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Factsheet: EU-Caribbean relations

1. Quick facts about CARICOM

 

country info
country info

 

2. General information

The Caribbean Community (CARICOM) was established in 1973 and includes twenty members: fifteen full members and five associate members. It is home to approximately 18.5 million citizens, 60% of whom are under the age of 30.

Nearly 30 years after CARICOM’s establishment, member countries signed the Revised Treaty of Chaguaramas to create an economic union, by initiating the CARICOM Single Market and Economy (CSME). Members felt that the Original Treaty fell short of addressing its stated objectives—of free movement of goods, services, capital and people, strengthening the region’s external position through coordination of foreign policies, and pooling limited resources through functional cooperation. The Revised Treaty in 2002 aimed to create a common economic space and transform CARICOM into a borderless community, with deeper economic policy coordination, increased harmonization of functional areas, and an eventual move to a currency union.

caricom member states map

 

3. EU-Caribbean relations

The European Union (EU) has provided support to CARICOM/CARIFORUM since 1986. Formalised accreditation of the EU Ambassador in Barbados to the Caribbean Community (CARICOM) began in 2016. The EU has good relations with CARICOM at political and technical level. There are dedicated focal points at technical level in both EU Delegation and the CARICOM Secretariat.

The EU’s relationship with the Caribbean centres on political, trade, and development, and is shaped by various overlapping frameworks. The most important are the Cotonou Partnership Agreement and the CARIFORUM-EU Economic Partnership Agreement (EPA). A new Agreement with the Organisation of African, Caribbean and Pacific States (OACPS) has been negotiated and is in the formal approval process (“Post-Cotonou”). On development, the EU is the Caribbean’s largest partner. Regarding trade, the CARIFORUM-EU EPA signed in 2008, is the first regional Economic Partnership Agreement with the Forum of the Caribbean Group of African, Caribbean and Pacific states (CARIFORUM), and the EU is the group’s second largest trading partner.

CARIFORUM is a subgroup of the Organisation of African, Caribbean and Pacific States and serves as a base for economic dialogue with the European Union. Established in 1992, the membership of CARIFORUM comprises the 15 Caribbean Community members, along with the Dominican Republic. Cuba is a member of the ACP and CARIFORUM but not a signatory to the CARIFORUM-EU Economic Partnership Agreement. CARIFORUM is headed by a Director General who reports directly to the Secretary General of CARICOM.

Development cooperation

A total of nearly EUR 150 million has been provided to CARICOM/CARIFORUM Institutions, Agencies, Associate Institutions, Functional Corporation Institutions and other Regional Organisations (e.g. the Caribbean Disaster Emergency Management Agency (CDEMA), CARICOM Implementation Agency for Crime and Security (IMPACS), Caribbean Community Climate Change Centre (CCCCC), Caribbean Development Bank (CDB), Caribbean Public Health Agency (CARPHA) and the Caribbean Export Development Agency (CEDA)).

This includes some programmes of direct support to the CARICOM Secretariat and the CARIFORUM Directorate of about EUR 23 million, including:

  • 11th European Development Fund (EDF) Caribbean Regional Indicative Programme (CRIP) Support to CARIFORUM Role in Regional Cooperation and EPA Implementation (EUR 7.3 M)

This programme aims at strengthening capacity to promote regional cooperation in the Caribbean as well as CARIFORUM capacity to implement development cooperation, through the reinforcement of the responsible structures. The proposal also addresses the institutional capacity of CARIFORUM to implement the CARIFORUM-EU EPA.

  • 11th EDF - measures to support the implementation of the Economic Partnership Agreement (EUR 21.08 M)

The CARIFORUM-EU EPA is a major instrument underpinning Caribbean-EU relations, making it easier for people and businesses from the two regions to trade and invest with each other while helping CARIFORUM countries with economic growth and job creation. The overall objective of this programme is to contribute to the integration of CARIFORUM into the world economy, and its specific objective is the effective operation of the EPA.

  • 11th EDF Strengthening Framework for CARICOM Integration and Cooperation Process (CSME) (EUR 13.5 M)

Regional integration and cooperation in the wider Caribbean is one of the thematic priorities of the Joint Caribbean-EU Partnership Strategy. Consistent with this commitment and building on previous programmes, programme provides support for the consolidation of the CARICOM Single Market and Economy (CSME) and improved capacity for evidence-based policy formulation. These objectives are to be pursued through the strengthening of the institutional infrastructure of the CSME, improving the arrangements for decision-making and implementation, and capacity building.

1.  For the period 2014-2020, EU development cooperation to the entire Caribbean region amounted to around EUR 1.5 billion, including bilateral cooperation.

development problem investment

 

One specific “success story” worth highlighting:

  • Support to the Caribbean Catastrophe Risk Insurance Facility (CCRIF) - EUR 10 M in 2020, new injection of EUR 5 M upcoming

In a moment where Caribbean economies were strongly impacted by the COVID-19 pandemic and their fiscal space was shrinking, the EU provided a grant of EUR 10 million to the help their member countries pay the disaster insurance for the 2020 hurricane season. Through the support provided by the EU, Caribbean countries received discounts of at least a quarter on their insurance coverage for tropical storms or hurricanes, excess rainfall, earthquakes, and damage to coastal communities and fisheries. The importance was twofold. On the one hand, this support alleviated fiscal pressure on the governments, allowing them to pursue economic recovery policies and initiatives. On the other hand, as they enter a hurricane season that was forecasted above average, the disaster insurance guaranteed immediate pay-outs to countries hit by natural hazard for covering the needs of everyone affected along with the planning of a stronger and more resilient reconstruction.

