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CARICOM, Dominican Republic get into Free Trade

John Collins (1)

Two-way free trade has commenced between the Dominican Republic (D.R.) and the 14-member Caribbean Community (CARICOM) and initially the principal partner in the new relationship is the twin-island nation of Trinidad & Tobago (T&T), according to Fernando Gonzalez-Nicolas, the president of the T&T Chamber of the Commerce in the D.R.

“The two-way trade between the D.R. and T&T last year reached $125 million, making that country the largest trading partner of the D.R. in the Caribbean and Central America,” said Gonzalez, pointing out that the trade is not balanced because at present $90 million of the total is imports into the D.R. from T&T while exports in the other direction represent only the balance of $35 million.

While the gross domestic products (GDPs) of the two countries are about $20 billion each, that’s where the comparison ends. T&T combined have a population of 1.3 million in a land mass of 1,980 square miles. The D.R., on the other hand has 8.5 million inhabitants in a land mass of 19,000 square miles. These economic differences result in pronounced different per capita (PC) incomes with the D.R. hovering at $2,000 while T&T is above $5,000.

Accounting for the disparity in GDP and PC figures is the fact that T&T is rich is oil and natural gas deposits which have resulted in the country becoming the economic powerhouse in CARICOM.

“A closer relationship has developed between the private sectors of the two countries in recent years as each discovered the increased benefits of doing business with one other,” said Gonzalez.

The principal products from T&T being imported into the D.R. are natural gas derivatives and petrochemical byproducts led by butane gas cylinders and urea (a necessary ingredient in fertilizer). But exports from T&T to the D.R. are increasingly diversifying as D.R. manufacturers and wholesale distributors discover new sources of supplies that are more economical than those previously used in the U.S.

Some of the other items being imported into the D.R. from T&T include steel, glass bottles, diapers, cookies, candy, snacks and soft drinks. “While the trade is rather small in quantity now, it is growing steadily as companies in the D.R. come to know the quality of T&T products better and the savings that they represent,” said Gonzalez.

What is the D.R. sending to T&T? At present the principal items are tiles, limestone, fertilizer, fresh citrus products, canned fruits and vegetables,, corn meal, furniture and furniture parts, ice cream and transformed metal products like nails and rods.

LNG shipments to D.R. to start in October

All of this is set to more than double later this year when the D.R. commences receiving liquefied natural gas (LNG) under an agreement between BP, the British petroleum giant, and electrical energy supplier AES which operates two power plants in the D.R. The LNG shipments are estimated at $150 million a year initially and is expected to increase and be supplied to other firms in the country, according to Gonzalez. “This will also be cleaner as well as more economical and should reduce the price of energy,” he added. The LNG will be transported to the D.R. and Puerto Rico is a $300 million new vessel which BP is putting into the service.

The trade between the D.R. and T&T is expected to continue growing as a result of the Trade Agreement signed between the D.R. and CARICOM in 1998. It was ratified by the D.R., T&T, Jamaica and Barbados in 2001 and implementation commenced Dec. 1, 2001 between those countries that had already ratified it. Ratifications are pending with Belize, Guyana and the Eastern Caribbean States.

Recently government officials and representatives of  the private sectors of the D.R. and CARICOM states met in Santo Domingo to discuss the opportunities and challenges under the new agreement. While there were some problems with certain items in some countries, the atmosphere in the two-day conference was described as cordial with both co-chairs, CARICOM Secretary General Edwin Carrington and economist Miguel Ceara-Hatton leading the D.R. negotiating team.

What both seasoned negotiators commented on was the presence of the private sector representatives who participated in the discussion addressing their ideas and concerns. The changes that the new free trade between neighboring developing countries came up repeatedly but there was no acrimony even when issues were discussed forcefully.

Problems had already emerged over Dominican citrus exports to Jamaica which have Jamaican producers nervous because the D.R.’s massive potential and lower prices.  Belize appeared at the discussions to express its concern over D.R. exports to Jamaica. Even though Belize and the D.R. have no trade, 25% of  Belize citrus exports to Jamaica represent $7.4 million annually.

Snacks, candies and soft drinks are sensitive items for both the D.R. and T&T but the export of air conditioners and refrigeration units from T&T to the D.R. were approved. There are mechanisms in the agreement to review and arbitrate differences between the partners and they are expected to be utilized until any problems are cleared up.

Greater balance, diversification goals

“While the trade is concentrated between the D.R. and T&T at present and lopsided in favor of T&T, the challenge to the D.R. private sector is to strive for greater balance and diversification,” said Gonzalez. “When Jamaica and Barbados see what’s going on, they’ll get into it too and it’ll only be a matter of time before Guyana and then Suriname follow.”   

March 10, 2002

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1) Other articles by the well known Caribbean author John collins can be read at:
www.pymesdominicanas.com

 

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