It is a pleasure for me to be here at MSU, It is my first visit to
Lansing and this University and I want to thank the Caribbean Students Association for the
invitation, for working so hard to ensure smooth arrangements for this visit and for
making me feel so welcome here. I want to express appreciation as well to the Centre for
Latin American and Caribbean Studies its Director, Assistant Director and other
staff for its part in supporting this visit and for hosting this seminar this afternoon. I
am looking forward to the discussion we will have this afternoon.
When some weeks ago, we started talking with CSA, and through the CSA,
the Centre for Latin American and Caribbean Studies, about the topic of this
afternoons discussion, the issue of the Caribbeans CARICOM in
particular participation in the negotiations of the Free Trade Area of the Americas
In considering and accepting this suggestion, however, I felt it would be
important to broaden the discussion to include not only the FTAA negotiations, but also
the other trade and economic cooperation negotiations in which CARICOM is simultaneously
engaged. For, in addition to the FTAA process, CARICOM is also involved in negotiations
with Europe on the nature of the trade and economic cooperation relationship, which will
replace the Lomé IV accord when it expires.
CARICOM countries are also, at this time
coming to terms with the implications of membership in the World Trade Organisation. These
are, as will other trade and cooperation arrangements and issues, engaging the attention
of CARICOM at this time. These include current negotiations of a CARICOM-Dominican
Republic Free Trade Agreement, emerging discussions on the nature and scope of a
CARICOM-Central America relationship, the suggestions of CARICOM-Mercosur discussions and
existing arrangements of different kinds between CARICOM and Venezuela, CARICOM and
Mexico, CARICOM and Colombia.
In the context of this afternoons discussion, however, I will be
focusing on the major multi-lateral negotiations which are currently taking place
The FTAA, the past Lomé IV and the WTO processes. These three processes together,
will transform and redefine CARICOMs trade relations, not only in this hemisphere,
but internationally, with profound implications for economic, social and political
development in our countries.
The fact that these discussions are taking place, all at the same time,
and are engaging the participation at the CARICOM level, of the same set of
technical/professionals and negotiators, implies that at a basic operational level, what
is happening in the FTAA process will influence what is happening in the post-Lomé IV
process and vice versa. More fundamentally, however, the existence of the WTO and the
process of rules interpretation within this key institution in the international trading
system bring a very specific perspective to every other trade negotiation. That is,
evolving trade agreements between and among members of the WTO, must be WTO compatible.
The principle of WTO compatibility, therefore, ties the various negotiation processes
together inextricably and the WTO rules have become the least common denominator of the
trade arrangements which are being negotiated across the globe.
This is the context in which I am placing this afternoons
discussion. This is the context which explains the title of this afternoons
presentation: The Caribbean Community Preparing for and Adjusting to the New
Rules of the International Trading System.
I would like to begin by giving some background on the evolution of
From Free Trade Area to CARICOM
As some of you may know, CARICOM has its origins in the Caribbean Free
Trade Association, and, before that, the West Indies Federation.
The Caribbean Free Trade Association (CARIFTA) was established on 1 May
1968 subsequent to the demise of the Federation in 1962. The impetus for Regionalism, in
terms of economic integration and functional cooperation, lay in the recognition that as
the Region moved from its condition of political dependence, its ability to achieve
autonomous broadly-based development was directly related to its capacity to make full use
of its own resources, whether they were raw materials, agricultural potential,
technological innovation and adaptation, or national savings potential. CARIFTA emerged as
a vehicle for the transition from dependence to broad-based development.
CARIFTA was largely an exception as a Free Trade Area, as it
immediately allowed for some 90% of intra-regional trade to be freed of import duties and
quantitative restrictions. Whereas most integration groups had a gradual phasing-in of
free trade. Of course under CARIFTA, the removal of import duties was subject to the
"rules of origin" which included the requirement that a certain percentage of
value be added locally to the product.
CARIFTA brought considerable growth in intra-regional trade. There was
a disproportionate increase in exports by the MDCs in relation to that of the LDCs, but
this was not unexpected during the formative years of the Association. The five-year
CARIFTA period also saw the continued development of regional institutions, which
engendered functional cooperation. Apart from the University of the West Indies, the
Meteorological Service and the West Indies Shipping Council which existed prior to
CARIFTA, the Council of Legal Education, the Caribbean Development Bank and the Caribbean
Examination Council, among others, were established.
