Rotarians were given a wealth of information about the proposed Free Trade Area of the Americas agreement as the signing date draws near.
Second Chief Executive Officer at the Bahamas Financial Services Board, Wendy C. Warren, addressed the Rotary Club of Freeport yesterday afternoon, and said that the country should tread cautiously in signing on to the agreement.
Warren outlined reasons for free trade, stating that through the progressive removal of barriers to the international flow of goods and services, the agreement will promote general economic well-being.
“This is the PR and the propaganda behind the free trade,” she said. “Its national trade liberalisation is based on the theory of comparative advantage which holds that the lowest cost producers should, as a general principal, be permitted to supply markets with their goods and services regardless of the political jurisdiction in which they are located.”
Warren said the agreement is all about competitiveness and that it is something that can not really be examined without talking about the competitive environment The Bahamas provides, or at least should provide.
She added that the agreement is about removing barriers to permit all participants in the economy to specialise in those areas of business activity where they’re most skilled and that it promotes economic
efficiency, lowest prices through competition and thus, improves the
economic lobbying of consumers.
“Free trade is all about those who can negotiate the best,” she said, “and I believe that to negotiate the best, you have to be very well informed of
your own economy and that of other countries.”
Warren stated that US and European Union countries, the drivers of the trade initiatives, have economies that are becoming increasingly service dependent, while China, Mexico and other countries have become dominant in the production of goods.
For The Bahamas, Warren said that what is of particular interest is the relationship between services and investment, because The Bahamas is a service driven economy.
“Most of the dollars in capital investments have been invested in projects where there is a delivery or production of service,” she said. “The Bahamas exports its services generally, and the foreign direct investment has been very much concentrated in increasing our capacity to sell our services extraordinarily, whether it’s by way of tourism or by way of financial services.”
She said, as a result, the entire investment chapter is looked at in the scope of services business, noting that the reader must recognise that services and investment are two sides of the same coin for The Bahamas.
“The Bahamas has successfully traded its services,” she said. “We’ve earned a very good living off of it, but it’s all been outside of the context of a trade agreement. We’ve never operated in an environment where our services are defined and confined to predefined agreements.”
She noted that the country’s most recent interaction was with the OECD, which she described as an example of a multilateral body or group seeking to define rules.
Warren said, unlike our position with the OECD, it is very important for the country to have a seat at the negotiating table.
“We do not want the OECD experience to be repeated,” she said. “We need to be sure, at the end of the day, these agreements impact the country and we can’t escape it. Whether we’re a part of the group, or not a part of the group, we will be impacted.”
She pointed out that, at this stage in the FTAA, we are participating and there are no obligations, but The Bahamas is one of the few countries that are not members of the World Trade Organisation (WTO).
“We really have to ask ourselves ‘is it a position that we can sustain over the long term?'” she asked.
Warren then reported that, in May 2002, the FTAA, through the TFC, which is the highest level of discussions for the FTAA, mandated that offers among countries have to be submitted between December 15 and February 15, but The Bahamas has not yet submitted offers in investment or services.
“In fact, the February 15 deadline has passed and other countries are actually now in the process of negotiating improvements in those offers,”
she said. “One of the reasons why The Bahamas has found this more difficult is because, again, we’re new to this.
“Every other member of the proposed FTAA community is a member of WTO, so quite naturally, what they did was they submitted their current position in WTO.”
She noted that it is also very important for the country to take a cautious approach to ensure that it is deliberate in the offers it proposes.
“Anything we put forward will be expected to have a racheting-up effect, first of all, because WTO is not as all-inclusive and expansive in its goals as the FTAA, so your first offers are automatically going to be expected to be approved.
“Secondly, in the WTO right now, offers are in fact being improved in the Uruguay round, so there is going to be another racheting up of the stakes in terms of how much countries are expecting you to open up your economy,” she said.
By Patrick Mcgregor Senior Freeport News
