MANCHESTER TRADE LTD...
1710 Rhode Island Avenue, NW
Stephen Lande, President
Dr. David Lewis, Vice President
Anthony Carroll, Vice
February 3, 2007
Haitian Trade Initiatives after Passage of HOPE
Stephen Lande and Amb. Ernest H. Preeg
is now for trade-policy initiatives with the objective of making
a significant center of manufacturing in
. Such manufacturing
would include assembly of
and third-country inputs for export. Should this occur in
, it would replicate the role played by a
number of Far East locations (
) in the 1970s through the
1990s. It would require assuring effective implementation of HOPE. More
important, it would go beyond HOPE to address all aspects of trade, investment
and services. This paper focuses on these broader trade-policy initiatives.
Trade Policy Initiatives
of HOPE is the first step in the economic renaissance of Haiti. The bill
should reverse the recent decline in apparel assembly in Haiti and in
fact perhaps lead to double-digit growth. More important, however, is that it
sends the clear message that Haiti
is open for business. Provisions in HOPE are limited to garments and one
automotive part. The renaissance that we suggest for Haiti will involve many
manufacturing and service sectors.
Entry into a Stand-alone FTA with the U.S. or Adhere
almost always have positive effects on economic development. This experience
dates from the first FTA negotiated by the United
States with Israel in 1984 to NAFTA and most
recently to DR–CAFTA. Haiti
will gain even more than these countries. This is as much due to the positive
effect of the market opening in the Haitian economy as to the fact that an FTA
requires introduction of market principles in a number of key areas.
Eligibility requirements for HOPE implementation are actually a starting-point
for FTA negotiations since they can form the basis for Haiti to demonstrate that it is
ready to enter into an FTA.
It now appears that Trade
Promotion Authority, due to expire this June, will be extended before the end
of this year. Current indications are
that the extension may be for a short period of time (one year) and limited to
multilateral trade negotiations, specifically the DOHA Round. However, it is always possible that given the
support for Haitian development, most recently recognized by the passage of
HOPE, one can add a rider to TPA allowing free-trade negotiations for
. If such effort is to undertaken, the Haitian
government and private sector must in the near future convince the
administration and Congress of their readiness and commitment to such negotiations.
A major objective of this effort will be to negotiate a free-trade agreement
with the United States
before the 2009 reduction and the 2010 expiration of HOPE provisions covering
apparel incorporating third-country-woven fabrics. This period also coincides with the end of
the Haitian proposal for an IMF arrangement under the Haitian Poverty Reduction
and Growth Facility (PRGF). This would require negotiations during the time
period foreseen for any possible renewal of TPA.
A Free Trade Agreement (FTA) is absolutely necessary to create incentives
to carry out appropriate reforms, specifically in establishing good-governance
institutions and practices. Such an agreement is now a requirement since almost
all other countries with the exception of MERCOSUR and non-competitive
Caribbean countries will have entered into a free-trade agreement with the
early next year. In many ways the investment provisions in such an agreement
are more important than the trade provisions, since American companies rely on
the discipline within an FTA in making decisions as to where and how much to
invest. The trade provisions are also important since they are deeper and more
comprehensive than the transitory provisions available under CBI.
There are two ways that Haiti
can negotiate free trade with the United States. First is simply to negotiate a stand-alone
agreement with the United
This would only require an agreement with the United
States but would only provide duty-free access into the United States.
A second possibility is to request adhesion to DR–CAFTA. Such a path may be more difficult since it
requires not only the acquiescence of the United States but of the six other
members of CAFTA. The advantage of
adhering to DR–CAFTA is that it would allow free trade with the Dominican Republic. This would recognize the indivisibility of
imports from Hispaniola regardless of the mix of content from the Dominican Republic and Haiti. It would encourage full consolidation of
production on the island and encourage Haitian officials and businessmen to
learn from the successful transformation on the other side of the island.
If entry into DRCAFTA proves politically too complicated, it could be possible
FTAs with both the
. This would promote co-production on the island
of products since Haitian and Dominican origin will be treated the same for
purposes of duty-free entry into the
Negotiate FTAs with Additional Countries
should also consider negotiating free-trade arrangement with other countries.
