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Adapting Border Controls to Support Caribbean Trade and Development

May 4, 2000
Council on Foreign Relations

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[Note: A transcript of this meeting is unavailable. The discussion is summarized below.]

ACKNOWLEDGEMENTS

In early May 2000, a rather extraordinary event took place in Port of Spain, Trinidad. Over 40 very busy experts, business leaders, and senior officials came together for two days of intensive meetings to discuss how to cope with one of globalization’s most daunting challenges—managing entry points along national frontiers and at ports of entry so as to facilitate the flows of legitimate people and goods while at the same time, effectively policing borders so as to filter the bad from the good.

The academic co-sponsors of the conference were the Latin America Studies Program of the Council on Foreign Relations, the University of West Indies, and the North-South Center at the University of Miami. Without the material and intellectual assistance of Dr. Julia Sweig, Professor Trevor Munroe, and Professor Anthony T. Bryan, respectively from each of these institutions, this conference would never have taken place. The conference organizers are also indebted to Captain Rawle Baddaloo, who enlisted the Shipping Association of Trinidad and Tobago, the Point Lisas Industrial Port Development Corporation Ltd. (PLIPDECO), and the Caribbean Shipping Association to serve as the private sector co-sponsors and hosts for this event.

Ms. Jennifer Gonzalez of Shipping Association of Trinidad and Tobago and Ms. Angela Gouveia, of PLIPDECO skillfully tended to all the myriad logistical details. Commander Francis Weeks most generously agreed to host the conference attendees for an evening reception at his Coast Guard Base in Chagueramas which was universally acknowledged as the conference’s highlight.

A large part of the credit for the productivity of the two days goes to the individuals who agreed to serve as co-chairs for the working groups: Mr. Anthony Beaubrun, Prof. Ivelaw Griffith, Mr. Michael Leschaloupe, Prof. Maryann Cusimano, and Prof. Gillian Gunn Clissold. My ability to draft this summary report was made possible by the superb rapporteur work of Joseph Vorbach, Jessica Duda, and my own intrepid research associate, Caroline Wadhams. I am also indebted to Caroline and Robert Knake for their work in assembling this conference report.

STEPHEN E. FLYNN

New York, New York

Adapting Border Controls to Support Caribbean Trade and Development

CONFERENCE REPORT

May 4-5, 2000

TABLE OF CONTENTS

Executive Summary

Conference Summary

Conference Agenda

Conference Background Paper

by Dr. Stephen Flynn

Address by Mervyn Assam

Address by Sadiq Baksh

Address by Albert Ramdin

White Paper by Lawrie May

Academic Sponsor Descriptions

Panelist/Speaker Biographies

List of Participants

EXECUTIVE SUMMARY

Reforming border controls so as to achieve the optimal balance between policing and facilitating the transnational movements of people and goods is one of the most important priorities for the Caribbean region at the dawn of the new century. The prevalence of understaffing, lack of automation, insufficient salaries and training, and high levels of discretionary authority exercised by border control agents are fueling a rise in the incidence of customs and immigration violations, corruption, and weapons and drugs smuggling. This is bad news for governments who are deprived of lawful duties and fees while simultaneously facing the pressure to expend limited public resources on combating gangs and organized criminals. This is also bad news for the legitimate importers and exporters whose competitiveness is compromised by the delays, spoilage, wreckage, and thefts taking place in ports of entry. The result is a downward spiral of shrinking foreign investment and capital flight, declining public revenues and weakened social safety nets, rising unemployment, and more crime and corruption that further discourages investment. In short, absent change to the current practices for conducting regulatory, enforcement, and security measures within ports of entry and along national frontiers, the Caribbean region’s capacity to prosper in the global economy is in jeopardy.

These are some of the primary findings reached by over 40 distinguished business leaders, government officials, and academics who participated in an intensive workshop on May 4-5, 2000 in Port of Spain, Trinidad. The workshop was organized by the Latin America Studies Program of the Council on Foreign Relations, the University of West Indies, and the North-South Center at the University of Miami. The Shipping Association of Trinidad and Tobago, the Point Lisas Industrial Port Development Corporation Ltd., and the Caribbean Shipping Association served as co-sponsors and hosts for this event.

The workshop was convened to analyze and develop recommendations on how border controls should be adapted to support trade and development in the Caribbean region. The participants confronted head-on the conflict highlighted in the keynote address by the Honourable Mervyn Assam, Trinidad’s Minister of Trade, Industry, and Consumer Affairs:

On the one hand, there are those who are convinced that trade liberalization has been responsible for some loss in the control of a country’s borders, resulting in an increased incidence of customs fraud, illegal drugs and weapons smuggling. On the other hand are the protagonists of trade liberalization striving to reduce barriers to the cross-border traffic of people and goods.

While advocates for security and openness traditionally have been in opposing camps, the attendees at the workshop felt that they need not be. In fact, if border control systems are modernized and private-public cooperation is improved, then security and openness can be mutually reinforcing. Alternatively, a lopsided focus on openness without being mindful to the imperatives of security or vice versa can be self-defeating. This is because attracting investors and advancing sustainable development requires not just liberalized trade rules but an environment where the rule of law is consistently and judiciously administered. And societies that attempt to shield themselves from transnational threats by restricting their contact with global society are likely to suffer social and economic dislocations that fuel the very threats they are seeking to evade.

A central theme emerging from the workshop discussions was the importance of forging and sustaining relationships among the many stakeholders whose activities or livelihood are tied to how ports of entry and borders are managed. The forces of economic integration are creating more dynamic and complex pressures on the border. Public sector agencies are generally slow to understand and cope with these changes. Accordingly, there must be much deeper levels of interagency cooperation, multilateral cooperation, and private-public cooperation in addressing border issues then have historically been the case.

