Caricom’s bumpy ride
AS the recession bites deeper, focus has returned to Jamaica’s relationship with Caricom, in particular to the unfavourable trade imbalance with Trinidad.
There have been strident calls from writer Claude Clarke and latterly from Omar Azan, president of the Jamaica Manufacturers Association, for review and reform of the Revised Treaty of Chaguaramas.
The cardinal concern relates to the cost of energy to Trinidadian industries against similar costs in Jamaica. For example, as described by the JMA president at their annual Christmas lunch, electricity in Trinidad costs approximately 3 cents per KWH, as compared with approximately 20 cents per KWH in Jamaica, representing a significant manufacturing advantage for their industries. In parallel, the issue of energy cost also arose earlier in discussions regarding the proposed LNG supply from Trinidad to fuel Jamaica’s industries.
Both observers, Claude Clarke and Omar Azan, have identified energy and other sensitive areas, which should have been given serious attention by successive Jamaican administrations. Now, motivated by the precipitous recessional downturn, the administration should be prompted to take remedial equivalent action.
For the sake of good order, the nub of the issue – the cost of Trinidadian energy to Caricom member states – was examined in prior exchanges with the T&T government, during the LNG debate. Although references are made to T&T’s energy “subsidy”, this is yet to be proved before remedial action can be initiated. The fact that T&T’s energy cost advantage is applied nationally defeats use of the term “subsidy”, because to be a prohibited subsidy the cost advantage must conform to the following criteria: “provided that the subsidy is specific to an enterprise or industry or a group of enterprises or industries within the jurisdiction of the granting Member State”. Treaty Article 97.
It is therefore suggested that in T&T’s case Treaty Articles 7 and 8, be viewed as more appropriate: “Non Discrimination – (1) Within the scope of application of this Treaty and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality only shall be prohibited”. It should be borne in mind that the energy cost advantage only benefits T&T’s industries. “Article 8 – Most Favoured Nation Treatment – Subject to the provisions of this Treaty, each Member State shall, with respect to any rights covered by this Treaty, accord to another Member State treatment no less favourable than that accorded to: (a) a Third Member State, or (b) third States.”
It is understood that referral for an opinion was made to the secretary general of the Caricom Secretariat which obtained a relatively favourable response, but no follow-up action has yet been initiated; that would first have to be approved by COTED if countervailing measures were to be considered. Meanwhile, the significant supply of Trinidadian oil to Jamaica should not be overlooked.
If considered necessary, Jamaica may increase border tariffs on selected imports from Caricom or third countries, due to its balance of payments difficulties acknowledged by the International Monetary Fund, as permitted by GATT 1994, viz: “Countries are considered to be in BOP difficulties when their external earnings from trade in goods and services and the flow of investment and loans are far from adequate for their external payments liabilities, and when monetary reserves for meeting immediate liabilities are declining. The Understanding on Balance of Payments Provisions of GATT 1994, strongly urges member countries not to use quantitative restrictions to safeguard their BOP situations. It requires countries, whether developed or developing, to prefer in such situations price-based measures, such as import surcharges and import deposit requirements to quantitative restrictions, as their impact on the price of imported products is transparent and measurable. The WTO legal system has thus, by strengthening the rules against the use of quantitative restrictions, further reinforced the basic GATT rule that protection to domestic production should be given primarily through tariffs.”
Apart from Caricom, it is questionable that because of the recession, this measure has not already been implemented with third countries to increase border revenue, and protect the domestic market during its BOP difficulties from further unaffordable luxury imports and other high-value goods which are creating a severe strain on scarce foreign exchange resources. It is understood that distributors of such goods would be adversely affected, but in the dire circumstances in which the country finds itself, temporary sacrifice is the order of the day.
Criticisms of Jamaica’s faltering trade situation with T&T have not fallen on “deaf ears”. A review of the treaty is indeed under way, and senior officials of the Caricom Legal Affairs Committee met in Jamaica, November 16 – 19, to continue their review focused for the time being on establishment, services, capital, movement of community nationals, and trade policy. If Messrs Clarke and Azan did not meet with the committee on that occasion, it is suggested they arrange to attend the committee’s next sitting with a prepared brief and express their views.
This column wrote earlier: “While constructive criticism is healthy and useful, the ultimate aim must be to determine what other possible directions could be viable for the 15 nano states in the hemisphere, if not a coalition of sorts. Would dismantling the CSME provide the optimum solution? Of the 15 member states, very few possess the economic strength necessary to succeed independently in a globalised world. It is time for the advocates of dissolution to start emphasising not just the shortcomings that exist with the CSME, but exploring other possible critical paths for success.”