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Sunday, December 21, 2008

In response...EPA and it's implications!

A letter was sent to me by a colleague of mine from a community organization I had worked with some time back, asking me about the EPA (European Partnership Agreement) and the Caribbeans' position and more particularly, the implications of the agreement in the region. I had to put on my trade and development cap this time and give her a bang for her buck--with respects to the length of the response.

I would have to say that the Caribbean community, at least the Caribbean governments, are in favour of the EPA and were in favour from the onset-- except for President Jagdeo of Guyana and the Haitian government in regards to services.

President Jagdeo was reported saying that he did not want to sign the agreement, without a revision clause, which allows parties to revise the agreement after a certain period. The Haitian government, did not feel it as the right time to sign the services agreement of the EPA and maintained their position with "goods only" access and participation. The Bahamas took a similar position, but is expected to sign the full services and investments agreement of the EPA, with Haiti, still unclear and most likely will not be signing the services and investments portion of the agreement.

Notice I said "services" and "investments". There are three parts, for all intents and purposes.

So, the first question is answered-- to some extent. However, the question still remains- and it is funny that it is being asked at this late stage- is; what are the implications of the EPA in and on Caribbean countries?

To start things off, and I want to make clear that the entire ramifications of the EPA cannot be expounded upon in this one short article, but, I will try to touch on the more salient points of the issue that were widely discussed.

I want to say- now at the onset- that I am by no means being cheeky with this following remark in saying that many of the folks who were responsible for negotiating the agreement, don't quite fully understand the implications, themselves. Not to rail on anyone for them taking that position post "negotiations", because, many of the issues are a little far off of the economic forecast radar. However, there was not as much desired intent of signing the agreement from the Caribbean side of things, which spoke loudly and boldly to a particular policy direction, for best interest overall, moving forward with the progress of the implementation of the EPA, over that of what they were told to do by a select few Caribbean "negotiators" and the EU Trade Department.

The politics of this, is important to understanding why, fundamentally, we are at this stage of the issue.

I have heard government ministers and, even senior Caribbean Regional Negotiating Machinery (CRNM) personnel involved with the negotiations of the EPA, say that they are either troubled with the lack of policy coherence on the matter, in regards to national governments and their electorate. And, secondly, many feel as if the EPA was adopted, carte-blanche, by the region, with most of the issues for critical concern left up to European advisers.

I think that it is patently obvious that the EPA was given to the ACP (African, Caribbean and Pacific) countries, with little or no input from them. It's the colonial thinking by us, primarily and, the lack of true understanding of complex issues like international trade and finance. To their defence, if anyone were to tell you that they understood all there is to know about the issues, they would be a bold face liar. I won't lie to you in this article, from what I see and what is happening.

Even that is still not the issue, primarily, however. The issue is, yet again, what does this mean for business in the Caribbean?

Well, to begin to answer that question, one would seriously have to look at one's self and come to some conclusion on the matter--it's the best bet. Sadly, the few folks who do know how to analyze the issue from an economic and political standpoint, are few and far between. There is simply no room for economists, to make decisions on the economy. And, politics, is left up to the folks and how that is affects their bottom line--that does not mean that anyone, understands the issues any better than the other.

To be on the bright side of all of this, I would have to say that there are opportunities for business, as freer trade normally provides. However, there are issues that national governments, must be careful of in light of business, on the way their local policy affairs are impacted. And, also, where exactly are these opportunities and for whom will it benefit?

This leads me to a train of thought on the matter, which has been a major talking point and concern for regional governments on this issue; and that is, the EPA, and, international agreements like the EPA, would force much needed modernization in their respective national governments. Not exactly an economically based answer in regards to the bottom line dollar's and cent's. But, it is true.

While that seems pessimistic and dire, while at the same time, refreshingly honest in that they too see the need to modernize and admit that they are in a state of ubiquitous disillusionment on the matter of their respective governments, leading the modernization and policy reforms on their own. And, while I appreciate their candor, one can only help to think that, perhaps, the EPA would be fast tracked to save regional officials from themselves.

But, there is more at stake than just a few self deprecating government officials and negative Nellie's, allowing for us to to go on and swallow, or, spit, a full scale sweeping agreement, which, as it stands now, has neither a heads nor tails of the coin from their position and from their own admission, on the lack of true business interests representation and a coherent trade policy directive. How do we lead this region to a path of prosperity through this model?

I wrote in an article on my website "Global View Today" and published in the Caribbean Net News (which prompted a letter by the concerned reader and hence, my reply); "Negotiating Trade in Developing Countries", which touched on the same issues of lack of policy coherence on trade matters, from the perspective of persons, who are leading the negotiations, having no clear and direct ties to local business or international business. This is a serious issue and I encourage you to look for the article, and give us your thoughts. Not that we are bashing anyone, but, people have a right to understand what folks got us into. It's only fair. Tells us what you did and for why? Better yet, give us different answers and say it in a way folks understand.

Now, for me, personally, I am no protectionist. I too am in favour of international cooperation. Not the EPA in particular, or exclusive of the EPA in particular. But, international cooperation, which is fair and, at the same time, meaningful.

