The FINANCIAL — A new World Bank report released on June 16 at the Third Regional Caribbean Growth Forum, suggests that the rapidly changing environment for Caribbean exports presents both new opportunities and challenges for economies highly dependent on external markets. Despite high openness to trade of Caribbean economies, the Caribbean share in global trade fell from three percent in the 1970s to nearly a quarter percent in 2012.
The report, “Trade matters: New opportunities for the Caribbean,” highlights that trade plays an important role in job creation – with exporting firms accounting for 34 percent of formal employment and being the largest employer for the poorest. However, exporting also makes employment more vulnerable to external shocks.
“Entrepreneurs are already seeing improvements in the business climate. Continued efforts to improve trade facilitation and step up investments in research and innovation, as well as quality education, will help improve skills and generate well-paid jobs in the Caribbean,” said Jorge Familiar, World Bank Vice President for Latin America and the Caribbean.
The report also highlights that the region’s trade performance is limited by lack of diversity and limited innovation. The number of patent applications in the Caribbean has been lower than in other region of the world.
Looking at emerging trade opportunities, the report shows that the CARICOM agreements have driven a rapid increase in intra-regional trade and that a common market would lead to a substantial rise in exports in the region. Meanwhile, with the exception of the Bahamas, St. Kitts and Nevis, Saint Lucia, Belize and Haiti, exports from Caribbean countries to growing emerging markets remain small.
The report suggests three main opportunities to boost trade and generate a positive cycle of shared prosperity in the region:
Deepening trade integration with North America would boost trade and accelerate growth in the region. The gains for the Caribbean of entry to the North American Free Trade Agreement (NAFTA) would be six times the size of the gains for implementing a Caribbean common market. The negotiations toward a Canada-CARICOM free trade agreement launched in 2007 should also be pursued.
Improving trade facilitation environment through modernized custom systems and better connectivity would have a major impact on trade. Efforts across the region to modernize customs administrations and border management should be accelerated. With the expansion of the Panama Canal and the expected increase in transshipment, recent initiatives to modernize ports infrastructures and regulation are being carried out in Jamaica, the DR, Bahamas and Haiti.
Improving the business environment and investment climate would be essential to enhance productivity and competitiveness. While Caribbean economies recently adopted a record number of reforms improving local business regulatory climate, exporting firms remain affected by the limited access to electricity, telecommunication and transport services, and the need for policies to further promote technology capability and innovation. More efforts are needed to improve skills and access to infrastructure and finance.
The report concludes that there is considerable potential for boosting trade and accelerating growth in the region. Some of the proposed policy recommendations are being discussed today at the Caribbean Growth Forum in view of identifying new strategies and tools to stimulate competitiveness, productivity and entrepreneurship.