SPECIALOFFICE OF TRADE NEGOTIATIONS                   … for trade matters                                                 ...
2As far as the architecture and objectives are concerned, with                            The EPA vs. The AAemphases on as...
3Differences in Approach to Cultural Cooperation                                         way of example, in addressing the...
4extended to the Protocol on Cultural Cooperation. Both the EU                            Convention and to cooperate with...
5Appreciating the value of advantage                                                       Indication (GI) protection for ...
6                                                                                         CARIFORUM States (taken together...
7                                                                          8OTN UPDATE is the flagship electronic trade ne...
Upcoming SlideShare
Loading in …5
×

OTN Special Update (Capitalizing on Advantage – EU-Central American Agreement with the CF-EU Economic Partnership Agreement )

345 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
345
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
1
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

OTN Special Update (Capitalizing on Advantage – EU-Central American Agreement with the CF-EU Economic Partnership Agreement )

  1. 1. SPECIALOFFICE OF TRADE NEGOTIATIONS … for trade matters OTN Update May 26, 2011 Cap italizing on Adva nta ge: A co mp ariso n of t h e EU - C ent ral A merican A sso ciat io n A greem en t with t h e C arif o ru m- EU Eco n o m ic Part n ersh i p A g reem en t ( EPA ) On March 22, 2011, just shy of one year after to its competitiveness of the Central American economies completion, the European Union (EU)-Central America through trade. Association Agreement (AA) was initialled by the EU and participating Central American countries, namely Costa Rica, For the participating Central American countries, the El Salvador, Guatemala, Honduras, Nicaragua, and Panama. Agreement makes available improved market access to a wider range of products than what is available at the The Agreement gives legal expression to a new framework multilateral level or under the EU’s Generalized System of that will guide the context of economic, social and political Preferences (GSP). This improved access has been dialogue and cooperation between the EU and Central extended to agricultural products of particular significance America.1 In this regard, the Agreement is arranged in three to their economies such as bananas, the market access of primary sections addressing specific components of the EU- which several Central American countries have gone to Central America relationship, namely Political Dialogue, considerable lengths to expand at the multilateral level. 2 Cooperation and Trade. With respect to the Trade pillar of the AA, the provisions are aimed at establishing an advanced FTA that facilitates reciprocal albeit gradual liberalisation of trade in goods and services, investment, public procurement, the protection of intellectual property rights, cooperation regarding competition and trade defence instruments, trade facilitation and a dispute settlement mechanism. At the same time, the provisions take into account the asymmetry in development between the two The negotiations for an European Union (EU)-Central American regions and therefore include EU support measures to Association Agreement (AA) was concluded on May 18, 2010. promote changes in the productive sectors and the OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org
  2. 2. 2As far as the architecture and objectives are concerned, with The EPA vs. The AAemphases on asymmetry, support mechanisms and built inflexibilities, the AA is not that different from the CARIFORUM- Illustratively, in the case of goods trade liberalization, ratherEU Economic Partnership Agreement (EPA) in general terms. than providing immediate duty-free-quota-free marketTo improve their market access and competitiveness within the access for all goods as is the case for CARIFORUM goodsEU markets and wider international market, these agreements under the EPA, the AA liberalizes 91% of EU tariff lines,can be of strategic utility to the respective developing regions, equivalent to 87% of Central American exports to the EU.which share characteristics and circumstances that constrain Provision has however been made for a gradual reductiontheir growth and development. of the remaining tariffs. For Central America’s part, at the point of implementation, there will be a requirement for the immediate full liberalization of 48% of tariff lines forBoth regions still struggle to varying degrees with low products from the EU, equivalent to 67% of total trade.standards of living, comprising low incomes, high inequality, Within 10 years, 92% of tariff lines will be removed, equal topoor health and inadequate education; low levels of 95% of trade.3productivity; high and rising levels of unemployment andunderemployment; and significant dependence on agricultural In contrast, the EPA has more flexible CARIFORUMproduction and primary product exports. However, the contexts phasing requirements for the liberalization of goods.within which the