September 25, 2007

THE PROMOTERS OF THE CARIBBEAN BASIN Initiative (CBI) predicted in 1983 that the "magic of the marketplace" would rescue the beleaguered economies of U.S. allies to the south through new job-creating U.S. investment and increased Caribbean and Central American exports to the United States. But the export of Reaganomics failed so badly that even Peter Medford, one of the AID officials charged with its implementation in Barbados, admits, "The effects of the CBI have been the opposite of what was intended." The CBI had two major components: a one-shot dose of $350 million in "emergency" aid in 1984, and a new set of trade regulations affecting the export of some of the region's products to the United States. Caribbean goods which became eligible for duty-free status comprised only 7% to 10% of the region's exports to the United States. The largest and fastest-growing exports-petroleum products, clothing, textiles and shoes-were specifically excluded. To the extent that Caribbean exports increased, the main beneficiaries were U.S. exporters. Of the 12 leading products which became duty-free, seven are produced mainly by U.S. companies, many of which cut costs by using low-paid Caribbean workers to assemble components made outside the region, then bring the goods into the United States as "Caribbean Basin" exports. In addition, the losses to the Caribbean caused by new U.S. protectionist policies have far outweighed the small gains from the CBI. The value of Caribbean exports to the United States actually plunged by $1.5 billion between 1983 and 1986. Exports of textiles, sporting goods, pharmaceuticals, electronics, chemicals and coffee increased, but earnings from oil, bauxite, sugar and other traditional exports declined. CBI countries' share of the U.S. market fell from 3.4% to 1.7% in the same period. Caribbean countries have not become less efficient exporters; in fact, they have exported more goods at lower prices. The volume of Caribbean non-fuel exports grew by an average of 4.4% from 1980 to 1986. But due to the fall in world market prices, this resulted in a 0.1% decline in income. The decline in oil exports income was even greater. The value of exports of those few products which became eligible for duty-free status did increase, from $116 million in 1983 to $276 million in 1986. But those products represented only 11% of all Caribbean exports to the United States that year. AID enthusiastically publicized a slight increase in Caribbean exports of "exotic" fruits and winter vegetables in 1986. But the total value of such exports amounted to only 8.3% of the value of the region's five main traditional agricultural exports: coffee, cocoa, sugar, tobacco and bananas. Direct U.S. investment in the islands, except in off-shore banking, dropped by 7%, from $1.85 billion in 1983 to $1.71 billion in 1985, during the first two years of CBI, a time of increased U.S. investment worldwide. Economist Emilio Pantojas-Garcia reports that this trend has continued in subsequent years. Responding to the expectation of increased U.S. investments and markets-and under pressure from their creditors-Caribbean governments passed up tax and duty revenues and relinquished rights to regulate foreign corporations. They shifted resources away from production for Caribbean markets, and provided factory buildings, utilities and other services to foreign investors at below cost, incurring debts that have yet to be paid. The CBI enabled the United States to weaken movements for greater political and economic independence. It promoted competition among nations and fostered bilateral relations of economic dependence with the United States. CARICOM director for trade and agriculture, Hayden Blades, told U.S. legislators in 1988, "The process of regional integration was hijacked by the United States."

Tags: Caribbean, CBI, foreign aid, investment

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