Introduction

It is an honour and privilege to be granted this opportunity to address on behalf of the Secretary-General of the Caribbean Community (CARICOM), this Public Hearing devoted to a Review of Economic Growth and Development of the Caribbean Region. My statement will be focussed on the reality and experience of the integration grouping which comprises fifteen small island and low lying developing states of the Caribbean Community CARICOM. These states are Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St Kitts and Nevis, Saint Lucia, St. Vincent & the Grenadines, Suriname and Trinidad and Tobago.

These countries, notwithstanding their small size, have much in common with the United States. They share a commitment to freedom, democracy, rule of law, and to the improvement of the lives of their people through peaceful development and security of their borders.

Regional Integration

In order to overcome the limitations deriving from small size and other development challenges, the countries of the Region have embarked on a systematic programme of economic integration which is reflected in their intention to fully implement by 2015, the CARICOM Single Market and Economy (CSME), in keeping with the commitment in the Revised Treaty of Chaguaramas. This single economic space is expected to provide the springboard for the Region to advance the process of integrating into the global economy.

This deliberate process of regional economic integration began in 1968 with the formation of the Caribbean Free Trade Area (CARIFTA) with principal focus on trade in goods. This was deepened into the Caribbean Community and Common Market (CARICOM) in 1973 which strengthened the economic integration arrangements, included a foreign policy component, as well as cooperation in functional and social areas.

In 1989, the Heads of Government of the Caribbean Community took a major decision to create a Single Market and Economy (CSME). The Single Market became operational in January 2006 among twelve Member States. Of the others, Haiti is in the process of putting arrangements in place to participate. Montserrat, a British Dependency, is awaiting the necessary instrument of entrustment. The Bahamas has decided not to participate at this time.

We wish to take this opportunity to commend the Government of the United States for the HOPE Act of 2006 in favour of our sister state Haiti. For our part, the Caribbean Community has been and will continue to provide assistance to Haiti to facilitate its smooth entry into the Community and the CSME, and to be able to fully participate in all aspects of the integration movement.

The essential characteristics of the Single Market are free trade in goods and services, movement of labour and capital, and the right of establishment.

The operationalisation of the Single Economy has begun to gather momentum with the completion date set for 2015. This would involve the harmonization of monetary, fiscal and economic policies including Financial Policy Harmonization and the adoption of a CARICOM Financial Services Agreement, Investment and Incentive Policy Harmonization, and Sectoral policy harmonisation with respect to industry, agriculture and transportation.

A critical element of the regional integration process is the implementation of a CARICOM Development Fund as provided for in the Revised Treaty of Chaguaramas. The Fund is designed to provide financial and technical assistance to disadvantaged countries, regions and sectors to assist in the transformation of the economies of Member States, enhance their competitiveness and facilitate their insertion into the global economy. The Fund will become operational later this year.

Regional integration constitutes an important strategy for optimising the development possibilities of the Caribbean Community, based on a pooling of resources and as a means of ensuring effective participation in the global economy. However, creation of a Single Market and Economy is not by itself sufficient to solve the problems of small size, vulnerability and sustainability. The Community is therefore actively engaged in the expansion of trade and economic relations with third states. In this regard, CARICOM’s relations with the US, Canada and the European Union come readily to mind. The Region is also advancing its relations with Latin America and with other countries.

CARICOM Development Challenges

The economy of the Caribbean Community is at an important juncture. The critical challenge being faced is how to give effect to the meaningful insertion of CARICOM into the rapidly changing global economy. Although some of these countries have achieved commendable levels of per capita income and also rank reasonably well on the United Nations Human Development Index (HDI), there are still significant challenges to overcome.

CARICOM is also characterized by varying levels of development among its Member States. This is recognized in the Community’s Charter - The Revised Treaty of Chaguaramas - which designates six countries as More Developed (MDCs) and nine as Less Developed Countries (LDCs). It is against this background that we should view the Region’s economic policies and performance and its capacity for sustained development.

CARICOM’s LDCs for example, are among the least diversified economies in the Region with a great dependence on one or two economic sectors. Compounding the issue is the fact that these countries are largely open economies and as a result are susceptible to external shocks. In this regard, the Governor of the Eastern Caribbean Central Bank has cited rising food and fuel prices and the declining value of the US dollar to which their currency is pegged, as immediate challenges facing this group of countries.

