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'Be Sceptical' Of All Sides On Free Trade

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

An international trade attorney says that The Bahamas will “definitely” have to slash its average Customs duty rate in half if it continues to pursue full World Trade Organisation’s (WTO) membership.

Paul Lalonde, partner and head of international trade practice at Dentons Canada, told the Arbitration and Investment Summit that The Bahamas’ reliance on import tariffs as a major revenue source meant its WTO accession process will be “very different” from other countries.

He explained: “As a small economy that historically has been highly dependent on Customs duties for approximately 60 percent of your government revenue, your accession strategy is very different from the accession strategy of an economy where most of their government revenue comes from other places.

“The rates average around 30 percent, and this is a high level benchmark. The WTO encourages a rate reduction to an average of around 15 percent in a scenario such as what The Bahamas has. Definitely the WTO working group would want to see a reduction in these areas.”

The Bahamas’ momentum towards WTO accession slowed significantly during the 2019 second half, and the Government-appointed chief negotiator, Zhivargo Laing, said it was highly unlikely the process will be completed before the 2022 general election. He suggested this nation needed a “minimum” additional five years.

However, the Government has been well aware of the need to reduce its average import tariff rate to 15 percent. Many rate categories have already been reduced, while Value-Added Tax’s (VAT) implementation and subsequent increase to 12 percent have made this tax the Government’s primary revenue source.

Mr Lalonde, meanwhile, said The Bahamas would still be able to exclude or reserve specific industries from being opened up depending on the skills of its WTO negotiators. “If you have particularly sensitive areas, and particularly sensitive industries you want to maintain protections for, that’s the whole game of negotiations,” he said. “Every member of the WTO has these kinds of industries.

“One thing that I have learned is that the opponents of free trade agreements always overstate the negative impacts, and the proponents always vastly overstate the benefits of trade agreements. It’s wise to be sceptical about things we hear from both sides and ask the right questions.”

Citing an example of a protected industry in Canada, Mr Lalonde said: “One of our sacred cows is dairy. Do you know what the duty rate is for imported butter into Canada? It’s almost 400 percent, so 30 percent is really small in comparison. So that is the game of negotiations.”

He added that Canada has “no commitment” to bring down the duty rates on butter. Instead, in the context of WTO, it put in “tariff rate quotas” with the promise to reduce them over time. “You set a number and, over time, we will see how we can bring that number down. In Canada we have made no commitment to bring that down, but we may in the future,” Mr Lalonde explained.

“There isn’t a set box you have to fit in, and no mandate that every country has to modify their laws to fit like this in order to enter the WTO. With the example of the Russian accession and the Chinese accession, those were negotiated over a very long period of time and were very complex negotiations. Both countries had very different and detailed and sophisticated accession agreements.

“That means that over time different things about their various trading regimes will be modified in order to meet the WTO accession mandate. So it really isn’t a one-size fits all, all or nothing negotiating approach by the WTO.”

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