Caribbean Trade Law and Development

Tag: trade

  • OECD Trims Growth Forecast and Warns of Trade Deceleration in Latest Economic Outlook

    Alicia Nicholls

    The Organisation for Economic Cooperation and Development (OECD) has again trimmed its global growth forecast slightly downward in its second economic outlook for the year, reflecting the weakness in Emerging Market Economies (EMEs). The Paris-based grouping predicts global GDP will expand by just 2.9% in 2015, down from 3% forecasted in its Interim Outlook this September. Eight years into the crisis this is the weakest growth since 2009. In its report, the OECD noted that the outlook for EMEs is “a key source of uncertainty at present given their large contribution to global trade and GDP growth”.

    While the OECD predicts that global trade and output will recover in 2016/2017 assisted by stimulus measures in China, in his address at the launch of the report, OECD Secretary General, Jose Angel Gurria, emphasised that this improvement is dependent on a variety of factors, including “supportive macroeconomic policies, investment, continued low commodity prices for advanced economies and a steady improvement in the labour market”.

    In anticipation of the COP21 UN Climate Change Conference in Paris, the OECD’s Economic Outlook report includes a chapter on climate change which calls for urgent action to address this global issue. In his address Secretary General Gurria stressed “we are on a collision course with nature and we have to change course” and urged that  “the fragility of economic recovery cannot be an excuse for policy inaction”.

    Key points from the Report 

    • Global output is expected to grow by 2.9 percent in 2015 (weaker than the 3 percent predicted in the September Interim Outlook), with a modest upturn to 3.3 percent in 2016 (slower than the 3.6 percent forecasted in the September Interim Outlook), provided there is smoothening of the slowdown in China and stronger investment in advanced economies.
    • In contrast to 2011 and 2012 where EMEs were propelling global growth, lacklustre EME growth, including recessions in Brazil and Russia and a slowdown in China have negatively impacted global output and trade growth in 2015.
    • Global trade growth has slowed and is precariously close to levels usually associated with a global recession. Noting the link between trade and economic growth, the OECD pointed out that softening Chinese demand for imports is responsible in part not just for the deceleration of global trade but has negatively affected growth in economies which are linked to the Chinese economy. In its report, the OECD noted that “a more significant slowdown in Chinese domestic demand could hit financial market confidence and the growth prospects of many economies, including the advanced economies”.
    • Growth in the Chinese economy is projected to slow to 6.8 percent in 2015 (up slightly from 6.7 percent in the September forecast), 6.5 percent in 2016 and 6.2 percent in 2017 as the Chinese economy rebalances towards consumption and services activity.
    • Advanced economies remain resilient so far. The growth forecast for the United States economy is 2.4 percent in 2015, 2.5 percent in 2016 and 2.4 percent in 2017. Despite steady recovery in output and in employment, workers pay is still subdued. The OECD has expressed its belief that the time is ripe for the Federal Reserve to raise interest rates. This would be the first interest hike by the US central bank since the recession began.
    • Although recovery in the Eurozone is expected to strengthen, growth projections were downgraded from the September Interim Outlook. Eurozone countries are now expected to grow by 1.8 percent in 2016 and 1.9 percent in 2017 thanks to lower oil prices, accommodative monetary policy and an easing of budget tightening.
    • The refugee surge to the EU is expected to promote labour force growth and help offset the effect of an ageing population but this will depend on several factors, including the skill set of the refugees and current labour market conditions.
    • Unemployment in OECD countries is expected to fall but there will still be 39 million people out of work in OECD countries, six million more before the crisis started.
    • Trade and investment protectionism, inequality and productivity are problems which must be countered in order for growth to be achieved. There is also need for accelerating structural reforms.
    • A well-designed climate change policies can bring an improvement in short term outlook.
    • The OECD will release a policy note looking at the labour market and fiscal impact of the European refugee surge in advance of the G20 summit in Antalya.

    The full report and presentations on the OECD Economic Outlook 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. You can read more of her commentaries and follow her on Twitter @LicyLaw.

  • Trans-Pacific Partnership Agreement Text Finally Online!

    Alicia Nicholls

    At long last, the full text of the Trans-Pacific Partnership Agreement has finally been revealed. The TPP creates a free trade area encompassing 12 Pacific-rim countries. It has been mired in controversy due to the secrecy of the negotiations and concerns by civil society groups about its intellectual property and investment provisions, as well as their potential impact on the environment, labour, access to medicines etc. In spite of this, several countries, including Indonesia, the Philippines and Colombia have expressed interest in acceding to the TPP. The agreement includes rules on new and emerging trade issues like e-commerce, the environment, telecommunications, financial services, investment, government procurement, state-owned enterprises,small and medium sized enterprises, and competition law.

