PORT-OF-SPAIN, Trinidad, Tuesday January 20, 2015, CMC – Former Barbados prime minister Owen Arthur says while the decision in 1989 to transform Caribbean economies into a into a single market and economy was one of the most momentous decisions in the history of the Caribbean “it was a transformation that was never going to be easily achieved”.
Delivering the guest lecture at the Institute of International Relations at the St. Augustine campus of the University of the West Indies (UWI) on Monday, Arthur, said the transformation was therefore going to be more taxing if not attended by clarity of purpose, and the determination to hold to a steady course come what may.
Speaking on the topic “Caribbean Regionalism in the Context of Economic Challenges,” Arthur, who at one time had responsibility for the Caribbean Community (CARICOM) Single Market and Economy (CSME) portfolio within the quasi CARICOM cabinet, said the creation of the CSME was intended both to be an agency by which the region created indigenous opportunities for its development and at the same time serve as the principal vehicle by which the regional economy would be integrated into the evolving and dynamic global economy.
“In agreeing to reconstitute itself as a Single Market and Economy the region, for the first time, sought to rest its own development and its relationship with the rest of the world on the embrace of the economic ideology of liberalization.
“In this regard, the creation of a Single Market was to take the form of removal of all of the constraints on the movement within the region of goods, services, labour, capital and the creation of enterprises over centuries,” said Arthur, a three-time prime minister who lost office in 2008.
He told his audience that this process was however intended to be undertaken in accordance with particular principles and design features.
“To be precise, in reconstituting itself as a single market, the instruments of integration were to be designed to facilitate deeper, broader and faster liberalisation between individual economies in the
Caribbean than the region would agree to in its bilateral or multilateral agreements and relationships,” Arthur said, noting that it also meant that the region had to be prepared to venture into areas for which there was no provision in its previous attempts at integration such as labour mobility.
But he noted that in order to be relevant, the region had to embrace and incorporate into its own programme of integration protocols pertaining to economic disciplines for which they are no multilateral agreements such as Investment.
Arthur said it was also clearly understood that the CSME, which allows for the free movement of goods, skills, labour across the 15-member grouping, would or could never appear at any one time as a finite nor finished entity.
“It would have to be made to evolve to give effect to its intended purpose as an indigenous model for economies liberalization, and to ensure that the region’s treatment of its own constituent units are always more favourable that its commitments to liberalise under the auspices of the World Trade Organization (WTO) or through its bilateral trade and economic agreements.
“More pertinently, it was intended that the creation of a Single Market was not an end in itself. It was intended largely to create the foundations on which a virtual Single Economy would be erected.”
Arthur said that the Single Economy was intended to have as some of its key elements the provision for production integration, the harmonization of economic policies in critical areas, and the bringing about the convergence of the macro-economic policies of the individual economies such as would facilitate the adoption of more advanced forms of integration such as monetary union.
Arthur said the architects of the Single Market had recognized that while CARICOM was initially designed to give effect to economic integration, functional cooperation and the coordination of foreign policy as separate and distinct pillars,” the move to create a CSME required that a new and advanced harmony should be established between the various forms of regional integration”.
He said it was for this reason that at the CARICOM summit in 2007 regional leaders endorsed the Girvan Plan as the roadmap to the Single Economy, a decision was made to constitute a Regional Task Force on Functional Cooperation to link that subject more closely to the efforts to build the CSME.
“The Task Force reported, but its report is still at large, awaiting implementation,” Arthur said, adding that “at every step of the way, it appears that the enterprise to create the CSME is being confounded by doubts over what is being achieved, and even greater doubts as to how progress attained can and should be used to establish beach heads for even further progress”.
He said to begin with the scope of achievement involved in moving the region from the declaration to create a Single Market in 1989 to its incorporation into a Revised Treaty by 2006 is not understood nor appreciated in many quarters in the region.
“That exercise entailed the identification of over 400 existing restrictions on market activity across the region and the development of nine protocols to amend the original Treaty to make provision for the removal of those restrictions to be incorporated into domestic law in Caribbean jurisdictions,” Arthur said in his wide ranging speech examining challenges to Caribbean economies.
He said that it took Europe 35 years to move from the Treaty of Rome in 1957 to the creation of its own Single Market in 1992, while it has taken the Caribbean 17 years”.
