Caribbean Trade Law and Development

Author: caribbeantradelaw

  • The WTO Trade Facilitation Agreement and Caribbean Small Island Developing States: Challenges and Opportunities

    Alicia Nicholls

    Getting raw sugar from a sugar factory in Guyana or Suriname to supermarkets and kitchens half-way across the world involves many different customs processes and paperwork. The World Trade Organisation’s Trade Facilitation Agreement seeks to cut the red tape and reduce the transaction costs and delays in the movement, release and clearance of goods across borders through the harmonisation, simplification and acceleration of customs procedures.

    Trade facilitation, along with investment, competition policy and government procurement, was one of the four “Singapore Issues” which developing countries were opposed to including in the multilateral negotiation agenda at the 5th WTO Ministerial in Cancun in 2003. However, negotiations on trade facilitation were eventually launched in 2004 (pursuant to Annex D of the July Package) with the “aim to clarify and improve” relevant aspects of trade facilitation articles under the GATT 1994″ in order to speed up the movement, release and clearance of goods, including goods in transit.

    After nearly ten years of negotiations, the TFA was concluded at the 9th WTO Ministerial Conference in Bali, Indonesia in 2013. It is the only multilateral trade agreement to be concluded so far out of the deadlocked Doha Development Round and the first since the WTO was established twenty years ago.  A separate Protocol of Amendment was adopted by WTO members on November 27, 2014 to insert the TFA into Annex 1A of the WTO Agreement.

    The TFA will enter into force once two-thirds of the WTO’s 161 states (as at April 2015) ratifies the agreement. So far of the only 52 countries which have already ratified the agreement, Trinidad & Tobago and Belize are the only countries of the Caribbean Community (CARICOM) to have done so, while Mauritius is the only other SIDS worldwide to have done so. A report published by UNCTAD in September 2014 on the status of implementation revealed that though a priority, trade facilitation is a major challenge for developing countries and least-developed countries (LDCs) and that some of the major barriers to implementation are lack of resources and of legal frameworks.

    Caribbean Economies are trade dependent

    Trade facilitation is important for Caribbean economies which have a high dependence on trade. Limited natural resources and lack of scale make most Caribbean SIDS (with the exception of Trinidad & Tobago) highly dependent on imported food, fuel and medicines, while their export profiles are characterised by a narrow range of exports and export markets. They have limited participation in global value chains and face declining terms of trade.

    Smaller Caribbean SIDS have largely diversified from economic dependence on mono-crop agriculture to services trade, mostly tourism and/or financial services. However, the major commodities exporters in the region (Trinidad & Tobago and the mainland countries of Guyana, Suriname and Belize) rely on exports ranging from oil and natural gas in Trinidad & Tobago and Belize, to aluminium, rice and raw sugar in Guyana and Suriname.

    Importance of Trade Facilitation

    Despite market access opportunities created by trade agreements, a major complaint for Caribbean SIDS exporters, especially small and medium sized enterprises (SMEs), have been the cumbersome hurdles they face when seeking to export to foreign markets. These hurdles include not just complex customs procedures but also stringent sanitary and phyto-sanitary standards (SPS) and technical barriers to trade (TBTs), these latter two are covered in other WTO agreements (i.e. the SPS and TBT Agreements).

    Customs procedures vary by country. By standardising and simplifying customs procedures, reforms pursuant to the TFA can enhance access and predictability for Caribbean SIDS exporters in foreign markets and promote export diversification.

    As the industrial action by customs officials in Barbados earlier this year showed, customs delays can negatively impact businesses and consumers. These delays can stem from the time taken to process applications for obtaining import or export licenses to the length of time for barrels and containers to clear ports.The quicker goods clear customs the quicker they can reach businesses and consumers for use as inputs or as final goods. Efficient customs release and clearance is particularly important for time-sensitive perishable products such as fruit and meats. Loss of perishable goods equals lost revenue to businesses.

    Transparent customs procedures and rules can also limit the opportunity for corruption by officials at checkpoints. Moreover, as import duties are still important revenue sources for Caribbean SIDS, modernisation of customs collection procedures can facilitate increased tariff revenue collection.

    The Agreement

    The TFA is divided into 3 sections: general provisions, special and differential treatment provisions for developing country members and least-developed country members (LDCs) and institutional arrangements and final provisions.

