WHAT’S THE CHANCE OF A CARIBBEAN FREE TRADE AGREEMENT?
Recent years have seen a seismic shift in global politics. The election of US President Donald Trump, Brexit, and ongoing political turmoil in the European Union (EU) that’s seen imbalance between prosperous nations like Germany and embattled nations like Greece, has shaken the foundations of political consensus on globalization that existed for decades previously.
This in tandem with China’s growth. Beijing’s growing global influence has seen many nations looking inwards and to protectionism, seeking to defend against the Chinese government’s currency manipulation, and other economic manoeuvres by the Chinese Communist Party (CCP) that have resulted in an uneven playing field in global trade for many nations.
Within this global dynamic sits the Caribbean, and it is clear that inaction in this area will not suffice. Other nations and regions of the world may be content and able to turn inwards; as a maritime region intent on greater growth and development, the Caribbean must grow trade.
Yet, what is the path to grow regional trade? Is a free trade agreement (FTA) possible in the era of Trump, especially following the Trump administration’s high profile withdrawal of the Trans Pacific Partnership (TPP) free trade deal in Asia? A brief recap of the Asia region to find the path forward for this one is essential.
US President Donald Trump’s greatest fans and biggest detractors would agree on one thing, he is a political phenomenon. Campaigning and winning office on the promise to ‘Make America Great Again’, Trump has been a leading voice in the critique of global free trade.
While his observations surrounding the CCP’s currency manipulation and its impact on global trade won acclaim - with even The New York Times affirming his view - Trump’s critique of the North American Free Trade Agreement (NAFTA) has raised the ire of America’s trading partners in Canada and Mexico. As The Economist detailed earlier this month, the idea of a revised agreement on the Trump Administration’s terms is highly unlikely to win support in Ottawa or Mexico City.
Yet, notwithstanding Trump’s critique of agreements in place, the decision to withdraw America from the TPP may ultimately come to be the landmark moment in his economic legacy. Though the TPP would’ve seen the US build on already strong trade links it held with regional allies like Australia and Japan, it also promised to serve as a guard against Beijing’s economic dominance of the Asian region.
Like Brexit may do for the UK in Europe, the US withdrawal from the TPP - to put ‘America First’ as President Trump aspires - has ultimately diminished American economic leadership (in tandem with diplomacy and defence) influence in the region. Though the TPP is ultimately a trade matter for Asia, it’s illustrative of the dynamics in which the Caribbean may grow its trade.
Just as the TPP has continued with its 11 other members (including Chile, Mexico, Peru and Canada), the absence of the US’s economic power and access to its market will be felt, and greatly diminish the power of the TPP as an FTA. This is a vital consideration for any Caribbean FTA in future: Washington’s participation would be a key target. With this in mind, what are the prospects for a regional agreement as it exists today?
CARIBBEAN FREE TRADE AGREEMENT AS IT EXISTS NOW
At present the US has free trade agreements with the following Latin American nations: Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Panamá, and Perú. FTAs with 10 nations in the region is not insignificant but, even when adding in American territories like the US Virgin Islands and Puerto Rico, it still doesn’t equate to a majority of countries in the region.
Much less a shared consensus in a region with over 30 nations when including Belize, Bermuda and Mexico. These numbers, in tandem with the political climate in Washington, mean any prospect of a regional FTA with Washington’s participation is small.
This reality indicates not only the outlook of the Trump Administration, but the wider world. As Ben Power detailed in Acuity Magazine all the way back in December 2014, FTAs have increasingly lost their lustre as a vehicle of global trade.
This is not only to the sheer number of FTAs now in existence, but the emergence of borderless technologies and businesses like cryptocurrency and blockchain. That was apparent back then in 2014, and it’s only become more apparent now, in 2017.
While the Brexit decision will be remembered as a landmark moment in British politics, the economic reality of an EU exit for the UK has seen many Britons who voted ‘leave’ now thinking twice. The same is true of the British government negotiators, as growing reports suggest a ‘Brexit-lite’ is desired by London that’ll see the UK remain in the common market. This in tandem with the recent election of Emmanuel Macron in France who seeks to champion a renewed European Union.
The experience of the UK and France is illustrative of a guiding star for a Caribbean FTA. Beyond the headlines and political turbulence, the EU remains desirable as a free trade region.
While recent years have shown some of the shortcomings of the EU as an economic model, there still remains the capacity for the Caribbean to learn from mistakes made in Europe.
Ultimately, beyond economics, the EU has undoubtedly achieved its founding aim: to prevent a repeat of a breakdown of relations and a breakout of continental war as seen in World War II. Given the political diversity of the Caribbean there is no prospect of such political unity, but also not the same risk that led to the EU’s founding. It’s in economics that the Caribbean can build upon the EU experience.
LEADING BY EXAMPLE
Recent times have shown vividly that there are no certainties about global trade and geopolitics. This notwithstanding, it is never safe to bet upon any expectation of drastic change. Unless President Trump resigns or is removed, his administration shall lead American trade for at least another three years, and potentially more if he serves a second term. The same dynamic applies to China. Barring unforeseen upheaval, it will continue its growth, and global trading practices.
Accordingly, any negotiation of a free trade agreement in the Caribbean must be done with an acceptance of these challenges, irrespective of how difficult they may be. Rather than looking beyond the Caribbean and awaiting a change in global opinion, there is instead an avenue for regional leadership that could impact on a global scale. Ultimately, if the era of the FTA is held to be at the end, it is clear that the potential for greater regional growth increases.
This has been seen with the TPP in Asia as countries have continued on despite the US withdrawing. This is apparent in Mexico where though a preference to remain in NAFTA may exist, there are preparations underway in the event Washington does exit.
Till now, there have long been talks held and plans made for a greater integration of regional economies. As far back as 1989 the Grand Anse Declaration paved the way for a common market in the Caribbean under the umbrella of the Caribbean Community (CARICOM). The political climate would suggest it is time to revisit that Declaration, and begin anew on its work.
The creation of global value chains boosted trade during the last two decades, but may have run its course in recent years (IMF, 2016)