Enhancing India CARIFORUM Economic Relations and Prospects for Cooperation

ENHANCING INDIA CARIFORUM Economic Relations and Prospects for Cooperation

JAMAICA SAINT LUCIA HAITI THE BAHAMAS

DOMINICAN REPUBLIC THE BAHAMAS SURINAME HAITI JAMAICA BARBADOS GRENADA SAINT LUCIA TRINIDAD AND TOBAGO DOMINICA ANTIGUA AND BARBUDA SAINT LUCIA SURINAME GUYANA JAMAICA THE BAHAMAS

TRINIDAD AND TOBAGO GRENADA DOMINICA ANTIGUA AND BARBUDA SAINT LUCIA HAITI BELIZE

DOMINICAN REPUBLIC GRENADA

DOMINICA BARBADOS

SAINT KITTS AND NEVIS

BELIZE

GRENADA

BARBADOS

SAINT KITTS AND NEVIS

GUYANA

THE BAHAMAS

HAITI SURINAME

SURINAME

SAINT VINCENT AND THE GRENADINES

TRINIDAD AND TOBAGO THE BAHAMAS

DOMINICAN REPUBLIC

SAINT KITTS AND NEVIS SURINAME THE BAHAMAS HAITI

SAINT LUCIA JAMAICA

ANTIGUA AND BARBUDA SAINT VINCENT AND THE GRENADINES

www.carib-export.com

www.eximbankindia.in

ENHANCING INDIA-CARIFORUM ECONOMIC RELATIONS AND PROSPECTS FOR COOPERATION

India Exim Bank’s research publications are an attempt to disseminate the findings of research studies carried out in the India Exim Bank. The results of research studies can interest exporters, policy makers, industrialists, export promotion agencies as well as researchers. However, views expressed do not necessarily reflect those of the India Exim Bank. While reasonable care has been taken to ensure authenticity of information and data, India Exim Bank accepts no responsibility for authenticity, accuracy or completeness of such items.

The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the concerned organisations.

© Export-Import Bank of India March 2022

Foreword

India a nd the Caribbean share relations which are at least two centuries old. In the present day, Indo-Caribbeans comprise one of the largest ethnic group in many Caribbean countries. A strong emotional and cultural link already exists between the regions, which sets the base for enhancing economic relations via trade and investment. With ever increasing challenges in the world economy, diversification of trade partners and access to new markets has become a priority for all regions. The economies of the Caribbean are marked by high levels of openness to international trade, and they are also known globally for offering significant tax benefits, particularly to new investors. Similarly, India also offers immense opportunities for collaboration, trade, and investment for partner countries from the Caribbean. For Export-Import Bank of India (India Exim Bank), Latin America and the Caribbean (LAC) region has always been a region of focus, to promote and support two-way trade and investment. As a partner institution to promote economic development in LAC, India Exim Bank has set in place various activities and programs. I hope that this joint report published by the India Exim Bank and the Caribbean Export Development Agency (Caribbean Export) proves to be an important contribution to the existing knowledge pool on the subject and serves as a valuable reference for policy makers, businesses, and academia.

Harsha Bangari Managing Director Export-Import Bank of India

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

iii

Foreword

For over two decades the Caribbean Export Development Agency (Caribbean Export) has successfully contributed to the growth of the regional private sector through economic development and integration programming. Now at this time of global uncertainty Caribbean Export is delighted to partner with Export-Import Bank of India (India Exim Bank) on the production of this important study which explores how we can boost trade and investment between the Caribbean and India. The Caribbean and India share deep historical and cultural ties and the potential for increased trade, investment and international cooperation is limitless. This study unlocks investment and export opportunities for entrepreneurs on both sides, who can engage fruitfully and profitably to create jobs and prosperity for our people. On behalf of Caribbean Export, I would like to congratulate the research team for their efforts leading to this seminal publication. We are committed to strengthening our relationships with development partners such as India as we seek to transform the Caribbean.

Deodat Maharaj Executive Director Caribbean Export Development Agency

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

v

CONTENTS

Page No.

List of Tables

ix

List of Figures

xi

Executive Summary

1

1.

Macroeconomic Overview of the CARIFORUM Region

8

2.

International Trade Scenario of CARIFORUM Countries

12

3.

India’s Trade Relations with the CARIFORUM Countries

25

4.

Investment Scenario in the CARIFORUM Countries

33

5. Investment Framework in Select CARIFORUM Countries

40

6.

Investment Opportunities in the Caribbean

57

7. Activities of Export Import Bank of India in Latin America and Caribbean Region

63

8.

Key Observations and Recommendations

71

Project Team: From Export-Import Bank of India Mr. David Sinate, Chief General Manager Dr. Viswanath Jandhyala, Assistant General Manager Mr. Akshay Dutta, Deputy Manager From Caribbean Export Dr. Damie Sinanan, Manager, Competitiveness and Export Promotion Ms. Suzette Hudson, Senior Advisor, Investment Promotion Mr. Dario Carrington, Intern

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

vii

LIST OF TABLES

Page No.

