The CARIFORUM-EC EPA and the Services SectorBy

Carlos L.A. Wharton Senior Trade Policy Advisor

Management Consulting Business Symposium 2St. Kitts & Nevis

HEAD OFFICE: Hastings Main Road, Christ Church, BB15154, Barbados. Tel: +1 246-436-0578 Fax: +1 246-436-9999 Email: info@carib-export.com SUB-REGIONAL OFFICE: C/ Carlos Lora #9, Ensanche Los Retauradores, Santo Domingo. Dominican Republic Tel:+1-809-531-2411 Fax: +1-809-473-7532

Website: www.carib-export.com

Contents• Concepts• EPA Implementation

– Trade in Goods– Trade in Services– Regional Integration– Implications of trade agreements on Industrial and

Investment policies– Development cooperation

• Private Sector Constraints• The Way Forward

CONCEPTS - EPA IMPLEMENTATION• What is EPA Implementation?

– Treaty Implementation– Ensuring that firms and individuals take advantage of the new

trade regime offered under the EPA (and by extension all other bilateral and multilateral trade agreements)

– Government agencies must ensure that they are equipped with tools and human resources to monitor, regulate (inclusive of enforcement) and evaluate trade flows and patterns

– Ensuring that the necessary regulatory framework accommodate new commitments taken with the various trade instruments

CONTEXT

• Context– Erosion of preferential treatment– Reciprocity – (preference creation)

– Asymmetry– New Disciplines – Services and Investment as well

as Intellectual Property, Innovation, transparency in government procurement

– Regional Integration – Development Cooperation

Key Trade Agreements/Arrangements

– CARICOM Single Market and Economy– CARICOM-Dominican Republic

–CARIFORUM-EC EPA– CARICOM-Colombia– CARICOM-Costa Rica– CARICOM-Cuba– CARICOM-Venezuela– CARIBCAN– CBI/CBPTA

TRADE IN GOODS

• Trade in Goods– Phased reduction of Customs Duties/ODCs (Art. 16)

– National Treatment (Art. 27)

– Rules of Origin – (Protocol I)

– Administrative Cooperation (Art. 20)

– Safeguards (Art25 (6)(b) (Only with respect to the FCOR)

Adjustment Challenges

• Phased Reduction of Customs Duties etc.– Fiscal reform to replace and create revenue– Private sector competitiveness (Like or substitute products originating

from the EC)

– Exclusion list provides limited breathing room for producers and government

– TBT/SPS measures have limited the exports of agro-processed goods in the past. Establishing appropriate regulatory, institutional and monitoring mechanisms is required to enable these firms to export to EU Market.

ADJUSTMENT CHALLENGES• Rules of Origin– Reciprocal nature of the Agreement requires

CARIFORUM Governments to enforce the rules and therefore training of officials and the private sector will be important

– Firms must alter production methods and input markets in order to qualify for preference or be competitive

– Industrial and investment policies must be reviewed and revamped

Trade in Services and Investment• Trade in Services and Investment – Commitments in all modes of supply taken by the Parties –

asymmetrically in favour of CARIFORUM– Investment (commercial presence) CARIFORUM has taken

broader commitments than the EC for non-services investment

– Visas and work permits not covered by the Agreement– Moratoria exists for some countries in some sectors

ADJUSTMENT CHALLENGES– Development of domestic regulations– Establishment of and compliance to standards– Development of Mutual Recognition Agreements

(More so for Architects and engineers, Accountants) & Management Consultants?

