Caribbean Trade Law and Development

Alicia Nicholls

CARICOM countries could soon make up the majority of member states in the Bolivarian Alliance for the Peoples of Our America (ALBA). At the bloc’s 11th Summit last month in Caracas, both Suriname and St. Lucia  formally expressed their intention to become members of the eight-member group. They would join four other CARICOM countries which are already ALBA member states: Antigua & Barbuda, Dominica, St. Vincent & the Grenadines and more recently, Haiti.

The wave of interest in ALBA, a regional bloc which like CARICOM envisions deep integration between its members, comes against a backdrop of stagnation and crisis in the CARICOM integration process.  While ALBA leaders at their 11th Summit agreed to move full speed ahead to deepen their integration with the creation of a single monetary union – ECOALBA, CARICOM Heads of Governments caught most people by surprise last year when they inexplicably put the CARICOM Single Market and Economy (CSME) on ‘pause’ during their retreat in Guyana. It was a decision for which Prime Minister of St. Vincent and the Grenadines, Dr. Ralph Gonsalves recently expressed regret. In a candid letter sent to the Secretary General of CARICOM which effused both lament and frustration at the current ‘standstill’ in CARICOM, Dr. Ralph Gonsalves made mention of the augmented interest by CARICOM countries in courting ALBA. He predicted that more CARICOM countries were likely to follow suit and rhetorically asked what would be the implications of this for CARICOM.

ALBA is one of the most well-known South-South trade initiatives in the Western Hemisphere, not just because it was the brain child of the outspoken and no-nonsense President of Venezuela, Mr. Hugo Chavez, but because it potentially represents a more equitable alternative to the traditional neoliberal model of regionalism. It was launched by Venezuela and Cuba in 2004 originally as the Bolivarian Alternative for the Americas, and as an alternative to the now moribund Free Trade Area of the Americas which had been pushed by the United States. Drawing inspiration from the political thought of freedom fighters Jose Marti and Simon Bolivar, ALBA’s stated aim is to be a political, economic and social alliance which seeks to protect the independence, sovereignty, self-determination and identity of its Member States, and to protect the interests of the peoples of the South from political and economic domination.

If the question of ALBA’s threat to the CARICOM integration process is considered purely on the compatibility of ALBA CARICOM countries’ obligations, the flexibility which ALBA gives its members in terms of the initiatives which they can choose to be a part of means that ALBA CARICOM countries are free to refrain from initiatives which could conflict with their CARICOM and OECS obligations.  In the declaration of accession signed by St Vincent and the Grenadines for example, the Gonsalves Government made clear that as a regional movement ALBA does not alter but complements its obligations in other regional movements such as the OECS and CARICOM.  Thus, St Vincent and the Grenadines, like the other OECS members of ALBA, has not introduced the new regional trading currency – the sucre in light of its membership in the OECS’ monetary union.

A more immediate domain for conflict between ALBA and CARICOM obligations appears to be in the area of foreign policy. Foreign policy coordination is one of the stated objectives of CARICOM per the Revised Treaty of Chaguaramas and one of the pillars of functional cooperation.  While ALBA Members are given flexibility in foreign policy, ALBA as a group has been outspoken on several current conflicts, including throwing support in a recent declaration solidly behind Argentina in the recently escalating Falkland Islands dispute between that country and the United Kingdom.  The decision was made to join several other Latin American countries, including Argentina, to prevent Falkland-flagged ships from docking at their ports.  Although the ALBA CARICOM countries have not all come out and said whether their individual stance was in consonance with that of ALBA’s, one would not be unreasonable by taking their silence as agreement with the ALBA position. This position however is diametrically opposed to that taken by the non-ALBA members of CARICOM which have supported the Falkland Islands’ right to self-determination, that is, their right to remain British. Dr. Gonsalves’ stance on the issue caused some controversy in his country. However, on a larger scale, such divergence in policy position could be evidence of the potential threat of further fragmentation in the region’s foreign policy coherence.

Politics aside, there is no doubt that the main attraction of ALBA to those CARICOM countries which have acceded so far  is the developmental support provided by its founding countries Venezuela and Cuba. Havana has long been a development partner of many countries in the region. Through bilateral cooperation agreements signed between the Cuban government and the governments of the region, the people of the wider Caribbean have benefited from free eye care in Cuban hospitals under Operation Miracle, scholarships to study medicine at Cuban universities and free health care by Cuban doctors.  Haiti has also benefited from food and literacy programmes.

Under the Chavez administration, Venezuela has also taken a more active developmental role in the region. Since the establishment of the PetroCaribe Initiative in 2005, some 17 Caribbean countries, most of which are non-ALBA members, have benefitted from this arrangement which allows them to purchase oil on preferential terms of payment. Only part of the cost is paid up front and part can also be paid through the provision of agricultural goods. The remainder is repaid over a 25 year period at a 1% interest rate. The PetroCaribe deal has not been immune to criticism, and both Barbados and Trinidad & Tobago have not joined. Though such an arrangement helps in the short term to conserve much needed foreign exchange, it means that those countries which take oil on these terms are indebted to Venezuela in the longer term. Moreover, while PetroCaribe aims to promote energy security through the provision of “cheap” oil, Venezuelan fuel exports under the Agreement have decreased over time due to less available supply. Another criticism raised is that the ‘cheap oil’ provided under PetroCaribe increases the region’s dependence on the importation of fossil fuels. This latter argument is less persuasive given the increasing interest shown by CARICOM countries in renewable energy generation, through for instance geothermal, solar and wind energy.

