Caribbean Free Trade Association (CARIFTA)

DEFINITION of 'Caribbean Free Trade Association (CARIFTA)'

The Caribbean Free Trade Association (CARIFTA) is a multilateral free-trade area composed of Caribbean nations and dependencies that existed during 1965 to 1972. Following the dissolution of the West Indian Federation, a political union in the region, CARIFTA was established in order to strengthen and encourage economic activity among its members primarily by removing tariffs and quotas on goods produced within the trade bloc.

BREAKING DOWN 'Caribbean Free Trade Association (CARIFTA)'

After the West Indian Federation failed at creating a single independent state among the Caribbean islands, many governments in the region thought that it was critical to continue collaborating with neighboring islands by having some form of economic linkage. In 1965, a trade bloc known as CARIFTA was formed by four islands in order to continue economic integration. Shortly after other islands joined the free-trade area after seeing the potential benefits of increasing trade with each other. The increase in trade came as a result of reductions in tariffs on imports coming from other islands participating in the free-trade agreement.

This caused some issues as many Caribbean islands were heavily dependent on revenue generated from tariffs, and as a result governments in the region were not too keen on removing nor reducing their trade barriers. This ultimately resulted in CARIFTA being short-lived however it did provide a foundation for the formation of the Caribbean Community and Common Market (CARICOM), which still exists today.