SVG IN THE REGIONAL INTEGRATION MOVEMENT

EXTRACT FROM  SOME SALIENT ISSUES FOR RESOLUTION IN CARICOM LECTURE BY PM GONSALVES.

St. Vincent and the Grenadines, over several administrations before and after independence in 1979, has been committed to the deepening of the process of regional integration.  During the life of successive governments continuously under my leadership since March 29, 2001, this practical commitment to regional integration has deepened profoundly.

Today, St. Vincent and the Grenadines is an activist leader in the many overarching reginal entities to which it belongs, including the Caribbean Community (CARICOM), the OECS, the Association of Caribbean States (ACS), the Community of States of Latin America and the Caribbean (CELAC), the Bolivarian Alternative for Latin America (ALBA), and Petro Caribe.  Under the umbrella of our primary regional integration mechanisms ___ CARICOM and the OECS ___ there are numerous regional bodies in which St. Vincent and the Grenadines has membership.  Additionally, St. Vincent and the Grenadines is a Member State of a number of associate, allied or connected regional entities which themselves are not necessarily formal institutions of CARICOM or the OECS.

Among the principal of these regional bodies or entities are the following: The Eastern Caribbean Central Bank (ECCB); the University of the West Indies (UWI); the Caribbean Development Bank (CDB); the Regional Security System (RSS); the Eastern Caribbean Civil Aviation Authority (ECCAA); the Eastern Caribbean Telecommunications Authority (ECTEL); the CARICOM Development Fund (CDF); the Eastern Caribbean Supreme Court (ECSC); the Caribbean Court of Justice (CCJ); Caribbean Tourism Organisation (CTO); the Caribbean Institute of Hydrology and Meteorology; the Caribbean Disaster Emergency Management Agency (CDEMA); the Caribbean Agricultural Research and Development Institute (CARDI); the Caribbean Regional Technical Assistance Centre (CARTAC); CARICOM Implementation Agency on Crime and Security (IMPACS); Caribbean Regional Fisheries Mechanism (CRFM); the Caribbean Examination Council (CXC); the Seismic Research Centre; the Caribbean Public Health Agency (CARPHA); Caribbean Telecommunications Union (CTU); Leeward Islands Air Transport (LIAT); and the Office of the Trade Negotiator.

There are some forty (40) regional bodies and entities to which St. Vincent and the Grenadines belongs; these can be seen in one of the Appendices of the Estimates of Revenue and Expenditure for the year 2018.  The annual grants, contributions, subscriptions cost the Treasury in excess of EC $15 million for year.  The main annual contributions are to: UWI EC $6.5 million; OECS, EC $2.5 million; ECSC, EC $2.5 million; Regional Security System, EC $2.0 million; Caribbean Development Bank, EC $2.5 million; ECCAA, EC $0.85 million; CARICOM Secretariat, EC $0.7 million; and CARTAC, EC $0.543 million.

St. Vincent and the Grenadines benefits immensely from all of these regional organisations.  For example, LIAT is the major intra-regional airline; the UWI is our premier tertiary educational institution; the Caribbean Development Bank is our country’s major developmental financial entity which is currently owed EC $334.1 million by the public sector in St. Vincent and the Grenadines to facilitate socio-economic and infrastructural developments; ECCAA is the single regulatory body for civil aviation in the independent member countries of the OECS; the ECCB is the regulator for our sub-region’s monetary and banking systems; the ECSC is our sub-region’s common judiciary; CXC is the examinations body for our students exiting the primary, secondary, and post-secondary educational levels; the RSS and IMPACS are our major regional security agencies; CDEMA is our regional response agency for natural disasters; and so forth.  It is to be reiterated that CARICOM and the OECS are the major umbrella bodies for regional integration.

The salience of these regional integration mechanisms to St. Vincent and the Grenadines has been repeatedly emphasized by my government.  Thus, I find quite troubling and unacceptable the recommendation made by the Golding Report to “establish within the Treaty a body of sanctions for willful non-compliance or flagrant breaches that would include —– restricted access to policy-based loans or grants from the Caribbean Development Bank.”

