At the Fourth Heads of Government Conference held in Bridgetown, Barbados on 23-27 October 1967 it was agreed to establish the Caribbean Free Trade Association (CARIFTA) formally, and to include as many Commonwealth Caribbean countries as possible in the new arrangement of December 1965.  It was also agreed that the Free Trade Association was to be the beginning of what would become the Caribbean Common Market, the establishment of which would be conducted through a number of stages towards the achievement of a viable economic community of Caribbean territories.

CARIFTA was founded by Antigua and Barbuda, Barbados, Guyana, and Trinidad and Tobago on 15 December 1965, with the signing of the Dickenson Bay Agreement (the Agreement establishing the Caribbean Free Trade Association). They were joined on 1 July, 1968 by Dominica, Grenada, St Kitts-Nevis-Anguilla, Saint Lucia and St Vincent and the Grenadines; and on 1 August, 1968 by Montserrat and Jamaica. In 1971 Belize (then British Honduras) joined the Association.

These Caribbean countries had recently become independent, and CARIFTA was intended to unite their economies and to give them a joint presence on the international scene.

Specifically, CARIFTA was intended to encourage balanced development of the Region by:

• increasing trade - buying and selling more goods among the Member States
  
• diversifying trade - expanding the variety of goods and services available for trade
  
• liberalising trade - removing tariffs and quotas on goods produced and traded within the area
  
• ensuring fair competition - setting up rules for all members to follow to protect the smaller enterprises
  

In addition to providing for free trade, the Agreement sought to:

• ensure that the benefits of free trade were equitably distributed
  
• promote industrial development in the LDCs
  
• promote the development of the coconut industry (through an Oils and Fats Agreement) which was significant in many of the LDCs
  
• rationalise agricultural production but in the interim, facilitate the marketing of selected agricultural products of particular interest to the LDCs (through the Agricultural Marketing Protocol); and
  
• provide a longer period to phase out customs duty on certain products which were more important for the revenue of the LDCs
  

Emerging also from the 1967 Heads of Government Conference was the decision to establish the Commonwealth Caribbean Regional Secretariat on 1 May 1968 in Georgetown, Guyana and the Caribbean Development Bank (CDB) in October 1969 in Bridgetown, Barbados.

It was at the Seventh Heads of Government Conference in November 1972, that the Caribbean leaders decided to transform CARIFTA into a Common Market and establish the Caribbean Community of which the Common Market would be an integral part.

In 1973, CARIFTA became the Caribbean Community (CARICOM).