Economies of the Caribbean Community (CARICOM) need to transform their production systems in order to generate an expansion in exports and to take advantage of the market access opportunities provided by the trade arrangements with Latin America and the European Union, according to a new report by the Subregional Headquarters for the Caribbean of the Economic Commission for Latin America and the Caribbean’s (ECLAC).
The publication An assessment of the performance of CARICOM extra-regional trade agreements: an initial scoping exercise undertakes an assessment of the Free Trade Agreements (FTAs) with the Dominican Republic (entered into 1998) and Costa Rica (2004); the Partial Scope Agreements with Venezuela (1992), Colombia (1994) and Cuba (2000), and the Economic Partnership Agreement with the European Union (2008).
The document concludes that in spite of the various trade agreements negotiated, CARICOM export performance has not improved significantly.
According to the study, in 2012 the goods exports were dominated by extraregional markets such as the United States (39.1 %) and the European Union (23.5 %). Exports to Latin America and the Caribbean represented 25.7 % of total, but countries that have signed trade agreements with CARICOM received a small percentage of its products: Venezuela (4.24 %), Dominican Republic (0.30 %), Cuba (0.20 %), Colombia (0.08) and Costa Rica (0.01 %).
In addition, the Caribbean Community’s total goods exports to each of its bilateral partners declined over the period 2001-2013, with the exception of Venezuela due to PetroCaribe initiative. Concomitantly, imports from all the listed countries decreased, except for Venezuela and Dominican Republic. Moreover, the production and exports of Caribbean goods are more specialized in few products: the top ten products account for over 75 % of the subregion’s exports.
The document highlights that this diagnosis is likely attributable to several factors, among them, issues relating to the nature of comparative advantage and trade complementarity between CARICOM countries and their partners, as well as non-tariff measures implemented by the second ones, which may impede trade flows. It also mentions inherent structural gaps of the subregion, particularly in the areas of infrastructure, interconnection and productivity that have limited their ability to transform domestic production systems and increase trade competitiveness.
The publication suggests that for the subregion’s extraregional trade agreements to generate an expansion in exports, countries of the Community may need to address their structural rigidities and transform their production systems, including improving the business environment, as well as broaden existing and future agreements to include a services liberalization regime in order to exploit comparative advantages in key sectors in Latin America with which they have a high level of trade complementarity.