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PRESS RELEASE
PRESS/TPRB/85
23 October 1998Jamaica
must stabilize its economy and diversify its exports - Jamaican products to face market
access problems Back to top
Jamaica needs a stable domestic economy and open
access to export markets if it is to realize renewed economic growth by next year. Despite
comprehensive structural reforms in the mid-1990s, a new WTO report and the first on
Jamaica's trade policies and practices, notes that Jamaica's economy is highly vulnerable
to domestic and external shocks. While rising production costs and an appreciating
currency have undercut Jamaica's competitiveness, changes in external markets are making
it more difficult for Jamaica to export key products such as clothing, sugar, bananas and
bauxite. Moreover, the expiry of EU preferential trade access under Lomé IV and the
recent WTO legal rulings on the EU banana regime will affect Jamaican exports.
The WTO Secretariat report and a policy statement
prepared by the Government of Jamaica will provide the basis for a discussion at the WTO
on 29 and 30 October 1998.
That WTO report notes that in 1985, Jamaica started
a comprehensive programme of structural reform and liberalization and dismantled its price
controls, privatized several public enterprises, reduced import duties and enhanced the
role of the private sector. It also improved tax collection and reduced expenditure.
However, the financial crisis of the mid-1990s contributed to a recession in 1996-1997.
The economy is slowly beginning to recover, but is still deemed vulnerable.
According to the WTO's report, Jamaica is a
relatively open economy which is very dependent on trade, with external transactions in
goods and services representing over 100% of GDP. Tourism, followed by exports of
bauxite/alumina and clothing, are the main earners of foreign exchange, amounting to 75%
of foreign earnings. Jamaica's imports of goods, mainly oil, raw materials and capital
goods, are twice as large in value as its exports. Jamaica's export markets are the United
States, for manufactures, and the United Kingdom, for exports under preferential terms of
sugar and bananas.
Despite guaranteed access levels for certain
products, Jamaican exports of clothing to the United States have been losing market share
to other more competitive producers, especially from Mexico, a member of the North
American Free Trade Agreement (NAFTA). A main policy goal for Jamaica, a member of the
regional trade agreement CARICOM (Caribbean Community and Common Market), is to obtain
NAFTA-treatment for products of CARICOM origin. Preferential access for CARICOM bananas
may be affected by the recent ruling of a WTO panel on European Unions' banana import
regime, and by the expiry of Lomé IV.
Jamaica's import duties have been lowered from rates
as high as 200% to maximum levels of 30% for industrial products and 40% for agricultural
goods. Currently, Jamaica has an unweighted average MFN tariff of 10.9%. Protection is
higher for agricultural products, with an average of 20.2%, while industrial imports face
an average tariff of 8.4%. Jamaica's tariff structure offers higher levels of protection
to goods with high value added and to agricultural products. Inputs, whether raw materials
or capital goods, are generally granted duty-free access. Final goods that are substitutes
for domestic production normally face the highest CARICOM common external tariffs (CET),
from 20% to 25%. Exceptions to the CET, including motor vehicles and some electrical
appliances, are charged import duties of up to 30%. In addition to tariffs, other duties
are levied on certain imports, and can range from 65% to 90%. Moreover, a 15% General
Consumption Tax is applied on all imported and domestically-produced goods.
The report mentions that Jamaica applies a wide
range of production and export incentives, including tax concessions and duty-free access
for imports of inputs and capital goods. The Government plans to eliminate these incentive
schemes by the year 2003, when Jamaica, as a developing country, is expected to comply
fully with the disciplines of the WTO Subsidies Agreement.
Services, mostly tourism, is the largest and fastest
growing sector in the Jamaican economy, accounting for over 55% of GDP and employing
around 60% of the total employed population. Under the General Agreement on Trade in
Services (GATS), Jamaica made commitments on tourism, business, educational,
health-related, recreational, transport and financial services. Jamaica also participated
in the basic telecommunications and financial services negotiations concluded in 1997 .
The report notes that the mining sector is the
second most important generator of foreign exchange in Jamaica after tourism. Its
contribution to GDP was 9.4% in 1996, up from 8.8% in 1992. Bauxite and alumina production
accounted for over 50% of Jamaica's merchandise exports. All exports of minerals require a
permit from the Ministry of Mining.
Jamaica is not party to the WTO's plurilateral
Agreement on Government Procurement, although a regional CARICOM plan is underway to
create a central, regional information coordination agency. The report states that Jamaica
is currently bringing its anti-dumping legislation into conformity with the relevant
provisions of the WTO agreement.
The report concludes that in order for Jamaica to
meet the targets outlined in its future industrial plan, which aims to achieve annual GDP
growth of between 6 and 7.5%, it must continue to focus on increasing domestic economic
stability and ensuring open market access for its products in key export markets.
Notes to Editors
The WTO's Secretariat report, together with a policy
statement prepared by the Jamaican Government, will be discussed by the WTO Trade Policy
Review Body (TPRB) on 29 and 30 October 1998. The WTO's TPRB conducts a collective
evaluation of the full range of trade policies and practices of each WTO member at regular
periodic intervals and monitors significant trends and developments which may have an
impact on the global trading system. The Secretariat report covers the development of all
aspects of each of Jamaica's trade policies, including domestic laws and regulations, the
institutional framework, trade policies by measure and by sector. Since the WTO came into
force, the new "areas" of services and trade-related aspects of intellectual
property rights are also covered.
To this press release are attached the summary
observations from the Secretariat report and a summary of the government policy statement.
