CARICOM/US Relations: a chequered trade history

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By Elizabeth Morgan

British colony and Independent Republic

Besides the United Kingdom (UK/Britain), the United States of America (USA) is the oldest trading partner of the British West Indies (BWI)/Commonwealth Caribbean/Caribbean Community (CARICOM) countries.

The American territories, which would become the USA, were British colonies from 1607 until 1776 following the American Revolution. During this period, trade between the British American territories and the BWI was vibrant due to the British mercantilist system of preferences and their proximity. There was a close relationship between the southern slave states and the BWI.

Between 1776 and 1822, the British discouraged or prevented trade with the USA now a foreign power. Despite policies to promote food security and divert trade, a black market flourished between the BWI and USA.

By 1830, trade between both territories had to formally resume. BWI sugar was facing competition in the UK from domestic beet sugar and foreign imports due to emancipation and the liberalization of the British sugar market after 1846. The BWI began exporting sugar to the USA. The Jamaica/US banana trade commenced in 1868. This was despite Britain’s continuing efforts to limit US influence in the BWI. However, after the 1898 Spanish-American War, which saw the US gaining control in Cuba and Puerto Rico, the US focused on trade with those countries and with the Dominican Republic, Central and South America. US sugar and banana imports from the BWI waned.

BWI Sugar exports did not resume until after the 1959 Cuban revolution. Countries, such as Jamaica, received large quotas. From 1933, Jamaica began to export bananas exclusively to Britain under the Commonwealth Scheme of Preferences. The US United Fruit Company remained involved in the BWI banana trade. The British market, however, was reserved for bananas from the West Indies. This fueled a dispute over access to that market with US companies, including United Fruit and its successor, and their Latin American banana producers that would not be resolved until 2009.

By the 1950s, US companies were involved in mining and exporting bauxite and gypsum. Jamaica and other territories were also developing manufacturing. Textiles and clothing was an important sector and was exported under the Multi-fibre bilateral agreements. With increasing imports also, by the 1960s, the USA became the principal trading partner of Jamaica and other Commonwealth Caribbean territories.

Impact of US Trade Policy Measures

Concerned about the loss of jobs and protecting its domestic industries, in the 1960s, the US imposed high tariffs on textiles and clothing imports. This policy led to the demise of the industry in Jamaica and elsewhere.

Caribbean sugar exports to the USA also declined from the 1980s as the US further supported its domestic producers through subsidies and quotas limiting imports of sugar. Dispute settlement in the General Agreement on Tariffs and Trade (GATT) and the use of High Fructose Corn Syrup as a sweetener also affected exports to the USA.

After the 1970s, Jamaica also began to lose its position as a major bauxite/alumina producer. Production shifted away from the Caribbean to Australia and Africa.

Benefitting from US Preferential Trade Arrangements

The Commonwealth Caribbean/CARICOM did not export to the US under a preferential scheme until the US implemented the GATT/UNCTAD Generalized System of Preferences (GSP) through its 1974 Trade Act.

The Caribbean Basin Initiative (the Caribbean Basin Economic Recovery Act (CBERA)) arrived in 1983, providing non-reciprocal duty free access into the US market for a wide range of products originating in Central American and Caribbean beneficiary countries.

Continuing uncertainty in US investments and policies

Through the bilateral agreements with the USA, the textiles and clothing industry (807) was revived in Jamaica in the 1980s employing at its peak about 40,000 women. After 1994, that sector would again be in decline as the US entered into the North American Free Trade Agreement (NAFTA) and Mexican producers got better US market access. By the time NAFTA-parity was granted in 2000 under the Caribbean Basin Trade Partnership Act (CBTPA), the Caribbean textile and clothing industry was primarily surviving in Haiti.

The California-based Intel Corporation, a semi-conductor manufacturer, had established a subsidiary in Barbados and was the largest employer, but announced its closure in 1986.

Ethanol exports from Jamaica and other Caribbean countries to the USA also grew under CBERA/CBPTA. Ethanol exports too evaporated as the US quota disappeared. By 2015, a number of companies had exited the trade.

With the increasing number of migrants from the Caribbean into the USA, exports of Caribbean non-traditional products expanded. A key source of trade and investment is now Business Process Outsourcing (BPO). The US continues to be the primary source of tourist arrivals for the region. Imports of goods and services continue to increase.

The US remains the principal trading partner of CARICOM countries and has a huge trade surplus, most likely in both goods and services. With proximity, size, including the diaspora, this relationship is not likely to be diluted as history demonstrates.  The US, however, is now the principal beneficiary in this relationship with CARICOM. Further study, reflection and dialogue is required to determine how it can become a more balanced and predictable one with increasing trade benefits for CARICOM Member States.

 

Submitted by Elizabeth Morgan, Specialist in International Trade Policy and International Politics

 

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