Trade Agreements & Inward Investment

8/13/2019 Trade Agreements & Inward Investment

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David Jordan 1

Exploring Investment Opportunitieswith Saint Lucia Key Trading

Partners - the nexus

Trade Agreements and Inward Investment

Presented by

David Jordan

Masters International Affairs

Economic Policy and International Trade

Bsc. Economics, Dip Spanish



David Jordan 2

Overview

Trade Agreement History Structure List of Trade Agreements Nature of Trade AGREEMENTS

- The Nexus

Examine How has St. Lucia performedWhich countries are St. Lucia’s Trading Partners ?Saint Lucia’s Indicators on Investment

Exploring Opportunities Conclusions



David Jordan 3

Intro : A Definition

Trade Agreement - anundertaking endowned with economicopportunities that help promote growth anddevelopment of an economy via the mechanism of

Trade in goods and services “ conducted betweencountries or regions promoted through the privatesector” covering a geographical Area. or simply aProduct

What constitutes a Trade

Agreement ?Entails Rules, monitoringtrade partners: implementation, enforcement, andnegotiations of provisions : Signature of party (ies)Dispute settlement



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Intro :

Its Structure and contentcovers a geographical area in scope, Product orientation

ProductBilateral between two countriesMultilateral rules based arrangement to govern trade and investment

Why - Common interests, goals and objectives of parties

Major Agreement - WTO, FTA , RTA

Basic Princip les – Non Discrimination, Reciprocity, Binding EnforceableCommitments, Transparency

Modern approach

Trade and Investment Framework – discuss and resolve Trade – Goods, Services ,Investment issues

Asymmetry, Safeguards, Development Dimension,

Capacity Building Component - to enable unequal partners to negotiate, reform andimprove



David Jordan 5

Character of InternationalTrade

Free Trade The Invisible hand Maxim

laissez faire Adam SmithEconomies of Scale , Comparative Advantage

Protectionism via Qr’s or tariiffs thus limiting access infant industry argument

costs of trade = high cost of locally produced goodsbenefits of trade protection?quality issuesinefficiencies

Liberalisation most efficient firms survive global scope of industry

lower tariffs= lower costs to consumer = cheaper importstrade expansion vs trade diversion

global outreachquality and standards enhancementInnovation and Competitiveness



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History and Structure

1930’s Free Trade

1947 GATT

1970’s Protectionism-Old Order 1990’s Liberalisation-New Order

Globalisation

1995 WTO Global Financial Crisis



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Caribbean Bilateral and

Regional Trade Architecture

Entry int o force Name of Agreement

1973 CARICOM 1975 Lomé I 1979 Lomé II 1981 OECS * 1984 Lomé III 1984 United States Caribbean Basin Economic Recovery Act (CBERA) 1986 CARICOM-Canada Trade and Economic Co-operation Agreement (CARIBCAN) 1989 Lomé IV

1995 World Trade Organisation 1995 Lomé IV (revision) 1993 CARICOM-Venezuela (non reciprocal) 1995 CARICOM-Colombia Agreement on Trade, Economic and Technical Cooperation 2000 CARICOM – Cuba Trade and Economic Cooperation Agreement 2001 CARICOM – Dominican Republic

Entry int o force Name of Agreement

2002 Cotonou 2005 CARICOM – Costa Rica 2008 CARIFORUM – EU EPA Ongoing WTO DOHA Round Ongoing CARICOM - Canada Free Trade Agreement / Trade and Development Agreement On hiatus Free Trade Area of the Americas (FTAA) on hold since 2004 Ongoing CA RICOM-Central America



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Nature of Trade Agreements

Preferential Agreements – Commodities Sugar, Rice, Bananas

Product Arrangementseg Garments, Light Manufactureds

CARIBCAN – light manufactures

EPA Reciprocal arrangement Caricom/Canada



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Enabling Mechanism for

Investment I Rules Of Origin

Preferential Market Access

Promote - Trade, Industry, Services

Joint ventures,

Caricom Market / CMSE



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Enabling Mechanism II)Context TRIMS

Simply relates to the impositionof conditions on investmentwhich are Trade-related

WTO ; prohibits investmentrestrictions ( Non tariff restrictions)

which conflict with obligations

Art III.4, eg i) local contentrequirements ii) indirect



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Nexus to the Agreements

Strategic Alliances of PPP - location

Enabling Environment =No TBT’s , MFN

Stability of Countries a) Political b) Economic c) Social Environment d) Technology, e) Infrastructure f) Telecommunications g) Incentives, h) transparency of

legislation i) Rules, permits etc j) level of bureaucracy and red tape

Other Diplomatic Missions

INDEX of Corruption - bending therules and its cost



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Trading Partners ?

