In October 1985 at the Commonwealth Heads of Government meeting, Canada made a commitment to establish an economic and trade development assistance programme for Commonwealth Caribbean countries and territories known as CARIBCAN. Beginning on June 15, 1986, duty-free access to the Canadian market was granted for most commodities originating in Commonwealth Caribbean countries.

The objectives of CARIBCAN were to enhance Commonwealth Caribbean trade and export earnings, improve the trade and economic development prospects of the region, promote new investment opportunities, and encourage enhanced economic integration and co-operation.

Eighteen countries and dependent territories, including Jamaica, Trinidad and Tobago and Barbados, were made eligible to receive the duty-free benefits under CARIBCAN.
CARIBCAN's coverage is limited to trade in goods and does not extend to trade in services, which accounts for a growing proportion of Caricom-Canada trade.

This arrangement, like all preferential agreements, requires a WTO waiver in order to conform to international trade rules. A waiver was obtained for CARIBCAN and it was extended in 2006 to expire in 2011. The Canadian government has signalled its unwillingness to seek a further renewal of the WTO waiver when it expires in 2011.

Consequently, at the last meeting of Caricom Heads of Governments in The Bahamas in March, it was decided to begin negotiations with Canada this year for a successor Free Trade Agreement (FTA).

A key question is whether Canada will wish to engage in negotiations for a successor agreement with the CARIBCAN grouping, which includes non-Caricom members and the implications that this would have for regional trading arrangements.

CARIBCAN results
This initiative produced limited results in terms of the original objectives, as most of the exports to Canada from the region remain in the primary commodities category, with little developmental results.

About 16 per cent of Jamaica's total exports are to Canada, and about three per cent of imports are from Canada. Canada represents Jamaica's third largest export market, after the US and the EU. As a single destination, Canada is Jamaica's largest market for Alumina exports at about 30 per cent.

Canada is one of the few countries with which Jamaica has maintained a trade surplus over the years:

Imports from Canada consist mainly of wheat, fish products, pharmaceuticals, and electronic equipment.

Jamaica's Trade with Canada
(In US dollars)
Year Imports Domestic Exports Re-Exports Balance of Trade
2002 112,636,057 156,991,595 176,749 44,532,287
2003 97,994,316 191,781,217 630,216 94,417,117
2004 103,706,386 272,852,009 667,756 169,813,379
2005 109,555,409 293,840,869 1,123,585 185,409,045
2006 123,660,644 308,109,295 1,187,165 185,635,816
Source: Statistical Institute of Jamaica

Exports to Canada - 2006
Product Value (US$) % of Export
Alumina 286,987,418 93.15
Rum 8,549,052 2.78
Agricultural Produce 6,634,496 2.15
Beverages and Tobacco 2,620,377 0.85
Processed Foodstuff 2,100,938 0.68
Other 1,217,014 0.39 Total 308,109,295 100
Source: Statistical Institute of Jamaica

Current Perspective
Canada's market liberalisation at the multilateral level at the World Trade Organisation (WTO), under the Most Favoured Nation (MFN) rules, has reduced CARIBCAN's relative preferential value to beneficiary countries such as Jamaica. Under the WTO's MFN rules, tariff reductions by a member state must be made available to all members, except in specially exempted cases such as FTAs.
However, reductions in barriers to entry agreed to at the multilateral level erode the benefits of all preferential arrangements over the course of time, heralding an era of free competition.
In Jamaica's case, 94 per cent of Jamaica's exports to Canada in 2005 entered duty free under MFN free rates, while only 3.5 per cent of exports entered duty free under the CARIBCAN arrangement.
This means that Jamaica has little to gain in terms of the export of primary commodities from the traditional sectors in trade negotiations with Canada. Future trade opportunities with Canada lie with the export of value added goods and services.

