As trade deficit widens, JMEA head labels 50-year Caricom pact a dud
Business Jamaica is outmatched almost four times in its level of trade with Caricom partner and oil producer Trinidad & Tobago, a state of play that continues to irk the productive sector.
Last year, Trinidad exported US$442 million worth of goods to Jamaica, which was three times greater than the value of the merchandise supplied in 2021.
Jamaica also did better business with Trinidad in the same period, but not by much. Exports of nearly US$15 million in 2021 grew to US$19 million the following year, and with that performance, the trade gap widened between the two Caricom partners.
In 2021, the trade deficit with Trinidad was just over US$120 million, but in 2022 it nearly quadrupled to more than US$417 million, on the path towards becoming Jamaica’s fourth-largest source of imports that year, Statistical Institute of Jamaica data shows. The top three were the United States, China and Brazil.
Within the wider Caricom bloc, comprising 15 countries, Jamaica ran an overall trade deficit of US$458 million, or 2.5 times the deficit in 2021, monies that were mainly spent on mineral fuels, followed by food and beverage products.
However, Statin also reported that the Jamaican manufacturing sector sold 33 per cent more goods to the bloc last year.
Still, President of the Jamaica Manufacturers and Exporters Association, John Mahfood, says the numbers demonstrate that Jamaica has not benefited much from the Caricom trade pact, while citing the imbalance with Trinidad as the prime example.
This year, the region will celebrate 50 years since the signing of the Treaty of Chaguaramas in 1973, an agreement that created a customs union and later introduced a common external tariff, or CET, in 1992, a protection measure for trade within the bloc.
Under the 2001 Revised Treaty of Chaguaramas, which established the Caricom Single Market and Economy, the regional arrangement aimed to facilitate the free movement of goods, services, labour, and capital, as well as the right to commercially establish businesses throughout the bloc. The treaty also provides for the implementation of a common trade policy.
“We represent more than half of the population of the English-speaking Caribbean and represent the biggest market for goods for other countries, but there remains a significant imbalance in trade in favour of other countries,” said Mahfood.
“Trinidad subsidises its electricity and has the lowest rate in the Caribbean. Therefore, we lose foreign investments to Trinidad. This also gives Trinidad an unfair advantage in the items that they manufacture, compared to our local manufacturers,” he added.
Mahfood noted that while Jamaica imports oil from Trinidad, it does not receive a benefit in terms of concessionary pricing.
Additionally: “The small Eastern Caribbean islands are permitted to put up protection against the larger territories by charging tariffs of up to 100 per cent [duty] to protect their local manufacturers,” he said.
More generally, Mahfood noted that there was still a blockade against the free movement of labour within the bloc, despite the revised treaty, and even the current discussions to resolve the issue “anticipate that there would be a minimum requirement for an individual to have three CXCs”, he added.
And Caricom countries aren’t allowed to trade sugar freely with each other, the JMEA president added.
Were the sugar regime to change, it would encourage competition and allow the more efficient producers like Guyana to expand cultivation, he reasoned.
As for threats from outside the bloc impacting all of Caricom, Mahfood suggested that Caribbean leaders were not proactive in resolving them, citing the dumping of goods from China, and the exposure of local businesses to the unfair competition, including the mattress industry.
The Caricom treaty “has fallen woefully short of its original intent of 50 years ago and operates in name only. It benefits countries such as Trinidad and the DR, but Jamaica, which has the largest population, has not benefited,” the JMEA president said.
“Our government needs to take a stance and insist on changes that will provide a benefit for us, or we should get out [of the treaty]. Our economic development has not benefited, and our per capita income has been stuck at below US$5,000 for many years. Only Haiti, who has been in a never-ending civil unrest, is less than us,” he added.
However, the JMEA president ended with a rallying cry to the private sector.
“I have to also add that our own manufacturers must wake up and take advantage of the opportunities available to us to sell to our neighbours who have a similar background, history, and taste,” he said. “The other markets combined represent a much bigger market than our own and can create a real opportunity for growth.”