The full Secretariat and government reports are available for journalists from the WTO
Secretariat on request (call 41 22 739 5019). They are also available for the press in the
newsroom of the WTO internet site (www.wto.org). The Secretariat report, together with the
government policy statement, a report of the TPRB's discussion and the Chairman's summing
up, will be published in hardback in due course and will be available from the WTO
Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following
reports have been completed: Argentina (1992), Australia (1989, 1994 & 1998), Austria (1992), Bangladesh
(1992), Benin (1997), Bolivia (1993), Botswana (1998), Brazil (1992 & 1996), Cameroon
(1995), Canada (1990, 1992, 1994 & 1996), Chile (1991 & 1997), Colombia (1990
& 1996), Costa Rica (1995), Côte d'Ivoire (1995), Cyprus (1997), the Czech Republic
(1996), the Dominican Republic (1996), Egypt (1992), El Salvador (1996), the European
Communities (1991, 1993, 1995 & 1997), Fiji (1997), Finland (1992), Ghana (1992), Hong
Kong (1990 & 1994), Hungary (1991 & 1998), Iceland (1994), India (1993 &
1998), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992, 1995 & 1998),
Kenya (1993), Korea, Rep. of (1992 & 1996), Lesotho (1998), Macau (1994), Malaysia
(1993 & 1997), Mauritius (1995), Mexico (1993 & 1997), Morocco (1989 & 1996),
New Zealand (1990 & 1996), Namibia (1998), Nigeria (1991 & 1998), Norway (1991
& 1996), Pakistan (1995), Paraguay (1997), Peru (1994), the Philippines (1993), Poland
(1993), Romania (1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic
(1995), the Solomon Islands (1998), South Africa (1993 & 1998), Sri Lanka (1995),
Swaziland (1998), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991
& 1995), Tunisia (1994), Turkey (1994 & 1998), the United States (1989, 1992, 1994
& 1996), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia (1996) and Zimbabwe
(1994).
The
Secretariats report: summary Back to top
TRADE POLICY REVIEW BODY: JAMAICA
Report by the Secretariat Summary Observations
In the past twenty years, but particularly since
1985, the Jamaican economy has become relatively open and liberal, with few restrictions
to trade. A liberalization process engaged in the framework of CARICOM has gone
hand-in-hand with commitments under the multilateral trading system.
Economic environment
After average GDP growth of 5% between 1962 and
1973, the Jamaican economy underwent a period of declining output and large internal and
external imbalances that lasted until the mid-1980s. Although a more outward looking
strategy was initiated somewhat earlier, it was not until 1985 that Jamaica started a
comprehensive programme of structural reform and liberalization, aimed particularly at
restoring external balance and reducing state intervention in the economy. The process of
structural reform, supported by IMF and World Bank programmes and by debt rescheduling,
was continued and strengthened during the 1990s, when price controls were dismantled,
several public enterprises privatized, import duties reduced and the role of the private
sector in economic activity enhanced.
GDP grew at an average rate of some 2½% in the
decade following 1986. Monetary discipline served to help bring inflation down from 80% in
1991 to around 9% in 1997. However, the consequent high interest rates and real
appreciation of the currency, combined with a financial sector crisis, again slowed growth
and led to an economic downturn in 1996 and 1997.
After a period of budget surplus between 1990 and
1995, resulting from an improvement in tax collection, reductions in expenditure and
income from privatization, the fiscal balance deteriorated in 1996, to a deficit of 7.2%
of GDP in fiscal 1996/97 and 9.5% in 1997/98. The main reasons for this increase were the
reduced rate of economic activity stemming from the financial sector crisis (leading to
lower tax revenues) and increases in government spending resulting from higher interest
payments and a growing public sector wage bill.
The economy is very dependent on trade, with
external transactions in goods and services representing over 100% of GDP. Tourism has
been the main earner of foreign exchange since 1983, followed by exports of
bauxite/alumina and clothing; these three sectors account for 75% of foreign earnings. The
relatively low degree of export diversification and strong dependence on imported oil,
inputs and capital goods, means that Jamaica is vulnerable to external shocks. Jamaica's
heavy reliance on a single market, the United States, for exports of manufactures, and on
the United Kingdom for exports, under preferential terms, of sugar and bananas, adds to
this vulnerability, especially since rising unit labour costs and an appreciating currency
have affected competitiveness. Despite guaranteed access levels for certain products,
exports of clothing to the United States have been losing market share to other more
competitive producers during the past few years; in the case of bananas, preferential
access could be affected by the recent ruling of a WTO Panel regarding the EU's banana
import regime.
Net private transfers, particularly remittances from
Jamaicans working abroad, play an important role in the economy. The surplus on current
transfers, of some US$ 640 million in 1997, helps finance the large trade deficit.
Jamaica's imports of goods are twice as large in value as its exports. Net capital inflows
allowed an increase in foreign exchange reserves in most of the past ten years; more
recently, they have also been encouraged by high interest rates, contributing to the real
currency appreciation.
Trade Policy Regime and Objectives
The National Industrial Plan for the period 1996 to
2010 seeks to achieve annual GDP growth of between 6% and 7.5%, to reduce unemployment and
to triple the value of exports. It targets five strategic clusters in which Jamaica has
traditionally had a comparative advantage: tourism, shipping and berthing,
agro-processing, apparel, and bauxite and alumina. These are to be promoted through
investment in infrastructure, technology and machinery and equipment. The Plan aims at
encouraging the development of skills in areas with higher value added and technological
content, through the use of a number of incentives.
