Caribbean Trade Law and Development

Author: caribbeantradelaw

  • IMF trims global growth forecast to 3.2% in 2016

    Alicia Nicholls

    In the run up to its annual spring meetings in Washington DC  this week, the International Monetary Fund (IMF) in its World Economic Outlook released today, has cut its baseline projection for global growth  to 3.2% in 2016 and 3.5% in 2017, down from 3.4% and 3.6%, respectively, in its forecast in the January 2016 WEO Update Report. The title of its latest WEO Report “Too slow for too long” pretty much sums up the sluggish and disappointing pace of global growth post the global economic and financial recession and comes on the heels of the recently released World Trade Organisation’s report in which the WTO cut its forecast for global trade growth yet again.

    Noting that the global recovery has weakened further in the midst of turbulence in financial markets, the IMF report highlighted several factors which have hampered global growth including legacies from the global recession and the eurozone crisis, declines in potential growth, the impact of low oil and commodities prices (on oil and commodities exporting countries), currency fluctuations and geopolitical tensions which they assumed to remain elevated in 2016 given the situations in Russia, Ukraine and the Middle East. However, the IMF forecasts the modest eurozone recovery to continue in 2016/17.

    Emerging market and developing economies are expected to grow by 4.1% in 2016, compared to 1.9% projected output growth from advanced economies for the same period. While emerging and developing economies will continue to comprise the largest share of global growth in 2016, the IMF forecasts that growth  in these economies will be uneven and weaker than in the previous year as a result of a moderate slowdown in China and a weak outlook for non-oil commodities exporters owing to further softening in commodities prices.

    Not unrelated to the slowdown in global trade is the softer global investment demand, particularly in commodities-exporting economies due in part to China’s rebalancing and general uncertainty about global growth.

    Caribbean

    In regards to the Caribbean, the IMF forecasts real GDP growth of 3.5% (slightly above the global forecast) in 2016 and 3.6% in 2017. However, like the global situation, this growth will be uneven. The expected high flyers are as follows: Dominican Republic which is forecast to grow by 5.4% in 2016, Dominica at 4.9% and St. Kitts & Nevis at 4.7%. Barbados is projected to experience real GDP growth of over 2% in 2016, which is an improvement on the 0.5% growth in 2015 but still below both the global and regional average. Economic output in commodities exporting countries, Suriname and Trinidad & Tobago, is  forecast to contract by 2% and 1.1% respectively in 2016.

    Turning to the United States, the Caribbean region’s largest trade partner and one of the beacons of hope in an otherwise still subdued global economy, the IMF cut the United States’ growth forecast to 2.4% in 2016, down from it previous forecast of 2.6%. However, the IMF noted that stronger balance sheets, an improving housing market and better fiscal position would help offset any negative effects on US exports from appreciation of the US dollar, weaker manufacturing and tighter domestic financial conditions in some sectors in the US economy.

    In regards to the United Kingdom, a major tourist source market for many Caribbean countries, the IMF projects UK economic output to grow by 1.9% in 2016, down from 2.2% in 2015. The IMF listed Britain’s potential exit from the European Union ‘Brexit’ as one of the main risks to its outlook, noting that such a development would pose major challenges not just for the UK but the rest of Europe. Among the challenges highlighted would be disruption of trade and investment flows, while also increasing financial market volatility due to uncertainty during any post exit negotiations. Brexit is a development which the Region should monitor closely as any negative fall-out the UK’s exit from the EU has on the UK economy could affect countries like Barbados which depend heavily on the British market for tourist arrivals and real estate foreign direct investment inflows.

    IMF Recommendations

    Stressing that the “current diminished outlook and associated downside possibilities warrant an immediate response”, the IMF has made several recommendations, which are also applicable to the Caribbean. Though citing the importance of accommodative monetary policies, the IMF also stressed the immediate need for such policies to be supported by “other policies that directly boost demand and supply”, including infrastructure investment, public action to encourage of research and development activity, structural reforms in product and labour markets, tax reform and financial reforms.

    The full report may be viewed here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • The Movement of Wealth, Transparency, the Right to Privacy…and More

    Excellent interview by internationally renowned tax expert, Francoise Hendy, with IFC.

  • WTO predicts weak global trade growth in 2016

    WTO predicts weak global trade growth in 2016

    Alicia Nicholls

    “Trade is still registering positive growth, albeit at a disappointing rate.” This is according to the World Trade Organisation’s Director-General Roberto Azevedo in the WTO’s latest Trade Statistics and Outlook released this afternoon. In its latest report, the WTO has significantly revised its forecast of global trade growth in 2016 to 2.8%, down from its forecast of 3.9% in September 2015. This is disconcerting news for Caribbean countries  as weaker global demand also impacts demand for Caribbean exports.

    2015 performance

    According to the WTO, the projected expansion of global trade at 2.8% in 2016 would be same rate at which global trade grew in 2015. In what was described as a tumultuous year for global trade on account of weak global demand, 2015 saw trade declines in developing and developed countries in the second quarter of 2015 and a rebound in the final half of the year. South America saw the lowest growth in imports in 2015 as Brazil’s recession dampened demand for imports.

    The WTO did not provide any data for the Caribbean’s 2015 performance in its report. However, recently published data from the Barbados Statistical Service showed, for example, that though Barbados’ total merchandise exports from January-December 2015 increased year on year by $17.1 million or 1.8%  over 2014,  this export growth was limited to a robust 16.6% increase in re-exports whilst domestic merchandise exports actually fell by 8.8%.

