Caribbean Economic Development 1. Discuss strategies used to achieve economic development. 2.  Differentiate between economic growth and economic developm

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Caribbean Economic Development 1. Discuss strategies used to achieve economic development.

2.  Differentiate between economic growth and economic development

3. assess different measures of economic development

4. Explain economic development

5. Explain UN millennium Development goals

6. Outline the stages of economic growth

7. describe the various constraints to economic growth

8. explain the cost and benefits of economic growth

9.  Walt Whiteman Rostow five stages of economic growth

10. Challenges influencing agricultural production

11. assess the  roles that the government can play in agriculture development

12. explain the following terms and concepts; technology invention and technology innovation, brain drain and brain gain.

13. explain the term regional economic integration

14. assess the various obstacles the prevent regional integration

15.what are some of the challenges we face 

16. what are some limitation of funding

17. what level of integration we(Caribbean) are  at with integration

18. Creative industry help with post pandemic development ECON3501

CARIBBEAN ECONOMIC

DEVELOPMENT

UNIT 8 – REGIONAL ECONOMIC INTEGRATION

RESOURCE MATERIALS

 Levitt, Kari; Witter, Michael (1996). The Critical Tradition of Caribbean Political

Economy: The Legacy of George Beckford. Kingston. Ian Randle Publishers

 Beckford; George (2000) Persistent Poverty; Underdevelopment in the Plantation

Economies of the Third World. UWI Press.

 Todaro Michael & Smith Stephen; C. (2011) 11th Ed. Economic Development. Pearson

Education & Addison-Wesley

 Bhagwati Jagdish (2004). In Defence of Globalization, Oxford University Press

 Blackman; Courtney. (2005). The Practice of Economic Management: Caribbean

Perspective Kingston: Ian Randle Publishers

 United Nations- UNDP, Human Development Report. World Bank-World

Development Report
2

GLOSSARY

 ACP – African Caribbean and Pacific

 ACS – Association of Caribbean States

 CARIBCAN – Caribbean and Canadian Association

 CSME – Caribbean Single Market and Economy

 OECS – Organization of Eastern Caribbean States

3

ECONOMIC INTEGRATION

 Economic Integration refers to the removal of barriers to trade that

prevent or hinder the flow of goods and services into or out of a

nation or society.

 It usually implies repealing tariffs, quotas, embargos, or other punitive

customs practices,

 and may also include extending favourable taxation rates or regulatory

treatment to encourage cross-border investments.

4

ECONOMIC INTEGRATION

 Trade barriers can be:

 Tariffs – taxes imposed on imports to a country

 Quotas – a limit to the amount of a product that can be imported

 Embargos – complete ban on the importation of a good) and border restrictions

 For example, Canada, Mexico and the United States have formed the North

American Free Trade Agreement (NAFTA) now, United States Mexico and Canada

Agreement (USMCA), which reduces trade barriers between the three countries.

 Canada, the U.S. and Mexico are still free to set their own trade barriers on goods from

other countries. 5

ECONOMIC INTEGRATION

 Usually integration involves one or more written agreements that describe the areas

of cooperation in detail, as well as some coordinating bodies representing the

countries involved.

 This co-operation usually begins with economic integration and as it continues,

comes to include political integration.

 We can describe integration as a scale, with zero (0) representing no integration at

all between two or more countries.

 Ten (10) would represent complete integration between two or more countries.

 This means that the integrating states would actually become a new country — in

other words, total integration.
6

ECONOMIC INTEGRATION

7

ECONOMIC INTEGRATION

 The single market is the midpoint of the integration scale between political and
economic integration.

 It is the point at which the economies of the co-operating states become so
integrated that all barriers to the movements of labour, goods and capital are
removed.

 Political integration – as the economies of the co-operating countries become
completely integrated into a single market, there appears a need for common policies
in social policy (education, health care, unemployment benefits and pensions) and
common political institutions.

 This forms the basis for political integration. 8

ECONOMIC INTEGRATION

 There are three important dimensions of economic integration:

1. Trade in goods and services

2. Movement of capital and integration of financial markets.

3. Human migration (Labor)

9

STAGES OF ECONOMIC INTEGRATION

 Preferential Trade Agreement (PTA)

 is perhaps the weakest form of economic integration.

 In a PTA countries would offer tariff reductions, though perhaps not

eliminations, to a set of partner countries in some product categories or

sectors.

 Higher tariffs, perhaps non-discriminatory tariffs, would remain in all

remaining product categories or sectors. 10

FREE TRADE AREA

Free Trade Area

 occurs when a group of countries agree to eliminate trade barriers between

themselves, but maintain their own barriers against non-member countries.

