RNM UPDATE 0505

April 12, 2005

Prepared by the Communications Division of the Caribbean Regional Negotiating Machinery (CRNM), this
electronic newsletter focuses on the RNM, trade negotiation issues within its mandate and related activities.

- ANTIGUA & BARBUDA DECLARES VICTORY IN WTO INTERNET GAMING CASE

- GUYANA TO PRESS FOR SUGAR AND RICE AS ‘SPECIAL PRODUCTS’

- BELIZE-GUATEMALA TRADE PACT TALKS ADVANCED SIGNIFICANTLY BY SECOND

ENCOUNTER [AVANCE SIGNIFICATIVO EN EL SEGUNDO ENCUENTRO DE LAS CONVERSACIONES
COMERCIALES ENTRE BELIZE Y GUATEMALA]

- CARIBBEAN CONCERNED WITH BANANA CHALLENGE LODGED AT WTO

- SECOND CARIFORUM-EC TECHNICAL SESSION CONVENED

- DELAY IN RESUMPTION OF HIGH-LEVEL TALKS RAISES RENEWED CONCERNS OVER FTAA

PROCESS

- DR PRIVATE SECTOR TOUT NEED FOR ‘LEVEL PLAYING FIELD’ FOR TRADE PACT

- NEWS BRIEFS

- UPCOMING EVENTS

ANTIGUA & BARBUDA DECLARES VICTORY IN WTO INTERNET GAMING CASE

On April 7, the World Trade Organization (WTO) Appellate Body handed down a landmark decision
on the complaint of Antigua & Barbuda against “United States — Measures Affecting the Cross-
Border Supply of Gambling and Betting Services”. In its Findings and Conclusions (available on
the RNM website, www.crnm.org), the Appellate Body upheld many of the findings of an earlier
Panel ruling. Although a portion of the initial ruling was reversed by the Appellate Body, the overall
result remains substantially the same – in Antigua’s favor, an informed source told RNM UPDATE.
The decision confirms that indeed, in its schedule of specific commitments, the US had included
cross border gambling and betting services, and that it had scheduled no market access limitations
to foreign suppliers of these services. The Appellate Body also agreed with the Panel that three US
federal acts (the Wire Act, Travel Act and Illegal Gambling Act) were inconsistent with these
commitments to market access (this is a decision that could have far-reaching implications,
resulting in future challenges of US regulations on gambling). The US had argued that the three
federal acts were necessary to protect public morals or to maintain public order, and were

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measures permitted under the General Exceptions to commitments (Article XIV). However, the
Appellate Body held that because of the existence of the Interstate Horseracing Act, the US has
not shown that the prohibitions on Internet gambling contained in the federal acts applied equally to
foreign and domestic suppliers. In effect, the US had failed to meet its complete burden of proof
under its claimed Article XIV “morals” defense to Antigua’s claims, a source informed RNM
UPDATE.

“It is an unqualified win for Antigua,” lead legal counsel for Antigua, Mark E. Mendel, Esq., of
Texas–based law firm Mendel Blumenfeld, LLP, told RNM UPDATE - in reference to the Appellate
Body ruling. According to Mr. Mendel, the overall result is in Antigua’s favour; “we won on all the
major points,” he said. Mr. Mendel affirmed that because the ruling established that US laws were
discriminatory, the United States would now have to provide Antiguan gaming firms with fair access
to its market; treating Antiguan online casinos in the same way as traditional gambling outlets.
Speaking to the Press late last week, Antigua & Barbuda Finance and Economy Minister Hon. Dr.
Errol Cort reaffirmed the view that the ruling was propitious for Antigua, indicating that despite its
interpretation of the recent ruling, the US would have to liberalize its Internet gaming industry
based on the findings of the Appellate Body. Mendel also told the Press, “we expect that major
Internet search engines, including Google and Yahoo!, financial institutions and credit card service
providers will be required to accept advertising from Antiguan Internet gaming sites, as they do
currently with US gaming interests.”

In a Press release issued on behalf of Antigua & Barbuda on April 7 (available on www.crnm.org),
Antigua expressed surprise at claims of victory by the United States. Challenging the interpretation
by the United States that the Appellate Body has allowed the US ban on foreign online gambling
activity to remain in place, the Press release argues “the Appellate Body recommended that the
WTO cause the US laws to be brought in conformity with the GATS.” “The ruling also notes that, in
effect, the US laws discriminate against foreign commerce. Unless the US wishes to repeal all of
its laws that currently permit any form of domestic remote gambling and adopt laws to affirmatively
prohibit it in all forms country-wide, then they will have to provide Antiguan online gaming
companies fair access to the US market,” Mendel added.

