Express appreciation for the warm welcome and kind introduction.
Let me begin by thanking President Lagos and the organizers of this event for affording me the unique opportunity to address such a distinguished audience, and to the Executive Secretary of ECLAC for hosting the encounter.
This occasion bears particular significance, not only because it is my second visit to the ECLAC headquarters, but it is also a fitting setting to discuss matters of regional economic importance.
It is also a moment of reminiscence as we reflect on the organization’s evolution as one of the five Regional Economic Commissions established by the United Nations which has as among its mandates, the promotion of economic and social development through sub- regional cooperation and integration.
I recall the campaign by Caribbean countries such as Jamaica to have the nomenclature changed to tangibly take into account the “Caribbean” dimension of this process. Hence ECLA became ECLAC.
Over the years, in keeping with its mandate and mission, ECLAC, within the context of global developments, has provided an important forum for the promotion and discussion of issues relevant to the socio-economic advancement of developing countries in general, and to Latin America and the Caribbean in particular.
I wish to take this opportunity to commend the work being undertaken in the various areas of research, technical assistance and training, even as we seek collectively to strengthen the U.N. machinery to make it more responsive to the economic and social needs of its smaller members.
For all these reasons, I consider it a privilege to have been asked to share with you this morning, a few of my own thoughts on issues of regional interest, as Jamaica and Chile seek to strengthen bilateral relations and as we increase efforts in our respective sub-regional settings, to chart a course for the deepening of the regional integration machinery. While our economies may have certain distinguishing features, both Jamaica and Chile face the urgent challenge of building on these platforms in a manner which will guarantee our economic security, which ultimately will shape our relationship with the rest of the world.
In selecting the Theme: Strengthening Regionalism- A Catalyst for the survival of Small States, I offer my perspective on what I see as the challenges confronting small vulnerable economies such as those in Jamaica and CARICOM; the importance of building regional partnerships and alliances and pointing the way forward towards our full integration in the world economy, taking into account, current global realities.
The Global Context and the Challenges
We are all acutely aware that over the last two decades the world has experienced dramatic transformation and continues to be driven in this direction by the evolving process of globalization. This is characterized by increased liberalization of trade and cross-border movement of capital, as well as the transfer of increasingly advanced and sophisticated technology. Newly emerging forces, both regionally and internationally, have transformed the representation of national interests into a dynamic process, involving a wide range of interlocking issues. Both globalization and liberalization have, especially in the last decade, been the driving force behind the integration of the global economy.
Despite the potential benefits of this process, we have to concede that the long-term survival of developing countries requires adjustment to the new realities of an international environment, filled with fear and uncertainty. Notwithstanding the improvement in global economic prospects, large imbalances remain in the world economy. Latin American and Caribbean countries are finding it increasingly difficult to achieve sustained growth. We are now placed at an even greater disadvantage in trying to increase our per capita income. As such, current developments in the world economy underline continuing difficulties for the Region in 2005 and beyond including:
The impact of rising oil prices and weakness in non-oil commodity prices; rising unemployment and falling incomes; sharp drop in capital flows, as investors become increasingly risk averse; deterioration of already weak fiscal positions and growing debt; and continuing security concerns that could hinder trade, investment and tourism.
This scenario is not bright.
UNCTAD’s 2004 Trade and Development Report which notes that risks are resulting not only from rising oil prices but from large disparities in the strength of domestic demand among the major countries and increasing trade imbalances between the main economic blocs. This, together with new protectionist pressures and greater instability in currency and financial markets, pose serious threats to the economies of developing countries. While growth in Latin America and the Caribbean may reach 4.3% this year, the Region’s economy remain fragile, with fixed capital formation falling to its lowest in decades.
Fortunately, within CARICOM, some of our countries have been able to reap the benefits of significant investments. We have made in the tourism sector over the years. We have therefore been able to bounce back from the impact of the travel risks associated with the threats of terrorism. However, this does not hold true for the outlook for commodity exports, which in recent years have been the victims of the globalization process, with the gradual erosion of preferential trade access for many of our exports. Our sugar and bananas have already suffered in this regard.
The loss of preferential trade arrangements, pressure from the more developed countries to move rapidly to reciprocal trade rules, together with the added dictates of the multilateral trading system, pose increasingly daunting challenges. These place a considerable strain on human, financial, institutional and political resources of the small states of our Region. A related concern is the unprecedented array of external trade negotiations in which we are simultaneously involved. These present additional difficulties in terms of negotiation, implementation and adjustment.
Limited progress in these negotiations, coupled with the downward trend in flows of Development assistance, have stymied progress in the implementation of international commitments made at Doha, Monterrey and Johannesburg. This means that achievement of the internationally agreed Millennium Development Goals, such as poverty eradication, will remain elusive, unless there is substantial economic growth and an even higher degree of political will.