two regions deal with such development Furthermore, quite a number of tariff lines have beenchallenges are very different and affect their interface within excluded from liberalization. In this regard, the asymmetrythe global economy. between CARIFORUM and the EU is more deeply accommodated than under the AA. While the EPA requiredCentral America’s relatively larger size presents complexities a 52.8% reduction of tariffs on goods imported from the EUto it as a region but, at the same time, offers the benefits of from January 1, 2009, the removal of these tariffs hadrelatively large markets, a wide range of resources, and the negligible impact on revenue as most of the relatedpotential for self-sufficiency and economic diversity. In products faced applied rates of 0% or close to 0% prior tocontrast, for the developing island states of CARIFORUM, the the conclusion of the EPA. However, in 10 years tariffs willinverse applies. While smallness can present certain be removed from only 61.1% of goods imported fromadvantages, it also advances specific and arguably unique Europe. CARIFORUM also has been given up to 25 yearsvulnerabilities associated with relatively limited markets, to eliminate tariffs that will take the total level ofshortages of skills, scarce physical resources, weaker liberalization to 86.9%.bargaining power and influence within the global stage, andlimited prospects for economic diversification. Both the AA and the EPA also feature provisions on Cooperation. Under the AA, the provisions on cooperationThe full architecture of the EPA, supported by the background between the Parties address a range of developmentof the region’s historical relationship with the EU, especially issues within the scope of the agreement, including humanwithin the context of the Cotonou Agreement, is designed to rights and democracy, social cohesion, and thetake account of and help to ameliorate the region’s unique preservation of justice and freedom. The EPA centrescomplement of trade-related development challenges. With its development cooperation on trade related developmentmarked emphasis on (i) the infusion of development issues alone because the EPA is but the trade componentcooperation, the scope of which is far reaching and addresses of the Cotonou, which addresses the full ambit ofsupply side constraints as well as capacity constraints which cooperation under the ACP-EU bilateral relationship. Theimpede the region’s trade competitiveness and potential for agreements’ provisions on development cooperation witheconomic growth through trade; along with (ii) its liberal market respect to trade are albeit similar. However, there areaccess in services as well as in goods to the EU market; and important differences. These differences can be seen, by(iii) the inclusion of asymmetrical reciprocal liberalization way of example, in the way that cultural cooperation hasCARIFORUM obligations, the EPA, relative to the trade been addressed under the two agreements.chapter of the AA, goes much further. OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org
  3. 3. 3Differences in Approach to Cultural Cooperation way of example, in addressing the Parties’ commitments to collaborate in order to improve the conditions governingCultural and creative industries are of interest to developed their exchanges of cultural activities, goods, services andand developing countries alike. Importantly, these are also address imbalances which exist, the EPA, in contrast to theproductive areas in which many developing countries may AA, applies a stricter requirement. That requirementhave comparative and competitive advantage, the value of obligates the Parties to collaborate rather than towhich is underscored within the context of the emerging endeavour to collaborate. In that regard, the distinction is aknowledge economy cum creative economy. subtle albeit important conveying of the emphasis and depth of the ambition of the Parties.For this reason, securing effective market access and otherrelated trade support to facilitate the development and With respect to the level of ambition regarding sectoraladvancement of cultural and related industries is an important cooperation, there is also an important difference betweencomponent of the Caribbean region’s external trade policy. In the Protocols. Regarding audiovisual sectoral cooperation,the EPA, CARIFORUM pursued and secured market access, the EPA Protocol speaks to the facilitation of co-producedfor example, for its contractual services suppliers (CSSs) audiovisual works. CARIFORUM secured provision for co-under entertainment services other than audiovisual services, produced audiovisual works to access the EU marketthat was superior to the access afforded by the EU under its through the EU’s preferential scheme concerning theGATS commitments. Access for CSSs in Chef de Cuisine provision of audiovisual media services within the single EUservices and Fashion model services has also been secured.4 market as outlined under the Audiovisual Media ServicesHowever, CARIFORUM has also been a demandeur of the Directive (Directive 89/552/EEC).6 When similarinclusion of cooperation commitments as have been outlined preferential schemes are established within