CARICOMCARIBBEAN COMMUNITY AND COMMON MARKET

THE CARIBBEAN COMMUNITY

THE CARIBBEAN COMMUNITY

• Cooperation among Caribbean countries increased under

CARIFTA. Regional leaders recognised the need to strengthen

the areas of cooperation which existed under CARIFTA and to

develop new areas of cooperation. To this end they established

the Caribbean Community and Common Market.

• The Caribbean Community (CARICOM) is an association of

sovereign Caribbean countries with shared and common

values, a common culture, and a common desire to work

together to overcome the challenges which face the region and

to promote the wellbeing of the citizens.

THE TREATY OF CHAGUARAMAS –

THE ORIGINAL TREATY

• The Caribbean Community was established by the Treaty of

Chaguaramas which came into effect on 1st August 1973.

• The treaty created two distinct institutions:

1. The Caribbean Community

2. The Caribbean Common Market

• The agreement was signed separately and Caribbean countries

could choose membership of either the Community or the

Common Market or both. The Bahamas chose to be a member

of the Community only.

• The treaty also created the CARICOM Secretariat as the

principal administrative organ of the Community.

MEMBERS OF THE CARIBBEAN COMMUNITY

• The Caribbean Community comprises the twelve countries

which had been members of CARIFTA, plus the Bahamas,

Suriname, and Haiti.

• The British Virgin Islands (1991), the Turks and Caicos

Islands (1991), Anguilla (1999), the Cayman Islands (2002),

and Bermuda (2003), which are still UK overseas territories,

are associate members of CARICOM.

• Thus there are 15 member states and 5 associate members.

Member states of CARICOM

1. Antigua

2. Bahamas (1983 joined Community)

3. Barbados

4. Belize

5. Dominica

6. Grenada

7. Guyana

8. Haiti (2002)

9. Jamaica

10.Montserrat

11.St. Kitts/Nevis

12.St. Lucia

13.St. Vincent and the Grenadines

14.Suriname (1995)

15.Trinidad and Tobago

ASSOCIATE MEMBERS

1. British Virgin Islands (1991)

2. Turks and Caicos Islands (1991)

3. Anguilla (1999)

4. Cayman Islands (2002)

5. Bermuda (2003)

THE GOVERNANCE STRUCTURE OF CARICOM

Two principal governing organs:

1. The Conference of Heads of Government

(the highest organ of the Community)

2. The Common Market Council of Ministers

(the second highest organ of the Community)

– 13 institutions, each made up of a minister from each

member state, were created to develop policies for

cooperation in areas that would promote human and social

development

One administrative organ:

The CARICOM Secretariat (headed by a Secretary General)

THE OBJECTIVES OF CARICOM UNDER

THE TREATY OF CHAGUARAMAS

The objectives of the Caribbean Community (CARICOM) are intended

to deepen the integration process among the member states:

1. Increasing free trade in regionally produced goods among members

of the Common Market beyond the level of CARIFTA, and also

encouraging members to pursue common trade policies when

dealing with non-member states. TRADE LIBERALIZATION

2. Encouraging the independent member states to adopt, as far as

possible, a common policy when dealing with non-member states

and international organisations. COMMON POLICIES

3. Encouraging member states to share the costs of establishing and

operating organisations which provide common services for the

region in areas including education, culture, health ,

communications, and industry. FUNCTIONAL COOPERATION

CARICOM(two distinct institutions)

CARIBBEAN COMMON MARKETCARIBBEAN COMMUNITY

Two governing organs:

1. Conference of the Heads of

Government

2. Common Market Council of

Ministers

One administrative organ:

CARICOM Secretariat

(headed by Secretary General)

Treaty of Chaguaramas

• Signed on 4 July 1973

• Operational on 1 August 1973

4 signatories:

• T&T, Jamaica, Barbados, Guyana

• Others joined afterwards

1. Antigua

2. Bahamas

3. Barbados

4. Belize

5. Dominica

6. Grenada

7. Guyana

8. Haiti

9. Jamaica

10. Montserrat

11. St. Kitts/Nevis

12. St. Lucia

13. St. Vincent and the Grenadines

14. Suriname

15. Trinidad and Tobago

1. Antigua

2. Barbados

3. Belize

4. Dominica

5. Grenada

6. Guyana

7. Jamaica

8. Montserrat

9. St. Kitts/Nevis

10. St. Lucia

11. St. Vincent and the Grenadines

12. Suriname

13. Trinidad and Tobago

The Bahamas did

not join the

Common Market,

and Haiti applied

but was refused

membership

Objectives:

1. trade liberalization

2. functional cooperation

3. common policies

for dealing with

non-member states and

international

organizations

THE CARIBBEAN COMMON MARKET

CUSTOMS UNION• According to the GATT 1994, a Customs Union is an

agreement among nation states in which substantially all restrictions to trade among them are removed and a common tariff and the same regulations of commerce are applied by all of the Members to the goods imported from non-members.

