Trade Liberalization and Peripheral Postindustrialization
in the Caribbean.
Latin American Politics &
Spring2001, Vol. 43 Issue 1, p57, 21p
Examines trade liberalization and peripheral postindustrialization
in the Caribbean. Caribbean approach to trade liberalization;
Economic restructuring through peripheral postindustrialization;
Alternative view of economic restructuring.
In the 1990s, trade liberalization eroded the
competitiveness of Caribbean economies as manufacturing
export platforms. Proposed new economic strategies favored a shift from
vertically integrated, transnationally based segment
manufacturing to segments of knowledge-intensive industries and services. This
strategy, however, reproduces the economic asymmetries associated with the
core-periphery relation (low wages, value-added rates). Postindustrial
technologies and economic strategies provide the opportunity to formulate
alternative policies to overcome the shortcomings of peripheral postindustrialization and foster sustainable postindustrial
we direct our Ministers responsible for trade to begin negotiations for the
FTAA, in accordance with the March 1998 Ministerial Declaration of San Jose. We
reaffirm our determination to conclude the negotiation of the FTAA no later
than 2005 .... The FTAA agreement will be balanced, comprehensive,
WTO-consistent and constitute a single undertaking.
Declaration of Santiago Summit
the Americas April 19, 1998
Heads of State and Government of the Caribbean Forum of ACP States
(CARIFORUM)... reiterated their determination actively to participate in the
negotiations for the establishment of the Free Trade Area of the Americas, in order to ensure the incorporation of the
interest of smaller economies and their full participation in the process ... .
The Statement of Santo
First CARIFORUM Summit
August 22, 1998
Over the past two decades, neoliberal views on economic
policy have acquired increasing prominence throughout the world. Market fun damentalism, the notion of the superior efficiency,
rationality, and dynamism of the private entrepreneur and the marketplace, has
become the dominant Weltanschauung among economic development experts and
policymakers. This shift in the development paradigm has resulted in the
regional, subregional, and supraregional proposals of trade liberalization that move
away from state-directed development strategies in favor of market-centered
ones (Dietz and Pantojas-Garcia 1994, 19).
The adoption in the North of, first, the Canada-United
States Free Trade Agreement (CUFTA), and later the North American Free Trade
Agreement (NAFTA) has been shadowed by a number of regional and subregional initiatives of trade liberalization in the
southern Western Hemisphere (Aponte-Garcia and Alvarez-Swihart 1998; BID 1999, 42, 46-59). The creation of
MERCOSUR, grouping Argentina, Brazil, Uruguay, and Paraguay; the reactivation
of the Central American Common Market and the Andean Group; and the
proliferation of bilateral framework agreements throughout Latin America are
referred to by some experts as the spaghetti bowl effect of Northern trade
In the Caribbean, initial responses
to NAFTA took the form of asking the U.S. Congress to approve legislation
providing trade parity with Mexico
for the region.(n1) On March 18, 1993, the Caribbean Basin Free Trade Agreements
Act (HR 1403) was introduced in Congress to "ensure that the Caribbean
Basin Initiative [was] not adversely affected by the implementation the
NAFTA" and to provide for "fast-track" approval for free trade
agreements between the United
States and certain Caribbean
Other regional initiatives included the creation of the
Association of Caribbean States (ACS) in 1994 (with strong support by the Group
of Three--Mexico, Colombia, and Venezuela--the Central American Common Market,
and CARICOM); the proposal for a CARICOM single market, following the
recommendations from the West Indian Commission (1994,506); and the creation of
CARIFORUM in 1998. These are further examples of the scramble to find a
stronger bargaining position in the new politicoeconomic
milieu created by the adoption of transnational economic framework agreements
for liberalizing trade or free trade agreements (FTAs).
At first glance, the plethora of acronyms for new
organizations, agreements, symposia, and summits prompted by the triumph of
neoliberalism looks more like an alphabet soup than the framework for a new
economic order. Yet that framework is real. The first hemispheric call for a
Free Trade Area of the Americas (FTAA) in the 1994 Summit of the Americas
Declaration of Principles (Summit of the Americas 1994) led to the
intensification of discussions among Caribbean
political and business leaders on alternatives for horizontal Caribbean
integration to prepare for the process of hemispheric integration (Ceara-Hatton 1997, 1998). The reaffirmation of the goal of
hemispheric free trade by the year 2005 at the 1998 Summit of the Americas in
Santiago, Chile, calls for an analysis of the implications of adopting further
economic liberalization policies for the
small economies of the Caribbean and
of the region's role in the new hemispheric division of labor. The type of
analysis needed now is one that will help assess emerging scenarios from a new
perspective, given these changing realities.
This essay examines the evolution and impact of neoliberal
economic policies in the Caribbean economies from the enactment of the
Caribbean Basin Initiative (CBI) and the adoption of structural adjustment
policies in the 1980s to the proposals building up to the formation of an FTAA.
More concretely, it analyzes the process of economic restructuring that the
region is undergoing from manufacturing export platforms to peripheral
postindustrial sites. The later sections of this article examine alternative views
and policies for economic restructuring based on postindustrial activities, the
implications for the region of the normalization of trade relations between China
and the United States,
and the conflicts around the World Trade Organization negotiations on trade
is defined as the process in which the axis of economic growth shifts from transnationally based, vertically integrated segments of
manufacturing to transnationally based, vertically
integrated segments of knowledge-intensive industries and services. The notion
of periphery is alien to the literature on postindustrialization.