Among the recommendations advanced at the workshop were the following:

  • Formal and informal mechanisms should be in place to allow private and public stakeholders to regularly exchange views on each other’s interests, challenges, and priorities. These could include creating advisory councils with a statutory mandate or convening semiannual or annual workshops modeled after this conference.

  • Given their potential to significantly disrupt trade and travel, each country should engage in a comprehensive assessment as to whether data-collecting, revenue-collecting, regulatory, and enforcement functions currently being conducted at the borders or in ports of entry could be performed elsewhere, consolidated, eliminated, or privatized.

  • There needs to be greater reciprocity among governments in addressing the various border control imperatives confronting the region. The United States is widely perceived as zealous on the issues of drug trafficking and illegal migration and tepid in its willingness to address the region’s concern with small-arms smuggling and customs fraud.

  • Border control agencies should employ "risk management" methodologies in performing their inspection functions. Given the rising volume of people and goods and constraints on public resources, only a greater emphasis on gathering and sharing intelligence will make it possible to identify and target the highest-risk goods or people.

  • More resources must be dedicated to staffing, training, paying, and supervising border control agents. There also should be stepped-up efforts to move away from paper-based border control processes and towards automation with the aim of minimizing the discretionary authority of individual border control agents. To maximize the return on these investments, assessment criteria should be developed and applied to border control agencies to improve the public accountability of their performance.

  • Governments should seek to develop incentives for manufacturers, exporters, importers, carriers, cruise ships and airlines to engage in greater self-policing. This might include an advanced or "fast-track" border clearance system for private sector actors who post bonds and embrace measures that enhance their ability to comply with government mandates. Those companies that consistently and demonstrably exercise due diligence to abide by the rule of law and who cooperate closely with regulatory and enforcement officials could be allowed to move through the equivalent of a trade and travel "E-Z Lane." Border control agents would continue to conduct spot checks to ensure compliance.

CONFERENCE SUMMARY *

On May 4-5, 2000, over 40 distinguished business leaders, government officials, and academics met in Port of Spain, Trinidad to discuss the role of border control practices in supporting the advancement of trade and development in the Caribbean region. This was not a lecture- or a panel-based conference. It was a working meeting built around three two-hour sessions of small group work with a report-out and general plenary meeting following each session. Each of the three small groups were led by two co-chairs. The conference was informed by keynote addresses by the Honourable Mervyn Assam, Trinidad’s Minister of Trade, Industry and Consumer Affairs; the Honourable Sadiq Baksh, Trinidad’s Minister for Works and Transport, and the presentation of a paper by the conference’s lead organizer, Dr. Stephen Flynn, Senior Fellow with the New York based Council on Foreign Relations.** The conclusions of the final session were presented to a distinguished panel including Ambassador Albert Ramdin, the Caribbean Community’s Assistant Secretary General for Foreign and Community Relations; Captain Randolph Straughan, Chairman of the Caribbean Customs Law Enforcement Council; Mr. Pierrre Lapaque, the Deputy Director of the Caribbean Financial Action Task Force; and Commodore Anthony Franklin, Trinidad and Tobago’s Chief of the Defense Staff.

Session I: "POROUS BORDERS: THE IMPLICATIONS FOR CARIBBEAN TRADE AND DEVELOPMENT"

During this Session, the participants formulated responses to the following questions on the current challenges associated with controlling national borders in the region and the implications for trade and development of persisting with the status quo:

Absent change, to what extent can current border control inspection and enforcement capabilities handle a growth in trade and travel within the region?

What is the level of risk of a rise in the incidence of customs and immigration violations; corruption; organized crime; weapons, drugs, and hazardous material smuggling; and terrorism within the region?

To what extent would a limited capacity to perform regulatory, enforcement, and revenue collection functions within ports of entry present problems for attracting foreign investment, generating trade and advancing development within the Caribbean Region? Why is that so?

How likely is that public safety and security concerns about "porous borders" will undermine political support for the trade liberalization and facilitation measures associated with greater hemispheric economic integration?

There was nearly universal consensus that existing border control systems are already overwhelmed by the current levels of trade and travel. Problems include:

Inadequate use of technology to support a movement away from paper-based systems.

Insufficient staffing and training and weak supervisory practices.

Poor pay and morale among border control agents.

A general lack of accountability for slow or arbitrary work by border control agencies.

Few or no mechanisms for sharing information and coordinating activities among the various border control agencies within each country.

A reluctance to move away from random inspections vice developing inspection criteria informed by intelligence-based risk assessments.

Given the projected growth rates in trade and travel, the participants were very pessimistic about the future of the region’s border inspection systems. The frailty of regulatory and enforcement activities within ports of entry and along national frontiers are already manifesting themselves by the prevalence throughout the region of serious problems with customs and immigration violations, organized crime, and weapons and drugs smuggling, although the incidence of these problems often vary significantly among the countries in the region. The problems of hazardous material smuggling and terrorism are not presently serious issues.

The participants expressed serious concern that the incidence of border management problems not only discourages foreign investment, but is likely to fuel capital flight as well. Generally, investors are seeking a stable environment where cross-border activities are facilitated and the risk of arbitrary or capricious actions by government officials is low. If a port of entry develops a reputation as being inefficient or corrupt, thereby raising the transaction costs associated with moving goods and people through it, businesses will seek out alternatives. Additionally, if governments end up expending a greater percentage of their limited resources on responding to these problems, much needed investments in modernizing infrastructure or improving basic public services may go unfunded. Over time, this decline in public sector investment will translate into less attractive conditions for private sector investments, as well.

While border management problems have been commonplace throughout the region for some time, to date there has been little pressure from the general public or from the business community for national leaders to pursue serious reforms. This longstanding apathy and cynicism translates into a limited risk that the island populations will perceive the issue of porous borders as a consequence of regional economic integration. In the United States, however, the perception that the region serves as a major source for drug trafficking and illegal migration could adversely affect the political support for U.S. regional initiatives that advance greater trade facilitation and liberalization initiatives.

