CARICOMs Orientation in External Trade Negotiations: Regional Integration and Economic Growth Dr. Claudius Preville* Paper presented at the International Conference on Small States and Economic Resilience, University of Malta, Valetta, Malta. April 23-25, 2007

OUTLINE INTRODUCTION REGIONAL INTEGRATION THEORY CARICOMs EXPERIENCE PATTERN OF TRADE GROWTH PERFORMANCE EXTERNAL TRADE ORIENTATION GROWTH AND TRADE POLICY CONCLUDING REMARKS

INTRODUCTION CARICOM – Caribbean Community and Common Market; 15 members; Notified under GATT Art. XXIV October 1974; Active FTA negotiations with EU; Existing FTAs – Costa Rica, Venezuela, Colombia, Dominican Republic, Cuba; FTAs contemplated with: USA, MERCOSUR, Canada; USA and Canada interested in renewing non-reciprocals; Little progress with MERCOSUR; Paraguay holding out on renewal of CBI; CARIBCAN seems ok;

INTRODUCTION GDP – $ 50.7 Bn; Per capita – $8,112; Inflation < 5%; Trinidad and Tobago main growth pole; Growth driven by: Services; Agriculture; and Manufacturing;

REGIONAL INTEGRATION THERORY Countries come together to create an economic bloc; FTA; Customs Union; Common Market; Economic Union; Rationale for integration: Expand economic space, increase efficiency via specialization, exploit scale economies and common governance; Security;

REGIONAL INTEGRATION IN PRACTICE WTO GATT Article XXIV – Countries must liberalize tariffs on substantially all the trade among members of the integrating bloc; Substantially all the trade commonly means 90 percent or more; In FTAs between WTO members further liberalization must take place, incl. other restrictions on commerce;

REGIONAL INTEGRATION IN PRACTICE CARIFESTA; LIAT (1974); WISCO; ENLARGEMENT – HAITI (2002); CSME; SINGLE SPACE INITIATIVE (CWC);

PATTERN OF TRADE - GOODS IMPORTS Machinery and Transport Equip.29.3% - US; EU; ASIA; Manufactured goods –US, EU, CSME; Mineral fuels and lubricants – LAIA; M = USD 10 BN; EXPORTS Mineral fuels – 29.7% - US, CSME, other Caribbean; Food – 17.5% - EU, CSME, US; Chemicals – US, EU, CSME; X = USD 6.6BN;

PATTERN OF TRADE - SERVICES IMPORTS Commercial Services 39% - US; EU; ASIA; Transport -34% – US, EU, CSME; Travel – US, EU, CSME; M = USD 3.97BN; CS=1.55; TN= 1.35; EXPORTS Travel – 72.4 %; - US, EU, CSME, other Caribbean; Commercial Services -Food – EU, CSME, US; Transport – US, EU, CSME; X = USD 6.98BN; TR = 5.05; CS=1.04;

CHART - SERVICES

GROWTH PERFORMANCE GDP (1999) = USD 17.7BN; GROWTH (1999/98) = 3.2%; UNEVEN; CONTRACTION – Jamaica, Montserrat, Guyana; Manufacturing sector weak; Trinidad – major growth pole – oil and gas; Others – Services; Light manufacturing;

TRADE ORIENTATION GENERALLYDefensive;Exclusions; Long Phasing; Development assistance; Non-reciprocal preferences; Services – more offensive; WTO – SVEs work programme; Redressing imbalance from UR; Market access v development; Importance of policy space; Contribution less than other developing countries;

GROWTH AND TRADE POLICY Services – main driver of economic growth for most members; Distributive trade very important in services; Liberal import regime enables growth of the manufacturing-oriented members; But, fiscal reform is necessary as a pre- condition;

CONCLUDING REMARKS Economic integration, as is being pursued through the CSME process can maximize efficiency by encouraging specialization according to comparative advantage, resulting in higher levels of economic growth for all; But, more liberal trade policy is needed especially in Services and fiscal reform ahead of liberalization in manufacturing;