David R. Salmon | Tariffs, food insecurity and Ja’s agriculture industry

LAST MONTH, Opposition Spokesperson on Agriculture Dr Dayton Campbell suggested that Jamaica should “put a little thing” on imported food. This proposal was resoundingly ridiculed, and rightly so, for its potential to increase food prices.

He later clarified that in lieu of a new tax, a portion of import duties, determined by CARICOM’s Common External Tariff (CET), as well as stamp duties, should be reallocated to spur production. In any case, let’s take this argument at its best. Campbell’s heart is in the right place in trying to encourage domestic agriculture, even if his mouth is prone to ‘misspeaking’.

This commitment to expanding agriculture is also shared by the Government, with Minister of Agriculture, Fisheries and Mining Floyd Green even encouraging farmers to resume growing sugar cane to resurrect that industry. While Green’s proposal is not as egregious as Campbell’s earlier burble, the long-term sustainability of these strategies are not clear, as they do not address some of the sector’s pressing issues.

TARIFFS ARE NOT THE ANSWER

The underlying assumption underpinning both propositions is that the Jamaican and Caribbean markets, at large, can provide sufficient demand to ensure the profitability of different segments of the agriculture industry. The other assumption is that there are local suppliers that can satisfy this demand. This fallacy needs to be addressed if we are ever going to experience any sustained growth in that sector.

Currently, an array of imported agricultural products have taxes that include CARICOM’s CET, stamp duties and General Consumption Tax (GCT). According to the Jamaica Trade Information Portal, items such as sugar, fruits and vegetables of all kinds have import duties that range from 40 to 100 per cent per kilogram. There are also more specific charges on these items.

Let’s take oranges as an example. In addition to an import duty of 40 per cent, there is a stamp duty of 32.9 per cent, GCT of 15 per cent, an additional standard compliance fee, as well as an environmental levy. That means that for every dollar you spend on imported oranges up to 88 cents goes towards taxes and charges. To put it another way, in a country where 55 per cent of the population suffers from moderate to intense food insecurity, we are actively worsening this situation through our import policies.

Proponents of this status quo would argue that we need to support the domestic agricultural sector as it provides countless jobs. Thus, these duties are needed to ensure that farmers can compete with overseas suppliers. This is the implicit logic that Campbell is using to inform his proposition. Interestingly, despite these duties, Jamaica is still not self-sufficient in citrus, and the production of these fruits have been declining for decades. Therefore, the question we must ask is, why should we protect some, arguably inefficient producers, at the expense of the wider public?

UNDERMINING COMPETITIVENESS

Creating barriers to trade is not the answer to the challenges faced by our agriculture industry. Rather, we should be looking at how this sector can become globally competitive. If an industry has not become competitive, even after receiving decades of protection, then the current approach is clearly not working.

Instead of aiming to maintain these import duties, as the Opposition’s proposals would require, we should focus on reducing these tariffs in the medium to long term. This can be done after working with our farmers to ensure greater competitiveness for select commodities.

The reality is that this arrangement does not benefit local industries, either. As it is, CARICOM’s CET applies broadly to an array of items where it is not demonstrated that the region can be competitive in. Sugar is a classic example, as each year, regardless of the import duties, the industry has collapsed.

One of the few items that Jamaica continues to remain globally competitive in is rum, a product derived from sugar. However, with our current import duties, the input costs for this good is artificially higher than what it needs to be. This undermines the price competitiveness of our rum.

Beyond this alcoholic beverage, other manufactured exports that have sugar as one of their inputs include fruit juices, jams and sauces. These goods, which advance our international export position, should not be artificially more expensive on account of protecting domestic producers. Rather than maintaining the current import duties that contributes to both the public and our manufacturers paying higher prices, we should look at reducing these rates to be globally competitive.

IMPROVING COMPETITIVENESS

Am I suggesting that we completely fly the gate and let anything and everything be imported? No, certainly I am not. For example, chicken is one such item where we are self-sufficient, and it is a sector that generates export revenue. In a reality where supply chain shocks exist, it would be irresponsible to suggest the decimation of the chicken industry through highly subsidised American meat.

Undoubtedly, we can be selective in what we decide to specialise in and tailor our policies accordingly. For instance, tax credits can be introduced for producers that invest in assets such as greenhouses. This encourages resilience, given that adverse weather phenomenon is expected to be the norm in the coming years. Thus, traditional methods of farming is simply not efficient.

Additionally, the Government should work with our existing agro-processing firms, such as the Seprod Group and GraceKennedy Limited, to expand their production. This includes encouraging backward linkages with suppliers to ensure that raw materials are provided without hiccups. In cases where these inputs are not available at internationally competitive rates, the Government should reduce import duties even further.

Any barrier that impairs the competitiveness of Jamaican goods and increases food prices should be eliminated. Rather than protecting inefficiency and mediocrity, these are the proposals that Jamaicans want to see.

David R. Salmon is a public commentator, development specialist and a Rhodes Scholar. Send feedback to columns@gleanerjm.com and davidsalmon@live.com, or on X @DavidSalmonJA.