Lori Huthoefer

While lolling on a sun-drenched, white sand Caribbean beach, the last thing anyone wants to think about is aggressiveness. But that should be the first thing for exporters to focus on when they think of the Caribbean market.(*)

A growing market for the United States, the Caribbean's size and potential is underestimated by many U.S. food exporters, leaving much of the market to be dominated by European suppliers. The lesson is that unless U.S. food companies become more aggressive, the United States may find itself edged out of this neighboring market.

These islands individually represent small market, but with an average per capita income of $4,000 and a population of 32-35 million, they offered a combined market for more than $1 billion in U.S. agricultural sales in fiscal 1991.

This made the Caribbean the United States' eighth-largest food market and the third-largest in the Western Hemisphere behind Canada and Mexico.

High-Value Products Dominate

Over the past 12 years, U.S. agricultural exports to the Caribbean grew 80 percent, from $558 million in 1979 to over $1 billion in 1991. While growth has been broad-based, U.S. sales of consumer-oriented products have led agricultural shipments there since the early 1980s.

The Caribbean islands, excluding Haiti and the Dominican Republic, imported $1.5 billion in consumer-oriented products from the world's suppliers in 1990--up 34 percent from 1985. (World trade figures are latest available data.) The United States supplied only 25 percent (worth $360 million) of the Caribbean consumer-oriented market because of stiff competition, especially from the European Community (EC).

The United States' top consumer-oriented Caribbean markets and their respective 1991 export values include the Bahamas ($88 million), the Netherlands Antilles ($79 million), the Leeward-Windward islands ($55 million), Bermuda ($60 million) and Jamaica ($33 million). These islands account for nearly 80 percent of U.S. consumer-oriented exports to the Caribbean.

With the exception of the Bahamas, these markets have exhibited rapid growth in consumer-oriented imports from the United States over the past six years, particularly the Netherlands Antilles (up 55 percent) and the Leeward-Windward islands (up 64 percent).

Even though sales growth to the Bahamas is not as fast as to some other markets in the region, it remains the United States' largest consumer-oriented market in the Caribbean. Tourism there is the most lucrative industry, although the government is trying to lessen dependence on it by developing industrial and agricultural potential.

Trade ties between the United States and the Bahamas are firmly established, and the United States is overwhelmingly the top supplier of the island's imported agricultural products. Its proximity to the United States has been perhaps the best marketing tool for U.S. food exporters.

Much of the growth in Netherlands Antilles' imports can be attributed to the rapid development of tourism, particularly in Aruba. Aruba boasts an open economy, a favorable investment environment and few restrictions on foreign exchange.

Curacao also is turning its attention to tourism since the demise of its oil-refining industry.

Leeward-Windward Markets Fruitful

The Leeward-Windward islands--consisting of Anguilla, St. Vincent and the Grenadines, St. Kitts-Nevis, St. Lucia, Montserrat, Grenada, Dominica, the British Virgin Islands and Antigua-Barbuda--also have performed well in the past five years, with consumer-oriented purchases of U.S. products rising 61 percent, or $23 million.

The growth in exports to this region has been widespread due to an overall improvement in the economies of these islands and an increased awareness of U.S. products.

While tourism is also important here, these islands tend to be more economically diversified. For example, in St. Lucia--the United States' largest consumer-oriented market among the Leeward-Windward islands--agriculture generates an equal amount of income for the population as does tourism.

Grenada, another major U.S. market in this region, is predominantly agricultural, although tourism and light industry are growing in importance.

As members of Caricon, an economic community formed to foster trade and development among its members, many of the Leeward-Windward islands share concerns over their ability to compete in a global trading environment. It is possible that the United States may witness a drop in market share in this region due to increasing Caricom trade among its members.

This is expected to affect many consumer-oriented products purchased from the United States including poultry, processed dry products, such as breakfast cereals and snack foods, and a wide variety of horticultural products. Among the Leeward-Windward islands, all but Anguilla are active members of Caricom.

Nonetheless, the recent economic growth experienced by this island group has translated into increasing demand for U.S. high-value products.

French West Indies Has More Potential

Martinique and Guadeloupe are currently small markets for the United States but may hold hidden potential for U.S. food exporters.

