Barack Obama

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• • gleanerjamaica • jamaicagleaner • FEATURE THE GLEANER, THURSDAY, APRIL 9, 2015 E4
OBAMA
ON THE
ROCK
M
Edward Seaga
Contributor
THE PRESIDENT of the
United States, Barack Obama,
is visiting Jamaica and all
Jamaicans welcome him. This is the
second visit by an American presi-
dent since Independence, the first
being by President Ronald Reagan in
1982. The circumstances, however,
are not quite the same. The Reagan
visit was after I had the honour as
prime minister to visit the White
House in 1981. I was the first Head
of Government to be invited by
Reagan to pay an Official Visit to the
United States.
Washington reacted very positively
to our electoral victory in 1980.
Reagan’s victory in the US presiden-
tial election that year came one week
after the Jamaican general election.
Both parties, the Republican Party in
the United States and the Jamaica
Labour Party, had won handsomely
and their governments could now
establish a relationship as
sovereign governments.
But beyond the official reaction
to the JLP victory, the Washington
ideological movers and shakers
were already expressing delight at
the ideological shift which was
taking place in the Caribbean area,
led by the Jamaica election, as a
cluster of elections all resulted in
the unseating of governments
which were committed to leftist
ideologies. Suddenly the
Caribbean Sea which was being
tainted red was now being painted
blue by regional elections.
Although the visit was an official
visit featuring a ceremonial luncheon,
the talk after lunch was the highlight.
General Alexander Haig, Secretary
of State, came to see me. He was
alone. He said that the Reagan
administration had taken note of my
proposal for a type of Marshall
Plan for the region. On giving it
consideration, it was the view that a
better form of assistance would be
the creation of a one-way tariff free
treatment for goods exported from
the Caribbean region to the USA.
This meant that countries in the
region could export their goods free
of import tariffs to the US, but US
goods exported to the region would
still have to pay the regular import
duties. I thought it would be an
attractive idea for domestic exporters
and could be an incentive for
countries outside the region to estab-
lish plants which could export their
products free of duty to the US. I told
General Haig that, subject to approval
by the Jamaican Cabinet, the idea
was a splendid one, particularly
as it extended to the region. From
this discussion the idea of the
Caribbean Basin Initiative was born.
It was enacted by Congress in
January 1984.
LITANY OF DETERIORATION
I thought this would be a very
worthwhile decision to deal with
the longer-term problems of the
Jamaican economy. The perform-
ance of the macroeconomy was a
litany of deterioration over the
previous eight years, 1972-1980, as
revealed by the data base published:
The value of the total
production of the economy (Gross
Domestic Product) in 1980 was
17.5% less than in 1972, after
decreasing every year;
Inflation increased by 250%,
peaking at a 49.4% in 1978;
The total public debt as a per-
centage of GDP increased nearly
500%, creating a crushing burden;
The level of investment
collapsed by 40% of GDP and
savings by 53%;
The foreign exchange reserves
were wiped out, plunging from
positive US$239 million to nega-
tive US$549 million.
There was not a single bright
light in the economy over the eight
wasted years.
This was the one-of-a-kind
global performance which led the
World Bank president to declare
that Jamaica had the second-worst
economy in the world. This pathetic
performance was in great part due
to a fallout in the productive sectors:
agriculture, manufacturing, mining
and construction values declined
by 60%, in 1974 constant prices,
while costs increased by 547%.
Tourism performance followed the
same pattern.
Some 14,000 small shops were
either closed or operating with
only one window open because
there was little to sell.
Unemployment increased by
43.3% from 182,000 to 271,000.
This assessment was indeed dis-
mal. But it enabled an analysis to
be carried out to determine the
areas of weakness and strength on
which future strategies could be
based to create a robust economy.
It is against this background of
the 1970s that President Reagan
launched the CBI in 1983 when he
said, “I am requesting authority to
eliminate duties on all imports from
the Caribbean Basin except textiles
and apparel items subject to textile
agreements. The only other limita-
tion will be for sugar; as long as a
sugar price support programme is
in effect, duty-free imports of sugar
will be permitted only up to speci-
fied ceilings. Safeguards will be
available to US industries seriously
injured by increased Basin imports.”
