I.                   introduction

1.                   The state of Grenada consists of the islands of Grenada, Carriacou, and Petit Martinique and has a land area of three hundred and forty-five square kilometers (or 133 square miles).  The population was estimated at 101,100 in 1999.  Grenada is the southernmost of the Windward Island Group situated in the Eastern Caribbean and is a member of the sub-regional grouping called the Organisation of Eastern Caribbean States (OECS).  As an OECS member, Grenada shares a common Central Bank and cooperates with the other member states in several economic and social areas.  Grenada is also a member of the Caribbean Community and Common Market (CARICOM) and the Association of Caribbean States (ACS).

2.                   Grenada is recovering from one of the most difficult periods in its economic history.  Grenada has been buffeted by several external shocks in recent years: the September 11, 2001 attacks in the United States which triggered a recession in 2001-02, Tropical Storm Lili in 2002, Hurricane Ivan in September 2004 (causing an unprecedented 200 per cent of GDP damage), Hurricane Emily in July 2005 (which caused additional 12 per cent of GDP damage), and, more recently, high world oil prices. As a result, economic growth has fluctuated sharply since 2001, unemployment and poverty have risen, and effective policy implementation has been hampered.  The poverty eradication and fiscal consolidation programmes that the Government of Grenada had initiated before Hurricane Ivan struck have also been derailed.  Reconstruction needs remain substantial, while fiscal imbalances, financing gaps and the public debt burden are high.

3.                   Two hurricanes in the space of 10 months, as well as recent and emerging global phenomena, have contributed to defining Grenada’s current socio-economic situation.  Hurricane Ivan, which affected the island in September 2004, severely impacted the country’s economic and social sectors, resulting in the contraction of the productive sectors, dislocating the labour force, and destroying schools, houses and buildings, as well as disrupting key infrastructure such as electricity and telephones.  Hurricane Emily, which struck the country in July 2005, though not as destructive as the previous one (Hurricane Ivan), affected the Northern part of the island and, in particular, the food crop sector, which was in the process of recovering from Hurricane Ivan.  The damage to the economy is estimated at EC$2.4 billion as a result of Hurricane Ivan with an additional EC$140 million following the passage of Hurricane Emily.  Fifty-eight per cent of the damage caused by Hurricane Ivan was attributed to the housing sector.

4.                   As a Small Island Developing country, Grenada is constrained in its development by a number of factors.  These include: susceptibility to natural disasters;  limited diversification due to a very narrow resource base and small domestic market;  limited domestic and export production on a limited number of products;  Inadequate Infrastructure;  and low levels of productivity.

II.                Macro-economic Environment and Trade PERFORMANCE

(i)                 Macro-economic Performance

5.                   The domestic economy in 2006 was influenced primarily by developments in the major industrial economies to which Grenada’s economy is linked.  Those developments include:

·                     An increase in global output by 5.1 per cent, and

·                     Relatively high rates of inflation, fuelled mainly by the high price of oil particularly during the earlier part of the year.

6.                   Grenada has had a relatively diversified economic structure, based on the contributions of agriculture, manufacturing, tourism, construction, communications, transportation and government.  Its economy experienced impressive growth during 1997 and 2000, a period of relative stability, with real GDP growing from 4.42% to approximately 7% .  As might be expected after the September 11^th disaster in the United States, one of the leading tourist markets, GDP is estimated to have declined by 4.36% in 2001.  In addition, the transportation and construction sectors, which are linked with the travel and tourist sectors, were adversely affected by the September 11^th disaster.  Signs of recovery were evidenced in the Years 2002 and 2003, mainly as a result of the upturn in tourism.  Grenada however suffered a major set back with the passage of Hurricane Ivan in September 2004.  It is estimated that Grenada’s real GDP declined by 6.9 per cent in 2004 (see table A1).

7.                   Agriculture had been in decline before the passing of Hurricanes Ivan and Emily despite showing good growth in 2002.  Agricultural output declined by 7.33 per cent in 2004 and significantly more (38 per cent) in 2005.  The tourist sector, whose positive contribution in 2003 turned negative in 2004, showed a significant decline of 42.5 per cent in 2005, as most accommodation establishments remained inoperative until the winter season of 2005.  In the case of manufacturing, the sector, which had been in decline from 2001 to 2003, experienced a further decline in 2004.

