by Serena Joseph-Harris
My forthcoming book, The Twilight of America’s Omnipresence: China’s Aggrandizement in the New Era of Multi-polarity analyzes China’s increasing regional profile against the backdrop of power shifts within Latin America and the Caribbean, undergirding ideological divisions, and the challenges now posed to American exceptionalism as China assumes a more or less self-defining course within the region. The book notes that against the backdrop of opportunistic fervor the PRC regarded the 2001-2008 drawdown of US presence within the region (immediately following the events of 9/11) as one of “strategic opportunity.”
The book discusses China’s widening orbit into the Americas as part of a wider and well-calculated strategic progression and assesses the impact of this trend. This article focuses on the potential within the Caribbean Basin for the burgeoning proceeds presently derived from increases in the legitimate investment, trade, and commerce emanating from Beijing and Washington to become entwined with illicitly derived funds generated from transnational crime activities, specifically the trafficking of drugs.
The registration of concern by no means deflects from the avowed commitment of regional governments to adhere to the global regime of benchmarks set by the Financial Action Task Force and equally binding authoritative instruments prescribed by the United Nations and numerous organs of the Organization of American States. There now exists among CARICOM member countries a unified Crime and Security agenda buttressed by an institutional architecture, at the core of which is the Implementation Agency for Crime and Security and a Regional Intelligence Fusion Center.
Insecurity in the Caribbean Basin
Many drivers of insecurity have dominated Caribbean societies over the years, the most important at present being their exploitation as a primary transit zone for the illicit trafficking of drugs and firearms and the associated funneling of illicit proceeds derived from trans-border crime. The United Office on Drugs and Crime in its 2010 Transnational Organized Crime Threat Assessment deemed drugs “the highest value illicit commodities trafficked internationally.” According to the assessment which meticulously traces flows of illegal profits internationally, drugs now represent a long-term source of income for organized crime groups operating out of the region with linkages in North America, West Africa, and Europe.
Like in legitimate commercial activity, market forces drive transnational crime. The Financial Action Task Force estimated in the late 1980s that roughly US $424 billion (0.8 %) in the United States and Europe or 0.5% of the global GDP would have been available for laundering money. Based on 2009 data this would have amounted to US $1.2 trillion. IMF figures stated that money laundering amounted to an estimated 2% to 5% of the global GDP- approximately US $0.6 to US $1.5 trillion in the late 1990s. A more recent study in the developing world undertaken by William Baker, founder of Global Finance Integrity, based its study on twelve key categories of transnational crime including illicit drugs and firearms trafficking. This study arrived at an estimated US $650 billion in criminal proceeds per annum, the largest sources being derived from illicit drugs (50%), followed by sale/use of counterfeit (39%), human trafficking (5%) and illicit trade in other sectors.
Caribbean Basin tax shelters and specifically those countries falling within the cusp of primary drug transshipment are firmly on the radar of the US International Narcotics Control Report 2012. The Bahamas, the British Virgin Islands, The Cayman Islands and the Dominican Republic have been registered as nations “of primary concern” to the US government. Antigua and Barbuda, Barbados, Grenada, Trinidad and Tobago, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines and Suriname were all deemed to be jurisdictions “of concern” whilst Dominica and Barbuda remain “under monitor.”
The significance of this notification lies in the fact that despite having adhered(albeit at an uneven pace) to the global regime of Financial Action Task Force recommendations, these are identified venues within the region that are considered risks to US interests and/or that of the wider global economy by virtue of one or a combination of several criteria, namely:
- Engaging in currency transactions involving significant amounts of proceeds from international narcotics trafficking
- Vulnerable to money laundering activity due to weak or non-existent supervisory or enforcement regimes or weak political will
- Inimical to US interests Ineffective implementation of laws and /or absence of appropriate licensing and oversight in relation to offshore financial centers.
Established trafficking routes typically follow market forces which means that drugs flow from the less developed countries in the south (Colombia, Peru, Bolivia) to more developed countries in the north. 38% of the global demand for cocaine originates from the Americas – Peru, Colombia and Bolivia presently account for the bulk of global supplies. The phenomenon renders the Caribbean Basin a transshipment locale of regional and international concern. These trends and patterns are corroborated in the United Nations Office on Drugs and Crime Annual Reports 2009, 2010.
Alongside this phenomenon, Caribbean Basin countries have been the recipients by both Chinese firms and the government of the People’s Republic of China of a preponderance of lucrative projects and foreign direct investments (FDIs) and this unprecedented level of commercial and trade activity exceeds usual parameters.
In terms of commercial significance the Caribbean archipelagic chain stretches along a generally south-east direction from Florida to the northern tier of South America, facilitating relatively narrow passages through which commerce is allowed to navigate. The Strait of Florida between Key West and Havana is one of the wider passages ninety miles across and comparatively smaller than the straits between Cuba and Haiti and the tiny islands of the Lesser Antilles and between Venezuela and Grenada.
44% of tonnage entering the US transits the Caribbean Basin. Additionally many minerals of strategic and commercial significance to the United States originate within South America and cross the Caribbean Basin along chartered routes, as for example copper from Chile and Peru, tin from Bolivia along with manganese and chromium for steel production, and nickel and cobalt, bauxite (of which aluminum is a principal derivative) from Jamaica, and natural gas and ammonia from Trinidad and Tobago.
