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World Trade Organization |
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WT/TPR/G/190 | |
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(07-3992) |
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Trade Policy Review Body |
Original: English |
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TRADE POLICY REVIEW Report by oecs-wto members |
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Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the |
Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on the OECS-WTO Members.
CONTENTS
Page
1. Introduction 5
2. Main Economic Developments 5
3. Trade Policy and Institutional Framework 10
4. Regional Integration 12
5. Bilateral/Hemispheric and Preferential Trade Agreements 13
6. The World Trade Organization (WTO) 15
7. Conclusion 20
1. Introduction
The Organisation of Eastern Caribbean States (OECS) was established in June 1981 with the signing of the Treaty of Basseterre. The OECS comprises nine member states including six independent states and three non-independent territories. The six independent members of the OECS,
The OECS members of the WTO are extremely small resource constrained economies with a total population of 441,836 (mid-2007 estimates) and a combined GDP of US$3.98 billion in 2005 and a share in world merchandise trade of 0.001% for 2005. The OECS experienced modest growth averaging 2.5% for 2001 – 2005. The effects of
Trade policy is seen as a tool for bringing about economic and social development. The region seeks to foster economic growth through trade but is mindful that there are potentially negative social and economic effects of trade liberalisation. The region’s engagement in trade negotiations has intensified with the OECS increasing its participation in the WTO Doha round and broadening its mandate to include the Economic Partnership Agreements with the EU, and several bilaterals as part of CARICOM. In the period under review the OECS has deepened its regional integration efforts, joining the CARICOM Single Market in June 2006 and signing a declaration of intent towards the establishment of the OECS Economic Union.
This is the second trade policy review for the OECS, the first one having been undertaken in June 2001. The OECS member states view the trade policy review exercise as an opportunity to undertake ongoing inventory of its trade policies and practices. It also presents a forum for the OECS member states to articulate their positions in the context of the Doha Round and to also make a statement on the impact of the multilateral trade system and rules on the trade policies and actions of their trading partners and the resulting implications for their economies.
2. Main Economic Developments
Macro-economic performance
In the wake of the events of
Growth in tourism and construction activity was driven by the preparations for the Cricket World Cup which was held during March to April 2007.
The apparently favourable performance of the OECS must however, be assessed in context. Despite relatively high per capita incomes and GDP growth figures, unemployment is high (estimated between 5% –20%) and poverty levels range from 12% –38%. The very high levels of vulnerability of these countries to exogenous factors, as demonstrated by various vulnerability indices must be taken into consideration. The OECS countries are highly vulnerable to natural disasters, ranking among the most vulnerable in the world. Over the last three years, no less than three hurricanes have severely affected the region. Over a 10 month period,
Agriculture’s contribution to GDP has continued to decline as a result of declining output and the strong performance of the services sector. The reform of the EU banana regime over the last 15 years has given rise to unfavourable market conditions which have resulted in decreased earnings and reduced production brought about by a drastic reduction in the number of producers – from 24,000 banana producers in 1993 to 5,000 in 2004. In
Inflation rates remained low during the period under review, largely reflecting the situation in major trading partners as well as the constraining monetary policy arrangement inherent in the quasi-currency board operations of the ECCB. However, there was some upward movement in the CPI for the ECCU, which rose steadily during the period under review, peaking at 4.6% in 2005 due to increases in international oil prices and decreasing to 1.4% in 2006 as the effect subsided.
Unemployment figures are not available for all OECS-WTO member states but have been estimated to be at levels ranging from 5 – 20 per cent with a higher incidence in agricultural areas.
Fiscal Performance
As small countries with limited resources and with the monetary arrangements of the ECCU, fiscal policy instruments are the simplest and least burdensome policy tools available to the OECS to effect changes in economic activity. Fiscal policy has largely been geared towards the generation of revenue to finance public expenditure, although there has been some use of it to encourage economic activity. While each country sets out its fiscal policy individually there has been discussion of the harmonisation of fiscal policy as the OECS moves towards Economic Union.
