Business Page – April 1st, 2001


CARICOM

Introduction

Caricom is the world’s smallest trading bloc with a population of less than six million and a combined GDP of US$20Bn. It is therefore most vulnerable to both domestic and regional shocks. It clearly needs to deepen the integration movement if it is to narrow the gap with the more developed countries and regions of the world and give hope to its people that there is a future for them in the region. Yet forty-three years after the formation of the Federation, progress is slow and we still hear words like being at the crossroads.

The future for the region was well articulated by Barbados Prime Minister Owen Arthur in his keynote address to the Annual Miami Conference on the Caribbean and Latin America when he said that ‘our best hope lies in the most effective integration of Caribbean economy; a process that require the choice of the best niches for specialisation, the forging of the correct relationship with global capital, production systems, trading regimes and the multilateral financial institutions”. While he agrees the necessity for the creation of the Caribbean Single market and Economy, PM Owens does not consider that its achievement will by itself resolve the economic problems of the Caribbean.

Earlier efforts at development in the Caribbean have not been successful and leads to understandable doubts whether with each country more pre-occupied with its domestic politics, future attempts will be any more successful. The Caribbean Trade & Investment Report published by the Caricom Secretariat on which this article is based, identifies several initiatives which did not produce the expected results. These include the Caricom Enterprise Regime, the Caricom Industrial Programming Scheme, the Caricom Multilateral Clearing Facility and the joint agricultural and marketing and production schemes.

These attempts which reflected then prevailing conventional wisdom sought to erect barriers to protect regional businesses and in the process distort what the economists would refer to as allocate efficiency. Countries in the region are now ceding often unwillingly their development options to an increasingly powerful World Trade Organisation which the more powerful countries and the multilateral financial institutions employ to impose their will. Faced with the plethora of rules national government and regional bodies are abandoning previously cherished development options which conflict with the rules of the WTO.

The Caricom Report referred to earlier points out that even as the Caribbean seeks to deepen and widen the regional integration movement in its quest for survival, at the global level the forces of liberalisation and deregulation seek to achieve universal allocative efficiency. Inevitably this raises tensions between regionalism and globalisation with absence of political clout and economic muscle putting regional countries at a significant disadvantage. An unfortunate and intractable problem which continues to challenge regional policy makers and the Caricom Secretariat, the principal administrative organ of the Community, is that notwithstanding their regional credentials, our political leaders think country first and in the process undermine the regional integration movement. As a result efforts to advance or defend regional interests in the international fora are compromised.

The consequences of this domestic and often selfish focus has been a further exacerbation of the vulnerability of our small economies which during the nineties have shown erratic performance. It is interesting that only Belize and the OECS countries have recorded positive real growth for all the years while all the MDC’s have recorded negative growth in some cases for three years. For the countries of Caricom to enjoy political and social stability, their citizens must enjoy consistently improving standards of living which can only come from consistently high rates of growth and a fair distribution of the income and wealth of the countries.

The challenge is enormous and there has to be some doubt as to whether our political leaders and indeed the countries share the vision and possess the will, talent and resources to develop at rates which will narrow the gap between these and the more developed countries. The ordinary citizen has to be forgiven for thinking that our political leaders have only a vague idea of where they wish to take us. For example, in Guyana there is a view held by persons of influence that for Guyana we should be thinking of a “continental destiny while maintaining our links with Caricom”. Geography and more recent developments also seem to reduce the commitment of The Bahamas, Jamaica and Belize to a Caricom Destiny even if one was possible.

The Report calls for higher rates of domestic savings and investments in both the private and public sectors and a greater degree of entrepreneurial dynamism and a capacity for picking winners. Private entrepreneurs will probably respond that the they are seldom consulted by the politicians and regional bureaucrats and their views do not enter into national and regional deliberations. To the extent that the low growth rates in the Caricom countries permit any savings, the performance of the domestic currency has not inspired any confidence among savers who have sought safe havens in the offshore sector and Miami.

Monetary Union

As part of the decision to create the Caricom Single Market & Economy (CSME) is the initiative to introduce the free movement of capital as part of the proposed Monetary Union leading to a common currency. There was once a view perhaps reinforced by the performance of the Eastern Caribbean currency, that a monetary union and single currency leads to exchange rate stability. The experiences of the Euro must have shattered that feeling. Whether that will cause a rethink of the decision for a common currency is at this stage uncertain but it is seems certain that a common currency is nowhere on the radar.

According to the Caricom Report, certain convergence criteria were established. These are that member countries would attain three months import cover in foreign exchange over an agreed twelve month period, a fifteen percent debt service ratio and exchange rate stability. Under this latter requirement the exchange of the floating currencies of the region must remain within a one and one half percent band for a continuous period of thirty-six months. While Barbados and to a lesser extent Trinidad & Tobago have maintained remarkable exchange rate stability the performance of Jamaica and Guyana have been disheartening and it is difficult to see how and when these two economies will meet the convergence criteria.

Conclusion

CARICOM countries are indeed at the crossroad but this time the world is moving much faster and individually and as a region they have to respond with greater will and vision. They have to adapt to the increasingly harsh and complex rules of international trade and investment which make little or no allowance for economies operating under any disadvantages whether of size, history or accident.

The countries need to demonstrate their commitment to the region by mutual support and trade and investment practices which foster regional integration. Entrepreneurs need to become more informed of the benefits of the regional movement and to avoid practices which strengthen one at the expense of the other. The Caricom Secretariat needs to follow up this excellent Report with more public information activities and encounters with key stakeholders to promote noble objectives which have eluded the region for a large part of the last century.