Speaking to RNM UPDATE, Director of Gaming-Financial Services Regulatory Commission of

Antigua & Barbuda, Ms. Kaye McDonald, characterized the Appellate Body ruling as “a historical
milestone”, and favourable for Antigua & Barbuda. In an official statement released April 7, the
Antigua & Barbuda Financial Services Regulatory Commission maintained that in its 146 page
Report, the Appellate Body “recommends that the Dispute Settlement Body request the United
States to bring its measures, found in this Report and in the Panel Report as modified by this
Report to be inconsistent with the General Agreement on Trade in Services, into conformity with its
obligations under the Agreement.” The Regulatory Commission’s statement adds, “the ruling, in a
general context, can be viewed as taking into account the need for developing countries to improve
their economic and social development through the liberalization of trade in services.”

Permanent Secretary in the Antiguan Ministry of Trade Ambassador Colin Murdoch characterized
the Appellate Body ruling as a “landmark victory”, representing a “vindication” for his country. He
added, “politically and symbolically, this is a great result, and a triumph for all small developing
countries – in so far as no matter how small a country, it has a voice in the WTO.” Mr. Elliott Paige,

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an Antiguan trade diplomat based in Geneva, reaffirmed this view, emphasizing “the Appellate
Body Report sent a clear signal that small developing countries can be treated equally and fairly in
the WTO dispute settlement system.”

A number of industry interests have also responded to the Appellate Body ruling. In a statement
issued April 7, the UC Group – a company based in the UK, that provides payment services for a
number of Internet business sectors, including online Internet gaming - said “the WTO has now
found US prohibitions on Internet Gambling improper and discriminatory under global trade
rules…this WTO ruling means the US will need to regulate, rather than prohibit Internet gaming.
It’s clear that this will require Internet gaming companies seeking to do business with US
consumers to have adequate protections for consumers in place, to deal with such problems as the
risk of underage gaming, fraud, and money laundering. The good news is that there are now
solutions in the payment system to do just that.”

As at press time, a detailed legal assessment of the Appellate Body Report and a definitive legal
paper explaining exactly why the US claim of a “win” is legally false was being prepared. Based on
this assessment, sources said, Antigua will engage the United States on the modalities of the
ruling. A senior Antiguan government official cautioned though that, “there are no precedents for
the road ahead; we need now to think of innovative ways in which concerned parties can agree as
regards how this ruling is to be enforced, to ensure compliance.”

There is no further appeal to the Appellate Body ruling. The dispute stems from a complaint filed
with the WTO in 2003 by Antigua & Barbuda, as a result of efforts by the US to crack down on a
nascent Internet gaming industry that affected jobs and government revenue negatively, as it did
efforts aimed at reducing the island’s economic dependence on tourism.

GUYANA TO PRESS FOR SUGAR AND RICE AS ‘SPECIAL PRODUCTS’

An informed source revealed to RNM UPDATE that Guyana is poised to publicly signal its intention
to designate sugar and rice as Special Products. “It is the view of Guyana that both products
should have recourse to the Special Safeguard Mechanism. Other products will be identified
pending further consultations with relevant stakeholders,” the source also said.

Agriculture plays a central role in the Guyanese economy, and remains vital for its very survival
and future development. As a member of the G-33 alliance of WTO members dedicated to
ensuring a meaningful agreement on ‘Special Products and a Special Safeguard Mechanism’ for
developing countries, Guyana fully supports the work of this important group. Guyana is of the
view that, if current Doha-mandated global trade talks are to be successful, developing countries
must be given the flexibility to adopt measures aimed at enhancing domestic food production, and
protecting the livelihoods of the rural poor and small farmers. In that connection, products
identified by developing countries as being essential to food and livelihood security should not be
subject to cuts in tariffs, and should also be eligible for additional protection in circumstances
where they come under threat. “It is on this basis that Guyana is pressing for sugar and rice as
Special Products,” the source added.

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In the WTO July Framework Package emerging from a General Council meeting in July 2004 (see
WT/L/579), Paragraph 41 of Annex A provides that: “Developing country Members will have the
flexibility to designate an appropriate number of products as Special Products, based on criteria of
food security, livelihood security and rural development needs. These products will be eligible for
more flexible treatment.” Paragraph 42 states that “a Special Safeguard Mechanism will be
established for use by developing country Members.”

BELIZE-GUATEMALA TRADE PACT TALKS ADVANCED SIGNIFICANTLY BY SECOND

ENCOUNTER

“We have substantially advanced negotiations, over the course of this five day round of talks.” This
was the word from Mr. Jose Alpuche, Director-General in the Directorate General for Foreign
Trade, Ministry of Foreign Affairs of Belize, who spoke to RNM UPDATE at the close of the second
round of negotiations between Belize and Guatemala for a Partial Scope Trade Agreement (PSA).
The talks were convened in Belize City, Belize, having got under way April 4.

