Category Archives: Current Affairs

Post-Brexit UK-Caribbean Trading Relations: What are the options?

Alicia Nicholls

With the United Kingdom’s Prime Minister Theresa May due to formally begin the Brexit process by making the Article 50 notification this Wednesday (March 29), it is worth considering what are the possible options for future Caribbean trading relations with post-Brexit “Global Britain”. Moreover, should one of the options be participation in a Commonwealth-wide free trade agreement (FTA)?

UK-CARICOM Trading Relations

The UK and the Commonwealth Caribbean have a shared and close relationship which goes beyond historical, cultural and diplomatic ties. While Commonwealth Caribbean countries’ trade with the United States dwarfs trade with the UK, the latter remains the region’s largest trading partner within Europe. Caribbean Community (CARICOM) Member States, as part of the CARIFORUM (CARICOM plus the Dominican Republic), enjoy preferential access to the UK market under the CARIFORUM-EU Economic Partnership Agreement (EPA) signed in October 2008.

As the EU agreements to which the UK is currently part will cease to apply to the UK once it has completely withdrawn from the EU, here is what CARICOM/CARIFORUM will losing preferential access to (a) the world’s fifth largest economy (or sixth largest according to some reports), (b) a market of over 64 million people which includes a Caribbean diaspora population whose potential demand for Caribbean goods and services and as a source of diaspora investment still remains largely under-exploited, and (c) a trading partner with a shared language, shared culture and shared values and a common law legal system which brings a level of assurance and certainty for cross-border commerce.

Merchandise trade aside, the UK is an important source of tourist arrivals for many Caribbean countries, while in Barbados, for example, British high net worth individuals (HNWIs) are the largest buyers of luxury real estate on the island, making the UK the largest source of real estate foreign direct investment (FDI) into the island.

Whilst the UK cannot formally commence negotiations with third States until it has left the EU, the May Government has reportedly already begun preliminary informal trade talks with some States. Indeed, several countries around the world, including Commonwealth states like Australia, Canada and India have lined up in hopes of being among the first negotiate post-Brexit trade agreements with the UK. Here in the Caribbean, the Dominican Republic has also signalled its interest in a post-Brexit UK-DR FTA as the UK is apparently the Dominican Republic’s fastest growing market for Dominican exports according to the statement made by the DR’s Ambassador to the UK.

To this point, it is heartening to note that Prime Minister May has bucked the protectionist trend and intends to expand the UK’s trading relations around the world under her “Global Britain” banner. Indeed, Mrs. May argued that one of the compelling reasons for Brexit was so Britain would be free to expand its trade with the rest of the world on its own terms. The door is clearly open to the region for dialogue.

Possible Options for post-Brexit UK-CARICOM/CARIFORUM Relations

As I see it, the possible options for post-Brexit UK-CARICOM/CARIFORUM trading relations are as follows:

  1. Interim Arrangement which preserves EPA-level concessions before an FTA can be negotiated
  2. Negotiation of a UK-CARICOM or UK-CARIFORUM FTA
  3. Commonwealth FTA
  4. Most Favoured Nation (trading under WTO rules)

The Commonwealth Advantage?

This discussion is even more interesting in light of what is clearly a Commonwealth pivot by the UK government as it seeks to map its future trade policy and relations. Most CARICOM countries are member states of the 52-member Commonwealth of Nations, an intergovernmental organisation which consists primarily of former British colonies and current dependencies spanning Africa, Asia, the Americas, Europe and the Pacific.

The Commonwealth is not a trade bloc. However, despite the absence of a Commonwealth FTA, intra-Commonwealth trade and investment flows are substantial and growing. According to a 2015 report released by the Commonwealth, not only is “trade between Commonwealth members on average 20 per cent higher and trade costs are 19 per cent lower compared with in trading between other partners”, but intra-Commonwealth trade is expected to reach 1 trillion by 2020. The Secretariat’s International Trade Policy section also publishes very timely  and insightful research on trade matters. A good example is this brief which was part of the Meeting documents.

However, despite this, Commonwealth Trade Ministers have not met frequently. This is why the Inaugural Commonwealth Trade Ministers Meeting two weeks ago was such a momentous event.  From all reports the meeting was not only well-attended but the ministers discussed prospects for deepening intra-Commonwealth trade and investment ties using the “Commonwealth Advantage”. Inter alia, Ministers directed the Secretariat to “develop pragmatic and practical options to increase Commonwealth trade and investment”, to regularise and institutionalise Trade Minister meetings, and to cooperate on the implementation of the WTO’s Trade Facilitation Agreement.

