Caribbean Trade Law and Development

Category: Trade

  • 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.

  • Trade Year in Review 2024: Top 5 Trade Developments

    Trade Year in Review 2024: Top 5 Trade Developments

    Alicia Nicholls

    As 2024 draws to a close and we prepare to welcome 2025 in another week or so, it is time yet again to reflect on the defining trade policy developments that shaped these past twelve months. This year unfolded against a backdrop of persistent geopolitical tensions, an escalating climate crisis, and economic uncertainty. Yet, amidst these challenges, we also witnessed a resurgence in global trade growth, some landmark trade agreements, and other notable developments, including right here in the Caribbean.

    Here are my picks for the top five trade stories that left their mark in 2024.

    1. Global Trade Hits Record High Amid Uncertain Outlook

    According to UN Trade and Development (UNCTAD) in its latest Global Trade Update, global trade will surge to an unprecedented $33 trillion in 2024, surpassing its 2022 record, and growing by 3.3% over 2023 levels. This impressive growth was driven by a robust 7% expansion in services trade, offsetting the more modest 2% growth in merchandise trade, which remains below its 2022 peak. However, the growth pattern was uneven, with developed regions taking the lead in the third quarter.

    While UNCTAD predicts a positive start to 2025, it notes that potential escalation in trade wars, geopolitical instability, and the increasing adoption of industrial policies by major economies add layers of uncertainty.

     The World Trade Organization’s (WTO) latest G20 Trade Measures report highlights a notable uptick in trade restrictions and the proliferation of climate-focused support measures by G20 countries, underscoring the complex relationship between protectionism and sustainability.

    2. Barbados Hosts Inaugural Global Supply Chain Forum

    In May, Barbados made history by co-hosting the first-ever Global Supply Chain Forum with UNCTAD. This groundbreaking event convened global leaders, experts, and stakeholders to tackle the critical issues of sustainable and resilient transport and logistics in Small Island Developing States (SIDS).

    The Forum culminated in the adoption of the Barbados Ministerial Declaration, a pivotal contribution to the Fourth International Conference on SIDS (SIDS 4) held in Antigua & Barbuda shortly thereafter. As an attendee of both events, I would like to once again extend kudos to the organisers on two very well organised events which exemplified the Caribbean region’s role in contributing to global discussion and action on key trade and development issues.

    3. WTO Director-General Ngozi Okonjo-Iweala Secures Second Term

    In November, World Trade Organization (WTO) Director-General Dr. Ngozi Okonjo-Iweala was appointed by the General Council via consensus to a second four-year term starting September 1, 2025. Her leadership comes at a critical juncture, with the WTO navigating legacy reforms and heightened trade tensions. Dr. Okonjo-Iweala’s four-year vision encompasses a WTO that delivers results, modernises to remain relevant, and capitalises on emerging trade opportunities. Her agenda includes finalising agreements on the outstanding agenda of the fisheries subsidies agreement (Fish 2) and Investment Facilitation for Development and preparing for the 14th Ministerial Conference (MC14) in Cameroon in 2026.

    4. Landmark Trade Agreements and Ongoing Negotiations

    This year saw several landmark trade agreements. The European Union and four Mercosur countries (Argentina, Brazil, Paraguay, and Uruguay) finalized a historic deal after 25 years of negotiations. This agreement promises to deepen economic cooperation and includes provisions addressing deforestation concerns, a contentious point during talks.

    In November, Costa Rica, Iceland, New Zealand, and Switzerland signed the Agreement on Climate Change, Trade, and Sustainability, setting a precedent for integrating climate and sustainability goals into trade agreements. Meanwhile, the African Continental Free Trade Area (AfCFTA) launched its operationalization phase with five key instruments adopted, marking a significant leap for intra-African trade.

    Closer to home, Trinidad & Tobago and Curaçao advanced negotiations on a partial scope agreement, expected to conclude in 2025.

