RNM UPDATE 0801

March 27, 2008

Prepared by the Information Unit of the Caribbean Regional Negotiating Machinery (CRNM), this electronic
newsletter focuses on the RNM, trade negotiation issues within its mandate and related activities.

• THE OFFICIAL RELEASE OF THE EPA TEXT

• OAS STRENGTHENS THE ABILITY OF REGIONAL NEGOTIATORS TO ANALYZE
INTERNATIONAL TRADE FLOWS
• CRNM EPA REFLECTIONS
• WTO UPDATE
• ANTIGUA VS. THE US: THE BEGINNING OF THE FINAL CHAPTER
• NEWS BRIEF
• UPCOMING EVENTS

THE OFFICIAL RELEASE OF THE EPA TEXT

BRIDGETOWN, BARBADOS The legal scrub of the CARIFORUM- EC Economic Partnership

Agreement has been completed. As a consequence the Text has been authorized by Heads of
CARIFORUM for official release.

Commenting on the official release, Caribbean Regional Negotiating Machinery (CRNM) Director-
General Ambassador Richard Bernal said,

“The Text that has been released reflects the result of the legal scrub which was a verification
process that checked the Agreement for errors and consistency in use of terminology.”

“The Text has been distributed to Member States where a process of legal review has been
inaugurated to ensure consistency between the EPA and domestic laws. When that process has
been completed, the respective Cabinets can confer authority to a Minister to sign the EPA.”

It was previously agreed that signature of the EPA text would take place in April. However, this will
no longer be possible. As the Director-General explained, “The legal scrub has taken longer than
was anticipated. It is necessary therefore to allow Member States enough time to complete their
legal review of the text. Meanwhile, the European Commission will be completing their internal
process of translating the EPA text into all of the official languages. Additionally, the College of
Commissioners will be seeking the authority of the EU General Council to sign the Agreement.”

Signing by the EC and all the participating CARIFORUM Member States must occur before
provisional application can be activated. The CARIFORUM Heads have committed themselves to
take the necessary steps to complete their internal review processes in a timely manner to facilitate
signature and provisional application of the Agreement by 30 June 2008.

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OAS STRENGTHENS THE ABILITY OF REGIONAL NEGOTIATORS TO ANALYZE
INTERNATIONAL TRADE FLOWS

The Organization of American States (OAS), a long standing donor contributor and supporter of
Caribbean development has partnered with the Caribbean Regional Negotiating Machinery
(CRNM) to develop a regional trade statistics database. The funding commitments from the OAS
have enhanced CRNM’s ability to identify the short and long-term needs for trade information and
to develop a database for Caribbean trade statistics that can be updated on an ongoing basis by
the Member States.

This OAS-CRNM partnership bears strategic development importance. Trade is becoming an

ever-more essential part of the Caribbean economy as countries participate in an increasing
number of trade negotiations and confront an international trade agenda of growing complexity.
The effective participation of the Caribbean region in external negotiations is contingent upon the
availability of accurate and timely trade data.

Having access to sound trade data is vital for policymakers negotiating and implementing trade
agreements as well as for the entrepreneurs striving to take advantage of the opportunities created
by expanding international trade. This custom-made analytical tool will enhance the efficacy with
which the Region negotiates international trade agreements whilst being complementary to existing
regional and national data repositories.

Partnership between the OAS and the CRNM in this venture was formally commemorated on
Wednesday 19 March 2008, when the OAS Barbados Representative Wendell Goodin presented
CRNM’s Director of Technical Cooperation, Partnerships and Information Trevor Boothe with the
database server at the OAS office located in Bridgetown.

CRNM EPA REFLECTIONS

The signing of the CARIFORUM- EC Economic Partnership Agreement (EPA) has taken longer
than was initially anticipated. It is crucial to bear in mind that delays in the signing of the Agreement
could result in CARIFORUM States losing their preferential access to Europe. The European
Commission (EC), through its domestic regulation COUNCIL REGULATION (EC) No 1528/2007, is
currently providing duty-free quota-free access for CARIFORUM’s goods to the European market.
However, without full signature of the Agreement, CARIFORUM’s duty-free quota-free access does
not have legal cover under the law of international trade.

