The phrase “it’s the economy, stupid” has entered the US political lexicon. It was coined to encourage staffers in the Clinton presidential campaign in 1992 to concentrate on what was considered to be most important. The state of the economy is always a major issue in an election and our own poll last May was no exception, though other factors like corruption and poor governance were also significant.
On taking office, the FNM government made it clear the nation’s finances were in dire straits with an unprecedented level of debt. This meant it was just recently compelled to borrow in the international market in order to meet existing financial obligations. It was also clear radical measures would be required to reduce public spending and stimulate growth to enable the economy to recover and be placed on a sound footing for the future.
It is, therefore, encouraging to learn of the government’s strategy to overhaul the nation’s existing economic model and re-position it through liberalisation and deregulation with a view to improving GDP growth and attracting new investment. Most recently, it has demonstrated its intent by tabling the Commercial Enterprise Bill designed to build a stronger and more stable economy, including measures to encourage investment and to streamline the issuing of work permits.
The Minister of Financial Services, Trade and Industry and Immigration should be congratulated for spearheading this new strategy. Not only has he stated publicly that The Bahamas must face reality and embrace change and reform in order to comply with international regulatory standards and best practice in relation to financial standards, but he has also made it clear, as an essential step in making the Bahamian economy more open and competitive, the government will make an “aggressive” push to join other major CARICOM countries by becoming a member of the World Trade Organisation (WTO) by 2019. Such membership has been on the table for a number of years, but earlier negotiations withered on the vine and were discontinued.
The WTO is a negotiating forum for its member states to ensure the conditions for world trade are stable and transparent – and this includes a mechanism to resolve trade disputes. It is concerned only with free trade and the global rules which apply to it. Its task is to facilitate the removal of barriers to trade because goods and services moving as freely as possible among its members promotes economic growth and reduces poverty.
In today’s interdependent world, with global companies and marketing and distribution networks - together with increased movement of tourists, money, goods and services across national borders -- it is important for smaller countries to interact as widely as possible internationally and to accept competition. This is particularly important for us in The Bahamas because we are dependent on others for our livelihood and prosperity insofar as we need to earn foreign exchange to import what is required to sustain the way of life to which we have become accustomed.
Traditionally in this country we have resisted any opening up of our domestic industries and businesses to foreign competition and have reserved certain sectors for Bahamian ownership only.
So, moves towards WTO membership will require a lengthy period of consultation across-the-board to determine what exemptions may have to be negotiated - there is provision for these in respect of national security, health, safety or other public policy grounds as well as the need to protect a specific industrial or commercial sector.
One clear advantage of membership will be to encourage potential overseas investors in the knowledge that international rules will be respected; for example, in relation to preventing government intervention in investment decisions. Far from the perceived danger of foreign firms taking over successful local businesses and freezing them out, cross-border investment offers opportunities for joint ventures and partnerships. Moreover, competition can result in greater efficiencies and productivity leading to more choice for consumers and lower prices.
In addition, apart from facilitating trade and investment as a whole, WTO membership provides protection against bilateral bullying by larger countries which could be important to us as a net importer.
Another issue of concern is the apparent loss of sovereignty in signing up to a set of international trade rules. Accession to any international organization involves some diminution of sovereignty, as in the case, for example, of The Bahamas’ membership of the International Civil Aviation Organization or the International Maritime Organization which require adherence to international regulations. But this does not affect an independent state’s sovereign right fundamentally to regulate its own society and its borders and to protect its national security.
We believe the success of the government’s plans for WTO membership will depend to a large extent on its willingness to engage in advance with the private sector in order to determine an agreed negotiating stance. It will also need to consult about tax reform since import duties are not normally compatible with WTO rules.
Overall, accession to the WTO is a major and complex issue and we commend the government for grasping this particular nettle so early in its term of office.