Nontraditional Exports as the Frontier of Caribbean Development

Abstract

The definition of nontraditional exports is fuzzy and may vary from country to country. In general, the foreign markets for these products have never been exploited and, therefore, they have never been a major source of foreign exchange. Quite often, they are indigenous products that have long been consumed domestically by the population. Over the years, as migration builds up a large expatriate population abroad, a foreign market is created for some of these products. But for many Caribbean countries, the most significant nontraditional exports come from offshore production where finished products are assembled from imported raw materials for export to the parent firms. These labor-intensive assembly industries typically operate with little sunk capital in free trade zones where they pay no taxes and employ workers with relatively low skills. In some instances, government will provide a subsidy for the training of labor. The expectation of the governments offering these incentives is that the foreign exchange benefits will more than offset the tax revenues foregone. Typically, production takes place in export-processing zones under arrangements that require duty-free import of all raw material and the export of the finished product.