The prospect of a Commonwealth-wide FTA has been floated informally, although it does not yet appear to be a firm policy proposal. The arguments for a Commonwealth FTA include a ready market of over 2.4 billion people yoked by a shared language and history, common principles and values, respect for the rule of law, the common law legal system, all of which form part of the “Commonwealth Advantage”. Additionally, it is argued by proponents of a pan-Commonwealth FTA that the potential for even greater intra-Commonwealth trade and investment should be harnessed as a buttress against rising protectionism and slowing global trade which are potentially harmful for Commonwealth developing States.

To be sure, the Commonwealth brings important value for the Caribbean. It has, for example, developed a strong small states agenda, which is not surprising given that thirty-one of its member States are small States. As an illustration, the Commonwealth launched the Commonwealth Small States Trade Finance Facility in 2015. Moreover, the fact that the current Secretary-General, Dame Patricia Scotland QC, is a daughter of the soil is also an advantage for the region.

There is also, of course, merit to fomenting closer commercial and political ties with fellow Commonwealth countries as some of the more developed Commonwealth countries are part of influential fora like the Group of 20 (G20), Organisation for Economic Cooperation and Development (OECD) and the Financial Action Taskforce (FATF) where Commonwealth Caribbean countries are not represented.  This is doubly important in light of the on-going slowdown in global trade flows, an apparent retreat from multilateralism and rising protectionism. Moreover, Commonwealth Caribbean countries have been seeking to diversify their trading partners, including source markets for tourism, foreign investment and international business and deepening ties with the rest of the Commonwealth could be useful.

Nonetheless, while I have not done any econometric analysis on what would be the possible economic and welfare benefits of any Commonwealth FTA for CARICOM/CARIFORUM, given the length of time it may take to negotiate a Commonwealth FTA, the varying levels of development, the differences in economic profile, and the diverse offensive and defensive interests of the various Commonwealth Member States which will need to be managed, the negotiation of a Commonwealth-wide FTA will not be an easy task. Therefore, I submit that the Caribbean region’s interests will, at least in the short to medium term, be better served by either negotiating an interim arrangement  with the UK which preserves EPA-level concessions until an FTA can be negotiated or negotiating an FTA with the UK straight off the bat.

So what should a possible UK-CARICOM/CARIFORUM take into account?

CARICOM countries have limited experience in negotiating FTAs with developed countries. So far the EPA is the region’s only completed FTA with a developed partner, as the Canada-CARICOM negotiations are currently in abeyance. Perhaps, fortuitously, the UK has even less experience with negotiating trade agreements, as trade negotiations have hitherto been handled exclusively by the European Commission, pursuant to the EU’s common commercial policy. So both parties, despite the power asymmetry, will be on a learning curve.

Commitments made under any prospective UK-CARICOM/CARIFORUM free trade agreement should take into account the sustainable development and economic growth needs and interests of both parties in a mutually beneficial way, while also taking into account differential levels of development among CARICOM/CARIFORUM countries.

CARICOM/CARIFORUM countries will also want at least the same level of concessions for their service suppliers, particularly in Mode 4 (Presence of Natural Persons) which has been the mode of supply which is the least liberalised. Additionally, as capital-importing States, CARICOM/CARIFORUM countries will likely wish to negotiate an investment chapter which protects, promotes and liberalises investment between CARICOM/CARIFORUM and the UK for the mutual development of both parties.

Of course, stakeholder consultations with not just the private sector but also civil society and citizens at large should continue to inform the region’s negotiating positions, including whether there is actually the need for an UK-CARICOM FTA and what are the region’s offensive and defensive interests.

FTA negotiations can take several years. The EPA negotiations, for instance, had been launched in April 2004 and the Agreement was not signed until October 2008. Therefore, unless a WTO-compatible interim arrangement could be negotiated whereby the UK agrees to continue EPA-type concessions to the region until a UK-CARICOM/CARIFORUM FTA is negotiated, it is possible that UK-CARICOM/CARIFORUM trade relations may revert to MFN conditions. Even so, while the UK is also a WTO member in its own right, its schedules are part of the EU’s which means the country will have to work out its own tariff schedules under the WTO post-Brexit. Additionally, WTO MFN conditions will not afford CARIFORUM countries the level of market access, especially for their service suppliers in the UK market, that they currently enjoy under the EPA.

