Category Archives: CARICOM

The Golding Report Adopted by Jamaica Government: What Next?

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Alicia Nicholls

Last week the Report of the Commission to Review Jamaica’s Relations within the CARICOM and CARIFORUM Frameworks, commonly referred to as the “Golding Report” after the Commission’s distinguished Chairman, the Honourable Bruce Golding, former Prime Minister of Jamaica, was debated and adopted by the Jamaica House of Representatives. We now finally have some idea of what is the official position by the Government of Jamaica on the report which was commissioned by the Most Honourable, Andrew Holness, Prime Minister of Jamaica and completed nine months later in March 2017.

Initial fears that the report would serve as the basis for a Jexit (Jamaica’s exit from the CARICOM), akin to the country’s withdrawal from the West Indies Federation in 1961, have been allayed somewhat. Official statements from the Jamaican Government do not evince an intention to leave CARICOM and the Government appears convinced, at least for now, that the CARICOM Single Market and Economy (CSME) is the best raft for navigating increasingly uncertain global economic and policy waters.

The 51-page report sought to examine Jamaica’s relations within CARICOM and CARIFORUM, but has presented another opportunity for introspection by CARICOM leaders and other stakeholders on what has been achieved, where we have failed and what is needed to move forward. The fact that consultations were held with persons not just from Jamaica, but also from across the wider CARICOM shows that the Report was not solely insular in focus.

The Holness Government has indicated that it would not push for the five-year deadline for full CSME implementation recommended by the Report, calling the timeline “unrealistic”. Instead, Mr. Holness stated that the Government would “get commitments from the various heads for the full and effective implementation of the Common Market, which are things that we can do within the five years.”

The Holness Government has also thrown its support behind a review of the CARICOM contribution scale of fees payable to the Secretariat and other bodies. Jamaica is currently the second largest contributor (23.15%) and is working to reduce its arrears of just under $500 million. Jamaica is not the only Member State to owe arrears, but the lack of information on the level of arrears owed by Member States was one of the transparency issues raised in the report.

In his contribution to the debate on the Report in the Lower House, Mr. Holness further noted that some of the report’s thirty-three recommendations were more immediately implementable than others, and there was need for some flexibility. The Leader of the Opposition, PNP Leader, Dr. Peter Phillips, also supported the report.

Disappointingly, there has been no public reaction by CARICOM leaders to the report so far, aside from the comments made by Prime Minister of St. Vincent & the Grenadines, Dr. the Honourable Ralph Gonsalves. No reference was made to the Report in the Communique from the 29th Intersessional Meeting, but the report is likely to be one of the agenda items at the upcoming 39th Regular Meeting of the Conference of the Heads of Government of the Caribbean Community (CARICOM) carded for July 4-6 in Jamaica.

At the two-day Stakeholder Consultation on the CARICOM Single Market and Economy (CSME) held at the Ramada Princess Hotel in Georgetown, Guyana June 8-9, the Honourable Bruce Golding, who was one of the presenters, noted that the CARICOM Secretariat was not to blame for the implementation deficit.

The Jamaica Government should be lauded for this effort. The Report, which has been the most comprehensive report on CARICOM since the Ramphal Commission’s Time for Action Report of 1992, also addresses issues such as transparency, financing and accountability. The report’s recommendations, most of which are not new, are however, far-reaching. Among the more novel recommendations are the proposed establishment of an Office of an Auditor-General, a Central Dispute Settlement Body, and greater involvement of the private sector.

More could have been said in the Report about ensuring buy-in by future generations by increasing youth participation and engagement in the regional integration process, such as through the expansion of the CARICOM Young Ambassadors Programme, the establishment of a CARICOM Young Professionals Programme at the CARICOM Secretariat or across its institutions, or at least providing greater opportunities for young persons to see first hand the work of the Secretariat through internships.

Like the many reports and studies before it, the Golding Report presents an important opportunity for conversation and dialogue, but talk must be parlayed to action. Jamaica will assume chairmanship of the Conference of Heads of Government under its rotational system from July 1-December 31, 2018, and Mr. Holness will have an opportunity within his six month chairmanship to hopefully influence how much attention is paid to the report and its recommendations, and what should be the next steps.

