Caribbean Trade Law and Development

Category: Trade

  • Climate Change, the US Elections and Small Island Developing States’ Survival

    Climate Change, the US Elections and Small Island Developing States’ Survival

    Alicia Nicholls

    “We are the first generation to be able to end poverty, and the last generation that can take steps to avoid the worst impacts of climate change. Future generations will judge us harshly if we fail to uphold our moral and historical responsibilities.” – Ban Ki-Moon, Secretary General of the United Nations.

    In a step that was both historic and symbolic, the Presidents of the United States (US) and China last week ratified the Paris Agreement ahead of the on-going G20 summit in Hangzhou, China. This single showing of solidarity by the world’s two largest industrialised powers was welcomed news for the small island developing states (SIDS) such as those in the Caribbean, Pacific and the Africa, Indian Ocean, Mediterranean and South China Sea (AIMS) states. Through the 44-member Alliance of Small Island States (AOSIS), SIDS  pushed not only for the conclusion of the Paris Agreement but insisted on the inclusion of language in the Agreement in which parties endeavored to “pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels” (Article 2(a) of the Paris Agreement).

    SIDS are the least culpable but most physically and economically vulnerable to the adverse effects of climate change. Rising sea levels have dislocated coastal communities and threaten the territorial integrity of the Pacific states of Kiribati and the Marshall Islands. Earlier this year, Cyclone Winston caused US1.4billion in damage, with the highest economic and human toll in Fiji, while Tropical Storm Erika in 2015 cost the Caribbean state of Dominica nearly half of its GDP. However, as the story of a remote Alaskan village which has voted to relocate from their ancestral home because of sea level rise shows, climate change is not a SIDS’ problem alone. It is a cross-cutting global issue which has implications not just for the global environment but for human health, security, sustainable development and economic growth.

    So what does all of this have to do with the upcoming election for the 45th President of the US? Well, if one considers the wide disparity in climate change rhetoric and policy proposals between the two major candidates running for the Oval Office, it is pellucid that the election of either Mrs. Clinton or Mr. Trump is the difference between strong US support for reducing GHG emissions and leading the global fight against climate change on the one hand, and on the other, a reversal of the gains that have been hard fought for. In other words, the future of SIDS’ survival could depend on the outcome of the US election.

    Current US climate change policy

    Current US policy supports global climate change efforts. US President Obama’s three-pronged Climate Action Plan commits to cutting carbon pollution in America, preparing the US for the impacts of climate change, and critically for the Paris Agreement, leading international efforts to address Global Climate Change. This is a policy position which Democratic candidate, Hillary Clinton, has pledged to honour should she be elected to office by the American people this November.

    The Paris Agreement was concluded in December 2015 at the end of the United Nations Framework Convention on Climate Change (UNFCCC) Twenty-first session of the Conference of the Parties (COP21). Since the Agreement’s opening for signature in April 2016, over 180 states have signed. However, as of September 3, only 26 states so far (representing 39% of global emissions) have ratified it. The recent ratification by the US and China, which together account for about nearly 40% of GHG emissions, is a significant step towards the threshold needed for the Agreement to come into effect; ratification by at least 55 countries which contribute to 55% of global GHG emissions. According to a White House press release on the US-China Climate Change cooperation outcomes, the two countries “committed to working bilaterally and with other countries to advance the post-Paris negotiation process and to achieve successful outcomes this year in related multilateral fora”.

    Climate Change Platforms of Candidates 

    While a four-way race in theory, the candidates of the two major parties, the Democratic Party and the Republican Party, still have a large lead ahead of the two other candidates (Jill Stein of the Green Party and Gary Johnson of the Libertarian Party). Perhaps never before has there been such wide disparity in the positions of two US presidential candidates on the issue of climate change. The democratic candidate, former US Secretary of State, Hillary Clinton, has vowed to “take on the threat of climate change and make America the world’s clean energy superpower”. Some of her major policy initiatives to this end are: launching a $60 billion Clean Energy Challenge, investing in clean energy production and infrastructure, cutting methane emissions across the economy and prioritising environmental and climate justice, inter alia.