A major trade policy concern is the loss of export
competitiveness due to high production costs and the erosion of preferential market
access, as well as real exchange rate appreciation. The authorities are particularly
concerned about exports of clothing to the U.S. market, which have lost market share
vis-à-vis Mexico and other lower-cost producers A policy goal is to achieve
NAFTA-treatment for CARICOM products. Another trade policy concern is Jamaica's access to
the EU market and the expiry of Lomé IV in 2000.
Jamaica, formerly a GATT contracting party, became a
WTO Member on 9 March 1995. In the Uruguay Round, Jamaica bound all its industrial tariffs
at a uniform ceiling rate of 50% and its agricultural lines at 100%; other duties and
charges were bound at 15%, with few exceptions. Jamaica is also in the process of amending
its domestic legislation, where necessary, to give effect to obligations undertaken in the
Uruguay Round. An Anti-dumping Act is currently under preparation. New Patent and
Trademark Acts are being drafted, and the Copyright Act is in the process of amendment to
conform with the WTO Agreement on the Trade-related Aspects of Intellectual Property
Rights (TRIPS), as well as with the Bilateral Intellectual Property Rights Agreement with
the United States. Legislation with respect to trade secrets and layout design is expected
to be implemented shortly.
Under the GATS, Jamaica made commitments on tourism,
business (including professional), educational, health related, recreational, transport
and financial services, as well as in the subsequent negotiations on telecommunications
and financial services.
To date, Jamaica has not been involved directly, as
either plaintiff or defendant, under the GATT or WTO dispute settlement mechanisms.
However, Jamaica's exports of bananas may be affected by the recent WTO dispute settlement
funding that the EU's import regime and licensing procedures were inconsistent with
certain WTO provisions. Jamaica has held bilateral consultations with the European Union,
Canada, and the United States regarding technical regulations and standards, seafood, and
textiles.
Jamaica is a founding member of the Caribbean
Community and Common Market (CARICOM). CARICOM has been moving towards greater integration
since 1991, when the Caribbean Single Market and Economy (CSME) was endorsed. Jamaica
adopted CARICOM's Common External Tariff (CET) in 1991. In 1993, a four-phase schedule of
CET rate reductions was implemented, with the goal of lowering the maximum tariff for most
goods other than agricultural products to 20% in 1998. A further step towards integration
was taken in 1997 under two protocols amending the Treaty Establishing the Caribbean
Community; these are expected to lead to the free movement of goods, services, and
capital, while further steps are taken to liberalize the movement of persons. Schedule I
of the CARICOM Treaty allows a few national exceptions to the duty free entry of goods
from other CARICOM member states. Jamaica maintains milk and cream (fresh, evaporated or
condensed) on this list; imports of these products from other CARICOM countries are
subject to the CET.
CARICOM has preferential trade agreements with
Colombia and Venezuela. Under the Agreement with Colombia, Jamaica, as a CARICOM
medium-development country, binds duty-free access bilaterally as of 1 June 1998 on a
number of products that de facto already receive MFN duty free treatment, on an unbound
basis. Phased, bound duty reductions will be extended from 1 January 1999 on another group
of products, including some that currently pay MFN customs duties. The Agreement with
Venezuela offers unilateral preferential treatment for CARICOM exports.
Foreign investment is regulated by the provisions of
bilateral investment agreements, which generally incorporate the national treatment
principle. To date, agreements exist with Argentina, China, France, Germany, Italy, the
Netherlands, Switzerland, the United Kingdom and the United States, while bilateral
agreements with Belgium/Luxembourg, Canada, Costa Rica, Cuba, Korea and Russia are under
negotiation. Investment issues are also covered in CARICOM's agreements with Colombia and
Venezuela. There are no restricted areas for foreign investment; screening practices, used
until recently, have been abandoned.
Trade Policy by Instrument
Border measures
Since the mid 1980s, when Jamaica engaged in a
process of trade liberalization, import duties have been lowered from rates as high as
200% to the current maxima of 30% for industrial products and 40% for agricultural goods.
Jamaica adopted the CARICOM's Common External Tariff (CET) in 1991 for all goods, except a
group of mainly agricultural products (List A) and industrial goods (List C). Under
CARICOM Jamaica has engaged in tariff reductions to a ceiling, possibly to be achieved
during 1998, of 20% for industrial products other than those included in its list of
exceptions. As a consequence of this liberalization effort, Jamaica currently has an
unweighted average MFN tariff of 10.9%. Protection is higher for agricultural products,
with an average rate of 20.2%, while industrial imports face an average tariff of
8.4%.
Tariffs and other price-based measures are currently
the preferred trade policy instrument. Jamaica does not use other measures, such as prior
import deposits, minimum import or export prices, variable import levies, import
surveillance, local-content requirements, or restrictions for balance-of-payments
purposes. Jamaica's tariff structure offers higher levels of protection to goods with high
value added and to agricultural products. Inputs, whether raw materials or capital goods,
are generally granted duty-free access. Final goods that are substitutes for domestic
production normally face the highest CET rates, from 20% to 25%. Exceptions to the CET,
including motor vehicles and some electrical appliances, are charged import duties of up
to 30%.
In addition to tariffs, Additional Stamp Duties on
Customs Warrants Inward are levied on certain imports, including some agricultural
products, alcoholic beverages, tobacco products, and aluminium products. Border charges
for agricultural products are calculated on an aggregate level including the tariff, and
they range from 65% to 90% The additional stamp duty on alcoholic beverages is 34%, while
tobacco products are subject to a rate of 56% rate, and aluminium products to rates of 20%
to 25%..
