In October 2008, the European Union (EU) and 14 Caribbean countries (as part of the 15-member Cariforum organisation) signed an Economic Partnership Agreement (EPA). We therefore have been just commemorating the 15-year anniversary of that event.
After 15 years, however, we are far past the stage of just celebrating another anniversary of the signing of the EPA. The focus has to be on what role can the EPA play now in view of the current global turmoil. The question is: 15 years after, is the EPA fulfilling its mandate as a trade and development tool for the region?
Why an EPA?
A bit of history: since 1975, Caribbean countries enjoyed already some preferential access to EU markets for their products. However, over time, the share of their exports steadily decreased. The incompatibility of these preferences with the rules of the World Trade Organisation and the disputes by other developing countries prompted the negotiation of an EPA to reverse this trend and promote development.
The asymmetric nature of the Agreement recognised the capacity issues of the region. Since 2009, all goods from the Cariforum have been thus entering the EU duty-free and quota-free, while for the Caribbean, trade liberalisation was made subject to a long transition period of 25 years (until 2033), giving Caribbean countries time to adjust. Many sensitive products were excluded from liberalisation altogether, such as fish, meats, fruits, dairy, or rum. These EU goods will never be subject to duty-free treatment under EPA, shielded from EU competition.
The EPA is one of EU’s most comprehensive trade agreements ever signed with developing countries. It incorporates sustainable development clauses, provides key business certainty and promotes regional integration. In addition to opening the EU and CARIFORUM markets for trade in goods and services, it also includes specific rules on access for investments and e-commerce, as well as supportive and trade-facilitating provisions in the areas of Customs, Agriculture, Technical regulation, Innovation, Intellectual Property, Public Procurement, or Protection of Personal Data. Through these rules, the EPA has laid the ground for many reforms in Caribbean States, which have been and will be further contributing to improving the situation of consumers and businesses.
How has the EPA worked so far?
It is no secret that global crises have adversely affected the Caribbean. Over the years, EPA implementation has been a challenge due to global economic slumps, the Covid pandemic, war in Ukraine or overstretched resources. However, the focus on the development needs of the Caribbean is what makes this Agreement impactful. The irony is that as countries seek solutions to their financial and economic difficulties, other priorities have sometimes taken precedence over the implementation of trade agreements. The EPA could, however, contribute much more to economic growth and poverty reduction if fully implemented…
The EU is Carifocum’s third-largest trading partner overall. In 2022, trade in goods between the two regions was EUR 19.8 billion. Caribbean exports to the EU amounted to EUR 12 billion, and exceeded imports, which stood at EUR 7.8 billion. Putting that into context, Cariforum exports of goods to the EU experienced an increase of 142% (in value) and 35.7% (in quantities) in the period 2008–2022.
Services remain the competitive advantage for Cariforum States. This is reflected by the value of trade in services exceeding goods exchanges in many years. Cariforum service exports to the EU increased steadily over the years from EUR 2.9 billion in 2013 to a pinnacle of EUR 59.7 billion just before the Covid-19 pandemic.
One may argue the products and services traded are still not at the desired level of diversification, but it is undeniable that EPA has secured solid trade patterns over the years, even with all of the challenges faced, making this a trade relationship worth preserving and enhancing.
Does the EPA matter now?
Caribbean governments, for the most part, have shown goodwill to their EPA commitments. The Agreement has been ratified by most countries. Some Caribbean countries are well on track in implementing the agreed phased reduction of tariffs on EU goods. Some others, however, have been late or idle in that process, to the detriment of local consumers. The EU is however ready to support all Caribbean states in implementing the EPA through financial assistance programmes.
Although the governments have shown leadership of the EPA, it is the average consumer and businessperson that stand to benefit from the Agreement. Through lower tariffs, for example, the EPA facilitates the supply of cheaper inputs and capital goods for spurring growth. EPA lowers overall imports costs, which is key in highly import-dependent countries given the recent price hikes. Consumers can benefit from cheaper quality goods from the EU, including cars, car parts, textiles, medicines, household items, construction items, electronic equipment or machinery. Under EPA rules, most of those EU goods should now be entering duty-free into Caricom. Take, for example, European cars: thanks to the EPA, they should not be charged any import duty in your country as of 1 January 2023!
But the EPA is about so much more than just trading products. It provides a framework for boosting growth, selling services, increasing investments in green and digital solutions, and improving business environments. EU investors are keen to see Caribbean countries implementing and making the most out of the EPA. The agreement will be paramount to ensure a favourable investment climate, as the EU aims to boost investments and attract capital in the region.
In conclusion: the EPA represents one of the most generous trade partnerships the EU has ever offered to any trading partner: free access to the EU, a framework for investments and market reforms, asymmetrical implementation and provisions tailor-made to development needs. After 15 years, the EPA continues to be a work in progress — yes — but it also remains a premium trade, growth and development tool for the Caribbean.
