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Trade Brief
CARICOM-Canada Negotiations: Prospects for the CARICOM Agriculture and Fisheries Sector

BACKGROUND
The CARICOM agricultural sector is characterized by a combination of small and medium-scale enterprises both at the primary and secondary stages of production. The historical domination of the sector by plantation export agriculture has all but disappeared in some countries but retains its significance in a select number. The bulk of the sector consists of highly diversified, mainly domestic-oriented enterprises. Intra-regional trade is similarly highly diversified but is limited, among other things, by issues of transportation, non-tariff restrictions and poor facilities for bulking up and handling. Exports to both CARICOM and non-CARICOM destinations are characterized, for the most part, by low volumes with certain notable exceptions. The current agricultural and rural model in the Caribbean is based on a combination of historical plantation structures and low input peasanttype production units and is under considerable pressure. Contributing factors include: 1. the continuous decline in the attractiveness of traditional export markets 2. increasing competition from larger scale producers in both export and domestic markets 3. the reduced ability of governments to provide protection to the sector due to commitments made to international development financing bodies, and multilateral and bilateral trade commitments, and 4. high production costs. Factor costs (both domestic and imported) are high by developing country standards. The labour constraint is particularly great in countries with significant tourist and oil sectors. Land is also a scarce and increasingly expensive resource, and not only in the smaller islands. Water resources are also scarce in some cases, and water management capabilities are often deficient. Financing costs vary considerably but are generally high. Operations costs energy, transportation and communications are in some cases prohibitive. On the other hand, the human resources available to the sector are of a reasonably high quality - literacy levels are high by developing country standards, and the ability to absorb new technology is also reasonably high. The Regions agricultural policy has been conditioned mainly by perceptions of the sectors lack of competitiveness and the concomitant need to protect it from international competition. This has underpinned the regions position in all international negotiations, including the WTO and the EPA negotiations. Under CARICOMs bilateral negotiations with neighboring countries agriculture has been effectively excluded. In the EPA negotiations, some 70% of all agricultural tariff lines were excluded from CARIFORUMs market access commitments. In the bilateral

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agreements with Cuba, Costa Rica and the Dominican Republic, CARICOM excluded most agricultural products and also listed a range of products that could be traded only within certain seasons. This is in addition to the fact that CARICOMs LDCs were not required to provide reciprocal market access in the area of goods. In respect of fisheries, most of the pressing issues relate to resource management, i.e. ensuring that the resources are sustainably exploited and that existing pressures are relieved. CARICOMs fisheries resources are very fragile and require constant monitoring, using objective, science-based methodologies, if collapse is to be prevented. The resources are also very unevenly distributed with most being concentrated in the coastal mainland countries Belize, Guyana and Suriname. Exports are dominated by high-value products, such as shrimp, lobster and conch while imports are predominantly of lower-value dried, smoked and canned products. Entry into major markets is duty free and the major barriers to entry are connected with technical and food safety measures.

CARICOMS INTERESTS
CARICOMs major imports from Canada are fish and fish products (mostly salted or canned), potatoes, pig meat, wheat products, other food preparations, peas and beans, salted beef, milk concentrates, turkey meat, and miscellaneous food preparations. Imports of fish consist mainly of herring (about US$17 million), sardines (US$12 million), cod (US$2.1 million) and haddock and other fish (US$1.9 million). The tariffs that CARICOM applies to these products are generally low or zero, reflecting the fact that these are considered to be basic food staples. It is also the case that, under the EPA, most of the products falling in the top tier of imports from Canada were excluded from liberalization. Nevertheless, significant tariff lines were liberalized albeit in the 10 year and 20 year baskets. Most pork products, peas and beans (except lentils) were excluded from EPA commitments as were milk products. Therefore, in determining the shape of CARICOMs market access commitments for agricultural and fisheries products in the CARICOMCanada negotiations, the impact of the MFN clause in the EPA, which commits the Region to extending no greater benefits to other major trading partners than those extended to the EU, will undoubtedly be highly influential.

Fish
The Region as a whole is a net exporter of fish, in value terms, although most of the Eastern Caribbean countries are net importers. Most of the exports are of high-value products such as shrimp, lobster and conch while the imports are predominantly of processed low-value products, such as salted herring and sardines. Exports of fish and fish products under CARIBCAN are duty-free, therefore, is no additional market access to be gained under the new trade agreement. However, CARICOM Member States would stand to benefit from a relaxation of the rules of origin requirements their exporters would have to satisfy in order for their fish to qualify for the duty-free market access. CARICOM therefore has an interest in seeking to secure such gains under a new trade agreement with Canada.

