Accelerating Trade and Integration in the Caribbean: Policy Options for Sustained Growth, Job Creation, and Poverty Reduction (World Bank Country Study) Summary:
By World Bank
Publisher: World Bank Publications
Number Of Pages: 364
Publication Date: 2009-07-17
ISBN-10 / ASIN: 0821380176
ISBN-13 / EAN: 9780821380178
Product Description:
The main objective of this report is to help policymakers in the Caribbean design an agenda of policy actions to accelerate trade integration and growth, and to reduce poverty. Each part of the report focuses on a key question and provides an in-depth analysis of the issues raised, laying the foundations for policy recommendations described in the last chapter of the report. Part I asks whether the Caribbean's economic and trade system are sound enough to sustain the new era of its global trade relations. Part II addresses the opportunities and challenges that the new trade environment offers to the Caribbean. Part III assesses the impact of the recently-negotiated Economic Partnership Agreement on growth and poverty reduction using two types of macroeconomic models. The report concludes with policy priorities for accelerating Caribbean integration into the world economy and for reaping the benefits of global competition.
Contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
Abbreviations and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
Part I: Overview of Economic and Trade System Context . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Macroeconomic and Structural Constraints on Trade Reform
in the Caribbean . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Caribbean Economy and Macroeconomic Constraints . . . . . . . . . . . . . . . . . . . . . . . . 4
Structural and Physical Constraints. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2. Caribbean Regional and Global Trading Relations . . . . . . . . . . . . . . . . . . . . . . . . . 27
Intra-Caribbean and Regional Integration Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
The Caribbean and the Global Trading Environment . . . . . . . . . . . . . . . . . . . . . . . . 41
Structural, Institutional, and Political Constraints to Trade Integration . . . . . . . . . 55
3. Trade Patterns and Flows, and Competitiveness Issues. . . . . . . . . . . . . . . . . . . . . . 61
Trade Performance, Trade Flows, and Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Competitiveness, Specialization, and Complementarity . . . . . . . . . . . . . . . . . . . . . . 70
Binding Constraints to Competitiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Part II: Challenges and New Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
4. New Areas of Opportunities and Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Trade in Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Financial Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Services in the Cariforum-EC Economic Partnership Agreement . . . . . . . . . . . . . . 92
5. Capitalizing on a Changing International Environment . . . . . . . . . . . . . . . . . . . . 95
Longer-term Trade Strategy and Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Managing Transitional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Alleviating Structural and Institutional Constraints on “Old” and “New”
Opportunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
iii
Part III: Quantifying the Impact of Trade Reform on Growth, Job Creation,
and Poverty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
6. Quantifying the Gains from Global Trade Integration—A Dynamic
Macroeconomic Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Assessing the Gains from Trade: A Dynamic Multi-Country Analysis . . . . . . . . . 113
Assessing the Gains from Trade: A Dynamic Analysis for Jamaica . . . . . . . . . . . . 125
Aid for Trade, Growth, and Poverty: A Dynamic Analysis for the Dominican
Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
7. From Diagnosis to Policy Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Reducing Macroeconomic and Fiscal Imbalances, and Investing
in Trade Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Accelerating National Trade Policy Reforms and Improving Investment
Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Adjusting to Preferences Erosion, Accelerating the Implementation
of the CSME, and Using the EPA for Enhanced Competitiveness
and Global Trade Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Develop a Long-term Trade Strategy with a Focus on Increased Competitiveness
and New Areas of Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Reinforcing CARIFORUM Regional Institutions with a Focus
on Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Implications for the Aid for Trade Agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Appendix Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Technical Appendixes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
A. Infrastructure, Trade, and Growth—Evidence and Implications
for Trade Reform in the Caribbean . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
B. Aid for Trade—Rationale and Implications for Trade Reform in Caribbean
Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
C. Employment and Poverty Effects of Trade Reforms—Evidence and Policy
Lessons for the Caribbean. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275
D. Key Characteristics of the CGE Models—GLOBE and Jamaican Models . . . . 291
E. Structure of the Jamaican Economy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297
F. SPAHD Models—Overall Structure and Links with Human
Development Indicators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307
LIST OF TABLES
1.1. Caribbean Economies: Real GDP Growth, 1997–2006. . . . . . . . . . . . . . . . . . . . . . . . . 5
1.2. Caribbean Economies: Inflation Rates, 1997–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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1.3. Caribbean Economies: Merchandise Trade Balance, 1997–2006. . . . . . . . . . . . . . . . 7
1.4. Caribbean Economies: Current Account Balance, 1997–2006. . . . . . . . . . . . . . . . . . 7
