Economic and cooperation relations between Latin America and the Caribbean and the countries of the European Union: Status and prospects ahead of the II CELAC-EU Summit 2015 (Complementary Note) Extra-Regional Relations Regional Meeting to monitor and analyze the economic situation of the European Union and its impact on the countries of Latin America and the Caribbean Caracas, Venezuela 3 November 2014 SP/RRSASEUEIPALC/DT N 2-14/Add.1
Copyright SELA, November 2014. All rights reserved. Printed in the Permanent Secretariat of SELA, Caracas, Venezuela. The Press and Publications Department of the Permanent Secretariat of SELA must authorize reproduction of this document, whether totally or partially, through sela@sela.org. The Member States and their government institutions may reproduce this document without prior authorization, provided that the source is mentioned and the Secretariat is aware of said reproduction.
Economic and cooperation relations between Latin America and the Caribbean and the countries of the European Union: Status and prospects ahead of the II CELAC-EU Summit 2015 (Complementary Note) SP/RRSASEUEIPALC/DT N 2-14/Add.1 3 COMPLEMENTARY NOTE ON THE RELATIONS BETWEEN THE EUROPEAN UNION AND THE CARIBBEAN FOR THE STUDY ON LAC-EU 1. Background At the beginning of the new century, the economic and cooperation relations between the European Union and the Caribbean countries were governed by the system of preferences established within the framework of the Lomé Conventions and the Cotonou Agreement between the European Union and the Group of African, Caribbean and Pacific Group of States (ACP). Later on, as of the year 2008, a new era began for trade, investment and cooperation relations between the Caribbean and the European Union, when the special group of 15 Caribbean countries, created in 1992 to promote political dialogue, regional cooperation and integration between the two regions, signed the Economic Partnership Agreement (EPA) between the European Union and CARIFORUM comprising the Member States of CARICOM and Dominican Republic on 15 October 2008. For the members of CARICOM, this was the first really comprehensive North-South trade agreement. The main goal of the agreement is the promotion of trade, investment and cooperation for development in areas of common interest. It is also aimed at promoting the sustainable development of CARIFORUM by facilitating the development of exports and regional integration. Before this agreement, most of the exports from the CARIFORUM countries and, in general from the ACP countries, accessed the enlarged EU market free of custom duties. However, those preferences were subject to a unilateral and temporary treatment, whereas the new agreement establishes that the preferential access to the European market will be permanent. Moreover, exports from these countries to the EU tended to lose share in the European market. Therefore, the EPAs seek to establish a broad range of measures to help the ACP countries to expand their trade with the EU, among themselves and with the rest of the world. For example, it is known that these countries need to adjust their sanitary and quality standards to match those of the EU. For this reason, the EPAs include technical assistance and measures to promote technology transfers and to strengthen institutional capacities. In addition, the service and investment sectors have rapidly grown in recent decades. Thus, the EPA is expected to encourage Caribbean exports in the sectors of tourism, information technology and creative, such as the music and film industries. 2. The Economic Partnership Agreement The agreement covers three main areas: trade, political dialogue and cooperation for development. In addition to trade in goods, it includes trade in services, direct investment and other matters, such as innovation and development assistance. Its main objectives are: i. Gradually eliminate obstacles to trade between both regions. ii. Express support from the European Union to poverty eradication and search, on the part of the Caribbean, for a better way towards the accomplishment of the Millennium Development Goals (MDGs) and the future objectives of sustainable development.
Permanent Secretariat Extra-Regional Relations 4 iii. iv. Make strides with the dialogue on issues related to trade, such as promotion of free trade in goods and services, promotion and protection of foreign direct investments (FDI) and greater predictability and transparency of the legal framework of the Member States. Ensure support from the European Union to increasing competitiveness of Caribbean economies as well as cooperation in all areas. Two central aspects of this important agreement are: first, the consideration of asymmetries between the parties and, second, the fact that it is an instrument to revitalize commercial ties and investments for development purposes, as it provides for technical and financial cooperation from the EU to increase export capacity and promote foreign investment in the Caribbean. The treatment of the issue of asymmetries in the agreement comprises two fundamental instruments, namely: i) the asymmetric liberalization of investments and trade in goods and services; and ii) the promotion of cooperation and technical assistance. 3. Evolution of trade exchanges 1 At present, the European Union is the second largest trading partner of the CARIFORUM following the United States. Caribbean exports to European markets stand above 20% of all exports from the subregion and their growth rate is higher than that of exports to the United States. Also, exports from CARIFORUM countries to the new EU Member States in Central and Eastern Europe, which were virtually non-existent before the signing of the EPA, now account for almost 3% of total CARIFORUM exports. In 2012, trade between the parties reached 10.3 billion euros, with a trade deficit of 1,633 million euros for the Caribbean. Exchange amounts have remained relatively stable over the last decade, therefore neither the accession of new members to the EU nor the signing of the EPA have had a substantial on trade flows, as can be seen in the following table. CARIBBEAN-EUROPEAN UNION TRADE IN GOODS (Millions of euros) Year CAR-EU Exports CAR-EU Imports 2008 4,606 6,161 2010 4,217 5,661 2011 4,525 4,994 2012 4,326 5,960 Source: Eurostat, 2013. Exports of goods from the Caribbean to the European Union are concentrated on a very narrow range of articles. In most of the countries, the five main products account for 90% or more of total exports. Such concentration is lower in Dominica and the Dominican Republic, even though in both cases the first five products still account for more than 60% of shipments. The main export goods from the Caribbean to the EU are: fuels and products from mining (particularly gas and oil), bananas, sugar, rum, gold, corundum a mineral made up of aluminium oxide iron ore and fertilizers. The exports from the small economies of the Organization of Eastern Caribbean States (OECS) are 1 Source: Caribbean Export Overview of the CARICOM-EC EPA (2013).
