For a New Trade Policy
What exactly are the elements of our trade policy? This is a question that should be occupying our policymakers from both sides of the political divide, rather their interminable wrangling. Our trade policy cannot be a mere ritual of tariff and subsidy manipulations but a coherent vision for a structural transformation of the economy.
Domestic and international trade volumes are the functions of an economy. Human, financial, technological, industrial, agricultural and political factors play their role in producing specialised surplus for trade. The structure of an economy and system of resource allocation determines whether a country will export low-end plantain-chips or become internationally competitive in high-end computer chips.
Success in gaining competitiveness in international trade is not simply a function of comparative advantage but an expression of a multitude of complex factors which help build competitive advantages in diversified range of products through acquisition of technological capability and human capital.
Despite claims from the trade policy orthodoxy that trade liberalisation results in specialisation and ultimately increases the efficient allocation of scarce resources, the issue of deliberately building competitive advantages is crucial. Identification of those products and processes which can deliver sustainable development from exports is of fundamental importance. Unleashing such potentials is a function of public and private sector synergy working to progressively grow from being ‘infants industries’ to highly competitive adults.
Liberalization creates a relatively open arena for those who have become stronger and can penetrate foreign markets or can defend domestic share of the market with relative ease.
The rest, including Guyana, are either cornered or eliminated from the market. Therefore, who, how and how much will be accumulated, produced and consumed makes perfect sense for heterodox economic thinking, which advocates social efficiency along with economic efficiency of resource allocations.
From a human development perspective, the analysis of a trade policy has to be undertaken to assess whether the policy has actually increased employment or not other than its impact on economic growth and trade to GDP ratio. Nowadays, some argue that the impact of trade policy on ‘sustainability’ in terms of environment and other social factors such as health and education, ‘empowerment’ in terms of employment creation, ‘equity’ in terms of distribution of opportunities and wealth, and ‘productivity’ in terms of human capital must be assessed. Such an assessment is conspicuous by its absence in Guyana.
The role of the state is vital for creating an environment for trade benefiting the people and is actually embedded in, apart from providing a stable macro-economic framework, the ability to envision, develop, and execute industry, trade, and technology (ITT) policies which are in sync with the larger economic development objectives of the state. There must be the creation of backward and forward linkages through inter-sectoral articulation and wage and skill increases through social articulation are keys for economic success with equity.
Harvard’s trade economist, Dani Rodrik, argues that economic growth can come from three sources – foreign borrowing, commodity boom in international market, and from economic restructuring and diversification into new products. For Guyana, a conscious decision is required to divert administrative and financial resources for diversification of products and destinations.
To do this, Guyana must focus on ITT policies and have an active labour policy. We need to identify a mix of products which can generate a higher proportion of increasing returns to scale. A good starting point for such thinking would be to focus on a combination of industrial, agricultural, and livestock sector. However, for such programmes, governments need to change resource allocations in a big way.
Another good proposal could be to earmark research and development subsidies for agro-food industries. However, these subsidies only make rich people richer if these are not reciprocal to the performance firms deliver in the domestic and international markets. With successful research and development efforts and as a result of both product and process innovations, Guyanese firms can join global value chains and global production networks in a better way.