    A full month after the agreement’s completion on October 5th, the full text of the Agreement may now be accessed on the official website of the US Trade Representative.

    For more in this TPP Article series, click here.

  • Is ALBA a threat to CARICOM integration?

    Alicia Nicholls

    CARICOM countries could soon make up the majority of member states in the Bolivarian Alliance for the Peoples of Our America (ALBA). At the bloc’s 11th Summit last month in Caracas, both Suriname and St. Lucia  formally expressed their intention to become members of the eight-member group. They would join four other CARICOM countries which are already ALBA member states: Antigua & Barbuda, Dominica, St. Vincent & the Grenadines and more recently, Haiti.

    The wave of interest in ALBA, a regional bloc which like CARICOM envisions deep integration between its members, comes against a backdrop of stagnation and crisis in the CARICOM integration process.  While ALBA leaders at their 11th Summit agreed to move full speed ahead to deepen their integration with the creation of a single monetary union – ECOALBA, CARICOM Heads of Governments caught most people by surprise last year when they inexplicably put the CARICOM Single Market and Economy (CSME) on ‘pause’ during their retreat in Guyana. It was a decision for which Prime Minister of St. Vincent and the Grenadines, Dr. Ralph Gonsalves recently expressed regret. In a candid letter sent to the Secretary General of CARICOM which effused both lament and frustration at the current ‘standstill’ in CARICOM, Dr. Ralph Gonsalves made mention of the augmented interest by CARICOM countries in courting ALBA. He predicted that more CARICOM countries were likely to follow suit and rhetorically asked what would be the implications of this for CARICOM.

    ALBA is one of the most well-known South-South trade initiatives in the Western Hemisphere, not just because it was the brain child of the outspoken and no-nonsense President of Venezuela, Mr. Hugo Chavez, but because it potentially represents a more equitable alternative to the traditional neoliberal model of regionalism. It was launched by Venezuela and Cuba in 2004 originally as the Bolivarian Alternative for the Americas, and as an alternative to the now moribund Free Trade Area of the Americas which had been pushed by the United States. Drawing inspiration from the political thought of freedom fighters Jose Marti and Simon Bolivar, ALBA’s stated aim is to be a political, economic and social alliance which seeks to protect the independence, sovereignty, self-determination and identity of its Member States, and to protect the interests of the peoples of the South from political and economic domination.

    If the question of ALBA’s threat to the CARICOM integration process is considered purely on the compatibility of ALBA CARICOM countries’ obligations, the flexibility which ALBA gives its members in terms of the initiatives which they can choose to be a part of means that ALBA CARICOM countries are free to refrain from initiatives which could conflict with their CARICOM and OECS obligations.  In the declaration of accession signed by St Vincent and the Grenadines for example, the Gonsalves Government made clear that as a regional movement ALBA does not alter but complements its obligations in other regional movements such as the OECS and CARICOM.  Thus, St Vincent and the Grenadines, like the other OECS members of ALBA, has not introduced the new regional trading currency – the sucre in light of its membership in the OECS’ monetary union.

    A more immediate domain for conflict between ALBA and CARICOM obligations appears to be in the area of foreign policy. Foreign policy coordination is one of the stated objectives of CARICOM per the Revised Treaty of Chaguaramas and one of the pillars of functional cooperation.  While ALBA Members are given flexibility in foreign policy, ALBA as a group has been outspoken on several current conflicts, including throwing support in a recent declaration solidly behind Argentina in the recently escalating Falkland Islands dispute between that country and the United Kingdom.  The decision was made to join several other Latin American countries, including Argentina, to prevent Falkland-flagged ships from docking at their ports.  Although the ALBA CARICOM countries have not all come out and said whether their individual stance was in consonance with that of ALBA’s, one would not be unreasonable by taking their silence as agreement with the ALBA position. This position however is diametrically opposed to that taken by the non-ALBA members of CARICOM which have supported the Falkland Islands’ right to self-determination, that is, their right to remain British. Dr. Gonsalves’ stance on the issue caused some controversy in his country. However, on a larger scale, such divergence in policy position could be evidence of the potential threat of further fragmentation in the region’s foreign policy coherence.

