Some of our political leaders are apparently not yet prepared to come to terms with the fundamental shifts that have taken place in the geo-political and economic arrangements over the past 25 years.

Dennis Morrison

As a result, they are still wedded to the view that Jamaica ought not to cast its lot with Barbados and Trinidad and Tobago and other regional countries to establish the Caribbean Single Market and Economy (CSME), although the implementation of the agreement began on January 1.

From their vantage point, it is as if we are back in the early 1960s when the popular belief here in Jamaica was that we would be losers in any regional economic or political movement as the other islands were anxious to exploit us.

Forty years later, the argument being raised is that we are not ready for the CSME because our firms are not able to compete successfully against those from other regional countries. It is being said as well that we would gain more by operating on our own and gearing our efforts to compete outside of the region.

There is the subtle message which is implied in the anti-CSME position that we could also secure one-way preferential trade arrangements with the USA and Europe. Such arrangements would presumably flow from some special political relationships as existed in the 1980s with the Reagan and Thatcher administrations.

Anyone who has been following the shifts in global relations in the post-Soviet era could not have failed to see that one-way preferential arrangements are falling away and being replaced by reciprocal trade agreements.

And the negotiations for the Free Trade Area of the Americans (FTAA) are proceeding on that basis, even if special treatment will be provided for small island economies to allow them a longer adjustment period.

The fact, however, is that those negotiations are between blocks of countries in which the Caribbean is represented as a group rather than as individual islands, for the reason that the bargaining position of any single Caribbean island would be so limited as to make it mere cannon fodder.

More importantly, it makes absolutely no sense to argue that Jamaica is not ready to compete in CSME but it can do so against the USA, Canada and the rest of the world.

Given the similar level of development in the countries of the CSME, there is a greater possibility that Jamaican firms could put themselves in a position to complete favourably for the markets of these countries which will now become part of our domestic market.

Being able to set up production facilities in any part of the economic space and with the freedom to move capital and labour to such facilities, the scope for expansion will be greatly enhanced moving from a domestic market of 2.7 million people to one of over five million.

Already, some of this is happening with financial entities like JMMB, DB & G and NCB moving to Trinidad and Tobago. Before that, Sandals and SuperClubs had expanded their hotel chains into other Caribbean countries to create bigger operating entities, thereby enjoying economies of scale.

The movement of capital via the Caribbean Stock Exchange is also beginning to have an impact on businesses such as Grace, Kennedy & Company.

Of course, financial entities from both Barbados and Trinidad & Tobago have entered the Jamaican market in the banking and insurance industries. Some firms have also taken up ownership stakes in the real economy through Carib Cement and so on.

Their entry has brought capital that has served to enhance the viability of the various entities, the most glaring case being that of Carib Cement which was burdened by expensive debt before being taken over.

Now, it is getting ready to expand capacity and to undertake further modernisation of its production process. Fresh capital injected into the financial entities has also contributed to the restoration of the local financial sector, and these entities are now providing access to loan capital for firms such as JPS.

Cursory examination of key indicators for the major economies of the countries that will form the CSME indicates that their macro-economic situation is stable as inflation rates are in low single-digits in most cases, and foreign reserves are at healthy levels. Trinidad & Tobago, which endured six consecutive years of negative growth, reversed that position to chalk up 11 consecutive years of positive growth, starting in 1994 and reaching five per cent or more in four of these years while its foreign reserves stood at US$2.5 billion at the end of 2003.

This was after it recorded negative reserves in 1988 and again in 1992, slipping from US$3.2 billion in reserves at the end of 1981. Trinidad & Tobago has also maintained single-digit inflation rates since 1995. Jamaica has turned around its foreign reserves position, moving from negative US$739.3 million in 1983 to US$1.1 billion at the end of 2003, and US$1.8 billion by the end of 2004.

Our inflation picture has improved dramatically since the mid-1990s to the point where we had enjoyed six consecutive years of single-digit rates although the rates for 2003 and 2004 were in double digits. The major challenges are to speed up the growth rate and reduce the debt burden.

Barbados is showing sound fundamentals with a strong foreign reserve position which stood at US$751.5 million at the end of 2003 and has maintained its tradition of low inflation rates. Its growth rates have, however, been less impressive than those of Trinidad & Tobago, especially since 1999, but it has done better than Jamaica in this regard.

The implementation of CSME now provides an impetus for firms in these three economies to use the single economic space to spur investment and business activity across borders.

Trinidad & Tobago as a capital surplus economy is an attractive partner for Jamaica which is entering an expansion phase in terms of investment in tourism, infrastructure and mining and needs to have access to capital to finance a range of projects. The introduction of LNG into the Jamaican energy sector is yet another investment opportunity for both economies.

Shouldn't the authorities in Jamaica and Trinidad & Tobago be looking at some form of alliance between Air Jamaica and BWIA? Does it make sense for us to be trying to keep two bankrupt airlines operating overlapping routes where some form of consolidation and common service arrangements could help reduce the massive losses?

Can Air Jamaica continue to fly all its current routes offering the service levels for which the Air Jamaica Acquisition Group (AJAG) has been commended but at the same time expect the losses to be trimmed? Aren't those who either directly urge the pursuit of these 'best of both worlds' results or imply that the losses of previous years were totally unconnected to those things for which the AJAG is being rightfully commended (new fleet of planes, luxury service, high-profile branding and marketing initiatives) living in a fool's paradise? If they aren't, why is it that American, Delta, United and the other so-called legacy carriers are revamping their product offering and fare structures?

It seems to me that the CSME is not only a logical step for Jamaica if its firms are to be made ready for global competition, but that it provides a regional network which is one option that could facilitate the restructuring of critical economic vehicles such as Air Jamaica, which may not be possible for any one country to undertake. Afterall, even the proud French have had to merge their national carrier, Air France, with KLM.

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