Yes, we need to export more as the Curaçao government informercial tells us daily on television, obviously referring to the “Growth Strategy”. What we need to realize however is that (increasing) export is not a random event. First, you need goods and services that have a competitive advantage and that other people want. Competitiveness in turn depends on above all, productivity, flexible labor and capital markets and cost of doing business. In this area we don’t score well. In order to export you also need a good trade network. Here we score zero.
According to the World Trade Organization (WTO) there are 524 trade agreements in existence in the world. Curaçao has none and is among a handful of nations without one. A trade agreement means that participating countries phase out tariffs on merchandise trade, reduce restrictions on trade in services and foreign investment. A Curaçao product for lack of a trade agreement with let’s say Canada will be more expensive in Canada due to tariffs and non tariff barriers compared to an identical product exported from Barbados into Canada if there is a trade agreement between Barbados and Canada.
You could say that all we need to do in this case is negotiate a trade agreement with Canada. Wrong. Not only don’t we have trade agreements with anyone, but we are unable to enter into one. This, because we have broken our international obligations and are noncompliant. No country will even negotiate with us without facing repercussions. We can still export, but our goods and services face steep barriers and tariffs.
Reason for our trade isolation and noncompliance stems from the 70s when we introduced a very strict protection policy with levies of up to 90%, costing consumers dearly and making some people very rich. While protection in those days was used in some countries to temporarily stimulate infant industries, here it lasted for more than 40 years and became a ‘right’ protected by some politicians. On the eve of the creation of the WTO in 1994 we were told in Marrakesh that we were violating our GATT (General Agreements on Trade and Tariffs) agreements from 1948. No steps were taken to correct this however. Since we are noncompliant WTO members could impose trade sanction on us which could end up costing us millions.
In 2005, the first decision I took as Minister of Economic Affairs was to scrap protection. We protected an internal market of 150,000 for decades instead of looking for export markets via trade agreements. The price we are still paying for this failed policy is trade isolation and possible sanctions.
The first priority is to engage with our partners to become compliant. I held two high-level meetings with the Office of the United States Trade Representative (USTR) to resolve this matter. In a letter dated 14 March, 2007 the USTR informed me that: “We feel that your offer is in the right direction. There are just two outstanding issues.”
Since 2009 the Curaçao government chose however not to build on the progress made. After “10-10-10” a brand new ball game started due to the dismantling of the Netherlands Antilles. Since Curaçao government has opted for a totally different and complicated path, it seems according to an internal memo that it will take at least 10 years for Curaçao to become compliant in 2029.
It’s a specialized matter and not easy to wrap your head around it. What’s not complicated to understand is that in a world with an ever-growing amount of trade agreements, not having one will increasingly make us isolated whilst our economy, balance of payments and foreign reserves continue to deteriorate. Let’s not continue to fool ourselves into thinking that increasing export can be achieved without a definite plan or purpose.
Willemstad, Curaçao
Alex David Rosaria Blog 