    It provides binding obligations in relation to procedures for pre-arrival processing, electronic payment, procedures allowing the release of goods prior to the final determination of customs duties, taxes, fees and charge, a risk management system for customs control, post-clearance audits, establishment and publication of average release times, procedures to allow expedited release of at least goods entered through air cargo facilities and procedures for releasing perishable goods within the shortest possible time.

    Provisions requiring publication and availability of information (such as applied rates and import/export restrictions) on the internet and for allowing traders and “other interested parties” the opportunity for comment and if necessary consultations before introducing or amending laws of general application to trade in goods, aim to promote transparency. While this latter provision may sound like an invasion of policy space, developing countries should take advantage of this provision to have their say on proposed policies by developed countries which might have an impact on their exporters.

    The Agreement also includes some ‘best endeavour” provisions, such as encouraging members to use relevant international standards in their formalities and procedures and to establish a single window for traders. The Agreement further provides for the establishment of a permanent WTO committee on trade facilitation and member states are required to designate a national committee to facilitate domestic coordination and implementation of the provisions of the Agreement.

    Special and Differential Treatment

    The TFA presents numerous benefits for Caribbean SIDS. However, Caribbean governments’ capacity to implement these trade facilitation reforms varies considerably as evidenced by the difference in their Category A notifications.

    The special and differential treatment provisions in Section II of the Agreement take this into account by linking countries’ commitments to their capacity to implement them. Moreover, LDCs will only be required to undertake commitments to the extent consistent with their individual development, financial and trade needs or their administrative and institutional capabilities.

    These flexibilities are based on the modalities that had been agreed in Annex D of the July 2004 Framework Agreement and paragraph 33 of and Annex E of the Hong Kong Ministerial Declaration. Developing countries and LDCs are to receive assistance and support for capacity building to implement the provisions of the Agreement in accordance with their nature and scope.

    Developing and LDC countries are required to categorise each provision of the Agreement  based on their individual implementation capacity, with Category A being those measures they can implement by the time the Agreement comes into force (or within one year after  for LDCs), Category B being those which they will implement after a transitional period following the Agreement’s entry into force and Category C meaning those which require capacity building support for implementation after a transitional period after the Agreement’s entry into force. Most Caribbean SIDS, including Barbados, have now submitted their Category A notifications.

    Trade Facilitation Facility

    A key developmental element of the TFA, the Trade Facilitation Facility (TFF) was established in July 2014 to provide assistance to developing countries and LDCs to ensure “no WTO member is left behind”. The TFF is to provide assistance in helping them assess their capacity to implement the TFA, by maintaining an information sharing platform to assist with the identification of possible donors , providing guidance on the implementation of the TFA through the development or collection of case studies and training materials,  undertaking donor and recipient match-making activities and providing project preparation and implementation grants related to the implementation of TFA provisions in cases where efforts to attract funding from other sources have failed.

    According to the World Trade Report 2015, once it enters into force, the TFA is expected to reduce total trade costs by up to 15 per cent in developing countries.

    Status of Implementation

    At the recently concluded COTED meeting in Georgetown, Guyana, CARICOM members reported on their status of TFA implementation. However, this status information has not been made public. Despite this, the Organisation for Economic Cooperation and Development (OECD) has a ‘compare your country on trade facilitation performance’ portal which allows for comparing countries on trade facilitation indicators.

    Looking at Barbados’ performance for instance, Barbados “matches or exceeds the average performance of high income countries in the areas of fees and charges and simplification and harmonisation of documents”, with performance improving in appeal procedures and automation. However, some ground was lost in information availability and internal border agency cooperation.

    Implementation Challenges

    Trade facilitation reforms can be beneficial to Caribbean SIDS.  This does not mean however that there will not be significant implementation challenges, particularly the infrastructure costs related to technology and equipment, and administrative, human resource and training costs. There will also be costs associated with raising private sector awareness. These costs are not just one-time costs but are recurring.  In light of competing resource demands and their limited access to concessionary loans these costs will not be easy for cash-trapped Caribbean SIDS which already have high debt to GDP ratios.

    The flexibilities in the Agreement allow states  to implement the provisions in accordance with their capabilities and there are aid for trade initiatives such as the European Development Fund of which Caribbean SIDS have been taking advantage in varying degrees.  Other challenges for implementation include limited human resource capacity and the need to reform existing laws and regulations to give effect to obligations.