It is hoped that the Golding Report will not suffer the fate that so many previous studies on CARICOM suffered, that is, being relegated to “File 13”. The report should provoke serious introspection about whether the CSME is really what we want. What concrete steps are we willing to take to implement the commitments made under the Revised Treaty of Chaguaramas?

Leaders of CARICOM countries must not just be willing to make commitments but be champions for their implementation domestically. The election result in Barbados, which under the quasi-cabinet has lead for the Single Market (including Monetary Union), presents some cause for hope. The new Prime Minister, the Honourable Mia Amor Mottley, has taken a more pro-integration stance than seen in the previous administration, and one of her first acts was to remove the visa requirement for citizens from Haiti, which is not yet a CSME participatory but is a CARICOM Member State.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international 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.

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CARICOM Heads to meet this week for 29th Intersessional HoG Meeting

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Alicia Nicholls

Heads of Government of the Caribbean Community (CARICOM) will meet this week, February 26 & 27, 2018, in Port au Prince, Haiti for their 29th Intersessional Meeting. The meeting will be chaired by current chairman of the Conference of the Heads of Government, Haitian President, His Excellency Jovenel Moise.

Chairmanship of the Conference of Heads of Government rotates every six months. Haiti, which became a full member of CARICOM in 2002, will hold chairmanship from January 1st to June 30th. Jamaica’s Prime Minister Andrew Holness will assume chairmanship on July 1st.

Major agenda items for the intersessional meeting include building climate resilience, crime and violence, the impact on CARICOM Member States of blacklisting actions and de-risking actions by global banks.

Additionally, according to the official press release, the meeting “will seek to advance plans to further strengthen key elements of the CARICOM Single Market and Economy (CSME)  including those related to travel and trade”.

CARICOM Secretary-General Ambassador Irwin LaRocque; the immediate-past CARICOM Chairman, Prime Minister Dr. Keith Mitchell of Grenada and current Chairman, President Moise of Haiti, will make remarks at the Opening Ceremony carded for February 26 and which will be live streamed on CARICOM’s website.

In anticipation of the meeting, Haiti’s Ministry of Trade held a Public Forum last Friday to discuss “Integration of Haiti in CARICOM: Challenges and Opportunities”.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international 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.

 

Golding Report on CARICOM-Jamaica Relations Tabled in Jamaican Parliament

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Alicia Nicholls

The long-awaited report of the CARICOM Review Commission chaired by former Jamaican Prime Minister, Bruce Golding, has been tabled in the Jamaica Parliament by Prime Minister, the Most Excellent Andrew Holness, O.N. The CARICOM Review Commission, which was commissioned by Mr. Holness in July 2016 to review Jamaica’s relations within the Caribbean Community (CARICOM) and CARIFORUM (CARICOM plus the Dominican Republic) frameworks,  submitted its report in April 2017.

For those who may have feared that the Review was intended to pave the way towards a Jamxit (Jamaica exit from CARICOM), these have been allayed to some extent. In giving its support for regional integration, the Golding Commission noted that “the value of regional integration…is as relevant and useful and perhaps, even more urgent today than it was at [CARICOM’s] inception”. However, it lamented the limited progress on many of the commitments signed on to by CARICOM Member States.

In this vein, the Commission made thirty-three timely, pertinent and wide-ranging proposals aimed at addressing the structural and organisational deficiencies in CARICOM. Many of the Commission’s recommendations include things which most CARICOM Member States have already committed to under the CARICOM Single Market and Economy but have yet to be fully realised, while others are reminiscent of those made by the Ramphal Commission in its A Time For Action Report in 1992.  Other recommendations were more novel and include instituting sanctions for wilful non-compliance with commitments made, as well as the establishment of a Central Dispute Settlement Body similar to that of the World Trade Organisation (WTO) which would offer non-judicial options for settlement of disputes.

The Commission also recommended that Jamaica establish closer ties with Northern Caribbean countries, namely the Dominican Republic and Cuba, including in the negotiation of trade agreements with third States.

To address CARICOM’s implementation deficit, the Golding Commission has called for time-bound commitments and public progress reports on  Member States’ advancement towards meeting the various commitments. It also called for greater engagement of the private sector and the people of CARICOM.

