Masthead image

Related Commentaries

The following commentaries share at least one of the same topic categories.

Return to commentary archive

Trump, Trade and the Caribbean

Donald J Trump inagurated as 45th US President

Trade between the US and other countries of the world, particularly China, was a major plank of Donald Trump’s campaign for the Presidency.  He regarded all the trade deals as inimical to US interests.   So, is there reason for Caribbean Community Common Market (CARICOM) countries to worry about their trade relationship with the US under the Trump Presidency?  
Let’s examine the facts, by starting with what Trump has said.  On his own website, he has stated quite categorically that he will withdraw the US from the Trans-Pacific Partnership, which has not yet been ratified; tell Mexico and Canada – the US partners in the North American Free Trade Agreement – that he wants to renegotiate the deal; instruct the Treasury Secretary to label China a currency manipulator and tell the U.S. Trade Representative to bring trade cases against China, both in this country and at the WTO.   In his election campaign, he also attacked global trade deals, calling the WTO a "disaster" and said the US would "pull out" of the Geneva-based body if Washington was not able renegotiate the rules on major issues like tariffs.
CARICOM as a collective is hardly likely to be a focus of the new President’s perspective on trade.   One very good reason is that the US enjoys a significant balance of trade surplus with CARICOM countries collectively.   In 2014, the US trade surplus was $3.24 billion, rising to $4.17 billion in 2015.   Only two CARICOM countries have trade surpluses with the US and in both cases the surpluses are declining – Trinidad and Tobago’s surplus slipped from $3.58 billion in 2014 to $1.8 billion in 2015; Guyana dropped from $131.4 million in 2014 to $63 million in 2015. 
CARICOM countries, except Suriname, enjoy access to the US market for a narrow range of products under the Caribbean Basin Economic Recovery Act (CBERA) which was expanded by the Caribbean Basin Trade Partnership Act (CBTA) in 2000.    Haiti benefits not only from CBERA but from a number of other specially designed trade preferences in the HOPE Act and the HELP Act.  But, even with these, Haiti still experiences a trade deficit with the US ($367.6 million in 2014 and $190.5 million in 2015).
However, it is obvious that CBERA provides important benefits to the US.  As the USTR reported to Congress in December 2015, “the value of US exports to CBERA countries grew (by) 2.5% in 2014, exceeding the growth rate for total US exports which grew by 2.1%”.  It is clear, therefore, that the US has no reason for regarding its trade in goods relationship with CARICOM countries as anything but beneficial. 
The most significant threat to the US-CARICOM trade relationship (in goods and services) comes not from CARICOM states, but from the US itself.  That threat it is the withdrawal of correspondent banking relations (CBR’s) from Caribbean banks by US banks.  The threat, in its extreme form, is that if CBR’s are withdrawn from all banks operating in the Caribbean, CARICOM importers will be unable to pay for US goods and services causing: (a) diversion of trade away from the US; (b) a decline in US exports; (c) loss of employment and revenues associated with such exports; and (d) decline in US influence in the region.   In relation to trade in services, the withdrawal of CBR’s will have a direct effect on millions of US tourists (air and sea) for whom the Caribbean is a highly desirable holiday destination.  It would also cause a decline in Caribbean tourism to the US; and significantly reduce the use of many US services such as Universities, hospitals and doctors by Caribbean people.
At a secondary level, even if Caribbean countries employ more expensive means of paying for goods and services from the US (by going through distant third countries), the rising costs will adversely affect the quantum of imports from the US and purchase of services, therefore, revenues and jobs in the US will decline.
Further, if trade in goods and services between the US and CARICOM countries is allowed to decline, the US would lose the influence it presently enjoys in the region.   That influence would flow to countries with which stronger economic relationships are forged.  This would be destructive to the collaborative relationship between the US and CARICOM countries over a range of areas, including security (terrorism and drug trafficking); political support in the international community; containing the flow of economic refugees; and maintaining the Caribbean as a nearby, safe and affordable destination for a large number of Americans.
Therefore, it is in the interest of the US to strengthen its trade relations with the Carbbean and, in this context, to ensure that the barriers to trade (including the withdrawal of correspondent banking relations) are lifted.
With regard to the World Trade Organisation (WTO), all countries need a rules-based system for international trade.   These rules protect markets from unfair trade practices that could displace national producers; they provide remedies for correcting trade violations (albeit not always effective for small countries, as Antigua and Barbuda knows in its 14-year contention with the US over Internet Gaming); and they permit cross-border access to markets in a structured and agreed manner.  The WTO, and the rules-based system over which it presides, are essential safeguards against chaos and conflict at a global level arising from trade.
What is more, the US uses the dispute settlement machinery of the WTO more than any other country, and has benefitted from its peaceful arbitration of conflicts.  Indeed, Mr Trump has himself said, as pointed out earlier, that he would instruct the U.S. Trade Representative “to bring trade cases against China at the WTO”.
With regard to investment, US investment in CARICOM countries has been declining steadily, and particularly after the recession that began in 2008.  The major new investment has been EXXON Mobil’s recent oil exploration in Guyana.  Yet, the CARICOM region is one of the most peaceful in the world and is safe for investment. Four of the 14 CARICOM countries have Bilateral Investment and Protection Treaties (BITs) with the US, and all would be interested in concluding such treaties. 
Additionally, all CARICOM countries have Tax Information Exchange Agreements (TIEAs) with the US for the automatic provision of tax information, and 12 of the 14 countries have signed Inter-Governmental Agreements to comply with the US Foreign Accounts Tax Compliance Act (FATCA). CARICOM countries also offer generous incentives to US investors, including tax holidays and full repatriation of profits.
On the face of it the countries of CARICOM represent an area in which the US enjoys a consistent trade surplus in goods that contributes to US revenues and employment.  The area has been a source of revenues for safe and secure investment.  Therefore, there is every benefit for a Trump administration not only to maintain and enhance trade with CARICOM, but to lift the barriers to trade, including the withdrawal of CBRs by US banks, and increase the level of investment which has proved to be mutually beneficial.
These are arguments that CARICOM governments and the private sector – at every level - have to lay before the Trump administration as early as now.

Top of commentary |  Return to commentary archive