COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document COUNCIL DECISION on the Association of the Overseas Countries and Territories with the European Union
Date: 2012-07-16
Institutions: European Commission
Subjects: association agreement (EU), competitiveness, development aid, economic development, economic relations, less-favoured region, overseas countries and territories, social development, sustainable development, trade relations

EUROPEAN COMMISSION 

Brussels, 16.7.2012  
SWD(2012) 193 final 

COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

COUNCIL DECISION 

on the Association of the Overseas Countries and Territories with the European Union

{COM(2012) 362 final} 
{SWD(2012) 194 final} 

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COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

COUNCIL DECISION 

on the Association of the Overseas Countries and Territories with the European Union 

1. 

PROBLEM DEFINITION 

Part  Four  of  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  associates  the 
Overseas Countries and Territories (OCTs) with the European Union (EU). Article 198 of the 
TFEU  stipulates  that  the  purpose  of  the  EU-OCT  association  is  to  promote  the  OCTs' 
economic and  social development  and to create close economic relations between them and 
the EU as a whole. It is also underlined that the association shall serve primarily to further the 
interests and prosperity of the inhabitants of the OCTs, in order to lead them to the economic, 
social and cultural development to which they aspire.  

Since 1958, the detailed rules and the procedure for this association have been laid down by 
the  Council  of  the  EU  through  successive  Overseas  Association  Decisions  (OADs).  The 
present  OAD1  will  expire  on  31  December  2013.  The  revision  process  of  this  Decision, 
conducted  within  the  limits  of  the  TFEU,  is  underway  and  should  lead  to  a  legislative 
proposal  for  a  new  OAD,  expected  to  enter  into  force  on  1  January  2014.  This  legislative 
proposal will be based on a holistic review in the context of this impact assessment and which 
has  involved  the  European  Commission,  the  OCTs,  their  Member  States  and  other 
stakeholders. In line with Council Conclusions 17801/2009 of 22 December 2009 on the EU's 
relations with the  OCTs,  the  legislative proposal should aim at renewing the association, as 
well as focusing its areas of cooperation around priorities recognised by all parties as being of 
mutual interest.  

According to Article 203 of the TFEU, the legislative proposal will lay down the provisions 
as regards the detailed rules and the procedure for the association of all OCTs with the EU, 
irrespectively of their level of wealth or other specific characteristics of individual OCTs. It 
will set the legal framework and define the General Framework of the EU-OCT Association, 
the  possible  areas  of  cooperation  between  the  EU  and  the  OCTs,  the  trade  regime  that  will 
govern the exchanges and the cooperation in that field between OCTs and the EU as well as 
the  different  financial  instruments  to  which  OCTs  will  be  eligible  to  (11th  EDF  and  the 
horizontal programmes).This homogeneous framework will be further detailed, as far as EU 
financial  assistance  is  concerned,  at  the  programming  stage  with  each  beneficiary  OCT  in 
order to identify the areas of cooperation where EU's aid would be the most effective in view 
of  meeting  the  objectives  of  the  association.  In  that  respect,  special  consideration  will  be 

1 

Decision 2001/822/EC of the Council of 27 November 2001 on the association of the overseas countries 
and  territories  with  the  European  Community,  (OJ  L  314/1,  30.11.2001),  amended  by  Decision 
2007/249/EC (OJ L 109/33, 26.04.2007). 

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given  to  the  specific  economic,  social  and  environmental  situation  and  needs  faced  by  the 
concerned OCT.  

The  legislative  proposal  for  a  Council  Decision  forms  part  of  the  European  Commission's 
work programme for 2012. 

Since the adoption in 2001 of the current OAD, the regional and international environments in 
which  OCTs  operate  have  considerably  changed.  New  political  priorities  have  emerged  at 
European  and  international  level,  (such  as  environment,  climate  change,  sustainable 
management of natural resources) as well as changes in global trade patterns. The European 
Commission  proposed  a  strategy2  articulated  around  three  priorities:  smart  growth, 
sustainable growth and inclusive growth as a response to the economic and financial crisis. 

For  their  part,  the  OCTs  continue  to  face  economic  and  social  problems  and/or  struggle  to 
found  their  economies  on  a  sustainable  basis.  They  are  confronted  with  a  number  of 
difficulties linked to their fragile environments and the need to secure the environmental pillar 
of sustainable development.  

Through  public  consultations,  a  number  of  general  issues  have  been  defined,  such  as  the 
change  of  focus  from  poverty  reduction  in  development  cooperation,  to  a  more  reciprocal 
relationship.  This  change  would  allow  for  the  association  to  respond  to  the  realities  in  the 
field  and  ensure  recognition  of  the  OCT  specificities,  diversity  and  vulnerability,  as  well  as 
their  importance  in  terms  of  biodiversity.  This  change  would  also  reflect  the  fact  that  the 
OCTs' main problem is not poverty as such. 

