Poorer Caricom states subsidising richer ones

Wednesday, September 26, 2012    

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THE theory and practice of regional economic integration recognises that there will be an unequal distribution of benefits with a disproportionate share accruing to the more developed countries.

In order to compensate the less developed the integration scheme usually arranges for a transfer of funds to the less developed countries. The European Union is the prototype, and these resource transfers made an important contribution to the economic development of the relatively backward countries such as Ireland and Portugal.

These development funds, apart from promoting economic growth, also help to maintain the spirit of community among the member states of the regional grouping. The design of the Caribbean Community (Caricom) was based on an imitation of the regional integration arrangements and process in Europe. Where Caricom has diverged from the European model was in the transfer of resources as affirmative action.

The member states of Caricom are divided into two classes, namely, the “more developed countries” (MDCs) and the “less developed countries” (LDCs). This bifurcation was a misnomer because it represented a division on the basis of size, ie the MDCs were the larger countries such Guyana, Jamaica, Trinidad and Tobago, and Barbados and the LDCs were the smaller countries - the Organisation of Eastern Caribbean States (OECS) and Belize, which is included although it is among the largest countries in Caricom.

At the inception of the integration arrangements, size and level of development roughly paralleled each other calculated on the basis of size of population and annual per capita income. Today, Guyana is no longer expected to perform the duties of an MDC because it is a “least developed country” by United Nations classification and a Highly Indebted Poor Country.

Caricom’s affirmative actions are of two kinds; first, the LDCs are allowed permanent special and differential treatment in the form of derogations from obligations which the MDCs have to meet. In addition, the expenses of operating Caricom are calculated on the basis of size of GDP, so Jamaica is responsible for the largest share. Second, all member states are required to contribute to the Caribbean Development Fund (CDF), but in its first dispensation the beneficiaries are confined to the LDCs.

This situation discriminates against Jamaica, having the country pay into the CDF funds which will be used by countries with much higher per capita incomes, but who happen to have a smaller population. This is unfair because Jamaica is transferring resources to countries which are economically much better off. The per capita income of Jamaica is US$4,750; for Antigua it is US$10,610 and for St Kitts it is US$9,980.

Size cannot be the basis for perpetuating the outdated and unjust classification of member states. The redundant division of member states in the two groups and the attendant nomenclature must be abolished because the larger, but poorer countries, cannot permanently subsidise the smaller wealthier ones. All countries must be beneficiaries of the CDF.

There cannot be a Caribbean Community or CSME with differential treatment which is not based on development; otherwise it is not differential treatment, but discrimination based on size of population.

It was unfair, discriminatory treatment like this that prompted Jamaica to leave the West Indies Federation.





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