A New Chapter in U.S.-Caribbean Relations

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Friday, July 27th, 2007

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CARICOM and Washington Commission a New Chapter in U.S.-Caribbean Relations

Another in a Series of COHA Caribbean-Related Reports

For the first time in ten years, heads of state from the fifteen-nation Caribbean Community (CARICOM) and the United States came together at the “Conference on the Caribbean: A 20/20 Vision” held in Washington, D.C., from June 19 - 21, 2007. The agenda for the conference included various forums to facilitate dialogue and an exchange of ideas. Discourse between heads of government took place as Caribbean leaders met with President Bush and Secretary of State Condoleezza Rice; communication between government bodies and the citizenry was facilitated by several expert and private sector forums which addressed trade and development issues as well as investment opportunities; and interaction between islanders and fellow countrymen who had migrated to the U.S. was made possible through a Diaspora forum that highlighted the role of Caribbean nationals living abroad.

The conference brought together policymakers, the International Finance Agency, the academic community, private sector representatives, and private citizens of the Caribbean and the U.S. to examine the growth and development of CARICOM from a regional perspective, and to mark the beginning of a new, more dynamic chapter in the relationship between the U.S. and CARICOM. Some key topics included: small business stimulation, job creation, and economic diversification, as well as combating illegal drug trafficking, international organized crime and HIV/AIDS. Additionally, having declared June 2007 as the official “Caribbean-American Heritage Month,” President Bush said that the Caribbean Basin Initiative (CBI) would be renewed as a key economic and trade program, and specified a series of benefits and concessions especially for Caribbean countries based on commercial ties between the U.S. and that region. The Conference on the Caribbean provided the first occasion since the Clinton Administration left office for Caribbean leaders and their American counterparts to focus solely on issues crucial to the region; that being said, there was much to talk about.

Caribbean Integration to Bolster Regional Development
According to a recent World Bank study, “unemployment, particularly of youth, is increasing, inequities are emerging, productivity is falling—all of which are contributing to stagnant or declining economic activity in the Caribbean region.” Furthermore, several of the CARICOM countries rank among the most highly indebted emerging economies in the world; without debt relief, poverty is sure to increase. The June summit called upon the international financial community to help the Caribbean islands to diversify and transform their economies in order to meet regional goals and global standards. Also, Caribbean tourism, competitiveness, and investment were stressed as important areas where progress was necessary in order for local quality of life indicators to improve.

The conference took place within the context of the Caribbean Single Market Economy (CSME), which came into being in 2006. Not unlike the Single Market of the European Union, the CSME will eliminate all intra-regional tariffs and trade barriers. According to U.S. Secretary of Commerce Carlos Gutierrez, the new economic entity will make progress toward “increasing regional competitiveness, growing economies, and creating jobs in the region.” The CSME will further provide opportunities for manufactured Caribbean products and services to be sold in foreign markets while simultaneously attracting investment to the region. A noteworthy aspiration of the CSME is to develop a Caribbean regional ferry service and airline. CARICOM’s new CSME is an important medium through which member states will be able to achieve long term development goals; it is a necessary innovation in a global setting where small Caribbean island nations have a disadvantage over much larger economic conglomerations which are able to achieve economies of scale. With CARICOM’s total population numbering only 15 million, the CSME will help the Caribbean region to better integrate and achieve its place in the global market. Likewise, by 2008, the introduction of a single regional currency will assist economic development, much like the role of the euro in the European Union. Akin to the euro implementation process, a common currency in the Caribbean may take several years to be fully and successfully adapted to daily use on all of the islands; however, drawing on the EU’s economic performance and practical set of experiences, tangible results of a positive nature are likely to follow.

