Stop thinking local, go global instead, exporters told

In order for Trinidad and Tobago to face the challenges of globalisation and the FTAA, it must first change the perception of the country away from one of just a “Carnival Destination” to one of a serious business and investment location.

This is the view of Earle Baccus, president, Business Development Company Limited (BDC). At an exporters’ workshop titled “Meeting the Global Challenges Facing Local Exporters,”  at the Crowne Plaza Hotel last week, he spelt out the hardships facing exporters on the open market. The BDC plans to set up an Export Service Facility to assist local companies sustain and increase their export market share. “After decades of shelter from open market competition, local producers and exporters now face shocks occasioned by globalised economies and liberalised markets and now have to accept the changes and challenges these bring,” he told a packed workshop.

Baccus said the history of doing business in TT has in the past been one pursued within a framework of “produce what you consume, consume what you produce” — with production entities operating behind high tariffs and quotas. He noted that the inefficiencies, which these protective policies engendered, were exacerbated by the preferential, non-reciprocal access arrangements to regional and extra regional markets within agreements such as Lom?, the Caribbean Basin Initiative (CBI), Caricom and Caribcan among others. He said the need to operate out from under a protective environment has spurred the need for these operations to enhance and in the majority of circumstances, to become internationally competitive.“Our small size with limited production bases, similar production systems and products, inadequate transportation links, weak management systems and obsolete production technology makes more daunting the challenge our companies face in this global environment.”

At the regional level, he said liberalisation has opened up this country’s trading environment. He cited Caricom as an example and noted that the reduction in the Common External tariff (CET) from a high of 45 percent to a maximum of 20 percent has created a need for a “buffer” for companies to adapt to the lower level of protection by way of very low and in the majority of cases, zero tariff on raw materials and other inputs into the production process. “Other support measures must include the offer of technical assistance and implementation of human resource development programmes at the management, supervisory, and operational levels as well as low cost funding for export initiatives. Baccus said at the national level, trade agreements have been entered into with other countries and groupings, so as to boost investment in production and increase access to larger markets.

“Policies have also been instituted to enable our local enterprises to take advantage of cumulative treatment arrangements allowing them to utilise raw materials and other inputs from Latin American countries in order to more easily access markets in Europe.” However, he said more needs to be done at the policy and infrastructure level including upgrading TT’s support facilities such as the Bureau of Standards, statistics department and customs administration in order to facilitate a more conducive and business environment so that local firms can do business locally, regionally and with the rest of the world. He noted that at the level of enterprise, the challenge to exporters and would-be exporters is  not only the need to produce at an acceptable price and to the required market demand, but also to meet environmental norms, adapt to loss of preferences and conform to particular standards.

“There are examples of textile products rejected in Germany as dyes used were not environment friendly, cut flowers returned as the packaging did not conform to certain environmental requirements, other products not meeting pesticide residue levels, production depleting the ozone layer, beverages unsold as the business did not have a deposit and return system and shrimp caught in trawlers not fitted with turtle exclusion devices not gaining entry into the United States (US) market. Additionally, loss of preferences are exemplified by the various and several actions taken at the multilateral and bilateral levels in respect of bananas, rum, rice and apparel. Baccus said the question then arises, ‘how should exporters respond to these challenges?’ There is the need for companies to recognise the impact of global changes on their business and their business practices, he said.

“They need to stop thinking local and begin thinking global.” He said there will therefore be the need to plan and implement measures to include being more open to forming strategic alliances with external partners within and outside the region, upgrading plant, equipment and technology, improving waste management, improving plant efficiency by utilising excess capacity, increasing the productivity to wages ratio and upgrading products and packaging requirements. Secondly, he said companies need to maximise the competitive advantage they hold in the regional and international market place. “The demand for our sauces, condiments and other foods is the fastest growing segment in the US and UK gourmet food markets. Our products have moved from ethnic to mainstream and are now in major outlets in Europe and North America.” At the end of the day though, Baccus noted that the major concern is the transformation of the production structure of these local enterprises to one that is consistent with the structure of international demand.

“The emphasis must shift towards adding new and improved export goods and services and exploring new markets.” He said this may result in a change in the sectoral structure of production through investment in machinery and equipment and technological innovation. He added that the production slate may, in light of competition from low-cost production centres in the Far East be biased towards the higher valued, knowledge based goods and services or those that can satisfy niche markets. “In other words firms must gear themselves to choose a position within an industry and develop a sustained competitive advantage relative to their competitors.”