Caribbean Trade Law and Development

Month: February 2025

  • CARICOM’s Trade Deals: Are They Working for Us?

    CARICOM’s Trade Deals: Are They Working for Us?

    It is a provocative question but one which came to mind (not for the first time) as I read that Caribbean Community (CARICOM) leaders have launched a ‘comprehensive review’ of the region’s trading relationship with the United States of America (US). This was one of the major announcements from the recently concluded 48th Regular Meeting of Caribbean Community (CARICOM) Heads of Government in Barbados February 19-21, 2025 under the theme ‘Strength in Unity: Forging Caribbean Resilience, Inclusive Growth and Sustainable Development’. A necessary and timely move given the significant shifts in US trade policy, it should also serve as a wake-up call for CARICOM to adopt a culture of regular reviews of all its trade agreements and arrangements, with the findings not just for internal use but for all the region’s stakeholders to access.

    CARICOM countries are signatories to a number of trade arrangements and agreements with external partners, mostly as part of CARICOM. However, notably Trinidad & Tobago and Belize for example, have negotiated and signed a few partial scope agreements with external partners on their own. Most CARICOM countries enjoy duty-free access to the US market for their goods under the Caribbean Basin Initiative and its constituent legislation, such as the Caribbean Basin Economic Recovery Act (CBERA) and the Caribbean Basin Trade Preferences Act (CBTPA). CBI is a unilateral arrangement, that is, it is a result of legislation passed by the US Congress and not a negotiated trade agreement. It is also non-reciprocal in that beneficiary countries are not required to extend the same treatment to US goods. The extent to which this will still be the case is something I have discussed elsewhere.

    We also have a similar arrangement with Canada under CARIBCAN. This, like the CBERA, is subject to periodic World Trade Organisation (WTO) waivers. CARICOM countries also have trade agreements with the European Union (EU) and the United Kingdom (UK) through CARIFORUM, as well as with Colombia, Costa Rica, Cuba, Dominican Republic and Venezuela. These latter are mostly partial scope agreements. At one point the region was negotiating a trade agreement with Canada but these negotiations were eventually shelved.

    Unfortunately, many of CARICOM’s trade agreements have remained largely unexamined in terms of their development impact. At least, if such reviews have been conducted, this information has not been made publicly available for the most part. While the US conducts biennial reviews of the Caribbean Basin Economic Recovery Act (CBERA) as is going on right now, and the European Union regularly assesses its trade agreements, CARICOM does not appear to have institutionalised a similar approach. Right now, the most comprehensive publicly available information on the operation of our agreements is published in reviews by our partners and not by us. This must change.

    However, one of the most comprehensive reviews of CARICOM’s trade agreements, conducted by two renowned regional economists McClean and Khadan (2015), found that the region’s trade agreements are generally underutilized, leading to poor intra-regional and extra-regional trade performance. The reasons range from a lack of awareness among businesses to challenges in meeting market entry requirements and supply-side constraints.  

    Regular reviews of its trade arrangements and agreements would allow CARICOM to have evidence-based interventions to improve our trade performance and to assess the real development impact of these agreements. Have they led to increased exports and increased export diversification? Have they strengthened our industries and led to job creation? What are the major challenges our exporters face in each of these markets? How can we better leverage the diaspora in these markets? Are our current agreements still fit for purpose given the new sectors we are exploring? Without this information, it is impossible to determine whether these agreements are truly serving the region’s economic interests and what, if any, future trade agreements we should seek to conclude. Moreover, these assessments should be data-driven. Addressing the chronic issue of data scarcity in the Caribbean is essential for making informed decisions that strengthen our trade policy. To achieve this, the private sector and academia must play a key role in the review process. Since businesses are the ones actively engaged in trade, their input—whether through surveys or interviews—is vital for conducting comprehensive empirically-sound evaluations. Meanwhile, academia offers a wealth of scholarly research on the region’s trade performance, providing valuable insights that can inform policy decisions.

    Beyond merely conducting reviews, CARICOM must also ensure that the findings are made publicly available. Transparency in trade policymaking is crucial for fostering public trust and allowing businesses, academia and civil society to engage meaningfully in shaping evidence-based trade policy that redounds to regional development. Citizens and the private sector must be able to see how these agreements impact their livelihoods. While the hard-working team at CARICOM has increased the visibility of their work, too often it still feels like what happens at the regional level is far-removed from the every day citizen.

