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 UNDERSTANDING INTERNATIONAL TRADE

A publication of the OECS Trade Policy Project aimed at students,

businesspersons and the public that explains the operation of the trading
system from the perspective of the Eastern Caribbean

Written for the OECS Trade Policy Project by Edwin Laurent.

Editor: Paula Hippolyte.
Published by: The OECS Trade Policy Project June 2006.
Design layout and artwork: Media Publishing International, Edwin Laurent and EPO Belgium,
Paula Hippolyte and T Lindsey-Bethune.
Cover design by John Steele - InnaEye Art Studio - legend@hotmail.com
Printed by: Enschedé-Van Muysewinkel June 2006.

Valuable contributions, assistance and support received from: Hon Charles Cadet, Dr. Paul Goodison,
Dr. Mark Griffith and Mrs Thérèse Louérat.
For making this work possible: The OECS Trade Policy Project, the Canadian International Development
Agency (CIDA) and the OECS Secretariat.

Copyright, 2006 OECS Secretariat

P.O. Box 179, Morne Fortune, Castries, Saint Lucia

Disclaimer:
The ideas expressed in this publication are those of the writer and do not necessarily reflect the
positions or views of CIDA, the OECS or any of its organs.

1
 ACRONYMS
ACP African, Caribbean and Pacific Group GDP Gross Domestic Product
BFA Banana Framework Agreement
GSP Generalised System of Preferences
BPOA Barbados Programme of Action
HTCI Harmful Tax Competition Initiative
(adopted in 1994 by the 1st UN
conference on the sustainable ICT Information Communication
development of SIDS). Technology
CAP Common Agricultural Policy ITC International Trade Centre
CARICOM Caribbean Common Market LDC Least Developed Countries (UN)
CARIBCAN Caribbean-Canada Agreement LDC Less Developed Countries
CARIFTA Caribbean Free Trade Area (CARICOM)

CBI Caribbean Basin Initiative MDGs Millennium Development Goals

CET Common External Tariff MFN Most Favoured Nation

COM or CMO Common Organisation of the MTN Multilateral Trade Negotiations

Market (in the EU) NAMA Non Agricultural Market Access
COTED Council for Trade and NGO Non-Governmental Organisation
Economic Development
NIP National Indicative Programme
CSME Caribbean Single Market and
Economy NTB Non-Tariff Barriers

DDA Doha Development Agenda. OECD Organisation for Economic

Cooperation and Development
DFID Department for International
Development (UK) OECS Organisation of Eastern Caribbean
States
DSB Dispute Settlement Body
QR Quantitative Restrictions
DSU Dispute Settlement Understanding
RTA Regional Trading Arrangement
DTI Department for Trade and Industry
(UK) SFA Special Framework of Assistance
EBA Everything But Arms Initiative SIDS Small Island Developing States
EC European Community SSA Special System of Assistance
(for bananas by the EU)
ECCM East Caribbean Common
Market STABEX Stabilisation in Export Earnings
EDF European Development Fund SVE Small Vulnerable Economy
EEC European Economic Community TBT Technical Barriers to Trade
EIB European Investment Bank TRQ Tariff Rate Quota
EPA Economic Partnership Agreement UNCTAD United Nations Conference on
Trade and Development
ESM European Single Market
EU European Union USTR United States Trade Representative
WIBDECO Windward Islands Banana
FAO Food and Agriculture Organisation Development Export Company
FLEX Fluctuation in Export Earnings WINFA Windward Islands Farmers’
FOB Free on Board Association

FTA Free Trade Area WIRSPA West Indies Rum and Spirits
Producers Association
FTAA Free Trade Area of the Americas
WISA West Indies Associated States
GATS General Agreement on Trade in (Council of Ministers)
Services
GATT General Agreement on Tariffs and WTO World Trade Organisation
Trade

So all these letters

2 really mean something
then
 PREFACE
Professor Vaughan A. Lewis1

This is an opportune time to publish this guide to the trade issues which shape the
current situation of the OECS countries and the international economic environment. The
fate of the banana and sugar industries, as the conditions for entering an increasingly
integrated and expanded European market change, in the face of global trade rules change,
has awakened many citizens of the islands to the dramatic, negative effects on their
livelihoods that have already occurred and are still likely to occur. And this has certainly been
forcing a discussion on the manner in which these countries should adapt to such changes,
and on the extent to which such adaptation can be successfully achieved.

It is now some twenty years since the European Community indicated to the participating
states in the African, Caribbean and Pacific (ACP) grouping that its pursuit of a European
Single Market and Economy would require full liberalization of trade within the Community,
and that its intention with to achieve this by 1993. At first, it appeared to the OECS governments
that, following the successful diplomatic effort which, in concert with others, had resulted in
the 1975 Lomé Convention, a similar effort of negotiation with the Community could be
undertaken. The essential objective of this would be to preserve the benefits accruing from
the Convention, including the preferential arrangements by which their key products were
facilitated entry into the markets in Europe.

Early on, however, it became apparent that two processes had been taking place, which
would affect the nature of the negotiations and their potential results:

• First the expanding membership of the Community was effecting a change of

Community sentiment away from its previous understanding of and response to
particular concerns of developing states, to one of reduced sympathy for them. The
developing view was that there should be no substantial discriminatory difference
among Member States with regard to the conditions under which third party products
could enter into Community markets.

• Secondly, at the time of the European decision on its Single Market and Economy, the
member-states of the Community were already deeply engaged in negotiations within
the Uruguay Round for further liberalization of international trade, the extension of
the principles of liberalization to the sphere of production, and the further extension
of those principles to the spheres of agriculture and services. This orientation was
being pushed with a certain anxiety and persistence by the United States of America.

As the writer indicates, as they began their negotiations, the OECS and CARICOM
exporters of bananas were caught somewhat by surprise at the extent to which their
traditional diplomatic relationship with the United Kingdom was not enough to achieve a
smooth consensus with the other member states of the EC. This certainly revealed the
diminished capacity of the United Kingdom to act as a diplomatic broker on behalf of the
ACP, and therefore Caribbean states, and to achieve, relatively intact, broader agreement in
Europe on proposals reached between the UK and the Caribbean. Britain, of course, had itself
been engaged in a policy revolution focused on the liberalization and deregulation of her
own domestic economy under Prime Ministers Thatcher and then Major, and thus could not
legitimately resist the extension of that process to the international economy as a whole.

It is useful to recall at this point that the realization on the part of the OECS and
CARICOM states that changing international conditions would require substantial “structural
adjustment” and “diversification” of their own economies was not something of sudden origin.
In fact in the mid-1960’s, the Governments of the time, shocked into recognizing the
implications of Britain’s decision to apply for membership of the European Communities, had
appealed to that country to seek to ensure that in the process some form of preferences for
their agricultural exports would be maintained, and “compensation” or “support” for progressive
“adjustment” of the economies of their states towards “economic diversification”.

1
Dr Vaughan Lewis is Professor of International Relations of the Caribbean at the University of the West Indies, St Augustine
Campus, Trinidad. He was the first Director General of the OECS Secretariat and is a former Prime Minister of Saint Lucia. 3
 Consequently the long period of successfully negotiated successive Lomé Conventions
with their arrangements for STABEX compensation for exports periodically affected negatively
by market or production conditions, along with satisfactorily negotiated preferential
arrangements, appears to have lulled Governments into a false sense of the security of those
arrangements as props for their post-colonial mode of economic production and marketing.

The rude awakening of Caribbean governments to the persistent push for liberalization
of the European internal market, spurred on by commitments now made to the World Trade
Organization (WTO), indeed revived the language, in Caribbean diplomacy of the 1990’s of
compensation, adjustment, special treatment and gradual erosion of preferences, that had
been prevalent since the 1960’s and 1970’s. And this has been persistently so, particularly as
the WTO in general has shown no sympathy for ACP countries presumed status as requiring,
in this case at least, “special and differential treatment”.

Regional and International Relations

The decision, of the CARICOM states to establish a Single Market and Economy, initially
made in 1989 and formalized in 1992 was an indication of the compulsions moving the region
towards principles of liberalization increasingly being implemented as a requirement of their
receipt of assistance from the World Bank and the International Monetary Fund at a time of
recession among, in particular, the More Developed Countries of the Region.

This commitment, including reductions in the levels of the CARICOM Common

External Tariff, intensified discussions in the region as a whole, on the necessity for domestic
structural adjustment and liberalization, which Governments had been forced to undertake
at the international level (at the level of EU-ACP relations). The requirements for compensation
arrangements (including a Regional Integration Fund) and special treatment, which where
being pleased for at that international level, were now re-echoed by Lesser Developed
Countries (largely OECS States) within a regional context.

Again here, the discourse led by OECS Governments has been strangely reminiscent of
the “demands” made by Antigua and Barbuda and Montserrat at the time of the transformation
of CARIFTA into CARICOM in 1973. These resulted in the “compensatory” arrangements for
the establishment of the Caribbean Investment Corporation and a renewed commitment to
focus the Caribbean Development Bank’s efforts on the Lesser Developed Countries efforts.

The banana producing countries which have had to contend since the 1990’s with the
fallout from changes in the banana marketing arrangements, and which have been taking this
message to European capitals since then, in search of a viable solution to the decline in banana
preferences, have now been followed in their diplomatic forays by Governments of the sugar
producing states of the Region. In the early 1990’s, the view was taken that the Sugar Protocol,
having been separately agreed, and agreed prior to the Lomé Convention, would be exempt
from the pressures for change emanating form the liberalization process of the European
Single Market and Economy.

But ten to fifteen years later, Caribbean Governments have been shocked into recognition
that the process of internationalization of decision-making on trade arrangements, (the WTO
process) which ruthlessly negated agreements which the Banana producing countries
continually negotiated and deemed as settled, has come to affect the status of their sugar
exports. The European Union has had to bend to the mandates of the WTO, and our
traditional “interlocutor valuable” or diplomatic broker, the United Kingdom, has not been
able to roll back the waves of liberalization and deregulation in spite of her professed
sympathy for our case.

What all this raises, surely, is the extent to which, over the years of change in our
conditions of international trade and production, the Caribbean countries are being forced to
adjust to new trading conditions, either through the reorganization of their traditional
economic (and in particular agricultural) activities, or the creation of new activities capable
of penetrating existing international markets under the new conditions.

4
Reform
The European Union, in a prelude to elaboration of new proposals for what has become
the formula of the Economic Partnership Agreement (EPA), had given a signal in its Green
Paper (discussed in this Guide) that it had not been satisfied that the provisions of the Lomé
Conventions, providing access to the non-agricultural sector of the EU economy, had been
appropriately made use of. The EU observed that the extensive aid provided to ACP countries
over the years had not resulted in sustained structural adjustment of their economies.
The EU, now reaching into South and Central America in search of new markets and new
locations for investment (through the establishment of free trade areas), is conscious that in
doing so, it is required to conform to the disciplines attached to such trading arrangements,
particularly those relating to the principles of reciprocity. It was therefore but a matter of
time before the EU was to insist that reciprocity – mutual opening of markets - should
underlie any new trading arrangement between itself and the ACP countries, irrespective of size
of economy. And in turn Caribbean countries have felt compelled to raise the battle cry of the
need for deliberate differentiation based on size and level of economy through mechanisms
of special and differential treatment.
As the writer indicates this is a discussion now in progress, and we are left to see what
the translation of reciprocity into rules and regulations means for these self-categorized
small-island developing countries (SIDS) in addition to the larger mainland producers of sugar
(Guyana and Belize) and of bananas (Belize).
In a sense, in this process the ball is now squarely in the court of the ACP countries –
specifically the Caribbean states. For it is recognized that our negotiations for an EPA will not
be diplomatically “mediated” by the United Kingdom in any substantial sense as were our
negotiations towards the 1975 Lomé Convention. And that, further, our states cannot have the
attention of the “traditional” European member states of the EU as they struggle with their
new venture of simultaneous deepening and widening of their own internal market involving
states with even less empathy for our objectives than the block of “liberalizing-inclined” EC
states in the 1990’s.
This raises an issue which goes beyond the reach of this Guide: the need to search for
new diplomatic allies in the difficult situation where differences of orientation among
developing countries themselves are tending to become evident – witness the stand of
Guyana’s neighbour Brazil on the sugar issue.
A further issue raised is that of the translation of the demand for assistance within the
structure of a new EPA into efforts conducive to encouraging structural adjustment and
sustainable development. The writer stresses the need for the detailed programming of EU
funded projects to coincide with European expectations of visible progress in the structures
of our economies.
These issues are being negotiated at the Caricom regional level, and should presume an
effective single economic space to meet the need for diversification on the basis of scale
adequate to meet the demands of the competitive environment, and to permit diversification
of economic activities and therefore exports.
Charting a new course
The OECS countries have recognized the need to systematically travel the road to some
form of economic union and creation of a single economic space. The urgent question now is
what form is the larger system to take in terms of creation of a Caricom single economic space,
and the extent to which this is necessary to give the OECS countries a stronger base for
economic diversification, or will affect their own process of economic union.
This internal discussion needs to take place with some deliberation within our sub-Region
at this time. As the author emphasizes, it requires extensive technical and financial resources.

5
 It is a prerequisite for adapting to both the new environments of the EU and the emerging free
trade area agreements in our Hemisphere.
The European Union is presently carrying out an experiment related to the adjustment of
its new members of Eastern Europe, which in a sense speaks to the issue of the arrangements
between lesser and more developed countries. As we approach them in our negotiations they
will see us in constant comparison with their own circumstances, and match our progress against
those circumstances.
The insistence in the EU Green Paper on the need for more appropriate utilization of aid
funds will undoubtedly remain a significant part of European diplomacy, and a condition of the
success of our own diplomacy.And our success in this sphere will undoubtedly influence the
nature of the relations that we work out in this Hemisphere as the United States pushes
relentlessly on towards the creation of a free trade area, or a multiplicity of free trade areas here.

6
 FOREWORD
In an environment governed by global trade rules with a capacity for determining the
economic and social progress of small states vulnerable to change, trade matters have within
the OECS States become the business of everyone. This is particularly true for students about
to enter a world of business which demands knowledge of such issues.

Under an assistance Programme designed to Strengthen the capacity of the OECS sub-region
to better participate within the regional integration and wider multilateral trade agreement
processes, the OECS Trade Policy Project, funded by the Canadian International Development
Agency, included in its activities an awareness component intended to create a general
climate of understanding of the trade issues which will need to be addressed in this context.

It is against this background that an allocation of resources from the awareness component
of the CIDA/OECS Trade Policy Project was directed by the OECS Secretariat towards the
preparation of this trade policy guide which, while specifically targeted at tertiary school
students, is hoped will be found usefully informative by a wider public.

Dr. Len Ishmael

Director General
OECS Secretariat

7
 Table of Contents

Glossary .................................................................................................................................................................................... 10
Introduction .................................................................................................................................................................................... 13
Section 1 TRADING SYSTEMS........................................................................................................................................... 15
Chapter 1 ECONOMIC INTEGRATION IN THE CARIBBEAN.................................................................................15
1.1 THE OECS................................................................................................................................................................ 15
1.2 THE CARICOM AND THE CSME.....................................................................................................................15
1.2.1 Creating the CSME................................................................................................................................................16
1.3 HOW DO THE SINGLE MARKET AND THE SINGLE ECONOMY WORK ?...................................18
1.3.1 What is in the CSME for the OECS ?........................................................................................................... 18
Chapter 2 BILATERAL / BI-REGIONAL TRADING ARRANGEMENTS...............................................................21
2.1 ECONOMIC PARTNERSHIP WITH EUROPE...............................................................................................22
2.1.1 The EPA negotiations and their policy context...................................................................................... 22
2.1.2 Background to EPAs.............................................................................................................................................23
2.1.3 What is the EPA?....................................................................................................................................................24
2.1.4 Criticism of EPAs...................................................................................................................................................24
2.1.5 Issues in the EPA negotiations.........................................................................................................................25
2.1.6 Matching up the two sides.............................................................................................................................. 27
2.1.7 Stop EPAs ?.............................................................................................................................................................. 28
2.2 FREE TRADE AREA OF THE AMERICAS.......................................................................................................28
2.2.1 Prospects and challenges..................................................................................................................................28
2.3 BILATERAL TRADE AGREEMENTS................................................................................................................. 29
Chapter 3 A MULTILATERAL ALTERNATIVE - THE WTO........................................................................................30
3.1 ORIGINS AND EVOLUTION............................................................................................................................ 30
3.2 MULTILATERAL PRINCIPLES.............................................................................................................................30
3.2.1 The system.............................................................................................................................................................. 31
3.3 THE URUGUAY ROUND AND THE BIRTH OF THE WTO.................................................................... 32
3.4 THE WTO’S DISPUTE SETTLEMENT MECHANISM................................................................................. 32
3.4.1 The process............................................................................................................................................................. 33
3.4.2 OECS Participation in Panel Disputes.......................................................................................................... 33
3.5 THE WTO DOHA DEVELOPMENT AGENDA (DDA)................................................................................33
3.5.1 Small Vulnerable Economies............................................................................................................................34
Section 2 THE OECS EXPERIENCE ....................................................................................................................................36
Chapter 4 BANANAS –THE FIGHT FOR THE EU MARKET.....................................................................................36
4.1.1 The Banana Dispute.............................................................................................................................................37
4.1.2 The role of diplomacy........................................................................................................................................38
4.1.3 Resolution of the dispute and subsequent reforms..............................................................................39
4.1.4 Consequences for the Windwards................................................................................................................39
4.1.5 2004 – EU Enlargement.....................................................................................................................................40
4.1.6 More recent threats: Arbitration and the abolition of quotas.........................................................41
4.1.7 The CARICOM-OECS position........................................................................................................................41
4.1.8 Beyond Cotonou.................................................................................................................................................. 42
4.1.9 Charting a course for the future....................................................................................................................42
Chapter 5 SUGAR...................................................................................................................................................................... 44
5.1.1 The Sugar Protocol.............................................................................................................................................. 44
5.1.2 Threats to the Protocol..................................................................................................................................... 44
5.1.3 Reforming the EU Common Market Organisation for Sugar............................................................. 45
5.1.4 Consequences for the Sugar Protocol Members.................................................................................... 46
5.1.5 Securing and using financial support...........................................................................................................46
5.1.6 What future for sugar ?......................................................................................................................................47

8
Chapter 6 TOURISM AND OTHER SERVICES - THE ISSUES IN MULTILATERAL NEGOTIATION.........50
6.1.1 What are the OECS’ interests ?....................................................................................................................... 50
6.1.2 Tourism.......................................................................................................................................................................52
6.1.3 Financial services...................................................................................................................................................53
6.1.4 Information and communication technology (ICT)................................................................................53
6.1.5 Mode 4...................................................................................................................................................................... 54
6.1.6 Other negotiating aims.......................................................................................................................................54
Section 3 THE WAY FORWARD......................................................................................................................................... 55
Chapter 7 ADOPTING NEW APPROACHES................................................................................................................... 55
7.1 DIVERSIFICATION AND DEVELOPMENT......................................................................................................55
7.1.1 A role for the private sector............................................................................................................................ 55
7.1.2 The experience of external support............................................................................................................ 57
7.1.3 Was the support effective ?.............................................................................................................................57
7.2 TRADE AND ENVIRONMENT........................................................................................................................... 58
7.3 NEGOTIATION- USING TRADE DIPLOMACY TO ADVANCE NATIONAL/REGIONAL GOALS....60

Further reading ..................................................................................................................................................................................... 63

List of tables

Table 1 Supplies of Bananas to the EU 15, 1990-2002 (thousand tonnes).................................................... 36

Table 2 Banana Export Values (fob) (US$ million).................................................................................................. 40
Table 3 Contribution of sugar to employment and foreign exchange.......................................................... 44
Table 4 Projected loss of earnings..................................................................................................................................46

List of boxes

Box 1 The building blocks of the CSME....................................................................................................................20

Box 2 Department for International Development and Department of Trade and Industry Report.. 25
Box 3 UK Parliamentary Report................................................................................................................................... 27
Box 4 Trade policy reviews.............................................................................................................................................31
Box 5 UNCTAD.................................................................................................................................................................... 34
Box 6 The problem of different production costs between the ACP and Latin America.................. 37
Box 7 CommonFund for Commodities..................................................................................................................... 47
Box 8 Rum............................................................................................................................................................................. 48
Box 9 Making Trade Policy..............................................................................................................................................49
Box 10 The International Trade Centre.......................................................................................................................58
Box 11 Millenium Development Goals (MDGs)..................................................................................................... 59

List of figures and charts

Figure 1. Merchandise trade in the OECS, 2004.........................................................................................................14

Figure 2. The position of the OECS within the global trading system.............................................................21
Figure 3. Average free on board (fob) prices, 1999.................................................................................................... 37
Figure 4. Number of active banana growers in the Windward Islands, 1993-2001, thousands.............. 39
Figure 5. Export values for bananas fob, 1991-2002, $US million....................................................................... 40
Figure 6. Services Trade of the OECS, 2003.................................................................................................................51
Figure 7. Tourist arrivals in the OECS, 2004 (thousands)........................................................................................52
Figure 8. Estim. value of expenditure, EC$ m, 2004.................................................................................................53
Figure 9. Estim. % total tourist expenditure, 2004................................................................................................... 53

