Go Lean…Caribbean

Go Lean Commentary

Q: Where does an 800-pound gorilla sleep? A: Anywhere it wants to.

There is no doubt the United States is the 800 pound gorilla for trade in the Caribbean region. From a sheer negotiation tactic, there is no basis for respect and consideration for the needs and aspirations of the small Bahamas island nation. A lion share of trade in the Bahamas comes from the US. Also, a lion share of the Bahamas Government revenue comes from Customs duties. So in any stretch of the imagination, eliminating Customs duties from American imports would devastate the Bahamas Government’s treasuries.

Is this an over-simplification of the logical argument in the foregoing news article? No!

Rather, this is a consistent theme in the book Go Lean…Caribbean. The book posits that the objectives of American foreign, trade and security policy may not align with the priorities of the Caribbean. Even more, no Caribbean member-state has voting powers in the US Capitol where those policies might be codified. It is what it is!

The Bahamas is so small compared to the US that the ranting from Nassau would be inconsequential to the decision makers in Washington. The Bahamas and the US are not “brothers”; at best, the Bahamas can expect a “good neighbor” relationship with the US. But since “blood is thicker than water”, it is only to be expected that the US would prioritize the needs of its people ahead of Bahamians.

By: Alison Lowe, Nassau Guardian Business Editor

NASSAU, Bahamas — The United States has called for The Bahamas to immediately drop all of its duties on US products coming into this country on “day one” of The Bahamas’ accession to the World Trade Organization (WTO) – a request which the government has rejected on the basis that it could wipe out the domestic economy, according to the [Bahamas] Minister of Financial Services.

Disclosing some of the background to The Bahamas’ bilateral negotiations over the terms of its bid to join the WTO, [Minister] Ryan Pinder said that the US government has not been “amenable” to The Bahamas’ phasing in tariff reductions on US goods. “Phasing in” refers to the ability to reduce the duty rate levels over a number of years.

However, he suggested that the government has struck back on the issue, suggesting that a phased-in reduction of tariffs on US goods – the vast majority of all imported goods coming into The Bahamas – would be more appropriate.

He was speaking at a meeting on Wednesday between members of the Bahamas Chamber of Commerce and Employers Confederation and David Shark, deputy director general of the WTO, who is in the country to engage with stakeholders over The Bahamas’ accession process.

Among the requirements of joining the WTO is that The Bahamas lowers its duty rates on goods imported into the country. It is this requirement that contributes in part to the decision by the government to push ahead with introducing a new form of revenue collection in the form of value added tax (VAT), although the WTO deputy director said the WTO itself has no preference about what form of tax the government chooses to replace former duty taxes with.

In a question and answer session, Pinder said that how quickly and how low The Bahamas would have to reduce its duties is not a decision of the WTO, but one which is determined in bilateral negotiations with other WTO members.

Pinder said, “The EPA (Economic Partnership Agreement trade deal with Europe) is phased, and they phase to zero, so at some point in time there will be no duty paid on items sourced out of the EU, but it’s not a huge deal because I think there’s $8 million of revenue a year to the government on EU products.

“Now the US: day one that’s what they want. Imagine if they said let’s phase it to zero like the EPA, because that’s what they’ll use as a precedent: You negotiated the EPA, you phased, you phased to zero. So imagine if we phase to zero (on goods coming from the US – you would not have a domestic economy because you would not have 35 percent on readymade items anymore, you’d have zero. So you have to be careful what you push for at times.”

He added: “Right now the US is taking the posture that they want on-day-one reductions. They’ve taken the posture they want cuts straight across the board. We’ve taken the position we’re not going to negotiate on that basis but we will negotiate trying to protect domestic industry.

“I think they got the point but there’ll be further negotiations on that. So they haven’t been too amenable to phasing. We anticipate that in some time in the future we will have to re-negotiate the Caribbean Basin Initiative on a bilateral basis which is a whole other issue with respect to the US and their trading regime,” said Pinder.

In terms of how the government would make up the lost revenue, the government has a plan of sorts in place in the form of the implementation of value added tax (VAT), or – if the private sector has its way — some other form of alternative taxation.

However, replacing the revenue lost to the government when duties are reduced under WTO accession does not address the challenge of how the reduction in duties would impact local manufacturers, who rely on the fact that the goods they produce have high rates of duty applied when they cross the border.

In this regard, seven months on from when he announced that the government would be undertaking a study to examine the “vulnerabilities and opportunities” that would arise for Bahamian businesses from joining the WTO, Pinder said on Wednesday that the government is now moving to shortlist who will conduct this study so the government will have a clearer picture of the impact on industry of acceding to the WTO.

