U.S.-CARICOM FREE TRADE AGREEMENT: JAMAICAN URGES

C O N F I D E N T I A L KINGSTON 001500 SIPDIS SIPDIS STATE FOR WHA/CAR (BUDDEN),EB/TPP/BTA/EWH (LAMPRON) STATE PLEASE PASS FOR USTR E.O. 12958: DECL: 07/31/2016 TAGS: ECIN ECON EINV PREL ETRD JM SUBJECT: U.S.-CARICOM FREE TRADE AGREEMENT: JAMAICAN URGES U.S. TO MAKE MOVE NOW REF: KINGSTON 1482 Classified By: CDA Hugh Neighbour, reasons 1.4 (b) and (d) ¶1. (C) Summary: According to a Jamaican official at the Caribbean Regional Negotiating Machinery (CRNM),there is tension within CARICOM regarding a Free Trade Agreement (FTA) with the U.S. The larger economies appear to desire an FTA, but the smaller Organization of Eastern Caribbean States (OECS) countries are more reticent. He said the CARICOM position at the upcoming U.S.-CARICOM Trade and Investment Council meeting in September will be informed by this tension, the expiration of Trade Promotion Authority and benefits under the Caribbean Basin Initiative scheduled for 2007 and 2008, respectively, the precarious position of CARICOM's regional trade negotiator Ambassador Richard Bernal, and a general leftward ideological shift. End summary. -------------- Context -------------- ¶2. (SBU) Recent meetings with Lincoln Price (protect), Private Sector Liaison to the Caribbean Regional Negotiating Machinery (CRNM),and with Claudius Preville (protect),Trade Policy Advisor and Representative to the OECS at the CRNM, pointed to tensions within CARICOM countries regarding a Free Trade Agreement (FTA) with the U.S. According to Price and Preville, the larger economies ) in particular Jamaica, Trinidad and Tobago, and Barbados ) appear to support an FTA, but the smaller OECS countries worry that the anticipated loss of tariffs would undermine their competitiveness and devastate their revenue base. ¶3. (SBU) Price noted that USTR had told CRNM that the USG was unlikely to negotiate with a single country or with a sub-group. He further worried that USTR was reticent about special and differential treatment, something that the OECS countries would certainly have on their agenda. ¶4. (C) Price expected that FTA discussions would feature prominently at the U.S.-CARICOM Trade and Investment Council (TIC) meeting, tentatively scheduled for September. He suggested that there were four main factors leading CRNM toward an aggressive push for an FTA: the impending expiry of Presidential Trade Promotion Authority (TPA); the 2008 expiry of benefits under the Caribbean Basin Initiative (CBI); the uncertain future of current CRNM Director General Ambassador Richard Bernal; and the perception among trade technocrats that a general ideological shift leftwards in the region may mitigate against an FTA in the future. -------------- TPA expiration -------------- ¶5. (C) Both Price and Preville expressed surprise and dismay that TPA would expire in 2007, and wondered aloud if there was a possibility that the authority would be renewed. Preville doubted that there would be enough time to make any real progress on negotiations, and noted that even if they did, that progress will be undermined once TPA expires. -------------- Private Sector Fear Loss of CBI Benefits -------------- ¶6. (C) Price noted that private sector groups in the larger CARICOM economies were particularly keen to pursue an FTA, as they are fearful that CBI preferences will be lost in 2008. Preville countered, however, that the private sector view in the OECS countries was that the services sector was already operating in a liberalized environment, and the smaller manufacturing industries needed the protective tariffs to stay competitive. (Note: Preville is based in Castries, St.Lucia, but was in Kingston to participate in preparatory meetings for the CARICOM-EU Economic Partnership Agreement negotiations. End note.) -------------- Goodbye, Bernal? -------------- ¶7. (C) CARICOM's lead negotiator Ambassador Richard Bernal is in a precarious position, as his term expires in December. Bernal openly supported Dr. Peter Phillips in the People,s National Party (PNP) leadership election against the eventual winner, Prime Minister Portia Simpson Miller. While Simpson Miller has not yet given any indication that she wishes to replace Bernal, if the PNP win impending elections (reftel), many expect widespread changes in the administration. ¶8. (C) According to Preville, some OECS leaders are also frustrated with negotiations towards and Economic Partnership Agreement (EPA) with the European Union. The perception is that Bernal has failed to realize the development and aid concessions that the region seeks. As a result, Preville stated that if Simpson Miller did seek to replace Bernal, they may push to appoint a regional trade negotiator more closely aligned to the needs of the smaller states, and less supportive of an FTA of the kind favored by the U.S. One name mentioned was that of Ambassador Errol Humphreys of Barbados. -------------- The "Leftward Drift" -------------- ¶9. (C) Price opined that the region is "leaning leftwards." He stated that some in the CRNM had noticed that the tone of trade ministerials had shifted: rather than trade technocrats controlling the discussions with data and analysis, the emphasis was moving towards more ideological stances. He speculated that CARICOM is also being pushed by declining USG foreign assistance, coupled with an increase from Venezuela. He claimed that the WTO internet gambling ruling against Antigua had likewise hardened the belief among some that there is no place in a globalized world for their smaller economies. -------------- Comment -------------- ¶10. (C) Price (who has been a candid interlocutor of the U.S. Embassy for some time) ) strongly - and Preville ) guardedly ) support discussion, consultation, and exploration within the framework of the Trade and Investment Council. They said that for the OECS countries, the deal-breaker could be an assistance package that the USG might offer, as well as the timeline for implementation for the FTA that we propose. Both recognized that the U.S. market was of singular importance to the region. The clear view of Price, in particular, was that the USG must make its intentions known. With TPA likely to disappear and with the region allegedly moving closer to Chavez, if the USG desires an FTA, he believes that the time to act is right now. End comment. NEIGHBOUR