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# 52012SC0194

**COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document COUNCIL DECISION on the association of the overseas countries and territories with the European Union ("Overseas Association Decision")**

  

Contents

List
of Acronyms. 4

Introduction. 6

1........... Procedural issues and consultation of interested parties. 8

1.1........ Organisation and timing. 8

1.2........ Impact Assessment Board (IAB) 8

1.3........ Consultation and expertise: review of consultations, studies and
evaluation reports. 9

1.4........ Statistical Data. 14

2........... Problem Definition. 15

2.1........ The problem requiring action and the scope of the decision. 15

2.1.1..... The problem.. 15

2.1.2..... Main challenges. 15

2.2........ The underlying drivers of the problem.. 17

2.3........ The EU's right to act and the EU added value. 18

3........... Objectives of the future legislative framework. 19

3.1........ General objectives. 19

3.2........ Specific objectives. 19

3.3........ Consistency with external action priorities and other EU policies. 21

4........... Policy options. 22

4.1........ Discarded options. 22

4.2........ Policy option 1: Status Quo Renewal of the current Overseas
Association Decision without any changes. 22

4.3........ Policy option 2: Modernisation of the Overseas Association Decision
and alignment with EU policy framework  23

4.4........ Option 3: Several partnership agreements concluded. 25

5........... Impact assessment of policy options. 27

5.1........ Assessment policy option 1. 27

5.2........ Assessment policy option 2. 28

5.3........ Assessment policy option 3. 30

6........... Comparing and weighing the policy options. 32

6.1........ Comparing the policy options. 32

6.2........ Weighing the policy options. 35

6.3........ Preferred option. 37

7........... Monitoring and evaluation. 37

Annex 1 – List of
references. 39

Annex 2 – Glossary. 42

Annex 3 – Services
that participated in the Impact Assessment 44

Annex 4 – Structure
of the Overseas Association Decision. 46

Annex 5 – Public
consultation Green Paper 47

Annex 6 – EU
financed cooperation with OCTs. 49

Annex 7 – OCT
Remoteness – Liner Shipping Connectivity. 51

Annex 8 – EU 27
Goods Imports from all OCTs in 2010 (values in 1,000 EUR) 52

Annex 9 – Treatment
of OCT Goods Imported into the EU under CET rates. 53

Annex 10 – Overview
per OCT. 54

Annexe 11 – Thematic
report on environmental and climate change issues. 61

Annex 12 - Thematic
report on Trade and Trade Related Aspects of the Overseas Association Decision  90

              List of Acronyms

ACP                                  African, Caribbean
and Pacific States

ACS                                  Association of
Caribbean States

ASEAN                             Association of South
East Asian Nations

AVE                                  Ad Valorem
Equivalent

CARICOM                        Caribbean Community and
Common Market

CARIFORUM                   Caribbean Forum of ACP
States.

CFP                                   Common Fisheries
Policy

CET                                   Common External
Tariff

COMESA                          Common Market for
Eastern and Southern Africa

COMTRADE                    Commodity Trade Statistics

CSME                               CARICOM Single Market
and Economy

DDA                                  Doha Development
Agenda

DFQF                                Duty Free and Quota
Free

EAC                                  East African
Community

EBA                                   Everything But
Arms

EDF                                   European
Development Fund

EEN                                   Europe Enterprise Network

EIB                                    European
Investment Bank

EPA                                   Economic
Partnership Agreement

ERDF                                European Regional
Development Fund

ESA                                   Eastern Southern Africa

EU                                     European Union

EUR                                   Euro

FTA                                   Free Trade
Agreement

GATS                                General Agreement on
Trade in Services

GATT                                General Agreement on
Tariffs and Trade

GDP                                  Gross Domestic
Product

GSP                                   General System of
Preferences

HS                                     Harmonised System
Nomenclature

ILO                                    International
Labour Organisation

ISG                                    Inter Service
Group

IUU                                   Illegal,
Unregulated, Unreported fishing

LDC                                  Least Developed
Country

MacMap                            Market Access Map

MDG                                 Millennium
Development Goals

MERCOSUR                     Mercado Común del Sur

MFF                                  Multi-Annual
Financial Framework

MFN                                 Most Favoured Nation

NAMA                              Non-Agricultural Market
Access

NTB                                  Non-Tariff Barrier

OAD                                  Overseas
Association Decision

OCTA                               Association of the
Overseas Countries and Territories

OCTs                                 Overseas Countries
and Territories

OECS                                Organisation of East
Caribbean States

PACER                              Pacific Agreement on
Closer Economic Relations

PICTA                               Pacific Island Countries Trade Agreement

SACU                                Southern African
Customs Union

SADC                                Southern African
Development Community

SPD                                   Single Programming
Document

SPS                                   Sanitary and
Phytosanitary Measures

STABEX                           System for the
Stabilisation of ACP and OCT Export Earnings

TBT                                   Technical Barriers
to Trade

TFEU                                 Treaty on the
Functioning of the European Union

TRIPs                                Trade-related
aspects of Intellectual Property Rights

UNCTAD                          United Nations
Conference on Trade and Development

UNECLAC                        United Nations Economic
Commission for Latin America and
                                          the Caribbean

US                                     United States

USD                                  United States Dollar

WITS                                 World Integrated
Trade Solutions

WTO                                 World Trade
Organisation

              Introduction

Policy context of the renewal of the Overseas
Association Decision

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)[1].
The present OAD 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 interests.

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 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.

Brief presentation of the OCTs[2]

OCTs are islands located in the Atlantic,
Antarctic, Arctic, Caribbean, Indian Ocean and Pacific regions. They are not
sovereign countries but depend on four Member States of the EU: Denmark, France, the Netherlands and the United Kingdom. The association of the OCTs with the EU
flows from the constitutional relations that these countries and territories
have with the four Member States.

Table 1: The OCTs associated with the EU

UK || NL || FR || DK

Caribbean

Anguilla || Aruba || Saint-Barthélemy ||

British Virgin Islands || Bonaire || ||

Cayman Islands || Curaçao || ||

Montserrat || Saba || ||

Turks and Caicos Islands || Sint-Eustatius || ||

(Bermuda) i || Sint-Maarten || ||

Pacific

Pitcairn || || French Polynesia ||

|| || New Caledonia ||

|| || Wallis and Futuna ||

Indian Ocean

British Indian Ocean Territory || || Mayotte ||

Northern Atlantic

|| || Saint-Pierre et Miquelon || Greenland

Southern Atlantic and Antarctic

Saint Helena, Ascension Island, Tristan da Cunha || || French Southern and Antarctic Territories ||

Falkland Islands || || ||

South-Georgia and the South Sandwich Islands || || ||

British Antarctic Territory || || ||

i Though Bermuda is mentioned in both the
TFEU and the OAD, it has asked that the association arrangements would not
apply.

In general, OCTs have wide ranging
autonomy, covering areas such as economic affairs, employment market, public
health, home affairs and customs. Defence and foreign affairs usually remain
within the remit of the Member States. The OCTs are not part of the EU's
customs territory and are outside the Internal Market. The EU legislation does
not apply.

Being nationals of the EU Member States to
which their countries and territories are constitutionally linked, OCT
inhabitants hold EU citizenship. The OCTs' total population represents only
0.02% of the world population (1.2 million).Their total land mass represents
only 80,000 sq km[3].

1.           Procedural
issues and consultation of interested parties

1.1.        Organisation
and timing

The preparation of the new Overseas
Association Decision OAD has been carried out under the lead of DG Development
and Cooperation - EuropeAid. The drafting of this Impact Assessment report has
been coordinated by the Inter-service Group (ISG) for Overseas Countries and
Territories, acting as Impact Assessment Steering Group and composed by
representatives of all relevant services[4].
It aimed at ensuring consistency of the proposals developed within this report
with other EU policies and duly took into consideration the consultations,
reviews and studies mentioned in Section 1.3. The European Investment Bank was
also consulted.

Given the wide scope of
the OAD, specific working groups conducted detailed
analysis of environmental issues and climate change on
the one hand and of trade and trade related aspects on the other hand. These
working groups delivered specific reports that are attached as Annexes 11 and
12 to the present report.

Given that EU financial assistance to OCTs
have been financed by the European Development Fund (EDF) so far and that the
European Commission have proposed to continue this funding for the next
multi-annual financial framework (MFF), this impact assessment took into
consideration the Impact Assessment conducted in the context of the preparation
of the proposal for the 11th EDF[5].

1.2.        Impact Assessment Board (IAB)

Two
versions were successively submitted to the Impact Assessment Board which
delivered its opinions on 17 February 2012 and on 7 May 2012. IAB's comments were incorporated
in this revised version of the report. In particular, the following changes
were made: the scope of the OAD was better explained in the introduction in
order to underline the fact that the OAD will apply to all OCTs, irrespectively
of their level of wealth or other specific characteristics. The outcome of past
consultations, studies and evaluations was better explained (section 1.3 and
Annexe 5) and linked to the underlined drivers. Furthermore, the problems were
better identified and linked to the objectives and policy options (in that
regard two tables were added for clarity). International financial services and
taxation issues were incorporated in the report. Policy options were revised in
order to clearly explain the shortcomings of the current OAD and the discarded
policy options were mentioned in the report. The options were compared in terms
of effectiveness, efficiency and coherence. Furthermore, the report fully
integrates and references the findings in the annexes. The specific reports on
environmental issues on the one hand and on trade issues on the other hand were
incorporated in the report as annexes and were referenced where necessary as
appropriate in the main report. Finally, former Annex 4 has been incorporated,
as requested, in the main text and a glossary (Annex 2) was added.

1.3.        Consultation
and expertise: review of consultations, studies and evaluation reports

In accordance with the greater emphasis
placed on consultation and expertise as a tool to inform policy making, the
present report takes account of a wide range of consultations, studies and
evaluation reports.

Outcome of stakeholders' consultation

The revision of the OAD has been the
subject of various stakeholders' consultations throughout the period 2008-2011.
These include public consultations, but also ad hoc regular meetings between
the OCTs, the Member States to which they are constitutionally linked and the
European Commission, as well as dialogue foreseen under the association such as
the annual Forums, the regular trilateral meetings, or the partnership working
parties dedicated to environmental issues, trade issues, regional integration
of the OCTs, financial services in the OCTs and the future EU-OCTs relations.

The outcome of stakeholders' consultation
highlighted the following issues:

Paradigm shift and new policy priorities

In their replies to the Green Paper[6], stakeholders called for a
change of the association's current focus on poverty reduction and development
cooperation to a more reciprocal relationship focused on the sustainable
development of the OCTs (i.e. a development model that conciliates economic
activities and social well-being in the long run while preserving natural
resources and ecosystems for future generations), which could, at the same
time, support the promotion of EU values and standards in the wider world.

This was highlighted during the
interventions at the stakeholders' conference in October 2008 which gathered
over 100 interested parties from the OCTs' authorities, their Member States,
the EU's institutions and bodies and civil society at large.

The Council of the European Union in its Conclusions
of 22 December 2009[7]
welcomed and expressed support to the change of paradigm.

In a Joint Position Paper[8] adopted in February 2011, the
OCTs and their Member States called for a better recognition of the OCTs as
part of the European family, an association further based on the mutual
interests of the EU and the OCTs and a focus on potential and vulnerabilities
of the OCTs. The document also draws the attention to the issues of preference
erosion and other trade related issues and building capacity, and calls for the
EU to recognise the efforts the OCTs have made in complying with international
standards in the area of tax governance and the regulation of financial
services.

It was also underlined that issues relating
to environment, climate change and disaster risk reduction should constitute a
priority for the future EU-OCT relations: sustainable use and protection of OCTs
biodiversity and natural resources, environmental security, energy and
renewable energy, ecosystems conservation, fight against climate change impacts
and mitigation, preparedness and response to disasters, invasive species,
sustainable fisheries. Stakeholders[9]
called for an enhanced cooperation of the EU with the OCTs and Outermost
regions in the field of conservation of biodiversity and ecosystems services.

EU's solidarity with the OCTs

Solidarity between the EU and OCTs should
be based on the fact that OCT inhabitants, as nationals of the related Member
States, were also EU citizens. It was underlined that by helping OCTs to
strengthen their competitiveness and resilience, reduce their vulnerability and
implant themselves in their regional environment, the EU would actually be
investing in strategic outposts able to promote EU values in the world.

Lessons and conclusions from studies

The EU-OCT association was analysed in
various studies[10],
commissioned either by the European Commission or by the OCTs. These studies
covered topics such as the trade regime contained in the OAD, the OCTs'
environmental profiles, OCT statistical systems and capacities, OCT disaster
preparedness as well as the cooperation of the EU with the OCT during the
period 1999-2009[11].
This latter evaluation was presented and discussed with the stakeholders on the
occasion of the annual OCT-EU Forum in March 2011.

The main conclusions of these studies are:

Financial assistance to OCTs[12]

The external evaluation study conducted in
2011[13]
found that the EU-OCT financial cooperation in the period 1999-2009 (under the
8th and 9th EDF as well as under the Greenland budget
lines) was coherent with both the association's objectives and the OCTs'
political priorities.

Out of EUR 380
million committed, 31% were dedicated to education (e.g. skills development in
mining industry, a sector with export potential in New Caledonia), 23 % to
transport infrastructure (e.g. upgrade of harbours, air-ports and road
infrastructure to improve connectivity of Saint-Pierre et Miquelon, St. Helena,
Ascension Island and Tristan da Cunha, Anguilla, New Caledonia, Turks and
Caicos and Montserrat with the world), 21 % to water and sanitation
infrastructure, 9 % to environment (management and protection of resources, disaster
preparedness and waste management), 7 % to island economies and 9 % to
activities such as technical assistance and cooperation on trade and trade
related areas (e.g. support to trade in services, notably in the area of
tourism in Montserrat or support to trade development of Falkland Islands,
including key export sectors, such as fisheries, aquaculture, meat production
and tourism).

Despite the
positive results obtained, the study recommended that the current association
framework be revised so as to better adapt the financial assistance framework
to political priorities that have recently emerged as well as the needs and
realities of OCTs. It has to be noted that this aspect falls within the scope
of the powers of the Commission to administratively manage EU financial
assistance and therefore it is not addressed in the OAD. It will be detailed in
the Commission Regulation implementing the OAD.

The study also
highlighted that there was a need to foster cooperation between OCTs and their
neighbouring countries was also identified as a means to reach efficiency. In
this respect, the study highlighted that cooperation between the OCTs and their
neighbours (third countries, ACP States or outermost regions of the EU) is
insufficiently facilitated by the EU.

Access to EU programmes and horizontal
budget lines[14]
has, despite the full eligibility of the OCTs to these programmes, proven
difficult to implement, due primarily to lack of administrative capacity in
most OCTs. The OCTs are more than willing to participate in the different
programmes, yet there is need for better information and guidance in the
application process.

The study recommended that the current
association framework be revised so as:

(a)
to incorporate the political priorities
mentioned above in the programming the themes and political priorities that
have emerged in the last decade;

(b)
to promote cooperation between OCTs and their
neighbouring countries, amongst others through a better coordination and
coherence of EU actions and strategies in relation with the different actors;

(c)
to facilitate access to EU horizontal programmes,
notably through information sessions and/or seminars financially supported by a
dedicated envelope or by means foreseen in each programme.

Trade and trade related issues[15]

In their
overall assessments of the OCT trade regime, OCTs, their Member States as well
as external evaluators all agree that the trade and economic component of the EU-OCT
association has contributed to the sustainable social and economic development
of OCTs by providing OCTs a secure access to the large EU market, providing
numerous export opportunities, and supporting local economies. Echoing the
conclusion of an earlier external evaluation of the 9th EDF[16], ECO Consult et al. (2011)
stated that EU-OCT cooperation programmes and projects under the 8th
and 9th EDF had been highly relevant to the individual OCTs' needs
as well as coherent with both the association's objectives and the OCTs' own
priorities[17].
As regards coherence between EU support to the OCTs and other EU policies
(migration, trade, fisheries etc.) ECO Consult et al. (2011) found no marked
contradictions or inconsistencies[18].

Even if the OCT
trade regime has provided levers for the OCTs' economic development, certain
areas of improvement were identified. LUFF et al. (2010) and others have
pointed out that while the EU offers OCT wide market access, this has not
always translated in actual trade opportunities, as OCTs faced several
challenges to effectively exploit the market access that was offered. The
challenges not only relate to structural difficulties OCTs face, such as the
size of their economies and their enterprise, the remoteness of their
territories or even the absence of OCT trade policies, but also have to a
certain extent to do with the EU rules and conditions which define the OCTs'
actual market access. The studies also point out that the relative worth of the
OCTs' duty free and quota free market access is decreasing as a result of
progressive trade liberalisation on a global and regional scale. Finally, the
studies highlighted that compared to the arrangements for trade in goods, the
OAD arrangements for trade in services were relatively underdeveloped.

The recommendations of external evaluators were:

(a)
to adapt the arrangements concerning trade in goods
so as to better take into account structural difficulties (small sized
economies, enterprises, administrative capacity), amongst others by introducing
more flexible rules of origin for OCT goods exports to the EU;

(b)
to allow for the possibility for OCTs to engage
in more favourable trade relations with other OCTs and developing countries, so
as to reflect the increasing importance that trade in services has gained in
world and regional economies in the last decade and to facilitate regional
integration in this area;

(c)
to foresee support and capacity building for the
development of OCT trade related policies as well as to assist OCTs in
regulatory reform;

(d)
to support dissemination within OCTs of information
regarding the conditions defining access to the EU market (e.g. European
technical, food and consumer health regulations);

(e)
to maintain the direct dialogue between the
European Commission and the OCTs on e.g. trade and trade related issues and
ensure that OCT interests are taken into account in the context of EU trade
negotiations.

One example of the difficulties that OCTs
have encountered in accessing the EU market relates to the rules of origin and
the requirements for OCT fish exports to the EU. One of the requirements
concerns the nationality of the crew that operate the fishing vessels that
catch fish outside an OCT's territorial waters[19].
For example, due to their remoteness and small size population, the Falkland
Islands have had difficulties in complying with this requirement. As a consequence,
the Falkland Islands are dependent on temporary derogations from the rules of
origin to ensure that its fish products caught outside territorial waters can
be exported to the EU free of duty.

Another example of problems relating to the
rules of origin which OCTs have encountered relate to the possibilities for OCTs
to cumulate their own materials and materials from third countries in view of
exporting originating goods that may enter the EU market duty free and quota
free. Presently, the OAD allows OCTs to cumulate materials from other OCTs, ACP
States or from EU Member States. However, for certain OCTs, such as the
isolated OCTs (e.g. Greenland and Saint-Pierre et Miquelon) cumulation with ACP
States or EU Member States is either not interesting or not feasible as these
partners are located too far away. These OCTs are more interested in cumulation
possibilities with other third countries, such as Canada, which is currently
not allowed under the OAD, unless derogations are granted.

Environmental issues[20]

The study "OCTs environmental profiles"[21] identified the following main
concerns of the OCTs:

–
climate change,

–
natural disasters,

–
threats to wildlife and biodiversity, habitat
destruction,

–
illegal, unregulated and unreported fishing,

–
waste management,

–
water supply and sanitation.

Another external study[22] on the cooperation of the EU
with the OCTs during the period 1999-2009 concluded that environment and
climate change adaptation are regarded as matters of vital importance to the
OCTs. However, only few concrete results of the EU-OCT cooperation were found
in this field due to limited funding, despite the recognition of the importance
of the environment, the reality of climate change and the importance of
disaster preparedness. The study therefore recommended that for the post 2013
EU-OCT relationship, the association framework should be revisited in order to
better respond to new and emerging priorities in the OCTs, such as energy and
climate change and to address new objectives such as sustainable management of
natural resources and conservation of biodiversity.

The Communication[23] from the
Commission of 6 November 2009

The outcome of the public consultation
process and the conclusions from the studies were taken into account by the European
Commission in its proposals for the orientations of the future association of
the OCTs with the EU. In its Communication of 6 November 2009, the Commission
recognised the necessity for the EU-OCT association to focus more on a
partnership based on the mutual interests of the EU and the OCTs rather than on
the fight against poverty. The Communication identified three central
objectives in order to pursue the purpose of the association as stated in
Article 198 TFEU: (i) enhancing OCTs' competitiveness, (ii) reducing their vulnerabilities
and (iii) promoting their cooperation with other partners.

1.4.        Statistical
Data

The analysis in this report is based on
both qualitative and quantitative data, where available. An important
reservation needs to be made regarding the latter. The analysis below mainly draws on
data directly available to the European Commission and external studies, one of
which was specifically dedicated to OCT statistical
systems and capabilities[24].
For instance, the study found that whereas all of the OCTs that responded to
its survey produced statistics relative to trade (exports and imports in broad
categories, volume and value), these were not always publicly available
(through websites, hard copies and/or CD-ROM). Among the reasons given to
explain the lack of public availability of certain statistics the following
four were most cited: lack of demand, provision only on demand, lack of
financial resources and unreliability or non-conformity with international
standards. Where statistics were publicly available, their publication was not
always timely and the reference periods not up to date. Also, the available
statistics were not always in conformity with internationally agreed
nomenclatures[25].

2.           Problem
Definition

2.1.        The
problem requiring action and the scope of the decision

2.1.1.     The
problem

Since the adoption in 2001 of the current
OAD, the regional and international environments in which OCTs operate has
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 strategy[26]
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.

2.1.2.     Main challenges

Based on the results of the various studies
and consultation of stakeholders, it appears that the main challenge OCTs face consists
in putting their economies and societies on a sustainable development path by improving
their competitiveness, reducing their vulnerability, increasing environmental
resilience, and cooperating with their neighbours and integrating in the
regional and/or world economies, where this is possible.

Economic challenges

OCT economies
all have, in general, small-sized domestic markets due to their small
populations. Trade development therefore often represents an important
potential for OCT economic development. However, OCT production bases are
generally small and economic activity is often concentrated in a few sectors.

As net
importers all of them face structurally negative trade balances with the rest
of the world, even if between 2004 and 2008 overall OCT exports grew 9%
annually from USD 1.2 billion to USD 1.8 billion. In the same period, however,
OCT imports increased with 10% every year from USD 3.4 billion to USD 5.9
billion[27].
OCT exports are generally concentrated in a few sectors.

For some OCTs,
economic ties with the EU are of great importance, but in general OCT/EU trade
tends to be one-sided. For other OCTs, the economic ties between them and the
EU remain limited. The tendency for OCTs to run trade deficits is reflected in
OCT/EU trade flows. In 2010 the OCT/EU import/export ratio was approximately
1/2, with the value of EU27 exports to the OCTs amounting to over EUR 2 billion
and the value OCT exports to the EU27 amounting less than EUR 1 billion (see
Annex 8). While OCTs export mainly fishery and other mineral and natural
products to the EU, the EU primarily exports industrial products and some
agro-food products to the OCTs.

Services represent an important part of the
economy in all OCTs, though the actual percentage varies. In light of the
increasing importance that trade in services has acquired in the world economy
and the limited potential for development of trade in goods, OCTs show considerable
interest in developing economic activity and exports in their services sectors
as a way to diversify their economies. Tourism and related sectors (culture,
recreation and sports) came out as drawing the most attention. Other sectors
being considered by OCTs were: (renewable) energy (consulting, engineering
etc.) and environment services (environment protection etc.) as well as
business, telecommunication and other supporting services (telephone support
services, data storage, internet traffic relay etc.)[28].

In some OCTs, located in the Caribbean,
financial services are the mainstay of their economies. In 2008, the values of
the respective GDPs of the Cayman Islands and British Virgin Islands were
estimated at USD 2.87 billion and USD 1.215 billion[29]. Foreign investments into the
territories amounted to USD 10.9 billion and USD 3 billion respectively, the
bulk of which goes to the financial sector. Investment outflows are important
as well. By contrast, productive investments in the real economy are modest,
especially when compared with other OCTs such as New Caledonia.[30]

Environmental challenges[31]

All OCTs are characterised by a high
biological diversity as they are remote and have developed in isolation. These
insular and remote countries and territories constitute privileged locations
for the development of endemic species, whether animal or vegetable, terrestrial
or marine. However, the OCTs’ potential as regards biodiversity is subject to
several threats such as the impacts of climate change or the introduction of
non-endemic species. OCTs are amongst the insular countries that have to face
the impacts of climate change. Depending on the geographical location of the
OCTs, the effects of climate change will be different: melting of permafrost,
coral reef bleaching impacting marine fauna and flora, salinisation of fresh
wateraquifer are among examples.

The insular characteristics of the OCTs
make them particularly exposed to environmental shocks as well as natural
disasters whose frequency could be influenced by climate change. The OCTs are
particularly vulnerable to climatic, seismic and volcanic risks and to tsunamis.
Such natural disasters can easily destroy the infrastructures and hamper the
economic activities. Besides the risk of economic paralysis, these phenomena
can cause a heavy human toll and lead to the displacement of populations, and
are thus likely to disrupt the economic and social organisation of the OCTs.

OCTs are highly reliant on fossil fuels
imported at high transport costs, which make them extremely vulnerable to
external economic shocks. They therefore face the challenge of reducing this
energetic vulnerability.

Finally, sustainable management of water
and waste is of vital importance in OCTs. These issues are among the most
challenging OCTs need to face, as the absence of critical mass in these
countries and territories make adapted solutions necessary.

2.2.        The underlying drivers of
the problem

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

(1)
The OCTs have difficulties to overcome handicaps
due to their physical characteristics (insular, small, remote, variable in size
of exclusive economic zone);

(2)
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);

(3)
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;

(4)
They fail to develop their micro-economies characterized
by structural weaknesses, a small undiversified production base, with exports
concentrated in a few sectors [32]:

(5)
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
US and Canada) that are important destination markets for some OCTs;

(6)
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.

Table 2: problems
and underlying drivers

Problems || Underlying drivers

OCTs continue to face economic and social problems || · Handicaps linked to their physical characteristics · Low administrative capacities · Micro-economies with structural weaknesses

OCTs are confronted to difficulties linked to their vulnerable environments || · vulnerability linked to their geographic characteristics

The OCTs do not benefit from the changes global trade patterns and global issues that emerged the last ten years || · Erosion of trade preferences and increased competition for their exports to third markets · Incapacity to be part of initiatives relating to global issues that emerged in the last ten years

2.3.        The
EU's right to act and the EU added value

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[33]. 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.

3.           Objectives
of the future legislative framework

On the basis of the
policy needs, problems and drivers that are anticipated in the period until
2020, the general and specific objectives of the OAD 2014-2020 are as follows[34].

3.1.        General
objectives

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

(1)
to promote the economic and social development
of the OCTs;

(2)
to establish close economic relations between
the OCTs and the EU as a whole;

(3)
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;

(4)
to allow OCTs to benefit from the same trade
treatment that Member States accord to each other

(5)
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).

3.2.        Specific
objectives

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 EU[35]. The specific objectives might
seem broader and less detailed than would be appropriate for any particular
programme. The key purpose of these objectives is to provide a basis for
assessing the options in relation to the future priorities of the OAD.

The specific objectives of the next
association framework would therefore be as follows:

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

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

o to enhance OCTs' competitiveness;

o to strengthen OCTs' resilience, reduce their economic and
environmental vulnerabilities;

o to promote cooperation of OCTs with third partners;

o to integrate the latest EU policy agenda priorities;

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

Table 3: Link between problems and objectives

Problems || General Objectives || Specific objectives

OCTs continue to face economic and social problems || (6) To promote the economic and social development of the OCTs. (7) To establish close economic relations between the OCTs and the EU as a whole. (8) 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. (9) To allow OCTs to benefit from the same trade treatment that Member States accord to each other. (10) To promote the environmental development of the OCTs. || o To help promote EU's values and standards in the wider world. o To establish a more reciprocal relationship between EU and OCTs based on mutual interests. o To enhance OCTs' competitiveness. o To strengthen OCTs' resilience and reduce their economic and environmental vulnerabilities. o To promote cooperation of OCTs with third partners; o To integrate EU policy agenda priorities. o To take into account changes in global trade patterns and EU trade agreements with third partners.

OCTs are confronted to difficulties linked to their vulnerable environments || (11) 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. (12) To allow OCTs to benefit from the same trade treatment that Member States accord to each other. (13) To promote the environmental development of the OCTs. || o  To help promote EU's values and standards in the wider world. o To establish a more reciprocal relationship between EU and OCTs based on mutual interests. o To enhance OCTs' competitiveness. o To strengthen OCTs' resilience and reduce their economic and environmental vulnerabilities. o  To promote cooperation of OCTs with third partners.

Problems || General Objectives || Specific objectives

The EU-OCT association does not take into account the changes of global trade patterns and emerging global issues || (14) To promote the economic and social development of the OCTs. (15) To establish close economic relations between the OCTs and the EU as a whole. (16) Tto 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. (17) To allow OCTs to benefit from the same treatment that Member States accord to each other. (18) To promote the environmental development of the OCTs. || o To help promote EU's values and standards in the wider world. o To establish a more reciprocal relationship between EU and OCTs based on mutual interests. o To enhance OCTs' competitiveness. o To strengthen OCTs' resilience and reduce their economic and environmental vulnerabilities. o To promote cooperation of OCTs with third partners. o To integrate EU policy agenda priorities. o To take into account changes in global trade patterns and EU trade agreements with third partners.

3.3.        Consistency
with external action priorities and other EU policies

The "Europe 2020" provides the benchmark against which the
coherence of EU policies and the promotion of EU values, standards and interest
need to be checked[36].
Coherence with the Europe 2020 strategy should be
sought, as far as its smart growth and sustainable priorities are concerned,
promoting support to research, innovation as well as to information and
communication technologies (ICT) and sustainable growth capacities as catalysts
for socio-economic development.

The 2014-2020 OAD will
play an important role in that respect. Indeed, the idea of establishing
‘centres of experience and expertise’ could relate to the implementation and
promotion of high standards, including international standards, e.g. in the
fields of environment and food safety and consumer health. The OCTs are all
characterised by rich biodiversity. The sustainable use and protection of this
biodiversity would benefit from better scientific documentation and access to
research results.

Likewise, the
implementation of international standards within the area of food safety,
animal and plant health could facilitate trade between OCTs and their trading
partners, including EU Member States. The EU's commitment to environmental
standards as well as its role as a global player in the fight against climate
change could be of great value to both the EU and the OCTs. The European
Commission believes that biodiversity and other natural assets of the OCTs
could be the object of a strengthened cooperation in the field of research and
conservation. A partnership in the area of environment could be of mutual
interest to both parties.

4.           Policy
options

4.1.        Discarded
options

              a)
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.

b) 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.

Cooperation issues

Fight against poverty will continue to be
the overall goal of the association despite the fact that the Commission, the
Member States, the OCTs and all stakeholders have recognised its
inappropriateness in an EU-OCT framework of cooperation. Furthermore, the various
areas of cooperation will be maintained without any particular focus on the
mutual interests of the EU and OCTs.

Trade rules

The arrangements for trade between the EU
and the OCTs would remain unchanged (no possibility for introduction of
provisions for improved conditions under which OCTs access the EU market nor
for modifications in terms of the arrangements for trade in services and
establishment). Finally, under this option, and given the developments in trade
patterns and EU/third countries trade agreements, the EU would not be in a
position to comply with its Treaty obligations requiring applying to the OCTs
the same treatment as the one Member States accord each other.

Financial assistance

Under policy option 1, EDF resources would
be distributed between five main categories (Territorial, Regional, Technical
Assistance, Emergency/Humanitarian Aid, European Investment Bank – Investment
Facility) and according to the same key of distribution of the total envelope
(69%, 14%, 2%, 5% and 10% respectively). In addition to the financial
allocations under the EDF, the OCTs would remain eligible to the horizontal
budget lines of the EU.

Implementation of policy option 1

According to policy option 1 the period of
validity of the next OAD would be 2014- 2020. It would also imply the
definition and adoption of a Commission Regulation laying the implementation
modalities of the OAD as well as the establishment of programming guidelines
following consultations with OCTs and their Member States. In terms of
implementation of the financial cooperation under policy option 1, a margin of
flexibility could be built in by reserving a given amount as non-programmed aid
to respond to unforeseen events and mitigate the impact of economic external
shocks. Dedicated technical assistance and capacity building would be made
available to support the OCTs in identifying and formulating comprehensive
policies and subsequent implementation plans, namely in the areas chosen for EU
financial assistance.

Policy option 1 would allow the EU-OCT
association to continue to support the OCTs, the same way as the current
framework does, in the economic and social problems they face and the
difficulties linked to their vulnerable environment they are confronted with. The
implementation of the OAD as proposed under policy option 1 would not allow
addressing the issues in relation with the need to take into account changes in
global trade patterns and emerging global issues.

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.

Cooperation issues

Under this option, the EU-OCT cooperation would
give a particular focus on areas of mutual interests, 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.

Trade rules[37]

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 origin
(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.). In
addition, policy option 2 suggests revising the arrangements for trade in
services and establishment and granting the OCTs Most Favoured Nation
treatment, where they currently receive only basic third country treatment
(i.e. 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.

Financial assistance

The financial assistance for the OCTs would
still be based on territorial and regional envelopes. Option 2 suggests the
increase (in comparison with the current OAD) of regional allocation. This
would allow achieving the objectives aiming at better responding to issues that
emerged in the last decade, and are of common interest to all OCTs and the EU.
Some of these issues have been continuously highlighted by the OCTs and their
Member States, such as: environment, climate change, statistical systems,
disaster risk reduction, health threats, renewable energy and innovation.

The envisaged increase of the regional
allocation under the 2014-2020 OAD would also 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.
The OCTs, as recognised members of the wider European family and outposts of
the EU in their respective regions, will thus directly benefit not only the EU
as a whole but also their neighbours, thereby serving as a lever for the
objectives of EU external policy.

Option 2 also proposes to renew the
eligibility of the OCTs to all the EU programmes. Where relevant, EU programmes
would have a dedicated window in favour of the OCTs (e.g. climate change,
environmental research and biodiversity). Through a closer dialogue between
Member states, the European Commission and the OCTs, a better alignment of the
EU assistance and the aid provided by the Member States would be pursued. This
would facilitate the creation of synergies between the two types of assistance
and would lead to more predictability and aid efficiency.

Policy option 2 does not foresee a change
in relation with the programming modalities of financial resources. Indeed,
"territorial" and "regional" financial allocations would be
programmed in a Programming Document (PD). The OCTs would be requested to
concentrate the EU financial support on a single focal sector. For the regional
envelope the choice of focal sector would be done from the list of themes of
mutual interest mentioned above.

Implementation of policy option 2

The period of validity of the next OAD
would be 2014- 2020. As policy option 1, policy option 2 would also imply the
definition and adoption of a Commission Regulation laying the implementation
modalities of the OAD as well as the establishment of programming guidelines
following consultations with OCTs and their Member States. In terms of implementation
of the financial cooperation under policy option 2, a margin of flexibility
could be built in by reserving a given amount as non-programmed aid to respond
to unforeseen events and mitigate the impact of economic external shocks. Dedicated
technical assistance and capacity building would be made available to support
the OCTs in identifying and formulating comprehensive policies and subsequent
implementation plans, namely in the areas chosen for EU financial assistance.

In terms
of programming, option 2 suggests to keep the current programming requirements
and modalities while proposing that particular account will be taken and
consideration will be given where it exists a "comprehensive territorial development plan" or a "comprehensive development plan agreed
between the OCT and the Member State".

The association framework envisaged under
policy option 2 would allow the EU to continue supporting the OCTs in their
efforts to address the economic and social problems and difficulties they face
in a more focused and coordinated way than the current framework does. It would
fully take into account the requests expressed by the stakeholders for a more
targeted cooperation on areas of mutual interests. Changes in global trade
patterns and emerging global issues would be fully integrated in the new
framework.

This policy option could contribute to the
achievement of general and specific objectives defined in sections 3.1 and 3.2
above through a more focused and coordinated partnership, aligning with EU
policy framework, EU policy agenda priorities and changes in global trade
patterns.

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
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 include that
financial assistance would also take place outside of the association
framework.

Cooperation issues

Integrating OCTs in other trade agreements
would imply that at least that EU-OCT trade related cooperation would be
channelled via the specific institutional set up of the agreements in which the
OCTs would be integrated. For other areas of cooperation, such as environment
and climate change, EU-OCT cooperation could also be included in this framework
or could continue to take place in an EU-OCT specific framework covering all
OCTs or only one OCT, irrespective of the trade regime under which they would
fall.

Trade rules

Under this option, it would be made use of
theoretical opportunities for the inclusion of OCTs in EU trade agreements with
the Caribbean region (for Dutch and British OCTs), the Central American and
Andean countries (for Dutch OCTs), the Pacific region (for French and British OCTs)
and Canada (for French and Danish OCTs). As a consequence, OCTs would not only
be ensured market access to the EU, but also to the market(s) of the other
co-signatories of the relevant trade agreement(s). In exchange, the OCTs would
have to open up their markets to the EU and the trade partner(s) concerned
through negotiations. OCT commitments would have to be negotiated for each OCT
separately.

The rules of origin applicable to OCT goods
would be the ones negotiated in the context of the agreement in which the OCTs
would be integrated. For example, under the EPAs, the OCTs would benefit from a
number of simplifications and relaxations of the general provisions and product
specific rules that were introduced prior to the reform of the General System
of Preferences (GSP). Thus, the OCTs concerned would not benefit from
innovations such as the deletion of the crew requirement for vessels fishing
outside of territorial waters or the simplification of the rule on direct
transport. However, such innovations could be introduced at a later stage, at
the moment when the EU and its relevant trade partners review their agreement.
Additional cumulation possibilities could be foreseen, depending of the EPA
that the OCTs would join (cumulation with neighbouring countries belonging to a
coherent geographical entity or cumulation for products entering the EU duty
free quota free under MFN[, GSP] or, for industrial products, under an FTA with
the EU). For example, in the Pacific EPA, the OCTs would have access to the
global sourcing provision, allowing them to import non-originating tuna for
further processing that would benefit from preferential access when exported to
the EU[38].

OCTs that would be integrated in an EU
trade agreement would benefit from the commitments in trade in services and
establishment which the EU took in the context of that agreement. These OCTs
would need to give further market access to both the EU and the third countries
concerned.

The goods and services of those OCTs which
would not be integrated in other trade agreements would receive a treatment in
line with the ones described in policy options 1 and 2.

Financial assistance

For those OCTs that would be included in
other trade agreements, the trade and economic cooperation would take place in
the relevant FTA or EPA. Trade and economic cooperation with OCTs would take
place in the context of the relevant trade agreement. Cooperation in other
areas would continue to take place in a framework specific to the OCTs.
Financial assistance would be provided under the 11th EDF, taking
into account the different cooperation frameworks that would be foreseen.

Implementation of policy option 3

Integrating or
associating OCTs to other trade agreements would imply considerable legal
changes. It would imply that OCTs joining such an agreement would not be
covered by Part IV of the TFEU. Their Member States would have to request that
the OCTs concerned be removed from Annex II to the TFEU, which lists the OCTs
associated to the EU, if the substantive FTA provisions would be incompatible
with it. Inclusion of OCTs within the scope of EU trade agreements would be
subject to negotiations between the EU’s trade partners, representatives of the
OCTs themselves and the EU. As OCTs are not sovereign States, Member States
would have to represent them in the negotiations with the EU and the trade
partner concerned. The agreements that have already been concluded would need
to be amended to incorporate the OCTs and adapt them so as to cover the
realities of the OCTs. Some trading partners may request concessions from EU to
accommodate the inclusion of OCTs.

Option 3 would bring EU-OCT relations in
line with the current EU policy agenda, incorporating new political priorities
such as environment, climate change, biodiversity, sustainable management of
natural resources and food safety, while ensuring the upgrading of EU-OCT trade
relations.

The inclusion of OCTs in other EU trade
agreements could stimulate these OCTs' integration in regional and world
economies but would generate a multiplication of trade regimes and cooperation
settings which would constitute a real challenge in implementation terms of the
association between the EU and the OCTs as a group.

5.           Impact
assessment of policy options

As a consequence of the
absence of up-dated comparable and reliable statistics[39] regarding OCTs, assessing the
impacts of the different policy options is challenging. External assessors have
commented that the absence of data made it difficult if not impossible to
assess the possible social, economic and environmental impacts that certain EU
measures may have on the OCTs. Therefore, the
assessment of different policy options is focusing on quality rather than on
quantitative impacts (for a more detailed analysis of
the impacts of the different policy options in the fields of environment and
climate change and the trade and trade related aspects of the OAD, see Annex 11
chapter 5 and Annex 12 section 7.3).

5.1.        Assessment
policy option 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 (a
detailed analysis is provided in Annex 12 section 7.3.2).

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 commitments[40] 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.

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
the 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, 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 financial assistance.

5.2.        Assessment
policy option 2

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 partners. 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[41].

Weighted Openness Index

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. Those OCTs which highly depend on financial services would get
the opportunity to diversify their economy by proposing a wider range of
services. 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 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.

Environmental Impacts

The emphasis on regional allocation (suggested
under option 2) in view of better responding to issues that emerged in the last
decade, and 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.

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 period
would ensure a more coherent identification period 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
States and would be taken into account for defining the strategy of cooperation
between OCTs and the EU.

5.3.        Assessment
policy option 3

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 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 (GSP+ and ACP
countries). 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[42].

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 every OCT 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
OCTs[43].
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 budget lines of the EU. 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.

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 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.

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.           Comparing
and weighing the policy options

6.1.        Comparing
the policy options

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.

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 focus 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.

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 interests 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.

Policy option 3

By integrating or associating OCTs to other
trade agreements, some of the objectives of the OCT/EU 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. As 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.

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).

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 Communication[44] on the elements for a new
partnership between the EU and the OCTs and endorsed by the Council[45]. 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 uner option 1 for
the EU to attain the goal of a modernised EU-OCT framework.

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.

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.

6.2.        Weighing
the policy options

Effects || Option 1 || Option 2 || Option 3

Global objectives of the OAD

OCTs' economic & social  development || = || ++ || -

Close economic EU-OCT relations || = || ++ || -

Further the interests and prosperity of the inhabitants of the OCTs || = || ++ || -

OCT benefitting from the same trade treatment the Member States accord to each other || = || = || -

OCTs' environmental development || = || ++ || -

Specific objectives of partnership

Promotion of EU's values and standards in the wider world || - || ++ || -

Establishment of a more reciprocal relation based on mutual interests || - || ++ || -

OCTs' competitiveness || = || ++ || -

OCTs' resilience || = || ++ || -

OCTs' cooperation with other partners || = || + || ++

Integration of EU political agenda priorities || - || ++ || -

Taking into account changes in global trade patterns || - || ++ || +

Effects || Option 1 || Option 2 || Option 3

Policy Context

Alignment with developments in EU policies || - || ++ || +

Promotion of mutual interests & reciprocity || - || ++ || +

Facilitation of the EU-OCT dialogue || = || + || -

Adaptation to the particularities of the OCTs || - || + || +

Legislation

EU administrative burden || = || + || -

Conformity with TFEU || = || = || =

Coherence, Effectiveness & Efficiency

Coherence || = || + || +

Effectiveness || - || ++ || +

Efficiency || - || + || -

++ indicates a very
positive response in relation with the objective(s) + denotes a moderate
positive response in relation with the objective(s), - a negative one, and = a
neutral or minor impact compared to the current situation.

(1)
Coherence means
possibilities to create synergies with other decisions and policy agendas, with
the aim of achieving the agreed objectives and to avoid negative consequences
and overlaps between different decisions and policies.

(2)
Effectiveness
means setting the right goals and objectives and making sure they are attained.

(3)
Efficiency means
providing the most appropriate decision for the defined purpose and to ensure
that the resources allocated are administered in an efficient manner.

6.3.        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 in section 3.2 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 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 (by revising the
preferential rules of origin 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 OCTs' 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.). 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" (MFN) 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 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.

7.           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.

              Annex
1 – List of references

Council
Decisions and Conclusions

- Council Decision (2001/882/EC) of 27 November 2001 on the
association of the OCTs with the European Community (OJ L 314 of 30 November
2001) as amended by Council Decision (2007/249/EC) of 19 March 2007 (OJ L 109
of 26 April 2007)

- Council Decision (2006/526/EC) of 17 July 2006 on relations between
the European Community on the one hand, and Greenland and the Kingdom of
Denmark on the other(OJ L 208 of 27 July 2006)

- Council conclusions 17801/09 of 22 December 2009 on the on the EU’s
relations with Overseas Countries and Territories (OCTs)

Commission
Documents (Communications, Green Papers, Working Documents)

- Commission Green Paper COM(2008) 383 of 25 June 2008on Future
relations between the EU and the Overseas Countries and Territories .

- Commission Staff working document SEC(2008) 2067 of 25 June 2008
accompanying the green paper “Future relations between the EU and the Overseas
Countries and Territories” COM (2008) 383

- Commission Communication COM(2009) 623 of 6 November 2009 on
Elements for a new partnership between the EU and the OCTs

- Commission Communication COM(2010) 2020 of 3 March 2010 on Europe
2020: a Strategy for Smart, Sustainable and Inclusive Growth

- Commission Communication COM(2010)612 of 9 November 2010 on Trade,
Growth and World Affairs: Trade Policy as a Core Component of the EU's 2020
Strategy

- Commission Communication COM(2011) 837 of 7 December 2011 on Preparation
of the multiannual financial framework regarding the financing of EU cooperation
for African, Caribbean and Pacific States and Overseas Countries and Territories
for the 2014-2020 period (11th European Development Fund)

- Commission Staff working document SEC(2011) 1459 of 7 December 2011
on Preparation of the multiannual financial framework regarding the financing
of EU cooperation for African, Caribbean and Pacific States and Overseas
Countries and Territories for the 2014-2020 period (11th European Development
Fund) and covering the subsequent implementing and financial regulations of the
11th European Development Fund (EDF)

- Commission Staff working document SEC(2011) 1484 of 7 December 2011 Accompanying
the document [draft] Council Decision on relations between the European Union
on the one hand, and Greenland and the Kingdom of Denmarkon the other and
covering the subsequent implementing regulation of the Decision on relations
between the European Union on the one hand, and
Greenland and the Kingdom of Denmark on the other

Documents
from other Stakeholders

- Joint Position Paper of the Governments of the Kingdom of Denmark,
the French Republic, the Kingdom of the Netherlands and the United Kingdom of
Great Britain and Northern Ireland, and the Overseas Countries and Territories
on the future relations between the Overseas Countries and Territories and the
European Union, adopted at the Ministerial Conference of the Association of the
Overseas Countries and Territories of the European Union, Nouméa, New
Caledonia, 28 February 2011

- Message from La Réunion Island of July 2008: http://www.reunion2008.eu/pages/en/en-home.html

- Rio principles, Kyoto protocol: http://unfccc.int/2860.php

Studies

- BROOKS, P., STONEMAN, R. and RIOS, R. Enhancing Atlantic OCTs' Trade
and Economic Activity (within their region and the European Union),
EUROPEAID/11/9860/C/SV/multi - Lot N° 10, N° 2008/170783, February 2010

- BURKE, S.J., KIROSINGH, M., Overseas Countries and Territories
Technical Assistance for the Mid Term Review (MTR) 2006, Final Report,
Framework Contract Lot N° 4 – Sectoral and project evaluations – Specific
Contract No 119860/C/SV/multi, 18 December 2006

- ECLAC, Review of CARIFORUM/EU EPA: Implications for the British and
Dutch Caribbean OCTs, LC/CAR/M.176, 4 September 2008

- ECO Consult et al., Region Level Evaluation: Overseas Countries and
Territories (OCT), Contract N° EVA 2007/geo-acp, draft Final Report, July 2011.

- HELLYER, M., CARICOM Single Market and Economy: Costs/Benefits
Study, Final Report, June 2004

- KIRKPATRICK et al. (2011), A Trade Sustainability Impact Assessment
Relating to the Negotiation of a Comprehensive Economic and Trade Agreement
(CETA) between the EU and Canada, Trade 10/B3/B06, Final Report, June 2011.

- LUFF, David et al., the Analysis of the Regional Economic
Integration Processes (Caribbean, Pacific and Indian Ocean) and Recommendations
Aiming at Enhancing Trade and Economic Activity of OCTs within their Region and
with the EC, Framework Contract Beneficiaries– Lot 11, N° 2008/170791, February
2010

- SALMON Jean Michel, OCT Regional Integration Impact Study, Final
Report, Framework Contract Beneficiaries - Lot 11 N°. 2006/123116, July 2007

- SPANNEUT, C., Analysis of the Statistical Systems in the OCTs and
Recommendations Aiming at Enhancing Statistical Systems of OCTs, Framework
Contract Beneficiaries – Lot 11, N° 2010/253401/1, Draft Final Report,
September 2011.

- NIRAS PINSISI Consortium partners, OCTs Environmental profiles,
Service contract 2006/12146, January 2007

Main report:

http://ec.europa.eu/development/icenter/repository/environmental\_profile\_main\_report\_en.pdf

Caribbean region:

http://ec.europa.eu/development/icenter/repository/environmental\_profile\_caribbean\_en.pdf

Pacific region:

http://ec.europa.eu/development/icenter/repository/environmental\_profile\_pacific\_en.pdf

North Atlantic region:

http://ec.europa.eu/development/icenter/repository/environmental\_profile\_north\_atlantic\_en.pdf

South Atlantic region:

http://ec.europa.eu/development/icenter/repository/environmental\_profile\_south\_atlantic\_en.pdf

Indian Ocean region:

http://ec.europa.eu/development/icenter/repository/environmental\_profile\_indian\_ocean\_en.pdf

- Study on the current actions and initiatives in the field of civil
protection in the Caribbean in order to promote, enhance and reinforce the
regional cooperation mechanisms (final report of May 2010)

Other
Sources

- EU legislation concerning protection of nature and biodiversity:

http://europa.eu/legislation\_summaries/environment/nature\_and\_biodiversity/index\_en.htm

- EU legislation regarding climate change:

http://europa.eu/legislation\_summaries/environment/tackling\_climate\_change/l28157\_en.htm

- French initiative "Grenelle de l'Environnement" and
consecutive legislative decisions concerning the French overseas entities (OCTs
and outermost regions):

http://www.legrenelle-environnement.fr/

http://www.legrenelle-environnement.fr/spip.php?rubrique2

              Annex
2 – Glossary

Ad Valorem Equivalent (AVE): Rate of tariff
or tax on an item that equals the amount payable if it was taxed on the basis of
its value.

African, Caribbean and Pacific States: The European Union and the
African, Caribbean and Pacific countries (ACP countries) enjoy special
relations that can be traced back to the Union's beginnings. These political,
economic and social relations are to be found mainly in the field of
development cooperation. The Cotonou Agreement signed in 2000, follows on from
the previous conventions (Yaoundé, Lomé) and currently provides the general
framework for relations between the Union and the 79 ACP countries. This
framework is reinforced by regional and national components and supplemented by
a financial component represented mainly by the European Development Fund.

Common External
Tariff (CET): The Common External Tariff (CET)
comprises the tariff duties that are levied on any goods that are imported into
the European Union. As indicated by the name, these tariffs are common to all
EU Member States

Europe 2020
Agenda: Europe 2020 is the EU's growth strategy for
the coming decade. In a changing world, we want the EU to become a smart,
sustainable and inclusive economy. These three mutually reinforcing priorities
should help the EU and the Member States deliver high levels of employment,
productivity and social cohesion. Concretely, the Union has set five ambitious
objectives - on employment, innovation, education, social inclusion and
climate/energy - to be reached by 2020. Each Member State has adopted its own
national targets in each of these areas. Concrete actions at EU and national
levels underpin the strategy.

Economic
Partnership Agreements (EPAs): The Economic
Partnership Agreements (EPAs) between the EU and African, Caribbean and Pacific
group of countries are aimed at promoting trade between the two groupings – and
through trade development, sustainable growth and poverty reduction. Since
2002, six regional groupings negotiate EPAs with the EU to replace Cotonou
trade chapters. These EPA aim at reciprocal free trade, comprising of tariff
and quota free market access, asymmetric gradual market opening of ACP markets
for EU exports and simpler rules of origins. Only one full EPA has been
concluded so far with Cariforum, interim EPA are thus in place with Southern
African Development Community, East and Southern Africa and key trading
partners in the Pacific

European
Development Fund (EDF): Created in 1957 by the
Treaty of Rome, and first launched in 1959, the European Development Fund is
the main instrument for providing EU development aid in the African, Caribbean
and Pacific (ACP) countries.

European
Investment Bank (EIB): The European Investment Bank
(EIB) is the European Union's financing institution. Its shareholders are the
27 Member States of the Union, which have jointly subscribed its capital. The
EIB's Board of Governors is composed of the Finance Ministers of these States.
The EIB's role is to provide long-term finance in support of investment
projects.

European Regional Development Fund
(ERDF): The ERDF is a financial instrument of the
cohesion policy of the EU, aiming at strengthening economic and social cohesion
in the European Union by correcting imbalances in its regions.