The main issue which needs to be addressed consists in putting the economies and societies of 
the  OCTs  on  a  sustainable  development  path  by  increasing  their  competitiveness,  reducing 
their  vulnerability,  and  cooperating  with  their  neighbours  and  integrating  in  the  regional 
and/or world economies. 

The underlying drivers of the problem identified above can be summarised as follows: 

(1) 

(2) 

(3) 

(4) 

2 

3 

The  OCTs  have  difficulties  to  overcome  handicaps  due  to  their  physical 
characteristics (insular, small, remote, variable in size of exclusive economic zone); 

They fail to mitigate their high vulnerability linked to their geographic characteristics 
(located  in  areas  of  cyclonic  and  seismic  activities,  exposed  to  impacts  of  climate 
change such as coral reef bleaching or sea level rise, highly dependent on imports of 
fossil fuels at high transport costs); 

They hardly overcome low administrative capacities due to their small size and, as a 
consequence, they face difficulties in elaborating and implementing policy tools and 
developing infrastructures; 

They fail to develop their micro-economies characterized by structural weaknesses, a 
small undiversified production base, with exports concentrated in a few sectors 3: 

Communication  COM(2010)  2020  final  of  3  March  2010  "Europe  2020  –  A  strategy  for  smart, 
sustainable and inclusive growth" 
For a more detailed analysis of the OCTs' economic profiles, see Annex 12. 

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(5) 

(6) 

They  are  confronted  with  erosion  of  trade  preferences  for  OCTs  in  their  relations 
with the EU and increased competition for their exports in third markets, due to the 
conclusion  of  an  increasing  number  of  Free  Trade  Agreements  (FTAs)  by  major 
trading  partners  (the  EU,  the  United  States  and  Canada)  that  are  important 
destination markets for some OCTs; 

They are sometimes unable to be covered by initiatives/agreements concluded by the 
EU and/or their Member States aiming at tackling political priorities at European and 
international  level  that  emerged  in  the  last  ten  years  such  as  impacts  of  climate 
change  with  third  partners,  lowering  the  capacities  of  the  OCTs  to  join  global 
response mechanisms. 

2. 

ANALYSIS OF SUBSIDIARITY 

The EU's right to act in the area of EU-OCT relations derives primarily from Part Four of the 
TFEU.  The  purpose  of  the  EU-OCT  association,  the  social  and  economic  development  and 
close economic ties between the OCTs and the EU as a whole, cannot be achieved via actions 
at  Member  States  level.  Moreover,  with  regard  to  the  OCT  trade  regime,  Member  States 
actions would not be possible as the common commercial policy falls within the domain of 
the EU's  exclusive competence (Part Five, Title II of the TFEU). According to Article 206, 
the  EU's  trade  policy  should  contribute  to  the  harmonious  development  of  world  trade,  the 
progressive abolition of restrictions on international trade and on foreign investment, and the 
lowering of customs and other barriers. The rules of the EU-OCT preferential trade relations 
are governed by the principles laid down in Title II of Part Five of the TFEU regarding the 
EU's trade policy. 

As stipulated in Article 203 of the TFEU, the Council of the EU shall lay down provisions as 
regards the detailed rules, arrangements and procedures of the association of OCTs with the 
Union.  These  include  trade  and  trade  related  issues,  customs  arrangements,  public  health, 
public security or public policy and freedom of movement for workers throughout the OCTs 
and Member States. This is expected to be in accordance with the principles laid down in the 
TFEU regarding the definition and implementation of EU policies and activities, concerning 
inter alia environment and gender equality (TFEU Part One). 

In  view  of  increasingly  complex  challenges,  none  of  the  EU's  internal  priorities  –  security, 
smart,  inclusive  and  sustainable  growth  and  job  creation,  climate  change,  access  to  energy, 
resource  efficiency,  including  the  protection  of  biodiversity,  safe  management  of  water  or 
waste, health and pandemics, education - will be achieved in isolation from the wider world. 

With 27 Member States acting within common policies and strategies, the EU alone has the 
critical mass to respond to global challenges, such as climate change. The action of individual 
Member States can be limited and fragmented. This critical mass also puts the EU in a better 
position to conduct policy dialogue with partner OCT governments. 

Through its external action, the EU is committed to promoting its standards, and sharing its 
expertise. The OCTs have the potential for becoming strategic outposts of the EU throughout 
the world. Upgrading the OCTs legislation and standards to EU levels could increase both the 
influence of the OCTs and subsequently the EU in their respective regions.  

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3. 

OBJECTIVES OF EU INITIATIVE  

Based on the Articles 198 and 199 TFEU, the general objectives of the association are: 

– 

– 

– 

– 

– 

to promote the economic and social development of the OCTs; 

to establish close economic relations between the OCTs and the EU as a whole; 

to further the interests and prosperity of the inhabitants of the OCTs in order to lead 
them to the economic, social and cultural development to which they aspire; 

to allow OCTs to benefit from the same trade treatment that Member States accord to 
each other;  

to promote the definition and implementation of environmental policies in the OCTs 
as one of the three pillars of sustainable development (alongside with economic and 
social development). 