CARIFORUM, itwithin the Protocol on Cultural Cooperation under the EPA. is expected that CARIFORUM will also extend theSuch commitments were considered important to buttress associated preferential market benefits to co-producedCARIFORUM’s market access commitments for services and audiovisual works.goods related to the cultural and creative industries, and tostrengthen sustainable creative industries and cultural While the Protocol on Cultural Cooperation of the AAdevelopment. commits the Parties to facilitating access of co-productions, it does not explicitly afford such access through EU orGiven the importance of culture and creative industries to the Central American preferential schemes. CARIFORUMEU as well, the inclusion of provisions on cultural cooperation states have a distinct advantage relative to the Centralhas been consistent with its approach to integrating culture in American countries regarding the way market access of co-its external relations, including its bilateral trade relations. It is production audiovisual works will be treated within the EU.therefore not surprising that the EU has agreed to trade It should be noted that this type of treatment under the EPAinstruments such as the EPA and the AA, which feature cultural Protocol has been subsequently criticized by theprovisions on cultural cooperation.5 The themes addressed French Government as facilitating a de facto reintroductionunder the provisions are similar and include provisions on of audiovisual services into trade negotiations.7cultural exchanges and dialogue, technical assistance, the Appreciating that the audiovisual sector is regarded asfacilitation of entry and temporary stay of cultural sensitive by the EU and, for this reason, has been excludedprofessionals and practitioners, and cooperation on specific from liberalization, the significance of this gain forcultural and creative sectors including audiovisual, performing CARIFORUM under the EPA therefore looms large.arts and publications. However, important differences in thenuancing of the provisions distinguish the EPA Protocol from Another area of difference relates to the way in whichthe AA Protocol specifically. problems associated with the Protocol regarding for example, its interpretation or implementation will beBoth Protocols in large measure utilize ‘best endeavour’ resolved. As reflected in Article 250 of the EPA, all thelanguage to convey the extent of the ambition of the components of the EPA, including the Annexes andcommitments of the Parties. To be sure, best endeavour Protocols are to be regarded holistically. The disputelanguage does not nullify the obligation of Parties to operate settlement provisions which address the EPA are thereforein good faith and to try to honour commitments. However, by OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org
  4. 4. 4extended to the Protocol on Cultural Cooperation. Both the EU Convention and to cooperate within a framework that buildsand CARIFORUM can rely on and defer to a transparent and upon the principles of the Convention. Taking these factorspredictable mechanism to resolve disputes which may arise under consideration, the rationale for the attachment ofrelating to the implementation and or interpretation of the conditionality in the context of the AA but not within the EPAProtocol. Furthermore, there is an institutional framework context therefore seems curious.provided under the Agreement to address implementationmatters, including those related to the Protocol. The rationale may stem from the criticisms of the EU cultural cooperation model articulated by the French GovernmentThe AA, on the other hand, explicitly exempts its Protocol on following the conclusion of the EPA as alluded to previously.culture from the scope of the dispute settlement provisions of The French Government recommended a list of guidingthat Agreement. Inferring from the preamble of the Protocol, principles for the negotiation of Protocols on culturalwith respect to the management of the Protocol’s cooperation. That list included a recommendation to secureimplementation, it appears that reliance has been placed upon commitments within such Protocols that would emphasize thethe functioning of the Agreement’s Institutional Framework. centrality of the UNESCO convention. Such commitmentsUnder that framework, for the purposes of addressing the included the attachment of conditionalities on the applicationimplementation of the Protocol, provision has been made for of the Protocol.12 It is not surprising that the approach adoptedthe establishment of a Co-operation Sub-committee that with respect to the AA Protocol reflects the recommendationshould comprise officials with competence in cultural matters of the French government.and practices. However, regarding the resolution of disputesspecifically, it is not clear what mechanism will be used or the Making the application of the Protocol contingent on the entryextent to which such mechanism will be transparent or into force of the AA may have been linked to the preservationpredictable. of other EU interests. The objective may have been to ensure that the facilitation of the application of the Protocol did notThe EPA also does not attach any