elements of a trade strategy for growth and development in ... · the economic partnership...

Subregional Headquarters for the Caribbean Subregional Headquarters for the Caribbean

Elements of a trade strategy for growth and development in the

Caribbean

Sheldon McLean

Coordinator of Economic Development Unit

ECLAC Subregional Headquarters for the Caribbean

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Structure of the presentation: • Events shaping the subregion’s current approach to

trade and development

• Examination of the Caribbean’s trade competitiveness and export structure

• Regional intra-industry trade and structure of Caribbean economies

• Major challenges and possible remedial policy prescriptions

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Events shaping the subregion’s current approach to trade and development

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Selected imperatives of the West Indian Commission’s “Time for Action” report

• Recognized Trade and Regional Integration as Drivers of Economic Growth and Regional Economic Welfare Gains

• Special Consideration for the OECS under the Integration process

• Agriculture, Manufacturing and Tourism to be Developed Symbiotically


The 1995 WTO Agreement and increased propensity to negotiate bilateral trade agreements with Latin

America

Trade Agreements Description Date signed

CARICOM - Venezuela

Agreement between the Caribbean Community and the

Government of the Republic of Venezuela on Trade and

Investment.

1992

CARICOM - Colombia

Agreement on Trade, Economic and Technical

Cooperation between the CARICOM and the

Government of the Republic of Colombia.

1998

CARICOM - Cuba

Trade and Economic Cooperation Agreement between

the CARICOM and the Government of the Republic of

Cuba.

2000

CARICOM - Dominican Republic

Agreement Establishing the Free Trade Area between

the CARICOM and the Dominican Republic.

2001

CARICOM - Costa Rica

Free Trade Agreement between the CARICOM and the

Government of the Republic of Costa Rica

2004

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The Economic Partnership Agreement (2008) – A game changer

• The EPA satisfied the requirements of GATT Article XXIV - the liberalization of substantially all trade between parties of a free trade area or customs union;

• At the end of 10 years CARIFORUM is scheduled to liberalize 61.1 percent of EU imports; 82.7 percent at the end of 15 years; and at the end of the implementation period (25 years), 86.9 percent.

• The EPA covers a range of issues relating to trade in goods, trade in services, investment, and development cooperation.

•

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Examination of the Caribbean’s trade competitiveness and

export structure

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Subregional Headquarters for the Caribbean

Declining competitiveness of Caribbean economies

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TOURISM COMPETITIVENESS RATIO (Share of expenditure over share of arrivals)

Caribbean average Goods Producers

Service Producers

0.000

0.002

0.004

0.006

0.008

0.010

0.012

0.014

0.016

0.018

0.24

0.25

0.25

0.26

0.26

0.27

0.27

0.28

0.28

0.29

0.29

2005 2006 2007 2008 2009 2010 2011 2012 2013

EXPORTS OF GOODS AND SERVICES (Per cent of world exports)

Latin America Caribbean [right axis]


Trends in Revealed Comparative Analysis (RCA)

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4

6

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16

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European Union (27) Latin America United States

Comparative advantage with the EU, Latin America and the US 2006, 2010, 2014

(Number of products with an RCA greater than 1)

2006 2010 2014

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Top ten products by RCA 2014

EU(27) Latin America US

1

Metalliferous ores and metal scrap

Animals,live,zoo animals,dogs,cats

Sugar,sugar preparations and honey

2 Sugar,sugar preparations and honey --- Beverages

3 ---- Beverages Fish,crustaceans,mollucs,preparatio

4 Gold Gold Metalliferous ores and metal scrap

5 Fish,crustaceans,mollucs,preparatio

Crude fertilizers and crude materia

Animals,live,zoo animals,dogs,cats

6 Cereals and cereal preparations

Cereals and cereal preparations Gold

7 Animals,live,zoo animals,dogs,cats

Miscel.edible products and preparat

Crude fertilizers and crude materia

8 Crude fertilizers and crude materia

Artif.resins,plastic mat.,cellulose

Cereals and cereal preparations

9 Beverages Cork and wood ---

10 Cork and wood Fish,crustaceans,mollucs,preparatio Electric current

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Trade Complementarity Index

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0.10

0.12

0.14

0.16

0.18

0.20

0.22

0.24

0.26

CARIBBEAN TRADE COMPLEMENTARITY INDEX

World US EU(28) Latin America Source: UNCTADStat


Export Structure

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0%

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40%

50%

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70%

80%

90%

100%

2007 2008 2009 2010 2011 2012 2013 2014

TECHNOLOGY INTENSITY OF CARIBBEAN EXPORTS (Percentage of total exports)

