RNM UPDATE 0509

June 2, 2005

Prepared by the Communications Division of the Caribbean Regional Negotiating Machinery (CRNM), this
electronic newsletter focuses on the RNM, trade negotiation issues within its mandate and related activities.

- BELIZE-GUATEMALA TRADE PACT TALKS EXTENDED

- NEGOCIACIONES DEL PACTO COMERCIAL ENTRE BELIZE Y GUATEMALA SE EXTIENDEN

- THE ANTIGUAN INTERNET GAMING CASE, THE WAY FORWARD

- CARIFORUM-EC EPA TALKS ON TRACK, SAY PRINCIPAL NEGOTIATORS

- FORUM ON SPECIAL AND DIFFERENTIAL TREATMENT TO BE HELD IN BARBADOS

- NEWS BRIEFS

- UPCOMING EVENTS

BELIZE-GUATEMALA TRADE PACT TALKS EXTENDED

Belizean and Guatemalan negotiators met in Antigua, Guatemala, May 23 to 27, in a bid to
conclude talks for a Belize-Guatemala Partial Scope Trade Agreement (PSA), substantive
negotiations for which began in February this year. Recognizing that outstanding issues warranted
an additional negotiating session, a decision was made at last week’s encounter to convene a
fourth and final round of talks, to take place in Guatemala City, Guatemala, June 15 to 18.

Mr. Jose Alpuche, Director-General in the Directorate General for Foreign Trade, Ministry of
Foreign Affairs of Belize, told RNM UPDATE that despite the need for an additional negotiating
session the two sides were pleased with the pace of negotiations, “which have been substantially
advanced at this third encounter.”

The need for more time to consider proposals on market access was cited as the primary reason
for the decision to convene a fourth round of talks. “Market access is the major outstanding issue,”
Director-General Alpuche confirmed to RNM UPDATE. The market access talks include
negotiations on lowering existing tariff and non-tariff barriers to further facilitate and enhance trade
relations between both countries. Key in the week-long discussions was consideration of the list of
goods to be covered by the PSA.

The top Belizean trade official revealed that considerable progress had been made on the “bulk of
substantive issues under negotiation,” in particular talks have been concluded for an Investment

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Chapter (of great interest to both sides), which met with broad agreement. In addition to opening
up trade in a limited number of goods, the expectation is the trade pact would also provide an
investment promotion and protection framework, that advances clear and transparent rules
providing for a stable environment for investments. The Belizean private sector is particularly keen
on joint ventures with their Guatemalan counterparts in an effort to increase value-added in the
agri-business sector. Mr. Alpuche also underscored the investment opportunities offered by Belize
for joint ventures to access the CARICOM market, under the Single Market and Economy (SME).

The two sides have also settled on issues such as sanitary and phyto-sanitary, technical barriers to
trade, and dispute settlement, while significant progress was made on the other central component
of talks, the Land Transportation Facilitation Chapter.

Proposals on tourism facilitation and financial services have also been tabled by the Guatemalans.
There is agreement that talks on tourism issues will commence at this month’s encounter.
Belizean negotiators are currently analyzing proposals for financial services to be included in the
trade accord. Both countries have similar legislative frameworks which may enable articles on
facilitation to be negotiated.

The overall objective of the PSA, the first such trade pact Belize is pursuing with a Central
American country, is to enhance cross-border trade, market access and commercial linkages
between Belize and Guatemala, for a limited basket of products. As regards the specific list of
goods to be negotiated for preferential market access, particular attention is being given to the
volume and value of trade between the two parties. Provisions for the removal of non-tariff barriers
have also been included in the PSA.

There are three Negotiating Groups that form the broad parameters for negotiations, namely:
Market Access; Rules and Procedures; Investment and Land Transportation. Private Sector
contact groups are also in place, to assist in the process of negotiations, and in the implementation
of the Agreement. Negotiations for the trade accord were officially launched in November 2004,
following the adoption of a General Framework Document outlining the scope and negotiating
process for the PSA, by Belizean and Guatemalan Trade Ministers.

