Accelerating Trade and Integration in the Caribbean: Policy Options for Sustained Growth, Job Creation, and Poverty Reduction (World Bank Country Study)

Contents......Page 4
Foreword......Page 12
Acknowledgments......Page 14
Abbreviations and Acronyms......Page 16
Executive Summary......Page 18
Part I: Overview of Economic and Trade System Context......Page 52
1. Macroeconomic and Structural Constraints on Trade Reform in the Caribbean......Page 54
Caribbean Economy and Macroeconomic Constraints......Page 55
Structural and Physical Constraints......Page 66
2. Caribbean Regional and Global Trading Relations......Page 78
Intra-Caribbean and Regional Integration Issues......Page 79
The Caribbean and the Global Trading Environment......Page 92
Structural, Institutional, and Political Constraints to Trade Integration......Page 106
3. Trade Patterns and Flows, and Competitiveness Issues......Page 112
Trade Performance, Trade Flows, and Patterns......Page 113
Table 3.1. Index of Average Wage of Exports......Page 121
Binding Constraints to Competitiveness......Page 126
Part II: Challenges and New Opportunities......Page 132
4. New Areas of Opportunities and Challenges......Page 134
Trade in Services......Page 135
Figure 4.1. Money & Quasi Money/GDP for Selected Countries......Page 139
Services in the Cariforum-EC Economic Partnership Agreement......Page 143
5. Capitalizing on a Changing International Environment......Page 146
Longer-term Trade Strategy and Challenges......Page 147
Managing Transitional Costs......Page 154
Alleviating Structural and Institutional Constraints on “Old? and “New? Opportunities......Page 158
Part III: Quantifying the Impact of Trade Reform on Growth, Job Creation, and Poverty......Page 160
6. Quantifying the Gains from Global Trade Integration?A Dynamic Macroeconomic Analysis......Page 162
Assessing the Gains from Trade: A Dynamic Multi-Country Analysis......Page 164
Assessing the Gains from Trade: A Dynamic Analysis for Jamaica......Page 176
Aid for Trade, Growth, and Poverty: A Dynamic Analysis for the Dominican Republic......Page 182
7. From Diagnosis to Policy Recommendations......Page 194
Reducing Macroeconomic and Fiscal Imbalances, and Investing in Trade Infrastructure......Page 195
Accelerating National Trade Policy Reforms and Improving Investment Incentives......Page 196
Adjusting to Preferences Erosion, Accelerating the Implementation of the CSME, and Using the EPA for Enhanced Competitiveness and Global Trade Integration......Page 197
Develop a Long-term Trade Strategy with a Focus on Increased Competitiveness and New Areas of Opportunities......Page 199
Reinforcing CARIFORUM Regional Institutions with a Focus on Implementation......Page 201
Implications for the Aid for Trade Agenda......Page 202
Appendix Tables......Page 204
Technical Appendixes......Page 302
A. Infrastructure, Trade, and Growth?Evidence and Implications for Trade Reform in the Caribbean......Page 304
B. Aid for Trade?Rationale and Implications for Trade Reform in Caribbean Countries......Page 314
C. Employment and Poverty Effects of Trade Reforms?Evidence and Policy Lessons for the Caribbean......Page 326
D. Key Characteristics of the CGE Models?GLOBE and Jamaican Models......Page 342
E. Structure of the Jamaican Economy......Page 348
F. SPAHD Models?Overall Structure and Links with Human Development Indicators......Page 354
References......Page 358
Table 1.2. Caribbean Economies: Inflation Rates, 1997?2006......Page 56
Table 1.4. Caribbean Economies: Current Account Balance, 1997?2006......Page 58
Table 1.5. Caribbean Economies: Overall Fiscal Balance, 1997?2006......Page 61
Table 1.6. Caribbean Economies: Public Sector External Debt, 1997?2006......Page 63
Table 1.7. Unemployment Rates in Selected Caribbean Countries, 2002?06......Page 64
Table 1.8. Selected Infrastructure Indicators of Caribbean Countries and Comparable Developing Countries, 2004?06......Page 69
Table 1.9. Logistic Performance Index Caribbean Countries and Comparable Developing Countries......Page 70
Table 1.10. Per Capita Consumption of Electric Power......Page 71
Table 1.11. Air Transport, Freight......Page 72
Table 2.1. CARICOM: CET and National Applied Tariffs in Selected Countries, 2003......Page 87
Figure 2.5. CARIFORUM Main Export Partners, 2001?06......Page 94
Table 2.3. Comparing the Frameworks: The EPA versus the Lomé/Cotonou Agreement......Page 102
Table 2.4. Caribbean Bilateral and Regional Trade Architecture......Page 104
Table 2.5. Financing of CARICOM Secretariat: Member State Contributions......Page 110
Table 3.2. The Similarity between Caribbean Export and Partners’ Imports......Page 125
