EU to have same access as US, Canada to Caribbean market
Tariff removals will require fiscal reform
Stabroek News
October 15, 2002

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The Caribbean is in an unenviable position in that it is obliged to offer Europe the same access to its markets as industrialised countries in the Free Trade Area of the Americas will enjoy come 2005.

Henry Gill, a senior director with the Caribbean Regional Negotiating Machinery (CRNM) was addressing this ‘reciprocity’ issue at a one-day consultation yesterday hosted by the Ministry of Foreign Trade at the Ocean View Convention Centre as it relates to the new free trade agreement being negotiated with the European Union. These negotiations were launched last month in Brussels, Belgium.

Gill explained that under the most favoured nation clause in both the Lome and Cotonou agreements the Caribbean region has undertaken to grant the same reciprocal access to the European Union that it has granted to other industrialised countries, namely the United States and Canada.

He said the CRNM has made the first step towards formulating a position on the issue, which it presented to the CARICOM Council on Trade and Economic Development (COTED) two months ago at when it met in Trinidad and Tobago.

Gill noted too that resolution of the issue would have to be framed within the context of maintaining the unity of the African, Caribbean and Pacific (ACP) group of countries since the Caribbean would be the only region involved in the FTAA.

Another challenge for the region is the impact of the removal of tariff barriers, which for some Caribbean countries will be the equivalent of reforming their fiscal policies.

Gill explained that unlike the US and Brazil where tariffs make up a mere 2-3 per cent of government revenues, in the Caribbean it represents some 50-70 per cent of government revenues. To mitigate the effects of the removal of the tariff barriers, Gill said the region would have to negotiate the longest possible transition period to allow for the tax reforms.

Another major challenge facing the region, having gained acceptance in the FTAA negotiations of the general principle of differentiated treatment for smaller economies, is that of gaining acceptance of “absolute size” in defining “small economies” and a precise formulation of the needs of the smaller economies.

With regard to definitional issue, Gill noted that Latin America perceived the concept as referring to the level of development rather than in terms of actual population or economic size. A consequence of this, he explained is that Latin America sees the Caribbean as being highly competitive in tourism because of the size of the contribution the sector makes to the economy.

In terms of formulation of the needs of the smaller economies in respect to the negotiations for the FTAA, Gill offered as his personal opinion that the region is yet to precisely formulate these since up to now its attention has been focused on first gaining acceptance of the principle.

Demerara Distillers Limited Managing Director, Komal Samaroo and Executive Director of the Sugar Association of the Caribbean, Ian McDonald identified other challenges when they discussed the future of the rum and sugar industries under the new trading arrangements with the EU.

Samaroo stressed the need for the regional negotiators to maintain the definition of rum as agreed under the Lome and Cotonou agreements, explaining that with the expansion of the European Union there would be pressure to allow derogations to accommodate those products classified as rum in the Eastern European countries.

Samaroo recalled that in negotiating the definition it was discovered that large quantities of such products wrongfully classified as rum were being sold.

He also identified the need for the region to safeguard reciprocity being granted in the trade of products, the materials for which are subsidised by the governments of the exporting countries. He cited as examples vodka, brandy, whisky and gin.

Another challenge facing the region’s rum industry is the transition from the production of bulk rum for export to the marketing of brand names, despite the assistance being given by the EU to aid the modernisation of the industry.

He pointed out that in marketing a brand name no distinction is made between a producer from a developing country and the one from the developed countries. To be competitive, the producer from the developing countries has to meet the same benchmarks as ones in the developed countries.

Samaroo stressed that in marketing a brand name product the geographic definition should not only cover a particular country but should be region-wide, citing the major effort that is being made in marketing a Caribbean rum.

He added that it is important that a qualification for being branded a Caribbean rum is that the product is fermented and distilled in the Caribbean.

McDonald too in his presentation on sugar stressed the need to resist the removal of barriers on the importation of products for which the raw materials are subsidised.

He noted that while Brazil and Australia have challenged the European sugar arrangements, sugar production in Brazil is subsidised by production of ethanol and in Australia the government recently announced a US$280M subsidy to the industry because of the low world market prices. He said that he has been reliably informed that the Australian government also provides subsidies in other forms.

With regard to the present preferential arrangements for sugar, McDonald was optimistic that they would remain, though he said the industry has to be prepared to meet the challenges of falling prices.

To meet these challenges, McDonald said the industry in the Caribbean has to modernise, be more efficient, add value and be more cost-effective. He observed that the industry in Guyana is moving in that direction.

McDonald said his optimism was based on the fact that countries around the world subsidise their sugar industries, that the preferential arrangements are part of the EU sugar regime and the lobbying clout that the EU’s 16M metric tonnes industry enjoys. He cited the USA, Japan, Brazil and Australia as governments that subsidise their sugar industries.

McDonald observed that another challenge facing the industry is the need to operationalise article 36(4) of the Cotonou agreement to ensure that its benefits extended to the EPAs still to be concluded. Article 36(4) underlines the importance of the commodity agreements.

McDonald stressed the need for the sugar industry to meet the expectation of better quality as demanded by consumers including that the product not be genetically modified.

McDonald also cited the need for the negotiators to redress the loss of millions the ACP suffered from the reallocation of sugar quotas to accommodate the EU’s Everything But Arms Initiative. McDonald said it is the EU, which should provide the additional access for the least developed countries rather than taking it away from the ACP quotas.

He said too that the region has to reject the notion that the preferences for sugar will end as that is buying into the attack on them that has been going on for the past 47 years.

Jagnarine Singh of the Guyana Rice Development Board painted a gloomy picture for rice under the new arrangements.

Singh said under the new arrangements based on new policy decisions by the European Commission the price for rice will fall as a result of a reduction of the intervention price and the access granted to the Asian rice producers.

He said it would be difficult for the industry to maintain market access with the removal of the preferences. The industry, he said, has to switch to the production of value-added products.