“The PSA is being negotiated to ensure that it is compliant with the Treaty of Chaguaramas,” Mr.
Alpuche explained. During a meeting of the CARICOM Council for Trade and Economic
Development (COTED) in January this year, Belize formally submitted an Article 80 notification to
CARICOM regarding negotiations for a PSA with Guatemala. Under Article 80 (Paragraph 5) of
the Revised Treaty of Chaguaramas, Belize has been granted a special dispensation to negotiate
“arrangements with neighbouring economic groupings.”

With negotiations and “legal scrubbing” of the trade accord slated for completion this month, it is
expected the PSA will be tabled for consideration at the next meeting of COTED.

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NEGOCIACIONES DEL PACTO COMERCIAL ENTRE BELIZE Y GUATEMALA SE EXTIENDEN

Los negociadores belizeños y guatemaltecos se reunieron en Antigua, Guatemala del 23 al 27 de

mayo, en un intento por concluir las negociaciones para el Acuerdo Comercial de Alcance Parcial
(AAP) entre las dos naciones, las cuales se iniciaron en febrero de este año.

Ambos lados reconocieron que todavía quedan asuntos pendientes que requieren una sesión de
negociación adicional, por lo que decidieron convocar una cuarta y última ronda de negociaciones,
la cual se llevará a cabo en Ciudad Guatemala del 15 al 18 de junio.

José Alpuche, Director General de la Dirección General de Comercio Exterior del Ministerio de
Relaciones Exteriores de Belize, reportó a RNM UPDATE que a pesar de la necesidad de una
ronda adicional, ambas partes están satisfechas con las negociaciones “las cuales avanzaron
sustancialmente en esta tercera ronda.”

La necesidad de tener más tiempo para considerar propuestas sobre acceso a mercados fue el
principal motivo para convenir una cuarta ronda de negociaciones: “Acceso a mercados en el
principal asunto pendiente,” confirmó Alpuche a RNM UPDATE. Las negociaciones sobre acceso
a mercados incluyeron conversaciones para disminuir las barreras arancelarias y no arancelarias
actuales, a fin de facilitar y mejorar las relaciones comerciales entre los dos países. Una cuestión
clave en las discusiones llevadas a cabo durante la semana, fue la lista de bienes que serán
cubiertos por el AAP.

El Jefe Negociador belizeño reveló que se ha logrado un progreso considerable en “los asuntos
principales bajo negociación”. En particular, las negociaciones concluyeron un Capítulo sobre
Inversión de gran interés para ambas partes. Además, se acordó abrir el comercio a un número
limitado de bienes. Las expectativas son que el pacto comercial también contenga un esquema
sobre la promoción y protección de inversiones que establezca reglas claras y transparentes para
un clima de inversiones estable. El sector privado belizeño está particularmente interesado en
inversiones conjuntas con su contraparte guatemalteca, para de esa forma incrementar el valor
añadido de los productos del sector agroindustrial. El Sr. Alpuche también subrrayó las
oportunidades de inversión ofrecidas por Belize para inversiones conjuntas que quieran acceso al
mercado de la CARICOM dentro del Mercado y Economía Unica Caribeña.

Ambas partes también acordaron aspectos sobre medidas sanitarias y fitosanitarias, barreras
técnicas al comercio y solución de controversias, así como también se logró un progreso
significativo en un aspecto central de las negociaciones como es el Capítulo sobre Facilitación de
Transporte Terrestre.

Propuestas sobre la facilitación del turismo y servicios financieros también fueron expuestas por

los guatemaltecos. Se acordó que las conversaciones sobre aspectos del turismo comenzarán en

el encuentro de junio. Los negociadores belizeños están analizando las propuestas para servicios

financieros a ser incluídas en el acuerdo.

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El objetivo general del AAP, el primero de su tipo que Belize busca establecer con un país

centroaméricano, es el de mejorar al comercio transfronterizo, el acceso a mercados y el

encadenamiento comercial entre Belize y Guatemala, para un número limitado de productos. En

lo que concierne a la lista de productos específicos para acceso preferencial, se le está dando

atención especial al volúmen y el valor del comercio entre las dos partes. Provisiones para

remover las barreras no arancelarias también han sido incluídas en el AAP.