OECS-WTO members have been heavily reliant on revenues from trade taxes to fund government expenditure. In 2006, trade tax revenue stood at 12.8% of GDP and accounted for just over half of tax revenue. The increasing pressure to reduce tariffs in multilateral and bilateral negotiations has presented the OECS with a major policy challenge as the fiscal deficit continues to expand. In the
The policy response to the deteriorating fiscal situation in the OECS has been to develop a programme of tax reform based on the recommendations of Report of Tax Reform and Administration Commission released in 2003, for the reform of the tax structure and the strengthening of the tax administration system in the currency union. Changes have been made in
One of the investment promotion strategies used by the OECS is the provision of tax concessions. Admittedly, this has resulted in the foregoing of tax revenue; however, this has been a significant policy instrument for attracting FDI to the region and has resulted in employment generation and growth. Reform of these regimes is anticipated in the short to medium term within the CSME through the development and implementation of a regional investment code.
Monetary Policy
The Eastern Caribbean Central Bank (ECCB) is the monetary authority for the Eastern Caribbean Currency Union (ECCU) which comprises eight island economies including
The ECCB has pursued a strong dollar policy in an effort to create a stable and predictable environment in the ECCU. A fixed exchange rate regime has been maintained since 1976 which pegs the Eastern Caribbean dollar to the U.S. dollar at the rate of EC$2.71/US$1. During the period under review, however, the EC dollar depreciated in real effective terms as the U.S. dollar, depreciated against other major currencies. Foreign exchange reserves stood at EC$1.9 billion at the end of December 2006 resulting in a backing ratio of 99.2%. The ECCU is cognisant that reforms may be required to maintain the exchange rate peg.
Since the last TPR, the Eastern Caribbean Securities Market was launched in October 2001 with the opening of the Eastern Caribbean Securities Exchange Ltd. A regional market for government papers became operational with the establishment of the Regional Government Securities Market in November 2002. Since its establishment, governments have raised EC$1.7 billion and realised savings of almost EC$14 million in debt servicing, as at December 2006.
Balance of Payments
Except for 2005, the OECS[1] have posted a small Balance of Payments surplus for the period under review. The services surplus has been sufficient to offset the significant deficit in the current account. The OECS economies have been plagued by an ever widening current account deficit which is primarily attributable to the decline in merchandise exports, rising fuel prices and the increase in the cost and volume of imports. The growth in the services sector, particularly tourism and construction, has been a boon and a disadvantage and increased activity in these sectors is also driving up the demand for imported goods.
The overall weak export performance for the period under review has been largely attributed to declining banana production due to unfavourable market conditions, the cessation of sugar production due to the closure of the sugar industry in
In 2006, despite an increase in current account deficit by 4.4% from 2005 a surplus of 2.3% was posted for the ECCU. The upturn is attributable to the increased inflows of FDI linked to the hosting of the 2007 Cricket World Cup, increased visitor arrivals and an increase in volume and price for banana exports.
Sectoral Developments
Agriculture
The contribution of the agriculture sector to GDP continued to decline in the period under review, falling 1.27 percentage points from 6.77% in 2001 to 5.50% in 2005. The decline was most marked in
In 2006, there was an improvement in the performance in the agricultural sector. The ECCB reported that value added increased by 10.8 per cent after declining by 11.7 per cent in 2005. This was attributed to a surge in banana production by 6.4% in 2006, compared to a decline of 25.7% decline in 2005, as well as by favourable movement in exchange rates for banana prices. The increase in output was due to a confluence of factors including the efficacy of measures to control leaf spot disease, generally favourable weather conditions and the higher prices paid to farmers under the Fair Trade label. Other traditional crops mainly cocoa, nutmeg and mace also showed some signs of recovery in the wake of hurricane damage in
Manufacturing
The manufacturing sector has been showing steady growth since 2003. In 2006, the sector increased by 3.4%. Expansion in construction, incipient recovery in the agricultural sector and preparations for the Cricket World Cup, have contributed to increased demand for manufactured and processed products.
Services
Services continue to be the major contributor to GDP through the period under review fuelling the positive macroeconomic performance of the OECS. Expansion in the construction sector was of the order of 15.5% in 2006 and 20.4% in 2005. Public and private sector investment ahead of the Cricket World Cup, reconstruction after Hurricane Ivan and investment in tourism spurred growth.
