Caribbean Trade Law and Development

Tag: trade

  • Has the Caribbean Basin Initiative Outlived its Usefulness to CARICOM countries?

    Alicia Nicholls

    This September the United States International Trade Commission (USITC) released its biennial report on the operation of the Caribbean Basin Economic and Recovery Act (CBERA), one of the components of the Caribbean Basin Initiative under which CARICOM countries currently enjoy non-reciprocal, preferential access to the US market for most merchandise exports.

    Three years ago I authored an article questioning whether the CBI was still relevant and beneficial to CARICOM countries. In that article I had highlighted that while the CBI still has relevance for CARICOM countries, its structure meant that CARICOM countries have benefited unequally and risk losing any margin of preference if its WTO waiver is not extended. I had concluded that a reform of the CBI would have been a preferred option but that a CARICOM-US FTA which had a trade and development focus could be more beneficial in the long term to CARICOM countries once it allows for special and differential treatment and capacity building assistance.

    The USITC reports that average CBERA utilisation rates fell in 2014 and that the impact, though positive, has been small and again limited to a few exports and a few countries. This prompts two questions: has the CBI outlived its usefulness and is it time for CARICOM countries to negotiate a free trade agreement (FTA) with the US?

    Current CARICOM-US Trading Arrangements

    Most CARICOM countries currently enjoy non-reciprocal duty-free or reduced duty access for most merchandise exports (about 5,700 HTS 8-digit tariff lines) to the US market under the Caribbean Basin Initiative. The CBI is comprised of CBERA (non-expiring) and CBTPA (expiring September 30, 2020). Haiti also enjoys additional preferences under the HOPE Acts (Haitian Hemispheric Opportunity through Partnership Encouragement Acts of 2006 (HOPE I) and of 2008 (HOPE II)) and the Haitian Economic Lift Program (HELP) Act of 2010 which give preferential treatment to Haitian apparel, textiles, and certain other goods.

    The stated goal of the CBI is to contribute to the economic growth and development of beneficiaries. The seventeen Caribbean beneficiary countries and territories are: Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, British Virgin Islands, Curaçao, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago. Though a CARICOM country, Suriname is not a CBERA beneficiary.

    In May 2013, CARICOM countries signed a Trade and Investment Framework Agreement (TIFA) in Port of Spain, Trinidad following a meeting between CARICOM Heads of Government and US Vice President Joe Biden. The TIFA, an updated agreement to one signed in 1991, is not an FTA. While it outlines several objectives and goals, it does not create binding commitments or market access. It does however create a CARICOM-US Trade and Investment Council which will be charged with executing the agreement. An annex to the Agreement called the Initial Action Agenda sets out priority areas for action. Currently, Grenada, Jamaica and Trinidad & Tobago are the only CARICOM countries which currently have bilateral investment treaties in force with the US.

    Current Level of CARICOM-US Trade

    The US is CARICOM countries’ largest trading partner for goods and services trade and a major tourism source market for CARICOM countries. However, the $8.5 billion USD worth of total US exports from CBERA countries (with and without preferences) only accounted for 0.36% of total US’ imports from the world, and declined from $8.9 billion in 2013 and $12 billion in 2012 (USITC 2015).

    US product imports from CBERA countries are concentrated primarily in the energy and mining and manufacturing sectors (USITC 2015). Trinidad & Tobago, Haiti, The Bahamas, and Guyana jointly accounted for 89.1 percent of the value of US CBERA imports in 2014 (USITC 2015).

    The USITC 2015 reports that CBERA utilisation rates, that is, CBERA imports as a percentage of total US imports from that country, have fluctuated over the past five years and have varied by country. After rising to 26.5% in 2013, average CBERA utilisation rates fell to 23.1% in 2014, although a few countries saw an increase in their utilisation rates during this period. This means that of the CBERA countries’ exports to the US in 2014 ($8.5 billion), only 23.1% ($1.97 billion), or less than a quarter, were done under CBERA. Most CARICOM merchandise exports to the US are therefore not under the CBERA but are either under the Generalised System of Preferences (GSP) or under Most Favoured Nation (MFN) applied rates.

