CARICOM and Canada: Good Trading Partners?

Oct 2016
Despite seven rounds of negotiations since 2007, the Caribbean Community (CARICOM) and Canada were unable to concur on the establishment of a free trade agreement (FTA) to replace the existing Caribbean Canada Trade Agreement (CARIBCAN). Instead, the CARIBCAN waiver has been extended until 2023. At this stage, it is unclear when or if both parties will return to negotiations under the extended CARIBCAN waiver. Despite this uncertainty, it is important to determine whether Canada is a good trading partner for the CARICOM region. To undertake this exercise, we examine issues relating to export competitiveness, comparative advantage, and trade complementarity for trade in goods and services between CARICOM countries and Canada. We also conduct an experiment which assumes that a FTA is formed between CARICOM and Canada in order to estimate the impact of tariff liberalization on trade, revenue, and welfare on CARICOM countries. Our results indicate an unfavorable outlook for CARICOM countries on welfare grounds as well as on improving exports from CARICOM countries to Canada.