Expanding Jamaica’s export income
In the last two weeks, I have written about Jamaica’s 2018 trade performance and its widening trade deficit, as well as the rather gloomy outlook for international trade in 2019. The question now is: What actions can be taken to expand earnings from export of goods and services in 2019 and beyond?
During the week, I reviewed Jamaica’s trade statistics since the 1960s. My review confirmed that the export mainstays in goods and services have remained alumina and tourism. Much of the traditional agricultural products exported in the 25 years after Independence have declined or ceased for various reasons. Products exported included bananas, sugar, molasses, rum, ginger, cocoa, coffee, pimento, and tobacco. In fact, Jamaica now imports molasses. From my calculations, I also found that in Jamaica’s merchandise trade, up to the 1990s, on average, export income covered more than 50 per cent of expenditure on imports — in the 1960s (74 per cent), 1970s (68 per cent), 1980s (60 per cent), and 1990s (50 per cent). Toward the end of the 1990s, the figure actually began to dip below 50 per cent. In the 2000s, this became the trend. By 2009, exports would cover only 31 per cent of import expenditure, and from 2012 – 2017 it averaged 26 per cent.
In looking at the 2018 trade performance I pointed out that Jamaica’s combined income from the export of goods and services did not cover the country’s combined expenditure on imports, leaving an overall deficit. Jamaica has had a perennial trade deficit dating back to the 1960s. The fact is that, as an open economy dependent on trade, the country may always have a deficit. The question is can the gap be narrowed in the coming years?
One of our challenges has been the role of wholesale and retail in the economy. Wholesale/retail is possibly the largest employer in both the formal and informal economy. Most of the products being bought and sold are imported. Other large consumers of imported goods include the tourist industry, manufacturing (inputs), and construction.
Jamaica’s import bill will continue to increase unless the country can consistently expand export earnings to a level which can narrow the gap between inflows from exports and outflows from imports. The country should be aiming to increase the share of exports (goods and services) in the gross domestic product (GDP), which in 2017 was about 32 per cent.
It was encouraging to read that the hot water treatment plant for mangoes should soon be established at Norman Manley International Airport, which would enable Jamaican mangoes bound for the European Union and US to meet sanitary and phyto-sanitary (SPS) standards.
So to the question what more can be done to expand exports I offer the following views, many of which, of course, will not be new:
1. Implement government policies and legislation
Coming under the umbrella of the National Development Policy, Vision 2030, Jamaica now has a National Foreign Trade Policy and a National Export Strategy. In addition, work is being done on a National Investment Policy and I believe that the National Industrial Policy is being revised. There are a range of sector policies and legislation which are aimed at improving production and strengthening the trade infrastructure. There are a number of pieces of trade-related legislation which still need to be reviewed and updated. Policies should be promoting value-added and exploring new industries — blue and green — and improving global competitiveness. There is need to focus on completion and adoption of policies and legislation, and on implementation, with proper coordination, which has been the stumbling block. It is true, it just takes too long to get things done, and the blame does not rest only on civil servants.
2. Promote research and development, innovation, and intellectual property rights
Under this heading, it would be really exciting to hear that, finally, the Patents and Design Bill has been completed and adopted. Apparently, it is now more than 20 years since work on this important Bill began.
3. Facilitate trade
Jamaica is currently implementing the World Trade Organization (WTO) Agreement on Trade Facilitation which, in my view, emphasises the inflow of imports. For Jamaica, trade facilitation should be predominantly about enabling production and export of goods and services. The term “trade facilitation” used to cover from production to export. It was not exclusively about simplifying Customs procedures.
4. Meet international standards
We must ensure that goods, including in agriculture and fisheries, and services meet international standards both for the local and export markets. Produce sold in local supermarkets should be soil-free. There should be one standard for all. Money has to be spent to improve operations and obtain certification, but it should be worth the investment to offer good quality products and services.
5. Aid access to financing for entrepreneurship and small and medium enterprises
As is known, getting a car loan is quite uncomplicated, but it is not so easy to qualify for financing to produce goods and services for export from innovative ideas, aiming to be globally competitive.
6. Pursue import substitution
In the 1960s and 70s import substitution was a policy. Notwithstanding WTO rules, perhaps the country needs to do more of this through promoting food security, among other things.
7. Ramp up export-led growth strategy
In the 1980s and 1990s the trend was towards export-led growth. It is not clear whether this is the strategy being followed by the Government and private sector. Some clarity is needed.
8. Improve the tourism product
Regardless of the increase in visitor arrivals and income, as “a dry land tourist” I am of the view that Jamaica needs to further upgrade its tourism product offering more variety. There are so many attractions which need to be developed, upgraded and properly managed. The linkages with other sectors should also be clearer.
9. Reduce crime, violence, corruption, and indiscipline
It goes without saying that this is a monster pervading the entire society and stifling our development, no matter how upbeat persons are about Jamaica’s prospects for growth. With Jamaica’s global recognition and talent pool, the demand for access to do business should be overwhelming.
There is so much more which could be said, such as the need to be interested in international trade policy issues which determine market access. In the public and private sectors as well as in civil society one wants to see the will, determination and activism aimed at expanding exports. This is needed for the country to achieve and sustain a growth rate of five per cent or more and to effectively narrow the gap between import expenditure and export income, thus increasing the contribution of exports to the GDP.
Elizabeth Morgan is a specialist in international trade and politics.