Jamaica Observer | Friday, February 27, 2009

Jagdeo calls for freeze on EPA in light of global crisis

Guyana’s President Bharrat Jagdeo believes there should be a delay in implementing the Economic Partnership Agreement (EPA) trade deal with Europe because of challenges created by the global financial crisis.

Jagdeo told a gathering of African Caribbean Pacific Group of States and European Union (EU) parliamentarians here Wednesday that the Caribbean Community (Caricom) countries were in need of such a reprieve in order to source funds to diversify their economies.

"If we have a moratorium on this we will be able to raise some of those funds," he said.

"The investments we need in our economy now by opening it up are not coming because investors can’t find money; investment has dried up in many of our regions. I’m sure you can do that over the course of the next two days, come up with a series of reasons why we should hold back on these (EPAs)," the Guyanese leader said.

The EPA, signed by Caribbean governments last year, governs all trade between the region and the EU and calls for the removal of certain protectionist trade barriers.

However, Jagdeo pointed out that more developed countries, at the first signs of trouble, were turning to protectionist methods to safeguard their economies.

"Some of the leaders in these countries (Europe) were the strongest advocates of reciprocity in the EPA and of free trade; and the first sign of trouble move to protect their economies," he said.

"Now, if these countries can’t handle open trade and they have a social safety net for their people and a large per capita GDP, what will reciprocity in the EPA do to us?"

He noted that even the United States had moved to protectionism, including a "Buy America" clause in its stimulus legislation, a provision which was later removed.

However, Jagdeo said he was confident that the US would find some way to maintain the "Buy America" practice.

Turning his attention to the wider global financial situation, Jagdeo said that as a group of developing nations, the region has fewer financial and technical mechanisms to cope with the effects of the crisis.

"Many times when we speak to the European Union, historically, they will always say we need to diversify our economies and I keep asking ’into what?’ What are we going to diversify our economies into? When you look at the studies that are done, there are very, very few things that we can actually diversify into because someone else is doing them better, cheaper on a large scale in another part of the world," Jagdeo argued.

According to Jagdeo, even if the region wanted to diversify, the institutions are not in place to do so and a long process would have to be embarked upon since creating a new economic sector takes time.

He added that if the developed nations were really interested in seeing the countries in the region grow then they would need to have a more in-depth understanding of the challenges and peculiarities they face.

Jagdeo, a Russia-trained economist, said a new model of development had to be found, adding that the neo- liberal model was not working for developing countries.

"Take for example, many Latin American countries because of instability in capital markets in another part of the world they saw overnight total welfare wiped out in many of their countries. How can you have a sustainable model that when you practise sound policies as proposed by these [financial] institutions you could see overnight wiping out of many of the gains that you’ve made over decades?" the president queried.

"The solution I feel, lies with market and regulations. Yes, we can’t stifle the power of the market, we have to make sure that the market generates enough wealth as possible, but if the market in its inherent instability could lead to the failure of large institutions and cause so much grief around the world then you better make sure that we regulate these markets properly," Jagdeo said.