By Keith Nurse, Senior Fellow, Sir Arthur Lewis Institute of Social and Economic Studies; World Trade Organization Chair, University of the West Indies.
To learn more about countries’ strategies for economic transformation, learn about the 9th Plenary Meeting of the OECD Initiative for Global Value Chains, Production Transformation and Development hosted by the Economic and Social Commission for Asia and the Pacific (ESCAP) in Bangkok, Thailand on November 2017.
2017 will go down as a landmark year given the huge impact of hurricanes on the economic, social and ecological environments in the wider Caribbean. The decimation of several island territories, such as Dominica, Anguilla, Barbuda, St. Maarten, Turks and Caicos, US and British Virgin Islands, and Puerto Rico have taken hundreds of lives and destroyed livelihoods in key sectors like tourism. Take the case of Dominica that had a direct hit from category 5 hurricane Maria on September 18, 2017.1 It is estimated that 35% of the reefs at dive sites in Dominica were damaged, and a month later only 43% of accommodation properties are operational. Hurricane Maria went on to hit Puerto Rico that is now facing a humanitarian crisis.2
The economic losses for the Caribbean are staggering. For instance, the initial estimates from damages by hurricane Irma are larger than the annual GDP of the smaller territories (see figure )3 — about 130% of the GDP for St. Maarten, 250% for St. Martin, 140% for the British Virgin Islands, 37% for Turks and Caicos, 95% for Anguilla, and 15% for Antigua and Barbuda. In contrast, the impact for larger territories like Florida and Cuba are 5.3% and 2.6%, respectively. This data illustrates how vulnerable small island developing states (SIDS) are to the environmental impact of climate change and how quickly these economies can accumulate high debt-to-GDP ratios because of the rebuilding costs from a weather disaster.4
What makes dealing with this climate disaster all the more challenging for the Caribbean is the fact that it is the world’s most tourism-dependent region. The tourism and travel sector is, after all, the mainstay of most SIDS economies. Although the Caribbean accounts for approximately 2% of total global tourist flows, it is the number one destination for the cruise ship industry. And the continued sustainability of the travel and tourism sector depends on sound climate policies, given the significant global economic and social value of these industries and their close links with climate.
No wonder the implications of climate change are very concerning for SIDS. The tragedy is that SIDS are not large greenhouse gas emitters and as such are not major contributors to the problem of climate change. However, it is forecasted that these countries are increasingly vulnerable to associated ecological, health and natural disaster risks and that their key industries, like agriculture, fisheries, energy and tourism, will be heavily impacted. The challenge of climate change for SIDS in the specific context of the travel and tourism industry, for instance, is twofold. The industry is both a victim of climate change due to rising sea levels, coral bleaching and storm surges as well as a contributor to greenhouse gas emissions through the airline and cruise ship industries. The contribution of international tourism to global carbon emissions is expected to exceed 10% by 2035.
This reality prompts SIDS and the Caribbean region to move with greater urgency on climate action and reinvent their economies. Indeed, opportunities exist for SIDS to use the SDG agenda as a driver for economic transformation considering the possibilities of restructuring current production and consumption modes to cope with climate change. From this perspective, some argue that the global community should create frameworks that shield SIDS from the potentially devastating economic impact of travel-related climate policies, given their dependence on international tourism and travel. It was a theme echoed at the Third International Conference on Small Island Developing States in Samoa in September 2014, where heads of state and government officials affirmed that ‘’sustainable tourism represents an important driver of SIDS sustainable economic growth and creation of decent jobs.’’ Similarly, targets related to SDG 12 call on states to “develop and implement tools to monitor sustainable development impacts for sustainable tourism which creates jobs, promotes local culture and products.” And both the 2007 Davos Declaration and the 2016 Paris Agreement on Climate Change recognise the links between responsive climate policies and the continued sustainability of travel and tourism.5
In this context, SIDS need to do more than cope solely with the challenges of environmental change. Actionable strategies are required to identify new market spaces and opportunities and to adapt global climate action to the local level. What does this mean concretely from a trade perspective?
First, SIDS lack the financial resources and the technologies required to shift to green growth and a low-carbon economy. As such, SIDS require appropriately scaled financing mechanisms along with technology transfer in green and renewable technologies. To advance the process, SIDS should pursue innovation policies to facilitate more rapid adaptation responses. For example, SIDS could widen their value strategy beyond commodity tourism to embrace new opportunities in cultural, medical and eco-tourism. Additionally, SIDS and Caribbean countries can position themselves as carbon-neutral tourism zones. This would encourage the development of non-traditional branches of tourism such as “low-volume, high-value tourism” as well as “pro-poor, responsible tourism.”
Second, liberalising trade in energy-efficient goods is needed in areas where competitive local production does not exist. Such trade policy measures can therefore include tax incentives or zero-tariff measures for environmentally friendly products. These areas include promoting renewable energy, improving energy and resource efficiency, managing waste, and monitoring the quality of the environment. If implemented in areas such as renewable energy, the appropriate policies can help reduce climate change impact on the tourism sector. For example, policy instruments can promote institutional support through measures such as insurance that help reduce risks. Additionally, diversification can reduce the impact of economic volatility, while moving up the supply chain can increase income and reduce vulnerability.
The 2017 hurricanes and their aftermath are a clear wake-up call that climate change impact on SIDS – and the industries that employ their people – cannot be overlooked, given that they are “hotspots” for climate-related disasters. The time is now to heed that call through climate action and trade governance policies adapted to the realities of SIDS.
4.↩ Acevedo, Sebastian, 2014, “Debt, Growth and Natural Disasters: A Caribbean Trilogy,” IMF Working Paper No. 14/125.
5.↩ World Tourism Organization and United Nations Environment Programme (2008) ‘Climate Change and Tourism – Responding to Global Challenges’ at p. 13