By Alicia Nicholls
It is a new year; one filled with promise coupled with uncertainty amidst a growing climate crisis, a forecasted deceleration in global growth and escalating geopolitical tensions and instability in several parts of the world. While the expected global recession of 2023 failed to materialise, we trade analysts are keeping a keen eye on the impact of the ongoing geopolitical tensions, including the Russia-Ukraine and Israel-Palestine conflict, on global trade. Moreover, the international media has dubbed 2024 a historic “mega-election” year as some of the world’s largest countries, including the Caribbean region’s biggest trading partner, the United States of America (USA), are poised to hold general elections.
This first SRC Trading Thoughts for the year reflects on US-Caribbean economic relations, particularly their trading relationship, in light of the pending US presidential elections.
US as the region’s largest trading partner
The US is not just the Caribbean region’s largest trading partner. It is also an important tourism source market and a major tourism destination for Caribbean people to shop and vacation. These things, in addition to its being home to the region’s largest diaspora and being a provider of development assistance, make the US a vital economic partner for the region. Caribbean people are major consumers of American media and other cultural content. As such, presidential elections in the US always hold some mystique for us regional observers, particularly given the fluidity of US foreign trade policy depending on who occupies 1600 Pennsylvania Avenue. With just a couple of months to go before November 5, 2024 (election day) and primary season still ongoing, it remains undecided who will be the two main presidential contenders. Based on current poll numbers, a rematch is expected between now incumbent President Joseph R. Biden (Democratic Party) and his predecessor, former president Donald J. Trump (Republican Party). Several third-party candidates are vying on independent tickets, but unless a major upset happens, the eventual winner of the US presidential election is almost guaranteed to be from one of the two main parties.
US trade policy and the region
While outside of the scope of this piece, climate change – an issue of existential importance for Caribbean small island developing States (SIDS) – is one big area of difference between Presidents Biden and Trump, with the latter being a self-confessed climate change denier. However, on issues of trade, there has not been as wide a gulf between these two leaders as one might initially believe, in some respects. President Biden has championed a “worker-centred trade policy”, which is not as pellucidly nationalistic as Trump’s “America First” policy. Nonetheless, it has been equally criticised as being a mercantilist turn away from the pro-free trade stance that characterised US trade policy previously. Take for example the Inflation Reduction Act of 2022 which many analysts have deemed as protectionist and the ongoing US-China ‘chip war’. The Biden administration has also continued the Trump administration’s blockade of appointments to the World Trade Organisation (WTO)’s Appellate Body which has been unable to review appeals due to vacancies on that body since 2019. While a temporary alternative – the Multi-party Interim Appeal Arbitration Arrangement (MPIA) – is in effect among some WTO members, the ongoing Appellate Body gridlock has long-reaching implications for the peaceful settlement of multilateral trade disputes and predictability of the rules-based trading system.
That said, there are some areas of meaningful disagreement between Biden and Trump. Support for the WTO, at least in principle, is one example. President Trump has been openly anti-WTO while Biden has been generally supportive on the face of it. The Biden administration withdrew the Trump administration’s proposal in the WTO that had sought to establish eligibility criteria for developing country status in the WTO. If successful, this proposal could have potentially excluded at least four high-income Caribbean countries from accessing special and differential treatment (S&DT) under the WTO’s agreements. Whoever wins the US presidential election, therefore, could make the difference between a US government which is largely supportive of the WTO-headed rules-based multilateral trading system and one which is demonstrably and expressly against it. One constant in US trade policy, however, has been the US government’s support for the Caribbean Basin Initiative, the unilateral trade preferences programme which since 1983 has provided eligible Caribbean countries duty-free access to the US market for most goods. Of note is that at the end of last year, the Office of the United States Trade Representative (USTR) published, as required by Congress, its biennial report. According to this report, in 2022 US imports under CBI tariff preferences rose to $1.9 billion, compared to $1.4 billion in 2021. CBI countries accounted for 0.3 per cent of total US goods imports from the world and ranked 26th among US import suppliers. The US has for many years enjoyed a large trade surplus with the region as a whole. This overall surplus remains as of the most recent report. A key question for the region is how can its exporters increase and diversify their exports to the US, including by taking greater advantage of the CBI preferences.
On that note, there appears to be some progress. Utilisation by some CBI-eligible countries of CBI preferences for some eligible products has increased, according to the report. However, despite improvements, the utilisation rate reportedly remains uneven across beneficiary countries. Moreover, the CBI suffers from several shortcomings as Ewart (2023) outlined in a white paper commissioned by the SRC. Chief among these are the fact that there has been a gradual erosion of the tariff preference margin for CBI-eligible goods and also the goods-only nature of the arrangement. As such, one key issue for the region to discuss with whoever will be the next US president will be how can the CBI be made more effective for the stated goals of facilitating the region’s economic development, increasing production and export diversification of the region’s economies.
One way in which the region can do so is by making greater use of existing mechanisms for US-Caribbean engagement such as the US-CARICOM Trade and Investment Framework Agreement (TIFA) in force since 2013. The US-CARICOM TIFA is one of several TIFAs the US has signed with various trading partners. While the TIFA lacks binding market access provisions, it provides an important mechanism through which CARICOM could, for example, raise issues encountered by its exporters in the US market. The last Trade and Investment Council (TIC) meeting was held in Guyana in October 2023 and, among other things, it was agreed to establish a joint working programme on services given the importance of services trade to CARICOM countries’ economies.
Guyana’s discovery of oil, the long-standing Guyana-Venezuela conflict as well as growing Chinese economic presence in the region, have placed the Caribbean once more pointedly on Washington’s radar. President Obama championed the US Caribbean Strategic Engagement Act of 2016 which was passed by Congress in 2016. During their term of office, President Biden and Vice President Kamala Harris have announced several hemispheric initiatives, including the Americas Partnership for Economic Prosperity (APEP or commonly called the Americas Partnership at the Summit of the Americas in 2022). In a statement delivered on January 27, 2023, President Biden described the Americas Partnership as “a flexible framework and open to all countries that share our values and vision for a prosperous hemisphere”. So far, its membership reportedly comprises approximately 90 per cent of the Western Hemisphere’s GDP and nearly two-thirds of its population of the Americas. Importantly for the region, two of the initiatives are “launching a new investment platform to channel billions of dollars in financing for sustainable infrastructure” and “a new accelerator program to support and steer investment to hundreds of up-and-coming entrepreneurs”. However, only some Caribbean countries are partners and it is unclear to what extent this initiative would be continued should Biden not be re-elected.
Will 2024 be a pivotal year for US-Caribbean relations? It depends. As I mentioned, we still have no clear idea who will ultimately be the nominees of the two major parties, far less, who will win the presidency. On the face of it, not much is likely to change with regard to the US stance on the CBI since it is widely regarded to be beneficial or at least, not prejudicial, to US economic and geopolitical interests. On issues such as wider hemispheric cooperation, climate change and support for the multilateral rules-based trading system, it is here that the stakes for the region are higher depending on who is the eventual winner.
Alicia D. Nicholls is the Junior Research Fellow with the Shridath Ramphal Centre for International Trade Law, Policy and Services of The University of the West Indies, Cave Hill. Learn more about the SRC at www.shridathramphalcentre.com
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