1 GDP of CARIFORUM Countries at Current Prices and Real Growth Rates

10

2

CARIFORUM’s Top Export Products (US$ billion)

17

3

CARIFORUM’S Country-wise Top Export Items

18

4

CARIFORUM’s Top Import Products (US$ billion)

19

5

CARIFORUM’S Countrywise Top Import Items

20

6

CARIFORUM Exports- Major Partners

22

7

CARIFORUM Imports- Major Partners

23

8

India’s Major Exports to CARIFORUM Countries

29

9 India’s Exports to CARIFORUM- Top Destinations, Product Wise

30

10 India’s Major Imports from CARIFORUM Countries

31

11 India’s Imports from CARIFORUM- Top Sources, Product wise

32

12 FDI Inflows in the CARIFORUM- Country Wise Share

34

13 OFDI from India to the CARIFORUM Countries (US$ mn)

37

14 Most Common Incentives in the Caribbean

40

15 List of Operative LOCs extended to Countries in LAC

65

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

ix

LIST OF FIGURES

Page No.

A

CARIFORUM Countries’ Trade Over the Years

2

B

India's Trade with CARIFORUM Region

3

C

FDI Inflows in the CARIFORUM Countries, US$ billion

4

D

India’s OFDI to the CARIFORUM Countries (US$ million)

5

1

GDP of the CARIFORUM Countries (US$ billion)

9

2

CARIFORUM Countries’ Trade Over the Years

14

3

Top Exporters in CARIFORUM, % Share in 2020

15

4

Top Importers in CARIFORUM, % Share in 2020

16

5

CARIFORUM’s Top Export Destinations, % Share 2020

21

6

CARIFORUM’s Top Import Sources, % Share 2020

23

7

India's Trade with CARIFORUM Region

26

8

CARIFORUM’s Top Importers of India’s Exports (%, 2020)

27

9

CARIFORUM’s Top Exporters to India (%, 2020)

28

10 FDI Inflows in the CARIFORUM Countries, US$ billion

34

11 Top Sector Attracting FDI in the CARIFORUM Countries (2003-2019)

35

12 Top Investing Countries in CARIDORUM Region (2003-2019)

36

13 India’s OFDI to the CARIFORUM Countries (US$ million)

37

14 India’s OFDI to CARIFORUM Region- Sector Wise Share

38

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

xi

EXECUTIVE SUMMARY

The Caribbean Forum, which consists of 15 states namely: Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Dominican Republic, Haiti, Grenada, Guyana, Jamaica, Saint Lucia, St. Kitts and Nevis, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago, had a total GDP of US$ 160 billion, with a population of 29 million 1 , in 2020. Apart from rich endowments of minerals and commodities, the countries in this region are endowed with scenic beauty, including excellent beaches ample sunshine, and are thus, big tourist attractions. The economic disruptions due to the COVID-19 pandemic has impacted the CARIFORUM economies on twin fronts. First, the collapse of international commodity prices has left the commodities dependent economies 2 in deep trouble. Second, because of travel restrictions and lockdowns the tourism sector has taken one of the biggest hits ever. The disruption in the global demand and prices has severely hit commodity dependent economies in the CARIFORUM where the energy sector is an important source of income, fiscal revenues, and foreign exchange earnings. However, the economies in the CARIFORUM have promptly come into action and have implemented emergency fiscal and monetary measures, in order to mitigate the adverse impact of the pandemic. International Trade of CARIFORUM Countries The Caribbean Forum economies are characterized by high openness to trade as it is virtually impossible for small island economies to produce everything on their own, thus, they are

1 IMF WEO- October 2021 2 Belize, Guyana, Suriname, and Trinidad and Tobago

Executive Summary

1

more reliant on trade. The importance of trade for the region is reflected by the fact that economies have formed multiple trading blocs aimed at removing trade barriers, such as tariffs and quotas, among the member-states. The Caribbean Community and Common Market (CARICOM) and the Organization of Eastern Caribbean States (OECS) are the two most popular trade alliances in the region. Additionally, many islands have established preferential trade agreements with UK, Canada and members of the European Union. These trade agreements help in exposing economies in the CARIFORUM to wider markets. The total trade of CARIFORUM countries has grown by more than three-fold since the turn of century. Total trade in merchandise goods peaked at US$ 94.7 billion in 2019, before the COVID-19 pandemic shook the world and international trade collapsed as countries locked down borders to contain the spread of the coronavirus (Figure A) . Even then, exports have shown greater resilience compared to imports, which has meant that trade deficit has declined.

Figure A: CARIFORUM Countries’ Trade Over the Years (US$ billion)

Source: ITC Trademap; India Exim Bank Analysis

India’s Trade with CARIFORUM Countries India and the Caribbean countries have maintained historic and warm ties. India’s relations to the Caribbean can be traced back to at least the 19 th century, when Indian indentured labor arrived at the shores of the Caribbean countries to work on the sugar plantations. Presently, the Indo-Caribbeans comprise one of the largest ethnic group in many countries in the CARIFORUM. 3

3 Guyana, Trinidad and Tobago, Suriname

2

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

The historic relations among India and the Caribbean countries were given an impetus when an agreement establishing CARICOM-India Joint Commission was signed in 2003. The Prime Minister of India met the leaders of CARICOM on 25 September 2019, at the sidelines of United Nations General Assembly (UNGA), in New York. This was the first ever India-CARICOM Summit. The Summit level meeting highlighted “the steadily intensifying and deepening relations between India and partner countries of the Caribbean.” During the meeting PM Modi reiterated India’s firm commitment to strengthen its political, economic, and cultural engagement with CARICOM 4 . In 2001, India and CARIFORUM countries traded goods worth US$ 52.4 million between them. India’s exports amounted to US$ 49.9 million, with pharmaceutical products having the largest share and India’s imports from CARIFORUM countries amounted to US$ 2.5 million only. India’s total trade with CARIFORUM breached the US$ 1 billion mark in 2009. Exports accounted for US$ 847.7 million and imports US$ 204 million in the same year. Total trade grew and peaked at around US$ 3 billion in 2011, as both India’s exports and imports increased with the region. However, with a drop in India’s exports of refined petroleum products since 2013, has led to a moderation in the trade between India and the CARIFORUM countries. In 2019, the total trade stood at US$ 1.2 billion. Post 2013, India’s imports from the region have grown as India has started importing gold (majorly from Dominican Republic). India had a trade surplus with the region, which turned into a deficit in 2014. The trade deficit peaked at US$ 618.9 million in 2016. The trade gap has narrowed since then and in 2020, India has posted a marginal trade surplus with the region (Figure B) .

