Implementation Deficit: Why Member States Do Not Comply With CARICOM Directives

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1 Implementation Deficit: Why Member States Do Not Comply With CARICOM Directives Paul C. Clement 1 Caribbean Future Forum UWI, 5 th -7 th May 2015 The Caribbean Community (CARICOM) is at a crossroad. The recent decision by CARICOM leaders to pause the Single Economy project brought to the forefront the longstanding frustration with deepening regional integration. Some analysts have argued that regional integration in the Caribbean is not advancing because of external factors such as global financial crises. Through a case study of CARICOM s efforts to create a Caribbean Single Market and Economy (CSME), this paper argues that CARICOM has failed to deepen effectively its integration process due to obstacles at the national level. Using a general inductive approach, the paper traces the progress of CARICOM states in implementing regional directives while analyzing internal political conditions to explain observed patterns. The paper identifies national priorities among member governments and domestic constitutional arrangements as key obstacles to CARICOM integration. This research finding supports the argument that whether states make commitments to deepen regional integration and the political effects of these commitments depend on domestic factors. The paper concludes that both for the future of Caribbean integration and the study of regional integration in the developing world, domestic factors that influence a country s ability to implement regional decisions should be considered. National priorities among member governments and domestic constitutional arrangements are two of these factors. Introduction Since the signing of the Grand Anse Declaration, in July 1989, the Caribbean Community (CARICOM) has failed to deepen effectively its integration process. 2 CARICOM is an organization of fifteen countries with the goals of economic integration, 1 Paul C. Clement is an Associate Professor of Economics and Chair of the Department of Social Sciences at FIT, State University of New York (SUNY), New York, NY Deepening integration refers to eliminating trade barriers among member states. Moving from a free trade area to an economic union or supranational institution. 1

2 foreign policy coordination and functional cooperation. 3 Deepening integration refers to closer cooperation among members towards the creation of a supranational institution. Thirteen Heads of Government signed the Grand Anse Declaration in July 1989 with the goal of establishing a Caribbean Single Market and Economy (CSME) by July 4, More than two decades after this historic signing, the CSME is still not a reality. Expressing his views on the CSME progress, the late Prime Minister of Grenada, George Brizan stated, there is no doubt that CARICOM is experiencing a severe crisis. 5 Brizan s comments are rooted in the reality of a decline in intra-regional trade and the tendency for member states to breach the regional treaty. As a result, it is increasingly common for politicians and scholars to claim that CARICOM is facing a serious implementation deficit. 6 The 1973 Treaty of Chaguaramas established CARICOM. The members of the organization are: (1) Antigua and Barbuda; (2) The Bahamas; (3) Barbados; (4) Belize; (5) Dominica; (6) Grenada; (7) Guyana; (8) Haiti; (9) Jamaica; (10) Montserrat; (11) St. Kitts and Nevis; (12) St. Lucia; (13) Suriname; (14) St. Vincent and the Grenadines; and (15) Trinidad and Tobago. 7 According to a CARICOM report, most CARICOM states share the following preconditions for deepening regional integration: similar social and political institutions, stable political leadership, and longstanding democratic traditions. 8 As a result, it is puzzling that the organization has failed to meet targeted dates set to establish the CSME. The Grand Anse Declaration states, we are determined to work towards the establishment, in the shortest possible time, of a Single Market and Economy for the Caribbean Community. To that end, we shall ensure that the following steps are taken no later than July 4, However, the late Norman Girvan pointed out that target dates were variously set and missed in July 1993, December 1999, 3 Institute for the Integration of Latin America and the Caribbean (INTAL), CARICOM Report No.2 (Buenos Aires: IDB-INTAL, August 2005), 1. 4 The thirteen CARICOM Heads of Government were representing the following states: 1. Antigua & Barbuda 2. Bahamas 3. Barbados 4. Belize 5. Dominica 6. Grenada 7. Guyana 8. Jamaica 9. St. Kitts & Nevis 10. St. Lucia 11. Suriname 12. St. Vincent & the Grenadines 13. Trinidad &Tobago. CARICOM Secretariat, Communiqué issued at the conclusion of the tenth Heads of Government Conference of the Caribbean Community, July 3-7, 1989 (Georgetown: Caribbean Community Secretariat, 1989). 5 George Brizan, interview with author, St. George s, Grenada, April 13, Implementation deficit is defined as the difference between number of directives required by CARICOM to complete the CSME and the actual number of directives implemented at a point in time. 7 Caribbean Association of Investment Agencies (CAIPA), See also 8 Institute for the Integration of Latin America and the Caribbean (INTAL), CARICOM Report No.2 (Buenos Aires: IDB-INTAL, August 2005), 28. For a discussion on the Caribbean as a region that has sustained a tradition of liberal democracy, see Jorge Dominguez, Robert Pastor, and De Lisle Worrell, Democracy in the Caribbean: Political, Economic, and Social Perspectives (Baltimore: Johns Hopkins University Press, 1993). 9 CARICOM Secretariat, Communiqué issued at the conclusion of the tenth Heads of Government Conference of the Caribbean Community, July , Grand Anse, Grenada. (Georgetown: Caribbean Community Secretariat, 1989). See Shridath Ramphal, Laboring in the Vineyard, Huntington News, May 28, 2012, 2