    I warmly applaud the decision to review the CARICOM-US trading relationship, but this should not be an isolated exercise. The global trade landscape is rapidly changing, and CARICOM cannot afford to be reactive. Instead, this must be the start of a broader initiative to systematically monitor and evaluate all of CARICOM’s trading arrangements. Only through such an approach can CARICOM ensure that its trade agreements are truly working in the best interest of the region’s economies and people and contributing to resilience, inclusive growth and sustainable development.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade policy specialist and founder of the Caribbean Trade Law and Development Blog: www.caribbeantradelaw.com.

  • US Tariff Wars: What possible impact for the Caribbean?

    US Tariff Wars: What possible impact for the Caribbean?

    Alicia Nicholls

    What a time to be an international trade analyst! That was my first thought after reading the latest memorandum dated February 1, 2025, announcing sweeping tariffs on America’s three biggest trading partners—Canada, Mexico, and China. Well-known for using tariffs as a tool for geopolitical ends, President Donald J. Trump is justifying these latest measures as part of a national emergency he declared against illegal immigration and drug trafficking under the International Emergency Economic Powers Act (IEEPA). This Act, signed in 1977, allows the President broad powers to regulate commerce after declaring a national emergency.

    These aggressive trade moves, the latest in Trump’s America First Trade Policy 2.0, are in fulfillment of promises he made on the campaign trail and expand on his first-term tariffs on China (which President Biden largely maintained). In his first term he had also announced 25% tariffs on steel imports and 10% on aluminum imports from the European Union (EU), Canada and Mexico. Canada and Mexico are not just the US’ largest trading partners, but are its treaty partners under the U.S.-Mexico-Canada Agreement (USMCA), the agreement that replaced the North America Free Trade Agreement (NAFTA) during Trump’s first term and which is due for review in July 2026 under its review clause.

    What do these new tariffs involve?

    Yesterday, President Trump announced a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China, and has also vowed to increase these tariffs should these countries retaliate.

    This move will of course hurt those countries, affecting manufacturers and also jobs. But Trade 101 is that tariffs also mainly hurt consumers in the country imposing them – the US in this case! Billions of dollars in trade occurs among USMCA countries each year, with tightly interwoven supply chains, especially in the automobile, agriculture, textiles and other industries. Indeed, U.S. goods and services trade with USMCA totaled an estimated $1.8 trillion in 2022, according to the Office of the US Trade Representative (USTR). This means that many of the goods on American shelves come from these countries or were made with inputs sourced from these countries. Therefore, American manufacturers will pay higher costs for raw materials and intermediate goods sourced from these countries and higher business costs which they will likely pass on to consumers. The end result is that American shoppers and businesses will pay higher prices for everyday goods, an ironic state of affairs given that reducing these costs was said to be one of the reasons the American public voted for President Trump.

    For their part, both Canada and Mexico have announced retaliatory measures of their own yesterday. Outgoing Canadian Prime Minister, Justin Trudeau, announced in a press conference last evening a 25% tariff on 155 billion (Canadian dollars) of US goods, while Mexican President Claudia Sheinbaum indicated that Mexico will be implementing retaliatory measures as well.

    Trump has also again threatened to hit the EU with tariffs, and Colombia following a row over Colombia’s insistence that its deportees be returned with dignity. Trade wars among the world’s major powers threaten global economic stability, as the International Monetary Fund (IMF) warned in October last year, even before Donald Trump was re-elected but in the amidst of tariff threats he made on the campaign trail.

    They’ll Hit Caribbean Consumers too

    Caribbean manufacturers, which depend on US inputs, will likely face higher prices and business costs, while we end consumers might spend more for American-made food, cars, electronics and the like. However, there are ways in which we could seek to combat this to the best that we can. Caribbean manufacturers should, to the extent possible, continue to explore alternative suppliers to mitigate against these possible price hikes. This state of affairs also makes the case for more intra-Caribbean sourcing. After all, instead of sourcing so much of our fresh fruit from Florida, we could be sourcing these from within the region more.

    Final Thoughts

    Trump’s tariffs may be aimed at Canada, Mexico, and China, but the ripple effects will be felt far beyond in the possible form of higher prices and business costs, supply chain disruptions and economic uncertainty. Our jobs as trade analysts have never been more important as we help the Caribbean businesses and governments we advise to stay informed, and ready to adapt in an increasingly unpredictable global trade landscape.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is an international trade specialist and the founder of the Caribbean Trade Law Blog. Learn more about her work at http://www.caribbeantradelaw.com.