|
Appendix C -- Islands of the Commonwealth Caribbean
THE CARIBBEAN COMMUNITY AND COMMON MARKET
In the late 1980s, the members of the Caribbean Community and
Common Market (Caricom) consisted of Antigua and Barbuda, the
Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica,
Montserrat, St. Christopher (hereafter, St. Kitts) and Nevis, St.
Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago. The
members faced problems typical of many developing societies: high
birth rates, unemployment and an unskilled labor force, inadequate
infrastructure, balance of payments constraints, and insufficient
domestic savings to achieve development goals. In addition, Caricom
members lacked diversified economies and were incapable of
producing most capital goods and some basic consumer goods
necessary for productive expansion. The Caricom members, therefore,
were forced to rely heavily on imports of essential goods. As a
result, development goals were subordinated because of the need to
raise foreign exchange to pay for the imports.
Since 1981 the ability of Caricom members to raise the needed
capital via export expansion has been severely limited by the lack
of export diversification and the reliance on primary products and
tourism services, which are extremely vulnerable to changing forces
of demand, supply, and price in the international political
economy. In the late 1980s, intraregional cooperation was urgently
needed to create an atmosphere conducive to overcoming the
handicaps of small market size, economic fragmentation, and
external dependence.
Caricom's goal of regional integration was designed to serve as
a catalyst for sustained growth in the short or medium term by
allowing for market expansion, harmonization of production
strategies, and development of economies of scale. Integration was
also expected to promote industrial growth by eliminating excess
capacity in the manufacturing sector and to stimulate investment in
new sectors of the expanded market. The long-term hope was for
balanced growth, minimal unemployment, a higher standard of living,
and optimal use of available human and natural resources.
BACKGROUND AND OBJECTIVES
Following the example of the European Economic Community (EEC),
many nations have organized themselves into regional integration
organizations, such as Latin America's Central American Common
Market, the Latin America Integration Association, and the Andean
Pact. The Commonwealth Caribbean made a serious move toward
establishing a unit of integration by creating the West Indies
Federation in 1958. The federation, formed under the auspices of
the British, was doomed from the start by nationalistic tendencies
and the lack of taxation privileges, and it failed when Jamaica and
Trinidad and Tobago attained independence and withdrew in 1962.
Nevertheless, a few institutions, such as the University of the
West Indies (UWI) and the Regional Shipping Council, were
established under the short-lived federation and continue today.
After the demise of the West Indies Federation, economist W. Arthur
Lewis attempted to organize a smaller organization among the
so-called Little Eight islands (Antigua and Barbuda, Barbados,
Dominica, Grenada, Montserrat, St. Kitts-Nevis-Anguilla, St. Lucia,
and St. Vincent and the Grenadines); however, his efforts yielded
little success.
The first call for a regional Caribbean community was made in
a January 1962 speech by Eric Williams, former prime minister and
first head of state of independent Trinidad and Tobago. However, it
was not until the late 1960s that advocates of a new federation
focused their attention on the issue of regional integration. In
July 1965, Antigua and Barbuda, Barbados, and Guyana signed the
Treaty of Dickenson Bay, which established the Caribbean Free Trade
Association (Carifta). Under the terms of the 1968 Treaty of St.
John's, Carifta was widened to include Anguilla, Dominica, Grenada,
Jamaica, St. Kitts and Nevis, St. Lucia, Montserrat, St. Vincent
and the Grenadines, and Trinidad and Tobago. Although a free-trade
area was established, Carifta did not provide for the free movement
of labor and capital or the coordination of agricultural,
industrial, defense, and foreign policies. Thus, over the next five
years, little progress was made toward creating a regionally
integrated unit. In 1970 the prospect of Britain's joining the EEC
alerted the islands to their vulnerability to any disruption in
their preferential trading ties with Britain. In the same year,
economists at the UWI issued a report contending that the creation
of a free-trade area alone was not sufficient to procure full gains
from regional integration. These events led to the development of
the present Caricom structure.
