Years ago, when I was at the University of Aberdeen, I remember chatting with one of my Professors about ‘globalization.’ I was trying to make the point that our economies and societies are so incredibly interconnected in our modern world. He responded in his typically aloof way and asked me what I meant by ‘globalization.’ His view was and probably still is that so-called ‘globalization’ always existed. More and more research is proving that there was always trade among nations. There was always some movement of people among countries. So perhaps he is right to ask somewhat rhetorically – what is so different about our situation today?
My argument is that the level of social and economic interconnectedness is far greater now than at any time in recorded history. In terms of people's movement, I remember reading that about three million people travel by air every day and much of that air traffic is international - not to mention land and sea travel. When there were the bird flu and swine flu outbreaks some years ago, it was staggering just how quickly it spread internationally because of how fluid movement between countries has become.
From an economic point of view, it is so easy to see just how interconnected and interdependent markets have become every day when you read the news. That fact became real for me back in 2008 when the US government decided to bail out insurance giant AIG. We heard that not just US investment banks depended on AIG’s insurance contracts (credit default swaps in particular) but so did European banks and other financial institutions worldwide. Some said that, unlike Lehman Brothers, e.g., if AIG went, the entire global system faced collapse because of just how interconnected everything had become. Similarly, if China were to stop propping up the US economy by not buying US debt, yes, the dollar would collapse. Still, China would also lose its biggest export market and face internal socio-economic turmoil. We are all connected in a way not seen before.
The same principle applies to smaller economies such as ours in the Caribbean. Some would say that given our small size, we are much more vulnerable to economic shocks than bigger economies, and we need to get along with our regional neighbors to survive. This takes me to a recent article in the Barbados Advocate by John Blackman entitled – Straight to the Point: Trinidad, Benefitting from CARICOM.
Blackman makes the point that “a study of trading in CARICOM would reveal that Trinidad is perhaps the greatest beneficiary in terms of trade” in that Trinidad and Tobago exports far more to its Caribbean neighbors than it imports. The writer then quotes statistics to convincingly support his point with regards to Barbados and Jamaica in particular. The main contention is understandably the lower energy prices that Trinidad manufacturers enjoy compared to their CARICOM neighbors. Blackman goes on to quote a Sunday Gleaner (Jamaica) article from August 10, 2011, which explained that “…Such subsidies give Trinidad’s producers an insurmountable advantage and are incompatible with the fundamental principles of fair trade within a common market. Trinidad’s producers now completely dominate Jamaica’s market, while Jamaican producers have a minimal presence in theirs. How can it be rational for our Government to ask us to sacrifice revenues we desperately need for our schools, our hospitals, and our security forces to allow subsidized Trinidadian goods to drive Jamaican goods produced in Jamaican farms and factories by Jamaican workers out of the Jamaican market?”
While there are probably other factors to explain Trinidad and Tobago’s competitive advantage, we should not turn a blind eye to our CARICOM neighbors. Our neighbors’ economies are in far worse shape and given the level of interdependence. It is not in Trinidad and Tobago’s long-term interest to look away. Trinidad depends on energy exports, and with decreasing demand from North America, we will look to CARICOM more than before (ALBA aside). Furthermore, it is hard to exaggerate how non-energy exports are dependent on the CARICOM market. Ask everyone from Blue Waters to SM Jaleel, Holidays Foods, Bermudez, Neal, Massey, etc. To put it simply, the more our neighbors suffer, the more Trinidad and Tobago’s economy will continue to weaken. Again, I do not blame our political leaders. We, as Caribbean people, need to understand what is really at stake. We need to wake up.
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My name is Derren Joseph, and I love my country. Despite its challenges, I continue to have the audacity of hope that we will enjoy a brighter tomorrow.
Read more on derrenjoseph.blogspot.com.
Note: The blog that used to be here is now at https://www.mooresrowland.tax/.