 Hence there are no tariffs or quota restrictions.

 The North American Free Trade Area (NAFTA), now USMCA is an example of a

FTA.

 Free trade areas are pursued vigorously by governments because they are a move

towards a free market for a wide range of goods and services.

 These are goods and services that originate from one and traded to one of the

other member countries of the regional economic free trade area.
11

FREE TRADE AREA

Examples of Free Trade Agreements:
 AFTA: Association of South East Asian Nations (ASEAN) Free Trade Area (1992)

 CEFTA: Central European Free Trade Agreement- Non- EU countries in Southeast Europe

 CISFTA: Commonwealth of Independent States Free Trade Area- (2011)

 COMESA: Common Market for Eastern and Southern Africa (2000)

 GAFTA: Greater Arab Free Trade Area (1997)

 GCC: Gulf Cooperation Council (1981)

 NAFTA: North American Free Trade Agreement- Canada, US and Mexico (1994)

 SAFTA: South Asian Free Trade Area (2004)

 SICA: Central American Integration System (1993)

 Caribbean Free Trade Agreement (1965-1973)
12

CUSTOMS UNION

Customs Union

 This is an agreement among several countries to eliminate barriers to trade

among themselves and erect common barriers against non-member

countries.

 Hence a common external tariff is charged to non-member countries.

 The European Union represents such an arrangement but CARICOM also

represents a customs union.

 With customs union there is the inherent problem of policy coordination.
13

CUSTOMS UNION

Examples of Custom Unions:

 CAN- Andean Community (1969/1996) Bolivia, Colombia, Ecuador, and Peru

 CUBKR- Eurasian Customs Union (2010)

 EAC- East African Community (1967- 1977) (2000)

 EUCU- European Union Customs Union (1958)

 MERCOSUR- Mercado Común del Sur- Southern Common Market-(1991) U (1994

 SACU- Southern African Customs Union (1910) Up. (1970)

14

COMMON MARKET
 This is a Customs Union however countries can move labor and capital freely across

borders.

 Group formed by countries within a geographical area to promote duty free trade and

free movement of labor and capital among its members.

 Common markets impose Common External Tariffs (CET) on imports from non-

member countries.

 Labor is the principal factor of production that benefits from the forming of a common

market. In recent times, greater effort has been allowed in CARICOM toward becoming an

actual common market.

 Many categories of workers are now allowed to cross regional borders to seek

employment.

 The European Community (EC) was issued with EC passports, as well as CARICOM

members. They can also work in different parts of the region without restrictions.

15

COMMON MARKET

Examples of Common Market:

 EEA- European Economic Area (1994)

 EFTA- European Free Trade Association (1960) Iceland,

Liechtenstein, Norway and Switzerland

 CES- Common Economic Space (2003) replaced by the Eurasian

Customs Union 2012 and the Eurasian Economic Union (2015)

 CSME – CARICOM Single Market and Economy (2006)
16

ECONOMIC UNION

 An economic union typically will maintain free trade in goods and services,

set common external tariffs among members, allow the free mobility of capital

and labor, and will also relegate some fiscal spending responsibilities to a

supra-national agency.

 Hence it is a common market with a substantial co-ordination of economic

policies.

 It is the fourth important discrete point on the integration continuum.

 It involves the union of policies with regard to major macroeconomic variables

such as inflation, interest rates and exchange rates.
17

ECONOMIC UNION

Examples of Economic Unions:

 EU- European Union’s (EU) Internal Market (1993)

 EEU/EAEU- Eurasian Economic Union (2014)

18

MONETARY UNION

 This agreement allows for Economic Union arrangements with the inclusion of a

Currency Union (i.e. Common Currency)

 This involves the formation of a central monetary authority which will determine

monetary policy for the entire group. A well-known example is the European

Union (EU).

 An outstanding example of an economic union in the Caribbean is the

Organization of Eastern Caribbean States (OECS), which comprises the Lesser

Developed Countries (LDCs) of the CARICOM group, such as Antigua and

Barbuda, Dominica, Grenada etc.

 These countries share a common currency, the Eastern Caribbean Dollar and a

common Central Bank (Caribbean Development Bank).
19

POLITICAL UNION

 The final step in the process of economic integration is the

development of a political union.

 This involves the elimination of trade barriers in addition to the

development of common external barriers plus the free movement

of factors of production, the harmonization of economic policies, and

common political institutions and governance procedures.

