The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ “is in good shape” to lower its average tariff rate to the 15 percent demanded by the WTO, its chief negotiator said yesterday, describing this as a “good deal” for consumers.

Zhivargo Laing, the former Cabinet minister, told Tribune Business that the push for full World Trade Organisation (WTO) membership will now bring “structure, discipline and acceleration” to a tariff-cutting “trend” overseen by successive governments since the turn of the century.

He pointed out that The Bahamas’ average import tariff rate had already been slashed from 45 percent in 2001, when he himself submitted this nation’s WTO application as part of the then-Ingraham administration, to around 32 percent currently.

With the Bahamas already half-way to meeting the WTO’s desires, Mr Laing yesterday reassured industries that rely on high tariff rates for protection - and to maintain their competitiveness and economic viability against foreign rivals - that the Government would not abandon their interests in the accession discussions.

He reiterated that The Bahamas would seek to achieve the WTO average while maintaining existing high tariff rates for imports that competed directly with Bahamian manufacturers and other sectors vulnerable to foreign competition in a liberalised trading environment. 

“On the tariff side of it, I am fairly confident that The Bahamas is in good shape to meet with what the WTO regards as a reasonable level of average tariff rate,” Mr Laing told Tribune Business.

“We have received commendations for our progress in that regard. Over time, the Bahamas has brought down the average tariff rate, and the present position is compatible with WTO but doesn’t create any injuries to government revenue to that extent.”

The WTO, the multilateral institution that oversees and enforces global trade rules, regards import tariffs such as Customs duties as “barriers to trade” that impede the free flow of goods and commerce across borders.

The Bahamas has, though, in recent years switched from import duties to Value-Added Tax (VAT) as its primary taxation mechanism - partly in preparation for accession to full WTO membership. The $334.819m that the Government expects to earn from import duties in the 2018-2019 fiscal year amounts to just 14.4 percent of its total tax revenues.

Government studies, though, have suggested that The Bahamas will ultimately have to replace between $100m-$200m in import tariff revenues foregone as a result of WTO accession, although the precise amount has not been disclosed as this will depend on the country’s yet-to-be-settled accession terms.

Mr Laing, who as minister of state for finance when they were introduced, yesterday said it was “certainly the aim” of the Government to protect its higher-yielding revenue items - such as alcohol and automobiles - by shifting them from import tariffs and placing them under the Excise Tax.

He conceded, though, that this was unlikely to pass without challenge during The Bahamas’ negotiations with potential trading partners over the WTO membership accession. “I wouldn’t be surprised if we have questions about it,” he told Tribune Business.

The WTO requires members to have an “indicative” average tariff rate of 15 percent, with cuts and eliminations usually phased in over three to five years. Mr Laing reiterated that meeting the WTO’s requirements would benefit Bahamian consumers through reduced goods prices as a result of these reductions.

“For the Bahamian consuming public to have an average rate of Customs duties of 15 per cent, compared to 32 percent, doesn’t sound like a bad deal,” he said, confirming that 32 percent is this nation’s current average.

“When this application was made [in 2001] it would have been around 45 percent,” Mr Laing added, pointing to the tariff cuts made by successive PLP and FNM administrations in part-preparation for WTO accession.

The ex-Cabinet minister said some reductions would relate to The Bahamas’ commitments under the Economic Partnership Agreement (EPA) with the European Union (EU), which remains the only rules-based trading regime this nation has entered to-date.

“Historically we have reduced the number of tariff categories from 120-something to 20-something, and the average rate from 45 percent to 32 percent,” Mr Laing told Tribune Business. “This was a trend we were moving on apart from any trade agreement, so this [WTO] brings structure, discipline and acceleration to that process.”

Ryan Pinder, the former financial services minister who had responsibility for trade, and is now a legal adviser to Bahamian manufacturers on the WTO accession, has previously called for a strategy that protects the sector by reserving, or “carving out”, tariffs on rival imports from the negotiations.

He has urged a strategy that meets the WTO’s 15 percent average tariff requirement but maintains high rates for rival foreign products, arguing this may be the only way to save domestic manufacturing.

While agreeing with the concept, Mr Laing yesterday suggested it was nothing new. “That was the strategy from when I put in the application in 2001. It remains the strategy today,” he pledged.