The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Manufacturers must “justify” any demands they make for protective tariffs, a senior industry executive believes, adding that the Government had included “a lot of these” in its initial World Trade Organisation (WTO) offers.

Andrew Rogers, head of the Bahamas Trade Commission’s manufacturing sub-committee, told Tribune Business that local consumers “have to live”, acknowledging the ‘two sides’ to the protective tariff argument when it came to manufacturing.

Backing the policy agenda outlined by Ryan Pinder, minister of financial services, who called for a ‘holistic approach’ to supporting Bahamian manufacturing, Mr Rogers said lowering the overall cost of doing business in this nation – especially energy-related expenses – would automatically reduce the import (competitor) tariff rates sought by the sector.

And Mr Rogers, who heads Bahamas Aluminium Manufacturing, backed the Government’s plans to create a Standards Bureau on the grounds it will “make us worthy of such protective tariffs” via product quality control.

Reiterating the manufacturing sub-committee’s report that protective tariffs were “a must” for the survival of many Bahamian companies, Mr Rogers said the required rates were industry-specific and depended on the costs involved in making a particular commodity.

However, one issue affecting all Bahamian manufacturers was energy costs. Suggesting these would have to fall by 85 per cent to come into line with their US equivalent, Mr Rogers said water companies such as Caribbean Bottling (Bahamas), Bapak and Aquapure were likely incurring $80,000 per month BEC bills, totaling around $960,000 per year.

“Energy costs are helping to strangle manufacturing in the country. It’s really affecting the bottom line drastically,” he told Tribune Business. “If we can reduce the expense of electricity to the water bottling companies by 75 per cent, you allow them to keep three-quarters of that $80,000 per month in the company for expansion, investment and everything else.”

The Manufacturing Sub-Committee’s report to the Trade Commission had again called for the Government to introduce a three-tier electricity rate structure of the sort found in many ‘first world’ countries. BEC would segment its market into residential, commercial and industrial customers, with the latter – as largest users by volume – enjoying the lowest rates.

This may become possible once the current BEC/energy reform process is completed, and Mr Rogers added: “The purpose of these lower costs is so we can become more competitive, and in return put back in expenses that would normally go out the door.

“The manufacturing sector in our country wants to expand, wants to make more money. That’s the nature of the beast in my business. If we’re allowed to keep more money in our companies, we can hire more people.

“I would definitely agree that reducing direct operating costs like electricity would surely help in keeping protective tariffs down. To what extent depends on the actual product manufactured and electricity costs incurred in that company.”

Mr Rogers said his company, which manufactures windows and doors, was pushing for a 45 per cent tariff on rival imports – low in comparison to other sectors – because it was a relatively low user of electricity.

“My foreign competitors can bring in doors at 10 per cent, windows at 35 per cent,” he added. “There’s no protection for doors, and I don’t sell many.”

As previously revealed by Tribune Business, manufacturers had argued they “cannot survive” as an industry in the Bahamas without protective tariffs as high as 200 per cent.

The Bahamas Trade Commission’s Manufacturing Sub-Committee report had detailed a ‘protective tariff’ wish list requested by different manufacturing sectors, with the industry “unanimously” agreeing such measures are essential to its survival in a trade liberalization environment.

Asked what tariff rates should be set for their protection, industry responses varied from uniforms and chicken products except leg quarters (50 per cent) to ice (200 per cent). Drinking water companies sought tariff rates on imported rivals ranging from 72 per cent to 150 per cent, while food processors, bedding manufacturers, concrete block makers, sail and awning manufacturers, and automotive and marine battery manufacturers all wanted 100 per cent tariffs.

Other sectors seeking high tariff rates were makers of rubbing alcohol, cleaners and auto coolant (150 per cent), with cleaning chemicals and pipe manufacturers also wanting import duties as high as this.

Bahamian manufacturers are largely unable to compete on price with foreign rivals who enjoy greater economies of scale and much lower raw material, equipment and other input costs. Protecting these businesses via import tariffs and other so-called ‘protectionist measures’ also goes against consumer interests, as they are faced with purchasing higher-priced products.

The relief that greeted the reinstatement of Bahamian manufacturers’ 100 per cent duty exemptions on raw materials and equipment perfectly illustrated how vulnerable the sector is, something that will only be exacerbated by trade liberalization.

Yet Mr Rogers argued that the sector’s GDP and employment contribution, with 2,500 companies generating 12,00 direct, and 2,500 indirect, jobs meant its survival was “critical” and “definitely worth protecting”.

Suggesting that Bahamas Aluminium Manufacturing would have been “out of business” without reinstatement of the raw material/equipment duty-free incentives, he added: “We cannot survive if they are going to charge us any tariffs on our raw materials.”

Yet Mr Rogers told Tribune Business that both the industry and the Government “have to be careful to look after the Bahamian consumer, who wants to live”.

Acknowledging that import tariffs raised living costs for Bahamians, he agreed that the Government needed to weigh ‘protectionist’ demands with the impact on consumers. This ultimately meant any tariff requests had to be justified.

“The Government needs to say: ‘OK, they want a 200 per cent protectionist tariff, but why do they need it?’. Let them justify it,” Mr Rogers explained. “If they can’t justify it, it shouldn’t be imposed.

“On any tariffs that the Government sees are a little bit high, they need to weigh the pros and cons. How many people are employed in this area? If they can’t justify it, they can’t ask the Government for a blank cheque. No government is going to do that. You can’t expect the Government to protect you if you aren’t an asset to the country.”

It is unclear whether the Bahamas will be able to obtain all the tariff rates sought by manufacturers at the WTO, although all nations are able to secure ‘carve outs’ and exemptions from certain industries.

Acknowledging that the high-end tariffs “could be very difficult” to achieve as the Bahamas seeks full WTO membership, Mr Rogers nevertheless told Tribune Business: “The Government is very proactive in trying to protect its local industry.

“I feel a lot of those rates have been imposed in the first offer or thereafter to the WTO. I feel very strongly the Government is working towards protective tariffs within the WTO.”

By the same token, Mr Rogers said the Government’s proposed Standards Bureau and anti-dumping legislation would ensure Bahamian manufacturers fulfilled their side of the bargain by producing high-quality products.

“We will make quality products, and look forward to quality control that guarantees local consumers get value for money,” he added.