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Challenges expected for Carib countries adopting the EPA
published: Sunday | January 6, 2008

David Jessop, Contributor

Every nation and culture has a knowledge of where it has come from, an awareness of shared experience and a sense of its place in world.

In the Caribbean, history and smallness have distilled and elevated this into an often intense requirement for ownership and a constant and passionate defence of national identity and sovereignty.

But if this reflects where the region and its people have come from, the future, save for a desire for economic growth, stability and greater social equity, is less than clear as both geography and history are set aside by economic globalisation and governments become less able to isolate any state from external shocks or global realignments.

What is surprising is how little has ever been written in either context about the economic partnership agreement (EPA) between Cariforum and Europe that was concluded in December after three and a half years of negotiation.

Taken at face value, the EPA is simply a trade agreement with a somewhat less-than-clear develop-ment dimension.

But in the context of history it presages a change of direction for the Caribbean.

It is based on an assumption - some might say a vision, others a gamble - that the region as a whole has the confidence and ability to abandon past thinking and rise to the challenge of what has been agreed.

In essence, the EPA accepts that protection, preference and subsidies cannot be sustained; that Caribbean nations, no matter how small, have to compete globally; that the basis for doing so is services and a restructured agricultural economy; that future success requires an economically integrated region that sets aside historic, cultural and linguistic boundaries; that a spur or catalyst for change will be the threat of opening Caribbean markets to European and other companies within 25 years; and that the Caribbean has the latent ability to compete in Europe and generate new sources of wealth that will be repatriated.

In pursing this approach, the independent region as a whole, save Cuba, has agreed to formally embrace market-based economic policies and in effect, the principles of the 'Washington Consensus', and intends to adapt every Caribbean economy accordingly over the next 25 years.

While this may be little more than a public endorsement of what for a decade or more many Caribbean politicians, the region's larger enterprises and some academics have accepted as inevitable or essential, it is still strikingly at odds with the thinking and lifestyles of many millions of the region's people.

Let me make clear that this is not a criticism of what has been agreed, but points to the massive philosophical and logistical challenge that many of the nations of the region, large and small, have set themselves in rapidly adapting national thinking to the economic, fiscal and by extension, social implications of the EPA and market opening.

In remarks made nationally, shortly after the EPA was agreed, the Prime Ministers of Barbados, Jamaica and St. Lucia, the President of Guyana, and the director general of the Caribbean Regional Negotiating Machinery all recognised the challenge.

Caricom Secretary General Edwin Carrington warned that the free entry of European goods into the regional market was 'something never experienced before' and a precursor to similar arrangements to come with products from the United States, Canada and others.

"The one sure answer we have is to achieve a massive increase in our productivity and therefore our competitiveness. This is the clear unvarnished message we have to convey."

The successful delivery of the EPA requires a kind of faith as future economic success will depend ultimately on the ability of the region's private sector to compete in its own markets with European suppliers and service providers. It also requires them to develop their services and products inside the European market.

Will thrive in this environment

Arguably, regionally owned transnational companies such as Angostura, Goddard Enterprises, GraceKennedy, Jamaica Producers, Demerara Distillers, or Brugal and the Vicini Group in the Dominican Republic, which have already invested within and outside of the region, will thrive in this environment.

So, too, will newer export industries, such as those in tourism, financial and cultural services.

But significantly less certain is whether the region's many very small enterprises that survive on commission, agency agreements or the provision of nationally protected services have either the willingness or ability to compete.

While this suggests consolidation through mergers or acquisitions across the region, and takeovers by European firms, it is far from clear whether governments or citizens are yet ready to accept this.

Just as uncertain is whether the CARICOM Single Market and Economy can rapidly be made to function efficiently and in line with the pace of market liberalisation that has been agreed with Europe.

The EPA also demands that government actively encourages business to flourish and to provide a positive enabling environment that will result in increased profitability and thus, increased government revenues to replace lost import duties.

This is happening in some nations but throughout much of the region, public sector reform is painfully slow and seems not as yet to have incorporated an awareness that government's future role will be to loosen the constraints on commercial activity while regulating lightly to ensure that consumers are not exploited or disadvantaged.

Europe, too, has to change. It can and may well cause the EPA to fail through political neglect.

Previous politically endorsed economic agreements involving development assistance have proved disastrous in their implementation because the European bureaucracy seems incapable or unwilling to provide support within agreed transitional time scales.

Moreover, the lack of empathy with the region shown by European commissioners during the negotiations and the political enmity this engendered does not augur well for resolving difficulties that will undoubtedly arise in implementation.

It is also far from certain that European business will see non-services opportunities in the region as attractive enough to want to compete or invest and thus, spur change.

The EPA challenges the Caribbean to change the way it thinks about itself and to craft new programmes of public education, an entrepreneurial spirit and new thinking.

Above all, it requires the region within 25 years to become a genuinely integrated and homo-genous whole without distorting polarities.

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