Tue | May 23, 2017

The problem with CARICOM (Part 3)

Published:Sunday | June 21, 2015 | 6:00 AMBruce Golding, Contributor
Former Prime Minister Bruce Golding
The business and industrial district of Trinidad’s capital, Port-of-Spain. Jamaican manufacturers have been complaining of unfair trade advantages received by their Trinidadian counterparts.
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In two previous articles I put forward valid reasons the single market and economy, the centrepiece of the Revised Treaty of Chaguaramas, is unachievable, and suggested the need for CARICOM to be reconfigured and repurposed.

The Gleaner, in its editorial of June 9, dismissed my argument as "whining". The late Professor Norman Girvan was as committed to Caribbean integration as anyone could possibly be, but in an address titled 'Reinventing the CSME' to the Caribbean Association of Judicial Officers on September 23, 2013, a few months before his untimely passing, he "whined": "My argument is that the CSME (CARICOM Single Market and Economy) is a 'borrowed model' of economic integration ... . My argument is that the CSME has been a failure, not because it was implemented and failed to bring the desired results, not because its failure in implementation is due to defects in governance, but because it is a borrowed model of integration known as open regionalism, which is an imperfectly designed instrument to boost the development of Caribbean economies. Hence, it never developed the degree of traction among governments and other stakeholders required to sustain it."

He continued his "whining": "Nearly a quarter of a century has passed. We now face the necessity of jettisoning or seriously modifying the failed model which we mistakenly adopted. The alternative is the very real danger of gradual collapse of the economic integration project."

Professor Girvan was of the view that the CSME ought to be redesigned:

"I want to put on the table here a third approach. This is to reinvent the CSME in a way that makes sense to actual conditions on the ground in CARICOM. In other words, an exercise that addresses the most pressing needs of the regional economies, that is crafted to deliver tangible benefits in the not too distant future, that takes into account the actual implementation capacity of member states."

Among the recommendations put forward by Professor Girvan, the two most significant are:

- reprogramming the CSME to focus on three key areas: agriculture and food security, renewable energy, and maritime transport;

- delegation of authority by member states to CARICOM organs in specific, limited areas to support these three focus areas.

It is to be recalled that the CSME was originally scheduled to have come into effect in 2008. As its 'undoability' became more apparent, the timeline was extended to 2015, but by 2011, the decision was taken to put the entire process on hold pending a re-evaluation. That re-evaluation led to the formulation of the Strategic Plan for Repositioning CARICOM 2015-2019, which was approved by the heads of government in 2014. The architects of the plan evidently did not share Professor Girvan's pragmatic view that a more targeted and doable approach should be adopted.

 

unfulfilled goals

The Strategic Plan is merely a reaffirmation of the unfulfilled goals of CARICOM and the CSME with a few new ones thrown in to deal with things like climate change, cybercrimes and information and communication technologies (ICT). Thus, it lists among its strategic initiatives the accelerated implementation of the single market and economy, advancing the free movement of people, macroeconomic convergence among member states, and expansion in intraregional trade - objectives that have so far been beyond us.

The plan is basically a rescheduling to 2019 of the implementation commitments that were not delivered in 2008 or 2015. They are not likely to be delivered by 2019 because they ignore the fundamental issues that have caused the huge implementation deficit. Clearly, we have learnt little from the experience of the last 14 years.

One of the flaws in the single market concept is the assumption that by combining the markets of the several member states, each would then benefit from access to a larger market. This theory holds only if two conditions are present:

- the productive bases of the various countries are different and complimentary rather than in competition with each other;

- production is at a level of efficiency that, with duty-free access, it is able to replace imports from third countries.

Apart from Trinidad's energy endowment and its energy-subsidised superiority in manufacturing and, of much less impact, bauxite reserves in Jamaica and Guyana, neither of those two conditions obtain. We largely compete with each other in critical sectors such as manufacturing, tourism and financial services. Agriculture is insulated only by the protective tariffs allowed under the Treaty.

 

most profound impact

Since its establishment in 1973, trade among CARICOM members as a percentage of total trade has increased from nine to 16 per cent - hardly a stellar performance over 42 years. In fact, CARICOM's most profound impact in terms of trade has been a redistribution of the market, with Trinidad being the prime beneficiary since its exports to other CARICOM countries (principally Jamaica) account for two-thirds of all intraregional exports.

There is a graveyard of Jamaican manufacturing companies whose products have been displaced from our own supermarket shelves by competition from Trinidad. We must not be too quick to blame it on Trinidad. We would have taken similar advantage of our oil reserves if we had them, and even if we did, we would still have difficulty competing because of our other deficiencies. Jamaican labour productivity has fallen by 40 per cent in the last 40 years. The cost of doing business in Jamaica, including our abnormal security costs, still renders many potential business opportunities unviable.

I have always argued that CARICOM's major defect is that it is much too inward-looking. Instead of looking (and glaring) at each other, each with our own pair of eyes, we would be much better off and would see much more if together, we looked at the rest of the world and the opportunities that can be exploited with 14 pairs of eyes.

A World Bank report released only a few days ago underscores my point. It highlights the fact that "the region's trade performance is limited by lack of diversity and limited innovation". More strikingly, however, it reveals that "the Caribbean's share in global trade fell from three per cent in the 1970s to nearly a quarter per cent in 2012". No more profound testament to CARICOM's failure in terms of its economic objectives is needed.

See the final part of this four-part series in Monday's Gleaner.

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