The Tribune

By NEIL HARTNELL

Tribune Business Editor

THE Bahamas "can be assured" that Freeport's very foundation, the Hawksbill Creek Agreement, will be challenged under the World Trade Organisation (WTO) regime, a leading trade economist told Tribune Business yesterday.

Hank Ferguson, the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) former leading trade adviser, said it was not Freeport's duty-free and tax incentives that would be questioned by WTO members, but the fact that the Bahamian government had devolved regulatory and administrative responsibility for the 230 square mile area to the Grand Bahama Port Authority (GBPA).

The Bahamas is currently moving to accede to full WTO membership and, ironically, last week's Supreme Court ruling against the Road Traffic Department and its senior officials has provided further backing for the GBPA's regulatory and licensing authority in Freeport.

Meanwhile, Mr Ferguson yesterday suggested that the Government should focus on expanding Freeport's 'bonded' vehicle and fuel benefits to east and west Grand Bahama as a means of stimulating economic activity, as he questioned how effective an extension of the Hawksbill Creek Agreement incentives to the rest of the island would be.

He pointed out that businesses wishing to locate outside the Port area in Grand Bahama already had access to numerous duty-free and tax incentives via statute legislation such as the Hotels Encouragement Act and Industries Encouragement Act, so merely extending the Hawksbill Creek Agreement's geographical coverage seemingly carried little additional benefit.

"The Hawksbill Creek Agreement, by itself, can expect to be challenged under the WTO," Mr Ferguson told Tribune Business.

He pointed out that in the Bahamas' Memorandum of Trade Regime, the starting point for this nation's WTO and Economic Partnership Agreement (EPA) negotiations, the Government had described Freeport as a "special economic development zone" as a way to explain the Hawksbill Creek Agreement and the special benefits bestowed on Freeport.

However, this is unlikely to pass muster with members of the Working Group negotiating the terms of the Bahamas' accession to full WTO members. The countries on this group will include all this nation's major trading partners, such as the US, Canada, China and CARICOM members, plus others who may have an interest in trading with the Bahamas.

"The Hawksbill Creek Agreement by itself will have to be explained, and be subject to negotiation, in the context of the WTO," Mr Ferguson told Tribune Business, "not so much because of the duty-free concessions, but because of the administrative and regulatory authority given to a third party [the GBPA]."

He explained that the WTO, and its members nations, were looking for countries to have transparent and liberalised trading environments, plus a clearly defined set of rules and processes for investment. The GBPA's quasi-governmental authority, and separate regulatory regime, complicates and rubs up against these criteria.

"Looking at the Hawksbill Creek Agreement in the context of the WTO, absolutely we can be assured there will be questions raised, and there will have to be studies and investigations as to how we can make it compatible with international trading regimes," Mr Ferguson told Tribune Business.

"There can't be a government within a government, and there can't be separate terms and conditions for people to do business in the Bahamas."

Mr Ferguson, who is Grand Bahama-based and a member of the island's Chamber of Commerce, also questioned whether extending the Hawksbill Creek Agreement's benefits and incentives to the rest of the island would result in the economic stimulus the Government was hoping for.

Companies and investors already had access to similar incentives under statute law, and he added: "I don't necessarily see the extension of duty-free concessions to east and west Grand Bahama as necessarily being a positive thing.

"I'm waiting to see what it does. There's no point to it. I don't see astounding benefits to it and the spurring of economic development, if all we're doing is facilitating people to go to over to Miami to buy clothing and flat screen TVs."

Instead, Mr Ferguson suggested that the Government be more creative and focus on extending 'targeted' incentives beyond the Port area to the rest of Grand Bahama.

The Christie administration has already talked about reducing aircraft landing fees in Grand Bahama, and Mr Ferguson said the Government should go a step further by extending 'bonded' or duty-free aviation fuel privileges to east and west Grand Bahama.

This, by reducing fuel costs, could stimulate increased commercial and private aviation traffic to these areas, thus benefiting the tourism industry. And Mr Ferguson also encouraged the Government to allow owners of 'bonded' vehicles to take them outside the Port area, saying this would "create a lot more opportunities to spend money" throughout the island.

The trade economist also suggested to Tribune Business that operators of commercial and pleasure boats outside the Port area be allowed access to 'bonded' or duty-free fuel for use in their businesses, something that could encourage a maritime sector re-domiciling to Grand Bahama.

"They are some of the things we can look at," Mr Ferguson said. "We just have to be more creative and do more work on what's needed to spur more economic activity."

As a GBPA licencee, Mr Ferguson added that he was "really excited" about the implications stemming from the precedent-setting Supreme Court ruling handed down last week in favour of G. B. Janiki Investments.

Justice Estelle Gray-Evans found the Road Traffic Department's inspector and controller acted "illegally, procedurally improperly and ultra vires" in refusing to licence the company's vehicle on the grounds that it did not have a 'taxi cab' licence issued by the Government, and that a supposed taxi 'moratorium' was in place.

Of its implications, Mr Ferguson said: "The ability to approve and licence is now firmly vested in the Port Authority, not the Government.

"As a licencee, I'm really excited about that ruling. It affirms the Hawksbill Creek Agreement was a treaty between the Port Authority and the Government, and that we can require regulators and outside bodies, like URCA, which come from Nassau to regulate this area, to leave.

"I'm waiting to see if this will be appealed and what the end result will be. Right now, it should be a happy day for the Port Authority. It definitely affirms a strong incentive for licensing, and for persons to come and be licensed by the Port."