Table 3.3. The Similarity between Caribbean Exports and Partners’ Exports......Page 127
Table 3.4. Average Tariffs in the Caribbean......Page 129
Table 4.1. Trade in Services Contribution to GDP and Exports in CARIFORUM......Page 136
Table 4.2. Tourism Contribution to CARICOM Countries......Page 137
Table 5.1. Doing Business: Selected Indicators Caribbean and Comparable Developing Countries......Page 149
Table 6.2. Experiments Description in the GLOBE Model, CARIFORUM......Page 166
Table 6.3. Summary of Experiments: CARIFORUM Duties on EU Imports......Page 168
Table 6.5. Aggregate Results with Balanced Macro, Factor Tax Adjustment, Unemployed Unskilled Labor......Page 169
Table 6.6. CARIFORUM Imports from the United States for GLOBE Model Experiments......Page 170
Table 6.7. CARIFORUM Imports from the EU15 for GLOBE Model Experiments......Page 171
Table 6.8. Gross Output by Sector CARIFORUM for GLOBE Model Experiments......Page 172
Table 6.10. Experiments Description in the Jamaica model......Page 175
Table 6.12. Aggregate Real Imports and Exports by Region......Page 177
Table 6.14. Gross Output by Sector, Jamaica CGE Model......Page 178
Table 6.16. Macro Results, Trade Diversion Scenarios, Jamaica Model......Page 180
Table 6.17. Aggregate Real Imports and Exports by Region......Page 181
Table 6.18. Dominican Republic Human Development Indicators, 2008?20 Baseline Scenario......Page 185
Table 6.19. Tariff Loss Compensated by Higher Indirect Taxes?Deviations from Baseline, 2008?20......Page 187
Table 6.20. Aid as a Temporary Compensation Scheme?Deviations from Baseline, 2008?20......Page 188
Table 6.21. Aid Increase Goes to Public Investment?Deviations from Baseline, 2008?20......Page 190
Table 6.22. Aid Increase Goes to Public Infrastructure Investment?Deviations from Baseline, 2008?20......Page 191
Table A1. Caribbean Economies, Real GDP Growth, 1997?2006......Page 205
Table A2. Caribbean Economies, Inflation Rates, 1997?2006......Page 206
Table A3. Caribbean Economies, Merchandise Trade Balance in Percent of GDP, 1997?2006......Page 207
Table A4. Caribbean Economies. Current Account Balance, 1997?2006......Page 208
Table A5. Caribbean Economies, Public Sector External Debt, 1997?2006......Page 209
Table A6. Caribbean Economies, Structure of Public Finance, 1997?2006......Page 210
Table A7. Regional Export Shares by Commodity: CARIFORUM Reference Equilibrium......Page 218
Table A8. Regional Import Shares by Commodity: CARIFORUM Reference Equilibrium......Page 219
Table A9. Private Consumption by Commodity CARIFORUM for GLOBE Model Experiments......Page 220
Table A10. Total Exports by Sector CARIFORUM for GLOBE Model Experiments......Page 221
Table A11. CARIFORUM Exports by Region of Destination for GLOBE Model Experiments......Page 222
Table A12. CARIFORUM Exports by Region of Destination for GLOBE model Experiments......Page 223
Table A13. Schematic Summary of Experiments: CARIFORUM Duties on EU Imports......Page 224
Table A14. Schematic Summary of Experiments: EU Duties on CARIFORUM Imports......Page 225
Table A15. Macro Results for GLOBE Model Experiments......Page 226
Table A16. Gross Output by Sector CARIFORUM for GLOBE Model Experiments......Page 227
Table A17. Total Exports by Sector CARIFORUM for GLOBE Model Experiments......Page 229
Table A18. Total Imports by Sector CARIFORUM for GLOBE Model Experiments......Page 231
Table A19. CARIFORUM Imports by Region of Origin for GLOBE Model Experiments......Page 233
Table A20. CARIFORUM Imports by Region of Origin for GLOBE Model Experiments......Page 235
Table A21. CARIFORUM Exports by Region of Destination for GLOBE Model Experiments......Page 237
Table A22. CARIFORUM Exports by Region of Destination for GLOBE Model Experiments......Page 239
Table A23. Macro Results for GLOBE Model Experiments......Page 241
Table A24. Gross Output by Sector CARIFORUM for GLOBE Model Experiments......Page 242
Table A25. Total Exports by Sector CARIFORUM for GLOBE Model Experiments......Page 244
Table A26. Total Imports by Sector CARIFORUM for GLOBE Model Experiments......Page 246
Table A27. CARIFORUM Imports by Region of Origin for GLOBE Model Experiments......Page 248
Table A28. CARIFORUM Imports by Region of Origin for GLOBE Model Experiments......Page 250
Table A29. CARIFORUM Exports by Region of Destination for GLOBE Model Experiments......Page 252
Table A30. CARIFORUM Exports by Region of Destination for GLOBE Model Experiments......Page 255
Table A31. Macro Results for GLOBE Model Experiments......Page 256
Table A32. CARIFORUM Imports by Region of Origin for GLOBE Model Experiments......Page 257
Table A33. CARIFORUM Imports by Region of Origin for GLOBE Model Experiments......Page 258
