Caribbean Trade Law and Development

Tag: Barbados

  • Is the Caribbean Basin Initiative still relevant to CARICOM countries?

    Alicia Nicholls

    For my latest article on CBI, click here.

    In late December of last year, the United States Trade Representative (USTR) released its ninth report to the US Congress on the operation of the Caribbean Basin Initiative (CBI). As the CBI approaches almost thirty years in existence, it is worth pondering on whether the CBI, initially passed during the Cold War, is still relevant to CARICOM countries today.

    The Caribbean Basin Initiative refers to the preferential trade concessions extended unilaterally by the United States under several key pieces of legislation to seventeen sovereign countries and dependent territories washed by the Caribbean Basin.  Instituted by the Reagan administration under the Caribbean Basin Economic Recovery Act (CBERA) in 1983, the CBI is said to represent a permanent commitment by the US to encourage the development of strong democratic governments and revitalized economies in the Caribbean Basin. The preferential treatment accorded under the CBERA includes duty-free treatment for most products, and in other cases, tariff rates which are much less than the most favoured nation (MFN) rate. Amendments to the CBERA and the passage of the Caribbean Basin Trade Partnership Act (CBTPA) in 2000 and the Trade Act of 2002 have increased the number of items eligible for preferential treatment and granted NAFTA-parity to some items.  Haiti benefits from additional concessions, primarily for apparel, under the  Haiti Hemispheric Opportunity through Partnership Encouragement (HOPE) Act of 2006,  the HOPE II Act of 2008 and the Haiti Economic Lift Programme (HELP) Act of 2010.

    Trade under the CBI

    The US is the Caribbean’s main trading partner and trade under the auspices of the CBI accounts for much of the US’ imports from CBI countries.  The USTR report reveals that in 2010 total US imports from CBI countries was $10.1 billion, representing 0.5% share of total US imports from the world. CBI countries were the eighteenth largest market for the US exports to the world. Although there were originally 24 beneficiary countries, five Central American countries plus the Dominican Republic became parties to a free trade agreement with the US (CAFTA-DR), thus losing their beneficiary status. Panama has also recently signed an FTA with the US (Panama-US).

    Some challenges

    The CBI is a unilateral arrangement. The benefits are granted by the US to certain eligible goods from CBI beneficiary countries without reciprocal treatment being demanded for US goods. The CBI statutes outline several eligibility criteria which must be met before the president can grant such treatment to any beneficiary country. The CBERA was passed during the height of the Cold War and many of the eligibility criteria under the initial act and in subsequent acts have the objective of furthering US national security and foreign policy goals. In some cases, these eligibility criteria do work in the region’s interest. The recognition of internationally recognised workers’ rights and commitments to eliminate the worst forms of child labour, to combat corruption and to  promote the rule of law are things which most CARICOM countries would readily demand of their governments. However, some criteria like the stipulation that no communist country can be a beneficiary country and the requirement of beneficiaries to provide  ‘equitable and reasonable access’  to their markets and basic commodity resources are much less innocuous and could arguably limit policy space and the right of the beneficiary countries to choose their own political and economic path to development without fear of repercussions.

    Unilateral preferential arrangements like the CBI also bring with them a measure of uncertainty due to their unilateral nature.  CBI concessions can  be unilaterally limited, suspended or withdrawn in the case of non-compliance by a beneficiary country with the eligibility criteria or where imports from the country or a group of countries is deemed to cause ‘serious’ injury to domestic producers. This uncertainty is heightened by the increased international hostility towards non-reciprocal trading arrangements which has cast a shadow on the future of CBI. Like the African Growth and Opportunity Act (AGOA), the CBERA does not qualify under the WTO’s ‘Enabling Clause’ because it discriminates among developing countries and thus requires a waiver. Although the CBTPA extends the CBI through to September 2020 or until an FTA is signed with the US, the WTO waiver expires in 2014. This means that the  CBI preferences would no longer be legal under the WTO rules after 2014 unless another waiver is obtained.

    Besides these inherent structural problems with the arrangement, not all countries in the region have benefited equally from the CBI. Its benefits have tended to be concentrated in a few countries.  Since the inclusion of petroleum products for preferential treatment, Trinidad & Tobago has benefited the most thanks to its resource base and manufacturing capacity.  With the exit of the CAFTA-DR countries, that country is now the leading CBI exporter to the US with petroleum products and methanol now making up the bulk (76%) of CBERA exports (from non-CAFTA-DR countries) to the US market in 2010 and almost all exports of such products come from Trinidad & Tobago.  Another ‘winner’ is Haiti. After Costa Rica joined the CAFTA-DR, Haiti became the second largest exporter to the US under the CBI. According to the USTR report, apparel not only accounts for over 90% of Haitian exports to the US but almost all of Haiti’s apparel imports enter under the CBTPA and the HOPE Acts.

