|The Courier N° 123 Sept - October 1990 - Dossier Higher Education - Country Reports: Barbados - (EC Courier, 1990, 104 p.)|
|Barbados: Basking in the economic sunshine|
Trading with the outside world
Barbados adheres to the principle of Free Trade . With a very limited domestic market, a successful diversification of the economy will depend a great deal on the development of a vibrant export sector. But are the outside markets sufficiently open to Barbadian goods? In this written interview, Minister of Trade, Industry and Commerce, Evelyn Greaves, explores the prospects.
· The collapse of the Jamaican, and Trinidad and Tobagos markets in the early 80s adversely affected Barbados exports. How has trade with the two countries recovered following the stabilisation measures undertaken by them in recent years?
- If by stabilisation measures you mean fiscal, monetary and other measures (action) taken by these two governments to improve their foreign reserves and also increase productivity as well as to restructure their economies or sectors thereof, then the following comments can be made:
It is a fact that Barbados export trade to the region, and more specifically to Jamaica, and Trinidad and Tobago, has been seriously affected from the early 1980s, owing to the severe effects of the 1981-83 world economic crisis which persisted in the region long after it had ended in the developed countries. But this was a factor not peculiar to Barbados, for intra-regional trade during the period 1983-87 declined significantly.
With respect to our trade with Jamaica, the serious foreign exchange problems which this country experienced in early 1983 and onwards forced it to operate import licensing and foreign exchange regimes which had a negative impact on intra-regional trade. Barbados export trade was severely affected as can been seen from an examination of the trade data. For example, Barbados domestic exports to Jamaica fell from BDS$ 18.4 million in 1983 to some BDS$6.8 million by the end of 1987.
We had a similar experience with Trinidad and Tobago starting from late 1983 when that country began to experience severe haemorrhaging of their foreign reserves owing to a decline in the price of petroleum, their major earner of foreign exchange. Trinidad and Tobago responded through the introduction of a comprehensive import licensing and foreign exchange control regime, thus severely restricting access to its market. And despite efforts at both the bilateral and regional level to persuade Trinidad and Tobago to relax the regime in favour of CARICOM trade, access to that market remained extremely restricted up to the end of 1988. Barbados domestic exports to that country dropped from BDS$ 79.4 million in 1983 to some BDS$ 16 million in 1987.
Despite the decisions taken at a Special Council meeting of Regional Trade Ministers in 1984, as well as the conclusions of the Heads of Government Conference in Nassau of the same year, no improvement in intra-regional trade was achieved until 1988 when it increased by some 18%. The increase was 27.5% in 1989. This performance during those two years was primarily due to a definite recommitment on the part of regional governments to the improvement of intra-regional trade.
Because of this commitment Barbados was able to achieve an increase in its domestic export trade to the region by 33.5% in 1988 and 40.4% in 1989. Our exports to Jamaica for that period increased by 15% in 1988 and doubled in 1989. With respect to Trinidad and Tobago, domestic exports during the period increased by 33.5% and 68.4% respectively.
Insecticides, chemicals, stationery, building materials, foods items and garments constituted our main export items to these countries.
· You have been quoted as saying that it was time the regional market was considered as domestic. Does this means that protectionism within CARICOM is a thing of the past?
- Let me state up front that I do not know of any economic grouping, including the European Common Market, where some form of protectionism does not exist. Indeed, I believe that Europe 19927 is an admission of this fact.
What I mean is that in terms of how we in CARICOM relate to the outside world our actions and decisions should be informed by the understanding that we are one market. Indeed this is what the Common Market is all about. Let me give you an example of what I mean. When we offer protection to products, say T-shirts or Shirt-jac suits, we are also granting this same protection in our market to similar products coming from any member state of CARICOM. Even in the operation of our fiscal incentives regime when we refer to an approved enterprise producing for the domestic market we mean the entire regional market - not just the Barbados market.