    According to the USITC Report, while Belize had the highest CBERA utilisation rate (62.5%) and was the fifth largest source of US imports under the CBERA in 2014, Trinidad & Tobago was the leading source of US imports under CBERA but registered the 6th highest CBERA utilisation rate for the same period. Trinidad & Tobago which has been the main beneficiary of CBERA due to its energy exports (mainly methanol and crude petroleum) has seen its total imports and utilisation rate decline due to declining US consumption, increased US production of crude oil and maintenance and shutdown of some factories in Trinidad (USITC 2015).

    CBERA is of less importance for smaller islands of the region whose economies are services-based, mostly tourism and financial services. St. Lucia’s utilisation rate dropped from 51.7% in 2010 to just 7.5% in 2014. While Barbados saw its utilisation rate increase from a mere 3.8% in 2013 to 10.6% in 2014, this still is down from its rate of 17% in 2010.

    The good news is that despite my prediction back in 2012, the WTO Council for Trade in Goods considered and approved the US’ waiver request for CBERA again and it is now up to the General Council to adopt it. Additionally, some of the products which are eligible for dutyfree access under the CBERA are not eligible under the GSP. However, more sobering is that the weaknesses of the CBI remain, including the exceptions in its product coverage, the lack of eligibility for services trade and certain stringent product eligibility requirements. Another problem is its unpredictability due to its unilateral nature. A beneficiary’s status may be revoked or the programme discontinued at any time. As an example, the US recently indicated it will suspend South Africa’s benefits under AGOA, a preferential programme for African countries, for allegedly failing to make continual progress towards eliminating barriers to U.S. trade and investment.

    Generalised System of Preferences

    Besides CBI, certain CARICOM countries also currently benefit under the Generalised System of Preferences (GSP), the oldest of the US’ trade preference programmes. Similar to the CBI, the GSP is a unilateral arrangement providing non-reciprocal duty-free access to eligible products originating in qualifying countries. Unlike the CBI which currently applies only to Caribbean countries, according to the USTR Report 2015, as of January 1, 2015, there were 122 designated GSP beneficiary developing countries, of which 43 were LDCs.

    Under the GSP less tariff categories and products benefit from preferences than under the CBERA. However, LDCs, such as Haiti, are entitled to additional product coverage.

    The only CARICOM countries currently eligible for benefits under the US GSP are Belize, Dominica, Grenada, Guyana, Haiti, Montserrat, St. Kitts & Nevis, St. Lucia, Suriname, St. Vincent and the Grenadines. Eligibility of a country for beneficiary status is subject to both economic and political considerations. Among other things, the US President is prohibited by statute from designating any communist countries (with exceptions) or countries which have expropriated, imposed taxes or other measures on US property as GSP beneficiaries.

    If he/she finds that a country is sufficiently competitive or developed, the President may withdraw, suspend or limit the GSP status of any beneficiary country. Antigua & Barbuda, the Bahamas, Barbados, and Trinidad & Tobago are not currently GSP beneficiaries.

    The GSP expired on July 31 2013 and was renewed retroactively on June 29, 2015. It has been extended to December 31, 2017. The future of the GSP beyond December 2017 is uncertain. However, some in the US believe GSP benefits should only be extended to LDCs, in which case only Haiti would benefit among current CARICOM beneficiary countries. Some so-called import sensitive products for the US, especially those in which developing countries have a competitive advantage such as most textiles and apparel, are not eligible. GSP imports are also subject to more stringent rules of origin than those under CBERA.

    Would an FTA with the US be the answer?

    Several former CBERA beneficiaries have concluded FTAs with the US, including five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua) and the Dominican Republic (CAFTA-DR in 2004) and Panama (US-Panama FTA in 2012). Given the issues outlined with both the CBI and the GSP, should CARICOM countries do the same?

