The Caribbean Free Trade Association (CARIFTA) was an English-speaking economic trade organisation. It organised on 1 May 1968, to provide a continued economic linkage between the English-speaking countries of the Caribbean. The agreements establishing it came following the dissolution of the West Indies Federation, which lasted from 1958 to 1962.
History The origins of CARIFTA lay in a meeting on July 4, 1965, between the Prime Ministers of Barbados and British Guiana (Errol Barrow and Forbes Burnham respectively) to discuss the possibility of establishing a free trade area between the two territories, which at the time were moving towards independence from the United Kingdom. The discussions revolved around establish a free trade area between only those two countries initially and then extending it to the rest of the Caribbean when the other countries in the Commonwealth Caribbean were ready to join.
These bilateral discussions between Barrow and Burnham were later expanded to include V. C. Bird of Antigua and the three leaders ultimately signed the initial CARIFTA Agreement (the Agreement of Dickenson Bay in Antigua) on December 15, 1965. Kamal, A True Caribbean Man The original date envisioned for the Caribbean Free Trade Area to come into existence, according to the Dickenson Bay Agreement, was May 15, 1967. However, as a result of shuttle diplomacy engaged by Dr. Eric Williams, Prime Minister of Trinidad and Tobago, (through one of his ministers, Kamaluddin Mohammed) this was postponed as in order to allow Trinidad and Tobago to be included in the agreement and to generally make the agreement region-wide from the beginning. Dr. Williams had for years been advocating the establishment of a Caribbean Economic Community and was now fearful that Barbados, Antigua and Guyana were planning to form a free trade area between themselves to the exclusion of Trinidad and Tobago. The push to make the free trade area a region-initiative was successful and the issue was discussed at the fourth Conference of the Heads of Government of Commonwealth Caribbean Countries in Bridgetown, Barbados in October 1967. There it was resolved to introduce the free trade area by May 1, 1968, with the delegations of Montserrat and British Honduras (Belize) entering reservations to the conclusions of the resolution due to the constitutional status of their governments at the time.4th Conference of Heads of Government of Commonwealth Caribbean Countries, 23-27 October 1967, Bridgetown, Barbados As a result of this a supplementary agreement to the original Carifta Agreement was signed in Georgetown, Guyana on March 15, 1968, and in St John's, Antigua on March 18, 1968, with Carifta Day set for May 1, 1968.
The new CARIFTA agreement came into effect on May 1, 1968, with the participation of Antigua, Barbados, Trinidad and Tobago and Guyana. The original idea to permit all territories in the region to participate in the Association was achieved a few months later with the entry of Dominica, Grenada, St. Kitts/Nevis/Anguilla, Saint Lucia and St. Vincent in July and of Jamaica and Montserrat on August 1, 1968. British Honduras (Belize) became a member in May 1971 History of the Caribbean Community following its government's agreement to become a member of the Association (and had promised to take the necessary steps to become so) in February 1969 at a Commonwealth Caribbean Heads of Government Conference in Port-of-Spain, Trinidad and Tobago.5th Conference of Heads of Government of Commonwealth Caribbean Countries, 3-5 February 1969, Port-of-Spain, Trinidad and Tobago
Function and Internal Trade The Caribbean Free Trade Association was created to improve relations between the various Caribbean islands. One of the reasons of the formation of the CARIFTA was to increase the quota and variety of goods able to be sold. Specifically, CARIFTA was intended to encourage balanced development of the Region by the following:
increasing trade - buying and selling more goods among the Member States diversifying trade - expanding the variety of goods and services available for trade liberalising trade - removing tariffs and quotas on goods produced and traded within the area ensuring fair competition - setting up rules for all members to follow to protect the smaller enterprises
In addition to providing for free trade, the Agreement sought the following:
ensure that the benefits of free trade were equitably distributed promote industrial development in the Less Developed Countries (LDCs) promote the development of the coconut industry (through an Oils and Fats Agreement) which was significant in many of the LDCs rationalise agricultural production but in the interim, facilitate the marketing of selected agricultural products of particular interest to the LDCs (through the Agricultural Marketing Protocol); and provide a longer period to phase out customs duty on certain products which were more important for the revenue of the LDCs
Although CARIFTA itself was limited to trade in goods, it freed approximately 90% of intra-regional trade in manufactured goods and instituted managed intra-regional trade in some agricultural products. Between 1968 and 1973 the absolute trade, diversity of traded goods and the significance of intra-CARIFTA trade relative to external markets all increased notably. Intra-CARIFTA imports rose from EC$95 million in 1968 to EC$300 million in 1973. Whilst foodstuff and petroleum products accounted for the bulk of this trade, a range of new manufactured items (particularly from Jamaica and Trinidad & Tobago) began to be supplied for the first time. Diversification not only occurred in the types of goods sold but in the matrix of trade relationships with Jamaica's trade expanding away from the traditional markets of Belize and the northern Caribbean towards the southern and eastern Caribbean while Trinidad & Tobago's trade concurrently expanded from the traditional markets of Guyana and the Eastern Caribbean towards Jamaica, Belize and the northern Caribbean.United Nations Economic Commission for Latin America: CARIFTA Developments in 1973 Additionally the LDCs, particularly Saint Lucia, Dominica and St. Vincent & the Grenadines benefitted from increase exports to the More Developed Countries (MDCs - Barbados, Guyana, Jamaica, and Trinidad & Tobago) of ground provisions (like sweet potatoes), copra and raw oils (such as coconut oil) under the Agricultural Marketing Protocol and the Oil and Fats Agreement (which was initially an Agreement among some regional states that pre-dated CARIFTA but was incorporated into CARIFTA as a Protocol and extended to all CARIFTA members in 1970) respectively.
Overall for CARIFTA members intra-CARIFTA trade went from accounting for around 6% of total domestic exports in 1967 to constituting 9% of domestic exports in 1970 (total domestic imports from intra-CARIFTA trade remained general stable at around 5%), even as the share trade with more traditional markets fluctuated and generally declined:
Markets Exports, 1967 (% of total exports) Exports, 1971 (% of total exports) Imports, 1967 (% of total imports) Imports, 1971 (% of total imports) United Kingdom 20.9 16.0 20.2 18.7 United States 38.0 36.5 25.5 26.5 Canada 8.6 5.4 8.7 5.4 Latin America 2.7 3.1 20.0 8.1 European Economic Community 3.7 2.4 7.6 6.9 CARIFTA 6.4 9.2 4.9 4.5 Others 19.7 25.4 13.1 29.8
Broken down by the MDC and LDC designations, the MDC territories experienced 77% growth of intra-CARIFTA exports over four years (with Jamaica's export trade expanding the most, growing by 46% in exports and 24% in imports for the period 1967–1969) and the LDC territories saw 35% growth in intra-CARIFTA exports over the same period.
By the time CARIFTA was officially wound up in mid-1974 both intra-CARIFTA imports and exports had risen more than four-fold compared to 1966, with intra-CARIFTA imports increasing from EC$89 million to EC$473 million (433% increase) and intra-CARIFTA exports increasing from EC$82 million in 1966 to EC$455 million in 1974 (a 457% increase). The equivalent statistics for total trade with all partners by contrast showed a three-fold increase with imports increasing from EC$1.862 billion in 1966 to EC$7.141 billion in 1974 (a 284% increase) and exports increasing from EC$1.4 billion to EC$6.3 billion (a 350% increase) over the same period. This indicates that CARIFTA was successful in creating trade rather than merely diverting trade with the Free Trade Area.United Nations Economic Commission for Latin America - Evaluation of the integration movement (CARIFTA to CARICOM)
Inter-Regional Settlements Agreement
On November 26, 1969 the central banks of Guyana, Jamaica, and Trinidad and Tobago jointly announced the institution of an Inter-Regional Settlements AgreementFinancial Arrangements between Central Banks in the Caribbean (also known as the Intra-Regional Payments Scheme)The CMCF and CARICOM Trade aimed at facilitating and reducing the cost of making payments from trade among CARIFTA states. The Agreement became operational on December 1, 1969 between those three countries; while the remaining CARIFTA states of Antigua and Barbuda, Barbados, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, and Montserrat were intended to join the scheme on January 19, 1970. However, all of these states except Barbados did not actually join the scheme until February 1970 and Barbados itself joined in May 1972. Belize (having been renamed from British Honduras in 1973) joined in February 1976.
This Inter-Regional Settlements Agreement expanded upon pre-existing arrangements between CARIFTA states for dealing with their regional currencies (exchanging their various currency notes and coins) by allowing for the purchasing and selling of regional currencies via bank transfers. This would enable the regional monetary authorities to facilitate regional commercial banks in concluding final settlements between themselves locally rather than having such payments done through London as was the practice up to that time. In turn this allowed commercial banks to offer better rates of exchange and settlement in the regional currencies to their customers. The new arrangement also allowed for the desired increase in international liquidity for the CARIFTA states be formally making CARIFTA currencies convertible within the CARIFTA Area. This was considered a necessity as the volume of intra-CARIFTA trade increased.
However, under the Scheme the various CARIFTA central banks or monetary authorities effected settlements with each other individually, with each member extended an interest-free maximum credit line of £100,000 and outstanding net balances being settled quarterly by actual currency exchange (in Pounds Sterling). In 1974 the individual credit lines were increased to £500,000 (or approximately US$1.160 million) and in 1976, total credit in the arrangements was increased to US$40 million.
The Settlements Agreement facilitated the flow of regional trade, conserved the region's international reserves, and encouraged the integration of the regional banking systems. The settlement on a quarterly basis significantly reduced the previously erratic changes in foreign exchange reserves of the participating member states caused by having to settle at least once a day in both directions prior to the scheme (to pay for imports and receive funds from exports).