    Politics aside, there is no doubt that the main attraction of ALBA to those CARICOM countries which have acceded so far  is the developmental support provided by its founding countries Venezuela and Cuba. Havana has long been a development partner of many countries in the region. Through bilateral cooperation agreements signed between the Cuban government and the governments of the region, the people of the wider Caribbean have benefited from free eye care in Cuban hospitals under Operation Miracle, scholarships to study medicine at Cuban universities and free health care by Cuban doctors.  Haiti has also benefited from food and literacy programmes.

    Under the Chavez administration, Venezuela has also taken a more active developmental role in the region. Since the establishment of the PetroCaribe Initiative in 2005, some 17 Caribbean countries, most of which are non-ALBA members, have benefitted from this arrangement which allows them to purchase oil on preferential terms of payment. Only part of the cost is paid up front and part can also be paid through the provision of agricultural goods. The remainder is repaid over a 25 year period at a 1% interest rate. The PetroCaribe deal has not been immune to criticism, and both Barbados and Trinidad & Tobago have not joined. Though such an arrangement helps in the short term to conserve much needed foreign exchange, it means that those countries which take oil on these terms are indebted to Venezuela in the longer term. Moreover, while PetroCaribe aims to promote energy security through the provision of “cheap” oil, Venezuelan fuel exports under the Agreement have decreased over time due to less available supply. Another criticism raised is that the ‘cheap oil’ provided under PetroCaribe increases the region’s dependence on the importation of fossil fuels. This latter argument is less persuasive given the increasing interest shown by CARICOM countries in renewable energy generation, through for instance geothermal, solar and wind energy.

    The financial support offered by ALBA is  highly attractive to debt-ridden CARICOM countries faced with an uncertain global economic and financial climate. Loans are given at favourable terms and without most of the usual conditionalities insisted on by traditional donors. Through its loan funds, ALBA has provided funding for projects, including infrastructure, housing and agriculture projects in Dominica for example. St Vincent and the Grenadines also received a loan from the ALBA Bank for the construction of a new international airport.

    The availability of credit under ALBA’s several funds can be contrasted with the limited capitalization of the CARICOM Development Fund. The CDF is provided for under Article 158 of the Revised Treaty of Chaguaramas as a fund to provide financial and technical assistance to disadvantaged countries, regions and sections within the grouping. The limited capitalization of the CDF, plus problems with the Petroleum Facility and the perceived lack of sensibility to the OECS countries’ unique vulnerabilities, were some of the many shortfalls of CARICOM about which Dr. Gonsalves complained in his previously mentioned letter. Frustrations like these over ill-functioning regional aid mechanisms plus the more readily available economic aid under ALBA, could lead to more CARICOM countries turning their attention to ALBA.

    One area in which CARICOM arguably maintains an upper-hand over ALBA is in trade. With a population of 70 million people, ALBA represents a larger market for regional goods than does CARICOM. That being said though, the export capabilities of the ALBA CARICOM remain too weak to effectively take advantage of this.  It is true that over the period 1999-2008, it is reported that average yearly trade between Venezuela and Antigua & Barbuda was USD 6.5 million, between Venezuela and Dominica, USD 179 million and between Venezuela and St. Vincent and the Grenadines, 4.5 million dollars. However, given that petroleum trade accounts for most bilateral trade between Venezuela and ALBA CARICOM countries, the balance of trade is skewed in Venezuela’s favour.  While trade asymmetries do exist within CARICOM as well, the regime created by the Revised Treaty of Chaguaramas envisions the freedom of movement of goods, services, people (skilled) and capital within the Community, the right of Community nationals to establish businesses in other territories, as well as a competition commission which is charged with ensuring the rules of the market are respected.  ALBA has not as yet reached this level of integration. That being said, however, the large gulf between what the Revised Treaty provides for and what operates in practice in CARICOM has led to frustration that the expected benefits are not being seen.  Moreover, ALBA does intend to become an economic union, something which continues to elude CARICOM.

    Although there is an undisputed role for ALBA as a development aid and trade partner for our countries, their main integration focus should be on deepening CARICOM integration. CARICOM is more than a trade group. It was founded on the vision of our regional founding fathers who believed that strength comes not through parochialism but through the political, economic and social unification of a people already united through a common history and a shared culture and values. Regardless of its many shortcomings, CARICOM, its organs and associated bodies, have played a tremendous role in the region for the past nearly forty years and can play an even greater role once a serious attempt is made at reform by our Heads of Government.