    Since the failure of the CARICOM-Canada negotiations, CARICOM still only has one FTA with a developed partner (the Economic Partnership Agreement with the EU). CARIFORUM’s negotiation position during the EPA negotiations was strengthened by the presence of the Dominican Republic. Such would not be the case in FTA negotiations with the US.
    US FTAs, even those with developing countries such as CAFTA-DR and US-Panama, are generally light on development provisions and strong on those which provide protection for US investors and their investments, and for intellectual property rights.

    For a sense of the US’ negotiation prowess, just take into consideration that with just a few exceptions the Trans-Pacific Partnership (TPP)’s investment chapter agreed to by 11 other negotiating partners is practically a carbon copy of the US’ Model BIT 2012. CARICOM countries will have to be strategic and clear on what they want to achieve and what are their deal breakers.

    Priorities for CARICOM would be recognition of CARICOM countries’ small size and economic vulnerability and asymmetry in the commitments. As such they would likely be lobbying for special and differential treatment, development cooperation provisions, including technical assistance and capacity building to assist them, especially CARICOM lesser developed countries, in taking advantage of the market access opportunities an FTA with the US would open. With regards to services trade, CARICOM countries would likely seek enhanced commitments from the US in regards to (Mode 4) temporary entry for CARICOM natural persons.

    Under the CBI, Caribbean countries are not required to extend duty-free treatment to like US imports into their territories. One of the main drawbacks to an FTA with the US will be the loss of tax revenues from the removal and reduction of tariffs on US imports as would be required under an FTA. One way to mitigate this would be lobbying for asymmetric and phased tariff removal, similar to what was committed to under the CARIFORUM-EPA with the EU. However, US FTAs, including CAFTA-DR are always ambitious in their scope in regards to liberalisation. Under the EPA, CARIFORUM was able to exclude a number of their most sensitive sectors from liberalisation. A deal breaker for any FTA with the US would be the extent to which CARICOM countries are able to protect nationally-important and sensitive industries from the stiff competition and possible death of these sectors and job losses if liberalised to competing US products too quickly. Civil society and industry consultations thus would be crucial to determining which sectors are most sensitive.

    While an FTA with the US will likely increase the volume of US goods into CARICOM, the reverse is not necessarily guaranteed. Most CARICOM merchandise goods exports are already competing with other countries’ exports under normal trade conditions (i.e. at the MFN applied rate), and not under preferences. Therefore, the margin of preference secured for some CARICOM goods under a trade agreement may be negligible.

    Investment treaty practice has evolved since the days when Grenada, Jamaica and Trinidad & Tobago signed their BITs with the US. The investor protections provided by a comprehensive investment chapter in a US-CARICOM FTA, coupled with robust investment promotion provisions, could serve as a signal for greater US investment to the region, while at the same time include development-friendly provisions and provisions which reinforce the right of the State to regulate.

    As CARICOM service providers enjoy no preferential access to the US market, they face competition from service providers of countries which already have FTAs with the US. However, even when market access is created under an FTA for cross border services trade, there will be the need for mutual recognition agreements and visa waiver agreements in order to translate market access into market penetration.

    The US will likely insist on a negative list approach to market access liberalisation of service sectors, the approach used in NAFTA and its subsequent FTAs. The negative list approach requires liberalisation of all sectors unless a reservation is specifically made in a country’s list of reservations. CARICOM countries and other developing countries have preferred to use the positive list approach used under the General Agreement on Trade in Services (GATS). It is a more development friendly approach which means only sectors specifically listed in a country’s schedule of commitments are liberalised and thus allows for the gradual liberalisation of sectors in keeping with each country’s development goals.
    The US will also likely insist on no less favourable treatment than what CARICOM countries had agreed to with the EC under the EPA. CARICOM will also have to bear in mind that given a provision in the MFN clause in the EU-CARIFORUM EPA, the EU can insist on any more favourable treatment given to US than was given the EU under the EPA.

    US treaty practice typically includes binding commitments on non-trade issues, such as labour. It has an on-going claim against Guatemala before the CAFTA-DR dispute settlement body in which it claims Guatemala has failed to meet its obligations under the CAFTA-DR agreement relating to effective enforcement of labour laws.

