The devastating 7.0 earthquake that struck Haiti on January 12th would have been a harsh blow for any economy, but was particularly acute for the poorest nation in the western hemisphere. As politicians and aid groups around the world begin to focus on rebuilding the economy, trade must be part of the solution. The small island nation is naturally dependent on international trade for many modern consumer goods and services. Not trading is not an option.

Haiti is a country of 9.0 million people on 10,714 square miles, slightly smaller than the state of Maryland. It is the world’s 147th largest country in land area, 20 percent larger than Israel, 10 percent smaller than Belgium and 60 percent of the Dominican Republic, with which it shares the Caribbean island of Hispaniola. Skilled labor is in short supply, while two-thirds of the labor force does not have formal jobs and 80 percent of the people live below the poverty line. Only 53 percent of the population 15 years old and over can read and write. The population is growing 1.8 percent per year with 38.1 percent of the people 14 years old and younger.

Per capita annual gross domestic product (GDP) on a purchasing power parity basis is $1,300, ranking it 203rd in the world, about the same as midlevel sub-Saharan African countries and far behind the Dominican Republic at $8,200 per year. Agriculture accounts for 66 percent of the 3.6 million labor force, but is only 28 percent of GDP. About 28 percent of the land is arable with 40 percent of that in permanent crops like coffee and mangoes. The World Bank estimates in 2008 Haiti produced 43 percent of its food needs. Estimates from the Foreign Agricultural Service of USDA show that annual rice acreage harvested has been relatively stable over the last 20 years in a range of 125,000-135,000 acres in most years, but yield per acre has trended lower from 2,000 pounds per acre in 1989-93 to 1,700 pounds per acre for 2005-09. Consumption of rice increased from an average of 184,000 metric tons (MT) in 1989-91 to 403,000 MT in 2007-09 as rice imports increased from an average of 117,000 MT per year in 1989-91 to 315,000 MT for 2007-09.

The CIA World Factbook summarizes Haiti’s situation in an economic overview, “Haiti suffers from high inflation, a lack of investment because of insecurity and limited infrastructure, and a severe trade deficit…The government relies on formal international economic assistance for fiscal sustainability.” Haiti has a low per capita GDP because it lacks the basic legal systems, property rights and education programs found in economically successful countries.

The WTO’s Trade Profile for 2009 reports Haiti has relatively low import tariffs compared to other developing countries. For agricultural goods the simple average bound tariff is 21.3 percent with the average applied tariff at 5.7 percent. For non-agricultural goods tariffs are somewhat lower with bound tariffs at 18.3 percent and applied at 2.4 percent. Non ad-valorem tariffs are bound on 9.3 percent of tariff lines, but none are applied. In 2008 merchandize trade imports were $2.148 billion while merchandize exports were only $490 million. Commercial services exports were $193 million while imports were $558 million. Haiti must increase exports to earn funds to buy necessities in other country markets.

In 2006 the U.S. Congress passed The Haitian Hemispheric Opportunity Through Partnership Encouragement Act (HOPE) to provide new trade preferences for textile/apparel products. An extension was passed in 2008 (HOPE II). According to an analysis by the Heritage Foundation, apparel makes up about two-thirds of Haitian exports and nearly a tenth of Haiti’s GDP. Discussions in the Doha Round of WTO negotiations have included removing all tariffs on imports from the least developed countries. That would be a great benefit to Haiti today and long term.

Haiti can also pursue an open trade policy by removing remaining import tariffs. Import tariffs increase the cost of living for desperately poor people, reduce the benefits of international assistance and raise the cost of doing business for companies that want to compete in international markets.

Haiti brings three assets to the trade table: a convenient location to North American and European markets; low cost labor; and two deep water ports – now in need of major repairs. Haiti must become part of internationally competitive value chains to use its existing assets. To date, Haiti’s trade assets have not been able to offset its liabilities of uncertain electricity, failed police and judicial systems, lack of infrastructure like roads and a shortage of skilled labor.

Governments and non-government organizations have begun calling for massive new aid programs to help Haiti rebuild. Bret Stephens writing in the Wall Street Journal citing analysis from a 2006 report Why Foreign Aid to Haiti Failed by the National Academy of Public Administration wrote that foreign aid should be stopped because, “it will foster the very culture of dependence the country so desperately needs to break.” While stopping aid totally is not likely to happen, it does address the reality that doing more of the same will not likely result in a different outcome. The U.S. Secretary of State’s website reports that most foreign aid is now directed through private agencies and contractors to ensure funds are used as intended.

Haitian agriculture has to be part of any economic rebuilding plan. Down-trending rice yields indicate that agriculture suffers from all the problems that affect the rest of the economy. Total U.S. agricultural exports to Haiti in 2008 were $403 million, with rice accounting for almost half at $197 million. Wheat was next at $64 million followed by poultry meat at $28 million and vegetable oils at $27 million. Imports to the U.S. of agricultural products from Haiti in 2008 were only $22 million.

To recover from this latest tragedy Haiti will need aid to meet short-term daily needs and build basic infrastructure that will attract international investors and importers of products that cannot be efficiently produced in the country. Developed countries have a role to play in opening market to Haitian products and the Haitian government has to commit to open markets and security for investors. With those starting points, the long road to recovery and economic growth can begin.