Impact of 9/11 on Caribbean Counties

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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...
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