    Moreover, although Venezuela is a useful ally for countries in the region by virtue of its stronger bargaining power in the international community, CARICOM’s interests as small states and those of Latin American countries, including Venezuela’s are not always complementary as seen in the Banana Wars in the WTO. It should also not be forgotten that Venezuela continues to have border disputes with two CARICOM States (Guyana and Dominica) which have still not been resolved and for which Venezuela has not changed its position.  A further caveat to bear in mind is that given the strong ideological divide in Venezuelan politics, there is no guarantee that whichever president eventually succeeds President Chavez would be leftist in political orientation or that he or she would be as sympathetic as his or her predecessor to the region’s concerns, or be committed to continuing ALBA and its component programs. Therefore, there is some concern about ALBA’s survivability in a post-Chavez era.

    The real threat to CARICOM is not ALBA though, but CARICOM itself.  Impatience with the slow process of integration and its associated benefits at the CARICOM level has had as its natural corollary a desire to explore more seemingly attractive alternatives. It is not surprising therefore that the poorer countries in the region, and some of the larger countries like Suriname as well, have set their compass to ALBA for the superior economic security it provides and its seemingly better alignment with their interests.  Unless our Heads of Government act seriously on their commitment made at the last inter-sessional meeting to formulate a plan of action designed to reform CARICOM to make it more effective, there could be a day when all of our countries eventually turn their backs completely on CARICOM in favour of other blocs which they believe have both the ability and will to better cater to their peoples’ interests and needs. That would be a sad day.

    Alicia Nicholls is a trade policy specialist and law student at the University of the West Indies – Cave Hill. You can contact her here or follow her on Twitter at @LicyLaw.

  • Embracing ‘Mother India’: Some thoughts on prospects for enhanced India and Trinidad & Tobago trade

    Alicia Nicholls

    I was quite delighted when I read in the news last week that the Prime Minister of Trinidad & Tobago, the Hon Kamla Persad-Bissessar, is currently on a ten day official mission to India at the invitation of Indian Prime Minister, the Hon Manmohan Singh. Though I am not Trinibagonian or Indian for that matter, the news piqued my interest, particularly because I am a firm believer in south-south trade and development.  Two weeks ago, I wrote about the prospects of enhancing Brazil-CARICOM trade. This week, the state visit by Prime Minister Persad-Bissessar serves as a good backdrop against which to consider the prospects for enhanced Trinidad & Tobago-India trade.

    India-Trinidad & Tobago connection

    Trinidad & Tobago proudly calls itself the land of steelpan, calypso and chutney. Successive waves of European colonialism, indenture-ship and later waves of migration have made the twin island republic one of the most multicultural societies in the Commonwealth Caribbean.

    Trinidad & Tobago and India share more than just a deep passion for cricket. Though separated by many thousands of kilometers of land and sea, they are united by deep historic and cultural bonds rooted in the colonial experience. Indo-Trinibagonians are estimated to comprise 42% of that country’s population. Take a walk down the streets of Port of Spain on an average day and you can see restaurants and street vendors selling Indian-inspired local delicacies like roti and buss-up-shut. The uptempo rhythm of Chutney music shares the airwaves with soca and calypso and national holidays like Indian Arrival Day, Diwali and Eid-ul-Fitr are celebrated with reverence.

    Prime Minister Kamla Persad-Bissessar, whose ancestral village is in Bihar in India, is the first woman and the second person of Indian descent to ascend to the reins of Government in Trinidad & Tobago. She is also the first woman of the wider Indian diaspora to become a Head of Government.  Accompanied on the mission by a high-level ministerial and business delegation which also includes cricketing legend, Brian Lara, Prime Minister Persad-Bissessar is the chief guest at the 10th Pravasi Bhartiya Divas (PBD) ‘Global India-Inclusive Growth’ in Jaipur and will be conferred the coveted Pravasi Bharatiya Samman Award.  The PBD is a prestigious annual event which unites distinguished persons of Indian origin across the world. The event is part of India’s wider efforts to court and harness the potential of its vast diaspora for socio-economic development in the homeland and Trinidad & Tobago has seized the opportunity with open arms.

    Trinidad & Tobago-India Bilateral Trade

    Trinidad & Tobago and India have long shared strong diplomatic ties, which have been cemented through formal and informal cultural exchanges over the years, including the establishment of the Mahatma Gandhi Institute for Cultural Cooperation in Port of Spain and the provision of Indian Technical and Economic Cooperation (ITEC) programme scholarships to  Trinibagonian students each year.

