1 CANADA AND THE CARIBBEAN COMMUNITY: PROSPECTS FOR AN ENHANCED TRADE ARRANGEMENT * RAMESH CHAITOO AND ANN WESTON Introduction The election of a Conservative Government in Canada in January 2006 was followed by a review of Canada’s trade strategy, which led to an “aggressive bilateral trade negotiations agenda” notably in the Americas (FAITC, June 2007). According to the government, free trade agreements (FTAs) are needed to maintain competitiveness with the United States (which has now signed 16 FTAs) and to reinforce Canada’s place in the North American production platform. Competition with the European Union (EU), which has signed FTAs with a number of countries in the region, is another likely factor. Canadian agricultural exporters, service providers, and financial and mining companies have also sought improved market access and predictability of treatment through FTAs. One group with which the Canadian government has embarked on trade negotiations is CARICOM – the 15‐member economic community in the Caribbean.1 This was announced in July 2007 by Canada’s Prime Minister Stephen Harper and CARICOM Chairman, then‐Prime Minister of Barbados, Owen Arthur.2 CARICOM was then deeply involved in negotiation of an Economic Partnership Agreement (EPA) with the EU which was concluded in December 2007.3 So it was only in early 2008 that Canada‐CARICOM negotiations could start in earnest. Given * Ramesh Chaitoo is Head of the Services Trade Unit at the Caribbean Regional Negotiating Machinery based in Barbados. He was previously a Senior Associate of the Centre for Trade Policy and Law at Carleton University in Ottawa. Ann Weston is Vice-President and Research Coordinator at The North-South Institute in Ottawa. Her research has focused on Canada’s trade relations with developing countries, the WTO and trade and development. She studied at the University of Sussex and the School of Oriental and African Studies at the University of London. 1 Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Suriname, Trinidad and Tobago. Haiti joined CARICOM a few years ago but has not yet been able to implement the commitments of the Single Market. The Bahamas is a member of CARICOM but not of the Single Market. 2 In January 2001, then-Prime Minister Jean Chrétien and CARICOM Heads of Government attending the Sixth Canada-CARICOM Summit agreed “to establish a Joint Working Group to prepare a Framework Agreement on the scope and nature of a more mature trade and economic agreement in enhancement of existing arrangements and culminating in a possible Free Trade Agreement.” 3 The EPA is between CARIFORUM (i.e., CARICOM and the Dominican Republic) and the EU. 2 recent developments in Canadian and CARICOM trade policies, notably Canada’s pursuit of a series of new bilateral FTAs in the Americas and CARICOM’s EPA with the EU, the key issues to be addressed in this paper, are: (i) What are the prospects for an enhanced trade arrangement (ETA) between Canada and the Caribbean? And (ii) what model is most likely to contribute to the region’s development needs? 1. Canada‐Caribbean Trade and Investment Relations Trade between Canada and CARICOM is relatively small, though growing. Two‐way goods trade amounted to some $2 billion in 2006 (see Figure 1), while trade in services involved another $3 billion (see Table 3). In both goods and services Canada has had a deficit with CARICOM, which in total has averaged about $1 billion per annum in the last five years. Goods trade is fairly concentrated with the top five countries accounting for 82 percent of Canadian exports to the region in 2006 (Trinidad and Tobago, Jamaica, Antigua and Barbuda, Barbados, and Bahamas) and 95 percent of imports (Jamaica, Trinidad and Tobago, Suriname, Guyana, and Bahamas). For Canada, the region is a very small trading partner with 0.01‐0.02 percent of total trade in goods, though CARICOM ranks on a par with or above the other countries in the Americas with which Canada is negotiating trade agreements.4 For CARICOM, Canada is a slightly more important partner, though still only accounting for 2.3 percent of CARICOM’s total imports in 2006 and 3.3 percent of exports. This compares with the United States (32.2 percent and 51.0 percent, respectively) and the EU (11.1 percent and 11.6 percent) (see Figures 2 and 3). The United States has become considerably more important as an export market for CARICOM than it was in 2001, while Canada and the EU have declined. (In 2001 Canada supplied 2.8 percent of the region’s imports and bought 6.0 percent of exports – compared to 40.1 percent and 37.7 percent for the US and 14.6 percent and 13.5 percent for the EU, respectively.) 