EU-CARIFORUM EPA Monitoring Report finds five-fold increase in EU FDI to CARIFORUM

Alicia Nicholls

Foreign Direct Investment (FDI) from the European Union (EU) increased five-fold to CARIFORUM countries on a whole over the period 2013-2017, with the Bahamas and to a lesser extent, Barbados, being the main destinations. This increase, however, was not as a direct result of the EU-CARIFORUM Economic Partnership Agreement (EU-CARIFORUM EPA). These are some of the conclusions emanating from the final report of the study “Ex-post evaluation of the Economic Partnership Agreement (EPA) between the European Union and CARIFORUM” evaluating the implementation of the EPA over the period 2008-2018.

The EU-CARIFORUM EPA was signed in 2008 and has been provisionally applied since then. It liberalises trade and investment between the EU and CARIFORUM on the basis of asymmetrical reciprocity and provides for development cooperation. It comprises 15 countries on the CARIFORUM side and had included the then 28 EU Member States when the United Kingdom was still an EU member. The first EPA monitoring report of 2014 had found several implementation shortcomings and it appears not much has changed since that first report.

The current report found overall that implementation of the Agreement has been “mixed”, noting that while “clear progress in implementation has been made, several shortcomings remain.” It revealed implementation shortcomings in a number of categories, namely, liberalisation commitments, regulatory commitments, as well the institutional commitments. It further stated that “while in the EU not many shortcomings in terms of EPA implementation were observed, there are clearly barriers in place which can limit the CARIFORUM countries’ expected benefits under the EPA.” Several implementation shortcomings on the CARIFORUM side have been noted, including regarding commitments on intellectual property rights, electronic commerce and regional preferences.

Implementation gaps related to the institutional commitments are common to both Parties, according to the report. Ratifications have, however, increased since the last report with 25 out of the (then) 28 EU countries and 10 out of 15 CARIFORUM countries having ratified the agreement.

It is not lost on the reader that there are some clear assumptions expressed in the report, some of the same assumptions that have resulted in the EU unfairly placing some CARIFORUM countries on its blacklists for tax and anti-money laundering and countering the financing of terrorism (AML/CFT) purposes. For one, with regard to the increase in FDI, the report questioned “to what extent these are productive investments, as they are concentrated in the Bahamas and to a lesser extent Barbados”, which are low tax jurisdictions, and that “in the consultations, no clear champions could be identified”.

The EU remains the top provider of development assistance to the region. It is, therefore, curious that while the report rightly listed a number of development challenges facing CARIFORUM, including climate change and the COVID-19 pandemic, it unfortunately appears to flippantly note that “the countries do not face these challenges alone, but together with their key partners”. That statement ignores the fact that CARIFORUM countries are primarily small island developing States whose capacity to meet these challenges, is much more circumscribed than that of larger countries. One only needs to look at the fact that CARIFORUM countries face significant challenges in accessing COVID-19 vaccines for their populations on equal terms as larger countries.

Another interesting finding from the report regarding FDI is that the EPA has had a low impact on EU FDI into the CARIFORUM tourism sector. The EPA, it argued, was rarely among the decisive factors driving FDI to the region and “the level of awareness of the EPA is very low, with even large investors often being unaware of the EPA.”

It should be noted that the EPA does not include a full investment chapter as the EU Commission at the time only had competence to negotiate investment liberalisation. Investment protection provisions are not included in the EPA’s investment chapter. Investors would have to rely on protections included in the individual BITs existing between various CARIFORUM and EU countries, where available and in force, most of which predate the EPA.

In sum, the study found that the EPA had occasioned limited changes in overall trade and investment between the EU and CARIFORUM, leading to a conclusion of a lack of a clear impact of the EPA. It also outlines several recommendations.

The executive summary of the final report may be accessed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. All views herein expressed are her personal views and should not be attributed to any institution with which she may from time to time be affiliated. You can read more of her commentaries and follow her on Twitter @LicyLaw.