The second round sought to press ahead with substantive negotiations of the proposed Text of the
Agreement. All Chapters were under consideration at the marathon week-long talks, as
negotiators met in three parallel groups, to cover the various trade disciplines such as Rules of
Origin, Customs Procedures and Non-Tariff Barriers. Negotiating Groups on Investment and
Transportation were also convened during the week. “Headway was made in our deliberations.
We are pleased with the pace of negotiations,” Mr. Alpuche said, characterizing the mood of the
talks as positive; underscoring, “the Guatemalan side used the opportunity of being in Belize to
publicly reaffirm their commitment to the PSA talks.”

The top Belizian trade official revealed that the two sides agreed on criteria for developing a list of
products to be traded, for a limited basket of goods. On special and differential treatment,
Guatemala agreed to the principle of asymmetric treatment; “this was evidenced by agreement that
Belize would have longer phasing in periods for its tariff preference liberalization obligations,”
Alpuche said. Special asymmetric treatment for market access for Belize’s agricultural sector was
also discussed.

Guatemalan negotiators pitched the idea of the two sides exploring the incorporation of financial
services into the framework for on-going talks. “The proposal is currently under review,” Director-
General Alpuche confirmed to RNM UPDATE.

The First Round of negotiations, which took place in Guatemala, aimed primarily at clarification of
the proposed draft Text, as well as exchange of information to facilitate a deeper understanding of
the trade policies of each country (see RNM UPDATE 0503, February 28, 2005 - FIRST ROUND
OF BELIZE/GUATEMALA TRADE PACT NEGOTIATIONS HAILED A SUCCESS).

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AVANCE SIGNIFICATIVO EN EL SEGUNDO ENCUENTRO DE LAS CONVERSACIONES
COMERCIALES ENTRE BELIZE Y GUATEMALA

“Durante los cinco días de esta ronda de negociación, hemos logrado un avance sustancial en las
negociaciones.” Estas fueron las palabras de José Alpuche, Director General de la Dirección
General de Comercio Exterior del Ministerio de Relaciones Exteriores de Belize, quien conversó
con RNM UPDATE al final de la Segunda Ronda de negociaciones entre Belize y Guatemala con
vistas a un Acuerdo Comercial de Alcance Parcial. La ronda se llevó a cabo en Belize City, Belize
desde el 4 de abril.

En esta segunda ronda se procuró avanzar en el borrador de texto del acuerdo. Todos los
capítulos fueron discutidos durante las maratónicas sesiones llevadas a cabo, en las que hubo
tres grupos de negociadores reuniéndose de manera paralela para cubrir varias disciplinas
comerciales tales como Reglas de Origen, Procedimientos Aduaneros y Barreras No
Arancelarias. Los grupos de negociación en Inversión y Transporte también se reunieron durante
la semana pasada. “Progresamos en nuestras deliberaciones y estamos satisfechos con el
avance de las negociaciones” afirmó Alpuche, quien calificó el ambiente de las negociaciones
como positivo, subrayando que "el lado Guatemalteco aprovechó la oportunidad de estar en Belize
para reafirmar públicamente su compromiso con las conversaciones sobre el Acuerdo de Alcance
Parcial.

El alto funcionario comercial belizeño, reveló que ambas partes habían acordado los criterios para
desarrollar una lista de productos a ser comercializados, dentro de una limitada canasta de
bienes. En lo que respecta Trato Especial y Diferenciado, Guatemala estuvo de acuerdo con
aplicar el principio de tratamiento asimétrico, “esto quedó en evidencia por el acuerdo de que
Belize tendrá periódos de desmonte más largos para la liberalización de sus obligaciones
arancelarias preferenciales” dijo Alpuche. El trato asimétrico especial para el acceso a mercado
de los productos agrícolas belizeños también formó parte de los temas discutidos.

Los negociadores gualtemaltecos propusieron que ambos lados exploraran la posibilidad de

incorporar los servicios financieros dentro del marco de las actuales discusiones. “La propuesta
está siendo evaluada en estos momentos” confirmó Alpuche a RNM UPDATE.

La Primera Ronda de negociaciones, que tuvo lugar en Guatemala, se concentró en conocer y

estudiar el texto del Acuerdo así como en intercambiar informaciones entre las partes para facilitar
un mejor entendimiento de las políticas comerciales entre los dos países. (Ver RNM UPDATE
0503, Febrero 28, 2005 - FIRST ROUND OF BELIZE/GUATEMALA TRADE PACT
NEGOTIATIONS HAILED A SUCCESS).

