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Regional integration: Towards an inclusive value chain strategy

Published date 2014-05-07
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Adapted from Chapter IV, entitled, "The Special Challenges of Integration in the Caribbean":

In the past 25 years, the member countries of the Caribbean Community (CARICOM) have made efforts to consolidate their integration through a subregional mechanism known as the Caribbean Single Market and Economy (CSME). Although restrictions on the movement of goods, services, capital and people have gradually been rolled back, it has been difficult to implement the legislative changes needed to put all the agreements reached into effect. The deadlines originally set for full implementation of CSME have therefore had to be extended. The CARICOM Secretariat announced in January 2012 that CSME was 64% on the way to completion. The greatest progress with respect to the deepening of economic integration has been reflected in the establishment of the Economic Union of the Organisation of Eastern Caribbean States (OECS). The Dominican Republic and the members of the Caribbean Community (CARICOM) form the Forum of the Caribbean Group of African, Caribbean and Pacific (ACP) States (CARIFORUM), an intergovernmental mechanism that coordinates interregional political dialogue with the European Union.

Caribbean countries are characterized by a number of peculiarities and constraints that raise special challenges for their integration processes. These include geography, heterogeneity in respect of income and population, the small scale of production and exports, dependence on external markets, and macroeconomic and environmental vulnerability, with a high degree of exposure to extreme natural disasters. Geographically, 12 of the 15 CARIFORUM member States are islands, with an area of some 60,000 km2. Just three CARICOM member countries are on the continent: Guyana and Suriname in South America, and Belize in Central America. This island geography increases the cost of integration. For example, it is faster, easier and cheaper to transport cargo overland from Mexico to Belize than to move it to any other destination in the Caribbean.

Secondly, the incomes and population of CARICOM members are very heterogeneous. This is illustrated by the broad dispersion of per capita GDP, which is over US$ 21,000 in the Bahamas and less than US$ 800 in Haiti. Annual GDP growth in the CARICOM member countries as a group in 2000-2012 was 2.4%, well below the regional average of 3.3% for the same period. Where population is concerned, two countries, Haiti and Jamaica, account for 75% of all inhabitants (10 million and 2.8 million, respectively), whereas the seven countries of OECS have just over half a million inhabitants between them. These income and population data confirm the Caribbean’s position as the most heterogeneous subregion in Latin America and the Caribbean.

Another noteworthy characteristic is the small scale of the Caribbean countries’ production and exports. Although they are open, export-oriented economies, they account for only a small share of global and regional trade (less than 0.2% and 1.2%, respectively, in 2013). The exports of the subregion go in large proportion to extraregional markets such as the United States, where unilateral tariff preferences are on offer. Likewise, acting through CARIFORUM, in 2008 the Caribbean countries signed an Economic Partnership Agreement with the European Union with the object of promoting regional integration and greater participation in the world economy. These advances have not been enough to improve the export position of the CARICOM countries, as the take-up of preferences is still very low. Lastly, the financial crisis in Europe has depressed demand for Caribbean products as well as services, particularly tourism.