Opinion
- Editorial- Commentary
Sir
Ronald Sanders :
Time
for a single Caribbean dollar
SERIOUS
ATTENTION has to be given to the creation of
a single currency by the countries of the Caribbean
Community and Common Market (Caricom) that earlier
this year signed an agreement to establish a Single
Market. If they don’t, the single market
will begin to unravel as free movement of goods
and services fails to bring significant benefits
because transaction costs remain high and exchange
rates continue to foster uncertainties.
A monetary union and a single currency in the
countries of the Caribbean Community and Common
Market (Caricom) would be a boon to commercial
operations in the region from the smallest trader
to the largest corporation. It would also be a
delight to multi-destination tourists and to the
ordinary Caricom citizen travelling from one country
to another.
Caricom countries need look no further than within
their seven smaller member states, the countries
that comprise the Organisation of Eastern Caribbean
States (OECS), to witness some of the benefits
of a currency union and single currency.
In the OECS countries, cross border investment
has increased, the currency is the strongest in
the region, transaction costs for business is less
than they are with other Caricom countries, and
the people of the area are able to travel without
the burden of having to change their money.
During
the recently concluded Cricket World Cup tournament
in the Caribbean, the absence of a single
currency in the much vaunted “single economic
space” was a glaring weakness. Persons travelling
from one country to another, except within the
OECS, found that they had to endure the inconvenience
of changing money at every destination, often losing
heavily on exchange rates.
In
a recent paper to Caricom Heads of Government,
noted Economist, Norman Girvan, observed, “Among
the advantages of monetary union are reduction
of transaction costs of intra-regional trade, investment
and remittances; increased price transparency,
reduced exchange rate uncertainty, enhanced efficiency
of financial markets, and a deepened sense of regional
identity.”
And, Barbados Central Bank governor, Dr Marion
Williams, has warned that the United States dollar
might emerge as a default common currency if Caricom
countries do not move toward a single currency.
In
1992, another Barbados Central Bank official,
Dr Delisle Worrell, had cautioned against adopting
the US dollar as legal tender, saying that the
lack of credible, convertible Caribbean currency “may
give the US an enormous political lever over countries
which are so dependent that they should maximise
whatever opportunity avails to increase their room
for manoeuvre.”
To be fair to the US, no person in authority in
the US has suggested that Caricom countries should
opt for the US dollar as their currencies. But,
the reality is that cross-border transactions among
Caricom countries are conducted in US dollars,
and in the absence of a single monetary authority
and a single currency, the US dollar is the measure
of exchange.
On
all counts it is highly desirable for Caricom
countries to establish a single currency. The West
Indian Commission in its 1992 report, “Time
for Action,” had suggested to Caricom governments
that “immediate steps should be taken towards
the goal of a common currency.” And the Commis-sioners
went on to propose that it should “be attained
on a phased basis and under arrangements which
take account of existing exchange rate differentials”.
In reality, the seven OECS countries, Barbados
and Belize could probably establish a single monetary
authority and single currency within a short space
of time. Their exchange rate and other economic
factors are close enough to merge with little disruption.
Other
countries — Trinidad and Tobago, Jamaica,
Guyana and Suriname — could operate on a
parallel track with the single currency area until
they satisfy criteria to join.
A
reference of how this could be done exists now
in the European Union (EU). Fourteen EU member
countries are not part of the European single currency,
the euro, or the common central bank. They are
required to achieve “sustainable economic
convergence with the euro area.”
This includes price stability, a low level of
public debt, and a stable exchange rate. In the
meantime, agreements have been worked out to facilitate
their trade, investment and currency conversion
with the other thirteen EU members, but their costs
are higher.
A single monetary authority and a single currency
for Caricom countries could bring enormous benefits
for more investment, greater trade, better prices
for goods and services and easier movement of people
for tourism and commerce. The Caricom single market,
and the single economic space would then assume
far greater relevance to the lives of Caribbean
people.
It is time for a single Caribbean dollar.
Sir
Ronald Sanders is a business executive and former
Caribbean diplomat who publishes widely on small
states in the global community. Petroleumworld not necessarily share these
views.
Editor's
Note: This article was first publish in Trinidad
Newsday, Sunday, June 24 2007. Petroleumworld
reprint this article in the interest of our readers.
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Petroleumworld
24/06/07
Copyright ©2006
Ronald Sanders. All Rights Reserved.
