Negotiators completed the final text of the new EPA which involved threats by the Caribbean of litigation in European courts in a dispute over sugar, and led to bad blood between the two regions.

Come January 1, a new trade and aid pact between 15 Caribbean nations and the 27 members of the European Union (EU) will herald a new era in relations between the two trade blocs based largely on reciprocity rather than protected trade, as has been the case for centuries.
According to Ipsnews.net, in recent days, negotiators for the two sides completed most of the final text of a new Economic Partnership Agreement (EPA) that took the better part of five years to negotiate, involved threats by the Caribbean of litigation in European courts in a dispute over sugar, and led to bad blood between the two regions because of what Guyana’s President Bharrat Jagdeo refers to as EU bullying to forge an agreement at all cost.
The negotiations were wrapped up in Barbados with just days left before a year-end deadline that, if missed, would have meant disaster for the Caribbean--as most of its key export products would have faced duties of up to 30 percent entering the EU. That was the threat from the EU that Jagdeo and other leaders were uncomfortable with, but had to respect just in case the Europeans were not bluffing.
Under the new EPA, which replaces the 2001 Cotonou Agreement signed in Africa, the Caribbean will now have to open 86.9 percent of its market to duty-free imports of EU products over the next 25 years. It calls for 82.7 percent to be liberalized in the first 15 years.
There will be a moratorium of three years on all tariffs except those on motor vehicles, spare parts and gasoline coming into the region. Other duties and charges are to be kept during the first seven years and then phased out in the following three years.
For sugar, which governments so zealously guarded during negotiations, the Caribbean gets an additional 60,000 tons on top of the 410,000 it is allowed to export under the old arrangements. But the quota now has to be split between a new exporter--the Dominican Republic and the English-speaking producers that traditionally sold the commodity to European destinations.
Fixed quotas and duty-free access are set to be removed by late 2009, meaning that exports from the region will no longer be protected and would have to compete with cheaper products from third-party exporters.
Additionally, the two sides agreed that those able to take up the slack would share any shortfall by a sugar-producing nation. A 41,000-ton Trinidad shortfall will go to its neighbors. St. Kitts has also quit sugar production, but it is unclear what has happened to its quota if not divided among bloc members already.
One thing has clearly emerged from the talks that began when the EU decided to split up the 79-nation African, Caribbean and Pacific (ACP) umbrella group into six separate regions, with each having to battle for its own EPA. Leaders say the new liberalized environment means that the region has to produce more efficiently as competition would come from countries with cheaper labor and production costs.
Jamaican Prime Minister Bruce Golding, who is responsible for external negotiations for the Caribbean trade bloc, echoed Carrington’s sentiments.
“It is now for us to get our act together, to demonstrate efficiency in the goods we produce and the services we provide and competitiveness in how we price our goods,“ he said.
Twice in recent weeks the two sides were deadlocked. First there was a disagreement over sugar. Then the same EU states, France in particular, refused to allow regional entertainers to work freely in Europe.
More of the same could be coming in 2008 when Canada and the Caribbean begin free trade talks that would cover hundreds of goods. Governments are also thinking about whether to follow the lead of Central America in negotiating a group free trade agreement with the US now that talks for a hemispheric pact have collapsed with little hope of resuming.
Regional negotiators say they will take a break over the holidays and then prepare the agreement for cabinet and parliament consideration.

Since China adopted its reform and liberalization policies, the country has delegated more and more power to regional governments, especially in the economic arena, to give full play to regional initiatives, reported Chinaview.cn.
The authority, financial power and even special privileges enjoyed by regional governments have expanded remarkably, which has promoted regional economic development.
However, the congenital defects endemic to regional power, such as partiality, shortsightedness and narrow-mindedness, have generated local protectionism and problems such as smuggling, draining of tax incomes, counterfeited products, fake statistics, environmental deterioration and work safety accidents.
The complicated financial problems facing the country’s market economy should be dealt with comprehensively, and the national environment requires the cultivation of a unified market. Regional power is weak in resolving such problems and sometimes even becomes an obstacle for the central government to execute solutions.
Given this background, vertical management has been enhanced. It expands from traditional areas like customs and security organs to new fields like taxation and environmental protection departments. The latter were formerly controlled by regional governments.
Industry and commerce, local taxes, land use, quality supervision, inspection and quarantine and food and drug administration are managed by provincial-level governments.
The national land inspection, audit, financial inspection, environmental protection enforcement supervision and inspection teams sent by the National Bureau of Statistics fall under the category of special vertical management, which is a new thing, appearing with just the past few years.
The enhancement of vertical management will help break down local protectionism, guarantee the smooth implementation of policies and regulations, avoid intervention by regional governments, optimize the allocation of resources and ensure the maximum protection of national interests. But vertical management is not a cure-all formula.
Vertical management departments cannot completely stamp out intervention by local governments as there are multiple interest relations and connections to consider. Affected by the trend of vertical management, departments under regional governments may try to crowd themselves into vertical systems, which would affect the stability of regional governments and may result in some unpredictable problems in central-regional government relations.
Thus the relationship should be regulated according to the following principles:
First, all laws regulating the relationship between local departments directly under central government organs and local governments should be made within the framework of the Constitution.
Second, a complete legal system is a prerequisite for the rule of law. We need to complete our laws and regulations according to the Constitution to regulate the division of power.
Third, the opinions of local governments should be taken into consideration when the central government makes any adjustments. Democratic decision-making is needed.
Last but not least, vertical management will only be rational and practical when the functions are at the national or trans-regional levels.

