The Caribbean Impact: Trade, Economy, Immigration, and Regional Security While the movement of peoples and goods between the contiguous land borders of the United States and Canada and the United States and Mexico represents the major cross-border movement, the “Third Border” of the United States, namely the Caribbean, is also critical, raising important economic and security concerns that Washington cannot afford to overlook.

The Caribbean is the tenth-largest trading partner of the United States, a major regional source of migration and visitors to the United States, and an important destination for both North American tourists and business investments. In the immediate wake of the September 11 attacks, turning off the transportation spigot that carries travelers and cargo to and from the United States jeopardized the future of already fragile Caribbean economies and added to potential scenarios for regional instability.

Major sectors of Caribbean economies — air transport, tourism, agricultural commodity exports, manufacturing, mining, and capital markets — depend on ready access to the U. S. economy. Even by mid-2002, the economic impact on the Caribbean was still severe. Tourism is the single largest earner of foreign exchange in 16 of 28 countries in the Wider Caribbean region.

Even before September 11, tourism, which directly or indirectly employs one in four Caribbean citizens and generates income for the region in excess of US$2 billion per year, had been in decline as a result of the downturn in the global economy. Weeks after the tragic loss of over 3,000 innocent civilians — including at least 160 nationals from 15 Caribbean countries — the short-term outlook for Caribbean tourism was grim.

International leisure passengers cancelled flights, air carriers reduced their services, cruise ships shifted their destinations, and hotel staffs were retrenched. The negative multiplier effect on businesses or investments that depend indirectly on the hospitality industry took hold. Although major tourism-dependent Caribbean countries such as Barbados, Jamaica, and the Dominican Republic responded quickly to the crisis by appropriating financial resources and encouraging other incentives to protect the sector,3 by mid-2002, the industry was in the economic doldrums.

The costs of service disruptions, cancellations, air and cruise-ship traffic decline, increased security, higher insurance rates, and reluctance by leisure passengers to pay higher airfares are yet to be calculated. The overall outlook for global tourism by mid-2002 was cautious because of the unknown repercussions of the war on terrorism, the possibility of a global recession, and a dramatic loss of tourism revenue as U. S. and European travelers continue to postpone or cancel their overseas vacations.

But Caribbean countries are revamping their marketing strategies, negotiating increased airlift, and taking steps to improve the regional tourism product to meet the expected competition from Florida and other global destinations when the industry rebounds. As many of the world’s nations position themselves to combat “terrorism with a global reach,” the Caribbean region likely will experience economic distress in other areas as well.

A decline in foreign direct investment; regional inability to raise international finance; increased costs for the shipment of agricultural and manufactured exports; additional costs for insurance and reinsurance; a decline in remittances to the region (now valued at approximately US$3 billion) because of job losses among Caribbean nationals in the United States, Europe and Canada; and higher energy costs, are all expected as shortand medium-term impacts of the 9/11 tragedy. 4

Offshore financial jurisdictions, already under attack by the Organization for Economic Cooperation and Development (OECD), are coming under more intense international scrutiny as to how they are regulated, to ensure that such sectors will not be used to fund terrorists or terrorism. Offshore financial centers will be under pressure to do more to meet international standards of regulation and best practice, since a major part of the money laundering connected with global terrorism is then routed through banks in North America and Europe.

In fact, most Caribbean offshore centers are not ignoring the renewed threats to their financial services sector and are reviewing their accounts to ensure that terrorist groups or individual terrorists did not use them directly or indirectly to launder money. 5As painful as the post 9/11 economic disruption has been for the region, it will likely prove modest by comparison to that which would follow an attack on the United States by terrorists whose operations are linked to a Caribbean base. By simple virtue of its geographic proximity, the Caribbean offers a potentially attractive staging area for such attacks.

An airliner hijacked after departure from an airport in the northern Caribbean or the Bahamas can be flying over South Florida in less than one hour. Terrorists can sabotage or seize control of a cruise ship after the vessel leaves a Caribbean port. Moreover, terrorists with false passports and visas issued in the Caribbean may be able to move easily through passport controls in Canada or the United States. Also, Caribbean countries are as vulnerable as anywhere else to the clandestine manufacture and deployment of biological weapons within national borders.

The worrisome trend toward closer ties between drug trafficking and terrorism, as in Colombia and Peru, only elevates the region’s risk of becoming an operating center for terrorist organizations. The Caribbean may find itself to be a tempting target for terrorists as well. Ironically, stepped-up domestic protective measures undertaken by the U. S. government may contribute to this, as terrorist organizations find it increasingly difficult to gain access to or operate within the United States.