Failing commitment by Member States to make the commitments outlined in the report, the Commission recommended that Jamaica should withdraw from the CSME, but remain a member of CARICOM.

The full report may be viewed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international 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.

 

 

Post-Brexit UK-Caribbean Trading Relations: What are the options?

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Alicia Nicholls

With the United Kingdom’s Prime Minister Theresa May due to formally begin the Brexit process by making the Article 50 notification this Wednesday (March 29), it is worth considering what are the possible options for future Caribbean trading relations with post-Brexit “Global Britain”. Moreover, should one of the options be participation in a Commonwealth-wide free trade agreement (FTA)?

UK-CARICOM Trading Relations

The UK and the Commonwealth Caribbean have a shared and close relationship which goes beyond historical, cultural and diplomatic ties. While Commonwealth Caribbean countries’ trade with the United States dwarfs trade with the UK, the latter remains the region’s largest trading partner within Europe. Caribbean Community (CARICOM) Member States, as part of the CARIFORUM (CARICOM plus the Dominican Republic), enjoy preferential access to the UK market under the CARIFORUM-EU Economic Partnership Agreement (EPA) signed in October 2008.

As the EU agreements to which the UK is currently part will cease to apply to the UK once it has completely withdrawn from the EU, here is what CARICOM/CARIFORUM will losing preferential access to (a) the world’s fifth largest economy (or sixth largest according to some reports), (b) a market of over 64 million people which includes a Caribbean diaspora population whose potential demand for Caribbean goods and services and as a source of diaspora investment still remains largely under-exploited, and (c) a trading partner with a shared language, shared culture and shared values and a common law legal system which brings a level of assurance and certainty for cross-border commerce.

Merchandise trade aside, the UK is an important source of tourist arrivals for many Caribbean countries, while in Barbados, for example, British high net worth individuals (HNWIs) are the largest buyers of luxury real estate on the island, making the UK the largest source of real estate foreign direct investment (FDI) into the island.

Whilst the UK cannot formally commence negotiations with third States until it has left the EU, the May Government has reportedly already begun preliminary informal trade talks with some States. Indeed, several countries around the world, including Commonwealth states like Australia, Canada and India have lined up in hopes of being among the first negotiate post-Brexit trade agreements with the UK. Here in the Caribbean, the Dominican Republic has also signalled its interest in a post-Brexit UK-DR FTA as the UK is apparently the Dominican Republic’s fastest growing market for Dominican exports according to the statement made by the DR’s Ambassador to the UK.

To this point, it is heartening to note that Prime Minister May has bucked the protectionist trend and intends to expand the UK’s trading relations around the world under her “Global Britain” banner. Indeed, Mrs. May argued that one of the compelling reasons for Brexit was so Britain would be free to expand its trade with the rest of the world on its own terms. The door is clearly open to the region for dialogue.

Possible Options for post-Brexit UK-CARICOM/CARIFORUM Relations

As I see it, the possible options for post-Brexit UK-CARICOM/CARIFORUM trading relations are as follows:

  1. Interim Arrangement which preserves EPA-level concessions before an FTA can be negotiated
  2. Negotiation of a UK-CARICOM or UK-CARIFORUM FTA
  3. Commonwealth FTA
  4. Most Favoured Nation (trading under WTO rules)

The Commonwealth Advantage?

This discussion is even more interesting in light of what is clearly a Commonwealth pivot by the UK government as it seeks to map its future trade policy and relations. Most CARICOM countries are member states of the 52-member Commonwealth of Nations, an intergovernmental organisation which consists primarily of former British colonies and current dependencies spanning Africa, Asia, the Americas, Europe and the Pacific.

The Commonwealth is not a trade bloc. However, despite the absence of a Commonwealth FTA, intra-Commonwealth trade and investment flows are substantial and growing. According to a 2015 report released by the Commonwealth, not only is “trade between Commonwealth members on average 20 per cent higher and trade costs are 19 per cent lower compared with in trading between other partners”, but intra-Commonwealth trade is expected to reach 1 trillion by 2020. The Secretariat’s International Trade Policy section also publishes very timely  and insightful research on trade matters. A good example is this brief which was part of the Meeting documents.