3 December 2000 and December CARICOM missed its target date for the full implementation of the Single Economy in December On May 22, 2011, CARICOM placed the Single Economy project on pause. 11 The pause, as explained in a press statement was due to the realization that the process towards full implementation would take longer than anticipated. 12 Why then, given the above-mentioned favorable preconditions, is regional integration so challenging for CARICOM? This puzzle motivates the overarching question of this paper: why are member states not complying with CARICOM directives? The Analytical Framework The overall analytical framework developed to guide this study addresses the following questions: First, what evidence exists to confirm the relative failure of CARICOM to deepen its integration process? Second, if an implementation deficit exists why are member states not complying with CARICOM s directives? 13 The first question on the status of the CSME compliance record is addressed by examining the extent to which actions required for implementation were completed. 14 Whereas Girvan s study presented the CSME s overall level of compliance for 2004, this study extends Girvan s analysis to include the overall level of compliance, as well as the compliance rates for individual member states over the period A key expectation in measuring implementation rates over time is the ability to compare compliance rates by categories and across countries. Additionally, this approach allows for the comparison of speed of implementation and transparency of the issues that the directives involve. The period under study was limited only by the availability of data from CARICOM. The CSME implementation rates from 2004 to 2007 were computed from CARICOM data reports entitled Establishment of the CARICOM Single Market and Economy Summary of Status of Key Elements. 15 The CARICOM Secretariat lists 12 categories in the CSME Program that corresponds to the nine directives amending the Treaty of Chaguaramas. Following Girvan s approach, the 12 categories were grouped into three main areas of Legal and Institutional Infrastructure, Single Market provisions and Single Economy provisions. This evaluation focuses on CARICOM s directives, which specify 10 Norman Girvan, CSME: Status of Implementation of Main Elements, in Kenneth Hall, Myrtle Chuck- A-Sang, CARICOM Single Market and Economy: Challenges, Benefits, Prospects (Kingston: Ian Randle Publishers, 2007), CARICOM Secretariat, CARICOM Leaders Seek Greater Focus on Prosperity for the People. May 22, Press Release, 2011 (Georgetown: Caribbean Community Secretariat, 2011), 12 Ibid. 13 Directives or protocols are used interchangeably in this paper. They are amendments to the original Treaty of Chaguaramas to be implemented by the twelve-member states. 14 Norman Girvan, Whither Me, Journal of Caribbean International Relations, no.1 (2005), CARICOM Secretariat, Matrix of Agreement, 3

4 actions that each member state must undertake to meet CSME commitments. A directive is completed when all twelve-member states have fulfilled their particular responsibility. The second question is concerned with exploring why the implementation of some regional directives succeed or fail. The study traces the progress of CARICOM states in implementing CSME directives while analyzing internal political conditions to describe levels of compliance. In the case of the Caribbean, national governments are the most dominant actors in the politics of integration. According to Axline, CARIFTA and CARICOM were established as intergovernmental organizations where the idea of sovereign equality prevails, and policies require the approval of all governments in order to be adopted. 16 Therefore, CARICOM governments stand between the domestic and regional levels and mediate the domestic-regional interaction. In this case, the Prime Minister or his/her designee acts as the country s representative at the CARICOM Heads of Government Conference. The willingness of member governments to implement regional policies is only a starting point for the study of domestic constraints on CARICOM s integration. The Revised Treaty rule for all members clearly states that decisions of competent organs considered under this treaty shall be subject to the applicable constitutional procedures of the member states before creating legally binding rights and obligations for nationals of such states. 17 In other words, the directives for establishing the CSME are subject to the constitutional procedures of the twelve participating states. In the case of CARICOM states, the Westminster constitutional arrangements with the two-thirds majority parliamentary vote and a public referendum for amending the constitutions is required in nine of the twelve participating states. This multi-level governance system leaves much space for constitutional interpretations as well as for informal lobbying and bargaining at the national level. This system sets up an adversarial political interaction between the opposition and the ruling party that thus slows down the integration process. The CSME Implementation Record: What is the overall level of compliance for the CARICOM Single Market and Economy? This question has plagued CARICOM since it failed to meet its ambitious goals in CARICOM leaders have claimed, with hardly any empirical evidence of support, that one of the main challenges facing the CSME is an implementation deficit. 18 The implementation deficit is defined as the difference between the total CARICOM directives to be implemented and the actual number of directives implemented. While the benefits of 16 Andrew Axline, Caribbean Integration: The Politics of Regionalism (London: Nichols Pub. Co., 1979), Critics have argued that this rule is not applied evenly across the region because no country held a referendum asking the member states to accept the CARICOM Treaty. CARICOM Secretariat, Revised Treaty of Chaguaramas, Article 240 (1). treaty-text.pdf. 18 Ian Boxhill, Ideology and Caribbean Integration (Kingston: University of the West Indies, 1993), 1. Rickey Singh, Confronting CARICOM s Implementation Deficit, Jamaica Observer Online, 4