In this regard, we suggest both hemispheric (
Colombia, Central America)
and extra-hemispheric arrangements with such countries as Malaysia (upscale assembling), Taiwan and Israel (technology.)
more limited option would be for FTA trade partners in the hemisphere to agree
to treat Haitian-origin materials the same as materials originating in any
member of the FTA. There is whole array
of such agreements, with the largest being NAFTA and MERCOSUR. Given their
political involvement in
and their support of a democratically-elected regime, the United States and Brazil among others might well
support this concept. In fact, the two countries could agree to work with their
respective free-trade partners to allow FTA duty-free entry for products
containing third-country components but assembled in Haiti. There also may be efforts in
the hemisphere to knit together various FTAs which could include harmonizing
Utilization of Existing CBI Benefits
Secondly, CBI provisions should be reviewed. Once CAFTA–DR is
fully implemented for all participants,
Haiti will be the only country with
manufacturing capability that will remain as a beneficiary of CBI. There are a
large number of existing opportunities for Haitian producers to incorporate
third-country inputs and meet CBI origin requirements — opportunities that can
be realized without changing current provisions. Haitian authorities, possibly
working with a proposed investment commission, can work with the USITC and
outside consultants to identify such products and circulate the information to
the private sector and multilateral development organizations. Secondly, in
those areas where origin rules discourage such production, one can amend CBI
especially in those cases where no U.S. manufacturer would be harmed.
One useful tool could be to temporarily reduce the required value-added to 20
percent, restoring it to 35 percent over time.
AID For Trade
international community is prepared to provide a significant amount of
assistance to help
develop trade-related infrastructure and other forms of supply-side capacity.
Supply-side capacity-building involves numerous factors, the most pertinent of
which is institution-building to allow good governance, particularly rapid
decision-making and reduction in corruption, promotion of the private sector,
adequate middle management, and upgrading of manufacturing skills. Such an
effort would have to be accompanied by a solid program of investment promotion,
managerial training and upgrading the skills of the work force.
be successful, the Haitian private sector would have to expand beyond its
preoccupation with clothing exports and move into other products and other
sectors. Fortunately, the Haitian private sector has proven to be resilient
with an ability to recover from political disorder in the past, and if given
the opportunity and some assistance, should be able to diversify and upgrade.
trade-related issues which must be addressed for the FTA to work for Haiti include
port security, extension of duty-free zones, and trade-facilitation measures.
Even with sufficient donor resources, the beneficiary country still must have a
plan to coordinate the assistance offer.
addition to the normal aid flows, there are two new sources of funding. The
Millennium Challenge Corporation has been established by the Bush
administration to provide assistance to “worthy” developing countries with
project assistance. Countries must enter into a compact with the U.S.-government-supported
Millennium Challenge Corporation. An MCC compact provides support for
infrastructure and capacity-building programs in exchange for responsible
Haitian policies. To be eligible to enter into a compact with the corporation,
countries must have policies that are judged to be reflective of good
governance and investor- and market-friendliness. The policies must also be
conducive to reducing poverty. Haiti
can develop this eligibility.
has set up a working group to develop guidelines of “Aid for Trade” as a tool
for building supply-side capacity and trade-related infrastructure. Aid for
Trade is designed to allow a developing country to take advantage of trade
liberalization from multilateral, plurilateral and bilateral negotiations as
well as to meet increased competition from market-opening measures. Although
the DOHA Round is currently suspended, the work of the AID for Trade Working
Group continues and its recommendations were delivered last week to the WTO
General Council. We believe that Haiti should follow the work of
this group. Being the only least-developed country in the Western
Hemisphere, it could be an ideal country to benefit from the
In cases where the United States
and its trading partner agree not to enter into free-trade agreements, the
negotiated agreements focusing on investment.
For example, MERCOSUR rules prevented Uruguay
from negotiating an FTA with the
Instead, the two countries recently concluded
negotiations for an investment agreement.
After a failure to negotiate an FTA with the South African Customs Union, the
announced that it would try to negotiate an investment agreement
Haiti should not settle
for such agreements since it will maintain the disadvantage faced by Haitian
exports in the U.S.
compared to those from those
free-trade partners. Duty-free treatment
would not be bound and
would not be able to use dispute- settlement procedures against unilateral
reduce or remove benefits. Investment
provisions are included in an FTA—thus failure to negotiate an FTA would be a
There are two types of investment agreements. A Trade and Investment Framework Agreement (TIFA) promotes the establishment of legal
protections for investors, improvements in intellectual-property protection,
more transparent and efficient customs procedures, and greater transparency in
government and commercial regulations. A Bilateral Investment Treaty (BIT)
is more limited, focusing on investment issues.
The BIT program’s basic aims are to protect
investment abroad and to
encourage countries to adopt market-oriented domestic policies that treat
private investment in an open, unbiased and transparent manner.