“It is critical that the move to create the CSME should never to be confounded because progress in an area of fundamental importance to the region’s development is judged, without the merit of empirical validation, to be inimical to the orderly functioning of the constituent units.
“Sadly, this has obtained in relation to the treatment of labour mobility. The chief benefit from economic integration in the Caribbean is that it can enable the societies to make the most productive use of their human resources, broaden the horizons of opportunity for the ordinary citizen and enable most efficient enterprises to be created by having access to a regional pool of skills.”
Arthur said that provision for full labour mobility is therefore enshrined as an Article of Tariff in the Revised Treaty, and provision is made for its accomplishment in phases.
“Yet, a decision has been made to put the movement towards the CSME or pause largely because it was alleged that the functioning of the societies was being overwhelmed by the sheer scope of the movement of people. There is no evidence to support this.”
The former Barbados prime minister said that a study of the impact of free movement in the region has revealed that just under 10,000 skills certification have been issued to Caribbean nationals in the 10 years between 1997 and 2008 to allow them to find employment in the region.
But he noted that in 2008 alone, 18,000 work permits were issued by Caribbean countries, of which over 85 per cent were issued to persons who were not nationals of the region.
“The brutal truth is that the Caribbean economy in any given year grants 10 times more work permits to foreigners, than it grant skill certificates to its own national. It merits reflection as to how much progress could have been attained if the region had been as generous to its own as it has been to those from outside the region.
“For good measure it should be added that there is no evidence to show that the movement of persons outside the categories provided for in the Revised Treaty has had any negative on the functioning of the societies as alleged,” Arthur said.
He told his audience that a similar diffidence has been exhibited by the region in taking advantage of those aspects of its Economic Partnership Agreement (EPA) with Europe that can contribute most decisively to its development.
He said the most important aspect of the EPA is the generous provision made in respect of Mode 4 for trade in service for which they are no equivalence in Europe’s relations with any other group, nor by any other group of countries in effecting new bilateral trade agreements.
Arthur said the market access granted for in the EPA for professional employees of Caribbean firms to provide contractual services in the European Union (EU) for up to six months annually, and the opening up of 11 sectors for temporary entry by independent professionals and self-employed persons could, if effectively utilized, make the emergence and growth of cultural industries and other agencies of the creative economy a strong driving force behind Caribbean development.
“It is an opportunity that is being allowed to languish. An additional important aspect of the current crisis in regional economic integration has to do with the ineffectiveness of the regional response to the global economy crisis of 2008/2009.
“Unlike the European Union which mounted financial rescue missions for its members in deepest trouble, there is no equivalent regional financial mechanism to which member countries in CARICOM would make recourse in their hour of greatest need.
“In such a context, development of financial relationships with extra-regional countries, and the entering of financial programmes with the International Monetary Fund (IMF) have assumed greater significance in the affairs of the region that carrying forward the regional movement itself.”
Arthur said the unavailability of regional stabilisation facilities to assist in countries facing fiscal stress was compounded by the ineffectual nature of the few regional initiatives that were attempted.
He said a regional Task Force headed by the Governor of the Barbados Central Baank, Dr. Delisle Worrell, was constituted in 2009 to prescribe a regional response for the benefits of the respective domestic economies.
“That Task Force report too is at large,” he said, adding that more importantly, the G20 countries committed a significant sum to assist the countries of the Caribbean to counter the financial stress caused by the global recession.
He said six billion US dollars was intended to be distributed by the International America Development Bank (IADB) and that the funds were committed to a new liquidity programme for growth sustainability which member countries could access to correct any liquidity problems in its financial sector.
“The Caribbean however had no liquidity problem in its financial sector such as afflicted the United States of America. Hence hardly any use has been made of the funds under this programme.
“In short, the principal financial support planned by the global community to help Caribbean economies at their moment of greatest need was put into a programme for which there was no need,” Arthur said, adding that the “greatest adverse effect of the global crisis of 2008/2009 was cessation of economic activity funded by private capital inflows to the region.
“It is very clear that the region would have been far better off if a regional financial mechanism had been made available with quick disbursing loans to enable governments to accelerate their capital investment programme to counter the fall off in private capital inflows.
“The opportunity to find a regional solution to a common regional problem at a time of acute crisis was missed. It has significantly diminished confidence in the value and purpose of regional integration.
All of this has occurred at a time when developments in the global economic environment took a turn for the worst for the Caribbean,” the former Barbados prime minister said.