It comes from the field of development economics, and is anchored in Raul Prebisch's view of deteriorating terms of trade for primary
products traded between underdeveloped (agrarian) and developed
(industrialized) countries. "Dependency" theorists in the 1970s
extended the coreperiphery dichotomy to refer, in
general, to economic relations based on unequal exchange between countries. In
its initial formulation, the core-periphery view emphasized the geographical
basis of the dichotomy of developed versus underdeveloped countries; for
example, first versus third worlds (Rodriguez 1980; Love 1980; Negron-Diaz
The process of economic liberalization and corporate
intermingling on a global scale taking place today makes it difficult to speak
of national economies or countries as the principal actors of the world
economy. Still, it can be argued that the core-periphery relation continues in
the global economy; only now, instead of referring mainly to a geographical
distribution of the core and the periphery, it can be conceptualized in terms
of core versus peripheral circuits of transnational capital. In the new
globalized and liberalized economy, transnational conglomerates or
transnational megacorporations (acting as global
information and financial networks for multiple production companies) have
emerged as the main actors driving the dynamic circuits or vertical chains of
global production, trade, investment, and finance. These "core" mega-TNCs are behind the emerging movement to liberalize all
trade in goods and services on a global scale.
TNCs, however, continue to operate
in a geographical framework that privileges "developed" countries. In
1995, of a total of 44,508 parent corporations based in countries throughout
the world, 36,380, or 82 percent, were based in developed countries. Of the top
100 TNCs in the world, 87 were based in the United
States, the European Union, or Japan.
Only two of these, Daewoo Corporation of South
Korea and Petroleos
de Venezuela S.A.,
operated in "newly industrializing countries." These top 100 TNCs control one-fifth of the world's assets (UNCTAD 1997,
128-29, 134-37). TNCs are stratified, moreover, and
not all operate within the new financial core of the global economy.
THE CARIBBEAN ROAD
TO TRADE LIBERALIZATION
In the 1980s, Caribbean policymakers
and entrepreneurs adopted a set of economic policies that effected a shift from
state-directed to market-oriented development strategies. Knowingly or not,
however, these market-centered policies were anchored in preferential treatment
of Caribbean commodities by developed countries, not in
the principles of market fundamentalism. The preferential regimes driving
economic development in the 1980s started with the launching of the CBI,
enacted by the signing of the Caribbean Basin Economic Recovery Act in August
1983. This measure was followed by Lome III in
December 1984 and CARIBCAN (Canadian Programs for Commonwealth Caribbean Trade,
Investment and Industrial Cooperation) in 1986.
agreements were framed in the structural adjustment package known as the Nassau
Understanding, signed by CARICOM leaders in July 1984, and enveloped in a heavy
rhetoric of market fundamentalism. History demonstrates, however, that these
measures constituted a neoprotectionist package that
provided preferential market access for selected Caribbean
commodities to the United States,
Canada, and Europe.
These preferential regimes, especially the CBI, fostered a process of economic
restructuring centered on labor- and import-intensive, export-processing
industries, known as maquiladoras.
operations, with limited production linkages to the domestic economy,
multiplied in newly established free trade zones (FTZs)
that Caribbean Basin
governments created, often with private sector assistance. Among the products
that benefited most from the CBI and these new offshore sourcing arrangements
were light manufactures (electrical machines, sporting goods, furniture) and agroindustrials (frozen fruits and vegetables, fruit
juices, and preserved fruits) (USITC 1992, chap. 3).
The CBI, however, did not cover the category of light
manufacturing that grew fastest: apparel. The rapid growth in apparel assembly
was fueled by another U.S.
special preference program passed in 1986, known as the GAL (Guaranteed Access
Level program, or "807a," for its section in the U.S. Customs Code).
The GAL ensured unrestricted access to the U.S. market for apparel assembled in
the Caribbean Basin originating from fabric made and cut in the United States.
Under this program, exports of assembled apparel from the Caribbean
to the United States
more than doubled in only four years, from $1,125.4 million in 1987 to $2,589.6
million in 1991, an annual growth rate of 23.2 percent. By 1995,
"807" exports to the United States
had risen to $5,544.6 million, an annual growth rate since 1991 of 21 percent
(USITC 1996, table 6).
Still, despite growth in particular industries, the early
impact of these preferential regimes on export production in the Caribbean
Basin was disappointing to
policymakers in both the region and the United
States. Between 1984 and 1988, exports from
CBI beneficiary countries to the United States
declined from $8.9 billion to $6.2 billion. Exports moved up to $8.4 billion in
1991, but this was partly from the addition of Guyana
to the list of CBI countries in 1988. In the short run, the CBI-induced exports
did not compensate for the decline in traditional exports. Although by 1994, Caribbean
Basin exports to the United
States had reached $12.2 billion, more than
one-third of this total, $4.6 billion, was in assembled apparel (figures from
the U.S. Department of Commerce). The value-added content of these assembled
products averaged 25 percent or less. Hence, the foreign exchange earnings of
the new industries were estimated to be less than those of traditional
agricultural exports (GAO 1988, 22-23).
