Caribbean Convergence AN ESSAY

Transcription

Caribbean Convergence
AN ESSAY
BY
DAVID C. ANYANWU
Prepared for the Forum on the Future
of the Caribbean
May 5-7, 2015
The University of the West Indies St.
Augustine Campus
& Hyatt Regency Trinidad
Caribbean Convergence – An essay
2
WRITTEN BY:
DAVID C. ANYANWU, PhD
RESEARCH ASSISTANTS:
Carolyn Bermudez
Danielle Too-A-Foo
This paper was commissioned by the Honourable Winston Dookeran,
Minister of Foreign Affairs of Trinidad and Tobago. It was prepared
following extensive consultation with Minister Winston Dookeran and
in collaboration with Dr. Giovanni di Cola, former Director of the ILO
Office and Decent Work Team (DWT) for the Caribbean.
The author is grateful to (in alphabetical order) Prof. Andy Knight, Dr.
Anthony Gonzales, Dr. Dillon Alleyne, Dr. Kusha Haraksingn and Dr.
Mathew Bishop for their willingness to discuss the subject.
DISCLAIMER:
The views presented in this paper are those of the author and do not
necessarily represent those of ILO or Ministry of Foreign Affairs of
Trinidad and Tobago. The author is solely responsible for any
mistake or omission in the study.
CONTACT:
David Anyanwu, Consultant, goDev Consulting Ltd, Trinidad and
Tobago: [email protected]
3
Table of Contents
Abstract
5
Introduction
6
Situating Caribbean Integration in the Global Context
8
Outlook .......................................................................................................................................8
Concentric Circles of Caribbean Integration Movement ........................................................9
Is the region fragmented? ......................................................................................................12
Analytical Framework
14
Regimes, cooperation and plurilateralism ............................................................................15
Towards a Model for Caribbean Sea Convergence
17
What is convergence?.............................................................................................................17
Geographical Configuration ...................................................................................................21
What lessons can we learn from existing models? – Pacific Alliance and the ASEAN ....22
Assessing the Challenges for a Caribbean Convergence
24
The politics of convergence ...................................................................................................25
Market Issues ...........................................................................................................................27
Interoperability of a Caribbean Convergence with existing regional and sub-regional
integration processes .............................................................................................................28
Mechanism for Caribbean Sea Convergence
29
Can production integration drive a Caribbean Sea economy? ...........................................31
The Way Forward - Proposals for interpreting an holistic and an
integrated convergence model
34
Migration and labour mobility ................................................................................................34
A tripartite approach to PPPs .................................................................................................35
Building the capacity of small and medium sized enterprises (SMEs) ..............................37
Multinational enterprises (MNEs) ...........................................................................................38
Financing Development ..........................................................................................................40
Institutions ...............................................................................................................................43
Future Directions
43
Bibliography
46
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Abstract
The recent global economic crisis has not only exposed the structural limitations
and vulnerabilities of Caribbean economies, it also forces Caribbean countries to
carve out new pathways for building greater economic resilience as well as
growth and development. The changing dynamics in the global economic and
financial landscapes necessitate a realignment of national focus away from
mainstream and dominant conceptualizations of globalization, regionalism and
integration, to engagement without borders. Convergence is presented in this
paper as a new pathway that is emerging in response to these global forces at
work, and a process that requires Caribbean countries to embark on bold,
transformative and forward actions by both governments and private sector. It is
about identifying where Caribbean common interests lie and how to pursue those
interests so as be able to respond to the myriad global pressing challenges
Caribbean countries are faced with. A convergence of Caribbean economies
around core issues of production integration, competitiveness and cooperation is
presented from a perspective of ‘building a scenario’ for action.
5
Introduction
A convergence1 of Caribbean economies around core issues of production
integration, competitiveness and collaboration is presented from a perspective of
‘building a scenario’ for consideration towards the future direction of the
Caribbean region. At a time when the region is not only reeling from the
‘structured vulnerabilities’ of its history, it is also forced to grapple with a series of
‘new vulnerabilities.’ These ‘new vulnerabilities’ are reflected in institutional
arrangements and requirements in international organizations that leave little
wiggle room for these small economies particularly those in the Caribbean to
respond to the changing global economic and political landscape.
Increasingly stringent trade and financial rules often present significant obstacles
for small developing countries to efficiently and effectively take advantage of
trade and economic opportunities across the globe. Neorealists have for long
noted the debilitating impact of international structures that limit policy options for
states in the international system. This is most visible in the inability of
developing countries to aptly influence the international economic or financial
architecture due to the factors allured to earlier.
The intent of the paper (as with convergence) is not about ‘designing a blueprint’,
but rather to lay the foundation for a more in-depth exploration of convergence. In
moving beyond intermediate approaches that have only served to perpetuate the
region’s narrow-mindedness, we need bold, disruptive and transformative
approaches, which can provide ‘newer platforms’ for economic growth and
development as well as diplomatic and political cooperation. Convergence as
articulated is not about supplanting existing structures and processes, but rather
about ‘getting things done’ in a transformative manner through greater policy
coordination beyond the framework of existing integration structures.
1
Convergence as a basis of cooperation between countries on issues of production, distribution and competitiveness is
distinguished from economic convergence also referred to as the ‘catch-up effect’ which posits a narrowing of gaps in per
capita income and other development indicators between poor and rich countries. Although the author concedes the latter
could be an outcome of former.
6
The impetus for Caribbean convergence therefore derives from the argument
that integration models based on trade and markets do not capture the full scope
of the development challenge that is linked to production and distribution.
Consequently the recalibration of integration in the wider region premised on
‘open regionalism’2
and increasingly towards ‘cross regionalism’3, ‘post-
hegemonic’ or ‘post-liberal’ liberalism’ 4, should be conceptualized as a strategic
response to the policy imperatives generated by globalization.5 It is about
identifying where Caribbean ‘common interests’ lie and how to pursue those
interests so as to stand a better chance at reshaping of global economic
architecture. Such a permanent dialogue is currently non-existent (at least not as
articulated in this paper) and is incorrectly assumed in many quarters as being
able to take place solely in a conventional integration setting. This new paradigm
of economic cooperation and governance in the Caribbean and beyond6 will call
for bold political and economic decision-making, new and innovative ideas, and
integrated interests towards win-win outcomes.
The paper is structured in four parts. The first section locates the Caribbean in
the global scenario and makes the case for wider engagement. An analytical
framework for convergence is presented in section two. Section three attempts to
demystify the concept of convergence, while the natural but surmountable
challenges associated with the convergence process are analyzed and
discussed in section four. Section five proposes the mechanisms necessary to
2
ECLAC (1994:8) defines open regionalism as the use of regional preferential integration agreements and other policies
in a context of liberalization and deregulation, geared towards enhancing the competitiveness of the countries of the
region.
3
The growing trend of conclusion of trade agreements between countries from different regions of the world. For more
see Alfred Tobias, ‘The Brave New World of Cross Regionalism’, 2008
4
These are new anti-systemic regional institutions such as UNASUR and Alba.
5
Ruiz-Dana, Alejandra; Peter Goldschagg; Edmundo Claro and Hernan Blanco, ‘Regional Integration, Trade and Conflict
in Latin America’, International Institute for Sustainable Development (IISD)
6
The word ‘Beyond’ envisages Latin America in the first instance and then opportunities beyond.
7
drive a Caribbean Sea convergence and finally the paper makes some
recommendations for the way forward in the final section.
1.
Situating Caribbean Integration in the Global Context
Outlook
Despite predictions by some mainstream thinkers 7 that the global economy is
recovering from its slump, recent events including falling oil and gas prices do not
support that outlook. The global economic crises, falling commodity prices, weak
demand, as well as domestic supply-side constraints, have aggravated the
Caribbean development problematique, bringing these economies, particularly
the tourism dependent economies, to their knees.
The impact has been most visible in countries with high levels of private and
public debt beyond the 60% benchmark and almost 100% of GDP in some
tourism-dependent economies.8 Weak banking and financial systems with little or
no buffers accompanied by systemic barriers to competitiveness (including both
demand and supply-side constraints) have stymied growth. Growth has averaged
less than 2% a year for the past two-decades, and the IMF projects growth in the
region to remain low at 2.2 percent in 2015, but slightly better than 1.3 percent
averaged in 2014.9
A slow and costly bureaucracy remains a huge problem with as much as 70
percent of GDP of some countries spent on running the government and paying
salaries.10 Unemployment rates remain a source of concern in the region even as
the International Labour Organization (ILO) warns that the ‘challenge of bringing
7
International Monetary Fund (IMF), World Bank, Inter-American Development Bank (IDB) and economists.
8
The IMF reports in its Regional Outlooks that at the end of 2012, 11 CARICOM countries (Antigua and Barbuda,
Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Kitts and Nevis St. Lucia, and St. Vincent and the
Grenadines all had debt-to-GDP ratios over 50 per cent and 10 of those exceeded 60 per cent. Jamaica and St. Kitts and
Nevis have the highest debt-to-GDP ratios over 140 per cent.
9
IMF, “Latin America and the Caribbean”, Global Economic Prospects, January 2015.
