BY NOW, everyone who reads my articles would know that I have always been a gigantic enthusiast of regional integration because there is no other better option for increasing economic prosperity in the Caribbean. I maintain that our countries could have been much advanced economically had we done more to facilitate deeper integration among ourselves dating back to the 1970s. That strong belief, coupled with a conversation I had with a dear friend and colleague two weeks ago in Grenada, provides the motivation for this week’s contribution.
My friend asked whether I was able to operate a motor vehicle in Grenada using my Barbados driver’s licence. I said fortunately the government of Grenada recently passed legislation allowing holders of driver’s licences from other CARICOM countries to operate motor vehicles there.
The conversation went to a much wider discussion about the free movement of goods, services and people from one country to another within the context of the CARICOM Single Market and Economy (CSME). My colleague wanted to know: Why do CARICOM citizens still have to clear Immigration and Customs when moving from one country to the next? He observed that anyone travelling from, say, Miami to New York simply collects his bags on arrival in New York and heads straight to the taxi stand for transportation to his residence. Why are duties imposed on goods bought in one CARICOM country and brought to another? My response was the governments need tax revenue to pay wages and salaries as well as to facilitate the purchase of goods and services, meet various obligations to statutory bodies and cover interests due on debts.
When it comes to import duties, we in CARICOM could do much better if we allow sufficient time for careful thinking.
You see, one of the static gains from regional integration is that of trade creation. Take the case of a Jamaican student who has just completed her studies at the Cave Hill Campus of the University of the West Indies and is about to return home. Imagined now, that the student can buy all sorts of goods in Barbados and takes them back to Jamaica with her with the full knowledge that she pays absolutely no import duties in Jamaica. That scenario results clearly in trade creation between Barbados and Jamaica. More important, that Jamaican student is supporting employment and production in Barbados.
There are Barbadian students studying in Jamaica as well. If they too, purchase goods in Jamaica and transport them to Barbados without having to face exorbitant import duties, then, they would be creating trade between Jamaica and Barbados and hence supporting employment and production in Jamaica. The question that arises, therefore, is: If all the countries in CARICOM, as part of the CSME, completely remove duties and other charges on goods imported from one country to another how much trade will be created among the countries? Will governments’ gain or lose current revenue?
In the absence of empirical data, it is not too farfetched to surmise that our governments can potentially benefit much more in terms of revenues because of gains in taxes on domestic transactions as well as from personal income taxes since more people will be employed in the local economies and domestic production will rise in accordance with higher demands as a result of trade creation. Why then do we focus so much on the loss of revenue if import duties are removed?
Accordingly, there is a good chance we could experience increasing economic prosperity in the Caribbean by simply promoting deeper integration among our various countries. Do you get my drift?
Email: bfrancis@uwi.edu.bb
