|The Courier N° 184 - Jan - Feb 2001 - Dossier: Press and Democracy - Country Reports: St Kitts and Nevis (EC Courier, 2001, 96 p.)|
|Focus on development|
by Aya Kasasa
The invitation had come straight from their government, so it was under the watchful eye of students from the Clarence Fitzroy Bryant College that the opening ceremony of the annual meeting between Cariforum and the European Union took place. Clearly the gesture had not been lost on any of the participants, showing as it did that the leaders of the Caribbean States are intent on cultivating their future elites as they negotiate the terms of their development with the international community. The annual meeting provides an opportunity for the members of Cariforum and the representatives of the European Commission to exchange opinions on key aspects of cooperation programmes and bilateral relations.
This year the discussions have turned to cooperation issues based on the 6th, 7th and 8th programmes of the European Development Fund (EDF). The list of projects covered by these programmes feature plans for regional economic integration and regional cooperation - including trade and development of the private sector, development of tourism and the services industry and rural development of economic infrastructures. The plans also cover human resources development and the strengthening of the knowledge and skills base, including education, training and research.
The meeting was held in St Kitts and Nevis on 20 October 2000 under the joint chairmanship of Sam Condor, Deputy Prime Minister and Minister of Foreign Affairs, International Trade and Caricom affairs, and Friedrich Hamburger, Director at DG Development for the Caribbean, Pacific and Indian Ocean. After the opening speeches it was the turn of Billie Miller, Barbadian Deputy Prime Minister and Minister of Foreign Affairs and Trade to speak.
Immediately, the tone was set: the Caribbean states were anxious to express their very real disappointment at the All except Arms initiative that had been put forward by the European Union last September. European Commissioner Pascal Lamy, whose brief covers trade, had proposed the initiative to enable all the least developed countries (LDCs) to benefit from the liberalisation of trade by exempting their entire range of exports to the European Union from all customs duties, with the exception of arms and munitions. This commitment has been written into Article 85 of the Cotonou Agreement, which provides for special treatment of the LDCs with the aim of reducing their economic and political marginalisation. For the EU, the proposal is viewed as a sign that it has taken the initiative in post-Seattle trade deregulation and shows that it is quite serious about taking on board the needs and concerns expressed by the LDCs in the run-up to a new round of multilateral trade negotiations. Apart from the strong signal the initiative has sent out from the EU, it could serve as an example of good practice for other members of the WTO, particularly industrialised economies. In global terms, the EU is by far the biggest importer of products from the LDCs: in 1998 its share stood at 56%, compared with 26% for the United States, six per cent for Japan and two per cent for Canada. As a result, any decisions taken by the Community on trade with the LDCs can impact strongly on the economies of the latter. And this is precisely what the Caribbean countries fear, as each of the speakers repeatedly stressed, saying there was a risk that the initiative would leave them all the poorer and whittle away any benefits they had achieved over the long years of cooperation. For the ACP countries, the very substance of the Cotonou Agreement was now at stake, with the real possibility that the unique nature of the partnership could be reduced to ashes. The Cariforum representatives also took note of ACP disappointment at the lack of consultation prior to the EU launching its proposal: The ink on the signatures was not even dry, Billie Miller declared loudly, before one of the parties started taking decisions that might well spell the ruin of the other! During the period of transition, any threats directed at the ACP countries should be firmly resisted. We have not been consulted, and this solution would run counter to our partnership agreement. We all know there is no point in further impoverishing the poorest of the poor. Some of our countries have only just emerged from absolute poverty: they have no desire to repeat the experience.
