The bauxite levy debate held centre stage in the House on October 30 when Opposition spokesman on mining and energy, Phillip Paulwell, again took the Government to task for what he described as a wrong decision to enter a profit-share agreement with New Day rather than impose the bauxite levy. Supported by his party colleagues, he argued that the Government is already losing revenue through the profit-share agreement in place in relation to the operations of New Day subsidiary, Noranda Bauxite Company.

The Government side countered that the profit-sharing arrangement ensures that both partners benefit from any ‘financial recovery’ in the performance of the mining and refining operations of the entity. Further, the agreement signed with the company spells out that the Government of Jamaica will earn 17.33 per cent of the profit made, or be paid the applicable levy now in place (whichever figure is greater).

Now, based on the history of the bauxite levy which was imposed in 1974 by the Michael Manley Government, one can expect that any move to touch, disturb, or remove this tax would bring down the wrath of the People’s National Party (PNP), who regard the levy as Manley’s legacy. Indeed, the PNP has been said to have reacted with raised feathers whenever the question of a waiver of levy obligations is raised. But what is good for the goose is good for the gander. The standard 1974 levy has never been treated as sacrosanct by either party, and the records will show that past PNP administrations have waived and adjusted the terms of the legislation more often than the Jamaica Labour Party (JLP).

In October 2012 Paulwell, as minister, gave concessions to aluminium producer RUSAL and was vilified by the then JLP Opposition for giving away the country’s birthright. Paulwell stoutly defended the move.

“If we didn’t do that, I believe the scenario would be quite different today. We wouldn’t have it, the US$7 million, plus we wouldn’t have the 600 jobs or the production, so I think it is a win-win for us all,” he stated at a press conference.

So we see where successive governments have consistently justified their levy adjustments with the need to not only sustain the industry, but to keep jobs.

In the present Government’s case, any prologue to the New Day agreement echoes the job-saving factor. In Noranda’s case, 800 jobs and more are at stake.

This bauxite levy debate has been one of longest debates inside and outside of the House and, indeed, inside and outside of Jamaica. It started with the dramatic announcement by Manley in the House on May 15, 1974 that was to change the course of the Jamaican bauxite industry history. In a 90-minute statement, the prime minister reported that, “The review of the bauxite structure negotiations with the companies, which began on March 18, have not been concluded… and, in the face of urgent need, the Government cannot allow the negotiations to continue indefinitely.”

Further, he said, “The companies have failed to prove that Jamaica’s position is unjust or based on faulty logic. In the light of this, the Government has decided to exercise its sovereign right to impose just and equitable taxation in the form of a production levy.”

The companies did not take this lying down. They considered the move as a violation of the contract, and three of the companies submitted the dispute to the World Bank’s International Centre for Settlement of Investment Disputes. The debate had just started.

Jamaica was on edge as to where this would go, and whether it would take the bauxite industry along with it. Overseas, investment circles and the foreign press were raking Manley and the Government over the coals. The action was seen as effrontery by a small country against the superior powers.

Revere took their case to the Jamaican Supreme Court. Revere also took arbitration proceedings against the US Government insurer, Overseas Private Investment Corporation (OPIC), claiming that the Jamaican action was effectively an appropriation of its assets. The revenue matter, according to Dr Carlton Davis, one of the architects of the process, “had rapidly taken international centre stage as a cause célèbre”.

It is a matter of history that it was Kaiser Bauxite Company that broke the impasse between the Government and the operating companies on this matter.

According to Dr Davis, in his book, Jamaica in the World Aluminum Industry Volume 11, Kaiser Aluminum not only had almost total dependence on Jamaica for its raw material (bauxite), but “It was led by one of the last patricians in the US industry, Edgar Kaiser, who reflected an understanding of the aspirations of developing countries with respect to their key natural resources and felt that statesmanship could lead to a win-win situation.”

