Problems With Current U.S. Policy.

The U.S. move to replace preferential trade treatment with tariff reciprocity as the foundation of its Caribbean policy faces the same problems that have bedeviled the CBI from its outset. Efforts to grant NAFTA parity to Caricom and other CBI countries repeatedly stalled in Congress. The sticking point has consistently been duty-free treatment for textile products, blocked by continuing opposition from fair trade groups, labor unions, and portions of the textile industry.

In May 2000, however, congressional leaders reached agreement on such legislation as part of the Africa-CBI trade bill. The legislation, which the president has signed, provides immediate tariff reduction to NAFTA levels for imports excluded under CBI, specifically some apparel, which received not only duty-free but also quota-free treatment. The new dispensation will be maintained until 2008, or until the FTAA or another relevant trade agreement enters force, if that date is earlier. The legislation is saddled with a number of conditions that could prevent the Caribbean from fully utilizing its benefits.

Another sticking point in U.S.-Caribbean economic relations is Caricom's longstanding request for an overall Caricom sugar quota (the amount of sugar the U.S. agrees to import annually at a rate above the prevailing world price). An overall quota would replace the country quotas and could then be reallocated among Caricom members in the event of a special need or export shortfall.

A related concern is the sharp decline in sugar quotas for Caribbean countries. Compounding this problem are Mexico's efforts to increase its sugar exports to the U.S. market at a faster rate than originally established in the side agreement accompanying NAFTA. Unless Mexico's request can be accommodated without a reduction in the quota currently allocated to the Caricom countries, the additional loss in preferential access to the U.S. market could have severe socio-economic consequences.

At the heart of the problematic character of U.S.-Caribbean economic relations is a differing approach to the global economy. As a rule, the U.S. holds to the neoliberal view that all countries should compete equally in the international market. For their part, the Caribbean nations, while eager to integrate into the global market, note that their small size, lower level of development, and primitive export structures undermine their capacity to participate effectively in global trade liberalization without special preferences, or at least their phased withdrawal. During the preparatory FTAA meetings, the U.S. did not appreciate these concerns. Caribbean negotiators also have not received any indication that the issue of smaller economies would be given adequate attention during the ongoing FTAA negotiations.

As the banana issue indicates, U.S. trade policy in the Caribbean makes little allowance for the development concerns of small economies. Caribbean countries predict that the U.S. effort to end preferential access to the EU market will ruin the economies of the banana producing countries, and they warn that, as a result, there will be more illegal migration of Caribbean job seekers to the U.S., increased marijuana cultivation for export, and an upsurge in drug trafficking.

Lack of consultation with Caribbean nations helps explain the current strained state of U.S. relations with the region. Unilateralism--of which the CBI was a prime example--rather than bilateral consultations, has been the standard U.S. method for dealing with the region. The notable exception has been the Caricom/U.S. Trade and Investment Council, an instrument of negotiations established in 1991 as part of the Bush administration's Enterprise for the Americas Initiative. In 1996, U.S. strong-arm negotiating tactics sparked a confrontation between the U.S. and both Barbados and Jamaica. The controversy concerned implementation of the Shiprider Agreement, which was intended to advance international drug cooperation between the U.S. and the Caribbean. Barbados and Jamaica declined to sign the proposal, preferring instead a framework of cooperation based on democratic principles and respect for sovereignty.

The U.S.-Caribbean Summit in 1997, on which Caricom had insisted, reflected the region's preference for dialogue. The ensuing Bridgetown Accord committed the U.S. and Caricom to cooperate on a wide range of mutual concerns and interests. The leaders outlined several measures to enhance their trade relations, including continuing "to work with all concerned parties to achieve mutually satisfactory marketing arrangements for Caribbean bananas, recognizing the critical importance to Caribbean countries of the continued access of Caribbean bananas to the traditional markets of the EU."

Since the summit, the offshore tax regimes in the Caribbean have surfaced at the top of the U.S.-Caribbean agenda as a contentious economic and security issue. Igniting this dispute was a 1998 report by the Organization for Economic Cooperation and Development (OECD) entitled Harmful Tax Competition: An Emerging Global Issue. The OECD proposed that member countries take unilateral action against perceived tax havens, blacklisting these countries, and possibly imposing economic sanctions. The U.S., an OECD member, has individually expressed concerns that numerous Caribbean countries offer U.S. nationals opportunities to avoid taxation and to launder drug money. Caricom countries contend that the OECD actions are highhanded and illegal, because they have established the criteria to judge Caribbean tax regimes. Consequently, the Caricom countries say it would be more appropriate for the issue of tax practices--and more generally the maintenance of international financial markets--to be addressed in multilateral institutions, where adequate regard can be given to the interests of small states.

Key Problems

* Protectionist forces have routinely thwarted legislative efforts that would grant CBI beneficiary countries NAFTA parity by providing the same market access conditions Mexico receives.

* U.S.-European banana dispute damaged U.S.-Caribbean relations.

* Washington's preference for unilateral action in the Caribbean strained the U.S. relationship with the region, until the 1997 Bridgetown Accord established a consultative mechanism.

Cedric Grant, ([e-mail]) is a professor of international and Caribbean affairs at Clark Atlanta University, and former Guyanese ambassador to the U.S.