Editorial | Make use of WTO faux pas

Jamaican farmers are likely to welcome Nigel Clarke’s promise to impose additional stamp duties on imported raw foods in compensation for his planned removal of the general consumption tax (GCT) from those products.

But the finance minister will no doubt understand why farmers and other stakeholders are concerned that his proposed compensatory action appears to have been an afterthought, coming in the wake of a public outcry against his declaration of intent on the GCT removal, rather than simultaneously with his initial announcement. General consumption tax, a value-added tax, is at 15 per cent of the value of the transaction.

In the circumstances, Dr Clarke must ensure that there is no lag time between dropping the GCT and introducing the protective measures for farmers.

At the same time, stakeholders are surprised at the public silence of the agriculture minister, Floyd Green, and the commerce minister, Aubyn Hill, on this significant development, as well as the seeming exclusion of the foreign affairs and foreign trade ministry from the working group which Dr Clarke says he will establish to craft the details of the compensatory mechanism. Yet, it is the foreign affairs and foreign trade ministry that oversees Jamaica’s relationship with the World Trade Organization (WTO), negotiates its global trade deals, and is the island’s main repository of expertise in these matters. Perhaps the minister’s failure to name that ministry was an oversight.

The imbroglio, though, is an opportunity for two separate strands of public engagement by the Government on policy issues on which there has been, so far, insufficient engagement or mobilisation.

TRADE POLICY REVIEW

The first is around the question of food security in the face of Jamaica’s food import bill of US$1.4 billion and the expected contribution to the Caribbean Community’s target of reducing the value of the region’s food import bill (over US$5 billion two years ago) by 25 per cent by 2025.

Next, the foreign ministry should open a national dialogue on global trade relations; the trade treaties and organisations to which Jamaica is a signatory; and if the WTO is, in fact, in the business of blacklisting countries in the style of the Financial Action Task Force with respect to countries that the group perceives to be laggards on anti-money laundering regimes.

Indeed, global trade relations is an area to which Jamaicans, including those with ambition to export, pay too little attention.

Regarding the GCT matter, even key groups were surprised at the finance minister’s announcement during the debate last month that the tax, in place for imported raw foods for a dozen years, would be removed because Jamaica was breaking global trade rules and could possibly be blacklisted by the WTO.

“We don’t have a choice, and we’re not going to wait until the blacklisting by the WTO is final to do something about it,” Dr Clarke said.

The finance minister has suggested that the GCT on raw foods, an internal tax applied to imports by the previous administration, was highlighted by a visiting WTO mission – which we presume had to do with the organisation’s periodic trade policy review of Jamaica. The last of those reports, for 2011 to 2016, was published in 2017.

While the WTO may indeed draw countries’ attention to areas where they are non-compliant with its rules, the organisation, insofar as this newspaper is aware, does not institutionally sanction members.

EXPAND WORKING GROUP

As this newspaper previously pointed out, when a country breaks the rules, an aggrieved party may file a complaint for the issue to be adjudicated via the WTO’s dispute resolution mechanism, usually starting with consultation between the parties. If resolution is not possible, the issue may be dealt with by a dispute panel.

Or, as the WTO put in an explanatory document: “First rulings are made by a panel and endorsed (or rejected) by the WTO’s full membership. Appeals based on points of law are possible.”

Sometimes, especially between powerful trade and geopolitical rivals, such as the United States and China, one country may unilaterally impose, or retaliate against, trade restrictions against the other.

While Jamaica’s wish to be compliant with trade rules is fully appreciated, it is not clear which state party complained to Jamaica about the GCT breach or filed a dispute action against Kingston at the WTO, to make the matter one of such great urgency that planned action was publicly announced before stakeholders were informed. Antigua and Barbuda would have been happy with similar alacrity by the United States, having gone two decades without compensation from the US, after winning a case against Americans at the WTO for banning online gambling from the Eastern Caribbean country.

On the larger question, Dr Clarke’s working group from the ministries of finance, investment and commerce, and agriculture must be expanded to include the Ministry of Foreign Affairs and Foreign Trade. And its mandate must evolve to more than finding an immediate alternative to the GCT.

It should be the launch of a much deeper review of Jamaica’s place in the global economy and for the development of a multisectoral industrial policy to guide Jamaica from macroeconomic stability to sustainable development and growth.