5 understanding implementation rates in the integration process have been documented in other regions, there has been a dearth of systematic reviews of this important task for the Caribbean community. 19 This study advances the understanding of the integration process by utilizing new empirical data ( ) to assess the implementation status of the CSME project over the period This study utilizes CARICOM records and reports to compute both the overall and individual levels of compliance for the CSME. An explanation of the CSME implementation process is followed by a summary of the CSME implementation record. The results are presented in Table 1. Explaining the CSME implementation process The process of implementing the CSME involves the removal of restrictions and making arrangements for the rights envisioned in the Revised Treaty of Chaguaramas enforceable. 21 Explaining the relative failure of CARICOM to deepen its integration process is primarily concerned with identifying the main obstacles to the implementation of the CSME directives. Implementation is taken to include all activities required to realize the operation of the CSME and the legal and institutional infrastructure. Directives indicate specific actions that each member state must undertake to meet its CSME commitments. Since parliaments must ratify these changes into domestic law, it is at this stage that CARICOM experiences what is sometimes referred to in the literature as an implementation deficit. 22 The implementation process begins with agenda proposals from all members of the CARICOM Heads of Government Conference. Since the Heads of Government Conference has no supranational powers, CARICOM as an organization lacks the ability to condition the nature of the policies adopted. As a result, member states maintain a substantial and prominent role. One way in which states exercise their influence is through their veto power and representation in the Heads of Government Conference. Each CSME issue is voted on and must receive unanimous approval from the Heads of Government before being delivered to each member state for implementation. As a result, the regional agenda tends to reflect member state concerns, rather than being the result of thinking through what CSME initiatives could be top priorities for the region as a whole. 23 Thus, the CSME activities 19 See Lisa Martin, The influence of National Parliaments on European Integration, in Barry Eichengreen, Jeffrey Frieden and Jurgen von Hagen, eds., Politics and Institutions in an Integrated Europe (New York: Springer-Verlag, 1995), CARICOM has not released implementation records since 2007, thus the reason for the limited data analysis. See CARICOM Secretariat, Matrix of Agreements, and List of Agreement, Treaties, Directives, MOUs, Declarations and Instruments of Ratification (Georgetown: CARICOM Secretariat, 2003) The John Kissoon Report, Implementing the CARICOM Single Market and Economy, See Norman Girvan, Whither CSME, Journal of Caribbean International Relations, no. 1 (April 2005): Richard Stoneman, Duke Pollard and Hugo Inniss, Turning Around CARICOM: Proposals to Restructure the Secretariat (Georgetown: CARICOM Secretariat, 2012), 42. 5

6 undertaken through regional integration can be explained in terms of the national interests of the member states. The CARICOM Secretariat monitors the implementation of directives in member states and lists the directives of the CSME program in reports entitled Establishment of the CARICOM Single Market and Economy Summary of Status of Key Elements. 24 Governments implementation performance is monitored through a scheduled program negotiated and approved by the community. According to the CARICOM Secretariat, the member states carry out their scheduled program, notifying the CARICOM Secretariat at regular intervals of the actions undertaken. 25 The CARICOM Secretariat then publishes informational reports on the number of actions taken at the national level. One caveat, however, is that due to limited resources and lack of institutional capacity, CARICOM does not provide a general analysis of the reports. Summary of the CSME Implementation Record Having explained the CARICOM policy implementation process, Table 1 presents a summary of the implementation status of the CSME for the years 2004, 2005, 2006, and The Table reflects data from the following CARICOM Secretariat documents: Establishment of the CARICOM Single Market and Economy: Summary of Status of Key Elements, dated as of October 2004, February 2005, November 2006, and May Table 1 includes the twelve member states that are fully participating in the CSME and capable of carrying out its commitments. Following Girvan s method, the overall degree of implementation is measured by computing the total number of directives that need to be carried out by all entities concerned, then by identifying the number carried out to date, and finally by expressing the latter as a proportion of the former. 27 Table 1 shows the overall level of CSME compliance from 2004 to The overall level of compliance in 2004 was 39%; in %; in %; and in 2007 approximately 38%. In 2007, the category with the lowest compliance level was the Facilitation of Travel. The transfer of Social Security Benefits had the best compliance rate. These results clearly show the extent to which member governments are experiencing great difficulty in implementing CARICOM policies at the national level. To summarize, Table 1 column 1, lists the three main categories of the Revised Treaty and their sub-headings: (A) The Legal and Institutional Infrastructure; (B) The Single Market; and (C) The Single Economy. Columns 2, 3, 4 and 5 shows the total 24 CARICOM Secretariat Ibid. 26 Ibid. 27 See Norman Girvan, Whither CSME, Journal of Caribbean International Relations, no. 1 (April 2005):11. 6

7 Table 1. The CSME Implementation Summary Status, CATEGORY Total Required Directives¹ No. of Directives Completed % of Directives Completed A. LEGAL & INSTITUTIONAL INFRASTRUCTURE 1. Treaty Revision National Administration² Enforcement and Regulation Caribbean Court of Justice (original) 3.2. Caribbean Court of Justice (Appellate) 3.3. CROSQ (Standards & Quality 3.4. National Compet. Authorities B. SINGLE MARKET Free Movement of Goods Free Movement of Services Free Movement of Persons Free Movement of Skills Contingent Rights n.a na na na na na na na na na na na 6.3. Facilitation of Travel Accreditation &Equivalency Transfer Soc Sec Benefits Free Movement of Capital Removal of Restrictions Capital Market Integration Double Taxation Agreement Right of Establishment C. SINGLE ECONOMY Common External Policy Harmonization of Laws Sectoral Program & Enabling Environment Common Support Measures Public Education na na na na na na na na na na na na 14. TOTAL Source: Author compiled from documents Establishment of CARICOM Single Market and Economy: Summary of Status of Key Elements. October 2004, January 2005, April 2006, May required directives member states must adopt. Columns 6, 7, 8, and 9, indicates the number of directives completed by all participating states. The Percentage of Directives Completed shown in columns 10, 11, 12, and 13 represents the percentage of directives completed by 7

