Islands Apart: The Caribbean Struggles to Keep Pace with Free Trade

By Pantojas-Garcia, Emilio | Hemisphere, Fall 1998 | Go to article overview

Islands Apart: The Caribbean Struggles to Keep Pace with Free Trade


Pantojas-Garcia, Emilio, Hemisphere


Since the early 1980s, neoliberal views on economic policy have acquired increasing prominence throughout the world. The notion of the superior efficiency, rationality and dynamism of the private entrepreneur and the marketplace has become the dominant weltanschauung among economic development experts and policy makers. This shift in the development paradigm has resulted in the adoption of regional, subregional and supraregional policies aimed at trade liberalization, the impact of which is highly debated. Most recently, the second Summit of the Americas in Santiago, Chile brought together hemispheric leaders to discuss the potential consequences of these policies. The following is an attempt to examine some of the implications for the future development of the insular Caribbean.

The signing of the North American Free Trade Agreement (Nafta) was received by Caribbean political and economic leaders with a forceful request for trade parity. This request resulted in the introduction of a bill in the US Congress known as the Caribbean Trade Security Act. It and other initiatives have sought the liberalization of regional trade to pave the way for accession to Nafta or full participation in a Free Trade Area of the Americas (FTAA). The creation of the Group of Three (Mexico, Colombia and Venezuela); the reactivation of the Central American Common Market; the creation of the Association of Caribbean States; and a proposal for a Caribbean Community single market are examples of the scramble for position by Caribbean Basin leaders.

THE CARIBBEAN PATH TO FREE TRADE

In the 1980s, Caribbean policy makers and entrepreneurs embraced a set of pseudo-neoliberal policies effecting a shift from state-directed to market-centered development strategies. The new policies were not anchored on the principles of free trade, but on preferential treatment of Caribbean commodities by developed countries. The tandem of preferential regimes that served as the framework for this creole neoliberalism started with the launching of the Caribbean Basin Initiative (CBI) in August 1983, followed by other similar programs. Despite the free trade rhetoric that surrounded them, these measures constituted a neoprotectionist package that fostered a process of economic restructuring centered around labor- and import-intensive export processing industries, known as maquiladoras. Maquila-type operations with limited backward production linkages to the domestic economy multiplied in newly established free trade zones (FTZs) in the Caribbean. Among the products that benefitted most from the CBI and the new offshore sourcing arrangements were light manufactures and agroindustrial products.

The apparel industry, the category of light manufacturing that grew fastest, was not even covered by the CBI. The rapid growth in apparel assembly was fueled by another special preference program known as GAL (Guaranteed Access Level program, or "807a" for its section in the US Customs Code), which ensured unrestricted access to the US market for apparel assembled in the Caribbean Basin from fabric made and cut in the US. Under this program, exports of assembled apparel from the Caribbean to the US more than doubled in only four years, from approximately $1.1 billion in 1987 to $2.5 billion in 1991. By 1995, 807a exports to the US had risen to $5.5 billion.

Yet, in spite of growth in particular industries, the early impact of these preferential regimes on export production was disappointing to US and Caribbean policy makers. Between 1984 and 1988, US Department of Commerce figures showed that overall exports from CBI countries to the US declined from $8.9 to $6.2 billion. Exports rose to $8.4 billion in 1991, but this was partly due to the addition of Guyana to the list of CBI countries in 1988. In the short run, CBI induced exports did not compensate for the decline in traditional exports. Although by 1994 Caribbean Basin exports to the US had reached $12. …

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