Jamaica Gleaner | June 28, 2012

EU losing patience

Daraine Luton, Senior Staff Reporter

European Union says Jamaica risking credibility with failure to act on partnership agreement

Brussels, Belgium:

Jamaica is being told to reduce customs duties on imported goods from Europe or risk further damage to its credibility.

Alexander Walford, policy officer in charge of Caribbean-European Union (EU) trade relations, said yesterday that the EU is growing impatient with Jamaica for failing to honour its obligations under the Economic Partnership Agreement (EPA).

Under the pact, which was signed in 2008, Jamaica and 14 other Caribbean countries agreed to start the reduction of customs duties by January 2011.

Walford said only six Caribbean countries have so far reduced customs duties as agreed under the EPA.

"The key thing for us at the moment is the initial cuts in tariffs on goods imported from the EU. All CARIFORUM states, including Jamaica, have a three-year grace period when there were no cuts," Walford noted.

He added: "This matters to us not because there is a line of European exporters waiting to swamp the Jamaican market, but more importantly because it sends a signal that the Government is complying with its obligations. It’s doing what it said it would, it is serious about being part of the international trade community. That’s very important. We hope that the cuts are going to happen soon."

AGREEMENT MUST BE HONOURED

Battered by the global recession, Jamaica is currently seeking to craft an agreement with the International Monetary Fund (IMF) for an extended-fund facility. The last agreement failed after the Government did not deliver on its commitment to implement certain structural economic reforms. As a result, the country was unable to draw down on funds from the IMF, the EU and other multilateral organisations.

Walford, however, said notwithstanding the fiscal realities, Jamaica must honour its end of the agreement.

"I don’t see that presenting a plan like that (IMF deal) and sticking to your commitments in an international trade agreement is mutually exclusive," Walford said.

Asked if the EU would consider waiving the requirement for countries to reduce their tariffs, Walford said "no".

"This is what you said you would do, and you need to follow through on your word," Walford said.

"People are watching and they are not only watching in the region and in Europe, but they are watching elsewhere."

He said: "Impressions count for a lot and investors, very often, they look at different regions comparing one against the other. They are looking for reliability, for security and anything that might prejudice that could potentially deter."

In the meantime, the EU representative said Jamaica, like other Caribbean governments, might be resisting because of the state of its public finances.

"It is not necessarily the easiest thing to do and we understand that," Walford said. He also said there was a misplaced fear that revenues would be lost because customs revenue accounts form a significant portion of revenue.

"It was a concern that was raised during the negotiation and we are working through our development assistance to help governments reform their taxation system so that they are less reliant on customs revenue and more reliant on other sources of tax," Walford said.

He contended that, "After a certain point, the credibility of not just Jamaica and other states, but ourselves as signatory to the agreement, starts to be called into question. We do have limited patience."

He said: "The agreement does provide for arbitration and the settling of disputes and we may have to seek recourse through those provisions if we find that we are not getting anywhere."

Walford said Jamaica must seek to grow its economy and reduce its debt-to-GDP ratio in order to pull itself out of the crisis.

"I would not want to be in his shoes. He has got a real challenge. I don’t envy him," he said of Finance Minister Dr Peter Phillips.

"He says he is serious about Jamaica taking its part in the global economy. You don’t do it by hiding behind customs tax barriers and reneging on commitments that you made with your biggest trade partner. That’s not how you are going to get growth."

daraine.luton@gleanerjm.com