THE ECONOMIC PARTNERSHIP AGREEMENT (EPA)

THE ECONOMIC PARTNERSHIP AGREEMENT (EPA) A Briefing for Parliamentarians Wednesday, June 25, 2008 OUTLINE 1. The Role played by Globalization & Trade Liberalization in the Economic Growth & Development of The Bahamas 2. The ACP - an Overview 3. Genesis of the EPA 4. The WTO Challenge 5. EPA Negotiations Framework 6. Structure of the EPA 7. Benefits 8. Challenges 9. Public Fears/Concerns 10. Addressing Public Concerns 11. Bahamas Trade Policy Going Forward GLOBALIZATION, TRADE LIBERALIZATION & THE BAHAMAS • The Bahamas is a middle-income ($20,000 GDP per Capita) developing country with a high Human Development Index Ranking. • It has an open, fixed-exchange rate economy the trade principally in international services (tourism & financial services @ some 60%). Approximately 80% of total economy services driven. • Agriculture, fisheries & Domestic Manufacturing account for some 10% of GDP. GLOBALIZATION, TRADE LIBERALIZATION & THE BAHAMAS • Globalization and International Trade Liberalization have played a significant role in the country’s economic growth & development, even though we had not formally signed onto any major trade arrangements (WTO, CSME, NAFTA, CFTA, etc.). • Invitations for formal involvement have been mounting since the late 1980’s/early 1990’s with formation of CSME, WTO, FTAA. THE EC- A.C.P. • An association established in 1975 with the signing of the First Lome Convention between 9 E.C. countries & 46 ACP countries. • The Bahamas was one of the original signatories. AFRICAN, CARIBBEAN & PACIFIC (ACP) COUNTRIES Europe Caribbean African Pacific Rim AFRICAN COUNTRIES IN ACP • • • • • • • • • • • • • • • • Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo-Brazzaville Congo-Kinshasa Côte d'Ivoire Djibouti Equatorial Guinea Eritrea • • • • • • • • • • • • • • • • Ethiopia Gabon Gambia Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Madagascar Malawi Mali Mauritania Mauritius Mozambique Namibia • • • • • • • • • • • • • • • • Niger Nigeria Rwanda São Tomé and Príncipe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Uganda Zambia Zimbabwe CARIBBEAN COUNTRIES IN ACP • • • • • • • • Antigua and Barbuda Bahamas Barbados Belize Cuba Dominica Dominican Republic Grenada • • • • • • • • Guyana Haiti Jamaica Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines Suriname Trinidad and Tobago PACIFIC RIM COUNTRIES IN ACP • • • • • • • • Cook Islands Timor-Leste Fiji Kiribati Marshall Islands FS Micronesia Nauru Niue • • • • • • • Palau Papua New Guinea Samoa Solomon Islands Tonga Tuvalu Vanuatu GENESIS OF THE EPA • EU & ACP Agreed a convention to provide Trade (agriculture & mineral exports duty free & sugar and beef quota access) and Aid • Lome I Convention between EC & ACP agreed in 1975 and came into force in April 1976. • Lome II Convention –Jan 1, 1981 – Feb 1985. • Lome III – 1985 – 1990. • Lome IV – 1990 – 1999 (Trade for 10 yrs & Aid & Investment for 5 years). • Contonou Agreement succeeded Lome Conventions. THE WTO CHALLENGE • The US Challenged the WTO compatibility of EU-ACP Pact, as violating MFN rule. • The Dispute Settlement Body of the WTO agreed. • The Cotonou Agreement agreed in June 2000- continuing preferential access for less developed countries & regional free trade with more developed countries. • WTO incompatibility continued to be raised. • EU applied for a waiver which was granted until December 31st, 2007 pending the conclusion of EPAs. WTO CHALLENGE • EU unwilling to maintain a 30-year old WTO-incompatible trade arrangement that is subject to challenge from their major global trading partners (US, Canada, etc.). • The Bahamas and others had to decide whether to continue in a relationship with the EU on new terms. • All agreed to negotiate on the basis of new agreement at Contonou. EPA NEGOTIATIONS FRAMEWORK • • • • Mandated by Cotonou Agreement. Began in September 27, 2002 in Brussels. Scheduled to last 5 years. Negotiations conducted with six regions: 1. West Africa, 2. Central Africa, 3. East Africa, 4. Southern Africa, 5. The Caribbean as Cariforum (Caricom & Dom Rep) and 6. The Pacific. Deadline December 31, 2007. • BAHAMAS PARTICIPATION IN THE NEGOTIATIONS • Bahamas Participation, as with other countries, has been at three levels: 1. 2. 3. Head of Governments (Set Overall Negotiating Objectives) Trade Ministers (Provide specific negotiation objectives) Officials (Provided input on goods and services schedules) • • Bahamas’ involvement limited for first 3 years, both in terms of presence & participation. Became much more active in last year-and-ahalf. Region relied on Caricom Regional Negotiating Machinery (CRNM). OBJECTIVES OF THE EPA • The objectives of economic and trade cooperation as defined in Article 34 of the Cotonou Agreement are to foster “the smooth and gradual integration of the ACP countries into the world economy… thereby promoting their sustainable development and contributing to poverty eradication”. OBJECTIVES OF THE EPA • Contributing to the reduction and eventual eradication of poverty through the establishment of a trade partnership consistent with the objective of sustainable development, the Millennium Development Goals and the Contonou Agreement; Promoting regional integration, economic cooperation and good governance thus establishing and implementing an effective, predictable and transparent regulatory framework for trade and investment between the Parties and in the Cariforum region; Promoting the gradual integration of the Cariforum States into the world economy, in conformity with their political choices and development priorities; Improving the Cariforum States’ capacity in trade policy and trade related issues; Supporting the conditions for increasing investment and private sector initiative and enhancing supply capacity, competitiveness