The implications of this reality were brought to light during the Meeting of the WTO General Council
on 5th February 2008 when Ecuador asked the EC under what legal cover agreed to by WTO
Members was it providing goods from ACP States with duty free and quota free access while
requiring tariffs and limiting to quotas goods originating in other countries. While the EC has
diplomatically averted this issue, it can not be avoided indefinitely. Signature would be the only
remedy to ensure that CARIFORUM is able to legally secure its rights and obligations under the
Agreement. It is therefore heartening to note that the Heads of Government have committed

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themselves to complete their internal review processes by June 30 in order to facilitate the signing
and provisional application of the Agreement.

Reviewing the EPA

The review process being undertaken throughout the Region is considered paramount to the
inauguration of the implementation of the EPA but that process is also integral to the harmonization
of external trade policy and strategy vis-à-vis the treatment of other external trading partners, such
as Canada and the United States of America.

As the CRNM looks to the future, it has already completed its own internal reflections on the EPA
negotiations with the aim of identifying core elements of the EPA process that have worked for the
Region and those which may be improved and incorporated into future negotiations. The following
summarizes a few of the conclusions that arose from CRNM’s internal review of the EPA
negotiations.

View Diagram of the CARIFORUM EPA Negotiating Structure

1. Stakeholder Consultation and Participation

It is evident that the negotiating Structure (illustrated above), as approved by the CARIFORUM
Trade Ministerial Caucus on 24 March 2004, has successfully delivered an EPA and therefore can
be used as a model for other negotiations. However, the negotiating process may be strengthened
if inherent features are more efficiently utilized.

Strengthening the consultation components of the negotiating process is inextricably linked to

ensuring the optimum engagement with and participation of key stakeholders, particularly the
private sector, whose input is critical to the formulation of the negotiating agenda and strategy. To
this end, emphasis should be placed on increasing the allocation of resources to facilitate private
sector engagement and to build the capacity of firms to identify and articulate defensive and
offensive interests in external trade negotiations.

CRNM has also recognised that it must find ways to improve the efficiency and efficacy of
interaction and dialogue with Non-State Actors (NSAs) because their improved participation is
critical to consensus building. While the input of NSAs is desirable, their interests are vast and
diverse. Therefore, in order to coherently capture and incorporate these interests, more can and
should be done by NSAs in the future to improve their organization to respond to issues in
negotiations. Their support and cooperation to improve their participation in this way may be
achieved especially by increasing their inputs through analytical studies and research
undertakings. Amongst other things, more analysis and input from NSAs in the area of
development analysis would be particularly relevant to the negotiation of trade agreements. The
development dimensions of trade agreements need to be measured broadly in terms of impact on
sectors and economic processes. Development Dimensions should not simply be confined to
development assistance which may or may not be attached. Inputs from NSAs can significantly
accelerate epistemological advance in this area away from traditional to more sophisticated sui

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generis development approaches of relevance to the Caribbean experience and complementary to
the realities of contemporary international trade realities.

It is also critical to consider that while regional consultations are complementary to the consultation
process, they are not a substitute for national consultations. National consultations are critical to
the adequate formulation of coherent national positions which should not only incorporate a
balance of interests of the more robust and vocal stakeholder groups but also of smaller and
weaker stakeholder groups. Therefore, greater emphasis should be placed on utilising the
provisions for national consultations within respective Member States.

It is also prudent that economic sustainability and cost effectiveness of regional consultation should
be evaluated. Donor funds have been extensively used to support the implementation of
consultations, which has been a necessary but expensive undertaking. However, availability of
future donor funding is widely variable. Therefore, the future sustainability of Regional external
trade negotiations will be dependent upon finding more costs effective regional solutions to
consultation. It may also be necessary for the Region to demonstrate greater commitment by
investing more fully in the future negotiations.

2. Knowledge Building and Information Sharing

The importance of knowledge building and information sharing was particularly evident during the
EPA negotiation process. The availability of relevant information and data within the Region, for
example, continues to be inadequate. The timely formulation of regional positions can be enhanced
if national and regional trade statistics and other analytical information such as the results of non-
confidential national studies, are collected, made available sooner, and more effectively
disseminated amongst other Member States and the CRNM during the negotiating process.
Creating better synergies and facilitating greater cooperation in this regard would be beneficial.

