RNM UPDATE 0710

July 12, 2007

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.

• RESULT OF THE 28TH MEETING OF THE CONFERENCE OF HEADS OF GOVERNMENT OF

THE CARIBBEAN COMMUNITY
• PANAMA RATIFIES FREE TRADE DEAL WITH THE US
• MERCOSUR FINALLY AGREES TO GRANT CONCESSIONS TO PARAGUAY AND URUGUAY
• THE OECS TRADE MINISTERS SHOW SOLIDARITY WITH ANTIGUA AND BARBUDA’S US
INTERNET GAMING CHALLENGES
• NEWS BRIEF
• UPCOMING EVENTS

RESULT OF THE 28TH MEETING OF THE CONFERENCE OF HEADS OF GOVERNMENT OF

THE CARIBBEAN COMMUNITY

Heads of Government of CARICOM continued to illustrate their command at the helm during the
28th Meeting of the Conference of Heads of Government of the Caribbean Community. This was
particularly apparent when Heads were confronted with tough issues related to external
negotiations. The primary aspects of the issues related to external negotiations and the Heads
decisions are outlined in the following.

Bilateral Negotiations

In light of the breakdown of multilateralism in international trade relations, the Member States,
taking a pragmatic stance, have recognised the necessity of reconstituting its relations with its
traditional and hemispheric trading partners. The aim of CARICOM has been to evolve mature
trading relationships with developed country as well as developing country trading partners that are
relevant to the Region’s development trajectory.

CARICOM – Canada

In keeping with a former 2006 Heads decision to initiate negotiations with Canada, CARICOM
Heads of Government during this 28th Conference took the important step to agree to formally
launch trade negotiations with Canada on July 19, 2007.

In the absence of a new permanent trade arrangement with the United States, negotiating a new
trade arrangement with Canada is strategically pragmatic given that the Canadian market,
supporting an annual US$377 billion in imports of goods and services, is of hemispheric
significance. Furthermore, a new trade arrangement with Canada affords an opportunity to build on
the economic involvement and depth of cooperation that has historically characterised the
relationship between CARICOM and Canada.

This undertaking is also advantageous in that it would allow trade relations to mature and evolve
from the CARIBCAN preferential arrangement to an inclusive, comprehensive and WTO
compatible arrangement that

i) includes the CARIBCAN excluded Member States of Haiti and Suriname, and

ii) accommodates services and investment as well as goods, including those not
currently available under the CARIBCAN arrangement such as clothing, footwear and
agricultural products with tariff rate quotas (TRQs).

CARICOM is aware of the plethora of hemispheric bilateral trade agreements that have emerged
since the dormancy of the FTAA process. This has integrated CARICOM’s hemispheric neighbour
with the hemispheric trade giants in a network of modern trade facilitating instruments, of which
CARICOM is not part.

This is not only of consequence to CARICOM-US relations but also to CARICOM – Canada
relations. In a June 2007 release Canada expressed its expectation to launch negotiations with the
Dominican Republic (DR), which already has an agreement with the US under the CAFTA, and
some Latin American countries.

The challenge for CARICOM is to weigh the extent of our ambition and the complementarities of
our trading arrangements to ensure that trade bilaterals can comprehensively facilitate the
development of CARICOM’s international competitiveness.

CARICOM – Central America

CARICOM and SICA Heads of Government earlier this year agreed to initiate discussions on a
FTA between these Parties that would build on the CARICOM- Costa Rica FTA.

However such an approach to a FTA between SICA and CARICOM that proposes accedence to
the CARICOM – Costa Rica FTA, necessitates complete ratification of the existing agreement by
all Parties. To date, only 3 CARICOM Member States have completed ratification – a fact of some
concern to the SICA Member States.

During the Conference, Heads, recognising the importance of ratification of the existing
arrangement to the new negotiations process, urged Member States that have not yet ratified the
CARICOM – Costa Rica FTA to expedite this process.

