Exploring Investment Opportunities with Saint Lucia Key Trading Partners

- the nexus

Trade Agreements and Inward Investment

Presented by David Jordan Masters International Affairs Economic Policy and International Trade Bsc. Economics, Dip Spanish

David Jordan

Overview

Trade Agreement History Structure List of Trade Agreements Nature of Trade AGREEMENTS

- The Nexus Examine How has St. Lucia performed Which countries are St. Lucias Trading Partners ? Saint Lucias Indicators on Investment

Exploring Opportunities Conclusions

David Jordan

Intro : A Definition
Trade

Agreement - an undertaking endowned with economic

opportunities that help promote growth and development of an economy via the mechanism of Trade in goods and services conducted between countries or regions promoted through the private sector covering a geographical Area. or simply a Product

What

constitutes a Trade Agreement ?Entails Rules, monitoring

trade partners: implementation, enforcement, and negotiations of provisions : Signature of party (ies) Dispute settlement
David Jordan 3

Intro :
Its Structure and content
covers a geographical area in scope, Product orientation Product
Bilateral between two countries Multilateral rules based arrangement to govern trade and investment Why - Common interests, goals and objectives of parties Major Agreement - WTO, FTA , RTA Basic Principles Non Discrimination, Reciprocity, Binding Enforceable Commitments, Transparency Modern approach Trade and Investment Framework discuss and resolve Trade Goods, Services , Investment issues Asymmetry, Safeguards, Development Dimension, Capacity Building Component - to enable unequal partners to negotiate, reform and improve

David Jordan

Character of International Trade

Free Trade Protectionism

The Invisible hand Maxim laissez faire Adam Smith Economies of Scale , Comparative Advantage

via Qrs or tariiffs thus limiting access infant industry argument costs of trade = high cost of locally produced goods benefits of trade protection? quality issues inefficiencies

Liberalisation
most efficient firms survive global scope of industry lower tariffs= lower costs to consumer = cheaper imports trade expansion vs trade diversion global outreach quality and standards enhancement Innovation and Competitiveness

David Jordan

History and Structure

1930s Free Trade 1947 GATT 1970s Protectionism-Old Order 1990s Liberalisation-New Order Globalisation 1995 WTO Global Financial Crisis
David Jordan 6

Caribbean Bilateral and Regional Trade Architecture

Entry into force Name of Agreement 1973 CARICOM 1975 Lom I 1979 Lom II 1981 OECS * 1984 Lom III 1984 United States Caribbean Basin Economic Recovery Act (CBERA) 1986 CARICOM-Canada Trade and Economic Co-operation Agreement (CARIBCAN) 1989 Lom IV 1995 World Trade Organisation 1995 Lom IV (revision) 1993 CARICOM-Venezuela (non reciprocal) 1995 CARICOM-Colombia Agreement on Trade, Economic and Technical Cooperation 2000 CARICOM Cuba Trade and Economic Cooperation Agreement 2001 CARICOM Dominican Republic Entry into force Name of Agreement 2002 Cotonou 2005 CARICOM Costa Rica 2008 CARIFORUM EU EPA Ongoing WTO DOHA Round Ongoing CARICOM - Canada Free Trade Agreement / Trade and Development Agreement On hiatus Free Trade Area of the Americas (FTAA) on hold since 2004 Ongoing CA RICOM-Central America

David Jordan

Nature of Trade Agreements

Preferential Agreements Commodities Sugar, Rice, Bananas Product Arrangements eg Garments, Light Manufactureds CARIBCAN light manufactures EPA Reciprocal arrangement Caricom/Canada
David Jordan 8

Enabling Mechanism for Investment I

Rules Of Origin Preferential Market Access Promote - Trade, Industry, Services Joint ventures, Caricom Market / CMSE

David Jordan

Enabling Mechanism II) Context TRIMS

Simply relates to the imposition of conditions on investment which are Trade-related WTO ; prohibits investment restrictions ( Non tariff restrictions) which conflict with obligations Art III.4, eg i) local content requirements ii) indirect
David Jordan 10

Nexus to the Agreements

Strategic Alliances of PPP - location Enabling Environment = No TBTs , MFN Stability of Countries
a) Political b) Economic c) Social Environment d) Technology, e) Infrastructure f) Telecommunications g) Incentives, h) transparency of legislation i) Rules, permits etc j) level of bureaucracy and red tape

Other Diplomatic Missions INDEX of Corruption rules and its cost bending the

David Jordan

11

Trading Partners ?
Sources for Investment 1. USA 2. EUROPE 3. CARICOM 4. Venezuela = Sources of Trade USA EUROPE / UK TRINIDAD/CARICOM JAPAN/ CHINA

David Jordan

12

Composition of St. Lucias FDI Stock

FDI / GDP St. Lucia already has a very high level of FDI stock relative to the size of the economy, indicating that the country has been very successful in the past in attracting FDI - a key selling point for future investors. The stock of FDI in St. Lucia reached US$1,669 million in 2007, which equals 174% of GDP. This has increased from 113% in 2000 and 76% in 1990.