In 1973 the Carifta members signed the Treaty of Chaguaramas,
replacing the ineffective Carifta structure with Caricom. Caricom
has three essential components: economic integration based on a
regional common market; functional cooperation in such areas as
culture, education, health, labor relations, tourism, and
transportation; and coordination of foreign and defense policies.
Although the regional common market is an integral part of the
broader based community arrangements, it has a completely separate
identity juridically. Thus, it was possible for the Bahamas to
become a member of the community in 1983 without joining the Common
Market. In 1981 the Eastern Caribbean islands of Antigua and
Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St.
Lucia, and St. Vincent and the Grenadines established an associate
entity, the Organisation of Eastern Caribbean States (OECS--see
Glossary), which replaced the West Indies States Association (WISA)
as the islands' administrative body. The OECS coordinates
development strategies among its members and provides for
cooperation in economic, foreign policy, and defense matters. The
OECS was created after studies indicated that most of the benefits
derived from integration were flowing to the larger islands
(especially Jamaica and Trinidad and Tobago) at the expense of the
smaller.
INSTITUTIONAL STRUCTURE
The institutional structure of Caricom consists of the Heads of
Government Conference, the Common Market Council of Ministers, the
Caribbean Community Secretariat, and other special bodies (see fig.
A, this appendix). Unlike in the EEC, each member has a right of
veto. Decision making in Caricom, although centralized at some
levels, is quite decentralized at others.
The Heads of Government Conference is the supreme decision
making body. Each member of Caricom has one vote, and a unanimous
vote is required to legislate decisions or to make policy
recommendations. The conference determines the policies to be
pursued by Caricom's related institutions. This conference also is
responsible for concluding all treaties, making financial
disbursements, and maintaining relations with other international
organizations.
The Common Market Council of Ministers is the second principal
body of Caricom and the principal body of the regional Common
Market. The Common Market Council consists of one ministerial
representative from each member. Decisions are made by unanimous
vote, with minor exceptions. The council resolves problems and
makes proposals to the Heads of Government Conference to achieve
efficient development and operation of the Common Market.
The Caribbean Community Secretariat is Caricom's principal
administrative component. The Secretariat operates to serve the
interests of the region rather than those of each government.
Although the Secretariat has no decision making-power, its
discussions, studies, and projects have made it a dynamic element
in the integration process.
Other offices responsible for specific sectoral aspects of
regional integration are the nine Standing Committees of Ministers
(health, education, labor, foreign affairs and defense policy,
finance, agriculture, mines, industry, and transport). In addition,
independent associate institutions include the Caribbean
Development Bank (CDB), the Caribbean Examinations Council, the
Council of Legal Education, the University of Guyana, the UWI, the
Caribbean Meteorological Council, the Caribbean Food Corporation,
the Regional Shipping Council, and the Caribbean Marketing
Enterprise. Finally, the Joint Consultative Group, comprising
business, consumer, and trade groups, meets to review the
integration process and ensure interest group participation in
Caricom activities.
MARKET INTEGRATION MECHANISMS
Caricom seeks to achieve economic integration through market
forces. The Common Market was established to promote intraregional
trade. It achieves this through trade liberalization by removing
duties, licensing arrangements, quotas, and other tariff and
nontariff barriers to trade; the Rules of Origin; the Common
External Tariff (CET) and the Common Protective Policy (CPP); and
trade arrangements such as the Agricultural Marketing Protocol and
the Oils and Fats Agreement.
The Common Market contains a number of important mechanisms for
liberalizing trade. These include eliminating extraregional export
duties, removing quantitative restrictions on regional exports,
permitting free transit for products of members, and eliminating
quantitative restrictions on imported goods. Article 28 of the
Treaty of Chaguaramas permits the application of quantitative
restrictions if the member has severe balance of payments problems.
However, because of the invocation of this clause in 1977 by both
Guyana and Jamaica and the continuing economic problems confronting
the Caricom members, removal of this provision was being considered
in 1987.