CARICOM – USA

The Conference of the Caribbean was useful in the determination of scope for improving trade
relations and cooperation with the US. The Joint Statement emanating from the Conference of the
Caribbean reflected mutual determination to expand economic opportunities and to provide the
benefits of democracy, recognising that these objectives can best be served if the societies of
CARICOM and the US both have prosperous economies. Specifically in relation to trade it was
jointly decided to strengthen existing trade arrangements, which includes an upgrade and
extension of CBI and the 1991 Trade and Investment Framework Agreement.

Beyond this, Heads of Government of CARICOM have still not reached final consensus on the way
forward in creating a more mature and permanent trade arrangement with the US.

However, during the 28th Conference, the dialogue that ensued in Washington was continued and
facilitated through discussion with the Chairman of the US House Committee of Ways and Means,
Congressman Charles Rangel, who was a specially invited guest of the Heads.

Heads decided after the dialogue with the Congressman that building on Congressional
relationships, particularly with the Congressional Black Caucus could be advantageous in the
CARICOM endeavour to forge a new relationship with the US.

Indeed, given the declining significance of Caribbean geo-political relations with the West since the
end of the Cold War, there is little US incentive to prioritize the creation of a new US – CARICOM
trade relationship.

How this is measured depends largely on perspective. US foreign policy is currently tailored to
address security issues as well as the expansion of US export markets. CARICOM is not a large
export market for the US. Furthermore, collectively, CARICOM States, with relatively stable
democratic political regimes, do not pose significant threat to US national security.

However the proximity of CARICOM States is sufficiently significant to warrant US concerns about
hemispheric security and the protection of its ‘Third Border’. Therefore, CARICOM may be able to
seize the attention of the US if it couches the language of development with the language of
security and the preservation of democracy.

A new trade arrangement with the US of developmental consequence to the Caribbean depends
on the ability of CARICOM to focus its dialogue with the US on the direct relationship between
economic development, development assistance and the preservation of democracy, political
stability and US security.

Critical to this is the inextricable link between the disbursement of development funding and the
development of the CSME, and the preservation of CARICOM integration, particularly as that
relates to fostering the stabilization, rehabilitation and development of Haiti. These critical
components of CARICOM development must not only be expressed as crucial to us but also as
primary features of a US Hemispheric strategy.

Success in this regard also hinges on using the intricacies and nuances of the American
Congressional political system to locate all allies in this endeavour, including the Congressional
Black Caucus. Diplomacy that includes a focus on general Diasporic linkages could be
complementary to creating the necessary impetus in Washington that will enable the CARICOM
agenda.
Pursuant to the decision to extend and improve the CBI and the 1991 Trade and Investment
Framework Agreement, CARICOM will soon be engaged in technical discussions.

CARICOM- Dominican Republic

Since the signing of the FTA between CARICOM and the DR, a number of issues have arisen that
have compromised implementation which in turn have challenged progress in negotiating Services
as part of the built-in Agenda of the Agreement.

However these are not insurmountable issues. The upcoming meetings between the DR and
CARICOM will be critical in resolving these outstanding issues. CARICOM Heads during the 28th
Conference mandated Member States to assume a suitably flexible posture that would facilitate
compromise while safeguarding the interests of Member States and CARICOM.

The EPA Negotiations

During the 28th Conference, Heads noted the accomplishments that have been made by
CARIFORUM so far in the EPA negotiations. These include, inter alia,

• The Insertion of a Development Chapter which outlines needs based specific development
priorities to be supported by EU-funded programmes
• Reduced burden of tariff liberalization commitments through agreement to renounce the
application of the principle of non-discrimination in tariff liberalization.
• The negotiation of an unprecedented maximum phasing period of 25 years for tariff
liberalization for sensitive products.
• The agreement to specially treat cultural services and the inclusion of the movement of
natural persons not linked to establishing commercial presence in the Services
negotiations.
• The development of an exclusions list

Heads also recognized and appreciated the time constraints in finalising the negotiations and the
need to move assiduously to complete the negotiations on time.

However there are some outstanding issues to be resolved especially in relation to tariff
liberalization. One of these relates to developing a decisive position on the Duty free/ Quota Free
market access offer tabled by the Europeans on April 4 2007. While the offer was a positive
evolution in the EPA negotiations, it does present some challenges to the adjustment of key
agricultural sectors of bananas and sugar.