It was also realized that wider information sharing amongst civil society is also very critical to their
participation and to consensus building. Therefore, it is always necessary to balance confidentiality,
which is a necessary characteristic of trade negotiations, and the need to share pertinent
information with civil society. While CRNM already has a tradition of communications outreach
which has generally been effective in keeping regional stakeholders informed, more innovative
solutions to public outreach may be necessary in the future to encourage greater participation of
civil society including the youth demographic. To enable this, more cooperation between Member
States, NSAs, the private sector and CRNM in information sharing and wider dissemination may be
necessary.

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 3. The Complementarity of Regional Integration Processes

Regional external trade negotiations are undertaken to secure economic flexibility in an age of
globalization and long term gains for generations of Caribbean people through trade agreements.
Such negotiations are complementary to, and consistent with, external trade policy as well as
national and regional economic development policies. The CARICOM Single Market and Economy
(CSME) is the fulcrum upon which Caribbean economies rely to maximize development
opportunities, including those made available through trade agreements. At the same time, the
processes of integration initiatives like the CSME influence the development of parameters for
negotiation mandates. The inextricable inter-linkages between the CSME and trade negotiations
mean that lack of progress in the former constrains the success of the latter. The CSME process
must therefore be accelerated to secure the interests of future external trade negotiations and to
enable the Region’s ability to capitalize on economic opportunities.

4. Regional Governance

At the Regional level, efficiency of decision making may also need to be revisited. The negotiating
mandate is determined by the Heads not the negotiators. Discretion in the interpretation of those
mandates is neither the prerogative of the negotiators nor of groups and Regional fora at
subordinate levels. It is paramount that the decisions made by Heads of Government are
respected. Inefficiency in the execution of directives from Heads compromises the negotiation
process and the credibility of negotiating strategies. In circumstances where groups at a
subordinate level encounter difficulties, the responsibility of that group or forum is to refer the
matter back to higher levels along with their recommendations for review of the decision. It would
also be advantageous that greater inter-linkages and engagement between Community fora such
as COTED, COFAP and COHSOD are fostered to ensure consolidation of positions of Member
State officials across varying areas of responsibility and to buttress the decision making of the
Heads.

It has also been made evident by some challenges encountered during the EPA negotiation
process that it is also important that more should be done by regional Trade Ministers and the
Heads of Government to utilize formal and informal channels of trade diplomacy to pursue regional
negotiation interests in the future.

Conclusion

The lessons generated by the EPA experience are positive for the CRNM and for the Region and
can greatly enhance future prospects for Region. The preceding reflections are indicative of just a
few of the pertinent lessons that may be drawn from the CARIFORUM EPA experience. It is
evident that continued success in future external trade negotiations will increasingly depend on
deeper cooperation amongst all stakeholders in all areas that affect the negotiation process.

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WTO UPDATE

Easter has come and gone. Still it would appear that no deal has been struck on the trade
modalities for agriculture and manufacturing at the WTO. Ater the February release of the new
draft texts on Agriculture and NAMA, it was optimistically anticipated that a deal could be struck
before Easter. While the texts have reflected some progress, remaining divisions continue to hinder
progress in the Doha Round.

NAMA

In the NAMA negotiations, divisions still remain on the trade-off between the formula that will
determine the tariff cuts of developed and developing countries, and the flexibilities afforded to
developing countries to help them buffer the full effect of global competition on sensitive products.
The result of the tradeoff would be that countries may accept higher tariff reductions or lower
coefficients once greater flexibility is afforded to exclude sensitive products from liberalization. The
NAMA text released in February this year proposes coefficients between 8 and 9 for developed
countries and between 19 and 23 for developing countries. This was criticized by the NAMA-11 as
placing a disproportionate burden of liberalization on developing countries and that the level of
compromise required of developing countries in the NAMA talks was not in sync with the level of
compromise offered by developed countries relative to subsidy cuts in Agriculture negotiations. On
the other hand, the view of developed countries is converse in that they contend the coefficient
under NAMA makes the concessions given in agricultural reform under the Agriculture negotiations
tolerable. Developed countries such as the United States have indicated an unwillingness to accept
higher coefficients for developing countries and will not tolerate lower coefficients for developed
countries.

