The Economic Partnership Agreement (EPA) signed in 2008 signalled a new era of trade relations between the European Union (EU) and the Caribbean Forum of African, Caribbean and Pacific States (CARIFORUM). Caribbean exporters previously had greater duty-free access to the EU market than European exporters enjoyed in the Caribbean, along with quotas that enabled them to avoid price competition with rivals from outside the Lomé ACP (Africa, Caribbean and Pacific) bloc.
With the advent of the World Trade Organization (WTO) in 1995, the EU and the Caribbean were forced to negotiate new terms of engagement. The EPA represented a shift towards a more liberal trading regime in which greater reciprocity is the norm.
Critics of the EPA believe the new trade regime will inhibit the development of new (particularly manufacturing) industries in the region and worsen the fiscal accounts of Caribbean countries. This paper, however, concludes that the aggregate negative impact of the EPA on Caribbean states will be modest, although it will likely produce challenges for smaller Caribbean governments. In particular, this paper emphasizes that the EPA will not be effective without the successful implementation and operation of the Caribbean Single Market Economy (CSME), which requires Caribbean governments to plan and coordinate economic activities together. The EPA provides the opportunity for the region to build the framework that will allow it to compete in a liberalized global economy, where a competitive environment is necessary for survival.