CARIBBEAN COMMONWEALTH MEMBERS: IMPLICATIONS OF BRITAIN'S POSSIBLE ENTRY INTO THE COMMON MARKET

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001600030114-2
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 13
• Document Creation Date: December 22, 2016
• Document Release Date: October 31, 2011
• Sequence Number: 114
• Publication Date: August 1, 1970
• Content Type: IM

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DIRECTORATE OF
INTELLIGENCE
25X1
Intelligence Memorandum
Caribbean Commonwealth Members:
Implications Of Britain's Possible Entry Into The Common Market
ER. IM 70-114
August 1970
Copy No. 40
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt' by an unauthorized person is prohibited by law.
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25X1
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
August 1970
Caribbean Commonwealth Members:
Implications Of Bri thin' s Possible Entr
Into T e Common Market
Introduction
The United Kingdom's re=ewed bid to enter the
European Common Market (EEC), which is expected to
get firm support from the new Conservative govern-
ment, raises questions about the future of the
Commonwealth Preference System and the economic
fortunes of certain Commonwealth members. Some
observers have been concerned about the effects on
the Caribbean Commonwealth region* (see the map),
particularly since black nationalism threatens at
the same time to scare off tourists and discourage
foreign investment. This memorandum examines the
region's economic relationships with the United
Kingdom and assesses the impact of British acces-
sion to the EEC.
As used in this memorandum, the term Caribbean
Commonwealth region embraces: (a) the independent
states of Barbados, Guyana, Jamaica, and Trinidad-
Tobago; (b) the individual Associated States of the
Windward Islands (Dominica, St. Lucia, St. Vincent,
and Grenada) and Leeward Islands (Antigua and St. Kitts,
Nevis, and Anguilla) -- all of which are scZf-
governing but rely on the United Kingdom for defense
and diplomacy; and (c) the colonies of British Hon-
duras, Montserrat (in the Leeward Islands), and the
British Virgin islands. The Bahamas and Bermuda
would not be affected significantly by Britain's
joining the Common Market and are not discussed in
this memorandum.
Note: This memorandum was produced solely by CIA.
It was prepared by the Office of Economic Research
and was coordinated with the Office of Current Intel-
ligence
CONFIDENTIAL
25X1
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Background
1. The Caribbean Commonwealth economies are
characterized by narrow resource bases, very small
markets, strong population pressures (especially in
the islands) 'and heavy dependence on foreign trade.
Agriculture remains the dominant activity, providing
a major portion of the food supp~; y and some exports.
Bauxite in Jamaica and Guyana and oil in Trinidad-
Tobago are the only important mineral resources.
About :`our-fifths of the region's 4.7 million people
inhabit the islands, which have a population density
approaching 500 persons per square mile -- 14 times
the Latin Nnerican average. Although Guyana and
British Honduras have lightly settled hinterlands,
arable land.1n the islands is in increasingly short
supply. Population growth typically amounts to 2%
to 3% annually, and unemployment amounts to k:stween
:15% and 25% of the labor forces. Annual per capita
output ranges from only $215 in the Windward Islands
to $770 in Trinidad-Tobago (see the table).
2. The region's import needs are re1.atively
large, equaling about 40% of gross national product
on the average. Exports consist mainly of bauxite,
petrol-aum, sugar, and bananas, and cover only about
two-thirds of the import bill. Additional foreign
exchange is obtained from tourism -- a particularly
important industry in Jamaica and Barbados -- and
from foreign aid and private investment. The
region's c:.osest economic relations are with the
United States, the United Kingdom, and Canada.
3. Although the predominantly Negro populations
of the larger Caribbean Commonwealth members have
in most instances won independence since the late
1950s and have elected black-led governments, long-
standing social and economic grievances have spawned
influential black rationalist movements. Capitaliz-
ing on widespread discontent with economic progress
and domination of business by white citizens and
foreigners, nationalists have condemned the govern-
ments as black fronts manipulated by white power and
have precipitated sporadic violence. Government
efforts to counter the nationalists' highly emotional
appeals may well hamper economic expansion. The
regimes in Guyana and Trinidad-Tobago have demanded
greater equity participation in the bauxite-alumina
and petroleum industries, respectively. Similarly,
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Caribbean Commonwealth Members: Selected Economic Characteristics a/
Jamaica
Trinidad-Tobago
Barbados
Guyana
Beit-ish
Honduras
Windward
islands
Leeward
Islands b/
Area (square miles)
4,410
1,980
166
83,000
8,870
826
367
Population (million persons)
2.0
1.0
0.26
0.75
0.12
0.39
0.14
Economic growth rate (average percent,
4.6
4.3
2.9
4.3
..A.