9
 GLOSSARY
Adjustment Assistance: The financial and technical support
provided for States, firms, workers and communities to help
them adapt to and function satisfactorily in conditions of
increased competition for their products in overseas and/or
domestic markets. This assistance can include help to
Governments to devise alternative revenue collection
mechanisms to replace duties lost as a result of their reduction
or elimination of tariffs on imported goods.
Appellate Body: The WTO group that hears appeals against the
conclusions of Dispute Settlement Panels.
Asymmetry in the Trade Agreement: The treatment of the sides
in a trading arrangement where the rate of tariff reduction
undertaken by the Parties is different, or asymmetrical. One
Party could be given a longer time compared to the other for
completing the process. Alternately, a lesser percentage of its
total imports could be subjected to tariff reduction and elimination,
and also, different obligations on the rate or extent of removal
of other barriers to trade could apply.
Barriers to trade - (tariff and non-tariff): Restrictions placed by
governments on imports that take the form of customs duties,
charges, limitations on the volume and other measures, which
are not borne by domestic products. These barriers can have the
effect of making imports more expensive and/or reducing their
volume.
Beggar-thy-Neighbour Policy (Protectionism): A country
seeking to strengthen the competitive position of its domestic
production vis-à-vis imports through discouraging imports with
high tariffs and other measures that restrict imports. The imagery stems
from a side effect of the policy that exporters could lose the
market and might well be impoverished.
Bilateral: Negotiations, agreements or understandings between
two countries.
Binding: When countries agree in the WTO not to increase the
rate of duty on a particular item imported from other Members,
the rate is “bound”. The country cannot then charge duties at
rates higher than the bound level; it would be violating the rules
and action could be taken against it. There are, however, provisions
for it to subsequently negotiate for increases in its tariff rate.
A country is free to charge (apply) a lower rate of duty.
Bretton Woods Institutions: The collective name for the
International Monetary Fund and the World Bank. Named after
the town in New Hampshire in the US where they were created
in 1944.
Caribbean Single Market and Economy: The single economic
space among members of CARICOM in which there are no
restrictions on the free movement of goods, services, labour and
capital.
Commodities: Widely traded bulk goods, often unprocessed and
homogeneous.
10
Commodity Protocols: The ACP-EU Agreements contain special
arrangements regarding ACP trade in specific commodities like
sugar and bananas. The aim is to provide additional provisions to
the ACP that will support development and remunerative trade
of these commodities.
Common Agriculture Policy (CAP): The unified system operated
by EU countries for conducting their agricultural programmes
and policies that are based principally on price supports or subsidies
and production quotas.
Common External Tariff (CET): The schedule or list of import
duties applied by all Members of a common market on imports
from non-member countries.
Comparative Advantage: The international trading system is
based on this principle first elaborated in 1817 by the economist
David Ricardo that a country should produce and export those
goods and services in which it is most competitive internationally
and import to satisfy its needs for those that it does not produce.
Concessions: In negotiations, countries offer to reduce tariffs or
other trade barriers, in exchange for, or to induce similar action
from their trading partners.
Consensus (decision making): Agreement is reached when there
is no continuing objection by any participating member of the
decision making group. This is in contrast with unanimity where
agreement of all participants is actually ascertained.
Contracting Party: A country that signed the GATT and
accepted its obligations and benefits.
Discrimination: Providing more favourable tariff or other
treatment for goods and services imported from particular
countries as opposed to others.
Dispute Settlement Body: The grouping of representatives of all
WTO Members that administers WTO rules, establishes Panels to
adjudicate disputes and authorises punitive measures for countries
that violate the rules.
Diversification: Expanding the foundations of the economy to a
wider range of production beyond reliance on a single or a narrow
range of goods and services. This improves the prospects for
economic growth and development.
Erosion of Preferences: As importing countries reduce tariffs
because of liberalisation, the advantages enjoyed by their sup-
pliers with duty-free or reduced duty privileges are cut back.
Everything but Arms Initiative: The package first offered to
LDCs in 2001 in which Developed Countries and now Developing
Countries in a position to offer it, are encouraged to grant pro-
ducts from LDCs unrestricted entry to their own markets by
removing duties and quotas on all imports except for arms and
ammunition.
Export subsidies: Payments by government to domestic exporters
of goods and services. Such payments enable foreign sales to be
at lower prices; hence they are more competitive than they
would otherwise have been. The WTO therefore considers that
such subsidies change trade patterns and distort trade.
Factors of Production: According to economic thinking: land,
labour and capital.
Fairtrade: The production and marketing of goods according to
stipulated criteria regarding working conditions, welfare of
workers, acceptable environmental standards and the provision
of fair returns to producers.
Free Trade: The ultimate theoretical goal where there are no
governmental barriers to international trade in the form of tariffs
and other barriers to goods and services entering the country.
Free Trade Area (FTA): A cooperative arrangement among a
group of countries to remove tariffs and trade restrictions
among themselves, but they keep their individual tariffs on
imports from outside the area. CARIFTA was a Free Trade Area.
Generalised System of Preferences (GSP): A system under
which tariffs applied by developed countries on certain imports
from developing countries are reduced or eliminated on the
basis of agreed conditions.
Gross Domestic Product (GDP): The total value of new goods
and services produced in a country during a given year.
Import quota : The maximum quantity or value of a particular
product allowed to enter a country during a specified time period.
Least Developed Countries (LDCs): These are countries classified
by the UN on the basis of a range of criteria, principally their per
capita income below $900 per annum. According to that criterion,
none of the OECS countries are LDCs. The only LDC in the
Americas is Haiti. LDCs are eligible for special trading privileges
including the Everything but Arms initiative (EBA).
Less Developed Countries (LDCs): CARICOM designates the
OECS and Belize as LDCs in view of their small size, narrow
resource base and low level of development. This designation
makes them eligible for special support measures within CARICOM.
Liberalisation: An underlying principle of the WTO and the earlier
GATT that seeks the reduction and eventual elimination of tariffs
and other measures that impede trade.
Licensing: When Governments limit the volume of imports of a
certain product they might grant permits or licenses to importers
that provide them with approval, whether or not in a physical
document, that grants them rights to import. Often specific
conditions are stipulated. Licensing can also be operated for
exports.
Market Access: The availability of a national market to exporting
countries.
Mercantilism: The now discredited policy of the pursuit of trade
surplus and the accumulation of monetary assets by promoting
exportation and discouraging importation.
Mode 4: The temporary relocation of workers to another country
where they are employed to provide a service. The farm worker
programmes with the US and with Canada are examples.
Most Favoured Nation (treatment): A cardinal principle of the
Multilateral Trading System is that a country will automatically
apply to all WTO Members the lowest tariffs or reductions it
applies on imports from any source, whether another WTO
member or not. Exceptions to this rule are possible, e.g. in FTAs.
Multilateral: Negotiations, agreements or understandings
among several countries or groupings.
Multilateral Trade Negotiations: These negotiations among all
WTO Members (previously GATT Contracting Parties) have been
held at intervals to advance the attainment of the objectives of
the WTO and are referred to as “rounds”. The current round is
called the Doha Development Agenda (DDA) or Doha Round.
National Treatment: The commitment to treat foreign products,
sellers, businesses and those who provide services the same as
domestic counterparts.
Non- Tariff Barriers (NTBs): These are measures, other than
import duties, taken by a government, that impose limitations on
or impede imports. They can range from outright import
prohibitions to onerous quality standards and labelling
requirements.
Preferences: Advantages extended to imports from selected
trading partners in the form of lower or zero tariffs or exemption
from certain NTBs.
Quantitative Restrictions (QRs): The limitation of the import
volume of specific products from the rest of the world or from
specific countries.
Quota Rent: When the importation of a particular product is
limited by a quota, the restriction can sometimes lead to a
scarcity that increases prices in the import market. The quota
rent is the difference between the domestic price (net of the
import tariff) and the world price. This value may be obtained by
the exporters, importers or distributors or shared among them.
Reciprocity: This is the principle that generally guides trade
negotiations; where a country awards trade concessions, they are
matched by the provision of equivalent advantages in exchange.
Rule/s of Origin: The criterion that determines whether a
particular item was produced in a country e.g. the production
process or the amount of value added locally.
Sanitary and Phytosanitary Import Measures: Controls and
restrictions placed on imports, to protect human, animal and
plant health.
Single Undertaking: The requirement in a trade negotiation to
accept the entire package rather than just particular elements of
the agreement.
Special and Differential Treatment: The principle that the
award of benefits to developing countries and the demands
made of them should be in keeping with their trade, financial
and development needs and capacity.
11
Supply-side Constraints: New trading opportunities cannot
always be taken up by a country because it is unable to increase
its competitive production due to a number of reasons
(constraints) such as insufficiency of investment, lack of the
required skilled labour, inappropriate public policy framework,
limited land space, etc.
Tariff: A tax on imports. This might be charged as a percentage
of the value of the product (ad valorem) or a fixed charge per
unit (specific).
Tariff-Rate-Quota (TRQ): The application of a different tariff on
imports of the same item with the higher rate levied on imports
above a certain volume. This can have the same practical effect
as a QR where the upper rate is so high that the imports on
which it is charged would be made too expensive and therefore
unsaleable with the result that imports do not actually take
place. (The TRQ device became quite widespread in the
mid-1990’s when WTO Members were required to end QRs on
agricultural products and resorted to it in order to effectively
retain their prohibition on imports beyond set levels, whilst
ostensibly complying with the rules).
The Singapore Issues: Investment, competition policy,
transparency in government procurement and trade facilitation
were four subjects that Trade Ministers meeting in Singapore in
1996 decided should be studied by the WTO.
12
Trade Diversion: The redirection of trade flows as a result of
providing preferences to less efficient trading partners. Goods
might be sourced from them because the trade preference could
make them competitive with the more efficient exporters.
Trade Facilitation: Reducing red tape and inefficient
administrative procedures so as to enable goods to be imported
and exported more easily, quickly and possibly cheaply.
Vulnerability: The frequency and intensity with which a country
is exposed to negative environmental events and other disasters
and the extent of damage caused. A country can also be
vulnerable to adverse economic developments from abroad such
as a loss of export markets, decline in prices etc. The narrower the
production and export base the more vulnerable the country.
Waiver: The authorisation granted by the WTO to a Member
permitting it to deviate from legally binding agreements or
obligations.
WTO-Compatible: An agreement, policy or practice that is in
keeping with the rules of the WTO. Trade arrangements,
agreements and policies of WTO Members are supposed to
conform with its rules.
Now I know what all
these big words mean
 Introduction
The world of international trade can appear abstract and far removed from everyday
life. The very terms used, the WTO, the FTAA, the CSME, might seem designed to mystify
rather than enlighten. Many people are therefore content to ignore trade negotiations,
disputes and agreements, viewing those matters as concerning only Governments and big
businesses. Increasingly, however, these processes are defining not only commercial and trading
relations among countries, but economic activities within countries themselves. Quite
ominously, they constrain Governments’ flexibility on an increasing range of economic policy
issues.

In the 21st century no country can expect to be an “island unto itself”, shut off from and
indifferent to the outside world. This is nowhere more true than in the OECS countries2,
whose economies have, from the earliest colonial times, been open to and reliant on
international trade. The quality of life of their people, their security and standard of living
have therefore always depended upon the international situation and developments. Rather
than producing for themselves the things that they need, these islands have earned their
livelihood through producing goods for sale abroad; initially a variety of commodities,
ranging from cane sugar, rum and bananas, to light manufactured goods, and now, increasingly,
to the provision of services for foreigners, principally tourism. Their exports of goods have
been principally to Europe, the Caribbean and the USA. Their imports are more varied,
coming from the USA, Japan, Europe, Latin America, China and several other sources. Services
are sold principally to North America and Europe. The income from the sale or export of the
narrow range of goods and services that they produce is used to purchase from abroad
(to import) the diversity of goods and services they consume. Therefore, what happens
internationally affects the lives of everyone locally and is thus of real concern. At the most
basic level it determines what can be sold abroad and sets the prices that can be received and
those to be paid for purchases from abroad.

This publication seeks to demystify the functioning of the trading system and explores
how international regulations impact on the trade and economic life of OECS countries.
It also assesses whether very small countries can have any significant influence on the
international processes that influence their future and whether they can be more than passive
observers while their fate is being determined. Is the international system just a jungle in
which only the fittest can survive and prosper? In the context within which they operate,
economic and political power is important. However, the system is based on rules and
democratic principles, so even the smallest Members can use their voices to safeguard and
advance their interests. The experiences of the Islands over the last decade are used to
examine these issues and questions, and the conclusion that emerges is that under certain
conditions they can actually influence, to their benefit, the course of events.

The first section of this publication assesses the trading position of the OECS, and
reviews the origins of regional economic cooperation and the issues at stake for the OECS
within the Caribbean Single Market and Economy (CSME), the Economic Partnership
Agreement (EPA) with Europe, the Free Trade Area of the Americas (FTAA) and the World Trade
Organisation (WTO). The second section studies the experiences of OECS countries’ principal
foreign exchange earners. It also explores public and private sector roles in diversification and
assesses the environmental considerations in the formulation of trade policy. Finally, drawing
on experience in international negotiations and trade diplomacy, it makes recommendations
regarding approaches to ensuring fuller benefit from the system.

Why participate in the multilateral trading system?

The members of the OECS have no option but to rely on and be open to
the outside world for their survival and prosperity. They do not have the means to produce
even a significant portion of the range of capital and consumer goods that their populations

2
The Membership of the Organization of Eastern Caribbean States (OECS) comprises of Antigua and Barbuda,
Commonwealth of Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines with 13
Anguilla and the British Virgin Islands as associate Members.
 require to maintain the lifestyles that they are accustomed to. (The islands therefore cannot
be self-sufficient). If the goods that they consume are to be obtained from abroad, then
foreign exchange to pay for them must be earned through the countries’ own export of goods
and services. OECS countries therefore have no choice but to trade: they have always been
traders. The trend for OECS countries to import more than they export is illustrated in the
500 following chart that highlights
their trade imbalance.
US $ million

400
They face numerous
300 constraints that make them
particularly vulnerable to shocks
200 from abroad and limit their
development prospects. The most
100 decisive factors are their small
Source : WTO

size, insularity and shortage of

0
natural resources.3 These structural
constraints cannot be overcome
and they combine to make it more
difficult for the Islands to achieve
economies of scale in several
Figure 1. Merchandise trade in the OECS, 2004 areas of production at the same
time. As a result, they have relied
on mono-crop (or single industry) production. Economists however warn that a diversified
production base is essential for sustainable development.
It is within their constraints that the islands endeavour to grow and develop. But
domestic policy measures alone will not be sufficient. The international environment, which
is increasingly being shaped by regulations, must be favourable. The questions that they face
are: what should they do, and can their efforts really have any impact?
Consequently, as countries seek to ensure that the conditions in the outside world are
favourable to their economic well being, they work specifically for supportive trade rules and
other regulations. This is the underlying reason why OECS Member States participate in
negotiations, lobbying and economic diplomacy. These activities can be viewed as an essential
complement to, as well as an extension of, domestic and OECS policy aimed at fostering
economic security, growth and development and the improved welfare of their citizens.
The review of the trading system is presented in this guide, in three sections. The first
addresses the regional versus the global approach. In the first chapter it considers the
experiences of cooperation within the OECS and CARICOM and in chapter two, with the EU.
Chapter three examines the evolution and functioning of the World Trade Organisation
(WTO). Section two reviews the actual international engagement of OECS countries from the
perspective of the income generating activities on which their participation in the trading
system is based. The experience of the banana dispute and the reform of the EU market,
reviewed in chapter four offer valuable lessons for small developing countries. The impact on
cane sugar exportation is considered in chapter five. Tourism and services in international
negotiations are analysed in chapter six in an attempt to identify more precisely the interests
and issues at stake. The final section is forward looking, beginning with the case for
diversification in chapter seven, as well as the key role to be played by the private sector. The
necessity for OECS countries to incorporate their environmental interests and concerns into
the formulation of their national economic policies is also considered in the final chapter. It
ends by drawing on OECS experiences and those of the writer to suggest how small countries
can use trade negotiation and diplomacy to secure and advance their trading interests.

3
Conclusion of the World Bank in its Report No. 31725-LAC “A Time to Choose - Caribbean Development in the
14 21st century” 26 April 2005.
Tell me why
I should bother
 Trading Systems
Section
•The bilateral/bi-regional vs.
the multilateral approach
•OECS/CARICOM/CSME
•ACP/EU & FTAA
1
C
•The WTO
hapter 1
Economic Integration in the Caribbean

1.1 The OECS

Working together in the Eastern Caribbean is quite understandable; proximity and small
size make a compelling case for economic and institutional integration. Collaborating
amongst themselves can promote efficiency and optimize the benefits of scarce human,
institutional and other resources. This no doubt is the reason why historically, these neighbouring
islands have shared institutions 4. The 1932 Closer Union Commission appointed by the British
Government, proposed a Federation of all the Leeward and Windward Islands. This did not
materialize but in 1938, the Moyne Commission repeated this suggestion. Not surprisingly, no
progress was made during the World War that began in the following year.
The Leeward and Windward Islands have always had a strong desire for cooperation
both within the wider Caribbean grouping and among themselves. They all joined the 1967
Caribbean Free Trade Area (CARIFTA) but even before that, had set out to pursue closer
coordination and integration among themselves. In the previous year, 1966, they created the
West Indies Associated States Council of Ministers (WISA) to administer various common
services. It met at the level of Heads of Government and had a small secretariat. Then one
year after WISA, the Heads decided on a more ambitious programme of economic integration,
the East Caribbean Common Market (ECCM). This was to be a mechanism to further the
islands’ harmonious economic growth and development, improved standard of living and
their closer economic relations. Specifically, they committed themselves to eliminating
import duties and restrictions on trade amongst themselves; introduction of free movement
of persons, services and capital, the coordination of currency and financial policies (they
already shared a common currency); harmonisation of tax and incentive legislation, cooperation
in transport and communications and agricultural policy. With their Common External Tariff
(CET), single currency, judiciary and civil aviation authority, the islands would successfully
operate a parallel but more advanced and closer unit within the broader regional integration
grouping.
When most of the islands had attained political independence from the United
Kingdom, they decided to replace WISA by a unified institution backed by a treaty. This was
the Organisation of Eastern Caribbean States (OECS), inaugurated on 18th June 1981 with the
signing of the Treaty of Basseterre. The mandate of WISA was subsumed within the OECS,
which expanded its scope to broader political cooperation and security issues, collaboration
in the purchase of pharmaceuticals and formalised its joint overseas diplomatic representation.
The ECCM agreement was annexed to the OECS Treaty so that their Common Market continued
even within the wider Caribbean Common Market.
Integration among the Windward and Leeward Islands has always been a step ahead of
that in the wider Caribbean region, but their full participation in the Caribbean “family of
nations”, has also played a central role in the national policy of OECS countries.
1.2 CARICOM and the CSME
The Leeward and Windward Islands had always pursued closer union among themselves
in parallel with their ambitions for broader Caribbean unity. The following paragraphs trace
the origins and changing nature of that wider relationship.

4
The Leeward Islands actually had a Federal Government from 1871-1956.
One for all
and all for one!
15
 Evidence can be found of aspirations for Caribbean integration early in the last century.
This desire was based on a widespread notion of a West Indian identity characterised by
Norman Manley who said at the 1947 Caribbean Labour Conference: “Wherever there is an
assembly of West Indians…you feel at home and as one…. The sense of unity in the West Indies…
is so powerful and so rapidly growing today that the minor historical differences are irrelevant
in the face of innumerable common ties.” Complementing this sense of identity was the
recognition that on their own, Caribbean entities are too small to set and effectively pursue
their own agendas particularly with respect to economic development and improved welfare
of their populations.

It was a desire to work together to improve prospects for economic success that
prompted the current phase of Caribbean integration. Its actual conception can be traced to
the meeting of West Indian leaders in Montego Bay in 1947 that formally explored the idea
of “the closer association of the British West Indian colonies”. This meeting of Caribbean leaders
actually predated the 1951 Coal and Steel Community, which was the predecessor to the
European Common Market. The aspirations and ideas of unity eventually materialised in the
form of the West Indian Federation. By 1962, however, the Federation collapsed after Jamaica
and then Trinidad and Tobago withdrew, proceeding to political independence on their own.
A last ditch attempt to persevere with a union of just the Leeward and Windward Islands and
Barbados, the “Little Eight”, failed.

Five years later, a fundamentally different approach was embarked upon: the 1967
Caribbean Free Trade Area (CARIFTA), which lifted duties on goods being traded within the
Region. It is from this initiative that the origins of the CSME can be traced, though its direct
institutional precursor was the 1973 Caribbean Community and Common Market (CARICOM).

CARICOM was a major advance from CARIFTA, taken to strengthen the coordination
and regulation of economic and trading relations among Members in order to advance their
balanced development. The mandate of CARICOM institutions and the harmonisation of
national regulations, however, stopped well short of the creation of a genuine single market.
This, though, was not for lack of ambition. Caribbean economic integration was an unpredictable
process conducted without the benefit of similar models or earlier experiences among small
developing countries. Forbes Burnham, the then Prime Minister of Guyana, summarised
the realism of Caribbean leaders when he said at the 1967 Conference of the Heads of
Government of the Commonwealth Caribbean: “we cannot start off with some ideal or perfect
arrangement. Neither can we hope to be so prescient of the future as to be able to determine
all the consequences and difficulties of integration… This is the naked truth, either we integrate,
or we perish, unwept, unhonoured.” When CARIFTA was born and later gave way to CARICOM,
there was no detailed or rigid road map and timetable but leaders had a very clear vision of
the direction in which they would steer the region.

Such clarity among Caribbean Governments of the ultimate goal of regional integration
was the critical factor in its evolution and survival. Having an agreed destination but with
flexibility as to the “route and pace of travel” might well have assisted the region in surviving
its most difficult period from 1975-1982. With their economies reeling from the impact of the
global petroleum crises and many saddled with unmanageable debt, balance of payment
problems and the region embroiled in the ideological conflict spawned by the Cold War,
progress in regional integration was “left on hold”, but never abandoned.

The stalemate came to an end at the Ocho Rios Summit in 1982 and the integration
movement got back on track. By 1989, at their Summit in Grenada, CARICOM Heads decided
to establish the Caribbean Single Market and Economy (CSME) in order “to deepen the
integration process and strengthen the Caribbean community in all its dimensions”. They envisaged
a single market that would allow the free flow of goods, services, people and capital across
borders without tariff or other barriers or restrictions. They expected that it would permit
the coordination and harmonisation of national economic policies covering foreign exchange
and interest rates, taxation and currency policies among Caribbean countries.