Despite the significant ground covered by way of economic and
functional cooperation during these early years, the time quickly came when the movement
stopped to take a look at itself. The stage had been set to advance the integration
process, and it was critical that specific challenges be met, in such areas as the Common
External Tariff, the Harmonisation of Fiscal Incentives and a policy on integration of
industries. Commitments in all these areas were made in the CARIFTA Agreement. However,
even though there was agreement on what was ultimately desirable, there were differing
opinions on various political issues and the institutional framework for the integration
In 1972, there was a wind of change through the Region and the
integration movement took on new life. The proposal to convert CARIFTA to the Caribbean
Common Market and to strengthen the areas of functional cooperation, implied a completely
new institutional framework and thus the idea of a Caribbean Community was born. The
Treaty of Chaguaramas converting CARIFTA to the Caribbean Community and Common Market came
into effect from 1 May 1973.
The CARICOM Agreement took functional cooperation into new areas:
health, and other human/social development areas; agriculture, tourism and other
productive sector areas and telecommunications were areas in which functional cooperation
was expressly provided for. The move to CARICOM Community and the Common Market also
raised the stakes in the integration process to include integration of the economies and
the coordination of foreign policies of the independent member states of the Community.
While the 1970s and 1980s saw significant strengthening of
the integration movement, progress was neither steady nor all encompassing. The
1980s in particular were a difficult decade, during which several countries of the
Region experienced tremendous economic shocks and social dislocations which focused
national attention on national problems. By the middle of the decade, regional
integration, sometimes by default, was moved to the back burner.
This did not last very long. By the end of the 1980s the Region
was once again taking stock of the integration process and charting a way forward.
CARICOM SINGLE MARKET and ECONOMY
In 1989, CARICOM Heads of Government took a decision to move the
Community towards a Single Market and Economy (CSM&E). The CSM&E was conceived as
an instrument to facilitate economic development of the Member States in an increasingly
open and competitive global environment. The essential characteristics of the CSM&E
are the free (unrestricted) movement of factors of production goods, services,
capital and labour along with the supporting measures as appropriate. The CSM&E is
intended to provide the framework for efficient and competitive production of goods and
services for the regional and international market.
At the same time, Heads of Government also established an independent West
Indian Commission to examine the regional integration process evaluate advances made
and chart a way forward. The Report of the West Indian Commission - " Time for Action
" was completed in 1992 after region-wide consultations at all levels of the
Community. It is a comprehensive study of the problems and challenges facing the Caribbean
region and presents abroad set of recommendations across many fields. In the words of Sir
Shridath, Chair of the West Indian Commission, it has been widely used as "something
of a regional manifesto for the nineties and beyond".
One major recommendation of "Time for Action" was the
restructuring and streamlining of the institutional framework of the community. The new
organisational structure and the new thrust towards the Single Market and Economy has
necessitated a revision of the Treaty of Chaguaramas. This revision is scheduled to be
completed by the end of this year.
A second major recommendation of " Time for Action" was the
broadening of the integration process to include the wider Caribbean. This is in the
context of the expansion of CARICOM to include Suriname and Haiti and the establishment of
the Association of Caribbean States.
I have spent some time on the background to CARICOM , because I believe
that background is important to understanding CARICOMs strategy for inserting itself
into the negotiations of the FTAA, Lomé IV and the WTO process.
The FTAA had as its precursors the CBI and NAFTA.
CARIBBEAN BASIN INITIATIVE
The CBI, launched in 1983 through the US Government enactment of the
Caribbean Basin Economic Recovery Act, was described as a "Bill to promote economic
revitalization and facilitate expansion of economic opportunities in the Caribbean Basin
region". Duty free treatment provided under this act applied to an article which was
imported directly from a beneficiary country into the customs territory of the United
States and subject to specific rules of origin and excluding certain categories of goods
such as textile and apparel , footwear, handbags, luggage, flat goods, work gloves,
leather wearing apparel or tuna, petroleum, watches or watch parts. The launching of the
CBI, marked a definitive shift in the paradigm guiding the US development policy in the
Caribbean, signalling a change in US foreign policy stance from direct aid towards
"trade not aid".
