I welcome the convening of this Third Global Review of Aid for Trade which focuses attention on the very important issue of the impact that Aid for Trade funded programmes and projects can have on the economic prospects of developing countries, including small, vulnerable economies like Jamaica. Trade, i.e., imports and exports of goods and services, is indispensable to small, developing economies. It is a fact that Jamaica is an open economy. On the export side, Jamaica has long benefitted from non-reciprocal market access arrangements with principal trading partners.  However, trade liberalization, in the domestic market, has been undertaken by Jamaica on a unilateral basis through structural adjustment, multilateral rounds of liberalization and in our regional free trade arrangement, CARICOM. Since the 1990s, as a member of CARICOM, Jamaica has also been engaged in negotiating bilateral free trade agreements and with the ACP Caribbean Forum (CARIFORUM) has also negotiated the Economic Partnership Agreement with the European Union.

Despite its openness, Jamaica has reaped limited benefits from liberalization. In fact, the high degree of trade openness (90%) masks the relatively poor performance of exports to imports, as well as the high degree of concentration of specific commodities in overall trade.  In 2010, the total value of merchandise exports accounted for 24 per cent of GDP compared with 43 per cent of GDP in 2008. There is also a high degree of concentration with respect to merchandise imports, as mineral fuel imports accounted for approximately 30 per cent of total imports in 2010. As a net food importing developing country, food items are also a significant contributor to imports. Thus, food security and the promotion of domestic agriculture remain priorities for Jamaica, especially with rising food prices.

It has also long been recognized that openness and market access alone are not sufficient factors for expanding trade. Where we have had enhanced market access, without the capacity to produce for trade, this has been of limited value. It is, therefore, not surprising that the country has a large trade deficit with imports of goods outstripping exports by almost 4 to 1. As a small economy, export performance is critical to Jamaica’s economic growth and job creation prospects.  It has been argued that trade in services balances out the deficit.  We have not found this to be so, especially in recent times.  The fact is that economic growth has stagnated and the export of goods and services has not expanded to levels that would increase employment and lead to sustained economic growth.  Investment levels have been low. Tourism is also a fragile and vulnerable sector. Other services sectors are actually in the developmental stages even though services account for the largest share of the GDP. Jamaica is also impacted by competition from larger and cheaper producers both in the domestic and export markets.

There are inherent structural problems in the Jamaican economy which are a deterrent to achieving meaningful gains in trade. These structural challenges include our small size; high debt to GDP ratio which is manifested in resource constraints; vulnerability to natural disasters including hurricanes, droughts and climate change which can wreak havoc on the country’s infrastructure and cause reduction in economic activity. Further, Jamaica’s vulnerability to external economic shocks was reaffirmed by the impact on the country of the recent global financial crisis. This resulted in the closure of three alumina refineries.  Bauxite & Alumina exports account for approximately 50 per cent of total merchandise exports, therefore the fallout in production and exports in this industry was the primary reason for the decline in the share of exports to GDP over the last three years by some 4%.  In addition, our high dependence on imported fuel, as a non-oil producing country, leaves the country vulnerable to price fluctuations which impacts the entire economy and contributes to the lack of competitiveness.  In that regard, it should be noted that several initiatives are being undertaken to address the issue of the high cost of energy.

Given this reality, Aid for Trade has a lot to offer countries, even those such as Jamaica, which are already trade-oriented. For Jamaica, Aid for Trade is an essential element that can strengthen our ability to adjust to changes in the trading environment, build productive capacity and enhance our competitiveness in the production of goods and services, with a resultant increase in exports. This would ultimately lead to growth in the economy and create job opportunities through removing the binding constraints to export, such as inadequate infrastructure, a weak facilitating framework, and the need for modernization of our sanitary and phyto-sanitary regime as well as building resilience to shocks in the built and natural environment as identified in the country’s Growth Inducement Strategy 2011 and the Vision 2030: Jamaica National Development Plan.

Aid-for-Trade is predicated on the understanding that improved market access opportunities do not automatically translate into increased investment, production and exporters penetrating global markets.  It is for this reason that Jamaica has mainstreamed trade into its national development plan – Vision 2030, in order to effectively utilize limited funds and to bring coherence and cohesion to trade projects. Jamaica has also worked with the IDB to formulate a National Aid for Trade Strategy, a shortened version of which is being circulated here at the Third Global Review of Aid for Trade.

