Edward SeagaThe recent ceremony of countries ratifying their membership in the Caribbean Single Market (CSM) and the declaration by other countries signifying their intent to join, indicate that the CSM is entering the cocoon stage.
CARICOM has promoted the CSM as the means to transform the poor countries of the region into productive, prosperous states by metamorphosis within the cocoon. This transformation will require dozens of laws and policies to converge or harmonise so that they become the same in all countries in order to produce easy passage of goods and services within the CARICOM region.
Easy movement of goods and services are always an advantage in a trading environment. Other factors being positively aligned, a seamless region eliminating cross-border obstacles of member states, creates a more accessible trading space.
There are two ways in which this can be beneficial to CSM participating countries. Firstly, it could facilitate trading between member countries and, secondly, it would be more attractive as a larger market space for trading with external countries. This is the theoretical reasoning which supports the argument on the benefits of the CSM. But in practical terms, there are serious problems for most member countries, of which Jamaica is the prime example.
Competitive pricing
In intra-regional trade, the seamless borders created will not by themselves sell goods and services. The price has to be right, that is, pricing must be competitive. Competitiveness is a factor of productivity which is measured by the per capita growth of GDP. A recent paper entitled 'Growth Trends in the Developing World: Country Forecasts and Determinants' by Elena Danchovichina (senior economist) and Pooja Kacher (consultant), both at the World Bank, established per capita GDP forecasts for all developing countries. The period covered by these forecasts is 2004-2015. The paper is empirically exacting and comprehensive.
The forecasts, not surprisingly, position Jamaica as one of only two countries in the CARICOM group which is projected to have a declining productivity rate. The other is Haiti. The projected rate for Jamaica is 0.41 per cent, which is not only negative but far lower than the projected rates for other CARICOM states, except Haiti. Indeed, it is the fourth lowest in all of Latin America.
To put this in its proper perspective, the forecasts project what the GDP per capita performance will be if appropriate growth policies are not pursued.
This raises the question of whether the policy initiatives of the CSM will lift the Jamaican economy significantly over the next 10 years. The data also indicate that because the Jamaican performance is so far below the other CARICOM countries, only a paradigm policy shift can raise Jamaican goods and services to competitive levels to enhance the growth of Jamaican exports.
improving the
productivity rate
In other writings, I have set out the two main factors which can improve the productivity rate: Transformation of the educational system to lift it from its near bottom-of-the-ladder position to higher levels of proficiency, and a paradigm shift of macro-economic policies to enable economic growth.
There is no convincing policy prescription for the transformation of the education system. The announced transformation policy reforms for education have failed to get off the ground due to the impossibility of raising the exceptionally large amount of funding required, which is way beyond the capacity of the Jamaican economy. At any rate, these reforms are wrongly focused and, even with funding, would not produce the expected results. The reforms do not commence with the building of a solid early childhood education foundation and then continue to build on that solid foundation. The reforms focus on middle and upper-level areas of the educational system which sit on a fragile early childhood base. It will not require a rocket scientist to project that such a structure will continue to crumble.
As far as the macro-economy is concerned, it has been stated repeatedly that the model will not be changed. Based on the prevailing model, the performance of the economy in terms of the rate of GDP per capita growth in the decade 1991-2000, was negative 0.56, the second worst in the CARICOM region, surpassed only by Haiti. This record of declining competitiveness is not likely to have changed appreciably over the 2000-2005 period.
production integration
The conclusion to be drawn, is that this dismal record will continue as projected in the paper unless appropriate policies are introduced to promote meaningful educational performance and consistent, significant economic growth. With little expectation of macroeconomic improvement and even less for raising educational performance to productive levels, the inappropriate policy prescriptions being followed by Jamaica will doom the country in a CSM setting to being buyers, not sellers, of goods and services intra-regionally.
There is a third route to improving productivity rates. The concept of production integration forms part of the CSM framework. It envisages more than one country producing different components of a single item of goods or services on a cost-beneficial basis. A reasoned approach to this integrated process will be hard pressed to find any worthwhile examples in which Jamaica can be a part-producer on an economic basis. The one example which stands out, and it is a powerful one, is the production in Trinidad of aluminum metal from Jamaican alumina using Trinidad natural gas, a low cost source of energy. But alumina also exists in Guyana and Suriname, the sources of which are nearer to Trinidad. Still, possibilities exist for this proposed linkage first proposed some 30 years ago in the Michael Manley era.
prospects for
benefiting bleak
The Jamaican prospects for benefiting from the CSM strategy is, without doubt, bleak as it depends on the competitiveness of its production which has been in decline for the past 15 years and is now projected to continue to decline over the next 10 years. This is a prescription for failing effort and dwindling prospects.
It is important to recognise this as the OECS group of countries is withholding formal participation in the CSM pending the establishment of a substantial regional fund which is to compensate them for the deterioration in their balance of trade arising out of expected increase in imports by those countries without an offsetting increase in exports.
How does Jamaica fit into the grouping of countries to benefit from the regional fund? Jamaica is expected to absorb by far the greater share of increased imports generated. This will produce a bigger trade deficit for Jamaica as there will not be an increase in exports to compensate. Further, only two countries in CARICOM have lower per capita GDP than Jamaica: Guyana and St. Vincent. On a comparative basis, Jamaica then qualifies to be a beneficiary from the regional fund as the Jamaican economy has the same profile of weakness as the OECS group. But will Jamaica be considered to be a beneficiary of the fund although it is eligible on a per capita basis and very unlikely to reap benefits from the CSM? I am of the view that despite the handicaps of the Jamaican economy, the country will be expected to be a contributor, not a beneficiary of the fund.
All these concerns raise a final point: Who is looking after the interests of Jamaica? The Government? The Opposition? Who?
Wake up Jamaicans!
Edward Seaga is a former Prime Minister. He is now a Distinguished Fellow at the University of the West Indies. Email: odf@uwimona.edu.jm.
