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Caribbean commodities in retreat

Published:Sunday | April 18, 2010 | 12:00 AM

David Jessop, Gleaner Writer

Over the last decade or so, starting with rum in 1997, the Caribbean has seen its special trade arrangements with Europe eroded as the European Union has sought something close to trade reciprocity with the African, Caribbean and Pacific (ACP) states for either mercantile, philosophical or legal reasons.

The consequence has been that Europe has offered greater market opportunity to an ever-wider range of developing nations, has sought the removal of its own and others' trade-distorting subsidies, and has negotiated aggressively to open new markets to the advantage of its manufacturers and suppliers.

For the Caribbean, this process is far from over and it is likely that bananas, sugar, rum and rice will continue to see the arrangements that they have further weakened.

Rum continues to fight a battle against the unjust way in which it is being treated, about which more will be said later; the banana industry remains unhappy with the European Union's (EU) willingness to make further concessions to Latin American producers; while sugar is next in line for significant change.

Unlimited access

Under the present sugar regime, the Cariforum group of nations has unlimited access to the EU market, subject only to a regional threshold of 560,000 tonnes of raw sugar if total ACP sugar supplies exceed 3.5 million tonnes.

In practice, the arrangement means that each supplying country is able to negotiate individual commercial contracts with refiners, or to sell to the EU for direct consumption, while the Dominican Republic is now free to supply unlimited quantities of sugar within the regional threshold.

Although the existing sugar regime is fixed to 2015, Europe is in the process of opening its market to unplanned-for volumes of sugar from Andean and Central American nations; has announced in the last few days that it is launching a rapid consultation process on the future of Europe's Common Agricultural Policy; will probably, before long, establish Economic Partnership Agreements with seven other sugar-producing regions of the ACP; and continues to press for a multilateral trade liberalisation at the World Trade Organisation.

Caribbean sugar producers and others working with the industry suggest that what they want is long-term certainty and the ability to plan 20 years ahead in order to make the commercial decisions that will guarantee the industry's future.

By this they mean they want an integrated package of measures built around stable prices that can support a commercially efficient and competitive industry; secure access to a sensitively managed market; and predictability buttressed by solid tariff and other mechanisms.

They, too, like almost every other Caribbean industry that has had experience of the huge delays in the delivery of Eastern Caribbean support, want a change in the funding mechanisms that have ill-served the region when it comes to trade agreements.

What is good is that the sugar industry in the Caribbean and those outside that support it, know that they have to begin to make a case now for what they want, and to develop strategies to work with others like the EU beet producers, who also require long-term certainty.

They have also recognised the key role that bodies like the European Parliament now have in European decision making and the value that comes from the region's sugar producers all being able to speak with one voice.

In this latter respect, however, they have yet to take the big step that the rum and banana industries took some years back.

That is, to bring the Dominican Republic and its vastly larger producers inside the regional fold and experience the value of being able to speak with a single voice.

While for rum and bananas the process of integration was not always easy, the benefits for all have been substantial.

Despite this, there remain clouds on the horizon.

Caribbean commodity industries have begun in recent weeks to express their concern that at a political level, the Caribbean is not helping make their case as forcefully as they have in the past. There is a sense that there is no longer any Caribbean trade minister with the technical understanding or ability to negotiate incisively with skilled counterparts in Europe or the United States.

The consequence is that a number of key industries are beginning to wonder how best to defend their interests when political representations are required.

In recent weeks, a number of articles to this effect have appeared in the regional media and in Europe focused on the problems facing the region's only true post-commodity industry, rum.

These relate to the failure of Caribbean ministers to respond forcefully to the EU decision to end prematurely the completion of the demonstrably successful rum-development programme that it has been co-funding with the industry, and to Europe's willingness to trade away without compensation, a linked tariff designed to give the industry a small degree of protection while it adapts to a fully liberalised market.

Why the region seems no longer to be strenuously defending its political interests in Europe is a matter that the Caribbean needs to address.

However, it is clear that the absence of direct ministerial representations in Europe on key commodity issues is of growing concern to industry groups who have a very real sense that European trade negotiators, and the large European companies that stand behind them, are now exploiting this situation.

Long negotiations

Trade negotiations involve long-time horizons. This is because industries require space to adapt, especially if whatever is agreed results in greater competition, a diminution in market share, or an end to preferential agreements.

Usually such time frames run beyond any Government's period in office, with the consequence that the impact of implementation has to be accepted politically by those who had no part in the original decisions.

In the developed world and in advanced developing nations, this problem is usually overcome by private meetings involving Govern-ment, opposition and experts that seek to look over the horizon at where the world or a trade issue may be ten or twenty years hence; not so in the Caribbean.

Current developments suggest that the time has come for the commodity-based industries of the Caribbean to consider coming together to at the very least, inform politicians on both sides of the Atlantic why together, they still have a vital long-term economic role in the Caribbean economy.

David Jessop is director of the Caribbean Council.