 E.g. the former United Soviet Union.
20

REGIONAL ECONOMIC INTEGRATION

 Regional economic integration is an agreement among countries in a

geographic region to reduce and ultimately remove, tariff and non tariff

barriers to the free flow of goods or services and factors of production

among each others, countries agree to coordinate their trade, fiscal, and/or

monetary policies.

 Regional integration is the process by which two or more nation-states

agree to co-operate and work closely together to achieve peace, stability

and wealth.

 Many trading blocs already exist and in order to compete effectively,

Caribbean countries as well as other developing countries must improve

their own competitiveness.

21

BENEFITS OF REGIONAL INTEGRATION

 Regional economic integration carries many benefits to Caribbean

economies.

 In many cases, it is seen as a continuum with several discrete or pausing

points at which countries may decide either to stop the integration

process or pause prior to integrating further.

 Regional economic integration is usually fueled and pursued in the

interest of trade.
22

23

BENEFITS OF INTEGRATION

 Trade creation: Trade creation occurs when consumption shifts from a high cost

producer to a low cost producer. Economic integration increases specialization by

removing trade barriers and by encouraging specialization, it enables a shift in

production from high cost to low cost countries.

 Economic integration increases the variety of products available to

consumers in member states. Removal of trade barriers enables consumers

to have a variety of commodities from which to choose. Local consumers are no

longer restricted to consuming local products. Increased variety and consumer

choice improve people’s standard of living.
24

BENEFITS OF INTEGRATION

 Economic integration allows for improved relationships when there are

conflicts between countries.

 When countries are united in economic efforts, it becomes necessary to maintain

friendly relations.

 When there are successful integration efforts, what was considered as

international trade is immediately converted to domestic trade.

 This removes much of the bureaucracy that was previously involved in

international trade and results in trading being more efficient and hence,

more profitable. 25

BENEFITS OF INTEGRATION

 Member countries enjoy economies of scale: Economic integration enables

member countries to expand the scale of production and enjoy economies of scale

because of the expanded market.

 Attracting Direct Foreign Investment (DFI): Investors are attracted by large

markets. Small and fragmented national markets are usually not sufficient to attract

huge investments. Economic integration makes the region a huge market which

foreign investors find attractive.

 Economic integration improves bargaining power: A group of countries

acting together improves their bargaining power in trade agreements with other

countries and trade blocs. A common policy and common stand enables the group

of countries to integrate to achieve more than they would if the individual countries

bargained individually.
26

BENEFITS OF INTEGRATION

 Economic integration Reduces problems of exchange rates:

Economic integration enables member countries to use the same currency

throughout the region. This eliminates the need for converting currencies

for cross border trade.

 Integration encourages specialization: The knowledge that a country

will be able to freely export surplus output to its trading partners

encourages specialization which greatly improves the efficiency and quality

of output produced.

 Employment due to movement of factors of production: The free

movement of factors of production in an integrated region enables

unemployed factors of production to find employment in other countries.
27

BENEFITS OF INTEGRATION

 Lower costs of research and joint utilities: When countries integrate, they are

able to undertake very costly projects that they would not have afforded individually.

This enables them to undertake costly research, develop better and modern

infrastructures and services.

 Increases competition: With many firms from the member countries competing

for the market without restrictions, firms are forced to improve on quality and sell

at lower prices. Firms must devise the most efficient methods of production so as to

favorably compete. Integration therefore promotes efficiency.

 Peace and security: Economic integration promotes peace and security within the

region. A country will find it difficult to wage war against a fellow member state.

There are also many structures aimed at resolving conflicts amicably without

resorting to war.

28

BENEFITS OF INTEGRATION

Benefit of Economic Integration to the Caribbean Region

 A wider market

 Greater economies of scale

 Efficient allocation of world resources

 Increased Investments

 Greater variety of goods and services

 Lower prices

 Promotion of regional economic growth and development 29

PITFALLS OF INTEGRATION

 Creation of Trading Blocs: It can also increase trade barriers against

non-member countries.

 Trade Diversion: Due to trade barriers, trade is diverted from a non-

member country to a member country despite the inefficiency in cost.

 For example, a country has to stop trading with a low cost

manufacture in a non-member country and trade with a manufacturer

in a member country which has a higher cost. 30

PITFALLS OF INTEGRATION

 National Sovereignty: it requires member countries to give up some

degree of control over key policies like trade, monetary and fiscal

policies.

