CARIBBEAN BASIN INITIATIVE (CBI)
The Caribbean Basin Initiative (CBI) was a unilateral and temporary United
States program initiated by the 1983 "Caribbean Basin Economic Recovery
Act" (CBERA). The CBI came into effect on January 1, 1984 and aimed to
provide several tariff and trade benefits to many Central American and
Caribbean countries. It arose in the context of a U.S. desire to respond with
aid and trade to leftist movements that were active in some countries of the
region, such as the guerrillas in El Salvador and the Sandinista government in
Nicaragua. Provisions in the CBERA prevented the U.S. from extending
preferences to CBI countries that it judged to be under the influence of
Communists or that had expropriated American property.
The "Caribbean Basin Economic Recovery Expansion Act" of 1990,
known as "CBI II", made the CBI permanent. However, once the U.S.
entered into the North American Free Trade Agreement (NAFTA) in 1994 with
Mexico it became easier for Mexico to export its products to the U.S. CBI
countries had lost their advantage relative to Mexico, a major competitor in
industries such as textiles and apparel, so they sought to increase their own
preferences and achieve "NAFTA parity". Those efforts were not
successful until the 2000 Caribbean Basin Trade Partnership Act, which was
broadened in 2002. Several exports from the region continue to receive
preferential status in the U.S., however those preferences will likely be
replaced by bilateral free trade agreements, and possibly by the proposed Free
Trade Area of the Americas.
In its fundamental elements, the
U.S. trade and tariff policy historically has treated both the Caribbean Basin
countries and Mexico, in many respects their competitor and a major U.S.
trading partner, in an equal manner. Both are accorded most-favored-nation
(nondiscriminatory) treatment, to both apply the general tariff advantages of
the “production sharing” (also referred as “offshore assembly”) provisions
(which have been, in both cases, extensively used by U.S. firms), and, prior to
the entry into force of the North American Free Trade Agreement (NAFTA), both
were designated beneficiary countries (BDCs) of the U.S. generalized system of
preferences (GSP). Until NAFTA, however, most Caribbean Basin countries had a significant
advantage over Mexico because of their participation in the Caribbean Basin
Initiative (CBI).
With the entry into force, on
January 1, 1994, of the preferential tariff and quota
provisions of the NAFTA, however,
the earlier advantage of CBI countries over Mexico was totally eroded.
Moreover, much of NAFTA’s further staged implementation put CBI countries at a
distinct competitive disadvantage compared to Mexico with respect to a
substantial portion of U.S. imports from either area. The gap would become even
wider with full implementation of NAFTA liberalization (by January 1, 2008). To
mitigate, if not eliminate, the adverse effect of the advantages that Mexico
already had gained and would continue to gain relative to CBI countries,
legislation was introduced in recent Congresses to authorize for imports from
CBI countries tariff and quota treatment that is identical with or very similar
to that accorded Mexico under NAFTA. This treatment would be of limited
duration and, in some instances, with a specific view toward eventual accession
of Caribbean Basin countries to the NAFTA or the proposed Free Trade Area of
the Americas, or conclusion of an equivalent bilateral agreement with the
United States.
To
provide an idea of the nature and scope of changes in trade competitiveness
between the CBERA countries and Mexico that have resulted from the
implementation of the NAFTA, the relevant preferential or special tariff
treatments, as applicable, are described below. The aspects of trade policy
that apply generally to all (or most) U.S. trading partners (e.g.,
most-favored-nation/normal-trade-relations status, or production-sharing
provisions) are not included in any detail.
