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Appendix C -- Guyana and Belize
THE CARIBBEAN COMMUNITY AND COMMON MARKET
In 1991 thirteen nations located in or bordering on the
Caribbean Sea were members of the Caribbean Community and Common
Market (Caricom--see table B, this appendix). Observers included
Anguilla, Bermuda, the British Virgin Islands, the Dominican
Republic, Haiti, the Netherlands Antilles, and Suriname. In 1991
the British Virgin Islands, the Dominican Republic, and the Turks
and Caicos Islands were being considered for full membership. 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
nations lacked diversified economies and were incapable of
producing most capital goods and some basic consumer goods
necessary for productive expansion. The Caricom nations, 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 nations to raise the needed
capital via export expansion has been severely limited by the lack
of export diversification and 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 1991 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 by stimulating 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
schemes, such as Latin America's Central American Common Market,
the Latin America Integration Association, and the Andean Pact. The
Commonwealth Caribbean archipelago made a serious move toward
establishing a unit of integration by forming the West Indies
Federation (WIF) in April 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 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 WIF, economist Arthur Lewis attempted to
organize a smaller body among the Eastern Caribbean islands;
however, his efforts yielded little success, and most of the
islands reverted to British colonial status.
The next 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 the 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, the contemporary nations of 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 Saint John's, Carifta was
widened to include Anguilla, Dominica, Grenada, Jamaica, Saint
Kitts and Nevis, Saint Lucia, Montserrat, Saint 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 nations 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 seven Eastern Caribbean island nations--
Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Lucia,
Saint Kitts and Nevis, and Saint Vincent and the Grenadines--
established an associate entity, the Organisation of Eastern
Caribbean States (OECS), which replaced the West Indies States
Association (WISA) as the islands' major administrative body. The
OECS coordinates development strategies among the member nations
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 nations of Caricom (especially Jamaica and Trinidad and
Tobago) at the expense of the smaller nations.
INSTITUTIONAL STRUCTURE
The institutional structure of Caricom consists of the Heads of
Government Conference, Common Market Council of Ministers,
Caribbean Community Secretariat, and other special bodies (see fig.
A). Unlike in the EEC, these bodies are not supranational; each
member has a right of veto and thus retains much of its national
sovereignty. 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 state 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 nation. Decisions are also made by
unanimous vote, with minor exceptions. This council resolves
problems and makes proposals to the Heads of Government Conference
to achieve efficient development and operation of the regional
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 thirteen Standing Committees of
Ministers (health, education, labor, foreign affairs and defense
policy, finance, agriculture, mines and natural resources,
industry, transport, legal affairs, energy, science and technology,
and tourism). In addition, independent associate institutions
include the Caribbean Agricultural Research and Development
Institute, the Caribbean Development Bank (CDB), the Caribbean
Examinations Council, the Caribbean Tourism Research and
Development Centre, the Council of Legal Education, the University
of Guyana, the UWI, Disaster Emergency Response Agency, the
Caribbean Meteorological Organisation, the Caribbean Food
Corporation, the Agricultural Research and Development Institute,
the Regional Shipping Council, the Caribbean Trade Information
System, 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 through: trade liberalization by removing duties, licensing
arrangements, quotas, and other tariff and nontariff barriers to
trade; Rules of Origin; a Common External Tariff (CET) and a 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 member nations, and
eliminating quantitative restrictions on imported goods. Article 28
of the Treaty of Chaguaramas permits the application of
quantitative restrictions if the nation has severe balance of
payments problems. At the 1987 annual conference, Caricom agreed to
abolish all obstacles to trade by October 1988. Seventeen products,
however, were allowed an additional three years of protection with
all tariffs on them to be removed by 1991.
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.
The Treaty of Chaguaramas mandates gradually implementing a CET
and CPP. The CET stimulates local production by imposing low
tariffs on capital goods and industrial raw materials and higher
tariffs on value-added (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 member countries.
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 a
Guaranteed Market Scheme whereby in certain circumstances Jamaica,
Barbados, and Trinidad and Tobago will purchase fixed quantities of
agroproducts from the other member nations.
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 nation'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 industrial programming
was first considered in 1973, concrete actions did not begin until
1985. In 1988 members agreed to fully implement the Industrial
Programming Scheme by 1993 but progress toward realizing the plan
was slow. The most-cited example of industrial cooperation and
integration was a regional alumina refinery that was to use bauxite
from Jamaica and Guyana and oil from Trinidad and Tobago. Although
the project was thoroughly discussed during the 1970s, it remained
doubtful in the 1991 that such a project would ever be realized. In
addition, there were agricultural programs that represented 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, and it 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, a Food and Nutrition
Institute was established at the UWI in Mona, Kingston, Jamaica.
Transportation is indispensable for effective trade, export
promotion, and other integration objectives. Cooperation in
maritime transportation was envisioned through the West Indies
Shipping Corporation (WISCO), which was established in 1961 and
restructured in 1975. WISCO went bankrupt in 1992 and was replaced
by the Regional Shipping Council. WISCO theoretically provides
services to all Caricom nations. In early 1987, however, Belize,
Dominica, and Saint Vincent and the Grenadines withdrew from WISCO,
claiming they had received few benefits from the service. In 1991
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. A
proposal was made in 1991 to restructure and coordinate regional
air service.
Tourism is important to the region, 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 early 1990s 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 is intended 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
travellers' 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 type of cooperation to include meteorological
services and hurricane insurance; health and nutrition services;
technical assistance; public utilities; education and job training;
broadcasting, 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 member nations (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 Foreign Ministers of Caricom are responsible for coordinating
the defense and foreign policies of member nations 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 less developed nations have gained
preferential access to EEC markets and economic assistance. The
Lomé Convention is updated every five years.
CARICOM: 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 1991 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, national 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 1991 as reflected in the
plans for 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 1991 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
external markets, to facilitate significant financial transfers to
its members (especially non-oil-producing and non-oil-refining
nations), and to achieve a fair degree of internal market access.
Nevertheless, two outstanding shortcomings remained: the failure to
achieve significant benefits from 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. 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. The late 1980s, however,
saw a dramatic reversal in the trade decline. The value of trade
within within the community rose 8 percent in 1987, 156 percent in
1988, and over 20 percent in 1989.
At their eighth annual meeting in 1989, the Conference of Heads
of Government agreed to implement completely the provisions of the
Treaty of Chaguaramas by July 1993. These measures included the
full implementation of a common external tariff, free movement of
skilled labor, establishment of the Caricom Industrial Programming
Scheme, removal of all barriers to internal trade, and
establishment of regional air and sea transportation systems.
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 the early 1990s many 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.
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