That was We are all

one long road on it though!
16
1.2.1 Creating the CSME

The CSME was built on an institutional base already created by CARICOM. To appreciate
the scope and nature of the change, it is necessary therefore to recognise what was already
in place. The 1973 Treaty establishing CARICOM committed its Members to the removal of
restrictions on intra-regional trade in goods. Under Articles 15, 17, 18, 20 and 21, they agreed,
with certain exceptions, to remove import duties and other restrictions on goods produced
in other Member countries. They also decided to apply the same level of duty on the goods
that they imported from non-CARICOM sources and to co-ordinate economic policy more
fully and effectively.
The initial aims of the Treaty with respect to the free movement of capital and labour
were quite limited. In the case of capital, it was simply “to examine” the introduction of a
scheme that regulated movement, whilst the Treaty explicitly excluded any requirement for
permitting the free movement of persons. Having just free movement of goods but not of
capital and labour meant that CARICOM could not be a full common market.
Work however continued on achieving the objective of creating a genuine common
market and the Treaty was revised on 5th July 2001. Countries for the first time committed
themselves to the goal of free movement of labour and agreed to the immediate removal of
restrictions on the free movement of certain categories of workers. In a fundamental shift
from the original CARICOM Treaty, they now agreed in Article 46 paragraph 3 that the revised
Treaty should not inhibit Member States from permitting free entry of persons from the
rest of CARICOM5. This distinction was not of mere semantic significance but reflected a
fundamental shift in labour migration policy between 1973 and 2001.
Progress was also made with respect to the movement of capital. In a real common
market, funds must be able to flow freely for investment and for payment of goods and services.
CARICOM States agreed in 2001 not to impose any new restrictions on the movement of
capital (Art. 39) and in Art. 40, they agreed to the removal of all restrictions on the movement
of capital and current payments.
The other key area of liberalisation, which had been largely ignored in the original
Treaty, was that of services. Here, restrictions were to be lifted on the establishment of
businesses by nationals and firms from other CARICOM States. Persons travelling to other
Member States to provide paid services would not be restricted and steps would be taken
to develop common standards and recognition of qualifications.
The Treaty Revision of 2001 achieved two critical objectives:
- It extended the scope of CARICOM to include the free movement of capital and
of labour and to liberalise the trade in services; and
- It enshrined the principle of “national treatment” in all areas. Goods, services, capital
and labour were not merely to be given preferential treatment to those originating from outside
of the region but treatment that is not less favourable than that given to local counterparts.

5
The original Treaty (Art.38) had explicitly stated that countries would not be required to grant free movement.
17
 The revised Treaty though, would not itself create the Single Market and Economy. The
Governments’ mere agreement to grant certain freedoms and promises to carry out measures
do not make them happen; additional institutional and administrative measures would also
need to be taken. Most importantly, domestic laws and regulations might need to be passed
for certain of the arrangements to be implementable and enforceable within each country.
1.3 How do the Single Market and the Single Economy work ?
The two components of the CSME are explained separately. Firstly the Single Market: it
allows goods, services, people and capital to move among the participating countries
without any restrictions at the border. The Single Economy on the other hand, seeks to
harmonise economic, monetary and fiscal policies and measures in an attempt to have
region-wide policies in those areas. It is expected that foreign exchange and interest rate policies,
tax regimes and certain laws will be coordinated and harmonised6.
1.3.1 What is in the SME for the OECS ?
The idea from the outset of Caribbean economic integration was for the eventual
creation of a genuine Common Market, foreseen under the CARIFTA agreement as “a viable
community of Caribbean Territories”. In 1974 what the Leeward and Windward Islands joined
Courtesy WINFA

was however only a partial Common Market but which they all expected would be completed
eventually. In joining they would grow and
develop as part of the “viable community”
with their neighbours. The 2006 CSME is
really a stage (albeit a crucial one) in
Caribbean regional integration rather than
the completion of a process. The question
to be addressed is: having already largely
achieved free movement of goods is there
anything that is substantially new for OECS
countries ?
First, what is the theoretical case? The
economic justification of the CSME is
founded on classical economic principles of
the gains from expansion of economic size, freedom of trade and competition. OECS
countries expect to build on the benefits of economic integration in various ways including
having a larger market for their domestic goods and services. Instead of being limited to their
home island, they have free access to the wider regional market. Hence, production that
would otherwise not have been possible, can take place because of the expanded consumer
base.
Removal of restrictions on capital flows should contribute to more optimal decision
making on the location of investment as well as the pooling of regional resources with the
effect of increasing the impact of investment and promoting competition or the consolidation
of regional firms. Similarly freedom of movement of workers should promote flexibility of
the labour markets and make for more efficient use of the region’s pool of skills.
But will this yield concrete benefit? Of course OECS countries do not have as extensive
a range and volume of products available for export as the more developed countries (the
MDCs) in the region, hence, the trade benefits of the CSME both intra-regionally and extra-
regionally might be disproportionately shared out.
In a speech delivered in November 2005, the Barbados’ Prime Minister pointed out that
inequality among Members of the grouping could lead to fragmentation. It was agreed
therefore that a cohesion fund would be made available for the LDCs (OECS and Belize) that
would provide them with financial and technical assistance to help them catch up.
The other means through which the CSME is intended to benefit the OECS is via enhanced
functional co-operation among the countries and stronger positions in external negotiations.

6
“Deepening Caribbean Integration: Barbados in the CSME.”A production of the Ministry of Foreign Affairs & Foreign Trade
18 of Barbados.
The realisation of benefits in these areas will depend on a number of factors, including the
appropriateness of the actual joint regional policies and the adequacy of their incorporation
as well as the reconciliation of the interests of all Members. The benefit for the OECS
countries would therefore depend on the effectiveness of their participation in regional
policy formulation.
The ability of the grouping to articulate joint positions is expected to secure greater
external influence and benefits for CARICOM. However for joint negotiations to actually lead
to better outcomes for the individual countries, the following features must characterise the
development and articulation of regional positions:
- Adequacy of incorporation and reconciliation of the interests of all countries and
full national involvement, transparency in decision-making and effective monitoring
and oversight.
- Certainty of full and consistent support by all Members for the regionally agreed
positions.
- Full accountability by spokespersons, whether or not they are representatives of
governments or institutions.
- Competent and effective articulation, negotiation and advancement of positions.
For a regional approach to negotiations to be of greater effectiveness than the individual
country approach, the individual States would need to continue to be actively involved in the
process so that they could contribute to the attainment of the negotiating aims through
their continued political backing and support.
January 2006 marked a crucial milestone in the integration of the Caribbean. It was not
the conclusion but rather work in progress on the construction project that was set in train
in 1973. It also represented the coming to fruition of a much earlier Caribbean dream of a single
economic space in the region. The case for the CSME ultimately rests on its ability to improve
regional welfare through the removal of barriers to allow the free flow of goods, services,
capital and labour within the region that is expected to lead to greater efficiency of production,
thus enhancing international competitiveness. The CSME is therefore expected to provide a
boost to economic development of the participating states.
On the 30th January 2006 only Barbados, Belize, Guyana, Jamaica, Surinam and Trinidad
and Tobago signed the instruments and formal declaration launching the CSME, but its
Membership will eventually increase. The OECS group of countries has indicated that they
will join by 30th June 2006, when all their Members would be ready. Montserrat, as a British
dependency, requires an “instrument of entrustment” from the UK in order to join.

There must be something

in it for all of us.

19
 The building blocks of the CSME
Box 1
The transition from a Common Market to a Single Market and Economy was made possible
by amendments to the CARICOM Treaty that centred on nine new elements or Protocols having legal force
within each CARICOM State that, in certain cases, require changes to domestic legislation. They are:
Management
New Community organs7 and institutions have been gradually introduced in recent years, intended to make
the functioning of the community more efficient. New procedures were also agreed upon, a most notable one
has been the replacement of the unanimity rule by qualified majority voting, except for decisions by the Heads
of Government where it has been retained.
Right of establishment, provision of services and movement of capital
This Protocol creates a regime for trade and services that will facilitate investment by businesses and persons
in other Member States as well as the free movement of services, capital and selected categories of labour.
This will have the most dramatic impact on business since it will ensure that CARICOM citizens and businesses will,
with few exceptions, be able to establish in any country and enjoy the same treatment as locals. The complete
removal of certain of the restrictions such as the free movement of all categories of labour, as well as common
education standards and mutual recognition of certificates/qualifications is to be achieved over time.
Industrial Policy
This Protocol harmonises industrial policy and seeks to promote industrial production through integration and
the establishment of enterprises with branches, subsidiaries or joint ventures in more than one Member State.
A key instrument of this Protocol that will stimulate intra-regional investment is the Regional Double Taxation
Agreement. In order to improve the quality of goods and provide a basis for regional participation in
international standard-setting negotiations, the CARICOM Regional Organisation for Standards and Quality
(CROSQ) has been established.
Trade Policy
This Protocol builds upon and consolidates existing provisions such as the CET, rules of origin and customs
cooperation that are aimed at enabling the free movement of goods by removing all tariff and non-tariff barriers.
Agriculture
The aim here is to strengthen and upgrade cooperation in diversification and transformation of the agricultural
sectors in keeping with Member State goals of greater efficiency in production and marketing, employment,
poverty alleviation and Food Security.
Transport policy
Member States commit themselves to cooperate in the development of enhanced air and maritime transport
systems and the uniform application of regulatory practices among themselves.
Disadvantaged countries
A special regime is provided for disadvantaged countries, regions and sectors that need assistance in
order to become viable. The OECS countries along with Belize and Guyana have, in addition to Haïti, been
designated as “disadvantaged” . They are to benefit from a package of measures including financial assistance
to facilitate their economic adjustment to and full participation in the CSME as well as to provide special
transitional arrangements and a programme to attract investment.
Competition
This Protocol seeks to harmonize legislation on competition policy and fair-trading across the region and to
promote and preserve conditions for competition, as well as promoting and protecting consumer rights.
Disputes
Through this Protocol, a comprehensive system for the settlement of disputes that begins with referral to
good offices, followed by mediation, consultations, conciliation and finally arbitration and adjudication has been
established. The Caribbean Court of Justice has been given compulsory and exclusive jurisdiction to hear and
determine disputes relating to the interpretation of the Treaty.

7
Including “Council for Finance and Planning” (COFAP), Council for Foreign Community Relations” (COFCOR), and “Council
20 for Trade and Economic Development” (COTED).
Together we will
take on the world!
 C hapter 2
Bilateral / Bi-regional Trading Arrangements

Economic integration of the OECS and CARICOM has been against a backdrop of a
deep-rooted sense of Caribbean identity and long-standing aspirations for closer unity, which
was driven by the desire to reap the benefits of the pooling of resources and markets. The
regional experience from WISA/ECCM to OECS, and from the West Indies Federation to
CARICOM and now the CSME, can be understood in terms of these factors. Beyond the
region, however, trade and economic relations are instead generally motivated by the desire
to secure and advance national interests. In interacting with the rest of the world, the question
facing OECS, CARICOM and many countries is what route to follow, should they deal
selectively with other countries or groupings, and seek to develop trade and remove barriers
exclusively among themselves, i.e., bilaterally? Or, should they pursue the multilateral route,
as advocated by the WTO, and remove restrictions on imports from all sources? The two
alternatives are examined in this section.
Although OECS countries have not yet opened up their markets to other countries
beyond CARICOM, they are in the process of negotiating to do so. This chapter reviews those
negotiations and their implications. The multilateral alternative, too, is explored later on. The
choice of which approach or combination of the two should be followed, will have to be
based not on ideological considerations or political pressure, but rather on the sovereign
decision taken by the countries themselves as to what is in their best interests.
Current OECS policy is based more on the bilateral/regional rather than the multilateral
approach. The chart below illustrates the position of the OECS within the global system. It
shows the OECS within CARICOM and maintaining trading arrangements that are currently
non-reciprocal with the EU (Cotonou), set to be replaced by an Economic Partnership
Agreement (EPA) by 1st January 2008. It also indicates their relations with the USA through
the Caribbean Basin Initiative (CBI), and with Canada, via Caribcan, and various bilateral
arrangements with neighbouring countries that are to become reciprocal over time. With the
exception of Cuba, all of these bilateral initiatives can be expected to be superseded by the
Free Trade Area of the Americas (FTAA). The chart shows the OECS and CARICOM falling
within that designated zone. All of the countries operate within the WTO; hence their relations
are subject to its strictures. Then there is the rest of the world, with countries that do not
belong to the WTO such as Russia, Seychelles, and many islands in the Pacific like Vanuatu
and the Cook Islands. In the Caribbean only The Bahamas is not yet a Member of the WTO.

REST OF
THE WORLD

Figure 2. The position of the OECS within the global trading system

So that is
how it works ! 21
 2.1 Economic Partnership with Europe
When the UK joined the European Economic Community (EEC) in 1973, it had to give up
the system of trade preferences that existed throughout the Commonwealth. Under these
arrangements, the Commonwealth had operated as a sort of exclusive trading club where
Members exempted each other’s imports from duties or charged them at rates lower than
those applied on imports from non-Commonwealth countries. At the time, most of the former
French African colonies were in a similar trading arrangement with the EEC, via the Yaoundé
Convention. They were able to export duty-free to the EEC and waived duties on imports
from it (i.e., this was a reciprocal arrangement). Rather than simply seeking to continue the
Yaoundé Convention and having it extended to the ex-British colonies, the two sets of former
colonies banded together to negotiate a radically new trading arrangement and called
themselves the African Caribbean and Pacific Group (ACP).
At a time of great insecurity in global commodity markets and the height of the Cold
War, these countries were able to conclude an arrangement that was based on the principles
of special and differential treatment. The arrangement would provide them with financial
and technical assistance and duty-free entry to the EEC for most of their exports. The ACP
did not have to offer the same facility to the EEC. It was non-reciprocal. This accord adopted
the name of the West African city of Lomé where it was signed in 1975. It lasted for five years
and was renegotiated at regular intervals until the fourth Convention, which entered into
force in 1990 and had a ten-year life.
At the outset OECS countries were not yet independent and were not able to negotiate
the first Lomé Convention that came into effect in 1975. However, because of their political
association with the UK they were able to participate in the trading arrangements and
enjoyed certain benefits. When the various islands achieved independence they were then
able to participate fully in the negotiations with Europe.
With OECS economies so very open to outside influences and their trade and economic
relations extending beyond the confines of the Caribbean region, they are obliged to secure
their economic interests by seeking agreements further afield. So far the relationship with
Europe has been central. Since their independence they have been full Members of the ACP
group of countries and were party to the Lomé trade and aid Conventions, which, in 2000,
were succeeded by the “Cotonou Partnership Agreement”. That relationship has been a
foundation of their participation in international trade. Over the years a major portion of
their exports, principally of agricultural goods, have been exported to the European Union
(EU)8 where they enjoy duty-free entry, whereas competitors often face high duties. In other
words, they enjoyed trading preferences. Also, they have been receiving considerable financial
and technical assistance for their development from the EU, via its various grant and loan
facilities; the National Indicative Programmes (NIP), Regional Indicative Programme (RIP) and
the Stabilisation of Export Earnings (STABEX) which was replaced in 2002 by the Fluctuation
in Export Earnings (FLEX) facility. With other ad hoc programmes like the Special Framework
of Assistance (SFA) for bananas or for rum and the €2.2 billion Investment Fund that is
administered by the European Investment Bank (EIB), the EU is overall the largest single aid
donor to OECS countries.
That link with Europe has been so extensive, enduring and deep-rooted that it sometimes
appears as an integral and permanent fixture of the architecture of the international system
in which the islands operate. However, in reality, there is nothing certain or permanent about
that relationship. Indeed, negotiations are currently ongoing that will fundamentally
refashion their trading dimension.
2.1.1 The EPA negotiations and their policy context
Ever since the signing of the 1st Lomé Convention of 1975, OECS countries have been
able to export to the European Common Market virtually anything that they produce, which
meets the rules of origin9. In certain cases, as with sugar and bananas, special arrangements
provided them with additional support that ensured that this trade was viable and could
actually take place even when the islands might have been producing at much higher cost
than their competitors.

8
The EU replaced the EEC with the signing of Treaty of European Union, at Masstricht in the Netherlands on 7th February
22 1992. We really have been My mother wasn’t
9
See glossary. with these Europeans even born yet !
for a long time.
 The current system, the Cotonou Agreement, under which OECS countries can export
to the EU without having to pay customs duty, expires at the end of 2007. A new trading system
therefore has to be agreed upon to permit OECS countries to continue their duty-free
exports to the EU from 2008. Negotiations that are aimed at replacing the current arrangements
with a new structure for trade and economic relations between Caribbean countries and
Europe are ongoing. It is essential to recognise that despite the negotiations for new
Economic Partnership Agreement (EPA), the current Cotonou Agreement itself has a life of 20
years, expiring by 2020. Therefore the financial aid provided in five-year cycles under the
Financial Protocols is to continue independently of the outcome of these EPA talks. This is
significant since the decision on the EPA can be based on an objective assessment of its own
value rather than a false perception that concluding it is necessary for the safeguarding of
funding from the EU.
Given the tremendous importance to OECS economies of their trade and economic
relations with Europe, the new arrangement will be of major significance for future economic
performance, income and employment. Hence, the negotiations between the ACP and EU,
launched on the 27th September 2002 that will define the new arrangements are of
overwhelming political importance.
While the EPA negotiations have focussed on preparing new WTO-compatible trading10
arrangements aimed at progressively removing barriers to trade and enhancing cooperation
in all areas relevant to trade, their agreed objectives are broader and rooted in the wider
development objectives of the Cotonou Agreement. These are the reduction and eventual
elimination of poverty in ACP countries, the promotion of sustainable development and, as
a tool for achieving these objectives, the progressive integration of ACP countries into the
world economy.
A clear appreciation of the background and broader context of these negotiations on
which the Caribbean and the other ACP regions have embarked with the EU is vital. The
progress and their implications for OECS countries are reviewed below.
2.1.2 Background to EPAs
The conceptual origins of EPAs can be traced to the European Commission’s 1997 “Green
Paper on relations between the European Union and the ACP countries on the eve of the 21st
century”. It took a critical look at the ACP- EU relationship in the light of global developments
following the end of the ‘Cold War’ and also the changing international economic environment,
notably the greatly strengthened regulation of the multilateral trading system under the
leadership of the WTO. New approaches to political and financial cooperation were explored,
but the most radical thinking related to the options for trade. The Commission appreciated
that the successful challenge to certain aspects of the European banana import regime by
Latin American countries and the USA during the 1990s, had exposed the vulnerability of the
preferential trading arrangements to challenge within the WTO.
Currently ACP countries export their eligible products to the EU market without paying
duty; however, they charge duty on imports from the EU. In other words there is no reciprocity
since trade is not free on both sides.
The European Commission wanted change. The clear preference of the 1997 Green
Paper was for a reciprocal trading arrangement with the ACP countries. (In other words,
exports both from the ACP and Europe would have duty free entry into each other’s markets).
This was consistent with the orientations in the Commission’s 1995 staff paper on Free Trade
Areas, which proposed a twin-track approach to the promotion of EU trade and economic
interests – through multilateral trade liberalisation at the WTO and through the conclusion
of bilateral and regionally-based free trade area arrangements, which secured better treatment
for European exports i.e., trade preferences for EU exporters.
By 1998, the European Commission received a mandate from the EU Council of
Ministers to negotiate the replacement of the non-reciprocal trading system with a new
trading arrangement that would be in conformity with WTO rules, particularly GATT Article
XXIV11. Since the ACP already enjoyed duty-free access for most of their exports to the EU,

10
See Glossary: “WTO Compatible”
11
The General Agreement on Tariffs and Trade (GATT 1947), Art’ XXIV ‘Territorial Application – Frontier Traffic – Customs
Unions and Free-trade Areas’ sets out inter alia the rules governing Regional Trading Arrangements (RTA). So they want 23
to change things
But the change must
be good for us too.
 the innovation in the proposed trading relationship would essentially be that EU products
would now also enter the ACP on a duty-free basis. Some sceptics saw this as a one-sided
change offering new benefit to the EU but not the ACP. The Commission, however, insisted
that the EPA was not about market opening per se, but rather, development’. It argued that
the EPA would achieve this by promoting ACP integration both regionally and into the global
trading system, it would build trading capacity, be based on principles of asymmetry with
more favourable or special and differential treatment for the ACP and review the rules of
origin. Their contention was that ACP countries would gain overall from concluding EPAs with
Europe.
2.1.3 What is the EPA?
This question continues at the heart of the negotiations, but fundamental differences
in perception persist between the ACP and EU sides. Commission negotiators tend often to
operate on the premise that an EPA is essentially a free trade area agreement, which, according
to conventional WTO practice on free trade areas, must:
a) Involve the removal of import duties and taxes on “substantially all trade” between the
countries that sign the agreement. This is generally considered to cover as much as 90%
of current imports and exports;
b) Be fully in place within a 10 to 12 year transition period;
c) Exclude no economic sector from the coverage of the free trade area; and
d) Include agreements on trade in services and trade related areas.
However, if EPAs are to support economic development and contribute to the elimination
of poverty in the OECS (and other ACP) countries, they cannot simply be classical free trade
area agreements in which all that happens is that OECS markets are opened up. They must
also include measures to promote and support structural transformation and economic
growth. Given the different levels of economic development of EU and OECS economies,
particular care needs to be taken in devising the EPA. It evidently is important that the removal
of duties and other restrictions on imports from Europe does not cause local industries to
collapse under the pressure from increased competition from imported EU goods; which
would undermine economic development prospects. The rest of the ACP have similar
concerns to the OECS and expect EPAs to be more than classical free trade area agreements,
with a little bit of extra financial assistance provided.

2.1.4 Criticism of EPAs

The EPA negotiations have been criticized virtually from the outset. First there were
isolated complaints within the ACP group and then more widely among Non-Governmental
Organizations (NGOs) who have been conducting a vociferous “stop EPA” campaign. They
argue that a disadvantageous deal12 for the ACP would detract from, rather than advance,
economic development.

