DYNAMICS OF INTRA-REGIONAL AND EXTRA-REGIONAL TRADING PATTERNS The focus of CARICOM intra-regional trade performance will be the period since 2005. Besides examination of the performance of countries that have been contributing to the Growth in Inra-egional trade, particular attention will be paid to those factors that have been impacting on trade creation and trade diversion. ‘The bulk ofthe paper is on merchandise trade since acquiring data on trade in services | eortinues to presen: serious statistical problems of both identification and disaggregation. An Annex devoted to trade with Third Parties is included. ‘structure of CARICOM trade has remained basically unchanged, confined mainly to Cf a small percentage of total production to intra-regional markets while the ss Wo the traditonal markets of the USA, Canada, the UK and the rest of the sn Union. The composition of exports mirrors that of production pattems and of = primary products with some light manufacturing and, #singly, services. Although Member States traditionally produce similar products ‘a more or less homogenous range of services, there Is some amount of In trade especially in the intra-regional markets. ication of technology to the production process, some countries are now ble o produce and export a wider range of products at lower cost than was once vhen there was reliance only on traditional factor endowment. The use of ‘in the production process and product development and enhancement hasTrae hiesrmentRpert2040 ‘Served to increase the range of products that is now possible to be included in intra- regional and total trade. 1. Intra-Regional Imports. Intra-regional trade continues to be a minute portion of total CARICOM trade even though itis gaining some momentum. In addition, the proliferation of intra-CARICOM firms might have added to the slow but steady increase in intra-regional trade. A umber of firms, mainly from Trinidad and Tobago and to a lesser extent Jamaica and Barbados have expanded their operations across the Region taking advantage of the infastucture thats avaiable such 2s the ntr-CARICOM Double Taxation Agreemeny- ‘and the Treaty provisions protecting the markets from extra-regional imports. 'A large portion of the cross border fms operate in such a way that they require inputs Of raw material and other inputs in the production process from their home base, thus the steady increase in intra-Regional imports. Table I.1 shows that in 2004, intra-regional imports amounted to US$1.68 bn and by 2008 had grown by 92 per cent to reach US$3.22 bn. That growth rate however does ‘not include data for Antigua and Barbuda and therefore must be interpreted as only an ‘approximation, :r-Regional and Ete Rogol Tradeg Pato Table I: Value Of CARICOM Intra-Regional Imports by Country, 2004-2008 (US$mn) and the total % change for the period Montserrat Salat Lucie St Vincent and [pee Ga fs by far the largest intra-regional importer and saw its inta-regional imports eteased by approxmately 191 per cent between 2004 and 2008. The level of 's imports is due in part to its population size and the demand for consumption the rest of the Region along relia ‘Suriname, on the other 10 experience overall nagative intra-regional import growth for the review It recorded negative growth of 44.6 per cent. Suriname's negative intra- Performance is due to a combination of factors, including the relative from the ta 1° OM 8 Contrast between that country’s intra-regional import and G2 over the review period is depicted in Figure I.4| il caooean Trade &nvotnent Report 2010, _ Figure 1.1: Suriname and Jamaica Intra-Regional import Performance, 2004-2008 “Yreeize, anther geographically distant Member Stats, aw @ mere 7 per can increase | its invovoional merchandise imports beweon 2004 and 2008, Both Surname and Bolzo are now producers of pevleum products and during te prt 2004-2008 when most other Member ‘States were saddled with high Ingots for petroleum and petoloum product those counties wore able 10 moet some of thee domestic domand From local sources. Ths partaly expla the sioner growth in ther ive regnal impos, Bebados also recorded nly & modest inctoase of 27per cent In ina-ogina imports between 2004-2008 and the relatively low rato of growth fs perhaps sila ue fo that country being sie Yo provide some of ts petleum needs rm Hs om domestic sources. The bulk of intra-rogional trade is dominated by the MUGS in which Jamaica's shat looms large parly because of is population size. The LDCs (OECS plus Belize) ints regional trade is conditioned by a number of factors including: (the narrow range of products produced and the similarity to those producec the rest of the Region; 4 ‘small market size and demand, i access to petroleum and petroleum products on concessionary terms. ft Venezuela under the PetroCaribe agreement; and § (iv) inthe case of Belize > abilly to supply a portion of petroleum and fuel ol from its domestic source: > the inaccessibility to the other regional markets; > long distance from sources of supply; > high transportation cost; and % infrequency of transportation.