Free Trade
Agreement (FTA): Free trade Agreements are non
tariff and non barrier trade agreements whose rules are set out in the WTO,
Article XXIV of the GATT and Article V of the GATS. The EU negotiates
comprehensive, new generation FTAs (with WTO members) which include services,
FDI, IPR, public procurement, standards, competition… but also non trade
concerns. Free trade Agreement can be pictured at the centre of the EU pyramid
of trade preferences, after MFN treatment and Non reciprocal preferences
(GSP-EBA) and less comprehensive than association agreements or internal market
association.

General Agreement
on Trade in Services (GATS): The General Agreement
on Trade in Services states how much access foreign service providers are
allowed for specific sectors. It also includes a list of types of services
where individual countries say they are not applying the “most-favoured-nation”
principle of non-discrimination.

Generalised
System of Preferences (GSP): Generalised System of
Preferences (GSP): The Generalised System of Preferences is a scheme under
which the EU offers non-reciprocal trade preferences to support developing
countries exporting to the EU. The GSP is based on the 1979 GATT enabling
clause and is composed of three components with increasing benefits; GSP, GSP+
and EBA. The general arrangement of the GSP system allows for duty free access
for non sensitive products, tariff reductions for sensitive products [...].
GSP+  presents more conditionality than the general GSP system, it is defined
as a special incentive for sustainable development and good governance in which
vulnerable countries can have duty free access to up to  90, 4 % of tariff
lines. EBA is a special arrangement for least developed countries, offering
duty free and quota free access for all products except arms.

Most Favoured Nation (MFN): The most favoured nation treatment is a fundamental non
discrimination principle of the WTO trading system. It entails each member of
the WTO to treat all other members equally as their most favoured trading
partner. This principle ensures non discrimination between imported foreign
products guaranteeing imports from lowest cost foreign suppliers. Free trade
agreements sometimes also contain MFN clauses. Via such clauses the parties
commit themselves to granting each other the most favourable treatment they
give to any third partner with which they have a free trade agreement separate
from the one they conclude amongst themselves.

Preference
Erosion: Preference erosion is the phenomenon by
which the relative value of trade preferences which major trading partners
traditionally granted to certain beneficiaries decreases as a consequence of
the unilateral or bilateral trade liberalisation conducted by the same trading
partners.

Rules of
Origin: Within the context of international trade,
the notion of origin refers to the "economic nationality" of goods.
Origin determines whether or not goods which are imported into a certain market
benefit from preferential access (reduced or zero rate of duty). The rules that
are followed to determine the origin of an imported product are laid down in
preferential trade agreements or arrangements. The rules of origin that apply to
OCT exports to the EU market are laid down in Annex III to the OAD.

Sanitary and
Phytosanitary Measures (SPS): Measures dealing with
food safety and animal and plant health. With regards to the OCTs the cost of
complying to certain Sanitary and Phytosanitary rules is high and acts as a
disincentive.

              Annex
3 – Services that participated in the Impact Assessment

Agriculture and Rural Development (AGRI)

Climate Action (CLIMA), Competition (COMP)

Economic and Financial Affairs (ECFIN)

Education and Culture (EAC)

Employment, Social Affairs and Inclusion
(EMPL)

Enterprise and Industry (ENTR)

Environment (ENV)

Health and Consumers (SANCO)

Home Affairs (HOME)

Information Society and Media (INFSO)

Maritime Affairs and Fisheries (MARE)

Internal Market and Services (MARKT)

Justice (JUST)

Legal Service (SJ)

Mobility and Transport (MOVE)

Regional Policy (REGIO), Research and
Innovation (RTD)

Secretariat General (SG)

Trade (TRADE)

European Anti-Fraud Office (OLAF)

Budget (BUDG)

Taxation and Customs (TAXUD).

Furthermore, EU Delegations in Mauritius,
Fiji, Barbados, Guyana and Jamaica, European Investment Bank (EIB), as well as
thematic and geographical units of Directorate General for Development and
Cooperation – EuropeAid were associated to this exercise.

              Annex
4 – Structure of the Overseas Association Decision

Part One: General Provisions of the Association of the OCTs with the Community

Chapter 1 || General provisions: purpose, objectives, principles, basic elements, least developed OCTs

Chapter 2 || Actors of cooperation

Chapter 3 || Principles and procedures: dialogue and partnership, ACP/EU Parliamentary Assembly, Management

Part Two: Areas of Cooperation

Articles 10 -17 || Productive sectors, trade development, trade in services, trade related areas, social sectors, regional cooperation and integration, cultural and social cooperation

Part Three: Instruments of OCT/EU Cooperation

Title I || Development finance cooperation (rules governing the use of development finance cooperation)

Chapters 1-8 || General provisions Objectives (support and promote OCT efforts to achieve sustainable development, economic diversification, encourage inter-OCT and OCT/ACP regional cooperation etc.); principles (partnership, complementarity and subsidiarity), Single Programming Documents, scope of financing, eligibility for financing, programming and implementation, resources available, implementation procedures etc.

Title II || Economic and trade cooperation (rules regarding trade in goods and services, establishment and trade related areas)

Chapters 1 - 5 || Objectives (OCT economic & social development, OCT/EU economic ties, economic integration), arrangements for trade in goods (EU measures, OCT measures, transhipment, surveillance, safeguard), trade in services and establishment, trade related areas (payments and capital movement, competition, intellectual property rights, standardisation/certification, trade and environment, trade and labour standards, consumer policy and consumer health protection), monetary and tax matters, vocational training, programmes open to OCTs etc.

Part Four: Final Provisions

Annexes

Annex I A - B || List of OCTs and list of OCTs considered to be the least developed

Annexes II A - F || Rules and conditions for OCT eligibility to funding from internal and external financial instruments: 9th and 10th EDF, loans from EIB Own Resources, EIB Investment Facility, support in case of fluctuations in export earnings, budgetary aid for developing countries (DCI, Instrument for Stability etc.), participation in Community programmes (Competitiveness and Innovation Framework, Research Framework etc.)

Annex III || Rules of origin

Annex IV || Transhipment facility

              Annex
5 – Public consultation Green Paper

The Green Paper launched a public
consultation that ran from 1 July to 17 October 2008[46], and the Commission organised
a stakeholder conference in Brussels on 3 October 2008[47] to present the issues raised
in the Green Paper. Moreover, the Commission, the OCTs and the Member States to
which the OCTs are linked discussed the Green Paper at the annual OCT Forum on
28 and 29 November 2008[48].

The contributions received in response to
the Green Paper, as well as the discussions during the stakeholder conference
and the 2008 OCT Forum, revealed a broad consensus between the parties directly
concerned on a number of general issues..
A common opinion is that the current anti-poverty focus in the relations
between the EU and the OCTs no longer corresponds to the reality in the field
and should be replaced by a new approach. The unique relationship between the
OCTs and the EU should be the cornerstone of such a new logic. It should take
due account of the OCTs’ specificities, in particular their economic and social
development, diversity and vulnerability, as well as their environmental
importance. It should also aim to strengthen their resilience and enhance their
competiveness, especially in the regions where they are located. One key
message is that the OCTs, as outposts of Europe all over the world, should be
seen as assets for the EU and not a burden.

Many contributions stressed that the
solidarity between the EU and the OCTs should be based on the fact that all
inhabitants of the OCTs are in principle[49]
EU citizens, as nationals of the related Member States, and on the close links
resulting from common history and constitutional traditions. They argue that
the new association should focus on the potential of the OCTs, while addressing
their vulnerability, rather than the fight against poverty. According to some
contributions, this also means that the OCTs should not be ‘worse off’ in the
future in terms of Community financial assistance, and that the OCTs’ access to
funding in general should be facilitated.

Furthermore, the public consultation
confirmed the OCTs’ challenges and potential from an environmental point of
view, and the mutual interests of the EU and the OCTs in this field. Many
contributions demonstrate the importance of the OCTs and their rich
biodiversity as a global environmental heritage. They also suggest that the
OCTs could usefully be seen as laboratories for examining the impacts of
climate change or as testing grounds for environmental pilot projects. A large
number of stakeholders suggested making available specific — and additional —
resources for environmental protection in the OCTs, the fight against climate
change and disaster risk reduction.

There is a general demand for more ‘partnership’
between the EU and the OCTs, but only a few contributions provided input on the
actual responsibilities that this should entail for the OCTs themselves. On the
other hand, a lot of reactions call for the OCTs to be taken better into
account and even involved more directly in EU policy-making in areas that are
likely to affect them.

Several contributions point to the need for
supporting the OCTs to become more competitive, for example through the
creation of centres of excellence, the reinforcement of regional cooperation
and integration, strengthening of the role that OCTs could play as outposts of
the EU in their respective regions, the simplification of rules of origin and
sanitary and phyto-sanitary requirements for import into the Community, etc. Notwithstanding
the importance attached to regional cooperation, it appears that the degree of
an OCT’s participation in regional integration processes, where possible,
depends on the actual advantages this would bring for each partner.

Nearly all contributions call for a new
framework able to take due account of the OCTs’ diversity. In particular with
regard to trade issues, the different situations in which OCTs find themselves
are highlighted. Consequently, there is a strong demand for more flexibility to
address an OCT’s specific challenges. However, several contributions calling
for greater diversification underline at the same time the importance of
maintaining a coherent overall framework for all OCTs.

              Annex
6 – EU financed cooperation with OCTs

The European Development Fund

Since the Treaty of Rome, EU financial
assistance to OCTs has been mainly delivered under the European Development
Fund (EDF). The 10th EDF foresees a total amount of EUR 286 million
for cooperation with the OCTs. This amount is divided as follows: EUR 195
million for territorial programmes and projects, EUR 40 million for a regional
programme, EUR 30 million for an OCT investment facility managed by the EIB,
EUR 6 million for technical assistance managed by the European Commission; and
EUR 15 million for contingency aid (disasters, fluctuations in export earnings)[50].

Grants for programmable support for long terms development, humanitarian aid, emergency aid, refugee aid and additional support in the event of fluctuations in export earnings as well as for support for regional cooperation and integration Total: EUR 250 million || Territorial envelope: EUR 195 million This envelope is distributed among OCTs whose GDP does not exceed the EU average GDP. Only 13 OCTs are eligible to this envelope that must be programmed through a territorial Single Programming Document (SPD). The individual amounts delivered rank from 2 million Euros to 22.92 million Euros for the whole period. Greenland is not eligible to this envelope, bilateral cooperation with the EU being financed under the budget.

Regional envelope: EUR 40 million This envelope is programmed through a regional SPD that contains five sub-programs. Two of them are thematic and concern all OCTs (territorial strategies for innovation and technical assistance to the OCT Association). The three other sub-programs concern the OCTs located in Caribbean, the Indian Ocean and the Pacific.

Non allocated reserve: EUR 15 million humanitarian, emergency and refugee aid for the OCTs and, if necessary, the additional support in the event of fluctuations in export earnings new allocations in accordance with the development of the needs and performance of the OCTs

Investment Facility managed by the European Investment Bank (EIB) Total: EUR 30 million ||

Technical assistance managed by the European Commission Total: EUR 6 million ||

In its Communication of December 2011 on an
Internal Agreement between Member States regarding the 11th EDF the European
Commission proposes to reserve EUR 343.4 million to finance territorial and regional programmes, technical assistance and interventions in case of
contingency situations in the period 2014-2020[51]. EUR 5 million would be allocated to the European Investment Bank
(EIB) to finance interest subsidies and technical assistance in the
context of EIB projects.

EU budget lines and horizontal programmes

Articles 25.2 and 58 of the current OAD
stipulate that OCTs can benefit from certain actions under EU programmes,
subject to the rules and objectives of the programmes and the arrangements
applicable to the Member State to which the OCT is linked. OCTs are eligible
for the following actions adopted for developing countries within the general
budget of the EU: thematic programmes financed by the Development Cooperation
Instrument[52],
rehabilitation and reconstruction operations financed under the Instrument for
Stability[53]
and Humanitarian Aid[54].

              Annex
7 – OCT Remoteness – Liner Shipping Connectivity

Most OCTs are
remote and/or at great distance from the European continent and their
neighbouring markets, with low freight transport connectivity, irregular
shipping and air transport services and high transport costs as a consequence.
This forms a major obstacle to the OCTs' participation in those markets.
UNCTAD' Liner Shipping Connectivity Index (LSCI) ECO Consult et al. (2011)
gives an indication of the OCTs' weak integration into global liner shipping
networks.

Evolution of shipping lines connectivity
index 2004-2009

|| 2004 || 2005 || 2006 || 2007 || 2008 || Growth p. a 2004 – 2008 || 2009 || Growth 2009/2008 || Rank 2009 (161 countries)

Aruba || 7.37 || 7.52 || 7.53 || 5.09 || 5.09 || - 0.57 || 3.52 || - 1.57 || 144

Cayman Islands || 1.90 || 2.23 || 1.79 || 1.78 || 1.78 || - 0.03 || 1.76 || - 0.02 || 158

Greenland || 2.32 || 2.32 || 2.27 || 2.27 || 2.36 || - 0.01 || 2.27 || - 0.09 || 156

French Polynesia || 10.46 || 11.14 || 8.91 || 8.60 || 9.01 || - 0.36 || 8.39 || - 0.62 || 95

Netherlands Antilles || 8.16 || 8.23 || 7.82 || 9.22 || 8.56 || - 0.10 || 8.57 || 0.01 || 92

New Caledonia || 9.83 || 10.34 || 9.00 || 8.81 || 9.23 || - 0.15 || 8.74 || - 0.49 || 90

|| || || || || || || || ||

France || 67.34 || 70.00 || 67.78 || 64.84 || 66.24 || - 0.28 || 67.01 || 0.77 || 13

Netherlands || 78.81 || 79.95 || 80.97 || 84.78 || 87.57 || 2.19 || 88.66 || 1.09 || 4

United Kingdom || 81.69 || 79.58 || 81.53 || 76.77 || 77.99 || - 0.92 || 84.82 || 6.83 || 6

Source: ECO Consult et al. (2011) p. 71. || || || || ||

              Annex
8 – EU 27 Goods Imports from all OCTs in 2010 (values in 1,000 EUR)

HS || Description || totals (A) || % (A/B)

03 || Fish & crustaceans, molluscs & other aquatic invertebrates || 340.914 || 34.5%

16 || Preparations of meat, of fish or of crustaceans, molluscs || 91.567 || 9.2%

27 || Mineral fuels, mineral oils and products of their distillation || 35.774 || 3.6%

71 || Natural or cultured pearls, precious or semi-precious stones || 75.854 || 7.6%

72 || Iron & steel || 158.556 || 16%

75 || Nickel & articles thereof || 175.079 || 17.7%

|| Total value of main EU 27 imports from OCTs || 877.744 || 88.6%

|| Total value of all EU 27 imports from OCTs\* || 987.543 ||

(A) Value of EU27 imports (at 2-digit level of the HS) from OCTs representing at least 1% of all EU27 imports from OCTs (B) Total value of all EU27 imports from OCTs

EU 27 Goods
Exports to all OCTs in 2010 (values in 1,000 EUR)

HS || Description || totals (A) || % (A/B)

04 || Dairy produce; birds' eggs; natural honey || 51.000 || 1.7%

19 || Preparations of cereals, flour, starch or milk || 50.410 || 1.7%

21 || Miscellaneous edible preparations || 61.449 || 2.1%

22 || Beverages, spirits & vinegar || 119.445 || 4.1%

27 || Mineral fuels, mineral oils & products of their distillation || 219.503 || 7.6%

30 || Pharmaceutical products || 179.710 || 6.2%

39 || Plastics & articles thereof || 71.317 || 2.4%

48 || Paper & paperboard; articles of paper pulp || 43.412 || 1.5%

73 || Articles of iron or steel || 101.083 || 3.5%

84 || Nuclear reactors, boilers, machinery & mechanical appliances || 422.780 || 14.6%

85 || Electrical machinery and equipment & parts thereof || 295.648 || 10.2%

87 || Vehicles other than railway or tramway rolling-stock || 250.756 || 8.6%

90 || Optical, photographic, measuring, precision, medical instruments || 96.063 || 3.3%

94 || Furniture; bedding, mattresses, mattress supports, cushions || 68.780 || 2.3%

|| Total value of main EU 27 exports to OCTs || 2.031.355 || 69.8%

|| Total value of all EU 27 exports to OCTs \* || 2.884.688 ||

(A) Value of EU27 exports (at 2-digit level of the HS) to OCTs representing at least 1% of all EU27 exports to OCTs (B) Total value of all EU27 exports to OCTs

              Annex
9 – Treatment of OCT Goods Imported into the EU under CET rates

OCT (all figures for 2010) || Imports\* (A) (€ 1000)\*\* || Dutiable Imports (B) (€ 1000) || CET Duties (C) (€ 1000€) || AVE CET\*\*\* Total (C/A) %

Cayman Islands || 872,367 || 2,808 || 63 || 0.01

New Caledonia || 343,875 || 7,350 || 461 || 0.13

Greenland || 316,672 || 297,796 || 37,587 || 11.87

Virgin Islands (British) || 155,862 || 5,762 || 223 || 0.14

(former) Netherlands Antilles || 144,533 || 56,487 || 9,105 || 6.30

Falkland Islands || 112,444 || 110,740 || 7,696 || 6.84

French Polynesia || 23,028 || 12,683 || 1,268 || 5.51

Mayotte || 5,016 || 1,766 || 143 || 2.86

Aruba || 3,993 || 2,172 || 119 || 2.99

Saint Helena || 1,608 || 252 || 25 || 1.56

Saint-Pierre et Miquelon || 1,314 || 1,311 || 194 || 14.78

Montserrat || 1,222 || 410 || 15 || 1.24

Pitcairn || 592 || 490 || 18 || 3.09

Turks and Caicos Islands || 344 || 207 || 15 || 4.46

Anguilla || 289 || 17 || 0 || 0.17

Wallis and Futuna Islands || 50 || 34 || 2 || 4.57

Total || 1,983,211 || 500,285 || 56,937 || 2.87

\* Total value of EU imports || || || ||

\*\* Thousands of Euros || || || ||

\*\*\* Ad Valorem Equivalent || || || ||

The average rate is calculated by dividing dutiable
exports by total exports. Pitcairn, Turks and Caicos and Wallis and Futuna
exports are so small that all three OCTs combined would face duties between EUR
35,000 and 14,000, taking into account that their combined exports to the EU
represent only EUR 1million.

              Annex
10 – Overview per OCT

Caribbean OCTs

Anguilla (UK)

Constitutional relations with Member State || British Overseas Territory. UK remains responsible for external affairs, offshore finance, defence and internal security (including the police force) and the public service. Citizens can renounce British nationality if they wish. Debate ongoing on the future of Anguilla’s status vis-à-vis the UK. Recently, political tensions arose between the UK & Anguilla governments over the balance of the latter's budget.

Capital || The Valley

Geography || 91 km² island located in the upper part of the arch formed by the Leeward Island

Industries || Tourism, construction, government service, international financial services, banks and insurance.

Trading partners || North America (mainly US), Caribbean Region (CARICOM, St Martin/St Maarten and other Caribbean countries).

Aruba (NL)

Constitutional relations with Member State || Country within the Kingdom of the Netherlands, together with the Netherlands, Curaçao and Sint-Maarten. Autonomy in internal affairs. Common interests of the Kingdom of the Netherlands, such as defence and foreign affairs, are promoted jointly.

Capital || Oranjestad

Geography || 180 km² island located in the Lesser Antilles, north of Venezuela.

Industries || Tourism, international financial services, oil refining and storage.

Trading partners || US, NL, PA, CO, VZ, Netherlands Antilles

British Virgin Islands (UK)

Constitutional relations with Member State || British Overseas Territory. UK remains responsible for external affairs, offshore finance, defence and internal security (including the police force) and the public service. Citizens can renounce British nationality if they wish.

Capital || Road Town, Tortola

Geography || Group of islands with a total land area of 153 km².located at the extreme northern point of the arch formed by the Leeward Islands.

Industries || Tourism, international financial services.

Trading partners || VI (US) & US.

Cayman Islands (UK)

Constitutional relations with Member State || British Overseas Territory. UK remains responsible for external affairs, offshore finance, defence and internal security (including the police force) and the public service. Citizens can renounce British nationality if they wish.

Capital || George Town, Grand Cayman

Geography || 3 islands with a total land area of 260 km² island, located south of Cuba and east of Jamaica

Industries || Tourism, international financial services, real estate sales and development.

Trading partners || US.

Montserrat (UK)

Constitutional relations with Member State || British Overseas Territory. UK remains responsible for external affairs, offshore finance, defence and internal security (including the police force) and the public service. Citizens can renounce British nationality if they wish.

Capital || Plymouth (now destroyed by the volcano)

Geography || 102 km² island, located in the upper part of the arch formed by the Leeward islands

Industries || 2/3 of the island uninhabitable following volcano eruptions in 1995 & 1997. Limited economic activity including mining and quarrying, construction, international financial services, professional services and tourism.

Trading partners || US, UK, JP, TT, PR.

(Former) Netherlands Antilles (NL)

Constitutional relations with Member State || Former Country of the Kingdom of the Netherlands. Dissolved on 10 October 2010 and replaced by two new countries (Curaçao and Sint-Maarten) and three special municipalities (Bonaire, St-Eustatius and Saba - BES). Curaçao and Sint-Maarten have autonomy in internal affairs. The BES islands are attached to the Netherlands. All islands continue to have OCT status and for EU law purposes the Netherlands Antilles still exist.

Capitals || Curaçao: Willemstad, Sint-Maarten: Philipsburg

Geography || Curaçao (444 km²) & Bonaire (288 km²) are p are located north of Venezuela; Sint-Maarten (34 km²), Saba (13 km²) & Sint-Eustatius (21 km²) are located in the upper part of the Leeward Islands.

Industries || Tourism, petroleum refining, international financial services.

Trading partners || US, EU.

Saint-Barthélemy (FR)

Constitutional relations with Member State || The island used to be part of the overseas department of Guadeloupe, before becoming in 2007 an overseas collectivity of the French Republic. This evolution in internal law led the island to be ruled by Art. 74 of the French Constitution which provides for legislative speciality (French laws are not automatically applicable)and an ad hoc status for the overseas collectivities sharing the competences with the States. Nevertheless, legislative speciality (French laws automatically applicable) remains in all competences of the State, excepting the texts regulating the entry and residence of foreigners that must explicitly be applicable to Saint-Barthélemy. The island became an OCT associated with the EU on 1 January 2012.

Capital city || Gustavia

Geography || Island of 21 km² (25 km² including the islets) located at the extreme North-East of the Caribbean sea.

Industries || Up-market and residential tourism,

Trading partners || FR

Turks and Caicos Islands (UK)

Constitutional relations with Member State || British Overseas Territory. UK remains responsible for external affairs, offshore finance, defence and internal security (including the police force) and the public service. Citizens can renounce British nationality if they wish. TCI's elected government and parliament were dissolved in August 2009 after it became apparent that the incumbent government had indulged in fraud and maladministration practices. The UK governor is now in charge of the Turks and Caicos Islands government. The UK government has made a return to normalcy conditional to sufficient progress in the achievement of a set of constitutional, electoral, political and financial reforms.

Capital || Cockburn Town, Grand Turk

Geography || Island grouping with a total area of 430 km² located north of Haiti and the Dominican Republic.

Industries || Tourism, property development, real estate, international financial services and fishing. The combined effect of the financial, economic and political crisis as well as the passage of tropical storm Hanna & Hurricane Ike in 2008 led to the deterioration of the archipelago's economy.

Trading partners || US

Atlantic Ocean

Falkland Islands (UK)

Constitutional relations with Member State || British Overseas Territory. UK remains responsible for external affairs, offshore finance, defence and internal security (including the police force) and the public service. Citizens can renounce British nationality if they wish.

Capital || Stanley

Geography || Group of islands with a total area of 12 173 km²located in the South Atlantic, east of the Argentine province of Tierra de Fuego

Industries || Fisheries, tourism, agriculture. Potential for the hydrocarbon industry. Oil drilling activities are taking place in the waters surrounding the Falkland Islands

Trading partners || UK, ES, CL

Greenland (DK)

Constitutional relations with Member State || Greenland is an autonomous community within the Kingdom of Denmark. Status governed by the 2009 Self Governance Act, which recognises the Greenlanders as a separate people with a right to self-determination. The Kingdom of Denmark remains responsible for foreign policy, but Greenland has received great autonomy to negotiate entries on behalf of the Kingdom in areas where Greenland has full competence.

Relations with EU || 1973 – 1985: Part of the EU territory 1985 - …: Greenland Treaty; Greenland Decision & Greenland/EU Fisheries Partnership Agreement

Capital || Nuuk

Geography || Largest island in the world with a total land area of 2 166 086 km, located between the Arctic Ocean and the North Atlantic Ocean, northeast of Canada and northwest of Iceland

Industries || Main sectors: Fishing, tourism and minerals. Greenland is potentially one of the biggest sources of rare earth elements (REE), crucial for technological appliances such as cell phones. Restrictions on exploitation of these resources, because of zero tolerance for uranium (side-product of REE). Ban followed the crash of a US air bomber with nuclear heads at the Thule airbase in 1968, causing wide spread radioactive contamination. Exploratory oil drilling activities are taking place in the waters surrounding Greenland.

Trading partners || EU (DK, UK, DE), US, JP, CN & RU.

Saint Helena, Ascension Island and Tristan da Cunha (UK)

Constitutional relations with Member State || British Overseas Territory. UK remains responsible for external affairs, offshore finance, defence and internal security (including the police force) and the public service. Citizens can renounce British nationality if they wish.

Capital || Jamestown

Geography || Disparate group of islands with a total area of 122 km² located in South Atlantic. The main island lays about 1200 miles from the south west coast of Africa.

Industries || The territory has few natural resources. Agriculture, fishing and tourism are the main economic activities, apart from retail and construction.

Trading partners || US, TZ, ID, UK, JP, NL, NG, PL & ES.

Saint Pierre et Miquelon (FR)

Constitutional relations with Member State || Overseas collectivity of the French Republic with partial legislative speciality: i.e. French laws are applicable except in areas where the collectivity has specific competence (customs, taxes, urban development etc.)

Capital city || Saint-Pierre

Geography || Archipelago of 8 small islands in the North Atlantic Ocean, south of Newfoundland. Total area: 242 km²

Industries || Fish and fish products, soybeans, animal feed, molluscs and crustaceans, fox and mink pelts.

Trading partners || CA, UE (FR, PT, NL, ES, DE), CN, US

Pacific Ocean

French Polynesia (FR)

Constitutional relations with Member State || Overseas collectivity of the French Republic with legislative speciality: i.e. French laws are applicable to the territory only if they explicitly provide for this and the share of competences with the State is provided for in an ad hoc status.

Capital city || Papeete

Geography || Grouping of 118 islands in the South Pacific, with a total area of 3 600 km² scattered over a maritime area as vast as Europe (2.5 million km²). The islands are grouped in 5 archipelagos: the Society Islands, the Tuamotu Islands, the Marquesas Islands, the Gambier Islands & the Austral Islands.

Industries || Tourism, pearls, fisheries, copra.

Trading partners || EU (mostly FR), SG, US, CN, NZ, AU, JP.

New Caledonia (FR)

Constitutional relations with Member State || Sui generis collectivity of the French Republic. Some State competences have been progressively and irreversibly transferred to New Caledonia, formed by the three provinces of Province Nord, Province Sud and Province des Iles Loyauté.

Capital city || Nouméa

Geography || Archipelago of 18 575 km² in the Pacific Ocean

Industries || Nickel, tourism.

Trading partners || EU (mostly FR), SG, AU, NZ, JP, US.

Pitcairn (UK)

Constitutional relations with Member State || British Overseas Territory. UK remains responsible for external affairs, offshore finance, defence and internal security (including the police force) and the public service. Citizens can renounce British nationality if they wish.

Main town || Adamstown

Geography || Pitcairn is situated in the South Pacific, mid-way between New Zealand and Panama. It is approximately 2 miles by 1 mile. There are 3 other (uninhabited) islands in the Pitcairn group, Oeno, Ducie & Henderson.

Industries || The Territory has few natural resources. Tourism is the main economic activity.

Trading partners || None. Developing low-level market garden exports to French Polynesia.

Wallis et Futuna (FR)

Constitutional relations with Member State || Overseas collectivity of the French Republic with legislative speciality: i.e. French laws are applicable to the territory only if they explicitly provide for this and the share of competences with the State is provided for in an ad hoc statuts.

Capital city || Mata-Utu

Geography || Archipelago in the South Pacific composed of Wallis, Futuna and Alofi

Industries || Barter economy

Trading partners || FR, SG, AU, NZ, FJ, NC

Indian Ocean

Mayotte (FR)

Constitutional relations with Member State || Overseas department of the French Republic since March 2011 ruled under Article 73 of the French Constitution (French laws are automatically applicable). France has requested the evolution of Mayotte from an OCT associated with the EU to an Outermost Region of the EU as from 2014 onwards.

Capital city || Dzaoudzi

Geography || Located in the Indian Ocean (Channel of Mozambique). Eastern part of the Comoros archipelago.

Industries || Ylang-Ylang, aquaculture, vanilla, tourism.

Trading partners || Imports: UE (FR, DE), CN, TH, MY, JP Exports: FR, KM, MG, MU.

              Annexe
11 – Thematic report on environmental and climate change issues

Introduction

The
non-European Overseas Countries and Territories (OCTs) which have special
relations with Denmark, France, the Netherlands and the United Kingdom are
associated with the European Union, accordingly with Part IV of the Treaty on
the Functioning of the European Union (TFEU). The detailed rules and the
procedure for this association are laid down by the Council in the Overseas
Association Decision (OAD)[55]
that will expire on 31 December 2013. The revision process of this Decision,
conducted within the limits of the TFEU, is underway and should lead by July
2012 to a legislative proposal for a new OAD, expected to enter into force on 1
January 2014.

An impact assessment was carried out in order to assess different
policy options for the revision of the OAD. According to this framework,
environmental issues in the OCTs, including climate change impacts, were
subject to a specific analysis.

Chapter 1: Procedural Issues and Consultation of
Interested Parties

1.1.        Procedural issues

The impact
assessment has been prepared by Directorate General for Development and
Cooperation - EuropeAid. Inter-service cooperation was ensured through the OCT Inter-Service
Group (ISG), acting as the impact assessment steering group. A working group on
environmental and climate change issues was set up in September 2011 in which
all interested DGs participated.

1.2.        Consultation and Expertise

Consultation process: In June 2008, the Commission issued a Green Paper on the
future relations between the EU and the OCTs[56],
which launched a broad public consultation from 1 July until 17 October 2008
via 'Your voice in Europe'. Thirty contributions were received, emanating from
the OCTs, their Member States, a Member of the European Parliament,
Non-Governmental Organizations and private individuals.

To question number 4 "What are, in
your view, the most important domains of mutual interest for cooperation
between the OCTs and the EU?", 84% of the contributions answered that
environmental, climate change and disaster risk reduction issues should
constitute a major concern for the future EU-OCT relations: sustainable use and
protection of OCTs biodiversity and natural resources, environmental security,
energy and renewable energy, ecosystems conservation, fight against climate
change impacts and mitigation, preparedness and response to disasters, invasive
species, sustainable fisheries. The importance of international and regional
engagement in those matters was underlined.

In July 2008 a conference on "The
European Union and its Overseas Entities: Strategies to counter Climate Change
and Biodiversity Loss" was held in La Réunion Island under the French
Presidency of the European Union. This event gathered the European Commission,
Members of the European Parliament and public authorities and civil
stakeholders from the OCTs, the outermost regions of the EU and from the Member
States of the EU. A message – "the message from La Réunion Island"
– was issued at the end of the conference, paragraph 13 of this document
stated: "There is an urgent need for EU Member States and the European
Commission, together with the ORs and OCTs, to establish a voluntary scheme for
the protection of species and habitats, inspired by the Natura 2000 approach.
This scheme should be easily accessible, flexible, adapted to the local
situation, balance conservation and development needs, as well as take into
account existing mechanisms and tools. The implementation of the scheme should
be based on local commitment and shared financing". As a follow up of
the message from La Réunion Island, the services of the European Commission (DG
Environment) developed a programme called the BEST scheme (Voluntary
scheme for Biodiversity and Ecosystem Services in Territories of the EU
Outermost Regions and Overseas Countries and Territories) and supported by EU
funds[57].

In the framework of the consultation
process, the Commission organized a stakeholders conference in October
2008 in Brussels. The event gathered around over 100 interested parties from
the OCTs' authorities, Member States, the EU's institutions and bodies and
civil society at large, both in the OCTs and in the EU. On this occasion, the
role of the OCTs as representatives of a global environmental heritage and rich
biodiversity was pointed out as a possible focal point for future EU-OCT
partnership and policy framework.

The outcome of
the consultation process as well as the
Commission's opinion on essential elements for the future partnership between
the EU and the OCTs were presented in the Communication from the Commission of
6 November 2009[58].  Environmental, climate change and disaster risk reduction
issues were recognized as areas of mutual interests and as axes of cooperation
that could contribute to attain the three central objectives that were
identified for the future partnership: (i) enhancing OCTs' competitiveness,
(ii) strenghening their resilience and (iii) promoting their cooperation with
regional, national, EU and international partners.

Since 2005, the future relations between
the EU and the OCTs have been the central themes of a partnership working party
gathering representatives of the OCTs, their Member States and the European
Commission. The future relations are also systematically discussed during the
annual EU-OCT Forums at high political level (President of the executive power
in the OCTs, Members of Governments of the Member States and EU Commissioner).

The latest annual EU-OCT Forum was
organized in March 2011. On this occasion, the OCTs and their Member States
endorsed a Joint Position Paper on the future EU-OCT relations in which
they identified environmental issues, climate change mitigation and disaster
risk reduction as main concerns. They requested a partnership in which the
assets of the OCTs as well as the challenges they face in these areas could be
taken into account.

Expertise: In 2006, an independent
study was commissioned from external consultants[59] in
order to assess the environmental profiles of the OCTs. The final
report, delivered in January 2007, identified the following main concerns in
the OCTs:

-
climate change,

-
natural disasters,

-
threats to wildlife and biodiversity, habitat
destruction

-
illegal, unregulated and unreported fishing,

-
waste management,

-
water supply and sanitation.

In 2010, the Commission contracted an
independent study[60] to evaluate the strategies of cooperation between the EU and the
OCTs and their implementation during the period 1999-2009. The results of the
evaluation were presented to the stakeholders on the occasion of the annual
EU-OCT Forum in March 2011. The evaluation concluded that environment and
climate change adaptation are regarded as matters of vital importance to the
OCTs. However, increased awareness in these issues has not been met with a
relevant increase in EU funds or interventions for this sector. The main
findings on environmental, climate change and disaster risk reduction issues
are presented in more details in section 2.2.

Chapter 2:
Problem Definition

2.1.
Description of the current framework

2.1.1.
Objectives of the association of the OCTs
with the EU

According to
the TFEU, the purpose of the association shall be to promote the economic and
social development of the OCTs and to establish close economic relations
between them and the EU as a whole. 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
(Article 198 TFEU).

The OAD stipulates that the association
shall pursue the objectives laid down in the Treaty, by focusing on the
reduction, prevention and, eventually, eradication of poverty and on
sustainable development.

2.1.2.
Structure of the current Overseas Association
Decision[61]

The current structure of the OAD does not
address environmental and climate change issues as such and does not identify
areas of cooperation specifically dedicated to environmental issues, climate
change, prevention/preparedness/response to natural disasters. The provisions
of the OAD concerning these areas are contained in articles, chapters or sections
relating to productive sectors, trade in services, trade-related areas, social
sectors, regional cooperation and integration, development finance cooperation.

Furthermore, the current OAD does not
confer any responsibilities on the OCTs to engage effectively in climate change
action, environmental protection and conservation activities according to EU
standards, in the monitoring of fisheries activities, in effective pollution
control measures and adequate emergency response capacities where new
commercial possibilities could be exploited, or in scientific cooperation with
European research institutes and teams from Member States other than those to
which the OCTs are linked. Finally, the OCTs are not always eligible to EU specific
mechanisms or programs in these domains (Life + for example).

2.1.3.
EU financial assistance to OCTs

a) The European Development Fund

Since the Treaty of Rome, the EU financial
assistance to OCTs has been delivered under the European Development Fund
(EDF). The repartition of the amount of 286 million Euros dedicated to OCTs
under the 10th EDF is specified in annex I of the current OAD as
follows:

Grants for programmable support for long terms development, humanitarian aid, emergency aid, refugee aid and additional support in the event of fluctuations in export earnings as well as for support for regional cooperation and integration Total: 250 million Euros || Territorial envelope: 195 million Euros This envelope is distributed among OCTs whose GDP does not exceed the EU average GDP. Only 13 OCTs are eligible to this envelope that must be programmed through a territorial Single Programming Document (SPD). The individual amounts delivered rank from 2 million Euros to 22.92 million Euros for the whole period. Greenland is not eligible to this envelope, bilateral cooperation with the EU being financed under the budget.

Regional envelope: 40 million Euros This envelope is programmed through a regional SPD that contains five sub-programs. Two of them are thematic and concern all OCTs (territorial strategies for innovation and technical assistance to the OCT Association). The three other sub-programs concern the OCTs located in Caribean, the Indian Ocean and the Pacific.

Non allocated reserve: 15 million Euros - humanitarian, emergency and refugee aid for the OCTs and, if necessary, the additional support in the event of fluctuations in export earnings - new allocations in accordance with the development of the needs and performance of the OCTs

Investment Facility managed by the European Investment Bank (EIB) 30 million Euros ||

Technical assistance managed by the Commission 6 million Euros ||

The criteria applied for the distribution
of territorial allocations under the 10th EDF were the size of the
population, the level of GDP per capita. Territorial allocations were increased
for least developed OCTs and remote OCTs – located in areas not included in one
of the three regional subprograms for Caribbean, Indian Ocean and Pacific.

The regional envelope was increased by 80%,
compared to the 9th EDF, rising from 8 to 40 million Euros whereas
the non allocated reserve decreased from 35 to 15 million Euros (- 57%).

Territorial and regional allocations are
programmed in a Single Programming Document (SPD). Due to the limited amount of
each allocation, the OCTs are requested to choose a unique focal sector.

Greenland is
not eligible for an EDF territorial allocation but receives financial
assistance of the EU under budget line 21 07 02 amounting 176.6 million Euros
for the current period. The EU-Greenland partnership focuses on education and
vocational training.

Greenland also concluded a fisheries
agreement with the EU in which it perceives 17.8 million Euros per year.

b) EU budget lines and horizontal programs

Article 25.2 of the current OAD stipulates that OCTs can benefit from certain actions adopted for developing
countries within the general budget of the EU and participate in some
programmes, subject to the rules and objectives of the programmes and the
arrangements applicable to the Member State to which the OCT is linked.

Only one of the three budget lines[62] identified in Annex II E of
the OAD was mobilized for the OCTs. The Instrument for Development Cooperation
(DCI) funded actions in the OCTs under the environment and sustainable
management of natural resources including energy (ENRTP):

-
In 2009, a call for proposals specifically
targeted actions in favour of biodiversity conservation and fighting against
invasive species in Small Islands Developing States and in OCTs. The projects
proposed by organisms from OCTs were not selected. The only selected project
that concerned OCTs was an action against invasive species in French Polynesia,
New Caledonia, Fiji, Palau, Cook Islands and Western Samoa for which Bird Life
International was granted 1 163 984 Euros in 2010.

-
In May 2011, a technical seminar was organised
in French Polynesia in order to raise awareness on environmental issues and the
possibilities offered by the ENRTP. Pacific OCTs and ACPs participated in this
seminar which was co-financed by the ENRTP with 150 000 Euros.

Additional support:

The Global Climate Change Alliance

The OCTs are
not eligible for the Global Climate Change Alliance (GCCA). Despite this
situation, the European Commission took the decision to associate the Pacific
OCTs with the joint EU-Pacific initiative on climate change. The GCCA financed
the participation of the representatives of these OCTs in the political
dialogue, the ministerial conference and the GCCA training workshops that took
place in Vanuatu in March 2011. In 2012, a specific training workshop for all
OCTs will be organised in Brussels, back-to-back with the annual EU-OCT Forum,
and the Caribbean OCTs will be invited to participate in the regional workshop.
In total, the participation of the OCTs to these different workshops might not
exceed 50 000 Euros, but the important information is that even though GCCA
cannot finance projects in the OCTs, it fosters their integration within
regional networks.

The BEST
Scheme

As a follow-up to the conference " The
European Union and its Overseas Entities: Strategies to counter Climate Change
and Biodiversity Loss" that was held in July 2008 in La Réunion Island
under the French Presidency of the EU, the services of the European Commission
(DG Environment) developed a programme called the BEST scheme (Voluntary
scheme for Biodiversity and Ecosystem Services in Territories of the EU
Outermost Regions and Overseas Countries and Territories). This programme
intends to promote the conservation and sustainable use of biodiversity and
ecosystem services in European overseas entities, drawing on the experience
gained with EU conservation programmes such as Natura 2000, from which the
Overseas Countries and Territories and most outermost regions of the EU are
excluded.

In 2011, the European Parliament took the
initiative of a preparatory action of 2 million euros[63]. The specific
objectives of the preparatory action are:

(1)
promote the establishment and effective
management of marine and terrestrial protected areas (PAs) in the EU Outermost
Regions and Overseas Countries and Territories, also taking into account
already existing PAs;

(2)
implement sustainable management of marine and
terrestrial resources, which contribute to protecting important species,
habitats and ecosystem functions outside PAs;

(3)
strengthen conservation and sustainable use of
biodiversity and ecosystem services in the EU Outermost Regions and OCTs by:

–
addressing the wider ecosystem challenge of
climate change by maintaining healthy, resilient ecosystems and fostering green
infrastructure and ecosystem-based approaches to climate change adaptation and
mitigation which often bring multiple benefits;

–
strengthening capacities at a local and regional
scale, including the neighbouring countries, by promoting exchange of
information and best practice amongst all stakeholders including local
administration, landowners, private sector, researchers and civil societies
etc… ;

–
strengthening existing nature conservation
programmes and related efforts within and outside conservation areas;

–
broadening the knowledge base and filling the
knowledge gaps, including quantifying the value of ecosystem functions and
services;

(4)
encourage and facilitate transboundary working;
addressing issues such as invasive alien species, the impacts of climate change
and the implementation of international conventions;

(5)
develop mechanisms to lever resources including
‘payments for ecosystem-services’(PES).

2.2.
Lessons Learnt

The evaluation of the strategies of
cooperation between the EU and the OCTs and their implementation during the
period 1999-2009 identified the following sectors supported by the EU under the
EDF:

-
management of water resources (both fresh water
as well as marine, as the first has a direct impact on the second);

-
OCTs disaster preparedness (only within their
own regional context);

-
OCTs environmental policy formulation and
management capacities;

-
local biodiversity monitoring;

-
scientific research on biodiversity issues
taking into consideration the unique setting of the OCTs and their location in
areas of ecological fragility and high biodiversity.

The evaluation study underlined that
despite the recognition of the importance of the environment, the reality of
climate change and the importance of disaster preparedness, only few concrete
results of the EU-OCT cooperation were found in this field. According to the
study, this situation is due to limited funding. The evaluation has concluded
that environment and climate change adaptation are considered by the OCTs as
matters of vital importance, as well as disaster preparedness. However,
increased awareness in these issues has not been met with a relevant increase
in EU funds or interventions for this sector.

The study recommends that for the post 2013
EU-OCT partnership the association framework should be revisited in order to better
respond to new and emerging priorities in the OCTs, such as energy and climate
change challenges and to address new objectives such as sustainable management
of natural resources and conservation of biodiversity.

The necessity to foster cooperation with
neighbouring countries was also identified as a means to reach efficiency. In
this respect, the study highlights that cooperation between the OCTs and their
neighbours (third countries, ACP States or outermost regions of the EU) is
insufficiently supported by the EU, notably because the partners must mobilize
different EU funds: the European Regional Development Fund (ERDF) for the
outermost regions and the EDF for the ACP States and the OCTs. The main
difficulties encountered are due to the fact that these instruments are ruled
by different programming and implementation procedures, according to their
positioning inside or outside the EU budget, and to the insufficient knowledge
of these procedures from the different stakeholders. Only two projects supported
by the EU could be successfully carried out under the 9th EDF in the
Caribbean and the Indian Ocean, involving OCTs, ACP States and outermost
regions. One of them focused on biodiversity conservation but did not involve
OCTs.

2.3.
The environmental situation in the OCTs

This section is mainly based on information
contained in the OCTs environmental profiles[64].

2.3.1. Biodiversity

All the OCTs are characterised by a
biodiversity that is much richer than in continental Europe as a whole. These
insular and remote countries and territories constitute privileged locations
for the development of endemic species, whether animal or vegetable,
terrestrial or marine. The OCTs are also important places for migrating species
(eg.: black-browed albatrosses in the Falkland Islands, in South Georgia and in
the French Southern and Antarctic Territories; humpback whales in French
Polynesia). Thus, the OCTs are of major importance for world biodiversity
balance.

Biodiversity and ecosystem services are the
basis of many island economies, which often heavily depend on tourism and
fisheries. Without the protection through coastal ecosystems such as mangroves
and coral reefs, coasts and perhaps entire islands risk becoming inhabitable.
The conservation and sustainable use of biodiversity and development of ecosystem
services as well as the development and use of ecosystem based approaches to
climate change adaptation and mitigation contribute to a green economy through
the provisions of jobs and business opportunities. Most OCTs are located in
regions where many communities depend directly on natural resources for their
livelihoods.

Besides the significance of the OCTs’
environmental sustainability for their own well-being, the preservation of the
OCTs’ biodiversity is of major importance to the EU and for the world at large,
given its international dimension in terms of research, the sustainable
exploitation of natural resources and the fight against climate change. The
OCTs also play an important role for the EU as they help to achieve the EU's
global biodiversity targets as well as commitments under other relevant
Multilateral Environmental Agreements (MEA).

The OCTs’ potential as regards biodiversity
is already recognised at an international level, through the development of
scientific projects to gain a better understanding of ecosystems, the way they
interact and their importance for the worldwide environmental balance. These
research projects also aim to find solutions to safeguard this potential, which
is highly threatened, for instance, by the introduction of non-endemic species
that destroy existing habitats or supplant endemic vegetation, or by the impact
of climate change on corals. The international community feels increasingly
concerned about the loss of biodiversity.

2.3.2. Climate Change

OCTs are amongst the insular countries that
have to face the impacts of climate change. The OCTs environmental profiles
assessed these impacts. Depending on the geographical location of the OCTs, the
effects of climate change will be different:

In Greenland:

-
Melting of sea-ice will deprive some important
species, notably seals and polar bears of habitat. This is likely to have
harmful effects on the communities of these species and on local people who
depend on them for food and livelihood.

-
The increased melting of land-ice will affect
drainage and hydrology, and this will also have an effect on landscapes and
habitats on the territory. It will also have an effect on sea salinity, and
therefore possibly marine habitats and fisheries.

-
Melting of the permafrost will lead to damage of
buildings and infrastructure which used the permafrost as bedrock on the
assumption that, as its name implies, permafrost is permanent.

-
Finally the increased temperature of the seas,
together with changes in its salinity and in the flux of nutrients as a result
of changes in sea currents may generate changes in fish stocks; an issue of
great importance to a territory dependent on its fisheries income.

Source: OCTs environmental profiles –
Main report – January 2007

In Antarctic OCTs:

Compared to Greenland, the temperatures in
the Antarctic OCTs are colder and no significant melting of the grounded ice is
expected. On the contrary, expected increased precipitation due to climate
change will induce an increase of the ice-sheet. The most important impact of
climate change that has been identified so far is a change in marine life in
the Southern Ocean for similar reasons to those applying to Greenland (warming
of the sea), which could have consequences for the important fisheries in this
region.

In temperate islands:

According to the study, these OCTs will be
the least affected by sea-level rise as most of them have steep rocky
perimeters. The main effects of climate change identified in these territories
are:

-
changes to fisheries;

-
unpredictable changes in flora and fauna,
including the threatened and endemic species. Biodiversity on small islands may
find adaptation to climate change more difficult than continental flora and
fauna because there is no opportunity for species to gradually migrate
latitudinally in order to compensate;

-
the arrival and thriving of more non-native
species in polar regions, some of which may place pressures on endemic species.

In tropical islands:

The study assessed that tropical OCTs are
particularly vulnerable, physically and economically, to the effects of climate
change:

-
Increase of the frequency and the force of
natural disasters linked to adverse impacts of climate change: hurricanes,
cyclones, floods, landslides and more generally hydro-meteorological,
geophysical and oceanographic triggers events. Impacts of natural disasters on
human beings and economic activities (see paragraph 2.3.3).

-
Coral reefs bleaching due to the increase of the
surface temperature of the sea and increase of CO2 concentration in the sea
water. This phenomenon threatens the ecosystem itself and thus the population
(food resources), the local economy (fishing, tourism). Threats on coral reefs
also have impacts on shorelines as coral reefs have a coastal protection role.
Ocean acidification is also a problem.

-
Salinisation of freshwater aquifers due to the
intrusion of seawater.

-
Destruction or shoreward retreat of mangroves.

To this identified threats must be added climate-induced
migrants and related threats of mass displacement.

Source:
OCTs environmental profiles – Main report – January 2007

The conclusions of the study are presented
in the following box:

2.3.3. Natural disasters

The insular characteristics of the OCTs make
them particularly exposed to environmental shocks as well as natural disasters
whose frequency could be influenced by climate change. The OCTs are
particularly vulnerable to climatic, seismic and volcanic risks and to
tsunamis. Such natural disasters can easily destroy the infrastructures and
hamper the economic activities. Besides the risk of economic paralysis, these
phenomena can cause a heavy human toll and lead to the displacement of
populations, and are thus likely to disrupt the economic and social
organisation of the OCTs.

Against this background, the OCTs and the Member States
to which they are linked have consistently indicated that the Overseas
Association Decision should take better account of the OCTs’ vulnerability and
that specific criterion and instruments should be identified in line with their
specific situation. In the context of the revision of the Overseas Association
Decision in 2007, the Council and the Commission stressed that greater
coordination between support at regional and territorial level could contribute
to enhancing the resilience of the OCTs towards the challenges that they are
facing regardless of the level of per capita GNP or other elements used to
determine the territorial allocations. Nonetheless, the Commission did not
propose a fundamental revision of the existing criteria and instruments,
because it felt that such issues should be discussed in the context of a wider
dialogue on the overall philosophy underpinning the OCT/EU association that
could take place in view of the revision for the post 2013 period. Moreover, if
it were accepted that allocation criteria should be more
vulnerability-oriented, the ancillary challenge of quantifying vulnerability in
an objective way on the basis of other elements than those already taken into
account today would require further reflection.

2.3.4. Energy

The OCTs are heavily reliant on fossil
fuels imported at high transport costs, which makes them extremely vulnerable
to economic external shocks. Moving towards a greener economy, resource
efficiency and sustainable consumption and production would contribute to one
of the objectives indicated in the Communication from the Commission of 6
November 2009[65],
namely to increase the OCTs competitiveness. While the transformation may be
hard-fought, a greener society would be expected to result in new economic
activities, new jobs and increased competitiveness on the market, creating a
more efficient and sustainable economy.

Energy could be one of the possible drivers
of the renewed partnership between the EU and the OCTs, by promoting both EU's
interest, such as research activities, investment opportunities, and those of
the OCTs, such as development of local know-how and labour.

2.3.5. Water

Unsustainable agricultural practices, industrial expansion and
rising urban population are generating demand well beyond the capacity of most
OCTs to provide access to safe water.

Safe drinking water and basic sanitation is of crucial importance to
the preservation of human health. Households with improved services suffer less
from water-related diseases and water-caused mortalities. Improved water
services reduce health-related costs and save time that can be invested in
other income generation activities, thus offering more productive lives. Water
projects may help to empower the powerless to participate in community decision-making.

Capacity building of administrations and local organisations will be
needed to sustain water services. More effort is needed to boost the OCTs water
catchment, storage, treatment and distribution capacity. OCTs should put more
emphasis on good environmental management. Complete and enforced legislative
framework for environmental conservation and management is needed to address
environmental problems adequately.

2.3.6. Waste

The OCTs environmental profiles reflected a general lack of data on
the situation regarding waste in the OCTs (volumes, trends and management).
Nevertheless, the study could assess that the main method of waste disposal is
dumping the waste on waste dumps, which are full or nearly full in at least
half the territories. Consequently, informal and unauthorised dump sites have
developed. Furthermore, the absence of toxic and hazardous waste disposal
facilities encourages their dumping with normal waste. The situation has
damaging effects on surface and groundwater sources, rivers and the marine
environment, but also on public health. The study stipulates that bad waste
management practises in the OCTs have degraded ecosystems such as mangroves,
salt ponds and marine and fresh water wetlands. In addition, both the
industrial expansion and the intensification of tourism represent a pressure on
local waste management.