Throughout the various consultations and external studies, a clear consensus has arisen among 
stakeholders,  external  assessors  and  political  actors  alike  that  the  purpose  and  objectives  of 
the  association,  as  laid  down  in  Articles  198  and  199  of  the  TFEU,  would  need  to  be 
translated into the objectives identified by the Commission as central to this framework and 
which  were  endorsed  by  the  Council  of  the  EU4.  The  specific  objectives  of  the  next 
association framework would therefore be as follows: 

– 

– 

– 

– 

– 

– 

– 

to help promote EU's values and standards in the wider world; 

to establish a more reciprocal relationship  between  EU  and  OCTs  based  on  mutual 
interests; 

to enhance OCTs' competitiveness; 

to  strengthen  OCTs'  resilience,  reduce 
vulnerabilities; 

their  economic  and  environmental 

to promote cooperation of OCTs with third partners; 

to integrate the latest EU policy agenda priorities; 

to take into account changes in global trade patterns and EU trade agreements with 
third partners. 

4. 

POLICY OPTIONS  

4.1. 

Discarded options 

4.1.1.  No EU action 

The option ‘no EU action’ is not assessed in this impact assessment report as Part IV of the 
TFEU constitutes in itself an obligation for the EU to act. 

4 

COM(2009) 623 and conclusions of the Council 17801/09. 

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4.1.2.  Two distinctive Council Decisions: one for trade regime and another for cooperation 

for sustainable development  

This option was discarded since it would weakness the possibility to define a comprehensive 
framework  for  all  OCTs.  In  addition,  it  would  rather  increase  the  legislative  burden  for  EU 
institutions and would limit the visibility of the EU-OCT partnership.  

4.2. 

Policy  option  1:  Status  Quo  Renewal  of  the  current  Overseas  Association 
Decision without any changes. 

Under  Policy  option  1,  the  structure  and  the  content  of  the  currently  into  force  Association 
Decision would be maintained for the period 2014-2020.  

4.3. 

Policy  option  2:  Modernisation  of  the  Overseas  Association  Decision  and 
alignment with EU policy framework 

Option 2 would modernise and align the OAD with the EU policy framework. Its objectives 
and principles would be revised, taking into account the political orientations of the Council 
of the EU, the requests the OCTs and their Member States expressed on different occasions as 
well as the results of external studies. 

Under this option, the EU-OCT cooperation would give a particular focus on areas of mutual 
interest, as called for by the stakeholders and underlined as a recommendation in the external 
studies,  e.g  climate  change,  biodiversity  conservation,  research  and  innovation,  allowing  to 
take  into  account  the  international  political  priorities  that  emerged  in  the  last  ten  years  and 
which  are  in  accordance  with  the  Europe  2020  agenda.  Furthermore,  under  this  option,  the 
EU-OCT  association  would  contribute  to  the  promotion  of  EU  interests  and  values, 
considering OCTs as outposts of the EU in their regions. 

Under policy option 2, the trade regime would continue to give OCTs duty free and quota free 
access to the EU market. In parallel, new provisions would foresee improved conditions under 
which  OCTs  could  access  the  EU  market  by  revising  the  preferential  rules  of  origin5.  In 
addition,  policy  option  2  suggests  revising  the  arrangements  for  trade  in  services  and 
establishment  and  granting  to  the  OCTs  Most  Favoured  Nation  treatment,  where  they 
currently  receive  only  basic  third  country  treatment  (i.e.  General  Agreement  on  Trade  in 
Services - GATS).  

Finally,  policy  option  2  suggests  the  introduction  of  new  provisions  that  would  ensure  the 
correct management of trade preferences and the clarification of the respective responsibilities 
of OCTs, Member States and the EU concerning administrative errors and fraud. 

4.4. 

Option 3: Several partnership agreements concluded 

Option  3  would  entail  a  diversification  of  EU-OCT  relations.  In  the  area  of  trade  and 
economic cooperation two approaches would be adopted. Certain OCTs could be included in 
other  EU  bilateral  trade  arrangements,  namely  Economic  Partnership  agreements  (EPAs)  or 
FTAs, where relevant and possible. For the remaining OCTs, an OCT trade regime equivalent 

5 

(e.g. deletion of the requirement regarding the nationality of the crew manning vessels fishing outside 
territorial waters and the inclusion of new or clearer definitions of wholly obtained goods and minimal 
operations,  lighter  administrative  requirements  regarding  evidence  of  direct  transport  of  OCT  goods 
between the OCT's territory and the EU, new possibilities for cumulation, more flexible administrative 
procedures for granting derogations to the rules of origin with period of validity determined on a case 
by case basis, etc.) 

