Monday, January 19, 2009

Commentary: European shadow dims Canada - Caribbean trade talks

By Sir Ronald Sanders
(The writer is a business consultant and former Caribbean diplomat)

The fall-out from the controversial Economic Partnership Agreement (EPA) signed between the European Union (EU) and individual Caribbean countries has begun to show itself.

Sir Ronald Sanders is a business executive and former Caribbean diplomat who publishes widely on small states in the global community. Reponses to:

Two events highlight the legacy of the EPA. The first is the announcement by an official of the Jamaica Finance Ministry, that Jamaica will have to raise its general consumption tax to compensate for revenues that the government will lose from the removal of tariffs on EU imports over time. The second event is a statement by Guyana’s President Bharat Jagdeo that the Caribbean Regional Negotiating Machinery (CRNM) can’t speak for Guyana at the forthcoming negotiations of a Free Trade Agreement between Caribbean countries and Canada.

Those who had opposed many aspects of the EPA had pointed to the reliance by many Caribbean governments on tariff revenues to help finance annual budgets. It was emphasised that when these tariffs were removed, governments would be compelled either to increase personal income tax or increase the level of their sales taxes. The further point was made that while the loss of government revenue from the removal of tariffs from EU goods may be small for some Caribbean governments, similar tariffs would have to be removed from goods imported from other countries such as Canada and the US once Caribbean countries conclude free trade agreements with them.

In the case of the six independent small countries of the Organisation of Eastern Caribbean States (OECS), I had urged that even though they have more EU products excluded from tariff liberalisation than, for instance, Trinidad and Tobago they should have been exempted by the EU, and any other country with which they enter a free trade agreement, from having to remove tariffs given their small size and the inherent constraints on their capacity to manoeuvre.

Now, like Jamaica, all Caribbean countries that are signatories to the EPA will have to replace lost tariff revenues by increased taxes. Fortunately, in the present global financial crisis, increases in taxes to compensate for lost tariff-revenues do not have to be implemented this year. But, the crunch is coming, and it will be worse once the Canada-Caribbean free trade agreement is signed. The EPA, regrettably, has set the minimum standard for negotiation.

Paradoxically, as President Jagdeo has pointed out, while he opposed the EPA to the bitter end, his government has already liberalised imports so that the effect of lost revenues from tariff removals will not be felt as much in Guyana as in other Caribbean countries.

And this brings us to the CRNM and Jagdeo’s statement that it can’t negotiate the Canada free trade agreement for Guyana. This is a lamentable development because every country in the Caribbean would surely do better if the region pooled its best resources to negotiate jointly with other countries.

But, the CRNM brought this situation upon itself. During the Guyana national consultations on the EPA and in its aftermath, more than one representative of the CRNM aligned themselves openly with the position of the EU and its negotiators. A handwritten note from a CRNM official to the EU’s chief negotiator at the Guyana consultations (clumsily left behind) confirmed that situation, as did other events including circulated emails lambasting the Guyana government and others.

Heads of government – responsible to their electorates – are entitled to require loyalty from those employed to negotiate on their behalf. However much CRNM officials may have disagreed with Jagdeo’s criticism of the EPA, they had an obligation to be, at the very least, circumspect about his concerns.

Some good can come of all this if Caribbean governments are prepared to address the weaknesses in the structure and authority for their joint trade negotiations. For a start, each government should have joint national public sector-private sector machinery in place which would work out its own national requirements and negotiate, on that basis, a Caribbean position. Given the nature of the decision-making process by Caribbean governments, the Head of government should be an integral part of such national machinery.

In theory, a structure of this kind already exists in Jamaica, Barbados, and Trinidad and Tobago. But as far as I am aware there is no such working structure in the OECS countries and Guyana.

In turn, Caribbean ministers should oversee every stage of the negotiations ensuring that the mandates from their national machinery are met. Again, in theory, this is the task of the Council of Trade Ministers, but it is clear from the way the EPA negotiations were handled that oversight was far from adequate, and, for most countries, there was no reporting back to a national group.