    5. Donald Trump’s Re-election and Its Trade Implications

    Campaigning on promises of reshoring manufacturing and imposing hefty tariffs, incoming US President Donald Trump’s second term is poised to once again reshape U.S. trade dynamics. He has already threatened more tariffs on China, as well as tariffs on its US-Mexico-Canada (USMCA) free trade agreement partners: Canada and Mexico. Increased US tariffs on imports from its major trading partners, and retaliatory tariffs by these trading partners could signal potential disruption to the global trade landscape.

    Trade analysts are bracing for ripple effects, including retaliatory measures and a potential pivot toward greater unilateralism. The implications for the multilateral trading system and global economic stability will undoubtedly be profound, making this a development to watch in the coming months.

    Looking Ahead

    At the CTLD Blog, we remain committed to delivering insights on the evolving trade landscape. As we bid farewell to 2024, I extend my heartfelt gratitude for your readership and engagement throughout the year. Here’s wishing you and your families a joyful holiday season and a prosperous 2025. Stay tuned as we continue to unpack the stories shaping global trade in 2025!

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

  • Barbados’ Debt-for-Climate Resilience Swap: A Blueprint for Sustainable Development

    Barbados’ Debt-for-Climate Resilience Swap: A Blueprint for Sustainable Development

    Ainsley Brown (Guest contributor)

    Barbados has once again positioned itself as a global trailblazer, completing what it calls the world’s first debt-for-climate resilience swap, a groundbreaking financial arrangement that frees up USD$165 million for critical investments in water infrastructure, food security, and environmental protection. This bold move not only addresses urgent climate adaptation needs but also underscores Barbados’ commitment to sustainable development and ESG (Environment, Social, and Governance) principles.

    This initiative is a watershed moment for small island developing states (SIDS) and other climate-vulnerable nations facing the triple crises of high debt, climate change, and biodiversity loss. But what does this deal mean in the broader context of global sustainability, and can it serve as a template for other countries grappling with similar challenges?

    What Is a Debt-for-Climate Resilience Swap?

    In essence, a debt-for-climate resilience swap involves a country negotiating with its creditors to restructure or reduce its sovereign debt in exchange for commitments to invest in climate resilience or biodiversity conservation. In Barbados’ case, the funds will be channeled into:

    • Water infrastructure projects: Including the construction of a new South Coast Water Reclamation and Reuse Facility to more than double water availability by 2050.
    • Environmental protection: Investments in mangrove conservation and water restoration.
    • Agricultural resilience: Enhancing food security amidst rising climate pressures.

    This model allows governments to reallocate resources from debt servicing to vital climate adaptation measures. For creditors, it’s an opportunity to support global public goods like biodiversity conservation while safeguarding their financial interests.

    Why Debt Swaps Matter for SIDS and Climate-Vulnerable Countries

    Barbados’ Prime Minister Mia Mottley aptly describes this transaction as a model for other vulnerable states. Small island nations like Barbados are the “canaries in the coal mine” of climate change, grappling with rising sea levels, more frequent hurricanes, and dwindling freshwater resources.

    Water Scarcity in Barbados

    Barbados is one of the most water-scarce nations in the world. Climate change exacerbates this scarcity, threatening not just daily life but also economic activities like agriculture. The New South Coast Water Facility, financed through the swap, aims to alleviate these challenges by increasing water availability and reducing pollution in the Caribbean.

    The Debt Crisis

    Debt burdens severely limit the ability of developing nations to invest in climate resilience. According to the UN Conference on Trade and Development (UNCTAD), global sovereign debt reached a staggering USD$92 trillion in 2022. More than 50 of the poorest countries are on the brink of default, with some spending more on interest payments than on health or education.

    Barbados’ debt restructuring initiative is part of a broader effort to reduce its debt-to-GDP ratio from 105% to 60% by 2036.

