On January 28, 2022, the Caribbean Community (CARICOM) and the Republic of Colombia successfully concluded their Second Ministerial Summit. Trade and investment, especially in the context of the existing CARICOM-Colombia partial scope agreement, was among the areas highlighted in the summit’s outcome document, the Declaration of Barranquilla. This just concluded summit provides an opportune moment for exploring the prospects for deepening CARICOM-Colombia trade in a context where CARICOM Member States have prioritised export diversification as part of their post-COVID-19 economic recovery efforts.
CARICOM comprises 15 Member States (14 independent countries and 1 British Overseas Territory) with a combined population of about 16 million. Despite linguistic and cultural differences, Colombia presents an attractive market to CARICOM for at least five main reasons. First, it is the fourth largest economy in Latin America with a GDP of US$271.3 in 2020. Second, while there are income disparities, Colombia is one of the most prosperous economies in Latin America and became a member of Organisation for Economic Cooperation and Development in April 2020. Third, Colombia represents a market of over 50 million people and is a member of the Andean Community, a free trade area comprising Bolivia, Peru and Ecuador. Fourth, ECLAC estimates GDP growth of 9.5% in Colombia in 2021, following a contraction of 6.8% in 2020. Colombia is ranked by the World Bank as an Upper Middle Income Economy. Fifth, Colombia is one of the countries with which CARICOM has a trade agreement in place.
Existing CARICOM-Colombia trade
According to International Trade Centre (ITC) Trade Map data, Colombia enjoys a trade surplus with CARICOM, meaning that it exports more to CARICOM than it imports. Colombia exported US$596 million in goods from CARICOM in 2020, while importing $128 million from the bloc in that same year, resulting in a balance of trade $468 million in favour of Colombia. However, trade between Colombia and CARICOM has dropped significantly from 2019 figures when Columbia exported US$1,289 million to, and imported US$142 million in goods from the region.
Colombia and CARICOM’s trade with each other only account for a small percentage of their total trade with the world respectively and has declined sharply since 2020. The top goods traded between CARICOM and Colombia were concentrated, falling mainly under minerals/fuels, fertilisers, organic chemicals, sugars and confectionary and electrical machinery.
Anecdotally, it is known that some limited services trade exists between CARICOM and Colombia, such as educational services and tourism/travel services for example. However, as data on services trade between CARICOM and Colombia were difficult to obtain, the focus will be on existing goods trade.
There is, therefore, scope for not only expanding existing levels of trade between CARICOM and Colombia but also diversifying the existing products traded, including expanding trade in services, such as tourism/travel services, cultural/creative services, professional services, education and energy services.
CARICOM-Colombia Trading Framework
CARICOM and Colombia signed the Agreement on Trade, Economic and Technical Cooperation (referred to here as the CARICOM-Colombia partial scope agreement) on July 24, 1994 and which entered into force among 12 out of the 15 CARICOM Member States.
The agreement takes into account the different levels of development between CARICOM Member States and Colombia. As such, the agreement initially provided for non-reciprocal access to the Colombian market. A Protocol amending the agreement in 1998 allowed for reciprocity. This Protocol outlines the list of goods eligible for duty-free trade. CARICOM Member States which are classified as Less Developed Countries for the purposes of the Revised Treaty of Chaguaramas are not required to give preferential access to Colombia goods. These are the OECS countries and Belize.
To this author’s knowledge, there are no bilateral investment treaties between Colombia and CARICOM countries and although there had been mention of an intention by Barbados under the previous government to negotiate a tax treaty with Colombia, no tax treaty exists between Colombia or any CARICOM Member State. It is known that over the years there have been some bilateral trade missions that have taken place between Colombia and some Caribbean countries.
It is recognized that the Ministerial Summit is a high-level forum where higher level issues and broad areas of commitments will be discussed. Trade and investment were among the several areas for cooperation explicitly referred to in the Declaration of Barranquilla. Indeed, the Declaration recognized the 28th anniversary of the establishment of official relations between Colombia and CARICOM through the signing of the CARICOM-Colombia PSA. It also noted that the agreement “should be an instrument for economic and commercial reactivation. They also “reaffirm the importance of an active agenda, that allows the current commercial Agreement to be adapted to new global trends and incorporate new disciplines and products to encourage greater participation by companies in foreign trade, allowing for the comprehensive and further deepening of economic and commercial relations”. They invited the Bahamas, Haiti and Suriname, which are not currently signed on to the agreement, to explore their incorporation into the PSA.
Of particular interest was the statement in the Declaration of Barranquilla where it highlighted “the interest of some countries in creating bilateral agreements with Colombia on trade and investment matters and, in line with the above, urge these countries to establish working groups to explore such bilateral trade approaches.” CARICOM countries would have to consider if it is in their interests to pursue these agreements on a bilateral basis, as opposed to continuing to build on and expand the existing CARICOM-Colombia PSA.
However, it is firms which trade and not countries. Both CARICOM Member States and Colombia will need to assess what are the levels of interest among CARICOM and Colombia businesses in each other’s markets, the level of awareness of the CARICOM-Colombia PSA among the respective business communities, the current barriers faced and what mechanisms governments could put in place to help businesses overcome these barriers. A good mechanism for doing this is the CARICOM-Colombia Joint Council on Trade, Economic and Business Cooperation established by the CARICOM-Colombia PSA and which is responsible for the administration of this Agreement and consisting of representatives of Colombia and CARICOM. It would also be interesting to know whether the CARICOM-Colombia Business Council as provided for in Article 20 of the PSA has met over the years and what has it accomplished so far.
In summary, Colombia presents an interesting and promising market for CARICOM countries. This will be a space to watch as CARICOM countries intensify their export diversification efforts.
Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development specialist and founder of the Caribbean Trade Law Blog www.caribbeantradelaw.com.