An outside review group made up of qualified Caribbean professionals, including from NGO’s, would also be a sensible addition to the negotiating process. Since they would not be part of the intimacy of the negotiations, their objective advice to Caribbean negotiators and national oversight groups would bring a valuable dimension to the process.

This leaves the relationship between the CRNM and the CARICOM Secretariat to be resolved. Governments might consider taking the position that the CRNM should now be absorbed into the CARICOM Secretariat—as recommended in an independent report commissioned by Caricom one year ago-- becoming a division of the Secretariat responsible for all trade negotiations and subject to the direction and authority of a Special Ministerial oversight Committee.

CARICOM is still tinkering with ‘a new governance architecture’ which the flurry of meetings scheduled for the end of this month will almost certainly not advance. Meanwhile, the negotiations with Canada are upon us.

The Canadians themselves would not want a repeat of the EU-EPA debacle. They want to negotiate an agreement which has the support of all the countries and over which there will be no recriminations. They would welcome informed national guidance of a negotiating mandate to a single Caribbean team.

Therefore, all Caribbean governments should lose no time in setting-up effective national machinery to inform and monitor a single Regional negotiating team and to be actively involved in reviewing every stage of the negotiations.

BARBADOS-CARICOM-Regional academics call for re-shuffling of CARICOM’s quasi cabinet
Fri, 16 Jan 2009 20:05:00

BRIDGETOWN, Barbados, CMC – Two regional academics have expressed concern that the Caribbean Community (CARICOM) integration movement is being stymied and have called for a re-ordering of portfolios within CARICOM’s quasi cabinet.

“I honestly think that a reshuffle is required,” said lecturer in political science at the University of the West Indies, Cave Hill Campus, Dr. Tennyson Joseph, while suggesting that the matter could be handled in much the same way as ministers are conferred with portfolios at the domestic level of government.

“You actually look at commitment and skill and personal ability, for example, before you give someone a ministry of agriculture or a ministry of tourism etc. and what we have in CARICOM is where a Prime Minister may inherit a portfolio,” he said.

Joseph was particularly critical of the David Thompson administration in Barbados, stating, quite frankly, ‘the language and pronouncements that are being made would lead one to conclude that the current leadership is not pro-integration”.

The St. Lucia-born political scientist also recalled that when the late Sir John Compton was re-elected in 2006, he had asked that the Vincentian Prime Minister Dr. Ralph Gonsalves be allowed to take on the CARICOM governance portfolio.

Given a growing public perception of a slow down in the integration process over the last two to three years, he believes a reshuffling is currently in order.

Noted Professor Norman Girvan also expressed similar sentiments during a radio programme in Barbados on Friday evening, which sought to assess the state of play within CARICOM.

However, Girvan went further to illustrate what he termed the current state of “paralysis” within the 15 member regional grouping that is scheduled to have a regional single market and economy (CSME) fully in place by 2015 and is currently working towards free movement of people, goods and services.

On the contentious issue of free movement of skilled nationals, Girvan said there has really been no progress since the last CARICOM summit in Antigua last July.

In fact, he said at least two technical meetings that were scheduled to be held last year to take forward the issue did not materialise.

Professor Girvan believes the problem is one of leadership and has pointed to what he sees as a general lack of “enthusiasm” on the part of present day CARICOM Heads of Government.

“The fact of the matter now is that the CARICOM economic integration process is in a state of paralysis, call a spade a spade,” Girvan said.

Joseph also expressed the view that there was general support among the populace for Caribbean integration. He further argued that the CSME remains a “structural necessity” given the global situation.

But he said there was a need for a “technical institutional framework” to ensure that the momentum does not slow with the change of governments, as has occurred recently on several occasions when CARICOM electorates went to the polls.

Girvan noted that a proposal was made as far back as 1992 to establish a CARICOM Commission, as a possible governance mechanism and again, as recently as a year go, but this still had not been acted upon.

“What it means is that we have governments and leaders of the day with the façade of sovereignty because the substance is not there.

“We are being dictated to by our external trading partners and we are being buffeted by the world economy,” he said.