    This stands in stark contrast to the stated position of Republican candidate, billionaire real estate mogul Donald Trump, who, inter alia, tweeted in November 2012 that “the concept of global warming was created by and for the Chinese in order to make US manufacturing non-competitive”. He later said he was joking. Unfortunately, for the world, and especially for SIDS, climate change is no joking matter.

    While Trump’s skepticism on the anthropogenic nature of climate change is not dissimilar to that of most Congressional Republicans, a Sierra Club report has rightly stated that “if elected, Trump would be the only world leader to deny the science of climate change.” He has also denounced the Paris Agreement as a bad deal for America, ascertaining it “gives foreign bureaucrats control over how much energy we use right here in America”, a claim soundly and poignantly rejected by the US special envoy for climate change (2009-2016) in a Washington Post op-ed. Mr. Trump first asserted he would renegotiate the Agreement and later stated that he would ‘cancel‘ the US’ participation in it. He has railed against environmental regulations. His proposals to reverse President Obama’s climate change initiatives, abolish the US Environmental Protection Agency, save the coal industry and continue subsidies to the oil and gas industry would jeopardise the US’s current emission reduction targets.

    Implications for SIDS of US Climate Policy Change

    Should a President Trump, if elected, implement his stated policies, not only will there be a 360 degree reversal of the US’ current commitment to meeting its emission-reduction targets, but an end to US cooperation or support for the global climate change agenda. If this happens, there will be little the world could do,besides raise universal condemnation. This is because one weakness of the Paris Agreement is that there is no binding enforcement mechanism in the agreement to force compliance of countries to the emissions limits they set for themselves. Already, there is skepticism that the current “nationally determined contributions” are not ambitious enough to conform with the Agreement’s goal of “holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels” (Article 2(a) of the Paris Agreement).

    Secondly, should the US withdraw from the Agreement or renege on its commitments, some other high emitters may feel less of a moral imperative to follow through with their own commitments or may withdraw as well.

    Thirdly, climate change finance is important for SIDS’ adaptation to, and mitigation of, the effects of climate change. Under Article 9 of the Paris Agreement developed country members are obligated to provide “financial resources to assist developing country Parties with respect to both mitigation and adaptation in continuation of their existing obligations under the Convention”.

    Caribbean countries  and several other vulnerable states around the world have benefited significantly over the years from the US Department of International Aid (USAID)’s projects which aim to build countries’ resilience to climate change. Climate change was one of the Obama Administration’s priorities for DA funding with $310.3 million in funding requested for Global Climate Change in the FY2017 Budget Request. The future of USAID aid flows to developing countries for climate change adaptation is bleak if current US policy towards climate change action changes under a Trump administration.

    What then for SIDS?

    The aim of this article is NOT to be an endorsement of either of the two major candidates running for the upcoming US Presidential election, neither is it an attempt to influence the American people’s decision. The US election is a democratic choice for the American people and only they can decide which of the four candidates’ platform better serves their interests. What this article attempts to do is to discuss and show the wide policy differences which exist between the two candidates of the major parties on climate change, and argues that any negative change in current US climate change policy will have far-reaching implications for the global climate change fight.

    There are a few nuggets of hope, however.  Because of Article 28 of the Paris Agreement, a President Trump would have to wait at least three years from the date the Agreement has entered into force in the US before he could notify his intention to withdraw the US from the Agreement and it would take another year for such withdrawal to come into effect.Any US withdrawal from the Paris Agreement is unlikely to be a popular move among Americans. Recent US polling data show there is grassroots support for Climate Change. Action. This includes not just environmental lobbies but the ordinary man on the street. There would also be universal condemnation by other major countries.

    SIDS may have a few allies in the fight within the US. Outside of federal action, some states, like Oregon, have quite robust climate change initiatives. Moreover, faced with pressure from more discerning and environmentally-aware consumers, more businesses and large corporations are forced to demonstrate their use of energy-friendly processes and products.

