Caribbean Regionalism Economic Challenges

Caribbean Journal of International Relations & Diplomacy Vol. 2, No. 4, December 2014: pp.147-164 REFLECTION Caribbean Regionalism in the Context of Economic Challenges Owen Arthur Former Prime Minister of Barbados Keywords : CARICOM; Regionalism; Economic Crisis; Barbados ; Trade; Global Value Chains It is customary, in discussing matters relating to tthehe process of economic integration in the Caribbean, to provide asas context the prophetic words of A.N.R. Robinson in 1989, that unless something was done to remedy the situation, the Caribbean could be in danger of becoming a backwater, separated from the main current of human advance into the twenty-first century. 1 It is, however, beyond dispute that the situation inin which the Caribbean now finds itself is, in every respect, evevenen more dire than that presaged by Robinson. The words of another illustrious Trinidadian could therefore serve as context for this presentat ion. They are the opening words of V.S. Naipaul’s A Bend in the River : The world is what it is; men who are nothing, who allow themselves to become nothing, have no place in it. 2 It has to be acknowledged at the outset that the integration movement in the Caribbean and the individual countricountrieses of the Caribbean Community (CARICOM) now have to grapple wwiithth challenges which either did not exist or are now more severe than 148 Owen Arthur anticipated when the movement was established in 1973. The stage has been reached where the sheer magnitude of the economic problems that require an immediate and far-reaching response raises disturbing doubts about their capacity to function as viable economies. In many instances, there are no apparent or articulated domestic solutions that can suffice. Compounding this is the fact that there are no regional mechanisms that countries can look towards in this time of grave crisis to provide effective solutions to economic problems which require, to reiterate, nothing less than immediate and far-reaching solutions. In a real sense, the region has come to this moment with the integration movement functioning virtually as the fifth wheel to a coach. It exists, but it is of very little practical value. The full significance of this is borne out when the recent performance of the respective economies of the Caribbean is evaluated as individual entities. Yet this takes place in a context shaped by dynamics that have been affecting the region as a whole. From an individual standpoint, it is within the common knowledge that the different economies of the region stand in danger of being overwhelmed by the most debilitating crisis in a short history which is already crisis-ridden. Indeed, individually, they have exhibited, in recent years, the worst growth performance of any class of economy in the global arena. The typical Caribbean economy is also now grappling with a debt management problem which will not only evoke responses that will lead to drastic cuts in the current standard of living of their citizens, but will also compromise their ability to finance the operation of existing regional institutions, and also make it virtually impossible for them to support the creation of any new ones. It is difficult to envisage any straightforward or immediate solutions to this low-growth and high-debt debacle emerging. What is perhaps even more disturbing is the fact that, taken as a group, the Caribbean has underperformed and even regressed in the specific areas which have been chosen as being of greatest strategic importance to its progress and development. It has also underperformed relative to the broader global group of small island economies on almost every major determinant of competitiveness. As a consequence, it can be said of the Caribbean collectively that the institutional arrangements, the physical infrastructure, and the policy disposition have not been put in place to enable it to function effectively – let alone successfully - in Caribbean Regionalism and Economic Challenges 149 a global economy where new dynamics of liberalisation are everywhere taking effect. The evidence is staggering. According to a recent World Bank study entitled The New Trade Environment and Trade Performance in the Caribbean , the region’s share of world exports has declined from 0.5 per cent in 1980 to 0.2 per cent at the most recent count. 3 The report also indicates that Caribbean integration into the global economy has been much slower than that of countries and regions which have not enjoyed preferential access to some of the main markets of the world. Of even greater significance is the fact that, over the past five years, many Caribbean countries have lost market share in their principal service export sectors, the dynamism of which was required to compensate for declining activity in the commodity-producing sectors which have been most negatively affected by the new forces of economic liberalisation. In short: as small, open economies facing a rapidly changing international trading environment, the Caribbean is now exhibiting indices relating to both trade performance itself, and the factors which underpin the capacity to be able to trade successfully, that are suggestive of growing uncompetitiveness. This is extremely problematic for many reasons. Firstly, the region’s weighted average tariff at 11.6 per cent is higher than all other regions except for South Asia, and is significantly higher than that of other small island economies at 7.4 per cent. Higher tariffs lead to higher costs of inputs, especially for export services industries, and they result in a reduction in the capacity of domestic firms to compete against those operating under a lower tariff regime elsewhere. Secondly, the efficiency of the ports and other points of entry – along with the procedures employed by customs to facilitate trade – are clearly a major determinant of trade performance. Such factors are measured in order to arrive, analytically-speaking, at a country’s Trade Logistics Performance Index. According to the World Bank, the Caribbean has a lower index than any other region of the world. 4 Thirdly, as regards the benchmark which measures maritime connectivity, the Caribbean has a liner shipping connectivity index which is the lowest for any region. Moreover, according to the Global Competitiveness Report, which ranks 150 countries based on six criteria concerning their capacity to innovate and compete, the Caribbean again registers poorly with only Barbados ranking in the top 50. 5 In addition, as regards the benchmarks reported on globally by the World Bank concerning the ease of doing business, again the region figures 150 Owen Arthur poorly on virtually all indices, and none register in the top 50 countries globally. 6 The significance of all of these negative indices must not be missed. At a time when there is little fiscal space to stimulate growth, recourse to enablers and drivers that can help reduce costs, stimulate productivity and generate higher rates of returns should feature more significantly in the macro-economic strategies of regional economies. The significant improvement by Jamaica in many of the indices measuring its competitiveness and the ease of doing business in its jurisdiction is a very hopeful sign for the entire region. Yet it is clear that a widespread failure to adopt international best practices on the matters that vitally affect the operation of enterprises is proving to be a major drag on the competitiveness of the regional economy. Tragically, this failure to apply international best practices to matters which fundamentally determine competitiveness has coincided with a crisis in the implementation of the programme to integrate the region. THE CONTEMPORARY CRISIS IN REGIONAL INTEGRATION In recent years, there has been abundant evidence that the regional economic movement has come to face a growing crisis which has manifested itself in an inability and unwillingness to put the engines of integration to work as they were originally conceived, and as warranted by changing circumstances. In 1947, at the Montego Bay Conference, Norman Manley observed that ‘great causes are not won by doubtful men’. The decision taken in 1989 at Grand Anse to endeavour to transform the respective Caribbean economies - which had evolved over centuries characterized by the existence of more effective linkages with the outside world than between themselves - into a single market and economy (CSME) was one of the most momentous decisions in the history of the Caribbean. It was a transformation that was never going to be easily achieved, and was therefore going to be more taxing if not attended by clarity of purpose, and the determination to hold to a steady course come what may. The current crisis pertaining to regional integration has part of its origins precisely in the lack of clarity of purpose and difficulties over planned implementation. I deal first with issues related to clarity of purpose. The creation of the CSME was intended both to be an agency by which the region created indigenous opportunities for its development and at the Caribbean Regionalism and Economic Challenges 151 same time to serve as the principal vehicle by which the regional economy would be integrated into the rapidly evolving and dynamic global economy. In agreeing to reconstitute itself as a Single Market and Economy, the region, for the first time, sought to rest its own development and its relationship with the rest of the world on the embrace of the economic ideology of liberalisation. In this regard, the creation of a Single Market was to take the form of the removal of all of the constraints on the movement within the region of goods, services, labour and capital that had been built up, along with the creation of Caribbean enterprises, over centuries. This process was, however, intended to be undertaken in accordance with particular principles and design features.

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