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Summary:

  The CARICOM agricultural sector is characterized by a combination of small and medium-scale enterprises both at the primary and secondary stages of production. The historical domination of the sector by plantation export agriculture has all but disappeared in some countries but retains its significance in a select number. The bulk of the sector consists of highly diversified, mainly domestic-oriented enterprises. Intra-regional trade is similarly highly diversified but is limited, among other things, by issues of transportation, non-tariff restrictions and poor facilities for bulking up and handling. Exports to both CARICOM and non-CARICOM destinations are characterized, for the most part, by low volumes with certain notable exceptions.

  Background

  The CARICOM agricultural sector is characterized by a combination of small and medium-scale enterprises both at the primary and secondary stages of production. The historical domination of the sector by plantation export agriculture has all but disappeared in some countries but retains its significance in a select number. The bulk of the sector consists of highly diversified, mainly domestic-oriented enterprises. Intra-regional trade is similarly highly diversified but is limited, among other things, by issues of transportation, non-tariff restrictions and poor facilities for bulking up and handling. Exports to both CARICOM and non-CARICOM destinations are characterized, for the most part, by low volumes with certain notable exceptions.

  The current agricultural and rural model in the Caribbean is based on a combination of historical plantation structures and low input peasant-type production units and is under considerable pressure. Contributing factors include:

  i) the continuous decline in the attractiveness of traditional export markets

  ii) increasing competition from larger scale producers on both export and domestic markets, and

  iii) high production costs.

  Of these, the last is probably the most crucial. Factor costs (both domestic and imported) are high by developing country standards. The labour constraint is particularly great in countries with significant tourist and oil sectors. Land is also a scarce and increasingly expensive resource, and not only in the smaller islands. Water resources are also scarce in some cases, and water management capabilities are often deficient. Financing costs vary considerably but are generally high. Operations costs – energy, transportation and communications – are in some cases prohibitive. On the other hand, the human resources available to the sector are of a reasonably high quality – literacy levels are high by developing country standards, and the ability to absorb new technology is also reasonably high.

  Thus, agricultural policy in CARICOM is conditioned mainly by perceptions of the sector’s uncompetitiveness and the concomitant need to protect it from international competition. This has underpinned the region’s position in all international negotiations

  Nevertheless, it is also recognized that that, in order for the sector to survive and prosper,there must be a transformation of the production structures, and a reorientation of investment decisions and strategies. The future of Caribbean agriculture lies in production of value-added goods and services, and to achieve this, it is necessary to ensure that producers receive the right incentives, and that governments make strategic investments of an institutional and infrastructural type that will bolster the potential of the sector and assist with its transformation. Depending on protection alone will not provide the impetus for transformation, especially given the small size of the CARICOM market. Indeed, there is a downside to protectionism in that it disconnects domestic production from the price signals and other dynamics of the international market thereby stymieing the competitive ability of the very producers that it is meant to help.

  Benefits of Trade Agreements

  Trade agreements—free trade areas (FTAs), customs unions etc.—have the benefit of givinglegal certainty and predictability to operators in the marketplace. Although CARICOM has enjoyed duty-free access to its major markets for several decades, under arrangements such as the Lomé/Cotonou Trade Partnership Agreements with the European Union[1], the Caribbean Basin Initiative of the US[2], and the Canadian trade programme for the Commonwealth Caribbean (CARIBCAN), these preferences have all been autonomously granted by the countries concerned and could, in theory at least, be withdrawn or modified without agreement of the beneficiary countries. They also operate outside of the normal rules of the multilateral system and are therefore subject to periodic waivers by the WTO membership. Indeed, in the case of the Lomé/Cotonou trading arrangements, it became clear that the WTO membership was not willing to grant the EU any further extensions of the waiver that covered the period 2001-2007 and thus, in order to protect its preferences, the Caribbean ACP group had little alternative but to conclude a reciprocal Economic Partnership Agreement (EPA) within that timeframe.

  FTAs may also provide additional market access, especially in cases where the existing access arrangements are on a so-called Most Favoured Nation (MFN) basis, which in reality means the least attractive market access regime granted by any WTO member. Even In the case of the EPA, where most of the region’s products already enjoyed duty-free status, the restrictions that did exist were all in respect of agricultural products —all the EU’s Common Agricultural Policy (CAP) products were either excluded from the Lomé/Cotonou arrangements or were subject to some level of tariffs, some of which were prohibitive.

  CARICOM’s Positions

  In all its international trade negotiations, whether at the multilateral or bilateral level, CARICOM’s position on agriculture has been very defensive. In the current WTO negotiations, the region has, as part of the Small and Vulnerable Economies group (SVEs) successfully carved out for itself special dispensations that will allow it to continue providing significant protection to its agricultural sector. The same was true of the failed FTAA[3] negotiations in which CARICOM staked out a very defensive position. Even in its agreements with neighbouring countries – Costa Rica, Cuba and the Dominican Republic—CARICOM excluded most agricultural products and also listed a range of products that could be traded only within certain seasons. This is in addition to the fact that CARICOM’s LDCs[4] were not required to provide reciprocal market access in the area of goods. In the EPA, some 70% of all agricultural tariff lines were excluded from CARIFORUM’s[5] market access commitments. It is expected that a similar stance will be taken by CARICOM in the upcoming FTA negotiations with Canada. Thus, there is no evidence that the interests of the CARICOM agricultural sector have been negatively affected by commitments entered into under multilateral and bilateral trade agreements.

