The Caribbean Community

Article excerpt

The Caribbean community THE quest for economic integration in the English-speaking Caribbean started in the 1960s after the collapse of the ill-fated Federation of the British West Indies in 1962. After a vain attempt to revive the federalist idea of political unity, leaders turned increasingly to the concept of economic integration as a means fo preserving ties between the islands and the mainland territories of British Honduras (Belize) and British Guiana (Guyana). The federalist venture, which was singularly encouraged by the colonial power, foundered on the rock of personality clashes, conflicting notions of weak federalism versus strong central federalism, freedom of movement between territories and insular notions of nationalism.

According to Dr. Eric Williams, noted historian and late Prime Minister of Trinidad and Tobago, writing in 1970, "the Federal experience as well as the post-independence situation in the Commonwealth Caribbean showed that the quest for identity and solidarity among the ex-British possessions in the Caribbean had to be pursued by other means--namely, the method of regional economic collaboration and the working out of complementary rather than competitive strategies of economic development."

It was self-evident in the early 1960s that Caribbean countries were linked economically more closely to the metropolitan countries (in particular the former colonial power) than to each other. This factor in itself produced and perpetuated vertical, bi-lateral trading relations between each country on the one hand and countries outside the region on the other hand. As a result, intra-regional, horizontal economic relations, the development of multilateral commerce and the reationalization of fiscal and excise policies were non-existent, thereby contributing to the continued economic isolation of individual countries.

In 1965, then, the leaders of Antigua, Barbados and British Guiana concluded an agreement to establish a Free Trade Area. By 1967, other territories had accepted the principle of such an association and at the Heads of Government Conference in Barbados in October 1967 adopted a number of resolutions aimed at establishing a Caribbean Free Trade Association (CARIFTA); creating a Caribbean regional development bank; and furthering the integration process. The CARIFTA Agreement, ratified by the three founding members at St. John's, Antigua, entered into force on 1 May 1968. At the same time, other territories signed a Protocol of Interest and pledged to become members.

It may be useful at this point to place this initial integration effort in perspective. One cannot underestimate the economic legacy of three centuries of colonialism which assigned to the Caribbean territories the role of producers of primary commodities and suppliers of cheap labour for metropolitan consumption. The pattern of single-crop industries led to the neglect of diversification and accentuated dependence on favoured treatment by the colonial power. Agricultural production for the domestic market and the gradual expansion of the industrial base received scant attention, resulting in the increased vulnerability of national economies of the Caribbean.

Nor can one underestimate the considerable prestige and influence of Sir Arthur Lewis on West Indian economic thinking in the 1950s and 1960s. In the 1950s the future Nobel Prize-winner in Economics, a citizen of Saint Lucia, produced two seminal works which left their impact on economic policy in the region for some time. In an article published in 1950, Sir Arthur argued that: "A poor people spends a very high proportion of its income on food and shelter, and only a small proportion on manufactures. At their present low standard of living, the number of persons for whom West Indians can provide employment in manufacturing by their own purchases is extremely small."

The apparent anti-industrialization slant was later to be echoed in a classic article in which Lewis shows that in a dualistic economy the sector offering higher wages will attract labour without necessarily depressing those of the rival sector when the labour supply is precisely "unlimited". Lewis' theory therefore seemed to lay the justification for attracting foreign capital and technology which would avail themselves of inexpensive labour on the local market.

The relatively cheap and abundant labour supply in Caribbean countries prompted political leaders to open their economies to the North American multinationals which installed light manufacturing plants and benefited from highly attractive fiscal incentives. However, their presence resulted in investment in capital intensive activities which hardly addressed the root cause of high unemployment: the absence of a wide spectrum of agricultural and industrial activity supplying both the domestic and export markets. Secondly, a significant percentage of multinational profits was repatriated to the North and could not be re-invested locally so as to contribute to the growth of national investment. Thirdly, the increasingly high cost of the required technology proved frequently beyond the means of such small countries. It must also be noted that the severly limited tax base did not generate the funds necessary for major public capital investment in infrastructure.

