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EPA will provide more dynamic export market for Caribbean, say trade experts

Jamaica Observer

EPA will provide more dynamic export market for Caribbean, say trade experts

by Julian Richardson, Business Observer staff reporter

14 March 2007

Jamaican trade experts are confident that when the ongoing Economic Partnership Agreement (EPA) negotiations between the European Union (EU) and the Caribbean Forum of ACP States (CARIFORUM) are completed by the end of the year, it will facilitate a more dynamic export market for Jamaica and the rest of the region.

One key member of the Caribbean’s negotiating team, Jamaica’s foreign minister, Anthony Hylton, distinctly highlighted the intentions of what the EPA should facilitate in his contribution to the state of the nation debate in the Senate in January.

"The role of the EPA as a dynamic tool for the sustainable development of CARIFORUM member states cannot be overemphasized," said Hylton. "Throughout the course of our engagement with the European side, we have unequivocally affirmed the need for close attention to be paid to the balance of measures in support of development and our efforts to achieve regional integration."

CARIFORUM is the body formed by Caribbean Community (Caricom) members and the Dominican Republic to represent the region in negotiating the EPA. The European Union is the Caribbean’s second largest trading partner, with trade in goods worth just over euro3 billion annually. Aluminium, rum, sugar and bananas are the main Caribbean exports to Europe.

The meetings between the two parties focus on one of a pool of EPAs, which will, as of January 1, 2008, govern trade and aid relations between Europe and its former and present colonies in the African, Caribbean and Pacific (ACP) grouping, succeeding the non-reciprocal preferential trade regimes of the Cotonou Agreement and its predecessor, Lomé Convention, which have governed Euro-ACP trade for over three decades.

For years, the EU allowed former colonies in the ACP preferential access to its markets and paid them higher than world market prices for their sugar and bananas. But the World Trade Organisation ruled that this was unfair and ordered a regularisation of the trading arrangement.

Between February and November 2006, six rounds of technical negotiations were held in Brussels, Belgium; Barbados; Jamaica; and the Dominican Republic. One of the underlying agendas of the negotiations is the importance of shaping the EPAs into trade and development agreements that will boost and diversify Caribbean economies.

This agenda is supported by the fact that one of the most common criticisms directed at the Caribbean is that its exports have not diversified over the years into higher-value goods and services. This point was addressed by president of the Caribbean Association of Industry and Commerce (CAIC), James Moss-Solomon.

"What we need to stop doing is to think we are going to get a preferential price for the rest of our life," Moss-Solomon told the Business Observer. "(Under the EPA,) funds are available to facilitate usages, and I think funds are also available for changing usages.the thing I am (promoting) is to break out of the traditional way of just thinking about something in a one-dimensional way.

I don’t think we will be very successful in getting assistance (through the EPA) for doing the same old thing, but I think there is room in the negotiation for us to say we need transitional help, whether it be in technology funds or expertise to do something different than what we have here."

Due to competition, primarily from large-scale South American farmers who are able to produce at a fraction of the cost of Caricom nations, and the fact that there will be further reduction in the prices that the EU pays for the commodities under a European domestic market reform, the traditional banana and sugar industries of Caricom nations are no longer a priority for the EU as it moves towards a more free trade environment. In January 2006, the EU cut sugar prices to the ACP by 5 per cent and plans on a decrease of 36 per cent by 2009.

Moss-Solomon is optimistic that the EPA’s mandate of moving away from the dependence on traditional exports such as sugar and banana will not only boost the economy, but by facilitating value-added derivatives of the commodities, save the ailing sectors as well.

The CAIC president said Jamaica Broilers Group’s ethanol initiative is an example that the sectors can survive by restructuring to focus on efficient elements to improve productivity. In July, Broilers announced it would invest J$1.1 billion in a plant that will produce ethanol from sugar cane for use as an additive in the petrol used by Jamaican motorists.

"So now that people are talking about ethanol, I don’t know that we should be in such a panic," said Moss-Solomon. "Within the Caribbean, people need to recognise that when we have an association with doing something, it’s something specific. When we say sugar in Jamaica, we only mean bulk sugar, which is obviously not going to be profitable for us in the future. if we speak about sugar cane, if we speak about molasses, if we speak about other byproducts of sugar cane, then I don’t think the panic is there that we need to stop growing these things."

Under the current Sugar Protocol, Caribbean countries are allowed to export fixed quantities of sugar to the EU and receive the price of the internal market. However, government estimates that due to the price reductions arising from European market reforms, Jamaica will lose some $2.1 billion per annum by 2009. This will have serious implications if no adjustment measures are taken to transform the sugar industry.

Though the basic elements of the Sugar Protocol and its reforms won’t be affected by the EPA, Allan Rickards, president of the All Island Jamaica Cane Farmers Association, said that additional benefits can be negotiated through the EPA.

"The negotiating machinery, supported by the views of the industries of the region through the Sugar Association of the Caribbean (SAC), have agreed that we should be part of the negotiations to a new EPA without prejudice to the present protocol and that the strategy should be to try and have embodied in the new EPA, all the present virtues of the protocol and additional benefits so that we would be ahead of the game in the EPA," said Rickards.

He said that one of the EPA benefits that the SAC, through the Caribbean Regional Negotiating Machinery (CRNM), is pressing for in the EPA negotiations is that, should there be any shortfall of an individual member of Cariforum in supplying a quota to the EU, that shortfall will be redistributed inside the grouping. He points to the fallout from Eastern Caribbean island St Kitts’ departure from sugar as an example. St Kitts closed its industry after the subsidy cuts were first announced and because of rising production costs.

St Kitts, he said, are going to lose their quota because they are going out of the production of sugar, while we are fighting to retain it. "If we are successful in our EPA negotiation, we wouldn’t have to fight to retain it, it would be redistributed among the sugar-producing countries in the grouping," said Rickards. "So we are not anticipating a situation in which we would lose benefits, but that we would retain all those benefits that we have in the present protocol and have additional advantages coming out of the EPA negotiations."

Immediate past president of the Jamaica Exporters’ Association (JEA), Dr Andre Gordon, said that critical to the EPA negotiations is how it will facilitate Jamaica’s growing non-traditional export sector. Driven mainly by the growth in exports of products such as ackee, fish and seafood, limestones, beverage, mineral fuels-related products and ethanol, non-traditional exports earned Jamaica US$341.6 million in 2005. That figure is estimated to have increased to more than US$500 million in 2006.

"If negotiated properly, the EPA (will facilitate) non-traditional exports," said Dr Gordon. "Most of our growth is going to come from non-traditional exports and these have to be a particular focus on our EPA negotiating stance."

Dr Gordon acknowledged that it is up to the negotiators representing Cariforum to get the best possible deal to provide goods and services to the European market. He said that the CRNM has been doing a good job in presenting its case thus far.

"The approach is to make sure that in the negotiation we structure an agreement that gives us the best possible return - one that allows most of our goods in under favourable terms for as long a period as possible, and at the same time get the kind of support needed to help change the structure of our economy to support production for exports," said Dr Gordon.

"I think that our negotiating teams - both our national negotiating team and the regional negotiating machinery - have been doing a very good job of (presenting) information of what are the important issues for the firms and sectors that are likely to be affected and have been very effective in putting these on the table and defending the kind of position that we want to take."