The other side of the argument
The European Union immediately tried to play down any misunderstandings. Friedrich Hamburger clarified the positions of the 15 Member States, saying that the EU had an obligation to respect the rules of the WTO and, eventually, to provide free access to the products of the LDCs. Of course we need to discuss the principle that access to markets should apply to all products apart from arms. But we're talking about a proposal we're still in the process of drafting, he emphasised, a proposal that, in accordance with due procedures, has yet to be submitted to the European Parliament and Council of Ministers. I have to say that these procedures take time, nothing has been decided yet, and it would be wrong to draw premature conclusions. We have listened to you carefully and will be passing on your concerns, but you should rest assured that the key principle of consultation at the heart of our partnership will never be broken. With this, the two sides went back to their deliberations and discussed issues related to the EDF programme. In this regard they noted the progress that had been made, the difficulties that still lay ahead and agreed on ways of improving joint collaboration procedures wherever required. The representatives of Cariforum and the European Commission also discussed an outline strategy leading to the establishment of a framework for a regional cooperation programme under the 9th EDF. They exchanged opinions on the guiding principles and policies for the regional programme under the provisions of the new Cotonou Agreement.
What does the future have in store?
Questions still remain on what the future holds for Cariforum and what kind of assistance the EDF can provide to help the rum and rice producing industries adapt to the new framework of international trade. There seems little doubt that the new package of measures for the region will see the stepping up of resources in the field of trade policies and negotiations. In terms of developing trade relations, the Commission is gearing itself up to staging negotiations on the drafting of a regional economic partnership agreement (REPA) on trade and trade issues. These preparations are due to begin in 2002, with the regional agreements being finalised and launched in 2008. After this long period of transition, trade practices will then be fully compatible with the legal requirements of the WTO. What is more, Europe will start to view the Caribbean region in a broader context, one which encompasses the Latin American and Caribbean countries. The most recent summit held in Rio between the EU and these countries, Mr Hamburger said, is a harbinger of things to come. Rio illustrated the need to open up the process of political dialogue, to intensify moves towards trade deregulation and the free flow of capital, and to attach greater priority to cooperation in the fields of education and culture.
At the end of the meeting the participants expressed their overall satisfaction with the outcome of the negotiations and were pleased that the issues of concern to the ACP countries had been brought fairly and squarely to the bargaining table. So it had been an excellent meeting, with both sides stating in their closing remarks that they were determined to overcome the outstanding obstacles on the path to cooperation in a spirit of amicable relations.
Cariforum (the Caribbean Forum of African, Caribbean and Pacific States) acts as the mechanism of coordination between the Caribbean ACP countries and the European Union in preparing and agreeing strategies to support the regional integration process of selecting and drafting projects eligible for assistance from the Regional Indicative Programme for the Caribbean Region (RIPCR), which was signed in July 1992 under the LomV Convention and funded by the EDF. Cariforum is based in Georgetown (Guyana), and its Secretary-General, Edwin Carrington from Trinidad, is well known for his work with Caricom.
Given that Cariforum has managed to acquire considerable political clout over the years, it is hardly surprising that the press frequently confuses it with Caricom. There are plenty of observers who believe that the best thing would be for the functions of the Cariforum secretariat to be merged into Caricom at the earliest opportunity.
While the Cariforum countries differ in the disparity of their economies, levels of development and diversity in terms of race, history, culture and language, they nonetheless share common characteristics and problems. As stable countries with moderate incomes and slow but steady growth rates (apart from the notorious case of Haiti, the bottom-ranked LDC in the zone), they tend to remain over-dependent on the primary sector or on tourism in terms of creating jobs or building up trade links. The narrow geographical confines of most of these countries constitute a major barrier to their development, particularly since their economies are regularly thrown into turmoil by natural catastrophes.
Left to right, Edwin Carrington, Sam Condor and Friedrich Hamburger
An initiative set to cause much ink to flow
In terms of its commercial impact, the All except Arms proposal affects imports that currently amount to some €78 million - compared with a total of €8.7 billion for products imported from LDCs. A drop in the ocean? Not necessarily, for the simple reason that the new proposal covers a wide range of products that until now have been excluded from the official import statistics because of the excessive customs duty levied on them. The removal of a high degree of protection is aimed at stimulating the growth of imports from these countries.
However, the granting of free access to products from the LDCs is not the only important step intended to stop the downward economic and structural slide of these countries. In order to benefit from the possibilities opened up by the deregulation of trade, these countries will also be forced to find ways of producing a greater number of quality products for export. This explains why a cornerstone of European policy will no doubt continue to remain focused on maintaining technical and financial assistance to the LDCs so that they can improve and broaden their export capacities.