• Though called a Common Market, in practice CARICOM was really a customs union where in addition to eliminating the barriers to trade in goods, the Member States established a Common External Tariff.

• This Common External Tariff is simply a harmonized schedule of duties that would be applied to goods produced outside of the region.

• The net effect was that the Common Market area was protected for goods produced within the region.

CUSTOMS UNION

• As with CARIFTA, CARICOM allowed for special treatment for certain sensitive industries in the LDCs (Belize and the OECS). Sensitive goods as identified by the LDCs enjoyed duty free access to the entire market, while the same goods produced in the More Developed Countries do not enjoy similar treatment – that is to say the rules of origin or tariff treatment were suspended for such goods.

• There are no import duties on goods of CARICOM origin. Tariffs and quantitative restrictions in all Member States are removed.

• There are agreed regional standards for the production of goods throughout the Region. This is a major incentive for producers/manufacturers to aim at a high standard of products.

• Manufacturers are able to get their goods to over six million (14 million if Haiti is included) people in the Caribbean.

THE CARIBBEAN COMMON MARKETThe Common Market was formed as a response to changing rules governing

international trade:

• Import restrictions were being phased out

• Preferential trade arrangements were being phased out

Caribbean producers of bananas and sugar:-

– lost their preferential trading arrangements which they had with Europe

– Now had to compete with more efficient producers of these products

– Had to prepare for increased competition from foreign imports in their

domestic and regional markets.

➢ Our exported goods now faced fierce competition from foreign producers

(threat to our export markets)

➢ In our own countries, we were now facing increased competition from

foreign imported goods which were often cheaper and of a higher quality

(threat to our local and regional markets)

St Lucia

Mexico

Phillipines

Germany

Ecuador

Colombia

5%

30%

30%

25%

20%

30%

0%

0%

0%

0%

0%

0%

Preferential trade arrangements being gradually phased out:-a) Increased competition

in export markets from foreign producers

b) Loss of guaranteed export markets

Before

WTO

After

WTO

CARICOM: CARIBBEAN COMMON MARKET (1973)

• Caribbean producers therefore needed an arrangement which would enable them to become competitive, in order to sell in international markets without the help of trade preferences, and to sell in the region without having to rely on trade restrictions on foreign imports. These factors led to the establishment of the Caribbean Common Market.

• The Caribbean Common Market represents the second stage in the economic integration of the Caribbean. All the members of the Caribbean community except the Bahamas and Haiti were members of the Common Market. The Bahamas chose not to be a member, while Haiti's application for membership was not accepted.

OBJECTIVES OF THE CARIBBEAN COMMON MARKET

• The Caribbean Common Market was established to remedy a major weakness of CARIFTA.

• CARIFTA was a very loose economic grouping in the sense that each member state was free to charge its own individual rate of duty on foreign imports. Some countries did not charge rates high enough to allow some goods that were produced in the region to compete with extra-regional imports on the regional market.

• This meant that the regional market was not protected from foreign competition.

CARIFTA country Import duty

Antigua-Barbuda 20%

Barbados 25%

Guyana 30%

St. Lucia 10%

Imaginary rates of import duty charged

on an item by CARIFTA countries

COMMON EXTERNAL TARIFF• The Caribbean Common Market encouraged the member

states to pursue a common policy to protect the industries from

competition from extra regional imports by imposing a

Common External Tariff (CET). The CET was the main

feature which made the Caribbean Common Market different

from CARIFTA.

• The CARICOM CET is a list of the common rates of duty that

the members of CARICOM have agreed to apply to goods

imported into CARICOM countries from countries which are

not members.

• One advantage of using a CET is that it can give Common

Market producers a chance to compete by making imports

from outside the Common Market more expensive.

OBJECTIVES OF THE COMMON MARKET

• In addition to the CET, the Common Market Treaty contained

provisions for the removal of restrictions to the establishment

of businesses, provision of services, the movement of capital,

and the coordination of economic policies. However, these

provisions were not implemented.

• The objectives of the Caribbean Common Market included:

– increasing and regulating free trade among member states

and sharing the benefits from increased trade fairly

– increasing the total output of goods

– promoting the economic development of the member states.