With the IDB, we are aiming to have the official launch of the Strategy early in September 2011. In our Aid for Trade Strategy, Jamaica has identified key priorities for assistance which are network infrastructure; competitiveness; and export diversification and trade development. These pillars are critical to building trade capacity, which is the raison d’etre of Aid-for-Trade, and will help us to benefit from market access opportunities. Jamaica’s export sector has been recognized as having significant earning potential under the aegis of “Brand Jamaica” which can impact greatly the country’s economic development. This is also reflected in our National Aid for Trade Strategy. 

In addition, Aid for Trade could assist Jamaica in focusing on the following actions in order to ensure that Jamaica remains in a position to access markets, take advantage of trade agreements and remain an active player in the international trade arena:

1.       Assist Jamaica in focusing on priority areas to address trade-related infrastructure constraints;


2.       Establishment of Economic Zones;


3.       Establishment of a  Logistics Hub


4.       Climate Change Adaptation Programme


5.       Promoting food security


6.       Sustainable development of the Agro-processing industry


Another major constraint to Jamaica’s development is its high debt burden. In fact, this is cited as the country’s main economic problem. Jamaica emerged out of the decade of the 1980’s with a heavy external debt burden which has increased over the years with a significant contribution from domestic debt.

For the financial year 2010/2011, the total debt to GDP ratio was 128.3% of which external debt was 62.2%. The country has made tremendous strides in terms of its debt management, through the Debt Management Unit which was established in the Ministry of Finance in 1998.  Over the next two years, our aim is to reduce the debt to GDP ratio to below 100%.

It is also recognized that our indebtedness has contributed to Jamaica’s historically low growth rates.  We are thus pursuing a number of reform programmes aimed at fostering and accelerating economic growth. I should add that the principal objective of Jamaica’s IMF Stand-by Agreement (SBA) is the reduction in the country’s debt burden. This means that our fiscal space is limited, with attendant implications for Aid for Trade resources. This SBA includes several strategies and initiatives aimed at addressing the high level of debt by putting the country in a position to reverse the upward trajectory debt stock in the medium term. In addition, a series of reforms are already being implemented, these include; the fiscal responsibility framework, which seeks to ensure the prudent management of fiscal accounts, and the gradual elimination of waivers and ineffective incentives.

It is also important to recognize that the trade imbalances (trade deficits) recorded by Jamaica are a major source of the country’s debt problem.  Any initiative geared at alleviating this trade imbalance, through improved export performance, would, therefore, serve to reduce the burden of external debt financing. This would be manifested in two ways:

·          reducing the trade deficit would reduce the need for new debt and

·          increasing exports or reducing imports would imply higher GDP levels which also serves to reduce the Debt-GDP ratio.

Having said this, addressing the constraints of indebtedness and advocacy for Aid for Trade in terms of its relevance to our development, are not mutually exclusive. Despite our small size and high indebtedness, we are classified as a middle income developing country. This belies the daunting challenges facing the country. Jamaica, historically, has been preference dependent and the country is still reeling from the steady erosion of preferences.. Further, tariff revenues, which have declined over the years, still make a significant contribution to the budget.  Debt reduction requires growth and, as an open economy, Jamaica must trade to realize growth. In addition, countries like ours face supply side constraints, low productivity, limited productive capacity, inadequate economic and trade related infrastructure, and high energy costs, all of which affect our ability to compete or to increase exports. Importantly, in recent times, Jamaica has experienced a shortfall in trade finance and other financial flows. For example, in 2010, Jamaica experienced a decline of nearly 5% in new Official Development Assistance by multilateral and bilateral partners. Taken together, these issues render us vulnerable to further marginalization in world trade.  The Government of Jamaica has established trade as a national priority and Aid for Trade is seen as a contributing factor in strengthening trade capacity and expanding exports.

We recognize that funding through Aid for Trade will have to be within our limited fiscal space and that grant funds are limited.  Nevertheless, the Aid for Trade Initiative is able to undergird a wide gamut of activities within a coherent trade strategy. Undoubtedly, it can be an important component in Jamaica’s thrust towards trade expansion and the enhancement of the country’s competitiveness. The National Export Strategy was also developed in order to facilitate the improvement of our export performance and market penetration. We are also about to undertake a review of our trade policy, adapting it to current realties and to ensure coherence in trade policy and programmes. There is no doubt that Aid for Trade can and should play a major role in all these efforts by garnering financial resources and other trade related technical assistance in a coordinated and coherent manner. Further, we attach great importance to the building of capacity and knowledge transfer which will facilitate the development of the framework to increase exports. Therefore, Jamaica views Aid for Trade as critical to these efforts and to supporting our development objectives.

I invite you to review our brochure on Jamaica’s National Aid for Trade Strategy.

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