“Our leaders are not prepared to take a qualitative leap into collective sovereignty and until and unless they are willing to do that, we are going to continue in a state of paralysis and go into a state of more and more fragmentation,” the professor warned.

CMC kj/09

Tuesday, December 9, 2008

Statement to the European Parliament on the EPA Havelock Brewster

It is to be regretted that this process of conception of the Agreement, one that purports to represent an Economic Partnership between a group of some of the largest and most wealthy States in the world and a group of poor micro-States, had not been more transparent, more democratic and more pro-development. A good opportunity to craft a best- practice model of international development cooperation has been missed…

Download full address: Havelock Brewster

Friday, November 28, 2008

ACP PRESS STATEMENT (November 15, 2008)

The banana companies in African, Caribbean and Pacific (ACP) States maybe forced out of business following the European Union’s decision to negotiate a Free Trade agreement (FTA) with Central American countries in what the ACP Group describes as on “too generous” terms.
The ACP Group expressed shock that only a week after the EU signed the first Economic Partnership Agreement (EPA) with an ACP region (CARIFORUM), which supposes to secure, and expand preferential access for ACP bananas into the EU market, the EU has gone ahead to negotiate an FTA with the Central Americans in terms which pose serious threat to ACP preferences.

The EU’s market access offer for bananas in the Framework of the FTA under negotiation might include an initial reference import tariff for bananas, which will be lower than the current applied tariff. Also, there will be a rapid decrease over a relatively short period to a final import tariff landing zone, which is lower than the figure that was indicated by ACP countries as the minimum tariff for the necessary preference that would enable them to continue their export of bananas to the EU.

The ACP understands that the EU plans to lower the current levy on competing bananas from certain Central America States of 176 euros per tonne to 95 euros over ten years.

The Chairman of the ACP Banana Working Group, Ambassador Gerhard Hiwat of Suriname, said that the new offer to Central America would mean the end of the banana industry in all the banana producing countries of the ACP Group.

The chairman believes that EU’s action also contradicts the objectives of the EPAs it signed with the Caribbean and interim agreement initialed with some African Banana exporting countries, and seriously questions the ACP-EU partnership.

The Ambassador of the Dominican Republic, His Excellency Dr Fredrico Alberto Cuello Camilo, re-iterated that the EU is negotiating with Central America on “too generous” terms.

He said that if the negotiation between the two parties is successful it would put ACP exporters out of business, adding that it would also result in the dislocation of economies and loss of jobs in the ACP countries concerned and might even impact on neighboring countries.

The Ambassador stated that in his country alone 15,000 families depend on bananas for employment, and they have also employed a lot of Haitians.Dr Cuello Camilo said that most of the economies that rely on bananas would collapse if the EU pushes ahead with the planned agreement with Central America.

The Ambassador of Jamaica, Her Excellency Mrs. Marcia Gilbert-Roberts, said the reduction of tariff from 176 Euros to 95 Euros would make it impossible for her farmers to compete on the European market.

Delegates from African banana exporting nations like Côte d'Ivoire, Ghana and Cameroon did also express the same concerns. The Charge d’Affairs of the Eastern Caribbean States, Dr Arnold Thomas, said that banana has been a source of livelihood of the states he represents and now it has been threatened.

The ACP appeals to the EU to honour the partnership and cautions that it’s the EU’s actions towards the Central Americans, would not send a right signal to the regions that have yet to sign off to an EPA.

European Parliamentarian says Pacific EPAs must be changed

By Online Editor
4:33 pm GMT+12, 27/11/2008, Papua New Guinea

A member of the European Parliament has told the African, Caribbean and Pacific (ACP) – European Union (EU) joint parliamentary assembly meeting this week in Port Moresby that free trade deals initialled between the EU and Pacific countries must be changed to reflect the development needs of the region.

Glyn Ford, the Member of the European Parliament responsible for reporting on negotiations for an Economic Partnership Agreement (EPA) with Pacific countries said he would recommend the European Parliament vote “no” to the interim agreement unless contentious issues in the interim EPAs are addressed.