    Trinidad & Tobago and India already do a fair and growing amount of bilateral trade.  According to a recent study published by the Export-Import Bank of India, Trinidad & Tobago is the leading country for Indian imports from the region, accounting for 79% in 2009-10 and is the second largest importer of Indian goods from the region (after the Bahamas).  The report reveals that manufactures of metals account for nearly half of Trinidad & Tobago’s imports from India followed by petroleum products, primary & semi-finished iron & steel, pharmaceutical products and plastic & linoleum products. Trinidad & Tobago is also the largest destination for Indian investment in the region, receiving 67.5% of these flows. The main sectors  for Indian investment in Trinidad & Tobago include finance, iron and steel and metal and food processing. Several major Indian multinational firms like Arcelor Mittal and the New India Assurance Co already have a presence in that country. India and Trinidad & Tobago also have a double taxation treaty.

    Embracing ‘Mother India’

    The move by Prime Minister Persad-Bissessar to capitalize on India’s overtures towards engaging its diaspora for homeland development is a smart and strategic one. Despite its current economic woes, India remains one of the most robust and dynamic economies in the world.  Currently the world’s tenth largest economy, India is predicted by the economic think tank the Centre for Economics and Business Research (CEBR) to become the world’s  fifth largest economy by 2020.   Besides the gains which Trinidad & Tobago-India trade present for south-south trade, Indian expertise and investment could help in Trinidad & Tobago’s export diversification, while greater trade links with India could help reduce the vulnerability associated with an over-reliance on too few export markets.

    Moreover, the move to embrace ‘Mother India’ is one which has global precedent. The Pacific island nation of Mauritius, which bears several similarities with Trinidad & Tobago including a large Indian diaspora, has strategically deepened its economic and cultural links with the sub-continent.  Mauritius is not only among the top direct investors in India, but the island is currently one of the preferred destinations for Indian outward FDI and serves a gateway for Indian investment in Africa.

    Though Indian investment in foreign countries has slowed, closer economic ties between India and Trinidad & Tobago could make it easier for Indian businesses to invest in and do business in Trinidad & Tobago and vice-versa.  The Export-Import Bank of India study cited several areas of potential sectors of Indian investment in Trinidad & Tobago, chiefly energy, fish processing, film and ICTs.  Besides its low energy costs, well-skilled workforce and favourable investment climate and incentives package, the twin island republic’s geographic location  has also been touted by its Prime Minister as the perfect base for Indian investment in the Latin America and Caribbean (LAC) region and for Ayurveda and wellness centres specialising in traditional Indian medicine and healing.

    In terms of Trinidad & Tobago-India services trade, there is much potential as well given the skills and know-how which Indian professionals could continue to bring to Trinidad & Tobago, particularly in the areas of engineering, traditional Indian medicine and information technology. This expertise sharing will not be one-way. As Prime Minister Persad- Bissessar  acknowledged, Trinidad & Tobago can provide to India over a hundred years of technical expertise in oil and natural gas production. Indeed, Trinidad & Tobago is already sharing this expertise with other developing countries, including Ghana.

    There is also much scope for expanded cultural industries trade and tourism given the strong cultural affinity many in the Indo-Trinibagonian community feel with ‘Mother India’ and the popularity of Bollywood music and films in Trinidad & Tobago. Trinidad & Tobago has also signaled an intention to promote steelpan music in India. Despite the long distance and prohibitive costs of air travel, Indo-Trinidadians seeking to trace their Indian roots and to learn about their ancestral home could be a good target market for Indian tourism officials. In regards to Indian tourism in Trinidad & Tobago, the Trinidad & Tobago government has already waived visa restrictions on Indians visiting that country for tourism and business purposes within a 90 year period.

    Indeed, the prospects for deepening Trinidad & Tobago and Indian trade are bright and exciting. According to the joint statement released by India and Trinidad & Tobago, bilateral agreements have already been signed on cooperation in the areas of air services, culture, technical education and traditional Indian medicine. Prime Minister Persad-Bissessar has also offered Trinidad & Tobago as a venue for hosting PBDs in the Caribbean. I think it would be useful for Trinidad & Tobago and India to encourage cooperation between their respective investment promotion agencies in order to better inform potential investors of investment opportunities in their respective countries and to facilitate the flow of investments between the two countries.  Just two more days are left in the official visit. I look forward to what other prospects they bring.

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