Monthly Archives: October 2016

EU-Canada CETA: Seven Things to Know

Alicia Nicholls

After a week more akin to the nail-biting final minutes of a suspense film, the European Union and Canada have finally signed the Comprehensive Economic and Trade Agreement (CETA) today Sunday, October 30, 2016. This sets the stage for the agreement to be provisionally applied.

Here are seven quick things to know about CETA:

  1. CETA is the EU’s first completed  free trade agreement with a G-7 country and its most ambitious trade agreement to date -By numbers, it encompasses over 500 million people (500 million in the EU-28 and  35 million in Canada), 29 countries and 24 languages. Prior to CETA’s signature, trade relations between the EU and Canada were guided by the Framework Agreement for Commercial and Economic Cooperation, in force since 1976 as well as a number of sectoral agreements.
  2. Canada was the EU’s 11th largest trading partner in 2015 – This is according to EUROSTAT data as at April 2016 which valued Canada-EU trade in 2015 at 63,479 million euro, accounting for 1.8% of EU trade with non-EU partners. On the flip side, the EU is second only to the United States as Canada’s largest  trading partner. According to Statcan data, Canada exported $39,454.8 million ($CAN) in goods to the EU in 2015 and imported $53.004.5 in the same period.
  3. CETA was several years in the making –  Negotiations between the EU and Canada began in 2009 and the text was concluded in 2014 and received legal approval in February 2016. However,the agreement has had to overcome several hurdles, including the fact that as a “mixed” agreement under EU law, it had to obtain the approval of each of the 28 EU member countries (in accordance with their own constitutional arrangements). There has been popular and political opposition to the Agreement, including the impasse between the Belgium Federal Government and the regional government of Wallonia which had threatened  to be the final nail in the coffin until a last minute internal deal saved the day. Despite the resolution of this political impasse, some popular dissent towards the Agreement remains as evidenced by the anti-CETA protests.
  4.  Almost 99% of tariffs will be eliminated on goods trade between the EU and Canada – The exceptions are a few sensitive agricultural products. However, tariff-eliminations are only a small part of CETA and the Agreement is WTO-plus in many aspects. It includes provisions on trade in services, investment,  sustainable development, labour, environment, inter alia. It also opens up the procurement market in the EU and Canada so businesses in those countries can bid on government contracts in each other’s countries.
  5. CETA provides for a novel Investment Court System – The permanent bilateral investment tribunal provided for in CETA’s Investment Chapter (Chapter 8) is a marked departure from the ad hoc tribunals used in traditional investor-state dispute settlement systems. The tribunal will be comprised of 15 members (five EU nationals, five Canadian nationals and five nationals of third states). In addition to this new ISDS system, the investment chapter provides more explicit language regarding the State’s right to regulate, an appellate tribunal, greater provisions on transparency of proceedings and conflict of interests, as well as commitment by the EU and Canada towards the shared objective of working towards the establishment of a permanent multilateral investment court which will replace the bilateral court under CETA.
  6. CETA is expected to boost income in both the EU and Canada. According to a 2008 joint study by the European Commission and the Government of Canada, conducted prior to the launch of the negotiations, it was found that the annual real income gain  within seven years of CETA’s implementation is to be an estimated  11.6 billion euros for the EU and 8.2 billion euros for Canada. The stated benefits of CETA are job creation, a liberalised procurement market and increased merchandise and services trade and investment flows between Canada and the EU and cheaper goods and services for consumers.
  7. CETA will be the benchmark for future agreements signed by both the EU and Canada with subsequent trade partners.  The standard of ambition in the Agreement is high. CETA is likely to be the last trade agreement signed by the UK as an EU-member before the UK is expected to make its Article 50 notification and BREXIT negotiations begin (slated for March 2017).

The full text of the Agreement may be viewed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

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Caribbean Trade and Development Digest – October 23-29, 2016

Alicia Nicholls

These are some of the major trade and development headlines and analysis across the Caribbean region and the world for the week of October 23-29, 2016. 

For past issues, please visit here.

