British Colonial Hilton

11th April 2005

I appreciate the opportunity for this dialogue with you on the CARICOM Single Market and Economy (CSME). This is the third occasion within ten days that I have had the opportunity to address this subject. I begin with the fact that the Cabinet made a decision on 21st December 2004 to move to the next, and hopefully, the final stages of the discussion on this matter. It is universally accepted in the business sector that there needs to be trade liberalization. The question is: on what terms? In other words, what kind of deal can The Bahamas work for itself so that our economy can progress?

The discussion around the pros and cons of the CSME has tended to centre around the question of the free movement of labour. There is a terrible fear that should CSME come, aliens from the south will swamp The Bahamas, and that our way of life will be destroyed. That is not true but it is a fear that we must recognize exists.

The second point that businessmen make is that The Bahamas is not yet in a position to compete with other Caribbean businesses, so there ought to continue to be barriers which allow certain sectors of the economy to be protected for Bahamians. The question there is: whether or not the continuation of these polices is good for the Bahamian economy? You might put that question to a housewife who has to pay $1.29 per pound for chicken produced locally, as against 19 cents a pound or less when it is imported.

You might also ask the young entrepreneurs who are searching around for capital whether or not they would like the idea of access to capital by joint ventures; and the free movement of capital: the idea that capital can be more liberally obtained and more liberally repatriated within the community.

Let me seek to describe what a single market and economy is. We begin with The Bahamas, which is a single economic space from Abaco in the north to Inagua in the south. In other words there are no transaction taxes on the movement of goods and services from one island to the next. The idea of a CSME is that when goods and services move from The Bahamas to Bermuda, to Jamaica, to St. Kitts and Nevis or any other country in the Caribbean, there will be no taxes or non-tariff barriers to entry or departure, thus the free movement of good and services all the way to Suriname and Guyana.

Given the political sensitivities of these matters, it is the view that we ought to ask for certain exceptions or reservation if we enter the CSME in July or at the next most convenient point. We think that there ought to be reservations on the free movement of people, the Caribbean Court of Justice, the Common External Tariff and the monetary union. A reservation means that we except ourselves from those provisions.

The Common External Tariff is the most complex matter. This is because it has potential revenue impacts. In terms of the CSME regime, it will not be significant since the total volume of our trade with the region is just under one per cent of total volume. But because this is the staging ground and arguing point for our proposals on accession to the World Trade Organization (WTO) which is of wider application for goods from all countries, we think that it requires careful study and certain transition provisions. We will most likely migrate to value-added tax, and you know that the Ministry of Finance is studying this issue even now. The great benefit of value-added tax is that services will now be properly taxed. Services are now substantially out of the tax ambit.

I said in another forum that CSME is not a magic bullet. It is not a panacea for all trade issues. But neither is it a bugaboo, something of which we ought to be afraid. It is part of the normal process of change that is coming to the country, which I think will liberalize the atmosphere of trade in The Bahamas, and make it easier to go into business. The idea then is to make it easier for business to get going, for it to keep going. We ought to be known as jurisdiction that embraces all forms of legitimate commerce.

The other important aspect of this is the fact of increased attractiveness of The Bahamas as a place for investment. Many persons want to invest in The Bahamas because it is so close to the United States and the atmosphere is very American. Their placing manufacturing concerns in The Bahamas would allow them access to Caribbean markets. In fact, Bacardi is poised today to take advantage of this if we were part of the CSME today.

I believe also that it is crucial that The Bahamas not stand apart from processes, patting ourselves on the backs about how well we are doing. We are doing well but there are other countries that have emulated our success, and we need to keep up, not just for today but also for the year 2020. Where will we position ourselves in 2002? I do not want to be in the position of knowing that the right thing to do to today was to liberalize the trade environment in The Bahamas, and I did not do my best to change the environment. If we do not act, in the year 2020, that generation of leaders will be asking of this generation: why did you shirk your duty to us?

In terms of financial services, you know that where there is commerce, there is money. Where there is money someone needs to watch over the management of that money or that wealth. If The Bahamas embraces this new liberalized atmosphere, then in a rules based environment we have the recourse to the rule of law, instead of the normal predatory environment, which we now suffer from in the present financial services context, and we enhance the wealth of our people.

I think on balance there is nothing to fear. I look forward to the comments that you will make and the dialogue. I also hope that you will find the draft proposals in the White Paper about the reservations that are proposed something, which you think you are in a position to accept.

Thank you very much indeed.