 The higher the level of integration, the greater the degree of

controls that needs to be given up particularly in the case of a

political union economic integration which requires nations to give

up a high degree of sovereignty.
31

EVOLUTION OF CARIBBEAN INTEGRATION

 The West Indies Federation was a political union in the making established in1958 by

the British Caribbean Federation Act of 1956 and comprised of ten territories: Antigua and

Barbuda, Barbados, Dominica, Grenada, Jamaica, Montserrat, the then St Kitts-Nevis-

Anguilla, Saint Lucia, St Vincent and Trinidad and Tobago.

 Fundamental issues debated with a view to strengthening the Federation were direct

taxation by the Federal Government, Central planning for development, Establishment of a

Regional Customs Union and Reform of the Federal Constitution.

 Several problems including governance and administrative structures imposed by the

British; policy disagreements an unwillingness to give up power to the Federal Government

were faced.

 The demise however, was led by the withdrawal of Jamaica – the largest member and

Trinidad and Tobago’s subsequent withdrawal shortly after.
32

EVOLUTION OF CARIBBEAN INTEGRATION

 The Caribbean Free Trade Association (CARIFTA) was founded by Antigua and Barbuda,

Barbados, Guyana, and Trinidad and Tobago in1965, with the signing of the Dickenson Bay Agreement

(the Agreement establishing the Caribbean Free Trade Association).

 They were joined in 968 by Dominica, Grenada, St Kitts-Nevis-Anguilla, Saint Lucia, St Vincent and

the Grenadines, Montserrat and Jamaica.; and in 1971 by Belize.

 The intent was to unite their economies and to give them a joint presence on the international

scene by encouraging a balanced development through:

 increasing trade – buying and selling more goods among the Member States

 diversifying trade – expanding the variety of goods and services available for trade

 liberalizing trade – removing tariffs and quotas on goods produced and traded within the area

 ensuring fair competition – setting up rules for all members to follow to protect the smaller

enterprises.

33

EVOLUTION OF CARIBBEAN INTEGRATION

In addition to providing for free trade, the Agreement sought to:

 ensure that the benefits of free trade were equitably distributed

 promote industrial development in the LDCs

 promote the development of the coconut industry (through an Oils and Fats Agreement)

which was significant in many of the LDCs

 rationalize agricultural production but in the interim, facilitate the marketing of selected

agricultural products of particular interest to the LDCs (through the Agricultural Marketing

Protocol)

 provide a longer period to phase out customs duty on certain products which were more

important for the revenue of the LDCs 34

EVOLUTION OF CARIBBEAN INTEGRATION

 The main limitation of The Caribbean Free Trade Association (CARIFTA) was that it

only facilitated the trading of merchandise goods.

 According to the narrative of Singh, CARIFTA also failed to harmonize the industrial

and foreign policies throughout the region (“Guyana Chronicle: The History of

CARICOM”).

 This led to the development of a broader form of integration that accommodated

the free movement of commercial services, people and capital within the Caribbean

known as the Caribbean Community (CARICOM) in 1973.

35

EVOLUTION OF CARIBBEAN INTEGRATION

 The Caribbean Community and Common Market (CARICOM) 1973-
1989, replaced CARIFTA in 1973 with the signing of the Treaty of Chaguaramas.

 CARICOM was a stronger form of integration with three ‘pillars’ of economic
integration (a common market in goods), functional cooperation (education, health
and several other areas), and foreign policy coordination.

 CARICOM now comprises twenty countries; fifteen of which are Members and five
Associate Members. They work together to coordinate economic policies, engage in
development planning, launching of special projects targeted at less-developed
countries and handling trade disputes within the region.

 The CARICOM customs union was never completed and in the 1980s intraregional
trade deteriorated. 36

EVOLUTION OF CARIBBEAN INTEGRATION

 CARICOM Single Market and Economy (CSME) – In 1989 CARICOM Heads

of Government (HoG) declared their intention to create a Single Market and

Economy (CSME).

 The legal basis was laid with the signing of The Revised Treaty of Chaguaramas in

2001.

 New organs of governance were set up and the Caribbean Court of Justice was

created.

 Security was added as the fourth pillar of integration in 2007.

 The CARICOM Single Market was officially inaugurated in 2006 and the Single

Economy is scheduled for completion in 2015.
37

EVOLUTION OF CARIBBEAN INTEGRATION

 The CSME seeks to implement provisions for the removal of trade and

professional restrictions.

 These provisions facilitate the right to establishment businesses,

to provide regional services, the free movement of capital and the

coordination of economic policies.

