Outlook for Jamaica’s international trade in 2019
By Elizabeth Morgan
The prospects for expanding exports depend significantly on the state of the economy and its trading partners. The major global economic institutions, such as the International Monetary Fund (IMF), the Inter-American Development Bank (IDB), and the Organization for Economic Cooperation and Development (OECD), are projecting that in 2019 global economic growth will slow, hovering around 3.7 per cent. The World Trade Organization (WTO) has projected that trade will contract in 2019 if there is a continuing move to protectionist policies. Both the gross domestic product (GDP) and trade figures will depend on domestic policies in major global economies and the outcome of trade negotiations between the USA and China. For G7 and G20 countries, growth is being projected downwards.
In North America (Canada, USA and Mexico) growth is expected to continue at a moderate pace taking account of lower oil prices, among other things. The replacement North American free trade agreement, the US, Mexico, Canada trade agreement still has to be approved in the three parliaments before implementation can commence. Canada is expected to have growth of about 1.7 per cent and is focused on export diversification as it moves into general elections in October. Mexico’s growth is expected to be about 2.3 per cent with a new President in office promising change. The USA’s growth is projected to be between two to three per cent. There is speculation about a possible recession in the USA before the end of 2019 and continuing concern about the erratic foreign and economic policies of the Donald Trump Administration. A recession in the US would be bad news.
In the European Union (EU), expectations for growth are moderate as focus is on the likely effects of Brexit, subdued activity in the Eurozone, and political turbulence in member states. As the UK prepares to leave the EU, growth is projected to increase slightly until there can be a clear sense of the actual impact on the economy after its departure. There is much anxiety in the UK.
In Latin America and the Caribbean, the projections are for continuing uneven growth patterns. Brazil will be watched to see whether the new conservative president will move towards a more liberal trade policy. Colombia and Chile remain strong economies with growth projected at over 3.5 per cent. The strongest growth in Central America and the Caribbean is projected to be in Panama and the Dominican Republic, while Costa Rica remains stable. In Asia, growth in China is projected to continue slowing, while growth in India and Japan will remain fairly strong. In Africa, growth should continue to be uneven as large economies, such as Nigeria and South Africa, continue performing below expectations.
In Caricom, growth is also expected to be uneven. The IMF has been optimistic about the outlook for 2019, in spite of the not-too-favourable global outlook. The Caribbean Tourism Organization (CTO) is projecting positive growth in tourism. Growth should be about 2.8 per cent in Guyana, 0.8 per cent in Barbados, and about 1.9 per cent in both Trinidad and Tobago and Jamaica. However, the Caribbean must always factor in its vulnerability to natural disasters particularly between June to November. The Caribbean Development Bank (CDB) publishes its regional projections in February.
TRADE AGENDA WITH MAIN PARTNERS
Jamaica’s principal trading partners are USA, EU/UK, Canada, Russia and Caricom for exports. For imports, include China, Japan, Brazil and Mexico. Over the years, Jamaica has been exploring possibilities for exporting to Brazil, India, Mexico, West Africa (Ghana/Nigeria), South Africa, Panama , Cuba, Costa Rica and Dominican Republic. As pointed out previously, while growth in imports has been consistent, growth in exports has not. Jamaica has not been able to successfully enter markets in Latin America, including Mexico, even where trade agreements exist, and the same holds in Asia and Africa. There has been some activity with the Dominican Republic, China and Japan. Export activity in the main markets, USA, EU, Canada and CARICOM, has been inconsistent. I expect efforts to improve exports into these markets to continue in 2019. Jampro has reopened its office in New York and is focusing on increasing exports into the US market.
The 2019 trade policy agenda for Jamaica/CARICOM in the main markets is expected to include USA — CBI renewal and a possible meeting of the US/CARICOM Trade and Investment Council; UK — completion of the roll-over agreement before March and the overdue UK/Caribbean Forum should be held in London; EU — work will continue on implementation of the Economic Partnership Agreement (EPA), there should be assessment of relations with the EU27, and the ACP/EU post-Cotonou negotiations will continue; and, in CARICOM, work will continue on CSME implementation. Canada’s CARIBCAN arrangement is expected to continue to 2023. There is, at present, no active mechanism for trade discussions between Canada and CARICOM.
JAMAICA’S EXPORT CHALLENGE FOR 2019
While there has been some increase in exports, and demand for authentic Jamaican products still exist, Jamaica has been continuously plagued by issues of inconsistent supply, low productivity, high cost of production, inadequate marketing, and inability to successfully diversify exports. Jamaica has been challenged to compete in export markets by difficulty in meeting international technical (eg, packaging) and sanitary and phyto-sanitary (eg, food health) standards. Exports from Jamaica must also compete with similar products being manufactured at a lower cost in the domestic export markets (USA, UK, Canada) or supplied from other countries. In services, Jamaican performers are competing against high-quality home-grown performers from Europe and other countries. Generally, applying international standards and regulations, and acquiring international certification are critical in the services trade. Meanwhile, obtaining visas for travel remains an issue.
Consumer taste and demand are also changing, as are methods of delivering goods and services with greater emphasis on e-commerce. Business strategies are also changing. It is a fact that innovation (research and development), technology, market research and effective management must be applied for businesses to be competitive in global markets.
Therefore, in an uncertain global trade environment, Jamaican businesses will have to make an even greater effort to further expand exports during 2019.
Elizabeth Morgan is a specialist in international trade and politics.