OECS SIX SIGN ON TO CSME

UNCLAS SECTION 01 OF 02 BRIDGETOWN 001287

SIPDIS

SENSITIVE
SIPDIS

SOUTHCOM ALSO FOR POLAD

E.O. 12958: N/A
TAGS: ETRD ECIN EAID PREL PINR XL
SUBJECT: OECS SIX SIGN ON TO CSME

REF: A. BRIDGETOWN 1236

B. BRIDGETOWN 992

C. BRIDGETOWN 206

D. 05 BRIDGETOWN 1544


1. (SBU) Summary: After months of quibbling and backtracking
(Ref B),the six nations of the Organization of Eastern
Caribbean States (OECS) signed on to the single market phase
of the CARICOM Single Market and Economy (CSME) at the start
of the CARICOM Heads of Government meeting July 3-6 in St.
Kitts and Nevis. The OECS six were supposed to sign in
January, but demurred, demanding payment in exchange for
their participation in the regional pact, which will allow
for freer movement of goods, services, capital, and labor
across the region. CARICOM met the OECS demands, in the form
of a Regional Development Fund (RDF). The RDF is supposed to
alleviate some of the pain from further opening up the OECS
countries' markets to increased competition from lower-cost
manufacturers like Trinidad. End Summary.


2. (U) In a formal gesture at the opening ceremony of the
Caribbean Community (CARICOM) Heads of Government (HOGs)
meeting in St. Kitts and Nevis, OECS heads signed on to the
single market phase of the CARICOM Single Market and Economy.
(Note: The single market phase of the CSME has also been
referred to as the CSM - CARICOM Single Market. End Note.)
Despite having already negotiated and signed the revised
treaty of Chaguaramas, which lays out the form and structure
of the CSME, OECS leaders refused to participate in a
ceremonial "signing on" to the CSME in January. In exchange
for their signatures, they demanded that a Regional
Development Fund (RDF),part of the CSME treaty (Article
158),be set up. This fund is meant to help the less
developed countries of CARICOM avoid having their small
economies overwhelmed by a flood of exports from more
competitive manufacturing sectors in larger economies such as
Trinidad's. CARICOM also met three additional OECS demands:
OECS countries get to keep additional restrictions on foreign
land ownership, free movement of labor will be extended to
more people, and a regional stock exchange will be
established.

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"Comrade Ralph" Seeks Divine Guidance
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3. (SBU) St. Vincent and the Grenadines Prime Minister Ralph
Gonsalves invoked the Pauline teaching of the organic unity
of the body found in I Corinthians, Chapter 12, to argue for
"special and differential treatment" of the OECS in the CSME.
Despite the oddity of a former communist quoting scripture,
Gonsalves rather eloquently made the point that smaller
countries like St. Vincent are like the fingers while the
stronger economies like Trinidad are the head or heart of the
CARICOM body. The body parts/countries serve different
purposes, but all are important. Other than this apparent
divine justification for the RDF, Gonsalves pointed out more
earthly reasons for the OECS to receive additional aid. He
said the CSME and RDF will address "the concrete and
practical matters which are closest to us" including poverty,
unemployment, and lack of competitiveness. As he did in his
speech to OECS heads (Ref A),he veered off the subject at
the end of his talk to attack the U.S. for "arrogant
triumphalism" and to blame more powerful countries for most
of the Caribbean's problems.

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Economic Foundations of OECS' Hesitation
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4. (SBU) Apart from the word of God as interpreted by PM
Gonsalves, there are significant economic reasons for the
OECS to be hesitant in implementing the CSME. The six
independent nations of the OECS (Antigua and Barbuda,
Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St.
Vincent and the Grenadines) collectively compose only nine
percent of the entire GDP of the CSME twelve (the twelve
countries who have signed on to the CSME--all of CARICOM
minus Montserrat, Haiti, and the Bahamas). Jamaica and
Trinidad each make up around thirty percent of the CSME
twelve GDP, and Barbados contributes a further thirteen
percent. OECS leaders fear that a further opening of their
markets, to Trinidad in particular, will be too much for
their nascent domestic manufacturing sectors to handle.
According to the OECS secretariat (Ref B),the larger CARICOM
countries would continue to dominate intra-regional trade

BRIDGETOWN 00001287 002 OF 002


under the CSME. St. Lucia PM Kenny Anthony, in his speech at
the 2005 HOGs meeting, illustrated this same point by stating
that the OECS share of intra-regional trade dropped from 2.3
percent in 1985 to just 1.4 percent in 2003 (Ref D).

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The RDF Explained
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5. (SBU) Chapter Seven of the Revised Treaty of Chaguaramas
provides for "...a special regime for the Less Developed
Countries in order to enhance their prospects for successful
competition within the Community (CARICOM),and redress, to
the extent possible, any negative impact of the establishment
of the CSME." Within that chapter, Article 158 outlines the
establishment of the RDF. The treaty contains 240 Articles
divided into nine chapters, all of which CARICOM states must
eventually implement. OECS leaders, particularly Ralph
Gonsalves, used their leverage as a bloc within CARICOM to
dictate that Article 158 should be implemented before the
OECS would officially sign on to the CSME. The rest of
CARICOM has generally reacted sympathetically to this OECS
demand. According to Barbados Prime Minister Owen Arthur,
the RDF is supposed to be a US$250 million fund. The first
US$110 million of the RDF will come from CARICOM member
states under an undisclosed assessment formula that takes
into account the ability of various states to pay. A further
US$20 million will come from Trinidad's Petroleum Fund, and
CARICOM hopes that international donors will contribute the
remaining US$120 million.

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Barbados CSME Conference
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6. (SBU) Immediately preceding the HOGs meeting, the Barbados
government, along with CARICOM, hosted a "High-Level
Symposium on the CSME" in Barbados from June 28-30 that
attracted a broad cross section of Caribbean society,
including academics, NGOs, companies, and governments. As a
show of his support for the CSME, PM Arthur attended every
session of the conference and participated actively, asking
probing questions of various presenters in an effort to
provoke discussion and crack open issues holding up the
implementation of the CSME. Notably, St. Kitts and Nevis
Prime Minister Denzil Douglas, who was scheduled to speak at
the opening ceremony of the symposium, did not show. The
OECS in general was not as well represented as other parts of
the Caribbean, perhaps in keeping with their wariness towards
the CSME in general. In any case, the conference was
productive and allowed various CSME players both to air their
issues in public and to hold private consultations on the
margins to resolve differences.

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Comment
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7. (SBU) The formal signing of the CSME, while a purely
ceremonial act (Ref C),provided a public display that almost
all CARICOM countries are on board with the common market.
This act provides political support to the technocrats
working both at the CARICOM Secretariat and at the country
level to translate the myriad provisions of the CSME into
national law and to develop the necessary regulations to
implement the new laws. The signing also gave CARICOM a
useful deadline to spur member states towards faster
implementation of the CSME. Now that the ink has dried,
there is a real danger that the momentum to put the "E" (or
single economy) back in CSME could slow. The previous
deadline for the single economy phase was 2008, but that may
be far too ambitious given the amount of political wrangling
needed to induce the OECS states to sign the CSME. The CSME
is now at a precarious point. PM Arthur, lead CARICOM Prime
Minister for the CSME, along with other regional leaders,
will have to maintain steady focus to keep the regional
integration process moving forward.

KRAMER