Safeguarding our manufacturers

Over the past five years, the Trinidad and Tobago economy has been experiencing something of a boom.  Trade is up and quite brisk: imports are on the rise; and non-energy oil exports have been increasing, along with their attendant foreign exchange revenues.  Non-energy imports and non-energy exports grew by an average of 14.5% and 6.7% respectively. And the latest trade figures show that the TT economy is very healthy: between 2003 and 2004, non-energy imports increased by 32.5 % from TT$ 15.9 billion to TT$ 21.1 billion in 2004.  Meanwhile, non-energy exports increased by 20.1 % from TT$ 4.5 billion in 2003, to TT$ 5.4 billion in 2004.

Life has been good for both the merchants doing a brisk import trade, and the consumer benefiting from increased choices and competitive pricing. But some local manufacturers have been experiencing discomfort, as they battle against a flood of cheaper priced imports from their foreign counterparts.  And as the local manufacturers feel the pinch, inevitably, so will John and Jane Public employed with these struggling local manufacturers, who might be forced to go on the breadline.

Trade Challenge
Unfortunately, this is one of the challenges of trade liberalisation; but there is no turning back to the days of protectionism to maintain market share and job security.  However, there are tools, sanctioned by the Word Trade Organisation (WTO) and the Caricom Single Market and Economy (CSME), which can be employed to ease the transition, and reduce the negative fallout of free trade.  Safeguards are one of these.

Safeguards Legislation is coming…
Government believes that TT manufacturers, once given the proper time to adjust, would thrive in a free trade environment.  Its trade and industrial policy is to promote the interest of the local industry and manufacturer, because of the foreign exchange earnings and the employment they generate. Before the current Parliamentary session is over, Government will be introducing Safeguards Legislation on the agenda. By implementing safeguard legislation, Trinidad and Tobago will be  increasing the range of measures available for protecting local industry against the adverse effects of trade liberalisation.  In addition, the current demand for anti-dumping protection by local producers justifies the introduction of this legislation.

What Safeguards do
In essence, safeguard legislation supports those local industries that produce the same goods as those that are being imported.  These industries are earners of foreign exchange, and even more importantly, they are generators of employment.  When safeguard legislation is established, it is with a view to protecting the general economic well being of the country — ensuring that these industries don’t go out of business, and continue to keep people employed.

Sometimes the imports coming into the market are dumped; sometimes they are not, and it is simply a matter that the volume of the imports is too much for local industries to handle. If these local producers aren’t supported, at least during the short term, they run the risk of reduced market share, substantial loss of sales, and eventually, collapse.  Their demise would result in reduced foreign exchange earnings for the nation’s coffers, and increased unemployment as workers in these industries are laid off.  To ensure that this does not happen, safeguard measures would be imposed.

Adjusting Time
While the safeguards are in place, the affected industry must take steps to adjust to the increased competition that will follow the removal of these measures.  Adjustment could take many forms; adopting improved technology, or rationalising production structures.  In addition, evidence that the affected industry is adjusting must be provided to the WTO Committee on Safeguards, when the safeguard measure is being extended. However, safeguard mechanisms will not be employed arbitrarily or automatically. 

There will be a clear and transparent investigation before any action is taken.  The local industry or manufacturer must present the Ministry of Trade and Industry with hard evidence of an increased influx of imports; the actual product prices in the country of export or origin are not required. The ministry would then conduct a proper investigation, including a cost benefit analysis, to determine whether the mechanisms should be implemented. The unit that would be responsible for this kind of work would be a subset of the Ministry’s Fair Trading / Anti-Dumping Unit.