Caribbean Basin Initiative (CBI)

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Caribbean Basin Initiative (CBI)

Caribbean Basin Initiative (CBI), a twelve-year program that went into effect on 1 January 1984, under which designated Caribbean and Central American countries could ship a wide range of products duty-free to the United States. First proposed by President Ronald Reagan in February 1982, the program was not approved by Congress until July 1983. The primary motivation for this policy was to help strengthen the stability and economies of these countries in order to prevent leftist movements from growing as they had in Central America. Reagan's original proposal called for an emergency appropriation of $350 million for currency support; duty-free entry into the United States for exports, except textiles and apparel; and tax incentives for U.S. firms investing in manufacturing plants in the region. When approved by Congress, only the emergency appropriation remained unchanged. The duty-free list was altered to exclude footwear, handbags, luggage, flat goods (cloth materials), work gloves, leather apparel, canned tuna, petroleum and petroleum products, and certain watches and parts. Bowing to U.S. labor group pressure, Congress jettisoned the investment tax incentives. Communist-ruled countries—a clear reference to Cuba and Nicaragua—were denied any benefits under the plan.

From the outset the CBI was fraught with problems. More than half of the initial emergency allocation went to Costa Rica and El Salvador, the two countries most affected by Reagan's efforts to dislodge the Sandinistas from power in Nicaragua. The Bahamas and the Cayman Islands refused to participate in the CBI because the program required them to share tax information with the United States (an attempt to discourage offshore banking). Heads of Caribbean states immediately began to pressure Reagan to expand the duty-free list. The only concessions included the admission of garments manufactured with fabrics made in the United States and the implementation of a "twin plant" program by the Commonwealth of Puerto Rico, by which Puerto Rican-based industries could establish subsidiary operations in other Caribbean countries to produce products that would be sent back to Puerto Rico for final assembly. By 1990 the CBI had not generated broad-based economic growth, alleviated debt problems, generated lasting employment opportunities, or improved trade relations with the United States. Efforts by Reagan and his successor, George Bush, to expand and extend the program until 2007 failed to win congressional approval. However, in 2000, the Caribbean Basin Trade Partnership Act was passed. A planned economic agreement for Latin America, the Free Trade Area of the Americas (FTAA), would also include Caribbean countries.

BIBLIOGRAPHY

Bakan, Abigail B., David Cox, and Colin Leys, eds. Imperial Power and Regional Trade: The Caribbean Basin Initiative. Waterloo, ON: Wilfrid Laurier University Press, 1993.

"The Reagan Caribbean Basin Initiative," Congressional Digest 62 (1983): 69-96.

Tirado de Alonso, Irma, ed. Caribbean Economies in the Twenty-First Century. Gainesville: University Press of Florida, 2002.

U.S. Congress. House Committee On Ways and Means, Subcommittee on Oversight, Review of the Impact and Effectiveness of the Caribbean Basin Initiative, 99th Congress, 2d session, February 1986.

Whitney, Peter D. Five Years of the Caribbean Basin Initiative (1990).

Thomas M. Leonard

Encyclopedia of Latin American History and Culture