10
Anthony, Kenny, “Delivered or Denied: The Dividends of Integration”, Special lecture given by the Prime Minister of St.
Lucia, UWI Distinguished Lecture Series, UWI St. Augustine, 3 March 2015
8
unemployment back to pre-crisis levels (particularly for women and youth),
seems as daunting a task as ever’.11
Indeed, this has been a pre-crisis issue,
and the slowdown in economic growth will not help high unemployment levels
which CARICOM leaders have recognized as an ‘extraordinary challenge’.12
Although ECLAC counters that the combined economic outlook for Latin America
and the Caribbean has been substantial and positive, it cautions however that
the larger mineral and resource rich economies have been the main points of
attraction of foreign investments. It is within this context that Dookeran notes that
with effective coordination and programming within a new convergence, the
benefits could be extended across the region.13 Responding to current and future
economic trends therefore will require a renewed commitment to international
cooperation.
Concentric Circles of Caribbean Integration Movement
From time to time, we need a dose of reality to remind us that the Caribbean is
really small in the global context. With a total population of about 18 million (Haiti
accounting for more than half of the regional population) and a total area of about
460,000km2 the region and its microstates are struggling to maintain some sort of
strategic relevance in the current multilateral framework. Internally, the attempts
to deepen CARICOM14 as with any other regional arrangement including the
European Union, has been hampered partly by inconsistencies within the
grouping including the diversity in language, population size and pace of
economic development of some members as well as severe implementation
deficits that have been sufficiently articulated by many including Norman Girvan.
11
The Guardian, “Global Unemployment to Rise to 212 Million, Says ILO”, published Monday 19 January 2015, http://
www.theguardian.com/business/2015/jan/19/global-unemployment-rising-ilo-social-unrest
12
Keynote speech by Bahamas Prime Minister Perry Christie, at the Ninth International Labour Organization Meeting of
Caribbean Labour Ministers in Nassau, Bahamas.
13
Dookeran, Winston, ‘Introducing the Convergence Model of Integrated Production’, Colombia, 7 March 2013
14
Member States of CARICOM are Antigua and Barbuda, Belize, Barbados, Bahamas, Dominica, Grenada, Guyana,
Haiti, Jamaica, Montserrat, St. Kitts and Nevis, Saint. Lucia, St. Vincent and the Grenadines, Suriname and Trinidad and
Tobago.
9
A theory-based explanation of the Caribbean integration as comprising of a set of
concentric circles representing the different levels of integration in the region
offers the best insight into the long varied history of the region’s integration
movement. The OECS which was established in 1981 by the Treaty of
Basseterre for the major goal of economic integration, can be seen as the inner
circle of Caribbean economic and monetary integration. Having adopted a single
currency pegged to the US dollar and managed by the Easter Caribbean Central
Bank (ECCB), there is full monetary union in the OECS.15 The sub-region also
shares common judiciary, a single telecommunications regulatory body as we all
as joint diplomatic representation in Ottawa, Brussels and Geneva.
Borrowing from a framework which has been applied to explain differentiated
membership in the EU system, Caribbean’s integration legacy can also be seen
as the outcome of two logics of polity-building - identity and efficiency.1617 The
logic of efficiency posits that the core of deepest integration is comprised of those
states who share the highest levels of interdependence, the most common
interests in policy, minimal distributional conflict and strongest policy capacity.
The logic of identity on the other hand posits that states in the inner circle of
deepest integration are those with a deep sense of collective identity and share
the most common values and norms. This is reflected by the experience of the
OECS states. Conversely, states with little interdependence, less common
interests in policy, high distributional conflict and asymmetries in policy capacity
will constituted the periphery.
Within this framework, CARICOM integration can be located at the outer layer of
these concentric circles. The notion that CARICOM was originally set up on the
basis of market integration and market expansion has been well espoused and
documented.18 CARICOM’s history can be traced back to the short-lived West
15
The Revised Treaty of Basseterre which established the OECS Economic Union entered into force in January 2011.
16
Schimmelfennig, Frank, “Circles and Hemispheres: Differenced Integration in and beyond the European Union”, Center
for Comparative and International Studies, Zurich, May 2013
17 Both of these factors have to be jointly present to remain in the inner circle of the concentric
18
Dookeran and others.
10
Indies Federation which failed in 1962 because the political action intended was
not seen by many as reflective of their best interests. The Federation was
succeeded by CARIFTA19 in 1965 and subsequently CARICOM in 1973. More
than CARIFTA, CARICOM was intended to provide a framework for economic
integration with special emphasis on intra-regional trade, functional cooperation
in several areas including foreign policy coordination. Despite the similar identity
and the seeming interdependence of the economies, CARICOM unlike the
OECS, has not been able to implement a single economy as the Caribbean
Single Market and Economy (CSME) which was born by the Revised Treaty of
Chaguaramas in 2001, is yet to be implemented.20
It therefore doesn’t come as a surprise that while OECS citizens are able to
move and work freely in the sub-region, CARICOM citizens as a whole cannot.
Similarly, decision making at the OECS level has been more fluid than at the
CARICOM level where it is still a struggle to reach common positions on issues
of regional interest. Situated in the periphery is CARIFORUM – a grouping of
Caribbean signatories to the Lome Convention and includes CARICOM, Haiti
and the Dominican Republic, and the Association of Caribbean States (ACS)21,
which embraces the entire basin. What is obvious in these circles is that the
success or failure of the various integration processes has been to an extent, a
reflection of the nature and features of their structures, including their economic
or political focus as well as the willingness of regional leaders to provide political
action.
A ‘do it our own way attitude’ has also meant the region is not able to function at
an optimal level in this ‘intermistic environment’22 where the boundaries between
19
The Caribbean Free Trade Association was a free trade agreement signed in 1965 to liberalize trade in manufactured
goods and manage trade in agricultural goods with special arrangements for the LDCs of the region.
20
It is now scheduled for implementation in 2015.
21
The location of the Association of Caribbean States (ACS) which was created in 1994, at the peripheral level does not
suggest its unimportance, but rather represents an argument that members have exhibited little interdependence, less
common interests in policy, high distributional conflict and asymmetries in policy capacity compared to the OECS and
CARICOM in this instance.
22
Knight, Andy, “Governing Intermestic Complexity”, Contact Magazine, TT Chamber of Commerce, Vol.14 No.3 2014
11
‘the domestic’ and ‘the international’ are so blurred and without a common
domestic or regional foreign policy small developing states such as these stand
little chance of influencing global decisions which impact their development. Even
attempts by the OECS23 to deepen its integration have met serious scrutiny in
some corners of CARICOM. Moreover, the reluctance of CARICOM Member
States to explore deeper integration or go beyond the boundaries set by the 2001
Revised Treaty of Chaguaramas,24 coupled with a crisis of leadership (reflected
mostly in political inaction at the domestic/national level) which has stalled
attempts towards a single market and economy25 have not made things any
better.
Is the region fragmented?
It should be noted that the Caribbean governments since independence have
always had a tendency towards atomization. Despite the common challenges
they face, countries have traditionally chosen to exploit their own paths (often to
mediocre results) as evidenced by the pursuit of several bilateral options for
market and trade expansion outside of the framework of existing integration
structures. Similarly, other countries are positioning themselves to take
advantage of opportunities around them within the framework of convergence.
While Trinidad and Tobago has signed several partial scope trade agreements,
Jamaica is looking to take advantage of Chinese foreign direct investment (FDI)
as they engage in port expansion. Similarly, in seeking to act as beachheads to
CARICOM for the South, Guyana and Suriname cannot be faulted for seeking to
readjust their positioning in hemispheric and regional politics as they become
more South American than Caribbean and Belize for assiduously pursuing closer
ties in Central America. Trinidad and Tobago has also already taken steps to
23
Member States of the OECS are Anguilla, Antigua and Barbuda, British Virgin Islands, Dominica, Grenada, Montserrat,
St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines (Montserrat is the only overseas territory (in this case of the
United Kingdom) with full membership of both the OECS and CARICOM)
24
The 2001 Revised Treaty of Chaguaramas establishes the Caribbean Community including the CARICOM Single
Market and Economy.
25
Ramphal, Sridath, “Vision and Leadership: The infinite unity of Caribbean needs”. In Ramphal, Sridath, Caribbean
Challenges, Hansib Publications, London, 2012. Pp. 157-173
12
engage the Latin America region as both an observer in the Pacific Alliance26, a
full member of the Andean Development bank, and a member of the Brazilian
constituency in both the IMF and World Bank.
Indeed, these trends suggest a challenge of the “no-country left behind”
sentiment – are these countries leaving the rest of the region behind or are they
really paving the way for a smoother passage for the rest? While the answer is
not clear, what these countries have in common however is the realization that
they must expand their horizons both economically and politically in other to
respond to the challenges of today.