The Rules of Origin establish the conditions of eligibility of
regional products so that they may be considered of Common Market
origin and thus qualified for preferential treatment. In 1986 a new
set of Rules of Origin was adopted to increase the use of regional
products and promote employment, investment, and savings of foreign
exchange. Given the scarcity of products within Caricom in the late
1980s, observers believed that achieving high levels of regional
value-added worth even with the new Rules of Origin would be
difficult.
The Treaty of Chaguaramas mandates gradually implementing the
CET and CPP. The CET stimulates production by imposing low tariffs
on capital goods and industrial raw materials and higher tariffs on
finished products. The CPP standardizes quantitative restrictions
to protect specific regional industrial sectors. Together, the CET
and CPP, coupled with intraregional trade liberalization, were
expected to stimulate reciprocal investment and trade among
members. In reality, these had not been achieved by the late 1980s
because of problems in implementing the CPP and excluding goods
from the CET.
The final market integration mechanism aims at providing
guaranteed markets and prices for Caricom exports to overcome the
volatile trade in primary commodities. The Agricultural Marketing
Protocol and the Oils and Fats Agreement regulate intraregional
trade via certain buy-and-sell accords at fixed prices resulting
from shortages or surpluses within Caricom. Caricom also has the
Guaranteed Market Scheme, whereby in certain circumstances Jamaica,
Barbados, and Trinidad and Tobago will purchase fixed quantities of
agricultural products from the other members.
MECHANISMS OF COOPERATION IN MARKETING AND PRODUCTION
Joint regional action in production and marketing activities is
viewed by Caricom as a means of coordinating and controlling each
member's output to avoid injury to other members or to the entire
region. Coordinating policies is also intended to encourage
specialization and complementary production. One important
mechanism in this regard is regional industrial programming aimed
at promoting specialization and economic diversification and
avoiding duplication of investment. Although regional industrial
programming was first considered in 1973, concrete actions did not
begin until 1985 with the completion of the first phase of regional
industrial programming. Of the thirty-five projects originally
considered, only twenty-three have been identified as feasible.
Only sixteen had been implemented by 1986. The most cited example
of industrial cooperation and integration was a regional alumina
(see Glossary) refinery that was to use bauxite (see Glossary) from
Jamaica and Guyana and oil from Trinidad and Tobago. Although the
project was thoroughly discussed during the 1970s, it remained
doubtful in the late 1980s that such a project would ever be
realized. In addition, related agricultural programs offered joint
efforts to provide extension, marketing, and research and
development services to reduce unit costs, increase quality and
yield, and slash imports of basic foodstuffs.
The Regional Food and Nutrition Strategy is the main instrument
for Caricom's agricultural development. The strategy establishes a
framework and identifies priorities for a regional approach to
agricultural self- sufficiency. The Caribbean Food Corporation,
founded in 1976, is the main mechanism for planning and
implementing the strategy's objectives. Also, the Caribbean Food
and Nutrition Institute was established by Caricom at the UWI in
Mona, Jamaica.
Transportation is indispensable for effective trade, export
promotion, and other integration objectives. Cooperation in
maritime transportation is envisioned through the West Indies
Shipping Corporation (WISCO), which was established in 1961 and
restructured in 1975. WISCO theoretically provides services to all
Caricom nations. In early 1987, however, Belize, Dominica, and St.
Vincent and the Grenadines withdrew from WISCO, claiming they had
received few benefits from the service. In the late 1980s, air
transportation remained inadequate because of the lack of
coordination among the existing airlines. Standardizing air
transport by coordinating and planning routes and fares, as well as
mergers, was necessary to improve service and reduce costs.
Tourism is important to the region by providing foreign
exchange, increasing employment, encouraging the production of
tourist-oriented products and services, and stimulating the
construction of basic infrastructure. Some regional cooperation in
tourism has been carried out by the Caribbean Tourism Association,
the Caribbean Tourism Research and Development Centre (located in
Barbados), and the Hotel Training School at the UWI in the Bahamas.
Nevertheless, in the late 1980s further cooperation was needed to
link the tourism sector to the rest of the economy and to establish
regional tourism enterprises.