Despite our implementation of wide-ranging reform programmes, debt relief so far has not been sufficient to fully remove the obstacle to development to enable our economies to attain a sustainable debt position. This has served to constrain development in critical social sectors such as health and education, particularly at a time when the threat of the HIV/AIDS pandemic is of major concern (given the high degree of infection rates in the Caribbean), and the literacy and numeracy of our citizens are foremost on our development agenda.
Inadequate capital flows have also limited our capacity to produce internationally competitive goods and services to take advantage of the opportunities generated by globalization.
While we remain preoccupied with these economic realities, our attention is also drawn to other threats of survival, including security concerns sparked by the tragic events of September 11. The dangers of terrorism, the threat to multilateralism, the growing spread of illicit trade in narcotics and other psychotropic substances as well as the proliferation in small arms and light weapons, continue to test our resilience. These have far-reaching implications for human security and how we conduct our international relations.
At the same time, as Island States, we remain peculiarly vulnerable to environmental hazards that pose serious threats to our economic growth and development. The environmental challenges facing Small Island Developing States include ecological fragility, limited natural resources and exposure to extremely damaging natural disasters.
In Jamaica, damage from Hurricane Dennis in early July has been assessed at US$40 million, with final assessments still pending. This follows the heavy expenditure occasioned by the passage of Hurricane Ivan in 2004 which caused extensive damage to the island.
Let me here briefly focus on one of the main concerns of the Caribbean within the external trade scenario just outlined, in order to illustrate more clearly the peculiar situation of our countries.
Preferential Trading Arrangements and loss of Market Access
The decisions taken at the 4th WTO Ministerial Meeting in Qatar in 2001, have effectively intensified the trade negotiating agenda for us in Jamaica and the Caribbean. Among the decisions taken, was the need for special and differential treatment for developing countries and increased technical assistance and capacity building.
Also, of special importance to Jamaica was the decision to establish, for the first time, a Work Programme in the WTO which has been examining issues related to the trade of small economies, in order to assist their full integration into the world economy. One area of sensitivity, is the removal of preferential trading arrangements. This is of great significance for Jamaica and the Caribbean, given the implications for market access for export products which contribute a large percentage of foreign exchange earnings to our economies and employment of our labour force.
Jamaica exports 40,000 tonnes of bananas each year to the EU and consumes around 90,000 to 100,000 tonnes locally. Over the last five years the country has earned on average US$26M per year from its banana exports. We are prepared to go along with the proposed tariff only system, but we need the higher tariff rate of Euro 275/t., which would allow for maintenance of the existing market access instead the proposed 230/t. which would not afford adequate price protection for our small farmers involved in banana cultivation.
With regard to sugar, the current EU sugar regime will continue until the end of the 2014/2015 marketing year. There will also be no review of the sugar regime in 2008 under the Cotonou Agreement. Quotas will continue to be applied throughout the lifespan of the regime, that is until 2014/2015.
The intervention price will be replaced by a reference price, which is to be supported by a private storage scheme, applying in instances where sugar suppliers exceed their quotas. The price proposed to preferential sugar imports would also be cut by 39% over a four-year period. For small countries like Jamaica, the level and pace of the price reduction is of great concern. We need at least an 8-year transitional period for such savage cuts and compensatory mechanisms which are of no less value than those offered to European producers of beet sugar.
Nonetheless, Jamaica has been actively engaged in identifying alternative uses for cane, including ethanol, co-generation and refining. However, in order to transform the industry, it is estimated that it will require transitional assistance in the region of Euro200 million in both soft loans and grants in order to adapt and develop the cane industry.
Jamaica and its CARICOM partners, while mindful of the demands of the current trading environment, remain resolute in our position, that measures must be found to mitigate the negative impact of the loss of preferential market access.
It will be recalled that negotiations on agricultural issues arrived at an impasse earlier this year due to difficulties in resolving the issues of the most appropriate methodology for converting unbound tariffs to ad valorem equivalents.
These negotiations have resulted in what the Chairman of the Negotiating Group on Agriculture has termed a “weak positive outcome,” following insufficient progress observed within the context of the July First Approximation which was intended to establish modalities for further commitments in the areas of market access, domestic support and export competition.
The recently concluded Mini-Ministerial held in Dalian, China, has not resulted in any significant movement in the consultations with the US and the EC. Both have simply restated their original positions and expressed unwillingness to discuss other texts such as that proposed by the G20 group of countries.
It is my hope that with both Chile and CARICOM working together in the WTO. In the coming months, we will be able to make progress on some of these critical issues.