On the matter of the treatment of sugar within the EPA, CARIFORUM seeks to transfer the benefits
under the ACP Sugar Protocol under the regime for sugar within the EPA which is still being
resisted within the negotiations.

The treatment of bananas is complicated by the African support for the EC Market Access Offer
and the openness of the Europeans to adjusting the MFN tariff by 50 % over 6 years. This
indubitably is designed to assuage the Latin Americans who have recently re-established dispute
against the European regime for ACP bananas under the WTO. It is further relevant to note the
increasing pressure of the dispute process on the current regime for bananas given the recent
recourse to Article 21.5 of the WTO DSU by the US.

In light of this CARICOM Heads called on CARIFORUM stakeholders to meet to urgently

determine their positions for the negotiations.

WTO Negotiations

Heads noted the dim prospects for a negotiation breakthrough in the WTO negotiations.

Clearly, the announcement by Agriculture Chair Ambassador Crawford Falconer and NAMA Chair
Ambassador Don Stephenson of the September schedule for discussing draft versions of
conceivable deals that will be presented to the WTO membership indicates that the WTO Director-
General’s hopes of clinching a deal by the end of July are dashed.

Given the failure at Potsdam amongst the G4 to arrive at consensus on the way forward in the
Doha Round, the hopes of resolving the impasse will undoubtedly shift to the multilateral level once
again, which will afford wider participation and transparency in the dialogue to move the Doha
Round along.

It is doubtful that much will be achieved in the multilateral process however because the wider
WTO systemic linkages to the G4 impasse. Lack of progress in regard to the Doha Round further
reiterates the importance of key negotiations for the Region.

PANAMA RATIFIES FREE TRADE DEAL WITH THE US

Despite some displays of domestic opposition, the Panamanian Legislature swiftly ratified the new
free trade agreement with the US featuring the recently added provisions that constituted the
Bipartisan deal struck in Washington, on Wednesday 11 July 2007.

The National Assembly approved the agreement by a 58 to 3 majority, with one abstention.

The US, while applauding the progress made by Peru in this regard, is yet to ratify the agreement
in Congress. In a Conversation on the Americas transcript, US President George Bush expressed:

“I'd like to see the Peruvian deal done by the beginning of August. They've got time to get the bill
done. Members of Congress have got ample days on the calendar to pass this important piece of
legislation, so we can send the clear signal to our neighbourhood that we want you to be
prosperous; that we want to help you realize your potential through trade with the United States of
America. Trade agreements are good for both sides -- it's good for U.S. workers, and it's good for
Peruvian, Colombian, or Panamanian workers. And it's in our interest to promote trade.”
It is likely that the President’s expectations may be met. Democrat Congresswoman Nancy Pelosi
has indicated her support and commitment to completing this process.

“The May 10th bipartisan trade agreement reflected long-standing Democratic priorities to promote
free and fair trade by including enforceable, core labor rights and environmental standards within
the text of our free trade agreements. We remain committed to consideration of the Peru and
Panama FTAs this fall and are confident that Chairman Rangel's trip to the region will move that
process forward.

MERCOSUR FINALLY AGREES TO GRANT CONCESSIONS TO PARAGUAY AND URUGUAY

During the 33rd Summit of the Common Market of the South (MERCOSUR), the larger Member
States of Argentina and Brazil agreed to grant concessions to the smaller Member States of
Paraguay and Uruguay.

These concessions are late in coming given the smaller states’ complaints that Brazil and
Argentina continue to unfairly restrict access to their larger markets. The frustration of the smaller
countries was two-fold given that full members of MERCOSUR are restricted from negotiating other
bilaterals with third states because of MERCOSUR’s ambition to evolve into a customs union.
Therefore without access to the large markets within the bloc and without the ability to negotiate
more favorable circumstances with other nations, these countries were victims, locked in perpetuity
in a ‘raw deal’. Paraguay and Uruguay eventually implied that their membership may not have
been in their best economic interests.