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to policy option 1 or 2 would be foreseen under the association framework. Whilst this would 
not  cover  the  trade  and  economic  cooperation  with  those  OCTs  which  would  have  been 
included  in  other  trade  agreements,  it  could  cover  cooperation  with  all  OCTs  in  all  other 
areas.  An  alternative  option  would  consist  in  having  all  cooperation  with  OCTs  that  would 
fall under an EPA  or  FTA  take  place  in the context of these agreements. This  would imply 
that financial assistance would also take place outside of the association framework. 

5. 

ASSESSMENT OF IMPACTS 

5.1. 

Assessment policy option 1 

5.1.1. 

Social and economic impacts 

Deterioration  of  EU  market  access  for  OCTs:  any  trade-related  impact  would  stem  from 
increased  competition  which  OCTs  might  face  on  the  EU  market  as  a  consequence  of  EU 
third partners gaining better market access for their goods and services (e.g. through an FTA 
or via a multilateral agreement). An OCT loss in competitiveness might translate in weakened 
EU-OCT  economic  ties.  Policy  option  1  might  also  be  an  option  in  which  the  trade  rules 
would  not  offer  enough  incentives  to  those  OCTs  that  currently  do  not  maintain  strong 
economic relations with the EU to start doing so. It is therefore unlikely that the trade rules 
under policy option 1 would promote OCT economic diversification. Regional integration of 
the  OCTs  would  be  undermined  as  the  set  of  rules  of  origin  would  not  offer  additional 
opportunities  for  OCTs  to  source  inputs  from  their  neighbours,  and  thus  trade  more  with 
them. 

5.1.2.  Environmental impact 

Maintaining  the  status  quo  would  fail  to  impulse  greater  positive  impact  of  the  EU-OCT 
association on the OCTs' environment. The absence of the recognition of environmental and 
climate  change  issues  as  an  area  of  mutual  interest  for  the  EU  and  the  OCTs  undermines 
progress in these fields in which only a few OCTs decide to cooperate with the EU.  

Furthermore, policy option 1 would not allow the EU to promote its political agenda and its 
international commitments6 regarding biodiversity, green energy, climate change and disaster 
risk  reduction  in  the  OCTs,  and  the  OCTs  would  not  help  to  promote  EU's  values  and 
standard in these fields in the wider world. 

5.1.3.  Administrative impact 

This option would not influence the administrative burden of neither the EU nor the OCTs. 
The  programming  cycle  would  remain  the  same,  as  would  the  legal  framework.  Under  this 
option, it would be difficult to respond positively to the requests/recommendations expressed 
by external evaluators in relation with the promotion of the cooperation between OCTs  and 
their  neighbouring  countries,  amongst  others  through  a  better  coordination  of  the  respective 
financial  instruments  available  to  OCTs,  African-Caribbean-Pacific  (ACP)  States  and  the 
Outermost Regions of the EU (European Regional Development Fund - ERDF). Furthermore, 
option 1 would not allow adapting rules and procedures of the programming of EU financial 
assistance. 

6 

Communication COM(2010)2020final of 3.3.2010 "Europe 2020 – a strategy for smart, sustainable and 
inclusive growth" and Communication COM(2011) 500 final of 29 June 2011 "A budget for EU 2020 . 

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5.2. 

Assessment policy option 2 

5.2.1. 

Social and economic impacts 

Policy option 2 is likely to have a positive social and economic impact on OCTs due to the 
improvement of the market access conditions for OCT goods, a greater EU openness to OCT 
services  operators  and  investors,  and  the  possibility  of  more  focused  capacity  building 
measures.  Option  2  thus  carries  the  potential  for  greater  economic  diversification  and  job 
creation in sectors such as renewable energies, ecosystems management, innovation etc. The 
proposed changes to the rules of origin are likely to result in a more effective use by OCTs of 
the export opportunities offered by the OCT trade regime.  

Simplifying and relaxing conditions, strengthening transparency and coherence with the rules 
of  origin  of  other  trade  partners  is  likely  to  result  in  efficiency  gains,  increase  the 
attractiveness  and  legal  certainty  for  investments  in  economic  sectors  that  depend  on 
preferential  market  access  and  reduce  administrative  burdens  for  OCT  companies  and 
authorities. The diversification of cumulation possibilities would allow for an improvement of 
sourcing  opportunities  for  OCT  companies,  which  could  have  a  positive  influence  on  their 
competitive  position  and  could  stimulate  the  development  of  economic  relations  between 
OCTs and other third countries.  

Through  technical  assistance  and  capacity  building  OCTs  could  be  supported  in  complying 
with technical, sanitary and phyto-sanitary rules which constitute the most important obstacles 
which OCT exports face in accessing the EU market. In the services sector, the benefits for 
OCTs would be considerable.  