CARIBBEAN NEWS

Dominican Republic and Cuba negotiate trade agreement

Prensa Latina: Cuba”s ambassador to the Dominican Republic, Carlos de la Nuez, reported today that the two countries have begun negotiations for the signing of a partial scope trade agreement. Read more
EU-CELAC Ministerial Meeting: Santo Domingo Declaration
We, the Ministers of Foreign Affairs of the Community of Latin American and Caribbean States (CELAC) and of the European Union and the High Representative of the European Union for Foreign Affairs and Security Policy, met on the occasion of our first Inter-Summit meeting, held in the Dominican Republic on the 25th and 26th of October 2016. Read more 
US Correspondent Banks Snub Stakeholders Conference
Antigua Observer: Following what organizers have hailed as a successful Stakeholders’ Conference on Correspondent Banking Relations (CBR), Prime Minister Gaston Browne admitted that he was “disappointed” by the no-show of representatives from some of the US corresponding banks. Read more 
IDB helps thousands of LAC SMEs do business with China

Sunday Express (T&T): The Inter-American Development Bank (IDB) says it is helping thousands of small and medium enterprises (SMEs) in Latin America and the Caribbean (LAC) do business with Canada. Read more 

 

US abstains on UN resolution to end embargo against Cuba

Jamaica Observer: The United States yesterday abstained from a United Nations General Assembly (UNGA) vote on a resolution calling for an end to the decade’s old trade embargo it has imposed on Cuba, a move being regarded as an improvement in relations between the two countries. Read more 

 

Guyana wants CARICOM help is freeing up honey trade
Demerara Waves: Guyana is hoping that the Caribbean Community (Caricom) can unblock Trinidad and Tobago as the route through which honey exports must be transshipped  to regional and extra-regional markets, following a US$3,000 fine that La Parkan had to pay for violating the laws of that twin-island nation. Read more 
Caribbean poultry sector looks for import restrictions to defend industry
Caribbean News Now: While poultry farms are making serious efforts, including financial investments, to make the region self-sufficient, several issues such as illegal imports from Brazil and cheap ‘dump chicken’ from the US are harming the industry, local entrepreneurs say. Read more
CARICOM Highlights Importance of Investment for Caribbean Agriculture
Prensa Latina: The Secretary-General of the Caribbean Community (Caricom), Irwin LaRocque, highlighted today the importance of investment for boosting the development of agriculture in the region. Read more
Pacific Islands Impressed with CARICOM Agriculture
Barbados Today: The Caribbean Community (CARICOM) may have made more progress in its agricultural sector than it realises, an official from the Pacific says, as his region takes lessons from the Caribbean ahead of its first Pacific Week of Agriculture, slated to take place next year. Read more 

INTERNATIONAL NEWS

CETA: EU and Canada to sign long-delayed free trade deal

BBC: Canadian Prime Minister Justin Trudeau is finally on his way to Belgium to sign a long-delayed landmark trade deal with the European Union.He will attend a summit in Brussels where a signing ceremony planned for Thursday was cancelled after a Belgian region vetoed the agreement. Read more

Policy Prescriptions: Trump and Clinton on trade

CTV News: Donald Trump wants to blow up the way the United States does business with the rest of the world. Hillary Clinton repudiates an ambitious Asia-Pacific trade deal she once praised and vows to appoint a special prosecutor to keep U.S. trading partners in line.Read more

AGOA Non-Oil trade with Africa grows from $1.4bn to 4.1bn – US Official

Ghana Business News: Non-oil trade between African countries and the US under the African Growth and Opportunity Act (AGOA) is said to have grown from $1.4 billion in 2001 to $4.1 billion in 2015. Read more

Trans-Pacific Partnership Trade Deal Doomed, ex-PM Brian Mulroney predicts

Former prime minister Brian Mulroney says the Trans-Pacific Partnership trade deal is doomed to fail because of hostility in the U.S. Congress and widespread antipathy to trade initiatives in general.Read more

Trade Agreements Under Attack: Can they be salvaged and is it worth it?

Huffington Post: Part of the current anti-globalization backlash in advanced countries takes the form of opposition to trade agreements.Read more 

NEW ON CARIBBEAN TRADE LAW & DEVELOPMENT

Caribbean Response to Withdrawal of Correspondent Banking

CETA Trade Deal Deadlock Broken 

Citizenship by Investment receipts power economic growth in Eastern Caribbean countries 

Jamaica is Commonwealth Caribbean’s Easiest Place to do Business

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Caribbean Response to the Withdrawal of Correspondent Banking

Alicia Nicholls

IMF Deputy Managing Director, Mr. Tao Zhang, gave an interesting and comprehensive speech summarising the “Caribbean response to the Withdrawal of Correspondent Banking” at the Conference on the Withdrawal of Correspondent Banking in Antigua & Barbuda on October 28, 2016.

