ITC Issues Report on Economic Growth and Development in the Caribbean Region
The International Trade Commission has issued a report providing a description of the current level of economic development in the Caribbean Basin and an overview of potential Caribbean development. The report was issued at the request of the House Ways and Means Committee to assist it in identifying the ways that U.S. trade and aid policy can most help the Caribbean Basin.
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(Note that in August 1990, the Caribbean Basin Economic Recovery Act (CBERA) became a permanent program, and in May 2008, the U.S.-Caribbean Basin Trade Partnership Act (CBTPA), which amended the CBERA in 2000, was extended for two years by the "Farm Bill" (P.L. 110-234), until September 30, 2010.)
Current Level of Economic Development
The 18 countries1 covered in the report vary considerably in population, gross domestic product (GDP) and per-capita GDP, social indicators, and production and export bases. There are, however, some commonalities including:
constraints due to the relatively small size of their economies and limited natural resources, making economies of scale difficult to achieve;
heavy reliance on one or two industries in their output and/or exports;
heavy reliance on imports for consumption and capital goods; and
despite relatively high per-capita incomes, substantial social development problems (i.e. high poverty rates, income inequality, etc.).
Trends in Caribbean-U.S. Trade
Merchandise trade with the U.S. is important for most of the countries, but varies considerably. The share of imports from the U.S. in 2006 ranged from 27% of total imports in Panama to 88% in The Bahamas. The share of exports to the U.S. ranged from 4% in Montserrat to 89% in St. Kitts and Nevis.
U.S. mainly imports fuel, natural gas, apparel. U.S. imports of petroleum and natural gas and their derivatives, most of which come from Trinidad and Tobago, Aruba, and the Netherlands Antilles, accounted for nearly 80% of the U.S. imports by value from the region in 2007. Apparel, the next largest U.S. import category, came mainly from Haiti.
CBERA utilization rates vary. Overall imports under CBERA as a percent of total imports (CBERA utilization rates) vary significantly from 0% in Montserrat to 88% in Haiti in 2007. Only Belize and Haiti have CBERA utilization rates of more than 50%, and seven countries have utilization rates less than 10%: Antigua and Barbuda, British Virgin Islands, Dominica, Grenada, Guyana, Montserrat, and Netherlands Antilles.
Impediments to Future Development in Caribbean
The report identifies a number of impediments to future development in the Caribbean which primarily fall into three broad categories:
Small size of countries/companies. Small countries tend to produce and export a relatively narrow range of goods and services, making them more vulnerable to economic shocks, such as worldwide price declines or preference erosion. Most small enterprises in the region have limited access to financing, limited knowledge of export opportunities, and face difficulty complying with international standards, such as port security and sanitary and phytosanitary regulations.
Limited infrastructure development. Limited infrastructure development is often cited as one of the most important factors impeding further development in the region. The most developed components of Caribbean infrastructure are the port and telecommunication systems, but basic infrastructure services, such as electricity and water, are not as well developed.
Trade policies. The region has liberalized most tariffs on intra-Caribbean trade, but external tariffs remain high. This regional tariff liberalization has considerably reduced government revenue, and some countries have been unable to transition to other revenue sources. In addition, high external tariffs raise import prices and reduce the efficient allocation of resources within the countries.
1The Committee requested that the report cover the 18 beneficiary countries of the CBERA that are not parties to the Central America-Dominican Republic-U.S. Free Trade Agreement (DR-CAFTA): Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, the British Virgin Islands, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Netherlands Antilles, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago.
(See ITT's Online Archives or 12/28/07 news, 07122820, for BP summary of the ITC's initiation of this investigation.)
ITC press release (dated 06/13/08) available at http://www.usitc.gov/ext_relations/news_release/2008/er0613ff1.htm
ITC report, "Caribbean Region: Review of Economic Growth and Development" (Inv. No. 332-496, dated May 2008) available at http://hotdocs.usitc.gov/docs/pubs/332/pub4000.pdf