8.                   The economy is estimated to have rebounded with a growth rate of 12.9 per cent in 2005, mainly as a result of the extensive rehabilitation and reconstruction programmes necessitated by the hurricanes.  As might be expected, the construction sector was the main contributor, with an estimated 91 per cent increase in output in 2005.  In keeping with the increased construction activity, the retail and wholesale sector also showed appreciable growth.  The manufacturing sector also grew by 18.8 per cent reflecting the increased demand for chemicals and paints for use in the reconstruction programme.  Preliminary data show that in 2006, the economy of Grenada recorded positive real growth of 1.3 per cent compared to an unsustained rate of 12.1 per cent recorded in the previous year. All the major productive and services sectors of the economy have shown signs of recovery and are contributing to this growth.  For example, the agricultural sector grew by 20.5 per cent in 2006 following a decline of 38.1 per cent in the previous year.  This growth was reflected in increased production of crops, livestock, forestry and fishing.

9.                   The Hotels and Restaurant sector, a proxy for the tourism industry, grew by 65.0 per cent as most of Grenada’s hotels are now up and running.  On the other hand, value added in the construction sector declined by 20 per cent (as was expected) following substantial growth of 91 per cent in the previous year.  In short, with all of the productive and service sectors contributing positively to growth, the economy of Grenada has become more diversified, and less dependent on one sector.

10.               An examination of the public finances indicates that Grenada registered a positive balance on current account during 2000 and 2003.  In 2004, however, it recorded a deficit of EC$28.3 million.  A surplus of EC$60.6 million was recorded in 2005 mainly as a result of the collection of arrears and strong growth in imports stimulated by the reconstruction requirements.  As is the case for most developing countries, Grenada’s overall fiscal balance is negative.  However sharp increases in the deficit are noticeable in 2001 and 2002, while an improvement is observed in 2003.  The public debt, while considered to be sustainable, showed a tendency to rise over the period 2001 – 2003.  By 2004, having reached a debt/GDP ratio of 129%, it was considered unsustainable.  Debt servicing, which increased from 18% in 2001 to 34% in 2003 and was budgeted at 35% in 2004, accounts for large portions of the current expenditure.  However, in November 2005, the Government of Grenada negotiated a debt re-scheduling agreement with its commercial creditors resulting in savings in debt servicing of US$135 million over a ten year period (Budget Speech 2006).  The Government also negotiated debt relief with the Paris Club in 2006.

11.               The General Consumption Tax on imports is the highest single component of Government revenue, contributing 27 – 29 per cent of revenues.  Import duties accounted for 11 per cent of revenue in 2001 and 2002, and an estimated 13 per cent in 2003.  On the whole, taxes on international trade and transactions contribute 49 – 54 per cent of current revenue.  Corporate taxes account for 10% of revenue, while personal income tax accounts for 3.2%.  The General Consumption Tax on domestic goods contributes approximately 9% to total revenues.

12.               Unemployment was estimated at 18.5% in 2005, having reached as high as 40% in the aftermath of hurricane Ivan.  The reduction in the rate can be explained by the significant increase in demand for construction workers to the extent that workers were imported from the Region to satisfy demand.

13.               Total Central Government debt at December 31, 2005 stood at EC$1.4 billion or 108.7% of GDP, comprising 85.5% external and 14.5% domestic.  This can be compared with a debt stock of EC$1.2 billion in 2004, comprising 72% external and 28% domestic.

(ii)               Trade and Sectoral Performance

14.               Grenada registered a deficit on the balance of payments on current account over the period 1998 to 2005.  The services sector, mainly tourism, accounted for a net positive balance, while the visible balance of trade has been in deficit estimated at EC$488 million in 2003, the year prior to the Hurricane.  The current account balance improved in 2004, largely as a result of a substantial increase in remittances and insurance payments.  Current transfers increased 232 per cent in 2004.  This contributed to the deficit on current account declining to EC$159.2 million.  The balance on current account again deteriorated in 2005, mainly as a result of a further decline in exports of goods and services.  The overall balance of payments has been positive for most of the period, largely as a result of inflows of direct investment and capital transfers.  Negative overall balances were however recorded in 2003 and 2005.

15.               In determining the economy’s internal dynamic, it is necessary to focus on the factors underlying the current account.  It will be observed that the value of domestic exports has been in decline in the pre-hurricane period, during the years 2001 to 2003.  Agricultural exports declined from a value of EC$54.5 million in 2001 to EC$46.3 million in 2003.  Similarly, manufacturing exports indicated a significant decrease in value from EC$93.8 million in 2001 to EC$33.9 million in 2003.

