Anthony Hylton, Contributor

Resorting to its Parliamentary majority, the Jamaica Labour Party (JLP)-led government took the decision on September 2 to sign the economic partnership agreement (EPA) with Europe, without any amendment or reservations. This was done notwithstanding the early and sustained views of the Opposition that the Most Favoured Nations (MFN) clause in the agreement is inimical to Jamaica's and CARIFORUM's economic and foreign-relations interests.

It should be remembered that the negotiations for the EPA, which started during the Opposition's term in government, was not concluded before the People's National Party administration demitted office. The fact is, there remained a handful of issues which the Opposition thought needed more time, technical work and further consultations with stakeholders. Among the issues was the settlement of a combined regional schedule for liberalising CARIFORUM markets, including the treatment to be given to a list of sensitive items that would either be on a phased list or an exclusion list, as well as regional preferences.

From as early as 2000, which marked the signing of the Cotonou Agreement, the Opposition had committed Jamaica and CARICOM to negotiate an EPA that was aimed at assisting Jamaica and CARICOM's gradual integration into the global economy, assisting in our sustainable development and the reduction of poverty.

As stated in my presentation in the Parliamentary Debate, the Opposition:

" .... agrees with the Government that Jamaica would have to join the global marketplace in negotiating a phased reciprocal agreement with a strong development focus. In fact, the Opposition negotiated a large portion of the EPA." I reiterated that the Opposition recognises that the era of preferential trade arrangements is at an end and that an EPA would be a necessary step as Jamaica and the region try to position themselves within the current challenging global environment.

expected development assistance

"The Opposition does, however, take issue with some terms of the initialed EPA that it believes are not in the best interests of the region. The EPA has progressed along a significantly different path from that originally contemplated, as the promised and expected development assistance is transformed to keep it in line with the EU's trade policy, and not with the region's best interests or developmental needs. There is some technical assistance, but the language is not binding on the EU, and it is clear that there will be no new funds provided for the region to assist the transition of our economies into the global economy. Instead, CARIFORUM has been directed to the European Development Fund (EDF) for funding, which from past experience, is extremely difficult to access on a timely basis."

Notwithstanding this, the Opposition has been consistent in its view that these concerns were not fatal to the signing of the agreement, on the basis that it provided for an implementation mechanism, which allowed for joint decision making between CARIFORUM and the EU, and thus, an opportunity for continuing discussions on these issues.

The Opposition further supported the view expressed in the Report of the Internal and External Affairs Committee of Parliament, which I have the privilege of chairing, that:

"The fact that CARICOM would have agreed to negotiate the EPA does not belie the right of the region to decry those portions of the EPA that are detrimental to the best interests of the country. It is critical for the region to take a proactive stance now, even after the initialling of the EPA, to ensure that before the document has been signed, it will benefit and not hinder the future development of the region. "

The Opposition expressed its view that it would not have signed the current EPA, because in its view, it would have been "better for us to not meet the December 2007 timeline set in the Cotonou Agreement, and for us as a nation and a region to safeguard our interests, set the pace for our own liberalisation and ensure that the agreement is one that will fulfil the intentions set out in the Cotonou Agreement".

The Opposition's major concern, as has been stated, is with the MFN clause, which is dangerously different from any MFN provision in other trade agreements. The MFN provision in the EPA has come under serious scrutiny by the WTO and has been denounced by a number of WTO members. Among the most vocal are Brazil, China and South Africa. On February 5, 2008, Brazil voiced its concerns during the WTO General Council in Geneva. At the moment, the main developing countries which would qualify as 'major trading economies' would include India, China, Malaysia, Indonesia, Thailand and Brazil. In the future, other developing countries will likely fall within this one per cent threshold and would also be captured by the MFN clause.

"Most troubling is the fact that most, if not all, countries have membership in one or more regional trading blocs. This typifies the trend in world trade. The threshold, therefore, for triggering the MFN clause regarding regional trading blocs of 1.5 per cent is a mere fig leaf, is illusory, and ineffectual in providing any limits for defining 'major trading economies'.

Additionally, it must be recognised that Jamaica is currently a leading member of the G-15 Group of countries whose raison d'etre is to further South-South co-operation, and among its membership are the countries of Brazil, India and Malaysia, the very countries that the proposed MFN provision is directed at. There are two perspectives from which we must view the operation of the MFN clause: our own perspective and that of third countries. Examining the MFN clause from our own perspective, the Opposition's major concern is that it unduly restricts our policy space and flexibility in designing our own trade policy towards the rest of the world.

choosing trading partners

The importance of this cannot be understated, at a time when flexibility in choosing our trading partners and thereby, our terms of trade, is of vital importance in an increasingly competitive global environment. Indeed, if we hope to improve our terms of trade, we must make concessions to other countries, with differing interests in our relatively small market, and any other more favourable concessions granted to third countries, must be given to the EU.