    Despite this, however, besides lobbying and moral suasion by other countries, there is little SIDS  can realistically do to change US climate change policy should there be a reversal. The vote for US president is a decision only the US electorate can make. However, for SIDS it could be a matter of survival.

    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.

  • FHA TAX ALERT – Barbados 2016 Budget

    A review of the Barbados Budget Proposals 2016 by FRANHENDY Attorneys

  • Can Sports help Caribbean Countries’ Export Diversification Efforts?

    Can Sports help Caribbean Countries’ Export Diversification Efforts?

    Alicia Nicholls

    The Brazil-hosted XXXI Summer Olympiad has come to an end with all of the panache one would expect from “a cidade maravilhosa” (the marvelous city) of Rio de Janeiro. I would be the first to admit that unlike most persons, I was not glued to the Games. However, seeing the success of Caribbean athletes, particularly the Jamaican team which can boast of having the fastest man and woman in the world for the third Olympiad in a row, made me ponder on the possibilities sports could have for Caribbean export diversification. Much of the discourse on sport as an export diversification strategy is often limited to sports tourism. However, I believe that the opportunities for sports trade go beyond simply sports tourism to encompass a wider array of sporting services which will be the focus of this article.

    No longer viewed as simply pastimes and sources of entertainment and recreation, the global sports industry is a lucrative and growing one.  A study by AT Kearney found that this industry is worth $480-620 billion dollars. For an appreciation of the sheer economic scale of the recently concluded Rio Olympic Games, this article by the BBC shows there were “more than 10,000 athletes, representing 207 nations, [competing] in 31 sports in Brazil.” It is therefore little surprise why an increasing number of developing countries are exploring the ways in which the commercialisation of their sporting industries can contribute to their economic diversification efforts.

    If we turn to the medal count statistics in the Rio Olympics, we see that Jamaica, a Caribbean small island developing state with a population shy of 3 million, won 11 goals (6 gold, 3 silver and 2 bronze), while Jamaican sprinting legend Usain Bolt won a historic three consecutive goals in the 100m, 200m and 4x100m relay further engraving his legacy on history’s page as the fastest man on earth. Caribbean countries’ sporting prowess is not limited to athletics. The West Indies Cricket Team dominated the cricketing world for many years. Here in Barbados we can boast of Sir Garfield Sobers who is regarded internationally as “the greatest cricketer the world has ever seen”, and of being the inventors of road tennis. The raw sporting talent is obviously there so how can we convert our sports talent into economic and export opportunities?

    Sports as Export Services

    The  commercialisation of sporting services has been internationally recognised in trade classifications. Under the World Trade Organisation (WTO) services classification, “sporting and other recreational services” is one of the sub-sectors of Recreational, Cultural and Sporting Services (other than audiovisual services). The sub-classes of sporting services are quite limited as they only capture a narrow range of the activities currently engaged in by sporting services suppliers, namely,  sports event promotion services; sports event organisation services; sports facility operation services and other sporting services. The UNESCO Framework for Cultural Statistics considers sports as part of the cultural industries.

    Caribbean countries’ existing market access and national treatment commitments in “recreational, cultural and sporting services (other than audiovisual services)” in their GATS schedules of specific commitments have been modest. This is not surprising as sporting services have not been a sector most countries have traditionally sought to liberalise. Only Cuba, Dominica, Grenada, St. Kitts & Nevis, St. Lucia, Trinidad & Tobago have made market access and national treatment commitments in sporting and other recreational services (CPC 964) in their GATS schedules.

    Sports Tourism

    When we speak of sports commercialisation in the region, our discussion tends to be limited primarily to sports tourism which involves travel to another destination for participation or observation of sporting events, sports conferences and meetings. This would be considered a services export under Mode 2 (consumption abroad). Countries around the world joust with each other to host major sporting events from the Olympics to World Cup Football. The Caribbean has had a piece of the action by successfully hosting the ICC Cricket World Cup in 2007, while also hosting several other smaller hemispheric and regional sporting events such as the Commonwealth Youth Games which the Bahamas will host in 2017.The rationale for hosting these events is not just for the immediate inflows of tourist arrivals and expenditure, but also the marketing and promotional opportunities which such intense media attention could bring.