Although the argument is often rightly made that the Caribbean region will be at the low rung of the negotiation priority ladder, I believe that the region cannot sit idly by as the clock begins ticking come Wednesday. While other major countries have begun to erect barriers, the May Government’s “Global Britain” outlook is a welcomed open door for the region. We should at least signal to the May government our interest in beginning talks on cementing a mutually beneficial UK-CARICOM/CARIFORUM trading arrangement post-Brexit, and take steps to do the ground work for such an eventuality.

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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Human Development Report 2015 – A Mixed Bag for Barbados and the Caribbean

Alicia Nicholls

The United Nations Development Programme (UNDP) released its Human Development Report 2015 yesterday. Entitled “Work for Human Development”, this year’s report focuses on the link between work and human development.  The central thrust of the Report is that work (not limited to a job or employment but in the broadest sense) can enhance human development. However, the link between income and human development is not automatic. While sustainable work can contribute to human development, some types of work (such as work which violates human rights) are detrimental to human development.

The Human Development Index 2015, the Report’s flagship index, ranks 188 countries based on a range of human development indicators. Norway again topped the HDI rankings with an HDI value of 0.944, followed by Australia, Switzerland, Denmark and the Netherlands which retained their top 5 positions in the same order as in 2013. Niger was the lowest ranked country with an HDI of 0.348.

Caribbean Performance 

Caribbean countries continue to have a high level of human development. However, their performance in the 2014 HDI rankings was mixed. Barbados, Jamaica, Cuba, Dominica, Haiti and Suriname declined slightly from their 2013 rankings. The Bahamas, Antigua & Barbuda, Trinidad & Tobago, St. Lucia and Guyana maintained their positions. Only four countries: Dominican Republic, St. Kitts & Nevis, Grenada and St. Vincent & the Grenadines improved their ranking. The biggest improver was Grenada which jumped from 82nd position in 2013 to 79th position in 2014, with improvements in life expectancy at birth and mean and expected years of schooling.

Countries on the HDI are classified by development level into one of the following categories: very high human development, high human development, medium human development or low human development. The majority of Caribbean countries are ranked as having high human development.

The Bahamas has the highest level of human development in the Caribbean, maintaining its 55th place overall and increasing in HDI value from 0.786 in 2013 to 0.790 in 2014. Barbados has the second highest human development level in the Caribbean, dropping one place from 56 in 2014 to 57 in 2015 but maintaining an HDI of 0.785.

The other Caribbean islands included in the High Human Development rank were: Antigua & Barbuda (58), Trinidad & Tobago (64), Cuba (67), Saint Kitts & Nevis (77), Grenada (79), Saint Lucia (89), Dominica (94), Saint Vincent & the Grenadines (97), Jamaica (99), Belize (101), Dominican Republic (101) and Suriname (103).

Guyana which ranked at 124 is the only Caribbean country ranked in the Medium Human Development category. Haiti was the lowest ranked Caribbean country with a rank of 163 and an HDI value of 0.483. It is the only Caribbean country in the Low Human Development category.

When compared to the HDI values of SIDS on average (0.660) and the average world HDI of 0.711, the performances of the Bahamas, Barbados and Antigua & Barbuda are especially commendable.

Room for Improvement

However, Caribbean countries should not take their rankings at face value as a reason for complacency. Drilling down into the HDI indicators and in the other indices comprising the report, there are several areas of concern and where improvement is needed. HIV prevalence among adults remains high in the region compared to other SIDS and the world. The Report also reaffirms the high vulnerability of Caribbean populations to natural disasters.

Another worrying statistic is the high prison population per 100,000. Saint Kitts & Nevis had the highest per capita prison population in the region with 714 prisoners per 100,000. Crime is also an area for concern. For the period 2008-2012 Belize had the highest homicide rate among CARICOM countries, with 44.7 homicides per 100,000. Violence against women also raises concern. For Barbados and Jamaica, two of the handful of Caribbean states for which this  data was available, 30 per cent and 35 per cent of women (15 years and over) respectively have experienced intimate or intimate partner violence.

Many Caribbean countries are seeing declining private capital inflows as a percentage of GDP and have also seen a decrease in their GNI per capita. Barbados’ GNI per capita decreased by about 0.8 per cent between 1980 and 2014. Jamaica’s decreased by about 32.5 percent during the same period. On the contrary, Grenada’s GNI per capita increased by about 124.6 per cent.

