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AmericasAugust 3 2009

Ralph Gonsalves

Ralph Gonsalves, St Vincent and Grenadines prime ministerThe currency union of the Organisation of East Caribbean States is eyeing additional members and full economic union status. The prime minister of St Vincent and the Grenadines ponders the future of the OECS and its impact on the wider Caricom group of countries. Writer Brian Caplen
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Ralph Gonsalves

Currency unions are frequently talked about but seldom realised and there are only a handful in the world. One of the few is the eastern Caribbean currency union, which encompasses Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St Kitts and Nevis, St Lucia and St Vincent and the Grenadines, and dates back to 1965. All belong to the Organisation of East Caribbean States (OECS) which also includes the British Virgin Islands. Now the plan is to link the OECS with Trinidad and Tobago and possibly Barbados to turn it into a fully fledged economic union with a regional assembly. Other Caribbean nations such as Jamaica and Belize fear a beefed up OECS will undermine the broader Caricom (Caribbean Community) grouping with its own single market. The prime minister of St Vincent and the Grenadines, Ralph Gonsalves, explains why he is pushing for the agreement.

Q: What is the thinking behind the plan for an OECS economic union?

A: In the OECS at the moment we have the deepest form of regional integration in the Caribbean and this rests on certain important treaty arrangements which are all in our domestic laws. First, the Treaty of Basseterre, which set up in 1981 a range of functional co-operation mechanisms and purposes. Second, the intergovernmental agreement which established the eastern Caribbean currency union and the central bank [the Eastern Caribbean Central Bank].

Those two documents - the treaty and the agreement - are part of domestic law. In relation to the matter of security we have a similar agreement which is also in domestic law, a regional security system, one that includes Barbados. Then we have a single regulatory authority for telecommunications in a single telecommunications act. We have also evolved co-operative measures such as bulk purchase of pharmaceutical products and so on and so forth.

In a fundamental sense really they are the core elements for an economic union. But we want to extend this and to do this we have to alter the governance arrangements. We have to devolve greater authority to the regional institutions within the OECS. And that's why we have to recast the OECS authority, which is a law-making entity under the draft OECS treaty, but also to provide a legislative filter though an indirectly elected OECS assembly. In some senses it would have features more advanced than the EU, in some senses with features less advanced.

Q: How would it compare with the EU?

A: We are more advanced in respect of the currency union. Of course you have the euro in the EU, but the UK and other countries are not part of the euro. But all our countries are part of the OECS (single currency) except the British Virgin Islands, which uses the US dollar.

We are less advanced in the sense that the assembly we are looking at doesn't have quite the same powers as the European parliament. It wouldn't be directly elected for the time being; it would be indirectly elected by the respective parliaments although I am sure that would evolve.

We would be appointing a commissioner for each country, resident in their own country, but working with the director-general or chief executive office of the OECS to actually run the organisation. You will have a greater national input by having the commissioners but will retain a regional focus. And each of those commissioners would head in their own country a regional integration unit which has already been established.

Q: When will the treaty come into force?

A: It is being discussed at the moment. We hope to sign the treaty at the end of December to be operational in June next year. All the independent countries in OECS - that is to say Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, St Lucia, St Vincent and Grenadines and Montserrat - would be part of the OECS economic union. Montserrat [which is a UK overseas territory] has to receive the requisite entrustments from the UK government but in so far as the OECS economic union is concerned that will be fairly straight-forward because it is just a question of extending what already exists for the OECS and the currency system.

Q: Will Trinidad and Tobago join?

A: Trinidad and Tobago has seen the success of the OECS arrangements and our quest for an economic union. At the same time the country realises that Caricom is unlikely to move swiftly to a single economy, either for economic reasons such as the question of the currency arrangement, or for political reasons such as some countries within Caricom not wanting to have a central authority structure like the one we have evolved in the OECS and are now evolving further in the OECS economic union.

We are in a single market in Caricom but the odds of us moving to a single economy are low. One issue is the currency arrangements but also a single economy, as exists in Europe, has a level of central political arrangements that is unlikely to be agreed upon in Caricom as a whole. I suspect Jamaica would not want this, nor Belize, to name two countries. The Bahamas is not interested at all in the single economy or indeed in the single market. Trinidad and Tobago is a good fit because the economies of the OECS are already integrated with it. Shareholders from Trinidad own a lot of the banks, insurance companies, distributive trades and a lot of the manufacturing in the OECS states. [St Vincent's] economy is more integrated with Trinidad and Tobago in terms of economic transactions and trade than it is with St Lucia's economy, other than the currency arrangement. Barbados also has deep links of a practical day-to-day kind [with the OECS]. Most of Barbados's trade in Caricom is with the OECS market.

Q: How would you integrate the Trinidad and Tobago dollar with the East Caribbean dollar?

A: In the case of Trinidad and Tobago, the rate of exchange is six Trinidad dollars to one US dollar. In the case of the OECS and the eastern Caribbean currency its 2.7 to one US dollar. Trinidad and Tobago would have 11 months of reserves for imports, we will have three and a half months, Barbados has a strong dollar too so maybe five months. It becomes easier to work out parity arrangements between them than you would be able to say with Jamaica or Guyana, which are just out of the ballpark. Technical studies have shown that.

Q: How is the rest of Caricom reacting to the idea?

A: Jamaica is concerned that it may subvert or undermine Caricom. We don't think so. President Jagdeo [of Guyana] may share Jamaica's position but the rest of the leaders don't. Historically we have always had different circles of integration.

Q: The same critique can be levelled against Caricom members joining the A: Bolivarian Alternative for the Americas (ALBA), promoted by Venezuela?

With ALBA it's a similar thing. I signed on to ALBA and you can see the document I signed. Among the things we have in that document is that there is no requirement for reciprocity on trade matters. You don't have to give reciprocal treatment to any of the ALBA members which would subvert the Caricom arrangements. Second, ALBA is complementary - to and not subversive - to other circles of integration such as Caricom and the OECS.

For one thing Petrocaribe [an alliance to sell Venezuelan oil at preferential rates] is part of ALBA and there are a lot of resources and special programmes to be got out of Petrocaribe and St Vincent will have access to the resources of the ALBA Bank. ALBA is not a military union, it's a social and political arrangement.

Q: What about the influence of Venezuela?

A: Venezuela has never asked St Vincent and the Grenadines or Dominica or Antigua and Barbuda to do anything which we would not otherwise have done. There are other countries in ALBA, in Latin America and Cuba. They have a virtual currency, the sucre. We are not part of that because we have the eastern Caribbean currency union. In other words, where there is a conflict [of interest] we stay where we are and that shows the flexibility of ALBA. ALBA is grounded in certain basic principles that are like motherhood: complementarity of economies, solidarity, respect for sovereignty and independence, emphasis on progammes for the poor and the marginalised. Only someone with extreme right-wing views or off the planet would disagree with these things.

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Question time: St Vincent and Grenadines prime minister Ralph Gonsalves answers questions at the Caricom Heads of State Summit in Guyana

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