VZCZCXRO8275
PP RUEHGR
DE RUEHWN #1287/01 2022144
ZNR UUUUU ZZH
P 212144Z JUL 06
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC PRIORITY 2984
INFO RUCNCOM/EC CARICOM COLLECTIVE PRIORITY
RUEHCV/AMEMBASSY CARACAS PRIORITY 1476
RUEHCV/USDAO CARACAS VE PRIORITY
RUMIAAA/HQ USSOUTHCOM J2 MIAMI FL PRIORITY
RUMIAAA/HQ USSOUTHCOM J5 MIAMI FL PRIORITY

UNCLAS SECTION 01 OF 02 BRIDGETOWN 001287 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: N/A 
TAGS: ETRD ECIN EAID PREL PINR XL
SUBJECT: OECS SIX SIGN ON TO CSME 
 
REF: A. BRIDGETOWN 1236 
     ¶B. BRIDGETOWN 992 
     ¶C. BRIDGETOWN 206 
     ¶D. 05 BRIDGETOWN 1544 
 
¶1. (SBU) Summary:  After months of quibbling and backtracking 
(Ref B), the six nations of the Organization of Eastern 
Caribbean States (OECS) signed on to the single market phase 
of the CARICOM Single Market and Economy (CSME) at the start 
of the CARICOM Heads of Government meeting July 3-6 in St. 
Kitts and Nevis.  The OECS six were supposed to sign in 
January, but demurred, demanding payment in exchange for 
their participation in the regional pact, which will allow 
for freer movement of goods, services, capital, and labor 
across the region.  CARICOM met the OECS demands, in the form 
of a Regional Development Fund (RDF).  The RDF is supposed to 
alleviate some of the pain from further opening up the OECS 
countries' markets to increased competition from lower-cost 
manufacturers like Trinidad.  End Summary. 
 
¶2. (U) In a formal gesture at the opening ceremony of the 
Caribbean Community (CARICOM) Heads of Government (HOGs) 
meeting in St. Kitts and Nevis, OECS heads signed on to the 
single market phase of the CARICOM Single Market and Economy. 
 (Note:  The single market phase of the CSME has also been 
referred to as the CSM - CARICOM Single Market.  End Note.) 
Despite having already negotiated and signed the revised 
treaty of Chaguaramas, which lays out the form and structure 
of the CSME, OECS leaders refused to participate in a 
ceremonial "signing on" to the CSME in January.  In exchange 
for their signatures, they demanded that a Regional 
Development Fund (RDF), part of the CSME treaty (Article 
158), be set up.  This fund is meant to help the less 
developed countries of CARICOM avoid having their small 
economies overwhelmed by a flood of exports from more 
competitive manufacturing sectors in larger economies such as 
Trinidad's.  CARICOM also met three additional OECS demands: 
OECS countries get to keep additional restrictions on foreign 
land ownership, free movement of labor will be extended to 
more people, and a regional stock exchange will be 
established. 
 
------------------------------------- 
"Comrade Ralph" Seeks Divine Guidance 
------------------------------------- 
 
¶3. (SBU) St. Vincent and the Grenadines Prime Minister Ralph 
Gonsalves invoked the Pauline teaching of the organic unity 
of the body found in I Corinthians, Chapter 12, to argue for 
"special and differential treatment" of the OECS in the CSME. 
 Despite the oddity of a former communist quoting scripture, 
Gonsalves rather eloquently made the point that smaller 
countries like St. Vincent are like the fingers while the 
stronger economies like Trinidad are the head or heart of the 
CARICOM body.  The body parts/countries serve different 
purposes, but all are important.  Other than this apparent 
divine justification for the RDF, Gonsalves pointed out more 
earthly reasons for the OECS to receive additional aid.  He 
said the CSME and RDF will address "the concrete and 
practical matters which are closest to us" including poverty, 
unemployment, and lack of competitiveness.  As he did in his 
speech to OECS heads (Ref A), he veered off the subject at 
the end of his talk to attack the U.S. for "arrogant 
triumphalism" and to blame more powerful countries for most 
of the Caribbean's problems. 
 