David Jordan

13

Composition of FDI

In terms of current flows, foreign direct investment accounted for 66 percent of gross fixed capital formation in St. Lucia in 2007, thus making a greater contribution than in many comparator countries. Foreign direct investment in St. Lucia totaled US$379.5 million in 2001-05, compared with total net FDI of US$265 million in 1995-99.[1] St. Lucia attracted overseas investment of US$261 million in 2007. Most foreign investment has been directed into services, particularly hotel development. [1] WTO Trade Review.
David Jordan 14

Other side of the COIN !

A diminishing level of overseas investment in the sectors of the economy such as agri-business and manufacturing which suggests that St. Lucias relative competitiveness in these areas is waning.

David Jordan

15

Other Side of the Coin !

i) widespread use of concessions has narrowed the tax base of St. Lucia, ii) has created distortions in the economy, and iii) has created dependence by many businesses on Government intervention
David Jordan 16

The NDC Perspective

David Jordan

17

The NDC Perspective

The Annual Report (2005) is a useful source, to describe the gains of the five years.( 2000-2005). However, the Overview provided may have overstated the extent of investments on the ground and would need further analysis. This period reflects that as a result of Governments and NDCs efforts, St Lucia is again considered an excellent host for FDI and has attracted new investments worth over $150.0 M USD and commitments of almost $900MUSD. In 2005, the value of investments was estimated at $60.M USD ( Page 7, NDC Annual Report 2005). Need to reconcile DATA and Approaches of Assessment

David Jordan

18

Saint Lucia Investment LANDSCAPE

Needs a PLAN !- Policy , Strategy and Action Needs Revision of Climate Critical are i) 1974 Incentives for Industry ii) 1974 Trade License iii) Investment Policy Review
David Jordan 19

UNEXPLORED Opportunities

Martinique / DOMS CSME/ CARICOM Need to explore new Industrial Policy a) National b) Regional CARICOM DR / COSTA RICA SMEs, Brand Marketing EUROPE EPA/CARIFORUM
David Jordan 20

HOW
Political Assertiveness = Will = Shared Vision PPP Arrangements National Development Planning vs Regional Planning Proper and Effective Planning = mainstreaming Trade Public Education of stakeholders =improve technical capacity Private sector Assertiveness = capitalise on opportunities Preparedness to Invest, the Hunger to Invest - access to capital Utilisation of Innovation & Technology = Reflective of time and environment

David Jordan

21

HOW to the NEXUS

More Efficient Agencies Coordination, Convergence

eg. Investment Promotion, Export Promotion Agencies
- need to be more effective and efficient and developing timely strategies, synergies - need to be more collaborative / coordinating in approach - International Involvement SHOULD BE PART OF THE Strategy,

Not Business as Usual WHY ? Challenges and Opportunities a) WTO b) EPA c) CSME < Review of Harmonisation Incentives Implications for both Sectors.

Public Sector
Ministries Agric, Commerce , Trade, Tourism, Culture, Health - constantly need to refine, respond and moreso develop policies in a timely fashion

Private Sector
SLISBA, Chamber, Manufacturer Assoc, NGOs

Focus of - innovation and creativity and competitiveness in National Planning

David Jordan

22

Conclusions
What are the messages ? 1. 2. The Changing face of Trade Agreements warrant a different Approach to Investment Policy, Strategy, Priorities and Opportunities Saint Lucia has some good assessments but need to take a more proactive stance in developing ITS OWN Strategy which can emanate from these Agreements Greater Need for the exploit of Provisions of Trade Agreements eg Investments - Comparative advantages seem to be in Services b) New opportunities Increasingly the Index of Corruption features

3.

4.

5. 6.

Private Sector is critical, as it is they who Trade and Invest access to capital Governments negotiate and it is important in working the Agenda TO REFLECT A NATIONAL AGENDA.

David Jordan

23

THANK YOU FOR YOUR Patience !

David Jordan
Director Intl Trade & Investment Ministry of External Affairs Intl Trade & Investment

djordan@gosl.gov.lc 758 468 4519

David Jordan 24