RNM UPDATE 0704

March 7, 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.

- ANTIGUA & BARBUDA VS THE US – THE BATTLE CONTINUES

- DR FINALLY FOUND COMPLIANT WITH CAFTA BUT WITH HIGH COSTS

- AMBASSADOR CLARKE IS NEW WTO SERVICES CHAIR

- CRNM WORKSHOP FOR REGIONAL JOURNALISTS A SUCCESS

- NEWS BRIEF

- UPCOMING EVENTS

ANTIGUA & BARBUDA VS THE US – THE BATTLE CONTINUES

In 2005, Antigua and Barbuda were favoured in the decision from the World Trade Organization
(WTO) in Geneva, which declared that the United States efforts to prevent the provision of these
services to consumers in America from Antigua and Barbuda were in violation of the United States’
obligations under global trade agreements. However the ruling of the Appellate Body in this case
did not impede the passing of US legislation titled the “Unlawful Internet Gambling Enforcement Act
of 2006” in September 2006.

The Antigua and Barbuda victory at the WTO level was symbolically important in that it indicates
that the WTO dispute settlement mechanism indeed works even for small and vulnerable States.
Additionally this victory, through extension of deductive reasoning, indicates that the rules of
liberalized trade do govern the ‘David’s and ‘Goliath’s of the world trading stage. While there are
those who question the legitimacy of the fundamental fairness of the WTO, the outcome of this
case apparently indicates that the rules of international trade are applicable to every Member
State.

It is apparent that despite the ruling, the US has continued to flaunt the rules of international trade
in this context. Antigua and Barbuda are claiming victory with regards to a WTO compliance review
of the US with the 2005 ruling. Antigua and Barbuda WTO Attorney Mark Mendel has citied that the
report of the compliance review gives the US ‘no place to hide and no way to try to explain
themselves out of this’. See News Brief below.

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However a niggling detail has not been overridden by the outcome of the 2005 dispute or by the
report of the compliance review. The rule of international law as it relates to trade may be
applicable to every State but there are limitations to the extent that these rules can effect fairness
in the interactions between States. As the persistence of the behaviour of the US implies the rules
of international trade may have little effect on the dynamics of power that still characterise the
interactions of sovereign states. A philosophical question is presented here – To what extent can
international law really govern the behaviour of sovereign states? Certainly within the WTO,
consideration is extended to the effecting compliance with WTO rulings by giving Member States
the right to impose sanctions on rogue states to encourage compliance with dispute settlement
rulings. However the extent to which this is practical for small and vulnerable States is small (use
another word than small). Not only is Antigua and Barbuda as an open economy highly dependent
upon trade with the US but the imposition of sanctions against the US would have de minimis effect
on a large economy like the US.

What is therefore the recourse for Antigua and Barbuda? There is reason to be cautiously
optimistic that the US will comply with the WTO decision in the absence of the Antigua and
Barbuda’s ability to impose sanctions. It is useful to be reminded that the resolve to have peaceful
international relations is still a powerful incentive for any State to comply with international law. In
this context, what is even more important is that powerful countries too need liberalized trade and
are reliant on the cooperation of all states to ensure the transparency and legitimacy of the system
of international trade and the rules that govern it. This is indeed reiterated by the US annual
economic report prepared by the Council of Economic Advisors which as InsideTrade indicates,
makes a case for further liberalization and the importance of removing non-tariff trade barriers.

Another consideration is the important link between US compliance and the success of the recently
resumed Doha Round. WTO Director General Pascal Lamy in his remarks as Chairman of the
Trade Negotiations Committee (TNC) at the February 2007 Informal Meeting of the TNC stated
that

“Political conditions are… more favourable for the conclusion of the Round than they have been for
a long time, and the challenge now is to make the most of them. Political leaders around the world
clearly want us to get fully back to business, and we in turn need their continuing commitment.”

If this is valid then US compliance with WTO rulings would be symbolically important to the
signalling of real political will to engage in the Doha negotiations particularly as they relate to the
incorporation of the development needs of small and vulnerable developing States.

The question of US compliance will also impact bilateral US- CARICOM relations to an albeit
different degree as they engage in the context of the US-CARICOM Trade and Investment Council
(TIC).

