David Jessop, Trade Writer

When it comes to financial services - banking, insurance and a myriad of other activities involving money and its movement - the average business operator reading the text in the Economic Partnership Agreement (EPA) with Europe should be forgiven if he or she is baffled.

This is because most of its significance lies in what Caribbean negotiators managed to exclude, as well as in the not particularly accessible services liberalisation schedules that accompany the EPA text.

Fundamentally the EPA services text grants European and Cariforum financial institutions the right to establish businesses in each others markets subject to the same rules as those that apply to local companies.

However, during the negotiations Europe tried to have the Caribbean adopt OECD principles or developed country rules on the regulation and supervision of the financial services sector relating taxation, money laundering and possible tax evasion.

Early European Commission draft text also required information exchange.

For the Caribbean, this was seen as Europe attempting to obtain via a back door, agreement on issues that would affect the competitiveness of the region's onshore and offshore financial services industry and impose a form of extra-territorial financial services supervision.

Supersede agreements

As such it not only challenged Caribbean sovereignty, but attempted to supersede other agreements already in place between Europe and Caribbean nations.

As with many aspects of the EPA negotiations it was a case of Europe trying out language that it wished to use in far more significant negotiations to come with India, Brazil and other emerging markets.

In the end Caribbean negotiators backed by Heads of Government rejected the EC's approach and achieved language that was neither intrusive nor challenging to Caribbean sovereignty.

Thus, the main text of the EPA makes clear that both the EU and Cariforum will only 'endeavour' to facilitate the implementation and application in their territory of internationally agreed standards for regulation and supervision in the financial services sector'.

It is also very specific in noting that nothing in the EPA should be construed as requiring either party 'to disclose information relating to the affairs and accounts of individual consumers or any confidential or proprietary information in the possession of public entities'.

Elsewhere, the EPA sets out the scope of financial services covered and the right of both Cariforum and EU nations to take measures that protect investors and maintain the integrity and stability of their financial systems.

Same treatment

Subject to the accompanying schedule the EPA text makes clear that any European financial services provider must be given the same regulatory and other treatment within the Caribbean as local companies operating in this sector.

The EPA also provides for financial services suppliers in either party to transfer data electronically between the EU and Cariforum and it would seem, between Cariforum nations subject to the adequate protection of privacy.

The EPA also makes it clear that Cariforum or EU states and their public bodies can exclusively operate their own public pension and social security schemes and govern monetary or exchange rate policies. This may seem odd but effectively enables government to operate alone in these areas without any legal challenge.

Beyond this is the detail of what governments have committed themselves to in the context of liberalisation of financial services for those who are prepared to endure the EPAs dry and legalistic schedules.

These are all important but so far seem to have had only limited circulation. They make clear exactly what is being liberalised and when on a country-by-country basis across the Caribbean (the commitments for twenty five of Europe's twenty seven member states are identical).

For the average reader this part of the text is best described as obscure. This is because to understand it and its annotations you have to know what the four modes of services provision are under the WTO General Agreement on Trade in Services.

Territorial presence

In general terms, these refer to the origins of the service supplier and the consumer and the type of territorial presence that both have when a service is delivered.

Space does not permit me to explain this in any detail - regional negotiators need to provide a user-friendly version of the WTO text along with the schedules - but for example against each form of financial service, each Caribbean country has made clear how they will treat EU investors.

Thus, and taken at random, the words 'DOM, JAM 3) None' appear under the heading 'banking and other financial services'. This means that in the Dominican Republic and Jamaica under WTO mode 3 which deals with commercial presence, there will be no limitation on market access or national treatment for the acceptance of deposits and repayable funds by EU banks that might wish to operate in these nations when the EPA comes into force.

david.jessop@cribbean-council.org