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COMMENTARY: The Caribbean at the End of 2006…and Beyond

Posted by kinchendavid on December 31, 2006

By Sir Ronald Sanders

As dusk descends on the Year 2006, the 15 small countries of the Caribbean Community (CARICOM) continued to face daunting challenges in the global community in relation to trade, investment and development assistance.

Banana exports were already badly hurt from the loss of their preferential access to the European Union (EU) market causing pain for small banana growers in rural communities in several Caribbean countries. But, as the year was drawing to a close, Ecuador, which already controls 60 per cent of the world market, launched a new challenge to EU banana regime. It is a challenge Ecuador is likely to win in the long run simply because World Trade Organization (WTO) rules say the days of preferences are done, and CARICOM states have not managed to get themselves into a category of countries which qualify for special and differential treatment.

Therefore, Caribbean banana growers in Belize, Jamaica, St Lucia, St Vincent and Dominica are headed for more difficult times.

The prospects for sugar exports seemed no better. Having lost the preferential price they earned in the EU, the sugar producers in CARICOM countries (Barbados, Belize, Guyana, Jamaica and Trinidad and Tobago) were struggling with ways to transform the industry; but at least some of them are coming to terms with the need for innovation such as ethanol production.

Financial services, particularly off shore banking and insurance, once held out hope for the adjustment of some CARICOM economies; this hope is fading fast. While it is true that there has been growth in the provision of financial services within CARICOM particularly from financial institutions in Trinidad, Barbados and Jamaica, participation in the global economy is shrinking.

Except for the Bahamas and to a certain extent Barbados (which has a special treaty arrangement with Canada), the Organization for Economic Cooperation and Development and the Financial Action Task Force (both creatures of the richest countries of the world), using the International Monetary Fund as a surrogate to implement suffocating rules that suit their own powerful states, have effectively constrained the scope of much of the Caribbean’s financial services sector as a global player. The requirements for regulation, monitoring and enforcement are out of proportion to the scale of money and transactions that pass through the area, and they are eating into profitability.

Current negotiations between Caribbean countries and the EU over Economic Partnership Agreements are sadly lacking in a development orientation. The EU is insistent on the Caribbean opening its markets to European goods, services and investment with little compensatory mechanisms for the dislocation which such opening will cause to local businesses and the losses to governments of tariff revenues.

This situation calls into question policy positions adopted by the region in its negotiating strategies and demands a more radical approach, including a re-examination of the negotiating structures themselves. The negotiations require the expertise of good technical officials, but they also now cry out for political positions to be adopted based on the realities of economic conditions on the ground. As the year ended, there were rumblings within the Caribbean over the internal workings of the negotiation strategy and structure.

Tourism was the one bright spot in an otherwise bleak horizon in 2006. But, the industry boomed in the last three years on the back of a weak US dollar to which many Caribbean currencies are tied. European and other tourism to the region improved simply because the drop in the exchange rate between the US dollar and other major currencies created a de facto devaluation of Caribbean currencies.

Structural changes that are desperately required for tourism, including the promotion of local ownership, enforceable linkages to farmers and local manufacturers, greater pan-Caribbean cooperation in promotion, flight scheduling and hospitality-sharing, are yet to happen. A proposal for a Caribbean Tourism Fund, commissioned by the Caribbean Hotels Association, has been produced by a UK firm, but so far no action has been taken on it.

Global competition not only in its traditional export markets, but also within their own domestic market stared CARICOM countries in the face as 2006 faded away, underlying starkly the absolute necessity to integrate or perish.

At least the year started with six CARICOM countries at last bringing the much promised Caribbean Single Market (CSM) into existence, and, despite the uncertainties that surrounded their decision, the OECS countries joined in the middle of the year.

The Single Market is by no means complete and, unless a range of measures are established by law including common regulatory rules for services and the machinery for integrating production across CARICOM countries, it will be a flawed process giving rise more to contention than to harmony.

A key issue – the freedom of movement of labour – remains off the discussion table, mired in fears of a political backlash for the political party in each country that dares to acknowledge the reality that there can be no genuine single market without free movement of all the factors of production. A great insularity (if not xenophobia) continues to exist among groups within CARICOM countries directed at each other.

Sharp divisions are still part of the relationship between governments and the private sector, on the one hand, and governments and the trade union movement on the other, in many counties of CARICOM. Yet, until there is a symbiotic relationship between these three groups that is built around an agreed strategy for taking forward the Single Market, CARICOM will be marking time in a world where other regions are marching forward.