At present, Pinder has stated a goal of December 2014 for The Bahamas to complete its lengthy accession process, but has also indicated that the process could well continue into 2015.

In an interview with Guardian Business on Wednesday, Shark touted the benefits of WTO accession. He said that WTO members have been seen to have recovered more quickly following the global economic downturn, as a result of having a more certain environment for investment.

“The Bahamas is already heavily integrated into the international trading system, so for a country that’s as deeply enmeshed in international trade as the Bahamas the better question is ‘Why not (join)?’

“As a member of the WTO, you get to level the playing field with some of your neighbours. You’re the only CARICOM member who’s not a member of the WTO, and when companies are trying to decide where to invest, being a member of the WTO provides assurances to investors of the conditions of their investment… and all of that matters a lot in terms of being a part of global supply chains.

“The rules of international trade, whether you are a member of the WTO or not, affect you, so why wouldn’t you want to be at the table in negotiating those rules?

“It’s protection against protectionism; if someone does something that causes you harm you can challenge them whether you are a large or small country, under the WTO system,” he added.

Caribbean News Now / Nassau Guardian (Posted 04-11-2014; retrieved 05-22-2014) –http://www.caribbeannewsnow.com/topstory-Bahamas-rejects-US-trade-demand-20677.html

How to counteract and mitigate this undesirable negotiating quagmire? The answer is to join a bigger family! This requires lowering the volume on the cries of independence and then lean-in for interdependence: regional and WTO solutions. The book Go Lean… Caribbean, serves as a roadmap for the introduction and implementation of the Caribbean Union Trade Federation (CU). This represents a confederation, a brotherhood, of the 30 member-states of the Caribbean region, including Puerto Rico and the US Virgin Islands.  This CU/Go Lean roadmap extolls these 3 prime directives:

• Optimize the economic engines of the Caribbean to grow the regional economy.
• Establish a security apparatus to protect the resultant economic engines.
• Improve Caribbean governance to support these engines.

Imagine the force of a single market of 42 million people as opposed to the minimal 320,000. Imagine too … the purchasing power of an $800 Billion economy as opposed to $9.2 Billion (2010). The roadmap immediately calls for the consolidation of trade negotiation of the Bahamas with the rest of the Caribbean. This point is echoed early, and often, in the Go Lean book, commencing with these opening pronouncements in the Declaration of Interdependence (Page 11/12), as follows:

 viii.   Whereas the population size is too small to foster good negotiations for products and commodities from international vendors, the Federation must allow the unification of the region as one purchasing agent, thereby garnering better terms and discounts.

 x.         Whereas we are surrounded and allied to nations of larger proportions in land mass, populations, and treasuries, elements in their societies may have ill-intent in their pursuits, at the expense of … our citizens. We must therefore appoint “new guards” to ensure … our society, both domestic and foreign.

The roadmap recognizes that this request to forge a confederated technocracy is atypical in Caribbean pursuits. Despite previous integration efforts, the most that has been accomplished is the recognition of the benefits of consolidation, but no real manifestation of an integrated society.

Go Lean … Caribbean therefore constitutes a change for the Caribbean. This is a roadmap to consolidate 30 member-states of 4 different languages and 5 colonial legacies (American, British, Dutch, French, Spanish) into a Trade Federation with the tools/techniques (but without sovereignty) to bring immediate change to the region to benefit one and all member-states. While this is an integration of region’s economic interest, there is no expectation of re-distributing existing wealth among the member-states.

Just how is this accomplished?

The book details that there must first be adoption of community ethos to forge such a change; plus the executions of the following strategies, tactics, implementations and advocacies to impact the regions prospects in negotiations and fulfilling the needs of Caribbean stakeholders:

The foregoing news article uses language like “day one”, in that it reports that there are expectations for the immediate adjustments in the US-Bahamas trade dynamics with the inauguration of the WTO regime. This type of development is impractical and destructive for Bahamian society. The Go Lean roadmap therefore proposes an alternative implementation, with accelerations of progressive changes over a methodical 5 year period. This is thusly proposed to minimize the disruption to government revenue schemes.

The WTO has a Trade First mantra. While this is an advantageous goal, this book posits that trade must not be implemented at the expense of the societal safety nets that bind Bahamian society together. Go Lean … Caribbean is therefore a detailed turn-by-turn roadmap for how-when-why-where to apply the best-practices of trade-economic-security-government delivery options.

The Go Lean roadmap is therefore a complete solution for Caribbean elevation, considering the needs of all stakeholders: residents, trading partners, Diaspora and visitors. The region is hereby urged to lean-in to this roadmap, to fulfill the vision of making the Caribbean region a better place to live, work and play.

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