    There are currently three main trade issues between the US and CARICOM countries which have to be addressed expeditiously even without an FTA. CARICOM rum exports are losing market share in the US market because of large subsidies given to rum producers in two US territories: the USVI and Puerto Rico. Secondly, the US/Antigua & Barbuda cross border gambling services dispute remains unresolved despite a WTO ruling in Antigua & Barbuda’s favour. An FTA will not necessarily resolve these issues as the DR which is a part of CAFTA-DR has complained about the rum issue as well.

    Thirdly, the US has for a long time criticised copyright protection and enforcement in the Caribbean, a possible issue which might trigger disputes under any future US-CARICOM FTA. Caribbean countries constantly feature on the US Watch Lists under its annual Special 301 Report. The 2015 Special 301 Report is no different.

    The Bottom Line

    CARICOM countries should continue to take advantage of the non-reciprocal duty-free access to the US market provided by the CBI for their goods while these benefits last. However, while I do not think the CBI has outlived its usefulness just yet, it has several deficiencies which means it should not be treated as a long term strategy for boosting CARICOM trade with the US.

    As mentioned, CBERA exports as a proportion of total CARICOM exports to the US are small and declining. The beneficial impact on regional exports has been unevenly spread and its unilateral nature, like the GSP, means benefits may be discontinued by the US at any time.

    For the short term, the updated TIFA presents the best opportunity for CARICOM through the US-CARICOM Trade Council to lobby for reform of the CBI, address the long-standing rum and internet gambling disputes, and to negotiate concrete frameworks for increasing trade and investment between the US and CARICOM countries. Success on this front will not be automatic and will require strong regional cooperation, as well as effort on the part of both CARICOM and the US to ensure that concrete initiatives and commitments come out of these efforts.

    However, given the importance of the US market for CARICOM and the growing importance of services-trade to regional economies, CARICOM will at some point  in the future have to consider, albeit cautiously, negotiating an FTA with the US as part of a long term plan to create a more predictable trade framework for US-CARICOM trade.

    I say in the future because negotiations are an expensive and human-resource intensive exercise and require extensive research and stakeholder consultations. At the moment CARICOM countries are still grappling with the lingering effects of the 2008/2009 crisis on their economies and are also still struggling to implement many of the commitments made to the EU under the EPA. Progress on deepening CARICOM integration itself has ground to a halt and it would be easier to formulate a consolidated negotiating position as a more integrated region. I say cautiously because based on its current treaty practice the US is unlikely to extend the same level of special and differential treatment or development assistance which CARIFORUM was able to secure from the EU.

    An interesting space to watch would be the on-going Trans-Atlantic Trade and Investment Partnership (TTIP) negotiations between the US and EU. The EU is currently insisting on the inclusion of certain sustainable development provisions into the agreement. An example is its recently released proposed text for the investment chapter. It would be interesting to see whether these provisions make it into the final TTIP text and that could help make it easier for CARICOM to insist on some of the same provisions in any future FTA with the US.

    For my previous article on the relevance of the CBI, please click 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. Please note that the views expressed in this article are solely hers. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • OECD Trims Growth Forecast and Warns of Trade Deceleration in Latest Economic Outlook

    Alicia Nicholls

    The Organisation for Economic Cooperation and Development (OECD) has again trimmed its global growth forecast slightly downward in its second economic outlook for the year, reflecting the weakness in Emerging Market Economies (EMEs). The Paris-based grouping predicts global GDP will expand by just 2.9% in 2015, down from 3% forecasted in its Interim Outlook this September. Eight years into the crisis this is the weakest growth since 2009. In its report, the OECD noted that the outlook for EMEs is “a key source of uncertainty at present given their large contribution to global trade and GDP growth”.

    While the OECD predicts that global trade and output will recover in 2016/2017 assisted by stimulus measures in China, in his address at the launch of the report, OECD Secretary General, Jose Angel Gurria, emphasised that this improvement is dependent on a variety of factors, including “supportive macroeconomic policies, investment, continued low commodity prices for advanced economies and a steady improvement in the labour market”.

