Years before the North American Free Trade Agreement (NAFTA) became the law of the land, when Canada, Mexico and the United States were still in early negotiations, many Caribbean Basin countries feared that NAFTA would result in a lowering of their exports to the United States. These countries believed that the effect of such a sweeping trilateral agreement would see a decrease in overall trade with the US and a general decrease in investment flow in the region.
The US imports mostly agricultural products from Caribbean Basin countries. These include but are not limited to sugar cane, coffee, cocoa, and bananas. Other major exports to the US include petroleum and aluminum ore products. There was much statistical evidence to suggest that following NAFTA implementation, such decreases in trade activity would take place. The extent to which it would affect the Caribbean economies was not known.
The US understood and agreed with such concerns. In 1984, a full decade before NAFTA passage by Congress, the US developed and implemented a trade and investment policy referred to as the Caribbean Basin Initiative (CBI), written into law as the Caribbean Basin Economic Recovery Act (CBERA). CBERA granted duty-free status to certain exports from the region. While popular, 24 nations take advantage of such preferences for their products, the program is perceived as limited in nature because of its limited scope. The law does not cover every vital sector of the region�s economy.
Concern over trade issues, especially in the Caribbean, was heightened again as NAFTA neared completion and began to make its way through Congress. On March 18, 1993 Representative Sam Gibbons introduced a bill to provide "NAFTA Parity". The bill was to prevent the erosion of the CBERA following NAFTA implementation. The bill granted NAFTA-like privileges to Caribbean Basin countries. A similar bill was introduced in the Senate. President Clinton joined House Ways and Means Chairman Bill Archer in supporting relief for the region, but agreement has yet to be reached on the appropriate legislative strategy to remedy the situation.
NAFTA Parity remains a contentious issue. For its part, the International Trade Commission (ITC) set out to analyze the effects of NAFTA on the Caribbean Basin. An examination of US imports since NAFTA implementation showed an increase in Mexico�s import share, but a relatively stagnant share for the Caribbean region. When the analysis is focused solely on trade directly related to NAFTA and CBERA, the effects are more pronounced. Shares for the Caribbean region declined while Mexico shares increased significantly. However, NAFTA Parity is not the only issue impacting trade flows. The value of the peso dropped considerably, causing the cost of goods from Mexico to decrease. The Commission looked at the apparel sector specifically to get a snapshot of the problem. It found that Mexican imports are growing 3-6 times as fast as imports from CBERA partners.
For more information on the issue of NAFTA Parity for the Caribbean Basin, contact the International Trade Commission for publications on the issue, (202) 205-1809, or visit their Internet site, www.usitc.gov
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