Status and Development Issues of the EC-CARIFORUM EPA Negotiations Ambassador Dr. Richard L. Bernal Director General, Caribbean Regional Negotiating Machinery Address to the Committee on Economic Development, Finance and Trade of the ACP-EU Joint Parliamentary Assembly of EU-ACP Parliamentarians Sherbourne Conference Centre, Bridgetown, Barbados, 18 November 2006 Let me place on record my appreciation for the opportunity to address the ACP Parliamentary Group on the CARIFORUM-EC Economic Partnership Agreement (EPA) negotiations. This meeting is taking place immediately before the two regions commence the final engagement in the penultimate phase of the EPA negotiations and just before the formal and comprehensive review the EPA negotiations mandated in Article 37.4 of the Cotonou Agreement. This session therefore comes at a critical juncture in the EPA negotiations. I will briefly outline the current status of the negotiations for a CARIFORUM-EC Economic Partnership Agreement and discuss the issues, which have emerged in these negotiations. STATUS OF THE NEGOTIATIONS The ACP-EU Partnership Agreement (Cotonou Agreement), signed in Cotonou in June 2000, establishes a comprehensive framework for future ACP-EU relations. The core objectives of the partnership are economic development, the reduction and eventual eradication of poverty, and the smooth and gradual integration of ACP States into the world economy. These objectives are envisioned to be achieved by the conclusion of new WTO-compatible Economic Partnership Agreements (EPAs) between the ACP and the EU. Negotiations would be conducted during the period September 2002 and late 2007 to allow the EPAs to come into effect on 1st January 2008. The process began as scheduled with discussions at the ACP-EC level and the CARIFORUM-EC negotiations were launched on April 16, 2004. The Plan and Schedule, jointly agreed by CARIFORUM and the EC to launch stated that an EPA between CARIFORUM countries and the EC should contribute to realising the following broad objectives: 1. Promotion of economic development that is socially and environmentally sustainable; 2. Enhancement of the ability of small Caribbean states to play a more meaningful role in the international community; 3. Facilitation of Caribbean structural transformation leading to a reduction in the region’s acute economic vulnerability and 4. Assist the adjustment of Caribbean economies in a manner and at a pace that is conducive to overall economic and social development. The principles to guide the EPA negotiations express the means of attainment of the objectives. These include (1) promote sustainable development, (2) complimenting and advancing the region’s already ongoing integration, (3) special & differential treatment for 1 small and vulnerable CARIFORUM countries, (4) application of an asymmetrical approach to trade liberalisation (5) enhancement of international competitiveness and (6) assisting in capacity building by synchronizing the delivery of development cooperation with the process of trade liberalization and the adjustment. The negotiations between the EU and CARIFORUM have adhered to the agreed schedule. There has been progress in a wide range of issues and specific disciplines which reflects a sense of common purpose and a genuine spirit of constructive engagement. However there are persistent divergences indicative of philosophical differences. At this time the process is at a critical conjuncture because there are several fundamental issues which must be resolved. The opportunity to achieve resolution and continue the momentum is the series of negotiations which culminate in a ministerial meeting 29-30th November 2006 in Brussels. If these meetings do not resolve the outstanding issues it would put in jeopardy the completion of the negotiations within the agreed schedule. A delay in the completion of the negotiations will raise the question of a renewal/extension of the WTO waiver. Recent experience at the WTO demonstrates that it is increasingly difficult to secure waivers. Delays would extend the period of negotiations and increase the cost of the negotiations in human and financial resources. This would be very onerous for the small states of the CARIFORUM. Since April, 2004 there have been 6 rounds of negotiations at the level of Principal Negotiators and 7 meetings of the technical negotiators as well as Ministerial encounters. These engagements are serviced by an extensive programme of consultative meetings in the CARIFORUM region and technical work by the Caribbean Regional Negotiating Machinery and other regional organizations. CARIFORUM is committed to and will endeavour to forge an EPA within the schedule prescribed by the Cotonou Agreement and the terms of the WTO waiver. This