Bahamas rejects US trade demand
The United States has called for The Bahamas to immediately drop all of its duties on US products coming into this country on “day one” of The Bahamas’ accession to the World Trade Organization (WTO) – a request which the government has rejected on the basis that it could wipe out the domestic economy, according to the minister of financial services.
Disclosing some of the background to The Bahamas’ bilateral negotiations over the terms of its bid to join the WTO, Ryan Pinder said that the US government has not been “amenable” to The Bahamas’ phasing in tariff reductions on US goods. “Phasing in” refers to the ability to reduce the duty rate levels over a number of years.
However, he suggested that the government has struck back on the issue, suggesting that a phased-in reduction of tariffs on US goods – the vast majority of all imported goods coming into The Bahamas – would be more appropriate.
He was speaking at a meeting on Wednesday between members of the Bahamas Chamber of Commerce and Employers Confederation and David Shark, deputy director general of the WTO, who is in the country to engage with stakeholders over The Bahamas’ accession process.
Among the requirements of joining the WTO is that The Bahamas lowers its duty rates on goods imported into the country. It is this requirement that contributes in part to the decision by the government to push ahead with introducing a new form of revenue collection in the form of value added tax (VAT), although the WTO deputy director said the WTO itself has no preference about what form of tax the government chooses to replace former duty taxes with.
In a question and answer session, Pinder said that how quickly and how low The Bahamas would have to reduce its duties is not a decision of the WTO, but one which is determined in bilateral negotiations with other WTO members.
Pinder said, “The EPA (Economic Partnership Agreement trade deal with Europe) is phased, and they phase to zero, so at some point in time there will be no duty paid on items sourced out of the EU, but it’s not a huge deal because I think there’s $8 million of revenue a year to the government on EU products.
“Now the US: day one that’s what they want. Imagine if they said let’s phase it to zero like the EPA, because that’s what they’ll use as a precedent: You negotiated the EPA, you phased, you phased to zero. So imagine if we phase to zero (on goods coming from the US – you would not have a domestic economy because you would not have 35 percent on readymade items anymore, you’d have zero. So you have to be careful what you push for at times.”
He added: “Right now the US is taking the posture that they want on-day-one reductions. They’ve taken the posture they want cuts straight across the board. We’ve taken the position we’re not going to negotiate on that basis but we will negotiate trying to protect domestic industry.
“I think they got the point but there’ll be further negotiations on that. So they haven’t been too amenable to phasing. We anticipate that in some time in the future we will have to re-negotiate the Caribbean Basin Initiative on a bilateral basis which is a whole other issue with respect to the US and their trading regime,” said Pinder.
In terms of how the government would make up the lost revenue, the government has a plan of sorts in place in the form of the implementation of value added tax, or – if the private sector has its way — some other form of alternative taxation.
However, replacing the revenue lost to the government when duties are reduced under WTO accession does not address the challenge of how the reduction in duties would impact local manufacturers, who rely on the fact that the goods they produce have high rates of duty applied when they cross the border.
In this regard, seven months on from when he announced that the government would be undertaking a study to examine the “vulnerabilities and opportunities” that would arise for Bahamian businesses from joining the WTO, Pinder said on Wednesday that the government is now moving to shortlist who will conduct this study so the government will have a clearer picture of the impact on industry of acceding to the WTO.
At present, Pinder has stated a goal of December 2014 for The Bahamas to complete its lengthy accession process, but has also indicated that the process could well continue into 2015.
In an interview with Guardian Business on Wednesday, Shark touted the benefits of WTO accession. He said that WTO members have been seen to have recovered more quickly following the global economic downturn, as a result of having a more certain environment for investment.
“The Bahamas is already heavily integrated into the international trading system, so for a country that’s as deeply enmeshed in international trade as the Bahamas the better question is ‘Why not (join)?’
“As a member of the WTO, you get to level the playing field with some of your neighbours. You’re the only CARICOM member who’s not a member of the WTO, and when companies are trying to decide where to invest, being a member of the WTO provides assurances to investors of the conditions of their investment… and all of that matters a lot in terms of being a part of global supply chains.
“The rules of international trade, whether you are a member of the WTO or not, affect you, so why wouldn’t you want to be at the table in negotiating those rules?
“It’s protection against protectionism; if someone does something that causes you harm you can challenge them whether you are a large or small country, under the WTO system,” he added.