The main problems faced by the OCTs are:

-
Lack of the critical size to reach necessary
economies-of-scale necessary for modern waste management techniques - sanitary
landfills, safe incinerators - economic. A rule-of thumb in industrialised
countries is that a minimum waste catchment population of 50,000 is needed to
make such facilities economic. Many OCTs do not have this minimum population,
but there is further fragmentation between different islands, with inter-island
transport of waste not being feasible.

-
Lack of facilities, critical size, markets to
make recycling and composting feasible.

-
Lack of public awareness about waste, need for
prevention and reduction.

-
Lack of facilities for dealing with hazardous
waste including infectious clinical waste.

-
Lack of suitable space for building waste
management infrastructures and resistance by inhabitants.

2.4.
Definition of the problem

The European Commission, the OCTs and their
Member States recognized environmental, climate change and disaster risk
reduction issues as being of major concerns in the OCTs[66]. The OCTs continue to face
difficulties to integrate environmental issues within their local development
policies and as far as the environmental pillar of sustainable development is
concerned, the objectives of the association of the OCTs with the EU have not
been fully achieved.

2.5.
Underlying Drivers of the Problem

–
Insufficient legal and political basis/framework
for action

Constitutional
/ Institutional links with the Member States

– Depending on the competences national Constitutions procure to OCTs,
they might not have the ability to adhere to international agreements (eg:
Kyoto protocol) and thus to the mechanisms created in the framework of these
international agreements.

-
Restricted constitutional capacities of OCTs in
certain areas (eg. illegal, unreported and unregulated fishing).

Weak
local framework

– Low administrative capacities of the OCTs.

– Lack of local legislative framework/standards and of
strategies/policies in these areas. Need for an improved environmental
governance.

– Low regional cooperation with their neighbours.

–
Structural weaknesses

Small-sized
territories

– Small territories suffering from double insularity (remoteness and
archipelagic characteristics) facing difficulties to create scale economies, which
makes it difficult to create structured activities in certain issues (eg: waste).

– Small market economies where it is difficult to develop green
energy/economic activities for a reasonable cost.

Extreme
vulnerability

– to external shocks (eg: OCTs highly dependent on fossil energies
imports);

– to natural disasters and impacts of climate change, even though the
OCTs have a low share in greenhouse gas emissions;

– to threats on terrestrial/marine biodiversity. The OCTs host rich
endemic ecosystems that are extremely vulnerable (eg: invasive species, impacts
of climate change and natural disasters on economic activities).

–
Limitations of the EU/OCT association

Lack of
visibility of mutual interests in these issues

-
Potential and assets of the OCTs not taken into
account at EU level. The OCTs themselves do not exploit or communicate on these
potentials and assets.

-
Lack of coordinated intersectoral management of
environmental issues. The issue of Environment is scattered over the current AOD,
thus diminishing the visibility of the need and importance of adequately
addressing environmental and climate issues. No visible link is introduced
between the environment and increased competitiveness of OCTs based on green
economy.

-
EU policies in these areas are not always
applicable to the OCTs, thus EU interests are not visible nor pursued.

Insufficient
accessibility to EU mechanisms

– The OCTs are not eligible to all relevant EU horizontal programs and
budget lines.

– OCTs are not eligible to the global funds (eg. GCCA) and/or the
different sources of funds are difficult to coordinate (eg. EDF/ERDF), which
hamper their integration in global initiatives.

2.6.
Legal Basis for EU Action and Policy
Framework

Part IV of the treaty on the functioning of
the EU.

2.7.
EU Added Value

An enhanced
partnership with the OCTs in the field of environment, climate change
adaptation and mitigation and disaster risk reduction will reinforce the role
of the EU as a global player. This positioning of the EU was underlined by the
Commission in its Communication of 29 June 2011.[67] This Communication outlines
the main elements of the action of the EU as a global player for the period
2014-2020 and underlines the European Commission's view that the instruments
can "facilitate the EU's engagement (…) on issues that are of global
concern, such as climate change, environmental protection,
irregular migration and regional instabilities, and allow the EU to respond
rapidly and effectively to natural and manmade disasters".

Chapter 3: Objectives

3.1.
General and Specific Objectives

3.1.1.
The general objectives

Article 198 of the TFEU specifies that the purpose of
the association shall be to promote the economic and social development of the
OCTs and to establish close economic relations between them and the EU as a
whole. 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.

In its Communication of 6 November 2009[68], the Commission considered
that the purpose of the association specified by the Treaty implies that the EU
should promote the OCTs' sustainable development, in its economic, social and
environmental dimensions. The Commission identified the three following
objectives that should underlie the future EU-OCT partnership: (i) enhancing
OCTs' competitiveness, (ii) strengthening their resilience and (iii) promoting
their cooperation with regionnal, national, EU and international partners.

The Commission also underlined that since
the OCTs are closely linked to the EU by way of their constitutional links with
their Member States, the future EU-OCT relations should also ensure the
promotion of the EU's values and standards in the wider world. In this
Communication, the Commission considered that the rationale of the
future relationship should be more reciprocal and based on mutual interests.

3.1.2.
The specific objectives

As far as the environmental pillar of sustainable development
is concerned, the legislative proposal relating to the next OAD should:

·
Support the OCTs' sustainable development by
ensuring a coordinated partnership in the field of environment, climate change
and disaster risk reduction, which would (i) enable the OCTs to elaborate
policies and strategies, (ii) enhance their integration in regional networks
and initiatives.

·
Enhance the visibility of the EU-OCT partnership
on environmental, climate change and disaster risk reduction issues.

·
Help the OCTs to promote the conservation and
sustainable use of biodiversity and ecosystem service.

3.2.
Consistency with Other EU Policies

The Lisbon Treaty
reinforced the principle of the necessary coherence between the EU's internal
and external policies. External action instruments and initiatives are expected
to take into account EU concerns, values, interests and objectives that are
dealt with within the EU's internal policies, by providing the possibility of
giving them an external dimension. Issues such as climate change and
environment have to be streamlined into EU external actions and should be an
integral part of the EU's dialogue with third partners. Inversely, internal
policies are expected to take into account the possible impacts certain
measures and initiatives may have on the EU's partners.

The Europe 2020 Agenda
adopted by the Commission in March 2010 provides the strategic framework
against which the coherence of EU policies and the promotion of EU values,
standards and interest need to be checked[69].
For OCTs, the principle of coherence is of particular
importance as the inhabitants of OCTs possess the EU citizenship.

Integrating a specific
part dedicated to environmental, climate change and disaster risk reduction
issues in the next OAD will allow meeting the coherence with other EU policies.
The OCTs are not eligible to the financing instruments of EU internal policies.
Therefore, there is no risk of overlap.

Chapter 4: Policy Options

The different policy options are developed
under the framework of the provisions of the TFEU.

4.1. Policy Option 1 'Zero Option' (No EU action for environmental and
climate change issues nor for disaster risk reduction)

Under this option, no EU financial
assistance will be delivered to OCTs to support their actions in the field of
environment, climate change and disaster risk reduction.

4.2.
Policy Option 2 'status quo'

Under this option, the future OAD will not
comprise significant change comparing to the current OAD. The decision to use
EU funds in order to tackle environmental and climate change issues as well as
disaster risk reduction will depend on the willingness of the OCTs, as it is
currently the case.

-
 Sub-option 2A: the structure of the future OAD
will be the same as the current OAD.

-
Sub-option 2B: the visibility of issues relating
to environment, climate change and disaster risk reduction is enhanced in the
structure of the future OAD.

4.3.
Policy Option 3 'A specific programme
dedicated to issues relating to environment, climate change and disaster risk
reduction'

Under this policy option, the next OAD will be modified as presented
in order the visibility of EU-OCT cooperation in these areas and to provide for
a specific programme financed by EU funds dedicated environment, climate change
and disaster risk reduction.

-
Sub-option 4A: environmental, climate change and
disaster risk reduction are tackled at individual OCTs level

-
Sub-option 4B: environmental, climate change and
disaster risk reduction are tackled at regional level

-
Sub-option 4C: environmental, climate change and
disaster risk reduction are a thematic subject

Chapter 5: Analysis of Impacts

Consequences of biodiversity loss

Loss of biodiversity and ecosystems has social, environmental and
economic consequences, which are summarised briefly below.

There are strong ethical and moral arguments in favour of protecting
biodiversity in its own right, for its intrinsic value, independent of its
instrumental value to humans. In addition, biodiversity loss has economic costs
that are only now starting to be fully appreciated.

Ecosystems provide a number of services that contribute directly and
indirectly to human well-being. There are four main types of ecosystem
services: provisioning services (e.g. food, water, fuel); regulating services
(e.g. flood and disease control); supporting/habitat services (e.g. nutrient
cycling); and cultural services (e.g. recreation). These services are of
benefit locally, nationally or globally.

In general, the loss of ecosystems is equivalent to losing an
important "natural" structural system whereas the loss of
biodiversity is equivalent to losing a vital component of that structure. The
former has direct human, social and economic costs whereas the latter is often
more subtle – it makes ecosystems less stable and more vulnerable to collapse.

These economic impacts are, of course, associated with impacts on
jobs. Some jobs are directly concerned with the conservation and management of
biodiversity (e.g. in land management, protection of sites and species,
provision of advice, and scientific research and monitoring activities). More
numerous are jobs dependent on the provisioning, regulating and cultural
services that biodiversity plays a role in delivering. Other social
consequences include health, territorial cohesion, and social inclusion
impacts.

Impacts of climate change

The OCTs are particularly vulnerable to climate change effects.
Mostly tropical islands, they are generally small in size with limited
resources; they are often isolated and largely exposed to cyclones and sea
level rise. Insular ecosystems are particularly rich, with remarkable endemism
rates, but they are also extremely fragile and often highly deteriorated;
therefore, their resilience to new aggressions is limited. Furthermore, island
economies strongly rely on the quality of their natural environment, notably
through tourism, fishing and subsistence farming; a degradation of their
environment could deeply affect local communities. European territories located
in the Polar Regions are particularly threatened as well; rises in temperature
projected in the Arctic are twice higher than the global average. In summary,
the European Union overseas entities seem to be “sentinel territories” or
indicators testifying to the effects of global changes on ecosystems and
societies worldwide

Importance of the environment for the OCTs economies

The economies of tropical islands are highly dependent upon natural
resources. Industrial activities are, as a general rule, poorly developed and
subsistence agriculture plays an important role in the informal economy.
Fishing and agricultural activities also occupy an important place in the
balance of trade. Pearl farming has become the primary economic activity in
French Polynesia. A change in the state of the natural resources brought about
by climate change could therefore have a particularly serious impact on the
already fragile economies of these territories.

Finally, tourism has become an important driver of the economy in
most of the overseas entities. For many, it has become the most important
economic pillar and the one offering the greatest potential for development. In
the tropical islands, tourism is directly dependent upon the quality of the
environment, especially the beaches and the coral reefs. A degradation of these
features as a result of climate change could make these less attractive
destinations and put a brake on economic development. The repeated destruction
of tourist infrastructure by ever more intense cyclones and the emergence of
new infectious tropical diseases are likewise phenomena that could lead to a
reduction in

Natural capital – our ecosystems, biodiversity, and natural
resources – underpins economies, societies and individual well-being. However,
the values of ecosystem services and underlying biodiversity are all too often
overlooked or poorly understood. Rarely are they reflected in price signals in
markets, and taken into account in day to day decisions by business and
citizens. Nor are they reflected adequately in the economic accounts of
society.

Decision-makers with better access to information on ecosystem
service values and on economic policy tools will be better placed to make
efficient, cost-effective and fair choices and to justify their reasons for
taking action, or for choosing between policy options.

For example, biodiversity loss and land degradation is undermining
food security. The collapse in fisheries and other food harvested from the wild
is a major problem in this regard. The loss of diversity of the wild races of
domesticated plants and animals as a result of habitat loss or of ancient
domesticated varieties as farmers adopt fewer modern hybrids in their farming
systems is similarly a serious concern.

It is difficult to quantify the economic and social impacts of the
future OAD, but one could expect in absolute terms the following benefits, in
case the next partnership provides tackles environment, climate change and
disaster risk reduction:

·
Environment, climate change and disaster risk
reduction become priorities in the EU-OCT partnership.

·
Substantial health impacts both from the
investment in improved natural environments and from improvements in
environmental quality.

·
A sustainable management of natural resources
and the conservation of ecosystems will have an impact on OCTs economies. For
example, the conservation of lagoon ecosystems (coral reef) in small islands is
essential to ensure fish resources and thus the economic activities relating to
the exploitation of these resources.

·
It is expected that a
specific programme dedicated to environment, climate change and disaster risk
reduction tends to create and retain employment in areas that are being
depopulated and/or have lower relative incomes.

·
Conservation of biodiversity and ecosystems
could also develop a green tourism, allowing for the creation of employment in
this economic sector.

Chapter 6: Comparison of Options

6.1.
Policy Option 1 'Zero Option' (No EU
action for environmental and climate change issues nor for disaster risk
reduction)

Under this option, no EU funds from the 11th
OCT-EDF will be dedicated to environmental, climate change and disaster risk
reduction issues. No complementary funds could be mobilised from EU budget
lines and programs.

As a consequence,
the general and specific objectives identified in section 3.1 would not be
attained and the solutions to the difficulties encountered by the OCTs will not
be implemented with the support of the EU. There will be no EU added value in
the field of environment, climate change and disaster risk reduction.

6.2.
Policy Option 2 'Status quo'

This policy option proposes no substantial
revision of the OAD regarding environment, climate change and disaster risk
reduction.

Sub-option 2A: the structure of the
future OAD will be the same as the current OAD

Under this sub-option, the current
structure of the EU-OCT association will be renewed after 2013 and the future
OAD will still not specifically address the environmental, climate change and
disaster risk reduction issues.

The utilisation of the territorial and regional allocations being
based on the principle of ownership, the amount of EU funds mobilised on this
field will depend on the political willingness of the OCTs, as it is currently
the case.

Unequal involvement of the OCTs in these
issues with the support of the EU will continue and the achievement of the
general and specific objectives in section 3.1 will largely depend on their
willingness. The underlying drivers identified in section 2.5 will not be
addressed, unless the OCTs decide to mobilize their allocations on these
issues.

Mainstreaming will nevertheless
be possible, but coordinated action will not be possible under this option, as
a dedicated financial framework will not be set up.

Sub-option 2B: the visibility of issues
relating to environment, climate change and disaster risk reduction is enhanced
in the structure of the future OAD

This
sub-option proposes that Part 2 of the future OAD is renamed 'The areas of
OCT-EU partnership' and consecrates a specific article to an EU-OCT
partnership on the field environment, climate change and disaster risk
reduction.

The changes (in italics) introduced will be the following:

Current OAD || Future OAD

PART 2: The areas of OCT-EC cooperation Article 10: Areas of Cooperation Article 11: Productive Sectors Article 12: Trade Development Article 13: Trade in Services Article 14: Trade-related Areas Article 15: Social Sectors Article 16: Regional Cooperation and Integration Article 17: Cultural and Social Cooperation || PART 2: The areas of OCT-EU partnership Article 10: Areas of Partnership Article 11: Productive Sectors Article 12: Trade Development Article 13: Trade in Services Article 14: Trade-related Areas Article 15: Environment, climate change and disaster risk reduction Article 16: Social Sectors Article 17: Regional Cooperation and Integration Article 18: Cultural and Social Cooperation

The provisions concerning the field of environment, climate change
and disaster risk reduction currently contained in articles 11, 13, 14, 15 and
16 will be positioned in the future article 15.

Under this option, article 10 will remain unchanged and will still
provide for a partnership "in accordance with the priorities
established in the development strategies for each OCT or, where appropriate,
in the form of regional measures".

As a consequence, like in sub-option 2A, the utilisation of the
territorial and regional allocations being based on the principle of ownership,
the amount of EU funds mobilised in this field will depend on the political
willingness of the OCTs, as it is currently the case.

Unequal involvement of the OCTs in these issues with the support of
the EU will continue and the achievement of the general and specific objectives
in section 3.1 will largely depend on their willingness. The underlying drivers
identified in section 2.5 will not be addressed, unless the OCTs decide to
mobilize their allocations on these issues.

Mainstreaming will nevertheless be possible, but coordinated action
will not be possible under this option, as a dedicated financial framework will
not be set up.

The main advantage of sub-option 2B
compared to sub-option 2A will be to enhance the visibility in the field of
environment, climate change and disaster risk reduction as an area of
partnership between the OCTs and the EU. This sub-option will thus address
driver number 3.a identified in section 2.5 above and specific objective number
2 describe in section 3.1.2.

6.3.
Policy Option 3 ' A specific programme
dedicated to issues relating to environment, climate change and disaster risk
reduction '

Under this policy option, the visibility of EU-OCT cooperation in
these fields will be enhanced and an amount of EU funds will be
specifically allocated in order to address these issues.

Policy option 3 proposes to modify the next OAD in its Parts 2 and
3.

The changes (in italics) introduced in Part 2 of the OAD will
be as described in sub - policy option 2A:

Current OAD || Future OAD

PART 2: The areas of OCT-EC cooperation Article 10: Areas of Cooperation Article 11: Productive Sectors Article 12: Trade Development Article 13: Trade in Services Article 14: Trade-related Areas Article 15: Social Sectors Article 16: Regional Cooperation and Integration Article 17: Cultural and Social Cooperation || PART 2: The areas of OCT-EU partnership Article 10: Areas of Partnership Article 11: Productive Sectors Article 12: Trade Development Article 13: Trade in Services Article 14: Trade-related Areas Article 15: Environment, climate change and disaster risk reduction Article 16: Social Sectors Article 17: Regional Cooperation and Integration Article 18: Cultural and Social Cooperation

The changes introduced in Part 3 of the OAD will be the following:

-
The article relating to the objectives of the
development finance cooperation (current Article 18) shall make a specific
reference to the specific objectives identified in section 3.1.2 of the present
report:

o
Support the OCTs' sustainable development by
ensuring a coordinated partnership in the field of environment, climate change
and disaster risk reduction, which would (i) enable the OCTs, with the support
of the EU, to elaborate policies and strategies, (ii) enhance their integration
in regional networks and initiatives.

o
Enhance the visibility of the EU-OCT partnership
on environmental, climate change and disaster risk reduction issues.

o
Help the OCTs to promote the conservation and
sustainable use of biodiversity and ecosystem service.

-
The article relating to the scope of financing
(current Article 21) already includes institutional development, capacity
building and integration of environmental aspects. This reference in the next
OAD shall be enlarged to climate change and disaster risk reduction.

The current structure of Part 3 – Title 1 of the OAD will be
modified in order to introduce a specific chapter dedicated to environmental, climate
change and disaster risk reduction, as follows:

Current OAD || Indicative amendments

PART 3: Instruments of OCT-EC cooperation TITLE 1: Development finance cooperation Chapter 1: General Provisions Article 18: Objectives Article 19: Principles Article 20: Single Programming Documents Article 21: Scope of Financing Article 22: Eligibility for Financing Article 23: Programming and Implementation Article 24: The EDF-OCT Committee Chapter 2: Resources Made Available to the OCTs Article 25: Financial Assistance Chapter 3: Private sector investment support Article 26: Investment Promotion Article 27: Investment Support and Financing Chapter 4: Additional Support in the Event of Fluctuations in Export Earnings Article 28: Additional Support Chapter 5: Support for Other Actors of Cooperation Article 29: Objectives and Financing Chapter 6: Support for Humanitarian and Emergency Aid Article 30: Objectives and Means Chapter 7: Implementation Procedures Article 31: Technical Assistance Article 32: Financial Control || PART 3: Instruments of OCT-EU partnership TITLE 1: Development finance cooperation Chapter 1: General Provisions Article 18: Objectives Article 19: Principles Article 20: Single Programming Documents Article 21: Scope of Financing Article 22: Eligibility for Financing Article 23: Programming and Implementation Article 24: The EDF-OCT Committee Chapter 2: Resources Made Available to the OCTs Article 25: Financial Assistance Chapter 3: Private sector investment support Article 26: Investment Promotion Article 27: Investment Support and Financing Chapter 4: Promotion of activities in the field of environmental, climate change and disaster risk reduction Article 28: Objectives and Means Chapter 5: Additional Support in the Event of Fluctuations in Export Earnings Article 29: Additional Support Chapter 6: Support for Other Actors of Cooperation Article 30: Objectives and Financing Chapter 7: Support for Humanitarian and Emergency Aid Article 31: Objectives and Means Chapter 8: Implementation Procedures Article 32: Technical Assistance Article 33: Financial Control

Within this framework, three sub-options can be identified:

Sub-option 3A: environmental, climate change and disaster risk
reduction are tackled at individual OCTs level

This sub-option could imply the introduction of a new criterion for
the distribution of the territorial envelope. This criterion could be based on
some of the environmental indicators used by the European Commission in its
annual environment policy review.[70]

Under this sub-option, environmental, climate change and disaster
risk reduction activities will be funded within the territorial allocations of
the OCTs.

The OCTs will mobilize one part of their territorial allocations to
support the focal sector they will choose in the framework of the policy
dialogue with the Commission, and will use the other part of their territorial
allocation in order to support activities in the field on environment, climate
change and disaster risk reduction.

In this hypothesis, two different approaches can be identified:

-
The territorial Single Programming Documents
will include two focal sectors maximum.

-
There will be two Single Programming Documents
per OCTs eligible to the territorial allocations: a first one dedicated to the
focal sector identified in the framework of the policy dialogue between the
OCTs and the European Commission, a second one for environmental, climate
change and disaster risk reduction issues.

This hypothesis requires the modification of Article 10 of the
current OAD (Part 2) in order to introduce an obligation to tackle
environmental, climate change and disaster risk reduction in the strategies of
each OCT.

Under this sub-option, eligibility to EU budget lines and programs
shall be maintained or reinforced when possible (for example via targeted calls
for proposals) in order to support cooperation with other partners and
networking.

This sub-option could also provide for incentives in the form of
additional funds to be released after the mid-term review on the basis of the
performance of the OCTs in the implementation of the focal sector concerning
environment, climate change and disaster risk reduction.

Sub-option 3A does not plead in favour of simplification.

In the event in which a Single Programming Document would include
two focal sectors, the programming exercise will not progress at the same pace
for the two sectors as different local administrations and/or interlocutors
will be involved in the exercise.

In case of two separate Single Programming Documents, the
administrative procedures on the Commission's side will be increased since all
these documents will each require an adoption by the College.

Sub-option 3B: environmental, climate change and disaster risk
reduction are tackled at regional level

Under this option, the regional Single Programming Document
will integrate a specific regional sub-program dedicated to environment,
climate change and disaster risk reduction will be proposed to all OCTs,
including the OCTs which are not eligible to a territorial allocation as well
as the uninhabited OCTs.

In order to address the drivers identified
in section 2.5, this regional sub-programme should principally:

-  accompany the OCTs in elaborating and implementing the necessary
legal framework in domains identified as priorities: climate change mitigation,
biodiversity conservation, preparedness and response to natural disasters, management
of natural resources, waste and water management, green energy (driver 1);

- support the OCTs in joining regional initiatives (drivers 1 and 2).

In order to finance the perpetuation of the BEST scheme, the
regional sub-programme would reserve an amount dedicated to calls for proposals
that would allow for the involvement of civil society. Since the BEST scheme
has the advantage to associate OCTs and Outermost regions of the EU and thus,
foster cooperation between these regional partners, the reserved amount and the
related calls for proposals should be managed by a service of the European
Commission that can act for both the OCTs and Outermost regions.

This sub-option requires modifying Article 10 of the current OAD
(Part 2) in order to introduce an obligation to tackle environmental, climate
change and disaster risk reduction at the regional level.

Under this sub-option, eligibility to EU budget lines and programs
shall be maintained or reinforced when possible (for example via targeted calls
for proposals) in order to support cooperation with other partners and
networking.

In terms of simplification, this sub-option allows reducing
administrative procedures in integrating the environmental and climate change
dimensions in already requested programming documents.

Sub-option 3C: environmental, climate change and disaster risk
reduction are a thematic subject

Under this sub-option, a specific envelope will be created for
environmental, climate change and disaster risk reduction issues. It will not
be included within the territorial nor the regional allocations.

All OCTs, including uninhabited ones,
will be eligible for this envelope.

This envelope would be implemented by the European Commission under
the form of a Technical Cooperation Facility. This modality allows flexibility
(for example, an OCT can rapidly join a regional initiative).

In order to finance the perpetuation of the BEST scheme, this envelope
would reserve an amount dedicated to calls for proposals that would allow for
the involvement of civil society. Since the BEST scheme has the advantage of
associating OCTs and Outermost regions of the EU and thus, foster cooperation
between these regional partners, the reserved amount and the related calls for
proposals should be managed by a service of the European Commission that can
act for both OCTs and Outermost Regions.

Under this sub-option, eligibility to EU budget lines and programs
shall be maintained or reinforced when possible (for example via targeted calls
for proposals) in order to support cooperation with other partners and
networking.

In terms of simplification, the administrative tasks of the
European Commission will be increased by the management of the contracts
(preparation of terms of reference, calls, contracting procedures,
disbursements, closure of contracts).

Main advantages of policy option 3

- Policy option 3, which proposes to use an amount of funds for
environmental, climate change and disaster risk reduction activities, would
enhance the EU added value as a global partner in the field of environment,
climate change and disaster risk reduction.

- For the same reason, policy option 3 would enhance the visibility of
the action of the EU in the OCTs in this field. This visibility would be
greater under sub-options 3A and 3B which ensure a coordinated action through
programming.

- Sub-option 3A allows addressing the environmental, climate change
and disaster risk reduction challenges an individual OCT faces.

- Sub-options 3A and 3B allow addressing the environmental, climate
change and disaster risk reduction challenges in a coordinated way and will
pave the way for an integration of these issues in OCTs' public policies and
strategies.

- Sub-option 3B does not increase the administrative procedures on the
Commission's side as the programming and implementation of the sub-regional
programme come within already existing procedures.

- Policy option 3B and 3C would foster regional cooperation and
integration of the OCTs.

- Sub-options 3B and 3C allow for the continuation of the BEST scheme
and builds on a dynamic initiated in 2008, developed by the European
Commission, supported by the European Parliament and implemented for the first
time by the European Commission in 2011.

- Sub-options 3A and 3B allow the implementation of the programs by
the OCTs.

- Sub-option 3C allows a real flexibility since activities are not
programmed in advance for the whole period.

Main drawbacks of policy option 3

- Simplification is not attained under
sub-options 3A and 3C.

- Sub-option 3A, which tackles environmental, climate change and
disaster risk reduction at the territorial level, will not allow for the
perpetuation of the BEST scheme which notably aims to gather OCTs and Outermost
Regions of the EU.

- Sub-option 3C will not allow a coordinated action of the EU in the
OCTs in the field of environment, climate change and disaster risk reduction.
Indeed, Technical Cooperation Facilities are managed under the principle:
"First come, First served".

Impacts of the policy options on EU added value identified in
section 2.7 of Annex 11:

Negative ranking from (---) to (-), Neutral (0), Positive ranking
from (+) to (+++)

Option 1 || Sub-option 2A || Sub-option 2B || Sub-option 3A || Sub-option 3B || Sub-option 43C

(---) || (-) || (0) || (++) || (+++) || (+++)

Impacts of the policy options on the underlying drivers identified
in section 2.5 of Annex 11:

Negative ranking from (---) to (-), Neutral (0), Positive ranking
from (+) to (+++)

Drivers || Option 1 || Sub-option 2A || Sub-option 2B || Sub-option 3A || Sub-option 3B || Sub-option 3C

Insufficient legal and political basis/framework for action || (---) || (--) || (--) || (++) || (+++) || (++)

Structural weaknesses || (---) || (--) || (--) || (++) || (+++) || (++)

Limitations of the EU/OCT association || (---) || (---) || (---) || (++) || (++) || (++)

Impacts of the policy options on the objectives identified in
section 3.1 of Annex 11:

Negative: ranking from (---) to (-), Neutral (0), Positive ranking
from (+) to (+++)

Objectives || Option 1 || Sub-option 2A || Sub-option 2B || Sub-option 3A || Sub-option 3B || Sub-option 3C

Promotion of close economic and social development || (---) || (0) || (0) || (+) || (++) || (++)

Serve the interests and prosperity of the inhabitants to lead them to the economic, social and cultural development to which they aspire || (---) || (+) || (+) || (+) || (++) || (++)

Enhancing competitiveness || (---) || (+) || (+) || (+) || (+) || (+)

Strengthening resilience || (---) || (+) || (+) || (+++) || (+++) || (+++)

Promoting cooperation with other partners || (---) || (+) || (+) || (---) || (+++) || (++)

Support the OCTs' sustainable development by ensuring a coordinated partnership in the field of environment, climate change and disaster risk reduction in order to enable the OCTs to elaborate policies and strategies and to enhance their integration in regional initiatives || (---) || (+) || (+) || (---) || (+++) || (++)

Enhance visibility of the EU-OCT partnership on these issues || (---) || (0) || (++) || (++) || (+++) || (+++)

Help the OCTs to promote the conservation and sustainable use of biodiversity and ecosystem services || (---) || (---) || (---) || (---) ||  (+++) || (+++)

              Annex
12 - Thematic report on Trade and Trade Related Aspects of the Overseas
Association Decision

1.           Introduction

The present
paper regarding the trade and trade related aspects of the Overseas Association
Decision has been prepared by a dedicated working group consisting of
representatives of the European Commission in the context of the Impact
Assessment of the revision of the Overseas Association Decision which the
European Commission conducted between September 2011
and January 2012. Its purpose is:

-
to provide a detailed analysis of the economic
and trade challenges to which OCTs are confronted and their underlying drivers;

-
to evaluate the trade regime which the EU offers
OCTs as well as the assistance it provides to support OCT trade related
activities; and

-
to develop and compare possible options for EU
policy towards OCTs in the field of trade and trade related issues.

Sources

The paper feeds
into the Impact Assessment report prepared by the Commission Inter Service
Group on Overseas Countries and Territories. It takes into account findings and
recommendations of three kinds of sources:

(a) EU official Documents

-
Council, Conclusions (16710/09) on the EU’s
relations with Overseas Countries and Territories (OCTs), 22 December 2009;

-
Commission, Green Paper COM(2008) 383 on Future
relations between the EU and the Overseas Countries and Territories reference,
25 June 2008;

-
Commission, Staff working document accompanying
the green paper “Future relations between the EU and the Overseas Countries and
Territories” COM (2008) 383, SEC(2008) 2067, 25 June 2008;

-
Commission, Communication COM(2009) 623 on
Elements for a new partnership between the EU and the OCTs, 6 November 2009;

(b) External studies

-
BROOKS, P., STONEMAN, R. and RIOS, R. Enhancing
Atlantic OCTs' Trade and Economic Activity (within their region and the
European Union), EUROPEAID/11/9860/C/SV/multi - Lot 10, No 2008/170783,
February 2010 (hereafter: BROOKS, P., STONEMAN, R. and RIOS, R. (2010) );

-
ECO Consult et al., Region Level Evaluation:
Overseas Countries and Territories (OCT), Contract N° EVA 2007/geo-acp, draft
Final Report, July 2011 (hereafter: ECO Consult et al. (2011) );

-
LUFF, D. et al., the Analysis of the Regional
Economic Integration Processes (Caribbean, Pacific and Indian Ocean) and
Recommendations Aiming at Enhancing Trade and Economic Activity of OCTs within
their Region and with the EC, Framework Contract BENEF – Lot 11, No
2008/170791, February 2010 (hereafter: LUFF et al. (2010) );

-
SALMON J.M., OCT Regional Integration Impact
Study, Final Report, EC Project No. FWC BENEF Lot 11– Specific Contract No.
2006/123116, July 2007[71] (hereafter: SALMON (2007) );

-
SPANNEUT, C., Analysis of the Statistical
Systems in the OCTs and Recommendations Aiming at Enhancing Statistical Systems
of OCTs, Framework Contract Beneficiaries – Lot 11, N° 2010/253401/1, Draft
Final Report, September 2011 (hereafter: SPANNEUT (2011) ).

(c) Stakeholder consultations

Following the publication of Green Paper
COM(2008) 383 on Future relations between the EU and the Overseas Countries and
Territories on 25 June 2008, a public consultation was held from 1 July to 17
October 2008. This included a stakeholder conference in Brussels on 3 October
2008. Subsequently consultations of stakeholders, notably the OCTs and their
Member States, continued to be organised on a regular basis via different
channels and means. A more extensive discussion of these consultations is
provided in Chapter 5 of Annex 12.

A list of references is provided at the end
of this paper.

Statistical Data

The analysis is based on both qualitative
and quantitative data, where available. An important reservation needs to be
made regarding the latter. The analysis below mainly draws on data directly available to the
European Commission, such as the imports of the EU from OCTs or its exports to
OCTs (see Annex 12.1). Whereas extensive data are available as far as the
OCT/EU trade is concerned, this is not always the case where OCT trade with
other third countries is concerned. LUFF et al. (2010) observed that with regard to the latter there is a general lack of reliable
and harmonised trade and tariff data regarding OCTs in international databases
such as the United Nations' Commodity Trade Statistics (COMTRADE) database, the
World Bank's World Integrated Trade Solutions (WITS) database or the
International Trade Centre's Market Access Map (MacMap) database[72]. Statistical capabilities of most OCTs were deemed to be
insufficient to allow for a systematic analysis of trade flows.

The problems encountered above were confirmed
by a later study, SPANNEUT (2011), specifically dedicated to OCT statistical
systems and capabilities. The study found that whereas all of the OCTs that
responded to its survey produced statistics relative to trade (exports and
imports in broad categories, volume and value), these were not always publicly
available (through websites, hard copies and/or CD-ROM)[73]. Among
the reasons given to explain the lack of public availability of certain
statistics (not only trade related) the following four were most cited: lack of
demand, provision only on demand, lack of financial resources and unreliability
or non-conformity with international standards. Where statistics were publicly
available, their publication was not always timely and the reference periods
not up to date. Also, the available statistics were not always in conformity
with internationally agreed nomenclatures. Spanneut found that often different
versions and combinations were used, at different levels of analysis, of
national and international classification systems such as the Harmonised System
(World Customs Organisation), the Standard International Trade Classification
(UN) and the Broad Economic Classification (UN)[74].

2.           Problem
definition

2.1.        Purpose and Objectives of the OCT/EU Association

Non-European Overseas Countries and
Territories (OCTs) with constitutional links to four EU Member States (Denmark,
France, the Netherlands and the United Kingdom) are associated to the EU. The
legal basis for the association has been laid down in Part Four (Articles
198-204) of the Treaty on the Functioning of the European Union (TFEU) and has
been implemented by consecutive Overseas Association Decisions (OAD)[75]. The purpose of this association relationship is to foster the
OCTs' economic and social development and to create close economic ties between
them and the EU as a whole (Art. 198 TFEU). The association is intended to
primarily further the interests and prosperity of the inhabitants of the OCTs,
supporting them in achieving the economic social and cultural development they
aspire to.

The general objectives of the association's
trade and economic cooperation part, as defined in the TFEU and the OAD are:

-
to ensure OCTs' access to the EU market (Arts.
199 – 202 TFEU);

-
to contribute to the necessary investment for
the economic development of OCTs (ibid.);

-
to put OCTs on a sustainable development path,
tackle poverty and gradually integrate them in world economies (Art. 1 OAD);

-
to support the effective integration of OCTs in
the global economy and the development of their trade in goods and services to
regional and world markets (Art. 34 OAD).

The general
objectives of the trade related development assistance under the association,
as defined in Article 18 of the OAD are amongst others to support and promote
the OCTs' own efforts to achieve sustainable social, cultural and economic
development, by supporting:

-
OCT efforts to achieve economic diversification;

-
OCT private investment and private sector
development;

-
inter-OCT and OCT/ACP regional cooperation and integration;

-
the establishment of more balanced economic and
social relations between the OCTs, ACP countries, the EU and the rest of the
world.

2.2.        Problem to be Addressed

The purpose and objectives of the OCT/EU
association have not been fully achieved. 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 challenges related to their insular
character, remoteness and rich, but vulnerable environments. For some OCTs,
economic ties with the EU are of great importance, but in general OCT/EU trade
tends to be one-sided, and with little diversification. For other OCTs, the
economic ties between them and the EU remain underdeveloped.

2.3.        Challenges for the Future

The main challenge that the OCTs need to
address consists in putting their economies and societies on a sustainable
development path by:

-
increasing their competitiveness;

-
reducing their vulnerability; and

-
cooperating with their neighbours and
integrating in the regional and world economies.

To achieve this goal, the OCTs will have to
be able to fully exploit the opportunities which their regional and
international economic environments have to offer. Indeed, the regional and
international economic environment of the OCTs has considerably changed over
the last few years. This is partly due to the multiplication of bilateral free trade
agreements (FTAs) by leading trade powers such as the US, Canada and the EU.
OCTs will need to adopt the necessary trade and industrial policies, develop
the required expertise, capacities and infrastructure and be instrumental to
the creation of an enabling/business environment that is supportive of trade
activities, so as to be able to cope with these challenges.

For the EU, the challenge resides in
supporting the OCTs with the accomplishment of these goals, via the framework
of an OCT/EU association relationship that is adapted to OCT needs, realities
and particularities.

2.4.        Underlying Drivers

The underlying drivers
of the problems and challenges which the OCTs face relate to:

-
Increasing divergence between OCTs in terms of
wealth, prospects for economic development, natural resources endowment and the
correlating potential for economic development, demographic dynamics

-
Geographic characteristics of inhabited OCTs[76]: Arctic, subtropical and tropical locations, remoteness, size of
land mass and of exclusive economic zone

-
Micro-economies with structural weaknesses, a
small production base, with exports concentrated in a few sectors

-
Changes in trade patterns, including an
increasing number of FTAs by the EU, the US and Canada (main destination
markets for some OCTs), resulting in erosion of trade preferences for OCTs and
increased competition for their exports

-
Changing international regulatory environment

-
Size and capacities of OCT economic operators
and OCT authorities

-
Absence of industrial and trade policies

-
Limited capacities, expertise and infrastructure
in trade and trade related areas

-
Limited participation in regional cooperation
and integration processes, amongst others due to their specific constitutional
status, which sometimes impedes OCTs to take part in international agreements
and initiatives

Annex 12.2
provides a schematic representation of the problem to be addressed and the
underlying drivers in the form of a problem tree of the OCT trade regime.

3.           OCT
Trade Position

3.1.        Commonalities between OCT Economies and Trade Positions

From the
literature it appears that OCTs have a number of economic and commercial
commonalities[77]. They all constitute small island economies that are vulnerable to
external shocks. Most OCTs are remote and/or at great distance from the
European continent and their neighbouring markets, with low freight transport
connectivity, irregular shipping and air transport services and high transport
costs as a consequence. This forms a major obstacle to the OCTs' participation
in those markets. UNCTAD' Liner Shipping Connectivity Index (LSCI) ECO Consult
et al. (2011) gives an indication of the OCTs' weak integration into global
liner shipping networks.

Evolution of shipping lines connectivity
index 2004-2009

|| 2004 || 2005 || 2006 || 2007 || 2008 || Growth p. a 2004 – 2008 || 2009 || Growth 2009/2008 || Rank 2009 (161 countries)

Aruba || 7.37 || 7.52 || 7.53 || 5.09 || 5.09 || - 0.57 || 3.52 || - 1.57 || 144

Cayman Islands || 1.90 || 2.23 || 1.79 || 1.78 || 1.78 || - 0.03 || 1.76 || - 0.02 || 158

Greenland || 2.32 || 2.32 || 2.27 || 2.27 || 2.36 || - 0.01 || 2.27 || - 0.09 || 156

French Polynesia || 10.46 || 11.14 || 8.91 || 8.60 || 9.01 || - 0.36 || 8.39 || - 0.62 || 95

Netherlands Antilles || 8.16 || 8.23 || 7.82 || 9.22 || 8.56 || - 0.10 || 8.57 || 0.01 || 92

New Caledonia || 9.83 || 10.34 || 9.00 || 8.81 || 9.23 || - 0.15 || 8.74 || - 0.49 || 90

|| || || || || || || || ||

France || 67.34 || 70.00 || 67.78 || 64.84 || 66.24 || - 0.28 || 67.01 || 0.77 || 13

Netherlands || 78.81 || 79.95 || 80.97 || 84.78 || 87.57 || 2.19 || 88.66 || 1.09 || 4

United Kingdom || 81.69 || 79.58 || 81.53 || 76.77 || 77.99 || - 0.92 || 84.82 || 6.83 || 6

Source: ECO Consult et al. (2011) p. 71. || || || || ||

The production bases of OCTs are generally small and as net
importers most of them face structurally negative trade balances, even if
between 2004 and 2008 OCT exports have been growing 9% annually from USD 1.2
billion to USD 1.8 billion. In the same period, however, OCT imports increased
with 10% every year from USD 3.4 billion to USD 5.9 billion[78]. With an account surplus of EUR 5.8 million in 2007 (data ECO
Consult et al. (2011), the Falkland Islands are an exception to this trend.

The tendency
for OCTs to run trade deficits is also reflected in OCT/EU trade flows. In 2010
the OCT/EU export ratio was approximately 1/2, with the value of EU27 exports
to the OCTs amounting to over EUR 2 billion and the value of OCT exports to the
EU27 amounting less than EUR 1 billion. The two tables below give an overview
of the main products which the OCTs and the EU trade with each other[79]. While OCTs export mainly fishery and other mineral and natural
products to the EU, the EU primarily exports industrial products and some
agro-food products to the OCTs.

Within the
tables, main exports or imports are understood as those products representing
more than 1% of the total value of exports or imports[80]. The
products are represented at 2-digit level of the Harmonised
Commodity Description and Coding System (or Harmonised System – HS). Annex 12.1
provides an overview (at HS 2 digit level) of all EU27 goods imports from OCTs
and EU27 goods exports to OCTs, including those representing less than 1 % of the imports and exports. It provides also additional
information regarding the geographic distribution of EU27 goods imports and
exports by the OCT concerned.

EU 27 Goods Imports
from all OCTs in 2010 (values in 1,000 EUR)

HS || Description || totals (A) || % (A/B)

03 || Fish & crustaceans, molluscs & other aquatic invertebrates || 340.914 || 34.5%

16 || Preparations of meat, of fish or of crustaceans, molluscs || 91.567 || 9.2%

27 || Mineral fuels, mineral oils and products of their distillation || 35.774 || 3.6%

71 || Natural or cultured pearls, precious or semi-precious stones || 75.854 || 7.6%

72 || Iron & steel || 158.556 || 16%

75 || Nickel & articles thereof || 175.079 || 17.7%

|| Total value of main EU 27 imports from OCTs || 877.744 || 88.6%

|| Total value of all EU 27 imports from OCTs\* || 987.543 ||

(A) Value of EU 27 imports (at 2-digit level of the HS) from OCTs representing at least 1% of all EU 27 imports from OCTs (B) Total value of all EU 27 imports from OCTs

EU 27 Goods Exports to
all OCTs in 2010 (values in 1,000 EUR)

HS || Description || totals (A) || % (A/B)

04 || Dairy produce; birds' eggs; natural honey || 51.000 || 1.7%

19 || Preparations of cereals, flour, starch or milk || 50.410 || 1.7%

21 || Miscellaneous edible preparations || 61.449 || 2.1%

22 || Beverages, spirits & vinegar || 119.445 || 4.1%

27 || Mineral fuels, mineral oils & products of their distillation || 219.503 || 7.6%

30 || Pharmaceutical products || 179.710 || 6.2%

39 || Plastics & articles thereof || 71.317 || 2.4%

48 || Paper & paperboard; articles of paper pulp || 43.412 || 1.5%

73 || Articles of iron or steel || 101.083 || 3.5%

84 || Nuclear reactors, boilers, machinery & mechanical appliances || 422.780 || 14.6%

85 || Electrical machinery and equipment & parts thereof || 295.648 || 10.2%

87 || Vehicles other than railway or tramway rolling-stock || 250.756 || 8.6%

90 || Optical, photographic, measuring, precision, medical instruments || 96.063 || 3.3%

94 || Furniture; bedding, mattresses, mattress supports, cushions || 68.780 || 2.3%

|| Total value of main EU 27 exports to OCTs || 2.031.355 || 69.8%

|| Total value of all EU 27 exports to OCTs \* || 2.884.688 ||

(A) Value of EU 27 exports (at 2-digit level of the HS) to OCTs representing at least 1% of all EU 27 exports to OCTs (B) Total value of all EU 27 exports to OCTs

As the OCT/EU export trade flows described above demonstrate, OCT
exports of goods and services tend to be concentrated in a few specific sectors
and generally target high value niche segments (tourism, pearls, natural
essences, oil refinery, nickel) in industrialised or industrialising countries.
In some OCTs, with large reserves of natural and mineral resources there is a
strong potential for developing exports of these materials. For instance, in
Greenland the development of the mineral extraction industry, if successful,
has the potential to alter the structure of this OCT's economy and its exports.
Services represent an important part of the economy in all OCTs, though the
actual percentage varies.

Tourism is an
element of interest to almost all of the OCTs. For those OCTs that are located
in the Caribbean, Indian Ocean and Pacific ACP regions, LUFF et al. (2010)
found that the impact that the conclusion of Economic Partnership Agreements
(EPAs) and interim EPAs would have on their economies and trade environment was
likely to be small. OCTs were thought to gain potential benefits from the
impulse that the EPAs are likely to give to the different economic integration
processes in their regions through the emergence of new export markets.

Various
external studies pointed out that few OCTs have really engaged in developing
trade and export oriented policies. Concerning the British Caribbean OCTs, LUFF
et al. (2011) commented that "no trade policy per se currently
exists, and trade policy amounts to a laissez faire approach, except with
regard to the collection of tariff revenue, where the government imposes
certain disciplines"[81]. The Dutch OCTs were found to have been more active in developing a
trade and industrial policy and to have engaged in some degree of bilateral
trade liberalisation[82]. Concerning the trade and economic policies of the French Pacific
OCTs, LUFF et al. (2010) commented that their trade policy tended towards
protection of domestic product and import substitution through tariffs and that
no real export oriented policies were developed[83].
BROOKS, STONEMAN and RIOS (2010) came to similar conclusions for the isolated Atlantic
OCTs.

Both of the
above mentioned studies, commissioned by the Association of Overseas Countries
and Territories of the European Union (OCTA), formulated a number of concrete
recommendations and steps for OCTs to develop trade and export oriented
policies. In their evaluation study of OCT/EU cooperation in the period
1999-2009, ECO Consult et al. (2011) came to the conclusion that one year after
its publication the LUFF et al. (2010) study "stays totally unknown by
governments and professional organizations"[84].

3.2.        Dutch and British OCTs in the Caribbean

3.2.1.     Economic Structure, Trade Partners, Exports

The Dutch and
British Caribbean OCTs rely heavily on services for their economy, notably
tourism and the financial, banking and business services. In these territories,
public services have a lesser importance than for instance in the French OCTs
in the Pacific and Indian Ocean regions or in the isolated Atlantic OCTs of
which the regional economic hinterland is very limited (see below).

In the case of
the Cayman Islands and the British Virgin Islands, financial services are key
to the economy. With an estimated value of USD 2.8 billion and USD 1.215
billion in 2008[85], the respective GDPs of these two islands are high for the size of
their territories and populations. Their economies attract a lot of foreign
investments (USD 10.9 billion and USD 3 billion respectively in 2008), the bulk
of which goes to the financial sector. Investment outflows are important as
well. By contrast, productive investments in the real economy are modest,
especially when compared with other OCTs such as New Caledonia[86].

British OCTs in
the Caribbean are generally oriented towards third markets for both their
imports and exports, rather than to the EU. Dependency on the US is high,
particularly for imports. In the case of the Turks and Caicos Islands, almost
all of its trade takes place with the US. The degree to which the OCTs in this
region trade with their neighbours varies. Being part of the CARICOM, Montserrat
is the OCT which is the most oriented towards its neighbours, at least for its
exports.

Of all the
OCTs, the Caribbean OCTs are the least affected by the problems relating to
remoteness and insufficient transport freight connectivity[87]. In comparison to other OCTs, they are better connected with their
main destination market, i.e. the US, which is closely located. Also, given the
prominence of services in Caribbean OCTs, transport freight connectivity is a
less determinant factor for the Caribbean OCTs' trade.

In most cases
the products exported by these OCTs, notably the British OCTs, are in fact
re-exports[88]. For instance, some of Anguilla's main exports products are
transmission apparatus for radio-telephony and vehicles. For the Dutch OCTs,
oil and by-products from oil refining still have a certain importance. LUFF et
al. (2010) identifies possible opportunities for British and Dutch OCT goods
exports in third markets, including the EU, in amongst others: fisheries and
marine products (lobster, crab, conch, salt etc.), live stock, vegetables and
fruit preparations, cosmetics, essential oils and other artisanal products
(garments, art work etc.), beverages and spirits such as mineral water, rum and
rum products as well as all kinds of services (financial services, educational
services, professional and business support services, recreational, health care
services, culture and sport services, environmental services etc.)[89].

3.2.2.     Market Access and Business Environment

In 2007, Salmon
estimated that tariffs on imports in most of these OCTs lay between 10% and 20%
of the value of imports[90]. The British Virgin Islands and the former Netherlands Antilles
maintained tariffs below 1%. According to the study, the Caribbean OCTs in
general did not impose non-tariff barriers on imports, except for Montserrat
which had compulsory import licenses. Luff's follow-up study commissioned in
2010 noted that in the British OCTs, businesses complained about the lack of
transparency regarding the OCTs' domestic rules and regulations that apply to
imports into the territories and/or exports to third countries (e.g. arbitrary
application of tariff rates, complicated and little known rules of the duty
drawback system etc.)[91]. In general, the Caribbean OCTs seem to have fewer restrictions on
foreign investment than other OCTs.

3.2.3.     Regional Economic Perspectives

The perspective
on regional economic integration (see Annex 12.5 for an overview of OCT
membership to regional organisations) varies according to the different OCTs.
For instance, the political authorities of Aruba and Curaçao, the two Dutch
OCTs located just above Venezuela, tend to look towards South America and the
US for exports.

Previously,
Montserrat expressed the wish to further integrate in the region and
participate in the CARICOM Single Market and Economy (CSME)[92]. A 2004 external study commissioned by the government of Montserrat
concluded that Montserrat's integration in the CSME was likely to have a
positive impact on the OCT's development in the long run, dependent on the
policies the government of Montserrat would adopt[93]. It
was concluded that in the short run, Montserrat's integration in the CSME would
lead to substantial adaptation costs (increased government expenditure and
reduced revenues) in the short term (7-8 years). Increased investment and
exports through lower costs of production in Montserrat and an increased
economic efficiency were identified as potential positive benefits of
Montserrat's participation in the CSME. For the time being, Montserrat does not
participate either in the Economic Union that the sovereign members of the
Organisation of Eastern Caribbean States (OECS) are in the process of setting
up[94].

Though only an
associate member, Anguilla has largely harmonised its tariffs with the common external
tariff of the CARICOM. In the British Virgin Islands and the Cayman Islands
there seems little interest to participate in the existing regional integration
schemes as the territories seem to have little to gain in such schemes. In the
past, the Turks and Caicos Islands, though (associate) member of several
Caribbean organisations, have shown little interest in pursuing regional
integration with their neighbours. As they are currently facing a major
political and financial crisis, it is unlikely that this theme may move up the
political agenda.

Article 246 of
the EPA which the EU concluded with CARIFORUM foresees the possibility of OCTs
being brought within the scope of the agreement[95]. The
impact of an accession of the Caribbean OCTs to the EPA was assessed by
different external studies. In 2007, Salmon came to the conclusion that the
Caribbean OCTs had no immediate incentive neither to pursue membership of the
EPA under negotiation nor to integrate the CSME and that it would be more
prudent for those OCTs to adopt a wait-and-see attitude vis-à-vis both
integration processes[96].

A 2008 study of
the United Nations Economic Commission for Latin America and the Caribbean
(ECLAC) confirmed these conclusions, putting forward three reasons[97]. First, it was deemed that the growth of the Caribbean OCTs' main
wealth creating sectors (tourism) was independent from joining an EPA. Second,
it was suggested that signing up to the EPA might result in a loss of autonomy
by Caribbean OCTs with regard to their offshore financial policy, as the EPA
includes general commitments to reinforce transparency dialogue and
collaborative action in areas such as tax policy, anti-corruption and the
financing of terrorism. Third, the study thought it likely that if Caribbean
OCTs expressed an interest in joining the EPA, the ACP partners were likely to
make accession conditional on a liberalisation of the OCTs' markets.