In a first instance, the EU's market openness to OCTs' service operators would be aligned with 
the  EU's  most  favourable  treatment  and  would  thereafter  be  automatically  increased  every 
time  the  EU  would  grant  more  favourable  treatment  to  other  third  partners7.  The  services 
sectors  which  would  benefit  most  from  removing  limitations  would  be  the  construction 
services,  environmental  services,  and  recreational  services;  all  of  which  are  of  interest  to 
OCTs. By further opening its services sectors to OCTs' operators, the EU would stimulate the 
further  development  of  new  or  existing  sectors  by  offering  additional  opportunities  for 
exports,  including  for  cross-border  trade  through  modern  communication  technologies.  In 
addition,  policy  option  2  would  open  the  non-services  investment  (establishment)  to  OCTs, 
which  is  currently  not  covered.  It  would  also  contribute  to  OCTs  becoming  more  attractive 
destinations of foreign direct investment. Ensuring that OCTs automatically extend to the EU 
the treatment they give to major economies such as US or China would respect the spirit of 
the special relationship between EU and OCTs and would be a translation of the principle of 
reciprocity.  

Within a bilateral dialogue, the EU might encourage OCTs to promote principles of Corporate 
Social Responsibility (CSR) among the companies investing and operating in their territory. 
This would positively impact social and environmental standards in OCTs. 

The continued, targeted and coordinated support to OCT strategies, capacities, legislative and 
institutional  frameworks  proposed  under  policy  option  2  is  likely  to  increase  the  EU's 
involvement  in  OCT  policies,  regulatory  models  and  the  like.  An  avenue  for  doing  so  is 

7 

Whereas  the  weighted  average  openness  of  the  EU  corresponds  to  a  factor  34  for  modes  1,  2  and  3 
under  GATS,  it  corresponds  to  a  factor  57  (and  74  for  establishment)  under  a  preferential  agreement 
such as the EPA with CARIFORUM. See appendix 2 on trade and trade related aspects of the OAD. 

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offered  by  the  new  provisions  concerning  EU-OCT  cooperation  on  trade  which  option  2 
envisages. 

The  EU  support  to  OCTs'  capacity  building  could  also  concern  the  elaboration  and/or 
implementation of social policies (e.g concerning unemployment or professional training) in 
order to accompany their strategies towards economic growth. 

5.2.2.  Environmental Impacts 

The  emphasis  on  regional/thematic  allocation  in  view  of  better  responding  to  issues  that 
emerged in the last decade, and that are of common interest to all OCTs and the EU, would 
ensure  that  the  specific  characteristics  of  the  OCTs  regarding  environment,  climate  change 
and  biodiversity  issues,  are  dealt  with  more  appropriately.  The  allocation  of  a  specific 
envelope  to  environment  and  climate  change  would  be  in  line  with  the  EU  policy  agenda 
priorities and promote EU values. Furthermore, investment in improved natural environments 
and  improvements  in  environmental  quality  would  also  result  in  substantial  economic  and 
health impacts. 

5.2.3.  Administrative impact 

The automatic granting by the EU of the most favourable treatment in services would mean 
that the implementation of this policy option would not put additional strains on the limited 
administrative capacities of OCTs as long and complex negotiations would be avoided. The 
proposal to define the technical assistance for the entire programming period would ensure a 
more coherent identification and a subsequently more efficient administration of the strategies 
and  programmes  chosen  for  cooperation.  This  would  ensure  coherence  and  exchange  of 
know-how between the local administrations and external experts.  

Shorter  lead-in  times  for  EU  financial  assistance  and  faster  implementation  of  the  EU 
assistance  would  lead  to  further  development  of  OCTs  capacities  in  the  field  of  policy 
formulation and legislation. 

Option 2 is expected to have a positive impact also in terms of timely programming thanks to 
the  possibility  which  is  proposed  in  relation  with  "comprehensive  territorial  development 
plans"  or  "comprehensive  development  plans"  agreed  between  the  OCT  and  their  Member 
State.  These  plans  would  be  taken  into  account  for  defining  the  strategy  of  cooperation 
between OCTs and the EU. 

5.3. 

Assessment policy option 3 

5.3.1. 

Social and economic impacts 

The  impact  of  policy  option  3  would  depend  on  the  results  of  the  negotiations  between  the 
OCTs,  the  EU  and  the  third  partner(s)  concerned.  Thus,  the  impact  would  vary  from  one 
negotiation to another. In general, under this option, OCT trade flows with the third partner(s) 
might gain in importance. On the other hand, their industries could face stronger competition 
in  the  OCTs'  domestic  markets  as  cheaper  imported  products  could  become  available. 
Consumers would gain in this development. Where the cheaper products would serve as input 
to processing industries, the latter may benefit and become more competitive as costs would 
drop.  The  most  sensitive  products  could  be  excluded  from  liberalisation.  Customs  revenues 
could go down and OCTs would then have to develop alternative sources of revenue that are 

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less  dependent  on  goods  trade.  The  option  could  therefore  have  a  serious  impact  on  public 
spending in OCTs. 