As experience has shown in Africa, the Middle East, and Latin America, terrorists are willing to look outside Europe and the United States to strike at U. S. and European interests. In addition to the tourist industry, some Caribbean countries are home to major industrial complexes with direct corporate or economic ties to the United States. Trinidad, for instance, plays host to more than 100 companies that produce the majority of the world’s methanol and ammonium sulfate and 40 percent of U. S. imports of liquefied natural gas (LNG).

Virtually all of these industrial complexes have only modest security measures in place, making them highly vulnerable targets. The Necessity for U. S. -Caribbean Cooperation Over the years, there have been efforts to strengthen the region’s security systems, particularly in countries of the English-speaking Caribbean. The stimulus has often been directed at pursuing drug traffickers and their money. However, despite the much heralded “Third Border Initiative,”6 the United States has paid little policy attention to the Caribbean countries as an integral part of its “perimeter defense” structure.

Continued neglect of this agenda by the United States could well undermine stability in the region, thereby fostering the very conditions that its costly investment in domestic security measures aims to counter. Caribbean countries should be encouraged to participate in a genuine multilateral partnership to guarantee as far as possible the mutual security of North America, including the entire Caribbean region. 7 This collaboration, which is in the interest of both regions, should include a review of some clearly counter-productive aspects of current U. S. olicy, including the virtual blind eye it directs at the flow of illegal small arms smuggled into Caribbean countries (exacerbating already serious domestic crime problems), as well as the “repatriation” of sophisticated criminals who might have only the most tenuous claim to birthright or citizenship in a Caribbean country. However, fashioning a workable solution to a transnational challenge such as terrorism poses significant challenges, not the least of which is that the imperative for greater controls risks running headlong into the market imperative for societies and economies to be increasingly open if they are to prosper.

What is clear is that no nation — even a superpower — can tackle this task by itself. The pervasiveness of the global terrorism threat requires a sea change in Washington’s and in the Caribbean’s thinking about regional security. Only a collective approach will work. Still, many Caribbean citizens may see only heavy-handed U. S. unilateralism behind the new counter- terrorism agenda. Certainly, the United States shows every intention of casting a jaundiced eye toward its neighbors. Caribbean seaports may soon find their security measures subject to oversight with the passage of the Maritime and Seaport Security Bill.

Among other things, the bill directs that U. S. inspectors be dispatched to ports in the Caribbean and elsewhere to assess the extent to which foreign ports may pose a security risk for U. S. -bound ships and cargo. These foreign ports will be evaluated against standards almost identical to those in the United States. 8 U. S. Customs has already embraced this approach in seaports under a program that Commissioner Robert Bonner has called the “Container Security Initiative. ” An important element of that initiative is stationing U. S.

Customs inspectors overseas in loading and transshipment ports to inspect suspicious cargo bound for the United States before it is even loaded on a ship. Nations that agree to participate are given reciprocal privileges in U. S. ports. 9 DANTE B. FASCELL NORTH-SOUTH CENTER WORKING PAPER NUMBER EIGHT 5 In principle, Caribbean governments can resist calls by the United States that the region formally adopts new security standards to govern the operations of its seaports and financial sectors, to improve and share cargo and traveler documentation, and to host U. S. inspectors.

However, the price to be paid is likely to be felt quickly in the pocketbook, as the United States takes steps to restrict access to its market by those it deems to be “high risk. ” It is clear that some Caribbean governments have recognized that it is more advantageous to be on the inside looking out of a U. S. security perimeter rather than the alternative. In partnership with the private sector, Caribbean governments are taking steps to upgrade security at airports and other critical locales. Maritime officials have pledged to tighten security on ships and cargo destined for U.

S. ports and are discussing new measures, such as better screening of port staff, improved lighting at piers, increased security patrols, the installation of security cameras, and the acquisition of high-tech equipment to scan electronically millions of cargo containers used in trade between the Caribbean and the United States. 10 The Jamaican government has already ordered Vehicle and Cargo Inspection System (VACIS) X-ray machines for its container ports and has established a Port Security Corps, consisting of 1,762 officers deployed at 17 locations throughout the country.

