Knowledge Note

This policy note is based on the seven chapters of the Caribbean trade report, The New Trade Environment and Shared Prosperity in the Caribbean, prepared by the World Bank for the Caribbean Growth Forum. Despite fairly respectable economic growth over the decades and a degree of high trade openness, unemployment rates remain very high in the Caribbean, averaging 10 percent for the region between 2002 and 2009, and poverty reduction has been slow. The purpose of this note is to provide background information on the role of trade in the unemployment and poverty reduction in the Caribbean and, based on recent World Bank analysis, to suggest areas where greater policy attention could promote trade and thus reduce poverty. The report begins with a profile of employment in the Caribbean, and discusses the impact of trade on employment during the global financial crisis. Evidence is reviewed on the role of trade in employment and development over the long term, and whether the poor in the Caribbean benefit from export activities. Then the report presents a discussion how addressing constraints on exports and reducing tariff levels will enhance growth and reduce poverty. The conclusion summarizes the main issues of addressing constraints on exports and promoting broad-based benefits of trade. The report's analysis shows that international trade plays a major role in terms of job creation and poverty reduction in the Caribbean, more so, on average, than in the other developing countries. However, in general, poor Caribbean households have not benefited fully from the employment opportunities created by trade. There is a role for policy in alleviating poverty by helping promote the shared benefits of trade. Considering the variety of issues involved in this area, it will likely require a multi-pronged approach involving the following measures: 1) promoting quality education for all; 2) strengthening links to the value chain among small enterprises; and 3) addressing key impediments to trade performances shows that acting to remove some key trade impediments may also directly help the poor.