The General Consumption Tax (GCT), introduced in
1991, is applied on all imported and domestically-produced goods, except those exempted or
zero-rated. The rate for most products is 15%. Motor vehicles are generally subject to
higher GCT rates than other goods, with rates reaching a peak of 176.92%.
Jamaica has delayed the application of the WTO
Agreement on the Implementation of GATT Article VII (on Customs Valuation), in accordance
with the provisions of the Agreement, and has until end-1999 to bring its valuation system
into conformity with its WTO commitments; it is in the process of implementing the changes
required. The valuation system currently applied is based on the Brussels Definition of
Value. Reference prices are sometimes used, especially on imports of meat and other foods,
clothing, footwear, and used motor vehicles.
The Jamaica Bureau of Standards (JBS), under the
Ministry of Commerce and Technology, is in charge of developing and controlling standards.
It also assesses the conformity of applied standards with ISO standards, as well as their
WTO conformity. Jamaica has about 500 local standards, including 100 technical
regulations. A number of compulsory standards have been notified to the WTO. Jamaica is in
the process of harmonizing standards, labelling and packaging with other CARICOM members.
Jamaica is not party to the plurilateral Agreement
on Government Procurement. Government procurement is not included in the scope of CARICOM,
although an action plan to create a central regional information coordinating agency has
been launched. Procurement for Jamaican governmental agencies is regulated by the
Financial Administration and Audit Act (FAA). Ministry of Finance and Planning guidelines
are used for the procurement of supplies.
Anti-dumping legislation is being brought into
conformity with the relevant provisions of the WTO Agreement on the Implementation of
Article VI of the GATT, 1994 (Anti-Dumping Agreement); this exercise is expected to be
completed before the end of 1998. The Anti-Dumping Advisory Board is in charge of
conducting investigations with respect to the dumping of goods, as well as for the
possible application of countervailing measures. Some investigations have taken place, but
Jamaica has never made use of anti-dumping measures; nor has it applied countervailing
duties on imports.
Although licences are still needed for the
importation of some products, particularly motor vehicles and some agricultural products,
in general terms licensing is not used as an instrument for the protection of local
production, but for health and environmental reasons. Quantitative restrictions were
eliminated in the mid-1980s.
Measures affecting exports, production and trade
Jamaica applies no export taxes. There are no export
bans, but a system of export licensing for products representing over half of Jamaica's
exports, including bauxite/alumina, is in effect. There are no export quotas or specific
export performance requirements.
Jamaica applies a wide range of incentive schemes;
these generally include tax concessions and duty-free access for imports of inputs and
capital goods. Some schemes are geared at promoting exports, such as measures under the
Export Industry Encouragement Act (EIEA) and Foreign Sales Act. Others are designed to
promote the development of some specific industry, such as the Hotel Incentives Act or the
Bauxite Encouragement Act, while still others are more broadly applied to a whole sector,
such as the Modernization of Industry Programme. The Government plans to eliminate these
incentive schemes by the year 2003, when Jamaica, as a developing country, is expected to
comply fully with the disciplines of the WTO Agreement on Subsidies and Countervailing
Measures. The elimination of these schemes will be facilitated by Jamaica's programme of
tariff reductions; duty concessions granted by some schemes have, in some cases, already
been eroded or wiped out by the elimination of tariffs on non-competing inputs and capital
goods.
The establishment of free zones is regulated through
the Free Zone Encouragement Act, which has now been extended to cover single-entity zones,
namely, firms located outside the three existing Free Zones. Companies in Free Zones must
export at least 85% of their production; activity is concentrated in textile and clothing
production.
Most price controls and food subsidies have been
eliminated, and only the prices of certain basic products and services, including water,
electricity, domestic kerosene and bus fares, remain under administration. Business
practices are regulated by the Fair Competition Act.
Measures by Sector
Agriculture
The agricultural sector, including food processing,
beverages and tobacco, accounts for some 16% of GDP. Agricultural exports are dominated by
traditional products, especially sugar, bananas, cocoa, citrus and other fresh fruit and
vegetables, which accounted for almost 16% of domestic exports in 1996. Processed foods,
beverages and tobacco are an additional 14% of exports.
Jamaica is a net importer of agricultural products;
in 1996 imports were almost one third greater in U.S. dollar value than exports. The main
imported agricultural products are cereals and preparations of cereals, dairy products and
eggs, meat, sugar and sugar products, beverages and spirits, vegetable oils and fats, and
fish. Until deregulation in the mid-1980s, Commodity Marketing Boards acted as single
traders for a number of crops, including cocoa, coffee, bananas, coconut and sugar; these
are now open to private trading. Quantitative restrictions on the importation of
agricultural products were dismantled in the mid-1980s and replaced by tariffs and
additional stamp duties. All imports of fresh fruits and vegetables, plants and plant
parts require an import permit, issued by the Plant Quarantine Department of the Ministry
of Agriculture.
Agricultural tariffs vary between 0 and 40%, with
inputs normally subject to low rates or granted duty free access. In 1997, Jamaica's
simple average MFN tariff on agricultural products was 20.2%. Imports of fruit, vegetables
and sugar face above average tariffs, while non-competing imports, either for final
consumption or as inputs, face lower rates. A wide range of agricultural imports are
subject to additional stamp duties, which, applied on the c.i.f. value plus the tariff,
can raise the level of protection to up to 90%. Beverages and spirits are subject in
addition to a special consumption tax.