Notwithstanding the matter of the formula, questions on the flexibilities are still to be worked out.
Though numbers in the flexibilities for developing countries were not included in the February 8
NAMA text, since that time NAMA Chair Ambassador Don Stephenson has proposed several
options on flexibilities. One approach is to vary the number of sensitive products eligible to be
exempted from tariff reduction in accordance with the size of the deviation from standard tariff
obligations. Another approach proposes to reward developing countries that participate in sector-
specific liberalization initiatives with a higher coefficient. However, since these options were tabled
for discussion earlier in March, WTO Members have indicated some interest in examining the
‘sliding scale’ approach. Under this type of approach, developing countries would trade a higher
coefficient in exchange for fewer flexibilities, and vice versa.

Agriculture

In Agricultural negotiations the stalemate of late is related to the issue of sensitive products. In the
Doha Round, all WTO members will be allowed to make smaller tariff cuts on some sensitive
agricultural products in exchange for expanded import quotas. The extent to which these quotas
expand is to be based on domestic consumption. Determining the quota expansion is highly
dependent on data on domestic consumption from the major international food importers such as
the European Union, the United States of America and Canada. There is a lack of available data
that is sufficiently detailed and accurate. Data detail relates to the degree of specificity of the

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designation of agricultural commodities as sensitive. It also relates to the comparative calculation
of separate ingredients of processed products relative to unprocessed primary commodities.
Details of this nature could have an inflationary or deflationary effect on the domestic consumption
figures which in turn would affect the import quota expansion and market access gains. Both
exporting and importing countries would have an interest in the data.

However, the devil is in the detail. Import sensitive countries are particularly interested in using
very specific domestic consumption data that is formulated under the 8-digit harmonized system of
tariffs. Under this system, importers are better able to isolate protection for specific products as
‘sensitive’ across a broader range of products. With regard to the treatment of processed products,
exporters are more interested in excluding processed products the ingredients of which may
incorporate primary commodities. The domestic consumption figures for unprocessed primary
products may be significantly inflated if processed products containing that unprocessed product
are used in the calculation. Inflated domestic consumption figures for a product in an importing
country may suggest justification for a much wider expansion of existing import quotas for that
product designated as sensitive, which would allow exporting countries to increase their market
access gains without incurring higher tariffs.

What is necessary in order to move forward is that importer and exporter country interests, vis-à-
vis the treatment of sensitive product data, must be reconciled so that an acceptable solution may
be formulated. The NAMA and Agriculture Chairs are hopeful to formulate new draft texts that
would drive horizontal negotiations. It is expected that horizontal negotiations could lead to a
Ministerial meeting by the end of April or early May. However, this matter related to sensitive
product data should be resolved before a new draft Agriculture text is formulated.

However time is proving elusive. If progress is not made soon, the chances of concluding a deal
before the end of this year will be threatened. Against all of these considerations, another factor
could derail consensus building which is necessary to forge a WTO deal. According to a Third
World Network (TWN) article, completing the Doha Round this year is implausible because the
Bush Administration currently has no congressional authority to accede to a WTO deal. The article
points out further that there is no prospect that Congress will provide President Bush with such
authority. If the Bush Administration initials a deal this year, after the US Presidential elections, the
incumbent would not be bound by any accord that was initialed.

It is clear however, that the longer it takes WTO Membership to forge a deal the more uncertain the
future of the Round becomes. Multilateral fatigue may be a direct consequence of further delay
which would have devastating implications for the implementation of the Doha Development
Agenda.

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ANTIGUA vs. THE USA: THE BEGINNING OF THE FINAL CHAPTER

The United States of America (US) announced last year that it would withdraw its GATS
commitments on internet gaming in accordance with GATS Article XXI after a 2007 WTO report
confirmed that the US was still not in compliance with the original WTO ruling. That ruling was that
the US had discriminated against Antigua by banning its Internet gambling services while allowing
domestic off-track horse betting online.

Compensation attempts by Antigua against the US for non-compliance in accordance with Article
22.6 of the WTO Dispute Settlement Understanding (DSU) led to an arbitration process where
Antigua demanded $3.443 billion in annual retaliatory sanctions to recompense damages from the
loss of U.S. gambling business. The arbitration ruling in December 2007 was that Antigua was
granted the right to impose annual sanctions worth only $21 million against US patents, copyrights,
trademarks, and other intellectual property, as well as services companies.