Figure B: India's Trade with CARIFORUM Region (US$ million)

Source: ITC Trademap; India Exim Bank Analysis

4 PM met with the leaders of CARICOM at the UNGA- PMI India

Executive Summary

3

FDI Inflows in CARIFORUM The Caribbean governments generally employ a myriad of preferential tax measures or fiscal policy tools to achieve specific socio-economic and in some cases environmental objectives. These tools incentivize savings and investment into local economies in the region, promote specific industries, discourage or promote the consumption or production of specific goods and services, support business growth and development, job creation and the protection of the environment, among others. The implementation of these incentives may lead to a reduction in government revenue streams from taxes, but their use is supported throughout the region due to the perceived benefits that far outweigh the costs. The Caribbean is known globally for its significant generosity in tax benefits, particularly to new investors as the region seeks to compensate for the perceived competitive disadvantages related to geographical size, market size, relatively low internal demand and significant competition from neighboring territories. In 2020, the FDI inflows to the region have fallen by 16.7 percent to reach US$ 5.9 billion. The reasons for this fall in the FDI inflows can be broadly attributed to a collapse in tourism led by the coronavirus pandemic and a staggering fall in international commodity prices. Thus, both the service dependent and the commodity dependent economies have taken hits in terms of investment inflows. FDI inflows are expected to recover to the pre-crisis level only by 2023 (Figure C) .

Figure C: FDI Inflows in the CARIFORUM Countries (US$ billion)

Source: UNCTAD FDI Data; India Exim Bank Analysis

4

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

Indian Investments in CARIFORUM India’s investments in the CARIFORUM countries during the period April 1996 to March 2021 stood at US$ 279 million, which is a little less than one percent of India’s total outwards foreign investments. Cumulative investments during April 1996 to March 2011 stood at US$ 28.3 million. Post 2011, investments peaked during financial year 2012-13 at US$ 55 million. Indian investments have remained on the lower side only, barring a couple of years viz 2014-15 when investments amounted to US$ 39.1 million and 2018-19 when investments amounted to US$ 43.1 million (Figure D) .

Figure D: India’s OFDI to the CARIFORUM Countries (US$ million)

Source: Reserve Bank of India database on monthly OFDI from India and India Exim Bank Analysis

Investment Opportunities in the Caribbean The CARICOM Secretariat’s 2015-2019 Strategic Plan highlights the priority sectors for investment in the Caribbean. Many of the sectors identified in the Secretariat´s Strategy also form a part of the priority sectors identified by 23 member countries of the Caribbean Association of Investment Promotion Agencies (CAIPA) in their 2016 Regional Investment Promotion Strategy. Following are the priority sectors:

• Creative Industries • Service Industries • Manufacturing • Resort and Hotel Development • Agriculture

Executive Summary

5

• ICT and Business Process Outsourcing • Logistics and Transportation • Renewable Energy

For India, the Caribbean serves as an ideal location since its located near the Americas. The US, Canada, UK and Europe are highly accessible from many Caribbean countries. The Caribbean has garnered critical acclaim as a Mecca for tourism with its abundant natural resources. However, there are a number of other competitive sectors including: information communications technology/business process outsourcing, financial services, agribusiness and the creative industries, across 23 diverse territories of the Caribbean region. Way Forward India-Caribbean relations have gradually increased and intensified over the years. This development has been a rather quiet one. Even during the Covid-19 period, when activity rates generally came down across the world, the Caribbean countries greatly appreciated India’s proactive gesture of providing vaccines in the form grants. While ethnic connections and common colonial history had laid the foundations for our relations, there are conscious efforts on both sides to have frequent interactions right up to the highest levels and enhance engagement for mutual benefits. Enhancing Trade between India and CARIFORUM India and the CARIFORUM countries can reap mutual benefits by partnering with one another. Trade between India and CARIFORUM countries has increased from US$ 52.4 million in 2001 to around US$ 1.2 billion in 2019. However, India’s share in CARIFORUM’s global imports stood at mere 1.2% in 2020. India has potential to expand exports in product categories such as mineral fuels and oils, electronics, transport vehicles, cereals, optical instruments, meat and edible meat offal, and animal or vegetable fats and oils etc. Expanding Trade Agreements In the Latin American and Caribbean (LAC) region, India presently has Preferential Trade Agreements (PTA) with Chile and MERCOSUR and negotiations over a Free Trade Agreement (FTA) are ongoing between India and Peru. However, India does not have a PTA or FTA with any CARIFORUM country. India has signed a trade agreement with Trinidad & Tobago (signed in 1997), which accords most favored nation status to each other. The CARIFORUM