Likewise, with a more convergent range of economic interests, the OECS has
deepened integration and is committed to organizational change to better to
respond to the economic realities of our time. While linguistic and population
differences have been challenging, the gap in pace of development has been a
very contentious factor in the grouping and likely to play a critical role in the
readiness of Caribbean economies to participate in a converged economic
space. Unlike Trinidad and Tobago which has over an extended period, had the
luxury of high hydrocarbon prices and buffers from the heritage and stabilization
fund, Jamaica has been burdened by high manufacturing costs and its
macroeconomic and structural situation have made it uncompetitive. What would
be the cost of adjustment for a country like Jamaica and how can the body of
countries that choose to participate ensure that smaller economies are not further
marginalized and burned by a new kind of competition or that the benefits can
actually trickle down to smaller businesses and not become the domain for
international conglomerates?
In the face of internal differences, the region has an opportunity to realign the
direction of its economic future through a convergence of economies. However
26
The Pacific Alliance is a mechanism for the economic and commercial integration of Chile, Colombia, Mexico and Peru,
formally established via the Framework Agreement of 6 June 2012. The Alliance also establishes an important
commitment to cooperation in the matter of flexible migration.
13
success of this process will require from all sectors ‘unity in purpose’ and a
commitment to action. It goes without saying that, “tackling the many challenges
of tomorrow’s world demands a coming together of the best efforts of all
nations”.27 Literally, ‘all hands must be on deck’. This cannot be an easy
message to convey given the number of countries that are going through internal
adjustments and redeploying domestic fiscal consolidation as mandated by
international financial institutions. Perhaps, this will require some political
leadership and direction from leading economies in the region, particularly
Trinidad and Tobago and Guyana to steer this process. Really, this convergence
must be approached with the mindset of overcoming ideological, political and
historical challenges for the greater goal of economic resilience 28 and sustained
growth.
With regards to the evolving financial, economic, political and development
challenges these economies are faced with and the limitations of the current
systems to respond adequately to them, expanding the economic space beyond
what currently exists so as to provide the scope for leverage in production and
competitiveness becomes a viable option for serious consideration. Caribbean
economies will perform better tomorrow within a more flexible plurilateral
framework that converges countries around areas of common challenges and
interest. As the eminent Norman Girvan righty stated:
‘we will always be where we are; and the Sea will always be with
us. We have no choice but to center our world on this space; to
embrace our Sea and make it ours.’29
2.
Analytical Framework
27
Pigasse, Mathieu, “The Americas in a Changing Global Economic Scenario: The Role of PPPs”, 10th OAS Private
Sector Forum, Asuncion, Paraguay, June 2 2014
28
Lino et al…2009) define resilience as a country’s ability to cope with external shocks – the ability to withstand the effect
of external shocks and quickly recovering from those shocks.
29
Girvan, Norman, “Constructing the greater Caribbean”, Keynote Address at SALISES Regional Integration Conference
2013, Rethinking Regionalism: Beyond the CARICOM Integration Project, 7 October 2013
14
Regimes, cooperation and plurilateralism
The ‘political imperative for convergence’ and the need for ‘appropriate correcting
mechanisms’ were identified as important during the discussions on ‘Regional
Economic Integration: Caribbean Convergence and Competitiveness’ in the 2012
Caribbean Growth Forum. If we are to agree that the political logic of
convergence is to foster cooperation among likeminded states over common
interests, then the study of international regimes provides the conceptual lens in
our quest to understand the means and conditions under which Caribbean and
Latin American States can cooperate with one another.30
Regime theory provides an explanation of how public and private-sector interests
come together in ways that allow cooperation across a spectrum of special
issues.31 Studies have applied regime theory to explain cooperation in areas
such as trade, services, the seas, and the environment,32 As such, it represents a
significant contribution to the convergence debate.
In line with the neoliberal perspective, the convergence of Caribbean economies
will facilitate cooperation by providing information, reducing the costs of
transactions, and facilitating forward and backward linkages. The most critical
element becomes the removal of uncertainties that plague interactions among
states thereby facilitating the attainment of ‘optimal outcomes’.33 In adapting to
the contemporary realities of international political economy34 , we find that at all
levels (political, economic, social etc) the traditional methods of multilateralism
are no longer timely in their responsiveness.35
30
Brahm, Eric, “International Regimes”, Beyond Intractability, September 2005
31
Stephen Krasner first offered a definition of regimes as “implicit or explicit principles, norms, rules and decision-making
procedures around which actors’ expectations converge in a given area of international relations.”
32
Meyers, Eytan, “Multilateral Cooperation, Integration and Regimes: The Case of International Labor Mobility”, The
Center for Comparative Immigration Studies, University of California, San Diego, Working Paper 61, November 2002
33
Brahm, Eric, “International Regimes”, 2005
34 Or what can also be inferred as the discontents of globalization.
35
It has also been suggested that multilateralism is being undermined by regional agreements on value chains.
No country wants to be left behind and Caribbean certainly cannot afford to be left behind.
15
As evidenced in the Doha Development Round or climate change talks, overpoliticization of issues alongside difficulties in reaching decisions or forging
simple consensus within a multilateral framework has stymied progress and
adversely impacted developing countries. With multilateral and increasingly
bilateral efforts yielding mediocre results, ‘ad hoc plurilateral approaches have
thus emerged as ‘an’ effective means’, in this new international political
economy.36This is especially the case in what Knight describes as ‘intermestic
environment’,37 where boundaries between ‘the international’ and ‘the domestic’
are so blurred and a highly complex system of multi-level governance has
become the norm.
These reconfigurations of the international political economy architecture have
not only prompted changes in the ways international relations is conducted but
has also broadened the scope of participation for a wide range of actors. Gone
are the days when ‘international relations’ was the sole domain of nation-states.
The number of players has increased markedly, and similarly, the web of
interests and influence has become significantly more complex and inter-related
in what John G. Ruggie identifies as a “global public domain”,38 featuring actors,
local and international, small and large, formal and inform, natural and
transnational, secular and international all collectively contributing to a highly
complex system of multi-level governance.39
Civil society’s terms of engagement have also broadened to one of partnership
and its interest is no longer restricted to trade policy and social issues but have
broadened to cover all issues including terrorism, nuclear proliferation,
environment, health governance and disarmament. Based on the foregoing, we
36
Sidhu, W. Pal, “Plurilateralism and the New World Order”, ByBorderline, Live Mint, 30 December 2009
37
38
Dookeran, Winston, A New Frontier for Caribbean Convergence. Trans. Fudan International Studies Review, August
2014 (translated in mandarin). Also, Dookeran, Winston, 2013
39
16
already know that the future of the international political economy is going to be
different both in its dynamics and configuration.40
Mathieu Pigasse notes that the emerging world presents for Latin America ‘and
by extension Caribbean countries’, a challenge and more importantly an
opportunity to pursue bold and necessary reforms 41 in response to contemporary
global economic and financial challenges. Globally, we are seeing articulations of
global groups like BRICS (which has set up a New Development Bank of BRICS)
and the dynamic convergence of ASEAN and Pacific Alliance countries, as well
as configurations such as the Pacific Basin Forum and the Trans-Pacific
Economic Cooperation as alternative ways of pursuing economic growth and
development. Truly, these are also being driven by preconditions for global
efficiency in a highly competitive economy in which participation in global value
chain production systems must now form an integral part of every winning firm’s
strategy and national in economic growth and development plans.
Even the Samoa Pathway Document reiterates long-established calls for more
South-South cooperation, particularly SIDS-SIDS, to complement existing NorthSouth arrangement, leveraging opportunities wherever possible through a
partnership platform.42 It is within this context that a Caribbean Sea convergence
is premised.
3.
Towards a Model for Caribbean Sea Convergence
What is convergence?
The world is evolving rapidly not only in terms of the complexity of changes it
presents, but also by the new processes and actors emerging and countries
converging and cross-integrating in various configurations around the world. The
40
Dookeran, Winston, “A New Frontier for Caribbean Convergence: Integration without Borders”, 2013
41
Mathieu Pigasse is a former senior official and Chief of staff for two French Finance Ministers, Dominique Strauss-Khan
and Laurent Fabius.
42
SIDS Accelerated Modalities of Action (S.A.M.O.A) Pathway, UN Conference on Small Island Developing States, Apia,
Samoa, 1-4 September 2014
17
ultimate purpose remains sustainable development facilitated by sustained
economic growth and strong fiscal performance. There are currently few states
that do not belong in one group or another and all of these are happening in spite
of borders. Indeed, the world is in an era of ‘networks’ as opposed to ‘blocs’ as
countries actively pursue something more than integration that can afford them
the leverage to reframe the terms of their engagement with the rest of the
world.43
‘Open regionalism’ and increasingly ‘cross regionalism’ have provided countries
with the framework to respond to the demands of the changing global landscape
and the discontents of globalization. It is in this context that convergence is now
being placed on the agenda as a point of departure for the future. Convergence
is therefore about countries choosing to participate in a Greater Caribbean
project based on a common view of the need for depended cooperation as well
as facilitating freer movement of goods, finances, persons 44 and services. This is
the antithesis of a protectionist and inward looking approach that has dogged
traditional regional groupings/blocs.