The initiative itself can be traced back to a meeting of ministers in Singapore at which WTO members decided to ease the access of LDCs to the markets of the industrialised countries, principally by granting exemptions to their exports from excise duties on an autonomous basis. In June 1997, the Council of Ministers decided to extend the benefits enjoyed by ACP countries to the LDCs that had yet to sign up to the Lomonvention, and to provide free access in the medium term to the vast majority of LDC products.
The fact remains that, even after the 1998 reform of regulations governing standard preferential systems for LDCs, 944 of the 10,500 joint customs tariff items still remain outside the scheme. In June 2000 the Council of Ministers decided to move a step further by concluding an agreement with the ACP countries to initiate an excise duty exemption process and free up access for virtually all products originating from each LDC by 2005.
The new proposal from the Commission now takes these commitments a stage further and affects 48 of the poorest countries in the world. It intends to add a further 919 tariff items to the free access scheme. If the proposal is accepted by the Council and the European Parliament, all products originating from LDCs could be imported duty-free into the EU countries - with the exception of bananas, sugar and rice. Customs duties on the latter are due to be successively phased out in three stages over a three-year period.
Source: Commission en Direct, I. Hvaas
A partnership with a bright future
Relations between the EU and the 15 independent countries of the 3 Caribbean are based on the Cotonou Agreement. The Netherlands and the United Kingdom have constitutional ties with overseas countries and territories (PTOM), and France with overseas departments (DOM). The Caribbean ACP States and territories have a total population of approximately 22 million, over a total surface area of 599,276 km2. The existence of successive Lomonventions in the past, and the new Cotonou Agreement today, has given this group of countries the benefit of a harmonised reference framework for handling matters of political dialogue, trade relations and development cooperation. This framework allows these countries to derive advantage from joint institutions with the European Union and regional representative agencies. All this has facilitated dialogue on policies and made it easier for the specific needs of the Caribbean region to be taken into account.
Dialogue takes place primarily within the joint institutions provided for in the Cotonou Agreement, in particular the Council of Ministers and the Joint Parliamentary Assembly, composed of members of parliament of the signatory States. At regional level, specific dialogue with the Caribbean region has been set up through The Caribbean Community (CARICOM) and its vehicle for cooperation and dialogue, CARIFORUM. Founded in 1973, CARICOM's objective is to promote economic integration, coordinate foreign policy and provide public services in areas such as shipping, health, education and issues relating to women. Interdepartmental meetings between the European Union and the countries of the Caribbean are organised each year under the auspices of CARIFORUM. Despite the economic, commercial and political differences which inevitably characterise such a diverse region, CARICOM is a major catalyst for regional integration, thanks to the organisation's wide-ranging objectives and large number of Member States. New initiatives for integration in the region have led to the creation of the Association of Caribbean States, comprising all the countries in the Caribbean. This organisation for political cooperation is active on a number of fronts and has already seen concrete results in areas such as the fight against organised crime and illegal drug-trafficking, good governance, support for the democratisation process and respect for human rights.
The Lomramework has gradually expanded to include more of the region. Haiti and the Dominican Republic are the most recent countries to have joined the ACP group (in December 1989, when LomV was signed). Although Cuba did not sign that particular convention, it did participate as an observer in the negotiations on Cotonou.
The Caribbean States greatly value this strengthening of their links with Europe as a source of diversification in their commercial and economic - and also in their political - relations. The European alternative can look like a viable counterbalance to what is sometimes perceived to be economic and political over-dependency.
EU development aid (public sector) to Caribbean countries (in US$ million)
Direct EU investment in the Caribbean, 1990-1997 (net flows, in US$ million)
Barbados, Guyana, Jamaica, Suriname and Trinidad & Tobago are regarded as the most developed countries of the group. All the other member States, except the Bahamas, are regarded as less developed countries.
