Burbank, California; October 20, 2001; Joan Marques, MBA
The shock of the terrorist activities of September 11 may, in retrospect, be one of the least impressive and lasting effects that this event had on the world and, hence, on the CARICOM. The economic consequences have yet to start showing their grim face. Factors such as the increased security, as well as decreased traveling, consumption and job opportunities within the United States, have a direct effect on the CARICOM, its member countries, and their citizens. The Region calls for amplified security as part of a global campaign against terrorism, and needs to look for ways to cushion the decreasing tourism, air traffic, job-opportunities, and overall trade-balance effects resulting from the fact that our most important trade partner has fallen into a recession.
The shock of the terrorist activities of September 11 may, in retrospect, be one of the least impressive and lasting effects that this event had on the world and hence, on the Caribbean Community (CARICOM). The economic consequences have yet to start showing their grim face. Being the most important trade partner of the CARICOM, the current problems within the U.S. have an immediate impact on our region.
What has changed in the U.S.
North America is currently enduring one of the most turbulent episodes in its history. The Western giant has lost its "global innocence" and may very well be on its way to a real recession. The despair brought upon this nation did not end with the bombing of the World Trade Center in New York, but is expanding itself as a growing disease with every Anthrax-related announcement that?s being made, and with every day that the current War Against Terrorism lasts. The most visible results from the September 11 disaster within the U.S. society are,
* Increased security: The call for increased security is not just limited to airports and Governmental institutions but has expanded to include civilians in all corners of the United States. This made Americans aware of the relativity of life and the fragility of loved ones.
* Decreased traveling: Instead of the initially expected increase in gas prices, there is a significant registered drop, due to Americans not only deciding to drastically cut down on flying, but on traveling altogether--at least for a while.
* Increased patriotism: 8 out of every 10 cars are driving around with one or more waving American flags to express the unity in the U.S. Local producers of flags, pins, T-shirts and other patriotic accessories, and their vendors, are making huge profits by capitalizing on the sentiments of this emotionally wounded nation. According to U.S. leaders, the patriotic thing to do  is to shop, to fly on airplanes, to go to Broadway shows, and to just do anything to revive the flattened U.S. economy--and with it the economies of Japan, Europe, Mexico, Taiwan, and all the others that depend on American consumers and businesses to keep their factories humming (Fortune Magazine, October 29, 2001). Unfortunately, this is easier said than done when you're one of the millions that have been laid off, due to downsizing left and right.
* Decreased consumption: it seems that the few things people are interested in these days in the U.S. are, satisfying their vital needs, and expressing their feelings of nationalism. A recession in the U.S. [may] remove the last remaining source of demand from the global economy (BusinessWeek, September 24, 2001).
* Decreased job-opportunities: Thousands of workers are being laid off. The downsizing is not only limited to directly affected industries, such as the airline- and hotel industry, but seeps through to the most unexpected facets of the economy. Companies are abruptly withdrawing from unprofitable lines of business, cutting workers, selling out to rivals, and in the last resort, going out of business (BusinessWeek, October 15).
* Recession: The U.S. economy is in a recession, although not officially announced as such yet. Overall this is "a time of shrinking GDP, weak retail sales, sharply rising unemployment, and all-around tough times (Fortune Magazine, October 29, 2001)".
What this means for the CARICOM.
Since the United States is regarded as the most important trade partner of the CARICOM, it is obvious that everything that happens to this nation, will directly affect our community. A closer look at the abovementioned issues within the CARICOM scope leads to the following visible effects (among many others):
* Increased security: this should be seen as part of a global campaign against terrorism. The announcement regarding increased security as one of the leading consequential actions to be implemented was made at the recent meeting of heads of Government of the Caribbean Community held on 11 and 12 October in the Bahamas. Enhanced security will not only involve airports and airlines, but will also require greater coordination and collaboration among regional security services, particularly in intelligence gathering, analysis and sharing, with a focus on crime, illicit drugs and terrorism (Nassau, Bahamas, 12 October, 2001)
* Decreased Tourism: Since the tourism sector is the Region?s main earner of foreign exchange and its major employer (CARICOM Press release, October 15, 2001), it is expected that the increased global airline security, combined with the decreased desire to travel, will have a negative impact on the Caribbean's number one income-source. Thereby we should not underestimate that most of the tourists to the region are from the U.S. (Sowinski, 2000). The occupancy rate of some hotels, which even before the crisis had fallen to 20 per cent, coupled with cancellations and people not bothering to travel, reflect the grim picture. Due to the low rates, many in the entertainment and hotel industries in the countries that rely heavily on tourism have been laid off (The Guyana Monthly Update, October 2001).