High Technology manufactures Low Technology manufactures Medium Technology manufactures

Natural resource based manufactures Primary Products


Caribbean Export Markets

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4.8 4.2 4.5 3.9 6.6 8.6 16.0 12.2 13.2 11.4

18.5 15.6 12.5 16.1 14.3 17.7

11.6 10.0 9.7 12.5

11.7 15.3 15.8

16.7 17.5 12.6

17.5

17.0 16.6 17.7 1.2 0.6

0.6 1.4 1.4 2.6

1.8

3.0 2.9 2.7 2.6 2.0

3.8 4.1 2.2 3.5

0.7 0.5 0.4 1.4

48.0 49.4 48.2 41.1 45.3 38.9 30.0

28.0 29.7 32.2

2.7 2.2 3.2 3.2

1.8 1.6

0.8

0.7 0.6

0.9

0

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20

30

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60

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80

90

100

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

CARIBBEAN EXPORT MARKETS (Per cent of total exports)

Canada Caribbean European Union Mercosur SICA USA Wider Caribbean


Regional intra-industry trade and structure of Caribbean economies

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Structure of Caribbean Economies

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ATG BHS BLZ BRB DMA GRD GUY JAM KNA LCA VCT SUR TTO

SECTORAL SHARE OF GDP AND GOODS TRADE, 2015 (Per cent of GDP)

Agriculture Industry Manufacturing Services Exports Imports


CARICOM: indices of intra-industrial trade by trading partner, 2013-2014

(Grubel-Lloyd Indices)

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Source: World International Trade Statistics (WITS) Note: The Grubel-Lloyd Index for each country is calculated as the sum over all products, weighting each class by share of total trade

ATG BRB BLZ DMA GRD GUY JAM KNA LCA VCT SUR TTO

ATG 0.014 0.000 0.132 0.000 0.000 0.000 0.047 0.088 0.000 0.000 0.045

BHS 0.000 0.000 0.000 0.000 0.000 0.000 0.002 0.000 0.000 0.000 0.000 0.000

BRB 0.023 0.019 0.092 0.042 0.221 0.312 0.020 0.097 0.153 0.008 0.181

BLZ 0.000 0.024 0.000 0.000 0.045 0.007 0.000 0.000 0.000 0.000 0.017

GUY 0.036 0.212 0.114 0.037 0.018 0.165 0.002 0.106 0.041 0.040 0.072

JAM 0.046 0.151 0.042 0.150 0.103 0.149 0.001 0.185 0.175 0.015 0.034

LCA 0.455 0.175 0.080 0.185 0.103 0.117 0.111 0.642 0.089 0.154 0.063

SUR 0.038 0.036 0.019 0.090 0.000 0.083 0.018 0.000 0.000 0.039 0.241


Major challenges and possible remedial policy prescriptions

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Some broad conclusions which should inform policy-setting…

• Trade complementarity and relative competitiveness have no significant impact on exports due to narrow production base of Caribbean

• Preferential trading arrangements appear to be a major driver of Caribbean exports

•

• The region’s high trade concentration and import dependency increase its vulnerability to external economic shocks

• Key structural gaps have constrained the Caribbean’s export performance

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Major challenges facing the Caribbean

• High Public debt – averaged 72% of GDP in 2014

• Undiversified energy portfolio mix – 90% dependence on fossil fuels

• Insufficient economic diversification – high export concentration; limited movement up the value change

• Maintaining correspondent banking relations

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Key policy prescriptions

• Debt for climate adaptation swaps

• Development of green industries

• Fostering Trade-led economic development

– Enhancing trade-related economic infrastructure through investment in key public goods

– Deepening trade with natural trading partners; as well as tapping into avenues for increased intra-industry trade between Caribbean economies

– Private sector development

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Subregional Headquarters for the Caribbean

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THANK YOU!

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