The perspective
of further integration of the Caribbean OCTs in the CSME was discouraged for
similar reasons. Due to the small size of their economies OCTs lacked the
necessary critical mass to gain from acceding to the regional market. Accession
to the CSME would also mean the Caribbean OCTs granting CARICOM nationals free
access to their labour markets; a condition which would likely increase
immigration to the territory of qualified workers attracted by the prospect of
high wages offered in the territories. The ECLAC (2008) study therefore
concluded that a functional cooperation as associate members of the CSME was
likely to be more beneficial for the Caribbean OCTs[98].

3.3.        The Isolated Atlantic OCTs

3.3.1.     Economic Structure, Trade Partners and Exports

In the isolated
Danish, French and British OCTs located in the Southern and Northern Atlantic
Ocean, activities related to manufacture and (processed) food products remain
important[99]. These OCTs are generally oriented towards the EU market for both
imports and exports. The public services sector tends to be important. This
reflects the importance of budget transfers from the Member States (e.g. the
block grant from Denmark to Greenland representing approximately EUR 460
million p.a.). The Falkland Islands, being self sufficient, are an exception in
this respect. Fish and fisheries products (shrimps, squid, cod, finfish, mackerel,
lobster, scallop etc.) represent 96 % of total exports by the Falkland Islands,
88.2 % of exports by Greenland, 94 % of total exports by Saint-Pierre et
Miquelon, and 9 % of Saint Helena[100].
Whereas in the case of the Falkland Islands, the fisheries sector is a major
contributor to the Falkland Islands' GDP, contributing on average USD 200
million per year or 60 % of the territory's GDP[101],
fisheries make less important contributions to the GDP of Saint-Pierre et
Miquelon. There, the sector contributes 4 % to the GDP and its exports almost 2
%[102]. Workers in the fisheries sector make up 5 to 7% of the total
workforce. In Greenland, exports of fishery products contribute 17.2 % to the
GDP and 4.3 % to the labour force in 2007[103].

Liner shipping
connectivity is not measured for OCTs such as the Falkland Islands, St Helena,
Ascension Island and Tristan da Cunha, but if it were, it is likely that the
resulting figure would be on the lower end of the Liner Shipping Connectivity
Index, as is the case for Greenland[104]. In
the case of Saint Helena, for instance, freight and passenger ships only make a
stopover on the territory every six weeks or more. As export flows are low,
cargo ships that pass by the Atlantic OCTs often return empty. As a
consequence, port operations in those OCTs remain expensive[105].

3.3.2.     Market Access and Business Environment

Except for a
couple of products, the Falkland Islands do not seem to levy tariffs on their
imports[106]. They do maintain some non-tariff barriers to protect local
agricultural production. There are no restrictions on foreign investment,
except for landownership. In contrast with the Falkland Islands, Greenland and
Saint-Pierre et Miquelon have rather high average tariffs on imports, which are
in excess of 20% of their value. Saint-Helena, Ascension Island and Tristan da
Cunha maintain tariff levels within the average range of 10 – 20 %.

3.3.3.     Regional Economic Perspectives

Possibilities
for regional integration and cooperation for the isolated OCTs are limited. The
North Atlantic OCTs of Greenland and Saint-Pierre et Miquelon have relatively
close ties and cooperate with Canada, but they still mainly look towards the
EU. This situation might change for Greenland in the near future due to raw
materials and oil explorations. The situation of the Falkland Islands is
somewhat complicated due to the Argentine policy of claiming sovereignty over
the islands. Economic cooperation with Argentina is not possible. Oil
exploration activities are taking place here as well. The prospects for regional
integration and cooperation of Saint-Helena, Ascension Island and Tristan da
Cunha located several thousands of kilometres from the closest neighbouring
African country are slim, given poor transportation connections and
infrastructure.

The EU's FTA
negotiations with Canada may impact on the economic situation of Greenland and
Saint-Pierre et Miquelon as Canada has indicated that it wishes a full removal
of tariffs on fish and seafood (mostly in frozen seafood). A sustainable impact
assessment study of the ongoing negotiations with Canada that was conducted in
2011 put forward that a full fisheries liberalisation could have a negative
impact the fisheries sectors of the two territories as Canada is one of their
main competitors in certain products[107].
Given the limited economic diversification of both territories and their
dependency on fisheries, the losses to the economies of Saint-Pierre et
Miquelon and Greenland could be substantial.

3.4.        The Pacific OCTs

3.4.1.     Economic Structure, Trade Partners and Exports

As with the
isolated OCTs, the Pacific OCTs are oriented towards the EU market. The
importance of public services also tends to be high and reflects substantial
budget transfers from the respective Member States.

The production
and exports of the French Pacific OCTs, in particular French Polynesia and New
Caledonia, seem less concentrated in one sector and include for instance
jewellery products, natural pearls and cultured pearls, oils and essential oils
(French Polynesia), nickel and nickel derivates (New Caledonia) as well as
products of animal origin (French Polynesia and New Caledonia)[108]. The production and exports of the third French OCT, Wallis and
Futuna, and the only UK OCT in the region, Pitcairn, are modest.

As the French
Pacific OCTs export manufactured goods, their remoteness and isolation from the
international shipping routes and their main export markets impacts on their
competiveness. Like the isolated Atlantic OCTs, the Pacific OCTs are confronted
with high transport and freighting costs, multiple connections, lack of economy
of scale and other like problems[109].

According to
LUFF et al. (2010), possible opportunities in third markets, including the EU,
for the French Pacific OCTs may lie in amongst others: fisheries, crustaceans
and sea products, textile, wood (by-) products, vanilla, textile products, air
transportation, engineering, mining services.

3.4.2.     Market Access and Business Environment

Of all OCTs,
French Polynesia and New Caledonia constitute the biggest markets, due to the
relatively big size of their respective populations (over 200.000 each) Both
OCTs pursue an industrial policy aimed at stimulating local production. In 2007
New Caledonia made use of relatively high average tariff barriers in excess of
20% to stimulate its food processing, plastics, wood and agricultural sectors,
with an aim to satisfy internal market needs[110]. At
the time, New Caledonia did not have a Value Added Tax system yet, but was
considering its introduction. Goods imported from the EU, ACP countries and OCTs
are exempted from customs duties. New Caledonia maintains non-tariff barriers
as well, which mainly target agricultural and food products. Restrictions on
investments also exist. French Polynesia's maintains lower tariff barriers
which are within the 10 – 20% range. Since the introduction of a Value Added Tax
system, the territory is less dependent on customs duties for government
revenues than New Caledonia is. Goods from the EU benefit from certain
exemptions. French Polynesia regularly makes use of non-tariff barriers to
protect the most sensitive sectors. However, imports from the EU are no longer
targeted.

3.4.3.     Regional Economic Perspectives

Both New
Caledonia and French Polynesia play an active role in the regional cooperation
and integration schemes in the Pacific (see Annex 12.5), albeit it mainly in
non-commercial areas such as environment and civil protection, research,
education and transportation. SALMON (2007) indicated that regional economic
integration with their neighbours through trade liberalisation, by joining the
Pacific Island Countries Trade Agreement (PICTA) or by negotiating separate
trade agreements with its members, could have advantages for the two
territories if such liberalisation would include trade in services, where the territories
have comparative advantages[111]. Such a scenario would only be possible, though, if New Caledonia
and French Polynesia would be prepared to abandon (in part or in full) the
protectionist aspects of their customs policies, unless exceptions or safeguards
could be negotiated for specific products. The latter scenario would entail
that the negotiations between PICTA members regarding the extension of
agreement's scope to trade in services would be concluded[112]. LUFF et al. (2010) confirms these findings and recommendations[113]. A variation on the integration scenario would consist in French
Polynesia and New Caledonia joining the Pacific Agreement on Closer Economic
Relations (PACER), a regional trade agreement driven by Australia and New
Zealand and intended to be supportive of PICTA members' economic development
through greater regional trade and economic integration. As with the PICTA, an
extension of the PACER to include trade in services is being negotiated.

With regard to
the possibility of French Polynesia and New Caledonia joining the Pacific EPA[114], SALMON (2007) suggested that more caution was warranted as such a
scenario would lead to increased competition from European companies[115]. Unlike in the EPA with CARIFORUM, the Pacific interim EPA does not
contain a provision which allows for bringing the region's OCTs within the
agreement's scope. According to LUFF et al. (2010) the possible impact of the
interim EPA with the Pacific ACP countries (Fiji and Papua New Guinea) on the
region's OCTs would likely be low, if the latter choose to remain outside of
the agreement[116]. The territories may experience an increase in competition from
their neighbours in the fisheries and the pearls sectors. Regarding fisheries,
global sourcing might increase supply of raw materials from third parties to
Papua New Guinea and Fiji and it might have adverse consequences for the OCTs'
potential to supply fish to these countries. In practice, the increase in
exports by the two ACP States might not be so substantial[117]. As French Polynesia only exports 10% of its pearls to the EU
market, the increase of competition might not be so much felt.

3.5.        Indian Ocean OCT: Mayotte

As of 31 March
2011 Mayotte has become a French Overseas Department within the French internal
order. On 26 October 2011, France officially requested the European Council
that the process be engaged to change territory's status to that of an
Outermost Region. France suggested 1 January 2014 as a tentative date for this
change to enter into force[118]. Until such time, Mayotte will remain associated to the EU as an
OCT.

3.5.1.     Economic Structure, Trade Partners and Exports

As in other
French OCTs, public services represent an important share in both Mayotte's GDP
and the territory's employment. Like for most of the isolated Atlantic OCTs,
this represents important budget transfers from France to the territory. The
potential of tourism related services remains largely unexploited as Mayotte
mainly attracts touristic visitors from its expatriate community and their
friends. Farming still represents an important part of economic activity, but
mainly takes the form of subsistence farming; thus contributing little added
value. Fisheries and aquaculture have been on the rise in the last few years
and constituted the mainstay of the territory's exports in 2008[119]. Traditional export products such as essential oils based on ylang
ylang and vanilla come second. In 2008 the EU remained Mayotte's single most
important trading partner, both for exports and imports. According to LUFF et
al. (2010), third markets may offer opportunities for Mayotte in the following
areas: fisheries products and crustaceans, miscellaneous edible preparations
and essential oils[120].

3.5.2.     Market Access and Business Environment

Though in 2007 Mayotte
on average applied customs duties between 0% and 15%, the actual imposition
rate of imports was around 30% of the value of imports due to the existence of
a consumption tax levied on imported luxury products or products in competition
with local products[121]. With no Value Added Tax system in place, these taxes represented
approximately 68% of Mayotte's local tax revenues.

3.5.3.     Regional Economic Perspectives

Mayotte's regional
environment is characterised by a proliferation of regional cooperation and
integration organisations such as the Southern African Customs Union (SACU),
Southern African Development Community (SADC), the Common Market for Eastern
and Southern Africa (COMESA) or the Indian Ocean Commission. Mayotte's
participation in these processes has been limited, to a large extent due to the
existence of a bilateral dispute which opposes the Comoros and France over the
sovereignty over the territory.

Anticipating a French
request for a change of the territory's status under EU law, a 2010 external
study assessed the potential impact the EPAs in the Southern and Eastern
African region could have on the island's economy once these agreements have
come into force and after Mayotte would have joined the EU customs territory.
The study found that as Mayotte has relatively little trade with its immediate
neighbours, the impact would all in all be relatively small. Inclusion of
Mayotte on the European side of the EPAs could bring the territory benefits in
the area of services, mainly transport services and would allow for its
fisheries sector to take part in regional production chains[122].

3.6.        OCTs and Multilateral Trade Liberalisation

The OAD trade
regime has been notified at the General Agreement on Tariffs and Trade (GATT)
before the World Trade Organisation (WTO) was established. OCTs are not members
of the WTO in their own rights, although they may be covered by the commitments
taken by their Member States. According to Communication COM(1999) 163, those
OCTs that were covered by GATT 1947 at the time of the creation of the WTO were
included in the General agreement of 1994[123]. The
Kingdom of Denmark, for instance, has included Greenland in its WTO membership
and most of the WTO multilateral and plurilateral agreements (see 12. 6). Aruba
and the (former) Netherlands Antilles are members of the WTO through the
Kingdom of the Netherlands. Aruba is part of the Government Procurement
Agreement (GPA). Neither the WTO Agreement nor the multilateral agreements
apply to the British OCTs, but the plurilateral Agreement on Trade in Civil Aircraft
applies to the Falkland Islands, Pitcairn St Helena, Ascension Island and
Tristan da Cunha, South Georgia and the South Sandwich Islands and the Turks
and Caicos Islands[124]. As far as the French OCTs are concerned, the WTO Agreement, GATT
1994, GATS and the TRIPS Agreement apply[125].

There is a
certain degree of uncertainty on the extent to which multilateral and
plurilateral trade rules and disciplines apply to OCTs. It would seem that in
general the advantages of successive rounds of trade liberalisation only accrue
to them indirectly. It appears that OCTs would only benefit directly from these
advantages on the condition that they acquire full competence to enter into
agreements as separate customs territories. All in all, the interest of OCTs to
become fully engaged in the WTO seems to be limited or non-existent and thus
the debate regarding the legal implications of such a move may be theoretical
in nature. It has been suggested that unilateral harmonisation of OCT trade
policies with the rules, disciplines and even tariff reductions agreed upon
within the WTO in selected areas may be advisable for OCTs, although this would
require substantial efforts from their side[126]. Such
autonomous changes could have positive impact on the OCT trade activities. Tariff
reductions, for instance, would contribute to reducing the price of finished
products for exports and thus increase OCT competitiveness. Attracting
investments in key services such as financial, telecommunication and transport
services would not only contribute to raising the competitiveness of these
sectors, but also of OCT economies in general. LUFF et al. (2010) identified
the following possible consequences from a successful conclusion of the
negotiations of the Doha Development Agenda (DDA):

-
more certain and possibly increased market
access in other markets than the EU as far as trade in goods is concerned due
to the generalised binding or lowering of Most Favoured Nation (MFN) tariff
rates in all WTO members, and more disciplines with regard to none-tariff
barriers (NTB), technical barriers to trade (TBT) and and sanitary and
phtyo-sanitary SPS issues;

-
possible opportunities in the following sectors:
fisheries and fisheries products, forest products, gems and jewellery, raw
material, tropical/exotic fruits and vegetables, pepper, organic coffee, tea,
rice, rubber, and environmental goods and services;

-
possibly greater protection for quality products
produced in OCT through advances in the protection of intellectual property
rights (Tahitian pearl and monoi  etc.);

-
possible impact on agricultural subsidies.

4.           The
OCT Trade Regime and EU Trade Related Support

4.1.        Legal Framework and Characteristics

4.1.1.     Part IV TFEU: OCT/EU Association

The historical ties between the EU on the one hand and the Overseas
Countries and Territories on the other are invoked in the Preamble to the
Treaty on the Functioning of the European Union (TFEU), which refers to
the contracting parties' intent to "confirm the solidarity which binds
Europe and the overseas countries and [desire] to ensure the development of
their prosperity".

Part IV of the TFEU lays the basis for the OCT/EU association and
the corresponding trade regime. In Articles 199 to 202 the Treaty offers OCTs a
single, comprehensive and asymmetric trade regime. OCT exports to the EU
benefit from duty free and quota free (DFQF) access to its market while EU
exports to OCT markets may still be subjected to both duties and quantitative
restrictions for reasons set out in the Treaty. The resulting trade arrangements
applied by an OCT to the EU may not be any less favourable than those it
applies to third countries, in accordance with the Most Favoured Nation (MFN)
principle, unless another OCT or developing country is involved. These
arrangements may not give rise to any discrimination between Member States.
This means that the treatment that an OCT grants to the EU Member State to
which it is linked should be extended to all other EU Member States.

The detailed rules and procedures of the association are laid down in
an Overseas Association Decision (OAD) which, according to Article 203
of the TFEU, is adopted by the Council with unanimity, following the special
legislative procedure, upon proposal of the Commission and after consultation
of the European Parliament.

4.1.2.     Part V, Title II: EU Trade Policy

The OCT trade regime is part of the EU's trade policy, as defined in
Title II of Part V of the TFEU, which concerns the Union's External Action.
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. Article 207 states that the EU's trade policy
"shall be based on uniform principles, particularly with regard to changes
in tariff rates, the conclusion of tariff and trade agreements relating to
trade in goods and services, and the commercial aspects of intellectual
property right, foreign direct investment, the achievement of uniformity in
measures of liberalisation, export policy and measures to protect trade such as
those to be taken in the event of dumping or subsidies". In addition, the
EU trade policy "shall be conducted in the context of the principles and
objectives of the Union's external action".

4.1.3.     Overseas Association
Decision: Trade Arrangements

The arrangements for goods and services and establishment are laid
down in Part III (Instruments of OCT-EC Cooperation), Title II (Economic and
Trade Cooperation) of the OAD. Article 34 defines the general objectives of the
association's economic and trade cooperation as follows:

-
to promote the economic and social development
of the OCTs, in particular by establishing close economic relations between
them and the EU as a whole;

-
to support the effective integration of OCTs in
the global economy and the development of their trade in goods and services to
regional and world markets.

Trade arrangements for goods and services are respectively contained
in chapters 1 and 2 of this Title. The rules regarding trade related areas,
such as competition policy, protection of intellectual property rights, trade
and environment and trade and labour standards are dealt with in chapter 3 of
the OAD (Trade related areas). Chapter 4 deals with monetary and tax matters.

The extent to which OCT products enjoy access to the EU is defined
by the rules of origin laid down in Annex III to the OAD "concerning the
definition of the concept of 'originating products' and methods of
administrative cooperation". An exception is provided via the special
transhipment facility that is foreseen by the OAD, the specific rules of which
are laid down by Annex IV to the OAD on the "conditions for entry into the
Community of products not originating in the OCT, but which are in free
circulation in the OCT, and methods of administrative cooperation.

4.1.4.     Overseas Association Decision: Trade and Trade Related
Cooperation

Areas of Cooperation

Alongside trade rules the OAD also foresees in trade and trade
related OCT/EU cooperation in its Part 3 (Areas of Cooperation). This
cooperation takes financial and non-financial forms and concerns: trade
development (Art. 12), trade in services (Art. 13), trade related areas (Art.
14) and regional cooperation and integration (Art. 16). Chapter 3 (Trade
Related Areas) of Title II (Economic and Trade cooperation) of Part III foresees
cooperation in the areas of current payment and capital movements (Art. 47),
competition policies (Art. 48), protection of intellectual property rights
(Art. 49), standardisation and certification (Art. 50), trade and environment
(Art. 51), trade and labour standards (Art. 52), consumer policy and consumer
health protection (Art. 53).

These Articles cover a wide range of possible cooperation activities
in numerous fields, which are not necessarily limited to trade. The provisions
foresee in supporting and cooperation activities that can help OCT public and
private actors to develop the policies, strategies, legal and institutional
frameworks necessary for developing, regulating and exploring markets,
developing products and encouraging investments. They also foresee cooperation
with OCTs to help OCT public and private develop the necessary skills,
capacities and infrastructure that they need to take full advantage of trade
opportunities presented to them. Such cooperation not only covers trade in
goods and services, but also specific themes such as competition, the
protection of intellectual property rights; consumer, animal and plant health;
trade and labour standards; trade and environment and standardisation and
certification. In services, emphasis is put on sustainable tourism and trade
related services such as maritime and air traffic transport as well as
telecommunication and information technology services. The latter services
relate to the OCTs' connectivity and accessibility and are not studied in
detail in the context of this paper. A more detailed overview of the elaborate
list of specific objectives for and possible types of cooperation that can be
envisaged under Articles 12, 13 and 14 goes in Annex 12.4 of the present paper.

Financial Assistance

OCT/EU cooperation in trade and trade related areas is mainly
financed from the European Development Fund (EDF) following the
principles and rules laid down in Title I (Development Finance Cooperation) of
Part III of the OAD and Annexes II A to II D regarding the 9th and
10th EDF, the investment facility of the European Investment Bank
(EIB) and additional support in the event of short term fluctuations in export
earnings.

Traditionally, the EDF constitutes the main
source of funding for EU financial assistance to the OCTs under the Overseas
Association Decision (OAD). The EDF is outside to the EU general budget and is
constituted on the basis of contributions to which the EU Member States agree
between themselves in the context of Internal Agreement concluded within the
Council[127]. These Agreements establish the total resources and the broad
sub-categories for a given programming period and lays down provisions
regarding its implementation and financial monitoring. The specific
Greenland/EU partnership is funded from the EU general Budget (Chapter 4 of the
EU budget, article 21 07 02) [128].

In line with the principle of partnership,
the use of the financial resources available under the European Development
Funds has been jointly decided by the OCTs and the EU on the basis of the
political priorities of OCTs. Since the 9th EDF, the EU's bilateral
interventions (i.e. at the level of the territory) have been based on
cooperation strategies and multiannual programmes which take the form of Single
Programming Documents. In conformity with the principle of concentration which
the EU's financial assistance needs to respect and in view of increasing their
impact and effectiveness, such interventions have been concentrated on one to
two sectors only.

Article 58 of the OAD lays down the principle of OCT eligibility
under horizontal external and internal programmes. As regards the other
external instruments to which OCTs are presently eligible, Annex II E to the
OAD mentions the following instruments and programmes:

-
the thematic programmes under the Development Cooperation
Instrument;

-
the rehabilitation and reconstruction operations
under the Instrument for Stability;

-
the EU humanitarian aid.

Annex II F to
the OAD provides a non-exhaustive list of internal programmes to which OCT
nationals are eligible within the framework of the quota for the Member State
to which the OCT is linked:

-
education and training programmes (lifelong
learning, youth in action)

-
the Competitiveness and Innovation Framework;

-
programmes under the seventh Framework Programme
of the EU for research and development

-
cultural and audio-visual programmes (MEDIA and
other cultural programmes);

-
the Human Resources Training programme in Japan.

Annex 12.3 of the present paper provides an overview of the trade
and trade related provisions in the OAD and its Annexes.

4.1.5.     Overseas Association Decision: Dialogue on Trade and
Trade Related Issues

Alongside technical assistance, the OAD
allows for the OCTs to regularly engage with the EU on trade and trade related
issues that are of concern to them via the dialogue and partnership instances
which it provides for in its Article 7. This provision allows for a broad-based
exchange of views on the implementation of the OCT-EU association. Since 1991,
such dialogues have been systematically held on a trilateral basis, i.e.
between the EU, the OCTs and the related Member States. The main platforms in
which the state of association is discussed are the annual OCT/EU Forums, which
gather representatives of the OCTs, the Member States and the Commission at
ministerial or high official level, regular trilateral meetings between the
OCTs, their Member States and the Commission as well as four thematic
Partnership Working Parties, one of which is dedicated to trade and regional
integration. Such meetings are complementary to the various bilateral meetings
which the European Commission has with an individual OCT and its Member State.

4.2.        Justification of EU Intervention

The Treaty on the Functioning of the European Union (TFEU) provides
the legal basis for the set-up of EU's policies vis-à-vis the OCTs. In the
first place, the laying down of the detailed arrangements of the provisions in
Part IV of the TFEU necessarily have to take place at EU level as the purpose
of the association, the social and economic development and close economic ties
between the OCTs and the EU as a whole, could not be achieved via
actions at Member States level. Moreover, as regards the OCT trade regime,
Member States actions would not be possible as the EU's common commercial
policy, as laid down in Title II of Part V of the TFEU, falls within the domain
of the EU's exclusive competence.

4.3.        Evolving Policy Context

4.3.1.     EU Policy Agenda: External
Relations and Europe 2020

Coherence between
Internal and External EU Policies

With the entry into force
of the changes the Lisbon Treaty made to the Treaties on the European Union and
on the Functioning of the European Union, the principle of the necessary
coherence between the EU's internal and external policies has been more firmly
established. Both types of policies are expected to take into account each
other’s objectives. This means, for instance, that the EU's development
cooperation under the 11th European Development Fund (EDF) should be
coherent with and complementary to other types of external cooperation financed
from other external instruments, such as the Development Cooperation Instrument
(DCI), the Instrument for Nuclear Safety (INSC) and the Partnership Instrument
(PI).

In addition, external
action instruments and initiatives are expected to take into account of the EU
concerns, values, interests and objectives that are dealt with within the EU's
internal policies, by providing the possibility of giving them an external
dimension. In other words, this means that issues such as climate change,
environment, energy (including access to sustainable energy), fair and
sustainable production and trade of raw materials, employment and social policy
(including promotion of decent work, development of social protection systems
and respect internationally recognised labour standards), immigration,
fisheries, agriculture, health, research and innovation for smart, inclusive
and sustainable growth have to be streamlined into EU external actions and
should be an integral part of the EU's dialogue with third partners.

Inversely, internal
policies are expected to take into account the possible impacts certain
measures and initiatives may have on the EU's partners.

EU Values and
Interests

Besides the promotion
of the fundamental interests of the EU, the reinforcement of the principle of
coherence which governs the EU's external, also means that the EU's normative
agenda has gained in importance. Through its external action, the EU intends to
project the values and principles which define it. Article 21 of the Treaty on
the European Union states that "[t]he Union's action on the international
scene shall be guided by the principles which have inspired its own creation,
development and enlargement, and which it seeks to advance in the wider world:
democracy, the rule of law, the universality and indivisibility of human rights
and fundamental freedoms, respect for human dignity, the principles of equality
and solidarity, and respect for the principles of the United Nations Charter
and international law". As a consequence of this evolution, the inclusion
of the principles of good governance has become a standard element of EU
cooperation with third partners and partnership, responsibility
and accountability have become key words in the EU's cooperation frameworks.

The Europe 2020 Agenda that
was adopted by the Commission in March 2010 and subsequently endorsed by the
Council of the EU, provides the benchmark against which the coherence of EU
policies and the promotion of EU values, standards and interest needs to be checked[129]. For OCTs, the principle of coherence is of
particular importance as the territories and their inhabitants have a special
status vis-à-vis the European Union. One the one hand, the OCTs are located
outside of the EU territory and customs union and the EU legislation does not
apply. As indicated above the OCT trade regime is part of the EU's trade policy
and thus the relevant chapter of the EU's external action applies. From this
perspective, OCTs are external stakeholders of the relevant EU policies. On the
other hand, the inhabitants of OCTs have the nationality of their Member States
and thus EU citizenship is conferred upon them[130]. From
this perspective, the OCTs are internal stakeholders of the relevant EU
policies and actions.

In terms of support to
the OCTs, its citizens, companies, civil society and other organisation, this
double-natured relationship with the EU translates itself in the eligibility
for funding outside of the European Development Fund (EDF) from horizontal and
thematic programmes and budget lines under external action instruments such as
the, Partnership Instrument, the Development Cooperation Instrument and
internal policy instruments such as those dedicated to research and innovation.
A coordinated use of the different financial instruments to which the OCTs are
eligible, is likely to contribute to reaching the objectives of the OCT/EU
association because of the synergies it creates and the larger impact it has.
It is likely that such use of EU funds will also contribute to obtain other EU
goals and objectives. For instance, having interested OCTs such as Greenland
participate in the raw materials strategy may benefit Greenland through an
intensified bilateral cooperation (see 4.3.3), contribute to the achievement of
the EU's aim to ensure fair and sustainable production and trade of raw
materials as well as to provide show cases of the EU model of management of raw
materials, which includes strong innovation and recycling components.

The sustainable
management of fisheries is another important area of action for the EU. The reform of the Common Fisheries Policy (CFP) which is underway
aims to ensure sustainable exploitation of marine living resources while
working towards robust economic performance, inclusive growth and enhanced cohesion
in coastal regions. In July 2011, the Commission adopted a Communication on the external dimension of the CFP, which may be
relevant to OCTs and which translates the principles of the proposed CFP reform
at international level[131]. Building on existing initiatives such as the comprehensive
strategy to combat illegal, unreported and unregulated (IUU) fishing in EU and
international waters it adopted in 2008[132], the
Commission proposes amongst others to further the global and multilateral
agenda promoting sustainable fisheries, to strengthen the performance of
Regional Fisheries Management Organisations in terms of the conservation and
management of marine living resources and to base
Fisheries Partnership Agreements (FPAs) on the best available scientific advice
and ensuring that fisheries agreements support better governance of the
fisheries sector in the partner country.

4.3.2.     Developments in EU Trade
Policy

The OCT trade
regime, as it stands, is a vector of EU trade policy. Over the years, this
policy has evolved into a diverse and multifaceted policy, intervening at
multilateral, inter-regional and bilateral levels. There have traditionally
been strong parallels between the OCT trade regime and the regime for African,
Caribbean and Pacific (ACP) countries under the Lomé Conventions and Cotonou
Agreement, which served development purposes. Since 2008 Economic Partnership
Agreements (EPAs) are in place between the EU and several ACP countries and
regions with a view to furthering their sustainable development and regional
integration. The only comprehensive regional EPA so far (in the Caribbean)
contains a clause enabling OCTs to be brought within the scope of the
Agreement.

At the same
time, on-going negotiations and agreements with different regions and countries
(MERCOSUR, Central America, Colombia and Peru, Canada, etc.) have become two
way streets based on mutual interests and benefits and on the recognition that
all actors have rights as well as duties. In this context, OCTs are taken into
account in the on-going negotiations and in the finalized agreements via the
Impact Assessments. These agreements go beyond trade in goods and embrace also
regulatory aspects in different areas, including services and investment,
public procurement, intellectual property rights and sustainable development
(i.e. decent work, labour standards, environmental protection and other
trade-related aspects, including in the area of fisheries).

In addition, in
May 2011 the Commission adopted a proposal for a new Regulation on the
Generalised System of Preferences (GSP)[133]. The
new GSP will grant specific tariff preferences to fewer countries and it will
aim to focus the benefits on those countries most in need and on those which
effectively implement international labour standards and principles of human
rights, environmental protection and good governance. The OCTs will no longer
be eligible to the new GSP because they have already their own trade regime
with the EU, which is embedded in a far-reaching association relationship with
a developed block of countries.           This exclusion is important from the
point of view of the EU's international legal obligations. Granting OCTs GSP preferences
treatment would mean that the territories would OCTs receive preferences
despite the fact that they are integrated in the structure of a developed
country. Yet, the WTO allows GSP preferences only for developing
partners. Under the current OAD, OCTs benefit from free access to the EU market
(duty free quota free) and therefore do not need to benefit from GSP.

In November
2010, the Commission adopted a Communication on "Trade, Growth and World
Affairs"[134] by which it announced the following set of policy initiatives:

1.
a legislative proposal for an EU instrument to
secure access in government procurement in developing and large emerging
markets;

2.
the completion of the internal EU debate on a
new investment policy;

3.
the presentation of proposals on how to
strengthen the links and coherence between Internal Market regulations and
external trade policy;

4.
the adoption of a Communication on Trade and
Development;

5.
a legislative proposal on the reform of the
Generalised System of Preferences;

6.
the presentation of a Communication on possible
support measures to help SMEs that want to develop their international activities;

7.
the adoption of a Green Paper on how to improve
the EU's export control system;

8.
the launch of an annual trade and investment
barriers report in view of providing a basis on which enforcement actions can
be taken;

9.
the revision of the EU's strategy on the
protection and enforcement of intellectual property rights.

Of these initiatives, OCTs might have some
interest in following the question of links and coherence between Internal
Market regulations and external trade policy, which has not yet reached the
stage of presenting proposals.

4.3.3.     Additional Support in Trade and Trade Related Areas in EU
Policies

As the EU's
trade policy agenda evolved over the years, going beyond trade in goods to
incorporate various other themes, so did related policy fields, by foreseeing
trade supporting measures available to economic operators from the EU and/or
third countries. OCTs being in principle eligible for financing from external
and internal horizontal programmes and budget lines, some of these measures
also apply to OCTs or consideration could be given to extending their scope to
OCTs. Some of the measures that may be of interest to OCTs are listed below.

Market
Access

A strategy for
increasing market access for European businesses in important third markets is
one of such supporting initiatives[135].
Through increased cooperation and coordination between business, Member State
and Commission services, it seeks to tackle trade barriers in third markets.

For producers
from developing countries and territories which export to the EU, an Export
Helpdesk is made available which provides information on tariffs, import
measures and requirements, internal taxes from the EU and its Member States[136]. OCTs could investigate possibilities to make use of both
initiatives, either directly or via their Member States (in the case of the
market access strategy). While the Export Helpdesk potentially constitutes a
good source of market intelligence for OCTs, they seem little aware of its
existence.

Raw Materials

In the last few years, raw materials have
attracted increased political interest as access to these materials are often
key to industrial production. The issue of raw materials touches upon a wide
range of policy strands, including regulatory frameworks for production,
environment, protection, development policy, international trade and research
and innovation. In 2008, the Commission adopted a Raw Materials Initiative
which aimed at bringing together the available policy tools in a coherent
manner[137]. This initiative was further developed with the adoption in
February 2011 of the Raw Materials Strategy[138]. The
strategy is built on three pillars (1) fair and undistorted access to raw
materials on the global markets (2) sustainable supply from domestic courses
and (3) resource efficiency and recycling. This strategy could offer opportunities
for bilateral cooperation to those OCTs that either produce and export raw
materials or have the potential to do so. In Greenland and New Caledonia, for
instance, deposits of raw materials critical to the EU were found (aluminium,
nickel, gold, rare earth elements, aluminium, gold etc.). Cooperation with the
EU could include e.g. assistance in governance of natural resources, access to
EU environmental laws enforcement expertise, assistance in geological mapping
and development of geological skills and knowledge. The latter already
comprises cooperation with third countries and developing countries, the
cooperation with the African Union being a case in point. Cooperation could
either take place via the OCT’s Member State within the internal/domestic
dimension of the strategy and/or within the raw materials diplomacy if the
strategy’s external dimension,

Business Support

The “Competitiveness and Innovation
Framework Programme” (CIP) adopted in 2006 and covering the period 2007-2013 supports innovation activities, provides better access to
finance and delivers business support services in the regions, with SMEs as
main target. Two of its three sub-programmes, the EIP (Entrepreneurship
and innovation programme), which also includes the Enterprise Europe Network
(EEN), and the ICT policy support programme, are examples of existing EU
instruments for which the OCTs are already eligible and which are relevant for
trade related and accessibility issues.

The Enterprise
Europe Network (which replaces the Euro Info Centres and Innovation Relay
Centres set up under the predecessor programme), brings together more than 580
business support organisations (chambers of commerce and industry, technology
centres, research institutes and development agencies) from 49 countries with a
view to help European Small and Medium Enterprises (SMEs) to develop their
business in markets within and outside of the European Single Market[139]. The objective of the EEN is to offer information and
support on EU matters to SMEs, to obtain feedback from them, and to provide
business cooperation, technology transfer and innovation services.

The EIP and EEN
are the main EU instruments to implement actions in favour of SMEs, including
entrepreneurship, access to finance, tourism and business support. The OAD
(Arts. 13 and 14) already covers possible actions in the field of tourism and
e-Business. In its Article 59, the current OAD refers to the possibility of
Euro-Info Correspondence Centres being set up in OCTs. This Article was not
updated following the setup of the Entreprise European Network and OCTs never
made use of the provision, though recently OCTs have shown interest in this
kind of EU initiatives. Though OCTs are in theory already eligible to the
programme, they have not been associated in practice.

The EEN was
established in 2008, following a call for proposal to business support
organisation in the different Member States and partner countries concerned.
The present EEN will remain operational until 2014. Calls for proposals for the
next operational period (2014-2020) are likely to be organised in the course of
2013.

OCTs could gain
benefit from the EEN, either by cooperating with EEN members from the Member
States to which they are linked and/or respond to the next call for proposals
by submitting a work programme in line with the specifications contained in
them. Thus, the OCTs could follow the example of Outermost Regions such as
Réunion, Martinique and Guadeloupe which have business support organisations
that already participate in the EEN.

With the CIP
expiring in 2013, new programmes are being prepared. The Innovation part of the
programme will be covered by the future “Horizon 2020” (successor to the 7th
Research Framework Programme) while Entrepreneurship and access to finance
policies will be covered by a new programme “Business Competitiveness and SME
Programme”.

Sector
Support

Additional
support for third partners in developing countries and territories in policy
areas other than but related to trade is available as well. In the field of
food and consumer safety, for instance, the EU provides through the
"Better Training for Safer Food" (BTSF) programme trainings in the
areas of food law, feed law, animal health and animal welfare rules, as well as
plant health rules[140].

Other examples
of support to third countries and territories in these areas are some
facilities targeting ACP countries within the Aid for Trade agenda such as the
TradeCom Facility or the Strengthening Fishery Products Health Conditions in
ACP/OCT Countries[141].

4.3.4.     Communication on Elements for a Revised OCT/EU
Partnership

The EU wishes to use the revision of the Overseas Association Decision (OAD) as an opportunity to redesign
and modernise the association arrangements, so as to bring them more in line
with OCT needs and realities. Over the last ten years discussions about this
revision have taken a central place in the OCT/EU policy dialogue, since the
adoption on 20 May 1999 of the Commission Communication COM(1999) 163 on
"the status of OCTs associated with the EC and options for OCT 2000",
which led to current OAD. On 6 November 2009, the Commission adopted a new
Communication on elements for a new partnership between the EU and the OCTs,
COM (2009) 623, in view of the expiry of the current OAD on 31 December 2013
and following extensive consultations of stakeholders (cf. below). The
conclusions and orientations of the Communication were politically endorsed by
the Council on 22 December 2009 in its conclusions (16710/09). These documents identified
the following three general objectives for the future OCT/EU partnership:

1.    to enhance OCT competitiveness,

2.    to reduce OCT vulnerability, and

3.    to stimulate regional cooperation and integration.

These three objectives are to be translated
in five principles and axes, notably:

-
to contribute to the development of OCTs as
centres of excellence;

-
to stimulate trade and economic cooperation;

-
to promote EU rules and standards;

-
to cooperate on environmental issues and disasters;

-
to contribute to OCT connectivity to the outside
world.

According to these documents, the professed
goal of the EU is to make use of the opportunity of the revision of the OAD to
better adapt the association relation to the specific situation of OCTs, which
implies moving away from the classic development cooperation approach to adopt
a reciprocal partnership in support the OCTs' sustainable development, and
whereby OCTs are expected to contribute to the promotion of European values in
the wider world. Key words in this light are: partnership, mutual interests,
reciprocity, rights and obligations and the OCTs as outposts of the EU in the
world. A more comprehensive description of the political orientations given by
the Council is provided in the Impact Assessment report to which the present
paper is attached.

5.           Evaluations
of OCT/EU Association and Stakeholder Consultations

The OCT/EU
association has been the subject of different evaluation exercises by different
types of actors. In addition, it has been the topic of various stakeholder
consultations in different formats and at different times. As described in
Chapter 4 of this paper, the OCT/EU association foresees a wide range of
platforms for dialogue and cooperation in which the OCTs, the Member States to
which they are constitutionally linked and the EU can discuss trade and trade
related issues: annual Forums, regular trilateral meetings, the partnership
working party on trade and regional integration and other ad hoc meetings.
These instances of discussion have often provided the setting in which the OCTs
as main stakeholders of the OCT/EU association could be consulted. This chapter
analyses the content of the different consultation moments that took place as
well as the different assessments that were made. This analysis integrates
elements of the assessment and evaluation exercises of the OCT/EU association
the Commission has conducted.

5.1.        Stakeholder Consultations

5.1.1.     Public Consultation

In 2008 the
OCT/EU association was subject of a public consultation that ran from 1 July to
17 October 2008, including a stakeholder conference in Brussels on 3 October
2008. The public consultation took place following the adoption on 25 June 2008
of the Green Paper COM(2008) 383 on future relations between the EU and the
Overseas Countries and Territories. Ten questions (questions 7.1. to 10.3. of
the Green Paper) were submitted on trade and trade related issues[142]. These took the purpose and objectives of the association as a
starting point and covered various issues related to the OCT trade rules and
trade related support. The questions addressed issues such as:

-
possible benefits to OCTs of the progressing
world trade liberalisation and regional economic integration and the way in
which the EU could facilitate OCT participation in regional trade;

-
suggestions for the modernisation of the rules
of origin applicable to OCT products and the added value and use of OCT-ACP
cumulation of origin,

-
the added value of cooperation with the OCTs in
trade-related areas and possible improvements;

-
the relevance or the added value of the
transhipment facility and possible alternatives that could promote the
development of transport infrastructure.

The 2008 Green
Paper was instrumental to framing and giving focus to the OCT/EU dialogue on
the trade and trade related issues which ensued in the following years. The
results of the public consultation were summarised in Communication (2009) 623
(pp. 2-4).

Generally
speaking, the OCTs called for a stronger OCT/EU partnership, based on
reciprocity and taking due account of the OCT specificities, in particular
their economic and social development, diversity and vulnerability, as well as
their environmental importance. It was deemed that such a partnership would
have to contribute to enhancing their competiveness, notably in the regions
where they are located. Contributions put forward the idea of OCTs being
outposts of the EU in the world. As part of the partnership, contributions
asked that OCTs would be given a greater involvement in EU policy making. With
regard to trade and regional integration, contributions highlighted the
diversity of the OCTs and expressed the wish of the OCT trade regime being more
flexible so that specific challenges could be taken into account. At the same
time, it was also deemed necessary to maintain a coherent overall framework for
all OCTs. More specifically, several contributions called for a simplification
of the OCT rules of origin and the sanitary and phyto-sanitary requirements for
OCT exports to the EU.

5.1.2.     OCT/EU Forums: High Level Discussions

The Green Paper
was extensively discussed at the 7th OCT/EU Forum which took place
on 28 and 29 November 2008 in the Cayman Islands. The results of the
consultation were subsequently summarised in the Commission Communication
COM(2009) 623 on Elements for a new partnership between the EU and the overseas
countries and territories, which was subsequently discussed at the 8th
OCT/EU Forum which took place in March 2010.

At the OCTA
Ministerial Conference which took place in New Caledonia on 28 February 2011,
the OCTs and their Member States adopted a Joint Position Paper, a substantial
part of which was dedicated to the trade and trade related aspects of the
OCT/EU association[143]. This document was substantially discussed in the days following
the Conference at the 9th OCT/EU Forum which also took place in New
Caledonia. Members of the European Parliament took part in the Forums of 2010
and 2011.

Joint
Position Paper of OCTs and their Member States

In their Joint
Position Paper, the OCTs and their Member States subscribe to the three
objectives of competitiveness, resilience and cooperation put forward by the
Commission in Communication COM(2009) 623 and endorsed by the Council, as well
as the underlying philosophy of building a partnership based on mutual rights
and obligations, shared values and the principle of good governance. OCTs and
their Member States see the revision of the OCT/EU association as an
opportunity to reaffirm the OCTs' belonging to the European family and to allow
them to play a role as outposts for the EU in the world.

The Joint
Position Paper acknowledges the benefits that the OCT/EU association has been
beneficial to the OCTs' social and economic development, identifying the trade
arrangements as one of the main benefits. Support under the European
Development Fund (EDF) is also deemed to have contributed to the OCTs’
development. The EU support to OCT innovation strategies and to Caribbean Small
and Medium Sized Enterprises (SMEs) part of the 10th EDF regional
programme are named as good examples of the cooperation initiatives in support
of the competitiveness of OCTs which the EU is invited to replicate under the
future association framework. Reminding of the structural problems and challenges
they face, the OCTs stress that continued EU assistance is needed for
formulating policies and strategies, for strengthening their markets, as
support to regulatory reform processes and to stimulate OCT compliance with
international and EU rules and standards, notably in the field of food safety
and consumer health and to support the setup and maintenance of necessary
infrastructures. The paper suggests that this assistance takes the form of
continued financial and technical assistance, information exchange and
dialogue, capacity building activities access to capital and financing
opportunities outside of the EDF (internal and external horizontal programmes).

In the field of
the trade, the OCTs and their Member States express their concern about the erosion
of the theoretical benefits which the asymmetric trade arrangements offer them,
due to the on-going process of trade liberalisation. They ask for improved
market access, amongst others through modernised and flexible rules of origin
and regular exchange of information and market intelligence. The paper asks
that OCT interests be taken into account in EU trade negotiations with
neighbours of the OCTs.

5.1.3.     Partnership Working Party: Technical Discussions

Throughout
2008-2011, and even before that time, the trade and trade related aspects of
the Association were also discussed at technical level within the context of
the partnership working party (PWP) dedicated to trade and regional
Integration. In this context and as a follow-up to the discussions which took
place at the 9th OCT/EU Forum, the European Commission sent out a
questionnaire in the Summer of 2011, which covered the following topics:

-
economic sectors and products of interests to
OCTs (current and prospective);

-
access, opportunities and possible obstacles to
OCT access to third markets (including the EU);

-
existing support to OCT exporters and additional
needs for support;

-
OCT interest in selected topics of the EU trade
policy;

-
OCT position in light of international trade
law.

Of the twenty
inhabited OCTs that were queried, eleven OCTs located in the Atlantic,
Caribbean and Pacific responded to the questionnaire; which corresponds to a
reply rate of 55 %. An overview of the answer to the questionnaire goes in
Annex 12.7. They were discussed with OCTs and Member States at the meeting of
the PWP on trade and regional integration that took place on 14 October 2011.
The results confirmed the main findings of the external studies.

Interest in Export Markets

It was found that OCT interests in third
markets reflected trends in international trade, the European-North American
axis being a strong focal point for OCT interest, followed by the
industrialised and industrialising countries in Asia and Latin America and the
neighbouring countries of the Caribbean and Pacific OCTs. This trend also
translates itself by the OCTs' geographic interest in EU trade agreements,
which extends beyond their ACP neighbours.

Interest in Goods Exports

From the replies to the questionnaire, it
could be deduced that OCTs had a marked interest in exporting agro-food
products[144], in particular fishery products and beverages. This is valid for
present markets as well as prospective markets and also applies to OCTs which
traditionally are not associated with fisheries sectors. Interests in this
sector related to several species: cod, scallops, shrimps, mussels, halibut,
tuna, molluscs, crab and lobsters. To a lesser extent materials (earth, stones,
construction materials etc.), chemicals and plastics and ores, metals,
minerals, precious metals, fuels and oils were marked as products of interest
to the OCTs.

Interest in Services Exports

The results also confirmed the services
sectors as a potential for growth for OCT. Tourism and related sectors
(culture, recreation and sports) came out as drawing the most attention. Other
sectors being considered by OCTs were: (renewable) energy (consulting,
engineering etc.) and environment services (environment protection etc.) as
well as business, telecommunication and other supporting services (telephone
support services, data storage, internet traffic relay etc.).

Obstacles to Market Access in Third
Countries and the EU

The questionnaire confirmed that the main
problems that OCTs face in accessing non-EU and EU markets relate to their
remoteness and isolation on the one hand, and the small size and capacities of
their enterprises on the other hand. To help their economic operators to
overcome the challenges with which they are confronted, the OCT authorities
indicated that they mainly provided public support in the form of public aids
and support programmes. Support by the Member States was mentioned for only a
number of OCTs.

Policies and Support

Little mention was made of the existence of
export strategies, but some OCTs indicated that they were considering adopting
such strategies. OCTs seemed to agree that additional support could be foreseen
in the form of capacity building and technical assistance, notably in fields
such as food safety and consumer health (SPS) as well as other fields submitted
to technical regulations (TBT), access to capital (commercial and concessional
loans from the EIB and other financial instances) and continued support
programmes. One OCT highlighted the need for assistance for building the OCTs'
statistical capacities.

5.1.4.     Ad hoc Bilateral Meetings with Individual OCTs and their
Member States

In addition to
consultations of OCTs, their Member States and other stakeholders, the European
Commission has held ad hoc meetings with individual OCTs and their Member
States, to discuss issues of individual concern to them. Such discussions dealt
with the progress of the EU's trade negotiations with selected partners,
derogations to the rules of origin applicable to OCT products and autonomous
trade measures of the EU.

5.2.        Overall Assessment Economic and Trade Cooperation of the
OAD

5.2.1.     External Assessment

In their
overall assessments of the OCT trade regime, OCTs, their Member States as well
as external evaluators all agree that the trade and economic component of the
OCT/EU association has contributed to the sustainable social and economic
development of OCTs by providing OCTs a secure access to the large EU market,
providing numerous export opportunities, and supporting local economies.
Echoing the conclusion of an earlier external evaluation of the 9th
EDF[145], ECO Consult et al. (2011) stated that OCT/EU cooperation
programmes and projects under the 8th and 9th EDF had
been highly relevant to the individual OCTs' needs as well as coherent with
both the association's objectives and the OCTs' own priorities[146]. As regards coherence between EU support to the OCTs and other EU
policies (migration, trade, fisheries etc.) ECO Consult et al. (2011) found no
marked contradictions or inconsistencies[147].

5.2.2.     OCT Trade Regime

Overall Impact

With a duty
free and quota free access to the EU market since the 1991 revision of the OAD,
the OCTs have benefitted from the most generous tariff regime that the EU has
offered, with larger preferential margins than those traditionally granted to
developing countries; at least until full implementation of the Everything But
Arms initiative and the Economic Partnership Agreements from 2008-2009 on.

The evolution
of fishery exports from Greenland, Saint-Pierre et Miquelon and Falkland
Islands to the EU are an example of the positive impact that the OCT trade
regime has had on OCTs[148]. In the period from 2002 to 2010, exports of fishery products from
Greenland to the EU steadily increased from 94,000 tonnes to 112,000 tonnes,
amounting to EUR 280 million in export value in 2010. EU exports of fisheries
products to Greenland, on the other hand, represented only 436 tonnes in 2010
or EUR 3 million in export value. 90 % of the fish exports of Greenland target
the EU market (notably Denmark). In the same fashion, exports of fishery
products from Saint-Pierre et Miquelon to the EU rose from 142 tonnes in 2002
to 1,407 in 2008 (or EUR 6 million in value) to go down to 856 tonnes in 2009, even
though the derogation of 1,290 tonnes for fishery products that entered into
force in 2007 applies until 2013. The EU, however, is not the only trade
partner of Saint-Pierre et Miquelon regarding fisheries; Saint-Pierre et
Miquelon fish is also exported to Canada (4 %) and the United States (17 %). As
indicated above, the value of the total catches in the Falkland Islands fishing
conservation zone average USD 200 million a year and greatly contribute to the
Falkland Islands' GDP. Most of the Falkland Islands' fishery exports target the
EU. With exports worth EUR 70 million, the Falkland Islands are the EU's fourth
largest provider of frozen Loligo squid after India (EUR 130 million), Thailand
(EUR 90 million) and China (EUR 90 million)[149].

To support
existing economic activities and stimulate the creation of new industries in
OCTs, the OCT trade regime has included certain flexibilities in its trade
rules, which have allowed OCTs to take advantage of the export opportunities
offered by the regime. With derogations to the rules of origin granted to
Saint-Pierre et Miquelon, Greenland and the Falkland Islands for their fishery
products the EU has showed willingness to support these territories (see
below).

Considering the
evolution of OCT exports and imports, ECO Consult et al. (2011) found an
encouraging growth in exports (from USD 1.2 billion in 2004 to USD 1.8 billion
in 2008), which it linked to emerging OCT strategic thinking on economic
diversification, stimulated by OCT/EU policy dialogue and EU support operations
in the form of sector or general budget support[150].
Despite this positive development, OCT problems with trade balances that are
structurally in deficit were not resolved as OCT imports grew as well and at a
faster pace (from USD 3.5 billion in 2004 to USD 5.9 billion in 2008).

Possible
Improvements

Even if the OCT
trade regime has provided levers for the OCTs' economic development, certain
areas of improvement were identified. LUFF et al. (2010) and others have
pointed out that while the EU offers OCT wide market access, this has not
always translated in actual trade opportunities, as OCTs faced several
challenges to effectively exploit the market access that was offered. The
challenges not only relate to structural difficulties OCTs face, such as the
size of their economies and their enterprise, the remoteness of their territories
or even the absence of OCT trade policies, but also have to a certain extent to
do with the EU rules and conditions which define the OCTs' actual market
access. The studies also point out that the relative worth of the OCTs' duty
free and quota free market access is decreasing as a result of progressive
trade liberalisation on a global and regional scale. Finally, the studies
highlighted that compared to the arrangements for trade in goods, the OAD
arrangements for trade in services were relatively underdeveloped. The
following chapter contains a more comprehensive discussion of the points just
raised

In its Green
Paper COM(2008) 383 and Communication COM(2009) 623, the European Commission
indicated that the OCT trade regime could be improved in certain areas, so as
to increase its utility as a lever for the OCTs' social and economic
development. For the EU the expiry of the OAD provides an opportunity to bring
the OCT trade regime in line with the latest developments in EU trade policy
and other related policies, while respecting the specific nature of the OCT/EU
association. Translating the notion that the OCT/EU association should be based
on reciprocity, mutual interests, rights and obligations, and ensuring policy
coherence between EU external and internal policies and with the Europe 2020
Agenda, mean that a number of other issues with the present OAD other than the
ones discussed in the next chapter are addressed as well.

