The Alphabet Soup
of a Caribbean Economics Crisis

by

Intro to Caribbean History, May 19, 2000

CARICOM, CBI, OECS, NAFTA, CDB, EU are just a few players and factors, that add spice to the alphabet soup of Caribbean economics. As we enter into a new millennium the Anglophone Caribbean countries find themselves in the midst of new and old problems that all together spells crisis. The most dominant issue is being marginalized in the new global market. The task of economic integration to avoid this and how to go about carrying it out in a way that is beneficial to all of its members and the Caribbean community as a whole is another issue. A related issue is closing the economic disparity between its less developed countries and

With in the contents of this term paper, I would like to convey the importance of the integration of the Caribbean market into a single united market as opposed to single scattered markets. I will also show how things like globalization, trade barriers, and trade blocks affect the Caribbean market. I will also discuss the role of CARICOM, OECS, CBI, NAFTA, and CDB in this scheme. Based upon this information I am confident that in order to avoid being marginalized, the Caribbean MUST integrate at a faster rate than has been demonstrated and must wean itself from it’s dependency on former colonizers.

The threat of being marginalized comes from quite a few directions. The first is their respective small size is not beneficial with competitors like Mexico. In order to survive in against competition like Mexico they must integrate (TO SHOW LAND MASS COMPARISION). In order to establish and maintain a competitive position, they must realize the power of numbers and pooled resources.

The Caribbean Community and Common Market (CARICOM) is an association of fourteen Anglophone Caribbean countries that favor the integration of the region. The members of CARICOM have all adopted a common external tariff and rules of origin for outside trade. CARICOM was formed in 1973 in transition from the Caribbean Free Trade Area, which was formed in 1968. Listed below are CARICOM members and their annual average growth rates between 1981-1997.

Real GDP Growth Rate 1981-1997

Source: www.worldbank.com

The Organization of Eastern Caribbean States (OECS) is made up of seven small islands was formed in 1981 with ideals that mirror that of CARICOM’s. below list info

The Caribbean economy has suffered many blows. Falling export prices, rising foreign debt, falling savings, world wide economic rescission, not to mention devastating hurricanes have all hurt it’s economy.

Caribbean countries have received preferential trade relationships with the United States, Canada, and former European colonist. The 1975 Lome convention granted preferential trade relationships between former European and their respective colonies. The former Caribbean colonies were granted preferential treatment for goods such as bananas, rum, sugar, etc. They were also provided with financial assistance. Another unilateral trade agreement was Canada’s Caribbean and Canada Trade Agreement (CARICAN) of 1996. But these special trade agreements are fast drying up because of free trade agreement such as NAFTA and GATT.

The General Agreement on Tariff and Trade or GATT put an end to that in regards to the Caribbean’s preferential trade of bananas with the European Union. ADD The North American Trade Agreement (NAFTA) of 1994 between the United States, Canada, and Mexico eliminated trade barriers between them and facilitated a cross boarder movement of goods and services. This trade agreement really put a wrench in the Caribbean’s preferential trading with the United States. This raised major concern because the United States is a major market in term of trade to the Caribbean.

With NAFTA by its side, Mexican made apparel and apparel in assembled in Mexico with US fabric could enter the US market free of quotas and duty free. Apparel producing countries such as Jamaica would still have to pay the twenty percent duty on their garment even though they are made from American fabric. NAFTA will also give Mexico open access to trade in agricultural and horticultural goods and services as well as electronic and apparel assembly. The massive size of Mexico’s low wage work force and it proximity to the United States is another threatening factor to the Caribbean in terms of foreign investment.

These factors may also lure established investors in the Caribbean to relocate to Mexico. Caribbean tourism also threatened by Mexico’s heightened interest in Mexican destinations such as Cancun and Cozumel. In order to level the playing field, the Caribbean Basin Free Trade Agreement was proposed to give the Caribbean a NAFTA like parity. This agreement gave the Caribbean the same tariff free movements extended to Mexico and Canada. The life of this agreement was only three years because its purpose was that of a transitional aid to protect the Caribbean from NAFTA shock. NAFTA came as a wake up call to the Caribbean that times are changing and if they were to survive they would have to liberalize their trade policies. In the long run Reciprocal trade is more economically productive than the immediate nonreciprocal preferential trade because deepens the sense of independence but more importantly its potential to attract new international investments.

The Caribbean Basin Initiative (CBI) was introduced by the Regan administration to generate economic recovery through private investment and lowering trade barriers. It provided CBI members with permanent duty-free access to the American market for most export items p27.

In conclusion before the Anglophone Caribbean countries can join the global market it must first strengthen its regional market by way of integration and liberalization of its trade policy. It must form a common currency, justice system, consolidate and diversify its natural resources and services, and further develop infrastructure. There is power in numbers and properly pooled and developed natural resources and services. In order to gain the respect of the bigger more powerful markets such as the American, Mexican, European, etc must have something to show. They must truly understand that a conglomerate wields much more power than a small mom and pop business. With out integration the future of the Caribbean economic state will spell DOA– dead on arrival.

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