Is Caricom really useful?

What are some of the ways in which Caribbean states have put the Caribbean Community (Caricom) to use, and how effective have such measures been? This is part of the general question of whether Caricom is beneficial to Jamaica and to other member states.

Caricom countries are committed, through the regional institutional arrangements, to seek unified foreign policy positions that work to our collective advantage. Thus, within various fora such as the United Nations, the Organization of American States and the Latin American and Caribbean Economic Area (CELAC), Caricom countries often aspire to, and maintain, collective positions.

While it may be difficult in some circumstances to determine the usefulness of these collective efforts, their value in other cases is self-evident. For example, in matters concerning elections to various prestigious international bodies, candidates from the Caribbean may often anticipate a solid bloc of 13 or 14 votes from Caricom. With this block as a starting point, it is sometimes possible to garner additional support from other countries which are allied in particular respects to Caricom countries, whether individually or together.

But sometimes the Caricom voting bloc does not work in unison: this may occur, for instance, when more than one Caricom national is interested in the same position. When Caricom is so divided, this reduces the prospects of each Caricom national and dilutes Caricom’s impact. If anything, this underlines the importance of Caricom, as a working group, to each state. Jamaicans who have been successful in regional and international bodies can attest to this fact.

Perhaps more significantly, Jamaicans may recall that the country’s successful bid to serve as headquarters of the International Seabed Authority, built partly on the public internationalism of the Michael Manley Administration, also benefitted from the country’s starting point within the Caricom bloc and its links with African and other Third World counterparts.

POLITICAL INFLUENCE

Not every Caricom bid will be successful even when the group is unified, but unity enhances prospects in each case. This is an important point to remember in discussions concerning the value of Caricom to individual countries. Even where Caricom does not promote significant economic interests through intra-regional trade and investment, group solidarity may lead to indirect benefits such as access to positions of influence in international organisations.

In much the same way, membership of Caricom allows individual states to exercise some degree of political influence in their bilateral relations with the major powers. Would Jamaica, standing on its own, have greater weight without Caricom in deliberations with, say, major power X? The answer would seem to me to be self-evidently no; for, in all likelihood, major power X may presume that Jamaica will present itself as a representative, if not a leader, on matters of interest to all Caricom states. Each Caricom state may punch above its international weight because of the collective support we garner from our regional allies.

DONOR PERSPECTIVES

In assessing whether — and to what extent — Caricom is beneficial to individual Caribbean states, we should also bear in mind that other countries and international development agencies may wish to undertake technical assistance and other activities with us as a group. The international agencies may calculate, for example, that their initiatives are more efficiently implemented across Caricom as a whole, rather than in one or two countries.

By the same token, where Caricom countries share common problems — say, for instance with respect to human rights — donor agencies and countries may wish to promote solutions across the region. This may not always be the most suitable approach for individual Caribbean states, for we are unique on some issues. But, it may well be that we tend to overemphasise our uniqueness. In any event, the donor agencies may not be prepared to help us as individual states but will support a group approach.

BESIDE THE POINT

Now, the cynic may well say that the putative benefits mentioned above are incidental or, perhaps even beside the main point. The argument would be that individual Caribbean states could well derive the benefits of voting as a bloc and so forth without taking up all the institutional elements of Caricom. In response, the Caricom supporter — who may wish, for argument’s sake, to discourage Jamaica’s departure from the regional organisation — needs to identify some of the value added by Caricom as an economic grouping to Jamaica’s fortunes.

Starting then with trade, Caricom has sought to make its mark in two distinct areas, namely, external trade policy and intra-regional trade policy. As to the former, Caricom states have agreed that items entering the region must be subject to the same customs regime regardless of the importing country — in other words, the Caricom import system is based on a common external tariff.

COMMON EXTERNAL TARIFF

One effect of the common external tariff is to discourage individual Caricom countries from competing with each other in the setting of import duties. So, for instance, St Lucia will be in a position to undertake its economic planning safe in the knowledge that tax rate on importing a given item is the same for St Lucia as it is for Jamaica, and vice versa.

Ideally, the common external tariff promotes consistency among Caricom states in their economic dealings with the rest of the world. The Common External Tariff also seeks to promote fairness, as it discourages individual States from lowering their import rates in order to gain advantages vis-à-vis other States. In addition, it presents a united approach to countries outside the Region, and underlines the view that Caricom is one community for economic purposes.

On the other hand, the Common External Tariff may suffer from the disadvantages of inflexibility. It proceeds on the assumption that the level of import duties most suitable for, say, Barbados’ economic interests is also best for Grenada. As a matter of fact, this may not always be a reasonable assumption. The Common External Tariff also limits the ability of domestic governments to adjust import duties in order to meet fiscal demands.