Renewal of the Caribbean Basin Initiative Goes Beyond Trade
At the June 20 meeting with the CARICOM heads of state, President Bush made a commitment to engage with the Caribbean on a more regular basis. Upon conclusion of the meeting, President Bush renewed the CBI, symbolizing a positive step in the direction of relaxing trade restrictions between the U.S. and the Caribbean. The CBI arrangement, having sat in limbo for the last seven years, was set to expire in 2008. According to the Office of the United States Trade Representative, the CBI is intended to facilitate the economic development and export-oriented diversification and expansion of the Caribbean Basin economies. The CBI also includes the Caribbean Basin Economic Recovery Act (CBERA) and the U.S.-Caribbean Basin Trade Partnership Act (CBTPA), which currently provide 24 beneficiary countries with duty-free access to the U.S. market for most goods. The CBI is essentially an informal free trade agreement between the U.S. and its Caribbean beneficiaries until formal Free Trade Association agreements can be negotiated with individual countries. Prior to 2000, the CBI allowed duty and quota-free preferential treatment for various goods; however such commerce was contingent upon a slew of special stipulations attached by Washington. These mainly applied to apparel goods including clauses specifying that all apparel exported to the U.S. be made from 100 percent content of U.S.-made fabrics. Other specific amendments to the CBI included a safeguard whereby the U.S. president could, at his discretion, suspend all duty-free aspects of CBI programs if he felt domestic products were being adversely affected by the competition. Since 2000, however, these rules have been relaxed. The Trade Act of 2002 allowed for the export of apparel made from a hybrid of U.S. and Caribbean components, and it also recognized the CARICOM countries’ positive cooperation and enforcement with transshipping rules and child labor laws.

Most importantly, the renewal of the CBI at the recently concluded Conference on the Caribbean has transformed the program into one that goes beyond the trade sector. CBI beneficiary designation now rests upon criterion in the fields of labor law, corruption, government transparency, and anti-narcotics. Additionally, CBI beneficiaries are encouraged to be “good neighbors” as well as to actively promote the advancement of their own economies—regional revitalization as well as “self-help” economic development prerequisites now play large roles in CBI beneficiary matters. By renewing the CBI, President Bush underscored the commitment Congress made in 2000 when the lawmaking body highlighted the U.S. interest of promoting growth in the Caribbean Basin. Furthermore, by transforming the CBI into an agreement that goes beyond trade, the U.S. has shown that it wishes to maintain a strong interest in ensuring that the Caribbean states practice sound economic policy within their respective societies and with regard to the interests of their neighbors.

Following negotiation of the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) in August 2005, the U.S. established a free trade zone extending to the five Central American nations and partially into the Caribbean region by way of the Dominican Republic. The CAFTA-DR agreement affords the region a comprehensive trade plan that, like the CBI, goes well beyond simple tariff reductions. Speaking at the 37th annual Washington Conference on the Americas in May 2007, U.S. Deputy Secretary of State John Negroponte stated that CAFTA-DR will assist area nations in “building their capacity to export, expanding and improving their business operations, attracting significant new investment, creating new jobs and business opportunities, raising labor and environmental protection standards, and increasing global competitiveness.” He also stressed the pact’s emphasis on the issue of energy security, proclaiming that CAFTA-DR would help to “diversify energy suppliers and energy types by promoting alternative fuels and new technologies, promote energy efficiency and conservation, and expand the international use of strategic oil stocks.” It is expected that CAFTA-DR will expand into the Caribbean, and as more nations in that region adhere to it over time, the CBI programs will no longer be necessary. Nevertheless, the U.S. has shown that its involvement will be robust in the promotion of economic development in the Caribbean region in years to come. Currently, the CBI programs remain a fundamental element of the U.S.-Caribbean economic relationship.

Our Own Backyard is Important
The aforementioned Conference on the Caribbean set forth many important issues that had been ignored while U.S. policy in the last seven years focused on other regions of the world. John Negroponte declared 2007 to be the “Year of This Hemisphere” and acknowledged that the Caribbean is “an extremely important part of the world… it’s the part of the world in which we happen to live in, and we neglect this hemisphere at our own peril.” U.S. involvement in the region is key; one must not forget that the recently foiled terrorist plot against JFK Airport in New York was orchestrated in part by three Caribbean nationals. During that crisis situation, both Trinidad and Tobago and Guyana cooperated with U.S. authorities in coordinating the arrests and arranging for the extradition process.

