What the Caribbean should do about the new Trump administration

On Jan. 20, 2016, the Trump Administration entered into power, and Caribbean interests will have a number of issues to discuss with the new administration: financial services and de-risking; tourism and travel; migration; energy; security and disaster resilience; debt; trade; climate change; and foreign assistance.

The time for lobbying is ripe because on June 13, 2016, the House of Representatives passed H.R. 4939 (the United States-Caribbean Strategic Engagement Act of 2016) by a vote of 386 to 6.

H.R. 4939 requires the secretary of state, in coordination with the administrator of the U.S. Agency for International Aid, to submit a multi-year strategy for U.S. engagement with the Caribbean region to Congress no later than 180 days after enactment. This strategy would in part focus on improving citizen security, reducing trafficking of illicit drugs, strengthening the rule of law and promoting greater economic development. Although it has not yet acted, there is significant bipartisan interest in a similar bill in the Senate.

H.R. 4939 is motivated primarily by U.S. national security interests in the region and the way in which Venezuela, China and Cuba have filled the void in the region. The bill offers the first opportunity since the Caribbean Basin Initiative in 1983 for the region to engage the U.S. government.

On July 14, 2016, the U.S. House of Representatives Committee on Foreign Affairs Subcommittee on the Western Hemisphere held a hearing on the “Strategic Importance of Building a Stronger U.S.-Caribbean Partnership.” The hearing examined the void in the region due to the collapse of Venezuela and the limitations of PetroCaribe, the Venezuelan program which provided highly subsidized oil to the Caribbean. The hearing emphasized the need to relieve the region from its dependence on imported energy and shift to alternative energy sources, such as solar, wind and thermal. The hearing discussed the need to strengthen the Obama administration’s Caribbean Energy Security Initiative to facilitate a cleaner, more energy secure future consistent with the Paris climate change accords.

The hearing underscored the fact that the preferences in the Caribbean Basin Economic Recovery Act, last revised in 1990, are limited to trade in goods, while current trade in the region is in services. Hence, any new trade arrangement should strengthen trade in services between the U.S. and the Caribbean, including in health, education and business. The hearing discussed the need to enable  Caribbean jurisdictions to take advantage of financing and feasibility studies by the Overseas Private Investment Corporation, even though at present their small size has until precluded the possibility.

The hearing discussed the recent withdrawal by U.S. banks from correspondent relationships with Caribbean indigenous banks, and how such withdrawals harm U.S.-Caribbean cooperation by cutting Caribbean people from U.S. banking and producing a void that makes the Caribbean vulnerable to interests inimical to the U.S.

In order to lobby effectively, the Caribbean must identify key members in the different Congressional Committees (e.g., foreign affairs, finance, energy) as well as in the key caucuses (e.g., Caribbean Caucus, Congressional Black Congress, Travel and Tourism Caucus). The Caribbean must simultaneously identify and communicate with the key members of the executive branch (e.g. state, Treasury, National Security Council, Office of the Controller of the Currency, Commerce). Caribbean governments must try to influence a Trump administration to pursue policies for which there is, at the very least, mutual benefit. The Caribbean ambassadors in Washington, DC are most important in this regard.   Just as importantly, the Caribbean must communicate with the diaspora and identify like-minded organizations in the private sector (e.g. trade and business groups, private voluntary organizations whose mission is the Caribbean and Western Hemisphere). The region must immediately start a dialogue with all persons who may be interested in the topics prioritized by the region.

 

Strategy

The region should also prioritize a discussion of de-risking, as well as education and cultural exchanges. It should also advocate expanding the Caribbean Basic Economic Recovery Act to include services.

The Caribbean should ask the U.S. government to make exceptions on financing and feasibility studies, notwithstanding the small size of the Caribbean, so that U.S. investors can compete in the region with Canadian, Chinese, Brazilian, Russian and Middle Eastern investors.

On financial services, the region is likely to find the new Administration more friendly when it comes to tax transparency, anti-money laundering, and entity transparency. However, the horse is already out of the barn: the major challenge is now the OECD’s Common Reporting Standard. The Caribbean jurisdictions will be sanctioned if they do not comply. Yet many structures are already moving to South Dakota, Wyoming, Nevada and Delaware because the U.S. has informed the OECD it lacks authority to sign the CRS. Prospects will not improve in the Trump Administration.  The Caribbean also frequently finds itself the target of the anti-tax haven initiatives from U.S. states. Until now, the executive branch has said it does not have the authority to control the tax authority of the states.

One element the Caribbean can request is bilateral tourism agreements, whereby the U.S. agrees to collaborate with Caribbean countries in developing tourism joint ventures, tourism promotion and marketing, and technical assistance. The Department of Commerce concluded many such agreements in the 1980s, but has stopped recently.

On travel and tourism, the region should request the U.S. to take a strategic look at increasing U.S. immigration pre-clearance presence through a hub and spoke system to provide enhanced security. Another suggestion was to provide technical assistance, such as in the area of increased training for the development of a shared watch-list for travelers into and within the region. The region also should express interest in helping with ongoing efforts of the U.S. to ensure that third countries adequately screen all travelers for terrorist concerns. In light of Trump’s immigration proposals to suspend the issuance of visas to any place where adequate screening cannot occur until proven and effective vetting mechanisms can be put into place, to ensure that other countries take their people back when the U.S. orders them deported, and to ensure that a biometric entry-exit visa tracking system is fully implemented at all land, air and sea ports, the region may want to signal its willingness to work with the U.S. in upgrading its screening and cooperation with the U.S. and obtaining and use of a biometric entry-exist visa tracking system.

The region should educate the new administration on the importance of continuing and expanding the current U.S. initiative on clean and renewable energy; the U.S. energy initiative will help provide an alternative in the region to Venezuelan PetroCaribe. U.S. technical assistance concerning financing, technology transfer, and debt-for-nature swaps would all help the region’s quest for clean and sustainable energy while reducing significantly its large imported energy deficit.

The region must engage the new administration on climate change. The Caribbean experiences annual and intense natural disasters. Climate change and the accompanying sea-level rise have already adversely impacted the region’s fragile economies, coral reefs and land areas.

Just as importantly, the Caribbean should try to engage with U.S. states. Many long-term tourists from Asia and Northern Europe like to combine trips to Florida and Eastern U.S. with the Caribbean. By having tourism agreements with states, those states and the Caribbean, working with the private sector, can develop and market joint tourism agreements in areas such as plantocracy, music, visual arts, food and other culture. Such collaboration will benefit the states as much as the Caribbean. The region should engage U.S. states to collaborate on educational, cultural and health care exchanges, in the same fashion as the current collaboration between Cuba and the CARICOM countries.

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Bruce Zagaris

Bruce concentrates his practice in tax controversy and international criminal law. His tax controversy work has included representing individuals on voluntary disclosures, audits, and litigation as well as consulting and serving as an expert witness in criminal trials for defendants and the U.S. Government. Since 1981, he has also represented foreign governments in international tax and financial services, including advising and helping negotiate income tax and tax information exchange agreements. He has also written a number of books and articles, and is an adjunct professor. Bruce is founder and editor of the International Enforcement Law Reporter.
 

Bruce Zagaris
Partner
Berliner Corcoran & Rowe LLP
Washington, D.C.
United States

T: +1 (202) 293-2371            
E: bzagaris@bcr-dc.com            
W: www.bcr.us www.ielr.com  

 

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T
: +1 (202) 293-2371            
E: bzagaris@bcr-dc.com            
W: www.bcr.us www.ielr.com