Opinion
- Editorial
Dennis
Morrison:Towards
a more integrated Caribbean
The mood of the Caribbean people towards, and their
intensity of thought about economic integration
of the region have gone through wild swings over
the past decade. Specifically, progress in the integration
process as measured by the most objective criteria
has been disappointing over the last 30-odd years,
since the Caricom Treaty was signed. This result
is due in no small measure to the fact that steps
taken by regional governments to co-ordinate and
spur intra-regional trade have been slow.
While the people of the region have been going through
their mood swings and ups and downs in intensity
of thought, many countries have moved towards regional
blocs as trade liberalisation and global competition
have accelerated. Even countries that are powerful
on their own have thought to strengthen their economies
and enhance their competitiveness by expanding their
market space through regional trading blocs. Canada,
Mexico and the USA came together to form NAFTA,
and the South-East Asian countries are in the ASEAN
group.
In
our Latin-American region, MERCOSUR brings together
Argentina, Brazil, Paraguay and Uruguay. This bloc
has survived wild economic swings, including the
meltdown in Argentina, which at another time would
have torn it asunder.
Over
the years, trade between these countries has not
only grown, but has come to represent a larger share
of their total imports and exports.
On the other hand, intra-regional trade in Caricom
has not been strong, and it still represents a small
share of the overall trade flows of the region.
Since
the 1990s, Caricom governments have instituted some
policy measures to liberalise trading arrangements
in the region, to allow freer movement of people,
and to encourage cross-border trading on the stock
markets. Jamaican companies are listed on Barbadian
and Trinidadian stock markets, and vice versa. Finance
companies from those two countries have also moved
to purchase major assets in Jamaica's banking and
insurance business. Jamaica in particular, has become
a good market for Trinidadian companies seeking
to invest abroad.
Very
little has happened in the real sectors in terms
of intra-regional direct investment to expand the
productive capacity of firms and countries. Direct
investment is still taking place to meet the demand
for goods and services within individual countries,
and not for expanding intra-regional trade. Foreign
direct investment to the region is also targeted
to individual countries, and is primarily aimed
at expanding capacity for exporting goods and services
to markets outside the region.
The
Caricom experience stands in sharp contrast to what
started in Western Europe as BENELUX, then eventually
evolved into the EEC, and now the European Union.
Over the 50 years since the six countries of the
EEC began the economic integration process, trading
patterns and investment flows of the countries involved
at each stage have taken on an intensified intra-regional
nature. Both in absolute terms and as a share of
their overall trade, intra-regional flows between
European countries far outweigh the flows between
these individual countries and the rest of the world.
This
did not happen by accident, but as a result of the
constant strengthening of the institutional arrangements
underpinning economic relationships between countries.
The Economic Commission was given powers to issue
directives relating to trade, competition and a
whole range of economic and social matters. Thus,
the links between the countries have deepened and
expanded to the point where there is a single currency
and agreements on the synchronisation of monetary
and fiscal policies.
Progress
on establishing effective institutional arrangements
in the case of Caricom has been unsatisfactory,
despite the recommendations of numerous working
groups, including that led by Sir Shridath Ramphal
more than a decade ago. Lengthy consultations and
ambitious objectives have not taken the process
forward with any great speed, even with the commitment
of several heads of government to the integration
movement.
Among
the topical issues are a single currency and the
need for a regional airline. The discussions about
a single currency ignore the fundamental requirements
such as fiscal and monetary policy alignment, trade
flows and legal framework, among other things. A
single currency is feasible if a platform is created
by harmonising policies in these areas. It does
not create the dynamic for integration, as seems
to be the expectation. Not even in the European
Union are all countries yet able to adopt the single
currency, much less Caricom where so many fundamental
elements are still missing.
In
the case of a regional airline to serve the Caribbean,
we would face the reality that its overwhelming
focus would be extra-regional, as intra-regional
traffic is still relatively small, though important.
Moreover, the big issues would be rationalisation
of aircraft fleet, air routes, and maintenance systems.
It is still not clear how a single airline could
be organised to serve so many small markets that
are unintegrated, and whether a hub could be created
to streamline traffic flows.
When
European integration started its post-world War
II phase with BENELUX, the driving force was the
rationalisation of the iron and steel industry of
the three countries which form the group. The motivation
was that the industry could form the foundation
for modern industrial production in the region.
Caricom
does not seem to have any such economic sector,
although some would argue that tourism could serve
as a driver. The view is that agricultural and manufacturing
production could be integrated in the countries
with competitive advantage to meet the demands of
the regional tourist industry.
Jamaica
and Trinidad and Tobago have, by far, the largest
volume of intra-regional trade, based on Jamaica's
imports of petroleum products and manufactured goods.
And as was indicated earlier, Jamaica is a market
for investment of Trinidadian capital, as in Carib
Cement. The relationship is still a narrow one,
however, with Jamaica running a massive trade deficit,
which in 2004 stood at US$465 million, up from US$231
million in 1996. With the sharp increase in oil
prices in 2005 that gap must now be over US$500
million, and the question is, how sustainable is
this one-way flow?
There
is scope for deeper industrial linkages, based on
Trinidad's natural gas base, which, like iron and
steel in BENELUX, could form the platform.
Reports
in last Thursday's Trinidad Guardian point to the
imminent settling of a cross-border agreement to
share common gas fields between Trinidad and Tobago
and Venezuela. Estimates indicate that T & T's
share of the gas in these fields would expand its
reserves substantially. What are the chances that
Trinidad and Tobago would see its long-term economic
future as being strategically linked to using a
share of its natural gas as the motor for regional
industrial and economic expansion?
Talk
about regional integration and single currency is
not meaningful outside of deep and positive consideration
of these questions and possibilities. Whether bilaterally
or as between Jamaica and T & T part of Caricom,
steps in this direction are indispensable if Caricom
is to become more than an effective political lobbying
tool, as important as that is in today's global
environment.
Dennis
Morrison is
one Jamaica Observer's columnist. Petroleumworld
not necessarily share these views.
Editor's
Note: This article was first publish in Jamaica
Observer, on Sunday, November 12, 2006. Petroleumworld
reprint this article in the interest of our readers.
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11/12/06
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