Regional Integration: What is in it for CARICOM?

Mendoza, Eduardo;
Apr 2007
Economic and political integration have been a perennial and neuralgic issue in the Caribbean agenda. This paper draws on the literature on trade, growth and regional agreements to discuss the motivation behind the Caribbean drive for integration, the results obtained so far and what is in stock for the future. It argues, with the help of descriptive statistics, an empirical growth model and a gravity model, that the traditional, trade related gains from regional integration have been and are bound to be limited because of (1) the countries¿ high openness; (2) the limited size of the "common", enlarged market; and (3) the countries¿ relatively similar factor endowments. It also argues, though, that gains in the area of "non-tradables", due to economies of scale which cannot be mitigated by trade and openness, can be substantial.