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Doubt over Canada-Caricom trade talks

By Ronald Sanders

NEGOTIATIONS on a trade agreement between Canada and Caricom countries have limped along for over five years. Unless political will and energy are now put into the process, the negotiations could fizzle out by the end of June—a “drop-dead” date now accepted by both sides.
Abandonment of these negotiations would not be good for Canada and certainly not for Caricom countries. For, while the negotiations focus on trade and investment and rules that guide them, the relationship between Canada and Caricom goes far beyond these considerations.
In Canada’s case, although its merchandise trade with all Caricom countries is less than one per cent of its total trade in goods, successive governments have enjoyed close relations with 12 of the Commonwealth Caribbean countries that are part of the 14 independent countries of Caricom. Until recently, Canadian governments have been able to rely on Commonwealth Caribbean governments for support on hemispheric and international issues reflecting their shared values and common interests.
That there has been a rupture in that long-term support is the fault of both sides and is in the interest of neither.
From a Caricom viewpoint, Canada should remain a crucially important hemispheric, Commonwealth and international partner. And, although Canada represents only four per cent of Caricom’s market for the export of goods, it is the only developed country with which Caricom enjoys a trade surplus.
Additionally, Canada is home to a significant number of Caricom’s diaspora; it is a major source of tourists to the region; and Canadian private sector investment in the region is huge—direct investment is in excess of US$75 billion, and trade in services is roughly US$3 billion annually.
To be fair to Canada, successive Liberal and Conservative governments tried for years to engage Caricom in settling a Free Trade Agreement (FTA), but it was not until 2008 that the Caribbean governments agreed to engage Canada, and then only when the Carib-Can agreement (established in 1986) was approaching its scheduled expiration in 2011.
Under the Carib-Can arrangement, Caricom goods, with a few exceptions, entered the Canadian market duty free with no reciprocal benefits for Canadian exports to Caricom. The dilatory pace of the negotiations saw the Carib-Can Agreement run out and Canada had to apply to the World Trade Organisation (WTO) to extend it until 2013 in the interest of Caricom states.
That extension has now expired and the WTO is unlikely to further extend it. Access to the Canadian market for Caricom goods (with the possible exception of rum, which is governed by a separate protocol) is now endangered.
In the meantime, the Canadian government has issued a list of countries which reflects its priorities for FTAs—no Caribbean country is among them. Canada is looking to dynamic markets in Asia. It is to those markets that the Government now wishes to devote its resources.
In this context, prolonging negotiations on an FTA with Caricom that shows no sense of urgency is a distraction for Canada. Further, in September 2013, the Canadian government issued an order withdrawing General Preferential Tariff (GPT) treatment from 72 higher-income and trade-competitive countries —11 Caricom countries are among them. Only Belize, Guyana and Haiti, because of their low income, are not affected.
In their present economic circumstances, the political leadership of Caricom should provide their negotiators with a more flexible mandate than they now have.
For example, Caricom countries are said to be resisting co-operation agreements that Canada is seeking on labour and environmental standards, but these are the same standards to which Caricom countries have already signed on with the EU in their Economic Partnership Agreement (EPA). Since the standards will have to be met anyway, the reason for the resistance is difficult to fathom.
Canada also wants a chapter in the FTA to govern investment. This is a two-way street. Investment promotion and protection agreements are in the interest of Caricom countries as they provide a high level of comfort for foreign investment that the region critically needs.
Negotiations on services are reportedly still a problem area for Caricom governments, but there has been a history of co-operation between Canada and Caricom countries in services, particularly banking and tourism. If flexibility is given to negotiators on both sides, there is every reason to be optimistic about a successful conclusion.
Some Caricom governments would also now be troubled over removing tariffs on Canadian goods entering their countries. The governments are already facing difficulties implementing the tariff cuts to which they signed up with the EU under the EPA, and they are tormented about how to replace the direct revenues they will lose.
However, the tariff cuts with the EU are spread out over a period of years. Canada should agree to a similar arrangement, particularly for agriculture.
There are only two negotiating sessions scheduled before June 30 when an FTA between Canada and Caricom will be effectively dead. Political will and direction are needed on both sides to conclude a realistic and beneficial arrangement. Our leaders should provide it, and so should the leadership of Canada.

• Ronald Sanders is a consultant, senior research fellow at London University and former Caribbean diplomat
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