Canada and CARICOM in the “America First” trade era: CCI Recommendations

President Trump is blowing up his trade relations with international partners, particularly by way of a heavy-handed tariff policy. For the U.S., trade policy is no longer viewed as something that should be of mutual international benefit…something that raises all boats… U.S. trade policy is to drive benefits only to the U.S.

Observers seem to agree that Trump’s objectives here are i) to generate revenue to pay for the tax cuts he promised in the election; ii) to shift production from abroad to the U.S. so as to “reindustrialize” the U.S. and iii) to leverage other nations to change certain policy behaviours that he does not like.

Trump’s tariff policies, and the economic uncertainty that they create, are going to have negative effects on Canada, to be sure. Canadian exports to the U.S. will be reduced with an accompanying reduction in Canadian industry and jobs.

Of course, while they not admit it yet, there will be a negative impact on U.S. consumers of Canadian products as prices rise in the U.S. and as Canada imposes retaliatory tariffs.

And in the Caribbean, even if tariffs are not imposed directly on the Caribbean, Caribbean business, which depends on U.S. inputs, will face higher prices and business costs, while consumers will have to spend more for American-made food, cars, electronics and the like. And, if Trump follows through with his idea that he will impose a system of “reciprocal tariffs” on countries that impose tariffs on the U.S., (tariffs being given a very wide interpretation in the announcement) could jeopardize the preferential tariff treatment that CARICOM now enjoys into the U.S.

Trump’s approach doesn’t mean that the international trade and investment has somehow stopped to produce benefits to all parties involved. It means only that the U.S. can no longer be relied upon as a trusted friend and ally. And it means that everybody else must find a way to deal with the economic and political damage and uncertainty that U.S. trade policy now brings with it.

Particularly for Canada and the Caribbean, who both depend to a large extent on the U.S. market, we need to find a way to manage the situation as best we can. This will not be easy, nor entirely satisfactory, given the pre-eminent position the U.S. market has in all our economies. And both sides will be preoccupied with protecting their interests vis a vis the U.S.

However, there are several tangible actions that Canadian and Caribbean governments, and our business sectors, can take now to perhaps provide something of a buffer to these risks and which would give the Canada-Caribbean trade relationship the jolt it needs to grow into the future. We aren’t going to solve all of our trade problems bilaterally… but we can take positive steps forward together.

Our historical trade policies suggest that both Canada and the Caribbean seem to prefer working with larger markets, with their potential of bigger export and investment results. That is understandable. But in a world where our largest market is looking like it is closing on us…we should really examine upping our game together. And both the Canadian and Caribbean markets are large enough that we should not be ignoring each other.

The Canada-Caribbean Institute has previously made the following recommendations to governments.

CANADA-CARICOM STRATEGIC PARTNERSHIP
RECOMMENDATIONS ON TRADE AND INVESTMENT

Make use of the existing agreement A Trade and Economic Cooperation Agreement Between the Government of Canada and the Governments of the Member States of the Caribbean Common Market

• no need to negotiate anything new… simply activate the Joint Trade and Economic Committee and begin to work more closely together
• meet on a regular scheduled basis to discuss developments in the bilateral market (including sharing data) and how trade policies (in bilateral and multilateral fora) can be oriented to support trade diversification
• consult business and others (and share results) to reveal priority issues for gov’t attention (CCI could be useful to assist gov’ts with consultation)
• report publicly on joint progress

Provide financial support to the creation of a bilateral Business Council/Chamber of Commerce

• support could cover a study phase to identify and consult any organizations that are active in the market today (Canada-Guyana Chamber of Commerce; Caribbean Chamber of Commerce) to learn lessons and gauge interest in participating.
• support could extend to support the budget of a new organization until is properly established.

Direct trade and investment promotion agencies to focus on export diversification in the Canada-Caribbean market

• Increase the number, quality and reach of trade and investment promotion initiatives 
• Review funding for the Canadian Trade Commissioner Service and the Canadian Trade Facilitation Office targeted in the Caribbean. The same should be done with respect to the Caribbean Export Development Agency. This would enable a determination of whether these trade promotion agencies are properly resourced to fully service the Canada-CARICOM space.
• Encourage joint events and activity between Canadian and Caribbean export and investment agencies
• Hold an annual “marquee” trade and investment event to promote business opportunities.

Encourage researchers in Canada and the Caribbean to collaborate

• Using analytical resources available (including in the CCI), advance research/analysis of trade policy issues; increased trade and investment opportunities; better data, etc.

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Acting on these recommendations would put some tangible progress behind the Canada-CARICOM Strategic Partnership. See text of Canada-CARICOM Strategic Partnership.

Acting on these recommendations would assist CARICOM to carry out the recent tasking of the Heads of Government with respect to geopolitics and economics. See full CARICOM Communique.