EDITORIAL: Coping in a tough environment
THE world has certainly become an unstable place for small Caribbean islands to do business. When the globalization train was moving along, the messages were very clear: integration of markets, integration of production, free and better trade relationships, offered benefits. This is no longer the case as the world has become a more dangerous place. How small states cope with this reality remains to be seen.
On Thursday night, Dr. Linda Tesar of the University of Michigan touched on a point we in this region have been noticing. It has to do with multilateralism, which has brought enormous prosperity to countries around the world. However, she said it is gradually giving way to bilateralism, which is not good.
The current trade war between the United States and China continues to raise alarms about what can happen to the free trade agenda that the World Trade Organisation has been pushing since its establishment in the mid-1990s. Brexit, which stands for the UK’s departure from the European Union, is at a standstill following the announcement last week that British Prime Minister Theresa May is stepping down. In the meantime, tensions in the Middle East, one of the hot spots around the world, are growing between the United States and Iran, at the same time that Venezuela remains in crisis.
Small states want to see a global environment that is conducive to their economic space and from which they are able to extract benefits, be they trade, investment, and other opportunities that are vital for their survival. These countries have put their faith in the multilateral process and in particular the World Trade Organisation where their quest for trade is discussed, and given maximum consideration.
However, it is very unlikely that they stand a chance of having their interest looked after in the present circumstances. The trade war between China and the USA could have a negative impact on the economies of small states. They will face higher prices once the tit-for-tat between the two global powerhouses continues to play out. The tensions in the Middle East also have implications for higher oil prices and the resulting negatives for their economies. It will be recalled that the oil shocks of the early 1970s, the early 1980s, and the global crisis of 2008/2009, hit these countries very hard. The latter was raised last week by Governor of the Central Bank of Barbados, Cleviston Haynes. He acknowledged the difficult situation the increase in oil prices from under US$100 a barrel to almost US$150 a barrel in 2008 presented for Barbados. While oil prices have been trending upward in recent months, the USA-Iran controversy, should it get out of hand, is likely to raise prices even faster.
As for Brexit, the Caribbean will have to wait a bit longer to gauge what will be the strategy for a successor to Mrs. May and how responsive the European Union (EU) will be to that strategy.
Up to now, the Caribbean has not come up with measures to deal with a UK that is not part of the EU. Like all of the other issues raised here, there is no time to fool around. We have to act and do so fast and decisively.