SRC Trading thoughts, Reconsidering Strategic Trade Alliances for the Caribbean - by Shineco Sutherland

 

Introduction

Caribbean news was recently abuzz with Barbados’ plan to remove the Queen as its Head of State, which would signal a severing of some of the last vestiges of its legislative colonial ties. In the aftermath of that announcement, some of the media in the Global North pounced on China as the instigator of this change, suggesting thereby that our own Caribbean leaders could not themselves be credited with such a move. As a budding trade professional, my thoughts pivoted to the underlying recognition of the importance of strategic relations, in particular, in matters of trade.  The result is this Shridath Ramphal Centre (SRC) Trading Thoughts which provides a snapshot of the Caribbean’s main trading relations, chronicles developments with some of their trade partners arising from COVID-19 and finally proposes recommendations for future trading relations and strategies.

Brief Snapshot of Caribbean Trade

A country or region’s trade profile is inherently embedded with geopolitics, ebbs and flows in power and economic diplomacy. As such, the trading partners with which a country opts to align itself may change as its interests also change. In the case of the Caribbean, its colonial past birthed trading relations and infrastructure which are deeply entrenched in the Global North, resulting in traditional trading partnerships primarily with the United Kingdom (UK) and the United States (US). The UK remains one of the biggest source markets for the Caribbean’s tourism product; and for merchandise trade, UNCTAD’s 2020 Trade statistics for CARICOM shows that approximately 50%  of imports are from the US. The US is also the trade partner to which the highest proportion of CARICOM merchandise is exported. The UNCTAD statistics also show that intra-regional trade remains chronically low, accounting for only 8.28% of the region’s imports in 2019. The Caribbean (primarily through CARICOM) enjoys market access to these countries based on its trade agreements and arrangements including the Caribbean Basin Initiative and the CARIFORUM-EU Economic Partnership Agreement.

Developments with Trade Partners arising from COVID-19

Throughout the COVID-19 pandemic, a number of developments in trade patterns with our trading partners were witnessed.  For instance, the US imposed restrictions on the export of medical equipment required for the fight against COVID-19. In April, 2020, the Federal Emergency Management Agency (FEMA)  issued a directive to prevent the export of Personal Protective Equipment (PPEs) overseas. The list of PPEs – which included N-95 filtering facepiece respirators, other filtering facepiece respirators, PPE surgical masks and PPE gloves – was updated in August and applies up to December 31^st, 2020. The new list retains the same categories for the ban but identified more specific classes of products in each category. In more positive developments, the US Centre for Disease Control donated US $400,000.00 to Barbados to assist its COVID-19 response in areas such as infection prevention, laboratory reagents and improvements to data management. Similarly, the EU provided grants valued at €8,000,000.00 towards improving the Caribbean’s capacity to detect, monitor and respond to the pandemic. However, the EU also instituted export restrictions on PPEs, which has since ended. It however remains one of the regions worst affected by COVID-19 which has implications for the regional and international border policies for EU travellers into and out of the Caribbean.

Regionally, Cuba dispatched its “white coat brigade” to several Caribbean countries, which used the Cuban medical services to bolster their COVID-19 response strategies. Those countries include Jamaica with a cadre of 140 medical professionals, St. Lucia with 113, Barbados with 101, Saint Vincent and the Grenadines with 16.  These services were provided at a cost to the Caribbean Governments and was not without controversy from some quarters, like the US, which labelled the programme as “human trafficking”. Regional institutions such as the Caribbean Public Health Agency (CARPHA) also provided invaluable support to national COVID-19 responses across the Caribbean while the OECS Pooled Pharmaceutical Procurement Service procured medication for OECS and CARICOM countries. Simultaneously, COVID-19 became the last straw for the region’s air travel industry, grounding the regional carrier LIAT. Additionally, countries continue to maintain differing national policies on border control. 

