If we must pull out of Caricom...

Wednesday, April 25, 2012    

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WE get the sense that suggestions that Jamaica should leave the Caribbean Community (Caricom) and go it alone continue to resonate with Jamaicans who believe that the regional economic integration process has nothing to offer us, as the territory with the largest economy and the largest population. Indeed, Jamaica, along with Trinidad, pays more than half of the Caricom budget.

This isolationist mentality persists in the thinking of the majority of Jamaicans but has been offset by politicians, businessmen and intellectuals purveying the benefits of the imagined community of the West Indies. They have extolled the virtues of Caricom as a matrix of institutional arrangements for regional cooperation, for example. The University of the West Indies, and as a vehicle for collective action to influence international affairs, for example, joint policy positions in international fora.

However, with the de-industrialisation of the Jamaican economy, the trade deficit with the rest of Caricom, in particular Trinidad and Tobago, has escalated exponentially. The enormous adverse trade balance is now held up as proof that membership in Caricom has had a harmful effect on the Jamaican economy.

It is our view that in an extension of this line of argument many have created an irrational conspectus in which Caricom is seen as the cause of the decline of the manufacturing sector, and imports of manufactured goods from Trinidad especially, as the cause of the demise of manufacturing of certain products. Yet, the real cause of the trade deficit centres on the lack of international competitiveness of production in Jamaica.

The fact that a firm in Trinidad can import peanuts into Trinidad, process them, package them, ship to Jamaica and sell for less than a local firm, points to differences in the cost of production.

These in turn derive from the business environment, eg the cost of electricity, rates of interest, levels of taxation, cost of transportation, etc. The fact is that it is much less expensive to produce and manufacture in Trinidad than in Jamaica because of cheaper energy and lower interest rates.

This is the case with most countries producing manufactured goods, especially where large size provides the additional benefit of economies of scale, as in the United States, and lower wages, as in India or both, as in China.

Because the costs of production in Jamaica are so high, compared with other countries, we have a growing trade deficit not confined to Caricom or Trinidad. If Jamaica stopped importing goods from Caricom it is more than likely that these would be replaced by imports from other non-Caricom countries, and not by local production.

If we want to reduce or eliminate the trade deficit with Caricom, then we must, first, create a business environment where our firms can produce at internationally competitive prices -- we cannot ask the consumer to pay more for a biscuit made in Jamaica as against similar biscuit from Trinidad or England. And second, Jamaicans must buy locally produced goods in preference to imports, whether they are from Caricom or elsewhere.

If we must leave Caricom, it must be for the right reasons.





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