Norman Girvan, Guest Commentator

Norman Girvan

This is the final article in a paper written by Professor Girvan, and published weekly in the Financial Gleaner that started running January 24, 2008.

The Economic Partnership Agreement (EPA) sets up an elaborate institutional structure of governance.

At the apex will be a Joint Cariforum-EC Council, a ministerial body with the power to "take decisions on all matters related to the agreement."

Its decisions are "binding on the parties."

These decisions of the Joint Council will therefore have automatic legal force over member states, buttressed by an enforcement machinery that provides for resort to trade sanctions in certain instances.

This is a property of decision-making that has so far been lacking within the organs of governance of the Caribbean Community (CARICOM) itself, including the conference of heads of Government, its supreme authority.

In effect, it endows EPA implementation with a degree of supra-nationality which Caricom governance itself does not possess.

Veto power

It is ironic that, with virtually no consultations or discussion on the substantive issues involved, Caricom governments have been prepared to endow a Joint Council set up with the Dominican Republic and with Europe, with legal powers that it has been unable to agree on giving its own organs of governance after several years of inconclusive discussion.

On paper, the requirement of decisions being taken by consensus will give Cariforum states a formal veto power.

But clearly the EC will have the upper hand in the power relationship by virtue of its control over market access and development assistance.

And doubts about the EC's willingness to use this leverage would have been removed by its conduct during the EPA negotiations.

Further, Caricom's Council for Trade and Economic Development would seem set to suffer a considerable diminution of its role and authority as its room to manoeuvre in external trade negotiations will also be circumscribed by EPA obligations.

The Trade and Development Committee, a body of senior officials operating under the Joint Council, will be responsible for direct supervision of EPA implementation.

It has nine separately listed functions in the subject area of trade and five functions in the area of development; and is mentioned frequently throughout the EPA text. This committee is also endowed with specific legal powers over the actions of member states.

Other key bodies will be the Implementation Committee and the Special Committee on Customs Cooperation and Trade Facilitation.

A Consultative Committee and the Joint Parliamentary Committee are for consultation and dialogue among stakeholders. They have no specific legal powers in respect of the EPA. A cynic might say that these are the 'governance window-dressing' of the agreement.

Each of the six bodies listed above will have a schedule of meetings, many requiring servicing by national and regional officials, reporting requirements, and travel budgets.

It is well-known that national and regional officials are already hard-pressed to service the busy schedule of Caricom meetings and related matters as well as the myriad other demands made on their time and attention. Something will have to give-and it appears unlikely to be the requirements of EPA compliance.

IMPLICATIONS FOR CSME

Finally, what does all this mean for the Caricom Single Market and Economy (CSME)?

It is noteworthy that the EPA is not explicitl in support of the Caricom Development Vision that was approved by the heads of government in 2007 as 'the framework for the development of the community'.

This document identified the sectoral drivers of regional economic growth and transformation spelt out the enabling environment in considerable detail; and set out a timetable for the completion of the CSME from 2007 through 2015.

It stated that foreign trade policies will b with the priorities and policies set out in the Vision and will seek to ensure the policy space necessary to achieve it.

The document, prepared with the extensive involvement of the private sector and other stakeholders, can therefore be properly considered to represent the 'Caricom agenda'.

The EU, for its part, has always asserted that the goals of EPAs are to contribute to the sustainable development of ACP countries and to the reduction of poverty.

Absent Caricom agenda

EU states, as members of the Organisation for Economic Cooperation and Development are on record as promoting the principle of 'home-grown solutions' and 'local ownership' of development strategies and programmes.

The Caricom agenda is for the most part absent from the EPA.

The phasing of EPA implementation is not dovetailed with Caricom's agreed phasing of CSME implementation.

Import liberalisation of goods and the opening of service sectors under the EPA are not synchronised with the Community's own national and regional development strategies.

Impending CSME regimes for investment, services, harmonised taxation, incentives, intellectual property, competition, government procurement, telecommunications and the environment are not points of reference in the corresponding sections of the EPA; nor is their establishment anticipated in the text.

There is thus a very real possibility of contradictions between CSME and EPA implementation measures, both in content and in sequencing.

