Inward-looking economies trail BRICs

Published: Friday | December 13, 2013 Comments 0

Jamaica's neighbours to the south have secured the highest rating for growth fuelled by global trade in a new study which also suggests that the United States and Japan risk falling behind other large exporters.

Those lagging behind could miss out on future economic growth as a result, the analysis proposes.

The study, dated December 2013, spanned 27 economies and was conducted by UHY - an international network of legally independent accounting and consultancy firms whose administrative entity is Urbach Hacker Young (UHY) International Limited, a UK company.

It rated the economies on several factors - including taxation and trade policy - that indicate how internationalised an economy already is and how well positioned it is to take advantage of future globalisation of trade.

Factors examined in the study included how successful a country has been in negotiating favourable tax arrangements with potential trading partners; how successful it has been in growing exports; how important a part trade already plays in its economy; how much tax it imposes on companies 'repatriating' overseas profits; how it is rated in the World Bank's Ease of Doing Business survey, which considers factors such as bureaucracy and transparency and labour costs.

South American threat

By those indictors, the report stated, South America now threatens to outperform North America. Brazil and its neighbour Uruguay had the highest overall ratings on both continents, thanks primarily to low labour costs and high proportions of duty-free export arrangements with foreign trading partners.

Relatively low scores in several other areas indicate that Brazil still has the capacity to improve its performance significantly, the study points out, noting that "its export growth lagged far behind that of China and India and there is also plenty of scope for improving its trade-to-GDP ratio and securing more dual-tax treaties."

The US and Japan with scores of 3.7 and 3.0, respectively, placed behind both China with a score of 4.6, and the EU member states, with an average score of 5.2 out of a maximum of 10 points.

"While the USA and Japan both did well on their Ease of Doing Business rating, their economies still remain more aligned to domestic activity than many of their competitors," said UHY.

Germany topped the ratings with a score of 6.4, while Slovakia was not far behind with 6.3 points. India was the best performing BRIC with a score of 5.1, helped by its low labour costs with an average monthly salary less than half as high as China's.

Within the Americas, Canada presented the least promising picture.

"Its dependence on slow-growing developed economies means that Canada was the only country in the study to achieve negative annual growth in exports on average in recent years - a factor which brought down its overall score dramatically," said UHY.

"A recent Canadian survey suggested that many Canadian companies are now looking to grow by targeting exports to Brazil and China."

But Canada, at 4.3 points, still ranked higher than the US. The US can achieve more by encouraging and supporting American companies in exporting and expanding overseas, the report asserted.

avia.collinder@gleanerjm.com

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