Raphael John-Lall

T&T is con­tin­u­ing to shift its com­mer­cial and busi­ness ties to Latin Amer­i­ca as T&T’s Prime Min­is­ter Kam­la Per­sad-Bisses­sar makes good on her promise to ex­pand trade links be­yond Cari­com.

A for­mer trade min­is­ter, Vas­ant Bharath, be­lieves that the Gov­ern­ment’s de­ci­sion to pur­sue clos­er com­mer­cial ties with the large South Amer­i­can trade bloc, the South­ern Com­mon Mar­ket (Mer­co­sur for its Span­ish ini­tials) is a “bold step” to­wards di­ver­si­fy­ing T&T’s econ­o­my be­yond Cari­com.

In a news re­lease dat­ed June 30, Min­istry of For­eign and Cari­com Af­fairs, Sean Sobers, ad­vanced T&T’s for­eign pol­i­cy goal of pur­su­ing a new com­mer­cial trade part­ner­ship with Mer­co­sur.

In an in­ter­view with the Busi­ness Guardian, Bharath jus­ti­fied why he thinks T&T is mak­ing the right de­ci­sion in at­tempt­ing to en­ter one of Latin Amer­i­ca’s most im­por­tant trade blocs which is made up of over quar­ter bil­lion peo­ple.

Bharath gave the view that the “eco­nom­ic log­ic” for T&T’s trade ex­pan­sion in­to South Amer­i­ca is “com­pelling.”

“Mer­co­sur in­cludes Brazil, Ar­genti­na, Bo­livia, Paraguay and Uruguay, economies that to­geth­er rep­re­sent a mar­ket of well over 300 mil­lion peo­ple. Ac­cess to these mar­kets could po­ten­tial­ly cre­ate new op­por­tu­ni­ties for T&T’s man­u­fac­tur­ers, par­tic­u­lar­ly in in­dus­tries such as food pro­cess­ing, chem­i­cals, plas­tics, bev­er­ages and con­struc­tion ma­te­ri­als. It al­so has the po­ten­tial to at­tract in­vest­ment in sec­tors rang­ing from lo­gis­tics and man­u­fac­tur­ing to en­er­gy ser­vices,” he said.

At the same time, he said con­sumers and busi­ness­es could ben­e­fit from eas­i­er ac­cess to com­pet­i­tive­ly priced im­ports as Brazil and Ar­genti­na are ma­jor pro­duc­ers of food, fer­tilis­er, steel and in­dus­tri­al equip­ment. Re­duced trade bar­ri­ers could low­er pro­duc­tion costs for lo­cal busi­ness­es and help ease in­fla­tion­ary pres­sures that have af­fect­ed house­holds and man­u­fac­tur­ers alike.

How­ev­er, he warned that trade lib­er­al­i­sa­tion is nev­er with­out risks.

“Open­ing the do­mes­tic mar­ket to South Amer­i­can pro­duc­ers means lo­cal man­u­fac­tur­ers will have to com­pete with com­pa­nies that of­ten op­er­ate on a much larg­er scale and at low­er pro­duc­tion costs. Whilst the ob­jec­tive of ex­pand­ing trade is dif­fi­cult to fault, the ini­tia­tive how­ev­er rais­es im­por­tant ques­tions about whether the coun­try is ready to ben­e­fit from such an arrange­ment or if it risks ex­pos­ing long-stand­ing weak­ness­es in the do­mes­tic econ­o­my.”

He iden­ti­fied com­pet­i­tive­ness as the first con­cern.

He said T&T has strug­gled for years with bu­reau­crat­ic de­lays, crime, for­eign ex­change short­ages and de­clin­ing man­u­fac­tur­ing com­pet­i­tive­ness. These chal­lenges have made it dif­fi­cult for many lo­cal busi­ness­es to com­pete even in Cari­com. Ex­pect­ing them to sud­den­ly com­pete with in­dus­tri­al gi­ants such as Brazil and Ar­genti­na may be un­re­al­is­tic with­out first ad­dress­ing these struc­tur­al prob­lems.

