Wayne M. Lewis Press & Information Officer, Delegation of the European Commission to Barbados and the Eastern Caribbean

The argument that EPAs are a threat to development could not be further from the truth. Through a set of forward looking, development centered, regionally harmonized, dynamic trade rules, the EU is working with ACP countries in general and Caribbean countries in particular to move away from post-colonial trade preferences to a more dynamic partnership that will boost their competitiveness and integration into the world economy.

The reasons why the EU and the ACPs have determined to forge new trade arrangements are well known: EU and ACP States agreed on 23 June 2000, seven years ago, as part of the Cotonou Agreement, to bring their trading arrangements in line with WTO rules, which prohibit non-reciprocal agreements. Of course, the date of 31 December 2007 for concluding negotiations was not imposed by the EU or chosen arbitrarily, but because it coincided with the end of the WTO waiver on Cotonou trade preferences.

But it is not just a question of compliance with WTO rules. EPAs stem first and foremost from a joint ambition for development: despite the ‘Lome’ trade preferences introduced in 1975, the ACPs have lost market share in EU markets to other more dynamic developing countries with lower access to EU markets. Moreover, trade preferences have not helped the ACPs move on to higher value-added products but encouraged their trade to focus on low-cost commodities. EPAs are a way to ensure continued privileged market access for Caribbean firms into the EU market, while promoting a progressive and asymmetrical opening of the CARIFORUM economies to each other’s and to EU goods and services, with extensive transition periods of up to 25 years for sensitive products and possible exclusion of these products. By creating a more integrated regional market, the Caribbean may overcome the diseconomies of scale induced by the fragmentation of these economies.

Indeed, size matters. One of the characteristics of Caribbean economies is that individually they are very small. The smallest OECS economy is some 10% of the GDP of Barbados, the whole of the OECS is some 110% of the GDP of Barbados. The whole of CARICOM GDP is roughly similar to that of Ecuador. Therefore the chance that a single company acquires a dominant market position, oligopolist or even worse, monopolist, in individual national markets is very high.

Everybody is familiar with the monopolistic structure of the Caribbean telecom market until a few years ago and the high telecom rates paid by Caribbean consumers. The technological innovation of mobile telephony (that allowed for competition between fixed and mobile telephony), combined with the regulatory liberalization of the last few years, have brought about a healthy competition to the benefit of firms and households throughout the region.

A lesser known example is the OECS brewery market: through a combination of regulatory provisions (Art.164 of the Revised Treaty of Chaguaramas) and inter-firm license provisions, the OECS brewery market consists of a series of very small individual markets with one dominant producer in each island and little or no competition. Another example is the air transport sector, where the principle of a single Caricom domestic air space has not yet been applied. We could also talk about the distribution sector and others. Smallness and regulatory fragmentation bring about dis-economies of scale that both CSME and EPA aim to reduce.

In this context, the EPAs aim to support the region’s own integration efforts. To enhance the competitiveness of these generally small and vulnerable economies, CARICOM countries have decided to establish a Caricom Single Market and Economy (CSME): the aim is to progressively create a regionally harmonized level-playing field where goods, services, labor and capital can move more freely, allow for a more efficient allocation of factors of production, allow for more competition in a larger market, improve competitiveness and productivity. An open market allows for regional added-value built on the relative endowment of factors of production of its various participants: cheap raw materials in country A, cheap labor in country B, dynamic financial sector in country C, etc. For instance, the progressive integration of Haiti into the CSME and EPA would provide Caribbean manufacturing with a competitive edge in the same way that the EU enlargement to Central Europe has improved the competitiveness of the West European manufacturing sector.

The objective of the EPAs is similar to that of the CSME - to gradually widen the market, reduce rent-seeking situations, instill more competition, bring about more competitiveness, create a training ground that nurtures regional champions fitter to compete in the global market place… … the opposite of new-colonialism.

In the process the EU is also providing substantial financial resources to assist the countries and the region for overall national and regional development, to adapt to a more competitive environment, for the banana sector, for sugar, rum, rice. This includes new resources up to an amount of € 1.5 billion for the Caribbean alone over the next 5-7 years in addition to existing programmes; as well as aid for trade (€ 2 billion annually by 2010 out of which a substantial share should benefit the ACPs) and commitments from individual EU Member States. It should be recalled that the European Union is already the world’s largest donor of international assistance, providing over 60% of the world’s official aid.

The EPA is not a threat but a tool for development, and a promise to help Caribbean economies in progressively becoming more efficient and attractive in the new environment of globalization. EPAs should be discussed in a transparent and open manner; scaremongering and raising irrational fears are but a disservice to the peoples of the region.