Industrial policy and post-COVID19 economic transformation in CARICOM: a treatise [Part I]

Editor’s Note: The following article, was written by Alicia Nicholls (Miss), B.Sc., M.Sc., LL.B., PgCUTL Junior Research Fellow (Trade), Shridath Ramphal Centre for International Trade Law, Policy & Services The University of the West Indies, and will be presented as a two-part series.

Writing in an SRC Trading Thoughts back in May 2020, the author Joel K. Richards presciently posited that the COVID-19 pandemic, which was then still in its early days, provided the Caribbean Community (CARICOM) with the opportune time to ‘reclaim’ industrial policy. Fast forward three years later, CARICOM appears to be making concrete steps to formulate the community industrial policy called for by the Revised Treaty of Chaguaramas (RTC).

In the communique emanating from their thirty-third Intersessional Meeting held in Belize, March 1-2, 2022, the CARICOM Heads of Government recognized “the urgent need” for developing a community industrial policy strategy.

Additionally, Suriname will now have industrial policy added to the list of issues on which it has lead responsibility under the CARICOM quasi-cabinet. At the latest 44th Regular Heads of Government Conference meeting held in The
Bahamas, issues around the consolidation of the CARICOM Single Market and Economy (CSME) again occupied a significant part of the agenda. This SRC Trading Thoughts offers some initial reflections on how a community industrial policy strategy could assist the region’s requisite transformation to a sustainable and resilient economy as the grouping enters its fiftieth year of existence.

Industrial policy

Falling out of favour in the 1980s and 1990s, industrial policy is squarely back in vogue in the post-COVID-19 era. UNCTAD (2018) defines modern industrial policy as “a package of interactive strategies and measures aimed at (i) building enabling industrial systems (infrastructure, financial systems) and productive capacity (including assets, technology, and skills), and (ii) supporting the development of internal and export markets”.

Even before the pandemic, UNCTAD’s World Investment Report 2018 reported that in the preceding ten years, some 101 developing and developed economies had adopted formal industrial policies. This is even the case in advanced economies which once used and later rejected these policies on the basis of neoliberal orthodoxy as being inefficient or as the government “picking winners”. Take for example the United States CHIPS and Science Act of 2022 which provides funding to boost domestic research and manufacturing of semi-conductors or the EU’s Industrial Strategy to promote a green and digital economic transition.

Many CARICOM countries in the past relied in some part on Sir W. Arthur Lewis’ industrialization by investment which sought to promote industrialization by encouraging foreign direct investment through the use of fiscal and other incentives. Modern industrial policies extend beyond the economic growth and job creation imperatives and incorporate sustainability and sustainable development goals (SDGs), digital transformation, and global value chain integration. Modern industrial policies must also operate within the confines of global trade rules and financial regulations which had not existed when advanced economies were developing.

Industrial Policy in the RTC

The RTC was very forward-looking in that industrial policy is one of the policies for sectoral development outlined in Chapter Four. Moreover, the RTC mandates that the goal of the community industrial policy should be “market-led, internationally competitive and sustainable production of goods and services for the promotion of the Region’s economic and social development”. While industrial policy discussions often speak of manufacturing, industrialization entails not just manufacturing but also services industries.

Back in 2001 when the RTC was signed, its framers were clear-eyed that sustainability must be at the heart of any community industrial policy. This emphasis on sustainability, in particular SDGs 8 (decent work and economic growth) and 9 (industry, innovation, and infrastructure) will likely be top of mind for members of the CARICOM Ministerial Task Force on Industrial Policy which will be chaired by Suriname.

A technical working group has been mandated to develop and implement the policy. The Ministerial Task Force and the technical working group would undoubtedly be guided by the RTC’s blueprint of nine objectives that should be at the heart of the Community Industrial Policy. These objectives include cross-border employment of resources, linkages among economic sectors, promotion of regional economic enterprises, the establishment of a viable MSME sector, enhanced and diversified production of goods and services, enhanced production on an environmentally sustainable basis, and balanced economic and social development, bearing in mind the needs of disadvantaged countries,
regions and sectors.