Difficult choices for the Caribbean – Dominican Today

The View from EuropeDavid Jessop

Can the Caribbean avoid being caught up in the accelerating east-west struggle for global influence? Is the region likely to find itself in a bidding war, dancing to the rhythm of dollar diplomacy, as Jamaicas former Prime Minister, Bruce Golding, has suggested?

Reading the communiqu from the recently held G7 summit, it is hard to avoid the conclusion that the consensus arrived at by wealthy western nations on relations with China and Russia, the promotion of shared values, and investment in post pandemic economic recovery, will not be used to attempt to seduce the region.

Although the meeting held in Englands far Southwest touched on multiple issues, it is the future approach agreed towards China and its Belt and Road Initiative, and on corporate taxation which will likely become the most complex future issues that Caribbean governments must now respond to.

Despite differences between the US and EU about the detail, there was, according to US officials, a common recognition of the threat China posed.

In the final communiqu and at subsequent press conferences, it was made clear by President Biden and others that the G7 intend trying to counter Chinas growing global influence. Their objective is to offset its economic rise by offering developing nations an alternative infrastructure plan. This is intended to rival Beijings 2013 Belt and Road infrastructure and trade Initiative in which Jamaica, Trinidad, the Dominican Republic, Cuba, and many other nations are already participating.

The plan, President Biden said, is to create a values-driven, high-standard, transparent financing mechanism that will provide and support projects in four key areas: climate, health, digital technology, and gender equity.

Reflecting this, the communiqu makes clear that the G7 will continue to consult with its international partners on what it describes as competition in the global economy and collective approaches to challenging non-market policies and practices. The document links such new initiatives to spelt out concerns about respect for human rights and fundamental freedoms.

The approach is a belated recognition that Chinas rise to global economic preeminence is likely, and a fear that its values, system of government, and growing military strength may eclipse the global reach and influence of the US and its G7 partners: Canada, France, Germany, Italy, and Japan, plus the European Union.

Although the details of the G7s proposed Build Back Better World Partnership initiative have yet to be spelt out, it would appear to involve in the first instance the creation of a high level G7 committee to consider according to President Biden, how to meet the more than US$40 trillion needed for infrastructure in the developing world.

The emphasis will be on infrastructure investment in low- and middle-income countries and in Africa. It will also involve other nations in seeking to orient development finance tools to address climate change; health systems and security; digital solutions; and advance gender equality and education. It will involve, the communiqu suggests, strategic partnerships that are market led, involve private sector capital, and support from national and development financing institutions.

After the summit, President Biden chose to place the initiative in the context of a contest not with China per se, but with autocrats, autocratic governments around the world, as to whether or not democracies can compete with them in the rapidly changing 21st century.

The inference is that by placing support in the context of values and competition for influence, the G7s leaders and those attending a subsequent NATO meeting have begun to frame the parameters of a new sort of cold war.

Chinas response has been rapid and unequivocal. As a group composed of developed countries, the G7 should contribute more to helping developing countries accelerate their development rather than drive conflicts and divergences to disrupt the process of global economic recovery, Chinas Foreign Ministry spokesperson, Wang Wenbin, told a press briefing in Beijing. Any attempt to meddle in Chinas internal affairs, undermine Chinas sovereignty, or tarnish Chinas image in disregard of basic norms of international relations is doomed to fail he added.

Writing recently in the Jamaica Observer about a coming cold war, former Prime Minister Golding, recognized the problem the G7s new thinking poses for the Caribbean. He noted that Washington is almost certain to insist on loan, grant and investment conditions designed to discourage recipient countries from engagement with Chinas Belt and Road. Observing the significantly greater leverage the US has in the region, he suggested that the Caribbean needs to start thinking now about how it responds to this new struggle between two economic superpowers with both of which we have comfortably enjoyed such good relations.

At their meeting, the G7 also agreed to continue trying to reach consensus on a global minimum tax of at least 15% on a country-by-country basis through the G20 and OECD, with the objective of reaching agreement this July when G20 Finance Ministers and Central Bank Governors meet.

The measure is aimed, the US says, at reversing a 40-year race to the bottom in relation to where tax liability is due. However, the initiative potentially threatens to undercut Caribbean fiscal sovereignty, every economy in a region where countries attract investment through low corporate taxation and tax holidays, and end legitimate business structured through the regions offshore financial centers. In doing so, it raises serious questions about future Caribbean growth, sustainability, job creation and the ability to fund education, health care and social provision, at just the moment the region is struggling to address worsening pandemic related indebtedness.

How quickly any of what the G7 has proposed will materialize, remains to be seen. This is because of the sheer complexity of implementation, its financing, and maintaining unanimity, when a possible return to Trumpist, America first unilateralism in 2025 has begun to be factored into medium term thinking in Europe about China, global trade, and US reliability.

By virtue of its location, smallness and need for development, the Caribbean will continue to struggle to be the mistress of its own destiny unless it can achieve unity of purpose, new thinking, a clear vision, and real-time execution. The coming chill in relations between the West and China will make finding solutions to the problems the region faces more challenging.

These are the themes that this column will now explore as after 26 years of continuous publication it moves from being weekly to monthly.

David Jessop is a consultant to the Caribbean Council and can be contacted atdavid.jessop@caribbean-council.org

Previous columns can be found at https://www.caribbean-council.org/research-analysis/

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Difficult choices for the Caribbean - Dominican Today