U.S. Trade Policy and the Caribbean: From Trade Preferences to Free Trade Agreements *

By Hornbeck, J. F. | Current Politics and Economics of South and Central America, January 1, 2012 | Go to article overview

U.S. Trade Policy and the Caribbean: From Trade Preferences to Free Trade Agreements *


Hornbeck, J. F., Current Politics and Economics of South and Central America


INTRODUCTION

For over 40 years, the United States has relied on unilateral trade preferences as an integral part of its foreign economic policy. Trade preferences give market access to selected developing country goods, duty free or at tariffs below normal (NTR)1 rates, without requiring reciprocal trade concessions. They come in many forms and are intended to promote economic growth and development in poor countries by stimulating export promotion and investment, and to encourage the use of U.S. inputs in foreign manufacturing. Trade preference programs must be authorized by Congress and are usually done so for specified periods of time.

The Caribbean Basin (see Figure 1)2 has benefitted from multiple preferential trade arrangements, the best known being those linked to the Caribbean Basin Initiative (CBI) implemented on January 1, 1984, and revised periodically by Congress. Since 1984, the growth of free trade agreements (FTAs) in the region has signaled a shift in U.S. trade policy. The increase in reciprocal FTAs (particularly the Dominican Republic-Central America-United States Free Trade Agreement-CAFTA-DR) with even more generous trade provisions for certain Caribbean exports has the effect of -eroding" the relative benefits given to countries covered only by the CBI programs, raising questions about the future path of U.S. trade policy for those countries.

This report reviews unilateral preference programs for the Caribbean, discusses how they have been affected by FTAs in the region, and considers trade policy options for dealing with countries still relying on trade preferences and that may be considering whether to negotiate an FTA with the United States.

U.S. PREFERENTIAL TRADE PROGRAMS AND THE CARIBBEAN REGION

The United States has a long history of employing various types of trade incentives to encourage specific trade activities. Motivated by commercial, political, and security interests at times, the U.S. Congress has created multiple unilateral trade preference programs that promote developing-country exports, but are often structured so as to limit the negative economic effects on U.S. producers and workers. Over time, bilateral, regional, and multilateral trade agreements have come to eclipse the importance of many preference arrangements, a trend that a review of these developments will show has been particularly visible in the Caribbean Basin.

Background: Early Trade Preference Programs

In 1964, the United States government initiated a preferential tariff program based on production sharing. Production sharing is a cost-reducing business strategy that seeks competitive (price) advantage by locating manufacturing processes in more than one country (now often referred to a value added chains). U.S. firms specialize in the capital intensive, technology driven stages of production, and outsource assembly and other lower-skill processing to lower-wage countries. Under the U.S. production-sharing program, foreign firms that import U.S. component parts and assemble or process them into finished or semi-finished products may then re-export them back to the United States, with duties levied only on the value added abroad (no tariff on U.S. content).3

U.S. firms benefit from production sharing by the required use of their inputs (to receive the tariff exemption) and in retaining a portion of the global market for goods that might otherwise go to lower-cost foreign producers that do not use U.S. inputs. Foreign firms using U.S. inputs benefit from the tariff exemption, making their products more competitive in the U.S. market relative to those of other producers who face a duty on the full value of their competing exports. This type of production arrangement has been commonly used for automobile parts, electronics, and apparel, among other manufactured goods.4

The Caribbean Basin and Mexico were early beneficiaries of the production sharing program, with proximity providing a major advantage. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

U.S. Trade Policy and the Caribbean: From Trade Preferences to Free Trade Agreements *
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    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.