The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

BAHAMIAN manufacturers yesterday said they are “not yet fully committed to the necessity of joining the World Trade Organisation (WTO)” based on the Oxford Economics study’s findings.

The Bahamas Light Industries Development Council (BLIDC), commenting on the recently-released report that was commissioned by the Bahamas Chamber of Commerce and Employers Confederation (BCCEC), said it backed the authors’ conclusion that full WTO membership will “not be the catalyst to right The Bahamas’ ship” by itself.

The BLIDC, which represents some 30 local manufacturers, added that the sector’s future expansion into new areas could be inhibited by the inability to provide tariff protection for infant companies because all rates would become “bound” - and unable to be increased - once this nation joined.

Pointing out that Oxford Economics’ estimate of a 4,000-strong sector workforce was just 450 less than financial services to highlight its importance to employment, the BLIDC also highlighted the report’s assertion that those workers would struggle to find jobs elsewhere if manufacturing downsized post-WTO accession.

It said in a statement: “The BLIDC, as representatives of the manufacturing and light industries sector in The Bahamas, is not yet fully committed to the necessity of joining the WTO, but appreciates the Government’s goal of positioning the Bahamian economy for future growth.

“What is perhaps most relevant to Bahamian businesses today is the finding that substantial reform is required, both legislatively and institutionally. Businesses have long voiced concerns over the ease of doing business, and the lack thereof.

“These hurdles have stifled economic growth in existing sectors and served as deterrents for new market entrants. Oxford Economics has rightly drawn the conclusion that WTO accession alone will not serve as the catalyst to right our ship.”

The BLIDC added that although the report disagreed with their members’ request for “bound” tariff rates higher than those currently in existence, it welcomed Oxford Economics’ assessment that protective tariffs can likely be maintained on goods presently produced.

“This strategy does potentially limit the future expansion of manufacturing in The Bahamas, as any protection that would normally be provided to facilitate local industry would no longer be in place,” it said.

“It does, however, protect the 4,000-plus jobs in the sector today. In fact, the Oxford Economics report includes data from the Department of Statistics whose records reflect that in excess of 8,000 individuals are employed in manufacturing. It is worth noting that, when referencing the conservative figure of 4,000 workers, this figure is a mere 450 shy of the employee count of the financial services sector.”

The BLIDC added: “Of particular interest to the Board was the finding that it would be unlikely that jobs lost from the potential downsizing of manufacturing would easily be absorbed elsewhere in the economy.

“It has often been suggested that these individuals would be absorbed by the anticipated growth in other sectors, yet the report concludes that this likely would not be the case. The BLIDC must also applaud the Government for making the goods and services offers public, and is currently awaiting dialogue as it relates to the most recent Working Group meeting held last month.”

Ramesh Chaitoo, who co-authored the Oxford Economics study on full WTO membership’s impact on the Bahamian economy, said increasing tariffs during the accession negotiations to better defend local producers simply “won’t fly”.

He told Tribune Business, though, that maintaining existing tariff rates on the 250 import types that compete directly with Bahamian manufacturers was “doable” and could be achieved while still meeting the 15 percent average tariff rates demanded by the world’s rules-based trading regime overseer.

Mr Chaitoo said the key to accomplishing such an objective will be to “disaggregate” what Bahamas-bound exports are important to the US, as many of the 250 tariff lines key to this nation may not merit such attention from Washington D. C.

The Oxford Economics report said of The Bahamas: “While it is a services economy, the real challenge for The Bahamas in WTO accession negotiations is trade in goods, particularly tariff bindings and reductions.

“If not properly calibrated, these could negatively affect the manufacturing and agriculture sectors and lead to unemployment, since the local firms will not be able to withstand full competition. It is likely that Bahamian negotiators may have to trade-off concessions on the investment front in order to keep tariffs higher than what has been the norm in recent accessions.”

The Bahamas had 329 manufacturing companies in 2015, according to United Nations (UN) data, and the Oxford Economics report said: “The products important to the manufacturing and agriculture sector account for only about 250 tariff lines out of a maximum of about 5,000. So, in principle The Bahamas should safeguard these from liberalisation or reduction if the maintenance of local jobs in the Bahamian economy is an important objective of the government.

“But increasing some of the tariffs to the levels proposed by the Bahamas Light Industries Development Council (60-100 percent) before binding them will be difficult to defend in WTO accession negotiations.....

“It is therefore recommended that an attempt be made to get to the 15 percent simple average non-agricultural market access (NAMA) tariff that seems to be the basic entry requirement for accession nowadays while keeping the 250 tariff lines out of the liberalisation package,” it added.

“The bottom-line negotiating position should be to bind them at the current applied rates. And it would be advisable to phase in over a three to five-year period the tariffs on some of the other products that are major revenue generators for the Government.

“It will be difficult to sell this proposal to the US, but given local sensitivities in The Bahamas these should be considered negotiating ‘red lines’. If not, the political economy costs of acceding to the WTO may be higher than the short- to-medium term benefits.”