Elizabeth Morgan | What has been CARICOM’s foreign trade strategy and agenda?

On February 20, 2019, my article in The Gleaner was titled ‘Needed: A CARICOM foreign trade strategy and agenda’. On September 2, 2020, I addressed ‘Jamaica’s trade performance: Turbulence ahead’. This article was relevant to CARICOM generally. Last week, referring specifically to Jamaica’s Cabinet appointments in foreign affairs and foreign trade, I pointed out that this may be the time for the region to review its foreign trade strategy and agenda as it determines requirements to stimulate its economic growth in this time of COVID-19.

While intra-regional trade is important, the bulk of CARICOM member states’ trade is with external partners. In 2019, CARICOM collectively imported an estimated US$36 billion in goods from the world and exported US$18 billion. The total value of goods trade within CARICOM, imports and exports, was US$7 billion.

So, what has been CARICOM’s foreign trade policy strategy?

APPLYING A DEVELOPMENT STRATEGY

This strategy, to gain market access in developed countries, has been based on trade and development concepts which emerged in the General Agreement on Tariffs and Trade (GATT) and the United Nations Conference on Trade and Development (UNCTAD) in the 1960s.

The first is non-reciprocity from GATT Part IV dealing with trade and development, which meant that developing countries were not required to participate in market liberalisation in the GATT rounds of trade negotiations. The second, Special and Differential Treatment (S&DT), resulted from UNCTAD’s Generalized System of Preferences (GSP) by which developed countries provided non-reciprocal (one-way) market access to developing countries.

Applying the trade and development provisions in GATT and UNCTAD, CARICOM member states were implementing a neo-mercantilist trade policy, as the aim was to have limited domestic liberalisation of trade to external trade partners, while improving access to the markets of developed trading partners.

The European Community (EC) and the African, Caribbean and Pacific Group of States negotiated the Lomé Conventions (1975-2000), applying these development principles of non-reciprocity and S&DT. This was continued in the trade arrangements with the USA and Canada which gave rise to the Caribbean Basin Initiative in 1983 and the Canada-Caribbean Trade Agreement in 1986.

Among CARICOM countries, in the 1980s, Jamaica particularly, under World Bank and IMF structural adjustment programmes, undertook unilateral trade liberalisation by reducing tariffs, thus further opening the domestic market to extra-regional trade.

With the launch of the GATT Uruguay round of negotiations in 1986, there was a more aggressive move towards liberalisation of global trade. Developing countries, including those in CARICOM, held to the principles of non-reciprocity and S&DT, aiming to protect their market access into developed countries, especially the EC, and protecting specific domestic production.

Market access in the EC would be challenged in GATT and its successor, the World Trade Organization (WTO), starting with Latin American banana producers supported by the USA. This challenge would require the now European Union (EU) to propose negotiating WTO-compatible regional Economic Partnership Agreements (EPAs) with the ACP countries commencing in 2001.

NEGOTIATING FTAS

At the same time, there was a further move to promote trade liberalisation through negotiating free-trade agreements (FTAs). The USA proposed negotiating the hemispheric Free Trade Area of the Americas (FTAA) agreement between 1998 and 2005. This period saw CARICOM engaging in other trade negotiations with the Dominican Republic, Venezuela, Colombia, Cuba, and exploring negotiations with Central America and MERCOSUR. Other Latin American countries, for example, Chile, were interested in negotiating with CARICOM. A schedule for negotiations was prepared. The FTAA would stall and be consigned to cold-storage. CARICOM’s policy for negotiating these agreements remained centred on S&DT to meet development needs. In the FTAA, the idea of special treatment for small, vulnerable economies was introduced.

The EPA regional negotiations between the EU and the Caribbean (CARIFORUM) would conclude in 2008. This was a development-oriented agreement phasing in reciprocal market access for the EU.

CARICOM, in 2001, had proposed negotiating an FTA with Canada, thinking it would be the template for a development-oriented agreement with the EU. The then Liberal Canadian government of Jean Chrétien, after exploratory talks, did not issue the negotiating mandate. This would not be forthcoming until 2007, when the Conservative government of Stephen Harper came into office. These negotiations commenced in 2009. The CARIFORUM-EU EPA then became the template for these negotiations. The 2001 strategy had been upended.

At the multilateral level, the WTO Doha ‘development’ round of negotiations was also launched in 2001. Development was to be at its core. Thus, S&DT and small, vulnerable economies were on board. With the Doha Round petering out and the advent of the Trump administration in the USA, S&DT is under close scrutiny as a measure for reform.

CARICOM’s zeal for negotiating FTAs waned after 2015 when the negotiations with Canada were suspended. The work programme has been limited to outstanding work on existing FTAs, such as those with Cuba, Costa Rica and the Dominican Republic, and on continuing work in the WTO.

So, given the crisis created by COVID-19 and the situation with foreign and foreign trade policy at the bilateral, regional, hemispheric, and international levels, it is time for CARICOM to assess the continued effectiveness of its development-oriented foreign trade strategy and resulting trade agreements to determine the way forward.

Elizabeth Morgan is a specialist in international trade policy and international politics. Email feedback to columns@gleanerjm.com .