In addition to their economic vulnerabilities the development of CARICOM Member States is also constrained by their ecological fragility, susceptibility to natural disasters, notably hurricanes and the impact of climate change. In the aftermath of natural disasters, Governments have to embark on costly rebuilding programmes. In 2004, Grenada’s economy was totally wiped out within five hours by Hurricane Ivan. The economy and infrastructure are still being rebuilt. Similarly, the impact of climate change and its consequences for sea level rise has become a growing preoccupation, given its potential to cause significant economic disruption in small islands and low–lying coastal states of our Community. It is a tragic irony that countries which contribute the least to global warming are the most directly impacted.

The situation in CARICOM is not entirely negative. While agriculture continues to be the main sector in some Member States, others have sought to diversify their economies through the development of the manufacturing and services sectors, including tourism and financial services. In some of the countries, the services sector has become the lead economic driver accounting for as much as ninety per cent of output in the LDCs. In the MDCs such as The Bahamas, Barbados and Jamaica this sector makes a very significant contribution to growth.

The Region’s efforts to develop its services sector have not been without difficulty. Developments in the international community and unfriendly trading stances adopted by developed countries, including some of their main trading partners, have sought to frustrate these efforts. One such example relates to offshore financial services. Another concerns Internet Gaming, which despite a WTO ruling in favour of a CARICOM Member State remains an issue as a result of non-compliance with the ruling by the major developed country in our hemisphere.

More recently, CARICOM was forced to make strong representation to achieve the attenuation of US policy which would have resulted in a reduction in US tourist arrivals in CARICOM.

More generally, the global trade regime which is aimed at the creation of a more liberalised trade environment has created special challenges for the CARICOM Member States and has emphasised the need for increased productivity in order to enable the countries of the Region to compete effectively in the global economy. The need for improved competitiveness through the transformation of existing production structures, the increased application of technology as well as improved organisational arrangements has become a major preoccupation of policy makers in government and also in the private sector as we expand our trading relations with third states.

CARICOM/US Trade and Economic Relations

In January 1984, CARICOM/US trade relations were formalised under the Caribbean Basin Economic Recovery Act (CBERA) adopted by the US Congress in an effort to stimulate increased trade with the Caribbean by granting duty free access for a wide range of goods to the US market. The subsequent Caribbean Basin Trade Partnership Act (CBTPA) which entered into force in 2000 expanded the list of duty free products which some beneficiary states can export into the US. However, CARICOM Member States have been unable to take full advantage of these preferential arrangements mainly due to capacity constraints.

CBERA provided a significant impetus to the development of the apparel industry particularly in Jamaica and Haiti with exports targetted to the US market. However, while the industry continues to grow in Haiti because of its competitive wage structure, it has declined significantly in Jamaica with the advent of NAFTA. Overall CARICOM exports to the US have been skewed in favour of a few countries producing a limited range of goods. Petroleum and related products have been, by far, the major exports from the Region. During the period 2000 to 2002 CARICOM recorded negative trade balances with the US. Beginning 2003, CARICOM experienced a turnaround in export performance recording positive trade balances up to 2005, the highest being US$2.7 billion recorded in 2005.

However, if one were to exclude exports from Trinidad and Tobago which comprised largely petroleum and related products, the Region would record negative trade balances over the entire period 2000 to 2005.

The impact of the preferential arrangement has therefore not been as broad based as envisioned.

In order for the Region to be better able to take advantage of access arrangements to the US market, assistance is needed to address the issues relating to production capacity, particularly in the private sector. Such support could be in the form of technical assistance and infrastructure-related “aid for trade”, research and development, and investment and trade promotion events. In this regard, the Caribbean Community’s capacity in the area of trade facilitation and custom procedures will be soon strengthened through assistance from the US.

Attracting investment continues to be a priority for the countries of our Region. At present, investment into the Region is concentrated in one or two countries; but the entire Region is open for business and, to this end, the CARICOM Investment Code will soon be in place. The Code is intended to make the Caribbean Community a single investment location rather than one with different jurisdictions. CARICOM therefore welcomes investors from the USA to seek their respective market niches in the enabling business environment via wholly-owned or joint venture arrangements.

