European shadow dims Canada – Caribbean trade talks

by Sir Ronald Saunders 23.JAN.09

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.

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. {{more}}

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.

(The writer is a business consultant and former Caribbean diplomat)

(responses to: ronaldsanders29@hotmail.com)