Fifteen years of the CARIFORUM-EU economic partnership agreement

By Malgorzata Wasilewska

On October 15, 2008, the European Commission and 13 Caribbean countries (as part of the 15-member CARIFORUM organization) signed the CARIFORUM – European Union (EU) Economic Partnership Agreement (EPA), with Guyana and Haiti signing subsequently.

This year is therefore the commemoration of the 15th anniversary of the Agreement’s signature.

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, before the signing of the EPA, Caribbean countries have had already some preferential access to EU markets for most of their products. However, over time, the share of exports to the EU steadily decreased. Caribbean exports also constituted very few products – such as aluminium, rum, sugar, bananas, and oil – that were basic in nature and lacked diversification or any added value.

The incompatibility of these preferences with the rules of the World Trade Organization (WTO) and the dispute challenges by other developing countries further showed that this avenue was a dead-end for Caribbean-EU trade. The overall objective behind an EPA process has been therefore to reverse this trend and to promote development.

The asymmetric nature of the Agreement recognizes the capacity issues of the region. Since day one of the EPA’s functioning all goods from the CARIFORUM member states have been entering the EU duty-free and quota-free. On the other hand, for the Caribbean, trade liberalisation was made subject to a long transition period of up to 25 years (until 2033), giving Caribbean countries time to adjust to the gradual trade opening. It is also important to mention that many sensitive products were excluded from liberalization altogether, including fish and fish products, poultry and other meats, fruits and vegetables, dairy products, rum and other beverages, furniture and apparel. These products will never be subject to duty-free competing imports from the EU and therefore Caribbean States will have all the space and time to develop, expand and diversify these sectors.

The EPA is one of the most comprehensive trade agreements that the EU has ever signed with developing countries. It incorporates sustainable development clauses, promotes regional integration and includes development cooperation provisions. The EPA is permanent, with no end date, giving potential investors, whether local or foreign, the stability they look for. It creates new business opportunities, aims at attracting more investments, protects local producers and promotes shared values. In addition to opening the EU and CARIFORUM markets for trade in goods and services, it also includes specific rules of access in investments and e-commerce.

Moreover,  it covers a wide range of trade-related areas, with supportive and trade-facilitating provisions in the fields of customs, agriculture and fisheries, technical regulation, Sanitary and Phytosanitary Measures (SPS), fair competition, innovation, intellectual property, public procurement, or the 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 ease of doing business.

How has the EPA worked so far?

It is no secret that the global economic and financial crisis has adversely affected the Caribbean, as well as it has the EU. Over the years, implementation has been a challenge for the Caribbean due to global economic slumps, the COVID-19 pandemic, war in Ukraine, limited and stretched resources, as well as the complex and extensive nature of the Agreement itself. However, with sustainable development as an overarching principle of the EPA, the comprehensive focus on the development needs of the Caribbean region 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 the trade aspects of the agreement. The EPA could, however, contribute much more to economic growth and poverty reduction of the Caribbean economies if fully implemented.

The EU is CARIFORUM’s third largest trading partner overall, after the United States (US). In 2022, total trade in goods between the two regions was over EUR 19.8 billion. Caribbean exports to the EU amounted to 12 billion and exceeded imports, which stood at 7.8 billion. This represents a 173 percent increase in exports and a 26 percent growth in imports over 2021. To put it into context, CARIFORUM exports to the EU experienced an initial downward trend immediately after the EPA was implemented. However, since 2016 they have shown strong recovery (particularly in 2021 and 2022).

Overall, CARIFORUM exports of goods to the EU experienced an increase of 142 percent (in value) and 35.7 percent (in quantities) in the period 2008-2022.  The main exports from the Caribbean were fuel and mining products, bananas, sugar and rum, minerals, iron ore products, and fertilisers. The main products imported from the EU were boats, cars, construction vehicles and engine parts, phone equipment, milk and cream, and spirit drinks.

Services remain the competitive advantage for CARIFORUM States, and account for as much as 75 percent of GDP for some countries. This is reflected in CARIFORUM – EU trade by the value of trade in services exceeding the value of trade in goods in many years. CARIFORUM service exports to the EU increased steadily over the years from €2.9 billion in 2013 to a pinnacle of €59.7 billion just before the COVID-19 pandemic in 2019. EU services exports to CARIFORUM are not as robust, moving from EUR 2.3 billion in 2013 to 3.2 billion in 2021, with a peak of 6.2 billion in 2018.

One may argue the products and services traded are still not at the desired level of diversification, but one cannot deny that there has been an increase in trade over the years, even with all of the challenges faced, making this a trade relationship that is worth preserving and enhancing.

Does the EPA matter now?

Caribbean governments for the most part, have shown goodwill to their commitment to implement the EPA. The Agreement has been ratified by most countries. National Ministries monitor, coordinate and facilitate the implementation of the Agreement, and National EPA Coordinators have been appointed and are functioning extremely well. Many of the Caribbean countries are on track in implementing the agreed-phased reduction of import duties on EU goods.

Some others, however, have been late or idle in that process. The EU is however ready to support all Cariforum countries in fulfilling their EPA commitments in the framework of its financial assistance programs.

Although the governments have shown leadership of the EPA, it is the average consumer and the private sector, which stand to benefit from the Agreement. As such, an essential measure of success is the businesses that have been able to benefit or the increased investment in the region. All this then translates into economic growth and job creation.

Through lower tariffs, for example, the EPA facilitates the supply of key inputs and capital goods for spurring growth. It contributes to lowering costs in highly import-dependent countries, which is key in view of the recent price hikes. Of equal importance is the general ability for consumers to benefit every day from quality and cheaper goods from the EU, including cars, car parts, textiles, medicines, household items, construction inputs, electronic equipment or machinery.

As a result of the EPA liberalisation process, most of those EU items should now be entering duty-free in all CARICOM and the Dominican Republic. Take, for example, European cars: thanks to the EPA, they should not be charged any import duty in your country from January 1, 2023.

But the EPA is about much more than just trading products. Indeed, it provides a whole framework for boosting growth, selling services, increasing investments and improving business environments. It is about business certainty and trust, which have proven to be crucial for economic recovery and building economic links. 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 strives to boost its investments in the Region under its Global Gateway initiative.

In conclusion, the EPA represents one of the most generous trade partnerships the EU has ever offered to any trading partner. It continues to provide for CARIFORUM countries full free access to the EU, asymmetrical obligations, a framework for investments, a basis for their market reforms, flexibility in implementation and provisions tailor-made to their development needs. The EU remains committed to provide the needed development support in order to help its Caribbean partners fully benefit from the EPA. After fifteen years, the EPA continues to be a work in progress but it remains a premium trade and development tool for the region.