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Caribbean Islands External Sector
External Trade
Trade has always played a major role in Jamaica's economic
activity; indeed, the island is one of the most trade-dependent
countries in the world. Trade as a ratio of GDP was over 50 percent
in the 1970s, a figure that increased in the 1980s as the economy
opened further to international trade. Although trade allowed
Jamaica to import productive resources and consumer goods, chronic
trade deficits generated a long-term drain on government finances.
During the first twenty-five years of independence, Jamaica ran a
trade surplus in only three years--1963, 1977, and 1978. Trade
deficits reached unprecedented levels, in excess of US$500 million,
by the mid-1980s. Jamaican exports generally suffered in the 1980s
because of unfavorable prices for traditional exports such as
bauxite and sugar. Newly developed nontraditional exports
experienced rapid growth, but their small volume improved the
negative trade balance only marginally.
Total imports in 1985 were valued at US$1.14 billion. Imports
were divided as follows: fuels (37 percent), machinery and
transport equipment (17 percent), food (15 percent), manufactured
goods (15 percent), chemicals (11 percent), and the balance in
various other categories. The United States was the major supplier
of goods and services to Jamaica, accounting for approximately 40
percent of imports in the mid-1980s. Other major suppliers were
Britain, Canada, Venezuela, the Netherlands Antilles, and Caricom.
Imports fluctuated throughout the 1980s. The relative price of oil
was an influential factor in determining the total import bill and
the origin of imports. The Seaga government sought to reduce
imports in the 1980s as part of an overall strategy to reduce
aggregate demand in the economy. Although the government devalued
the Jamaican dollar several times over its 1970s value in an effort
to discourage imports, the dismantling of import controls,
licensing, and quantitative restrictions actually increased
imports, at least in the short run. Import liberalization policies
were scheduled to continue into the late 1980s.
Exports were generally broken down into three categories in
Jamaica: traditional, reexports, and nontraditional. Traditional
exports included bauxite, alumina, gypsum, sugar, bananas, citrus,
coffee, cocoa, pimento, and rum. Reexports were goods shipped to
Jamaica and then reexported for a profit, usually transhipments.
Nontraditional exports were all remaining exports. In the 1980s,
the major exports remained alumina, bauxite, and sugar. Total
exports averaged US$650 million from 1983 to 1985, or roughly half
of imports. The substantial trade gap between exports and imports
created large annual trade deficits. In fact, the 1985 trade
deficit equaled over a third of total trade. Despite a downturn in
the bauxite market worldwide, the bauxite sector still accounted
for over half of visible export earnings. Nontraditional exports
made up a quarter of total exports in the 1980s, a share that was
steadily increasing. Contributing most to the expansion of
nontraditional exports were garment and apparel manufacturing,
nontraditional agriculture, and mineral fuels and lubricants. The
principal markets for exports were generally the same countries
from which imports were obtained. As Jamaicans sought to break into
new markets with nontraditional goods and services, the United
States share of Jamaican exports increased from 35 percent in 1982
to over 40 percent by mid-decade.
In the mid-1980s, Jamaica enjoyed wide access to foreign
markets for its exports. As a former British colony, it
participated in the Lomé Convention, which provided guaranteed
access levels for certain products, often at favorable prices.
Jamaican exports to the United States entered under various
preferential agreements, including the Generalized System of
Preferences, the CBI, and the 807 program. Canada also introduced
a trade initiative in 1986 called "Caribcan" that provided
preferential access to its market similar to that of the CBI.
Access to the Caricom market, the traditional market for Jamaica's
manufactured goods, declined in the 1980s; recession, devaluation,
and other exchange rate and import licensing policies in Jamaica
and Trinidad and Tobago, the two principal members of the
community, caused a steady decline in regional trade. Although
various bilateral and multilateral accords had been signed and the
political support for Caricom existed, increased trade was not a
reality in the late 1980s. As a result of its foreign exchange
shortage, Jamaica was increasingly involved in countertrade or
barter deals that circumvented currency exchanges. The most
prominent agreement of that kind allowed Jamaica to export bauxite
to the Soviet Union in exchange for Lada automobiles.
Data as of November 1987
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