Sugar is Jamaica's main agricultural export, with a
value of some US$ 100 million in 1997. Jamaica's sugar exports are directed mainly to two
markets: the United Kingdom and the United States, under preferential market access and
price arrangements. Exports of sugar to the European Union are subject to a regular annual
quota of 126,000 tonnes and a supplementary quota of 30,000 tonnes. The regular quota has
been filled every year, while the degree of use of the supplementary quota has varied. The
Sugar Industry Authority (SIA) is in charge of handling specialized market arrangements
and of granting export licences.
Bananas are Jamaica's second largest agricultural
export, to a value of US$45 million in 1997. The main market for Jamaican bananas is the
United Kingdom. Bananas from Jamaica and other Caribbean countries have traditionally
enjoyed preferential access to the European Union under the Lomé Convention. The sector
could be affected by the ruling of the WTO Dispute Settlement and Appellate Bodies that
certain import practices by the EU contravene WTO rules.
Manufacturing
The 1997 MFN tariff on imports of industrial
products averaged 8.4%, with a peak of 30%. The highest tariffs are applied on products
where there is significant important domestic production, such as clothing and apparel
articles, leather goods, and soap, toiletries and detergents. The manufacturing sector has
a number of incentives, including income tax exemptions, and import duty concessions on
production for export outside CARICOM.
Textiles and clothing are the main earners of
foreign exchange in manufacturing. Some 84% of exports go to the United States, with
guaranteed or designated access quotas for a group of clothing products under the
framework of the Bilateral Textile and Apparel Agreement signed between Jamaica and the
United States in 1994. The Agreement applies to textile manufactured products of cotton,
wool, or man-made fibres. Quotas are applied on 20 products grouped in eight categories,
and are generally not filled. Most companies benefiting from these programmes operate in
Free Zones, particularly the Montego Bay Free Zone. Jamaica also has a textile and
clothing arrangement with Canada, dealing with managed access under a quota system for
underwear.
Mining
The mining sector is the second most important
generator of foreign exchange, after tourism; its contribution to GDP was 9.4% in 1996, up
from 8.8% in 1992. Bauxite and alumina production accounted for over 50% of Jamaica's
merchandise exports, generating foreign exchange earnings of US$ 726 million, in 1997.
Other mining products of importance include non-metallic materials, such as
limestone/lime, marble and gypsum. However, as a capital-intensive activity, the sector
employs only about 6,000 people. There are no government controls on mining production,
and prices are market-determined. Although there are no restrictions on the importation or
exportation of minerals, all exports of minerals require a permit from the Ministry of
Mining.
Services
The services sector is the largest and fastest
growing in the Jamaican economy. It accounts for over 55% of GDP (including government
services) and employs around 60% of the total employed population; tourism receipts are
almost equal to those from merchandise exports (US$ 1.4 billion). Activity in the sector
has been largely liberalized, with few restrictions remaining. Market access is relatively
open in most of the services sub-sectors; national treatment applies for providers of
services in most areas. Financial services and telecommunications have undergone major
reforms in the past years, with now a strengthened regulatory framework. In
telecommunications, privatization had led to a temporary monopoly in the provision of
basic telephony services, which is expected to be dismantled by 2013.
Under the General Agreement on Trade in Services
(GATS), Jamaica scheduled "horizontal" commitments regarding commercial presence
and the movement of natural persons for all sectors included in its Schedule. Specific
commitments were scheduled in business services (including professional services, computer
and related services, research and development services, real estate and other business
services); educational services; financial services; health related and social services;
tourism and travel-related services; recreation, cultural and sporting services; and
transport services. Jamaica presented a Schedule of Specific Commitments in the
Negotiations on Telecommunications. Jamaica also submitted an offer in the Negotiations on
Financial Services. The commitments in professional and other business services, including
computer services generally accord national treatment; employment of foreigners
("presence of natural persons") is subject to the relevant domestic legislation.
For some services, (e.g. tax agents) an economic needs test may be required. There are no
broad restrictions with respect to national treatment: total foreign ownership is allowed
in all sectors. The last area where foreign ownership was limited, insurance, was
liberalized in the WTO Negotiations on Financial Services, concluded in December 1997.
Conclusions
Jamaica's economy has undergone a dramatic process
of liberalization and deregulation since 1985, particularly during the 1990s. The
financial crisis of the mid-1990s has, however, contributed to a recession out of which
the economy is only now beginning to emerge. Dependence on a limited number of exports and
markets, and on tourism, keeps the island's economy highly vulnerable to both domestic and
external shocks; in this context, the rising domestic cost structure and adjustment to
changes in external markets for textiles, clothing and bananas are cause for possible
concern. Jamaica needs both domestic economic stability and open access to markets for its
exports in order to progress.
Government
report Back to top
TRADE POLICY REVIEW BODY: JAMAICA
Report by the Government
Background
Jamaica is an independent, English-speaking Caribbean island which has a
total area of 10,990.5km2. It forms part of the greater Antilles comprising
also Cuba, Hispaniola (Haiti and the Dominican Republic), and Puerto Rico. The population
of Jamaica is estimated at 2.5 million with a work force of 1.1 million. Jamaica since its
independence in 1962, adopted, as its form of government, a parliamentary democracy based
on the Westminster model.
There have been several phases to the countrys development.
Jamaica was under Spanish rule from 1494 to 1655, and subsequently under British rule from
1655 to 1962. For more than 180 years after 1655, Jamaica was primarily a plantation
economy based on the cultivation of sugar cane and export of sugar using slave labour.
