RNM UPDATE 0603

February 10, 2006

Prepared by the Communications Division of the Caribbean Regional Negotiating Machinery (CRNM), this
electronic newsletter focuses on the RNM, trade negotiation issues within its mandate and related activities.

Special Issue: WTO, EPA Talks - Caribbean Consolidates Negotiating Positions

- NEWS BRIEFS

- UPCOMING EVENTS

This ‘Special Issue’ of RNM UPDATE leads off with a review of consultations that took place at
recently convened meetings of Caribbean Trade Ministers and Heads of Government, that took
stock of external trade issues germane to the Region. WTO and EPA negotiations involving the
Region are examined in this ‘Special Issue’, as the Caribbean is poised to step-up negotiations in
these two critically important negotiating theatres. Finally, there is an examination of issues
surrounding a coherent, cohesive regional trade policy, that have special significance at this
juncture, given that the Caribbean’s external trade negotiating agenda is intensifying at a time
when negotiating resources are stretched.

The Region Consults, A Statesman Bows Out, RNM Head Pays Tribute

The Eighteenth meeting of the CARICOM Prime Ministerial Sub-Committee (PMSC) on External
Negotiations was held February 8 in Port-of-Spain, Trinidad, under the chairmanship of Prime
Minister the Most Hon. P.J. Patterson of Jamaica. The purpose of the meeting was two-fold: for
Prime Minister Patterson to hand over after chairing all meetings of the PMSC since its inception
and to examine an agenda covering the World Trade Organization (WTO), Economic Partnership
Agreement (EPA) and Bilateral arenas, with recommended areas for discussion having been
proposed by a Special COTED meeting, held a day earlier.

The Seventeenth Inter-Sessional Meeting of the Conference of Heads of Government of

CARICOM, which met from February 9 to 10, received a report from the PMSC, and endorsed its
recommendations with respect to the conduct of negotiations at the level of the WTO,
CARIFORUM-EU EPAs, and between the Community and Third Countries. The Heads of
Government congratulated the Ministerial team responsible for the conduct of external
negotiations, particularly the team that participated in last December’s Sixth WTO Ministerial
Meeting in Hong Kong. The Heads of Government also paid sterling tribute to the work of the
Chairman of the PMSC on External Negotiations, Prime Minister Patterson, over the period of his
stewardship.

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There was special symbolism in Prime Minister Patterson chairing the PMSC meeting, as he is set
to retire from active politics after over thirty years of service to the Caribbean Community, ending
his tenure as Chair of this important body for the past thirteen years. The meeting was marked by
many laudatory interventions from heads of delegation, the Caribbean Regional Negotiating
Machinery’s (RNM) Director General and the Caricom Secretariat Secretary General concerning
Prime Minister Patterson’s tenure. In a moving farewell speech at the PMSC, Prime Minister
Patterson said, “it has been for me a great honour and privilege to chair this committee since it was
first conceived in the Bahamas in 1993. I believe I depart the political scene much richer for the
experience I have been able to garner in the discharge of these duties.”

Director General of the RNM Ambassador Dr. Richard Bernal, who has worked alongside Prime
Minister Patterson since the late 1970s, paid special tribute to the Jamaican Prime Minister for his
leadership, statesmanship, negotiating experience and his dedicated commitment to regionalism,
saying “the Prime Minister has displayed a level of political acumen and diplomacy that we can
only aspire to.” He also expressed appreciation on behalf of the RNM and also personally for the
Prime Minister’s lead role in Caribbean trade policy for so many years.

The PMSC was preceded by the Fifteenth Special Meeting of the Council for Trade and Economic
Development (COTED) on External Negotiations, held in Port-of-Spain, Trinidad, February 7. The
meeting was significant in that it provided an opportunity, at high-level, to assess the Caribbean’s
performance at the Sixth WTO Ministerial, last December, but also take stock of the decisions,
mandates, and deadlines emanating from that Ministerial. The Special COTED provided the first
high-level regional opportunity, post-Hong Kong, for the Caribbean to reflect and consult
collectively to determine the way forward and the implications of Hong Kong for its WTO strategy;
especially in view of efforts to form a South Alliance, the evolution of the Small Economies Group,
and the performance of the G90 at Hong Kong.