The biggest surprise of 2007 was the way the housing slump shook the world economy.

For 2008, the economic outlook is Topic No. 1 for almost all American investors. Stock prices and bond yields already reflect recession worries, but an actual downturn would hit portfolios hard.
The bottom line looks like this: The economists project, on average, that the US economy will grow 2.1 percent from the fourth quarter of 2007 to the end of 2008, vs. 2.6 percent in 2007. Only two of the forecasters expect a recession, although it might feel like one if there’s sluggish growth over the next couple of quarters, as many predict. Almost all think the risk of a downturn has risen substantially in recent months.
According to Businessweek.com, the forecasters say slow growth in the US will lift the jobless rate from 4.7 percent in November to 5.1 percent, and it will hold down inflation. As oil prices level off or decline, the yearly growth in consumer prices will slide from 4.3 percent in November to 2.4 percent, while core inflation, which excludes energy and food, will hold steady at a tame 2.2 percent. Profits will grow in the low single digits. Home prices will fall about 7 percent, but housing starts will bottom out by midyear.
Almost all “no recession“ forecasts are predicated on further rate cuts by the Fed. The target rate is expected to drop from 4.25 percent to between 2.5 percent and 4 percent, with almost half of the analysts projecting it to fall below 4 percent.

Credit Crunch
Perhaps the biggest surprise of 2007 was the way the housing slump shook the world economy.
It wasn’t just the direct drag of less construction activity, the shrinking outlays on home-related goods, and lost consumer wealth, as economists had expected. It was the way the subprime debacle hit the financial markets, setting off two things: a new downturn in housing activity and a liquidity crisis that now threatens a broad squeeze on credit availability.
Analysts are encouraged by the Fed’s coordinated efforts with other central banks to auction off funds in an effort to relieve strains on liquidity. However, if key market rates, crucial to the short-term funding needs of businesses, fail to come down, most economists believe aggressive rate cutting will be the only way to protect the US economy.
With help from the Fed, consumers and businesses should be able to manage the crunch. Businesses will continue to expand their outlays and payrolls, since they are not overextended with debt, excess production capacity, or inventories, and the lower dollar is providing a stimulus for exports, especially since the rest of the world is doing O.K. But without effective Fed action, the credit vise could begin to squeeze too hard.

Housing Slump
“Housing starts must fall low enough relative to sales to bring a significant reduction in inventories,“ says Robert Melman at JPMorgan (JPM). Only then can prices bottom out, as supply and demand rebalance.
That will probably take all of 2008. Maybe longer. Housing starts have fallen to an annual rate of 1.2 million, from a peak of 2.3 million nearly two years ago. Economists expect them to bottom out around midyear at 1 million, so the drag from housing will ease. Inventories of existing homes are still sky-high, which is keeping downward pressure on prices, but builders’ stocks of new homes have begun to shrink.

Global Economy
Foreign trade will be a big support for US growth in 2008.
In 2007, a shrinking trade deficit, fueled in large part by an export boom, almost completely offset the direct negative effect of falling residential construction on overall growth. The same will be true in the coming year, given good growth overseas and a competitive dollar.
The lower dollar will help, but there could be a dark side if, for example, the euro becomes overly strong and begins to hurt economic growth in Europe. The greenback will most likely decline a bit more, but not much.
As the US trade deficit narrows further, 2008 will mark a second consecutive year of movement toward a more balanced global economy. However, it’s a transition that means the US is shifting away from a heavy dependence on consumer spending and toward more reliance on exports.