A Proposal for a Comprehensive Economic and Trade Agreement between CARICOM And China

Executive Summary

(Full Report available here)

States must adapt to the changing circumstances to ensure their continued development as power shifts in an increasingly multipolar world. Globalisation has made States more interdependent, particularly economically, as institutions such as the World Trade Organization (WTO) have promoted and facilitated a rules-based free trade system. Smaller States, such as CARICOM, have become increasingly reliant on international trade to develop their nations given trade’s importance to a State’s development. However, over the years, CARICOM States’ trade performance has decreased for a myriad of reasons. Aside from having poor direct investment inflows and contending with increasing global competition, a large part of this decrease is due to CARICOM States’ dependence on their long-standing trading relationships with Europe and the United States of America (USA).

The East Asian market constitutes approximately 60% of the world’s consumers and is deemed one of the fastest-growing regions in the world, thus it has been highlighted as a potential region for CARICOM States to diversify their export markets. China is the largest of the entities that comprise the East Asian market. It is the world’s largest trading nation and has growing influence because of its economic prowess. Given China’s growing dominance and the erosion of the trading relationship between CARICOM and its traditional partners – Europe and the USA – it is essential to explore the possibility of engaging in deeper multilateral economic relations with China. Consequently, this memorandum seeks to map and analyse CARICOM and China’s economic relationship to propose a CETA.

The purpose of this memorandum is to analyse the economic relationship between the Caribbean Community (CARICOM) and China with a proposal for the creation of a Comprehensive Economic and Trade Agreement (CETA) between the two Parties. This proposal takes into account the Parties’ trade objectives and their economic relationship, including current economic arrangements between several CARICOM States and China and trading patterns in both goods and services between the Parties. It also examines current Chinese agreements with comparator States such as Costa Rica, Iceland and Mauritius. Additionally, this proposal identifies the possible political ramifications and risks for CARICOM States in creating a CETA. In formulating the proposed CETA, this memorandum was laid out in the following way:

Chapter 1 introduces the Parties: CARICOM and China and examines their place in the global economy and their interests in each other and the possible sectors for trade liberalisation.

Chapter 2 lays out the trade objectives of the Parties and identifies key values and points of focus. The similarities in the policies of the two parties are examined so that possible areas of partnership and the type of relationship that the parties can have may be determined.

Chapter 3 examines the trade, investment and economic trade agreements between CARICOM and China such as the double taxation treaties (DTT), the bilateral investment treaties (BITs) and the Belt and Road Initiative (BRI). This chapter also looks at the impact of Chinese investment and shows that the relationship between the two Parties appears to be predominantly through loans and grant funding but argues there is also the existence of high trade potential between the Parties.

Chapter 4 analyses the current trading relationship between the Parties as well as of the trade relationship of the Parties as compared to the traditional CARICOM trading partners and considers implications of the current trade relationship between CARICOM and China.

Chapter 5 look at trade arrangements between China and comparator States such as Costa Rica, Iceland and Mauritius with the aim of understanding the possible trade impacts of entering into an economic and trade agreement with China. Ultimately, this chapter seeks to provide insight into the provisions and measures that CARICOM should consider for the CETA.

Chapter 6 discusses the proposed CETA. This chapter demonstrates that the CETA is largely an amalgamation of international treaties such as free trade agreements (FTAs) and international investment agreements (IIAs) while encompassing aspects of economic sustainability and shows the importance of this combination for the creation of a more substantive agreement. This chapter also uses the analyses from previous chapters to discuss possible markets for exploration such as construction, e-commerce, energy, financial services and tourism. Lastly, the chapter includes proposed provisions for the CETA with a discussion on both general and specialised clauses.

Chapter 7 details pertinent external considerations that entering into such an agreement with China would entail. This includes an examination of the possible shift in political relationships, the depletion of CARICOM States’ national resources, the conditions that may be attached to being party to this CETA and the possibility of a breakdown in regional integration as well the possible erosion of integration efforts.

Chapter 8 concludes by summarising the findings of this project and notes that it can be used to realise and readjust CARICOM’s trade relationships with other States.

Full Report available here.