The Special COTED also provided an opportunity for consideration of CARIFORUM-EU EPA
negotiations by Caribbean Trade Ministers. This consultation took place at a time when the Region
is poised to undergo a qualitative shift in focus and specificity in EPA negotiations this month, with
the start of the first in a series of substantive technical negotiating sessions set for 2006 between
the two sides. Interchange at the COTED was centred on consideration of: i) Phase II of EPA talks
and the agenda for Phase III; and, ii) negotiation of scope and approach.

Bilateral trade treaties involving CARICOM Member States were also discussed. Attention was
given to possible trade agreements the Region is contemplating. However, discussions centred
too on the CARICOM-Dominican Republic Free Trade Agreement, namely outstanding Services
negotiations.

An agenda item at the Special COTED, Prime Minister Patterson also spearheaded a discussion at
the PMSC of the RNM’s legal status.

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Global Trade Talks: Balance, Developing Country Alliances and Timeline

Beset by setbacks last year, Doha Round talks were particularly disconcerting for the small and
vulnerable Members of this global trade body. Despite consistently making the case for leveraging
the negotiating agenda on a ‘development thrust’, these appeals went largely unanswered, save for
a last ditch attempt at that by the principal players immediately prior to and at last December’s
Sixth WTO Ministerial meeting. While securing some progress in the contentious agenda of global
trade talks, the Ministerial’s success can be gauged as a triumph less so for the substantive issues
it successfully tackled than in the fact that it averted floundering WTO talks derailing altogether.

The Sixth WTO Ministerial had a limited objective: along with refocusing on a development
package, it sought to advance agreement on modalities and build on the July 2004 framework
agreement. Indeed, a minimalist text was taken to Hong Kong (that tactically mitigated a Cancun-
style collapse). The attainment of full modalities in many areas was beyond the reach of the
Ministerial. Some general parameters have been provided to guide the development of ‘full
modalities’ on Agriculture and NAMA, with an April 2006 deadline for finalizing them. The Hong
Kong Ministerial’s outcome is “a modest follow up” to the July framework, and came as no surprise
since expectations for the meeting had been “recalibrated” in the run-up to the Ministerial.

The establishment of an end-date for eliminating agricultural export subsidies (2013) is cited as the
principal achievement of the Hong Kong Ministerial. However, the Ministerial must also be credited
for enabling deeper recognition of the need to protect Special Products, as well as proposals on
Cotton, Aid for Trade, and least-developed countries’ long-standing request for duty- and quota-
free market access.

The Ministerial’s outcome reflects a delicate balance. Progress has been made on issues of
interest to developing countries, namely: export subsidies, SP and SSM, Aid for Trade, an
expanded Integrated Framework, additional flexibilities for Small Vulnerable Economies in NAMA,
enhanced technical cooperation, and the five LDC proposals, of which the proposal on Cotton is a
part. The trade-off is a new plurilateral approach in Services and the adoption of a Swiss Formula,
both of which provide some flexibilities for developing countries. In respect of the former, the
flexibility pertains to developing country reservations about the treatment of plurilateral negotiations
in Annex C, which have been accommodated by the weakening of the prescriptive nature of certain
provisions. In respect of the Swiss Formula, the Small Economies that are the developing
countries most vulnerable to the formula also received some additional concessions.

The Hong Kong Ministerial was positive for Small Economies such as those of the Caribbean, as
they gained greater recognition in the multilateral process. The Small Economies Group has now
become a formally recognized WTO negotiating group, that is still largely focused on tariff
reduction, particularly in NAMA. Caribbean countries form their own WTO group, and actively
participate mainly in groupings such as the ACP, G90, Small Economies, and the issue-based
coalitions of the G33 and G20. This engagement reflects the in-built flexibility of the Region’s
negotiating approach.

