Caribbean Trade Law and Development

Year: 2016

  • BRICS Summit 2016: Five Key Trade Takeaways

    BRICS Summit 2016: Five Key Trade Takeaways

    Alicia Nicholls

    The BRICS grouping, comprising of the emerging economies of Brazil, Russia, India, China and South Africa, held its 8th Summit in Goa, India under the theme “Building Responsive, Inclusive and Collective Solutions” October, 15-16, 2016. India currently holds the chairmanship of the five-nation grouping.

    Here are the main trade takeaways from the Summit:

    1. Support for the WTO-based Multilateral Trading System

    The BRICS leaders have reiterated their support for the rules-based multilateral trading system and the World Trade Organisation’s centrality. Leaders noted the increased spaghetti bowl of bilateral, regional and plurilateral trade agreements and advocated that these agreements should be complementary to the multilateral trading system. According to the Goa Declaration, BRICS leaders also encouraged parties to ” align their work in consolidating the multilateral trading system under the WTO in accordance with the principles of transparency, inclusiveness, and compatibility with the WTO rules.”

    2. Continued support of Doha Development Agenda

    Contrary to the G20 Statement where the Doha Development Agenda was essentially scrubbed from the trade vocabulary, BRICS leaders reiterated their support for advancing negotiations in the DDA, reflecting the sharply divided opinion on the future of Doha  which was demonstrated in the Nairobi Ministerial Statement. They also emphasised the importance of implementing the decisions taken at the Bali and Nairobi Ministerial Conferences and urged all WTO members to work together to ensure a strong development oriented outcome for MC11 and beyond.

    3. Promoting BRICS Economic Cooperation

    The BRICS leaders praised progress made so far on the implementation of the Strategy for BRICS Economic Partnership and emphasised the importance of the BRICS Roadmap for Trade, Economic and Investment Cooperation until 2020.

    4. Improving intra-BRICS Customs Cooperation

    The BRICS leaders commended the establishment of the Customs Cooperation Committee of BRICS and the signing of the Regulations on Customs Cooperation Committee of the BRICS in line with the undertaking in the Strategy for BRICS Economic Partnership to strengthen interaction among Customs Administrations.

    5. Double intra-BRICS trade by 2020

    In his plenary address, India’s Prime Minister Narendra Modi called on fellow BRICS leaders to double the value of intra-BRICS trade to $500 billion by  2020. According to Prime Minister Modi, intra-BRICS trade was $250 billion in 2015. He further noted that this target would require “businesses and industry in all five countries to scale up their engagement” and “for governments to facilitate this process to the fullest”.

    The full text of the Goa Statement 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.

  • Caribbean Trade and Development Weekly Digest – October 2-8, 2016

    These are some of the major trade and development headlines and analysis across the Caribbean region and the world for the week of October 2-8, 2016. 

    For past issues, please visit here.

    Regional

    China tariffs and NTBS inhibit Caribbean and Latin America imports

    Stabroek: Prohibitive tariff and non-tariff barriers for trade between China and Latin America and the Caribbean (LAC) continue to seriously inhibit the prospects for the export of both agricultural and manufactured goods to the world’s single largest market, according to a recently concluded study done by the Inter-American Development Bank (IDB).. Read more

    World Bank says Caribbean beginning to show signs of recovery

    Trinidad Express:The World Bank says Latin America and Caribbean countries are showing signs of economic recovery and an increased volume of exports, including new products in higher quality niches. Read more

    International

    Pound hit by ‘flash crash’ in biggest crash since Brexit

    Euractiv: The pound suffered a “flash crash” Friday morning, its biggest drop since Britain voted in June to leave the EU, with confused traders scrambling to understand the reason for the sharp sell-off. Read more

    Forget Brussels, Brexit’s Toughest Battleground is the WTO

    Politico.EU: WTO’s accession chief says Britain’s departure from the EU creates an unprecedented situation that could take years to resolve.Read more