The foregoing elements demonstrate that as these territories moved towards independence in the 1960s and 1970s, they were characterized by very small, mono-crop, technically and financially weak economies producing for limited markets. The problem, then, was how best to unite more than a dozen territories into a credible economic zone in the face of ever rising international competition and inflationary pressures, compounded by falling prices of non-petroleum primary commodities. The absence of economies of scale and a critical level of economic activity underscored the need for an institution affording stronger integration links than those offered by a Free Trade Association. Thus in July 1973 was signed the Treaty of Chaguaramas, instituting the Caribbean Community and Common Market (CARICOM) providing for increased co-operation under three headings: Common Market, Functional Co-operation and the Co-ordination of Foreign Policy.

The Treaty of Chaguaramas provides for two classifications of Member States. Firstly, the More Developed Countries (MDCs), comprising Barbados, Guyana, Jamaica, and Trinidad and Tobago. Secondly, there are the Less Developed Countries (LDCs), including Antigua and Barbuda, Belize, Dominica, Grenada, Montserrat, Saint Christopher and Nevis, Saint Lucia, Saint Vincent and The Grenadines. The latter were able, during negotiations leading tup to the Treaty, to persuade the MDCs that given their more fragile economies they were entitled to special consideration. The integration movement had to take into account the reality of the highly uneven economic development of MEmber States and devise mechanisms tending to protect the economies of the LDCs. One may note, for example, that with a population of 260,000, Barbados has a Gross Domestic Product double that of all the LDCs combined, which have a population of approximately 600,000.

However intense and sincere might have been the underlying intentions and efforts, the integration movement clearly could not exist in a caribbean vacuum. Caribbean solidarity inevitably had to cope with realities external to the region and adapt to the shifting tempo of the international economic and financial context which dramatically changed in 1973, the year of the Chaguaramas Treaty, with the first oil shock. Whereas Trinidad and Tobago, with its oil resources, was able to profit from the price spiral, the other countries, in particular the LDCs, were hard pressed by a constantly rising energy bill which compromised investment capabilities.

The subsequent conservative political reaction, with its inevitable monetarist economic policies and austerity measures, further undermined the thrust towards economic integration. The world recessions of 1974-1975 and 1981-1983 were to leave their mark on struggling Caribbean economies. Jamaica and Guyana, both heavily dependent on their bauxite industry, were the hardest hit in the 1970s by the downturn of the world economy. In turn, intra-regional trade suffered from the slowdown of these two important markets, along with that of Barbados, which witnessed the tapering off of the tourist trade. In 1984 alone, intra-regional trade fell by approximately 13 per cent. The drop in trade was largely responsible for the difficulties of the CARICOM Multilateral Clearing Facility (CMCF), which was established in 1977 to create an efficient payments system and provide short-term credits while ameliorating the foreign exchange situation. The CMCF encountered difficulties and lapsed into virtual neglect as early as 1982, when Guyana defaulted on its payment.

Any decline in intra-regional trade necessarily has adverse consequences for all regional economies and in particular those of the LDCs with a weaker base. Certain protectionist measures adopted by the MDCs could almost be interpreted as punitive actions against the free flow of exports from the LDCs, for there is little doubt that the wider CARICOM market has assumed major significance for LDC countries. Between 1973 and 1981, exports from LDCs to CARICOM increased by over 600 per cent, more especially in the area of light manufactures. However, the problem of market size arises whenever a MDC decides to apply import restrictions, as decided by Trinidad and Tobago, where imports from CARICOM fell by 30 per cent in 1985.

A further development tending to reinforce the capability of the smaller eastern Caribbean States was the establishment in July 1981 of the Organization of Eastern Caribbean States (OECS) regrouping Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Christopher and Nevis, Saint Lucia, and Saint Christopher and Nevis, Saint Lucia, and Saint Vincent and the Grenadines. In addition to co-operation at the political, judicial and cultural levels, the OECS Treaty provides for the promotion of economic integration. The creation of an Economic Affairs Committee and the East Caribbean Common Market attests to the importance attached by Member States to the problem of economic development.

Yet it must be recognized that the economic situation of the early 1980s has acted as a severe constraint on these efforts. Despite the overall rise in protectionist attitudes, the general thrust towards economic integration seems to be firmly established in the political consciousness of the region. New perspectives will need to be explored and fully exploited. Among these one may cite the possibilities offered under the Lome III Agreement. In the final analysis, it is perhaps useful to reflect on whether integration does not constitute a function of economic growth and therefore suffers when growth decreases. If the corollary holds true, i.e., that integration promotes growth, then Caribbean countries have established the necessary institutional fabric to propel such growth inspired by integration. But only time will determine which of these two possibilities bears the greater historical validity.

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.