    In anticipation of the COP21 UN Climate Change Conference in Paris, the OECD’s Economic Outlook report includes a chapter on climate change which calls for urgent action to address this global issue. In his address Secretary General Gurria stressed “we are on a collision course with nature and we have to change course” and urged that  “the fragility of economic recovery cannot be an excuse for policy inaction”.

    Key points from the Report 

    • Global output is expected to grow by 2.9 percent in 2015 (weaker than the 3 percent predicted in the September Interim Outlook), with a modest upturn to 3.3 percent in 2016 (slower than the 3.6 percent forecasted in the September Interim Outlook), provided there is smoothening of the slowdown in China and stronger investment in advanced economies.
    • In contrast to 2011 and 2012 where EMEs were propelling global growth, lacklustre EME growth, including recessions in Brazil and Russia and a slowdown in China have negatively impacted global output and trade growth in 2015.
    • Global trade growth has slowed and is precariously close to levels usually associated with a global recession. Noting the link between trade and economic growth, the OECD pointed out that softening Chinese demand for imports is responsible in part not just for the deceleration of global trade but has negatively affected growth in economies which are linked to the Chinese economy. In its report, the OECD noted that “a more significant slowdown in Chinese domestic demand could hit financial market confidence and the growth prospects of many economies, including the advanced economies”.
    • Growth in the Chinese economy is projected to slow to 6.8 percent in 2015 (up slightly from 6.7 percent in the September forecast), 6.5 percent in 2016 and 6.2 percent in 2017 as the Chinese economy rebalances towards consumption and services activity.
    • Advanced economies remain resilient so far. The growth forecast for the United States economy is 2.4 percent in 2015, 2.5 percent in 2016 and 2.4 percent in 2017. Despite steady recovery in output and in employment, workers pay is still subdued. The OECD has expressed its belief that the time is ripe for the Federal Reserve to raise interest rates. This would be the first interest hike by the US central bank since the recession began.
    • Although recovery in the Eurozone is expected to strengthen, growth projections were downgraded from the September Interim Outlook. Eurozone countries are now expected to grow by 1.8 percent in 2016 and 1.9 percent in 2017 thanks to lower oil prices, accommodative monetary policy and an easing of budget tightening.
    • The refugee surge to the EU is expected to promote labour force growth and help offset the effect of an ageing population but this will depend on several factors, including the skill set of the refugees and current labour market conditions.
    • Unemployment in OECD countries is expected to fall but there will still be 39 million people out of work in OECD countries, six million more before the crisis started.
    • Trade and investment protectionism, inequality and productivity are problems which must be countered in order for growth to be achieved. There is also need for accelerating structural reforms.
    • A well-designed climate change policies can bring an improvement in short term outlook.
    • The OECD will release a policy note looking at the labour market and fiscal impact of the European refugee surge in advance of the G20 summit in Antalya.

    The full report and presentations on the OECD Economic Outlook may be found 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 read more of her commentaries and follow her on Twitter @LicyLaw.

  • Trans-Pacific Partnership Agreement Text Finally Online!

    Alicia Nicholls

    At long last, the full text of the Trans-Pacific Partnership Agreement has finally been revealed. The TPP creates a free trade area encompassing 12 Pacific-rim countries. It has been mired in controversy due to the secrecy of the negotiations and concerns by civil society groups about its intellectual property and investment provisions, as well as their potential impact on the environment, labour, access to medicines etc. In spite of this, several countries, including Indonesia, the Philippines and Colombia have expressed interest in acceding to the TPP. The agreement includes rules on new and emerging trade issues like e-commerce, the environment, telecommunications, financial services, investment, government procurement, state-owned enterprises,small and medium sized enterprises, and competition law.

    A full month after the agreement’s completion on October 5th, the full text of the Agreement may now be accessed on the official website of the US Trade Representative.

    For more in this TPP Article series, click here.

  • Is ALBA a threat to CARICOM integration?

    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.