Are the people of Jamaica better off through free trade? Why or why not? It is difficult to say whether or not Jamaica is better off under free trade. Certainly, some economic indicators are positive, “The annual inflation rate has decreased from a high of 80.2% in 1991 to 7.9% in 1998.” Other indicators, however, are not as positive. “The Jamaican dollar has been slipping, despite intervention, resulting in an average exchange rate of J$43.5 to the US$1.00 (2000).”
So what do these indicators mean in real terms for the people of Jamaica? According to the video we watched in class, it would seem that the people of Jamaica are much worse off under free trade. The island has been flooded with cheaper international goods, which has all but wiped out domestic production and consumption of these same goods. Unfortunately, this huge influx of cheap international goods has not been balanced out by a large demand for many of Jamaica’s exports.
In the video it was clear that dairy production was decimated by the importation of dry milk. Likewise, many of the agricultural products (carrots, cabbage, and onions) which can be grown in Jamaica are not able to compete on a global scale with vegetables from Europe and America. These importing countries’ agricultural technology is generally far more advanced than the Jamaican technology. Also, some of the importing countries prop up their farmers with subsidies, making it cheaper for them to produce their goods, while Jamaica is unable to offer the same subsidies under terms imposed by the International Monetary Fund (IMF).
Exacerbating the country’s dire economic situation a severe island-wide drought (the worst in 70 years) struck in 1997 drastically reducing agricultural production. Jamaica’s strongest industries have been traditionally mining (bauxite and alumina) and tourism. Although both tourism and mining are profitable these industries are not large enough to employ the entire population. Accordingly, Jamaica is left with the majority of its domestic production losing out to lower cost imports, while its exportable industry is too small to support the entire population.
Making matters worse, at least in the short term, a division of the IMF has imposed stringent monetary and economic policies upon the government as preconditions for receiving loans. The IMF’s stated long term goal is to assist “member countries in implementing economic and financial policies that promote stability, reduce vulnerability to crisis, and encourage sustained growth and high living standards”. According to the video, however, the IMF’s terms have caused massive hardships to date for many Jamaicans.
Michael Manley asserts in the video that it is important to consider who founded the IMF and whose interests and stability they are ultimately looking after. By opening up an economy to free trade the IMF aims to benefit its 184 member countries. Some of its member countries benefit more than others, however, and the voting within the organization is heavily skewed towards the more well-to-do member nations.
It remains to be seen if free trade will make the people of Jamaica better off or not in the long-run. Change and stabilization of an economy is never smooth. While the IMF may offer loans and policy advice that is purportedly designed to help Jamaica’s economy by bringing the nation into the global free market, it is important to consider the repercussions resulting from the particular terms and conditions of entering into that agreement. Free trade has, in my opinion, in the short-term been an overall detriment to the people of Jamaica. Although parts of the economy have improved, it seems that a larger portion has been damaged by an influx of cheap goods into a market that was not yet ready or able to compete in the global marketplace.
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