The following realities stood out to me from Mr. Zhang’s speech:

  1. Almost 60% of the Caribbean Association of Banks’ member institutions,  which it has interviewed, report a loss of CBRs.
  2. In some cases where the banks have been able to hold on to CBRs,  some key services have been discontinued e.g: cheque clearance, trade finance and wire transfers
  3. Some banks face higher costs for the remaining services.
  4. Global correspondent banks are withdrawing from transactions involving money transfer operators.

Given the above, Mr. Zhang rightly noted that if this continues, not only would it affect the financial stability of affected countries, but also economic growth, financial inclusion, and other development goals. He further reiterated that continued loss of CBRs would drive legitimate transactions underground and encourage increased informality, thereby undermining anti-money laundering and countering the financing of terrorism (AML/CFT) objectives.

Mr. Zhang then turned to the issues driving this trend. A number of international organisations and agencies have studied this issue, including the IMF, and their findings were echoed in Mr. Zhang’s speech. He noted, for example, the cost-benefit considerations which banks have to weigh; rising expenses associated with compliance and international tax transparency versus limited profitability in some CBRs.

He made reference to several policy responses being made by Caribbean authorities and other affected regions which he  noted have already started to have some results. He gave the example of the US Treasury Department which has increased its education of financial institutions on the “precise nature of transactions and behaviours that are subject to sanctions”. He further made reference of Eastern Caribbean Currency Union (ECCU) countries’ decision to consolidate their national AML/CFT work into one regional operation under the responsibility of the Eastern Caribbean Central Bank (ECCB).

Mr. Zhang emphasised that there is “no quick fix” to the problem and reiterated the need for urgent action to mitigate the impact on affected economies.

In addressing what are the next steps, he outlined three areas for further exploration:

  • Addressing the problem of economies of scale
  • Mitigating cost and technical limitations
  • Improving information flows

He also set out a number of ways in which the IMF could be of assistance, including for example, facilitating dialogue and encouraging standard-setting bodies to take account of the impact of CBR policies.

In concluding, Mr. Zhang reiterated the IMF’s continued commitment to working with affected countries on the issue until it is solved.

The full speech is a must-read and may be accessed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

CETA Trade Deal Deadlock Broken

Alicia Nicholls

UPDATE: Text of the Addendum (in French) is available here.

The Comprehensive Economic and Trade Agreement (CETA) between the European Union (EU) and Canada has finally won the backing of Belgium’s hold-out Walloon region. This is according to reporting by BBC News which broke the news earlier this evening. According to the BBC, Belgium’s Prime Minister, Charles Michel,  has advised that after internal negotiations among Belgium’s federated bodies, an addendum to the deal has been struck which has “addressed regional concerns over the rights of farmers and governments”.

Hailed as the EU’s most ambitious agreement with a third party to date, CETA is a  landmark agreement encompassing not just the elimination of customs duties on goods between the EU and Canada, but also deep provisions on trade in services, intellectual property, investment, government procurement, inter alia. Though negotiations formally ended in 2014, the agreement has not yet been signed.

As a mixed agreement under EU law, CETA requires the signature of all 28 EU member states (in accordance with their own constitutional arrangements). Under Belgium’s federated structure, the consent of its regional legislatures is required before the Belgium federal government can sign trade agreements with third states.

Wallonia is Belgium’s francophone region, with a population of 3.6 million which is generally less prosperous than Flanders, the Dutch-speaking region.  Wallonia’s minister-president, Paul Magnette had raised a number of concerns over the Agreement’s provisions which he insisted needed to be addressed before Wallonia would give its support. These included, chiefly, the potential impact on Walloon farmer’s in the face of competition from Canadian pork and beef imports and the potential impact of the agreement’s investor-state dispute settlement (ISDS) provisions on governments’ regulatory rights.

Monday’s deadline which the EU had set for Belgium to address its internal opposition to the agreement was missed and the signing ceremony which had been carded for today, Thursday, was cancelled. The prospect of one region potentially vetoing seven years’ of negotiating work led not only to concerns about the EU’s ability to effectively enter into international trade deals with third parties, but  on whether a similar scenario would play out in the Brexit negotiations with the UK..

Symptomatic of the anti-globalisation, anti-free trade furor sweeping over western countries, CETA has faced some popular and political opposition in other European countries as well, although all EU governments (including the Belgium federal government) have indicated their intention to sign.

