RNM UPDATE 0708

June 14, 2007

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

- WTO Update – Agricultural Market Access

- US Bipartisan Deal: A Facilitator of Affordable Access to Pharmaceuticals

- The Outcome of the CARICOM–SICA Preparatory Meeting

- Creating a 20/20 Vision

- NEWS BRIEF

- UPCOMING EVENTS

WTO Update – Agricultural Market Access

WTO Director-General Pascal Lamy since the start of the year has been trying to induce
consensus amongst the WTO Members to break the impasse that has impeded progress in the
Doha Development Round (DDR). Evoking political will more so than the process of disaggregating
the technical issues has been the real challenge in this exercise to clinch a deal, optimistically, by
the end of July 2007.

Therefore, political dialogue amongst the WTO Members has been an important parallel in this
process. Particularly amongst the four major trading powers, or G4 (Europe, India, The United
States and Brazil), convergence on the issue of Agriculture especially could be the defining
impetus to bring the DDR into alignment. Much is hinged on the upcoming G4 meeting scheduled
June 19-22, 2007.

Notwithstanding the need to advance progress in this regard, the small and vulnerable developing
countries of the Caribbean would be guarded against proponents of this process that may seek a
deal at all cost, irrespective of whether the deal is congruent with the mandate of the DDR. The G4
meeting is expected to be ‘decisive’, that is, conclusive on whether a deal can be reached. A look
at the progress of recent negotiations on agriculture so far indicates that progress at the G4 level
will be very difficult to achieve.
The Current WTO Negotiations in Agriculture

The primary influence on the current negotiations has come from a controversial report presented
on April 30, 2007 by the Chairman of the Special Session of the Committee on Agriculture,
Ambassador Crawford Falconer. The report is seemingly predicated on a motive to challenge
negotiators and galvanise them into focused and decisive action. While the report addressed the
three main issues related to the agriculture debate in negotiations – Market Access, Domestic
Support and Export Competition, the discussion on Market Access presented some issues of
particular interest and concern to the Caribbean. These issues are outlined in the following
negotiations update on market access.

Market Access

The Chair’s submission on market access can be disaggregated into two issues

A. The interpretation of the treatment of Special Products

B. The approach to tariff reduction

A. The Interpretation of the treatment of Special Products (SPs)

The Hong Kong Ministerial Mandate provided for a framework where WTO developing countries for
reasons related to food security, the protection of farmer livelihood and rural development needs
could self-designate Special Products. SPs could be afforded more flexible treatment, that is, these
products could be subjected to smaller tariff reduction than those required for other agricultural
products.

On this matter, identifying what would constitute as an acceptable level of tariff reduction for SPs is
precisely the source of contention. Ambassador Falconer espoused an opinion in his report that
flexibility afforded to special products could not be interpreted as an accommodation of the
complete exemption of these products from tariff reduction. In contrast, the view of developing
countries, including the Caribbean, is that, in this context, this is a narrow interpretation of ‘flexible
treatment’ which undermines the intended purpose of the facilitating framework for SPs.

In addition to interpretive matters, the report also opined that only a limit of 5-8 percent of the
number of tariff lines could be designated as ‘special’. This is a significant departure from what was
agreed and specified at the level of the G33, where a minimum of 20 percent of tariff lines is
considered appropriate to bring realistic benefit to developing countries.

B. The Approach to tariff reduction

The US, under pressure from the EU to cut domestic support to the agricultural sector, advocates
that tariff reduction is really the gravest issue, and that the Europeans need to reduce their highest
tariffs by at least 83 percent. The EU is at this point unwilling to reduce their highest tariffs beyond
60 percent, whereas that country is advocating that the US reduce domestic support to $15 billion,
instead of the $22 billion cap as proposed by the US. During the G4 meeting, Europe and the US
would have to concede to a level of compromise on reducing domestic support on one hand and
tariffs on the other.

