Impact of Globalization on Caribbean Economies Definition: ‘Globalisation is often described as a historical process that entails the increasing integration
of, and interaction between countries as national borders become less significant.’ Globalisation entails economic, cultural, political and environmental integration, however for this course; the focus will be on economic integration Factors leading to the recent acceleration of the globalization process Internationalization of finance; i.e. liberalization of capital markets and financial flows Internationalization of production and distribution; offshore production, the subcontracting of work to firms in other countries Technological, Information and Communication revolution Globalization: The Caribbean experience 1. Caribbean countries have been fairly open as trade including import and exports accounts for more that a 100% of GDP for most countries 2. Large volume of foreign capital is being invested, usually in the form of FDI in industries developed from our natural resource base eg. TOURISM 3. Free trade is gradually replacing the existing system, which posses barriers to protect the local markets from imports, and save infant industries from mulateral giants. 4. the regions trading relationships is now being made more complex as the region tries to diversify its trading relationships beyond traditional partners for example, US , UK and Canada to include Latin America and other counties 5. There is increase cross border investment within CARICOM, Trinidad and Tobago is the leader 6. Firms are now reorganizing and restructuring businesses to operate more efficiently and more effectively in the Global environment. This includes formation of alliances, takeovers and regional expansion 7. Restructuring and reorganization of government activities; greater focus on macro economic stability and greater focus on creating an investment friendly environment.
8. There has been a negative impact on businesses and individuals The Vulnerability of Small States to the Negative Effects of Globalisation
The lack of diversification of exports, over-dependence on specific overseas markets, and dependence on imported technology and intermediate goods. Small States cannot influence the international prices of their exports. SIDS rely heavily on taxes on international trade to generate revenue. The WTO effort to achieve extensive tariff reduction could cause increased fiscal deficits. Relatively high transportation costs cause a loss of competitiveness.
example is the hot pepper industry The opening of markets and the increased mobility of capital is also presenting opportunities for businesses with well established bands to relocate production to other markets.
. UWI Mona. technology. lower production and distribution costs and better distribution networks In the short and medium term. hence it is easier for investors to gain access to foreign capital.
Potential Benefits of Globalization Increase access to foreign capital. By doing so they can benefit from increase access to skills. Jamaica Sugar and Banana are two important crops. because countries can import from any where goods can be had at the cheapest prices Increase access to modern technology Coping Strategies Product differentiation and niche marketing should be the basis of short term and medium term response to globalization. finance. strategic alliances and other special arrangements can be used to overcome some of the challenges and build competitive advantage Increase mobility of skilled labour presents an opportunity for businesses to acquire expertise from outside while seeking to build their internal capacity Additional financing and restructuring.•
Traditional agricultural exports are uncompetitive due to the legacy of preferential trade agreements. partnerships. this however may be difficult to acquire Major policy changes and intervention will be required to emphasize the creation of knowledge industries based on innovation and entrepreneurship
CASE STUDY: The Impact of Globalization on the Caribbean Sugar and Banana Industry Belal Ahmed. Flexibility is also essential Amalgamation of production efforts is increasingly important to meet the needs of the international markets and to benefit from economies of scale. telecommunications and financial services) are all limited by size. 0ncrease movement of capital across international borders. they are major foreign exchange earners and sources of employment for most Caribbean countries Presently the cost of producing sugar and Bananas is three times higher than the world market price This is compensated by preferential treatment under the Lomé Convention. the Cotonou Agreement was also signed in 2000 providing a guaranteed market at competitive prices for both products until 2008. after which both industries will face the full effect of globalization. Consultant in Agriculture. This will fill the gap between domestic savings and investment needed Increase access to global markets for their exports Improves consumer welfare. The key support sectors (transportation. Kingston.
Columbia… The cost per kilo for producing raw cane sugar. Costa Rica and Ecuador filed a complaint to the WTO trading body. gives special prices and privileges to agricultural imports from the ACP countries.Challenges that these industries face in light of Globalization • • • • • • Lack of increased production and productivity Absence of economies of scale Labour problems and high cost Slow pace of crop diversification Low level of technology Inadequate research and development support
Globalization and Caribbean Agriculture Globalization manifested in two ways. Given the creation of the WTO these privileges are currently under threat of complete extinction. hence the protocol should be discontinued. and corn syrup averaged less than $0. They charged that the Lome Conversion’s Banana Protocol unfairly acts against the Central and Latin American banana producers. Guatemala.20 US between 1989 and 1995 While the corresponding figure for the Caribbean during the said period averaged around $1. • Removal of farming subsidies • Liberalization of the import regime Caribbean Agriculture has experienced a decline in production • Caribbean countries are more vulnerable to the globalization process given their limited size. the United States along with Mexico. The Lome Conversion. In April 1996. St Kitts and Nevis In 2000 the crop season produced 17. beet sugar. was first signed in 1975. Impact of Globalization on Sugar and Banana Industries SUGAR Cost of sugar production in the Caribbean is relatively higher than world prices and the more efficient producers For low cost producers. the prices decline as the producers strive to bring prices in line with the WTO proposal for achieving consistent prices between cane sugar and beet sugar by 2003. 374 produced in 1997. Brazil.00 US Globalization has impacted negatively on the price of world sugar in recent years. the Jamaican. 639 tons of sugar a reduction from the 31. • Due to liberalization of the exchange market. Guyanese and Trinidadian dollar depreciated against major world currencies Lomé Convention / Cotonou Agreement The Lome convention is an agreement between the ACP countries and the European (EU). Jamaica In 1998 the Government purchased the Sugar Company of Jamaica (SCJ) to prevent the company from collapsing Belize In 1995 the Sugar Company was privatized due to the continued heavy loses incurred
The Cost of production has gone up steadily in the banana industry over the past 10 years and banana export form Caribbean countries decreased steadily during 1995-1999 due to natural disasters. The Sugar Industries Research Institute in Jamaica has developed a number of items from sugar including cane Juice drink.BANANAS The impact of globalization on the Banana industry will affect huge effects on Jamaica. the 600 ace farm had an estimated loss of US$ 48 million due to mismanagement bad planning and wrong choice of crops. Trinidad and Tobago’s only sugar company. rice and fruit production. Considering diversification. candied. One such project was the winter vegetable production in Spring Plain.40 per ton. flour and nectar.50 per ton while the average world Market price is US 473. low market demand and low price offers Some Initiative in crop and Product diversification Attempts have been made to replace sugar and Banana with other crops. However the EU’s average preferential market price is US$ 833. fruits. The cost of producing bananas is US$ 537. spices and bamboo are more suitable for the region.20 per ton.
. Belize and the Windward Islands. Livestock production. The Scientific research council of Jamaica has developed products from bananas including chips. Jamaica. After three years of experimentation. industrial syrup and charcoal. has partially diversified its operations into beef and milk production. The Caroni Ltd.