Another area for improvement is in gender equality. Despite females in Barbados having a higher level of human development than males due to their higher life expectancy at birth, longer expected years of schooling and mean years of schooling for females, GNI per capita is much higher for males (10,407 for females and 14,739 for males).  Moreover, while a higher percentage of Barbadian women than men have at least a secondary level education, women have a lower participation in the workforce and make up only 19.6% of seats in Parliament. Therefore, despite a ranking of 57 on the HDI, Barbados ranks 69 out of 155 countries on the Report’s Gender Inequality Index. In comparison, the Bahamas is ranked at 55 on the HDR and  58 on the GII.

Maternal mortality ratios in the Region remain a cause for concern. Haiti’s rate is 380 maternal deaths per 100,000 live births. Though much lower than Haiti’s, Trinidad & Tobago’s maternal mortality ratio of 86 per 100,000 and Cuba and Jamaica’s of 80 per 100,000  are above the average rate for SIDS of 61.5 per 100,000 live births and above the average for high human develoment countries (41 per 100,000). Barbados’ ratio of 52 maternal deaths per 100,000 births is also worrying.

Youth unemployment is a growing problem globally and in the region exacerbated by the global recession of 2008 and the continuing uncertainty in the global economy. According to the HDR report, the global youth-to-adult unemployment ratio is at a historical peak and in 2015, 74 million young people (ages 15- 24) were unemployed. Youth unemployment data was not available for all Caribbean countries. However, the available data in the report is troubling. For example, according to the report, Trinidad & Tobago’s rate of youth (not employed or not in school) was 52.5%.

For too many indicators, there is lack of data available for Caribbean countries.  It is for this reason that we have no idea of how Caribbean countries would rank on the inequality-adjusted human development index which gives a truer measure of human development as it takes into account inequality. Lack of data makes it difficult to track progress.

Despite a mixed performance in 2014, the Caribbean Region continues to enjoy overall high levels of human development. However, there are several areas of concern which policymakers will have to target if our countries are to reach the ranks of “very high human development”.

The full Human Development Report 2015 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. 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.

WTO General Council Agrees Draft Ministerial Decision on Small Economies

Alicia Nicholls

On November 30th, the General Council of the World Trade Organisation (WTO) agreed on a draft ministerial decision on small economies which affirms WTO Members’ commitment to the work programme on small economies which was adopted in 2002.

The Draft Decision

Under the Draft Decision agreed to this week, WTO members meeting as the General Council have:

  • Affirmed their commitment to the Work Programme on Small Economies
  • Taken note of the work carried out since 2013, including on the challenges and opportunities faced by small economies in linking into global value chains in trade in goods and services
  • Instructed the CTD to continue its work in Dedicated Session under the overall responsibility of the General Council.
  • Instructed the Dedicated Session to consider in further detail the various submissions that have been received to date, examine any additional proposals that Members might wish to submit and, where possible, and within its mandate, make recommendations to the General Council on any of these proposals.
  • Indicated that the General Council will direct relevant subsidiary bodies to frame responses to the trade-related issues identified by the CTD with a view to making recommendations for action.
  • Instructed the WTO Secretariat to provide relevant information and factual analysis for discussion among Members in the CTD’s Dedicated Session
  • Requested the WTO Secretariat to also conduct work on the challenges small economies experience in their efforts to reduce trade costs, particularly in the area of trade facilitation.
  • Mandated the CTD in Dedicated Session to continue monitoring the progress of the small economy proposals in WTO bodies and in negotiating groups

The Draft Decision has been forwarded to the Ministerial Conference to be held in Nairobi, Kenya later this month for adoption by the WTO ministers.

Brief background on Small Economies 

The Small Vulnerable Economies (SVEs) do not form an official sub-category of WTO members but are one of the negotiating coalitions in the WTO which have been active in the negotiations on agriculture, NAMA and fisheries rules.

These small states, which  account for only a small fraction of world trade, pushed for WTO recognition of the unique  challenges they face in participating in world trade because of their small size, concentration of exports, distance from major markets, lack of economies of scale and limited trade capacity. They also expressed concern about what they saw was an erosion of their policy space.

The countries which have been spearheading the SVE initiative are small island states in the Caribbean and the Pacific and smaller Central and South America nations like Honduras, El Salvador and Paraguay.