MECHANISMS OF FINANCIAL COOPERATION
Financial cooperation tries to fulfill the objectives of
economic integration by facilitating payments for intraregional
trade and by mobilizing investment funds to productive sectors of
the economy. The principal vehicle for financial cooperation is
Caricom's Multilateral Clearing Facility (CMCF). It was established
in 1977 by the central banks and other financial entities of
Caricom's members. The facility's objectives are to reduce the use
of foreign exchange and expedite intraregional payments through
credit and other financial arrangements. Other related mechanisms
include harmonizing exchange rates by pegging the six existing
currencies to the United States dollar and by issuing regional
traveler's checks through the Central Bank of Trinidad and Tobago.
Finally, the CDB contributes to the equitable development of the
region by providing low-interest loans for projects and related
integration plans.
FUNCTIONAL COOPERATION
The Treaty of Chaguaramas also envisioned coordinating efforts
in many noneconomic areas. The Caricom structure has formalized and
expanded this kind of cooperation to include meteorological
services and hurricane insurance; health and nutrition services;
technical assistance; public utilities; education and job training;
broadcasts, printed media, and information; culture and language;
social security, labor, and industrial relations; science and
technology; and harmonizing the laws and legal systems within
Caricom. This cooperation has been successful in improving services
to the members (especially the smaller ones) and lowering costs of
activities through joint ventures. The regional university and
health and nutrition systems are examples of successful functional
cooperation.
COORDINATION OF DEFENSE AND FOREIGN POLICIES
The Heads of Government Conference and the Standing Committee
of Ministers of Foreign Affairs and Defence Policy are responsible
for coordinating the defense and foreign policies of members to
increase their international bargaining power. Caricom has been
able to present a regional foreign policy position in defense of
the principles of regional security and nonintervention; support of
the territorial integrity of Guyana and Belize in their border
disputes; and various negotiations for the Lomé Convention (see
Glossary), by which many Third World nations have gained
preferential access to EEC markets and economic assistance.
A BRIEF EVALUATION OF THE INTEGRATION EFFORT
One method of evaluating Caricom's integration efforts is to
look at three of its principal goals: defense and foreign policy
coordination, functional cooperation, and economic and trade
cooperation. In the late 1980s, some positive results had been
achieved in defense and foreign policy coordination. Caribbean
expressions of solidarity on issues of regional security and
territorial integrity focused international attention on the region
and strengthened Caricom's bargaining position in negotiations with
regional and extraregional nations and in international forums.
Ultimately, however, parochial concerns have always overshadowed
regional interests. The ideological pluralism of the region and the
often drastic changes in government orientation have hurt the
coordination process through bilateralism and polarization of
interests.
Functional cooperation had improved by the late 1980s, as
reflected in the successful regional air transport, education, and
health systems. However, Caricom had not expanded beyond these
programs to develop common cultural and political linkages.
Although a Caribbean parliament could potentially be an important
force, in the late 1980s none appeared likely to materialize. Many
observers argued that Caricom had spread itself too thin and should
concentrate on solving problems rather than expanding.
Economic and trade cooperation had also improved. Examples of
such improvements are Caricom's collective ability to mobilize
large volumes of external capital, to gain greater access to
third-country markets, to facilitate significant financial
transfers to its members (especially to those not producing or
refining oil), and to achieve a fair degree of access to internal
markets. Nevertheless, two outstanding shortcomings remained: the
failure to achieve significant benefits from the complementary use
of the region's human and natural resources and the inability to
formulate a common policy vis-à-vis foreign investment. Both of
these issues have immense significance for the long-term
development objectives of greater self-reliance and reduced
external dependence.
Although the increase in intraregional trade in the 1973-81
period consisted largely of manufactured consumer products not
previously traded, such an increase indicated neither
diversification nor specialization of production as envisioned by
Caricom's designers. On the contrary, duplication of production was
evident. When coupled with the foreign exchange crisis and the weak
extraregional trade performance since 1981, the nations have been
forced to borrow from abroad; this has caused increased foreign
debt and reduced imports of consumer goods, which comprise much
intraregional trade. The Caribbean Community Secretariat reported
that the decline in intraregional trade was approximately 33
percent in 1986, following declines of 3.3 percent in 1985, 10.9
percent in 1984, and 12.2 percent in 1983. Finally, many observers
have noted the polarized development patterns and disproportionate
gains from Caricom's integration mechanisms. Nevertheless, this
polarization may not be an inherent fault of Caricom, but rather
the result of a political economy that many argue continues to be
biased toward the more developed nations. Thus, simple changes in
trade patterns could not modify the situation without substantial
structural change.
