Trinidad and Tobago Express
Europe - the support from the EU for change carries agendas
No simple subsidies
Friday January 21 2005
As 2005 proceeds, some Caribbean nations such as St Kitts or Jamaica, may find themselves faced with an unusually specific strategic choice. Europe may suggest the need to consider the relative weight they intend to give in the medium to long term to the development of newer sectors such as tourism in preference to the role presently afforded to traditional agriculture.
While the response will undoubtedly vary from nation to nation and will involve many shades of grey, the answer may determine the ways in which longer-term support is forthcoming from the European Union.
The question will of course not be posed so bluntly. Rather it will come in the context of the tradeoffs involved in negotiating an Economic Partnership Agreement (EPA) with Europe, the European Commission’s shortly to be announced action plan for sugar and any agreement reached at this December’s World Trade Organisation (WTO) Ministerial meeting in Hong Kong.
To understand this better the two recent industry examples point to the choices and challenges that the region faces.
As is now well known, the European Commission (EC) proposed in July of 2004 changes to the European sugar regime. These suggest that the Caribbean will experience a 34 per cent cut in price over a three year period causing much of the industry to become unviable unless cane producing nations rationalise, identify value added applications for sugar or develop alternative forms of economic activity.
To support a transition, the ACP is likely to be offered by Europe a funded transitional package. Although at the time of writing its contents are unknown, a presentation on its shape was made to a workshop in Stockholm on January 11.
At this event officials set out the conditions for such support. They noted that programmes would be country specific but would take into account trade measures to be agreed within the EPA negotiations and in the WTO Doha Development Agenda. Development assistance, it was suggested, would also be available but would be based on an objective assessment of the opportunities in each sugar-producing nation.
Although it was accepted that such support might be directed towards the creation of a competitive sugar sector, the suggestion was that Europe would wish to target alternative sources of activity. Just as tellingly the presentation suggested that the EC’s would focus on the needs of sugar dependent areas, rather than the sugar sector itself. The presentation also suggested that there would be an eight-year maximum period of support.
All of which is not the way in which the sugar sector in the Caribbean sees the future. It wants European support to make where possible sugar competitive and for cane to become an added value industry producing products such as bio-ethanol or rum or being used for electricity co-generation. The industry recognises that retrenchment and diversification will be necessary and that agricultural linkages to tourism offer new possibilities. But it does not wish to see support funds being diverted to sectors other than agriculture. Neither does it they want solutions that trade off the sugar sectors loss of preference for tariff concessions in negotiations on services.
In parallel and quite separately the Caribbean has been considering the role of tourism in development and how it is accommodated international trade negotiations.
At a recent meeting of the Caricom Committee of Trade and Economic Development (COTED), Ministers endorsed a proposal that for the first time formally places the industry in a developmental context in trade negotiations. The paper, which is in limited circulation within the industry and has still to be endorsed by Heads of Government, makes clear the importance of tourism to the economic development of the region. It recognises the value of the industry and suggests ways in which the Caribbean Regional Negotiating Machinery might incorporate tourism into international trade negotiations. It suggests also that tourism has become the region’s primary export industry.
For its part the tourism industry welcomes this and is interested in exploring how some of the funds for restructuring agriculture might flow in its direction and be used for improving the Caribbean tourism product, training and ancillary services.
What all of this suggests beyond the need for clear national priorities and the need for coherence in trade negotiating strategies, is the emergence parallel ways of thinking about the future development of the region and available resources. One approach sees the Caribbean’s future development based on finding news ways to exploit existing commodities while the other seeks an active transition out of older industries to the services sector.
Regular readers of this column may not perceive this to be a problem being in some cases actively involved in encouraging the transition from one form of economic activity to others in which the region has competitive advantage. However, there is still little understanding at a grass roots level of why change in agriculture is inevitable, what in practical terms the development of a service sector may mean for migration, education and employment, how sugar or commodity agriculture might be transformed to everyone’s advantage and who should benefit.
More difficult still are the unspoken difficulties associated with whether work in tourism and the service sector in Caribbean societies has the same moral or societal values as employment in agriculture.
That this is little debated suggests that there is a real need for the services industries and the agriculture and fisheries sector to find ways to develop a closer dialogue that creates more complex economic relationships. For instance there are real reasons to explore the possibility of linkages that go beyond the production of high quality foodstuffs for hotels to providing essential oils or medicinal herbs that can be used to develop health spas and can subsequently be marketed internationally as products of a country or region.
Answers on how best to restructure economies in which commodities still play a central role as significant employers of labour are unlikely to be straightforward. Fragile economies and sensitive electorates require change to be gradual. For this reason those who design development policy in the Caribbean and in Europe need to consider carefully the implications of who wins and who looses as priorities are reordered.
David Jessop is the Director of the Caribbean Council