The OCT
asymmetric trade regime is not fully aligned on other EU unilateral (GSP) trade
arrangements or bilateral agreements (FTAs, EPAs) as regards measures that
ensure the effective application of tariff treatment and prevent/combat fraud
and irregularities. In addition, the OCT trade regime is not explicit about the
consequences and liabilities relating to administrative errors in the
application of the trade regime where these errors lead to losses of import
duties. Standard EU policy for the management of all preferential regimes is to
include strong provisions on administrative cooperation, management of errors
and temporary withdrawal of preferences, so as to avoid and combat fraudulent use of the arrangements and loss of EU own resources[151]. Such provisions
are indispensable for the proper management of EU trade preferences, and
ultimately allow for the temporary suspension of tariff preferences for goods
on which beneficiaries are not providing the necessary
cooperation as regards origin verification or assistance with enquiries. Preferential trade arrangements already containing provisions on the
temporary withdrawal of preferences include the GSP (Article 16 of the current
regulation, Article 21 of the post-2014 proposal) [152], and the Market Access
Regulation for ACP countries having negotiated EPAs (Article 5)[153]. Such provisions are also contained in the Economic Partnership
Agreement between the CARIFORUM States and the EU and its Member States
(Article 20) and in all other EPAs negotiated/under negotiation.

5.2.3.     OCT/EU Trade and Trade Related Cooperation

As was mentioned above,
the current Overseas Association Decision provides a wide range of cooperation
possibilities with OCTs in the provisions concerning trade and trade related
areas; i.e. Articles 12, 13, 14 and 16 as well as Chapter 3 of Title II of Part
3. This cooperation has non-financial and financial aspects. The present
section will focus on the non-financial cooperation in these areas. The next
section will be dedicated to the financial cooperation.

OCT/EU cooperation and
consultation on trade and trade related generally takes place in the context of
the various instances of dialogue provided for under the OAD in its Article 7
(See Chapter 4): annual Forums, trilateral meetings between OCTs, Member States
and the EU and the EU and the partnership working party on trade and regional
integration. As described above, such meetings have provided the OCTs the
opportunity to express possible concerns they may have had with regard to the
trade and economic cooperation part of the OAD.

However, the OCT/EU
dialogue in this context has somewhat lacked focus as the agendas of these
meetings were in general defined on a case by case basis, depending on what was
the topic of interest for OCTs at a given moment. In general, no systematic
follow-up has been given by OCTs to these topics whenever they were raised. In
addition, the OCT/EU dialogue on trade and trade related issues has had the
tendency to focus on aspects of the EU trade policy which the EU undertakes
independently from the OCT/EU association. In particular the EU's trade
negotiations and its unilateral trade measures have been prone to dominate
OCT/EU discussions on trade and trade related issues.

These discussions have
also tended to lack interaction between the different actors. Although the
meetings of the partnership working party on trade and regional integration are
supposed to be attended by technical experts, the OCTs usually are represented
by generalists based in Europe (Brussels or the capitals of their Member
States), rather technical experts from their home administration. As a
consequence, the OCT/EU dialogue has lacked certain depth as well.

Given its tendency to
go one way, rather than two ways, the OCT/EU dialogue has not always provided
the context in which mutual trade interests, such as raw materials, could be
taken into account. Thus, it has not always been an instance based on
reciprocity, partnership and mutual interests.

In addition, the
provisions contained in Chapter 3 of Title II (Trade Related Areas) of Part 3,
which foresee in administrative cooperation between the EU and OCTs in the
fields of current payments and capital movements, competition policies,
protection of intellectual property rights, standardisation and certification,
trade and environment, trade and labour standards and consumer policy and
consumer health protection have not been used, monitored
or been the subject of dialogue or cooperation for the most part.

The reasons for this
are probably manifold. The theoretical justification for including the relevant
articles during the 2001 revision of the Decision seems sound, as the areas
mentioned are increasingly impacting on trade in goods while traditional trade
tools (i.e. tariffs and quotas) keep losing relevance. Furthermore, while the
articles were inspired by novel wording in the 2000 Cotonou Partnership
Agreement, at the same time they were adapted to the OCT context where the
legal basis was not an international agreement but an EU Council decision.
However, in the process the relevant provisions became very much best-endeavour
clauses, with cooperation foreseen but not really integrated into existing
cooperation instruments (notwithstanding the requirement that development
finance cooperation and trade and economic cooperation under the OAD should be
mutually supportive).

To a large extent, the
problems mentioned above relate to the limited administrative resources and
technical expertise available to OCTs as well as the absence of OCT trade
policies.

5.2.4.     EU Financial Support to OCTs in Trade and Trade Related
Areas

The present section focuses on the
financial cooperation in trade and trade related areas in the last decade. The
non-financial cooperation on trade and trade related aspects are covered in a
separate section.

8th-9th EDF

In a preliminary report, external evaluators
reviewing the financial resources committed and allocated to OCT/EU cooperation
in the period 1999-2009 (under the 8th and 9th European
Development Funds and the budget lines for cooperation with Greenland in
education and fisheries) found that, at a prima facie basis, trade and trade
related areas, were part of only a small minority of EU financed projects and
programmes (see figure below)[154]. Out
of the EUR 380 million committed, 31 % was dedicated to education (reflecting
the high allocation to Greenland), 23 % to transport infrastructure, 21 % to
water and sanitation infrastructure, 9 % to environment (management and
protection of resources, disaster preparedness and waste management), 7 % to a
category entitled "island economies" and 9 % to miscellaneous
activities such as technical assistance and cooperation on trade and trade
related areas. What the difference is between what the authors consider as
trade and trade related assistance and assistance to the island economies is
difficult to know as they do not provide a definition for the latter and
actually only use it once in their study.

Source: ECO Consult et al. (2011), pp. 25-26

Examples of projects and programmes with a
link to trade and trade related matters were:

-
the support to the development of trade in
services in Montserrat under the 9th EDF (allocation: EUR 17.2
million, sector budget support): private sector development, development of
tourism products and repositioning of Montserrat as a tourism destination,
development of institutional and regulatory framework and ICT infrastructure[155];

-
the trade development support to the Falkland
Islands under the 9th EDF (allocation: EUR 4.547 million, sector
budget support): private sector development, develop key export sectors such as
fisheries and aquaculture, meat production and tourism[156];

-
the reallocation to the 9th EDF of
resources previously allocated to Falklands Islands under the STABEX scheme of
past EDFs to mitigate the harmful consequences of instability in wool export
earnings (reallocation EUR 2.466 million –sector budget support): improvement in the quality and returns from agricultural production
through training programmes and product development and development of
aquaculture activities in view of diversifying the Falkland Islands economy[157];

-
STABEX funds allocated to Mayotte (EUR 380,486)
for the development of vanilla and ylang-ylang essential oils marketing chains.

Even if trade and trade related areas were
little in focus in OCT/EU cooperation projects and programmes under the 8th
and 9th EDF, the EU support activities in other fields were found to
have positively contributed to the development of trade related activities in
the OCTs, notably in the tourism sector. Interventions such as support to the
rehabilitation and extension of harbours, airports and/or road infrastructures
in Saint-Pierre et Miquelon, St Helena, Ascension Island and Tristan da Cunha,
Anguilla, New Caledonia, Turks and Caicos and Montserrat contributed to
increase OCT connectivity to the world, mainly improving passenger traffic
conditions, which is likely to be conducive to a greater influx of tourists[158]. Likewise, the vocational and education training interventions in
New Caledonia and Greenland contributed to increasing employment opportunities
for OCT inhabitants and strengthening the skills base, notably in economic
sectors with high export potential such as the mining industry (e.g. nickel
extraction in New Caledonia)[159]. Interventions in the field of environment such as the water
sanitation project on the French Polynesian island of Bora Bora in order to
preserve its lagoons or the development of the Arikok national park in Aruba
contributed to the attractiveness of both territories as a tourism destination.

10th
EDF

Under the 10th
EDF, EUR 286 million have been reserved for cooperation with the OCTs: EUR 195
million for territorial programmes and projects: EUR 40 million for a regional
programme; EUR 30 million for an OCT investment facility managed by the EIB,
EUR 6 million for technical assistance managed by the European Commission; and
EUR 15 million for contingency aid (disasters, fluctuations in export
earnings). In addition, EUR 175 million (2006 prices) has been reserved for
cooperation with Greenland in non-fisheries sectors and EUR 77 million for cooperation
in the fisheries sector (2007-2012) The territorial and regional programmes and
projects are either being implemented or in the process of being committed.

The areas on
which EU support will concentrate under the 10th EDF will roughly
follow the same orientations as under the previous EDFs, with a strong focus on
education (Aruba, Greenland and New Caledonia), infrastructure (former
Netherlands Antilles, Anguilla, Turks and Caicos Islands, Saint Helena,
Ascension Island and Tristan da Cunha, French Polynesia and Wallis and Futuna)
and environment (French Polynesia, Pacific and Indian Ocean projects). Trade
and trade related matters will be given more attention via the general budget
EDF operations in Montserrat, Saint-Pierre et Miquelon and the Falkland Islands
in support of general government policies, all of which include trade
components, as well as the Caribbean project targeting the development of the
capacities of the Dutch and British OCT SMEs and business support
organisations. In addition, the two horizontal projects covering all OCTs that
are foreseen, entitled "Technical assistance to the Association of
Overseas Countries and Territories (OCTA)" and "Territorial
Strategies for Innovation" are likely to bring benefits to the OCTs in the
field of trade and trade related economic activities, amongst others by
improving the OCTs' access to the EU's horizontal programmes and budget lines
to which they are eligible.

The various external studies provide some
explanations for the relatively low interest that OCTs generally had in
cooperating with the EU on trade, trade related areas and regional cooperation
under the previous EDFs, notably:

-
the fact that regional economic integration with
ACP countries does not necessarily bear much interest to OCTs (see SALMON
(2007) and the analysis in chapter 3);

-
the absence of capacities, infrastructure and
political will to engage in structural reforms and liberalisation (LUFF et al.
(2010), ECO Consult et al. (2011).

As indicated
above, ECO Consult et al. (2011) noticed that OCT attitudes seemed to be
changing as a consequence of the more generalised use of general and sector
budget support operations, which have stimulated OCTs to think about economic
diversification in a more strategic way, trade and trade related issues being
part thereof[160]. Concerning the Atlantic OCTs, for which trade issues are generally
more important, BROOKS, STONEMAN and RIOS (2010) concluded that in future these
OCTs would continue to need EU financial assistance to support their process of
economic diversification, in the form of development aid, facilitated
participation in the EU horizontal programmes and budget lines, and access to
concessional and commercial loans from the EIB and other financial instances[161].

EU Horizontal
Programmes and Budget Lines

As was
demonstrated above with the example of OCT involvement in the Enterprise Europe
Network, OCT participation in horizontal programmes and budget lines in support
of trade development and related activities to which they are in principle
eligible often turns out to be very limited in reality. Another example of a
programme of interest to the OCTs is the current Competitiveness and Innovation
Framework Programme. The statement above holds true for both the internal and
external instruments to which the OCTs are eligible. In part, the limited
participation of OCTs can be related to the limited capacities of their
businesses, organisations and authorities, but other factors play as well.

For instance,
cooperation with the relevant organisations and instances of Member States,
which are supposed to cover the OCTs is often complicated because no real links
exist between them and the organisations and instances of OCTs. In those
programmes where funding is made conditional to the submission of proposals by
consortia of organisations and instances from at least three different Member
States or associated States, the absence of well-developed OCT networks plays
against their participation as well. Often, OCT businesses, organisations and
authorities have links with counterparts in their Member States only.
Cooperation between OCTs associated to different Member States is, for the time
being, not a practice that is established enough in order for OCT businesses,
organisations and other instances to exploit eligibility in those cases. Thus,
the absence of established cooperation networks in the Caribbean between the
Dutch and the British OCTs and the French Outermost Regions excludes from
certain parts of the Seventh Framework Programme where the rule of the
consortia composed of organisations from three Member States applies.

As a
consequence of the limited OCT participation in the EU horizontal programmes
and budget lines to which they are eligible, the EDFs has to a certain extent
been used for financing activities that could have been financed via other
financial instruments. Thus, the notion that financial assistance through the
EDF should be complementary to territorial, national and other EU financing has
not been put in practice and the potential synergies that could have been
created by combining different financial sources have not come about.

The problems
mentioned above relate to a certain extent to particular nature of OCT/EU
relations. Whereas the territories themselves are outside the customs territory
and the internal market, their citizens benefit from EU citizenship and the
rights associated to it. This has led to a certain confusion about and tension
between the territorial and personal scope of the EU law[162].

Some of the
projects and programmes under consideration for the 10th EDF intend
to address the problems identified above. For instance, under the regional
programme technical assistance will be provided to the Association of Overseas
Countries and Territories of the European Union. Through this association the
OCTs wish to reinforce cooperation amongst themselves and develop networks
within the EU institutions and with other third partners. The technical
assistance will also support OCTs in formulating proposals for financing under horizontal
programmes.

11th
EDF

According to the
Commission proposal for an Internal Agreement between Member States regarding
the 11th EDF (envisaged for adoption in December 2011), EUR 338.4
million would be reserved to finance
territorial and regional programmes,
technical assistance and interventions in case of contingency situations
in the period 2014-2020. EUR 5 million
would be allocated to the European Investment Bank (EIB) to finance interest
subsidies and technical assistance in accordance with the Overseas
Association Decision.

5.3.        Recommendations External Literature

As mentioned above, between 2007 to 2010,
the Association of the Overseas Countries and Territories of the European Union
made use of technical assistance provided for by the European Commission to
finance external studies (SALMON (2007), LUFF et al. (2010), BROOKS, STONEMAN
and RIOS (2010) dedicated to the impacts of the changes to the OCTs' trade
environments as a consequence of free trade and/or economic integration
negotiations negotiations at bilateral (FTAs), regional (EPAs) and multilateral
(WTO) level. An additional external evaluation of OCT/EU cooperation from 1999
to 2009 was conducted by ECO Consult et al. A specific study (SPANNEUT (2011)
was dedicated to OCT statistical systems and capacities. Several of these
studies' findings have fed into the present paper. The list below concentrates
on their recommendations relating to the OCT trade regime and the EU trade
related support.

The external
studies recommend that the revised OCT/EU association would:

-
review the trade in services treatment (in Part
III, Title II, Chapter 2) of the OAD, so as to bring them in line with the
trade in goods treatment of the OAD;

-
review the rules of origin contained in Appendix
2 to Annex III to the OAD, so as to bring them in line with the rules of origin
granted in the context of the Pacific EPA, in particular for fisheries
products, and possibly for other products;

-
foresee enough possibilities for trade and
regulatory reform related technical assistance supportive of the streamlining
trade in OCT government policies (formulation of trade and industrial policies,
improve and harmonise statistics gathering and analysis capacities,
institutional support to trade actors, studies, etc.);

-
provide trade related technical assistance to
authorities and economic operators in areas related to tariff policy, rules of
origin, services trade liberalisation, compliance with international and/or
European norms and standards concerning technical, food safety and consumer
health regulations (harmonisation with TBT and SPS agreements), subsidies,
protection of intellectual property rights, competition policy, foreign direct
investments.

-
assist with the set up and costs related to the
implementation of the dispositions related to the EU's food safety and consumer
health regulations;

-
support the economic adjustment of OCTs through
the setup of a fisheries adaptation programme similar to the Sugar Adaptation
programme for ACPs, which would aim at improving the competitiveness of the OCT
fisheries sector, assist displaced workers and encourage diversification;

-
refocus support projects in the field of trade
from infrastructure to business development;

-
facilitate OCT access to and knowledge about EU
horizontal programmes and budget lines to which OCTs are in principle eligible,
amongst others through technical assistance and capacity building;

-
facilitate OCT participation in other external
programmes, such as Pro€invest for the development of the OCTs' touristic
potential;

-
ensure that OCT interests are taken into account
in the context of EU trade negotiations;

-
continue the direct dialogue between the
European Commission and the OCTs on inter alia trade and trade related issues.

6.           Identification
and Analysis of Specific Issues

6.1.        Preference Erosion

6.1.1.     Main Issues

One of the
concerns often expressed by OCTs is that the EU's active policy of free trade
negotiations as well as autonomous trade measures (e.g. tariff quotas for
shrimps) are decreasing the relative value of the trade preferences of which
the OCTs have traditionally been benefitting[163].
Fisheries products are the prime subject of such concerns. Targeted free trade
negotiations are those with Canada (Comprehensive Economic and Trade Agreement,
CETA). If the negotiations with MERCOSUR pick up, those may come to be targeted
as SALMON (2007) pointed out that South American countries are competitors of
Saint-Pierre et Miquelon for scallops. The Falkland Islands are also concerned
as they compete with Argentina over the same resources: squid.

6.1.2.     OCT Requests

The OCTs are of
the opinion that they are entitled to the best possible treatment under the OAD
and that this means that the EU should take into account OCT sensitivities when
negotiating free trade agreements, including by taking them into consideration
in impact assessment exercises concerning such agreements[164]. Greenland has argued that the EU should compensate for the
possible losses that OCTs have due to the phenomenon of preference erosion.

6.1.3.     Commission Analysis of OCT Requests

The ongoing
liberalisation of world trade, in which the EU takes part and plays an active
role, may potentially have consequences for the competitive position of OCTs on
the EU market as regards imports into the EU, because an increasing number of
the EU's trade partners are obtaining improved access to the EU market. This
transition is part of the EU trade policy, as defined in Article 206 of the
Treaty on the Functioning of the European Union (cf. above) and is a process
that cannot be put on halt. It should be pointed out that the issue of
preference erosion should not be exaggerated. It does not affect all OCTs and
internal research by Commission services indicates that for the time being OCT
products have not been affected by EU trade measures (cf. analysis of Greenland
and Saint-Pierre et Miquelon exports to the EU in Chapter 5 of Annex 12).

For those OCT
products where there may be an issue in the future, the Commission entertains a
dialogue with the concerned OCTs and derogations from the rules of origin have
been granted on several occasions and for several OCTs (see below). The
Commission has upon occasion assured his OCT interlocutors that it would
continue to take into account OCT sensitivities in the EU's trade negotiations.
At present, the Commission already includes OCTs in the Impact Assessment and
Sustainability Impact Assessment exercises it conducts in the context of free
trade negotiations. However, the process by which the theoretical benefits
offered to the OCTs under the current OCT trade regime in terms of preferential
access to the EU market are eroding as a result of progressive trade
liberalisation on a global and regional scale must be considered inevitable.

6.2.        Rules of Origin and Derogations

6.2.1.     Main Characteristics and Issues

For a number of
OCTs, rules of origin applicable to OCT products and in particular the
derogations from these rules can play a positive role in relation with the
continuation of their exports to the EU, the development of existing industries
and/or the creation of new industries. Within the context of international
trade, the notion of origin refers to the "economic nationality" of
goods. Origin determines whether or not goods which are imported into a certain
market benefit from preferential access (reduced or zero rate of duty). The
rules that are followed to determine the origin of an imported product are laid
down in preferential trade agreements or arrangements. The rules of origin that
apply to OCT exports to the EU market are laid down in Annex III to the OAD.

General
Provisions and Product Specific Rules

The OAD's general
provisions on the rules of origin applicable to OCT products are based on the
EU's standard general provisions, which stipulate with which conditions
and requirements products need to comply in order for them to acquire the
origin of a beneficiary country. In complementing its general provisions on
rules of origin for OCT products, the OAD also provides for product specific
rules. The conditions and requirements in the general and product specific
rules are amongst others:

-
goods need to be either wholly obtained or
sufficiently worked or processed in OCTs (cf. Articles 3 and 4 of Annex III to
the OAD and the list mentioned in its Appendix 2 on the product specific rules);

-
goods need to be transported directly from the
OCT's territory to the EU's and this direct transport condition needs to be
proved systematically by relevant documentary evidences (Article 12 of Annex
III to the OAD);

-
fish caught beyond the territorial waters of the
OCTs needs to be caught by vessels fulfilling four cumulative criteria (Article
3 of Annex III to the OAD);

-
the value of the use of non-originating
materials mentioned in the list of Product Specific Rules is allowed up to a limit of 15% of the ex-works price of the final product, provided that specific percentages given in
the list of Specific Product Rules are not exceeded by the application of this
value tolerance.

Certification
of origin is done by customs authorities of the OCTs, unless the exporter has
been formally approved by the same customs authorities. For the purposes of the
OAD, OCTs are treated a single territory.

OAD
Specificities

The OAD
also includes specificities. For instance, the possibilities of
cumulation are extensive (Article 6 of Annex III to the OAD). Cumulation allows
originating products of a country A which are further processed or/and
incorporated into products of a country B, to be considered as products
originating from B, if the processing goes beyond minimal operations. It allows
the final product manufactured in the country B to fulfil more easily the
applicable criteria. The OAD not only provides for bilateral cumulation with
the EU, but also for diagonal and full cumulation with the OCTs and ACP States.
Such cumulation does not apply to agricultural products, which fall within
Chapters 1 to 24 of the Harmonised Commodity Description and
Coding System, (Harmonised System – HS), originating in the EU and are
covered by an export refund system. In addition, special cumulation provisions
apply on sugar and sugar products (HS Chapter 17, 1806
1030 and 1806 1090) and rice (heading HS 1006).

Derogations

Apart from the
tolerance level for non-originating material mentioned above, the OAD foresees
additional flexibility by providing the possibility for Member State or OCT
authorities to request derogations from the rules of origin. Such
derogations consist in temporary relaxations of the rules, allowing
preferential treatment to be accorded to products which may not be able to
satisfy the usual criteria. According to Article 37 of Annex III to the OAD
derogations may be granted where the development of existing industries or the
creation of new ones justify them. The same Article imposes the EU to consider
OCT requests with a positive bias, stating that it "shall respond
positively to all the requests which are duly justified in conformity with
[it] and which cannot cause serious injury to an established [EU]
industry". The Article also facilitates the acceptance of the request by
the EU, by stipulating that derogations “shall be granted where the value added
to the non-originating products used in the OCT concerned is at least 45 % of
the value of the finished product”.

In the past,
the EU has positively responded to requests to accommodate OCT needs and has
granted derogations to the rules of origin for several products. Recent
examples are:

-
the (former) Netherlands Antilles to allow them
to import non-originating sugar and perform small processing for the production
and export of crystal sugar and sugar lumps until 2013[165];

-
the Falkland Islands allowing for more flexible
vessels conditions until 30 November 2012[166];

-
Greenland so as to allow it to be able to import
and process non-originating shrimps and prawns from third countries until 31
December 2013[167];

-
Saint-Pierre and Miquelon to import and process
non originating sprats, shell-on scallops and scallop meat, lobsters, mackerel,
herring, mussels from third countries/Canada until at least 31 December 2013[168].

6.2.2.     OCT Requests

In the Joint
Position Paper, OCTs put strong emphasis on the rules of origin, which they
deem to be instrumental to regional integration and sustainable development.
Particular attention was given to the rules of origin applicable to fisheries
products. In the Joint Position Paper the OCTs invited the Commission to
consider the possibility of:

-
simplifying the existing rules of origin and
greater flexibility, even if no specific request has been made by OCTs;

-
replicating innovations related to rules of
origin, notably those that were negotiated in the context of the Pacific and
African EPAs, respectively global sourcing on one hand and automatic derogation
(for tuna and tuna loins) and extended possibilities of cumulation on the other[169];

-
longer durations for the derogation (e.g. ten
years and more);

-
less cumbersome procedures while applying for
derogations, for which technical assistance should be available.

The OCT
requests mentioned above relate to specific problems which OCTs have
encountered with the application of the rules of origin, in particular with
regard to fishery products. Currently, the general provisions of the rules of
origin determine that in order for the fish caught beyond the territorial
waters of the OCTs to acquire OCT origin (and hence preferential treatment),
the vessels and factory ships concerned need to fulfil four conditions. In
Article 3.2 of Annex III to the OAD these are listed as vessels and factory
ships:

-
which are registered or recorded in an OCT, in a
Member State or in an ACP State;

-
which sail under the flag of an OCT, of an EU
Member State or of an ACP State;

-
which are owned to an extent of at least 50 % by
OCT, Member State or ACP nationals, or by a company with its head office in the
OCT or one of these States, of which Chairman of the Board of Directors or the
Supervisory Board, and the majority of the members of such boards are OCT,
Member State, or ACP nationals and of which, in addition, in the case of
partnerships or limited companies, at least half the capital belongs to Member
States or ACP States or to public bodies or nationals of the said States, or of
an OCT; and

-
of which at least 50 % of the crew, master and
officers included, are OCT, Member State, or ACP nationals.

Some OCTs have
difficulties to fulfil these conditions. This is the case, in particular, for
the Falklands Islands as regards the crew requirement. A derogation was needed
to allow the territory to export its fish to the EU free of duty. In addition,
the crew requirement and the ownership requirement have often caused problems
of interpretation and it has proven to be difficult to verify that these
requirements are met in practice.

Another concern
relates to the general provision on direct transport, which is relatively
burdensome as it implies that OCT exporters should systematically prove, with
relevant documentary evidences, that the goods have been transported directly
from the OCTs to the EU without being altered. The requirement that OCT customs
authorities certify the origin of OCT exports sometimes is also perceived as
time consuming and generating additional compliance costs.

As already
mentioned, the trade rules of the present OAD only allow for cumulation with
all ACP States. This provision is relevant for OCTs which maintain regular
trade relations with ACP countries, which is potentially the case for French
Polynesia and New Caledonia with Fiji or Papua New Guinea and, the (former)
Netherlands Antilles and British Virgin Islands with CARIFORUM EPA countries.
However, for a number of OCTs trade relations with ACP States are non-existent
or represent only a small part of their trade. Consequently, cumulation with
ACP States is not always relevant for these OCTs, which are more interested in
cumulation with some of their non-ACP neighbours, including developed
countries. For example, French Polynesia has significant exchanges with ASEAN
countries, with India, with Canada and with MERCOSUR; the former Netherlands
Antilles exchange with Canada, Colombia, Peru, Central America and MERCOSUR.

With regard to
derogations to the rules of origin, OCTs such as Saint-Pierre et Miquelon and
the Falkland Islands have argued that the temporary character of this
flexibility did not provide the necessary incentives for significant long term
investment as derogations are generally granted for short time spans (five
years in general) and their prolongation is not guaranteed. In addition,
procedures to grant derogations are considered to be burdensome.

6.2.3.     Commission Analysis of OCT Requests

Since 1st January 2011, the EU
implements, with its beneficiary countries new rules of origin which are more
modern, simpler and more development friendly. The policy of the EU is to
promote relaxation, simplification, transparency and coherence between the
different sets of EU rules of origin. For instance, some EPAs were concluded
before the revised GSP rules of origin came into force and thus do not apply
this new set of rules. Nevertheless, most of the EPAs now include a review
clause which foresees that the rules of origin will be reviewed in order to
take on broad improvements such as those introduced in the GSP rules of origin.

As indicated in Communication COM(2009)
623, taking into account the on-going reform process
and the importance of simplification, transparency and manageability,
modernisation of the OCT rules of origin could give rise to an OCT-specific set
of rules of origin that would in principle apply to all OCTs. As was pointed
out by the Commission Staff Working Document accompanying the 2008 Green Paper,
the revised rules of origin should provide leverage for the OCTs’ sustainable
development, by allowing OCTs to exploit the opportunities offered by their
duty free and quota free access to the EU market[170]. This
goal will not be accomplished if the rules of origin would lead to OCTs merely
becoming a platform for products of other countries trying to reach the EU
market under the OCT preferences.

When considering different solutions, it is
worth reminding that differences between OCTs are significant, for example in
terms of relative wealth, actual population size, natural resources,
geographical characteristics, physical isolation, climate, possibilities for
economic diversification, etc, even within a same region. These differences
should be taken into account, whilst recognizing that OCTs could also have
similar interests. Some elements of differentiation could then be foreseen.

Improved rules of origin could help OCTs to diversify their exports. Products that OCTs may
be able to export are: agricultural products (vanilla, coffee, sugar), fisheries, aquaculture and marine products
present in the waters in proximity (lobster, crab, conch, salt, shrimps, squid,
cod, finfish, mackerel, scallop etc.), some processed agricultural products
(jams, fruit juices), raw materials (salt, nickel, copper), essential oils and
other artisanal products (garments, art work), rum and rum products, wool,
apparel, wood pulp, pearls, ferro-alloys, some machinery. However, it is
important to note that, for certain products, the impact
of the rules of origin on the
potential volume of exports is limited as the territories either manufacture them entirely in their territory
(e.g.. mutton for the Falklands Islands; reindeer meat, raw materials or water
for Greenland; vanilla or pearls for French Polynesia, vegetable and fruits for
New Caledonia) or because the products involved enter the EU duty free ,
irrespective of the preferential origin (e.g. precious metal or seaweed
produced by Greenland).

As was
suggested by the analysis of the trends in fisheries exports by Greenland,
Saint-Pierre et Miquelon and the Falkland Islands in section 5.2, the existing
EU-OCT rules of origin do not seem to pose insurmountable problems for the
exports of fisheries products from the OCTs to the EU. As mentioned in section
6.2.1. these territories, as well as the (former) Netherlands Antilles, benefit
from derogations to the rules of origin. In the case of Greenland and
Saint-Pierre et Miquelon, the annual quota granted under the different derogations
are relatively under-utilised. For instance, in the period 2008-2011,
Saint-Pierre and Miquelon did not make any use of its annual quota for sprats,
shell-on scallops and scallop meat (250 tonnes p.a.). It does not make much use
of its derogation for cod, coalfish, haddock, redfish, hake and plaice either
(1,290 tonnes p.a. for each species). The authorities of Saint-Pierre and
Miquelon have suggested that this is because the quotas are too low for
reaching a production level that is significant enough to be viable (2,000
tonnes of cod would only allow the processing of 700 tonnes of final product).

Nevertheless,
the low utilisation rates seem to indicate that neither of the two territories
are entirely dependent on these derogations for maintaining their position on
the EU market. As far as Saint-Pierre et Miquelon is concerned, one could ask
whether the territory's problems with regard to competitiveness could be
addressed by derogations as these do not seem to be in line with the actual
needs of its industry. The utilisation rates of the derogations suggest that an
update and simplification of the procedures for granting derogations to rules
of origin, including the possibility of longer application periods in order to
increase predictability for economic operators, could contribute to address OCT
concerns. A condition for adopting such a simplification would be that the
Commission would keep the possibility to carefully examine requests for
derogations and their renewals in the light of economic considerations that
justify them. It is also important to bear in mind that, though useful,
derogations to the rules of origin are by definition meant to provide
exceptional flexibilities and not to create unlimited and permanent rules.

An OCT concern
which seems justified relates to the requirement, for OCT exporters, to
systematically prove that goods have been directly transported from the OCTs to
the EU, without being altered, which the OCTs deem too burdensome. The
necessity to reduce the administrative burden in this field would be in line
with the current EU policy to facilitate trade.

The extent to which the EU can take into
consideration OCT requests for extending the global sourcing for processed
fishery products accorded within the framework of the
Economic Partnership Agreement (EPA) of the Pacific region is determined,
amongst others, by whether or not granting such extension is coherent with
other EU policies, notably the EU's development cooperation. The global
sourcing is a very sensitive matter for the EU, considering the controversies
that emerged within the EU following the granting of this flexibility and
considering that this rule is contested by various EU stakeholders. In
addition, it is worth mentioning that those rules of origin were negotiated in
a specific bilateral setting, where the EU's partners provided a number of
guarantees to the EU. For example, the fisheries chapter that is being
negotiated in the context of the comprehensive EPA with the ACP Pacific region
will contain provisions supporting conservation and management of fisheries
resources as well as provisions promoting responsible and sustainable fishing
practices. Monitoring and surveillance provisions will be an essential part of
the proposal.

Also, the special rules of origin applying
to the Economic Partnership Agreement of the Pacific region do not cover all
fishery products. They concern solely processed prepared or preserved fish and
fishery products (HS Headings 1604 and 1605) which
need to be manufactured in on-land premises from non-originating fish,
crustaceans, molluscs and other aquatic invertebrates (HS chapter 03). It has
been clearly established that they do not constitute a precedent for future
free trade agreement negotiations with third countries.

6.3.        OCT Compliance with EU Standards and Regulations

6.3.1.     Main Characteristics and Issues

All OCTs have
difficulties complying with EU standards, rules and regulations in sector of
interest to them. Both LUFF et al. (2010) and BROOOKS, STONEMAN and RIOS (2010)
found that exports in the fisheries sector may be - to diverging degrees – of
interest to all OCTs, but that OCTs faced difficulties with complying with the
requirements of the EU's regulatory framework in the area of food safety,
because of the relatively large expenses they entail and the absence of the
necessary knowledge and expertise, capacities and/or infrastructure (including
legislation) in OCTs. For example, with regard to the possibility of Anguilla,
Turks and Caicos and the British Virgin Islands exporting lobsters and conch to
the EU, the cost of complying with the EU sanitary and phyto-sanitary rules and
regulations (SPS) was mentioned as a disincentive. Accreditations and
certifications, the financing of testing laboratories, the registering of freezer
and factory vessels, compliance with demands concerning Illegal, Unregulated
and Unreported fishing activities and traceability are some of the concerns
with regard to SPS and fisheries mentioned by OCTs. Both external
studies put forward that in order for the OCTs to be able to exploit the export
opportunities which the EU has to offer in the area of fisheries products,
targeted technical and financial assistance to businesses from (territorial,
national and/or European) public authorities would be needed.

6.3.2.     OCT Requests

In the Joint
Position Paper the OCTs called for increased access to information and
technical and financial assistance in view of:

-
possibly updating of OCT legislative framework
with regard to food safety and consumer health;

-
supporting the necessary skills, expertise,
capacities and infrastructure in OCTs in oder for them to be able to setup and
maintain testing laboratories and certification authorities.

In addition,
regularly provided information and increased OCT participation in programmes
such as Strengthening Fishery Products Health Conditions in ACP/OCT Countries
is requested.

6.3.3.     Commission Analysis of OCT Requests

With regard to
OCT concerns about supposed non-tariff barriers related to technical
regulations and regulations regarding food safety and consumer health, no easy
solution can be provided to overcome these obstacles and reduce the costs or
efforts needed to overcome them. It would be difficult and counter- to provide
rules for EU and third country operators on the one hand and separate, more
lenient rules for OCTs on the other productive, as nobody would want to buy
sub-standard produce. Compliance with the health and safety rules, standards
and regulations governing the access of products on the EU market cannot be put
into question.

Rather than
trying to bring down the EU standards, rules and regulations for OCTs, support
activities that could help OCTs with bringing up the quality of their products
and that would provide the necessary expertise, capacity and infrastructure to
comply with these standards and rules in areas of particular interest to them
may be envisaged. Given the marked interest that OCTs have shown in agro-foods,
in particular fisheries products, it could be considered to focus the EU's
assistance on these sectors. Such assistance should, in principle, be provided
for under the dedicated EU horizontal programmes available to OCTs, both
internal and external. Under the 11th European Development (EDF),
financial resources could also be mobilised to finance complementary actions.

Under the 10th
EDF, financial resources could already be used for such purposes as the
targeted areas are included as possible areas for cooperation under the OAD.
The impression that not enough resources were available for cooperation and
support in the field of food safety and consumer health is the consequence of
the fact that the total available resources for territorial and regional
programmes and projects as well as technical assistance are committed on the
basis of an OCT/EU dialogue on joint priorities. As indicated above, the
principle of concentration obliges the EU's financial assistance to OCTs to be
concentrated on a limited set of sectors. If this principle is maintained for
the next EDF, then the EDF resources available for cooperation on sanitary and
phyto-sanitary issues will depend on whether or not OCTs would decide to give
priority to it.

6.4.        Transhipment

6.4.1.     Main Characteristics and Issues

The current OAD
foresees a provision that allows for transhipment activities which enables a
product not originating in an OCT, but which is put in free circulation in that
OCT, to be re-exported to the EU duty and quota free, provided that the OCT in
question applied the EU's common external tariff (but on a slightly lower
"cost, insurance, freight" basis); and it did not waive or repay any
duties or taxes due (Article 36 OAD).

This provision
dates back to 1991. At the request of some Member States, the 2011 OAD added
the possibility for the Commission to authorise public financial aid to those
operating the transhipment procedure. The OAD also included a committee
procedure for dealing with related OCT requests (Article 37 OAD). In following
years, following OCT requests, the Commission clarified the conditions and criteria
for transhipment. One OCT actually requested Commission authorisation for
public financial aid but withdrew its request after in-depth discussion,
including in meetings of the partnership working party on trade and regional
integration, both relating to the request itself and to an earlier,
unsuccessful attempt to implement the transhipment article of the 1991 Council
Decision. Both the new request and the earlier case were characterised by the
absence of actual transhipment activity.

The Committee
foreseen by Article 37 OAD has never met as there have been no OCT requests for
authorisation of public financial aid to be examined.

6.4.2.     OCT Requests

Some OCTs
remain convinced of the facility's relevance and wish that it is maintained in
the revised OAD. Interested OCTs view it as an instrument which can help them
with developing trade and transforming their territories in regional hubs.

6.4.3.     Commission Analysis of OCT Requests

In the
Commission Staff Working Paper accompanying the 2008 Green Paper, it was
pointed out that transhipment had not yielded the expected results[171]. The original aim of the transhipment procedure was to promote the
exploitation of existing infrastructures and create local economic growth, but
in practice it has led to creating purely artificial trade routes that present
no added value for third-country economic operators or OCTs.

The
transhipment facility has also been subject to fraud involving refund/drawback
of duties, the effective charging of which was a condition of importation of
the goods concerned into the EU without further application of duties. Until
now no legal transhipment has taken place since the procedure was created in
1991 or since it was updated in 2001.

6.5.        Trade in Services and
Establishment

6.5.1.     Main Characteristics and Issues

As indicated
above, the OAD provisions on trade in services are limited. The TFEU refers to
services and establishment in Articles 199:1-2 and 199:5 TFEU, which lay the
basis for trade between Member States and OCTs, including trade in services and
for the right of establishment of nationals, companies or firms. The detailed
rules are subjected to specific conditions laid out in the OAD.

The relevant
Article 45:2:b of the OAD states that the EU shall apply GATS treatment to OCTs
and that EU Member States are not entitled to discriminate between OCTs. At the
same time, OCTs are expected to give to EU nationals, companies and enterprises
no less favourable than the treatment accorded to the nationals, companies and
enterprises of third countries (Article 45:2:b). As GATS only covers
establishment in services sectors, the current OAD does not accord any rights
as regards to establishment in non-services sectors.

SALMON (2007)
pointed out that there was a discrepancy between the treatment in the field of
the trade in goods (Article 40 OAD) on the one hand and the trade in services
(Article 45 OAD) on the other, notably in respect of what in an FTA would be
called the MFN clause. Whereas the goods treatment allows the OCTs to grant
preferential treatment to other partners than the EU - developing countries and
other OCTs, with a view to promoting regional and South-South integration - the
services treatment excludes this option. The study therefore suggests that this
situation be remedied.

Furthermore,
the EU trade negotiations with third countries, including those with EPA
regions, go further than the existing GATS commitments which stem mostly from
Uruguay round (1995), and also cover establishment commitments in non-services
sectors. Hence, the treatment given to EU trading partners with whom an FTA or
an EPA has been concluded generally exceeds that provided to OCTs.

LUFF et al.
(2010) makes a further comment as regards OCT's service providers access to EU
services market and in particular that OCTs service providers are mostly in a
better position than their competitors in developing countries as regards
temporary presence of natural persons to provide services within the context of
a services contract (mode 4)[172]. The study claims that the OCTs have already extensive market
access in mode 4.

In their
replies to the trade questionnaire which the European Commission sent to them
in the course of the Summer of 2011, the OCTs showed considerable interest in
developing economic activity and exports in their services sectors as a way to
diversify their economies. Within the list of services to be developed, tourism
related services ranks high. Amongst others, such services comprise cruises,
food serving and lodging services. Contingent services, likely to increase the
OCTs' attractiveness as touristic destination, such as the recreational, sports
and cultural services, is also frequently considered. A second cluster of
services of interest to OCTs is formed by the consulting and engineering services
in the field of renewable energy and environmental (protection) services, which
relate to their environmental assets. A third cluster consists of business,
computer and telecommunication services such as internet traffic relaying, data
storage and telephone support services (call centres). Finally, medical and
education services are also considered for development, alongside transport,
distribution and financial services.

6.5.2.     OCT Requests

OCTs request a revision
of the trade in services treatment within the OAD, so that OCTs would be
allowed to be able to take part in regional services markets in their
respective regions, without having to grant Most Favoured Nation (MFN)
treatment to the EU.

6.5.3.     Commission Analysis of OCT Requests

On the issue of
the MFN clause, the Commission already indicated in the 2008 Green Paper that
it was prepared to look at it in more detail. Furthermore, the treatment
accorded to ACPs in the framework of EPAs as regards services and establishment
is indeed more favourable than that accorded to OCTs under the current OAD.
Regarding mode 4, those OCT service providers that have EU citizenship indeed
do have an advantage over their third country competitors, as they do not need
a visa or a work permit to be able to be active on the EU's service market.
However, access for OCTs to the EU services markets does not only depend on
such formalities only.

In light of this background the treatment
of OCT services and establishment could be brought in line with the treatments
that have been negotiated in recent trade agreements.

7.           Options
for a Renewed OCT Trade Regime and EU Trade Related Support

7.1.        Policy Objectives

Based on the
analysis and evaluations made above, the outcome of consultations and the
political orientations given by the Council, and taking into account the
provisions of Part IV of the Treaty on the Functioning of the European Union,
the following overall objectives can be formulated for the next OCT/EU
association framework:

-
to promote the OCT's sustainable economic development;

-
to strengthen the economic ties of the OCTs with
the EU;

-
to enhance OCT competitiveness;

-
to strengthen OCT resilience;

-
to promote cooperation

Within this
framework, the general objectives of the OCT/EU trade and economic
cooperation regime can be resumed as follows:

-
to stimulate the OCT's integration in their
regional economic environment;

-
to support the process of diversification of OCT
economies;

-
to support OCT export/trading capacity;

-
to support OCT efforts to converge their local
legislation with the EU acquis in relevant policy areas (notably in such areas
as consumer and food safety);

-
to provide possibilities for targeted trade and
economic cooperation

The trade and
economic cooperation component of the revised OCT/EU association framework will
need to translate these objectives in conformity with the principle of policy
coherence between the EU's internal and external policies, taking
into account its strategic interests and values. This would mean the
incorporation or strengthening of the following principles:

-
the alignment of the OCT trade and economic
cooperation regime with recent developments in the EU common commercial policy
and other preferential regimes;

-
the promotion of joint interests through a more
reciprocal, but asymmetrical relationship, that takes into account the
development level of OCTs;

-
the facilitation of synergies with other EU
policies

-
the adaptation of the trade and economic
cooperation regime to the particularities of the OCT/EU relations;

-
the facilitation of the OCT/EU dialogue on trade
and trade related matters

7.2.        Policy Options

In light of the problems and challenges OCT
face, the evolution of the policy context and, the policy objectives presented
above could be translated the following four policy options can be envisaged:

Policy option 1 would consist in a discontinuation of the current preferential
trade relations, without them being replaced by others.

Policy option 2 would consist in keeping the status quo, i.e. a roll-over of
the current preferential trade relations under the OAD.

Policy option 3 would consist in an upgrade of the current trade regime, with the EU
foreseeing in improved preferential relations. While asymmetric, the
improvement of the trade relations would also encompass a better representation
of mutual interests in areas such as raw materials, amongst others by given
these interests more prominence in the trade and trade related cooperation.

Policy option 4 would consist in replacing the current trade arrangements by including
OCTs in other trade agreements (FTAs or EPA's). This could imply that OCT
products would get the same treatment as the EU trade partner(s) and that OCTs
would necessarily have to grant reciprocal access. It might also mean taking
OCTs outside of the scope of Part IV of the TFEU, to the extent that there
would be any contradiction between the relevant provisions of the FTA and Part
IV of the TFEU.

These policy options are compared below and
concentrate on a set of relevant trade issues highlighted in external studies
and OCT positions, in particular:

1.
trade in goods;

2.
 rules of origin;

3.
 services and establishment;

4.
 support to trade related activities;

5.
 legal and policy framework

For each of the policy options, the
implications on the legal and policy framework are also indicated.

The policy
options were developed on the basis of available qualitative and quantitative
data. As was mentioned in the introduction to this paper (see Chapter 1), the paucity,
reliability and lack of harmonisation of trade statistics concerning OCTs have
been a complicating factor both for the analysis of the OCTs' trade situation
and the evaluation of the OCT/EU trade relations and cooperation as for the
assessment of the impacts of the different policy options. Some of the problems
with regard to the latter will be discussed in the dedicated section below.

7.2.1.     Policy Option 1: Discontinuation of Preferential Trade
Relations

Policy option 1 would consist in a
discontinuation of the present preferential trade relations, without new
preferential relations being put into place. It would mean that OCT goods and
services would be given basic third-country treatment for OCT goods and
services. No institutionalised dialogue on trade and trade related matters
would be organised between OCTs and the EU as both would not maintain
privileged trade relations. OCTs would be considered as external stakeholders
only.

Trade in Goods

In this option, OCTs would not have duty free,
quota free access to the EU market and no specific trade-facilitation measures
would be foreseen for them.

This would mean that OCT exports would be
given basic third-country treatment consisting in the application of the EU's
Common External Tariff[173]. The "transhipment" facility of Article 36 OAD would be
discontinued, as would the provision stating that OCTs do not discriminate
neither between EU Member States nor between EU and developed third countries.
OCTs retain the right to decide about any further liberalisation of their
imports and the application of duties or quotas to EU imports.[174]

Rules of Origin

Policy option 1 would not necessitate that
preferential rules of origin be foreseen. OCT exports would fall under the
non-preferential rules of origin defined in the EU Customs Code.

Services and establishment

Discontinuing the present preferential
relations in the OCT/EU trade in services would imply that:

-
companies established in OCTs would no longer
benefit from GATS level commitments for services;

-
those nationals of OCTs, who are EU citizens,
would continue to benefit from the right of establishment in the EU market both
for services and non-services, but no longer from commitments as regards
cross-border trade in services;

-
companies and nationals of EU Member States
would no longer benefit in OCTs of most-favoured treatment for services and
establishment.

Trade Related Cooperation and Support

Policy option 1 would also imply that the
OCT/EU cooperation on trade and trade related issues would end and that no EU
financial assistance would be given to OCTs. They would need to develop their trade
strategies, capacities, infrastructure and legal frameworks on their own, or
with the help of their Member States. No technical assistance, capacity
building operations or support to sector policies or territorial development
plans would be granted. OCTs would only be eligible to those EU horizontal
programmes and budget lines which cover all possible third partners and which
are open to EU citizens on an individual basis. There would be no framework for
cooperating with the EU in the trade related areas listed in Chapter 3 of Title
II (current payments, competition policies, intellectual property rights,
standardisation, trade and the environment, trade and labour standards,
consumer policy). EU involvement in the development of relevant OCT policies would
be non existent. The EU's capacity to promote its interests and values via the
OCT/EU relations would thus disappear. Where the EU would have an interest in
developing cooperation with OCTs in new areas, such as raw materials (see
section 4.3.3), this would not be possible.

Legal and Policy Framework

Discontinuing the present OCT/EU trade
relations would entail that the present OAD expires on 31 December 2013 without
it being renewed or replaced. This would mean that Part IV of the Treaty on the
Functioning of the European Union would not be given translation in the EU’s
secondary legislation. Part IV and the Preamble to the Treaty may need to be
changed. Other legislative acts applying to the OCTs, notably concerning the 11th
EDF might need to be amended as well.

7.2.2.     Policy Option 2: Roll Over of Present Preferential Trade
Relations

Policy option 2 would consist in keeping
the status quo, i.e. a roll over of the current preferential trade relations
under the OAD. OCT goods and services would continue to receive access to the
EU market under the same conditions.

Trade in Goods

The rules concerning the trade in goods
would continue to provide duty free, quota free access to EU market for goods
originating in the OCTs. The individual territories would retain the right to
decide about any further liberalisation of their imports and the application of
duties or quotas to EU imports. However, discrimination between EU Member
States or between EU and third countries or territories would still not be
allowed; unless the latter are developing countries or OCTs. OCTs would
continue to have the possibility, at least in theory, to apply the
"transhipment" facility of Article 36 OAD to products not originating
in OCTs but in free circulation there and re-exported as such to the EU. The EU
would retain the right to apply surveillance and safeguard provisions.

Rules of Origin[175]

Rolling over the current OCT trade regime
would imply that the current rules of origin be maintained. OCTs would continue
to be considered as one single territory and an identical single set of rules
will apply to all of them. The product specific rules would also remain
as stringent as is the case today. Concerning the general provisions, no
change would occur. For instance, for fishery products based on fish caught
beyond the territorial waters of the OCTs to acquire origin, it would still
be necessary for the vessels to fulfil four conditions: registration, flag,
ownership and nationality of the crew (see section 6.2.2.).

Cumulation
opportunities between all OCTs and with ACP States would be kept in place. The
rules of origin applicable to inputs send from           A         CP States to
OCTs would be the ones applicable within the context of the bilateral
relationship between the ACP State concerned and the EU. No provision on
cumulation with neighbouring countries other than ACP States would be foreseen
and such cumulation would only be possible by derogation from the rules of
origin under Article 37:6 of the OAD. No changes would be made to the present
rules and procedures for granting derogations from the rules of origin.

Services and Establishment

In terms of the OCT/EU trade in services
and establishment, policy option 2 would consist in the EU continuing to grant
OCTs its GATS commitments, while OCTs would continue to give to EU the most
favourable treatment given to any third country or territory, both on
non-discriminatory basis. OCTs would not have to further liberalise their
services sectors and could continue to limit EU access to them but only as far
as no trade commitments are taken in any trade agreements with third countries/territories.
No commitments would exist as regards establishment in non-services areas.

Trade Related Cooperation and Support

The OCT/EU dialogue on trade and trade
related issues would continue to take place primarily in the context of the
trilateral meetings of OCTs, Member States and the Commission, the OCT/EU
Forums and the meetings of the partnership working party on trade and regional integration.
The agendas of these meetings would continue to be defined on an ad hoc basis.

The OCT/EU association would continue to
provide a wide range of possibilities for trade and trade related EU
cooperation and assistance. These would correspond to the topics and themes
presently covered in the OAD under Articles 12 (trade development), 13 (trade
in services), 14 (trade related areas) and 16 (regional cooperation) and which
include themes that relate to areas contingent to trade (e.g. safety of
harbours, airports etc.), as well as the provisions of Chapter 3 of Title II
("Trade Related Areas).

EU support to formulation and
implementation of trade and export strategies, development of trade capacities
and infrastructure and legal frameworks could take the form of support to
regional cooperation strategies, territorial development strategies or sector
policies. It could also take the form of a specific project as is the case with
a project that will be funded under the 10th European Development
Fund (EDF) with the support that will provided to business intermediaries of
Dutch and British OCTs in the Caribbean under the regional programme for OCTs.

Under policy option 2, OCTs would remain
eligible in principle to the relevant EU horizontal programmes and budget lines
relevant to trade and trade related areas. Specific assistance to facilitate
OCT participation could be provided at the request of individual or groups of
OCTs, as is the case under the 10th EDF.

As is presently the case, the coherence
between EU and Member State support would be guaranteed through an indirect
coordination via the OCT authorities themselves. No active coordination would
be sought.

OCTs would mainly be considered as external
stakeholders, not fully as outpost of the EU

Legal and Policy Framework

Rolling over the current OCT/EU relations
would imply that only minor changes be made to the governing legal texts.
Amendments would need to be made to the present OAD and the Commission
Regulation implementing the OAD in order to extend their duration and adapt
them to the setup of the 11th EDF.

7.2.3.     Policy Option 3: Improved Preferential Trade Relations

Policy option 3 would consist in an upgrade
of the current OCT/EU preferential trade arrangements. Where possible, OCT
goods and services would access the EU market under better conditions and more
opportunities would be offered, while the overarching trade rules would be
modernised and brought in line with the latest developments in EU trade policy.

Trade in Goods

Originating  OCT goods would continue to benefit
from duty free, quota free access to the EU market. As in the previous
scenario, the individual territories would retain the right to decide about any
further liberalisation of their imports and the application of duties or quotas
to EU imports. No discrimination between EU Member States or between EU and
third countries or territories would be allowed; unless the latter would be developing
countries or OCTs.

The transhipment facility of Article 36 OAD
would be deleted and could be replaced by  support measures aimed at overcoming
sanitary, phyto-sanitary or technical barriers to trade, and at
capacity-building in interested OCTs. The EU would retain the right to apply
surveillance and safeguard provisions, as well as provisions dealing with
administrative errors and fraud.