On top of that, Kaiser had a warm personal friendship with Michael Manley demonstrated by the following account given by his driver in Jamaica, Vincent Rose, and recounted in my own book, In Partnership with Jamaica: The story of Kaiser Aluminum’s 50-year partnership with Jamaica.” Rose tells us how during the negotiations on partnership in 1974, Kaiser had been to an early morning meeting with Prime Minister Manley at Jamaica House and was due to leave at 9:00 am to catch a private flight out of Norman Manley International Airport. However, the meeting went an hour overtime and, at about 10:00 am, with the plane waiting on the tarmac, and Rose and Kaiser’s wife waiting patiently in the car, Kaiser and Manley came out of Jamaica House and walked slowly to the vehicle while carrying on an animated conversation which continued for another half-hour. It was Dudley Thompson, minister of mining, who eventually broke up the conversation by nudging Kaiser gently into his seat and hurrying the party to the airport.

Inside the car, Kaiser explained that Manley and himself realised that they were running behind time, but that he did not consider it protocol for him to adjourn the meeting with the prime minister, hence the extra half-hour delay.

Rose later heard that the prime minister, who himself was running late for a parliamentary appointment, was at the same time explaining to an aide that he could not possibly be the one to adjourn a conversation with such a charming gentleman like Kaiser, as that would have been poor manners and, in any case, “We were enjoying each other’s company immensely.”

Davis tells us in his book that the Government and Kaiser Aluminum agreed to set out their future relationships with a firm partnership (the format of which still exists today). The agreement achieved two significant objectives, said Davis: “One, it represented a breaking of the ranks of the companies in accepting a new situation; and two, it became the model for arrangements made with the other bauxite company, Reynolds, and to some extent the agreements with the alumina producers.”

But, not so fast. Problems were to surface. Partnership negotiations with Reynolds led to an agreement in 1977. But Reynolds folded and left Jamaica in 1984. The company stated that their decision was not related to the principles of the levy. But others took issue with that claim and blamed the levy for the Reynolds fallout.

Alcoa also temporarily closed its gates in Clarendon on February 6, 1985, again sparking debate over the reasons, with some blaming the levy and others defending it. Another company, Revere, closed its shutters on August 19, 1975.

The increased earnings from the levy propelled the revenue from US$19.2 million in 1973 to a whopping US$180 million in 1974. But the levy also moved the cost of Jamaican bauxite from being the cheapest to the most expensive worldwide.

The companies began increasing their investments in other bauxite-producing countries, and Jamaica consequently lost its position near the top of the ratings as a world-leading producer.

So the levy has been around for a long time, and with it came a lot of cass-cass and haranguing, aspects of which have continued into today.

We thought, for example, that according to reports from Jamaica Observer Senior Reporter Balford Henry that, “The Government and the Opposition appear to be moving closer to an understanding of the situation with the bauxite levy after Tuesday’s sitting (October 30) of the House of Representatives.

“During the sitting Minister of Finance and the Public Service Dr Nigel Clarke not only answered questions asked of him by Opposition spokesman on Mining and Energy Phillip Paulwell, but also gave his own take on the issues surrounding the Government’s reduced intake from the once-lucrative revenue source and virtually made a pact with Opposition Leader Dr Peter Phillips to maintain a united approach to dealing with the international producers.

“It was an exemplary approach by the Members of Parliament to a possibly divisive issue, which could have breached the decades-long cooperation between both major political parties and open up the industry to corporate control, but in effect reminded us of the power of our Parliament when members put country above party.”

But this doesn’t seem to be the case, because the debate was reopened on Friday, November 9, 2018 with a young Opposition senator, Sophia Fraser Binns, saying that the time has come for debate on the bauxite/alumina industry to move from focusing on the levy to debating the future of the industry.

Rather than prolong the debate, however, she believes that the time has come for what she calls a serious conversation on the future of bauxite: “I believe that the time has come for us, as a country, to have a serious conversation on the future of bauxite.” She suggested focusing on the effect on small farmers in the parishes where bauxite mining is being done.

