CMCFeature CARIBBEAN-Fifteen years of the CARIFORUM-EU Economic Partnership Agreement

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BRIDGETOWN, Barbados, CMC – On October 15th, 2008, the European Commission and 13 Caribbean countries (as part of the 15-member CARIFORUM organization) signed the CARIFORUM – European Union (EU) Economic Partnership Agreement (EPA), with Guyana and Haiti signing subsequently. Therefore, this year commemorates the 15-year anniversary of the Agreement’s signature.

After 15 years, however, we are far past the stage of just celebrating another anniversary of the signing of the EPA. Given the current global turmoil, The focus must be on what role the EPA can play now. The question is – fifteen years after – is the EPA fulfilling its mandate as a regional trade and development tool?

Why an EPA?

A bit of history: Since 1975, before the signing of the EPA, Caribbean countries have had preferential access to EU markets for most of their products. However, over time, the share of exports to the EU steadily decreased. Caribbean exports also constituted very few products – such as aluminum, rum, sugar, bananas, and oil – that were basic and lacked diversification or any added value.

The incompatibility of these preferences with the World Trade Organization (WTO) rules and the dispute challenges by other developing countries further showed that this avenue was a dead-end for Caribbean-EU trade. Therefore, The objective behind the EPA process has been to reverse this trend and promote development.

The asymmetric nature of the Agreement recognizes the capacity issues of the Region. Since day one of the EPA’s functioning, all goods from the CARIFORUM member states have been entering the EU duty-free and quota-free. On the other hand, for the Caribbean, trade liberalization was made subject to an extended transition period of up to 25 years (until 2033), giving Caribbean countries time to adjust to the gradual trade opening.

It is also important to mention that many sensitive products were excluded from liberalization, including fish and fish, poultry and other meats, fruits and vegetables, dairy products, rum and other beverages, furniture, and apparel. These products will never be subject to duty-free competing imports from the EU, and therefore, Caribbean States will have all the space and time to develop, expand, and diversify these sectors.

The EPA is one of the most comprehensive trade agreements the EU has ever signed with developing countries. It incorporates sustainable development clauses, promotes regional integration, and includes development cooperation provisions. The EPA is permanent, with no end date, giving potential investors, local or foreign, the stability they seek.

It creates new business opportunities, aims to attract more investments, protects local producers, and promotes shared values. In addition to opening the EU and CARIFORUM markets for trade in goods and services, it also includes specific rules of access in investments and e-commerce.

Moreover, it covers a wide range of trade-related areas, with supportive and trade-facilitating provisions in the fields of Customs, Agriculture and Fisheries, Technical regulation, Sanitary and Phytosanitary Measures (SPS), Fair Competition, Innovation, Intellectual Property, Public Procurement, or the Protection of Personal Data.

Through these rules, the EPA has laid the ground for many reforms in the Caribbean States, which have been and will be further contributing to improving the situation of consumers and ease of doing business.

How has the EPA worked so far?

It is no secret that the global economic and financial crisis has adversely affected the Caribbean and the EU. Over the years, implementation has been a challenge for the Caribbean due to global economic slumps, the COVID-19 pandemic, the war in Ukraine, limited and stretched resources, and the complex and extensive nature of the Agreement.

However, with sustainable development as an overarching principle of the EPA, the comprehensive focus on the development needs of the Caribbean Region is what makes this Agreement impactful. The irony is that as countries seek solutions to their financial and economic difficulties, other priorities have sometimes taken precedence over the implementation of the trade aspects of the Agreement. The EPA could, however, contribute much more to economic growth and poverty reduction of the Caribbean economies if fully implemented.

The EU is CARIFORUM’s third largest trading partner after the United States (US). In 2022, total trade in goods between the two regions was over EUR 19.8 billion (One Euro=US$1.29 cents). Caribbean exports to the EU amounted to EUR12 billion and exceeded imports, which stood at EUR.8 billion.

This represents a 173 percent increase in exports and a 26% growth in imports over 2021. To put it into context, CARIFORUM exports to the EU experienced an initial downward trend immediately after the EPA was implemented.

However, since 2016, they have shown strong recovery (particularly in 2021 and 2022). Overall, CARIFORUM exports of goods to the EU experienced an increase of 142% (in value) and 35.7 percent (in quantities) in 2008-2022.

The main exports from the Caribbean were fuel and mining products, bananas, sugar and rum, minerals, iron ore products, and fertilizers. The main products imported from the EU were boats, cars, construction vehicles and engine parts, phone equipment, milk and cream, and spirit drinks.

Services remain the competitive advantage for the CARIFORUM States and account for as much as 75 percent of GDP for some countries. This is reflected in CARIFORUM – EU trade by the value of trade in services exceeding the value of trade in goods in many years.

CARIFORUM service exports to the EU increased steadily from EUR 2.9 billion in 2013 to a pinnacle of EUR 59.7 billion just before the COVID-19 pandemic in 2019. EU services exports to CARIFORUM are less robust, moving from EUR 2.3 billion in 2013 to EUR 3.2 billion in 2021, with a peak of EUR 6.2 billion in 2018.

The products and services traded are still not at the desired level of diversification. Still, one cannot deny that trade has increased over the years, even with all the challenges faced, making this a trade relationship worth preserving and enhancing.

Does the EPA matter now?

For the most part, Caribbean governments have shown goodwill in their commitment to implementing the EPA. Most countries have ratified the Agreement. National Ministries monitor, coordinate, and facilitate the Agreement’s implementation, and National EPA Coordinators have been appointed and are functioning exceptionally well.

Many Caribbean countries are on track to implementing the agreed-phased reduction of import duties on EU goods. Some others, however, have needed to catch up in that process. The EU is, however, ready to support all CARIFORUM countries in fulfilling their EPA commitments in the framework of its financial assistance programs.

Although the governments have shown leadership of the EPA, the average consumer and the private sector stand to benefit from the Agreement. As such, an essential measure of success is the businesses that have benefitted from the increased regional investment.

All this then translates into economic growth and job creation. For example, the EPA facilitates the supply of critical inputs and capital goods for spurring growth through lower tariffs. It contributes to lowering costs in highly import-dependent countries, which is essential given the recent price hikes.

Of equal importance is the general ability of consumers to benefit every day from quality and cheaper goods from the EU, including cars, car parts, textiles, medicines, household items, construction inputs, electronic equipment, or machinery. As a result of the EPA liberalization process, most of those EU items should now be entering duty-free in all CARICOM and the Dominican Republic. For example, European cars: thanks to the EPA, they should not be charged any import duty in your country as of January 1st, 2023.

But the EPA is about much more than just trading products. Indeed, it provides a framework for boosting growth, selling services, increasing investments, and improving business environments. It is about business certainty and trust, which have proven crucial for economic recovery and building economic links.

EU investors are keen to see Caribbean countries implementing and making the most of the EPA. The Agreement will be paramount to ensure a favorable investment climate as the EU strives to boost its investments in the Region under its Global Gateway initiative.

In conclusion, the EPA represents one of the most generous trade partnerships the EU has ever offered to any trading partner. It continues to provide full free access to the EU for CARIFORUM countries, asymmetrical obligations, a framework for investments, a basis for their market reforms, flexibility in implementation, and provisions tailor-made to their development needs.

The EU remains committed to providing the needed development support to help its Caribbean partners fully benefit from the EPA. After fifteen years, the EPA remains a work in progress but a premium trade and development tool for the Region.

*Malgorzata Wasilewska is the European Union Ambassador to Barbados, the Eastern Caribbean States, the OECS, and CARICOM/CARIFORU.

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