The Greatest Challenge

First Published: 2006-01-20

In mid-December Leslie Miller attended a World Trade Organization (WTO) meeting in Hong Kong and his comments were reported in a Tribune article on December 17th.

* "If the country was to fully implement some WTO positions – like the elimination of tariffs on goods from the European Union – the Bahamas would be 'wiped out' overnight…where would we get compensation from for those lost funds?" WTO demands could cripple our economy…"It's frightening."

* This comment was followed with the statement that the Bahamas "does not export anything – except rum – in substantial quantities" and it will eventually lose the present favorable tariff treatment for rum exports from the Bahamas to the European Union.

A more informative appraisal was made by the "Bahamians Agitating for a Referendum on Free Trade (BARF)" and reported in the Tribune on January 6, 2006. BARF says the Bahamas should withdraw its membership application in the WTO since "joining would 'stultify' economic growth and retard national development."

Background.

As a background to this discussion it is helpful to know that the WTO was formed in 1995. It incorporates two regimes: the General Agreement on Tariffs and Trade founded in 1944 by the United Nations and the General Agreement on Trade in Services (GATS) in 1995.

The latter applies the principles of "most favored nation" and "national treatment" developed under GATT.

* The Most Favored Nation clause requires each country to grant to each other member country the same tax, legal and regulatory framework that it extends to its most favored trading partner.

* The National Treatment clause requires each country to grant each other country and its citizens the same inducements, legal privileges and protections that it extends to its own citizens.

GATS differs from GATT insofar as it applies to 12 services that include business, financial, health, tourism and retail distribution services. As was the case with GATT, GATS is built upon the principle of progressive liberalization. Members are mandated to undertake periodic negotiating rounds to improve their commitments to freer trade and thus achieve a progressively higher level of liberalization.

The BARF Position.

BARF argues that becoming a WTO member and embracing its principles would "erode sovereignty and ensure that some law-making power was transferred to the WTO." This would happen because the Bahamas is such a small country that it cannot realistically protect its self-interests within WTO.

Fayne Thompson is quoted as saying "Not joining is 'the lesser of two evils' as the Bahamas and its economy is faced with 'a greater challenge in joining than we have in opting out.'"

In April 2003 the Tourism Taskforce on Trade Liberalization, a group of business and labour associations, delivered a formal report to the Trade Commission that dealt with the pending Free Trade Agreement of the Americas. The rationale expressed on FTAA is equally applicable to WTO.

That Report meticulously listed the pros and cons of joining or not joining. Quite frankly no issue or group of issues would cause one to choose one or the other with great enthusiasm. Nevertheless, the Report recommended joining but with a concerted effort to delay the imposition of the National Treatment clause.

However, the Report very clearly identified an even greater challenge.

The Greatest Challenge.

The Report produced "never before published" data on the profitability of a traditional hotel in the Bahamas versus comparable hotels in the Caribbean and North America. This data dramatically showed that the high operating costs in the Bahamas reduced Gross Operating Profits from 59 to 74 percent below the other two locations.

The Report concluded that –

1. The Bahamas needs both foreign direct and domestic investment to produce sustained growth.

2. It is a high cost country and this puts it at a competitive disadvantage in all businesses including tourism, the mainstay of its prosperity for the past 50-years.

3. It must take concerted action to improve its competitive position for all businesses; and it identified areas such as education, privatization and the rule of law where action should be taken. The purpose of these measures was to avoid even more drastic remedial measures.

4. It must change and this includes its "norms of behavior, conventions, and codes of conduct".

5. Its people must become its greatest asset.

6. It must become a desirable place to do business.

The Report did not result in a formal public response or statement by the Trade Commission.

Since 2003 investors have made significant commitments to hire Bahamian workers in connection with their approved expansion programs. A major problem is the hiring of competent Bahamian workers; and this has caused business and labour to form the Coalition for Education Reform and address point #5 above. The result was "Bahamian Youth: The Untapped Resource" a report presented to the Ministry of Education in June 2005.

The Coalition analyzed the Government's own BGCSE report for 2004 on what students "know, understand and can do after completing three years of high school study" and agreed with that report that the present situation is "unacceptable." The Coalition made 14 specific proposals.

It is all well and good that the Hon. Leslie Miller, the Minister of Trade and Industry, and BARF address the principles of "Most Favored Nation" and "National Treatment."

But it would be even more productive if they focused on how the Bahamas will prosper in the global market of the 21st Century. This is the "Greatest Challenge." The Bahamas can hide from this challenge only at great peril.

The Nassau Institute

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