Developing countries, specifically the Members of the ACP favour a formula (under the tiered
approach) used for tariff reduction that creates an overall average cut of 36 percent for developed
countries, and 24 percent for developing countries.

However, Ambassador Falconer has suggested that in order for a deal to be possible, the overall
average cut would have to be at least 50 per cent. Furthermore, for the Chair, under the tiered
approach, when the principle of proportionality is applied to work out the tariff reduction
commitments of developing countries relative to developed countries, developing countries would
have to reduce their tariffs by two-thirds of that which is determined for developed countries. When
calculated, this would mean that the overall average cut for developing countries would be 33
percent, which is much higher than that proposed under the ACP tariff reduction formula. This tariff
reduction commitment would present significant issues for the small and vulnerable economies of
the Caribbean.

The report went on to propose an entirely different alternative to the tiered approach for developing
countries. He has suggested that developing countries “Drop the tiered approach, drop the
complicated flexibilities, two-third proportionalities, all the ‘specials’ debate and instead go for a
straight overall average cut target”, provided that a minimum cut is specified on each tariff line.
This approach would be similar to the Uruguay Round tariff reduction formula.

However, even though the simplicity of this approach may appear to be an attractive alternative,
developing countries must be cautious. Ambassador Falconer is heavily implying that the trade off
for a more palatable tariff reduction approach would be, inter alia, the surrender of emphasis on
SPs – a critical component in the arsenal of Special and Differential Treatment, which is
inextricably linked to the substance of the Doha Development Agenda (DDA). It is critical therefore
that concessions made to forge a deal during the dialogue at the G4 meeting do not include
compromises on the substantive development agenda of the DDR.

Conclusion

The Caribbean and indeed developing countries will watch with interest as the dialogue continues
on Agriculture to break the impasse that impedes the DDR. In particular, the developing country
community will continue to be hopeful that consensus can be reached but not at the expense of
maintaining the integrity of the DDA.
US Bipartisan Deal: A Facilitator of Affordable Access to Pharmaceuticals

The recent bipartisan deal struck in Washington included provisions, in addition to those relating to
labour and environment protection standards, related to intellectual property rights and access to
medicines.

Firstly, one new provision makes it easier for generic pharmaceutical manufacturers to access and
utilize the scientific and technical innovation of new drugs in order to allow quality generics to enter
the market more quickly. This change was made possible by amending the time frame within which
a manufacturer of generic drugs may not use the clinical test data of an innovative drug
manufacturer, which is otherwise referred to as the ‘data exclusivity’ provision. The management of
the process of access to scientific innovation in the health sector especially, is critical to the
question of who controls and who benefits from developments of scientific innovation. This is not to
suggest that the rights of innovative drug manufacturers to protection of the time, money and effort
that has been invested in that scientific innovation should be dismissed. However access to the
information related to new drugs impacts the availability and affordability of new medicines of a
high standard, which would be especially an issue of concern for the governments and consumers
within the developing countries of Colombia, Panama and Peru that are the US FTA Trading
Partners.

Secondly, the new provisions also seek to protect the rights of innovative drug manufactures but
without prejudicing the marketing or production of generic varieties. Therefore while the new
provisions seek to strengthen the expeditiousness of judicial processes related to patent
infringement, especially in the FTA Trading Partner countries, the deal now eliminates the
regulatory requirement that mandates a drug regulatory body to withhold the approval for generic
drugs until that agency can verify and certify that the marketing of the generic would not undermine
the patent rights of an innovative drug manufacturer.

Provisions also ensure more expeditious patent approval processes. Simultaneously, the
provisions prevent the mandatory extension of patent terms which may occur because of any
unreasonable delays in the patent approval and regulatory processes. This therefore prevents
large branded pharmaceutical companies from taking advantage of regulatory and administrative
deficiencies that may exist in the US FTA Trading Partner, and prevents these companies from
having greater intellectual property rights than they are allowed to have under US law within the
US. Greater facilitation of this is also made possible with the provision for cooperation and
assistance between the US and its FTA Trading Partners.

