InInNo. 14CBriefBrief- November 2006 Overview of the regional EPA negotiations Caribbean-EU Economic Partnership Agreement The purpose of this InBrief series is to provide a synthesis of the main elements and issues at stake for the 6 African, Caribbean, and Pacific (ACP) groupings negotiating an Economic Partnership Agreement (EPA) with the European Union (EU). Each InBrief offers an overview of the economic and regional integration dynamics influencing the structure, pace, and outcome of the EPA negotiation process for each region. It also focuses on the main issues and challenges to be tackled by each region in order to make the new trade arrangement a development oriented instrument. Each regional InBrief is complemented by an update on the ongoing EPA negotiation process. Every 6 months until the conclusion of the EPAs, a new update will be produced. www.ecdpm.org/inbrief14c Introduction Organization (WTO), as well as in bilateral Agreement (EPA) which will replace, by end trade talks with regional partners. With 2008, the thirty-year-old Lomé non-recip- The Caribbean region is composed of many the European Union, the region is currently rocal trade regime. small islands that are greatly dependent on negotiating an Economic Partnership trade for their economic development. In 1999, the share of trade in the region’s gross domestic product (GDP) amounted to 80%, compared to 49% for sub-Saharan Africa and 46% for the world on average. Despite Caribbean-EU EPA regional configuration the importance of its external trade rela- tions, particularly with the United States and the European Union, the Caribbean has Bahamas experienced a sharp decline in its share of world trade, falling from 1.7% in 1950 to 0.2% in 2000 with regard to world merchandise exports. The region has there- fore been unable to benefit from global Haiti St. Kitts and Nevis trade liberalisation. Furthermore, the Belize Antigua and Barbuda Caribbean economies are scarcely diversi- Jamaica Dominican fied, with services, especially travel and Republic tourism, and agriculture currently playing Dominica the major role. Saint Lucia Saint Vincent Barbados At the regional level, the Caribbean is and the Grenadines pursuing its own economic integration Grenada process through the implementation of the CARICOM Single Market and Economy Trinidad & Tobago (CSME), whose first component, the single market, was launched in January 2006. The Guyana Caribbean countries are also simultane- Surinam ously involved in a series of external trade negotiations at the multilateral level in the context of the World Trade ation per oo c European Centre for Development Policy Management U -E P C A F 1 2 a g Centre européen de gestion des politiques de développement c n 9 i i 0 l i t t a 8 e t 0 r i l l i 6 a c 6 a c F o o p é r a t i o n A C P - U E Page 2 Overview of the regional EPA negotiations November 2006 InBrief 14C CARICOM by seven small eastern Caribbean sion of a free trade arrangement with this CARICOM (14) islands.3 It represents a deeper form of South American region.6 Concerning bilat- Trade in Goods with regional integration, as exhibited in its eral trade relations, CARICOM has concluded the European Union, 2005 monetary union and common judiciary trade agreements with Venezuela, Colombia system. and with Costa Rica. Trade flows • EU-bound exports: !3,349 million In August 1998, CARICOM and the (growth 2004-2005: 23.7%) Dominican Republic concluded a free trade EPA Negotiations • Imports from the European Union: agreement (FTA), which provisionally !3,891 million (growth 2004-2005: entered into force in December 2001.4 This In previous ACP-EU cooperation agreements, 20.4%) agreement contains provisions on market all ACP countries enjoyed non-reciprocal • Trade balance: !542 million access for goods, including on rules of tariff preferences for their exports to the EU origin, technical barriers to trade, sanitary market. Under the Cotonou Agreement this Share of agriculture in trade and phytosanitary (SPS) standards, customs will change after 2008, when reciprocal free • EU-bound exports:22% procedures and trade promotion. It also trade agreements negotiated between the • Imports from the European Union: 7% covers investment (reciprocal promotion EC and the six ACP regions will replace the and protection) and provides for the asym- previous preferential trade regime. These Participation in EU trade: metrical application of the reciprocity prin- new agreements are to be compatible with • EU-bound exports: 0.36% ciple in favour of the less developed WTO rules, development-oriented and build • Imports from the European Union: 0.28% countries within CARICOM that are signato- upon ACP regional integration initiatives. ries to the treaty.5 It further provides for The new regime is also expected to incorpo- Main trade partners (2003): future negotiations in the areas of trade in rate and improve on the Lomé/Cotonou • Exports: United States (50%), services and government procurement. A instruments regarding access to the EU European Union (18%), other (27%) review of this FTA