Table A34. Gross Output by Sector CARIFORUM for GLOBE Model Experiments......Page 259
Table A35. Total Exports by Sector CARIFORUM for GLOBE Model Experiments......Page 260
Table A36. CARIFORUM Exports by Region of Destination for GLOBE Model Experiments......Page 261
Table A37. CARIFORUM Exports by Region of Destination for GLOBE Model Experiments......Page 262
Table A38. Private Consumption by Sector CARIFORUM for GLOBE Model Experiments......Page 263
Table A39. Aggregate Results with Balanced Macro, Factor Tax Adjustment, Unemployed Unskilled Labor......Page 264
Table A40. CARIFORUM Imports by Region of Origin for GLOBE Model Experiments......Page 265
Table A41. CARIFORUM Imports by Region of Origin for GLOBE Model Experiments......Page 266
Table A42. Gross Output by Sector CARIFORUM for GLOBE Model Experiments......Page 267
Table A43. Total Exports by Sector CARIFORUM for GLOBE Model Experiments......Page 268
Table A44. CARIFORUM Exports by Region of Destination for GLOBE Model Experiments......Page 269
Table A45. CARIFORUM Exports by Region of Destination for GLOBE Model Experiments......Page 270
Table A46. Private Consumption by Sector CARIFORUM for GLOBE Model Experiments......Page 271
Table A47. Structural Shares by Commodity: Jamaica Base 2000......Page 272
Table A48. Regional Export Shares by Commodity: Jamaica Base 2000......Page 273
Table A49. Regional Import Shares by Commodity: Jamaica Base 2000......Page 274
Table A50. Factor Shares within Sector: Jamaica Base 2000......Page 275
Table A51. Dominican Republic Human Development Indicators, 2007?20, Baseline Scenario......Page 276
Table A52. Tariff Loss Compensated by Higher Indirect Taxes?Deviations from Baseline, 2008?20......Page 278
Table A53. Aid as a Temporary Compensation Scheme?Deviations from Baseline, 2008?20......Page 282
Table A54. Aid Increase Goes to Public Infrastructure Investment?Deviations from Baseline, 2008?20......Page 286
Table A55. Aid Increase Goes to Public Infrastructure Investment?Deviations from Baseline, 2008?20......Page 290
Table A56. Aid Sustained Longer to Public Investment?Deviations from Baseline, 2008?20......Page 294
Table A57. Aid Sustained Longer to Public Infrastructure Investment?Deviations from Baseline, 2008?20......Page 298
Table A58. Labor Force that has Migrated to OECD Countries and the USA by Level of Schooling, 2000......Page 334
Table A59. Characteristics of Labor Market Regulation for the English Speaking Caribbean in the 1990s......Page 335
Table A60. Jamaica: Indicators of Labor Market Rigidity......Page 337
Table A61. Caribbean: Unemployment Rates in Selected Countries 2002?06......Page 338
Table A62. OECS Countries: Poverty Estimates......Page 339
Figure A1. Dominican Republic: Evolution of Poverty Rates, 2000?06......Page 340
Table A64. Sectors, Factors and Regions in the Jamaica Country CGE Model......Page 347
Table A65. Structural Shares by Commodity: Jamaica Base 2000......Page 349
Table A66. Regional Export Shares by Commodity: Jamaica Base 2000......Page 350
Table A67. Regional Import Shares by Commodity: Jamaica Base 2000......Page 351
Table A68. Factor Shares within Sector: Jamaica Base 2000......Page 352
Figure 2.2. Intra-Caricom Export Growth......Page 83
Figure 2.4. Trade in Services, 2005......Page 93
Figure 2.6. Principal Exports to the EU, 1999 versus 2006......Page 98
Figure 2.7. Principal Exports to the USA, 1999 versus 2006......Page 105
Figure 3.1. Merchandise Export Performance in the Caribbean, 1995?2006......Page 114
Figure 3.3. Export Indices for the Caribbean, Central America, and South America, 1995?2006......Page 115
Figure 3.4. Merchandise Import Performance in the Caribbean, 1995?2006......Page 116
Figure 3.5. CARICOM: Sector Composition of Exports, 1995 and 2006......Page 117
Figure 3.8. Principal Exports to the USA, 1999 versus 2006......Page 118
Figure 3.10. Caribbean Exports Plus Imports, 1980?2006......Page 122
Figure 3.11. Misalignment and Merchandise Export Growth......Page 128
Figure 3.12. Misalignment and Manufacturing Export Growth......Page 130
Figure 4.2. Quasi Money/GDP for Selected Countries......Page 140
Box 1. Effects of the Financial Crisis on Trade and Economic Growth in the Caribbean......Page 57
Box 2. Infrastructure, Trade and Growth: Linkages and Implications for the Trade Agenda of Caribbean Countries......Page 73
Box 3. History of Regional Integration in the Caribbean: Key Dates and Developments......Page 81
Box 4. Aid for Trade: Rationale and Implications for Trade Reform in the Caribbean......Page 100
Box 5. Principal Organs and Bodies of CARICOM......Page 108
Box 6. Financial Services in Trinidad and Tobago: Leveraging the RegionalMarket to Succeed......Page 142