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Why is our EU trade falling?

Caribbean exports fall under European deal

BY JULIAN RICHARDSON Assistant Business Co-ordinator richardsonj@jamaicaobserver.com

Friday, November 16, 2012



CARIBBEAN countries have not made major inroads into the European export market since gaining duty-free and quota-free access there nearly five years ago, say trade experts.


"We have had market access for years and what the data shows is that the terms for that market access have not led to enough sustainable growth for our firms," said Lincoln Price, private sector liaison at the Office of Trade Negotiations of the Caricom Secretariat.


The Cariforum group of countries (Caricom and the Dominican Republic) concluded negotiations with the European Union (EU) in December 2007 for the historic Economic Partnership Agreement (EPA) which liberalised Europe's markets for the region's exports in goods and services.


But since the EPA became effective on January 1, 2008, Caricom exports to the EU have declined, with Jamaica making the biggest retreat from the European market, Price said. The Dominican Republic has significantly outperformed its Caricom partners in the deal. Boosted by agricultural produce, the country has seen its exports grow significantly under the EPA to US$611.3 million in 2010.


Price, addressing journalists at a regional media workshop on the EPA at the Rex Resort in Grenada, said Caricom has not sufficiently produced value-added products, which are critical for export competitiveness.


"We are essentially involved in a commodity-based approach to competitiveness, where we compete not necessarily on doing anything creative," Price said, adding, "Our economies are still competing based on our natural endowments of gold, bauxite, forestry reserves, petroleum and natural gas."


David Gomez, manager of trade and export at the Caribbean Export Development Agency, suggested that businesses need to put more focus in areas where the region is more competitive, such as the creative and services industries.


"We seem to be stuck, from a private sector perspective, in wanting to achieve the same results that our countries did when the drivers of economic development were predicated on preferential market access — the business models have not shifted," said Gomez.


"The issue is squarely one of competitiveness and that is why we see the Dominican Republic now taking more advantage of the provision of the EPA than the rest of the region is; they understand that what has to be done is to develop competitive industries," he noted.


Lack of interest and awareness, along with the global financial meltdown — which was triggered around the same time as the signing of the EPA — are factors behind the slow market entry, said Allyson Francis, trade in services and investment specialist, EPA Implementation Unit of the Caricom Secretariat.


"It is sort of a chain reaction, and because we are in this financial situation, we tend to be quite myopic and risk-adverse," she said.


But despite the slow pace of penetration for Caribbean businesses into Europe, there are some success stories.


Baron Food Limited, a sauces and condiments manufacturer, ships over 250,000 cartons of produce to Europe annually and has grown significantly since the EPA. Founded in St Lucia, the company has expanded its manufacturing to Grenada and, in 2013, will set up another satellite plant in Trinidad and Tobago.


Principal of Baron, Chris Persad, noted that the EPA provides an opportunity for Caribbean companies with or without prior presence in the European market.


"We have already established a presence in London. What the EPA does is give us an opportunity to set up a factory in England and compete on a local scale because the market is open to both your skilled force and the capital equipment to come and invest," said Persad. "For those without the presence, there is the benefit of social capital, because those companies can tap into the know-how and the benefits of the EPA to gain access and entry into the market."


Grenadian agro-processor Noelville Limited is making a name for itself in Europe with its nutmeg-based instant pain relieving spray and cream brand, Nut-Med. A popular crop on the 'Spice Island', nutmeg is said to have special pain-relieving properties that makes it an effective sedative.


"We have a lot of things going on for us in the Caribbean but we have to (take advantage of) them. Herbs can bring so much income to our countries," said Noelville's managing director, Denis Noel.


Noelville and Baron are two examples of companies tapping into the value-added that is needed for Caribbean exports to strive in Europe and the wider global market, say the trade experts. They note that the support mechanisms are there for producers who want to become more competitive and innovative.


For instance, Caribbean Export provides grant funding to producers for a number of initiatives, including research and development, advisory services and quality and environment systems. The organisation this week disbursed funds to the Jamaica Manufacturers' Association for improving packaging, an important element to enhancing export competitiveness.


What's more, under one of the EU framework programmes, the organisation provides incentives for eco-innovation, said Price.


"They have projects through the Jamaica Business Development Corporation that looks at making paper from banana and lamps and jewellery from conch shells," he noted, adding that hemp is a another very sustainable natural resource which Caribbean producers could develop into lucrative value-added products.


The EPA is a reciprocal agreement — Cariforum has 25 years to fully liberalise its markets to the EU — what replaced the preferential trade arrangement that governed Caricom-EU trade for decades.