In response to growing hemispheric security threats, the U.S. established the “Third Border Initiative,” which, during the Special Summit of the Americas in January 2007, was welcomed as “a valuable framework for structuring [U.S.] engagement across the broad spectrum of matters that affect the prosperity and well-being of the region and its peoples.” The Third Border Initiative is a comprehensive program that targets a wide range of sectors in which constructive U.S.-Caribbean engagement is deemed beneficial. These include the diplomatic, security, economic, environment, health, and education sectors. Although the Third Border Initiative was originally formulated in 2001, it is a vital program that largely has been put on the backburner by the Bush Administration. This neglect is wrong-headed since it is a necessary component in defining an optimal relationship between the U.S. and its Caribbean neighbors, and critical to the establishment of effective counter-terrorism measures to ensure security on the southeastern border of the U.S.

Another important issue raised during the conference was that of the deportation of criminals. The U.S. has a one-strike policy concerning criminal offenders of foreign nationality—immediate deportation to their native countries. It is necessary to note that in a global setting, combating organized international crime requires responsible behavior by all parties involved. Immediate transferal of criminals back to their home countries only leaves the door open for the creation of organized crime networks at home; many Caribbean nations have complained of such results as their nationals, who, having become hardened criminals, return after spending years in the U.S., bringing their skills and connections back to their home islands. In fact, rising crime rates on Caribbean islands have often been directly linked to criminal deportees from the U.S. If the deportation policy is to remain active in the U.S., there must be specific programs of rehabilitation and reintegration of deportees into the societies to which they are returned. To complement this, effective monitoring systems must also be put in place to ensure against the resurgence of criminal activity. At the conference it was agreed that Caribbean deportees remain the single most vexing issue for Caribbean-Americans.

A series of disputes between the U.S. and various Caribbean countries are in dire need of being resolved. The controversial Shiprider Agreement, which the U.S. aggressively has attempted to negotiate with many Caribbean nations, is one example. According to the Institute for Policy Studies, the 1996 agreements were “intended to advance international drug cooperation between the U.S. and the Caribbean.” They stipulated that, in accordance with anti-narcotic measures, any U.S. Coast Guard vessel be permitted to enter national waters of a Caribbean country once a local law enforcement official was aboard. In the late 1990s, the Shiprider Agreements led to severe criticism from many Caribbean nations, who preferred to work within a framework of cooperation based on democratic principles and respect for sovereignty. Although some nations signed the agreement, there has been strong opposition to it from others. Jamaica and Guyana, for instance, have refused to implement the agreements or have imposed stricter limits on them, subsequently feeling the consequences of their actions. The U.S. has threatened economic sanctions in the past for failure to implement the measures, as well as refused assistance to its neighbors in the form of drug interdiction training and equipment. UN figures show that 40 percent of the 200,000 tons of cocaine shipped to the U.S. every year pass through the Caribbean and Central America; thus, a solution to these disputes is vital.

Similarly, a recent decision by the court of the WTO ruled in favor of the Caribbean island nation of Antigua-Barbuda and against the U.S. in a dispute over online gaming. Nevertheless, the U.S. remains non-compliant with the ruling, denying the island nation of 70,000 the right to provide online gaming to U.S. Internet customers. The decision of the WTO must be respected so this bothersome quarrel, which only reflects poorly upon the U.S., can be properly remedied. President Bush’s pledge of closer cooperation with the region at the Conference on the Caribbean presents a chance for both parties to find solutions to these issues and begin to establish more productive, mutually beneficial relations.