While there is a view that existing processes such as the Economic Partnership
Agreement (EPA) for example, has deepened integration (that is after all one of
the aims) and global value chains are forging networks and connections at the
global level, the results have not been as obvious. Convergence is about moving
beyond boundaries to create economic opportunities. Such a permanent
dialogue is currently non-existent (at least not as articulated in this paper) and is
incorrectly assumed in many quarters as being able to take place solely in a
conventional integration setting. This new paradigm of economic cooperation and
governance in the Caribbean and beyond 45 will call for bold political and
economic decision-making, new and innovative ideas, and integrated interests
towards win-win outcomes.
43
New technologies have played a role in this regard by allowing for interconnection in trade among people and markets
44
Starting with skilled persons across sectors/industries
45
The word ‘Beyond’ envisages Latin America in the first instance and then opportunities beyond.
18
There is significant potential in a wider Caribbean of 40,000,000 people to bring
sustained benefits to converging economies. However, the onus will rest on
governments and the private sector to exploit the process to the fullest through
PPPs to take advantage the vast potential for economic growth and development
the Caribbean Sea offers. Despite the political requirements, the focus should
remain on the economic opportunities if this dream is to be realized.
The Convergence approach articulated is based on three key points. (a) The first
is a new approach to regionalism that focuses on the wider hemisphere; (b) an
emphasis on capability building through cooperation and not just a focus on trade
and markets; (c) a strong focus on production integration, competitiveness and
equity of the Caribbean economies in the global order). 46 These points are further
supported by four pillars: (i) endogenous growth; (ii) inclusive and equitable
development; (iii) entrepreneurial competitiveness; and (iv) adaptive and
realigned institutions.
While the major challenge of convergence is conceptual in nature, the idea is not
new; it can be traced back to the ‘deepening and widening’ debates on
CARICOM’ integration.47,48 Convergence has been taking place at varying levels
and across a range of issues such as climate change, renewal/alternative
energy, maritime, communicable diseases etc. Indeed countries have traditionally
converged into powerful blocs based on their common interests ‘to formulate,
influence and negotiate policies both within and outside multilateral frameworks
that characterize international decision-making processes’ such as G7/G8/G20,
BRICS, IBSA etc.49
46
There is no geographic limitation to Caribbean convergence; it is a shift from a physically limited plane to an open
economic space
47
For a historical perspective, see work of William Demas on ‘The Deepening and Widening of CAICOM’.
48
Antoni Estevadeordal, a senior official in the Inter-American Development Bank also traces convergence back to the
late 1990s in Europe, ‘when the various Preferential Trade Arrangements criss-crossing the old continent were brought
together under a single, pan-European area of accumulation of production’ a process which he sites as the focus of many
groupings in the Americas and Asia-Pacific.
49
Chenoy, Kamal Mitra, “Plurilateralism and the Global South”, India, Brazil South Africa Academic Forum: A Policy
Dialogue, Brasilia, 12-13 April 2010
19
As Knight observed, this joggle between frameworks is the world’s attempt to find
novel ways of governing what he calls an ‘unruly globe’.50 While these sorts of
configurations have been criticized for their informality and counter/disruptive
processes (operating outside mainstream multilateral frameworks), as evidenced
in the ASEAN and BRICS, buoyed by the ICT revolution and technology
digitization, they have become the very efficient, fast and flexible ways by which
countries can pursue common interests. Therefore, ‘plurilateralism, not
multilateralism’ is the foundation of convergence because it provides the room for
flexibility, which in turn facilitates convergence.
The essence of convergence in this context is that cooperation towards an
economic space or any issue of common interest should not be limited or
determined by geographical boundaries. But what will this new ‘grouping’ look
like and will it challenge traditional integration structures to which targeted
countries already belong?
The strategy framework for convergence provides a new political and economic
life in the process of Caribbean integration and is not conceptualized to replace
the Caribbean integration movement; rather the goal is to ‘reinforce it with some
innovative ways of moving the process forward towards an economy of the
Caribbean Sea.’ 51 Given the focus on flexibility, the strategy draws upon practical
convergence of economies regardless of structures and geographical
boundaries.
The convergence of ‘open economic spaces’ is therefore a response to the
limitations of traditional multilateral frameworks dodged by politicization,
indecisiveness and bureaucracy. It will complement existing arrangements and
allow participating States the opportunity to act voluntarily in framing new spaces
and opportunities for regional, hemispheric and international engagement.
50
Knight, Andy, “Governing Intermestic Complexity”, Contact Magazine, 2014
51
Dookeran, Winston, A New Frontier for Caribbean Convergence: Integration without Borders, 2013
20
Geographical Configuration
Geographically, the convergence of a Caribbean Sea economy posits an
incremental process that starts with a few players beyond CARICOM and can be
expanded with more economic and political buy-in. Inclusiveness is critical in this
process of enlargement of the Caribbean Sea economic space. A phased
approach to participation is preferred. At a glance, an ‘economic space’ that
includes CARICOM States as well as the Dominican Republic, Cuba, the Dutch
and French Islands and French Guyana in the first instance will appear a natural
starting point. This will easily create a market of 40,000,000 that will encourage
investment in the productive sectors of resource rich countries such as Guyana,
Suriname and Trinidad and Tobago.
This phased approach is necessary given differences in size, readiness and the
need to ensure the manageability of the process. A second phase will see the
expansion to the other countries of the Greater Caribbean.
Given the crucial role that the ACS and possibly the Community of Latin
American and Caribbean States (CELAC) would be expected to play in
facilitating this process, this configuration could function within either of these
cooperation frameworks initially as countries converge into this economic space.
As stated previously, countries with interest in cooperation will form regimes
because the success of that convergence will depend on the ‘compatibility of
interests, willingness to compromise and sharing of information’.52 Given the
requirements of globalization, there cannot be a limit to the convergence process
and ultimately the search for production integration and competiveness would be
global.
Estevadeordal notes that a ‘region-wide agreement in Latin America and the
Caribbean would yield great economic benefits’ because it would provide a more
52
Keohane, Robert, ‘The Demand for International Regimes’, in Stephen Krasner (ed.) International Regimes, Ithaca,
New York, 1983
21
flexible and effective link for trade and economic cooperation.53 Of course, we
have to give serious considerations to asymmetries in economic capacity and
power, in terms of who steers the convergence process, after all, regimes such
as this are very much the outcome of political change, power and interests. Also
one must imagine that for a microstate like St. Kitts and Nevis, participation in a
convergence process with Dominican Republic and Cuba (a combined
population of more than 20 million), while the process is likely to be beneficial in
the long run, it might bring fewer gains than risks in the short-term. Although this
is not an integration movement and countries will only participate based on
foreseen benefits, it is important nonetheless to ensure that the cost of
adjustment for countries, particularly the smaller economies can be balanced by
gains in the economic space.
What lessons can we learn from existing models? – Pacific Alliance and the
ASEAN
Several initiatives in the hemisphere are based on similar approaches including
the Pacific Alliance which is a very interesting model for this Caribbean Sea
convergence.54 What separates the Pacific Alliance from existing integration
processes in Latin America 55 is its outward-oriented focus, and its pragmatic
approach – seeking to create an enlarged economic space of likeminded Pacificrim economies in the region. It’s been viewed as a ‘convergence experiment’
because instead of supplanting existing initiatives, it seeks to build on them
towards an export platform to the Asia-Pacific region.56
The common interests shared by members remain the foundation of the initiative
and provides the pragmatic flexibility required to advance the alliance. In seeking
to promote the growth of the trading activity as well as efficient and competitive
53
Estevadeordal, Antoni, “Economic Integration in the Americas: An Unfinished Agenda”, July 2012
54
The four original members are Chile, Colombia, Mexico and Peru. Costa Rica is negotiating to join and discussions
have emerged about a possible merge with MERCUSOR.
55
Particularly MERCUSOR which is inward-looking
56
Villarreal, M. Angeles, “The Pacific Alliance: A Trade Integration Initiative in Latin America”, Congressional Research
Service Report, 2014
22
infrastructure development, member countries formed the Latin American
Integrated Market (MILA) to combine their exchanges and central securities
depositaries. By integrating trade/export promotion activities 57 of all member
countries at international fairs; organizing joint market research and trade
missions; and the creation of a joint scholarship fund to enable students to study
in any member country in areas critical for enabling the competitiveness of SMEs
so as to promote youth entrepreneurship; the grouping has shown great
commitment to cooperation and partnership. Despite asymmetries in size, they
have been able to converge to build a greater market and financial space.
Even as negotiations into the Trans-Pacific Partnership (TPP)58 continue as a
response to global preconditions for efficiency, five countries of the Americas 59
have also advanced discussions towards convergence with the Asia-Pacific
Economic Cooperation (APEC). Effective cooperation between China and other
APEC members has not only turned the region into an engine of global economic
growth but also cushioned it from the global financial crisis. These examples go
to show that that a model that is based on a mutually beneficial, win-win, open
and inclusive cooperation can bring significant benefits to the Caribbean Sea
convergence.
As with other regions, Caribbean economies have the same challenge of
implementing changes and economic reforms towards the creation of ‘an
endogenous driving force for sustainable and sound economic development’.60
The scope for cooperation is limitless within a Caribbean Sea economic space. It
will facilitate both institutional and people-to-people- connectivity, while providing
the space for cooperation in areas such as green economy, blue economy and
57
An example is the ‘Pacific Alliance Flavours’ project, which was developed as a regional project based on the Chilean
food export promotion tagged ‘Flavours of Chile’.
