Trade and economic relations between the Caribbean Community (CARICOM) and Canada date back to the early 18th century when the British northern Atlantic colonies exchanged fish, lumber and other staples for West Indian rum, molasses and spices. Currently, trade and economic co-operation relations are covered under a number of instruments, namely, the 1979 Caricom-Canada Trade and Economic Co-operation Agreement and its Protocols, including the CARICOM-Canada 1998 Protocol on Rum;CARIBCAN Agreement which is a non-reciprocal preferential trade agreement that grants unilateral duty free access to eligible goods from beneficiary countries in the English-speaking Caribbean up to 2011; and Bilateral Investment Treaties with individual Member States, namely Barbados and Trinidad and Tobago.
In addition to CARIBCAN, relations with Canada and CARICOM Member States are also formalized by a number of Bilateral Investment Treaties with individual Member States, namely Barbados and Trinidad and Tobago. Canada is a significant source of Foreign Direct Investment (FDI) for CARICOM. Canadian direct investment in Caribbean economies increased significantly from US$28bn (stock) in 2000 to US$53bn in 2006, (the bulk of which is portfolio investment).
CARICOM is also increasing the FDI presence in the Canadian market, even though not in as dynamic a fashion as the Canadian private sector in the CARICOM market. CARICOM stock of capital in Canada has increased from US$531mn in 2000 to US$760mn in 2006. The Bahamas (US$136mn) and Barbados (US$471mn) have been the major regional investors in Canada over this period.
Canada also has MOUs with Jamaica, Trinidad and Tobago, Barbados and the OECS countries under which farm workers are allowed to work in Canada on a seasonal basis each year. This special facility is protected by an MFN exemption under GATS. In recent years, hospitality workers from Barbados and a few other CARICOM states have been recruited on a temporary basis to work in the hotel sector in Canada, as well as household assistants.
It is recognised, however, that current non-reciprocal preferential programmes such as CARIBCAN do not provide an adequate and secure foundation on which to anchor the Region’s future trade and economic relations with Canada and for bringing dynamism to CARICOM export performance vis-à-vis Canada.
It should be noted first that, CARIBCAN’s relative value to CARICOM has been reduced since it was first introduced in 1986 due to progressive market liberalization by Canada as a result of bilateral trade agreements and/or unilateral initiatives. Additionally, market liberalization undertaken in the context of the Doha Development Agenda (DDA) negotiations will erode whatever residual preferential margin exists under CARIBCAN for CARICOM merchandise exports.
In addition to the progressive erosion of the CARIBCAN preferences, the coverage of the arrangement is limited to trade in goods anddoes not extend to trade in services, which accounts for a growing proportion of CARICOM-Canada trade, in particular for Jamaica, The Bahamas and Barbados.
It should also be noted that CARIBCAN preferences are innately incompatible with WTO rules and therefore require a WTO waiver. Although access to these preferences has been extended under a new WTO waiver, the Region’s continued enjoyment of the non-reciprocal preferences under that waiver is not expected to extend beyond December 30, 2011.
Furthermore, the lessons discerned from the ongoing challenges in US-CARICOM trade relations regarding the extension and expansion of CBERA and CBTPA preferences also provide strong incentive for the Region to secure the existing preferences and preferential margins in a new reciprocal trade arrangement, which would be WTO compatible and would provide long term security and predictability for traders and investors.
Therefore, the erosion of preference to CARICOM products due to Canada’s progressive bilateral and unilateral liberalization with CARICOM’s competitors; the erosion of CARICOM’s preference due to progressive liberalization at the multilateral level; and the overall limited scope and benefit of current preference agreements between CARICOM and Canada, have all provided incentive to CARICOM to improve and mature its trade relationship with Canada, which continues to be the region’s 3rd most important market.
Towards an FTA
CARICOM and Canadian Heads of Government agreed during the Sixth Canada-CARICOM Summit in January 2001 in Jamaica to begin exploratory work on a Free Trade Agreement.