Overseas Countries and Territories (PTOM)
Overseas Departments (DOM)
Economic and trade relations
Lack of diversity in most island economies means complete dependence on the EU market and the preferential conditions for access to it, in former times guaranteed by the successive conventions. Although the average per capita income level in the region is quite high (GDP of $4,500 per capita), there is considerable disparity between countries (Haiti's GDP per capita is $250). In the main, these island economies remain fragile, often dependent on a very limited number of export products and therefore vulnerable to fluctuations in the price of raw materials; thus they rely on preferential trade agreements.
The Caribbean countries benefit from the Cotonou Agreement's ample non-reciprocal trade preferences. Indeed, for some countries the sugar, banana and rum protocols have ensured significant export revenues. This commercial relationship should in future evolve towards another form of agreement, to reflect better the mutual interests of both parties and to bring the trading system in line with WTO regulations. The European Union's mandate for negotiating the new agreement permitted a proposal for setting up a genuine economic and commercial partnership through the gradual introduction of reciprocity in trade links and the offer of a global trade policy strategy.
In 1997, the EU imported 3,137 billion dollars worth of produce from the Caribbean and exported 3,806 billion dollars worth of European goods to the same region. The EU is the Caribbean's main export market, primarily for certain agricultural products (bananas, sugar, rice, etc.) and certain manufactured goods. European exports principally take the form of manufactured goods, services and tourism.
Community cooperation in the Caribbean
With the Inter-American Development Bank (IDB), the EU is the region's biggest financial backer. In the context of the 8th EDF (1995-2000), National Indicative Programmes totalling €511,350 million were set up, as well as a €90 million Regional Indicative Programme. To these figures should be added €200 million for STABEX, SYSMIN and the Structural Adjustment Facility. EU aid is primarily directed towards transport and communication infrastructure, trade and tourism, agriculture and rural development, development of human resources and the environment, with the aim of promoting economic and social advancement in the Caribbean. It also supports the anti-drugs campaign, reform and modernisation of the State, as well as regional integration.
The fact that many Caribbean economies are neither robust nor competitive makes regional economic integration essential, and here the EU example is unquestionably helpful. Almost all Caribbean countries have established stable political systems based on multi-party democracy. In the last few years, they have also implemented economic reforms which are having a noticeable impact on their growth. Further strengthening of democratic life in these countries would, however, be advisable if economic growth is to be transformed into long-term development.
The production of drinks contributes significantly to the local economy
To replace the current non-reciprocal trade preferences, the European Union proposes entering into Regional Economic Partnership Agreements (REPAs) with various ACP countries and territories. From 2005, while continuing to enjoy preferential access to the EU market, the ACP signatories of such agreements will be obliged gradually to open up their own markets to EU exporters on a preferential basis.
This text is a rmf the publication Union europne,
Amque Latine, Caras: une progression commune
[European Union, Latin America, Caribbean: Advancing together], published by DG Development (June 1999).
The regional challenge - Keeping up the good work
How are the Member States to develop in line with changes at international level without losing any of the social, economic and political achievements of recent decades? In the eyes of the World Bank, this is the monumental challenge facing the Caribbean in the 21st century.
The world economy has seen a great many changes over the last 10 or 20 years, not least the introduction of new international trade mechanisms, something of a challenge to the region. Service industries, information technology and capital flows have become more important in terms of companies' competitiveness and the means are available to governments for dealing with such developments, particularly the governments in developing countries.
The growth of the service industries has had a knock-on effect in this region, boosting tourism and enabling international financial centres to expand. At the same time the Caribbean has left itself open to the vulnerability that goes with specialising too closely in industries of this type.
At present, six countries in the Caribbean basin are facing sanctions imposed by the G7 countries owing to an alleged lack of cooperation in applying international regulations in the fight against money laundering. These countries insist that they were given very little opportunity either to state their case or to influence the decision.
As far as tourism is concerned the vulnerability is due to natural disasters, environmental damage, criminal acts and tourist behaviour.
To a certain extent, these factors can be controlled, especially the last two. This is why ecologically-viable tourism is now being looked into, a concept devised with the help of the OTC (Caribbean tourism association).
World Bank economists have stressed that the majority of the region's economies can make the transition from agriculture to the service industries, with tourism and financial services leading the way. However, the region continues to depend on preferential trade arrangements with its main partners, the European Union and the United States, particularly for exporting agricultural produce and manufactured goods.