12
Christian Aid briefing 2004, “Why EPAs Need a Rethink”, www.epawatch.net
24
 In May 2004 Botswana’s President, Festus Mogae said, “We fear that our economies will
not be able to withstand the pressures associated with liberalisation as prescribed by the
World Trade Organisation. This therefore challenges us all as partners to ensure that the
outcome of the ongoing EPA negotiations does not leave ACP countries more vulnerable to the
vagaries of globalisation and liberalisation, thus further marginalizing their economies”.
The debate over the likely impact on the ACP of EPAs, received renewed impetus from
two reports released in the UK. Firstly, in March 2005, the Department for International
Development (DFID) and Department of Trade and Industry (DTI) released a joint report
entitled ‘Economic Partnership Agreements: making EPAs deliver for development13. It questioned
the contribution of EPAS, as they are currently being negotiated, to the development of ACP
countries. Then, in the following month, the Cross Party International Development
Committee of the House of Commons (The Select Committee), released its own highly critical
report of the EPA negotiating process.

D e p a r t m e n t fo r I n te r n at i o n a l D eve l o p m e n t
Box 2 a n d D e p a r t m e n t o f Tr a d e a n d I n d u s t r y R e p o r t
This report advanced the view that developing countries can gain in the long run from trade
liberalisation only if they have in place the infrastructure and capacity to trade competitively. In this context it
urged the EU to pursue a non-mercantilist approach to the negotiations and avoid resorting to traditional
market-opening tactics. It called for ACP regional groupings to be provided with maximum flexibility for their
own market opening for European goods and services and called for the EU to offer an unconditional transition
period of a minimum of twenty years. It made the case for additional financial assistance to develop the supply-side
capacity of ACP economies and to support necessary trade reforms required to build competitiveness.
Finally the report called on the EU to work within the WTO for a review of GATT Article XXIV in order
to reduce the requirements for reciprocity and for the Commission to provide an acceptable and non-punitive
alternative to EPAs. This would ensure that any ACP state choosing not to enter into an EPA would not be left
worse off14. (The provisions of the Cotonou Agreement require this alternative so that countries would have a
real choice when deciding to accept the EPA or otherwise).

2.1.5 Issues in the EPA negotiations

There are a number of issues of underlying concern in the EPA negotiations that will
have to be addressed and reconciled between the two sides. These include:
The adjustment costs of EPAs and Policy responses: A particular concern arises when
formerly protected industries are no longer able to compete with imports following the
removal of tariffs. This lack of competitiveness can lead to factory closures and job losses. If
the introduction of EPAs is not accompanied by new and competitive domestic production
for the local, regional or international markets, then the negative effects on producers can
outweigh the benefits gained by consumers and importers from the introduction of free
trade with Europe.
A key issue in determining the extent of adjustment costs is the level of trade on which
tariffs are to be eliminated and the pace at which this is to be done. It is important that this
provision for asymmetry in the EPA is fully utilised by the Caribbean, with both the time
frame for tariff reductions and elimination being as long as possible and the number of
products that they exclude from tariff reductions being maximised.
Development focus: The initial intention of both sides was that the EPA would have a clear
development purpose, rather than being a classical free trade area with negotiations aimed
simply at market opening and trade expansion. The concept of “development” in the EPA was
intended to be more than a rhetorical device or merely the provision of additional financial
resources. Rather it is a shared commitment of the EU and ACP sides to construct an agreement
that in its operations would actually promote sustainable development.
For the EPA to contribute to development, it would have to support the expansion on
a sustainable basis of domestic production and exports. The key impediments to achieving
this are the range of supply-side constraints facing the OECS and other ACP countries.
Addressing these constraints on competitive production in a systematic and comprehensive

13
www.dti.gov.uk/ewt/epas.pdf I better open my eyes
14 wide - wide !
ACP-EU Agreement of Cotonou, Art.37 Para’ 6. 25
 way is the fundamental challenge of the negotiations and is essential if ACP countries are
actually to benefit from EPA’s. There is the need therefore, for the establishment of co-ordinated
and integrated country-specific programmes of assistance to address supply-side constraints,
which reach beyond the current instruments and approaches.
The fiscal impact of an EPA: This is an area of concern to the OECS and many ACP countries
where revenue from import duties is a principal contributor to government income. Imports
from the EU into all OECS countries are high and the elimination of duties would therefore
result in a major reduction in overall customs revenues and have significant adverse
effects on total Government revenues. Consequently, alternative revenue sources need to be
developed before the fiscal losses actually occur.
An immediate challenge to the OECS in an EPA would be to establish cost-effective
alternative revenue collection mechanisms. These would have to generate enough additional
revenue to compensate for losses resulting from the lifting of duties on imports from the EU.
If a budgetary crisis is to be avoided, such programmes of fiscal restructuring must be
effectively in place before the full implementation of any reciprocal free trade area
arrangements with the EU. Such restructuring, however, will be costly. Work undertaken by
the Commonwealth Secretariat suggests that approximately €3,300 million is required15 for
the ACP as a whole to finance programmes of restructuring and avoid the revenue losses
envisaged under an EPA. It is important to stress that this is a transitional rather than a long-term
net-economic cost.
The erosion of the value of traditional protocol preferences: Of concern to the OECS has
been the severe deterioration of their trading position with the EU, even before an EPA. This
was due to erosion of the value of the traditional trade preferences granted through the
commodity protocols of successive Lomé Conventions and the Cotonou Agreement. For
example, the value of the Rum Protocol was lost by the decision of the EU following agreement
with the US in 199616 to phase out the import duties that had been protecting Caribbean rum.
Also, the value of the banana preferences for the Windward Islands has been undermined by
the 1st January 2006 reform of the banana regime that replaced the quota system by a single
tariff and begun the phasing out of the historical-based licensing system for ACP bananas.
Finally, the commercial benefits provided by the sugar protocol to the Caribbean17 will be
drastically cut back by the impact of the November 2005 reforms of the EU sugar regime.
The future value of the commodity exports that have traditionally been the foundation
of the OECS trade relationship with the EU is now quite bleak. For the OECS, the critical issue
is to secure trading benefits from the EPA, but they must have competitively priced goods
and services to export. Of course, OECS countries can obtain net benefit from EPAs even if
their exports to Europe decline. However, this would require the development of exports to
other markets and possibly the replacement of some imports by domestic production.
WTO compatibility: Complying with WTO rules constrains the flexibility of the negotiation
of EPAs. The Cotonou Agreement commits the EU and ACP to defending, within the WTO, the
arrangements that they have reached between themselves. Compatibility is therefore to be
assessed in terms of anticipated, not current, WTO rules. The Cotonou Agreement uses the
words “in conformity with WTO rules then [sic] prevailing.”18
This clearly implies that the negotiations do not necessarily have initially to be in conformity
with the existing WTO rules. The understanding enshrined in the Agreement is that the
negotiations would not necessarily be strictly within the scope ‘prescribed by’ current WTO
rules, their flexibility or interpretation; rather negotiators could anticipate dynamism in the
rules, conclude an agreement and then seek acceptance at the WTO19. It is the eventually
concluded EPA, not the negotiations, that needs to be in keeping with WTO rules. These
stipulations of the Cotonou Agreement are not a matter of mere semantics, but vital to the
ACP for achieving their goal of negotiating EPAs that could be to their economic advantage.
A related concern is that the changes to WTO rules required by the ACP need to be
secured during, not after the Doha Round, since once it has been completed, the ACP will
have no immediate and realistic prospect of getting adjustments to the rules to rebalance
them in their favour.
15
This does not include transitional budgetary support, but solely the financing of programmes to restructure the revenue
16
base of the state, diversify exports and enhance/adapt skills and employment.
“Zero for Zero” Agreement on liberalizing the trade in White spirits between the US and the EU signed in Singapore in 1996.
17
OECS countries no longer export sugar to the EU.
26 18
ACP-EU Agreement of Cotonou, Art.37 Para’ 7.
19
ACP-EU Agreement of Cotonou, Art.37 Para’ 8, “The parties shall closely collaborate in the WTO with a view to defending
the arrangements reached, in particular with regard to the degree of flexibility available.”
2.1.6 Matching up the two sides
Considerable differences in position exist between the ACP and EU sides. The ACP
negotiations are being conducted by regional teams that are fragmented and under-resourced.
They face a European Commission with an integrated negotiating
structure operated by well-trained, organised and experienced
personnel who are backed by considerable institutional resources for
their preparation and conduct of the negotiations and who have a
clear and precise policy mandate. For the EC side nothing is left to
chance; interests and objectives are meticulously coordinated and
agreed by the Member States in which the views and positions of all
are first accommodated or reconciled. From this political consensus,
precise and detailed directions are provided to the Commission. As a
team, EC negotiators are amongst the most formidable in the world
with considerable experience in tough bilateral and multilateral trade
negotiations aimed primarily at prising open foreign markets and
safeguarding the economic interests of Europe. With the advantages in
the negotiations overwhelmingly on the side of the Commission, it is
not surprising that the ACP has been lagging behind in securing ‘victories’ or breakthroughs.
The presentation in this stark manner of the relative power of the Commission should
not prompt pessimism or defeatism, but rather encourage realism, closer policy oversight and
spur fuller and more professional preparation for the negotiations. Certainly the ACP regionscan
improve their prospects for success by being precise in defining their goals, as well as
coherent and forceful in pursuing them. They can fully utilise their resources and learn relevant
lessons from their experiences in multilateral trade negotiations. Since ACP regions have
different objectives from the Commission, they do not intend simply to accept the EU
positions. However, if they are to have any hope of actually changing those positions on the
EU side that they consider unacceptable, a reappraisal of their organisation, preparation for
and conduct of the negotiations, as well as their deployment of political and other resources
would be essential.
U K Pa r l i a m e n t a r y R e p o r t
Box 3
This report of the Cross Party Select Committee of the UK Parliament on EPAs was very
strongly worded. The Committee took evidence from a range of institutions and individuals, including the EU
Commissioners for Trade and for Development.
The Committee observed that the relationship between the EU and the ACP is not and indeed never has
been an equal one. The ACP countries lack the negotiating capacity of the EU. ACP regions, most notably the
Caribbean, are stretched to negotiate simultaneously in the WTO and various other regional negotiations. The
ACP countries are also economically weak compared to the EU. The negotiating process should therefore
recognise this disparity in power. It called for far greater substance to the development dimension of the EPA
negotiations. For example, it noted that EU Trade Commissioner Mandelson told the Select Committee that he
is in favour of promoting a more flexible interpretation of GATT Article XXIV (which deals with Regional Trading
Arrangements) in order to accommodate progressive market opening as envisaged under the EPAs. However EC
negotiators in the WTO have given little support to ACP efforts to secure such flexibilities under WTO rules,
including the minimum eighteen-year transition sought by ACP regions before they would have to open their
markets to the EU. In the absence of strong EU support, the ACP proposals have been poorly received by other
WTO members, despite the numerical strength of the ACP and the EU together in the WTO.
With regard to alternatives to EPAs, the report recognised that to date none has been devised and proposed
to the ACP, despite a clear requirement of the Cotonou Agreement. The availability of a satisfactory alternative
to EPAs is essential since it would permit ACP governments to assess any EPA agreement on its own merits and
allow them to reject such an agreement if it did not support their economic development. The UK
Government was asked to press the Commission to ensure that alternatives for non-LDC-ACP States guarantee
the same level of market access of the current Cotonou arrangements. The Select Committee felt that it would
not be sufficient for the European Commission to present the alternative as a second best option, with no
developmental component. This is an important issue for the OECS since its Members are not classified in this
context as LDCs.
Overall, the Select committee expressed concern that the EU is approaching the negotiations as if they
were “a game of poker” and refuses “to lay its cards on the table”. (Such an approach it felt might of course be
acceptable for partners with comparable hands but in this particular case where the ACP is negotiating at a
serious disadvantage, the EU’s approach merely reinforces the unequal nature of the process.)

But if we don’t have

anything to sell,
where is the
free trade ? 27
 2.1.7 Stop EPAs ?
Despite the implicit presumption of the NGO-led “Stop EPAs” campaign, that ACP
States cannot secure, through negotiations, the type of economically beneficial EPA provided
for and envisaged under the Cotonou Agreement, the ACP believe that it is in fact possible
to conclude EPAs that make them better off. The challenge is for the various ACP regions to
effectively negotiate and secure acceptable outcomes in the EPA and related WTO negotiations.
Although the challenge facing the ACP can seem overwhelming, the Caribbean and other ACP
regions have some bargaining chips that they can, and will need to deploy if the outcome is
to reflect their own vision and aspirations, rather than being limited to the level of ambition
envisaged by the Commission’s negotiating mandate. In the end, when the negotiations are
complete each OECS and ACP country will have to assess the balance sheet of costs and
benefits of the final package and determine where its national interests lie. But OECS countries
do not have to await the completion of the negotiations to then decide on the value to them
of the deal. Rather, during the course of the negotiations, they can ensure that their interests
are adequately reflected in regional positions and safeguarded and advanced during the
actual conduct of the talks.
An approach to the negotiations as outlined above in which the Caribbean and other
ACP negotiating teams effectively articulate and negotiate their developmental interests are
essential for an outcome that meets the objectives of both sides. It is evident that this is in
the interests of the ACP. Less evident but also true is that this is what the EU also wants.
Having economically strengthened ACP regional partners is in the long-term political and
economic interest of the EU. The process of arriving at the EPA is through negotiation hence
the EU quite correctly expects ACP negotiators to make the case for the arrangement that
will contribute to their sustainable development. This explains the considerable support
being provided by the EU for capacity building in trade negotiations; it has already approved
“Trade.com”, a €50 million facility, and the “Hub and Spoke” programme of €18 million that
is being managed by the Commonwealth Secretariat. In other words the EU will not simply
hand over an EPA that contributes to ACP development but leaves it to them to negotiate the
satisfactory terms for themselves.
2.2 Free Trade Area of the Americas
The push for economic integration throughout the Americas to include North, Central
and South America and the Caribbean, was motivated by both economic and political
concerns. In December 1994, the then United States President, Bill Clinton invited all Heads
of Government of the Western Hemisphere to a Summit meeting in Miami, pointedly excluding
the Cuban leader. They all decided to create a Free Trade Area of the Americas (FTAA) that
would link their countries, within which barriers to trade and investment would be progressively
removed. The negotiations, they agreed, would be completed by January 2005. This would be
the largest FTA in the world with a Gross Domestic Product (GDP) of over US$ 10 trillion and
a population of 800 million. They instructed their Trade Ministers to make the necessary
preparations. These held four meetings and agreed upon a structure and guidelines for the
negotiations.
By April 1998, all was ready and negotiations were launched at the Summit of Heads of
Government held in Santiago, Chile. They formally agreed that the negotiations would be
balanced, comprehensive and in conformity with WTO rules. Quite importantly, the intention
was to end up with a single undertaking. In other words at the end of the negotiations,
Governments would be faced with a comprehensive and indivisible package of rights and
obligations which they would accept, or could indeed reject, but only in its entirety.
Countries would not be able to pick and choose aspects of the agreement that would apply
to them. The combination of the comprehensiveness of the mandate and the fact that it
would be a single undertaking, make the FTAA negotiations of particular concern to the OECS
countries since the outcome would have direct and indirect implications for several aspects
of their economic life.
2.2.1 Prospects and challenges
The prospect of the creation of this massive free trade area was initially enthusiastically
welcomed. Its backers emphasised the enormous size of the market that would be created,

Hmmm...
That is one big
28 supermarket !
with benefits for trade creation, improvement to living standards and working conditions and
protection of the environment.
With the plans to have an agreement finalised by January 2005, a Trade Negotiations
Committee was set up to oversee the negotiations and an array of working groups was
established to deal with the substantive areas.
However OECS Members, fully involved with EPA negotiations as well as the WTO and
CSME talks, were being stretched. The problems faced by the OECS were not unique but were
also affecting other Caribbean countries. They therefore agreed to joint participation in the
FTAA talks since, on their own, they did not have the personnel and other resources to
individually service the range of meetings. They therefore worked closely together and their
positions were often articulated by a single spokesperson.
But the FTAA project itself was in trouble, global political and economic conditions had
been changing dramatically since 1995, when the decision to launch the negotiations had
been taken. Ten years later differences in vision had emerged and there was a serious rethinking
in several countries. Nonetheless, up till November 2003, Ministers had been speaking as if
the FTAA was still on track and only Venezuela expressed a reservation on the reaffirmation
of the commitment to complete the negotiations by 2005. The differences were over the
scope of the talks and the linkages with the WTO Doha negotiations. The FTAA talks therefore
effectively went into cold storage, though attempts to revive them continued.
Whenever negotiations recommence, the countries that initially joined the FTAA project,
will be deciding on their positions according to their assessments of their interests. For the
OECS the specific questions can be expected to focus firstly on whether the original idea of
open markets for the Americas will provide them with net advantages and opportunities
from which they would actually benefit. Secondly whether any compensating measures
provided will be adequate to ensure that they do not lose but gain overall from the FTAA.
They would also be expected to consider the alternative, i.e. the cost of staying out of a FTAA
in which possibly the rest of the Caribbean (specifically CARICOM) and the Americas are
involved. Their decision will have to be based on a carefully calculated assessment of the
costs and benefits of joining or not and their judgement of where their national interests lie.

2.3 Bilateral Trade Agreements

As Members of CARICOM, the OECS also participates in free trade area arrangements
with Costa Rica, Colombia, Venezuela and Cuba. These provide duty-free access for the OECS
but they do not immediately have to grant reciprocal duty-free entry to imports from these
Latin American countries. A longstanding arrangement with Canada, Caribcan provides duty-
free access for exports from CARICOM. The future of these bilateral agreements might well
be influenced by the creation of the FTAA.

29
 C hapter 3
A Multilateral Alternative - The WTO

All the independent OECS Members belong to the World Trade Organisation (WTO)
and the others apply its rules and benefit from its provisions because of their constitutional
relationship with the UK, which is also a WTO Member. Its principles and enforceable rules
dominate international trade and major segments of domestic production and commerce.
This system has a major influence on shaping the global trading environment and defining the
scope for policy flexibility for all its 150 Members. As a consequence, the WTO plays a
determining role in national economic performance, employment and well-being, especially
in small islands that are heavily dependant on trade. It is therefore essential to understand
this institution that, during the last decade, has become one of the most powerful entities on
the world stage and whose regulations have a major impact on OECS countries.
3.1 Origins and evolution
The conceptual origins of the World Trade Organisation can be traced back to 1947. The
previous decade had witnessed a most severe global economic depression followed by a
world war of unprecedented horror and devastation, for which the mercantilist policies that
had characterised international trading relations were partly to blame.
The leaders of the major non-communist nations who were behind this initiative were
determined to avoid repetition of the chain of disastrous events that led to the war. This
would be achieved by a new approach to economic relations among States that would be
based on rules. Negotiations were then launched to create a regulator; the International
Trade Organisation (ITO).
The ITO was expected to regulate trade, employment, restrictive business practices,
commodity agreements, investment and services and prevent protectionism. It was the
ambitious mandate of the ITO that anticipated what eventually became the World Trade
Organisation (WTO) on 1st January 1995; an organisation that is committed to the liberalisation
of trade and oversees the bulk of global trade.
Whilst negotiations for the ITO were still ongoing, 23 countries decided that they
should reduce tariffs on a range of imports and committed themselves not to raise them in
the future i.e., to “bind” them. They called this the General Agreement on Tariffs and Trade
(GATT) and it came into force on 1st January 1948. Three months later, the ITO Charter was
signed in Havana, Cuba. It however made no headway and when in 1950, the US, the world’s
foremost trade and economic power, announced that it would not be ratifying, the ITO’s fate
was sealed. It was the GATT that would manage trade rules and whose principles would shape
the evolution of the multilateral system for the next half a century.
3.2 Multilateral Principles
The principles on which the GATT was founded, have certainly evolved and adapted to
changing circumstances but their essence of promoting fair competition remains at the heart
of the WTO system. The mandate to promote free trade was enshrined specifically in the
GATT preamble. It achieves this objective through the following key principles.
Most favoured nation treatment (MFN)
According to this rule, all Members must be treated equally. (Of course non-Members
can be and often have been discriminated against, e.g. China before it joined the WTO in
2001). If an import tariff is lowered for one country or it is granted a trade concession, then,
unless special authorisation is received, the tariff must be lowered equally for all other WTO
Members, or they too must be granted the same trade concession. Hence, although the bulk
of tariff negotiations under the GATT were conducted among a few countries, the benefits
were made available to all Members. A notable exception to the MFN rule is in Regional

So that war was At least

so important ? nothing like
30 Ancient history. that happened again.
Trading Agreements (RTA) such as CARICOM, where Members can be authorised to provide
better treatment to fellow participants than to those that are not, even if they are WTO
Members.
National treatment
The GATT requires that both foreign and locally produced goods be treated equally
once duties on the former had been paid. No additional charges or impediments are to be
imposed on foreign goods that are not also borne by the same type of local products.
Predictability
This is achieved through transparency and binding20 by which a country undertakes not
to increase its tariff above an agreed level so an exporter from abroad (or indeed a local
importer) knows what tariff his goods will face. It is true that such ceilings on tariffs can be
raised but only after negotiating with trading partners (and often providing them with
compensation).
Transparency is an important factor in ensuring predictability. Whilst tariff reduction
negotiations may be conducted within restricted groups, their results must be notified to all
Members. Also, government policy is scrutinised under the regular Trade Policy Review
mechanism. A joint review of the trade policy of the OECS Members that belong to the WTO
was conducted in June 2001.21
Supporting development
Initially the GATT did not differentiate among its Members. The presumption was that
trade liberalisation and provisions to promote competition and equal treatment would suffice
in enabling all countries to gain from trade. However by the early 1970’s the inherent
competitive disadvantage of some countries was becoming evident. If the rules were to be
applied in the same manner to all, then those whose economies were already more advanced
and stronger would be in a better position to take disproportionate advantage of the new
opportunities. Liberalisation that did not take account of inequality could therefore lead to
skewed sharing of benefits. This idea was given concrete effect in 1974 with the incorporation
of a new Part IV to the GATT that recognised the weaker position of developing countries and
provided them with special and differential treatment.

