Open Regionalism: The FTAA and Implications for CARICOM Development

• Author: Bhoendradatt Tewari/Roger Hosein
• Pages: 98-120

Chapter 4

Open Regionalism: The FTAA and

Implications for CARICOM Development1

This chapter makes the point that the countries of CARICOM do not

have a choice about whether it wants to participate in the intensifying

globalization process or when. The region may have some negotiating

space on how to engage, but the reality is that the new globalization is

already here and engagement is inevitable. The article examines the

benefits and costs of participation in the FTAA for the small economies

of CARICOM and makes the case for both build up of increased

competitive capacity by these countries as well as one for special and

differential status in its negotiation with larger, more mature economies.

This article was first published in A. Bissessar (ed.), Globalization and

Governance: Essays on the Challenges for Small States, McFarland

Publishers, (2004) pp. 173–195.

1 The authors would like to acknowledge the assistance of Rishi Singh.

Open Regionalism 99

4.1 INTRODUCTION

One major ingredient of Globalization involves the international

integration of markets in goods and services and this reality is not only

an important feature of the contemporary world economy but also one

which the Caribbean Community (CARICOM) cannot ignore. The level

of intensification of the process of globalization is reflected in a number

of features including the fact that world merchandize trade expanded at

an annual average of 6.8% per annum from US$3,423bn in 1990 to reach

US$6,243bn in 2000. In a similar sense, merchandise imports expanded

considerably from US$3,430bn to 1990 to US$6,507bn in 2000.

Merchandize exports of developing countries also, increased with

globalization from US$969.8m in 1990 to reach US$2,257bn in 2000.

For these developing countries their imports increased from US$1,331bn

in 1990 to US$2,187bn in 2000.

Similarly, astonishing changes have taken place with regard to global

gross capital flows which in 2000 was US$7.5 trillion as compared to

US$1.4 trillion in 1990, an increase of almost 400%. In this environment

of rapid globalization there has also been an increase in the number of

regional trade agreements, albeit as a stepping-stone for even higher

levels of multilateral trade.

Economic integration schemes in the decade of the 1960s and 1970s

were mainly customs union that reinforced the inward or import-

substituting mode of industrial development. In the main these customs

unions served to expand the protected market base for the manufactures

produced by the members of the trade agreement, and followed the line

of reasoning suggested by distinguished South American economic

scholars, such as Raul Prebisch (Argentina) and Hans Singer (Columbia).

These import substituting industrialization (ISI) models were supposed to

modify the very structure of the economy of practicing member states by

increasing the amount of economic activity that originated in the

manufacturing sector and in so doing reduce the extent of dependence of

members of the regional agreement on the industrialized nations. The

main rationale for these inward oriented development strategies

supported by regional trade agreements at the time, were the colonial

division of labour which perpetuated the trend in which LDCs exported

primary goods and imported manufactures for their own consumption

against the background of worsening terms of trade.

The free trade area established by the removal of intra-regional barriers

to trade was supposed to enhance the growth of trade within the trade

bloc. The customs union protected domestic firms through the

establishment of a common external tariff (CET). Common external