As Secretary-General of the Caribbean Community, I would like to thank the Ministry of External Affairs and International Trade and Civil Aviation for affording me the privilege of presenting this address on the occasion of the re-launch of your Council on Economic External Trade, on the eve of the historic Meeting of Heads of Government of the Caribbean Community, on the Revival of the Regional Economy. I could not but notice the spirit of determination inherent in this national effort and heartily congratulate those involved. There is a lot to be said for the adage that “if at first you don’t succeed, try and try again.” This dimension of your national interest is one which is certainly worthy of that perseverance.
Today’s international dynamic is such that even large countries recognise the value of regional blocs in the pursuit of their national interest. For small countries, there is virtually no choice. But the Region’s negotiating positions in the various spheres of action must be informed by the interests and concerns of the individual Member States.
The establishment of this Council is therefore an important step in equipping Saint Lucia to make its contribution to our Region’s efforts to carve out a dynamic place for the Caribbean Community, in the changing global economic environment. This is evident from the Council’s mandate to develop a strategic domestic response to the challenges and opportunities created by the changing tide of globalisation.
Ladies and Gentlemen, down through the ages, the phenomenon of “the small state” has preoccupied thinkers, political leaders and statesmen alike. From Plato and Aristotle to Roosveldt and Kennedy, to Ramphal and Arthur, to Butros Butros Ghali and Kofi Annan, all have struggled with this phenomenon with a view to determining its nature, its determining characteristics and its rightful place among the community of nations. We are at a juncture today where Alan Henrikson using the thoughts of our own Owen Arthur stated:
“While it may take some time for the international community to accept that the indicia of small stateness are ‘enough to warrant small societies being classified as a Special Species of Society’ these signs are ‘enough to point to the substantive conclusion that the circumstances facing small states are drastically different from those of other societies’. The challenges they face in improving their development prospects ‘cannot feasibly be met unless their special conditions of vulnerability and volatility are understood and taken deliberately into account’. That means ‘a New Deal for small states’, with the international community giving support for a new development agenda for them that ‘draws from their special circumstances’. It would be based on the precept long ago espoused by Aristotle that ‘as between equals equality; as between nonequals proportionality'”.
This view was all but buttressed by Ramphal’s “small is beautiful but vulnerable” (Opening Address Commonwealth SG, First Meeting Commonwealth Consultative Group on the Special Needs of Small States, 18 July 1984); and Kofi Annan’s “globalisation offers great opportunities but at present its benefits are very unequally distributed, while its costs are borne by all” (March 2000 Millennium Report We the Peoples.)
You know who is in danger of bearing costs without benefits – the triple Ss (for Small States)!
Saint Lucia with its small geographic size and population, is not only simply beautiful, but has also proven to the world that though a small state, its citizens have the intellectual capacity to make a difference. St Lucia has been the birth place of two Nobel Laureates, the highest per capita Nobel prize winners in the world! Can you now display the same leadership in charting a safe course for small states in this sea of global economic change? When I examine your strategic response as outlined in the work programme of the Council of External Trade I am convinced that once the strategies contained therein are implemented you will be well on your way to providing such leadership.
Is it really true that we as small/micro States are swimming against the tide of the international economic change? And is that our desire? Our battles could either suggest a struggle on our part to keep our economies alive in the face of a hostile external environment, or countries’ unwillingness to accept change. In the case of the former, this may indeed be the reality which we face. I hope the latter is not really true. Indeed, it should be our desire, recognising the realities of the currents and undercurrents in the international economic ocean, to ensure that amidst those changes, we are not only able to survive but to build viable economic societies, through which we can improve the standards of living of our populations.
In order to ensure that we achieve this objective we must not only strengthen our negotiating capacities, but also equip our relevant Institutions with the requisite skills and techniques to allow us to be competitive swimmers, as we seek a safe harbour. We must therefore engage all sectors of our society in the development of our trade policies as we make the necessary adjustments in our economies; hence I believe the contours of your Council for External Trade.
What are some of the current trends which face our Region as smaller developing economies in the world today, many of which trends have to date, not been in our favour, and to which trends your Council will have to pay attention.
- Economic Liberalisation: The watershed for international trade policy at the close of the 20th century, came with the negotiation of the Uruguay Round of Multilateral Trade Negotiations, the establishment of the World Trade Organisation in 1994 and the general trend towards trade liberalisation. This has resulted in an erosion of our preferential access to traditional markets on which our economies have historically been built. For the Windward Islands in particular, the WTO decision with respect to the regime for the export of bananas to the European market, has resulted in a significant reduction in export earnings of this commodity. For the CARICOM Region as a whole, banana export earnings fell from US$ 193 million in 1992 to US$ 152 million in 1995 and reached a low of US$97 million in 2000. This trend will no doubt result in wider and deeper economic and social changes in our societies.