CARIBBEAN CONCERNED WITH BANANA CHALLENGE LODGED AT WTO

A response to an earlier European Union (EU) decision to shift from the current quota system for
the importation of bananas to a Tariff-Only system with a proposed duty of EURO230 per tonne,
six Latin American banana-producing countries (Colombia, Costa Rica, Ecuador, Guatemala,

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Honduras and Panama) signaled their intent to seek WTO arbitration as regards the EU’s
proposed new tariff, March 30 (see RNM UPDATE 0502, February 11, 2005 - EU NOTIFIES
TARIFF OF EURO230). Three more Latin American countries (Brazil, Nicaragua and Venezuela)
subsequently signed on to the request for arbitration.

“The request for arbitration is regrettable,” the Director-General of the Caribbean Regional
Negotiating Machinery (RNM), Ambassador Dr. Richard Bernal, told RNM UPDATE. He
underscored that what these Latin American countries have elected to do will not ensure a fair or
an equitable outcome for all suppliers, making special note of Caribbean countries.

H.E. George Bullen of the Embassy of Eastern Caribbean States (ECS) in Brussels also expressed
regret at the arbitration request. Ambassador Bullen added that the Latin American countries
concerned were reluctant to go to arbitration in the first place, because of uncertainty over how the
arbitrator would rule. “Their call for two additional arbitrators stems from their uncertainty over
whether a sole arbitrator would rule in their favor, and certainly not for the reason they are justifying
the request, on the basis that the case is too complex a matter for one person to rule on,” the
Caribbean diplomat said.

On January 31 this year, the European Commission notified the WTO of its proposed tariff of
EURO230 per tonne for most favoured nation (MFN) suppliers - mostly in Latin America – as
regards the new Tariff-Only system for the EU’s import regime for bananas, intended to replace the
present regime based on tariff quotas, as of January 1, 2006. The Commission made this
notification to the WTO under terms agreed at the Fourth WTO Ministerial in 2001, explicitly
requested by the Latin American exporting countries, and which provide for the possibility of
arbitration on the level of the tariff.

The level of duty proposed by the EU for the new Tariff-Only system for the EU’s import regime for
bananas is unacceptable to both the Africa Caribbean and Pacific (ACP) and Latin American
banana suppliers. For the ACP, the proposed tariff is too low. The ACP countries have
consistently indicated that a minimum tariff of EURO275 per tonne is required to maintain the
overall level of protection for their bananas. For their part, Latin American countries have signaled
they support a maximum tariff of EURO75.

In an exclusive interview with RNM UPDATE, Mr. Bernard Cornibert, CEO of a key industry player,
the Windward Islands Banana Development and Exporting Company (WIBDECO) - a private
company tasked with advancing the commercial development and interests of the Windward
Islands’ banana industry – rebuffed the proposed EU tariff, saying “we do not believe that the tariff
proposed by the EU will adequately safeguard Windward Island bananas; naturally we support the
ACP position of a tariff of EURO275, and we are disappointed that the EU has pitched EURO230
as a tariff proposal. If fixed at EURO230 the Windward Island banana industry would really
struggle to survive.” The top executive underscored, “we are also concerned that the matter has
now been referred to arbitration. While we will have to wait and see what happens, we think there
is an alternative to the Tariff-Only system, that does not pit the Caribbean against the Latin
Americans – but we are not giving up hope.”

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An informed source reaffirmed Mr. Cornibert’s views, calling for a “constructive alternative” to be
sought. The source noted that in the arbitration process, socio-economic and multifunctional
considerations as they relate to synergies between the banana industry in small countries and the
livelihood of entire communities, such as those of the Windward Islands, “will likely take a back
seat to other considerations.”

A Brussels-based Caribbean diplomat is of the view that it is essential that however the matter
evolves, Caribbean banana producing countries’ right to export their bananas on a “secure and
remunerative basis” be recognized and upheld by the EU and the WTO.

Local banana producers in the Region are also expressing concern with the request for arbitration.
“Although we are not completely surprised, we’re concerned by the move,” said Dr. Henry Fagan,
Chairman of Dominica Banana Producers Ltd, a private producers company that markets
Dominican bananas and provides technical assistance to banana farmers to meet Sanitary and
Phyto-Sanitary (SPS) requirements and standards, and to meet criteria of fair trade production
practices. He told RNM UPDATE, “we fear this arbitration process may lead to a decision that may
be to the detriment of our competitiveness in export markets. For Dominica, the synergies
between our banana industry and the economy at large are very evident. A substantial reduction
of banana exports would resonate through the economy at large; indeed, it already has. Consider
that in 1990 there were over 6,000 Dominican banana farmers. Currently that figure has dropped
to 1,000; yet in access of 6,000 persons are dependent on banana production for their livlihoods.”