    2016 forecast

    Though projected trade growth remains positive, WTO economists have noted that the rate of global trade growth remains below the average global trade growth rate of 5% since 1990. This year’s forecast would also make it five consecutive years that global trade would have grown at almost the same rate as global GDP, as opposed to twice as fast. The report also notes that despite the growth in trade volumes, the dollar value of trade fell 13% in 2015  due to falling commodities prices and exchange rate volatility.

    According to the WTO’s Report, Asia will lead global export growth in 2016 at 3.4% growth, followed by North America and Europe, which are both estimated to see a 3.1% increase in their exports. For South and Central America, Africa, the Commonwealth of Independent States and the Middle East, the picture is not as rosy, with imports expected to contract (albeit lower) due to low oil and commodities prices. WTO economists predict that while exports from developed countries are expected to grow around the same rate (2.9% in developed countries and 2.8% in developing), developed economies imports are projected to grow faster (at 3.3%) than developing countries’ imports (at 1.8%) in 2016.

    Noting that “risks to the trade forecasts remain tilted to the downside”, the WTO highlighted the slowdown in the Chinese economy, the worsening volatility in financial markets, exposure of countries with high levels of foreign indebtedness to sharp exchange rate movements and declining business and consumer confidence in developed countries which could lead to slower GDP growth in the EU and US in 2016.

    At the same time, the WTO has also suggested that more accommodative monetary policy of the European Central Bank could promote growth in the Euro area and encourage demand for goods and services. The WTO also highlighted the threat of “creeping protectionism” due to the growth in trade restrictive measures. The good news is that global trade growth is expected to pick up in 2017 to 3.6%.

    These are developments which the Caribbean should continue to monitor closely, particularly the developments in the US and EU, our major trading partners, as well as China which has become a leading development partner for the region. The drop in oil prices has negatively affected oil exports from Trinidad & Tobago and its economy is currently in recession. Commodities exporter Suriname has also faced hard times due to the low commodities prices.

    The full press release may be accessed here

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • Inaugural Africa Regional Integration Index Launched

    Alicia Nicholls

    “ The Vision of the African Union is to
    become an integrated, prosperous and
    peaceful Africa, driven by its own citizens
    and representing a dynamic force in the
    global arena.”
    African Union Agenda 2063

    In a not insignificant milestone in the thrust towards a united African continent, the African Union Commission, along with the African Development Bank (AfDB),and the United Nations Economic Commission for Africa (UNECA),  launched the inaugural Africa Regional Integration Index  last Sunday in Addis Ababa, Ethiopia during Africa Development Week.

    Recognising that integration is key for securing prosperity and development for the continent’s peoples and promoting economic growth, the African Union has made it no secret that it plans to deepen the continent’s integration imperative, with plans for a continental free trade area by 2017. The African Union’s Agenda 2063 “sets out the vision for Africa’s integration path over the next 50 years” and is complemented by the Regional Integration Policy and Strategy (2014-2023) developed by the African Development Bank Group.

    However, significant data gaps on the current levels of integration and their impact on countries within the continent exist. The inaugural African Regional Integration Index 2016 aims to remedy this lacuna by providing a monitoring and evaluation mechanism, with the concomitant aim of facilitating evidence-based regional policy making.

    The current report focuses on the member countries of the 8 regional economic communities (RECs) recognised by the African Union: Community of Sahel–Saharan States (CEN–SAD),  Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC), Economic Community of Central African States (ECCAS), Economic Community of West African States (ECOWAS), Intergovernmental Authority on Development (IGAD), Southern African Development Community (SADC) and Arab Maghreb Union (UMA).

    The analysis is based on five dimensions (regional infrastructure, trade integration, financial and macroeconomic integration, productive integration and free movement of people) and 16 indicators.

    Findings

    The report shows that the EAC (consisting of Kenya, Rwanda, Burundi, Tanzania, Uganda) has the highest level of integration among the RECs and “has higher than average scores
    across each Dimension of Regional integration, except for financial and macroeconomic integration”. Overall, it found that trade integration had the highest scores while financial and macroeconomic integration had the lowest. Another interesting finding was that the biggest economies, such as Nigeria, Egypt and Algeria, were not among the best integrated.

    In his foreword to the report, Deputy Chairperson of the African Union Commission, Erastus Mwencha,noted that

    Findings show that while progress is being made, with 28 high
    performing countries across the eight Regional Economic Communities, average
    integration scores stand at below half of the scale. It is time for Africa to build on this
    and drive regional integration ever further forward.

    African integration still has a long way to go and many of the challenges facing Africa in its integration efforts are not dissimilar to those we share in the Caribbean Community (CARICOM). For instance, similar to CARICOM, Africa countries’ major trading partners are not each other but are external. Intra-African trade currently constitutes around 12% of total African trade, lagging behind other regional groupings. A myriad of logistical and other challenges have served as barriers to intra-African trade and a continental FTA would be a solution to removing many of these barriers.

    I believe this index initiative is a laudable step, even more so that the results have been made available to the public. To know where one needs to go, one needs to know where one stands and the empirical data contained in this stocktaking report are an important first step in both measuring and monitoring the pace and impact of integration on the countries included and should serve as a basis on which reforms and policy decisions concerning the region can be made. It is something which we in the Caribbean Community (CARICOM), whose  experimentation with integration predates Africa’s, should consider emulating as we seek to reform our own integration process.

    The full report may be accessed here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.