by Ambassador Odeen Ishmael of Guyana in Opening the Seminar on
The Future of Caribbean Business Within the Free Trade Area of the Americas,
at Howard University, Washington DC, July 13, 2002
Posted July 15th, 2002
Ladies and Gentlemen,
I welcome you to this seminar on "The Future of Caribbean Business Within the Free Trade Area of the Americas". This activity is the result of the joint collaboration of the CARICOM Caucus of Ambassadors, the Trade Unit of the Organization of American States and the Regional Negotiation Machinery of CARICOM.
As all of you will agree, such a seminar, with such a theme, is very opportune and essential. I also feel that seminars of this kind must be also held for Caribbean business communities in the Caribbean itself. I say so because it is amazing how little the general Caribbean public, and even the business communities in the region, know of the Free Trade Area of the Americas. And even for those businesses that are aware of the FTAA, most of them are not making themselves prepared for it.
In the course of today's activity, we will hear from experts in the field of free trade negotiations, and some of my ambassadorial colleagues will coordinate question and answer periods. We are all looking forward to the expert information that will emanate from this exercise.
I want to seize this opportunity to make some brief comments on the Free Trade Area of the Americas as it affects Caribbean business, industry and trade.
For the Caribbean business community, it is obvious that one of the most critical areas towards the FTAA is that of the negotiations on market access. These negotiations began on May 15 last.
Market access is a major concern for the smaller economies. Import restrictions on some goods from the Caribbean region and subsidies granted by the US Government are not helping the process at all. One has to wonder why rich countries feel that subsidies are good for their producers, but not for producers in poor countries.
For example, the US rice industry is heavily subsidized, and this gives American rice an unfair advantage over rice produced in Guyana within the Caribbean market itself. Obviously, such unfair competition by a developed economy at the expense of the smaller economies goes against the spirit of free trade. That is why countries of CARICOM, while supporting free trade, are also insisting that there must also be fair trade under a free trade regime.
For rich countries, subsidies are regarded as incentives, yet when poor countries try to do the same, the subsidies are regarded as handouts. And as you know, these poor countries will face all sorts of economic pressures from the international financial institutions and rich donor countries if they dare to subsidize their industries as some rich countries are doing.
Market access involves the gradual removal of tariffs and non-tariff barriers which restrict trade between countries. Among the issues are methods and a schedule for eliminating tariffs, phase-in periods, and the tariff for negotiations.
The market access issue presents great challenges, particularly when we understand that the two largest economies in the hemisphere, the United States and Brazil, have opposing views on how it should be handled. The US, with the lowest tariff rate (4.5 percent) sees tariff reduction as a main priority. Brazil on the other hand, with a high tariff rate (14.3 percent) is against this since it feels that a rapid reduction will cause cheap American products to pour into the country to the detriment of its own manufacturing industries.
The CARICOM countries, like the other smaller economies, more or less assess the situation as Brazil does. Since import duties amount for much of their revenues, rapid tariff reduction can be harmful to their economies. It is obvious that when CARICOM countries enter the FTAA, they will lose some of these revenues, but this loss can be offset if these countries obtain greater market access and if trade is expanded to a wider range of developed economies. For the CARICOM countries access to the US market for their agricultural products, steel and textiles is essential for their economic survival.
But while there are concerns over market access issues, there is also a growing anxiety among the Caribbean business community over what they regard as the slowness of economic integration within the region.
The Caribbean Single Market and Economy (CSME) is not yet realized, even though it is very essential for the region's preparation for hemispheric free trade. The CSME, as you are aware, allows for goods, people and capital to move within the region without any tariffs, restrictions or barriers. This process eventually will create a single expanded economic entity. The CSME also aims at harmonization of tax regimes, foreign exchange and interest rate policies, and also the establishment of a common currency. Politically and economically, this works to the advantage of the CARICOM region which will be able to develop a single economic and trade policy for all the member states. This will enable the region to coordinate and negotiate as a single entity with the rest of the world.
It is of great importance that the CARICOM states implement the CSME, since this definitely will assist the Caribbean business firms to prepare themselves for free trade. Remember, in these days it is not Governments that trade; the firms are the ones that do the trading.
At the same time, Governments have an increasing role to play in developing processes to facilitate expanded trade and investment. But the smaller economies do have problems in catching up with the rest of the hemisphere in order to compete on a more level playing field when the FTAA comes into being. We need skills training, infrastructure development, and a more modernized and industrial base. But we do not have the capacity to handle all of these in a hurry. That is why CARICOM has been calling for the establishment of a Regional Integration Fund to be established under the umbrella of the FTAA to provide economic assistance to the smaller economies. Certainly, the business community will be able to benefit from such a fund.
I recently read a news report that the Caribbean Association of Industry and Commerce complained that this economic integration has been taking too long to be realized, even though CARICOM was established nearly 30 years ago. The Association feels that because of non-integration, Caribbean businesses could be left behind when the FTAA is finally established. Obviously, this is a problem which must be corrected with great urgency.
I am sure that these issues I have raised and others as well will receive more detailed treatment in the course of this seminar.
I am sure that the presentations and discussions at today's seminar will make everyone in this audience more aware of CARICOM's role in the FTAA negotiations. But of greater importance, I hope that this seminar will make the Caribbean business community more aware that it must begin to prepare itself for the advent of the Free Trade Area of the Americas.