N.A.
N.A
1964-68)
.
Unemployment rate (estimated percent)
Per capita gross national product (US $)
Value of exports cf
(million US $, f.o.b.)
Z Principal export items
V A
20-25 15
550 770
219 244
Bauxite, Crude oil,
alumina, petroleum
and products,
sugar and sugar
United United States,
States, United King
'meted dom, CARIFTA
Kingdom, countries
Canada
15 20-25
430 310
26 104
15 15-25 15-25
390 215 340
10 22 8
Sugar, Sugar, Sugar, Bananas, Sugar and
rum, and bauxite lumber, sugar, molasses
molasses alumina, and and
and rice citrus spices
fruits
United United United United United
Kingdom, Kingdom, Kingdom, Kingdom, Kingdom,
United United United United United
States, States, States, States, States,
CARIFTA Canada Mexico Canada Canada
countries
Net earnings from tourism (million US $) 76 4 15-1/2 -3 N.A. 2-1/2 d/ 5 d/
a. Data are for the moat recent year avas Is, generally 1968 f617-population an foreign trade dat-2 but as early as 1964
for certain gross national product estimates. -
B. - IncZuding British Virgin Islands (population, 11,000; area, 69 squa_-e -miles).
c. 14xeZuding reexports. For Trinidad-Tobago, exports of petroleum products derived from imported crude oil are valued at
the 'processing fee" negotiated by the government and the oil companies.
d. Figure for 1962; earnings are sabstartiaZly larger now.
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the Jamaican government is pressuring the bauxite-
alumina industry for a larger profit share and more
effective participation in operations.
Importance of Commonwealth Trade Preferences
4. The Commonwealth Preference System provides
guaranteed quotas, reduced tariff rates, and pref-
erential prices for members' agricultural exports to
the United Kingdom. Consequently it is now of major
importance only for the smaller Caribbean islands,
where most exports still consist of agricultural
commodities. Sales under the preference system make
up 80% of exports for the Windward Islands, 64% for
Barbados, and 58% for the Leeward Islands. Once
equally important in the exports of Trinidad-Tobago,
Jamaica, and Guyana, preferences have become less
consequential as the countries developed mineral
exports. The share of exports aided by the pref-
erence system now approximates 20% for Jamaica, 16%
for Guyana, and 7% for Trinidad-Tobago. British
Honduras exports mostly sugar and canned citrus prod-
ucts, but preferential sales to Britain make up only
26% of total exports.
5. Sugar and bananas are the region's main
agricultural :xports and chief beneficiaries of
preferences. Under the Commonwealth Sugar Agreement,
the region has a quota for raw sugar exports of
757,000 metric tons annually in 1969-71 and probably
will receive similar quotas for 1972-74. These sales
are made at a preferential price renegotiated every
three years. During 1968-69, deliveries to the
United Kingdom averaged some 730,000 metric tons
annually, or about two-thirds of total sugar exports.
Britain paid 5.1 cents per pound for this sugar, or
1 to 3 cents above the fluctuating world market
price during this period. Preferential sugar exports
accoui;t for only 13% of the region's total exports
but 58% of the Leeward Islands' exports (see the
chart).
6. Bananas are expc.rted under a quota system
that assures the Commonwealth Caribbean 90% of the
British market. While there is no price guarantee,
exclusion of competitors, particularly those in
Latin America, results in prices substantially above
world market levels. Banana exports to the United
Kingdom totaled about 330,000 metric tons in 1968
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EXPORTS* OF THE CARIBBEAN COMMONWEALTH REGION
Sugar
? Bananas
? Spice
m
Date are for 1967 for WIndwarn and Leeward Wanda,
and 1966 for other members,
GUYANA BARBADOS
I Dominica, Grenade, St. Lucie, St. Vincent
bAntlgua, St. Kitts, Montserrat, Br. Virgin Islands
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and provided 5% of the region's total export earn-
ings. Nearly 80% of the Windward Islands' exports
and about 8% of Jamaica's exports consisted of
bananas sold to the United Kingdom. Spices, fresh
citrus fruits, and a few other tropical crops also
are exported under the preference system but earn
only a million dollars annually.
British Aid to the Caribbean
7,? British aid to the Commonwealth Caribbean
totals only $15 million to $25 million annually,
consists mostly of grants, and goes mainly to the
smaller islands as well as to British Honduras.