| ‘Cheper— Dyranics of nes Repeal and Ex Regina ising Pats Table 1.2 shows the intra-regional Imports as @ per cent of total Imports for the period 2604-08. It shows that Trinidad and Tobago has consistently maintained the smallest percentage of intra-regional imports, as a percentage of total mports, averaging less than 2 per cent each year since 2004. ‘Table .2: Intra-Regional imports 1a Percentage of Total Imports, 2004-2008, 25 [oaricom os Dee The dala show also tht th intrarogional marti «relatively important one forthe LOGS. These countries, because of their market size and relative demand capacity able to source imports from larger Third Party countries which request '@ minimum size, which for the most part, are too large for the small economies {in addition, the existence of firms from the MDCs producing for thepo 2040 Figure 1.2: CARICOM Intra-Reglonal Imports and Total Imports Comp: ‘Atthough intra-egional imports increased by 92 per cent between 2004 and 2008 they ‘were only 12.6 per cent of total imports and reached only 13.0 per cent by 2008, a very marginal increase (Table 1.3). This is an indication of the homogenous nature of inta- regional imports, compared to that from the rest of the world. The lack of diversity regoral reducion-has_concbuted fo the almost constant share of Inreregiona, ipo in total mports over ime. Table 1.3: Comparison of Intra-Regional imports with Total Imporis, 2004-2008 (US$bn and Per cont) joalimpons 1327 er saacoginal impos CARICOM USHEa | TSI} EST] 227] 2a] — 3 Trogon aS HT Eee] aa] Ew] TES] er RSS Natura ofthe Growth in Intra-Regional imports for Dominica | ‘and St Vineont and the Grenadineschaps ~ Dyna of ita Replona and Ex Region! Tiaing Pato, ” Figure L3 shows the eratic nature ofthe growth in intra-regional imports for Daminica {7d St Vincent and the Grenadines and Table 14 provides the annual per cent change inintreregional imports and shows tha, ofall the CARICOM Member Stats for which complete data is available, Dominica and St. Vincent and the Grenadines are the only two Member States which recorded positive growth in intra-egional imports for every year fom 2004-2008. Table 1.4: Percentage Changes in intra-Regional Imports, 2004-2008 (CARICOM Baap ee, tal 260 ci 307 “8| 134 358 “Barbados 184 ‘35 [at [ er 22.8 28. 56] 330) amsiea 42| as} 775) = Surname 3. é SA “Trinidad and Tobago 6.8] 4.08 | 207 Tes sie] 145) 94 “Belle 38. 0 3 ToEcs 328 | 180, 92 ‘Antigua-and Barbuda . 38] 23. Dominica 08 35[ 10] 136 a76 | are| eta] 62 oa] 220| 910 | 40] ——a.5 156 7s] 28| 250 as7[— aes | rar t0a a3] zap 2.2 26 in 2008 after a negative growth of 84 per cent in 2007. On the other hand, ‘growth rate of intra-regional imports almost halved in 2008, compared to {0 general weakness in the economy, particularly in relation to mounting That country managed to divert a significant part of its demand for ‘and petrochemicals from Trinidad and Tobago to Venezuela where It was it from 2 deferred payment scheme, Import of Petroleum Products Of petroleum products have been increasing as a share of total | imports between 2004 and 2008, as seen in Table 1.5(Cabean Tre & investment Report 2010 Table 1.5: CARICOM Petroleum Imports as % of Total Intra-Regional Imports, 2004-2008 Tamales ‘&3| 723 [78] 08 | a4 | ‘Suriname 3] saz] eur | a} 87 “nia ana Tobago 755| 08] a0] 2a waz ies sia] ste] ser] 8 ar Balin 0] 98] 82] 08 a7, oes us| sat | 07] | atigua ona Barbuda wa} soz] a Doninies seo] aoa] 403 | sa | a8 Grenada 28| 8 m3] a7] 98 Montserrat va] sus} rea] 780] 78 ‘SCR and Wave 0] 408 | aaa | tea] a8 Salo cia aa] sur] aa] a7] 0) ‘SE Vincant and The W8| as] 38] "a8 aa Grenadines Toate: CARICOM Sac 2 In 2004 CARICOM MDGs imported US$795 millon worth of petroleum products from the Region. That fgure climbed to almost USS2 bilion in 2008. This was partly due increases in the demand for the product and partly to global supply pice Increases. The country most severely impacted was Jamaica, whose impor bil for petroleu products rose from US$364 milion in 2004 to USS1.3 billon by 2008 accounting fo ‘almost 70 por cent of the MDCs total import bill for petroleum products. This lrg9) Jamaica sha being able to supply 8 is party due to Barbados, Belize, and Surins Portion of their demestic demand, in addition to Trinidad and Tobago being a majo ‘exporter of the commodity.namics of rr Rexlona nd Trading Pats, nts, ‘Table 1.8: Value of Intra-Regional Imports of Petroleum and Petroleum Products, 2004-2008 (US$mn) EEBCCEEE | the LDCs, the import of petroleum products also increased, with that for 3. Grenada and Saint Lucia in 2008 being more than twice what it was in 2004, ‘case of the MDGs, the extent of the LDCs intra-CARICOM import bill for might have been much higher had it not been for the PetroCaribe assistance ided by the Government of Venezuela, The implications are obvious for a to energy security, in which a renewable energy policy would be to play an important role,Yr Corman Trade & investment Report 2010 Figure L4: Intra-Regional Imports of Petroleum 2. Intra-Reglonal Exports Intr-regional exports, which do not include data for Suriname among the MDCs and ‘Antigua and Barbuda for the LDCs, continue to increase daspite the similarity among the products which are produced by Member States. The exclusion of Suriname from the data set should not sigiicanty affect the outcome pertaining to intra-regional exports forthe review period mainly because export from that country have never been) 8 Significant portion of intra-CARICOM trade. In 2008, the value of intra-regional exports was US$3.78 bn up from US$1.24 bn in 2004 an increase of almost 200 per, ‘cont,Chapter Oynamis of Irs Reyonl end Exe Regional Tading Patios Table 1.7: Value of intra-Regional Total Exports by CARICOM ‘Countries, 2004-2009 (USSmn} § y 5 5 3 (ae | awe | __area| 2s | TF 79 TH] cad 1 "107 Ta) J = 3) a 50] 1908] 2428 | —a.763 | 368 Te ae aye Ba B aL i a We) ar 1 7 m= By Ey sa} of | © MDCs jn CARICOM, Trinidad and Tobago showed the largest increase in I exports, moving from US$859 milion in 2004 to US$3.2bn in 2008, an 279 per cent. That country’s significant increase in exports is mainly ae ame of the jlght manufactured goods and petroleum products. The iarket by exporters of manufactures from Trinidad and Tasted well ih nue of eer regional producers wh have bes lack of competitiveness in the regional market to unfair advantage of 2m Trinidad and Tobago, based on the latter's manufacturers having 6d cheaper sources of energy.catbeun Tras & Investment Report 2010 —— Figure L5: Intra-Regional