The tourism sector generally performed positively during the period under review but is vulnerable to externalities. The sector performed poorly in 2002 and 2005 due to the effects of
Other services sectors continued to maintain a major share in economic output. In 2005, the communication, wholesale and retail trade, transport and banks and insurance sectors, together accounted for approximately 46% of real GDP. Growth in communication was fuelled by the entry of new service providers into the market. Growth in the other sectors was triggered by expansion in the construction sector which drove up demand for other goods and services.
Outlook
The positive economic growth trend is expected to continue over the short to medium term, albeit at a reduced rate due to the completion of many major construction projects. Growth will be spurred by the expansion of the services sector particularly tourism, financial services, construction and agriculture. The tourism industry is expected to be propelled by increased marketing exposure, especially through the region’s hosting of the 2007 Cricket World Cup. Expansion in the tourism sector is expected to influence the performance of other sectors through the creation of linkages. Efforts are being undertaken at the national and regional levels to create backward linkages between tourism and agriculture and manufacturing. Alternative markets are being explored for traditional agricultural products such as ethical labelling under the Fair-Trade brand and this should continue to yield favourable developments in the agricultural sector. Efforts at retooling the manufacturing sector in line with recommendations and assistance from inter alia USAID and International Trade Centre (ITC) are also expected to result in expansion of the manufacturing sector.
The region will continue to attempt to diversify its economic base, focussing on the development of world-class and competitive services industries paying attention to areas such as offshore education, ICT, cultural industries and tourism sector and the linkages between services and other sectors including manufacturing and agriculture, health and wellness and promoting investment in value-added sectors especial agro-processing.
The region is faced with the major challenge of reducing its debt and fiscal imbalances. The fiscal deficit is expected to narrow as public sector investment in capital projects falls and the effects of the measures implemented under tax reform programmes implemented in the OECS-WTO member states kick in. A new system of fiscal benchmarks was approved by the ECCB monetary council in 2006 replacing the 1998 ones which had been unsuccessful in achieving fiscal convergence by 2007. The target date for compliance is 2020. The OECS remains committed to the strong dollar policy and will maintain the exchange rate peg which has created a stable and predictable economic environment. Efforts to develop regional capital markets will continue and deepening regional integration efforts are expected to result in greater integration of the OECS ECCU into wider
3. Trade Policy and Institutional Framework
The global environment has changed significantly – the events of
The development objectives of the OECS Member States include poverty reduction, job creation, increased access to education and health services, environmental sustainability, good Governance and sustainable economic growth through the development of key sectors such as Agriculture, Tourism, Financial Services and Manufacturing.
The OECS sees trade as a vehicle for promoting its development objectives. The challenge, therefore, has been to enter into negotiated arrangements that are suited to domestic realities and national development objectives and which are WTO-compatible. The OECS seeks to become integrated into the global economy and to maximise the benefits of trade liberalisation while mitigating its potentially negative impacts. The OECS seeks policy space and flexibilities which allow for the promotion and safeguarding of sensitive industries and sectors. Any liberalisation commitments undertaken by these countries are to be commensurate in depth and scope with their levels of development, resource availability and share of world trade. Market access for traditional commodities must be safeguarded and real market access for products and services of export interest to the OECS needs to be secured.
The OECS is seeking to enhance the competitiveness of its economies while securing enhanced market access opportunities for its exports and flexibilities in market access commitments that will support adjustment to increased competition. The OECS trade strategy is three-tiered. At one level, is the regional integration process which acts as a platform for integration into the global economy. The CSME and the OECS Economic Union are mechanisms for building resilient and competitive economies. On the second tier are bilateral and regional arrangements and at the third tier is the multilateral process in the WTO.
The OECS-WTO members are now engaged in a number of trade negotiations which are stretching already limited technical and financial resources. On average, there are two trade officials in each member state that are assigned to dealing with all trade issues across all negotiating theatres. The capacity of the OECS to participate in the negotiations and in the implementation of its commitments is hampered by the sheer paucity of human and financial resources that can be assigned to trade matters. The OECS Secretariat plays a pivotal role in the coordination and development of trade policy for the OECS and has spearheaded several initiatives that have been undertaken at the subregional regional level to enhance the OECS capacity to participate in a rapidly expanding trade negotiations agenda. These included the establishment of the OECS Trade Negotiations Group (2002), the Trade Policy Unit (2003), designation of Ministerial Spokespersons (2004), the OECS Business Forum (2005) and the Geneva Technical Mission (2005). While collaboration and shared actions at the regional level have helped to alleviate the situation, joint mechanisms and institutions tend to survive on external sources of funding and where this has been limited, so has been the effectiveness of the mechanisms.