Developing countries at large fared well at Hong Kong. In terms of developing country solidarity,
Ministers representing every developing country group in the WTO such as G-20, the G-33, the

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ACP Group, the LDC Group, the African Union, and the Small Economies held a historic ministerial
co-ordination meeting and a joint Press conference to demonstrate their interest in the
development dimension of the Round and their expectations for a comprehensive development
outcome.

In fact, prior to the Ministerial a pre-Hong Kong G90 Alliance (ACP-LDCs-AU) Joint Declaration
was issued, augmented by coordination efforts at Hong Kong. In the post-Hong Kong period, the
intention is to intensify dialogue and a South alliance, and ensure that this Round is about
development. The participation of Small Vulnerable Economies – like those of the Caribbean - in
the meeting of all developing countries (loosely termed G-110) at Hong Kong constitutes a
watershed.

However, the Hong Kong Ministerial was never intended to finalize negotiation of a development
package. It sought to keep the process on course. So, it is not surprising that the Ministerial’s
results are considerably less than the development package expected from the Doha Declaration.

An informal meeting of trade ministers – which the Caribbean was not invited to participate in - on
the sidelines of the World Economic Forum in Davos last month appears to have kept global trade
talks on track. December’s Ministerial had set some early deadlines to finalize full modalities and
submit comprehensive draft schedules of commitments in NAMA, Agriculture and Services.
Concerns quickly surfaced following the Hong Kong Ministerial that the looming April deadline
might have been too ambitious a target set for completing modalities, however the resumption of
work in Geneva and signals emanating from the Davos encounter indicate a strong commitment to
meeting these deadlines.

In Hong Kong’s aftermath, a feeling of urgency remains in respect of the April modalities deadline.
WTO Director General Pascal Lamy, in his report to the General Council February 8 as Chair of the
Trade Negotiations Committee, underlined that the “only way to make progress across the board in
these negotiations is focus on the two main elements we must now develop - numbers and words,
texts”. While not an excuse for complacency, there appears to be a new political resolve to
advance global trade talks (but apparently this is not a reason for mutual recriminations to stop, as
major players the US, the EU, India and Brazil continue to trade blows). But to do otherwise would
risk a protracted Doha Round. With December as the set deadline for the conclusion of
negotiations, any delay in the April deadline would derail prospects for reaching the July deadline
for submission of draft schedules, as honouring the July marker is contingent on the April cut-off for
modalities being clinched. For Services, a second round of revised offers should be submitted
before July 31 and final draft national schedules by October 30, 2006. By Lamy’s own admission,
as of last December, sixty percent of the negotiating agenda had been completed. With forty
percent remaining, there is a slim margin for error in respect of delays in the negotiating process in
2006. However, whether momentum is kept up through the first half of 2006 depends on the level
of ambition. If major players are not willing to improve their current offers, ambition for the Round
would clearly be lowered. If the negotiating schedule for 2006 is derailed because ambition and as
a result momentum is curtailed, negotiations would stretch into 2007, and perhaps beyond. This
would not auger well for the Round, given the scheduled expiry of US Trade Promotion Authority
(TPA) in 2007.

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Important to consider also is that prospects for the development dimension are intimately tied to
the level of ambition in WTO talks. If the level of ambition for the Round were to be lowered, this
would impact negatively on the development package. It is expected that several “mini-ministerials”
will have to be held in the coming months to advance negotiations, and to meet the deadlines set
at Hong Kong.

CARIFORUM EPA Negotiations reach a Milestone

The Caribbean has reached a milestone in EPA negotiations. The Region is set to press ahead
with a major undertaking in regards to its external trade negotiations, substantive talks with the
EU. The qualitative shift that this new, enhanced phase of EPA negotiations represents is
informing the Region’s negotiating approach. The level of negotiating intensify is reflected in the
six Technical Negotiating Group (TNG) sessions and three meetings of Principal Negotiators set
for 2006, culminating in a Ministerial meeting in December 2006 - all these encounters having been
scheduled for Phase III of CARIFORUM-EU EPA negotiations.