It is a glaring reality – from which the Caribbean as a whole is yet to learn – that the government negotiators in trade negotiations, whether bilaterally, at the WTO, or through the OECD – are representing the interests of big businesses in their countries who want access to the markets of others on the most advantageous terms while at the same time restricting entry to their own market through the use of non-tariff barriers and other ruses.

The time is now urgent when there must be substantial consultations between Caribbean governments, the Caribbean private sector and the Caribbean Trade Union movement, to determine agreed strategies for trade negotiations in goods and services.

The way in which CARICOM itself is to be governed is an issue that governments continue to duck. For over fourteen years, there has been a blueprint for such joint governance produced by the West Indian Commission. It is a blueprint that would ensure through CARICOM-wide laws that decisions are enforced and not left to languish until the last reluctant government recognizes the value of their implementation.

For fourteen years, some governments have filibustered over the plan, worried, it seems, about the loss of individual national control even though each structure presented so far has resided final authority in councils of ministers drawn from each territory and, of course, in Heads of government themselves.

When CARICOM Heads of Government meet early in 2007, a new report on governance of the Caribbean Community will be before them. It is to be hoped that this time, given the competition that the region is facing in the international community, for trade, investment and aid, they will be emboldened to put the necessary machinery in place.

One thing is for sure: if the Single Market is not completed in all its aspects, and the governance of the community remains unsettled, the prospect of a Single Economy in 2008 – which is a far more ambitious even though vital project – will dim as it drifts into the distance.

CARICOM can not afford the delay. And, it can no longer live on the laurels of being one of the most advanced regional integration movements in global society. Events in world trade, in business competitiveness, in science and technology are overtaking it. Real empowerment has to be given to the regional integration structure if it CARICOM and its member states are to advance. If such empowerment does not occur, some of the more progressive member states will break out on their own, and the regional process will wither on the vine.

Already some governments of CARICOM countries believe that, in their individual interest, they should be entering bilateral trade and investment relationships with countries such as the US, Canada, India and China. Countries such as Trinidad and Tobago, which have resources – particularly oil and gas – in which these larger countries are very interested, may not long tolerate the constraints of a slow moving and indecisive CARICOM.

The Single Market will also continue not to fulfill its promise to farmers and manufacturers in CARICOM until governments pay serious attention to transportation within the region by developing a common and enforceable transportation policy. It is not a tribute to CARICOM that after 33 years of existence, the agricultural and manufacturing production of CARICOM states can not be transported within the region. Yet, both farm products and manufactured goods can be brought to individual countries through the United States.

It should be noted that the region’s bill for food imported from outside the areas is now US$3.6 billion.

A policy of CARICOM wide incentives for creating a shipping industry within the region is non-existent. But, if the market were to be developed to include all the CARICOM countries plus Cuba and the Dominican Republic, a profitable investment opportunity surely presents itself.

In the meantime, the absence of an agreed policy has made a complete mess of regional air transportation. As 2007 dawns, neither tourism to the region nor Caribbean travelers within the region can feel secure. Instead of one regional airline – or at least a merger of some of the costly activities of individual carriers – national carriers are continuing to compete among themselves. Caribbean Airlines, the successor to BWIA, will compete with the new airline that emerges from negotiations between LIAT and Caribbean Star; Air Jamaica will compete with Caribbean Airlines on traffic from the US into the Caribbean; and Caribbean Airlines operations from the United Kingdom will have no Caribbean identity as British Airways aircraft takes BWIA’s place in a code sharing deal.

The arrangements in air transportation have been reached by individual governments. It seems no government is willing to offend other governments by insisting at a CARICOM level on an air transportation policy. So, in the name of national pride or national control, the gains that could result from regional cooperation go by the way side.

At the root of this lack of progress in deepening CARICOM’s integration arrangements are two things: political pandering to, if not exploitation of, the fears by groups within national communities that they will be swamped by an influx of other Caribbean nationals into their territory; and a failure to explain effectively that CARICOM should be a single space, like the United States, where people, production, and capital of each state move freely just as, for example, the people, production and capital of Texas move to New York.

2006 witnessed a small step forward in this process when the basic foundation of the Caribbean Single Market was laid. Beyond 2006, CARICOM must deepen the integration process and must, particularly, facilitate the integration of the factors of production to make Caribbean economies more competitive in the global economy.

It is urgent that the mental construct of national boundaries be broken down and replaced with a realistic understanding that for the people of CARICOM to survive the onslaught of global competition, CARICOM must be a single landscape.

* * *

Sir Ronald Sanders is a business executive and former Caribbean Ambassador to the World Trade Organisation who publishes widely on Small States in the global community. He is a regular contributor to Huntington News Network. Responses to: ronaldsanders29@hotmail.com

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