Inputs
Most agricultural inputs, such as machinery and fertilizers, are usually located in the non-agricultural sections of a tariff schedule. It would therefore be an important consideration for various agri-industries that the liberalization of such inputs is undertaken, to the extent practicable, to support the competitiveness of the agricultural sector.

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CARICOMS EXPORT INTERESTS

As demonstrated in the table below, given the provisions of CARIBCAN and the Canadian preferential tariff for LDCs, the tariffs faced by CARICOM exporters to Canada are minimal. The overwhelming proportion of products (both agricultural and other) enters duty-free and without other restrictions. For agricultural products, however, there is a list of supply-managed products on which Canada imposes quota restrictions. While some of these products are temperate crops e.g. wheat and barley, the remainder are dairy and meat products, which conceivably could be exported from CARICOM (see section on tariff rate quotas). Main Canadian Agricultural and Fisheries Imports from CARICOM Canada Tariff Code HS 2007 2905.11.00 2208.40.10 0306.11.00 3102.10.00 0807.20.00 2208.70.00 0302.69.00 2203.00.00 0714.20.00 0714.90.90 Description Methanol (methyl alcohol) Rum Rock lobster and other sea crawfish Urea, whether or not in aqueous solution Papaws (papayas) Liqueurs and cordials Other fish, fresh or chilled Beer made from malt. Sweet potatoes (2004-2006 US$ Average) Value of Imports from CARICOM MFN 52,288,115 11,960,306 6,900,022 6,703,818 4,497,998 2,201,192 1,396,040 1,363,543 1,257,566 5.5 % 24.56 /litre 5% Free Free 12.28 /liter Free Free Free Free Canada Tariff Treatment GPT 3% Fre e N/A Fre e Fre e Fre e Fre e Fre e Fre e Fre e CARIBCAN Free Free Free Free Free Free Free Free Free Free

Other roots, fresh, chilled, 1,024,621 frozen or dried Source: Canada Customs. N/A denotes that the product is excluded from the scheme.

Tariff Rate Quotas

Canada operates a number of tariff rate quotas (TRQs) for agricultural products. TRQs allow certain quantities or values of a product to enter a country at a reduced duty rate over a specific period of time. After the specific quantity or value threshold is met, additional items may be imported but the rate of duty will be higher. It follows that in the case of Canadas TRQs for agricultural products, imports are subject to low "within access commitment" rates of duty up to a predetermined limit (i.e. until the import access quantity has been reached), while imports over this limit are subject to significantly higher "over access commitment" rates of duty. For most products, the privilege to import at the within access commitment rates of duty is allocated to firms through the issuance of import allocations (or "quota-shares"). Those with quota-shares will, upon application, receive specific import permits giving access to the within access commitment rates of duty as long as they meet the terms and conditions of permit issuance.1 Some of the products are
1

see http://www.international.gc.ca/controls-controles/prod/agri/tarif.aspx?menu_id=22&menu=R

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Of these, CARICOM exported cheese and margarine during the 2004-06 period. The exports were: Cheese Heading Exports Duty paid 0406.30.10 US$118,815 Free 0406.90.11 US$768 Free

Jamaica was responsible for these exports, which were within access commitment and therefore duty free. Margarine Heading 1517.10 .10 1517.10 .20 1517.90 .99 Exports US$8223 US$18,915 US$452 Duty paid Free 82.28 /kg Free

These exports were from Haiti and Guyana. There is therefore scope for improvement in market access conditions for this margarine. Other products on the control list with potential for export include chicken, eggs and egg products, yogurt, ice cream, and beef and veal. There were no recorded exports of these products from CARICOM during the 2004-6 period. Yogurt and ice cream are products for which there are now several regional manufacturers. There is also the potential to export beef to Canada from Belize and Guyana. While CARICOM would have an interest in seeking to secure full duty-free and quota free access for all its exports, the Region will continue to be mindful that in its bilateral trade agreement negotiations, such as under the negotiations of the Canada-Costa Rica agreement, Canada has preserved its defensive domestic interests by excluding all its supply-managed products from liberalization.2

Safeguards
Special safeguards for agricultural products, over and above general safeguards, are to be found in many trade agreements. In the case of the Canada-Costa Rica agreement, there is such a provision (Annex III.3.2) which allows each party to apply a tariff rate quota if imports exceed a certain trigger level for the particular good. The trigger levels are increased by 5% each year for ten years. The maximum over-quota tariff rate