    Non-Tourism Sporting Services

    Besides sports tourism, there are other possibilities for sporting services exports as the schematic below shows utilising the four modes of supply under the General Agreement on Trade in Services (GATS):

    • Mode 1 (Cross border supply)  – from the territory of one Member into the territory of any other Member e.g: sports consultancy firm providing consulting services to clients in another country online
    • Mode 2 (Consumption Abroad) -in the territory of one Member to the service consumer of any other Member e.g : an athlete of one country attending a training facility in another country
    • Mode 3 (Commercial presence) – by a service supplier of one Member, through commercial presence, in the territory of any other Member e.g: an investor establishing a sports academy  in another country
    • Mode 4 (Movement  of Natural Persons) – by a service supplier of one Member, through the presence of natural persons of a Member in the territory of any other Member e.g: coaches providing training in another country

    If we take Jamaica as a case study of sporting services exports, the country already conducts sporting services exports under Mode 4 as Jamaican coaches coach at overseas universities and training facilities. It also exports under Mode 2 as it hosts international sporting events (sports tourism) and its IAAF-funded High Performance Training Centre provides training for both Jamaican and international athletes. Unfortunately, the value of these services to the Jamaican economy is difficult to measure.

    In 2013 the then Government under Prime Minister, Portia Simpson-Miller introduced the Jamaica National Sports Policy which provides a framework for the development of sport in Jamaica includes upgrades to sports infrastructure, improvements in schools’ physical sport infrastructure and tax relief for contributions to amateur sport under the Charitable Organizations (Tax Harmonization) Act 2013 and the Charities Act 2013. Jamaica is known as the Sprint Capital of the World for its prowess in athletics, adding to the strength of Brand Jamaica. This is already reaping benefits and sports is one of the sectors in which Jamaica promotes foreign investment. Besides athletics, Jamaica has also enjoyed international success in cricket, football, netball and bobsled.

    Some sports-related investment already exists in the Caribbean such as in the Caribbean (Cricket) Premier League. Sports services trade through mode 3 (commercial presence) is possible through  foreign direct investment in the form of sports academies, colleges and other sports facilities which can generate foreign exchange and direct and indirect employment. However, strong regulatory and monitoring frameworks need to be in place to ensure these meet world anti-doping standards and anti-money laundering laws.

    Linkages with other sectors

    Sporting services can have strong linkages with, and spill-over benefits for other sectors, such as in manufacturing, health & wellness, education, research & development, and audiovisual services. According to this article in the India Times, Usain Bolt requires brands wishing to feature him in advertising campaigns to film in his home country of Jamaica to allow his country to benefit.

    Conclusions

    Caribbean countries have produced world-class sporting talent which far exceeds their small physical and economic sizes. There are opportunities to leverage that talent into sports services export opportunities which go beyond simply sports tourism. The current contribution of sporting services trade, such as sports festivals, to Caribbean countries’ GDPs is not being captured and remains undertapped.

    One of the reasons for the paucity of data on sporting services internationally is that there is the need for the broadening and refining of the CPC classification of sporting services beyond the four currently recognised sub-classes. Better classification and measurement is needed in order to assess the current value, impact and contribution of sports trade to Caribbean countries. This data would assist in the formulation of evidence-based policies and interventions to promote the development of sports as an export diversification strategy.

    The level of development of the sports industry and the policy frameworks and support structures for the development of sport varies by country across the region. Sportpersons benefit under the free movement of skilled labour under the CSME but there is no regional policy for the development of sport as an export. Sports are still not seen as a legitimate career option for many young people due to limited financing opportunities and lack of world-class training facilities in many Caribbean countries.

    Alas, however, there has also been progress in the right direction. There has been the introduction of sports degrees at the University of the West Indies campuses which could also attract international students. Several Caribbean countries have introduced national sports policies and have invested in upgrading their sports infrastructure. Some have made sports tourism part of their marketing plan e.g: Barbados hosted the 2014 Top Gear Festival at its newly redeveloped Bushy Park Circuit.

