Whither Caricom?
Business Page
Stabroek News
April 1, 2001
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 the Caribbean economy; a process that requires 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.
Conventional wisdom
Earlier efforts at
development in the Caribbean have not been successful and lead 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 allocative 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.
Tension
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 have 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 leadership challenge
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 politicians and regional
bureaucrats seldom consult them 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
A 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 lead 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, and a
fifteen per cent 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 per cent 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
crossroads 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 the noble objectives which
have eluded the region for a large part of the last century.