According to the CEO of the Generic Pharmaceutical Association, the new trade policy proves that
balance between fostering drug innovation on the one hand, and ensuring access to affordable
drugs in the US and internationally on the other, can be achieved in US FTAs. The facilitation of
market penetration of high quality generics engenders greater competition in the pharmaceutical
market, which lowers consumer prices while simultaneously encouraging innovation in that
industry.

CARICOM, as a developing region, would regard affordable access to medicines as an important

factor in the successful pursuit of the Millennium Development Goals, especially as they relate to
improving health and reducing poverty. Therefore this new precedent in US trade policy would be
of interest to CARICOM, especially if it positively considers engaging in an FTA with the US.

The Outcome of the CARICOM–SICA Preparatory Meeting

Consistent with the mandate that was established in the Joint Declaration of the Second Summit of
Heads of State and Government of SICA and CARICOM dated May 12, 2007, a preparatory
meeting of high official was held in Panama May 30, 2007 to discuss a FTA between both regions.

Discussions included issues related to:

• the legal format that would constitute the Agreement especially in light of the consideration
that CARICOM already has a bilateral agreement with Costa Rica, a member of SICA;
• the amendments and revisions that must be incorporated to align the integration of the
other SICA members into the framework of the Costa Rica – CARICOM FTA;
• market access such as rules of origin and customs rules and administrative procedures.

The Meeting provided opportunity for both sides to exchange relevant information. The CARICOM
delegation provided a briefing on the CARICOM Costa Rica bilateral agreement and the status of
ratification of that agreement in the CARICOM Member States. During the meeting, representatives
from both sides exchanged information regarding the preparatory phase of the negotiations, and
they took stock of the format of their respective negotiating structures.

Additionally, representatives reached agreement that Central American countries will forward to the
CARICOM Secretariat, their concerns on legal issues related to the existing FTA between
CARICOM and Costa Rica by June 1, 2007. They further agreed that additional information
exchange will be facilitated by the CARICOM Secretariat and the Pro Tempore Chair of Central
America.

As Dominican Minister of Foreign Affairs, Charles Savarin indicated while addressing the opening
of the Twenty-Third Meeting of the CARICOM Council for Trade and Economic Development
(COTED) in Castries, Saint Lucia, this new negotiation process between CARICOM and Central
America will present “increased demands on [our] limited resources and capacity whether it is time,
financial and human. However establishing these external links is a critical part of the current
international environment in which we are operating.” Indeed strengthening external relations with
our hemispheric partners is in the interests of CARICOM States. CARICOM and Central America
as relatively small and vulnerable States share common challenges when confronting globalization
especially in regard to their shared economic openness and vulnerability to natural disaster,
climate change and hemispheric security challenges. In this regard, cooperation between the two
regions is a logical step.

Creating a 20/20 Vision

The outcome of the upcoming Conference on the Caribbean: A 20/20 Vision will be significant to
the mapping of future US – CARICOM relations. It is expected that CARICOM will pursue dialogue
during such time that will engender consideration of expanded areas of partnership and
cooperation in a manner that would foster meaningful and productive benefit to the modern
development of CARICOM economies and the betterment of the quality of life of CARICOM
people. To this end, CARICOM will place emphasis on assistance, through increased investment
and technical support, in the timely achievement of its Millennium Development Goals, the
improvement of its human resource capacity and the development of innovation and technical
competence of the region in the sphere of science and technology.

CARICOM interests in this dialogue would invariably include seeking cooperation, investment and
technical support in the development of critical sectors (including tourism, financial services,
cultural industries, energy) earmarked as essential to the achievement of economic development of
CARICOM Member States.

Especially important to CARICOM would be the exploration of the development of a new and
relevant trade facilitating instrument that would improve and secure, over the long term, positive
trade and investment flows between the Region and the US. Options in this regard include but are
not limited to the redevelopment of the Trade and Investment Council (TIC) and a FTA.

