Publication Number: 4000

Report Title: Caribbean Region: Review of Economic Growth and Development

Author's name(s): Walker Pollard, Nannette Christ, Alan Fox, Nick Grossman, William Powers, James Stamps, Craig Thomsen, Lauren Deason, Lisa Ferens-Alejandro, Laura Bloodgood, Samantha Brady, Raymond Cantrell, Alfred Dennis, Vincent DeSapio, Andrew Gately, Doug Newman, Erick Oh, Laura Rodriguez, George Serletis, Ralph Watkins, Isaac Wohl

Report Description/Introductory Text: The report provides an in-depth description of the current level of economic development in the Caribbean basin at the regional level and in country profiles, and identifies possible future development strategies through an overview of the economic literature on potential Caribbean development. The report also contains brief case studies of successful industries that have been able to compete globally or regionally despite small size or capacity constraints.

The report covers 18 countries—Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, the British Virgin Islands, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, the Netherlands Antilles, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago. These countries vary considerably in population, GDP and per-capita GDP, social indicators, and production and export bases. They are all, however, constrained by the relatively small size of their economies and limited natural resources, thus economies of scale are difficult to achieve. In addition, most countries’ output and/or exports rely heavily on one or two industries (e.g., tourism in the services sector, energy-related products in the manufacturing sector, and bananas or sugar in the agricultural sector). Despite the relatively high per-capita incomes for most countries, many have substantial social development problems, such as high poverty rates, income inequality, unemployment, underemployment, and susceptibility to external forces (including weather, U.S. economic fluctuations, and changes in global commodity prices). Haiti’s problems are particularly challenging, given the country accounts for nearly one-half of the population in the covered countries and is the only country in the region (and the Western Hemisphere) classified as “low income” by the World Bank.

The literature review identifies a number of impediments to future economic growth in the Caribbean: the small size of countries and firms, limited infrastructure development, high levels of government debt, and slow progress toward regional integration.

The literature review also identifies policies that can increase scale in production of export-oriented goods. Expanded Caribbean government cooperation through the CARICOM Single Market Economy can promote increased regional harmonization of regulations and reduce barriers to the regional movement of labor. Expanded provision of microcredit can benefit the smallest and most vulnerable firms in the region. The United States could increase assistance targeted toward small economies and enterprises, including educational programs that spread awareness of export opportunities and trade benefits, as well as programs to enable firms to better comply with international regulations regarding port security and food safety.

Infrastructure development directly improves the health and well-being of households, improves the competitiveness of firms in the region, and is one of the most important factors in attracting new investment to the region. Caribbean governments can foster infrastructure development by promoting the private provision of infrastructure services, such as electricity and telecommunications. The U.S. government could improve the performance of port infrastructure, increase shipping reliability, and reduce time to market by addressing limitations in Caribbean port infrastructure.

The economic literature generally finds that countries that are more open to trade experience faster growth. Caribbean countries can promote trade by reducing external tariffs and advancing efforts at regional integration that are already underway. The literature highlights ways that the United States can encourage service exports from the Caribbean to promote growth and high-wage production. For example, the United States could relax regulations on Caribbean exporters of professional services and increase international portability of health insurance benefits.

The extension and expansion of U.S. trade preference programs for the region can also assist the development of Caribbean exports. The literature notes that the United States could further enhance Caribbean development by improving CBERA’s sectoral coverage and duration, and by liberalizing CBERA’s rules of origin to allow fabric inputs from additional non-U.S. sources.

Topics Covered: Caribbean, CBERA, CBTPA, CBI, development, economic growth

Countries: Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Virgin Islands (British), Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Netherlands Antilles, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadi, Trinidad and Tobago, United States

HTS Numbers: 2709, 2710, 61, 62, 2207, 2814, 2905

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