The Caribbean Trade Barriers Come Down

David Renwick looks at the effects of trade liberalisation in the Caribbean.

Export products on display in Port of Spain. Photograph courtesy Export Development Corporation, Trinidad and TobagoPhotograph courtesy Export Development Corporation, Trinidad and TobagoPhotograph courtesy Export Development Corporation, Trinidad and Tobago

Trading opportunities in the 13-nation Caribbean Community and Common Market (CARICOM) group will increase substantially from this year, as age-old protective barriers are dismantled. Producers in North America and Europe have never been happy with the fact that strict quota restrictions (known as “negative listing” against their goods have effectively ruled out the CARICOM area as a potential market for many years. This applied particularly to light manufactured consumer goods, which almost every country in the area was trying to produce locally, as part of a post-independence economic development strategy.

Hundreds of products, and product groups, appeared on the disliked negative list, and many exporters from the industrialised countries were obliged virtually to write off the Caribbean markets which had served them so well in the pre-war and early post-war years.

But times, strategies and international realities have changed. Trade barriers are under assault everywhere, and the English-speaking Caribbean region is no exception. The increasing involvement in Caribbean affairs of international agencies like the IMF and the World Bank, which are ideologically opposed to restraints on trade, has speeded up the Caribbean’s conversion to liberalisation as part of wider “economic restructuring” initiatives.

The conversion has also been hastened by the Caribbean nations’ own realisation that it is time their domestic producers were exposed to some international competition at home, if they are to be toughened up for their own forays into the world market.

As Bertrand Doyle, chairman of Trinidad and Tobago’s Industrial Development Corporation (IDC), says: “After 30 years of protection, our own industries must move on from the fledgling stage to full adulthood. If not now, when?”

The freeing-up of trade barriers in the Caribbean is being accompanied by foreign exchange liberalisation, giving local exporters access to funds they need to bring in foreign goods. Both Jamaica and Guyana have created an open market in foreign exchange, with commercial banks and private traders taking over from the Central Bank as dealers in foreign currencies.

Exporters in the industrialised countries should be warned, however, that they will still have to make the effort to win acceptance for their goods in a market that stretches a thousand miles from Jamaica in the north to Guyana in the south. Though negative listing has been removed in most countries, tariffs have not, and American producers, for example, accustomed to exporting duty-free to their own Caribbean territories of Puerto Rico and the U.S. Virgin Islands, will find themselves still having to face tariff barriers in the CARICOM area.

In fact, tariffs have been increased in countries like Trinidad and Tobago (potentially the best market for foreign consumer goods in CARICOM) to give local manufacturers a last breathing space.

This is a temporary measure but it imposes on overseas producers the need to be competitive themselves if they wish to regain the CARICOM market. CARICOM governments are also fighting back actively, promoting “buy local” campaigns, and a huge Caribbean trade fair is being held in Port of Spain this year.

There will be some pressure on the 13 CARICOM territories in the years ahead to go further and remove remaining tariff barriers, on US and Latin American goods in particular. President Bush’s Enterprise for the Americas Initiative (EAI) specifically includes a reciprocal free trade component, unlike earlier trade liberalisation efforts, such as the GATT’s Generalised System of Preferences (GSP) and President Reagan’s Caribbean Basin Initiative (CBI).

CARICOM countries have been told by spokesmen such as David Malprass, Deputy Assistant Secretary for Economic Affairs in the US State Department, that “two-way free trade will create stronger support for Caribbean products in the U.S. market.”

CARICOM and the US have already set up a Trade and Investment Council to promote more “growth-inducing trade and economic relationships”, as the CARICOM Secretary- General, Roderick Rainford, described it. The US Trade Representative, Carla Hills, herself attended the signing ceremony in Washington and said she expected the Council to produce “meaningful trade results”.

The long-term vision therefore points to a time when the Caribbean may be fully opened-up for foreign goods, particularly those from North America. But local producers do not intend to lie down and die, and will be responding vigorously in an effort to retain the lion’s share of their own market.