Looking forward, support to CCRIF remains a tool for the EU to strengthen climate resilience in the Caribbean, helping partner countries to develop and diversify risk financing mechanisms. In this sense, an additional EUR 5 million contribution to CCRIF was approved in December 2021. Discussions are ongoing on what these funds should be targeted at.

Among other areas of successful cooperation, we can count renewable energy and energy efficiency, waste management, health and climate change adaptation.

2) For the period 2021-2027, under the Neighbourhood, Development and International Cooperation Instrument (NDICI) – Global Europe, a minimum amount of EUR 800 million is guaranteed across the Caribbean portfolio.

A share of EUR 532 million is foreseen for bilateral country Multiannual Indicative Programmes (MIPs), EUR 208 million for the Caribbean regional window, and EUR 60 million for Erasmus+, Caribbean participation in global facilities, and administrative expenses. 

With NDICI-Global Europe and the new Post-Cotonou set up, CARICOM/CARIFORUM will no longer play the role of Regional Authorising Officer (RAO) nor have dedicated envelope, but it remains the EU counterpart for the political and policy dialogue with the region. Regional integration remains an important priority under the new Caribbean-EU partnership and there is foreseen support to regional actions that will deliver results in areas of the core organisation’s mandate.

EU development cooperation through grants is complemented by development finance loans with low interest rates through the European Investment Bank (EIB). This financing follows the NDICI – Global Europe policy priorities, and targets climate resilient infrastructure, environmental protection and access to finance for micro, small and medium sized enterprises (MSMEs).

The EU also makes grants available to a range of development financing institutions, such as Caribbean Development Bank, Inter-American Development Bank, the French AFD, the German KfW, as well as the EIB through the EU-Caribbean Investment Facility (EU CIF). The grants complement these institutions’ loans to help pay for investments and technical assistance, thereby increasing the impact and affordability of the projects financed.

Trade relations

In 2008, CARIFOROM states signed an Economic Partnership Agreement with the European Union, covering substantially all trade between the parties. It is one of the EU’s most comprehensive agreements with the African Caribbean and Pacific States (ACP). Beyond trade in goods, it also covers trade in services and investment, and contains ambitious provisions in many trade-related areas such as competition, intellectual property rights, innovation and public procurement. In the services sectors, it is expected to lead to the opening of the EU market beyond WTO commitments. The Agreement provides for asymmetrical liberalisation of trade considering the differences in the levels of development between the two sides.

  • The EU is CARIFORUM's second-largest trading partner, after the US.
  • The main exports from the Caribbean to the EU are fuel and mining products, notably petroleum gas and oils, bananas, sugar and rum, minerals (notably gold, corundum, aluminium oxide and hydroxide), iron ore products, and fertilisers. An export diversification process can be observed on CARIFORUM side, since the start of the implementation of the EPA. Moreover, before COVID hit in 2020, exports of some of the CARIFORUM countries had increased substantially since the beginning of the implementation of the EPA: Jamaica (+150%), the Dominican Republic (+94%), Grenada (+92%), or Guyana (+89%).
  • The main imports into the Caribbean from the EU are boats, ships, cars, constructions vehicles and engine parts, phone equipment, milk and cream, and spirit drinks. At the same time, refined oils, food preparations, plastics and precision instruments have benefited the most from the EPA on the EU side in terms of exports increase.
  • Foreign Direct Investment (FDI) is extremely important for the Caribbean. Relative to their size, these economies receive substantial levels of investment. The ratio of FDI inflows to GDP in 2018 was 4% for the CARIFORUM, with many countries above 5% and some above 10%.
  • EU FDI stocks have increased significantly since 2013 to reach 53 billion euros in 2020 (with a peak at 101 billion in 2017). The Bahamas, Barbados, Guyana and the Dominican Republic are the main recipient of EU FDI in CARIFORUM.
EU Trade with ACP

 

ACP Trade flows
top trading partners

 

The COVID-19 crisis had a significant impact on EU trade with region and the CARIFORUM states due to high tourism dependence and still low diversification in most of these economies.  In general, the crisis has undercut the GDP of the CARIFORUM states by around 70% on average affecting the mostly tourism and related services – main part of CARIFORUM’s economies and the main source of income and employment.

Decrease in international trade in 2020 also affected CARIFORUM states more strongly with a drastic drop of trade flows with the region approx. 25% for total trade (compared to total 10.5% decrease for EU trade globally), with 28.5% decrease for imports from CARIFORUM and 21% for EU exports.

In recent years, China has gained a significant import share in some CARIFORUM states (in 2020, almost 15% of CARIFORUM imports came from China, and 13% from the EU). Due to Brexit, the share of the EU in CARIFORUM’s trade with the rest of the world has decreased by around 2%, due to the UK’s past role as traditional hub of goods entry into the EU.

The next meeting of the EU-CARIFORUM Trade and Development Committee and the Joint Council are tentatively planned still for this year in the region. The currently ongoing joint CARIFORUM-EU EPA Review process, which is to assess the challenges, costs and benefits of the Agreement’s functioning, will lead to the Joint EU-CARIFORUM Review Report that will be presented to the next Joint Council.