November 25, 2009

Will the Caribbean take the leap of faith?

by Alan Cordova and Justin Vance

Source: The Panama News : Vol 9 Number 15 August 3 - 16, 2003

In its July 5 Rose Hall Declaration, the Caribbean Community (CARICOM) again expressed its dedication to the goal of implementing the Caribbean Single Market Economy (CSME), a proposed regional free trade zone allowing for free movement of labor and capital, common external tariffs and a single monetary standard. However, words will not easily translate into action because formidable political obstacles bedevil CARICOM's bold new plan. Now, time is running out for the trade bloc. With the US pushing for the implementation of its Free Trade Area of the Americas (FTAA) in 2005, Caribbean nations would be wise to present a united front to avoid being steamrolled by the world's most powerful economy. To do this, members must be willing to sign on to multilateral agreements instead of continuing to pursue narrow self interests at the expense of CARICOM's legitimacy and the region's long-term welfare.

So far, some CARICOM members resemble players involved in the prisoners' dilemma, in which an individual betrays his comrades in order to better his own situation. Such behavior by a CARICOM member undermines the authority of the organization by destroying the trust underlying such multilateral agreements, endangering the fulfillment of the group's common goals. Jamaica's behavior closely fits this paradigm. In 2002, it signed an air services agreement with the US Federal Aviation Administration instead of participating in CARICOM's collective negotiations with this agency. However, Kingston argues that to depend on the slow- moving CARICOM bureaucracy would have further jeopardized Jamaica's hard-pressed tourist industry.

As part of the CSME, the focus has been on allowing the free movement of labor across national boundaries. However, unrestricted transit is a highly contentious issue for the Bahamas, which fears that its economy will be inundated by foreign laborers, causing its unemployment to swell. As Prime Minister Hubert A. Ingraham explains, "the 'free movement of people' aspect of the SME would have serious social and political implications for the Bahamas, given its unique position as the target for massive unregulated migration from many countries." Although The Bahamas' situation is indeed unique, with a far lower unemployment rate and higher per capita GDP the CARICOM average, in stalling the labor agreement, the Bahamas has defrauded its neighbors in order to protect its own interests. If the CSME has any hope of realization, CARICOM must discourage this behavior by instilling a desire for cooperation among individual nations.

In order to achieve this required level of trust, CARICOM must establish itself as a legitimate source of policy coordination by developing effective institutions. While the existing Caribbean Court of Justice (CCJ) is an integral part of the overall design, CARICOM must create additional regional institutions aimed at removing economic barriers and achieving political integration, following the example of the EU in the 1980s. The linchpin of the emerging CSME should be a representative governing council able to promote new policies, overseeing deadlines for implementation and assessing fines and penalties when nations renege on their responsibilities.

A strong layer of governance must supercede the fifteen individual national governments and negotiate in all of their names. Currently, CARICOM has a system of "consultations" in which member nations hold meetings with concerned parties to discuss specific issues. Unfortunately, they often conclude with a joint statement that sets out ambitious goals and but no mechanisms to enforce them. In order to effectively govern a single market, CARICOM needs to create a powerful, representational council that announces area-wide policy and empowers the court to solve regional disputes.

As the various members' objections have demonstrated, CARICOM cannot forge a single market economy overnight. Realistically, it must take carefully planned steps that both preserve national sovereignty and makes progress towards regional unification part of the transitional process. Rather than focusing on freeing up the factors of production, CARICOM must begin by unifying the current individual finance systems, both on a public scale with such institutions as the Caribbean Development Bank, and on a private scale with a regional stock exchange. CARICOM ultimately could be the manager of collective resources and fund shared enterprises and initiatives, such as a regional airline, that could demonstrably revitalize faltering national economies.

At a fundamental level, CARICOM must be more than a forum for policy discussion --- it must become a true supranational institution inheriting basic governmental responsibilities. To grant it legitimacy, each country must comply with regulations and sacrifice some of its sovereignty in order to achieve the greater interests of the community. With the 2005 FTAA deadline fast approaching, CARICOM must follow the road to economic integration, come up with a better idea, or watch as the dream of a globally competitive Caribbean vanishes.

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