DISCUSS THE ECONOMIC AND POLITICAL RELATIONSHIP BETWEEN GUYANA

AND THE US USING THE THEORY OF MERCANTILISM.

“The great economic error of mercantilism is the belief that foreign buyers are great but

foreign sellers are not, and thus are barriers to imports necessary. For a nation at large, this

error can be extremely costly because it dooms producers in the home country to inefficient lines

of production and foists unnecessarily high prices on consumers.”1

At the outset, I wish to set out briefly what the paper hopes to achieve and how it intends

to do so. The paper will indicate that while the theory of mercantilism on the face of it may

appear outdated - and in a vacuum, cannot adequately characterize the current economic and

political relationship between Guyana and the US, it offers insight into how mercantilist theories

still have instructive value, even in the current “free-trade” liberalist environment. It concludes

that mercantilism still has a place in economic theory especially when assessing the relationship

between Guyana and the United States of America. The paper will give a brief summary of

mercantilism and its development, define the key terms, expound on the historical nature of

imperialism and its impact on the Guyana-US relations and examine where the mercantilist

theory diverges from the current state of trade in Guyana.

At this juncture, it is imperative that we first define mercantilism as it is the economic

theory under discussion today. Mercantilism which is a term coined by Adam Smith2 is used to

describe the system of political economy that sought to enrich the country by restraining imports

and encouraging exports. This system dominated Western European economic thought and

policies from the sixteenth to the late eighteenth centuries. The goal of these policies was,
1
Llewellyn H. Rockwell Jnr.; Mercantilism, USA; (2018) Mises Institute - Austrian Economics, Freedom and Peace
2
Allen, William R. “Mercantilism.” In John Eatwell, Murray Milgate, and Peter Newman, eds., The New Palgrave: A
Dictionary of Economics. Vol. 3. London: Macmillan, 1987. Pp. 445–448.
supposedly, to achieve a “favorable” balance of trade.3 At the basic level, to put this in

perspective, a local mercantilist view of the economic and political relationship between Guyana

and the US would mean that Guyana should export more than it imports and accumulate revenue

through this system.

It is no secret that Guyana depends a great deal on international trade to keep the

economy viable and growing. The World Trade Organization (WTO) in its annual report 20184

indicated that more than 55% of Guyana’s GDP comes from international trade and only 25% of

it comes from trade with other CARICOM countries. Of the 55%, more than 25% comes from

the US. Naturally this makes the United States of America by far, Guyana’s largest trading

partner.

Guyana’s trade experience is steeped in Guyana’s colonial and post-colonial experience.

It has been argued elsewhere that during the period of the 16th to the 18th centuries when

mercantilism was dominant, international trade was used by the colonial authorities to acquire

wealth and power.5 The thinking was simple; countries that ran a trade surplus had more wealth

to accumulate than those who had a trade deficit. It was the states responsibility to provide

security and wealth was the means by which to do so; therefore the state played an integral role

in directing trade relations.

Specifically, one important tenet of mercantilism was the belief that the export of

agricultural products and raw materials yielded far less returns than manufactured goods and thus

mercantilists focused heavily on manufacturing exports. Considering the Guyana experience,

3
David N. Balaam, Bradford Dillman; Introduction to International Political Economy (6 th ed.); 2013; Routledge
ISBN-13; pg. 14-34
4
World Trade Organization – Guyana Profile; sourced from https://www.wto.org/ english/thewto_e/ countries_e/
guyana_e.htm; February 26th 2019.
5
Rawle Lucas; Trade and the International Monetary System; Stabroek News; February 26th, 2017
there has been a steady emergence and dominance by new liberalist means of thinking about

trade, which have supplanted in some places and combined with mercantilist principles in some

others. The liberal view became stronger over time and the view that there should be no

restrictions to trade has gained international consensus, especially with the formation of the

World Trade Organization (WTO). Today the International community uses a mixture of both

liberalist and mercantilist trade regimes and this is analogous to the Guyana-US trade

relationship today.

