CARICOM Must Develop Its Single Market

David Renwick says the Caribbean Community (CARICOM) must speed up its plan for a single market and decide its future trading relationships.

––Angostura bittersBananas are still a major export tradeBarrels for export

The 13 nations of the Caribbean Community and Common Market (Caricom) have so far made little headway towards completing their own single market. That failure bodes ill for their future economic relations with the outside world.

For a regional market is a pre-requisite for Caricom’s efforts to forge advantageous international economic links. As the world solidifies into different economic blocs – the North American Free Trade Area (NAFTA), the European Community (EC), Japan and her south-east Asian partners – Caricom will need to decide where its trading future lies and to move as one body to secure it.

A decision on that matter cannot be long delayed. As we reported in the Spring issue (1992) of BWee CARIBBEAN BEAT, Caricom countries are liberalising their own import regimes under pressure from international agencies, and are importing much more freely from the outside world. This has created new marketing opportunities for businessmen in the United States, Canada, Britain, Germany, Japan and other countries that have traded with the Caribbean for decades.

But to pay for these imports, Caricom itself needs to export and to maintain its own markets in the outside world. Caricom has been lucky, in that its historic colonial connection with Europe, its Commonwealth links with Canada and its geographic location in the US-dominated western hemisphere have all enabled it to form favourable trading and aid arrangements with the European Community through the Lomé Convention, with Canada through Caribcan, and with the United States through the Caribbean Basin Initiative (CBI).

Key aspects of all these trading relationships, however, are now under threat in one way or another.

For example, as Europe moves inexorably towards its own single internal market at the end of this year, a major Caricom export – bananas – faces the prospect of losing sales in Britain because cheaper Central American fruit will be able to circulate freely in Europe once tariff and quota barriers are swept away. Four Caricom members – St Lucia, St Vincent, Dominica and Grenada – exported 222,087 tons of bananas to Britain in 1991, earning US$120.8 million in the process.

Though export preferences in the United States for Caricom goods under the CBI are supposedly permanent by virtue of the 1990 Caribbean Basin Economic Recovery Expansion Act, fears have been expressed that the newer NAFTA may gradually undermine these benefits.

Jamaica’s chief trade representative, Peter King, is on record as warning that Mexico’s unrestricted access to the United States under NAFTA could eventually wipe out the US$2 billion Caribbean apparel export business in the same market, which is already constrained by quotas and a tariff barrier, albeit a small one. Mr King thinks NAFTA has the daunting potential to set back industrial development in the Caribbean “for at least 20 to 25 years”.

This possibility has been considered serious enough to spur the United States International Trade Commission (ITC) into setting up an enquiry into the matter.

In the same way, although Caribcan allows most Caricom exports into the Canadian market duty free, Canada’s membership of NAFTA could mean that such exports will soon face the same sort of unequal competition from Mexican, not to mention United States, goods.

What’s more, Caricom now has to contend with the new Andean Trade Preference regime, signed into law by President Bush on December 14, 1991. This gives Colombia, Peru, Bolivia and Ecuador the chance to export most of their goods to the United States duty free, on a non-reciprocal basis. This is Washington’s way of rewarding those countries which have shown willingness to combat the production, processing and shipment of illegal drugs, but it represents another source of competition for Caricom in the crucial United States market.

Clearly, therefore, Caricom has to move much faster to put its own single market in place, so it can make strategic decisions about how to deal with the emerging world of separate economic blocs.

Major regional exporters – like Angostura, Dansteel and Associated Brands in Trinidad and Tobago, and Grace Kennedy and Desnoes and Geddes in Jamaica – need to know where, if anywhere, their future international trading opportunities will lie.