Caribbean integration and lessons from the European Union
Although there is no indication whether the Caribbean Community (Caricom) integration project had any aspirations to mirror the European Union (EU) model or the federal model of the United States of America, one researcher believes that there are lessons the regional organization can learn from the past.
Collin Constantine, in his review of the Caricom Review Commission report – otherwise known as the Golding report – noted the document’s failure to “recognize the teachable moment of the Eurozone crisis”.
“I highlight two main lessons that the Caribbean integration project can draw from the European experience. First, enhanced economic integration without community-wide social solidarity – in the form of effective redistribution mechanisms to laggards – inevitably produces significant socio-economic costs and/or disintegration. . Second, financial integration can serve as a powerful propellant for intra-regional polarization – as is evident in the periphery of the eurozone”, a- he continued.
While Caricom initially served as a customs union after its establishment in 1973, preceded by the Caribbean Trade Association, the organization has taken further steps towards integration as member states cooperate on issues such as health , sport, education, agriculture and transport. But the organization has since 2001 attempted to achieve even greater integration through the creation of the Caricom single market and economy.
While the ultimate goal of the Revised Treaty of Chaguaramas was to create a single economic space and ultimately an economic union, full policy coordination, harmonization of functional areas and a common currency, the last element has since been removed. of the exam.
Even though a common currency has been achieved among the Organization of Eastern Caribbean States (OECS) through the Eastern Caribbean Currency Union, other Caricom territories still retain their own currencies with exchange rates per against the US dollar. In fact, while Trinidad and Tobago, Barbados, Belize and the OECS maintain relatively fixed exchange rates against the US dollar (from $2 to $6), Jamaica and Guyana both subscribe to flexible exchange rates (about $150 and $200).
That aside, Constantine argues that Caricom member states do not share similar economic structures and, therefore, will have different economic circumstances and political priorities in the region. Examples of different economic structures include goods-producing versus service-based economies or natural resource-dependent versus manufacturing-based economies.
Another disparity, Constantine points out, is between the more developed countries (MDC) and the less developed countries (LDCs) of Caricom. So while Caricom has preferential trade agreements with the United States, United Kingdom and Canada, it has reciprocal trade agreements with Cuba, the Dominican Republic and mainland Latin American countries. While LDCs like Jamaica, Trinidad and Tobago, Guyana and Belize may benefit from reciprocal trade relations, this may not be the case for Grenada, Dominica, Saint Lucia or other Eastern Caribbean Member States. In this regard, the difference between an MDC and an LDC lies in the larger industrial capabilities of the former.
Even considering the benefits that LDCs derive from offshore financial centers and citizenship through investment programs, they are more vulnerable to regulatory scrutiny from Organization for Economic Co-operation and Development countries.
Here, Constantine notes a parallel between Caricom and the Eurozone, pointing out that “asymmetric integration can produce winners and losers”.
“It’s unfortunate because even the poorly implemented CSME has clearly produced lead countries and follower countries – potential center and periphery hubs – with Trinidad and Tobago dominating intra-regional trade.”
He adds: “The central point is that the integration of economies with sufficiently different productive structures… will produce substantially unequal gains between member states.
In the case of the euro zone, financial and economic integration has created core countries and peripheral countries.
While integration theories predict lower interest rates and more efficient allocation of capital, in reality capital flows have been misallocated to non-tradable and low-tech economic activities in peripheral countries of the world. Europe, namely Portugal, Spain, Italy and Greece.
After the global economic downturn between 2008 and 2011, as countries like the UK, France and Germany rebounded, peripheral countries struggled to deleverage.
“Quite contrary to the theoretical prediction, financial integration has divided European countries,” Constantine said, adding that failure to intervene in Caricom would lead to a similar result.