Until the adoption of structural adjustment policies and the
enactment of the CBI and the GAL, U.S. manufacturers considered Caribbean
countries (with the exception of Haiti and the Dominican Republic) to be
relatively high-cost producers because of their high levels of unionization,
comparatively high wage rates, and high transportation costs. The CBI-GAL trade
preferences were designed to allow Caribbean-based manufacturers to establish
operations that could compete in the U.S.
market with Asian- and Mexican-based manufacturers. By 1994, a group of
researchers studying the global chain of apparel production described a
production "triangle" for Asian and American corporations in which
the Caribbean was one of the key axes (Bonacich 1994, 3-4; Bonacich and
Waller 1994, 21-41). But the CBI-GAL regime was shortlived.
The enactment of NAFTA, just ten years after the CBI, re-established the
comparative disadvantages of the Caribbean compared to Mexico
as a maquila-type
In the short run, Mexico's
low wages and proximity to the United States,
combined with NAFTA's duty-free treatment, seemed to
provide a nearly insurmountable competitive advantage for Mexico
over Caribbean production locations. In the textile and
apparel industry in particular, freer market access under NAFTA caused the
value of Mexican textile and apparel exports to the United
States to grow exponentially, while the
combined value of the four larger Caribbean exporters
sagged. In the first two years after NAFTA began (1994-96), the value of Mexican
textile and apparel exports to the United States
grew by 123 percent, while the combined exports of the Dominican
St. Lucia, and Haiti
grew by only 14 percent. Exports from the Dominican
Republic, the single largest Caribbean
exporter to the United States,
grew by only 12 percent in this period. In the three-year period previous to
NAFTA, 1992-94, the growth rates for these exports were 70 percent for Mexico,
54 percent for Jamaica,
and 29 percent for the Dominican Republic,
with an overall growth of 29 percent for the Caribbean
four. The volume of exports followed a similar pattern (USITC 1996; unpublished
1996 figures from the U.S. International Trade Commission).
In addition to NAFTA, the Central American peace process has
demonstrated that under equal competitive preferences (the CBI and the GAL),
other countries in the hemisphere are more competitive export platforms than
the countries of the insular Caribbean. Between 1994 and
1996, the value of textile and apparel exports to the United
States from Honduras
grew by 89 percent, from El Salvador
by 78 percent, and from Guatemala
by 32 percent (figures from USITC).
Thus it seems clear that maintaining a competitive advantage
in labor-intensive maquiladoras
is a self-defeating strategy for the Caribbean, considering that the key to
remaining competitive as a maquila export platform means deepening the social and
economic disadvantages of the working population. Low-wage industries will
continue to grow in those countries where policymakers are willing to go along
with wage-lowering policies, such as continued currency devaluations, reduction
in public services, and minimum or nonexistent fringe benefits. The question
that arises for Caribbean policymakers and
entrepreneurs, then, is which path to take in the unavoidable process of
economic restructuring being induced by NAFTA and the prospects of an FTAA.
THE CARIBBEAN AND THE EMERGING
The problems raised by the changing world order are not
simply economic. The U.S.
government's past efforts to promote trade and investment in the Western
Hemisphere (the Alliance
for Progress) or in the Caribbean Basin
(the CBI-GAL) often were linked primarily to geopolitical interests framed in
Cold War politics. Hence, the NAFTA and FTAA debates can be seen as debates
about the shaping of post-Cold War hemispheric and global economic and
The analysis of the still-emerging global and hemispheric
division of labor, based on liberalized trade and the freer flow of investment
across national borders, cannot be conceived as a mere geographical reshuffling
in the economic specialization of the region. We are witnessing technological,
institutional, and economic transformations that are designed to allow for
greater global mobility of the factors of production (particularly capital and
technology) on a greater scale than ever before. The various international
agreements, treaties, and institutions, like the World Bank, the International
Monetary Fund (IMF), the World Trade Organization (WTO), and the recently
created FTAA Secretariat, willingly or not, are helping to implement and
reinforce neoliberal policies sought by transnational corporations at a level
of implementation above and beyond the power of national governments.
Ricardo Grinspun and Robert Kreklewich (1994) call these arrangements fashioned at the
supranational level conditioning frameworks. These emerging supranational
regulatory frameworks increase the freedom and security of movement of TNCs and open up resources that previously were nationally
controlled, while they facilitate the more complex transnationalization of
economic space and further the vertical integration of production into vast
global commodity chains (Applebaum and Gereffi 1994; Dietz 1985). Commodity chains, which are
internal to the global operations of transnational corporations, function most
efficiently in an environment of weak states; free movement of goods, services,
and capital; and leveled or harmonized standards of global competition.
If the thrust toward more encompassing free trade agreements
among national states constitutes a further push in the direction of
transnationalization of the economic space under conditions less restrictive to
private investors, the question at hand is what place the Caribbean
will occupy in this changing order. Given the drive toward freer trade and the
emergence of new technologies and management practices in transnational
corporations that enable the adoption on a global scale of flexible production
and "just in time" (JIT) industrial organization (Wilson 1992), we
can expect a retrenchment of traditional assembly manufacturing activities
relying on location-specific FTZs and the
restructuring of labor-intensive assembly manufacturing on a global scale. With
the proliferation of free trade agreements and areas, goods and capital will be
able to move under standardized global conditions and supranational rules that
cannot be affected easily by changes in national governments and their policies.