Exports Guyana, despite its more or less guaranteed market for rice, was only able to increase Its exports to the rest of CARICOM by a mere 7 per cent between 2004 and 2008 and: Jamaica increased its intraregional exports by only 27 per cent. Barbados’ intra- regional exports grew by 49 per cent from 2004 to 2008, Intra-regional export performance by the LDCs was erratic during the review period. Belize saw its intra-egional exports dectine by 31 per cent between 2004 and 2008, perhaps due to the same constraining factors mentioned above with respect to its intra-, regional imports. Among the OECS countries, both Dominica and Montserrat recorded) ‘negative growth in intra-regional exports, while St. Kitts and Nevis and St. Vincent and) the Grenadines had stellar growth performances during the 2004-2008 period of peer cent and 108 per cont, respectively. Figure LG: Intra-Regional Exports for Selected LDCs[Chapter - Dynamics of na Ragonal end Extra Regional Trading Patene Good performances were also recorded for Grenada and Saint Lucia. Table 1.8 shows the percentage changes from 200 to 2008, on a yearly basis, and the overall change from 2004-2008, it showed thatthe only country which did not experience @ negative growth in intr-regional export at any time during the period was St. Vincent and the Geenedines. Even St. Kits and Nevis, which saw its intra-egional exporis grow by ‘almost 220 per cent between 2004 and 2008, recorded negative growth in 2007. Table 8: Percentage Change in the Value of Intra-Regional Exports by CARICOM Countries, 2004-2009 eae er a er = z Faas ta s a ata a Jamaica 26 4 268 | a oe a a5} — nat —as| — war} — ror wl | — yt —“eat past "op patos Eee “S| 15} ast — ara pagel Eeeee 35[ — 1} a 5} [2h | aaa shen ee —————— ‘ant and, | Grenada 64 a7 05 4 e57 2 ah Speer taf er} Sa oo we {| —w5| sar] ml] ea 5] see urea” CARISGM Sarina 2004 re 2008, traeplonal exports by the LDCS seem to have picked up im bul Bul represented 8 small facton ofthe oveal regional Wade: Mare a 1be dono to ena the ul arco f Une LDCs In Uwe voor gion lonal Trade Balance Bn Fecofded an overall surplus of US$S57 million in intra-regional trade in {Dut tum is very interesting since it was achieved despite all countries for Wvallable, except Belize and Trinidad and Tobago, turning out negative 1695. Table |. 9 gives the trade balance for the period 2004-2008, 1s_Carbean Tate nvostont Repo 2010 Table 1.9: CARICOM intra-Regional Trade Balance, 2004-2008 (USSmn) aes 425 Eas 3 as 397 = 3a] a] 183] as} oer as a | ae] a} ax} ae] Tapa 3 sea] ae] iss] ae] | Jamaica 505 a8 8 aise 587} zara : = Tid wad TOSS 78 aa} 188] aap er as “| a1] ses TLE ap] op ERs arf a6} ar <8 heed = ai aT 7 a — 7 = 3 irat ¥ a SR ad Woe 33[ a1] 35} —2} a] Torta $3] 1] a} a] a Wana The Genans | a3] a8] ae] or] —ar a ae pe ld TST E AICO SS i ‘The trade balance for Trinidad and Tobago has been increasing at a fast pace, from US$769 milion in 2004 to US$3.13 bilion by 2008.[Shooter ~ Dynamics five-Regions rd Extra Reponal Teasing Pater Figure 17: Trinidad and Tobago Trade Balance, 2004-2008 (US$mn) lopsided performance of intra-regional trade has resulted in the call for Trinidad and obago to help the other countries reduce the imbalance. In response, programmes of tance have been launched, including the Petroleum Development Fund and, fore that, the CARICOM Trade Support Programme. The assistance has not been ty effective to reduce the trade imbalance and the manufacturing secior in ber Stales continues to call for some redress. For example, the President of fade Support Programme, although well intentioned, was not much utlized and 80 produce the intended results. The main difficuity with the programme is that it the Issues which the manufacturing sector did not consider to be hindrances access. The programme capitalized to the tune of USS16 milion, was mainly lessistance as folows: of strategic and business plans and feasiilty studies aketing research and marketing plans, including export market development; promotion and distribution (website development and e-commerce); Xiuction management, procursment and inventory menagement; ty improvement and contol, including cerification; es Isa soe evra(cabean Tad & nveement Report 2010, Figure 1.8: Trade Balance for Selected Countries Inire-regional trade grew somewhat between 2004 and 2008, even though the Imbalance continues. “What is clear is that the trade is centred around a few Member’ States with Trinidad and Tobago as the major beneficiary. This sltuation could ‘aggravate tensions within the regional Community. “Trinidadian manufacturers pay just ‘over three cents per klowatt-hour for electricity, in contrast with their Jamaican rivels who pay es much as 20 cents per kllowatt-h 4 \What is yet to occur is regional producers exploring the option of exercising thelr rights under the Article 32 (5) of the Revised Treaty and deciding to establish «1 Production/manufacturing presence in Trinidad and Tobago to take advantage of th! ‘cheap energy. MDC-LDC Trade 2 Trade performance between MDCs and LOGs does not include Antigua and Barbuda there are missing data for that country. As @ result, the analysis is done on a county ‘specific basis. The data revealed that intra-regional trade Is skewed in favour of th MDCs which have captured a significant part of the LOCs markets, In addition €) exporting to the LDCs, the MDCs have established operations in a number of Countries and so serve the market through producing. A significant number of the {rom the MDCs with a presence in the LDCs tend to be from the dominant trade par ‘Trinidad and Tobago. Palicy makers across the Region are, of course, well aware of the challenges they fa in trying to increase the level of intra-regional trade and to reduce the dlsparity now exists. There is disparity between the MDCs and the