Since 2001, several exploratory discussions have been held to exchange information on the scope and content of the negotiations. However, preparatory work within the region intensified since CARICOM Heads of Government and the Canadian Prime Minister Steven Harper finally agreed to launch trade negotiations in August 2007. The intensification of preparatory work has culminated thus far in the conclusion of two meetings of the Technical Working Group on CARICOM Canada Negotiations, which are comprised of officials from Member States, the OECS and CARICOM Secretariats, and the CRNM. The first of these meetings was convened in June 2008, and the second, in November 2008. These meetings have been instrumental in providing recommendations of initial negotiating mandates which have been forwarded in the form of a Draft Negotiating Brief to the CARICOM Council for Trade and Economic Development (COTED) for consideration.
These recommendations suggest negotiating positions on a number of negotiation issues and generally reflect CARICOM’s objectives in an enhanced trade arrangement with Canada. These objectives are to_ (i) preserve, build on and broaden the scope of the current instruments of trade and economic co-operation; (ii) where possible, to deepen disciplines to improve market access for CARICOM exports of goods and services; (iii) to broaden the country coverage to include all CARICOM states; (iv) to stimulate increased flows of Canadian investment into the region; and, (v) to provide a comprehensive framework for development co-operation initiatives.
In accordance with a decision taken at the Twentieth Inter-Sessional Meeting of The Conference of Heads of Government of CARICOM held 12-13 March 2009, the Heads of Government approved the CARICOM Negotiating Brief to be used as the basis for the commencement of negotiations of the Agreement.
However, during the Twentieth Inter-Sessional Meeting, the Heads of Government also decided to “incorporate the Caribbean Regional Negotiating Machinery (CRNM) into the Caribbean Community (CARICOM) Secretariat as a Specialised Department recognizing and providing for the special nature of its role and functions. The Heads of Government further decided at the 30th Meeting of the Conference of Heads of Government of the Caribbean Community (CARICOM) held 2-4 July 2009 in Guyana that the Caribbean Regional Negotiating Machinery (CRNM) should be referred to as the Office of Trade Negotiations (OTN). In keeping with these institutional changes, a new Director General, Ambassador Gail Mathurin, was also appointed in July 2009.
The implementation of the decisions of the Heads regarding the entity responsible for the Community’s external trade negotiations resulted in delays in the scheduling of the formal commencement of the negotiations. Further delay was also attributable to difficulties experienced by both Sides in scheduling a meeting at the Ministerial level. A meeting of the Ministers was considered a necessary precursor to the formal commencement of the negotiation between the Parties, which would allow CARICOM and Canada to clarify their perspectives on a number of matters pertaining to the negotiations.
CARICOM Ministers of Trade and Minister of International Trade of Canada, The Honourable Stockwell Day finally met in Port of Spain, Trinidad and Tobago on Friday, September 11th, 2009. Final approval by the Parties on the scope of negotiations was also achieved during the September Ministerial. Some elements related to the Scope of the negotiations remained unresolved during the meeting. However, this did not impede agreement at the September Ministerial to formally commence negotiations on November 9, 2009. The conclusion of the Ministerial marked the conclusion of the exploratory phase of the discussions between CARICOM and Canada on trade negotiations.
Subsequently, CARICOM completed a number of tasks in preparation for the commencement of the first Round. These activities included the approval of the selection of the College of Negotiators by the COTED during its 28th Meeting in Barbados held on October 5-8, 2009. Meetings of the Technical Working Groups (TWGs) were also convened on October 19-23, 2009. At this early phase of the negotiations, the discussions did not pertain to the entire range of negotiating issues but were limited to Services, Investment and Market Access in goods and Agriculture.
