Global Policy Forum

Eastern Economic Union Takes Shape


By Peter Ischyrion

Inter Press Service
February 6, 2007

Their history of cooperation is well established. Even before they signed the Treaty of Basseterre in 1981, the seven islands of the Eastern Caribbean had been pooling their economic and political resources and institutions, creating their own common market, currency and judiciary.

These islands have always regarded such formal arrangements as necessary to push forward development efforts, particularly after gaining political independence from Britain. Now comprising nine islands, the Organisation of Eastern Caribbean States (OECS) is preparing to enter into a new era of political, economic and financial cooperation in the form of an economic union, hoping that the new venture will help them better respond to changes in the global environment.

"It is serious work in progress and we have set about how we are going to go about doing it. The framework is quite in place," said Baldwin Spencer, the prime minister of Antigua and Barbuda. The OECS leaders say that the very small physical and population sizes of their countries, juxtaposed against the high expectations of their citizens and the context of liberal democratic systems with multiparty politics, pose particular challenges.

They believe that the inevitability of broader regional integration and international liberalisation and globalisation would seem on the surface to compound the challenges. The governor of the Eastern Caribbean Central Bank (ECCB), Sir Dwight Venner, says the economies of the OECS islands "are highly open and vulnerable and therefore need to respond to these circumstances by setting policies which take this as a given."

"Closer integration arrangements will lead to improved economies of scale in production, distribution, marketing and administration," he said. "They will allow for improved negotiating capacity between the currency union and third countries or groups of countries. They will lower and mitigate risks across a wide range of activities and events ranging from banking and insurance crises to external shocks and natural disasters."

Last year, the economies of the OECS grew by 7.1 percent, one of the highest growth rates in recent times. The upturn in economic performance followed an average six percent in the 1980s, dropping to three percent in the 1990s before declining even further afterwards. The ECCB said that several factors, including a weakened United States dollar to which the OECS currency is pegged, accounted for the improved economic position in 2006.

The U.S. dollar had also weakened against the Euro and the British Pound Sterling, making exports, and particularly tourism, more competitive. But despite the growth and the favourable conditions, the increase in the price of oil and non-U.S. imports led to an increase in domestic prices.

Last week, the OECS countries hosted a one-day "Open for Business Forum" in Trinidad, reminding potential investors from the wider regional community that the sub-region has a "strong tradition of economic stability, successful economic integration and good governance", and the potential for continued growth.

The sub-region has also strengthened its money and capital markets, launching the Eastern Caribbean Securities Market (ECSM) in 2001. Chief executive officer of the Royal Bank of Trinidad and Tobago, one of the largest financial institutions in the oil-rich republic, said the creation of the ECSM "has positively impacted the regional integration movement by seamlessly linking the markets of the member states".

The decision to establish the economic union was taken by the OECS leaders at their summit in 2001 and work has been ongoing regarding the new arrangements to replace the Treaty of Basseterre. The leaders of Antigua and Barbuda, Dominica, Grenada, St. Lucia, St. Vincent and the Grenadines, Montserrat, St. Kitts-Nevis, Anguilla and the British Virgin Islands have already endorsed a proposal to proceed with public consultations and discussions on the draft economic union treaty.

"Such consultations are to encompass all segments of the OECS public, including the parliamentary opposition in each member state," Spencer said. Three of the nine-member grouping --Montserrat, Anguilla and the British Virgin Islands -- are still dependent territories of Britain and the OECS leaders have said there is need for "urgent and further dialogue" to determine how the three can accede to membership.

At their summit, the leaders received a refined version of the draft OECS Economic Union Treaty from the Task Force on Economic Union, chaired by Venner. The amendments included a provision for the establishment of a Regional Assembly of Parliamentarians (RSP) to act as a legislative filtre under the proposed governance structure that would now comprise the OECS leaders, the Council of Ministers, the Economic Affairs Council and the Eastern Caribbean Commission.

At their next meeting in May, the sub-regional leaders should have before them a proposal outlining the cost of an OECS Economic Union Unit that would be patterned after the stand-alone Caribbean Community (Caricom) Single Market and Economy (CSME) Unit set up by the wider regional grouping Caricom to drive the CSME process. The OECS countries have downplayed suggestions that their planned economic union would be in conflict with the efforts by Caricom, of which they are part, to get the CSME, allowing for the free movement of goods, skills, labour and services across the region, on the road by 2008.

Dominica's Foreign Affairs Minister Charles Savarin said the two processes were in no way contradictory neither is it a case of unnecessary duplication. He said while OECS states remain very committed to the CSME, they still needed to safeguard their own special interests. "What is good for Trinidad is not necessarily good for Antigua, What is good for Dominica... Jamaica may have a different opinion as to where Jamaica's interest lies. So I think it is important that we can pool our interests together and give us the ability to be able to represent those interests more forcefully within the Caricom organisation," he added. Venner agrees, saying that the OECS economic integration should serve as a model not just for Caricom, but indeed the rest of the world to follow.

"There are things that we are doing there that are very interesting not only to ourselves but the international community," he said noting that over the last six months, the World Bank has been conducting studies of the OECS, including one on the OECS court system which has been in existence for 40 years. "Because you see in these things some very viable arrangements [that] can be transported to other small states. So we are already experiencing something here," he said.

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