16.               Needless to say, the hurricanes have adversely affected Grenada’s export performance and its balance of payments.  Its major export crops –nutmeg, cocoa, mace and bananas – as well as its main service export – tourism all contracted as a result of the hurricanes.

TOURISM

17.               The Hotel & Restaurant sector contracted in 2005.  Growth was estimated at negative 42.5% compared to a negative growth of 13.1% obtained in 2004.  Stay-over visitors decreased by 26.6%, from a level of 133,865 in 2004 to 98,244 in 2005.  The number of cruise ship calls increased from 249 in 2004 to 257 in 2005, reflecting an increase of 19.7% in cruise passengers from 229,800 in 2004 to 275,080 in 2005.

CONSTRUCTION

18.               The construction sector was the fastest growing sector in the aftermath of Hurricane Ivan.  Growth in 2005 was estimated at 91.0%.  Retail sales of building materials increased significantly by 114.1%.  Demand for cement and other materials remained strong, indicating that this sector would continue on its strong growth path in 2006 and 2007.

MANUFACTURING

19.               The manufacturing sector consists of a variety of products, namely wheat flour, beer and brewery products, bottled water, clothing, paints and chemicals.  While small, the sector has contributed to the diversification of the economy.  However, it has been in decline and faces strong competition with the advent of the CSME and in particular from neighbouring Trinidad, which has considerable cost advantages.  Grenada, together with the other least developed countries within the CSME, nevertheless, has negotiated a ten-year period during which selected manufacturing industries will be given protection, thus providing them an opportunity to reorganize and be better able to cope with the full implementation of the CSME.

20.               Output in the Manufacturing sector was driven by significant increases in the production of chemical and paints of 81.6% in response to the construction boom.  The value of output for the other industries showed positive growth reflecting the fact that the economy is on a growth recovery path.  This sector grew by 18.8% in real terms in 2005.

21.               The manufacturing sector in Grenada suffers from high unit costs of production arising from a significantly high proportion of imported inputs, high overhead costs, the application of inappropriate technology and high cost of borrowing for initial investment and working capital.  The sector is been granted assistance in the form of duty free importation of inputs and corporate tax exemption.

22.               The National Export Strategy developed by the Government is aimed at facilitating international competitiveness and enhancing productivity and output in the manufacturing sector.

AGRICULTURE

23.               The Agricultural sector has been an important contributor to the Grenadian economy in terms of its contribution to Gross Domestic Product (8.7% in 2004), employment, income and foreign exchange earnings.  The sub-sector components indicate that nutmeg made up 59% of agricultural exports in 2003, cocoa (7%), mace (7%) and fish (25%).  Agricultural exports have shown a decline in value over the period 2001 to 2005, thus contributing to the declining balance of trade over the same period.  Both price and quantity have shown some volatility over the period 1998 to 2005.

24.               Given the importance of Agriculture to the economy, Government policies in the agricultural sector are aimed at improving productivity, efficiency and product quality.  The Government will concentrate on increasing production and value-added in the sector and ensuring rural development and food security.

25.               Following the severe devastation of the sector by Hurricanes Ivan and Emily in 2004 and 2005 respectively, the Government of Grenada agreed to an agricultural sector strategy and policy document titled ‘Modernizing Agriculture in Grenada:  A National Policy and Strategy’.  The policy document highlights the need to provide an enabling environment that enhances commercial viability, facilitate private sector investment and enhance the commercial perspective throughout the sector. Given the major focus of rehabilitating the sector, the Government in its 2007 Budget, allocated 14.3 per cent of the Capital Investment portfolio to the agricultural sector.  The nutmeg, cocoa and food crops sub-sectors remain important pillars of the agricultural sector in Grenada.

III.             Government Economic Reforms Programmes 2006-2008

26.               The Government of Grenada has undertaken a reform programme for the period 2006-2008 entitled – “Enhancing Growth, Poverty Alleviation and Macroeconomic Stability”.  The main goals of the program are to:  promote sustained high economic growth by improving the climate for private investment;  restore fiscal and debt sustainability through fiscal consolidation and reform;  reduce vulnerabilities by safeguarding the soundness of the financial system;  and reduce poverty through more effective social development programmes and safety nets.

27.               In order to achieve the above goals, the Government of Grenada will, during the period 2006-2008, undertake the following reforms:

·                     Debt Restructuring:  The Government has already undertaken and was successful in its debt restructuring involving its commercial creditors.  This debt restructuring exercise was concluded on November 15, 2005, resulting in substantial lowering of debt service payments for the next few years.

