A tail of two pities

After three and half years of negotiations, CARIFORUM and the European Commission finally concluded a comprehensive Economic Partnership Agreement on December 16, 2007. (See the Regional Negotiating Machinery’s Junior Lodge’s reflections in attached document below.)

The Economic Partnership Agreement or EPA is an instrument of trade partnership required by the Cotonou Agreement to replace the trade component of Lomé IV. It is expected that it will help ACP countries, including CARIFORUM, to reduce poverty and achieve economic growth through sustainable trade with Europe.

Under World Trade Organization rules, CARFORUM (CARICOM plus) and its partners in the ACP group must relinquish preferences in trade agreements. The predominant products of CARICOM/CARIFORUM which received preferences were sugar and bananas and American owned fruit companies backed their government in insisting the WTO regime be accepted, irrespective of the consequences on the small economies.

That said, the Caribbean territories had lost any price advantage in producing sugar and bananas to the Central American republics and Brazil, and the preferences were secured primarily out of a sense of reparations for the damages of slavery and colonialism. It was perhaps full time that the countries started looking for value added in bananas and sugar or get out of the business.

Jamaica, Barbados, Guyana and Trinidad and Tobago in particular have cited social dislocation from abandoning sugar cane which employed many low skilled rural workers in crop planting and harvesting season. But both productivity and production have fallen away.

Now that the EPA has been concluded many in the Caribbean business sector have been lamenting the selling of some birthright and cower under the thought of being swamped by European goods which will have free access to the region’s markets.

Is the fear legitimate? It may be for those with growing manufacturing sectors and who do significant imports already from Europe. However, most of the regions big ticket items such as cars are from Japan, consumer electronics are from the USA, Japan and increasingly, China and food is again the USA and Canada.

Jamaica’s prime minister, Bruce Golding, whose party has taken up a new appreciation for a strong CARICOM, has chastised members of the moaning private sector.

“There are persons who believe that the preferences that we have enjoyed – this business where Europe pays you twice as much for your sugar than they can buy it elsewhere – that those are things that must remain in perpetuity,” he told delegates to an investment and capital markets conference hosted by the Jamaica Stock Exchange (JSE) in Montego Bay, last week.

“It is a kind of mendicancy that we need to purge ourselves of.”

Golding’s criticism seems appropriate at a time when Caribbean manufacturers need to dispense of their reputation as sample producers who don’t deliver the goods.

Whether the region, now vastly dependent on tourism and offshore services, can hold its own in the open trade in these areas, is to be seen.

CARICOM’s Regional Negotiating Machinery, based in Barbados spearheaded the EPA negotiations and now another CARICOM arm is talking about negotiating free trade with the USA (see story), which prodded away the European preferences, leveraging the WTO.

It will be interesting to see what is garnered in Washington and how it measures against the Brussels pact.