Meaning of trade liberalisation

Trade Minister Ken Valley seems to be taking his own sweet time to solve the problems his Government has caused for the sugar-dependent manufacturers. Companies such as KC Confectionery and SM Jaleel & Company have had to send home workers until the issue is resolved, while Associated Brands Limited, Nestl? Ltd, Pepsi and Coca-Cola have had to scale back their operations. Meanwhile, Valley issues a statement promising he will “lobby Cabinet” so the manufacturers can get imported sugar. It is impossible to imagine any government official in, say, Singapore or Taiwan, taking such a laid-back attitude in a similar situation.

They would have met the same day that the manufacturers made their problems known and most likely taken action by nightfall. Indeed, it is unlikely that a government minister would have had to get involved at all, since the technocrats in these countries know they have to help, not hinder, business. Not so in Trinidad and Tobago. While Caroni (1975) Limited was in existence, the government imposed tariffs which prevented sugar manufacturers accessing sugar from outside sources. This was always a bad idea, since it meant imposing higher costs on manufacturers (who could not reduce their production overheads by accessing cheaper ingredients more efficiently) and on the taxpayer (whose dollars funded the subsidised sugar).

Amazingly, even after the Government closed down Caroni Ltd, with just the scaled-down Sugar Manufacturing Company Ltd (SMCL) left to harvest and process the crop, they left the tariff in place. The present shortage was inevitable. Even more amazing, though, is the Government’s “solution.” The Cabinet recently gave permission for local manufacturers to import ten thousand tonnes of refined sugar, duty-free, between September 1 and December 5. Yet even this simple procedure they got wrong. Some of the orders went to the wrong countries and manufacturers are also complaining that Caricom countries are refusing to waive the usual duties on their products, because the imported sugar makes TT manufacturers’ goods not 100 percent Caribbean-made.

At least this is a good opportunity for Caricom’s secretary general Dr Edwin Carrington to make good on his promise to use his recently-acquired Trinity Cross to seek the interests of Trinidad and Tobago. While we await Caricom’s removal of this economically backward regulation, however, the Government needs to take swift and decisive action to help local manufacturers. This should, quite simply, be the removal of the restrictions which prevent manufacturers from accessing sugar freely. Mr Valley talks glibly about having the SMCL be the sole importer in order to take advantage of “economies of scale.” This is nonsense. The more efficient method is to speedily grant manufacturers licences so they can access sugar from whatever source they prefer.

Now that Caroni (1975) Ltd has been closed, the SMCL should not be given the status of a protected industry. It is an economic truth, as the present imbroglio proves, that protecting one industry harms other industries. Removing tariffs, on the other hand, helps increase productivity and raise real wages. This is a crucial part of trade liberalisation, which the Government officially favours. The sugar crisis gives this administration a chance to put its money where its mouth is.