The Caribbean

Trade winds
Oct 16th 2008 | PORT OF SPAIN From The Economist print edition

Finally, a deal with Europe

THE negotiations took almost four years but were completed last December. Ten months of dither then followed, in which arranging a signing ceremony seemed about as easy as getting a horse race under starters orders. But finally in Barbados on October 15th, at the fifth attempt, 13 Caribbean countries approved a new Economic Partnership Agreement (EPA) with the European Union. Two more may soon join in. The EPA involves only gradual changes to a trading relationship which goes back to colonial days. It grants almost all Caribbean exports duty-free and quota-free access to Europe. In return, the Caribbean will phase out duties on 87% of European imports by 2033. Both sides will ease restrictions on most service providers, allowing Caribbean architects or musicians to ply their trade from Vilnius to Valenciaor indeed in the French overseas dpartements of Martinique and Guadeloupe. The Europeans hope the agreement will be the first of six with groups of former colonies in Africa, the Caribbean and Pacific. These countries have had one-way market access since 1975 under the Lom Convention, and its successor, the Cotonou agreement. But this no longer squares with the rules of the World Trade Organisation. The Caribbean agreement covers the Dominican Republic and Suriname as well as the English-speaking countries. Haiti, distracted by recent hurricanes, did not sign but says it will. Along with the Bahamas, it has a further six months to finalise arrangements for trade in services. Guyana initialled the EPA in December only to have second thoughts. Bharrat Jagdeo, the president, says his country needs more aid to adjust. He has proved adept at getting outside help: the Inter-American Development Bank has spent more than $400m in Guyana in the past ten years, and the country has also benefited from debt relief worth more than $1 billion. Guyana is expected to sign shortly. Proponents reckon the agreement will help the Caribbean to develop new exports, and to rely less on old staples like bananas and sugar. But the EPA has aroused furious opposition from an assortment of opposition parties, elderly academics, retired diplomats, churches, trade unions and NGOs. They complain that it will require higher taxes to replace lost customs revenue. Some of them worry that it covers public procurement and investment protectionissues that developing countries excluded from the stalled Doha round of world trade talks. The EPA will also require the Caribbean to extend to Europe any more generous concessions that it makes in future

to countries such as Brazil or China. For such reasons African and Pacific countries have been reluctant to sign a similar deal. Caribbean businesses seem relaxed about the loss of protection. The EPAs most prominent opponents cannot name any companieslarge or small, in manufacturing or serviceswhich oppose the deal. Many are keen to move into Europe. The region imports most of its manufactured goods anyway, and agreed earlier this year to remove duties on essential foodstuffs as a tool to fight inflation. Once the deal is signed, the politicians may start to feel better about it.