58
A proposed regional regulatory and investment initiative involving twelve countries, four of which (Canada, Mexico, Peru
and the United States) are from the Americas.
59
Canada, Chile, Mexico, Peru and the United States
60
Yuan, Chen, “Prospects of China’s Economic Cooperation with the Asia Pacific”, China Institute of International Studies,
November 14 2014
23
ocean governance (significant in terms of economic development), freer
movement of people, space management and production integration.
Another relevant model for Caribbean convergence is the experience of the
Association of South East Asian Nations (ASEAN).61 Within this model, there is
the recognition of the importance of cooperation in both real and financial sectors
and the need for the free flow of skilled labour necessary to facilitate cooperative
behavior.62 Several key features of the model distinguish it from other integration
processes and make it the most vital choice to assist in outlining the mechanism
for the convergence process. These include:
(i)
the flexibility that the model offers.
(ii)
the primary basis of the ASEAN’s existence is not a treaty but a
declaration.63
(iii)
a private sector led approach
(iv)
a sector based approach
The ASEAN model has been designed with the comfort of participating states in
mind. This is reflected in the terms of approach, the scope and pace of
implementation. While the model has been criticized as being inadequate to
sustain the creation of an economic community, Caribbean economies will find
attractive the flexibility the model allows members in terms of their level of
development, comfort and preparedness to join the process.
4.
Assessing the Challenges for a Caribbean Convergence
61
ASEAN was established in 1967 by the five original members (ASEAN-5): Indonesia, Malaysia, Philippines, Singapore
and Thailand. It subsequently over the years to include Brunei Darussalam, Cambodia, Lao PDR, Myanmar and Vietnam.
62
Plummer, Michael, “The ASEAN Economic Community and the European Experience”, ADB Working Paper Series on
Regional Economic Integration, Asian Development Bank, No.1.July 2006
63
The Bangkok Declaration simply proclaimed the aims of ASEAN ‘to promote peace, stability and prosperity through
regional cooperation, respect for the rule of law and adherence to UN principles’. This is different from the Treaty of
Chaguaramas which established CARICOM or the Treaty of Rome that established the European Union.
24
The politics of convergence
There is no denying that the political complications that the convergence process
faces are real. However, the convergence of Caribbean economies has to be
pursued with a common mindset of overcoming these impediments in the
realization that convergence which is sought represents the heavy price of
survival in today’s global economic landscape. As former Jamaican Prime
Minister and one of the pioneers of the integration movement Norman Manley
noted, there is a sense that the ‘old ways in politics are no longer equal to the
new needs’,64 hence the need to focus on the economic goal. He further noted
that integration is not just about geographical proximity and a common cultural
background but must be grounded in economics pursued through political
action.65
In the last forty years, the Latin American and Caribbean region has undergone
several transformations, a ‘third wave of democratization’ that saw the political
transformation of Latin America from authoritarianism to democracy and
economically from an import-substitution industrialization (ISI) strategy towards
trade liberalization and open regionalism.
Ultimately, the management by
countries of the politics of a Caribbean Sea economy would be critical for
convergence in terms of reconciling alliances, competing ideologies, historical
and linguistic differences with their economic realities. While ‘neutrality’ has been
applied to cushion some of these concerns, prospective participants in this
process would have to be willing and prepared to forego the very raison d'être - a
common ideology and purpose - upon which past visionaries conceived this
integration. Interestingly, this is already happening.
The consequence of the realignment of global/regional politics is the rise of posthegemonic regimes such as PetroCaribe, the Union of South American States
(UNASUR), the Bolivarian Alliance of the Peoples of Our America (ALBA), the
64
Manley, Norman, “The Caribbean Community Envisioned by its Forefathers: A Reality after 25 Years”, undated
65
Manley, Norman, “The Caribbean Community Envisioned by its Forefathers and a Reality – 5 Years After”, Silvertorch
Home, undated
25
Initiative for the Integration of the Regional Infrastructure in South America
(IIRSA) and CELAC as new and attractive windows for cooperation beyond the
ACS. These regimes are broadening and deepening areas of cooperation so as
to leverage economic and financial opportunities within and outside the
hemisphere. For example, as an economic cooperation regime, PetroCaribe has
created ‘subgroupings within traditional groups in pursuit of economic and
development opportunities. On another note, heightened tensions between Haiti
and the Dominican Republic remains an issue.66 While the Dominican Republic is
envisaged to be a critical part of this convergence (also participates in
CARIFORUM), its interest in CARICOM membership remains undecided.67
Even as the global/regional political architecture continues to reshape, so have
relations evolved overtime, more recently with US-Cuba relations. Ultimately,
Caribbean countries do not necessarily have to damage a relationship to gain
one or vice versa. This quest however calls for a level of pragmatism in the
strategy employed because as the Brazilian experience with BRICS has shown,
convergence has the potential to sharpen existing relations so it is mutually
benefiting to all members. Yet, the region needs to ‘keep its eyes focused on the
prize’ as political differences should not stop states with common economic
interests from engaging at this level. In the long run, the economic benefits are
likely to outweigh the political differences given the orientation towards getting
business going and getting the economy right. As Ambassador Ramdin noted,
‘ideology does not bring development today, what brings development is
pragmatism’.68
66
The precarious situation of 240,000 Haitians,66 which are at risk of statelessness following the decision by the Supreme
Court of the Dominican Republic remains largely unresolved and puts the governments of the region in a dicey situation.
The recent lynching of a Haitian man in the Dominican Republic will not ease rising tensions.
67
Dookeran has noted that ‘creating the Caribbean Sea economy is a first politics-driven process requiring a partnership
approach. Therefore, the immediate policy requirement is to grant membership to the Dominican Republic’.
68
Ramdin, Albert, “CARICOM in the Hemisphere”, Caribbean Journal of International Relations and Diplomacy, December
2013
26
Market Issues
Having already noted that the success of the convergence process is not
squarely dependent on integration, it is also worth noting that stronger and faster
economic growth in Caribbean economic space will require closer trade
liberalization and integration than is currently provided for in trade agreements.
Consequently, the convergence process will be facilitated by the widening of all
Partial Scope Agreements and as much as possible, the removal of all
impediments to freer trade and movement of skilled persons.
It is unfortunate that the existing trade agreements with Latin American countries
are not currently been fully utilized to enhance trade and economic relations.69 In
the case of Cuba, which shares similar structural and macroeconomic
vulnerabilities with CARICOM, opportunities for cooperation especially tourism
investment towards multi-destination tourism and sports tourism can be
advanced through PPPs within the framework of a Caribbean Sea convergence.
Cuba has to be engaged early on and at a high level given the changing
dynamics of hemispheric politics as the United States government gradually
loosens its blockade on Cuba.
CARICOM leaders only recently endorsed the Declaration of Havana,70 which
reiterated:
“the need to pool our efforts in order to improve the productivity,
infrastructure, air and sea connectivity of our countries, as well as to
broaden our economic and trade relations through the
implementation of the revised Trade and Economic Cooperation
Agreement between CARICOM and Cuba.”
What is left is therefore to respective governments to put this declaration
into policy and implement. This will however require leadership at the
government level by countries such as Trinidad and Tobago and Guyana,
69
CARICOM has signed trade agreements with Cuba, Costa Rica, Colombia, Dominican Republic and Venezuela.
70
CARICOM Secretariat, “Declaration of Havana on the Occasion of the Fifth CARICOM-Cuba Summit”, 8 December
2014
27
technical direction by ECLAC given their technical focus and institutional
support by both ACS and CEPAL.
Interoperability of a Caribbean Convergence with existing regional and
sub-regional integration processes
As already indicated, Caribbean Sea convergence does not seek to replace
existing processes. Regional and hemispheric institutions have a critical role to
play in the convergence process. CARICOM can evolve to play an even
important role in the convergence process. It must be noted that the ACS, which
is envisioned to drive the convergence process, itself is an outcome of a
CARICOM decision to create a zone of co-operation involving CARICOM
Member States and other countries in the Greater Caribbean. Similarly, at the
hemispheric level, the Organization of American States (OAS) would need to
continue to convene the private sector and governments from Latin America and
the Caribbean together towards exploring avenues for social, political and
economic cooperation.
However, the fact that many CARICOM countries are fully participating in parallel
integration processes across the region does raise some concerns for the
interoperability of these processes especially where conflicts of interest might
arise in the medium-to-long-term with regards to the commitments states would
have made under these agreements. Belize for example is full member of the
Central American Integration System (SICA) as explained previously and;
Guyana and Suriname are UNASUR members. Certainly, participation in these
processes does not indicate whether or not these countries have moved on from
CARICOM, but the question therefore arises as to the interoperability of these
different structures with the Caribbean Sea economic space, which when in effect
shall not be limited by geographical boundaries. Even as we consider the roles of
these preexisting institutions, especially for CARICOM and SICA as springboards
for wider engagement n driving the convergence process, concerns around
institutional redundancy should be carefully considered going forward.
28
5.