8 all states. Row 14 columns 10, 11, 12 and 13 show the overall level of compliance. For example, for the year 2005, the data shows the CSME operating at 38% level of compliance. That is the number of directives completed for 2005, 361, divided by the total required directives for 2005, 948, in percentage equals 38% (361/948 X100/1 = 38%). The overall implementation deficit in this case is 62% (100% -38% =62%). The overall level of compliance for the years 2004,2005,2006,2007 were 39.0%, 38.0%, 37.0% and 38% respectively. An important note is that the 948 in 2005 includes those directives not implemented in Although very few analysts would be surprised that the CSME is experiencing an implementation deficit, a key contribution of this study is the identification of the Single Economy as the category with the most serious implementation deficit. The Single Economy had an implementation deficit of 94 percent or a compliance rate of only six percent. This revelation is critical and timely since CARICOM is at a crossroad on how to address the Single Market and Single Economy dilemma. Norman Girvan claimed, there has been very little progress in implementing the CSME since the Single Market was inaugurated with much fanfare in The May 21, 2011 announcement that the Caribbean Single Economy was on pause has substantiated Girvan s claim. The following section discusses the CSME implementation rates and seeks the answer to the following question: Why are member states not complying with CARICOM s directives? Explaining CSME Policy Implementation Mismatch The evidence presented in this paper supports the argument that CARICOM has failed to deepen effectively its integration process. The analysis of the status of the CSME implementation project confirmed a policy implementation deficit asserted by politicians and scholars. A surprising discovery however, is the CARICOM Single Economy as an outlier with a dismal implementation deficit of 94 percent. This revelation is important to CARICOM policymakers since the Single Economy implementation deficit is a serious threat to the development of CARICOM policies and thus to the strengthening of the integration process. The data in this paper shows that in 2007 the CSME was operating at about thirty-eight percent overall level of compliance. That is an implementation deficit of 62 percent. The three main categories, Legal and Institutional Infrastructure, CARICOM Single Market and the CARICOM Single Economy, were functioning but not at the level of effectiveness expected by the community. Their compliance grades were as follows: Legal and Institutional Infrastructure, seventy-six percent; CARICOM Single Economy sixty-two percent; and the CARICOM Single Economy, six percent. These empirical results support the claim that CARICOM has failed to reach its goal of establishing a CSME. This paper seeks a deeper explanation of the implementation deficit by using a two-pronged approach to analyze and explain the implementation rates of the CSME from The first 28 Norman Girvan, CARICOM s Original Sin, Address to CARICOM Regional Civil Society Consultation, Port-of-Spain, Trinidad and Tobago, February 2011, 8

9 approach analyzes the mismatch between CARICOM s ambitious implementation agenda and the overall levels of compliance. The second approach traces the progress of CARICOM states in implementing regional policies while analyzing internal political conditions to explain observed patterns. A noticeable contradiction from the CARICOM data is the mismatch between CARICOM s ambitious implementation schedule of directives and the low level of compliance. Table 2 shows that in the year 2004, 936 directives were scheduled to be implemented and only 369 were actually implemented. In 2005, 948 directives were scheduled to be implemented, and only 361 were implemented. In 2006, 924 directives were scheduled to be implemented, and only 338 were implemented. In 2007, 900 directives were scheduled to be implemented, and only 338 were implemented. An analysis of the overall implementation rates for 2004 and 2005 (columns 10 and 11), reveal that the implementation rates decreased from 39 percent to 38 percent in 2004 and 2005 respectively and the total number of directives scheduled increased from 936 in 2004 to 948 in Table 2 CSME Policy Implementation Mismatch, CATEGORY Total Required Directives No. of Directives Completed % of Directives Completed A. LEGAL & INSTITUTIONAL INFRASTRUCTURE B.SINGLE MARKET C. SINGLE ECONOMY TOTAL Source: Author compiled from documents Establishment of CARICOM Single Market and Economy: Summary of Status of Key Elements. October 2004, January 2005, April 2006, May What explains the Heads of Governments decision to add directives to an already overloaded agenda? Why do Caribbean leaders agree to ambitious regional integration directives without considering the chances of getting them through the bureaucracy and parliaments back home? This observation poses a puzzle that provides insight into the influence of domestic factors on the implementation of CARICOM policies at the national level. An examination of the Single Economy category provides a solution to the puzzle. The research shows that an Investment Code Directive and Accreditation Directive was added to the agenda. The directives were adopted by the Heads of Governments Conference and added to the key elements to be implemented by member states. However, these two directives were expected to be strongly challenged in some MDC states, with Barbados leading the charge. The Investment Agreement and Investment Code were not expected to be implemented at the domestic level because of Barbados opposition to the test of 9

10 ownership and control clause in the directive. 29 According to Francoise Hendy, Barbados Director of International Business, the test of ownership and control clause made it clear that to qualify for benefits under the CARICOM Investment Code an investor must have more than fifty percent equity interest owned by a person who is a citizen of the member state in which the company or legal entity is a national. 30 Hendy, a strong opponent to the directive, claims that this clause was counter-productive to the interests of some foreign investors already conducting business in Barbados. 31 Hendy stated, crafting unwarranted limitations on the source of the investment does not send the right signals to regional nor extra-regional investors. 32 An important question then is why did this directive get the support of the Heads of Governments Conference? Why in light of opposition in Barbados to the Investment Code and Accreditation Directives, were these directives added to the already overloaded implementation schedule? The research revealed that these directives were added because the process of adding directives to the CARICOM agenda made it easy for the governments to do so, as well as potential domestic political benefits from an upcoming general election. What are these political benefits? National leaders must demonstrate to their constituency that their policies in support of regional integration are contributing to national economic wellbeing by creating jobs in the domestic market. Therefore, at the regional level, the goal of supporting the Investment Code and Accreditation Directives, was to appease the domestic constituency and increase the re-election chances of the incumbent government. Brizan s opinion on similar directives is revealing. Heads of government tend to support directives based on either domestic political conditions or the ideological perspectives of their political party. 33 The investment code protected local investors and made it mandatory that they share any foreign investment in the local economy. In an election year, the political benefits from local businesses could be substantial ranging from campaign contributions to public endorsements. Therefore, regional leaders appear to be concerned with the short run goal of winning the upcoming election and discount the long run consequences of their decisions. 34 However, this finding reveals that in the process of adding items onto the CARICOM agenda, national priorities override initiatives that otherwise would be top priorities for the region as a whole. 29 The test of ownership and control clause mandates that corporations have 51 percent local ownership. However, Barbados, had pre-established agreements without restrictions. 30 Francoise Hendy, Investment Harmonization: The State of Play and its Potential Impacts (Barbados, Ministry of Economic Affairs and Development, April 13, 2006), Ibid., Ibid. 33 George Brizan, interview with author, St. George s, Grenada, April 13, See Paul Pierson, Increasing Returns, Path Dependence, and the Study of Politics, American Political Science Review 94, no. 2 (2000), 263. According to Pierson, the principal reason is the logic of electoral politics. Since the decisions of voters are taken in the short run, elected officials generally employ a high discount rate. 10