Sources for Investment = Sources of Trade

1. USA USA

2. EUROPE EUROPE / UK

3. CARICOM TRINIDAD/CARICOM

4. Venezuela JAPAN/ CHINA



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Compositionof St. Lucia’s FDI Stock

FDI / GDP

St. Lucia already has a very high level of FDI stockrelative to the size of the economy, indicating that thecountry has been very successful in the past inattracting FDI - a key selling point for future investors.

The stock of FDI in St. Lucia reached US$1,669 millionin 2007, which equals 174% of GDP.

This has increased from 113% in 2000 and 76% in1990.



David Jordan 14

Composition of FDI

In terms of current flows, foreign directinvestment accounted for 66 percent ofgross fixed capital formation in St. Lucia in2007, thus making a greater contributionthan in many comparator countries.

Foreign direct investment in St. Luciatotaled US$379.5 million in 2001-05,compared with total net FDI ofUS$265 million in 1995-99.[1]

St. Lucia attracted overseas investment of

US$261 million in 2007. Most foreigninvestment has been directed into services,particularly hotel development.

[1] WTO Trade Review.



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Other side of the COIN !

A diminishing level of overseasinvestment in the sectors of theeconomy such as agri-business

and manufacturing whichsuggests that St. Lucia’s relativecompetitiveness in these areas

is waning.



David Jordan 16

Other Side of the Coin !

i) widespread use of concessionshas narrowed the tax base of

St. Lucia,

ii) has created distortions in theeconomy, and

iii) has created dependence bymany businesses onGovernment intervention



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The NDC Perspective



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The NDC Perspective

The Annual Report (2005) is a useful source, todescribe the gains of the five years.( 2000-2005).However, the Overview provided may haveoverstated the extent of investments on the groundand would need further analysis. This periodreflects that “ as a result of Government’s and

NDC’s efforts, St Lucia is again considered anexcellent host for FDI and has attracted newinvestments worth over $150.0 M USD andcommitments of almost $900MUSD. In 2005, thevalue of investments was estimated at $60.M USD

( Page 7, NDC Annual Report 2005).

Need to reconcile DATA and Approaches of Assessment



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Saint Lucia InvestmentLANDSCAPE

Needs a PLAN !- Policy , Strategyand Action

Needs Revision of ClimateCritical are

i) 1974 Incentives for Industry

ii) 1974 Trade Licenseiii) Investment Policy Review



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UNEXPLORED Opportunities

Martinique / DOMS

CSME/ CARICOM

Need to explore new Industrial Policy

a) National b) Regional

CARICOM DR / COSTA RICA

SME’s,

Brand Marketing

EUROPE – EPA/CARIFORUM



David Jordan 21

HOW

Political Assertiveness = Will = Shared VisionPPP Arrangements

National Development Planning vs Regional Planning

Proper and Effective Planning = mainstreaming TradePublic Education of stakeholders =improve technical capacity

Private sector Assertiveness = capitalise on opportunitiesPreparedness to Invest, the “ Hunger to Invest ”

- access to capital

Utilisation of Innovation & Technology = Reflective of timeand environment



David Jordan 22

HOW to the NEXUS

More Efficient Agencies – Coordination,Convergence

eg. Investment Promotion, Export Promotion Agencies

- need to be more effective and efficient and developing timely strategies, synergies- need to be more collaborative / coordinating in approach- International Involvement SHOULD BE PART OF THE Strategy,

Not Business as Usual WHY ?

Challenges and Opportuniti es a) WTO b) EPA c ) CSME < Review of Harmonisation Incentiv es

Implications for both Sectors.

Public SectorMinistries – Agric, Commerce , Trade, Tourism, Culture, Health

- constantly need to refine, respond and moreso develop policies in a timely fashion

Private SectorSLISBA, Chamber, Manufacturer Assoc, NGO’s

Focus of - innovation and creativity and competitiveness in National Planning



David Jordan 23

ConclusionsWhat are the messages ?

1. The Changing face of Trade Agreements warrant a different Approachto Investment – Policy, Strategy, Priorities and Opportunities

2. Saint Lucia has some good assessments but need to take a moreproactive stance in developing ITS OWN Strategy which can emanatefrom these Agreements

3. Greater Need for the exploit of Provisions of Trade Agreements egInvestments - Comparative advantages seem to be in Services b)New opportunities

4. Increasingly the Index of Corruption features

5. Private Sector is critical, as it is they who Trade and Invest – access tocapital

6. Governments negotiate and it is important in working the Agenda TOREFLECT A NATIONAL AGENDA.



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THANK YOU FORYOUR Patience !

David Jordan

Director Int’l Trade & Investment

Ministry of External Affairs Int’l Trade &Investment

[email protected]

758 468 4519

mailto:[email protected]

mailto:[email protected]

Trade Agreements & Inward Investment

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