Although it was expected, an informed source revealed to RNM UPDATE that there are suspicions
in diplomatic circles as to the timing of Latin American countries’ arbitration request. “There are
questions over what motivated these countries to wait until now to lodge an arbitration request at
the WTO; some insiders have openly suggested it may have been a delay tactic,” the source said.
Depending on how the arbitration process goes, if the case for the EU’s preferred tariff unravels,
because it is rejected by certain banana suppliers, it will likely have to propose a new one. In the
case of the Caribbean, there is a clear consensus that the Region would reject any reduction to the
level of the tariff proposed by the EU, which is already too low.

As regards a timeline, it is likely the WTO will not hand down a decision in the first instance until
late July. The prospect of a second round of WTO arbitration could be in the cards, and the
implications are daunting for completing this process in advance of the scheduled January 2006
date for the Tariff Only system to come into effect. The implications of the recent arbitration move
for troubled WTO talks has also been raised in trade circles. A trade diplomat told RNM UPDATE,
“there is the potential that what cotton was for the Fifth WTO Ministerial – in that it almost derailed
that key meeting – bananas could be for the Sixth WTO Ministerial; as bananas could overshadow
this key meeting set for Hong Kong, if the arbitration process drags on past the Summer and a deal
is not struck in advance of the December Ministerial.” Latin American countries, in fact, threatened
to block the successful conclusion of the Fourth WTO Ministerial, until their concerns as regards
leaving the door open to arbitration as regards bananas were addressed.

An ACP Working Group on Bananas met on April 8, and decided to seek third party status for ACP
banana exporting states in the arbitration proceedings. The precise form of the request remains
unclear, as quite a number of ACP states have voiced their readiness to lodge individual requests.

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Speaking to RNM UPDATE, head of the Windward Island Farmers Association (WINFA) - an
umbrella organization that mainly represents banana producers in the Windward Islands – Mr.
Renwick Rose said, “we are very concerned with this Latin American action. However, we are
strongly for the status quo, as regards the EU banana import regime, and are of the view that the
EU hold back on implementing the Tariff-Only system, though not indefinitely, and give enough
time for all parties involved to come up with a solution in all their interests.”

Mr. Rose’s sentiments were reaffirmed by a recent statement issued by a broad coalition of
organizations behind the Second International Banana Conference (set for Brussels, April 28 to 30)
which said that any new European import regime based solely on tariffs will not only cause severe
social and environmental damage in Latin America, but also in the Caribbean. The coalition
organizing the conference comprises: EUROBAN (the European Banana Action Network), a pan-
European alliance of trade unions, environment and development NGOs and fair trade
organisations; COLSIBA (the Coordinating Centre of Latin American banana workers’ unions);
WINFA (the Association of Caribbean Farmers, based in the Windward Islands); the IUF
(International Union of Food, Agricultural, Restaurant, Catering, Tobacco and Allied Workers’
Unions); and the US Labour Education in the Americas Project (USLEAP).

Representatives of Governments, traders, supermarkets and producers will also be taking part in
the end of month forum. The “big five” banana companies – Dole, Chiquita, Del Monte, Fyffes and
Noboa - have all confirmed their participation. A WINFA media release lists as the aims of the
conference: “securing commitments by governments and banana companies to respect/enforce
labor and trade union rights and standards for workers in all producing countries; securing
commitments by marketing companies to fair remuneration for small producers and plantation
workers; placing the specific needs of women workers and small farmers firmly on the international
agenda; exploring mechanisms to control over-production and to stabilize prices; elaborating a
definition of a “fair price”; analyzing the implications of changes in the structure of the chain
(notably the growing power of the supermarkets); proposing viable measures for an EU-25 banana
import regime that favors sustainable production and fair trade; securing better protection of the
working, living and natural environment; analyzing the impact to date – and discuss the future role
– of the voluntary labor and environmental standards initiatives; and, creating a permanent
mechanism/forum in which to continue dialogue (and/or negotiations) between the different actors.”

SECOND CARIFORUM-EC TECHNICAL SESSION CONVENED

The Second CARIFORUM-EC Technical Session on Regional Market Access Issues was held in
Brussels, March 30 to 31. Discussions covered customs issues applicable within the CARICOM
Single Market and Economy (CSME), technical barriers to trade (TBT) matters and SPS issues.

In discussing customs issues, the CARIFORUM team highlighted that all CARICOM Member
States, save one, were using the ASYCUDA system for customs data; two are currently moving
towards the “ASYCUDA ++” system, that incorporates risk analysis tools. CARIFORUM informed
the meeting of the Revised Treaty of Chaguaramas undertaking (Article 239) to provide a legal
framework for the free circulation of goods, and provided an update on ongoing work relating to
harmonised customs legislation.