The difference between this clause and the usual MFN clause in trade agreements, is that the traditional MFN clause does not require developing countries to pass on to a developed country any benefits or concessions received from another developing country.

The proposed MFN clause provides that CARIFORUM must notify the EU of all more-favourable concessions granted to third countries, thereby giving the EU the right to 'cherry-pick' the concessions that it views as being beneficial to it.

technological developments

Let us examine for a moment a very practical and immediate example. Brazil has made technological developments in fuel-efficient and dual-fuel motor vehicle and we may wish, for environmental and other reasons, to enter into trade arrangements with them to benefit from this technological advance. Brazil may wish tariff and other non-tariff concessions in the Jamaican market to assist it in developing their industry. After signing the EPA, however, Brazil will recognise that the EU will have the right to insist upon these concessions as well. Thus, Brazil will face increased competition in the Jamaican market from the entire 27 EU member states. What would be the incentive for Brazil to invest in our market and face that potential increased competition, when it could opt to invest in non-CARIFORUM countries and not run the risk of its investment being undermined immediately? Under the traditional MFN clause, the EU would not have had a right to insist on receiving any concession, by virtue of Jamaica's grant of concessions to Brazil.

The lessons to be drawn from this are manifold. First, it speaks to the necessity for maintaining flexibility in designing our trade policy to respond to pressing domestic needs and developments in the global marketplace. Second, it demonstrates in a practical way how the granting of the right to the EU to cherry-pick concessions may adversely affect our future trading relations with third countries.

Let us now briefly examine the MFN clause from the perspective of third countries. The previous example, involving Brazil, also demonstrates the risk Jamaica may incur in making itself unattractive to potential third-country partners. Indeed, as previously mentioned by the leader of the opposition, we could become "international lepers" were the MFN provision to be adopted. Third countries are likely to avoid CARIFORUM countries like a plague to avoid suffering the disadvantages of increased competition in a relatively small market without significant benefits and the increased risk of losses.

Important as our trading relations with the EU have been historically, our trade relations with the US and Canada have been even more important. Thus far, the administration has given no indication to the country as to the likely effects of the EPA, and the MFN provision, on the CBI, under which important trading concessions remain. Take for example, our increasing trade in ethanol into the US market, where Jamaica is currently the largest exporter of ethanol under the CBI arrangement with, an approximate value of well over US$300 million with increased potential for significant growth in this market.

future negotiations

Two points can be made here:

"The MFN clause will set the floor, not the ceiling, in terms of concessions to be demanded in pending and future negotiations with Canada and the US. Any more favourable concession granted to the US and Canada is likely to be demanded by the EU, by virtue of the MFN clause.

"These increased concessions will increase revenue loss for the country, and, significantly, the administration, though realising the point, has not indicated the measures to be taken to address the inescapable shift of burden to local taxpayers in order to ensure revenue neutrality.

Given the Government's insistence on signing the EPA, without amendment or reservations, two questions must be asked: Why is the Government so fundamentally opposed to negotiating an amendment of the MFN clause, or, failing this, to enter a reservation? Why is the renegotiation of the MFN clause being classified as a 'deal-breaker' for the EU?

These questions are pregnant with possibilities, not least among which is the fact that the EU and other developed countries have attempted on previous occasions, to introduce changes to the traditional developing-country category in the multilateral fora, without success, and with stout resistance from developing countries. That it should now seek to introduce a new category of developing country in the WTO, as part of these EPA negotiations with the weaker ACP regions, including CARIFORUM, is cause for cynicism.

credible argument

Additionally, the Opposition remains steadfast in its view that Jamaica and CARIFORUM should not provide a stick for the EU with which to beat Africa. CARIFORUM countries are likely to be the first to sign either a full or partial EPA with the MFN provision, thus setting a precedent for the rest of the ACP regions.

The Government must take ownership of this policy choice and make clear to the Jamaican people and the rest of the world that it believes that this is the best decision it could make on this most important issue.

It was the Government's failure to mount any credible argument that the Opposition was able to accept, and its use of its parliamentary majority to dismiss the amendment sought by the Opposition.

Anthony Hylton is opposition spokesman for foreign affairs and foreign trade and member of parliament for Western St Andrew. Feedback may be sent to columns@gleanerjm.com