    Surveys of developing countries and LDCs conducted by the WTO found that trade facilitation remains a high priority for developing countries. For Caribbean SIDS there certainly has been some interesting developments on this front. The governments of several Caribbean states have openly stated their countries’ firm commitment to trade facilitation and their recognition of its potential for economic growth.

    Trinidad & Tobago was recently approved for a $25 million loan from the Inter-American Development Bank (IDB) to help strengthen the country’s Single Electronic Window for Trade and Business Facilitation Project (TTBizLink). With the aim of becoming a logistics hub, Jamaica has recently established a Trade Facilitation Task Force. Technical assistance and aid for trade facilitation are also included in the EC-CARIFORUM Economic Partnership Agreement, which includes a protocol on mutual administrative assistance in customs matters.Moreover, in Barbados’ latest Trade Policy Review 2014 WTO members noted the considerable progress the country made with respect to the adoption of trade-facilitation measures. Recently, the island  also amended its Customs Act to allow for post-clearance audits.

    Taking full advantage of the technical assistance, aid and capacity building assistance under the TFF will be key for Caribbean SIDS in their implementation efforts.

    The Case of Mauritius 

    As the Indian Ocean island of Mauritius was the first SIDS to ratify the Agreement, it provides useful lessons for Caribbean SIDS. Seizing the opportunity to boost its competitiveness, Mauritius has received assistance from the International Trade Centre and UNCTAD, including for the establishment of the Mauritius National Trade Facilitation Committee. One can read about the Mauritius experience here.

    Conclusions

    Despite the high costs and challenges of implementation, trade facilitation reforms pursuant to the WTO TFA have the potential to bring many benefits to Caribbean SIDS. By streamlining the flow of cross-border trade, the ratification and speedy implementation of the TFA by Caribbean SIDS and their trade partners will allow Caribbean exporters to capitalise on the market access openings available in foreign export markets, thereby boosting Caribbean SIDS’ export competitiveness and GDP growth, with spillovers for income and job creation. However, regional exports will still need to meet SPS and technical standards which for many exporters still remain significant barriers to trade.

    Ratification and full implementation  of the TFA by all CARICOM states could also improve Caribbean regional integration by easing transaction costs of exporting across CARICOM states. Implementing these reforms also send a strong signal to the business community of these countries’ commitment to improving their business environment.

    Full realisation of the benefits of the TFA will not be automatic and the degree will largely be contingent on the pace and depth of implementation of the Agreement by  Caribbean governments and their trading partners and on stakeholder buy-in. Stakeholder holder consultation and strong coordination between public and private actors will be crucial for the formulation of implementation plans and the monitoring and assessment of the impact of the reforms. In this regard, lessons can be learnt from the Mauritius experience. Trinidad & Tobago and Belize have already made the step by ratifying  the Agreement. It is hoped that other Caribbean SIDS will soon follow suit.

    The full text of the Trade Facilitation Agreement is available 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. Please note that the views expressed in this article are solely hers. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • The G-20 Antalya Summit and BEPS.

  • The Hoyos File – Cement Tariff

    Part of what I want to do on this site is share different perspectives on trade related issues. In his Hoyos File this week, veteran journalist and publisher of the Broad Street Journal, Patrick Hoyos, whose articles I absolutely enjoy, wrote as per usual an interesting article stimulated by the issue of Barbados’ lowering of the tariff on imported hydraulic cement from 60% to 5%.

    Mr. Hoyos has couched his insightful article in a wider discussion and critique of Barbados’ tariff policy, highlighting some of the inconsistencies in our tariff policy.

    While applauding the decision to lower the tariff, he also questions the maintenance of high tariffs for other products. He highlights the competition issues which arise as a result of high tariffs, as well as the disconnect between tariff rates and stated policy goals. As an example he cites the inconsistency on maintaining duties on electric cars while at the same time purporting to promote reduced dependency on fossil fuels. In reference to Barbados’ most recent trade policy review which was undertaken in 2014, he notes the WTO’s  continued concern about Barbados’ high tariffs and the wide disparity in levels between our applied and bound rates.

    Very interesting analysis. Click here to have a read of the whole article!

    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. Please note that the views expressed in this article are solely hers. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • Human Rights vs National Security Interests: An Uneasy Tension

    Alicia Nicholls

    If we destroy human rights and rule of law in the response to terrorism, they have won.