Jamaica and other small countries
in the designated group showed no
dramatic change in exports to the
United States. In the Jamaican
case, over the 20 years from 1984-
2004, annual exports increased
from US$396 million in 1984 to
US$460 million in 2001, then
decreased to US$370 million in
2004, showing marginal change
over the 1984-2004 period.
Leaders of the other Caribbean
islands made the same complaints.
Clearly, the CBI trade was not a
substantial boost to Jamaica and
other small countries in the region
even though the benefits of duty-
free concessions were supported to
be considerable. The smaller
countries did not have the population
base for a sizeable domestic market
to benefit from the reduced cost
derived from an economy of scale,
nor were they able to modernise
their plants to produce manufactured
items cost effectively. Trinidad and
Costa Rica were the exceptions in
this group.
Fortunately, a companion measure
to the CBI which was part of the US
policy for the region was in place.
This was the Multi-Fibre Agreement.
The production of selected types
of apparel for export to the United
States was a separate negotiation
carried out under the Multi-Fibre
Arrangement (MFA). The principal
aim of the MFAwas to “further the
economic and social development
of developing countries and secure
a substantial increase in their export
earnings from textile products to
provide scope for a greater share for
them in World Trade in these prod-
ucts.” (Ministry Paper 29/86)
Up to 1981, not many benefits in
the apparel trade had accrued to
developing countries. This led to the
establishment, on February 7, 1986,
of the International Textiles and
Clothing Bureau (ITCB) (MP 29,
1986) to enable support for member
countries to consult and provide
information on developments.
This was necessary because of the
intense pressure of the International
Ladies’Garment Workers Union
(ILGWU), a powerful American
trade union which persistently
pressured for import quotas for those
countries supplying the US market to
be cut. The target, it was maintained,
should be at least no higher than the
rate of growth of demand for garment
products in the US rather than an
automatic 6% increase annually with
flexibility to increase to up to 13%.
MINIMAL LOSS OF GROUND
The Reagan administration,
though recognising that it could not
argue for liberalised trade globally
while being very restrictive in the
treatment of its own markets, did
not yield to the ILGWU and other
pressure groups to any substantial
level. The loss of ground here in a
narrow range of products would be
minimal to the strength gained for
the US economy in agreeing for
market liberalisation for the wider
range of US products worldwide.
But what the collective represen-
tation of the 18,000 garment firms
was unable to do the 50 textile
companies took on as a pressure
group. Their protests were directed
to Washington in the heart of the
1980 presidential election cam-
paign to cut back apparel imports
because of the resulting reduction
in demand for American textiles.
This undertaking apparently fell
short in implementation and by 1985,
the pressure was on again to reduce
quotas, this time by the textile mills.
It was at that time that I proposed to
Ambassador Bill Brock, secretary of
labour with responsibility for the CBI
and MFA, that increased quotas for
apparel should be allowed for
production which used fabrics from
US textile mills. This became known
as the Seaga strategy in the Reagan
Cabinet. This was adopted by
Washington and implemented with
some dissatisfaction by Far Eastern
producers in the Caribbean countries.
But they eventually accepted the new
protocol for the provision of quotas.
The garment programme, after an
associated programme which
allowed cutting of the fabric by
producers with skills in the
Caribbean Basin, grew rapidly with
peak earnings in Jamaica of US$ 500
million by 1995 compared to less
than US$16 million at the outset in
1983, a dozen years earlier.
Employment grew tenfold over the
period to 50,000 women working
in apparel factories.
The apparel export programme
was very successful in boosting
employment and foreign exchange.
Notwithstanding the shortcoming
of offering low wages which were
at the statutory minimum wage
level, it became one of the largest
earners of foreign exchange for
Jamaica, before most producers
moved to other locations which
were considered more favourable
for apparel manufacture in the
1980s.
The combination of the CBI and
MFA created a positive US trade
programme for the Caribbean in
the 1980s. It gave a strong
economic lift to Jamaica.
We trust another positive
programme is in the making for
the future.
Edward Seaga is a former
prime minister of Jamaica.
US TRADE LIFTED JAMAICA