OTN - CARICOM-Canada Agriculture & Fisheries Brief


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OTN - CARICOM-Canada Agriculture & Fisheries Brief

  1. 1. OTN BARBADOS OFFICE  1st Floor, Speedbird House, Bridgetown BB11121,  Ref: 31000.3/1-2010-07-28 BARBADOS  Tel: (246) 430‐1670 Fax: (246) 228‐9528  Email: barbados.office@crnm.org  OTN JAMAICA OFFICE  2ND Floor, PCJ Building, Kingston 5,  JAMAICA  Tel: (876) 908‐4242 Fax: (876) 754‐2998  Email: jamaica.office@crnm.orgTrade Brief CARICOM-Canada Negotiations: Prospects for the CARICOM Agriculture and Fisheries Sector BACKGROUNDThe CARICOM agricultural sector is characterized by a combination of small and medium-scale enterprises both at the primary and secondarystages of production. The historical domination of the sector by plantation export agriculture has all but disappeared in some countries butretains 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 poorfacilities for bulking up and handling. Exports to both CARICOM and non-CARICOM destinations are characterized, for the most part, by lowvolumes with certain notable exceptions.The current agricultural and rural model in the Caribbean is based on a combination of historical plantation structures and low input peasant-type production units and is under considerable pressure. Contributing factors include: 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 countrieswith significant tourist and oil sectors. Land is also a scarce and increasingly expensive resource, and not only in the smaller islands. Waterresources are also scarce in some cases, and water management capabilities are often deficient. Financing costs vary considerably but aregenerally high. Operations costs – energy, transportation and communications – are in some cases prohibitive. On the other hand, the humanresources available to the sector are of a reasonably high quality - literacy levels are high by developing country standards, and the ability toabsorb new technology is also reasonably high.The Region’s agricultural policy has been conditioned mainly by perceptions of the sector’s lack of competitiveness and the concomitant needto protect it from international competition. This has underpinned the region’s position in all international negotiations, including the WTO andthe EPA negotiations. Under CARICOM’s bilateral negotiations with neighboring countries agriculture has been effectively excluded. In theEPA negotiations, some 70% of all agricultural tariff lines were excluded from CARIFORUM’s market access commitments. In the bilateral CARICOM-Canada Trade and Development Agreement
  2. 2. Page 2 www.crnm.orgagreements with Cuba, Costa Rica and the Dominican Republic, CARICOM excluded most agricultural products and also listed a range ofproducts that could be traded only within certain seasons. This is in addition to the fact that CARICOM’s LDCs were not required to providereciprocal 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 exploitedand that existing pressures are relieved. CARICOM’s 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 inthe coastal mainland countries – Belize, Guyana and Suriname. Exports are dominated by high-value products, such as shrimp, lobster andconch while imports are predominantly of lower-value dried, smoked and canned products. Entry into major markets is duty free and the majorbarriers to entry are connected with technical and food safety measures. CARICOM’S INTERESTSCARICOM’s major imports from Canada are fish and fish products (mostly salted or canned), potatoes, pig meat, wheat products, other foodpreparations, 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 tobe 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 (exceptlentils) were excluded from EPA commitments as were milk products.Therefore, in determining the shape of CARICOM’s market access commitments for agricultural and fisheries products in the CARICOM-Canada negotiations, the impact of the “MFN clause” in the EPA, which commits the Region to extending no greater benefits to other majortrading partners than those extended to the EU, will undoubtedly be highly influential. FishThe Region as a whole is a net exporter of fish, in value terms, although most of the Eastern Caribbean countries are net importers. Most ofthe exports are of high-value products such as shrimp, lobster and conch while the imports are predominantly of processed low-valueproducts, such as salted herring and sardines. Exports of fish and fish products under CARIBCAN are duty-free, therefore, is no additionalmarket access to be gained under the new trade agreement. However, CARICOM Member States would stand to benefit from a relaxation ofthe rules of origin requirements their exporters would have to satisfy in order for their fish to qualify for the duty-free market access. CARICOMtherefore has an interest in seeking to secure such gains under a new trade agreement with Canada. InputsMost agricultural inputs, such as machinery and fertilizers, are usually located in the non-agricultural sections of a tariff schedule. It wouldtherefore 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. CARICOM-Canada Trade and Development Agreement