However, despite this, Commonwealth Trade Ministers have not met frequently. This is why the Inaugural Commonwealth Trade Ministers Meeting two weeks ago was such a momentous event.  From all reports the meeting was not only well-attended but the ministers discussed prospects for deepening intra-Commonwealth trade and investment ties using the “Commonwealth Advantage”. Inter alia, Ministers directed the Secretariat to “develop pragmatic and practical options to increase Commonwealth trade and investment”, to regularise and institutionalise Trade Minister meetings, and to cooperate on the implementation of the WTO’s Trade Facilitation Agreement.

The prospect of a Commonwealth-wide FTA has been floated informally, although it does not yet appear to be a firm policy proposal. The arguments for a Commonwealth FTA include a ready market of over 2.4 billion people yoked by a shared language and history, common principles and values, respect for the rule of law, the common law legal system, all of which form part of the “Commonwealth Advantage”. Additionally, it is argued by proponents of a pan-Commonwealth FTA that the potential for even greater intra-Commonwealth trade and investment should be harnessed as a buttress against rising protectionism and slowing global trade which are potentially harmful for Commonwealth developing States.

To be sure, the Commonwealth brings important value for the Caribbean. It has, for example, developed a strong small states agenda, which is not surprising given that thirty-one of its member States are small States. As an illustration, the Commonwealth launched the Commonwealth Small States Trade Finance Facility in 2015. Moreover, the fact that the current Secretary-General, Dame Patricia Scotland QC, is a daughter of the soil is also an advantage for the region.

There is also, of course, merit to fomenting closer commercial and political ties with fellow Commonwealth countries as some of the more developed Commonwealth countries are part of influential fora like the Group of 20 (G20), Organisation for Economic Cooperation and Development (OECD) and the Financial Action Taskforce (FATF) where Commonwealth Caribbean countries are not represented.  This is doubly important in light of the on-going slowdown in global trade flows, an apparent retreat from multilateralism and rising protectionism. Moreover, Commonwealth Caribbean countries have been seeking to diversify their trading partners, including source markets for tourism, foreign investment and international business and deepening ties with the rest of the Commonwealth could be useful.

Nonetheless, while I have not done any econometric analysis on what would be the possible economic and welfare benefits of any Commonwealth FTA for CARICOM/CARIFORUM, given the length of time it may take to negotiate a Commonwealth FTA, the varying levels of development, the differences in economic profile, and the diverse offensive and defensive interests of the various Commonwealth Member States which will need to be managed, the negotiation of a Commonwealth-wide FTA will not be an easy task. Therefore, I submit that the Caribbean region’s interests will, at least in the short to medium term, be better served by either negotiating an interim arrangement  with the UK which preserves EPA-level concessions until an FTA can be negotiated or negotiating an FTA with the UK straight off the bat.

So what should a possible UK-CARICOM/CARIFORUM take into account?

CARICOM countries have limited experience in negotiating FTAs with developed countries. So far the EPA is the region’s only completed FTA with a developed partner, as the Canada-CARICOM negotiations are currently in abeyance. Perhaps, fortuitously, the UK has even less experience with negotiating trade agreements, as trade negotiations have hitherto been handled exclusively by the European Commission, pursuant to the EU’s common commercial policy. So both parties, despite the power asymmetry, will be on a learning curve.

Commitments made under any prospective UK-CARICOM/CARIFORUM free trade agreement should take into account the sustainable development and economic growth needs and interests of both parties in a mutually beneficial way, while also taking into account differential levels of development among CARICOM/CARIFORUM countries.

CARICOM/CARIFORUM countries will also want at least the same level of concessions for their service suppliers, particularly in Mode 4 (Presence of Natural Persons) which has been the mode of supply which is the least liberalised. Additionally, as capital-importing States, CARICOM/CARIFORUM countries will likely wish to negotiate an investment chapter which protects, promotes and liberalises investment between CARICOM/CARIFORUM and the UK for the mutual development of both parties.

Of course, stakeholder consultations with not just the private sector but also civil society and citizens at large should continue to inform the region’s negotiating positions, including whether there is actually the need for an UK-CARICOM FTA and what are the region’s offensive and defensive interests.