In favour of the EPA

In any such clash of agendas, the odds favour the EPA; for it is legally binding, embodies supranational governance, is reinforced by the leverage of market access to Europe and is supported by EC funding - all of which are lacking in the CSME.

The most likely scenario, then, is one in which the CSME is melded into the EPA as an adjunct to the larger scheme of economic integration with Europe, and collaterally, with the Dominican Republic.

Within 10-15 years, the Caricom Common External Tariff will have largely been eliminated; market integration in goods, services and investment with much larger and more economically powerful trading partners will be far advanced; and policies in key areas will have been adapted to suit. EU and possibly DR firms may be dominating the most profitable sectors. In a sense, the logic of the EPA is to replace the CSME with a 'Cariforum-EU Single Market and Economy'.

Casualities of the logic

That this logic is integral to the EPA's objective is clear from a reading of the Preamble and Part 1; and from examination of the Cotonou Agreement from which EPAs were derived.

Another likely casualty of this logic is the CSME goal of creating large pan-Caribbean firms capable of competing on the world economic stage; for the most successful local enterprises will inevitably become targets for take-over by EU, Canadian and United States firms.

It is also not unlikely that local small and medium enterprises in the most lucrative lines of business will be displaced as a result of competition from imports or acquisition by extra-regional firms.

There is a further complication that arises out of the way in which the EPA is legally structured. Caricom as a juridical entity is not a party to the EPA. The parties are 15 Cariforum states, the European Commission, and the 27 member states of the European Union.

The 15 Cariforum states will each sign in their individual capacity.

The EPA reportedly distinguishes certain obligations for which Cariforum states are collectively responsible from another set of obligations for which they are individually responsible.

The reason was to avoid a situation where the collectivity could be exposed to sanctions from the EC as a result of the actions of just one member.

One consequence of this will be to pit Caricom member states in competition with each other for the fulfilment of their EPA obligations and access to EPA benefits and opportunities.

It is even possible to envisage a situation in which one (or several) Caricom member states join with the EC in bringing a complaint against another Caricom member or members.

To put it another way: which countries will be 'first' to negotiate mutual recognition agreements for their different classes of professionals? To streamline their customs administration in line with EPA implementation? To amend their intellectual property legislation and institutions to make them EPA-compliant? To adopt the required public procurement procedures?

Those countries will have a built-in advantage in securing 'develop-ment cooperation' from Europe and their exporters will have an advantage in taking advantage of market access opportunities.

Given the wide differences among Caricom countries in levels of economic and social development and in the quality of institutions; the likely consequences are undermining of regional solidarity an intra-regional inequalities.

Superceding caricom

In short, the EPA, far from fulfilling its supposed objective of fostering regional integration, could end up superceding the governance of Caricom, marginalising the CSME, and fragmenting and eventually dismembering Caricom.

Finally, we should take into account the impact of the EPA on the up-coming negotiations on bilateral free trade agreements with Canada and the United States. These partners will not accept less, and may well demand more, than the concessions granted to the EU. The main task of regional negotiators, then, will then be to reconcile the different agendas and requirements of different trading partners and of the local export interests associated with the respective markets.

In these circumstances, it becomes increasingly difficult to sustain a strategy by which trade policy is adapted to national and regional development strategies and the consolidation of regional integration.

MORE THAN A TRADE PACT

The EPA is more than just a trade agreement: it commits or carries the potential of committing the region to a certain development path.

That is a path of unequal and asymmetrical integration of the Caribbean with the wider world; of even greater loss of autonomy; and o fragmentation. This is not a new situation for the region, whether in history or in the present.

The issue is that the EPA may foreclose certain options for development and integration.

If that is the path the region wishes to follow, then it should do so with full knowledge of the possible or likely consequences. If not, then it might wish to pause and take stock. But surely the choice should be a conscious one.

One has the sense that towards the end decisions on the EPA were driven by a combination of expediency and fright. This may be understandable; but the region will have to live with the consequences indefinitely, consequences that may prove difficult to reverse. Whichever way you look at it, full disclosure, full explanation and full discussion of the agreement are vital.

norm.girvan@sta.uwi.edu