FD 13A Law Governance & Society

The CARICOM Single Market & Economy

1. The fundamental premise for regional integration in the Caribbean has been
the promotion of economic development. The nature of the relationship between
integration and economic development has been altered over the years but the
relationship itself has never strayed far from the fundamental premise.

2. Trace the background of events relating to the formation of the CARICOM Single
Market and Economy (CSME). What are the likely benefits to accrue for the
CARICOM Member countries?

3. Should the CSME will affect your life will this be negative or positive?

The overall objective of todays discussion on the CARICOM Single Market & Economy
is to enable you to understand the issues surrounding the move towards creating this
Institution and Trading Bloc. To that end you should be able to appreciation and answer
the above printed statement and questions respectively.
History of Caribbean Integration

1. West Indies Federation

The Bristish West Indies Federation was the brainchild of the colonial powers.
This Federation consisted of ten (10) British Colonial Territories
It was suppose to be a Political Union [Political federation that would unite the
various territorites and eventually culminate in the political independence of the
region.]
This was not the will of the Caribbean region
The Federation failed in 1961 with the withdrawal of Jamaica
Trinidad & Tobago was also not in support of the Federation. A Customs Union
which was integral to the Federation was not supported by T & T.

2. Caribbean Free Trade Association (CARIFTA)

In 1965 leaders of Barbados, British Guyana and Antigua met for the 1st Heads of
Govt Conference.
The Caribbean Free Trade Association was established with the allowance to
include as much Commonwealth countries as possible
The objective of this was to create a a viable economic community of
Caribbean Territories.
In 1968 T&T, Jamaica, Dominica, Grenada, St. Kitts & Nevis, Aguilla, St, Lucia,
St. Vincent and Monserrat joined
In 1968 and 1969 respectively the Commonwealth Regional Secretariat and
Caribbean Development Ban k was established.

3. Caribbean Community & Common Market (CARICOM)

1972 at the 7th Heads of Govt Conference it was decided that the Caribbean
Community and Common Market should be established
In 1973 the Treaty (Legal Instrument) establishing the CARICOM, the Treaty of
Chaguaramas was signed by Jamaica, Guyana, Barbados and T&T. it took effect
on August 1.
In 2000 Haiti joined.
The Community was to promote the integration of the economies of the
member states, coordinating foreign polices of the independent members and a
functional cooperation in areas of social and human endeavour.
The Community undertook a programme of tariff removal and lowering for intra-
regional trade. This was done while creating the framework for the application of
a Common External Tax (CET).
The Community sought to reorient the regions economies, however, this was still
inward looking and it focused primarily on Trade in Goods.
This programme reorientation to create economies based in export and a market
conducive to invetsemnt could not hold in the framework of the Common Market.
 A single entity with greater collaboration was needed.

4. CARICOM Single Market & Economy (CSME)

In 1989 at the Heads of Govt Conference (HOG) it was decided to establish the
Single Market & Economy.
The Treaty of Chaguaramas was revised in order to accommodate the CSMEs
aims.
The Revised Treaty of Chaguaramas Establishing the Caribbean Community
including the CARICOM Single Market & Economy was adopted at the 22nd
HOG Conference July 5, 2001.
The rationale behind the developmet of the CSME is the realization of the need to
strengthen the region as a unit I orderto adequately respond to the challenges
and opportunities presented by the changes in the global economy.
The Revised Treaty now forms the foundation of the CSME and the Caribbean
Community.

Impetus for the creation of the CSME

1. The Common Market was inward-looking to the neglect of extra regional trade.
Now in the age where removal of tariffs is the order of the day market access is
integral to a countrys or regions economic policies. Neglecting this was a chronic
weakness of the Common Market.

2. The Common Market did not allow for the diversification of the regions
economies. The Common Market focused on Trade in Goods and Goods at their
ends stage. Again neglecting Trade in Services and other stages of production.

3. This was further debilitating to efforts of economic development as the economies

in the region are competing rather than complimentary.

4. The broad practicing of neoliberal economic polices through the international

community was a inherent problem to small economies, moreover, undiversified
ones. Caribbean nations needed to pool their resources and create a bigger market
in order to increase their share of the international political economy.

5. The creation of the EU adversely affected our trading agreements with our
European counterparts.

6. WTO programme of removal of tariff and non-tariff barriers to trade (free and
Fair Trade). Blow to small states which rely heavily on tariffs for govt revenues.

