COMMERCE DEPARTMENT SAYS: Guest workers help maintain consumer prices within reach

Amid brewing debates on the eventual exodus of foreign workers from the Northern Marianas, economic experts have warned that any changes in the demand for consumer items would have an immediate effect on the prices of goods sold in the local market.

Acting Commerce Secretary David S. Palacios said this is especially true in an open market system like that of the CNMI’s where even a fluctuation in the volume of either the demand or supply would already spell a big difference in prevailing market prices.

“In a market system, changes in either demand or supply bring about changes in the amount of goods sold. Obviously, the large number of foreign workers on the island plays a role in maintaining consumer prices,” Mr. Palacios said.

A bigger bulk of demand for consumer goods in the Northern Marianas come from the foreign worker communities, which embrace over 50 percent of the total CNMI population.

This means that any significant reduction in the number of nonresident workers in the CNMI would result to sky-rocketing increases in the prevailing local prices of consumer items, especially those of imported goods.

Mr. Palacios explained shipping and transportation costs will shoot up when demand for imported good declines, which will bring about higher prices for imported consumer items.

At present, the number of foreign workers in the CNMI and the existence of the apparel manufacturing industry on Saipan facilitate a stable range of consumer prices since the current demand for imports and the finished garment exports support the island’s inbound and outbound cargo segments.

In a previous interview, Marianas Pacific Distributor resident manager Joseph V. Santos disclosed issues that cloud the stay of foreign workers in the Northern Marianas make it more difficult for business owners and operators to project whether consumption will grow or decline in the next years.

The possible relocation of Saipan’s garment manufacturing sector, coupled with the departure of thousands of its workers, will eventually drive up the transportation costs for Saipan imports, according to impact studies commissioned by the CNMI government.

Saipan’s container traffic is heavily imbalance with nearly three times as many loads bound for the island than originating in the island. The net result of these inefficiencies and lack of scale means higher cost to carriers.

Because 90 percent of inbound but only 20 percent of outbound traffic is loaded with cargo, carriers are faced with costly container repositioning charges. In fact, Sea-Land’s current ocean freight rate for grocery items to Saipan from the U.S. West Coast is over 30 percent higher than to Guam.

Analysts are wary that prices of imports will shoot up when cargo ships start leaving the CNMI empty due to the garment sector’s pending pull out, which may even be aggravated when they start coming in half-full due to low demand from the local market following a possible exodus of foreign workers.

However, Mr. Palacios said other factors affect the quantity of demand for consumer items that include the level of disposable income, the price of both complementary and substitute goods, and consumer taste and preference.

Open market

At the same time, the commerce department believes the prevailing open market policy will continue to hold basic commodities within the reach of an ordinary Northern Marianas minimum wage earner, although at a higher cost particularly when demand has dramatically dropped.

The Northern Marianas market is open enough to allow the entry of new industry players in case existing businesses are considered selling items at higher price levels.

An open market policy could never allow overpricing of goods because it allows new players to come into the trading of the same goods if the existing merchants are perceived to be making a killing in profits.

These new entrants will most likely offer the same items at prices lower than that of the overpricing merchant. To stay in competition, the overpricing merchant will be forced to lower his prices to stay in the market.

Mr. Palacios stressed that an open market policy helps regulate the price of goods by enhancing the consumers’ control over price and quantity decisions.

At the same time, other measures had also been put in place by the CNMI government to protect the interests of both consumers and businesses in the Northern Marianas.

The Consumer Counsel of the Attorney-General’s Office had been established to coordinate preventive and remedial consumer protection programs, and to prosecute those who violate CNMI’s consumer protection laws.

The CNMI has a consumer protection law which guarantees that the public interest requires that consumers be protected from abuses in commerce which deprive them of the full value and benefit of their purchases of goods and services.