was initially planned for market for the ACP countries. • Imports: United States (27%), 2004, but due to lack of finance was not European Union (19%), other (25%) carried out. CARIFORUM-EU EPA negotiation CARICOM also signed a trade and economic principles The Caribbean Regional agreement with Cuba on 5 July 2000, which Integration Process will lead to a strengthening of economic The CARIFORUM-EU negotiations towards ties between the region and that country. an EPA are to be based on the following The Caribbean Community and Common principles, which are enshrined in a plan and Market (CARICOM)1 was established in 1973 The Caribbean Forum of ACP States (CARI- schedule agreed by the negotiating parties by the Treaty of Chaguaramas, which was FORUM) includes the CARICOM member in April 2004.7 revised during the 1990s.2 Historically, CARI- states plus the Dominican Republic and COM replaced the Caribbean Free Trade Cuba. This political group was created in The CARIFORUM-EU EPA is, first and fore- Association (CARIFTA) which was set up 1992 with the aim of providing a regional- most, to be conceived as an instrument for following the collapse of the short-lived level interlocutor for interactions with the development, forged within the broader British West Indies Federation. European Commission (EC), above all to context of the ACP-EU partnership and coordinate European aid under the consistent with – and complementary to – CARICOM’s main areas of activity are three: European Development Fund (EDF). The the Cotonou Agreement’s goals and princi- (i) economic integration, (ii) functional coop- geographical configuration of the Economic ples. That means the EPA should be mutu- eration and (iii) coordination of the foreign Partnership Agreement (EPA) negotiations ally reinforcing and supportive of the policy of the member states. with the Caribbean coincides with the CARI- Cotonou Agreement’s political dimensions FORUM member states except for Cuba, and development cooperation strategies, Looking at economic integration, CARICOM which is not a signatory to the Cotonou and thus contribute to the global objectives member states agreed in February 2002 to Partnership Agreement. of sustainable development, smooth and implement the CSME by end December gradual integration into the world economy 2005. The CARICOM single market was and poverty eradication in the Caribbean launched in January 2006, and the CARI- International Trade states. Furthermore, the EPA should COM single economy is due to be estab- Negotiations promote sustained growth, increase produc- lished by 2008. When complete, the CSME tion and supply capacities, foster economic will provide for the free movement of Caribbean countries are currently engaged structural transformation and diversifica- goods, services, capital and labour and for in a variety of external trade negotiations tion and support regional integration in a the right of establishment within the that should foster their integration into the way that is consistent with the develop- Community. It will also provide for a world economy. These include negotiations ment policy objectives and strategies of the common external trade policy, effectively in the Doha Development Round of the CARIFORUM countries and regional group- coordinated macroeconomic and sectoral WTO, continuing talks on the Free Trade ings. To achieve these goals, consideration policies and harmonised laws and regula- Area of the Americas (FTAA), and negotia- should be given to the economic, social, tions affecting trade. tion of an EPA with the European Union and environmental and structural constraints of of a FTA with Canada. CARICOM has also the Caribbean country or region concerned, The Organisation of Eastern Caribbean started discussions on deepening trade rela- as well as to their capacity to adapt their States (OECS) was created in 1981 within tions with MERCOSUR through the conclu- economies to the EPA process. During the www.ecdpm.org/inbrief14c Page 3 preparatory period of the negotiations, EPA College of Negotiators in charge of States, which was incorporated in the capacity-building measures will be imple- conducting negotiations at the subject- Central America Free Trade Agreement mented, particularly to enhance competi- specific level. The Regional Secretariats from (CAFTA). tiveness, modernise infrastructure, foster CARICOM and the OECS also play an impor- supply capacity and strengthen regional tant role in providing technical support to integration processes. the negotiation process. Moreover, partici- Links with the Caribbean regional pation in all of the components of the nego- integration process Another fundamental negotiation principle tiating structure is open to CARIFORUM is that the CARIFORUM-EU EPA should build member states. Economic regional integration is a central upon and support the Caribbean’s own issue in the EPA negotiations. That process regional integration process. This relates in the Caribbean is currently moving mainly to the completion of the CSME Key issues and challenges forward, but is far from complete.