Of course in any economic grouping such as ours or even when one is participating in some special trading arrangement which is designed for the mutual benefit of the participants, there is always provision for safeguards. Articles 28 and 29 of the Annex to the Treaty of Chaguaramas are indicative of this fact. They provide for the imposition of some restrictions on intra-regional trade due to balance of payments problems and difficulties experienced by particular industries in any member state.
· An emerging idea from Trinidad and Tobago is for the introduction of counter trade within CARICOM. Do you subscribe to that?
- It depends on what Trinidad and Tobago perceives as counter trade. As I understand it, counter trade, in its simplest form, is actual barter - exchanging a good for another good or goods. No money is involved. It can become complex whereby a number of mechanisms/instruments are utilised in the facilitation of trade.
If the first concept is being used here I believe that we have passed the stage where we would have to resort to barter within CARICOM. You will recall that I referred earlier to the period 1983-88 when, owing to the serious shortage of foreign reserves within the region, intra-regional trade was severely hampered. This was compounded by the fact that the mechanism which we had put in place in the late 1970s to help us to cope with this problem had to be suspended in early 1983. I mean the Caribbean Multilateral Clearing Facility. But we weathered the storm during those most difficult years. And this was primarily due to the active and close co-operation of the Central Banks and Monetary Authorities within the region.
I believe that what we should be doing is actively encouraging and promoting this collaborative effort.
If by counter trade one is thinking of the utilisation or employment of various kinds of mechanisms for facilitating trade, other than barter, then I would not be averse to considering these proposals. Of course, they would have to be sound and effective proposals.
· Barbados has turned increasingly to markets outside CARICOM, particularly the US and Canada. How far have you penetrated those markets?
- First, in response to your statement - not your question - I would like to point out that given the size of the regional market (some five and a half million people), it is imperative for any country in the Caribbean that bases its economic development partly on international trade, to look to the extra-regional market. Therefore, Barbados should not be considered as an exception. At the same time, it should not be construed that we are ignoring the importance of the regional market.
Barbados total trade, 1980-1989 (millions of dollars) %
Now to your question. Despite the existence of preferential trading arrangements with Canada and United States, Barbados cannot be said to have been that successful in the penetration of these markets. There are several reasons for this:
- We have a narrow resource base from which to develop a wide range of goods at competitive prices for those markets;
- We depend heavily on foreign investment to enable us to capitalise on some of the opportunities offered under the above trading arrangements. But it must be recognised that we are in competition with developed as well as developing countries in attracting such investment;
- Despite the access which we are supposed to be enjoying under these preferential trading arrangements, it ought to be pointed out that what is actually lacking is effective access to the markets of these countries. In general, we do not have the capability to capitalise on the opportunities offered under these arrangements. I believe that most of these arrangements should have been accompanied by a well-structured package of technical assistance to their beneficiaries.
· Recently the Canadian Prime Minister announced a widening of the range of goods that can enter Canada duty free under the CARIBCAN Agreement. What effect will this have on Barbadoss exports to that country?
- I think that question can best be answered by examining the items that were originally excluded from CARIBCAN. These included textiles and clothing, leather products, footwear, handbags and luggage. Prime Minister Mulroneys recent announcements as far as new duty-free items are concerned, included leather luggage and certain vegetable fibre products (still to be defined).
As you will note it does not include textiles and clothing which are of major interest to Barbados, and indeed, the entire Caribbean, since we do have some expertise and the installed capacity to produce and export these products.
To answer your question directly, I do not consider that the recent inclusions will have any effect on our export trade to Canada - certainly not in the short or medium term. But what I want to emphasise, however, is the point I made earlier with respect to the need for these preferential trading arrangements to be accompanied by an appropriate programme of technical assistance. The programme should include assistance such as marketing and product development. CARIBCAN is no exception.
· How crucial to manufacturing in Barbados is the question of management?
- Management - and I mean effective management - is a prerequisite for successful manufacturing in any country. Barbados is no exception. We have recognised that in certain areas of industry in Barbados this question needs to be seriously addressed. The Government is committed to assisting the manufacturing sector in overcoming any difficulties which it faces. This includes improving the management capability of the sector.
Interview by A.O.