CARIBBEAN PERSPECTIVES
An in-depth focus on Caribbean issues
By Sandra Ann Baptiste
The writer is a business consultant and specialist in Caribbean Affairs
(This is the First in a two-part series)
AFTER a lengthy period of preparations by Caribbean governments, Canadian and Caribbean trade negotiators have had a “productive” initial round of talks in Barbados on a Canada-CARICOM enhanced trade agreement, against the backdrop of the region advocating a strong development aspect and the Canadians insisting on including labour and environmental side accords.

CARIBCAN, the current non-reciprocal trade accord has provided duty-free status for about 83 per cent of Caribbean exports to Canada but a waiver by the World Trade Organization (WTO) for preferential access under this regime expires at the end of 2011.

Since tariffs are not a major issue, the main agenda items include expanding product coverage to include those sectors excluded under CARIBCAN (textiles, clothing and footwear) and some agricultural products, as well as trade in services, securing changes to prohibitive Canadian provincial regulations, investment provisions and support for building Caribbean capacity to take advantage of Canadian market access.

Canada accounts for only around 3 per cent of CARICOM’s total exports and 2 per cent of imports but it is an important source of foreign direct investment in the region, mainly in the financial services, mining and tourism sectors.

Canada is the largest bilateral aid donor to the region and has traditionally been a strong ally of the Caribbean in the international trade and finance arena.

The Caribbean negotiating strategy includes securing a distinct chapter in the agreement on development cooperation that takes account of the small and vulnerable economies of most of the 15-nation CARICOM grouping.

The region is interested in securing technical and financial assistance to facilitate adjustment to liberalization and trade facilitation and countries of the Organization of the Eastern Caribbean States (OECS) grouping are looking for special provisions.

The Caribbean negotiating team, headed by CARICOM’s new Office of Trade Negotiation (OTN) Director General, Gail Mathurin, is seeking extended phase in periods for liberalizing trade in goods and services.

The region will press for exemptions to apply to regional agricultural products regarded as “sensitive” due to their importance to food security in the region.

Critical for the region, is how CARICOM countries will offset the drop in public sector revenues as a result of opening their markets to Canadian goods and services.

The region’s merchandise trade surplus with Canada has been widening. According to data from the CARICOM Secretariat, between 1999 and 2008 CARICOM exports to Canada increased annually by close to 15 percent, from US$400 million to US$1.4 billion.

Canada’s exports to the region increased by 12.4 percent annually over the same period, from US$296 million to $850 million.

More recently, the picture has not been so rosy. For the first quarter of 2009, CARICOM exports to Canada declined by 31 per cent over a similar period in 2008.

Suriname, Guyana, Trinidad and Tobago and Jamaica are the top exporting countries. Trinidad and Tobago‘s export earnings dropped by almost 50 percent.

POTENTIAL BENEFITS
Canadian trade officials say a new Free Trade Agreement (FTA) with CARICOM, will among other things, reduce prices for Canadian and Caribbean consumers and input costs for manufacturers in all countries that sign the accord.

Canadian exporters of industrial goods, agriculture and agri-food, fish and seafood are likely to benefit from opportunities that will arise under a comprehensive FTA with CARICOM.

The controversial Economic Partnership Agreement (EPA), between CARICOM and the European Union, signed last year, will guide and inform the region’s negotiations with Canada. The negotiators will press for similar and in some cases, better terms of conditions than those in the EPA.

While CARICOM is seeking to have a trade and development agreement, the Canadians are working towards a FTA. Canada has negotiated several FTA’s over the last 15 years including with Chile, Costa Rica, Colombia and Peru.

Under the Peru agreement, which went into effect last August, Canada immediately eliminated 97 percent of its tariffs on Peruvian goods, with the remainder to be eliminated over a three to seven year period while Peru agreed to provide duty free access to 95 percent of Canadian exports, with most remaining tariffs to be phased out over five to ten years.

A key element of CARICOM’s EPA with the EU is gradual opening of CARICOM markets to European products over a period of 25 years.

Canadian international trade officials say they understand the region’s capacity constraints and the vulnerability of small island States. They are awaiting detailed proposals from the CARICOM side on ways in which cooperation elements could be addressed.

A 2009 study by the OTN, when it was the Caribbean Regional Negotiating Machinery (RNM), suggests that the opportunities on trade in services hold the “great potential new benefit” for most CARICOM countries. It recommends that sub-contracting arrangements with Canadian firms might be feasible in accounting and health services, audio-visual editing, call centres and data processing services.

On the services side, CARICOM wants greater access of professionals involved in software/information technology, health services, entertainment, culture and tourism.

On the other hand, Canada is interested in sectors such as telecommunications, environmental and business services. Canada wants to see the elimination of state and local purchase provisions, easier access for its technical workers to service equipment and stronger intellectual property rights protection.

LABOUR AND ENVIRONMENT SIDE AGREEMENTS
Two features of recently negotiated Canadian FTAs are side agreements on labour and the environment, which CARICOM governments were initially strongly opposed to discussing, largely because of sanctions involved, but have now softened their position somewhat by agreeing to review the Canadian proposals.

Under the Canada-Peru agreement on labour cooperation, failure to respect principles of the International Labour Organization (ILO) and to enforce domestic laws is subject to penalties, which could include payment of up to Cdn 15 million dollars.

The Environmental agreement also commits both countries to substantially increase environmental protection, to enforce environmental laws, with emphasis on respecting the interests of indigenous peoples and local communities.

Canadian officials note that in the 15-year history of negotiating labour agreements alongside the FTAs, all disputes have been resolved without recourse to the use of financial penalties. They point out that the money goes into a fund and is applied to the dispute resolution process.

Canada already has a Cdn $1M three-year technical cooperation agreement with CARICOM on labour issues.

PRIVATE SECTOR POSITION
Caribbean private sector officials advise that they have no issue with the labour and environmental parallel agreements.

In fact, the regional umbrella private sector organization, the Caribbean Association of Industry and Commerce (CAIC) has decided to approach CARICOM leaders to re-think their opposition to the side agreements.

Private sector sources close to the negotiations note that there are numerous conciliatory measures in case a breach of such agreements occur, so the chances of it reaching punitive measures are slim.

They feel that if the region discusses and signs these side agreements, it will strengthen the Caribbean ‘s case for deeper development assistance, particularly for those sectors that have the greatest export potential.

Regional business leaders are concerned that while the accord is being negotiated at the Canadian Federal level, regional products that should be accorded duty-free status can be subjected to Other Duties and Charges (ODCs), including environmental taxes, in individual provinces.

The Caribbean private sector wants a new trade and development accord to provide funding for training Caribbean workers in selected sectors in Canada.

As well, CAIC is calling for a change in regulations to allow regional cultural service providers to conduct their business under more favorable circumstances and with greater ease in Canada.

REGIONAL LABOUR PERSPECTIVE
The regional labour movement, the Caribbean Congress of Labour (CCL) is not opposed to the labour or environment side agreements and wants these to be on the negotiating table.

The CCL wants to have an accord that provides assistance to build capacity at Caribbean Labour ministries, among other things.

The region’s labour unions say they have no issue since the region already adheres to international labour standards such as the right to collective bargaining, freedom of association and the elimination of child and forced labour.

Further, the labour movement argues that Caribbean’s labour standards are high compared with other developing countries and a new trade and development agreement with Canada should ensure that these are not eroded.

On the labour front as well, regional governments have underscored the importance of the bilateral farm labour program that provides income for Caribbean seasonal workers.

There is interest in an expansion to include all CARICOM countries and scope for introducing similar programs covering sectors such as the hospitality and construction industries.