Notwithstanding these considerations, political ‘massaging’ will still be necessary to motivate US

compliance. Therefore Antigua and Barbuda will find it important to continue to consolidate with
sympathetic countries like China and Brazil to inculcate US compliance which as Mendel indicates
is the intention of Antigua and Barbuda.

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DR FINALLY FOUND COMPLIANT WITH CAFTA BUT WITH HIGH COSTS

The Dominican Republic (DR) would have made the necessary legislative changes related to their
application of taxes on alcohol and taxes on imported luxury cars which had previously been the
cause of the delay in DR CAFTA compliance. (See RNM Update 0702). However since that time
another issue came up which again caused delays. The US has insisted that the DR make
concessions related to two DR Resolutions (Resolution 23 and Resolution 148) that froze fuel
transportation contracts that already exited between fuel companies and fuel transporters in the
DR. The apparent aim of the resolutions was to protect DR fuel transporters by inhibiting major fuel
companies like Chevron from cancelling fuel transport contracts with DR fuel transporters. The US
argument was that these resolutions contravened the services provisions under the CAFTA
specifically Article 11.4. The basic provision of this article is that there can be no permitted
limitation on the number of service providers, service operations, people that are employed in the
services sector or the total value of service transactions. The DR having not negotiated exemptions
within this sector in this context could not create resolutions to stop US service providers like fuel
transporters from operating in the DR. This is lamentable however since Chevron’s intent to cancel
fuel transport contracts with DR Service providers, as announced by the fuel company, would have
strong displacement effects within that local sector.

While the US appears to be very strong on apparent DR violations of the CAFTA, they are yet to
make positive concessions regarding the compensation/concessions package that must be
awarded to the DR as was the provision of the ‘pocketing deal’. (See RNM Update 0703) The
arguments of the US have been that the DR has already been given considerable concessions and
that the US can not be made to compensate the DR for the failings of its apparel industry. The US
has conceded that while they are willing to assist the DR relative to the trouser industry, this
assistance is separate and distinct from the compensation package related to the ‘pocketing deal’.
Such assistance offered relates to the ‘aid for trade’ program or the modification of the supply
scarcity or short supply CAFTA provision for certain textiles.

Notwithstanding the its problems, the DR has made the legislative changes to nullify the previous
Resolutions and on March 1 was declared compliant with the CAFTA.

All these legislative changes would undoubtedly result in the DR having to make considerable
conciliatory adjustments at a domestic level. Retrospectively, it is unfortunate but not surprising
that there has been little if any room afforded to the DR by the US, because the CAFTA is beyond
the negotiation stage. Despite the concessions made by the DR in this context, the DR would
remain optimistic about the benefits of being engaged in an FTA with the United States.

AMBASSADOR CLARKE IS NEW WTO SERVICES CHAIR

Permanent representative to the United Nations Office in Geneva, Switzerland, Ambassador

Trevor Clarke has been appointed Chair of the Council for Trade in Services in the WTO for one
year.

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The general mandate for this Council is to oversee the existing rules on services and to manage
negotiations for new rules. The Council is open to all WTO members and currently oversees four
subsidiary bodies namely the Committee on Financial Services, the Committee on Specific
Commitments, the Working Party on Domestic Regulation and the Working party on General
Agreement on Trade in Services Rules.

The agenda for services is critical in the WTO negotiations. As Pascal Lamy has indicated there is
a need to work assiduously towards the speeding up of these negotiations particularly as they
relate to the submission of services offers. Liberalization in services is thought of as particularly
important to developing countries especially as this relates to mode 4 (movement of natural
persons).

CRNM WORKSHOP FOR REGIONAL JOURNALISTS A SUCCESS

CRNM hosted a workshop for regional journalists entitled Regional Journalism and the EPA:
Mitigating Communications Challenges. The Hon. Kerry Symmonds, Minister of State in the
Ministry of Foreign Affairs and Foreign Trade of Barbados, in delivering the keynote address,
acknowledged that the press plays an important role in social and economic development of the
region and congratulated the CRNM on taking the initiative to organise the workshop.

