Trade bill could reverse economic progress in the Caribbean

While all eyes are focused on the potential effect of Congress's omnibus trade bill on East Asian exporters, the Caribbean may be affected more dramatically. Backers of programs such as the Caribbean Basin Initiative (CBI) insist that, because of the types of activity going on in the islands and in Central America, this region is likely to be caught in the fray over Asian imports.

``There are no raw materials in the Caribbean,'' says Stephen Lande, a lawyer with Manchester Associates, a Washington-based consulting firm specializing in international trade, ``so industries there are involved with processing.''

This means that components brought in from Asia and the European Community for final assembly may be treated as candidates for new US import barriers, under provisions of either the Senate or the House versions of the trade bill. That would hurt the budding manufacturing base in the Caribbean that has grown up as a result of the 1984 Caribbean Basin Initiative.

The CBI grants trade concessions to 22 nations to bolster their economies and attract investment to the region. It offers duty-free access to the United States on selected items.

Although trade in nontraditional items, including manufactured goods, has increased since 1984, overall Caribbean exports to the US declined from $9.2 million in 1983 to $6.5 million last year. The first six months of 1987 indicate that a modest increase is under way, however.

Two key clauses in the proposed legislation worry CBI proponents.

One is diversionary dumping, wherein industrialized nations divert heavily subsidized goods to the Caribbean. These goods are then processed into products. Cold rolled steel reaches Trinidad and Tobago from the European Community. But under the trade law that is likely to emerge from Congress, Trinidad and Tobago might be forced to pay an increased margin calculated on rates of initial European subsidies.

A bloc of Caribbean embassies in Washington lobbied against the United States' putting diversionary dumping into the bill. But a lawyer sympathetic with CBI concedes that the initiative's non-US supporters ``missed the boat'' on this issue.

A second concern is over the concept of cumulation. The quantities of Caribbean imports in various product lines are minuscule, compared with total US imports. But the new trade law considers cumulation as a means of solving the US balance-of-payments problem. Costa Rican cut flowers, for example, constitute a scant 1 percent of all imports, but that country is being penalized along with major foreign exporters such as Colombia.

``A lack of information in this region about the trade bill makes it hard for companies to plan on sales to the US market,'' says Wilson Rude, chairman of the US Chamber of Commerce in the Dominican Republic. ``It tends to make you think that there is little prospect for serious exports.''

CBI proponents are hoping for an extension of the Caribbean Basin Initiative. US Rep. Sam Gibbons (D) of Florida and 27 co-sponsors are backing a bill to extend duty-free treatment of some imports from the 22 CBI nations through the year 2007.

Supporters of this extension say the original CBI contained several flaws. The plan excluded industries such as textiles, leather goods, petroleum, sugar, and footwear - the mainstay of the region's economic base. Slumps in sugar prices, a collapse of the bauxite market, and weak petroleum prices affected Caribbean trade during CBI's first three years.

Despite the setbacks, some strides have been made.

``The goal of diversifying the export base,'' contends Mr. Lande, the Washington lawyer, ``has been achieved in some cases. Nontraditional exports such as Jamaican winter vegetables are on the rise.''

Projects such as shrimp farming in Grenada, frozen fruits and vegetables in Costa Rica, and cantaloupe production in the Dominican Republic are all promising, says Frank Frazier at the American Society of Agricultural Consultants. He reports that ``teams of investors have been there'' recently, and that substantial paybacks to US agribusiness would result ``as those countries move up along the food chain.''

But adapting to the US economy and US trade patterns is vital, he notes.

Another trade goal of the CBI involves the establishment of light manufacturing in the islands.

``Any move by Congress to impose restrictions on entry of Caribbean-made products damages manufacturing,'' says Alfred Roach, chairman of Long Island-based TII Industries. ``My gut feeling is that it sends the wrong message to potential investors, and they [Caribbean nations] need them badly to build an infrastructure.''

TII makes regulators which protect sensitive computer systems. Mr. Roach says costs to produce these units in the US would be upwards of $45 an hour. In Haiti, however, he says costs are only $2 an hour.

``Those savings can allow manufacturers to beat out Asian competition in electronics assembly,'' he says. He employs 1,000 in Puerto Rico, Haiti, and in the Dominican Republic.