Under these circumstances, the recent regulations imposed by the WTO against preferential European arrangements with respect to bananas is one of the biggest problems facing the region. Since the 1980s, economic growth has been satisfactory on the whole and has even seen some improvement in recent years. The region has gradually become better integrated at international level, with more trade openings and direct foreign investment.
This - following international trends - has become an essential source of funds, keeping debt levels in check. Recent World Bank studies show that the region's long-term growth is on a par with average growth in a great many countries, and programmes of reform and structural adjustment over the last two decades have influenced economic growth in line with the results obtained by other countries that implement similar measures.
A need for caution
Despite encouraging results, experts have expressed the need for caution. Indeed, good current performance is not necessarily an indication of future performance. As the experts see it, to keep up this trend, Caribbean countries will have to see their transition to economies based on service industries through to completion. They will have to move towards greater diversification of their core economies, continue to attract foreign investment and improve their competitiveness at international level.
Closer analysis is therefore required. Economies in this region are generally small and open to foreign investors. They are restricted in terms of export and particularly vulnerable to natural disasters, especially hurricanes.
Since the 1980s, the majority of Caribbean countries have opted for strategies to extend their economic base by building on their agricultural and manufacturing industries while simultaneously taking a more aggressive approach to promoting their services, especially tourism. In 1998, income from this sector amounted to one third of the total revenue from the export of goods and services, in other words 16% of GDP. The agricultural value added made up eight per cent of GDP.
Over the last two years, inflation has generally been low in the majority of these countries, mirroring the situation in Europe and the United States, their main trade partners. Real GDP growth has ranged from 1.5% in Guyana (1998) to 8.32% in the Dominican Republic (1999). One of the factors that contributed to this variation was the fall in oil and commodity prices in 1998, closely followed by a rise in oil prices in 1999. The negative impact on production and worries over trade preferences with respect to bananas and sugar, and the effects of climate conditions and the financial crises of 1997 and 1998, decreased the number of tourists visiting the region. The rise was particularly high in countries with significant services industries, where tourism and the construction industry have been major sources of economic activity (Bahamas, Barbados, Belize, the Dominican Republic and St Vincent and the Grenadines).
Time for new strategies?
Today, tourism and the other service industries are first in line for development. The decision to invest in the sector has started to reap rewards, especially for offshore services which are contributing more and more to real GDP growth. This proves that the countries have been working together, exchanging information and knowledge on the subject, to the benefit of all involved. The Caribbean States have also pooled their resources to tighten legislation on money laundering.
Open the door to the 21st century?
Economically-viable tourism, a future industry for the Caribbean States
The construction industry is next. Several governments, including those of the Bahamas, Barbados and St Kitts and Nevis have continued to modernise their tourist industries. Others, such as Trinidad and Tobago, Guyana and Belize, have focused on improving their infrastructures (sea routes and defences). The countries worst hit by hurricanes have increased their public-sector investment in critical infrastructure.
Then comes agriculture. The region has seen a clear increase in agricultural production in Guyana, Jamaica, Barbados and Trinidad and Tobago. In St Kitts, hurricanes and high production costs have led to a decline in production. Banana production also seems to have dwindled slightly in most countries, partly due to the uncertainties that have crept in as a result of the slow abolition of trade preferences and the WTO regulations against the European Union's importation arrangements.
And what of manufacturing? This is an industry, with the exception of sugar production, that has shown strong performance (textiles, the clothing industry, beer, non-alcoholic beverages, fruit concentrates, etc), especially for those countries benefiting from special trade agreements with the USA.
Keeping up the good work
If the region is to flourish in the future, the easing of trade restrictions will have to continue. Non-tariff barriers still exist and a considerable degree of discretion still prevails in terms of the granting of tax incentives. Too many countries still have a tendency to protect their domestic sectors. They will also have to step up the development of human capital, along with the legal and regulatory framework within which business affairs are conducted.
In short, boosting the region's economies will require reforms that increase production and bring down costs.