WORLD TRADE

ORGANIZATIONWT/TPR/M/8515 August 2001(01-4022)

Trade Policy Review Body5 and 7 June 2001

TRADE POLICY REVIEW

OECS-WTO MEMBERS

Minutes of Meeting

Chairperson: H.E. Mr. Pekka Huhtaniemi (Finland)

Page

I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3

II. OPENING STATEMENT BY THE REPRESENTATIVES OF THE OECS-MEMBERS 4

III. STATEMENT BY THE DISCUSSANT 19

IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 24

V. REPLIES FROM THE REPRESENTATIVES OF THE OECS-WTOMEMBERS AND ADDITIONAL COMMENTS 34

VI. CONCLUDING REMARKS BY THE CHAIRPERSON 43

ANNEX RESPONSES PROVIDED BY THE OECS-WTO MEMBERS TOADVANCE WRITTEN QUESTIONS 45

ANNEX I RESPONSES PROVIDED BY ST. KITTS AND NEVIS TO ADVANCEWRITTEN QUESTIONS 64

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I. INTRODUCTORY REMARKS BY THE CHAIRPERSON

1. The first Trade Policy Review of the OECS-WTO Members (Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines) was held on 5 and 7 June 2001. The Chairperson welcomed H.E. Hilroy Humphreys, Minister of Trade, as head of the Antigua and Barbuda delegation, H.E. Osborne Rivière, Minister of Trade, as head of the Dominica delegation and Ambassador Mr. G. Williams; H.E. Elvin Nimrod, Minister of Foreign Affairs and International Trade, as head of Grenada delegation; H.E. Sam Condor, Minister of Foreign Affairs and International Trade, as head of St. Kitts and Nevis delegation; H.E. Julian Hunte, Minister of Foreign Affairs and International Trade, as head of St. Lucia delegation, and Ambassador Mr. E. Laurent; and H.E. Conrad Sayers, Minister of State, Ministry of Foreign Affairs and International Trade as head of St. Vincent and the Grenadines delegation; as well as the representatives of St. John's, Roseau, St. Georges, Basseterre, Castries and Kingstown.

2. The Chairperson introduced the discussant, H.E. Ms. Michèle Pranchères-Tomassini of Luxembourg, and reminded Members that the discussant would, as usual, speak in her personal capacity. In accordance with the established procedure, the discussant had made available in advance an outline of the main issues she intended to raise. This was contained in document WT/TRP/D/64.

3. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of the procedures of the meeting. The Reports by the Government of the OECS-WTO Members were contained in document series WT/TPR/G/85, and those of the WTO Secretariat in document series WT/TPR/S/85. Copies of advance written questions submitted by Canada; the European Union; Hong Kong, China; Japan; and the United States had been transmitted to the delegations of the OECS. Replies to these questions are reproduced in the Annex.

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II. OPENING STATEMENTS BY THE REPRESENTATIVES OF THE OECS-WTO MEMBERS

4. The representative of Grenada, speaking on behalf of the OECS-WTO Members, said that the Trade Policy Review (TPR) exercise could not have come at a more opportune moment, since the Eastern Caribbean States (ECS) were in the process of articulating a comprehensive economic strategy.

5. The economies of the Eastern Caribbean were small, dependent, vulnerable, and open, and primarily single sectored. The combined population of the OECS was 450,000. In 1999, the economies shared a mere 0.0061% of world exports. Bananas, the largest merchandise export of these economies, amounted to no more than 0.86% of world exports of that commodity. While the economies of the ECS might have experienced fairly good economic growth, the chronic problem of unemployment and persistent poverty remained and deserved immediate attention. Unemployment was as high as 20% in some of the member States and poverty ranged from 20% to 30%.

6. A recent World Bank document noted that "income inequality in the subregion is quite high" and that: "The remaining two-thirds of poor households might be termed conjunctionally poor i.e. those unable to achieve satisfactory incomes, due to low human capital and/or the economic environment, including internal and external shocks. As alluded to at the outset, income insecurity/volatility as a result of shocks is particularly important in the subregion given the small size, limited economic diversification and openness of the countries and their extreme vulnerability to unfavourable natural phenomenon (hurricanes, severe storms and volcanic activity)."

7. He recalled that the interdependent nature of the global economy and the ultimate objectives of the rules and requirements was the economic advancement of all peoples. Members should never lose sight of this objective in the rule-making process and in the application of the global economic system requirements. If the stringent application of the requirements of the global trading agreement would lead to more disadvantaged countries and more impoverished peoples of the world, then Members should pause and reflect on the fundamental objective of the global economic system. This was not to say that there should not be greater gainers from global economic integration. However, there should not be greater losers, certainly when contrasted with their initial position before the global trade discipline. The globalization and liberalization of trade ought not to be viewed as ends in themselves, but rather as means to achieving the economic advancement of the peoples all over the world. In spite of the difficulties faced, the economies of the Eastern Caribbean had pursued prudent economic policies a monetary policy directed at maintaining a strong dollar so as to provide a more certain economic environment conducive to economic activity; and a fiscal policy aimed at generating surpluses to finance capital investment while at the same time generating employment.

8. In the pursuit of sound economic policies the economies were constantly faced with a number of dilemmas. The process of trade liberalization had proved to be in sharp conflict with the need to raise revenue, and had forced the economies of the ECS to take compensatory revenue-enhancing measures to mitigate the harshness of the decline in revenue following trade liberalization. The economies of the Eastern Caribbean had also engaged in meaningful economic reform. In some of the ECS a number of state-owned enterprises had been privatized and public sector reform had been undertaken. The banana industry of the Windward Islands had been undergoing a process of restructuring, as a result of the DSB rulings. The economies were currently in the process of deepening and broadening the financial sector with the establishment of a regional stock exchange in the near future. The ECS hoped that this would complete the financial integration of the economies into the global financial market. In this regard, a regional market for government papers would be operation in the near future. There had been a phased reduction in tariffs as part of commitments in the CARICOM arrangement. At the same time, the economies had begun the process of removing

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quantitative restrictions and instituting a regime of tariffication. In a very practical way the economies of the Eastern Caribbean had taken the bold step of de-monopolising the telecommunications sector, and set in motion a process of liberalization leading to the practical coordination of sector policy and the establishment of a coherent regional regulatory framework for the sector. Policy expectations were that liberalization of the telecommunications sector might be followed by similar processes with respect to other utilities in the economies. As part of the opening-up of the ECS economies there had been efforts aimed at implementing measures that would allow the free movement of labour and capital in the Eastern Caribbean. The process of free movement of labour and capital also extended to the wider Caribbean region, including the rights of establishment. Complementary policy measures had also been adopted to liberalize current and capital account transactions, and all the economies, operating under a common central bank, had long attained Article VIII status.

9. With respect to trade policy, the OECS Members were committed to pursuing a policy course ensuring investment in the economies and employment to their people so as to eradicate the scourge of poverty. While pursuing this policy objective within the context of the global economy there was the unquestionable need to be accorded greater measures of special and differential treatment. The special need of the OECS economies was recognized at the level of CARICOM as well as in all of their hemispheric external economic negotiations, through non-reciprocal treatment at least for an extended period. The ECS would continue to formulate policies aimed at attracting foreign direct investment to stimulate economic growth and employment, and to close the savings-investment gap in the economies on a sustainable basis. Particular attention would be given to the services sector in general, and to the tourism industry in particular; the aim would be to create an environment that would be conducive to investment with the granting of concessions to participating foreign investors.

10. All the ECS economies had had problems with the implementation of their respective obligations under the WTO Agreements, which were primarily associated with the lack of institutional capacity, by no means restricted to the implementation of the WTO Agreements but rather affecting the entire spectrum of economic management and governance. Almost singularly as a result of the lack of capacity, some of the economies of the Eastern Caribbean had been unable to implement some of their commitments under the WTO. The issue of the lack of capacity had not been given the relevant prominence when attempting to fully understand the exact nature of the difficulties faced by small island developing economies like the ECS. Thanks to the generosity of Canada, through a fully funded project, the ECS were attempting to build capacity in the field of trade policy. The objectives of the trade policy project was, inter alia, the development of a coherent international trade policy and the strengthening of the OECS capacity to meet their obligations under regional and international trade agreements. Attempts were also being made to bring institutional rationality to the various institutions handling matters related to international trade. Simultaneously, there was a programme of legislative reform to bring laws in line with WTO commitments and regional agreements. Looking to the future the OECS economies anticipated posting moderate economic growth spurred on by tourism, information technology, financial services, construction and, to a lesser extent, agriculture. The construction sector was likely to be influenced by public sector projects as well as projects associated with the tourism industry. While there would be a continuing role for agriculture, the future of the sector was less certain, especially in the context of the developments in the European Union banana regime. In this context, there would be greater efforts to alleviate poverty.

11. Both fiscal and monetary policies were expected to be in line with the immediate past trends. The Governments of the Eastern Caribbean would continue their prudent fiscal management in order to generate surpluses so as to facilitate public sector investment in their respective economies. At the general macroeconomic level, policy would be guided by the recognition of the close relationship between productivity and employment in order to better manage aggregate demand in the system,

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while stemming pressure on the balance-of-payments. In conclusion, the OECS Members were happy to be part of this Trade Policy Review, and had learnt a lot from it. They hoped that WTO Members would better understand the peculiar conditions under which the OECS economies had tried to survive, and their situation. These economies were small and little could be done to increase their size, therefore they needed to be treated differently from the larger economies.

12. The representative of Antigua and Barbuda said that his country attached great importance to the WTO Trade Policy Review Mechanism. This was an important exercise which promoted understanding of Members' trade policies and priorities while providing them with the opportunity to explain their domestic imperatives. This was the first time that Antigua and Barbuda and the other OECS Members had participated in this process. Antigua and Barbuda was confident, however, that in spite of their small size and level of development, the OECS would make every effort to comply with their WTO obligations.

13. He welcomed the opportunity to highlight his country's main concerns, in particular its vulnerability as a small island developing state with limited financial and human resources and institutional capacity. A concern that had to be taken into consideration more fully, if benefits derived by small Members were to meet their WTO obligations and commitments.

14. Antigua and Barbuda appreciated the important role played by the WTO in advocating a rule-based and transparent international trade environment. However, in Antigua and Barbuda's view there was a need for clear flexibility and special and differential treatment for small developing States with regard to implementation of WTO rules.

15. Antigua and Barbuda had attempted to faithfully comply with all its obligations. However, the trade division of his Ministry had a total staff of four individuals dealing with the WTO, the Cotonou agreement, the Free-Trade Area of the Americas (FTAA), the CARICOM single market and economy, and day-to-day issues. This situation explained why implementation was such an important issue. In this respect, he expressed his delegation's gratitude for the assistance provided by Canada and the Inter-American Development Bank in the area of implementation of the WTO Agreements.

16. With regard to the substance of the Secretariat Report, Antigua and Barbuda welcomed the WTO Secretariat's clear recognition of the vulnerability of Antigua and Barbuda and of the OECS. The Report had highlighted the high cost structures and the effects of diseconomies of scale. These fundamental and inherent constraints to economic development were compounded by frequent natural disasters, i.e. five hurricanes over a six-year period. The Secretariat Report also stated that export-oriented production had only occurred in sectors where trade preferences were available. Given the emergence of a globalized economy where trade preferences were rapidly eroding, and the inherently high cost structure in the OECS, it was incumbent upon the international community to answer the question of what the OECS islands would produce once their preferences would be eliminated, or why an investor would choose to invest in a high cost location when faced with a world of low cost alternatives. If silence was the only answer to these questions, then the OECS marginalization would be assured. During the process of diversifying their economy in an attempt to meet the challenges of globalization, the OECS remained highly dependent upon tourism and financial services, sectors of diversification suggested by the international community. While tourism was their largest foreign exchange earner it was highly dependent upon cruise ships arrivals and also highly vulnerable to the effects of natural disasters. Antigua and Barbuda was also encouraged to diversify into the financial services sector where the OECS faced the possibility of economic sanctions as a result of the OECD harmful tax initiative.

17. Increasingly, small States, including Antigua and Barbuda, had become vulnerable to trade and economic policy shift in the developed world. The banana dispute, the impact of the European

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Union's "Everything but Arms" proposal on the sugar and rice industries, and the OECD harmful tax initiative were undermining the traditional foundations of their economies. Antigua and Barbuda called upon the international community to recognize that a process of globalization that marginalized small developing States would in the long term serve to undermine the confidence in the multilateral trading system. Antigua and Barbuda did not ask for the process of globalization to be retarded or halted, but rather sought a process of globalization that recognised small States' inherent weaknesses, and that created incentive systems for disadvantaged areas to attract foreign investment, in the same way as developed WTO Members used such incentives to attract investment into disadvantaged regions of their own countries. The time had come for Members to globalize their attitude to inherent disadvantages faced by small island developing States. Antigua and Barbuda called on the WTO and the World Bank to develop mechanisms that addressed the barriers to investment in disadvantaged small States. Antigua and Barbuda thanked the Secretariat, and the World Intellectual Property Organization for its assistance in helping it to meet its obligations under the TRIPS Agreement; it hoped to benefit from future interventions. Antigua and Barbuda attached great importance to market liberalization, and would strive harder in the future to work towards compliance with its WTO obligations. However, in the light of its resource constraints Antigua and Barbuda would continue to require technical assistance.

18. The representative of Dominica said that when the possibility for a Trade Policy Review of Dominica was first presented by the Secretariat in 1999, Dominica saw a very unique and valuable opportunity to do two things. First, a trade policy review would create the opportunity to undertake an internal assessment and stocktaking of the development and implementation of trade policy in Dominica and of the trade policy measures, it had used over the years. Second, the exercise would provide the opportunity to demonstrate to the rest of the world its special and unique circumstances and the context within which these policies were developed and implemented.

19. The information required was very detailed and extensive. The process extended Dominica's resources to the limit and demonstrated in a vivid and dramatic way the enormous problems that small States faced when trying to engage and participate in the WTO process. The experience highlighted that there was a need, inter alia, for targeted technical assistance to small States if they were to meet their WTO obligations.

20. Notwithstanding its many difficulties, Dominica was able to take advantage of the trade policy review process to carry out its own internal review of the trade sector, identify the sources of its strengths and weaknesses, and at the same time assess the appropriateness of the policy measures adopted over the recent past. The results of the internal examination together with the useful interaction with the Secretariat during the process were contained in Dominica's Government Report.

21. However, the main economic indicators used for the economy of Dominica, such as GDP per capita and the contribution of certain sectors to GDP, gave a distorted and misleading picture of the actual situation and of the prospects of an economy that, in reality, had few development options. Reliance on such indicators led to quite misleading conclusions with dangerous implications for international policy as it related to particular groups of countries, especially small States.

22. The preparation of its Government Report had provided Dominica the opportunity to articulate to the rest of the world the basics underlying the policies it pursued. This was reinforced by the discussions with, and the draft Report by the Secretariat. While the Report was an accurate representation of the trade policies implemented by Dominica, more needed to be said.

23. Dominica was part of the multilateral trade system, and a founding Member of the WTO. Examination of the reports would indicate clearly that Dominica had demonstrated its commitment to participating effectively in the multilateral trading system to the extent of its administrative and

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institutional capabilities. Since the 1990s, Dominica had been pursuing structural trade reform and economic diversification in response to globalization and trade liberalization and in an effort to achieve greater integration into the world economy.

24. Policy in this area had and would continue to focus on the development of institutional and legislative framework to reposition Dominica's trade sector to reap the benefits of globalization and to overcome the numerous challenges that would undoubtedly emerge as the process continued. Dominica was ensuring that domestic producers were given the opportunity to undertake the necessary structural reforms in order to be better positioned to face increased competition.

25. Dominica was actively involved in developing closer CARICOM and OECS economic integration through participation in the creation of a CARICOM and OECS single market and economy. Dominica saw the CARICOM single market as an instrument to facilitate sustained economic development and to assist in the stimulation of investments and, by extension, in job creation. A strong and forward-looking regional economic integration movement was therefore crucial to the attainment Dominica's economic development goals.

26. The major strategic objective of these actions was to facilitate the accelerated emergence of modernized, more diversified and resilient economic structures. These would be supportive of genuinely profit-oriented private sector investment, which were less reliant on access to guaranteed export markets and more compatible with the imperative of ecological sustainability and the realities of the rapidly emerging liberalized global trading environment.

27. To a large extent the economic restructuring experienced thus far had been more in response to external pressures. There had been little programmed implementation of a consistent set of policy initiatives geared towards facilitating the emergence of a more resilient and diversified structure of production and exports. Dominica recognized this weakness and was addressing it.

28. The necessary institutional mechanisms were in the process of being established. The allocative decision-making process would be restructured to allow for greater integration between economic and physical planning operations, improved interface between budgeting and planning functions. Dominica would also seek to institutionalize policy dialogue between the public and private sector and the rest of civil society.

29. Dominica's report gave further details on measures taken and to be taken in the area of fiscal consolidation, industrial and investment promotion, poverty alleviation, and the sectoral programmes in agriculture and tourism.

30. However, while Dominica had taken all these steps to secure its further economic development, it was critically important to make the point very clear. Dominica was a small island developing State, and it faced very unique and peculiar disadvantages that characterized small States. The economic development of Dominica could not be fully realized without addressing the structural and institutional difficulties it faced which profoundly affected the process of its economic growth and stability.

31. Dominica's difficulties had been well documented in numerous studies, and included smallness, remoteness, vulnerability to natural disasters, scarcity of human, natural and financial resources, openness, limited institutional capacity, and limited diversification. The consequences of such difficulties were: diseconomies of scale, diseconomies of scope, high unit costs of input factors and transport costs leading to high cost production.

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32. Furthermore, Dominica's export capabilities were weak, and the production base was very narrow. While there was growth in the services sector that area was in its infancy. The infrastructure base was still very weak. Sustainable development in the tourism sector was constrained by the inadequacy and sub-optimal use of existing airport facilities. The internal transport and communications network remained particularly vulnerable to the effects of adverse weather conditions.

33. Most of Dominica's trade had been preferential trade either through the non-reciprocal arrangements with the EU or the free-trade area within the Caribbean Community (CARICOM). Dominica faced an erosion of these preferential margins because of MFN tariff liberalization.

34. The domestic policies outlined would not go very far if they were not supported by the international development, trade, and financial institutions of the world, such as the WTO. WTO support would include agreement on transition periods of sufficient length to enable Dominica to undertake the necessary reforms. Dominica needed longer periods to comply with certain specific regulations. This could also include exemption from commitments in certain areas.

35. There was also a need for a formal recognition of the difficulties faced by small States because of their vulnerabilities and structural disadvantages. Such recognition needed to be translated in the creation of a distinct category for small island developing States or economies and the appropriate language enshrined in the WTO Agreements. The WTO Agreement, as it stood, did not speak to the very real issue of small States.

36. Action needed to be taken wherever possible to reduce or remove exports barriers for the small variety of goods that Dominica exported. Dominica had heard of increased market access for goods from developing countries resulting from the Uruguay Round, but in many cases this was not meaningful access, particularly in the area of agriculture where tariff peaks and tariff escalations posed a major problem for small developing countries.

37. Increased participation of small States in the WTO and international trade discussions was also needed. Dominica did not have a mission in Geneva, however it recognized that it was no longer an option to be in Geneva: a country simply had to be there to safeguard its interests in the global economy. However, the costs associated with such a venture was far too great for contemplation in the near future. Negotiations were under way in agriculture and services, two sectors of great importance to Dominica. However, Dominica had not been participating as wished therein. If a round was launched in Doha it would face further demands.

38. Finally, more resources needed to be channelled for technical and financial cooperation measures to ease the transition of small economies into the multilateral trading system. Dominica looked forward to mechanisms that would bring it the benefits of integration while addressing the constraints it faced as a small and developing country.

39. The WTO needed to create room for all its Members, including Dominica and the rest of the OECS, whose circumstances necessitated a certain measure of policy space and latitude to pursue economic development goals. Dominica recalled that the preamble to the WTO Agreement recognized that there was a need for positive efforts designed to ensure that developing countries and especially the least developing among them secured a share in the growth in international trade commensurate with the needs of their economic development.

40. Dominica, along with the OECS, faced the major task of preparing itself to meet the competitive challenges associated with liberalization and the dismantling of preferential arrangements on which its economy had traditionally relied. Dominica recognized the issues that were currently

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most relevant to the establishment of a sustainable growth path and the alignment of Dominica's economy environment with the realities of the globalized market. Dominica had outlined its approach to dealing with those issues.

41. Dominica hoped that it had provided the TPR body with a greater understanding of its trade policies, priorities, and domestic imperatives.