With the abolition of slavery in 1838 and the decline of sugar, until the 1940's, Jamaica
progressively diversified into the production of other export crops such as coffee, cocoa,
logwood, bananas and citrus. Tourism became an increasingly important industry after the
turn of the century. From the 1950s, and for nearly 35 years, bauxite mining and alumina
production was the islands most important earner of foreign exchange. In 1985, it
was surpassed by tourism. During the 1950s and 1960s, economic and trade policies were
designed to promote import substitution for domestic consumption and export promotion with
the emphasis on labour intensive industries. In the 1970's, Jamaica continued on the path
of a mixed economy but with increased state participation.
Since the 1980's and throughout the early 1990's, Jamaica underwent an
accelerated programme of structural adjustment reforms to adapt to the global trend toward
trade liberalization.
The reforms consisted of the programme of privatization and divestment
which facilitated the deregulation of sectors of critical development importance such as
agriculture, tourism, transportation, banking, manufacturing and communications. These
have resulted in the liberalization of markets, the elimination of price controls and
subsidies, and the reduction and removal of tariffs and non-tariff barriers to trade.
Other measures included a simplification of the tax system, financial sector reforms to
enhance the prudential and supervisory role of the Bank of Jamaica, and the strengthening
of monetary policy .
The economic development of Jamaica, classified as a small economy, has
to be viewed, in part, in the context of the constraints placed upon it by its small size,
population, markets, and limited range of resources. Countries the size of Jamaica tend to
be high cost producers in both the manufacturing and agricultural sectors. They are also
externally propelled economies because of their high degree of openness. The impact of
global economic fluctuations is felt more intensely in a very small country and this
compounds economic vulnerability. Jamaica is continually striving to improve its level of
international competitiveness, but it is challenged both by its geography and the new
international trading environment in which it must now function.
Recent Economic and Trade Environment
Prompted by the emergence of an increasingly competitive global economy
and sluggish domestic economic growth, the government adopted, in March 1996, a National
Industrial Policy (NIP) outlining the range of policies which will serve to underpin the
current process of domestic macro-economic adjustment and recovery. Recognizing the
pivotal role of the export sector to the countrys development, the NIP emphasizes an
aggressive export-oriented, private sector-led development strategy coupled with a
programme of efficient import substitution. This outward-looking approach has been adopted
as a means of facilitating Jamaicas integration into the regional and global
economies by way of ensuring that the requisite conditions are in place to facilitate a
swift response to the new requirements of global competitiveness, as well as guaranteeing
Jamaicas ability to implement the commitments undertaken in regional, bilateral and
multilateral trade negotiations.
The main components of the NIP include (a) macro-economic policy aimed
at creating the basis for growth in a stable environment; (b) an industrial strategy aimed
at investment and trade promotion and the development of supporting physical, economic and
human infrastructure; (c) social policy aimed at poverty alleviation and (d) environment
policy aimed at ensuring the sustainability of activities on land and in the oceans. Its
implementation period spans a course of fifteen years and is characterized by three
inter-locking phases each beginning in 1996.
Phase I, 1996-1997, seeks to establish a Social Partnership between the
government, business and labour in the short term. Phase II, 1996-1998, intends to achieve
the medium-term strategy of growth and stability. Phase III, the long-term strategy, ends
in 2010 with the overall achievement of sustainable export growth within a stable and
predictable macro-economic environment.
Five strategic industry clusters drawn from the services, science and
technology, manufacturing and agricultural sectors have been identified as possessing the
required dynamism which will serve to propel growth in the overall economy. Within each
cluster one or two leading industries have been targeted as growth poles in
the economy. These growth poles - tourism, shipping and berthing, apparel,
agro-processing, minerals, bauxite and alumina - exhibit significant potential for export
growth and expansion. Although it is recognized that export potential still exists in the
more traditional agricultural sector, emphasis is now being placed on the human
resource-based services sectors such as tourism, entertainment, telecommunications,
shipping and berthing, and informatics (and the synergies among these sectors) as new
growth sectors. The decision to target the services sector as the catalyst for economic
development stems from the fact that services are expected to play an increasingly
dominant role in world trade. Jamaicas primary service sector, tourism, is expected
to continue to exhibit overall growth and improvement due in large part to the drive
toward product enhancement and diversification within a context of sustainable
development.
Trade Performance
Although the NIP was implemented in March 1996, the expected growth in
the export sector was not realized for reasons such as, inter alia: (a) high
financing and operating costs; (b) increased competition from imports, and (c)
drought.
Merchandise trade
The value of total merchandise exports for 1997 remained constant at
US$1, 387.6 million, reflecting an increase of 0.1% over 1996. Merchandise exports
contracted by 3.5%, or US$49.9 million in 1996 over 1995. This performance contrasts
sharply with the three previous years when export growth during 1993-1995 averaged 11.1%
per annum. Merchandise imports increased by 6.5% moving from US$2,916.4 million in 1996 to
US$3,106.7 million in 1997. This increase in imports contributed largely to the widening
of the trade deficit which stood at US$1,719.1 million. Total merchandise trade for 1997
increased by 4.4% over the 1996 figure of US$4,303.3 million to reach US$4,494.3 million.
Traditional and non-traditional export performance
The lack of export growth in 1997 was attributable to the negative
effects in the agricultural sector of a year-long drought which resulted in a reduction in
agricultural production. This reduction led to an increase in the price of produce for the
local market which led to a diversion of some products from the export market to the
domestic market. Another reason for the poor export performance was the decline in export
earnings from, inter alia, the apparel sector and chemicals and chemical
products.