Governance, the preservation of Democracy, and Security will also be part of the agenda and will
undoubtedly be a priority of the US Government. In this regard, addressing terrorism, money
laundering and other trans-border crime, drug and human trafficking ill be high on the agenda. In
this regard, CARICOM would seek to attain greater technical and infrastructural support to
strengthen and consolidate existing security and regulatory initiatives and to create new ones.

NEWS BRIEFS

Regional News

Minister Savarin Calls upon COTED to be decisive

Addressing the opening of the Twenty-Third Meeting of the CARICOM Council for Trade and
Economic Development (COTED) in Castries, Saint Lucia, Dominican Minister of Foreign Affairs
and Chairman of the Council (COTED), Charles Savarin, noted that in order to fulfill its mandate, it
was crucial that COTED dealt with matters with on its Agenda with ‘requisite decisiveness and
finality’ to avoid the perennial inclusion of certain items to the COTED Agenda. Highlighting the
removal of restrictions for the creation of the single market as an example of a persistently
recurring agenda item, the Minister asserted that finality must be brought to these issues so that
the Caribbean could realize the benefits expected from the single market.

Additionally in relation to the Single Market, Minister Savarin, while noting that trade in goods data
must be supplemented by trade in services data to adequately illustrate the performance of the
single market, he emphasized that intra-regional trade in goods indicators still provide a starting
point to assess the degree to which the single market process was successfully instrumental in
distributing benefits amongst Member States. From this perspective, he pointed out that OECS
countries were still experiencing a negative balance in trade in goods. Therefore it is necessary
that services trade is compiled and assessed to deliver a final determination of whether the
imbalance in trade in goods is matched by a positive balance in services trade.

Guyana to build new ethanol plant

Guyana has decided to advance its efforts to diversify its agricultural sector and to find additional
ways of meeting its energy needs by building a ethanol plant which will be constructed by Global
Energy Ventures. President Jagdeo when commenting on the new private venture was optimistic
and noted in a meeting held at the Office of the President that

“This could add a new sector to the economy. It could create thousands of jobs and therefore, we
decided this may be an appropriate use of land along the Coast and possibly in the intermediate
savannahs.”

Brazil supports Antigua and Barbuda in row against the US over Internet Gambling

Prime Minister of Antigua and Barbuda, Baldwin Spencer, said that assurances of Brazil’s support
came from Secretary-General of the Ministry of Foreign Affairs of Brazil, Ambassador Samuel
Pinheiro Guimaraes during bilateral talks on the fringes of the 37th meeting of the Organization of
American Sates General (OAS) Assembly. He noted that,

"We have repeatedly argued that no WTO member, no matter its physical size or its economic
importance, should simply be able to withdraw its WTO commitments in any sector whenever it
does not want to comply with the recommendations and rulings of the WTO's Dispute Settlement
Body, and I am, glad that this argument has found particular resonance among some of the major
trading partners of the United States.”

Convening of the Second Joint Meeting of COFAP and COTED Ministers

The Second Joint Meeting of the Council for Trade and Economic Development (COTED) and the
Council for Finance and Planning (COFAP) was convened at the Crowne Plaza Hotel, Port-of-
Spain, Trinidad and Tobago on Thursday, 7 June 2007.

The Meeting of the Councils was preceded by a Meeting of Officials Preparatory to the Second
Joint Meeting of the COTED and the COFAP at the Ambassador Hotel, Maraval, Trinidad and
Tobago on Tuesday, 5 June 2007.

The Second Joint Meeting was co-chaired by Hon. Charles Savarin, Minister of Foreign Affairs,
Trade and Labour, Dominica on behalf of the COTED and Hon. Guy Meyers, Minister of Trade,
Industry and Commerce, Saint Lucia on behalf of the COFAP.