The First Round
The first Round of the CARICOM-Canada Trade Negotiations commenced on November 10, 2009. The first Meeting of the College of Negotiators preceded the commencement of the negotiations and took place on November 9, 2009. This initial session of the College facilitated the planning of strategic approaches which were adopted during formal exchanges with Canada during the first Round. Amongst other things, the College sought to ensure that the proposals in each of the subject areas tabled during the course of the negotiations safeguarded the sustainable development interests of the CARICOM Member States.
Selected by the Director General of the Office of Trade Negotiations (OTN), subject to the approval of the CARICOM Council for Trade and Economic Development (COTED), the College is comprised of Leads and Alternate Leads who are regional individuals with expertise in the range of subjects under negotiation. Their role is to maintain technocratic and thematic synchronization throughout the negotiations with the aim of ensuring that the terms negotiated under each subject are complementary and are consistent with the overall negotiation mandate.
The OTN, led by the Director General, Ambassador Gail Mathurin, coordinated the meeting of the College and the technical negotiating sessions in each subject area, which were conducted simultaneously throughout the first Round which took place at the Grand Barbados Hotel, St. Michael, Barbados.
Conducted in an amicable atmosphere, the negotiations facilitated exchanges on the mandates, positions and approaches of the Parties regarding the issues on the agenda of that preliminary Round. These included the subjects of Market Access of agricultural and industrial goods; Services, Investment; Institutional Issues and Dispute Settlement.
Canada recognized that the provisions in the Agreement should reflect the differences in development between CARICOM and Canada, as well as the differences in development between the CARICOM Less Developed Countries (LDCs) and the CARICOM More Developed Countries (MDCs). The Canadian Side was also receptive to hearing proposals from CARICOM on the treatment of development in the negotiations.
The Second Round
The second Round of negotiations of a Trade and Development Agreement between CARICOM and Canada was held in Barbados on 29-31 March, 2010. With negotiations in the early stages, the Round provided an opportunity for both Sides to advance the discussions on scope and coverage of the negotiations, exchange information and seek clarification on their respective positions and perspectives on the issues under negotiation.
Thus far, the sides are exchanging more detailed information about their respective trading regimes. CARICOM has, for example, explained the intricacy and sensitivities of the unfolding internal regime of the single economic space termed the CARICOM Single Market and Economy (CSME). In like vein, Canada has sought to bring to the fore greater insight into Canada’s Federal system, highlighting in particular the differentiated characteristics of both Provincial and Federal jurisdictions with respect to the various areas of trade policy.
To date, CARICOM has signalled to the other side its intent to conclude an agreement that is predicated on specific fundamental objectives and principles. CARICOM wants to ensure that the Agreement has a development dimension that would include various measures of development assistance. The focus of the latter should assist the region in developing its capacity to produce and export, (ii) help develop its internal trade market, and (iii) facilitate a level of cooperation with Canada that would assist in circumventing trade challenges that currently impede its economic development.
It is expected that the commitments and provisions of the Agreement will reflect an accommodation of the differences in development between the Parties of the Agreement as well as the differentiated levels of development amongst CARICOM member states. Having regard to this principle of asymmetry, CARICOM has argued that the Agreement should reflect special and differential (S&D) treatment for CARICOM member states. Canada has been generally receptive to the principle of asymmetry and has acknowledged that S&D for CARICOM should also feature in the Agreement.
From the CARICOM perspective, it is further expected that the Agreement will lock in the market access for good exports that CARICOM already enjoys under the preferential trade regime of CARIBCAN. The WTO waiver for this preferential regime is set to expire in 2011. In addition, CARICOM is also seeking to obtain access to Canada’s services markets and to create a framework that will improve the attractiveness of CARICOM’s investment regime to Canadian investors. The Services Sector is for CARICOM a productive sector which holds tremendous opportunity for economic growth and development, particularly in the areas of cultural, entertainment, and professional services. For this reason, the development of the services regimes within CARICOM as well as the improvement of CARICOM’s access to external services markets are priorities of CARICOM’s development agenda. Developing an ambitious chapter in Services which can help address CARICOM’s services sector development priorities is particularly important to CARICOM in these negotiations. At the same time, increasing the presence of investors across a wide range of productive sectors within CARICOM, can improve CARICOM’s access to the valuable assets which are deployed by investors once they are established. Such assets include capital, technology, knowledge, innovation and expertise regarding international best practice in production processes, product development and business administration.
