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Identifier
Created
Classification
Origin
06BRIDGETOWN206
2006-01-31 14:17:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Bridgetown
Cable title:  

EASTERN CARIBBEAN WARY OF CARICOM SINGLE MARKET

Tags:   ECIN  ETRD  ELAB  EAID  EIND  EFIN  PREL  XL 
pdf how-to read a cable
VZCZCXRO7550
PP RUEHGR
DE RUEHWN #0206/01 0311417
ZNR UUUUU ZZH
P 311417Z JAN 06
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC PRIORITY 1785
INFO RUCNCOM/EC CARICOM COLLECTIVE PRIORITY
RUEHCV/AMEMBASSY CARACAS PRIORITY 1366
RUEHDG/AMEMBASSY SANTO DOMINGO PRIORITY 5792
RUMIAAA/HQ USSOUTHCOM J5 MIAMI FL PRIORITY
						UNCLAS SECTION 01 OF 03 BRIDGETOWN 000206 

SIPDIS

SENSITIVE
SIPDIS

SANTO DOMINGO FOR FCS, SOUTHCOM ALSO FOR POLAD

E.O. 12958: N/A
TAGS: ECIN ETRD ELAB EAID EIND EFIN PREL XL
SUBJECT: EASTERN CARIBBEAN WARY OF CARICOM SINGLE MARKET

REF: 05 BRIDGETOWN 644



1. (U) Summary. The January 1 "start" of the CARICOM Single
Market and Economy (CSME) and January 30 signing are purely
ceremonial events because the CSME is a patchwork process
that countries must implement through national legislation.
Owing to fears of a mass influx of foreign labor, concerns
that regional competition could overwhelm local businesses, a
craving for special treatment, and limited technical
capacity, the Organization of Eastern Caribbean States (OECS)
countries have been slow to implement the CSME. The present
status of CSME is therefore "Single Market Lite," falling
somewhere above a free trade agreement but significantly
below a true single market. Labor mobility is restricted (to
university graduates, media, athletes, artists, and
musicians); hundreds of laws must be changed to open trade in
services; and there has been little harmonization of
regulations, even in areas essential to trade, such as
customs. The Caribbean Court of Justice (CCJ) has original
jurisdiction for CSME-related disputes and could play an
important role in establishing precedent for how the CSME
functions. End Summary.



--------------------------


January 1 Milestone and January 30 Signing


--------------------------





2. (U) The much-publicized January 1, 2006 "start" of the
CSME is misleading. According to the CARICOM CSME Unit, the
various provisions of the CSME only take effect when they are
passed into national law in each country. Coming up with the
January 1 date was a way CARICOM members could publicly
proclaim their progress towards the CSME and push the more
reluctant parties to embrace CSME provisions, but nothing
regarding the CSME is legally different this year from last
year. In the same vein, the January 30 signing ceremony that
took place in Jamaica was also purely ceremonial. A similar
"start" of the CSME for Barbados, Trinidad and Tobago, and
Jamaica took place in early 2005, and there will likely be
yet another "start" to the CSME and another signing ceremony
later this year or early next year for the OECS countries.
These dates lack significance because CARICOM, unlike the
European Union (EU), has no executive authority over its
member states. There is no supranational body in CARICOM
comparable to the European Parliament or European Commission.
The downside of not ceding any sovereignty to CARICOM is
that each country must amend hundreds of old laws and pass
many new laws on all aspects of the CSME, from customs and
immigration to business law to financial regulations.



--------------------------


Background and State of Play


--------------------------






3. (U) Nations of the English-speaking Caribbean founded
CARICOM in 1972 as the Caribbean Community and Common Market,
but have made little progress on moving toward a common
market since that time. CARICOM revised its founding treaty
(The Treaty of Chaguaramas - revised text online at
www.caricom.org) in 2001 to give substance to the common
market as implemented through the CSME. Member states have
integrated their economies more quickly since then, but the
original full-implementation deadline of 2005 for both the
single market and economy proved far too ambitious. After
several deadline extensions, in February 2005, CARICOM
proclaimed the "start" of the CSME when Barbados, Trinidad
and Tobago, and Jamaica stated that they were "CSME-Ready,"
meaning that those countries had updated their laws and
regulations to allow the partially free movement of goods,
services, and labor.



4. (U) In February 2005, all CARICOM countries other than
Montserrat (waiting for Britain's permission to join the
CSME), the Bahamas (opted out of the CSME), and Haiti
(CARICOM has not recognized the interim government), pledged
to be "CSME-ready" by the end of 2005. Only six countries
(Barbados, Belize, Guyana, Jamaica, Suriname, and Trinidad
and Tobago) actually met the deadline. None of the OECS
countries (Antigua and Barbuda, Dominica, Grenada, St. Kitts
and Nevis, St. Lucia, St. Vincent and the Grenadines) were
"CSME-ready" by the deadline. Instead, the OECS countries
demanded special and differential treatment and a regional
development fund as conditions of their participation in the
CSME. (Note: CARICOM heads of government agreed to a
regional development fund at the end of 2005, and the OECS
countries will likely get some form of special treatment,
such as technical assistance and more time to implement CSME

BRIDGETOWN 00000206 002 OF 003


provisions. End Note.)