Las negociaciones se dividen en tres grupos: Acceso a Mercados; Reglas y Procedimientos; e

Inversión y Transporte Terrestre. El sector privado también participa como asesor en el proceso
de negociaciones. Las negociaciones comenzaron oficialmente en noviembre de 2004, después
de la adopción del Marco General que define el alcance del proceso de negociación para el AAP.

“El AAP se está negociando de forma que cumpla con lo estipulado en el Tratado de
Chaguaramas,” puntualizó Alpuche. Durante la reunión del Consejo para el Desarrollo Comercial
y Económico (COTED) de la CARICOM, en enero de este año, Belize notificó oficialmente sobre
las negociaciones de un AAP con Guatemala, de acuerdo a lo estipulado en el Artïculo 80 del
Tratado de Chaguaramas Revisado. En el párrafo 5 de dicho artículo, Belize tiene una dispensa
especial para negociar “acuerdos con grupos ecónomicos de su región.”

Con las negociaciones y la “revisión legal” del acuerdo comercial pautadas para este mes, se
espera que el AAP sea tema de agenda para la consideración de la próxima reunión del COTED.

THE ANTIGUAN INTERNET GAMING CASE, THE WAY FORWARD

At a May 19 meeting of the WTO Dispute Settlement Body (DSB), the US announced its intention
to comply with the Appellate Body’s Report in the Internet Gambling case, and informed the
meeting that it had already begun evaluating its options (for background on the Report see RNM
UPDATE 0505, April 12, 2005 - ANTIGUA & BARBUDA DECLARES VICTORY IN WTO
INTERNET GAMING CASE). US representatives signalled that the US would need a reasonable
period of time to do so, and expressed a willingness to engage in discussions with the Antigua &
Barbuda Government on the matter.

The Appellate Body ruling against the US had found that certain US measures affecting Internet
gambling services violated WTO General Agreement on Trade in Services (GATS) commitments,
but that they could nonetheless be exempted under GATS rules if they were applied in a non-
discriminatory way between domestic and foreign service suppliers. According to that decision, the
US had not proven this in regards to one of its federal measures, namely its Interstate Horseracing
Act. An informed source told RNM UPDATE, a key element of the United States’ Article XIV

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morals defence was also undermined because, as the Appellate Body ruled, the US had not met its
burden under the so-called “chapeau” of Article XIV (i.e. “the measure must not be applied in a
manner which would constitute a means of arbitrary or unjustifiable discrimination”). The US, itself,
sanctioned “remote” gambling within its borders, importantly across State lines, applicable to
domestic service suppliers (and not foreign service suppliers) by way of off-track betting on horse
racing, under the Interstate Horseracing Act. This constitutes a definitive finding as regards
discriminatory practices in Antigua’s favor, despite the lack of clarity in parts of the Appellate Body
Report, as compared to the Panel Report. Furthermore, it is the ambiguous language contained in
the Appellate Body Report that has led to misinterpretations that the United States won the dispute
on appeal or that all the United States is obligated to do is to “tweak” a law to facilitate compliance
with the GATS, RNM UPDATE was told.

In its final recommendation, the Appellate Body Report noted: “The Appellate Body recommends
that the Dispute Settlement Body request the United States to bring its measures, found in this
Report and in the Panel Report to be inconsistent with the General Agreement on Trade in
Services, into conformity with its obligations under that Agreement.” The measures that have been
found to be inconsistent are the three US federal laws at issue: the Wire Act, the Travel Act, and
the Illegal Gambling Business Act. The Appellate Body’s finding was that the three US federal
statutes violated Article XVI of the GATS, in that a law that prohibits the supply of a service or the
use of a means of delivery – in this case the Internet – violates Article XVI:2(a) and (c). In
essence, the United States’ market access obligations to foreign service suppliers under Article
XVI had been violated; importantly, for Antigua & Barbuda, the Appellate Body found that the
United States’ offending measures reduced the number of service providers from that country. In
this regard, a key finding of the Appellate Body was that the US had indeed made “specific
commitments” for respective service sectors, i.e. the provision of market access to WTO Members
in gambling and betting services in its GATS schedule, despite US claims to the contrary.