Then, hemispheric and global production sourcing will be able to shift more
easily and constantly from country to country or region to region, within and
even between trade blocs, in search of lower costs, faster turnaround times,
greater design flexibility, higher quality, and other advantages.
These changes in the trade policy environment, production
technologies, and manufacturing-sector management practices may very probably
make obsolete or economically uncompetitive a substantial part of the infrastructure
that fostered the development of manufacturing export platforms in some Caribbean
countries under the CBI-GAL--led regime of trade preferences. Moreover, many of
the recent trade liberalization agreements have focused on intellectual
property rights issues, which suggests that the crown jewel of the new
international trade agreements is the liberalization of trade and investment in
knowledge-intensive industries and in services. Indeed, in 1994 the WTO
achieved the first global accord on trade in services, the General Agreement on
Trade in Services (GATS). Negotiated in the context of the GATT's Uruguay
Round, the GATS was designed as the framework for progressive multilateral
liberalization of trade in services, with the first full round of global
negotiations scheduled to begin no later than January 1, 2000 (World Bank 1996,
Those negotiations went ahead in May 2000, despite the WTO's failure to reach agreement at its Seattle Ministerial
Conference in December 1999 and the concurrent tensions surrounding the WTO's dispute settlement procedures (Tradewatch
2000). In addition, the FTAA Consulting Group on Services held its seventh
meeting in Miami, in May 2000, to
continue work on the draft text of the services chapter of the FTAA agreement
(FTAA 2000). Both the GATS and the FTAA have a target date for completion in
the year 2005.
It can be argued that
completion of the GATS and the FTAA will shift the competitive advantage to
postindustrial activities. Knowledge, technology, creativity, and management
expertise, rather than location-specific fiscal advantages (for example, trade
preferences), will be the key component of competitive advantages in the
twenty-first century. The trend of the future for the Caribbean
can be defined as peripheral postindustrialization.
The emerging crop of postindustrial maquiladoras will be in segments of knowledge-intensive
industries and services, where the main imported inputs are know-how and
technology and the main exports are services delivered through a digital
telecommunications network. These postindustrial products and services will be
patented or copyrighted and will accrue heavy payments in royalties, fees, and
franchise permits or licenses.
Indeed, the deregulation of international trade in services
and the global harmonization of intellectual property rights have been key
components of the U.S.
agenda in international negotiations on trade liberalization since the
beginning of the Uruguay Round of the GATT. U.S.
pressure on Mexico
to effect intellectual property rights reforms before NAFTA was signed also
served as leverage to propel negotiations on intellectual property rights and
liberalization of trade in services in the Uruguay Round (Mead 1992; BLA 1991a,
leaders believe that North American businesses have a comparative advantage in
copyrighted and patented products and international services over their Asian
and European competitors. Pushing for the liberalization of trade in services
and global enforcement of copyrights and patents would counter the decline of U.S.
competitiveness in traded manufactured goods compared with Asian and European
Transnational corporations in tourism and transportation see
the Caribbean as a site for potential expansion. During
the 1980s, tourism receipts in the region grew at an annual rate of 9 percent
(World Bank 1994, xii). Hotel chains, airlines, and cruise ship companies have
longstanding business ventures in services in the Caribbean.
They are aware that, in spite of significant social inequalities, most Caribbean
countries have an educated labor force with experience in tourism and related
services, such as banking and entertainment; knowledge of the English language;
and a time zone shared with the eastern United
States, the departure point for many
Caribbean-bound flights and cruises. Caribbean countries
also have a middle class educated in the United
States or Europe,
familiar with Western business culture, and mobile among urban centers in all
Besides the already existing services, new enterprises see
investment opportunities. Fast food restaurants, telemarketing, data
processing, real estate, entertainment, and recreation companies are following
on the heels of tourism expansion. These trends have led World Bank experts to
argue that international services have growth potential in the Caribbean
and that potential market niches may exist in this sector in the new
hemispheric and global division of labor (World Bank 1996).
ECONOMIC RESTRUCTURING THROUGH PERIPHERAL
The notion of peripheral postindustrialization
has been used to describe the development process of segments of
knowledge-intensive (postindustrial) transnational industries in Ireland
and Puerto Rico (Jacobsen 1989; Pantojas-Garcia
1990, 158-73). Changes in telecommunications, management techniques,
transportation, informatics, and other services to industry have made possible
the vertical segmentation of corporate production lines, as well as services. A
good example of this is the U.S.
pharmaceutical industry. Research and development of drugs are conducted in the
United States; materials and components are produced in a vertically integrated
global production line (commodity chain); while the drugs are assembled and
marketed out of the peripheral postindustrial site (Puerto Rico or Ireland),
where companies enjoy certain competitive advantages not only in the industrial
segment of assembly but in marketing, financial, and management services.
