In one of the most important economic policy presentations so far this year, entitled “Jamaica : Gearing up to succeed in international markets”, former Jampro head Patricia Francis, now executive director of the Geneva-based International Trade Centre (ITC) since June 2006, gave a whirlwind overview of global economic trends, how to succeed in international markets, the critical importance of participating in global value chains, whether Jamaica was ready (benchmarking our competitiveness), the thorny issue of non-tariff measures (the ITC has recently done a study on Jamaica’s behalf), and the policy implications for export success to public and private sector leaders at a Jamaica Chamber of Commerce hosted breakfast last week Thursday.

She started by emphasising Jamaica’s need to focus more on emerging markets. The changing landscape includes firstly the continued much faster growth of the BRIICS (plus M), meaning Brazil, Russia, India, Indonesia, China, and Mexico, than developed economies. Of critical importance to our planned hub is the lessening importance of the legacy trade lanes e.g. from Europe to North America, and the emergence of new super trade corridors including South America to Asia (and South America to North America), the Middle East to Africa and Asia, and inter Asia (the growth in which trade Jamaica would still be connected through the Panama Canal expansion).

Additional factors include the rapid globalisation of fast growing enterprises. This trend now goes well beyond the traditional US Fortune 500, as the Asia Pacific region has more companies on the Forbes Global 2000 list (701) than North America (603), a reversal of the situation just four years ago. The continued rise of state owned enterprises, such as China Harbour, also represents key new actors that small nation states such as Jamaica will have to learn how to deal with.

In the view of Mrs Francis, Jamaica has some critical gaps. One example is our fragmented and inaccurate information, as the Caribbean was one of the worst places in the world with respect to data gathering. Reform was still taking place in silos, without an emphasis on how a horizontal process should flow. Just one example is that trade data from customs was still delivered in printed form to Statin, requiring further inputting. Another is that recent research has now revealed that services are far more important than anyone ever thought, but their value is often incorrectly estimated (understated) as they are usually bundled with trade in products, making this a key area for further research (not just in Jamaica). She noted this was particularly important as a guide to good policy making for a services dependent economy like Jamaica.

There was also a lack of understanding of targeted foreign markets, and the “next” practices required to ease penetration into new emerging markets. For example, she outlined the heavy trust and confidence building, based partly on personal relationships, over a number of years that it required to get GE to place a research and development facility in Rio de Janiero in Brazil.

There was a clear need for Jamaica to acquire more trusted partners and new business networks. The uncertainties in the global market requires agility, and the ability to support end to end business. Today, 80 per cent of world trade occurs through global value chains that Jamaica desperately needs to understand. For example, Jamaica may not fit into the global value chain of Asian manufacturing (factory Asia with China as the hub), but it may fit into North America’s revived manufacturing value chain (factory North America with the US as the hub), or into a value chain based on international trade with Europe.

In the case of China, for example, their value added is only 20 to 30 per cent, as the rest comes from somewhere else. Economic power comes from adding value. Jamaica has ambitions to become a hub, but by their very nature, hubs only add a small amount of value, relying instead on a large volume of in transit business, and therefore need to be extremely cost competitive. However, low costs are equally important to a local exporter experiencing a delay in customs, as when this cost is combined with high other charges, it may wipe out the entire profitability of their shipment.

As a general rule, for smaller economies like Jamaica, the cost of high protective tariffs is much higher than for large countries. Import tariffs on parts and raw materials have a very large negative impact on our ability to export, and may both discourage inward based foreign direct investment and encourage outward based foreign investment e.g. encourage the building of a food manufacturing plant overseas. For a hub strategy to be successful, there is a particularly strong need for the ability to move goods, people and services around quickly. In a hub such as Dubai, everything is connected, all with goal not so much of policing trade, but allowing it to flow. If one looks at local customs reform purely in terms of increasing collection, or “gatekeeping”, this will not allow Jamaica to become competitive.

It should come as no surprise to anyone in Jamaica that based on the rankings of the World Bank doing business survey 2013 and the World Economic Forum competitiveness survey, Jamaica’s business environment is not competitive in a wide range of areas with a number of key hubs including Singapore, UAE (Dubai) and Panama. In the World Bank survey subset measure of “trading across borders”, Jamaica, whilst not too far out of the line with our region’s average, performs particularly badly compared to these hubs, with obvious implications. For example, the US dollar cost to export a container in Jamaica is four times that of Singapore, and nearly three times that of a sample of other countries, with very similar figures for the US dollar cost to import a container. In the UAE, reducing time to export/import from 12 to nine days between 2005 and 2009 saved them US$40 billion.

She cited a recent conversation she had with the former Prime Minister of Malaysia, who when encouraging his civil servants to help create a “super corridor” to encourage international trade, reminded them that “their salaries were paid from the profits of companies, and that taxes were only paid if profits were made”. In short, they had a different view about the role and function of government than in Jamaica, where for too long we appeared to be pulling in different directions.

She reiterated the rationale for investment incentives, such as encouraging the upgrade of technology and infrastructure, job creation and providing “anchor” investments that provide multiplier effects and create linkages to the local economy. Best practices in administering incentives included the automatic eligibility of law based on objective criteria, that tax incentives should be part of the tax code, and the obvious point that incentives require adequate monitoring and control. The key is for incentives to be both competitive and very transparent.

Addressing head on the issue of export subsidies, she noted that until the Uruguay round of trade negotiations that ended in 2000, you could provide export subsidies on goods, but not after. A number of smaller developing countries, including Jamaica, got waivers from this requirement, which were extended again to 2015, but opposition to this from other countries has been increasing and Jamaica should try to anticipate change. This does not mean, of course, that you can’t have incentives to attract foreign direct investment.

In the case of Serbia’s free trade zone for example, importers were not liable for value added tax on imported goods, there were unlimited duty free imports and exports out of the zone, and goods from the zones can be distributed after customs duties have been paid. By clearing customs at national boundaries outside the free trade zone, Serbia was able to make both exports and imports that much more competitive. The implication has to be if war torn Serbia can do it, why can’t we.

Finally, in his concluding remarks, Minister of Industry, Investment and Commerce Anthony Hylton applauded the presentation as completely in line with his own views, and emphasized the partnership across all arms of government in bringing the planned logistics hub to fruition, in cooperation with the private sector.