Working on intra-CARICOM trade
The global economy is traversed by a network of constantly shifting economic/trade blocs, of which the 15-member Caribbean Community has been the second-longest running economic integration scheme, at 40 years old, counting from the 1973 Treaty of Chaguaramas.
Only the European Union has been around longer, having begun as an integration project with six countries in 1958, now grown to 27 member states.
But the English-speaking countries of the Caribbean have been pursuing economic integration since the establishment of the auspiciously named Caribbean Free Trade Area in 1968.
Several other economic blocs have emerged, some have prospered, others have stalled, some have collapsed, and some have restarted more than once. What is driving this is the constantly changing pattern of global trade and investment which presents a fluid menu of challenges and opportunities.
The general objective is to promote the economic development of participating member states by increasing trade within the ambit of a group of countries that have lowered tariffs and other trade barriers and are committed to further trade liberalisation. The success of these trade blocs is to be judged by the amount and growth of intra-regional trade.
Regrettably, a comparison of the amount of intra-regional trade as a percentage of total trade would suggest that Caricom is performing the worst of all the economic/trade blocs. Intra-regional trade accounts for 63 per cent in the EU’s total trade; 52 per cent in Asia and 27 per cent in South and Central America.
Intra-NAFTA trade as a percentage of total trade is 40 per cent for the US and over 75 per cent for Canada and Mexico. Intra-Caricom trade has been 13 per cent and 15 per cent of Caricom’s total trade for the last 20 years. It has not increased as a share of Caricom’s trade in stark contrast to the growth experience of other trade blocs.
Ironically, intra-regional trade in Asia has grown very rapidly in the absence of any formal institutional arrangement for economic integration or trade agreement. One explanation could be that a formal integration arrangement is neither necessary nor sufficient to increase intra-regional trade.
The expansion of intra-regional trade in Asia could then be said to be a reflection of the rapid economic growth of the countries of the region, in particular China. That being so, however, does not detract from the fact that Europe has the highest ratio of intra-regional trade to total trade. The inference is that formal economic integration arrangements can help to promote intra-regional trade.
The facts show that intra-regional trade has grown in every trade bloc except Caricom. We can learn from the Pacific Alliance involving Chile, Colombia, Mexico and Peru which, on May 23 signed an agreement removing tariffs on 90 per cent of their merchandise trade with the other 10 per cent to be removed in seven years. China and Latin America are talking about a trade agreement between Asia and those same four countries.
The NAFTA countries and Asia are thinking about the Trans-Pacific Partnership Agreement, and the EU and the United States are conceptualising the Transatlantic Trade and Investment Partnership.
Will Caricom remain the bloc that the builders rejected?