Unity on the Economy

Oct 16, 2008 Editorial

Yesterday, most of the countries that form Cariforum signed the Economic Partnership Agreement (EPA) with the European Union, in Barbados. By now every Guyanese knows that our government did not sign.

However, given that the European Union heeded Guyana’s contention that the EPA as it stood was inadequate, and given that Guyana successfully piloted two amendments, the way is now clear for a signing before the end of the year. And President Bharrat Jagdeo has said that Guyana will now sign the EPA.

The statement of the President to the meeting of the ACP summarized our objections very succinctly and cogently: “Guyana has indicated its unwillingness to sign a ‘full EPA’ as a matter of urgency and under threat of GSP (General Systems of Preferences) tariff sanctions.

“We are particularly unhappy about the inclusion of ‘services’ and the ‘Singapore issues’ in the Caribbean EPA, the MFN (Most Favoured Nations) clause (which will impair South-South cooperation) and the absence of provisions to address supply side deficiencies…its anti-developmental character and its propensity to be inimical to Caribbean integration.”

The President subsequently proposed two insertions as a precondition for signing: should the EPA conflict with the Revised Treaty of Chaguaramas during its implementation that the Treaty takes precedence. The EU has agreed but has included a watered down version of the Guyana proposal.

Secondly, Guyana pressed that there be a ‘review clause’ included as well to allow for a review of the deal every five years in order to examine the socio-economic impact on the people of the region and a commitment by Europe to address the impact, should it be adverse.

On the first proposal, all that was conceded by the EU was that the implementation of the EPA “will pay due regard to the integration processes in Cariforum”.

“Due regard” in no way equates with “takes precedence”. On the second, while a review was agreed to, there was no “commitment by Europe to address the impact, should it be adverse.”

So all we will know is how badly we were shafted. In our estimation, our country had no other option but to sign, in view of the deleterious effects that the imposition of GSP tariffs on our sugar and rice that is shipped to Europe, would have on our fragile economy.

This danger had become even more threatening in light of the meltdown of the financial system in the US, Europe and other developed economies that is now universally accepted will propel the entire world economy into a recession.

The only question left unanswered, even by those who are supposedly in charge, is how deep and for how long will the recession bite?

In such a climate, goods such as sugar are especially vulnerable. While in the developed countries the demand may be fairly inelastic, the newly developing economies that form the bulk of the growing sugar market would definitely cut back consumption, with a consequent drop in the price.

As with rice, we can count on our erstwhile friends in Caricom, which is our largest alternate market, to seek sugar from cheaper sources.

While our financial system was fortuitously not deeply enmeshed in the financial shenanigans that precipitated the meltdown in the developed world – primarily because we were stuck in the backwaters of international financing, the President has also well articulated the probable effects on our real economy: lower remittances, tighter credit for development projects, less development aid and lower prices for commodities such as bauxite. All things considered, we are facing parlous times.

The President has called for national and regional consultations to create a figurative “firewall” that would protect us from the ravages of the impending world recession.

However, while we believe that we must continue to struggle for a regional response to threats and opportunities in the global economy, the behaviour of Caricom leaders, especially Mr. Bruce Golding of Jamaica, in the aftermath of the initialing of the EPA, does not inspire much confidence that a coherent response will be forthcoming from this quarter.

In our considered judgment, the President should utilize both the EPA and world recession threats to our economic survival and indeed overall viability as a state, to develop a unified national response plan.

The President should first have his Ministers whose portfolios impact on economic activities and trade to institutionalize a cooperative working relationship.

He has also called for a “stakeholders meeting” but we believe that the agenda of the meeting should be the formation of teams of experts drawn from all political parties as well as civil society to craft a plan that all Guyanese can get behind. Unlike the US Treasury Secretary, let us not act too late.