EU-CARIBBEAN: New EPA Sets Timeline For Trade Liberalisation

By Bert Wilkinson

GEORGETOWN, Guyana, Dec 21 (IPS) - Come Jan.1 a new trade and aid pact between fifteen Caribbean nations and the 27 members of the European Union (EU) kicks into force heralding in a new era in relations between the two trade blocs that will be based largely on reciprocity rather than protected trade, as has been the case for centuries.

In recent days, negotiators for the two sides completed most of the final text of a new Economic Partnership Agreement (EPA) that took the better part of five years to negotiate, involved threats by the Caribbean of litigation in European courts in a dispute over sugar, and led to bad blood between the two regions because of what Guyana's President Bharrat Jagdeo refers to as EU bullying to forge an agreement at all cost.

The negotiations were wrapped up in Barbados with just days left before a yearend deadline that, if missed, would have meant disaster for the Caribbean -- as most of its key export products would have faced duties of up to 30 percent entering the EU. That was the threat from the EU that Jagdeo and other leaders were uncomfortable with, but had to respect just in case the Europeans were not bluffing.

Under the new EPA, which replaces the 2001 Cotonou Agreement signed in Africa, the Caribbean will now have to open 86.9 percent of its market to duty free imports of EU products over the next 25 years. It calls for 82.7 percent to be liberalised in the first 15 years. There will be a moratorium of three years on all tariffs except those on motor vehicles, spare parts and gasoline coming into the region. Other duties and charges are to be kept during the first seven years and then phased out in the following three years.

For sugar, which governments so zealously guarded during negotiations, the Caribbean gets an additional 60,000 tonnes on top of the 410,000 it is allowed to export under the old arrangements. But the quota now has to be split between a new exporter -- the Dominican Republic -- and the English- speaking producers that traditionally sold the commodity to European destinations. Fixed quotas and duty free access are set to be removed by late 2009, meaning that exports from the region will no longer be protected and would have to compete with cheaper products from third party exporters.

Additionally, the two sides agreed that those able to take up the slack would share any shortfall by a sugar-producing nation. A 41,000 tonne Trinidad shortfall will go to its neighbours. St. Kitts has also quit sugar production, but it is unclear what has happened to its quota if not divided among bloc members already.

One thing has clearly emerged from the talks that began when the EU decided to split up the 79-nation African, Caribbean and Pacific (ACP) umbrella group into six separate regions, with each having to battle for its own EPA. Leaders say the new liberalised environment means that the region has to produce more efficiently as competition would come from countries with cheaper labour and production costs.

"We have to increase our productivity and competitiveness. That is the lesson we have to imbibe now. We have to start now. And the quicker we get that message out in an unvarnished fashion the better," said Edwin Carrington, secretary general of CariForum, under which the 15 negotiating nations fall.

Jamaican Prime Minister Bruce Golding, who is responsible for external negotiations for the Caribbean trade bloc, echoed Carrington’s sentiments.

"It is now for us to get our act together, to demonstrate efficiency in the goods we produce and the services we provide and competitiveness in how we price our goods," he told Jamaica's parliament this week.

Twice in recent weeks the two sides were deadlocked. First there was a disagreement over sugar. Then the some EU states, France in particular, refused to allow regional entertainers to work freely in Europe. Calling it one area where the region remains competitive, Barbados Prime Minister Owen Arthur had said leaders were "prepared to draw a line in the sand" and to go without an agreement if its cultural workers were not allowed free access to the EU. The new deal allows unrestricted access except in Austria and Germany where artists will be limited to authors and dance instructors.

Some artists like reggae superstars -- including Shaggy, Sean Paul and Bennie Man, among others -- bring the region more income annually than Jamaican banana exports. There were calls to devote less energy to negotiating on bananas, sugar, rice and rum exports, and more energy to the arts and entertainment sector. Musicians and studio owners like Eddy Grant of Ice Studios say that is where the focus should be as this sector is not yet fully developed or exploited.

Still, Miller and Carrington say the region has a perfect opportunity to exploit the new arrangements. Rum producers for example, need not worry about competition from the EU as taxes remain on their wines and spirits. Analysts say that one thing is clear: preferential, duty free, fixed quota, infinite time trade is a thing of the past and the Caribbean had better be prepared for it.

More of the same could be coming in the 2008 when Canada and the Caribbean begin free trade talks that would cover hundreds of goods. Governments are also thinking about whether to follow the lead of Central America in negotiating a group free trade agreement with the U.S. now that talks for a hemispheric pact have collapsed with little hope of resuming. Regional negotiators say they will take a break over the holidays and then prepare the agreement for cabinet and parliament consideration.

"We are the only ones who have concluded a full EPA. The other regions have concluded interim agreements that relate only to the trade in goods. Other areas like services will be negotiated at a later date," said negotiator David Hales, paying tribute to the team."