11 National Priorities and the Regional Agenda The CARICOM directives adopted at the regional level can be explained in terms of the national priorities among member governments. The principal policies adopted by the CARICOM Heads of Government define the issues presented to the member states for implementation. These issues arise from the interests of one or more member states, which, according to a recent CARICOM report, there is no mechanism for filtering, evaluating and prioritizing member state demands at the Heads of Governments Conference. 35 Therefore, there is no enforced system to have directives placed on the agenda. According to the report, there had been a mistaken reluctance on the part of the Secretariat to challenge specific instances when too much was asked. 36 This administrative loophole explains how national priorities get to dominate the Heads of Government Conference agenda instead of initiatives that are top priorities for the region as a whole. An important finding therefore, is that the absence of a prioritization and enforcement process in CARICOM s agenda setting procedure, results in state leaders loading the agenda with national priorities instead of top priorities for the CARICOM region as a whole. Although preliminary, the following cursory results show a positive correlation between the signing of significant integration treaties and general electoral cycles in the Caribbean. One caveat is that the following results are not conclusive, and the patterns suggest a promising area for further research in investigating the correlation between national electoral cycles and regional integration in the Caribbean. A landmark treaty was the signing of the Grand Anse Declaration in July 1989 in Grenada. According to Brizan, the Grand Anse Declaration was a significant political event for politicians all over the Caribbean and even more so for the host Prime Minister Herbert Blaize and his ruling political party. 37 The intended implementation date of July 4, 1993 was extremely ambitious given the hundreds of directives that were to be implemented by the twelve-member states. Why was communicating the full implementation of the Grand Anse Declaration so urgent? A cursory examination of the relationship between key CSME agreements and Caribbean election cycles provides a possible answer. Table 3 indicates a positive correlation between key CARICOM decisions and member states general election cycles. Nine out of the twelve CSME member states held general parliamentary elections in 1989, the same year of the signing of the Grand Anse Declaration. The member states were Antigua and Barbuda, Belize, Dominica, Guyana, Jamaica, St. Lucia, Suriname, St. Kitts and Nevis, and St. Vincent and the Grenadines. 38 In June, 1989 the Heads of Government of Dominica, St Lucia and St. Vincent and the Grenadines met together in order to discuss with the Prime Minister of Grenada, Herbert Blaize, the early holding of elections. St. Lucia s Prime Minister, John 35 Ibid., Richard Stoneman, Duke Pollard and Hugo Inniss, Turning Around CARICOM: Proposals to Restructure the Secretariat (Georgetown: CARICOM Secretariat, 2012), George Brizan, interview with author, St. George s Grenada, April 13, Christoph Mullerleile, CARICOM Integration: Progress and Hurdles: A European View (Kingston: Kingston Publishers, 1996),

12 Compton, said that general elections in Grenada and other OECS member states were no longer only a national question. 39 The context of this statement was the post United States invasion of Grenada and the return of the former dictator Eric Gairy. Compton and others feared Gairy s Grenada United Labor Party (GULP) and the Maurice Bishop Patriotic Movement (MBPM) could outperform the moderate parties based on their new popularity and financial resources. 40 An analysis of the timing of the signing of the other landmark decision, the 2001 Revised Treaty of Chaguaramas, shows that five of the 12 members (Table 3 column 2) of CSME members held general elections in 2000, and St. Vincent and the Grenadines held a Table 3. Elections Schedule in CSME Member States, Selected Years. Country General Election Year Signing of the Grand Anse Declaration General Election Year (1) (1a) (2) (2a) Antigua & Barbuda Barbados Belize Dominica * 2001 Grenada Guyana Jamaica Suriname * 2001 Trinidad & Tobago * 2001 St. Kitts &Nevis * 2001 St. Lucia * 2001 St. Vincent & Grenadines Source: (Columns 1a and 2a). (columns 1 and 2). Signing of the Revised Treaty of Chaguaramas general election in 2001.The expansion of the CARICOM conference agenda allows the leaders to handpick certain directives that demonstrate to their national constituency that they are looking out for their national well-being. To elaborate, it appears from this analysis that just prior to general elections Caribbean leaders propose directives in order to improve their election chances. Adopting directives at the regional level have politically popular results in the short run, regardless of the chances of being incorporated into national law. These patterns suggest a promising area for further research. 39 Ibid. 40 Ibid. 12