The social and economic impact of a possible inclusion of the Pacific OCTs in an EPA could 
stimulate the development of processing industry (for example fish/tuna), which might attract 
more  foreign  investment,  at  the  expense  of  other  partners.  It  could  also  lead  to  a  vertical 
integration  of  the  different  industries.  The  EU's  relevant  processing  industry  could  benefit 
from  these  developments  if  it  would  lead  to  a  steady  supply  of  these  products  to  the  EU. 
However,  the  EU  industry  could  also  be  negatively  affected  by  the  stronger  competition 
which  they  would  face.  In  the  most  negative  scenario,  this  could  lead  to  job  loss  and  the 
cessation of activities in certain EU Member States.  

OCTs opening their market in services and establishment to their neighbours might bring in 
more  foreign  direct  investment  or  temporary  service  providers  as  well  as  open  markets  for 
OCT  service  providers  and  investors.  However,  this  depends  on  the  outcome  of  the 
negotiations  with  third  countries  and  the  sectors  that  the  OCTs  would  choose  to  liberalise. 
Due to limited administrative capacity for negotiations on the OCTs side, close cooperation 
and support would be needed during negotiations so as to avoid a premature liberalisation of 
sectors  where  domestic  regulation  has  not  been  sufficiently  developed  to  ensure  consumer 
protection.  Where  the  partner  countries'  interest  for  OCT  markets  is  not  very  high,  adding 
OCTs  to  EU  FTAs  (possibly  including  a  multilateral  negotiation  in  services  and 
establishment) may mean that the EU will be asked by its FTA partners to compensate with 
further  commitments.  This  would  risk  unbalancing  the  deal  reached  between  EU  and  the 
partner country/ies.  

Those  OCTs  that  would  join  EPAs  could  gain  access  to  nominally  larger  amounts  of  trade 
related financial assistance under the 11th European Development Fund, but they would have 
no guarantee that sufficient financial resources be dedicated to their needs as the interests of 
the bigger partners and the developing countries may prevail. This effect may be counteracted 
if the OCTs would ally themselves within their region with ACP States such as Antigua and 
Barbuda, Fiji, Guyana and Palau, which are Small Island Developing States and face similar 
challenges  as  the  OCTs8.  While  gaining  access  to  these  funds,  the  OCTs  would  be  cut  off 
from other potential sources of financing from which they benefitted under the OAD, such as 
the internal horizontal programmes and EU budget lines. This would be the case as well for 
OCTs which would be integrated or associated to other free trade agreements. However, for 
them  this  loss  would  not  be  compensated  by  access  to  additional  funds  under  external 
programmes covering their region. 

5.3.2.  Environmental impact 

Given the size of OCTs, the environmental impact of including some of them in other trade 
agreements  is  likely  to  be  limited  and  would  not  add  to  the  environmental  impact  already 
identified  for  those  agreements.  The  environmental  impact  of  opening  to  a  neighbouring 
country might also be higher than when opening to the EU alone, as one could expect that this 
would lead to an increase of transport related impacts, although these neighbours would tend 
to be located closer to the OCT than the EU. The net impact (compared to the status quo and 
the improved arrangements under option 2) would differ by OCT, the agreement to which it 
would be annexed and the situation in the OCTs in specific sectors prior to negotiations. For 
those OCTs that would remain in the trade regime under the OAD, the environmental impact 

8 

For 
the  UN 
rep/ohrlls/sid/list.htm. 

list  of  Small 

Island  Developing  States, 

see:  http://www.un.org/special-

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would  correspond  to  the  one  identified  for  policy  options  1  or  2.  Negative  environmental 
impacts might be mitigated through cooperation with the EU on environmental issues. 

5.3.3.  Administrative impact 

The  negotiation  and  implementation  of  policy  option  3  would  be  heavy  and  complex  for 
OCTs,  their  Member  States,  the  EU  trade  partner(s)  and  the  EU  alike.  This  process  would 
have  to  be  reiterated  for  every  single  trade  agreement  that  would  need  to  be  amended  to 
include specific OCTs. 

6. 

COMPARISON OF OPTIONS  

6.1. 

Policy option 1 

Maintaining  the  status  quo  could  legitimately  be  considered  as  a  valid  option  for  the  future 
EU-OCT  association  as  current  arrangements  were  found  to  have  been  beneficial  for  the 
OCTs' social and economic development, amongst others by providing free access to the large 
EU  market  and  the  possibility  of  support  for  exploiting  the  export  opportunities  this 
represents.  The  EU-OCT  cooperation  in  the  period  1999-2009  was  considered  by  external 
studies  to  have  been  coherent  with  both  the  association's  objectives  and  the  OCTs'  political 
priorities  and  concluded  that  no  marked  contradictions  or  inconsistencies  had  occurred 
between EU-OCT cooperation and other EU policies. Though consistent with Part Four of the 
TFEU and its Preamble, option 1 would not accomplish the shared ambition of OCTs, their 
Member  States  and  the  European  Commission  to  reshape  and  modernise  the  EU-OCT 
relations on a reciprocal basis. Rather than modernising the relations and introducing a more 
reciprocal  partnership,  in  which  mutual  interests  could  be  better  taken  into  account,  the 
donor/beneficiary rationale which has traditionally underpinned EU-OCT relations would be 
maintained. 