According to the U.S. Department of Commerce6, Guyana recorded a USD 148.5 million

merchandise trade surplus with the United States in 2013. Furthermore, it noted that agriculture

and mining are Guyana's most important economic activities, with sugar, bauxite, rice, and gold

accounting for 70–75 percent of export earnings. However, the rice and sugar sectors have seen

declines over recent years, which have caused Guyana to go from a trade surplus to a trade

deficit, which runs counter to the tenets of mercantilism. However, it has been convincingly

argued that this is not all together a bad thing for a country.

Lucas observes that Countries with trade surpluses also appear to have the highest

median per capita income when measured in purchasing power parity. It would appear therefore

that the view of the mercantilists about the importance of manufactured goods in the export

product mix remains valid today. The implication being that while many items needed for

economic activity are not being imported on the same quantities as before, on the face of it, trade

deficits do not necessarily hinder growth because the Guyana economy was still able to grow,

albeit at a slower pace.7 So clearly there is a solid basis for the view that a country can still

6
US Department of Commerce; Guyana Profile; Sourced from https://www.usa.gov/federal-agencies/u-s-
department-of-commerce’; March 1, 2019
7
Rawle Lucas; Is Free Trade a Myth; Stabroek News; 8th May 2016
thrive if it does not strictly adhere to mercantilist trading practices and continues to trade widely

nonetheless.

Conversely, the WTO Secretariat8 recently concluded that Guyana has taken important

steps to liberalize its trade and investment regimes in the last few years, enhancing its integration

into the global economy, but needs to make further efforts to increase its competitiveness while

also seeking to diversify its production and export base to face a possible further erosion of trade

preferences. The report says that Guyana’s economy, now dependent to a great extent on a few

natural resources, such as sugar, gold, bauxite and rice, has been growing at a very slow pace in

recent years despite the reform efforts undertaken and needs to continue along the path of

“progressive liberalization”.

With the preceding in mind, it is clear that the Guyana-US political and economic

relationship is being nudged willingly into a more free-trade liberalist regime, but it is still

buoyed by tenets of mercantilism, albeit a broader view of its theories. In-keeping with the

findings of the WTO it can be argued that Mercantilism in its more modern form is not mutually-

exclusive conceptually or contradictory to liberalism in the context of Guyana-US trade

relations, and the theory that is most beneficial to Guyana may require the selection of various

aspects of both theories to arrive at one consistent and uniformed machinery.

8
World Trade Organization – Guyana Profile; sourced from https://www.wto.org/ english/thewto_e/ countries_e/
guyana_e.htm; February 26th 2019.
DISCUSS THE ECONOMIC AND POLITICAL RELATIONSHIP BETWEEN GUYANA

AND THE US USING THE THEORY OF MERCANTILISM.

Name: Nellon Mckenzie

Programme: International Relations
Course: Global Political Economy
Lecturer: Rawle Lucas
Course Code: IRL 3209
USI: 1015825
 REFERNCES

Llewellyn H. Rockwell Jnr.; Mercantilism, USA; (2018) Mises Institute - Austrian Economics,
Freedom and Peace

Allen, William R. “Mercantilism.” In John Eatwell, Murray Milgate, and Peter Newman,
eds., The New Palgrave: A Dictionary of Economics. Vol. 3. London: Macmillan, 1987. Pp.
445–448.

David N. Balaam, Bradford Dillman; Introduction to International Political Economy (6th ed.);
2013; Routledge ISBN-13; pg. 14-34

World Trade Organization – Guyana Profile; sourced from https://www.wto.org/

english/thewto_e/ countries_e/ guyana_e.htm; February 26th 2019.

Magnusson, Lars. Mercantilism: The Shaping of an Economic Language. London: Routledge,

1994.

Rawle Lucas; Trade and the International Monetary System; Stabroek News; February 26th,
2017

US Department of Commerce; Guyana Profile; Sourced from https://www.usa.gov/federal-

agencies/u-s-department-of-commerce’; March 1, 2019

Rawle Lucas; Is Free Trade a Myth; Stabroek News; 8th May 2016

Salvatore, Dominick, ed. The New Protectionist Threat to World Welfare. New York: North-
Holland, 1987.

Smith, Adam. The Wealth of Nations. Edwin Cannan edition. 1937. Available online
at: http://www.econlib.org/library/Smith/smWN.html; February 18th 2019