Mrs. Angella Persad, President, Trinidad and Tobago Chamber of Industry and Commerce;
Your Excellency Yolanda de Gavidia, Secretary-General, Economic Integration in Central America (SEICA);
Your Excellency Luis Andrade Falla, Secretary-General Association of Caribbean States
Mr. Dennis Evans, President Bankers Association of Trinidad and Tobago (BATT);
Professor Miguel Carrillo, Executive Director, Arthur Lok Jack Graduate School of Business;
Representatives of the Media;
Ladies and Gentlemen;
I feel very privileged to have been asked by the organisers to participate in today’s conference. This is the kind of initiative by the private sector that must be lauded, encouraged and promoted as our Caribbean Community seeks to ensure maximum benefit from the linkages that have been created with Third Countries and other regions.
Therefore, it was with pleasure that as Secretary-General of this Community I accepted the invitation to speak on the topic “Opportunities in CARICOM and the Way Forward” in the context of the title of the Conference: “Connecting the Caribbean and Central America: Exploring and Seizing New Opportunities.”
CARICOM has had a long and very cordial relationship with the countries of Central America. The two regions have much in common including being small economies, highly dependent on agriculture and tourism. Both areas also suffer from the debilitating effects of damaging natural disasters and from the exodus of their trained and skilled human resources, to cite a few.
Belize, one of CARICOM’s Member States is also a member of the Central American Integration System or SICA, (its Spanish acronym). That link, or bridge as it has been often referred to, has been used to make some tentative steps towards enhancing and deepening the CARICOM-Central America relationship.
This deepening of the CARICOM-Central America relationship should be seen in the context of a strategy being pursued by the CARICOM Heads of Government to chart the Region’s development course in the 21st century, through judicious participation in the global trading and economic system. One element of this strategy is the strengthening of trading links with non-traditional trading partners – an approach intended to increase market size and opportunities and to stimulate competition among countries and enterprises of roughly similar size and stage of development as is the case with CARICOM and Central America.
At the political level CARICOM and SICA have had active collaboration in crucial areas identified as priority by both sides. Many of these areas have been incorporated in the CARICOM-SICA Plan of Action which was signed in 2007 at the second CARICOM-SICA Summit. That Plan of Action provides for cooperation in the areas of Human Resource Development, Health, Housing, Poverty Eradication, Environment and Natural Disasters, Foreign Policy Coordination, Crime and Security, Anti-Corruption initiatives, Cultural Exchanges, and Trade and Investment.
In the area of trade and investment, the Caribbean Community has had a Free Trade Agreement (FTA) with Costa Rica since 2006. To date however, only Barbados, Dominica, Guyana and Trinidad and Tobago have ratified that Agreement. The accession clause, (Article XVII:06) of that Agreement provides for other Central American countries to accede to the FTA. Negotiations to this end were officially launched in August 2007 with El Salvador, Guatemala, Honduras, Nicaragua and Panama but regrettably these negotiations have stalled in large part due to other negotiating demands on both parties.
Overall there is a partial framework towards connecting our two regions, CARICOM and Central America. It remains however for us to complete that framework through the wider participation by the countries of both regions which would enable us to take tangible and profitable actions.
At the broader hemispheric level, CARICOM’s trade and economic links include an FTA with the Dominican Republic and partial scope trade agreements with Colombia, Cuba and Venezuela. More recently negotiations have begun for a Trade and Development Agreement with Canada. Further, CARICOM has embarked on initiatives with the United States, Brazil and Mexico (all somewhat tentatively) and has also participated in the efforts to create a Community of Latin American and Caribbean States (CLAC).
It is clear, therefore, that CARICOM has been engaged in very deliberate and concrete steps to connect the Caribbean Community not only with Central America but with its neighbours in North and South America as well.
Caribbean Integration
Chair, in keeping with the theme of the presentation, given the limited time, let us look briefly at the evolution of regional integration in the Caribbean with emphasis on trade and investment, as it relates to the opportunities which it opens for the countries of Central America.
