Entrenched in several regional trade agreements are clauses that provide for the safeguarding of the investments, allowing for the fair treatment of investors and their investments and supports the promotion of FDIs into the region. These agreements afford the policy space for the continued attraction of investments to the Caribbean and presents opportunities for increased investments.
The investment provisions in these agreements provide a number of benefits:
- They commit (lock in) the host state to rules that promote fairness in the investment regime;
- They increase transparency providing the investor with increased information and access to information on what to expect when investing in the other’s territories;
- They provide a level of assurance to investors, increasing investor confidence during a grievance procedure in cases where there is a dispute with the state;
- These rules may reduce the political risk of overseas investments through promoting fairness in cases where nationalization occurs in the host state
- They allow for clear/transparent rules for the hiring of board members and senior managers in the operation of the investments; and
- They may also promote cooperation between investment promotion agencies and other stakeholders in the investment support network.
- Key tenets of these agreements are listed below.
CARICOM (Caribbean Community)
The Caribbean Community (CARICOM) is an organization of 15 Caribbean nations and dependencies. CARICOM’s main purposes are to promote economic integration and cooperation among its members, to ensure that the benefits of integration are equitably shared, and to coordinate foreign policy. The members are Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, and Trinidad and Tobago. The agreement upon which the Community is formed is the revised Treaty of Chaguaramas. With regard to investments, the treaty encourages the following:
- The establishment and promotion of measures for the co-ordination and convergence of
- National macro-economic policies of the Member States and for the execution of a harmonized policy on foreign investment;
- The establishment and maintenance of an investment-friendly environment, including a facilitative administrative process;
- The elimination of bureaucratic impediments to deployment of investments in industrial enterprises;
- Increased investment in services and the establishment of a policy environment designed to attract investment to the agricultural sector, the forestry sub-sector and the transportation sector, including ancillary services that support this sector; and
- The continued development of the Community Investment Policy that seeks to realize the harmonization of investment incentives in CARICOM in the industrial, agricultural and services sectors.
Caribbean Basin Initiative
The trade programs known collectively as the Caribbean Basin Initiative (CBI) are intended to facilitate the economic development and export diversification of the Caribbean Basin economies. Initially launched in 1983, through the Caribbean Basin Economic Recovery Act (CBERA), and substantially expanded in 2000 through the U.S.-Caribbean Basin Trade Partnership Act (CBTPA), the CBI currently provides beneficiary countries with duty-free access to the U.S. market for most goods.
The CBTPA entered into force on October 1, 2000, and continues in effect until September 30, 2020, or the date, if sooner, on which a free trade agreement as described in legislation enters into force between the United States and a CBTPA beneficiary country. The beneficiaries are Barbados, Belize, Guyana, Haiti, Jamaica, Panama, St. Lucia and Trinidad and Tobago.
On August 5, 2004, the United States signed the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) with five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) and the Dominican Republic. The CAFTA-DR is the first free trade agreement between the United States and a group of smaller developing economies. This agreement is creating new economic opportunities by eliminating tariffs, opening markets, reducing barriers to services, and promoting transparency. It is facilitating trade and investment among the seven countries and furthering regional integration. On August 15, 2008, the CAFTA-DR Parties implemented important changes to the agreement’s textiles provisions, including changing the rules of origin to ensure that pocket fabric in apparel is sourced from the United States or another CAFTA-DR Party. DR-CAFTA grants reciprocal nondiscriminatory rights to investors from signatory parties to establish, acquire, and operate investments on an equal footing with local investors, unless specifically stated otherwise. The chapter deepens the commitments that Central American countries have made at the WTO and to one another in the area of investment protection. All forms of investment are protected under the agreement, including enterprises, debt, concessions, contracts and intellectual property. Investors receive protection under DR-CAFTA for due process as well as the right to receive a fair market value for property in the event of an expropriation. The agreement also includes impartial procedures for dispute settlement and explicit commitments to free and expeditious transfers of profits, subject to non-discriminatory domestic regulations on the financial sector and the protection of creditor rights.
Haiti Economic Lift Program (HELP) Act of 2010
Some of the main principles of the HELP Act that supports the attraction of investments include the following:
- Extends CBTPA and HOPE – The law extends the Caribbean Basin Trade Partnership Act (CBTPA) and the Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE) through to September 30, 2020.
- Expands the Wholly Assembled List – The legislation provides duty-free treatment for additional textile and apparel products that are wholly assembled or knit-to-shape in Haiti regardless of the origin of the inputs.
- Increases the Tariff Preference Levels – It increases from 70 million square meter equivalents (smes) to 200 million smes the respective tariff preference levels (TPLs) under which certain Haitian knit and woven apparel products may receive duty-free treatment regardless of the origin of the inputs.
- Extends the Value-Added Rule – The law extends until December 20, 2015, the rule that provides duty-free treatment for apparel wholly assembled or knit-to-shape in Haiti with at least 50 percent value from Haiti, the United States, a U.S. free trade agreement partner or preference program beneficiary, or a combination thereof. The law similarly extends until December 20, 2017, duty-free treatment for Haitian apparel with at least 55 percent of value from qualifying countries, and until December 20, 2018, duty-free treatment for Haitian apparel with at least 60 percent of value from qualifying countries.
- Extends Duty-Free Treatment for Wire Harnesses – The law extends until December 20, 2016, the rule that provides duty-free treatment for wire harness automotive components imported from Haiti.
Economic Partnership Agreement (EPA) with European Union and CARIFORUM
The EPA is the first comprehensive North-South trade and development agreement in the global economy. It includes a package of measures to stimulate trade, investment and innovation, and to promote sustainable development, build a regional market among Caribbean countries and help reduce poverty. The EPA was signed on October 15 2008 by the European Community and the following members of CARIFORUM: Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, the Dominican Republic, Grenada, Jamaica, Saint Christopher and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago. Guyana later signed on October 20, 2008. Haiti signed the Agreement on December 11 2009. The CARIFORUM-EC EPA is guided by a number of principles including: supporting and building upon the regional integration process; promoting the development objectives of countries of the Region, while being consistent with their development strategies; and encompassing Special and Differential Treatment, including provisions that go beyond existing WTO measures in addressing the constraints of small size and vulnerability, among others.
Investment Provisions in the CARIFORUM –EU Economic Partnership Agreement
With regard to investments, the EU and CARIFORUM commit to grant each other’s investors access to their markets, in those sectors which are identified in an annex to txe Agreement and grant them treatment that is not less favorable than that provided for in the specific commitments contained in the annex. Parties to the agreement must grant the investors and establishment of the other parties “treatment no less favorable” than that they accord to their own investors and establishments in that particular sector. The Agreement contains provisions related to the behavior of investors (Art. 72). In order to prevent abuses by investors, and to guarantee that investment liberalization does not result in social or environmental costs, the EPA provides that the parties cooperate to ensure that: • Corruption by investors is forbidden and investors are held liable in case of corruption; • Investors act in accordance with core labor standards as required by the International Labor Organization; • Investors do not operate their investments in a manner that circumvents international environmental or labor obligations arising from agreements to which the parties have adhered; and • Investors establish and maintain, where appropriate, local community liaison processes, especially in projects involving extensive natural resource-based activities.
Other Regional Free Trade Agreements
Other regional trade agreements that include different levels of rules for the promotion and protection of investments include:
- CARICOM-Costa Rica
- CARICOM-Dominican Republic, and