– Establishment of Co-production Agreements

REGIONAL INTEGRATION• Pace and content of integration is a matter to

be determine exclusively by CARIFORUM Member States (Art 4)

• In the area of services – the progressive removal of remaining barriers and the provision of appropriate regulatory framework among CARIFORUM States (Art. 64)

• Regional Preference – (Art. 238)• Cooperation with FCORs – (Art 239)

Regional Preference• This principle has implications for:– the trade relationship between CARICOM and the

Dominican Republic in particular the Strengthening of the Agreement Establishing a Free Trade Area between CARICOM and the Dominican Republic (elimination of customs duties, rules of origin, trade in services and investment and so on)

– Bahamas and CARICOM– Bahamas and the Dominican Republic– Haiti and the Dominican Republic

ADJUSTMENT CHALLENGES

– CARICOM-Dominican Republic as well as CARICOM-The Bahamas trade relations set to deepen. Provides an opportunity for the Parties to develop a mutually beneficial arrangement that is consistent with Art. 238

– Fast tracking the CSME –to provide the development space required for CARICOM SMEs

– Deepening relations with the Bahamas will require political commitment and human resources

Impact of Trade Policy on Industrial Policy

– These Agreements will have implications on the types of assistance that can be offered to firms in the future. Member States should re-examine their industrial policy in lights of the evolving framework.

– Safeguard Article on Infant Industries prohibits the use of tariffs as a safeguard measure to protect infant industries 10 years after entry into force the Agreement

– Liberalisation of Services also require States to revisit industrial and incentive regime to promote trade with Europe

– WTO SCM Agreement prohibits the use of important Export Subsidies by 2015

Private Sector Constraints: Role for Management Consultants

• Few firms are exporting and the range of products exported are limited

– The use of limited and outdated technology in production– Limited supply capacity and value chain management– Limited or no use of research & development and innovation– High production costs– Limited skills sets– Limited access to affordable financing– A business environment that is often characterised as bureaucratic and slow to

facilitate business transactions– Limited foreign direct investment as well as local and regional Investment flows– The lack of modern management and business processes that promote

efficiency, product quality and cost competitiveness. – limited exposure to standards, market requirements and best practices in their

fields.

Development CooperationPriorities

– Building human, legal and institutional capacity – Promotion of private sector enterprise development– Diversification of exports– Enhancing technological and research capabilities– Development of Innovation systems– Development and use of IP

Development PrioritiesServices

– Improving Access to Market Intelligence– Improving the export capacity of service suppliers– Promoting Investment and Joint ventures between

service suppliers– Facilitating dialogue between CARIFORUM and EC

Service Suppliers

EPA IMPLEMENTATION– Focus on building human and technical capacity– Enhancing training and education – Deepening trade relations with the FCORs and OCTs– Ensuring that there is sufficient direct assistance to

encourage firms to meet the necessary standards and requirements in export markets

– Working with professional associations to ensure that qualifications are recognised

EPA IMPLEMENTATION– Strengthen Business Support Organisations to ensure

that firms are equipped with the necessary intelligence to penetrate markets

– Identify possibilities for joint ventures and strategic alliances between regions

– Working with Management Consultants to assist firms in mitigating the challenges associated with trade liberalisation.

WHO SHOULD BE INVOLVED?Regional

– CARIFORUM Coordinator – CARIFORUM DIrectorate– CARICOM SEC/CARICOM Implementation Unit– OECS Secretariat– CROSQ, CAFHSA, CCC,– Caribbean Export

• National– Implementation Unit– Customs– Ministries of Finance, Foreign Trade, Industry and commerce, Labour,

Education– BSOs, Universities, NGOs

– FIRMS

Contact Details

Carlos WhartonSenior Trade Policy AdvisorEmail: cwharton@carib-export.com

Head OfficeMutual BuildingHastings Main Road Christ Church, BB15154P.O. Box 34BBrittons Hill Post OfficeSt. Michael, BB14000 BARBADOSTel: +1(246) 436-0578Fax: +1(246) 436-9999E-mail: info@carib-export.com

Sub Regional OfficeCalle Carlos Lora No. 9Ensanche Los RestauradoresSanto DomingoDOMINICAN REPUBLICTel: +1 (809) 531-2411 Fax: +1 (809) 473-7532E-mail: c.export@codetel.net.do