An­oth­er pos­si­ble chal­lenge, Bharath said, is there is al­so the dan­ger that the agree­ment could fur­ther in­crease the coun­try’s trade deficit.

“Brazil and Ar­genti­na are glob­al pow­er­hous­es in agri­cul­ture, man­u­fac­tur­ing and in­dus­tri­al pro­duc­tion. T&T, by con­trast, im­ports much of what it con­sumes and has seen its non-en­er­gy ex­port base shrink over the past decade. Low­er tar­iffs may sim­ply re­sult in more South Amer­i­can prod­ucts en­ter­ing the lo­cal mar­ket while T&T ex­ports strug­gle to gain a mean­ing­ful foothold. Fur­ther out­flows of scarce for­eign ex­change will on­ly ex­ac­er­bate an al­ready dire sit­u­a­tion.”

He point­ed to agri­cul­ture as an­oth­er area of con­cern.

“Lo­cal farm­ers al­ready face high pro­duc­tion costs, lega­cy is­sues such as flood­ing, prae­di­al lar­ce­ny, in­fra­struc­ture, se­cu­ri­ty of tenure, lim­it­ed ac­cess to fi­nanc­ing and com­pe­ti­tion from im­port­ed goods. Open­ing up the mar­ket to agri­cul­tur­al im­ports from Brazil and Ar­genti­na, coun­tries with vast tracts of farm­land and high­ly mech­a­nised pro­duc­tion fa­cil­i­ties could place ad­di­tion­al pres­sure on a sec­tor that is strug­gling and one that has his­tor­i­cal­ly been mar­gin­alised by suc­ces­sive gov­ern­ments.”

He iden­ti­fied in­fra­struc­ture as an­oth­er weak link.

“Ef­fi­cient ports, reg­u­lar ship­ping ser­vices and stream­lined cus­toms pro­ce­dures are es­sen­tial for suc­cess­ful in­ter­na­tion­al trade. Busi­ness­es have re­peat­ed­ly com­plained about ship­ping costs, port de­lays and ad­min­is­tra­tive in­ef­fi­cien­cies. There are over 100 coun­tries world­wide where the ease of do­ing busi­ness is bet­ter than T&T, ac­cord­ing to the World Bank. Un­less these is­sues are re­solved, greater mar­ket ac­cess on pa­per may not trans­late in­to in­creased ex­ports in prac­tice.”

He said the Gov­ern­ment has al­so not clear­ly ex­plained how a Mer­cor­sur agree­ment fits in­to a broad­er na­tion­al trade strat­e­gy.

“Di­ver­si­fi­ca­tion should in­volve more than sign­ing trade agree­ments. It re­quires in­vest­ments in pro­duc­tiv­i­ty, in­no­va­tion, work­force de­vel­op­ment and ex­port pro­mo­tion. With­out these sup­port­ing poli­cies, new agree­ments risk be­com­ing sym­bol­ic achieve­ments rather than en­gines of eco­nom­ic growth.”

He said T&T al­ready has many cur­rent trade agree­ments in­clud­ing those with the US, Eu­rope, Cana­da, Venezuela, Cos­ta Ri­ca, Cu­ba, Pana­ma and Do­mini­can Re­pub­lic.

“None of this sug­gests that pur­su­ing stronger ties with South Amer­i­ca is a mis­take. T&T’s lo­ca­tion makes clos­er en­gage­ment with the con­ti­nent both log­i­cal and po­ten­tial­ly ben­e­fi­cial. How­ev­er, suc­cess­ful trade pol­i­cy be­gins at home. Be­fore open­ing lo­cal mar­kets to stronger com­peti­tors, the Gov­ern­ment must en­sure that do­mes­tic in­dus­tries are equipped to com­pete.”

Ex­port di­ver­si­fi­ca­tion

Econ­o­mist Dr An­tho­ny Gon­za­les told the Busi­ness Guardian that T&T needs to di­ver­si­fy its ex­port mar­kets, par­tic­u­lar­ly as a re­sult of high­er US tar­iff on T&T ex­ports.