conditionalities to the deter the Central American countries from fulfilling theirapplication of its Cultural Protocol. The application of the obligations to effect entry into force of the rest of the AA. EntryProtocol is considered to be effected by the provisional into force of the AA would facilitate cooperation on otherapplication of the Agreement.8 However, the AA requires matters that would be of particular interest to the EU such asunder its Protocol that the application of the Protocol between cooperation on the prevention of financing of terrorism andthe EU and each Central American Party must be preceded by money laundering.the ratification of the UNESCO Convention on the Protectionand Promotion of the Diversity of Cultural Expressions by the The fundamental point is that the exclusion of conditionalityCentral America Party. Furthermore, if the deposit of regarding the application of the Cultural Protocol under theinstruments of ratification of the Convention is completed by all EPA has facilitated an unfettered opportunity for culturalthe Central American countries prior to the completion of practitioners within CARIFORUM to benefit from therequirements to facilitate the entry into force of the Agreement, provisions. In contrast, recognizing the time lag that may passthe provisions of the Protocol will apply from the date of entry between the initialling of the Association Agreement, theinto force of the Agreement . ratification of the UNESCO Convention by each Central American country, and the entry into force of the Agreement,At the time of the completion of the AA, the ratification of the it is difficult to discern when cultural practitioners from theUNESCO Convention was not complete amongst the Central Central American states will be able to access the benefits ofAmerican countries and the conditionality seems to have been the Protocol.directed at ameliorating this.9 Furthermore, it would appearthat for the EU, facilitating the centrality of the UNESCOConvention is regarded as hallmark objective of theestablishment of Protocols on cultural cooperation.10However, only eight of the CARIFORUM countries haveratified the UNESCO Convention.11 At the same time, thepreambular text of both Protocols refers specifically to therecognition of the Parties’ intent to implement the UNESCO OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org
  5. 5. 5Appreciating the value of advantage Indication (GI) protection for its bananas.14 While the resources, time and investment utilized to realize this mayAs seen in the above illustrations, with more favourable have been considerable for a developing country like Costapreferential treatment accorded to CARIFORUM under the Rica, by effectively developing and exploiting the value of theEPA than Central America has been able to attain under the GI, Costa Rica will improve its chances of more successfullyAA, CARIFORUM can have an advantage over its Central quality differentiating, branding and marketing its bananas,American competitors in dealing with the development of its thereby expanding its revenue and total market share withintrade competitiveness. As alluded to, the advantage was also the EU market and beyond.facilitated by the early provisional application of the EPA whichhas allowed the CARIFORUM region to exploit the preferential This action by Costa Rica looms large for CARIFORUMaccess to the EU market prior to the entry into force of the countries as an example of appropriate adaptation andEPA. In the case of EU-Central American Relationship under response to global competition. CARIFORUM shouldthe AA, while the agreement has been initialled, it is not clear therefore not only exploit its preferential market advantageswhen it will be signed by the Parties or when it will enter into but should also continue to pursue, with alacrity, theforce. Furthermore, although the Agreement provides exploration and use of a myriad of other adaptation tools toarrangements for provisional application of the section on improve its own global competitiveness.Trade prior to entry into force of the AA, it is not clear when thelegal procedures necessary for this purpose will becompleted.13 ******************CARIFORUM, relative to Central America, will thereforecontinue to have an advantage but only for a time. The valueof the advantage will only be realized through capitalization.Furthermore, the overall value of its preferential regime withthe EU will progressively change and diminish over time as theEU pursues and completes additional free trade agreementswith other countries and regions from across the developingand developed world. Additionally, progressive liberalization atthe multilateral level will also erode the value of bilateralpreferences.However, the key to economic growth and developmentthrough external trade in part resides in entrepreneurialexpansion and increased development in export interest andreadiness amongst the private sector. Without these, it will bedifficult to capitalize upon any advantages facilitated throughpreferential trade agreements.It should also be noted that Central American countries, suchas Costa Rica have shown signs of exploiting available toolsand initiatives which are not conditional to the establishment orimplementation of a trade agreement, but that can be used toimprove their competitiveness in export markets, including theEU market.For example, with respect to the banana industry, a sector ofimportance to CARICOM countries and some CentralAmerican countries, Costa Rica has secured Geographical OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org