  Defining the Interests of the Sector in Trade Negotiations

  Although the main preoccupation of agricultural sector actors is with defending their level of tariff protection, trade negotiations are not confined to goods and embrace the important area of services as well as other trade-related areas. Further, the treatment of non-agricultural goods in such negotiations can have significant impact on the sector’s operations. It is therefore important that agricultural sector personnel in both the private and public sectors pay attention and become fully engaged in the entire negotiating spectrum. The agricultural sector could, for example, be negatively affected if the market for non-agricultural goods (inputs in particular) or services (e.g. shipping) remains restricted. In some cases, the importance of a particular product or service to agriculture may not be evident to sector personnel.

  As some researchers have noted, there is now substantial evidence that policies that reduce competition in service industries are very costly to developing countries. Producer services, in particular, play a crucial role in the development and growth process. It is well known that losses of agricultural output due to lack of financial intermediation, poor transportation and storage facilities and substandard communication networks can be significant.[6] The agricultural sector could, for example, be negatively affected if the market for non-agricultural goods (e.g. inputs such as equipment and packaging material) or services (e.g. shipping) remains restricted or significantly taxed. In some cases, there may be no clear distinction between inputs and final goods, especially where smaller operations are concerned, and the impact that trade taxation may be having on the sector may not be evident to policy makers.Trade agreements, therefore, provide producers with the opportunity to press for reforms to the trading system, which could redound to the sector’s benefit. But unless the advocates for the sector clearly articulate their interests in these areas, and do so in the language of the negotiations, the result could be one in which important interests are overlooked.

  The Role of Information

  Duty-free or preferential access to a market does not necessarily translate into market presence or an improved level of market penetration. The record of CARICOM’s exports to its preferential markets has been a mixed one but there is clear evidence that other countries not having such privileged access have, in some cases, been able to perform as well or better. Market access can be complicated by a host of non-tariff issues such as technical and health measures, border charges other than customs duties, administrative procedures and even technical standards imposed by the private sectors in the importing countries. It is well known, for example, that while the EU might, as part of its Food and Feed regulations require that exporters are able to provide records of their production processes for two or three sages back, private importers may require information on several stages more.

  Facilitating market entry by providing useful, comprehensive and timely information on market entry conditions is thus an area that cries out for attention. This is certainly an area in which additional public support should be provided through regional and sub-regional organizations with the full participation of the private sector. This is an issue that applies equally to the CARICOM market itself, a fact that has been recognized at the highest levels.

  The Latin American and Caribbean Region

  CARICOM’s historical dependence on a few major markets for both exports and imports is a fact that needs to be addressed since it results in a limited vision of market opportunities both on the part of governments and the private sector. Perceived barriers of language and tradition are sometimes used as rationalizations for the region’s failure to reach out to non-traditional markets. CARICOM has negotiated trade agreements with only a few countries in the hemisphere. The CARICOM Council for Trade & Development (COTED) regularly decides on the priorities and schedules for trade negotiations. If, however, it is wish of the private sector to have additional trade agreements negotiated, then this should be communicated through the appropriate channels, identifying the assessed opportunities.

  Organization of the Private Sector

  The important role of business organizations has been well recognized. These bodies can provide a host of benefits for their members, and for the sector as a whole. In relation to trade and marketing, these include, providing information on market conditions (see above), lobbying governments in both the home countries and abroad for beneficial policy changes, facilitating the provision of technical assistance to enterprises. In addition, as mentioned above, private sector organizations can play a crucial role in coordinating positions for trade negotiations. So far, the private sector has played only a limited role in trade negotiations, a situation that needs to be corrected. The important role of such organizations as the Caribbean AgriBusiness Association (CABA) and WINFA has been recognized by COTED and this provides such bodies with the opportunity to become more deeply involved in shaping the trade policy agenda.

  Above based on a presentation by Nigel Durrant at the Private Sector Dialogue held on conjunction with the 5th Hemispheric Ministerial & 15th Regular Inter-American Board of Agriculture Meetings, Montego Bay, Jamaica, October 27, 2009

[1] The Partnership Agreement ACP-EC, signed in Cotonou on 23 June 2000 (Revised in Luxemburg on 25 June 2005) is the latest of these agreements and runs for 20 years. The trade provisions, however, ended on December 31, 2007 and were replaced, in the case of the Caribbean ACP countries, by the Economic Partnership Agreement (EPA)

  [2] Caribbean Basin Initiative (CBI), a term covering two pieces of US legislation, namely, the “Caribbean Basin Economic Recovery Act” (CBERA) of 1983 and the Caribbean Basin Trade Partnership Act (CBTPA) of 2000.

  [3] Free Trade Area of the Americas (FTAA)

  [4] The countries of the Organization of Eastern Caribbean States (OECS), Belize and Haiti

  [5] The Caribbean Forum of African, Caribbean & Pacific (ACP) States, consisting of CARICOM countries (including the Bahamas) and the Dominican Republic.

  [6] Hoekman, Bernard and Anderson, Kym“Developing Country Agriculture and the New Trade Agenda”

  World Bank, Washington, D.C. and CEPR bhoekman@worldbank.org and CEPR, and School of Economics and Centre for International Economic Studies University of Adelaide 5005 Australia kanderson@economics.adelaide.edu.au – Presented at the American Economic Association Annual Meeting, New York, 3-5 January 1999.

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Post Author: Nelzine Brown

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