·                     Investment Promotion:  Steps will be taken to ensure that Grenada Industrial Development Corporation (GIDC), our investment promotion agency, plays a more prominent and proactive role in promoting the country as an attractive investment destination.  Higher private investment is critical to sustaining growth beyond 2007.  The Government is in the process of preparing a new Investment Code which will be legislated by the end of 2007.  This Code will, inter alia, improve and clarify the legal system for investment in Grenada;  outline investor rights and obligations;  detail investment procedures and the means to access fiscal incentives.

·                     Tax Incentives:  The Government has initiated reforms to the present costly and complex system of tax incentives.  During 2000–02, revenue forgone from import duty and consumption tax concessions were nearly 11 per cent of GDP.  In 2003–04, Government took steps to curtail concessions, although these efforts were set back by Hurricane Ivan.

The Government took the decision, effective, January 1, 2006, not to grant any new tax holidays or renew expiring ones;  incentives thereafter will be provided in the form of tax write-offs for investment and after June 1, 2006 through accelerated depreciation with loss carry forward provisions.  The Government will also repeal the Investment Code Incentives and Qualified Enterprises Acts by the end of 2007.  These little used Acts give wide discretionary powers to grant tax concessions in many areas.

·                     Public Sector Modernization Programme:  The Government will undertake reforms to enhance the performance appraisal system in the civil service and improve the efficiency and quality of government services, including through commercialization.  With assistance from the World Bank, Government is undertaking a Public Sector Modernization Programme that will be implemented during 2006-10.

·                     Value Added Tax:  In order to reduce the Country’s reliance on international trade taxes, Government will introduce a value added tax (VAT) in 2008.  Work on this had commenced before Hurricane Ivan struck in 2004.  The VAT will replace the ticket tax, motor vehicle tax and the existing general consumption tax that applies on a relatively narrow base and has multiple and varying rates for domestic and imported goods.  To broaden the base, the VAT will only incorporate standard exemptions (financial, education and health services, etc) with a zero rate for exports.  The VAT and accompanying system of excises will be calibrated to be broadly revenue neutral.

·                     National Export Strategy:  In 2006, the Trade and Industry Division, Ministry of Finance in collaboration with the Private Sector, other Government Agencies and Non-Governmental Organizations, developed a National Export Strategy (NES) for Grenada.  The objective of the NES is to improve export performance through improved national competitiveness, value addition, improved quality and reduction of the cost of production.

28.               The NES has identified five priority sectors.  These sectors include:

            (1)     Agriculture (nutmeg, fruits and vegetables and fish);

            (2)     Manufacturing (aerated beverages, water, alcoholic and non-alcoholic beverages,              processed nutmeg products, and light manufacturing (paints, roofing sheets, garments               and paper products);

            (3)     Tourism (attractions, yachting and cruise tourism);

            (4)     Services (education, professional, engineering and engineering related services and            entertainment);

            (5)     Gifts and craft items.

29.               The implementation of this Strategy will require considerable resources – financial, human and institutional.

·                     Simplification of Customs Procedures:  There will also be comprehensive reforms taken in simplifying customs clearance.  The envisaged reforms at the Customs Authority will seek to reduce the amount of paper work and time (currently as much as 4 days) needed to clear imports through the Ports.

·                     Dismantling Price Controls:  To foster the functioning of markets and efficient allocation of productive resources, the Ministry of Finance plans to abolish the small number of items under price controls with the exception of a few essential items such as rice, chicken, sugar, medicines, biscuits etc, for cost of living reasons.

·                     Debt Management:  The Government will undertake steps to enhance our debt management capacity and transparency.  With assistance from the Commonwealth Secretariat and the ECCB, the Government intends to upgrade the debt recording systems.  The Government further intends to implement a debt management strategy with a view to improving the debt profile and lowering vulnerabilities, including through retiring expensive debt with any financing surpluses that accrue and asset sales.  Due consideration has also been given to divesting remaining government assets and using the proceeds to retire debt and approved capital expenditures subject to strict rate of return analysis.  While most of the privatization and divestiture occurred in the 1990s, the Government retains small share holdings.