42. Some measure of success was registered as a result of Dominica's efforts. There were promising prospects for the offshore financial services. The tourism sector continued to grow and Dominica was establishing itself as the premier eco-tourism destination in the Caribbean. Dominica had a comparatively modern communications system, which with the coming liberalization would experience increased efficiency and lower costs. This, together with a reformed education system to take into consideration the demands of the information age, and an adaptable and trainable labour force, would help Dominica to take full advantage of the future.

43. But this was not the entire story. Recognizing that its future depended largely on management of its natural and other resources, the Government had taken the responsibility to establish Dominica as the model of sustainable development for small island developing States in the Caribbean. With this in mind, Dominica promised a totally different development picture on its next review in six years.

44. The representative of Grenada stated that his Government attached great importance to the Trade Policy Review, a mechanism that provided the opportunity to assess the extent to which Members were complying with their WTO commitments and aimed at promoting transparency and an understanding of the trade policies and priorities of individual Members while providing the country under review with an opportunity to explain its trade policies and relations. Grenada made, and would make, every effort to comply with its WTO commitments and obligations.

45. The optimistic forecasts in the macroeconomic studies made at the conclusion of the Uruguay Round of the income and trade gains that would result from the liberalization measures had proved to be illusory. A large number of developing countries, including Grenada, found that their exports were not growing. As a result, far from becoming integrated in the world economy, they were facing the prospect of marginalization.

46. Grenada, as a small island developing nation, was endeavouring to rise to the triple challenges of globalization, trade liberalization, and poverty eradication, and to seize whatever opportunities the first two challenges presented. Survival in this new economic order largely depended on Grenada's ability to be more internationally competitive in the era of globalization and trade liberalization. However, in order to be internationally competitive and reap the benefits that trade liberalization presented, Grenada as a developing country was constrained by: (i) smallness and openness of its economy; (ii) vulnerability to natural disasters; (iii) limited resources (financial, human and technical); (iv) high rates of poverty and unemployment, and (v) lack of the private sector to exhibit dynamism.

47. One of the Government's major objectives over the medium term was the reduction of poverty. A national poverty assessment survey conducted in 1999 by the Caribbean Development Bank (CDB) found that 32.1% of the population still lived in a state of poverty; thus, over the medium term, the Government's priority was to reduce that figure. With Grenada's limited resources, it would be extremely difficult over the medium term to participate effectively in meeting its international obligations, without serious hardship to its economy. Therefore, Grenada would need all the assistance possible from the developed countries and international organizations. In all negotiations at the multilateral level, Grenada had sought to place the issue of vulnerability on the

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agenda, but until more recent times these arguments had in the main fallen on unreceptive ears. Grenada wished to take this opportunity to stress the need to inscribe the issue of vulnerability and the need for special and differential treatment on the global agenda.

48. Notwithstanding its economic difficulties, Grenada was committed to pursuing economic policy towards liberalization. Grenada had embarked on a phased reduction of external tariffs; tariffs had been lowered under the various phases of the CARICOM CET. The tariff was based on the Harmonized commodity description and coding system (HS 96). The simple average MFN tariff in 2000 was 11.2%. Grenada had also reduced the number of items requiring import licence, which was used mainly for administrative purposes. Negotiations were currently under way for the tariffication of the items where quantitative restrictions were applied, and which would be in compliance with the GATT.

49. Under a regional initiative, Grenada and four other OECS countries had taken the bold step of de-monopolizing the telecommunication sector. In October 2000, the Eastern Caribbean Telecommunications Authority (ECTEL) was established, to move forward to liberalize completely the market as from April 2001. Grenada made commitments under the GATS and under market access where bypass of the exclusive operator (Cable and Wireless Grenada Ltd.) was not permitted until 2006. However, with the liberalization of the sector as of April 2001, the process had started earlier.

50. Grenada was further pursuing vigorous policies for the promotion of investment, by gradually removing restrictions that were applied previously to foreign direct investment and providing an environment conductive to investment. Foreign investors could have 100% ownership of business and there were no restrictions applied on the free movement of capital and profits. Further, Grenada did not apply levies or taxes on exports or grant subsidies or maintain countervailing duties on imports.

51. Grenada pursued trade liberalization not only within the context of its WTO obligations but at the regional and hemispheric level as well. CARICOM members were in the process of creating a single market economy leading to the significant deepening of the regional integration; Grenada was an active member of that process. Regional integration would result in the free movement of goods and the movement of services, the unrestricted movement of capital, the movement of selected categories of skills, and the right of CARICOM nationals to set up business in any CARICOM country, i.e. the right of establishment. Grenada together with other CARICOM members had also concluded and signed trade agreements with Venezuela, Colombia, the Dominican Republic, and Cuba. Grenada was a member of the Association of Caribbean States (ACS) aimed at expanding regional trade relationships. Grenada, together with its CARICOM and hemispheric partners, was also engaged in the negotiations of a Free-Trade Area of the Americas (FTAA).

52. The increasing marginalization of developing countries like Grenada in international trade and their inability to take full advantage of the multilateral trading system was attributed to financial constraints and lack of adequacy trained personnel, in adopting the legal and institutional framework required for the effective administration and implementation of the complex set of substantive and procedural rules, which the multilateral trading system had created. Therefore, the future programme of work would have to be directed towards achieving the main WTO objectives in trade and economic development by integrating developing countries into the multilateral trading system through, inter alia: (i) capacity-building through technical assistance, to enable developing countries to device full advantage from rights and obligations created by the system; (ii) removing the existing asymmetries and anomalies in the rules, which put developing countries in a position of serious disadvantage in competing in the international markets; (iii) finding solutions to the problems and issues with regard to the implementation of the WTO Agreements; and (iv) ensuring that countries

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whose economies were adversely affected as a result of decline in prices were appropriately compensated.

53. Special and differential treatment had to be accorded to Grenada and other developing countries, if they were to succeed in the global economic environment. If developing countries were treated equally in the international economic arena, their chances of survival would be minimal, in light of their economic vulnerability and lack of capacity. As a result, they would not obtain the benefits of economic growth and improved standards of living from trade liberalization. Thus, LDCs and developing countries should be required to undertake commitments and concessions to the extent consistent with their individual development, economic and trade needs or their administrative and institutional capabilities. Special and differential treatment should take the form of: recognizing of the peculiar condition of developing countries and of LDCs; ensuring that countries whose economies were adversely affected as a result of decline in prices were appropriately compensated; longer time periods for the implementation of obligations; and technical assistance. Even if the playing field was level, there was the equally critical factor of unequal participation in the game. The economy of Grenada could never be economically equal in that sense.

54. Grenada was fully committed to the multilateral trading system and was making every effort to implement the Marrakesh Agreement, within its constraints. Thus, Grenada requested that the international community recognize the special circumstances of small developing countries.

55. The representative of St. Kitts and Nevis said that his Government was convinced that this peer review could only improve the quality of national and international public debate on the issues and ensure an adequate evaluation of the impact of policies on the world trading system by taking into account not only the opportunities but also the constraints of particular relevance to a small State like St. Kitts and Nevis.

56. It was customary to assume that WTO membership automatically led to benefits for all countries, regardless of size and level of development. St. Kitts and Nevis' experience, however, suggested that the obligations imposed bore tremendous responsibility, costs and risks which did not necessarily accord with the benefits for a State of 40,000 persons, a GDP of US$300 million and total government revenue of US$92 million to meet all the expenses a modern State was expected to undertake and whose contribution to world trade was so minuscule, less than 0.0002%. Recently, the World Bank and UNCTAD estimated that it cost US$10 million just to implement the TRIPS Agreement. This sum was equivalent to 14% of the annual budget of St. Kitts and Nevis for the year 2000. This high cost of implementation applied equally to some of the other WTO agreements, such as customs valuation and sanitary and phytosanitary measures. It was important to remember this size factor since it was never fully appreciated when compliance with WTO obligations was considered.

57. Notwithstanding its human and financial limitations, St. Kitts and Nevis had a track record of commitment to an open multilateral system before and since joining the WTO in 1996. This stemmed essentially from the basic importance of foreign trade to its economy. A trade policy that enlarged access to markets and made this access more secure, as well as strengthening the multilateral system, constituted a priority for St. Kitts and Nevis. St. Kitts and Nevis had demonstrated this commitment in its participation in the multilateral round and built-in agenda negotiations since becoming a Member of the WTO. Moreover, in the face of severe threat to the fiscal stability from the onslaught of hurricanes, St. Kitts and Nevis had kept faith with the multilateral system and did not impose new nor intensify existing restrictions on payments and transfers for current international transactions; it did not introduce any multiple currency practices; and it did not impose new nor intensify existing import restrictions for balance-of-payments purposes. St. Kitts and Nevis' trade regime had been characterized by the following: almost total liberalization of the capital account; low average tariff rates by international standards; quantitative restrictions limited just to a few items; an absence of

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anti-dumping and countervailing measures; and no use of the safeguard mechanism since 1993. These features reflected the structural openness of St. Kitts and Nevis. In addition, import and export controls had been kept to the minimum and, except for a few sensitive products, controls were applied mainly for health, safety or security reasons. The trade regime of St. Kitts and Nevis was not designed to pick or identify winners through investment schemes and did not contain any anti-export bias since the objective was to focus on foreign exchange earning activities. This historical openness had been positive, and had fostered the shift from a dependence on single-crop agricultural exports to a more diversified economy with an emphasis on services.

58. In the last decade St. Kitts and Nevis had continued to pursue the liberalization of its trade and the deregulation of its economy as evidenced by its unilateral opening, participation in CARICOM, and the adoption of the commitments negotiated within the framework of the Uruguay Round. Tariff policy had been essentially governed by revenue concerns and the need to provide the population with basic foodstuffs and other essential items at affordable rates. As a result, tariffs were never high enough to afford any real widespread protection to infant industries. This was particularly evident when in 1993 CARICOM introduced a revised common external tariff. The 1993 revised CET would have meant an increase for St. Kitts and Nevis in a number of areas, since the existing tariff schedule had lower rates, especially in manufacturing. St. Kitts and Nevis was granted a derogation from the 1993 CET to maintain the lower rates on a range of items for cost-of-living considerations. The maximum tariff for most industrial goods was 25%, and 66.6% of all tariff lines carried rates of 10% or lower. St. Kitts and Nevis had implemented the first three phases of the CET reduction in spite of the difficulties faced. The slower pace at which St. Kitts and Nevis was implementing the CET reduction schedule was due mainly to its revenue constraint. The revenue implications were fundamental as St. Kitts and Nevis obtained much of its revenue from tariffs. Further, the social implications of tariff reduction and the consequential loss of revenue as well as the sensitivity of fiscal restructuring had to be carefully considered.

59. St. Kitts and Nevis had experienced some difficulty with interpretation of the WTO bindings. It was never its intention to bind other duties and charges. St. Kitts and Nevis was merely supplying information on its other duties and charges in response to a request from the Secretariat. This was for the purpose of transparency only. This misunderstanding illustrated the extreme capacity constraints which confronted small states when acceding to the WTO.

60. As St. Kitts and Nevis integrated more into the world economy, its government and private sector were confronted with an expanding array of policy and competitiveness challenges. St. Kitts and Nevis continued its efforts at improving trade and investment regimes, building supply-side capacities, and enhancing the competitiveness of the private sector. This task was challenging as it required major steps towards strengthening the basic human and institutional capacities in the whole economy. A major development challenge lay in the promotion of non-traditional products in manufacturing, agricultural and services output. It was a source of concern to St. Kitts and Nevis that insufficient attention had been paid to the plight of small States in terms of according special and differential treatment.

61. The extreme vulnerability of small island States resulting from their exposure to economic volatility caused by high export commodity dependence, the high costs of environmental changes and impact for small island developing countries, the curse of smallness in terms of building competitiveness, and the disastrous effects of natural disasters were not considered. Neither were the adjustment policies, domestically and internationally, which were needed to facilitate their smooth and gradual integration into the world economy, sufficiently recognized. In fact, the larger demand for international regulation of trade, in terms of environmental norms, intellectual property rights, tighter consumer standards, and contingent protection in the form of anti-dumping and countervailing duties in a context of reciprocity in trade between developing and developed countries, had placed an

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additional burden on small States insofar as developing capacity for trade policy formulation and implementation was concerned. As small island-states struggled to respond to the new challenges arising in the sphere of multilateral trade, they also aimed to strengthening their institutional capacity and to adopt an approach to trade-capacity development that would address some of the trade-related constraints, which impacted on trade and investment policy and performance. However, the costs of participation in the multilateral and hemispheric trading processes, the difficulties of obtaining revenue and the fragility of small island States' economy were realities that confronted them, and they could only succeed if the international institutions like the WTO understood the special circumstances of micro States, and were sufficiently flexible in their approach in designing appropriate measures.

62. St. Kitts and Nevis recognized that the WTO agenda for the next few years was extensive and complex. The built-in agenda contained a large number of issues which the Uruguay Round Agreements made necessary to deal with in greater detail. There were also implementation issues that had to be tackled. St. Kitts and Nevis therefore requested that some accommodation be extended so as to permit it to undertake some of the implementation measures. This would require lower levels of commitment and exemptions from certain commitments, extended phase-in periods, and financial and technical assistance to comply with their WTO commitments. St. Kitts and Nevis was attempting to comply with its duties and obligations responsibly, and its participation in the review mechanism under the new disciplines and Agreements of the Uruguay Round was the proof of this commitment.

63. The representative of St. Lucia welcomed his country's first Trade Policy Review not only because it provided the opportunity to restate St. Lucia's commitment to the WTO multilateral trading system, but also because it provided a forum to explain the difficulties faced by small island economies, like St. Lucia, in their efforts to fulfill their WTO obligations.

64. St. Lucia hoped that this Review would not simply be a barrage of criticisms for perceived shortcomings but instead would equip the OECS to operate more effectively within the rules of a liberalized trading system. First, St. Lucia was a small country with a very young population. As a result, St. Lucia possessed limited human, administrative, and institutional resources. This impeded its ability to participate effectively in the WTO. Second, St. Lucia's economy was minuscule, extremely vulnerable to natural disasters, with no mineral wealth and bedevilled by sporadic economic activity. Consequently, it was difficult for St. Lucia to enjoy the type of economies of scale that allowed production of goods and services that could compete with those of larger and more developed Members.

65. St. Lucia's economic activity focused on very few sectors, namely: agriculture, mainly banana production, manufacturing, tourism, and recently financial services. In the last few years, attempts had been made at major structural reforms. In fact, this Trade Policy Review came at a time when strenuous efforts were being made to transform St. Lucia's economy from one dominated by agriculture to one led by the services sectors, mainly tourism and financial services. These changes, coupled with international economic turmoil, had resulted in a reduction of St. Lucia's economic growth rate in last year and a half. St. Lucia was working assiduously to stabilize its economic situation.

66. At the macroeconomic level, St. Lucia was attempting to reduce the unemployment rate and to maintain a stable rate of inflation, in the face of continuing threats from countries it had grown to believe were its allies. Despite the changing economic environment and difficult economic circumstances, St. Lucia had in good faith endeavoured to comply with its WTO obligations. Its presence at the Trade Policy Review, notwithstanding the exceedingly high cost, was testimony to this commitment. St. Lucia believed that it would be much richer as a result, since the WTO would come to view small island developing States in a much better light than in the past. This was all part of the learning curve.

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67. In the area of intellectual property, St. Lucia had enacted new legislation to promote and protect intellectual property rights and a WTO TRIPS Review in April 2001 had applauded the work done. In the Customs field, the valuation procedures based on the WTO Agreement on Customs Valuation had also been adopted. A Bureau of Standards had been established, though it suffered from the lack of resources, particularly manpower and scientific equipment. St. Lucia and other OECS Members had taken a collective stance to dismantle the monopoly in the telecommunications sector. Legislation had been enacted, which liberalized the industry effective from 1 April 2001. St. Lucia extended MFN treatment to all its trading partners, the major ones being the United States, Japan, the EU, and other CARICOM member countries. In 1999, imports were 68.9 % of GDP. St. Lucia granted duty-free access to CARICOM-produced goods, and, with CARICOM States, was in the process of creating a single market and economy which would significantly deepen the economic integration process in the region. As a member State of CARICOM, St. Lucia was party to free-trade agreements with Venezuela, Colombia, the Dominican Republic, and Cuba.

68. Regarding WTO notification obligations, St. Lucia had only been able to make a few since 1995, this had been a direct consequence of its severe financial and human resource constraints. St. Lucia was in the process of putting mechanisms in place to address this problem. In trade-related legislation, due to a lack of administrative capacity St. Lucia had not yet been able to undertake the comprehensive review needed to ensure its compatibility with WTO rules. However, the Government had decided to utilize its own resources to contract a foreign law firm to begin this exercise before year-end. The degree of liberalization that St. Lucia had achieved thus far had had a serious impact on its economy as a result of the reduction in tariffs on international trade, which accounted for 56.8% of total government revenue in 1999. In this respect, it had been estimated that with the adoption of Phase Four of the CARICOM CET, which would further reduce applied tariffs, St. Lucia would experience a reduction of approximately $5 million in revenue from import duties and consumption tax.

69. The need to diversify agriculture, to reorganize the banana sector to meet the challenges of a new banana market, occasioned by the WTO ruling on the trading arrangements under which it exported bananas to Europe was, in St. Lucia's opinion, cruel and unfair treatment. The experience of St. Lucia and the other OECS banana exporting countries with the WTO dispute settlement mechanism had been unfortunate and bitter. St. Lucia had discovered that, even though they were the most likely to be affected by the WTO rulings, they had hardly had a voice in the judicial process, and that their sovereign right to choose their representatives to the proceedings was questioned, and two of them were ejected. Subsequently, the unfavourable DSB ruling on the European marketing arrangements had destabilized the banana industry as it had led to a loss of confidence among farmers, again resulting in a loss of revenue due to decreased production. Given the impact of WTO obligations and rulings on the social fabric of its fragile economy, St. Lucia had to raise the clarion call for the WTO to awaken and take cognizance of the particular and peculiar needs and circumstances of small island economies. The pace and extent of trade liberalization could not be the same for those who were only able to crawl as for those who leaped.

70. St. Lucia appreciated the technical assistance that the WTO had already extended through training courses, and the establishment of a WTO reference center. However, more was needed to strengthen St. Lucia's capacity to comply with its WTO obligations. For example, as a result of the changes in customs valuation, undervaluation had become one of the biggest problems confronting St. Lucia's customs authorities. Technical assistance was needed in order to develop the capacity to detect and prevent these incidents of customs fraud. Another of the challenges facing St. Lucia was its inability to afford a resident mission at the WTO in Geneva. For a small developing country, the cost of such representation was prohibitive, and the human resources for an effective presence were scarce. St. Lucia had considered joint representation with the other OECS countries, but this had proved to be difficult. One way in which the WTO might assist in this dilemma would be for its

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larger and more wealthy Members to come together and provide the facility of an office complex in Geneva that would house the representatives of small countries at concessionary rates, similar to one at the United Nations in New York. St. Lucia also expressed its sincere appreciation for the efforts by the WTO Secretariat and the Commonwealth Secretariat, inter alia, to establish a facility to service and support non-resident missions.

71. St. Lucia reiterated its commitment to the WTO, and to a rule-based liberalized trading system. However this system had to take into account the circumstances of all its Members, and in particular the smallest and most vulnerable so as to ensure that they did not feel that the system excluded them at critical moments. If there was not a clear recognition of the unique circumstances of small island developing States, which precluded them of taking advantage from the new trade opportunities, small island-developing states would feel excluded.

72. Every country had the right to development and improved welfare. If this fundamental WTO objective was not to be frustrated than the peculiar situation of small island-states had to be accommodated within the regulatory system. Should the one-size-fit-all approach apply to small island-states, it would result in further marginalization. St. Lucia was aware of the efforts made to launch a new round of negotiations. St. Lucia could not justify its unequivocal support unless the problems which had been plaguing it since the end of the Uruguay Round were ironed out. It would be futile to participate in a system with regulations and procedures that turned out to be onerous and burdensome, retarding economic development rather than giving a fair opportunity to all to enjoy the successes of the new world trading order. Armed with the faith that equality could be achieved, St. Lucia's dream of progress could be realized in a spirit of mutual cooperation in which small nations could realize the status of true partners in the global trading system.

73. The representative of St. Vincent and the Grenadines said that as a small island developing State it was committed to the process of trade liberalization and integration into the new global economy as well as to the need to place on the agenda of the WTO the special and differential treatment required to survive on such an uneven playing field.

