Wed | Oct 18, 2017

The problem with CARICOM (Part 2)

Published:Sunday | June 7, 2015 | 12:00 AMBruce Golding, Contributor
File Former Prime Minister Bruce Golding

There is strategic value in a structured alliance among countries that have common interests, face similar challenges and share even broadly the same geographic space. The majority of countries of the world are increasingly grouping themselves into larger economic blocs in order to exploit the synergies that can result and become more formidable forces in global trade.

The European Union is the oldest and most advanced and is the model that, to a great extent, other blocs have sought to follow. Today, there are the Russia-led Eurasian Economic Union, East African Community, the merger of Mercusor and the Andean Community into the Union of South American Nations (USAN), and the Association of South East Asian Nations (ASEAN). Together, they comprise 74 countries with a combined population of almost 2 billion and account for 45 per cent of the world economy.

I do not hold the view that Jamaica is better off dealing with the rest of the world on its own. Unilateralism may have been good enough before the end of the Cold War when Jamaica enjoyed significant geopolitical importance and could command the attention of the powerful political and economic centres of the world.

That era has long passed, and with the advance of globalisation, small and economically challenged countries like Jamaica have difficulty in doing so. Singapore is perhaps the best example of a small but extraordinarily wealthy country that could choose to 'go it alone', but, instead, has been a key player in ASEAN, an economic bloc of 10 countries with a population of 625 million, one of the stated objectives of which is "to create a single market and production base which is stable, prosperous, highly competitive and economically integrated". The difficulty with which all these groupings have to grapple is how that "integration" is to be structured and executed.

single economic space

The 2001 revision of the Treaty of Chaguaramas seeks to move beyond the common market for trade in goods that was established by the original treaty in 1973 to a single market and economy, in other words, a single economic space. We have not had much serious discussion about what this means and what would be required to achieve it.

It is extremely difficult to establish and properly manage a single economic space encompassing 14 sovereign countries with widely diverging macroeconomic profiles, individually determined fiscal and monetary policies, and nine separate central banks or monetary authorities each operating independently and issuing its own currency. Those who crafted the revised treaty were not unmindful of this. Hence, it requires member states to:

- establish measures for the coordination and convergence of national macroeconomic policies [Article 14(2)(a)];

- adopt measures for fiscal and monetary cooperation among member countries [Article 14(2)(b)];

- recommend measures to achieve and maintain fiscal discipline by member states [Article 14(2)(c)];

- coordinate their foreign exchange policies (Article 42);

- abolish exchange controls and provide for free convertibility of their national currencies (Article 44);

- commit themselves to the goal of free movement of CARICOM nationals (Article 45);

- coordinate their industrial policies (Article 52);

- harmonise investment incentives in the industrial, agricultural and services sectors (Article 69);

- coordinate their external trade policies with third countries (Article 80).However, these measures do not provide a sufficiently sturdy and predictable platform on which a single economic space can function and flourish. I very much doubt whether any minister of finance within CARICOM, when preparing his budget, concerns himself or even bothers to inform himself with what other ministers of finance are doing.

Worse still, the obligations imposed on CARICOM member states, weak and imprecise as they are, are more often than not ignored, deferred or breached with no provision for enforcement. Decisions to give effect to any of these requirements have to be approved by all 14 heads, not just by the Conference of Heads. The CARICOM Secretariat, the perennial whipping boy for CARICOM failures, has absolutely no power to implement those decisions. The implementation has to be done by each of the 14 separate governments and where, as is invariably the case, legislation is required to give legal effect to those decisions, that has to be done by 14 separate Parliaments enacting 14 separate packages of legislation that end up saying and meaning the same thing. Such a process requires not just harmonisation; it requires a synchronisation analogous to an aircraft tanker refuelling another plane while in full flight.

It was this dilemma and the increasing frustration with CARICOM's perceived lack of progress that led to the idea of setting up a CARICOM Commission, a kind of executive body in which would be vested by the 14 separate governments the power to implement the decisions of the heads of government across all member states. The proposal was accepted by the heads in 2003 and the Jamaica Labour Party objected vehemently to what it saw as a transfer of executive authority to an external body that was not answerable to the Jamaican people. It is my view that such an arrangement, if challenged, would have been found unconstitutional.

This brings me to the essential problem with CARICOM in its present state. It is extremely difficult and, in the case of immature economies like those in CARICOM, nigh impossible for a single market and economy to exist without unification (not just harmonisation) of critical macroeconomic policies and institutional arrangements. That kind of unification cannot depend on the vagaries of 14 different governments and 14 different legislatures, especially given the periodic changes of administration. It requires a political structure in order to make it work.

The European Community confronted that necessity at Maastricht in 1992 and put in place the political arrangements to make the European Union work: the European Council, the European Commission, a directly elected European Parliament with more than 750 members and a European Court of Auditors. Before gaining entry into the EU, a country has to meet certain benchmarks 'convergence criteria' relating to issues such as inflation, fiscal performance and debt ratios. Once admitted, member countries are bound by the Stability and Growth Pact (SGP), which lays down rules and limits regarding critical variables such as fiscal and debt ratios.

The severe financial crisis that hit Europe and the slowness of its recovery have been blamed, in large measure, on the failure of some member countries such as Greece, Spain, and Ireland to abide by the SGP rules despite the sophisticated EU political architecture. A strong case is now being made for greater control over fiscal decisions to be moved from the sovereign member countries to the European centre.

sophisticated political structure

Clearly, therefore, a single economic space requires a sophisticated political structure to make it work. The experience being played out in Europe suggests that even the EU's advanced political arrangements are not sufficient to ensure that it works. A political union would avoid all these hazards. It would dissolve the problem of free movement of people, which is an essential component of a single economic space.

The unification of policies to make that single economic space work would be automatic. That, no doubt, is the route that Ralph Gonsalves, Patrick Manning and others would wish to take. The Jamaican people are not so disposed, having so declared in 1961, and, I believe, would do so again if asked today. I doubt that we are alone. Guyana was not part of the West Indies Federation; nor was the Bahamas which, from the very outset, made it clear that it would not be part of the single market and economy (yet the Bahamas is never accused of being anti-regionalist the way Jamaica so often is). Those countries that wish to form a political union should be allowed, and, indeed, encouraged to do so.

I expect that they would remain within CARICOM, but now as one member country instead of four or five. Once the issue of political union is resolved, the CARICOM member countries should face the reality that the lofty, far-reaching goals set out in the revised Chaguaramas cannot be achieved because the political framework that it requires can never be achieved.

We would then be able to look at CARICOM and the regional integration process more objectively and pragmatically as so many other countries are doing in their own spheres.

My thoughts as to how that new approach should be pursued for the benefit of all CARICOM member states will be the subject of the third and final part of this series.

- Bruce Golding is a former prime minister of Jamaica. Email feedback to columns@gleanerjm.com.