The financial support offered by ALBA is  highly attractive to debt-ridden CARICOM countries faced with an uncertain global economic and financial climate. Loans are given at favourable terms and without most of the usual conditionalities insisted on by traditional donors. Through its loan funds, ALBA has provided funding for projects, including infrastructure, housing and agriculture projects in Dominica for example. St Vincent and the Grenadines also received a loan from the ALBA Bank for the construction of a new international airport.

The availability of credit under ALBA’s several funds can be contrasted with the limited capitalization of the CARICOM Development Fund. The CDF is provided for under Article 158 of the Revised Treaty of Chaguaramas as a fund to provide financial and technical assistance to disadvantaged countries, regions and sections within the grouping. The limited capitalization of the CDF, plus problems with the Petroleum Facility and the perceived lack of sensibility to the OECS countries’ unique vulnerabilities, were some of the many shortfalls of CARICOM about which Dr. Gonsalves complained in his previously mentioned letter. Frustrations like these over ill-functioning regional aid mechanisms plus the more readily available economic aid under ALBA, could lead to more CARICOM countries turning their attention to ALBA.

One area in which CARICOM arguably maintains an upper-hand over ALBA is in trade. With a population of 70 million people, ALBA represents a larger market for regional goods than does CARICOM. That being said though, the export capabilities of the ALBA CARICOM remain too weak to effectively take advantage of this.  It is true that over the period 1999-2008, it is reported that average yearly trade between Venezuela and Antigua & Barbuda was USD 6.5 million, between Venezuela and Dominica, USD 179 million and between Venezuela and St. Vincent and the Grenadines, 4.5 million dollars. However, given that petroleum trade accounts for most bilateral trade between Venezuela and ALBA CARICOM countries, the balance of trade is skewed in Venezuela’s favour.  While trade asymmetries do exist within CARICOM as well, the regime created by the Revised Treaty of Chaguaramas envisions the freedom of movement of goods, services, people (skilled) and capital within the Community, the right of Community nationals to establish businesses in other territories, as well as a competition commission which is charged with ensuring the rules of the market are respected.  ALBA has not as yet reached this level of integration. That being said, however, the large gulf between what the Revised Treaty provides for and what operates in practice in CARICOM has led to frustration that the expected benefits are not being seen.  Moreover, ALBA does intend to become an economic union, something which continues to elude CARICOM.

Although there is an undisputed role for ALBA as a development aid and trade partner for our countries, their main integration focus should be on deepening CARICOM integration. CARICOM is more than a trade group. It was founded on the vision of our regional founding fathers who believed that strength comes not through parochialism but through the political, economic and social unification of a people already united through a common history and a shared culture and values. Regardless of its many shortcomings, CARICOM, its organs and associated bodies, have played a tremendous role in the region for the past nearly forty years and can play an even greater role once a serious attempt is made at reform by our Heads of Government.

Moreover, although Venezuela is a useful ally for countries in the region by virtue of its stronger bargaining power in the international community, CARICOM’s interests as small states and those of Latin American countries, including Venezuela’s are not always complementary as seen in the Banana Wars in the WTO. It should also not be forgotten that Venezuela continues to have border disputes with two CARICOM States (Guyana and Dominica) which have still not been resolved and for which Venezuela has not changed its position.  A further caveat to bear in mind is that given the strong ideological divide in Venezuelan politics, there is no guarantee that whichever president eventually succeeds President Chavez would be leftist in political orientation or that he or she would be as sympathetic as his or her predecessor to the region’s concerns, or be committed to continuing ALBA and its component programs. Therefore, there is some concern about ALBA’s survivability in a post-Chavez era.

The real threat to CARICOM is not ALBA though, but CARICOM itself.  Impatience with the slow process of integration and its associated benefits at the CARICOM level has had as its natural corollary a desire to explore more seemingly attractive alternatives. It is not surprising therefore that the poorer countries in the region, and some of the larger countries like Suriname as well, have set their compass to ALBA for the superior economic security it provides and its seemingly better alignment with their interests.  Unless our Heads of Government act seriously on their commitment made at the last inter-sessional meeting to formulate a plan of action designed to reform CARICOM to make it more effective, there could be a day when all of our countries eventually turn their backs completely on CARICOM in favour of other blocs which they believe have both the ability and will to better cater to their peoples’ interests and needs. That would be a sad day.

Alicia Nicholls is a trade policy specialist and law student at the University of the West Indies – Cave Hill. You can contact her here or follow her on Twitter at @LicyLaw.