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Decade of Decline For Small Caribbean Islands December 25, 2009

Posted by tkcollier in Economy & Business, Geopolitics.
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The first decade of the 21st Century – 2000 to 2009 – has proven to be a decade of decline for the Countries of the Caribbean Community and Common Market (CARICOM).

Real income in the CARICOM area is less today than it was 10 years ago; unemployment is higher in 2009 than it was in 1999; poverty has expanded in many countries; and many CARICOM countries now experience debt levels of over 100% of their GDP.
When the UN Human Development index was published in 1999, four of the 13 independent CARICOM countries (not including Haiti) were rated among the top 50 nations.  Ten years later in 2009, only Barbados and Antigua and Barbuda are among the top 50 having dropped from 29 to 37, and from 38 to 47 respectively.   The two others, Bahamas and Trinidad and Tobago, fell from 31 to 52 and 46 to 64.

With the exception of St Lucia which improved its position from 81 to 69, every other CARICOM country fell in the index indicating that the condition of the region as a whole deteriorated.

Throughout the decade, tourism demonstrated how fragile an industry it is.

The 9/11 atrocity in 2001 in New York severely affected tourism as Americans and people from many other nations curtailed travel.  Two years later the outbreak of Severe Acute Respiratory Syndrome (SARS) also delivered a vicious blow to tourism.  Then the financial crisis, which started toward the end of 2008, walloped the industry. Tourist arrivals dropped by 10% in Bahamas, Antigua and Barbuda and Barbados and by 20% in St Vincent and the Grenadines and St Kitts-Nevis.

Prices for the region’s commodities also fell.  Jamaica, Guyana and Suriname experienced a 50% drop in prices for aluminium, and the price for a barrel of Trinidad and Tobago’s oil plummeted to US$40 from $147.
And, as the decade was drawing to a close the region’s preferential market for bananas in the European Union (EU) was fatally punctured by a deal stitched up between the EU Commission and Latin American producers with the active participation of the Director-General of the World Trade Organisation (WTO) Pascal Lamy, a former EU trade negotiator.   Now neither Caribbean bananas nor Caribbean sugar has much prospect for markets in the EU.

The region as a whole also faces an uncertain future in global trade negotiations under the WTO.  Having conceded the opening of key areas of their economies to the EU under an Economic Partnership Agreement (EPA) signed in 2008, the regional countries have no chance of bargaining for more advantageous conditions in the WTO.  And, it has to be noted that the EPA negotiations were a travesty, ending with the EU holding a gun at the heads of Caribbean governments to either sign or have higher tariffs placed on their key exports.

The picture for international financial services is just as bleak.  Having fought off the so-called ‘Harmful tax competition initiative’ (HTCI) of the Organisation for Economic Cooperation and Development (OECD) – the club of the rich countries – in 2002, Caribbean governments allowed themselves to be threatened by the newly formed G20 countries in 2009 into singing up to 12 Tax Information Exchange Agreements (TIEA’s) with OECD countries. New members of the G20 – Brazil, China, India and South Africa – who Caribbean countries might have expected to fight their corner, simply endorsed the OECD agenda.  The cost of compliance with these agreements will place an unreasonable burden of cost on regulatory bodies and financial institutions in the Caribbean.  Despite all the protestations to the contrary, the offshore sector of the majority of Caribbean countries is dying, as its contribution to economic growth and employment withers.

The significant point is that Caribbean governments agreed to sign up to the TIEA’s with all their attendant costs and did not seek to fight the issue collectively.

As the curtain came down on 2009, the International Monetary Fund (IMF) projected negative growth for all CARICOM countries with the possible exception of Guyana, Suriname and Dominica.  Nonetheless, almost all of the CARICOM countries have unemployment levels in excess of 12%, and in the next decade many of them will have to surrender direction of their economic and fiscal policies to the IMF in return for its financial assistance.

In crime and security, the decline in Caribbean circumstances has been dramatic.  Between 2000 and 2009, murder rates became higher than in any other region of the world, and assault rates rose significantly above the world average.  According to the UN report ‘Crime, Violence and Development: Trends, costs and Policy Options in the Caribbean,’ narcotics trafficking is at the core of these high rates embedding violence, undermining social cohesion and contributing to widespread availability of firearms.

Each CARICOM country individually and all of them collectively have come to the end of the first decade of the 21st Century considerably worse off domestically and in the international community than when the decade began. They are marginalised in international negotiations and they have no meaningful seat at important global talks, as was evident in the Copenhagen Conference on climate change.  They continue to mistake the display of 13 votes at the UN and in the OAS for power when indeed these votes make no difference to the real issues that confront them.

The era of tolerance for small states is over, except where issues such as illegal migration and narcotics trafficking impinge on the concerns of larger states.  As long as CARICOM countries continue to see their economic and social development through the narrow lens of “national sovereignty”, their conditions will deteriorate still further.  They may survive a little longer by making themselves clients for other countries’ ambitions, but that too will have its price.

The creation of an Economic union by the small countries of the Organisation of Eastern Caribbean States (OECS) is a good advance for them but it is not nearly enough.  The last decade points clearly to the absolute necessity for deeper regional integration now if CARICOM countries are to retain some semblance of control of their economies, their identities and their destiny.

http://www.caribbean360.com/asp/blogview.asp?BlogID=3&MessageID=1507.

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