Traditional domestic exports
In 1997, the value of domestic exports of traditional products increased
by 4.1% to reach US$948.1 million up from US$910.9 million for 1996. This increase in
domestic export earnings was attributable to an increase in earnings for a few products
namely alumina, bananas, coffee and coffee products and rum which increased by 7.6%, 2.0%,
7.7% and 5.7% respectively. With respect to other traditional exports, earnings from sugar
and bauxite decreased as a result of a decline in the volume of exports of these products.
Net earnings from the bauxite/alumina sector, however, were estimated at
US$335.5 million for 1997, representing an increase of 0.8% over the 1996 total of
US$332.7 million. Although the volume of banana exports fell by 10.3% to 79,709 tonnes
from 88,917 tonnes in 1996, earnings increased by 2.0% to US$45 million consequent on a
23.9% increase in the price per tonne on the European market from US$456 per tonne in 1996
to US$565 in 1997. Therefore the increase in export earnings for bananas resulted
primarily from the increase in price per tonne for this product.
Non-traditional domestic exports
Domestic exports of non-traditional products totalled US$406.9 million
representing a decline of 6.6% over total exports for these products in 1996. Exports of
miscellaneous manufactured products accounted for approximately 57% of total
non-traditional exports in 1997. Apparel was the chief earner of foreign exchange in this
category of exports
The apparel sector
Over the years, the apparel sector has been one of Jamaicas
leading non-traditional exports. This sector exhibited robust growth between 1991-1995 and
accounted primarily for the positive performance of Jamaicas non-traditional export
sector. In 1991 export earnings from the sector amounted to US$301.8 million. By 1995
export earnings increased by 92.4% to US$580.9 million. In 1996 the total value of apparel
exports was US$538.2 million representing a decline of 7.3% over total earnings for 1995.
The rate of growth contracted marginally the following year when exports declined by 0.3%
over total exports for 1996 amounting to US$536.6 million in 1997. This is in sharp
contrast to the average annual growth rate of 18% for the apparel sector between
1991-1995.
The apparel sector began to suffer reversals in 1996 due to competition
from Mexican apparel producers since the implementation of NAFTA, the on-going process of
liberalization of the global textiles industry consequent on the phasing out of the
Multifibre Arrangement (MFA), and the macroeconomic environment within which local
manufacturers have operated. This led to the closure of approximately 23 factories and a
reduction in the level of investment in the sector since 1996.
The apparel sector is now benefiting from a programme designed to
strengthen its international competitiveness through cost reduction, industrial
restructuring, training and productivity improvement.
Services
The share of services has increased dramatically moving from a level of
32.3% in 1980 to an average of approximately 53% in the 1990s. In 1996 services accounted
for 57.1% of total earnings increasing from 49% in 1991. Over the last five years,
1993-1997, Jamaicas net services exports moved from US$233.6 million in 1993 to
US$299.3 million in 1997 representing an average growth rate of 9.7%. Services exports
declined by 12.1% from US$340.6 million in 1996 to US$299.3 million in 1997. This decline
in net earnings was attributable to (a) stagnant earnings from foreign travel; (b)
increased levels of investment income outflows particularly through increased profit
repatriation by mining companies, and (c) increased foreign exchange outflows from other
services.
Although tourism is the primary services exports, the share of other
services such as transportation consisting of passenger fares from the national airlines
and port disbursements for the use of the increasingly important cargo transhipment
facilities; data entry and processing, and the miscellaneous category of services
consisting of, inter alia, fees for various types of professional services have
been increasing steadily. The contribution of the entertainment industry to economic
development is difficult to assess and quantify. However, the contribution of this
industry is considered to be very significant and is increasing at a rapid rate.
Achievements under the NIP
Two years after the implementation of the NIP, macro-economic
stability has been substantially achieved. Reflecting the successful pursuit of a
strict monetary policy during the financial year 1996/97, inflation declined from a peak
of 80.2% in 1991 to 15.8% in 1996 down from 25.6% in 1995. By the end of the calendar year
1997 inflation fell to 9.2%. For the fiscal year 1997/98 to December, the rate of
inflation was 7.2%, a marginal decrease from the 7.5% recorded for the same period of the
1996/97 fiscal year. Nominal interest rates declined and the exchange rate is relatively
stable with fluctuations occurring within a narrow band around J$36.00 to the US dollar.
Local aggregate demand has been contained so that import growth slowed during the fiscal
year 1996/97. External trade, however, is still characterized by a large deficit of US$1.7
billion in the merchandise trade account for 1997. Macroeconomic achievements include a)
inflows of relatively high levels of private capital, and b) an increase in the Net
International Reserves (NIR) by US$271.3 million to US$692.6 million. A major objective of
subsequent budgets has been to build on the gains of the 1997/98 fiscal year. Projections
for the current fiscal year 1998/99 envisage the maintenance of a competitive exchange
rate; a lowering of the inflation rate to 6%-8%; the attainment of real GDP growth of 2-3%
and an increase in the NIR by US$118 million.
Progress has also been made with regard to the establishment of a Social
Partnership between the Government, the private sector and labour. The main
objective of the Social Partnership is the achievement and maintenance of sustainable
macroeconomic growth and development through a process of cooperation and coordination in
economic management and decision-making among the three major partners. Under this
tri-partite agreement, each party will undertake commitments in its respective area(s) -
the government - macroeconomic management; the private sector - prices, and the trade
unions - wages - with a view to obtaining the aforementioned objective.
