EPA - the MAI in disguise?

Trinidad Express | Monday, January 14th 2008

EPA - the MAI in disguise?

Mary King

Professor Norman Girvan, in an article titled "Proceed with Caution" in the T&T Review of January 7, 2008, made the following comment:

"At the time of writing the full text of the EPA (Economic Partnership Agreement) and accompanying documentation have not been placed in the public domain. Information provided by the CRNM and government leaders has been highly summary, focusing on selected aspects of the agreement mainly related to trade and development co-operation and the opportunities it will allegedly provide to the private sector, particularly in services. In many respects the information provided raises more questions than answers.’’

Really, our negotiators and Government have signed an agreement on trade and other matters which is not in the public domain, an agreement which binds our Parliament to enact certain legal structures, yet our MPs in general are unaware of and unable to debate any of the issues covered by the agreement.

Listen again to Prof Girvan:

"The comprehensive agreement includes subjects such as investments, competition policy and government procurement all of which were rejected for inclusion in current WTO negotiations by developing countries as a whole. In effect it exchanges a degree of policy autonomy in return for expected benefits in the form of additional private investment and development assistance Moreover in most of the ’trade-related’ areas the details of the relevant CSME regime are not yet settled, let alone implemented."

I consider herein the impact of the EPA, with regard to investments for our economic diversification, the need to establish an Innovation System (IS) and the policies that will govern the creation of SMEs. These IS policies will necessarily deal with investments, encouragement of local firms to foster their development and the implementation of structures (e.g. government procurement) in the local test market that favour these SMEs.

Note that the large European firms that will be seeking freedom to invest in the ACP countries did not themselves develop in the kind of market that the EPA is demanding of our developing economies — they grew up behind trade barriers that included constraints on international investments.

The EPA has entrenched the principle of national treatment in trade, investment and services — it requires the Caribbean governments to treat EU firms operating in the region exactly as local firms. The EPA forbids local governments from providing protection or preferential treatment to locally or regionally owned firms. However, Minister Rowley talks about protection for sensitive industries, whatever that means.

The Innovation Diamond discussed in this column specifically requires Government involvement in R&D grants, investments in local start-ups, facilitation of these companies in a local test market, transfer to local shareholders of assets via IPOs, all of which can contravene the EPA.

What is ironic is that Europe attempted to impose similar investment conditions and policies in the late 90s under the Multilateral Agreement on Investments (MAI) which was shot down by the anti-MAI campaign supported by the developing countries. The EPA investments requirements as Mary Robinson, ex-president of Ireland, says, will constrain the creation of advanced factor jobs in the country and our IS.

The MAI was to be an international treaty which would give foreign investors unprecedented rights to enter countries in almost all sectors, freely bring funds in and out and be treated no less favourably (possibly better) than local companies. Just as in the case of the EPA, the MAI was being negotiated without total public knowledge of its contents until the draft MAI text was leaked and posted on the Internet.

An objective of the MAI is to set up strong enforcement systems. Prof Girvan in his article refers to similar enforcement methods under what he calls the "EPA’s Supra Nationality’’. For example the EPA includes a trade and development committee which has specific legal powers over the action of governments without, to date, our Parliament’s approval for such supra-national power.

The MAI, as the EPA, would have given the foreign investor the right to establish fully owned firms in member countries. Governments would no longer have the right to screen foreign investors or place limits on the degree of their participation in the local economy. This implies that policies that favour local business, farmers or even consumers e.g., in house and land purchases and ownership, would be prohibited.

Under such conditions the THA could not exert any control on who buys land in Tobago! SMEs could not enjoy any "affirmative action" or policies in, say, our IS since they would be considered illegal acts that discriminate against foreign companies.