Opinion
- Editorial
Sir Ronald
Sanders : A
US-Caribbean free trade area?
Should
Caribbean Community (Caricom) countries enter a
Free Trade Agreement (FTA) with the United States?
A few readers interpreted an observation that I
made in my commentary (US mid-term elections and
the Caribbean) to mean that I was advocating such
an agreement.
In
fact, I was not.
All
that I did was to point out that “the Caribbean
is yet to negotiate a Free Trade Agreement with
the US;” Caricom “has not seriously
focused” on such an agreement; and “time
may be running out to get negotiations for such
an agreement firmly underway” with the present
US administration since the authority that Congress
gave President George W Bush to sign such agreements
ends in July 2007.
The
matter of whether Caricom countries should enter
an FTA with the US is complex.
What
are the arguments for Caricom countries entering
an FTA with the US?
The
main argument is that the US has entered FTA’s
with other countries whose goods and services compete
with Caricom‚s in the US market. Among these
FTA’s is the agreement between the US, a number
of Central American countries and the Dominican
Republic.
When
these FTA’s are up and running, the exports
of these countries will displace Caricom products
in the US market because they will enter the market
on more advantageous terms.
Caricom
saw this happen when the North American Free Trade
Agreement (Nafta) was signed in 1994 by the US,
Canada and Mexico.
Prior
to Nafta, certain goods from Caricom countries enjoyed
duty-free treatment in the US market under the Caribbean
Basin Initiative introduced by the Reagan administration.
Once Nafta came into force, those goods could not
compete with similar products from Mexico.
But
the fact that the US is concluding FTA’s with
other countries and regions is not, by itself, sufficient
reason for Caricom countries to enter an agreement
with the US.
The
experience of Mexico with Nafta clearly demonstrates
that while there were benefits to Mexico in terms
of lower tariffs on Mexican goods entering the US
market, there was also a huge downside to the agreement.
For
example, the US used non-tariff barriers to block
Mexican products that began to give serious competition
to US produced goods. At the same time, heavily
subsidised US agricultural products, particularly
corn, entered the Mexican market cheaper than Mexican
farmers could produce them. This led to a displacement
of Mexican farmers in their own domestic market.
Further,
because Mexico had to drop its tariffs on goods
imported from the US, the government’s tax
revenues declined adversely affecting its public
expenditure programme on education, housing and
other social welfare programmes.
Caricom
countries would face similar problems unless the
FTA was carefully negotiated.
In
the cases of Antigua and Barbuda, the Bahamas whose
economies are almost entirely reliant on services,
particularly tourism and financial services, they
would hardly benefit from duty free entry to the
US market for goods. Conversely, their governments
would suffer a significant loss of revenue from
lowering tariffs on imports from the US.
But,
other Caricom countries such as Belize, Jamaica,
Guyana and T&T, could find advantage in securing
duty-free entry to the US market for certain commodities.
Having
said that, the point should also be made that already,
without an FTA, many small farmers in Caricom countries
have lost markets within their own countries because
subsidised US farm products are delivered to Caribbean
supermarkets and hotels at prices that make it very
difficult for local farmers to compete. An FTA which
requires Caricom countries to lower tariffs on imports
of US agricultural products would wipe out Caribbean
small farmers altogether.
In
all cases, Caricom countries would want to set certain
basic criteria for negotiations with the US. These
would include: a means of imposing duties on products
which the US subsidises; clear language to stop
the US from using non-tariff barriers to prohibit
exports into its market; non-reciprocity for the
reduction of tariffs on certain goods for a defined
period to allow Caribbean producers to develop the
capacity to compete; the removal of restrictions
on US imports of certain commodities such as sugar;
and access to US capital as grants or as loans on
soft terms to compensate for opening up Caribbean
markets (aid for trade).
None
of these criteria would be easy to achieve unless
the US was genuinely concerned with helping Caricom
countries to develop and grow. If US negotiators
view an FTA with Caricom in the same way that they
would regard an agreement with, say, the European
Union or South East Asian nations, then Caricom
would do well to scrap the idea before it starts.
What
has to be established firmly in advance of negotiations
on a Caricom-US free trade agreement is that it
would be development oriented.
Of
course, this is also the problem that the Caribbean
faces in its current negotiations with the European
Union (EU) for Economic Partnership Agreements (EPA’s).
Caribbean countries, like their counterparts in
Africa and the Pacific, feel that the EU is not
taking sufficient account of the development dimension
of the EPA’s.
And,
at the even wider international level, the global
negotiations on trade rules have stalled precisely
because although developed countries promised at
Doha in 2001 that these negotiations would focus
on development, they have done nothing of the sort.
This
is not to say that the US could not adopt a more
enlightened and ambitious approach to the Caricom
countries. For, the Caribbean is a very close neighbour,
and what happens in the Caribbean should matter
to the US.
A
genuine FTA with a strong development orientation
would help the small and vulnerable countries of
Caricom enormously. Given the relatively small size
both of the economies of Caricom countries and their
exports, the US would lose nothing by being generous
and would gain much in terms of showing concern
for its neighbours.
Sir
Ronald Sanders is a business
executive and former Caribbean diplomat (ronaldsanders29@hotmail.com).
Petroleumworld not necessarily share these views.
Editor's
Note: This article was first publish in Trinidad
Guardian on,
Thursday
23rd November 2006. Petroleumworld reprint this
article in the interest of our readers.
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Petroleumworld
11/26/06
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