OCT  goods  and  services  access  to  the  EU  would  remain  subject  to  the  existing  rules  and 
would  lead  to  loss  of  market  access  for  the  OCTs  (due  to  preference  erosion).  This  would 
have a negative impact on the social and economic position of OCTs. 

6.2. 

Policy option 2 

Policy  option  2  would  enhance  an  EU-OCT  cooperation  based  on  the  mutual  interests  the 
stakeholders  identified  throughout  the  consultation  process.  It  would  also  promote  a  more 
efficient  cooperation  through  a  more  focused  and  coordinated  action  between  the  EU,  the 
OCTs  and  their  Member  States.  Areas  of  cooperation  recognized  as  priorities  by  the  OCTs 
would  receive  an  enhanced  support  from  the  EU  (e.g.:  conservation  of  biodiversity  and 
ecosystem services, research and innovation). 

Under  policy  option  2,  the  EU  would  support  the  OCTs  to  address  sensitive  issues 
undermining their sustainable development, such as climate change which they cannot tackle 
alone. For such challenges, insular territories cannot develop successful measures alone, they 
need to find partners and be integrated in global responses. 

Policy option 2 would offer to the OCTs a modernised trade regime with the EU that would 1) 
entail  improved  rules  and  origins  and  2)  guarantee  a  treatment  for  trade  in  services  and 
establishment that would not be less favourable than the one given by the EU to other third 
partners, which is not the case under the current framework. 

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Policy option 2 would be consistent with Part Four of the TFEU and its Preamble. It would 
also  translate  the  political  orientations  of  the  Council  of  the  EU  on  the  three  objectives  of 
competitiveness, resilience and cooperation. Under policy option 2, the association framework 
would take into account recent policy developments and would take stock of discussions that 
emerged in the last decade. Policy coherence would be ensured under this option and would 
be  strengthened.  The  social,  economic  and  environmental  impacts  would  be  more  positive 
than under options 1. 

Policy option 2 would better reflect the notion of mutual interest than it is currently the case. 
It would allow the integration of EU policy agenda priorities in the relations between the EU 
and the OCTs and the EU added value as a global partner in emerging global issues would be 
enhanced. In doing so, the OCTs better promote EU's values and standards in the wider world. 

6.3. 

Policy option 3 

By integrating or associating OCTs to other trade agreements, some of the objectives of the 
EU-OCT association could be met. However, this would be done outside of the association as 
such.  Furthermore,  option  3  may  not  be  fully  adapted  to  the  needs  and  realities  of  most  or 
even  all  OCTs.  There  may  be  negative  impacts  also  for  the  EU  itself  if  significant 
compensation  is  required  in  order  to  incorporate  the  OCTs  into  existing  agreements.  By 
integrating  OCTs  in  other  trade  agreements  the  associated  countries  and  territories  with 
constitutional links to Member States would legally and effectively cease to be OCTs. Since 
the implementation of policy option 3 may result in the EU having to work out solutions for 
setting up different types of relations with each of the OCTs, the legal process would be very 
complicated  and  would  need  to  be  reiterated  for  every  OCT.  It  would  likely  increase 
confusion  as  regards  to  their  status  and  that  of  their  inhabitants.  Certain  rules  currently 
contained or being considered in the different agreements may not apply to OCT inhabitants 
to the extent that they are EU citizens. 

6.4. 

Coherence 

The three policy options are coherent with Part IV of the TFEU.  

Policy  options  2  and  3  will  allow  for  consistency  with  the  policy  agendas  and  the  political 
priorities  that  emerged  in  the  last  ten  years,  while  policy  option  1  would  not  align  the 
association  with  these  latest  developments  and  would  not  fully  integrate  the  three  central 
objectives  of  competitiveness,  resilience  and  cooperation  that  were  proposed  by  the 
Commission and politically endorsed by the Council of the EU (cf. Section 1.3 above).  

6.5. 

Effectiveness 

Policy  option  1  does  not  allow  a  definition  of  goals  and  objectives  in  conformity  with  the 
political  priorities  defined  by  the  Commission  in  its  Communication9  on  the  elements  for  a 
new partnership between the EU and the OCTs and endorsed by the Council10. Indeed, policy 
option  1  does  not  foresee  the  revision  of  the  Association  Decision  in  order  to  integrate  the 
new challenges faced by both the EU and the OCTs. Furthermore, the inability of the OAD to 
take into consideration the changes in the context of EU trade agreements with third partners 
would  diminish  the  capability  under  option  1  for the  EU  to  attain  the goal  of  a  modernised 
EU-OCT framework. 