The Doha Ministerial Declaration of November 20, 2001, which provided the negotiating mandate for the Doha Development Agenda negotiations, provided for a work programme “to examine issues relating to the trade of small economies”. Paragraph 35 of the Declaration states the objective of the work programme is to:

frame responses to the trade-related issues identified for the fuller integration of small, vulnerable economies into the multilateral trading system, and not to create a sub-category of WTO Members.

The Work Programme on small states is being done under the auspices of the General Council which instructed the Council on Trade and Development (CTD) in March  2002 to hold dedicated sessions  on the work programme and make periodic progress reports to the General Council, making the work programme on small states an agenda item of the General Council.

Under paragraph 41 of the Hong Kong Ministerial 2005 a two-pronged track was agreed where the CTD was instructed, under the General Council’s responsibility, to continue the work in the Dedicated Session and to monitor progress of the small economies’ proposals in the negotiating and other bodies. The aim of this was to be able to provide responses to the trade-related issues of small economies.

So far several Ministerial and General Council decisions have been taken and proposals by SVEs have been made in areas such as agriculture, industrial goods, service trade and trade facilitation. These decisions as well as proposals are routinely compiled by the WTO Secretariat to show what has been achieved under this agenda item so far. The text of the most recent WTO Secretariat compilation paper of October 16, 2015 may be found 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.

 

A sustainable future for SIDS necessitates an ambitious outcome at COP21

Alicia Nicholls

Over the next two weeks (November 30 to December 11), leaders and delegates from over 190 countries are gathered in Paris, France for the 21st Conference of the Parties (COP21) of the United Nations Framework Convention on Climate Change (UNFCCC), with the aim of achieving a legally binding multilateral agreement on climate change.

For small island developing states (SIDS), which are already suffering the adverse effects of climate change, the stakes are particularly high. The importance of climate change to the post 2015 development agenda has been reflected by its inclusion as Goal 13 of the Sustainable Development Goals. Failure to act on climate change has implications not just for the economies, societies and survival of SIDS, but will undermine their achievement of many of the sustainable development goals, including poverty reduction.

Vulnerabilities

SIDS are not the only countries affected by climate change. However, while combined their contribution to global greenhouse gas (GHG) emissions is minuscule, they are among the most vulnerable to the adverse manifestations of climate change. The geographical vulnerabilities of small states, such as their geographic location, small land masses, concentration of human settlements and major infrastructure along coastal and low-lying areas and dependence on limited industries, enhance their vulnerabilities to rising sea levels, ocean acidification, coral bleaching, more frequent and destructive weather events and changing precipitation patterns.

Several SIDS, including those of the Caribbean Community (CARICOM), are already experiencing beach erosion, more devastating hurricanes, flooding and longer droughts. The situation is even direr in lowlying islands and atolls in the Pacific like Kiribati which face displacement of coastal communities because of rising sea levels.

Sustainable Development Goals and Climate Change

Addressing climate change has been made part of the post-2015 development agenda. SDG 13 mandates states to take urgent action to combat climate change and its impacts. The targets under goal 13 include strengthening resilience and adaptative capacity to climate-related hazards and natural disasters, integrating climate change measures in policy frameworks, improving education and awareness, promoting mechanisms for raising capacity for effective climate change planning in LDCs and SIDS and implementing developed countries’ commitment of mobilizing jointly $100 billion annually by 2020 to address the needs of developing countries.

Climate change poses not only an existential threat to SIDS but also to their ability to meet sustainable development goals. Longer droughts as a result of changing precipitation patterns diminish crop yields and hurt livestock which in turn diminish the livelihoods of farmers and the families which depend on small plots of land for income and food. Low agricultural yields means reduced food production which has an impact on nutrition and food security, with implications for the achievement of SDG 2 – zero hunger. For subsistence farmers, income from surplus yields is used to finance household expenses and education of children. Loss of homes and livelihood from cyclones, droughts and floods has an impact on the eradication of poverty (SDG 1 – no poverty). In many poorer countries, women make up the majority of small farmers and are the ones required to fetch water for their families, highlighting the gendered impact of climate change which affects the achievement of SDG 5 – gender equality.