Against the background of such an uncertain and hostile international milieu, exacerbated by the increasing demands of adjustment to a new global scenario, our countries have to respond in a responsible manner to these developments, in order to achieve the ultimate goal of sustainable development and improving the well – being of our peoples.
This empowerment has found concrete expression in the deepening and widening of the regional integration process. The reality is that economic and trade integration is now not just an option but an imperative for economic survival and national development, especially for small countries. Without integration, countries such as Jamaica and the rest of CARICOM will be marginalised in the international economy.
Latin America and Caribbean countries have generally participated in regional integration schemes beginning in the 1960s-1970s. In the case of CARICOM, as the longest surviving scheme in this hemisphere, the move towards integration long predates the signing of the Treaty of Chaguaramas in 1974, which formalized the establishment of the Caribbean Community.
This coming together of a small group of countries, was seen as a natural consequence of our common history and geographic proximity. It also became a precedent for the formation of similar groupings, such as the establishment of the Andean Group, MERCOSUR, the Central American Common Market, the Central American Integration System (SICA), and most recently, the Community of South American Nations.
These are all tangible expressions of the conviction that there is strength in numbers, rather than individual stances.
Emanating from this process is a plethora of various arrangements and Agreements, in varying forms, not only at the SouthSouth level, but between developed and developing countries.
These, in one form or another, have all set the stage for deeper integration with added focus, in some cases, on human resource development, financial and capital markets development and harmonization of economic policies.
Given the array of arrangements provoked by global transformation since the establishment of the EEC in 1957, the concept of regionalism has gone through several changes. It has become so multi-faceted and multi-dimensional, that not even academics and political scientists can agree on a common definition anymore. What has remained constant, however, is the pervasive influence of this development mechanism in different parts of the world.
The recent PetroCaribe Energy Cooperation initiative extended by Venezuela to Countries of the Caribbean, in the wake of rising oil prices, vividly demonstrates that there is an inherent advantage by our uniting around a common vision, a unifying objective and a mutually beneficial set of goals for the region. If we remain true to our beliefs in interdependence and mutual respect, we have already seen where the initiatives, Petrosur and Petroandino, will also meet those objectives and serve the region in ways which will redound to the benefit of the citizens of each country across the southern hemisphere.
CARICOM and the CSME
From as early as the 1980s, given the early manifestations of globalization, it became quite clear that within CARICOM, it could not be business as usual.
CARICOM Heads of Government, in 1989, through the Grand Anse Declaration, agreed that as a result of the rapidly changing international environment, the establishment of a CARICOM Single Market and Economy (CSME) was the only viable option for the small economies of CARICOM.
The Revised Treaty of Chaguaramas, which created a new framework for regional integration and the strengthening of the institutions of the Community, demanded a mature kind of regionalism which would guide the integration process as we sought to achieve “sustained economic development based on international competitiveness, coordinated economic and foreign policies, functional cooperation and enhanced trade and economic relations with third states”.
Interestingly, since then, the cultural face of CARICOM has changed to reflect three distinct languages and cultures with a combined population of 15 million, compared to 5 million previously, comprising only English-speaking members. It has also formed new alliances and partnerships beginning with its neighbours, Cuba and the Dominican Republic and has extended its reach to other countries in the wider Caribbean Basin and Latin America, including Costa Rica and Central America and of course with countries in the Southern cone such as Chile and Brazil.
The advent of the CSME must therefore be seen as a turning point in the integration process, representing one of the most ambitious undertakings to which the Region has ever committed itself. It will allow us to adjust to reciprocal trade and investment within a regional market by taking advantage of our geographical proximity and our cultural affinity.
In today’s knowledge-based global economy, it is new creative activities that will transform our economies and provide the basis for sustainable development in the region. With the phasing out of traditional preferences, the development of creative, competitive enterprises must provide the basis on which we can diversify our economy away from the current dominance of a few sectors.
Elements of the CSME and its Advantages
One of the major objectives of the CSME is the creation of a single economic space which will provide for, among other things, the free movement of goods and services, labour and capital.
The essential features of the CSME are:
The free movement of capital; The free movement of goods, services and people; Harmonization of trade and economic policies; Harmonization of economic, fiscal and monetary policies; and Movement towards a single currency over time.
The CSME will assist its members to overcome the constraint of small size and lack of resources, as it pools resources in a single market and economy that is greater than the sum of its individual parts. With the advantage of a larger market size, our ability to effectively penetrate markets outside of CARICOM will be crucial in achieving a sustainable competitive advantage.
This will result in unprecedented market access for our products and services and an expansion in our businesses, large and small, traditional and non-traditional. With new investments and expanded businesses we envisage economic growth and employment and ultimately higher standards of living for our people.
