VZCZCXRO7550
PP RUEHGR
DE RUEHWN #0206/01 0311417
ZNR UUUUU ZZH
P 311417Z JAN 06
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC PRIORITY 1785
INFO RUCNCOM/EC CARICOM COLLECTIVE PRIORITY
RUEHCV/AMEMBASSY CARACAS PRIORITY 1366
RUEHDG/AMEMBASSY SANTO DOMINGO PRIORITY 5792
RUMIAAA/HQ USSOUTHCOM J5 MIAMI FL PRIORITY

UNCLAS SECTION 01 OF 03 BRIDGETOWN 000206 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
SANTO DOMINGO FOR FCS, SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: N/A 
TAGS: ECIN ETRD ELAB EAID EIND EFIN PREL XL
SUBJECT: EASTERN CARIBBEAN WARY OF CARICOM SINGLE MARKET 
 
REF: 05 BRIDGETOWN 644 
 
¶1. (U) Summary.  The January 1 "start" of the CARICOM Single 
Market and Economy (CSME) and January 30 signing are purely 
ceremonial events because the CSME is a patchwork process 
that countries must implement through national legislation. 
Owing to fears of a mass influx of foreign labor, concerns 
that regional competition could overwhelm local businesses, a 
craving for special treatment, and limited technical 
capacity, the Organization of Eastern Caribbean States (OECS) 
countries have been slow to implement the CSME.  The present 
status of CSME is therefore "Single Market Lite," falling 
somewhere above a free trade agreement but significantly 
below a true single market.  Labor mobility is restricted (to 
university graduates, media, athletes, artists, and 
musicians); hundreds of laws must be changed to open trade in 
services; and there has been little harmonization of 
regulations, even in areas essential to trade, such as 
customs.  The Caribbean Court of Justice (CCJ) has original 
jurisdiction for CSME-related disputes and could play an 
important role in establishing precedent for how the CSME 
functions.  End Summary. 
 
------------------------------------------ 
January 1 Milestone and January 30 Signing 
------------------------------------------ 
 
¶2. (U) The much-publicized January 1, 2006 "start" of the 
CSME is misleading.  According to the CARICOM CSME Unit, the 
various provisions of the CSME only take effect when they are 
passed into national law in each country.  Coming up with the 
January 1 date was a way CARICOM members could publicly 
proclaim their progress towards the CSME and push the more 
reluctant parties to embrace CSME provisions, but nothing 
regarding the CSME is legally different this year from last 
year.  In the same vein, the January 30 signing ceremony that 
took place in Jamaica was also purely ceremonial.  A similar 
"start" of the CSME for Barbados, Trinidad and Tobago, and 
Jamaica took place in early 2005, and there will likely be 
yet another "start" to the CSME and another signing ceremony 
later this year or early next year for the OECS countries. 
These dates lack significance because CARICOM, unlike the 
European Union (EU), has no executive authority over its 
member states.  There is no supranational body in CARICOM 
comparable to the European Parliament or European Commission. 
 The downside of not ceding any sovereignty to CARICOM is 
that each country must amend hundreds of old laws and pass 
many new laws on all aspects of the CSME, from customs and 
immigration to business law to financial regulations. 
 
---------------------------- 
Background and State of Play 
---------------------------- 
 
¶3. (U) Nations of the English-speaking Caribbean founded 
CARICOM in 1972 as the Caribbean Community and Common Market, 
but have made little progress on moving toward a common 
market since that time.  CARICOM revised its founding treaty 
(The Treaty of Chaguaramas - revised text online at 
www.caricom.org) in 2001 to give substance to the common 
market as implemented through the CSME.  Member states have 
integrated their economies more quickly since then, but the 
original full-implementation deadline of 2005 for both the 
single market and economy proved far too ambitious.  After 
several deadline extensions, in February 2005, CARICOM 
proclaimed the "start" of the CSME when Barbados, Trinidad 
and Tobago, and Jamaica stated that they were "CSME-Ready," 
meaning that those countries had updated their laws and 
regulations to allow the partially free movement of goods, 
services, and labor. 
 
¶4. (U) In February 2005, all CARICOM countries other than 
Montserrat (waiting for Britain's permission to join the 
CSME), the Bahamas (opted out of the CSME), and Haiti 
(CARICOM has not recognized the interim government), pledged 
to be "CSME-ready" by the end of 2005.  Only six countries 
(Barbados, Belize, Guyana, Jamaica, Suriname, and Trinidad 
and Tobago) actually met the deadline.  None of the OECS 
countries (Antigua and Barbuda, Dominica, Grenada, St. Kitts 
and Nevis, St. Lucia, St. Vincent and the Grenadines) were 
"CSME-ready" by the deadline.  Instead, the OECS countries 
demanded special and differential treatment and a regional 
development fund as conditions of their participation in the 
CSME.  (Note:  CARICOM heads of government agreed to a 
regional development fund at the end of 2005, and the OECS 
countries will likely get some form of special treatment, 
such as technical assistance and more time to implement CSME 
 
BRIDGETOWN 00000206  002 OF 003 
 
 
provisions.  End Note.) 
 
------------ 
OECS Demands 
------------ 
 
¶5. (U) In response to mounting public and government fears 
that the CSME would cause severe economic disruptions for 
their small economies, OECS heads of government decided in 
their June 2005 meeting to ask for special and differential 
treatment in the CSME, based on chapter seven of the Revised 
Treaty of Chaguaramus.  CARICOM, unlike other organizations, 
is more sensitive to geographic, economic, and population 
size than income per capita when calculating which countries 
are "less developed."  The other CARICOM states have accepted 
the OECS demands, and have agreed to a new deadline of March 
31, 2006, for the OECS countries to be CSME-ready. 
 