The TNG sessions will consist initially of parallel negotiations on three subject areas: (a) Market
Access (including Agriculture); (b) Services and Investment, and (c) Trade-related Issues. At a
later stage, a fourth subject - Institutional Arrangements - will be added.

In the run-up to this historic juncture, collaboration among ACP EPA configurations has also
increased, especially over the past six months. Three interfaces of Senior EPA Negotiators have
been convened since the last quarter of 2005: a meeting of Chief Negotiators, jointly organized by
the PMU for ACP Capacity Building for EPA Negotiations and the Commonwealth Secretariat
(October 2005); the ACP Technical Monitoring Committee (November 2005); and, meeting of ACP
Senior Officials on EPA Negotiations (January 2006). The meetings afforded open and frank
exchanges on overarching and strategic issues of concern to all ACP regions.

Another meeting of Senior ACP EPA negotiators is expected to be convened by the ACP
Secretariat prior to the meeting of the ACP Ministerial Trade Committee in mid-March.

Intensity of the Negotiating Agenda, the need to Cement Coherent Regional Trade Policy

The Region’s parallel process of engagement in the WTO and EPA theatres is intensifying. The
external trade negotiating agenda facing the Caribbean is formidable, and the demands on the
Region’s negotiating resources pronounced. This was acknowledged at the recently convened
Special COTED and PMSC meetings.

The deadlines and roster of meetings ahead in the WTO and EPA negotiating arenas will place
enormous pressure on the Geneva and Brussels processes, Officials and Capitals and the RNM. It
will therefore be necessary to accelerate the provision of technical inputs and coordination in the
early part of 2006.

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Coordination is the centerpiece for forging cohesive, coherent trade policy in the Region. In this
regard, as Caribbean trade officials and policymakers take stock of the negotiating agenda facing
the Region on the cusp of a recommencement of what is certain to be a hectic year of external
trade negotiations, if not one of the most challenging years in Caribbean trade negotiations to date,
the stretched human, financial and other resource constraints in this Region have particular
resonance. As the Caribbean is set to contend with the complex and significantly advanced trade
policy agenda, at the institutional level, the Region – pressed for resources as it is – can ill afford
for parallel regional institutions to duplicate functions regarding its trade policy - this according to
Ambassador Bernal.

“In charting the way ahead for Caribbean trade policy, Caribbean trade officials and policymakers
must give due regard to the importance of effective coordination, both strategically and on the
technical issues under negotiation. In this vein, the RNM has a critical role to play,” said
Ambassador Bernal; who made these points on the occasion of the cluster of high-level meetings
that focused on external trade issues in Port-of-Spain the week of February 6. “Mandated as it is to
advance the Region’s trade policy interests, the RNM is the primary regional institution with
responsibility in this area,” he noted; adding “regional bureaucracies need to urgently scrutinize
and rationalize their collective undertakings in trade policy, in regards to the expenditure of time,
personnel and resources, but also in their interface with Member States.”

“The Region must be seen as putting forward a coherent, cohesive, consistent and united front in
the face of external trade negotiations that are at an advanced stage, a point that the RNM has
repeatedly made,” said Ambassador Bernal; emphasizing, “there must be a clarity of purpose, a
singular vision driving the pursuit of sound international trade policy (an essential ingredient for
economic development) in this small region. The process of deepening sub-regional integration
within CARICOM should not preclude the RNM’s role in advancing a cohesive, coherent approach
to Caribbean trade policy, but rather should be approached in a way that serves to enhance this
role.”

There are synergies that regional institutions can and must capitalize on, in order to advance the
common vision and goal of dynamic economic growth for the Caribbean, through the marriage of
trade and development policy objectives. “However, in order to avert competing institutional roles,
regional institutions must revisit often conflicting and duplicative functions,” Ambassador Bernal
said; calling for regional institutions to foster an enabling environment for successful regional trade
policy since “it holds open the potential to unlock future development. The Caribbean’s economic
future will depend on its success in external trade negotiations, and allied to this its readiness and
capacity to assume the commitments emanating from these agreements.”