The oceans are the lifeblood of SIDS, whether through fisheries or as part of their tourism product. Ocean acidification due to oceanic uptake of CO2, warming seas and coral bleaching cause fish to migrate to more favourable waters resulting in lower fish yields and loss of aquatic biodiversity (SDG 14 – life below water). This in turn leads to loss of income for fishermen, glass bottom boat operators and entire coastal communities which depend on marine biodiversity and fish catches for food and income, again with implications for poverty reduction (SDG 1). Another alarming aspect of climate change is saltwater intrusion into freshwater aquifers which limits the availability of fresh water for human consumption, farming and other economic activities and will undermine the achievement of SDG6 – clean water and sanitation.

Speaking of the achievement of SDG9 – industry, innovation and infrastructure, the major economic drivers in SIDS tend to be tourism, agriculture, fisheries, which are climate sensitive industries. In Grenada an entire nutmeg harvest was devastated by Hurricane Ivan in 2005. Major infrastructure in many islands, such as hotels, road networks, electrical power plants and such, are concentrated along coastal areas which can become inundated by rising sea levels and destroyed by hurricanes.  Destruction or damage of these ports of entry impact on their ability to receive tourists, which is crippling for economies dependent on tourism.

Aside from these impacts on economic growth and sustainability, infrastructure and livelihood, the loss of human life is one of the greatest threats. One only needs to consider the devastation by Tropical Storm Erika in Dominica and the loss of life to see that the impact is indeed real. According to the Rapid Damage and Impact Assessment, the damage and loss has been estimated at US $483 million which is equivalent to 90 percent of Dominica’s GDP.

The scale of the problem

Climate change has been one foreign policy area on which CARICOM countries have been steadfastly united. They have participated keenly in climate change negotiations and have submitted their intended nationally determined contributions (INDCs) setting out their post-2020 country commitments. A taskforce on climate change was also established.

Previous attempts by the global community to achieve an internationally accepted binding agreement for the reduction of GHG emissions have left a lot to be desired. The Kyoto Protocol, adopted in Kyoto, Japan in 1997 and entered in force in 2005, is the first multilateral treaty requiring countries to cut their GHG emissions. However, the US, currently the second largest  emiter, never ratified the Agreement and China  (currently the largest emiter) and India, were exempted from the emission cuts because they were not major emiters during the period of industrialisation. Moreover, the emission cut targets of 5.2% under Kyoto are not enough.

The inertia of the world’s major emiters on substantially cutting emissions and on achieving an ambitious binding agreement so far on climate change has had devastating consequences. The World Meteorological Organisation reported that concentrations of carbon dioxide increased at their fastest rate for 30 years in 2013. Moreover, a World Bank scientific report published in 2012 found that the world is heading towards a temperature increase of 4 degrees celsius by the turn of the century if current emission levels remain. A recent report by the IPCC further reiterated this. Such an increase would be catastrophic for SIDS.

The current global position for emissions reduction is for limiting temperature increase to no more than 2 degrees above pre-industrial levels. However, any long term temperature increase by 1.5 degrees Celsius over pre-industrial levels will have a devastating impact on SIDS. As such, countries of the Alliance of Small Island States (AOSIS), including CARICOM, have been pushing the “1.5 to Stay Alive” campaign to raise awareness and support for cuts which will limit the increase to no more than 1.5 degrees.

Moreover, the current level of actual financing provided by developed nations to meet the adaptation needs of small states has been woefully inadequate.

CARICOM negotiating position

The Rt. Hon Dr. Kenny Anthony, Prime Minister of St. Lucia, has lead responsibility for climate change for CARICOM.

In a press conference given by Dr. Anthony, CARICOM’s negotiating position was articulated. It re-emphasises the position taken in the Community’s  Declaration for Climate Action issued pursuant to regular meeting of CARICOM Heads of Government in Barbados in July of this year. As stated by Dr. Anthony, CARICOM is advocating for:

the retention of the principal of special circumstances and unique vulnerability of SIDS;

five-year review cycles of green house gas emission reduction targets with the first review to take place prior to 2020, to allow for the adjustments necessary to achieve the goal of 1.5 degrees;

recognition of loss and damage (the irreversible, slow onset impacts of climate change to which it is not possible to adapt, example sea-level rise and ocean acidification) as a critical issue for SIDS and the development of a mechanism to address this element, treated separately from adaptation;

support for REDD+ (efforts to reduce emissions from deforestation and forest degradation and the sustainable management of forests);

adequate provisions for adaptation to help Caribbean countries reduce their vulnerability to effects of climate change and develop great climate resilience where possible; and

commitment by developed countries to take the lead in scaling up the provision of adequate, predictable and new sources of financing for mitigation, adaptation, loss and damage, and for technology support.

