Under Attack
Sometime soon the members of the Caribbean Community and Common Market (CARICOM) will commence talks in earnest with Canada on the establishment of a Free Trade Agreement to govern trade and economic relations between the two sides. Trade between CARICOM states and Canada currently takes place within the framework of the CARIBCAN arrangement. This regime of preferential treatment for selected goods from CARICOM states has come under attack by non-beneficiary countries. In response, Canada has been liberalizing its trade policies and eroding the exclusive advantage that the CARICOM states once enjoyed under the CARIBCAN arrangement. To overcome these hurdles, Canada and CARICOM have agreed to pursue the formation of a Free Trade Agreement.
Negligible
Canada and CARICOM states have a long history of trade and economic relations. Canada also holds a substantial amount of direct foreign investment, about $53 billion, in various member states and has been an important source of funding for several initiatives undertaken by CARICOM as an organization. At the same time, several countries in the region depend on the Canadian market to sell their products. Despite the depth of the economic relationship, Caribbean exports to Canada make up less than six percent of the total goods sold by the region. The bulk of the goods exported, nearly 60 percent, goes to the United States of America and the member states of the European Union. In light of this reality, it is reasonable to ask why is it necessary to push forward with an agreement with Canada when the volume of trade appears so negligible. It seems as ludicrous as trading pleasant summer days for inhospitable winter nights.
Economic Realism
Individuals migrate anyway from pleasant summer nights out of self-interest and economic realism. Similar motives drive the move by CARICOM in the direction of a Free Trade Agreement with Canada. The most obvious reason for CARICOM is to secure access to the Canadian market without fear of it being eroded by accusations of unfair competition and the rules of the World Trade Organization (WTO). CARICOM countries have enjoyed favourable trading experience under CARIBCAN and the positive experience persuades them that a Free Trade Agreement can yield equally favourable returns. Pragmatism is an important variable too. CARICOM also knows that Canada is not relying on it to expand its economic opportunities. Canada is negotiating trade agreements with other countries and regions and if CARICOM does not get on board it could be left out in the cold.
In addition, those who closely follow the trends in the relationship between CARICOM and Canada know that trade between these two economic units has been growing significantly. Ten years ago trade with Canada hovered around $1 billion. By 2008, the total trade in goods was approaching the $3 billion mark, representing a near 200 percent increase in the economic exchange. Further proof of this positive trend is seen in the 2006 statistics that showed trade expanding by about 14 percent. This sizable growth rate indicates that there is substantial room for expanding the economic exchange between the two sides.
No Altruism
As good a Samaritan as Canada might be with its development aid, it is not coming into a trade agreement for altruistic reasons. Comments by Canadian officials could easily lead one to conclude that selflessness is the underlying motive for joining CARICOM in a trade agreement. Canada sees CARICOM as a growing market that offers opportunities for its goods, services and investments. But even as the two sides prepare to launch negotiations, CARICOM enjoys the better of the exchange in goods and services. Trade in services amounted to $3 billion in 2006 with CARICOM enjoying a surplus in the service exchange as it does in the trade in goods.
The value of the trade in goods and services which together amount to $6 billion in no way matches the level of direct foreign investment by Canada in the region. Canadian investors held an estimated $53 billion in investments in 2007, primarily in the banking and insurance industries in the CARICOM economic sphere of influence. In contrast, CARICOM had $1.2 billion in direct foreign investments in Canada, thanks primarily to risk taking by investors from Barbados and the Bahamas. When all three sectors are brought together, Canada enjoys an advantage that is almost nine times greater than what CARICOM can expect in the imminent negotiations.
Broad Range of Interests
It would be interesting to see how CARICOM positions itself against the stronger and more formidable Canadian negotiating machinery. Canada has a broad range of interests that CARICOM would have to consider accommodating. One area would be that of foreign investments. From comments appearing in Canadian publications, it is clear that Canada wants stronger investment rules that would appeal to its investors, if it were to encourage its companies to invest in the region. It is an area of strength for Canada and no member state should act surprised when Canada starts insisting on clear, transparent and predictable rules for new direct foreign investments.
The negotiation of the Economic Partnership Agreement with the EU has left a bitter taste in the mouths of many Caribbean governments and the region without some of the expertise developed during those negotiations. That agreement is in place and the Canadians know its details.
Another area of interest to Canada would be that of the environment. Canada has spent the last two years gathering information from its experts and citizens on how to tackle this issue in the negotiations. Through the process of consultations, Canada has already built up the goodwill of its people and understands what the negotiations mean to them. From this simple but informative act, anyone can tell that the free trade negotiations are clearly not about the government but about the citizens and economic interests of Canada.
CARICOM member states have had a long association with environmental issues. Yet, it is not clear that many governments have taken the time to educate their populations about the environmental issues that can arise in the negotiations. Nor is there any evidence that CARICOM governments have moved to develop a consensus on environmental issues that helps to circumscribe the negotiations. The lack of input from the populations of CARICOM member states would leave CARICOM vulnerable to charges of neglect from both its people and the Canadians. To avoid such charges and to secure the support of the population, CARICOM should engage in a series of consultation that includes citizens of all walks of life.
Insistence
The issue that the region needs to be prepared for most is that of governance and accountability. It is perhaps the one thing that Canada needs to insist be included in any trade agreement. The European Union did it and when donors look at the experience in Guyana, it is not hard to understand why Canada should do it. This issue affects a range of activities including public procurement and the rule of law. While the administration in many CARICOM states can be trusted to do the right thing, recent events reveal that the administration in Guyana needs to be pushed real hard to display sensitivity to its citizens and to apply the laws of the country fairly. And even when pushed by Guyanese to do the right thing, the administration turns on them like rabid animals.
An insistence by Canada on good governance and accountability could turn such inhospitable winter nights into pleasant summer days.