6

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

countries have numerous trade agreements with major trade blocs of the world. For the Indian corporates the CARIFORUM region could, therefore, also act as a gateway to the world, besides the potential existing in the CARIFORUM region itself. Transportation and Logistics Costs One of the major impediments to trade between India and the CARIFORUM countries is trade logistics and transportation costs. Efforts should be made to reduce transaction and transport costs, streamline trade logistics, in order to realise the trade potential between the regions. People to People Exchanges, Tourism, and Media Exchanges Even though the relations between the two regions date back to at least 19 th century, and a significant presence of ethnic Indians in the CARIFORUM countries, challenges to greater economic integration stem from differences in business and trade culture, as well as from the geographic distance and concomitant problems of connectivity. Therefore, the importance of people to people exchanges, tourism, and media exchanges can’t be ignored. Increased Industry Engagements In order to increase awareness of the regions on both sides, business conclaves like the India-LAC conclave and other industry association engagements, endeavour to provide a platform for increased interaction among industry, academicians, policy makers, and government representatives with a view to benefiting the entrepreneurs, investors and business community. Enhancing Engagement through new Embassies Expansion of India's diplomatic presence in the LAC region could contribute to significantaly enahancing relations between India and LAC region. India, till recently, had only 14 embassies in LAC. On the other hand, LAC is represented by 21 embassies in India. With increased physical presence, an impetus to the growth story can be reasonably foreseen. The missions are expected to help in providing market access for Indian companies and the export of goods and services. These missions are also likely to help in further enhancing people to people contacts and help in bolstering political outreach.

Executive Summary

7

1

MACROECONOMIC OVERVIEW OF THE CARIFORUM REGION

The Caribbean region is located, between North and South America, in the Caribbean Sea. The region lies southeast of the Gulf of Mexico and North America, east of Central America, and north of South America. The Caribbean region is rich in natural resources like mineral oils, bauxite, iron, nickel, and timber among others 5 . Apart from rich endowments of minerals and commodities, the countries in this region are endowed with scenic beauty, including excellent beaches ample sunshine, and are thus, big tourist attractions. The focus of this study is the Caribbean Forum (CARIFORUM) Region. The Caribbean Forum consists of 15 states namely: Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Dominican Republic, Haiti, Grenada, Guyana, Jamaica, Saint Lucia, St. Kitts and Nevis, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago. As of 2020, the total GDP of these countries stands at US$ 160 billion, with a population of 29 million 6 . The GDP of CARIFORUM countries which stood at US$ 26.7 billion in 1980, has witnessed a six-fold growth to reach US$ 180.1 billion in 2019 (Figure 1) . Economic growth accelerated with the onset of the 21 st century. This accelerated growth can be attributed to the boom in commodity prices, which is also termed as the ‘Commodity Supercycle’ 7 . This commodity supercycle, which began in 2000 and continued till 2012, was a result of various factors such as strong growth in emerging economies around the world, especially BRIC economies. Thus, an increased demand led to increase in commodity prices. Apart from this, following the

5 CARICOM Caribbean Community – Our Resources 6 IMF WEO- October 2021 7 Commodity Supercycle- A trend in which international prices of several commodities increased steadily and simultaneously

8

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

financial crisis of 2007-08, investors pumped money in commodities such as gold, which also led to increasing prices of commodities. As a result, the period 2000-12 was particularly very good for commodities exporting economies of the CARIFORUM region. Post 2012, however, the commodities super cycle ended as growth in emerging economies slowed down and oil prices took a hit with the production of shale oil and gas in the USA reaching an all-time high. With a fall in global commodity prices, the commodity producing economies of the region suffered moderating growth rates, while natural disasters like hurricanes and stagnating tourist arrivals led to less than stellar economic performance in the services-based economies.

Figure 1: GDP of the CARIFORUM Countries (US$ billion)

Source: IMF WEO October 2021

Present Scenario and the Impact of COVID-19 The first case of the coronavirus infection was reported in the Caribbean region on March 12, 2020, in Jamaica. The CARIFORUM Countries have reported 1,123,516 cases of coronavirus infections, and 15,227 people have succumbed because of the infection, as on February 01, 2022 8 . The economic disruptions due to the COVID-19 pandemic has impacted the CARIFORUM economies on twin fronts. First, the collapse of international commodity prices has left the commodities dependent economies 9 in deep trouble. Second, because of travel restrictions and lockdowns the tourism sector has taken one of the biggest hits ever. As a

8 Johns Hopkins Coronavirus Resource Center 9 Belize, Guyana, Suriname, and Trinidad and Tobago

Macroeconomic Overview of the CARIFORUM Region

9

result, the service-based economies, have also not been spared. Apart from Guyana 10 , every other economy in the region has witnessed contraction in 2020 (Table 1) . As per ECLAC, the total employment is estimated to have reduced by 9 percentage points in the Caribbean, compared to two percentage points in Latin America. This is because lockdowns and travel restrictions have impacted travel and tourism industry disproportionately. According to WTTC 2019, tourism’s direct contribution to GDP in 2019 was 11.8% in the Caribbean GDP and its overall contribution amounted to 28.5% of GDP. Tourism also accounted for around 15% of the jobs, majority of which are held by women.

