Summary
The EC’s analysis of the CARIFORUM-EU EPA while factually accurate is misleading. While the EU’s growing trade surplus with CARIFORUM is acknowledged the importance of the principal change brought about by the EPA – improved market access for EU exporters is glossed over. EU agro-food exports have shown particular strong growth with dairy products, meat and meat preparations, beverages and fresh vegetables leading the way. In contrasts the value of CARIFORUM agro-food exports has stagnated, although the masks a rise in agro-food exports to the EU from the Dominican republic and a decline in the value of CARICOM exports. The decline in CARICOM exports however mask a rise in non-traditional exports and a dramatic fall in the value of banana and sugar exports to the EU. Despite the institutional structures in place the single most important issue facing CARIFORUM exporters to the EU, Brexit, has not been addressed within EPA consultative structures. The impact of Brexit on the value of preferential exports under the EU EPA will be so profound as to require an immediate policy response from the EU to areas of CARIFORUM concern in regard to improving EPA implementation (e.g. removing all obstacles to full DFQF exports to the DOMs and OCTs, intensifying and acting on SPS dialogues, eliminating UTPs along CARIFORUM-EU supply chains, introducing flexibility in EPA implementation). The EU also needs to recognise and address the effects of its wider policy changes on the value of preferential access granted CARIFORUM countries under the EPA. Failure to do so will amount to a continued failure to deliver on the expectations raised by the EPA agreement in the Caribbean region.
- The Scope of the CARIFORUM-EU EPA
The CARIFORUM-EU EPA has been under provisional implementation since 29th December 2008. However by end of 2017, while 22 EU Member States had ratified the agreement only 9 Caribbean States had done so (1).
The CARIFORUM-EU EPA unlike other EPAs is a comprehensive agreement covering the whole ACP Caribbean region ‘and including not only provisions on trade in goods, but also trade in services and provisions on trade-related issues (including competition, innovation and intellectual property, transparency in public procurement and trade and sustainable development)’(1).
In regard to the trade in goods chapter, which is most relevant to the agro-food sector, according to the EC a reciprocal yet asymmetric market opening process has been agreed. Under the EPA ‘CARIFORUM states will open about 92% of its trade over a 25-year period (83% over 15 years), and will exclude about 8% of imports from liberalisation altogether’, while in terms of access to the EU market all Caribbean products except arms and ammunitions will enjoy duty free-quota free access to the EU market. However as the EC acknowledges ‘this largely represents a continuation of the trade preferences granted up to 2008 under the Cotonou Agreement’ (1).
Thus in terms of trade in goods the principal change brought about by the CARIFORUM-EU EPA relates to the basis for EU exports to the CARIFORUM region. This needs to be seen in a context where the EU is CARIFORUMs second most important trade partner behind the USA (1).
In terms of EU exports the EC highlights how the first tariff cuts under the agreement ‘were scheduled for 1 January 2011’, followed by further rounds of tariff cuts in 2013, 2015 and 2017. However as of November 2017 while ‘the bigger Caribbean countries were implementing the tariff liberalization schedule as planned’, ‘progress was still required in some of the smaller countries that form part of the Organisation of Eastern Caribbean States (OECS)’ (1).
EU figures included in the 2017 EPA implementation report show a remarkable increase in the EU’s favourable trade balance with CARIFORUM countries. The EU’s trade in goods surplus increased from €102 million in 2014 to €1,569 million in 2017. This needs to be seen in the context of a 23.3% increase in the value of EU exports to CARIFORUM countries between 2014 and 2017 and a 12.2% decline in the value of CARIFORUM exports to the EU over the same period (despite a 12.1% recovery in export values to the EU in 2017) (1).
In terms of trade with the EU the Dominican Republic plays a major role accounting for 25% of CARIFORUM exports and 34% of imports from the EU. Indeed trends in trade with the Dominican Republic have a major influence on overall trends in EU-CARIFORUM trade. This constantly needs to be borne in mid when reviewing development in EU-CARIFORUM trade flows.
According to the EC ‘most of the CARIFORUM countries are not yet implementing the regional preference clause which requires countries to grant each other treatment at least as favourable as that accorded to the EU’. This implies EU companies are being granted tariff preferences which are not extended to fellow CARIFORUM members. It is unclear from the EC’s review in what areas this is the case.