Rules of Origin[176]

Policy option 2 would entail that improved
rules of origin be introduced based on those introduced in the GSP scheme. The
latter are the most modern and development friendly that the EU has to offer.
As none of the OCTs appear in the list of Least Developed Countries (LDCs)
drawn up by the United Nations Conference on Trade and Development (UNCTAD),
the rules of origin applicable to non-LDCs would serve as basis as the
introduction of differentiated rules could not be justified on the basis of the
level of development of the OCTs. For reasons of simplification and coherence,
only one set of rules would apply to all OCTs. The flexibilities of the rules
of origin in the GSP are likely to sufficiently address the main concerns of
the vast majority of OCTs.

The new product specific rules would
offer extended possibilities of sourcing through higher thresholds of
non-originating materials (including sugar). The relaxations could increase the
export potential of OCTs in goods that they already produce such as: coffee,
chocolate, jam, fruit juices, rum, oil, essential oils, processed base metals,
ammonia, articles of plastics, pottery, aluminium, machinery and mechanical
appliances, handicraft and furniture.

The general provisions of the
rules of origin would see a number of improvements and simplifications:

1.
With regard to exports of fishery products based
on fish caught outside OCT territorial waters, the requirement regarding
the nationality of the crew would be deleted. The requirement regarding
ownership would be clarified so as to remedy problems with interpretation.

2.
To improve transparency and user friendliness of
the new set of rules of origin, the list of wholly obtained products would
be amended to include a new definition of aquaculture products, which so far
are treated as other live animals, as well as new provisions for products
obtained from slaughtered animals.

3.
In the same fashion, the list of minimal
operations would be changed to update existing minimal operations or
include new ones regarding sugar products, chemical products and textile and
clothing.

4.
The general tolerance applicable to
non-originating materials would remain at 15%. However, the value would now be
calculated in percentage of the weight of the product for agricultural
products, whilst for industrial and fishery products it would continue to be
calculated on the basis of the value of the final product. The specific
tolerance applying to textile and clothing would also remain the same.

5.
The requirement on the direct transport
of OCT goods would be reviewed and documentary evidence that OCT goods imported
in the EU are exactly the same as the ones which OCTs exported would only be
requested from OCT exporters when customs authorities would have reason to
believe that the requirement was not respected.

Certification of origin of the final product by OCT customs authorities could be replaced by
a system of self-certification by registered exporters. This would imply that
exporters wanting to export to the EU would register with the customs
authorities and ask that their data would be included in a database available
to EU importers. Via this database, the latter would be able to verify whether
the trade partner with whom they consider doing business is registered and entitled
to deliver proofs of origin to be presented at the EU border. The
implementation of this system however, will require a transitory period, as it
involves the creation, by the EU, of an electronic database complying with the
principles of confidentiality. Its creation could be tentatively be expected
for 2017. In the mean time, the current system of certification would be
maintained.

The improved rules of origin would foresee
several possibilities for cumulation with different types of partners.
Cumulation between OCTs and with EPA States  would be
maintained, though with the specific exclusions for products originating from
South Africa and high sugar content products required to prevent trade
circumvention. No specific provision would be foreseen allowing for cumulation
with neighbouring non-ACP countries, but the GSP type rules of origin
would nevertheless provide additional sourcing possibilities for OCTs by
granting, upon request, cumulation for industrial products originating in
countries with which the EU has concluded an FTA (extended cumulation).
Products within Chapters 1 to 24 of the Harmonised System (agricultural
products, fishery products and processed agricultural products) would be
excluded from this possibility.OCT rules regarding derogations would be
based on those in the GSP scheme, but would also be adapted to extend the basis
on which a derogation could be granted. The administrative framework of the
procedure would be more flexible and the period of validity of the derogation
would be established on a case by case basis. In addition, the EU would be
allowed to propose a derogation on its own initiative if it deems it necessary.
Granting derogations would be justified when: (a) internal or external factors
temporarily deprive an OCT of the ability to comply with the rules of origin
where it previously could do so; (b) an OCT requires time to prepare itself to
comply with the rules of origin; or (c) the development of existing industries
or the creation of new industries call for them.

Lastly, additional flexibilities
could be foreseen, on a case by case basis, upon request, within the framework
of the derogations, in support of diversification efforts by OCTs and to
stimulate investment in their productive sectors. They could be used to
address, for example, the wish from Saint-Pierre et Miquelon, to take better
advantage of its specific relationship with Canada for fishery products. A
similar opportunity could be foreseen for Greenland.

Services and Establishment

Under policy option 3 OCTs would be
guaranteed a treatment for trade in services and establishment that would be
similar but more favourable than the one given to the EU’s EPA partners via the
inclusion of a simple asymmetrical MFN clause. This would mean on the one hand
that the EU would give OCTs the most favourable treatment for trade in services
and establishment that it offers or has offered to any of its other trade
partners. It would apply to all services sectors and all modes of supply as
well as to non-services establishment. On the other hand, OCTs would grant the
EU the most beneficial treatment they give to other major trading economies[177], but would not need to extend to the EU the preferential treatment
they give to OCTs or developing countries that are not major trading economies.

By including an asymmetrical MFN clause in
the OCT/EU trade regime, OCTs would always benefit from the EU's best possible
treatment in any given sector and mode, without the need to negotiate the
conditions (as would be the case in FTA negotiations) nor the need for
harmonisation with EU legislation (which would be needed for Internal Market
purposes). For example, if in a trade negotiation EU would give best treatment
in cross-border service provision to partner A, but not to partner B, while
giving a better treatment in establishment in another sector to partner B but
not to partner A, the OCTs would benefit from both best treatments.

Trade
Related Cooperation and Support

The OCT/EU dialogue and cooperation on
trade and trade related issues would continue to take place in the context of
the annual OCT/EU Forums, the regular trilateral meetings between the OCTs,
their Member States and the Commission and the partnership working party on trade
and regional Integration. However, rather than defining agendas on a case by
case basis, a joint work programme would be agreed upon by OCTs, Member States
and the Commission. Such a work programme would provide the framework for the
dialogue and cooperation between the three parties on trade and trade related
issues by listing the specific topics and themes on which discussions would
have to focus within a given timeframe. This dialogue would also envisage
exchange of views concerning the implementation of the OCT/EU association.
Taking into account the principles of reciprocity and mutual accountability on
which the renewed OCT/EU partnership would be based, the work programme should
provide room for discussion of trade and trade related of mutual interest, such
as for instance raw materials. A work programme could be adopted for either the
whole operational period 2014-2020 or for only part of it (e.g. 2014-2016).

Rather than maintaining the wide range of
possibilities for cooperation as presently listed in Articles 12, 13 and 14 of
the OAD, as well as Chapter 3 of Title II (Trade Related Areas), a more limited
set of areas would be retained, based on the specific interests expressed by
OCTs. In this light, topics and themes relating to contingent areas, such as
the safety of harbours, road and airports or the setup of telecommunication and
information networks would not be part of the OCT/EU dialogue and cooperation
on trade and trade related issues, but would fall under a different component
of the OCT/EU association. EU policy initiatives such ongoing trade
negotiations could continue to be part of the work programme, the focus of the
latter would be placed on topics that would be more directly relevant to OCT
efforts to develop trade activities. These could include the following
elements:

-
macro-economic policies, trade strategies and
the corresponding legislative and institutional frameworks, including the
creation of enabling business environments in OCTs;

-
development of trade related capacities, human
resources and professional skills

-
support to SMEs and intermediaries

-
trade and business promotion;

-
market development and exploration and marketing
and branding measures;

-
standardisation and certification and
convergence with international and/or EU norms; with specific attention to
quality management and conformity assessment;

-
specific attention for products such as
agriculture and fishery products, services such as tourism, business services
and environment and energy services

-
specific attention for sector specific issues
such as compliance with international and EU rules regarding food safety and
consumer health.

Under policy option 3 the different types
of trade and trade related EU assistance available to OCTs under the 11th
European Development Fund (EDF) and EU horizontal programmes would be better
coordinated. The principle of the complementary and additional nature of the 11th
EDF would be strengthened and more explicitly put forward. This would mean that
activities for which funding would be available for OCTs in horizontal
programmes and budget lines to which they are eligible, would in principle not
be financed under the EDF. This could apply to certain types of support to OCTs
relative to private sector development, tourism promotion, innovation,
development of skills, expertises, capacities and infrastructure in specialised
fields such as food safety and consumer health. Under the 11th EDF
technical assistance could be made available to OCTs in support of the
development of their capacities to submit competitive proposals for financing
under the relevant programmes and budget lines.

In addition, part of the resources for
technical assistance and which the European Commission manages directly would
be reserved for a limited set of intervention areas relating to trade and trade
related issues. The joint work programme(s) could serve as a basis to define
these intervention areas. Such targeting would mean that technical assistance
activities which would not be on the list of chosen intervention areas, would
not be able to be financed by the technical assistance resources managed by the
Commission.

Via sector or general budget support
operations, the EU would support the OCTs efforts to develop their trade
related policies at a macro-level. Such operations would support the
formulation and implementation of trade and export strategies, development of
trade capacities and legal frameworks based on the OCTs' own sector policies,
territorial development strategies or regional cooperation strategies of OCTs.
This would only be possible if the OCTs would make trade and trade related
issues a political priority for their cooperation with the EU.

Within the financial envelope reserved for
regional cooperation, resources would be allocated to supporting OCT
participation in trade and trade relevant cooperation programmes targeted at
their neighbours. This could for instance cover cooperation with ACP countries
and/or Outermost regions regarding trade development and facilitation, capacity
building, food safety and consumer health and like topics.

The adoption of a joint work programme
under policy option 3 would serve as a basis to engage with the Member States
in a discussion about a possible distribution of labour in terms of trade and
trade related support to OCTs.

Legal and Policy Framework

Upgrading the current OCT/EU relations
would imply that the legal texts governing them would be substantially changed.
A new OAD and the Commission Regulation implementing the OAD would need to be
adopted. It would involve making changes to the provisions presently contained
in the OAD in the following subdivisions:

-
Part II of the OAD (Areas of Cooperation);

-
Part III (Instruments of OCT-EC Cooperation),
Title I (Development Finance Cooperation) and Title II (Economic and Trade
Cooperation), Chapters 1 to 4;

-
Annexes II A to F (financial assistance)

-
Annexes III (rules of origin) and IV
(Transhipment)

The new OAD would enter into force after
expiry of the present one on 31 December 2013.

Certain of the
changes proposed under this policy option would not necessitate modifications
to the legal bases as such. The choice of the intervention areas, for instance,
would have to be determined on the basis of discussions with OCTs and their
Member States at the onset of the operational period.

7.2.4.     Policy Option 4: Inclusion in Other Trade Relations

Policy option 4 would consist in
overhauling the current trade relations by including or associating OCTs to
other bilateral or regional trade relations (FTAs or EPAs), essentially by
negotiating tri- or plurilateral agreements with OCTs as separate parties of an
agreement already existing or under negotiation. This could imply that OCT
products would get the same treatment as the EU trade partner(s) and that OCTs
would necessarily have to grant reciprocal access.

Based on the OCTs’ location and main
trading interests, the following theoretical opportunities exist:

-
integration or association of the British and
Dutch OCTs located in the Caribbean to the EPA with CARIFORUM;

-
integration or association of the Dutch OCTs
located in the Caribbean to the trade agreements with Central America or the
Andean countries;

-
integration or association of the French OCTs
located in the Pacific (French Polynesia, New Caledonia and Wallis et Futuna)
to the Pacific EPA;

-
integration or association of Mayotte to the EPAs
with ESA or EAC;

-
integration or association of Saint Helena,
Ascension Island and Tristan da Cunha to the EPA under negotiation with SADC;

-
integration or association of Greenland and
Saint-Pierre et Miquelon to the CETA under negotiation;

-
integration or association of the Falkland
Islands to the FTA with MERCOSUR under negotiation.

A number of scenarios seem purely
theoretical, at least for the time being. Those OCTs for which it would not be
possible to integrate into one of the other trade agreements, third country/GATS
treatment would be granted if the EU choose not to replace the OAD. In case the
EU would want to maintain specific trade relations with OCTs which would not be
able to be integrated in other trade regimes, policy options 2 or 3 could also
apply.

Trade in Goods

In the case of Economic Partnership
Agreements (EPAs) with African, Caribbean and Pacific (ACP) States and regions,
duty free quota free access applies to both ACPs and OCTs. In the case of other
free trade agreements (FTAs), there are two sub-options at least in theory:

1.
OCT access to the EU market is aligned with the
access of the EU trading partners involved; or, where this is found to be
incompatible with Part IV of the TFEU;

2.
OCT duty free quota free access is maintained
but with restrictions on OCT exports based on goods imported from the EU's
trading partner.

In addition, OCTs would gain access to the
markets of the EU's trading partners. OCTs that would opt into an FTA/EPA would
participate in trade liberalisation under the agreement, including by
liberalising imports. The precise degree of OCT liberalisation vis-à-vis the EU
and the EU's trading partner would be subject to negotiation. Under this
scenario, OCTs would have to provide preferential access to the EU without discriminating
between EU Member States.

The transhipment facility in Article 36 of
the present OAD would disappear but the trade facilitation provisions of the
FTA/EPA would apply. Under the respective agreements in which the OCTs would be
integrated or associated, the EU and OCTs would be allowed to apply the
surveillance and safeguard measures provisions included in the specific
FTA/EPA.

Rules of Origin[178]

Integrating OCTs in trade relations other
than the ones provided under Part IV of the TFEU, would also mean that OCTs
would no longer be considered as a single territory for the purposes of EU
customs policy. In other words, they would receive differentiated treatment.

OCTs would no longer benefit from the same
set of rules of origin as the ones that apply in the EU’s trade agreements
differ from one trade partner to another. These are typically the result of
specific negotiations between the trade partners trying to accommodate and take
into account their different sensitivities.

As far as the product specific rules
are concerned, the rules of origin negotiated in the context of the EPAs
currently provide for a number of relaxations of the conditions which applied
previously, compared to what exists in the OAD. Relaxations have been
introduced for fishery products (e.g. new definition of aquaculture), products
in the agricultural sector (e.g. products with a high sugar content) and
textiles (e.g. single stage transformation which allows for the manufacturing
of garments on the basis of imported fabrics).

If OCTs were to join an EPA today, they
would benefit from the simplifications that were introduced in the general
provisions. For fishery products, the requirement that products based on fish
caught outside territorial waters comply with the nationality condition
regarding the crew manning the vessels has been deleted. In addition, the
criterion regarding ownership of the vessels was clarified. As regards
the definition of wholly obtained products, the rules of the EPA would
include a new definition specific to aquaculture. Under the current definition
of the OAD OCT aquaculture products have to comply with the conditions
applicable to other live animals. Under EPAs OCTs would also benefit from the
improved general provision on minimal operations. The general tolerance
applicable to non-originating materials would remain at the same level (15% in
value of the final product). The specific tolerance applying to textile and
clothing would also remain the same.

The procedure of certification by
customs authorities and the direct transport rule would remain the
same as currently in the OAD.

OCTs which would join the Pacific EPA would
have access to the global sourcing provision, allowing them to import
non-originating fish, crustaceans, molluscs and other invertebrates (HS Chapter
03) for further processing into pre-cooked, packaged or canned products (HS
headings 1604 and 1605) and benefit from preferential treatment upon
importation in the EU.

In terms of cumulation, integration
or association to EPAs would offer the OCTs to continue to apply the full range
of cumulation possibilities they currently have:  cumulation with the EU, with
other OCTs, with the ACP countries covered by the EPA to which the OCTs would
have acceded, as well as cumulation with ACP countries covered by other EPAs.
Some EPAs (Pacific and Caribbean) also include provisions that allow cumulation
with neighbouring countries belonging to a coherent geographical entity; a
possibility which is not provided by the current OAD.

After they enter into force, the EPAs that
are currently being negotiated will also offer the signatory ACP States the
possibility to cumulate materials which enter the EU duty free quota free under
MFN, GSP or an FTA (for the production of industrial goods). This possibility
is not offered under the previously concluded EPAs in the Caribbean and the Pacific,
but it may be included when the rules of origin of the EPAs are reviewed.

Depending on the EPA which they would join,
the conditions under which OCTs could obtain derogations from the rules
of origin may change, Currently, Article 37:6 of the OAD stipulates that the EU
shall accept requests for derogation when the value added by OCTs to the
non-originating products represents at least 45 % of the total value of the
finished product. In addition, some EPAs (West Africa, Eastern and Southern
Africa, East African Community) include the possibility of an automatic
derogation for fixed quantities of tuna products. However, no OCT would be well
placed to join any of these EPAs.

Services and Establishment

Under policy option 4 OCTs would be granted
the treatment for trade in services and establishment that is given to the EPA
or FTA partners concerned. The treatment given by OCTs would have to be
negotiated for every single OCT separately, both for what is given to the EU or
to the other trading partner(s). Furthermore, the trade regime between the EU
and the other Party to the agreement would most likely have to be renegotiated
to balance the fact that the other Party would extend its treatment to
territories which may not necessarily be of great economic interest to them. In
particular, the treatment for the so called mode 4 – movement of natural
persons for business purposes – might require compensation from EU.

Finally, though trade negotiations in
services and establishment do not require countries or territories to
liberalise their services sectors or privatise public services companies, any
trade in services agreement will have to comply with article V of GATS meaning
that it cannot exclude any modes of supply and has to have substantial sectoral
coverage. Assuming that substantial coverage means a majority of sectors, this may
mean that OCTs, could find themselves in a position in which they would have to
negotiate commitments and binding trade liberalisation levels in over 80
services sectors.

Trade Related Cooperation and Support

Integrating OCTs in the other trade
agreements would imply that the OCT/EU trade related cooperation would be
channelled via the specific institutional set up of the agreements in which the
OCTs would be integrated. In case OCTs would join the Economic Partnership
Agreement with CARIFORUM, the OCT/ACP/EU dialogue would take place in the
context of the Joint CARIFORUM/EU Council (Art. 227 of the Agreement), the
Trade and Development Committee (Art. 230), the CARIFORUM/EU Parliamentary
Committee (Art. 231), the CARIFORUM/EU Consultative Committee (Art. 232) and
the Special Committee on Customs Cooperation and Trade Facilitation (Art. 36).

Some of the general priorities of
OCT/ACP/EU cooperation, as set out in Article 8 of the EPA, would be:

-
the building of human, legal and institutional capacity;

-
the promotion of private
sector and enterprise development, in particular SMEs and enhancing the
international competitiveness of firms and the diversification of the OCT/ACP
economies;

-
the diversification of OCT/ACP exports of goods
and services through new investment and the development of new sectors;

-
the enhancement of technological and research
capabilities of the OCTs/ACP States, to facilitate development of and
compliance with internationally recognised sanitary and phyto-sanitary measures
and technical standards;

-
the development of OCT/ACP innovation systems
and technological capacities

In addition to such general priorities, the
specific priorities for sectoral cooperation set out in the different chapters
of the EPA would apply. These include amongst others cooperation with regard
to:

-
cooperation and dialogue regarding tariff
matters, customs legislation and procedures, mutual administrative assistances,
customs matters, rules of origin and administrative cooperation (Arts. 35-36 of
the Agreement);

-
the improvement of the competitiveness of
ACP/OCT agricultural and fishery products, the development of ACP/OCT export
marketing capabilities in this area and compliance with international quality
standards (Art. 43);

-
the promotion of ACP/OCT enterprises to meet
regulatory and market requirements related to technical regulations (Art. 51);

-
the provision of training and expertise and the
exchange of information regarding sanitary and phyto-sanitary measures and the
development of ACP/OCT enterprises in this area (Art. 59);

-
cooperation and technical assistance for
internet marketing strategies for ACP/OCTs as touristic destination, the
promotion of ACP/OCT participation in international standard setting bodies for
tourism and in tourism exchange and training programmes (Art. 117);

-
cooperation and assistance to OCT/ACP
competition and innovation policies (Arts. 130 and 135)

As the free trade agreements of interest to
OCTs (mainly Canada for Saint Pierre et Miquelon and Greenland) are still under
negotiation, the institutional setup of these agreements is not known yet. With
those OCTs for which integration or association to a trade agreement would not
be an option, the OCT/EU trade related dialogue and cooperation would be
organised along either of the proposals suggested in policy options 1 to 3.

In the case where OCTs would join an EPA or
FTA, the EU would foresee support to OCTs to help it with the implementation of
the agreement. Separate financing would be foreseen for those OCTs that would
not join a trade agreement in case policy options 2 or 3 would be retained for
them. If policy option 1 would be withheld, then no financing would be foreseen
for these OCTs.

All types of support would be financed from
the 11th European Development Fund, but the envelope reserved for
cooperation with OCTs under this financial instrument would be split into two
or three different envelopes corresponding to the different types of trade
relations which the OCTs would maintain with the EU.

As regards internal horizontal programmes
and budget lines of the EU, those OCTs that would join a trade agreement would
only be eligible to the programmes and budget lines in which all possible third
partners can participate. They would continue to be eligible to the external
horizontal programmes and budget lines as well as those geographic programmes
and budget lines that cover the region in which they would be integrated. The
OCTs which would not join a trade agreement would continue to be eligible in
principle to all possible internal horizontal programmes and budget lines of
the EU and the thematic components of external programmes and budget lines. To
the extent that natural persons can apply for financing from internal
horizontal programmes and budget lines, inhabitants of OCTs would remain
eligible because they would continue to have EU citizenship regardless of the
relation of their territory vis-à-vis the EU.

Legal and Policy Framework

Integrating or
associating OCTs to other trade agreements would imply legal changes. It might
mean that OCTs would want to join another bilateral agreement, would have to
leave the framework of Part IV of the TFEU. This would then mean that their Member
States would have to request that the OCTs concerned be removed from Annex II
to the TFEU, which lists the OCTs associated to the EU, if the substantive FTA
provisions would be incompatible with it. Inclusion of OCTs within the scope of
EU trade agreements would be subject to negotiations between the EU’s trade
partners, representatives of the OCTs themselves and the EU.

After the Council would
have given negotiating directives to the Commission, negotiations would have to
be conducted to extend the trade agreements concerned to the OCTs involved.
Negotiations would involve not only the OCTs, the EU trade partner(s) concerned
and the Commission, but also the Member States to which the OCTs are linked. As
OCTs are not sovereign States, the Member States would have to act as the
agents of their territories and represent them in their negotiations with the
EU and the trade partner concerned. The agreements that have been concluded
would need to be amended to incorporate the OCTs and adapt them so as to cover
the realities of the OCTs.

For services and
establishment, the treatment that OCTs would give to the EU or to the other
trading partner(s) would have to be negotiated separately, while the EU's
treatment of the other trading partner(s) would probably also have to be
renegotiated to compensate for the inclusion of OCTs.

In case policy option 1
would apply to those OCTs for which integration or association would not be an
option, policy option 4 would imply that the present OAD and its Annexes would
expire on 31 December 2013 without being renewed nor replaced. The Treaty might
then have to be amended to delete Part IV and the relevant Annexes and
Protocols of the TFEU. If not, changes would need to be made to the legal bases
as described in the sections on policy options 2 and 3.

In case three different
types of trade relations (OCT trade regime, EPA, FTA) would be foreseen, it is
likely that the legal bases for the 11th European Development would
need to be adapted, including the Internal Agreement between Member States.

7.3.        Impact Assessment of the Different Policy Options

The four options presented above need to be
assessed in the light of: (a) Art. 198 TFEU (centred on the objective of social
and economic development of OCTs) and (b) the three objectives which the
Commission has put forward in Communication COM(2009) 623 and which were
endorsed by the Council in its Conclusions (16710/09): strengthening OCT
competitiveness, enhancing their resilience and promoting cooperation.

Methodological Considerations

As was mentioned in the introduction to
this paper (See Chapter 1), the lack of comparable and reliable statistics
regarding OCT tariffs and trade flows with (non-EU) third countries has
complicated the analysis of this paper. One OCT admitted that as far as its
trade flows were concerned, it did not have any statistical data itself. As a
consequence of this situation, assessing the impacts of the different policy
options is challenging. The external assessors that conducted an external study
on the sustainability impacts of a possible EU agreement with Canada, commented
that the absence of data made it impossible to assess the possible social,
economic and environmental impacts of this agreement on the OCTs most concerned
(Greenland and Saint-Pierre et Miquelon) through economic modelling[179].

The number and disparity of OCT economic
profiles adds a layer of complexity. As discussed in Chapter 3 of this paper,
not every OCT maintains close economic relations with the EU. In fact the
majority of OCTs, i.e. those located in the Caribbean, hardly export to the EU.
For those OCTs, exporting goods to the EU is more a potentiality than a
reality. Consequently, assessing the impacts of the proposed changes can only
be hypothetical.

For those OCTs for which currently the
trade relations with the EU are important, fisheries is often the single most
import export sector. The analysis below takes this sector as case study of
the social and economic impacts that the different policy options could
have on OCTs as far as the goods arrangements  are concerned.

It should be pointed out that OCT
production and exports in the fishery and aquaculture sectors are not
homogenous either. Exports vary from white fish, to crustaceans and to molluscs.
Two OCTs account for more than 90 % of all OCT exports of fishery products to
the EU[180]. In terms of value, the most important OCT supplier is Greenland.
Greenland accounts for roughly 67 % of all the OCT exports of fishery products
to the EU. The Falkland Islands represent 25 %. The remaining percentage is
composed of the (former) Netherlands Antilles followed by the rest of the OCTs.

Concerning specific fishery products,
shrimps represent 66 % of the Greenland exports of fishery products to the EU.
The remaining 33 % is taken up by white fish. Squid accounts for 80 % of the
exports of the Falkland Islands to the EU.

Regarding the economic and social impact
for the EU of the various OCT fishery and aquaculture products imported by the
EU, although the overall EU impact could be established to a certain level, any
impact will not be homogenous, as it will vary from OCT to OCT, and within a
given OCT from harvesters to processors. Such impact could even affect
differently processors in a given OCT depending on the fishery product in
question. Some industries in some EU Member States use OCT imports as raw
material. Other Member States and industries use it as a final product,
directly intended for final consumers and not or hardly for processing. Thus,
for some fishery products imported from the OCTs there is major EU production
of like or directly competing products. For other products EU production is, to
a certain extent, favoured by the consumers' and processors' preferences (for
example, chilled over frozen). This applies to certain product and market
segments in some countries. In any event, it is unlikely that the impact on the
EU producers and the EU processing industry of fishery products of the
different policy options would be alike.

The assessment of possible environmental
impacts equally poses a problem as the problem regarding the paucity of
statistical data on OCTs also concerns CO² emissions in OCTs[181]. Consequently, it is difficult, if not impossible to assess
quantitatively the possible environmental impact that the different policy
options may have. Instead, certain assumptions could be made.

For instance, where policy options are
likely to stimulate production and export of goods and services, these are
likely to have a greater environmental impact, amongst others due to the
emission of additional CO² in the production process and the transport from
OCTs to the EU or other third countries or vice versa (where tourism is
concerned). This rule of thumb may not fully apply to all cases. For instance,
the environmental impact related to transport is likely to be null in the case
of isolated OCTs such as Saint-Helena, Ascension and Tristan da Cunha, from
where presently cargo ships often return empty.

Where policy options would have a negative
environmental impact, this impact could be mitigated by OCT/EU cooperation and
EU financial assistance, of which environmental issues are an integral part.
Where possible and relevant, the assessment of policy options will indicate the
possible environmental impacts of the different policy options.

7.3.1.     Assessment Policy Option 1: Discontinuation of
Preferential Trade Relations

Trade in Goods

The possible impact of replacing OCT duty free,
quota free access to the EU market by access based on the EU's Common External
Tariff (CET) varies per OCT because it depends on their exports to the EU[182]. A simulation of the impacts which the introducing of CET duties
would have on the goods of selected OCTs (see 12.8), at current exports, shows
that this would result in OCTs having to make duty payments of EUR 56.9
million. The average CET duty rate applicable to OCT goods would range from
14.78 % (for Saint Pierre et Miquelon) to 0.01 % (for Cayman Islands).

The OCTs most affected would be: Falkland
Islands, French Polynesia, Greenland, Netherlands Antilles and Saint Pierre et
Miquelon. In fact, these OCTs would be paying 98 % of the above mentioned total
OCT duty payments under CET. Other OCTs would hardly be affected as they mainly
export products for which the average rate is zero or almost zero. The OCTs for
which dutiable exports are negligible are: British Virgin Islands, New
Caledonia, Cayman Islands and Anguilla. In other cases, the amount of duty
would be a small part of the value of their exports. Hence, they would not be
much affected. This is the case for Aruba, Mayotte, Montserrat, Saint Helena,
Pitcairn, Turks and Caicos and Wallis and Futuna, where the average duty rate
would ranges from 4.57 % (for Wallis and Futuna) to 1.29 % (for Montserrat).

When considering how the main OCT exports
would be affected under CET rates, OCT exports of fish and processed fish,
sugar, industrial products and crude coconut oil come out as the products most
likely to face significant customs duties. The OCTs most affected would be: Greenland,
Saint-Pierre et Miquelon, Falkland Islands, the (former) Netherlands Antilles,
and French Polynesia. Annex 12.9 shows this by indicating what duties would
have to be paid on the main goods exports of OCTs under CET conditions as well
as the average CET rates that apply to those products. Main goods exports are
defined as totalling over EUR 100,000 in value.

For Greenland fish and processed fish
represent 89 % of total exports to the EU and are the products that would
attract most of the CET duties of its exports to the EU. 99% of total CET
duties would be paid on fish and processed fish products. Among these, shrimp
exports would be affected by the highest CET rates. For Saint-Pierre et
Miquelon cod exports (51% of total exports to the EU) would attract
approximately 50% of all duties under CET rates. For the Falklands Islands,
fish and processed fish, representing 96.2 % of total Falkland Islands exports
to the EU, would also be subjected to most of the CET duties (99% of total
duties). Among those, some products such as frozen hake and frozen saltwater
fish would face considerable rates. In the case of the former Netherlands
Antilles, the sampled products only amount to 26 % of exports to the EU, but
would attract most of the duties under CET (92 %). Tuna and raw cane sugar
would be the products most affected by CET rates. French Polynesian products
that would be affected by CET duties are fish and crude coconut oil, on which
73 % of the CET duties would be paid[183].

The increase of tariffs duties for OCTs
exporting fishery products to the EU is likely to have important social and
economic impacts on the OCTs. These are likely to be negative. OCTs would
be exposed to increased competitiveness by other EU trade partners exporting
similar products to the EU at CET or reduced duties (e.g. Norway in the context
of the European Economic Area). The loss in competitiveness may be even more
pronounced if direct competitors of OCTs (e.g. Canada) would gain better market
access in the context of an EU trade agreement.

It is therefore likely that policy option 1
would result in a decrease of OCT exports, which is likely to  negatively
impact employment in the fishery sectors. As mentioned above (Chapter 3 of the
present paper), these sectors Saint-Pierre et Miquelon represent 5 to 7 % of
the total workforce, but 11.4 to 16 % of the privately employed workforce (2007
figures)[184]. In Greenland the fishery sectors represent 4.3 % of the total
workforce, but 8.1 % of the privately employed workforce (2007 figures)[185].

Given the strong importance both
territories attach to these traditional activities – with Greenland considering
it as an integral part of the traditional Inuit way of living – any small
decrease in employment opportunities may be perceived to be far more substantial
than what the figures indicate. In addition, where jobs would be lost in the
fishery sector, the territorial authorities are likely to have to increase
social expenditure in the form of unemployment benefits (where available).
Thus, policy option 1 is likely to negatively affect the territorial budgets as
well. Where OCTs would try to compensate for the loss in competitiveness and
maintain their position on the EU, they may be tempted to adopt a number of
measures which may negatively impact on the working conditions of the sector's
employees.

For those OCTs which are not dependent from
access to the EU market or the fishery sector, the impact of policy option 1
would be either null or very marginal. Potential levers for economic and social
development might be lost to them. Indirectly, policy option 1 may have a
positive impact on the extent to which OCTs cooperate with their neighbours as
they may want to replace the OCT/EU association by cooperation schemes with
other third partners. The most vulnerable OCTs might not be able to benefit
from this situation for lack of sufficient assets which would make them
interesting as a partner to cooperate with.

On the EU side, policy option 1 would have
diverse effects. The EU could benefit from it as it would generate new revenues
for the EU. Policy option 1 could generate a theoretical maximum of some EUR 57
million of revenue for the EU via the duties levied on the major OCT exports
referred to above[186], but only if one were to assume that current OCT export levels
would be maintained. On the other hand, where policy option 1 would lead to a
deterioration of the economic, social and fiscal situation of the OCTs, the
governments of the four Member States might be impacted as well as this
situation could force them to increase their financial transfers to the OCTs;
an effect which could be aggravated by the fact that OCTs would no longer
benefit from EU financial assistance.

If major trade deflection would occur as a
consequence of OCTs losing in competitiveness on the EU market in the fishery
sector, this may have an impact on the EU's fishery sector. EU producers
(harvesters) of like products (notably shrimps, squid and white fish) could
gain from this and fill the gap left by reduced OCTs imports. In addition to
this, there could be an upward pressure on EU prices due to the reduced supply,
depending on the country, product, market and the form in which the fish
products are presented. Policy option 1 may also lead to a reduction of
competitive raw materials available to EU processors of fishery products,
notably for shrimps, but also for white fish, and this could have a negative
impact on production and employment in the EU processing industries in a number
of EU Member States[187], depending on the product and the form in which it is presented.

The environmental impacts of policy
option 1 are likely to be small. On the OCT side, the environmental impact of
OCT/EU trade may actually decrease as e.g. CO² emission would reduce with the
decrease of production and exports to the EU. This effect may be annulled where
EU producers and operators would replace OCT suppliers. Depending on the
respective scales of production, the degree to which the production processes
are polluting in both the EU and the OCTs and depending how polluting transport
from OCTs to the EU is, the overall balance may be positive or negative.

Rules of Origin

In the absence of preferential rules of
origin, rules of origin are not a factor that would affect the OCTs' economic
and trade position.

Services and Establishment

The practical impact of discontinuing the
current OCT/EU trade relations in the services sectors may be limited at first
glance as in trade in services the autonomous liberalisation (i.e. the basic
third country treatment as it is given in practice vs. the one to which a trade
partner has internationally committed) may be and often is more liberal than
the trade commitments. This may mean that discontinuing the preferential trade
relations does not lead to great change in actual market access.

However, the legal certainty for businesses
would be considerably reduced as both sides could unilaterally worsen the trade
treatment of the other. This is most important for investments (establishment
both in services and non-services sectors), where long-term financial
commitments may have been taken by businesses. Unilateral changes in regulation
that would worsen the market access or national treatment conditions could be
adopted for reasons of legitimate policy objectives, but also for protectionism.
While within the GATS framework, Article XXI allows for the possibility of
withdrawing certain commitments provided that compensation be given so as to
ensure similar level of trade openness, OCTs would not benefit from such
compensation.

Policy option 1 would also mean that there
would not be any regulation of trade in services and establishment between the
EU and the OCTs other than that in the respective Member State legislation and
would hence not fulfil the objectives set in the Article 199 of the TFEU.

Trade Related Cooperation and Support

Discontinuing OCT/EU cooperation is likely
to negatively impact on the OCT capacities to exploit the remaining market
access opportunities in the EU and possibly other markets. The sustainable
social and economic development of OCTs would not be actively promoted by the
EU and the objective of establishing close economic ties between the OCTs and
the EU would thus be difficult to achieve. OCT competitiveness and resilience
to economic shocks would not be strengthened and are likely to reduce under
this policy option as they would face stronger competition in the EU market,
with having being able to prepare for this situation and without additional
support to their limited administrative and trade capacities being available.

Though this policy option may give an
impulse to regional cooperation and integration as OCTs may look to their
developed and developing neighbours to replace the OCT/EU cooperation, it is
likely to do so, based on a negative motivation.

Discontinuing OCT/EU cooperation in trade
and trade related matters is likely to result in a loss of EU involvement inn
OCT economic policies, regulatory models and the like. The absence of financial
and administrative cooperation, such as currently provided (but not used) under
Chapter 3 of Title II of Part 3 of the OAD may also lead to a deterioration of
the environment of OCTs as they may develop trade policies which take little
account of environment. The idea of OCTs as outputs of the EU in the world would
not be achieved in this policy option. It would result in a situation in which
EU interests and values would not be actively promoted.

Legal and Policy Framework

Discontinuing preferential relations for
OCTs may be contrary to the Preamble and Part IV of the TFEU, which emphasise
the solidarity between the EU and the OCTs and which stipulate that the purpose
of the association is the sustainable social and economic development of the
OCTs. This policy option could therefore necessitate a Treaty change.

Policy coherence would not be an issue as
in principle no specific policy towards OCTs would be foreseen. OCTs would
benefit from EU policies only to the extent that third partners without any
privileged relation with the EU can take part in them.

However, such a stance would not be
consistent with the political orientations regarding the revision of OCT/EU
relations in its conclusions the Council laid down in its conclusions (16710/09)
of 22 December 2009 and which endorsed the three objectives proposed by the
Commission in its Communication COM(2009) 623.

7.3.2.     Assessment Policy Option 2: Roll Over of Present
Preferential Trade Relations

Trade in Goods

In the status-quo scenario, all applicable
provisions would remain unchanged. Therefore, any impact would stem from the
improved market access to the EU for non-OCT exporters, e.g. the EU's FTA
partners ("preference erosion"). Analysis of the products exported by
the OCTs and recent EU FTA negotiations (see above) shows that fish and
processed fish are the products most at risk of such preference erosion. The
OCTs potentially most affected are: Falkland Islands, French Polynesia,
Greenland, Saint Pierre et Miquelon and the (former) Netherlands Antilles. The
increased competition of non-OCT exporters could lead to similar economic
and social impacts (job loss, increased social expenditure) as described in
policy option 1, though to a lesser extent.

No major impact on the EU producers or the
EU processing industry would occur as the present competitive positions of OCT
suppliers and EU producers would be maintained. Where OCTs would lose in
competitiveness to the benefit of other trade partners, this is likely to
result in a status quo for the EU producers. This would for instance be the
case if the EU free trade negotiations with Canada would result in the
Comprehensive Economic and Trade Agreement (CETA) being concluded. According to
KIRKPATRICK et al. (2011), this agreement will have no noticeable impact on
employment in the EU, even if it might have some negative impact in some
specific industries in specific EU Member States. As the EU's fishery
processing industry is concerned, a positive impact is expected as it would
gain access to raw materials at more competitive prices.

In terms of environmental impacts,
the status quo under policy option 2 is unlikely to lead to an increase of such
impacts. If policy option 2 would be implemented during the next operational
period, increases of e.g. CO² emissions are likely to be the consequence of
factors independent from EU interventions (e.g. government policy). Where the
OCT partner would choose to use EU financial resources in support of trade and
trade related priorities, the streamlining of environmental issues in the EU's
financial assistance  is likely to have a mitigating effect (see below).

Rules of Origin

As far as rules of origin are concerned,
the status quo would avoid adaptation costs as OCT economic operators would not
have to get used to a new set of rules of origin and the possible uncertainties
that may accompany them.

OCT trade flows, in particular to the EU,
are likely to remain either the same or to decrease as no new incentive for
investment would be provided. In the mean time, as the EU would continue to
conclude FTAs with new trade partners who could possibly be OCT competitors
(e.g. Canada versus Saint-Pierre et Miquelon and Greenland), the effect of
erosion of preferences would become more marked.

In the absence of a relaxation of the product
specific rules the prospects of diversification of OCT exports would be
limited.

As no changes would be made to the general
provisions, the procedures would remain burdensome, mainly as regards with
the certification by the customs authorities and the documentary
evidences to be submitted as proof that the goods have been transported
directly from the country of origin to the EU. Compliance costs (i.e. costs
incurred for the delivery of a proof of origin) would also remain the same.

Though cumulation possibilities with
OCTs and ACPs would be maintained, trade opportunities are likely to decrease
with EPAs granting ACP signatories the same tariff treatment as the OCTs, thus
reducing their incentive to send their products to OCTs for further processing
(sugar products for example). In the absence of a provision on cumulation with
non-ACP neighbouring countries, the prospects to strengthen the relationships
with these countries would not be furthered.

As no changes would be made to the rules
and procedures for granting derogations, the issue of predictability would
remain.

Services and Establishment

Maintaining the present OCT/EU trade
relations would entail the automatic improvement of the treatment the EU gives
to OCT services if and when it would upgrade its commitments under GATS
following WTO negotiations.

However, as the status and progress of the
ongoing DDA negotiations is unclear, so is the ambition of the current GATS
commitments which were made in 1994. Moreover, the treatment accorded in WTO to
all WTO 153 members is not reflecting the special relationship between EU and
OCTs as foreseen by Part IV of the TEU. Furthermore, since 2000 the EU has
entered into several bilateral preferential trade agreements which also cover
trade in services and establishment and which accord a treatment more
favourable than the one the EU offers under the GATS.

In the context of the Economic Partnership
Agreement (EPA) that was concluded with CARIFORUM and the ongoing negotiations
regarding with other ACP regions a more favourable treatment has been or will
be granted to neighbouring countries of OCTs. Even if autonomous liberalisation
in Member States presently rarely differentiates between service providers and
investors on the basis of country of origin, except for EU Internal Market
purposes and in the context of the European Economic Area, the possibility for
such differentiation to happen in the future or in particular sensitive sectors
still exists. Thus, the main issue at hand is again the legal certainty for
investments, but also cross-border trade in services some of which are very
important to certain OCTs (such as financial services to British Virgin Islands
or Cayman Island).

As pointed out in previous studies, the
current OAD regime is not balanced as EU grants the OCTs GATS treatment, while
OCTs are giving the EU full MFN including the treatment they accord between
themselves and to developing partners. In the status quo option (option 2) it
would not be possible to redress this problem, which has been raised as the
most serious problem in the area of trade in services.

As GATS does not foresee a specific
treatment for OCT services, policy option 2 would not allow the OCTs to benefit
from liberalisation driven economic development in sectors of interest to them,
unless they would decide to adopt a development strategy based on autonomous
trade liberalisation and attracting investment. They would have the same
treatment as the other 153 WTO members. For non-services establishment, no
trade regime would be foreseen at all.

Consequently, the economic and social
impacts of the services and establishment component of this option would be
limited or non-existent. Furthermore, the impact on OCTs would partly depend on
the trade agreements, if any, OCTs conclude with other partners as currently
they are committed to give to EU the best treatment they give to any other
third country. This would mean that OCT South/South agreements with
neighbouring countries would all have to be extended to EU.

Under policy option 2, EU funding could be
used in support of the implementation of the relevant strategies for the
development of OCT services sectors, should that be the wish of the OCT
governments concerned. If the sectors relevant for tourism would be marked as sectors
for development, their increased attractiveness as a touristic destination may
have an environmental impact as it could lead to increased pollution
through air and transport by ships. Here as well, EU financial assistance may
be a mitigating factor as it could influence OCT policies through its
obligation to take into account environmental issues.

Trade Related Cooperation and Support

By rolling over the present cooperation and
support arrangements the EU would continue to support the reinforcement of OCT
capacities to exploit the generous market access opportunities in the EU and
possibly in other third countries, in those instances of cooperation where
trade and trade related areas are in focus. Thus, the EU would continue to
promote the sustainable social and economic development of OCTs.

As the agenda for the OCT/EU dialogue on
trade and trade related issues would continue to be defined on an ad hoc basis,
it would likely lack focus. Maintaining the wide range of topics covered by
Articles 12, 13, 14 and 16 of the OAD would likely contribute to the
diffuseness of the OCT/EU trade and trade related dialogue and cooperation.

For OCT/EU cooperation under the 11th
European Development Fund (EDF) to have an impact on OCT trade and trade
related issues, the political priorities would need to be translated by
dedicated financial allocations as 11th EDF operation would continue
to be linked to OCT priorities. In such a scenario EU interventions in trade
and trade related areas would have a more lasting impact if they would be
integrated in regional, territorial or sector (development) strategies.
Cooperation in the form of ad hoc projects or technical assistance would have a
more limited impact.

By continuing to provide financial
assistance to OCTs in the area of trade and trade related matters, the EU would
continue to actively support OCT efforts to put in place measures in these
areas which are intended to strengthen the competitiveness of their economies
and decrease their vulnerability to external shocks.

Coordination of EU and Member State
interventions through OCT authorities would continue to have beneficial
impacts, but potential synergies might not be exploited.

The extent to which OCTs would be able in
practice to benefit from these programmes and budget lines would to a large
extent be dependent of the capacity of their beneficiaries to formulate
competitive proposals. The success rate of OCT beneficiaries' participation in
these programmes would likely remain low. By providing technical assistance on
demand, the EU might indirectly have a positive impact on this.

As a consequence of the low utilisation by
OCTs of the EU horizontal programmes and budget lines, it is likely that the 11th
EDF would remain the main source for financial assistance in support of OCT
efforts to develop their private sectors, to formulate innovation strategies
and to develop their capacities and infrastructure in specialised fields such
as food safety and consumer health. Thus, rather than being supportive of OCT
participation in EU horizontal programmes, the EDF might in effect continue to function
as substitute to those programmes. The potential for synergies between the two
types of financial instruments would remain underused.

By continuing to support the development of
OCT strategies, capacities, infrastructure and legislative frameworks, the EU
would continue to exert an influence on their policies, regulatory models and
the like. In case the provisions concerning trade related areas such as
environment and labour states foreseen in Chapter 3 of Title II, Part 3 of the
OAD would be put into effect, the OCT/EU administrative cooperation could have
a positive social and environmental impact by influencing the relevant
OCT policies. Thus, the EU would continue to actively contribute to the
promotion of EU interests and values in the world. Such support may stimulate
convergence of OCT legislation with the EU acquis.

Legal and Policy Framework

A roll over of the present OCT/EU relations
would be consistent with Part IV of the Treaty on the Functioning of the
European Union and its Preamble, but not with the shared ambition of OCTs,
their Member States and the Commission to reshape and modernise the OCT/EU
relations.

Policy coherence would be assured under
this option, but the OAD would not incorporate any of the policy evolutions in
trade and trade related provisions over the last ten years.

The option would not be consistent with the
political orientations regarding the revision of OCT/EU relations in its
conclusions the Council laid down in its conclusions (16710/09) of 22 December
2009 and which endorsed the three objectives proposed by the Commission in its
Communication COM(2009) 623 of 6 November 2009.

7.3.3.     Assessment Policy Option 3: Improved Asymmetric Trade
Relations

Trade in Goods

As the room for improving duty free, quota free
access is very small, the impact on OCT exports in this scenario would depend
on:

1.
the degree to which the simplification and
relaxation of the rules of origin would contribute to developing OCT trade;

2.
the degree to which the further opening of the
EU's services market to OCT operators would increase actual business
opportunities for these operators;

3.
the effectiveness of support measures that could
be put in place to help OCTs  in overcoming problems they face complying with sanitary,
phyto-sanitary or technical rules that apply to their goods exports, in
particular their fish and processed fish exports[188].

The discontinuation of the transhipment
facility mentioned in Article 36 of the OAD would have no practical effect as
the provision has never been implemented successfully. In other words,
transhipment operations have never given rise to EU duties being waived,
because the provision's conditions have never been fully met. Similarly, the
Commission has never approved any OCT transhipment scheme under paragraph 2 of
that Article. The feasibility of a functioning transhipment scheme under
Article 36 of the OAD has never been demonstrated.

Rules of Origin

The proposed changes to the rules of origin
under policy option 3 would likely result in a more effective use by OCTs of
the export opportunities which the OCT trade regime offers them, by improving
the conditions under which OCT goods access the EU market. This would have a
positive social and economic impact on the OCT, notably in the fishery
sector. In doing so, the economic ties between the OCTs and the EU would be
strengthened and the OCTs' competitiveness stimulated. Simplifying and relaxing
conditions, strengthening transparency and coherence with the rules of origin
of other trade partners is likely to result in efficiency gains and reduce
administrative burdens.

The new product specific rules would
likely increase market opportunities for OCTs by providing additional sourcing
opportunities through higher thresholds of non-originating materials. The
relaxations could increase the export potential of OCTs in goods that they
already produce, chocolate (New Caledonia), jam (British Virgin Islands), fruit
juices (French Polynesia), rum (British Virgin Islands), oil (Greenland),
essential oils (French Polynesia), processed base metals (New Caledonia,
Greenland, British Virgin Islands), ammonia (Greenland), articles of plastics
(French Polynesia), pottery (British Virgin Islands), aluminium (Greenland),
machinery and mechanical appliances (New Caledonia), handicraft (British Virgin
Islands, Saint Helena, Ascension Island and Tristan da Cunha) and furniture
(British Virgin Islands).

The changes to the definition of wholly
obtained products, as part of the changes to the general provisions,
would contribute to making the rule more transparent and user friendly. The
inclusion of operations relating to textiles and clothing in the list of
minimal operations could have an impact for the determination of the
country of origin of the product within the cumulation context. Nevertheless,
exports from OCTs of processed textiles products are very low and consequently
the impact would be limited (the main export interest for textile and clothing
involves wool, so cumulation would not be used for these products and, in
addition, these materials enter the EU at CET-zero, so the preferential rules
of origin would not be used anyway).

While changes to the rules of origin
proposed under policy option 3 is likely to have positive social and
economic impacts on OCTs in the fishery sector, the impact on EU producers
and processing industries of fishery products would vary. The most important
impact would likely be the elimination of the crew requirement, notably for Falkland Islands. On the EU side, the impact would be more felt by the EU processing
industry than for the EU producers. However, as the Falkland Islands currently benefit
from a derogation for the crew requirement, the impact in the short-term may
not differ from the status quo offers. Similarly the improved text on the
vessel’s ownership could facilitate trade for OCTs. The social and economic
impact on the EU would likely  be negligible taking into account the number of
cases where this question was raised in the past.

More difficult to assess is the possible
impact more flexible derogations would have. It would depend on the duration of
the derogations, the products concerned, the producers' and customers'
preferences (chilled, frozen or processed) and the volumes as well as the
actual utilisation rates. Here as well, the impact would vary between EU
producers and EU processors, with EU processors being able to gain access to
raw materials at more competitive prices and being able to maintain production,
and jobs and EU producers witnessing the entry of competitive products in case
of the EU production of like products.

Diversification of the cumulation
possibilities would allow an improvement of the sourcing opportunities.
Cumulation with EPA countries will allow maintaining significant trade links
with some EPA countries. For example French Polynesia with Fiji Islands, Papua
New Guinea or Ghana, the (former) Netherlands Antilles and British Virgin
Islands with CARIFORUM EPA countries, New Caledonia with Pacific EPA. In the
same fashion, extended cumulation would allow OCT countries to take better
advantage of the current trade flows, for example French Polynesia has
significant exchanges with ASEAN countries, with India, with Canada and with
Mercosur; the (former) Netherlands Antilles have exchanges with Canada,
Colombia, Peru, Central America and Mercosur; Greenland is interested by
sourcing in ASEAN.

Services and Establishment

The inclusion of an asymmetrical MFN clause
would mean that the current services and establishment treatment of OCTs would
be considerably improved, while at the same time OCTs would be allowed to have
greater autonomy regarding the type of treatment they would give to the EU.
OCTs have stressed the importance of the latter point (see chapter 6), as it is
instrumental to enabling South/South agreements in trade in services. The
services and establishment treatment would also be more favourable than the
treatment given to ACP partners in EPAs, as it would cover both past and future
EU agreements (while CARIFORUM agreement for example covers only future agreements).

The benefits which would accrue to the OCTs
under policy option 3 would be considerable and would increase with every new
further trade liberalisation of the EU commitments in a bilateral or
multilateral context. In comparison to the current GATS commitments, policy
option would result in almost doubling the EU's market openness to OCTs. Taking
into account both the sectors for which commitments have been taken and the
limitations that were introduced (see box below), the weighted average openness
of the EU under GATS corresponds to a factor 34 for modes 1, 2 and 3. Under the
EPA with CARIFORUM it corresponds to a factor 57 (and 74 for establishment).

Weighted Openness Index

The sectors which would benefit most from removal of limitations
(the number of sectors committed remains the same as EU commits almost all
sectors) would be the construction services, environmental services,
recreational services and other services. The lowest opening would occur in the
health and educational services, as these are sensitive for the EU for consumer
(patient) protection reasons.

By opening its services sectors to OCT
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. Thus, the social and
economic impacts of this policy option would likely be positive. 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. It would also give legal certainty for EU investors, which, in
turn, could contribute to attracting Foreign Direct Investment (FDI) to the
OCTs.

EU funding could be used in support of the
implementation of the relevant commitments to further increase the services
capacity and infrastructure as well as to ensure a legal environment that would
support the investments. Most importantly, as
improvements of OCT treatment would be granted automatically when the EU would
upgrade the services treatment in other of its agreements, the implementation
of this policy option would not put additional strains on the limited
administrative capacities of OCTs, which would not have to face the prospect of
long and complex negotiations. EU financial assistance,
if directed to sectors where commitments are taken, could be a mitigating
factor for any environmental impact through its obligation to take into
account environmental issues.

