Economy & Trade, Headlines, Latin America & the Caribbean, North America

CARIBBEAN: Region Cautious on Free Trade with Canada

Peter Richards

PORT OF SPAIN, Trinidad, Apr 3 2009 (IPS) - Two years ago, newly elected Canadian Prime Minister Stephen Harper acknowledged his country’s neglect of the Caribbean in recent years.

Now, as he gets ready for talks with Caribbean Community (CARICOM) leaders ahead of the Apr. 17-19 Summit of the Americas here, regional leaders are being warned that they should not rush into a new accord with Ottawa to replace the 1985 one-way duty-free Caribbean-Canada (CARIBCAN) agreement.

Regional trade technocrats have said that while it may be politically appealing for CARICOM to seek an expansion of the agreement to include all its members, all products, and some services, more generous rules of origin and greater security, this may be practically difficult.

They point to the fact that CARIBCAN is non-reciprocal and would require a World Trade Organisation (WTO) waiver, recalling when Canada extended the current waiver to 2011, it was with the expectation that a new trade agreement would be in place in the near future so that it would not be necessary to return to the WTO for an extension.

At their end of their inter-sessional summit in Belize last month, Caribbean leaders reaffirmed their commitment to the early commencement of negotiations with Canada and have already given their blessing to a “negotiating brief’ with the proviso that “the recommendations may have to …[be] re-examine[d] in the context of the continuing global financial and economic situation”.

Trade between Canada and CARICOM is relatively small, though growing. Official figures show that two-way trade in goods amounted to 2.0 billion dollars in 2006, while trade in services involved another 3.0 billion dollars.

In both goods and services, Canada has had a deficit with CARICOM, which in total has averaged about 1.0 billion annually over the last five years.

“For Canada, the region is a very small trading partner with 0.01-0.02 percent of total trade in goods, though CARICOM ranks on a par with or above the other countries in the Americas with which Canada is negotiating trade agreements,” said Ramesh Chaitoo, head of the Services Trade Unit at the Barbados-based Caribbean Regional Negotiating Machinery (CRNM), and Ann Weston, vice-president and research coordinator at the North-South Institute in Ottawa.

In a joint paper entitled ” Canada and the Caribbean Community: Prospects for an enhanced trade agreement”, they noted that for CARICOM, Canada is a slightly more important partner, though still only accounting for 2.3 percent of CARICOM’s total imports in 2006 and 3.3 percent of exports.

This compares with the United States (imports accounting for 32.2 percent and exports 51.0 percent) and the European Union (11.1 percent and 11.6 percent, respectively).

While there may be a general consensus that CARICOM would benefit from a new trade accord with Canada, not everyone is enthusiastic.

Noted Caribbean economist Norman Girvan said the region should await the outcome of free trade negotiations between Canada and other countries.

In a statement, Girvan warned that the wide scope of the proposed agreement suggests that CARICOM will have to be prepared to accept another layer of legally binding commitments on its national and regional policies, in addition to what has been agreed under the Economic Partnership Agreement (EPA) with the European Union.

“Apart from implementation obligations, this will further complicate the task of completing the CARICOM Single Market and Economy (CSME) and further constrict the ‘policy space’ of regional governments,” he said.

Three years ago, of the 91.5 million dollars in imports from the region benefiting from CARIBCAN treatment, 79 percent came from Trinidad and Tobago – and 65 percent of that figure consisted of shipments of methanol from a Canadian-owned firm in Trinidad.

“It is questionable whether the preservation of market access for a single Canadian owned firm in one member state provides an urgent or compelling reason for all 14 CARICOM member states to open their markets to Canadian imports,” Girvan said, noting also that the tariffs on other Caribbean products such as rum, lobster, fruit, vegetables and condiments “are either zero or relatively low”.

“In other words only a small proportion of CARICOM exports would be affected by the unavailability of CARIBCAN,” he said.

Senior Trade Policy Specialist at the Barbados-based Caribbean Export Development Agency, Carlos Wharton, said that CARIBCAN beneficiaries were also increasingly trading under Most Favoured Nation (MFN) duty-free conditions rather than under the preferential regime offered by CARIBCAN.

“This means that an increasingly higher number of CARICOM firms are already exporting to that market and are competing with other firms from third countries. In addition, as future rounds of negotiations take place at the WTO it is expected that additional products would be subject to duty-free treatment on a MFN basis,” he noted.

Girvan warned that a CARICOM-Canada FTA would also increase the pressure on Washington to terminate the non-reciprocal duty-free treatment granted CARICOM under the Caribbean Basin Initiative, and to replace it with a CARICOM-U.S. free trade agreement.

“Hence, the ‘domino effect’ of EPA/FTAs with Europe, Canada and the United States is that CARICOM could end up with a large part of regional imports becoming duty-free in 10-15 years. This would have major revenue implications for several CARICOM countries, for the CSME, and for the ability to foster local and regional agricultural and industrial development through tariff protection and other policies favouring regional producers.”

He said that the idea a CARICOM-Canada FTA will contain a substantial or meaningful development dimension “may just be pie in the sky,” reminding regional leaders that Ottawa’s recently announced aid programme of 478 million dollars for 15 regional countries over 10 years averages 3.1 million dollars per country per year.

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