Tapping into the Oil Well that is the Caribbean Diaspora
One major goal of the Conference on the Caribbean was “the strengthening of the relationship among the Caribbean Diaspora in the United States as well as the energizing of the Diaspora and friends of the Caribbean in support of the Region’s Development.” The U.S. is home to the largest number of Caribbean migrants. The conference stressed that the Caribbean Diaspora in the U.S. is underutilized; it emphasized that the Diaspora can and must play a larger role in assisting development of their homeland. It may be worthwhile for Caribbean governments to take advantage of recent U.S. outsourcing; Caribbean nations can attract some of the most educated and skilled members of the Diaspora back to their home countries to support innovative business growth.

It is also important that Caribbean governments be able to better reach out to overseas communities by strengthening and overseeing their consular and embassy services. Diaspora organizations located in the U.S. must be strengthened, and the pool of highly skilled Caribbean-American nationals might develop a sense of duty about investing in the betterment of the image of the Caribbean region. There exists a reservoir of talent and ingenuity in the Diaspora which can be better used to promote the Caribbean as a place of both business and leisure. One example of this are sports players: it is estimated that close to six hundred baseball players from the Dominican Republic play in North American leagues, as well as a large number of track and field athletes and coaches from the English-speaking Caribbean islands. These two groups could use their wealth and social position to invest financially in the region and promote a positive image of the Caribbean.

Remittances are possibly the most important issue involving the Caribbean Diaspora. The Caribbean communities living in the U.S. collectively send billions of dollars home each year, directly influencing CARICOM economies. In 2006, remittances to Jamaica and Haiti totaled $1.7 billion and $1.65 billion, respectively. It is undeniable that remittances represent the most dominant factor in the economic relationship between the U.S. and the Caribbean, and along with a heavy stream of consumer goods exported to Caribbean nations by relatives living in the U.S., remittances account for the largest portion of the GDP in most Caribbean nations. Thus, the challenge in this sector is to translate these remittances into positive societal investments so that CARICOM populations can benefit from them as a whole.

The Big Picture
The strong tradition of democracy and respect for human rights in the Caribbean has long advanced a fruitful relationship with the U.S. The recent Conference on the Caribbean has successfully allowed CARICOM to deepen its relationship with the U.S. through the tackling of trade-related issues and the establishment of institutionalized dialogue. However, many challenges to the region still remain. CARICOM countries must seek out avenues in which the abundant resources and apparent potential can be translated into real benefits for Caribbean society. Certain issues, such as anti-narcotics enforcement and deportees, require intensive discourse and cooperation on both sides. Furthermore, questions such as HIV/AIDS, which require large amounts of financial assistance for a variety of treatment and prevention programs, can be assisted with help from outside countries, such as the U.S. In fact, some Caribbean nations are now benefiting from the Bush Administration’s $5 billion package to the developing region aimed at curbing the global HIV/Aids pandemic.

The Caribbean region is geopolitically strategic in terms of security, and cooperation with CARICOM is essential in combating organized crime, drug trafficking, and terrorism. In this respect, the Caribbean and the U.S. must be able to support and maintain healthy relations into the future. CARICOM is wise to take advantage of the opportunity of high-level meetings with the U.S. After all, the U.S. is the Caribbean’s closest developed neighbor, its most significant trading partner, and the home of the largest number of emigrants from the region.

With a population at barely 5 percent of that of the U.S., Caribbean integration vis á vis CSME will better prepare the CARICOM nations to find their niche in the global market; however, a good rapport with the region’s major global partners is necessary in the pursuit of overall Caribbean development goals. Conversely, one would hope that President Bush’s renewal of the CBI and the recent Conference on the Caribbean signifies a revitalization of the U.S.-Caribbean relationship that has been characteristically absent during his two terms in office. Considering the Bush Administration’s consistent preoccupation with other regions of the globe and America’s increasingly tattered image around the world, such a conclusion might be refreshing not only for otherwise fragile Caribbean economies but for a battered U.S. regime policy as well.

This analysis was prepared by COHA Research Associate Andrew Carmona
July 27th, 2007

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