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C'bean should assess US approach to unilateral preferential trade arrangements

BY Elizabeth Morgan

Wednesday, September 12, 2018

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Since the start of this year, on several occasions US President Donald Trump has said that his favourite words are “reciprocal” and “reciprocity”. In trade, reciprocal means that both parties in a trade arrangement exchange preferential concessions for market access. Non-reciprocal means that only one party (the more developed country) unilaterally gives trade concessions (duty-free access) to the other party (usually a developing country).

The US gives unilateral non-reciprocal preferential trade concessions to a range of developing countries, including in the Caribbean and Africa, under its Generalised System of Preferences (GSP) renewed in March to 2020; the Caribbean Basin Initiative (CBI) to expire in 2020; and the African Growth and Opportunity Act (AGOA) to expire in 2025.

I recently came across an article about the US/Africa AGOA which could be of interest to CBI Caribbean beneficiaries.

The US/Africa AGOA was adopted by the US Congress in 2000 to provide development assistance to countries in Africa. This includes non-reciprocal preferential trade access. AGOA was extended in 2015 for 10 years to 2025. The US has a trade deficit with the AGOA beneficiary countries. The 17th AGOA Ministerial Forum was held in Washington, DC, July 11-12, 2018, under the theme 'Forging new strategies for US/Africa trade and investment'. It is reported that, for the US, focus was on a post-2025 AGOA arrangement, including a free trade agreement with an interested country, which could be a model for other developing countries.

In his opening statement at the forum, US Trade Representative Robert Lighthizer stated that: “One-way tariff preferences can only do so much to drive trade and investments. When corporations decide where to invest and do business much more goes into the equation. US companies value clear rules of the road and a sound business environment…” He also pointed out that countries in Africa have trade agreements with other countries which are part of the EU and with China.

Although it was said that the US would not be abandoning AGOA, it is clear that the US's future trade relationship with African countries was not being viewed only in the context of the AGOA non-reciprocal relationship, but within reciprocal free trade agreements with individual countries. Lighthizer told the forum that there were compelling reasons to pursue a comprehensive and more permanent trade and investment framework to govern trade between the US and Africa.

The Trump Administration sees economic gains to be made in Africa and wants to improve the US trade balance and increase investments. They are also concerned about the strong influence of the EU and China in Africa.

From a Caribbean perspective, recall that presently only countries in this region are beneficiaries of the CBI, comprising the Caribbean Basin Economic Recovery Act (CBERA) and the Caribbean Basin Trade Partnership Act (CBTPA). Haiti, the only least developed country (LDC) in the region, benefits under CBI from the 2006 Haiti Hemispheric Opportunity for Partnership Encouragement Act (HOPE).

The US has a trade surplus with Caribbean countries. In September 2017, following destructive Hurricanes Irma and Maria, a bipartisan bill was tabled in Congress to extend the CBERA/CBTPA. The Bill has yet to be considered. The US/Caricom Trade and Investment Council (TIC) has not met since 2016. With CBERA/CBTPA expiring in September 2020, the question of extension must be addressed before September 2019. The World Trade Organization (WTO) most favoured nation (MFN) waiver expires on December 31, 2019. The last successful US waiver request in 2014 took account of the aftermath of the earthquake in Haiti. The regular status report on CBERA/CBTPA was routinely considered at the WTO in July 2018.

Note also that the 2017 US Strategy for Engagement in the Caribbean resulting from the 2016 US Caribbean Strategic Engagement Act, under prosperity, aims to promote sustainable economic policies and job creation, as well as private sector-led growth, utilising trade preference programmes and key forums such as the US-Caricom TIC. For 2018, there is, so far, no evidence of movement on the implementation of this strategy.

One senses, though, that the US is also concerned about the influence of the EU and China, and possibly others, in the Caribbean. While the Caribbean is not Africa, the region should be interested in the US trade representative's approach to its non-reciprocal trade arrangements and its future strategy for trade and investment with the countries which are current beneficiaries. A positive is that the Trump Administration renewed the GSP in March when it was feared that they might let it terminate. Nevertheless, as the Caribbean anticipates a positive outcome for CBI leading into 2019, the region should bear in mind President Trump's favourite words — reciprocal and reciprocity — when contemplating the future strategy for trade and investment with the USA.

Elizabeth Morgan is a specialist in international trade and politics. Send comments to the Observer or elizabethmorganstliz@gmail.com.

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