FTA negotiations can take several years. The EPA negotiations, for instance, had been launched in April 2004 and the Agreement was not signed until October 2008. Therefore, unless a WTO-compatible interim arrangement could be negotiated whereby the UK agrees to continue EPA-type concessions to the region until a UK-CARICOM/CARIFORUM FTA is negotiated, it is possible that UK-CARICOM/CARIFORUM trade relations may revert to MFN conditions. Even so, while the UK is also a WTO member in its own right, its schedules are part of the EU’s which means the country will have to work out its own tariff schedules under the WTO post-Brexit. Additionally, WTO MFN conditions will not afford CARIFORUM countries the level of market access, especially for their service suppliers in the UK market, that they currently enjoy under the EPA.

Although the argument is often rightly made that the Caribbean region will be at the low rung of the negotiation priority ladder, I believe that the region cannot sit idly by as the clock begins ticking come Wednesday. While other major countries have begun to erect barriers, the May Government’s “Global Britain” outlook is a welcomed open door for the region. We should at least signal to the May government our interest in beginning talks on cementing a mutually beneficial UK-CARICOM/CARIFORUM trading arrangement post-Brexit, and take steps to do the ground work for such an eventuality.

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.

De-Risking discussed at CARICOM 28th Inter-sessional Meeting

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Alicia Nicholls

The issue of de-risking by global banks, manifested most prominently by the restriction or withdrawal of correspondent banking relationships with mainly indigenous banks in the Region, was discussed at the Caribbean Community (CARICOM) Twenty-Eighth Inter-sessional Meeting of the Heads of Government of CARICOM which took place in Georgetown, Guyana February 16-17 last week.

CARICOM countries have been engaging in high-level advocacy to raise awareness of the implications of global banks’ de-risking, including the restriction and termination of correspondent banking services to mainly indigenous Caribbean banks. In the Communique released after the Inter-Sessional Meeting, it was noted that Heads of Government recognised the need for a continued regional approach and concerted action on this issue which has the potential to undermine the region’s financial systems and to cut off access to trade, investment and other financial flows, with both economic and poverty-reduction implications.

Heads of Government also  recognised the need for continued urgent action to strengthen the integrity of the financial system in CARICOM Member States and to address the perception of the Caribbean as a high-risk Region. They also commended the Prime Minister of Antigua and Barbuda, and the Committee of Ministers of Finance for spearheading the advocacy initiatives towards resolution of the issue.

Below are the main take-aways from the Communique in regards to Heads of Government’s current and further action on the de-risking issue:

  • Heads of Government considered the Strategy and Action Plan submitted by the Committee of Central Bank Governors, and requested the Committee of Ministers of Finance with responsibility for Correspondent Financing to assume the oversight of its roll-out.
  • The Heads of Government agreed that the Region must continue its robust and unrelenting advocacy on the issue of Correspondent Banking, noting the advocacy initiatives’ success in raising international awareness of the consequences of de-risking.
  • Heads of Government encouraged Member States to seize the opportunity of heightened awareness among International Development Partners (IDPs) to secure the resources and support required to strengthen the domestic and regional financial system.
  • Heads of Government welcomed the efforts of the Caribbean Development Bank (CDB) to assist Member States to strengthen their financial systems and partnering with multilateral financial institutions to determine solutions to the ongoing de-risking threat to the Community.
  • Heads of Government acknowledged the multi-dimensional nature of the several drivers behind the de-risking strategies being pursued by global banks, and called for a comprehensive stock-taking exercise to determine Member States’ status and ensure that national action plans are aligned with the timetable for compliance with global regulatory standards.
  • Heads of Government noted the need to strengthen Member States’ compliance with the global regulatory standards with regard to Anti-Money Laundering/Counter Terrorism Financing (AML/CTF) and Tax Transparency Information Exchange.

More on the 28th Inter-sessional Meeting may be viewed here.

The full communique is available 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.

