Trinidad and Tobago Economy - External Trade
Sources: The Library of Congress Country Studies
Trinidad and Tobago was very dependent on trade; export revenues from oil represented the major source of dynamism in the economy. More than any other factor, fluctuations in the world price of oil determined the country's annual trade performance during the 1970s and 1980s. The quadrupling of oil prices in 1973 provided Trinidad and Tobago with extremely favorable terms of trade; this pattern was reversed in 1982, when oil prices declined. Export prices also affected the country's productive base, as increased oil revenues encouraged the greater importation of goods and services that were previously produced locally, especially in agriculture. Between 1960 and 1980, Trinidad and Tobago's food import bill at current prices increased ninefold. Unlike other Commonwealth Caribbean countries, Trinidad and Tobago frequently attained annual trade surpluses because of its oil resources, a position that was also achieved when oil prices were depressed, as was the case in 1984 and 1985. In 1982 and 1983, however, unprecedented trade deficits were recorded.
Total imports in 1985 were valued at US$1.4 billion, well below the peak import level of US$2.4 billion in 1982. Imports were reduced in the mid-1980s through revised exchange controls that sought to stabilize the country's balance of payments, a goal that was generally achieved through large reductions in consumption items. In 1985 machinery and transport equipment comprised 30 percent of imports, followed by food at 20 percent, manufactured goods at 20 percent, chemicals at 10 percent, and the balance in various other categories. The country's level of food imports was high even for a Caribbean country. The absence of oil as a major import category further differentiated Trinidad and Tobago from its Caribbean neighbors. The structure of imports changed drastically in 1983, when the processing of imported crude oil was discontinued, which had accounted for as much as 30 percent of total imports. In 1985 the United States provided 39 percent of the country's imports, trailed by Britain (10 percent), Japan (10 percent), Canada (8 percent), Caricom (6 percent), and other West European and Latin American and Caribbean countries. Major changes in the origin of the country's imports also resulted from the termination of the oil-processing program. In 1981 about 26 percent of all imports had come from Saudi Arabia; after the discontinuation of the program, the Saudi share of total imports dropped to 0.1 percent. These events in turn directly affected the share of total imports from the United States, which increased from 26 to 42 percent over the same time period.
In the 1980s, Trinidad and Tobago sought to stabilize its balance of payments by reducing the flood of imports that had become customary during the previous decade. Unable to sustain that level of imports after 1982, the Chambers government introduced a new system of import licensing and a two-tier exchange rate that hindered the flow of Caricom goods. Jamaica was most affected by these maneuvers. In an effort to improve bilateral trade relations, the two governments signed the Port-of-Spain Accord in 1985. Trade did improve somewhat as a result and was expected to expand further with the unification of the two-tier exchange system in 1987. Nevertheless, in the late 1980s imports continued to be restrained by a restrictive import quota system--dubbed the "negative list"-- that completely protected hundreds of locally manufactured goods.
Exports totaled US$2.1 billion in 1985, or about 20 percent below the country's peak export performance of 1981. A marginal increase in exports and a significant reduction in imports produced a trade surplus in 1985 of US$750 million. Petroleum products continued to dominate export revenues, accounting for 79 percent of exports in 1985. Other major export categories included chemicals (13 percent), machinery (3 percent), and manufacturing (2 percent). The price of oil was the most important determinant of the structure of Trinidad and Tobago's exports. As the price of oil declined in the 1980s, so did oil's share of exports. Oil fell from 93 percent of exports in 1980, to 83 percent in 1983, and to 79 percent by mid-decade. The other major change in the structure of exports in the 1980s was the increased share for chemicals. As the new petrochemical plants opened in the early 1980s, chemicals rose from 3 percent of total exports in 1980 to 13 percent by 1985. The overwhelming share (63 percent in 1985) of the country's exports went to the United States market. Exports were also shipped to the EEC (13 percent), Caricom (11 percent), and various other countries, particularly developing countries. Inside Caricom, most exports went to Guyana, Barbados, and Jamaica.
Trinidad and Tobago benefited from wide access to foreign markets, often under numerous preferential agreements. As a former British colony, it enjoyed special access to Britain's markets through the Commonwealth of Nations (see Appendix B) and access to the EEC under the provisions of the Lomé Convention. Exports to the United States entered under three preferential programs: the Generalized System of Preferences, the Caribbean Basin Initiative (CBI--see Appendix D), and the 807 program (see Glossary), which was named after its corresponding Tariff Schedules of the United States number. Nonetheless, Trinidad and Tobago benefited little from the CBI's trade provisions. Despite providing 18 percent of the region's exports, the nation contributed only 3 percent of CBI exports and less than 1 percent of 807 program exports. Trinidad and Tobago gained preferential access to Canada's market through Caribcan, a 1986 Canadian trade initiative similar in scope to the CBI. Although total trade within Caricom was in decline in the 1980s as a result of the international recession, Trinidad and Tobago continued to enjoy a trade surplus with the region.
The drive for increased exports was bolstered in 1984 by the creation of the Export Development Fund, which was designed to improve marketing and finance for local exporters and to diversify into light manufacturing and nontraditional items destined for hard currency markets. Export competitiveness was also expected to increase as a result of the devaluation of the Trinidad and Tobago dollar in December 1985.
Data as of November 1987
NOTE: The information regarding Trinidad and Tobago on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Trinidad and Tobago Section information contained here. All suggestions for corrections of any errors about Trinidad and Tobago Section should be addressed to the Library of Congress and the CIA.