Table 1: GDP of CARIFORUM Countries at Current Prices and Real Growth Rates

GDP (US$ bn)

Real GDP Growth (%)

Countries

2020 e

2021 f

2020 e

2021 f

2019

2019

Antigua and Barbuda

1.7

1.4 9.9 4.4 1.7 0.5

1.4

4.7 -20.0 0.7 -14.5 -1.3 -18.0 1.8 -14.0 7.5 -11.0

1.0 2.0 3.3 8.5 3.4 9.5 2.7

The Bahamas

13.2

10.7

Barbados

5.3 2.0 0.6

4.6 1.9 0.6

Belize

Dominica

Dominican Republic

89.0

78.9

89.5

5.1

-6.7

Grenada Guyana

1.2 5.2

1.0 5.5

1.1 7.4

0.7 -13.1

5.4

43.5 -3.3

20.4 -0.7

Haiti

14.8 15.8

14.5 14.0

20.1 14.9

-1.7

Jamaica

1.0 -10.0 4.8 -14.4 -0.1 -20.4

4.6

St. Kitts and Nevis

1.2 2.1 0.8 4.0

1.0 1.6 0.8 2.9

1.0 1.7 0.8 2.8

-1.0

St. Lucia

3.5

St. Vincent and the Grenadines

0.5

-3.3

-6.1

Suriname

1.1 -15.9

0.7

Trinidad and Tobago

23.2

21.6

21.6

-1.2

-7.9

-1.0

Source- IMF WEO October 2021 e - Estimates; f - Forecasts

On the other hand, the disruption in the global demand and prices severely hit commodity dependent economies in the CARIFORUM where the energy sector is an important source of income, fiscal revenues, and foreign exchange earnings. For example, in Trinidad and Tobago, the energy sector accounts for 26 percent of economic activity, 84 percent of export and 34

10 Guyana’s recent oil discovery has ensured growth for the economy

10

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

percent of fiscal revenues. While for Guyana, which commenced commercial oil production in December 2019, it was projected that the energy sector would account for 33 percent of economic activity, 59 percent of export and 15 percent of fiscal revenues 11 . The economies in the CARIFORUM have promptly come into action and have implemented emergency fiscal and monetary measures, in order to mitigate the adverse impact of the pandemic. The fiscal measures have ranged from 1% to 4% of GDP (except Barbados, which announced a fiscal package of 19% of GDP) 12 . However, the higher fiscal outlays could pose a challenge to the debt sustainability for countries in the region. With the emergence of the COVID-19 vaccines and beginning of vaccination programs around the world, the year 2021 is expected to witness a sharp global economic recovery. The commodity prices have started firming up; however, tourism sector continues to slack. Of the 15 countries considered in this analysis, 10 are expected to post a positive real growth rate in 2021. Guyana is expected to post a double-digit growth rate, on the back of oil production and exports.

11 ECLAC- Economic Survey of the Caribbean 2020: Facing the Challenge of COVID-19 12 ECLAC- Economic Survey of the Caribbean 2020: Facing the Challenge of COVID-19

Macroeconomic Overview of the CARIFORUM Region

11

2

INTERNATIONAL TRADE SCENARIO OF CARIFORUM COUNTRIES

The Caribbean Forum economies are characterized by high openness to trade as it is virtually impossible for small island economies to produce everything on their own, thus, they are more reliant on trade. The importance of trade for the region is reflected by the fact that economies have formed multiple trading blocs aimed at removing trade barriers, such as tariffs and quotas, among the member-states. The Caribbean Community and Common Market (CARICOM) and the Organization of Eastern Caribbean States (OECS) are the two most popular trade alliances in the region. Additionally, many islands have established preferential trade agreements with UK, Canada and members of the European Union. These trade agreements help in providing economies in the CARIFORUM access to wider markets. The Caribbean Community and Common Market (CARICOM) is a grouping of twenty countries – fifteen member states and five associate members. The member states are Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Lucia, St Kitts and Nevis, St Vincent and Grenadines, Suriname, and Trinidad and Tobago. The associate members are Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Turks and Caicos Islands. The CARICOM came into being on 4 July 1973. It is home to approximately sixteen million citizens, 60 percent of whom are under the age of 30. The four major pillars for the CARICOM cooperation are: economic integration; foreign policy coordination; human and social development; and security. 13 The CARICOM and the Government of Republic of Cuba signed the Trade and Economic Cooperation Agreement (TECA) between them, on 5th July 2000. The Agreement provided for further negotiations between the Parties in 2001, to convert the partial scope Agreement

13 CARICOM Official Website

12

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

to a Free Trade Agreement (FTA). The Agreement was inspired by the need to promote an expanded economic space for regional trade and investment, as well as to foster economic integration. The Agreement covers trade, tourism, transportation, trade promotion and financing, business facilitation etc. The CARICOM also has a Free Trade Agreement (FTA) with Dominican Republic, which was signed in 1998. The Agreement addresses major trade areas such as trade in goods and services, economic cooperation, and government procurement. Other bilateral trade agreements signed by CARICOM are with Venezuela (1993), Colombia (1994), and Costa Rica (2004). The Organization of Eastern Caribbean States (OECS) came into being on June 18, 1981, and is dedicated to the regional integration in the Eastern Caribbean. The OECS is an eleven member grouping comprising of the member states of Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, Saint Lucia and St. Vincent and the Grenadines. These members are part of the Economic Union and received the full benefits of Economic Union like free movement of people and goods, with the British Virgin Islands, Anguilla, Martinique and Guadeloupe as associate members of the OECS. 14 In 2008, the CARIFORUM countries entered into a partnership with the European Union (EU). This partnership, officially called the CARIFORUM-EU Economic Partnership Agreement was signed in October 2008. Apart from trade in goods, this agreement also includes commitments on trade in services, investment, trade-related issues such as competition policy, government procurement, intellectual property rights, as well as sustainable development aspects. 15 Post the BREXIT, the UK has sought to replicate trade agreements with its existing trade partners. Therefore, in March 2019, the CARIFORUM and UK signed an Economic Partnership Agreement (EPA). The UK is one of the main markets for CARIFORUM exports to the EU. Additionally, the UK remains an important market source for tourists to the Caribbean. The EPA replicates the institutions under the CARIFORUM- EU EPA, such as a joint CARIFORUM UK Council, and CARIFORUM-UK Trade and Development Committee. The US, which is the largest trading partner, had launched the Caribbean Basin Initiative (CBI) in 1983, through the Caribbean Basin Economic Recovery Act (CBERA). As per the Office of the United States Trade Representative (USTR), “The CBI is intended to facilitate