  3. 3. Page 3 www.crnm.org CARICOM’S EXPORT INTERESTSAs demonstrated in the table below, given the provisions of CARIBCAN and the Canadian preferential tariff for LDCs, the tariffs faced byCARICOM exporters to Canada are minimal. The overwhelming proportion of products (both agricultural and other) enters duty-free andwithout other restrictions. For agricultural products, however, there is a list of “supply-managed” products on which Canada imposes quotarestrictions. While some of these products are temperate crops e.g. wheat and barley, the remainder are dairy and meat products, whichconceivably could be exported from CARICOM (see section on tariff rate quotas). Main Canadian Agricultural and Fisheries Imports from CARICOM (2004-2006 US$ Average)Canada Tariff Code Description Value of Imports from Canada Tariff Treatment HS 2007 CARICOM MFN GPT CARIBCAN 2905.11.00 Methanol (methyl alcohol) 52,288,115 5.5 % 3% Free 2208.40.10 Rum 11,960,306 24.56 Fre Free ¢/litre e 0306.11.00 Rock lobster and other sea 6,900,022 5% N/A Free crawfish 3102.10.00 Urea, whether or not in 6,703,818 Free Fre Free aqueous solution e 0807.20.00 Papaws (papayas) 4,497,998 Free Fre Free e 2208.70.00 Liqueurs and cordials 2,201,192 12.28 Fre Free ¢/liter e 0302.69.00 Other fish, fresh or chilled 1,396,040 Free Fre Free e 2203.00.00 Beer made from malt. 1,363,543 Free Fre Free e 0714.20.00 Sweet potatoes 1,257,566 Free Fre Free e 0714.90.90 Other roots, fresh, chilled, 1,024,621 Free Fre Free frozen or dried e Source: Canada Customs. ‘N/A’ denotes that the product is excluded from the scheme. Tariff Rate QuotasCanada operates a number of tariff rate quotas (TRQs) for agricultural products. TRQs allow certain quantities or values of a product to enter acountry at a reduced duty rate over a specific period of time. After the specific quantity or value threshold is met, additional items may beimported but the rate of duty will be higher. It follows that in the case of Canada’s 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 importsover 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 importallocations (or "quota-shares"). Those with quota-shares will, upon application, receive specific import permits giving access to the withinaccess commitment rates of duty as long as they meet the terms and conditions of permit issuance.1Some of the products are 1 see http://www.international.gc.ca/controls-controles/prod/agri/tarif.aspx?menu_id=22&menu=R CARICOM-Canada Trade and Development Agreement
  4. 4. Page 4 www.crnm.org  Turkey  Chicken  Egg and egg products  Fluid milk  Butter  Yogurt  Ice Cream  Cheese  Wheat  Beef and vealOf 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 FreeJamaica was responsible for these exports, which were “within access commitment” and therefore duty free. Margarine Heading Exports Duty paid 1517.10 US$8223 Free .10 1517.10 US$18,915 82.28 .20 ¢/kg 1517.90 US$452 Free .99These 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. Therewere no recorded exports of these products from CARICOM during the 2004-6 period. Yogurt and ice cream are products for which there arenow 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 tobe mindful that in its bilateral trade agreement negotiations, such as under the negotiations of the Canada-Costa Rica agreement, Canada haspreserved its defensive domestic interests by excluding all its ‘supply-managed’ products from liberalization.2 SafeguardsSpecial safeguards for agricultural products, over and above general safeguards, are to be found in many trade agreements. In the case of theCanada-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 acertain trigger level for the particular good. The trigger levels are increased by 5% each year for ten years. The maximum over-quota tariff rate 2 See Canada’s schedule under the Canada-Costa Rica Free Trade Agreement - http://www.international.gc.ca/assets/trade-agreements-accords-commerciaux/pdfs/canada_schedule-e.pdf CARICOM-Canada Trade and Development Agreement
