Caribbean Trade Law and Development

Tag: Economic Partnership Agreement

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

    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.

  • EU Commission Launches CARIFORUM-EU EPA Public Consultation

    EU Commission Launches CARIFORUM-EU EPA Public Consultation

    The European Commission on April 17, 2019 launched an evaluation of the CARIFORUM-EU Economic Partnership Agreement (CARIFORUM-EU EPA) which governs trade between the current EU-28 and CARIFORUM countries. The CARIFORUM-EU EPA has been provisionally applied since 2008.

    Part of this evaluation exercise involves a public consultation in which stakeholders both in the EU and CARIFORUM countries, which are directly affected by the Agreement, are encouraged to contribute to the consultation. They can do so by completing a questionnaire online. The deadline for submission of responses to the survey is June 28, 2019, while the evaluation will take place between April 17, 2019- July 10, 2019.

    Stakeholders include businesses, business organisations and chambers of commerce, workers’ representatives and trade unions, citizens/individuals, workers, consumers, public authorities, NGOs and other civil society organisations, academia, research institutions, experts and think tanks from the EU and CARIFORUM.

    For further information and to complete the questionnaire, visit here.

  • The Draft Brexit Withdrawal Agreement: What implications for future CARIFORUM-UK Trading Relations?

    The Draft Brexit Withdrawal Agreement: What implications for future CARIFORUM-UK Trading Relations?

    Alicia Nicholls

    After nearly two years of negotiations between the European Union (EU-27) and the United Kingdom (UK), European leaders endorsed the “The Draft Agreement on the Withdrawal of the United Kingdom from the European Union and the European Atomic Energy Community”and the “Political Declaration Setting out the Framework for the Future Relationship between the European Union and the United Kingdom” at a special meeting of the European Council on November 25, 2018.

    This process is taking place pursuant to Article 50 of the Treaty on European Union (TEU), which sets out the terms and timelines for the withdrawal of any Member State from the EU. The text of the UK’s draft Withdrawal agreement, which was released on November 14, 2018, delineates the terms of the UK’s withdrawal from the EU, while the Political Declaration outlines broad aspirations for the constitutive elements of the two parties’ future trading relationship.

    This article takes a brief look at what possible implications the draft Brexit Withdrawal Agreement may have for future CARIFORUM-UK trading relations, which are currently under negotiation and are reportedly close to being finalised.

    Essential Elements of the Withdrawal Agreement

    The UK ceases to be an EU Member State on March 29, 2019. During the transition period (March 29, 2019 to December 31, 2020), and subject to certain limited exceptions, EU law and the EU institutions and agencies will continue to be applicable to the UK, although it will no longer be an EU Member State. The UK will, however, be ineligible to be represented on, or participate in the decision-making processes of these institutions. This arrangement was deemed necessary to ensure a ‘smooth’ transition and provide for some certainty for traders while the parties hammer out the details of their future trading relationship. The Joint Committee may extend the transition period only once and this must be exercised before July 1, 2020.

    The Protocol on Ireland and Northern Ireland includes the controversial “backstop” option, whereby in the event that the EU and UK fail to negotiate an agreement which prevents a ‘hard border’ between Northern Ireland (a country of the UK) and the Republic of Ireland (an EU Member State) within the transition period, the UK will be part of a single UK-EU customs territory until such an agreement is made. However, both the EU and UK have expressly stated their intention to conclude such an agreement by July 1, 2020.

    Both the EU and UK Government have openly stated that they consider the negotiations on the two agreements closed, and have argued that the deal was the best that could be achieved in the circumstances. Although EU leaders endorsed both agreements, approval and ratification by the UK parliament is also needed under the EU (Withdrawal) Act 2018. UK House of Commons support appears questionable at this stage given the fervent opposition by both Remain and Leave MPs to the current Withdrawal Agreement. The House of Commons will debate the deal on December 11, 2018.

    Implications for CARIFORUM-UK Trading Relations

    Traders from CARIFORUM currently have preferential access to the UK market under the CARIFORUM-EU Economic Partnership Agreement (CARIFORUM-EU EPA). While CARIFORUM-EU trading relations will remain unchanged once the UK leaves the EU, the same cannot be said for CARIFORUM-UK relations.