- EU Agro-Food Exports to CARIFORUM Countries
Between 2013 and 2017 the strongest growth in EU exports to CARIFORUM countries was in agro-food products, which grew 42.2% in 5 years compared to a growth rate in overall EU exports of 20.9% (2). EU agro-food exports to CARIFORUM countries have shown a steady increase in value over the past 5 years, with according to the EC, EU exports being dominated by ‘processed food products and beverages (such as spirits, wine, dairy products, pasta,)’. A more careful review reveals a number of major areas of growth in EU food product exports to the CARIFORUM region in the past five years.
Main EU Agro-Food exports to CARIFORUM Countries
| € millions | 2013 | 2014 | 2015 | 2016 | 2017 | % change 2013-17 |
| Total EU Exports | 4,055 | 3,965 | 5,081 | 4,747 | 4,904 | +20.9% |
| Total EU Agri-Food Exports | 607 | 689 | 788 | 804 | 863 | +42.2% |
| – Dairy products | 125 | 141 | 153 | 150 | 177 | +41.6% |
| Milk powders | 83 | 91 | 96 | 78 | 94 | +13.3% |
| Cheese | 30 | 36 | 40 | 51 | 59 | +96.7% |
| Fresh milk & cream | 8 | 10 | 11 | 15 | 17 | +112.5% |
| Butter | 4 | 4 | 6 | 6 | 7 | +75.0% |
| – Meat products | 19 | 24 | 31 | 36 | 47 | +147.4% |
| Poultry | 4 | 5 | 6 | 9 | 15 | +275.0% |
| Beef | 1 | 2 | 2 | 3 | 3 | +200.0% |
| Pork | 4 | 7 | 8 | 8 | 11 | +175% |
| Meat Preparations | 10 | 10 | 15 | 16 | 18 | +80.0% |
| Veg. fresh, chilled & dried | 26 | 28 | 35 | 39 | 37 | +42.3% |
| Beverages | 104 | 113 | 157 | 157 | 152 | +46.2% |
| Food preparations | 140 | 162 | 169 | 180 | 185 | +8.6% |
| Sugar | 0 | 0 | 1 | 1 | 4 | n.a. |
Source: Main source for agri-food trade statistics – EC, Agri-food trade statistical factsheet: Agri-food trade with: EPA Cariforum
This has included:
- A 41.6% increase in the value of dairy product exports despite the decline in global dairy prices over this period. In 2017 milk powders accounted for 53% of EU dairy exports, cheese 33.3%, fresh milk 9.6% and butter 4%. This followed a 3% increase in the value of milk powder exports; a steady and sustained increase in the value of cheese exports totalling 97%; a steady and sustained increase in the value of fresh milk and cream exports totalling 112.5%; and a 75% increase in butter exports. By 2017 EU dairy exports accounted for 20.5% of total EU agro-food exports to CARIFORUM countries (2).
- EU exports of meat and meat preparations have also grown strongly (+160%), with poultry meat leading the way followed by beef and pork. By 2017 EU meat and meat preparation exports accounted for 6% of EU agro-food exports to CARIFORUM countries (up from 3.1% in 2013) (2).
- EU exports of fresh vegetables have also shown strong growth over the 2013-17 period increasing 42% in value and coming to account for 4.3% of EU agro-food exports to CARIFORUM countries in 2017 (2).
- Beverages, which constitute the second largest category of EU agro-food exports to CARIFORUM countries after dairy products, also grew strongly increasing in value by 46% between 2013 and 2017. These exports consisted largely of spirits (69.1%) and soft drinks (19.1%) but with beer exports increasing 50% in five years (2).
- In 2015 the EU also emerged as a sugar exporter to CARIFORUM countries with export values quadrupling by 2017 although be it from a very low base (from €1 million to €4 million) (2).
- The general category of food preparations also showed strong growth increasing 32.1% in value between 2013 and 2017 (2).
- EU Agro-Food Imports from CARIFORUM Countries
In distinct contrast to this continuous increase in the value of EU agro-food exports to the CARIFORUM region the value of EU agro-food imports from CARIFORUM members has stagnated within a variable trend.