Clearly, this is an egregious example of over-reach by the Golding Report; it is plain wrong; and it has no chance of happening.  The CDB has its own charter, rules, and legal personality separate and distinct from CARICOM; in fact, the CDB is NOT an institution of CARICOM; in Article 22 of the Revised Treaty it is listed merely as an Associate Institution of the Community in the same way the OECS, UWI, the University of Guyana, and the Caribbean Law Institute are named as Associate Institutions.  The CDB has borrowing members which are in CARICOM but also has several non-borrowing members including Canada, China, United Kingdom, Germany, Mexico, and Venezuela.  CARICOM has absolutely no control over the CDB and cannot thus create some far-fetched sanction through the medium of the CDB for some “willful non-compliance or flagrant breaches” in CARICOM.

In any event, the CDB’s policy loans and limited grants are already possessed of their own restrictions and conditions entirely unconnected to CARICOM.  For St. Vincent and the Grenadines, the CDB as our premier regional development finance institution is sacrosanct, and immune from interference by CARICOM.

St. Vincent and the Grenadines does not have a large visible export trade, particularly since the demise of the banana industry consequent upon the diminution, leading to a virtual cessation, of market preferences for its bananas in the United Kingdom subsequent to the 1992 entry of that country into the European Single Market. In 2010, St. Vincent and the Grenadines’ visible exports amounted to US $41.08 million rising to US $45.11 million in 2014.  By far, the bulk of St. Vincent and the Grenadines’ visible export trade is within CARICOM, mainly to other OECS countries, Barbados, and Trinidad and Tobago.  In 2010, St. Vincent and the Grenadines’ intra-regional exports amounted to US $32.42 million or 79 percent of total export trade; in 2014, St. Vincent and the Grenadines’ intra-regional exports amounted to US $38.82 million or 86 percent of its total export trade.  Most of the exports have been agricultural products and manufacturing commodities such as flour, animal feed, and beer.

Only St. Lucia, in the OECS has a higher level of intra-regional export trade than St. Vincent and Grenadines.  In 2010, St. Lucia’s intra-regional exports amounted to US $69.53 million, more than twice the comparable figure for St. Vincent and the Grenadines; in 2014, St. Lucia’s intra-regional exports had fallen to US $41.86 million, a mere US $3.04 million over the comparable number for St. Vincent and the Grenadines.

The intra-regional exports in 2014 for the other OECS countries in CARICOM were: Antigua and Barbuda, US $5.15 million; Dominica, US $38.7 million; Grenada, US $7.12 million; St. Kitts and Nevis, US $7.70 million; and Montserrat, US $1.22 million.  In 2014, the total intra-regional exports from these OECS member countries amounted to US $101.87 million.  In 2014, the other LDC, Belize, and the five MDCs in the CSME (Barbados, Guyana, Jamaica, Suriname, Trinidad and Tobago) had a total intra-regional export trade of US $2.6 billion of which Trinidad and Tobago accounted for a whopping US $1.93 billion or 74.2 percent thereof; Barbados, US $167.02 million; Guyana, US $124.32 million; Jamaica, US $89.82 million; and Suriname US $290.75 million.

The statistics on CARICOM’s intra-regional imports for 2014 are instructive: The five MDCs imported, intra-regionally, goods amounting to US $2.36 billion, of which Trinidad and Tobago accounted for only US $190.2 million, a far smaller level of imports than any of the other four MDCs in the CSME. Jamaica, intra-regional importer, accounted for US $763.87 million or 27 percent of total intra-regional CSME import trade. The six independent OECS countries plus Montserrat imported intra-regionally US $487.50 million in goods. Thus, these OECS member countries had an intra-regional visible trade deficit of US $385.63 million.

The visible balance on intra-regional trade in 2014 for the five MDCs in the CSME are as follows: Deficits for Barbados (US $327.35 million), Guyana (US $420.15 million); Jamaica (US $674.05 million); Suriname (US $81.34 million); and a surplus for Trinidad and Tobago of US $1.74 million).