The technological revolution has also permitted the
segmentation of services, or even the exact reproduction of services and
products, on a global basis. Such is the case for real estate companies that
can sell and buy property for international clients across national borders.
Certain patented services, such as fast food restaurants (McDonald's, Kentucky
Fried Chicken, Burger King), rely on computer-regulated technology to deliver a
similar service and product over time and geographic space (Garson 1989, 20-21;
Watson 1997, 21-22).(n2) A company, moreover, can design a product in one
country; have it produced by contractors in various countries, continents
apart; sell the product with its brand name by phone or Internet almost
anywhere in the world; and have other contractors (international carriers)
deliver it. The services involved (design, sales, financing, delivery) can be
done without the various actors' ever meeting face to face (except for the
As a potential hub for international services for the global
economy, the Caribbean region thus already appears to
have the basic infrastructure, as well as comparative advantages in tourism and
financial services. There are also multiple policy initiatives to attract
investment in informatics and entertainment (World Bank 1996; Mullings 1998). The next question is, along what lines will
international services grow? One direction is along the lines of regional
platforms for segments of transnational service corporations; another is in
generating specialized services grounded in indigenous expertise and resources
with particular or specialized qualitative comparative advantages. It cannot be
argued that these are mutually exclusive options; but how they combine will
determine whether the new strategy is one of peripheral postindustrialization,
reproducing the same economic and political asymmetries of assembly processing,
or one of sustainable growth, producing a variety of locally grounded business
activities and enterprises that allow the domestic and regional markets to
Recent developments show that there is already a trend
favoring peripheral postindustrialization. In the
1960s and in some cases earlier, many Caribbean
countries developed international banking centers that served as havens for
companies and entrepreneurs involved in legal and illegal tax evasion schemes.
More recently, money laundering for illegal activities such as drug trafficking
and gambling has helped those banking centers proliferate even further (Griffith
1995). A network of secret international corporations exists side by side with
a network of U.S.,
Canadian, British, Dutch, and French banks, as well as international financial
service companies, such as American Express. The transnational corporate side
of this network is already in place and ready to expand as the process of
hemispheric financial liberalization and harmonization of financial regulations
progresses in the context of FTAA negotiations (C/LAA 1997, 46).
In tourism, the
package tour, resort-based tourist industry is developing rapidly in the Caribbean
as an alternative to the more expensive destinations for North American
tourists, such as Hawaii, the Mediterranean,
and the Greek islands. U.S.
and European hotel and cruise ship companies (Hilton, Hyatt, Marriott,
Sheraton, Holiday Inn, Club Med, Cunard, Holland
already operating in the region. Canadian hotel companies, such as Leisure
Canada and Delta Hotels, and regional groups, such as Jamaica's
Superclubs, also have important shares of this
sector, which is rapidly becoming the leading sector in many Caribbean
The Caribbean tourist sector is
highly transnationalized and depends on imports for
food, beverages, and equipment. Moreover, transnational resort-based complexes
are trying to homogenize their product (a competitively priced room by the
beach with unlimited food and drink) to the point that it would be hard to tell
the difference between a vacation in a resort in Barbados
or in the Dominican Republic,
except for the phenotypes and accents of the hotel attendants. Most jobs
created in this sector are low-end jobs with low wages and heavy seasonal
entertainment and informatics services are driving the expansion of the
telecommunications network in countries like the Dominican
Republic and Jamaica.
The Dominican Republic
hosts one of 12 Internet relay stations in the world, and is quickly becoming a
major international processing center for telemarketing (C/LAA 1997, 171). U.S.
telecommunications TNCs such as Sprint, AT&T, and
TRICO, a subsidiary of Motorola, are taking advantage of geographical
proximity, shared time zone, relaxed regulatory standards, and demand for
bilingual services to establish the Dominican
Republic as a hub for telecommunications
services for the U.S. Latino market.
Here again, the proliferating service segments are not
high-end, high-value-added ones. Individuals and companies providing a gamut of
services, from psychic readings to party lines to illegal gambling in U.S.
sports, seem to be the main investors at this stage. For example, Miami-based
personalities, such as psychic Walter Mercado and salsa singer Celia Cruz, have
franchised their names to psychic phone lines based in the Dominican
Republic. Typically, these lines are
operated by telemarketing companies that offer psychic consultations to
international callers, advertising on television and in newspapers throughout Latin
America and the United States.
The caller can pay hundreds of dollars, depending on the length of the call,
which is charged to a credit card or the caller's telephone bill through
designated "900" phone lines. The lion's share of the profits goes to
the telecommunications company (a TNC); the telemarketing company, usually
registered as a foreign corporation enjoying tax-free status; and the
celebrities, who live and commercially register their names in the United
States, in this case. The local psychics are mere wage laborers.
under the pressure of its structural adjustment agreement with the IMF and the
World Bank, the government succeeded in promoting the establishment of a
digital port facility in the Montego Bay FTZ. Owned
by a consortium of the privatized Telecommunications of Jamaica, Cable and
Wireless, and AT&T, the Jamaica Digiport
International ODD provides low-cost data transmission and telemarketing
services. The establishment of JDI and the concentration of fiscal incentives
in companies operating in FTZs, however, fostered a dollarized cost structure that created a duality in the
data entry and processing export sector, placing the local data processing
providers at a cost disadvantage. Local entrepreneurs who had developed export
services in data entry and processing could not afford to pay the rent on the
JDI facilities in U.S. dollars, and therefore could not benefit from the
low-cost telecommunications rates associated with the facility. Thus the JDI's operations resulted effectively in the subsidization
of TNC operations and the discouragement of local service providers (Mullings 1998, 144).
