In order for the Caribbean region to successfully maximise on any trade relations with China and narrow the gap within the free trade system, the region must create a free trade agreement that would facilitate value added activities and spur growth. This is the advice of Bharrat Jagdeo, President of Guyana, who was speaking on Monday at the Third China-Caribbean Economic and Trade Co-operation Forum, at the Hyatt Regency Trinidad Hotel, Port-of-Spain. Jagdeo, who declared that China is the future for trade within the Caribbean, said there exists inequalities in trade relations between developed and developing countries that create barriers to successful trading-putting developing countries at a disadvantage.
"This disparity must be addressed before the Caribbean engages in any trade with the new superpower: China." He explained that the Caribbean must establish a structured approach that identifies several key issues in its trade relations with China, so practical changes can be realised before the next forum in 2015. Jagdeo said one of the key problems that currently exists is duty free access into China, and that only one Least Developed Country (LDC)-Haiti-has duty free access. He recommended that a partial or non-reciprocal free trade agreement, which covers the top 30 products that the Caribbean export or have potential to export into China, allow duty-free access into the Chinese market. Jagdeo said Caribbean trade, compared to global trade, is small, but trading with China would mean a lot for the value added activity and creation of wealth in the region. He said everyone has cited the gaps in trade statistics, "but if we have to narrow the gap, we need a trade agreement to facilitate value added activities and growth in the region."
Financing trade relations
Supporting the view of China's Vice Minister, Ministry of Commerce, Wang Chao, that the private sector is the engine of growth and needs to create wealth rather than the government, Jagdeo said the Caribbean must adopt this ideology. To facilitate that ideology, though, the private sector must be enabled to stand on its own without much involvement from government institutions, he stated. In most cases, if not all, Jagdeo said the financial arrangements for trade relations are usually established between governments. He said loans are most likely to have a government guarantee from the Caribbean Development Bank (CDB) and the soft loans and many of the grants would also be given to governments. The region was given US$1billion by the Chinese government, US$6.26 million was allocated to T&T for mutually agreed initiatives. agdeo questioned: "How do we (the Caribbean) capitalise on China's abundance of capital, which they invest around the world and how some of that investment could flow to our private sector?"
He suggested that the private sector would require different forms of financing, but financing that is given without a government guarantee while also ensuring the Chinese funds are safe. To accomplish that, Jagdeo said, "We have to think about the creation of such an institution in the region, either through the CDB or other banks, that have an aggressive private sector-oriented window." The creation of such a mechanism, he said, must ensure that the Chinese money is safe, the returns are good and facilitate the private sector with a new source of financing, which is required in an environment where the cost of capital is not very high.
China refashioning global relations
Jagdeo strongly advised that the Caribbean must capitalise on China's well-being and global growth with regards to the global financial system. Jagdeo explained that countries such as T&T and Guyana are policy-takers and the policies that affect us the most are the ones created by the International Monetary Fund (IMF) and the World Bank and within the major capitals of the world. "Even though we try to fight it from time to time, we eventually have to comply because of the dominance of these institutions in the world economic and financial trade policymakers." "The concern, therefore is, how do the Caribbean establish this framework on a global level to make it more sympathetic to us?" Jagdeo recommended that the Caribbean rely on China and other emerging economies' growth and their demand to play a greater role in the governance of the IMF and the World Bank and other institutions.
The logic behind the suggestion is that if the new emerging economies are in the Caribbean, they could facilitate an environment whereby policies and instruments are designed to be more sympathetic to the Caribbean's investments needs.
He said China's emergence in the Word Trade Organisation (WTO) may afford the Caribbean the opportunity to have secure and preferential treatment for such small developing countries as St Kitts/ Nevis. Using St Kitts as an example, Jagdeo said the country cannot trade equally with the United States, as St Kitts has other non-trade variables that affect them and a population of 40,000, which is equivalent to 40,000 people working in one building in the United States. As a result, China could play a pivotal role in refashioning global relations.
Encourage joint ownerships
Jagdeo said family-run businesses should open up to joint partnerships by Chinese investors.
Speaking specifically to family businesses that do not want other investors sharing ownership, he appealed to them to change their attitudes and be more open to portfolio investments. "We have to be receptive to Chinese investors coming in and buying shares and may be sharing ownership of companies." He explained that this could redound to the benefit of locals as the Chinese bring greater access to markets and evolving technologies. He said there were great opportunities for direct investments in tourism, hotels and building new properties, oil and gas sector and in natural resources.
Jagdeo said Guyana has a vast array of natural resources like the United Kingdom, but is capital-starved. "But with the right capital and technology, we can unlock these resources to mutually benefit the countries."
Commited to the Caribbean
Chinese Vice Premier Wang Qishan said the two-way trade between China and the Caribbean has been growing at an annual rate of 24 per cent on average and has reached US$7.2 billion in 2010. The accumulative Chinese investment in the Caribbean now stands at US$400 million. Qishan said China being a developing country itself, has provided assistance within its capability to the Caribbean countries without conditions. He said that they helped built a number of public facilities and projects and trained 1,700 officials and technicians and dispatched 200 agricultural and medical experts. He said China cannot develop in isolation, therefore, China looks forward to the China-Caribbean friendship and economic co-operation. He said they remained committed to promoting economic development, improving people's livelihood, advancing regional integration and playing an active role in international affairs.