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Caribbean Islands External Sector
External Trade
Trinidad and Tobago was very dependent on trade; export
revenues from oil represented the major source of dynamism in the
economy. More than any other factor, fluctuations in the world
price of oil determined the country's annual trade performance
during the 1970s and 1980s. The quadrupling of oil prices in 1973
provided Trinidad and Tobago with extremely favorable terms of
trade; this pattern was reversed in 1982, when oil prices declined.
Export prices also affected the country's productive base, as
increased oil revenues encouraged the greater importation of goods
and services that were previously produced locally, especially in
agriculture. Between 1960 and 1980, Trinidad and Tobago's food
import bill at current prices increased ninefold. Unlike other
Commonwealth Caribbean countries, Trinidad and Tobago frequently
attained annual trade surpluses because of its oil resources, a
position that was also achieved when oil prices were depressed, as
was the case in 1984 and 1985. In 1982 and 1983, however,
unprecedented trade deficits were recorded.
Total imports in 1985 were valued at US$1.4 billion, well below
the peak import level of US$2.4 billion in 1982. Imports were
reduced in the mid-1980s through revised exchange controls that
sought to stabilize the country's balance of payments, a goal that
was generally achieved through large reductions in consumption
items. In 1985 machinery and transport equipment comprised 30
percent of imports, followed by food at 20 percent, manufactured
goods at 20 percent, chemicals at 10 percent, and the balance in
various other categories. The country's level of food imports was
high even for a Caribbean country. The absence of oil as a major
import category further differentiated Trinidad and Tobago from its
Caribbean neighbors. The structure of imports changed drastically
in 1983, when the processing of imported crude oil was
discontinued, which had accounted for as much as 30 percent of
total imports. In 1985 the United States provided 39 percent of the
country's imports, trailed by Britain (10 percent), Japan (10
percent), Canada (8 percent), Caricom (6 percent), and other West
European and Latin American and Caribbean countries. Major changes
in the origin of the country's imports also resulted from the
termination of the oil-processing program. In 1981 about 26 percent
of all imports had come from Saudi Arabia; after the
discontinuation of the program, the Saudi share of total imports
dropped to 0.1 percent. These events in turn directly affected the
share of total imports from the United States, which increased from
26 to 42 percent over the same time period.
In the 1980s, Trinidad and Tobago sought to stabilize its
balance of payments by reducing the flood of imports that had
become customary during the previous decade. Unable to sustain that
level of imports after 1982, the Chambers government introduced a
new system of import licensing and a two-tier exchange rate that
hindered the flow of Caricom goods. Jamaica was most affected by
these maneuvers. In an effort to improve bilateral trade relations,
the two governments signed the Port-of-Spain Accord in 1985. Trade
did improve somewhat as a result and was expected to expand further
with the unification of the two-tier exchange system in 1987.
Nevertheless, in the late 1980s imports continued to be restrained
by a restrictive import quota system--dubbed the "negative list"--
that completely protected hundreds of locally manufactured goods.
Exports totaled US$2.1 billion in 1985, or about 20 percent
below the country's peak export performance of 1981. A marginal
increase in exports and a significant reduction in imports produced
a trade surplus in 1985 of US$750 million. Petroleum products
continued to dominate export revenues, accounting for 79 percent of
exports in 1985. Other major export categories included chemicals
(13 percent), machinery (3 percent), and manufacturing (2 percent).
The price of oil was the most important determinant of the
structure of Trinidad and Tobago's exports. As the price of oil
declined in the 1980s, so did oil's share of exports. Oil fell from
93 percent of exports in 1980, to 83 percent in 1983, and to 79
percent by mid-decade. The other major change in the structure of
exports in the 1980s was the increased share for chemicals. As the
new petrochemical plants opened in the early 1980s, chemicals rose
from 3 percent of total exports in 1980 to 13 percent by 1985. The
overwhelming share (63 percent in 1985) of the country's exports
went to the United States market. Exports were also shipped to the
EEC (13 percent), Caricom (11 percent), and various other
countries, particularly developing countries. Inside Caricom, most
exports went to Guyana, Barbados, and Jamaica.
Trinidad and Tobago benefited from wide access to foreign
markets, often under numerous preferential agreements. As a former
British colony, it enjoyed special access to Britain's markets
through the Commonwealth of Nations (see Appendix B) and access to
the EEC under the provisions of the Lomé Convention. Exports to the
United States entered under three preferential programs: the
Generalized System of Preferences, the Caribbean Basin Initiative
(CBI--see Appendix D), and the 807 program (see Glossary), which
was named after its corresponding Tariff Schedules of the United
States number. Nonetheless, Trinidad and Tobago benefited little
from the CBI's trade provisions. Despite providing 18 percent of
the region's exports, the nation contributed only 3 percent of CBI
exports and less than 1 percent of 807 program exports. Trinidad
and Tobago gained preferential access to Canada's market through
Caribcan, a 1986 Canadian trade initiative similar in scope to the
CBI. Although total trade within Caricom was in decline in the
1980s as a result of the international recession, Trinidad and
Tobago continued to enjoy a trade surplus with the region.
The drive for increased exports was bolstered in 1984 by the
creation of the Export Development Fund, which was designed to
improve marketing and finance for local exporters and to diversify
into light manufacturing and nontraditional items destined for hard
currency markets. Export competitiveness was also expected to
increase as a result of the devaluation of the Trinidad and Tobago
dollar in December 1985.
Data as of November 1987
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