Caricom governments are fully aware of the pros and cons of the Common External Tariff, and have sought, through the work of the Ministerial Council on Trade and Development, to establish procedures to ensure fairness in the administration of the system.

PREFERENTIAL ACCESS

Still with respect to external trade policy, Caricom states work consistently to have their exports enter foreign markets on preferential terms. In this regard, we hope that, by having low import duties placed on our exports (or no duties at all), we will be able to compete effectively against low cost exporters entering traditional markets for Caricom products. This is our attempt at profit maximisation through trade, and it builds on traditional systems of preferences and quotas that assure us stable markets for our products.

So, on one side, we have a uniform system for imports into the region, and on the other, we aspire to preferential access for our exports outside the region.

The Caricom approach to external trade policy, taken as a whole, is vulnerable to the criticism that it runs contrary to the free trade principles that characterise the current era of globalisation.

In particular, on trade matters, globalisation encourages the removal of barriers on all sides; thus, in the vision of true supporters of globalisation, the Common External Tariff would be removed, and Caricom exports, as well as exports from other countries, would enter foreign markets without import duties.

FREE TRADE SUPPORTERS

Free trade supporters argue that the removal of import duties — such as those encompassed in the Common External Tariff — leads to cheaper imports for consumers in the importing country, and therefore helps many nationals. For example, milk powder imported into Jamaica without significant duty will help to enhance the welfare of some of the most disadvantaged in society.

Free trade supporters also argue that the removal of duties on our exports — and the exports of other countries — into foreign markets forces us to become more efficient. This is so because, if we want to compete with other countries, we need to lower our costs of production and raise the quality of our products. By removing the protection of preferential access, free trade forces us to become “world class” in order to survive.

At the level of theory, the free trade approach is thus quite defensible. It has been, for at least two decades, part of the central plank of economic liberalisation supported by international economic agencies such as the International Monetary Fund, the World Bank, and the World Trade Organization.

It has also formed the starting-point for regional economic regimes such as the north american free trade area (nafta), and has prompted the ongoing negotiations concerning the trans-pacific partnership (tpp) and the transatlantic trade and investment partnership agreement (ttip).

PROTECTIONISM

As a group, however, Caricom does not accept the free trade approach. To support its anti-free trade perspective, Caricom has advanced at least three main arguments. To begin with, Caricom opposes free trade on historical grounds. The essence of the argument based on history is that Caribbean countries have inherited structural inefficiencies from the colonial era, and therefore need preferential treatment in order to compete reasonably against other countries.

During the colonial period, Britain introduced and maintained trade arrangements that worked to the advantage of the imperial power, and, conversely, confined most Caribbean economies to monocrop existence. With this background, we argue that more time is needed to allow us to enter foreign markets on equal terms with producers unshackled by a history of colonialism and production systems linked to enslavement.

REPARATIONS

Increasingly, too, the reparations argument based on history is invoked to justify protectionism. Thus, it is argued, for instance, that Jamaica was subject to British colonial exploitation for 307 years. Our parlous economic circumstances, and the treatment our forefathers have received, both present arguments for the view that we should be repaid for our historical periods of oppression sanctioned by the British authorities.

As is well-known, former British Prime Minister David Cameron publicly sidestepped the reparations argument on his visit to Jamaica last year. However, it seems that some implicit regard is given to the issue of reparations in preferential trading arrangements from the recent past, such as the Lome and Cotonou Agreements between the European Union and various African, Caribbean and Pacific (ACP) States. My point here is not whether these agreements from the past were compatible with more current arrangements or with the World Trade Organization system. It is just that Lome and Cotonou Agreements were rationalised in part on an implicit acceptance of the reparations argument.

FAIRNESS AND EQUALITY

A second argument raised by Caricom states in favour of protectionism is built on the premise of fairness and equality. Caricom governments argue that, given our pronounced economic problems, it would be unfair to expect our economies to compete fully with others in the globalised environment.

In some instances, Caricom states add that we need “special and differential treatment” in trade matters because we are small, poor, and especially vulnerable to the ravages of hurricanes — characteristic national features which undermine our productive capacities in significant ways.

Because of our small size, our economies do not enjoy economies of scale. Poverty prevents us from routinely acquiring the latest technological methods to enhance production — as Mwalimu Julius Nyerere perceptively noted at UWI, Mona, in the 1970s, “the poor remain poor because they are poor”. And hurricanes frequent disrupt economic development efforts.

