David Jessop, Trade Writer
All free trade agree-ments are essentially about reducing tariffs on imported goods or lessening restrictions on the supply of services.
The theory is that by reducing the cost of goods for consumption or the cost of inputs used by manufacturers or service providers, industries and economies become more competitive.
The Economic Partnership Agreement (EPA) between the Caribbean and Europe, a free-trade agreement in all but name, but with development objectives, is no exception.
Accompanying the legal text and at the heart of the EPA is a lengthy trade in goods schedule.
This sets out on a tariff line by tariff line and Cariforum country-by-country basis the pace and depth of the tariff cuts for thousands of categories of products that the Caribbean imports from Europe.
Importantly and as noted in an earlier column on understanding the EPA, this tariff reduction schedule has to be read in conjunction with an extensive list of European products for which there will be no tariff liberalisation at all.
Excluded items
Such excluded items range from food stuff through wines and spirits to paint and make-up by value around 20 per cent of European trade with Cari-forum nations.
For the remaining 80 per cent, Cariforum nations will reduce tariffs over a 15-year period, with some tariffs on sensitive goods or those that provide significant revenue to government being phased out more slowly.
Additionally, Cariforum nations will benefit from a three-year moratorium before any tariff reduction begins with this being extended to 10 years in the case of automobiles and gasolene.
From the perspective of governments, Cariforum was successful in retaining the right to maintain other duties and charges, such as customs user fees, excise taxes, stamp duties and environmental levies for up to 10 years with no obligation to commence the liberalisation process on such charges before seven years.
For its part, Europe has granted duty-free and quota-free treatment for all Cariforum goods starting from the date of entry into force of the agreement, sometime in June 2008.
The only exceptions are rice and sugar for which there is a two-year transition period.
More generally, the EPA enables Cariforum states to suspend the liberalisation process in order to safeguard national industries against the adverse effects of dumping, that is, selling goods below their normal value.
Knowing tariff lines
There is also a safeguard mechanism that enables Cariforum to adopt measures where a serious disturbance to the regional economy or a sector occurs as a result of the increased importation of EC goods. This is understood among negotiators to mean that Cariforum states can introduce such measures at a much lower threshold than currently pertains under World Trade Organisation rules.
To know what all this means, in practical terms, it is necessary for every Caribbean manufacturer and importer to know the tariff lines for each of their products or imports and then go to the trade in goods schedule accompanying the EPA.
With this information they will then be able to see what each Cariforum nation has committed itself to in terms of tariff reductions for the product concerned; the period over which liberalisation will occur; and in a few cases - mainly the Dominican Republic - where special provisions apply.
Thus, to take a random tariff line 950490: Tables for Casino Games, the trade in goods schedule shows that tariff will be phased out over 15 years from a base rate of 20 per cent in all Caribbean countries except in the case of the Bahamas where the base rate is 50 per cent.
In the case of the Dominican Republic, the reason why the schedule indicates a wide range of different tariff reductions is because unlike all other Cariforum nations it has already entered into a free trade agreement with the United States (US), along with its partners in Central America.
This meant that it was not able to limit European Union (EU) access to its market beyond the terms it had agreed with the US.
Thus while imported European wines, spirits and beers remain excluded from tariff liberalisation for all CARICOM nations this is not the case for the Dominican Republic.
The heart of the pact
EU spirits producers successfully argued that EC negotiators must obtain the same treatment for their products as was offered to their US competitors.
The trade in goods schedules accompanying the EPA lie at the heart of the agreement.
Although reference to it may be a chore, it is in reality an essential task for every importer, manu-facturer and service provider if they are to separate the fact from the fiction about the EPA.
Only by reading the schedule themselves can they see if, how or when their business interests may be affected, either positively or negatively.
david.jessop@caribbean-council.org
Note: This concludes the series on understanding the EPA. Parts 1 to 10 were published January 11 to March 14, 2008.