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In discussions on TBT matters, the CARIFORUM team indicated that the Caribbean Regional
Organisation for Standards and Quality (CROSQ) was at an early stage of development, and that it
would benefit from the support that was due to be provided under the EC’s Caribbean Regional
Indicative Programme. The meeting was informed about the function and operation of CROSQ
within CARICOM. The key functions of CROSQ are to lead the process of promoting and applying
harmonised standards across the region, and to provide technical advice to CARICOM Ministerial
Councils, including in matters concerning TBT measures affecting trade. The policy on
standardization in the CSME is to apply international standards. The system will remain mixed with
some national and some regional standards in application. CARIFORUM agreed with the EC on
the benefits of CROSQ participating in international standard setting bodies due to economies of
scale considerations, but noted that it had yet to make this principle operational. CROSQ
coordinates the activities of Member States, but the obligations under the WTO TBT Agreement
(e.g. on notification) are still under national responsibility.

The establishment and operationalization of the Caribbean Agricultural Health and Food Safety
Agency (CAHFSA) was discussed, as an institution that is currently the core of CARIFORUM’s
approach to SPS. The CARIFORUM team explained that a major challenge is ensuring the
sustainability of CAHFSA. Both sides agreed that additional support for the development of a
CARIFORUM regional SPS regime could provide early harvest results from the negotiations.

The CARIFORUM team also updated the meeting on the state-of-play of the implementation of the
CARICOM-Dominica Republic Free Trade Agreement. Specifically, they noted that technical
meetings are scheduled for April 12 to 14, and would involve two committees: a) the Rules of
Origin committee which would conclude the outstanding rules; b) the agricultural experts
committee, which would review the list of agricultural products that were subject to special trade
arrangements, with a view to putting it on a more objective footing in light of actual experience.
The next meeting of the Joint Council is expected to take place by mid-2005. Following the Joint
Council meeting, and in view of the recent ratification by Suriname’s Parliament, the Free Trade
Agreement would be able to move from partial application to full entry into force.

CARIFORUM and the EU will meet later this month, to continue this phase of the negotiations on
the topic of trade in services, and again in May on other trade-related issues. The Principal
Negotiators are also expected to convene their second meeting in May.

DELAY IN RESUMPTION OF HIGH-LEVEL TALKS RAISES RENEWED CONCERNS OVER

FTAA PROCESS

The recent postponement of an end of March meeting of Free Trade Area of the Americas (FTAA)
Trade Negotiations Committee (TNC) Co-Chairs has raised concerns about the FTAA process,
coming on the heels of momentum garnered from an encounter of TNC Co-Chairs in February this
year (see RNM UPDATE 0503, February 28, 2005 - AMERICAS-WIDE TRADE TALKS RECEIVE
IMPETUS). “CARICOM is disappointed at this further delay in the resumption of negotiations,”
Ambassador Bernal said.

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The scheduling change was announced in late March by the TNC Co-Chairs, who subsequently
informed TNC Vice-Ministers that they will be meeting in Washington, DC on May 12. The work
that the meeting will undertake is being viewed as a key step in the resumption of the Seventeenth
TNC meeting, as the intention is to present the results of their deliberations to the resumed TNC
meeting. A successful result for this process is also essential in connection with the continued
operation and funding of the FTAA Administrative Secretariat after June 30, and beyond 2005. It is
an issue that will have to be addressed even before the substantial resumption of negotiations.

This latest development as regards the troubled FTAA process marks yet another delay in the
resumption of FTAA talks. An informed source told RNM UPDATE, the delay has surfaced for a
variety of reasons. The source underscored the request for an extension of US Trade Promotion
Authority (TPA) by President Bush on March 30 and the United States’ focus on WTO talks, in
particular. As regards the former, the TPA as it currently exists would only apply to trade
agreements concluded by July 1, 2005. If requested by the President, the TPA Act of 2002
provides for extension of “trade authorities procedures” to include agreements entered into before
July 1, 2007. “The United States does not want to risk re-starting FTAA negotiations without
having the extension of TPA guaranteed until July 2007, lest the agreement/commitments entered
into at the negotiating table by the US executive branch be reopened by Congress,” the source
said. However the source emphasized, this only partially explains the continued difficulty in
maintaining momentum in the FTAA process. “On-going Doha Round talks are taking up
considerable attention at this juncture, on the part of the United States; and this focus will only
intensify in the lead up to the Sixth WTO Ministerial at year’s end,” the source said; adding, “as a
result, Americas-wide trade talks have been placed on the back-burner.”