Over the last few weeks, there has been much speculation amongst legal minds and the gaming
industry as to the ease with which the US will be able to comply with the ruling.

According to established WTO rules on dispute settlement, the US was required to announce its
intention to comply with the recommendations and rulings of the Report by May 19: within 30 days
of the adoption of the Appellate Body Report. (Since the Report was adopted on April 20, this gave
the US until May 19 to announce its intentions). These rules provide that if the US is unable to
comply immediately, it is granted a “reasonable period of time”, to be determined in accordance
with set criteria: Firstly, the US must propose a period of time, which must be approved by the
DSB. Failing this, the US and Antigua can agree between themselves on a date for compliance
within 45 days of the adoption of the report (June 6). If there is still no agreement between the
parties, the process reverts to binding arbitration, for a determination of what constitutes a
reasonable time frame in the circumstances of the case. A decision by an arbitrator must be
rendered within 90 days of adoption of the Report. In determining what constitutes a reasonable
time frame, the arbitrator should be guided by a 15-month time frame from adoption of the Report.

The failure of the US, at the May 19 meeting and to date, to give details as to when and how it will
comply has only increased speculation amongst legal experts and the gaming industry as to how
easily the US can actually implement the ruling. The pronouncement by the Office of the United

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States Trade Representative soon after publication of the ruling claiming victory over Antigua &
Barbuda suggested that the US could easily satisfy the Appellate Body recommendations by
“clarify[ing] Internet gambling restrictions in certain ways” or “tweak[ing]” the Interstate Horseracing
Act. The apparent delay in putting forward a tangible solution, and the request for a reasonable
time for compliance may be a signal that there are difficult political and other hurdles within the US
that have not been overcome, RNM UPDATE was told.

Meanwhile, the government of Antigua & Barbuda has remained vigilant of the United States. At
the DSB meeting of May 19, Antigua asked the US for greater and more detailed precision of
implementation plans. Antiguan Minister of Finance Errol Cort has said that as far as his country is
concerned, there are only two options that the US has for compliance: (i) market access for
Antigua & Barbuda service providers for the supply of online betting and gambling services; or (ii) a
complete ban on remote Internet gambling altogether, which would impact on both domestic and
foreign suppliers.

In the final analysis, the United States must at this time either seek approval for a reasonable time
period for implementation or else enter into negotiations with Antigua & Barbuda, before June 6. In
the absence of agreement, the decision of a reasonable period will be made by an arbitrator by
mid-July.

Under Article 21(5) of the Dispute Settlement Understanding, if Antigua & Barbuda is dis-satisfied
with the measures taken by the United States to comply with the Appellate Body
recommendations, it can once again resort to dispute settlement procedures.

CARIFORUM-EC EPA TALKS ON TRACK, SAY PRINCIPAL NEGOTIATORS

“Progress on substantive issues has been achieved by both sides;” this was the view of the
Director General of the Caribbean Regional Negotiating Machinery (RNM), Ambassador Dr.
Richard Bernal, in remarks made at the close of the Third Meeting of Principal Negotiators as
regards CARIFORUM-EC Economic Partnership Agreement (EPA) negotiations, May 20. “There
is a shared view that CARIFORUM and the EC are keeping pace with and achieving the objectives
of Phase II, as set out in the Joint Plan and Schedule,” he said.

In Phase II of the negotiations, the twin objectives are: (a) to create a common understanding on
the respective economic spaces that will assume the commitments of an EPA on January 1, 2008;
and, (b) to establish the priorities of CARIFORUM regional integration processes, to be supported
by an EPA.

Ambassador Bernal and his European Commission counterpart, Mr. Karl Falkenberg, co-chaired
the negotiating session, which considered joint reports of all three clusters of issues in Phase II of
the negotiations, i.e. Regional Market Access Issues; Services and Investment; and, Trade-Related
Areas.

