Abstract
In February 1982 President Ronald Reagan announced the Caribbean Basin Initiative (CBI). This new U.S. foreign economic policy was designed to assist the small, developing countries of the Caribbean and Central America. The centerpiece of the initiative was a liberal trade provision allowing free-duty access to the U.S. market for a period of twelve years. From the very moment of its announcement, the program has been controversial. Supporters and critics have been able to cite the same trade data to alternatively proclaim the CBI a success or a failure. This study assesses the effectiveness of the Caribbean Basin Initiative in a scholarly fashion. The work examines the trends, prospects, and policy issues of the CBI through the theoretical lenses of the discipline of international business studies.The controlling idea of the research asserts that the CBI model greatly overestimates the leverage of duty-free market access as an incentive to invest in the Caribbean Basin. Conceptually, the study examines the international business decision-making process as it relates to foreign direct investment and also, the tortuous Congressional path of the CBI. The empirical research measures U.S. direct investment in, and U.S. imports from the Caribbean Basin countries. Various measurements on these variables are taken and the values are considered independently as well as interactively. Several statistical yardsticks are developed to offer diachronic and cross-national comparisons.By all measurements taken, the research shows that the CBI has failed to increase U.S. investment and trade activity with the Caribbean Basin countries. The study concludes that as designed the CBI is not going to work since it does not address the competitive advantage issues which are the basis for business investment strategies. In an effort to integrate theory, policy, and practice, an example of a redesigned CBI using the concepts discussed is then offered.