DR PRIVATE SECTOR TOUT NEED FOR ‘LEVEL PLAYING FIELD’ FOR TRADE PACT

Legislative passage of the US-Dominican Republic-Central American Free Trade Agreement (DR-
CAFTA) in the Dominican Republic legislature needs to be preceded by an ‘implementing
package’; this is the view of several Dominican private sector interests and associations. In recent
weeks, a number of private sector groups, while expressing support for CAFTA, have been
pressing for what they describe as a “prerequisite” to DR-CAFTA legislative passage. Most
recently these groups articulated this message in consultations with Chairman of the Trade and
Industry Commission of the Dominican Republic Senate, Senator Alehandro Santos. They
characterize such a package as essential to providing them with an “enabling environment” to
compete with their Central American counterparts, who have access to similar incentives.

Speaking to RNM UPDATE, an advisor to Senator Santos said “the package proposed by the
private sector is two-pronged in approach;” highlighting that “one approach is fiscal centred, related
to duties on certain imported goods, while the other seeks to put in place institutional framework-
type reforms, as regards an entity to administer and implement the trade pact.”

As regards legislative passage of the trade pact in Central American countries, on March 10
Guatemala’s legislature voted in favour of DR-CAFTA, following on the heels of ratification of the
Agreement by both El Salvador (earlier this year) and Honduras (March 3). An informed source

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told RNM UPDATE, “once the US Congress approves DR-CAFTA (tentative schedule of late May
in the House and late June in the Senate) probably by the July 4 recess, then the Agreement is
effective for all, as it becomes effective with US + 1 of DR-CAFTA countries.” The source added,
“Nicaragua is expected to ratify the trade pact in about a month’s time from the Easter recess. The
Dominican Republic and Costa Rica will then be pressed for their approval sometime before July,
at the latest.”

As regards passage of the trade pact through the US Congress, this is proving to be a rancorous
affair, not only because of intense opposition from the US sugar and textile industries but due to
labour rights concerns amongst US lawmakers and NGOs. Labour rights concerns amongst US
lawmakers as regards Central American countries have stymied favourable consideration of the
trade pact. Several US lawmakers strongly contend the trade pact fails to go far enough in
obligating Central American countries to raise their worker protection standards.

Amidst these concerns, on April 5, Trade and Labour Ministers of Costa Rica, the Dominican
Republic, El Salvador, Guatemala, Honduras and Nicaragua announced their formal endorsement
of recommendations and follow-up work plan contained in a White Paper on labour related issues
concerning Central America and the Dominican Republic, prepared by a Working Group of their
Vice Ministers with the support of the Inter-American Development Bank (IDB). The White Paper –
titled ‘The Labour Dimension in Central America and the Dominican Republic, Building on
Progress: Strengthening Compliance and Enhancing Capacity’ – contains recommendations to
strengthen labour law compliance and improve the capacity of labour-related institutions in key
areas.

The IDB is supporting efforts to strengthen compliance with labour laws and strengthen related
institutions in the region. The IDB has signalled its intent to provide financial resources to support
the implementation of some of the recommendations approved by the Ministers. In Washington,
DC to meet with US Congressional lawmakers recently, DR-CAFTA country Ministers underscored
the message that their respective countries are committed to addressing shortcomings as regards
enforcement of labour laws, but that an implemented DR-CAFTA will accelerate progress in
addressing inadequate labour enforcement concerns.

NEWS BRIEFS

OECS Agriculture Ministers request Programme to help Reposition Sector

Agriculture Ministers of Organisation of Eastern Caribbean States (OECS) countries met for a
Ministerial meeting in Antigua, March 31. At the meeting, Ministers were taken through a Plan of
Action that outlines nine programme areas, designed to provide impetus to the sub-region’s
agriculture sector. Institutions such as the Food and Agriculture Organization and the Inter-
American Institute for Cooperation on Agriculture (IICA) updated the meeting on their respective
work-plans, proposing new initiatives of assistance consistent with the nine areas identified in the
Plan of Action. Synergies between agriculture and tourism, the sub-region’s two most important
industries, were highlighted at the meeting, in the context of strengthening agri-tourism capacities.
Developing an effective and efficient marketing system were also recognized as essential to

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revitalizing the sector, as are initiatives to strengthen the capabilities of the agricultural health and
food safety systems in Member States.

Emerging from the meeting, Ministers tasked the OECS Secretariat with developing a full
programme and related implementation schedule and a budget by September 2005, so that funds
could be sourced for implementation. The Minister’s meeting was preceded by a preparatory
meeting of senior officials, March 30.

Key US Lawmaker Urges Re-examination of T&T Duty-Free Ethanol Eligibility

On March 29, US Senator Chuck Grassley, Chairman of the Committee on Finance, sent a letter to
the US Bureau of Customs and Border Protection, requesting a ruling on the eligibility of
dehydrated ethanol to be produced by Trinidadian company Angostura Holdings Limited to enter
the US market duty-free. The facility is currently under construction, and is set to be commissioned
next month. In order for a product to qualify for duty-free treatment under the Caribbean Basin
Economic Recovery Act (CBERA), at least 35 percent of the value of the product must be added in
CBERA beneficiary countries. Senator Grassley’s request is based on an allegation that
Angostura’s ethanol dehydration facility would only add some 10 percent in value to Brazilian
ethanol to be dehydrated by it. Speaking to RNM UPDATE, a top executive at Angostura said
Senator Grassley’s assertion “is not at all correct,” indicating further that the company was in the
process of formulating a response due to be released soon.

