The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Bahamas will seek to protect its “high revenue-earning tariffs” in joining the WTO, a lead negotiator yesterday admitting that the 2019 accession timetable is “very aggressive”.

Raymond Winder, who co-heads the Government-appointed negotiating team with former director of trade, Viana Gardiner, told Tribune Business that meeting the Government’s World Trade Organisation (WTO) membership timeline depended on “how serious and dedicated” the Bahamas is. He added that it was also reliant on the “resources and time” provided by the Government to handle negotiations with the WTO Working Party, formed from nations interested in trading with the Bahamas, which will determine this nation’s accession terms.

“It’s early days. I really don’t have a feel quite yet whether that’s going to be a challenge,” Mr Winder said of the Minnis administration’s 2019 target.

“We all agree that’s very aggressive.

“It really depends on the whole negotiating process: How serious and aggressive we are in putting in the resources to respond adequately to the questions and concerns [of the Working Party], and how aggressive we are in identifying areas where we can make an impact and difference.

“It’s a very aggressive plan to accede to the WTO. The Government has given us the mandate and understands this process requires a significant amount of resources and time.”

A critical element of the Bahamas’ negotiations will be its existing tariff structure, with the Working Party certain to seek the elimination and/or major reduction of many import duty rates. While this nation has used import tariffs primarily as a revenue-raising mechanism, the WTO and other rules-based regimes view them as protectionist trade barriers.

“Those areas that are high revenue earning for the Government, we will seek to protect them by placing them in certain categories, which is permissible by the countries in the WTO,” Mr Winder told Tribune Business. “We still have to get through that process, and hopefully it won’t be very difficult.”

He added that the Bahamas had been preparing for import duty liberalisation for some time, with the last Ingraham administration having placed major revenue earners such as automobiles under the ‘Excise Tax’ heading in the Budget in readiness for WTO accession.

The Bahamas is already involved in a rules-based trading regime through its membership of the Economic Partnership Agreement (EPA) with the European Union (EU), which required it to identify tariff lines that would be eliminated, cut or ‘excluded’ from such a process.

Mr Winder added that Value-Added Tax’s (VAT) implementation was also connected to the WTO accession, given that it provided the Government with a revenue replacement option for lost import duty/tariff income.

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.

All 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.

“We now need to pick it up,” Mr Winder added of the WTO accession process, “see where we left off, revisit the questions countries have and move forward.” He pledged a sustained public education campaign to ensure that the Bahamian private sector and individuals were kept fully informed on the progress of negotiations, and understood the key issues.

The Bahamas has 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 is also the only nation in the Western Hemisphere to remain outside the WTO, the rules-setting body for global trade.

The Minnis administration, arguing that the Bahamas cannot maintain such an isolationist stance, has identified completion of the WTO accession as a critical element in its overall strategy to reposition the economy via liberalisation, deregulation and the attraction of new industries.

Some observers have suggested that the 2019 WTO membership deadline is a further indication of the urgency with which the Government feels it has to move to break the Bahamas out of its low growth/high unemployment cycle, as was demonstrated by the haste with which it moved on the Commercial Enterprises Bill.

The Bahamas will not have to open up all industries to foreign competitors, 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.

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.

Sceptics, though, argue 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 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 leading members of the Working Party that the Bahamas will have to negotiate with will be the US, European Union (EU), CARICOM and individual Caribbean states, China, the United Kingdom and, possibly, the likes of Brazil and other Latin American nations.

The Bahamas has already submitted its Memorandum of Trade regime document to the WTO, outlining its current trade regime and laws/regulations, but talks with the Working Party and information exchanges appeared to cease in 2013.