David Jessop, Contributor
AS THIS is being written, Caribbean Heads of Government have begun to arrive in St Lucia for the 26th CARICOM Heads of Government meeting.
Their agenda will as usual be wide-ranging, covering an extraordinary number of pressing and diverse issues including sugar, crime and security. But these issues apart, the most far-reaching and challenging discussion is likely to be that on the completion of the Caribbean Single Market and Economy (CSME).
In the last few weeks, differences over this issue have become increasingly public, as leaders in the Organisation of Eastern Caribbean States (OECS) have expressed reservations about the extent to which their nations will benefit from a single market.
Their fear is based on a number of factors including growing trade imbalances between larger and smaller CARICOM states, high levels of indebtedness and the difficulty of achieving competitiveness when diseconomies of scale in small states, for example, cause utilities to cost more.
These public doubts follow from a study for the OECS Secretariat conducted by the United Nations Commission for Latin America and the Caribbean. The study noted the increasingly unfavourable balance of trade between the OECS and Caricom.
PATTERN OF TRADE
Such imbalances, St. Lucia's Prime Minister, Kenny Anthony, has argued, could defeat the main purpose of a customs union - to change the pattern of trade of its member countries - and make the primary beneficiary of regional integration Trinidad's substantial manufacturing and services sector.
Dr Anthony's solution in part was to suggest that to address OECS-specific constraints, a regional development and integration fund be set up as a permanent feature of the CSME.
Speaking in London on June 22 at a conference at Lancaster House on the CSME, Barbados' Prime Minister, Owen Arthur, outlined in detail why such a feature of a single market is now vital.
Prime Minister Arthur argued that if the present intra-regional trade balance continues, the "pathway to prosperity will not be travelled by all."
In his view the region must be sensitive to the fact that the distribution of costs and benefits of market integration will not, without affirmative action, be equitable.
A programme of special and differential treatment for less developed members of CARICOM, therefore, required urgent implementation.
SOCIAL, ECONOMIC COHESION
"In such a context," he told his audience, "we must pay urgent attention to the need for social and economic cohesion. CARICOM should not be evolved as a permanent coalition of More Developed Countries (MDC) and Less Developed Countries (LDC) that are forever locked into their various stages of development. Every effort must be made to ensure that LDCs converge or catch up with the MDCs."
Prime Minister Arthur went on to say that it was essential if such disparities were not to lead to fragmentation, that a compensatory and/or corrective mechanism was required and that this should be taken to mean the establishment of a regional development fund.
The function of such a fund, he suggested, should be to "increase productivity and incomes and be used for adjusting production systems, technology and the input of resources". In other words, for structural adjustment and not to support budgetary deficits.
In this respect, the Barbadian Prime Minister is suggesting the creation of a fund similar in scope and intent to that successfully established by the European Union to reduce disparities between member-nations.
Predominantly, from the mid-1980s, the EU has invested euro324 billion in development grants to enable poorer members states to catch up with their neighbours.
The result has been that nations such as Ireland, Spain and Portugal have achieved levels of growth that have enabled them to successfully compete, stem the flow of European migrants from poorer to richer nations and become successful, fully-integrated members of the single market.
While the lessons for the region from the way in which Europe set about establishing the fund as well as its structure and function warrant more substantive analysis than room permits here, four features of the European experience are worth noting.
Firstly, the funds were not used for budgetary support. They were specifically designated for promoting economic and social cohesion through co-financing productive investments that created employment, infrastructure and small and medium-size enterprises.
They were also used to provide education and training, support structural reform of the agricultural sector, encourage sustainable fisheries practices and to improve the environment and the transport infrastructure.
Secondly, they operated on the basis of cost sharing and co-financing with all EU member states, including the poorest, making agreed levels of contributions to regional development funds.
REGIONAL DEVELOPMENT FUND
Thirdly, they were delivered at a regional level within member-states, using the principal of subsidiarity with decisions on programmes being taken at a local level within clear and commonly agreed and monitored guidelines.
And fourthly, a supra-national institution, the European Commission, designed to represent common and depoliticised interests rather than bodies operating at a national level, administered the funds.
When CARICOM Heads of Government meet, the Caribbean Development Bank is expected to outline its thinking on the possible shape and function of a regional development fund for the Caribbean.
Its report is expected to focus on the ways in which a fund might support closer regional integration. The subsequent debate on the purpose, structure and scope of such a fund is expected to be difficult. However, time is not on the region's side. Completion of the CSME is now vital if the region is to be able to survive the extraordinary external pressures it will face in the next few years as preferences end, tariffs are reduced and global trade liberalised.
While Europe's experience does not provide precise models of relevance to the Caribbean, the EU's approach towards the role of structural development funds makes clear that a well-managed mechanism that focuses only on development on a cost-sharing basis within strict guidelines eventually benefits all.
CORRECTION
In my last column on sugar, I referred to the EC's sugar reforms involving a 39 per cent cut in price over two years. This is as stated in the text of the EU proposals.
However, a close reading of the annexes to these documents suggests that the 39 per cent cut that the EC is proposing will in fact, take place over three years starting in 2007/8, with the reference price of euro 631.9 being applied in an extended campaign year in 2006/2007.
David Jessop is the Director of the Caribbean Council and can be contacted at davcid.jessop @caribbean-council.org
