Beware, Mr Shaw

WERE HE not so avuncular and entertainingly jocular, we would probably invoke, for Audley Shaw, Metry Seaga’s advice to Karl James when he, as Mr Shaw has now done, accused Jamaica’s manufacturers of cheating the Government of import duties on refined sugar.

“Blow the goddamn whistle, or shut your mouth,” Mr Seaga, the president of the Jamaica Manufacturers and Exporters’ Association, told Mr James, who was then the general manager of the quasi-official Jamaica Cane Products Sales, of which he is now the chairman. That was two and a half years ago.

Instead, we’ll limit our advice to the minister to the proclivities of Jamaica’s sugar industry, for which he now has responsibility. It is like someone hooked on cocaine – always wanting the next hit, hoping that it is as good as the last and equal to the first, but never quite capturing the hoped-for high. Or, perhaps, it’s the addicted gambler who’s on a losing streak, but confident that the next throw of the dice will turn things around. It doesn’t usually happen.

SQUANDERED ON SUGAR

Mr Shaw has to be wary of being inveigled into that sugar addiction, a habit on which, over the decades, Jamaica’s governments have squandered a hefty portion of the family jewels.

The issue at hand is Minister Shaw’s reprisal this week of the old claim that food processors, who are allowed to import refined sugar at zero tariff, rather than the nearly 200 per cent applied when the commodity is for general consumption, actually purchase more than required, then sell the excess on the domestic market, at a high profit. The 80,000 tonnes of refined sugar consumed in Jamaica annually is roughly equivalent to the island’s output of raw sugar in recent years.

According to Mr Shaw, there’s more than anecdotal evidence of this thievery, facilitated systemic corruption. “...The corruption is everywhere,” he said. “The corruption is at Customs; the corruption is among so-called brokers, who are brokering on behalf of manufacturers who import the sugar dutyfree. Some (imported sugar) goes to manufacturing and the rest goes into the market, destroying the sugar industry.”

Any evidence of corruption, especially one on as grand a scale as Mr Shaw alleges, ought to be turned over to law enforcement for prosecution. That, however, is not what Mr Shaw proposes to do. He intends to embrace the plan of Derrick Kellier, the agriculture minister of the previous administration, of having food processors pay the tariff, or a cess of some kind, upfront, and then claw it back at a later date.

COLLECTIVE PUNISHMENT

Government’s notoriety for slowness in paying rebates to taxpayers makes businesses sceptical of this idea. Further, the sector’s competitiveness, thin margins as well as the cash flow and the future value implications of front-loading payments will exacerbate this concern. In the event, what Mr Shaw has proposed is collective punishment, rather than discipline in identifying who breaks the law and throwing the book at them.

The more fundamental issue, though, is Mr Shaw’s seeming misconception that supposedly illegally imported sugar is having a big hand in “destroying” Jamaica’s sugar industry. The truth is that Jamaica’s sugar industry is globally uncompetitive. It, for decades, survived in protected and preferential markets, and outside that, when world market prices are sufficiently high to mask its inherent inefficiencies, including the relatively small size of sugar cane plantations that denies the island the benefits of economies of scales.

Jamaica has stuck with sugar, in part, because of an allegiance to history and the fact that the industry employs more than 30,000 mostly seasonal workers, who it is feared would become jobless. Thus is the case for its frequent fallback on government subsidies.

It would be cheaper to provide cash transfers to displaced sugar workers, rather than this frequent rolling out of cushions for the industry. Entrepreneurs could then rationally use free cane lands for other forms of agriculture, including growing crops to displace up to a quarter of the country’s US$700million bill for imported foods, which experts say can be the subject of domestic substitution.

The Gleaner.