Saturday, December 13, 2014

The World Trade Organisation and The Bahamas!

The Minister responsible for Financial Services and Trade, The Honourable Ryan Pinder, resigned his post as Minister to take up a private post. This leaves his Ministry without a Minister. In addition, just previously to his resignation, the Director of his Ministry, was selected to head up the secretariat charged with producing a national development plan for The Bahamas. Without a doubt, international trade and integration for The Bahamas has been put under a very serious test: With or without the understanding that the ministry of finance has dual carriage for trade matters.

Over the last 15 years The Bahamas has been making greater steps towards becoming a member of the World Trade Organisation (WTO). This is an important step in the development for any country that wishes to become a member of this grouping. So far, the Bahamas is among a particularly awkward group of countries that are currently not members: Iran and Iraq are some other notable countries, with Russia officially joining in 2012.

Just for background information, the WTO has been around since the end of the Second World War. It was formerly called the General Agreement on Tariffs and Trade (GATT), before the conclusion of the 1996 Uruguay Round of world trade talks which then established a universal name for the grouping and tighter rules on goods and services. Before 1996 it was promoted as a post-war economic integration mechanism for European and North American countries and since then, it has been promoted even more so, but with more countries included along with their contentions and complexities.

The WTO is currently in the middle of a seemingly endless round of trade talks, which started in Doha Qatar in 2002. Having a round of talks in the Middle East, post 9-11 attacks and the US Middle Eastern invasion, was supposed to be the olive branch extended to the Middle Eastern world by Western powers (well, let's just say by the USA) as a way to show them "peace through trade”. Sort of like the US's Iraq invasion strategy of bombs and bread, with trade added to it.

More importantly, however, the idea that the WTO is a complex organisation is true to a great extent. Its rules based arrangements are designed purposefully to be intrusive on sovereign authority and sovereign economic policy making.

This international rules based mechanism, makes the interconnection and coordination of multi-national protocols and standards, based on traditions and customs as well as sovereign protection on industries deemed as sacred, difficult, when this system has to cater to the needs, the flexibilities and sometimes inflexibility of its members.

The position the Bahamas finds itself in at this stage by not being a member, can be good, or bad, depending on the premium placed on the economic position of the Bahamas and what Bahamians feel as their best interests for the future.

For one, not being a member makes you a pariah. Even though the Bahamas is a member of a lot of other international bodies and agreements and has a good political and economic track record, not being a member of this standard bearing group looks a little dubious. Along with being a pariah, doing business with international firms that expect a transparent system for them to invest, becomes problematic if national standards aren't, at least, at baseline international standards and compliance benchmarks.

The second thing is with regard to tax reform and the need for The Bahamas for taxation reform. Tax reform has never just been a trivial matter in any country, let alone for a country that has no other forms of taxation other than from import tariffs and public service charges and some minor, real property taxes- with the latter not taken very seriously. But, the matter of proper taxation is critical to being successful at world trade level and at the same time, protecting domestic interests.

One thing is clear with WTO economic principles: Reducing tariffs on import competing products is at the essential core of the WTO. In fact, two foremost policies are: 1. The non-Discrimination of goods and services and 2. The reciprocity of that trade openness, between countries, either by direct tariff cuts or through modality approach- that being, phased in over a period of time.

A country, like The Bahamas, which is heavily dependent on tariffs/customs duties for government revenue, once the phasing in of WTO standards and honouring commitments to other members on reducing customs duties on certain items, indicates very bluntly that the Bahamas will have to find other sources of revenue, as it is poised to implement Value Added Tax by January 1st, 2015.

Everything from tax reform, to increasing the transparency in public and private investments, to even proper record keeping, speaks to a larger issue of broader public sector reform and also to the cultural way we tend to do business. Not only broader private and public sector reform, but having the capacity to commit to contracts and agreements over the time period in which you said you were going to do exactly that.

Cutting this point short: The entire way we do business has to change. A colleague of mine from Trinidad, who worked in the Bahamas for a short time stated to a group he was presenting to; "Do you remember when your mother used to bake that sweet bread every Sunday? (YEA!) And the neighbour used to fix her door or cabinets for her in exchange for that baked bread? (YEA!) Well, those days are long gone! (OOOOOOHHHH!!!)"

The changes needed in the way we do business do not have to be drastic and done overnight. It can be done bit by bit to suit our needs, or, actually- “GASP”- structurally planned! The issue of whether or not what change comes first; to what extent should certain institutions- whether they are public or private- should change; and how to sensitively change what we know needs to change without public insurrection, is where the discussion on WTO accession should be. But it isn't.

The reason why the discussion isn't where it ought to be is because the broader public, on average, tend to become frustrated when we speak about large macro-economic and macro-financial jargon and concepts. It's like, for example, an accountant trying to understand quantum physics. They would be no better off than a person who has the reading capability of a second year college student- or perhaps even a first year college student.

The other reason why the discussion isn't where it ought to be- and that being on the institutional and the economic way of how we do business- is because no one has been able to break down the large concepts and ideas, into bite sized nuggets for the citizens to digest.

For the most part in The Bahamas, the public discussion comes in after the fact. In fact, not only does public discussion come in after the fact, it sometimes isn’t very fruitful to the issue at all. The reason being that the persons explaining the issues, become frustrated at times at the lack of, seemingly, intellectual depth by the broader public on the matter (like the average Joe understands stochastic measurements and the difference between the HO model and the Laffer curve).

In addition, the broader public become angry at the persons making these decisions and making them without their input and apparently always in secret- a very open secret I may add. So, the cycle of confusion and obfuscation continues.

All of this uncovers another problem (well, not really another problem uncovered, because anyone who has ever done anything in The Bahamas understands this by now), and that is the lack of information that is readily available for the general public to digest. Not just transparency in the public sector, or private sector for that matter, but, the transparently coherent of initiatives for the broader public.

My sentiment is that: You can't blow my mind if I don't understand what it is you are blowing my mind with. This goes a very long way in educating the public on the importance, for them, of what trade agreements and in particular, what the WTO means.

The issue of knowing what to expect is critical to putting in place the safety mechanisms in order to protect the state revenue and the public interest with regard to consumer protection, commercial protectionism and cultural influx.

What should happen with labour and unions? What should happen with tax reform and state revenue? What would happen when legal immigration and immigration become larger problems? What would happen to sovereign rights? What should happen to infant industries? What should happen to the inflow of capital becomes too much or too little? What should happen to import competing companies? What should happen with regard to exports and export support? What should happen to the lives that depend on the decisions made upon all of these?

There's no cookie cutter solution for these problems. This WTO accession approach simply needs a touch of policy flexibility, imagination and creativity, put into realistic institutions that don't harm the domestic economy or be damaging to global competitors and the clout they carry.

The proper discussions need to take place. Not discussions on what people have done after the fact. But, what should we do and why it affects you. There is no easier other way!

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