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What is a partial scope agreement?
Thursday, May 10, 2012
In trade negotiations lingo, the term partial scope agreement (PSA) has become more commonplace of late. In March T&T signed such an agreement with the Central American country, Panama. In April, this country began negotiations with Guatemala on a PSA. These moves are all part of an aggressive and sustained campaign to ensure Latin America is seen as the new frontier for south/south trade opportunities. The question is: what is a partial scope agreement? What about its terms and conditions differentiates it from, say a bilaterial agreement? Apart from the PSAs signed with Panama and Guatemala, Brazil has signed with St Kitts/Nevis, Guyana with Brazil, Caricom with Cuba, Caricom with Venezuela and Belize with Guatemala. According to the Office of Trade Negotiations, Caricom secretariat, “Caricom also has a bilateral trade agreement with Venezuela. secured in October 1992. The Caricom-Venezuela Trade and Investment Agreement was signed in October 1992 and became effective on January 1, 1993.” Now, what’s negotiated around a table doesn’t always translate to the real world. For instance:
Belize/Guatemala partial scope agreement
The Belize-Guatemala PSA is the first trade agreement that Belize has signed with another country bi-laterally. Negotiations were launched on November 22, 2004. Belize had signed the Agreement on June 26, 2006, and the Congress of the Federal Government of Guatemala had approved the PSA in October 2009. The Guatemalan President issued a decree to give effect to the agreement on April 4, 2010.
Existing trade with Guatemala
Belize has a negative trade balance with Guatemala. This means that Belize imports more Guatemalan products that it exports to Guatemala. There are great export opportunities to be gained from the PSA with Guatemala.
Potential for trade expansion
Based on the data provided by the Directorate for Foreign Trade, Guatemala imports products that Belize can easily supply on a predictable and consistent basis. These products are orange juice, spirited, whether or not sugared, sweetened or frozen, kidney beans, fresh fish, livers and roes, frozen shrimps and prawns, in shell or not, fish, crustaceans, molluscs, aquatic invertebrates, meat and edible meat offal, live poultry, live swine, bovine animals, and corn.
The agreement is only partial in scope, meaning it allows for reciprocal (two-way) trade between Belize and Guatemala on a small number of goods. The agreement covers 150 specified tradeable products. The PSA specifies for the immediate elimination of tariffs by 50 per cent and 100 per cent; these goods are grouped in Category A. Under Category A products, Belize will be able to sell at preferential tariff margins to Guatemala products such as: tilapia, yellow maize (up to 20,000 metric tonnes at zero per cent duty), black beans (up to 875 metric tonnes at zero per cent duty), rice, toilet paper, doors, windows, wooden and wicker furniture, matches, most citrus fruits and concentrate, mangos, guavas, watermelons, pineapples, plantains, among others. The goods marked with Category ‘A’ on Guatemala’s list are those products in which Guatemala has granted Belize preferential (duty-free, in many instances) access to their market. The agreement also provides for Belize to gradually eliminate its tariffs it charges on Guatemalan imports by 50 and 100 per cent over three years for those products categorised as ‘B’. Likewise, a gradual elimination of Belize’s tariffs on Guatemalan imports by 50 per cent and then 100 per cent over a five-year period is contained in category ‘C’. The PSA also defines what would be considered as insufficient working or processing in which a certificate of origin will not be issued.
The PSA provides for the promotion of investment between both countries. Particularly, the agreement speaks of joint venturing and the facilitation by both parties with respect to the issuance of necessary permits, licenses, and contracts for technical, commercial or administrative assistance with relation to investments.
The PSA also provides for a favourable investment climate to attract investment in both countries. Emphasis on the discouragement of anti-competitive business practices was enshrined in the chapter on investments. The agreement also provides that investments of investors of either party shall not be nationalised, expropriated or subjected to measures that would nullify their value, or have effects equivalent to nationalisation or expropriation.
The chapter on investments also contains its own provisions for the settlement of disputes between an investor and the country to which the investment is made concerning any breach of obligations under the agreement. (Wikipedia)