LDCs and, also, MDCs themselves. The trade balance of selected OECS countries with Trinidad ‘Tobago, for the period 2004-2008, Is given in Table 1.10 18chap: Oyramis of inte Raglona nd Ext» Regional Trading Pate Table 1.10: Trade Balance between Solected OECS Countries and Trinidad and Tobago (US$'000) 923,956 | 30,67 arA6T | 09,505 | as Ea | as east | 307 arse OECS Member States (except for Antigua end Barbuda for which no data is ) recorded an aggregate trade deficit with Trinidad and Tobago of USS217 __ That trade deficit grew steadily and reached US$401 million by 2008. Both jea and St. Vincent Grenadines recorded a steady rise in the level oftheir deficit de with Trinidad and Tobago. The others, while recording a balance of trade deficit ‘rate Balance of Selected OECS Countries with Trinidad and Tobago, 2004-2008 (US$'000)Ccatbean Trade Investment Repo 2010 ‘The LDCs, and in particular the OECS, are important markets for the MDCs and, also, @ training ground for honing smurkelng sklis ahead of venturing into extra-rogional markets, Even though the OECS is highly dependent on imported fuel from Trinidad ‘and Tobago, which in part explains the mushrooming trade defcit with that country, the sub-region also runs a trade deficit with the other MDCs. Because of the not’ insignificant amount of trade that is carried on between the OECS and the rest of | CARICOM, it is clear that whatever happens in the sub-region wil affect the rest of CARICOM. tis ertica, therefore that growth be maintained in the OECS because of the existing symbiotic relationship. B. Application and impact of the External Tariff (CET) One of the ettical instruments to faciitate trade in the Region Is the Common External Tariff (CET) which countries have relied on to provide support for their domestic industries, While goods of CARICOM origin enjoy duty free entry to other Member ‘States, the CET allows the maintaining of common customs duties (also called tari ‘against goods sourced outside the Region. The effectiveness of the support afforded by the CET is being somewhat stymisd by the Region’s deeper integration into the gi trade arena. Trade agreements signed by CARICOM Member States would graduall allow for goods coming from outside the Region to enter the CARICOM market free duty over time (such as the CARIFORUM-EU Economic Partnership Agreement, whi allows for the phasing-in of duty-free access for European goods to the Region over next 25 years), While this is taking place, CARICOM countries have not successfully retool! themselves to deal with the erosion of CET protection. Some captains of industries ar ‘now of the view that the CET in its present form has outlived its usefulness and shou! be revised. ‘The current rate structure of the CARICOM CET is based upon the 1992 categorisati’ of all goods according to whether they are inputs into the production of other goods. fare final products, with inputs being grouped into primary, intermediate and capi items, These two broad categories ~ Inputs into production and final products - further distinguished according to whether the products are competing of ‘competing with locally/regionally produced Community products. The capacity to satis ‘a minimum of 75 per cent of regional demand or the potential to achieve this level short order could eam for any goods produced in one or more of the Member St the protection of a competing level of tariff under the CET. xtor |~ Dynamic of ts Raplona and Extra Ragone! Trading Paes | Inthe recently concluded OAS sponsored survey of selected firms in the Region, some industrialists suggested thatthe time has come for removal of CET protection on those also, 2 | ingustries that no longer have the capacity to provide the quantity nor the quality of ‘egloral | products needed in the Region. One of the industries that came in for a lot of criticism Trinldad | Wes sugar, which despite not being produced in the quantity nor quality demanded by @ vtry, the | large section of the manufacturing sector, continues to be protected. The result of the the not } CET on sugar is that manufacturers of products requiring sugar as an input have to Fest of | make applicetion for removal of the CET on sugar from extra regional sources. Another Test of | protected industry which was criticized is that of cooking ol. Box Lt gives the details of ‘use of | the rate structure of the CET and the intended purposes. ‘Secretariat has been mandated by the Council for Trade and Economic {COTED) which comprises Regional Ministers of Trade and Industry, to prehensive review of the CARICOM CET and its Rules of Origin. This Rate tho tanf, and it is expected that it wil result in the Regional tariff Tebvant and current to the needs of Member Statoe and thor ei, ‘ {2 Condifonal Duty Exemption Regime, under which Member States import duty provided under the rate structure with respect toAer Caean Trae & estan Repet 2010, items imported for use in certain circumstances (0.9. Industry, Agriculture, Forestry, Fishing and Mining) or for certain social purposes or by certain institutions. ‘The Conditional Duty Exemption Regime incorporates the List of Items Ineligible for Duty Exemption. This List Includes those items produced in the Community in ‘quantities which are considered adequate to justify the application of tariff protection. ‘These items wil not be eligible for the grant of exemption from duty (in whole or part) where they are imported for use in industry, Agriculture, Fisheries, Forestry and Mining. ‘The development of infrastructure to boost the growth potential of economies in trac has been slow, even tough there are some institutions designed to do just that. Noi tariff barriers to trade, including within the Region, still exist in a number of countre ‘and, in the recently ‘concluded OAS sponsored CARICOM Secretariat Mission