Since its inception, Caricom has experienced continuous crises.
These have occurred to such a degree that many observers have come
to regard the situation as a natural condition associated with
developing nations, especially in light of external debt and trade
constriction. However, in 1987 a group of Caribbean experts
expressed cautious optimism because the institutional framework of
the community remained intact, intraregional dialogue was
maintained, and trade and functional cooperation continued to show
resilience.
EVENTS AFFECTING THE COMMUNITY IN THE 1980s
A purposeful and cooperative spirit characterized Caricom's
seventh summit conference, which was held in Guyana in July 1986.
The highlights of this conference included establishing a regional
Export Credit Facility (ECF) by July 1987 and implementing the
regional industrial programming by late 1986.
In a declaration published at the end of the summit, Caricom
leaders decided to implement the articles dealing with external
trade, industrial policy, and joint development of resources. The
creation of the ECF (ratified in May 1987) was aimed at providing
pre- and post-shipment credit for Caricom manufacturers exporting
goods both inside and outside Caricom, excluding such traditional
products as bananas, bauxite, oil, and sugar. The industrial policy
was intended to encourage regional joint ventures and investment
initiatives geared toward improving the production structure of the
Caricom members.
Approximately 25 percent of the funding for the ECF--around
US$75 million--will be subscribed by the Caricom nations. The
remainder will be raised through loans from the CDB, the World Bank
(see Glossary), and other sources. Colombia has offered to provide
technical assistance and will help to coordinate the ECF program.
At the seventh summit conference, talks continued on reactivating
the CMCF, whose activities were suspended in 1983 after reaching
its credit ceiling via emergency loans to Jamaica and Guyana.
Related to this, Barbados and Guyana discussed a US$100 million
joint venture in lumber production and marketing that should help
Guyana finance its debt to the CMCF. (In 1987 Jamaica was several
years in arrears on its debt to the CMCF.)
Much of the discussion at the seventh summit conference focused
on the 1984 Nassau Agreement. This agreement, aimed at reducing
trade barriers and harmonizing external tariffs, recommended the
use of the CET, not quantitative restrictions, to protect
industrial development. The agreement also advocated removing price
controls, developing incentives for industrial production, and
improving training programs for displaced workers. A proposal for
creating a common monetary unit was rejected on the grounds that
the frequent fluctuation in Caricom's exchange rates would
undermine such efforts. Nevertheless, summit participants decided
that the members should consult Caricom's financial institutions if
planning devaluations or pegging exchange rates.
In addition to the collective decisions reached at this summit,
certain bilateral accords and negotiations were announced. One
principal accord involved air transport between Jamaica and
Trinidad and Tobago. Air Jamaica was granted landing rights in
Port-of-Spain (with intermediate locations), whereas Trinidad and
Tobago's carrier, British West Indian Airways, was authorized to
service Kingston with intermediate stops. Barbados and Trinidad and
Tobago announced talks aimed at a similar accord.
* * *
In the years since Caricom was established in 1973, a considerable amount of
material has been published on the structure, positive and negative aspects,
and future of the organization. The Inter-American Development Bank's Ten
Years of Caricom and Economic and Social Progress in Latin America&1 and
the Caribbean Community Secretariat's yearly publication, Report to the
Secretary General of Caricom, are recommended. A concise overview of Caricom
may be found in Eduardo Margain's Development Challenges and Cooperation
in the Commonwealth Caribbean; detailed essays on Caricom and the Commonwealth
Caribbean may be found in Anthony Payne and Paul Sutton's Dependency under
Challenge. (For further information and complete citations, see Bibliography.)
|