    Global Examples and Lessons Learned

    Barbados is not alone in leveraging debt swaps to address climate challenges:

    • Belize: A 2021 debt-for-nature deal reduced its debt by 12% of GDP and unlocked USD$180 million in long-term conservation funding, helping protect the Western Hemisphere’s longest coral reef.
    • Ecuador: Converted USD$1.6 billion of debt into USD$12 million annually for Galápagos Islands conservation, under the world’s largest debt-for-nature deal.
    • Seychelles: Pioneered marine debt-for-nature swaps, safeguarding its ocean territory while alleviating fiscal pressures.

    These examples illustrate how debt swaps can provide fiscal relief, protect biodiversity, and attract new actors and financing mechanisms into the climate action space.

    The Bridgetown Initiative: Reimagining Global Finance

    Barbados’ efforts are closely tied to the Bridgetown Initiative, a global movement led by Prime Minister Mottley to reform the international financial architecture. Key proposals include:

    1. Redefining loan terms: Preventing nations from spiraling into debt crises after climate disasters.
    2. Mobilizing USD$1 trillion for climate resilience: Through development banks and discounted lending for vulnerable countries.
    3. Establishing a global reconstruction mechanism: Backed by private-sector investment to fund post-disaster recovery.

    The initiative recognizes that the current financial system, designed in a post-World War II era, is ill-equipped to address today’s challenges, including systemic inequality and climate change.

    Challenges and Limitations of Debt Swaps

    Despite their promise, debt-for-nature and debt-for-climate swaps are not panaceas. Critics highlight several challenges, which include:

    • Limited scale: While impactful, the financial relief from debt swaps is often small relative to the scale of global adaptation needs, estimated at USD$359 billion annually by the United Nations.
    • Complexity: These transactions require extensive negotiations, partnerships, and upfront financing, which can deter broader adoption.
    • Dependency on grants and private investment: Debt swaps cannot replace the need for concessional financing, grants, or private sector participation.

    A recent IMF report underscores that while debt swaps are valuable, they must complement—not replace—comprehensive debt restructuring and other financial tools.

    A Blueprint for the Future?

    Barbados’ leadership sets an example of how innovative finance can align debt management with sustainable development goals. The country’s latest debt swap, bolstered by guarantees from institutions like the European Investment Bank and Inter-American Development Bank, illustrates the power of partnerships. This approach also offers co-benefits, such as potential credit rating upgrades, as seen in Belize, which can lower borrowing costs and unlock further investment opportunities. For countries in the Global South, debt swaps could:

    • Enhance fiscal space: Freeing up resources for health, education, and climate action.
    • Attract international support: By demonstrating strong commitments to ESG principles.
    • Foster resilience: By addressing both immediate adaptation needs and long-term sustainability.

    Conclusion

    Barbados’ debt-for-climate resilience swap is not just a financial transaction; it’s a bold declaration that climate action and fiscal responsibility can—and must—go hand in hand. As more countries explore similar arrangements, the potential for scaling up global climate finance becomes evident. However, achieving transformative change requires systemic reform, including:

    1. Expanding access to concessional financing for vulnerable nations.
    1. Enhancing the efficiency and scope of global financial institutions.
    2. Prioritizing sustainable development in creditor-debtor negotiations.

    Barbados has provided a roadmap for others to follow. The question is no longer whether debt swaps are feasible but how quickly and effectively they can be scaled to meet the global challenges of our time. As Prime Minister Mottley aptly said, this is not just about Barbados—it’s about creating a future where “people and the planet” take precedence over profit and debt burdens. Let this serve as a call to action for governments, financial institutions, and global citizens to rally behind innovative solutions for a more sustainable world.

    By pioneering this debt-for-climate resilience swap, Barbados has turned an economic challenge into an opportunity for leadership. The world would do well to take notice—and to act.

    Ainsley Brown is a global expert in economic development and special economic zones, passionate about aligning finance with climate action to create resilient futures.