollars to CARICOM that the regional bloc’s Secretary General Irwin La Rocque said came at a time when regional governments were determined to ensure that integration delivers tangible results to Caribbean people.

Europe is providing 8.6 million euros (11.4 million dollars) to support economic integration and trade by the sub-regional Organisation of Eastern Caribbean States (OECS), as well as 28 million euro (37.2 million dollars) for the CARICOM integration process.

In addition, funds are being provided for an EPA Capacity Building Programme, intended to assist in developing capacity and allow CARIFORUM countries to take full advantage of the EPA provisions and honour their commitments.

La Rocque said that the 46.5 million euro (61.9-million-dollar) programme will provide support for fiscal reform and adjustment; for sanitary and phyto-sanitary measures and for technical barriers to trade as well as for services through Caribbean Export and for the regional rum industry through the West Indies Rum and Spirits Producers Association (WIRSPA).

La Rocque said he also hoped that the proposed changes in EU development policy will not diminish traditional support provided by the EU to CARIFORUM and its member states, adding “the region looks forward to negotiating with the EU a substantial Regional Indicative Programme under the 11th EDF (European Development Fund)”.

Head of delegation of the European Union to Guyana, Suriname, Trinidad and Tobago, Ambassador Robert Kopecký, said the funds are “a testimony of the EU’s continued commitments to support the Caribbean region in the dynamic process of regional integration and signal another milestone in the longstanding relation between the Caribbean Forum of ACP States and the European Union.

“The path to full integration is a long and dynamic process, not deprived of obstacles. The European Union was not made all at once, or according to a single plan but rather it has been built through concrete achievements which created solidarity. As such the EU has been supporting the integration steps of CARICOM along this process,” he added.