Shridath Ramphal Centre Trading Thoughts: Applying climate commitments to trade between CARICOM and Canada

At the CARICOM Heads of Government Conference held in February 2023, regional leaders received the Prime Minister of Canada, The Right Honourable Justin Trudeau, PC, MP. The engagement between the Canadian and CARICOM leadership focused on “charting new strategic partnerships, built on modern realities, including the diversification of the economic relationships and addressing climate change and doing both in ways that would create good jobs in all the countries.” CARICOM leaders welcomed the efforts by Prime Minister Trudeau to strengthen and deepen the special relationship between CARICOM and Canada.

Canada and CARICOM’s commitment to forging new strategic partnerships to address climate change could not come at a more crucial time for the region. In a policy paper on Trade-Related Climate Priorities for CARICOM at the World Trade Organization (Dr. Jan Yves Remy, UWI SRC & TESS Forum 2023) Small Island Developing States including those comprising CARICOM were recognised as especially vulnerable to global (climate-driven) shocks, despite their disproportionately low contribution to global greenhouse gas emissions. The paper also notes that “natural disasters from climate change present a clear and present danger to CARICOM economic activity”.

These challenges are compounded by macro-economic pressures that hamper the region’s ability to develop its climate resilience. Trade and trade policies can be harnessed to drive climate change mitigation and adaptation efforts. This SRC Trading Thoughts considers how trade rules could be leveraged to promote green industries, and highlights the possible components of a strategic “Green Free Trade Agreement (FTA)” between CARICOM and Canada.

An opportunity to reignite trade negotiations between CARICOM and Canada?

Negotiations between Canada and CARICOM towards a reciprocal FTA were launched on July 1, 2007. This was intended to replace the existing CARIBCAN preferential trade agreement which has been in existence since 1986, and provides duty-free access to the Canadian market for certain goods of CARICOM origin. As of May 2015, Canada’s position on the reciprocal FTA negotiations was that ‘[g]iven the lengthy negotiations and that Canada and CARICOM continue to have different objectives for a Canada-CARICOM trade agreement, no additional negotiations are planned at this date.’ In the context of Canada’s renewed commitment to climate-related strategic ventures in the CARICOM region, including its vocal support for the Bridgetown Initiative and pledged funding to tackle the climate crisis in the Caribbean , there are favourable diplomatic conditions for revisiting the idea of a Canada-CARICOM FTA.

Canada’s trade priorities include “contributing to a rules-based international system that advances Canadian interests” by “fostering cooperative multilateral action and pursuing new and innovative partnerships with a focus on … climate change and environmental protection.” While a formal articulation of CARICOM’s trade priorities, in particular as it relates to climate change, is less readily available, CARICOM leaders at the Heads of Government Conference “recognised that the impact of Climate Change and other exogenous shocks were having a debilitating effect on Small Island and low-lying coastal Developing States (SIDS) as well as other vulnerable developing countries, and that there was an urgent need to provide macro-economic security, resilience and sustainability for our countries”.

CARICOM and Canada, therefore, have a common strategic interest in mutual partnership to address climate change and environmental protection. Revisiting the Canada- CARICOM negotiations from the angle of a ”Green-FTA” could be part of CARICOM’s response to the urgent needs triggered by the impact of climate change.

Where to begin?

Generally, trade agreements can promote green industries by removing tariffs and non-tariff barriers on green goods and services and improving access to climate-related technologies. FTAs can also be used to incorporate environmental standards into trade agreements and to embed environmental commitments such as those found in the Paris Agreement. Recent agreements also focus on sustainable production methods, sustainability criteria, and conditions of labour. FTA rules can also be used to incentivize environmentally friendly practices. For instance, trade agreements can provide preferential treatment for countries that adopt sustainable practices, or are in the process of transitioning to climate-resilient economies.

An increasing number of FTAs include provisions addressing the environmental goods which are necessary for building climate-resilient and climate-responsive economies. Canada is a member of the Asia-Pacific Economic Cooperation (APEC) and as such has established a list of environmental goods for targeted tariff reduction so that APEC businesses and citizens access important environmental technologies at lower cost, which in turn will facilitate their use and benefit the environment. Some of the environmental goods identified in APEC’s list which are relevant to CARICOM’s own green transition include solar water heaters, solar photovoltaic cells, smart grid equipment, and recycling machinery.

Similar collaboration between Canada and CARICOM to phase out or reduce tariffs on a list of environmental goods of mutual interest over an agreed timeframe would lower the cost of importing these technologies into the region and potentially aid the region’s green economy transition and would be an attractive market access proposition for Canadian manufacturers of environmental goods.

FTAs between Canada and other developing countries hint at opportunities for strategic collaboration between CARICOM and Canada to address climate and environmental priorities. When Canada entered into an FTA with Honduras, the countries also entered into a parallel agreement on environmental collaboration. That agreement includes provisions that are relevant to CARICOM’s efforts at climate change mitigation, adaptation, and promotion of sustainable development.

For example, Canada and Honduras committed to ensuring that their domestic environmental laws provide for high levels of environmental protection and continuing to develop those laws and environmental management systems,
taking into consideration their respective levels of development. The Canada-Honduras collaboration is a good example of the type of legal framework which could be adopted in a Canada-CARICOM agreement. In the CARICOM context, it would encourage the harmonisation of environmental laws across the region and potentially raise the level of environmental protection within individual member states, while providing a measure of flexibility appropriate to the realities of our small vulnerable economies.

These commitments should be exempt from the dispute resolution provisions of the FTA. During the previous Canada-CARICOM FTA negotiations, Canada expressed its intention to seek to negotiate a parallel Environment Agreement which would also address commitments not to derogate from domestic environmental laws to encourage trade or investment, compliance with and the enforcement of environmental laws, and promotion of accountability, transparency and public participation on environmental matters.

Looking beyond Canada and CARICOM trade practice, the WTO has observed that an increasing number of FTAs contain provisions that address green issues. A non-exhaustive list of areas that are relevant to the CARICOM region and could potentially be addressed in a Canada-CARICOM Green FTA includes public, private, and civil sector
participation in policymaking processes; transparency; remedies in environmental matters; biodiversity and traditional knowledge; patents and plant variety protection; sustainable management of forests and fisheries; trade in forest and fish products; energy and mineral resource management; clean energy; energy efficiency; natural disaster management and technical assistance and cooperation provisions aimed at supporting the implementation of some of the environmental provisions.

A Canada-CARICOM joint committee could be established to support these objectives by identifying areas of mutual interest from among these and implementing appropriate measures and provisions. The commitments expressed at the Conference of Heads of Government must now be translated into policy and action to secure a sustainable and prosperous future for the region. A Canada-CARICOM Green FTA would promote sustainable development, protect
the environment, stimulate economic growth and support CARICOM members to address their climate priorities.

Russell Campbell is a Research Assistant at the Shridath Ramphal Centre for International Trade Law, Policy, and Services of The University of the West Indies, Cave Hill.

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