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The Caribbean

Trade winds

Oct 16th 2008 | PORT OF SPAINFrom The Economistprint edition

Finally, a deal with Europe

THE negotiations took almost four years but were completed last December. Tenmonths of dither then followed, in which arranging a signing ceremony seemed aboutas easy as getting a horse race under starters orders. But finally in Barbados onOctober 15th, at the fifth attempt, 13 Caribbean countries approved a new EconomicPartnership 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 tocolonial days. It grants almost all Caribbean exports duty-free and quota-free accessto Europe. In return, the Caribbean will phase out duties on 87% of European importsby 2033. Both sides will ease restrictions on most service providers, allowingCaribbean architects or musicians to ply their trade from Vilnius to Valenciaor indeein the French overseas dpartements of Martinique and Guadeloupe.

The Europeans hope the agreement will be the first of six with groups of formercolonies in Africa, the Caribbean and Pacific. These countries have had one-waymarket access since 1975 under the Lom Convention, and its successor, the Cotonouagreement. 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 theEnglish-speaking countries. Haiti, distracted by recent hurricanes, did not sign butsays it will. Along with the Bahamas, it has a further six months to finalisearrangements 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 atgetting 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, anto rely less on old staples like bananas and sugar. But the EPA has aroused furiousopposition from an assortment of opposition parties, elderly academics, retireddiplomats, churches, trade unions and NGOs. They complain that it will require highertaxes to replace lost customs revenue. Some of them worry that it covers publicprocurement and investment protectionissues that developing countries excludedfrom the stalled Doha round of world trade talks. The EPA will also require theCaribbean to extend to Europe any more generous concessions that it makes in future

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to countries such as Brazil or China. For such reasons African and Pacific countrieshave been reluctant to sign a similar deal.

Caribbean businesses seem relaxed about the loss of protection. The EPAs mostprominent opponents cannot name any companieslarge or small, in manufacturingor serviceswhich oppose the deal. Many are keen to move into Europe. The regionimports most of its manufactured goods anyway, and agreed earlier this year toremove duties on essential foodstuffs as a tool to fight inflation. Once the deal is

signed, the politicians may start to feel better about it.