Discussions at the Meeting included issues related to the CARICOM Single Economy; the
CARICOM Development Fund; the Regional Development Agency; the impact of tariff liberalization
in the context of fiscal harmonization and external negotiations; the CARICOM Financial Services
Agreement; the Caribbean Investment Code; the Caribbean Regional technical Assistance Centre;
and the Community Competition Commission.
CRNM Director-General addresses External Trade Negotiation Issues

As the Caribbean region pursues the conclusion of the EPA negotiations and explores other
options to shape trade relationships with international trading partners, CRNM has continued to
engage with all stakeholders on issues related to the Regions external trade negotiations.

The CRNM Director-General, Ambassador Richard Bernal, has participated in several discussions
with stakeholders within the Region and across the Diaspora on EPA related issues.

The Ambassador presented on the ‘The EPA as an Instrument for Development’ at the Wilton Park
Conference on May 23, 2007. During that visit to London, the Ambassador also spoke to the
implications of missing the deadline of the EPA negotiations when he delivered the lunch time
Feature Address at a seminar series entitled ‘The Challenges of Completing international Trade
Negotiations and their Implications for the Caribbean’. This seminar was hosted by The Caribbean
Britain Business Council in partnership with Chatham House, on May 29, 2007 in London, England.

In addition, on June 4, 2007 the Sugar Manufactures Association of Jamaica and the CRNM
Director-General engaged in vigorous discussion on the treatment of sugar within the EPA.

External trade negotiations are affected by the relationships between development, international
environmental phenomena and Caribbean economic policy. Therefore during the UK/Caribbean
Forum on Climate Change and the Caribbean Economy: Threats and Opportunities, Ambassador
Bernal addressed the way in which these relationships inform the process by which the Region
seeks to get the best trade deal possible with its international neighbours. The UK/Caribbean
Forum was held in Trinidad on June 8, 2007.

International News

Ecuador lobbies for extension of preferences

Ecuador is lobbying members of Congress to extend trade preferences, set to run out at the end of
the month, that are intended to counter narcotics trafficking. These preferences, as indicated by
Ecuador Foreign Minister Maria Espinosa, allow duty-free entry for apparel, cut flowers and other
products, and support 300,000 jobs in Ecuador. A discontinuation would lead to economic and
social instability within Ecuador.

Espinosa said Secretary of State Condoleezza Rice offered support for extending the preferences
for two years when she met with officials in Panama. Sources say that this reflects the State
Department’s desire to prevent Ecuador and Bolivia from moving further to the orbit of Chavez,
who is battling the U.S. for influence in Latin America.
UPCOMING EVENTS

June

12-15: 13th Meeting of the TNG/OECS Ministers of Trade, St. Lucia

13-15: Eleventh Special Meeting of Council for Human and Social Development (COHSOD) [Health],
Barbados

18: 8th RPTF Meeting, Brussels

19-21: Conference on the Caribbean: A 2020 Vision, Washington D.C.

19-21: Third World Services Congress, Bogotá

20-22: Preparatory Meetings and 8th Session of the ACP Parliamentary Assembly, Wiesbaden

23-28: Preparatory Meetings and 13th Session of the ACP-EU Joint Parliamentary Assembly, Wiesbaden,
Germany

25-26: PRO€INVEST/TRINNEX, Enhancing Investment in Tourism: Promotion, Trade Arrangements and

Public – Private Dialogue in Eastern and Eastern and Southern Africa, Kampala, Uganda

25-29: EC Seminar for senior administrators from Caribbean and Pacific countries and their umbrella
organisations on EC import legislation in the area of Sanitary and Phytosanitary (SPS) issues, Brussels

28-29: Fifteenth Meeting of the Forum of Ministers and Officials Responsible for Culture Policies, Trinidad
and Tobago

29: CRNM, Workshop on Labour Movement Issues in the OECS, Grenada

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For More Information Contact:

Marsha Drakes
Programme Officer-Trade Information
Caribbean Regional Negotiating Machinery (RNM)
3rd Floor The Mutual Building
Hastings Main Road
Hastings, Christ Church, Barbados
Tel: (246) 430-1678
Fax: (246) 228-9528
marsha.drakes@crnm.org