    For most Anglophone CARIFORUM countries, the UK is their main trading partner within the EU, as well as a major source market for tourism and investment. It has been reported that UK-CARIFORUM bilateral trade totaled £2.1 billion in 2016.

    Under the Withdrawal Agreement, the UK remains bound to all EU international agreements, including trade agreements such as the CARIFORUM-EU EPA, to which it is party by virtue of being an EU Member State. However, during the transition period, the UK must not engage in actions deemed “likely prejudicial to EU interests” and its representatives will be barred from participating in the work of any bodies established pursuant to such agreements, unless it does so in its own right or upon invitation by the EU. This would include any bodies, such as the Joint CARIFORUM-EU Council, established pursuant to the CARIFORUM-EU EPA.

    The Withdrawal Agreement does not preclude the UK from negotiating, signing and ratifying its own trade agreements with third States or groupings, such as CARIFORUM, during the transition period. But the entry into force and application of said agreements during the transition period would be subject to EU authorization. With respect to CARIFORUM, the grouping is currently negotiating a roll-over of the EPA concessions with the UK to minimize any disruption to CARIFORUM-UK trade. Such a CARIFORUM-UK trade agreement, therefore, would be subject to EU authorization if it is to enter into force during the transition period. In any case, as noted above, the UK will remain a party to the EPA and bound to apply EPA concessions to CARIFORUM traders during the transition period.

    But what about the UK’s future trading relations with the EU? A ‘no deal Brexit’ is still a possibility as the draft Withdrawal Agreement needs ratification by each of the EU 27 countries. There is also still that pesky question of the negotiation of the future UK-EU trading relationship. The Political Declaration envisions a UK-EU free trade agreement, the terms of which remain to be negotiated.

    A ‘no deal Brexit’ would make it difficult for CARIFORUM firms looking to use the UK as a stepping stone to EU markets, which means a climate of uncertainty will continue to prevail for Caribbean firms seeking to use the UK as a conduit for accessing the EU market until the full details of future UK-EU terms of trade are agreed.  It was recently reported that the agreement between the UK and CARIFORUM was close to being reached and has taken into account the possibility of a ‘no deal Brexit’.

    The climate of uncertainty may also impact CARIFORUM-UK trade and investment from the UK side. Although some UK businesses have by now conducted risk assessments and built in Brexit contingency plans, the continued political and economic uncertainty and volatility of sterling will continue to weigh on their export, hiring and investment decisions.

    The Withdrawal Agreement takes us one step closer to some idea of what the future UK-EU relations will be, but a climate of political and economic uncertainty will remain for some time, which may have an impact on CARIFORUM-UK trading relations.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • French Election 2017: What’s at stake for the world and the Caribbean?

    French Election 2017: What’s at stake for the world and the Caribbean?

    Photo source: Pixabay

    Alicia Nicholls

    The results of the first round of voting in the two-round French presidential elections are in! Pro-EU businessman Emmanuel Macron and far-right candidate Marine Le Pen are the two candidates who will face off in the second/final round of voting within a fortnight.

    French presidential elections do not normally attract this much fanfare internationally, but the results of the first round of the 2017 race are interesting for two main reasons. The first is that there is a 50% chance that there could be a Le Pen presidency which would add to a growing string of political upsets globally. The second is that neither candidate is from the mainstream political parties in France, a firm rejection by the French people of the entrenched political establishment, not unlike what occurred in the US with the election of Donald Trump.

    France has a two-ballot presidential election system which means that in the event of no one candidate winning over 50% of the votes in the first ballot, the two front-runners  have to face off against each other in a second ballot. As of the time of this article’s writing, Emmanuel Macron is estimated to have won this first run-off with  23.9% of the vote, while Ms. Le Pen came second with 21.4%, beating the other candidates.

    France at the moment is facing lacklustre GDP growth, high unemployment, high debt and an increase in high-profile and deadly terrorist attacks, which means the anti-establishment, anti-business as usual mood comes as no surprise. Incumbent President, Francois Hollande, currently faces low approval ratings and has decided not to seek a second term.

