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Implementation Challenges: Insights from the First CARIFORUM-EU EPA Five-year Review

16-10-2014

Silva, S. 2014. Implementation challenges: Insights from the first CARIFORUM-EU-EPA five-year review. GREAT insights Magazine, Volume 3, Issue 9. October/November 2014.

Since its signing in 2008, the Economic Partnership Agreement (EPA) between the Caribbean Forum (CARIFORUM) and the European Union (EU) has been the subject of intense scrutiny from academics, civil society, opinion-makers and policymakers. The agreement arguably cast a long shadow over the other EPA regions’ much-delayed negotiations with the EU, in their search for a final package that better reflected their own unique trading profile. But, until now, there has been no comprehensive effort to evaluate its implementation and impact.

The intense interest lies in both the timing and the novelty of the agreement. In October 2014, the CARIFORUM region – consisting of 15 Caribbean ACP countries (1) – is still the only ACP regional grouping to have signed a ‘full’ EPA, i.e. with all members of the original regional configuration. CARIFORUM also remains the only region to have comprehensively treated the full suite of negotiating issues in the final text, including commitments on trade in services, so-called “trade and sustainable development” (i.e. labour and the environment), and trade-related issues ranging from competition policy to public procurement.

The recently-published study that reviews the EPA at its five-year mark, drawing on country missions to ten CARIFORUM members and now available online on the European Commission DG Trade website (2), provides both a fascinating glimpse into the realities of implementation – long after the euphoric highs, frustrating lows and long nights of the negotiations – as well as important lessons for other ACP regions. 

The results of the five-year review: Much done…

In a context where the wider EPA process has stretched far beyond its originally allotted schedule (and likely beyond the attention span of many observers of the ACP-EU relationship), it is important to note at the outset that the first five-year period of implementing the CARIFORUM EPA has seen its share of successes.

Around half of EU and CARIFORUM Member States have ratified the Agreement, and ten out of 15 CARIFORUM countries have given effect to the agreed tariff reductions. Institutions tasked with guiding implementation efforts have been established at the national and regional level within CARIFORUM, supported by EU cooperation funds that have generally covered the key priority areas envisioned under the EPA (albeit with some important exceptions). In some instances where the European Development Fund (EDF) programming process was slow in delivering assistance for EPA implementation, bilateral donors such as the United Kingdom and Germany stepped in to fill the breach. Bilateral dialogues have taken place on important issues to CARIFORUM (such as mutual recognition), and partner agencies on the ground have used EU funds to help some CARIFORUM firms better contest the EU market. 

All of these successes have taken place in a highly unfavourable economic context, whereby CARIFORUM and EU governments affixed their signatures to the EPA at the brink of a deep and damaging global recession – one whose negative impacts are still being felt in many CARIFORUM countries, and which has arguably set back (or even frozen) much political enthusiasm for, and resources behind, EPA implementation.

and much to do

Yet the study also finds serious and important deficits on both sides in some of the basic elements of the implementation agenda. On ratification and tariff reduction, for example – arguably key psychological signals of both Parties’ commitment to the Agreement – the less-than-full implementation picture means that the EPA has yet to enter into force, and that some CARIFORUM countries have had to (imperfectly) resort to implementing the tariff reductions administratively.

The regional integration element of the EPA, highlighted from an early stage as a new-generation ‘value-added’ of the Agreement, remains a largely unfulfilled promise, as CARIFORUM countries have yet to agree on how to implement the ‘regional preference’ obligation between them, and as trade between CARIFORUM and the EU outermost regions remains subject to barriers.

The study also finds that key opportunities for bilateral dialogue – the crucial non-financial cooperation aspect of the ACP-EU relationship, enshrined in scheduled reviews of certain provisions of the Agreement – have not been actively taken up, from improvements in the EPA rules of origin to future liberalisation in services and investment. Critical areas of trade-related regulation in CARIFORUM that underpin a range of provisions – effective competition policy, for example – remain a work in progress in several countries.

Even where many national and regional EPA Units have been established, resources and sustainability are a constant concern. While EDF funded projects are increasingly covering the full range of implementation activities, and while organisations such as Caribbean Export are breaking new ground in their support to the private sector, many key projects have only very recently come on-stream. Delays in supporting some critical areas of the Agreement (e.g. the protection of intellectual property rights) have held up efforts to craft CARIFORUM positions and thus further dialogue and negotiation with the EU.

And finally – and arguably most importantly – there is still little clear recognition or activation of some of the main ‘wins’ achieved by CARIFORUM at the negotiating table. For example, rather than reflecting the EPA’s innovative provisions on temporary movement in trade in services, the information made publicly available by EU Member States still refers to ‘migration’, ‘employment’ and/or ‘workers’ attempting to access the labour market, rather than the short-term movement of CARIFORUM services suppliers which are meant to enjoy a clear competitive edge over other third-country nationals. Whether as cause or consequence of this lack of recognition, consultations indicated that very few CARIFORUM service suppliers have actually attempted to contest the EU market under the EPA.