Session II: "ADAPTING BORDER CONTROLS TO SUPPORT CARIBBEAN TRADE AND DEVELOPMENT"

The participants discussed how border control measures can be best adapted to respond to the challenges outlined in Session I, so as to achieve the twin objectives of lowering barriers for the legal transborder movement of peoples and goods and strengthening the capacity to filter the bad from the good in international travel and trade flows. Specifically, they were asked to respond to the following questions:

What can be done to reduce the incidence of delay, spoilage, and loss of legitimate commerce as a result of inspection and enforcement activities within ports of entry?

To what extent should states build upon existing regional arrangements so as to harmonize the standards and improve their overall capacity for monitoring and inspecting the flows of people and goods originating from or transshipping through the United States and the Caribbean?

What self-enforcement steps should manufacturers, carriers, cruise ships, forwarders, and importers be reasonably expected to take in order to lower the incidence of fraud and to reduce the risk of their unintentional complicity with illegal transborder activities?

How appropriate is it to push manufacturers, carriers, cruise ships, forwarders, and importers to make the international flows of cargo and passengers more "transparent" in order to enhance the capacity for appropriate authorities to monitor the inbound and outbound movements of people and goods?

The first question spawned a number of suggestions for improving the efficiency of border control inspection systems. These include:

Improving coordination among port authorities and regulatory and enforcement agencies within each country and among countries with an eye towards finding ways in which the work of these agencies could be better tailored to port operations.

Conducting a comprehensive assessment of all the data-collecting, revenue-collecting, regulatory, and enforcement functions currently being conducted at borders or in ports of entry to determine whether they could be performed elsewhere, consolidated, eliminated, or privatized.

Raising morale among border control agents by bolstering staffing, pay, training, and improving management.

Embracing electronic and internet-based technologies that can support information sharing that allows border control agents to conduct risk-assessments and grant pre-clearance of goods or travelers.

Reaching greater regional consensus on how to improve border control processes was seen as a prerequisite to attracting funding from the United States, Canada, Europe, and international financial institutions for instituting reforms. The nearly three-decade old Caribbean Customs Law Enforcement Council (CCLEC) provides an important and useful regional mechanism for better harmonizing standards and improving coordination among customs agencies throughout the region. However, there was a general sense that the full potential of the CCLEC and other regional agencies had not been realized because of a shortage of resources, restrictive membership requirements, and an inconsistent level of commitment to multilateral initiatives by the member nations. Another venue for advancing common security practices in ports is the Organization of American States’ Inter-American Committee on Ports which recently created a technical advisory group on port security in October 1999. CCLEC and other regional organizations would benefit from greater outreach to stakeholders including trade associations, port authorities, chambers of commerce, and non-governmental organizations.

One important area to address was the need for better intelligence sharing and closer cooperation to support investigations. Regional intelligence centers have been created, but concern about security compromises has restricted their effectiveness. There are also conflicts over the priorities towards which investigative and enforcement resources are directed. The United States is widely perceived as being zealous on issues of drug trafficking and illicit migration, but less committed to redressing the issues of small-arms smuggling and customs fraud that are prevalent throughout the region.

The tourist industry generally and the cruise industry specifically would benefit from a pre-clearance system. This could include the electronic forwarding of passenger manifests by air and sea carriers at the point of embarkation so that immigration officials could examine them against a regionally maintained database. Also, whenever its is practical, border control agencies should consider entering into arrangements which allow immigration and customs officials from one country to conduct pre-clearance inspections in another country or onboard a cruise ship in advance of its arrival.

Ultimately, striking the proper balance between security and control will prove impossible without a strong private sector commitment toward bolstering industry-wide compliance with national laws and regulations. Developing appropriate incentives for rigorous self-policing measures were seen as key to advancing and sustaining this commitment. These include such "sticks" as (1) the swift, fair, and consistent application of fines and penalties for non-compliance, and (2) requiring participants involved in the export and import processes to post bonds. They also include such "carrots" as (1) providing access to a fast-track system for cargo and passenger clearance for importers who have a good system of security controls and a history of compliance, and (2) the mitigation of penalties for private actors who detect and self-report infractions.

Two of the conference participants, Mr. Lawrie May and Mr. Michael Surridge, were vocal proponents of developing a fast-track clearance system.* They argued that such an approach makes it possible to speed the flow of cargo and passengers while increasing the effectiveness of controls. This is accomplished by allowing low-risk importations to be cleared quickly thereby allowing limited customs inspection and investigative efforts to be concentrated on the highest-risk importations. The conditions for receiving a rating as low-risk would be:

  • Ensuring a secure location where cargo and passengers are loaded and discharged.

  • Access to such locations at any time by regulatory or enforcement agents.

  • Early notification to border control agents of expected imports and full customs documentation for these importations.

  • Access to commercial records and tallies that would allow border control agents to conduct periodic audits for ensuring honest customs documentation.

  • Immediate notification to customs of any discrepancies discovered by the importer or carrier.

  • The posting of a bond to cover penalties associated with any discovered discrepancies.

  • Agreeing to be subject to periodic, random, comprehensive examinations of importations in order to verify the integrity of the system.

  • Notification of any changes in the importer’s ownership and officers.

  • Acceptance that any serious breach of the conditions or discrepancies in entered goods will lead to immediate removal of low-risk importer status.

While the private-sector must be willing to embrace self-enforcement and transparency measures, some participants warned that it is important to avoid creating the impression or the reality that the burden for costly public sector activities are being disproportionately placed on the backs of importers and carriers. Also, there needs to be some consideration of the disparate range of data-management and self-policing capacities among large, established businesses on the one hand, and small or new businesses on the other. The goal should be to build an effective private-public partnership where responsibilities and expenses are equitably shared. Greater private sector transparency such as advance electronic transfer of detailed cargo or passenger manifest information would likely be supported by the private sector as long as they saw that such information sharing arrangements helped to speed up the clearance of their passengers and cargo.