·                     Supervision of the Financial Sector:  To strengthen the supervision of the banking sector, the Government passed a new Uniform Banking Act in August 2006, making Grenada one of the first countries in the Region to do so.  Our banks are now supervised under this new Act. To strengthen the supervision of the non-bank financial sector which includes the insurance sector, cooperatives, the offshore sector and money changers, a new Act was passed in Parliament in 2006 for the Regulation of Financial Institutions (GARFIN).  The Act establishes a single supervisory agency for the non-bank financial sector.  GARFIN became operational on February 1^st, 2007.

IV.              Trade Policy and institutional framework

(i)                 Grenada Trade Policy

30.               Grenada is actively engaged in the negotiation of multilateral, regional and bilateral trade agreements as a means of securing its trade interests and enhancing trade performance.

31.               The main objectives of Grenada’s trade policies are:

            - To improve competitiveness in the manufacturing sector;

            - Diversification of the agriculture sector;

            - Development of the services sector to be internationally competitive;

            - To gain greater market access for non-traditional sectors;

            - Export led growth;

            - To generate sustained economic growth and reduction of poverty.

32.               In order to achieve the above objectives, there will be strong public/private sector dialogue.  In order to have more public/private sector involvement in trade policy formulation, Cabinet has appointed a National Trade Policy Committee, comprising representatives from the public sector, private sector and civil society, in a consultative mechanism which informs the development of trade policy and positions for trade negotiations.

(ii)               Institutional Framework

33.               The Ministry of Economic Development and Planning now has responsibility for the formulation of trade policy as it relates to international trade and for the negotiation of trade agreements.  A number of other Ministries and agencies are also engaged in the formulation and implementation of overall trade policy namely the Ministries of Finance, Tourism, Agriculture, Foreign Affairs, Legal Affairs, Health and the Environment, Prime Minister’s Office and the Ministry of Works and Communications, and trade related agencies such as the Grenada Bureau of Standards and the Grenada Industrial Development Cooperation.

34.               The Ministry of Economic Development and Planning also coordinates the work of the Cabinet appointed National Trade Policy Committee, which brings together representatives of Ministries and Departments with a bearing on trade policy, as well as representatives of the Private Sector and Civil Society, in a consultative mechanism which informs the development of trade policy and adopt positions for trade negotiations.

35.               Grenada’s position for trade negotiations, agreed to by the National Trade Policy Committee, is fed into the OECS Trade Negotiating Group (TNG), which comprises representatives from the Public and Private Sectors of OECS member states.  Positions of the TNG are fed into the various CARICOM Technical Working Groups and harmonized as much as possible into an overall CARICOM position.  Any position adopted by CARICOM in external negotiations must be approved by the Council for Trade and Economic Development (COTED).

36.               The Region’s trade position is collectively represented at external fora by the Caribbean Regional Negotiating Machinery (CRNM).  The Caribbean Regional Negotiating Machinery (CRNM) was created by the Caribbean Community (CARICOM) Governments to develop, coordinate and execute an overall negotiating strategy for various external trade negotiations in which the Region is involved.  The CRNM is responsible for developing and maintaining a cohesive and effective framework for the coordination and management of the Caribbean Region’s negotiating resources and expertise.

V.                 CARICOM SINGLE MARKET AND ECONOMY, BILATERAL AND PREFERENTIAL TRADING ARRANGEMENTS

37.               Over the last decade Grenada’s trade policy evolved as a result of its participation in international, regional and bi-lateral trade agreements.  The change in trade policies reflected a shift from import substitution to a more liberalised trading system.  The erosion of trade preferences, including the trend towards liberalization of world trade, the establishment of the WTO and the proliferation of regional trade agreements have all impacted on the formulation of Grenada’s trade policies.

38.               As a member of the Caribbean Community, Grenada’s policy decisions on trade are taken in consideration of the country’s obligations under the Revised Treaty of Chaguaramas.

(i)    CARICOM Single Market and Economy

39.               To further deepen the integration process, CARICOM Governments decided in 1989 to establish the CARICOM Single Market and Economy (CSME).  The aim of the Single Market is the creation of a single economic space to facilitate the free movement of goods, services, capital and people across the Region for the efficient and competitive production of goods and services.  The Revised Treaty also makes provision for the establishment of a Single Economy through harmonisation, coordination and convergence of macro-economic policies in a number of areas including, capital market integration and development, investment and incentives policy harmonisation, fiscal policy harmonisation, corporate tax harmonisation and monetary union.  It is expected that the Single Economy will be implemented by 2015.