1.5. Caribbean Economies: Overall Fiscal Balance, 1997–2006 . . . . . . . . . . . . . . . . . . . . 10
1.6. Caribbean Economies: Public Sector External Debt, 1997–2006 . . . . . . . . . . . . . . 12
1.7. Unemployment Rates in Selected Caribbean Countries, 2002–06 . . . . . . . . . . . . . 13
1.8. Selected Infrastructure Indicators of Caribbean Countries and Comparable
Developing Countries, 2004–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.9. Logistic Performance Index Caribbean Countries and Comparable
Developing Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.10. Per Capita Consumption of Electric Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.11. Air Transport, Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.1. CARICOM: CET and National Applied Tariffs in Selected
Countries, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.2. Share of Mercahndise Exports by Country, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.3. Comparing the Frameworks: The EPA versus the Lomé/Cotonou Agreement . . . 51
2.4. Caribbean Bilateral and Regional Trade Architecture . . . . . . . . . . . . . . . . . . . . . . . 53
2.5. Financing of CARICOM Secretariat: Member State Contributions . . . . . . . . . . . 59
3.1. Index of Average Wage of Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
3.2. The Similarity between Caribbean Export and Partners’ Imports . . . . . . . . . . . . . 74
3.3. The Similarity between Caribbean Exports and Partners’ Exports . . . . . . . . . . . . . 76
3.4. Average Tariffs in the Caribbean . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
4.1. Trade in Services Contribution to GDP and Exports in CARIFORUM. . . . . . . . . 85
4.2. Tourism Contribution to CARICOM Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
5.1. Doing Business: Selected Indicators Caribbean and Comparable
Developing Countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
6.1. Sectors, Factors and Regions in the GLOBE Model . . . . . . . . . . . . . . . . . . . . . . . . 115
6.2. Experiments Description in the GLOBE Model, CARIFORUM. . . . . . . . . . . . . . 115
6.3. Summary of Experiments: CARIFORUM Duties on EU Imports . . . . . . . . . . . . 117
6.4. Schematic Summary of Experiments: EU Duties on CARIFORUM Imports . . . 118
6.5. Aggregate Results with Balanced Macro, Factor Tax Adjustment, Unemployed
Unskilled Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
6.6. CARIFORUM Imports from the United States for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
6.7. CARIFORUM Imports from the EU15 for GLOBE Model Experiments. . . . . . . 120
6.8. Gross Output by Sector CARIFORUM for GLOBE Model Experiments . . . . . . . 121
6.9. Aggregate Results with Balanced Macro, Factor Tax Adjustment,
Unemployed Unskilled Labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
6.10. Experiments Description in the Jamaica model . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
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6.11. Aggregate Results for Jamaica CGE Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
6.12. Aggregate Real Imports and Exports by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
6.13. Factor Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
6.14. Gross Output by Sector, Jamaica CGE Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
6.15. Trade Diversion Scenarios, Jamaica Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
6.16. Macro Results, Trade Diversion Scenarios, Jamaica Model . . . . . . . . . . . . . . . . . . 129
6.17. Aggregate Real Imports and Exports by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
6.18. Dominican Republic Human Development Indicators, 2008–20
Baseline Scenario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
6.19. Tariff Loss Compensated by Higher Indirect Taxes—Deviations
from Baseline, 2008–20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
6.20. Aid as a Temporary Compensation Scheme—Deviations
from Baseline, 2008–20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
6.21. Aid Increase Goes to Public Investment—Deviations
from Baseline, 2008–20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
6.22. Aid Increase Goes to Public Infrastructure Investment—Deviations
from Baseline, 2008–20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
A1. Caribbean Economies, Real GDP Growth, 1997–2006. . . . . . . . . . . . . . . . . . . . . . 154
A2. Caribbean Economies, Inflation Rates, 1997–2006. . . . . . . . . . . . . . . . . . . . . . . . . 155
A3. Caribbean Economies, Merchandise Trade Balance in Percent
of GDP, 1997–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
A4. Caribbean Economies. Current Account Balance, 1997–2006. . . . . . . . . . . . . . . . 157
A5. Caribbean Economies, Public Sector External Debt, 1997–2006. . . . . . . . . . . . . . 158
A6. Caribbean Economies, Structure of Public Finance, 1997–2006 . . . . . . . . . . . . . . 159
A7. Regional Export Shares by Commodity: CARIFORUM
Reference Equilibrium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
A8. Regional Import Shares by Commodity: CARIFORUM
Reference Equilibrium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
A9. Private Consumption by Commodity CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
A10. Total Exports by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
A11. CARIFORUM Exports by Region of Destination for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
A12. CARIFORUM Exports by Region of Destination for GLOBE
model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
A13. Schematic Summary of Experiments: CARIFORUM Duties
on EU Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
A14. Schematic Summary of Experiments: EU Duties on CARIFORUM
Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
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Contents vii
A15. Macro Results for GLOBE Model Experiments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
A16. Gross Output by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
A17. Total Exports by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
A18. Total Imports by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
