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Sunday, January 15, 2006 

The View from Europe
What are the prospects for CSME?
By David Jessop (Executive Director of the Caribbean Council for Europe
Sunday, January 15th 2006



For the past week I have been travelling in the Caribbean. Meetings apart, I have been trying to understand the prospects for the Caribbean Single Market and Economy (CSME). I have been asking those that I have met if this vital aspect of the regional integration process can be made to work.

Almost everyone I spoke to agreed that the creation of a CSME was a necessary Carib-bean response to the forces of economic globalisation and competition that threaten to overwhelm the region's largely insignificant economies.

They argued that by unifying the Caribbean into a single market and enabling the free movement of goods, capital, labour and services between all states, a critical economic mass will be created. Economic theory, they reminded, suggests that this should then enable economies of scale and allow the region over time to become globally competitive and to thrive.

They also noted the widespread and sometimes emotive belief that the single market is a first step down the road to satisfying the long- standing and deep-seated political and cultural vision of a single integrated region. It is, as one senior individual commented, a step towards the commonly held belief that the Caribbean is a single homogeneous region.

But when I came to probe just a little deeper, it became apparent that this desire for a regional identity and integration was not matched to any significant extent by the private thinking of some of those who are actively engaged in trying to shape the future.

The more I discussed the issue the more difficult it was to reconcile the contradictions between the genuine commitment to the ideal of regionalism and the reality of the Caribbean of today. What emerged were a number of issues that seemed to require urgent intellectual and practical resolution if the concept of a single market and economy is ever to become a sustainable reality.

The first related to whether there is anywhere a successful economic integration movement that involves nations without contiguous borders. The point was made that the fragmented nature of the region with its very small and physically separated nations suggested that the economies of scale that ought to arise from integration were not likely to be present in the Caribbean.

As a consequence it may not be possible to rationalise and reduce the costs associated with everything from utilities to manufacturing. Moreover, the inadequacy of inter-Caricom transport systems resulted in high transactional costs of doing business between small island states.

The second was whether a region of economies at very different levels of development stands any chance of achieving the consensus necessary to make a single market work. There was widespread concern about the vastly differing levels of development of the CSME's members and a fear about the possibility that the larger and wealthier may take over the smaller. It was noted that one solution had been proposed to address this: the creation of a regional development fund supported financially by all, that could float less developed econo-mies up to something closer those of the more developed.

However, there was a concern that the proposed fund seemed likely to be stillborn because smaller Caricom nations were reluctant to contribute.

The third was a real doubt about the ability of the private sector to deliver a single market and whether the majority of companies in the region have any taste for the competition implied by economic integration. It seemed to be little understood in some parts of government that for a single market and economy to work, a vibrant private sector able to mobilise and risk capital for investments is required.

Yet much of the private sector remains locked into a form of xenophobic protectionism while a significant part of the rest, the large and successful companies that are able to consider risk, now only invest outside of the region.

To further confound the possibility of a single economy the absence of a regional stock exchange made investment across the region and from beyond difficult.

The fourth was whether the construction of a single market was politically viable when much of the Caribbean electorate remains sceptical, limiting governments' room for manoeuvre.

And a fifth was the suggestion that the region's key institutions that should be leading the way had lost touch with the reality of the region. The absence of substantially endowed chairs at the Univer-sity of the West Indies in crime and security and tourism, both now key components in the region's future were cited as examples.

The absence of common policies on regional energy security or food security were cited as other examples that raised questions about the extent to which regional integration can be achieved.

What all of this seemed to indicate was a regional integration movement at best moving at a pace that bears no relationship to the rapidly changing global economy, presided over by regional institutions designed for an age that has passed.

What was also striking was how many senior figures privately shared these thoughts, yet despite their creative and new ideas could see no easy way forward.

Much the same can be said about thinking in Europe.

Seen from beyond the region the single market is regarded as being an essential prerequisite for economic development. The European Commission's trade negotiators see the creation of a CSME as the critical first step towards making a fragmented region viable.

They regard it as providing the enabling environment for the proposed Economic Partnership Agreement (EPA) that is meant to be established in 2008 between the Caribbean and Europe.
They too feel frustrated but for different reasons. They are worried about the growing number of caveats that are being introduced into a possible future arrangement.

They question how they are meant to contend with a single regional unit that contains nations that require special treatment within their own customs union and consequently an arrangement with Europe.

They wonder in private whether such variable geometry will defy the benefits of economic integration.

In the region and beyond some suggest that generational and political change may provide answers. But the lack of any mechanism able to generate regional homogeneity implies that the uniqueness of each Caribbean nation's problems will remain. If this is the case it suggests that a moment will come when policies have to be designed that accept this difficult fact.

© Stabroek News

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