Trinidad and Tobago is also investing heavily in airport security, including equipment and training, while regional ports servicing the cruise tourism industry have begun to network on security systems. 11 The U. S. government should welcome and support these Caribbean initiatives, as they provide a basis for the only realistic approach to dealing with the fact that anti-American terrorists with a global reach are capable of carrying out catastrophic attacks. On its face, there are two ways to try to prevent terrorists’ potential use of the global transportation networks that underpin global commerce.

First: stop and examine all inbound people, cargo, and conveyances when they arrive within the jurisdiction of the country of destination. Second: examine all people, cargo, and conveyances at the point of origin and transshipment. Inspection at the port of arrival, of course, is how nations have historically policed inbound people and goods. Presumably, the United States could pursue a stepped-up version of this approach without any infringement on the sovereignty of its neighbors or trade partners. As a practical matter, however, if U. S. uthorities inspected any more than its current import inspection rate of 1-2 percent, it would bring global commerce to its knees. This is because there is neither time nor space to inspect more than this tiny amount without creating gridlock at U. S. air or marine terminals or creating border chaos. For instance, when U. S. Customs and immigration officials attempted to perform a 100-percent inspection rate of inbound vehicles and trucks immediately following the September 11 attacks, it created an 18- hour traffic jam at the Windsor, Ontario-Detroit, Michigan border crossings.

Everyone who seeks entry into the world’s largest market would suffer if the United States found itself compelled to exercise increasingly tighter border controls as a means of combating the terrorist threat. Clearly, both the United States and its trade partners, especially those in the Caribbean, have a shared interest in preventing U. S. border inspections from creating costly delays in the flow of commerce. The way to avoid this outcome is to work collectively to relieve the pressure on U. S. ustoms and immigration agents by taking cooperative steps to confirm the legitimacy and to safeguard the integrity of transnational flows of people and goods from their points of origin and throughout the supply chain. The policing of the global trade and travel corridors must move upstream. The private sector and traveling public both in the United States and the Caribbean have important roles to play. The overwhelming majority of international carriers, cargo shippers, and travelers in the region are legitimate.

For their own safety and economic interests, they need to embrace tightened security measures and be prepared to provide proof of their identities and purposes as early as possible. Such cooperation would allow border agencies to determine with more confidence what risk travelers, carriers, and cargo might pose. Verifying the identity and purpose of users or operators at their points of origin could be accomplished through electronic fingerprint technology and cargo- and vehicle-scanning equipment.

Tracking devices, such as electronic tagging and universal bar codes, could be adopted to insure tighter control over commerce. This in-transit accountability would allow authorities to act on intelligence of a potential breach in security before and after arrival at U. S. borders. The work of border authorities must be effectively coordinated and supported by analysts and data management systems that enable more effective targeting. DANTE B. FASCELL NORTH-SOUTH CENTER WORKING PAPER NUMBER EIGHT 6 Beyond Border Control

The vibrancy of a global economy depends on the free movement of people, goods, and services. Quarantining the transportation system in the face of terrorism cannot be the right cure for this disease. Strengthening traditional approaches to border management and control will not work in an era of globalization. Similarly, it is vital for the United States and the Caribbean to find an alternative to “hardened” borders in order to achieve homeland security. The most viable alternative is to look beyond national borders as a line of defense.

Terrorists utilize hemispheric and international trade and travel networks to penetrate borders. There is a strong argument for collaborative “point of origin” controls. These require more credible national border management approaches within departure countries — approaches that also serve the national interests of those countries in dealing effectively with issues such as better facilitation of legitimate trade and travel, while thwarting the activities of arms smugglers, drug traffickers, and terrorists.

But simply relocating the areas where inspections take place is not sufficient. Border control agencies fundamentally need to change the way they do business as well. The kind of “smart border” initiatives being embraced on the U. S. -Canada border, as opposed to the “hardened border” approach being used on the U. S. -Mexico divide, may hold some promise for the Caribbean. 12 While it is clearly in the interests of the Caribbean region and the United States to transform their border management practices, these actions will not happen spontaneously.

What is required is that the United States, Canada, the European Community, the World Bank, the Inter-American Development Bank, and other appropriate organizations be mobilized to support the equipment and training needs of Caribbean border agencies who are willing but currently unable to become active partners in such a regime. Advocates for economic development in the Caribbean should be deeply concerned about the status of border controls. The free trade agenda requires a willingness to reduce barriers to the cross-border traffic of people and goods.

