Keeping WTO at bay

Finding a balance in trade policy that meets the needs of development relevant to the specific conditions in your economy is not an easy task. It becomes even more difficult while trying to remain compliant with the “wisdom” emanating from international organizations. The industrialized countries have greatest weight in international organizations, and their interests and ideology underpin the analysis coming out of those institutions, and their collective voice is generally reflected in the policy prescriptions. Indeed, the dogmatism of international institutions and their damaging influence on developing countries’ policies are nothing short of neo-imperialism. In most cases, their prescriptions go against the fundamental interest of protecting the internal means of development, that is, not just generating growth and income, but doing so while ensuring maximum employment for locals, and retaining in the local economy a fair share of the profits derived from growth in the economy.

Belize’s experience is a good example of this. Recently, Belize underwent a Trade Policy Review at the World Trade Organisation (WTO). Somehow, the recommendations coming out of the Trade Policy Review read like the text book neo-liberal prescriptions with little relevance to the structure of the economy being diagnosed. The finding of the Review Committee was that import protection weighed down Belize’s exports. The report acknowledged that Belize has taken significant steps to liberalise most aspects of its trade regime, but it still maintains high levels of protection for a few selected domestic activities. According to the report, Belize’s licensing regime amounts in some cases to outright prohibitions, which distorts resource allocation and undermines the transparency of its trade regime. To sustain the high rates of economic growth enjoyed in recent years, Belize needs to tighten fiscal and monetary policies and find ways to stimulate competition in vital areas of the economy like financial services and electricity. Enhanced multilateral commitments could play a useful role in anchoring future reform efforts and bolstering the predictability of reforms for traders and investors, the report said.

What does this all mean? The fact is that Belize mainly prohibits the import of food products which they produce locally in sufficient amounts to feed the population. By doing so, they have made themselves more self-sufficient in food than any other CARICOM country. They have ensured the employment of some 50 percent of the population, and thus their livelihood, and prevented a massive rural to urban migration with all its accompanying misery and socially dysfunctional outcomes. This would surely be the result if prohibition of imports of agricultural products that are locally produced is removed, and the agricultural sector collapses in the face of competition from imports of subsidized agricultural products from the US and Europe. They have been able to save scarce foreign reserves that would be needed if they had to import food. By de-linking food supply from dependence on foreign currency, they have provided food security. They have also linked the supply side of food for the tourism sector with the agricultural sector in the local economy, thus giving a boost to food production.

How then, can we justify the  critique of the WTO Review Panel that Belize’s licensing regime distorts resource allocation and undermines the transparency of its trade regime. “Transparency” and “resource allocation” in whose interest? Further, the high sustained growth experienced by Belize over the past few years has much to do with the growth of tourism resulting from the diversion of cruise ships to ports closer to Miami because of security reasons, and the development of the farmed shrimp industry. Post September 11 saw a rapid increase of cruise ship visits to Belize and a corresponding decline in visits to ports further south in the Caribbean.  Visits by cruise ships increased by 500 percent between 2000 and 2003. Removing license requirements will neither boost tourism nor the shrimp farming sector.  The report said that import restrictions weigh down Belize’s export sector. Presumably those who provided this wisdom meant that by restricting imports in the goods that are exported, the sector is not exposed to competition and therefore cannot develop international competitiveness. What does Belize export? The three leading export products are sugar, citrus juices and bananas. Farmed shrimp, conch and lobster are the next most important export of goods.

Some garments are exported under the Caribbean Basin Initiative (CBI) arrangement. Tourism is a growing sector. So, should Belize open up its market to subsidized sugar and citrus juices from the North? The duty imposed on sugar and citrus ranges from 15 % to 40% as of 2003. These are the major earners of foreign currency and are operating without government subsidy, are largely privately owned, and are exported under preferential trading arrangements. Why should the Belizeans allow subsidized products to compete with these locally produced products in the local market? Further, the comment on import prohibition and its removal was wide ranging, but the benefits touted are linked to export products, while only two are protected. The report suggested that Belize needs to tighten fiscal and monetary policies and find ways to stimulate competition in vital areas of the economy like financial services and electricity.

While there is good value in this recommendation, there are also constraints of small size that limits competition because of limited market size. So, the financial sector and the electricity sector are burdened by severe constraints caused by lack of minimum efficient scale. Notwithstanding this, there has been enhanced competition in the financial sector in recent times and the electricity sector was privatised more than a decade ago. Granted, while generation and distribution have been decoupled, the firms are owned by the same parent company. Some progress in this area is warranted.

The suggestion that enhanced multilateral commitments could play a useful role in anchoring future reform efforts and bolstering the predictability of reforms for traders and investors merely means that through commitments to external agreements, internal policy could be disciplined in accordance with neo-liberal prescriptions. In other words, our weak negotiating position in external trade negotiations could lead to commitments that would weaken our industrial policy and internal dynamics to growth. The point being made here is that Belize has made a choice of industrial policy and supported this with their trade policy. This works to the benefit of the local economy, and could be very negatively affected if the trade policy were changed according to the dictates of the industrial countries channelled through the WTO.

The views expressed in this column are not necessarily those of Guardian Life. You are invited to send your comments to: guardianlife@ghl.co.tt