13 Antigua Barbados Belize Dominica Grenada Guyana Jamaica St.Kitts St. Lucia St. Vincent Suriname Trinidad % directives implemented Explaining CSME Implementation Rates, A serious problem facing CARICOM is the fundamental contradiction between the goals of CARICOM and the complex policy implementation process to achieve those goals. Implementation matters are considered particularly important because they reflect the problems caused by the multi-level structure of CARICOM policy making. The directives for deepening regional integration within CARICOM states are subject to the constitutional procedures of the twelve member states. This multi-level system thus complicates the control of CARICOM policy making. When the CARICOM Heads of Governments commit themselves to a particular agreement, they must also concern themselves with the domestic arrangements in their respective home country. Therefore, in implementation, domestic economic and political conditions play a major role. An analysis of implementation rates in Figure 1 shows that in the case of the CSME, among the four MDCs, Trinidad and Tobago, Jamaica, Barbados and Guyana, not one of them had achieved an implementation rate over Figure 1 Implementation Rates of Member States, Member State Figure 8 Member State Implementation Rates Through Time, Source: Author compiled from documents Establishment of CARICOM Single Market and Economy: Summary of Status of Key Elements. October 2004, January 2005, April 2006, May Sourced from CARICOM website, 55 percent. What explains this puzzling case? Puzzling because despite the sound theoretical basis for expecting the MDCs of the region to have higher implementation rates than LDC s, Figure 1 shows that there is little difference in the implementation rates between both groups. Theoretically the MDCs such as Trinidad and Tobago and Jamaica are expected to be the strongest supporters of the CSME since they are the most developed countries in the region and thus potentially the greatest beneficiaries of free trade. This finding is therefore inconsistent with theoretical expectation. If one were to suggest the intuitive notion that 13

14 states performance in living up to their commitments was a straightforward function of their benefits from integration, the MDCs would have significantly higher implementation rates. This observation poses a puzzle that provides insight into the role of domestic political and economic arrangements in the region. The following assessment of CSME implementation rates begin with the member states progress in implementing the CSME s Legal and Institutional Infrastructure directives, followed by an analysis of the progress of member states in implementing the Single Market and Single Economy directives. The extent of policy implementation varies widely within each category and the level of completion varies widely between the three main categories. The Revised Treaty: The Legal and Institutional Infrastructure According to the data in Table 4, as of 2007, compliance is most impressive in the Legal and Institutional Infrastructure category where more than three-fourths of the directives needed to establish the Legal and Institutional Infrastructure were completed. However, the degree of completion varies widely between the Legal and Institutional infrastructure subcategories. The notable exception is the Caribbean Court of Justice (CCJ) Appellate Jurisdiction operating with only 16.6 percent compliance level and the National Competition Authorities operating at a level of only 16.7 percent. Treaty Revision The Revised Treaty of nine directives were produced by an intergovernmental Task Force (IGTF) and signed by the More Developed Countries (MDCs), Barbados, Guyana, Jamaica and Trinidad and Tobago on July 5, According to Ralph Gonsalves, Prime Minister of St. Vincent and the Grenadines, because they were not guaranteed compensation in 2001, the Less Developed Countries, Antigua and Barbuda, Belize, Dominica, Grenada, St. Vincent and the Grenadines, and St Lucia withheld support for the Revised Treaty. 41 It is possible that the smaller countries delayed signing because of the potential losses of customs revenue and increased competition for their domestic industries. The following statement by the manager of an agro-industrial plant in Grenada sums up the concern of most of the business owners in the LDCs, opening up competition in the region, with larger companies in Trinidad and Tobago and Jamaica, there is no way my business will survive. 42 The less developed countries eventually bargained for a number of specific concessions and derogations under the Revised Treaty. 41 Ralph Gonsalves, The CARICOM Single Market and Economy and Its Implications for Credit Unions in the Region. Keynote Address delivered at the Conference of the GSB Credit Union in Jamaica (St. Vincent and the Grenadines: Office of the Prime Minister, April 24, 2004). 42 ADM Agro-industries Manager, interview with author, St. George s, Grenada, April 11,

15 Table 4 Implementation Rates: Legal and Institutional Infrastructure CATEGORY Total Required Directives¹ No. of Directives Completed % of Directives Completed A. LEGAL & INSTITUTIONAL INFRASTRUCTURE 1. Treaty Revision National Administration² 3. Enforcement and Regulation 3.1. Caribbean Court of Justice (original) 3.2. Caribbean Court of Justice (Appellate) 3.3. CROSQ (Standards & Quality 3.4. National Competition Authorities. Source: Author compiled from documents Establishment of CARICOM Single Market and Economy: Summary of Status of Key Elements. October 2004, January 2005, April 2006, May Chapter VII Article 142 of the Revised Treaty of Chaguaramas allows compensation as well as derogations from community obligations for all LDCs countries. According to the CARICOM records, Grenada was the last member to enact the Revised Treaty into law because of the devastation of the island in 2004 by Hurricane Ivan. The directive on the Treaty Revision was deleted from the key elements in 2007 because all participating members had signed onto the Revised Treaty. 43 Enforcement and Regulation In the category of Enforcement and Regulation, the notable exceptions are the Caribbean Court of Justice (CCJ) Appellate Jurisdiction, operating with only 16.6 percent compliance level and the National Competition Authorities, operating at a level of only 16.7 percent compliance. In February 2001, CARICOM member states entered into a binding treaty to create the Caribbean Court of Justice (CCJ). 44 According to the Revised Treaty, the CCJ is charged with employing the rules of international law to interpret and apply the Revised Treaty of Chaguaramas establishing the Caribbean Community, including the 43 This evidence shows the number of directives in a particular year could fluctuate. 44 CARICOM Secretariat, Signing of the Agreement Establishing the Caribbean Court of Justice, Twelfth Inter-Sessional Meeting of the Conference of Heads of Government of the Caribbean Community, February 14-15, 2001, Bridgetown, Barbados, (Georgetown: CARICOM Secretariat, 2001). 15