74. While St. Vincent and the Grenadines, like other Members, had not realized trade benefits as a result of the Uruguay Round Agreements, it recognized that the process of trade liberalization was inevitable, and serious attention was being paid to the restructuring of its economy. St. Vincent and the Grenadines had participated in the Trade Policy Review exercise, and honoured its obligations for transparency and review of its trade policies within the framework of well-meaning commitments to the WTO disciplines.

75. The Government of St. Vincent and the Grenadines had come to this exercise only two months after assuming government as a result of general elections preceded by nine months of intense national debate on the social and economic challenges facing the country. It was cognisant of the scepticism especially in the agricultural sector, of the usefulness of the WTO in representing the trade and development interest of small States.

76. The erosion of trade preferential arrangements with its traditional partners, as exemplified in the banana dispute, had shaken the foundations of the economy, created widespread rural poverty, disenfranchisement, and a myriad of social and economic problems.

77. Nevertheless, as St. Vincent and the Grenadines identified alternative productive activity in which some level of international competitiveness could be achieved, believed that the WTO multilateral framework might be the best arena to integrate its fledgling economy into the global trading environment.

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78. St. Vincent and the Grenadines therefore welcomed the Trade Policy Review exercise with its sub-regional partners to explain the difficulties experienced in bringing its domestic trade regime into compliance with the WTO. The pressure of domestic circumstances forced St. Vincent and the Grenadines to use the TPR exercise as an opportunity to highlight concerns of special interest to small vulnerable States with limited resources. These concerns needed to be taken fully into account if the benefits and gains from trade were to be commensurate with the high cost and the share weight of the commitments assumed by St. Vincent and the Grenadines as a WTO Member.

79. As a small island developing State, St. Vincent and the Grenadines recognized the need to strengthen its domestic institutions and empower the private sector to take advantage of the trade opportunities created by the multilateral trading system. In this regard, attempts were being made at diversifying the production and export base and creating an environment conducive to attracting and increasing investment.

80. St. Vincent and the Grenadines was committed to the continuation of its trade liberalization programme, which preceded the Uruguay Round. During the Uruguay Round, transparency, predictability and guarantee of access to St. Vincent and the Grenadines' market were enhanced through ceiling bindings of its tariffs on all agricultural and industrial products. As a result of the Uruguay Round, an automatic licensing system and unilateral reduction in tariffs far below the bound rates had provided liberal access to the St. Vincent and the Grenadines market for all its WTO trading partners. More recently it had also made offers under the GATS. This liberal and open stance was reflected in a simple average MFN tariff in 2000 of 10.9%. The average tariff on agricultural imports was 18% and 9.6% on non-agricultural imports. The Government had also implemented the Agreement on Customs Valuation in its comprehensive Customs Administration Act. Additionally, a new operational manual for the Port Authority had modernized the operations of the several ports of entry. The foreign exchange control reforms, comprehensive tax reforms, and the enactment of a Fair Competition Act, all intended to reduce transaction and business costs, provided a level playing field for investors and encourage competition and efficiency for the benefit of the consumer. St. Vincent and the Grenadines had also operationalized a National Economic Transformation Programme, popularly known as the first 100-days plan, and the first phase was already in the process of implementation. This programme outlined a wide range of policies, which would be used as catalysts in the process of macroeconomic transformation and growth. The programme would focus on an aggressive export-oriented, private-sector-led development strategy.

81. The changing nature and volatility of international economic relations and the relatively greater vulnerability of small economies in the new global environment made it mandatory for St. Vincent and the Grenadines to redouble its reliance on an outward-looking approach to trade and development. This facilitated its participation in the deepening and widening regional integration process as a means for its survival. St. Vincent and the Grenadines was therefore committed to the creation of the CARICOM single market and economy at the regional level, and of the Free Trade Area of the Americas (FTAA) by the year 2005. These initiatives would allow it to build the capacity and create the conditions to facilitate adequate responses to the new requirements of universal efficiency and global competitiveness, and further required that St. Vincent and the Grenadines create the institutional capacity to implement the commitments and obligations undertaken under bilateral regional and multilateral trade agreements.

82. The Economic and Social Transformation Programme would be implemented on a sound institutional framework, including social partnership between the Government, the private sector, and labour, including trade unions, to constitute a Tripartite Committee. The primary objective of this group was the achievement and maintenance of sustainable macroeconomic growth and development through a process of cooperation in economic management among the three major partners. A broad- based National Economic and Social Advisory Council, composed of public and private sector

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officials, NGOs and other civil society partners would act as the prime mover in the Economic Transformation Programme. A Cabinet Committee on the Economy comprising ministers and technical experts from the main economic growth sectors was established. Overall direction would be provided by this Cabinet Committee to the Transformation Programme. This institutional framework would allow greater private sector participation and initiative in the national effort to achieve international competitiveness, especially in areas that could serve as catalysts for the diversification of the production and export base, and the modernization of the economy. In this respect, the WTO-related matters had been given high priority in all of the committees established. St. Vincent and the Grenadines relied heavily on a limited number of trained officials to provide technical guidance in this area.

83. The Government of St. Vincent and the Grenadines had also embarked upon a thorough fiscal review of the economy, and therefore confirmed that as the least fortunate of the OECS Members present its economy faced an economic policy dilemma. The unilateral reduction in tariffs consistent with the WTO principles had severely eroded the revenue base required for public sector investment in social services and amenities. Since tariffs and other border taxes constituted the main revenue source to government, reduction in this revenue placed greater strain on the economy, and compromized its ability to provide the economic and social infrastructure for investment, employment creation, and business development. Coupled with the reduction in government revenue was the high per capita cost of administration, both in the public and private sector.

84. The small size of St. Vincent and the Grenadines economy did not provide the economies of scale for competitive market development, resulting in the creation of natural monopolies and oligopolies. This hindered the transfer of welfare benefits from suppliers to consumers. The lack of institutional capacity was also a characteristic of the small and financially strapped economies, like St. Vincent and the Grenadines. It was unable to attract technical expertise and, where developed, was unable to retain them.

85. St. Vincent and the Grenadines appealed to the WTO to place the concept of special and differential treatment for small and vulnerable developing States firmly on the agenda and work programme of the Committee on Trade and Development. St. Vincent and the Grenadines' experience in Seattle, and more recently in Quebec, had indicated that countries participating in the liberalization process had to assure their critical constituency that the multilateral framework was concerned with the just, equitable distribution of wealth while ensuring the development of the people and the preservation of the environment.

86. St. Vincent and the Grenadines required extended time periods for implementation of the Uruguay Round Agreements, as well as technical and legal support in the areas of intellectual property, anti-dumping and subsidies. One important objective of the GATT and the WTO was the achievement of a sustainable level of growth and development by all countries. Therefore, technical assistance and support for implementation of extended time periods, as well as for preferential arrangements and non-reciprocal agreements, historically important to its trade, had to be maintained if St. Vincent and the Grenadines was to achieve a smooth transition into the liberalized global economy and sustainable growth and development as promised by the WTO. In this respect, St. Vincent and the Grenadines requested the support of WTO Members for the granting of a waiver for the Cotonou Agreement signed between the ACP countries and the European Union.

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III. STATEMENT BY THE DISCUSSANT

87. The discussant (H.E. Ms. Michèle Pranchères-Tomassini, Luxembourg) said that the OECS-WTO Members had committed themselves to a process which, once begun, implied a review of their trade policy every six years. She welcomed this collective decision, the political signal of a long-term commitment to the WTO, a commitment which also reflected an investment on the part of these states: an obligation of result. A synergy had been developed with the trade policy review officials that had helped to establish contacts with the WTO, and which extended beyond the scope of formal accession to a multilateral organization.

88. None of the six OECS was permanently represented in Geneva: there was an obvious communication problem. Members remembered that the tense moments of the banana dispute had led to the arrival of Saint Lucia on the WTO scene.

89. The multilateral framework offered by the WTO could work to the advantage of small countries, and in particular the small island developing countries like the OECS. In this regard, she hoped that the TPR would contribute to identify ways to help the ECS to achieve optimum integration of their economic development into the international trading system. The TPR should also be an opportunity for Members to hear OECS concerns.

(i) Economic and institutional environments

90. World trade had played a predominant role in the history of these six island-countries. Their first TPR coincided with the preparations in Geneva of the World Conference against Racism to be held at the end of August in Durban (South Africa), and which would address the issues of slavery and colonialism, Members could not but recall the historical burden carried by these countries: these were sensitive and complex issues that Members had to bear in mind.

91. In a way these six states had been subjected to the effects of globalization for five centuries. Nowadays, they were among the first countries to suffer the less favourable effects of globalization: global warming had led to an increase in the violence of cyclones and contributed to soil erosion. This added vulnerability was devastating for all the economies under review. Usually, because of these threats people would leave their country of origin, particularly when the standard of living and of education increased their mobility. In the case of the OECS, expatriation seemed to play only a marginal role: in spite of the environmental threats, in spite of the persistent poverty and unemployment, there seemed to be social stability and cohesion, which undoubtedly had contributed to the consolidation of these countries as a tourist destination, a major source of income, and to the attraction of foreign investment in general.

92. In this context, the educational system seemed to be one of the strong points of the OECS. With the knowledge-based economy taking over, even from the niche economy, the level of education of local populations added to the competitive advantage of a foreign investment. How far was it possible to go? What was the cost of educating elites abroad?

93. While access to information technologies was seen as a priority, the on-going liberalization of the telecommunications market might conceal more difficulties than it might actually resolve, owing to the geographical environment and exposure of distribution networks to natural disasters. What could be more eloquent than the technological gap revealed by Dominica's telephone penetration rate of 69% for a population of which 30% under the poverty threshold. Apart from lower rates, what developments could be expected from deregulation in terms of increased access to information? As shown by the example of the customs administrations, the computerization battle was far from won.

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94. The steady development of infrastructure would continue to place a burden on public finances, and this raised the question of how the authorities intended to deal with the prospect of structural indebtedness. Had there been any common thinking, for example, about how to improve the efficiency of government procurement? Was there an environmental component in public investment planning?

95. The fiscal dependence of these countries on tariffs and other import taxes monopolized and provided subsistence for human resources which could otherwise be mobilized by the public or private production sector. This should provide food for thought. To what extent might this administrative overload, which impeded the development of a more diversified economy, be due to the countries' adherence to the CARICOM CET. While the CET was clearly designed for countries with a strong potential for exporting manufactured goods, the OECS members import virtually all of their manufactured goods. Consequently, the OECS had to apply the CET with a system of exemptions that was not only complicated in itself, but that varied from country to country. Did the OECS members intend to negotiate with their CARICOM partners, a system of CET exemptions that was easier to manage, more transparent, and hence more favourable to trade, as the Secretariat Report suggested? Had the possibility of a single reduced tariff been considered? If any progress was to be made, the situation on the spot had be carefully examined, and she commended the efforts made in this connection by the Trade Policy Review officials to identify technical cooperation needs.

96. While political and administrative structures were undeniably complex, economies of scale were often made unfeasible by the fragmented geographical structure.

97. However, the devotion to sovereignty as an indication of a strong feeling of individualism constituted the strength of small countries. This spirit of independence was also reflected in the cautious approach to the transfer of powers that the development of common institutions such as the OECS Secretariat or the CARICOM negotiating machinery could involve. Add to this the tensions on the employment market and the problem of rehabilitating farmers on the one hand, and the shortage of labour, particularly in the Leeward Islands, on the other hand, and the problems of the eastern Caribbean archipelago began to bear a strong resemblance to the crisis caused by the impact of globalization on the nation-states, particularly in Europe. While the member States of the European Union could afford the luxury of discussing their institutional choices here, for reasons of scale, there was a pressing need for economic and social results, as expressed by the Prime Minister of Luxembourg, Mr. Jean-Claude Juncker.

(ii) Trade policies

98. Several of the Government Reports revealed with satisfaction how the preparations for this Review had improved inter-institutional cooperation. When Dominica and St. Lucia, for example, had to agree on a justification for prohibiting the importation of shaving brushes from a given WTO Member, as in so many other cases, they were in the process of putting their trade policy to a very simple and very direct test. Likewise, when a country was asked to identify its technical assistance needs, it should be entitled to ask for a prior evaluation of those needs. This should be a mutually rewarding exercise for everyone. In this spirit, she urged the OECS members to allow all of the different divisions of the WTO Secretariat to use the data collected during the current Review to enhance their understanding of the OECS specific problems.

99. The OECS integration, through the WTO, in a rules-based trading system, their regional integration efforts (OECS, CARICOM, FTAA and extension of the bilateral agreements), the historical links they had cultivated with the Commonwealth or la Francophonie, not to mention their partnership with the European Union, suggested that there was a consensus on the need to take

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advantage of the development opportunities available to them. To what extent were they truly available? Should they be used indiscriminately?

100. An archipelago made up of small, independent multi-island States should not underestimate the importance of building alliances. This required a permanent balancing act as was only too clear when it came to defending closer ties with Cuba. Regrettably, there were some missing links: what about trade with the French departments of Martinique and the Guadeloupe?

101. It was true that the actual impact of the extended network of alliances had been mixed: (i) As shown by CARICOM's position with respect to the WTO or the FTAA, integration in that community seemed to be decisive. Had internal coordination in the OECS been strengthened as a result? (ii) Partnership with the EU continued to be of major importance, and progress would hopefully be made in accepting the consistency of the Cotonou agreements with the WTO rules. If there were problems relating to payment deadlines, they might be linked to excessive conditionality, but they were probably, above all, a result of the major crisis affecting the European executive, due precisely to accounting problems, a crisis that had been fatal to European Commission President Jacques Santer. It would take time for the European Commission to strike a satisfactory balance between efficiency in the field and corresponding accounting efficiency at home. (iii) In the area of duty-free market access, the European "Everything but Arms" initiative launched at the third United Nations Conference on Least-Developed Countries could result in a competitive disadvantage for the OECS Members. However, the phased approach for sensitive products, in particular sugar and bananas, should help to temper these concerns, particularly, and this was the main argument for such an initiative, since banana production did not exhaust the preferential quotas allocated, even in the new agreement on the EU banana regime. The purely theoretical competition from the LDCs was nothing to worry about: she was more worried at the tendency to prejudge, somewhat hastily, the potential for development of banana production, in particular, and agriculture, in general. The survival of the OECS depended on the preferential regime for agricultural exports towards the European Union. (iv) Participation in agreements providing for duty-free access to the U.S. and Canadian markets for manufactured goods made sense in the framework of CARICOM, but was not necessarily relevant to the OECS – or else it led, as would seem to be the case at present, to the development of a manufacturing industry through free zones, where the comparative advantages were far from obvious. In the short-term, however, for lack of any better solution, this was a means of rehabilitating the workers who had lost their jobs in the declining agricultural sector. In the long-term, the loss of traditional knowledge, and in the short-term, desertion of the land without any prospects for substitution, was a source of concern. The development of free zones with export-oriented industries seemed to be taking place at the expense of the development of small enterprises. But could individuals be encouraged to take risks when they were threatened with ecological disasters? (v) As regards the non-reciprocal generalized preferential access agreements, their value appeared to be limited. Moreover, it was unclear what the impact of the enlargement of the European Union would be.

102. At the WTO, as in other institutions, often what was demanded was so out of proportion with the realities on the spot that the commitments made, but not respected, often resulted in tension or complacent inertia. This explained the problems involved in special and differential treatment and in technical assistance. Implementation was one of the WTO's major problems. She hoped that efforts made, like in the OECS case, to outline, with the Secretariat and the WTO Members, solutions that were adapted to local situations, would help to establish the general framework for a new round of multilateral negotiations, a round in which technical cooperation and capacity-building would be at the centre of discussions.

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(iii) Sectoral policies

103. In spite of all these difficulties, the overall impression emerging from the OECS statements was that there was a determination to take things in hand. But the question remained: should Members make promises they could not live up to?

104. The Secretariat had rightly pointed out that the Review had posed certain problems: the collection of data was not easy, and given the scale involved, statistics could be misleading, since the critical mass to justify generalizations was lacking. At the same time, the considerable fluctuations caused by an isolated event, such as the decommissioning of a ship for one tourist season, underscored the basic vulnerability of the economies under review. The absence of any room for manoeuvre clearly limited both the possibility of diversification and the capacity for recovery.

105. This was why the decline in traditional agriculture was a source of concern, even if she fully recognized the need for a broad range of reforms. The problem facing Grenada, at present, in organizing the production and marketing of nutmeg was significant, otherwise, why would the international press bother to discuss it? The EU's Banana Production Recovery Plan and the Winward Islands Strategy appeared to be the pillars of a medium-term trade strategy that would not be simple. For reasons of scale, it would not be possible to do everything at the same time: would market surveys make it possible to establish priorities at this point already?

106. It was no accident that the CARICOM proposal on agriculture included the notion of multi-functionality. The impact of agriculture on the prevention of ecological disasters should not be underestimated: was it right to abandon crops that contributed to the fight against soil erosion?

107. Landscape preservation was an integral part of the development of quality tourism. The tourist industry needed to be diversified to take account of the competition of cruise tourism. Customers had to be targeted: initiatives such as the development of a network of tourist boats were commendable. Between cruise tourism and national tourism, the option of locally organized regional tourism appeared to have encountered a number of problems, the most obvious of which was transport.

108. The apparent dynamism in the tourist industry in particular called for a shared awareness of the risk of economic destabilization linked to the spread of HIV/AIDS.

109. On the whole, the impression was that the OECS members were under pressure to strike a balance between providing facilities to attract foreign investment and exporting the profits generated. This problem was particularly acute when it came to managing the financial sector where, for the most part, offshore activities remained dissociated from onshore activities. Was there any data on length of stay beyond the tax holiday? And on the world market, were the diversification of financial products, demand for products specifically focusing on development projects, and the growing interest of institutional investors in micro-finance taken into account in developing a banking sector oriented towards the local market? Had any thought been given to the possible synergies between these two sectors in the countries where the agricultural credit institutions were only just emerging?

110. Of course, this depended on Members consolidating their offshore financial services in the face of international pressure against competitiveness based on the principle of fiscal sovereignty, and knowing that this single factor of competitiveness was now within reach of a growing number of developing countries.

111. The impact that the financial sector had on the reputation of the OECS was a matter of general concern. This reputation was due, inter alia, to the introduction by the OECD in 1998, at the

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initiative of the Committee on Fiscal Affairs, of a system of lists identifying the "tax havens" and classifying them according to their willingness to cooperate, implying an extension of normal cooperation in the penal area to tax administrations and other institutions. Luxembourg, together with Switzerland, was able, as a member, to attend the OECD negotiations. The OECS were not given such a possibility: false assumptions were made, and there was a deliberate effort to damage their reputation, not very difficult given the media coverage involved. Now, the trend seemed to be reversed, and tax competition was no longer seen as automatically being unfair: fashion played a role, even in tax-administrations-related issues. However, the damage was done and harassment had become customary, as reflected in the pressure on the OECS members to abolish, inter alia, what was known as economic citizenship, as if what was common practice in other States were automatically suspect in the case of a small underdeveloped State. A passport from a small State could not be rivalled in terms of traceability.

112. To revert to the subject of offshore centres, it would be interesting to know how the DSB would have ruled if the initiative of the OECD, and of most of its member States, had been brought before the WTO. It was true that the WTO had only existed since 1995, but nevertheless, one wondered why the States whose tax administrations felt that they had been injured had not brought their complaint before the WTO. Did they fear the independence of a panel ruling? Perhaps the creation of these defamatory lists could have been challenged. Perhaps the nuance between tax competition and fiscal dumping or between tax haven and tax hell might have introduced an element of balance and conciliation in this lop-sided discussion. But this did not happen, and frankly, Luxembourg had not thought of it. She believed she was not misinterpreting the OECS thoughts when she said that the WTO was still too recent to enter into the field of vision of the countries concerned; and besides, legal assistance was needed to bring a case before the DSB.

113. In relation to the communication problem, if the TPR could lead to the establishment of a permanent representation of the OECS-WTO Members in Geneva, that would be a true achievement.

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IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY

114. The representative of Hong Kong, China appreciated the support showed by the OECS Members to the multilateral trading system and to trade liberalization in spite of their difficulties and capacity constraints in implementing the WTO Agreements. Hong Kong, China urged the OECS Members to further pursue their trade liberalization efforts, while recognizing the need to provide adequate technical assistance to improve their capacity in fulfilling their WTO obligations. Market access for exports originating from these Members was essential to enable them to fully benefit from the multilateral trading system. Hong Kong, China was ready to support initiatives to improve trade-related capacity-building programmes.

115. Hong Kong, China noted that OECS Members applied CARICOM CET to imports from third economies at relatively high rates of up to 20% to 35% for industrial products. Though a four-phase schedule of tariff reductions had been established, not all OECS Members had implemented the tariff reduction as scheduled. Hong Kong, China encouraged these Members to speed-up the reduction process, and to consider further lowering their tariffs as well as other duties and charges, in a pace taking into account their own development needs.