Instead of developing a self-reliant and innovative
international service industry, the JDI and its cost structure favored the
establishment of service offices of TNCs. These
segments of the service industry are typically outsourcing operations organized
in assembly line-type workshops, which produce low-end, repetitive jobs and
reproduce the working and living conditions associated with traditional maquiladoras (low
wages and skills, high turnover rates, no fringe benefits). Indeed, many of the
workers in this sector have been women who, once they gain experience and
dexterity, opt to move on to clerical and secretarial positions in other
companies (Mullings 1998, 150-51).
The JDI experience is typical of the informatics industry in
the English-speaking Caribbean. In 1994, according to a
World Bank study, 72 information-processing firms employed about 6,500 people,
largely in data entry and processing activities operating mainly in Barbados
(World Bank 1996, 9-10). Barbara Garson (1989) describes these segments of the
informatics industry as electronic sweatshops. Repetitive, low-skilled, and
low-wage jobs are now confined to computerized offices but, in essence, they
resemble jobs in maquiladoras.
Another activity flourishing in the Caribbean
is long-distance gambling. In 1992 the CBS television program Sixty Minutes
reported a scheme used by a New York-based illegal gambling operator that
established "charge accounts" accessed from the United States through
an "800" phone line in the Dominican Republic to place bets on U.S.
sports. Because the operation was legal in the Dominican
authorities could take no action to stop the owners or the gamblers, who
operated under locally sanctioned secrecy.
In another example, on December 11, 1999, the Fox Television Network program
Fox Files reported on "cyber bookies" operating on the island
of Antigua. Two companies ran
Internet-based gambling facilities for international sports events. One company
combined telemarketing operations with computerized gambling; the other relied
exclusively on the Internet to process all gambling transactions and was,
therefore, totally automated. Both companies conducted electronic money
transactions. In dealing with U.S.
customers, the money transactions were disguised as legal financial
transactions in other entertainment activities (such as sweepstakes) to avoid
prosecution by U.S.
authorities (in the United States,
gambling on sports is illegal, except in Las Vegas).
Here again, local labor was minimal; the cash "spent" passed through
the Antiguan telecommunications network but did not trickle down, except in the
wages of a few operators and minimal operating costs (rent, utilities).
Although the activities associated with peripheral postindustrialization are substantially different from
those in export processing, manufacturing, and agribusiness, the socioeconomic
impact is similar: low-value-added, low-wage, semiskilled jobs and few economic
links to the host economy. Peripheral postindustrialization
in the Caribbean is reproducing the economic asymmetries
traditionally associated with maquiladoras.
AN ALTERNATIVE VIEW OF ECONOMIC RESTRUCTRING
Considerations about alternative strategies for service-led development
are not merely abstract moral issues of social justice. These are crucial
policy issues to be considered if a postindustrial strategy for economic growth
is to become a sustainable basis to provide an adequate living for the working
populations of developing countries. Indeed, the main themes of the Second
Summit of the Americas
dealt with issues of poverty, education, and sustainable development in the
context of developing the FTAA (Summit of the Americas 1998). Hence, the issues
of living standards, sustainability, and quality of life raised by a
development strategy based on postindustrial maquiladoras need to be pondered.
The adoption of a postindustrial strategy for the Caribbean
need not be premised on policies that promote peripheral postindustrialization.
Postindustrial competitiveness and competitive advantages should not be equated
with cheap labor and cheap infrastructure. The Jamaican experience in
developing an information-processing service industry illustrates how a
one-track strategy to attract TNCs on the basis of
mainly low-wage and subsidized infrastructure, in the hope of generating
foreign exchange earnings, can be detrimental to the longer-term goal of
developing a self-reliant and sustainable export service sector (Mullings 1998, 144).
Postindustrial development strategies in the Caribbean
could promote economic activities centered on the high quality of service,
specialized know-how, and specialized skills of the local work force and
managers. Niches of competitive excellence, rather than low wages, relaxed
regulations, and hidden subsidies to private enterprises can be effective
comparative advantages. The quality of human resources, infrastructure, and
services should be looked at as key components of any postindustrial development
strategy (World Bank 1996, xi). If the weather is a natural comparative
advantage, it should packaged in a strategy that emphasizes a kind of tourism
that fosters greater links with local producers and providers of services.
Aware of the need for
such a policy, the ACS Heads of State and/or Government issued the Declaration
for the Establishment of the Sustainable Tourism Zone of the Caribbean
during organization's Second Summit, held in the Dominican
Republic in April 1999 (ACS 1999a). In this
document the ACS leaders state the need to coordinate a policy for the
development of tourism in the region in a manner that will ensure that global
competitiveness is consistent with ecological, social, and economic
sustainability and that tourism development benefits the communities and
peoples of the Caribbean.
