While in Washington DC for the finance ministers meeting from Commonwealth countries in October 2010, I wanted to change the flight details of a ticket I had bought online while in London.
While in Washington DC for the finance ministers meeting from Commonwealth countries in October 2010, I wanted to change the flight details of a ticket I had bought online while in London. I looked at the print out of the ticket and saw a phone number which I was advised to call to make the changes.
When I dialled the number, a sweet female voice picked the call, introducing herself as Nishana and asked how she could help me.
“I want to change my flight details,” I said. “I am pleased to help you out Sir, can I take your booking reference number?” she asked.
I gave her the details and she took me through the various options that were available to me. We finally sorted out my travels, but before I put down the hand set, I asked where in UK their offices were located? And she said. “Oh No! The company is registered in UK, but I am speaking to you from India. That is where the customer service centre is based!”
Nishana told me that she was a business student at one of India’s universities, and that she was doing this job to pay her tuition fees and look after her siblings. The fact that someone in India was handling queries for a company based in UK was a further demonstration of the role technology plays in making the world one small global village, as Canadian communication scholars, Marshal McLuhan once said. But it spoke even more.
This incident came back vividly to mind during the first week of December 2010 at a workshop on promoting trade in export in professional services in the Caribbean region that took place in St Kitts and Nevis.
Trade in services? What is that? Many people asked when I posted a note from the meeting on my facebook page. What are services? And can you trade in them?
Trade in Services refers to the sale and delivery of an intangible “product”-, a service, between a producer and consumer. These services include tourism, construction, finance and banking, catering, wellness and medical tourism, and music and film production, etc.
The workshop in St Kitts which was organised by Trade Section of the Commonwealth Secretariat and St Kitts Ministry of Trade focussed on other services other than tourism.
But one may ask whether trade in services really makes any serious contribution to national economies. Yes, is the answer? In 2003, forexample, according to the OECD and WTO, global trade in Services was estimated at over US$2.5 trillion and growth was expected to remain brisk at an average rate of over 7 percent per annum.
“Yes, absolutely,” asserts, Estella Aryada, a trade adviser at the Commonwealth whose portfolio involves supporting member countries to improve their competitiveness in trade in services.
“For a service like providing call centre advice, one can export their skills without having to leave their home countries—and cash just flows into their bank accounts. This is especially important for Small Island States which are grappling with brain drain,” she said.
And the importance of this sector for Caribbean countries, and other developing Commonwealth countries cannot be underestimated. For a long time, most of the economies in the Africa Caribbean and Pacific (ACP) region were dependent on exporting commodities to the European markets on a preferential basis—i.e—having lower tariff access to European consumers on an assured quota basis and secured prices. And for most of the countries, notably those in the Caribbean, the major export goods were Sugar and Bananas.
Indeed, even in Uganda, I remember in 2002, when the country’s President Yoweri Museveni told students at a graduation ceremony at Makerere University that he had been contacted by a Canadian company looking to employ call centre advisers to their clients, as well as accountants and book keepers.
How the trade preferences started...
In 1968 the United Nations Conference on Trade and Development (UNCTAD) recommended the creation of a ‘Generalised System of Tariff Preferences’ under which developed countries would grant trade preferences to all developing countries.
The EU was the first to implement a GSP scheme in 1971. The EU's GSP grants products imported from the 178 GSP beneficiary countries and territories either duty-free access or a tariff reduction.
Under the EU GSP between 1999-2003 developing countries share in total EU imports grew from 33% to 40%. The EU is the largest trading partner for the world’s poorest countries: 40 % of EU imports originate in developing countries, amounting to €362 billion worth of trade.
But this arrangement was not to last forever. Indeed, some countries which were producing similar products started complaining that the EU was unfair in giving preferential treatment to access of good from poor countries to their market, and demanded a share of the same cake. They argued that the EU-ACP arrangement was not compatible to free trade, under the WTO rules.
