EDITORIAL: Strengthen ties with more states
LAST week Economist Jeremy Stephen advised that it is time the Caribbean look to pursue economic relations with Asia, which is gradually emerging as the new power in the global economy. To support his position the Economist stated that the top ten leading banks in the world are from Asia. He did not mentioned the fact that China is now the world’s second largest economy behind the United States, or that a new global financial institution that many see as a rival to the World Bank and the International Monetary Fund, has been created in China. That institution is attracting membership from Europe and South America. Former Prime Minister Owen Arthur has suggested that this country tie its dollar to a basket of currencies just as another Asian country, Singapore, has done, so as to aim for monetary and financial stability. Yesterday Pakistan, an Asian country, won the ICC Champions Trophy by defeating India, another Asian country in the finals at the Oval in London. Australia, New Zealand and England were nowhere to be found as they exited the tournament.
Stephen’s point about improved economic relations with Asia makes a lot of sense, assuming Barbados in particular is keen to do so. This recommendation has been put forward time and time again, especially given the fallout this region experienced from the global economic meltdown. When analysed, China and other Asian countries were spared the full fury of the crisis, as were a number of Latin American countries and our own neighbour Guyana. The reason these countries (Latin America, and Guyana to some extent) did not suffer any large scale fallout from the crisis was a result of their business relations with Asia. The other economies of the Caribbean, Barbados included, were hit hard because their traditional trading partners – the United States, Canada, the UK and Europe – experienced contagion from the crisis, which was started in the United States. Therefore, the saying ‘when the USA sneezes the Caribbean catches a cold or gets pneumonia’, was very evident since 2008.
We depend on the US for tourism, international business, a market for our exports, investment flows, and remittances. In an environment where those North Atlantic economies were tottering, they were unable to offer their Caribbean trading partners all of the above. Instead, they resorted to a programme of targeting their attention on the offshore business and financial services which these islands have been promoting, alleging that they were engaged in harmful taxation practices and were not cooperating with the global regulatory practices. The latest fad is de-risking and the withdrawal of correspondent banking services to this region. Based on what Stephen and others have said, the Caribbean now has to look to diversify their economic relations. It is not being suggested that they abandon ties with their traditional North Atlantic partners but to broaden their relations with other states in Asia, Latin America and, where possible, some of the African states. This has to be the game plan going forward. For Barbados, all the bilateral investment treaties it has in place with China, Panama, Botswana and other territories must be put to work. The future is challenging and we have to act with haste or be left behind.