Budget support for current expenditures, confined
almos,'c entirely to the smaller islands since the
mid-1960s, totaled $5.6 million in 1968. In addi-
tion, all members except Jamaica and Trinidad-Tobago
receive grants for capital prcjects. In 1968,
development grants approximatad $11 million and
accounted for two-thirds of the capital expenditures
of the smaller islands and British Honduras. Britain
also provides funds for 150 technicians' salaries
and for various other small assistance programs.
Implications of British Entry
into the Common Market
8. British membership in the Common Market
presumably would require revision and, eventually,
the ending of the Commonwealth Preference System.
The impact on the larger Caribbean members --
Jamaica, Guyana, Trinidad-Tobago, and British Hon-
duras -- would be small because the transition
period probably would be long and they no longer
depend heavily on preferences. The smaller islands'
exports to the United Kingdom could be hurt seriously.
But with a combined population of only 800,000 people,
they would require only moderate foreign aid receipts
or trade concessions from other countries to make up
the difference.
9. Since EEC members have temporarily retained
some special economic relationships with their former
colonies, Britain probably will try to obtain similar
arrangements for the less developed Commonwealth
members. The Commonwealth Sugar Agreement almost
certainly will be maintained through 1974 and might
be retained in modified form for several years
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thereafter. Continuing preferences for Caribbean
banana exports to Britain should also he possible,
inasmuch as several EEC countries have such.arrange-
ments. The E PC has the ultimate goal of establish-
iny single policy for imports of agricultural
products, but various temporary preferential arrange-
ments may last for many years.
10. Even if Britain joined the EEC soon and dis-
mantled its preference system promptly, only the
smaller Caribbean islands' exports probably would
be hit hard. If forced to sell sugar at the world
market price, most if not all of the Caribbean
governments would have to subsidi--e the industry to
sustain production levels -- a common practice around
the world. If the region received 3.25 cents a
pound* for sugar now going to Britain instead of the
5,1 cents that it actually pays, exports would fall
by about $30 million, or 5% of the 1968 total. For
Barbados and the Leeward Islands, however, export
earnings would drop by 23% and 21%, respectively.
Without preferential access to the British market,
Jamaica and the Windward Islands likewise would
have difficulty selling their bananas. Competition
from Latin American and African producers probably
would substantially reduce Caribbean banana exports,
which now amount to $30.million to $35 million
annually.
11. For several economies, the impact of reduced
export earnings on import capacity would be softened
by relatively large receipts from tourism, remit-
tances from abroad, and capital inflows, unless
nationalism and violence depressed them. In recent
years, net receipts from nontrade transactions have
equalled over half of Jamaica's and Barbados' exports
and perhaps exceeded the Leeward Islands' exports.
Loss of all preferential exports to the United King-
dom probably would reduce the region's foreign
exchange income by only 5% to 6%. The impact would
be greatest for the smallest islands, because their
export loss would be substantially higher than the
*-This- is the minimum price objective of the Inter-
national Sugar Agreement. The world market price
ranged from 1.9 to 8.5 cents on an average annual
basis during the 1960e and recently has approximated
4 cents.
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9 -
CONFI,DENTIAL
countries.
at least reapportioning its aid to the Commonwealth
Caribbean, which has averaged $21 million annually
in recent years and has gone mostly to the larger
regional average and nontrade sources of foreign
exchange in most instances are relatively small.
1.2. Because of pressure from domestic sugar
producers and foreign policy objectives elsewhere,
the United States would find it difficult to sub-
stantially increase the Commonwealth Caribbean's
present sugar export quota of 206,000 metric tons
(4.7% of the quota for all foreign suppliers). US
sugar demand grows only slowly; domestic producers
share in the increase by law; and unused quotas
generally are allocated proportionately among West-
ern Hemisphere suppliers. Presidential authority
to make special allocations of unused quotas for
Puerto Rico and other suppliers, if they are judged
to be in the national interest, has been exercised
only for the Dominican Republic's benefit. It is
even possible that the overall quota for foreign
deliveries will be reduced when the US Suaar Act is
revised in 1971, because domestic producers are
pressing strongly for a share of Puerto Rico's short-
fall, which rose to some 700,000 metric tons in 1969.
Bananas and most other Caribbean crops have unre-
stricted access to the United States, but US producers
no doubt would oppose efforts to reduce tariffs on
fresh and processed citrus fruits from th