Canada-CARICOM Relations: The Tipping Point

HISTORY OF THE NEGOTIATIONS

In 2008, heads of government party to the Canada-CARICOM agreement decided to move ahead with a free trade agreement. The negotiations began on November 10th 2009, and thus far, six rounds of negotiations have been held. The last round was held in March 2014, and nothing is considered agreed until the negotiations are concluded and everything is agreed on. Negotiations have taken place on market access for goods, rules of origin, trade in services and investment, financial services, intellectual property, customs procedures, dispute settlement, institutional issues, environmental and labour issues which indicates that the agreement is broad in scope.

The recent trade regime between the parties has been underpinned by the CARICOM-Canada Trade and Economic Co-operation Agreement (1979) (and its Protocols including the CARICOM-Canada 1998 Protocol on Rum); the Canada-Barbados Bilateral Investment Treaty; the Canada-Trinidad and Tobago Bilateral Investment Treaty and CARIBCAN Agreement. CARIBCAN is a non-reciprocal preferential trade agreement that grants unilateral, duty-free access to eligible goods only up to the year 2011. Canada applied for a waiver until 2013 to bring the preferential access into compliance with WTO rules. This WTO waiver expired in December 2013.

The new Trade and Development Agreement will hopefully take into account the varying levels of development and the vulnerabilities of Small Island developing states, and see more dynamic trade, investment and relations among the parties.

JUNE 2014: THE CRUCIAL MOMENT

The end of June could signal the re-invigoration and increased discussion, interaction and trade between Canada and the CARICOM block, or it could be the start of the very opposite. June 30, 2014 is the agreed date to end CARICOM-Canada trade negotiations – with or without an agreement. This means that although the negotiators have concluded six rounds of talks, nothing is agreed upon until everything is agreed on!

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The Trinidad skyline. (Photo by Janique-ka John)

While the negotiations focus primarily on trade, the agreement is also a mechanism for reinforcing the relationship between the parties, which goes beyond trade and the text of the agreement. Canada-CARICOM relations go as far back as the 18th Century with the exchange of fish, lumber and the like for West Indian Rum, molasses and spices. Currently, Canada enjoys a close relationship with the Caribbean, particularly the Commonwealth countries therein, who have been supporters of Canadian positions in hemispheric and global issues. Canada is also home to a large portion of the Caribbean’s diaspora, and Canadian investment in the region is significant and most notable in the financial sector.

Undoubtedly, through these negotiations Canada would want to strengthen its commercial relationship with the region and hopefully contribute to its development. CARICOM is seeking to increase Canadian investment in the region, improve market access for Caribbean goods and services in the Canadian market, as well as settle on comprehensive development cooperation.

From the onset though, the negotiations have been less than smooth, with both side unable to agree on the scope. Is this proposed agreement about international development or is it solely about trade? For countries in the Caribbean, and for north-south agreements in general, it has to be about both. For developing countries, trade agreements are useless without a framework to support capacity building and develop. At issue is also the extent to which Canada would want to espouse development commitments within an agreement. Doing so may set precedent for future negotiations, and this is a position that Canada may be trying to avoid.

The next issue is undoubtedly the architecture of the agreement, particularly as it relates to services and investment. Both sides have been known to use different approaches to scheduling liberalizations and reconciling this would not be an easy task. Also, sectoral carve-outs and whether or not there should be side-agreements and the chapters to be included would have been a hurdle. For example, should culture be a side agreement, or be part of the agreement at all?

Moreover, as with all trade negotiations the extent of liberalization is a sticking point, but perhaps the Economic Partnership Agreement (EPA) between CARIFORUM and the EU that was concluded before prejudices these negotiations. Under the EPA, if CARICOM countries negotiate a more favourable agreement with another major trading economy (and Canada qualifies as such under the EPA), they have to give that level of preference to the EU as well. CARICOM negotiators would therefore have to be mindful of the preferences that it offers to Canada, and the EPA in many cases would be the ceiling of their commitment to Canada. On the other hand too, the EPA is a comprehensive trade agreement, which contains specific commitments to development assistance and funding that is predictable and identifiable. If Canada expects the same (and even higher) levels of commitment from CARICOM as compared to the EPA, then CARICOM would naturally expect the same and even higher levels of commitments from Canada, particularly as it relates to development cooperation.

WHERE TO GO FROM HERE?

As if all these challenges were insufficient, negotiators now have to contend with a deadline. As the saying goes “hurry birds do not build good nests”. On both sides, governments should be weary of trying to hurriedly come to a decision in order to meet a deadline. An agreement had not been reached as yet at the start of June. If one is reached by the end of the month it is always going to be called into question, particularly on the side of CARICOM who paradoxically has a lot to gain from the potential of what a sound agreement can do; and also the least to gain from a hurried ill-conceived compromise.

For this to be a truly successful negotiation that all parties can benefit from there needs to be flexibility and compromise on both sides. The longstanding issues as it relates to rum should be addressed in addition to the restrictive rules of origin from CARICOM products. The agreement should take into consideration the characteristics that make small-island developing states vulnerable, in that light facilitating asymmetrical liberalization and phased tariff cuts. It is important that it goes beyond market access to address supply side constraints and incapacities, assist in the transfer of technologies and knowledge. A sound agreement can undoubtedly bring new opportunities to both Caribbean and Canadian businesses.

Therefore, the region eagerly awaits what will happen post-June, particularly given the tone of negotiations currently.

 

CARICOM: Antigua and Barbuda; The Bahamas; Barbados; Belize; Dominica; Grenada; Guyana; Haiti; Jamaica; Montserrat; St. Lucia; St. Kitts and Nevis; St. Vincent and the Grenadines; Suriname; Trinidad and Tobago.

CARIFORUM: CARICOM and Dominican Republic.

 

Aurelia Bruce is a Research Officer at the TTCSI and has had experience conducting trade-related research in both the Caribbean and Canada. Bruce is passionate about regional integration and development and while her research centers around trade in services generally, some of her interests include the creative industries, ICT and ITeS, financial services, and trade law and policy. She graduated from the University of the West Indies (UWI), Cave Hill Campus, with a Master’s degree in International Trade Policy (Distinction) and a BSc. in Political Science with Law (Hons).

Featured Photo by Aurelia Bruce.

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