116. OECS Members maintained an extensive system of import licensing. Non-automatic licensing was also applied on products subject to quantitative restrictions under Article 56 of the CARICOM Treaty and these restrictions were in practice applied to all trading partners. For trade facilitation purposes, Hong Kong, China encouraged OECS Members to simplify their licensing requirements and to speed-up the process of dismantling quantitative restrictions.

117. The OECS economies were service-oriented. The services sectors constituted in most cases around 75% to 80% of GDP in all OECS Members and employed an important portion of the work force. Members would want to take an active part in the on-going WTO negotiations on trade in services. A negotiating proposal submitted in early 2001 demonstrated CARICOM's interest in this area. Hong Kong, China welcomed this proposal, and looked forward to work closely with the CARICOM countries in the future.

118. The representative of the European Union encouraged the representatives from the ECS to pursue their efforts in dealing with the impacts of the transition to new global requirements. The Government and the Secretariat Reports indicated the specific problems and limitations their technical assistance needs.

119. In spite of their vulnerability as small island States, their traditional mono-crop economies and their high costs for economic and social infrastructures, the OECS Members had achieved remarkable progress towards global and regional integration in areas such as trade, investment, agriculture, transportation, environment and health.

120. The status of these countries as the better-off developing-country Members of the WTO was partly due to their active participation in international trade. The OECS Members formed part of a group of 15 countries in the Caribbean region who were signatories to the ACP-EU Conventions. These countries had established in 1992 the Forum of the Caribbean ACP States (CARIFORUM) as a regional coordinating mechanism. Relations with the EU had been developed essentially in the areas of technical and financial cooperation and trade. Initial steps had consisted of upgrading the ACP-EU relationship and instituting permanent mechanisms for an EU-Caribbean political dialogue.

121. The OECS was a beneficiary of the EU regional development cooperation activities, in the framework of programmes and projects covering the whole CARIFORUM region and through activities that were specially designed for the sub-region. Under the 9 th European Development Fund

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(EDF) preparations were under way for the establishment of a Regional Support Strategy (RSS), expected to enter into force by the first quarter of 2002, aimed at supporting the integration of the beneficiary countries into the world economy.

122. Within this framework, the institutional and regulatory development of CARICOM and the OECS, the enhancement of their capacity to participate in trade negotiations as well as trade and services facilitation measures would probably be considered. The overall impact of the EU regional cooperation in the Caribbean had been undoubtedly positive and had contributed to advancing the integration process and to strengthening the economic links between the two regions. Under the recent ACP-EU Cotonou agreement, regional integration and cooperation were regarded as the foundations of the new ACP-EU trade regime, leading to the notion of Regional Partnership Agreements (REPAs).

123. The OECS Members enjoyed a strategic location on the main trading routes in the Western Hemisphere, a traditional openness to trade, and qualified human resources. These advantages offered the prospect of a successful interaction with the world economy. Regional integration and cooperation could be major determinants insofar as they promoted a dynamic of complementarity and economies of scale leading to international competitiveness and long-term sustainable economic growth. The integration of small developing countries into the world economy was not easy. Technical assistance was necessary to help the OECS Members to survive, and take part in the global economic environment.

124. The EU appreciated the OECS Members' commitment to the multilateral trading system, the WTO, and further trade liberalization. In fact, the EU believed that small-sized and trade-dependent island economies, like the OECS Members, could only benefit from a strong multilateral trading system with predictable, transparent, and fair rules. The EU expressed its interest in hearing their expectations in relation to the possible launch of a new round of multilateral trade negotiations and, more specifically, on subjects and issues they wished to see addressed.

125. The EU asked for explanations on the OECS Members' multi-layered structure when determining and implementing trade policy rules: (i) how the OECS thought domestic, OECS, CARICOM and multilateral aspects could be better coordinated, and (ii) whether the OECS agreed with the suggestion by the WTO Secretariat that the delegation of greater responsibilities to regional structures would allow cost savings. The WTO notification requirements, and amendments to the OECS national legislation to comply with the WTO Agreements had been slow due to human resources constraints and to institutional limitations. These countries had entered into, or were in the process of entering into, a number of regional agreements. The EU asked whether governments had carried out an analysis of the resources required for these regional initiatives. The EU wished to hear the OECS Members' views regarding the interface between their regional efforts and the WTO, in particular on their level of ambition, the timing and the expected benefits of all their existing or envisaged regional arrangements, and how these agreements would dovetail with the post-Cotonou programme.

126. Technical assistance to ensure full compliance with the WTO obligations and to achieve a better integration into the global economy was needed. The EU asked for further details on the OECS technical assistance needs in the WTO-related activities.

127. The OECS Members had not yet fully implemented the CARICOM CET, because of its effect on government revenue. Replacing part of the tariffs and similar charges with indirect taxes such as the VAT could be examined as a possible solution. The EU asked for the OECS' views on this idea. The OECS Members tariffs were generally bound at very high rates. The EU therefore suggested that the countries concerned consider the possibility of moving towards lower bindings as a positive signal for traders and investors.

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128. The EU wished to be informed of any concrete steps currently being undertaken by the OECS Members to put their legislations into conformity with their TRIPS obligations. The EU encouraged the OECS to continue this process, and was prepared to further cooperate with the OECS in the pursuit of their ambitions.

129. The representative of Japan said that although trade flows between her country and the OECS were not significant, Japan kept good trade relationship with the OECS members.

130. As small island developing countries the OECS members had traditionally depended on agriculture throughout the difficult weather and geographical conditions. Japan appreciated the OECS' efforts to maintain and promote their agricultural sector in spite of the difficulties they faced, such as hurricanes, as well as their continuing successful process of moving from reliance on agriculture to tertiary activities, notably tourism and offshore services.

131. The Secretariat Report stated that the OECS remained vulnerable to external shock as a result of local production patterns reflecting long-standing unilateral preferences granted to a few trading partners. In this respect, Japan wished to know what diversification strategies each OECS Member was considering in order to overcome its economic vulnerability. Japan considered that information technology (IT) could play a key role for the development of national economies, and wished to know whether OECS Members had any strategies to utilize IT for their economic development.

132. Japan also appreciated that OECS Members were gradually moving from an import-substitution model towards a more open and liberal trade regime. However, as indicated in the Secretariat Report, import licensing was widely used by all six countries and quantitative restrictions on a number of products still remained.

133. Some goods required import licences when imported from any country that was not an OECS or a CARICOM member, and an import licence was required for the importation of goods such as soap and margarine when originating from a more developed CARICOM country or a third country. Japan asked for an explanation by the OECS Members on how this was consistent with Article 1, paragraph 3 of the Agreement on Import Licensing Procedures, which provided neutral application as well as fair and equitable administration in import licensing procedures.

134. OECS Members applied a number of safeguard measures under Article 28 and 29 of the CARICOM Treaty. Japan requested an explanation on the consistency between the conditions for applying safeguard measures under Article 29 of the CARICOM Treaty and the provisions under the Agreement on Safeguards, and on the consistency between quantitative restrictions on imports used for the purpose of safeguarding balance of payments as provided by Article 28 of the CARICOM Treaty and the WTO Agreement on Safeguards.

135. Japan expected OECS Members to make further efforts towards diversification of their economies, and liberalization of their trade and investment regimes by reducing tariffs and other trade barriers, while eliminating any discriminatory treatment to contribute to preserving and strengthening the multilateral trading system.

136. The representative of Canada said that her country had a close trade relationship with the OECS, and was therefore pleased to assist OECS Members in capacity building and greater inter-state cooperation in such relevant areas as trade policy development, tax administration, financial sector supervision, economic management, and judicial reform.

137. As small States, OECS members faced real capacity limitations and challenges. These challenges had been compounded in recent years by rapid changes within their economies and new pressures in the regional and global trading environment. Nevertheless, the ECS had shown

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considerable resilience and success in managing a rapid transformation from agricultural to service-based economies as their tourism, financial, and telecommunications sectors had expanded considerably. In particular, the emphasis on tourism to create jobs and generate income appeared to be bearing fruit.

138. The shift to services had been supported by the OECS’ successful investment promotion activities, which had attracted US$1.3 billion in the period 1995-1999, mainly in the tourism sector. However, OECS members wished to avoid exchanging mono-crop agriculture for dependence on one service sector, and had succeeded in developing other services areas. For example, Antigua and Barbuda was in the process of diversifying its reliance on tourism by getting into data-processing.

139. International support and attention to assist the OECS Members in developing a broader competitiveness agenda, including support for their very limited private sectors was necessary. The Secretariat had found that OECS governments, while engaging in trade liberalization, were also still seeking to "pick winners" through multiple production and investment incentives, including tax concessions; these policies often worked at cross-purposes to their trade liberalization agenda. The OECS members’ trade policies were to be integrated in their development policies.

140. Canada commended Dominica’s success in replacing most of its import quantitative restrictions with import duties. Dominica had completed the process in 1998, before all other OECS, which were to replace all quantitative restrictions with tariffs by 2005. In Canada's view, accelerating this shift and then progressively reducing tariffs would further open the door to the benefits of the multilateral trading system. The Secretariat noted that trade policies based on import-substitution were inappropriate for the OECS' economies and correctly drew attention to OECS governments’ concern regarding the fiscal implications of trade liberalization. Canada encouraged the OECS Members to draw on the considerable technical support and advice available from international donors agencies and new mechanisms, like the Caribbean Regional Technical Assistance Centre, largely financed by Canada.

141. The OECS members pursued active trade policies at domestic, sub-regional, regional, hemispheric and multilateral levels; they were working to coordinate their reforms more closely within the OECS, had joined CARICOM members in developing the CARICOM Single Market and Economy, and participated in the work of CARICOM’s regional negotiating machinery on trade negotiations for the FTTA and the WTO. However, limited capacity and resources meant that they often could not participate as fully as they wished.

142. Canada also supported the Secretariat’s suggestions for further strengthening of a rational approach to regional cooperation, and delegating greater responsibilities to regional structures. Canada encouraged the OECS Members to vigorously pursue an integration policy within the OECS and CARICOM, to reduce resources required to formulate individual trade policies. Canada strongly supported the role of CARICOM regional negotiating machinery in developing and coordinating trade policy for CARICOM members. Closer cooperation and participation of the OECS Members in its work, and investigative authorities on issues like trade remedies could be best set up on an OECS-wide basis, or better still, at the CARICOM regional level.

143. In 2001, the Trade Policy Review process for the OECS coincided with the national implementation reviews for developing Members, and Canada would address intellectual-property-related issues in that process. Canada had submitted questions to Grenada and St. Lucia for the April 2001 TRIPS Council reviews; these reviews were not completed and were expected in late 2001. Canada had also submitted advance questions to Antigua and Barbuda, Dominica, and Saint Kitts and Nevis for the June 2001 TRIPS Council meeting, and looked forward to their participation in the review process. St. Vincent and the Grenadines’ intellectual property regime was currently under review by Canada's officials. Canada would submit questions as part of the National Implementation Review process scheduled for November 2001.

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144. Additional technical assistance to strengthen OECS capacity in trade-related areas was also needed. Canada was already providing such assistance, and looked forward to working closely with the WTO, the World Bank, and the Inter-American Bank to assist OECS Members further in this regard.

145. The representative of India congratulated the six OECS Members for their steadfast commitment to a free and open multilateral trading system in spite of the problems they faced as small economies. It was encouraging that these economies had adopted prudent fiscal policies with most of them posting current account surpluses. It was noted that their macro-economic performance in recent years was commendable.

146. The Joint Report by the OECS Members showed the magnitude of the problems they faced as small and more or less single sectored economies. These economies had been frequently affected by natural disasters, and their size as well as lack of adequate human and financial resources had been cited as the main reasons for their not being able to derive maximum benefits from the multilateral trading system. They had a combined trade deficit of 52.9% of GDP and keeping in view the transportation pattern and their limited production possibilities, they had not been able to have a meaningful development of the large regional market. Joint production possibilities could be considered as one of the means to overcome this handicap but this had not been possible so far due to a variety of reasons.

147. Being single sectored and mono-crop production economies and vulnerable to natural disasters, these economies were also affected by the adverse movement of the international prices of their products. It was, therefore, encouraging that these Members had initiated the process of diversification and were now focusing on the services sectors as the engine of growth of their economies. India noted that, at present, there was a heavy dependence on the tourism sector, but efforts were underway to develop a vibrant financial services sector and an efficient information and technology sector. However, as pointed out in the Joint Report under reference, the efforts of these OECS Members to diversify into financial services sector had met with challenges from larger economies. Given the potential for development of financial services in the region, the OECS Members had suggested that more focused attention be given to this sector in the on-going services’ negotiations. In this respect, India wished to know how these Members intended to approach the services’ negotiations. It was also encouraging that the OECS Members were attempting to modernise and diversify their agricultural sector and hence India wished to hear more from these Members on their plans in this regard.

148. Referring to the Joint Report, India noted the public policy dilemma faced by the OECS Governments in the context of trade liberalization through the process of tariff reductions and tariffication of quantitative restrictions. While quantitative restrictions, meant for protection of the infant industries, were proposed to be tariffied by the end of 2005, the Governments faced the dilemma that such a move would considerably strain the governments’ financial resources since, given the narrow production base, most of the government revenue was dependent on international trade and transactions. In this regard, India commended the call by the Heads of Governments for a review of the fiscal regime of the OECS Members and for the examination of the possibility of implementing a system of value-added tax and requested the OECS Members to give details of the review process and the likely time-table for implementation of the value-added tax system.

149. India supported the request of OECS Members for special consideration being given to them taking into account their vulnerability and lack of capacity. India noted that the Joint Report of the Governments as well as the Secretariat Report clearly identified the technical assistance needs of the OECS Members. India supported this request of technical assistance and stated that this would enable these Members to effectively participate in the work of the WTO and to derive meaningful gains from the multilateral trading system for the welfare of their peoples.

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150. India was strongly encouraged by the good macro economic performance of the six OECS WTO Members under review and noted with satisfaction that in spite of domestic pressures, these Members had steadily taken steps to bring their trade regimes in line with the WTO rules. India hoped that this would be facilitated and encouraged by the WTO and its Member States. In this context, India supported the OECS Members’ call for strong support from WTO and its Member States for taking note of their concerns and extending adequate technical assistance. Finally, it hoped that with the support of the international community and as a result of the initiatives being taken by the six OECS Members, they would be able to effectively overcome their economic difficulties in the very near future.

151. The representative of Mauritius recalled that the TPR was mainly a transparency-exercise. In this regard, the level of attendance of the present meeting seemed to demonstrate that the OECS trade policies were totally transparent as only few delegations were seeking clarifications thereof. Although, it preferred not to interpret the low level of attendance as another form of marginalization of the small island-Members, Mauritius was disappointed that only few Members were present, and willing to listen.

152. Members currently engaged in discussions on competition policy would have understood the realities of competition policy from the perspective of six small islands, if they had attended the present meeting. Grenada had stated that: "in order to be internationally competitive and to reap the benefits of trade liberalization Grenada, as a developing country, was constrained by: (i) smallness and openness of its economy; (ii) vulnerability to natural disasters; (iii)  limited financial, human and technical resources; (iv) high rates of poverty and unemployment, and (v) lack of private sector to exhibit dynamism". These ideas were not taken up in other WTO debates.

153. The OECS were full-fledged WTO Members. Mauritius identified with most of their concerns, and believed that, if the WTO continued with the one-size-fits-all approach, these countries, like Mauritius, were six potential candidates for further marginalization.

154. Although, Mauritius fully shared Dominica's view that GDP per capita and the contribution of certain economic sectors to GDP could give a distorted and misleading picture of the actual economic situation on the ground, and of the development options available to these small island-States. Two logical steps forward were to be envisaged: (i) to revisit these indicators for the purpose of elaborating more appropriate indicators conveying not only the empirical circumstances but also the vulnerability of small islands; and (ii) to place firmly on the WTO agenda the vulnerability of the small island-States.

155. The defensive attitude shown by the OECS-Members in expressing their concerns resulted from the fear of lack of competitiveness and loss of trade preferences. The banana dispute had shown the implications of these issues.

156. In the on-going agriculture negotiations Mauritius was fighting for the survival of its sugar industry. This was also the case for the OECS. Mauritius supported the discussant's statement with regard to the granting of a waiver for the Cotonou agreement. Preferences granted by preferential agreements were insignificant from a world standpoint, but remained vital for the countries concerned.

157. This TPR exercise would fail, if it could not lead to the sensitization of the wider WTO Membership to the concerns of the small island-developing states. The low level of attendance of the present meeting justified, a redistribution of the WTO negotiating rights in favour of small Members as advocated by St. Lucia.

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158. The representative of Venezuela said that although the existing trade flow was not significant, Venezuela intended to further develop its trade relations with the OECS Members in spite of difficulties relating to means of transportation. In the last 20 years Venezuela's cooperation with the OECS had taken the form of, inter alia, the 1992 Agreement on Trade and Investment, which provided unilateral preferential treatment to the CARICOM as well as to the countries under review. These Members had also made efforts to be fully integrated into the multilateral trading system notwithstanding their limitations as small developing island countries. The WTO and, in particular its developed Members, had to provide necessary cooperation to allow OECS Members to successfully complete their reforms and development process in compliance with their WTO commitments.

159. The representative of Cuba recognized the efforts by the OECS Members in international trade, and was interested in increasing trade flow with the OECS, and strengthening Cuba's trade relations in enterprise as well as in government sectors.

160. Cuba was satisfied with the Economic Cooperation and Trade Agreement signed with the Caribbean Community (CARICOM) on 5 July 2000, involving the OECS and providing not only for the opening of markets for an important number of exports items, and for negotiations on a trade regime in services but also for investment and intellectual property promotion.

161. Based on the GSP treatment, and to stimulate their social and economic development, relatively less developed CARICOM countries did not apply reciprocity to Cuba; in the course of 2001, Cuba would shape-up a free trade arrangement with the CARICOM.

162. Better market access for goods and services originating from the OECS, and effective implement GSP to the small island economies had to be ensured. Cuba also pleaded for increased WTO technical assistance as well as for early granting of the waiver for the Cotonou agreement to allow these economies to gradually face the challenges of international trade. A solution to the issue of representation of the OECS in Geneva to allow them to closely follow and participate in the WTO activities had also to be found. Cuba hoped that the Secretariat would continue to support this process.

163. The representative of the Dominican Republic said that the OECS Members were signatories of the free-trade agreement between the CARICOM and his country, signed in 1998 and entered into force in 2001. Dominican Republic asked how the OECS were preparing for the entry into force of this agreement, which was a preliminary step to the entry into force of the FTAA.

164. As single-crop exporters, the ECS faced serious diversification challenges. The WTO rules did not facilitate such a diversification. Through waivers to the Agreement on Subsidies and Countervailing Measures (SCM Agreement), the OECS might be able to implement the appropriate policies to diversify their economies. The lack of representation in Geneva was another serious problem. The raising of sea levels as a result of the global warming was a problem which, although not yet tackled in the WTO, was of concern for all Caribbean tourism industry as it could lead to the flooding of their beaches. In the case of the Dominican Republic the tourism represented 30% of its foreign currency supply.

165. Like Mauritius and Cuba, the Dominican Republic believed that a waiver to the Cotonou agreement should be granted. The Domincan Republic recognized the leadership showed by the OECS Members in breaking down the telecommunications monopoly, a barrier to their competitiveness and to the emerging of new information sectors, and believed that the ECS would take better advantage of their high qualified human capital.

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166. The representative of the United States said that close historic relations, based on geographical proximity and strong commercial ties existed between the United States and the ECS. The Caribbean constituted the United States' "third border". Personal and family ties joined Americans with the Caribbean region, which could be seen in the region's extraordinary influence on the U.S. arts and popular culture as well as in the political ideals of democratic government and the open society that all of the ECS had come to share. Many of the more than 200 million tourists a year to OECS countries were from the United States.

167. Building on strong physical and human resources, the ECS had already achieved an average income of US$4,800 per capita. The economic growth rate in most of the OECS countries for the last three years had been 4% per annum. The U.S. supported the efforts made by the ECS to expand their economic base, enhance intra-regional economic integration and improve their citizen's standards of living.

168. The Bridgetown Summit committed the United States and the signatory Caribbean nations to a Plan of Action in trade and economic development, the environment, and justice and security. To help implement this plan the U.S. had established a Caribbean Regional Program (CRP), which recently opened offices in Bridgetown. The economic programmes foreseen in this Plan targeted telecommunications reform, information technology, trade reform, financial services, and export competitiveness for accelerated development. The CRP also recognized the special needs of these nations in dealing with hurricanes and tropical storms which periodically hit the Caribbean.