---------------------------------------- 
Economic Foundations of OECS' Hesitation 
---------------------------------------- 
 
¶4. (SBU) Apart from the word of God as interpreted by PM 
Gonsalves, there are significant economic reasons for the 
OECS to be hesitant in implementing the CSME.  The six 
independent nations of the OECS (Antigua and Barbuda, 
Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. 
Vincent and the Grenadines) collectively compose only nine 
percent of the entire GDP of the CSME twelve (the twelve 
countries who have signed on to the CSME--all of CARICOM 
minus Montserrat, Haiti, and the Bahamas).  Jamaica and 
Trinidad each make up around thirty percent of the CSME 
twelve GDP, and Barbados contributes a further thirteen 
percent.  OECS leaders fear that a further opening of their 
markets, to Trinidad in particular, will be too much for 
their nascent domestic manufacturing sectors to handle. 
According to the OECS secretariat (Ref B), the larger CARICOM 
countries would continue to dominate intra-regional trade 
 
BRIDGETOWN 00001287  002 OF 002 
 
 
under the CSME.  St. Lucia PM Kenny Anthony, in his speech at 
the 2005 HOGs meeting, illustrated this same point by stating 
that the OECS share of intra-regional trade dropped from 2.3 
percent in 1985 to just 1.4 percent in 2003 (Ref D). 
 
----------------- 
The RDF Explained 
----------------- 
 
¶5. (SBU)  Chapter Seven of the Revised Treaty of Chaguaramas 
provides for "...a special regime for the Less Developed 
Countries in order to enhance their prospects for successful 
competition within the Community (CARICOM), and redress, to 
the extent possible, any negative impact of the establishment 
of the CSME."  Within that chapter, Article 158 outlines the 
establishment of the RDF.  The treaty contains 240 Articles 
divided into nine chapters, all of which CARICOM states must 
eventually implement.  OECS leaders, particularly Ralph 
Gonsalves, used their leverage as a bloc within CARICOM to 
dictate that Article 158 should be implemented before the 
OECS would officially sign on to the CSME.  The rest of 
CARICOM has generally reacted sympathetically to this OECS 
demand.  According to Barbados Prime Minister Owen Arthur, 
the RDF is supposed to be a US$250 million fund.  The first 
US$110 million of the RDF will come from CARICOM member 
states under an undisclosed assessment formula that takes 
into account the ability of various states to pay.  A further 
US$20 million will come from Trinidad's Petroleum Fund, and 
CARICOM hopes that international donors will contribute the 
remaining US$120 million. 
 
------------------------ 
Barbados CSME Conference 
------------------------ 
 
¶6. (SBU) Immediately preceding the HOGs meeting, the Barbados 
government, along with CARICOM, hosted a "High-Level 
Symposium on the CSME" in Barbados from June 28-30 that 
attracted a broad cross section of Caribbean society, 
including academics, NGOs, companies, and governments.  As a 
show of his support for the CSME, PM Arthur attended every 
session of the conference and participated actively, asking 
probing questions of various presenters in an effort to 
provoke discussion and crack open issues holding up the 
implementation of the CSME.  Notably, St. Kitts and Nevis 
Prime Minister Denzil Douglas, who was scheduled to speak at 
the opening ceremony of the symposium, did not show.  The 
OECS in general was not as well represented as other parts of 
the Caribbean, perhaps in keeping with their wariness towards 
the CSME in general.  In any case, the conference was 
productive and allowed various CSME players both to air their 
issues in public and to hold private consultations on the 
margins to resolve differences. 
 
------- 
Comment 
------- 
 
¶7. (SBU)  The formal signing of the CSME, while a purely 
ceremonial act (Ref C), provided a public display that almost 
all CARICOM countries are on board with the common market. 
This act provides political support to the technocrats 
working both at the CARICOM Secretariat and at the country 
level to translate the myriad provisions of the CSME into 
national law and to develop the necessary regulations to 
implement the new laws.  The signing also gave CARICOM a 
useful deadline to spur member states towards faster 
implementation of the CSME.  Now that the ink has dried, 
there is a real danger that the momentum to put the "E" (or 
single economy) back in CSME could slow.  The previous 
deadline for the single economy phase was 2008, but that may 
be far too ambitious given the amount of political wrangling 
needed to induce the OECS states to sign the CSME.  The CSME 
is now at a precarious point.  PM Arthur, lead CARICOM Prime 
Minister for the CSME, along with other regional leaders, 
will have to maintain steady focus to keep the regional 
integration process moving forward. 
 
KRAMER