Session III: "GETTING THERE FROM HERE"

In this final session, the participants identified the likely barriers to overcoming the status quo and attempted to devise a near and medium term strategy for overcoming these barriers by formulating responses to the following questions:

Why might (1) the private sector, (2) enforcement and regulatory officials, and (3) individual Caribbean governments resist initiatives designed to adapt current border control processes to a changing economic and security environment?

What preliminary steps can be taken to build trust and improve public-private cooperation on border control issues?

· What incentives can be devised to get manufacturers, carriers, cruise ships, forwarders, and importers to undertake more self-policing responsibilities within transportation and logistics networks?

How can the United States, Canada, European Community, World Bank, Inter-American Development Bank, and other appropriate organizations be engaged to assist with providing the requisite resources and training?

The participants had little trouble inventorying the potential barriers for overcoming the status quo. Among the likely reasons for resisting border control reforms are:

The prevalence of distrust by private sector actors of border control officials. This distrust stems from: (1) historically not being included in the deliberations on developing regulatory and enforcement processes, and (2) the perception or reality that border control agents act arbitrarily, capriciously, or inefficiently and thus, cannot be trusted to abide by new arrangements.

Private sector actors who are already operating on thin profit margins will be reluctant to embrace any initiative that raises their costs in the short-to-medium term, even if there are benefits over the long-run. This is because they may not be confident of their ability to be around long enough to realize any long-term gains.

Private sector actors who are benefiting from existing systems by engaging in fraudulent or illicit activities would naturally resist any meaningful reform initiatives.

The prevalence of distrust among public sector officials of private sector actors.

Fear by unions and associations that changes that automate and streamline border control processes by embracing new technologies are likely to lead to a loss in overtime pay or even jobs.

Bureaucratic tendencies toward turf guarding and resisting change to the status quo.

Corrupt border control agents will not want to see any erosion of their discretionary authority or the adoption of new technologies which might raise the risk of detection and accountability.

Regional efforts to reform border management practices will invariably raise sovereignty concerns among some Caribbean governments.

The shortage of sufficient trust among the governments in the region stemming from past conflicts, unresolved current political and economic disputes, and the enormous asymmetry in size and capacities among the countries.

In developing recommendations on how to overcome these barriers, the participants emphasized the importance of carefully constructing processes that would allow private and public stakeholders to regularly exchange views on each other’s interests, challenges, and priorities. Suggestions included creating advisory councils with a formal legal mandate or convening semiannual or annual workshops for stakeholders modeled after this conference. Generating the political will for national leaders to embrace these reforms would likely require a concerted public education campaign that outlines (1) the important role border management processes play in providing for national security and economic development, (2) the cost of persisting with the status quo, and (3) the benefits to be accrued by embracing the proposed reforms. It will also require that port authorities, chambers of commerce, tourism boosters and cruise lines, and shipping associations band together in sponsoring these education efforts and generating pressure for public sector reform.

Outside resources and expertise will be necessary to effect these changes. To attract this assistance, regional organizations such as CCLEC should continue to work towards arriving at a consensus on equipment and training priorities for the region. Private consultants can help in designing and monitoring the implementation of reforms. The U.S. Customs Service’s "Americas Counter Smuggling Initiative" (ACSI) provides an opportunity for exporters, carriers, manufacturers, and other businesses to receive assistance from experienced customs agents in developing and implementing security programs. International Financial Institutions such as the World Bank and the Inter-American Development Bank should be enlisted in supporting these reforms as well. As Dr. Ronald Ramkissoon observed, for too long the development community has focused almost exclusively on the macro issues of free trade without addressing the micro facilitation issues that make that trade commercially viable. Captain Randolph Straughan suggested, "It’s as though all these years we have been talking about how to live on the moon without ever discussing how we can get there in the first place." The bottom-line is that adapting border controls to meet the demands of the new security and economic environment will be critical to assuring the capacity for the region to prosper in the 21st century global economy. As such, the participants hope that the institutions whose core mission is advancing trade and development will embrace and actively support the conference recommendations.

CONFERENCE AGENDA

May 4 and 5, 2000

Kapok Hotel, 16-18 Cotton Hill

St. Clair, Trinidad, WI

Thursday, May 4

8:30 Registration and Continental Breakfast

9:00 Opening Ceremony and Welcoming Remarks:

Presider:

Prof. Anthony T. Bryan

Director, Caribbean Studies Program

Dante B. Fascell North-South Center

University of Miami

Dr. Julia Sweig

Fellow and Deputy Director

Latin America and Caribbean Studies

Council on Foreign Relations

Prof. Trevor Munroe

Department of Government

University of West Indies-Mona

Captain Rawle Baddaloo

Vice President, Caribbean Shipping Association

Divisional Manager, Port of Port Lisas

Keynote Address

The Honorable Mervyn Assam

Minister of Trade, Industry and Consumer Affairs

Trinidad and Tobago

10:00 Introduction and Workshop Overview:

Dr. Stephen E. Flynn

Senior Fellow

Council on Foreign Relations

10:20 Break

10:30 Session I: "POROUS BORDERS: THE IMPLICATIONS FOR CARIBBEAN TRADE AND DEVELOPMENT"

During this Session, the participants will be divided into 3 groups. Each group will be tasked with formulating responses to the following questions on the current challenges associated with controlling national borders in the region and the implications for trade and development of persisting with the status quo:

Absent change, to what extent can current border control inspection and enforcement capabilities handle a growth in trade and travel within the region?