St. Vincent and the Grenadines’ deficit in its intra-regional CARICOM trade in 2014 amounted to: US $45.14 million [Intra-regional imports of US $83.96 million and intra-regional exports of US $38.82 million].  The bulk of St. Vincent and the Grenadines’ imports, intra-regionally, was from Trinidad and Tobago, predominantly petroleum products.

For completeness, we must note that in 2014, the six independent OECS countries and Montserrat had an overall deficit on the combined intra-regional and extra-regional trade of US $2.086 billion. [Total imports of US $2.45 billion; and exports of US $363.71 million].

A more detailed interrogation of the statistics relating to St. Vincent and the Grenadines’ intra-regional trade is of practical interest to policy-makers, exports, and importers.  Let us accordingly examine the 2016 intra-regional trade data for St. Vincent and the Grenadines. For my specifically OECS audience I am utilizing the data in EC dollars [EC $2.70 = US $1.00].

In 2016, St. Vincent and the Grenadines’ intra-regional imports amounted to EC $212.9 million; its intra-regional exports valued $100.5 million, giving rise to a visible trade deficit of EC $112.4 million.  The principal sources of St. Vincent and the Grenadines’ intra-regional imports in 2016 were: Trinidad and Tobago, EC $146.4 million; Barbados, EC $26.6 million; Guyana, EC $16.87 million; Jamaica, EC $10.94 million and St. Lucia, EC $5.5 million.  The main intra-regional destinations for St. Vincent and the Grenadines’ exports in 2016 were: St. Lucia, EC $19.95 million; Barbados, EC $19.40 million; Trinidad and Tobago, EC $17.20 million; Antigua and Barbuda, EC $16.97 million; Dominica, EC $9.36 million; St. Kitts and Nevis, EC $7.88 million; Grenada, EC $3.99 million; Belize, EC $3.68 million; Jamaica, EC $0.841 million; Suriname, EC $0.407 million; and Guyana, EC $0.182 million.

St. Vincent and the Grenadines thus imported from four of the MDCs (Barbados, Guyana, Jamaica, Trinidad and Tobago) in 2016, goods to the value of EC $200.81 million or 94 percent of its intra-regional imports.  To these same MDCs, St. Vincent and the Grenadines exported, in 2016, goods to the value of EC $37.60 million or 37.4 percent of its intra-regional exports.  At the same time, St. Vincent and the Grenadines’ exports to the OECS countries, in 2016, amounted to EC $58.84 million or 58 percent of its total intra-regional exports.  St. Vincent and the Grenadines’ imports from the OECS member countries in 2016 amounted to EC $10.13 million.

In short, the OECS, as a whole, is, by far, a more important export market for St. Vincent and the Grenadines than the MDCs; and in 2016, St. Vincent and the Grenadines had a trade surplus with the OECS member countries of EC $48 million.  On the other hand, St. Vincent and the Grenadines had a trade deficit in 2016 with these four MDCs (Barbados, Guyana, Jamaica, Trinidad and Tobago) of EC $163.21 million dollars.  Barbados is the MDC with which St. Vincent and the Grenadines had the most equitable trade in 2016: Imports of EC $26.6 million; and Exports of EC $19.4 million.  Clearly, St. Vincent and the Grenadines’ trade nexus with the OECS and Barbados is advantageous to it.

Given the importance to St. Vincent and the Grenadines of its export trade to the OECS member countries, the protection accorded it as a LDC under Article 164 of the Revised Treaty of Chaguaramas looms significantly.  For example, the protection offered to St. Vincent and the Grenadines’ flour and animal feed ___ a protection which expires in December 2018 unless COTED renews it ___ is closely monitored by my government.  In effect, this market protection mandates the payment of the Common External Tariff of 15 percent on exports of flour and animal feed from a CARICOM MDC to a CARICOM LDC.  The evidence indicates that exports of flour from a specific CARICOM MDC to a particular CARICOM LDC has occurred in breach of Article 164; that is, without payment of the CET.