But the 9/11 attacks bolster the position of those who argue that this traffic be tightly controlled so that the bad can be filtered from the good. The free trade agenda also requires sustained political support. However, a widespread sense that “open borders” are undermining important public interests, such as counter-terrorism, drug control, immigration, and public health could prove fatal for generating the political backing for advancing the Free Trade Area of the Americas (FTAA). In short, not doing enough about border control is likely to erode support for free trade.

However, if the United States relies too much on traditional border controls, the result could effectively kill free trade. The only way to extricate the region from this conundrum is to embrace the idea that it might be possible to have the best of both worlds — improved security and improved facilitation in the transborder flows of goods and people. If the United States and the Caribbean are willing to think creatively, they will find that the security imperative to confront transnational threats and globalizing pressures for greater openness need not be inimical.

Accordingly, while the region must be willing to take seriously the need to manage and police the growing volume of global trade, travel, and commerce, it should explore ways for accomplishing this by 1) reforming inefficient border control practices that create unnecessary delays, spoilage, and losses; 2) promoting and incorporating the use of new tracking and data management technologies within regional transportation and logistics networks; 3) forging stronger, more cooperative private and public working relationships among regional regulators, enforcement, and industry officials; and 4) advancing a regime that promotes greater industry self-policing and transparency in the regional and global flows of people and goods. The argument for transformed border management is clear. It is also an important step toward assuring the long-term sustainability of hemispheric trade and economic integration, to ensure that the costs of greater openness do not outweigh its benefits.

It requires a risk-management approach to policing cross-border flows that includes the close collaboration of a major beneficiary of an increasingly open North American continent — namely the Caribbean. More energy must be directed toward gaining greater control over hemispheric maritime and aviation commercial space. If that space cannot be made secure, the pressure from some quarters in the United States to harden the border along the Caribbean Sea and the Gulf of Mexico is likely to prove irresistible. The result might well be to undermine the decades-long efforts to make the nations in the region sustainable participants in the hemispheric and global economies. DANTE B. FASCELL NORTH-SOUTH CENTER WORKING PAPER NUMBER EIGHT 7 NOTES 1.

See National Strategy for Homeland Security. Washington, D. C: Office of Homeland Security, July 2002; and Stephen E. Flynn, “Beyond Border Control,” Foreign Affairs November 2000. 2. See National Strategy for Homeland Security, 22. 3. Jamaica earns an estimated gross US$1. 2 billion per year and directly employs more than 30,000 people in the industry; in Barbados tourism contributes approximately US$1 billion to the economy. 4. For a global view of the “spin off effect” of September 11, 2001, see the OCED study, The Economic Consequences of Terrorism. <http://www. oecd. org/EN/document/0, EN-document-590-17-no-12-30611- 590,00. html>. 5.

For an analysis of the attack on Caribbean offshore financial jurisdictions, see Anthony T. Bryan,” Transnational Organized Crime: The Caribbean Context. ” North South Center Working Paper No. 1, October 2000. 6. The “Third Border Initiative” or TBI is a targeted package of programs designed to enhance diplomatic, economic, health, education and law enforcement cooperation and collaboration with Caribbean countries. President George W. Bush announced this on April 21, 2001, at the Quebec Summit of the Americas. 7. In this context, the United States will have to consider even closer collaboration with Cuba in global security matters, despite current policy that brands Cuba as a terrorist state. 8.

See the statements of the president of the U. S. Maritime Security Council and the president of the Caribbean Shipping Association (CSA) in The Jamaica Observer, May 22, 2002. The CSA includes 12 national shipping associations and more than 100 individual member entities including port authorities, terminal operators, shipping agents, shipping lines, tug and salvage companies, consultants, freight forwarders, leasing companies, and others. 9. Robert C. Bonner, “Pushing Borders Outwards: Rethinking Customs Border Enforcement. ” A speech presented at the Center for Strategic and International Studies, Washington, D. C. , January 17, 2002. <http://www. cerias. purdue. du/coast/ids/ids-body. html>. 10. Regional deliberations of the Caribbean Shipping Association in several countries have focused on implementing such measures. See Barbados Advocate, June 12, 2002. 11. See “Government to Acquire X-Ray Machines for Ports,” Jamaica Gleaner, July 23, 2002; “US$ 700,000 to Be Spent on Aviation Security,” Newsday (Trinidad), July 10, 2002; and “Regional Ports Working Together,” St. Lucia Star, July 17, 2002. 12. See Stephen E. Flynn, “The False Conundrum: Hemispheric Integration vs. Homeland Security,” July 2002, for an analytical comparison of the different U. S. approaches to the Canadian and Mexican borders (manuscript