Trade Ministry gives TCL a lifeline

By Joel Julien

joel.julien@trinidadexpress.com

THE Government of Trinidad and Tobago has successfully obtained a suspension of the Common External Tariff, ena bling an increase in the duty rate on other hydraulic cements from five per cent to 20 per cent for the entire next year, with the aim of safeguarding Trinidad Cement Ltd.

However, the Trinidad and Tobago Contractors Association (TTCA) says while it supports the decision it has called on TCL not to take advantage of the situation by 'unreasonably or unjustifiably" increasing its prices.

The Ministry of Trade and Industry secured approval from the Council for Trade and Economic Development (COTED) of the Caribbean Community (Caricom) during its 57th meeting which was held in Guyana.

COTED had previously approved a suspension of the CET and the increase of the rate of duty to 50 per cent on other hydraulic cements of HS 2523.90.00 for the one year period, January 1 to December 31, 2021.

This rate was however reduced following a special meeting of COTED on December 10, 2021 where the suspension of the CET and an amendment of the rate of duty to 20 per cent on other hydraulic cements for the one year period, January 1 to December 31, 2022 was agreed.

The measure, the Trade Ministry, said was aimed at ensuring the continued viability of the local cement manufacturing industry.

According to the Trade Ministry, TCL, the lone cement manufacturer in T&T, experienced a 19 per cent decline in domestic sales volumes for the period 2018 to 2022.

TCL also generated approximately US$79 million in net foreign exchange earnings to the Trinidad and Tobago economy, over the 2020-2022 period.

The Trade Ministry stated that TCL also experienced a 16 per cent increase in fixed costs for the period and this year was also faced with an increase in its variable cost of approx- imately five per cent.

'Now notwithstanding this the company continues to invest. In 2022 the company invested US$4 million and is expected to inject an additional US$5 million by 2024 and these investments are aimed at improving the efficiency and capacity of its fac - tory as well as outfitting its plant to comply with environmental development goals to reduce carbon emissions and utilise alternative sourc- es of energy," permanent secretary Randall Karim, who represented the Trade Ministry, said.

Trade Minister Paula Gopee-Scoon was in London at the UK-Caribbean Trade and Investment Forum (TIF) at the time of the COTED meeting.

'As member states would appreciate according to the established Caricom policy where imports of a like product from outside the community are deemed to be competing with a regionally manufactured good a certain level of protection by the way of the CET is usually afforded," Karim stated 'And as member states are also aware cement from extra regional sources have been entering the domestic market as other hydraulic cement and other hydraulic cement is a perfect substitute for cement pro- duced in the region," he said.

Karim said the suspension of the CET and the 20 per cent increase are the government's way of seeking to provide support to the industry and to continuing the existing status quo.

Karim said the request is being made in accordance with Article 83:3 (f) of the revised Treaty of Chaguaramas which states 'In its consideration of an application to suspend the Common External Tariff on an item, COTED shall, where applicable, take into account whether...there is need to support an industry in that Mem- ber State." 'The government has recognised the need to pursue policies that will continue support the local industry and the increased rate of duty on other hydraulic cements is intended to assist by promoting the import substitution policy by providing a possible source of revenue for the government," Karim stated.

'In addition, through support given to the industry both production and exports have increased allowing the local manufacturer to maintain its operations which sustain employment levels to over 300 persons in Trinidad and engagement with over 450 small contractors for servic- es," he stated.

The Trade Ministry said it consulted with the T&T Chamber of Industry and Commerce as well as the T&T Manufacturers Association on the situation.

The TTCA in a letter dated November 17 supported the decision stating the reason for doing so was two-fold.

'Cement is a critical input material to the construction sector and as such the TTCA would support continued local manufac- turing of high-quality cement," it stated.

'The TTCA recognises the sustained generation of local employment that local manufacturing of cement brings to the construction sector, which also in turn generate much needed foreign exchange currency to the country," the TTCA stated.

The TTCA however said is also encourages 'fair competition among players in the industry, as this keeps the price of cement at competitive levels in the market." 'The TTCA therefore agrees with the reason given by your Ministry in setting the CET and this can be reviewed in time as the cement market changes overt the next year," it stated.

'However, while we support the Ministry's initiative in the regard, we trust that the sole local manufacturer of cement in Trinidad and Tobago does not view this step as an opportunity to unreasonably or unjustifiably in crease its prices with the attending negative impact on the al- ready soaring inflating pressures on the construction sector," the TTCA stated.

TCL responds

TCL also submitted its comments on the situation.

'At the outset, we at TCL wholeheartedly acknowledge the policy support provided by the Ministry of Trade and Industry, through the application of a suspended CET of 20 per cent and the maintenance of the Quota and Licensing system for Financial Year 2023. These meas- ures have afforded TCL impor tant market support, in the face of domestic market volumes which remain below pre-Covid levels, as well as increasing man- ufacturing cost, and intensified competition in our Caricom ex- port markets," it stated.

TCL said its positioning as a "significant regional supplier of cement to Caricom markets", continues to depend on the Trinidad and Tobago market providing the volumes required to generate the economies of scale necessary to sustain cement operations.

'The Dominican Republic now accounts for 10 per cent of the volumes in the Jamai- ca Market completely filling the Jamaica quota. At the same time, the threat of supply volumes from Turkey remains an ever-present risk to TCL in terms of regional market competition and market price stability. The potential market threat posed by imports from these two sources in the coming year, pose material risk to TCL in export markets, and without more, also presents heightened risk to the domestic market as well," it stated.

'While TCL's operations have seen some benefit from these declining freight rates, the real benefit is on final cement im ports, far more than imports of intermediate inputs used by TCL in cement manufacture. If the potential market threat from extra regional imports materialises, TCL may be further challenged, as imports from these cheap extra- regional sources will further benefit from these lower freight rates, and potentially create un- fair competition," it stated.

TCL said it has achieved sustained improvement in its plant's technical efficiencies over the past several years.

'However, the prevailing and projected market conditions, will render it difficult to sustain TCL's socio-economic contribution to Trinidad and Tobago, and to play our role as a significant Caricom manufacturer, without the bene- fit of a suspended CET of at least 25 per cent, coupled with the maintenance of the import quota and licensing regime at the reduced quota fill level of 44,000 MT/annum," it stated.

Trinidad Cement Ltd's Claxton Bay compound