Events

A New Economic Relationship Between the United States and the Caribbean

March 04, 2010 // 3:00pm5:00pm

The system of unilateral trade preferences for developing countries that had long characterized North-South commercial relationships has been progressively replaced by different types of commercial arrangements. These involve reciprocal concessions and broad agendas that go beyond the exchange of goods and services. Both the United States and the European Union have recast their trade relations with developing countries, through free trade agreements, economic partnership agreements, investment treaties, and other accords that promise to bring important changes to the nature of economic relations. As the beneficiary of the oldest U.S. trade preference program still in existence (the Caribbean Basin Initiative, or CBI), the Caribbean has begun a process of reflection regarding the contours of a post-CBI economic relationship with the United States. To examine the issues at stake and evaluate the policy alternatives, the Latin American Program held a roundtable on March 4, 2010, in conjunction with the Institute of Caribbean Studies.

The U. S. government has been pondering the future direction of Caribbean trade preferences and how to stimulate new trade and investment in the region, explained Irving Williamson, Commissioner at the United States International Trade Commission. To reach economies of scale and thus attract investment—an important goal of any initiative—the Caribbean must harmonize regional regulations and then bring these into convergence with those of the region's main trading partners. Williamson suggested several measures that Caribbean governments should support to boost competitiveness. These include improving the business environment (through the quality of infrastructure and the streamlining of procedures for business startups), improving advantages to service providers (including accreditation procedures for nurses, lawyers, and other service professions), increasing access to trade support for small and medium sized businesses, and active pursuing access to foreign markets through trade negotiations. This last point, Williamson suggested, should be the consequence of the previous measures, in order to fully reap the rewards of free trade agreements.

Presenting a view from civil society, Cecilia Babb, president of the Caribbean Policy Development Center (CPDC), argued that the CBI, or any other Caribbean trade initiative, needs to be integrated into development policies. Research at the CPDC found that only 51 percent of all Caribbean exports to the United States enter through the trade preferences of CBI, thus showing the evolution of the region's trade profile and the need for reform. CBI boosted Caribbean exports, but the next stage for the Caribbean, Babb indicated, must involve trade in services, an area not covered under the CBI.

Dav-Ernan Kowlessar, also of the CPDC, elaborated on the importance of services for any new Caribbean economic relationship with foreign countries. Services comprise between sixty-three and seventy percent of the productive capacity of the Caribbean Community (CARICOM), including Haiti. Yet because of infrastructure problems, Kowlessar noted, the Caribbean suffers from an inverse relationship between what is produced and what is traded. Micro-enterprises as well as small- and medium-sized companies possess the bulk of the productive capacity of the region, a fact that their small size seems to conceal. But most of these enterprises are located in the services sector. For this reason, Kowlessar explained, the private sector provisions of trade agreements remain largely unknown. Moreover, the Caribbean's trade infrastructure emphasizes trade in goods, while the infrastructure required for trade in services, such as investment regimes (to support joint ventures with the United States, for instance) and administrative and certification procedures, has not been sufficiently developed.

While acknowledging that the CBI may not have carried the Caribbean as far as it did Central America, Stephen Lande, president of Manchester Trade, explained that the CBI provided the Caribbean with a vision for an economic relationship with the United States. Such a vision is what the Caribbean needs now, Lande argued. He suggested several key elements of a future agenda. Regarding a services agreement, he invited Caribbean experts to question what services the Caribbean currently produces that face market access restrictions in the United States, and to use those to spearhead a trade negotiation with the United States. Lande insisted on the need to place Haiti at the center of Caribbean concerns, highlighting what he said is Haiti's potential to become the workshop of the Western hemisphere. Haiti needs a simple, comprehensive policy that supports a transformative goal for the Haitian economy, Lande argued. To become a manufacturing pole, Lande suggested a policy involving duty free access for all Haitian merchandise after a certain percentage of value added, as well as complete duty free for all merchandise entering Haiti and an organized infrastructural project for the entire country. Finally, Lande suggested a big role for the Caribbean in matters of technical assistance to Haiti, including the court system and other areas of public administration.

  

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