Other ventures in international services can be used to help
Caribbean public and private sector leaders to draw
policy alternatives. In the field called health tourism, the Cuban state
company Cubanacan has successfully established Mediclub, a joint venture with Italy's
Medical Finances (C/LAA 1997, 134). Mediclub uses the
skills of Cuban health professionals, existing medical infrastructure, natural
resources (such as climate, thermal waters), and Italian financing and
managerial skills to offer health services to foreigners in Cuba
at costs lower than those of advanced countries. Ventures like this could also
make available a variety of medical services at affordable prices to patients
from Latin America and the Caribbean
needing advanced medical services available only in developed countries. In Costa
Rica and the U.S. Virgin Islands, cosmetic
surgery clinics provide services to North Americans and affluent individuals
from the Caribbean and Latin America.
These types of services open up opportunities to well-trained health care
specialists who otherwise would migrate to developed countries; they provide
well-remunerated jobs in specialized medical facilities in their home
Latin American broadcasting networks, such as Univision, Televisa, and Gems,
are already present in the U.S.
market targeting the Latino population, and are broadcasting programs via cable
throughout the hemisphere. Following through on these experiences, a Caribbean
broadcasting company could be developed as a joint venture of existing
broadcasters to promote the expansion of the Caribbean
entertainment industry, encouraging the production and broadcasting via cable
TV of regional programs and news from various islands. Joint productions could
be established among French-, English-, and Spanish-speaking groups throughout
the hemisphere with cultural and educational purposes. These initiatives could
take advantage of the recent success of existing entertainment ventures, such
Reggae Sunsplash and the Trinidad Carnival, which
have been presented in cities across the United
States and Canada
(World Bank 1996, 13). Miami-based Cuban American singer Gloria Estefan launched her latest musical production on U.S.
network TV from the Bahamas
and later staged a similar production in La Romana, Dominican
These enterprises suggest the viability of adopting new and
creative perspectives on economic restructuring in the postindustrial era. Perspectives
that understand that market-centered policies need to take into account
sustainability as well as the needs (economic and social) of the working
populations. Strategies based on promoting the establishment of the service
offices of TNCs will tend to reproduce conditions
similar to those of traditional maquiladoras. Promoting a postindustrial strategy that
encourages the development of regionally based, small and medium-sized
international services and businesses may prove beneficial in the long run by
stimulating the development of new industries based on new types of knowledge.
In turn, this may result in sustainable growth stimulated by the better
prospects for socioeconomic advancement and the generation of additional income
and foreign exchange.
This is an
alternative vision of development that considers what economists call
"positive externalities" as important and necessary components of
development policy, rather than relying solely on criteria of maximum
profitability as the central determining factor in the formulation of
macroeconomic policy. The recent experience of neoliberalism in the Caribbean
suggests that a vision of development anchored in market fundamentalism will
foster economic; regimes in which the key comparative advantages of a country
are precisely its social, economic, and environmental disadvantages.
A key goal of any sustainable development policy in the
less-developed countries (LDCs) in a postindustrial
setting should be to involve private business, the state, and nongovernmental
organizations (NGOs) to take advantage of trade liberalization and
technological innovation to promote trade and economic linkages among small and
medium-sized local and regional businesses. That means expanding the market
beyond the bounds of existing North-South trade. In the context of a free trade
area, for example, small and medium-sized farmers in the Windward
Islands could provide for many of the needs of the tourist resorts
in Barbados, Curaçao, Antigua, Martinique,
Puerto Rico, or even Cuba
by establishing a telecommunications-based marketing network. This network
could incorporate just-in-time principles to ensure timely delivery of
perishable goods to tourist centers. Promoting such a policy would foster new
trade while facilitating the process of agricultural diversification of Windward
Islands banana growers. This might offset these producers'
diminishing access to the European market after the expiration of the Lome Convention in the year 2000, and the complaints of the
on behalf of U.S. TNCs before the WTO against what it
calls preferential treatment for CARICOM bananas in the European market (Pantin et al. 1999).
demand through telemarketing networks could also stimulate the development of a
better Caribbean transportation network. Ocean
transportation service costs in the Caribbean are high,
especially affecting agricultural products (Yeats 1989, 38-39). The smallness
of the insular economies make them marginal clients along the shipping routes.
The experience of the Farm to Market Project in Dominica
in the 1980s showed the potential for developing a regional marketing network
linking small and medium-sized farmers directly with retailers and bulk
consumers of agricultural products.(n3)
What is needed is management ingenuity and resourcefulness,
as well as a supportive policy environment to encourage investment in such new
ventures. The ACS is already taking steps to create such a policy environment
by creating the program "Uniting the Caribbean by
Air and Sea." This program is intended to address the need for more
efficient and cost-effective regional transportation by adopting a common
transportation policy, promoting technical cooperation, and sharing resources
among regional carriers (ACS 1999b, 2-3; 1999c).
The Caribbean has never been a top
priority in the foreign policy of the United
States except at times of heightened
international conflict. The end of the Cold War and the normalization of trade
relations between China
and the United States
placed the Caribbean farther down on the U.S.
foreign policy agenda. In May 2000, seven years after it was first proposed,
Congress finally passed and the president approved an expansion of the CBI
trade preferences. Yet this measure still falls short of the full NAFTA parity
that was sought. The "NAFTAlike" treatment
is extended to some products until the year 2008, and is offered to CBI
beneficiary countries willing to prepare to become a party to the FTAA (Public
Law 280 of 2000, Title II).
