The view from Europe
In early December the President of the Domi-nican Republic, Leonel Fernandez, was in Europe. His visit took in Portugal and France while that of his Foreign Minister Carlos Morales also included Germany.
The visit to Portugal was in the context of Nineteenth Summit of Ibero-American Heads of State, but like the rest of his European visit involved the aggressive identification and courting of potential investors. In Portugal the interest was in electricity, renewable energy, construction, circuit manufacturing and low cost housing with an additional focus on the possibility of undertaking joint operations in third countries.
In meetings with the French President Nicolas Sarkozy, the emphasis was also on investment after discussions on narcotics interdiction, climate change and Haiti. President Fernandez discussed France helping finance a second metro line for Santo Domingo and the construction of a Santo Domingo-Santiago rail service; a project in which a number of major French transport companies are interested. Elsewhere he met with thirty-five of France’s biggest companies for exchanges that centred on investment in tourism, energy, railways, technology, banking, perfumery and telecommunications.
All this is worth recounting because despite the Domini-can Republic’s serious economic problems, its government is continuing to work with its business community on a market-led approach towards development, that involves investment and trade liberalization.
In contrast, just before the Dominican Republic President’s visit to Europe, Caricom’s Chairman described to journalists an economic model that appeared to take a very different direction.
On November 29, Guyana’s President as the current Chairman of Caricom, speaking in Trinidad said that a “new Caricom economic model” was required “to meet the peculiarities of the region” in the face of the global economic crisis.
President Jagdeo suggested that the new model that would be viable for the Caribbean would be one that sees debt relief for middle-income countries; special and differential treatment in the global trading system; and dedicated instruments from the multilateral financial institutions to target the special vulnerabilities of the region through for instance a contingent line of credit to deal with hurricanes and other natural disasters.
In a statement that seemed to belatedly reverse aspects of what Caricom has negotiated with Europe, or accepted at the World Trade Organization and in other trade negotiations, Caricom’s Chairman suggested that a changed model was required to build a viable medium-term economic strategy.
The present economic model of the Caribbean, he suggested, was not sustainable. The capacity of the region to adopt the anti-cyclical spending approach of more developed nations had been limited because of the hugely indebted nature of most Caribbean economies.
In contrast to developed nations that have the ability to stimulate demand to create growth and to pursue free trade as a way of expanding global GDP, President Jagdeo argued “for countries like ours, many of those things would have sometimes a negative impact – the impact of reciprocity and removal of preferences which have led to the destruction of two major industries in the Caribbean – sugar and bananas.”
The President, who has been pursuing a similar line linked to resource transfer in the climate change conference in Copenhagen, is hoping that Caricom will be able to discuss this approach in March, if, as expected, the President of the World Bank, the Deputy Managing Director of the International Monetary Fund, the President of the Inter-American Development Bank and the UN Secretary General participate in the intersessional meeting of Caricom Heads of Government in Dominica.
All of which is in stark contrast to the remarks made by the Dominican Foreign Minister in Germany who told a business audience that by the end of this year his nation will have exported US$900 million worth of goods as a result of trade liberalization; an achievement that was, he said “reached with the help of the Economic Partnership Agreement (EPA).”
Indicating a radically different approach, he suggested that despite his country facing huge economic problems, the EPA has been a saving grace. Sugar, banana, cigars, apparel and rum exports to Europe will grow by ten per cent in the first half of 2009, a trend that is expected to continue to increase, he said. “It is an agreement that we value… to the point that we have now chosen its main lines as references and provisions that will guide negotiations on other free trade [agreements],” Minister Morales said.
While it is of course true that the Dominican Republic’s population is much larger and its economy more broadly based than most of its neighbours, Caricom’s alternative model raises questions as to where the Caribbean believes its long-term economic place is in the world, and whether it is forever to be reliant on special treatment and the transfer of money from those that are wealthier.
It is also far from clear whether all Caricom nations are thinking in this way; whether small Caribbean nations have the capacity to cope with huge resource transfers especially of the kind envisaged for climate change; or how at this late stage in multilateral trade negotiations a special carve-out might be agreed for the Caribbean, when Latin and other small developing nations will want the same. Neither is obvious why Europe, which is in the process of accelerating trade negotiations with almost all of Latin America, or the US, should be prepared to accept a fundamental change in thinking in the multilateral institutions they and others fund.
All of which is not to argue against a more equitable global system that treats the Caribbean fairly, but to wonder in a practical way how, against a background of limited global resources, Caricom can leverage such a solution and how it plans to integrate this with investment and private sector-led growth, let alone a single market and economy.
Some argue that the approach that Caricom is now pursuing will institutionalize dependency, while others suggest it is the only way to achieve economic recovery. For my part I cannot avoid the sense that the stronger likelihood is that the models that encourage investment, trade and market-led growth that are being pursued by the Dominican Republic, Trinidad or through Cuba’s different managed-market economic model, have a greater chance of success.
Previous columns can be found at www.caribbean-council.org