The OECS Trade Negotiations Group (TNG) was established by the OECS Heads of Government in June 2002. The group’s membership comprises trade officials and representatives of the private sector from each
The Trade Policy Unit (TPU) was established in 2003 in the Economic Affairs Division of the Secretariat based on the recommendation of the CIDA funded Trade Policy Project. The TPU currently has three staff members and is charged with providing technical support administrative support for trade policy implementation and trade negotiations to Member States across all negotiating fora. The unit has helped to strengthen the OECS’ ability to formulate and implement trade policy and participate effectively in trade negotiations.
The Authority assigned lead responsibility to Ministers of the Member States for monitoring activities in negotiating theatres and agreed to the establishment of a ministerial committee which would have oversight for OECS Trade Policy. Trade Policy is discussed at the national level and taken through the OECS TNG and the Council of Trade Ministers and endorsed by the OECS Authority. Policy decisions of the OECS Authority are communicated to the CARICOM Council on Trade and Economic Development (COTED) and then to the CARICOM Conference of Heads Caribbean where they are integrated into CARICOM positions. The Caribbean Regional Negotiating Mechanism (CRNM), the negotiating arm of CARICOM, is guided by the decisions of the COTED and the Conference of Heads in formulating regional positions and developing regional negotiating strategies.
Efforts have also been made to ensure the institutional development of the private sector. In this regard the OECS Business Forum was conceptualised as a mechanism for the exchange of views among private sector officials on trade matters and to build capacity of the private sector to deal with trade policy issues. The Forum now needs to be appropriately resourced to undertake its mandate and develop its work programme.
The OECS Observer Mission to the United Nations and Other International Organisations in
The existence of the
At the national level responsibility for trade policy development and implementation resides in different ministries. In an effort to achieve greater coordination at the national level and in order to mainstream trade into national economic policy, member states established national trade councils whose composition in some include private sector participation. This has resulted in greater organisation and coordination at the national level on matters of trade policy. The institutional framework for the development and implementation of trade policy has benefited from the rationalisation of trade ministries with the portfolios of trade and external affairs being handled by the same minister. Training of trade officials with the assistance of organisations such as the WTO remains an ongoing exercise.
4. Regional Integration
OECS Economic
The OECS has a history of successful joint institutions including the Eastern Caribbean Central Bank (ECCB), the Eastern Caribbean Supreme Court, mechanisms for the joint regulation of banking and securities, telecommunications and civil aviation, joint procurement of pharmaceuticals; joint diplomatic representation, functional cooperation and coordinated and cooperative approaches to trade, education, health, sports, agriculture, tourism, export development, the environment and maritime matters. The OECS has now entered into another phase in the journey of regional collaboration with the declaration of intent by the OECS Authority, the highest decision making body of the OECS in June 2006, to advance the process towards an Economic Union. A new Treaty towards this end is now in its final stages of review by the Authority with the intent of putting it out for public consultation and debate over a twelve month period prior to its final adoption. This would complete an integration process that began over forty years ago.
The establishment of the OECS Economic Union was first endorsed at the 34th meeting of the OECS Authority in 2001. The OECS Economic Union will create a single financial and economic space where people, goods and services move freely, rights of establishment are guaranteed and major economic policies are harmonised. This will also create a mechanism for common action in five major areas: justice, law and order, foreign affairs, public administration, management if human and natural resources and economic cooperation and coordination. It will require gradual surrender of sovereignty to a central supra national body, giving legal effect to the decisions of the Heads of Government and the grant of executive power to Organs of the Organisation.
The CARICOM Single Market and Economy (CSME)
The OECS member states are party to the Treaty of Chaguaramas signed in 1973 which established the Caribbean Community (CARICOM). The Revised Treaty of Chaguaramas (completed in 2000) has been enacted into the domestic legislation of all OECS-WTO member states giving effect to the CARICOM Single Market and Economy (CSME). The CSME is an arrangement that is intended to enhance the competitiveness of the region by effecting the free movement of the factors of production and the right of establishment. The expected benefits include increased efficiency, higher levels of investment, employment and increased intra- and extra-regional trade.