So, it seems as though disaster has been averted for now and both the EU and Canada can give a sigh of relief. Wallonia’s acquiescence paves the way for Belgium to sign the Agreement. However, two notes of caution must be borne in mind. Firstly, the exact details of the Belgian addendum have not been reported as yet. Secondly, the addendum will need to be accepted by the remaining 27 EU member states. Suffice it to say, the ending of this story has not been written as yet.

As an update, the text of the Addendum (in French) is available here.

Read the full BBC article here.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Citizenship by Investment receipts help power economic recovery in Eastern Caribbean Countries

Alicia Nicholls

Receipts from citizenship by investment programmes (CIPs) continue to be a major contributor to economic recovery in the Eastern Caribbean Currency Union (ECCU). This is according to the International Monetary Fund’s latest Staff Report on the ECCU released this month (October 2016).

CIPs have been an important development tool in Eastern Caribbean countries. In January 2016 St. Lucia became the 5th ECCU country to institute a CIP. The other ECCU countries which run CIPs are St. Kitts & Nevis, Grenada, Dominica and Antigua & Barbuda.

According to the IMF, most ECCU governments continued to rely on CIP inflows to fund their budgets in 2015. CIP inflows were highest in St. Kitts and Nevis, which has the world’s longest running CIP. In that country, CIP revenues to the public sector were at 17.4 percent of GDP. The report also noted that inflows reached 7.9 percent of GDP in 2015 in Antigua and Barbuda and 3.6 percent in Dominica.

However, the IMF did mention several potential downsides to the sustainability of the CIPs, including the increased competition ECCU CIPs face not only amongst themselves but from other CIPs and residency programmes worldwide, including Malta’s. Other risks the IMF mentioned include rising global migration pressures, elevated security concerns and geopolitical tensions which may trigger adverse actions by the international community, including suspension of visa-free travel for citizens of CIP countries.

In order to improve the sustainability of the programmes, the IMF also encouraged authorities to “develop a strong, regionally accepted set of principles and guidelines for citizenship by investment programs in order to enhance their sustainability” The staff suggested that the authorities share due diligence information on clients to prevent citizenship shopping in cases where an application is rejected by one jurisdiction.

The IMF cited the need to improve the management of the programmes and cautioned against over-reliance on CPI revenues for funding recurrent budgetary operations. Mindful of the threat posed by natural disasters, the IMF posited that CIP countries save the bulk of the CPI revenues in a well-managed fund to address natural disaster shocks and to fund disaster resilient infrastructure.

Arguing that a comprehensive governance framework is crucial to mitigating increased risks facing CIPs, IMF also recommended more transparency by making data on the programmes public and subject to financial audits.

The full IMF Staff Report for the ECCU may be viewed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Jamaica is Commonwealth Caribbean’s Easiest Place to do Business, World Bank Doing Business Report 2017

Alicia Nicholls

Jamaica has once again topped the Commonwealth Caribbean as the easiest place in which to do business, according to the recently released World Bank Doing Business Report 2017. This flagship annual index  measures and benchmarks countries around the world on the ease in which a hypothetical local entrepreneur can open and run a small to medium-size business when complying with relevant regulations.

Economies are ranked on 11 regulatory areas reflecting the life cycle of a business, namely starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labor market regulation. A total of 190 economies were included in this year’s index.

Jamaica’s Performance

Jamaica had an overall rank of 67th, down 2 places from its ranking of 65th on the 2016 index.  The World Bank noted that both Jamaica and Grenada “made significant upgrades to their electronic platforms, resulting in a substantial decrease in the time required for international trade processes”. The World Bank also praised Jamaica for making tax paying less costly by increasing tax depreciation rates and the initial capital allowance for assets acquired on or after January 1, 2014. Those reforms earned the country a leap of 39 places on the “paying taxes” indicator.

However, one criticism made by the World Bank was of Jamaica’s removal of the ability to complete next-day company incorporation which the Bank argued made starting a business more difficult. Outside of the indicators “paying taxes” and “trading borders”, the island saw slippage in its rankings on all other indicators. Its most precipitous fall was in its ranking on “getting electricity” where it slipped 20 places to 101st place.

Other Caribbean Countries’ Performance

Overall, Puerto Rico was the highest ranked economy in the Latin America and Caribbean (LAC) region with a rank of 55th, up one place from its rank of 56th in the 2016 index. Honourable mention must be made of Guyana which rose 16 places to 124th place. The Dominican Republic retained its 103rd rank.