This leads to the second and more fundamental concern about the EPA, which I feel has not been addressed, if, at all. The issue is what's in it for business and the bottom line? What's in the bag? What are the long term projections and analysis, of expected trade growth, investment growth in goods, intellectual growth in services and the long term effect of increased investments to the region, from other states in the agreement. The investment side is critical, as it was never addressed as services, were--as lightly as the services issue was. Show us how the agreement, will affect that bottom line with projections in true analyzable and actionable data. I think many would be hard pressed for that answer.

These answers should be left up to officials, who would have to share with us the information--if they can--and not from folks, looking from the outside in. One can only- through reading the material on the agreement- make up your own mind--if you have SPSS, Stata, RATS or even Exel, do your own quantitative and then, make a geographical comparison on economic and political viability, for yourself or your organization.

In regards to the quantitative, discussing taxes is an obvious, albeit, major concern. Analyzing the phasing rate's is too simplistic. But, there are a few serious issues, which takes experience to give us a fairer description on what's happening around the world as well a for us, as a region and a people, to take a paralactic approach to the issue and look at it from someone else's position using a totally different approach.

To give one example, there is an expected/projected increase in investment in government procurement coming to the Caribbean region, as opposed to the African states, who have more natural resources and can prop up their economies, without government capital spending plans. While they too need "aid for trade", they have other fish to fry and the Caribbean, as arid as our lands are in many regards and as barren is our mineral reserves, have to be careful of the corruption that can come as a result of that reality.

Also, the much vaunted sugar issue for the Caribbean as an export to the EU, has been hit with import quota's to the EU--which, in some extent, negates the potency for trade growth in that particular area, directly. It implies that, yes, you can have a reduced tariff rate access to the EU, but, you can only sell us so much. Not an ideal deal. Many analysts would tell you that no agreement is all fair, but, this makes this agreement seem as a wasted effort and well beyond less than fair--if the issue you go on for a campaign for, is hit with greater restrictions for trade and development growth, it makes the agreement, seem dangerous to the gains in development in the region.

Also, in regards to fisheries- another big commodity issue- is that there is a high demand for our fish--signing an agreement for the sake of saving the industry, from a regional perspective, just got us an agreement which cut our bottom line from the economic power it once had. That is not profit driven economics, at all. You would have thought that an export restriction, would have given an incentive to drive up the price. Apparently, some folks thought otherwise.

There are a few other issues for local importers and businesses in general, in regards to MFN status. They would most certainly have to compete with foreign companies and, considering the lack of policy instruments for safeguards in the CRNM's arsenal of intellectual capacity (or at least it has not been displayed, as yet), they will be given a free ride access to come in--basically, nothing much would change and something, which the EPA proponents suggested would be a dramatic change in modernization and moving from the "old way" of doing business. More FDI and little or no stopping it.

More importantly however, with the idea of investments, there would be a legalized influx, something in which we have to determine the long term aspects of development; labour capital; technological modernization; loss in domestic advantage, which would have implications for local politicians and; long term national and international debt, tied to foreign direct investments, we have no control over and a host of other issues, to lengthy to explain, in regards to this article. At least, tell us where do you see the benefit in this regards. I have my own ideas, but it is not up to me to make these determinations.

So, while we have to participate in this EPA exercise and, while regional governments say that they don't have to agree with anything in the agreement. The fact of the matter is, they did. Also, the other fact of the matter is that they did not have a sound hand in negotiating the marginal, or, broad term benefits that the EPA had the potential for. They left that up to the EU, as well.

Same issue is in regards to services, the issue which had everyone on baited hook, but will have as much impact on services in the region, as it always had--foreigners, with high qualifications, will have the same and even greater access to the region. That's globalization. However, what will national governments do, to educate and train their people? Also, how does this EPA address that? Especially from a major technological base of intellectual capacity, Europe? Unaddressed, as so many of the issues--unaddressed for established professionals and for prospective students in the region.

In my opinion, and it is disheartening to say this, is that this agreement would be a wasted effort, if not for the EU and their commitment to development in the developing world--as hypocritical in their positions as they have been in the past, markets are reigning supreme in the sense of stabilized markets. Not the same old "prop up a dictator" style of global leadership.

Also, in addition to that, this agreement would be totally botched, if the EU did not see long term growth potential for investments in the region, in order to sustain foreign markets for their goods--something, which was not taken into consideration with MFN treatment issues on foreign competing firms, in regards to goods trade, offsetting themselves due to the widening of the scope to a select group of countries, impacting the concentration of the revenue gains, in very many different ways.

To be fair, and to be refreshingly blunt again, is that the minute I got the first initial text of the agreement and, noticed the reaction of folks who were actively involved in the arrangement, I quit looking into it as its signage, as it was, was only a matter of time and that does not mean that its signing, was a particularly healthy endeavour. As a matter of fact, what I read had me a little concerned about the level of seriousness about the implications folks who were dealing with it, had for the region.
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