The continuing trade liberalization process has seriously
eroded the competitiveness of Caribbean economies as
manufacturing export platforms. The new proposed economic strategies favor a
shift in the axis of economic growth from vertically integrated, transnationally based segment manufacturing to segments of
knowledge-intensive industries and services. TNC-controlled tourism,
entertainment, and telecommunications services are targeted as the leading
sectors of this economic shift. If these changes are successfully implemented,
the result will be peripheral postindustrialization;
that is, an economic development model that will reproduce the economic
asymmetries associated with the core-periphery relation (low wages, low
value-added rates, high rates of unemployment and underemployment).
Postindustrial technologies and economic strategies, however, could afford the
opportunity to formulate alternative policies to overcome the shortcomings of
Although recent developments, such as the Asian financial
crisis, the failure of the Clinton administration to get fast track authority
for the FTAA, the failure to achieve consensus at the WTO meeting in Seattle,
and the trade war between the United States and Europe have dampened the pace
of the trade liberalization process, the agenda of trade liberalization
continues to move forward. The proponents of market fundamentalism and the
leaders of TNCs, international economic
organizations, and developed countries argue that what are needed are
"technical" adjustments. The Internet web page of the WTO reassures
the visitor that the organization is making the corrections and adjusting the
The heads of six
international agencies have agreed on a new approach to improve the delivery of
trade-related technical assistance to the least-developed countries, including
the launching of an Integrated Framework Trust Fund. [WTO] Director General
Mike Moore, who chaired the meeting of the IT, IMF, UNCTAD, UND, the World Bank
and the WTO on 6 July 2000
in New York, stressed that
"it is time these countries [LDCs] saw more of
the positive side of globalization." (WTO 2000)
The international economic milieu continues to evolve along
the path of market fundamentalism in the direction of postindustrialization.
The process of postindustrial economic restructuring may be full of
opportunities for the small economies of the Caribbean;
but if the asymmetrical schemes of the past are reproduced, the change will
only be in what is produced and traded, while the structure of unequal
international exchanges will remain intact.
Aware of this reality, the leadership of the region, through
the ACS, CARIFORUM, and CARICOM, is looking for ways to promote an economic
strategy that will take advantage of new technologies and know-how to produce
viable economic enterprises that could benefit not just economic niches in
vertically integrated, transnational commodity and service chains, but also the
region's market and socioeconomic needs. Liberalized trade can be seen as an
opportunity for sustainable development if it can make possible the creation of
a new economic situation that could overcome the traditional patterns of
unequal exchange. Innovative thinking and daring actions could result in the
creation of an economic space for small and medium-sized producers that could
benefit those sectors of the Caribbean population that
now rely primarily on the informal economy.
Such an alternative is not easy to implement. The proponents
of market fundamentalism insist that the rationality and logic of the firm and
the market will determine the path to follow. Privatization, deregulation, and
open markets have become the readymade answers to all economic problems. Recent
developments and trade rivalries, however, have shown that there is still no
final consensus on the new economic order. The challenge remains how to
envision a paradigm that can foster sustainable development for both developed
and less-developed (core and peripheral) countries in the new global economy.
I acknowledge the help of Jorge Giovanetti
and Benjamin Rivera-Davila, research assistants at the Centro de Investigaciones Sociales, University
of Puerto Rico; and the
contribution of my colleague James L. Dietz of California
Fullerton, who collaborated with me
on an earlier stage of this research.
(n1.) The term Caribbean
throughout this essay refers to the insular Caribbean
plus Guyana, Suriname,
and Belize. The
term Caribbean Basin refers to what the Association of Caribbean States (ACS)
designates as the Greater Caribbean, which includes the insular Caribbean,
Guyana, Suriname, Mexico, Colombia, Venezuela, and Central America. Most of the
data in this essay focus on the countries of the Caribbean Group for
Cooperation in Economic Development (CGCED), created by the
World Bank in 1977, which includes Antigua and Barbuda, the Bahamas, Barbados,
Belize, Dominica, the Dominican Republic, Grenada, Guyana, Haiti, Jamaica, St.
Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, and
Trinidad and Tobago. The CGCED countries are also gathered in CARIFORUM, which
is the Caribbean component of the signatories
of the Lome Convention between the
European Union and its former colonies in Asia, the Caribbean,
and the Pacific (ACP countries).
variations may be added, such as KFC serving rice and beans in Puerto
Rico or McDonald's selling vegetable burgers in India
(Watson 1997, xvii), but they are produced and delivered within the same
productive and managerial structure.
(n3.) Farm to Market
was an NGO that promoted direct marketing of products for Eastern
Caribbean small and medium-sized farmers. I learned of this
project in 1987 from Atherton Martin, its former director (see also McAfee
1991, 159). In 1991, I participated with Martin in developing a proposal for a
marketing network based in Portsmouth, Dominica,
following the principles of the Farm to Market Project. It was deemed a viable
and economically profitable venture by a San Juan-based Citibank vice president
who evaluated it.
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