Panama, perhaps, annexing island with one Caribbean state (5)
I believe the answer is:
haiti
'caribbean state' is the definition.
(country in the Caribbean)
'panama perhaps annexing island with one' is the wordplay.
'panama perhaps' becomes 'hat' (Panama is a type of hat).
'annexing' is an insertion indicator.
'island' becomes 'i' (geographical abbreviation).
'with' means one lot of letters go next to another.
'one' becomes 'i' (Roman numeral).
'hat' placed around 'i' is 'hait'.
'hait'+'i'='HAITI'
(Other definitions for haiti that I've seen before include "Western part of Hispaniola" , "Republic on island" , "Caribbean isle" , "Caribbean state" , "foreign state" .)