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NEWS BRIEFS

Third Meeting of CARICOM Sugar Stakeholders Convened

The third meeting of CARICOM Stakeholders on Sugar was held in Port-of-Spain, Trinidad,
February 6. In his feature address to the meeting (available on www.crnm.org), Hon. Clement
Rohee, CARICOM Ministerial Spokesperson on Sugar (and Guyana’s Trade Minister), noted that
the meeting comes at another critical juncture in the ongoing sugar reform process, i.e. on the eve
of an important meeting of the EU Agricultural Council, scheduled to be held February 20 to 21.
That meeting would likely deliberate on the level of financial support that will be extended to ACP
sugar supplying States for their Action Plans on Accompanying Measures.

The Stakeholders’ Meeting considered developments since the decision to reform the EU sugar
regime. A study was also examined, that reviews options in respect of Caribbean sugar. An
exchange of views on action plans to be submitted in response to the European Commission’s
proposed accompanying measures also took place. Recommendations and conclusions
emanating from the Stakeholders’ Meeting were passed on to the February 9 to 10 meeting of the
Inter-Sessional Meeting of Heads for their consideration. The RNM was represented at the
Stakeholders’ Meeting by Senior Director Mr. Henry Gill.

The Heads of Government agreed to mount a mission in March 2006 comprising the President of
Guyana and the Prime Minister of St. Kitts & Nevis accompanied by relevant Ministers, to select
European capitals and European Union institutions, to outline strongly the Region’s concerns with
respect to the proposed measures, in advance of the decision to be taken in April by the EU. The
Mission will seek to convey that the measures could have permanent repercussions, not only for
the sugar industry but for the Region as a whole.

Earlier this month, ACP sugar supplying nations requested millions of dollars from the EU, to
compensate for losses as a result of EU subsidy cuts. This call on the part of ACP suppliers
comes in the wake of an announcement last December by the EU for monetary compensation,
which is widely viewed as inadequate, given the dramatic losses in export earnings ACP sugar
supplying countries now face with the thirty-six percent cut in EU sugar subsidies. The EU’s offer
of compensation to its farmers, which was revealed last year, who are also set to be impacted by
the price cuts amounts to some US$8 billion. Caribbean sugar supplying countries are Barbados,
Belize, Guyana, Jamaica and Trinidad & Tobago. St. Kitts & Nevis discontinued its sugar industry
last year.

CARICOM Heads: New Banana Tariff should not be further Eroded

At their Seventeenth Inter-Sessional meeting February 9 to 10, CARICOM Heads of Government

noted that a new EU tariff-only regime of euro176 per tonne had come into effect on banana
imports from MFN countries since January 2006. They also noted that ACP banana suppliers are
being restricted by a duty-free quota of 775,000 metric tons. They further noted that the MFN
countries had already given notice of trade litigation action.

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In that context, the Heads of Government agreed that the key negotiating objective of the Region at
this time, paying due regard to negotiations of an EPA with the EU, should be to ensure that the
new banana tariff is not subject to further “downward revision” and that the EU proceeds to bind
such a tariff in the shortest possible time.

In a communiqué issued at the close of the Inter-Sessional, Heads of Government “agreed that the
Caribbean should secure a tariff preference on its banana exports into the EU within the context of
EPA negotiations and further agreed that the Caribbean should request that the EU designate
bananas as a sensitive product in the context of WTO agriculture negotiations, in which case
bananas would be subjected to very little or no tariff cuts, at least in the current Doha Round of
trade talks.” The communiqué noted further, “the Heads of Government took note of the
differences in the situation of Jamaica and the Windward Islands producers on the one hand, and
Belize and Suriname on the other. They resolved to make very effort to resolve those differences
prior to discussions with the European Union.”

