What’s Wrong With The Development Dimension

1. What’s Wrong With The Development Dimension The CARIFORUM- European Community Economic Partnership Agreement

2. There is no development dimension in the EPA • The basic development problem of CF is on the supply side:- • Undiversified, uncompetitive production capacity • This dimension is not addressed in the EPA • The EPA is almost entirely about market access and trade-related modalities • But falsely presents itself as “A Partnership for Growth, Stability and Development”

3. Market access alone cannot, and has not, delivered development- in the Caribbean or anywhere else in the world • Trade policy has to be a derivative of our development policy- not vice versa • One example: free trade in food will not deliver local food production/food security • This requires a comprehensive production strategy, and deriving from that, an appropriate trade policy

4. While trade policy is not the subject of this presentation, only a couple of examples are given here of its negative development impact • (1)The liberalization schedule bears no relationship to the relative economic strength of the two groupings: E.g. the EC GNP pc is about 13 times that of CF

5. Yet disproportionate trade concessions have been made to the EC:- • The EC begins with 53% of CF imports already free of customs duties • Plus it will have a front-loaded 30 % more liberalization of CF imports in years 3 to 15 • (2) Rules of Origin inhibit the development and diversification of CF States since most of them, including the exempted Central American States, have very limited natural resource endowments • These Rules of Origin require that imports from third parties not exceed 15 to 30 % of the ex-works price of the product • They are not only anti-development but contradict the EPA’s declared aim of integrating CF into the world economy

6. Examine now the EPA in respect of CF’s principal development sectors: • Agriculture and Fisheries • The EPA recognizes the development of this sector as a “fundamental objective” • Yet, the only provision is a statement that there is “need to avoid major disruption of markets” , and “to take account of conservation and management of resources”

7. Traditional Agriculture • There is a provision simply “to undertake prior consultation on trade policy developments that impact on competitive positions” and “to maintain significant preferential access…. as long as possible”

8. Food Security • The main provision is aimed simply at allowing import restrictions when importation leads to major difficulties in a CF State, the measures to be adopted being subject to approval by the Joint EC-CF Trade and Development Committee

9. Services • EU countries are permitted to establish a local presence in a variety of services, such as tourism, telecommunications, banking and other financial services, accounting, medical and other health services, education, sanitation, waste management, retailing • Prohibitions are introduced against treating local and foreign companies differently • But CF’s additional access to EU markets for services is insignificant or ring-fenced by complex, burdensome requirements and EU safeguards • The development of CF’s own production capacity in these services areas is not addressed in the EPA

10. Energy, Infrastructure, • Commodities, Manufactures • These are all fundamental to development programs; basic components in most ACP countries’ development strategies • In particular, Energy and Infrastructure are critical to the CARICOM Regional Strategic Development Plan • Yet there are no provisions at all on these sectors in the EPA

11. Transfer of Technology • Access to technology on fair and reasonable terms is a struggle the South has had with the North for decades • In the EPA it is disposed of simply as “the exchange of information on practices and policies” and taking “measures to prevent or control licensing practices”

12. Social Development • CARICOM States have made good progress on most UN Millennium Development Goals (MDGs) • However, massive efforts and investments need to be undertaken in health, education, housing, water, waste, rural communities, slums, crime and violence • The only provision on “social aspects” in the EPA is in respect of the re-affirmation of adherence to ILO Conventions on collective bargaining and employment practices • The motivation here is to prevent labor standards being lowered that would give CF an advantage in trade, investment and competition

13. Regional Integration • Is recognized as a fundamental objective in the EPA • However, there are several anti-development features in this respect in the EPA. Examples: • Rules of Origin which restrict CF capacity to use third party materials in the production transformation process • Restrictions on the right to regulate capital movement • Extension of regional preferences to a non-CARICOM Member, the Dominican Republic • Restrictions on the right to require investments to be made through joint ventures, and to limit foreign shareholding

14. Investment • The EPA is wholly concerned with the liberalization of CF entry conditions, commercial presence, market access, and MFN • But the issues of most concern to CF relate to access, adequacy, stability, rating, terms and conditions, timely transfer, and disbursement of investment, especially through the EU Investment Facility and the European Investment Bank, but also in international capital markets generally

15. Development Finance • Should be at the core of support for CF development • However, the EPA contains no new commitment, beyond that of the Cotonou Agreement, to additional development finance • The Regional Indicative Program (RIP) allocation, 2008 to 2013, via the European Development Fund/ Cotonou Agreement would amount to an average of about EUR 1.0 million per CF country per year

16. Development Finance (contd) • Reference to the availability of other funds- Aid for Trade- has no commitment or appropriation status in the EC or in any EU Member State • There is no assurance that funds so designated would not merely be a “re-packaging” of Aid, or that they would conform to CF priorities, be timely and predictable

17. Development Finance (contd) • Put the total CF RIP allocation ( EUR 165 million) in a comparative perspective: • The cost of implementing the EPA in CF has been estimated at EUR 900 million • The total capital investment needed by CARICOM countries (ex Haiti) to maintain current low growth rates is estimated over the next five years to be at least USD 45 billion • Ireland (4.3 million people), a lagging EU country (during the 1990s) received from the EU Structural and Cohesion Funds, during that period, on a per capita basis about 560 times the projected per capita allocation for CF (25 million people)

18. Enhancing the Benefits • CF has declared its intention to sign the EPA, as is. • However, it should be feasible to introduce changes that could enhance the development benefits, without challenging the entire EPA • The proposal is to append to the EPA a Protocol (Declaration) covering the principal development sectors ( as above)

19. Enhancing the Benefits (contd) • This Protocol would constitute a CF-EC framework understanding that would broadly delineate for each sector the main areas for development support measures, the implementation / institutional modalities, and timelines, the details, including cost estimates, of which would subsequently be elaborated in formal Sectoral Development Partnership Programs • This would be perfectly consistent with the protocols/declarations in the Cotonou Agreement on sugar, bananas, rum, meat, cotton • This Cotonou approach had widely been expected to provide a template for a more extensive treatment of the development dimension in the EPA.