Guyana: Trade-in-goods only

In last week’s column I had indicated that I would for the next couple of weeks be evaluating the Guyana Consultation on the Cariforum-EC, EPA held on September 5 and its aftermath. I wish however, to re-state that I do not intend to repeat matters already covered in my earlier columns on the EPA. Interested readers can obtain electronic copies of these columns from the Sunday Stabroek archives or from the Norman Girvan website (http://www.normangirvan.info).

Consensus

At the consultation there emerged a solid consensus in favour of the Government of Guyana singing on to those parts of the EPA that dealt with ‘trade-in-goods’ only. This approach was designed to prevent the European Commission (EC) from claiming that there is a breach of the WTO waiver deadline within which the trade-in-goods arrangements under the Cotonou Agreement were to be rectified. Technically, this deadline would have expired on December 31, 2007 if no alternative was in place. However, a WTO member would have had to activate a complaint of the breach for it to come to the notice of the WTO. Knowledgeable persons do not believe that such a complaint would be likely, because there is abundant evidence that the EPA is the subject of active ongoing deliberations between the EU and ACP countries. Countries never bring complaints when active negotiations are taking place.

Despite this, the EC has let it be known (some would say threatened) that it would impose the Generalised System of Preferences (GSP) tariffs on any Cariforum member state’s exports to Europe, if that member state does not sign the EPA initialled on December 16 last by the CRNM, by October 31, 2008. The question several readers have asked me is what is this GSP to which the President keeps referring?

Basically, the GSP is relevant because under the Cotonou Agreement, which came into effect in 2000 and runs until 2020 as well as other commercial agreements the region has with Europe (like the Sugar Protocol). Guyana and other Caricom states have enjoyed specially negotiated access to the European market, which in several instances are duty-free, if not quota-free. This access is more advantageous than the GSP.

What is the GSP?

The GSP was first proposed at the United Nations Conference on Trade and Development (UNCTAD) in 1968 and came into force in 1971. It provides for developing countries a margin of preference in the tariff rates their goods would face, when imported into the markets of developed countries. It was devised to boost the competitiveness of goods exported from the developing countries onto these markets. However, over the years this margin of preference has been substantially eroded, first, by developments at the WTO and the progress of multilateral trade negotiations that has led to the lowering of tariffs generally. Second, developed countries have also offered to many developing countries better margins of preference than those in the GSP, thereby reducing the value of the latter. Third, economic changes have affected the productivity and production costs of many goods so that the value of the GSP preference has again been reduced. In all instances, however, the GSP rates of tariff are not as attractive to Guyana and Caricom, as those that  are presently prevailing under the Cotonou Agreement. If Europe imposes GSP tariffs on our goods, this would definitely be a penalty.

Foolish arguments

The Heads of Government of Caricom meeting in Barbados on September 10 did not support Guyana’s position. Some of the reasons given are utterly foolish and reflect a disturbing misunderstanding of the EPA and what it represents.

One of the most widely circulated reasons for rejecting Guyana’s position is that other Caricom heads argue that, having signed on to the WTO agreement how can the region reasonably reject the EPA, based as it is on the WTO! Nothing could be further from the truth.

In fact the argument is that precisely because the region has signed on to the WTO agreement and that agreement has not yet begun negotiations on many of the topics ‘negotiated’ in the EPA that caution is being urged. Without the conclusion of WTO negotiations, there are no benchmarks or yardsticks with which to guide our own bilateral negotiations with the EU.

The real issue that should bind us to the WTO agreement is the requirement to reach a settlement on trade-in-goods. It is for this reason it is argued that the region should sign on to the trade-in-goods parts of the EPA and negotiate further on the other parts like services and trade-related matters.

An even more foolish argument circulating in the regional media attributable to the heads of government is that many countries state that their economies are services economies so that a trade-in-goods agreement is not relevant to them!

It can be argued that it is precisely because their economies are mainly services economies that they should sign on only to the technically required trade-in-goods portions of the agreement and pursue further deliberations on the portions of the EPA, which deal with services.

They can use the extra time fruitfully because the services agreement in the EPA as it stands is weak.

It is instructive to note one detail about the trade-in-goods commitment. Evidence is there that originally the EC had intended to propose to the ACP countries that if they liberalized about two-thirds of their markets to European firms, this would satisfy the WTO waiver requirement that “substantially all trade” is liberalized in the EC and ACP states negotiating EPAs.

This was raised to 80-90 per cent only when Europe found the going on this requirement in the negotiations easier than they had originally anticipated!

Next week I shall continue from this point.