What is the level of risk of a rise in the incidence of customs and immigration violations; corruption; organized crime; weapons, drugs, and hazardous material smuggling; and terrorism within the region?

To what extent would a limited capacity to perform regulatory, enforcement, and revenue collection functions within ports of entry present problems for attracting foreign investment, generating trade and advancing development within the Caribbean Region? Why is that so?

How likely is that public safety and security concerns about "porous borders" will undermine political support for the trade liberalization and facilitation measures associated with greater hemispheric economic integration?

12:15 Lunch

12:45 Group Report-outs and Discussion

A spokesperson for each of the 3 groups will present a summary report of their group’s findings in Session I to a plenary session of all the participants. This will be followed by a question and comment period.

2:00 Break

2:10 Session II: "ADAPTING BORDER CONTROLS TO SUPPORT CARIBBEAN TRADE AND DEVELOPMENT"

Working again in groups, the participants will discuss how border control measures can be best adapted to respond to the challenges outlined in Session I so as to achieve the twin objectives of lowering barriers for the legal transborder movement of peoples and goods and strengthening the capacity to filter the bad from the good in international travel and trade flows. Specifically, they will formulate responses to the following questions:

What can be done to reduce the incidence of delay, spoilage, and loss of legitimate commerce as a result of inspection and enforcement activities within ports of entry?

To what extent should states build upon existing regional arrangements so as to harmonize the standards and to improve their overall capacity for monitoring and inspecting the flows of people and goods originating from or transshipping through the United States and the Caribbean?

What self-enforcement steps should manufacturers, carriers, cruise ships, forwarders, and importers be reasonably expected to take in order to lower the incidence of fraud and to reduce the risk of their unintentional complicity with illegal transborder activities?

How appropriate is it to push manufacturers, carriers, cruise ships, forwarders, and importers to make the international flows of cargo and passengers more "transparent" so as to enhance the capacity for appropriate authorities to monitor the inbound and outbound movements of people and goods?

3:15 Break

3:25 Session II: (continued)

4:15 Group Report-outs and Discussion

A spokesperson for each of the 3 groups will present a summary report of their groups findings in Session II to a plenary session of all the participants. This will be followed by a question and comment period.

6:00 Depart for Reception - Trinidad Coast Guard Base

Friday, May 5

8:30 Continental Breakfast

8:45 Re-cap of Day 1

Dr. Stephen E. Flynn

Senior Fellow

Council on Foreign Relations

9:00 Keynote Address

The Honorable Sadiq Baksh

Minister for Works and Transport

Trinidad and Tobago

Presider:

Captain Rawle Baddaloo

Vice President, Caribbean Shipping Association

Divisional Manager, Port of Port Lisas

9:45 Session III: "GETTING THERE FROM HERE"

The participants will identify the likely barriers to overcoming the status quo and to devise a near and medium term strategy for overcoming these barriers by formulating responses to the following questions:

Why might (1) the private sector, (2) enforcement and regulatory officials, and (3) individual Caribbean governments resist initiatives designed to adapt current border control processes to a changing economic and security environment?

What preliminary steps can be taken to build trust and improve public-private cooperation on border control issues?

· What incentives can be devised to get manufacturers, carriers, cruise ships, forwarders, and importers to undertake more self-policing responsibilities within transportation and logistics networks?

How can the United States, Canada, European Community, World Bank, Inter-American Development Bank, and other appropriate organizations be engaged to assist with providing the requisite resources and training?

10:50 Break

11:00 Session III: (continued)

Session IV: WORKSHOP FINDINGS

12:00 Lunch

12:30 Group Report-outs to VIP Panel

A spokesperson for each of the 3 groups will present a summary report of their groups findings from the 3 sessions. This will be followed by a comment period by members of the VIP panel.

1:00 VIP Comments and Open Forum

VIP Panel

Ambassador Albert Ramdin

Assistant Secretary General for Foreign and Community Relations

Caribbean Community

Commodore Anthony Franklin

Chief of Defense Staff

Trinidad and Tobago

Mr. Pierre Lapaque

Deputy Director

Caribbean Financial Action Task Force

Captain Randolph Straughan

Chairman of the Executive Committee

Caribbean Customs Law Enforcement Council

Presider:

Prof. Anthony T. Bryan

Director, Caribbean Studies Program

Dante B. Fascell North-South Center

University of Miami

2:45 Closing Remarks:

Dr. Stephen E. Flynn

Senior Fellow

Council on Foreign Relations

New York, NY

ADAPTING BORDER CONTROLS TO SUPPORT

CARIBBEAN TRADE AND DEVELOPMENT

by Stephen E. Flynn

Abstract: This paper argues that border controls must be adapted to respond to a changing global economic and security environment. Absent reform, we can expect a decline in the Caribbean region’s capacity to be a competitive participant in the global economy. Further, there are likely to be greater incidences of customs and immigration violations, corruption, organized crime, weapons and drugs smuggling, and terrorism. The result could well be a downward spiral of declining foreign investment, expanding black markets, eroding public support for trade liberalization and regional economic integration, and greater political instability. What is needed is an approach that strikes the appropriate balance between lowering barriers for the legal transborder movement of peoples and goods while strengthening the capacity to filter the bad from the good in international travel and trade flows. Such an approach requires multilateral efforts that place greater emphasis on incorporating safeguards in the regional transportation and logistics networks at large in addition to improving the capacity to efficiently conduct regulatory and enforcement efforts in individual national ports of entry. Specifically, three things must be done: (1) states must work to harmonize the standards and to improve the capacity for inspecting and clearing imports and exports; (2) commercial actors must be encouraged to embrace more vigorous security practices within transportation and logistics networks, and (3) the capacity for appropriate authorities to monitor the international flows of goods and people must be improved.

