The Organisation of Eastern Caribbean States & Free Trade Area of the Americas Negotiations

Dr. J. Bernard Yankey

Director
Economic Affairs Secretariat
Organisation of Eastern Caribbean States (OECS)
Antigua.

Paper was Presented at the Colloquium Entitled "Diplomacy After 2000 : Small States and Negotiating Space in the New International Trading Environment" Organised by the Institute of International Relations, UWI for the 8th and 9th of October, 1996.

Contents
Introduction
The Free Trade Area of the Americas (FTAA)
What does the FTAA mean to the OECS?
Conclusion
FTAA- Synopsis of Declaration of Principles
Plan of action to accomplish FTAA

1. INTRODUCTION

1.01 The Free Trade Area of the Americas (FTAA) Initiative which was signed by CARICOM Governments at the Summit of the Americas held in Miami in December, 1994, is a formidable endeavour, probably the most comprehensive and far-reaching. The process to reach effectiveness and implementation will be exceptionally time consuming.

1.02 The time frame for the process is approximately ten years. Discussions on working groups are taking place concurrently. For small states of limited human resources in the appropriate skills and expertise within both the public and private sectors, a burnt-out situation is inevitable.

1.03 In order to make a concerted effort at participation - that means putting all available resources to the tasks - the Countries of the Organisation of Eastern Caribbean States (OECS) must be convinced that there are significant benefits to be derived in implementation. And if not, there will be appropriate mechanisms in place to address problems as they occur.

1.04 It is useful to recognise that all countries of the OECS are currently busy dealing with pressing economic and social demands. There are matters which sometimes require daily attention. Governments will therefore have to decide to give the FTAA an important position in their political agenda if the subject is not submerged to the bottom of "what matters", and given the attention only when remembered.

1.05 Within the grouping, there are obviously wide disparities among natural resource base, human resource capability, existing and potential professional and technical expertise, research and development facilities, economic and social data base systems, the quality of viability of institutions and entrepreneurial experiences. The implication is that some countries will enter the FTAA at very economically advantageous positions whilst others will be at economically least advantageous/disadvantageous positions.

1.06 The OECS Countries will undoubtedly be in the latter category. With highly one-sector dominant economies - be it tourism or agriculture (banana), the OECS Countries will find it difficult to secure optimal benefits from the FTAA unless an economic transformation towards economic diversification takes place.

1.07 Given the fact that economic and social development takes time, the preparation period of ten years seems insufficient. Special treatment provisions therefore must be negotiated where required for real benefits to be derived.

2. THE FREE TRADE AREA OF THE AMERICAS (FTAA)

2.01 The key focus of the Free Trade Area of the Americas (FTAA) is the expansion of trade and increasing investments guided through the liberalisation route.

2.02 The FTAA involves a Declaration of Principles and Plan of Action which is set out in Appendix I and II. These principles and actions require both international and national actions. Achievement of these goals, as set out, will demand the following:-

• Reforms and adjustments to the macro-economic environment, sectors, institutions, developing and enhancing export capabilities.

• Public policy in specific areas of

  - infrastructural development;

  - public sector reform;

  - development of economic enhancement facilitating legislation and training; and

  - export development.
  
  

• Appropriate Trade and Investment Policies in preparation of small economies to participate in the implementation of the FTAA process.
• Technical assistance to provide the appropriate research information to advance participation in the process of the FTAA.
• Serious involvement of the private sector with their business experiences. It is firms which trade. And it is at that level that international competitiveness and production efficiencies are most required. It is obvious that the action plan focuses on trade and investment, private sector infrastructure, micro enterprises, et al. The position of the OECS business/private sector must be entrenched in all negotiations.

2.03 Successful participation in the process of the FTAA requires two serious areas of focus and attention.

• What is to be done in the national economy to change, and to be equipped and ready

  - How increasing opportunities for trade and investment can be facilitated a and achieved (appropriate public sector policies to motivate and reward the private sector).
  

  - What mechanisms and measures are to be in place to take account of the capability required to meet these targets (adjustments to firms, training and re-training, including foreign languages etc).
  

  - What consensus that can be achieved by people's involvement, including an investigative role for all organisations that can provide appropriate inputs.
  

  - How communication systems can be so organised to disseminate information and knowledge effectively and broadened in scope to activate public interest and debate.
  
  

• Be ready for negotiations to obtain the best deal
  

  - Participation in the working group and ministerial committees to influence recommendations to be put forward.
  

  - Development of public sector and private sector/business synergy and strengthening of private sector organisations.
  

  - Identifying the real issues at the national level and together, as a regional grouping - CARICOM, to put them on the negotiating table, particularly in the areas of:
  

  (i) market access (removal of barriers) but to seek remedies for hurt and illegal practices;
  

  (ii) the rules of origin;
  

  (iii) product testing and certification recognition practices;
  

  (iv) subsidies (credit, investment creation, etc);
  

  (v) the principle of differential treatment, to reduce the impact on the smaller economies; and
  

  (vi) the appropriate time-frame, always seeking the time that fits the period it takes to realistically adjust, and not deferment of time to escape taking action.

