Trade and integration in the Caribbean: trends and prospects
The Caribbean Community (CARICOM) is a customs
union composed of 15 very heterogeneous States that are
in the process of forming a CARICOM Single Market and
Economy (CSME) by 2015.
incorporated them into domestic legislation, with the
exception of Bahamas and Montserrat, which decided to
not to join the CSME, and Haiti, which postponed its
entry.
The most recent global crisis struck Caribbean nations
harshly due to the fragility of their economies and public
finances. The crisis exacerbated their economic difficulties,
highlighted their vulnerability to external events and
postponed the implementation of subregional integration
commitments.
Except for Bahamas, the countries in this subregion have
adopted a common external tariff, which has been
significantly reduced from 20% in the 1990s to 10% in
2009. CARICOM has also adopted a common trade policy
towards external partners, although with certain
exceptions.
The value of CARICOM exports, mainly fuel and basic
commodities, dropped drastically in 2009, due more to the
falling prices of natural resources and food and less to a
lower volume of sales. After record growth from 20052008, in 2009 the value of exports fell 43.4%, especially in
Trinidad and Tobago (-51%), Jamaica (-50%) and Bahamas
(-30%).
The free intrasubregional movement of goods is very
advanced, given that tariffs on goods from CARICOM
countries were largely eliminated in the 1990s. However,
intrasubregional trade is concentrated in a few countries
and products.
Most CARICOM economies are providers of services,
mainly tourism, and to a lesser extent, financial services.
With the exception of Trinidad and Tobago, Guyana,
Belize and Surinam, services exports are the main sources
of foreign currency needed to finance imports. With the
crisis, services exports diminished 10.4% in 2009.
CARICOM has lost its share of the market in global
services trade, particularly in telecommunications,
informatics, finance and even tourism, in which it enjoys a
comparative advantage, falling from 1.2% in 1990 to 0.8%
in 2008. Due to the crisis, income from European and
United States tourists shrunk, although there was a slight
upturn during the first semester of 2010 (4.5%).
Towards a Single Market and Economy
There has been significant progress in the implementation
of the CARICOM Single Market and Economy (CSME).
Most CARICOM member States have signed, ratified and
promulgated the community treaties and have
CARICOM: AVERAGE ANNUAL RATES OF THE
VARIATION OF THE VALUE OF EXPORTED
GOODS AND SERVICES
2003 to 2008, 2009 and 2010 (Percentages)
Goods
20032008 2009
2010
a
Services
20032008 2009
6.5 10.4
4.4 10.7
8.6
-9.9
5.5
-1.5
37.0
0.7
CARICOM
23.5
-43.4
4.4
Bahamas
Barbados
Jamaica
Surinam
Trinidad and
Tobago
17.5
12.5
12.5
28.5
-30.3
-17.9
-49.8
-17.8
-23.9
4.8
-13.0
-0.7
29.1
-50.9
10.8
6.2
...
7.8
-2.4
2.7
4.3
-7.3
8.7
-2.6
-5.5
13.3
...
OECO
Others
b
Source: Economic Commission for Latin America and the Caribbean
(ECLAC) based on the International Monetary Fund (IMF), “Balance
of Payments Statistics” and “Direction of Trade Statistics”,
http://www.imf.org/external/data.htm, and official country data.
a/ Refers to the period January-February 2009 to January-February
2010.
b/ Includes Belize, Guyana and Haiti.
The participation of exports to other CARICOM
members as part of total exports grew from 11% in 1995
to 16% in 2008. Trinidad and Tobago has an increasingly
greater share of intrasubregional exports, representing
80% of total intrasubregional exports in 2008, compared
to 55% in 1990.
The creation of the Regional Development Fund to assist
some countries in the transition towards an integrated
market of goods and services has been an important
achievement. However, the lack of secure funding,
inadequate capital fund and the temporary nature of the
assistance could hinder reaching its goals.
Despite the progress made towards a single market and
economy, several obstacles remain:
 Lack of coordination and harmonization of fiscal and
monetary policies
 Wide use of tariff suspensions and reductions and
national exceptions to the common external tariff
 Obstacles to the full free movement of goods through
non-tariff barriers
 Incomplete free movement of capital and skilled labour
 The non-binding nature of decisions adopted by
CARICOM bodies
 Failure to define and apply common sectoral policies
 Slow progress in the harmonization of competition
policies and consumer protection regulations
 Weak technical and administrative capacities of member
governments
Agreement with the European Union
An Economic Partnership Agreement (EPA) with the
European Union has been in effect since 2008, providing
opportunities for diversifying exports and increasing
investment inflows and financial and technical assistance
to promote regional integration.
CARICOM member countries need to position
themselves better to capitalize on the market access
provided by the agreement in order to diversify their
exports. This repositioning will require taking the fullest
advantage of the financial and technical assistance
available under the agreement in the aim of developing
production capacity, strengthening institutions and
improving competitiveness.
Export diversification efforts are moving in the right
direction, but the process needs to be accelerated. The
constraints to export diversification that demand urgent
attention are deficient infrastructure, weak institutions and
private sector and inadequate expertise.
In order to attract foreign direct investment from the
European Union, CARICOM needs to improve the
business environment through the promotion of
macroeconomic stability, the creation of a skilled labour
force, the provision of adequate infrastructure and the
development of strong and independent institutions.