The threat of climate change to the livelihoods, economies and very existence of SIDS cannot be understated. World leaders in their various statementsleading up to the conference have all recognised that COP 21 represents a critical development juncture where adaptative and corrective action can still be taken towards charting a new course towards a climate friendly sustainable future. However the window of opportunity for avoiding an environmentally catastrophic global temperature increase of 4 degrees Celsius is closing.

A comprehensive, legally binding agreement with ambitious and substantive commitments on emissions reductions to reduce the global temperature increase to no more than 1.5 degrees over pre-industrial levels, which provides binding commitments for technology transfer, capacity building and adequate financial support for adaptation of SIDS and other vulnerable countries and communities to climate change and which recognises the vulnerability and differentiated responsibility of small states and LDCs will help reverse this. The hope of SIDS for a sustainable future depends on what action or inaction world leaders take over the next few days.

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 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.

Private Sector Development in the Caribbean: A Regional Overview 2015

Alicia Nicholls

The Economist Intelligence Unit recently released a report entitled “Private Sector Development in the Caribbean: A Regional Overview” commissioned by Compete Caribbean. The report discusses private sector development in the Caribbean region and is based primarily on the analysis in the Private Sector Assessment Reports (PSARs) on fourteen Caribbean countries which are available as separate reports on the website of Compete Caribbean.

A direct extract from the Report:

For the Caribbean countries as a group, 2015 will be a significantly more difficult year than the previous three, reflecting the still-challenging economic climate. The need for private-sector-oriented solutions to these nations’ longstanding challenges has never been greater.

Some of the key challenges and opportunities identified in the PSARs are:

Challenges:

  • Strained public finances
  • Cost of energy
  • Access to finance
  • Human capital, in particular inefficient labor markets and emigration of skilled labor
  • Innovation capacity

Opportunities:

  • Engagement of diasporas
  • Key measures to improve business environment
  • Improve education systems
  •  Improve firm productivity
  •  Regional approach to climate change

The full report may be accessed on the website of Compete Caribbean here. Happy reading!

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.

41st COTED Meeting in Georgetown Concludes

Alicia Nicholls

The CARICOM Council for Trade and Economic Development (COTED) concluded its 41st meeting in Georgetown, Guyana last Friday, November 13. The two-day meeting was preceded by a special session with the Region’s private sector on Thursday, with representation from a cross-section of regional private sector associations, including the West Indies Rum and Spirits Association (WIRSPA), the Private Sector Association of Jamaica and Caribbean Export, among others.

COTED is responsible for the promotion of trade and economic development of the Community and consists of ministers designated by each CARICOM member state. The packed agenda centered on matters pivotal to the region’s growth and development, including the private sector, the CARICOM SIngle Market, external economic and trade relations, health and the regional investment promotion strategy.

According to the Statement by the Hon Maxine McClean, Minister of Foreign Affairs and Foreign Trade of Barbados,  Chair of COTED, the following comprised the key items discussed at the meeting:

  • Private Sector – The discussion focused on investment promotion, the challenges and the priorities for the business community, doing business in the Caribbean, and the successes of various private sector development interventions and how these successes may be replicated.
  • CARICOM Single Market – The implementation of the CARICOM Single Market and Economy (CSME) Application Processing System (CAPS) will begin on a phased basis next year.
  • External Economic and Trade Relations – COTED Ministers began deliberations on the regional External Trade Strategy and agenda, reviewed preparations for participation in the 10th WTO Ministerial Meeting in Nairobi, Kenya in December and also received an update from Member States with regard to their progress in implementing the provisions of the WTO Trade Facilitation Agreement.
  • Health Matters – COTED Ministers recognised the need for action on confronting non-communicable diseases and their impacts on the health of the region’s workforce and their potential impacts on competitiveness. A presentation on the proposed establishment of a Caribbean Regulatory System for Medicines was considered.
  • Regional Investment Promotion Strategy – COTED Ministers recognised the completion of the Regional Investment Promotion Strategy (RIPS) and are expected to agree on a medium-term work programme for the implementation of the RIPS at the Ministerial Meeting scheduled for March 31, 2016.

The full statement by Minister McClean may be accessed on CARICOM’s website 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 read more of her commentaries and follow her on Twitter @LicyLaw.

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