Clash over CARICOM - Let's take a break!

Dr Christopher
Tufton, Contributor

The following is an edited version of a speech delivered to the Lions Club of Kingston recently.

Many Jamaicans are still uncertain as to the net benefits of our membership of CARICOM. The primary concern has been our trading relations with Trinidad and Tobago (T&T) within this free-trade framework.

The Jamaica-T&T trade issue has been caught up in a plethora of misinformation, misunderstandings and even cunning manipulation, with strong views for and against the call for review and radical reform to these existing arrangements within the CARICOM treaty.

Trinidad is very clear on why it supports CARICOM trade arrangements, and the value that Jamaican consumers offers it. We are T&T's largest market and the best prospects for them to dispose of their goods. They have prepared themselves in a manner that gives them an advantage under these arrangements, both in modernising industries and (some would argue, unfairly) applying energy subsidies. Jamaican producers have also expressed concerns about T&T's approach to rule-of-origin procedures under the treaty.

Jamaica has historically not been as prepared or deliberate when it comes to CARICOM trade, instead choosing to look north for larger markets in the diaspora and beyond. In fairness to T&T, the economic management of our country has affected all our trading arrangements, not just CARICOM. Shutting out T&T or CARICOM will not solve our problems entirely until we improve our internal efficiencies.

But the concerns about Jamaica-T&T trade within CARICOM are real, and continue to be a major source of disagreement between critical stakeholders. At a time when unity of purpose is so badly needed to solve our economic challenges, we cannot run from this issue.

THREE DOMINANT GROUPS

There are three main groups that have been dominant on this trade matter.

Self-interested pragmatists: First are those who argue purely on national economic activity grounds for a re-examination of the Trinidad-Jamaica trade relationship. They claim that their interests are about preservation of local industries and local jobs.

They also feel that given the missed opportunities for taxes to be collected at ports of entry, under these free-market arrangements, Jamaica, in its current economic crisis, should seek a temporary withdrawal from CARICOM and improve revenues from increased custom duties. This group cites nationalistic reasons for its demands. I call them the self-interested pragmatists.

Unrepentant neoliberal economists: Group Two are those who take a world view to this challenge that is steeped in ideological and theoretical constructs. They object to the self-interested pragmatists based on a fear that their interests may compromise those of others.

Manufacturers may benefit, they say, but consumers may have to pay higher prices because of increased costs. They feel that the laws of supply and demand will allow efficiencies to be established and jobs created in the right industries, over time. They are the same group that feels devaluation will automatically translate to increased exports and improved standards of living.

The old boys' network: Group three I refer to as the bleeding-heart emotionalists, those who are products of the 1960s and '70s, who attended universities together, either at a University of the West Indies campus or London School of Economics or the Inns of Court at the Temple Bar in England. They are sentimentally and historically attached to CARICOM, and continue to have nightmares of failed federation. They defend at all costs the preservation of the status quo.

They sometimes justify regionalism, even at the expense of nationalism. This old boys' network is small but, perhaps, the most influential group, and command the policymaking apparatus in Jamaica and the region.

LET IDEAS CONTEND

Whether you are a self-interest pragmatist, an unrepentant neoliberal economist, or a bleeding-heart emotionalist, all of us must be seized with the crisis Jamaica faces and the need for growth and economic development.

The latest IMF agreement would have reminded us of this crisis, and it is now up to us to rise to the occasion. We cannot continue to do things the way we have in the past.

We need jobs and increased economic activity, and the Government needs taxes as it attempts to reform itself in these times of fiscal constraints. The question has to be, how can CARICOM arrangements help in this regard? If Jamaicans have concerns about the current CARICOM arrangement, the Government has a duty to sincerely examine these issues. And there should be no sacred ground in doing so.

I fully agree that there are existing rules for complaints contained in the revised treaty, but as one newspaper editor correctly pointed out, that mechanism also includes the Ministry of Foreign Affairs and Foreign Trade, as well as the Ministry of Industry, Investment and Commerce. These ministries should also be a part of that mechanism for facilitating transparency and understanding of these trade issues, underpinned by a responsibility to support the interests of the Jamaican community.

BENEFITS OF COLLABORATION

We must accept that there have been benefits with regional collaboration, particularly in areas such as education, security and natural disaster risk management, and international lobbying.

However, in the area of trade between Jamaica and T&T, there are justifiable concerns around T&T's approach to transparency of its energy policy to warrant the Jamaican Government's intervention on behalf of its business community and its citizens.

In addition to the need for private-sector interests to pursue matters they find injurious to their activities based on perceived breaches, the Government of Jamaica should see, as part of its responsibility, engaging the Trinidadians on the following concerns:

1 The functioning and impact of the Petroleum Production Levy and Subsidy Act of T&T on the price of energy sold to T&T manufacturers and exporters, and if the implementation of this legislation places at a disadvantage Jamaican manufacturers and exporters.

2 The concentrated
control and involvement of the T&T Government in the energy
sector, with limited transparency of operations and sufficient
opportunity for subsidies to be applied to local T&T operations
that could be injurious to Jamaican businesses operating within the
CARICOM space.

3 The practice of market prices being
determined by government ministries in T&T, leaving sufficient
flexibility for these prices to be artificially set to the advantage of
T&T businesses, to the disadvantage of Jamaican competitors
operating in the CARICOM space.

4 The disparity
between retail prices of energy offered to the Trinidadian marketplace
versus the retail prices in Jamaican.

It is my view
that these are enough reasons for the government of Jamaica to have
high-level discussions with the T&T government, as it fulfils
its mandate to represent the interests of the Jamaican people, including
seeking to establish a better understanding of these
issues.

These discussions should be approached in a
manner that would also offer some guidance for local policies and
programmes that would enable a more efficient Jamaican business climate.
To be truly transparent and objective, one cannot conclude that it is
all T&T's fault why Jamaican exporters are uncompetitive. So
let's use this exercise to also clean up our
act!

TEMPORARY WITHDRAWAL

There is
another major reason why this exercise is
important.

Given the economic challenges currently
faced by our country, the time is right for the Jamaican Government to
have discussions with the relevant stakeholders to examine the
implications of a temporary withdrawal from CARICOM, citing adverse
balance-of-payments issues. This is allowed under the treaty (Section
43) and would, if nothing else, increase revenue flows to the Government
through increased border taxes, while providing space and time for
local producers and government policy reforms to improve business
efficiency and competitiveness.

Based on the more than
US$1-billion imports from CARICOM in 2011 (primarily from T&T),
taxes foregone which would have been collected are estimated to be
approximately US$170 million. Frankly, it would not matter where these
goods are sourced, as long as the appropriate taxes are
applied.

This period would also be sufficient for a
comprehensive examination to be done to determine if Jamaica should
leave CARICOM in its current form, and instead seek functional
collaboration on matters of strategic regional and international
importance.

We could also use this period to carry out
badly needed reforms, including tax reforms, and so position ourselves
to be more competitive over time in this trading
space.

Let me reiterate that the T&T
government is well within its right to do what it thinks is best for
Trinidadians, including offering subsidised fuel. We should not approach
this issue with any ill feelings or animosity to the government and
people of T&T or CARICOM for that matter. Jamaica, however, has
to do what's best for Jamaicans.

Senator Dr Chris
Tufton is opposition spokesman on foreign affairs, foreign trade and
investments and co-executive director of the Caribbean Policy Research
Institute. Email feedback to columns@gleanerjm.com and
cctufton@gmail.com.