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ANTHONY GOMES
Wednesday, June 30, 2010
WE are encouraged by the article in the Sunday Observer of June 13, 2010 by attorney at law Dr Delroy Beckford, "Competitive trade in Caricom". The more persons become aware of this sensitive subject, the better understanding and chance of it being noticed, and eventually acted upon by those who are being disadvantaged by the anomaly of preferential energy pricing of goods exported from the Eastern Region of Caricom to Jamaica.
The Private Sector Organisation of Jamaica has joined the ranks of concerned organisations and will be holding meetings to explore the depth of regional concern, and possible remedies for this serious situation which would culminate in a meeting with Trinidadian private sector interests.
Dr Beckford is of the opinion that "existing trade rules seem ill-equipped to provide an easy solution to this issue". His opinion is accurate to a point, as the option of involving the Caribbean Court of Justice in its original jurisdiction remains a possibility.
The problem is specifically the cost of electricity to Trinidadian industries, reported as US three cents per kilowatt hour, whereas Jamaican manufacturers pay US 30 cents per kilowatt hour, increasing with the latest award granted to the JPS by the Office of Utilities Regulation. It is reported that this competitive advantage resulted in deflection of trade, with some firms producing goods in Trinidad for their home markets.
In retrospect, when Jamaica signed the Revised Treaty of Chaguaramas (RTC) on July 5, 2001 in Nassau, Bahamas, it was not intended to confer a waiver on Trinidad and Tobago, for their nationals to be endowed exclusively with a preferential energy price unattainable by other states in the Community, thus distorting regional competition.
The RTC in its preamble states:
* "Resolved to establish conditions which would facilitate access by their nationals to the collective resources of the Region on a non-discriminatory basis".
* "Mindful further that the benefits expected from the establishment of the Caribbean Single Market and Economy (CSME) are not frustrated by anti-competitive business conduct whose objective or effect is to prevent, or distort competition".
* "Affirming also that the original jurisdiction of the Caribbean Court of Justice (CCJ) is essential for the successful operation of the CSME".
Article 7-Non-Discrimination:
* "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".
Jamaican manufacturers and exporters experience difficulty in competing with goods which enter the Jamaican market duty-free, in addition to enjoying lower production costs at home, due to the national preferential energy price. The severity of this continuous disadvantage is reflected in Jamaica's persistent trade deficit with Caricom and Trinidad and Tobago in particular, as compared with Jamaica's paltry volume of exports to those territories. In 2008 Jamaica's trade deficit with Caricom was US$1.6 billion, the major part owed to Trinidad. Exports to Caricom that year amounted to a paltry US$66 million! In 2002 manufacturing contributed 15.4 per cent of GDP. At present, the sector contributes 8.5 per cent of GDP. It is accepted that other domestic economic factors also had a bearing on the sector's precipitate decline.
Dr Beckford continues: "On the other hand, subsidised energy inputs, even if not "specific", have often been countered against in the final goods produced with the energy inputs. There are in fact many examples of countervailing or anti-subsidy measures being maintained against energy intensive final goods by several countries". Under current legislation a "subsidy" must apply to an industry or sector, but in Trinidad's case it applies nationally and cannot at this time be referred to as a "subsidy". He quotes the example of the US Department of Commerce which "has treated the provision of electricity at preferential rates as a subsidy remediable with higher import duties on the final goods (steel products from Thailand and Canada) produced by that benefit".
Jamaica's Balance of Payments difficulties evidenced by the International Monetary Fund agreement provides a unique opportunity to raise tariffs temporarily on Caricom goods. The Understanding on Balance of Payments Provisions of GATT 1994 and Article XVIIIB provides special and differential treatment for developing countries. The IMF also must provide a report to the WTO. This requires developed and developing countries to prefer in such situations implementation of price-based measures, (tariffs) as their impact on the price of imported products is transparent and measurable. The WTO legal system has further reinforced the basic GATT rule that protection to domestic production should be given primarily through tariffs. Article 43 of the RTC "Restrictions to Safeguard Balance -of-Payments" also applies, but so far has not been invoked in Caricom. This article in view of its inadequacy needs to be reformed to embrace the difficulties being experienced with the matter of preferential energy pricing.
Referral to the CCJ should be considered by the GOJ as a last resort when Jamaica assumes leadership of Caricom in July. Talks with the new administration in Trinidad should first be initiated prior to further action. It is alleged that some Trinidadian firms are reluctant to see their government dissipate their competitive edge that could result in official intransigence. Should the GOJ disagree, trade associations could initiate an action to regularise the pricing regime and fairly rebalance the terms of trade.
The matter is for discussion with visiting WTO officials next month prior to issuing Jamaica's Trade Policy Review. Without remedial action, Jamaica's industrial base would continue contracting while progressively ceding more of its domestic market to Trinidadian interests.
