CHAMBER OF COMMERCE LUNCHEON
10th March 2005
British Colonial Hilton

CARIBBEAN SINGLE MARKET AND ECONOMY

On 21st December 2004, the Government of The Bahamas made a decision to advance to the next stage of the discussion on the Caribbean Single Market and Economy (CSME) and its applicability to The Bahamas.  This decision was taken against the background of a fast moving world economic situation, where trade liberalization is the order of the day, and where The Bahamas must begin to position itself or get left behind in the global economic game.

The Bahamas faces some choices for public policy, which require us to properly position our country not just for today but well into the future.  The question is not so much where we are today but where will we be in the year 2020 and beyond.  Some countries in the region have already determined that by that year, they intend to become developed countries or first world countries.  The Bahamas should be heading in that direction.  So the decisions we take today will position us for the future.

It seems to me also that The Bahamas must begin to vie seriously for the title of ‘leader of the region’.  We have a successful economy but there is too much resting on our laurels and patting ourselves on the back, without taking true cognizance of the fact that our competitors in the region are emulating our success.

While there are many arguing that we can envelop ourselves in a protective cocoon forever, the world is changing, our neighbours are moving forward; enhancing opportunities for their citizens, but there are many arguing that we must turn away from the world.

Then there are those who would frighten us by suggesting that somehow the relationship with Caricom countries means necessarily that we no longer have a relationship with the United States of America.  Arthur Foulkes, the former Ambassador and now a Tribune columnist makes the point much better than I could that you can have more than one friend and relationship at the same time.

The role of the Ministry that I have the honour to head for the time being is to smooth passage of Bahamians wherever they are or want to go in the world.  This means whether for travel or trade, Bahamians ought to have smooth way to go.  This is anecdotal but from time to time and as recently as this week, Bahamians call and ask whether or not we are part of the CSME and when the answer comes back no, another Bahamian has been denied an opportunity which he or she thought might be available to them by trading within the region.
I say this against the background of the Government’s decision to prepare a white paper on the CSME.  It is proposed that there be reservations, which will except The Bahamas position from the requirement for the free movement of people, the Caribbean Court of Justice, Monetary Union, and there will have to be transition provisions for a move toward a Common External Tariff.  This is the tariff that all Caricom countries will be required to charge third countries for their goods being imported into The Bahamas.  This will require expert and careful work.

You will note at the same time that there are implications for the revenue.  However, it is important to note that quite apart from this exercise, The Bahamas is being drawn inexorably toward Value Added Tax, which would more properly reflect the share due the Government in the public interest as a percentage of the domestic product of the country.  There is a whole raft of work that needs to be done in terms of public education on tax policy, and on tax reform.

This morning, the press quoted extensively from the Standard and Poors report, which expresses the concern of the inelastic nature of our tax yield, and its vulnerability to shocks.  Once again, we are being pointed toward the need for more planning and making the hard choices to better position our country into the future.

The Bahamian businessman or woman should have absolutely no fears of the CSME.  There is no cultural threat; there is no economic threat.  There is only economic enhancement.

There is no threat to the sovereignty of the country.

The revised Treaty of Chaguramus is a treaty to which we had already signed save and except for our participation in the Caribbean Common Market.  We are in Caricom for geopolitical reasons.  That is the matter, which is of the greatest importance to us at the moment - the fact that the world speaks to this nation within the context of a region, not a single country.  Our impact on the world stage for the betterment of our country is enhanced by our relations with these other Caricom states.  In addition, you have the practical realities of the University of the West Indies, the Caribbean Emergency Disaster Relief Agency, the Caribbean Accreditation Council and other regional bodies, which provide economic, technical and social assistance to The Bahamas.  We have always stood apart from the economic agreements.

A decision was made, however for The Bahamas to join the World Trade Organization (WTO).  That application subject to the agreement of the cabinet and the completion of certain statistical information may be ready as early as this year to be submitted by the Trade Ministry.  The CSME agreements are part of the readiness for the WTO arrangements.

The beauty of all of these arrangements is that the predatory world of international trade will now be regulated, and we move toward a rules based system of trade, based on the mutual acceptance of a way of behavior instead of the unilateral system of preferences and barriers mounted by countries with which one trades.

It is true that the United States will continue to be our major partners in trade, but it is also true that opportunities through the CSME will also be available for Bahamians that are not now available.

One can look toward the Caribbean markets for capital, for example, which may be available more cheaply and on better terms than it is presently available within the Bahamian context.  Cleary, any liberalized arrangements must have implications for the regime of exchange control which is a regime that many argue is one from which the country should be slowly weaned.

It is expected that the reserves can reach one billion dollars this year through the prudent management of fiscal and monetary policy.  This has created a glut of money in the system already as it stands with 700 million in reserves.  There are two problems which arise out of this: a shortage of investment opportunities and the irony of this that while money is cheap, the lack of opportunities means that interest on bank deposits is also small.  The CSME can make available opportunities for investments in the region as well as for raising capital in the region to invest in The Bahamas by Bahamian and other investors. That is surely the direction that business should want to go.

The country has to then make ready to compete, and any agreement on joining this will be hedged by the necessary transition times to ensure that there is the least shock on the economy.  However, given the present level of trade at 1 per cent of total volume of trade of one billion dollars, there is unlikely to be any shocks at all.  I wish therefore once again to say that there is no special drama about this.  It is a natural progression, and will enhance rather than harm.

I urge your support of this important initiative and look forward to the discussion today.