Alutu Uzochukwu U
Student Registration Number:201461623
Being an assignment submitted to the Department of Economics, School of Business, University of Strathclyde in partial fulfillment of the requirement of International Trade and Policy (EC 925) for the award of M.Sc. in Applied Economics (2014/2015). November 2014.
Belize is a small private sector led economy1 that is highly dependent on external trade and vulnerable to internal and external shocks arising from its macroeconomic and trade policies2. Belize trade profile shows that about 61.6 percent of its exports are on agricultural products while imports and exports to Gross Domestic Product (GDP) ratios are 72.4 and 28.6 respectively (World Trade Organization, 2013; European Commission, 2014). This lack of significant diversification beyond agricultural production and tourism; and her high dependence on imports exacerbates Belize’s vulnerability. This is obviously a pointer to the fact that Belize is a labor intensive country primarily based on agriculture, tourism and services with much of its manufactures imported (less capital intensive). Taking cognizance of her exposure to the vulnerability of being a small open economy with high dependence on trade, Belize being a member of the World Trade Organization (WTO) has sought specific provisions for special and differential treatment for developing countries and the recognition of the special status and needs of small, vulnerable, developing economies (WTO, 2010). With this, a substantial volume of Belize’s exports is traded under preferential agreements and its trade policy is influenced by participation in the Caribbean Community and Community Market (CARICOM) as well as other Preferential Trading Agreements (PTAs) and negotiating groups. Whether or not its participation in these preferential trading groups is beneficial to its current and potential engagements in the world trading system is germane to this study.
This analysis is therefore aimed/focused at providing an insight into the Belize current and potential engagements in the world trading system. In order to achieve this, the analysis delves into the bases for trade in Belize (section 2); the effects of her trade policies on potential trade and negotiating position (section 3); the economic/political conditions affecting her trade (section 4) and concludes by summarizing the key findings.
2. Bases for Trade
Belize engages in trade with the rest of the world because there exist frontiers – constraints on movement of factors, different endowments and/or payments, different tax policies and trade/transport costs (Wooton, 2013). All these, inter-alia, culminate in differences between Belize and its trading partners, hence international trade. More specific, is the fact that Belize seeks to generate additional market access to create the requisite demand-pull for generating economies of scale, thereby relying heavily on imports for inputs into local production; and revenue to sustain economic growth (Institute for the Intergration of Latin America and the Carribean, 2005).
Belize export basket is concentrated in a narrow range of products (comprising majorly agricultural products and fuels and mining products), which account for much of its sales (Umana, 2013). All exports of citrus juice and papayas go to the United States, while exports of sugar and bananas go to the European Union (Umana, 2013). Belize started crude oil exports in 2006 and has maintained its exports of crude to the United States and Costa Rica for refining since then.
Just like its export basket, Belize export destination is also concentrated, with United States (46.3 percent of total exports) and European Union (34.3 percent of total exports) having the large share of the export market (WTO, 2013). Striking is the fact that only a small proportion of Belize’s total exports go to its neighbours: CARICOM, Central America (excluding crude oil to…