40.               The Single Market was implemented on January 1^st, 2006 and was formally signed onto by Jamaica, Barbados, Belize, Guyana, Suriname and Trinidad and Tobago.  Grenada, together with the rest of the OECS sub-grouping, officially joined the Single Market arrangement on July 3, 2006.

41.               The expected benefits of the CSME include greater efficiency in both the private and public sectors, higher levels of domestic and foreign investment, increased employment, and growth of intra-regional trade and of extra-regional exports.

(ii)               Bilateral Trade Agreements

42.               Grenada, together with its CARICOM partners, has negotiated Bilateral Trade Agreements with the following countries: Colombia, Venezuela, the Dominican Republic, Cuba and Costa Rica.

(iii)             Preferential Arrangements

(a)        Cotonou/Economic Partnership Agreement - The Cotonou Agreement, which was signed in June 2000 between the African, Caribbean and Pacific (ACP) States and the European Union, provides for trade and economic development between the EU and ACP countries.  It is also aimed at gradual and full integration of the ACP States into the world economy by enhancing their production, supply and trading capacity, as well as their capacity to attract investment.  This non-reciprocal trading arrangement will be replaced by WTO-compatible Economic Partnership Agreements (EPAs).  To facilitate the transition, current non-reciprocal preferential trading arrangements will remain in place until the end of 2007.  The EPAs are to enter into force in January 2008.

(b)        Caribbean Basin Initiative (CBI) - The Caribbean Basin Initiative (CBI) commenced in 1984 under the Caribbean Basin and Economic Recovery Act (CBERA) with amendments through the Caribbean Basin Trade Partnership Act (CBTPA).  This Agreement provides Grenada with preferential access to the market of the United States of America.  Benefits under the CBTPA are available until 2008.  CARICOM is exploring the possibility of negotiating with the U.S. a successor Agreement to CBI/CBTPA.

(c)        CARIBCAN - The CARIBCAN programme, which was introduced in 1986 covers trade, investment and industrial cooperation between Canada and the Commonwealth Caribbean countries.  This program provides Grenada’s exporters with preferential access to the Canadian market. CARICOM is also exploring the possibility of negotiating with Canada a successor Agreement to CARIBCAN.

(d)        Free Trade Area of the Americas - the Government of Grenada also participated in the negotiations towards the establishment of the FTAA.  The FTAA, should it have been completed in 2005, would have been the world’s largest free trade area with a population of over 800 million persons and a combined GDP of US$13 trillion.  Negotiations however stalled since 2004 and to date have not resumed.

VI.              WORLD TRADE ORGANIZATION

(a)                Implementation of the Uruguay Round Agreements

43.               Grenada became a WTO Member in February 1996.  Under the GATS, Grenada made initial commitments on tourism (hotel development), recreational (entertainment and sporting services), communications (telecommunications and courier services) and financial services (reinsurance).  Grenada presented an offer in the extended WTO negotiations on telecommunications, but did not participate in the continued negotiations on financial services.  Grenada subscribed to the Fourth Protocol on basic telecommunications on 4 December 1997, and the Agreement entered into force on February 5 1998.  Given the importance of a competitive and improved infrastructure in telecommunications, the Government of Grenada, together with other OECS Member States, established the Eastern Caribbean Telecommunications Authority (ECTEL), which has responsibility to promote market liberalization and competition in telecommunications of the contracting states.  As a result of this initiative there was an Agreement between ECTEL member states and Cable & Wireless, the monopoly supplier of telecommunications, which paved the way for the liberalization of the telecommunications sector in the ECTEL states.

44.               Grenada bound all tariff lines upon its accession to the WTO in 1996.  Tariffs on products classified under HS headings 25-97, other than those included in Annex I of the WTO Agreement in Agriculture, were bound at a uniform rate of 50%.  Agricultural products (WTO definition) were bound at a ceiling level of 100%, with an implementation period of six years.  Some exceptions were bound at lower rates (i.e., boneless meat, soybean oil, potato chips, breakfast cereals, cocoa butter, food preparations).  Some products were bound at zero rates, generally for products used as inputs (e.g. some seeds, inedible tallow, and soybean meal).  A number of fruits (e.g., bananas, pineapples, citrus fruit, etc), as well as spices (e.g. cloves, nutmeg, mace, ginger, saffron, turmeric) were bound at 200%.  In 2003 Grenada successfully renegotiated the bound rates under Article XXVIII of GATT for the following tariff headings:

45.               The main reason for the renegotiation is the renewed focus on the structural transformation of Grenada’s economy through, inter alia, an emphasis on the agricultural development of certain industries of critical importance to our food security and rural development objectives.