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Ambassador Bernal emphasized that the implementation of the CSME and the acceleration of
negotiation of the built-in agenda of the CARICOM-Dominican Republic Free Trade Agreement are
essential planks for developing regional integration coherence among CARIFORUM countries.

A point also underscored by Ambassador Bernal was that the Region applies the concept of
variable geometry to EPA negotiations, in the context of the various streams of regional integration
processes within the CARIFORUM economic space. These streams constitute the Organisation of
Eastern Caribbean States (OECS), the CSME and CARICOM-Dominican Republic FTA, but also
the case of Haiti – which enjoys a moratorium on the application of facets of the CSME – and The
Bahamas, which is a member of CARICOM, but not party to the CSME.

Preparations for the next CARIFORUM-EC Ministerial Meeting on EPA negotiations were also
reviewed. “We will have laid the groundwork for the commencement of Phase III negotiations by
the September meeting of the CARIFORUM–EC Ministerial,” Dr. Bernal said.

In keeping with the Joint Plan and Schedule and preceding the encounter of Principal Negotiators,
a final technical session on Trade-Related areas was held in Phase II in Brussels, May 17 to 18. It
covered CARIFORUM regional dimensions of intellectual property, competition policy and
government procurement, and was immediately followed by the Second Meeting of the
CARIFORUM-EC Regional Preparatory Task Force (RPTF). The RPTF agreed to examine eleven
trade areas identified by CARIFORUM where an EPA could bolster the Region’s trade capacity in a
number of areas spanning market access, services, investment, competition policy, government
procurement and intellectual property. CARIFORUM agreed to contribute to the exercise by
developing a number of terms of reference for feasibility studies, one of which refers to a pilot study
on SPS that has already been drafted.

FORUM ON SPECIAL AND DIFFERENTIAL TREATMENT TO BE HELD IN BARBADOS

A Global Forum on Trade entitled ‘Special and Differential Treatment: Thinking Outside the Box’
has been organized by the Trade Directorate of the Organisation for Economic Co-operation and
Development (OECD), with the support of the World Bank and the University of the West Indies.
To be convened June 28 to 29 in Bridgetown, Barbados, the workshop will bring together a number
of distinguished trade analysts and practitioners from a wide range of countries in Asia, Africa,
Europe and the Americas, including: Jamaica’s trade envoy to the WTO, Ambassador Ransford
Smith; Director General of the RNM, Ambassador Bernal; RNM WTO Director, Peter Gonzales;
and, University of the West Indies Professor Norman Girvan.

Strengthening and operationalizing special and differential treatment (SDT) is a central theme of
the WTO Doha Development Agenda (DDA), as well as certain regional negotiations. The
objective of the two-day workshop is to brainstorm and explore concrete options for precise,
effective and operational SDT in different areas, with a view to contributing to on-going trade
discussions at the multilateral and regional levels. Topics to be addressed include agriculture,
services, trade facilitation, smallness and vulnerability, among others. In addition, a range of

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alternative approaches to SDT, including trade-related capacity building, situational flexibilities,
variable geometry and other ideas will be examined.

The roster of speakers and participants draws extensively from international and regional
organisations such as the RNM, OECD, UNCTAD, the World Bank and the WTO, academic
institutions and think tanks, civil society and the private sector. The forum will also benefit from the
participation of policy-makers and government officials from developing countries who have had
direct experience with SDT.

For further information on this forum, contact Martina Abderrahmane from the OECD, (tel number
+33 1 44 24 89 31, fax number +33 1 44 30 61 63, email address
martina.abderrahmane@oecd.org Registration is open to a limited number of participants;
organizers are not covering the cost of attendance.

NEWS BRIEFS

RNM Staff Changes

Effective June 1, 2005, Mr. Trevor Boothe will take up the post of Director, Technical Cooperation
and Partnerships. Prior to joining the RNM, Mr. Boothe was a senior official with the Inter-
American Development Bank, previous to which he held various positions in the public and private
sectors – including the Ministry of Foreign Affairs of Jamaica.