In 2006, the CARICOM single market became operational with the signing of the Declaration by Heads of Government of the Caribbean Community on the participation of their countries in the CARICOM Single Market. A timeline of 2015 has been set for the implementation of the single economy.
Chapter VII of the Revised Treaty recognises the peculiar situation of OECS countries and categorises them as Less Developed Countries (LDCs) within the CARICOM grouping. The provisions of the chapter are designed to provide special and differential treatment to these countries. The OECS is committed to this regional integration process and like the OECS Economic Union, this is perceived as a means for reducing the vulnerability inherent to small economies by expanding access to the factors of production and creating a larger domestic market. The OECS will face similar challenges to benefiting from the CSME as faced in the wider global economy. The dearth of skilled labour and the high cost of production (due to high cost of energy, capital, labour, for example) place the OECS at a disadvantage to other lower cost CARICOM producers. The special provisions applicable to the OECS/CARICOM LDCs will be utilised to facilitate adjustment to the effects of regional liberalisation. These include a Regional Development Fund along with special and differential treatment accorded with respect to inter alia sensitive industries, access to land and free movement of labour.
The OECS-WTO members currently apply the CARICOM Common External Tariff (CET) as the MFN rate. Under Article 164 of the Revised Treaty, sensitive industries in the Less Developed Countries/OECS are accorded and additional level of tariff protection. The OECS-WTO members are in the process of tariffying the import licensing systems which have been used to safeguard these industries in order to make the regime more transparent and WTO compatible. The OECS-WTO members apply the CARICOM rules of origin regime in order to facilitate the duty-free entry of goods originating in CARICOM.
According to Article 46 of the Revised Treaty, one of the objectives of the single market is free movement of nationals. This is being implemented on a phased basis commencing with Nurses and Teachers, University Graduates; citizens possessing Associate degree or comparable qualifications, Sports Persons; Media Persons; Artistes and Musicians.
The region is now moving to the establishment of a Regional Competition Commission before the end of 2007 which will have responsibility for cross-border issues. The Revised Treaty of Chaguaramas requires that each CARICOM member state establish a national competition commission. However, due to resource constraints the OECS has opted to create an OECS competition commission which will function as a national competition commission for individual Member States.
The OECS Economic Union is also seen as facilitating the full implementation of the CSME and is therefore a means of deepening the CARICOM integration process.
5. Bilateral/Hemispheric and Preferential Trade Agreements
CARICOM Bilateral Arrangements
As part of CARICOM, the OECS is party to several bilateral trade arrangements. These include agreements with
CARICOM-U.S.
OECS exports have been eligible for duty-free access to the
The benefits available under the CBTPA are valid until September 2008. The
CARICOM has signalled its interest in engaging in dialogue with the
CARICOM-Canada
Since 1986, the Commonwealth Caribbean has enjoyed non-reciprocal preferential access to the Canadian market for most commodities under the Caribbean-Canada Free Trade Agreement. The OECS are among eighteen countries or dependent territories that benefit from this arrangement. The agreement is subject to a waiver from the WTO. The last waiver, granted by the WTO General Council in March 2007, expires on
CARICOM Ministers of Trade at the Second Summit of Heads of State and Government,
CARIFORUM-EU Economic Partnership Agreement Negotiations
As part of the ACP grouping, OECS members are party to the ACP-EU Cotonou Agreement which was signed in 2000 and revised in 2005. The Cotonou Agreement is the latest in a series of agreements that extended unilateral trade preferences and provided development assistance to the ACP grouping. Under these arrangements, the OECS agricultural sector benefited from secure and stable market access for several decades and also received technical and financial assistance. According to Articles 36 and 37 the parties agreed to negotiate “new WTO compatible arrangements” by
The OECS as part of CARIFORUM (CARICOM plus the
CARIFORUM is seeking the inclusion of a development dimension in the negotiations. Agreement on modalities that provide sufficient flexibilities in tariff liberalisation that address the region’s particular sensitivities with regard to fiscal revenue impacts and the adjustment of sensitive sectors has proven to be elusive. Convergence has been achieved however, in some aspects of the trade related issues and market access. Services and investment and the treatment of regional integration are also within the scope of the negotiating mandate. The OECS, like the rest of CARICOM, is seeking an outcome that is commercially meaningful and also provides for differing levels of commitment between CARICOM MDCs and LDCs.