EPA, Bananas in Spotlight at European Parliament Hearing

RNM Brussels Representative Mr. Junior Lodge spoke at a European Parliament Development and
Cooperation Committee Public Hearing on the Economic Partnership Agreements, January 31.
One of five panellists, he identified issues germane to CARIFORUM in the negotiation of the
Agreement with the EU, offering a broad review of the Region’s perspectives, approaches and
concerns. Points of special note were that CARIFORUM is poised to enter an intensified process
of engagement with the EC, that will place added strain on the Region’s negotiating resources.
Timely access to financial resources will therefore be critically important for the Region’s
negotiating effort.

A European Parliament Hearing entitled “Bananas: the situation after Hong Kong” also convened
January 31 benefited from a Caribbean perspective, with testimony from Special Envoy for
Dominica, St. Lucia and St. Vincent & the Grenadines to the European Union, Ambassador Edwin
Laurent. He described the January 1, 2006 move to a tariff-only regime as “changing everything
and shattering the dreams, the hopes of the last ten years.” The fateful step taken by the European
Union, more than anything else, has condemned banana suppliers to this irreversible “race to the
bottom”.” The envoy raised the issue of the management of the ACP quota; noting that in 2005,
the Commission had indicated its intention to impose a quota on the ACP, which the Commission
increased from 750 000 tonnes to 775 000 tonnes, thus putting the more vulnerable suppliers at
risk. Noting that it was under threat, Ambassador Laurent also touted the benefits of the licensing
system, which he said “prevents a free-for-all and the expansion by those that are lower-cost at the
expense of the higher-cost suppliers.” On the issue of trade in licenses, the Ambassador
disabused the notion of such practices in respect of operators like WIBDECO and JamCo. He
urged the Parliament to be “wary of self-serving propaganda and press decision makers to take no
action that would eliminate the licensing system that is so essential for safeguarding the trade of
vulnerable suppliers. I also appeal for a review and reduction of the currently onerous and
excessive deposits that are highly damaging particularly to the small operators.”

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Patterson Pledges CARICOM support for FTAA

Speaking on the occasion of the convening of a cluster of three high-level regional meetings the
week of February 6, Jamaican Prime Minister Hon. P.J. Patterson signalled CARICOM’s continued
support for Free Trade Area of the Americas (FTAA) negotiations, currently in hiatus. While
CARICOM continues to assess its strategic options in engagement at the bilateral level with third
countries in the hemisphere, he indicated that CARICOM looks forward to reengaging in the FTAA
process, once negotiations are restarted.

Aid for Trade Task Force Constituted

For developing countries, the gains to be harvested from future new market opportunities will
depend heavily on their ability to take advantage of that access. That ability is severely curtailed,
especially by supply-side constraints.

Through the Hong Kong Ministerial Declaration, Trade Ministers invited the WTO Director General
Pascal Lamy to create a Task Force to come up with recommendations as to how to operationalize
an Aid for Trade initiative. These recommendations are to be tabled to the WTO General Council
in July 2006.

On February 8, Lamy announced the composition of the Aid for Trade Task Force. Representing
Small Vulnerable Economies is Barbados. The Task Force will be composed of these 13
members: Barbados, Brazil, Canada, China, Colombia, the European Union, Japan, India,
Thailand, the United States and the coordinators of the ACP, the African Group and the LDC
Group. The Permanent Representative of Sweden, Ambassador Mia Horn Af Rantzien, will chair
this Task Force ad personam.

WTO Chairs Announced

The WTO General Council noted the consensus on a slate of names of chairpersons for WTO
Bodies, February 8 (for roster see: http://www.wto.org/english/news_e/pres06_e/pr433_e.htm).
Barbados’ WTO Ambassador, Trevor Clarke, is to Chair the Council for TRIPS.

UPCOMING EVENTS

February 14 to 17: CARIFORUM-EU Technical Negotiating Group meeting, Brussels

February 17: CARIFORUM-EU RPTF Meeting, Brussels

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For More Information Contact:

Nand C. Bardouille
Caribbean Regional Negotiating Machinery
3rd Floor, The Mutual Building, Hastings Main Road, Hastings, Christ Church, Barbados
Tel: (246) 430-1678
FAX: (246) 228-9528

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