Mechanism for Caribbean Sea Convergence
Both the ASEAN and the Pacific Alliance models can provide useful guidance for
framing a Caribbean Sea economic space. Given the severe challenges that limit
the fiscal space for the region’s economies, as well as their large account deficits
and largely undiversified export structures, it makes sense that the appropriate
mechanism for convergence will involve the integration of sectors among capital
and resource rich countries of the Greater Caribbean. Their role will be critical for
the success of the convergence. It will also imply the initial cooperation of the
goods producing and service economies of those most readily capable to
participate at that level. As a convener, it is expected that Trinidad and Tobago
will play a leading role in this regarded, and supported by strategic goods and
services economies such as Belize, Guyana, Jamaica, Suriname (within
CARICOM) and Dominican Republic and Cuba in Central America.
The mechanism will be most applicable on a sectoral basis and led by the private
sector in a PPP. Step one would be to identify viable prospects and possible
areas of cooperation, then the second step would involve the design and
implementation of relevant policies to facilitate sectoral projects in the countries
participating. This was the approach taken in the ASEAN case where countries
chose to integrate (cooperate in this case) on a number of selected sectors with
the goal of scaling them up and drawing from lessons learned. Also as seen in
both the Pacific Alliance and ASEAN experiences, the minimum necessary
condition required for a sector to operate as a production base and single market
would be the removal of tariff and non-tariff barriers on its final and intermediate
products so as to ensure that the outsourcing of inputs (particularly intermediate
inputs) is not hindered.71 72
Both the Pacific Alliance and ASEAN experiences show that the success of the
convergence will be dependent on a protagonist private sector, which will take
71
Reyes, Romeo A., “The ASEAN Model of Economic Integration”, Jakarta Post, Monday 19 July 2004, www.Asean.org
72
Members of the Pacific Alliance have removed tariffs on up to 96% of goods and are modifying the rules of origin.
29
commanding heights of the economy. Facilitating such private sector
engagement will be critical to the success of this model. The private sector led by
MNEs and SMEs would be expected to set the direction and pace of the
economic convergence. Given that market forces will drive participation of MNEs,
SMEs and other firms, they would be expected to locate their production base
based on the ease and cost of doing business and would also be expected to
outsource inputs from countries that would supply them at competitive rates to
produce the goods and services for the regional market. If successfully
implemented, MNEs operating in the region might be persuaded to set up their
operations in Trinidad for example, where manufacturing costs are relatively
cheaper, or in Guyana where labour costs are more competitive.
This process is not necessarily dependent on integration although existing
integration processes can facilitate it and make the process smoother. In this
regard, incremental joint action by secretariats of regional and sub-regional
institution and agencies such as CARICOM, ACS, SICA, SELA and ECLAC
towards a feasible framework that can coordinate the participation of
governments, private sector and civil society may be useful. The sub-regional
entities can be springboards for the convergence, while ECLAC and ACS are will
provide technical direction and institutional coordination respectively in the initial
stages. As the driver for this convergence process, ACS will provide the forum for
the engagement of the private sector and for collaboration to engender
production financing and investment flows.
With the support of ECLAC, Ministers responsible for trade and economic
development in the participating states would be expected to draw roadmaps
cooperating on priority sectors identified. In collaboration with national and
regional private sector bodies, countries would then meet to deliberate on these
roadmaps with a view to agreeing on possible sectors to pursue. It is worth
mentioning that, because this process would be voluntary, it would be expected
that countries that decide to participate must agree to the targets set.
30
The role of the ACS is most salient in this convergence process. The 32
contracting states, countries and territories that comprise the ACS have already
identified five priority areas of concern. These include the preservation and
conservation of the Caribbean Sea; tourism; advancing trade and economic
relations among states, natural disasters; and efficient and viable intraregional
transportation.73 These are not far removed for the purpose of convergence
which is about greater cooperation by states towards an economic space on
issues of common interest. Given the immediate focus on creating strong
partnerships among Caribbean economies along common issues of production
integration, trade facilitation, linkages and infrastructure development as well as
the focus on sustainable tourism, the ACS provides a natural starting point.
Strategic partnerships with private sector groups outside the Caribbean Sea
economic space will be encouraged to leverage more resources. The added
value in convergence is the flexibility which it will afford states given the
preference for a less rigid structure, absence of a predetermined geographical
space, as well as the strong focus which will placed on private sector led growth
through PPPs. As seen in the ASEAN case, many years of successful regional
economic cooperation has led to deepened and widened cooperation in other
areas. However, given that PPPs can be costly and prone to mismanagement,
there will be need for a robust regulatory framework to ensure transparency,
efficiency and accountability.
Can production integration drive a Caribbean Sea economy?
This model is based on a partnership approach, and in which the role of the
government and the private sector are aligned and geared towards the promotion
on production integration, distribution and competitiveness – economic logic. The
growing popularity of public-private partnerships (PPP) is because of the
recognition of the critical role the private sector can play in driving innovation,
economic growth and development. Though limited by geographical boundaries,
CSME, as a regional framework is based on production integration, primarily
73
Association of Caribbean States, http://www.acs-aec.org/index.php?q=about-the-acs
31
focused on goods and services as well as inter-industry relations among
CARICOM economies.74 Given that a convergence of Caribbean economies will
vastly increase the regional market from sub-regional numbers, this ‘economic
space’ will therefore serve as a ‘wider’ export platform.75
In this PPP process which the private sector will drive, competitive advantage of
the region’s economies cannot be predicated on countries’ resource endowments
but rather on their improved capabilities to finance new activities and upgrade
existing ones and transition to knowledge based industries, which can only come
through integrated private decision-making in investment and production.
Through the promotion of sustainable enterprises, the private sector can drive
social and economic development, particularly around skills development, job
creation, decent work and environmental protection.76 This is a very important
aspect of the process given the realization that the region is at the margins of the
global production space and the lack of ‘relevant skills’ for diversified industries is
a serious impediment to production of internationally competitive goods and
services.77 The convergence of Caribbean economies will therefore provide a
broader space for the building of local and regional capabilities and for
cooperation in areas such as regulation, financing of trade and investment
infrastructure.
In addition to equitable distribution of benefits, which has already been alluded to
as a prerequisite for success; transformative growth in the capital sector;
innovative and entrepreneurial competitiveness (ICT led efficiency and
competitiveness); and realigned and adaptive institutions are recognized as
critical performance pillars for a Caribbean Sea economic space. In this context,
74
Girvan, Norman, “Production Integration: A Critical Perspective”, in Benn and Hall (eds.) Production Integration in
CARICOM, 2006: pp 8-29
75
The author is aware that this is not an integration movement and the intention is not to form a single economic space.
76
International Labour Organization, “Conclusions Concerning the Promotion of Sustainable Enterprises”, para 1, ILC
2007; UN Commission on the Private Sector and Development: Unleashing Entrepreneurship: Making Business Work for
the Poor, 2004
77
Wehrmeyer, Walter, Jonathan Chenoweth, Anthony Clayton, Manuel Fernandez-Lopez and Ken Lum, “Foresighting and
Technology Choice in Small Developing Countries”, Paper 6 in EU-US Seminar: New Technology Foresight, Forecasting
and Assessment Methods, Seville 13-14 May 2004
32
what is needed is an economic transformation of the region through ‘disruptive
innovation’ – a move away from the traditional ‘sustaining innovation’ approach.
‘Disruptive innovation’ can potentially transform industries and markets or even
create new markets by seizing disruptive opportunities.78 This is contrasted from
‘sustaining innovation’ which although important, focuses on ‘doing things better’
to change markets, has been shown as not the best way to create new growth –
a key goal of the convergence process.79 The former will produce the kinds of
‘game changers’ or ‘innovators’ needed to drive skills and knowledge
development, facilitate the production of high-value goods and services and also
collectively move Caribbean economies away from the periphery of the global
product space.80 While the gains are not likely to be immediate, the region must
not fall back to short-term quick fix solutions, which end up harming the economy
more than it heals it.
The recently released 2015-19 Strategic Plan by CARICOM doesn’t do much to
quell this concern.81
The regional focus has to remain on long-term
transformation of their economies towards greater collaboration to build
capacities including development of skills and technological abilities necessary
for a competitive participation in the global market. As the old adage goes ‘Rome
was not built in a day’, therefore these economies must not continue to limit
themselves to these immediate shock-value/quick fix strategies that are not
sustainable in any form.
78
Christensen, Clayton, “The Innovator’s Dilemma”, Havard Business School Press, Boston, 1997
79
Anthony, Scott D., Mark W. Johnson, Joseph V. Sinfield and Elizabeth Altman, “The Innovator’s Guide to Growth:
Putting Disruptive Innovation to Work, Havard Business Press, 2008
80
This is admittedly a challenge in an educational system that is not primarily designed around problem solving. However,
investments in this regard in Trinidad and Tobago and in the University of the West Indies system can go a long way in
building this capacity.
81 Released in July 2014, the CARICOM’s Strategic Plan outlines the strategic repositioning of the Community
33
6.
The Way Forward - Proposals for interpreting an holistic
and an integrated convergence model
Migration and labour mobility
One of the essential priorities of a converged Caribbean Sea economy would be
to make more efficient use of resources and to improve the mobilization and
distribution of labour within the economic space. There is no denying that the
success of convergence will be dependent also on its impact on the labour
market, particularly how it can improve the quality of life of people in the region.
