Charges of unfair export practices raise policy issue of balance between agricultural production and value-added processing
13 June 2013
In April 2013, according to regional press sources, Jamaican manufacturers accused Trinidadian exporters “of violating trade rules by misrepresenting products as being of CARICOM origin, allowing them to benefit from lower customs duties and price advantages in the local market”. The accusations raised in the Jamaican parliament focused on the simple repackaging of imported raw materials and their relabelling as Trinidadian.
Food processing industry representatives in Trinidad and Tobago rejected these allegations, arguing that for products such as packaged peanuts, sufficient processing of imported nuts takes place to shift the product from one tariff heading to another and hence comply with the rules of origin applied under the CARICOM agreement.
The allegations and refutations come against the background of Jamaica’s widening trade deficit with the region, and Trinidad and Tobago in particular. Jamaican complaints over imports of packaged peanuts are just the latest in a series of disputes that have reportedly “strained commercial relations between the two countries in recent years”.
Significantly, oil- and gas-rich Trinidad and Tobago has significantly lower energy costs than Jamaica, with manufacturers reportedly paying 3 cents per kilowatt hour compared to 30 cents per kilowatt hour in Jamaica. This is seen as giving food manufacturers in Trinidad and Tobago “a huge competitive advantage”, particularly when processing imported raw materials.
Also in April, Jamaican Agriculture Minister Roger Clarke reiterated the government’s commitment to reducing food imports through the promotion of ‘agro parks’, where “basic infrastructure, such as irrigation, drainage, storage and packing house facilities” will be provided, alongside enhanced extension service. This is to be further supported by the development of “a proper marketing strategy for the agricultural sector”.
Editorial comment
There are long-standing complaints of Trinidadian companies importing raw materials, undertaking simple processing and packaging operations, and re-exporting within the region under preferential tariff arrangements. However, with rules of origin based on a change of tariff heading, these operations are invariably consistent with agreed rules of origin.
It has long since been recognised in CARICOM that, in view of supply capacity constraints, rules of origin permissive of the use of extra-regionally sourced raw materials are necessary. Some regional governments/private sectors have proved more adept at taking advantage of these provisions than others.
This, however, raises issues beyond the question of rules of origin, related to national strategies for the promotion of agro-food sector development, in a context where value-added processing can often generate more employment and greater ‘value added’ than the underlying agricultural activities.
The government of Trinidad and Tobago has an explicit policy orientation towards supporting the expansion of the manufacturing sector, including the food and beverage industry, through energy and air transport subsidies. This, coupled with the exploitation of rules of origin provisions, sees Trinidadian manufacturers of processed food and beverages dominating regional markets (ranging from processed meat products, through dairy products, to sugar-based products).
This poses serious challenges for other producers in the region and potentially raises competition issues. It can be argued that if free movement of agro-food products is to be promoted within the CARICOM single market, eventually common rules on state support to agriculture and agro-processing will be needed to avoid unfair competition. Discussions on this issue, however, are at a very early stage. But without commonly agreed rules on national support – and a willingness to enforce them – these types of tensions are likely to continue.
Even if common rules were established, this would leave the problem of enforcement, with current regional institutional arrangements being underdeveloped in this regard.
This issue is common across a number of ACP regions (e.g. the role of Mauritius in COMESA and potentially, in certain sectors, the role of Fiji in the Pacific). The EU could potentially offer some lessons in this regard, given the national flexibilities on state aid allowed within commonly agreed EU rules.