• 
  
  
  

  - Specific research work and policy formulation to give attention to OECS concerns and needs as outlined.
  

  (i) Creation of the ability to attract investments in competition with other participating countries and economic groupings;
  

  (ii) The identification of opportunities for economic diversification and the formulation of an appropriate strategy and programme to create the environment to expand trade and attract investment to take advantage of these opportunities;
  

  (iii) Stocktaking of the capability of manufacturing firms to adjust. Some have difficulty in competing within the CARICOM Region. What alternative production direction that must be pursued to absorb output losses if and when they do occur.
  

  (iv) The quality of management and operations of existing support and facilitating institutions to ensure sustained viability within industries which can benefit from expanded trade and new investments and the adjustments/replacements which must be made to those which are weak and inefficient.

3. WHAT DOES THE FTAA MEAN TO THE OECS?

3.01 Trade and investment is also central to the development of the OECS Countries as exemplified by the institutions in place - Eastern Caribbean Investment Promotion Services (ECIPS), Eastern Caribbean States Export Development Agency (ECSEDA), Agricultural Diversification Co-ordination Unit (ADCU). However, the OECS sub-region's participation is characterised by a number of factors which inhibit participation in the FTAA process. These factors are:

• LACK OF RESOURCES:

• - Inadequate Staffing
  

3.02 Inadequate staffing in the Ministries of Trade and Industry and Ministries of Legal Affairs is a serious problem. Usually, one senior office is responsible for managing and directing as well as attending all technical meetings on behalf of the Ministry. Travel fatigue is obvious. The annual budgets of these ministries to support their work programmes are small and inadequate.

• VENUE OF MEETING:

3.03 The meeting of the Working Groups are normally scheduled to be held in capitals far distant from the Caribbean Region. This undoubtedly impacts on meagre financial resources of the Member States. The timing of those meetings can be unsuitable at most times.

• NUMBER OF WORKING GROUPS

3.04 To date, approximately eleven Working Groups have been established. Given the spread of meetings across the hemisphere and the technical nature of these meetings, the human and financial resources of the OECS Countries are stretched beyond their limits in servicing these working group meetings.

• QUICK PACE OF PROCEEDINGS

3.05 The pace of proceedings in relation to the scheduling of meetings at both the Vice-Ministerial and Ministerial levels is overwhelming for the OECS sub-region. This is largely due to the unavailability of appropriate expertise to study the subjects adequately to make informed contributions. Hence the need for technical assistance to assist the countries as a group.

• PERCEPTIONS

3.06 There are three other less important though critical areas which work against the effective participation of the OECS Member States. The perception that:

• (i) the year 2005 is relatively far off;
  

  (ii) the OECS should not really have been part of the FTAA process at this point in time as it is not likely to benefit in any significant way; and
  

  (iii) the OECS and CARICOM States are not in a position to effectively influence the process.
  

3.07 These factors mitigate against the OECS Countries adopting a positive approach to active involvement in the working group process. These working groups are charged with the most important task of making recommendations for conducting negotiations. The OECS Countries therefore have to decide on a strategy for participation in the process.

3.08 The OECS has already recognised the need for the sub-region to fashion fundamental policy positions prior to Member States particularly the Working Group on Small Economies. This would go a long way in ensuring a common position for the OECS on key issues. It has been agreed that there should be collaboration between the OECS and CARICOM Secretariats in arriving at common positions on major issues. This is particularly necessary since CARICOM will be able to influence Member States on common approaches to issues for negotiations. The OECS is not recognised in any FTAA forum. As a regional integration movement, OECS/CARICOM Secretariats must work with Member States to develop basic strategy to approach negotiations.

3.09 A basic outline of Strategy to be adopted by the OECS is as follows:

Where We Want To Go - The Vision

• - Specify areas of interest for expansion of trade and to attract investment in order of priority as follows -
  

  (i) Services;
  

  (ii) Tourism; and
  

  (iii) Manufacturing, including agro-processing.
  
  

  - Define the project/programme activities with good potential for implementation.
  

  - Examine agriculture and identify what trading relationship that can be developed in non-traditional products and procurement of inputs so that transportation can be assured.
  

  - Define what types of investments are required, incentives to be offered and methods of promotion.
  

  - Define technical assistance requirements which will be included in a CARICOM package to address specific concerns and needs.
  

How Do We Get There

• - Collaborate with CARICOM Secretariat in a study of the Declaration of Principles and Action Plan of the FTAA to advise on what actions would be taken to pursue the objectives of OECS Member States as outlined above;
  

  - Adopt the position of being an integral part of CARICOM and therefore must negotiate as a CARICOM group in the spirit of the development of a CARICOM Single Market and Economy.
  