9 
10 

Com(2009) 623 final of 6 November 2009 
Council conclusions 17801/09 of 22 December 2009 on the EU's relations with the OCTs 

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On the contrary, policy option 2 proposes to revise the association framework and thus take 
full account of the association's purpose and objectives as defined in Part IV of the TFEU, of 
the political priorities that have emerged since 2001 as well as of the three central objectives 
of  competitiveness,  resilience  and  cooperation.  This  would  allow  closer  cooperation  on 
environment and climate issues, creating synergies and therefore increasing the environmental 
resilience of the OCTs with a positive impact on their social and economic development and 
on an increased competitiveness. 

Policy option 3 would theoretically allow to provide a "tailor made" response to OCTs in the 
field  of  trade  but  would  fail  to  set  a  comprehensive  framework  for  a  holistic  partnership 
between the EU and all OCTs. 

6.6. 

Efficiency 

As mentioned above, the Commission has indicated its intention to propose the modernisation 
of  the  EU-OCT  association.  In  that  respect,  policy  option  1  does  not  seem  to  constitute  the 
most appropriate decision. Indeed, option 1 is not addressing in an efficient manner the need 
to  renovate  the  partnership  between  the  OCTs  and  the  EU  since  it  would  fail  to  take  into 
consideration  the  ongoing  liberalisation  of  international  trade,  the  potential  of  OCTs  as 
proponents of the EU's values or the ability to pinpoint areas of mutual interest  and to give 
special attention to areas like the environment and regional integration. 

Policy option 2 provides the most appropriate response to the commitment of the Commission 
to propose a modernised association framework between the EU and the OCTs. In addition, 
policy  option  2  would  set  more  flexible  and  lighter  administrative  requirements  and 
procedures in the field of trade relations. 

The  efficiency  of  policy  option  3  could  be  affected  by  the  co-existence  of  two  parallel 
frameworks of cooperation (trade relations under the EPA or FTA on the one hand and OAD 
for other areas on the other hand), as it would put additional administrative burden. Putting it 
into place would be a heavy and complex process for the OCTs, their Member States, the EU 
trade  partner(s)  and  the  EU  alike.  These  drawbacks  are  likely  to  have  a  cost  incidence  on 
administrative expenditure for both the EU and the OCTs. 

7. 

PREFERRED OPTION 

Based  on  the  analysis  and  comparison  of  the  different  policy  options,  option  2  is  the 
preferred option since it would best reflect: 

(a) 

the  shared  ambition  of  the  European  Commission,  the  OCTs,  their  Member  States 
and  the  EU  to  review  and  revise  the  EU-OCT  association,  and  to  establish  a  more 
reciprocal partnership, based on mutual interests and taking into account the various 
challenges OCTs face; 

(b) 

the purpose and general objectives of the EU-OCT association as set out in Part Four 
of the TFEU on the EU’s relations with OCTs; 

(c) 

the specific objectives of the next association framework defined above. 

Option 2 would thus lead to the modernisation and alignment of the OAD with the current EU 
policy framework. Subsequently, option 2 makes possible to better focus on the three pillars 

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of sustainable development (economic, social and environmental) and to give more emphasis 
to the international political priorities, such as climate change, environment and energy, which 
emerged in the last ten years. 

Concerning trade rules, option 2 would permit to continue to give OCTs duty free and quota 
free  access  to  the  EU  market  and  at  the  same  time  (contrary  to  option  1)  to  introduce 
improved conditions under which OCTs would access the market. In addition, under option 2 
it is proposed to revise the arrangements for trade in services and establishment and grant the 
OCTs  the  "Most  Favoured  Nation"  treatment,  where  they  currently  receive  only  basic  third 
country treatment (i.e. GATS). 

Concerning  the  financial  assistance,  option  2  suggests  increasing  the  share  of  the  regional 
allocation  within  the  total  financial  allocation  reserved  for  the  OCTs  under  the  2014-2020 
period.  This  would  allow  to  financially  supporting  the  efforts  of  the  OCTs  in  addressing 
issues that emerged in the last decade, and that are of common interest to all OCTs and the 
EU.  In  parallel,  option  2  would  serve  the  objective  for  an  enhanced  cooperation  between 
OCTs and their neighbouring partners as well as the objective aiming at expanding the EU's 
sphere of influence via the OCTs and to promote EU's policy agenda as a global player. 

8. 

MONITORING AND EVALUATION 

The Overseas Association Decision is the legislative act by which the Council sets the legal 
framework for the association of the OCTs with the EU. It is by nature a text defining the EU 
external relations with these countries and territories and as such, its implementation cannot 
be assessed through core indicators.  

As far as the EU financed cooperation is concerned, the effectiveness of the association will 
be monitored through audits and evaluations. The detailed provisions for this monitoring will 
be  laid  down  in  a  Commission  regulation  implementing  the  Council  Decision.  Input  and 
output  indicators  will  be  defined  in  the  framework  of  each  programme  relating  to  the  EU 
financed cooperation that will be concluded between the Commission and each OCT. These 
evaluations will be in line with the provisions that will concern the implementation of the 11th 
EDF. 

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