Rules of Origin
Rules of Origin (ROO) are critical to Jamaica's prospects to increase its exports of value-added goods into the Canadian market, and must be viewed as a developmental tool.
They are used as a tool for determining the 'economic nationality' of a product, and conditions contained in ROO are some of the most important determinants of market access. These rules will determine whether Jamaica and the region will reap any benefits in its negotiations with Canada.

To qualify for duty-free treatment under CARIBCAN, at least 60 per cent of the ex-factory price of the goods as packed for shipment to Canada must originate in one or more beneficiary countries or Canada. The 60 per cent qualifying content may be cumulated from various CARIBCAN beneficiary countries or Canada. The goods must be finished in the beneficiary country in the form in which they are imported into Canada.

Under the Proof of Origin Regulations, either a duly completed Certificate of Origin or a written statement of origin signed by the exporter must be presented to Customs.
In the negotiations for a successor arrangement to CARIBCAN, it is recommended that a specific processing requirements methodology be used in product sectors with high import content, in order to gain market access for products that might not qualify under the current CARIBCAN structure.

Specific processing rules require a non-originating material or product to have complied with a predefined set of local operations or processes, for example the fabric used in garments must be cut locally.

Since Caricom countries will enjoy preferential market access under an FTA, albeit on a reciprocal basis, it is expected that Canada will want to ensure that it is only the countries which are party to the agreement which will benefit and that other countries do not have their goods shipped via a Caricom member state with the sole aim of obtaining preferential customs treatment, as is the case with all FTAs.
This is why there are rules of origin. Yet these rules should not be so restrictive that they prevent Caricom member states from capitalising on their tariff preference advantages in order to attract investment. The Rules of Origin should take into account the high regional import content, the limited industrial base, and the need to develop businesses and create employment.

A criterion such as "simple processing" should be used as far as possible, instead of "substantially transformed", for the apparel industry and assembly type operations to qualify under the agreement as a regional good.

This would allow Caricom member states, which might not be competitive in a particular good, to develop that industry and thereby create wealth and jobs locally. Eventually, with export growth, vertical integration could be achieved and the import content reduced.

Canada has indicated informally that the new FTA with Caricom to replace the CARIBCAN arrangement will not have a substantial development component comparable to the Economic Partnership Agreement (EPA) with the EU, as limited as that is. Therefore, Caricom can gain the most developmentally out of these negotiations by obtaining favourable Rules of Origin, and Canada should be persuaded to adopt this perspective.

Conclusion
Manufacturers wishing to benefit from the preferential benefits of the FTA need to precisely determine the level of foreign and local inputs into the final product, and request the appropriate Rules of Origin criteria (whether this is based on a percentage of the value of the product that is local, or some level of processing, or some combination of methodologies) which will allow them to qualify under the agreement, with proof of origin criteria that is not too cumbersome or complex.

The private sector is keen to take advantage of the new trading opportunities that trade negotiations with Canada can offer. The Jamaican Diaspora in Canada numbers over three hundred thousand, and Jamaican cultural influences extend to an even larger grouping, especially given the growth of tourism. This provides a unique opportunity for the expansion of Jamaica's export to the Canadian market. With the launch of the National Export Strategy on April 24, 2008, organisations such as the Private Sector Organisation of Jamaica (PSOJ) in partnership with other stakeholders and associations will ensure that the negotiations produce positive outcomes for the country.

In proceeding with the negotiations, it is necessary to formulate appropriate policies, develop strategic plans that clearly identify export interests and target markets, and determine the effect on all stakeholders in the society.

Alumina accounts for 93 per cent of Jamaica's exports to Canada, an industry with only another thirty years of viability based on remaining bauxite deposits. This underscores the urgency of taking advantage of these negotiations to establish new markets for agri-business products, and service sectors such as health and wellness, cultural industries, education, information and communication technologies and professional services.

The country stands on the threshold of a new trading relationship with our North American partner. Let us step forth confidently.

Omar Chedda is the Trade & Environment Manager of the Trade Policy Committee, Private Sector Organisation of Jamaica (PSOJ) .

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