Outlining concerns about the agreements for PNG and Fiji, Mr Ford said the European Commission should allow Pacific countries to use export taxes for development purposes and that EPAs should include adequate protection for infant industries. Mr Ford also said any new deal on services must allow Pacific workers entry into Europe to provide services.

Mr Ford raised concerns about intellectual property protection, saying new rules in the EPA should not be “just for Western technical artefacts”. He also said opening up public procurement to foreign business must be “consistent with Pacific states’ needs”.

Pacific Network on Globalisation coordinator Maureen Penjueli welcomed the intervention from Mr Ford. “We urge all members of the European Parliament to support Mr Ford’s recommendation and vote no if the European Commission fails to accept renegotiation of contentious clauses within the current interim EPAs,” said Ms Penjueli.

PNG and Fiji initialled interim-EPAs in late 2007 to protect market access for exports of tuna and sugar to Europe. If PNG and Fiji go ahead and sign the interim EPAs, the deals then go to the European Parliament for discussion and approval.

However, PNG and Fiji remain unhappy with the terms of the interim agreements. Throughout 2008, Pacific Trade Ministers have told the European Commission, the body responsible for negotiating Europe’s trade deals, that rules on export taxes, infant industry and the ‘Most Favoured Nation’ clause contained in the interim EPAs should be changed.

Today, Mr Ford asked the European Director-General for Development Louis Michel, if the European Commission would offer “feasible alternatives” that would allow Pacific countries to maintain market access to the European Union if they choose not to sign an EPA. Mr Michel responded in one word, saying “yes”.

Ms Penjueli said the EPA proposed by the European Commission posed serious dangers for Pacific countries – including dramatic losses in government revenue and the cutting off of policy space that could be used to stimulate development.

“The European Commission continues to be completely unreasonable in its negotiations with the Pacific,” said Ms Penjueli. “Given that the EPA has not been designed to meet the Pacific’s development needs, and that the Commission has shown a reluctance to move on key issues for Pacific negotiators, now is the time to start looking at alternatives.” She said the European Union should offer immediate access to the EU’s“Enhanced” General System of Preferences (GSP-plus) that would allow Pacific states to continue to access European markets, and that Pacific countries “should formally request these alternatives”.

More than 100 parliamentarians from across 27 EU countries and 79 ACP countries are meeting in Port Moresby this week to debate trade and development issues affecting their relationship as part of the 16th session of the ACP-EU Joint Parliamentary Assembly.


Papua New Guinea currently has an export tax on the export of logs (worth well over K100million each year). PNG Forestry Minister, Belden Namah, also announced earlier this year plans to ban all round log exports by 2010 to encourage development of the local forestry industry. Under the terms of the interim EPA initialled by PNG in 2007, PNG will not be able to maintain export taxes on logs or impose new bans on log exports if it goes ahead and signs the deal.

Fiji currently has an export ban on round logs which has helped develop its local furniture industry.

Solomon Islands also has an export tax on round logs which accounts for around 14% of government revenue.

Wednesday, November 19, 2008

The free trade agreements (FTAs) result in more unrestricted capital flows and financial services

The FTAs negotiated by the US and EU with developing countries also include a chapter on services and (sometimes a separate chapter on) investment. In the case of the EU's FTA negotiations with ACP countries in the Economic Partnership Agreements (EPAs) this results in GATS 'plus plus' as can be seen in the EPA signed between the EU and the Caribbean group (i.e. Cariforum States):

  • because of GATS art. V, developing countries have to make quite substantial liberalisation commitments,
  • the EPA includes elements which are not yet decided in the GATS negotiations or even elements which have been rejected in GATS negotiations,
  • liberalisation of investment in non-services sectors is being subjected to the to the same rules as services investment, which include a hybrid mix of different GATS rules.

During FTA negotiations, the financial services sector is a major target of EU to achieve liberalisation. This can also be seen by the many articles on liberalisation of financial services in the FTAs the EU has signed with Chile and Mexico. The Caribbean EPA contains far reaching, sometimes modified[1], elements of the GATS Annex on financial services and the GATS Understanding on Commitments in Financial Services (see above).