6. The World Trade Organization (WTO)
The OECS member states remain committed to the multilateral process of trade liberalisation, while at the same time being cognisant of the challenges and the fall out from trade liberalisation. The OECS-WTO members have become more active in the Doha Round with the establishment of the institutional mechanisms to support this. The OECS Geneva Mission has worked closely with OECS-WTO member states directly and through the TNG and the TPU to advance the OECS positions in the negotiations.
The
The OECS has been quite active in the Doha Round, particularly since the establishment of the Geneva Mission in June 2005. Proposals have been tabled and defended in Services, Agriculture, NAMA, Trade Facilitation, Rules especially Article 27.4 of the ASCM and fisheries subsidies and Aid for Trade. Engagement has been through the CARICOM/Caribbean Group, Small Vulnerable Economies (SVEs) Group, and the ACP.
As was noted in the previous review report, the OECS economies continue to attempt to adjust to the effects of trade liberalisation. These states face the challenge of overcoming the effects of declining revenues from trade taxes and contraction of productive sectors due to changes in trade policy brought about by changes in export markets based on outcomes of challenges to regimes from which OECS producers may benefit. As small, vulnerable developing economies, the OECS-WTO members are seeking modalities for trade liberalisation that are commensurate with the level of development of their economies.
OECS/CARICOM officials are concerned about the possible benefits to be gained from a round which seems to have little to offer smaller developing countries. The conclusion of the Round is of benefit to the OECS only if its interests have been addressed and a strategy for the inclusion of the region’s defensive and offensive positions in the emerging modalities is being pursued. The OECS supports the return to the multilateral process and would like to see the “frontloading” of development in the emerging modalities.
In Agriculture the OECS objective has been to secure flexible modalities that take into account the special circumstances of small developing countries. Including real market access for products of export interest and modalities that are flexible enough to cater for sensitive sectors and the pursuance of non-trade policy objectives. Special products that are excluded from tariff reduction commitments and a special safeguard mechanism are seen as some policy tools that can be considered in this regard. OECS member states need to ensure that any modalities on market access in agriculture include flexibilities that take into account our development concerns including rural development, livelihood security and food security.
In the negotiations on Non-Agricultural Market Access (NAMA) the OECS’ objective in these negotiations has been to secure policy space and to secure flexibilities in implementing tariff liberalization commitments that take into account the small size of the economies measured as share of world trade, vulnerability and tariff revenue dependency. In the context of the DDA, the OECS is seeking flexibilities in market access for goods to mitigate the corresponding loss in fiscal revenue but also to lessen the effects of preference erosion on products of interest to the OECS. The SVE argument is gaining traction and several OECS members have been quite active in this group seeking modalities that will facilitate adjustment of small economies to the effects of liberalisation such as lower tariff reductions and longer transition periods for sectors which are both revenue and production sensitive.
Market access for bananas and products benefiting from long-standing preferences still remains a matter of concern. The July 2007 text submitted by the Chairman of the Agriculture Committee has flagged the issue for further work and analysis. The idea that Aid for Trade could be compensation for the loss of preferences has been mooted but this is not a position that is supported by the OECS particularly because of the lack of clarity on the definition of the scope and benefits to be derived by the region under this rubric.
In Services the OECS participation in the negotiations on services has been mainly in domestic regulation. The OECS called for flexibility based on recognition of specific concerns including capacity constraints related to financial, administrative and institutional capacity as well as size and level of development. Given the impact of changes in plurilateral and national regulations and on small economies, notably the OECD’s Financial Action Task Force (FATF) blacklisting of some
Trade Facilitation is an area of interest for the OECS in the negotiations as this issue is supportive of OECS interest in improving the environment for investment by reducing the cost of doing business. However, modalities in TF must include special and differential treatment provisions that address the constraints to implementation that would be faced by small developing island economies.