ti selected Member States, some of those barriers were identified and include delay i ‘customs clearance at tre port, request for certification for each shipment, etc. Reducto! of these barriers will dlow more countries to enjoy the gains from intra-regional including access to new markets and customers for exporters from, in particular, th ‘smaller economies, waich have consistently complained about lack of access to regional markets. i ‘The regional policy makers have recognized the importance of standards in trade and February 2002 the Caribbean Regional Organization for Standards and Qi (CROSAQ) was formed with a mandate to promote efficiency and competitive producti in goods and services, through the process of standardization and the verification quality. This was impcrtant to improve the standards of products entering inte-regio trade as the successful development of the regional market requires the establish of technical and oF scientific institutions to promote recognized quality. In January 2008, the CARICOM Competition Commission was formed to fos ‘competition and fair trading in the single market. The goal of the Competil Commission is to ensure that the benefits expected from the CSME are not fu by anti-competitive business conduct. This is important as firms might take adva of business opportunites across the Region and in doing so create non conditions in the market. ‘Also created to foster rade among Member States is the Caribbean Animal Heal Food Safety Agency (CAHFSA). This institution was established in March 2040 strengthen regional agricultural health and food safety and ensure the highest stand {or trade in agricultural products. This will eventually lead to greater intra-regional #2 in animal products. & 2| ges tint ego nt Ee apa Teng Patone ‘The Agency will be responsible forthe coordination of all matters related to Agricultural Health and Food Safety, which includes strengthening the Member States’ capacity to aible for | sefeguard thelr borders from threats of pest and diseases (to their agricuture, forest tunity in| ard fisheries, and to the environment in general). Consumers will be safeguarded otection. | against threais from food borne diseases such es mad com, rabies, tuberculosis and ‘or part) | swine flu, as Governments’ border inspection and surveliance services will be Mining. | improved. Consumers would also benefit from having access to food less prone to spoilage and ensuing il health related to bad production and preparation processes. ‘The CAHFSA is also part of the process towards enabling agricultural goods to be of + acceptable intemational standards for exports, as enstrined in the Community's 5 agricultural policy, a main goal of which is to fundamentally transform the agricultural = sector towards market oriented, internationally competitive and environmentally sound -f producon, processing and distbution of agricultural goods. a Under the scope of CAHFSA policy-makers, laboratory and inspection officials, Esdentists and researchers are to define the right mix of legisiatve, technical * administrative and financial measures to safeguard the Community's borders from 1! ciluction and spread of pests and diseases, while ensuring that the agricultural that were produced, consumed’ and traded ere safe for human n. The expectation is that CAHSFA's will impact on the quality and standard yicultural products which are traded. Better quality should resuk in better prices for producers and therefore stimulate/increase the volumes of intra-regional Jn agricutural products, thus culminating in a lower import food bill of Member ioe y and Phyto-canitary (SPS) measures are a critical component in the trade of products, They impact on whether an agricultural commodity can cross the Fenother country. Agricultural primary goods, such as vegetables, fruits and ‘and chilled meats may carry pests and diseases which are not present in ‘or teritory. Since meat and meat products and live animals can also Which affect humans, the trade in agricultural goods must undergo atthe ports of entry into @ country. This is sometimes seen as a barrier affected stakeholders may perceive the number of inspection and processes (CARICOM is in the process of establishing a harmonized approach to the ISPS measures. The initiative is also seeking to impact on ‘undue delays’ ‘and customs/quarantine process for inspection and clearing of nents. The Region is also in the process of defining an approach to plant and animal products so that more red for trade intra-regionally Seen bs long frm ingcaton br gw in invaceina Justice !). By interpreting and applying the Treaty the CSME, the CCJ determines how the CSME functions. The CSME aCarebean Trade & Investment Report 2010, _ creates an extensive range of rights and obligations for states partis to the Treaty and, | through these states parties, for community nationals. In its original jurisdiction in respect of the interpretation and application of the Treaty establishing the Caribbean’ Community, the CCJ functions as the final arbiter on all matters relating to the! interprotation and application of the Revised Trealy where a dispute arises between Member States, or for example, between a community national and a Member State. ‘An aggrieved party may seek recourse in the Original Jurisdiction of the CC where it} has been prejudiced with respect of the enjoyment of a right or benefit conferred by the, Revised Treaty of Chaguramas. In 2009, TCL (a Regional cement manufacturer) made, use of the CCJ in separate disputes with the Caribbean Community and wi Government of Guyana. The judgments of the CCJ resulted in the Caribbeat Community changing the manner in which it granted suspensions of the Commo External Tarif, and the reinstatement of the application of the customs duty on cemen! by Guyana‘. CCitical