Forward to the past
Claude Clarke, GUEST COLUMNIST
It's as if the old People's National Party (PNP) had never left. Any impression of freshness created by the sprinkling of new faces in the old Cabinet has been obliterated by the return of the old brigade of advisers and technical experts, many of whom contributed in no small way to running the economy aground in the 1990s. The economic incoherence, dysfunction and the crippling debt they helped to produce remain with us to this day.
The Jamaica Labour Party's (JLP) brief period in office did little to change the downward drift of the economy. After berating the PNP for not being prepared to change course, the JLP Government embarked on a broad economic strategy of steadfast continuity; which diverted only slightly after it engaged with the IMF and introduced the Jamaica Debt Exchange.
While these late initiatives led to a brief reversal of our surging debt-servicing cost, the JLP never tackled the economic crisis it inherited. It seemed to have come to office without recognising the true nature of the economic challenge the country faced. So ignorant was the former government about the depth of the economic crisis that, to steal a line from Hollywood, "they didn't know nutten - they didn't even suspect nutten".
However, despite the JLP administration's cluelessness, there is no denying that it is the PNP's fingerprints that are most prominently displayed on the economic muddle in which the country is now stuck.
During its previous 18-and-a-half-year tenure, the PNP was either oblivious of, or deliberately ignored, critical signposts warning of the looming economic disaster that now engulfs us. The closure of dozens of manufacturing facilities, including many of Jamaica's largest and most prestigious such as Colgate-Palmolive, Gillette and Reckitt & Colman, and the rise in the informal sector (better described as commercial chaos), were among these cautioning markers. The result: Jamaica fell from its position as a top economic performer among CARICOM states to be the region's most dysfunctional economy.
Even in the most far-fetched works of fiction, it might be considered implausible for a sane person to put a new car in the hands of a driver who had just driven one over a precipice. But that is exactly the situation we have in Jamaica today.
The economy has been handed back to those who were principally responsible for taking it over the cliff. This observation has far less to do with the return of the PNP political administration than it does with its decision to continue to rely on the same technical players who were involved in producing the disastrous economic outcomes we live with today.
The people's democratic choice of a government is not to be blamed. Voters don't choose governments for their technical teams. They presume that politicians, when elected, will be sensible in engaging the technical assets needed to assist them to provide good governance. They would not expect that the government in which they place their trust and confidence would be oblivious to their past technical errors and the imperative of ensuring that these are not repeated.
They would expect that their elected leaders would avail themselves of expertise different from that which contributed to their past errors and capable of leading them to better outcomes than before. It is, therefore, inexplicable that we have been witnessing the return to key positions by many of the same individuals who contributed to the creation of the economic debacle that now confronts us.
Nowhere is there a greater need for fresh thinking than in Jamaica's economic relationship with CARICOM. We ended 1988 with a CARICOM trade surplus of US$3 million. By 2008, it had been converted to a deficit of US$1.6 billion.
The shocking reality is that Jamaica has been sacrificing tens of billions of dollars of desperately needed government revenue to give CARICOM imports a competitive advantage in the Jamaican market. All our imports from CARICOM are manufactured products. Whether they are processed petroleum or non-petroleum products, the import duty that would have been earned from them if they were not from CARICOM would be between 10 and 20 per cent. The duty given up on the more than US$5.4 billion of imports from CARICOM over the last five years may have been as much as J$70 billion. The only benefit from this sacrifice of valuable revenue has gone to CARICOM producers who are able to sell to us at higher prices because of the duty applied to products from their extraregional competitors.
The fact that a tariff is necessary to protect CARICOM imports from extraregional competition, including petroleum products, is ample evidence that more foreign exchange is used to buy goods from CARICOM than would be used to buy the same goods from extraregional sources. Poor Jamaicans, suffering from inadequate government services and declining economic opportunity, must be told why they are being asked to make these sacrifices for the benefit of other people within CARICOM.
Where is the quid pro quo?
It cannot be in lower import costs. Few things, if any, imported from the region are not available from other sources at lower prices. Certainly, it has not been economic spin-offs from our exports to the region. The meagre US$60 million exported to the region annually is hardly enough to compensate for the hundreds of millions of dollars of CARICOM imports that displace local production. Many Jamaican manufacturing enterprises have succumbed to competition from unrestricted duty-free, energy-subsidised imports from CARICOM. Fewer Jamaicans than ever are now engaged in producing goods for export to the region.
Nor has Jamaica benefited from the creation of employment opportunities in the countries that produce the CARICOM goods we import. One of the balancing features in a properly functioning free-trade group is that displaced workers in the less economically successful states have access to jobs in the more successful. But this has not occurred in CARICOM.
Former Barbados Prime Minister Owen Arthur recently lamented CARICOM's failure to fulfil its obligation to enable the free movement of labour between states, and was moved to observe that "the main 'labour' movement in CARICOM in the past decade have been non-CARICOM nationals who have benefited disproportionately from the employment opportunities which our region has generated".
Little, if any, incremental investment capital from the region has resulted from CARICOM. The investments that have come have amounted to no more than a transfer of ownership of existing economic capacity: Jamaican businesses being taken over by non-Jamaican owners. Additionally, they came mainly during the fire sale of Jamaican enterprises conducted by FINSAC and its affiliates and represent a net loss of value. CARICOM investors gained not only from the bargain basement prices of the assets they acquired but by the captive Jamaican market that came with them.
Economically, Jamaica's relationship with CARICOM has been a bane, not the boon we were promised. Why then does our engagement with the common market continue unchanged? Is it our long-held infatuation with the idea of regionalism? Is our love for CARICOM so unconditional that we are prepared to sacrifice the well-being of the Jamaican poor who need support from Government's Budget to survive?
It might be poetic justice that it has now come back to the very persons who led Government into this one-way, wrong-way relationship with CARICOM to correct the problem. But it is not clear that Jamaicans can be comforted by that. The question will always be, can the Government get over its love affair with CARICOM and recognise that we are in an abusive relationship?
Perhaps we can draw some encouragement from the portfolio changes involving Drs Peter Phillips and Omar Davies. Dr Phillips' track record would suggest that he might be sufficiently pragmatic, decisive and resolute to take on the CARICOM worshippers within his own Government and party and advance, instead, the critical goal of restoring the health of Jamaica's fiscal and economic condition.
Our leaders must make it clear to their CARICOM counterparts that our membership in the regional movement cannot continue to be at the expense of our economy and our people's well-being. Jamaica does not have to leave CARICOM. But the region must be made to understand that if our presence in the Community is to be valued, so must our fiscal and economic health.
We cannot wait for the Government to undo the errors that created the macroeconomic uncompetitiveness that now hobbles our producers' ability to compete in the region. During the many years it will take for that to be accomplished, the cost of CARICOM to our economy must be relieved. A temporary suspension of the duty-free status of some CARICOM imports, like petroleum products, is a possible solution. This will not only benefit Government's Budget but will conserve on the foreign exchange we use for imports. If new duty levels are tactically set, the competition from extraregional sources could ensure there will be little inflationary result.
When in the 1980s Trinidad was concerned about its relatively minor trade imbalance with CARICOM, it did not hesitate to unilaterally impose an import-restricting licensing regime on CARICOM imports.
But will the same old brigade that created the CARICOM trade wreck we now have be prepared to take a path so radically different from that to which they have been wedded for so long, and which brought our trade with the region to such a disastrous pass?
Claude Clarke is a businessman and former minister of trade. Email feedback to firstname.lastname@example.org.