AN EVALUATION OF THE IMPACT OF FREE TRADE AGREEMENTS ON THE COMPETITIVENESS OF THE CARICOM REGION

Abstract

Following the creation of the World Trade Organization agreement in 1994, CARICOM entered into a number of other Trade Agreements in order to increase the access of CARICOM's member states into foreign markets. These agreements encouraged the sharing of knowledge, removal of tariffs and non tariff barriers towards the improvement of each partner's trade position. This study examined whether there were gains or losses in CARICOM's trade competitiveness following the entry into effect of two of these free trade agreements: (i) CARICOM-Costa Rica, (ii) CARICOM-Dominican Republic. The study utilized the Relative Comparative Advantage, Regional Orientation, Trade Intensity and Trade Complementarity to examine the performance of major agricultural production segments, such as Sugar, Edible Oils and Textile products. These models were used to assess the changes of trade between partners relative to the world, and also to determine which trade agreement provided the greatest gains. The study examined the changes in performance over a nine (9)-year period (2001-2010), and trends for each of indices were created. According to the study: (i) CARICOM did not benefit from the agreements signed with Dominican Republic and Costa Rica. (ii) CARICOM maintained its Comparative Advantage within the exported product groups selected in the study whereas no bias in trade was observed to Dominican Republic and Costa Rica markets. (iii)Trade Intensity from CARICOM to Costa Rica was shown to be highest in the group of HS 0303 Crustaceans, while it decreased in the other selected groups. (iv)Trade potential remained high throughout the period 2001/2010, thus showing that CARICOM's exports in the selected groups did not capture any significant market shares in either the Dominican Republic or Costa Rica.