Ironically, these islands are the largest single importers of consumer-oriented food products in the Caribbean. In 1990, the French West Indies imported nearly $500 million worth of consumer-oriented products from world producers--roughly one-third of the total Caribbean consumer-ready food market. However, with U.S. exports of only $4 million, the United States held less than a 1-percent market share.

As French departments, Martinique and Guadeloupe are basically extensions of the European Community (EC). Therefore, exporters interested in these markets face EC tariffs. Both islands also impose additional tariffs, which can amount to another 8 percent.

U.S. exporters have done relatively little to try and penetrate this market. However, these two islands may represent the best opportunity in the Caribbean for the United States to increase its exports and overall competitiveness if it can obtain a larger share of the pie.

Trade Barriers Curtail U.S. Trade

Several barriers exist that hamper U.S. agricultural trade with the Caribbean islands. In general, tariff barriers are high; however, their range is significantly different from island to island. For example, in Aruba and Curacao, most U.S. food exports enter duty-free. Duties on taxable food items range from 5.5 to 12 percent. These two islands also offer attractive business incentives, which further reduce tax burdens and often include exemption from import duties.

At the other end of the spectrum, Martinique and Guadeloupe, as part of the EC, have virtually erected a wall of high tariffs around their market. The Bahamas, the Leeward-Windward islands and many of the eastern Caribbean islands, such as Barbados and Trinidad and Tobago, also have high tariffs on many goods.

For the Leeward-Windward islands, high tariffs are a relatively new form of trade restriction due to the implementation of the Common External Tariff (CET) of Caricom. In the past, tariffs and import licensing did not significantly hamper U.S. trade. However, with the CET, which can reach 45 percent on some items, it is expected that the import of many high-value foods will be affected.

The same situation exists on Barbados and Trinidad and Tobago. As Caricom members, these countries also implemented the CET and banned the importation of many products.

Another constraint is the strong ties between Caribbean islands and former colonizers. Much of the Caribbean shares traditional ties to EC countries, including the Netherlands, the United Kingdom and France. The influence of these relationships is strong and can be seen in Caribbean cultural, economic and social institutions.

These colonial ties have been perpetuated in trade relationships as well, with many of the islands enjoying special trade arrangements with their former colonizers.

Finally, lack of interest on the part of U.S. food companies to explore the Caribbean markets also hampers trade with the islands.

Because they represent small markets individually, the task of marketing a product in this region presents a unique set of challenges. In addition to language and cultural barriers, the benefits of investing in such a venture may not initially seem great enough to justify the costs when dealing with such a small consumer base.

While tariff and non-tariff restrictions can be high, there is no reason that the United States could not increase its current share of the Caribbean market. Major importers on Martinique and Guadeloupe reveal a strong interest in increasing U.S. purchases, since retail food industries have grown more competitive in recent years. Modern supermarkets and hypermarkets on these two islands are unequaled in the Caribbean, presenting consumers with one-stop shopping, well-organized displays and affordable prices.

As developing countries, the Caribbean islands' middle class is relatively small. However, while tourism has clearly been the engine of growth, contributing to the overall rise in consumer-oriented purchases from the United States, the Caribbean's domestic populations should not be overlooked.

An affinity for U.S. food products has been nurtured throughout the Caribbean because of cable television and exposure to American tourists' lifestyles. As their economies grow, their affection for U.S. foods will certainly become more evident as increasing incomes allow these consumers to purchase more U.S. products.

Develop a Marketing Strategy

U.S. food companies may find it helpful to focus marketing efforts on groups of islands that share common characteristics. Such a strategy would involve targeting a handful of Caribbean markets as opposed to each individual island.

Having established these marketing regions, food shows, trade teams and other marketing tools could then be utilized, providing a narrower focus but a wider consumer base.

U.S. exporters have done little to challenge Caribbean trade ties with their colonial counterparts. These bonds are not unbreakable and if U.S. firms can demonstrate the advantages of their products over those of competitors, new business relationships are possible. (*)For purposes of this article, the Caribbean market includes the Bahamas, Bermuda, the Netherlands Antilles, the Leeward-Windward islands and the French West Indies. Lori Huthoefer is with the Trade and Economic Information Division of the Foreign Agricultural Service. Tel. (202) 720-1034.

COPYRIGHT 1992 U.S. Department of Agriculture

COPYRIGHT 2004 Gale Group