 In the ensuing years, some Caribbean economies, under the auspices of

multilateral lending institutions, implemented structural

adjustment programmes having at their core, programmes of economic,

financial and trade liberalization that far exceeded their commitments as

expressed in the Treaty of Chaguaramas.
38

EVOLUTION OF CARIBBEAN INTEGRATION

The fundamental aspects of CSME are as following:

 Consumer Affairs

 Competition Policy

 Social Security

 Contingent Rights

 Immigration Arrangements for Free Movement of Persons

 Administrative Arrangements for Commercial Establishment

 Government Procurement

 Trade and Competitiveness in CARICOM 39

CSME OBSTACLES

 CARICOM is characterized by the heterogeneity of the region in terms of GDP per

capita as well as population. Furthermore, the economies are very open, but tend to

focus on very few export goods.

 Economic Integration among the countries in the Caribbean region has a long history

through CARIFTA, CARICOM and now CSME.

 The standard explanations for the conflicts and failures of regional economic integration

among developing countries have been concerned with the issue of equity in the

distribution of benefits.

 If within an integrated area, some countries are much more developed than others, the

gains from being integrated are very likely to be distributed unequally.
40

CSME OBSTACLES

 The advanced economies tend to attract more new industries than the less

advanced.

 The possible consequence is a wider gap between the members:

 The already developed area becomes more developed while the more rural

area is condemned to a lower level of development.

 The establishment of free movement within CARICOM might not stimulate strong

migration flows.

 There are not many incentives for a broad reallocation of labour within

CARICOM.
41

CSME OBSTACLES

 Due to the relative neighborhood to the large US labour market, citizens of

CARICOM willing to move will probably prefer to go to the US or other higher

developed countries outside CARICOM.

 Right now CSME is partially implemented with certain categories like graduates,

musicians artists etc. Artisans and unskilled persons still have to get work permits.

 The aim of CSME was to ensure that all facets of the agreement were in place

by 2015.

 CSME 2017-2019 in tandem with the Community Strategic Plan 2015–2019

 https://today.caricom.org/2018/10/26/implementation-plan-for-the-csme-2017-

2019/

42

Implementation Plan for the CSME 2017-2019

CSME OBSTACLES

 Concerns about distribution of cost and benefits

 Conflict with domestic policies

 Inadequate infrastructure

 A strong precondition for regional and economic integration is adequate infrastructure.

Economic gains prompted from regional integration are highly dependent upon the

ability of the system to move resources, people, capital, and information seamlessly from

the sourcing areas to production hubs and finally to distribute its products efficiently.

 Vested interest threatened

 Little role for private sector

 Weak states 43

CHALLENGES TO INTEGRATION

 https://www.everycrsreport.com/reports/RL34308.html#_Toc202746444

44

https://www.everycrsreport.com/reports/RL34308.html#_Toc202746444

GLOBALIZATION AND CARICOM

 Globalization poses significant challenges to small developing economies such as

those in the Caribbean, which are already dealing with a number of issues in their

pursuit of sustainable development.

 For Caribbean countries, the impact of globalization on trade has been reflected in

increased liberalization and market-opening policies, especially during the latter

part of the 1980s and the 1990s.

 The reduction of trade barriers and the increasing openness of these economies

have not led to a significant increase in intraregional trade or helped them to

obtain a growing share of the extra- regional export markets. As a result, these

countries’ growth potential has been limited.
45

GLOBALIZATION AND CARICOM

 This was the genesis of the CARICOM Single Market and Economy (CSME).

 It was intended to achieve a much broader and deeper integration than had

been possible under the existing treaty and, through the development of

economies of scale, to increase the competitiveness of these countries in

the global economy.

 Additionally, the creation of CSME was also meant to enhance the bargaining

position of CARICOM countries in international negotiations such as those

at the level of the World Trade Organization (WTO) and the future Free

Trade Area of the Americas (FTAA). 46

GLOBALIZATION AND CARICOM

 Globalization has been a prerequisite for the development of specific sectors but

has not provided the means to overcome the weaknesses and stumbling blocks

that have marked the development of some of the more traditional sectors.

 In this regard, it has reinforced a process of change in sectoral output and, in so

doing, has made the existing disparities among CARICOM countries more visible

and transparent.

 In the case of the agricultural sector, this change in the composition of output

has reflected a loss of competitiveness resulting from high production costs,

external shocks and a heavy dependence on trade preferences granted by the

European Union. 47

GLOBALIZATION AND CARICOM

 Globalization has affected the use of natural resources, the expansion of

human settlements and development policies aimed at addressing poverty

and income inequality, which are among the most serious sustainable

development issues confronted by the Caribbean countries.

 The most important and urgent requirement for seizing the

opportunities presented by the global environment is the transformation

from a labour intensive to a highly trained knowledge-based workforce
48

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