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Saturday, January 1, 2011

Revitalize the ACP for a Chinese deal

By Sir Ronald Sanders

BRIDGETOWN, Barbados,, December 9, 2010 - On December 2, the government of the People’s Republic of China posted on its Foreign Ministry’s website a response to a commentary I had written entitled, “Chinese take-away?”. 

The fact that the government felt it necessary to post its response on its official website is indicative of the sensitivity to the issues that were raised in the commentary.  Among the issues was the need for a treaty to be negotiated that would set out the relationship between Caribbean Community and Common Market (CARICOM) countries and China on a long term and predictable basis with regard to aid, trade and investment.  It was envisaged that the treaty would deal with issues such as the paramountcy of local laws in relation to the use of labour and industrial relations among other things.

In its response, the Chinese government said that it agreed with me “in the necessity of China and the CARICOM countries deepening their ties of friendship and cooperation via a long-term and comprehensive framework treaty or the like”.

Therefore, there is clearly an appetite in the government of China for a binding treaty, and one which Caribbean governments would do well to advance while the interest remains. 

In an earlier commentary than the one to which the Chinese government specifically responded, I had floated the notion that such a treaty could be structured along the lines of the original aid, trade and investment agreements (Lome and Cotonou) that were negotiated with the European Union (EU) jointly by the 79 African, Caribbean and Pacific (ACP) Group.

Given that China is now very active in all three ACP regions and that many countries in each of them are being exercised over how best to manage the China relationship, it may indeed be appropriate for the ACP to negotiate the overall treaty that would govern the relationship with China.  Separate protocols to the overarching treaty could cater for the specific circumstances of smaller nations.

The urgency of attending to China’s relationship with developing countries and particularly small island states is highlighted in a recent report by the Inter-American Development Bank entitled: “Ten years after take-off: Taking stock of the China-Latin America and the Caribbean Economic Relations”.  More about the economic relations between Latin America and China than the economic relations between China and the Caribbean, the report shows that trade between China and Latin America in the period 2000-2008, “grew at a breakneck annual rate of 31 percent, and even during the financial crisis in 2009 the dynamism remained unabated”.  

As the report states: “Hidden behind the impressive bilateral trade figures of the last decade, there is a heavily skewed distribution of benefits. As of 2008, approximately 90 percent of LAC’s exports to China were coming from just four countries in the Southern Cone: Brazil (41 percent), Chile (23.1 percent), Argentina (15.9 percent) and Peru (9.3 percent)”.  Caribbean countries hardly featured as exporters, and their balance of trade remains heavily in China’s favour. 

The report also points out that “China-LAC relationship in the last decade has stood almost entirely on one pillar: trade. The other pillars of a sustainable process of trade and integration—bilateral investment and cooperation—have been developing, but not at the same pace, leaving room for frictions”. 

Chinese Foreign Direct Investment (FDI) is also heavily concentrated in the Southern Cone, with Brazil (41 percent), Argentina (11 percent), Peru (12 percent) and Chile (2 percent) accounting for 66 percent of the investment in 2003–2009. When Venezuela is added to this group, the combined share reaches 81 percent.   The only two CARICOM countries, mentioned in the report, Guyana and Suriname received US$600,000 and US$24 million respectively over the years 2003-2009 in Chinese FDI.

All this suggests that CARICOM countries are not aggressively pursuing economic relations with China in a structured fashion.  Each country that has diplomatic relations with China appears to be pursuing ad-hoc, beggar-thy-neighbour policies.  But with far fewer resources of interest to China, CARICOM countries (except Guyana, Suriname and Jamaica which do have resources in which China has an interest),  CARICOM nations ought to be trying to establish investment and cooperation agreements with China that go beyond trade in goods. 

Such a negotiation would not be easy for the CARICOM region alone, as it would not be for the Pacific and certain countries in Africa, although it has to be acknowledged that several African countries have overhauled their trading regimes to make themselves far more competitive than they used to be.

In this connection, the ACP Group with an existing Secretariat and experience of harmonising the needs and negotiating strategies of its member states would be the ideal vehicle to negotiate an overall trade, aid and investment treaty with China. 

The basis for doing so is already enshrined in the Georgetown Agreement signed on 6 June 1975 in Guyana that formally established the ACP Group.

ronald_sanders_300_759685897.jpgIn the preamble to the Agreement, the governments of the Group declared that they are “desirous of enhancing the political identity of the ACP Group to enable them to act and speak with a single voice in all international fora and organisations”, and they set out among their objectives strengthening “the political identity of the ACP Group to enable it to act as a coherent political force in international bodies and to ensure that due regard is accorded its specific interests” and to “establish contacts and relations with other States and groups of States”.

In a world of fierce competition in economic relations, and where, increasingly, small states have to seek alliances with others to secure the attention they urgently need, the time has come not only to strengthen cohesion in the ACP Group in its dealing with the EU, but also to invoke its wider mandate to bargain for its member states as a whole in other economic relations.  China would be the right place to start now.

In the past, Caribbean countries have been key players in the formulation of ACP ideas and strategies that have benefitted all three regions.  This could be another such opportunity.

Which CARICOM government will hoist the banner?  Jamaica as the current Chairman of CARICOM or Trinidad and Tobago as the current Chairman of the Commonwealth that embraces many of the ACP
It may be, of course, that this is a deliberate strategy – a strategy not to fulfil obligations until the obligations of the treaties are enforced by the other side through costly arbitration and, eventually, punitive measures.   If that is indeed the strategy, it is a game of high-stakes poker, and not one that the region can win.

The point is that CARICOM states have to decide whether they see their development in terms of gifts for the odd building, a new Airport terminal, a bridge here and a road there that are small plasters for sores, but do not make the region holistically healthy. While there is a place for these things in development plans, they cannot be the entire plan.

What CARICOM has always needed – and what is urgent now – is a comprehensive regional plan devised jointly by governments, the private sector, trade unions and the best Caribbean brains that can be assembled from in and out of the region.  And, that plan must integrate production in a practical manner utilising resources from every country that has them, facilitate cross border investment, and encourage regional amalgamations of productive enterprises. 

The beggar thy neighbour policies that have characterised the region’s dealings for a decade and a year, should not continue into 2011.  It is time for leaders of individual states to make up their minds, state the case for regionalism boldly, and stop playing with the aspirations of the Caribbean people.

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