  6. 6. 6 CARIFORUM States (taken together) shall not be less than 20 perENDNOTES cent and not more than 80 per cent of the total production cost.___________________________________________1 The Association Agreement replaces the 2003 EU-Central 7 See “For a new European Union external cultural strategy –America Political Dialogue and Cooperation Agreement Communication by France”. The Document is available at:2 http://www.coalitionfrancaise.org/eng/wpcontent/uploads/2009/1 In 1996, the U.S. and a group of Latin American banana 2/comm_fr_strat_culturelle_ext_eng.pdfproducing countries, including the Central American republics ofEcuador, Guatemala, and The Honduras, pursued legal action at 8 Provisional Application of the EPA was effected on 29 Decemberthe WTO against the EU preferential regime for the importation 2008. Provisional application would be relevant to the provisions ofof bananas. The ensuing bananas trade war persisted for over a the entire Agreement with the exception of those that may bedecade and is thought to have been brought to an end through contingent on entry into force of the EPA.the 2009 conclusion of a deal between the EU and these 9countries, known as the Tropical Products proponents. This deal However, since the completion of the AA, Costa Rica ratified theknown as the Geneva Agreement on Trade in Bananas UNESCO Convention on the Protection and Promotion of theestablished a schedule for the reduction of EU multilateral tariffs Diversity of Cultural Expressions on March 2011, joining Theon its banana imports. The net effect of the deal has sealed the Honduras, Guatemala, Nicaragua and Panama.decline of the preferential margin of the Caribbean region’s 10 Communication by France, op cit. p. 4.bananas. Under the Association Agreement, bananas have beenaccorded special treatment the details of which are outlined 11 The eight countries that have ratified the UNESCO Convention onunder Appendix 3 of the Agreement. the Protection and Promotion of Biodiversity of Cultural3 Expressions adopted in Paris on 20 October 2005 and which came See Newsletter on the relations between the EU and Central into force on 18 March 2007 are as follows: Barbados (7/10/2008);America, No. 23 July 2010, APRODEV. Available at Dominican Republic (24/09/2009); Grenada (15/01/2009); Guyanahttp://www.aprodev.eu/files/EU_CA_News/hojadepica23july201 (8/2/2010);Haiti (8/2/2010); Jamaica (4/5/2007); St. Vincent and the0eng.pdf Grenadines (25/9/2009); and Trinidad and Tobago (25/7/2010)4 12 Most EU member states commitments under Entertainment Communication by France, op cit. , p. 8services other than audiovisual services are unbound. Under the 13EPA, access to most EU countries has been bound, though Refer to Article 353 para. 4 of Part V (General and FinalEconomic Needs Test (ENT) and qualifications may be required. Provisions) of the EU-Central America Association AgreementWhereas under the WTO, Chef de cuisine and Fashion model 14services are new sectors in which the EU has not made an offer Agritrade, “Latin American producers manoeuvre to secureon CSS, under the EPA, the EU has bound commitments for Chef price advantages”, The Technical Centre for Agricultural and Rural Cooperation (CTA) http://agritrade.cta.int/en/Commodities/Banana-de cuisine services and Fashion model services for the first time sector/News/Latin-American-producers-manoeuvre-to-secure-price-within a trade agreement. advantages5 The inclusion of a Protocol on Cultural Cooperation alsofeatures under the EU-Central America Association Agreement aswell as the EC-Korea Free Trade Agreement, which was signed inOctober 20106 Under Article 5 para. 2 of the EPA Cultural Protocol, access tothe preferential treatment is predicated upon the followingconditionalities (i) the co-produced audiovisual works arerealized between undertakings which are owned and continue tobe owned, whether directly or by majority participation, by aMember State of the European Union or a Signatory CARIFORUMState and/or by nationals of a Member State of the EuropeanUnion or nationals of a Signatory CARIFORUM State; (ii) therepresentative director(s) or manager(s) of the co-producingundertakings have the nationality of a Member State of theEuropean Union and/or of a Signatory CARIFORUM State; (iii)both (a) the total financial contributions of one or severalproducers of the EC Party (taken together), and (b) the totalfinancial contributions of one or several producers of Signatory OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org
  7. 7. 7 8OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery(CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developmentsgermane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandateand related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policydevelopments of currency and importance to the Caribbean. http://www.crnm.org

×