for the development of vibrant and sustained intra-regional trade is the creato ‘of an open system of regional competition that will alow firms to maximize efficiencie in their production and trading practices and processes. The newly created institution should ideally remove obstacles to doing business across the Region, standarciz product requirements such as labeling, presentation and measurements and so gi Some amount of certainty concerning market acceptability of the goods entering inl trade. ‘So what is ahead for the Region in terms of trade performance? A lot will depend whether policymakers can tackle @ number of issues, including product enna ‘and diversification, transportation logistics, marketing bottlenecks, standardization « Over the medium term, In addition, product market reforms may be necessary faclitate the development of new areas of comparative advantage es pattems: production and trade shift. ¢ 4hepter = Dynamics of Inte Regloral and Ext Regional Trading Pars ‘Annex to Chapter I: CARICOM’s Trade with Third Parties ‘A. Structural Characteristics of External Trade + Inthe years preceding the onset ofthe global financial and economic crisis in late 2008, = CARICOM trade with Third Parties had experienced very significant growth. From the time of recovery from the 9/11 tragedy to 2008, robust world economic growth, driven by both the developed and emerging market economies, had resulted in an even faster increase in global trade in primary and manufactured commodities. However, world & trade declined by 19 per cent in 2009° and CARICOM's trade with extemal partners 4 ay hve foen by art even rotor prcrlago, athough comprehen sat ove | post crisis performance are not yet available, “Anmex Table 4.4 on merchandise trade shows that thore was a doubling of CARICOM = exports to the USA between 2004 and 2008, but that imports increased at the ficanty slower rate of approximately 70 per cent. In the case of the EU, chandise exports to that market by CARICOM increased by about 340 per cent ‘the period, whereas imports grew by only approximately 25 per cent. However, dise trade performance is somewhat mixed with respect to the other ftading partners of CARICOM, CARICOM exports to Costa Rica, Cuba and minican Republic grew faster than imports forthe 2004-2008 period, ihereas tho was the case for merchandise trade with Canada and Venezuela. However, a8 fable 1.2 indicates, rapid export growth could not serve to eliminate’ the trade defict wih Colombia. nly, CARICOM's trede with Third Parties was characterized almost entrely by arket Scvess arangements. Preferential trade with the USA began in We Caribbean Basin Intiative and enancement has taken place over time. {8 Caribbean Basin Partnership Act (CBTPA) which as part of the asin Economic Recovery Act (CBERA) provides for preferential access into ket fora range o goods from nine (8) beneficiary counitins of which seven Member States. ‘The CBTPA expires on 30 September 2010 and ‘Progress to extand it for another three (3) years to September 2013, lonal USA assistance to Hail exists in the form ofthe Haltan Hemispheric trough Parinersip Encouragement (HOPE Act) also, there is a Halt Program (HELP Act that was introduced after the devastating earthquake ¥, 2010 With respect to trade with Canada, there is a Caribbean-Canada Jarangement that has been in existence since 1986 and which grants Fe Siity for sighteen (18) CARICOM and other English-speaking mntles tased on 60 per cent local content with respect {2 is. bul wih certain notable product exceptions. There continues 10 ;probiem and the Caribbean has failed to derive maximum benefits arket access arrangements.\Cembean ‘Trade & esment Repo 2010 CARICOM also has three partial scope bilateral Agreements that are worthy of note, with Columbia, Cuba and Venezuela, and two Free Trade Agreements with Costa Rica ‘and the Dominican Republic. These Agreements contain certain levels of preference in ‘a context of variable geometry: “The current Agreement with Colombia provides for preferential access in favour of all CARICOM States on an agreed list of items, along with preferential access in favour of Columbia into the CARICOM MDCs on a diferent list of tems. The CARICOM LDCs are not required to grant preferential access in favour of Colombia...Under the Agreement with Cuba, both CARICOM and Cuban exporters enjay preferential access on two separate lists of products. However, CARICOM LDCs are not required to grant preferential access in favour of Cuba...The Agreements with the Dominican Republic and Costa Rica provide for preferential ‘access in favour of all CARICOM exporters on all goods, except lists of {goods on which MEN treatment is maintained and lists of goods which are ‘subject to phased reduction of import duties. Exporters in the Dominican Republic and Costa Rica enjoy reciprocal preferential access into the MDCs but the CARICOM LDCs are not required to grant these States proferential accass®. ‘As has been reported in previous publications of the Caribbean Trade and Investmer Report (CTIR), certain structural constraints prevent the Caribbean from taking advantage of the preferential market access arrangements, including lack entrepreneurial capabilities; working knowiedge of foreign languages and cul transport facies; market inteligence; and abilty to overcome non-tariff barriers sanitary and phyto-sanitary hurdles. 