Editorial | Looking beyond Caribbean Basin Initiative

Even as the Caribbean Community (CARICOM) presses the United States for clarity on its mixed signals regarding trade preferences for the region, the community must proceed on the assumption that the Caribbean Basin Initiative is gone for good. If it happens otherwise, so much the better.

So, CARICOM, as its leaders underscored at their summit in Jamaica earlier this month, must not only accelerate efforts at deepening economic integration, but expand trade and investment arrangements with other parts of the world, including Africa.

In that regard, this newspaper fully endorses the move by the community to identify, and remove, frictions to intra-regional trade and that, as is too often the case with CARICOM, this just doesn’t lead to another unimplemented report.

The Gleaner also urges robust participation by the region’s policymakers and private sector in next week’s Africa-Caribbean trade and investment forum in Grenada, being put on by the African Export-Import Bank (Afreximbank). This forum will hopefully not only generate business opportunities for the two regions, but sets a good platform for the second CARICOM-African summit in Ethiopia in September.

If they were badly stressed before, it is now beyond doubt that with Donald Trump’s second advent to the US presidency, global alliances have been upended. The old international order is plagued with uncertainties. Small countries, especially, are being squeezed.

TRADE WAR

Nothing exemplifies this upheaval as the trade war Mr Trump unleashed on the world, placing high tariffs on US imports in an ostensibly effort to rebuild America’s manufacturing sector, as well as contain China.

Prior to Mr Trump’s actions, over 90 per cent of CARICOM’s exports to the United States were duty-free, under a series of laws collectively referred to as the Caribbean Basin Initiative (CBI). In April, Mr Trump announced the imposition of a minimum 10 per cent tariff on the region’s exports, although for one CARICOM member, Guyana, the rate was 38 per cent.

The CARICOM Private Sector Organisation (CPSO) has estimated that the Trump’s tariffs, if they hold at the proposed rates, will cost the community over US$542 million in export revenues, with US$101 million of that coming from agricultural sector that has enjoyed growth in the US markets among the Caribbean diaspora.

The US buys 30 per cent of CARICOM’s exports and 52 per cent of goods the region imports come from that country, which last year enjoyed a trade surplus of US$5.8 billion with the community. The imposition of the tariffs effectively suspended/dismantled the CBI regime.

Yet, on July 6 the US Trade Representative (USTR) asked the World Trade Organization (WTO) to extend for five years, until 2030, the current waiver that allows America to extend the CBI benefits to the Caribbean without having to offer them to other countries. The European Union has signalled its support for the application.

CARICOM’s leaders welcomed the US filing. However, unless Washington has some unknown larger strategy, the US move is contradictory. The CBI regime and the Trump tariffs can’t coexist simultaneously.

ALTERNATIVE OPTIONS

The community’s heads of government say they will press the US to maintain the CBI, which they should. But while they do so, they must also aggressively pursue alternative options and build internal capacities.

In that respect, setting a ministerial group to work “to address the free movement of intra-regional trade”, including transportation and other facilitation processes, is a positive development.

Depending on whose data you use, CARICOM’s total trade in 2023 was put at between $65 billion and $82.2 billion – the former reflecting directly reported figures by member states and the later from a harmonised global dataset of the Observatory of Economic Complexity (OEC), an open-source economic information project based at MIT.

Intra-regional trade is placed at between 10 per cent and 14 per cent of total trade. Increasing these proportions would represent opportunities to expand regional production in the context of a CARICOM single market and economy, which, at the same time, would widen possibilities for the creation of regional value-added for exports to third parties, where such arrangements exist.

Expanded intra-regional trade alone, though, won’t be sufficient to off-set the Trump tariffs or secure the economic growth and development that CARICOM craves. Hence, pursuing opportunities with the likes of India and Brazil, which the leaders placed on the agenda, is positive.

Additionally, the emerging partnership with Africa looks promising. A dozen CARICOM members are already party to a partnership agreement with Afreximbank, which is expanding its footprint in the diaspora, especially the Caribbean, which the African Union calls the sixth region of the continent.

CARICOM has to grasp all opportunities for investment and trade in its drive for economic growth and development.