Similarly, we submit that free trade in the globalised era results in social alienation. Precisely because we are unable to compete substantially in international markets, free trade does not necessarily enhance our prospects in those markets. And because foreign enterprises enjoy advantages which allow them to penetrate our markets, free trade leads to an influx of competing products that displaces our goods.

The result of this combination of circumstances is that unemployment is increased in our economies. This leads in turn to greater social inequality and an increasing sense of despondency among the broad majority of the people.

WESTERN PERSPECTIVE

A third argument against free trade raised by Caricom concerns the Western perspective. Although Western governments support free trade principles in the main, there are clear instances in which they resile from this position. It is also true that most Western countries, and some of the emergent economies of the East, have constructed their economic prowess on protectionist foundations, and then invoke free trade principles to reinforce their advantages.

Against this background, it is open to Caricom to say that our economies should be protected from heavy economic competition while we develop our capacity to compete on the open market. In this regard, it is noticeable that even within countries such as the United States, there is a significant strand of opinion which frowns on free trade largely because it is perceived as giving rise to economic problems in certain sectors of the economy. Caricom is therefore in a position to argue that even in the main capitalist economy of the world, free trade is not suitable for all economic agents.

In sum, Caricom as a group has worked towards ensuring that individual Caribbean states are not flooded by the high tide of free trade. True, in some areas we have not been able to stem the tide; but, by working together, Caricom has obtained concessions in international negotiations that acknowledge the challenges we face in addressing economic liberalisation.

MEETING QUOTAS

Paradoxically, although Caricom has been in the trenches in the fight for protectionist measures, this has not received much publicity. In some cases, Jamaica, for instance, has preferential arrangements such as those relating to quotas for our products in foreign markets. These quotas are in place to serve our exporters, and ensure that we have market access.

And yet — alas — in some cases we do not meet these quotas, and still complain that we are disadvantaged in terms of market access. Caricom needs to promote greater information about market access for our products, and encourage efforts among our exporters to take advantage of preferential arrangements obtained in hard-fought negotiations.

TRADE IN CARICOM

Some persons considering the significance of Caricom to individual member states concentrate on intra-regional trade, and conclude that Caricom is not working out. The basic scheme for intra-regional trade is built on the premise of free trade among all Caricom states. So, we may purchase and sell products without hindrance, and this, it is expected, will give rise to benefits for all.

As noted above, however, free trade can give rise to complex issues. It may also give us winners and losers. The challenge, therefore, is to ensure that the advantages of the Caricom free trade zone are spread in a fairly even way among the member states.

In his recent visit to Jamaica, Trinidad and Tobago’s Prime Minister, Dr Keith Rowley, brought a calm voice to our deliberations. But it is not entirely clear that the challenge of even treatment has been fully overcome. More specifically, it is discernible that Trinidad and Tobago benefits substantially from access to the comparatively large Jamaican market for a range of products. The converse, however, does not seem to be true. Our products do not compete very well in Trinidad and Tobago. There’s the quid, but where is the quo?

COSTS OF PRODUCTION

In some analyses of this challenge, it is suggested that Trinidad and Tobago has put up non-tariff barriers against our goods. In my view, this is not the case. Rather, the difficulty faced by Jamaica in Trinidad and Tobago seems to arise primarily from the fact that our costs of production exceed costs of our competitors. Consequently, even though we may have access to the Trinidad and Tobago market, and other markets in Caricom, the consumers are not impressed.

This is not necessarily the fault of Caricom, or of Trinidad and Tobago. We need, I believe, to study the structure of our production costs particularly with a view to assessing the impact of energy costs on our competitiveness. It is argued, for instance, that Trinidad and Tobago has an energy subsidy in place, and that we cannot compete against this. Caricom as a group needs to assess whether or not there is indeed such a subsidy, so that the accusations may be confirmed or refuted. Actions should be taken on the basis of empirical evidence.

MOVEMENT OF PEOPLE

Finally, in the assessment of whether Caricom works to the advantage of individual States, there should, of course, be consideration of the question of free movement of people. The concept of the Caricom Single Market — never mind the Single Economy which is a step too far just now — incorporates free movement.

Notice, though, that this has also generated much heat in our deliberations. Notice also that, if one single factor explains Brexit, it turns on the question of free movement of people. And notice, thirdly, that free movement of people has not yet fully embraced the idea that this should apply to Haiti, as a member state of Caricom.

It may, at very least, be time for the Caricom Heads of Government to develop a plan of action in the area of free movement. Travelling from one place to another in the Caribbean is already difficult enough — we should not also have to worry about problems upon arrival.

Stephen Vasciannie, CD, is Professor of International Law at UWI, Mona, and a former Jamaica Ambassador to the USA and the OAS.

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