“The reality is that many of the small farmers are giving up their lands, whether because they feel compelled or otherwise. These farmers are the ones who normally grow their crops and sell at the market. But, their lands are being mined out,” Fraser Binns noted.

The good senator is aware that farmers do “grow crops and sell at the market”, but is perhaps unaware of the 75 years of close relationships and partnerships developed between the bauxite industry and agriculture, and the numerous projects in land reclamation, crop farming, irrigation, marketing, cooperatives, housing resettlements, numerous subdivisions built, JASD and Rural Agricultural Development Authority (RADA) mutual assistance, provision of free water, agro-processing, cattle breeding, and champion farmer incentives and competition that have established comprehensive friendships and family relationships over the years.

The senator would also be pleased to note the greenhouse technology programmes which are being introduced to small farmers across the bauxite zones resulting in some 250 greenhouses pioneered by Noranda Bauxite, the Jamaica Bauxite Institute, and the Jamaica Social Investment Fund since 2015. The programme was initiated by Noranda in 2009 on rehabilitated bauxite lands in its own mining areas as a best option for community farmers restricted by drought conditions. Some farmers are reporting a 500 per cent increase in production, with eyes on proposed mining areas in Trelawny set for greenhouse project introduction.

The senator’s proposal to move the debate, or ‘conversation’, away from the levy to the matter of land use is admirable and would be welcomed, I am sure, by the industry. In a period where potshots are being taken against the industry from environmentalist campaigns, and is under constant threat from the unpredictable movements of global markets and economic and political decisions taken thousands of miles away, the industry is challenged once again to have the story told of its immense contribution to the development of Jamaica as an investor that has grown up with the country in pre- and post-Independence years. There are some 3,000 to 4,000 Jamaicans directly and indirectly employed in the industry, and there are thousands of job opportunities through contractor, service, vendor, and temporary jobs.

The negative rather than positive views expressed on some otherwise responsible platforms belie the role played by, and described by former Prime Minister Edward Seaga in his recent article in the Jamaica Observer on Sunday, October 28, 2018, entitled ‘The fatigue of development and jobs: Which model is best?’

In describing the economic performance of the country between 1981 and 1983, when “the strategies employed by the Government effected an economic turnaround”, he noted that in this period of recovery from the decade of the 70s, “The net international reserves were the only area of the economy that continued to fall. This was traced directly to the drastic fall in bauxite exports from 12 million tonnes in 1980 to 7.6 million tonnes in 1983. In turn, the dramatic reduction in bauxite exports can be linked directly to the stinging impact of the international recession.”

“But what,” comes the key question, “if bauxite production had not fallen”, asks Seaga. The former prime minister said he asked the national planning agency to calculate the impact on the major economic indicators if bauxite had not fallen.

“The results showed that not one IMF test would have been failed; no devaluation would have been necessary; no intense credit restrictions. In short, the economy would have been on a smooth course of gradual recovery.

“The shortfall in achieving the level of performance set by the IMF agreement can be identified, therefore, as a result of the fall of bauxite production to almost one half of the 1980 level.”

This is a telling indictment on those who would discredit the bauxite industry’s contribution to Jamaica. This writer knows that in critical periods it was advance levy payments by certain companies that kept the country’s budget afloat during tough times.

But now the industry is once again going through critical times, both from callers within and from callers without. The most reasonable call would be the one asking for a balanced view of the situation, where shortfalls are identified and corrected without hysteria or misinformation.

During the House debate on the levy, Dr Phillips asked of Dr Clarke that, having said all that he has said, “Was the Opposition to assume that as the minister responsible for the revenue, he would be prepared to keep the issue under review as to the best formula to be used to ensure that Jamaica gets a maximum return for the depleting asset?”

Dr Clarke replied: “As I said before, this is a national asset. So it is not an asset that I believe we should be divided on, at all. I believe that it is an asset that we should approach with a unified approach.” That’s our idea of a reasonable approach.

Lance Neita is a historian, public relations writer and consultant. Send comments to the Observer or lanceneita@hotmail.com.