Box 4 Tr a d e P o l i c y R e v i e w s
Transparency is central to the operation and integrity of the WTO system. Member countries need
to know that their trading partners are abiding by the rules or when they are in breach of any of them.
Transparency is essential for the smooth operation, predictability and confidence in the system.
This is achieved by two means. One is a voluminous and extensive set of notifications or self-
declarations by governments to be prepared on a regular basis and submitted to the WTO. The other device is
the periodic Trade Policy Review. It has three aims:
1. To increase transparency and understanding of countries policies and practices through regular
monitoring;
2. Improve the quality of public and inter governmental debate on the issues; and
3. Enable the Members to assess the effects of policies.
The WTO staff conducts an independent assessment, the Governments make a report and there is
the opportunity for all countries to peruse the reports and ask questions.
The largest WTO Members, the “Quad”- the EU, US, Japan and Canada- are reviewed every two years,
the next largest 16 others, every four years and the others every six years.
In 2001 the six OECS States who were Members of the WTO were reviewed together. The OECS
countries were given a good rating but areas of concern were signalled, notably subsidisation practices and
certain internal taxation measures and import restrictions.
This joint review was an innovation for the WTO. Since the experiment worked well, the approach
of simultaneous review of similar and neighbouring developing countries has since been frequently practised.

3.2.1 The system

By the early 1990’s the independent Member States of the OECS had become GATT
contracting parties. But before, while still colonies and later Associated States of the UK, they
had been subject to the rights and obligations of the GATT. Upon independence they continued
to exercise and enjoy them on a de facto basis until they all individually formally became
contracting Parties in their own right. All but St. Kitts & Nevis and Grenada were founding
Members of the WTO. 22

20
See Glossary.
21
OECS-WTO Members Trade Policy Review; Vols 1& 2. Report Published Geneva. January 2002.
22
Grenada and St Kitts & Nevis had not ratified the WTO Agreement before the end of 1994 and became Members on the 31
22 February 1996 and the 21st February 1996 respectively.
 A key feature of the GATT/WTO system was the use of Rounds of multilateral trade
negotiations (MTN). Members all come together to negotiate both separately with each
other (bilaterally) and all together (multilaterally). Initially they were exclusively concerned
with tariff reduction and binding. The sixth cycle of negotiations, called the Kennedy Round
(1964-1967) made tentative forays beyond tariffs on goods and addressed anti-dumping
measures. The Tokyo Round (1973-1979) was even more ambitious, drastically reducing tariffs on
industrial products, but also tackling non-tariff measures that restrict imports. This Round
came up with a number of agreements that were signed by only some of the GATT
Contracting Parties.
3.3 The Uruguay Round and the birth of the WTO
The eighth Round of trade negotiations was launched in Punta del Esté, Uruguay in 1986,
and dragged on till 1994, taking twice as long as originally expected. But its agenda was ambitious,
covering all the perceived outstanding trade policy issues. Not only would the traditional
subjects be tackled - tariff reduction and binding, non-tariff barriers and anti-dumping and
subsidies - but also the hitherto “no go” subjects of agriculture, textiles and clothing and
services. The list of subjects also included a review of GATT Articles, Dispute Settlement, the
GATT system and trade in tropical products.
The talks frequently ran into difficulties and deadlock, particularly over agriculture. It
was only when the US and the Europe settled their differences over agriculture in November
1992 in a deal known as the “Blair House Accord,” that progress in other areas could really
have taken place. Resolution of the other subjects took just over a year with agreement reached
on 15 December 1993. Although the talks had formally ended, the Members agreed to reopen
and continue formal negotiations in agriculture and services, in what was termed the “built-in
agenda”.
This “new creature”, the WTO, the most far-reaching outcome of the Uruguay Round,
was really a metamorphosis of the old GATT that had emerged as a larger and more powerful
global institution that would be exercising control over a broader area of economic regulation
and management. Its most decisive feature was its binding dispute settlement mechanism. So
unlike its predecessor it had real power to oversee its regulations; it had teeth!
3.4 The WTO’s Dispute Settlement Mechanism
The resolution of disputes is of such importance in the overall system that it needs to
be fully explained. It was an ostensibly small change in the procedures regarding the adoption
by the WTO of the reports of Panels that resulted in a fundamental revolution in the regulation
of the multilateral system and permitted the enforceability of its rules. Prior to the WTO the
GATT had provisions for the settlement of disputes. A country could complain that another
was violating the rules and an adjudication Panel of experts would be set up. It would report
to the Contracting Parties and the membership would have to adopt the conclusion for it to
be enforceable. The catch was that this decision needed to be by consensus. In other words
no one objected. Unless this happened the report would not be adopted. It can well be
understood that agreement of all countries would therefore be very difficult. At the very
least, the Party ruled against would be unlikely to support the finding and it alone could
prevent unanimous agreement to the decision. Not surprisingly, very few GATT Panel decisions
were actually ever adopted.
The real upheaval in the system was the change to the consensus rule for the adoption
of decisions at the Dispute Settlement Body made up of Member States. Now, the Panel
ruling would be adopted unless it was rejected by consensus, not, as before, approved by
consensus. Rejection of a Panel finding has therefore never happened and it seems unlikely
that every Member, including the winner of the proceedings who has achieved victory after
going through the cost and burden of the case, would reject the findings. Hence the Panel
process has become akin to the domestic judicial process. A complaint is made, a trial
follows to determine whether an infringement of the rules has taken place and an enforceable
decision is arrived at.
Another innovation that was introduced was the extension of the mandate of the
Dispute Settlement Body (DSB) to include intellectual property and services.23

23
This is why the US, although not a banana supplier, was able to lodge a complaint in 1995 against the EU Banana Regime in
order to “safeguard” the interests of its service suppliers.
32
3.4.1 The process
The Dispute Settlement process begins when a Member or a group lodges a complaint
(the Complainant/s) that another is not respecting one or more trade rules. A 60-day period
for consultation and possible mediation follows when the countries are to seek to settle their
differences. If they cannot, the WTO Director General, often through a nominee, tries to help
them reach a mutually agreeable solution. If this also fails, the Complainant/s can, within 45
days, ask for the establishment of a Panel. Other countries that have an interest in the matter
can request to be Third Parties. That gives them specified rights including making submissions
and participating in certain of the meetings. The Panel, normally made up of three experts
(can also be five) from different countries, examines the evidence and makes a ruling. It normally
has six months24 to consider the case and prepare its report, with a further 3 weeks to present
it to WTO Members. If either or both Parties do not appeal against the ruling within 60 days,
it is presented to the DSB for adoption. (The approval of the DSB would invariably be a
formality because of the practical impossibility of obtaining a consensus in favour of rejection).
In the event of an appeal, the matter is referred to the Appellate Board made up of seven
judges. Three of them would be assigned to the case reviewing the points of law. This, they
do in 20 days and the DSB has 30 days to adopt the report.
Panel and Appellate Body decisions, once adopted by the DSB, are mandatory and
enforceable. Should the Party ruled against refuse to comply or compensate the winner, the
latter can obtain approval to invoke sanctions that either compensate for non-compliance or
punish the offender so as to encourage compliance. However given international political and
commercial realities, most countries are loathe to impose sanctions, particularly against
those that are more powerful.

3.4.2 OECS Participation in Panel Disputes

Although some legal assistance is available to developing countries, bringing or defending
a case is very costly and can constitute a tremendous strain on the limited financial and
personnel resources of small countries like those of the OECS Members. They have, however,
participated actively as Third Parties when they perceived their vital economic interests as
being under threat viz. the Windward Islands in the series of Banana Panels appeals and related
complaints over the last decade and St Kitts & Nevis in the case against the EC export subsidies
on sugar brought by Australia, Brazil and Thailand. In only one instance has an OECS State
been a complainant in a dispute. Antigua and Barbuda initiated proceedings against the US in
the 2003 case on “Measures affecting the cross-border supply of gambling and betting services.”
3.5 The WTO Doha Development Agenda (DDA)
This still ongoing Round of WTO negotiations warrants special attention. It was launched
at Doha in November of 2001 and was to have been concluded no later than 1st January 2005.
During that time it would continue to expand the liberalisation agenda of the WTO and address
the concerns of developing countries.

24
In cases of perishable goods, the period for the Panel to review a case can be reduced to 3 months.

This is world 33
government !
 Although the Uruguay Round had given rise to the WTO and ushered in an era of
unparalleled liberalisation particularly in agriculture, textiles and clothing and services; the
process that had been set in train was nonetheless viewed by the major trading nations as
unfinished business. They considered that markets were still too restricted and WTO disciplines
were still not being applied to a sufficiently broad range of economic and commercial activity
such as investment, competition and trade facilitation. However, the majority of developing
countries, many of whom were becoming more assertive in the WTO, were not enthusiastic.
They felt that far from benefiting from the Uruguay Round changes and the WTO, they were
losing from liberalisation. The few that were benefiting wanted to first consolidate their gains
before further changes were contemplated.
Following prolonged political activity, a decision to launch the Round was finally
agreed upon at Doha in 2001. But in order to win developing country support, it was to be
different from all of its predecessors. Whilst the Round would continue the ongoing work of
market opening and expanding the scope of WTO regulation, it would also seek to rebalance
the operation of the system in favour of developing countries and facilitate their participation
and fuller integration into the system. However the scope of the Ministerial Declaration at
Doha was broad and had at its core support for development, even if the actual negotiations
are largely preoccupied with market opening. The actual focus has been principally over the
terms of a final agreement on agriculture that will eliminate export subsidies by 2013, reduce
import duties on agricultural imports and domestic support for farmers. With respect to
non-agricultural trade (NAMA), work has been progressing on alternative approaches to the
phased reduction of import duties. Services negotiations, which have been taking place on a
“request and offer”25 basis, are to be intensified. So far, the development dimension of the
negotiations has been largely focused on the concerns of the LDCs (the WTO uses the UN’s
income per capita criterion to determine which country is part of that category. That excludes
the OECS).

Box 5 U N C TA D
The United Nations Conference on Trade and Development (UNCTAD) has achieved a high profile
since it was born in 1964 in response to the need for a UN conference specifically to consider the problems of
developing countries and identify international actions. That conference meets every four years.
A formal structure and Secretariat were established in Geneva with the Argentinean economist
Raoul Prebisch as its first Secretary General. Its mandate was to promote the beneficial integration of developing
countries into the global economy. UNCTAD would serve as the focal point in the UN system for the integrated
treatment and attention to trade and development and related issues of finance, technology and sustainable
development. It would conduct research and analysis and provide technical assistance to developing
countries. The regular Ministerial and other conferences and meetings would serve as a forum for inter-
governmental discussion and consensus building.
Among the notable initiatives successfully championed by UNCTAD, has been the Generalised
System of Preferences (GSP). This was an arrangement under which developed countries would, under certain
circumstances, provide non-reciprocal trade preferences to developing countries. The qualifying imports from
the developing countries would enter at a reduced or zero rate of import duty. The distinguishing feature is
that the developing country does not have to offer any trade benefit in return.
Another innovation was the international commodity agreements championed by UNCTAD. Some
like the cocoa agreement have been thriving whilst attempts to create an international banana agreement
never materialised. Work on the control of restrictive business practices did not result in any concrete
institutions but evolved into competition policy, which is now on the WTO agenda.
The current Secretary General, Dr. Supachai Panitchpakdi, was appointed in 2005.

3.5.1 Small Vulnerable Economies

The OECS are among those developing country Members of the WTO with specific
difficulties stemming from the small size of their economies. Reference has increasingly been
made in the negotiations to “small vulnerable economies” (SVEs). This is quite positive since
it indicates recognition of those countries’ concerns. However, whilst the focus has been very
much on the SVEs as a group with shared interests in the DDA, so far there is little progress
on the acceptance of concrete initiatives that would actually benefit them, such as those
provided to benefit LDCs. The key factor is that the group is open and membership has
essentially been on a self-selection basis. The result is that some countries that are not
generally considered as small and vulnerable have joined the group. Its composition now

25
Participating countries place on the negotiating table lists of the market opening and other measures that they wish other
34 countries to take (their requests) and volunteer market opening and other measures of their own (offers).
A lot of
fancy talk
reflects a broad range of sizes and economic power in which the negative impact and the
constraints of smallness apply with varying degrees of intensity among its members.
WTO Members are understandably unwilling to grant any real trade benefits unless
they can be clear which countries will benefit. All attempts though, to determine the
composition of the group, have been frustrated by the objection of those countries that
participate in the group but might not qualify under any particular definition of SVEs that is
being considered. In addition, paragraph 35 of the Doha Declaration stated that a new category
of members was not to be created, so it has often been conveniently used for frustrating
progress.
Whilst representatives of small countries might be pleased to have secured references
to SVEs in negotiating texts, success needs to be measured instead by the tangible benefits
that are actually being secured. For instance references to LDCs only became meaningful
when backed by special provisions like the Everything but Arms (EBA) initiative, special access
to international finance including the Integrated Framework and now priority under the Aid
for Trade initiative.
Conclusion
The international trading system, based on rules and principles of free trade and
competition, was not established to satisfy the needs of small countries like the OECS but
they can use it to secure their interests. Despite their numerous constraints they can
participate in and have a voice in rule making and the management of the system. More
fundamentally they can gain from the application of the core principles of the WTO. Free
competition assures that correct signals will be sent to investors resulting in the rational
allocation of resources, something that is most beneficial from an economic standpoint. It is
true that the system has shortcomings; maybe the most glaring is that the rules are sometimes
selectively applied so that the full gains from trade are not realised because liberalisation is
only partial.
Given that the vast majority of countries belong to the WTO including virtually all of
the trading partners of the OECS, the latter cannot afford to be left out because the costs
and obligations of the rules would be applied to them anyway but they would enjoy none of
the safeguards, rights or benefits of membership. Meaningful protection of their interests can
only be assured within the system.

? Hmmm...

35
 Section
2
The previous sections have reviewed the working of the
international trading and regulatory system and the operation
of the OECS countries within it. This section deals with the
varying experiences of the major foreign income earners and
The OECS Experience
seeks to draw lessons from those experiences. •Bananas, Sugar, Rum
•Tourism and other Services

C hapter 4
Bananas –The fight for the EU market

The cultivation of bananas for export to the United Kingdom market was gradually
introduced into the Windward Islands starting from the late 1950s and steadily supplanted
sugar cane. Two decades later, it had come to dominate agricultural production in Dominica,
Saint Lucia and Saint Vincent and the
Grenadines, and was making a major economic
contribution in Grenada. The Islands’ share of
the UK market grew steadily because of strict
restrictions placed on the import of cheaper
Courtesy WIBDECO

bananas from Latin America. At the start of the

1990s, production had peaked in the Islands,
but by then, threats to the foundations on
which that trade could continue, were emerging.
In particular, the high profile and long-running
transatlantic dispute on the trade in bananas,
with its diverse mix of participants that included
the EU and ACP on the one hand and the US and
Latin American exporters on the other. At the
centre, were the Windward Islands, who were among the most determined and active, and as
a result, had a decisive bearing on the evolution of the banana regime.
This chapter examines their performance, the implications for them of the outcome of
the dispute and the lessons to be learnt, amongst the most intriguing of which is that smallness
does not preclude States from actually being more than passive onlookers in the processes
of international decision-making that determine their future.
In 1986, the European Communities (EC) decided to unify the various national markets
by 1st January 1993, thus creating a Single European Market (SEM). Prior to this, the various
Member States had operated their own import arrangements for bananas, often applying a
variety of tariff and quota restrictions. As that date approached, a struggle began over the
nature of the regulation of that Single Market and the extent to which it would restrict cheaper
Latin American bananas, thereby permitting European and ACP bananas to be sold.
The following table indicates the changing origin of bananas supplied to the EU before and
since the single market. It shows that the countries that have been most forceful in seeking
reforms have been the ones whose exports have increased the most.
Table 1 Supplies of Bananas to the EU 15, 1990-2002 (thousand tonnes)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
EU DOM 737 699 706 644 585 658 685 811 786 729 782 767 791
ACP 622 596 680 748 727 764 800 693 655 676 756 730 726
Of which:
Caribbean ACP* 384 342 384 374 328 340 362 295.4 273 278 288 207 185
Ivory Coast 95 116 144 161 149 160 181 166 158 193 200 218 211
Cameroon 78 115 110 147 158 165 167 157 155 161 205 216 230
Dominican 4 10 39 62 86 75 61 49 56 42 60 86 97
Republic
Dollar 2363 2641 2731 2560 2450 2405 2470 2462 2426 2522 2543 2561 2611
Of which:
Colombia 421 518 533 452 511 557 653 569 541 552 617 644 665
Costa Rica 643 608 520 565 727 564 604 603 640 663 656 634 686
Ecuador 381 646 745 651 612 632 686 738 569 697 691 702 829
Panama 649 591 601 569 427 416 311 358 417 422 389 347 307
Total 3722 3936 4117 3951 3762 3827 3955 3966 3867 3927 4081 4058 4128
Source: European Commission, DG Agriculture. * Traditional suppliers

Green gold !
36
 Box 6 T h e d i f f e r i n g p r o d u c t i o n c o s t s - AC P a n d L a t i n A m e r i c a
An underlying complication in the EU banana market is the substantial differential in the production
and shipping costs of its various suppliers. The large and highly capitalized plantations of Central and South
America benefit from favourable climatic and other conditions, such as vast expanses of suitable flat land with
deep fertile soils and most especially, economies of scale in production and shipping. These plantations, which
in general enjoy low unit labour and related costs, are able get their bananas to Europe at substantially lower
costs than those produced by the ACP or the overseas European producers of the Canary Islands, Martinique
or Guadeloupe (DOM).
By contrast, production costs in the Windward Islands are high, due to a variety of factors including
their hilly and difficult terrain, the small size of the severely under-capitalized, family-owned and operated
farms, unfavourable rainfall patterns and limited availability of arable land, all of which preclude any ability to
benefit from economies of scale. Their competitive disadvantage is compounded by susceptibility to storms
and hurricanes, and a wage and social cost structure that are significantly more burdensome than the average
for plantations in the Americas and Africa.
The following table shows the differences in cost of production in 1999 among a sample of producers.

Average 1999 f.o.b. prices of a sample of suppliers (US$ per tonne)

Ecuador 235
Belize 419
Jamaica 558
Dominica 547
St. Vincent 500
Saint Lucia 498
Sources: FAO Year Book and Windwards Islands Banana Development Company (WIBDECO)

It is evident that being so much cheaper, "dollar" bananas (as the Latin American bananas are popularly
known), would, unless impeded by regulation, quickly supplant European and most ACP bananas on the EU market.
To prevent this happening and to permit European bananas and those from the ACP, to be sold, various
national tariff and non-tariff barriers were introduced.

4.1.1 The Banana Dispute

The ACP banana suppliers, felt under threat as the 1993 Single Market approached. They
were concerned that Europe could introduce a liberal regime that would so dilute their
effective preference that they would not be able to compete with bananas from Latin
America. On the other hand, producers in these countries and the companies that marketed
their fruit, principally Chiquita, Dole, Del Monté and Noboa, were keen for a more liberal
Figure 3. Average fob prices, 1999 regime that would permit greater
access for "dollar" bananas.
600
The first skirmishes of the "banana
500 war" were therefore over the nature of
the unified regime. The EC had an
400 import duty rate on bananas of 20%,
but given the low price of “dollar
Sources : FAO and WIBDECO

300 bananas”, it was clear that such a tariff

on its own would be insufficient to
200 permit continued marketability of
Europe’s own and ACP bananas.
100
In the end, the Common
0 Organisation of the Market (COM) in
Bananas, enshrined in EC Regulation
Ecuador

Belize

St. Lucia

St. Vincent

Dominica

Jamaica

404 of 1993, maintained overall

Selected banana suppliers
protection by transforming the existing
national regimes into a unified system. It
Cost of Bananas
allotted tariff rate quotas (TRQs) for
Latin American bananas totaling 2.2
million tonnes, and each ACP traditional
exporter was assigned a maximum exporter

37
 was assigned a maximum tonnage within an autonomous quota for the ACP. There was no
price support given to ACP exporters, although the European suppliers were subsidized up
to maximum volumes per region. In an attempt to further unify the market and provide an
inducement for traders to handle the more costly ACP and European bananas, a system
popularly referred to as the "B" license system was established. It gave importers, a share of
import licenses for the cheaper Latin American bananas, according to the volume of ACP and
European bananas that they handled. They could then cross-subsidise the more expensive
fruit with their larger profits from the cheaper fruit.
This system was challenged from the outset; five Latin American countries (Colombia,
Costa Rica, Guatemala, Nicaragua and Venezuela) were able to get a GATT Panel established
in 1993 to review the quota system. Following negotiations with the Commission, all except
Guatemala withdrew their complaint and later signed the Banana Framework Agreement
(BFA), which gave them fixed country quotas and the consequent potentially lucrative power
to control their exports to Europe. However the 1994 BFA itself did not end the dispute since
it excluded one of the WTO complainants, Guatemala, which enthusiastically pursued the
dispute.
4.1.2 The role of diplomacy
The safeguarding of their banana industry was the top foreign policy goal of the
Windward Islands. Initially they had hoped that UK support would have assured a favourable
consensus among Member States. They soon realized that despite its tremendous value in the
articulation and promotion of their interests in Council, the UK’s voice was only one among
several. They therefore had to learn quickly and adjust their strategy to persuading, not just
one “old friend” but instead targeting the whole grouping both individually and collectively.
Consequently from the outset, they were at the forefront of the coalition seeking to ensure
that the COM would effectively limit imports of "dollar bananas" so as to ensure a tight market
and high enough prices. Their message was clearly and consistently articulated by their
diplomatic representatives to the EU but most importantly also, by senior political figures
who were quite visible and vocal campaigners in Brussels, London and Washington. The
coalition appreciated that securing a favourable position in the European Council of
Ministers, which had the decision-making authority, would require winning over public
opinion and enlisting the support of various groups including the Commission, the EU
Parliament, national Governments and Parliaments, NGOs, church groups and journalists,
among others. Since EU banana trade policy would not be made in isolation, the campaigners
targeted important third parties that would be exerting pressure on Europe for liberal reform.
Hence, they were active in Washington focusing principally on the Congress. Also, direct
though limited contact was maintained with Latin American supplying States and the multi-
national companies themselves in the hope of at least tempering their opposition to a
restrictive banana regime. It was the economic and social threat and danger posed to the
Windward Islands that provided the moral legitimacy and rationale for the campaign.
The ACP group itself had become more active in the dispute with a prominent role for
the OECS, as the Ambassador of the three Windward Islands began presiding over the ACP
Working Group on bananas and became the group’s Ambassadorial spokesman on bananas.
ACP participation in the dispute process was organized and a legal defence of the contested
provisions was prepared. A legal consortium was engaged which worked closely with officials.
Indeed, two of the legal advisers were included on the delegation of Saint Lucia to one of the
Panel Hearings in Geneva. The Panel expelled them on the grounds that they were not
full-time employees of the Government. This prompted the leader of the delegation to walk
out in protest at what he condemned as an unjust ruling. He complained that this would
disempower small State Parties that cannot afford to retain the required specialists on a
permanent basis and must rely on outside expertise to assist in the presentation of their case
before a Disputes Panel. Denying them that possibility would entrench their disadvantage in
WTO disputes.
This ruling by the Panel would have been appealed by Saint Lucia and the Caribbean but
as Third Parties, with limited rights, they could not introduce independent grounds of appeal.
Even if the Appellate Body did not explicitly overturn the contentious ruling, it reaffirmed

That was real war.