--------------------- 
Flood of Cheap Labor? 
--------------------- 
 
¶6. (U) Many people in the Eastern Caribbean, particularly 
Barbadians, fear that implementation of the CSME will result 
in an influx of cheap labor leading to a strain on social 
services, downward pressure on wages, a possible rise in 
crime, and disruption to the traditional makeup of society. 
Ironically, these fears are currently irrelevant to the CSME, 
because the only people that can move freely are university 
graduates, artists, musicians, athletes, and journalists. 
The CSME does not currently allow blue collar or unskilled 
workers free movement.  According to Ivor Carryl, an officer 
at the CSME Unit, CARICOM Heads of Government have not yet 
agreed to extend free movement of labor to all CARICOM 
nationals, but will probably do so by 2008.  A front-page 
article in the January 10 Barbados Advocate stated that only 
about 2000 CARICOM nationals applied for free movement of 
labor to Trinidad and Tobago under the CSME, and only 500 of 
those qualified.  Trinidad, with one of the strongest 
economies in the region, would seemingly attract a major 
influx of labor, but the initial numbers seem moderate. 
(Note:  More to come on free movement of labor septel.  End 
Note.) 
 
------------------------- 
Loss of Local Businesses? 
------------------------- 
 
¶7. (U) The CSME grants the "right of establishment," meaning 
that any CARICOM national can start a business in any CSME 
country.  This right gives free reign to larger Caribbean 
companies to expand regionally and compete with smaller local 
companies.  The single market also knocks down barriers to 
intra-regional trade in goods and services.  Trinidad, with 
its rock-bottom energy costs and relatively cheap labor, 
could flood the market with exports.  The expansion of larger 
regional businesses combined with the threat of Trinidadian 
imports has made some smaller OECS businesspeople and 
governments uneasy. 
 
¶8. (U) A lack of high-volume inter-island shipping providers, 
however, may limit Trinidad's ability to dominate 
intra-regional trade.  Econoff spoke with an official at 
Tropical Shipping, a large Florida-based company serving the 
Caribbean, who said her company does not ship cargo between 
the islands because there is insufficient volume to justify 
such routes.  Unless inter-island trade increases 
dramatically, local companies and U.S. exporters (using the 
direct shipping connection from Florida ports) will continue 
to have a competitive advantage because of relatively high 
inter-island shipping costs.  While some dislocation will 
likely occur, the net effect of the CSME on business should 
be an increase in efficiency and competitiveness. 
 
--------------------------------------------- 
Private Sector - Forge Ahead, but Retain a Good Lawyer 
--------------------------------------------- 
 
¶9. (U) Since the CSME is a patchwork process that each 
country must implement into national law, companies could end 
up waiting a long time for a fully-functioning CSME.  In the 
meantime, some courageous companies may have to forge ahead 
to test the limits of the new single market and go to court 
if necessary.  The newly-founded Caribbean Court of Justice 
(CCJ) has original jurisdiction for CSME-related disputes and 
may need some early court cases to set the precedent for how 
the single market will legally function.  According to Ivor 
 
BRIDGETOWN 00000206  003 OF 003 
 
 
Carryl, Program Manager at the CARICOM CSME Unit, individuals 
and companies can push their rights under the CSME in 
countries that have enacted the revised treaty of Chaguaramas 
into domestic law, even if the regulations implementing such 
laws are lagging behind.  If the CCJ comes down in favor of 
Carryl's approach, then that court could play a large role in 
pushing national governments to speed up their implementation 
of the CSME. 
 
---------------- 
Political Impact 
---------------- 
 
¶10. (U) The CSME has had a negligible political impact in the 
Eastern Caribbean, where policy and economic elites appear to 
be well ahead of the public on a topic that few people seem 
to understand well.  Hardly a week passes in which a 
politician or journalist does not call for enhanced efforts 
to educate the public on the CSME and its implications for 
the region.  Many political leaders, however, have 
contributed little in this regard.  Despite the importance of 
the single market push, it failed to emerge as an issue 
during elections held in 2005 in St. Vincent and Dominica, 
where neither ruling nor opposition parties sought to 
interject the CMSE into the campaign. 
 
¶11. (U) Wary ambivalence best sums up the views of people in 
the region, as suggested by public opinion polls.  In 
Barbados, which has done the most to educate the public about 
CSME, 44 percent of respondents expressed their support for 
the single market in a 2005 poll conducted by CADRES, a 
private research firm.  A prominent political scientist who 
analyzed the poll results found it troubling, however, that a 
vast majority of respondents were concerned about 
immigration, which appears to fly in the face of the CSME's 
stated goal of the free movement of labor.  He and other 
observers have suggested that such responses demonstrate an 
underlying xenophobia in Barbados and other Eastern Caribbean 
countries, where people fear the impact of immigration on 
their traditionally small, homogenous societies. 
 
------- 
Comment 
------- 
 
¶12. (SBU) Judging by the grand speeches on economic 
integration at nearly every CARICOM gathering, one would 
think that the CSME is a done deal.  Unfortunately, these 
integrationist instincts are foiled by fears of uncontrolled 
immigration and loss of sovereignty.  Protectionist economics 
have led to a "Single Market Lite," resulting in limited 
gains from economic integration.  If leaders can overcome 
their fears and develop a true single market, the region will 
likely benefit economically and have a better negotiating 
position in the FTAA, WTO, and other trade arenas.  Most 
likely, CARICOM leaders will continue to slowly implement the 
"Single Market Lite" and not take any bold moves towards 
further integration. 
KRAMER