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A basket to carry water

Jamaica Observer

A basket to carry water

By Anthony Gomes

23 November 2007

The grey clouds of attrition are gathering over concluding negotiations with the European Union, which has suddenly adopted a determined mercantilist attitude at this late date. The negotiations with Cariforum (CF) are now foundering in a sea of uncertainty, reminiscent of the opening stanza of the famous Trinidadian calypso "Captain, this ship is sinking.".

While there remains a significant number of outstanding matters yet to be resolved at this 11th hour, the most difficult and complex is ’Market Access’. For a better understanding of this perilous predicament, a summary of the CF’s Market Access offer that must be WTO-compatible should be reviewed.

Initially, a multiple "basket" approach was proposed to the European Commission (EC) in which different groups of products would be subject to varying transition periods of tariff reductions, providing greater flexibility in the phasing process. This would assist private sector enterprises in developing the necessary level of international competitiveness to participate successfully in the evolving global economy.

Five "baskets" were selected with phasing periods of five, 10, 15, 20, and 25 years. Over time, strenuous debate has continued, concerning the quantity and types of products for inclusion in each "basket". This remains the principal problem today together with the contents of the CF’s Exclusion List that is firm at 15 per cent of all trade with the EU, equating to 22.5 per cent of imports from the EU.

In October, the CF submitted its latest Market Access proposal for phasing out tariffs in each "basket". Prior to the commencement of the phase-out, the CF requested a moratorium, that is, a grace period, of three years. This translates to each "basket" thus: Basket 1: 3 years grace period, 2 years phasing out, total 5 years ending in 2012; Basket 2: 3 years grace period, 7 years phasing out, total 10 years ending in 2017; Basket 3: 3 years grace period, 12 years phasing out, total 15 years ending in 2022; Basket 4: 3 years grace period, 17 years phasing out, total 20 years ending in 2027; Basket 5: 3 years grace period, 22 years phasing out, total 25 years ending in 2033.

The percentage of EU imports affected in each "basket" would be: Basket 1: 25% of imports, or 14.3% of all trade with the EU; Basket 2: 25% of imports, or 15% of all trade with the EU; Basket 3: 25% of imports, or 7.2% of all trade with the EU; Basket 4: 5% of imports, or 5.2% of all trade with the EU; Basket 5: 5% of imports, or 4% of all trade with the EU; Total: 85% of imports, or 45.9% of all trade with the EU. The Exclusions List remains firm at 15% of all trade with the EU.

The above percentages of total trade exclude products which are already duty-free that total 36 per cent of CF trade or 68 per cent of Jamaica’s tariff lines already at zero. Other duties and charges (ODCs) such as Port Cess, Customs User Fees, etc, would stand still for seven years, after which phasing out would begin in 2014. ODCs do not include GCT.

The EC countered with proposed changes to the CF’s offer that dramatically limited the opportunity for an equitable conclusion of the negotiations. The EC’s proposed changes to the CF’s offer included removing numerous items from the Exclusions List, alterations to phasing periods, a grace period of one year instead of three years, ODCs to be phased out in five years instead of seven years, all of which requires a complete "makeover" of the CF’s negotiating line-by-line position by year-end, the dateline for conclusion.

Most critical is the EC’s proposal to remove nearly two-thirds of items from the Exclusions List, including nearly all non-agricultural items, thereby reducing exclusions from 18.2 per cent of all trade to six per cent! From current reports, the Jamaican private sector is not prepared to engage with the EC’s proposal, but would welcome additional time to negotiate beyond 31st December 2007 in search of a mutually acceptable solution.

In the event an agreement is not possible, the CF exports to the EU would be subject to the General Systems of Preferences (GSP), a tariff regime that would result in at least 25 per cent of Jamaica’s exports to the EU attracting duty, and a percentage of the CF’s exports becoming less competitive, and in some cases uncompetitive, in the EU after 31st December 2007. The regime will prevail until an agreement is reached when duty-free and quota-free access to the EU market should be restored. Other items of discord may be carried forward under the umbrella of a "Built-in Agenda", a term as yet to be defined.

Cariforum’s position remains liberalisation of 85 per cent of total trade (77.5 per cent of imports) with an Exclusion List of 15 per cent of total trade (22.5 per cent of imports), with a three-year grace period across the board. This means that liberalisation would commence in the fourth year of liberalisation periods of five, 10, 15, 20, and 25 years.

Other Duties and Charges would be liberalised over a 10-year period with a "standstill" period of seven years.

Remember the adage: "No agreement is better than a bad agreement." The EPA in its present form cannot be considered to be in the best interests of the 14 developing microstates in the hemisphere. Without a favourable solution by the end of November, Cariforum’s position should be maintained. It should not be overlooked that next year, Caricom may be negotiating with the USA, Canada and Mercosur for Free Trade Areas (FTAs) and the final agreement with the EU would be instrumental in determining the negotiating strategy employed by those industrialised countries. For now, we are therefore unable to accept "a basket to carry water".