7. Free Trade Area of the Americas (FTAA) slated to take effect about the same time
as CSME. This will create a hemispheric trading bloc, a possibly more hostile
economic climate for small developing states.
 8. North America Free Trade Area (NAFTA) this literally killed the textile in the
Caribbean; this led to the loss of hundreds of jobs and a reduction in govt
revenues.

9. The Common Market never allowed for the high level of collaboration and
economic harmonization that was necessary for the region to adequately respond
to its challenges and opportunities.

Rationale for the Creation of the CSME

Caribbean state leaders have always realized that they are a small entity relative to
other states in the region and that is something they have been trying to contend
with since the advent of mainstream globalization

They have realized that going it alone in an increasingly tumultuous international

system is detrimental to the hopes of having a developed region. Not only is the
region small as a market place but also in regards to the political influence it is
able to wield in the international context

The singular opportunity to organize itself for efficient and competitive

production and trade in a globalized world.

Deeper collaboration in order to effective address challenges posed by changes in

the international trading system

The CARICOM Single Market & Economy

What is the CSME?

The Single Market: - on becoming a reality will allow CARICOM goods, services,
people and capital to move throughout the Caribbean Community without tariffs/barriers
and without restrictions so as to create a single large economic space, and to provide for a
harmonious economic and trade policy for all CARICOM States;

The Single Economy: - will facilitate the coordination and harmonization of inter alia
foreign exchange and interest rate policies, tax regimes, laws and common currency,
among other things so as to achieve more homogenous economic performance across
CARICOM member states

In other words the CSME is a regional framework arrangement which is meant to foster
the economic development of the member states in an increasing globalised international
system.

The Revised Treaty comprises nine (9) Protocols or Agreements, when all nine takes
effects or is implemented then the CSME will also have take effect.

The Nine Protocols

Protocol I - Restructuring of the Organs and Institutions of the Community

This Protocol saw to the creation and restructuring of new and existing organs
respectively, in order to ensure effective functioning of the CSME.

The Conference of Heads of Government is the highest decision-making organ of the

Community and h the Community Council of Ministers, the second highest Organ. Other
organs are:

The Council for Finance and Planning (COFAP);

The Council for Foreign and Community Relations (COFCOR);

The Council for Trade and Economic Development (COTED) and;

The Council for Human and Social Development (COHSOD)

AT the Last HOGC held in Montego Bay, Jamaica a CARICOM Commission has been
proposed. This broad objective of this would to see to the implementation of
agreements and the fast-tracking of the CSME. As to where this Commission falls in
the hierarchy it is still being debated as it will require member states to give up some
sovereignty, which is a sore point in CARICOMs history.

Protocol II - Rights of Establishment, Services and Capital

The objective of this Protocol is to start Trade in Services, it is meant to also create an
environment that is conducive to trade and investment. The Rights of CARICOM
National to establish business enterprises throughout the Community is also enshrined in
this Protocol.

This Protocol supports the Free Movement of people and the issue of non-discrimination
between CARICOM Nationals.

Protocol III - Industrial; Policy

This Protocol governs the industries behavior. Such as the creation of industries which
has branches or subsidiaries in member states. It also addresses the issue of vertical or
horizontal integration of firms, which makes also relevant to production. The Protocol is
geared at ensuring that the region is internationally competitive in this regard.

Protocol IV - Trade Policy

The Trade Policy Protocol serves to bring under the umbrella of the Revised Treaty all
other trade arrangements relating to Trade within the region. These would include the
Rules of Origin, meaning how a good manufactured in or outside of the region will b
treated. The CET is also addressed in this Protocol, the Customs Union, Safeguards and
relations with third parties (non CSME countries) are also addressed herein.

Protocol V - Agricultural Policy

As was previously stated to economies in the region are competing, this Protocol serves
to strengthen collaboration in this sector among member states in order to promote
diversification of the agri-based economies. To and end that will enable the member
states to be more competitive in the international market.

The Protocol on a whole seeks to make the agricultural sectors in each member state
more efficient and environmentally conscious. The health of the consumer and the
standards of the products are also addressed.

Protocol VI - Transportation Policy

This Protocol speaks to the issue or adequate, safe and competitive travel services in the
region. An element of the CSME that is very important, for without travel the CSME may
never create the results it was intended to create.

Protocol VII - Disadvantaged Countries, Regions, and Sectors

Here provisions are created for supporting Less-Developed Countries and micro-states
like the OECS. Support measures will include:
(1) Financial assistance to address economic dislocation arising from participation in the
CSME.

(2) Transitional arrangements to facilitate adjustment to the competitive requirement to

the CSME.

(3) Programmes to attract investment and to encourage product and sectoral

diversification; programmes aimed at promoting infrastructural development.

