May 20, 2005
OECS holds key to CSME

by Sir Ronald Sanders

When Heads of Government of the Organisation of Eastern Caribbean States (OECS) meet on 26 and 27th May, they are scheduled to receive a study of the impact on their countries of participation in the much vaunted Caribbean Single Market and Economy (CSME).

The content of this study and their reaction to it will have a profound effect on the establishment and effectiveness of the CSME to whose formation they have already given a commitment. {{more}}

The OECS comprises six independent countries of the Leeward and Windward Islands (Antigua and Barbuda; St Kitts-Nevis; Dominica; St Lucia; St Vincent and the Grenadines; Grenada) and the British Overseas Territory, Montserrat.

Worry has always existed within the OECS at the levels of both the business community and the trade unions that the CSME would create dislocation in their economies. Many had envisaged the collapse of businesses and a loss of jobs through competition in their local economies from larger companies in the Caribbean Community (CARICOM).

Recently, this worry has intensified within the OECS. A member of parliament of the ruling, United Progressive Party, Mr Chanlah Codrington, is reported in the local Antigua media as expressing concern in the national assembly that “small islands like Antigua would become the dumping grounds for goods from larger territories”.

At another level, Sir Dwight Venner, the experienced Governor of the Eastern Caribbean Central Bank (ECCB) which governs the single OECS currency, has argued that the countries of the OECS should create an Economic Union as the only viable option that we have at this time as we advance towards the CSME.

This obvious disquiet within the OECS should not be ignored by the larger countries which make up the remaining eight member states of CARICOM. The concerns are legitimate and should be addressed now, lest the CSME ends up being still born.

Sir Dwight has made the telling point that “unlike the European Union, there is no compensating mechanism for redistribution to support the development efforts of the OECS countries, and to balance the trade inequalities in the region”. By this, it is assumed he means that the CSME has no Regional Development Fund and does not envisage the free movement of labour.

In the European Single Market and Economy, disadvantaged countries benefit from a fund that provides for their development, and labour is free to move across the member states. Both of these mechanisms allow for adjustment in less developed countries which suffer from the joining-up of their economies with more developed ones into a single space.

I have long argued that both a Regional Development Fund and the free movement of labour are essential to the acceptance and success of the CSME.

This is not to say that I have not recognised the difficulties associated with these notions. In the case of the Fund, resources would have to be invested by larger and more developed countries within CARICOM and this would cause both political and financial problems for them. It would be well nigh impossible for Jamaica, for instance, to explain to its population why it is providing taxpayers’ money to compensate for economic losses in the smaller territories. The wounds of the failed West Indian Federation would be re-opened all over again.

But, if the international community could see a seriousness and determination by CARICOM countries to create the CSME, they could be persuaded to make substantial contributions to a Regional Development Fund. This as part of the process of helping these small, vulnerable states to adjust to a world in which they no longer enjoy trade preferences for their principal exports.

Similarly, while it is acknowledged that agreeing to the free movement of labour poses problems for governing political parties who fear that opposition parties would whip up nationalist sentiment to unseat them from government, the CSME is simply not a practical idea without the free movement of labour. The Europeans recognised this basic reality which is why they developed the notion of European Citizenship‚ a Union of sovereign states with common citizenship.

CARICOM countries can not afford to put off confronting the necessity for CARICOM Citizenship‚ and the free movement of labour, however politically frightening it might be. A single market and economy, in which all other factors of production are free to move, simply cannot exist without it.

The public education programme on this issue should begin now while the formation of the CSME is still in its very early stage.

When the OECS Heads of Government meet later this month to consider the study of the impact on their countries of participation in the CSME, they are expected to pay close attention to Chapter Seven of the CARICOM Treaty which provides a Special Regime for Less Developed Countries. This Regime was intended to provide special treatment for what are now the OECS countries and Belize by „taking their special needs into account.

Times and circumstances have changed, however. Many OECS countries have a higher per capita income and enjoy higher ratings on the UN‚s Human Development Index than some larger countries in CARICOM. In this context, it is difficult to see what major concessions could be made to OECS countries and Belize by any other CARICOM country except oil and gas rich Trinidad and Tobago.

A more workable proposal has been made by the ECCB Governor, Sir Dwight Venner: the creation by the OECS countries of a single Economic Union. This is not the first time that an Economic Union of the OECS has been proposed, but Sir Dwight has put flesh to the bare bones of the idea, and, in doing so, he has given it real credibility.

The OECS countries are already far advanced on the road to an Economic Union. They have a common currency, one central bank, and a regional stock exchange, virtually free movement of goods and capital. In addition, they have a common judiciary and a range of other institutions such as the Civil Aviation Authority, which are endowed with supranational authority.

The creation of an Economic Union by OECS states who will still remain “sovereign”‚ and which would cede some of their individual sovereign rights for their common good, would strengthen them significantly, making them a larger collective market, and giving them enhanced negotiating capacity.

The seven member states of the OECS, acting as one, could then jointly participate in a CSME of nine countries, rather than fifteen. As Sir Dwight puts it, “the new OECS bloc would be large enough to command some leverage over the (CSME) process”.

Undoubtedly, fears will be thrown-up by the proposition of an OECS Economic Union. There will be those in the OECS who will regard the ceding to the Union of national sovereignty over some domestic economic policies as unacceptable. But this is the least unpalatable of the choices open to OECS countries which can not expect to maintain their quality of life in today’s world of reduced aid, very limited trade preferences and stiff competition for exports (including tourism) and investment.

Fears may also arise amongst some in larger CARICOM countries that might characterise an OECS Economic Union as weakening the CSME. Such fears would be ill-founded. The participation of the OECS as a single entity in the CSME could do nothing but bring greater coherence to the CSME project.

At the bottom line, the CSME is not widely understood within CARICOM countries and is certainly not universally accepted. Legitimate concerns exist and are surfacing everyday. These concerns have to be addressed boldly if the embryonic CSME is to be taken to full term and delivered successfully.

(The writer is a former Caribbean diplomat, now corporate executive, who publishes widely on small states in the global community)