In the very early years, efforts at regional integration in the Caribbean were contemplated in the context of a development strategy which promoted import-substitution. Integral to this strategy was a Common External Tariff resulting in a highly protected and inward-looking market. This early integration initiative did achieve some results, especially in respect of liberalization of intra-regional trade in goods and a modest stimulation of production within the market area. Indeed from the signing of the original Treaty of Chaguaramas (1973) to the signing of the Revised Treaty (2001) intra-regional trade as a percentage of total CARICOM trade grew from just under nine percent to just below 16 percent.
In 1989, the Community’s Leaders took a quantum leap in the process of regional integration by taking the decision to create a single economic space – the CARICOM Single Market and Economy (CSME) – a response to the twin phenomenon of globalization and trade liberalization. The expectation was that the deepening of the integration arrangement would provide the springboard for the Region to be better placed to confront the challenges and exploit the opportunities of the changing regional, hemispheric and global environment. The new arrangement, the CSME, provides for the free and unrestricted movement among Member States not only of goods, but also of services, capital and labour, and the right of establishment. The CSME is therefore expected to take the Community to a focus on competitive production for both intra and extra-regional trade.
Subsequent to 1989, the Community was enlarged to approximately 16 million first by the accession of Suriname (pop: approximately half a million) in 1995 and later in 1997, Haiti (pop: approx 10 million).
Let us be clear, ladies and gentlemen, that while regional integration constitutes an important strategy for optimizing the development possibilities of the Region, the act of creating a larger internal market by itself is insufficient to solve the problems of small size, vulnerability and sustainability. The pursuit of development by small states, as is the case with CARICOM Member States, also requires a capacity for greater economic leverage and effectiveness in their relations with third states and groups of states. One dimension of such relationships is the expansion of trade and economic relations with other countries.
Implications of Third Party Agreements
Ladies and Gentlemen, even as we seek to deepen our trade and investment arrangements between our two regions, there are developments with third parties which have a profound effect on our trading relations. I here refer in particular to the fact that CARICOM has an Economic Partnership Agreement (EPA) with the European Union while Central America has an FTA with the United States of America (DR-CAFTA) and is in the process of negotiating an FTA with the EU. A critical partner in both processes is the Dominican Republic – being a signatory to both the EPA and the DR-CAFTA.
These Agreements, while providing market access opportunities for us in Europe and the United States, they also heighten the level of competition in our markets for CARICOM as well as Central American producers. This puts at a disadvantage, the relatively smaller and higher cost producers into which category most of the manufacturers in our two regions fall.
In the context of enhancing trade between our two regions, let me point you to a provision in the rules of origin under the EPA. A producer in Trinidad and Tobago is able to utilise inputs sourced from Central America and have those inputs considered as being of Trinidad and Tobago origin in the production of final products for trade under the EPA. It is necessary, however, in such a case, for the administrative arrangements which underpin this trade to be examined and approved by the parties to the EPA. This arrangement is but one avenue through which the trade of both our regions can benefit from the EPA.
There is therefore a valuable opportunity for Central American and CARICOM business interests to join forces and establish larger and more efficient companies. These would not only be able to better compete at home but also take advantage of the possibilities in the EPA.
This is a test for our entrepreneurs in the Caribbean and Central America to demonstrate their acumen, creativity and initiative to derive maximum benefit from this trade arrangement. Size is no hindrance to intelligence and wit.
CARICOM-Central America Trade Experience to date
The question to be asked at this juncture is what has been the experience of CARICOM-Central America trade relationship. Some information in this regard might be enlightening.
It should be borne in mind that these figures are in a situation in which CARICOM offers a potential market of approximately 16 million when Haiti fully comes on board, while Central America’s is approximately 40 million. Per capita income in CARICOM ranges from approximately 18,000 (US) in Trinidad and Tobago to well under 1,000 in Haiti while in Central America it ranges from 6,599 in Costa Rica to 1,957 in Honduras.
The Agreement with Costa Rica provides for preferential access in favour of all CARICOM exporters on goods, excluding goods on which Most Favoured Nation (MFN) treatment is maintained and goods which are subject to phased reduction of import duties. Exports by Costa Rica are granted preferential access into the More Developed Countries (MDCs) of CARICOM – Barbados, Guyana, Jamaica, Suriname and Trinidad and Tobago. The CARICOM Less Developed Countries (LDCs) – Antigua and Barbuda, Belize, Dominica, Grenada, Montserrat, St. Kitts and Nevis, Saint Lucia and St. Vincent and the Grenadines – are not required to grant Costa Rica preferential access. This is a principle laid down by the Conference of Heads of Government for the negotiation of such bilateral trade agreements.