Free flow of skilled labour is expected to be a critical feature of the convergence
process. While labour mobility is bound to test the limits of any integration
process (as has been the case of CARICOM and the European Union), it can
also help to even out a local surplus of labour in countries and sub-regions and to
prevent asymmetric shocks from causing persistent structural unemployment
problems, which have overwhelmed CARICOM economies in recent times.
Participating countries have to agree on a common definition of ‘skilled
labour’ (within or outside the ambits of the ACS) in the sectors that are targeted.
Countries would be expected to ‘harmonize qualification standards and mutually
recognize them so that skilled labour can move freely within in the factor
market.’82
For long, CARICOM States have selfishly frustrated what little incentives existed
for movement of persons in the region, a casualty of this process is the Protocol
on the Contingent Rights of Skilled CARICOM national which although signed in
2006, is yet to be implemented at the national level. While it is true that citizens
are currently moving around the region through different legal/illegal pathways,
Caribbean countries’ level of economic growth can potentially rise as a result of
better use of resources and an improved regional distribution of labour within a
converged Caribbean economic space.
82
Reyes, Romeo A., “The ASEAN Model of Economic Integration, 2004
34
With many microstates, CARICOM economies are too small to sustain the labour
resources needed to driver growth of industries, improve productive and build
critical mass. It can therefore benefit from a well-managed liberalization of
regional labour migration, which would regulate and match skills between laboursurplus countries with labour-deficient countries. Countries will need to sort out
the ‘suppliers and the receivers’ hurdle. More importantly, skilled labour mobility
will assist the private sector in deciding on where to locate production bases
especially for skilled labour intensive production processes.
In the Caribbean, receivers of skilled labour have been Trinidad and Tobago and
Barbados and Antigua and Barbuda to an extent. The convergence process will
require strong political commitments to protect migrant workers, particularly
committing to the implementation of social protection measures early on in the
process so that competition for investments and jobs does not lead a ‘race to the
bottom’.83 Ultimately, without improvements in labour force capacity, a Caribbean
space will be of little attraction for FDIs.
A tripartite approach to PPPs
Given the infrastructural deficits 84 that exist in the Caribbean region and the
adverse effects on productivity and competitiveness at the firm and industry
levels, the infrastructure strategy for a Caribbean Sea economic space will
undoubtedly include terrestrial transport linkages, aerial linkages and
communications technology with cross-border capabilities, border management
and security, and the regulation of the movement of people.85
One only needs to put in perspective the opportunities for regional economic
development that can come from the establishment of greater aerial linkages
within the Latin America and Caribbean region. This can potentially usher in a
83
Martin, Philip and Manolo Abella, “Reaping the Economic and Social Benefits of Labour Mobility: ASEAN 2015”, ILO
Asia-Pacific Working Paper Series, November 2014
84
That can facilitate regional interconnection through ICT, land, sea and air.
85
Dookeran, Winston, “A New Frontier of Caribbean Convergence, 2013
35
new group of tourists and tourism activities and create new ways to scale up the
quality and value of tourism activities available offered in the region through
integration of provider-activities. Convergence will facilitate the space for the
harmonization of laws and regulations as well as the standardization of the
national quality infrastructures. Colombia for example has expressed interest in
establishing linkages between its national carrier (Avianca) and regional carriers
such as Liat and Caribbean Airlines – an arrangement which the ACS is
facilitating within the scope of meeting the infrastructural requirements of the
convergence process.
There is also evidence that with careful selection, structuring and management
within a robust regulatory framework, PPPs will assist in cost effective use of
financial and technical resources of both the public and private sectors to provide
improved infrastructure assets and services.86
An important challenge PPPs have faced in the region is the absence of a formal
policy and institutional framework, which meant that there were no clearly defined
expectations and instituted process for the management of risks and value for
money thereby resulting in delay in delivery of projects, poor standards and
quality, or unexpected costs to government,87 and to this extent it impacted the
quality of life of consumers. The ILO and World Bank can provide useful
frameworks for reconciling the challenges linked to the region’s limited policy and
institutional architecture critical for successful PPP implementation.88
In the interest of sustainable economic development, Caribbean economies
would have to make the best use of this partnership so as to deliver improved
infrastructure in critical areas that will boost economic growth and build
resilience. It also has to be implemented with a view to improving employment
86
World Bank, “Infrastructure Roadmap for Public Private Partnerships in the Caribbean”, Public-Private Infrastructure
Advisory Facility (PPIAF), March 2014
87
Ibid
88
World Bank Research shows serious gaps in Caribbean countries’ policy and institutional architecture in areas such as
policy, law, detailed guidelines, defined roles, dedicated units, staff with PPP experience and dedicated project prep
funding.
36
and employability of youths, decent work, with employers’ organizations and
unions in line with ILO framework.
The successful exploitation of PPPs in a converged Caribbean Sea economy
demands therefore due diligence in the introduction of relevant policies and in
screening and development of a pipeline of properly prepared projects at the
national level; as well as in institutional strengthening and capacity building at the
national and regional levels. Sustained success will also be dependent on both
technical and financing assistance from key institutions such as the ILO
(particularly in areas such as labour market information systems and youth
unemployment), the Caribbean Development Bank, NDB BRICS and also
traditional partners such as World Bank and the IADB to bridge wide gap of
infrastructure deficits. As seen in the ASEAN model, the role of PPP as an
innovative financing mechanism has to be properly studied given the changing
nature of the global financial architecture.
Building the capacity of small and medium sized enterprises (SMEs)
The SME sector consists the majority of firms in the Caribbean and given their
potential to create backward and forward economic linkages and reduce foreign
currency expenditure, they will be central to the success and survival of a
Caribbean Sea economic space. They will be the engine to drive growth in this
new economic space if their capacities are carefully harnessed to continuously
contribute to productivity growth through the constant supply of ideas, skills and
innovations critical for moving the region from the margins of the global product
space. Given that SMEs in developing countries are often restricted by stringent
business regulations, finance, human resource and technological capacities, the
ILO recommends the creation of conditions that provide the right macroeconomic
environment including access to credit, foreign exchange, important inputs and
fair taxation as well as the provision of effective labour laws and regulations to
37
raise the quality of employments in SMEs.89 Some of the greatest challenges
SMEs face relate to their limited capacities.
A convergence of economies will provide SMEs in the Caribbean opportunity to
engage in more joint-action and collective activities through which they can pool
their resources together to not only overcome critical mass requirements but also
to reduce production costs, facilitate integration into regional and global value
chains 90, as well as boost their technical capacities to meet product related
standards and regulations they face in global goods and services markets. There
will also be opportunities for cooperation within a converged economy in areas
such as tourism services development, especially towards more effective
application of information communication technologies in the marketing of
tourism and cultural services as a single regional product.
A Caribbean Sea economic space can provide the learning platform that can
enhance SME competitiveness at the global level. Given the bias to the
partnerships approach, SME growth challenges can be addressed through PPP.
The right partnership of the catalytic role of governments (in providing the
national/regional quality infrastructure); the skills and core competencies from the
private sector and financing from both international and domestic resources can
not only promote poverty alleviation, but can also stimulate economic growth,
reduce unemployment, promote social protection and improve the quality of life
of women and men at the national level.
Multinational enterprises (MNEs)
MNEs are powerful international transfer agents, moving products and factor
services including technology, management and capital among national
economies. Given their very large size, the cross border, multi-country entities
89
International Labour Office, “Job Creation in Small and Medium-Sized Enterprises”, Guide to ILO Recommendation No.
189, Geneva, 1998
90
Hausmann notes that “participating in GVCs is an alternative way to learn by doing that is potentially more powerful
than closing markets to foreign competition”. Ricardo Hausmann , “In Search of Convergence”, Project Syndicate, August
20, 2014
38
play a critical role in shaping patterns of global trade, investment and technology
flows. This global reach not only presents countries with opportunities to tap into
MNEs’ vast international innovation systems (through knowledge spillovers),91
but also it also poses serious challenges for smaller developing countries’
economies due to likely impact on domestic production, employment, balance of
payments, trade, services and business activities.
The ILO’s Tripartite Declaration of Principles concerning MNEs and Social Policy
provides useful guidance for the conduct of MNEs and how they relate to host
governments and employers’ and workers’ organizations. These guidelines are
not only useful in facilitating the operation of MNEs as international transfer
agents within the Caribbean Sea economic space,92 they also represent an
important avenue for the participating countries to protect and enhance the
national social and labour environment. The framework should be incorporated
by policymakers in the enhancement of the national business environment; one
that will be conducive to economic growth and social development.
There is no question that globally competitive cross-border productive
enterprises have to be encouraged. This is where regional clusters and value
chains are most effective. The ILO and ECLAC frameworks on MNEs and PPPs
and regional value chains respectively can be effective in guiding the attainment
of this goal. For example, when applied in conjunction with other national
policies, ILO frameworks on MNEs and PPPs can ensure that both ‘home’ and
‘host’ countries will promote good social practices in accordance to national
social and labour laws as well as international protocols. It will also reduce the
likelihood of conflicts between governments, or employers and employees or
governments and companies.