A new compensation suit was filed against the US in January 2008 by Antigua and Costa Rica on
the separate matter of the US withdrawal of its GATS commitments. It has been indicated in news
reports that the U.S. and Antigua decided at the beginning of March that Antigua would suspend,
until the end of the month, its request for WTO arbitration over the U.S. withdrawal of its cross-
border gambling commitments from the General Agreement on Trade in Services (GATS).

However, Antigua has warned that it will impose sanctions by the end of March if an acceptable
compensation package is not tabled by the US.

It should be recalled that in 2007, the Motion Picture Association of America (MPAA) called upon
the US government to suspend preferences offered to Antigua under the US–Caribbean Trade
Partnership Agreement (CBTPA) and the Caribbean Basin Economic Recovery Act (CBERA),
which together are known as the Caribbean Basin Initiative (CBI), if Antigua were to pursue these
sanctions. However, this suggestion to the US government would have been made before the
WTO arbitration panel ruled in December. The suggestion also would have preceded the
introduction of the Trade Preference Extension Act of 2008 by US House Ways and Means
Committee Chairman Charles B. Rangel (D-NY). That bill, inter alia, extends CBI preferences until
2010. Clearly, the threat to suspend unilateral preferences is therefore of little importance.

Costa Rica has since dropped its arbitration request and has accepted US compensation in the
form expanded services market access. Antigua, Macao and India are the only countries with
which the US has not negotiated a compensation package. The European Union (EU), Canada
and Japan have already resolved compensation. Still it should be recalled that both India and
Macao are yet to actively seek compensation or file for arbitration.

For Antigua, the risk in undertaking compensation procedures against the US has always been
related to insufficient negotiating collateral. However, Antigua’s negotiating power may not have
been compromised by Costa Rica’s decision because there is some leverage in the form of IPR
sanctions still available to Antigua. Mark Mendel, Antigua’s lead counsel is of the opinion that this
right to impose sanctions is a ‘very potent weapon’. Certainly the threat of IPR sanctions was
significant enough to prompt US interest group reactions in earlier stages of the dispute between

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Antigua and the US. The question that still remains to be answered is – Will Antigua’s leverage be
enough?

NEWS BRIEFS

Regional News

Bahamas PM and US President Bush meet in bilateral talks

The impact of both the Western Hemisphere Travel Initiative and global market instability, the
development of a joint maritime base in Inagua, renewable energy prospects and easier access to
US based tertiary institutions were among matters discussed between Bahamas Prime Minister
Hubert Ingraham and US President George Bush in meetings held at the White House last week.
The discussions were described as warm and friendly.

Exporting Services to Canada

The Caribbean Export development Agency is inviting service sector firms and Business Support
Organizations to attend a “Exporting Services to Canada” seminar on March 31st in BARBADOS,
where they will learn about exporting services, with a particular focus on the Canadian market. It is
expected that the information made available during this seminar may better enable service firms
to explore concrete business opportunities and for business support organizations to develop
service sector strategies to facilitate two-way trade between the Caribbean and Canada.

UPCOMING EVENTS

March 2008

31 · Caribbean Export/Trade Facilitation Office Canada, Seminar on

Exporting Services to Canada, Barbados

April 2008

01-03 · All ACP Agricultural Commodities Programme, Caribbean Regional

Consultative Kick-Off Workshop, Montego Bay, Jamaica
04 CARIFORUM-Central America Private Sector Meeting, Belize

07-08 Commonwealth Secretariat, in cooperation with TRALAC, EPA

Assessment Conference, Cape Town
14-15 CTA/ECDPM, Dialogue on challenges of changing agricultural markets in
the context of ACP-EU trade: Identifying an Aid for Trade agenda for the
agricultural sector, Brussels
20-25: Twelfth Session of the United Nations Conference on Trade and
Development (UNCTAD XII), Addressing the Opportunities and

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 Challenges of Globalisation for Development, Accra, Ghana

23-24: CRNM Energy Services Consultations, Trinidad and Tobago

30: CARIFORUM-EU Business Summit, Trinidad and Tobago

Seventeenth Meeting of the Council for Human and Social Development

(COHSOD), Suriname (nd)

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For More Information Contact:

Marsha Drakes
Programme Officer-Trade Information
Caribbean Regional Negotiating Machinery (RNM)
3rd Floor The Mutual Building
Hastings Main Road
Hastings, Christ Church, Barbados
Tel: (246) 430-1678
Fax: (246) 228-9528
marsha.drakes@crnm.org

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