A review of the trade data for the latest years available reveals that under the CARICOM and Costa Rica Free Trade Agreement, both have increased exports to each other. However Costa Rica has consistently enjoyed trade surpluses. At the time of signing of the Agreement (2006), CARICOM exports to Costa Rica totaled US$5.2 million while CARICOM imports from Costa Rica were valued at US$65.1 million (a trade balance of US$59.9 million in favour of Costa Rica). By 2008, CARICOM exports had surged to US$53.1 million, while imports from Costa Rica expanded to US$118.4 million; a surplus in favor of Costa Rica of US$65.3 million.
Under the Agreement, CARICOM’s major exports to Costa Rica include liquefied propane and butane; iron and steel bars, rods, angles, shapes and sections; fertilizers; refined petroleum; heating and cooling equipment and parts thereof; printed matter; wood products and cereal preparations.
Of the items not covered under the Agreement, (traded under the MFN provisions) soap, cleansing and polishing preparations; alcoholic beverages; and wood manufactures are items featuring in CARICOM’s exports to Costa Rica.
On the import side, under the Agreement CARICOM’s leading merchandise imports from Costa Rica include paper and paperboard, articles of paper or paperboard; quicklime; fabricated construction materials (except glass and clay construction); cereal preparations; household equipment of base metal; and beef.
There were, however, significant MFN imports from Costa Rica of glassware, articles of plastic; soap, cleansing and polishing materials; vegetables; and cement.
An examination of the data in respect of the other Central American countries here represented – El Salvador, Guatemala, Honduras and Panama – reveals a similar picture where the trade surplus, for the most part, emerges largely in favour of CARICOM’s Central American trade partner.
Major constraint facing the development of CARICOM/Central America trade
The biggest constraint is that of transportation links. The lack of direct or regular air and sea links poses a challenge in building the trading relations. Gone are the days when a shipping line, NAMUCAR, operated between Costa Rica and various Caribbean ports by-passing Miami. Even the more recent air link between Port of Spain and San Jose has been discontinued.
The transportation issue has also bedeviled intra-CARICOM arrangements with the greatest effect being on Belize – a CARICOM country located in Central America.
While trade agreements provide a necessary vehicle for increased trade, by themselves they are not sufficient to guarantee expansion of trade. The Region’s thrust must therefore be to put in place the conditions that will stimulate production, increase domestic competitiveness and productivity and facilitate increased trade, in particular through enhanced transportation links.
Nexus between Trade and Investment
Ladies and Gentlemen, it is well established that trade is underpinned by investment. Cognizant of this, policy makers in the Region, in the context of the deepening of the integration initiatives and the creation of the CSME, have formulated a number of initiatives. These are aimed at creating the conditions to attract investment, to enhance competitive production, spur trade, propel economic growth and achieve sustainable development in the Caribbean.
As business persons, I am sure you would be interested in those measures which are being advanced to stimulate and protect investment in the context of the Single Market and Economy. In this regard, work is being undertaken on the formulation of a Harmonised Investment Policy Framework for CARICOM States.
The Caribbean Community’s Investment Policy regime is a framework for attracting and promoting private sector investment (national, intra-regional and foreign) in support of the development objectives of the Community. In particular, objectives pertaining to the achievement of sustained economic development based on international competitiveness and enhanced trade and economic relations with Third States, are critical. The objective is to transform and market the Community as a single investment space.
For the business persons in Central America, the legal and institutional changes which are being put in place in the construction of the CSME, create a more attractive, secure, transparent and stable environment for doing business in the Caribbean Community.
Conclusion
Ladies and Gentlemen, the challenge now is for you as business persons, to seek out the opportunities being created by the implementation of the Single Market and the various trade agreements to which we are party.
The time is propitious for the private sector organisations in both regions to come together to explore real and practical means of co-operation for mutual benefit. The ideas and suggestions emanating from this conference should provide the marching orders for the organisations of both regions. The CARICOM Secretariat stands ready to provide the necessary technical support.
Should this be realised, this Conference would have served its purpose of Connecting the Caribbean and Central America for the benefit of the people of both regions.
I thank you.