This breach of Article 164 by the MDC exporter and LDC importer has occasioned a significant drop in St. Vincent and the Grenadines’ exports of flour to that CARICOM LDC:  A fall of 64 metric tons between 2014 and 2015 and 322 metric tons between 2015 and 2016.  It appears as though a similar situation obtains in respect of animal feed but involving another MDC exporter and another LDC importer.

In the case of the trade between St. Vincent and the Grenadines and Trinidad and Tobago there is a serious problem of non-availability of foreign exchange for traders from St. Vincent and the Grenadines who sell agricultural produce.  It is wrong and unconscionable that the relevant authorities in Trinidad and Tobago have failed and/or refused to address satisfactorily or at all this burning issue which affects our small farmers adversely.  I have raised this matter at the last two Heads of Government Conferences in Guyana and Grenada; the ECCB has sought to resolve the matter with the Central Bank of Trinidad and Tobago; I have made direct representations on the issue with the government of Trinidad and Tobago.  All of this has been to no avail; the matter remains unresolved. I will raise the issue, forcefully, again in Haiti next week.

The fact of the matter is that Trinidad and Tobago sells approximately EC $150 million annually to St. Vincent and the Grenadines; the bulk of these purchases is made up of petroleum products.  St. Vincent and the Grenadines has been selling on an average annually over the past five years some EC $18 million in export goods. St. Vincent and the Grenadines pays in hard currency for our imports from Trinidad and Tobago, but our traders are paid in TT (Trinidad and Tobago) dollars for their exports.  Our traders are starved of foreign exchange.  All we ask is for Trinidad and Tobago to set aside some EC $20 million in foreign exchange (US $8 million approximately) out of the huge trade surplus that is has with St. Vincent and the Grenadines.  Surely, this is reasonable.  How can the single market function properly in such an unfair environment?

It is evident that this foreign exchange problem has affected adversely the volume and value of exports from St. Vincent and the Grenadines to Trinidad and Tobago.  In 2015, St. Vincent and the Grenadines exported to Trinidad and Tobago, 13.24 million kilograms (net weight) of goods valued at EC $21 million; in 2016, these numbers fell to 11.08 million kilograms of goods with a value of EC $17.19 million; in 2017, the numbers further fell to 6.8 million kilograms of goods with a value of $11 million.  This is an urgent matter of huge importance to be solved permanently!  I shall continue to push aggressively for a solution.

The OECS member-countries, including St. Vincent and the Grenadines, make up their deficit in visible trade by their trade in services, particularly tourism from extra-reginal source markets.  Antigua and Barbuda, Grenada, St. Kitts-Nevis, and St. Lucia are largely service-oriented economies.  St. Vincent and the Grenadines itself has made the transition from a goods-based economy to a service-based one to such an extent that 80 percent of its economy’s output is in services.  And Dominica is not too far behind. Still, the importance of agriculture, forestry, and fisheries can hardly be overstated both for domestic consumption and intra-regional trade.  Medicinal cannabis is emerging as a possible growth sector, linking agriculture and industry for extra-regional exports.  St. Vincent and the Grenadines has much to learn from Jamaica which has a head-start on us in this regard.

A major take-away story from these statistics for St. Vincent and the Grenadines is that although, commendably, the bulk of its export trade in goods has been intra-regional, the actual export performance needs to be markedly strengthened.  There are well-known constraints and bottle-necks to competitiveness for export production of goods; and clearly emphasis ought to be on enhancing intra-regional export trade while seeking extra-regional niche markets.  It is for this reason that we must arrive at the optimal trading regime in CARICOM through an effective Single Market, but this does not mean a rush to the Single Economy in the light of all the extant circumstances.

It is to be noted that St. Vincent and the Grenadines encourages intra-regional trade through its fiscal policies.  Thus, for example, an exporter’s chargeable income on exports to the OECS markets attracts corporate taxation of 15 percent; on the exporter’s chargeable income on exports to the wider CARICOM markets, the tax rate is 20 percent.  The normal rate of corporate taxation at the top end is 30 percent.

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