and economic growth in the Cariforum region; Strengthening the existing relations between the Parties on the basis of solidarity and mutual interest. To this end, taking into account their respective levels of development and consistent with WTO obligations, the Agreement shall enhance commercial and economic relations, support a new trading dynamic between the Parties by means of the progressive, asymmetrical liberalization of trade between them and reinforce, broaden and deepen cooperation in all areas relevant to trade and investment. • • • • • STATUS OF THE EPA NEGOTIATIONS • Cariforum only region that concluded negotiations by deadline. • All countries of Cariforum, except Bahamas and Haiti, concluded negotiations on both goods and services. • Bahamas and Haiti given six months extension (June 2008) to present services offer. • Extensive consultations conducted with industry through Trade Commission. STRUCTURE OF THE EPA MAIN TEXT (common obligations) PROTOCOLS (Customs Cooperation, Rules of Origin, Culture) SCHEDULES (Goods, Services, Investment) GOODS SCHEDULE • All tariff lines except arms and ammunition placed in six ‘baskets’ that represent time for tariff to move from current level to 0. • Baskets - O, 5, 10, 15, 20, 25 • The ‘Excluded Basket’ contains the sensitive agriculture, fisheries and manufactured products. GOODS SCHEDULE • Important notes: – 40% of imports from EU enter duty free today; – 14% will be in excluded basket under EPA; – 46% to be liberalized over 25 years. • EU visible exports to The Bahamas amount to $60 million. • Bahamas exports to Europe amounts to some $x million. • Fiscal Impact estimated at some $6 million in loss revenue from total adjustment. BAHAMAS SERVICES SCHEDULE OFFER • Services Schedule offer is essentially completed, following extensive consultations with industry and was based on its development priorities • Bahamas as a More Developed Country (MDC) is expected to cover 116 of the 155 service sectors, which it has done. • Service sectors include financial services, computer and related services, research and development, telecommunications, environmental services, tourism and travel related services, recreational, cultural and sporting services, transport services, other business services BAHAMAS SERVICES SCHEDULE OFFER • For each service mode defined by U.N. Codes, four modes of operation possible: – – – – Mode 1 – Internet trade Mode 2 – Cross border trade – tourism Mode 3 – Commercial Presence – banks Mode 4 – Temporary Entry of Worker for Business Purpose. • For each mode in each service, commitment made as to: – None – open – Unbound – Subject to Bahamas rules • For the most part, reflects the current National Investment Policy with respect to commercial presence. INVESTMENT SCHEDULE • Investment in five non-service sectors: – – – – – 1. agriculture, hunting and forestry 2. fishing 3. mining and quarrying 4. manufacturing 5. production, transmission and distribution on own account of electricity, gas, steam and hot water BENEFITS • Preserves trade relations with a longstanding partner and the largest cohesive economic block in the world (EU) with huge tourism, financial services and inward Direct investment potential. • Maintains open, transparent and defined lines of trade communications with an area of the world sensitive to our financial services sector. • Protects & Preserve existing market access (fisheries, rum etc.) to the worlds second most lucrative market (EU). BENEFITS • Maintains the country’s competitive position vis-à-vis other Cariforum states as destination for EU investment. • Provides platform to enhance or development new visible and invisible exports for the European market (financial services, cultural services, computer services etc.). • Offers access to almost $200 million in trade development funding. DOMESTIC FEARS/CONCERNS • Potentially open up certain sectors to competition through “Right of Establishment”. • Might be viewed as an attempt to lessen the sovereign right or self determination by “Promotion of Regional Integration”. • Anticipates free movement of people through “Temporary Entry of Workers”. • Rushing decision. • Not enough public education. RESPONSE TO PUBLIC CONCERNS • Only sectors identified by the Government and agreed by the private sector would be open to foreign competition. Proposal is to let the status quo prevail for the most part. RESERVATIONS ARE PERMITTED. • Wholesale and Retail Trade closed, which covers many of the shop operators. • All of the previous agreements with the EU had regional integration as a long standing goal and this agreement states that the pace and content of regional integration is a matter to be determined exclusively by the Cariforum States in the exercise of their sovereignty and given their current and future political ambitions (Article 4.4). RESPONSE TO PUBLIC CONCERNS • Temporary entry requirements specific to business purposes and key personnel, graduate trainees, business services sellers (Article 80), similar to existing work permit policies in Bahamas. • The negotiations commenced in 2002, deadline for concluding negotiations set more than six years ago. • While sector consultations have been intense over the last six months, general public education limited. • Efforts ongoing to improve same. • AGREEMENT HAS DENOUNCIATION CLAUSE WHICH TAKES EFFECT SIX MONTHS AFTER DENOUNCIATION (Pt VI, Article 12.2 & 3) TRADE POLICY GOING FORWARD • More strategic approach to trade policy development.. • More deliberate engagement in international trading system. • Execute WTO membership accession • Better organization for continued trade review, policy development and negotiations. • Increased capacity building. • More structured private/public dialogue on trade matters. • More support for export trade development. QUESTIONS