CARIFORUM Economic Partnership Agreement (EPA) Negotiations

CARIFORUM-EU Negotiations as at January 2007

Launched in September 2005, Phase III of Economic Partnership Agreement (EPA) negotiations involving the Caribbean and the European Union has undergone a qualitative shift in focus and specificity. Building on Phase II discussions that focussed on regional integration content, processes and ambition within CARIFORUM, Phase III constitutes the structuring and consolidation of negotiations, such that the points of common understanding will be channelled into elements of a draft EPA Agreement.  These negotiations are at a mature stage, and the expectation is that they will be further advanced through 2007.  What follows takes stock of the background of EPA negotiations and the importance of the EPA to CARIFORUM.     

Background to the EPA

The Cotonou Agreement and EPA 

Having been forged within the broader political context of the ACP-EU partnership, the CARIFORUM-EC EPA takes into account the overall principles and objectives of the Cotonou Agreement.  Signed in June 2000, the Cotonou Agreement, which replaces four successive Lome accords, puts in place a comprehensive framework for ACP-EU relations, centred on economic development, the reduction and eventual eradication of poverty, and the smooth and gradual integration of ACP states into the global economy. 

With a view to achieving these objectives, the Cotonou Agreement makes provision for the ACP and EU to engage in WTO compatible trading arrangements.  In this vein, Article 36 of the Cotonou Agreement commits the Parties to conclude new WTO compatible trading arrangements, removing progressively barriers to trade between them and enhancing co-operation in all areas relevant to trade.  Six ACP regions are currently engaged in EPA negotiations with the EU, with a view to concluding their respective Agreements by mid-2007.

Fifteen Caribbean countries that make up the Caribbean Forum of ACP States (CARIFORUM) launched EPA negotiations with the EU in April 2004; they are: Antigua & Barbuda, The Bahamas, Barbados, Belize, Dominica, the Dominican Republic, Grenada, Guyana, Haiti, Jamaica, St. Kitts & Nevis, St. Lucia, St. Vincent & the Grenadines, Suriname, and Trinidad & Tobago.

Phasing of Negotiations 

Preceded by an all-ACP phase, there are four regional phases guiding interchange between the two sides; namely: i) Initial Phase: Establishing the Priorities of EPA Negotiations (April 2004 to September 2004) - the objective of this phase was to establish an understanding of the fundamental concerns and interests of EPA negotiations for both CARIFORUM and the EU; ii) Second Phase: Convergence on strategic approach to CARIFORUM regional integration (September 2004 to September 2005) - the aim of EPA negotiations during this phase was to establish a common understanding on the priorities for support of Caribbean regional integration, and the targets to be attained by the time of the commencement of implementation on January 1, 2008 and beyond; iii) Third Phase: the current phase of negotiations, ending in December 2006; and, iv) Final Phase: Finalisation (January 2007 to mid-2007) - negotiations during this final phase should concentrate on consolidating the results of the negotiations and completing them.  

Negotiating Architecture

The negotiation of the EPA is taking place at three tiers, namely: Ministerial, Principal Negotiators and subject-specific negotiators. 

The Lead Ministerial Spokesperson for EPA for the Region is Dame Billie Miller, Senior Minister and Minister of Foreign Affairs and Foreign Trade-Barbados.  Director General of the Caribbean Regional Negotiating Machinery (RNM) Ambassador Dr. Richard Bernal serves as CARIFORUM Principal Negotiator.  At the technical level, negotiations are being conducted by members of the EPA College of Negotiators.

RPTF

The ACP Guidelines for the negotiation of EPAs define as one of their strategic objectives to foster inter-linkage and complementarity between development strategies supported by the EU, and economic and trade cooperation so as to make them mutually reinforcing.  Achieving this objective through the creation of a Regional Preparatory Task Force (RPTF) for the whole duration of the negotiations is considered vitally important.