    Appellate Body issues report regarding EU duties on biodiesel from Argentina

    WTO: On 6 October 2016, the WTO Appellate Body issued its report in the case “European Union – Anti Dumping Measures on Biodiesel from Argentina” (DS473). Read more

    WTO and IFC leaders discuss action to tackle trade finance shortfall

    WTO: A large and growing shortfall in trade finance is stymieing growth and development because smaller enterprises are denied access to funds which are critical to their participation in global trade. Read more

    New Survey Finds Worsening Global Shortage of Trade Finance

    ICC: Small- and medium-sized enterprises (SMEs) and African countries are suffering the most from a deepening global trade finance gap according to the ICC 2016 Global Survey on Trade Finance. Read more

    Australian Negotiators arrive to begin post-Brexit trade talks

    Telegraph: Australian officials are ready to begin work on a free-trade deal with the UK, and have recently flown in to begin hammering out the details of a landmark pact, the country’s top official in Britain has revealed. Read more

    EU, US negotiators officially drop aim of concluding TTIP in 2016

    EUrativ: Negotiators on both sides of the Atlantic have clearly given up on the idea of concluding TTIP talks this year, despite progress achieved on the technical aspects of the negotiations.Read more

     

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    For past issues, please visit 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.

  • Evaluating Barbados’ WEF GCI Competitiveness Scorecard: Is Top of the Regional Class Good Enough?

    Alicia Nicholls

    Barbados made its grand reappearance on the World Economic Forum (WEF) Global Competitiveness Index (GCI) 2016-2017 after data shortages precluded its 2014-2015 inclusion. According to the WEF’s scorecard, the region’s star pupil topped its Latin American and Caribbean peers in the following subjects: infrastructure, labour market efficiency and technological readiness.

    Barbados is a 166 sq  miles (431 sq km) island nation with a population of about 280,000, a GDP of US4.4 billion and a GDP per capita of US$15,773, which puts us in the high income non-OECD range according to the World Bank. On the surface Barbados’ scorecard is commendable, particularly for a small island developing state (SIDS) whose recovery from the 2008/2009 global economic and financial crisis has been slow and protracted. Personally for me as a Barbadian I am proud of the achievements my country has made since our independence from the UK just shy of 50 years ago.

    But before we uncork the champagne, several things should give us pause. First, Barbados’ current rank of 72nd out of 138 economies marks a precipitous drop from its ranking in the GCI 2012-2013 where it was ranked 44th place out of 144 economies. Second, contrast this slide with the performance of another small island developing state (SIDS), Mauritius, which was ranked 54th in GCI 2012-2013 and has risen slowly but surely up the ranks to reach 45th place out of 138 economies in GCI 2016-2017. Third, only three other Caribbean economies were included on the index this year. While Barbados and Trinidad & Tobago lost ground, the other two Caribbean economies, Jamaica and the Dominican Republic, improved their rankings. Fourth, Barbados’ performance on eleven of the twelve pillars has been on a downward slope since 2012-2013.

    The Good

    Barbados’ top scores were in higher education and training, and infrastructure, where it ranked 29th and 30th respectively. For example, it ranks 6th in fixed-telephone lines /100 population and 25th in overall quality of infrastructure.  These have for a long time been among the island’s competitive advantages despite its small size. However, while the gross tertiary education enrolment rate is 36%, this is likely to decline given the removal of tuition-free tertiary education in 2014.

    Barbados also ranks 31st in technological readiness which is the only one of the twelve pillars on which the island’s performance remains on an upward trajectory. It ranks a commendable 10th in internet bandwidth kb/s/user. Unlike the other three Caribbean economies included, corruption was not seen as a major problem in Barbados.

    The Bad

    The GCI is a useful tool for policy makers to benchmark their economy’s current against its historical performance across over 100 competitiveness indicators. Factors which, according to the WEF GCI, affect doing business in Barbados are: poor work ethic in the national labour force, inefficient government bureaucracy, tax rates, restrictive labour regulations and access to financing.