Trade Related Cooperation and Support

Upgrading the present OCT/EU trade related
cooperation and support would likely reinforce OCT capacities to exploit the
improved access to the EU. Thus, the EU would continue to promote the
establishment of close economic ties between the OCTs and the EU. Via policy
option 3 the EU would also likely contribute to strengthening the OCTs'
position in other third markets. The trade related cooperation and support
under policy option 3 would therefore contribute to the promotion of the
sustainable social and economic development of OCTs.

The revision of the areas of cooperation,
presently covered by Articles 12, 13, 14 and 16 of the OAD, and their
limitation to a specific set of areas would increase focus of the OCT/EU trade
related cooperation and support and to facilitate the monitoring of its impact.
The adoption of the joint work programme, the concentration of EU technical
assistance in selected areas of intervention related to trade could  have a
similar effect. Where possible and relevant the coordination of EU and Member
State interventions would increase the impact of both. By strengthening the
principle that the 11th European Development Fund be complementary
to funding available to OCTs under the horizontal programmes and budget lines
relevant to trade, duplication would be avoided and potential synergies between
the two types of financing would be exploited.

Where the 11th EDF financial
assistance to OCTs sues would be foreseen in trade and trade related areas,
this assistance would have a more lasting and systemic effect where it would
take the form of general or sector budget support.

The continued, targeted and coordinated
support to OCT strategies, capacities, legislative and institutional frameworks
proposed under policy option 3 would likely increase the involvement that the
EU would have in OCT policies, regulatory models and the like. Such involvement
could extend to the OCT's labour policies and the environmental aspects of
their trade policies and activities by activating the provisions concerning
OCT/EU cooperation on trade and labour standards and trade and environment.
Thus, policy option 3 would have a positive social and environmental impact.
The inclusion of trade and trade related issues of mutual interest, such as raw
materials, would be an active contribution to the promotion of EU interests and
values in the world. Such support may stimulate convergence of OCT legislation
with the EU acquis.

Under this option, OCTs would not only be
considered as external stakeholders, but also as internal stakeholders and
could play to a certain extent a role as outpost of the EU.

Legal and Policy Framework

Policy option 3, which would consist in
upgrading the current asymmetric trade relations, would be consistent with Part
IV of the TFEU and its Preamble.

It would also translate the political
orientations regarding the revision of OCT/EU relations which the Council laid
down in its conclusions (16710/09) of 22 December 2009 in endorsement of the
three objectives proposed by the Commission in its Communication COM(2009) 623
of 6 November 2009.

Policy coherence would be ensured under
this option would be strengthened.

7.3.4.     Assessment Policy Option 4: Inclusion in other Preferential
Trade Relations

The impact of OCTs
adhering to EU FTAs or EPAs depends to a large extent on:

1.
The proximity and interest of the EU's trading
partners in developing trade relations with OCTs.

2.
The duties and/or quotas applicable to the OCTs
involved. Even if one assumes that access to the EU would remain duty free,
quota free, access to the EU's trading partners would be subject to negotiation
and vary by partner. This would give rise to unspecified new export
opportunities, but which are currently constrained by limits to OCT export
capacity and diversification.

3.
The precise degree and definition of OCT
liberalisation vis-à-vis the EU and the EU's trading partner. This would also
be subject to negotiation and vary from case to case. One would have to
distinguish competition/competitiveness and net revenue effects. Cheaper
imports would put pressure on OCT local industry, some of which might suffer
negative consequences, but they would lead to lower costs for consumers and
producers as a whole. Customs revenues might go down while alternative sources
of revenue collection could increase, especially if revenue reform can be
implemented.

4.
The effectiveness of any capacity building
measures.

An overview of the factors determining the
likeliness of individual OCTs being included another EU trade agreement is
given in 12.10.

Rules of Origin

The integration or association of OCTs to
EU trade agreements that have been concluded or are under negotiation is likely
to promote OCT insertion in their regional economic environments, as the rules
of origin applicable to OCTs would be the same as those applying to their
neighbouring countries or regions, within the joint set-up of the FTA or EPA in
question. Trade between the countries and territories included in the agreement
is likely to increase as cumulation possibilities could provide an incentive to
set up regional production chains. Such benefits would most likely accrue to
larger OCTs, such as New Caledonia, French Polynesia, Aruba and Curaçao.

However, these beneficial effects may not
come about if the rules of origin are not adapted to the specific needs and
sensitivities of the OCTs concerned. When joining an EPA or FTA, OCTs would be
submitted to a set of rules of origin which were negotiated without them in mind.
Thus, and unless the OCTs would be able to reach an  understanding with other
trade partners and address a common request to the EU for a review of the rules
of origin that were negotiated, the OCTs would have to comply with rules of
origin which may not be fully adapted to their specific situation. However, a
few strategic adaptations might go a long way in meeting OCT interests given
the limited range of their exports.

The improved product specific rules
under the EPAs would offer OCTs improved or new export opportunities in the
fishery, agricultural and textile sectors. In its reply to the trade
questionnaire on specific trade interests, which the European Commission sent
to OCTs and their Member States in the Summer of 2011, the British Virgin Islands
indicated to have an interest in developing textile and garment production.
However, for other products of interest to the OCTs, the EPA rules may still be
too stringent. Consequently, regional integration in an EPA may therefore offer
only limited advantages and might not compensate the adjustment costs and other
costs attached to membership of these agreements (reform of tariff and revenue
policy, etc.).

Some of the conditions laid down in the general
provisions would be improved under the regime of an EPA or FTA. Under the
EPAs the definitions of wholly obtained products and minimal
operations would also be improved for OCTs. Neither change would have a
major impact, apart from the increased transparency and user friendliness they
have introduced. For fish caught outside of territorial waters it would
no longer be necessary for the crew to have the nationality of an OCT, an ACP
country or an EU Member State. This would make it easier for OCTs to comply
with the rules in the case of EPAs or other relevant FTAs where such a rule
exists. As the certification of origin would still be undertaken by OCT
authorities, OCT exporters would continue to face high compliance costs.
However, the alternative system of exporter certification might also be
introduced, at least under rules of origin review for the EPAs. In any event it
will remain untested until 2017.

It remains to be seen whether by including
them in the Pacific EPA the OCTs in the region would be able to really benefit
from the global sourcing provision. In order for this to happen, French
Polynesia and New Caledonia, the two OCTs most likely to benefit from this
provision, would need to invest in the development of fish processing
industries. The profits which such operations could generate may not be substantial
enough to offset the costs of setting up the industries themselves and/or the
costs linked to membership of the EPA.

Where the Pacific OCTs would be able to
maximize the opportunities offered by the EPA and develop a fisheries and
processing sector, the social and economic impact of their inclusion on
the EU is likely to follow the same trends as the ones previously identified
for this specific EPA. The inclusion of OCTs in the Pacific EPA could
contribute to attracting EU investment in the Pacific OCTs and the region. Such
investment may lead to a decrease in investment in other markets where the EU
is established (GSP+ and ACP countries) in other to create liquidity for
investment and reinforce the shifting trend in supply for the EU industry.

The EU's tuna processing industry could
benefit from policy option 4 if it would lead to more favourable supply
conditions of raw materials (OCTs and Pacific ACP countries would be competing
for the same supply in a scenario of limited tuna stocks), a competitive
workforce in the OCTs and a certain vertical integration of the different
industries. Ifpolicy option 4 would lead to these developments, it could result
in a controlled flow of tuna exports to the EU, notably of tuna loins, that
would supply the EU processing industry. Thus, the impact on employment for the
EU tuna processing industry would be limited as the situation in this sector
depends on the degree of concentration of the loins processing and the
economies of scale that could be created. However, these developments might
negatively affect the EU fleet (operating in the Atlantic and Indian Oceans)
providing frozen tuna to the EU processing industry (as opposed to tuna loins).

In a more negative scenario, the EU's tuna
harvesting and processing industries could both be negatively impacted through
job loss and the closing of factories in certain EU Member States and the
cessation of production activities.

The wide range of cumulation possibilities
under the EPA would not only allow the OCTs to maintain and develop their
current trade links with ACP countries and the EU, but also may offer the
opportunity to develop economic relations outside of this group (e.g. Central
and Latin America) and engage in regional production of goods aimed at the EU market,
at the condition that this possibility is explicitly foreseen in the EPA.
However, the two EPAs which are of most interest to the OCTs, the Caribbean and
Pacific EPAs, do not include such possibility. Thus, the potential benefits of
this kind of measure would only materialise for OCTs if and when in the future
the parties to these EPAs would decide to have it included in their agreement.
Until that date, the Caribbean EPA offers the possibility of cumulation with
neighbouring developing countries (in Latin America) on request.

The effects of a possible, but currently
unlikely inclusion of Saint-Pierre et Miquelon in the CETA with Canada, would
have no noticeable impact beyond the one described in the Sustainability Impact
Assessment that was made of the CETA negotiations[189]. As
indicated above, the impact of this agreement on EU overall employment is
likely to be limited.

The impact of including Greenland in the
same agreement might have a bigger impact. Although Greenland already has duty
free quota free access to the EU market seemingly it has resorted in the past
to derogations on rules of origin in order to have access to more competitive
Canadian raw materials. Taking into account that Greenland has a consolidated
performing shrimp industry, the EU as its primary market for fishery products,
a large volume of competing fishery exports to the EU, a vertically integrated
industry, economies of scale, a large share of the EU imports for some fishery
products, existing EU distribution networks in combination with the additional
advantage of its relatively close proximity to the EU market, the social and
economic impacts on the EU of a possible cumulation with Canada could be larger
than the ones estimated in the external study mentioned above. In this regard,
in terms of employment, the impact could be negative for the EU producers of
like products. This impact may be more pronounced in a number of EU Member
States which are already experiencing difficulties as a consequence of such
imports (including full cessation of activity in some sectors, reduction of
production activities in other countries combined with drop in prices).
Inversely, the impact for the EU fish processing industry is likely to be
positive in terms of supply and probably in terms of employment depending of
the presentation of the final product.

As regards derogations, the absence
in the Caribbean EPA of the provision allowing the granting of the derogation
when the threshold of 45 % OCT/ACP added value to the non-originating materials
is met, is likely to make it more difficult for Caribbean OCTs to be granted
the derogations, compared to the current rules of origin.

Services and Establishment

The inclusion of OCTs in EPAs or FTAs would
entail OCT-specific services commitments both vis-à-vis third countries and the
EU. Apart from legal considerations, capacity constraints both for negotiations
as well as for implementation of the commitments would be a real concern for
most OCTs as negotiations regarding trade in services and establishment are
very burdensome and time consuming.

The treatment given by OCTs would have to
be negotiated with multiple partners (EU and third partners) and for each OCT
separately. This would mean double negotiations for OCTs as they would have to
decide which treatment they give to the EU as well as which treatment they
would give in every sector for the other partner(s). Furthermore, as the third
partner(s) would have to extend to the OCTs the treatment it gives the EU – an
amendment to the initial agreement in which it may not have a high interest –
this treatment would probably have to be renegotiated as well to compensate for
the inclusion of OCTs.

This means that three sets of negotiations
would have to be foreseen regarding:

-
the concession OCTs would need to make towards the EU

-
the concessions they would need to make towards the other partner(s)

-
the concessions the EU would need to make
towards the other partner(s) in exchange of the inclusion of OCTs

Market access commitments would probably
improve both for OCTs and their FTA/EPA partners. As the negotiating leverage
of OCTs would be low, it could be that OCTs would have to take more extensive
commitments than the other partner – unless the concerned Member States would
agree to compensate for this themselves; which is unlikely given the already
far reaching liberalisations they have offered in bilateral contexts.

Hence, the economic and social impacts
of this option would depend on the outcome of a hypothetical negotiation and
actual additional market opening occurring in addition to current autonomous
liberalisation. OCTs would benefit from further opening of the EU market and
other markets their service providers and investors both in the services and
non-services are            as. However, implementing these commitments in the
long list of services sectors could be very costly. Also, as the interest of
investors of neighbouring countries in OCT markets is likely to be higher than
the interest of EU investors, OCTs opening their market for the neighbours might
bring in more foreign direct investment or temporary service providers,
depending on which and how many sectors every OCT will choose to liberalise.

As mentioned above, OCTs suffer from low
administrative capacity for negotiations and low negotiating leverage, meaning
that close cooperation and support with the Member States to which they are
linked wouldl be needed also during negotiations with neighbouring partners in
order to ensure WTO compatibility of all agreements and to avoid liberalisation
of sectors where domestic regulation has not been sufficiently developed to
ensure consumer protection in sectors such as financial services, health,
education, tourism etc.

The environmental impact of opening
to a neighbouring country could also be potentially higher than when opening to
the EU alone, as for the latter one could expect that the preferred mode of
supply would be the so called mode 1, i.e. cross-border trade over
communication channels, while for neighbouring countries actual movement of
people and resulting transport related impacts can be expected. The net impact
(compared to the status quo and the improved arrangements under option 3) would
differ by OCT, the agreement to which it would be associated and the situation
in the OCTs in specific services sectors prior to negotiations.

Trade Related Cooperation and Support

While this policy option 4 may stimulate
the integration of OCTs in regional cooperation, it could lead to OCT
priorities and needs being given less attention as the trade agreements were
conceived with other trade partners in mind. The concerns of the bigger trade
partner(s), and in case of the EPAs, the developing partners would likely
dominate the trade related cooperation. For those OCTs that would join or would
be associated to a trade agreement, policy option 4 would come down to the end
of the privileged relations between the OCTs and the EU. This would be the case
for all OCTs if policy option 1 would be retained for those for which
integration into another agreement would not be possible.

Those OCTs that would join EPAs would gain
access to nominally larger amounts of financial assistance under the 11th
European Development Fund, but they would have no guarantee that sufficient
financial resources be dedicated to cover their needs as, here as well, 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 the ACP States such as Antigua and Barbuda, Fiji, Guyana and Palau,
which are Small Island Developing States and face similar challenges as the
OCTs[190]. While gaining access to these funds, the OCTs would be cut off
from potential other sources of financing from which they benefitted under the
OAD, such as the internal horizontal programmes and budget lines of the EU.
This would be the case as well for OCTs that would be integrated or associated
to trade agreements. However, for them this loss would not be compensated by
access to additional funds under external programmes covering their region.

Policy option 4 might therefore not be
conducive to strengthening the OCT capacities to exploit market access
opportunities in the EU and thus to close economic ties between the OCTs and
the EU. It could have a positive impact on the OCTs' trade relations with their
developing and developed countries, but these benefits might be offset by the
costs which adhering to the agreement might bring.

Via the inclusion of the OCTs in the trade
and trade related dialogue with other trade partners and providing support, the
EU could continue to have influence on OCT policies, regulatory models and the
like, albeit in a less direct manner. Implementation of policy option 4 would
mean that OCTs would mainly be considered as external stakeholders and not as
outposts of the EU in the world.

Legal and Policy Framework

By integrating or associating OCTs to other
trade agreements, some of the objectives of the OCT/EU association ight be met.
However, this would be done outside of the association as such. If for those
OCTs for which integration into another trade agreement would not be an option,
policy option 1 would be retained, then the combined effect of both policy
options would be the end of the OCT/EU association.

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. As the implementation
policy option ight result in the EU having to work out solutions for setting up
three different types of relations of a group of more than twenty entities, the
legal process would be very complicated and is also likely to result in
confusion as regards to their status and that of their inhabitants. Certain
rules currently contained or being considered in the different agreements might
not apply to OCT inhabitants to the extent that they are EU citizens. Thus, the
implementation of policy option 4 could amplify the tension that exists between
the territorial and personal scope of the TFEU.

While some OCTs might win in the process,
those OCTs for which integration is not an option could lose out, if the
alternative option is discontinuation of the association. However, if option 2
or 3 could apply to those OCTs remaining outside the EU’s agreements, the impacts
would be as described above.

Implementing this policy option might
translate some of the political orientations regarding the revision of
OCT/EU relations which the Council laid down in its conclusions (16710/09) of
22 December 2009 in endorsement of the three objectives proposed by the
Commission in its Communication COM(2009) 623, but not in the form foreseen.

7.4.        Weighing of the Policy Options

Effects || Option 1 Discontinuation || Option 2 Roll Over || Option 3 Improved Asymmetric Relations || Option 4 Other Trade Relations

Overall objectives of the OAD

OCT sustainable social & economic development || Mark || -- || Mark || 0 / - || Mark || ++ || Mark || + / -

Loss of privileged EU market access may adversely affect the OCTs' socioeconomic development; no clear impact on the environment; no support to mitigate the impacts || Free market access to the EU & untargeted cooperation & support are maintained; but this may not be sufficient to prevent stagnation or worsening of the OCTs' socioeconomic development no clear impact on the environment unless dedicated support is foreseen || Improved market access conditions (amongst others through simplified trade rules) for goods & services  & targeted support could contribute to maintaining OCT growth & socioeconomic development; no clear impact on the environment unless dedicated cooperation & support is foreseen || OCTs inserted in regional economic environment, cooperating with the EU & neighbouring countries; may have positive impacts on the socioeconomic development of the OCTs involved but not for those OCTs left or staying outside such arrangements; no clear impact on the environment unless dedicated cooperation is foreseen in the FTA

OCT/ EU economic ties || Mark || -- || Mark || + / 0 / - || Mark || ++ || Mark || + / -

Loss of preferences is likely to affect OCT exports to the EU, thus weakening economic ties || OCTs continue to benefit from export opportunities in the EU market; increase of exports and economic ties possible if trade is a political priority for cooperation; risk of stagnation & worsening of relative position viz. their competitors (preference erosion) || Improved market access conditions may allow OCTs to better exploit existing export opportunities & explore new economic activities; targeted cooperation & support facilitate this process of strengthening OCT/EU economic ties || OCT insertion in an agreement with the EU & third partner(s) likely to affect & alter OCT/EU economic ties, depending on the effects of trade reciprocity with the EU & third partners respectively: substitution of OCT trade with the EU by regional trade or increase of OCT trade with the EU

Effects || Option 1 Discontinuation || Option 2 Roll Over || Option 3 Improved Asymetric Relations || Option 4 Other Trade Relations

Overall objectives of the OAD (ctd.)

OCT competitiveness || Mark || -- || Mark || + / 0 || Mark || ++ || Mark || + / -

Increased loss of competitiveness due to loss of both preferences and cooperation with the EU || Possibility to maintain or increase competitiveness if trade is a political priority for cooperation, but not because of improved market access conditions || Increased competitiveness through improved market access conditions & targeted cooperation & support || Positive or negative effects on competitiveness depending on whether or not FTA allows them to exploit their advantages & adapt to increased competition from both EU and third countries, which may work with lower wages and standards

OCT resilience || Mark || -- || Mark || + / 0 || Mark || ++ || Mark || + / -

Increased vulnerability to economic shocks due to loss of both preferences and cooperation with the EU || Possibility to stimulate resilience if trade is a political priority || Improved market access & cooperation & support may contribute to OCT capacity to deal with economic shocks || OCT insertion in an agreement with the EU & third partner(s) may diversify export markets and products, but greater trade openness may also increase vulnerability or lead to adjustment

General objectives trade and economic cooperation

OCT regional integration || Mark || + / - || Mark || + / 0 / - || Mark || + || Mark || ++

May lead to OCT/EU trade relations being replaced by other trade relations including regional ones || No real stimulus for OCTs to engage with their neighbours, unless dedicated cooperation & support is foreseen || Aligning of OCT rules of origin with other sets of rules of origin & dedicated cooperation & support may stimulate regional integration || OCTs fully inserted in a coherent integration scheme

Effects || Option 1 Discontinuation || Option 2 Roll Over || Option 3 Improved Asymetric Relations || Option 4 Other Trade Relations

General objectives trade and economic cooperation (ctd.)

OCT economic diversification || Mark || -- || Mark || + / 0 / - || Mark || ++ || Mark || + / -

Reduced export opportunities are a disincentive to develop new sectors; no support available to do so || No fresh incentive for OCTs to make use of existing market access opportunities in the EU & other markets to develop new sectors & products to be exported to the EU; unless dedicated cooperation & support is foreseen || New export opportunities in the EU would present themselves to OCTs, allowing them to explore & possibly develop new sectors; with possible EU support || Positive impacts where the insertion of OCTs in the regional economic environment & increased reciprocity lead to the OCTs being able to develop new markets & products; possibly negative impacts if there is no regional demand for OCT products & increased competition on other products following regional liberalisation

OCT export/trading capacity || Mark || -- || Mark || + / 0 || Mark || + || Mark || + / -

Reduced market access may affect OCT export & trading capacity, which would be no longer supported || No fresh impetus for OCT trading capacity; unless dedicated cooperation & support is foreseen || Targeted cooperation & support may positively impact OCT trading capacity || Depends on the content of the cooperation & support provided by the EU and possibly arrangements negotiated with the third partner(s)

Convergence with EU acquis || Mark || -- || Mark || + / 0 || Mark || + || Mark || +

In the absence of cooperation & support, no EU involvement in OCT policies or legal frameworks || Where trade & trade related matters become part of the OCT/EU cooperation, the EU may stimulate convergence of OCT legislation with the EU acquis || Targeted support could be made available to help OCTs to upgrade legislation in relevant areas in line with the EU acquis || Targeted support could be made available to help OCTs to upgrade legislation in relevant areas in line with the EU acquis, which may also be promoted through the trade agreements involved

Effects || Option 1 Discontinuation || Option 2 Roll Over || Option 3 Improved Asymetric Relations || Option 4 Other Trade Relations

Policy Context

Alignment trade & economic cooperation/ developments EU trade policy || Mark || -- || Mark || - || Mark || ++ || Mark || ++

Third country treatment would go against the trend in EU trade policy to strengthen trade & economic cooperation with its privileged partners || OCT trade & economic cooperation may not be in tune with the latest developments in EU trade policy || OCT trade & economic cooperation would be in tune with the latest developments in EU autonomous trade policy || OCT trade & economic cooperation in tune with the latest developments in EU bilateral trade policy

Promotion of mutual interests & reciprocity || Mark || -- || Mark || 0 || Mark || + || Mark || ++

No mutual interests defined || Notions of mutual interests & reciprocity would remain underdeveloped due to lack of focus || Activation of certain parts of the association's trade & economic cooperation, as well as greater targeting of that cooperation through the adoption of a work programme could lead to greater reciprocity, better identification of mutual interests (e.g. raw materials) || EU trade agreements provide a coherent framework for dialogue & cooperation regarding mutual interests on a reciprocal basis

Facilitation of the OCT/EU dialogue on trade || Mark || -- || Mark || + / 0 || Mark || + || Mark || + / -

No dialogue mechanisms would be foreseen || Dialogue on an ad hoc basis would be maintained || Joint work programme would provide focus & facilitate exchanges || OCT concerns may or may not be well reflected in the dialogue in foreseen in the relevant trade agreements

Adaptation to particularities of the OCT/EU relations || Mark || -- || Mark || 0 || Mark || + || Mark || + / -

Unadjusted treatment, given the socio-economic difficulties & fragility of OCTs || Concerns about OCT/EU association not being enough adapted to OCT particularities || Particularities of OCT/EU relations would be better reflected || OCT insertion in an agreement with the EU & third partner(s) and reciprocity would reflect regional realities but would not be adapted to the needs of most OCTs; OCTs included in a regional trade agreement would have to compete for attention

Effects || Option 1 Discontinuation || Option 2 Roll Over || Option 3 Improved Asymetric Relations || Option 4 Other Trade Relations

Policy Context (ctd.)

Facilitation of synergies with other EU policies || Mark || -- || Mark || + / 0 || Mark || + || Mark || +

No synergies with other EU policies || Policy coherence would be ensured through OAD implementation; ad hoc synergies through OCT participation in horizontal programmes || Policy coherence would better be ensured through the OAD text and implementation; active facilitation synergies through promoting OCT participation in horizontal programmes || Coherence with the EU's bilateral trade policy would be actively pursued. No OCT participation in internal horizontal programmes, except for those open to individual EU citizens, OCT eligibility for external horizontal programmes

7.5.        Preferred Option

Based on the analysis
and comparison of the different policy options above, policy option 3
seems to be the policy option that, for OCTs as a whole, would best reflect:

(a)
the purpose and overall objectives of the OCT/EU
association as set out in Part IV of the TFEU and as suggested in Council
Conclusions (16710/09) on the EU’s relations with OCTs;

(b)
the general objectives for OCT/EU trade and
economic cooperation into which the association's purpose and overall
objectives are translated;

(c)
the shared ambition of OCTs and the EU to
modernise the OCT/EU association, and to establish a more reciprocal
partnership, based on mutual interests and taking into account the various
structural challenges OCTs face (see Chapter 2).

Other policy options
would not translate these objectives as well as policy option 3. Neither would
they present as good a balance of social, economic and environmental impacts as
policy option 3.

Policy Option 1:
Possibly Contrary to OCT sustainable development

Contrary to policy
option 3, policy option 1 is unlikely to contribute to achieving the overall
objectives of the OAD and the general objectives of OCT/EU trade and economic
cooperation; unless one would assume that these objectives would be reached by
the sudden exposure of OCT economies to increased competition by discontinuing
trade preferences and cooperation, which would force OCT governments to review
their economic policies in view of maintaining the competitiveness of OCT
businesses. The inherent structural problems OCTs face, such as the size of
their populations and economies and the limited capacities available to them,
suggest that such a scenario is unrealistic.

Instead, it is more
likely that policy option 1 would negatively impact the position of OCTs in
global, regional and EU markets. Due to the loss of preferential access to the
EU market, OCT exports to the EU are likely to fall, with all possible negative
impacts on employment that this might entail. Thus, rather than providing the
necessary levers for promoting the sustainable social and economic development
of OCTs, policy option 1 would more likely result in a declining social and
economic trend for OCTs.

Indirectly, policy
option 1 could have a positive impact on regional cooperation as OCTs might
want to replace the OCT/EU association by cooperation schemes with other third
partners. Where this would occur, the most vulnerable OCTs could be left in the
cold for lack of sufficient assets which would make them interesting as a
partner to cooperate with. In the absence of a framework for OCT/EU dialogue,
policy option 1 would also entail that the EU would not be able to promote its
values and interests in the world via its relations with OCTs. As it would not
actively engage with OCTs, the EU would not be involved in OCT trade related
policies in which it may have a particular interest, such as the access to raw
materials or the respect of labour standards.

Policy Option 2:
Likely to Lead to Stagnation

As was discussed in
Chapter 5, the present OCT/EU association arrangements have proven to be
beneficial for OCT social and economic development, by providing free access to
the large EU market and the possibility of support for exploiting the wide
range of export opportunities this represents. An external evaluation study
that was conducted in 2011 found that the OCT/EU cooperation in the period
1999-2009 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 OCT/EU cooperation and other EU policies.
In light of this assessment, policy option 2 could legitimately be considered
as a valid option for the future OCT/EU association relation.

However, the present
arrangements for the OCT/EU association date back to 2001, and underwent only
some small amendments in 2007. Since then, the trade and economic environments
in which OCTs operate have been changing substantially with the multiplication
of free trade negotiations and agreements by major trading countries and blocks
such as the EU, the US and Canada (thus contributing to OCT preference erosion)
and the corollary progress of international cooperation of trade related areas
such as public procurement, intellectual property rights and sustainable
development. While the present OCT/EU association arrangements already provide
opportunities for the OCTs and the EU to cooperate on these issues, these are
either rudimentary or largely remain inactive.

Rolling over the
present OCT/EU arrangements might not also be fully consistent with the
increased emphasis that has been put on the necessary coherence between EU
external and internal policies following the entry into force in December 2009
of the amendments to the Treaties on the European Union and on the Functioning
of the European Union that were introduced by the Lisbon Treaty. Policy option
2 would not be fully in line with the Europe 2020 Agenda that was adopted in
March 2010 as it would mean that rather than introducing a more reciprocal
partnership, in which EU interests could be better taken into account, the
donor/beneficiary rationale which has traditionally underpinned OCT/EU relations
would be maintained.

While it would be
possible to work towards the achievement of the three central objectives of
competitiveness, resilience and cooperation under policy option 2, this would
have to be done without OCTs being able to benefit from some of the innovative
elements that were recently introduced or are considered to be in other fields
of EU trade policy: improved market access conditions through a reform of the
rules of origin, a reduction of non-tariff barriers or further EU market opening
in the services sectors. While OCTs would not benefit from these innovations,
other EU partners, including OCT competitors would. Consequently, the positive
effects that for instance OCT/EU cooperation on trade and trade related issues
may have on OCT competitiveness may be cancelled out by the OCTs' loss of
relative competitiveness vis-à-vis other EU trade partners. Hence, policy
option 2 could be an option in which OCTs would stagnate economically and
socially, rather than maintaining the status quo.

Policy Option 4:
Theoretically Possible Only for a Few

Though it would be a
possibility to consider policy option 4 for structuring the future OCT/EU trade
relations, it is unlikely that it could constitute a systemic solution covering
all OCTs. Instead, it would likely be a policy option that would befit only a
few OCTs. Implementation of this policy option would be subject to the
following conditions:

(a)
OCT political commitment to regional cooperation
and integration and their long term anchoring in their regional economic
environment;

(b)
OCT economic interest in regional cooperation
and integration;

(c)
legal and institutional limits to OCT
integration;

(d)
EU and third partner political will to promote
OCT inclusion in other EU trade agreements.

As discussed in Chapter
3 of this paper, OCT engagement with their neighbours and interest in further
regional cooperation and integration is uneven. Montserrat, for instance, is
deeply involved in regional cooperation and integration processes in the
context of the OECS and CARICOM and has repeatedly expressed an interest to
take further steps. However, other OCTs have no opportunities and/or interest
in taking part in regional cooperation, amongst others due to their remoteness
(e.g. Saint Helena, Ascension Island and Tristan da Cunha) or for other
reasons, including political reasons (Falkland Islands).

The OCTs' own economic
analysis would also be determinant in their choice in favour of inclusion in
other EU trade agreements. OCTs might, at the end of the day, come to the conclusion
that the costs of membership of another EU trade agreement outweigh the
benefits of this membership. In those cases where OCT and third partner
political interests and economic analyses would meet, policy option 4 may
effectively contribute to the overall objectives of the OCT/EU association and
its trade and economic cooperation component; even if it would be implemented
by other means than the type of arrangements currently provided in the OAD.

As explained in the
sections of this chapter regarding policy option 4, its implementation would be
a heavy and complex process 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. Those
OCTs that would be included in one of the EU's other bilateral agreements might
run the risk of facing heavy competition by the larger trade partner(s) for
having their voices heard and concerns taken into account.

In addition, the
compatibility of policy option 4 with EU and international law would need to be
checked. The substantial overhaul of OCT/EU relations that this option would
imply might mean that an effective end would be put to the current association
to the EU of the OCTs concerned. Thus, policy option 4 may lead to a
multiplication of the types of trade relations the EU would maintain with OCTs;
even if this would be mitigated by their insertion in existing trade
agreements.

Finally, a variant of
this option, which would combine the possible benefits of policy options 3 and
4. It would consist of the OCTs, represented by their Member States,
negotiating free trade agreements with the EU's trade partner(s), independently
from the agreement the latter has with the EU. This would create a trilateral
trade configuration, wherein the OCTs would continue to benefit from the
treatment grants them on the one hand and the one they get from the other third
partner(s) on the other. In this scenario, OCT concessions would only have to
be made towards the third partner(s). Such negotiations would not involve the
EU and thus the ramifications of this scenario have not been taken into account
in the context of this paper.

              List
of References

Council
Decisions, Regulations and Other Texts

-
COUNCIL, Regulation (EEC)N° 2658/87 of 23 July
1987 on the tariff and statistical nomenclature and on the Common Customs
Tariff (OJ L 256, 07/09/1987, p. 1), as last amended by Council Regulation (EC)
No 254/2000 of 31 January 2000 (OJ L 28, 03/02/2000, p. 16).

-
COUNCIL, Decision (2001/882/EC) of 27 November
2001 on the association of the OCTs with the European Community (OJ L 314 of 30
November 2001) as amended by Council Decision (2007/249/EC) of 19 March 2007
(OJ L 109 of 26 April 2007)

-
COUNCIL, Decision (2006/526/EC) of 17 July 2006
on relations between the European Community on the one hand, and Greenland and
the Kingdom of Denmark on the other(OJ L 208 of 27 July 2006)

-
COUNCIL, Regulation (EC) N° 1528/2007 of 20
December 2007 applying the arrangements for products originating in certain
states which are part of the African, Caribbean and Pacific (ACP) Group of
States provided for in agreements establishing, or leading to the establishment
of, Economic Partnership Agreements (OJ L 348, 31 December 2007).

-
Internal Agreement between the representatives
of the Member States, meeting within the Council, on the financing of Community
aid under the multiannual financial framework for the period 2008 to 2013 in
accordance with the ACP-EC Partnership Agreement and on the allocation of
financial assistance for the Overseas Countries and Territories to which Part
Four of the EC Treaty applies (OJ L 247, 9 September 2006, p32).

-
COUNCIL, Regulation (EC) N° 1005/2008 of 29 September
2008 establishing a Community system to prevent, deter and eliminate illegal,
unreported and unregulated fishing, amending Regulations (EEC) No 2847/93, (EC)
No 1936/2001 and (EC) No 601/2004 and repealing Regulations (EC) No 1093/94 and
(EC) No 1447/1999 (OJ L 286, 29 October 2008, p. 1).

-
COUNCIL, Regulation (EC) N° 732/2008 of 22 July
2008 applying a scheme of generalised tariff preferences for the period from 1
January 2009 to 31 December 2011 and amending Regulations (EC) No 552/97, (EC)
No 1933/2006 and Commission Regulations (EC) No 1100/2006 and (EC) No 964/2007.

-
COUNCIL, Regulation (EC) N° 1528/2007 of 20
December 2007 applying the arrangements for products originating in certain
states which are part of the African, Caribbean and Pacific (ACP) Group of
States provided for in agreements establishing, or leading to the establishment
of Economic Partnership Agreements,

-
COUNCIL, Conclusions (16710/09) of 22 December
2009 on the EU’s relations with Overseas Countries and Territories (OCTs),

Commission
Documents (Communications, Green Papers, Working Documents)

-
COMMISSION, Communication COM(97) 402 of 23 July
1997 on the Management of Preferential Tariff Arrangements.

-
COMMISSION, Communication COM(1999) 163 of 20
May 1999 on the status of the OCTs associated with the EC and options for “OCT
2000”,

-
COMMISSION, Decision 2001/822/EC as regards the
rules of origin for meat of scallops of the genus Placopecten magellanicus from
Saint Pierre and Miquelon (OJ L 197 of 28 July 2005),

-
COMMISSION, Decision 2007/167/EC of 15 March
2007 derogating from the rules of origin set out in Council Decision
2001/822/EC as regards certain fishery products imported from Saint Pierre and
Miquelon (OJ L 76 of 16 March 2007).

-
COMMISSION, Communication COM(2007) 183 of 18
April 2007 on Global Europe: a stronger partnership to deliver market access
for European exporters.

-
COMMISSION, Decision 2007/767/EC of 15 November
2007 derogating from the rules of origin set out in Council Decision
2001/822/EC as regards certain fishery products imported from the Falkland
Islands (OJ L 310 of 28 November 2007).

-
COMMISSION, Green Paper COM(2008) 383 of 25 June
2008 on Future relations between the EU and the Overseas Countries and
Territories.

-
COMMISSION, Communication COM(2008) 699 of 4
November 2008 on the raw materials initiative — meeting our critical needs for
growth and jobs in Europe

-
COMMISSION, Staff working document SEC(2008)
2067 of 25 June 2008 accompanying the green paper “Future relations between the
EU and the Overseas Countries and Territories” (COM (2008) 383).

-
COMMISSION, Decision 2005/578/EC of 27 July 2005
derogating from Council D

-
COMMISSION, Decision 2009/776/EC of 16 October
2009 on a derogation from Council Decision 2001/822/EC, as regards the rules of
origin for prepared and preserved shrimps and prawns from Greenland (OJ L 278
of 23 October 2009).

-
COMMISSION, Communication COM(2009) 623 of 6
November 2009 on Elements for a new partnership between the EU and the OCTs.

-
COMMISSION, Communication COM(2010) 2020 of 3
March 2010 on Europe 2020: a Strategy for Smart, Sustainable and Inclusive
Growth

-
COMMISSION, Communication COM(2010)612 of 9
November 2010 on Trade, Growth and World Affairs: Trade Policy as a Core
Component of the EU's 2020 Strategy

-
COMMISSION, Decision 2011/47/EU of 20 January
2011 on a derogation from the rules of origin set out in Council Decision
2001/822/EC as regards sugar from the Netherlands Antilles (OJ L 21 of 25
January 2011)

-
 COMMISSION Decision  2011/122/EU of 22 February
2011 on a derogation from the rules of origin set out in Council Decision
2001/822/EC as regards certain fishery products imported from Saint Pierre and
Miquelon (OJ L 49 of 24 February 2011).

-
COMMISSION, Communication COM(2011) 241 of 10
May 2011 on a proposal for a regulation from Council and Parliament applying a
scheme of generalised tariff preferences.

-
COMMISSION, Communication COM (2011) 424 of 13
July 2011 on the external dimension of the Common Fisheries Policy.

-
COMMISSION, Communication COM(2011) 846 of 7
December 2011 on a proposal for a Council Decision on relations between the
European Union on the one hand, and Greenland and the Kingdom of Denmark on the
other.

-
COMMISSION, Staff Working Paper SEC(1484) of 7
December 2011, Impact Assessment accompanying the document “Council Decision on
relations between the European Union on the one hand, and Greenland and the
Kingdom of Denmark on the other” (COM(2011)846).

Documents
from Other Instances

-
Joint Position Paper of the Governments of the
Kingdom of Denmark, the French Republic, the Kingdom of the Netherlands and the
United Kingdom of Great Britain and Northern Ireland, and the Overseas
Countries and Territories on the future relations between the Overseas
Countries and Territories and the European Union, adopted at the Ministerial
Conference of the Association of the Overseas Countries and Territories of the
European Union, Nouméa, New Caledonia, 28 February 2011

Prior and
Ongoing Studies

-
BROOKS, P., STONEMAN, R. and RIOS, R. Enhancing
Atlantic OCTs' Trade and Economic Activity (within their region and the
European Union), EUROPEAID/11/9860/C/SV/multi - Lot N° 10, N° 2008/170783,
February 2010

-
BURKE, S.J., KIROSINGH, M., Overseas Countries
and Territories Technical Assistance for the Mid Term Review (MTR) 2006, Final
Report, Framework Contract Lot N° 4 – Sectoral and project evaluations –
Specific Contract No 119860/C/SV/multi, 18 December 2006

-
ECLAC, Review of CARIFORUM/EU EPA: Implications
for the British and Dutch Caribbean OCTs, LC/CAR/M.176, 4 September 2008

-
ECO Consult et al., Region Level Evaluation:
Overseas Countries and Territories (OCT), Contract N° EVA 2007/geo-acp, draft
Final Report, July 2011.

-
HELLYER, M., CARICOM Single Market and Economy:
Costs/Benefits Study, Final Report, June 2004 .

-
KIRKPATRICK et al. (2011), A Trade
Sustainability Impact Assessment Relating to the Negotiation of a Comprehensive
Economic and Trade Agreement (CETA) between the EU and Canada, Trade 10/B3/B06,
Final Report, June 2011.

-
LUFF, David et al., the Analysis of the Regional
Economic Integration Processes (Caribbean, Pacific and Indian Ocean) and
Recommendations Aiming at Enhancing Trade and Economic Activity of OCTs within
their Region and with the EC, Framework Contract Beneficiaries– Lot 11, N°
2008/170791, February 2010.

-
SALMON Jean Michel, OCT Regional Integration
Impact Study, Final Report, Framework Contract Beneficiaries - Lot 11 N°.
2006/123116, July 2007.

-
SPANNEUT, C., Analysis of the Statistical Systems
in the OCTs and Recommendations Aiming at Enhancing Statistical Systems of
OCTs, Framework Contract Beneficiaries – Lot 11, N° 2010/253401/1, Draft Final
Report, September 2011.

              Annex 12.2: Problem Tree of the OCT Trade Regime

Annex 12.3: OAD Provisions and Annexes
Relevant to the OCT Trade Regime

Part./Title/Chapter || Article

Part II: Areas of Cooperation

|| Art.12: Trade development

Art. 13: Trade in Services

Art. 14: Trade Related Areas

Art. 16: Regional Cooperation & Integration

Part III: Instruments of OCT-EC Cooperation

Title II: Economic & Trade Cooperation || Art. 34: Objective

Chapter 1: Arrangements for trade in goods || Art. 35: Free Access for Originating Products

Art. 36: Transhipment of Non-Originating Products

Art. 37: Committee Procedure

Art. 38: Quantitative Restrictions and Measures

Art. 39: Waste

Art. 40: Measures by OCTs

Art. 41: Surveillance Clause

Art. 42: Safeguard Measures

Art. 43: Committee Procedure

Chapter 2: Trade in Services & Rules of Establishment || Art. 44: General Objective

Art. 45: General Principles of Establishment and the Provision of Services

Art. 46: Maritime Transport

Chapter 3: Trade-Related Areas || Art. 47: Current Payments and Capital Movements

Art. 48: Competition Policies

Art. 49: Protection of Intellectual Property Rights

Art. 50: Standardisation & Certification

Art. 51: Trade & the Environment

Art. 52: Trade & Labour Standards

Art. 53: Consumer Policy & Consumer Health Protection

Art. 54: Prohibition of Disguised Protectionism

Chapter 4: Monetary & Tax Matters || Art. 55: Tax Carve-Out Clause

Art. 56: Tax & Customs Arrangements for EU Funded Contracts

Chapter 5: Vocational Training, Eligibility for EU Programmes & Other Provisions || Art. 58: Programmes Open to OCTs (notably those listed in Annex II F)

Art. 59: Euro Info Correspondence Centres

Art. 60: CDE & CTA

Annex II: EU Financial Assistance to OCTs ||

Annex III: Rules of Origin ||

Annex IV: Transhipment ||

              Annex
12.4: Trade and Trade Related Areas of Cooperation in Articles 12, 13 and 14 of
the OAD

Trade Development (Art. 12) || Trade in Services (Art. 13) || Trade Related Areas (Art. 14)

Support for developing the necessary macroeconomic policies, trade strategies and the corresponding legislative frameworks || Support to developing trade related services: maritime transport, air traffic and telecommunications\* || Support OCT capacities to handle all areas related to trade, including the institutional framework

Support to the development of trade related infrastructure, capacities, human resources, professional skills and intermediaries || Support to the formulation of sustainable tourism policies and the development of information systems on tourism || Cooperate on the promotion and protection of investments, support the formulation and development of policies and legal frameworks in the areas of competition and the protection of intellectual property (a.o. geographical indications)

Support to market development and exploration, product quality improvement || Support to the development in the field of tourism of markets, human resources & professional management capacities, marketing and branding measures, tourism infrastructure and tourism products, to measures encouraging investments || Support OCT efforts with regard to standardisation and certification, based on internationally agreed standards and norms, with specific attention to: quality management, metrology, conformity assessment and standardisation

Support to measures aimed at encouraging investments || || Support OCT public and private capacity with regard to human, animal and plant health measures

Support to Least developed OCTs' participation in international trade fairs || || Support OCT policies and capacities relative to consumer health protection

|| || Cooperate with OCTs on the mutual supportiveness of trade and environment policies and on trade and labour standards Support public and private sector efforts deployed in the field of information technology and telecommunications\*

\* Issues related to the OCTs' connectivity (transport infrastructure, telecommunications etc.) are subject of the part of the Impact Assessment dedicated to accessibility issues

              Annex
12.5: OCT Membership to Regional Organisations

||

Source: European Community – Caribbean Region, Regional Strategy Paper and Regional Indicative Programme 2008-2013; Strasbourg, 15 November 2008 || Source: Association of the Overseas Countries and Territories

INDIAN OCEAN AND ISOLATED TERRITORIES

Falkland
Islands

None

Greenland

Member of the Nordic Council

Member of the Nordic Atlantic Cooperation
and the West Nordic Foundation

Participant in the Arctic Council

Member of the Inuit Circumpolar Conference

Mayotte

None

Saint Pierre et Miquelon

None

Saint
Helena, Ascension Island and Tristan da Cunha

None

              Annex
12.6: WTO Obligations of OCTs - Greenland

Treaty || Denmark || Greenland

Marrakesh Agreement establishing the World Trade Organisation || x || x

Annex 1A: Multilateral Agreement on Trade in Goods || x || x

General Agreement on Tariffs and Trade 1994 || x || x

Agreement on Agriculture || x || x

Agreement on the Application of Sanitary and Phytosanitary Measures || x || x

Agreement on Textiles and Clothing || x || x

Agreement on Technical Barriers to Trade || x || x

Agreement on Trade related Investment Measures || x || x

Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 || x || x

Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 || x || x

Agreement on Preshipment Inspection || x || x

Agreement on Rules of Origin || x || x

Agreement on Import Licensing Procedures || x || x

Agreement on Subsidies and Countervailing Measures || x || x

Agreement on Safeguards || x || x

Annex 1B: General Agreement on Trade in Services || x || x

Annex 1C: Agreement on Trade related aspects of Intellectual Property Rights || x || x

Annex 2: Understanding on Rules and Procedures Governing the Settlement of Disputes || x || x

Annex 3: Trade Policy Review Mechanism || x || x

Annex 4: Plurilateral Trade Agreements || x || x

Agreement on Trade in Civil Aircraft || - || -

Agreement on Government Procurement || x || -

International Bovine Meat Agreement || - || -

x: Covered by the Agreement                    – not covered by the Agreement Source: Denmark, Ministry of Foreign Affairs, reply to Commission trade questionnaire to OCTs and their Member States, October 2011

              Annex
12.7: OCT Trade Interests

Current Markets                        Respondents       % Respondents EU                                               9                           82% US                                               9                           82% Caribbean                                   5                           46% Far East                                                                   36% Japan                                          3                           27% Far East (other)                          3                           27% Pacific                                          2                           18% China                                           2                           18% Latin America                               2                           18% Canada                                         2                           18% Europe (other)                              1                           9% Oceania                                        1                           9%                                                                                 || Future Markets                     Respondents           % Respondents EU                                          9                                               82% US                                           8                                               73% Latin America                        4                                               36% Far East                                  4                                               36% China                                      3                                               27% Caribbean                                3                                               27% Canada                                    3                                               27% Japan                                       2                                               18% Far East (other)                        2                                               18% Pacific                                     1                               9% Europe (other)                          1                               9% Oceania                                   1                               9% Middle East                              1                               9% Africa                                      1                               9%

Current Goods Exports                  Respondents    % Respondents Agro-food                                        9                                                         82% Fisheries                                         6                                                         55% Beverages                                       5                                                         45% Materials                                         4                                                         36% Chemicals & plastics                      3                                                         27% animal/veg prods (other)                     2                                                         18% Live animals                                      2                                                         18% Handicraft, household                         2                                                         18% Fruits and vegetables                          2                                                         18% Metals, minerals, ores, fuels, oils         2                                                         18% Machinery                                         2                                                         18% Textiles                                             2                                                         18% Fruit preparations                              1                                                         9% || Future Goods Exports                    Respondents    % Respondents Agro-food                                     8                                                         73% Fisheries                                      7                                                         64% Beverages                                   6                                                         55% Fruit preparations                           3                                                         27% Animal/veg prods (other)                3                                                         27% Metals, minerals, ores, fuels, oils      3                                                         27% Handicraft, household                     1                        9% Live animals                                   1                        9% Materials                                       1                        9%

Current Services Exports                 Respondents                                                           % Respondents Tourism Services                              6                                                           55% Construction Services                           2                                                           18% Transport Services                               2                                                           18% Business Services                                1                                                           9% Financial Services                                1                                                           9% Distribution Services                             1                                                           9% Recreation, sports, culture                     1                                                           9%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               || Future Services Exports               Respondents    % Respondents Tourism                                         9                       82% Recreation, sports, culture           6                       55% (renewable) energy                       5                       45% Business services                         5                       45% Telecommunication                       5                       45% Education                                      4                       36% Transport services                           3                        27% Medical Services                             3                        27% Distribution Services                        3                        27% Environment Services                       2                        18% Computer Services                           2                        18% Financial Services                            2                        18% Construction Services                       1                        9% ||

Obstacles non-EU                         Respondents                                                      % Respondents Logistics                                 8                                                73% Transport, freighting costs    7                                                64% Connectivity                           4                                                36% Access to capital                    4                                                36% Marketing/branding               4                                                36% Cooperation 3rd countries          3                                                27% Standards/rules (SPS/TBT)        3                                                27% Administrative procedures         3                                                27% Infrastructure                            2                                                18% Exchange rate                           2                                                18% Size/capacity companies            2                                                18% Labour costs                             1                                                9% Labour skills                             1                                                9% Visibility                                   1                                                9% || Obstacles EU                                  Respondents      % Respondents Logistics                                          6                                                         55% Transport, freighting costs             5                                                         45% Standards/rules (SPS/TBT)             5                                                         45% Marketing/branding                        4                                                         36% Access to capital                             4                                                         36% Administrative procedures             4                                                         36% Connectivity                                       3                          27% Infrastructure                                     2                          18% Size/capacity companies                     2                          18% Labour costs                                      1                          9% Visibility                                            1                          9% Labour skills                                      1                          9% Cooperation EU/ EU MS                    1                          9%

Support provided by territories, Member States, others Public aids/ support programmes  6                                                                              55% Trade promotion/ business support                                                                              5                                                                              45% Support participation fairs              3                                                                              27% Support to intermediaries              3                                                                              27% Economic representations             3                                                                              27% SME support                                     2                                                                              18% Legislative/ regulatory framework      2                                                                              18% Dedicated training                             2                                                                              18% Export certification                            1                                                                              9% Infrastructure                                    1                                                                              9% Export strategy (under development)  1                                                                              9% Market intelligence                            1                                                                              9% || Possible additional support                                            Technical assistance, training, capacity building      7                                                                                   64% Public aids/ support programmes                             4                                                                                   36% Access to capital/ investments                                 4                                                                                   36% Marketing/branding                                                  3                                                                                   27% Market intelligence, info on calls for tenders          3                                                                                   27% Participation in trade fairs                                             2                                                                                   18% Infrastructure                                                              2                                                                                   18% Conformity international/EU standards                          2                                                                                   18% Legislative/regulatory framework                                  1    9% Facilitation market access                                             1    9% Support intermediaries, participation business networks   1    9%

Interest in EU trade negotiations                              Caribbean                                               4                                                                                   36% CETA                                                      2                                                                18% Central America                                       2                                                                18% Andes                                                      2                                                                18% Chile                                                        2                                                                18% Mexico                                                     2                                                                18% Pacific                                                     1                                                                9% ASEAN                                                   1                                                                9%                                                                                      || Areas of Interest in EU trade negotiations                                                                                                 Preference erosion (Caribbean, Pacific, CETA)             3                                                                                   27% Regional integration (Caribbean)                                   2                                                                                   18% SPS/TBT (Pacific)                                                       1                                                                                   9% Rules of Origin (Pacific)                                               1                                                                                   9% Cooperation (Pacific)                                                   1                                                                                   9% Development dimension (Pacific)                                  1                                                                                   9% Tariff liberalisation and method (Pacific)                       1                                                                                   9% Reciprocity                                                                  1                                                                                   9% Tax and development                                                   1                                                                                   9% Special Differential Treatment                                      1                                                                                   9%

              Annex
12.8: Treatment of OCT Goods Imported into the EU under CET/GSP Rates

OCT (all figures for 2010) || Imports\* (A) (€ 1000)\*\* || Dutiable Imports (B) (€ 1000) || CET Duties (C) (€ 1000€) || GSP Duties (D) (€ 1000) || AVE CET\*\*\* Total (C/A) % || AVE GSP Total (D/A) %

Cayman Islands || 872,367 || 2,808 || 63 || 11 || 0.01 || 0.00

New Caledonia || 343,875 || 7,350 || 461 || 205 || 0.13 || 0.06

Greenland || 316,672 || 297,796 || 37,587 || 21,247 || 11.87 || 6.71

Virgin Islands (British) || 155,862 || 5,762 || 223 || 125 || 0.14 || 0.08

Netherlands Antilles || 144,533 || 56,487 || 9,105 || 7,176 || 6.30 || 4.97

Falkland Islands || 112,444 || 110,740 || 7,696 || 3,529 || 6.84 || 3.14

French Polynesia || 23,028 || 12,683 || 1,268 || 814 || 5.51 || 3.54

Mayotte || 5,016 || 1,766 || 143 || 64 || 2.86 || 1.28

Aruba || 3,993 || 2,172 || 119 || 27 || 2.99 || 0.68

Saint Helena || 1,608 || 252 || 25 || 17 || 1.56 || 1.04

Saint Pierre et Miquelon || 1,314 || 1,311 || 194 || 172 || 14.78 || 13.12

Montserrat || 1,222 || 410 || 15 || 5 || 1.24 || 0.39

Pitcairn || 592 || 490 || 18 || 4 || 3.09 || 0.70

Turks and Caicos Islands || 344 || 207 || 15 || 9 || 4.46 || 2.54

Anguilla || 289 || 17 || 0 || 0 || 0.17 || 0.04

Wallis and Futuna Islands || 50 || 34 || 2 || 1 || 4.57 || 2.22

Total || 1,983,211 || 500,285 || 56,937 || 33,406 || 2.87 || 1.68

\*: Total value of EU imports || || || || || ||

\*\*: Thousands of Euros || || || || || ||

\*\*\*:Ad Valorem Equivalent || || || || || ||

The average rate is calculated by dividing dutiable
exports by total exports. Pitcairn, Turks and Caicos and Wallis and Futuna
exports are so small that all three OCTs combined would face duties between EUR
35,000 and 14,000, taking into account that their combined exports to the EU
represent only EUR 1million.

