|Free Trade Area of the Americas - FTAA|
FTAA - COMMITTEE
OF GOVERNMENT REPRESENTATIVES ON THE PARTICIPATION OF
CONTRIBUTION IN RESPONSE TO THE OPEN AND ONGOING INVITATION
Recognizing the Special Circumstances
‘The particular vulnerabilities of small states should be recognized as justifying special consideration to deal with the issues that are crucial to transformation of their economies including length of transition periods, as the global process of trade liberalization and removal of special protective regimes, continues.’ Commonwealth Task Force Study on Small and Vulnerable Economies 2000
The countries within the Americas posses fundamental differences in levels of development and size of their economies; from the heavily industrialized economy of the US, through to the large middle- income developing countries of South, to the small underdeveloped economies of the Eastern Caribbean. The Guiding Principles of the FTAA suggest in theory that these vast disparities will be recognized and taken into consideration in the negotiating process.
However, within the current negotiations recommendations relating to the provision of Special and Differential treatment (S&D) for small and vulnerable economies are still bracketed and viewed as extremely contentious within the ongoing negotiations. This suggests that the implementation of the stated key principle in respect of ‘special attention been given to the needs of smaller economies’ is in danger of not being achieved.
The Commonwealth World Bank Task Force study on Smaller Economies notes, that factors such as remoteness and isolation, income volatility, openness, limited diversification, susceptibility to natural disasters and environmental change, poverty, limited access to external capital and limited institutional capacity, make it near impossible for small and vulnerable economies to compete effectively in the international trading system. The Caribbean (NGO) Reference Group on External Relations (CRG) believes that the FTAA negotiations should adopt the definition from the study in order to properly classify countries, which would be designated as small and vulnerable and applicable for Special & Differential (S&D) treatment.
In this context, nnegotiators must very soon arrive at the conclusion that S&D privileges for small economies are not ‘gifts’ to be grudgingly bestowed but necessities to be provided to ensure the survival of these countries. If all of the countries in the FTAA both large and small are to benefit equally, the process must provide functional and meaningful concessions. A completely reciprocal agreement among unequal partners is unrealistic and untenable.
In particular countries within the CARICOM will face numerous challenges as they try to come to grips with the fast paced and comprehensive nature of trade liberalisation. These challenges including, the dismantling of traditional preferential and non -reciprocal agreements for products of critical importance to the region, limited resource capacity and an underdeveloped indigenous private sector, will only be exacerbated by a system which does not recognise their particular vulnerabilities as small open economies. Allowances must therefore be made to deal with the difficulties and cost associated with adjustment both in the social and economic sphere.
Additionally, within the FTAA negotiations themselves, the CRG is aware that CARICOM negotiators are finding it hard to keep up with the pace of the negotiations. Even though negotiating as a group and sharing resources, CARICOM countries still do not have adequate financial and human resources to cover all of the activities of the various negotiating groups. This difficulty will increase as the FTAA negotiations accelerate to meet the stated deadline for completion and the number of meetings increases. This indicates that specific technical and other assistance is needed to ensure that these states can participate effectively within the negotiations
It is also noted that small states tend to be more dependent than large states on taxes on imports for their fiscal revenues. The high volume of external trade provides a conveniently broad tax base. Reduction of average import tariffs as part of an overall trade liberalization can therefore lead to a fall in tax revenues that is not always easy to offset in the short term. In this context, smaller economies within the FTAA will need to have special & differential treatment as it relates to tariff elimination and reduction, in the form of exemptions and phased and flexible approaches. Accordingly, we are recommending that such S&D treatment be classified as follows.
Further, countries designated as Highly Indebted Poorer Countries or Least Developed Countries under the World Bank/IMF Bank rating system should be granted full exemption from providing reciprocity within the agreement for a period of not less than 15years. A review should be undertaken after this period to assess their ability to apply commitments relating to reciprocity.
The CRG is also aware that currently within the FTAA discussions on this issue, it has been put forward that S&D privileges be allocated on a case by case basis and not be accorded to a single group of countries. The CRG views this position as extremely dangerous and unfounded. Why should countries like those in the CARICOM including Haiti, with similar social and economic constraints not be provided with the same allowances across the board? Who will decide which country fits the criteria? Will the decision be left to a select few? Is Grenada any less vulnerable than St. Vincent or Guyana or even Barbados with its heavy dependence on tourism?
The CRG believes that S&D provisions for small and vulnerable economies should be ingrained within the Agreement as a de facto right and accorded to a group of countries or groups of countries that meet agreed criteria. These criteria should be established only after careful unbiased research and analysis, the terms of reference of which should be agreed by all members.
The CRG therefore recommends that:
Industries that have the potential to be competitive, tariff reduction would be introduced at a decelerated pace to give these industries time to adjust to increased competition
2. Sensitive. Industries that are underdeveloped but have the potential to be significant money earners, and employ or are a source of employment for a significant amount of persons. Tariff reduction would be introduced over a period of fifteen years for compliance with the option of requesting an extension. Tariff reduction would be phased in over a period of time
3. Very-sensitive. The very sensitive industries, which are central to the economy with respect to employment and contribution to GDP, would receive an exemption from further tariff reduction, particularly in circumstances where substantial liberalization has already been undertaken.
Small and vulnerable countries should be granted an exemption from MFN and National treatment clauses which threaten the ability of government to provide essential public services and protect public interest. This should abide in the related Agreements on Investment and Services.
Smaller economies should be allowed to negotiate exemptions from rules on national treatment with respect to certain entities.
should be enforced for the provision of technical assistance and
cooperation to enable enterprises from smaller economies to participate
in tendering procedures
RULES OF ORIGIN
Only small and vulnerable economies should be allowed to apply safe guard measures, this would include allowing smaller economies to apply according to specific criteria, a safeguard measure against an imported product previously subject to such a measure.
CAPACUTY BUILDING - TECHINCAL AND FINANCIAL ASSISTANCE
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