46.               To date however, the legislative actions necessary to incorporate the WTO Agreement into national law in order to enable Grenada to comply with its WTO obligations, remain incomplete.  This situation was attributed to a number of factors including limited financial resources and technical personnel.  Notwithstanding the scarcity of technical and institutional resources, Grenada is committed to honouring its obligations under the WTO.  Grenada has started the process of amending its legislations so that the country can be WTO compliant.

47.               Work is currently ongoing to have the WTO Customs Valuation Agreement implemented in 2008, together with the new value added tax.

48.               Few changes have been made to Grenada’s intellectual property laws and agreements since its previous TPR.  Grenada is a member of the World Intellectual Property Organization (WIPO) and a signatory to a number of international agreements on intellectual property rights, which includes: Paris Convention for the Protection of Industrial property, Stockholm Text 1967;  Berne Convention for the Protection of Literary and Artistic Works 1971;  and Patent Corporation Treaty 1970.  Grenada has not signed any additional treaties on intellectual property since 2001.  Grenada’s national laws on intellectual property predate the WTO TRIPS Agreement.  To that end, the Ministry of Legal Affairs, with the assistance of WIPO, is working towards implementing WTO TRIPs compliant legislation.  The Ministry has set the target date of 31 December 2007 for the enactment of new legislation.

49.               In the Memorandum of Economic Policies submitted by the Government to the IMF, the Government indicated that steps will be taken to abolish price control items except on a few essential items.

50.               Grenada has notified the WTO that the Grenada Bureau of Standards is its enquiry point and national notification authority as foreseen in the Agreement on Technical Barriers to Trade.  Grenada adopted the WTO Code of Good Practice for the preparation, adoption and application of standards in 1997.  During the period under review, Grenada also notified a number of technical regulations to the Committee on Technical Barriers to Trade (TBT) before their adoption.  In addition, Grenada notified to the Committee on Technical Barriers to Trade its requirements for labelling of pesticides and other toxic chemicals, domestic electrical appliances, and retail packages of cigarettes.[1]  Grenada notified to the TBT Committee its specification for four food-related products:  wet seasoning, brewery products, packaged water, and for the sampling, tests, and analysis of rice.[2]  Grenada has also notified its specification for rum, for safety matches and its requirements for the approval and licensing of child care homes.[3]

51.               Work is now ongoing to upgrade existing legislations such as the Plant Protection Act, Pesticides and Toxic Chemicals Act.  A new Food Safety Act will also be implemented.  These measures would ensure that Grenada continues to be compliant with its WTO SPS obligations.

52.               Grenada maintains a licensing system to regulate the importation of certain goods.  The import licensing system is applied for regulating and monitoring purposes and security purposes.  Its objective is in no way to restrict the quantity or value of imports.

53.               Grenada's import-licensing regime has been notified to the WTO.  Grenada replied to the questionnaire on import licensing procedures in October 2006.[4]  The licensing regime is regulated by the Supplies Control Act CAP. 314 and the Supplies Control Regulations (Section 3).  The regime is administered by the Ministry of Finance and Trade through its Consumer Affairs Division.

54.               Grenada has made an important effort concerning notifications.  Although prior to 2001 Grenada had made no notifications to the WTO, it has since submitted notifications in the following areas, see table below.

Notifications made by Grenada to the WTO, Jan. 2001-Mar. 2007

Source:    WTO Secretariat.

(b)               Grenada’s Position on the Current Round of Negotiations at the WTO

55.               Grenada remains committed to the multilateral trading system and the liberalisation process. However, liberalisation must be at a pace and with levels of reductions which the economy can sustain.

56.               Grenada is an active participant in the current round of negotiations under the Doha Development Agenda. Grenada participates in the discussions in Agriculture, Non Agriculture Market Access (NAMA), Trade in Services, Trade Facilitation, Implementation Issues and Trade and Development.

57.               The gravity of the difficulties faced by small, vulnerable economies, as well as the clear mandate provided in the Doha Ministerial Declaration and reaffirmed in the 2004 July Package, make it necessary for the WTO to agree on concrete responses to the specific problems identified by small, vulnerable economies in the Committee on Trade and Development and in negotiations in other WTO bodies. Within the WTO context, small vulnerable economies like Grenada should not be required to undertake similar obligations as the more advanced developing countries.

