The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Minnis Cabinet has approved an "aggressive" push for the Bahamas to become a full World Trade Organisation (WTO) member by 2019.

Brent Symonette, minister with responsibility for trade and industry, confirmed to Tribune Business that the WTO process was among the Minnis administration's priorities as it seeks to re-position the Bahamian economy for growth via liberalisation and deregulation.

"The Government of the Bahamas has considered the question of WTO accession," Mr Symonette told this newspaper, "and reached a conclusion that we will appoint a chief negotiator and negotiating team, made up of different people from the relevant ministries - Ministry of Finance, Ministry of Financial Services etc - which will look at the current standing of WTO.

"The idea is to see if we can be in a position to accede to WTO in 2019, and then in the meantime there will be public consultation."

Mr Symonette told Tribune Business that becoming a full WTO member was part of the Government's strategy to overhaul the Bahamas' current economic model, and open up new GDP growth possibilities by attracting new industries and businesses to domicile in this nation.

"We can't be over-regulated and controlled, and still join the WTO," he explained. "The two are totally opposed to each other.

"It's part of the Government's plan to liberalise the economy and cause growth for future generations. That's why you see other things like the Prime Minister's announcement on Immigration changes, the Commercial Enterprises Bill. All of this is part of a repositioning of the Bahamas so that we have other industries.

"I'm on my way tonight to Singapore to attend a financial services conference, and while I'm over there I will be visiting its arbitration centre. That's another industry we'd like to bring to the Bahamas, so that it creates spin-offs for not just tourism but legal services and other industries."

Mr Symonette also disclosed that the Government was conducting "a revenue review study to see how joining the WTO affects Customs duties and the Budget".

He added: "We obviously cannot do away with certain taxes and not replace them. It has to be revenue neutral."

Import duties and Excise taxes accounted for 27.3 per cent, more than one-quarter, of the Government's revenue for the April-May 2017 period, the last for which data is available. Translated into the 2017-2018 Budget, this percentage is equivalent to almost $587 million of the projected $2.15 billion recurrent revenue.

Given that WTO and other rules-based, liberalised trade agreements view such 'border tariffs' as 'barriers to trade', tax reform will become a key issue for the Bahamas if it accedes to full membership given the amount of revenue it needs to replace.

This may explain why the International Monetary Fund's (IMF) recent Article IV report on the Bahamas recommended that this nation introduce a low-rate income tax over the medium term, specifically to replace revenue lost through tariff elimination/reduction.

Other reform options include introducing a corporate income tax (paid by companies on their profits), or increasing the Value-Added Tax (VAT) rate that is currently at 7.5 per cent and generating 36.2 per cent of government revenues.

Mr Symonette's confirmation of the Government's WTO accession plan is likely to set off alarm bells in certain parts of the economy, especially among Bahamian workers and small and medium-sized businesses who may consider themselves unable to compete against larger, deeper-pocketed rivals.

Trade unions are likely to fear for their members' jobs, while industries currently reserved for Bahamian ownership only - such as wholesale/retail operations; real estate; fisheries; public transportation; security services; auto and appliances services; and building supplies distribution - could all be opened to foreign competitors who can establish a physical operation in the Bahamas.

The two-year accession timeframe being targeted by the Government is also ambitious, and gives Bahamian-owned companies and workers relatively little time to prepare for what is likely to be a 'culture shock' and a complete revamping of the 'rules of the game' in terms of the business climate.

Mr Symonette, though, pledged that there would be full consultation with the private and public sectors to determine "what the next steps are" on WTO accession before the Bahamas actually takes them.

He pointed out that the Bahamas had set a record for the longest-running WTO accession process, having first served notice of its intention to join under the first Ingraham administration in 2001.

"It's been on the frontburner, off the frontburner, and now we're just working towards the accession," Mr Symonette told Tribune Business, emphasising that the Bahamas could not afford to be isolationist.

"We are one of the only countries in the region that has not acceded to the WTO. It's part of being a member of the international community..... It's going to be an aggressive programme to make 2019."

Mr Symonette added that the private sector's positions would lead the Bahamas' approach to the WTO accession negotiations, refuting fears that the Government would determine for itself what was good for local businesses and industries - a concern that was raised under the former Christie administration.

"That's not my way of operating," he told Tribune Business. "We discuss it and find out the best way forward. The Freeport area and how that fits into it, that's part of the discussion we have to have; what reservations we need to make in the WTO process and so forth."

The Bahamas will not have to open up all industries to foreign competitors, and reduce/eliminate every tariff line, as it will be able to 'reserve' or exempt select sectors from this. But which sectors, and how many, will depend on the skill of this nation's negotiators.

Mr Symonette said the Trade Commission's chairman, Deloitte & Touche (Bahamas) managing partner, Raymond Winder, will be the Bahamas' chief negotiator, and his vice-chairman his "alternate", thereby further strengthening Bahamian involvement in the process.

The WTO is the rule-setting body for global trade, meaning that the Bahamas and its entire private sector will have to 'play by the rules of the game' should this nation accede to full membership. The Bahamas currently has 'observer' status.

Bahamian businesses will also have to become familiar with terms such as 'Most Favoured Nation', 'national treatment' and 'reciprocity', which all relate to non-discrimination and will mean that this nation cannot - in many instances - treat local businesses and investors more favourably than foreign-owned ones.

Many sceptics also believe that full WTO membership will erode Bahamian sovereignty, and the ability of Parliament to set laws in the national interest, as these could be challenged and overridden by disputes resolution panels if they are non-compliant with international trade rules.

Others, though, believe WTO membership could open up new markets for Bahamian exports, while also making this nation more attractive to new industries and foreign direct investment (FDI) able to take comfort from greater certainty surrounding this nation's business climate.

The Bahamas remains the only nation in the Western Hemisphere that is not a full member of WTO. There was an 11-year gap between the Bahamas serving notice of its intent to join and the second meeting of the Working Party, made up of nations interested in trading with the Bahamas, which this nation will have to negotiate terms of its membership with.

The leading members of this Working Party will thus be the US, European Union (EU), CARICOM and individual Caribbean states, and China. The Bahamas has already submitted its Memorandum of Trade regime document, outlining its current trade regime and laws/regulations, but talks with the Working Party and information exchanges appeared to cease in 2013.