CARIBBEAN COMPANIES SHOULD GIRD THEIR LOINS

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Sir Ronald Sanders

Caribbean governments should move swiftly to set up national and regional working parties to study the Economic Partnership Agreement (EPA) with the European Union (EU) that was initialled by negotiators on December 16th.

When I discussed this matter in a previous commentary, I had not yet read the full text of the EPA.  I have now done so.  It is a highly complex document and I remain convinced that early national and regional consultation on all its aspects are vital if the Caribbean is to prepare itself for the coming onslaught from Europe.

The EPA document is so complex in parts and so vague in others that none but the negotiators could possibly understand it to the point of being sure that they have overcome all its ambiguities.

The government of Guyana has indicated that it will inaugurate a consultation with its private sector on the EPA.

This is a necessary initiative.  But, it should not be limited to the private sector; trade unions and government agencies, such as customs and labour departments, also need to be involved.  And, the Guyana initiative should be replicated in every Caribbean country.

In a real sense, this process is one of putting the cart before the horse.

The private sector, trade unions, non-governmental organisations and the Caribbean people should have been involved in the negotiations every step of the way.  Adding them at the end is really only an exercise in damage limitation.

The Caribbean Regional Negotiating Machinery (CRNM) did make efforts to keep private sector organisations informed, but only few Caribbean governments actually organised full and meaningful consultations with other stakeholders in their communities.

The implications of commitments by Caribbean countries to remove duties on 82.7% from European imports within 15 years; and open 75% of their service sectors to European firms and individuals providing services should have been publicly explained.

Many questions arise:  what are the products that are being allowed entry with no duty?  Will these products compete with production from local farmers and manufacturers, and, given the economies of scale, will the local producers be able to compete in their own markets?

In the services sector, the Caribbean will be wide open to telecommunications, computer services and financial services.

Inevitably this will mean that indigenous institutions will face competition from European firms with far greater resources.  Over time, they will swallow-up indigenous companies or put them out of business.

It will be argued that since the EPA is reciprocal, Caribbean companies can set up business in Europe.

But, the agreement is replete with clauses that would stop them doing so.  Among these are: a proviso that individual EU countries have the right to specify “the necessary qualifications and/or professional experience” required; and the right of an EU country to “adopt or maintain measures for prudential reasons” in the financial services sector.

In other words, the EPA may allow access, but it also reserves the right for individual countries to disallow such access through non-tariff barriers.

The Tourism Services section of the EPA is woefully inadequate for an industry that is of such crucial importance to a majority of Caribbean countries.

For instance, with regard to technology, the agreement does no more than commit the parties “to endeavour” to facilitate the transfer of technology on a “commercial” basis.  In other words, no official development assistance will be forthcoming, and even on commercial terms (read that as high cost) the parties have committed only to try to achieve them.

Even worse is the absence of a commitment to actively promote small and medium sized enterprises which is where some hope for local participation in the benefits of the tourism industry still resides.  In this connection, the EPA makes no greater commitment than to “endeavour to facilitate the participation” of such businesses in the tourism services sector.

As for exporting Caribbean manufactured goods into Europe, the Protocol on the Rules of Origin defies ordinary understanding.  The Annex to the protocol which tries to establish the processing that is required to determine originating status is even worse.  Caribbean manufacturers will be hard pressed to even begin to decipher it.

But, as I said in my previous commentary on the Caribbean EPA with the EU, it is a done deal.  Our negotiators did their best and an agreement of indefinite duration now exists. It has to be worked.

Working it requires a full understanding of it by all the parties in the Caribbean if the region is not to be overwhelmed by it.  No useful purpose will be served by simply declaring the EPA to be a triumph and then expressing surprise or crying foul when, in its implementation, Caribbean countries find themselves overrun by European companies.

The EPA, as it stands now, requires the parties to give “treatment no less favourable than they accord to their own like commercial presences and investors”.  In other words, local companies can not rely on any special considerations in their own domestic market; such treatment will have to be applied automatically to European firms.

It should be noted that the EPA requires the Caribbean to be ready in five years time for competition and to open government contracts to European firms.  Five years is a very short time for Caribbean contractors in a range of services, including road and building construction, to be ready to take on an onslaught of competition from European firms, but they need to get ready now.

Worryingly, the Caribbean has other free trade agreements to be negotiated.  Canada is next, and, undoubtedly, the Canadians will expect no less favourable treatment than the Caribbean has given the EU. And, the same principle will be applied by other countries and regions with which the Caribbean negotiates.

Caribbean companies had better gird up their loins.

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