See Canadas schedule under the Canada-Costa Rica Free Trade Agreement http://www.international.gc.ca/assets/trade-agreements-accords-commerciaux/pdfs/canada_schedule-e.pdf

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cannot exceed the MFN rate in place at April 1, 2001, or the MFN rate at the time the safeguard is applied, whichever is lower. Costa Rica has some 12 tariff lines in its safeguard schedule3 while Canada apparently does not have such a schedule. In the EPA negotiations, CARIFORUM had proposed a special agricultural safeguard covering all agricultural and fisheries products which was heavily resisted by the EC. In the end, CARIFORUM was satisfied that, given the fairly moderate market access commitments that it was required to make in agriculture, the special safeguard had been rendered unnecessary. In the negotiations with Canada, CARICOM would likely consider a similar calculus in determining whether a special safeguard is necessary.

Export Subsidies
Based on the provisions of the Canada-Costa Rica agreement (Article III.12), Canada is likely to call for the elimination of export subsidies on agricultural goods traded under the agreement. The EPA also has a similar provision (Article 28) but CARIFORUM was able to negotiate the right to apply any subsidies authorized under the WTO agreements on Agriculture (Article 9.4) and Subsidies & Countervailing Measures (Article 27). It would be consistent with the Regions interest for CARICOM to seek to preserve that right under a trade agreement with Canada.

Non-tariff Issues
The Canadian market for imported wine and spirits operates in a highly regulated environment and is characterised by government monopolies. Provincial liquor boards have sole authority to import wine into Canada. The exception is the Alberta Liquor Control Board, which has privatised its entire retail network. The other provincial liquor boards import, warehouse and distribute imported wines to their various retail outlets. However, private individuals and restaurateurs, hoteliers et c. may obtain approval to import unlisted products through the Liquor Control Boards.4 In 1988, a GATT panel ruled that certain practices of the Canadian provincial liquor boards were inconsistent with the national treatment provision of the GATT. As a result, both the EC5 and the US6 now have agreements with Canada, which specify in detail how the sales of alcoholic beverages should be treated, in particular, as it relates to listing (i.e. authority by the provincial authority to sell a product) and markups (basically taxes imposed by the provinces). On the other hand, the Protocol on Rum between Canada and CARICOM, which came into effect in 1998 basically states that Canada will use its good offices with the provincial authorities towards facilitating the accord of national treatment to rum that is the product of Member States of the Caribbean Common Market in respect of measures affecting the listing, delisting, distribution and mark-up of distilled spirit7. Given the substantially improved provisions that other countries have been able to negotiate with Canada, CARICOM has an interest in seeking similar or better disciplines aimed at facilitating its exports of alcoholic beverages within Canada. In addition to the above, there is also an interest in seeking an amendment to the Canadian Spirit Drinks Trade Act (S.C. 2005, c. 39) under which rum may only be sold under the name Caribbean if it has been made from sugar cane products of a Commonwealth Caribbean country, or it has been imported in bulk from a Commonwealth Caribbean country and subjected to blending either with other Caribbean rum or Canadian rum. The main difficulties with this are (i) that the current legislation prevents Caribbean producers from making use of raw materials acquired from elsewhere (a practice that is becoming more crucial over time as the availability of molasses from the Regions sugar industry declines); and (ii) that the law allows for the mixing of Caribbean rum with non-Caribbean products, a practice that is not in the best interests of the regions producers.

http://www.international.gc.ca/assets/trade-agreements-accords-commerciaux/pdfs/03-C3-AppendixIII.3.2-e.pdf 4 http://www.austrade.gov.au/Canada-Doing-business/default.aspx 5 http://www.delcan.ec.europa.eu/en/eu_and_canada/official_documents/agreements/eu-ca_ag_tcab.shtml 6 http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_002800.asp 7 See http://www.crnm.org/index.php?option=com_docman&task=doc_download&gid=571&Itemid=113

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DEVELOPMENT PRIORITIES
Canada has been a long-standing development partner of CARICOM. This has been evidenced through the CARIBCAN arrangements as well as through the significant development support that has spanned many decades, including specific support to fisheries at both regional and national levels. Consistent with its trade policy approach, CARICOM will seek to secure a specific chapter or section of the agreement devoted to cooperation in agriculture and fisheries. The areas of interest are based on the priorities identified by COTED Ministers (agriculture) as part of the CARICOM Regional Transformation Programme for Agriculture (RTP), and the Jagdeo Initiative. CARICOM will likely seek cooperation to support programmes and mechanisms that would assist, inter alia, regional food security, water management, and fisheries conservation and management.

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