    Once a leading exporter of ethanol and apparel to the US under the CBI, Jamaica’s ethanol and apparel exports to the US have declined.  The Bahamas has in fact now superseded Jamaica as the third leading source of US imports under the CBI.  For some countries like Antigua & Barbuda and Barbados, the majority of exports to the US enter under normal trade relations (i.e. at the MFN rate) as opposed to under CBERA or the CBTPA. Not only has there been concentration in the gains from the CBI but the CBI has led to little economic or export diversification in CBI countries. Petroleum products and apparel account for most CBI exports to the US. Moreover, even before the exit of the CAFTA-DR countries, CBI countries’ share of the US import market has been on a downward trend from 3.1% in 1983 to 1984, to just 0.5% in 2010, according to the USITC.

    Through their lobbying efforts and the aid of some empathetic members of the US Congress, CBI countries have succeeded in getting some important additional concessions which have helped make the CBI more beneficial. However, the CBI is a goods-only arrangement, meaning that only designated goods exports, as opposed to services exports, benefit from preferential access. Most CARICOM countries are now services-based economies and stand to benefit more from an arrangement which also provides market access for their service providers, particularly through Mode 4 (temporary movement of natural persons).  The CBI’s utilisation by regional exporters and its effectiveness have been limited by stringent rules of origin requirements and conditions, remaining non-tariff barriers to trade and declining margins of preference as the US continues to sign FTAs with other more competitive developing countries.  Some of these challenges were highlighted in a recent report. The argument can also be made that the CBI is based on an outdated school of thought which posits that free trade and increased exports automatically foment development.

    Contemporary Relevance ?

    Despite its many drawbacks and weaknesses, it is submitted that the CBI still remains relevant for CARICOM countries today even though some countries clearly benefit more than others and the developmental impact has been largely disappointing. It remains relevant because, for all its flaws, the CBI still provides a margin of preference for the region’s exports in a world where such non-reciprocal preferences are quickly shrinking away in favour of greater competition and a more ‘level’ playing field. The majority of the region’s exports which receive preferential treatment in the US market still enter under the CBI, as opposed to the Generalised System of Preferences (GSP) which has less favourable preferences than the CBI. For some countries like Barbados, no exports to the US entered under the GSP for the past few years and exports enter either at the MFN rate or under the CBI. Moreover, the CBI’s continued attractiveness is evidenced by the fact that according to the USTR Report, Suriname has indicated its interest in receiving beneficiary status and is currently in talks with the US to this effect.

    Though the extension and reform of the CBI to address the challenges outlined would be the preferred option for the region, it is unlikely that WTO members would be willing to grant another waiver, especially given the opposition that the current waiver encountered. With the Free Trade Agreement of the Americas (FTAA) off the table for the foreseeable future and the US actively engaged in pursuing FTAs, it is inevitable that CARICOM will at some point have to pursue an FTA with the US.  A CARICOM-US FTA which has a trade and development focus could be beneficial to CARICOM countries if it provides market access for the region’s  service providers, allows for special and differential treatment (especially for lesser developed CARICOM States) and includes technical and capacity building assistance to help the region meet its commitments and develop its export capacity to better capitalise on the market access gained. However, given the asymmetry in bargaining power between the US and CARICOM and the US approach to FTAs, it is probably unlikely that CARICOM would be able to gain from the US all of the concessions which it had gained from the EU with the Dominican Republic under the CARIFORUM-EC Economic Partnership Agreement.

    For my latest article on CBI, click here.

    Alicia Nicholls is a trade policy specialist and law student at the University of the West Indies. You can contact her by email and follow her on Twitter at @licylaw.

  • Barbados is not immune to the anti-incumbent fever sweeping the region

    Alicia Nicholls

    Another one bites the dust!  The Peoples National Party (PNP) has won the Jamaica elections, defeating the incumbent Jamaica Labour Party (JLP) by 41-22 seats. Former Prime Minister, Portia Simpson-Miller, has gotten the nod of approval from the Jamaican people and adds another female face to the CARICOM Heads of Government.

    There is no doubt that by tomorrow this latest defeat of another one-term incumbent government in the region is going to set the call-in programmes in Barbados ablaze, and everyone with an opinion is going to be speculating on what if anything this latest defeat means for the current Democratic Labour Party (DLP) administration. My take on it is that Barbados is not immune to the anti-incumbent fever stirring in the region.