NORTH AMERICA FREE TRADE AREA
NAFTA which was launched in January 1993, established the worlds
largest market, and was seen as a building block in the establishment of a hemispheric
free trade area.
NAFTA gave to Mexico access to the US market on terms more favourable
than those available for CBI exporters. Import duties were immediately removed on 80% of
Mexican apparel exports to the US. The remaining 20% benefited from an accelerated
implementation of free trade with annual duty cuts and liberalisation set to be completed
by year 2000. NAFTA also phased out duties on products for which CBI countries already
enjoy duty free treatment.
As a result Mexico gained parity with Caribbean countries for CBI
covered products, but for products excluded from the CBI, Mexico gained access to
the US market exceeding that granted to the Caribbean. This combined with Mexicos
access to cheap energy, lower transport costs, greater economies of scale and low wage
rates, gave Mexican exporters a distinct advantage. Additionally NAFTA granted Mexico a
valuable exception to tough "rule of origin" requirements to allow for
preferential entry into the US market of textile and apparel products . CBI textile and
apparel exporters and their customers enjoy no such flexibility.
As a consequence of these concessions, NAFTA , brought a diversion of
trade from CBI countries to Mexico.
FREE TRADE AREA OF THE AMERICAS
At the Summit of the Americas, held in Miami in December 1994, the
leaders of 34 Western Hemispheric countries agreed on the formation of a Free Trade Area
of the Americas by 2005, with concrete results to be made in completing negotiations
towards this goal by the end of the century.
The Miami summit laid out a two track work plan: the first (consistent
with "open regionalism") promotes building upon existing regional and
subregional free trade agreements. At present there are 26 such agreements in the western
hemisphere of which NAFTA is a major grouping. The second track directed the countries to
work towards free trade by progressively dismantling tariff and non-tariff barriers.
Overseeing the two-track approach, is a canopy principle that calls for the full and rapid
implementation of global trading arrangements under the WTO. The FTAA is intended to
progressively eliminate barriers to trade and investment.
The FTAA has at its helm the leaders of the 34 countries who agreed to
its formation at the Summit of the Americas, The Vice -Ministers (Ministers of Trade) form
the next level of consultations and then there are the twelve Working Groups who actually
participate in the various negotiations.
Analytical support is provided to these groups by a tripartite
committee comprising the IDB, OAS and ECLAC.
The first meeting of Trade Ministers held in Denver in June 1995
adopted a work programme and set up seven Working Groups with each being coordinated by a
particular country. At the Second Ministerial Meeting held in Cartegena in 1996, four
working groups were added (8-11 below). A Twelfth Working Group on Dispute Settlement was
set up at the Third Ministerial Meeting which took place in Belo Horizonte, Brazil on
13-15 May 1998. The Working Groups and their coordinating countries are as follows:
- Market Access (El Salvador)
- Customs Procedures and Rules of Origin (Bolivia)
- Investment (Costa Rica)
- Standards and Technical Barriers to Trade (Canada)
- Sanitary and Phytosanitary Measures (Mexico)
- Subsidies, Anti-dumping and Countervailing Duties (Argentina)
- Smaller Economies (Jamaica)
- Government Procurement (United States)
- Intellectual Property Rights (Honduras)
- Services (Chile)
- Competition Policy (Peru)
- Dispute Settlement (Uruguay)
The overriding difficulty faced by CARICOM countries in the FTAA
process is the scope of the negotiations which are to be concluded in a relatively short
time. The complexity of the negotiating structure and Human Resource constraints limit the
participation of all Member States in all of the Working Groups. As a grouping Member
States of CARICOM have undertaken a regional approach to the FTAA process. Therefore, even
though participation in the various Working Groups is on a country basis, participation in
the groups has been spread among Member States to ensure a presence, especially in the
more crucial groups.
