Regional Integration In The Caribbean

Regional Integration is when an economic alliance or trade agreement is formed among countries that are located geographically close to one another. This paper analyzes the role of regional integration in promoting global business, discusses the advantages and disadvantages of regional integration using a trading block as an example, and compares the economic development stages of two countries within a chosen region and discusses the ramifications of the region’s economic development for global business.

The purpose of regional integration is to achieve economic gains through free trade flow and investments between neighboring countries often by lowering or eliminating tariffs against imports from fellow member countries. Another purpose to the integration is to create institutions responsible for policy formulation concerning issues like education, health, labor matters and foreign policy within the member nations. These actions increase duty free trade, tourism, movement of labor, and the flow of capital across national borders, reducing the possibility of conflict.

Regional integration promotes global business in that it removes in stages or all together, previous barriers to foreign investments and other business ventures. As long as the policies set forth by the regional trade bloc are followed, businesses within each member country are encourages to participate in business activities such as forming strategic alliances, licensing, exporting, and relocating operations to other countries within the regional block to name a few. Businesses looking to expand globally have the opportunity to reduce productions costs through actions such as setting up manufacturing operations in another country where they would have access to products and or services that were previously unavailable or too expensive to purchase. Regional Integration gives businesses the means to increase revenue significantly by expanding globally.

The Caribbean countries formed a regional integration between themselves in 1973 called the Caribbean Community and Common Market (CARICOM). Member countries that make up CARICOM are: Antigua and Barbuda, Belize, Grenada, Montserrat, St. Vincent and the Grenadines, Turks and Caicos Islands, The Bahamas, British Virgin Islands, Guyana, St. Kitts and Nevis, Suriname, Barbados, Dominica, Jamaica, Saint Lucia, and Trinidad and Tobago. There are also countries with CARICOM observer status that include, Anguilla, The Cayman Islands, Haiti, Puerto Rico, Aruba, Colombia, Mexico, Venezuela, Bermuda, Dominican Republic, and the Netherlands Antilles.

According to Charles Hill in the text, International Business: Competing in the Global Marketplace, “Regional integration will not increase economic welfare if the trade creation effects in the free trade area are outweighed by the trade diversion effects.” In other words, to be beneficial to the regional economy, the CARICOM rate of high-cost domestic producers replaced by low-cost producers within the free trade region must be higher than the rate of low-cost external suppliers replaced by high-cost suppliers within the region. Achieving that goal is not an easy feat and may prove more difficult for some members of CARICOM than others. So, like all regional integrations the formation of CARICOM comes with its advantages and disadvantages. Some of the advantages are,

* Foreign Direct Investments (FDI) stimulates economic growth through the sharing of technology, marketing channels, managerial know-how and to the member nations

* Opening up and allowing duty free trade also stimulates the economy and creates dynamic gains from trade

* Unrestricted trade allows countries to specialize in the production of goods and services of which each has the capability to produce most efficiently. “The result is greater world production than would be possible with trade restrictions” (Hill, 2004)

* Encourages political cooperation through meshing economies and creating interdependence

Particular to CARICOM nations, foreign policies agrees upon through regional integration has enhanced the economic profile of the Caribbean countries and forced the international community to take their interest and concerns more seriously. Some of the disadvantages to regional integration include,

* Difficulty reaching a consensus on how to address policies which increase as more members join the trade block

* “Can be seen as an attempt to achieve additional gains from the free flow of trade and investment between countries beyond those attainable under international agreements such as he WTO” (Hill, 2004)

* Threat to the sovereignty of developing countries, in particular small countries like those in the Caribbean

* If one country suffers economically all members of the trade block are affected

* Changes in government ideology can undermine set agreements intended to increase the economic standing among the CARICOM countries.

Not all of the CARICOM countries have the same economic standing. Jamaica, largely a tourism economy, is struggling to keep the economy from failing. Although inflation has declined to 7% in 2007, “The economy faces serious long-term problems: high but declining interest rates, increased foreign competition, exchange rate instability, a sizable merchandise trade deficit, large-scale unemployment and underemployment, and a debt-to-GDP ratio of 135%. Jamaica's onerous debt burden - the fourth highest per