Not ready for a single market (Pt 1)
Ian Boxill
MEMBER GOVERNMENTS at the last CARICOM Heads of Government (HOG) meeting held in Trinidad and Tobago acknowledged that much more time was needed to implement appropriate measures that would facilitate the formation of a Single Market and Economy (SME). In light of this, it would seem that most of the countries in the region are not prepared for a SME. In fact, with few exceptions, our countries seem psychologically and economically ill-prepared to handle a world without preferences and aid. Likewise, regional governments and private sector interests seem divided in respect of the importance of the SME to the future development of CARICOM. Let me say that I am fully supportive of the formation of an SME in CARICOM. However, as someone who has been intimately involved in the regional discussions and policy formulation process for the establishment of the SME, I would like to raise a number of issues which I believe will have to be dealt with if we are to achieve a viable SME. Before proceeding any further, let me give you a brief bac kground on the SME. The idea for the formation of an SME can be traced back to the 1989 HOG meeting of CARICOM in Grand Anse, Grenada. The decision then was based on perceived threats and opportunities posed by globalisation. And, according to a document published by CARICOM, "in essence, the CARICOM Single Market and Economy was conceived as an instrument to facilitate the economic development of member states in an increasingly open and competitive global environment. The essential characteristics of the SME were the free or unrestricted movement of the factors of production, goods, services, capital and labour, along with any other appropriate supporting measures." The specific features of the SME include the removal of restrictions in trade and services; co-ordinated development of the services industry; elimination of the need for passports; facilitation at immigration points; elimination of the need for work permits; parity in academic qualifications; harmonisation and transferability of social security; convertibility of regional currencies; co-ordination of exchange rate policies; development of regional capital markets; and the abolition of foreign controls on consumer transactions. In addition to these features, there are a number of fiscal, economic and supporting measures aimed at encouraging easier and greater intra-regional trade as well as the development of firms and sectors, particularly within disadvantaged countries. Initially, it was agreed by HOG that steps would be taken to adopt these measures in 1993, and by sometime in 1997, the region would be well on the way to forming this new entity. This would give us enough time to prepare for entry into the Free Trade Area of the Americas (FTAA) in 2005. While some countries have taken a few token steps to create the SME, predictably, CARICOM has failed to keep the time lines which it has established for itself. Far from it, many countries have failed to implement many of the policies to which they agreed at the various governmental summits. Some of the polices which have been implemented by regional governments so far include: at least 10 member countries have signed the double taxation agreement, but only six have ratified the agreement (these include Barbados, Belize, Grenada, Jamaica, St. Lucia, Trinidad and Tobago). In addition to this, efforts are being made toward the formation of a regional capital market involving Jamaica, Trinidad and Tobago and Barbados. Guyana, Jamaica and Trinidad and Tobago have abolished exchange controls while Barbados and the OECS and Belize maintain exchange control requirements, but the convertibility of their currency and availability of foreign exchange mean that there is no impediment to trade. Equally, only eight CARICOM countries now accept forms of identification other than passports and 12 countries use common lines for citizens, residents and CARICOM nationals. Trinidad and Tobago maintains separate lines. The Bahamas does not seem interested in implementing this decision. Agreed legislation to permit tertiary level graduates to move throughout the region without the need for work permits is in place in Antigua, Barbados, Dominica, Grenada, Guyana, St Lucia, and Trinidad and Tobago and Jamaica. Barbados and Jamaica have already passed legislation to allow for the free movement of artistes, sports persons, musicians and media workers. Despite some apparent progress in the above areas, technical people at the CARICOM Secretariat are dissatisfied with the slow rate of progress and with the fact that a large number of changes in response to legislative and structural changes in the respective member state economies have not taken place. Furthermore, most CARICOM nations have expressed serious reservations about freedom of movement and there is little hope a single currency and a useful capital market will emerge in the near future given the 'business as usual' attitude of most member states. You must bear in mind that since the