Growth and decline
February 18, 2004
With an uprising tending to civil war in a Caricom member state, namely Haiti, and another member state, Barbados, threatening to impose sanctions on a fellow member state, Trinidad and Tobago, in the wake of a breakdown of the fourteen year old negotiations on fishing rights, there is a deepening sense of crisis over Caricom in which the real meaning of community is being challenged.
On the external front of trade negotiations the current outcomes are likewise deeply disturbing. Two weeks ago in Puebla, Mexico, the latest talks on the Free Trade Area of the Americas (FTAA) ended in sharp disagreement, if not deadlock. Moreover the emerging compromise on a two stage arrangement may not cater for Caricom's essential need for Special and differential Treatment (S&D). At the World Trade Organisation (WTO) in Geneva where no progress had been made in the S&D negotiations there are faltering steps on the resumption of the latter. In this context, the Commonwealth has taken an important initiative in which a ministerial team of four are visiting certain capitals and international agencies to make the case for the Commonwealth's vulnerable members. Caricom is represented on it by the Barbados Foreign Minister, Billie Miller.
Yet the matters mentioned above amount to only one threatening wave in the sea of troubles through which Caricom leaders must steer their canoes of state. There is the steady threat of erosion or disappearance of the overseas markets for the regional exports, both traditional and new. William Demas had pointed out in an early seminal book that growth in the small states of the region must always derive from export growth. And contrary to the usual impression, Caricom states have shown a remarkable capacity in responding to the challenge to develop new export products. One such early innovation was banana cultivation.
It was apparently the British who after the last war strongly promoted the cultivation of bananas as an alternative to sugar which had become too expensive to sell in the international market. Such diversification worked. Bananas became a mainstay and major contributor to the economies of several eastern Caribbean states and Jamaica. But it didn't stay that way. With the advent of the WTO there was the demand in keeping with WTO rules for the opening up of the preferential market in the European Union (in practice the British market) to the cheaper priced bananas produced in Central America, a demand strongly backed by the US government whose multinationals owned the banana plantations.
The rest of the story has recently been told by David Jessop in his Sunday column "The view from Europe" (February 8, 2004). The demand from the Central American producers prevailed. The WTO ruling led, as Jessop records, to a decline in the Caribbean industry and huge losses in employment. Since 1992 banana exports from the Windward Islands have fallen from 274,000 to 99,000 tons annually which translates into a decline in export earnings from US$147 million to US$45 million. In the case of Jamaica exports fell from 77,000 tons to 40,000 tons with Jamaica's earnings plummeting from US$40 million to US$23 million. In Suriname the banana industry has totally collapsed. Everywhere the loss of jobs and suffering is immense. Jessop points out that a further decline in the market price which would make even the lower production levels unjustifiable, may be in the offing as one effect of the EU's imminent expansion to include ten new members mainly eastern European states. Three Windward Islands Prime Ministers, Dominica, St. Lucia and St. Vincent and the Grenadines were in Europe last week "in an attempt to have the European Commission understand that the region's remaining banana producers are on the verge of disaster". The ministerial mission received reassurances but these can be at best a transitional holding action against the steady attrition in prices because of wider political processes.
The banana problem is surely one for Caricom as a whole. The fate of bananas must steadily attract the highest attention not only because it has sombre warnings for the sugar industry and underlines the need for continuous vigilance and strong and coordinated diplomatic action but also because it appears to be part of a wider pattern which defines the vulnerability of the region. Attention has recently been drawn to this pattern in an academic paper entitled "Globalisation and Economic Vulnerability - The Caribbean after 9/11" by Emilio Pantojas-Garcia of the University of Puerto Rico and Thomas Klak of Miami University. It should be compulsory reading for all high level decision makers in the region.
The two authors point out that Caribbean producers have tried to cope with the evolving and rapidly changing international market in three successive sectoral developments with each sector not being superseded but maintained somehow into the future. First there are the traditional and new agricultural export commodities. Second, there came light manufacturing for export markets. Thirdly and currently there are the new service industries, providing services for people or industries from outside the region.
Garcia and Klak have pointed out in their pathbreaking paper that as is the case with bananas, each sector of industry was once promoted in the Caribbean and later undermined in response to international change. The undermining has come about because of the pressure of international events especially after 9/11. The authors state that this is a function of the role of the Caribbean "as a price-taker rather than a price setter of international tradeable goods and services".
In terms of the foregoing analysis it would be illuminating to consider the Guyana experience in the three sectors. In the sector of agricultural exports, in the case of sugar there are at present deep challenges to the preferential market arrangements including pricing in the EU. Rice has had major difficulties in maintaining its EU market, but has fortunately been the recipient of grant funds to assist in making it competitive. Of the major new agricultural exports the most important are shrimps and prawns and fish including fillets of fresh water fish, all directed to the US market. Access has just been secured for fish exports to the EU market.
In the sector of manufacturing for export markets the major developments are plywood and garment manufacture including women's track suits, exports facilitated by the CBI market access arrangements. However it is apparently the case that garment factories established in the context of NAFTA on the US/Mexican border and Asian competition are now having adverse effects on the garment industry.
In the case of the international service sector Guyana is only at the beginning. There has been a start on hinterland tourism - a niche industry which should be capable of rapid development and some call centres based on telemarketing (recently adversely affected and facing closure as a result of recent US Congressional legislation) and medical transcription.
It is in the wider Caribbean that there has been large scale development in manufacturing and the services sector with consequent severe adverse impact from international factors.
As a result of duty free access granted to Mexican garment industries under NAFTA the garment factories in Jamaica and St. Lucia are struggling to hold on to market share.
Tourism was severely curtailed as a result of the 9/11 events.
A major services development was in Offshore Financial Centres (OFC's). OFC's were established in nearly all the OECS states and proved to be huge contributors to the revenue of those small states. OFC's have been established worldwide and some reports state that they may have on deposit 50-60% of the world's wealth. Suffice it to say that the Caricom OFC's attracted the hostile attention of the Organisation for European Cooperation and Development (OECD) which viewed them as harbouring tax evaders and have subjected them to pressure and harassment with consequent rapid diminution in their numbers and business.
Another lucrative field for these small states was tele-gambling. Here the problems which confronted Antigua and Barbuda are instructive. The US administration took action to close down the internal companies in Antigua dealing with gaming and betting, contending that all gaming services offered on a cross-border basis from road are unlawful. Antigua courageously challenged the US action under W.T.O. provisions and has so far succeeded in getting a panel appointed to adjudicate on the matter. The panel's judgement is awaited. In the meantime, however, as a result of US action the number of internal companies in Antigua and Barbuda have been reduced from 100 to 36 and the workforce of 5000 has been halved.
The Antigua experience is thus a recurrent pattern in the region, whether it be with bananas or garment manufacturing or tele-services. Industries established in the region are steadily at the mercy of international events and the internal pressure groups of major states. As small states there is little that Caricom can do about this.
Nevertheless despite this "tremendous vulnerability" Garcia and Klak end on a positive note. They assert that the region has demonstrated that it has diplomatic and negotiating powers. In support of this view they quote a Latin American writer Ruben Zamora who on the basis of the experience of another small state, El Salvador, observes, "We need to negotiate because we can win certain margins and because we can gain time so that the new problems generated by neoliberal development can mature... The new global economic order will emerge not only from the problems that neoliberal capitalism causes but also from our efforts and capacity to create alternatives on a global scale".
The lesson for regional leaders is plain.