The post-Cold War momentum towards open societies, liberalized economies, and new technologies have accentuated an important new reality—that despite the prerogatives of sovereignty, the capacity nations possess to police the movement of people and goods are frail and getting weaker. Stated succinctly, the traditional tools states use to filter the bad from the good among transborder flows are no match for: (1) the tenacity and ingenuity of modern criminals and terrorists; (2) the scale and complexity of modern transportation and logistics operations, and (3) the market imperatives for facilitating trade and travel. Despite these realities, most states are tenaciously clinging to their right to develop their own independent approach to policing their borders. Licit international travelers and freight must honor these distinct rules, norms, and practices. But for drugs, thugs, and terrorists, borders increasingly pose little in the way of a barrier.

Eroding border control has sobering implications for a wide range of economic development and security interests. For centuries, governments have sought to control their maritime and terrestrial borders in order to funnel the flow of goods into ports of entry so they can collect duties, tolls, and other fees. Additionally, inspection and enforcement activities at the border have always been an important means for stemming the flow of goods that the host society perceives as threatening, such as weapons and drugs. Also, states traditionally have had a keen interest in regulating who comes and goes across their borders so passports and visas are closely scrutinized at ports of entry. Finally, public health strategies that aim to manage the spread of disease by people, livestock, and agricultural products generally include border control measures. In short, states have an important stake in getting border control right.

Not surprisingly, with limited resources to dedicate to border control activities, the Caribbean region is finding itself susceptible to widespread customs and immigration violations, organized criminal activities, and weapons and drugs smuggling. The result has been to confound regional development in several important ways. When customs authorities cannot track what moves in and out of their ports and airports, they cannot collect the duties and fees which are a key source of government revenues for financing essential services and building infrastructure. In addition, when poor border control practices translate into shortfalls in revenues, many governments often try and compensate by raising fees and duties on selective items over which they are more confident they can control—such as the importation of automobiles—but this can produce the unintended consequences of contributing to the formation of black markets. Also, drug traffickers and arms smugglers intent on importing or transshipping their contraband can marshal virtually unlimited resources to corrupt or intimidate local officials. And when a port develops a reputation for being corrupt, foreign carriers and investors are likely to avoid it, elevating transportation costs for the legitimate goods that depend on that port.

But the challenge of managing national borders is by no means restricted to the island states of the Caribbean. Indeed, no nation dedicates more resources to border control activities than the United States, and no nation faces so great a border control challenge. The United States has nearly 100,000 miles of coastlines and 5,000 miles of land borders. People and goods arrive daily at more than 3,700 terminals in 301 ports of entry. With nearly 500 million people, 100 million vehicles, and $850 billion worth of imported merchandise passing through the U.S. cross-border inspection program last year, policing borders is a Herculean task for the world’s largest economy.

The serious problems for the United States and the Caribbean associated with border control present an opportunity. The public goods that are jeopardized by porous borders are ones that all legitimate states share a common interest in advancing. As each state—big and small—finds itself increasingly victimized by transnational threats, it has an incentive to join with others regionally and internationally in developing a response. Thus, as the crisis at the border intensifies, states should be more receptive to work together to develop regional approaches to common problems.

However, if not crafted properly, border enforcement activities designed to confront mounting transnational dangers could end up being a cure worse then the disease. This is because a myopic focus on "control" collides head on with global market forces that place a premium on the affordable and predictable movement of people and goods. "Facilitation" is the byword of the contemporary world economy. For many modern companies, maintaining competitiveness requires two things. First, they must engage in greater outsourcing of production functions for which they lack a comparative advantage. Second, they must adopt "just-in-time" delivery systems as a means to reducing the overhead costs associated with carrying large inventories. Increasingly, time really is money. In the United States, for instance, a delay at the Canadian border can shut down automotive assembly lines at the cost of $1 million per hour.

In short, the time is now at hand for a comprehensive reformulation of how the Caribbean region and the United States manage their borders. Attention will be required at three levels. First, any strategy to reduce risks along the sea, land, and terrestrial borders must be supportive of the need to move goods and people. There will be substantial resistance to any border control initiative that is perceived as compromising the competitive position of private sector actors. Accordingly, it will be essential to identify appropriate incentives for industry players to be supportive of new requirements.

Second, efforts to improve security at the border entry points require that parallel security efforts be undertaken in the rest of the transportation and logistics network. If they are not, inspectors will continue to be overwhelmed by the enormity of the task of identifying and intercepting illicit goods at arrival. Also, if security improvements are limited to the ports, airports, and land-border crossings, the result will be to generate the "balloon effect"; i.e., pushing illicit activities horizontally or vertically into the transportation and logistics systems where there is a reduced chance of detection or interdiction. Instead, a "layered-defense" approach is essential.

Third, border control initiatives must be pursued regionally and globally. Unilateral efforts to tighten security along one state’s borders without commensurate efforts to improve security in neighboring countries may lead carriers to "port-shop"; i.e., to move their business to other market-entry points where their goods are cleared more quickly. Thus the result for the more security-conscious state would be to find itself in the unenviable position of watching the competitive position of its transportation centers erode while the locus of the security risk simply shifts outside its reach.

In short, states that attempt only to bolster their conventional approaches to the growing border control threat will face disappointment. National or locally-directed measures such as: (1) requiring shippers and carriers to comply with unique local security requirements, (2) subjecting a greater number of goods and people to more intrusive inspections by customs and immigration authorities, and (3) imposing stiffer fines and penalties for non-compliance will, at a minimum, be actively resisted by the private sector and will likely spawn a cat-and-mouse game where companies constantly adapt their logistical operations to access the market where controls are weakest.

So what is to be done? Nations need to commit themselves to doing three things. First, they must work with the private sector, appropriate non-governmental organizations, and international organizations and reach agreement on common security guidelines to reduce the risk that the global transportation and logistics networks will be targeted or exploited by terrorists and criminals. Second, the capacity for appropriate authorities to monitor the international flows of goods and people must be improved. Third, states must agree to streamline the physical and procedural barriers to transborder movements for shippers and carriers who comply with the new guidelines.