Negotiations on the Social Partnership are currently being conducted on
a sectoral basis. A Memorandum of Understanding (MOU) has been concluded between the
Government, the bauxite/alumina companies and the unions and is now subject to
ratification by the workers. Indications are that the workers will ratify the MOU. A
similar Memorandum of Understanding has also been reached between the Jamaica Public
Service Company, the electricity supplier, and the unions. It is envisaged that other
agreements will be concluded in other sectors. It is expected that these agreements will
be a first step toward achieving a national social partnership.
Government continues to lend support to the private sector in its effort
to build international competitive advantage particularly in those sectors which will
serve as catalysts for the modernisation of the economy and diversification of the
production and export base. Under the NIP various initiatives have been undertaken by the
Government to re-examine and restructure the incentives regime with a view
to implementing a more flexible and transparent incentives programme. Measures taken to
improve the incentives regime include the extension of the Export Industry Encouragement
Act (EIEA) to grant tax relief to firms exporting a minimum of 5% of their output; the
amendment of the Jamaica Export Free Zones Act to allow for private designated free zones
outside of the existing free zone area; Motion Picture Encouragement Act is to be amended
to extend beneficiary status to musicians and providers of motion picture facilities; low
interest financing under the Export-Import Bank facility; the elimination of tariffs on
non-competing imported raw materials and capital goods, and the strengthening of the
Modernisation of Industry Programme. These pieces of legislation are designed to promote
investment, productivity, international competitiveness and industry parity with
competitors from other countries enjoying similar benefits.
The institutional framework within which the private
sector will operate is currently being re-organized. The supervisory role of the
government agencies and the mechanisms to facilitate public-private sector consultation
are being implemented. Nine (9) Industry Advisory Councils have been established under the
NIP and will serve as fora for discussions on sector-specific issues and on the
appropriate economic and trade policy measures to be implemented in order to facilitate
sectoral and overall growth and private sector integration into the economy. This will
provide the business sector the opportunity of having a direct input into the formulation
of trade and economic policy. Allied to this is the public sector modernisation programme
geared toward improving the productivity, efficiency and management capability of
government and para-statal institutions.
Other developments regarding the strengthening of the institutional and
regulatory framework within which businesses will operate include the review of the Fair
Competition Act; a revision of the Companies Act; the establishment of the Office of
Utilities Regulation to regulate the public utilities sector; strengthening of the Jamaica
Bureau of Standards in its measurement and quality assessment systems and financial sector
reform and adjustment.
An integral factor in Jamaicas industrial development is the
intrinsic role of investment in upgrading and expanding production methods
and facilities in research and development infrastructure; marketing and distribution;
technological advancement and innovation and the application of new business strategies
and support infrastructure in human and technical resources and science and technology. In
order to attract the requisite level of investment needed to spur economic growth, a
liberal foreign investment regime has been implemented representing great strides over the
last twenty years - the 1970's and 1980's - when the climate for foreign investment was
very restrictive. Numerous measures which once inhibited foreign investment such as the
Foreign Exchange Control Act, and the list of areas reserved for local investment only
have been eliminated. Consequently, Jamaica now has no legal impediment to direct foreign
investment and applies the principle of national treatment to foreign investors.
Social and environmental policies to complement the
industrial policy have also been developed. The government has developed a social agenda
addressing important issues of education and training consistent with the overall strategy
for human resource development.
Given the countrys high dependence on its natural resources,
particularly in the tourism, mining and agricultural sectors, emphasis is now being placed
on sustainable economic development as a means of effectively integrating environmental
concerns into economic planning thereby achieving a balance between economic development
objectives and those of environmental preservation.
Conclusions Back to top
Jamaica has embarked upon an irreversible process of market
liberalization. With the adoption of an export-led growth model attempts are being made to
create an environment conducive to attracting and increasing investment, fostering private
sector growth and increasing levels of productivity. The long-term policy directions of
the industrial policy is the sustainability of high growth through investment promotion,
particularly, the dynamic and competitive export clusters. However, in order to achieve
these growth targets, efforts will have to be aimed at (a) a further lowering of interest
rates; (b) promoting financial sector consolidation to stimulate long-term investment; (c)
promoting greater private sector productivity and efficiency; (d) upgrading the economic,
physical and social infrastructure, and (e) implementing WTO-consistent sector-specific
incentive schemes.
Jamaicas ability to strengthen and deepen the push toward export
growth will also depend to a large extent on the outcome of intra-regional negotiations on
the CSME and extra-regional
negotiations on the Lomé Convention, FTAA, the ACS, CARICOMs
negotiations with sub-regional blocs such as the Andean pact, the CACM and individual
countries such as Colombia, Venezuela and the Dominican Republic. These negotiations have
been characterized by the process of `open regionalism, the dismantlement of
protectionist policies, the reduction or the elimination of tariff and non-tariff barriers
and the creation of an expanded export market base for products of member states. The
issue of NAFTA parity is another matter of concern to Jamaica and by extension the CBI
region in terms of the trade diversionary impact on the local apparel industry as a result
of the more advantageous market access conditions afforded to Mexico under this agreement.
A market-oriented economy will serve to underpin Jamaicas
participation in these negotiations and, as a corollary, will consolidate the thrust
toward export growth. Open regionalism will assist in attracting foreign investment;
facilitate foreign market penetration; encourage intra-sectoral specialisation, increased
levels of productivity and will aim to foster the growth of reciprocal trade.
Ministry of Foreign Affairs and Foreign Trade |
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