    The Two Candidates

    While Macron and Le Pen are ‘outsiders’ from the political mainstream, the two candidates represent two diammetrically opposed worldviews. Emmanuel Macron is a former investment banker who has never held elected office, but had worked for Mr. Francois Hollande during the 2012 Presidential Election campaign. He also subsequently served as Minister of Economy, Industry and Digital Affairs under then Prime Minister Manuel Valls in 2014 until August 2016. Mr. Macron founded his own party En Marche!  in April 2016 which currently has 253,907 members, according to the Party’s official website. The centrist Mr. Macron is pro- Europe, socially liberal and believes that France’s prosperity can be ensured through pursuing pro-trade and outward-looking policies and through continued membership in the EU.

    Marine Le Pen is a lawyer, a Member of the European Parliament since 2009 and the leader of the populist Front National, a far-right party which had been on the dark fringes of French politics until recently.  She is the daughter of Front National co-founder, Jean Marie Le Pen, a far-right ethno-nationalist.  She sought to distance herself from some of her father’s most extreme views as she sought to broaden the Party’s appeal, and succeeded in having him ousted from the party. Ms. Le Pen, however, has strongly anti-immigrant, anti-EU views and has expressed enthusiastic support of both Brexit in the UK and the election of Donald Trump in the US.

    The polarity in the views of the two candidates means that the election of either will have completely opposite global implications.

    What’s at stake with the French presidential election?

    Although polls are showing a Macron victory, Le Pen still has a chance of winning the final run-off on May 7. A Le Pen victory on May 7th would be the continuation of a nationalist, inward-looking turn in advanced western economies, with both economic and geopolitical implications. Domestically, she has indicated her intention to pursue protectionist economic policies and champion anti-immigration reforms. She is anti-globalisation and anti-free trade. She has vowed that she would pull France from the EU and the eurozone, and the North Atlantic Treaty Organisation (NATO). She has voiced her intention to strengthen relations with Russia and had forcefully condemned the EU decision to extend its sanctions on Russia until mid-2017.

    In their forecasts for the global economy and world trade respectively, both the International Monetary Fund (IMF) and the World Trade Organisation (WTO) have forecast higher growth rates but noted the vulnerability of the forecast growth to trade, monetary and other policies pursued by governments. IMF Managing Director, Christine Legarde (who is a former French Minister of Finance) has been reported as stating that a Le Pen presidency could lead to political and economic upheaval.

    First, France is the 6th largest economy in the world. A founding member of the EU, it is also the eurozone’s second largest economy. A more isolationist France would impact on the global economy and have implications for western approaches to current global threats and a reshaping of global alliances. Moreover, a French withdrawal from the EU (termed ‘Frexit’), coming on the heels of the UK’s withdrawal from same, could plunge the EU into an existential crisis more so than Brexit would.

    Any implications of the French election for the Caribbean?

    Will there be any implications of a possible Le Pen presidency for the Caribbean? The specifics of Ms. Le Pen’s policies are still not fleshed out. However, a French withdrawal from the EU would reduce the amount of EU development assistance which the region currently receives under the European Development Fund (EDF).

    But what about trade? Thanks to the Economic Partnership Agreement (EPA) signed between the EU and CARIFORUM in 2008, the countries which make up CARIFORUM (CARICOM plus the Dominican Republic) currently enjoy preferential market access for their goods and services to the EU market, including to the French market (and to French Caribbean Outermost Regions, by extension).

    However, should France leave the EU, it would no longer be a party to the EPA. On its own, the lack of preferential access to the French market would be unlikely to have any significant economic impact on the anglophone Caribbean trade-wise as the volume of trade between English-speaking Caribbean countries and metropolitan France is limited.

    There are, however, small but growing trade links between some CARICOM countries) and the FCORs, which are Martinique, Guadeloupe and French Guiana. Martinique, for example, is one of the most important source markets for tourists to St. Lucia. While there are issues which have inhibited greater CARIFORUM trade with FCORs including the language barrier and the ‘octroi de mer’ (dock dues) charged on all imports into FCORs (despite the EPA), the FCORs are also seen as stepping stones for exporting to continental Europe using the EPA. A French withdrawal from the EU if Ms. Le Pen wins means the latter will not be possible.

    It is the democratic right of the French populace to choose which of the two candidates is in their country’s best interests. However, given France’s economic and geopolitical importance globally, and the political upsets of late, the results of the final round on May 7 will reverberate far beyond its borders.

    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. You can also read more of her commentaries and follow her on Twitter @LicyLaw.