According to the EC the main Caribbean agro-food exports to the EU are bananas (10% of total exports) sugar (4%) rum (4%) and cocoa beans (3%), rice (1.6%), with other agro-food products accounting for around 2.9% of total exports to the EU. The EC argues CARIFORUM exports of ‘tropical agricultural goods (sugar cane, tropical fruits and rice) from CARIFORUM into the EU have increased over the past year’. However this masks divergent trends both across commodities and between the Dominican Republic and CARICOM members
Main CARIFORUM Agro-Food exports to the EU (€ million
| € millions | 2013 | 2014 | 2015 | 2016 | 2017 | % change 2013-17 |
| Total CARIFORUM Exports to EU | 4,381 | 4,025 | 4,010 | 3,135 | 3,513 | |
| Total Agri-Food Exports to EU | 942 | 932 | 1,040 | 1,049 | 934 | -0.8% |
| Tropical fruit (mainly bananas) | 348 | 368 | 404 | 427 | 377 | +8.3% |
| Sugar | 224 | 189 | 148 | 94 | 121 | – 46.0% |
| Spirits and Liqueres | 94 | 91 | 102 | 116 | 116 | +23.4% |
| Cocoa beans, paste and powder | 82 | 85 | 132 | 152 | 94 | +14.6% |
| Rice | 30 | 35 | 65 | 83 | 58 | +93.3% |
| Preparations of Vegetables | 7 | 6 | 9 | 10 | 10 | +42.9% |
| – Sub-total | 785 | 774 | 860 | 882 | 776 | – 1.1% |
| % total agri-food exports to EU | 83.3% | 83.0% | 82.7% | 84.1% | 83.1% |
Source: Main source for agri-food trade statistics – EC, Agri-food trade statistical factsheet: Agri-food trade with: EPA Cariforum
A more detailed analysis comparing exports from the Dominican Republic and CARIFORUM as a whole shows that while between 2013-2016 the value of exports of agro-food products to the EU from the Dominican Republic rose some 23.7% agro-food exports from other CARIFORUM members fell 2%. This created a situation where although in 2013 the Dominican Republic accounted for 52.0% of CARIFORUM agro-food exports to the EU by 2016 this had risen to 57.8% of total CARIFORUM agro-food exports to the EU.
This divergent trend was mainly driven by the expansion of the value of the Dominican Republics’ banana exports to the EU and the contraction of the value of the sugar exports from CARICOM countries to the EU.
Agro-good exports to the EU 2013-16 (Total CARIFORUM, Dominican Republic and other CARIFORUM) (€ millions)
| 2013 | 2014 | 2015 | 2016 | % change 2013-16 | |
| CARIFORUM | 942 | 932 | 1,040 | 1,049 | +0.2% |
| Dom Rep. | 490 | 510 | 563 | 606 | +23.7% |
| Other CARIFORUM | 452 | 422 | 477 | 443 | -2.0% |
However while overall the CARICOM export values to the EU make depressing reading there are a number of bright spots, with the export growth of spirits and vegetable preparations from CARICOM countries out-performed the Dominican Republic. These positive developments however have been overshadowed by the declining value of traditional CARICOM banana and sugar exports to the EU.
- The Utilisation of Institutional Structures
The institutional structure established under the CARIFORUM-EU EPA is more fully developed than under other EU EPAs, given the length of time the agreement has been in operation. The agreement has a functioning Joint Council which meeting at Ministerial level a Trade and Development Committee of senior officials; a Parliamentary Committee consisting of MEPs and Caribbean national state Parliaments and Consultative Committee consisting of civil society representatives.
The Joint Council meets biannually and is responsible for monitoring the fulfilment of the objectives of the EPA, while senior officials meet annually with this providing the main forum for the substantive discussion of EPA implementation issues.
According to the EC report cooperation on agricultural trade and development issues is being intensified in the context of the EPA, with the Special Committee on Agriculture and Fisheries having held its first meeting in the Dominican Republic in October 2017 (1). This meeting included items on: agricultural development; SPS measures; technical barriers to trade, climate change and disaster risk management. It also saw the adoption of an EU-CARIFORUM agreement on Geographical Indication (GIs).
The EC claims ‘the EPA is a genuinely pro-development agreement and directly linked to the European Development Fund (EDF) funds’, with the EDF providing ‘considerable support to CARIFORUM and Caribbean governments for EPA implementation under the Caribbean Regional Indicative Programme (CRIP)’. Under the 10th EDF (2008-2014) some €140 million was allocated to the two objective of supporting ‘regional economic integration and EPA implementation’ (this was equivalent to 85% of the total CRIP of €165 million).