169. The U.S. Caribbean Basin Initiative (CBI) had been open to all of these countries since it was created in 1984. Designed to encourage economic revitalization and export diversification, the CBI provided unilateral free access to the U.S. market for most exports from eligible countries. Recently, CBI programme included more products and substantially greater market access for apparel; the benefits of this programme were the most generous of any U.S. non-reciprocal preferences. Building on the success of CBI, together with the OECS and CARICOM, the U.S. was working toward the prosperous, open and democratic hemispheric community envisioned in the FTAA. The United States was committed to completing the FTAA, and was pleased that the Eastern Caribbean States had been active participants in the process. At the Summit of the Americas in Quebec City, all 34 heads of State pledged to conclude negotiations on the FTAA no later than January 2005.

170. At this meeting, the U.S. President explained why free trade was one of his top priorities: "Free and open trade creates new jobs and new income. It lifts the lives of all our people, applying the power of markets to the needs of the poor. It also spurs the process of economic and legal reform. And open trade reinforces the habit of liberty that sustains democracy over the long haul". Over time, all countries would benefit from a generally stronger hemispheric economy that would increase opportunities for trade, investment and tourism throughout the region. This was particularly evident for the Caribbean region, as the natural bridge between the Americas.

171. The United States strongly shared with OECS Members the view that trade-related technical assistance was critically important in helping their countries implement WTO Agreements, negotiate further agreements, and integrate themselves more fully into the global economy and the multilateral trading system. The United States looked forward to working closely with the Secretariat and the Inter-American Development Bank in strengthen the OECS' capacity in these areas.

172. The OECS Members had managed to obtain a reasonable standard of living, but faced a challenge in achieving substantially higher rates of sustainable broad-based economic growth. Exports and tourism provided revenues vital for economic growth, while breaking into new export markets continued to be difficult. In tourism industry, where comparative advantages were apparent, further growth had been constrained by intense regional competition and the unmet needs for

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infrastructure investment. Long term international competitiveness had been reduced and high cost economies had emerged. The relatively high costs of transportation and telecommunication services had further constrained growth.

173. As the Secretariat report pointed out, two stated goals of the trade and investment policy of the OECS countries, namely: increased liberalization and ensuring that domestic suppliers can compete had been overcome by an array of policies that seemed contradictory. Most OECS Members had bound their entire tariff schedule, applied tariffs and customs taxes remained high. The CET applied rates of up to 20-35% for industrial products and 40% for agricultural goods. This tariff structure, further complicated by the extensive exceptions for each member, appeared ill-suited to most service-based OECS Members. Import licensing was required for imports of certain products and price controls were used by all OECS Members for a wide range of products. These practices created additional barriers to commerce and discouraged trade and investment.

174. The OECS Members had devoted considerable efforts and resources trying to attract foreign investment in the tourism sector. While they had all made commitments under the GATS, in particular in hotel construction and management, these commitments needed to be expanded in the tourism sectors as part of the effort to attract investment. While most of the OECS Members had recently taken steps to enhance competition in the telecommunications sector by ending the monopoly in the provision of basic services, commitments in this and other service sectors should be expanded further to attract investment in these areas. Tariff reductions on goods related to these industries would further enhance investment potential.

175. Observance of WTO provisions could help the OECS in making necessary reforms and in better utilizing trade to foster growth and development. Making the changes necessary to implement their WTO obligations would help them benefit more from the multilateral trading system. Specifically, the OECS had lagged behind in making their WTO notifications and had not incorporated WTO rules fully into their domestic statutes.

176. Although the degree to which OECS-WTO Members had amended or introduced domestic legislation to reflect the TRIPS Agreement varied considerably, no country had completed the process. Another area that required improvement was transparency in government procurement.

177. The OECS Members had benefited considerably from intensive participation in international trade, which had allowed their tourism sector to grow. The United States welcomed the use by developing countries of their physical and human resources to achieve such results and supported and encouraged the OECS Members to pursue trade liberalization efforts using WTO provisions and obligations as a framework.

178. The representative of Jamaica said that the presence of six Ministers, demonstrated the importance the Caribbean region attached to their WTO membership as well as to its consequences and implications. Jamaica, like the OECS, was part of the CARICOM, and fully shared their view of the importance of the WTO for the Caribbean region as well as for individual and collective trade and economic prospects.

179. Regarding the Secretariat Report, Jamaica would have hoped that the particular circumstances of the OECS Members would have received more nuance treatment in some areas. Some of the characteristics identified in the OECS Government Reports and the Secretariat Reports begged for a policy response recognizing the special characteristics and vulnerability of the small economies. A primary objective should be to ensure that, in terms of trade rules, Members take into account the highly open nature of the OECS economies; their extremely high levels of import penetration, on average 68.4% of GDP; the large and persistent deficits in external current accounts; their high

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dependence on trade taxes as a source of revenue; their severe diseconomies of scale and scope, applicable to production and trade and to administration as well as to their narrow range of domestic production and limited opportunities for diversification; volatility of income and earnings; resource constraints in negotiating and implementing agreements, including the lack of representation in Geneva; and susceptibility to and disproportionate economic impact of natural disasters. In the light of these circumstances, Jamaica believed that the efforts by the OECS Members to participate in the multilateral trading system, and to meet their WTO commitments deserved the highest commendation.

180. The situation of these countries required renewed efforts by the WTO to address the constraints cited through measures anchored in the principle of special and differential treatment and specifically directed towards meeting technical assistance and policy-related needs.

181. The Secretariat Report (para. 61) stated that: "The tariff structure is firmly based on an import substitution model ill-suited to most OECS Members given that their economies are service based and import intensive." While it appreciated and understood the disadvantages associated with traditional import substitution policies, Jamaica noted that imports already accounted for almost 70% of the OECS GDP on average, and thus the existing tariff structure rather than encouraging active import substitution seemed to merely facilitate the retention of a very narrow and minimal base of domestic goods production. The alternative clearly would be to have economies totally devoid of any goods output and totally dependent on tourism and in some cases one or two other service industries. Jamaica wondered what this might mean for continuing or even increased vulnerability. Jamaica therefore suggested that the special circumstances of small economies, typified by the OECS, be taken into account in the future.

182. Regarding St. Lucia's statement, did the dangers of the one-size-fits-all approach, Jamaica noted that the WTO counted among its Members a major player with a population of 275 million, with a GDP of US$9,000 billion, and a country like St. Kitts and Nevis, which registered a population of 44,000 and a GDP of US$305 million. Jamaica therefore believed that, under such circumstances, Members had an obligation to reflect seriously on the meaning of the term "level playing field" in the rule-making process.

183. The representative of St. Lucia said that the OECS had hoped to see a larger attendance at the TPR meeting. He added that as mono-crop economies, the OECS shared Mauritius' views with regard to the negotiations on agriculture. He noted also that the Secretariat had initially erred in computing GDP per capita of the OECS; although the error had been corrected (WT/TPR/S/85/Corr.1) this had nevertheless led to the assertion that these economies were among the better-off developing countries. The OECS faced the challenges of, inter alia, extreme smallness, massive structural unemployment and poverty, and unstable and declining earnings from their principle exports. Therefore the OECS were not better-off but rather among the most vulnerable and marginalized of the developing countries. Consequently, without special recognition of their difficulties and accommodation of their constraints, the OECS would not be able to participate effectively in the global trading system. The OECS Members hoped that this TPR would help not only the OECS Members to appreciate that they were part of the global trading system but also other WTO Members to take recognisance of the special circumstances the OECS faced.

184. The Chairman said that, based on his experience, the level of attendance of the present meeting was normal, and that major trade players, representing two thirds of world trade, were present. With regard to the issue of representation of the OECS in Geneva, discussions had taken place with the Director-General and the issue was under consideration by the Secretariat. He suggested that the Secretariat take into account the Geneva Foundation as a possible partner when considering possible solutions to this issue.

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V. REPLIES FROM THE REPRESENTATIVES OF THE OECS-WTO MEMBERS AND ADDITIONAL COMMENTS

185. The Chairperson invited the representative of Grenada, speaking on behalf of the OECS-WTO Members, to focus his responses on three main themes: (i) economic environment; (ii) trade policies and measures; and (iii) sectoral policies and measures.

(i) Economic environment

186. The representative of Grenada, speaking on behalf of the OECS-WTO Members, said that the six OECS Members varied in population from the smallest St. Kitts and Nevis with a population of 44,000 to the largest St Lucia with a population of 144,000. The total population of the OECS was 540,000.

187. Besides being small the economies remained highly vulnerable to the effects of climatic conditions and external shocks; movements in the exchange rate between the pound sterling and the U.S. dollar had significant effects on the earnings of the banana and sugar production of the OECS members. The same currency fluctuation had severely affected tourists arrivals from the United Kingdom. Climatic conditions affected every sphere of economic activity as well as the infrastructure as it was common for hurricanes to devastate the social and economic infrastructure. For example, in 1998 the only airport in St. Kitts was completely destroyed, while in Antigua and Barbuda over 60% of its tourism plant was also destroyed. In many cases hurricanes had led to the loss of almost an entire year's GDP, and to the constant need to rebuild the infrastructure of the economies resulting in apparent economic growth. However, the growth resulting from infrastructure rebuilding was without economic advancement while the rebuilding effort had to be financed largely by debt, which created an additional debt burden on the OECS economies. There was therefore no better case for debt relief.

188. All of the above clearly demonstrated the OECS acute vulnerability as, unlike larger countries that suffered similar natural disasters, the OECS economies, being smaller, were less resilient. In larger countries the damage from natural disasters could be localized but in the OECS case the damage was country wide, and depending on the expanse of the disaster, region wide.

189. The OECS countries remained also highly dependent on a single economic activity, whether banana or sugar production, in some cases, or tourism in others. Strenuous attempts were currently being made to diversify the economies with attention given to the services sector. The OECS members had also attempted to diversify agricultural exports but had met with severe difficulties in penetrating large developed-country-markets. In turn, this had led to the disenchantment of farmers and consequently had frustrated the process of agricultural diversification in the region. Nonetheless, the OECS countries had continued with the process of agricultural diversification and would seek assistance from WTO Members in overcoming sanitary and phytosanitary as well as marketing barriers to product and market diversification.

190. The fiscal account of all the OECS members was characterized by a heavy reliance on international trade taxes. On average, over the period 1994-99, international trade taxes had accounted for 82.84 % of total tax revenue in the OECS Members. The reliance on international trade taxes reflected the smallness of the economies and the consequent limited scope of taxation. Taxable capacity was simply limited and this increased the vulnerability of these economies. The heavy reliance on international trade taxes had posed an acute policy dilemma for all of the countries of the OECS. On the one hand they were committed to the progressive liberalization of trade in the form of tariff reductions, on the other hand tariff reduction eroded the tax base upon which they relied for financial resources for public administration and economic management.

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191. As a result of this fundamental policy dilemma, all of the OECS had had to adopt a gradual posture to further reduction in the external tariffs. Given the structure of the economies and their limited taxable capacity, there was a practical limit to the reduction of tariffs and, until the OECS found alternative means of raising the required revenue for public administration and macroeconomic management, tariff reductions would be practically constrained. In fact, most of the economies that had already reduced tariffs had had to resort to measures that would compensate for the decline in revenue.

192. Faced with this policy dilemma the OECS Members had begun studying the feasibility of introducing a value-added tax. A regional committee comprising representatives of the OECS Secretariat, the Eastern Caribbean Central Bank (the central bank of the OECS), and the Caribbean Development Bank had been established and had begun work in this area. In addition, through the Eastern Caribbean Central Bank the economies were embarking on a programme of fiscal reform, which included matters related to expenditure management and control (both current and capital), revenue generation (including tax and non-tax revenue) and financing. Best practices with respect to the inland revenue departments, customs, and other agencies of the public administration had been drafted. The attempts at fiscal reform had been generously supported by Canada. The OECS hoped that other WTO developed-country Members would demonstrate similar generosity.

193. The OECS had traditionally granted concessions to investors. This was absolutely necessary to attract investment to spur on economic growth, increase employment, and reduce the level of existing poverty in their economies, a fundamental policy objective of the OECS governments. Suggestions had been made about the apparent lack of consistency between the main trade and investment policies of the OECS. However, on closer examination this inconsistency was more apparent than real. The basic objective, as correctly stated by the WTO Secretariat: "is to enhance living standards through a more liberal trade environment in which they can compete".

194. The OECS' experience had been that no investment flows were attracted to the economies as a result of a reduction in tariffs, in fact the opposite had been experienced. Whatever investment flowed to the economies, resulted directly from the granting of incentives to investors. Had there not been these incentives, the OECS felt that investment would not have occurred and unemployment and poverty would no doubt have been further aggravated.

195. The free zones in the OECS economies were duty-free regions within the customs territories set aside for manufacturing and other value-added industries solely for exports outside of the CARICOM region. The goods entering or originating in the free zones were not permitted to enter the customs territories of the OECS without the payment of relevant duties.

196. The OECS member States were pursuing deeper regional and hemispheric arrangements as a means of facilitating their integration, on a sustainable base, in the multilateral trading system. Among the OECS member States there was an attempt to establish a single market and economy, working on the base of a common currency and the partial similarities of their economies. A number of activities were also conducted on a joint basis, i.e. common approaches to education reform in the context of human resource development, the development of the telecommunications sector, and the management of the environment especially in the context of tourism development.

197. The countries of the OECS pursued deeper regional and hemispheric trading arrangements as a mechanism for engagement in the global trading environment with the full recognition of the peculiar difficulties faced by their economies. Thus, in all of their external negotiations, the OECS had consistently argued for special and differential treatment as a basis for their participation in any trading arrangements. This was the case for both the CARICOM agreement, which contained explicit provisions recognizing the peculiar circumstances facing the OECS economies, and for the agreement

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with the European Union, which provided for preferential treatment to the OECS. Other bilateral arrangements between the CARICOM and other hemispheric countries contained provisions to take into account the special circumstances of the economies whereby the OECS member States were accorded special and differential treatment.

198. The OECS Members had been severely handicapped by a lack of institutional capacity, as result of which they had not been able to fully implement all their WTO obligations, and were lagging behind in the WTO notification requirements and in the implementation of some of the WTO Agreements. However, the lack of institutional capacity raised the issue of technical assistance to the OECS, which had already been raised on several occasions. A special programme of technical assistance should be developed to meet the needs of the OECS. Such a programme should include, inter alia, capacity building in the areas of customs administration, legal drafting, trade policy formulation and management, standards, and trade negotiation.

199. The OECS were aware that efforts were being made to launch a new round of negotiations. In this regard the OECS could not justify their unequivocal support to this initiative unless the problems of implementation of the Uruguay Round Agreements and Decisions, raised by developing countries, were satisfactorily addressed and resolved. It would be futile to participate in a system whose regulations and procedures turned out to be onerous and burdensome, retarding economic development rather than giving a fair opportunity to all to enjoy the success of the new world trading system that was envisaged. At the closing of the Uruguay Round, Members had been told by the WTO Director General that everyone would benefit from the liberalization process. However, the experience of the OECS over the last six years had been otherwise. They had not been beneficiaries of the trade liberalization process. Instead, they might have been made worse off.

200. The discussant regretted the low attendance by other WTO Members to the meeting. The busy schedule of meetings in Geneva, particularly other WTO meetings, was likely to be the explanation of the limited attendance to TPRB meetings. Considering the limited resources of a number of Members, it would be important to envisage a way to improve the scheduling of meetings to foster direct contact between the revised countries and other representatives to the WTO. The participation in TPRs of WTO staff from other divisions should also be encouraged to improve the understanding among the Secretariat of the problems specific to the countries under review.

201. She said that the OECS delegations had not had the opportunity to experience to a great extent the multilateral framework in Geneva, nor to attend other organization's meetings, i.e.  the ILO International Labour Conference where issues of primary importance to the OECS relating to health, employment, and agriculture were under discussion. She proposed that small delegations receive written questions in advance, and maximize their presence in Geneva by visiting other organizations and meeting with officials of other WTO Divisions, who could also attend TPRs meetings.

202. This TPR exercise had helped the OECS Members to better spell out their technical assistance needs: St. Kitts and Nevis had stressed the administrative requirement necessary to implement the TRIPS Agreement, while Antigua and Barbuda would have to employ a consultant to bring its legislation into conformity with the WTO Agreements. This was a disaster.

203. The representative of India said that many of the points stressed by the OECS applied to other developing-country Members. Their statement should therefore be circulated to all Members.

204. The representative of Haiti shared the assessment and concerns expressed by the OECS regarding the forthcoming round of negotiations. Implementation-related issues had to be tackled and resolved. Notwithstanding the scarcity of their resources, the OECS were an example that governments could work for the welfare of their population, and could achieve a great deal. Special

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attention had to be paid to small countries with highly vulnerable economies; Mauritius had pointed out that if the problems faced by small economies continued to be ignored, the number of LDCs would increase. Haiti was an LDC in the Caribbean region. Therefore, it pleaded, like the OECS, for technical assistance and for differential treatment be granted to these economies.

205. The representative of Cuba appreciated the ECS' efforts and shared all their concerns. Technical assistance was necessary. However, decisions needed to be taken to support the OECS efforts to fully integrate the multilateral trading system. Cuba considered that special and differential treatment had to be applied, and that the Doha WTO Ministerial Conference would provide an exceptional opportunity to show the necessary political will in this regard.

206. The representative of Barbados had any doubt about the difficulties that small countries experienced, and hoped that Members would better appreciate the OECS difficulties. A work programme should be developed for small economies under the auspices of the General Council. As a result of the TPR exercise, developed countries should become aware that special and differential treatment for small developing countries could not be limited to technical assistance, a promise and seldom a reality. Longer transition periods were also needed if small economies were to benefit economically from technical assistance.

207. The representative of the European Union said that all the points raised in this TPR would be reported in detail to Brussels. The EU reiterated the need for better scheduling of WTO meetings.

208. The representative of Mauritius said that her delegation, like the EU, wished to stress that the Secretariat could not control nor was it responsible for attendance of meetings. Mauritius wished to convey, through the Chairperson, the suggestion that the Trade Policy Reviews be rethought so as to achieve more active participation of Members. The presence of six Ministers warranted a greater presence. Mauritius appreciated that delegations disposed of limited human resources. However, there was a need for collective thought of what could be done to improve attendance. She agreed with the Chairperson that about two thirds of world trade was present. However, the QUAD trade partners represented only four votes in the WTO as opposed to six OECS Members. The issue was not only in terms of share of world trade but also in terms of votes.

209. The representative of Jamaica said that the attendance of the TPR meetings had not been low, when larger and more influential Members were under review. This was one of the problems that small countries encountered in the WTO, although the WTO was of equal importance, if not more important to small countries. Trade for the six OECS Members represented 85% of their GDP on the average, and was therefore vital.

210. The Chairperson said that in his view, if the low attendance of the TPR meetings continued the interest of Ministers to attend would diminish, and as a result the TPRs would lose their influence on trade policies of the countries under review. The WTO Chairpersons, including the Chairman of the General Council, would discuss the possible remedy to improve the attendance of the TPR meetings, i.e. avoid the overlapping of WTO meetings. In addition, meetings in the WTO, held within the preparatory process of the Qatar Ministerial Conference, tended to derail all other processes.

211. The representative of Canada said that the TPR process was larger than the TPR meetings. Every point raised in the present meeting would be taken into consideration in the formulation of Canada's technical assistance programme in the Eastern Caribbean region.

212. The representative of India echoed the sentiments expressed regarding the requirement of the presence of Members in this important TPR exercise. India had made such an effort. India also

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proposed that the Secretariat schedule the TPR meetings in the periods when no other meetings were planned and that the opening statements of countries under review, both on the opening day and under the three themes on the second day, be circulated for information of Members.

213. The representative of the Secretariat said that those who had been associated with the trade policy review process over the last couple of years had noticed that there had been a significant change in the way the reports were presented, and the way they were prepared.

214. In this instance, there had been five separate missions to the OECS, and two fully funded seminars to help in the capacity-building process. The use of Trade Policy Reviews as part of the capacity-building exercise was appropriate, and was increasing; for example, the Secretariat would hold a full one-year programme in the preparation of its Trade Policy Review of Haiti.

215. The association of trade policy review exercise with technical cooperation was being strengthened: a staff member of the Technical Cooperation Division had been involved in the OECS TPR process; the Technical Cooperation Division would also be involved in a number of TPRs planned for 2001-02, i.e. Haiti, Uganda and Malawi. Furthermore, a joint programme was under way whereby the Trade Policy Reviews would become the leading instrument for the identification of technical cooperation needs and priorities, and subsequently for their delivery. In this framework, a joint seminar was organized for four countries in Kampala (Uganda).