Working Group on Smaller Economies
Through pressure mainly from CARICOM countries, a Working Group on
Smaller Economies was established, which is chaired by Jamaica. There is as yet no
commitment to accept the recommendations although other Working Groups have been asked to
take into account in their deliberations, the findings and recommendations of the Working
Group on Smaller Economies. The small states issue is a cross-cutting one and does not
stand alone in the overall context. The problem faced by the smaller economies, primarily
CARICOM countries, is the underlying assumption of the larger countries, especially the
United States, that the smaller economies want to maintain protective barriers. In fact,
what smaller economies are seeking is an acceptance of the principle that dismantling of
barriers will have a relatively heavier impact on the smaller economies, and that this
fact must be taken into account in establishing a schedule for the dismantling of
barriers. It may even be said that the complexity issue and the small states issue are two
sides of the same coin.
Responding to opportunities in the FTAA would depend very much on
Caribbean preparations, which are less advanced than some Latin American countries.
Preparedness is a critical issue for the Caribbean. It is needed over a wide front. The
FTAA is intended to be like NAFTA, a WTO plus arrangement, and it is likely to cover more
fully than the WTO, areas like investment, services, including financial services, and
intellectual property rights. All these requirements would put great pressure on the
administration in small states.
The (ACP) African Caribbean and Pacific states and the EEC ( European
Economic Community ) signed their first Agreement Lome I in 1975, twenty-four years and
three Agreements later , the Lome convention is coming to an end.
Whereas the Lomé Convention was concerned primarily with technical
cooperation and aid flows from Europe to the ACP, the EUs desire to use a future
Convention in a much more determined manner to influence political, social and economic
development in ACP states. This reflects the view that stable and democratic political
environments are a precondition for higher living standards and for accessing the evolving
globalised trading system. In short, the European premises for a new ACP-EU agreement are
wholly different from those that underpinned Lomé 1973\5 to 2000.
The new ACP-EU partnership contemplated by the European
Commission directives reduces the traditionally accepted role of trade in development.
Less than one third of the directives are concerned with trade and development in Lomé
terms. The partnership is more of a political regime under which ACP countries
(but not the EU or its member states) will bind themselves contractually to the observance
of certain standards of social and political conduct, including structures of governance,
monitored and evaluated by the EU or EU designated agencies. And, although it is
not presented in this way, subject to adhering to these requirements, ACP countries will
have EU assistance (largely in the area of policy development) and will be able to
negotiate on a regional basis trade and economic cooperation agreements
(primarily geared to assisting private sector development and regional integration) and
ultimately to conclude (again) on a regional basis, Free Trade Agreements with the EU on
terms of `reciprocity acceptable to the WTO.
CARICOM countries take some exception with this approach of the EU, and
are approaching the negotiating table with its ACP partners with strong support for
keeping the negotiations as one process rather than "regionalising" it into
three processes. There is also strong support for finding a more appropriate approach to
dealing with issues of governance.
Small Island Developing Economies
A very significant feature of the EU directives is the acknowledgement
of the category of small island developing states. The WTO Agreement contains no similar
acknowledgement of any category of states within the group of developing Member Countries
other than the LLDC group though there is limited recognition of other low income
countries, including Guyana, with GNP per capital below $1,000 per annum in the Agreement
on Subsidies and Countervailing Measures. And, of course, there remain difficulties in the
FTAA process with gaining support for dealing specifically with needs of the smaller
CARICOM Participation in the WTO
CARICOM countries have been among the stronger supporters of the
establishment of the WTO as the arbiter of the agreed rules of the international trading
system in the hope and belief that such an institution would be important in inserting
fairness in the system.
The CARICOM countries will need to keep abreast to future developments
in the WTO and help to shape them, in order to ensure that those developments support the
economic and social objectives of their region. Far-reaching commitments have been
undertaken by all WTO members, which will effect the prospects of individual CARICOM
Member States (as well as on cooperation within CARICOM). The obligation to provide
notifications, and the certainty that further negotiations affecting CARICOM interests
will take place almost continuously in Geneva in the coming years, suggest an ongoing
engagement of CARICOM countries with the WTO. The WTO Secretariat itself has suggested
that "Participation in the work of the WTO in Geneva will become a continuing
exercise for all members, including the developing countries. Follow-up in capitals will
require a considerable strengthening of some Geneva-based delegations of developing
countries, and continuous coordination between delegations and capitals, and among all
concerned authorities within each developing country member".