  5. 5. Page 5 www.crnm.orgcannot 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 hassome 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 washeavily resisted by the EC. In the end, CARIFORUM was satisfied that, given the fairly moderate market access commitments that it wasrequired to make in agriculture, the special safeguard had been rendered unnecessary. In the negotiations with Canada, CARICOM wouldlikely consider a similar calculus in determining whether a special safeguard is necessary. Export SubsidiesBased on the provisions of the Canada-Costa Rica agreement (Article III.12), Canada is likely to call for the elimination of export subsidies onagricultural goods traded under the agreement. The EPA also has a similar provision (Article 28) but CARIFORUM was able to negotiate theright 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 Region’s interest for CARICOM to seek to preserve that right under a trade agreement withCanada. Non-tariff IssuesThe Canadian market for imported wine and spirits operates in a highly regulated environment and is characterised by governmentmonopolies. Provincial liquor boards have sole authority to import wine into Canada. The exception is the Alberta Liquor Control Board, whichhas privatised its entire retail network. The other provincial liquor boards import, warehouse and distribute imported wines to their various retailoutlets. However, private individuals and restaurateurs, hoteliers et c. may obtain approval to import unlisted products through the LiquorControl Boards.4In 1988, a GATT panel ruled that certain practices of the Canadian provincial liquor boards were inconsistent with the national treatmentprovision of the GATT. As a result, both the EC5 and the US6 now have agreements with Canada, which specify in detail how the sales ofalcoholic beverages should be treated, in particular, as it relates to listing (i.e. authority by the provincial authority to sell a product) and mark-ups (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 useits good offices with the provincial authorities towards facilitating the accord of national treatment to rum that is the product of Member States ofthe Caribbean Common Market in respect of measures affecting the listing, delisting, distribution and mark-up of distilled spirit7. Given thesubstantially improved provisions that other countries have been able to negotiate with Canada, CARICOM has an interest in seeking similaror 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) underwhich rum may only be sold under the name “Caribbean” if it has been made from sugar cane products of a Commonwealth Caribbeancountry, or it has been imported in bulk from a Commonwealth Caribbean country and subjected to blending either with other Caribbean rumor Canadian rum. The main difficulties with this are (i) that the current legislation prevents Caribbean producers from making use of rawmaterials acquired from elsewhere (a practice that is becoming more crucial over time as the availability of molasses from the Region’s sugarindustry declines); and (ii) that the law allows for the mixing of Caribbean rum with non-Caribbean products, a practice that is not in the bestinterests of the region’s producers. 3 http://www.international.gc.ca/assets/trade-agreements-accords-commerciaux/pdfs/03-C3-Appendix- III.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 CARICOM-Canada Trade and Development Agreement
  6. 6. Page 6 www.crnm.org DEVELOPMENT PRIORITIESCanada has been a long-standing development partner of CARICOM. This has been evidenced through the CARIBCAN arrangements aswell as through the significant development support that has spanned many decades, including specific support to fisheries at both regionaland national levels.Consistent with its trade policy approach, CARICOM will seek to secure a specific chapter or section of the agreement devoted to cooperationin agriculture and fisheries. The areas of interest are based on the priorities identified by COTED Ministers (agriculture) as part of theCARICOM Regional Transformation Programme for Agriculture (RTP), and the Jagdeo Initiative. CARICOM will likely seek cooperation tosupport programmes and mechanisms that would assist, inter alia, regional food security, water management, and fisheries conservation andmanagement. CARICOM-Canada Trade and Development Agreement