(4) The establishment of a development fund.

Protocol VIII - Competition Policy, Consumer Protection and Dumping and

Subsidies

The Protocol provides for consumer protection and the harmonization of competitions
policies in the Community.

Protocol IX - Dispute Settlement (Protocol IX)

In this Protocol the means for the settlement of disputes in there

varying forms is set out.

Most important in this Protocol it is conferred upon the Caribbean Court of Justice the
Exclusive Jurisdiction over anything relating to the interpretation of the Revised Treaty.

***************************************

When the nine (9) Protocols are implemented it will foster the harmonization of the
economic policies within the region, as such, converting the region into a single
economic entity.

The CSME will create allowance for the free movement of good, services and varying
factors of production without any restriction.

Foreign exchange, interest rates policies, tax regimes; laws inter alia will be coordinated
for the benefit of the participating countries.

In the international system the region will be seen as a single economic entity and the
rules of the WTO and FTAA will apply in that context.

The CSME will be able to focus in both intra-regional and extra-regional trade unlike it
predecessor. This will also include Trade in Services and goods at different stages of
production, which will facilitate the creation of industries.

The CSME creates an opportunity for the economy to fully market driven, however, the
Public Sector remains a player by regulating the field through it policies.
The CSME framework is intended to facilitate the full employment of all factors of
production. It SHOULD lead to the accelerated, coordinated and sustained economic
development of the region.

A long term objective of the CSME is to create a Monetary and Fiscal Union. This is not
clearly indicated in the Protocols.

Proposed Benefits of the CSME

1. Increase market access

The exports of each member will also be enhanced, as there is unrestricted access to
a greater market.

2. Increase scope for the diversification of the economies

The facilitation of services sector will reduce the reliance on the exportation of
primary goods

3. Increase quality of products

The competition among firms in the region is likely to increase due to fight for
greater market share; as a result standards of products will increase.

4. Enhanced employment.

With the Right of Establishment and the Free Movement of people the factor of
production; labour/human resource will be allowed to traverse the region for
employment. As such, the levels of unemployment will be reduced thus a reduction
in the strains on the governments purse.

5. Increase standard of living

This (enhanced employment) will result in an increase in the average standard of

living of each person in the Community, and more for the governments to spend on
providing vital public services.

6. Enhanced Agricultural Sector

With the Agricultural Policy Protocol the efficiency of these national sector will be
improved and with it the level of production. This however, will not alleviate the
international tensions regarding Agricultural subsidies. Sharing of technology
through functional cooperation.

7. Improved Transportation
The transportation sector of each state will be more important as the increase in
flows of economic variables will require better infrastructure of the means of
transportation. This will also require better management. This can only lead to an
improvement in the road networks in the region, something that is integral to
industrialization and development. Regional transportation through air and
maritime travel will experience improvement as that is necessary in order to meet
the increased demands that likely to occur.

8. Facilitation of Entrepreneurship

As the barriers to trade in goods and services will be removed the inflows of
economic variables will increase, resulting in the fostering of entrepreneurship and
the scope for joint ventures and mergers of firms in the region.

9. Streamlining of Education policies

A regional Accreditation body will be developed in order to effective address the

issue of freedom of Movement to work in member states.

10. Reduced Vulnerability of economies

The liberalization of the services industry will lead to a diversification of the

countries economy; hence the vulnerability level will be reduced

11. Increased prospect for the full employment of the endowments of the region.

12. Increase internal market of 15 million

Due to removal of Barrier to trade and harmonization of economic policies the

region will be seen as a Single Market.

13. Increase scope for investment

A market of 15 million in conjunction with the news policy as a result of the

Protocols will create a more attractive environment for investment whether by
CARICOM National or Foreigners.

14. Greater international recognition

The region will have greater voice in the international community as we will now
have fifteen nations speaking with one voice. This sort of collaboration has been
most successful in the UN and the FTAA through the CRNM.

15. Increase international support

 By this I mean support from the fellow CSME member and CARICOM
institutions like the Development Bank and CCJ.

Negatives to the CSME

1. The member government refuses to make the requisite concession, such as

giving up some of their sovereignty. Though, stated that they are fully
committal to the implementation of the CSME. In practice they are non-
committal

2. The CSME is seen as a precursor to political integration. There is no single

view on this. For Trinidad& Tobago wants political integration does not. This
may enhanced then non-committal trait of our Head of Government

3. Because of the pervasiveness of the requisite changes that are needed for the
implementation of the CSME. Should it fail the experience will be near
catastrophic in respect of restructuring and reorienting the economies.