 

CARICOM 28th Inter-Sessional Meeting; Economic Development and International Relations centre-stage

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Source: Pixabay

Alicia Nicholls

On February 16-17, Heads of Government of the 15-member Caribbean Community (CARICOM) converged in Georgetown, Guyana for the Twenty-Eighth Inter-Sessional Meeting of the Conference of Heads of Government.

The meeting, which was chaired by President of Guyana, His Excellency Brigadier (Retd’), David Granger, addressed a wide array of issues currently confronted by the Community. However, economic development and International Relations were among the three broad identified by CARICOM Secretary General, Ambassador Irwin LaRocque, in his opening remarks to the conference. The third was crime and security.

Ambassador LaRocque noted that the issue of economic development, including economic growth, was foremost, observing that the majority of CARICOM member States have been struggling with low growth, high debt and fiscal pressure. Further to this point, it should be noted that just last week the Caribbean Development Bank stated that although they project the Region to experience economic growth of approximately 1.7 percent in 2017, they also suggested that “this will not be enough to stimulate employment, particularly among youth, and reduce high regional debt levels”, and that a long term plan was needed to “facilitate the Region’s participation in global supply chains and drive sustainable economic growth”.

Ambassador LaRocque highlighted the importance of collective action to confront the problems facing the region, and reiterated the fact that the CARICOM Single Market & Economy (CSME) had been identified by member States as the “best vehicle” to promote our overall economic growth and development.

Indeed, a  major discussion point in the meeting was the status of the CSME. According to the official communique from the meeting, the Heads of Government received a review of the status of the CSME and noted the “the significant progress” in its implementation. They also agreed on priority areas to be addressed, including the challenges of payments for goods and services traded within the Region and the completion of the protocol on procedures relating to the facilitation of travel. They also supported the need for continually reviewing the impact of the CSME in both achieving the objectives of the Revised Treaty of Chaguaramas and on the lives of CARICOM peoples.

According to the communique, the Heads of Government also considered some impediments to furthering the CSME. Noting the importance of transportation to the movement of Community nationals, they called for a focused discussion on transportation in the context of the integration movement and also urged greater collaboration among the regional airlines.

Indeed, transportation issues also featured in the Heads of Government’s discussion on tourism,  which they reiterated was a vital sector for CARICOM member States. Inter alia, the Heads of Government called for “an urgent meeting of the Council for Trade and Development (COTED)-Transportation to address air transport issues in particular, including those related to the tourism sector”.

De-risking strategies of global banks, which include the restriction or withdrawal of correspondent banking services to banks in the region, was again an important agenda item. The Heads of Government endorsed the need for a continued regional approach to the challenge, including continued concerted action and advocacy. To this end, they considered the Strategy and Action Plan submitted by the Committee of Central Bank Governors and directed the Committee of Ministers of Finance with responsibility for Correspondent Financing to assume oversight of the roll-out.

Turning to the issue of international relations, the recently concluded negotiations by the CARICOM-Cuba Joint Commission on the Second Protocol to the Trade and Economic Cooperation Agreement was welcomed by the Heads of Government, who agreed that it would strengthen the economic relations and cooperation between CARICOM and Cuba.

US-CARICOM relations was another important agenda item. The Heads of Government welcomed the US-Caribbean Strategic Engagement Act of 2016. Emphasising the importance of the long-standing relationship between CARICOM and the US, the Heads of Government expressed their desire to continuing the “fruitful and mutually beneficial relationship with the new US Administration”.

CARICOM is part of the Caribbean sub-grouping of the Africa, Caribbean & Pacific (ACP) group. In light of the impending expiration of the Cotonou Agreement in 2020, Heads of Government noted the Cotonou Agreement’s importance as “a unique and valued instrument from which CARICOM has benefited with regard to trade, development co-operation and political dialogue with Europe” and suggested that the Agreement be renewed. Heads of Government also expressed their desire for the ACP to be strengthened, emphasising that membership in the ACP Group “remains a valuable construct which has facilitated relations with Africa and the Pacific”.

Besides these issues, the Heads of Government also discussed the on-going border disputes between Belize and Guatemala, and Guyana and Venezuela, relations with the Dominican Republic, an update on preparations for CARIFESTA, inter alia.

The full communique 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.