In sum, the ‘EPA signal’ – the active take-up of regulatory challenges and market opportunities – remains fairly muted, both within the Caribbean and the EU. The study finds a few discernible aggregate impacts from the EPA: for example, the expansion of agricultural exports and some free-zone manufactures from the Dominican Republic; a resurgent regional rum industry backed by an innovative EU-backed programme; some noticeable shifts in policy thinking amongst a few CARIFORUM policymakers. But there is still a long and unfinished implementation agenda to complete before the CARIFORUM EPA can ‘move the needle’ in terms of its impact on CARIFORUM trade and development.

What can other regions learn from the CARIFORUM experience?

The CARIFORUM experience of implementation yields four key lessons for other ACP regions as they navigate the post-2014 waters.

First, implementation is just as much a negotiation as the actual negotiation. Observers could be forgiven, after ten difficult years of stop-and-start negotiations between the ACP regions and the EU, for thinking that the signature of the EPA marked the finishing line. The experience of CARIFORUM however suggests otherwise: the signature merely marks the starting point of another long, highly technical and sometimes contentious process.

From the legal scrubbing of the Agreement, to the selection of persons for the various EPA committees, to the rectification of perceived errors further down the line, ACP regions will need to marshal the same (if not more) technical expertise that was deployed during the negotiations. Bilateral encounters with the European Commission will still require careful pre-strategising; ministerial interventions will still be required to unblock impasses on key issues; and technical expertise will still be needed to clarify the legal implications and economic impact of certain provisions, and shepherd the various pieces of EPA-related legislation through national parliaments.

ACP regions would be well advised to begin, at the earliest opportunity, liaising with donor partners to ensure an uninterrupted flow of resources for the implementation exercise, and ensure that institutional structures are in place with as much flexibility, resource availability and technical firepower as those in place for the actual negotiations.

Second, and closely linked to the first point, mobilising bilateral donors early is critical. While there are substantial envelopes of resources available under the EDF, the CARIFORUM experience suggests that those funds may not turn into actual projects for three to four years after signature.

Why the rush? Simply put, there is a narrow window for kick-starting implementation efforts. In many ACP regions (and here CARIFORUM is no exception), the EPA negotiations have attracted their fair share of criticism, and that criticism can easily harden into cynicism unless there is an early countervailing push to champion implementation and unlock the benefits of the Agreement.

In CARIFORUM, bilateral donors – particularly the United Kingdom and Germany – played a key role providing rapid-response support in those crucial early hours of implementation. Other EU Member States have not yet been as active.

Third, both Parties should ensure an ‘early harvest’ of key pillars of implementation. It is difficult to categorise certain areas of the Agreement as more important or more development-friendly than others. Yet consultations for the study suggested that certain parts of the Agreement were considered – particularly by the private sector – to be important markers of their governments’ seriousness in achieving the objectives of the EPA.

These included, inter alia, ratification of the Agreement, the launching of EU-funded projects (specifically those aimed at private sector development), the ability of the various EPA committees to quickly deal with issues arising from implementation, the implementation of tariff reduction, and the prioritising of those parts of the Agreement that mark a clear innovation from the status quo: in the CARIFORUM case, for example, the EPA provisions on temporary movement.

Rather than see the EPA as a single laundry list of obligations, these priority areas should be fast-tracked, to create a strong momentum in favour of implementation.

Fourth, the experience of EPA implementation does not necessarily undermine regional integration, but can certainly expose its shortcomings. There is understandable concern that the EPA – whether in the negotiations or implementation stage – could undermine the regional integration processes within the various ACP configurations. In the CARIFORUM case, the experience of implementation has, in certain cases, exposed the weaknesses of both intra-Caribbean Community (CARICOM) and intra-CARIFORUM integration. Implementation of regional preferences for trade in services, for example, has been shelved until there is clarity on the internal CARICOM services regime. Planned negotiations with the EU on issues such as geographical indications are being delayed due to the lack of agreed regional positions and frameworks. The readiness of certain countries to move ahead is checked by the hesitation or lack of preparedness in others.

While the EPA has set a certain de facto calendar for certain regional integration initiatives, the pre-EPA dynamic of incremental progress remains. Other ACP regions – which have both higher and lower levels of regional integration than that of CARIFORUM – will need to carefully manage both their own and the EU’s expectations for any provision requiring a common regional position. 

Sacha Silva

Sacha Silva is Senior Economist at WTI Advisors (Oxford/Geneva), and most recently Lead Author on the first 5-Year Review of the CARIFORUM-EU EPA. 

Footnotes 

 [1] CARIFORUM consists of Antigua & Barbuda, The Bahamas, Barbados, Belize, Dominica, Dominican Republic, Grenada, Guyana, Jamaica, Haiti, St Kitts & Nevis, St Lucia, St Vincent & the Grenadines, Suriname and Trinidad & Tobago.

[2] Monitoring the Implementation & Results of the CARIFORUM EU EPA, available online at http://ec.europa.eu/trade/policy/countries-and-regions/regions/caribbean, accessed on 9th October 2014.

 

This article was published in GREAT insights Volume 3, Issue 9 (October/November 2014).

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Economic Transformation and TradeTrade Policy and Economic Partnership AgreementsEconomic Partnership Agreements (EPAs)Caribbean

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Sacha Silva