During current FTA negotiations, the EU tries to introduce obligations on authorities to implement standards which would guarantee stability for their financial services sectors - an attempt which the Caribbean negotiators refused. The international standards which the EU wants to include in FTAs are many of those which are described in chapter 1 and which were hardly negotiated by developing countries, are:

  • the Basel Committee's "Core Principle for Effective Banking Supervision",
  • the International Association of Insurance Supervisors' "Insurance Core Principles",
  • the International Organisation of Securities Commissions' "Objectives and Principles of Securities Regulation",
  • the OECD's "Agreement on exchange of information on tax matters",
  • the G20 "Statement on Transparency and exchange of information for tax purposes" and
    the Financial Action Task Force's "Forty Recommendations on Money Laundering" and
    "Nine Special recommendations on Terrorist Financing".

The Parties also take note of the "Ten Key Principles for Information Exchange" promulgated by the Finance Ministers of the G7 Nations, and will take all steps necessary to try to apply them in their bilateral contacts

Worrying restrictions to control capital flows
A very worrying aspect of the FTAs such as the Caribbean EPA is that it restricts even further the authorities' capacity to control capital flows. The rules go beyond what is being agreed in the GATS which already prohibits restrictions on all payments for current transactions in sectors which have been liberalised under GATS. It also goes further than what the Cotonou agreed about capital movements. However the Caribbean EPA -which is based on the model for all FTAs the EU is currently negotiating- goes further to:

  • prohibit restrictions on all payments for current transactions between residents of the signatory countries,
  • prohibit restrictions on the free movement of capital relating to direct investments with regard to transactions on the capital account of balance of payments,
  • to require that measures ensuring the integrity and stability of a Party's financial system shall not be more burdensome than necessary to achieve their aim, and shall not discriminate against financial service suppliers of the other Party in comparison to its own like financial service suppliers,
  • to limit the ways safeguard measures with regard to capital movements can be taken: only "in exceptional circumstances" when payments and capital movements between the Parties cause or threaten to cause serious difficulties for the operation of monetary policy or exchange rate policy in one or more [signatory States]; and only those safeguard measures with regard to capital movements "that are strictly necessary may be taken" for a period not exceeding six months.

Such rules prohibit countries to have the necessary flexibility to prevent a financial crisis or to act during times of financial crisis to protect the financial and other needs of the society of the host country. There are some provisions to deal with balance of payments problems, but these are made conditional.[2]

[1] For instance the rule in the Caribbean EPA on introducing new financial services is somewhat more nuanced than the GATS and stipulates: Each Party shall permit a financial service supplier of the other Party to provide any new financial service of a type similar to those services that the Party permits its own financial service suppliers to provide under its domestic law in like circumstances. A Party may determine the juridical form Š a decision shall be made within a reasonable time the authorisation may only be refused for prudential reasons is required

[2] See the Caribbean - EU EPA: Part VI - General And Final Provisions

Tuesday, November 18, 2008

Dealing With a Bad Deal: Two Years of DR-CAFTA in Central America

Council on Hemispheric Affairs (COHA), Washington D.C.

Critics argue that for over a decade, the United States has been striving to create commercial in-roads into Latin America by way of bilateral free trade agreements that benefit U.S. economic interests to the detriment of those of Latin America.

A recent example of this trend was the passage of the Dominican Republic – Central America Free Trade Agreement (DR-CAFTA), a pact designed to promote trade and foreign investment between the U.S. and its Caribbean Basin neighbors. When it was being negotiated, advocates of DR-CAFTA repeatedly assured skeptics that the agreement was a “win-win” situation, arguing that it would economically benefit all countries involved…

However, two years have now passed since some Central American countries implemented DR-CAFTA’s mandates, and governments, farmers, and workers across the region are beginning to suffer the consequences of an unfair deal... More>>>

Tuesday, November 11, 2008

Africans Should Confront ''Blind Governments'' on EPAs

The People Left Out!