Cotton Sub-Committee hears updates on the Ag Talks

The Cotton Sub-Committee heard updates on the agriculture talks and development aspects of
cotton, getting down to substance after it swiftly adopted its work programme (that reflects the July
Framework Package as it relates to cotton and agriculture), at its second meeting on March 22.
Reportedly, reviews from the WTO Secretariat on development aspects of cotton, and from the
International Monetary Fund (IMF), the United Nations Conference on Trade and Development
(UNCTAD) and the EU on their development activities sparked a brief debate on how development
assistance could best be used to help recipient countries adjust, while also working on reducing
trade distortions through the agriculture negotiations.

Consultation on Small Economies Proposals

Consultations, on the margins of the ‘Tenth Geneva week’, were convened in Geneva for
Commonwealth small states. The meeting discussed and prioritized a series of proposals on small
economies, developed by Commonwealth small states trade experts in London earlier this year.
Officials agreed to review and take the proposals back to respective Capitals for further
consideration and sign off, with a view to submission in several negotiating bodies in the WTO.

S&DT Talks Suspended

Chairman Faisal Ismail, who is heading WTO Special and Differential Treatment talks, suspended
a special negotiating session, April 6; following objection to separating agreement-specific

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proposals from other cross-cutting issues by a group of developing countries. Ismail is said to be
in the process of holding consultations with concerned parties.

Varying Interpretations of ‘Confessional’ process for selection of WTO head

At a March 31 informal meeting of Heads of Delegation, the Chairman of the WTO General Council
outlined the way forward for consultations in the final two months of the appointment process for a
new WTO Director-General (JOB(05)/49); specifically, on a “confessional” basis repeated in
successive stages on the basis of a revised slate of candidature each round. According to the
Chairman’s statement, delegations will be invited to respond to the question, “what are your
preferences?” There are differing views in Geneva over signalling a second or third preference,
with one camp in favour of such an approach and the other strongly against such a methodology
for “confessionals”, arguing that the process should be guided by the expression of preference for
one candidate.

The selection process for the new WTO chief, which commenced on December 1, 2004, is to
conclude with a General Council meeting to be convened no later than May 31, 2005. A related
subject that has also surfaced in Geneva trade circles are reports that an apparent deal may have
been struck between the EU and US, as regards top posts for the World Bank and WTO,
respectively. Reports are that in exchange for European support of Paul Wolfowitz as the US pick
for the Presidency of the World Bank, the United States may have offered to back former EU trade
chief Pascal Lamy to take over the helm of the WTO. This view has been given credence by
recent remarks by former US Trade Representative and now United States Deputy Secretary of
State Robert Zoellick on April 4, where he gave the first public signals about which candidate the
United States is likely to back in a race for the WTO post of Director General, to be vacated shortly
by departing Director General Supachai Panitchpakdi in August of this year. In reference to Lamy,
Zoellick said “we would be very comfortable with […him…] as the WTO Director General”, adding
he would be a “strong candidate.” Although in making these comments, the former United States
Trade Representative did not discount other candidates, saying there are also other good
candidates. Formally, though, the United States has yet to indicate which candidate it will support
to take over the helm of the Geneva-based world trade body.

In addition to Lamy, the three other candidates vying to head the WTO are Mauritius Foreign
Minister Jaya Krishna Cuttaree (supported by the ACP countries), Brazil’s WTO ambassador Luiz
Felipe Seixas Correa and Uruguayan trade envoy Carlos Perez del Castillo. Supachai’s successor
will be nominated in late May, and will assume his duties on September 1, 2005.

UPCOMING EVENTS

April 14 to 15: Second Technical Group Meeting on Non-Agricultural Market Access (NAMA), Barbados

April 18-20: EPA PMU-funded Training Programme on Services and Investment for CARIFORUM
negotiators, Antigua

April 21-22: TWG on Services and Investment related to the regional integration dimension of EPA
negotiations, Antigua

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April 25-27: CARIFORUM-EC Technical Session on Services and Investment related to the regional
integration dimension of EPA negotiations, Antigua

For More Information Contact:

Nand C. Bardouille
Caribbean Regional Negotiating Machinery
3rd Floor, The Mutual Building, Hastings Main Road, Hastings, Christ Church, Barbados
Tel: (246) 430-1678
FAX: (246) 228-9528

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