38
the sovereign right of countries to determine the composition of their delegations to its
meetings. In effect, it implied dissent from the Panel's ruling. As a result, subsequent WTO
practice has allowed Parties to disputes to engage outside experts. This facility has since been
used in many instances by developing countries. Indeed, the WTO Advisory Law Centre was
subsequently created in recognition of that capacity gap in developing countries.
4.1.3 Resolution of the dispute and subsequent reforms
In an attempt to conform to multilateral trade rules, following the successful WTO
challenge to the regime by the Latin Americans, the EU introduced a new system on 1 January
199926 that among other things abandoned the “B” licences. However, the new system was
once again successfully challenged, this time by Ecuador, which claimed that the EC had still
not complied with the previous Panel's decisions.
The earlier defeats in the WTO compounded by the US imposition on the EU of US$191
million worth of trade sanctions (the US levied duties of 100% on a range of imports from the
EU), more than anything else, completely changed the attitude of Member States. With the
dispute now costing their exporters, they were determined to end it and directed the
Commission accordingly.
In a surprise announcement on 11th April 2001 the Commission and the US Trade
Representative jointly confirmed that agreement was reached to end the dispute. Ecuador,
the winner of the last Panel, incensed that a deal was struck without its involvement, threatened
to initiate new proceedings in the WTO. To avert this, the EU quickly started discussions with
Ecuador. They were formally concluded on the 30th April 2001 with an agreement that left
intact most of the US/EU deal but made some minor changes to the proposed reform.
The Agreements were reflected in a new set of import rules enshrined in a Commission
Regulation adopted on 2nd May 2001 and the licensing system was changed to allocate shares
differently among operators. The EU undertook to replace the TRQ system by 1st January 2006
with a single tariff that would not impact negatively on Latin American bananas.
With the implementation of the Agreement, the US ended its sanctions and along with
Ecuador agreed to support the EU application within the WTO for a waiver for the EU-ACP
Cotonou Partnership Agreement. This was done at the Doha Ministerial Conference of
the WTO on 14th November 2001, and the EU was authorized by a “waiver”27 to grant trade
preferences to ACP countries.
4.1.4 Consequences for the Windwards
The Windward Islands, through their marketing company WIBDECO, controlled sufficient
import licenses to be able to handle their exports. However production was declining sharply,
due principally to the reduction in the number of farmers and the abandonment of farms.
The following shows the declining number of growers in the Windward Islands, falling from
24,100 in 1993 to 7,300 in 2001. The consequences of such a decline on rural employment and
income were massive since there is no evidence of sufficiently widespread establishment of
alternative productive activities.
Figure 4. Number of active banana growers
Sources : FAO and WIBDECO

in the Windward Islands, 1993-2001, thousands

26
The EC implementation measures are contained in the following regulations: i) EC Regulation No. 163/1998 amending the
contested parent EC Regulation No. 404/1993 which established the Common Organization of the Market in bananas ii)
EC Regulation No. 2362 of 1998 which laid down the detailed rules for implementing Regulation 404 of 1993. EC 1998 39
Regulations, No’s 1637 and 2362 were applied from 1 January 1999. We did all that.
27
See Glossary.
 It was not only the loss of direct and indirect employment (at the ports, in transportation,
production of packaging materials, etc.), which resulted from the decline in banana production,
but also the loss of national income due to declining export earnings from banana exports.
The following table (table 2) and chart (fig. 5) show what has been happening, in constant US
dollar terms.

Table 2 Banana Export Values (fob) (US$ million)

Year Windward Islands Jamaica Belize Surinam
Dominica St. Lucia St. Vincent Grenada Total
1991 32 60 34 4 130 49 7 10
1992 32 72 40 3 147 40 10 10
1993 26 55 25 2 107 36 12 11
1994 24 49 17 92 46 15 11
1995 18 52 25 2 97 46 22 8
1996 18 52 22 1 93 45 29 9
1997 18 37 16 - 71 45 26 24
1998 15 37 22 - 74 36 25 15
1999 15 34 20 - 69 29 27 21
2000 12 28 19 - 59 23 .. ...
2001 8 16 13 ... 36 ... ... ...
2002 ... ... ... 45 ... ... ... ...
Source WIBDECO (Windward Islands 1992-2002) FAO Yearbooks vols 47, 50, and 53.
Values for Jamaica, Belize and Surinam for 1999 and 2000 are from NERA.

Figure 5. Export values for bananas fob, 1991-2002, $US million

Source : WIBDECO

The economic consequences of such a massive loss of earnings by a sector whose income
rapidly circulated within the rural and national economies, was quite catastrophic. The ACP
Ministerial spokesman on Bananas, Senator Julian Hunte, addressing the 28th ACP-EU Council
of Ministers in May 2003 stated, "Dominica, one of the most vulnerable suppliers, has been so
damaged by the falling prices and resultant export volumes that its economy is literally on the
verge of collapse. It had to have recourse to the IMF but a turnabout would only be possible if
the country can again begin to earn sufficient foreign exchange".
4.1.5 2004 – EU Enlargement
In May 2004, 10 new Members acceded to the Union and in keeping with its WTO
commitments to MFN suppliers and the new Member States themselves, the EU increased
the "dollar" quotas. However, this still did not contribute to increasing the volume of exports
from the Windward Islands. The ACP quota had been left unchanged and in any event
Windward’s production and export had continued to decline, in part due to previous reforms
and falling investment as many farmers lost confidence.

That is a lot of people

to lose their work
40
4.1.6 More recent threats: Arbitration and the abolition of quotas
After a period of relative calm following the 2001 EU/US and EU/Ecuador understandings,
the next challenge for Windward Island bananas came with the dismantling of the tariff rate
quota system and its replacement by a flat or single
tariff in 2006. Just one tariff was to be levied on all MFN
imports. Given the differences between costs of
production in the Windward Islands and the most
competitive "dollar" suppliers, unless the tariff is
sufficiently high, the former would not be able to find
buyers for their bananas because their bananas would be
too expensive. Whilst the Windwards required a high
tariff under the 2006 flat tariff regime for their duty
free bananas to be competitive, the Latin American
producers resisted that. The lowest cost Latin Americans
such as Ecuador feared that a high tariff would increase
prices and depress demand, hence their exports would
decrease. The higher cost producers were concerned
that they would lose market share to the lowest cost
ACP suppliers. Many of the trading companies envisaged
that they would lose income as quota rent disappeared.28
Quite early, the Commission embraced the idea
of placing a ceiling on the volume of ACP bananas that
would be eligible for duty-free entry under the new
system. This could partially appease the Latin Americans and the European producers, the
Latin Americans and the European producers, who were concerned about the expansion of
exports from West Africa. This, though, would cause problems of its own for the ACP, unless
adequate safeguards were introduced, since the restriction of the growth of overall exports
would lead to the displacement of other, more vulnerable Members of the ACP Group.
According to the agreement reached at Doha in 2001, the EC, upon request, would
enter into consultations with any interested Member of the WTO that had interests in the EU
banana market. The Latin American suppliers had the right to take the issue to arbitration if
they were not satisfied with the proposed tariff level. The outcome that the Windward
Islands dreaded was that the tariff could be too low to provide a sufficient margin of
preference to permit their bananas to be saleable.
4.1.7 The CARICOM-OECS position
Facing such a grave threat to the banana industry that could well result in their complete
inability to continue to sell bananas to Europe from the start of 2006, CARICOM appointed
the Prime Minister of Saint Vincent and the Grenadines, as “the lead Head of Government on
bananas”. He quickly organised an International Banana Conference in Kingstown in June of
2004 to assess the prospects for the industry and chart the way forward. Its varied list of
participants included Prime Ministers and other high level representatives from the other
Windward Islands.
The conference renewed the islands’ firm commitment to the continued production of
bananas and to securing the future viability of the industry by taking the necessary measures
to safeguard it and ensure its sustainability. A detailed domestic strategy was drawn up, and
it included the minimization of costs and maximisation of efficiency at all stages of production,
handling, transportation, ripening and wholesale distribution; the application of more
innovative production and marketing techniques, as well as product differentiation such as
Fair and Organic Trade, and the greater utilisation of the tourist and regional market for bananas.
The conference agreed upon a “comprehensive, focused, action oriented, lobby and
political awareness campaign aimed at bringing about a more informed and favourable attitude
to our interests among decision makers in the EU.” 29 For this purpose a series of actions were
initiated, including a letter campaign to key EU leaders. To assist the CARICOM Spokesman
in coordinating the political campaign and to complement the work on bananas of the
Windward Islands Diplomatic Representatives, a Special Envoy to the EU was appointed.

28
See Glossary.
29
Extract from Communiqué following the International Banana Conference,St. Vincent & the Grenadines, 10 June 2004.
41
Just sticks and stones But we had
against their big guns guts too!
 The Special Envoy assessed and analysed the prospects for safeguarding market access
and recommended strategy and tactics to be pursued by the Windward Islands. He managed
a lobby campaign directly targeting European and UK Parliamentarians and leading
journalists, NGOs and others with influence in policy formulation in the EU. A website,
www.bananasontheline.com, was created to assist in getting the message to a broader
audience. An informal alliance that eventually became know as “The Friends of Status Quo”
was established, comprising selected Ambassadors, representatives of the European producer
organisations, trade union representatives, NGOs and certain marketing companies.
Information was regularly fed to and exchanged among the group. Other activities of
the Office of the Special Envoy included monitoring and analysing the rapidly changing
developments and reporting on them to Governments and providing advice on preferred
strategy and options.
Towards the end of 2004 the MFN suppliers and the Commission began consultations
for setting the level of the flat tariff that they had agreed would be implemented in 200630.
The talks, though, made little progress. The Latins were arguing for a tariff at a maximum level
of €75 per tonne whilst EU producer interests were advocating tariffs ranging from €275 to
€300 per tonne. The ACP had been seeking a tariff of €275 but initially did not insist on its
right to be fully associated with these consultations. The Commission announced at the end
of January 2005 that it would set a tariff of €230 and the MFN suppliers immediately had
recourse to WTO Arbitration and the WTO Director General appointed a three-Member
Panel. It was only at this stage that the ACP sought full participation. However, it was not
successful and was relegated to Third Party status.
Two Arbitration procedures were conducted during 2005 in Geneva, during which the
EU defended its tariff proposals of €230 and €187 respectively.31 Both ended in favour of the
MFN countries, and against the EU and the ACP who required a high rate in order to maintain
their access to the EU market. In the end, the Commission unilaterally imposed a tariff of
€176 euros on MFN imports, and decided that ACP imports should continue to enter under
a quota that was increased from 750,000 tonnes to 775,000 tonnes. This did not satisfy the
Latins, who contested the figure and raised the matter at the 6th WTO Ministerial Conference,
held in Hong Kong in December 2005. The Conference did not rule on the level but set up a
monitoring mechanism, under the supervision of the Trade Minister of Norway to assess the
impact of the new rate on imports from MFN suppliers. Despite this arrangement some of
Latins have had recourse to the Dispute Settlement mechanism of the WTO.
4.1.8 Beyond Cotonou
By 2008, the current Cotonou trade preferences for ACP countries would have expired.
Whatever replaces them will be determined by the current negotiations between the ACP
and the EU for new Economic Partnership Agreements (EPAs). However, the prospects for the
continued marketability in the EU of Windward Island bananas will depend not only on the
level of duty on “dollar” bananas and the nature of the preferences secured but also the
structure of the banana market in place at the time, which will impact on market prices and
security.
4.1.9 Charting a course for the future
The aim of the small Caribbean traditional banana suppliers at the start of the last
decade was simply to secure continued access to the EU banana market on a viable basis.
They sought to ensure that the changes to the regulatory system would be sufficiently benign
to ensure adequate preferential margins and high enough market prices. This was in the
context of general appreciation of the need for drastic restructuring of their banana industries
to substantially reduce costs of production to make the industry more competitive. Of greater
long-term significance was the acceptance that the agricultural sector and wider economy
would need to be restructured to create new sources of income and employment.
Despite their small size and lack of power in the traditional commercial and political
sense, these islands, through commitment and perseverance, were able, along with their allies
and supporters, to ensure that the banana import regime retained its preferential character

30
Annex to WTO decision on the waiver for EC-ACP Partnership Agreement - 14 November 2001 Doha.
31
The Arbitrator’s first decision indicated that the EU’s proposal of €230 did not maintain total market access for MFN
42
countries and the EU made a second proposal of €187.
and that the market continued to be regulated so that prices remained remunerative for their
farmers. Their problem however is that despite advances in efficiency, reflected in reduced
costs and improved quality, the differential between the competitive Latin American producers
and the Windward Island producers remains wide. Whilst these islands have achieved a
considerable measure of success in the battle over the regulation of the system, they have
been losing market share with their exports falling drastically, from 274,000 tonnes in 1992 to
99,000 tonnes by 200232. The result has been an increase in unemployment and sharp declines
in foreign earnings.
If the Windwards are to avoid the complete loss of the market before alternative
productive activities have been developed, they will need to ensure that regulatory changes
to the market over the next few years preserve the required favourable and preferential
access terms essential to their ability to dispose of their bananas in Europe. For their long
term economic stability and growth, it will be essential that continued attention is paid to
minimizing costs of production at all levels in order to reduce as much as possible the cost
handicap which they face. Most importantly, renewed commitment and efforts will need to
be put into diversification into new lines of agricultural and non-agricultural production and
services. The long banana fight by the Windward Islands, their supporters and allies, was not
to change the underlying economic and commercial realities militating against the Islands’
lack of competitiveness. However, the real achievement was to “buy them time” that could
be used to undertake the required diversification and economic restructuring.

32
Source: Windwards Islands Banana Development Company (WIBDECO)
43
Sold down
the river...again !
 C hapter 5
Sugar
For centuries the Leeward and Windward Islands had earned their livelihoods from the
production of cane sugar. The islands began to leave the industry from the 1950s and by the
beginning of the last decade only St. Kitts/Nevis remained in production. Its sugar exports to
the European Union were made possible by special guaranteed preferential arrangements
enshrined in the Sugar Protocol of the ACP-EU Cotonou Agreement. The secure earnings from
this trade contributed to stability of rural incomes and earnings from sugar exports, which
were the foundation for national economic growth and development. However, threats to
the regulatory basis on which this trade operated began emerging within the last decade. The
background and the recent experiences and challenges that faced St Kitts/Nevis exports and
those of other ACP producers are explored in this chapter.
5.1.1 The Sugar Protocol
The sugar industry is a dominant force in the economies of most of the ACP supplying
States. The following chart summarises its contribution to foreign earnings and employment.
Table 3 Contribution of sugar to employment and foreign exchange
Contribution to Foreign
Earnings Share of Employment
Country Year
% of % of total % of % of total
agricultural exports employment employment
exports in Agriculture
Barbados 2001 100% 12.5% 52.6% 1.8%
Belize 2001 22% 19.6% 51.2% 14.1%
Fiji 2001 67.4% 23% 12.8% 7.3%
Guyana 2000 65.2% 22.6% 32.2% 9.7%
Jamaica 1999 48.7% 8% 16.4% 2.9%
Malawi 2001 11.2% 9% 5.5% 1.3%
Mauritius 2001 89.6% 19.5% 80.2% 6.4%
St Kitts/Nevis 1999 92.3% 21.8% 58.27% 8.45%
Swaziland 2001 34.4% 9.4% 80.9% 8.6%
Trinidad & 2001 18.2% 0.6% 61.7% 4.8%
Tobago
Zimbabwe 2000 7.6% 3.3% 7.8% 2.1%
Source: compiled from Third Party Submission by the ACP Sugar Industries, to the WTO Panel. 18 March 2004.

The Sugar Protocol, originally signed on 28 February 1975, committed the European
Communities (EC) “for an indefinite period to purchase and import, at guaranteed prices,
specific quantities of cane sugar, raw and white which originate in the ACP States and which
these States undertake to deliver to it.”33 This arrangement initially boosted the development of
the sugar industry in St Kitts/Nevis and other ACP States and provided them with guaranteed
market access at predictable
and stable prices, which for several years have been significantly in excess of world market
prices. The latter had, in general, been too low to cover costs of production and offer a
remunerative return to ACP producers. Between 1990 and 2001, average EU prices were 61.14
US cents/kg as opposed to a 22.20 US cents/kg on the world market.34
The key elements of the Sugar Protocol from its Members’ standpoint are the guaranteed
purchases of a fixed quantity of sugar (1.3 million tonnes from ACP and India) and the annually
“negotiated” price, whose level is to be “within the price range obtained in the community
taking into account all relevant economic factors.” The preferential arrangements for the ACP
and India are part of a much broaderstructure, the Common Market Organisation (CMO) for
sugar in the EU.35 If for whatever reason changes in the character or operation of the Sugar
Protocol result in significant price declines, exporting countries will be obliged to reduce
costs of production, find new sources of replacement income or both.
5.1.2 Threats to the Protocol
Whilst the legal integrity of the Protocol has so far not been explicitly challenged, its
ability to continue to provide prices that are sufficiently remunerative, has been undermined.
33
Protocol 3 of the ACP-EU Partnership Agreement, Cotonou, Benin, 2000.
34
Milner C. R. and Morgan L.W. “The impact of the ACP of the reduction by the EU of import export subsidies on Sugar”.
44 35
This system also encompasses a production quota scheme, guaranteed price and intervention mechanism, export refund
programme and production levies operating within a unified and interlinked structure. That was a sweet deal
It is dependent on the EU’s CMO which is being reformed, causing drastic price cuts. Change
is being forced by both internal and external pressures, the latter coming principally from the
mandate set out in paragraph 13 of the WTO Doha Ministerial Declaration of 14 November
2001.
Negotiations that made reform imperative had already been launched in the WTO
since 2000 under Article 20 of the Agreement on Agriculture,36 but were given new impetus
when, in the following year, Ministers launched the Doha Development Agenda with its
ambitious plan for agriculture, to “establish a fair and market-orientated trading system
through a programme of fundamental reform encompassing strengthened rules and specific
commitments on support and protection in order to correct and prevent restrictions and
distortions in world agricultural markets.” Based on that objective, Ministers in their
Declaration, committed to “comprehensive negotiations aimed at: substantial improvements
in market access; reductions of, with a view to phasing out all forms of export subsidies; and
substantial reductions in trade distorting domestic support.”37
Even as these negotiations were proceeding, Australia and Brazil on 27th September
2002 filed a complaint in the WTO, alleging that export subsidies in excess of the EC’s approved
ceilings were being granted and that the provision of the guaranteed price, since it is available
only to domestic producers, violates the national treatment provisions of GATT Article III.
The complaints were followed by fruitless consultations and eventually a Panel, the
“European Communities - Export subsidies on sugar” was established on 29th August 2003 by
the WTO’s Dispute Settlement Body and was composed on the 23rd December of the same
year with Thailand joining in as a complainant.
The ACP sugar suppliers were Third Parties to the dispute and provided both written
and oral testimony. This dispute was less about the ACP than about Europe’s own production
support and subsidisation policies, the principal beneficiaries of which were its own farmers
who supplied the bulk of the market. Even if the ACP’s share of the EU market was small, the
exports were of overwhelming importance to the countries. The quota allocation of St
Kitts/Nevis was 14,800 tonnes accounting for virtually all of its exports to Europe. This is why
St Kitts & Nevis and the other Sugar Protocol Members were so determined to secure a
favourable result from the Panel proceedings.
The Panel ruled in favour of the complainants. The report was presented to the Parties
in the first week of August 2004 and the ruling was appealed, but the Appellate Body found
that certain EU sugar exports benefited from cross-subsidisation and that the EU had been
exceeding its export subsidy commitments. Reform of the CMO for sugar became clearly
inevitable and was being forced on Europe by the final outcome both of this dispute and of
the ongoing WTO Agriculture negotiations.
5.1.3 Reforming the EU Common Market Organisation for Sugar
Anticipating these pressures and obligations to “liberalise”, the EU Commission, in July
2004, announced plans for reform of the CMO. In a communication to the European
Parliament on the fourteenth of the same month, the Commission proposed: “A significant
reduction in two steps of the institutional support price for EU sugar with the abolition of
intervention and the introduction of areference price. This reference price will serve in the
establishment of the minimum price for sugar beet producers, the trigger level for private
storage, the level of border protection and the guaranteed price under the preferential import
mechanism.” It also noted that: “In addition, the proposal will provide the basis for initiating
a structured dialogue with EU partners in the developing world on the sugar sector, in order
to consider the manner in which the EU can best contribute to necessary and inevitable adjustment
in sugar production in African, Caribbean and Pacific countries (ACP) and India.”
As the EU Agriculture and Rural Development Commissioner, Mrs Fischer-Boel said to the EU
Parliament in June 2005, “The need for change is born of forces working both at home and
abroad.” That month, her Directorate put out a public document summarising the imperative
for reform as being driven by:
• The unacceptability of artificially high prices, currently three times those on the world
market. The reform would promote more market-orientation while the restructuring of the
sugar sector takes place. Ultimately market prices will revert to their intended role of being

“Continuation of the Reform Process” Article 20; WTO Agreement on Agriculture; Marrakesh 15th April 1994.
36

Doha Ministerial Declaration, 2001, paragraph 13.