    Joichi Ito (Japanese-American entrepreneur)

    In the best of times human rights and national security interests enjoy an uneasy tension. In the darkest annals of human existence as in the aftermath of a terrorist tragedy like that in Paris last Friday, human rights concerns are often jettisoned in favour of national security goals. The discovery of a Syrian passport next to the body of one of the Paris attackers has fuelled the conviction that at least one of the attackers may have entered the country with the flow of Syrian refugees currently fleeing the brutality of Syria’s Assad regime. This unfortunate connection, true or not, has led many Western states to a retreat towards the ever trusted confines of national security rationale to renege on or double down on the denial of entry to refugees.

    On Friday, November 13, gunmen, later claimed by ISIL (Islamic State of Iraq and the Levant), launched a highly coordinated and brutal attack on six sites in the French capital of Paris, and its northern suburb of St. Denis. In the aftermath, 129 persons were senselessly massacred, most of them at the Bataclan Theatre. Over 430 were wounded. The attacks were the second ISIL attack within the space of 24 hours.  Earlier in Lebanon, two suicide bombers detonated explosives in a suburb of Beirut killing 43 and injuring over two hundred.  ISIL also claimed responsibility for that attack but this one was largely ignored by the media. Months earlier terrorists (not ISIL) massacred 149 innocent students at the University of Garissa. That too did not spark a percentage of the outrage which the Paris attacks did.

    A thorough history of the origins of ISIL are beyond the scope of this article.  However, ISIL is a Wahhabi/Salafi militant group which is led by Abu Bakr al-Baghdadi with the goal of launching global jihad. It claims to be an Islamic State and Caliphate but has been denounced by Al-Qaeda. The two are now rivals. ISIL has spread its poisonous tentacles from Iraq and Syria to include strongholds in several states across the Middle East and Africa, including in parts of Afghanistan, Libya and Nigeria. Comprised of Sunni Muslims, ISIL is one of the major groups fighting government forces and loyalists of the Shia government of President Bashar Al-Assad in Syria. Besides the brutality of the Assad regime, ISIL controlled areas of Syria have also been under iron rule.

    The net result has been a large scale displacement of hundreds of thousands of Syrian nationals seeking to flee the bloodshed, resulting in a veritable refugee crisis of historic proportions. European countries have seen thousands of refugees attempting to pour over their borders daily. Some walked thousands of miles to make it to safety often going days without food or shelter. Some like the little boy whose body washed up on the shores of Turkey and brought international attention to the situation, never make it.

    One of the hallmarks of a State’s power is the sovereign right to control the entry of people into its borders. It is a power which states guard jealously through such mechanisms such as border controls, visas and the like. It is a right which states only give up once it is believed that the economic benefits to free movement of persons outweigh the security concerns, such as in a political union like the European Union. The EU Schengen Area, which allows unimpeded travel for EU citizens across participating European country borders, is now under threat in light of the revelation that the porous borders may have facilitated the attackers.

    The 1951 Convention relating to the Status of Refugees and its Optional Protocol relating to the Status of Refugees define the international law on refugees and are part of the ambit of conventions which inform international human rights law.

    Article 1(a)(2) of the 1951 Convention defines a refugee as

    an individual who is outside his or her country of nationality or habitual residence who is unable or unwilling to return due to a well-founded fear of persecution based on his or her race, religion, nationality, political opinion, or membership in a particular social group.

    It is left up to states themselves to determine whether a person meets the definition of a refugee, something which often is decided within the scope of the state’s national interests.

    European states have been at a loss in regards to how to adequately respond to the Syrian migrant crisis, with some states like Germany agreeing to accept quotas of migrants. However, the Paris attacks have led some states like Poland to refuse the imposition of any quotas.

    In moments of tragedy it is human nature to succumb to deeper, darker frailties like fear and xenophobia.  However, it is lethal when these frailties inform and frame national policy. In one of her masterpieces “The Shock Doctrine: Rise of Disaster Capitalism”, world-renowned journalist Naomi Klein conceptualised what she termed “the shock doctrine” –  the exploitation of economic crises to enforce otherwise unpopular laissez-faire economic policies.  She also spoke of its use in the aftermath of 9/11.