Over the past decade, there has been a noticeable increase in the intra-regional flow of investments and the trade in goods and services. It is expected that investment flows within the region will be enhanced as companies take advantage of the free movement of capital and rights of establishment as well as the simplification of cross border investment and commercial activity. This, coupled with measures for social security, portability and the double taxation Agreements already in place, as well as removal of the legal and regulatory restrictions are all important elements of this process.
Through integrated production arrangements across the Region and greater access to capital, labour, raw materials and services, the CSME will also facilitate the achievement of valuable economies of scale.
The Revised Treaty also provides for functional cooperation and collaboration in sectoral development, ranging from diversification and transformation of agriculture, to the expansion of tourism, improving regional transportation and promoting industrial development, with the overall objective of assisting member countries to transform their economies.
The establishment of a Caribbean Court of Justice is an important pillar of the CSME, being the arbiter of disputes under the Treaty and is the front-runner in terms of regional institutional building and the shaping of a modern rules-driven process. It is also envisaged that the Court will eventually become the Region’s final Court of Appeal, replacing the existing UK Privy Council.
From an international perspective, the CSME provides a testing ground/building block for CARICOM’s integration into the wider trading arrangements especially the FTAA. Most importantly, the CSME provides a unified negotiating framework that enhances the capacity of individual CARICOM States to negotiate in multilateral fora. The CSME will strengthen our Regional Negotiating Machinery which we already have in place.
CSME – Where we are
A key element to complement the establishment and implementation of the Single Market is the creation of a Development Fund for Disadvantaged Countries and Sectors. A financing mechanism is currently being developed for the operation of the Fund.
The Single Economy, to come into being by December 2005, will facilitate the creation of an environment for competitive production in the Region. In this regard, work is ongoing on the harmonization of corporate tax structures, investment policy and the establishment of the macro-economic framework, as well as the development of a Regional Development Strategic Plan. The target date for the implementation of the Single Economy is January 2008.
In CARICOM, we have begun a structured dialogue with representatives of the political Opposition of member states to encourage a frank and open exchange of views on various elements of the process, so as to ensure transparency and full appreciation of the commitments to be undertaken.
The Caribbean Diaspora also has an important role to play in making their own contribution to the advancement of the deepening of CARICOM.
It is also my firm belief that the youth of our Region must take up the challenge of service and be equipped to fulfil the dream of a vibrant Community of nations wherever they are, so as to improve the quality of life for all.
As I look in the audience, I am pleased to see the future leaders of Chile sitting so attentively. Indeed, with your wealth of creative ideas, enthusiasm and willingness to take risks, your nation has a bright future.
An important pillar of the deepening of the integration process which will complement the implementation of the CSME is fashioning a system of regional governance to meet the needs of the Community.
Current proposals involve the establishment of a CARICOM Commission, the strengthening of the role of the Assembly of Caribbean Parliamentarians and the adoption of the principle of automatic resource transfers towards the funding of Community institutions.
Regional Influence in Multilateral fora
Ladies and Gentlemen,
I hasten to underscore that time is of the essence – the world we once knew no longer exists. The various dimensions of international discourse are interfacing at different points on the globe. We must seek to extend our reach, using our influence in various fora to advance the well-being of our peoples.
As current Chairman of the Group of 77 and China, Jamaica has identified a number of priorities for attention during the period of its chairmanship. These include increasing resource flows to developing countries; improving global governance; advancing the global development agenda; enhancing South/South cooperation and Disaster Management and Relief.
Also, Jamaica remains committed to championing the cause, in every forum in where we are represented, for due recognition to be given to the special situation of developing countries in the international trading system.
The FTAA negotiations, now at a critical phase, promises some potential benefits for countries such as Jamaica, providing a domestic market of some 800 million.
However, it presents some daunting challenges for our small countries which will not be able to compete in the area of market access and agriculture, on account of our small size. It is, therefore, imperative that all participants in this process become alert to the dynamic trade environment in which we now operate where size matters.
Ladies and Gentlemen.
In these remarks, I have tried to capture the urgency with which we must act if the countries of Latin America and the Caribbean are to survive, particularly the most vulnerable economies in the Region.
Attaining the age of maturity brings with it certain responsibilities. CARICOM, now at the mature age of 32 years, must make the right choice. We have chosen to deepen our integration efforts, fully convinced of the logic of the CSME and its potential for the economic, social and cultural progress of our countries.
May we the people of Latin America and the Caribbean be steadfast in our quest to fight the odds and equip ourselves to realise our goals of unity, development and prosperity, so that future generations may have a firm and secure foundation on which to build long after we are gone.