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US Economic Partnership with the Caribbean Islands

Partnership with the Caribbean IslandsThe vibrant atmospheres and scenic views in the Caribbean reach across 14 islands, as well as six more that are categorized as the Organization of Eastern Caribbean States. These islands in the Caribbean Sea have relatively small economies that are fiercely dependent on tourism. About 15% of employment and 13.9% of the Caribbean’s GDP centers around tourism, making the Caribbean islands the most tourism-dependent region in the world. However, the COVID-19 pandemic had a disastrous impact on the economy of several Caribbean islands, as people were not traveling and tourism decreased. Due to the United States’ reinstated partnership with the Caribbean islands, the economy may be looking up.

Background of Poverty in the Caribbean

The Caribbean’s exclusion of its poor has been apparent throughout its history, owing to hierarchies of race, class and gender established back through colonial domination. Around 30% of people live in poverty and most jobs that are accessible for uneducated people are low-skilled and low-paid.

There are few opportunities for impoverished people to gain ground in the Caribbean, and there was an even larger setback in the economy due to the lack of tourism during the COVID-19 pandemic, which has contracted the economy by approximately 8.6%. The ability of the Caribbean’s economy to bounce back from the pandemic will determine how many more of its people will fall below the poverty line.

Past U.S. Partnership with the Caribbean Islands

The U.S. has been the Caribbean’s largest trading partner for many years. Likewise, the Caribbean is the U.S.’s sixth-largest trading partner, with around 35.3 billion dollars exchanged between the two each year. The U.S. partnership with the Caribbean began in 1983 with the Caribbean Basin Initiative, consisting of two trade programs: the Caribbean Basin Economic Recovery Act and the US-Caribbean Basin Trade Partnership Act. These help Caribbean countries have more open access to U.S. markets.

The United States’ partnership with the Caribbean islands helps to boost its economy while simultaneously creating more jobs to employ Caribbean residents. This further emphasizes the importance of the U.S.’s reiteration of its commitment to the Caribbean.

Importance of Future U.S. Partnership with the Caribbean Islands

In June 2021, the United States committed itself to partner with the Caribbean as a means for economic growth and the eradication of poverty. This commitment was vocalized as the keynote address at the American Chamber of Commerce of Trinidad and Tobago by Ian Saunders, the U.S. Department of Commerce Deputy Assistant Secretary for the Western Hemisphere.

Saunders assured the Chamber of Commerce that the United States is a committed partner to the growth of the economy post-pandemic and of their efforts to help eradicate poverty throughout the islands.

According to the Trinidad and Tobago Guardian, Saunders stated that a Caribbean Region Trade Mission and Business Conference will take place in October 2021 with the help of the U.S. Department of Commerce and 14 American embassies. This conference will help connect U.S. companies to opportunities in the islands.

The COVID-19 pandemic interrupted a positive growth rate that had been maintained by the Caribbean for many years, decimating a lot of hard work by the islanders and plunging many people below the poverty line.

With the United States showing support for the economic backing of the Caribbean, things are looking up for tourism rates and commodity exportation to increase. 

– Allie Degner
Photo: Flickr

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How COVID-19 Created a Global Chip Shortage

global chip shortageThe COVID-19 pandemic created a global chip shortage that has ultimately exacerbated poverty. Most notably, the tech divide has widened as economic sanctions worldwide slowed production or halted it entirely, leaving many out of work. Fortunately, countries and manufacturers are stepping up to address the pandemic-induced global chip shortage.

The Cause of the Global Chip Shortage

Chips are known as the “brains” of electronic devices and are essential to several industries, including the cellphone industry and the motor vehicle industry. The shortage initially began because of a delay in production caused by factories shutting down due to the emergence of the COVID-19 virus in 2020. Simultaneously, remote work increased the demand for telecommunication, ultimately creating a strain on the supply and demand ratio.

The U.S.-China tech war also played a major factor in the global chip shortage. The U.S. Department of Commerce blacklisted SMIC, which is one of the largest semiconductor manufacturers in Asia. The inability to source U.S.-based parts to manufacture small chips had significant ramifications for the supply chain. Several companies, including Huawei Technologies Co., had anticipated such actions and began stockpiling chips as early as 2019.

Effects on the Global Economy

The chip shortage has harshly impacted several East Asian countries, largely because 75% of global semiconductor chips are produced in East Asia. Because of COVID-19, 2020 saw a $2.1 trillion revenue loss across Asia, putting an estimated 23 million individuals out of work.

The U.N. realized the economic strife that the COVID-19 pandemic brought upon the world. The U.N. predicted that 71 million individuals globally would be “pushed back into extreme poverty in 2020.” The pandemic even put previously financially secure individuals at risk of poverty.

Several motor vehicle manufacturers, including Ford, Nissan, Toyota and Honda, halted production at the beginning of the COVID-19 pandemic. When the companies eventually increased their semiconductor chip orders, suppliers such as Taiwan Semiconductor Manufacturing Company (TSMC) could not keep up. Due to the impact of chip shortages, Ford failed to produce upwards of 1.1 million cars, giving way to a potential $2.5 billion loss.

Chip Shortage Impact on the Tech Divide

Almost 60% of the global population has access to the internet, with Europe and Asia leading the highest internet penetration rates in 2020. China has around 854 million internet users out of a 1.4 billion population. In lower-income countries, however, internet penetration rates are far lower.

The COVID-19 pandemic created the global chip shortage, which in turn, caused high inflation. A significant factor in widening the tech divide is the high cost. GPUs, PS5s and Xboxes have skyrocketed in value, with some products tripling in price in a little over a year. For example, the Nvidia RTX 3060 Ti graphics card had seen an increased retail price of $399 to a street price of $1,226 by March 2021. These higher prices create barriers to internet access and other technological abilities for those in lower-income countries, thereby exacerbating the digital divide.

Resolving the Shortage

In order to address the global chip shortage, in February 2021, President Biden signed an executive order to expand semiconductor chip production within the United States. The U.S. accounts for 47% of the world’s semiconductor chip sales yet just 12% of all chip manufacturing. In order to solve the shortage, Biden sought “$37 billion in funding for legislation to supercharge chip manufacturing in the United States.”

In April 2021, TSMC announced a plan to invest $100 billion in chips over the next three years to address the global chip shortfall. In 2020, TSMC spent around $17 billion in producing semiconductor chips and originally only planned to spend between $25-28 billion for 2021. The budget changed to account for the shortfall and the increased demand in telecommunications.

The global chip shortage is projected to linger until 2023. Despite this prolonged shortfall, many companies look forward to operating at full capacity as COVID-19 vaccines become more globally available and the global chip shortage decreases.

– Camdyn Knox
Photo: Flickr