“Latin Amer­i­ca is a pri­or­i­ty re­gion due to its prox­im­i­ty. Join­ing Mer­co­sur is a first step as an as­so­ciate mem­ber as this will al­low tar­iff com­pat­i­bil­i­ty with Cari­com. Guyana is al­so an as­so­ciate mem­ber of Mer­co­sur. It will al­so en­sure that Mer­co­sur mem­bers treat our ex­ports to them in the most favoured way.”

How­ev­er, he said in a “fun­da­men­tal sense” this is just a “small step” as much more has to be done to pro­mote T&T’s ex­ports in­to Latin Amer­i­ca.

“It is how­ev­er the be­gin­ning of a com­mit­ment made by the Gov­ern­ment to di­ver­si­fy ex­ports and to de­vel­op more trade and busi­ness with Latin Amer­i­ca.”

T&T’S Latin shift

Ac­cord­ing to the June news re­lease from the Min­istry of For­eign and Cari­com Af­fairs, T&T is seek­ing to be­come an as­so­ciate mem­ber of Mer­co­sur as well as ne­go­ti­ate a Par­tial Scope Trade Agree­ment with Mer­co­sur.

The news re­lease al­so stat­ed that Min­is­ter Sobers was in Paraguay to at­tend the Sum­mit of Heads of State of Mer­co­sur and As­so­ci­at­ed States in Asun­cion, Paraguay.

Dur­ing the vis­it to Paraguay, Min­is­ter Sobers held sep­a­rate bi­lat­er­al meet­ings with Rubén Darío Ramírez Lez­cano, Min­is­ter of For­eign Af­fairs of the Re­pub­lic of Paraguay; Mau­ro Vieira, Min­is­ter of Ex­ter­nal Re­la­tions of The Fed­er­a­tive Re­pub­lic Of Brazil; Pablo Quirno Ma­grane, Min­is­ter of For­eign Af­fairs, In­ter­na­tion­al Trade and Wor­ship, Ar­gen­tine Re­pub­lic and Mario Lu­betkin, Min­is­ter of For­eign Af­fairs of Uruguay.

“Aris­ing out of these dis­cus­sions, it was agreed that Trinidad and To­ba­go’s ap­pli­ca­tion for as­so­ciate mem­ber­ship would pro­ceed to the next stage and would, in­ter alia, in­clude the ne­go­ti­a­tion of trade agree­ments with the core mem­bers of Mer­co­sur,” the state­ment said.

Min­is­ter Sobers was al­so in­vit­ed to ad­dress the Sum­mit. In his ad­dress de­liv­ered in Span­ish, Min­is­ter Sobers in­di­cat­ed that as T&T con­tin­ues to trans­form its econ­o­my through di­ver­si­fi­ca­tion and in­no­va­tion, it recog­nis­es that the time is right to el­e­vate the coun­try’s re­la­tion­ship with part­ners in South Amer­i­ca who share a com­mit­ment to shared pros­per­i­ty and re­gion­al de­vel­op­ment.

Mer­co­sur is a re­gion­al in­te­gra­tion process, ini­tial­ly es­tab­lished by Ar­genti­na, Brazil, Paraguay and Uruguay, and sub­se­quent­ly joined by Venezuela and Bo­livia. The As­so­ci­at­ed States of Mer­co­sur are Chile, Colom­bia, Ecuador, Guyana, Pana­ma, Pe­ru and Suri­name.

Mer­co­sur mem­bers en­com­pass ap­prox­i­mate­ly 308 mil­lion per­sons with a com­bined Gross Do­mes­tic Prod­uct of ap­prox­i­mate­ly US$3.0 tril­lion.

The state­ment said a Par­tial Scope Trade Agree­ment with Mer­co­sur will open new mar­ket-ac­cess op­por­tu­ni­ties for the lo­cal man­u­fac­tur­ing sec­tor, as T&T has a sig­nif­i­cant man­u­fac­tur­ing base with sev­er­al in­ter­na­tion­al­ly com­pet­i­tive prod­ucts which can suc­ceed in South Amer­i­ca.