The Week in Europe
By David Jessop

Some time around Easter, European Commissioners will agree a policy document
that will advise European Ministers on how best to shape negotiations on
economic partnership agreements (EPAs) between Europe and the African
Caribbean and Pacific (ACP) group of states.

These negotiations, which will begin in September of this year and continue
to 2007, aim to create two-way free trade areas between an enlarged Europe
and the Caribbean and the other regions and sub-regions of the ACP. They
will have the effect of creating by 2020 at the latest, if the EU has its
way, an agreement that will integrate the economy of Europe with that of the
Caribbean.

The impact will be substantial, will bring all ACP preferential arrangements
with the EU to an end and will cause virtually every Caribbean industry and
profession to have to compete directly in their own markets with their EU
counterparts.

According to internal EC documents, the first stage will be to offer the
Caribbean and the rest of the more developed ACP as of 2008 an equivalent
arrangement to Europe's 'Everything but Arms' initiative of last year. This
provided duty free and quota free entry into the EU for all products from
all least developed nations (LDCs) in the ACP and elsewhere. European
thinking is that in the period 2002 to 2007 it will negotiate on a
region-specific basis, economic partnership agreements that will in a second
phase after 2008, progressively open all more developed ACP markets to EU
goods and services. Europe wants this transitional process to something
close to full two-way free trade to take no more than 10 to 12 years and be
complete by 2020. ACP LDCs if they wish to remain part of a regional
economic grouping will be expected to join in the process towards its end.

But what might this mean in practice?

Firstly in the case of sugar, the Caribbean's single largest traditional
employer of labour, but now a relatively low contributor to GDP, the EU
proposes to review the sugar protocol. It appears to be proposing that
around 2008 or a year or so thereafter the sugar industry should be given
duty and quota free access to the EU market subject to certain safeguards
for EU producers but without any price guarantees. As in the case of bananas
it seems that any transition towards liberalisation will be supported by
assistance from European development funds: in other words a compensation
package for much of the region to go out of sugar.

Secondly and of greater economic significance in view of the importance that
the services sector now has for Caribbean economies, Europe is proposing at
some time after 2008 to fully liberalise trade in services between Europe
and the Caribbean. The EU recognises that this has to be achieved within new
provisions of the WTO's still to be negotiated General Agreement on Trade in
Services. However, it is clear that Europe expects its firms to be able to
compete directly within Caribbean markets in areas such as banking and
financial services, professional services such as accounting or
architecture, distribution, tourism, construction, information technology
and engineering.

Thirdly the EC approach suggests that Haiti will be forced to choose
eventually whether it wishes to remain a part of Caricom. The early drafts
of the EC's negotiating mandate state that as reciprocity is one of the
basic elements of an Economic partnership agreement no partner wishing to
participate can be excepted without depriving EPAs of their essence. In
other words while Europe may agree to a delayed start or a slower pace of
tariff dismantlement for less developed nations such as Haiti within an
existing regional free trade arrangement, Haiti will either have to accept
trade reciprocity or agree to become isolated within their own region.

Fourthly while the process envisaged allows during the transition period for
variable geometry, phasing and the possibility of opt outs, safeguard
mechanisms and antidumping provisions, much of what the Caribbean will be
asked to agree will be particularly difficult for small fragile economies to
bear. That is to say the region will be asked to progressively abolish
almost all export duties; abolish all quantitative restrictions on imports;
abolish discriminatory fiscal measures; ensure a standstill on new duties;
open public procurement contracts to European bidders; and accept EU
environmental and other standards and physosanitary measures.

Fifthly there will be a political dimension to EPAs. This suggests that
criteria set by the EU will continue to exclude Cuba from participating in
any EPA and thus militate against its full involvement in Caricom and the
completion of the regional integration process.

Space does not permit further examples, but as with the FTAA process, when
the sums are done the trade off envisaged for the Caribbean may not have the
value for the region that Europe imagines. This may particularly be so if
full reciprocity in services is required. The danger is that, if agreed on
these terms, full trade liberalisation may result in the implosion of an
already fragile group of economies and the end of the regional integration
movement.

Few Prime Ministers will discuss this in public, but in private some in the
Eastern Caribbean voice extreme doubts about the benefits to their economy
that such arrangements will bring or their ability to survive the political
cost of adjustment. Some have other doubts about the capacity of the
Caribbean to negotiate on three of four fronts at once especially in the
absence of a strong regional consensus or leadership. They argue that if the
benefit of the hemispheric process outweighs for some Caricom states the
benefit of the EU process or vice-versa it may be impossible to deliver a
single regional position.

The bleakest scenario of all, they note is that the Caribbean may find
itself facing a multilateral process of liberalisation in which it has to
remove virtually all tariffs, quantitative restrictions and non tariff
barriers to all comers at the same time. That is on the principle that the
region can not offer one trading bloc with which it is negotiating any worse
treatment than that offered to another.

The result is potentially a nightmare for small vulnerable economies. At
worst, it suggests a moment may come when it will be necessary for each
state to decide whether it is better to opt in or out of the process.

David Jessop is the Executive Director of the Caribbean Council for Europe
and can be contacted at [log in to unmask]
February 15th, 2002