4. The Dispute Settlement Mechanism has encountered choppy waters such to

the extent that its credibility may be scathed already without the court being
inaugurated. A weak dispute settlement mechanism can very much
undermine the effective functioning of the regulatory framework of the
CSME.

5. There is no provision for the sanctioning of member countries who flout the
undertakings of the Community. In other words do not comply with the
rules. E.g in the EU if member stated breaches the Growth & Stability Pact
(deficit exceeds 3% of GDP) then they will be fined 1% of the GDP. This not
anything similar does not exist in the CSME schema.

6. There is not solid independent mechanism to protect the interest of the

Community. The CARICOM Commission has been proposed by PM Ralph
Gonzalves, but it is yet to be implemented.

7. The objective of the single currency may be impractical because of the

varying levels of economic development enjoyed by the member countries
and the different fiscal policies. E.g the dollar in Jamaica in pegged to the US
dollar and is approx. 62:1, in Trinidad it is approximately 6:1 and in
Barbados is it 2:1. The exchange rate in Jamaica and Trinidad is not fixed
while in Barbados it is.

8. It is argued that if harmonization does not take place before the

implementation of the CSME it will be nothing more than the Common
Market with Trade in Services.
 9. The low levels of production in the region undermines the rationale for
having a CSME.

10. The very low level of intra regional trade also undermines the implied view
that member countries are partners and good for each. The member
countries partake in extra-regional trade much more than they do in intra-
regional. This fact buffers the view that CARICOM is just a group small
island hoping to count simply on the increase domestic market to enhanced
extra-regional trade.

11. There is no incentive for the member countries to trade more with their
CARICOM counterparts, when there exist a better trading relationship
between e.g. Jamaica and the US.

12. though the Common External Tariff has been an item on the agenda since the
1970s it is yet to be implemented.

13. the are 75 major pieces of legislations that are still outstanding

14. US$30 million is needed to complete the transition. This is yet to be secured

15. The Free Movement of Capital, Labour and Goods is the centre piece of the
CSME and yet there are still 350 forms a restrictions still existing within the
Community. Jamaica is the only country to date that has gone a head and
remove the requirement of work permits for CARICOM nationals.

16. The still exist financial and institutional capacity limitations.

Caribbean Court of Justice

Can the CSME function effectively without the CCJ?

The Caribbean Court of Justice as established by the Revised Treaty has two
functions in the Community.

Article 211 of the Revised Treaty states that the Court shall have compulsory and
exclusive jurisdiction to hear and determine disputes concerning the interpretation and
application of the Treaty, including:

(a) disputes between the Member States parties to the Agreement

(b) disputes between the Member States parties to the Agreement
and the Community
(c) referrals from national courts of the Member States parties to
the Agreement
 (d) applications by persons in accordance with Article 222

concerning the interpretation and application of this Treaty.

Expressly stated in this Article is the dual purpose of the Court

1. The Court is intended to replace the UK based Privy Council, which has final
appellate jurisdiction for most CARICOM countries.

2. The Court will serve as the final arbiter in trade disputes arising from the
CSME.

As such the Court will function as both municipal court and an international
tribunal

The Controversy surrounding the establishing of the Court is based in its appellate
jurisdiction. Making specific reference to the competence of the Regional Jurists to
sit on the Court and the process by which the Court is being established.

The Second function of the Court has not resulted in controversy not contention.
For without a tribunal to settles disputes among or between members states the
CSME will not be able to function effectively.

The Court is slated to be inaugurated in April 16, 2005, national legislative

instruments are still being debated in order to meet this deadline.

You can find by referring to the

1. Daily Gleaner
2. Daily Observer

3. Ministry of Foreign Affairs Website www.mofaft.gov.jm

4. www.caricome.org

Caribbean integration like that of the EU has shown progressive signs of deepening and
widening. Those of us who impress upon our underrating of IR theories would be able to
better appreciate the Neo-Functionalist perspective. Barring the West Indies Federation
each subsequent stage in Caribbean integration is deeper and wider and requires of
participating governments to giving-up of a bit of their sovereignty. Inherent in this need
for integrations is the very reason integration has been progressing at a snails pace for
going 30 + years.
a. Though there is the move in the international community to remove barriers to
trade and effect a regime a free trade (Most-Favoured Nation Rule of the WTO)
when a country is in a trading bloc the rule is not applied squarely on its head.
The countries in the trading bloc are allowed to treat with their counterparts
differently that they would external countries.

b. St. Vincent gains 70% of government revenue from duties how will the cope with
the removal and tariff barriers to trade?