- A further examination of our trade statistics indicates a significant loss in export earnings for seven of the eleven major products exported by CARICOM since 1994. As a consequence of our trade liberalisation efforts which began with the unilateral liberalisation in 1991 under the IMF/World Bank stabilisation policies, and the further liberalisation during the Uruguay Round , imports into the Region doubled between 1991 and 2000. Between 1995 and 2000, the gap in our balance of trade widened significantly with imports rising by 39% and exports by only 14%. This negative trade balance cannot be maintained unless there is significant growth in the services sector and \or significant inflows of foreign capital. In the long term the economic viability of our Member States will be threatened unless new products and new avenues for export earnings are found.
- It is incumbent on us to ensure that further liberalisation policies in the WTO, the FTAA and in the new economic Partnership Agreement with European Union, take full account of the potential impact on our economies and ensure that provisions are made to minimise possible further disruptive effects.
Another trend has been competition for financial resources:
- The worsening of our balance of payments situation has occurred at the same time that the Caribbean has encountered increasing difficulty, in attracting international financial resources from both the international private sector as well as from international donor countries and agencies. In the latter case donor resources play a significant part in financing capital and infrastructure projects in our small economies. Given our size, a relatively small injection of resources can assist in meeting many of our economic needs. Recently many traditional donors have shifted their focus towards providing poverty alleviation among the world’s poorest populations. Unfortunately in many cases this has been at the expense of our economies referred to by the Deputy Prime Minister of Barbados as “the recent poor“.
- To offset this trend, the financial services sector was one area where the Caribbean had been successful in attracting a significant flow of foreign investment. However the recent the OECD initiatives have posed significant challenges to our economies in this sector.
Another trend has been Competition for Human Resources:
- The Caribbean has prided itself on the excellent results of its education system. In fact we advertise this factor as one of the attractions of the Region. Our educational standards allow our work force to be easily trained to adapt to the changing global environment. The challenge which we currently face however, is the drain of our skilled resources especially in the health and education sectors through active recruitment drives, especially from the certain developed countries. This is occurring at the same time that these countries are making it more difficult and costly for our students to enter their educational facilities as well as at the same time as countries are forced to receive criminals elements with the minimum links to the Region who are being deported from these countries. The double negative social and economic impact of these polices are currently being seen in many of our Member States as critical institutions – hospitals schools – are inadequately manned and crime surges.
- In our regional and bilateral discussions with these developed countries we have to continue to develop policies to compensate us for the human capital they have acquired and/or for our losses.
Yet another trend relates to the Environmental challenge to Low Lying and Island States.
- Hurricanes, volcanoes, earthquakes and coastal erosions are constant threats to the economic viability of the Region. The Eastern Caribbean experiences about 2.5% storms per annum and a level 5 hurricane is expected every 5 years and a level three every 2 years.
- The Caribbean continues to have difficulty in getting the international community to recognise the vulnerability of our economies to these disasters and the devastation which occurs in the entire economies when such disasters strike. For example, I was reading a recent article which showed the impact of Hurricane Gilbert on Jamaica in 1988. Total damage resulted in a loss equivalent to 27% of its GDP mainly in the agricultural, tourism and light manufacturing sectors, 30% of the housing stock, 14% reduction in export earnings and a 10% increase in the public sector deficit. The actual loss was US$956million. I am sure that impacts have been even more extensive in relative terms for some of the smaller countries in the Eastern Caribbean. The article contrasts the impact on the Jamaican economy with the estimated Canadian $1.0 billion as a consequence of the 1998 ice storm, but recalls the fact that the Canadian economy is 80 times that of Jamaica’s.
While the international community continues to resist full recognition or the vulnerability of our economies, there is no such reluctance to hike our insurance fees to respond to disasters in the Region, but also for disasters to which we are indirectly linked, such as September 11.
- Against this background, our negotiators to the upcoming World Summit on Sustainable Development are challenged to ensure that the recognition given to SIDS in the Barbados Plan of Action is not eroded in that process.
INTERNATIONAL RELUCTANCE TO ACCORD
SPECIAL STATUS TO SMALL STATES
As pointed out earlier, the Region faces a major challenge posed by the reluctance on the part of the international community to recognise that small countries face special problems and even where such problems are recognised, there remain strong opposition to establishing a special category of small states. The work of the Commonwealth Secretariat has facilitated this process but there is still an uphill task in convincing the international community that the case for special treatment is a just one. The opposition was clearly stated in the Doha decision to establish a work programme for smaller economies in the WTO but not to establish a new category.
