Caribbean Global economic vulnerability
regional
integration
Caribbean Life, March 6-12, 2020 11
munity decisions to binding laws in individual
jurisdictions is a key impediment.
A decision-making process based on
unanimity principle, where each member
retains its sovereign authority, also
hinders progress.
In the absence of a facilitating regional
architecture, cooperation must rely
on well-aligned national interests and
shared goals, but national incentives
do not seem to be well-aligned for integration,
with its potential benefits perceived
by some as uncertain, potentially
uneven, and only materializing over a
long horizon.
Differing export/production structures
and income and development levels
make it challenging to harmonize
economic and structural policies around
well-integrated policy frameworks.
Some regional authorities attribute
the slow pace of implementation to a
“crisis of will,” as much as to wasteful
duplication and slow progress in harmonizing
legal and institutional frameworks
and to binding resource/capacity
gaps.
A worthwhile goal
The Caribbean authorities broadly
agree that integration should remain a
top priority and greater collaboration is
critical to tackle common challenges.
It is important to capitalize on this
momentum.
Recent IMF research finds that further
liberalization of trade and greater
labor mobility within the region can
generate significant benefits.
A 25-percent reduction in non-tariff
barriers and trade costs within CARICOM
and vis-à-vis non-CARICOM trade
partners can boost trade and improve
welfare gain for all members—at about
$6 billion, or 7.6 percent of the region’s
GDP in 2018.
It can also help restructure economies
from contracting to expanding sectors,
resulting in a net employment gain
across the region.
Way forward
Continued from Page 10
assembly and manufacturing plants in
the U.S. and Europe.”
Commodity prices plunge
Prices for commodities, from natural
rubber to coal, plunged in February
as Chinese companies cancelled
orders, dragging down prices.
The Wall Street Journal reports
one of the worst routs in commodity
prices in years due to the coronavirus
outbreak as prices for some natural
resources plunged to new lows.
With the outbreak spreading to
more countries, the oil price has
been dropping precipitously as global
demand weakens further. US and
Brent crude benchmark prices fell 16
percent and 14 percent respectively
during the past week, to its lowest levels
since July 2017.
Meanwhile, iron ore prices dropped
to US$81.35 per tonne during the first
week of February from around US$90
throughout January.
Perfect storm?
Years of spending cuts due to fiscal
austerity policies have undermined
public health provisioning, not only
in developing countries, but also in
developed economies.
Various countries are bracing for
economic fall outs from the COVID-19
virus outbreak, but have very limited
policy space after eschewing sustained
fiscal recovery efforts following the
2008-2009 global financial crisis.
Instead, monetary policies, including
unconventional ones, with historically
low interest rates and central
bank balance sheets, are still being
relied upon.
China’s central bank has already cut
the country’s benchmark lending rate
in February. The US Federal Reserve
has recently further loosened monetary
policy, with others quickly following
or expected to follow. However,
while rate cuts may temporarily boost
financial market indicators, they are
unlikely to be of much help.
Despite rejecting sustained fiscal
efforts to revive economic growth in
favour of austerity for a decade, debt
levels continued to rise as revenue
declined due to tax breaks. Scope for
a ‘big boost’ fiscal package is also
limited by public perceptions of the
record global debt level — estimated
at US$253tn, more than three times
global GDP.
Although the economic consequences
of the COVID-19 outbreak
require a global response, multilateralism
is in disarray. As if to underscore
its growing irrelevance, the G20
missed an important opportunity to
provide leadership at its Feb. 22-23
finance ministers’ meeting in Riyadh,
Saudi Arabia.
Continued from Page 10
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