CARICOM’s Economic Independence: Role of Foreign Trade

August is a significant month in Caribbean liberation history. The Anglo-Caribbean countries commemorated Emancipation Day, marking the official end of slavery. Jamaica and Trinidad and Tobago celebrate 57 years of Independence on August 6 and 31 respectively.

The Rt. Hon. Norman Manley expressed the view that his generation brought political independence and it was the task of future generations to deliver economic independence, termed “economic liberation” by some in Africa. For small developing economies, economic independence, realistically, may not be easy to achieve as past experience with nationalization taught. The Jamaican Government is now encouraging public involvement through investment in key assets. In 57 years, what the region is really still pursuing is “economic empowerment” – raising standards of living through sustainable economic growth and development and building economic resilience.

It is said repeatedly that as small economies, foreign trade, is critical to achieving sustained economic growth and development. Over the years, foreign trade, export and import of goods and services, has contributed up to 100% and more of the gross domestic product (GDP) in Caribbean countries, and their openness put them at risk to global policy changes.

A review of the region’s history, shows that there was robust growth and wealth accumulation for those in power from about 1625-1800 when a secure market, export of sugar and other agricultural products, and slave labour were dominant in the economies. Until there was increasing competition from larger cane sugar producers in the hemisphere and subsidized beet sugar in Europe, the Caribbean was a major producer and exporter. The first industrial revolution (1760-1830) contributed to the end of the slave trade and emancipation. With trade policy changes in Britain after 1845, the Caribbean’s position in trade declined heralding 100 years of economic depression, workers unrest and the move towards self-government and independence. It also led to economic diversification with the trade in bananas, growth of tourism, exploring other markets, and the reverse movement of labour as Caribbean people sought work in other countries and territories.

In the mid-20^th Century, foreign investment, production and export of oil, bauxite/alumina, manufacturing, and strengthened preferential market access saw a return to vigorous growth. Tourism became a mainstay in island economies.

Since the 1970s, the vicissitudes of trade, imports and exports, with other contributing factors, have determined the countries’ fluctuating economic fortunes.  Nevertheless, Caribbean small states, except Haiti, are classified by the World Bank as middle income countries.

It is clear from regional history, that a small country can be a leading world producer of products such as, sugar, bananas, bauxite/alumina, limes, but with competition, changing demand, innovation, and diseconomies of scale, that position is easily eroded. In addition, natural disasters stymie real growth. This is where building economic resilience becomes important.

In its 2019 forecast for the region, the International Monetary Fund (IMF) sees improvement, but generally believes long-term growth is impeded by continuing structural problems. The UN Economic Commission for Latin America and the Caribbean (ECLAC) forecast continuing sluggish growth citing poor export performance among other challenges. The countries need to focus on increasing economic growth and job creation by improving production, productivity, competitiveness, exports, and investment flows. The region is also in a fourth industrial revolution where e-commerce and digitization are the future and the future of work is automation. It is also grappling with the economic impact of climate change and the potential of green and blue economies.

In the quest for economic empowerment, the concern is whether CARICOM is preparing for future trade, noting that the CSME remains unimplemented; lack of a CARICOM trade strategy and agenda; and limited private sector engagement. With all that is now happening in global trade, CARICOM, as a region of trade dependent, vulnerable, middle income countries, cannot be disengaged and out of touch.

Submitted by Elizabeth Morgan, Specialist in International Trade Policy and International Politics

Source: CARICOM TODAY