- In the discussions the issue of a definition of small states or small economies often arise . It is generally accepted that small states tend to have many or all of the following characteristics : limited natural resources, small populations, small sized firms, limited domestic capacities, insufficient domestic demand, vulnerability, weak institutional structures. However the questions is often asked whether the problems which arise as a result of these characteristics are unique to small states . This definitional problem cannot be addressed purely on quantitative terms but on qualitative grounds with an emphasis on political attitudes and behaviours. Hence terms such as, (“you know one when you see one”… “those who consider themselves small”).
- Where recognition has been achieved e.g. in the FTAA process and in developing the work programme for smaller economies in the WTO, the Region has experienced significant difficulty in obtaining consensus on the special and differential treatment to be granted to these economies. For example since the establishment of the WTO the prevailing view by the developed countries that the only special and differential treatment which are required are longer time periods to phase in obligations and technical assistance to assist in many of the new trade related areas. However for small states there are certain structural problems which cannot be addressed by merely lengthening the time for adjustment. Indeed it can be argued that our share of hemispheric and world trade is so minimal that the grant of special measures will not distort hemispheric or world trade but on the other hand, could make a major difference to the viability of our economies.
Some of the other problems which we face relate to:
- the challenge to the viability of our tourism and transportation sectors following 9/11. Here in St Lucia you have had to face the double blow of a decline in the tourism sector at the same time as a reduction in your banana export earnings.
- the challenge of effective macro-economic management especially the fiscal challenge which will be faced with tariff reduction and elimination in the process of regional, hemispheric and global trade liberalisation.
WHAT ADVANTAGES DO WE HAVE?
- educated, trainable work force,
- political stability and conducive environment to attract investment – but this can easily be marred by the recent spate of violent crime occurring across many Members States in CARICOM.
- With respect to trade in goods because of limited production capacities we can target small niche markets.
- scope for growth in the services sector especially given the communications and technological infrastructure in some countries.
- location advantage of being close to the North American market.
WHAT CAN WE DO?
- Recognise the ongoing process of change in the international trade rules at the multilateral level in the WTO, ACP and in the FTAA. We cannot stop these processes but can take more pro-active steps to promote our interests. In this case it would not be a question of swimming against the tide but of adapting to remain viable and competitive in a world which is increasingly less inclined to cater to the needs of small and vulnerable economies.
- Acceleration the implementation of the CSME
- Must first be clear as to what our interests are, These can only be done if each country does its homework.
- We have to continue our struggle to have our special needs accommodated in all the negotiating fora. In this regard every effort should be made to provide the regional Negotiating machinery the information and support it requires to present our case in the respective negotiating fora.
- This process will be facilitated by the provision of specific information and clear empirical evidence to support our arguments and positions in the negotiations
- It is imperative that we seek and build alliances with like- minded countries in each fora and with influential countries in the process
- We also need to ensure that we use all the resources at our disposal to develop our trade policy skills and to develop capacity to meet the challenges of meeting our WTO obligations. These resources may reside in some or our Member States who have developed expertise in this area.
- We should also use the instruments and the financial and technical assistance which are at our disposal in the ACP/ EU Convention, the WTO technical assistance programme, Commonwealth other similar arrangements.
Specifically at the domestic level:
- we must begin a process to train and equip persons in new skills
- The private sector development is critical. In the smaller economies it is important that an entrepreneurial culture be encouraged. Firms should be encouraged to develop new and innovative ideas in order to take advantage of new opportunities. They should also be encouraged to seek partnerships with other regional and foreign firms who could inject new capital and other resources not currently available to the local firm. We must also develop new Corporate Structures.
- Encourage the diversification of the economy and increase the capacity to export goods and services of a high quality,
- Investment promotion
- Sound macro-economic policies.
CONCLUSION
Ladies and Gentlemen, when I look at the Work Programme of the Council I am sure that Saint Lucia is in the right stream and if the policies, and multi-pronged strategy outlined as part of the work of the Council of External Trade are executed, you will not swim against the tide but float on the sea of success. I implore you however to put in place the necessary resources to ensure that the activities and strategies envisaged for your Council are fully developed and implemented. Who knows, one may well have to consider in the near future awarding the Community’s highest honour – the Order of the Caribbean Community – not only to outstanding individuals, but to outstanding Institutions as well.
I count on your support and wish you the Council of External Trade of Saint Lucia, good luck and all success.
