The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport’s ‘free trade zone’ status will be “permissible” under World Trade Organisation (WTO) rules, a well-known attorney argued yesterday, because the city has consistently been a net contributor to the Public Treasury.

Carey Leonard, the former Grand Bahama Port Authority (GBPA) in-house counsel, told Tribune Business that under the WTO regime, “the key” was whether Freeport’s tax incentives/concessions amounted to a subsidy of the Port area.

Mr Leonard, who now works at the Callender’s & Co law firm, said the Bahamas could thus defend the incentives contained in the Hawksbill Creek Agreement on the basis that Freeport paid into the Treasury, on an annual basis, more revenues than the Government spent on it.

“There are opportunities for the Port to work with the Government,and I think we can regularise certain things between the Port area and the government and maintain what I would call ‘the free trade zone status’,” Mr Leonard told Tribune Business.

Pointing out that the key was whether “the tax concessions amount to a subsidy”, he added: “The tax concessions have, in effect, accrued to the benefit of the country,” Mr Leonard said.

“There’s always more money coming back to the Treasury than the Treasury has put into the Port area. One-sixth of the population is a net contributor to the Treasury.

“I think the Port area, in the long-run, under WTO will be permissible. How we go about doing this, I’m not sure, but certainly from a WTO point of view, we’re alright.”

However, Mr Leonard yesterday warned companies throughout the Bahamas not to become “distracted” by the planned implementation of a Value-Added Tax in 15 months’ time, or otherwise they would be “knocked out by WTO’s solid right hook”.

The attorney warned that the Bahamas’ accession to full WTO membership would result in a complete overhaul of the regulations and laws governing the way business was done in this nation, and companies almost had to be “shocked” into understanding this.

“Quite frankly, VAT is in many ways just a distraction,” Mr Leonard said, “because there’s so much legislation coming from WTO, and we need to pay more attention to WTO than VAT.

“If we focus solely on VAT, a solid right hook is going to knock you out, and that’s going to come from the WTO.”

WTO’s rules-based trading regime required non-discrimination in many areas, including the elimination of restrictions on the industries/sectors foreign investors and businesses can enter.

Mr Leonard explained that the Bahamas’ WTO negotiations were less about negotiating its own terms of entry, and more about doing the best it could to join an existing set of rules.

It was, he added, impossible to know whether certain protections currently enjoyed by Bahamian-owned businesses would be eliminated, and when.

Mr Leonard said that when he delivered this message at a Grand Bahama Chamber of Commerce luncheon last week, “there was shock from the Bahamian-owned businesses, and a sense of ‘at last’ from those that are foreign-owned.

“To me, it’s really important that Bahamian businesses focus on the fact the WTO is coming, and that in many ways they should now prepare a solid business plan to deal with it when it arrives.”

The Bahamas would have to bring its laws and regulations into line with WTO rules, Mr Leonard explained, which meant “powers of ministerial discretion will be reduced, if not eliminated”.

Standards and ‘rules of origin’ had to be tackled by the Bahamas, while professional associations - such as the Bar Association, doctors, engineers and architects - may find they had to admit non-Bahamians to membership if they passed the relevant entry exams.

These changes would come with bewildering speed over the next two-seven years, Mr Leonard said, adding that the failure to meet Economic Partnership Agreement (EPA) mandated tariff cuts at the beginning of the year showed the Bahamas was already “behind the eight-ball”.

Adding that he had to “almost scare the business sector into becoming more proactive”, Mr Leonard told Tribune Business: “We had an opportunity to make these changes earlier, we didn’t do it, and now we have to do it kicking and screaming.”

He revealed that the private sector’s lack of engagement with trade-related negotiations was already, in some instances, having an impact as he recalled how a fishermen’s permit was not renewed because his boat’s length and freezer did not conform to EPA requirements.

Urging Bahamian businesses to make their views on the WTO and its implications known to the Government’s negotiators, Mr Leonard said failing to do so meant the rest of the world would assume they were happy with what was being given.

“Once it’s in place, you cannot undo it,” he said. “You’ve got to participate before, not wait until it’s upon you and say: ‘I don’t like this, don’t like that’.”