    Not surprisingly, market size and the macroeconomic environment are the island’s Achilles heel and are a drag on the island’s competitiveness. The Central Bank of Barbados reports economic growth of 1.3% for the first half of 2016 but the island’s fiscal deficit and public debt remain unsustainably high. The island’s economic fragility is reflected in the low rankings on indicators such as government budget balance as % of GDP (122nd), gross national savings (127th) and government debt (127th). The island is rated 72 out of 100 for country credit rating, reflecting the successive downgrades since 2009 and could decline as the downgrades continue. Under the market size pillar, the country ranked 135th out of 136 on GDP (PPP).

    The Way Forward

    The GCI is an important scorecard showing the areas in which an economy is doing well, and those in which remedial attention is needed. Barbados remains a preferred jurisdiction in the Caribbean for doing business and the report shows that the island has clear competitive advantages in some areas that policymakers and the private sector should continue to build on and leverage in our investment promotions.

    However, I believe that while Barbados remains top of the class in the Caribbean, the island’s continued slippage in the rankings, including in areas which are our competitive advantage, is a concern. I dare say that top of the class in this case is not good enough. Discerning investors consult several indices, including the GCI, when considering potential investment locations. Barbados’ previous A-class performance on these indices was one of its selling points and this would carry less weight if the island continues to decline in its rankings.

    A useful feature of the GCI is that it allows for benchmarking against other economies and is a good tool for identifying best practices. Singapore, a small island developing state, currently ranks second place overall on the index and there may be some areas in which Barbados can learn from the reforms they have made. Besides Singapore, we can examine another top 50-rated SIDS, Mauritius, to see what best practices we can consider. We may also be able to learn from the Dominican Republic and Jamaica which, while ranked below us, saw improvements in their rankings.We have strong rankings in our technological and infrastructure capacity. Let us build on these strengths by improving the incorporation of ICTs for improving the ease of doing business and reducing some of the inefficiencies.

    Perhaps the best utility of the GCI is that it provides empirical evidence for identifying policy priorities as countries craft and evaluate their national competitiveness policies. As any eager pupil would, Barbados should take these findings to heart. Several competitiveness reforms have been on-going aimed at tackling some of the weaknesses which the GCI 2016 has again brought to light. For example, the $50 million fund for SMEs announced in the August budget should assist SMEs’ access to finance. The island also received a loan from the Inter-American Development Bank for competitiveness improvement called the Barbados Competitiveness Programme. These are good strides. However, if Barbados wants an A-grade and to be truly at the top of the global class, the island needs to quicken and deepen the pace of its competitiveness reforms, strengthening those things it is good at, working on those which it is not, while also putting mechanisms for monitoring and evaluation of their performance.

    Nonetheless, the responsibility for ensuring long-term and sustainable competitiveness does not rest with government alone but requires strong collaboration, honest dialogue and feedback among all national stakeholders, including for instance, through the social partnership.

    Private sector involvement is key for ensuring Barbados’ obtains a score card each year. A few years ago, I was part of the survey team which administered the WEF Executive Opinion Survey in Barbados, the main instrument used for gathering the data utilised in a whole suite of WEF reports, including the Global Competitiveness Report. While in each instance our team was able to meet our quota, the biggest challenge we found was the unwillingness of some business executives either to participate in the survey, or to complete it satisfactorily and in a timely manner. If insufficient businesses complete the survey, the country will not be included in the index. To encourage greater private sector participation in the survey, I suggest there be closer collaboration between the country partner institute and the various private sector bodies in the country.

     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.

  • Pound Sterling slips to 3 year low: What implications for Caribbean Countries?

    Pound Sterling slips to 3 year low: What implications for Caribbean Countries?

    Alicia Nicholls

    Two main statements enunciated by UK policy makers in the past few days have sent Sterling plunging to a three-year low. The first was Prime Minister Theresa May’s revelation after weeks of speculation that Brexit negotiations will begin in early March 2017. The second is statements by UK Trade Secretary Liam Fox which many have interpreted to show a preference for a “hard brexit”, that is, leaving the EU single market altogether and trading with the EU under WTO  rules.