Under the 11th EDF (2014-2020), some €346 million was allocated to the CRIP, with some €102 million allocated to regional economic cooperation and integration, within which the sub-category of support to EPA implementation is included.
The EU is also supporting a €24 million private sector development programme under the 11th EDF agreed in 2016/17 and implemented through the Caribbean Export Development Agency (1).
In conclusion the 2017 EC implementation report argued ‘progress was achieved in the implementation of the agreement, including notably on agriculture issues and services’, although the value of CARIFORUM agricultural exports to the EU ‘decreased by 11%’, with this being attributed in part to ‘falling world market prices’.
At the institutional level it was argued in 2017 ‘productive meetings of all EPA bodies took place’, but that ‘continuous effort of all partners will be needed to ensure that benefits of the agreement fully materialise’.
| Comments and Analysis
In a context where the EC highlights the well-established institutional structures for dialogue between the EU and CARIFORUM countries, the productive discussions being held within this dialogue framework and the intensified cooperation on agricultural trade and development issues underway, given the importance of the UK market to 9 CARIFORUM members it is remarkable that the issue of the impact of the UK’s departure from the EU on the value of CARIFORUM preferential access to the EU market has not been discussed within the EPA context. Caribbean Countries % of total exports to the EU destined for the UK market (2015-17)
Caribbean countries have some of the highest rates of dependence on the UK market in their trade with the EU of any ACP region, with only 8 other ACP members having high or above average rates of trade dependence on the UK market in their trade with the EU. As a consequence the UK’s departure from the EU will have a serious impact on the value of CARIFORUM exports to the EU market under the CARIFORUM-EU EPA (since the EU’s EPA agreement will no longer apply to the territory of the UK one the UK has fully left the EU, which could be in March 2019, 1st January 2021 or even 1st January 2023) The situation in regard to the importance of the UK market to key Caribbean agro-food exports is even more acute. In the sugar sector Jamaica, Guyana and Barbados generally have an ‘Exceptionally High Dependence’ on the UK market, while until 2017 Belize also had an ‘Exceptionally High Dependence’ on the UK market. Dependence on the UK Market for Caribbean Sugar Exporters
Meanwhile on average the Dominican Republic and Belize have had an ‘Exceptionally High Dependence’ on the UK market in their banana trade with the EU, while the smaller exporters of Grenada, St Lucia and Jamaica all have an exclusive dependence on the UK market in their banana trade with the EU. In is only Dominica which in recent years which has reduced its dependence on the UK market in its banana trade with the EU. While Surinam for its part has no direct banana export to the UK exporting solely to EU27 member states, this does not mean Surinam has no stake in the Brexit process. If a ‘no deal’ Brexit occurs then the issue of apportioning EU bilaterally negotiated TRQ allocations for bananas will be left unresolved. Given around 20% of current EU banana imports are destined for the UK market, the application of existing EU $ banana TRQs solely to the territory of EU27 member states would increase competition for CARIFORUM bananas on EU27 markets. This could potentially impact adversely on market prices undermining further the value of CARIFORUM banana sector preferences on EU27 markets (see later section for more details). Dependence on the UK Market for Caribbean Banana Exporters (tonnes)
Thus particularly in terms of agro-food sector trade Brexit carries serious implications for future CARIFORUM-EU trade relations. At a minimum it would appear to require · the full application of principal of duty free and levy free access to CARIFORUM exports to the Caribbean territories of EU member states through the abandonment of the application of the current import levies known as ‘dock duties’; · intensified dialogues on the design and implementation of SPS and food safety control systems; · an extension and rigorous application of new EU regulations on the elimination of unfair trading practices to CARIFORUM-EU agro-food sector supply chains; · a recognition of CARIFORUM members ‘Right to Development’ which would subordinate the application of EPA provisions to the national and sector development needs of CARIFORUM countries, with the enforcement of nominal obligations being deferred where this could have a significant adverse effect national and sector development efforts. This would create a right for small and vulnerable CARIFORUM countries not to be harmed by the imposition of EPA trade rules. · a commitment from the EU to the flexible and responsible interpretation and application of EPA