CARICOM’s trade relations with the European Union undermining its relations with the United States

Part1

(Stephen Lande, former Assistant United States Trade Representative (ret.), is President of Manchester Trade and has 40 years trade negotiating experience dating to the 1960’s Tokyo Round of the GATT. While at USTR, he developed and implemented the CBI (c.1983) and in 1984 founded Manchester Trade, a Washington, DC consulting firm focused on international trade in the Caribbean, Latin America, and Africa.)


By Stephen Lande
CARICOM appears to be sacrificing any possibility of continuing benefits under the U.S. Caribbean Basin Initiative (CBI) by rushing into full Economic Partnership Agreements (EPAs) with the EU. Given the complexities that have arisen since the conclusion of the negotiations, a delay in finalizing the EPAs would be prudent.  If the agreements are implemented before these issues have been resolved, CARICOM may find itself losing preferential access into the U.S., the major market of the Caribbean, in order to come to an agreement with the EU, a secondary trading partner.  This Update from Manchester Trade thus recommends a delay to allow time to find a solution.

EPAs as a problem to the Caribbean region
Giving into the EU insistence to replace unilateral preferences for ACP countries with a comprehensive and reciprocal agreement causes at least three problems for the region in its relations with the United States.

First, the agreement with the EU has made impossible the continuation of unilateral preferences with the U.S.  It is only a matter of time until the U.S. insists on replacing benefits under CBI with a comprehensive and reciprocal agreement similar to the EPA in scope and coverage.  There is no way that U.S. exporters will allow unilateral preferences to continue for the CBI  in the U.S. market while its exporters pay higher duties, receive less access for its services providers and face non-tariff barriers in CARICOM markets.  This agreement also undermined successful efforts by CARICOM countries and its friends in the U.S. which made the CBI into a permanent program.

Second, the EPA requires that any concession given to a third party be automatically bestowed on the EU.  Thus if CARICOM were to enter into FTA negotiations with the U.S., the EU would be an automatic beneficiary.  We doubt the U.S. would be happy with this situation and they would certainly be justified.  After all, it continues to provide benefits under CBI unilaterally but have no promise of benefiting in any way from the EU agreement.

The third and perhaps most important loss is that the Caribbean in general, and the CRNM (Caribbean Regional Negotiating Machinery) specifically, was unable to take advantage of opportunities to deepen and expand the more important relationship with the United States.  Chairman Rangel has now met several times with regional leaders since the Democrats gained majority in Congress in November 2006. However, yet to-date he has not received any specific proposals as to what the region wants from the U.S. in terms of improved trade relations.  It is indeed a remarkable opportunity to have the most powerful Congressman so intimately committed to the region as Chairman Rangel.  Although we expect the Chairman to continue in this position into the new Congress, there is a good chance that nothing will happen for sometime while the basis of U.S. trade policy is reviewed at the highest level.

Mitigating the problem in Caribbean
Haiti was the only CARICOM country which took advantage of the invitation to work with Congressman Rangel as well as with other Democrats and Republicans on the Ways & Means Committee.  The result was that in addition to the extension of Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE) and Caribbean Basin Trade Partnership Act of 2000 (CBTPA), the specific apparel provisions of HOPE was significantly improved.

Other than this initiative, the only CARICOM focus on the CBI was to request the Administration and Chairman Rangel to extend the CBTPA.  It was added to CBI in 2000 to provide duty-free treatment for garments assembled in the Caribbean from U.S. yarns and fabrics.  In today’s environment, this is a benefit of no value to any CARICOM member with the exception of Haiti.  At the time it was passed, it was of significance to many CBI beneficiaries including Costa Rica, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, and Jamaica.  However, since then, all but Haiti and Jamaica have left CBI as a condition for entering into CAFTA-DR.  However these provisions could easily have been amalgamated into the HOPE, the major program providing duty free treatment for Haitian exports into the U.S. Jamaica no longer exports such garments into the U.S.
There are many ideas for improving CBI, a number of which were described at USITC (United States International Trade Commission) hearings last January 2008 in Washington.  Embassy representatives, CARICOM and OAS Secretariats, and unpaid consultants such as Andrea Ewart and Manchester Trade suggested improvements.  These included more liberal origin rules, extension of duty-free treatment to agricultural commodities and introduction of services, energy and Aid for Trade provisions.  There were no suggestions to make CBI into a reciprocal agreement.

In the U.S., the New Partnership Development Act (NPDA) introduced by Congressman Jim McDermott (D-WA) with the co-sponsorship of Chairman Rangel, and Phil English, leading Republican Ways and Means Committee member along with more than thirty others, is gaining increased support.  The bill will not only extend and deepen textile concessions under African Growth and Opportunity Act (AGOA) for sub-Saharan Africa (SSA) beneficiaries but will also provide duty-free treatment for agricultural commodities and for the first time in a trade bill-authorize funding for Aid for Trade.  There had been no effort by the Caribbean to gain similar benefits.

For more information, you may contact Stephen Lande at stephenlande@manchestertrade.com

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