At first brush, advocating an approach that calls for raising the bar on the security and oversight of transportation and logistic networks, while simultaneously promoting greater facilitation of cross-border flows of goods and people appears counter-intuitive. But facilitation and security are not inversely related. Clearly the absence of security works against facilitation. If criminals and terrorists are free to do their worst in a country, most shippers and carriers will avoid it. Those who do not will have to bear the cost of hiring their own security forces to guard their goods in transit—a phenomenon that is becoming commonplace in contemporary Russia. Conversely, border control measures—however well-intentioned—that significantly slow the movements of goods may actually compromise security since the opportunity to steal goods or place contraband among them is greatest when cargo is at rest. In addition, if such measures are too onerous, they create substantial incentives for corruption which inevitably leads to less security. Confronted by long queues and lengthy delays, officials will be routinely tempted by bribes for the "privilege" to move to the head of the line or to obtain early release of legitimate commerce. Those who are willing to accept these payments become easy targets for organized criminals with more nefarious interests.

Not only is facilitation not necessarily at odds with security—and security with facilitation—today it is increasingly possible to construct a regime where they are mutually reinforcing. New technologies hold out the potential of making the international flows of cargo and passengers "transparent" and could serve two important purposes. First, it would allow cargo and passenger manifests to be "virtually" inspected well in advance of arrival so that non-suspicious flows could be cleared for entry without delay at the border—a boon for legitimate transporters. Second, for suspicious flows, it would provide the means to pinpoint interdiction efforts, which lowers the risk of collateral damage or disruption to legitimate cargo and passenger traffic. Since successful interdiction efforts often depend on intelligence received from external enforcement sources and informants, enhancing the means to act on that information would be a real windfall for customs, regulatory, and security officials. In short, greater transparency would help optimize limited enforcement resources by shrinking the haystack and eliminating many of the shadows within licit flows where illicit activities could flourish.

This is not the stuff of science fiction. The competitive imperatives that are fueling the explosive growth in international trade and travel have spawned what is known in the logistics industry as the "supply-chain management" revolution. Getting highly perishable goods to distant markets; keeping ambitious tourist agendas and globetrotting business travelers on schedule; and running virtual global assemble lines with minimally stocked shelves all requires a degree of logistical choreography that would have been impossible just a few years ago. New and affordable tagging, tracking, and communications technologies make it possible for commercial carriers, manufacturers, and retailers to monitor in near real-time the flow of products and passengers as they move from their points of origin to their final destinations. Such controls and the rich databases that support them represent a veritable gold mine for national authorities responsible for monitoring the arrival of travelers and imported goods. This is because they make it possible to conduct audits of inbound goods and people from where they originate vice trying to conduct these audits as they arrive.

Similarly, the supply-chain management revolution creates powerful incentives for private sector actors to work cooperatively with enforcement and regulatory officials. Logistic managers desperately need to lower the risk of delay. Since borders represent the greatest and most unpredictable source of disruption in their supply chain flows, there is ample cause for them to embrace more stringent security and reporting requirements, if, they can reduce that disruptive risk. Thus, rather than control measures being inherently at odds with the market, they can potentially be adapted to dovetail with it. When authorities can readily identify and be confident that the vast majority of legitimate goods and people that flow across borders are low risk, they can better concentrate limited enforcement resources on the activities that are at greatest risk of being compromised by criminals or terrorists.

Getting from where we are to where we need to be will not be easy. Profit margins in the transportation and logistics industries are generally quite thin and many shippers and carriers—particularly smaller firms—are likely to resist any new security initiative that raises short-term overhead costs. Moving away from traditional practices is also likely to be resisted by the government agencies and enforcement officials who are charged with border control responsibilities. Few within government understand the dynamic global forces behind the changes within the transportation industry and many believe that the current challenges can be readily met by a greater commitment to providing more resources to their agencies. In some locales where corruption is common, new practices that create "transparency" would threaten to undermine the lucrative ways many officials supplement their incomes. In short, many private sector and government actors are likely to have a substantial interest in preserving the status quo.

However, crafted and marketed carefully, the proposed regime could include sufficient incentives to win widespread acceptance. Increasingly, the issue of porous borders is capturing the attention of a vast array of important voter interests; i.e., individuals and groups concerned with combating weapons and drug smuggling, countering terrorism, preventing immigration and customs violations, curbing corruption, and responding to safety and environmental threats that range from hazardous waste dumping to invasive species. Collectively these groups represent a large and potentially powerful constituency for advancing reform.

Transportation officials, seaport and airport directors should also welcome the implication that logically flows from the proposed regime—that an important way to improve security is to eliminate delays from inefficient terminal operations, improve intermodal links, and streamline government procedures within these facilities. Thus, the argument for reforming obsolete labor practices, modernizing the transportation infrastructure and improving the connections to road and rail, and curbing the abuses of corrupt officials are not simply because this is good for business. Advocates for these reforms can argue that they will not only lower transportation costs and improve service for shippers and carriers, but they will help reduce the risk posed to society by organized criminals and terrorists as well.

Private sector actors must also be concerned with the possibility that states might undertake increasingly draconian measures to reassure domestic polities that important national interests are not being unduly compromised by the increased transborder flows associated with greater international trade. That is, a rise in the incidence of crime and terrorism would bolster neo-isolationist sentiments. In the case of a particularly egregious, well-publicized lapse of security, public officials are likely to respond by swiftly advancing new legislation designed to placate these fears—and the draft legislation is unlikely to be vetted with the private sector.

