Berger Paints Barbados’ decision to close its factory has triggered renewed concern about the future of manufacturing on the island and whether the Caribbean’s regional trade framework is working as intended.
On Monday, the company announced a shift to a new distribution model that will see the closure of its manufacturing plant, warehouse, Colour Shops and administrative offices by April 24. Berger products will be manufactured elsewhere in the region and distributed domestically through select partners, including Carters (via Blades and Williams) and Ace H&B Hardware.
In a statement, Berger said the move was driven by sustained changes in the operating environment, including the impact of Article 164 of the Revised Treaty of Chaguaramas, which governs CARICOM single market, which it said had affected the long-term viability of its local operations.
Two UWI economists, Dr Ankie Scott-Joseph and Dr Antonio Alleyne zeroed in Article 164 as lying at the heart of the issue.
“Article 164… allows small CARICOM economies, which are called Less Developing Countries [LDCs] to impose tariffs on specific goods imported from larger member countries like Barbados,” sad Dr Scott-Joseph. “The purpose is really to protect industries.”
That means Barbadian-made paint can be tariffed in those markets, in order to make production in those lower-cost territories more attractive. She added: “So the same provision that CARICOM has [that] made manufacturing unviable here makes it more attractive there… So as a consequence, Barbados loses and Grenada gains, Trinidad gained, and so on.”
The company’s decision, while fundamentally a business move, highlights deeper structural issues within the Barbadian economy, said Dr Alleyne.
“They found a cheaper location, so we may have cheaper products, but at the end of the day, the country’s productive base will decline as expected because our production base has never really been the most lucrative for any business.”
Barbados has traditionally positioned itself as a hub for high-end, high-value services rather than mass production, he noted.
“Companies seek Barbados for more of the high-end, high value type products and services and therefore, gives us an avenue to market our human capital. We produce highly educated individuals which definitely will fit in certain key areas.”
But he stressed that large-scale manufacturing has always faced limitations.
“If you look at mass production… this is not the base rate. We don’t have the land space, we don’t have the number of people and therefore the cost of production will always and has always been high.”
Dr Alleyne urged the government to monitor whether the closures become a pattern.
“You don’t really want that, unless the businesses are transitioning into something else where you can put persons into jobs. Just picking up and leaving, it will have an economic impact… you would have less and less control,” he warned.
While successive administrations have spoken of economic diversification, Dr Alleyne argued that this must be realistic.
“My notion of diversification in the manufacturing sector is more in the level of high-end, technologically based products… When it comes to mass production, that’s not going to be viable. The cost of living, the cost of energy… are way higher than most other countries across the Caribbean and obviously across the world.”
In recent years, ANSA McAL has invested millions of dollars into its Grenada operations, under its Sissons Paints Grenada Ltd (SPGL) brand. Grenada is considered an LDC in the regional trade bloc.
Dr Scott-Joseph stressed that Berger itself was not to blame for its decision.
“The company… it’s no fault of them… it’s a fault of the system. The intention of CARICOM is legitimate… but… there’s something called unintended consequences,” she said, pointing to the absence of a compensation mechanism for countries like Barbados facing industrial displacement.
She warned that the impact would extend beyond job losses.
“We will have to be importing, which shifts our dependence now. This brings foreign exchange into play… The impact… would extend throughout the macroeconomy… to some extent… on our current account and other multiplier effects.”
But she predicted there would be no immediate price impact for consumers, adding that government’s primary concern should be the tariff framework itself.
Both economists agreed that the development underscores the need for CARICOM to revisit and refine its trade arrangements to ensure that regional integration does not unintentionally disadvantage more advanced member states like Barbados.
(SB)
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