91
Root, Franklin F., “International Trade and Investment”, 6th Edition, Cincinnati, OH, South-Western Publishing Co., 1990,
pp. 580-608
92
ILO website, “Multinational Enterprises”, 2015.
39
Regional clusters have the ability through joint and collective action to contribute
to innovative and transformative endogenous growth and build competitiveness.
To foster this would require a regional strategy for capital mobility, FDI, facilitation
of the regional transfer of knowledge, skills and technology. The University of the
West Indies is already collaborating in research activities with other research
institutions in Central and South America, so this should be encouraged with a
view to identifying practical and efficient ways to manage clusters. These
research activities must incorporate the private sector particularly CEOs and
decision-makers so as to identify the best sectors and activities that will produce
value-for-money. Within this framework too, we should encourage
entrepreneurship that is not limited by space and geography but have flexibility to
allow for sustainable development across the region.
Financing Development
Finance and liquidity will power this convergence process, so it is incumbent on
us (interested parties) to shore up adequate resources to ensure that support the
convergence process. While this convergence of Caribbean economies will be
taking place in a very challenging global financial environment, it is expected
however, that convergence will usher in a new era of financial cooperation driven
through the promotion of monetary cooperation and a joint maintenance of
regional financial stability – shoring up economic and financial buffers at national
and regional levels to manage external shocks.
Even as existing external buffers (in IMF/WB and others) are being reviewed in
terms of their relevance to the realities of small economies, there is the need for
an integrated approach involving regional central banks so as to develop internal
buffers to enhance the resilience of a Caribbean Sea economy. As seen in the
ASEAN model, cross-border financial trading and mechanisms have to be
improved to enhance regional capital market. Through PPPs, regional sources of
financing should be pooled towards infrastructure development to facilitate
logistics and transportation, as well as investments in information communication
technologies, development of innovation clusters and economic diversification.
40
Given the scarcity of resources, the need for detailed prioritizing in order to
identify the most lucrative sectors and projects to invest in as part of a sound
policy and regulatory framework is critical. In order to effectively prioritize,
consideration have to be given to interest of lead firms, as well as existing
linkages and productive capacities for effective and efficient completion of the
production. The ILO’s Guiding Principles on PPPs provide the necessary
guidance on the criteria for assessing new initiatives in a PPP. When applied
properly, these steps will not just minimize the risk of bad investment decisionmaking, but also encourage prospective investors as well as advance
sustainable social development. It will also ensure equitable and inclusive
growth.
Caribbean economies would have to work together towards narrowing the gap in
financing for sustainable development. Access to a regional fund such as CAF as
a primary source of regional financing for PPP projects is a great incentive for
countries, particularly the smaller ones. Through CAF, an adjustment cushion can
also be set up to manage initial costs of participation. The CDB, IDB and other
development financial institutions with activities in the region can also play roles
to play in this regard, but the region must also explore newer facilities such as
the New Development Bank BRICS (NDB BRICS) as part of a broader southsouth engagement. The former would have to redesign their lending paradigm in
other to support the operation of public-private partnership in the convergence
process. These regional and multilateral banks can leverage capital and provide
Caribbean economies with concessional financing for special projects.
With regards to the international public finance landscape, the obvious
fragmentation in the system presents unprecedented challenges for Caribbean
economies. For the past twenty years, mainstream financial institutions have
limited most Caribbean economies’ access to concessional finance because of
their graduation to middle income countries. As a result, greater demand is
41
placed on domestic resources 93 to finance development and other sources of
public financing including bonds and non-concessional loans. The prevailing
argument from these institutions is that in addition to mobilizing domestic
resources, these ‘middle income countries’ can also leverage international capital
markets. As the UNDP index on ‘domestic resource mobilization’ has shown,
most Caribbean countries such as St. Kitts and Nevis, St. Lucia, and Antigua and
Barbuda do not have sufficient capacities to do these.
No doubt, that in a wider Caribbean economic space, the region would have a
stronger voice and can be in a better position to influence the global finance
architecture. To do this, Caribbean economies would be best served to
collectively advocate for the inclusion of additional criteria such as
‘vulnerability’,94 ‘domestic resource mobilization capacity’, ‘access to external
finance’, and ‘human development level’ for assessing concessional resources.95
This will bring relief to Caribbean economies such as St. Kitts and Nevis and
Jamaica96 who although represent some of the most vulnerable to natural
disasters – being battered by severe storms and hurricanes such as ‘Hurricane
Ivan’ – also enjoy moderate – high national per capita incomes. 97
At the national level, governments would need to review double-taxation
arrangements, pursue integration/harmonization of capital markets and consider
setting up a regional stock market with a view to eliminating the rigidities that limit
capital flows. The Pacific Alliance model provides the best example in this regard
as member countries were able to set up MILA to successfully combine the stock
93
The 2011 Gates Report to G20 Leaders presented that while not replacing ODA, domestic resources should be the
largest source of development funds as such, developing countries were urged to mobilize resources on a large scale and
spend on effectively on priorities. For a detailed consultation of the report, visit http://www.gatesfoundation.org/What-WeDo/Global-Policy/G20-Report
94
The Commonwealth has argued that the World Bank and International Monetary Fund (IMF) should use ‘vulnerability’
as a criterion for accessing concessional resources giving the increasing numbers of Commonwealth States caught up in
this dilemma of ‘high income levels’ and ‘high debt levels.” The World Bank and the IMF base their eligibility to
concessional lending facilities on income thresholds thereby making it difficult for most Caribbean countries in particular to
t.
95
United Nations Development Programme (UNDP), “Where Next for Aid? The Post-2015 Opportunity, June 2014
96
These two countries also have the highest public debt to GDP in the entire Caribbean.
97
Commonwealth Secretariat, “Addressing the Financing and Debt Challenges of Commonwealth Small States”,
Discussion Paper 18, Number 18, February 2015
42
exchanges and central securities depositories of all four countries: Chile,
Colombia, Peru and Mexico. This will be critical for the success of regional
public-private partnerships. The private sector would also be relied upon to
develop capital sovereign wealth funds which will be important pillars in the
operation structure of the devise.
Institutions
It might be useful at this time to start thinking about what the institutions for this
process might look like. There is no desire to replicate the broad and often
inefficient structures in existing regional projects. The Pacific Alliance provides a
good structure, which this process can adopt. An important aspect of that
structure is the Pacific Alliance Business Council, which draws on the experience
of the APEC Business Advisory Council. A potential Caribbean – Latin America
Cooperation Council (CLCC) can play that very crucial role of challenging the
involvement of the private council and coordinating the PPP process. CLCC can
be tasked with the responsibility of providing the intellectual input on economic
cooperation in the Caribbean and Latin America region in the first instance and
will work towards accelerating the process of convergence. Members of this
council will constitute representatives of governments as well as the private
sector and from across participating states.
7.
Future Directions
Convergence towards a Caribbean Sea economic space has been presented in
this paper in the context of an evolving economic architecture and in response to
the changing financial landscape, both of which present challenges for the
region. The process requires further analysis to decipher actual scope and
parameters for region-wide engagement. There is no doubt, that nobody wants a
cumbersome structure or a rather long decision-making process. In this regard
the decision-making process of the Pacific Alliance provides a useful starting
point for further enquiry.
43
Nonetheless, that in order for Caribbean countries to effectively respond to
contemporary economic challenges, they have to overcome the limitations of
history, structure and smallness by embracing a Caribbean convergence
process. The paper discussed briefly the challenges that CARICOM as a regional
integration movement is faced with and its inability and flexibility to respond
effectively to the economic needs of Member States. In noting the ongoing
reconfigurations in the international political economy architecture, Regime
theory is applied to explain how public and private sector interests align in ways
that allow for cooperation across a spectrum of special issues in a plurilateral
environment.
The Pacific Alliance model’s peculiar features that distinguish it from mainstream
integration movements are not just important, but also reflect the commonalities
in object and purpose with the economic convergence envisioned for the
Caribbean region. The model’s flexibility and openness, lack of legal personality,
private sector led approach, and sector based approach are critical features that
guide the development of the Caribbean convergence. With the support of
ECLAC as a proposed technical coordinating agency, it is suggested that the
preparation by trade and economic Ministers of the participating states,
roadmaps for cooperation in the sectors identified for development is seen as a
critical first step. In additional, the ILO provides useful frameworks that on PPPs,
MNEs and SMEs which when considered with other relevant frameworks will
assist in preparing countries and their private sector for this convergence
process.
The process will not be without challenges. Indeed, political and ideological
differences can threaten the process. Therefore countries are encouraged to take
the necessary steps to resolve any differences that are of such magnitude as to
threaten the convergence process. Having indicated from the beginning that
convergence is not intended to replace existing integration processes, the
interoperability of the convergence process with sub-regional and regional
44
integration processes remains a concern, but not an inevitable obstacle. Moving
forward, the erosion of impediments to the free flow of skilled labour and capital
in the factor market presents a sizeable challenge for countries.
45
8.
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Caribbean Convergence AN ESSAY

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