Both the CARIFORUM and the EC agreed to the establishment of a RPTF, in order to cement the strategic link between EPA negotiations and development co-operation.  The mandate of the RPTF is to translate needs for support identified in the course of the negotiations into operational ideas for trade-related and other development assistance and work out these ideas up to the level of pre-identification of fundable actions.

While not comprising a formal element of the negotiating structure, the RPTF is closely aligned to it.  

EPA to Contribute to Specific Objectives, Principles

In an effort to support and promote such objectives as sustained growth, enhancement of the Caribbean’s role in the international community, facilitation of Caribbean structural transformation, and the adjustment of Caribbean economies in a manner and at a pace conducive to economic and social development, the CARIFORUM-EC EPA is guided by a number of principles.  They include: (a) supporting and building upon the regional integration process; (b) promoting the development objectives of countries of the Region, while being consistent with their development strategies; (c) encompassing Special and Differential Treatment, including provisions that go beyond existing WTO measures in addressing the constraints of small size and vulnerability; (d) flexibility such that countries can individually calibrate the pattern and schedules of implementation, consistent with their national circumstances, while pursuing the objective of regional integration; (e) incorporating and improving on the Lome and Cotonou acquis regarding market access, for traditional and non-traditional Caribbean exports; and (f) a binding commitment to engage in consultations on any matter deemed necessary in order to safeguard the benefits of the Agreement.   

CARIFORUM Regional Integration and the EPA

A well-designed EPA should complement the existing Caribbean regional integration process, that is framed in the context of measures stated in the CARICOM-Dominican Republic Free Trade Agreement (C-DR FTA) and the Revised Treaty of Chaguaramas establishing the Caribbean Community including the CARICOM Single Market and Economy (CSME).  There is no mandate or programme to pursue at this time a more ambitious integration agenda beyond the scope of the C-DR FTA. 

CARIFORUM’s regional integration processes were framed by two paramount principles; namely, those of variable geometry and differentiation.  The former takes account of the variance in scope and implementation level of both the CSME and the C-DR FTA.  The latter takes account of extending to Less Developed Countries (LDCs) special and additional trade measures.

Both CARIFORUM and the EC share the conviction that deeper regional integration forms an important tool for development.  Strengthened regional regimes can enable increased competitiveness, enhanced flows of investment, the harnessing of sustained growth and the delivery of sustainable development.

The pursuit of development is a multi-dimensional undertaking.  Seeking to capture the benefits accruing from trade integration also requires accompanying adjustment measures and institutional capacity building. 

The ‘Development Dimension’: EPA, A Tool for Caribbean Development 

The EPA must be more than just a Free Trade Agreement.  Consistent with this view, both sides have a common adherence to the centrality of development in an EPA.  The Joint CARIFORUM-EC Plan and Schedule underscores the need to address the sustainable development of the Caribbean region.  In fact, the ACP and EU are guided by Article 37 (7) of the Cotonou Agreement that EPAs should “take account of the level of development of ACP states and the socio-economic impact of trade measures on the ACP, and their capacity to adapt and adjust their economies to the liberalisation process.”

Injecting the development dimension into the EPA must, however, transcend notions of asymmetry, in spite of its obvious importance.  It is well established that if market access opportunities are to be seized by the Caribbean, supply-side constraints must be overcome so as to enable increased exports from the Region.

Phase III of EPA Negotiations 

Phase III of CARIFORUM-EC negotiations for an EPA was launched in September 2005, with substantive negotiations slated to get underway in February 2006. 

Phase III will build on Phase II, which garnered qualified success, as measured in terms of harnessing results on its two primary objectives defined in the Joint CARIFORUM-EC Plan and Schedule.  These two primary objectives, which were at the heart of discussions during the regional integration phase, are: (a) developing an understanding of the respective regional economic spaces that will assume commitments under an EPA; and, (b) identifying CARIFORUM regional integration priorities to be supported by an EPA. 

