pub4000.pdf - U.S International Trade Commission COMMISSIONERS Daniel R Pearson Chairman Shara L Aranoff Vice Chairman Deanna Tanner Okun Charlotte R

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Unformatted text preview: U.S. International Trade Commission COMMISSIONERS Daniel R. Pearson, Chairman Shara L. Aranoff, Vice Chairman Deanna Tanner Okun Charlotte R. Lane Irving A. Willliamson Dean A. Pinkert Robert A. Rogowsky Director of Operations Robert B. Koopman Director of Economics Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 U.S. International Trade Commission Washington, DC 20436 Caribbean Region: Review of Economic Growth and Development Investigation No. 332-496 Publication 4000 May 2008 This report was principally prepared by Project Leader Walker A. Pollard [email protected], (202) 205-3228 Deputy Project Leader Nannette Christ [email protected], (202) 205--3263 Primary Reviewers Judith Dean and Katherine Linton Contributing Authors Office of Economics Alan Fox, Nick Grossman, William Powers, James Stamps, Craig Thomsen, and Lauren Deason, Intern Office of Industries Lisa Ferens-Alejandro, Laura Bloodgood, Samantha Brady, Raymond Cantrell, Alfred Dennis, Vincent DeSapio, Andrew Gately, Doug Newman, Erick Oh, Laura Rodriguez, George Serletis, Ralph Watkins, and Isaac Wohl Assistance was provided by Patricia M. Thomas, Office of Economics Under the direction of Arona M. Butcher Chief, Country and Regional Analysis Division PREFACE The Commission received a letter from the House Committee on Ways and Means on November 7, 2007, requesting that the Commission provide a report under section 332(g) of the Tariff Act of 1930 containing information that will assist the Committee in identifying the ways that U.S. trade and aid policy can most help the Caribbean Basin. The letter states that the overall objective of the report is to review economic growth and development in the Caribbean region. In preparing the report, the Commission was requested to provide (1) an in-depth description of the current level of economic development in the Caribbean basin and (2) an overview of the economic literature on potential Caribbean development. The Committee requested that the report be delivered no later than six months from the receipt of the letter. A copy of the request letter is in appendix A, and the associated Federal Register Notice is in appendix B. The Committee requested that the report cover the 18 beneficiary countries of the Caribbean Basin Economic Recovery Act that are not parties to the Central America–Dominican Republic–United States Free Trade Agreement (CAFTA–DR). The covered countries are Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, the British Virgin Islands, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Netherlands Antilles, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago. iii TABLE OF CONTENTS Page Preface ............................................................................................................................................. List of frequently used abbreviations and acronyms .................................................................. Executive Summary ....................................................................................................................... iii xi xv Chapter 1: Introduction ................................................................................................................. Purpose, scope, and approach of report .................................................................................... Purpose .............................................................................................................................. Scope, approach, and organization of the report ................................................................ U.S. trade preferences available to CBERA countries ............................................................. Caribbean Basin Economic Recovery Act ......................................................................... Caribbean Basin Trade Partnership Act ...................................................................... HOPE Act of 2006 ...................................................................................................... Other preference programs available to CBERA countries ................................................ Major U.S. institutions affecting trade and economic growth and development in CBERA countries ............................................................................................................................ 1-1 1-1 1-1 1-3 1-4 1-4 1-5 1-7 1-8 Chapter 2: Current level of Caribbean economic development: Regional overview ............... Regional overview ..................................................................................................................... Population and levels of economic development ................................................................. Indicators of economic development ............................................................................ Macroeconomic conditions and performance ...................................................................... Importance of trade to the Caribbean Basin countries ............................................................... Export diversification .......................................................................................................... Extent of utilization of CBERA preferences .............................................................................. Tourism and financial services as important region-wide sectors .............................................. The contribution of tourism to CBERA countries ............................................................... Tourism as a share of GDP ........................................................................................... Tourism exports ............................................................................................................ Financial services in CBERA countries .............................................................................. Ethanol dehydration industry ..................................................................................................... Overview of other major non-U.S. policies and institutions affecting trade and economic growth and development in CBERA countries ............................................................. World Bank ......................................................................................................................... Inter-American Development Bank ..................................................................................... Caribbean Development Bank ............................................................................................. Caribbean Community ........................................................................................................ Organization of Eastern Caribbean States ........................................................................... EU Economic Partnership Agreements ............................................................................... Caribbean–Canada Trade Agreement .................................................................................. Selected other trade and development agreements .............................................................. 2-1 2-1 2-2 2-7 2-9 2-11 2-15 2-20 2-20 2-23 2-26 2-27 2-28 2-31 Chapter 3: Overview of economic literature on potential Caribbean development ................. Introduction ........................................................................................................................... The determinants of economic development ............................................................................ The relationship between trade, economic growth, and poverty reduction ...................... Trade preferences and growth ................................................................................... 3-1 3-1 3-2 3-3 3-5 v 1-9 2-33 2-33 2-33 2-35 2-35 2-36 2-37 2-37 2-38 TABLE OF CONTENTS–Continued Page Chapter 3—Continued Effects of the CBERA on the Caribbean. ........................................................... Effects of other agreements on the Caribbean. ................................................... Utilization of preferential trade programs in the Caribbean........................................ Textile and apparel preferences under original CBERA and CBTPA. ....................... Nonapparel preferences under original CBERA and CBTPA. ................................... Promoting Caribbean Development: Challenges and opportunities. ......................................... Evolution of Caribbean policies and their effects on country competitiveness and the macroeconomy............................................................................................................ Development challenges for small countries and small enterprises................................... Export diversification. ................................................................................................ Overview.............................................................................................................. Policies identified in the literature........................................................................ Assistance for small enterprises and households. ....................................................... Overview.............................................................................................................. Policies identified in the literature........................................................................ Challenges posed by international standards. ............................................................. Overview.............................................................................................................. Policies identified in the literature........................................................................ Other key challenges for Caribbean development. ............................................................ Infrastructure in the Caribbean. .................................................................................. Basic infrastructure. ............................................................................................. Overview. ........................................................................................................ Policies identified in the literature................................................................... Ports and shipping infrastructure. ........................................................................ Overview. ........................................................................................................ Policies identified in the literature................................................................... Telecommunications and information and communications technology infrastructure. ........................................................................... Overview. ........................................................................................................ ICT as an export sector.................................................................................... Policies identified in the literature................................................................... Health and Education. ................................................................................................ Health and wellness services................................................................................ Overview. ........................................................................................................ Policies identified in the literature................................................................... Education. ............................................................................................................ Overview. ........................................................................................................ Policies identified in the literature................................................................... Foreign direct investment. .......................................................................................... Overview.............................................................................................................. Policies identified in the literature........................................................................ Trade and trade policy for Caribbean development. ......................................................... Recent trade patterns and trade liberalization. ............................................................ Trade policies identified in the literature for Caribbean countries.............................. Trade policies for the United States identified in the literature. ................................. vi 3-6 3-7 3-7 3-8 3-10 3-10 3-12 3-15 3-15 3-15 3-18 3-18 3-18 3-19 3-20 3-20 3-21 3-21 3-22 3-22 3-22 3-23 3-24 3-24 3-25 3-26 3-26 3-27 3-28 3-29 3-29 3-29 3-30 3-30 3-30 3-31 3-31 3-31 3-33 3-33 3-34 3-36 3-37 TABLE OF CONTENTS–Continued Page Chapter 3—Continued Textiles and apparel ................................................................................................... Sources ............................................................................................................................. 3-38 3-41 Chapter 4: Current level of Caribbean economic development: Country profiles .................. Antigua and Barbuda ................................................................................................................. Aruba ......................................................................................................................................... The Bahamas ............................................................................................................................. Barbados .................................................................................................................................... Belize ......................................................................................................................................... British Virgin Islands ................................................................................................................. Dominica ................................................................................................................................... Grenada ...................................................................................................................................... Guyana ....................................................................................................................................... Haiti ........................................................................................................................................... Jamaica ...................................................................................................................................... Montserrat .................................................................................................................................. Netherlands Antilles .................................................................................................................. Panama ....................................................................................................................................... St. Kitts and Nevis ..................................................................................................................... St. Lucia ..................................................................................................................................... St. Vincent and the Grenadines .................................................................................................. Trinidad and Tobago .................................................................................................................. 4-1 4-3 4-11 4-17 4-23 4-29 4-37 4-45 4-53 4-61 4-69 4-77 4-85 4-93 4-99 4-107 4-115 4-123 4-131 Chapter 5: Summary of Positions of Interested Parties ............................................................. Government of Barbados .......................................................................................................... Government of the Federation of Saint Kitts and Nevis ........................................................... Government of St. Vincent and the Grenadines ....................................................................... Government of the Republic of Trinidad and Tobago .............................................................. Government of Antigua and Barbuda ....................................................................................... Government of the Republic of Haiti ....................................................................................... Government of the Commonwealth of The Bahamas ............................................................... Government of Jamaica ............................................................................................................ Organization of American States (OAS) .................................................................................. Caribbean Community Secretariat (CARICOM) ...................................................................... Berliner, Corcoran & Rowe LLP .............................................................................................. Caribbean Association of Indigenous Banks, Inc. (CAIB) ....................................................... CBI Sugar Group ..................................................................................................................... Caribbean-Central American Action (CCAA) ......................................................................... Caribbean Hotel Association (CHA) ........................................................................................ Caribbean Regional Negotiating Machinery (CRNM) ............................................................. Andrea M. Ewart, PC ............................................................................................................... GeoNet Ethanol LLC ............................................................................................................... Halcrow, Inc. ............................................................................................................................ Inter-American Development Bank (IDB) ............................................................................... Inter-American Investment Corporation (IIC) .......................................................................... Jefferson Waterman International ............................................................................................ 5-1 5-1 5-1 5-2 5-3 5-4 5-5 5-5 5-6 5-7 5-8 5-9 5-11 5-11 5-12 5-13 5-13 5-14 5-14 5-15 5-15 5-16 5-16 vii TABLE OF CONTENTS–Continued Page Chapter 5–Continued Mercosur Consulting Group, Ltd.. .............................................................................................. National Coalition on Caribbean Affairs (NCOCA). .................................................................. National Council of Textile Organizations (NCTO). .................................................................. Trade, Aid and Security Coalition (TASC); Business Coalition for Capacity Building, LLC (BCCB). ..................................................................................................................... 5-17 5-17 5-18 5-18 Appendices A. Request Letter from Committee on Ways and Means. ................................................................ B. Federal Register Notice. ............................................................................................................. C. Hearing ca...
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