    If Caribbean countries are serious about commercialising their sports sectors, it is perhaps time that those countries which had not made any commitments in “sporting and other services” in their GATS schedules of specific commitments to consider taking commitments, while those which have already done so to consider  modifying the quality and number of their existing commitments. There is also the need to explore how Caribbean sports services suppliers can benefit from existing trade agreements like the CARIFORUM-EC Economic Partnership Agreement and from cooperation and funding under bilateral cooperation agreements with third states.

    An evidence-based approach would allow the region to determine what incentives and public/private sector support are needed to develop sporting services trade, the human resource, infrastructure and financing constraints  being faced and what additional public and private sector support can be given to regional sportspersons and sporting bodies. In the five Caribbean countries where citizenship by investment is offered, these countries can consider the feasibility of making an investment in sport one of the options of a qualifying investment.

    The good news is that while I was conducting my research for this article I stumbled across this document for a consultancy to conduct an assessment of the economic contribution of the sporting sector, especially sports tourism to the CARICOM Single Market and Economy (CSME) and the development of a Draft Regional Strategy for Sporting Services. This is a step in the right direction.

    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.

  • Antigua, Are you ready to Gamble?

    Antigua, Are you ready to Gamble?

    Javier Spencer, Guest Contributor 

    Javier

    –Did you know that in 2000, the Antigua and Barbuda’s Online Gaming Industry accounted for 61% of the Global Online Industry?(Global Betting and Gambling Consultants, 2007) This figure declined in 2001 onwards as the United States introduced statutes that limited Antigua’s supply of online gambling services in the US.

    The clock has been ticking and the Government of Antigua and Barbuda (Antigua) has now decided to take the necessary actions to retaliate against the United States (US) in its long-simmering case at the World Trade Organization (WTO) (See US Gambling DS285). The US Gambling case is the first case of its kind brought to the WTO in respect of interpreting and applying member states’ commitments under the General Agreement on Trade in Services (GATS). The GATS is a WTO Agreement that emanated from the Uruguay Round of negotiations in January 1995 and much like the General Agreement on Tariffs and Trade (GATT), the GATS’ remit is to substantially reduce barriers to trade within the services sector based on principles of Most Favoured Nation (MFN) and National Treatment (NT).

    Background & WTO Findings

    Antigua in 2003 filed a complaint to the WTO to challenge domestic legislation in the US that have significantly restricted the ability for service providers of Gambling and betting services in Antigua, to offer their services to customers in the US. The statutes brought into question were: ‘The Wire Act’, ‘The Travel Act’, and the ‘Illegal Gambling Business Act’; all of which Antigua claimed were de facto discriminatory and therefore in breach of the US’ market access commitments (Article XVI (I) GATS). In response, however, the US claimed that it had never made specific GATS commitments on the cross border supply of gambling services and further iterated that the statutes were passed with the main objective of protecting public morals and maintaining public order (Article XIV (a)).

     Much to the surprise of the US, a WTO panel ruled in favour of Antigua in 2004. This ruling was upheld by the Appellate Body in 2005 on the US’ appeal. The ruling found that regardless of the US’ intent to “protect public morals or to maintain public order” the US indeed made specific GATS commitment in respect of the supply of gambling services. Against the backdrop of the chapeau of Article XIV, the US failed to demonstrate that the pieces of legislation did not constitute “arbitrary and unjustifiable discrimination” in respect of the supply of online gaming.

     The US was given the deadline of until April 2006 to amend its legislation to be consistent with WTO law (DSU Article 21.5). Years later, the US has failed to comply with the ruling which prompted Antigua to file an enforcement case at the WTO. Fast forward to 2016 and the U.S. has still failed to comply with the WTO ruling. Therefore the Government of Antigua has recently announced its intention to implement remedies authorised by the WTO.

