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Agricultural exports continue to decline in Trinidad and Tobago

08 April 2012

Despite the efforts of the Trinidad and Tobago government to diversify the economy, figures in the latest WTO Trade Policy Review (TPR), published in March 2012, show that the country’s economy remains dominated by oil and gas (which account for three-quarters of exports and half of government revenue) while agriculture continues to decline. In 2010, agriculture accounted for only about 0.6% of GDP and less than 4% of employment which, the TPR concludes, indicates ‘the relatively low productivity found in this sector’.

Although agriculture accounts for 13.7% of non-oil exports, ‘it is concentrated in a few products, most of which are processed products rather than agricultural commodities’. These include (in declining order of value) sweetened or flavoured water (HS2202), cigarettes (HS2402) and baked bread (HS1905). ‘In many cases, such as tobacco, the raw material is imported and processed and the transformed product (cigarettes) exported.’ The main import is undenatured ethyl alcohol which, the TPR reports, is mainly ‘imported from Brazil, processed and exported to the United States at preferential tariffs under the Caribbean Basin Initiative.’

The commodities that are produced domestically have changed substantially in recent decades. The former export crops of coffee, cocoa and sugar are now non-existent or much reduced: ‘production of traditional crops like cocoa beans and coffee all declined to current levels several years ago, with sugar production following suit in the early 2000s.’ The value of sugar exports fell to US$2.2 million in 2009 (from US$37 million in 2006). Exports of sugar are mainly now to other Caribbean countries rather than the traditional European or US markets, as are flavoured beverages and cigarettes. Rum and beer, by contrast, are still exported throughout the world.

The TPR recognises that to some extent the decline in traditional exports can be attributed to preference erosion, but more fundamental contributing factors identified include ‘the small size of farms, uncertain tenure for many farmers, the small domestic market, and the decline in production of higher value crops like cocoa and coffee’.

Partly offsetting this decline in traditional export crops, there has been an increase in production of chicken (which now represents over half the total value of agricultural production) and pig meat, as well as a growth in production of pineapples and other fresh fruit. These products are mainly destined for domestic consumption, with production taking place behind relative high levels of tariff protection (average tariff on agricultural products is 20% compared with 6% for non-agricultural products, with some 93 exemptions to the CARICOM CET mainly for agricultural products). In addition to normal tariffs, for sugar and some other imports (including poultry until December 2006) surcharges are applied.

Despite the substantial support given to the agricultural sector (reaching a high equivalent to over half the value of agriculture’s contribution to GDP in 2007), the country imports most of its food and other agricultural products. Despite support policies which range from guaranteed prices for some products, through input and investment subsidies to low interest loans, the agricultural sector continues to decline. In the rice sector for example, despite an increase in the minimum prices paid to farmers by National Flour Mills and the leasing of land to producers, the number of rice farmers has fallen from 6,000 in 1992 to 1,500 in 2008, with the area under rice declining from 5,000 ha to 1,500 ha.

Editorial comment

Among CARICOM countries, Trinidad and Tobago (T&T) displays one of the highest degrees of product diversification in the food and agricultural sector. Early domestic trade reforms and entrepreneurship led to the emergence of a vibrant import-substitution industry, with processed and value-added products not only displacing imports but also penetrating regional markets.

This however occurred at the expense of primary agricultural production, including the production of agricultural commodities which could not compete for labour and increasingly for land resources.

The problems experienced by T&T illustrate one dimension of the so-called ‘resource curse’ whereby the positive effects of a major extractive industry are offset by other economic and political effects. Despite the relative wealth bestowed by oil and gas, the country’s increasing dependence on agricultural imports is a source of vulnerability. It has been affected by the recent global food price hikes: food prices rose by over 25% in 2008, contributing to a 12% increase in the retail prices index. Food prices rose by 39% in 2010 (partly as a result of drought) and transport costs also increased. While oil and gas support a comfortable balance of trade surplus, this shrank sharply in 2009 as world oil prices fell. This was exacerbated by an overvalued exchange rate which makes imports cheaper and undermines the export competitiveness of national production.

The focus of the TPR on land tenure and low productivity in small farms is well placed. A significant part of the solution to the problems of T&T agriculture is within the government’s purview. Both within T&T and in CARICOM, concerted action by governments in ‘getting the macro-economics right’ at home, in advancing aspects of the single market and economy regarding the liberalisation of agricultural labour, in eliminating the remaining non-tariff barriers for poultry meat and other meat products, and towards the creation of a harmonious ‘Single Market Regime’ for various CARICOM-produced products and commodities will contribute markedly in changing sectoral prospects. The recent unveiling by the T&T government of its new agriculture programme is expected to create the enabling environment for expanded production in key export and domestic food products.

However this requires getting to grips with the macro-economic effects of the dominant oil and gas sector. It would also require greater coordination among the heavily import-dependent CARICOM members over which sub-sectors will be protected in which countries.


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