Traditionally US policy has been to maintain regional dominance or at a very minimum exclude clearly hostile or powerful foreign rivals – a position that has been bluntly violated on several occasions in the not too distant past when Cuba served as a Soviet forward base and subsequently in the 1980s – 1990s when Grenada fell to a left-wing military coup and the Nicaraguan government succumbed to revolutionary forces.
China’s relationship with the nations of Latin America and the Caribbean impacts on the U.S. both in terms of the U.S relationship with the region and with China. While the U.S. will continue to be the principal investor, trading partner, and political force in Latin America and the Caribbean, China will undisputedly be the most powerful and visible new player. The Caribbean is part of a more all-encompassing Chinese strategy to:
Assume increasing visibility along trade routes and critical geo-strategic choke points within the hemisphere as part of its extended global reach.
Infiltrate fuel markets as in the case of liquefied natural gas produced by Trinidad and Tobago
Consolidate the country’s food supply hence the procurement of sugar cultivating lands in Jamaica
Secure access to primary products such as bauxite
Gain a foothold and access to the US market through invigorated trade with jurisdictions such as the Bahamas
Exploit opportunities offered by tax shelters
Invest heavily in high-grade infrastructure projects funded by loans from state owned banks and utilizing predominantly Chinese (cheap) labor
China is presently the third largest investor in the Caribbean with the US and European Union holding the top spots. Its share of foreign investment is currently roughly 9% with a total trade volume exceeding US $156 billion. Chinese multinationals have played a significant role in the global mergers and acquisitions market as well as in Foreign Direct Investment (DFI) activity. Their motivations are manifold:
- To enlarge their distribution networks
- To seek efficiency via lower cost destinations for operations, production, and labor
- To secure raw material and energy resources
- To seek out strategic assets including brand names and new technologies
- To diversify business portfolios both in terms of sectors and regions
- To boost China’s foreign exchange reserves
- To maintain high domestic savings rates
- To seek out low taxes to benefit sales revenues
- To avoid trade barriers such as quantitative restrictions and anti-dumping laws
The Caribbean has traditionally enjoyed trading partnerships with the United States, the United Kingdom and Canada. More recently this has widened to include the BRIC membership among which includes China. According to the International Trade Center’s Trade Map Database the principal exports from CARICOM to China are aluminum oxide, lumber tropical hardwood, bitumen, asphalt, ferrous waste, scrap of iron or steel, non-coniferous logs, poles, piles and non-sawn sawn conifers, electric conductors for voltage, and copper-zinc base alloys. Conversely the region is a recipient of an array of Chinese exports primarily light manufactured goods such as car parts and footwear and clothing.
In the wake of the recently concluded Thirty-Third CARICOM Regional Summit hosted by the government of St. Lucia on July 04, it was noted that some earnest attempts must be made by CARICOM to repay the exponentially increasing loans from China and elsewhere. Failure to so do will give lender countries considerable leverage in the economic and political affairs of the small beholden and indebted Caribbean states. The framework for operating the free trade area, specifically Protocol IV, Article 19 which addresses the issues of origin of goods, cooperation in customs administration, and the operation of a common external tariff aim summarily at refraining from policies that may prove to be injurious to small business enterprises and by extension inconsistent with the intent of the Caribbean Single Market and Economy Treaty. Governments are fully committed to ensuring that this balance is maintained. Indeed this was alluded to by the Prime Minister of Jamaica, Portia Simpson-Miller who, while reiterating her commitment to regionalism, observed that trade imbalances were in fact a distorting feature in the 15 member trade bloc. Among the more lucrative and notable ongoing Sino-Caribbean projects are:
- A US $600 million deep water project in Suriname
- A US $462 million cash infusion into a beach resort in the Dominican Republic
- A US $1billion container port in Barbados
- A US $17 million cricket stadium in Dominica along with US $122 million in economic assistance
- A US $100 million purchase of majority stake in Omai Bauxite from the government of Guyana
The aforementioned book advocates a number of solutions that must go beyond well-established military approaches such as the multinational naval presence and regional maritime security capacity. According to the International Monetary Fund the tight fiscal positions of regional governments have placed many economies in tenuous situations such as: extended credit facilities (Haiti), macroeconomic and debt restructuring (Jamaica), requiring the Extended Credit Facility (Grenada), standby arrangements (Antigua and Barbuda), making use of the Exogenous Shocks Facility(Dominica, St. Vincent and the Grenadines, St. Lucia), and emergency assistance(St. Kitts and Nevis).
Part I of the book discusses issues around strategic approaches to development (along similar lines to those advocated in the NOREF 2011 study on state fragility and peacebuilding) and more specifically the impact of expansionist policies of the U.S. and China within and beyond the Americas. It draws two key conclusions : firstly, that despite the emphasis in global discourse in relation to China’s invigorated diplomacy and rise to global power status, the indications are that the United States will maintain a strategic lead in both hemispheres and secondly, that notwithstanding the emergence of other centers of power, the U.S. and China will continue to feature as the primary global players that are indispensable to the international order for some time to come.
Serena Joseph-Harris is a former High Commissioner of Trinidad and Tobago to the Court of St. James, Co-ordinator of the Governmental Experts Group of the Inter American Drug Abuse Control Commission and designated country representative on the Caribbean Financial Action Task Force Council of Ministers and Plenary of Senior Officials.
Image source: caribbeanfreephoto