All other Caribbean countries saw declines from their 2016 rankings. The biggest decline was St. Lucia which dropped 8 places to 86th from 78th in 2016.

The rankings of all Caribbean countries are as follows:

WorldBankDoingBusinessCaribbean2017.jpg

Doing Business Data 2017

Global Rankings

On a global scale, the top 5 easiest places in which to do business were as follows: New Zealand, Singapore, Denmark, Hong Kong and the Republic of Korea. The bottom 5 economies were South Sudan, Venezuela, Libya, Eritrea and Somalia.

The full  Doing Business 2017 report may be accessed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

EU-Canada CETA trade deal hangs in the balance

Alicia Nicholls

The Comprehensive Economic and Trade Agreement (CETA) negotiated between the European Union (EU) and Canada appears to be in limbo as Belgium’s French-speaking Walloon region has said a strident non (no in French) to the deal. According to media reporting, two key issues appear to be sticking points for the Walloon government. Firstly, there are concerns about potential increased pork and beef imports from Canada which they believe would be disadvantageous to Walloon farmers. Secondly, there is disagreement about the investment court system mechanism proposed for the settlement of investor-state disputes which they argue is tilted in favour of investors and would infringe on states’ rights to regulate.

The other 27 EU countries (including the UK) have indicated their willingness to sign and so does the Belgium government. So how is it that a Belgium region of roughly 3.6 million out of a total EU population of 500 million could potentially veto a trade agreement which took in essence seven years to negotiate? The CETA is a mixed agreement which means that it requires signature and ratification by each EU member state in accordance with its own constitutional requirements. Under Belgium’s constitutional arrangements, each of that country’s regions must give its consent to the national government  to sign any trade agreement. The Walloon Government has declined to give its consent to the Belgium government to sign the CETA. This has given rise to the quandary now being faced.

The CETA is the EU’s most ambitious free trade agreement to date with a third party. It not only seeks to eliminate customs duties on all industrial goods and on most agricultural and food products, but covers trade in services, intellectual property, government procurement, investment, inter alia. The negotiations were officially completed in September 2014. The text has been legally reviewed but only becomes binding once the Agreement has entered into force.

CETA’s investment chapter is novel as it establishes a permanent investment court which would hear disputes brought by investors, allows for greater transparency in proceedings, defines more narrowly the circumstances under which investors can bring claims, includes an express right of states to regulate and includes an appeal system. This new system is a marked departure from the traditional ISDS system found in old school BITs and in investment chapters of most FTAs like the Trans-Pacific Partnership (TPP). CETA will replace the 8 bilateral investment treaties that currently exist between individual EU states and Canada and under which claims by investors were heard by ad hoc arbitration panels. The provisions in these BITs were tilted heavily in favour of the investor and lacked language protecting states’ regulatory rights. It should be noted that Belgium and Canada do not have a BIT.

This current showdown between Wallonia on the one hand, and the rest of the EU and Canada on the other is just the latest episode in the drama playing out between free trade and the rising anti-trade populism and consequent political opposition sweeping across western countries. For example, US ratification of the Trans-Pacific Partnership remains held up in the US Congress and whether it is indeed ratified is not a certainty given the rhetoric of both major presidential candidates. With regard to CETA itself, this is not the first hurdle the agreement has faced as earlier this year Bulgaria and Romania had raised objections to the agreement over Canada’s failure to remove visa requirements for Bulgarian and Romanian nationals.

The Monday deadline has been missed and it is the first time that one region in an EU country has threatened to derail a negotiated outcome with a third state, a prospect which is not just frustrating for EU leaders and Canada but raises questions about the reliability of the EU as a negotiating partner seeing that this agreement is with a western country with similar values on trade.

To this effect, Canada’s Minister of International Trade, Chrystia Freeland, is reported as stating as follows:

“Canada has worked, and I personally have worked very hard, but it is now evident to me, that the European Union is incapable of reaching an agreement — even with a country with the European values such as Canada, even with a country as nice and patient as Canada.”

Another question is what does this state of affairs mean for the future BREXIT negotiations once the UK makes its Article 50 notification? Some commentators had previously argued that CETA might have been a suitable model for future EU 27-UK relations as it does not involve the free movement of labour. This issue was raised by EU Commissioner, Cecilia Malmstrom, who is quoted in media reports as saying “If we can’t make it with Canada, I’m not sure we could make it with the UK.”

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

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