A19. CARIFORUM Imports by Region of Origin for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
A20. CARIFORUM Imports by Region of Origin for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
A21. CARIFORUM Exports by Region of Destination for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
A22. CARIFORUM Exports by Region of Destination for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
A23. Macro Results for GLOBE Model Experiments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
A24. Gross Output by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
A25. Total Exports by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
A26. Total Imports by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
A27. CARIFORUM Imports by Region of Origin for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
A28. CARIFORUM Imports by Region of Origin for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
A29. CARIFORUM Exports by Region of Destination for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
A30. CARIFORUM Exports by Region of Destination for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
A31. Macro Results for GLOBE Model Experiments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
A32. CARIFORUM Imports by Region of Origin for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206
A33. CARIFORUM Imports by Region of Origin for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
A34. Gross Output by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
A35. Total Exports by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
A36. CARIFORUM Exports by Region of Destination for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
A37. CARIFORUM Exports by Region of Destination for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
A38. Private Consumption by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212
A39. Aggregate Results with Balanced Macro, Factor Tax Adjustment, Unemployed
Unskilled Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
A40. CARIFORUM Imports by Region of Origin for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
A41. CARIFORUM Imports by Region of Origin for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
A42. Gross Output by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216
A43. Total Exports by Sector CARIFORUM for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
A44. CARIFORUM Exports by Region of Destination for GLOBE
Model Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218
A45. CARIFORUM Exports by Region of Destination for GLOBE Model
Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219
A46. Private Consumption by Sector CARIFORUM for GLOBE Model
Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
A47. Structural Shares by Commodity: Jamaica Base 2000 . . . . . . . . . . . . . . . . . . . . . . 221
A48. Regional Export Shares by Commodity: Jamaica Base 2000 . . . . . . . . . . . . . . . . . 222
A49. Regional Import Shares by Commodity: Jamaica Base 2000 . . . . . . . . . . . . . . . . . 223
A50. Factor Shares within Sector: Jamaica Base 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
A51. Dominican Republic Human Development Indicators, 2007–20,
Baseline Scenario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
A52. Tariff Loss Compensated by Higher Indirect Taxes—Deviations
from Baseline, 2008–20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
A53. Aid as a Temporary Compensation Scheme—Deviations
from Baseline, 2008–20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
A54. Aid Increase Goes to Public Infrastructure Investment—Deviations
from Baseline, 2008–20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
A55. Aid Increase Goes to Public Infrastructure Investment—Deviations
from Baseline, 2008–20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
A56. Aid Sustained Longer to Public Investment—Deviations from Baseline,
2008–20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243
A57. Aid Sustained Longer to Public Infrastructure Investment—Deviations
from Baseline, 2008–20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247
A58. Labor Force that has Migrated to OECD Countries and the USA by Level
of Schooling, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
viii Contents
Contents ix
A59. Characteristics of Labor Market Regulation for the English Speaking
Caribbean in the 1990s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284
A60. Jamaica: Indicators of Labor Market Rigidity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286
A61. Caribbean: Unemployment Rates in Selected Countries 2002–06 . . . . . . . . . . . . 287
A62. OECS Countries: Poverty Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288
A63. Jamaica: Poverty Trends, 1989–2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289
A64. Sectors, Factors and Regions in the Jamaica Country CGE Model . . . . . . . . . . . . 296
A65. Structural Shares by Commodity: Jamaica Base 2000 . . . . . . . . . . . . . . . . . . . . . . 298
A66. Regional Export Shares by Commodity: Jamaica Base 2000 . . . . . . . . . . . . . . . . . 299
A67. Regional Import Shares by Commodity: Jamaica Base 2000. . . . . . . . . . . . . . . . . 300
A68. Factor Shares within Sector: Jamaica Base 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 301
LIST OF FIGURES
2.1. Share of Regional Exports, 2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.2. Intra-Caricom Export Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.3. Exports Plus Imports of Goods and Services, 1995 vs. 2005/6 . . . . . . . . . . . . . . . . 42
2.4. Trade in Services, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.5. CARIFORUM Main Export Partners, 2001–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.6. Principal Exports to the EU, 1999 versus 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.7. Principal Exports to the USA, 1999 versus 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3.1. Merchandise Export Performance in the Caribbean, 1995–2006 . . . . . . . . . . . . . . 63
3.2. Export Indices for the Caribbean and the World and Developing
Countries, 1995–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