37
45
 the (undistorted) factor in the allocation of resources and investment decisions.
• The ruling of the WTO’s Appellate Body against certain of the practices of the EU’s
sugar regime.
• The need to replace the existing sugar regime that is set to expire on the 30th June 2006.
Given EBA commitments and the WTO ruling, continuation of the existing system was rejected
as an option.
As outlined in the European Commission’s June 2005 statement, “The European Sugar
sector- Its importance and future”, it will “Substantially cut back sugar exports and export
refunds, abolish intervention, reduce EU production and the informal sugar price and grant a
de-coupled payment to sugar beet farmers”. According to the projections of the Commission,
support prices will drop by 36% over three years.
The negative economic consequences of such a major fall in prices and hence revenue
will be considerable. (There will be no increase in overall volume since the country allocations
under the Protocol are fixed). The Commission confirmed that it will assist the Protocol countries
and India to adapt to the new market conditions with programmes for improving the
competitiveness of the sugar sector, where it is economically viable, and provide support for
diversification, when improvements in competitiveness in the sugar sector are not sustainable.
5.1.4 Consequences for the Sugar Protocol Members
St Kitts/Nevis and the other beneficiaries of the Sugar Protocol are all small economies
and their very heavy traditional dependence on the income from their sugar exports to
Europe makes them particularly vulnerable, since changes to the system that result in income
loss or contraction of the industry are greatly magnified and can have severe consequences
for the entire economy. The Technical Centre for Agricultural and Rural Cooperation based in
the Netherlands computed the likely impact on national earnings for ACP States of the
Commission’s reforms. The following table summarises the projected loss of earnings.
Table 4 Projected loss of earnings
Sugar Current earnings Earnings After Income losses
Country Protocol euros Stage 1 reform from
quota(tonnes) (€523.70/t) (€329.0/t) reform euros
Belize 40,349 21,130,771 13,274,821 - 7,855,950
Congo 10,186 5,334,408 3,351,194 - 1,983,214
Ivory Coast 10,186 5,334,408 3,351,194 - 1,983,214
Fiji 165,348 86,592,747 54,399,492 -32,193,255
Guyana 159,410 83,483,017 52,445,890 -31,037,127
Jamaica 118,696 62,161,095 39,050,984 -23,110,111
Barbados 50,312 26,348,394 16,552,648 - 9,795,746
Madagascar 10,760 5,635,012 3,540,040 - 2,094,972
Malawi 20,824 10,905,528 6,851,096 - 4,054,432
Mauritius 491,031 257,152,935 161,549,199 -95,603,736
St Kitts/ Nevis 15,591 8,165,007 5,129,439 - 4,313,432
Swaziland 117,845 61,715,426 38,771,005 -22,944,421
Tanzania 10,186 5,334,408 3,351,194 - 1,983,214
Trinidad & 43,751 22,912,398 14,394,079 - 8,518,319
Tobago
Zimbabwe 30,225 15,828,832 9,944,025 - 5,884,807
Source: “Agritrade,” a publication of the Technical Centre for Agricultural and Rural Cooperation

The economic impact of such massive loss of income will be considerable and will force
ACP countries to adapt. Already St Kitts/Nevis has found that it is unable to continue under
these circumstances and has abandoned the industry altogether.
5.1.5 Securing and using financial support
At a meeting with CARICOM Trade Ministers in Guyana in January 2005, EU
Commissioner Mandelson spoke of the early provision of restructuring assistance that would assist
countries to prepare for the anticipated changes rather than seeking to adjust subsequently.

46 So they wanted
cheap sugar
The Commission put out a working document in the following month indicating its preference
for funding and delivery of assistance through country-specific sugar adjustment strategies in
the form of budgetary support. Project funding would also be possible but considered to
require too much bureaucratic effort. A compensation figure for the ACP of €40 million was
included in the Commission’s 2006 budget. Caribbean and other sugar suppliers protested
vigorously that this sum was inadequate. The actual figure has since been increased to €165
million in 2007, gradually increasing in later years and ending at €190 million in 2013. Though
substantial, this figure falls short of the earnings that the ACP envisages that it will lose as a
result of the reforms.
It could be narrowly argued that St Kitts/Nevis, having given up the industry, no longer
would be entitled to support for restructuring and diversification. It will take the country a
considerable amount of time to replace the income and employment from sugar cane with
new productive activities. Consequently a long-term programme of assistance is justified
and substantial external funding will be required. The challenge to the country will be to
demonstrate that even if it no longer has an industry to restructure, it remains fully entitled
to EU support for diversification.

Box 7 C o m m o n Fu n d fo r C o m m o d i t i e s

The common fund for commodities is an inter-governmental financial institution that was negotiated
in UNCTAD during the 1970s. It came into force in 1989 and has 106 Members. It provides financing for
development projects, with a commodity rather than country focus. It currently is operating a five-year
development plan (2003-08) with activities geared to benefiting commodities of interest to LDCs and the
poorer strata of the population and small holders as well as small and medium sized industries involved in
processing and trade. Projects that have been funded include cocoa quality improvement, pilot facility for
coconut coir processing, organic banana promotion, use of cassava in animal feed, cassava processing, forest
product processing.
The executive office of the Fund is located at P.O. Box 74656, 1070 BR Amsterdam, The Netherlands,
tel: 31 205 754 949, fax: 31 206 760231; e-mail: themanaging.director@common-fund.org

5.1.6 What future for sugar?

The ACP Sugar Protocol Members, especially St Kitts/Nevis will need considerable
and multi-faceted external financial and other support for the adjustment of their economies
as income and employment in the sugar industry decline or disappear. An essential component
of the adjustment process will be diversification of their economies. However a most serious
obstacle is the inadequacy of access to risk capital on affordable terms for entrepreneurs in
productive enterprises. Unless this obstacle is overcome, diversification programmes will
either fail or make unacceptably slow progress.
The offer made by the Commission to initiate dialogue with the ACP sugar suppliers
and to draw up tailor made assistance programmes, needs to be seized upon. This will ensure
that the programmes are consistent with national economic policies and that the scope and
terms of support are adequate. Also, it is for the countries to ensure that the funding and
support programmes are devised and administered in such a manner that they can have real
impact as intended. There is already experience with external support for adaptation and
diversification of the banana sector using Special Framework of Assistance (SFA) and Special
System of Assistance (SSA) funds. It would be in the interests of ACP sugar suppliers to learn
from that record.

47
 Box 8 Rum
The Rum Protocol of the ACP-EU conventions of Lomé had given to the ACP, essentially the
Caribbean, a quota for duty free entry of bulk rum to Europe, where it was bottled. However, in 1996, the
Protocol was effectively abandoned. In that year, the quotas on ACP rum were lifted and the Caribbean was
therefore for the first time able to freely export rum to the EU, including bottled rum. The advantage did not
last very long and in March of the following year, Europe and the US agreed to lift their tariffs on four of the
eight customs classifications of rum. This would considerably reduce the tariff preference that the Caribbean
had previously enjoyed. This was the result of an agreement reached in the margins of the WTO Ministerial
Meeting in Singapore known as “zero for zero”. This EU/US trade deal, reduced duties over a phased
transitional period (2000-2003) not only between the two parties, but also on imports from all other WTO
Members in keeping with the MFN principle.38
Caribbean Governments and the West Indies Rum and Spirits Producers Association (WIRSPA), who
only learnt of the deal subsequently, were incensed that the US and the EU had arrived at it in secret. Following
vociferous Caribbean protests and intensive negotiations the EU agreed to provide support for the ACP rum
producers. A Declaration, number XXV, was agreed upon and appended to the Cotonou Agreement. It was
aimed at providing support for the rum industries of the ACP sector to achieve the following:

- Enhancement of the competitiveness of existing exporters of rum;

- Assistance in the creation of rum marques or brands by ACP region or country;
- Enabling of marketing campaigns to be designed and implemented;
- Assistance of ACP rum producers to meet environmental and waste management standards and
other norms in the international markets including the Community market;
- Assistance of the ACP rum industry to move out of bulk commodity production into higher value
branded rum products.
The most innovative feature of this €70 million EDF support scheme was that it was managed by the private
sector rather than being channelled through the public sector.
The Caribbean rum industry used this support to help in its branding, bottling and marketing, which
has permitted a greater degree of value addition in the region itself and secured greater economic benefit for
exporters. The aging, blending and bottling processes permit substantially higher selling prices and earnings
than from the export of bulk rum.
A new threat however is looming. The EU is determined to proceed with the liberalisation of those
remaining rum tariff lines on which it still maintains duties but had agreed with the US that it would lift. This
would complete the elimination of the remaining tariff preference enjoyed by Caribbean rum exports to the
EU. The Caribbean exporters argue that they do not oppose liberalisation but urge the EU to avoid the
precipitate lifting of the remaining protective tariffs. This, they fear, would have a devastating impact on the
industry by exposing it to increased competition from other producers like Brazil.

Conclusion
The recent experience of commodity trade has been mixed. However the economic
contribution of those productive activities is undeniable. The essential problem that the
OECS faces however, is that largely because of relatively high labour costs, small size and
difficult terrain, they are high cost producers of agricultural goods - not only the traditional
crops. This is a key policy concern to them. The factors that have prompted traditional
commodity production to be caricatured as “sunset industries” would equally constrain the
achievement of international competitiveness in other areas of agriculture.

Sunset industries
or economic base?

See GATT/WTO principles, chapter 3:2.

38

48
Box 9 M a k i n g t ra d e p o l i c y
Like other national policies, trade policy is conceived and developed by the Government
administration, principally the Ministry responsible for foreign trade, with the involvement of other Ministries,
though the extent varies from island to island. The Ministry takes into account the interests of the country as
a whole and seeks to reconcile views of the business community, professional organisations, workers,
consumers, and others. In the end therefore, the policy is one to which not just the Ministry has ownership,
but the entire Government, and it enjoys national commitment.
National policies often have to be taken to a higher level, that of the OECS. Here, they have to be
reconciled, refined and coordinated. The institutional mechanisms for those tasks are the Trade Negotiations
Committee, which meets at the level of officials and the Trade Ministers, who meet periodically. The supreme
rule-making body is the Authority of Heads of Government. Via this route, OECS-wide policies are devised.
The OECS Secretariat and its Trade Policy Project facilitate this intergovernmental coordination.
The OECS might often wish its policies to be incorporated into wider CARICOM policy or
alternatively, to influence development of the latter. The organ with the principal responsibility for policy
coordination at the CARICOM level is the Council for Trade and Economic Development, (COTED) which
meets regularly at Ministerial level. All OECS countries are represented on COTED. The Regional Negotiating
Machinery coordinates negotiations and regional positions.

So that is
how they do it. 49
 C hapter 6
Tourism and other Services
The issues in multilateral negotiation

With the combined effects of the erosion of preferences for traditional agricultural
exports and the islands’ relatively high wage structure making it difficult to compete in
agriculture and labour-intensive manufacturing, the services sector is widely seen as the
hope for the future of the OECS. After all, world trade in services has been growing at an
average of 9% since 2000, reaching a value of US $2.1 trillion in 2004. Conventional wisdom
might suggest that increased focus should therefore be placed on services in trade negotiations.
One of the prerequisites for success in multilateral negotiations is clarity and precision
of interests and goals. However, since the multilateral services negotiations have already
begun and are being conducted along set principles, the OECS has to draw up its position to
fit into the already existing framework. Hence, its strategy must be fully informed by and
coherent with the broader negotiating processes. This section reviews the issues and considers
the options for the OECS.
The fundamental aim of the WTO’s General Agreement on Services (GATS) is the
liberalisation of trade in services. In other words, the removal of governmental restrictions on
trade and the promotion of international competition, the fuller extension to services of the
most favoured nation (MFN) principle and ultimately subjection to the other principles of
non-discrimination and national treatment. The negotiations have been about the removal of
restrictions both through changes to the Agreement in which negotiators have been seeking to
more fully reflect core WTO principles in the framework for services regulation and on a
“request and offer” basis. Here, participants volunteer to reduce, remove or phase out the
restrictions that they place on foreign service-suppliers and their services and make specific
requests for improved access for their own service exports to identified markets.
6.1.1 What are the OECS’ interests?
The services sector in the Caribbean has been growing steadily over the last half
century, at an average rate of 5% per annum, and OECS countries have been sharing in that

50
growth. The following chart (fig. 6) indicates the value of services trade to the islands and
illustrates that unlike trade in goods, the islands all earn more from their export of services
than they pay for those that they import.
Figure 6. Services Trade of the OECS, 2003

Source: WTO

Not surprisingly, given the region’s natural beauty, proximity to North America and
Western Europe, the perception of a relaxed “sun, sea and sand” island lifestyle, the
Caribbean is the most tourism-intensive region in the world and has an absolute international
competitive advantage in tourism. To illustrate, the North American tourist will choose to
buy a Caribbean holiday, but the European finds the Windward Island banana too expensive.
As a result of the heavy international demand for Caribbean holidays, tourist arrivals increased
by an average of 2.9% since 1990 and, according to the World Travel and Tourism Council
(WTTC), the region hosted 30 million visitors in 2003.
Other service activities that have been growing include offshore education. Currently,
70% of the international medical graduates entering US colleges are trained in the Caribbean
with the majority trained at schools in Grenada and Dominica. The temporary movement of
workers to Canada and the US under farm labour schemes is also important. This is considered
as a trade in services and is referred to as Mode 4 in WTO terminology.
Another area that is considered to offer promise is that of financial services, which
currently account for 5.2% of world services trade. All OECS countries have special legislation
to attract and regulate international financial services. Opportunities have also been sought
in Information and Communication Technology (ICT).
The questions facing the OECS are what role, if any, would multilateral negotiations
play in advancing the development of these sectors and how should they be approached ?

We can use our

brains too 51
 6.1.2 Tourism
Tourism plays a vital role in the island economies as mentioned earlier. The following
figures (figs. 7 to 9) indicate the importance of the sector, showing the large numbers of visitors
and the considerable income that the sector generates.

Figure 7. Tourist arrivals in the OECS, 2004 (thousands)

Source: ECCB

Even before deciding on the stance to be adopted in negotiations, interests and

consequent goals need to be clear. The first question to be addressed is therefore what does
the OECS need from tourism? The goal is growth and development of the sector and its fuller
linkage with and integration into the rest of the economy. The realisation of these objectives
is dependent largely on investment decisions, domestic policy and regulation and relative
attractiveness of the destination. Whilst the WTO negotiations can impact on the foregoing,
they do not directly influence growth and the development of the tourism sector in the
islands. They may, however, constrain the flexibility of governments to use certain policy
measures aimed at promoting expansion of the sector and its fuller contribution to the
domestic economy.
The ongoing WTO negotiations pertaining to “Tourism and Travel Related Services” are
not about growth and development per se. Members have, instead, been addressing the
extent to which initial offers tabled can contribute to advancing such aims as the facilitation
of movement of natural persons supplying services in Tourism and recognition of their
qualifications; elimination of anti-competitive practices and unfair competition; elimination
of requirements for commercial establishment or presence and of nationality or residency
requirements.
A key objective of OECS Governments is to ensure that the relative attractiveness of
the islands as a destination for foreign investment is maintained. In this regard, an important
factor can be the support granted by governments for the establishment of hotels. OECS
Governments provide exemption from income tax and from import duty on building materials
and equipment for hotels. This device has been a key incentive in their hotel development
strategy. These are seen as being in breach of current WTO rules on subsidies, even if the rules
on subsidies in the services sector are subject to negotiation.
It could be argued that given the attractiveness of the islands for tourism, the hotels
would have been built anyway and by exempting the sector from certain taxes, the islands
have been depriving themselves of well-needed revenue. The retort might be that the
investment might then have been sited on another island. However investors can oblige the
islands to compete against each other in their pursuit of maximum fiscal advantage.

We have
a paradise here
52
 If the tax and duty waivers (subsidies) were prohibited in all countries, such implicit
competition that benefits the investor at the expense of the State would not be possible. No
island would suffer any change in its relative ability to attract hotel investors. On the premise
that the Caribbean is an attractive tourist destination, overall investment in the industry
should not be affected. Of course even if such adherence to the disciplines prohibiting
illegal subsidies is accepted, OECS countries might need to seek a grace period to satisfy their
legal obligations to existing investors and adapt their investment promotion strategies.

Figure 8. Estim. value of expenditure, EC$ m, 2004. Figure 9. Estim. % total tourist expenditure, 2004

Source: ECCB

6.1.3 Financial services

Exploiting certain niches in the area of financial services seems to promise benefit for
the islands. However these opportunities can be inherently unstable since very often they
depend on specific provisions in existing legislation and regulation in particular foreign
countries that provide an advantage to individuals and firms to deposit in, transit funds or
conduct business through offshore jurisdictions. Should that advantage or facility disappear
or be reduced by changes to the legislation in the source countries or because of international
regulation, e.g. via the OECD’s Harmful Tax Competition Initiative (HTCI), then the niche itself
could cease to exist.
The survival and growth of offshore financial services is subject not to multilateral
negotiation in the WTO but rather to policy in source countries and international groupings
like the OECD where OECS countries have little direct influence.
6.1.4 Information and communication technology (ICT)
Information and communication technology (ICT) had been perceived as offering promise
for investment in the islands. Hence negotiating deregulation and liberalisation that remove
restrictions in this area should make sense. However, the OECS has not demonstrated
substantial ability to attract and retain such
investment. A recent example was that of Call
Centres Antigua Ltd, which was set up as a
joint venture with the Government. Its goal of
creating a skilled workforce of 800 was not
met, the most it ever employed was 200 and
it eventually closed.
Another service industry in which
Antigua and Barbuda ventured is Internet
Gaming that was providing high-tech jobs of
US $750 per week. However various US federal
and state laws that prohibited the cross-border
supply of gambling and betting services ham-
pered the operations. Antigua and Barbuda took the matter to a WTO Dispute Settlement
Panel and won, then, through an Appeal process where its case against the US was largely
upheld. However, there is no indication that the US will revoke the restrictions. The lesson of
this case is that the continued viability of such an industry is largely at the mercy of policies
in other countries over which OECS countries are likely to have no control.

I know where
the real money is
53
 6.1.5 Mode 4
The temporary movement of workers from the OECS has been going on for many years
within bilateral agreements (for example the farm labour programmes with Canada and the
USA). Since access is not made available to workers from all countries, the conformity of
these agreements to WTO principles of non-discrimination can well come under closer
scrutiny. It is therefore in the interests of the OECS to promote and campaign for the extension
of the authority for such agreements.
6.1.6 Other negotiating aims
The OECS would also have concerns regarding the ability of its professionals to operate
in other countries but, given issues of small size, this is not a major negotiating aim. It also has
defensive interests regarding the protection of certain domestic services (such as small scale
retail, utilities, construction etc) that are not yet in a position to withstand full international
competition. Fortunately, these concerns are shared by the many other developing countries,
such as the rest of the ACP and the LDCs. Hence there is a block of Members already arguing
for those safeguards and policy flexibilities that OECS countries wish to have reflected in the
rules.
Conclusion
Services negotiations are of key concern to OECS countries. However, their interests are
largely defensive, viz. to ensure that their “policy space”39 and the bilateral arrangements from
which they benefit are preserved and their “infant” service sectors are not wiped out by
premature exposure to full deregulation. The development of the services sector is of major
importance to the OECS countries but mere participation in current multilateral negotiations
aimed at liberalisation will not make any substantial direct contribution to that goal. Rather,
the growth of the services sector will be facilitated by the appropriateness of domestic policies,
the adequacy of investment and whether international conditions are favourable.