216. Statements made in the TPR meetings as well as the Reviews themselves were distributed widely within the Secretariat, a meeting was held between the delegations of the countries under review and the Director-General and a detailed report of each TPR meeting was prepared for the DG, who attached particular importance to TPR follow-up as a means of identifying Technical Cooperation needs.

217. With regard to the matter of scheduling WTO meetings, as raised by India, he recalled that TPRB meetings were scheduled a year in advance, and were usually the first on the meetings calendar. Pursuant to the WTO guidelines on arrangements for scheduling of WTO meetings 1, the need to avoid overlapping with the existing schedule of meeting should be taken into consideration when convening WTO meetings (including informal meetings). Unfortunately, these guidelines were sometimes observed in the breach; the attention of the Director-General had been drawn to this issue. The Secretariat had made efforts to have those rules implemented, i.e. the meeting for the TPR of Gabon scheduled for 25 and 27 June 2001 had been rescheduled to 26 and 28 June 2001 to avoid overlapping with a senior officials meeting of the General Council to be held on the 25 June 2001.

218. Attendance at TPR meetings had increased over the last two or three years. Further consultations would be held on this issue, including between the Chair of the TPRB and the Chair of the General Council, and between the TPR Division and the Director-General.

219. Regarding dissemination of results of the OECS TPR, the Chairman's concluding remarks would become part of the press release and be published on Internet, becoming accessible to the world. The TPR documents would be published and widely distributed, free copies made available to delegations, and then put on sale worldwide.

220. Pursuant to the Rules of Procedure for the TPRB, which provided that written questions be made available a week in advance to allow time to prepare replies, the Secretariat requested Members to submit their written questions at least a week in advance of the meetings. The one-week deadline was respected by certain delegations but most submitted their written questions only one or two days before the meeting.

1 WT/L/106.

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(ii) Trade policies and measures

221. The representative of Grenada, speaking on behalf the OECS Members, said that the OECS had not yet been able to formally incorporate all WTO obligations into domestic legislation as a result, inter alia, of the extensive and complex requirements of the Uruguay Round Agreements that had overburdened their legislative agenda, and the lack of capacity in legal draftsmanship. Nonetheless, the OECS continued to make every reasonable effort to implement their WTO obligations.

222. While there was a schedule for the implementation of a phased reduction in the CET, some OECS countries had had to derogate from the schedule primarily as a result of revenue considerations. However, efforts were being made by the OECS members that had not yet implemented phase IV of the scheduled reduction to do so in the future. When acceding to the WTO, some OECS Members, in response to pressure from some developed Members, had bound their tariffs at very low rates. Questions had been raised regarding the complexity of the CET in relation to the OECS tariff bindings. The OECS considered this as an issue that posed obstacles to deepening the process of regional integration. Some of the OECS had moved to implement the transaction value method of customs valuation. The experience so far had been one of chronic under-invoicing resulting in the loss of significant revenue to the governments. OECS Members that had not introduced the transaction value method were taking due cognisance of the negative revenue implication for those that had applied this method. This was one of the identifiable areas in which the economies of the OECS would require technical assistance in order to enhance their capacity to apply this method without suffering the loss of revenue in the process.

223. The OECS, as part of the CARICOM arrangement, were also in the process of adopting a common approach to the harmonization of standards, which would be achieved with the establishment of the Caribbean Regional Organisation for Standards and Quality (CROSQ). The standards bureaux of the OECS had met in St. Lucia in the week of 1 June 2001 to begin the process of harmonization. The board of directors of CROSQ would comprise all heads of bureaux in the region. In the area of government procurement the OECS, again as part of CARICOM, had agreed to examine the possibility of introducing a government procurement regime within the context of the CARICOM single market and economy. It should however be noted that most of the sizable procurements were already subject to strict rules by virtue of the fact that they were externally funded; procurement of supplies i.e. toilet paper, pens, pencils and other office stationery was on a tendering basis, publicly advertised, and subject to a strict tendering process. However, given the small size of the OECS countries Members, these procurements were minimal in terms of value. With respect to export measures, the OECS were in the process of reviewing all such measures as part of the exercise aimed at articulating a comprehensive development strategy. Discussions and consultations had already taken place on the development strategy, and included international financial institutions and donor countries. Intellectual property matters were currently under review in the WTO, some OECS Members had already undertaken the IP review. By the end of 2001, all OECS members would have completed such a review.

224. The representative of India said that the difficulties encountered by the OECS countries in implementing the transaction value method of customs valuation were faced by a number of developing countries, including India. India was in the process of looking for its own solution. Some developing countries had been granted a one- or two-year waiver by the Committee on Customs Valuation to implement the transaction value method; the OECS might wish to consider this option.

225. The representative of the European Union said that in the Committee on Market Access, Members were attempting to complete the Integrated Data Base (IDB) containing tariffs and trade data by Members. In that process, regional reviews to identify technical problems faced by

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developing countries had been undertaken. The OECS Members could agree for the Secretariat to transfer trade and tariff data collected in this TPR exercise to the IDB. The complex tariff policy adopted by the OECS raised the question of whether a more simplified, transparent, and a uniform tariff structure including less reliance on other duties and charges would be more advisable.

226. The representative of the United States said that, like Canada, the TPR had involved officials from the U.S. capital, who were interested in this TPR proceedings. The United States looked forward to receiving the OECS replies under this section as well as to its written questions.

227. The delegate from St. Lucia (Ms. K. A. Brown) said that the OECS had taken note of the EU's statement. With regard to the tariff structure, the sub-regional, regional, hemispheric, and international integration processes, which would take the OECS into the multilateral trading system, provided for a certain degree of complexity in tariff structure. If the WTO rules were more flexible, and took into account the vulnerability and particular situation of the OECS market structure, that would facilitate the adoption of a more transparent system. With regard to the multiplicity of layers in the OECS tariff structure, the OECS were only attempting to become more competitive towards sustainable development in the framework of the multilateral trading system. With regard to data and tariffs data, the OECS would supply relevant data in due course.

228. The delegate from Dominica (Mr. Irwin Laroque) said that data on the CARICOM tariffs were provided to the Inter-American Developing Bank. Dominica drew Members' attention to the importance of the tariff in generating revenue for basic social services. The complexity of tariff structures also derived from the differences and levels of development among the CARICOM countries.

(iii) Sectoral policies and measures

229. The representative of Grenada, speaking on behalf of the OECS Members said that the OECS Members were aware of the necessity to diversify their agricultural production to reduce their reliance on bananas or sugar, which were subject to declining prices and whose future had become increasingly uncertain. However, finding viable new crops posed particular challenges related, inter alia, to OECS climatic conditions and difficult terrain, and the small size of the OECS domestic market: agricultural production had to be directed at external markets, although valuable linkages with the tourism industry were possible. As small island developing countries, the OECS Members would not necessarily be able to produce adequate volumes to benefit from economies of scale, which were indispensable to be internationally competitive. As a result, even if the OECS could identify crops that they could produce successfully, access to foreign markets on a satisfactorily preferential basis was necessary in order to be competitive. Diversification would only be successful if undertaken alongside existing sugar and banana production, including further development of agro-processing activity. The difficult issue of technical barriers to trade needed to be resolved.

230. The manufacturing sector in the OECS was very small and efforts were being made to enhance its further development. The OECS had also sought to diversify beyond the agricultural sector, and had paid particular attention to services including the financial and information technology sectors.

231. The services sector, which was an area that the OECS hoped to further develop in the future, had grown to be of added significance to their economies. The OECS had already liberalized the telecommunications sector as the first major step towards its development, and recognized that telecommunications served as an industry itself and a platform for other industries. Through this strategic interpretation of telecommunications, the OECS had moved decisively ahead with liberalization. In some economies new licences, e.g. for the provision of Internet access and the

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establishment of call centers, had already been issued for other service providers. The OECS hoped that these steps would start the process of competition in the telecommunication sector, and believed that there would be no turning back from this approach.

232. The development of financial services was also being actively pursued; in this connexion legislation had been passed in most of the OECS economies to prevent the inappropriate use of the offshore financial sector, and efforts were being made to develop stronger forensic accounting capacity to detect inappropriate activities.

233. The OECS Members asserted their sovereign right to establish national tax regimes that did not violate multilateral obligations they might have assumed. They emphasized the need for global economic coherence in policies promoted by financial and trade organizations and institutions, most notably the OECD, in facilitating the progressive integration of vulnerable, small island developing States into the global economy. In this regard, the OECS drew attention to the OECD harmful tax guidelines, which were not only an affront to their national sovereignty but also posed a serious threat to the development of the OECS service sector while undermining efforts towards economic diversification. Therefore, the OECS welcomed recent positive statements by the United States and hoped that other OECD countries would follow.

234. The OECS looked forward to a future when they could engage in economic activities which offered prospects for a competitive advantage. This would significantly assist in achieving their basic policy objective of enhancing living standards through a more liberal trade environment, in which the OECS could compete.

235. The discussant noted that the UNCTAD, the IMF were present, but not the OECD.

236. The representative of Canada said that, through the Trade Policy project, her delegation supported capacity-building activities relating to agriculture and services. Canada wished to work jointly with the Secretariat so as to avoid duplication.

237. The representative of India appreciated the prompt replies provided by the OECS in relation to their sectorial policies.

238. The delegate from St. Lucia (Ms. K. A. Brown) said that with regard to the EU's question, the OECS requested that the necessary time be granted for the information to be provided to the IDB.

239. The representative of St. Lucia, speaking on behalf of the OECS-WTO Members said that the first TPR exercise had provided the OECS Members an opportunity to express their concerns. The OECS were making a special effort to comply with their WTO obligations. However, as small countries they faced particular problems.

240. The OECS were dependent on customs duties to generate revenue, which was needed for balance-of-payments purposes, i.e. to ensure a capital account surplus to take care of social infrastructure. In reducing tariffs there had been a reduction in the OECS revenue-earning capacity. As a result, it had become difficult to provide a satisfactory explanation to the civil society on benefits deriving from WTO membership. Nevertheless, the OECS Members would pursue efforts to be an integral part of the WTO.

241. The experience in bananas had not been encouraging. The OECD initiative on harmful tax practices was destabilizing, and was an offence to the OECS sovereignty. The multilateral trading system could not discriminate against the less fortunate. Developed Members reaction with regard to

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granting of special and differential treatment seemed disproportionate. The OECS thanked the representatives of Mauritius, India, Cuba, the Dominican Republic, and Canada for their support.

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VI. CONCLUDING REMARKS BY THE CHAIRPERSON

242. We have had two days of frank and constructive discussion on the OECS-WTO Members' trade policies and practices. Jointly and individually, these Members made forceful presentations of the special challenges they face due to their small size and populations, diseconomies of scale, high infrastructure and social costs, and vulnerability to external shocks. As a result, and despite the number of Members attending the meeting itself, I am certain that all WTO Members will have gained a better appreciation of, and will no doubt pay greater attention to, the problems and difficulties of these economies. Members noted that, even given such difficulties, OECS-WTO countries had shown strong economic performance in recent years. However, the Members under review pointed to the still significant number of people living in poverty and the pressing need to address this problem.

243. Many WTO Members attributed much of the overall economic accomplishments of the OECS-WTO countries to their general openness and historical participation in international trade, a well educated labour force and stable, well-functioning institutions. WTO Members encouraged these countries to continue in their path to diversify their economies, particularly with a view to reducing their vulnerability. Some WTO Members considered that continued emphasis on developing the service sector offered the best growth opportunities, while other Members considered that agriculture would, and should, remain a key sector of the economies.

244. Members of this Body recognized the efforts made by OECS-WTO Members to further liberalize their economies, particularly through tariff reductions in the framework of their participation in CARICOM. Concerns were expressed, however, with respect to the persistence of quantitative restrictions, wide-spread import licensing requirements, and the use of safeguard measures. Members also noted that, although reduced, tariffs remained relatively high, but took the point that this was mainly for revenue purposes; some suggested that a more simplified tariff structure might be more appropriate. Some Members also suggested alternative revenue sources, with a Member proposing the adoption of a Value-Added Tax, the feasibility of which OECS countries are already studying. Members also invited OECS-WTO countries to lower their tariff bindings to rates closer to the currently applied rates, and thus improve the predictability of their import regimes.

245. Members were appreciative of the effort and progress made by OECS-WTO countries to meet their WTO notification requirements and bring their domestic legislation into line with WTO Agreements. Several Members also encouraged the countries under review to improve their commitments in the WTO with respect to services, putting them at a level comparable with their current, relatively liberal practices. Concerns were voiced with respect to the negative economic effects of being singled out as tax havens in other fora.

246. This Review has made clear the extent to which complying with WTO rules is constrained by limited human resources. In this regard, I believe this review has played an important role in helping OECS-WTO countries conduct their own internal reviews of the trade-related policies and practices they follow, and of the resources at their disposal to carry them out. Although, as a result, means might be found to make a more efficient use of those resources, including through ongoing initiatives for greater regional cooperation, the inescapable conclusion is that at this juncture the countries under review need the support of the international community to participate more effectively in the multilateral trading system. Acknowledging this, there were widespread expressions of support from Members for additional technical assistance to OECS-WTO countries. I hope the work undertaken throughout this review to identify the trade-related needs of these countries will lead to concrete steps to address these, including through a permanent presence in Geneva.

247. Several Members were understanding of the request by the OECS-WTO Members for special consideration for them, anchored in the principle of special and differential treatment granted in the

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WTO to developing countries. While noting the problem posed to OECS-WTO Members by the erosion of preferential margins, some Members expressed support for an early granting of the waiver from WTO rules for the Cotonou Agreement.

248. Specific questions were also asked the OECS-WTO Members on:

compliance with WTO notification requirements; improvements to customs valuation and administration; import licensing procedures; use of quantitative restrictions; administration of price controls; binding of "other duties and charges" in the WTO; export assistance and promotion activities; harmonization of standards and standards bodies; the role of commodity boards; transparency in government procurement; protection of IPRs; investment incentive schemes, and their coverage; and legislation, access conditions and incentives in specific service sectors.

249. Apart from the questions addressed to the OECS-WTO Members as a group, specific questions were directed to individual OECS-WTO countries, including:

to Antigua and Barbuda, on incentives schemes, free trade zones, imports of reconditioned vehicles, telecommunications and the functioning of the International Ship's Registry;

to Dominica, also on incentives schemes; to Grenada, on tariff bindings and the application of the general consumption tax; to St. Kitts and Nevis, on labelling standards and the functioning of the International Ships

Registry; to St. Lucia, on investment limitations in certain sectors; and to St. Vincent and the Grenadines, on incentives for non-hotel tourism activities.

250. Members appreciated the oral and written responses and explanations provided by the delegations of the OECS-WTO countries.

251. We look forward to receiving answers on still outstanding questions.

252. In conclusion, it is my sense that this Review has amply fulfilled its main objective of assessing in a collective manner the trade policies and practices of the OECS-WTO Members, particularly in the context of their development needs and objectives as well as of the external environment. The Members under review reaffirmed their full commitment to the multilateral trading system, and the presence of the six Ministers has been strong testimony to this. But we have also been made aware of the problems and difficulties hindering the fuller participation of the OECS-WTO Members in the system. Addressing these issues could be important for a greater participation of OECS-WTO Members in the multilateral trading system, which would not only help the Members reviewed take greater advantage of trading opportunities to foster growth and development, but also enrich and be of benefit to the system as a whole. In this respect, I am convinced the WTO offers the best framework in which these Members can participate as equal partners with larger economies in the global market.

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ANNEX

DRAFT RESPONSES PROVIDED BY THE OECS-WTO MEMBERSTO ADVANCE WRITTEN QUESTIONS

RESPONSE TO QUESTION FROM HONG KONG, CHINA

B. Standards and Technical Regulations (WT/TPR/S/85, p. 29, paras. 113-116)

We note that regional standards developed by the CARICOM Common Market Standards Council (CCMS) are not mandatory. We also note that there is no OECS-level common policy concerning standards or technical regulations, and particularly technical regulations are issued exclusively at a national level. We are interested in knowing if the OECS has any plan for harmonisation of standards and technical regulations in order to facilitate international trade.

Yes. This is work being done under CARICOM Single Market and Economy Programme. At the CARICOM level there is work on the harmonisation of standards through the CARICOM Common Market Standards Council (CCMSC), which is to be replaced by the CARICOM Regional Organisation Standards and Quality. The CCMSC is responsible for the region's cooperation on standards management, which involves the development of regional standards and the harmonization of standards.

REPONSE TO QUESTIONS FROM THE EUROPEAN UNION

Trade Policy Regime

(2) Policy Objectives and International Relations

(i) World Trade Organization

We note that OECS Members, although committed to multilateral rules and liberalising trade, still have doubts about the benefits of participating in the multilateral trading system within the WTO framework. With view to a WTO New Round the EU has taken such concerns into serious consideration. It has modified its strategy to better meet the interests of developing countries and to convince them about the need and the benefits of the multilateral system. We would be very interested if the OECS Members could specify what subjects they would like to see addressed in a New Round of trade negotiations and if they have additional suggestions on how the concerns of countries like the OECS could be best reflected in a New Round.

We welcome this statement that the EC has modified its strategy to better meet the interest of developing countries and to convince them about the need and the benefits of the multilateral system. We seek clarification with regard to particular changes in policy adopted by the EC which addresses the needs of developing countries, particularly the most vulnerable such as the OECS.

We are aware that efforts are being made to launch a new round of negotiations. We cannot justify our unequivocal support to this initiative unless we first iron out the problem which have been plaguing us since the end of the Uruguay Round. It would be futile to participate in a system whose regulations and procedures turned out to be onerous and burdensome, retarding economic development, rather than giving a fair opportunity to all to enjoy the successes of the new world trading order that is envisaged.

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The mandated negotiations in services and agriculture address principal sectors of importance to us. In order to alleviate our growing marginalization in the multilateral trading system, our inherent vulnerability as Small Island Developing States (SIDS) must be recognized and addressed.

(paras. 35, 41, 42, 43) The Report states that meeting WTO notification requirements and amending national legislation to conform to the WTO Agreements, albeit with considerable differences among the OECS countries, has been somewhat slow partly due to human-resource constraints and institutional limitations. At the same time the OECS-WTO Members have entered into or are in the process of entering into a number of regional agreements. Is there any analysis on the economic impact of these initiatives? What are consequences in terms of human resources and technical capacities in key ministries and needs for capacity building?

Yes, some work has been done, but no studies on the economic impact of these agreements have been undertaken.

OECS Members are engaged in simultaneous negotiations in several fora which pose monumental challenges given our capacity constraints. All OECS-WTO Members are non-resident, without resources in Geneva and very limited human resources and technical capacity. OECS Members have been unable to participate effectively in the multifaceted WTO process and to fulfill our commitments within the timeframe specified in the Uruguay Round Agreements (URAs). The extensive regulatory and notification requirements of the URAs impose a heavy burden on our already over stretched administrations. The provision of technical assistance measures and enhanced flexibility in WTO rules are imperative if we are to successfully integrate to multilateral trading system.

(2) (ii) Regional agreements

(para 50) We would be interested to know how far the OECS-WTO Members progressed in the areas defined in the FTAA Working Group on Smaller Economies (Mexico City, 14-16 October 1997). In that occasion, participants stressed the critical role of technical assistance in the FTAA process and highlighted the importance of training on multilateral and regional trade issues.

A response will be provided later.

(3) The OECS Members, the WTO, and Technical Cooperation

The Secretariat Report as well as the Government Report confirm that technical assistance is viewed by the OECS-WTO members as a critical need for ensuring full compliance with their WTO obligations and for assisting them in achieving fuller integration into the global economy and the multilateral trading system. It would be useful to know if the OECS has undertaken efforts to specify and inventory its Technical assistance needs in the various areas of WTO activities.

Technical assistance is a necessary though an insufficient measure for facilitating fully integration into the multilateral trading system.

The OECS countries have not undertaken to specify and inventory technical assistance needs.

We are, however, aware that we require such assistance in a range of areas including, but not limited to SPS, TBT, SCM, and Custom Valuation.

The EU is interested in the efforts being made to modernise and simplify customs and other trade procedures. We would appreciate views on progress being made, difficulties encountered, and needs

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in terms of technical assistance to support trade facilitation. Would the OECS share our view that if this issue is to be addressed in future negotiations in the WTO, there should be a strong developmental component and that capacity building will need to be increased?