3.3. Export Indices for the Caribbean, Central America, and South America,
1995–2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
3.4. Merchandise Import Performance in the Caribbean, 1995–2006 . . . . . . . . . . . . . . 65
3.5. CARICOM: Sector Composition of Exports, 1995 and 2006 . . . . . . . . . . . . . . . . . 66
3.6. Merchandise Exports by Destination, 1995 and 2006 . . . . . . . . . . . . . . . . . . . . . . . 67
3.7. Principal Exports to the EU, 1999 versus 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
3.8. Principal Exports to the USA, 1999 versus 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
3.9. Caribbean Exports Plus Imports Compared to Selected Asian
Countries, 1980–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
3.10. Caribbean Exports Plus Imports, 1980–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
3.11. Misalignment and Merchandise Export Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
3.12. Misalignment and Manufacturing Export Growth . . . . . . . . . . . . . . . . . . . . . . . . . 79
4.1. Money & Quasi Money/GDP for Selected Countries. . . . . . . . . . . . . . . . . . . . . . . . 88
4.2. Quasi Money/GDP for Selected Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
A1. Dominican Republic: Evolution of Poverty Rates, 2000–06 . . . . . . . . . . . . . . . . . 289
x Contents
LIST OF BOXS
1. Effects of the Financial Crisis on Trade and Economic Growth
in the Caribbean. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. Infrastructure, Trade and Growth: Linkages and Implications for the Trade
Agenda of Caribbean Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3. History of Regional Integration in the Caribbean: Key Dates
and Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4. Aid for Trade: Rationale and Implications for Trade Reform
in the Caribbean. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5. Principal Organs and Bodies of CARICOM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6. Financial Services in Trinidad and Tobago: Leveraging the Regional
Market to Succeed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Foreword
Almost five years ago the World Bank issued a flagship report entitled A Time to
Choose: Caribbean Development in the 21st Century with the observation that “the
Caribbean region is at a development crossroads and its member nations must take significant
and concrete steps to improve productivity and competitiveness and face up to
more global competition. . . . By [doing so], they will reposition themselves strategically
as an emerging trading bloc for goods and services; without such action, they risk growing
economic marginalization and erosion of many of the social gains of the last three
decades.” Notably, this report was issued long before the conclusion of the Economic Partnership
Agreement (EPA), signed by CARICOM member states in October 2008, before
the advent of the global economic crisis that has severely undermined the economic stability
of the small vulnerable economies of the Caribbean and before the reintroduction
of the tax haven laws in the US Congress which have the potential to decimate the foreign
exchange earnings and tax base of many of these economies.
The Caribbean therefore is no longer at a development crossroads. The time to choose
is now long past and, in a sense, the choices have already been made. Time is no longer on
the region’s side and the requirement at this juncture is to significantly accelerate the pace
of regional integration if the Caribbean is to survive and achieve growth in the face of the
economic challenges it faces. Despite enormous internal pressures, Caribbean countries
must steadfastly resist the temptation to surrender to insularity as, while it may appear to
resolve short-term challenges, it will only serve to destroy the fabric of regional integration
which remains the only viable course for sustained development and competitiveness for
these small states.
This volume builds on the foundation laid by the 2005 Report by focusing on the factors
affecting the region’s competitiveness and the critical role that the Caribbean Single
Market and Economy (CSME) has to play as a driver of integration and economic development.
In addition it highlights the potential of the EPA, if properly implemented, to significantly
increase the region’s competitiveness and to help it attain long-term sustained
development. This potential, however, will only be realized if precise trade and competitiveness
strategies are crafted to focus primarily on removing the constraints to competitiveness
endemic in the region. In addition, and this is a critical element of any
newly-devised strategy, is the necessity to revise regional institutional mechanisms and
mandates to promote implementation and to take advantage of the market access opportunities
presented by successive trade agreements such as the EPA.
This report, while highlighting the need for immediate and concrete actions on the
part of the CARICOM member states, also recognizes the responsibility of the donor community
in helping to play a catalytic role in supporting trade reform and macroeconomic
stability. The Aid for Trade agenda must seek to address the weaknesses inherent in the formulation
and application of international aid policies and implement new frameworks
aimed at enhancing the ability of these small nation states to meet and overcome the challenges
of global competitiveness.
Finally, this report has benefitted from the input of many of the region’s best minds
and intensive consultations with all stakeholders across the public sector, private sector, and
xi
civil society. We are indebted to these individuals and institutions and we hope that we have
accurately and adequately reflected their ideas, observations and expert knowledge. In the
final analysis, however, the full responsibility for the conclusions presented in this publication
rests with our two organizations.
Yvonne Tsikata Pamela Coke Hamilton
Director Director
Latin American and Caribbean Region Department of Trade and Tourism
World Bank Organization of American States