commitments while CARIFORUM countries adjust to the trade disruptions potentially arising from the Brexit process. Given the EC itself has acknowledged, the UK’s withdrawal from the EU will raise serious issues in the implementation of EU reciprocal preferential trade agreements (e.g. under the rules of origin, where the EC has been urging EU27 manufacturers to rethink their sourcing policies away from UK input suppliers so as to avoid any loss of tariff preferences as a result of an excessive use of non-EU ‘originating inputs’ in good exported under preferential tariff arrangements) this lack of EC engagement on the consequences of BREXIT for CARIFORUM countries within EPA institutional dialogue structures is somewhat surprising. This needs to be seen in the broader context where beyond the Dominican Republic, the value of agro-food exports from CARIFORUM countries to the EU have stagnated in recent years. The reason for this however is not entirely related to the weather events and global price volatility alluded to by the EC. Other important factors strongly impacting on this stagnation of CARIFORUM export earnings in agro-food sector trade with the EU arise from EU policy changes and developments in EU trade policy. The first example in this regard is the EU’s opening up of increased duty free access to the EU market for Ecuadorian banana exports, following Ecuador’s accession to the Andean Pact FTA. These new tariff preferences for Ecuadorian banana exports saw EU imports increase 13.8% by volume and 16.8% by value in 2017 (4) with a further 12% increase in volume in the first 9 months of 2018 (5). This needs to be seen in a context where Ecuador is the world’s leading banana exporter. In the second example in this regard involves the abolition of EU sugar production quotas in October 2017, which saw a surge in EU sugar production and a collapse of ACP sugar exports to the EU (particularly to the sugar deficit UK market). This surge in sugar production was not only linked to the abolition of national sugar production quotas in the EU but also the provision of decoupled direct aid payments to all EU farmers and the maintenance of voluntary coupled support payments for sugar producers in less competitive sugar production zones. This meant that growth in sugar production in the most efficient EU sugar production zones were not matched by any significant decline in production in less efficient sugar production zones in the EU. Indeed voluntary coupled support payments for sugar in the countries making use of this instrument actually require the maintenance of sugar production in these EU areas; otherwise the payments would not be made available. These EU policies not only affected EU import demand for ACP sugar but also led to much lower prices (see epamonitoring.net companion article ‘EU Sugar Quota Abolition Begins to Eat at ACP/LDC Export Volumes and Earnings’, 10 May 2018) and the re-emergence of much higher volumes of EU sugar exports. These EU policy influences have had an important bearing on the reduction in CARIFORUM sugar earnings on exports to the EU from €224 million in 2013 to €121 million in 2017 (2). These factors however were not touch on in the EC review of EPA implementation or in the CARIFORUM-EU discussions on the future implementation of the CARIFORUM-EU EPA. This can be seen as two important oversights in what is meant to be a deepening dialogue on agriculture and development issues. This needs to be seen in the broader context where events and policy developments extraneous to the core CARIFORUM-EU relationship, (ranging from EU domestic agricultural policy changes and new EU trade policy commitments to through the UK’s decision to leave the EU to the Russian import embargo on EU agro-food products, have all transformed the economic context for the implementation of the CARIFORUM-EU EPA. Given the scale of the economic consequences of these changes a fundamental review of the implementation of the CARIFORUM-EU EPA would appear to be in order. |
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Sources:
(1) EC, ‘Individual reports and info sheets on implementation of EU Free Trade Agreements’, pages 251-256, Commission Staff Working Documents, SWD(2018) 454 final, 31 October 2018
http://trade.ec.europa.eu/doclib/docs/2018/october/tradoc_157473.PDF
(2) EC, Agri-food trade statistical factsheet: Agri-food trade with: EPA Cariforum
https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside-eu/regions/agrifood-epa-cariforum_en.pdf
(3) EC, Agri-food trade statistical factsheet: EU Agri Food trade with: Dominican Republic
https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside-eu/countries/agrifood-dominican-republic_en.pdf
(4) EC, Market Access Data Base,
http://madb.europa.eu/madb/statistical_form.htm
(5) freshfruitportal.com, ‘US and Europe import greater banana volumes in 2018’, November 26, 2018
https://www.freshfruitportal.com/news/2018/11/26/u-s-and-europe-import-greater-banana-volumes-in-2018/