58.               Market Access (agriculture and non-agriculture) - A major concern for Grenada as a consequence of trade liberalization is the loss of government revenue. At present, approximately 55% of Grenada’s total revenue is obtained from taxes on international trade.  The benefits of trade liberalization can be outweighed in situations where Governments are dependent on these duties as a key component of government revenue.  A drastic reduction of government revenue from international trade taxes could have a negative effect on the fiscal balance and government’s ability to provide social services to its people.

59.               As a Small, Vulnerable Economy (SVE), Grenada should be required to undertake lower rates of reduction in its tariffs, and be allowed longer transition periods, to help mitigate the negative effects which tariff liberalization can have on government revenue, small manufacturers and producers.

60.               In the market access negotiations there should also be substantial improvement in market access for products of export interests to SVEs such as Grenada.

61.               Grenada should be given the right to designate a number of tariff lines as special products based on food security, livelihood security and rural development needs.  Added to this, given the importance of agriculture in achieving the above objectives, in the agriculture negotiations there should be in place a special safeguard mechanism for agricultural products.

62.               Service - In keeping with Grenada’s obligations under the GATS Agreement, the Government submitted its initial offer in services to the WTO.  This offer represents a commitment by the Government to the WTO and to the Services negotiations.  The Government views the initial offer, within the context of Article XIX of the GATS, as a reasonable and generous commitment to the goal of achieving progressively higher levels of liberalization.

63.               In addition to sectors scheduled, Grenada offers further commitments in the following Services Sectors:

·                     Research and development services;

·                     Other business services;

·                     Educational Services;

·                     Rental and leasing of yachts;  and

·                     Transport services.

64.               The services’ negotiations component of the Doha Development Agenda (DDA) are significant for Grenada as the country seeks to diversify its economy.  Grenada wants to see more commitments especially by developed countries under Mode 4, movement of natural persons, which will allow its services providers to temporarily move to provide services in those markets.

65.               Trade Facilitation - The Government of Grenada welcomes the negotiations on Trade Facilitation to improve and clarify GATT Articles V, VIII and X, which will result in the speedier release of goods through customs and eventually result in a reduction in transaction costs.

66.               The negotiation of new disciplines in the area of trade facilitation will result in new obligations to the Government of Grenada, and will require both financial and human capital. Accordingly, if Grenada is to effectively discharge those additional obligations effectively, there is need for technical assistance to build infrastructure in order to modernize Customs Administration.

67.               It is also imperative that there are concrete results in the negotiations on special and differential treatment and implementation-related issues, which remain at the core of the development dimension of the Doha negotiations.  If the current negotiations are to yield tangible benefits to Grenada, there is a need to ensure that adequate policy space is maintained to enable the country to undertake liberalization commensurate with its development needs.

68.               Grenada welcomed the initiative announced at the Hong Kong Ministerial Meeting in December 2005 on Aid for Trade.  The country firmly believes that Aid for Trade should involve:

·                     Adjustment costs- cost of preference erosion, cost of compliance with product standards, assistance with implementing WTO Agreements, cost of tariff revenue as a result of tariff reduction;

·                     Supply side capacity building;  and

·                     Trade-related infrastructure.

69.               Small vulnerable economies should be offered meaningful packages under the programme to develop and expand their trade.

VII.           Technical Assistance

70.               Grenada as a small developing country faces tremendous problems in its implementation efforts.  Lack of human and financial resources have severely constrained the enforcement of our commitments.

71.               The country welcomes the technical assistance it has received from the WTO.  In particular, Grenada has trade-related technical assistance needs in various areas, especially as it relates to the implementation of trade-related agreements, capacity-building for participation in trade negotiations and the formulation of trade policy.

72.               Technical Assistance is also needed in the following areas:

            - Technical support for agricultural research and training;

            - Assistance in developing domestic infrastructure in the agriculture sector;

            - Assistance in meeting SPS requirements in the export market;

            - Support for the development of our Bureau of Standard to undertake testing;

            -           Customs Automation – specifically a system for Electronic Data Interchange which will allow importers to transmit documents and  information electronically prior to the importation of goods;

            - Electronic Publication of Laws, Regulations and Procedures;

            - Development and Implementation of Risk Management System;

            - Mechanism for Post-Clearance Audit;

            - Assistance to develop Trade Facilitation National Needs Assessment.

Table A1: Gross Domestic Product (GDP)

Real Growth by Sectors 2003-2005

Source:    ECCB/Central Statistical Office.

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