studies on the establishment of a single currency have been completed by regional economists, nothing substantial has been done to act on their recommendations. THIS WEEK, I would like to raise two other issues which have had an impact on the progress of the CARICOM Single Market and Economy (SME). These issues include the different approaches to development adopted by CARICOM member states and secondly the varying levels of preparedness for the SME of member states. First, we will look at the different development approaches of the various member states of CARICOM. There can be no doubt that the larger countries in the region which have experienced structural adjustment have a much different view of the SME than the smaller countries, which have been fairly insulated from the reforms of the 1980s and 1990s. These differences are not new; they have been with us since the time of the Federation. And today one can, perhaps, identify four groupings in relation to the SME. Firstly, there is Jamaica and Trinidad. In general, Jamaica, and to a much lesser extent, Trinidad and Tobago, have less interest in the SME than the other countries of the region. Jamaican entrepreneurs (at least up to two years ago) did not believe that the SME would bring any additional benefits to their economies. Both Jamaica and Trinidad are more concerned with extra-regional than regional trade. This feeling of paying closer attention to extra-regional than regional trade is especially strong among Jamaican entrepreneurs. Interestingly, unlike Jamaicans, Trinidadians are the most aggressive and successful cross-border traders within CARICOM. CARICOM is therefore seen as an important stepping stone and a home base for Trinidadian businesses, many of which are slowly going global. The second group is comprised of Guyana and Barbados. Both Barbados and Guyana see economic opportunities in a SME. However, the Guyanese people and businesses see opportunities to get investment and receive much needed human resources from the other territories. They also believe that their larger size will enable them to compete more in the area of agriculture. OECS On the other hand, Barbadian businesses see business possibilities in the OECS and the wider Caribbean. Barbadians believe they can effectively compete with other CARICOM nations in the area of services, especially in the fields of accounting and high-tech computing. Third, there is the OECS, where there is cautious optimism associated with the SME. These countries fear that their manufacturing and service industries could be wiped out by Trinidad, Barbados and Jamaica. Hence, they are willing to go ahead with the SME unless serious and comprehensive steps are put in place to support their transition into the SME. Fourthly, there is Belize and Suriname, who feel marginalised by CARICOM and anticipate more loss than benefit from the SME. Both countries are of the view that Jamaica and Trinidad, in particular, will dominate their economies and virtually erase their struggling local manufacturing sector. They are also fearful of migration from other CARICOM nations to their countries if freedom of movement is permitted. Belize, in particular, fears that their services sector will be quickly dominated by CARICOM countries with higher levels of human resources. Consequently, there is serious resistance to the SME in both Suriname and Belize by private sector interests. The second factor which is impacting on the achievement of a SME is that the level of preparedness for a SME is far from uniform around the region. Belize, Suriname and the OECS have indicated that they are not prepared for regional competition within the context of a regional free market. In fact, the leading private sector interests in Suriname and Belize have indicated their desire to ask their governments to delay entry into the single market. These countries have an intense fear of being dominated by the 'larger', more vibrant economies. WTO ruling Thus, a part of the current dilemma facing the region is that the countries, which were forced to liberalise under Structural Adjustment Programmes (SAPs), are less likely to suffer dislocations from formation of the SME. On the other hand, the OECS, which has depended on preferences in the area of bananas, is even more cautious given the recent WTO ruling. Now a short take on our situation here in Jamaica. One of the things which worries me about the Jamaican position on the SME is that even within CARICOM, many Jamaican firms are finding it difficult to compete. Yet, many of our local firms have ignored CARICOM and constantly talk about extra-regional competition. Fortunately and advisedly, a number of our local firms, such as Grace, Kennedy, and some Trinidadian firms have clearly shown that working regionally can be good preparation for global competition. Peace!
Ian Boxill is a sociologist who lectures at the UWI, Mona. E-mail: iboxill@uwimona.edu.jm. His column will not appear for the next two weeks as he will be travelling overseas.
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