The world is confronting one of the most serious economic crises since the Great Depression of the 1930s.

According to the United Nation's World Economic Situation and Prospects 2009 publication, "...world income per capita is expected to decline by 3.7 per cent in 2009".

At least 60 developing countries of the 107 for which data is available are expected to suffer declining per-capita incomes, while only seven would register per-capita GDP growth of three per cent or higher - considered as the minimum required growth rate for achieving significant reduction in poverty - down from 69 countries in 2007, and 51 in 2008.

Economic setbacks are expected across the board, though strongest in the Commonwealth of Independent States (CIS), Sub-Saharan Africa and Latin America.

Also, the least developed countries (LDCs) will be severely affected, with growth decelerating by 3.5 percentage points from the robust growth witnessed in recent years.

The World Trade Organization (WTO) has predicted a drop in global trade of over 10 per cent for this year. WTO figures indicated before this year a slowdown in trade from six per cent growth by volume in 2007 to two per cent in 2008.

This massive contraction in trade is shown in the falling revenues and increasing layoffs of global transport companies. Across the world, ships, airplanes, trucks, and railroad equipment with no cargo to carry are being stored or scrapped.

Protectionist measures

Competition is in crisis in this scenario. Many countries have been increasingly adopting protectionist measures in creative ways, rather than simply raising duties on imports, in order to circumvent the terms of regional and international treaties, although, in many cases, duties have been raised as well.

Jamaican exporters have learnt this the hard way right in our own backyard of CARICOM.

Environmental levies and revenue-replacement duties applied by some CARICOM member states have negatively affected exporters. The main issue is the need for transparent non-discriminatory standards among CARICOM member states.

Trade tensions have increased in the region, arising out of disputes over the seizure of goods by customs authorities and the application of non-tariff barriers on an ad hoc basis.

However, the Private Sector Organisation of Jamaica (PSOJ) believes that retaliatory protectionist measures would not be the answer. Rather, the focus should be on implementing measures to ensure the sustainable export of Jamaican products.

There is also concern in the region over the application of the Least Developed Country category in CARICOM, which allows countries so classified to increase tariffs on products from Jamaica, which falls under the More Developed Country category, although some of these countries have been experiencing higher rates of growth.

Jamaica is no exception to the trend of protectionism, and the Government has been considering policies to protect local businesses.

However, care has to be taken to ensure that policy decisions do not end up achieving the opposite of what was intended.

While it is important to develop local productive capacity, this has to be understood in terms of what is necessary for businesses to succeed in a globally integrated economy.

For instance, policies that seek to favour companies that are involved in production using mainly local inputs, in order to create employment, could end up hurting more globally integrated firms that source their inputs internationally.

These firms have been able to compete effectively internationally, and should domestic policy negatively impact on their activities, they would have no choice but to relocate to more favourable locations for globally integrated firms.

This would have the net effect of decreasing the international competitiveness of the economy and ultimately, increasing unemployment, the opposite effect of what was intended.

Buy American

We can look at examples of this effect in our largest trading partner, the US, and internationally, to guide our actions at home.

The new 'Buy American' provisions of the American stimulus package are said to be threatening more globally integrated firms.

This is most clearly seen in the case of Duferco Farrell Corp, a Swiss-Russian partnership operating steel plants in the US, and employing significant numbers of people.

The new Buy American provisions have been threatening the operations of the company by favouring companies that source inputs locally.

Duferco utilises global supply chains to spread production among multiple countries in order to achieve efficiencies that give it a competitive edge in the marketplace.

This means that substantial parts of its production process take place in various countries around the world and the finished product is sold in the American market.

The US stimulus package for public works requires contractors who would normally buy their inputs from Duferco to utilise local products made in the US.

Hence, Duferco's customer base has collapsed and its US employees could face layoffs.

Some European countries have required banks receiving bailouts to focus on lending at home at the expense of overseas clients and the quality of the loan portfolio, which could once again jeopardise the financial stability of these institutions.

Other countries have insisted that producers move manufacturing jobs home in exchange for a government bailout, which could end up reducing their level of efficiencies in production, and hence, their competitive edge .

We can also look at history for guidance.

To counter the Great Depression, the US adopted the Smoot-Hawley Act in 1930, which raised import duties on most imports, leading to retaliation from trading partners.

Faced with that crisis, other countries pursued similar policies that slashed global trade volume from US$36 billion in 1929 to US$12 billion in 1932.

Exports and imports among all countries fell dramatically, and the economic crisis was prolonged.

The lesson to be learnt is that it is in the interest of every country to keep international trade flowing smoothly, as healthy international trade can help revive the world economy. Otherwise, history could repeat itself.

Hypothetically, Jamaica could improve its trading position by implementing various protectionist measures, if trading partners do not do likewise. However, it is unlikely that these trading partners would also keep their markets open to the same extent. Hence, all players would suffer a loss. Consequently, the only option for Jamaica is to consult and cooperate with its trading partners to gain important benefits, or suffer the consequences from the failure to do so.

It is with this objective in mind that the PSOJ is considering trade missions to CARICOM and the European Union in 2010 to find new opportunities for Jamaica's exports, and to strengthen relations with our current and future trading partners.

Jamaica's export interests lie mainly with the US, the EU, Canada and CARICOM.

Of course, Asia also offers new export opportunities despite the distance, and it is with this in mind that the PSOJ supports the Government's initiative in participating in Expo Shanghai 2010, to be held from May 1-October 31 in China.

In a global trading environment where exporters still face significant barriers, Jamaica must continue negotiations at the bilateral, regional and multilateral levels to ensure a level playing field for Jamaican goods and services.

Some of the barriers to trade, which still exist and which need to be addressed, include the following: