GULF WAR HURTING CARICOM
CARICOM economies, bruised by the slide in the United States economy which began in the fourth quarter of 2000, and aggravated by the air assault on New York’s World Trade Centre on September 11, 2001, are experiencing collateral damage from the US-United Kingdom invasion of Iraq.
The reluctance of many North Americans to travel by airliners or at all, as a result of the September 11 tragedy, had seen a marked drop in visitor arrivals in the Caribbean, whether in transits or stopovers, resulting in a decline of revenue from tourism as a principal contributor to real GDP growth of the island States. In turn, the further contraction of the United States market meant that manufactures from non-energy based Caricom industries, along with regional agricultural products, were now experiencing unusual difficulty in gaining access to the US. Caricom agricultural produce and products, which had for long enjoyed relatively large ‘ethnic markets’ in such cities as New York, Houston, Miami and Washington were adversely hit by the reality of September 11.
This arose when many Caribbean migrants lost jobs or had reduced work weeks flowing from the contraction of the United States economy. This inhibited their ability to purchase familiar products from their Caribbean countries. Yet another contributing factor was the competitive edge that products and produce imported from other countries, for example Mexico, had on Caricom exports. Thus, in a time of less spending money in North American Caribbean communities, sentiment had to take a back seat. The backlash in the Caribbean Community saw a loss of jobs, and consequently a loss of personal income, and along with this declining Government revenues from income tax, corporation tax and Value Added Tax among others.
Real GDP growth in Barbados, as documented by the Latin American Monitor, Regional Central Banks, slipped from 3.7 in 2000 to minus 2.3 in 2001, and barely edged up to 0.5 in 2002. In Trinidad and Tobago, the real GDP growth moved downward from 4.0 in 2000 to 3.5 in 2001 and 2.5 in 2002. And while, this downward movement did not altogether result from the same factors as had troubled, say Barbados, nonetheless September 11 had and continues to have a negative impact. A critical reason was that Caricom is Trinidad and Tobago’s second largest market after that of the United States.
The protest by the Government of the United States to the World Trade Organisation on the issue of preferential entry of Caribbean bananas to the European Union, threw the banana industry in Eastern Caribbean States into confusion and decline. Taking a broad view, the US was seeking to protect the interests of Central America-based United States owned banana producing companies. And while I am concerned at the effect on Caricom banana exporting countries, again if I take a broad view, the US was seeking the welfare of US-owned companies at a time when its overall economy was in trouble. It is a lesson that we here must learn, and which should encourage us to “think Caribbean first”, war or no war.
Whether or not we in the Caribbean are opposed to the United States-United Kingdom intervention in Iraq, specifically as it has been done without the sanction of the United Nations, we are involved, albeit regrettably, through the impact of the worsening of the slide of the US economy on our economies. Several Caribbean companies, id est cross listed companies with shareholders throughout the region, will be affected (indeed are already being affected) by the invasion of Iraq. BWIA West Indies Airways, (not unlike the US airline major, American Airlines), has been hit by the downturn in airline bookings, which first reared its proverbial head in the 2000 slide in the US economy, and was worsened by September 11, 2001, and made grimmer by the Iraq adventure.
What Trinidad and Tobago and the rest of the Caribbean have to appreciate is that BWIA’s Revenue-Expenditure position was hit hard not only by the drop in new bookings and/or the purchase of airline tickets, but the cancellation of tickets bought prior to September 11, and indeed prior to two weeks ago. Several industries are being hurt by BWIA’s and American Airlines’ drop in North America to the Caribbean seat sales as they relate to far better days. The hotel and guest house industry, the taxi transport industry, restaurant, catering industry; the specific airline catering industry, curio sales, haberdashers and what have you . Agriculture, too, is being hit.
As a result, shareholders, large and small, of several of these industries are likely to be affected in the medium and long term. For example, a regional company, with not insubstantial investments in airline catering services in Venezuela, Colombia, El Salvador, Guatemala, Brazil, Ecuador, Paraguay and Uruguay, as well as an airline and airport catering involvement in Jamaica, Trinidad and Tobago and Grenada can not be faulted for an understandable interest in a return by airlines to former seat sales. Should the Government of Trinidad and Tobago have to cut back on its plans for housing construction, due to a shortfall in revenue should any prolonged war over Iraq have an adverse multiplier effect, then this would impact on the cement company here, as well as on some of the downstream steel companies.
Other Caribbean corporate majors will also be affected by any fall off in earnings through retrenchment, occasioned by a downturn in the several regional economies, provoked by the war in Iraq. An extension of the conflict by the United States of America and the United Kingdom to say North Korea, the Sudan and Iran, and the shortages in foodstuffs and items, with a lower priority than that given to those ‘needed’ for the ‘successful prosecution’ of the war, will trigger inflation. We are unwilling victims of a war whose principal objective appears to be United States control of major supplies of oil.