Editorial | Canada-CARICOM trade

With Mark Carney keen to expand Canada’s global economic relationships to lessen its reliance on the United States, the time may be propitious for the Caribbean Community (CARICOM) to seek to rekindle negotiations with Ottawa on a free trade agreement.

For while it may not be said out loud, or with the same directness, the concerns raised by Mr Carney about dependence on an increasingly aggressive and unreliable America are shared in CARICOM – and alluded to by Prime Minister Dr Andrew Holness in his speech in Panama last week, when he called for greater policy coordination by Latin American countries so as to have a say in the shaping of a new global order.

“We must move from fragmented national initiatives to aligned regional priorities,” the Jamaican prime minister said. “We must shift from reacting to global change to anticipating it, helping to shape the standards and partnerships of the next decade.”

Dr Holness, who has lead responsibility in CARICOM for trade negotiations, channelled Mr Carney’s remarks in Davos a fortnight ago when he spoke of a “rupture” of the post-World War global order, and urged the world’s “middle powers” to act together in negotiations with the world’s hegemons.

“... Because, if we’re not at the table, we’re on the menu,” Mr Carney warned.

STRATEGIC PARTNERSHIP AGREEMENT

It is in that context that Mr Carney said that Canada, confronted with regular threats of high tariffs by its main trading partner, the United States, was seeking to strengthen its domestic economy and diversify its international trade.

If Canada, a US$2.4-trillion economy, feels itself vulnerable to the whims of its southern neighbour, those fears are greatly amplified among the mostly small island developing states of CARICOM.

So, while the region is obliged to maintain its historically strong relations with the United States, it would be wise for CARICOM to expand its global partnerships – an effort that, in the context of the times, will require skilful diplomacy.

CARICOM attempting to do this with Canada should not be perceived by Washington as a provocative gesture. And it ought to be easier to accomplish if both sides were ready for compromise, and given there is already a platform, as well as shared interests, from which they can proceed.

Like most CARICOM states, Canada is a member of the Commonwealth and, in common with the majority of the community’s members, operates a Westminster-style parliamentary democracy. Two years ago they signed a strategic partnership agreement to “foster the(ir) existing relationship” and to provide a structured forum “for regular dialogue, as well as for ad hoc consultations on issues of mutual interest”.

But Canada-Caribbean relations long preceded that agreement. Their bilateral trade goes back centuries. And for the past 40 years, Canada has provided a non-reciprocal, tariff-free export arrangement, known as CaribCan, to the Commonwealth Caribbean. A World Trade Organization (WTO) waiver for the pact runs until 2033.

However, since the spurt of its early years, CaribCan has had mixed performance. Canada-CARICOM bilateral trade (CDN$1.8 billion in 2024) mostly trended downwards in recent years. The region’s share of Canada’s imports has fallen, as a proportion of total imports, by 29 per cent (to 0.12 per cent) in the decade to 2024. On the other hand, over the same period, CARICOM’s imports from Canada have almost halved, to one and a half per cent of what the community buys from the rest of the world.

BRIDGE REGIONAL DIVIDE

Nonetheless, even for an economy of Canada’s size, and especially in the current environment, the approximately CDN$2 billion in goods and services Ottawa sells to CARICOM is not to be sneezed at. In fact, Mr Carney’s government and the country’s private sector, it is expected, would want to command a greater share of the region’s imports.

Similarly, the region would wish to expand its exports of approximately CDN$800 million in 2024. Some analysts say that opportunity is nearly three times that amount.

It seems, increasingly, that CaribCan is the vehicle through which the Canada-CARICOM relationship will realise its potential, especially as Canada enters free trade arrangements with other parties and Ottawa grows less invested in non-reciprocal arrangements.

Perhaps, therefore, it is time to put the idea of a full free trade agreement back on the agenda. After nearly eight years of meandering negotiations, the previous effort at striking such a deal paused in 2014 because of the parties’ sharply divergent perspectives.

Among the sticking points was Canada’s aversion to a development component in an agreement, similar to what exists in the Economic Partnership Agreement that CARIFORUM (CARICOM and the Dominican Republic) negotiated with the European Union in 2008. Meanwhile, some regional governments were wary of opening aspects of their markets, especially in agriculture and some sectors of services, to the Canadians. There were also fears of revenue loss from the removal of tariffs.

The environment has clearly shifted in the decade since the negotiations broke down. Mr Carney should not only welcome the access to CARICOM’s market, but appreciate that the numbers represented by the community offers potential amplification for concepts he espoused, especially if their economies are better cushioned against external pressures.

Similarly, CARICOM must accept the drift away from non-reciprocal trade agreements, and that the community will have to make compromises.

Prime Minister Holness, as a proponent of wider regional partnerships and lead on CARICOM’s trade negotiations, is the ideal person to attempt to bridge the regional divide on these issues.