commitment will be vigorously pursued but not at any cost. The negotiations will only be completed when CARIFURUM is satisfied that there is a development promoting EPA appropriate to its goals and circumstances supported by adequate development cooperation. Spokespersons for other ACP regions have alluded to or called for an extension to the EPA negotiation schedule. The position of the CARIFORUM in no way is prejudicial to the deliberations on this question by the Joint Review of EPA. ISSUES TO BE RESOLVED There are four major issues where there are divergent views. These need to be resolved in the negotiations later this month if the EPA negotiations are to proceed on schedule. These issues are: A. REGIONAL INTEGRATION This is an area of long-standing difference between CARIFORUM and the EC and one of the most important issues to be settled. There is a strong conviction on both sides that one of the key objectives of an EPA is to strengthen the CARIFORUM regional integration process, however different perspectives 2 persist over the eventual regional configuration and pace of integration. This has implications for the nature of the commitments, which will be assumed on the CARIFORUM side. 1. Variable Geometry of Regionalism In the negotiating sessions to date, the EC has sought to persuade CARIFORUM to pledge to establish regional arrangements which could assume common commitments in all disciplines, including market access schedules, SPS and TBT regimes, services, investment, government procurement, intellectual property, competition policy and dispute settlement mechanism. CARIFORUM’s approach to the regional economic space is that of a variable geometry which recognizes differentiation. The CARIFORUM position is based on the fact that there is no intention at this time to create a common economic space such as that provided by a customs union. The CARIFORUM-EC EPA must therefore take account of the reality of the co-existence of 3 streams of economic regionalism: namely (a) the Caribbean Single Market and Economy (CSME) involving 12 countries, (b) the CARICOM-Dominican Republic Free Trade Agreement (FTA) and (c) the Bahamas which is not currently a participant in either of these arrangements but is a member of the Caribbean Community. Within the CSME the Organization of Eastern Caribbean States enjoy certain derogations and Haiti is yet to assume full commitments the CSME. The CARIFORUM negotiators have repeatedly reiterated the principle of “variable geometry” because (a) it is the existing situation with respect to the region’s economic space, (b) it reflects the differences scope and the extent of implementation between the CSME and the CARICOM-Dominican republic FTA and (c) recognition that there is no contemplation at this time of creating a seamless economic space among CARIFORUM countries. It should be recalled that Article 28 of the Cotonou Agreement states “Cooperation shall provide effective assistance to achieve the objectives and priorities which the ACP States have set themselves”. An EPA must not re-shape ACP integration schemes but reinforce them while respecting their integrity. In response, and to its credit, the EC has dropped its proposal that CARIFORUM configure itself as a customs union as the basis for assuming EPA commitments. The EC nevertheless, has continued to stress that optimal levels EU development support could be realised only when CARIFORUM moves in the direction of constituting itself as a single seamless economic space. B. DEVELOPMENT The overarching objective of the CARIFORUM-EC is the promotion of sustainable economic development. All concerned with EPA must disabuse themselves of the notion an EPA should have a development dimension because this does not sufficiently recognize the centrality of development. To ensure that development infuses all aspects of the EPA, CARIFORUM has secured EC agreement to inserting a development chapter. Despite this concurrence one of the principal issues on which CARIFORUM and EC negotiators differ is how to make the EPAs development promoting instruments. While both parties share a common objective that the EPA should be a tool for CARIFORUM development, they advocate very different paths towards the ultimate goal. Three issues urgently require resolution: 3 1. Divergent Concepts The EC views development as a process that is driven by strengthened regional integration and trade liberalization, coupled with more stringent trade and investment rules, and accompanied by EU support for trade-related capacity building measures. This view of development does not give sufficient attention to the various structural deficiencies and supply-side rigidities that afflict small vulnerable economies. The challenges facing CARIFORUM are further exaggerated