The purpose of the workshop was not only to inform regional journalists about current outstanding
issues within the EPA but also to engage in dialogue about deepening the role of regional
journalists as partners in the dissemination of information about the EPA and its importance to the
people of the Caribbean. In addition, the workshop included training which was conducted by the
workshop’s Chair, Canute James, on how journalists could develop a generic approach to reporting
on the EPA and the trade negotiations for print, broadcast and new media.

The journalists also benefited from a number of enlightening presentations from CRNM staff, the
CARICOM Secretariat and the Private Sector Trade Team on a range of pertinent topics related to
the EPA negotiations which included innovation and competitiveness; opportunities and challenges
in services; the relationship between development of the regional integration and the EPA; and
stakeholder participation in the EPA process beyond implementation.

A full Summary document of the discussions and the recommendations that emanated from the
workshop is scheduled for dissemination in the upcoming weeks.

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NEWS BRIEFS

Regional News

Antigua victory sets new focus in gaming sector

Antigua and Barbuda is claiming victory in its WTO dispute with the US. While the report on the
latest ruling by the WTO is likely to remain confidential until the end of March to allow for its
translation and distribution, Minister of Finance and the Economy Dr. Errol Cort revealed that the
outcome was in Antigua and Barbuda’s favour. Antigua and Barbuda’s attorney at the WTO Mark
Mendel has indicated that the latest WTO ruling gives the US “no place to hide and no way to try to
explain themselves out of this.”

Dominica PM assured over trade talks

BBC Caribbean – The Prime Minister of Dominica, Roosevelt Skerrit, says he has had a
sympathetic hearing from British MPs to a Caribbean demand for development to be the main
plank of new economic partnership agreements being negotiated with the EU. Mr Skerrit told the
British House of Commons International Development Committee: "If we're talking about trade and
there are no principles upon which we'll be operating then we can't measure our success.

"We need to get the European Union to understand that development is what we should be
discussing because this is what is of concern to us in the region."

He said he was satisfied that "every member" of the parliamentary committee "was in support of
that position".

Countries of the ACP bloc have complained that the EU is more interested in the free trade
elements of the proposed agreements known as EPAs, a charge the EU denies.

EU banana rules to face another WTO challenge

The Miami Herald (adapted) – European restrictions on banana imports will face a new challenge
at the World Trade Organization next month when Ecuador asks the group to revisit a decade-old
trade dispute, officials said Monday.

Latin American countries and the United States have long contended that European Union tariffs
on the fruit amount to unfair trade discrimination. Indeed consistent rulings by the WTO against the
EU setting of tariffs for bananas, forced the bloc to overhaul a system that grants preference for
producers from African and Caribbean countries, mainly former British and French colonies.

However a new banana tariff established last year -- 176 euros ($231) per ton -- has brought the
system into compliance with WTO rulings.

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Ecuador, the world's largest banana producer, asked the EU for consultations in November and will
ask for a formal investigation when the WTO's dispute settlement body meets on March 8,
according to an advisory sent Monday to the organization's 150 members.

Michael Mann a spokesman for EU Agriculture Commissioner Mariann Fischer Boel has
rejected Ecuador's claim stating 'As far as we are concerned, we have done what we needed to
do,' said Michael Mann. He told the Associated Press 'Any idea that they are kept out of the
European market is just not true.'

It is reported by EU Officials that Latin American bananas currently have around 60 percent of the
market, while African and Caribbean producers have 20 percent.
Bananas grown in the EU -- mostly on Spanish and French islands -- account for another 20
percent.

Chile to discuss increased cooperation with CARICOM

St. Kitts and Nevis, SKNVibes (adapted) – Chilean Ambassador to St. Kitts and Nevis, His
Excellency Alphonso Silva has confirmed that Chile’s President, Her Excellency Michelle Bachelet
is committed to maintaining and strengthening relations between Chile and CARICOM. The
Ambassador expressed that the explorations of such will be on the agenda when Chile’s President
meets with CARICOM Secretary General Edwin Carrington during the meeting of the Rio Group in
March 2007. The intent of the Chilean government is to allocate US$1 million to assist the advance
of CARICOM regional integration.