              Annex
12.9: Main Dutiable OCT Products on Import in the EU

Greenland (Fish and processed fish) || Imports (A) (€ 1000) || CET Duties (B) (€ 1000) || GSP Duties (C) (€ 1000) || AVE CET (B/A) % || AVE GSP (C/A) %

frozen shrimps and prawns (…) || 85,526 || 10,263 || 3,592 || 12 || 4,20

shrimps and prawns in packaging > 2 kg (…) || 57,042 || 11,408 || 3,993 || 20 || 7,00

frozen lesser or Greenland halibut (…) || 55,995 || 4,200 || 4,200 || 7.50 || 7,50

shrimps and prawns in airtight container (…) || 32,586 || 6,517 || 6,517 || 20 || 20,00

frozen fillets of cod (…) || 15,084 || 1,131 || 392 || 7.50 || 2,60

frozen fillets of saltwater fish (…) || 14,985 || 1,708 || 1,184 || 11.40 || 7,90

fish livers and roes, dried, smoked (…) || 7,390 || 813 || 554 || 11 || 7,50

frozen crabs (…) || 5,809 || 436 || 151 || 7.51 || 2,60

frozen redfish (…) || 2,772 || 208 || 208 || 7.50 || 7,50

frozen fillets of haddock (…) || 1,430 || 107 || 107 || 7.48 || 7,48

shrimps and prawns in packaging < 2 kg (…) || 1,372 || 274 || 96 || 19.97 || 7,00

frozen saltwater fish, edible (…) || 1,205 || 149 || 63 || 12.37 || 5,23

frozen fillets of coalfish (…) || 652 || 49 || 49 || 7.52 || 7,52

Sub total of fish and processed fish || 281,848 || 37,263 || 21,106 || ||

% of total EU imports from Greenland || 89 || 99 || 99 || ||

Saint Pierre et Miquelon (fish) || Imports (A) (€ 1000) || CET Duties (B) (€ 1000) || GSP Duties (C) (€ 1000) || AVE CET (B/A) % || AVE GSP (C/A) %

cod (…) salted or in brine only (excl. fillets) || 683 || 89 || 89 || 13,03 || 13,03

Sub total || 683 || 89 || 89 || ||

% of total EU imports from SPM || 51 || 45 || 51 || ||

Falkland Islands (Fish and processed fish) || Imports (A) (€ 1000) || CET Duties (B) (€ 1000) || GSP Duties (C) (€ 1000) || AVE CET (B/A) % || AVE GSP (C/A) %

squid 'loligo patagonica' (…) || 65,445 || 3,927 || 1,636 || 6 || 2,50

squid 'loligo spp.', frozen (…) || 22,504 || 1,350 || 563 || 6 || 2,50

frozen saltwater fish, edible (…) || 8,263 || 1,025 || 430 || 12.40 || 5,20

illex spp.', with or without shell (…) || 4,804 || 384 || 216 || 7.99 || 4,50

frozen argentine hake (…) || 4,720 || 708 || 543 || 15 || 11,50

frozen pink cusk-eel (…) || 1,118 || 84 || 29 || 7,51 || 2,59

frozen fillets of saltwater fish (…) || 817 || 93 || 65 || 11.38 || 7,96

frozen meat (…) || 231 || 17 || 6 || 7.36 || 2,60

frozen cape hake (…) || 160 || 24 || 18 || 15 || 11,25

frozen fillets of argentine hake (…) || 132 || 10 || 5 || 7.58 || 3,79

Sub total of fish and processed fish || 108,194 || 7,622 || 3,511 || ||

% of total EU imports from Falkland Islands || 96.2 || 99 || 99 || ||

(Former) Netherlands Antilles || Imports (A) (€ 1000) || CET Duties (B) (€ 1000) || GSP Duties (C) (€ 1000) || AVE CET (B/A) % || AVE GSP (C/A) %

jet fuel, kerosene type || 16,404 || 771 || 0 || 4.70 || 0,00

frozen yellowfin tunas (…) || 9,738 || 2,142 || 1,802 || 22.00 || 18,50

raw cane sugar (…) || 5,418 || 4,139 || 4,139 || 76.39 || 76,39

frozen skipjack or bonito (…) || 4,505 || 991 || 833 || 22.00 || 18,49

frozen bigeye tunas (…) || 1,161 || 255 || 215 || 21.96 || 18,52

parts of gas turbines (…) || 684 || 28 || 0 || 4.09 || 0,00

waters, incl. mineral and aerated (…) || 438 || 42 || 27 || 9.59 || 6,16

Sub total || 38,348 || 8,368 || 7,016 || ||

% of total EU imports from N. Antilles || 26 || 92 || 97 || ||

French Polynesia || Imports (A) (€ 1000) || CET Duties (B) (€ 1000) || GSP Duties (C) (€ 1000) || AVE CET (B/A) % || AVE GSP (C/A) %

crude coconut oil || 4,133 || 264 || 91 || 6.39 || 2,20

fresh or chilled fillets and other fish || 1,470 || 265 || 213 || 18.03 || 14,49

vanilla || 943 || 57 || 20 || 6.04 || 2,12

frozen fish fillets (…) || 905 || 163 || 131 || 18.01 || 14,48

fruit and other edible parts of plants (…) || 797 || 166 || 138 || 20.83 || 17,31

articles of jewellery and parts (…) || 616 || 15 || 0 || 2.44 || 0,00

Sub total || 8,864 || 930 || 593 || ||

% of total EU imports from F. Polynesia || 35 || 73 || 73 || ||

              Annex
12.10: Prospects for Inclusion of OCTs in Other Trade Agreements

OCTs || EU trade partner(s) || State of play negotiations || Prospects inclusion OCT || Possible impact

Greenland Saint-Pierre et Miquelon || Canada || Well advanced || Small: outstanding legal questions || Access to Canadian market, with reciprocity

Caribbean OCTs || Caribbean || EPA concluded; provisional application, pending full ratification || EPA Article 246: possibility of bringing OCTs within the scope of the EPA || Access to 15 countries, with reciprocity

Central America; Colombia, Peru || Negotiations concluded; agreements moving towards signature and ratification || Small: outstanding legal questions || Access to Central American and 2 Andean countries, with reciprocity

Falkland Islands || MERCOSUR || FTA negotiations ongoing || Slim: political reasons (Argentina) || -

Mayotte || Eastern and Southern Africa || Interim EPAs negotiated; but not applied EPA negotiations well advanced || Perspective disappears if and when Mayotte becomes an Outermost Region || -

New Caledonia French Polynesia Wallis et Futuna || Pacific || Interim EPA applied with Papua New Guinea; pending with Fiji; regional negotiations ongoing || If interim EPA membership is widened, OCTs could be included; idem for possible regional EPA. || Access ranging from 2 to 15 countries, with reciprocity

              Annex
12.11: Comparison Rules of Origin under Policy Options 2-4

|| Option 2: Status Quo || Option 3: Improved Treatment || Option 4: Other Trade Relations

General provisions

Vessels conditions || 4 criteria (flag, registration, ownership, nationality of the crew) || 3 criteria (flag, registration, ownership) || 3 criteria (flag, registration, ownership)

Tolerance non-originating materials || 15% in value (except textile and clothing) || 15% in value or weight depending on products (except textile and clothing) || 15% in value (except textile and clothing)

Direct transport || Direct transport rule || Non-manipulation clause || Direct transport rule

Derogations (excluding possible derogations to the PSR granted through separate annexes) || - OCT or Member State initiative - For the development of existing industries or the creation of new industries - EU accepts requests by OCTs that are duly justified and when the value added by OCTs exceeds 45 % of the finished product || - OCT, Member State or Commission initiative - Granted when necessary for the development of existing industries or the creation of new industries - When OCT cannot fulfil the rule for temporary reasons or needs time to prepare itself to comply with the rules || - Existence of an automatic derogation for fishery products for some EPAs (cf. EAC, Central Africa…), under quota - EPA country initiative - Granted when necessary for the development of existing industries or the creation of new industries - EU shall respond positively to all requests by ACP States which are duly justified - In some EPAs, the EU accepts request when the value added by OCTs is higher than 45% of the finished product

Certification || OCT authorities || Self certification from 2017 || OCT authorities

|| Option 2: Status Quo || Option 3: Improved Treatment || Option 4: Other Trade Relations

Cumulation

Cumulation || - Full cumulation with the EU, all OCTs and all ACP countries, but with certain exclusions || - Bilateral cumulation with the EU; - Full cumulation with all OCTs and with ACP countries under EPAs, but with certain exclusions - Diagonal cumulation upon request with EU FTA partners, for industrial products || - Full cumulation with the EU, all OCTs, with countries of the same EPA and with other EPA countries, but with certain exclusions - Diagonal cumulation upon request with neighbouring countries for EPAs concluded - cumulation with materials which enter the EU DFQF under MFN, or under GSP or EBA for the EPA under negotiations, but with certain exclusions - Diagonal cumulation for products which enter the EU DFQF under an FTA, upon request, with exclusions

|| Option 2: Status Quo || Option 3: Improved Treatment || Option 4: Other Trade Relations

Product Specific Rules

agricultural products || “old type’ standard rules  (i.a. with allowance of non-originating sugar up to 30% value of the final product) ||  Modern GSP list rules (i.a with allowance of non-originating materials up to 40% based on weight for sugar, milk, etc.) || “old type’ standard rules  (i.a. with allowance of non-originating sugar up to 30% value of the final product), with the review clause the list rules will be updated.- Relaxations for specific agricultural products under separate annexes, dependent on the specific EPAs.

industrial products || Max. 40 % non-originating materials || Max. 50 % - 70 % non-originating materials, depending of the products || Max. 40 % non-originating materials

Textile and clothing || Double transformation rule || Double transformation rule, but with modern drafting || Single transformation rule

              Annex 12.12: Glossary

African
Caribbean and Pacific Group of States (ACP): The
denomination ACP States refers to a group of developing countries located in
Africa, the Caribbean and the Pacific regions, with which the EU has maintained
special formal relations since its establishment in 1957. The group mainly
consists of countries that formerly were colonies of individual Member States
of the EU. The term ACP States was coined by the Georgetown Agreement of 1975
which formally established the ACP Group of States. The ACP/EU Partnership
Agreement or Cotonou Agreement of 2000 provides the basis for ACP/EU
cooperation and political dialogue. Under the Cotonou Agreement it is foresee
that the economic and trade component of ACP/EU relations will be enshrined in
Economic Partnership Agreements (EPAs)

Caribbean Community (CARICOM): The Caribbean Community
and Single market and Economy (CARICOM) was first established in 1973 and is
composed of 15 Caribbean countries. CARICOM aims to promote economic
integration and cooperation between its members in view of improving standards
of living , attaining full employment of labour coordinating and sustaining
economic development; expanding trade and economic relations with third States;
enhancing levels of international competitiveness, production and productivity;
. The five associate members to the CARICOM are all British overseas
territories (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Turks
and Caicos); although it is a British overseas territory, Montserrat is a full
member of CARICOM.

CARICOM Single Market and Economy
(CSME): With the CARICOM Single Market and Economy
(CSME), the members of the Caribbean Community (CARICOM) seek to establish a
customs and economic union between themselves by ensuring freedom of goods,
services, labour and capital, the right of establishment, the setup of a common
trade policy and a common external tariff and through coordinated and
harmonised policies and legislation.

Common External Tariff: The Common external Tariff is the tariff rate agreed by all members
of a customs union on imports of a product from outside that same customs union.

Competitiveness and Innovation Framework
Programme (CIP): The Competitiveness and Innovation
Framework Programme (CIP) is an EU programme funded under the EU general budget
2007-2013 which provides support innovation activities (including
eco-innovation) by European small and medium sized enterprises (SMEs), provides
better access to finance and delivers business support services. It encourages
a better take-up and use of information and communication technologies (ICT)
and helps to develop the information society. It also promotes the increased
use of renewable energies and energy efficiency. The CIP runs from 2007 to 2013
with an overall budget of € 3621 million.

Duty
Drawback System: One of
the two variants of the inward processing procedure under which the import
duties are paid at release for free circulation and refunded when the processed
products or the goods in the unaltered state are re-exported. Many free-trade
agreements do not allow drawback if a preferential proof of origin is issued.

Doha Development
Agenda: The Doha Round is the latest round of multilateral
trade negotiations within the WTO membership. Its aim is to achieve major
reform of the international trading system through the introduction of lower
trade barriers and revised trade rules. The work programme covers about twenty
areas of trade. The Round is also known as the Doha Development Agenda
based on the fact that a fundamental objective is to improve the trading
prospects of developing countries.

Economic
Partnership Agreements: The Economic Partnership
Agreements (EPAs)  aim at promoting trade between the between the EU and groups
of countries that are member of the group of African, Caribbean and Pacific States 
through trade development, sustainable growth and poverty reduction. Since
2002, six regional groupings negotiate EPAs with the EU to replace the trade
chapters of the Cotonou Agreement. These EPAs aim at reciprocal free trade,
comprising of duty free and quota free market access, asymmetric gradual market
opening of ACP markets for EU exports and simpler rules of origins. Only one
full EPA has been concluded so far with CARIFORUM, interim EPA are thus in
place with the ACP countries of the Southern African Development Community,
East and Southern Africa and key trading partners in the Pacific.

Enterprise
Europe Network: The Enterprise Europe Network (EEN)
is a network of more than 580 business support organisations (chambers of
commerce and industry, technology centres, research institutes and development
agencies) from 49 countries with a view to help European Small and Medium
Enterprises (SMEs) to develop their business in markets within and outside of
the European Single Market. The objective of the EEN is to offer
information and support on EU matters to SMEs, to obtain feedback from them,
and to provide business cooperation, technology transfer and innovation
services.

Export
Helpdesk: The Export Helpdesk is an online service,
provided by the European Commission, to facilitate market access in particular
for developing countries to the European Union.

Free Trade
Agreement (FTA): Free trade agreements (FTAs) are international
agreements by which two or more countries or customs territories agree to
substantially open their respective markets to one another and improve the
conditions under which the products of their partner(s) access their markets.
Free trade agreements are an exception to the WTO principle of the Most
Favoured Nation, which states that any concession that WTO members cannot
discriminate between WTO members when granting trade concessions. Article XXIV
of the GATT and Article V of the GATs allow exemptions for customs unions and
free trade areas, provided that the members of such entities have liberalised substantially
all the trade between them.

Traditionally,
FTAs focused on reducing the barriers to trade in goods, both of a tariff and
non tariff (NTB) nature. Since the 1990's, the trade agenda has expanded to include
services and other topics such as investments, intellectual property rights,
public procurement, standards, but also trade related areas such as competition
policy, trade and environment and labour rights. The comprehensive FTAs that
the EU has negotiated or is negotiating encompass this agenda.

General
Agreement on Tariffs and Trade (GATT): the General Agreement on Tariffs and Trade (GATT) is an
international trade agreement by which the contracting parties commit to
progressively liberalise the trade in goods by reducing tariffs and abolish quota on trade in goods. The GATT is one of several
multilateral agreements attached to the Marrakesh Agreement or Agreement
Establishing the World Trade Organisation (WTO). All members of the WTO are
contracting party of the GATT. The agreement contains a set of rules and
disciplines regarding the use of restrictive measures such as tariffs and
quota, which all of the WTO members need to respect. It also contains a list of
commitments for each of the WTO members, which indicates the extent to which
they are prepared to open their markets to foreign goods on a
non-discriminatory basis

General
Agreement on Trade in Services (GATS): The General
Agreement on Trade in Services (GATS) is one of the multilateral agreements
that are annexed to the Agreement Establishing the World Trade Organisation
(WTO). It states to which extent foreign service providers have access to specific
sectors of the services markets of WTO members. It also includes a list of
types of services of individual WTO members to which individual member the Most
Favoured Nation principle of non-discrimination does not apply.

Generalised
System of Preferences (GSP): The Generalised System
of Preferences is an autonomous trade measure of the EU through which the EU
offers non-reciprocal trade preferences to support developing countries
exporting to the EU. The GSP is based on the 1979 GATT enabling clause and is
composed of three components with increasing benefits: GSP, GSP+ and EBA. The
general arrangement of the GSP system allows for duty free access for non
sensitive products and tariff reductions for sensitive products. GSP+ gives
wider market access to developing countries, with duty free access to up to 90
% of tariff lines, but this access is conditioned to the respect of certain
basic principles and legal texts regarding sustainable development and good
governance. Everything But Arms (EBA) is a special arrangement for least
developed countries, offering duty free and quota free access to all their products
except for arms.

Government
Procurement Agreement (GPA): The Agreement on
Government Procurement is one of the plurilateral agreements of the World Trade
Organisation. This means that not all WTO members are a signatory to it. The
GPA contains a number of rules and disciplines which the signatory members need
to obey in the procurement procedures of their national and sub-national
government bodies (see public procurement).

Harmonised
System: The Harmonised Commodity
Description and Coding System is an international nomenclature developed
by the World Customs Organisation, which is arranged in six-digit codes
allowing all participating countries to classify traded goods on a common basis.
Beyond the six-digit level, countries are free to introduce national
distinctions for tariffs and many other purposes. The
Combined Nomenclature of the EU integrates the HS Nomenclature and comprises
additional 8-digit subdivisions and legal notes specifically created to address
the needs of the EU.

International Labour Standards : Since 1919, the International Labour Organization has maintained
and developed a system of international labour standards aimed at promoting
opportunities for women and men to obtain decent and productive work, in
conditions of freedom, equity, security and dignity. The WTO recognise ILO's
international labour standards as set of internationally recognized “core”
standards and the ILO as the competent body to set and deal with these
standards.

Liner
Shipping Connectivity Index (LSCI): The Liner
Shipping Connectivity Index (LSCI) aims at capturing
how well countries are connected to global shipping networks. The Index takes
into account: a) number of ships; (b) the container-carrying capacity of those
ships; (c) the maximum vessel size; (d) the number of services; and (e) the
number of companies that deploy containerships on services from and to a
country’s ports.

Mercado Común del Sur/Mercado Comum do
Sul (MERCOSUR/ MERCOSUL): The Mercado Común del Sur
is an international agreement between Argentina, Brazil, Paraguay and Uruguay.
Ratification of Venzuela's accession to the customs union is still pending. Bolivia, Chile, Colombia, Ecuador and Peru have associate
member status. Alongside free trade, the MERCOSUR seeks to promote political
cooperation between its members. The agreement foresees in the free movement of
goods, services and factors, the establishment of a common external tariff and
the adoption of a common trade policy as well as the coordination of economic
and other policies.

Most Favoured Nation (MFN): The most favoured nation (MFN) treatment is a fundamental non
discrimination principle of the WTO trading system, it entails that each member
of the WTO to treat all other members equally as their most favoured trading
partner. This principle ensures non discrimination between imported foreign
products guaranteeing imports from lowest cost foreign suppliers.

Non-Tariff
Barriers (NTB): The notion of Non-Tariff Barriers
(NTBs) refers to restrictions that result from prohibitions, conditions, or
specific market requirements that make importation or exportation of products
difficult and/or costly. NTBs also include unjustified and/or improper
application of Non-Tariff Measures (NTMs) such as Sanitary and Phyto-Sanitary
(SPS) measures and other technical barriers to Trade (TBT).

OECS Economic Union: In January 2011, the revised OECS founding treaty came into force,
laying the foundation for an Economic Union between the sovereign members of
the OECS. It foresees in freedom of goods and services, labour and capital
between the different members of the OECS.

Organisation of Eastern Caribbean States
(OECS): The Organisation of Eastern Caribbean
States is a regional organisation set up by six sovereign States and three
British OCTs of the Caribbean with an aim to foster cooperation and solidarity
between its members, to coordinate and harmonise foreign policies and to
promote economic integration. Anguilla, the British Virgin Islands and
Montserrat are members or associate members of the OECS. The Eastern Caribbean
Dollar is the common currency for seven out of the nine OECS members or
associate members. All nine OECS members share a judiciary: the Eastern
Caribbean Supreme Court.

Pacific
Agreement on Closer Economic Relations (PACER): The
Pacific Agreement on Closer Economic Relations is a framework agreement between
all members of the Pacific Islands Forum (PIF), including Australia and New
Zealand that foresees in the gradual establishment of a regional single market
within the Pacific region. As a stepping stone towards this goal, it foresees
the establishment of a regional free trade agreement covering all Pacific
Islands Forum members. In the meantime, regional economic integration between
the members that are developing countries takes place within the context of the
Pacific Island Countries Trade Agreement (PICTA)

Pacific
Island Countries Trade Agreement (PICTA): The
Pacific Island Countries Trade Agreement (PICTA) is a free trade agreement set
up between the fourteen members of the Pacific Islands Forum that are
developing countries: Cook Islands, Fiji, Kiribati, Marshall Islands,
Micronesia, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands,
Tonga, Tuvalu and Vanuatu. Not all of the countries involved have signed and
ratified the agreement. It mainly covers goods, but negotiations on services
are ongoing.

Pacific
Islands Forum (PIF): The Pacific Islands Forum is
an international organisation that seeks to promote cooperation between the
different countries and territories of the Pacific region. It includes both
developing and developed countries and terrorise amongst its membership:
Australia, Cook Islands, Fiji, Kiribati, Marshall Islands, Micronesia, Nauru,
New Zealand, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga,
Tuvalu and Vanuatu. New Caledonia and French Polynesia are associate members.
Wallis and Futuna is an observer. The Pacific Islands Forum Secretariat is
located in Nouméa, New Caledonia. Two free trade agreements have been set up
between PIF members: the Pacific Island Countries Trade Agreement (PICTA),
covering only developing countries, on the one hand, and the Pacific Agreement
on Closer Economic Relations (PACER), covering all PIF members, on the other.

Pro€invest: PRO€INVEST is  a support programme to ACP countries, which is
financed by the EU under the 8th European Development Fund and which
has as an objective  to promote investment and technology flows to enterprises
operating within key sectors in ACP countries. This will be achieved through
the support to Intermediary Organisations  and professional associations and
through the development of north-south and south-south inter-enterprise
partnerships.

Public Procurement: The purchase of goods and services and
the ordering of works by a public authority such as a national government, a
local authority or their dependent bodies, are public contracts.

Rules of Origin: Within the context
of international trade agreements and unilateral trade preference schemes,
rules of origin are essential to ensure that preferences (lower or reduced
tariff rates) are only extend to those goods coming from countries for which
the preferences were initially foreseen. The rules of origin determine the economic
nationality of a good on the basis of a set of general and product specific
criteria and conditions with which imported goods need to comply.

Sanitary and
Phyto Sanitary (SPS): Measures dealing with food
safety and animal and plant health.

Small and
Medium Enterprises (SMEs): The EU qualifies
as  small and medium-sized enterprises (SMEs) those enterprises which employ
fewer than 250 persons and which have an annual turnover not exceeding EUR 50
million, and/or an annual balance sheet total not exceeding EUR 43 million.

STABEX
(Système de Stabilisation des Recettes d'Exportation): Stabex was previously a financial scheme from the EU which could
provide additional support to ACP States and OCTs to remedy the harmful effects
of instability of export revenue from agricultural products. The SYSMIN
(Système pour les Minerais) fulfilled a similar function for products from the
mineral extraction industry.

Strengthening
Fishery Products Health conditions in ACP/OCT Countries: The purpose of the project is to improve the access of ACP/OCT
countries fish and fishery products to the world market and help these
countries to fall in line with the EU's complex regulations. The SFP Programme
provides support in the (export) health control and in improving production
conditions of fishery products.  The beneficiary countries of the SFP Programme
are ACP countries (Africa, Caribbean & Pacific), signatories to the Lomé
Convention, and Overseas Countries and Territories (OCT) of The Netherlands and
the United Kingdom. The overall amount of EU financing for the Programme is EUR
44 860 000, including EUR 2 184 800 funded by The Netherlands and the United
Kingdom for their OCTs.

Technical
Barriers to Trade (TBT): The notion of technical
barriers to trade refers to technical regulations, standards, testing and
certification procedures with which products need to conform before they can be
placed in a given market and which could obstruct trade. The WTO’s TBT
Agreement aims to ensure that these do not create unnecessary obstacles.

TradeCom
Facility: The TradeCom programme, also referred to
as the TradeCom Facility, is an ACP Group Programme financed by the European
Development Fund. It is divided in three main, complementary, components, each
with its specific beneficiaries and results: (1) formulation of trade policies,
(2) trade negotiations and (3) implementation of trade policies and international
trade agreements.

[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).

[2]               See Annex 10 for a brief presentation of each
inhabited OCT

[3]               Not counting Greenland (the world's largest island)
and the British Antarctic Territory, which respectively account for 2.2 million
and 1.7 million km².

[4]               The ISG met on 13 September, 4 October and 30
November 2011, and 10 and 12 January 2012. See Annex 3 for participating
Commission services.

[5]               Commission Communication COM(2011)
837 of 7 December 2011. See the accompanying Commission
staff working paper SEC(2011) 1459 for an Impact Assessment dedicated to the European Development
Fund.

[6]       Green Paper COM(2008) 383 of 25 June 2008. A synthesis of the
different contributions is provided in Annex 5.

[7]       Conclusions 17801/09

[8]               See: http://www.octassociation.org/Visual%20Identity%20and%20Publications/Reports/joint%20position%20280211.pdf

[9]               In July 2008 a conference on "The European Union
and its Overseas Entities: Strategies to counter Climate Change and
Biodiversity Loss" was held in La Réunion Island gathered representatives
of the European Commission, European Parliament, public authorities and civil
stakeholders from the OCTs, outermost regions of the EU and EU Member States.

[10]             See Annex 1: list of references of all the documents
and studies considered in the impact assessment.

[11]             ECO Consult et al., Region Level Evaluation: Overseas
Countries and Territories (OCT), contract N° EVA 2004/geo-acp, Final Report,
July 2011 (hereafter ECO consult et al. (2011)).

[12]             An overview of the available sources for financing
cooperation with OCTs during 2007-2013 period is provided in Annex 6.

[13]             ECO Consult et al. (2011), Region Level Evaluation:
Overseas Countries and Territories.

[14]             An overview of the programmes and budget lines referred
to in Annexes II E-F of the OAD is provided in Annex 6 of this report.

[15]             For a more detailed analysis of trade and trade related
issues, see the dedicated report Annex 12

[16]             BURKE et al. (2006)

[17]             ECO Consult et al. (2011), p. 38.

[18]             Idem, pp. 81-83.

[19]             According to the rules of origin, at least 50% of the
crew needs to have the nationality of either an OCT, an ACP State or en EU
Member State.

[20]             See Annex 11, sections 1.2, 2.2 and 2.3.

[21]             OCTs environmental profiles – NIRAS PINSISI Consortium
Partners; Service contract 2006/12146; January 2007.

[22]             ECO Consult et al. (2011), Region Level Evaluation:
Overseas Countries and Territories.

[23]             Communication COM(2009) 623 of 6 November 2009
"Elements for a new partnership between the EU and the overseas countries
and territories".

[24]             Analysis of the Statistical Systems in the OCTs and
Recommendations Aiming at Enhancing Statistical Systems of OCTs, Framework
Contract Beneficiaries – Lot 11, N° 2010/253401/1, Draft Final Report,
September 2011.

[25]             Idem, pp. 43-44 and 52. Often different versions and
combinations were used, at different levels of analysis, of national and
international classification systems such as the Harmonised System (World
Customs Organisation), the Standard International Trade Classification (UN) and
the Broad Economic Classification (UN).

[26]             Communication COM(2010) 2020 final of 3 March 2010
"Europe 2020 – A strategy for smart, sustainable and inclusive growth"

[27]             ECO
Consult et al. (2011), Region Level Evaluation: Overseas Countries and
Territories, pp. 75-76. For more information about the OCTs' trade profiles,
see the report on trade and trade related aspects of the OAD in Annex 12,
notably pp. 90-102.

[28]             Information taken from a questionnaire the European
Commission circulated among the OCTs and their Member States in the Summer of
2011. A more detailed discussion as well as an overview of the replies to the
questionnaire can be found in the report on trade and trade related aspects of
the OAD in Annex 12.

[29]             Source: UN Statistics Division, Country Progiles for
Cayman Islands and British Virgin Islands. See: http://data.un.org/.

[30]             LUFF et al. (2010), pp. 163-163

[31]             "OCTs environmental profiles" assessed by the
Joint-Venture of NIRAS PINSISI Consortium partners. Service contract
2006/12146, January 2007. The main report can be consulted on the following web
page: http://ec.europa.eu/development/icenter/repository/environmental\_profile\_main\_report\_en.pdf

[32]             For a more detailed analysis of the OCTs' economic
profiles, see Annex 12.

[33]             An overview of the structure of the current OAD is
provided in Annex 4.

[34]             Operational objectives will be identified in future
cooperation programmes to be concluded with the OCTs.

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

[36]             Commission Communication COM (2010) 2020, 3 March 2010.

[37]             See Annex 12 section 7.2.3.

[38]             Limited to the Pacific EPA signatories, global sourcing
allows Pacific EPA countries to derogate from the standard rules of origin for
transformed fish products by using non-originating fish (tuna) as raw material.

[39]             See section 1.4 above.

[40]             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 .

[41]             See Annex 12 on trade and trade related aspects of the
OAD.

[42]             See Annex 12.

[43]             For the UN list of Small Island Developing States, see:
http://www.un.org/special-rep/ohrlls/sid/list.htm.

[44]             Com(2009) 623 final of 6 November 2009

[45]             Council conclusions 17801/09 of 22 December 2009 on the
EU's relations with the OCTs

[46]               http://ec.europa.eu/development/how/consultation/index.cfm?action=viewcons&id=3841

[47]               http://ec.europa.eu/development/geographical/regionscountries/regionscountriesocts\_en.cfm

[48]               http://ec.europa.eu/development/geographical/regionscountries/regionscountriesoctsforum\_en.cfm

[49]               Accordingly to Article 17 of the EC Treaty, every
person holding the nationality of a Member State shall be a citizen of the
Union. As a matter of fact, all nationals of Greenland, and the French and the
Dutch OCTs also have the nationality of the related Member States automatically
and are therefore EU citizens. As from 21 May 2002, the citizens of all the
British OCTs are also British citizens, but they can renounce it in favour of remaining
British overseas territories citizens only.

[50]               In addition, EUR 176.6 million has been reserved
within the EU General Budget (article 21 07 02) for cooperation with Greenland
in non-fisheries sectors in the period 2007-2013. The EU-Greenland non-fisheries
partnership focuses on education and vocational training. It has been the
subject of a separate impact assessment. See: Commission Staff Working Paper SEC(2011) 1484 of 7 December 2011. The
EU-Greenland Fisheries Agreement also foresees specific sectoral support
mechanisms to promote the implementation of sound and sustainable fisheries
policies and governance in Greenland. An ex-post Evaluation of the EU-Greenland
Fisheries Partnership Agreement was completed in August 2011.

[51]               See the Communication of the Commission
"Preparation of the multiannual financial framework regarding the
financing of EU cooperation for African, Caribbean and Pacific States and
Overseas Countries and Territories for the 2014-202 period (11th
European Development Fund)" – COM(2011) 837 final
of 7.12.2011.

[52]               Regulation (EC) N° 1905/2006 of the European
Parliament and of the Council of 18 December 2006 establishing a financing
Instrument for Development Cooperation (DCI) – OJ L 378, 27.12.2006, p. 41

[53]               Regulation (EC) N° 1717/2006 of the European
Parliament and of the Council of 15 November 2006 establishing an Instrument
for Stability – OJ L 327, 24.11.2006, p. 1

[54]               Council Regulation (EC) N° 1257/96 of 20 June 1996
concerning humanitarian aid – OJ L 163, 2.7.1996, p.1. Regulation a last
amended by Regulation (EC) N° 1882/2003 of the European Parliament and of the
Council (OJ L 284, 31.10.2003, p.1)

[55]               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).

[56]               COM(2008) 383 final of 25 June 2008

[57]               See section 2.1.3 b) of Annex 11.

[58]               COM(2009) 623 final of 6 November 2009 "Elements
for a new partnership between the EU and the overseas countries and
territories"

[59]               Study executed by the Joint-Venture of NIRAS PINSISI
Consortium partners. The main report can be consulted on the following web
page:

 http://ec.europa.eu/development/icenter/repository/environmental\_profile\_main\_report\_en.pdf

[60]               The study was carried out by a Consortium composed by
ECO Consult, AGEG, APRI, Euronet, IRAM and NCG.

[61]               See Annex 4 of the Impact Assessment.

[62]    Thematic programmes covered by Regulation (EC) No 1905/2006 of
the European Parliament and of the Council of18 December 2006 establishing a
financing Instrument for Development Cooperation  (DCI) and providing
direct support for the European Community development and cooperation policy.

Rehabilitation and reconstruction
operations as covered by Regulation (EC) No 1717/2006 of the European
Parliament and the Council of 15 November 2006 establishing an Instrument for
Stability.

Humanitarian aid as provided for by
Council Regulation (EC) No 1257/96 of 20 June 1996 concerning humanitarian aid.

[63]               The programme is financed under the budget line 07 03
27, accordingly with Commission Decision C(2011) 1258 final of 1 March 2011.

[64]             Study executed by the Joint-Venture of NIRAS PINSISI
Consortium partners. The main report, delivered in January 2007, can be
consulted on the following web page:

 http://ec.europa.eu/development/icenter/repository/environmental\_profile\_main\_report\_en.pdf

[65]             COM(2009) 623 final of 6 November 2009 "Elements
for a new partnership between the EU and the overseas countries and
territories"

[66]             See sections 1.2 and 2.7 of Annex 11

[67]             COM(2011)500 final- A Budget for Europe 2020

[68]             COM(2009) 623 final of 6 November 2009 "Elements
for a new partnership between the EU and the overseas countries and
territories"

[69]             Commission
Communication COM (2010) 2020, 3 March 2010.

[70]             More information on these indicators on the
Commission's annual environment policy review on the website of DG Environment http://ec.europa.eu/environment/indicators/index\_en.htm

[71]               See: http://ec.europa.eu/development/icenter/repository/OCT\_Impact\_Study\_RegInt\_and%20EPA\_20070907\_EN.pdf
(accessed: 07/11/2010)

[72]               LUFF
et al. (2010), p. 23. For the COMTRADE database, see: http://comtrade.un.org/db/default.aspx.
For the WITS database, see: http://wits.worldbank.org/wits/.
For the MacMap database, see: http://www.macmap.org/
(accessed: 07/11/2011).

[73]               SPANNEUT
(2011), pp. 43-44. Where statistics are publicly available, but only in paper
or CD ROM version, this may mean that access to relevant is de facto
limited as it implies that the user has to physically go to the relevant
agency/government department to retrieve the data or contact it and await the
data.

[74]               Idem,
p. 52.

[75]               Currently
by the Council Decision of 27 November 2001 (2001/822/EC), OJ L 314 of
30.11.2001 as amended by the Council Decision of 19 March 2007 (2007/249/EC),
OJ L 109 of 26.4.2007.

[76]               Of
the 21 OCTs associated to the EU, mentioned in Annex II to the TFEU, four are
uninhabited: the British Antarctic Territory, the British Indian Territory,
South Georgia and the South Sandwich Islands, and the French Southern and
Antarctic Territories

[77]               The
present chapter draws from the following studies: LUFF et al. (2010), BROOKS,
STONEMAN and RIOS (2010) and SALMON (2007) studies. See list of references in
Annex 1 of the Impact Assessment.

[78]               ECO
Consult et al. (2011), pp. 75-76. These conclusions
were confirmed by the results of a trade questionnaire that the European
Commission sent to OCTs and their Member States in the Summer of 2011. See
below.

[79]               Source:
European Commission data, Directorate General for Trade.

[80]             The
tables disregard the EU27 imports from OCTs of boats, ships and other floating
structures as well as aircraft, spacecraft, and parts thereof (HS Codes 89 and
88 at 2 digit level). Though they represent 24.6 % of the total value of EU 27
imports from the OCTs at 2 digit HS level, they do not constitute real export
activities of OCTs, but rather re-exports. See discussion of Caribbean OCTs'
exports in section 3.2 of Appendix 2.

[81]             LUFF
et al. (2010), pp. 160-161, 184-185.

[82]             Idem,
pp. 176-180, 192-193.

[83]             Idem,
pp. 83-101.

[84]             ECO
Consult et al. (2011), p. 73.

[85]             Source: UN Statistics Division, Country Profiles for
Cayman Islands and British Virgin Islands. See: http://data.un.org/.

[86]             LUFF
et al. (2010), pp. 163-65

[87]             ECO
Consult et al. (2011), pp. 70-72.

[88]             LUFF
et al. (2010), pp. 153-54. This observation is corroborated by the findings
about OCT/EU trade flows discussed in section 3.1. As mentioned, boats, ships
and other floating structures and aircraft, spacecraft, and parts thereof
represent the bulk of OCT exports to the EU in terms of value. However, this
does not represent real trade activity, but merely re-exports. OCT/EU trade
statistics indicated that the largest re-exporters of boats are Caribbean OCTs:
Cayman Islands (EUR 735.6 million) and the British Virgin Islands (EUR 249
million).

[89]             Idem,
pp. 180-83.

[90]             SALMON
(2007), pp. 37-68.

[91]             LUFF
et al. (2010), p. 17.

[92]             An
authorisation to that purpose was  requested from the UK government, but was not
granted

[93]             HELLYER,
M., CARICOM Single Market and Economy: Costs/Benefits Study, Final Report, June
2004

[94]             The
establishment of the OECS Economic Union is foreseen in the revised Treaty of
Basseterre, founding text of the organisation. Signature of the revised text
occurred on 1 January 2011

[95]             For
the full text of the Economic Partnership Agreement with the CARIFORUM States,
see: http://trade.ec.europa.eu/doclib/docs/2008/february/tradoc\_137971.pdf
(accessed 04/11/2011).

[96]             SALMON
(2007), pp. xiv-xv.

[97]             ECLAC,
Review of CARIFORUM-EU EPA: Implications for the British and Dutch Caribbean
OCTs, LC/CAR/L.176, September 2008, pp. 5-6.

[98]             Idem,
p. 9.

[99]             The
analysis of the Atlantic OCTs' economies in this section draws from BROOKS,
STONEMAN and RIOS (2010), unless otherwise mentioned.

[100]             Source:
European Commission data, Directorate General for Maritime Affairs and
Fisheries.

[101]             Source:
Falkland Islands government, presentation "EU Rules of Origin (RoO)
Issues, Trade and Regional Integration Workshop, 8th OCT/EU Forum,
Brussels, 23 March 2010.

[102]             KIRKPATRICK et al. (2011), A Trade Sustainability
Impact Assessment Relating to the Negotiation of a Comprehensive Economic and
Trade Agreement (CETA) between the EU and Canada, Trade 10/B3/B06, Final
Report, June 2011, pp. 106-108 (hereafter: KIRKPATRICK et al. (2011) ).

See: http://trade.ec.europa.eu/doclib/docs/2011/september/tradoc\_148201.pdf
(Accessed: 26/10/2011).

[103]             Based
on Statistics Greenland, Greenland in Figures, 6th and 8th
edition, June 2009 and May 2011. See: http://www.stat.gl/dialog/main.asp?lang=en&theme=Greenland
in Figures&link=GF (accessed: 26/10/2011).

[104]             ECO
Consult et al. (2011), p. 70.

[105]             Idem,
pp. 70-72.

[106]             SALMON
(2007), pp. 103-114

[107]             KIRKPATRICK
et al. (2011), pp. 105-119.

[108]             LUFF
et al. (2010), pp. 78-81, 102-107.

[109]             ECO
Consult et al. (2011), pp. 70-72.

[110]             SALMON
(2007), pp. 69-95.

[111]             Idem,
pp. 123-125.

[112]             The
sixth round of negotiations between PICTA members took place in August 2011.

[113]             LUFF
et al. (2010), p. 206.

[114]             For the full text of the EPA in the Pacific Region
(Fiji and Papua New Guinea), see:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:272:0002:0715:EN:PDF
(accessed 04/11/2011).

[115]             SALMON
(2007), p. 128.

[116]             LUFF
et al (2010), p. 78.

[117]             SALMON
(2007), p. 178.

[118]             Article
355:6 of the Treaty on the Functioning of the European Union foresees in the
possibility for the Danish, Dutch and French OCTs to change status to Outermost
Region and vice versa. Such change is decided upon by the European Council with
unanimity, after consultation of the European Commission. It is up to the
Member State to which an OCT is associated to submit a formal request to the
European Council.

[119]             LUFF
et al. (2010), Annex 8, p. 1.

[120]             Idem,
p. 139.

[121]             SALMON
(2007), p. 99.

[122]             LUFF et
al. (2010), p. 137.

[123]             Commission,
Communication COM(1999) 163, p. 42.

[124]             Source:
Foreign and Commonwealth Office, reply to Commission
trade questionnaire sent to OCTs and their Member States, September 2011

[125]             Source:
French Overseas Ministry, reply to Commission trade questionnaire sent to OCTs
and their Member States, October 2011.

[126]             LUFF et al. (2010), p. 9.

[127]             The
Internal Agreement for the 10th EDF was signed in July 2006 (OJ L
247, 9.9.2006, p32) and remains into force until 31 December 2013.

[128]          This
partnership is the subject of a separate impact assessment. See: Staff Working
Paper SEC(1484) of 7 December 2011, Impact Assessment accompanying the document
“Council Decision on relations between the European Union on the one hand, and
Greenland and the Kingdom of Denmark on the other” (COM(2011)846).

[129]             Commission
Communication COM (2010) 2020, 3 March 2010.

[130]             According
to Article 20 of the Treaty on the Functioning of the European Union, every
person holding the nationality of a Member State shall be a citizen of the
Union. As a matter of fact, all nationals of Greenland, and the French and the
Dutch OCTs also have the nationality of the related Member States automatically
and are therefore EU citizens. As from 21 May 2002, the citizens of all the
British OCTs are also British citizens, but they can renounce it in favour of
remaining British overseas territories citizens only.

[131]             Commission,
Communication COM (2011) 424 final, 13 July 2011.

[132]             Through,
amongst others, the setup of elaborate systems of
surveillance and certification and prevention and deterrence. The prevention and deterrence system has been set up by Council
Regulation (EC) N° 1005/2008 of 29 September 2008.

[133]             Commission
Proposal COM(2011) 241 of 10 May 2011 for a Regulation of the European
Parliament and the Council applying a scheme of generalised tariffs.

[134]             COM(2010) 612 of  9 November
2010.

See: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0612:FIN:EN:PDF
(accessed: 26/09/2011).

[135]             COM(2007)183 of 18 April 2007.

[136]             See: http://exporthelp.europa.eu/index\_en.html
(accessed: 08/11/2010).

[137]             COM(2008) 699 of 4
November 2008,

[138]             COM(2011)25 of  2 February 2011

[139]             See:
http://www.enterprise-europe-network.ec.europa.eu/index\_en.htm
(accessed: 08/11/2010).

[140]              See: http://ec.europa.eu/food/training\_strategy/index\_en.htm (accessed: 08/11/2010).

[141]             For
the TradeCom Facility, see: http://www.tradecom-acpeu.org/ (accessed
11/05/2011). For project entitled the Strengthening Fishery Products Health
Conditions in ACP/OCT Countries, see: http://sfp.acp.int/ (accessed 11/05/2011)

[142]             COM(2008)
383, pp. 14-15.

[143]             Joint
Position Paper of the Governments of the Kingdom of Denmark, the French
Republic, the Kingdom of the Netherlands and the United Kingdom of Great
Britain and Northern Ireland, and the Overseas Countries and Territories on the
future relations between the Overseas Countries and Territories and the
European Union, adopted at the Ministerial Conference of the Association of the
Overseas Countries and Territories of the European Union, Nouméa, New
Caledonia, 28 February 2011 (hereafter: Joint Position Paper).

[144]             In
this context, the notion of agro-food products is understood to cover products
such as fishery products, meat, fruits and fruit preparations, vegetables,
beverages, mineral water, rum, dairy products, tobacco, coffee, tea and animal
and vegetable oils.

[145]             BURKE
et al. (2006)

[146]             ECO
Consult et al. (2011), p. 38.

[147]             Idem,
pp. 81-83.

[148]             Data
provided by the European Commission, Directorate General for Maritime Affairs
and Fisheries.

[149]             Idem.

[150]             ECO
Consult et al. (2011), p. 75.

[151]             Basis
for the standard policy is based on Commission Communication COM(97) 402 of 23
July 1997 on the Management of Preferential Tariff Arrangements.

[152]             Council
Regulation (EC) N° 732/2008 of 22 July 2008 applying a scheme of generalised
tariff preferences for the period from 1 January 2009 to 31 December 2011 and
amending Regulations (EC) No 552/97, (EC) No 1933/2006 and Commission
Regulations (EC) No 1100/2006 and (EC) No 964/2007. Commission Communication
COM(2011) 241 of 10 May 2011 on a proposal for a regulation from Council and
Parliament applying a scheme of generalised tariff preferences.

[153]             Council
Regulation (EC) N° 1528/2007 of 20 December 2007 applying the arrangements for
products originating in certain states which are part of the African, Caribbean
and Pacific (ACP) Group of States provided for in agreements establishing, or
leading to the establishment of, Economic Partnership Agreements

[154]             ECO
Consult et al. (2011), pp. 25-26. The data provided
exclude regional programming, indicative allocations for the 10th
EDF and funding for disaster relief. The consultants looked at output rather
than at the precise source of financing, as, until the 10th EDF, it
was possible to transfer unused funds from one EDF to another. The data
provided were extracted from Commission databases.

[155]             Single
Programming Document for Overseas Countries and Territories Submitted to the
European Community by the Government of Montserrat, Montserrat 27 July 2004.

[156]             Falkland
Islands – European Community: Single Programming Document and Indicative
Programme for the Period 2004-2007, Brussels, 21 June 2004.

[157]             Framework
of Mutual Obligation (FMO) between the European Commission and the Government
of Falkland Islands, STABEX Transfers Application Years 1990-1994, Stanley 18
July 2007.

[158]             ECO
Consult et al. (2011), pp. 48-50.

[159]             Idem,
pp. 59-60.

[160]             ECO
Consult et al. (2011), p. 75.

[161]             BROOKS,
STONEMAN and RIOS (2010)

[162]             Communication
COM(1999) 163, p. 41.

[163]             See:
Joint Position Paper of OCTs and their Member States, p. 3.

[164]             Ibidem.

[165]             Commission
Decision 2011/47/EU of 20 January 2011 on a derogation from the rules of origin
set out in Council Decision 2001/822/EC as regards sugar from the Netherlands
Antilles. The decision foresees in quota that progressively decrease until
2013: 5,000 tonnes for 2011, 3,000 tonnes for 2012, 1,500 tonnes for 2013. The
derogation was requested, as the sugar it used to import from ACP countries did
no longer meet the quality requirements and because ACP States preferred to
export their sugar directly to the EU causing a supply problem for raw sugar.

[166]             Commission
Decision 2007/767/EC of 15 November 2007 derogating from the rules of origin
set out in Council Decision 2001/822/EC as regards certain fishery products
imported from the Falkland Islands.

[167]             Commission
Decision 2009/776/EC of 16 October 2009 on a derogation from Council Decision
2001/822/EC, as regards the rules of origin for prepared and preserved shrimps
and prawns from Greenland. The Decision foresees in a quota of 2,100 tonnes
p.a.

[168]             The
derogations granted to Saint Pierre et Miquelon are covered by three different
Commission Decisions: Decision 2005/578/EC of 27 July 2005 as regards meat of scallops of the genus
Placopecten magellanicus (250 tonnes p.a.); Decision 2007/167/EC
of 15 March 2007 as regards cod, coalfish, haddock, redfish, hake and plaice
(1,290 tonnes p.a. for each specifies) and Decision
2011/122/EU of 22 February 2011 as regards lobster (225 tonnes p.a.), herring
(600 tonnes p.a.) and mussels (205 tonnes p.a.). It is worth mentioning that
Saint-Pierre et Miquelon also asked for additional derogations for some other
products of headings 0303 to 0305 (mackerel and herrings), but these requests
were rejected by the EU as it was considered that the operations carried out in
Saint-Pierre et Miquelon on these products were minimal and did not create
enough value added and employment opportunities.

[169]             Joint
Position Paper, p. 4.

[170]            Commission,
SEC(2008) 2067, p. 33.

[171]            Commission Staff Working Paper SEC(2008) 2067, p. 38.

[172] LUFF et al. (2010).

[173]            Based
on Council Regulation (EEC)N° 2658/87 of 23 July 1987 on the tariff and
statistical nomenclature and on the Common Customs Tariff (OJ L 256, 07/09/1987,
p. 1), as last amended by Council Regulation (EC) No 254/2000 of 31 January
2000 (OJ L 28, 03/02/2000, p. 16).

[174]            As
explained above in section 4.3.2, under Commission proposal COM (2011) 241,
OCTs will no longer be eligible to the Generalised System of Preferences.
Nevertheless, for the sake of completeness, this document includes figures
relating to the theoretical impact that GSP treatment would have on OCTs.

[175]            A
comparison of the differences between policy options 2-4 in terms of rules of
origin is provided in Annex 10.

[176]            A
comparison of the differences between policy options 2-4 in terms of rules of
origin is provided in Annex 11.

[177] "Major trading economy" would mean any
country accounting for a share of world merchandise exports above 1 % in the year, or any group of countries
acting individually, collectively or through an economic integration agreement
accounting collectively for a share of world merchandise exports above 1.5 % in the year. For this calculation
official data by the WTO on leading exporters in world merchandise trade
(excluding intra-EU trade) would be used. Merchandise trade would be used as
data on trade in services in not available for many countries or not collected
based on comparable methodology.

[178]            A
comparison of the differences between policy options 2-4 in terms of rules of
origin is provided in Annex 10 of Appendix 2.

[179]            KIRKPATRICK
et al. (2011), p. 105.

[180]            All
data contained in this section is based on data available to the European
Commission, Directorate General for Maritime Affairs and Fisheries.

[181]            SPANNEUT (2011) found that statistics about greenhouse
gas emissions were collected in only one OCT (p. 44).

[182]            For the sake of completeness, the impact of relegating
OCTs to GSP treatment has been examined alongside the impact of MFN treatment
to explore the –negative– impact both would have compared to the current
situation. Full results are included in Annexes 6 and 7. However, as explained
above in section 4.3.2, the specific status of OCTs means that their GSP
eligibility should be discontinued.

[183]            Fisheries,
the main OCT export sector, is a clear case where the impact of CET and GSP
treatment is very close as both CET and GSP duties are relatively high.

[184]            Public
employment in Saint-Pierre et Miquelon represent 44% of total employment. See: Institut
des Emissions des Départements d'Outremer, Saint-Pierre et Miquelon: Rapport
Annuel 2010, Paris, 2011, p. 28.

[185]            Public
employment in Greenland represent 47 % of total employment. Based on Statistics
Greenland, Greenland in Figures, 6th and 8th edition,
June 2009 and May 2011. See: http://www.stat.gl/dialog/main.asp?lang=en&theme=Greenland
in Figures&link=GF (accessed: 26/10/2011).

[186]            See Annex 8 of Appendix 2

[187] The
United Kingdom is one such Member State that is dependent of shrimp imports
from Greenland to sustain its processing industry. See: DÖRING, R. and GUILLEN,
J. (ed.), Report of the Working Group on the evaluation of data collected on the fish processing sector (SGECA 10-04), Joint
Working Group on Economic Affairs (SGECA), of the Scientific, Technical and Economic
Committee for Fisheries (STECF), Ispra, 11-15 October 2010, pp. 166-7.

[188]          The OCTs that
stand to benefit most from provisions aimed at overcoming sanitary,
phyto-sanitary or technical barriers would be Falkland Islands, Greenland,
Saint-Pierre et Miquelon, Netherlands Antilles and French Polynesia.

[189]            KIRKPATRICK
et al. (2011).

[190]            For the UN list of Small Island Developing States, see: http://www.un.org/special-rep/ohrlls/sid/list.htm
(accessed 04/11/2011).

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