  - Encourage active participation of all OECS Member States in the activities of the Working Group on small economies in collaboration with CARICOM to pursue common positions;
  

  - Support at least one OECS Member States in the work of other Working Groups in collaboration with CARICOM to pursue common positions.

  - Initiate a private sector and labour forum to discuss all the issues involved which could be embraced by Governments and to form part of the common OECS/CARICOM positions;
  

  - Liaise constantly with the CARICOM Secretariat as the designated regional co-ordinator for the development of a common negotiating strategy arising from the proceedings of the working groups.
  

  - Work with CARICOM on seeking strategic alliances with specific countries and economic and trading groups to facilitate negotiations.
  

  - Work with CARICOM on the development of a negotiating strategy which facilitates the OECS. This strategy must define the acceptable limits of concession on any issue which impacts on the economies of the OECS. It is understood in negotiating that there will be areas of gain as well as loss. But on the balance, the sub-region must not be worse off as a group, given the economic space to be provided by the development of the OECS Single Market and Economy.
  
  

3.10 It must be underscored that participation in the Working Group on Smaller Economies is critical for the OECS and wider CARICOM Region. The positions taken b the Region in this Working Group will form the basis for participation and positions taken at the other Working Groups.

3.11 It is therefore necessary for the establishment of a participation framework involving CARICOM and OECS with a linkage to the service institutions of OAS, ECLAC and IDB. It is also important that appropriate Embassies in Washington and High Commissions in Ottawa be kept informed and briefed to allow for participation in Working Groups with CARICOM and the OECS. The Embassies in Washington, through CARICOM, could be required to monitor and follow-up developments where feasible, and attend meetings when held in Latin America. This would ensure a more effective and greater level of participation by the Region in the FTAA process.

4. CONCLUSION

4.01 The OECS Sub-Region is at a serious disadvantage in this exercise. It is difficult for Member States with inadequate financial and human resources, deficient infrastructure and weak institutions to benefit significantly and timely as individual Member States. It is also expensive and difficult to obtain a common CARICOM position on issues of importance. Already one CARICOM Country has favoured working towards the FTAA and another comparatively larger CARICOM economy favours entry into NAFTA.

4.02 It seems quite clear that in working towards such a massive trade and investment initiative, the CARICOM and OECS Countries would find it advantageous to develop their respective Single Market and Economy with a consolidated OECS/CARICOM Single Market and Economy to be the springboard for negotiations. It is obvious that the CARICOM Single Market and Economy with the economic space created would provide opportunities for expanding trade and developing new trading relationships. Similarly, investment opportunities would be more attractive to entrepreneurs looking for relatively good returns on investments.

4.03 The dynamics of these developments would reinforce the justification for free movement of the factors of production and speed up the Single Market and Economy. The medium to long-term impact could be a regional economy which is appropriately geared to absorbing real benefits from the FTAA which flows into increasing income and employment among Member States.

4.04 A serious question that must be given due consideration is whether the OECS Countries, and indeed the wider CARICOM Region, should spend so much of its resources on the FTAA, given the urgent need to prepare adequately for negotiations towards the satisfactory achievement of a successor to LOME IV. Preparation for LOME IV successor negotiations require specific trade, aid, investment and conditionalities. A decision must be taken on which way to give big priority attention, hence the appropriate shift in allocation of scarce resources.

FREE TRADE AREA OF THE AMERICAS SYNOPSIS OF DECLARATION OF PRINCIPLES

(1) To assure the full and effective exercise of democracy.

(2) To expand economic integration and Free Trade as the driving forces for the prosperity of participating nations, and to construct a Hemispheric Free Trade Zone.

(3) To overcome poverty and discrimination in the Hemisphere.

(4) To conserve the national environment of the Hemisphere for future generations.

(5) To assure:

• * Regional consultation and Co-ordination, the signatories call upon the OAS and the IADB to assist countries in implementing the pledges, drawing on PAHO and ECLAC.
  

  * National Political Involvement , the Signatories will convene special ministerial meetings to address topics such as trade and commerce, labour, transportation, counter-narcotics, and sustainable development.
  

  * Public engagement and commitment, the signatories invite the co-operation and participation of the private sector and NGOs in both the national and regional efforts, thus launching a new era of partnership between Government and Civil Society.

SOME ELEMENTS OF THE PLAN OF ACTION TO ACCOMPLISH THE FREE TRADE AREA OF THE AMERICAS

(Approved at the Miami Summit of the Americas)

December 1994

The Governments affirmed their Agreement to a PLAN OF ACTION in furtherance of the broad objectives set forth in their Declaration of Principles, and mindful of the need for practical progress on the vital tasks of enhancing Democracy, achieving economic integration, improving the lives of their people, and protecting the national environment for future generations. Some of the elements of that PLAN OF ACTION are set out in this table for an appreciation of the depth and extent of work to be accomplished, both in the international and national settings.

However, Trade is a central element of the FTAA.