4 Canada’s two-way goods trade with Peru was $2.23 billion (2006), Colombia $1.15 billion (2006), the CA4 $350 million (2005), and Dominican Republic $277 million (2006). 3 FIGURE 1 Canadian Trade with Caricom 1,400 1,200 1,000 Exports 800 Imports 600 400 Balance C$mn 200 - (200) 2002 2003 2004 2005 2006 (400) (600) Year Source: Derived from Industry Canada Trade Data Online 4 FIGURE 2 Caricom Imports by Source 2006 RoW Caricom Canada 14% 13% 2% Asia 11% EU USA 11% 32% LAIA 17% Note: Excludes Antigua and Barbuda Source: CARICOM Secretariat 5 FIGURE 3 Caricom Exports by Market 2006 ROW 4% Caricom EFTA Asia 16% Other 1% 3% Caribbean CACM EU 6% 1% 12% Canada LAIA 3% 3% USA 51% Table 1 shows that the top ten Canadian export products are a mix of manufactures, foodstuffs, and processed materials. The top five products account for 21 percent of the total. Imports from CARICOM (Table 2) are led by metals and energy products, and are more concentrated with the top five accounting for 85 percent of the total. Interestingly, clothing imports from CARICOM (HS 61 and 62) have risen by 50 percent from $9.7 million in 1997 to $15.7 million in 2006, though there has been a shift from woven products (which have fallen) to knitted products. 6 TABLE 1 Canadian exports to CARICOM ($mn) 2002 2003 2004 2005 2006 880230 - airplanes 0 0 0 0 38.99 6% 480100 - newsprint 33.26 35.41 25.72 19.71 37.12 6% 100190 - meslin, wheat 44.44 15.21 55.82 369.98 29.71 4% 300490 - medicaments 8.27 9.19 11.20 16.33 19.47 3% 852520 - trans./reception apparatus 0.83 0.29 1.17 7.27 19.31 3% 030569 - other fish - salted, etc. 10.14 11.37 10.69 13.18 16.32 2% 740811 - copper wire 0.16 0 6.84 14.31 15.84 2% 880240 - aircraft 0 0 0 2.96 13.28 2% 851790 - elec. apparatus parts 11.90 6.13 4.91 9.74 12.73 2% 200410 - potatoes, frozen 8.20 8.73 13.36 8.50 9.08 1% Total including others 503.22 446.09 499.82 564.52 669.15 100% TABLE 2 Canadian imports from CARICOM ($mn) 2002 2003 2004 2005 2006 281820 – aluminium oxides 244.19 231.81 322.31 363.41 386.95 33% 710812 – gold 257.75 192.54 328.41 322.37 345.01 30% 720310 ‐ ferrous products 109.14 55.19 30.55 108.63 132.65 11% 290511 ‐ methanol 19.01 61.73 85.93 77.96 75.83 7% 270900 ‐ crude petroleum 0 0.01 0 0 48.69 4% 271011 ‐ light petroleum 0 4.44 0 0 25.29 2% 220840 – rum, etc. 16.30 15.28 16.44 17.15 20.77 2% 310210 – urea 4.41 5.63 0 17.07 12.68 1% 271019 ‐ heavy petroleum 0 97.57 57.57 49.77 10.72 1% 030611 ‐ rock lobster 10.86 9.84 12.00 9.04 10.58 1% 762.70 789.21 946.35 1071.64 1160.00 100% Source: Industry Canada, Trade Data Online Data on Canadian trade in services with CARICOM show that Canada has had a deficit between $200 and $800 million in the last five years (see Table 3). Commercial services dominate the picture, particularly with Barbados (Table 4). These are associated with the movement of capital to benefit from the preferential tax regime there, rather than a reflection of services provided for/by Barbadian‐based businesses. In terms of the other main categories of services, for Canada exports of transportation and government services are somewhat larger than travel, while the reverse is the case for CARICOM. It is not possible to obtain disaggregated data from Statistics Canada for most CARICOM exports of services – the numbers of companies involved are too few for meeting confidentiality standards. The limited data available show the predominance of insurance services in most exports and imports. For Canadian services exports to CARICOM, insurance accounts for some 6 percent, followed by management services (7 percent), architectural, engineering, and other technical services (7 percent), miscellaneous services to businesses (4 percent), and computer and information services (1 percent). A 7 significant number of Canadian tourists visited CARICOM states over the past decade (350,000 in 20035) but the trends have stagnated compared to Cuba and the Dominican Republic. TABLE 3 Canada's Services Trade with CARICOM ($mn) 2000 2001 2002 2003 2004 2005 Total Services Receipts (Exports) 919 937 1540 1832 1461 1402 Total Services Payments (Imports) 1530 1670 1892 2188 2267 1612 Commercial services exports 771 762 1344 1671 1252 1178 Commercial services imports 1221 1333 1588 1839 1816 1160 Transportation and government services Exports 68 89 90 75 116 118 Transportation and government services Imports 112 112 109 119 135 182 Travel Exports 81 86 106 86 93 106 Travel Imports 197 225 195 230 316 270 Source: Statistics Canada Table 376‐0036 ‐ International transactions in services, by selected countries, annual (dollars), CANSIM (database).