Mr. Boothe takes over from Dr. Deryck Brown, who recently demitted office. Dr. Brown, however,
continues to be available to the RNM in the capacity of Advisor to the Director General.

Also, effective mid-June, Mrs. Theresa Hinkson will assume duties as the RNM’s Director of
Administration and Operations. She comes to the RNM having served as a senior accountant in
several institutions, most recently at the Caribbean Regional Human Resource Development
Program for Economic Competitiveness.

Ag. Talks underway in Geneva

A meeting of the WTO Agriculture Negotiating Group is taking place from May 30 to June 3. The
encounter represents a concerted attempt at addressing agricultural market access, as relates to a
formula for tariff cuts, but also the issue of sensitive and special products.

RNM DG meets with DFID Under-Secretary

Ambassador Bernal met recently with Parliamentary Under-Secretary of State in the United
Kingdom Department for International Development, Gareth R Thomas, in London, England. Dr.
Bernal described the meeting as “very constructive and fruitful.”

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Ambassador Bernal and the Under-Secretary had an exchange of views on the status of
negotiations in the WTO Doha Round and CARIFORUM-EU EPA talks.

The wide-ranging interchange also centred on the critically important role of the RNM in
developing, coordinating and executing an overall negotiating strategy for various external trade
negotiations in which the Region is involved. In this regard, support for the RNM was discussed,
and Ambassador Bernal expressed his appreciation for support provided to the RNM by the UK
Department for International Development.

Lamy confirmed as new WTO Head

Former European Union Trade Commissioner Pascal Lamy was formally selected, May 26, as the
WTO’s fifth Director General. The decision on France’s candidate for the post was taken by
consensus at the WTO General Council. Mr. Lamy will take up the post September 1. Following a
three month campaign period, General Council Chair Amina Mohamed recommended that
Members take a consensus decision to appoint Lamy as the next WTO Director General (for
background see RNM UPDATE 0508). The Director General designate described his primary
challenge as the completion of the Doha Round of global trade talks, saying “this will be my
immediate first, second and third priority so as to ensure that trade opening continues to contribute
to development and that we place the interests of developing countries at the centre of the world
trading system. The Hong Kong WTO Ministerial in December will be an important stepping stone
towards this goal.”

“First Approximations” downplayed in Geneva

At a May 19 WTO Trade Negotiations Committee (TNC) meeting, WTO Director General Supachai
Panitchpakdi again cautioned Members that Doha Round talks are progressing too slowly. He also
downplayed the significance of clinching “first approximations” by July, instead urging Members to
focus on a successful outcome for the WTO Ministerial set for Hong Kong this December.

WTO DSB Adopts Ruling on EC Sugar Export Subsidies

On May 19, the Dispute Settlement Body adopted the Appellate Body and the panel reports on the
European Communities’ export subsidies on sugar (see Adoption of Appellate Body and panel
reports DS265, DS266 & DS283: European Communities — Export subsidies on sugar available at
http://www.wto.org/english/news_e/news05_e/dsb_19may05_e.htm). Mauritius spoke on behalf of
Africa Caribbean Pacific (ACP) WTO Member States, expressing concern as regards the socio-
economic impact of the findings on weak and vulnerable ACP States. Mauritius explained that
some ACP countries, for example St. Kitts & Nevis, were already being forced out of their sugar
production. St. Kitts & Nevis said that it was currently planning its way out of sugar, and asked that
its attempt at adjustment be taken into account.

UPCOMING EVENTS

June 9: Fundación Global Democracia y Desarrollo, Conference on Challenges for the Dominican Republic
in EPA Negotiations, Santo Domingo

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June 10: Dominican Republic National Consultation on EPA Negotiations, Santo Domingo

June 15 to 17: CARIFORUM-EC Seminar on Regional Integration related to EPA Negotiations, Brussels

For More Information Contact:

Nand C. Bardouille
Caribbean Regional Negotiating Machinery
3rd Floor, The Mutual Building, Hastings Main Road, Hastings, Christ Church, Barbados
Tel: (246) 430-1678
FAX: (246) 228-9528

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