    Investors were not too happy with these developments. According to CNBC, the pound dropped to a low of 1 GBP to 1.2818 USD on Monday, almost as low as the 31-year low set in the days following the Brexit result of June 23rd. In the weeks following its Brexit low, the pound had regained some ground and appeared to stabilise somewhat around 1 GBP to 1.32 USD. The chart below from MoneyAM shows the 6-month performance of the GBP/USD.

    gbptousd
    Source: MoneyAM.com

    So what does this new slump in the pound mean for UK-Caribbean trade? The majority of Commonwealth Caribbean countries have fixed currencies which are pegged to the US dollar. The Barbados dollar, for instance, has been pegged BBD$2 to US$1 since 1975. The Eastern Caribbean dollar is pegged at 1 USD to EC $2.70. This means that any depreciation of sterling against the US dollar also strengthens US-pegged Caribbean currencies against sterling.

    The positives

    There are both positives and negatives to this development. Let us start with the positives. As I had indicated in an earlier article, this latest drop makes British goods and services cheaper  for Caribbean importers and consumers of UK products. Some of the major beneficiaries of this are students studying in the UK or doing online courses at UK educational institutions who would find their tuition is cheaper. For Caribbean persons who have been longing for that UK trip, now is the time to book your ticket!

    Another upside is that a lower pound increases the competitiveness of UK exports which, ceteris paribus, bodes well for the UK economy, and by extension, those Caribbean countries like Barbados for which the UK is the main source market for tourist arrivals and a  major source of foreign direct investment.

    The Negatives

    The severity of the impact will depend on the level of risk exposure Caribbean economies have to the UK economy and by extension to the fluctuation of sterling. There are several channels through which Caribbean countries can be affected economically.

    Caribbean merchandise and services exports will be more expensive for UK buyers and importers. Although the US and in recent years China have replaced the UK as the top trade partners for many Caribbean countries, the UK is Commonwealth Caribbean countries’ top market in Europe.  One way for Caribbean exporters to the UK to mitigate this might be to quote their UK buyers in pounds to eliminate currency risk for the buyer. The Brexit-related uncertainty could also dampen UK foreign direct investment in the region as investors adopt a “wait and see” approach.

    In Barbados, British tourists comprise nearly 40% of tourist arrivals and are a major source of visitor expenditure. As this report by Deutsche Welle suggests, it is likely that Britons may choose to spend their vacations closer to home to cut down on costs. Those who do travel to the Caribbean may cut back their length of stay and/or expenditure. Recent media reports in Barbados seem to indicate that British tourists to the island are spending less.

    Remittance data is quite limited. However, for countries like Jamaica and Barbados with sizable diasporas in the UK, it is not surprising that the UK is one of their major sources of remittances inflows. According to data published by the World Bank’s Bilateral Remittance Matrix, of the US$108 million in recorded remittances Barbados received in 2015, US$21 million (or a roughly a quarter) were from the UK, making the former Mother Country the island’s second largest source of remittances after the US. In Jamaica, which has a higher dependence on remittances than Barbados, $US 292 million out of the total of $2338 million that island received were from the UK. Unlike foreign direct investment, remittances tend to be counter-cyclical. However, it will now be more expensive for Caribbean-UK residents to repatriate remittances and the spending power of the money they send will be less.

    The bottom line

    Despite what appeared to be “buyers’ remorse” on the part of the British public in the days and weeks following the Brexit vote, Prime Minister May has indicated that “Brexit means Brexit”. Her unequivocal announcement  of a firm timeline for the UK’s Article 50 notification shows that there will be no reneging on the will of the British people who voted 52 to 48% to leave.

    Although several international agencies, including the International Monetary Fund (IMF) in its latest Economic Outlook, have downgraded their growth forecasts for the UK economy, the latest post-Brexit vote economic data released by the Office of National Statistics (ONS) has shown no major negative impact on the UK economy thus far. However, with fears of a hard Brexit spooking investors, my hunch is that we have not seen the last of sterling’s roller coaster ride which may intensify as trigger day draws near. Caribbean economies need to brace themselves for the continued volatility come what may.

     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.