International News

US, Emirates suspend trade talks

Washington – The US and the Arab Emirates have suspended negotiations for a free trade
agreement over differences on how the Gulf States would open its market to US banks and other
overseas investors, according to US officials.

The temporary halt in talks with a key US ally in the Middle Eats means the two sides will not meet
a Mach 31 deadline imposed by Congress if the deal is to be considered under President Bush’s
trade negotiating authority.

Progress made in WTO Meetings

Washington, Reuters (adapted) – Some World Trade Organization members are trying to construct
a deal on agriculture, the main sticking point in the five-year-old Doha round of world trade talks.
Recently in a round-robin series of bilateral meetings beginning in London and continuing in
Geneva, WTO members the United States, the European Union, India and Brazil intensified efforts
to reach a breakthrough in the talks before the White House's "fast track" trade negotiating
authority expires at the end of June.

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In recent months, negotiations have focused primarily on the most politically important commodities
for each trading partner in the talks, in the hopes that an agreement on how to handle those would
lead to an overall breakthrough.

Meeting of the Joint ACP-EU Ministerial Trade Committee Convened

ACP Secretariat (adapted)– The ACP Ministers in charge of the negotiations of the Economic
Partnership Agreements (EPA) met in Brussels, on 27 and 28 February 2007 to review the
progress of the negotiations and to take stock of the post-Hong Kong negotiations of the Doha
Round.

During their discussions, the Ministers took stock of the progress made in the negotiations and
heard reports from the different representatives on the negotiations in their respective regions.
They examined the development aspect of the EPAs and sought to address resource needs for the
preparation and implementation of the Agreements.

On the basis of information from the regions regarding their development needs and challenges in
terms of financial resource requirements, the participants considered ways and means of ensuring
that all the needs are taken into account. Furthermore, the Ministers examined progress made in
the formal and comprehensive review of the EPA negotiations (Article 37.4 of the Cotonou
Agreement) and discussed how the implementation of Article 37.6 of the Cotonou Agreement could
be implemented to ensure that the flow of trade between the European Union and the ACP States
is not interrupted whatever the outcome of the EPA negotiations.

The Ministers also focused some attention on the post-Hong Kong negotiations of the Doha Round
and explored WTO compatible alternatives in the event that the EPAs cannot be concluded by the
prescribed deadlines.

The ministerial session was preceded by a two-day technical preparatory meeting of senior officials
held 26 and 27 February 2007, and was later followed by the ACP Ministerial Trade Committee
and the ACP-EC Joint Ministerial Trade Committee on 28 February and 1 March 2007,
respectively.

UPCOMING EVENTS

MARCH

07: 22nd Special Meeting of the COTED, Georgetown, (postponed to May)

05-06: CARICOM consultations on Studies on Telecommunications and Agri-Food Distribution, St. Lucia

07-08: CARIFORUM TWG on Services and Investment in EPA negotiations, St. Lucia

06-08: OECS/’Hubs and Spokes’ Project, Agriculture Special Products Consultation, St. Vincent

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12: Meeting of ACP Chief Negotiators and senior officials & meeting of Chief Negotiators to Report to
Ministers, Bonn

13: Informal Dialogue between EU Ministers for Development Cooperation and ACP Ministers, Bonn

12-13: Government of India, UNCTAD, Carnegie Endowment, OXFAM, etc., International Seminar on
“Saving Doha and Delivering on Development”, New Delhi

12: Meeting of ACP Chief Negotiators and senior officials & meeting of Chief Negotiators to Report to
Ministers, Bonn

14: Meeting of Senior Officials, Brussels

15: Special Ministerial Consultations on Sugar, Brussels

14-16: OECS/’Hubs and Spokes’ Project, Agriculture Special Products Consultation, St. Kitts

15: Special Meeting of Heads of Government of the Caribbean Community on Health Issues, Port-of-Spain

15-16: Meeting on Cotton, Geneva

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For More Information Contact:

Nand C. Bardouille
Caribbean Regional Negotiating Machinery
3rd Floor, The Mutual Building, Hastings Main Road, Hastings, Christ Church, Barbados
Tel: (246) 430-1678
FAX: (246) 228-9528