4 B. Adjusting and Transitioning to Reciprocal Trade Regimes ‘The Agreement signed in October 2008 between CARIFORUM (CARICOM Dominican Republic) on the one hand, and the EU, on the other, is intended to successor (and more) to earlier colonialineo-colonial preferential market arrangements relating to essentially primary commodities such as bananas, sugar, and rice. The CARIFORUM-EU Agreement is said to have a number of important unique characteristics. First, the CARIFORUM countries of CARICOM and Dominican Republic contrived to negotiate as one entity, even though @ agreement had not previously been finalized amongst the two entities. Se number of WTO ‘plus’ arrangements, such as with respect to investment, procurement, competition, intelectual property rights, and the environment inserted into the Agreement. Third, a development component (Joint Deciaratt Development Cooperation) was included in the Agreement at the insistence CARIFORUM partners. Fourth, there is @ 25 year transitory period that the Fram Agreement provides for full tariff and other market access liberalization, withee ~ Dyna of na Reponal and xr Riera! Trading Paton distinction made between LDCs and MDGs, in terms of speed of compliance with respect to various obligations. ‘Some regional and international analysts are quite scathing in thet various cricisms of the Economic Partnership Agreement (EPA) as being one involving unequals: “They ‘pine thatthe governance arrangement is too binding, ime bound and sanctions driven that the scope is WTO plus rather than CSME consistont, thet the approach Is technocratc rather than needs strategic; that the development component is more lip serving than genuinely accessing; that the compeiiiveness derived potential is based fn faith rather than conviction or realty; and that the regional Integration impact Is {storing rather than deepening. In fact, one well known commentator has gone 80 far fo say that ‘es a legally binding Intemational instrument. with” elaborate ‘and enforcement provisions, it embodies a higher “degree of {supranational governance than the corresponding arrangements in the Caribbean “Community” “Fortunstely, the EPA has made provision for both an overall review rOteSs and @ review of specific Articles relating to the Builtin Agenda for progressive : jon a8 aan in Annax Box 11°rave & venient Report 2010, — “The net benefits to be derived from the EPA are of a somewhat unknown quantity, eve though itis sald that CARIFORUM possesses a considerable potential for penetratr the EU market in the area of certain types of services. But there was no other option negotiating an Agreement since the EU was not prepared to seek a WTO renewal ol tl MEN waiver with respect to preferential market access. The strategy then was to har included under the EPA a Joint Declaration on Bananas; a Joint Declaration on Ric and a Joint Declaration on Undelivered Quantities under the Sugar Protocol, along wi fan understanding relating to Rum. However, the CARIFORUM States are concern: that the EU will be Incapable of fully honouring its commitments to them ae a result the fairly generous market access EU Association Agreements with Columbia; Peru at Central America that were recently formulated in relation to MFN tariffs on benene agreed quotas with respect to sugar; agreed quotas with respect to rice; and agret tariffs with respect te bottled rum and agreed tariff quotas in relation to bulk rum. particular, there was concern that the EU might be planning to prematurely discontin the Integrated Suppert Programme for Rum even though the level of CARIFORUN competitiveness was still less than adequate.” The Caribbean is also currently engaged in negotiations of a so-called Trade at Development Agreement with Canada, although the latter has expressed preference { use of the term “cooperation” rather than development. The Canadian negotiators hat proposed that provisions in the Agreement could inform the programming of i Canadian $600 milion pledged by Prime Minister Harper in 2007. The next set negotiations planned by CARICOM is with the Mercosur Grouping. Brazil is the large ‘market within Mercosur and CARICOM in 2008 imported US$1.5 billon from th ‘country but only exported US$15.9 million, making for e merchandise trade defidt) USS1.3 billion. a C. Performance of Trade in Services 2 ‘The CARICOM Rogion is regarded as having @ genuine comparative advantage it area of services, pariculaly in the more customized tourism, entertainment and Gattwally related serices. However, except for tourism arrivals and es expenditure, services related trade data are not readily available. A first attempt! feeonlly made to colect a wider set of data on trade in services, athough even Sort was" limited to. four more Identfable balance of payments transportation; travel; commercial services — financial services, insurance services other business services; and government services". Even more limiting is the i fo disaggregate tho data according to direction of trade and to make a dist between intra-regional and exte-regional rade in services, However, # We faseume that inta-ogional trade in services accounts for about 10 per coat Rgion's world-wide trade in service, some inferences can be drawn concel magnitude ofthe sences trade, based on the below-mentoned data,Chapter | Byram ot ne Regione I Both Annex Table 1.3 on MDC services trade and Annex Table 1.4 on LDC ‘ services trade show that the Region ears significant foreign exchange therefrom, 7etratng | gthough not to the same extent as wih gcods trade, There is also @ very sizeable seteTihe | peskive trade balance, with the surplus during the 2000 to 2008 period being on _ average nearly 30 per cent in the case of the MOCs and 80 per cent for the LDCs. However, in the case of tho MOGs, data are not available for Barbados and Trinidad and Tobego for 2008, for Guyana for 2008 and 2007, and for Suriname for 2005. Better deta could certainly assist decision-making and strategizing with respect tothe services ‘cerned § « 41.4: Growtti of CARICOM! iterchendiee Trade with USA and EU 1432 | 18533 56 ‘9.8/8 jo | 87873 80 34435 7 086.0 318 8.7 S518) 7819, ate 08 2501 8 2ai{ 10985 |" 35029 [2478 23250 253 — ‘sos s|—~a.aea.2 | 203. 