OECS Member are making strenuous efforts to modernize and simplify custom and trade procedures. Because of our capacity and other constraints we have been experiencing difficulties. It is essential therefore that technical support be made available in this area.

Further details of progress to date, the difficulties encountered and our technical assistance needs in this area will be submitted in due course.

III. MARKET ACCESS IN GOODS

(2) Tariffs and Other Price-Based Measures

We would be grateful if the OECS-WTO Members could inform us about their views on developing the regional (CARICOM) approach to several issues, in particular customs valuation, anti-dumping and countervailing, government procurement?

CARICOM Member States including OECS Members have already agreed to a regional approach to Custom Valuation, Anti-dumping and Countervailing Duty, and Government Procurement.

The Report points out that some of the OECS countries have not fully implemented the CARICOM CET. There are still many exemptions. In addition, there is a customs service charge applied at different rates across these countries and in some cases there is non-automatic licensing. The most frequent reason mentioned for not fully implementing the CET is the effect on government revenue. Does the OECS share our view that replacing part of the tariffs and similar charges by indirect taxes such as VAT could be examined as a possible solution ?

OECS Member States have taken a formal decision to examine the possibility of introducing a VAT.

(ii) MFN import duties

(para 66) The Report states that "As at early 2001, three of the countries under review had reached Phase IV of the [CARICOM CET] implementation process", i.e. Grenada, St. Lucia, St. Vincent and the Grenadines. The Government Reports, however, stipulates that all OECS, accept for Antigua/Barbuda had reached this phase as of January 2001. Could the OECS-WTO Members please explain what the exact situation is?

Grenada, St. Lucia and St. Vincent and the Grenadines have already implemented Phase IV of the Common External Tariff )CET). Dominica will implement Phase IV on July 1, 2001. Antigua and Barbuda will implement Phase IV on August 1, 2001. St. Kitts and Nevis is presently on Phase III and is currently undertaking a fiscal review which will inform its future position.

(para 70) The Report refers to "a simplified tariff structure, with fewer rates, accompanied by the elimination of discretionary tariff concessions", as a means for enhancing transparency, streamlining administrations, and reducing economic distortions. Given the variety of different schemes (exemptions), could the OECS-WTO members indicate whether they have reflected on that and intend to adapt their systems in the future ?

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A study is to be undertaken by CARICOM to review the CET and the Rules of Origin and such matters are likely to be considered.

(para 74) Tariffs are bound at very high rates, i.e. 100% for agriculture and between 50% and 70% for most non-agricultural goods. Do the OECS-WTO Members agree that moving towards much lower bounds could be an argument for giving a signal to traders and investors?

OECS Members are co-ordinating policies towards progressive liberalisation at the regional level within CARICOM.

(iv) Other duties and charges

We would be grateful if the OECD (sic)-WTO Members could give an overview where they stand with regard to introducing or re-introducing value-added tax schemes.

OECS Member States have taken a formal decision to examine the possibility of introducing a VAT.

(3) Non-tariff measures

(ii) Safeguards

(para 96) The Report states that most OECS countries have maintained safeguards under Article 29 of the CARICOM Treaty. Can OECS Members please indicate when such measures have been imposed and provide information on duration, form and product coverage of such measures since 1995? Do OECS Members consider that these measures need to be notified to the WTO Committee on Safeguards under Article 12 of the WTO Agreement on Safeguards?

OECS Members are engaged in consultation within CARICOM with a view to rationalizing our regional and sub-regional arrangements with our WTO commitments. We are cognizant of the fact that any safeguard measure imposed after the entry into force of the WTO Agreement must comply with the provisions of both the Agreement on Safeguards and Article XIX of the GATT 1994. Article 12 of the Safeguards Agreement requires extensive notifications. OECS-WTO Members are subject to severe capacity constraints have limited our ability to fulfill all our notification obligations which must be recognized and addressed through, inter alia, WTO rules defining policy flexibility instruments which are appropriate to our level of development and inherent vulnerability.

IV. OTHER MEASURES AFFECTING TRADE

(2) Export measures

(para 110) The Report states that "incentives linked with exportation are, however, in place: some benefits under the respective Fiscal Incentives Acts are granted to enclave enterprises exporting all of their production; relief from income tax is granted to manufacturing enterprises on the profits accruing from exportation, provided that the enterprise is not enjoying another tax holiday." Can OECS Members please elaborate on the eligibility criteria for these incentives? Do OECS Members consider that these incentives are subsidies contingent upon export performance in accordance with Article 3.1(a) of the WTO Agreement on Subsidies and Countervailing Measures?

OECS Members are in the process of reviewing all fiscal incentives. In due course we will provide a more detailed response.

(3) Standards and Technical Regulations

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(para 115) It seems that there is a lack of coherence between the texts and Table IV.1: a) one standard adopted in Antigua/Barbuda is not listed in the table, b) Considering the Secretariat’s report for St Lucia, there are less standards in the text (32) than in Table IV.I (34). Could Antigua/Barbuda and St Lucia please explain the differences?

At the time of the WTO's officials visit to Antigua and Barbuda, the Antigua and Barbuda Bureau of Standards indicated that one Standard had in fact been declared. i.e. "Standards for Writing Standards" (this standard actually lists the steps involved from standard generation to Gazette by the Ministry of Legal Affairs). On further investigation, it was discovered that the above standard had in fact not been Gazetted. The Ministry of Legal Affairs is presently working on correcting this situation.

Table III.5 in St. Lucia's report is correct.

WT/TPR/S/85/GRD (para 114) We would be grateful if Grenada could indicate in which fields it has adopted ISO standards as Grenadian national standards.

The fields which Grenada has adopted ISO Standards as National Standards are:

a) Environmental Audit Systemb) Quality Management Systemsc) Environmental Management System

WT/TPR/S/85/GRD (para 116) Could Grenada please explain what is meant by saying that ‘standards comply with international standards’. Are these standards identical? Are they aligned?

When we say that Grenada standards comply with international standards we mean that they are identical to ISO standards.

WT/TPR/S/85/GRD (para 118) Reference is made to the fact that ‘compulsory standards are implemented through (technical) regulations’. Does that mean that a technical regulation is adopted to impose a voluntary standards?

No.

WT/TPR/S/85/GRD In which fields compulsory standards are implemented ?

Labelling of Commodities (general principles), Specification of labelling of commodities (labelling of pre-packaged goods), specification of products manufactured from textile, Specification of the labelling of commodities-(labelling of pre-packaged foods), Specification for the labelling of textile articles, Requirements for the labelling of Brewery products )Beer, Stout, Shandy, and Malt), Quality, Specification for Wheat flour, Specification of toilet tissues, specification for pneumatic passenger tyres, Specification of new pneumatic tyres for highway commercial vehicles

(4) Market competition

(iv) Intellectual property rights

As developing countries, OECS-WTO Members should implement the TRIPs Agreement by 1st January 2000. We would appreciate it if the OECS-WTO Members, in particular, Antigua and Barbuda, Grenada, and St. Vincent and the Grenadines, could you inform us of any concrete steps currently being undertaken in order to put their legislation in conformity with the TRIPs obligations.

In Antigua and Barbuda's case, Copyright and Related Acts Law, and Trade Mark Act based on the World Intellectual Property Organization (WIPO) model has been drafted and is expected to

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be tabled in the Parliament by the end of the year. Geographical Indicators and Patent Acts are being prepared.

At present Grenada is working in conjunction with WIPO to make its legislations compatible with the TRIPs obligations. Recognizing our lack of financial and technical resources to prepare legislation, Grenada has requested assistance from WIPO. WIPO is in the process of preparing model legislation for Grenada. As soon as it is completed, we will make the necessary domestic arrangements.

St. Vincent and the Grenadines is requesting the assistance of WIPO to bring its domestic legislations into conformity with the TRIPS Agreement.

III. MARKET ACCESS IN GOODS

(2) Tariffs and other Price Based Measures

(i) Customs Valuation

Paragraph 18

Could OECS-WTO Members explain why there is no harmonisation in their customs valuation procedures? What plans do OECS-WTO Members have to adopt the 'transaction value' method as prescribed by the Customs Valuation Agreement and by when?”

Grenada and Antigua and Barbuda are investigating this matter and are seeking technical assistance. The OECS countries are experiencing serious under invoicing and will require technical assistance with implementation.

WRITTEN QUESTIONS FROM JAPAN

General Questions concerning Trade and Investments

Do appropriate juridical procedures in dispute settlement on trade and investment exist in each OECS member state or in the OECS region, which ensure “due process” for foreign companies?

Yes.

Are there any measures which offer preferential treatments to the U.S. companies or the EC companies in comparison with Japanese companies? If there are, until when will they continue?

Some OECS Member have entered bilateral investment treaties with the U.S. and certain EC Members States which provide special regime governing the treatment covered investments and are consistent with our WTO obligations.

Are there any inquiry points that respond to questions concerning the laws and systems of investment or trade in each OECS country?

Ministries with responsibility for Trade, Ministries of Legal Affairs, Trade and Investment promotion Agencies.

When laws and regulations concerning trade and investment are amended, how much time is required for such amendments to be made known to public, including foreign companies, before they come into force?

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Draft bills are published in the Official Gazette prior to enactment in Parliament. All laws and regulations which are passed into law are immediately published in the Official Gazette upon entry into force..

Each OECS country is making efforts to diversify its economy, which has traditionally depended on a few agricultural products. Please explain in detail the strategies for diversifying the economies of each OECS country. When foreign companies invest in new industries and products in OECS countries, what conditions are imposed? When a tourism company stations a Japanese person as a guide and interpreter for Japanese tourists, what conditions are imposed? In such a case, how much is the fee to obtain a one-year visa? Japan considers that it would play a key role for the development of national economies. Does each of the OECS countries have any strategies to utilize it for their economic developments (for example, opening a web-site for tourist information which includes hotel reservations, as well as providing services through the use of IT to foreign banks and insurance companies).

A written response will be provide later.

What merit can be considered if foreign companies, which already have their branches in the United States, extend their investments into OECS countries? (What sort of international division of labour is considered between the U.S. and OECS countries.)

Foreign companies which already have their branches in the United States and wish to extend their investment into OECS countries are welcome, just as are other foreign companies, provided these companies comply with local laws and regulations.

Report on OECS-WTO Members by the Secretariat (WT/TPR/S/85)

III. MARKET ACCESS IN GOODS

(2) Tariffs and other price-based measures

Other duties and charges

(p. 24, Table III.8)

According to the Table, only St. Kitts and Nevis bound other duties and charges which comprises customs service charge and consumption tax as “ODC” in the WTO. Japan considers that the binding of ODC contributes to the improvement of transparency in customs duties, and therefore would like to know the opinion of countries other than St. Kitts and Nevis on this issue. Do the countries other than St. Kitts and Nevis have any plan to bind them in the WTO in the future?

OECS Members are cognizant of the fact that WTO rules require that other duties and charges shall be recorded in respect of all tariff bindings. OECS-WTO Members will continue to endeavour to comply with all WTO obligations.

(3) Non-tariff measures

Quantitative import restrictions and licensing

(p. 25, paragraph 87)

The Report states “goods are divided between products that require an import licence when imported from any country that is not an OECS member and goods that require a licence when imported from

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any country that is not an OECS or CARICOM member”. Is this measure consistent with Article 1, paragraph 3 of the Agreement on Import Licensing Procedures, which prescribes neutral application as well as fair and equitable administration in import licensing procedures?

Article 1.3 of the Licensing Agreement provides that rules for import licensing procedures shall be neutral in application and administered in a fair and equitable manner. WTO jurisprudence confirms that the administration of separate regimes in itself does not constitute a violation. The creation of a customs union requires that duties and other restrictive regulations of commerce (except where necessary those permitted under, inter alia, Article XI and XIII) are eliminated with respect to substantially all the trade in products originating in such territories. Import licenses procedures with respect to our CARICOM partners are in accordance with our CARICOM obligations.

The CARICOM Treaty has been notified to the WTO Committee on Regional Trading Arrangements. The CARICOM arrangements provide special and differential treatment for its less developed members which include all OECS Members under Article 56. This is a feature we would like to see more broadly reflected in WTO rules applicable to these small economies which are all vulnerable SIDS.

Significantly, Article 1.2 of the Import Licensing Agreement recognizes that an assessment of the WTO compatability of administrative procedures used to implement import licensing regimes must take into account the economic development purposes and financial and trade needs of developing country trade Members.

(p. 25, paragraph 88)

According to the Report, under the CARICOM Treaty, import licensing is required for the importation of soaps, margarine, shortening and oils when the source is a more developed CARICOM country (CARICOM MDC) or a third country. Is this measure consistent with Article 1, paragraph 3 of the Agreement on Import Licensing Procedures, which prescribes neutral application as well as fair and equitable administration in import licensing procedures?

See answer to question 8.

(pp. 25-26, paragraph 89 and 90)

According to the Report, OECS countries may impose quantitative restrictions on imports not only from CARICOM MDCs but also all trading partners. Is this measure consistent with Article 13 of the GATT, which prescribes non-discriminatory administration of quantitative restrictions?

Article XIII of the GATT 1994 is essentially an application in specific situations of the general principals stated in Article I to which Article XXIV of the GATT 1994 is a permissible exception we note that Article 1.2 of the Import Licensing Agreement requires that Members ensure that administrative procedures used to implement import licensing regimes conform with the GATT 1994, including the provision of Article XII.

See also answer to question 8.

Safeguards

(p. 26, paragraphs 95 and 96)

According to paragraph 95, Article 29 of the CARICOM Treaty allows quantitative import restrictions on the imports from other CARICOM members. On the other hand, according to

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paragraph 96, several OECS countries seem to apply import quotas on the importation of beer and malt not only from CARICOM MDCs but also from third countries on the basis of Article 29. Does this mean that Article 29 of the Treaty can be applied in the countries outside CARICOM? Are the conditions for applying the quantitative import restrictions under Article 29 of the Treaty consistent with the Agreement on Safeguards in the WTO?

The Report evidences a consistent misinterpretation of the articles under which import restrictions may be applied under the CARICOM Agreement.

The import restrictions currently imposed on beer are applied by virtue of Article 56, which provides for Special and Differential Treatment to CARICOM LDCs, including all OECS Members. On the other hand, Article 28 is a Safeguard Mechanism available to all CARICOM Member States.

The aforementioned provision for Special and Differential Treatment provides a model which the OECS recommends for consideration by the WTO in developing appropriately sensitive s&d treatment which also addresses the special needs of its more vulnerable members.

(p. 26, paragraph 95)

According to the Report, Article 28 of the CARICOM Treaty permit a member to introduce quantitative restrictions on imports for the purpose of safeguarding its balance of payments. Is this measure consistent with Article 12 of the GATT?

OECS Member States are WTO developing country Members. We recognize our obligations under the GATT 1994 to comply with the Provisions of Article XVIII, Section B with respect to balance-of-payments measures affecting trade in goods of other WTO Members. Article 28 of the CARICOM Treaty details our specific commitments within the CARICOM custom union. The CARICOM Treaty has been notified to the WTO Committee on Regional Trading Arrangements.

(p. 26, paragraph 97)

According to the Report, CARICOM’s free-trade agreements with Colombia and with the Dominican Republic allow the application of temporary bilateral safeguards. Are these safeguards also applied to the third countries?

No.

Report on Antigua and Barbuda by the Secretariat (WT/TPR/S/85/ATG)

(p. 17, paragraph 70)

According to the Report, reconditioned vehicles from Japan and Korea are restricted because freon is used in their air-conditioning system. Is it correct to understand that reconditioned vehicles from countries other than Japan and Korea are also restricted if freon is used in their air-conditioning system?

In keeping with the Montreal Protocol, vehicles with air-conditioning systems using freon refrigerant must be retrofitted to an ozone safe refrigerant at the port of St. John's regardless of the country of origin of the vehicle..

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(p. 34, paragraph 154)

According to the Report, an International Ship’s Registry is in operation under the Merchant Shipping Acts. Please provide an explanation in concrete terms on the content of the system of registry (for example, the required conditions for registry)

This information will be supplied in writing at a later date.

Concerning mode 3 of the Antigua and Barbuda’s GATS Schedule of Commitments on maritime transport services, there is a reservation based on the Merchant Shipping Acts referred in this paragraph. Please explain in detail the limitation arising from this reservation.

This information will be supplied in writing at a later date.

Report on Dominica by the Secretariat (WT/TPR/S/85/DMA)

(p. 20, paragraph 79)

According to the Report, shaving brushes manufactured in or exported from Japan are prohibited for import due to health and safety reasons. Please explain “health and safety reasons” in concrete terms.

The restriction is left over from colonial legislation. We only became aware of it during the TPR exercise. As far as we aware it has never been applied and it is not now enforced. It appears to have been due to "health and safety reason" reasons at the time of enactment. This will be reviewed.

Report on Grenada by the Secretariat (WT/TPR/S/85/GRD)

(p. 20, paragraph 77)

According to the Report, quantitative restrictions are applied on a number of imports from third countries and CARICOM MDCs. Is this measure consistent with Article 13 of the GATT?

See answers to questions 10 and 12 above.

Report on Saint Kitts and Nevis by the Secretariat (WT/TPR/S/85/KNA)

(p. 28, paragraph 128)

According to the Report, National Bureau of Standards plans to establish labelling standards, which are likely to be mandatory. Please explain the contents of these standards as well as the present situation concerning the establishment of these standards.

The standard applies to the labelling of all prepackaged goods to be offered for retail sale to the consumer or for catering purposes and sets out the requirements for the information to be included on the labels, the method of display of such information, and where necessary, the wording to be used.

(p. 41, paragraph 197)

The Report states that the limitations, which apply to ships under 1600 net tons, do not apply to ships over 1,600 net tons engaged in international trade, and that such ships may be registered in St. Kitts and Nevis regardless of the nationality of its owners. Does this mean that there is no limitation for

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registry in the case of ships over 1,600 net tons engaged in international trade? Please provide an explanation in concrete terms on the content of the system of International Ship Registry, which the Government is in the process of establishing by formulating legislations.

A written answer will be provide later.

Report on Saint Lucia by the Secretariat (WT/TPR/S/85/LCA)

(pp. 12-13, paragraph 44)

According to the Report, the investment activities reserved by Cabinet for nationals of St. Lucia is listed. Is there any plan to amend this list?

The matter is under review.

(p. 13, paragraph 45)

According to the Report, despite the reservations for nationals mentioned in paragraph 44, trade licenses may be granted to non-national companies or persons in cases where local investment has not been sufficiently forthcoming or where the appropriate technology is not available locally. Has the application of such exceptions been previously experienced?

Yes, application of such exceptions have frequently been experienced.

(p. 20, paragraph 72)

According to the Report, shaving brushes manufactured in or exported from Japan are prohibited. Please explain the reason for their prohibition in concrete terms.

See answer to question 17.

(p. 40, paragraph 174 and Table AIV.1)

Please explain the contents of the services called “transhipment services” and “free zone operations”, which St. Lucia commits to in its GATS Schedule of Commitments

A written response will be provided at a later date.

Report on Saint Vincent and The Grenadines by the Secretariat (WT/TPR/S/85/VCT)

(p. 34, paragraph 169)

The Report states “[I]n order to attract investment in plant and facilities, the Government intends to revise the Hotels Aid Act to include incentives for non-hotel tourism activities”. Kindly give a detailed explanation concerning the contents of the revised legislation as well as the planned schedule for the legislative process.

A response to this enquiry will be presented subsequently.

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(p. 35, paragraph 174)

Concerning the mode 3 of the market access in the Antigua and Barbuda’s GATS Schedule of Commitments on maritime transport services, there is a reservation based on the Exchange Control Act. Please explain in detail the limitation arising from this reservation.

This question cites Antigua and Barbuda and Barbuda's Schedule of Commitments. We assume that the current placement of this question is in error.

(p. 35, paragraph 174 and Table AIV.1)

Please explain the contents of the services called “transhipment services” and “free zone operations”, which St. Vincent and the Grenadines commits to in its GATS Schedule of Commitments

A response to this enquiry will be presented subsequently.

WRITTEN QUESTIONS FROM THE UNITED STATES

SUMMARY OBSERVATIONS

(I) INTRODUCTION

(para. 4)

The entry into force of the WTO has brought new rules that are yet to be fully incorporated in the domestic statutes of all the OECS members and most of them have lagged in meeting their notification obligations. What steps are OECS -WTO members taking or considering taking to incorporate WTO rules into their statutes and to make the required notifications?

OECS Members have adopted legislation in implementing their WTO commitments. OECS-WTO Member States will require technical assistance to enable Members to further discharge their obligations.