    Indeed,these are interesting times in our political landscape. I do not even plan on delving into the letter debacle or so-called attempted coup within the DLP, which to my mind was completely blown out of proportion. Putting that aside, strong parallels have been drawn by many political pundits between the election in St Lucia and what they believe to be similar political conditions in Barbados. In the St. Lucia election, the one-term Stephenson King administration was defeated by the St. Lucia Labour Party led by then former Prime Minister Kenny Anthony. Like Mr. King in St. Lucia after the death of Prime Minister John Compton, Prime Minister Freundel Stuart assumed office following the unfortunate death in office of Prime Minister David Thompson from pancreatic cancer last year. Although the circumstances of Mr. Andrew Holness’ rise to power in Jamaica differs from in St Lucia and Barbados, many will rightly see the Jamaica election as further cause for the DLP to be worried.

    It is worth noting that at the time when Mr. Stuart became Prime Minister, some learned pundits argued that Mr. Stuart should have sought his ‘own mandate’ from the people. I disagreed with that argument then and still do for two main reasons. First, as prime  ministers are not directly elected, mandates are given to a party, not to a party leader. The Barbadian electorate gave a mandate to the DLP in 2008, which logically extends to Mr. Stuart whether or not he was  party leader at the time. Second, elections are expensive undertakings and I do not think spending money on another election so soon after the last would have been justified, especially in these harsh economic times.

    What the elections in St. Lucia and now Jamaica make clear is that no government is immune to the anti-incumbent fever sweeping through the region. In two-party systems like ours in most of the Commonwealth Caribbean, third parties have little if any chance of winning or making a real impact on election results. Therefore, voters like myself are stuck with and taking a hard look at the limited political options before us. If this Government wants to inoculate itself from the anti-incumbent fever and the one-term plague, it has to listen to the people. It is not just about colourful manifestos and pretty campaign speeches. We want real ideas and a clear and cogent vision and plan of action for fostering development and prosperity for all Barbadians. As far as I am concerned, in these upcoming elections, whenever they are called, both political parties (DLP and BLP) have to come good if either gets my vote.

    Alicia Nicholls is a trade policy specialist and law student at the University of the West Indies. You can contact her by email and  follow her on Twitter at @licylaw.

  • Myrie case going to the Caribbean Court of Justice – Some thoughts

    Alicia Nicholls

    The Myrie case is heading for the region’s highest court early next year.  For those of you who do not know the unfortunate details involved, this case concerns a young Jamaican lady, Shanique Myrie, who was allegedly subjected to a degrading body cavity search at the Grantley Adams International Airport here in Barbados earlier this year. I use the term alleged because in the absence of any substantive information by the two Governments involved, many of the details in this case remain shrouded in a fog of uncertainty and speculation.

    In its original jurisdiction the Trinidad-based Caribbean Court of Justice has compulsory and exclusive jurisdiction to hear and determine disputes concerning the interpretation and application of the Revised Treaty of Chaguaramas Establishing the Caribbean Community Including the CARICOM Single Market and Economy. Naturally therefore, it would be within the Court’s competence to deal with the main issue involved here, that is, the freedom of movement of Community nationals, which is one of the pillars of the CARICOM Single Market and Economy (CSME).

    An intriguing aspect of the CCJ is that per Article 222 of the Revised Treaty, a  person (whether a private individual or company) can, with special leave of the Court, commence proceedings in the Court as a private entity, as opposed to having to rely on its respective State to bring a claim on its behalf.  Outside of investor-state dispute settlement, claims brought by private persons in international dispute settlement fora remain a rarity in international law. However, from a quick perusal of the list of judgments on the CCJ’s website, it seems so far that bringing a  claim as a private entity is the preferred avenue for commencing proceedings in the CCJ in its original jurisdiction (see the most recent case of Hummingbird Rice Mills Ltd v Suriname for example). This lack of preference for State-to-State dispute settlement was also noted by The Honourable Sir Dennis Byron, President of the CCJ in his recent paper.

    Turning back to the case at hand, it appears that this is probably the avenue that counsel for Ms. Myrie’s will be taking. While this may be the more expensive route for the Myrie team, it would arguably prevent the more politically unpalatable and potentially divisive alternative of having two CARICOM States (Barbados and Jamaica) seemingly at loggerheads in our highest regional tribunal. Without doubt, it is regrettable that diplomatic means of dispute settlement have failed to resolve this issue.  After all, this case remains a sore point in the relations between the two countries concerned. Moreover, the victim would have to wait longer for justice. However, from an academic standpoint, this case will present an opportunity to see the Court’s treatment of the issue of freedom of movement of CARICOM nationals, as well as the development of the Court’s jurisprudence.

    Alicia Nicholls is a trade policy specialist and a law student at the University of the West Indies. You can contact her by email and follow her on Twitter at @Licylaw.