There are several reasons for the failure of the West Indian Federation; the federation was a weak one, the question of custom union and freedom of movement was not resolved, there was also the conflict of where the federal capital should be located and the withdrawal of Jamaica from the union.
The Federation of 1958 was only given residual powers hence it was a weak federation. The Federation was given the responsibility for affairs which the unit governments did not consider important. The Federal Government was given the powers to administering the funds of the Colonial Development and Welfare Act, the West India Regiment, the University of the West Indies Administration costs, the Federal Shipping, Meteorology, Immigration and Exchange Control. The unit government maintained control over such important matters as taxation, education, health and agriculture. Therefore the Federal Government was restricted, especially by inadequate revenue because it had no control over taxation. Most of its meager revenue was already committed, and there was little left for anything constructive.
The Federation was also weakened by the British Government by allowing the units to make their own constitutional progress outside the Federation. Jamaica and Trinidad had political leaders who did not join the federal government and they put the constitutional development of their own islands before the Federation. Furthermore by the time Federation came into being in 1958, it was out of date as far as constitutional development in Barbados, Jamaica Trinidad and Tobago was concerned. These colonies had partial self-government and to them the federal constitution was a step backward since it had not acquired this status, hence, these unit governments were dissatisfied and Jamaicas Alexander Bustamante called the Federation, the Crown Colony Federation.
Freedom of movement was also a reason for the failure of federation. It was unthinkable to have a federation without freedom of movement from one part of the region to another. The small islands insisted on freedom of movement from one part to another. The small islands insisted on freedom of movement from on part to another; however the British Guiana and British Honduras had not joined originally because of this. When it arose again in 1961, Trinidad opposed it because her per capita income was twice that of the richest unit. Trinidad was relatively under populated in comparison with Barbados. Trinidad felt that she would suffer from large scale immigration which she would be powerless to prevent. This was the main cause of Trinidads withdrawal.
The idea of a Federal Custom Union was another reason why the Federation failed. It was hoped that the Federation would develop into a Custom Union. A Custom Union is a government department responsible for taxes on all goods imported into a country. This is one way government collects revenue to run the country. The Federation hoped to also create a free trade area, with tariffs on goods from outside the Federation. Jamaica was not in favour of such a move. Most of Jamaicas revenue was derived from custom duties so she opposed the Custom Union. Trinidad wanted her exports to move freely throughout the area so she supported free trade. Most unit members argued that a Custom Union would lead to an expansion in trade and production and would benefit all. Jamaica withdrew when it became obvious that Federal Governments policy was to introduce Custom Union.
The conflict that arose over the location of the Federal capital was another factor that weakens the Federation and ultimately led to its demise. There was conflict between Trinidad and the Federal Government over the Chaguaramas site for the Federal Capital. The conflict came about when the Trinidads Eric Williams felt that he should handle the question of the Federal capital instead of leaving it to the Federal Prime Minister, Grantley Adams. Britain had promised one million pounds towards the Federal Capital, Williams negotiated with the United States and Britain for the revoking of the lease on the ground that the Trinidadian people had not been consulted. He regarded as a domestic issue and Adams regarded it as a Federal issue as it involved the Federal Capital and that the Federal government should negotiate. This kind of conflict was not good for the union.
Jamaicas withdrawal from the Federation was the final straw that led to the dissolution of the Federation. Sir Alexander Bustamante, Leader of the Jamaica Democratic Labour Party (May 1961) demanded a referendum of the Jamaican people on the membership of the Federation. He had always had reservations about the Federation, suspecting it to be a device of the British Government for with-holding independence from Jamaica. He also saw Federation as a device whereby Britain would transfer responsibility for the smaller islands from herself t Jamaica.
He felt that Jamaica was being asked to subsidize the smaller islands from herself to Jamaica. He was able to convince organized labour in Jamaica that they were supporting the Eastern Caribbean and the referendum (the referring of a political question to the electorate for a direct decision by popular vote) rejected Federation. Manley subsequently lost the 1961 elections and Jamaica withdrew from the Federation of the West Indies and proceeded with separate independence. Trinidad did the same with Williams making his famous pronouncement one from ten leaves zero.
The Federation could not continue without its two most powerful members and in MAY 1962, the British Government formally dissolved the Federation.