From the above responses to the COVID-19 pandemic, a number of recommendations can be made to CARICOM States.  First, it is important to craft a strategic mix of trading and diplomatic relations which recognises relevant socio-political nuances. In practice, Caribbean nations have adopted different foreign policies which may make an immediate regional approach unfeasible and may result in the loss of some negotiating leverage and power. Nonetheless, strategic trading partners can provide resources to fill gaps, provide access to useful networks or propel national plans. Additionally, it is important for this mix to graduate beyond traditional trading partners. This will enable new support networks, alternative development opportunities and improved bargaining power where geopolitics can be leveraged.  In this regard, some Caribbean countries have made strides in diversifying trading partners such as with the ALBA arrangement via Venezuela, diplomatic relations with Cuba, participation in China’s Belt and Road Initiative and establishing diplomatic missions on the African continent with the intention of increasing trade.

Moreover, the need for nearshoring suppliers and producers is clear. Generally, the products and services procured by the region to support its COVID-19 strategies were from extra-regional sources. This led to delayed deployment of strategies as well as a leakage of resources, which could have alternatively recirculated in the region to mitigate its economic downturn.

Finally, a regional approach to trade and development agendas in the Caribbean is still merited, despite its complex nature. Although deployed within a context of resource challenges, the use of the regional mechanisms of CARPHA and the pooled procurement arrangements are prime examples of this. These two regional mechanisms allowed an internally devised strategy, to mitigate the region’s immediate emergency needs, when the international sphere was preoccupied with its own needs. Additionally, such regional mechanisms conferred reduced national costs when resources were pooled, allowing economies of operations. These lower costs then increased the fiscal space for alternative agendas.   

Recommendations for the Caribbean’s Trade Relations and Strategies

A High-Level Webinar hosted by the Shridath Ramphal Centre on the 9^th of October, 2020 provides more ideas on how the Caribbean might think of improving its trade relations and strategies in the future. 

Firstly, the Caribbean has negotiated a plethora of trade agreements which present a variety of market access and benefits. However, these agreements remain largely under-utilized. The Webinar recognised the merits of a diagnostic survey, critical to providing insights on the factors responsible for such underutilisation. This survey would be most meaningful if approached regionally, allowing it to serve the dual purpose of providing strategies to graduate from competitor to complementary economies. However, this regional approach must be accompanied by an active agenda to mitigate factors which presently negate effective regional integration and cooperation. Otherwise, such a diagnostic will be just another initiative that will ultimately be filed under “implementation deficit”. Additionally, the survey can be done through partnerships between the public and private sector, to benefit from a wider pool of expertise and resources.

Secondly, there must be a re-centring of trade and trade negotiations around the private sector. This is in recognition of the fact that businesses trade, not the state itself. This process of re-centring the private sector is ensuring that it is adequately consulted, to inform the business areas identified in trade negotiations; increasing the likelihood of identifying trade areas within which they hold a competitive advantage or relevant capacity. The Webinar recognised that in some cases, the private sector is insufficiently organised to appropriately participate in such consultations. However, such capacities can be nurtured over time. Re-centring also means actively creating an environment which facilitates the ability of the private sector to trade better, especially as businesses seek to capitalise on new opportunities such as south-south trade. This facilitation can take the form of economic diplomacy where diplomatic missions actively provide market intelligence to aid firms’ competitive positioning or engaging in state-centred negotiations to cultivate infrastructure which lowers the cost of doing business. Ultimately, this re-engagement of the private sector allows the state-centred approach to leverage the market research and learning curves of those which actually trade.  

Thirdly, the Caribbean can enhance its trade relations and strategies by using regional institutions to nurture enabling environments. This can include using the University of the West Indies to provide evidence-based advice on capabilities and capacity; the Caribbean Development Bank to provide investment funding and market intelligence; the Caribbean Development fund to train human resources to participate in the new trade ecosystems. This regional-institutions approach will chart a course to economies of scale, a more effective regional integration movement and a more strategic positioning of the Caribbean amongst its trading partners.

In conclusion, strategic Caribbean trade relations and strategies must be undergirded by a holistic understanding of its trade contexts; active engagement of the private sector in the business of trade; research-driven decisions; the leveraging of regional institutions and mechanisms to benefit from scale of operations.