Facing the threat of implosion, the concessions to the smaller countries were agreed upon during
the Summit. These include

• The application of more flexible rules of origin

• The extension of the validity of the common tax from 2012 to 2020
• The extension of the MERCOSUR deadline for submission of country lists of goods
imported from third states, necessary for the promotion of customs duties harmonization,
from end-2007 to end-2008.
• Extension of spending under the MERCOSUR Structural Convergence Fund (FOCEM) to
finance projects in Paraguay and Uruguay including those related to housing,
transportation, and incentives for micro-enterprise.

It is therefore fitting that MERCOSUR has taken measures to accommodate its smaller Members.
These concessions will go a long way in creating special and differential treatment to the most
vulnerable in regional integration arrangements. Comparisons can be drawn from the CARICOM
experience where CARICOM LDCs are given special accommodation. An example of this is the
CARICOM development fund, which is considered necessary to prevent the evolution of a ‘coalition
of un-equals’.
THE OECS TRADE MINISTERS SHOW SOLIDARITY WITH ANTIGUA AND BARBUDA’S US
INTERNET GAMING CHALLENGES

Organization of Eastern Caribbean States (OECS) Trade Ministers during the OECS Ministers of
Trade meeting held in St. Lucia on Wednesday July 11th 2007, declared solidarity with Antigua and
Barbuda’s quest for satisfactory treatment from the United States of America on the question of
cross border supply of internet gaming services.

The Ministers expressed further support for the measures taken by Antigua and Barbuda to obtain
compensation in light of the US failure to comply with the rulings of the WTO dispute settlement
bodies. These Ministers have also pledged to continue to express these sentiments in individual
and collective dialogue with the US.

The European Commission Deputy Director-General of Trade, Mr. Karl Falkenberg also addressed
the OECS Trade Ministers during the meeting.

NEWS BRIEFS

Regional News

Liat has agreed to a buy-out of Caribbean Star

Liat has agreed to a buy-out of Caribbean Star in the latest twist to negotiations between the two
former competitors.

The two airlines have been operating as one since February as a prelude to a formal agreement.
Liat CEO Mark Darby couldn't say how much the sale would cost but he expected that it would be
covered by a US$60 million dollar loan Liat is negotiating with the Caribbean Development Bank.

He said heavily-indebted Liat has been breaking even this year for the first time in years.

"This deal speeds up the process and the sooner we can get it done then it removes uncertainties
for employers and customers and allow us to get off to a flying start for the Autumn."

International News

US seek recourse to Article 21.5 of the WTO DSU

The US has claimed that the European Union's banana regime favours producers from African and
Caribbean countries over exporters from Latin America, in contravention of global trade rules and
have sought recourse under Article 21.5 of the WTO DSU.
The WTO has consistently ruled against how the EU on their banana regime, forcing the 27-nation
bloc to overhaul a system that grants preferential conditions mainly to former British and French
colonies.

Latin American producers and banana companies based in the United States have long
complained about the preferences.

The WTO is to convene a compliance panel to decide whether Brussels has implemented an
earlier ruling. The EU import rules are already being investigated because of a similar request by
Ecuador in March.

The EU has described this turn in events as unfortunate, claiming that the US interest in this may
be questionable given that it is neither a producer nor an exporting country of bananas.

UPCOMING EVENTS

July

• 16-17: TWG on EPA Services and Investment, Grenada

• 17: TWG on EPA Legal and Institutional Issues, Grenada
• 16-19 :TWG on EPA Market Access Issues, Grenada
• 17-18: TWG on EPA Trade-related Issues, Grenada
• 18: RNM Workshop on Labour Movement Issues in the OECS, Grenada
• 17-18: CROSQ and Trinidad and Tobago Bureau of Standards, Regional Conference on
“Enhancing Trade Competitiveness through Standardisation and Conformity Assessment”,
Macoya, Trinidad
• 20: AITIC, Informal Roundtable to discuss EPA issues, Brussels
• 24-25: CARIFORUM-EU Business Summit, Barbados (to be confirmed)
• 25-26: WTO General Council, Geneva
• 24-27 CARIFORUM-EC Technical Negotiating Group, Brussels

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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