Borrowing to correct the trade imbalance

Ramesh Sujanani, Contributor

There is considerable confusion in Jamaica over the stability of the CARICOM agreement, with various persons and organisations expressing support or backing withdrawal.

Very recently, there was a visit from the secretary general, Mr Irwin LaRocque, who gave us assurances that Jamaica would continue to do business within CARICOM, especially with Trinidad, where the main contention lies (not only with Jamaica, but with other territories in the Community).

In February, journalist Ricky Singh referred to comments made by Dr Ralph Gonsalves, prime minister of St Vincent and the Grenadines, in a letter (to Mr LaRocque), that there was a weakness in CARICOM to function as a people-centred movement; and he claimed that there existed a lethargy in our political leadership, and, similarly, a "bureaucratic inertia" that could no longer be tolerated (I interpret this to mean a general laziness among our politicians to attend to affairs).

Indeed, a mandated study of CARICOM infers that there were long-standing frustrations with limited progress, continuing economic retrenchment caused by the 2008 global financial crisis, and a serious weakening in its structure and operation which would cause CARICOM to expire over the next five years.

The trade issue

I am, therefore, at a loss when Mr LaRocque says that trade was only a small segment of the regional integration movement, and should not be an issue over which a decision has to be made. Is he serious? Trade is the main issue that will bind CARICOM, and without trade ties the Community will cease.

Mr LaRocque also said he had assurances from Jamaica's prime minister that CARICOM will be supported. This does not go further, and I wonder if the PM was properly briefed on the trade imbalance and the background in which CARICOM operates.

In retrospect, I recall that in September 1961, 256,000 Jamaicans, through a referendum, voted not to be part of regional integration (because they feared it would be a drain on Jamaica's wealth). For the next 10 years after this decision, Jamaica had the highest GDP growth years, averaging six per cent per year. On August 1, 1973, 37 members of parliament (MP) of the ruling party voted to put us back in via CARICOM. In December 2005, 34 MPs of the ruling party put us further in via the CSME, leaving us where we are now!

It is said that a good trading relationship between two parties is struck when both parties are making money; but if one side makes much more, creating a trading imbalance, then that makes that relationship unhappy for both parties.

The problem now is the correction of the trade imbalance. The solution is money and time to make money. Unless Jamaica gets some funds somewhere, CARICOM will falter, as Dr Gonsalves predicted. Many sources are waiting to be tapped; but only after the next International Monetary Fund agreement is put in place.

Reasons for the imbalance

It is clear that the cost of energy, and the benefit of energy subsidies to the Trinidadian manufacturer, and the successful execution of tariffs, are the reasons for the imbalance in CARICOM.

Although Jamaica was promised liquefied natural gas for energy production by the Trinidad authorities, it was subject to regasification equipment being installed between ports, which seemed to have caused a stalemate. In any event, Jamaica was denied the gas. It hurt our bauxite plans with Alcoa seriously, our energy considerations then and now, and has steered us deeper into imbalance.

The only solution is to borrow our way out, or for Trinidad to significantly write down or write off the debt, so that we can jointly make a new start, reviewing the CARICOM functions and streamlining them to be more efficient, and guard against future imbalances. If the former is being contemplated, a low-interest long-term loan from Trinidad might also be appropriate, or Trinidadian support through the Caribbean Development Bank.

All the comments written by readers of the various articles indicate a negative stance to Trinidad, and CARICOM, so I doubt there is substantive people support.

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