CARICOM GROWTH HOBBLED BY FIRST WORLD SUBSIDIES

The development of CARICOM, as with that of many developing nations or groupings of developing nations, continues to be hindered by cheap State-subsidised imports, much of it agricultural, from the European Union and the United States. State subsidies of European products have not merely affected Caribbean goods sold on the domestic market, but our exports as well, which in all too many cases have been made less competitive than European goods sold in European markets and/or the markets of both developing and other developed nations. 

In turn, the price set by the Convention of Lome for Caribbean sugar exported to the European Union under Lome’s preferential entry quota system was dictated by less than free market conditions. For example, the guaranteed price for Caribbean sugar, as it is for sugar generally throughout the ACP countries, which are signatories to the Convention of Lome Agreement, is based on the lowest price paid for European Union beet sugar. That low price, as in the case of all other beet sugar prices, resulted from subsidies paid to beet sugar producers!  It was an unrealistic price, one way below what it would have been had the beet sugar product not been subsidised. It was unfair for the European Union to have fixed their subsidised beet sugar price, somewhere in the region of 523 Euros a metric tonne, as the price it would pay for Caribbean, or ACP sugar.

Because of this obscene “might is right” attitude of the European Union, Trinidad and Tobago and other Caribbean countries were “persuaded” to subsidise European breakfast tables, their desserts and what have you for several years, and were deprived of hundreds of millions of dollars in revenue in the process. Admittedly, Tate and Lyle and other refiners of cane sugar pay a modest premium above the guaranteed price. The hundreds of millions of dollars lost, by particularly Trinidad and Tobago, Barbados, Guyana and St Kitts where the Governments own the factories, (and in the case of Jamaica, where State ownership is 70 per cent) could have been utilised to develop the infrastructure of the island States. Ironically, the same Governments have had over the years to borrow from international lending agencies money which should have been earned from sugar, had the subsidised minimum beet sugar price not been in effect.

European and American subsidies are, however, not limited to agriculture, although these subsidies have had a substantial negative bearing on Caribbean cost of living, Caribbean jobs and Caribbean development. Overall, they are a form of State dumping, not easily detected and as a consequence not easily challenged. But the goods which are subsidised can land here at prices made uncompetitive by being much lower than the real cost of production, and create economic discomfort in much the same way that the dumping of Thailand cement did to Trinidad Cement Limited in 1999. State subsidised imports can result not merely in existing industries having to cut back production, or to shut down, but can discourage relevant new industries from emerging as well. The brutal result is not merely a loss of profits and/or investment, but the CARICOM country suffers a loss of Corporation Taxes, Income Tax and Value Added Tax, and if the companies are exporters, then foreign exchange earnings as well. Jobs are either lost or severely reduced, and, consequently, less money is turned around within the economy.

A dozen World Trade Organisation (WTO) organised Cancuns will do little to dent the subsidies, if only because the countries in the driver’s seat (or is it drivers’ seats) at the WTO are the developed or First World nations! Meanwhile, Trinidad and Tobago will be hit twice. For as the night must follow the day, the adverse balance of payments position of several of the CARICOM States will worsen; their national debt will increase, and as unemployment levels rise this country can expect an influx of Caribbean nationals bent on relocating. There will be increased pressure on Trinidad and Tobago’s health and social services. The Caribbean immigrants will pose a challenge to nationals in the market place, and minimum wage or no minimum wage may be prepared, perhaps until their status is regularised, to accept jobs even at below the minimum wage. There will be an increase in squatter setlements. But the same arguments I have advanced may very well be applicable to those who have stayed at home.

What the Caribbean, (indeed the rest of the developed nations) is witnessing today is a repeat of European colonial history, in which Europe deliberately set out to de-industrialise Africa, India and China and its then assorted colonial possessions. In essence: neo-colonialism. Paul Bairoch, in his “Economics and World History: Myths and Paradoxes,” would write: “The phenomenon of colonialism, or of neo-colonialism had, during the course of the 19th century brought about the decline of traditional industry in most of the Third World. This trend continued during the first years of the 20th century, with the phenomenon reaching its peak towards the 1920s. By this period, everything that could be supplied profitably (for the exporting countries) by the industries of the developing countries were effectively done. In short, what could be described as the ‘de-industrialisation of the Third World’ was then at its apogee. Oh, for a Jawarhalal Nehru, or a Kwame Nkrumah, Michael Manley or Dr Eric Williams. CARICOM nations, and indeed the rest of the Third World, may have to seek to resist, through diplomatic means, as a Non-Aligned Group, this 21st century attempt at once again hobbling their economies, through another threatening round of de-industrialisation. Or “crapaud smoke their pipe.”