At present, only two CARIOCM countries, Jamaica and Trinidad and
Tobago, have permanent delegations to the WTO. For most, if not all, of the other CARICOM
countries, establishment of a mission in Geneva appears impracticable, both because of the
considerable expense involved and because, for any individual country, national officials
with the necessary qualifications would probably be better utilised in capitals. The
constraints of smallness again arises and the possibility of having some form of joint
regional representation in Geneva as the obvious solution has been put on the table for
CARICOM Member States support for the establishment and proper
functioning of the WTO, lay in the belief that, in an unequal world, an organisation
established on the basis of agreed rules, with a built-in process for disputes settlement,
should help to level the playing field. Our concern in the current trade dispute between
the US and the EU over the banana regime is therefore on several levels:
First, although Caribbean bananas account for less than 3% of the world
banana market , it accounts for more than 60% of the export earnings of the Windward
Islands . The immediate removal of the banana regime would destroy the economies of
several CARICOM member states.
Second, the US seems unwilling to have the WTO process work itself out
and, in fact, threatened/imposed severe trade sanctions on the EU in anticipation of a WTO
ruling in its favour. To the extent that this strategy is successful, it will weaken the
credibility of the WTO
CARICOMs Response Focused Attention Through The
Establishment of The Regional Negotiating Machinery
CARICOM Member States clearly are involved in a series of very
important negotiations which will determine the Regions place in the international
and hemispheric trading system. The capacity of Member States to serve and protect their
own interests in these processes is clearly constrained by the scale of resources
human and financial required to adequately participate as individual states. This
situation has led the community to adopt a strategic approach to enabling the community to
prepare for and undertake the negotiations. Through this approach, the Regional
Negotiating Machinery was established in 1997 as the negotiating arm of the Community in
four broad areas: Lomé/Europe, Western Hemisphere Trade and Economies including CBI/NAFTA
, FTAA, Summit of the Americas non-economic issues and global issues including WTO.
This machinery has allowed the Community to bring together a core of
seasoned negotiators and technical support to focus on these negotiations and to fashion
the strategies for developing and putting forward CARICOM positions . The RNM is based in
Barbados with offices in Jamaica, Guyana and London and with an agreed process for
consulting with Member States in forging consensus on issues as the negotiations proceed.
So far the process has been working.
CONCLUSION CARICOM Playing by the rules.
I have tried in this presentation to give an understanding of the
CARICOM integration process and , on this basis, to outline the issues faced by the
Region, as Member States, both as individual countries, and as part of the regional
grouping, seek to protect their interest in the evolving external trade negotiations.
One underlying thread tying together all processes, is the least common
denominator of WTO compatibility of the evolving agreements.
A second underlying issue is that of small size. Small size is not only
a determining factor in assessing the capacity of economies to absorb the effects of
adjustment to the removal of barriers to trade; small size is also key to determining the
capacity of small states to even effectively participate in the negotiating process.
CARICOM has assessed these difficulties and has fashioned strategies to
address them. The response, however, has not been positive with respect to getting
agreement on the need to deal with the special needs of small states. The strategy of
establishing the RNM has been more successful in addressing the difficulties posed by the
CARICOM has determined that the evolving rules of the international
trade system will be a critical factor in determining its capacity to participate in the
international trade system to its own advantage and has, therefore, determined that it
will participate in a structured way in the negotiation process which will lay down the
LIST OF REFERENCES
COMMONWEALTH CARIBBEAN REGIONAL SECRETARIAT, From CARIFTA to
PAYNE, Anthony, Politics of the Caribbean Community, 1961-1979: Regional Integration
Amongst New States
Grande Anse Declaration, July 1989
RNM College of Negotiators - Reports of Working and Consultative Groups and Committees,
FTAA Negotiations CARICOM Strategy and Positioning (Background Material)
Note from Chief Negotiator on Post-Lomé IV Negotiations (a) New Developments;
and (b) The Preparatory Process, February 1998
Understanding the Trade Provisions of the European Commissions Negotiating
Directive for a Successor Agreement to Lomé IV, March 1998
Outline of the Draft Regional Negotiating Strategy on Issues related to the Free Trade
Area of the Americas, January 1998