ANTHONY GOMES
Wednesday, June 30, 2010
WE are encouraged by the article in the Sunday Observer of June 13, 2010 by attorney at law Dr Delroy Beckford, "Competitive trade in Caricom". The more persons become aware of this sensitive subject, the better understanding and chance of it being noticed, and eventually acted upon by those who are being disadvantaged by the anomaly of preferential energy pricing of goods exported from the Eastern Region of Caricom to Jamaica.
The Private Sector Organisation of Jamaica has joined the ranks of concerned organisations and will be holding meetings to explore the depth of regional concern, and possible remedies for this serious situation which would culminate in a meeting with Trinidadian private sector interests.
Dr Beckford is of the opinion that "existing trade rules seem ill-equipped to provide an easy solution to this issue". His opinion is accurate to a point, as the option of involving the Caribbean Court of Justice in its original jurisdiction remains a possibility.
The problem is specifically the cost of electricity to Trinidadian industries, reported as US three cents per kilowatt hour, whereas Jamaican manufacturers pay US 30 cents per kilowatt hour, increasing with the latest award granted to the JPS by the Office of Utilities Regulation. It is reported that this competitive advantage resulted in deflection of trade, with some firms producing goods in Trinidad for their home markets.
In retrospect, when Jamaica signed the Revised Treaty of Chaguaramas (RTC) on July 5, 2001 in Nassau, Bahamas, it was not intended to confer a waiver on Trinidad and Tobago, for their nationals to be endowed exclusively with a preferential energy price unattainable by other states in the Community, thus distorting regional competition.
The RTC in its preamble states:
* "Resolved to establish conditions which would facilitate access by their nationals to the collective resources of the Region on a non-discriminatory basis".
* "Mindful further that the benefits expected from the establishment of the Caribbean Single Market and Economy (CSME) are not frustrated by anti-competitive business conduct whose objective or effect is to prevent, or distort competition".
* "Affirming also that the original jurisdiction of the Caribbean Court of Justice (CCJ) is essential for the successful operation of the CSME".
Article 7-Non-Discrimination:
* "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".
Jamaican manufacturers and exporters experience difficulty in competing with goods which enter the Jamaican market duty-free, in addition to enjoying lower production costs at home, due to the national preferential energy price. The severity of this continuous disadvantage is reflected in Jamaica's persistent trade deficit with Caricom and Trinidad and Tobago in particular, as compared with Jamaica's paltry volume of exports to those territories. In 2008 Jamaica's trade deficit with Caricom was US$1.6 billion, the major part owed to Trinidad. Exports to Caricom that year amounted to a paltry US$66 million! In 2002 manufacturing contributed 15.4 per cent of GDP. At present, the sector contributes 8.5 per cent of GDP. It is accepted that other domestic economic factors also had a bearing on the sector's precipitate decline.
Dr Beckford continues: "On the other hand, subsidised energy inputs, even if not "specific", have often been countered against in the final goods produced with the energy inputs. There are in fact many examples of countervailing or anti-subsidy measures being maintained against energy intensive final goods by several countries". Under current legislation a "subsidy" must apply to an industry or sector, but in Trinidad's case it applies nationally and cannot at this time be referred to as a "subsidy". He quotes the example of the US Department of Commerce which "has treated the provision of electricity at preferential rates as a subsidy remediable with higher import duties on the final goods (steel products from Thailand and Canada) produced by that benefit".
Jamaica's Balance of Payments difficulties evidenced by the International Monetary Fund agreement provides a unique opportunity to raise tariffs temporarily on Caricom goods. The Understanding on Balance of Payments Provisions of GATT 1994 and Article XVIIIB provides special and differential treatment for developing countries. The IMF also must provide a report to the WTO. This requires developed and developing countries to prefer in such situations implementation of price-based measures, (tariffs) as their impact on the price of imported products is transparent and measurable. The WTO legal system has further reinforced the basic GATT rule that protection to domestic production should be given primarily through tariffs. Article 43 of the RTC "Restrictions to Safeguard Balance -of-Payments" also applies, but so far has not been invoked in Caricom. This article in view of its inadequacy needs to be reformed to embrace the difficulties being experienced with the matter of preferential energy pricing.
Referral to the CCJ should be considered by the GOJ as a last resort when Jamaica assumes leadership of Caricom in July. Talks with the new administration in Trinidad should first be initiated prior to further action. It is alleged that some Trinidadian firms are reluctant to see their government dissipate their competitive edge that could result in official intransigence. Should the GOJ disagree, trade associations could initiate an action to regularise the pricing regime and fairly rebalance the terms of trade.
The matter is for discussion with visiting WTO officials next month prior to issuing Jamaica's Trade Policy Review. Without remedial action, Jamaica's industrial base would continue contracting while progressively ceding more of its domestic market to Trinidadian interests.