By Stanley Kwenda

PHOTO: Sarah Mwandiyambira, a Zimbabwean cross-border trader

HARARE, Nov 11 (IPS) - African governments came under fire for ‘‘blindly’’ negotiating the controversial economic partnership agreements (EPAs) and not making an effort to educate ‘‘ordinary people’’ on what they were negotiating. (ROK's Note: Sounds Familiar?)

The politicians, who gather in Geneva for World Trade Organisation (WTO) meetings and in Brussels for EPA talks, should know that they are there on behalf of their citizens and not themselves, said Rangarirai Machemedze, director of the Southern and Eastern African Trade Information and Negotiations Institute (SEATINI). SEATINI helps to build African capacity in world trade talks.

IPS interviewed him at a ‘‘reflective meeting on the state of the economy and sustainable alternatives’’, held last week by the Zimbabwe Coalition on Debt and Development (ZIMCODD) in Zimbabwe’s capital Harare. ZIMCODD is a coalition of like-minded Zimbabwean civil society organisations working in the field of trade and economic development. ‘‘Resources permitting, we need to educate people on what their governments are negotiating for them,’’ Machemedze told IPS.

ZIMCODD is holding meetings in an attempt to step into the breach. ‘‘This meeting is meant to basically try and give participants a clear picture as to how a country's economy operates within the global economy. We want to help them understand and give them a clear picture of the global market place,’’ Dakarayi Matanga, ZIMCODD’s director, told IPS.

One of these people is Sarah Mwandiyambira, a Zimbabwean cross-border trader. She had heard about EPAs before but had not had a chance to get a proper explanation in order to understand what they are and what they really stand for. At one time she was close to her tears after she was given the lowdown on how the EPAs will work once they are signed into binding instruments by the European Union (EU) and African countries.

‘‘This is scary. Something must be done to stop the EPAs. I am only a single woman who survives on cross-border trade to send my children to school.’’ The EPAs have been criticised for opening African countries’ markets too quickly to products from the EU, thereby destroying local production – whether agricultural or industrial.

The EU’s efforts to impose new issues such as equal treatment of foreign and local companies when it comes to government procurement, the liberalisation of services, and other issues, have also drawn protest. Said Mwandiyambira, ‘‘I can't believe this is what our governments are negotiating for us. I believe if all Zimbabweans are to be educated on these EPAs they will disapprove of them. They are only there to take away our economic means.

After these discussions I can tell you that this is a very serious issue which we are taking lightly as Africans.’’ Another participant, Sekai Saungweme, a legal and research consultant based in Harare, was left fuming at the Zimbabwean government after gaining an understanding of what the EPAs are all about: ‘‘It's a very sad scenario and one wonders what our governments are getting into. What was on their minds when they initialled the EPAs? Why did they initial such a flawed deal?’’

Machemedze urged African governments to establish a common togetherness when approaching the negotiations, which have been provisionally signed but are still to be finalised. African governments are not doing what they should be doing, Machemedze insisted.

He also blames European governments and other Western powers of using divisive tactics and the carrot and stick approach in trade talks. ‘‘It's a colonial problem. The powerful nations use divide and rule tactics. For example, if an African country is seeking funding for a dam project then that country is told that if you want funding then you must support EPAs,’’ alleged Machemedze, who has been attending trade negotiation meetings over the past four years.

‘‘Midnight calls are the order of the day at these meetings. There are no fair negotiations. There are visits to the hotel rooms of African negotiators at night where they are promised all kinds of aid.’’

Machemedze also contends that even with the existence of an arbitration court at the WTO, African countries will not be able to take on European countries because of the sheer amount of resources that such cases demand.

He believes that Zimbabwe ‘‘should delink itself from international trade. People might say we are in a global village but what has Africa benefited from it? We have to build our local markets first and then trade on a scale that we can sustain. He suggested that African countries should strengthen their local markets and then try and establish trade links with emerging economic giants such as Brazil, Argentina and India.

"At least they can identify with these emerging economies and learn from these countries,’’ Machemedze concluded. (END/2008)