SUCCESS OF THE CARIBBEAN COMMON MARKET

• Just like CARIFTA, the Common Market was

successful in increasing intra-regional trade.

• During the period 1973 - 2001 intra-regional

exports grew from EC$290.5 million to EC$

3709.7 million.

• In 2001 intra-regional exports represented

approximately 20% of the region’s total

exports.

GLOBALIZATION AND TRADE LIBERALIZATION

GLOBALIZATION AND TRADE LIBERALIZATION

• CARICOM countries are members of the World Trade

Organisation (WTO) and had signed the agreement to promote

free trade globally.

• CARICOM countries could no longer rely on the use of high

tariff barriers or other forms of restriction (quotas, licenses,

customs duties) to deliberately keep foreign imports out of

their markets.

• Neither could they rely on preferential trade agreements with

European countries to protect their agricultural exports of

sugar and bananas. These preferential agreements had to be

abolished as part of the trade liberalisation process.

GLOBALIZATION

Disadvantages

1. Caribbean consumers now have access to a wider variety of cheaper imported goods

2. Regional consumers exposed to foreign advertisements on global media (cable tv) developing a taste for foreign products

3. Producers face the real possibility of losing their regional and extra regional markets and being forced out of business by more efficient foreign companies and cheaper goods if they fail to become competitive.

Advantages

1. Opportunity to export to new and larger markets

2. Increased employment if they can increase trade

3. Increased investment as a result of the removal of the restrictions to the free flow of capital

4. Improved standard of living

5. Better quality of regionally produced goods and services

CARICOM SINGLE MARKET AND ECONOMY (CSME)

The establishment of the CARICOM Single Market and Economy represents the third and final stage of the economic union of the Caribbean.

It also represents the most challenging stage of the integration process because it requires participating member states to make more generous economic concessions than any previous regional economic integration strategy.

WHY CSME WAS NEEDED

• The Caribbean Common Market only permitted the free movement of goods of CARICOM origin within the region.

• Restrictions to the establishment of businesses, the provision of services, and the movement of capital and labour still remained. This prevented scarce factors of production from moving to the countries where they were needed.

• This in turn prevented Caribbean producers from producing their goods at the best possible prices to enable them to compete easily in international markets.

• CARICOM leaders decided that they had to transform the Common Market into a Single Market and Economy in order to prepare the region for the challenges and opportunities resulting from trade liberalisation and globalisation .

THE REVISED TREATY OF CHAGUARAMAS (2001)

The 1973 Treaty of Chaguaramas was revised in 2001 and CARICOM was renamed the CARICOM Single Market and Economy (CSME).

The existing Common Market was to become a Single Market and Economy in two phases:

• Phase 1: the CARICOM Single Market (CSM) – 2006

• Phase 2: the CARICOM Single Economy - scheduled for 2008 but still not implemented.

CARICOM SINGLE MARKET AND ECONOMY (CSME)

CARICOM SINGLE MARKET (CSM)

1. increasing trade in regional goods and services

2. increasing the output of goods and services

3. promoting competition among CARICOM firms

4. promoting the most efficient use of the region’s resources

5. improving the welfare of CARICOM citizens

- Regional Development Fund established to assist LDCs

CARICOM SINGLE ECONOMY (CSE)

1. corresponding company, property, and intellectual property laws

2. common foreign investment policy

3. common fiscal (taxation) policies

4. common monetary policies

5. similar strategies in developing their industries and small businesses

6. a common currency

Key elements of the Single Market and Economy

1) Right of Establishment

2) A Common trade policy

3) A Common External Tariff

4) Free circulation

5) Free movement of goods and services

6) Free movement of capital

7) Free movement of labour

8) Harmonisation of Laws and common economic, monetary and fiscal measures

Key elements of the Single Market and Economy

1. Right of Establishment - to permit the establishment of CARICOM owned businesses in any Member State without restrictions;

2. A Common trade policy - agreement among the members on matters related to internal and international trade and a coordinated external trade policy negotiated on a joint basis;

3. A Common External Tariff - a rate of duty applied by all Members of the Market to a product imported from a country which is not a member of the market;

4. Free circulation - free movement of goods imported from extra regional sources which would require collection of taxes at first point of entry into the Region and the provision for sharing of collected customs revenue;

5. Free movement of goods and services -through measures such as eliminating all barriers to intra-regional movement and harmonising standards to ensure acceptability of goods and services traded;

6. Free movement of Capital - through measures such as eliminating foreign exchange controls, convertibility of currencies (or a common currency) and integrated capital market, such as a regional stock exchange;

7. Free movement of labour - through measures such as removing all obstacles to intra-regional movement of skills, labour and travel, harmonising social services (education, health, etc.), providing for the transfer of social security benefits and establishing common standards and measures for accreditation and equivalency.