14 OECS Official Website 15 Official Website of European Commission

International Trade Scenario of the CARIFORUM Countries

13

the development of stable Caribbean Basin economies by providing beneficiary countries with duty-free access to the U.S. market for most goods.” The beneficiary countries of the CBRA are the following- Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, British Virgin Islands, Curacao, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Lucia, St Kitts and Nevis, St Vincent and Grenadines, and Trinidad and Tobago. The total trade of CARIFORUM countries has grown by more than three-fold since the turn of century. Total trade in merchandise goods peaked at US$ 94.7 billion in 2019, before the COVID-19 pandemic shook the world and international trade collapsed as countries locked down borders to contain the spread of the coronavirus (Figure 2) . Even then, exports have shown greater resilience compared to imports, which has meant that trade deficit has declined. However, the region faces increasing challenges with respect to globalization. The CARIFORUM’s share of world merchandise exports has been declining steadily, falling from 3 percent in the 1970s to nearly a quarter percent in 2012 and the share has remained around the same figure since then. The region’s integration into the world economy has been much slower than some other countries in the LAC region, and developing countries outside the region, that had similar levels of global integration 30 years ago 16 .

Figure 2: CARIFORUM Countries’ Trade Over the Years (US$ billion)

Source: ITC Trademap; India Exim Bank Analysis

16 Trade Matters- New Opportunities for the Caribbean, The World Bank Group 2015

14

Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

CARIFORUM’s Top Trading Countries

Top Exporting Countries In 2020, the CARIFORUM countries exported merchandise goods worth US$ 25 billion. Dominican Republic with a share of 40 percent was the largest exporter from the region. Dominican Republic was followed by Trinidad and Tobago, with 27 percent of exports, Guyana (11 percent), Suriname (7 percent), and The Bahamas (4 percent). The top five exporting countries together accounted for over 88 percent of total exports from the region in the year 2020 (Figure 3) .

Figure 3: Top Exporters in CARIFORUM, % Share in 2020

Source: ITC Trademap; India Exim Bank Analysis

Top Importing Countries On the other hand, the countries collectively imported merchandise goods worth US$ 42.4 billion in 2020, and Dominican Republic with a share of 36.7 percent in the total imports stood as the top importer in the region in 2020. Dominican Republic was followed by The Bahamas (13.9 percent of total imports in 2020), Trinidad and Tobago (11.8 percent), Jamaica (9.5 percent), and Haiti (7.8 percent). The top five importing countries together accounted for around 80 percent of total imports to the region in 2020 (Figure 4) .

International Trade Scenario of the CARIFORUM Countries

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Figure 4: Top Importers in CARIFORUM, % Share in 2020

Source: ITC Trademap; India Exim Bank Analysis

CARIFORUM’s Top Traded Products

CARIFORUM’s Top Exports The CARIFORUM has majorly two kinds of economies- commodity dependent and services dependent. The commodities dependent economies are- Belize, Guyana, Suriname and Trinidad and Tobago and rest of the economies are services dependent. Table 2 gives a gist of top exporting product categories from the region. In 2020, the top exporting item from the region was mineral fuels and oils with a little over one-fifth of total exports from the region. This was followed by natural or cultured pearls, precious or semi-precious stones, precious metals with a share of 15.9 percent, optical, photographic, cinematographic, medical or surgical equipment (6.6 percent), inorganic chemicals (4.9 percent), and organic chemicals (4.7 percent). The top five product categories accounted for 52.5 percent of total exports from the region in 2020.

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Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

Table 2: CARIFORUM’s Top Export Products (US$ billion)

Share in Exports (%, 2020)

HS Code

Product label

2018 2019

2020

All products

29.4 31.8 25.0

7.3 6.4

5.1

20.4%

27 Mineral fuels, mineral oils and products of their distillation

3.6 3.9

4.0

15.9%

71 Natural or cultured pearls, precious or semi-precious stones, precious metals

1.0 1.1

1.6

6.6%

90 Optical, photographic, cinematographic, medical or surgical equipment

28 Inorganic chemicals 29 Organic chemicals

2.4 1.9 2.0 1.8

1.2 1.2

4.9% 4.7%

1.1 1.4

1.1

4.4%

85 Electrical machinery and equipment and parts thereof 61 Articles of apparel and clothing accessories, knitted or crocheted 24 Tobacco and manufactured tobacco substitutes

1.3 1.4

1.1

4.4%

0.9 1.0 1.1 1.2 0.4 0.5 0.6 0.5 0.5 0.6 0.1 1.9 0.4 0.5 0.5 0.5

1.0 0.9 0.7 0.6 0.5 0.4 0.4 0.4

3.9% 3.6% 2.7% 2.2% 1.9% 1.7% 1.6% 1.5%

72 Iron and steel

8 Edible fruit and nuts 30 Pharmaceutical products 22 Beverages, spirits and vinegar 89 Ships, boats and floating structures

31 Fertilisers

39 Plastics and articles thereof

Source: ITC Trademap; India Exim Bank Analysis

The following table (Table 3) presents the top exporting items from the top five exporting countries of the region namely Dominican Republic, Trinidad and Tobago, Guyana, Suriname and Bahamas. In the last decade, one of the most important international discovery of commercially viable crude oil has taken place off the coast of Guyana. Thus, Guyana is soon expected to become a net oil exporter.