The negotiations on Article 27.4 of the Agreement on Subsidies and Countervailing Measures (ASCM) have been of keen interest to the OECS. As part of the SVE group, the OECS sought and has been granted an extension of the waiver of the obligations to eliminate export subsidies under this provision. A decision was taken at the July meeting of the WTO General Council to grant the waiver until December 2015 including a two-year phase out period. Despite the criticisms of these programmes the OECS maintains that they are significant in creating employment and stimulating export-oriented economic growth and diversification. Extensive reform of these programmes has been undertaken in
The OECS-WTO members have also participated in the Fisheries subsidies negotiations. Most OECS countries support the position articulated by a group of small vulnerable coastal states that modalities on fisheries subsidies should include appropriate special and differential treatment which would exempt the following from subsidies disciplines: development assistance to developing coastal states; assistance to artisanal or small-scale fisheries, access fees in fisheries access agreements; and fiscal incentives that facilitate the development of capabilities of small vulnerable coastal states.
Aid for Trade
Aid for Trade was brought into the Doha Round at the Hong Kong Ministerial. The OECS prefers to refer to this issue as Aid to Trade as the objective of the interventions under this should be to make countries achieve sustainable growth and development through trade and not to become mendicants. The OECS is also concerned that AFT not be put forward as a means of providing compensation for preferences. The OECS sees AFT as a means to address the challenges that Member States face in adjusting to the economic shocks from trade liberalization and to build medium to long-term competitiveness.
The OECS perceives AFT as comprising four components including:
i. Policy support, such that agencies including the IMF/World Bank can provide advice to governments upon request, for the mainstreaming of trade into their domestic policies such that export in their competitive areas can be enhanced;
ii. Infrastructural financing and support (“hard” technical assistance), such as improving roads, ports, airports, public utilities, trade-related laws, and regulations (all “hard” infrastructure that can be used to enhance trade); identification of alternative sources of energy and development of ICT. In this regard the OECS has received assistance from the Agency for International Trade Information and Cooperation in developing one such project proposal which can form the basis for an intervention to improve intra-regional maritime transportation;
iii. Trade adjustment financing for severance of workers in industries that close due to trade liberalisation. Donors could also help developing countries that so request it, to set-up unemployment insurance programmes. It could also be an area of investment;
iv Supply side support, such as assistance (financial and technical) to firms and small industries to build the capacity to become globally competitive. This could also include support for the Private Sector for the development of entrepreneurial skills and support systems for SMEs.
Aid for Trade should be simple to access and any adjustment assistance under this facility should be delivered in a timely manner. The OECS would also like to see a component that addresses the high level of indebtedness of the region. The OECS does not perceive the outcomes of AFT as being compensation for loss of preferences. AFT is also expected to be reflective of outcomes in the DDA and therefore should result in the provision of additional financing (or new sources of funds) and not the “recycling” or repackaging of existing financing instruments. AFT is seen as a new issue emerging from the Hong Kong Ministerial of December 2005. Previous trade-related technical assistance or development assistance could therefore not be appropriately defined as constituting AFT and therefore such assistance should not be computed into any AFT package.
Dispute Settlement
In 2003,
The developments in this case highlight the fact that the WTO system does not provide a level playing field. As a small economy there are few if any retaliatory measures that
The prospects for expanding the gaming sector are mixed.
Since the last trade policy review, the banana-producing OECS countries have continued to maintain third-party status in the ongoing consultation between the EU and the Latin American banana producing countries as the affected countries, namely
The banana issue continues to be a critical one and the further erosion or loss of preferential treatment would have the effect of completely decimating the once vibrant and now struggling banana industry in the OECS. This is an outcome of grave concern to these countries as it could only lead to further deterioration in the economic developmental prospects for the very small and vulnerable OECS economies.
The severe consequences for the OECS Member States are evident Banana production across the Caribbean, since 1999, has fallen by more than two-thirds and there has been severe economic and social dislocation as a result especially in the rural communities which were so reliant on production and export of bananas for sustainable livelihoods. Rural standards of living have fallen, migration to urban areas has increased significantly, creating new areas of pressure. Crime has increased, and generally, the development progress of these our countries have been set back. This is further reflected in a recent IMF Study which shows that the reduction in preferential market access for the OECS banana producers could see these countries experiencing a permanent loss of between 1-2% of GDP. For these small states, this is very significant. Despite this situation, the banana producing states continued to struggle to maintain some level of production within the framework of support still provided by the European Union, even though this framework is a far cry from what could be regarded as satisfactory.