--------------------------


OECS Demands


--------------------------





5. (U) In response to mounting public and government fears
that the CSME would cause severe economic disruptions for
their small economies, OECS heads of government decided in
their June 2005 meeting to ask for special and differential
treatment in the CSME, based on chapter seven of the Revised
Treaty of Chaguaramus. CARICOM, unlike other organizations,
is more sensitive to geographic, economic, and population
size than income per capita when calculating which countries
are "less developed." The other CARICOM states have accepted
the OECS demands, and have agreed to a new deadline of March
31, 2006, for the OECS countries to be CSME-ready.



--------------------------


Flood of Cheap Labor?


--------------------------





6. (U) Many people in the Eastern Caribbean, particularly
Barbadians, fear that implementation of the CSME will result
in an influx of cheap labor leading to a strain on social
services, downward pressure on wages, a possible rise in
crime, and disruption to the traditional makeup of society.
Ironically, these fears are currently irrelevant to the CSME,
because the only people that can move freely are university
graduates, artists, musicians, athletes, and journalists.
The CSME does not currently allow blue collar or unskilled
workers free movement. According to Ivor Carryl, an officer
at the CSME Unit, CARICOM Heads of Government have not yet
agreed to extend free movement of labor to all CARICOM
nationals, but will probably do so by 2008. A front-page
article in the January 10 Barbados Advocate stated that only
about 2000 CARICOM nationals applied for free movement of
labor to Trinidad and Tobago under the CSME, and only 500 of
those qualified. Trinidad, with one of the strongest
economies in the region, would seemingly attract a major
influx of labor, but the initial numbers seem moderate.
(Note: More to come on free movement of labor septel. End
Note.)



--------------------------


Loss of Local Businesses?


--------------------------





7. (U) The CSME grants the "right of establishment," meaning
that any CARICOM national can start a business in any CSME
country. This right gives free reign to larger Caribbean
companies to expand regionally and compete with smaller local
companies. The single market also knocks down barriers to
intra-regional trade in goods and services. Trinidad, with
its rock-bottom energy costs and relatively cheap labor,
could flood the market with exports. The expansion of larger
regional businesses combined with the threat of Trinidadian
imports has made some smaller OECS businesspeople and
governments uneasy.



8. (U) A lack of high-volume inter-island shipping providers,
however, may limit Trinidad's ability to dominate
intra-regional trade. Econoff spoke with an official at
Tropical Shipping, a large Florida-based company serving the
Caribbean, who said her company does not ship cargo between
the islands because there is insufficient volume to justify
such routes. Unless inter-island trade increases
dramatically, local companies and U.S. exporters (using the
direct shipping connection from Florida ports) will continue
to have a competitive advantage because of relatively high
inter-island shipping costs. While some dislocation will
likely occur, the net effect of the CSME on business should
be an increase in efficiency and competitiveness.



--------------------------


Private Sector - Forge Ahead, but Retain a Good Lawyer


--------------------------





9. (U) Since the CSME is a patchwork process that each
country must implement into national law, companies could end
up waiting a long time for a fully-functioning CSME. In the
meantime, some courageous companies may have to forge ahead
to test the limits of the new single market and go to court
if necessary. The newly-founded Caribbean Court of Justice
(CCJ) has original jurisdiction for CSME-related disputes and
may need some early court cases to set the precedent for how
the single market will legally function. According to Ivor

BRIDGETOWN 00000206 003 OF 003


Carryl, Program Manager at the CARICOM CSME Unit, individuals
and companies can push their rights under the CSME in
countries that have enacted the revised treaty of Chaguaramas
into domestic law, even if the regulations implementing such
laws are lagging behind. If the CCJ comes down in favor of
Carryl's approach, then that court could play a large role in
pushing national governments to speed up their implementation
of the CSME.



--------------------------


Political Impact


--------------------------





10. (U) The CSME has had a negligible political impact in the
Eastern Caribbean, where policy and economic elites appear to
be well ahead of the public on a topic that few people seem
to understand well. Hardly a week passes in which a
politician or journalist does not call for enhanced efforts
to educate the public on the CSME and its implications for
the region. Many political leaders, however, have
contributed little in this regard. Despite the importance of
the single market push, it failed to emerge as an issue
during elections held in 2005 in St. Vincent and Dominica,
where neither ruling nor opposition parties sought to
interject the CMSE into the campaign.



11. (U) Wary ambivalence best sums up the views of people in
the region, as suggested by public opinion polls. In
Barbados, which has done the most to educate the public about
CSME, 44 percent of respondents expressed their support for
the single market in a 2005 poll conducted by CADRES, a
private research firm. A prominent political scientist who
analyzed the poll results found it troubling, however, that a
vast majority of respondents were concerned about
immigration, which appears to fly in the face of the CSME's
stated goal of the free movement of labor. He and other
observers have suggested that such responses demonstrate an
underlying xenophobia in Barbados and other Eastern Caribbean
countries, where people fear the impact of immigration on
their traditionally small, homogenous societies.



--------------------------


Comment


--------------------------





12. (SBU) Judging by the grand speeches on economic
integration at nearly every CARICOM gathering, one would
think that the CSME is a done deal. Unfortunately, these
integrationist instincts are foiled by fears of uncontrolled
immigration and loss of sovereignty. Protectionist economics
have led to a "Single Market Lite," resulting in limited
gains from economic integration. If leaders can overcome
their fears and develop a true single market, the region will
likely benefit economically and have a better negotiating
position in the FTAA, WTO, and other trade arenas. Most
likely, CARICOM leaders will continue to slowly implement the
"Single Market Lite" and not take any bold moves towards
further integration.
KRAMER