Private actors connected with the transportation and logistics networks also should worry about the fact they are increasingly likely to be the targets of crime. In South Florida, drug trafficking organizations have been moving into what they apparently see as a lower risk and nearly as lucrative activity: cargo theft. The high-tech industry has been particularly hard hit, which by one industry estimate has had the result of raising the price of each PC sold in the United States by $100 to cover mounting insurance costs and losses. Many of these stolen goods are exported to the Caribbean and Latin America where they are sold on the black market, often below wholesale cost. For the legitimate businesses in these countries, the economic consequence of criminals "dumping" consumer goods into the local economy can be crippling.

Ultimately, there will need to be consensus among states that reform is necessary. These states will need to agree on security guidelines within transportation and logistics networks and encourage commercial actors to embrace them. Also, there needs to be consensus among states on the facilitation incentives to be provided to shippers, carriers, and forwarders who comply with these guidelines. Happily, these conditions are increasingly operative in the Caribbean region.

First, there appears to be a consensus among the political leadership in the region that the major security challenges to confront their countries are the transnational threats of organized crime, drug trafficking, weapons smuggling, and illicit migration. Evidence is mounting that organized criminal networks are finding the island states extremely attractive locales to base their operations. There, a little bit of money and intimidation can go a very long way. Since many of the Caribbean nations have only small constabularies and virtually no military, well-heeled and well-armed criminals are free to intimidate who they please. For the many honest public officials, there is nowhere to hide when criminals warn them that the cost of not accepting a bribe will be to risk injury to themselves or their families. Regional elites recognize that if left unchecked, their islands could be transformed into stationary pirate ships that fly national ensigns vice the Jolly Roger.

Second, the region knows that it must strengthen its links with the global economy if it is to be a beneficiary vice a victim of globalization. One of the most important barriers to development are the historically high transportation costs—on average adding 10 percent to the costs for imports and exports versus 3-4 percent in the United States. Lengthy and inefficient clearance procedures are an important factor contributing to these costs. Additional costs are accrued at U.S. borders where goods from the region face lengthy delays and, at times, destructive inspections. These aggressive inspections are often justified by U.S. enforcement authorities as essential, due to the rising incidence of drugs and other contraband being transshipped within legitimate cargo originating from Caribbean region states. Particularly for the "boutique" agricultural goods that are becoming an increasingly important component of the region’s micro-economies, long delays can be disastrous. Thus, there are real economic incentives to establish common security guidelines that could preclude these delays.

Third, there are a number of institutional frameworks already in place to advance common security, enforcement, and economic development challenges. In the early 1980s, a regional consensus on common security threats and a frank acknowledgment of resource limitations gave rise to the Eastern Caribbean’s Regional Security System in the early 1980s. To enhance law enforcement cooperation among the island nations, there is the Association of Caribbean Commissioners of Police (ACCP). The Caribbean Customs Law Enforcement Council seeks to facilitate the work of Customs authorities throughout the region. Caribbean Basin countries also have shown a willingness to enter into a variety of regional and international networks to combat drugs and money laundering. These include the Organization of American States’ Inter-American Drug Control Commission (CICAD), the Caribbean Financial Task Force (CFATF), the OAS Money Laundering Expert Group (OAS-MLEG). As recently as October 1999, many Caribbean states joined with other OAS member nations in agreeing to establish a technical advisory group on port security as a part of its new Inter-American Committee on Ports.

Fourth, public-private cooperation to counter drug trafficking is firmly established in the region. In 1984, U.S. Customs established the Sea Carrier Initiative (SCI), in which sea carriers participating in the program agreed to improve their port and cargo security practices to prevent drug smuggling. In return, in the event their security was breached, Customs would agree to reduce fines and not exercise its authority to seize conveyances. In 1996, in order to improve security further down the logistics chain, Customs established the Business Anti-Smuggling Coalition (BASC) in which it agrees to provide security site surveys, to assist in developing and implementing security programs, to conduct post-seizure analysis of drug smuggling cases, and to guide the application and deployment of security technology. Most recently, Customs has developed the Americas Counter Smuggling Initiative (ACSI) which seeks to strengthen cooperative regional efforts within the international trade community of Latin America to better police each aspect of the commercial transportation process.

These four ingredients provide a firm foundation for a concerted regional effort to better police the international flows of people and goods originating from or being transshipped through the Caribbean and the United States so as to simultaneously advance trade and development while reducing the growing risks to security. But, building on this foundation will require that the United States, Canada, the European Community, the World Bank, the Inter-American Development Bank, and other appropriate organizations be mobilized to provide for the resource and training needs of states who are willing, but presently unable to become active partners in such a regime.

CONCLUSION

Hemispheric advocates for greater trade liberalization and economic integration should be deeply concerned about the status of border controls. The free trade agenda requires a willingness to reduce barriers to the cross-border traffic of people and goods. But the rising incidence of crime bolsters the position of those who argue that this traffic be tightly controlled so that the bad can be filtered from the good. The free trade agenda also requires sustained political support. However, a widespread sense that "open borders" are undermining important public interests such as counter-terrorism, drug control, immigration, and public health, could prove fatal for generating the political backing for restoring fast-track authority to the President of the United States, and for advancing the Free Trade Area of America (FTAA). The recent demonstrations at the Seattle meeting of the World Trade Organization and against the World Bank and IMF in Washington made clear that there is a growing coalition of civic activists who are willing to strongly oppose liberalizing trends if they feel they are causing undue harm to important public interests such as the environment and labor. Thus, the decade-old momentum towards greater trade liberalization within the hemisphere could suffer an added blow if free trade critics can bolster their case by proffering evidence that the imperatives of regional economic integration are placing vital security interests increasingly at risk as well.

In short, not doing enough about border control is likely to erode support for free trade. Doing too much border control could effectively kill free trade. The only way to extricate ourselves from this conundrum is to embrace the idea that it might be possible to have the best of both worlds—improved security and improved facilitation in the transborder flows of goods and people. If w

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