16 CSME. 45 Establishing the appellate jurisdiction of the CCJ, a key pillar in the CARICOM structure, has proven to be the most challenging directive to enact into domestic law. The CCJ is intended to have two jurisdictions: an appellate jurisdiction to replace the Judicial Committee of the Privy Council and original jurisdiction to create the legal framework for the CSME. Duke Pollard, legal consultant to CARICOM, contends that the CSME would be weaker and much less attractive to investors without the foundation of a judicial body that guarantees stability. 46 According to Table 4, the compliance level for the CCJ original jurisdiction improved from 86.1 percent in 2004 to 97.2 percent in the following three years, while the appellate jurisdiction improved from zero percent to 16.6 percent. What explains the implementation gap between these two levels of jurisdictions? First, the original jurisdiction of the CCJ is concerned with the disputes under the Revised Treaty of Chaguaramas. [In particular, disputes about the interpretation of some aspect of the main treaty governing the CSME]. According to Stephen Vasciannie, cases under the original jurisdiction do not pass through local courts and originate in the CCJ. 47 The main reason is to show fairness and to respect the sovereignty of both countries. In addition, cases between countries are not heard in local courts in order to avoid problem of enforcement. Although the challenge of enforcement still exists if a member opts not to enforce judgements of the CCJ, the state would be in breach of the treaty establishing the CCJ and Revised Treaty of Chaguaramas. Other members could put political pressure on that country to obey the judgements of the CCJ. 48 Second, according to Vascianne, the appellate jurisdiction of the CCJ is concerned with appeals from local courts, through the local court of appeal to the CCJ as the final court of appeal. 49 What explains the implementation gap between these two levels of jurisdictions? The answer lies in factors impeding the implementation of the appellate jurisdiction at the national level. First, a number of states, Trinidad and Tobago and Jamaica in particular, have been reluctant to switch their right to final appeal from the Privy Council in Great Britain to the CCJ. One main concern for some MDCs is the possibility of not having a citizen on the CCJ to protect the interest of that country. 50 Therefore, the member states enact the original jurisdiction because their local courts and national sovereignty are not significantly affected. Another reason is that the CCJ requires member states to allocate their limited resources to a plan that would only help the country in the long run. While implementation costs for the CCJ are likely to be significant in the short-term, expected benefits to the community as a whole occur in the long-term. However, as mentioned earlier 45 Ibid. 46 Duke Pollard, The Caricom System: Basic Instruments (Kingston: Caribbean Law Pub. Co., 2003), Stephen Vasciannie states that in addition, to avoiding problems of enforcement, this is consistent with international law to show fairness and respect the sovereignty of both countries. Stephen Vasciannie, CCJ: Original Jurisdiction, Jamaica Gleaner, February 7, 2007, 48 Ibid. 49 Ibid. 50 Trinidad and Tobago Parliamentary Debates. Hansard Transcripts. February 2, 2005,

17 politicians are most interested in the short-term results of their actions. As a result, without compensation national priorities take precedence over implementing the appellate jurisdiction of the CCJ. Furthermore, attempts to implement the CCJ in Trinidad and Tobago and Jamaica illustrates how constitutional crisis brought to the forefront two significant challenges to deepening CARICOM integration. First, the absence of a supranational institution lend regional decisions hostage to domestic constitutional arrangements. Second, because of the unanimous vote needed at the CARICOM Heads of Government meeting a constitutional crisis in one state can hinder the entire progress of regional integration in the Caribbean. 51 The crisis surrounding the implementation of the CCJ directives in Jamaica demonstrates how constitutional arrangements affects the CARICOM integration process. The crisis brought to the fore the inadequacies of the inherited political constitutional arrangements and the need for constitutional reform. 52 The link between the CSME and the CCJ was manifested when the launch of the CCJ scheduled for February 16, 2005, was forced to be postponed after the Privy Council in London, Jamaica s highest court, ruled that the procedure followed by Jamaica to enact legislation to establish the CCJ as the final court of appeal was unconstitutional. 53 The CCJ was eventually inaugurated on April 16, 2005 in Port of Spain, Trinidad and Tobago. However, three CARICOM states, Barbados, Belize and Guyana, have signed on to both the original and appellate jurisdictions of the CCJ. What explains the success of these three states in acceding to the CCJ? An analysis of the constitutional arrangements in all three countries shows two main factors common in all three cases: first, none of their constitutions required a public referendum at the time of joining the CCJ; second, all ruling political parties in the government commanded more than a twothirds majority in the parliament. Therefore, the constitutional arrangements in these three cases actually supported implementation of the CCJ jurisdictions. Barbados, Guyana and Belize acceded to the CCJ as their final court of appeals after approval by their respective parliaments and not by popular support in a national referendum. All three-member states also had more than two-thirds majority in their parliaments at the time of the CCJ adoption vote. The constitutional arrangements in most member states sets up a contest between the opposition and the ruling parties that has hindered the regional integration process. One recommendation on how to overcome constitutional obstacles, given that some constitutions are so challenging to amend, is to encourage member states to revive and get more involved in the Assembly of Caribbean Community Parliamentarians (ACCP). Strengthening the ACCP is critical, since evidence in other regional integration organizations have shown that involving the entire legislature in the negotiation process improves 51 David Hinds, Trinidad s Crisis: A Consequence of the Caribbean s Authoritarian Culture. October , 52 David Hinds, Trinidad s Crisis: A Consequence of the Caribbean s Authoritarian Culture, October 8, 2001, 53 Privy Council Appeal No.41 of 2004 Independent Jamaica Council for Human Rights (1998) Limited and others v. Hon. Syringa Marshall-Burnett and Attorney general of Jamaica. 17

