Latest update March 19th, 2024 12:59 AM
Aug 24, 2016 News
By Kiana Wilburg
One of the crucial questions coming out of the debate on Guyana’s ailing manufacturing sector is whether it is possible for some level of protectionism to be had for local manufacturers without appearing discriminatory to other countries and/or infringing on some of the nation’s bilateral agreements.
Some Government officials have expressed great caution over the idea, saying that it involves too many risks.
But in the estimation of Foreign Affairs Minister, Carl Greenidge, protection is certainly possible without hurting international agreements. He noted, however, that it would call for a careful look at Guyana’s rules and regulations as well as its standards and enforcement of various forms of protectionism.
Greenidge explained that there are different types of protection, some of which include tariffs, quotas, embargoes, subsidies and administrative barriers.
The Foreign Affairs Minister explained that tariffs refer to a tax on imports, while quotas speak to physically limiting the quantity of imports. As for embargoes, he said that this is a ban on dangerous substances.
On the aspect of subsidies, Greenidge said that if a government gives financial support to domestic production, this gives the beneficiaries in the sector an unfair advantage over other competitors. He said that what a government may do is take action against the dumping of goods into the local markets by importers, at prices below their economic levels.
With regard to administrative barriers, Greenidge said that this mechanism makes it more difficult to trade, as one of the things it can seek to do is impose minimum environmental standards.
The Foreign Affairs Minister commented that countries may impose tariffs on goods in order to protect fledgling industries, and to give them a chance to become established. In order for such an argument to be defensible in Guyana’s case, he contended that an acceptable time limit will have to be set for those tariffs.
Greenidge also recorded his dismay with the fact that Guyana is importing goods such as roti and puri, tamarind balls, sugar cane juice, coconut water and water.
He said that normally, trade in such products which are primarily first stage processing would give local producers an advantage.
“However, we are witnessing these products entering Guyana as a result of several factors ranging from poor surveillance, to superior marketing and packaging by foreign competitors, and a more reliable delivery, as well as more competitive pricing by the said persons. It is also possible that a wider range of consumers with higher incomes are also influencing the trend by seeking a wider variety,” the former Finance Minister articulated.
He asserted that there can be little doubt that some manufacturers are worried and “rightly so” because some of the causes lie at their doorsteps.
“In negotiating trade agreements, the CARICOM negotiators normally identify those products which are so sensitive that we will not agree to negotiate access to our markets at all. In other cases we can also insist only to allow the importation if the access is phased over a period, during which we could try to enhance our capacity to compete.
Under the CARIFORUM-EU Economic Partnership Agreement there are such arrangements, with the restriction on some products being as long as 25 years. Obviously this cannot be applied to all potential imports which compete with our products.”
The Minister continued, “Clearly, more needs to be done to ensure that foreign suppliers do not get away with selling us goods of lower standard than our own manufacturers are required to meet. In a recent report, a consultant, Professor McKaig, suggested that foreign suppliers and domestic importers do not always adhere to the rules, and Guyanese Customs Administration neither makes nor enforces demands for safer, healthier or higher quality imports.”
He added, “It needs to be said that all states can demand adequate protection against potential health hazards in imports that may threaten the health of consumers, crops, and livestock.”
Greenidge noted that Guyana can impose more stringent and unified controls on international and local border crossings. But to do this in a manner that is defensible, the authorities would have to monitor and undertake surveillance of the prevalence of pests, diseases, and health hazards so that Guyana can have data required by trade partners, and information with which to manage health risks.
The politician said that the absence of a viable Sanitary and Phytosanitary or SPS system is at the core of the problem for SPS capacity building.
“Behind all of this is a need for our manufacturers to improve their capacity to compete. There are obvious constraints that need to be removed or attenuated. These include the cost and reliability of power, the cost of fuel, and the inefficiency at Customs and handling.”
Greenidge said that is for this reason that many economists emphasize the contribution of management efficiency, worker productivity and skill upgrading to improving cost/price competitiveness.
In addition, he said that they would often call for Government policy to pay more careful attention to the crucial role of non-price factors that are critical to winning and maintaining competitive advantages by firms in world markets.
Greenidge said that these include knowledge, skill, marketing and economic intelligence, product quality, production for specialized niche markets, management and organizational capabilities, and production flexibility.
“For the same reason there are calls for Governments in the region to look at industrial policy and options such as the use of international licensing as a means of ensuring that domestic companies can compete – by way of getting access to intangible assets, such as their patents, trade secrets, know-how, trademarks, or even their company name and logo, of foreign partners. Similar contractual agreements may include franchising, technical agreements, service or management contracts, and other variations.”
Greenidge noted, however, that, pre-1992; many of the imports causing concern now would not have been permitted, because there was the option of using tariffs. However, the economist said that it should also be noted that there existed specific policies to fill these needs, until the fiscal crisis made it difficult for the states to provide support to programmes that encouraged the type of extensive import substitution/replacement common at that time.
To be continued …
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