No Regional panaceas

Feb 27, 2012 Editorial

In our Sunday edition, eminent W.I. economist Norman Girvan offered a bleak but realistic assessment of the state of CariCom. He was responding to two recent interventions on the same subject- one from St. Vincent’s PM Ralph Gonsalves and the other from a CariCom mandated “Project Management Team’. Girvan pointed out that neither critique contained anything new – they both feared the imminent collapse of the regional initiative.
What was missing was a more candid assessment of the failure of the territories’ leadership and concrete proposals for dealing with that failure. Probably reacting to the stagnation of the local regional integration movement, Dr. Girvan also pointed out that several member states, including Guyana, have been following up on other regional integration initiatives. The question is whether these other Latin American initiatives have fared any better that CariCom?
Last year, the question was reviewed by the Carnegie Endowment for International Peace in a report: Regional Trade Blocs: The Way to the Future? Noting that after slow progress from the 1960’s “the trade strategy of most Latin American economies changed after the debt crisis in the 1980s. Economic reforms pushed by the IMF put a high priority on unilateral trade liberalization. As a result, average tariffs fell significantly.
At the same time, the paralysis in multilateral trade negotiations in the 1990s created a scenario favouring bilateral free trade agreements, within and beyond the Latin American region. This culminated in a most ambitious proposal, the Free Trade Area of the Americas (FTAA), which was to include all of Latin America, the Caribbean, the United States, and Canada. But after several rounds of discussions and negotiations starting in 1994, it became clear that the initiative would not prosper, as in fact happened.
Brazil and the MERCOSUR countries considered the FTAA an attempt at U.S. hegemony in trade relations in the hemisphere. True or not, that perception was enough to doom the initiative.
One of the unintended consequences of the FTAA initiative before it faded away was to increase the effort by Brazil and Argentina to strengthen MERCOSUR as an alternative to the FTAA.
Brazil and Argentina, as of 1990, had agreed to develop common political and economic objectives, with MERCOSUR as the instrument. The treaty that created MERCOSUR was signed in 1991, and Paraguay and Uruguay soon joined. Trade increased rapidly among member countries, reaching 21 percent of their total trade in 1995 (with a peak in 1998), but by 2008 it had declined sharply to 15 percent.
One of the reasons for this decline is that when faced with external shocks, like repeated financial crises, the main partners in MERCOSUR have resorted to diverse forms of protectionism, including nontariff restrictions to trade. MERCOSUR’s effectiveness as an integration tool has also been limited by a tendency to avoid incorporating into national legislation any MERCOSUR agreements that are not politically palatable at the national level. Of 840 norms approved by MERCOSUR, only 180 had been incorporated by all member countries into their domestic legislation and norms as of 2000.
Lack of coordination in macroeconomic policies has also been a factor. In part because of these very limited advances toward region-wide integration, new structures have been proposed and are being implemented. In the meantime, Venezuela, under the Chávez leadership, launched the Bolivarian Alternative for the Americas, which St Vincent and Dominica have joined. ALBA was offered as an alternative to previous alliances that were assumed to be contaminated by “neo-liberalism” and the supposed hegemony of the United States in the region.
Another attempt to hasten the process of regional integration, this time under the leadership of Brazil, led to the formation of the Union of South American Nations (UNASUR) and later to the Latin American and Caribbean Community of Nations (CELAC) – successor to the Rio group. It is too early to evaluate their potential, but these schemes are certainly adding new structures to an already fragile building.”
It does appear that there are no regional panaceas. Our focus must be on building our own capacity.

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