Implementation of
The last trade policy review stimulated interest in the OECS and drew attention to their technical assistance requirements and the challenging circumstances under which national governments were attempting to implement
Meeting the transparency requirements of the WTO agreements has presented specific difficulty to the OECS. Efforts have been made to improve this since the last review; however, there are still persistent human, technical and financial resource constraints to full compliance with notification requirements. However, with external technical assistance, the implementation of the TRIPS agreement has advanced substantially since 2001.
The OECS apply MFN at the CET rate which is well below the WTO notified bound rates. The only possible exception being
Technical Assistance
The OECS continues to face severe constraints, both human and financial constraints with respect to trade policy implementation. The OECS-WTO members have benefited from several technical assistance programmes aimed at building capacity to formulate and implement trade policy in the period under review. Notably the CIDA-Trade Policy Project which ended in 2006, the Commonwealth Secretariat’s Hub and Spokes Project which is managed by the Commonwealth Secretariat and funded by the European Union in its second year and the establishment in the OECS and the OECS Geneva Technical Mission which was established with the financial support of the European Union. Member States have also benefited from training in trade policy from the WTO Institute for Technical Cooperation and IDB/INTAL. This assistance has heightened the importance of trade policy at the national level and increased the capacity of the public and private sector to treat with trade policy matters.
The CIDA had provided a programme of assistance to the OECS through a trade policy assistance project that was implemented over the period 2000 to 2006 called the Trade Policy Project (TPP). The project purpose was to strengthen OECS capacity in three areas: development and maintenance of an OECS international strategy, strengthen OECS capacity to meet obligations under regional and international trade agreements and to strengthen OECS capacity to participate effectively in international trade negotiations. The TPP has been one of the most successful and effective in terms of its impact on the beneficiaries. Its outputs included the establishment of the Trade Policy Unit (TPU), the preparation of subregional trade policy frameworks for agriculture, manufacturing and services, the funding of meetings of the OECS TNG, support for participation in trade negotiation through conduct of technical analysis and funding of participation in working sessions.
The technical mission in
The OECS Hub and Spokes Project commenced in June 2005 with funding from the Commonwealth Secretariat. Its objective is to enhance capacity of Member States to implement policy and participate in WTO and EPA negotiations. The project has provided technical assistance with preparations for the EPA negotiations and the WTO Doha Round by undertaking technical analysis related to preparations for the negotiations and training for trade officials and private sector in subjects such as agriculture, services and rules of origin. The OECS is among several ACP regions that will benefit from projects of this type to provide trade policy assistance to ACP states.
The
The OECS Legislative drafting facility is a CARICOM Project with an office located at the Secretariat to service the needs of the OECS. It was established in response to the drafting needs of Member States towards the harmonization of legislation in the implementation of the CSME. The project has drafted over fifteen pieces of legislation treating with competition policy, consumer affairs, investment, financial services, and intellectual property. Efforts are now being made to source additional support for the continuation of this facility.
7. Conclusion
The OECS trade policy is outward-looking and the group is seeking to continue to engage in the process of trade liberalisation through the multilateral and bilateral process. The region is faced with the challenges of sustaining a positive macroeconomic performance, reducing fiscal and debt imbalances and mitigating the vulnerabilities that are attendant to smallness and the region’s geographic location.
The OECS recognises that the current global environment has become increasing unfavourable for the maintenance of the type of market access arrangements that had sustained the expansion of their economies. There has been a move away from unilateral preferential arrangements to negotiated reciprocal agreements consistent with WTO principles. The OECS maintains that any reciprocal arrangement for developing countries, particularly small economies that have an infinitesimal share in world trade (0.00%) should not be obligated to undertake commitments that are not commensurate that with their level of development and size.
Deepening the regional integration process is one strategy that will be pursued to enhance the competitiveness of the region and reduce vulnerability of the OECS economies and the establishment of the CSME and OECS Economic Union will be given the highest priority.
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