By Lesroy W. Williams

Observer Reporter

(Basseterre, St. Kitts) - Minister of International Trade, Dr. the Hon. Timothy Harris, in an interview with The St. Kitts-Nevis Observer, said that the Economic Partnership Agreement (EPA) between the European Union and CARIFORUM (Caricom and the Dominican Republic) has serious implications for revenue generation in the Federation of St. Kitts and Nevis.

The trade minister said that a significant portion of the government’s revenue – about 50 percent - comes from tariffs on imported goods, the trade minister said.

The trade minister’s remarks come just days before heads of Caricom States are expected to meet in Barbados on September 10 at a meeting convened by Prime Minister Baldwin Spencer, Chairman of Caricom, to discuss imbalances and irregularities with the EPA-CARIFORUM deal before deciding to affix their signatures.

Economic Partnership Agreements are a scheme to create a free trade area between the European Union and countries from the African Caribbean Pacific (ACP) territories. They are a response to continuing criticism than non-reciprocal and discriminating preferential trade agreements offered by the EU are incompatible with World Trade Organization (WTO) rules.

Due to the WTO incompatibility of previous arrangements, the EPA’s key feature is their reciprocity and non-discriminatory nature.

Given the situation that the EPA-CARIFORUM deal creates a free trade zone between both parties, Dr. Harris emphasized that the government will have to create other avenues for revenue generation. One of those avenues might be the introduction of a value added tax (VAT) to goods. However, this is one of the issues that is being discussed at the present moment, he said.

Some Caricom leaders have been split on the EPA and are reneging on their pledge to sign the agreement over concerns they have with respect to “imbalance” in the trading deal.

Dr. Harris was asked, what does St. Kitts have to export to Europe and who stands the most to benefit from the EPA-CARIFORUM trading deal?

Dr. Harris said that the EPA as a new arrangement encompasses more than trade and that it was intended to contribute to the development of the region and to promote regional integration.

Sugar was the mainstay of the St. Kitts economy until the 1970’s. St. Kitts and Nevis no longer export sugar to Europe. The Federation now longer has a sugar industry; it was closed in 2005 because of heavy losses for years.

The government has embarked on a program to diversify the agricultural sector and to stimulate other sectors of the economy.

Activities such as tourism and offshore banking have assumed larger roles in the economy. Tourism revenues are now the chief source of the islands foreign exchange.

One major concern with the EPA has been that the Caribbean region is made up of small open economies that are heavily reliant on tourism and the offshore sector to generate foreign exchange. This heavy dependence on the developed world to support Caribbean economies makes the business of negotiating economic partnership agreements a risky business. This is so because there is an imbalance in power; the developed countries stand more to benefit because they are much more economically powerful, which puts them in an advantageous position.

Prime Minister Denzil Douglas recently said that there are opportunities to be gained from signing the EPA and therefore his cabinet has taken the decision to sign.

“Our people would now have access to the European Market in a way that they didn’t have before and so if we are able to enter into that market and provide the necessary services, goods et cetera, then we can benefit,” Dr. Douglas said.

Dr. Harris stated that the EPA came about as a new arrangement and a successor arrangement to the Lome Convention which came into force in April 1976.

The Lome Convention was designed to provide a new framework of cooperation between the European Community and developing ACP countries. It had two main aspects. It provided for most ACP agricultural and mineral exports to enter the EC free of duty. Preferential access based on a quota system was agreed for products such as sugar and beef, in competition with EC agriculture. Secondly, the EC committed ECU 3 billion for aid and investment in the ACP countries.

The emergence of the single European Market at the end of 1992 affected ACP preferential access to EU markets. For example, many Caribbean countries feared that their bananas would no longer have access to the European Market but that cheaper bananas from Latin America would gain access.

“It became clear to the European Union in the context of World Trade Organization (WTO) rules that the Lome arrangement was not consistent with the new trading regime of liberalized trade. It was not consistent from the point that the Lome arrangement provided a one way preferential access for products from the ACP region into the European Market and by and large the new rule said that there must be reciprocity,” Dr. Harris said.

It was because of the non-reciprocity and discriminatory nature of the LOME agreement which was not compatible with WTO rules that brought it to an end in 2000 with LOME IV.

After Lome IV, a new trading arrangement came into being called the Cotonou agreement which promised that ACP states would continue to enjoy virtually free access to European markets and there will be regional free trade agreements between the EU and better-off developing countries.

However, the Cotonou agreement has been criticized for moving from partnership to excessive and unhelpful conditionality upon ACP countries. The ACP countries the Lomé Convention initially helped were economically hindered as the Cotonou Agreement was not particularly advantageous to the ACP countries.

Dr. Harris said that the EPA as a new arrangement was never meant to be a replica of the Lome agreement. Although there are imperfections in the EPA-CARIFORUM agreement, Dr. Harris feels that they can be ironed out with time.

NB: Some information sourced from Wikipedia Encyclopedia.