Dear Editor,
So our President has out of thin air conceded that Guyana will be willing to sign a goods-only EPA (SN Sep 7, 2008). However, any goods-only EPA must include asymmetric provisions. Guyanese goods just cannot compete under an agreement with full reciprocity. Therefore, President Jagdeo should clarify this.
But what kind of goods are they talking about: sugar and rum? The economy has to move beyond sugar if it is going to industrialize and develop. Any future agreement must codify a clear developmental vision for Guyana, a vision moreover which is embedded in a comprehensive and transparent industrial strategy framework. At a minimum, therefore, any agreement must protect a potentially symbiotic relationship between manufacturing value added and agriculture. The EPA as currently presented requires Guyana to specialize in production activities that will keep it poor while we import the elegant and sophisticated European goods. This is a recipe for permanent underdevelopment.
At least fifteen years of protection for a value-added food processing industry will be necessary. It is important to protect this industry given the fact that Guyana already has a large food market within Caricom, which imports at least US$3 billion annually in food. A goods-only EPA without asymmetric provisions will jeopardize this market and thwart Guyana’s industrialization and development efforts. This country cannot continue to depend on resource extraction and outmoded production activities such as sugar. That is why I believe the world situation presents a favourable circumstance for Guyana to enter aggressively sugar-based ethanol, which can present the initial thrust (and surplus) for that industrialization. Our government, however, is busy holding seminars on ethanol while other small countries have jumped on it.
There should also be protection of at least fifteen years for other kinds of manufacturing such as furniture making and others which I am certain the private sector people can point out.
These are the kind of consultations in which the President should be involved. Instead, there was a charade at the Chinese-built convention centre, a monument of mendicancy and a failed aid-driven economic strategy of the Jagdeo administration. A strategy, furthermore, which is based on the flawed premise that stabilizing the economy alone, building schools (without adequate teachers), pursuing trivial aid projects, etc, will automatically fix the production bottlenecks that exist. Development requires that the country transform its production structures; foreign aid and remittances have not done that and will not do it. Production transformation does not take place automatically when a country is faced with serious market failures and supply-side bottlenecks.
These bottlenecks have to be corrected within the context of a supply-side industrial strategy framework. This President and the PPP government never had one. It is therefore strange that the President suddenly, last year, woke up to the reality that the EPA can be harmful to Guyana’s development. Nevertheless they gambled US$200 million in sugar – a diminishing returns production activity which secures a vote bank of generations of low-skilled workers – which has passed its prime many generations go. But we know that skills upgrading is essential for development, yet the government is keen on preserving sugar which mostly depends on a mass of unskilled workers and preferential prices.
Guyanese have long developed that taste for foreign goods, so imagine what will happen when our market will be flooded by elegantly packaged European goods. This taste pattern has to be disciplined by a well specified industrial policy mechanism. But such a policy framework cannot succeed in an acrimonious political environment; thus therein lies another charade at the Chinese-built monument of mendicancy.
Therefore, I fail to see how one consultation session can address the long-term needs for a proper trade agreement that will affect the lives of current and future generations. The PPP government is responsible for not addressing these concerns during the negotiation stage of the EPA. Was the President too busy seeking foreign aid to spend on dubious projects (to present a sense of success) and advice from economists who believe blanket trade liberalization is necessary for development?
It is well known that aid has not done the developmental trick in the tropics. In Guyana’s case aid (along with remittances) has allowed the government to project a false sense of success and postpone the serious policy decisions relating to long-term economic development. That is why the President is in this dilemma today scrambling to come to grips with the EPA. They never thought about it before last year, fifteen years after taking over government from the PNC.
Trade liberalization has to be sequenced properly; if it is not done properly then Guyana can specialize in being poor while the rich specialize in being rich. In other words, static comparative advantage theory on which globalization is based, is not very good for Guyana’s development. One thing is clear, Guyana is not yet ready to face the competition of European (and Chinese, American, Mexican, etc) goods. It is sad our government did not pick this up fifteen years ago so they could have built these into the EPA of today.
The items that Guyana currently produces will not add anything to development but only maintain the current low real income level (assuming of course zero population growth). There has to be a breathing space in which the government and the opposition can put together a national industrial strategy for development, which is not the same as the pedantic National Development Strategy. I hope this strategy will be reflected in a revised EPA.
I hope the government will finally realize that the skills set required to run a country is fundamentally different from that required to win an election in an ethnically bi-communal society.
Yours faithfully,
Tarron Khemraj
