THE ECONOMIC PARTNERSHIP AGREEMENT (EPA)

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THE ECONOMIC PARTNERSHIP AGREEMENT (EPA)

• A Briefing for Parliamentarians
• Wednesday, June 25, 2008

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OUTLINE

• The Role played by Globalization Trade
  Liberalization in the Economic Growth
  Development of The Bahamas
• The ACP - an Overview
• Genesis of the EPA
• The WTO Challenge
• EPA Negotiations Framework
• Structure of the EPA
• Benefits
• Challenges
• Public Fears/Concerns
• Addressing Public Concerns
• Bahamas Trade Policy Going Forward

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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 _at_ some 60).
  Approximately 80 of total economy services
  driven.
• Agriculture, fisheries Domestic Manufacturing
  account for some 10 of GDP.

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GLOBALIZATION, TRADE LIBERALIZATION THE BAHAMAS

• Globalization and International Trade
  Liberalization have played a significant role in
  the countrys 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 1980s/early 1990s with
  formation of CSME, WTO, FTAA.

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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.

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AFRICAN, CARIBBEAN PACIFIC (ACP) COUNTRIES
Europe
Caribbean
Pacific Rim
African
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AFRICAN COUNTRIES IN ACP
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CARIBBEAN COUNTRIES IN ACP
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PACIFIC RIM COUNTRIES IN ACP

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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.

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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.

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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.

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EPA NEGOTIATIONS FRAMEWORK

• Mandated by Cotonou Agreement.
• Began in September 27, 2002 in Brussels.
• Scheduled to last 5 years.
• Negotiations conducted with six regions
• West Africa,
• Central Africa,
• East Africa,
• Southern Africa,
• The Caribbean as Cariforum (Caricom Dom Rep)
  and
• The Pacific.
• Deadline December 31, 2007.

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BAHAMAS PARTICIPATION IN THENEGOTIATIONS

• Bahamas Participation, as with other countries,
  has been at three levels
• 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-a-half.
• Region relied on Caricom Regional Negotiating
  Machinery (CRNM).

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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.

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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.

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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.

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STRUCTURE OF THE EPA
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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.

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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.

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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

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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.

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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

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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).

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BENEFITS

• Maintains the countrys 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.

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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.

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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).

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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)

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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.

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QUESTIONS