* Diminished Air traffic: In this crisis situation, the Caribbean airlines "Bahamas Air; Air Jamaica and BWIA" all have experienced significant losses. Unfortunately, they will not benefit from the bailout packages like the US carriers are getting from the U.S. Government (The Guyana Monthly Update, October 2001).
* Decreased job-opportunities: this does not only pertain to the local society, mainly those employed in the tourism sector, but also to the many listed and unlisted Caribbean workers in the U.S., who remit around $2.5 billion annually to their home countries (Kooros, McManis, Albareda, 1998). With people beginning to lose their jobs because the US economy is going into crisis and recession, the Gross Domestic Product (GDP) of many developing countries [in the Region] will feel the impact heavily (The Guyana Monthly Update, October 2001).
* Trade balance effects: Most of our import and export activities are focused on the U.S. With the threatening recession in this country, and the many lay-offs consequential to that, production in North-America may very well be decreasing, leading to less exports, less imports, and hence, less trade in general with any international trade partner. A special issue of concern is the impact on the Region?s financial services and agricultural sectors, together with tourism and aviation, which are major contributors to our GDP, foreign exchange earnings and employment.
* Set-back in the plans for a free trade zone for the America's, one of President Bush's plans to be realized preferably before 2003. Due to the current turmoil it may be that the negotiations for the FTAA (Free Trade Area of the America?s) will be temporarily put on hold.
Four days after the bombings, the CARICOM Secretary-General, Mr. Edward Carrington stated in an Emergency Summit with Community leaders that a plan of action needed to be set in train to put the Region in a firm responsive mode (CARICOM Press Release, 15 October 2001). It is obvious from the past events that one of the ways to cushion us is to focus on other trade partners as well. The Region?s cooperation with the European Union through the CARIFORUM, the Caribbean Forum of African, Caribbean and Pacific countries, can be a critical step in that direction.
In light of the terrorist activities it would be also recommendable to ensure that the CARICOM member countries? money laundering laws are set up properly.
CARICOM Heads of Government have agreed to undertake an $18-million tourism promotional and marketing campaign, consisting primarily of television advertisements in the United States, United Kingdom and Canada (Bahamas Information Services, October 2001). However, it is questionable, given the state of fear, depression, and war-involvement in which CARICOM?s largest tourist provider, the U.S., finds itself, whether any campaign would have any effect. People who are scared or economically unstable may just have no desire to vacation, no matter how attractive the rates, packages, or destinations. Important for us is to realize that recession is a cycle, which the U.S. has endured repeatedly. Since 1940 there have been 9 recessions and just as many recoveries in America.
So, while waiting for our most potential tourist market to recover and resume its traveling habits, it might be a better idea to fund promotional campaigns that are focused on improving the perceived quality of locally produced goods and services.
The good news:
Even though the current global situation could not look any grimmer, it might all work out well in the long run. The natural tendency of a capitalist economy, like the U.S., is to grow, and when a downturn hits, it usually takes a little less than a year for adjustments in interest rates, asset prices, commodity prices, and wages--plus a bit of deficit spending by the feds--to make growth possible again (Fortune, October 29, 2001).
To end this article on a hopeful note: the global unity now being shown in the war on terrorism could be the most positive outcome from the crisis. Perhaps once this war is won, there will be a greater appreciation that the fates of the West and the developing world are intermingled?economically as well as politically (BusinessWeek, October 8, 2001).
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