Economic and cooperation relations between Latin America and the Caribbean and the countries of the European Union: Status and prospects ahead of the II CELAC-EU Summit 2015 (Complementary Note) SP/RRSASEUEIPALC/DT N 2-14/Add.1 5 concentrated on agricultural products directed to the European Union, particularly fruit mainly bananas other fruits and prepared foods. Meanwhile, the CARIFORUM countries import a great variety of goods with high added value from the EU, including industrial products such as medical equipment, electrical appliances, machinery, vehicles for transport of passengers, pharmaceutical products and medicines, plastics and consumer durables (printers and furniture, among others). Agro-industrial imports include alcoholic beverages, milk and cream, as well as canned vegetables. The main importing countries in CARIFORUM are the Dominican Republic, Jamaica, Suriname and Trinidad and Tobago, totalling 83% of total exports altogether. In the small economies of the OECS, more than one-third of imports are medicines and foodstuff, particularly milk, cream, cheese, meat and cereals. Among the countries of CARICOM, the main exporters of goods to the EU are: Trinidad and Tobago (54%), Dominican Republic (25%), Bahamas (10%), Suriname (9%) and Jamaica (8%). The countries of the OECS, along with Guyana, were the origin of 6% of the subregion s exports to the EU between 2011 and 2013. The European Union is one of the main export markets for Saint Lucia (57%), Grenada (33%), Saint Vincent and the Grenadines (31%), Belize (26%), Suriname (26%) and Jamaica (25%). Between 2011 and 2013, exports from the OECS to the EU dropped by 16%. Noteworthy were the export declines seen in Saint Lucia (69%), Saint Vincent and the Grenadines (31%) and Dominica (28%). Only Trinidad and Tobago, Guyana and Jamaica managed to post trade surpluses (UN COMTRADE Database). 4. Provisions on services The Caribbean is the only region in the ACP Group which is a net exporter of services. They constitute the bulk of exports in most Caribbean countries and generate resources close to 25% of the subregion s GDP. The most important segments in this category are: tourism which accounts for two-thirds of service exports transportation and business services. Therefore, increasing the access to the European markets for services was a priority for CARIFORUM countries. In this regard, the EPA covers trade in services through a classification into three groups: corporate presence, cross-border provision of services and temporary presence of natural persons. Public utilities and other sensitive sectors were excluded from the liberalisation. This has expanded the possibilities for temporary employment of Caribbean professionals in Europe, and the professional employees of CARIFORUM companies that are not established in the region or the contractual service providers may provide temporary services in dozens of economic sectors in the European Union. 5. Economic and technical cooperation The economic and technical cooperation of the European Union is supported by the European Development Fund for ACP countries. Through this mechanism, 165 million euros were destined to the Caribbean during the period from 2008 to 2013, with the purpose of transferring the "excessive dependence on exports of basic products to services" and improving their participation in the world economy. Added to this there are several bilateral funds for CARIFORUM countries, which are basically intended for programmes to foster competitiveness, governance, the public administration reform and development of infrastructure. It should be noted that before the
Permanent Secretariat Extra-Regional Relations 6 signing of the EPA, regional cooperation programmes stemming from the EU-LAC summits had not provided for the inclusion of the Caribbean. 6. Evolution of the commitments of the EPA Thus far, the main results of the Economic Partnership Agreement have been as follows: 2 i. Immediate access free from tariffs and quotas for Caribbean products to the European Union market. ii. Asymmetric trade opening in favour of Caribbean countries, which have up to 25 years to open up their markets to European imports. The Agreement allows Caribbean countries to prepare the sectors classified as emerging or sensitive to competition with their European counterparts. iii. Liberalization of trade in services. iv. Elimination of double imposition of duties. v. Promotion of cooperation. Caribbean exporters and countries have received support for capacity-building in various areas of the Agreement, particularly the necessary technical assistance to meet the international standards and technical requirements of trade, among others. The Caribbean business sector has identified the following difficulties in taking full advantage of the Agreement: Obtaining visas to enter the European market. The lack of data in the services sector. The poor interrelationship among complementary sectors such as tourism, culture, entertainment and sports. The high costs of production and transportation. The limited access to raw materials. The lack of transparency within the European market. Scarce direct contacts with international buyers. 7. Remittances and migration Apart from Spain, the other European countries also represent important sources of remittances to countries of the Caribbean, especially those that have significant economic and cultural ties: for instance, the United Kingdom with Trinidad and Tobago, Jamaica, Belize and Barbados; and the Netherlands with Suriname. However, those flows are reduced in comparison with those coming from the United States and Spain. Anyway, remittance flows continue to be an important source of foreign income in many of the Caribbean countries and account for more than 10% of the Gross Domestic Product in several countries, such as Haiti, Guyana and Jamaica. These flows also represent an important source of income for millions of Caribbean families who receive transfers to cover basic needs and invest in education, health, housing and small businesses. 2 CARICOM Secretariat. Office of Trade Negotiations. http:www.crnm.org.