On November 24, Britain’s Chancellor of the Exchequer (Finance Minister), Alistair Darling, proposed increasing a tax that already impacts negatively the Caribbean and other tourism destinations. He did so ostensibly in the name of protecting the environment, regardless of the effect on the now struggling industry that underwrites most Caribbean economies or the economic implications for a region that is anyway a low carbon emitter.
The announcement is the latest in a long line of European decisions on trade, tariffs and taxation that now quite literally threatens almost every significant export industry that the Caribbean has. Whether it is rum, bananas, sugar, rice, offshore financial services or tourism, changes either underway or being proposed in the name of freer trade or removing special arrangements and exceptions, threaten to strip away the economic underpinning of the region.
Over the last decade, Europe has created the conditions for a perfect economic storm which seems set to hit the Caribbean at just the moment that a deep and prolonged global recession overtakes the regional economy, causing investment and financing to dry up.
It is occurring just as Europe and Cariforum struggle to work out how to implement an Economic Partnership Agreement that places emphasis on policies that reduce tariff based revenues and encourage the region to place greater emphasis on investment and the export of manufactured goods and services.
The British Chancellor’s decision involves increasing significantly the Air Passenger Duty on all travellers buying an airline ticket in the UK to travel to the Caribbean (and elsewhere) by requiring them to pay a tax based on the length of their journey and their class of travel. The tax will increase progressively over the next two years when it will be joined in 2010 by a European scheme that seeks to include aviation into the EU Emissions Trading Scheme, a directive for which is close to completion. This will involve the purchase of licences for all air transport operators to emit carbon.
To those who believe that there is a need to tackle climate change or who oppose air travel – oddly often the same groups that claim to be most concerned about the developing world − this may all sound laudable if it were not for two facts.
The first is that the UK and other governments in Europe can not demonstrate that the sums levied as green taxation are being used for environmental measures. And secondly they have not recognised the negative development impact these policies will have on tourism-dependent, low carbon emitting regions like the Caribbean.
Taxing tourism to the Caribbean and to other similar destinations will hit tourism dependent econo-mies at just the moment when they have to undertake a very difficult adjustment to accommodate externally led policies that remove or erode preferential arrangements.
It is also happening when the threat of changes in regulations has moved beyond sugar, bananas and rice to touch value-added manufacturing and the new services industries that the region had been actively encouraged to develop.
While the challenges facing bananas, sugar and rice are well known and arise from a desire by Europe to gradually end the non-WTO compatible special trade arrangements that it has with former colonies, less well understood is the nature of the threat facing almost all other export industries of which tourism is one.
For example, in the last months there have been clear signs that both Europe and the US are moving to curtail the activities offshore financial services. Value-added products also face a challenge. Rum, just the sort of agricultural value-added consumer product that relates well to the image of the region is in danger of having its small and finite measure of tariff protection in Europe traded away in the latter’s negotiations with Latin nations.
In short, Europe by acts of commission or omission continues to dismantle the post-colonial Caribbean economy without any viable alternative being in place and at the worst possible moment in relation to the international economy and the region’s ability to develop new markets.
The outcome of these short-sighted policies is creating a paradox. Europe and the world more generally is rightly deeply disturbed by the implications of the links between increases in organised crime, narcotics production and transhipment, weapons and people trafficking, political instability and failed states and terrorism. For this reason it has significant counter narcotics and related programmes underway in the Caribbean and has established high levels of security co-operation and co-ordination across the whole region.
Despite this Europe and Washington continue to take economic decisions in a vacuum. They seem not to see that by progressively diminishing the region’s ability to trade in those goods and services that provide a stable underpinning and time to develop competitive advantage, they are contributing to the precise circumstances that support unemployment, crime and instability and the broader problems that so concern them. Moreover in doing so they are creating situations that will cause regional governments to struggle politically as they try to deliver the social and other commitments made to their electorates.
Unfortunately in all of this the Caribbean has been its own worst enemy frequently reacting painfully slowly, over cautiously, bureaucratically and incoherently.
This could change. The Caribbean could inspire its own people by deciding to take a strong regional public stance on issues that matter.
The introduction of a tax on Caribbean tourism by the UK and European measures on carbon taxation offers not only an opportunity in Europe to make clear that enough is enough but to succeed in doing so.
They are issues that are about the new Caribbean economy. They touch every nation in the region. They join up the mainstream in Europe with the diaspora all of whom want to travel at low cost. They relate to development. They involve powerful European companies in the shape of airlines and tour operators. They embrace viable institutions like the Caribbean Tourism Organisation and Caribbean Hotel and Tourism Association and tourist boards that have their own public relations arrangements in Europe.
In short, taxing tourism and carbon create a new and unique issue on which to lobby.
Previous columns can be found at www.caribbean-council.org