 

Caribbean States raise de-risking concerns at the 71st United Nations General Assembly

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Alicia Nicholls

De-risking was one of the myriad of developmental issues raised by small states of the Caribbean Community (CARICOM) at the 71st Regular General Assembly of the United Nations in New York over the past few days. The theme of the general debate of the 71st session was “The Sustainable Development Goals: a universal push to transform our world.”

De-risking practices by banks involve the avoidance of risk by discontinuing business with whole classes of customers without taking into account their levels of risk. This is in direct contradiction to the risk-based approach advocated by the Financial Action Task Force (FATF). The major manifestation of bank de-risking has been the restriction or termination by large banks (particularly in the US) of correspondent banking relationships with banks and discontinuing relationships with money transfer operators (MTOs).

While countries across the world have been affected by de-risking in varying degrees, a World Bank study published in 2015 found that the Caribbean region appeared to be the most affected by a decline in correspondent banking relationships. This situation is even more vexing considering CARICOM countries’ adherence to international regulations and best practices, including the recommendations of the Financial Action Task Force.

Arguing that correspondent banking services are a public good, CARICOM countries launched a high-level diplomatic offensive over the past months to raise awareness and mobilise action on this serious issue. The restriction and loss of correspondent banking relationships not only threaten the region’s financial stability but also threaten to de-link Caribbean countries from the global financial and trading system, undermining their sustainable development prospects. There has, however, been limited international progress on this front despite strong advocacy and a myriad of studies on the issue by regional and international development agencies.

Singing from the same hymn sheet, CARICOM representatives consistently raised the issue in their national speeches before the UN General Assembly.  In perhaps one of the most comprehensive and impassioned statements, Minister for Foreign Affairs of the Bahamas, H.E. Frederick Mitchell,  made de-risking the starting point in his speech, emphasizing not only the difficulty being faced in opening accounts, but also the impact on tourism, remittance and financial flows. Calling it a “moral imperative,” he reiterated Caribbean countries’ adherence to anti-money laundering rules, while condemning the over-regulation which has had led to the de-risking phenomenon. He also termed the attacks on the Bahamas and the CARICOM region as “inaccurate and unfair”.

Touching on the sustainable development implications of de-risking, representative of Trinidad & Tobago, Senator the Honourable Dennis Moses, Minister of Foreign and CARICOM  Affairs, poignantly stated as follows:

“The 2030 Sustainable Development Agenda recognizes that national development efforts need to be supported by an enabling international economic environment through international business activity and finance, international development cooperation, and international trade. However, the issue of financial institutions terminating or restricting correspondent banking relations in the CARICOM Region has destabilized the financial sectors of our Member States and has disrupted the Region’s growth and economic progress.”

On behalf of Trinidad & Tobago and CARICOM, Senator Moses further called on “international banks to engage collaboratively with affected Member States to restore normal financial relationships between domestic banks and international markets.”

Prime Minister of St. Kitts & Nevis, the Hon. Timothy Harris noted that “[a]lready, in the Caribbean, as of the first half of this year, some 16 banks, across five countries have lost all or some of their correspondent banking relationships putting the financial lifeline of these countries at great risk”. Highlighting Caribbean countries’ dependence on tourism and remittance flows, he further explained that “such [de-risking] actions threaten to derail progress, undermine trade, direct foreign investment and repatriation of business profits.”

Laying the blame for de-risking on “heavy-handed” FATF regulations, Prime Minister of St. Vincent & Grenadines reiterated the potential of de-risking to disconnect Caribbean countries from global finance and “a shifting of potentially risky transactions to institutions that lack the regulatory wherewithal to handle them”. He further explained that “these [FATF] regulations must be revised urgently before legitimate transactions in the Caribbean–from credit card payments to remittances to foreign direct investment–grind to a halt.”

Besides de-risking, CARICOM representatives raised several other development issues, including climate change, graduation policies of international development agencies, United Nations reform, the US embargo of Cuba, the attack on international financial centres by OECD countries and the on-going border disputes between Guyana and Venezuela and Belize and Guatemala. CARICOM states also congratulated newly elected UNGA President, Peter Thomson of Fiji, and thanked outgoing UN Secretary General Ban Ki-Moon for his service, particularly his support of SIDS.

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.

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