Background to Negotiations on CARICOM Canada Trading Arrangements

Discussions on new trading arrangements commenced as far back as 2001 in a Canada/ CARICOM Summit held in Montego Bay, Jamaica. In July 2004, CARICOM Heads of Government mandated the CRNM to proceed with preparations for and commencement of formal negotiations with Canada.

The Caribbean has a long history of trade and cultural ties with Canada. A 2001 survey revealed that there were more than 530,000 people of Caribbean origin living in Canada compared to 256,000 from the whole of Latin America. In 2002, two-way merchandise trade between CARICOM and Canada totalled C$1.2 billion of which there was a positive balance in favour of CARICOM of C$335 million. In 2000, bilateral services trade between CARICOM and Canada amounted to C$2.28 billion with a CARICOM surplus of C$703 million. Leading CARICOM exports to Canada are gold, alumina/bauxite, fisheries and agri-food products, mineral fuels, petroleum oils, steel rods and industrial chemicals.

By comparison, the CARICOM countries offer Canadian companies a growing market for computers and components, and telecommunications equipment. In 2000, Canada exported C$346.91 million worth of goods to the CARICOM and imported C$539.98 million, for two-way merchandise trade of just underC$887 million in 2000; this figure does not capture many goods transhipped through the USA. Canadian investments in the region, centred in the financial, mining and energy sectors, are estimated by one source at C$25 billion, making CARICOM the third most important investment destination after the United States and the United Kingdom. It is also significant that Canadian firms are estimated to win some C$200 million in consulting and engineering contracts in the Caribbean annually. Leading Canadian exports to the region include fisheries and agri-food products, telecommunications equipment, computers, paper (including newsprint), furniture and pharmaceuticals.

Trade and economic co-operation between most CARICOM States and Canada are currently covered under a number of instruments:  CARIBCAN, a non-reciprocal preferential agreement granted by Canada for goods; the 1979 CARICOM-Canada Trade and Economic Co-operation Agreement and its Protocols, including the 1998 Protocol on Rum; and Bilateral Investment Treaties with Barbados and Trinidad and Tobago. Within the CARIBCAN agreement, approximately 96% of imports from the Commonwealth Caribbean enter Canada duty-free. Items exempted under the arrangement include some textiles, clothing and footwear, as well as certain agricultural products including products subject to tariff rate quotas. Canada and CARICOM also have in place a Trade and Economic Cooperation Agreement, which offers a general framework for dialogue and bilateral cooperation.

CARIBCAN’s relative preferential value has been reduced since it was first introduced in 1986 due to progressive market liberalization by Canada as a result of negotiations and/or unilateral initiatives.  In addition, 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, in particular for Jamaica, the Bahamas and Barbados.  Finally, and perhaps most importantly, the Canadian government has signalled its unwillingness to seek a further renewal of the WTO waiver for CARIBCAN when it expires in 2006.  

CARICOM’s objectives in an enhanced trade arrangement with Canada are to:

(i) Preserve, build on and broaden the scope of the current instruments of trade and economic co-operation;

(ii) where possible, deepen disciplines to improve market access for CARICOM exports of goods and services;

(iii) broaden the country coverage to include all CARICOM states;

(iv) stimulate increased flows of Canadian investment into the region; and provide a comprehensive framework for development co-operation initiatives.