The rules governing international trade are complex—but the gist of the matter is that there has been an erosion of the preferential treatment given to ACP countries, and as such, they (ACP) have to compete with big producers. But ACP countries argue that the ground is not levelled, and for example, a number of them have been out competed of the market.
In St Kitts and Nevis for example, the country had to abandon the 300 year old sugar production in 2005 after the country incurred huge losses to keep the business afloat in a market that was flooded by cheap sugar from other producers. Many jobs and livelihoods were lost. And the only option left to the country was tourism and the related services.
The same experience is being faced by other countries such as St Lucia, whose mainstay was export of Bananas to Europe. Again, this market is closing in.
Michael Smith, a 55 year old Kitittian knows what the impact of the closure of the sugar industry on the 40,000 population Islands means so well. For many years, Michael and his family lived off the sugar plantation in Basseterre. They never imagined life without working on the sugar cane crop. And then with time, they started hearing that the factory was making loses and that there were plans to close it.
“It was the last thing we could ever expect. Sugarcane was part and parcel of our heritage. It was more than just work,” Michael told me recently.
But after deep soul searching, and seeing that they could not take the losses any further, the St Kitts and Nevis Government swallowed the bitter pill and closed the sugar factory in 2005.
“It was one of the most painful decisions that our government had to make,” Dr Timothy Harris, the country’s Trade minister told a workshop of Commonwealth parliamentarians in November.
And with that decision, Michael, and his family of seven were left with no livelihood.
“It was after that incident that I started driving a taxi, taking tourists to different parts of the Island on a tour,” Michael said.
There are hundreds of families in St Kitts and Nevis, and indeed, other Caribbean countries who share Michael’s story. And for such, governments and other policy makers have the duty to create a conducive environment in which they can be able to make a livelihood, not just from agriculture, but other services sectors.
With the closure of the sugar industry, St Kitts and Nevis has been trying to find ways of diversifying her economy. The farmers who had had the livelihood on the sugar are being trained and encouraged to start growing other crops, such as pineapples, cabbages, tomatoes, peas, beans, carrots and other vegetables.
“ Our food import bill is very high,” says Gene Knight, an official from the Planning Unit of the ministry of Agriculture.
“If we could grow enough food locally and reduce the bill, we would be able to use the money we spend on food imports on other critical social services,” he says.
He however says that the culture of depending on the plantation agriculture entered people’s mindsets that it is difficult and will take long to change.
“On the sugar plantation, workers were used to being instructed on what to do. On personal private farms, they are expected to take care of the whole farming calendar—and we have found that to be a challenge. Most wait to be told when to plant, weed, harvest, etc—which is a bit of a challenge,” Mr Knight says.
“But we are keeping the momentum.”
So, participants at the workshop in St Kitts were trying to explore ways of enhancing export in services as a means of diversifying their economies, so that people like Michael’s taxi driving business can thrive.
But speaker after speaker lamented how there is limited understanding and appreciation of services as a viable option for diversifying their economies. They spoke of how there was limited or no supportive policy framework for the sector to flourish.
There were however some best case scenarios and sharing of best practices of what has worked elsewhere. Dr Brown from Bahamas spoke passionately about medical tourism at the Heart Centre in the country. Another speaker mentioned his venture in wellness and spur business in Barbados.
Professional services have been experiencing the fastest growth within the sub-sector. This vast and growing market is underexploited by many Commonwealth countries and this may be due to their limited capacity to access the markets brought about by the limited knowledge of professionals and governments to participate in this global services trade.
Trade in services provides a wider dimension for the socio-economic development in many countries in the Commonwealth. The benefits that can be derived from the professional services sector are immense, including; improvement in healthcare and education, reduction in unemployment, sustained development and a reduction of migration.
Julius Mucunguzi is an assistant spokesperson at the Commonwealth Secretariat in London. Email: j.mucunguzi@commonwealth.int
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