8. Harmonisation of Laws and common economic, monetary and fiscal measures

OBJECTIVES OF THE CARICOM SINGLE MARKET (CSM)

1. Free movement of goods produced in CARICOM

2. Free movement of capital and technology

3. Free movement of labour: allowing skilled workers such as University graduates, media workers, sportspersons, musicians, artists, managers, supervisors, and service providers to live and work in another member state without a work permit

– CARICOM passport

4. Right of Establishment of CARICOM businessesGranting Caribbean citizens and existing Caribbean businesses the right to set up businesses in any member state without restrictions

5. Imposition of the CET

OBJECTIVES OF THE CARICOM SINGLE ECONOMY (CSE)

The CSE is supposed to create a single financial space involving all the members of CARICOM. The objectives of the CARICOM Single Economy are to have member states:

• pursuing corresponding revenue (taxation) and spending policies (fiscal policies)

• pursuing corresponding policies to control the availability of spending money to businesses and consumers (monetary policies)

• adopting is single currency

• adopting common customs and company laws

• pursuing similar development policies in the major industries such as agriculture, tourism, manufacturing, and fisheries.

FACTORS DELAYING THE IMPLEMENTATION OF THE CARICOM SINGLE ECONOMY

1. NO COMMON CARICOM CURRENCY: The creation of the CARICOM Single Economy requires that the member states give up their national currency and use a new common regional currency. No agreement has been reached on the common currency.

2. NO COMMON FISCAL AND MONETARY POLICIES: Some governments still think that it may be necessary for them to pursue their own monetary and fiscal policies.

3. FOREIGN EXCHANGE CONTROLS: Some CARICOM countries still impose foreign exchange controls. These are measures whereby their Central Banks limit the conversion of national currencies into foreign currencies. Currently, CARICOM citizens are not able to freely exchange the currency of one member state into the currency of another member state.

• The CARICOM Single Market and Economy (CSME) is operating at about sixty-four percent (64%) overall level of compliance.

• There are 15 CARICOM Member States. Thirteen are currently actively participating in the CARICOM Single Market & Economy:

RIGHT OF ESTABLISHMENT• A self-employed person from a CARICOM Member State has the

right to engage in non-wage-earning activities of a commercial, industrial agricultural or artisanal nature.

• Such nationals may create and manage economic enterprises, including any type of organization which they own or control (e.g. sole proprietorship, company, etc) for the production of or trade in goods, or the provision of services. Nationals exercising this right may move to another Member State on a permanent basis.

• Affiliated with the right of establishment is the right to move the Technical, Supervisory and Managerial staff of such entities, as well as their spouses and immediate dependent family members. Persons within any of these five (5) named classes are not allowed to move in their own right unless they fall under one of the afore-mentioned nine (9) approved categories (where the member state recognizes these categories).

FREE MOVEMENT

• A CARICOM National entering another Member State with a Skills Certificate issued by another Member State must be granted a definite entry of six months and has the right to work immediately. A CARICOM National entering with a Skills Certificate issued by the receiving country must be granted an indefinite entry.

• It is advisable that Immigration Departments use stamps to indicate the current stay and status in the passport of the CARICOM National. In the case of definite entry the stamp may read “FREE MOVEMENT DEFINITE ENTRY – RIGHT TO WORK – VERIFICATION REQUIRED” and in the case of the indefinite entry “FREE MOVEMENT INDEFINITE ENTRY –RIGHT TO WORK”.

OBJECTIVES OF THE CARICOM SINGLE MARKET (CSM)

1. Removing barriers to the trade in goods and services of Caribbean origin

2. Allowing Caribbean citizens to move their financial capital and technology between member states without any restrictions

3. Allowing skilled workers such as university graduates, media workers, sportspersons, musicians, artists, managers, supervisors, and service providers to live and work in another member state without a work permit

4. Granting Caribbean citizens and existing Caribbean businesses the right to set up businesses in any member state without restrictions; this provision is known as the right of establishment

5. Agreeing on regional standards for the production of goods throughout the region, to ensure that they are of acceptable quality - to encourage investor and consumer confidence in regionally produced goods

6. Imposing a uniform rate of duty (CET) on goods imported from countries which are not members of the CSME

7. Pursuing a common regional and international trade policy

Image sources

• Flags: http://drealfmgrenada.com/wp-content/uploads/2019/01/98890542-caribbean-community-member-flags-vector-icon-set-flag-buttons-of-caricom.jpg

• https://caricom.org