2323 49| 1933 ‘1238 — Gay L883) wa) ya 2" Suename DOS) cute OECS and Belzo =(Ccerebean Trade & ivesman: Raper 2010{Chapa Dynamics of ita Regional ad Entre Rogions Trading Pato Annex Table 1.3: Trade in Services for CARICOM MDCs (US$mn} 2000. 8326. S187 21130. ‘2001 35059. 37108. 17882 2002. S784 38873 1957.1 "2008 1828. 30208 me28 | 2008 6851.8 3668. 25707 ‘08 T40T- 4305.4 Dat 0 2008. Tree 5236.8 "2406.0 ‘oor i235 5370.1 27534 2008. $5426 4033.7 508 ‘Soutear CARICOM Sas Deparment Annex Table 1.4: Trade in Services for CAI:COM LDSs (USSin) 338.1 5028 278.1 7249 57-4 Ea ‘550-1 SS. Depatint arrangements, our ability to communicate in a second language comes Languages ‘faciitate communication and ease transactions. Two the same language can communicate and trade with each other those without a sufficient knowledge of a common language must intermediary. The risks associated with the potential for costly Perception errors may be large enough to discourage what could be from taking place. ven that there are economic retums to proficiencies in foreign ar trading end investment purposes. For this reason the expectation is that ‘ean foster sustainable growth in the bilateral trade arrangements that Siaies have entered into with Costa Rice, Dominican Republic, ‘mare recently, with Europe under the EPA. Be_Cartoaun Trade & invegenant Ropet 2010 Whilst English, at present, is the only language spoken by enough people to have an economically significant effect on trade flows", regional traders are nevertheless disadvantaged by their deficiencias in foreign languages. For the Caribbean trader, the ability to speak foreign languages can have a positive economic payoff embodied In a better understanding of the demands of foreign markets, regulatory systems, production, methods and business practices and conduct. By being able to speak @ second, language, a Caribbean trader can be exposed to other non-financial non-pecuniary benefits such as ability to travel, study and spend longer periods abroad, to meet new People, and to understand their cultures. } The EPA provides the Region with a new, yet more complexed urgency to create) Proficiencies in other languages. Of the fitesn CARIFORUM Member States, withthe ‘exception of Halti and the Dominican Republic, all others use English as their native. language. CARIFORUM countries should not downplay the importance of acquiring, foreign language skils, as sharing a language translates into greater trade intensity, Using the European Union's 480 milion plus population as a Region. wh CARIFORUM has an export interest, the four mast widely spoken first languages apart from English, are German (67.2 million), French (67.2 milion), Spanish (28.8 milion), and ttalian (14.4 milion) having @ combined total of 177.6 milion. English is a frmea'* in parts of Westem anc Northem Europe where the working knowledge English as a foreign language is estimated at 38 per cont (182.4 milion). 4 ‘Thorefore French, German and Spanish are the key languages in which skils are to b developed. As Annex Table 1.5 shows, CARICOM's proportion of merchandise outside of its immediate economic grouping is probably the highest in the world. Fé CARIFORUM firms to improve export performance, regional policies should developed to adopt strategic approaches to multilingual communication which it activites such as, the appointment of European sales persons to work in expe) markets, recruit staff with the necessary language skills and hiring translators an interpreters. With such a strategic approach, multilingualism can itself be developed fan economic growth sector, creating jobs for language teachers, translators aj interpreters, plus their support staf. There will also be career opportunities for who design and produce electronic and IT support platforms, programmers, ‘specialists developing computer-assisted or automatic translation systems. Whilst the above reference relates to Europe, the same approach should apply to business with Spanish speaking partners. Spanish isthe first language ofthe Me {9TOUp of countries, which includes Argentina, Brazi, Chile and Paraguay. Also, growing influence of China as a treding partner should signal the importance of Chin 28 a language for eanacity building. aCapes |= Dynames oF ea Hegiona and Ext Regional Tredng Patems ‘Annex Table |.5: Intra-Hemispieric Grouping Trade as a Percentage of thelr Trade with the World as a WholeEndnotes and References ‘Sea Constancy fo Assess the Factors and Ceumstances Constlrng the Fil Partipation oft Organization of Eastom Carbbean States (OZCS) and Balze In tre CSME (Wimeo) CARICO} Secretaria 2010 AX Edwards, Making James's Manufacturing Sector @ Potent Economic Foros Jamsica Obsenes ‘8.Juno 2010 2 ‘The Gleaner (Jamaica) 1 July 2010 j Further lnfermation on these judgments may be obtained from te CCYs itp ww carbosanccurtofusion ca Unted Natons Conference on Trade and Development, Trae and Development Repert, United Natons, Naw York and Geneva CARICOM Secretariat, Analyle of CARICOM's Trade Performance, Georgetown, February (lmeo) 2 Norman Grvan,Implcatons of he CARIFORUM-EU EPA, 2008 (Mineo) p.1 4 fod on CARIFORUNCEuropeen Union Economic Partnership Agroomort, Bridgetown Brussels, 6 May, 2010 (Mimeo) 1600-2008 Mirneo) Nay, 2010 ‘Tho senios component of the belanco of payments as sistod In the IMF rolatod Balance Payments Manual (th Edition) compiee the flloning eaven ems: () Transpecaton () Travel ‘Communication Services (v) Conetrucion Services (Insurance Services (vi) Fhancal Sees Computer and Information Serves (sl) Royalties and Lleense Fees (x) other Business Servos Personal, Cutural and Recreatonel Senvcee, and (x) Government Services, not nud el sian end Jer Fie, Research paper -Foraign Languages and Trade, February 2009 ‘language Ubod es a common language between speakers whose naive languages ee dere