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Export Competitiveness in the context of Trade Negotiations (rev)

Regional Workshop on Export Competitiveness Strategies23-25 May, 2006Amaryllis Hotel, Barbados

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CARICOM’s Competitiveness vs. select Investment Competitors

Source: Global Competitiveness Report 2005. World Economic Forum

70

6050

102

64

4953

65

31

101

5057

-10

10

30

50

70

90

110

Jamaica Trin & Tob India Dom Rep Costa Rica China

Growth CompetitivenessMicroeconomic Competitiveness

n= 116

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What is the big deal about trade negotiations?

CARICOM Gaining market share• LNG: 60% vs 12%• Beer: 12% vs 7%• Diamonds: 60% vs -19%• Fresh papaya: 16% vs 12%• Fertilizers: 556% vs 13%• Frozen fish fillets: 27% vs 10%• Electrical relays: 307% vs 4%

CARICOM Losing market share• Bananas: -8% vs 7%• Shrimp/prawns: -4% vs 0%• Portland Cement: -1% vs 6%• Female underwear: -16% vs 5%• Medicaments: -9% vs 29%• Surface active preps: -4% vs 16%• Toilet soaps: -5% vs 9%

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Summary of External NegotiationsSummary of External Negotiations

Arena Status Critical issue(s) Impact on Competitiveness

WTO HK Ministerial in December failed to break deadlock in subsidies agriculture.

Formula for tariff ; Services offers; trade facilitation rules

Service contracts; faster customs clearance; agriculture will be in trouble if not on special products list

EPA Phase 3 started in St. Lucia- drafting text in progress

ROOs; reciprocity levels in mkt access for goods and services. Food safety and customs rules.

Competition for vulnerable companies; Ability to attract JV/devt financing; change prodn to meet ROOs;

FTAA Brazil and US trying to break deadlock. Disagreement on cross plurilateral process

Trade facilitation; SPS US granting other companies CBI benefits erodes our export share

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Arena Status Critical issue(s) Impact on Competitiveness

CSME 12 MS signed treaty; 9 have enacted into Domestic law

Movement of natural persons; elimination of capital/investment restrictions;

Reduction in transaction costs; Ability to attract JV; Service contracts but services framework needs completion;

Bilats Canada

DR

Costa Rica/Cuba/Venezuela

MERCOSURUS FTA

Canada wants an FTA, which we don’t want

Services and Investment provisions not yet finalized

No clear mandate for a US-FTA

Continued duty preferences into Canada when CARIBCAN expires in 2006;

DR agreement is important to exploit US$5 bn in untapped trade

LATAM provides cheap inputs for Tourism etc.

US FTA important to provide continued duty preferences in 2008

Summary of External NegotiationsSummary of External Negotiations

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How do the issues being discussed in Negotiations affect my firm’s competitiveness?

Issue Likely Outcome Business ImpactSubsidies ↓ subsidies in traded

goods↑ prices for some imported raw materials. ↑ ability to compete with imported finished products, ↓ local sales

Tariff ↓ tariffs on non-sensitive items. Shift to internal charges.

↑ margins for importers/distributors. ↓ local manufacturing margins. Companies need to know trade defense.

Quotas No quotas or tariff rate quotas

↑ price competition in export market. ↓ export margins. Consignees/distributors leverage ↑

Services ↓ in domestic regulations

More open services trade environment.

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How do the issues being discussed in Negotiations affect my firm’s competitiveness?

Issue Likely Outcome Business Impact

Preferences Eliminated. ↓ in export revenue. More difficult to get foreign partners.

Trade facilitation

↑ notification, faster customs clearance time. Transaction based customs valuation.

↓ time to clear raw materials; predictable customs rules and import valuations.

Export credits

More restrictions on use of credits (inc > 180 day LCs)

Banks could be restrained in terms of working capital loans.

Non-Tariff Measures

NTMs itemized and categorized.

NTB’s continue to inflate production costs and retard export growth

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CSM Services framework being widened• Currently covers 5 categories (graduates, media

workers, musicians, artistes and sportspersons);• Revised treaty committed MS to provide wider

coverage (self employed, businesspersons, spouses etc), but timetable staggered;

• CARICOM accreditation agency being established by July 5, 2006

• CARICOM is also consulting various sectors (health)• Professional services study being contracted

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Important deadlines in Current trade negotiations

• April 2006- tariff reduction formula in WTO to be decided. Decisions to be made on sensitive products.

• July 2006: Services offers/requests finalized• Dec 06- CARIBCAN waiver expires [new agreement required]• Sep. 30, 2008- CBI expires [new agreement required]• 2013- agricultural subsidies to be eliminated• EPA discussions ongoing to replace Cotonou by 2008 (check

www.crnm.org).• Bilaterals between Canada and possibly US and Mercusor

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If Private Sector does not prepare positions on these issues then….

• We will continue to “undercompete”. We do not adequately enforce the rights that we so costly negotiate. In many cases this results in poor development benefits of FTAs such as rural development, environmental protection etc.

• National and regional PSOs will lose membership;

• Private sector not able to maximize export sales;

• Imports will continue to displace local sales;

• Customs procedures will continue to be more focused on revenue than trade facilitation

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When you go back to your firm….

1. Spend 20 minutes/week to read TradeBrief and listen our Caribbean TradeBeat on www.crnm.org

2. Speak to your staff and unions/staff associations about trade issues. People need to know why they may either be called to move to another branch being opened overseas, or lose their jobs;

3. Email me private.sector@crnm.org with your comments and suggestions. All emails are confidential. Also contact your Chamber and trade Ministry

4. PARTICIPATE IN OUR SURVEYS