    What often happens in the wake of tragedies and heightened sense of fear and insecurity by the public is a kind of national security “shock doctrine” (If I may borrow her phrase); the promulgation of otherwise unpopular policies couched in national security terms which in effect strip away citizens’ rights. The aftermath of the 9/11 attacks spawned the Patriot Act, unauthorised wire-tapping and countless human rights violations, including indefinite detentions and waterboarding, violations which may never be prosecuted.  This is not a new phenomenon. Months after the Japanese attack on Pearl Harbour on December 7, 1941 there was the forced imprisonment in camps and deportation of hundreds of Japanese Americans pursuant to President Eisenhower’s Executive Order 9066.

    Every day persons are not immune to the draconian national security measures which have been imposed in an effort to protect the state. As recently as this month a Barbadian dentist was arrested in the United States while on a flight from Miami to Barbados simply for having a dental implement. Less dramatic, but still relevant, as recently as last year during the height of the Ebola Outbreak, numerous states, including some in CARICOM, closed their borders to all West African travellers, including some which were not from Ebola affected territories.

    Human rights violations in the interest of national security result not just from action but inaction by States. How often have we seen western states sit idly by while innocent people are being slaughtered under brutal dictatorships? How often have we seen western countries prop up dictatorships with arms and other support because it was in their vital economic or geopolitical interests to keep those dictators in power? Pinochet in Chile comes to mind.

    History shows that in the fight with national security, human rights will almost always be the challenger and not the champion. One ray of hope is the statement made by President of the United States, Barack Obama at the G20 Leaders Summit in Antalya, Turkey. He said as follows:

    “We also have to remember that many of these refugees are the victims of terrorism themselves, that’s what they’re fleeing. Slamming the door in their faces would be a betrayal of our values. Our nations can welcome refugees who are desperately seeking safety and ensure our own security. We can and must do both.”

    Another ray of hope is that Prime Minister of Canada, Justin Trudeau, doubled down on his commitment to accept 25,000 refugees.

    Both men however have a huge fight on their hands, particularly Mr. Obama. Several US governors have refused to accept any Syrian refugees in the wake of the attack. There have been calls to defund the President’s relocation programme. Republican presidential candidates, appealing to the xenophobic sentiments which characterise much of their base, have voiced their opposition.

    However, there is need for consideration of another dimension. While I absolutely and categorically condemn the attacks, western countries have to acknowledge some of the responsibility they have played in creating the environment for extremist groups like Al-Qaeda, ISIL and others like them to gain a foothold and expand in the region. Western countries played a significant role in helping to escalate much of the conflict which currently exists in the Middle East and which has served as a fertile breeding ground for these extremist groups to fill the vacuum created by the absence of the rule of law. Iraq and Libya are just two examples. Moreover, Muslim youth living in these European countries are often discriminated against and persecuted by the police. Groups like ISIL prey on young persons who feel alienated from Western societies in which they were born but are never treated like equals. In this regard, it is incumbent on western nations to address some of these issues to help reduce the attractiveness of radicalisation to these youth.

    Is there any way to reconcile this uneasy tension between human rights and national security?  While the tension has always existed, its escalation is in direct response to the completely different nature in which threats to national security manifest themselves in the age of globalisation. It is an age marked by increased porosity of borders and enhanced technological interconnectivity. It is also exacerbated by the difference in the threat itself. Military threats to countries these days are not flotillas of ships or armies coming to invade their territories. They come from well-funded, well-organised non-state entities which capitalise on the increased mobility afforded by globalisation and the interconnectivity permitted by social media to spread their messages of hate and terror.

    It is harder to spot a suicide bomber than it is to spot a soldier from an invading army. Increased screening of persons and security measures will of course be increasing priorities to assist states in ensuring they can quickly detect and deter any potential threats to their security.  In the case of the Syrian refugees, screening should of course be done wherever possible. However, while the right of the State to protect its borders is inherent and a necessity of statehood, there needs to be a re-think of the relationship between human rights and national security.  To purport to close the door to all Syrian refugees just because one of the Paris attackers was supposed to have been Syrian is not just unconscionable. It is simply inhumane. The de facto position for years has been that national security rights trump all and that human rights are a pastime to engage in only when there is nothing threatening the homeland.  If we are to ensure that basic rights are protected, then in the conflict between human rights and national security, human rights must triumph. As expressed in the Joichi Ito quote I opened with, jettisoning human rights simply to serve national security concerns only lets the terrorists win.

    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 her commentaries and follow her on Twitter @LicyLaw.