By Lincoln DePradine
A decade ago, events began unfolding in the United States that, at first, received little or no attention from Caribbean politicians and other citizens of the region. Those events began in 2007 with a crisis in the United States mortgage market and mushroomed into a full-blown international banking crisis and a global economic downturn.
Economists have described that period, beginning in 2007, as the worst financial crisis since the Great Depression of the 1930s. As the United States, Canada and European Union (E.U.) nations grappled with the crisis, there was a slowdown in bilateral and multilateral loans and grants from those countries, and a cutback in private sector investment as well, to the developing states of the Caribbean Community (CARICOM).
Now, another crisis – principally involving the United States., Canada, Mexico and the E.U. – is hovering. Again, on the surface, it all may seem to have nothing to do with the Caribbean, where the focus is heavily on recent general elections or pending ones; or on the next big entertainment events, such as carnival celebrations in St Vincent & the Grenadines and Grenada. But, CARICOM nations ought to be warned: the outcome of this latest issue involving their wealthy northern allies could negatively affect Caribbean economies.
The latest spat and the unravelling of things started after American President Donald Trump announced that his administration was imposing tariffs on aluminum and steel imports from Canada, Mexico and the E.U. He also is threatening to withdraw from the North American Free Trade Agreement with Canada and Mexico. Trump warned that if the affected countries retaliated to his tariff imposition, “they’re making a mistake”. The warning, thus far, has fallen on deaf ears.
Canadian Prime Minister Justin Trudeau said Trump’s new trade penalties are “totally unacceptable” and “unnecessary’’. Jean-Claude Juncker, President of the European Union, said the E.U. would move ahead with tariffs that are expected to affect roughly $7.5 billion worth of U.S. exports. And, the Mexican government said that it, too, would retaliate with its own comparable penalties on U.S. products, including pork, fruit and cheese.
The dispute, rather than being settled at last weekend’s meeting of western leaders at the 2018 G7 Summit in Charlevoix, Quebec, only worsened. The meeting’s host, Prime Minister Trudeau, reiterated Canada’s position to take retaliatory action by imposing its own tariffs on U.S. exports.
“It would be with regret – but it would be with absolute clarity and firmness – that we move forward with retaliatory measures on July 1, applying equivalent tariffs to the ones that the Americans have unjustly applied to us,’’ Trudeau said. “We are polite and reasonable but we would not be pushed around.’’
Trudeau’s comments angered Trump who took to twitter with name-calling, describing the Canadian leader as “very dishonest and weak’’.
“Canada has treated our agricultural business and farmers very poorly for a very long period of time,’’ the president claimed. “We’re like the piggy bank that everybody is robbing and that ends,’’ said Trump, who points to high tariffs imposed on United States dairy products entering Canada as an example of unfair U.S./Canada trade. He fails to mention, however, that overall, the U.S. has a trade surplus with Canada. The U.S. goods and services trade surplus with Canada was $8.4 billion in 2017, according to the Office of the United States Trade Representative.
If this trade dispute continues and expands into a trade war, it inevitably would lead to higher prices for some goods and services in Canada, the U.S., Mexico, Britain, Germany, France and in the rest of Europe. And, at the very least, some of those higher prices will be passed on to Caribbean consumers, who import goods from North America and Europe.
Already, in the aftermath of the Trump/Trudeau public feuding on the weekend, the Canadian dollar was trading lower on Monday. Many Caribbean nationals – from Jamaica in the north to Guyana in the south – have relatives and friends in Canada that make remittances to them. On Monday, the Canadian dollar was trading at 76.87 cents US, down 0.28 of a cent from its average value of 77.15 cents US last Friday. For every drop in the value of the Canadian currency, it means that people living in the Caribbean will be receiving less for the money sent to them from Canada.
The impending trade war could have a devastating effect on the Caribbean. Several countries in the region are still trying to recover from the effects of Hurricanes Irma and Maria of 2017. Dominica, apart from the tragic death of some of its citizens, also suffered an estimated US$900 million in damage from Hurricane Maria.. The death toll and economic loss for Puerto Rico were even higher. Puerto Rico was hit by both Irma and Maria, which caused an economic impact of more than $40 billion.
A report from the London-based World Travel and Tourism Council said the English-speaking Caribbean’s tourism sector lost close to US$700 million in revenue. The council said the 2017 hurricane season also resulted in almost one million fewer visitors to the region last year.
The devastating hurricanes of 2017 slammed the Caribbean as the countries were limping their way out of the prolonged global financial and economic crisis; a crisis that was responsible for the retrenchment of thousands of workers in the tourism industry across the Caribbean.
In a September 2016 interview, Caribbean Tourism Organization secretary general, Hugh Riley, admitted that regional countries were still trying to recover from the effects of the global crisis that begun in 2007/2008.
Caribbean leaders, many of whom are also the finance ministers of their countries, must carefully monitor this looming trade war of the G7 nations. Measures ought to be put in place to soften the adverse impact a trade war could – and would have – on the struggling economies of the Caribbean region.
We all are aware of the old saying that, when the United States sneezes, Caribbean countries catch a cold. And, we also are cognizant of the adage, “a stitch in time saves nine.’’
(Lincoln DePradine is a Grenada-born journalist.)