In 1973, the smaller, largely English-speaking countries of the Eastern Caribbean launched the Caribbean Community and Common Market (CARICOM), an integration plan intended to coordinate and enhance their collective economic and social development. CARICOM's strategy for finally achieving a "single economic space" rests on implementing the Caribbean Single Market and Economy (CSME), formally established on January 1, 2006 and intended to be fully in place by 2015. CARICOM is a highly trade dependent region undergoing major changes to its economic relationship with the world. Adjusting to these changes through the CSME is its primary development challenge. To fulfill the CSME vision, its members would have to adopt considerably deeper commitments to economic integration. The Caribbean Basin has been a longstanding interest of the United States, and the success of CARICOM directly affects stability in the region. It therefore has important implications for U.S. trade, investment, immigration, drug interdiction, and national security policies. Although small in size, CARICOM's trade and investment relationship with the United States may be poised to become a more prominent issue as the region adjusts to the changing external environment, not the least of which includes the ongoing erosion of trade preferences with Europe and the United States, as well as the concomitant rise of bilateral and regional free trade agreements in the region. This report evaluates CARICOM's development and implications for U.S. foreign economic policy. It will be updated periodically. The trends suggest that CARICOM trade policies were limited in advancing intraregional integration. Unilateral preferences with the EU are being replaced by a reciprocal Economic Partnership Agreement (EPA), while the relative benefit of unilateral trade preferences with the United States continues to erode as multilateral liberalization and U.S. reciprocal trade agreements, beginning with the North American Free Trade Agreement (NAFTA) in 1994, expand. The strong dependence on external markets reinforces the rationale for completing the CSME. EU and the Economic Partnership Agreement (EPA)

CARICOM's most immediate trade policy challenge is to implement the EPA concluded with the EU on December 16, 2007. Third, the importance of the U.S. economy as a trade partner will likely hinge, in part, on how U.S. trade policy responds to changes in CARICOM countries, particularly given diminishing role of the U.S. preferences. Managing the process of "insertion" into the global economy is the overriding task.
In 1973, the smaller, largely English-speaking countries of the Eastern Caribbean launched the Caribbean Community and Common Market (CARICOM), an integration plan intended to coordinate and enhance the collective economic and social development of 15 countries. After three decades of incremental success, CARICOM's strategy for achieving complete economic integration now rests on implementing the Caribbean Single Market and Economy (CSME), formally established on January 1, 2006, and intended to be fully in place by 2015. CARICOM is a highly trade-dependent region undergoing major changes to its economic relationships with the world. Adjusting to these changes through the CSME is its primary development challenge. To realize the CSME vision, the member countries would have to implement considerably deeper commitments to integration.
The Caribbean Basin has been a long-standing strategic interest of the United States. The success of CARICOM, as well as the continued stability of the region, have important implications for U.S. trade, investment, immigration, drug interdiction, and national security policies. Although small in size, CARICOM's trade and investment relationship with the United States may become a more prominent issue as the region adjusts to the changing external environment.
CARICOM faces dual challenges in its quest for economic integration through the CSME. First, it must complete the intraregional integration scheme, including tightening a loose common external tariff and intraregional trade policy, integrating more fully labor and capital markets, and deepening "functional cooperation" – pooling resources to improve efficiency in the delivery of public services. Second, it must devise and implement strategies for "inserting" the CARICOM economies into a dynamic and competitive global economy in the wake of expiring preferential trade arrangements with its two largest trade partners, the United States and the European Union (EU).
Two trade policy issues command immediate attention. Implementing the EU Economic Partnership Agreement (EPA), completed in December 2007, is the first. The EPA is a reciprocal, WTO-compliant accord that replaces unilateral preferential arrangements in place since 1975. Second, the Caribbean Basin Trade Partnership Act (CBTPA) preferences will expire on September 30, 2008, unless extended by the U.S. Congress. Although these preferences currently apply to only seven CARICOM members and have already been eroded considerably by U.S. free trade agreements with other countries in the region, CARICOM strongly advocates their renewal and expansion as it evaluates the costs and benefits of pursuing a reciprocal FTA of its own with the United States. This report evaluates CARICOM's development and implications for U.S. foreign economic policy. It will be updated periodically. For more on Caribbean issues, see CRS Report RL34157, Caribbean-U.S. Relations: Issues in the 110th Congress, by [author name scrubbed], and CRS Report RL33951, U.S. Trade Policy and the Caribbean: From Trade Preferences to Free Trade Agreements, by [author name scrubbed].