Integration in the Caribbean

Trade and economic integration improve welfare and productivity through several channels. Trade increases market size to export and import, promotes gains from specialization and economies of scale, and foster innovation and the spillover of knowledge from foreign to domestic firms. International trade literature has shown that the countries that benefit the most from trade are small countries like CARICOM members. In this policy note, we present several indicators of the evolution of trade indicators and trade costs for CARICOM members. We analyze the level of tariffs, the performance regarding trade facilitation, the participation in global value chains, and energy integration. As expected, trade figures for CARICOM are high compared to Latin American countries, but there is still room to reduce tariffs with South American partners, improve trade facilitation and deepen energy integration and participation in regional and global value chains.