The successful negotiation of a Trade and Development Agreement with Canada together with the CARIFORUM-EC Economic Partnership Agreement will be of significant strategic interest to the region. Together, they can facilitate CARICOM’s economic diversification and transformation. In addition, with the experience of negotiating trade and development agreements with developed countries such as Canada and Europe, CARICOM will be better positioned to leverage its interests in its bilateral trade relationships with other trade partners including the United States.
NEGOTIATING ISSUES DISCUSSIONS
Market Access - Goods
In the negotiations on market access in goods CARICOM and Canada have been examining various related issues such as Technical Barriers to Trade, Sanitary and Phytosanitary Measures, Emergency Action/Trade Defence Measures, Rules of Origin, Trade Facilitation, and Customs Procedures. This time round, the two sides engaged in more detailed discussions on Customs Procedures, and for the first time on Technical Barriers to Trade (TBT), and Sanitary and PhytoSanitary (SPS).
Discussions on Customs Procedures can be expected to focus for some time on approaches to Certification and Verification of Origin. These are issues at the crux of Rules of Origin negotiations. In order to qualify for preferential market access under bilateral trade agreements, proof must be provided that the goods produced are eligible under the terms of the agreement. The process of certifying and verifying goods involves certain administrative procedures, the quality of which can affect how efficiently and how speedily goods can be exported. The administration of certification and verification process therefore has cost implications for exporters. Utilization of modernized customs systems can reduce costs, improve efficiency, and allow customs departments to keep up with the pace of global trade. However, the availability and level of access to these systems varies across CARICOM countries. CARICOM’s approach to addressing customs procedures in trade agreements is therefore suited to its challenges with respect to Certification and Verification. On the other hand, Canada uses more modern or less administratively burdensome Certification and Verification processes. Consequently, this is reflected in Canada’s approach to customs procedures in its trade negotiations. In light of their differences vis-à-vis Certification and Verification, CARICOM and Canada differ with respect to their approaches to these aspects of customs procedures in trade negotiations and both sides have agreed on the need to find convergence.
Progress on TBT and SPS will depend on a common view of what should constitute the scope of the framework for these issues. Both Canada and those CARICOM member states that are members of the WTO are obliged to honour commitments enshrined under the WTO TBT and SPS Agreements. The intent of commitments on TBT and SPS in these negotiations is to ensure that freer trade is facilitated while maintaining the capacity of Parties to adopt measures to protect consumers, public health and safety and the environment. Both Canada and CARICOM are interested in developing a framework for communication and cooperation with respect to the application of technical standards and other measures to ensure that such measures do not unnecessarily impede trade.
Services
Discussions on services have focussed principally on detailed explanation of the domestic services regime of both CARICOM and Canada. CARICOM explained its approach to the development of services trade, highlighting aspects of the CARICOM strategic plan for the development of the regional services sector. Canada has made detailed presentations on its approach to financial services, telecommunications, E-commerce and Temporary Entry of Persons. The discussions helped CARICOM to obtain some insight into the scope for flexible treatment by Canada of those areas of interest to CARICOM.
Both Parties agreed that with respect to market access, the chapter on financial services should go beyond Canada’s and CARICOM’s respective GATS commitments. The discussions on the treatment of this sector also revealed that regulatory as well as market access issues are important in these negotiations. Given the current global economic crisis, prudential regulation has come under greater scrutiny both at the regional and international levels. Consequently, consideration of issues relating to the effective regulation of the sector will affect both CARICOM’s and Canada’s commitments to be made in the Agreement and further work will be conducted in future Rounds to develop these commitments.