In pursuit of the second objective of Phase II, namely the identification of support measures for Caribbean regional integration, CARIFORUM tabled concrete proposals in eleven specific fields.  It is of paramount importance that these proposals be acted on without delay; given that Phase III builds on Phase II and as such is guided by that Phase.  Getting resolution to issues outlined by CARIFORUM in Phase II is essential to effective and efficacious negotiations in Phase III.

Also in pursuit of the twin primary objectives, CARIFORUM and EU Principal Negotiators met three times through Phase II (November 2004, May and September 2005).  In addition, four technical sessions were convened in December 2004, March, April and May 2005 on Regional Market Access (twice), Services and Investment and Trade-Related Issues.  Negotiations covered tariffs and non-tariff measures, customs and trade facilitation issues, SPS, TBT, services and investment regimes, intellectual property, competition policy and government procurement.

The current phase of negotiations is intended to consolidate discussions, channelling the points of common understanding into elements of a draft EPA Agreement.  As regards objectives, the focus of Phase III is threefold; namely:

* Forging consensus on the structure of an EPA Agreement;

* Consolidating the outcome of discussions on the priority issues for CARIFORUM regional integration; and,

* Agreeing on an approach to trade liberalization.   

The Third Phase of negotiations is a critical one, allowing just one year to address a wide range of issues.  As regards scope, a CARIFORUM-EC EPA would be built on the following three platforms:

* Trade and Trade-related Provisions

* Trade and Economic Development Co-operation

* Institutional Arrangements and Dispute Settlement

EPA’s Importance for CARIFORUM 

The EPA is an important arrangement for CARIFORUM, given its role in advancing regional integration.  The EPA is unique amongst other arrangements involving the Caribbean, in that it is the first and only bi-regional agreement encompassing the CARIFORUM configuration.  It provides the framework to support and provide impetus for regional integration amongst CARIFORUM. 

Underpinned by a development dimension, the Agreement will take account of differences in levels of size and development, thereby creating a bi-regional agreement with wider scope than just a traditional Free Trade Agreement. 

The envisioned ‘development package’ is critical to providing the development financing necessary to build the export capacity and infrastructure of the Caribbean’s private sector,  so as to take advantage of market access opportunities presented under an EPA.  Allied to this, the package which will constitute technical and financial assistance would also be used to put in place an enabling environment in Caribbean countries for foreign investors.

Importantly, the EPA arrangement will provide for the establishment of a stable and secure trading environment for goods from the Caribbean.  It will also allow for the negotiation of a Services and Investment framework between CARIFORUM and the EU, for the first time.  The EPA is expected to open the door to an improved trade and investment relationship with Europe.  In recent years, trade and investment flows from Europe to the Caribbean (with the exception of the Dominican Republic) have been growing at a slower pace.  The EPA is intended to be an enabling mechanism for the revitalization of these flows.  It is intended to stimulate greater investment between Europe and the Caribbean, through mutual removal of barriers to investment, as well as the enhancement of the attractiveness of the Caribbean economic space in respect of foreign investment opportunities.  The Agreement is also intended to stimulate Caribbean exports of non-traditional products and services, encouraging and supporting diversification in these economies.

Therefore, from the Caribbean perspective, the partnership with Europe is expected to position the Region to take advantage of a more dynamic trade and investment relationship.      

Looking Ahead in 2007

The EPA negotiating process is intensifying at a time when other negotiating theatres are also maturing.  The sheer volume of meetings on the EPA front alone increased significantly in 2006.  In 2007 the intensity of the demands are even deeper as the EPA negotiations approach the concluding stages.

So far the progress of negotiations indicates the commitment of CARIFORUM and the EU to complete the EPA process. In 2007 the challenge for both sides will revolve around addressing areas relating to tariff liberalization, commitments in services and investment, government procurement relative to market access and the instruments of EU development cooperation.

While the EPA will occupy a significant amount of the CARIFORUM’s negotiating energies, CARICOM Member States will also be focused on exploring the deepening of bilateral relationships including possibilities with Canada in an FTA and the US in an FTA.