Guyana does not have a good case for waiver of the Common External Tariff on cement; this case will come back to haunt us with our rice exports

Dear Editor,

The Guyana Government has reportedly decided to waive the 15% Common External Tariff (CET)on cement imports from outside Caricom. This waiver has been in place since 2004, when there was a regional cement shortage. The main regional supplier, Trinidad Cement Limited (TCL), which manufactures cement in Jamaica, Barbados, and Trinidad, is opposing the continued waiver. It is arguing that there is no basis for the waiver.

In order to waive the CET, Guyana has to obtain the approval of the Caricom Council for Trade and Economic Development (COTED). A CET waiver is granted in three situations:

1. When a product is not produced in Caricom;

2. When there is a shortage in Caricom; and,

3. When a product being produced in Caricom is below Caricom standard.

TCL has vigorously disputed that any of the above three conditions apply. There is no question that TCL’s cement is a superior product. It even gives Guyanese customers a ‘zero burstage’ guarantee, which means that a burst bag can be returned to its plant for credit.

The only issue is whether TCL can reliably supply the Guyanese market. Guyanese importers of extra-regional cement argue that they have no confidence in TCL’s ability to supply the local market. TCL claims that it can easily supply the projected demand of between 12,000 to 17,000 tonnes per month. It points out that it has a storage capacity in Guyana of 8000 tonnes. It has also chartered two bulk cement carriers to guarantee that at any time 3000 tonnes could be en route to Guyana.

Guyana is being supplied by the TCL plants in Trinidad and Barbados, between which 39,000 tonnes of cement are available for export monthly. Both plants have designated Guyana as ‘local market’ meaning that Guyana has preference as a local buyer before cement is sold to anyone else. TCL’s new US$10 million bagging plant in Guyana has a capacity of 30,000 tonnes per month. It begs the question, therefore, with an export capacity of 39,000 tonnes, and Guyana being given preference, how could CL not meet Guyana’s maximum demand of 17,000 tonnes?

Local importers have argued that TCL has a monopoly which has resulted in high prices. They present themselves as champions of the Guyanese public, driving down cement prices by finding cheaper suppliers outside the region. This is a wonderful concept. Nobody likes monopolies and definitely not higher prices.

TCL does not concede that its prices over the long term will be higher. It points out that the wildly fluctuating prices came about after the waiver of the CET in 2004. It argues that its domestic bagging plant will result in lower prices. In fairness we must recognize that TCL has made a substantial commitment to Guyana with its US$10 million bagging plant. At the very least, it is creating jobs in Guyana. TCL must also be able to recoup its investment in the bagging plant.

However, even if TCL’s prices are higher it would be unwise to argue at COTED for a waiver of the CET on this basis. The Revised Treaty of Chaguaramas does not permit a waiver because of high prices. We will fail at COTED.

Worse yet, we will establish a precedent that will come back to bite us in the posterior region. We have more to lose with such an argument.

Our rice and sugar exports, which account for about 30% of all exports, enjoy a CET protection of 40%. Both rice and sugar can be purchased cheaper outside the region. We cannot compete on price with suppliers like the United States, India, Thailand, Belize, etc. The United States, with its heavily subsidized rice industry, could quickly wipe out our rice industry, putting thousands out of work, if it is permitted to dump cheap rice in Guyana. The CET is working well to protect Guyana’s rice industry.

The CET on rice has resulted in higher rice prices for Caricom consumers. With escalating food prices many Caricom countries would be tempted to tamper with the CET. The recent example of Jamaica trying to import 4000 tonnes of rice from Louisiana without paying the CET is a case in point.

Thankfully, Minister Robert Persaud was very aggressive in dealing with this issue. He was just as aggressive as Minister Rohee in 2004, when he fought Jamaican attempts to waive the CET on rice. Minister Rohee then described this as a ‘bread and butter’ issue for Guyana. Our rice producers will also recall the late 1990’s when Trinidad sought waiver of the CET on the basis that Guyana’s rice was substandard.

If price was the basis for waiver of the CET our sugar would also be in great danger. Guysuco is capturing an increasing share of the Caricom sugar market because it enjoys the protection of the CET. Virtually all of Trinidad’s brown sugar needs are met by Guysuco. If the CET is waived on Belizean ‘Plantation White’ or Colombian brown sugar we will not be able to compete.

When Guyana’s sugar refinery comes on stream we will be able to get a good price for our white sugar in Caricom with the protection of the CET.

When we argue for the waiver of the CET we must carefully consider the impact on our economy. Removal of the CET on rice and sugar will put thousands out of work who will not be able to afford cement at any price. Can we credibly go to COTED in the future with a straight face and resist Bajan, Trinidadian, and Jamaican attempts to waive the CET on rice and sugar?

And, with rising food prices being a leading issue throughout the region, we can anticipate pressure on regional governments to lower food prices by waiving the CET.

We must understand what is at stake is the very stability of the regional arrangement that is critical to our economy. We cannot afford to be shortsighted.

Yours faithfully,

Randy Depoo

Around the Web

Comments