The issues which have emerged from the Services discussions to date will be examined in detail at CARICOM’s next round of Services Technical Working Group meetings scheduled to take place in the latter part of April 2010, as the region works towards preparing its specific market access requests.
Investment
Canada has provided explanations of its approach to Investment chapters in free trade agreements. It is seeking to improve the stability, transparency and attractiveness of the Investment regime through greater investor protection. CARICOM has, for its part, been taking steps to develop an internal investment regime in order to attract more investment to the region. Currently, Canadian investment in CARICOM is quite robust particularly in the banking sector. CARICOM is therefore interested in building on its existing relationship with Canada in a manner that is consistent with CARICOM’s development interests and that improves the region’s attractiveness as an investment destination.
Further work is needed in order to find convergence on the approach to developing an investor regime in the context of the CARICOM-Canada Trade and Development Agreement. In addition, in the upcoming months the sides will also have to identify the sectors which should be opened up to investment.
Trade-related issues
There were exchanges on a number of trade-related issues including Trade and Innovation and Intellectual Property, Transparency in Government Procurement, and Trade and Competition Policy. The sides explored, inter alia, the basic framework principles and areas for technical cooperation and development assistance. These discussions revealed that there was great commonality and agreement on basic principles. Continued work in this area will relate to working out the application of these principles in practice and the textual articulation of the principles.
The Third Round
The third Round of negotiations was convened in Ottawa, Canada on April 4-8 2011. During this Round, the Region presented textual proposals in a number of subject areas. These included Safeguards; Agriculture and Fisheries; Alcoholic Beverages; Technical Barriers to Trade; Sanitary and Phytosanitary Measures (SPS); Facilitation of Business Persons; Institutional Issues; Dispute Avoidance and Dispute Settlement; and Development Cooperation. Framework texts on Trade in Services and Investment were also presented. Furthermore, CARICOM presented its broad approaches in a number of sectors of particular importance, such as Tourism, Culture, ICT, Telecoms, E-Commerce, and Energy Services.
The joint discussions facilitated explanation and clarification of the various proposals, allowing both Sides to identify areas of possible convergence and divergence. Canada also signalled that CARICOM’s specific proposals and the ensuing discussions provided important inputs for Canada’s ongoing internal consultations.
Overall, CARICOM’s proposals reflected the careful and detailed work the Region has been undertaking to bring to life CARICOM’s trade interests with Canada. As much specificity as possible was expressed in order to reflect not only the Region’s offensive and defensive interests but also its trade-related development priorities.
Furthermore, CARICOM’s texts clearly demonstrated the Region’s approach to the treatment of development through a) the elaboration of a separate chapter on Development Cooperation focussing on broad principles, and b) the inclusion of specific provisions on cooperation designed to develop and support aspects of the Region’s trade related capacity across all subject areas under negotiation.
The occasion of the third Round did not however facilitate the completion of preliminary exchanges on some of the text proposals. As a result, both Sides recognised that in order to complete this process, there was a need to reconvene the third Round at a mutually agreed time through use of video conferencing.
The Road Ahead
During the third Round, CARICOM and Canada were able to identify a detailed programme of work which will guide the Region’s preparations for a fourth Round which will be held in the Caribbean.
Update
While the CARIBCAN waiver was not expected to extend beyond the end of December 2011, the WTO General Council on November 30 2011 approved a new waiver for CARIBCAN until December 31 2013. Canada’s application for the waiver became necessary in order to preserve CARICOM’s preferential access whilst the two Sides continue to complete their negotiations of a new WTO-compatible trade agreement. Given that the new waiver is for a period of two years, both sides recognise the need to accelerate the pace of the negotiations in 2012 in order to complete the negotiations within a timeframe that would facilitate the technical and legal scrub, signature and ratification of the new Agreement prior to the expiry of the new waiver.