I. THE ECONOMIC ENVIRONMENT

(1) Main Economic Developments

(i) Introduction

(para. 5)

The small size of the domestic markets is an issue in the production of goods. OECS members have tried to address this through participation in the integrated regional market being created by CARICOM. What concrete steps are being taken to make further progress in CARICOM towards a more widely applicable common external tariff?

We draw attention to the fact that a study is being undertaking by CARICOM to review the CET.

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(ii) Structure of the economies

(para. 9)

The economies of the OECS-WTO Members are dominated by service activities, which accounts for around three quarters of GDP, with tourism accounting for over half of GDP in some countries. What steps are these countries taking to seek flexibility in labour markets and the provision of transport services to ensure the competitiveness of the tourism sector?

CARICOM Members are in the process of establishing a CARICOM Single Market and Economy. The OECS Members States are co-ordinating a approach top progressive liberalisation in the context of the mandated negotiations at the CARICOM level.

(2) Developments in Trade and Investment

(para. 30)

Net foreign investments in the OECS area totaled U.S. $1.3 billion in 1995-1999, with the single largest area for investments being tourism, in particular hotels and resorts. Are the tax and customs duty concessions granted in OECS members to promote hotel development available to all investors in the sector?

Yes.

II. TRADE POLICY REGIME

(1) Introduction

(para. 34)

Domestic implementation of OECS members WTO commitments has been somewhat slow, with most countries lagging in their WTO notifications and in the process of legislative reform required for the implementation of the WTO Agreements. What steps are OECS -WTO Members taking to speed up their implementation of WTO Agreements and notifications?

Same as the answer to question 1.

(2) Policy Objectives and International Relations

(para. 37)

The Secretariat Report notes that two trade policy objectives of OECS countries - increased liberalization and ensuring that domestic suppliers can compete - have given way to an array of specific policies which complicate trade and raise costs. This seems contradictory. What steps are OECS-WTO Members taking or considering taking to remedy this situation?

We do not consider increasing liberalisation and ensuring domestic suppliers can compete to be contradictory. We are undertaking a review of national policies in light of the continuing regional and sub-regional thrusts.

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(para. 39)

Despite increasing regional policy coordination, individual national economic plans show limited synchronisation or diverge in regionally agreed disciplines. While, in general the OECS economies are moving towards a more open trading environment, they are doing so very gradually. What steps are being taken to speed up this process?

Assessment of the regional integration process must take into account our capacity constraints.

(i) World Trade Organization

(para. 42)

Participation of OECS Members in the WTO has been limited, including in areas of particular economic importance to them like services. OECS countries have made only few commitments in their GATS Schedules. With respect to their WTO notifications, all countries are behind. What steps are OECS -WTO Members taking to expand their commitments?

All six OECS-WTO Members are non-residents. The reasons for this speak to our specific constraints.

Our policy approach to the mandated negotiations are being co-ordinated at the regional level.

(3) The OECS Members, the WTO and Technical Cooperation

(para. 57)

The Secretariat Report notes the importance of trade-related technical cooperation in relation to support for domestic implementation of WTO commitments. What are the OECS Members doing to incorporate trade and WTO issues into their development strategies? What steps are the OECS members taking to prioritise their technical assistance needs?

The OECS countries have not yet undertaken a detailed inventory of our technical assistance needs. We are increasingly aware that we require such assistance in a range of areas including, but not limited to SPS, TBT, SCM, and Custom Valuation.

III. MARKET ACCESS IN GOODS

(1) Introduction

(para. 60)

The Common External Tariff (CET) applies at relatively high rates of up to 20-35 percent for industrial products and 40 percent for agricultural goods. The tariff structure appears to be based on an import-substitution model ill-suited to most OECS Members, given that their economies are service-based. What are the OECS Members doing to reduce the CET and to create a simplified tariff structure with fewer rates and elimination of discretionary tariff concessions?

OECS Members can appreciate and do understand the disadvantages associated with traditional import substitution policies. It should be noted that imports already account for almost 70% of OECS GDP on average, and thus the existing tariff structure rather than encouraging active import substitution, would seem to merely facilitate the retention of an very narrow and minimal base

WT/TPR/M/85Page 59

of domestic goods production. The alternative clearly would be to have economies which are totally devoid of any good output and totally depended on tourism and in some cases on one or two other service industries. What might this not mean in light of our inherent vulnerability and increasing marginalization in the multilateral trading system.

(2) Tariffs and Other Price-Based Measures

(para. 75)

The Secretariat Report notes that some OECS Members’ WTO bindings are in conflict with CET rates. In Grenada, for example the CET has resulted in applied tariffs exceeding bound rates for certain products, such as frozen boneless meat, pumpkins, sweet peppers, inedible tallow, soybean oil, beer, and some juices. Has Grenada notified WTO members of this situation so that it can be rectified? If not, when will Grenada do so?

Responses will be provided in due course.

The Report also suggests that Grenada assesses a 25 percent General Consumption Tax on imports, but applies a 10 percent GCT to domestic products and like products from CARICOM members. Please confirm this interpretation. If this is the case, how does Grenada justify this internal tax system in light of its GATT Article III national treatment obligations?

Responses will be provided in due course.

(3) Non-Tariff Measures

(i) Import prohibitions, restrictions and licensing

(b) Quantitative import restrictions and licensing

(para. 88)

Licensing is required for the importation of soaps, margarine, shortening and oils when the source is a more developed CARICOM country or a third country, under Schedule IX of the CARICOM Treaty. These and some other goods are subject to priority sourcing from CARICOM. Additionally, in some countries, licenses are required for imports of certain clothing products from non-CARICOM sources and there is priority sourcing of these products from other CARICOM States. Could the OECS Members explain how the licensing system operates and how it is consistent with Article XI of the GATT?

Article 1.3 of the Licensing Agreement provides that rules for import licensing procedures shall be neutral in application and administered in a fair and equitable manner. WTO jurisprudence confirms that the administration of separate regimes in itself does not constitute a violation. The creation of a customs union requires that duties and other restrictive regulations of commerce (except where necessary those permitted under, inter alia, Article XI and XIII) are eliminated with respect to substantially all the trade in products originating in such territories. Import licenses procedures with respect to our CARICOM partners are in accordance with our CARICOM obligations.

The CARICOM Treaty has been notified to the WTO Committee on Regional Trading Arrangements. The CARICOM arrangements provide special and differential treatment for its less developed members which include all OECS Members under Article 56. This is a feature we would like to see more broadly reflected in WTO rules applicable to these small economies which are all vulnerable SIDS.

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Significantly, Article 1.2 of the Import Licensing Agreement recognizes that an assessment of the WTO compatability of administrative procedures used to implement import licensing regimes must take into account the economic development purposes and financial and trade needs of developing country trade Members.

(4) Government Procurement

The Secretariat paper cites transparency in procurement as one element that requires improvement and notes that this fact has been recognized by the OECS countries. Has there been a response for technical assistance to implement a government procurement regime at a regional level?

Yes, there has been a response to a regional approach. CARICOM intends to undertake an assessment of the possibility of a government procurement regime within the context of the CARICOM Single Market and Economy.

V. OTHER MEASURES AFFECTING TRADE

(1) Introduction

(para. 103)

A regionally harmonized, but complex web of incentives is in place, mainly in the form of income tax exemptions and the waiver of tariffs and other duties and charges on imports. Some of these programs, however, have local content-requirements and in some cases provide support contingent on exportation. Could the OECS Members explain how the exemptions and duty waiver system operates and how it is consistent with obligations under the SCM Agreement?

OECS Members are in the process of reviewing all fiscal incentives. Further information will be subsequently.

(3) Standards and Technical Regulations

(para. 114)

There is no OECS-level common policy concerning standards or technical regulations and all OECS members have their own Bureau of Standards. What are the OECS Members doing to increase cooperation with each other in the standards area?

At the CARICOM level there is work on the harmonisation of standards through the CARICOM Common Market Standards Council (CCMSC), which is to be replaced by the CARICOM Regional Organisation Standards and Quality. The CCMSC is responsible for regional cooperation on standards management, which involves the development of regional standards and the harmonization of standards.

(4) Market Competition

(i) Marketing boards and price controls

(para. 117)

Most OECS members have state enterprises that perform the function of marketing boards. What are the OECS Members plans to further curtail the monopoly rights of these enterprises?

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The GATT 1994 contains a number of rules aimed at preventing trade distortion including, most notably, Article XVII. The Understanding on the Interpretation of Article XVII of the GATT 1994 was concluded with the aim of the notification system with respect to State Trading enterprises including marketing boards. OECS Members intends to conduct a review of our policies with regard to the submission of notification to the Council of Trade in Goods.

(para. 118)

Price controls are used by all OECS Members for a wide range of products. What are the OECS Members’ plans to reduce the products subject to price control?

OECS Members recognize the importance of ensuring an equitable, fair trading system which addresses the needs of the most vulnerable defined in both global and national terms.

(iii) Assistance to activities

(para. 123)

Assistance to manufacturing and some service activities by OECS members is sizeable, with up to 40 percent of potential fiscal revenue foregone in the OECS area under some kind of fiscal incentive scheme or import duty concessions. What are the OECS Members’ plans to change the level and nature of this assistance?

OECS Members are in the process of reviewing all fiscal incentives. OECS Members are coordinating our policy approach to the development of GATS rules within CARICOM.

(iv) Intellectual Property Rights

(para. 132)

No country has completed the process of amending or introducing domestic legislation to reflect the TRIPS agreement. What is the status of OECS Members’ plans to comply with the TRIPS agreement?

St. Lucia and Dominica are well advanced at meeting their obligations under the TRIPS Agreement. In Antigua and Barbuda's case, Copyright and Related Acts Law, and Trade Mark Act based on the World Intellectual Property Organization (WIPO) model has been drafted and is expected to be tabled in the Parliament by the end of the year. Geographical Indicators and Patent Acts are being prepared.

At present, Grenada is working in conjunction with WIPO to make its legislation compatible with the TRIPs obligations. Recognizing our lack of financial and technical resources to prepare legislation, Grenada has requested assistance from WIPO. Thus WIPO is in the process of preparing model legislation for Grenada, As soon as it is completed, we will make the necessary domestic arrangements.

St. Vincent and the Grenadines is requesting the assistance of WIPO to bring its domestic legislations in conformity with the TRIPS Agreement.

V. INVESTMENT AND MARKET ACCESS IN SERVICES

(1) Introduction

(para. 134)

No OECS member has made commitments under the Financial Services agreement. Are the OECS Members planning to make such commitments in the future?

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OECS Members are coordinating our policy approach to the mandated negotiations within CARICOM.

(para. 142)

Clearly the OECS insurance regimes are much more liberal in practice than their GATS commitments would indicate. We urge the OECS countries to consider more ambitious GATS bindings extending to both on-shore and off-shore activities. Please clarify if an insurance license granted in one OECS country allows insurance to be provided in other OECS countries. Please define "agency arrangements."

OECS Members are coordinating our policy approach to the mandated negotiations within CARICOM Information on insurance licensing and definition of " Agency arrangements" will be provided subsequently.

(para. 143)

For what reason are foreign companies in Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis and St. Lucia subject to higher minimum capital requirements than domestic companies?

Response will be provided at a later date.

(c) Offshore financial services

(para. 145)

A report by the G-7 Financial Task Force on Money Laundering (FATF) named Dominica, St. Kitts and Nevis, and St. Vincent and the Grenadines. as "non-cooperative countries" and urged them to improve their anti-money laundering regime. What steps are these OECS Members doing to regulate and monitor offshore banks more closely?

(3) Telecommunications

(para. 146)

The United States is encouraged by the evidence of liberalization in the telecommunications sector and supports the ongoing efforts toward liberalization in the region. We look forward to reviewing the implementation process. The United States suggests that any new schedules of commitments bind the new regime in place.

OECS Members are coordinating our policy approach to the mandated negotiations within CARICOM. OECS Members underscore the importance of granting recognition and credit for autonomous liberalization.

(para. 147)

The United States was pleased that five OECS Members took steps as of 31 March 2001 to enhance competition in the telecommunications sector by ending the monopoly in the provision of basic services. Have new licenses been issued yet?

Yes.

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(para. 150)

The United States supports the ongoing services liberalization to which the OECS Member countries have committed under CARICOM. Have all OECS Member states implemented the Protocol II? What steps are being taken to ensure that, as part of a regional trade agreement, Protocol II is compatible with GATS Article V? What is the time frame for liberalization of services among the member states?

OECS Members are coordinating our policy approach to the mandated negotiations within CARICOM

(5) Tourism

(para. 156)

The United States was pleased that all six OECS Members made commitments under the GATS in hotel construction and management as well as in recreational and sporting services. Are the OECS Members planning to expand their commitments in the tourism sector?

OECS Members are coordinating our policy approach to the mandated negotiations within CARICOM.

(6) Transport

(para. 160)

The United States was pleased that most of the OECS Members made commitments under the GATS in maritime transport. Are the OECS Members planning to expand their commitments?

OECS Members are coordinating our policy approach to the mandated negotiations within CARICOM.

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ANNEX I

RESPONSES PROVIDED BY ST. KITTS AND NEVISTO ADVANCE WRITTEN QUESTIONS

QUESTIONS FROM THE UNITED STATES

REPORT ON SAINT KITTS AND NEVIS

II. TRADE POLICY REGIME

(4) Investment Policy

(para. 56)

What are the four types of enterprises which may qualify for tax holidays? For the sake of continued transparency, please notify all incentives and tax concessions which enterprises may receive that are related to earnings from exports.

Please refer to the Fiscal Incentives Act No. 17 of 1974.

III. TRADE POLICIES AND PRACTICES BY MEASURE

(1) Measures Directly Affecting Imports

(para. 72)

Do any of the import duty concessions and exemptions depend on whether or not an enterprise intends to export its end product?

Fiscal Incentives Act grants incentives to all manufacturing industries.

(para. 96)

Could you please provide the legislation related to anti-dumping and countervailing duties?

The External Trade Order chapter 338.

(2) Measures Directly Affecting Exports

(paras. 108-111)

It seems that many of the incentives under the Fiscal Incentives Act are dependent on exportation of goods. Can you please provide full notification of all of the incentives under this Act which are dependent or related to enterprises exporting their products?

See Fiscal Incentives Act No.17 of 1974.

(para. 110)

Can you please provide further information on the export financing guarantee scheme provided by the ECCB? Under what terms is the pre- and post-shipment financing provided?

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PRE-SHIPMENT FINANCE GUARANTEE SCHEME

Purpose of the Pre-Shipment Finance Guarantee Scheme

Under the PSFGS, financial institutions can advance working capital to bona fide exporters to purchase for their business:

Locally manufactured inputs Raw materials of indigenous or foreign origin Finished goods due for export by export trading companies

All credit(s) extended under the PSFGS must be made via demand loan facility and each credit issued must be based on a promissory note. The maximum term of repayment for credit provided to finance consumer and durable goods is 180 days and for capital goods, the period is 360 days.

POST-SHIPMENT DISCOUNT GUARANTEE SCHEME

Purpose of the Post-Shipment Discount Guarantee Scheme

Under the PSDGS, the exporter is allowed to discount up to 80% of the total gross invoice value of each export shipment on presentation to his lender/bank of documentary proof that the shipment has been made. The PSFGS and PSDGS work best together. When the Schemes are used together the working capital derived from the discounting mechanism will first be used to retire any notes maturing under the PSFGS. Surplus funds made available by utilizing the Post Shipment Discount Guarantee Scheme help to improve the working capital of the exporter, and also provides lower financing charges.

(para. 111)

What sorts of export promotion and marketing services are provided? Are these services available to all enterprises in all industries?

In plant technical assistance is provided to attend trade fairs and mount export promotion missions. These services are available to enterprises in all industries.

(3) Measures Affecting Production and Trade

(para. 118)

Please provide full notification of the benefits available for enclave enterprises which relate to tax holidays and other tax concessions, as these tax benefits seem to relate directly to export performance.

See Fiscal Incentives Act No.17 of 1974.

IV. MARKET ACCESS IN SERVICES

(1) Overview

(para. 158)

Please describe the regulatory requirements of St. Kitts and Nevis’ commercial code. What are the licensing requirements for purchasing land under the Alien Landholding Act? Please list the small business service opportunities reserved for Kittitian and Nevisian nationals.

St Kitts and Nevis has no commercial code.

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Under the Alien Land Holding Act application for a license is made to the Ministry of lands and housing.

The small business service opportunities reserved for Kittitian and Nevisian nationals include the following: Non-ethnic restaurants, Hotels- fifty rooms or less, Travel Agencies, Tour Operators, Tour Guides, Taxi Drivers and Car Rental.

(iii) Insurance

(para. 178)

Does St. Kitts and Nevis plan to schedule insurance commitments to bind current market practice?

We are reviewing our commitments in the GATS.

What are the registration requirements for insurance companies?

For a company to register it must have a paid up share capital of EC$ 2000 dollars or its equivalent. The company must have an Actuarial Certificate from a certified Actuary stating that the company is solvent. Registration is done with the Registrar and once approved the application for licensing follows.

What are the licensing criteria for firms operating in the domestic market?

Having met the registration requirements a potential insurance company would apply to the Inland Revenue Department to obtain a license. There is a fee of EC$4,500 per annum payable for life and non-life insurance licensing and an EC$300 per annum for marine licensing.

Are foreign firms accorded national treatment when registering or applying for a license? Are the registration/licensing criteria transparent?

(para. 179)

What are the licensing criteria for firms operating in the offshore market? Are the licensing criteria transparent? Please describe the scope of the restricted and unrestricted licenses. What activities are included under each type of license?

Firms operating in the offshore market would register with the general registrar of companies and are guided by the requirements set within that framework.

Restrictions are related to the operations of the company. A company having registered must operate within its confines. Therefore a company that has registered to operate locally cannot then branch out to another region having not had such license.

(5) Tourism

(para. 189)

Please describe the scope and rationale for the withholding tax. Does St. Kitts and Nevis plan to eliminate the 50-room threshold for foreign investment?

St. Kitts and Nevis is currently reviewing its commitments under the GATS.

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(para. 190)

Does St. Kitts and Nevis plan to schedule commitments on travel agency and tour operator services? Such services will help support the increase of hotel capacity.

St. Kitts and Nevis is currently reviewing its commitments under the GATS.

(para. 192)

Please describe the investment incentives offered for establishments of at least 10 rooms. The Secretariat’s report indicates that incentives on these establishments are available for both local and foreign investors; however, market access for foreign investors is limited to hotels in excess of 50 rooms. Please explain this discrepancy.

The investment incentives are as described in para 192, tax holiday and exemption from import duties on construction material and equipment.

There is no discrepancy.

Does St. Kitts and Nevis provide for duty-free entry of equipment, supplies and other materials that are needed by conference organizers to conduct international conferences and seminars efficiently?

The need has not arisen.

QUESTIONS FROM THE GOVERNMENT OF CANADA

WTO SECRETARIAT REPORT WT/TPR/S/85/KNA

IV. Market Access in Services; (1) Overview; paragraph 158

The Secretariat Report states that St. Kitts and Nevis’ horizontal commitments under the GATS includes the reservation of a number of small business service opportunities for nationals. The room limitation on hotel and resort development is mentioned as an example of this policy, but a comprehensive listing of other included service activities is not provided. Please provide additional information on other service activities covered by this limitation.

The following is a list of service activities reserved for nationals:Non-ethnic restaurantsHotels- fifty rooms or lessTravel AgenciesTour OperatorsTour GuidesTaxi Drivers

QUESTION FROM JAPAN TO ST KITTS AND NEVIS

REPORT ON SAINT KITTS AND NEVIS BY THE SECRETARIAT (WT/TPR/S/85/KNA)

(p. 28, paragraph 128)

According to the Report, National Bureau of Standards plans to establish labelling standards, which are likely to be mandatory. Please explain the contents of these standards as well as the present situation concerning the establishment of these standards.

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The standard applies to the labelling of all pre-packaged goods to be offered for retail sale to the consumer or for catering purposes and sets out the requirements for the information to be included on the labels, the method of display of such information, and where necessary, the wording to be used.

(p. 41, paragraph 197)

The Report states that the limitations, which apply to ships under 1600 net tons, do not apply to ships over 1,600 net tons engaged in international trade, and that such ships may be registered in St. Kitts and Nevis regardless of the nationality of its owners. Does this mean that there is no limitation for registry in the case of ships over 1600 net tons engaged in international trade? Please provide an explanation in concrete terms on the content of the system of International Ship Registry, which the Government is in the process of establishing by formulating legislations.

The nationality requirements do not apply to ships over 1,600 tons as long as it is a seagoing ship engaged in foreign trade and not constructed more than twelve years before the year in which application for registration is made.

Legislation regarding the International Ship Registry is in the process of being drafted.

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