Jamaica’s Trade Performance: Turbulence ahead
By Elizabeth Morgan
As tomorrow is Election Day, I have reviewed the party manifestos, listened to the debates, and reflected on the planning for COVID-19 economic recovery. This led me further to reflect on Jamaica’s depressing track record in trade over the last nearly 50 years. Looking to a future impacted by COVID-19, I envisage a turbulent period ahead of us.
It has been said time and again, a small, open developing economy must be actively engaged in international trade to achieve sustained economic growth and development. Goal 17 of the United Nations Sustainable Development Goals highlights the importance of trade as a critical means of implementation. On Jamaica’s underwhelming overall trade performance, I refer you to my previous articles on “Jamaica’s trade performance in 2018: a widening trade deficit”; “Outlook for Jamaica’s International Trade in 2019”; and “Expanding Jamaica’s Export Income”, all published in January 2019.
Coming out of over 100 years of economic depression, 1946-1972 was only the second period of robust economic growth in Jamaica’s history when the rate of growth exceeded 5% fairly consistently. Exports were vibrant – bauxite and alumina, gypsum, sugar, bananas, coffee, cocoa, ginger, citrus, pimento, copra, manufactured goods including textiles, and expansion in tourism. Jamaica had secure markets. Earnings from exports could almost pay for imports. There was optimism about the future although there were social imbalances; then, things changed, with political instability and international oil crises. Jamaica had to resort to the International Monetary Fund. Since then, exports have remained anaemic and economic growth rates erratic.
Over the last 47 years, Jamaica’s economic growth rate has fluctuated averaging less than 1%. The general view is that increasing economic growth signals expansion of the economy, increase in income and employment, and raising the overall standard of living. Therefore, most economies aim to expand production of goods and services and exports to increase the rate of economic growth and development. It is suggested that a country could feel some comfort if it could maintain an annual growth rate of about 3%. Jamaica has not been able to have a sustained positive growth rate. From 2010-2019, Jamaica’s rate of growth averaged 0.7% (2015-2019 averaged 1.2%).
Goods exports have been trending down, while imports have trended up. Even with increases in services earnings, Jamaica has been spending more than it earns. Thus, the budget deficit has to be covered by loans, grants, and additional taxes. As Jamaica is now classified by the World Bank as an upper middle income country, it is becoming more difficult to qualify for grants. With high debt ratios, fiscal space for loans has also narrowed.
Over the years, studies have been done showing that Jamaica needs to further diversify its economy and to address supply-side and other issues impacting productivity and competitiveness. Policies and plans have been formulated to address these issues and promote food security, investment, production and trade. These studies, policies and plans remain largely reference documents which are not fully implemented. CARICOM was established to assist Member States, including Jamaica, as small economies, to promote trade and advance growth and development within the region. The CSME, the centerpiece of regional integration, remains a goal still to be fully realized.
Trade performance has not been accorded such high priority in this election campaign and attaining a robust rate of economic growth seems less a priority.
The international context
As pointed out many times, Jamaica’s principal trade and development partners are the USA, Canada, the European Union, now, with Brexit, the United Kingdom, China, and Japan. Jamaica imports heavily from Asia – China, Japan, South Korea, and India. China has become an important development partner. Going forward, we have to look at our relationship with Africa and Latin America. Thus, foreign policy and foreign trade policy play a critical role in the country’s growth and development. We cannot ignore the international context which can make or break the country. Thus, our membership of the United Nations, the World Trade Organization and other international organizations is of high importance. The international context has also been absent from these election deliberations.
And so, out of that international situation, COVID-19 arrived on our shores. It has exposed our economic weaknesses, the growing dependence on one industry, tourism, as traditional agricultural exports have declined, manufacturing remains on the margins, and alumina has shrunk.
Our recovery cannot be achieved, unless there is global recovery and especially recovery in the USA, Canada, Europe and Asia.
Although the Government established a COVID-19 Economic Recovery Task Force, which issued a report, and the manifesto of the Jamaica Labour Party was advertised as centred on a 10-point COVID-19 recovery plan, discussions did not satisfactorily point attention to the economic crisis resulting from COVID-19 and the country’s economic recovery given its already fragile economy.
We should be focused on the troubling state of our economy and the global economy still in the throes of COVID-19. Journalists could have posed specific questions to both parties, not only about containing the virus, but about their economic recovery plans and ability to maintain fiscal discipline.
What we should care about in this general election is which team will have the discipline, understanding, wisdom and courage to guide the country, and the region, through the turbulent economic rapids which, I believe, we are about to traverse, and also to take the actions necessary to position the country to improve its trade performance and rate of economic growth. Thus, a sustained growth rate of 5% and more could eventually become a reality.
Submitted by Elizabeth Morgan, Specialist in International Trade Policy and International Politics