      The Remedy – Cross Retaliation

    In light of the US’ failure to bring its laws in compliance with WTO law, Antigua requested permission to retaliate against the US by suspending obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The TRIPS Agreement is another result of the Uruguay Round of negotiations which seeks to “promote effective and adequate protection of intellectual property rights”. Ultimately, of course, the agreement regulates intellectual property rights (IPRs) in a manner that eliminates or reduces any barriers to trade.

    Further to Antigua’s request, the WTO granted Antigua (as a compensatory measure) the authorization to retaliate in January 2013. This means that Antigua could withdraw US $21 million worth of concessions in IPRs held by US firms, per annum. This cross retaliation strategy has proven to be the best strategy in getting a developed country to comply with WTO rulings. As a precedent, the WTO granted Ecuador the rights to suspend IPR concession against the European Communities (EC) in EC- Bananas III (See DS27). In the final analysis, Ecuador never suspended its TRIPS obligations, but used it as leverage to quickly negotiate with the EC on a mutually agreed solution. This case signals that suspending IPRs as a retaliatory measure gives developing countries a strengthened negotiating position that will serve as an impetus for the developed country to comply or to quickly negotiate a mutually agreeable settlement.

    For Antigua, the cross-retaliation remedy could redound to the greater good of its citizens. For example, pharmaceuticals could be legally produced and distributed in Antigua to fight diseases without paying the remunerations otherwise required under TRIPS.

    However, a closer look at the suspension of TRIPS obligations yearns a pertinent question. Does Antigua possess the clout and capacity to retaliate using this method? In order for this remedy to secure a great impact on the U.S., firms in Antigua ought to demonstrate that they have technological capacity for (large scale) domestic production of copies of IPR goods from the U.S. This example is further exacerbated if Antigua’s import of IP goods and services from the U.S. is insignificant.

    The suspension of IPRs held by US firms is confined to the borders of Antigua and Barbuda which means that goods that would have been created under the TRIPS suspension regime cannot be exported out of Antigua to any other WTO country. At this juncture, a careful examination of the ‘first sale doctrine’ or ‘international exhaustion’ should be applied.

    Additionally, Antigua ought to guard against the risk associated with the authorization to retaliate. For instance, suspending TRIPS obligations may cause Antigua to violate its obligations under the Berne Convention and the Paris Convention. Secondly, the authorisation to suspend TRIPS obligations is only temporary in nature (Article 22.8 DSU), although the authorization set out by the DSB has no time limit to implement. However the broader picture portends that Antigua could only suspend TRIPS obligations until the US has removed or amend laws to become WTO consistent. In this regard, Antigua ought to be mindful of new industries that could emanate from this suspension as it would be highly susceptible to a quick change in US laws. Furthermore, Antigua’s preferences under the Caribbean Basin Economic Recovery Act (CBERA) could be negatively affected as one of the criteria is respect for IPRs.

    Conclusion

    The US Gambling case is a peculiar case where a WTO ruling has been in favour of the developing country’s complaint against the developed country. In such cases, the authorization of TRIPS obligations as a strategy for a developed country to comply could be highly flawed and wreaks greater havoc for the developing country.  Antigua’s retaliation, as case in point, could be ineffective whereas in comparison to the effect that the US statutes had on the Antiguan economy. There are many risks involved in respect of being in breach of other international treaties. Ultimately, however, the measure is meaningless if developing countries do not have the capacity to implement such an authorization.

    After a keen assessment of the economic and political risks associated, what other cards are left for Antigua to play? Perhaps Antigua could consider transferring its rights to suspend its TRIPS obligations to another WTO Member State who has the capacity and the clout to successfully implement such a regime. The uncertainty of the outcome is high as there is no precedent of a developing country who has successfully cross-retaliated through a suspension of their TRIPS obligations. This is truly a gamble and Antigua, are you ready?

    Javier Spencer, B.Sc., M.Sc., is an International Business & Trade Professional with a B.Sc. in International Business and a M.Sc. in International Trade Policy. His professional interests include Regional Integration, International Business, Global Diplomacy and International Trade & Development. He may be contacted at javier.spencer at gmail.com.