18 implementation performance. 54 Because parliamentarians on both sides are able to discuss the effects and possible remedies of directives beforehand, the directives going forward for parliamentary adoption stand a better chance. The main reason is that uncertainty is reduced and increases the chances of parliamentary adoption. National Competition Authorities National Competition Authorities was the second most difficult directive to be implemented after the Caribbean Court of Justice appellate directive. The CARICOM Treaty provides for the establishment and operation of a regional competition commission to facilitate implementation of a Community Competition Policy. 55 The objectives are to maintain competition and improve economic efficiency in production and trade; prohibit anti-competitive business conducts that prevent, restricts or distorts competition; promote consumer welfare and protect consumer interests. 56 Only three member states, Barbados, Jamaica, and St. Vincent and the Grenadines, currently have competition laws in place, and only Barbados and Jamaica have institutional arrangements to enforce those laws. The implementation rate in 2005 was 16.7 percent (Table 4). The implementation rate remained at the 16.7 percent level for 2006 and 2007 (Table 4). The failure in this area is explained by the various countries being more concerned with their own problems than with what is happening in the region. National Competition Authorities require resources to maintain an office and qualified staff to implement competition policy rules applicable throughout CARICOM. 57 The Revised Treaty: The Single Market According to Table 5, the Single Market is operating at a level of 62.8 percent compliance. Table 5 shows that the Single Market subcategories are not functioning at the level of effectiveness anticipated by CARICOM. The Free Movement of Goods, Free Movement of Skills, transfer of Social Security benefits and double taxation agreement were at 70.8 percent, 71.7 percent, 91.7 percent and 83.3 percent respectively. The following section analyzes these outliers. 54 See Lisa Martin, The influence of National Parliaments on European Integration, in Barry Eichengreen, Jeffrey Frieden and Jurgen von Hagen, eds., Politics and Institutions in an Integrated Europe (New York: Springer-Verlag, 1995), CARICOM Secretariat, Revised Treaty of Chaguaramas, Establishing the Caribbean Community, Including the CARICOM Single Market and Economy (Georgetown: CARICOM Secretariat, 2001). 56 Ibid. 57 Stephen Vasciannie, CCJ: Original Jurisdiction. Jamaica Gleaner. February 7,

19 Free Movement of Goods The freeing of trade in the Caribbean creates regional benefits as far as there is regional production to take advantage of the labor market. However, the benefits of free trade are unequally distributed towards MDCs such as Jamaica and Trinidad and Tobago, which are more advanced industrially and have already established some productive capacity. Table 5. Implementation Rates: The Single Market, CATEGORY Total Required Directives¹ No. of Directives Completed % of Directives Completed SINGLE MARKET Free Movement of Goods 2. Free Movement of Services 3. Free Movement of Persons 3.1. Free Movement of Skills 3.2. Contingent Rights n.a na na na na na na na na na na na 3.3. Facilitation of Travel Accreditation &Equivalency 3.5. Transfer Soc Sec Benefits 4. Free Movement of Capital 4.1. Removal of Restrictions 4.2. Capital Market Integration 4.3. Double Taxation Agreement 5. Right of Establishment Source: Author compiled from documents Establishment of CARICOM Single Market and Economy: Summary of Status of Key Elements. October 2004, January 2005, April 2006, May The record shows that LDC members states oppose the freeing of trade because of losses in customs revenue and increased competition for their domestic industries. In Grenada, for example, the top concern of small businesses is inter-island competition and the fear of losing business to the more developed Trinidad and Tobago and Jamaica. 58 The Free Movement of Goods category plummeted from 73.3 percent in 2004 to 58.3 percent in 2005 (see Table 5). 59 An investigation into the Single Market records exposes the reason behind this decline. In 2004, a number of member states exercised their right of exemption in the 58 ADM Agro-industries manager, interview with author, St. George s, Grenada, April 11,

20 Revised Treaty. For example, Belize applied a revenue replacement duty on a list of goods of CARICOM Community Origin; St. Kitts and Nevis applied an unauthorized import duty on beer, pasta and aerated beverages from St. Lucia s; St. Vincent and the Grenadines applied an import (equalization) tax on rum of Community Origin; 60 and St. Vincent and the Grenadines maintained prohibitions on certain agricultural products from Grenada, Jamaica and Trinidad and Tobago. 61 This evidence is revealing for two reasons. First, since St. Vincent and the Grenadines and Grenada are members of the OECS economic union, it is clear that these prohibitions are also posing challenges to the organization. Second, the provisions in the Revised Treaty that allow member states to opt in or opt out of regionalist actions depending on their interests and circumstances is counterproductive to deepening integration. It is clear that, in the absence of compensation, the LDC members choose national priorities ahead of regional commitments. The lack of an institutional leader and regional paymaster to ease distributional tensions through side payments may explain, in part, why CARICOM states have not shown an overriding commitment to regional integration and instead have placed national priorities ahead of regional commitments. Transfer of Social Security Benefits The subcategory with the highest level of compliance is the Transfer of Social Security benefits with a 91.7 percent implementation rate. The Transfer of Social Security Benefits is important in facilitating the free movement of labor within the CSME and applies to all persons who are moving to work or have worked in two or more countries that have implemented the agreement. The directive allows CARICOM countries much flexibility in coordinating their social security programs, and this may account for the high level of compliance. For example, under this directive, insured persons are entitled to benefits from one or more of the Social Security Organizations in various CARICOM member states for which they qualify. 62 An insured person who lives in a member state i.e., St. Lucia, and is employed in two or more CARICOM member states, including St. Lucia, that person will remain insured in St. Lucia. 63 In addition, a person living in one member state i.e., Jamaica, and is entitled to a benefit from another member state i.e., Grenada, that person will be paid in the currency of the country in which they reside i.e., Jamaican dollars, but at the same rate as if he/she lived in the Grenada. 64 The directive is in effect in all CSME member states except Suriname. Because the social security institutions are similar in terms of operations, 60 CARICOM Report, Institute for the Integration of Latin America and the Caribbean (INTAL), CARICOM Report No.2 (Buenos Aires: IDB-INTAL, August 2005): Ibid. 64 Ibid. 20