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Table 3: CARIFORUM’S Country-wise Top Export Items

Share in 2019 (%)

Total Exports 2019 (US$ mn)

HS Code

Top 5 Export Items

Exporter

21.6

71 Natural or cultured pearls, precious or semi-precious stones 85 Electrical machinery and equipment 24 Tobacco and manufactured tobacco substitutes 90 Optical, photographic, cinematographic equipment

11.5

Dominican Republic

9.5

9,963.50

9.5

72 Iron and steel

5.2

51.1

27 Mineral fuels, mineral oils and products of their distillation

29 Organic chemicals 28 Inorganic chemicals

15.1 10.3

Trinidad and Tobago

11,021.20

72 Iron and steel

5.9

31 Fertilisers

4

89 Ships, boats and floating structures

28

18

71 Natural or cultured pearls, precious or semi-precious stones 86 Railway or tramway locomotives 84 Machinery, mechanical appliances 71 Natural or cultured pearls, precious or semi-precious stones 44 Wood and articles of wood 68 Articles of stone, plaster, cement 26 Ores, slag and ash

Guyana

3,842.20

13.3 11.7

7.1

68.6

4.8 4.3 4.2 2.6

Suriname

1,461

26 Ores, slag and ash

3

Fish and crustaceans

89 Ships, boats and floating structures

45.1

17

27 Mineral fuels, mineral oils and products of their distillation

Bahamas

1,544.20

29 Organic chemicals

13.3

3

Fish and crustaceans

5.6 5.5

39 Plastics and articles thereof

Source: ITC Trademap; India Exim Bank Analysis

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Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

CARIFORUM’S Top Imports

The countries in the region are dependent on imported crude and refined petroleum products, and thus, in 2020, the largest imported product category was mineral fuels and oils. This product category comprised of 16.8 percent of total imports in the year 2020. This was followed by machinery and mechanical appliances (9.3 percent of total imports in 2020), electrical machinery and equipment (6.4 percent), and transport vehicles (5.6 percent). The top five product categories accounted for 42.6 percent of total imports in the year 2020 (Table 4) .

Table 4: CARIFORUM’s Top Import Products (US$ billion)

Share in Imports (%, 2020)

HS Code

Product label

2018 2019 2020

All products

52.4 62.9 42.4

9.2 11.4 7.1 16.8%

27 Mineral fuels, mineral oils and products of their distillation

84 Machinery, mechanical appliances

4.8 5.5 3.9 3.4 3.5 2.7 3.3 3.5 2.4 1.7 7.8 1.9 2.6 2.6 1.7 1.2 1.5 1.1 1.0 1.0 1.0 1.2 1.2 0.8 0.7 0.7 0.7 1.1 1.1 0.7 0.7 0.7 0.6 1.2 1.2 0.6 0.8 0.9 0.9

9.3% 6.4% 5.6% 4.5% 4.0% 2.7% 2.4% 2.0% 1.6% 1.6% 1.5% 1.5% 2.1%

85 Electrical machinery and equipment and parts thereof 87 Vehicles other than railway or tramway rolling stock

89 Ships, boats and floating structures

39 Plastics and articles thereof 73 Articles of iron or steel

10 Cereals

90 Optical, photographic, cinematographic, medical or surgical equipment

72 Iron and steel

4 Dairy produce; birds’ eggs; natural honey

48 Paper and paperboard

2

Meat and edible meat offal

30 Pharmaceutical products

0.7 0.8 0.6

1.4%

71 Natural or cultured pearls, precious or semi-precious stones, precious metals

Source: ITC Trademap; India Exim Bank Analysis

International Trade Scenario of the CARIFORUM Countries

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The following table (Table 5) presents the top items of import for the top importing countries of the CARIFORUM region viz Dominican Republic, The Bahamas, Trinidad and Tobago, Jamaica and Haiti.

Table 5: CARIFORUM’S Countrywise Top Import Items

Total Imports 2019 (US$)

Share in 2019 (%)

HS Code

Top 5 Import Items

Importer

17.8

71 Natural or cultured pearls, precious or semi-precious stones 85 Electrical machinery and equipment 84 Machinery, mechanical appliances 87 Vehicles other than railway or tramway rolling stock

8.1 8.1

Dominican Republic

22,202.3

7.5

39 Plastics and articles thereof

7

89 Ships, boats and floating structures

44.4

24.5

27 Mineral fuels, mineral oils and products of their distillation

84 Machinery, mechanical appliances 85 Electrical machinery and equipment

3.7 2.1

Bahamas

10,680.6

1.5

87 Vehicles other than railway or tramway rolling stock

84 Machinery, mechanical appliances

17.1

16

27 Mineral fuels, mineral oils and products of their distillation 87 Vehicles other than railway or tramway rolling stock

Trinidad and Tobago

6,973.7

5.8

85 Electrical machinery and equipment

5.1 5.1

26 Ores, slag and ash

26.3

27 Mineral fuels, mineral oils and products of their distillation

84 Machinery, mechanical appliances

8.6

Jamaica

6,339.2

8.6

87 Vehicles other than railway or tramway rolling stock

85 Electrical machinery and equipment

5.4 3.5

39 Plastics and articles thereof

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Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

