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The Bahamas & the WTO: a Marriage made in Heaven or in Hell?
21 October 2012
The general answers to the captioned question are implicit in my previous Blog because The Bahamas is a developing country and small island developing state in particular, so all relevant statements apply. We are patently a small country with a small and undiversified economy, a limited enterprise stock and few established firms with globally competitive products. In thinking through what we are likely to experience as a direct result of WTO membership, I should think the following would capture most, if not all consequences, desirable and undesirable.
First, specific benefits likely to accrue to us derive from Free Trade and the actions we will be forced to take as a new member to comply with WTO rules:
- Our most prestigious asset is our strategic geographic location, which should be attractive for many firms around the world.
- We will be forced to open our economy to competition from near and far, which should result in more and more aggressive companies entering the country's enterprise stock.
- Our enterprise stock will expand with two positive knock-on effects: the increase should provoke an industry shake-out that sees the end of under-performing, bloated, public-sector enterprises, like Bahamasair and BEC but the net amount of firms will increase.
- Our expanded enterprise stock should mean more jobs for Bahamians.
- Our expanded enterprise stock should mean enhanced opportunities for suppliers in the form of new, entrepreneurial firms.
- More jobs should contribute to economic growth and an increase in living standards.
- More companies should also mean a wider selection of products and better products.
- More companies and more products should result in lower prices for Bahamian consumers, also because firms face a higher incentive to cut costs.
- We will be forced to remove all tariffs on imports which should enable us to buy cheaper imports.
- Our specialist firms (producers of salt, aragonite) should enable an increase in economic welfare because they would specialise in producing goods where they have a lower opportunity cost (no raw materials imported, etc). Morton Salt should be fine because its German parent (K&S AG) is already a global leader in the field (prime competitor being the China National Salt Industry Corporation).
Second, specific disbenefits also derive, unsurprisingly, from Free Trade:
- The increase in competition from foreign firms will force some domestic firms out of business - this does not bode well for either the tourism or fishing industries (at the moment, we find it difficult to protect our fish supplies from the Dominicans).
- The enhanced opportunities for suppliers in the form of new, entrepreneurial firms is likely to challenge us severely because of the low rate of entrepreneurialism in the country (and which may mean foreign entrepreneurs filling the void).
- The industry shake-out will see the end of under-performing public-sector enterprises, but this is likely to be difficult and could get nasty.
- We would be an ideal 'dumping ground' for cheap or unwanted products (hopefully, not like Jamaica, which had to endure rotting chicken parts from the US), even though dumping is illegal ('selling goods in a foreign market for less than their cost of production or below their fair market value', Hill, 2010, p.706).
- The Bahamas is indebted to the US generally (e.g. technical support for drugs interdiction; and financial, through the Washington-based IADB, though owned by Member States), so would be reluctant to challenge the US (and perhaps, UK).
- The Bahamas possesses little in terms of negotiable assets - our most valuable asset being our location, as noted - so unless firms are after interested in exploiting this asset, trade negotiations will be one-sided.
- We have very limited human and technical resources, so our bill for external expertise (consultants, advisors, etc) will increase significantly.
- We do not have the personnel to cope with the heavy schedule of WTO meetings so will miss out on key negotiations.
- We would be estopped from protecting any of our 'infant industries', e.g. agriculture, so they are likely to be eaten up by the competition. Coincidentally, agriculture is one of the few sectors in which the WTO does not have strong agreements but one in which developing countries enjoy comparative advantage (to date, the WTO has encouraged little or no net liberalisation in this sector, which suggests more than a little bit of disingenuousness on the part of WTO).
- We must presume a dispute at some point, but dispute resolution will be costly and time-consuming.
- The WTO has been accused of 'creeping legalisation'; and their trade negotiators routinely publish vaguely worded final texts so we will spend an inordinate amount of time and energy interpreting policy documents.
- Once on-board, the WTO will ignore our specific plight, so any particular concern we have will have to be dealt with in their costly and time-consuming dispute resolution system (see 8 above).
- We should not look to the WTO to define our trade policy; trade policy, like charity, begins at home, so we should start with a coherent, well-thought out trade policy that has our specific interest at its core.
- TRIPS (the agreement on Trade-Related Intellectual Property Rights) will make pharmaceuticals more expensive.
- Inbound firms are likely to clash with unions and our collective bargaining mentality, which is not consistent with progressive enterprise.
- Conflict may also arise because we have a limited workforce with limited skills and capabilities so firms may want to import workers because firms will discover 'the missing middle' in our country.
- It will be difficult for us to increase the number of entrepreneurial firms, a badly-needed initiative because the threat of new entrants will have been removed by larger, more powerful, foreign firms.
- Since its founding in 1995, the WTO 'has displayed other worrying signs ... there has been an underlying bias against developing countries' (Sally 2002). The Bahamas is not likely to receive special treatment.
- Like all current WTO members, bar Australia, the Bahamas has no system in place 'toassess the costs and benefits of national trade policies', so our decisions are likely to be ill-informed, reactive and lacking introspection. We should strive to be 'thorough, deliberative (in our) consideration of public issues rather than (taking) unreflective, precipitate action taken on the basis of scant knowledge' (Sally 2002, quoting Lord Bryce).
This is not a comprehensive list of consequences of WTO membership for The Bahamas but the list contemplates the most likely consequences, in my view. We could delude ourselves into thinking that the time is right to join the club OR we could step back, take a long hard look at the implications of membership and delay indefinitely our decision. An examination of other countries' experiences, particularly with regard to dumping/anti-dumping, would be an instructive place to start:
Of course, it is never possible to predict all unforeseen and unintended consequences but from what we know and the reasonable inferences we can draw currently, we should be able to make up our minds preliminarily as to whether WTO membership will be a marriage made in Heaven or in Hell for our beloved Bahamas.
P.S. If you have a spare hour, you may wish to watch 'Life and Debt', 'a feature-length documentary which addresses the impact of the International Monetary Fund, the World Bank, the Inter-American Development Bank and current globalization policies on a developing country such as Jamaica':