The efforts of the Region to enhance its competitiveness through increased productivity and to attract investment have assumed added significance given that aid flows in recent years have declined. In addition, many countries have been graduated from World Bank concessionary financing. While the decline in aid flows has been partially offset through increased FDI inflows to some countries, the concentration of these resources in a few countries contributes to continued economic disparity. Where some CARICOM countries have been able to secure resources on the international financial markets, this has tended to be on crippling commercial terms with attendant consequences for macroeconomic management.

CARICOM/US Trade and Economic Relationship – 2008 and Beyond

CARICOM/US relations were given a significant boost with the holding of the first Summit between their Leaders in 1997, which resulted in the adoption of the Bridgetown Declaration “Partnership for Prosperity and Security”, whose elements remain relevant today. The importance of the relations was further advanced by the convening of the Conference on the Caribbean, in Washington in June 2007 which culminated with the second summit between Heads of State and Government of the United States of America and of the Caribbean Community Nations.

The timing of this Public Hearing is therefore propitious as it allows representatives of the Caribbean Community to share with US counterparts their views on how to build on the principles set out by the Heads of State and Government.

CARICOM contends that a new relationship with the United States in the 21st century should have as its primary objective, the acceleration of the pace of development of the countries of the Region while promoting stability and the preservation of their democratic traditions. To that end, I draw attention to what might be considered as elements for a more mature CARICOM/US trade and economic relationship.

First, CARICOM/US trade relations should be enhanced and placed on a permanent and more predictable footing. One way of achieving this would be for the US to lock-in the CBTPA preferences which expire in September this year into permanent legislation under CBERA and include all CARICOM Member States as beneficiaries. In addition, the US should broaden the categories of CARICOM products eligible for preferential access to its markets. CARICOM exporters could also benefit from more flexible Rules of Origin for exports to the United States. In this regard, the ‘cumulation principle’ should be preserved and further strengthened. This would enable enterprises to combine inputs from eligible countries in the Region in the production of goods and services.

Second, the services sector which is the fastest growing in the Region, contributes between 60 to 90 per cent of the economic output in Member States. This is clearly an area that needs to be taken into account and be explicitly provided for in any future CARICOM-US trade relations. Enhancement of the CARICOM-US trade and economic relationship along these lines, with development as its foundation, could only lead to mutually beneficial outcomes for both partners.

Third, as CARICOM seeks to promote the transformation of the economies of its Member States through their access to the resources and technical assistance to be provided by the CARICOM Development Fund, there is a role for the US, its long standing partner.

Fourth, capacity-building assistance to allow regional industries to capitalise on export opportunities is another area in which the US could be supportive of CARICOM. This should include training and technical assistance to address sanitary and phytosanitary requirements and other technical regulations and standards applied by the US.

Fifth, any new and enhanced trading relationship between CARICOM and the US should take into account the differences in the level of development between the two parties and among CARICOM countries themselves, as recognized by the Treaty of Chaguramas. In short, the principle of special and differential treatment should be a feature of any new arrangements.

The revitalised CARICOM-United States Trade and Investment Council (TIC) is expected to play an important part in the furthering of the enhanced trade and economic relationship.

Conclusion

In closing, I wish to express appreciation to Congressman Charles Rangel for his initiative which has led to this Public Hearing. By his initiative he has been true to the Joint Statement issued by the Heads of State and Government of the United States of America and of the Caribbean Community Nations on the occasion of the Conference on the Caribbean held here in Washington DC last June. The Heads of State and Government declared, inter alia;

“We recognize the establishment of the CARICOM Single Market and Economy as a critical element of the growth and development strategy of the Caribbean Community.

We are determined to strengthen our existing trade arrangements. We acknowledge President Bush’s announcement to work with Congress to extend and update the Caribbean Basin Trade Promotion Act and the 1991 Trade and Investment Framework Agreement. We further commit to the harmonisation of customs procedures consistent with global standards and the advancement of technical trade cooperation.

We reiterate our support for Caribbean efforts to expand the services sector, and encourage a focus on the international financial services sector to facilitate a competitive means of economic diversification while remaining committed to the maintenance of appropriate regulatory and supervisory practices, consistent with the highest international standards”.

Mr Chairman, I thank you and the other Commissioners for this opportunity to make a statement at this Public Hearing.

I thank you.