Total Imports 2019 (US$)

Share in 2019 (%)

HS Code

Top 5 Import Items

Importer

8

27 Mineral fuels, mineral oils and products of their distillation

10 Cereals

7.9

Haiti

3,706.8

7

61 Articles of apparel and clothing accessories, knitted or crocheted

60 Knitted or crocheted fabrics 39 Plastics and articles thereof

4.9 4.6

Source: ITC Trademap; India Exim Bank Analysis

CARIFORUM’S Trade Partners

Top Export Destinations

USA was the top export destination for the CARIFORUM’s exports in 2020, with a massive share of 42.6 percent. The other major export destinations in 2020 were Switzerland (9.4 percent of total exports in 2020), Canada (5.2 percent), China (3.7 percent), and Spain (2.8 percent). The top five destinations accounted for over 60 percent of total exports from the region in 2020 (Figure 5) .

Figure 5: CARIFORUM’s Top Export Destinations, % Share 2020

Source: ITC Trademap; India Exim Bank Analysis

The following table (Table 6) presents the top exporting destinations for the top five countries of the CARIFORUM region viz, Dominican Republic, Trinidad and Tobago, Guyana, Suriname and The Bahamas.

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Table 6: CARIFORUM Exports- Major Partners

Total Exports 2019 (US$)

Top 5 Export Destinations

Share in 2019 (%)

Exporter

USA Haiti

56.1

8.2 7.9 4.2 3.5 6.3 6.2 8.2 3.2

Dominican Republic

9,963.50

Switzerland

India

Canada

USA

32.9

Spain China

Trinidad and Tobago

11,021.20

Guyana

Netherlands

Trinidad and Tobago

32.2 12.2 11.1

Canada Portugal Ghana Norway

Guyana

3,842.20

8.4 6.3

UAE

36.7 31.8

Belgium

Suriname

1,461.00

Switzerland

6.4 2.5 1.9

Guyana

Brazil

USA

27.6 26.6

Poland Ecuador

Bahamas

1,544.20

7.5 5.1

China Japan

4

Source: ITC Trademap; India Exim Bank Analysis

Top Import Sources Similarly, the top import source for the region was the USA, with a substantial share of 46 percent in the total imports in 2020. USA was followed by China (12 percent share

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Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

in total imports in 2020), Brazil (3 percent), Japan (2 percent), Mexico (2 percent), and Colombia (2 percent). These top import sources together accounted for 65.1 percent of total imports in 2020 (Figure 6) .

Figure 6: CARIFORUM’s Top Import Sources, % Share 2020

Source: ITC Trademap; India Exim Bank Analysis

The following table (Table 7) presents the top import sources for the top five importing countries of the region, namely, Dominican Republic, The Bahamas, Trinidad and Tobago, Jamaica and Haiti.

Table 7: CARIFORUM Imports- Major Partners

Total Imports 2019 (US$)

Top 5 Import Sources

Share in 2019 (%)

Importer

USA

42.7 15.5

China

Mexico

4

Dominican Republic

22,202.30

Brazil Spain

3.5 3.4

USA

32.9

South Korea

6.3 6.2 8.2 3.2

Japan

Bahamas

10,680.60

Singapore

China

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Total Imports 2019 (US$)

Top 5 Import Sources

Share in 2019 (%)

Importer

USA

40.4 17.8

Guyana

China

5.2 3.6 3.1 7.8 5.2 4.7 3.1

Trinidad and Tobago

6,973.70

Netherlands

Brazil

USA

45.2

China

Colombia

Jamaica

6,339.20

Japan Brazil

USA

33.3 22.2 15.1

Dominican Republic

China Turkey Mexico

Haiti

3,706.80

3.6 3.0

Source: ITC Trademap; India Exim Bank Analysis

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Enhancing India-CARIFORUM Economic Relations and Prospects for Cooperation

3

INDIA’S TRADE RELATIONS WITH THE CARIFORUM COUNTRIES

India and the Caribbean countries have maintained historic and warm ties. India’s relations to the Caribbean can be traced back to at least the 19 th century when Indian indentured labor arrived at the shores of the Caribbean countries to work on the sugar plantations. Presently, the Indo-Caribbeans comprise one of the largest ethnic group in many countries in the CARIFORUM. 17 The historic relations among India and the Caribbean countries were given an impetus when an agreement establishing CARICOM-India Joint Commission was signed in 2003. However, the First Meeting of the India-CARICOM Joint Commission was held only in 2015. During this meeting, the entire gamut of bilateral relations between India and CARICOM, including cooperation in agriculture and food security, health and pharmaceuticals, small and medium enterprises, marine development and oceanography and disaster management were discussed. Discussions were also held on important regional and multilateral issues. 18 Later, in the first ever India CARICOM Summit, the Prime Minister of India met the leaders of CARICOM on 25 September 2019, at the sidelines of United Nations General Assembly (UNGA), in New York. The first ever Summit level meeting has highlighted “the steadily intensifying and deepening relations between India and partner countries of the Caribbean.” During the meeting PM Modi reiterated India’s firm commitment to strengthen its political, economic, and cultural engagement with CARICOM 19 . In 2001, India and CARIFORUM countries traded goods worth US$ 52.4 million between them. India’s exports amounted to US$ 49.9 million, with pharmaceutical products having the

17 Guyana, Trinidad and Tobago, Suriname 18 Ministry of External Affairs, India 19 PM met with the leaders of CARICOM at the UNGA- PMI India

India's Trade Relations with the CARIFORUM Countries

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