COVID-19 has exposed some of the deep-seated scars of free trade on small economies, including those within the Caribbean. So it is more important than ever to look at how the Caribbean typically draws the short-end of the stick in the free trading system.
The Caribbean’s effort to seamlessly integrate into the global trading system has been challenging. Shaped by past colonial rule, the region’s inherent vulnerability to globalization has been compounded by their small size, and susceptibility to natural disasters, and economic shocks. Generally, when integration into the global trading system is carefully managed, it can stimulate innovation, improve food security, and promote economic growth. Global financing bodies and trading organizations such as, the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO) have relentlessly promoted increased commitments towards a continuously open and free trade market. According to Christine Lagarde, past IMF Managing Director, “for many decades, trade integration has helped to increase prosperity, reduce poverty, spread new technologies, and boost productivity. For people all over the world, it has reduced the cost of living and created millions of new jobs with higher wages.” However, she also acknowledged that “not everyone has benefitted, that there are distortions in the trade system, and that it needs to be reformed.”
The agricultural trading capabilities of the Caribbean region have been severely crippled by the policies of free trade and restructuring programs. These prescribed reforms have failed to develop important infrastructures, efficient technologies and essential support services, ― inevitably hindering economic growth, crippling rural livelihoods and impacting food security. Furthermore, Caribbean governments have been restricted against providing intervention strategies aimed at stimulating growth within the agricultural sector. According to the U.N. Food and Agriculture Organization, Caribbean economies “have suffered damage to their agricultural production capacity” through these reduced subsidies. The award winning documentary “Life and Debt” by Stephanie Black, showcase how free trade destroyed Jamaica’s once successful dairy industry, where the local market was flooded with cheap imported powdered milk from the United States and Europe. Small dairy farmers were incapable of directly competing with large, subsidized farmers in developed nations. The industry experienced massive losses, from the dumping gallons of local unpasteurized milk, the pre-mature slaughter of dairy cows, and the loss of livelihood for many dairy farmers. Tony Weis, Associate Professor at the University of Western Ontario and expert in Caribbean rural development, recounts “the image of Jamaican dairy farmers pouring away fresh milk they cannot sell.” Even though attempts have been made to revitalize the dairy industry, its current operation is a mere fraction of its predecessor.
There is the persistent narrative that if small economies remain disciplined in adhering to free trade policies and agreements, then the unfair competition on the world market will eventually become beneficial. According to Oxfam, “international trade is a game governed by rules which are constructed to ensure that they [developing countries] cannot win.” This was highlighted through the phasing out of the Lomé Convention with the European Union (EU). This Convention had provided preferential trade and market access between the EU and 71 ACP (Asian, Caribbean and Pacific) states. In 1989 the Convention allowed all Caribbean exports to enter the European markets duty free and offered special schemes for commodities such as bananas and sugar. However, even though the USA itself did not export bananas to Europe, they complained (on behalf of the influential and powerful U.S.-owned Agro-TNCs Dole, Chiquita and Delmonte which had already dominated the European market) to the WTO that the Lomé Convention was inciting an unfair trading environment. This sparked the ‘Banana Wars’ where small Caribbean banana producers were caught in the middle of a trade war between the USA and the EU. Prominent Caribbean scholar and policy expert Professor Anthony T. Bryan further highlighted that Caribbean nations viewed this action by the U.S. as “insensitive to their plight and inimical to their needs― and initiated to satisfy domestic special interests at home.”
Caribbean states have higher costs of production, small land size and higher susceptibility to natural disasters, in comparison to the cheap labour and large plantations benefitting Agro-TNC farms in Latin American territories. It is difficult to surmise that removing preferential arrangements creates a ‘fair trading environment’ for the region. Nevertheless, sugar agreements also faced similar complaints by competitive exporters. According to the WTO, preferential arrangements infringed on its equal treatment for all of its members. The demise of these agreements between the EU and ACP states heightened the risk of unemployment, and catapulted banana and sugar farmers into impoverishment within nations such as St. Lucia, St. Vincent, Jamaica and Dominica. These industries now operate as a shadow of their former selves.
Even with this knowledge, the WTO, IMF, and World Bank, relentlessly continue to encourage developing countries to have little or no trade restrictions. According to Tony Weis, these organizations have persistently implemented their “cookie-cutter economic reforms” on small economies. They claim that in order to establish an impartial market-oriented agricultural trading system, support initiatives and trade barriers must be removed. However the U.N. Food and Agriculture Organization highlighted the “double standards in commitments to multilateral agreements” where major trading regions such as the EU and the U.S. have implemented protectionist policies in the form of technical regulations which make it increasingly difficult to access their markets, even though the domestic market in small states are continuously flooded with foreign imports. This was further reiterated by Sophia Murphy, Senior Specialist in agriculture and investment at the International Institute for Sustainable Development, who acknowledged that “the U.S. and the EU practice double standards in their advocacy of liberalization for developing countries but increased protection for their own agricultural export sectors.” This mirrors actions of the past, where developed countries such as Germany and the U.S. supported their young industries behind protectionist policies and rejected free-trade ideals until they were acknowledged as major economic powers. According to Oxfam, developing states experience financial losses of over US$100 billion, from the cost of all protectionist policies in developed countries; a cost which outweighs the benefits of development aid.
On the surface, the rules of the WTO control the degree to which countries can implement protectionist policies to guard themselves from increased competition. However behind this “facade of a ‘membership-driven’ organization is a governance system based on a dictatorship of wealth.” The uneven power-relations between wealthy countries and small developing economies reinforce the disparities in bargaining capacity at the global level. Additionally, apart from the WTO, powerful TNCs also extend their influence over the direction of trade policy. The colonialist undertones of developed countries, international finance institutions and TNCs have therefore fueled the ideology that developing states should “do as we say, not as we do.”
Small economies are forced to operate within a prejudicial free trading system, and are further limited by their inherent vulnerabilities to gain a competitive advantage. In 2016, IMF economists Jonathan Ostry, Prakash Loungani, and Davide Furceri admitted that “instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion.” In essence, the benefits of global free trade have been designed to favor developed countries. Therefore, unless the bias against agriculture in small economies is removed, then developed countries will continue to increase in wealth, while the former become even more marginalized. Strengthening intra-regional partnerships can improve bargaining power during these negotiations, such as proposing differentiated treatment within the WTO rules to accommodate the vulnerabilities of small economies. Caribbean territories can also seek to improve their competitiveness to counteract the negative impacts of free trade, by introducing policies that strengthen production and manufacturing systems geared towards the export market. These policies may be in the form of reducing the import of various crops produced domestically, enhancing institutional support, improving technology, and investing in research and development. Even though Caribbean territories have been constrained by trade policies of dependency under the guise of development, their resiliency to ensure national self-sufficiency and food security remains.