The scope for flexibility that is available to governments to select and use policies of their choice.
39

54
 Earlier sections have sought to explain and
demystify the working of the trading system. This final
chapter explains some of what the islands need to do in
order to ensure that they can actually benefit from the
multilateral system.
The Way Forward
•Diversification
•Environment
Section
3
C
•Tools of Negotiation
hapter 7
Adopting new approaches

7.1 Diversification and development

7.1.1 A role for the private sector

Whilst Government representatives deal with the regulations and structures of
international trade and economic relations, in free market economies like those of the OECS,
investment in productive activities is principally undertaken by the private sector. It actually
produces the goods and services that are traded. Hence, the success of diversification
ultimately depends on their adaptation and the creation of production structures.
Reliance on trading in just one traditional commodity, tourism or one of the new service
sectors will not be enough to secure the economic future of OECS countries. Instead, the
islands need a range of productive activities that generate employment and income. This is
so even if small size and limited natural resources make it hard for them to be competitive in
a range of activities. The key reason is that economies of scale are often required in several
areas, but the islands might not have the capacity to produce the minimum volumes that
would permit them to be internationally competitive. As a result they have relied on
mono-crop (or single industry) production. Their specializing permits them to be able to
produce at the lowest unit price and thus helps them minimise their size disadvantage.
However, external shocks and slowdowns in specific export sectors are inevitable; so if the
economy relies for its income on a range of activities, it could continue to make overall
progress and grow, even when one particular industry slows down or suffers a reversal.
A diversified production base is essential for balanced and sustained economic growth
and development of the OECS. Furthermore, the traditional sources of income and employment,
bananas and cane sugar, are being lost. Admittedly, it was rational to seek to maintain for as
long as possible the preferential arrangements that permitted these commodities to be sold
at relatively high prices in the secure and protected EC market. The strategy of seeking
to prolong the protection, which defined policy for many years, has contributed to the
continuation of the arrangements that permitted the marketability of their bananas.
However, with the reforms set in train by the EC, the advantages that permitted their
traditional exports to be sold on a remunerative basis are disappearing. St Kitts/Nevis has
had to abandon the sugar industry and the prospects for Windward Islands bananas are bleak.
To view the policy of safeguarding current marketing arrangements as a substitute for
diversification could be a mistake. Instead it was the countries’ attempt to “buy time” during
which diversification could take place in a stable environment without the catastrophic
shocks of massive employment and foreign exchange losses that would result from the sudden
demise of these traditional industries.
However, diversification is not easy for very small single-commodity exporters. In fact,
their economies were structured that way in the first place largely because, given their size,
such extreme specialisation permitted them to make fullest use of their limited scope for
economies of scale. The process of diversification, though, is not simply switching reliance
from one existing industry to another single crop or industry. If the countries are to develop,
the production base will have to be extended to a mix of industries turning out a range of

Don’t put all your eggs

in one basket
55
 goods and services in which they have an international competitive advantage. Even if actual
investment in productive and income-generating activities is undertaken principally by the
private sector Government has an indispensable role in providing support and creating an
environment that is conducive to business and risk taking.
The need for support
Governments have an essential role in creating favourable conditions for private sector
led diversification and can make the following contributions:
1- Provide a predictable, stable and supportive environment for business (both local and
foreign);
2- Provide institutional support and investment incentives for marketing, exporting and
improvement in technology and standards; and
3- Promote the upgrading and adaptation of the labour force and of managers through
adequate investment in appropriate technical education and skills training.
For certain of these activities Governments will invariably require donor assistance.
At the national level there is need for clear commitment to diversification and the
support for investment in new areas of productive activity where the OECS is competitive.
A key role for Governments will be to devise and administer investment incentives and
inducements that are coherent with their policies for diversification into new areas in which
the countries have existing or potential advantage. The signals sent to investors in existing
and new industries, through incentives etc., must be rational and clear with no masking of
market realities pertaining to international competitiveness. Incentives that promote
investment will be essential but where the beneficiaries are in activities with no economic
future, they will invariably prove to be counter-productive.
Even though the right signals and institutional and other support facilities are available,
entrepreneurs, particularly in new or non-traditional activities often face severe obstacles,
the most widespread of which is inadequate access to financing. This manifests itself in three
ways: 1) Exorbitant cost of capital in terms of interest rates;
2) Repayment periods that are too short in relation to the project’s envisaged income-
generation patterns;
3) Excessive collateral requirements; i.e. the security required to borrow from banks.
External grant and concessionary funding can be used in such a manner as to overcome
these impediments. These difficulties are quite common among developing countries
and to varying degrees have been recognised by international institutions such as the
Commonwealth Secretariat and even the European Investment Bank. It will be essential that
arrangements be devised to ensure that entrepreneurs can access investment funds on a
reasonable basis that does not place them at a disadvantage to their international competitors.

56
7.1.2 The experience of external support
The Windwards have received considerable financial support from Europe for their
diversification. Firstly, the EU introduced the Special System of Assistance (SSA) in 1994 by
Regulation 2686/94. The amount provided under the SSA was €78 million during the entire
four year programme. The Special Framework of Assistance (SFA) established by EC
Regulation 856/99 replaced this system in 1999. Funds averaging €45 million were made
available every year. A study by external consultants40 to evaluate the efficiency, effectiveness,
impact and viability of the arrangements recommended that priority in future should be
given to diversification. Steps were certainly taken to implement the recommendations, for
whilst diversification projects accounted for 12% of SFA funds in 1999, by 2002 they were
using up to 64% of the total. During the four years 1999 to 2002, out of a total of €176.18
million, the bulk of the funds, €118.33 million, nonetheless went into projects aimed at boosting
productivity. Diversification projects accounted for €14.84 million in Dominica, €24.9 million
in Saint Lucia, and €6.10 million in St. Vincent.
7.1.3 Was the support effective ?
According to the European Commission, the Windward Islands,41 which received a
substantial portion of the total assistance, have not made considerable progress in
diversification.42 In a 2003 evaluation of the SFA, the UK based consultancy firm, Landell Mills
Ltd., highlighted various short-comings including unclear objectives, which permitted
considerable influence of individual decision makers with negative consequences, unrealistic
expectations and an ill-defined approach to diversification. By the end of the last decade,
there was much greater enthusiasm and commitment but, nonetheless, the pace of actually
getting the projects operational has been slow. This was due to a number of factors, but it
should of course be appreciated that it is only a few years since the Islands’ serious acceptance
of diversification as a policy imperative. Given that diversification in single-commodity
exporting countries is a long-term process, it probably is too soon to expect dramatic results
in the Windward Islands. However, there might have been scope for more result-oriented
management of the process, particularly assisting and encouraging investment in new areas
of productive activity and ensuring the transmission of clearer market signals to entrepreneurs.
The experience of banana suppliers to mobilise and apply EU funding for diversification
provides useful guidance, not for replicating the experience but learning from it so as to avoid
pitfalls and errors and building on its lessons. Maybe the most important lesson is the need
for genuine commitment in the country to economic diversification. This might seem
superfluous, but without such commitment there cannot be the consistency of policy or the
adequacy of institutional support and facilitation needed for what would invariably be a
particularly challenging enterprise. This entails fundamental economic restructuring, and not
simply the selection and introduction of a replacement crop or service activity. The search
has to be for a range of new areas of productive activity in which the country has or can
realistically expect to develop a comparative advantage. Such identification and development
of new industries requires long term vision and programming with implementation within a
consistent policy framework. Indeed, the Commission itself recognised this as essential and,
in its report to the European Parliament on the 23 December 2002, undertook to explore the
possibility of devising multi-year action plans.
The islands, however, face severe impediments that make it more difficult to switch to
and develop new industries. These include:
- Labour market rigidities. Although the OECS has surplus labour there is inadequate
flexibility in the labour force; workers do not move rapidly from one industry to another;
this is in part because they lack the skills and training;
- Undeveloped capital markets that do not mobilise sufficient funds for investment or in
general make risk capital readily available for new ventures on reasonable terms,
particularly to entrepreneurs who are not yet established;
- The small size of the domestic market that obliges reliance on exports even in the current
context of the decline of trade preferences and the intensification of international
competition.

40
Hubbard M, Herbert A and Roumain de la Touche/ Evaluation of EU assistance to ACP banana producers.
41
Except for Grenada which has an historical trade in spices and cocoa. If not bananas, 57
42
Gary Melville, “Situational analysis of the Agricultural Sector of the OECS Member Countries”. Dec. 2002 what else ?
 Conclusion
Diversification is a prerequisite for the development of small mono-crop or single
industry developing countries. That will only come from investment in new enterprises that
creates income, employment and growth, the task of the private sector. The banks are essential
for mobilising and providing risk capital on acceptable terms to entrepreneurs. Governments
however have a crucial enabling role in creating and sustaining a climate that is conducive to
productive investment and risk taking and must provide support for the development of the
private sector.

Box 10 I n t e r n a t i o n a l Tr a d e C e n t r e
Whilst UNCTAD operates at an intergovernmental and Public policy level dealing with such issues as
helping governments formulate diversification policies, the ITC works with the business community. Like
UNCTAD it was set up in 1964 and supports firms in developing countries to develop exports with an emphasis
on competitiveness.
The ITC is located in Geneva and uses several hundred consultants to actually provide the specialised
assistance required by the business community, particularly small and medium sized enterprises. The
governments of beneficiary countries provide the liaison services for the ITC. Hence business people needing
assistance contact first the Trade or other designated Ministry in their home countries.

7.2 Trade and environment

As small islands that are prone to natural disasters and most vulnerable to the adverse
consequences of climate change, OECS countries have a keen interest in ensuring that the
multilateral trading system supports rather than detracts from environmental protection.
A brief assessment is undertaken below of the linkage between international trade and
environmental issues and concerns.
Environment and sustainable development issues are an integral part of the agenda of
the multilateral trading system. Even though not currently at the centre of the debate, in
devising the long-term regional negotiating strategy, these issues will have to be given due
prominence. The question is how will the focus on environmental and sustainable development
concerns improve the OECS’ trading position or how could the islands benefit from
incorporating these concerns into their trade policies? Such a focus has the potential to create
additional opportunities for growth and expansion. Examples can be the production of
environmentally friendly products from timber and non-timber forest products using
Dominica as a base and targeting developed country markets. Closely related to this would be
a range of issues including intellectual property, the protection of traditional knowledge etc.
Where there is recognition of environmentally- sound and sustainable production
methods, exports can attract higher prices e.g. organic fruit and vegetables. Also in certain
disputes and negotiations, it can provide valuable “moral” leverage for a country.43 Eventually
international regulation of environmental measures can provide advantages in the case of
restriction of market access due to non-compliance. The critical issue for the region, in this
context, is to ensure that measures are put in place to facilitate their effective participation
in the international standard setting processes so that their concerns are addressed and that
the necessary resources and conditions are put in place to assist them in complying with the
international standards embraced by the multilateral trading system. A laissez-faire approach
to environmental and sustainable development issues on the agenda of the multilateral trading
system could well work to the disadvantage of all countries in the long term.
At the initiative of Barbados, the United Nations held a conference on Environment and
Development in 1990, which called for attention to be paid to addressing the vulnerabilities
of Small Island Developing States (SIDS) and the promotion of their sustainable development.
A specific work programme, the Barbados Plan of Action (BPOA), was adopted that recognised
the special environmental security and development requirements of SIDS. A UN Summit
held in Mauritius in 2005 adopted a strategy for the further implementation of the BPOA. In
view of the UN’s recognition of SIDS as a special case for environment and development,
there is also a case for special attention, within the WTO work programme on
Small Economies, to address the needs of SIDS, as defined by the UN. The WTO, though,
has not recognised the special needs of SIDS as distinct from those other small economies.

43
In order to capitalize on this Dominica is working on being categorized as an Organic Island.
58
Keep it clean
and tidy
 This would, however, demand greater clarity of the criteria for determining which countries
should be categorized as SIDS. Definitional precision is a key element in advancing the interests
of SIDS in the multilateral trading system, since it would be difficult to formulate a Work
Programme for them without a clear understanding as to whom the Programme is being
designed to benefit.
From the SIDS’ standpoint, two essential concerns emerge in the debate; firstly, that
trade should not cause environmental damage, degradation or loss of biodiversity; and
secondly, that the multilateral system makes provision that accommodates
the special vulnerability of small islands like the OECS.
Several studies have been undertaken and negotiations conducted within
the framework of the WTO to seek to better understand the relationship
between trade and the environment. A lot of the emphasis was placed on
ensuring that environmental protection would not be misused as an
excuse to impede trade. As the negotiations and the understanding of
the issues have progressed, certain goods and services have been classified as “environmental”.
Their production and trade can have a positive or negative impact on the environment. An
example is those plants that can be important for halting erosion on hillsides. Campaigners
have therefore advocated that special incentives should be provided to support production,
trade or regulation of the products of such plants.
A service with major environmental impact is tourism. Large numbers of stay-over and
cruise ship visitors and the facilities that support them can place a strain on the fragile
environment of small islands. Hence governments seek to ensure that they retain enough
policy flexibility to adequately regulate the industry to prevent it from undermining the
environmental integrity of the islands. For instance, one of their aims is that international
rules do not preclude the imposition of environmental taxes.
A related area could be the restriction or prohibition of the export of certain items to
avoid damage to the environment or depletion of particular resources or the loss of
bio-diversity. Examples could be restrictions on removal and export of coral from reefs or
trade in endangered plant or animal species.
In the contexts of the debates over the EU banana and sugar regimes, OECS countries had
argued that their production of bananas and sugar cane fulfil a particular role in safeguarding
their environment. They pointed out that these plants slow down soil erosion and given their
short production cycles and rapid regeneration following wind and flood damage, are ideally
suited for islands that are located in the hurricane belt. The argument they have advanced is
that even if production that is environmentally friendly is more expensive, the cost should be
taken into account in the selling price of the end product. Alternatively preferential terms to
support trade of products that benefit the environment could be provided.

Box 11 M i l l e n n i u m D eve l o p m e n t G o a l s ( M D G s )
The UN Millennium Summit of September 2000 unanimously adopted a Declaration “of values,
principles and objectives for the international agenda for the twenty first-century”. It acknowledged collective
responsibility of Governments to uphold human dignity and recognised equality and equity. It pledged to
eliminate extreme poverty. Whilst the Summit agreed to work for open and non-discriminatory multilateral
trading and financial systems, also set specific targets, the MDGs as a way of monitoring the implimentation
of those goals. The following is a list of those goals and indicates how Latin America and the Caribbean have
so far been performing.
Goal 1 Goal 2
Reduce extreme poverty by half- Off target Achieve universal primary education
Reduce hunger by half - On target On target
Goal 3 Goal 4
Source: UN MDGs report 2005

Promote gender equality/ empower women Reduce child mortality by 2/3rds

On target On target
Goal 5 Goal 6
Reduce maternal mortality by 3/4 Combat HIV/AIDS- halt and reverse
Off target Off target
Goal 7 Goal 8
Ensure environmental sustainability Develop global partnership for Development
Progress mixed

59
 7.3 Negotiation- Using trade diplomacy to advance national/regional goals
The economic prospects of small open economies like those of the OECS are largely
fashioned by external, forces and developments. If their aspirations for development are to
be realised, then the external environment must be benign. But such small developing countries
often feel powerless and overwhelmed in the face of major international developments and
trends, and even more so during the current wave of global trade liberalisation. The result is
that they can be hesitant about seriously and constructively engaging in international trade
diplomacy because they might privately view efforts on their part as largely futile.
It is true that a vast portion of multilateral regulation and negotiation could be beyond
the means of individual OECS countries realistically to actively and effectively manage.
Formal negotiations take place within the WTO framework in Geneva, as well as between the
ACP and European Union in Brussels, for the FTAA, within the CARICOM etc., in addition to
the plethora of informal and ad hoc negotiations. For all of this, the required skilled manpower
and financial resources are not always available.
An additional challenge is that, in general, small countries like the OECS Members lack
significant political and economic power to back up their negotiating stances; hence outcomes
for them are primarily dependent on the actual performance of their negotiators at the table.
Courtesy Alec Singh

Since OECS countries must seek to survive and develop, no matter how hostile the
international environment, they need to find the means of bringing about change that is
conducive to their interests. Their key method is collaboration and cooperation within the
OECS and CARICOM regions. This entails the preparation and articulation of joint positions,
which greatly assist individual countries by permitting their interests to be represented and
advanced by fellow Members of the grouping, even when they cannot be physically present.
Of course, to be meaningful, this arrangement must be accompanied by effective prior
agreement on reconciliation and incorporation of national positions into the sub-regional or
regional positions. Facilities for oversight, monitoring and reporting to the national authorities
are essential. It is though still necessary to prioritise and be selective regarding the activities
to be pursued. After all, even the collective resources of the sub-region and the region are
inadequate for the effective and consistent representation of the countries’ interests in all
areas of international economic negotiation.
Based on experience and lessons of the past, the following principles have been identified and
can provide guidelines in the use of trade diplomacy to achieve national and regional goals
of small countries like the OECS:
• Small size and consequent lack of commercial and political power do not, on their
own, preclude countries from exercising influence in international decision-making and over
events that impact on their vital national interests. As a very first step in becoming effective,
the representatives must fully understand and appreciate what is in their real national interests.
They would then define clear, readily articulated and comprehensible objectives to which
combined national effort can be devoted in a coherent and consistent manner.

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 • Achieving the ambitious task of securing favourable international conditions and or
change by any country or group requires substantial and continuous political and diplomatic
commitment. For small developing countries, with limited political and commercial power,
visibility or influence on the international stage, the amount of resources to be invested
would be considerable which, given their limited human and financial resources, would
invariably constitute a major portion of what is available nationally. The implication is that if
they are to have real influence, small States are obliged, whether alone or with their allies, to
concentrate their efforts on achieving their priority goals.
• It is a truism that the stronger the international opposition to the particular goal/s
being sought, the greater the commitment of resources and effort that will be needed.
Though the formulation and skilful presentation of valid arguments are essential prerequisites
for changing or influencing the positions of governments and of major institutions, particularly
for small States, considerable effort beyond the negotiating table is also required.44 The
frequently encountered unwillingness of negotiators, when facing weaker partners, to concede
even if presented with irrefutable arguments, could be due to a number of factors including
a resistance to change already endorsed decisions or positions (sometimes simply bureaucratic
inertia). Also, it is often the case that the representatives sent to negotiate on behalf of major
countries or institutions are not the real decision makers but are instructed by superiors and
influenced by other entities such as national Parliaments, public opinion or even third countries,
international institutions or the business community. When presented with convincing
arguments that conflict with their original national or institutional mandates or perceived
interests, these interlocutors who engage in international negotiations would of course be
expected to seek adjustment to their brief or national position. However, when they face
relatively weak States that lack coercive or retaliatory power, they might not feel the necessity
to undertake the required negotiations with and/or persuasion of their superiors, legislatures,
business and other interest groups in order to be able to accept the position that the small
States have successfully championed but are in conflict with their own.
• Partly as a result of the above, as the OECS seeks, through lobbying and negotiation,
to change the position of more powerful countries, it will need to employ more than the
tools of traditional diplomacy in which the target is not just the executive arm of the host
Government and the interlocutors at the negotiating table. In contemporary developed
democratic societies, influence over decision-making is diffused; hence the alternative
approach of public diplomacy aimed at generating favourable public opinion would need to
be added to the arsenal if campaigns are to be won. This approach also applies when the target
for influence is an international institution.
• The historical association of many small States with major powers can sometimes
result in an over-reliance on and trust in international goodwill and dependence on friendly
developed countries to secure their interests. Whilst there is evidence of such principled
commitment, it could be uncertain in the long-term or when the small States' aims are in
conflict with the national interests or priorities of their "benevolent partners". Hence, the
OECS countries have the ultimate responsibility for achieving, through their own domestic
and concerted international action, the outcomes which they desire, whether or not they
require mobilizing international support and working with allies.
• As has already been explained, securing change at the international level can be very
demanding and likely to be proportionately difficult for small developing countries. Hence,
in order to be able to commit the required resources, they need to effectively mobilize and
engage all their national capacity. Their political, diplomatic, business, NGO, academic and
other emissaries who will articulate and advance the identified goals must be very well briefed
and able to present persuasive, consistent and coherent arguments. Senior Ministers and
even Heads of Government need to be enlisted to use their influence and the opportunities
that arise or are deliberately created for interaction with and persuading decision makers in
target countries and institutions. This can be very beneficial since such political representatives
are likely to be able to offer a broader range of concessions and can interact with their high
level counterparts where a greater scope for compromise and accommodation is often possible.
• In their pursuit of favourable decision-making at an international level, OECS States
can obtain leverage through working with allies and benefiting from the support of friendly

44
This includes the optimal use of and deployment of limited human and other resources. Targets of advocacy and lobbying
must include potential supporters and allies. 61
 countries and institutions. However, actually securing the desired objectives will need effective
preparation of positions and arguments and skilful negotiation by their representatives.
Hence, it is essential that they field skilled and committed tacticians and negotiators who can
actually win debates and change the views even of the experienced and highly competent
negotiators and representatives of the developed countries and the multilateral institutions.
The methods to ensure that capability will be long term and entail a combination of specialized
training, careful recruitment, development and retention.
• To be successful in the pursuit of their objectives, small countries like those of the
OECS have no option but to be ambitious and courageous. They will even have to be prepared
when necessary to seek to change the premises of the debate, expanding it to encompass
more fundamental issues such as development considerations, equity and the right of all
countries to participate on a sustainable basis in the global trading system.
Conclusion
In the contemporary world it is countries themselves, regardless of size, that are
ultimately responsible for their welfare and advancement. This review has sought to assess
whether OECS countries can effectively participate in international negotiations and
successfully defend their interests and if their participation in the negotiating exercise is not
futile. The experiences of OECS Members and their prospects have been examined in this
paper. They demonstrate that small size and minimal resources pose serious challenges.
However, the resulting difficult situation is not an insurmountable impediment to success,
but rather a challenge to be overcome. Though it is not an easy task, with ingenuity, commitment,
determination and an enlightened strategic and tactical approach to negotiations, they can,
in certain circumstances, be effective players and actually influence the course of international
developments to their advantage. Within a system based on rules in which all participants
have a voice, even small countries like those of the OECS can be more than mere spectators
or “cheerleaders”. They can be active participants in and contributors to the international
processes that shape their future. But for that, new thinking and innovative approaches, are
essential.

Girl, to win you must

This is David But David won ! work hard and run
and Goliath again We will faster than them
62 in the end
 Further reading

Arthur The Rt. Hon Owen, “The Caribbean Single Market and Economy.” Published in the
Integrationist Vol “No. 1 June 2004.

Bilal S. & Rampa F., Alternative (to) EPAs, Possible scenarios for the future ACP trade relations
with the EU, Policy Management report 11, ECDPM, February 2006.

Christian Aid briefing 2004, “Why EPAs Need a Rethink”, www.epawatch.net.

East Caribbean Central Bank, http://www.eccb-centralbank.org/Statistics/index.asp

Hall K., Re-inventing CARICOM: The road to a new integration, 2003.

Laurent E The Banana Dilemma: The Challenges Facing CARICOM” Published by the
UWI/CARICOM collection of studies “Appropriate Adaptation to a Changing Global
Environment”. December 2004.

Laurent E., Bananas: What future? March 2005.

Laurent E., Beyond EU sugar reform: financing diversification in ACP sugar exporting countries,
Trade Hot Topic, No 39, Commonwealth Secretariat, 2004.

Stiglitz J., An agenda for the development round of trade negotiations in the aftermath of
Cancun, Commonwealth Secretariat, 2004.

World Bank, A time to choose: Caribbean Development in the 21st Century, April 2005.

World Trade Organisation, Understanding the WTO, 3rd edition, September 2003.

World Trade Organisation, Trade Policy Review, OECS-WTO Members, volumes 1 & 2, 2001.

World Trade Organisation, Trade Profiles 2005.

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