The small business sector could face intense pressure from larger businesses, depending on The Government's conduct in the Free Trade Area of the Americas (FTAA) negotiations.
That is according to Governor of the Central Bank of The Bahamas Julian Francis, as he articulated his views on the FTAA on Immediate Response, a ZNS talk show.
With FTAA negotiations on the loom among the 34 countries in the Western Hemisphere, Mr. Francis expressed concerned for the small business sector, which could be adversely impacted.
A major issue of the FTAA is the free movement of goods and services within the hemisphere.
"This is one of the fundamental consequences of an open economic environment," Mr. Francis said.
To some extent, and for some years, he said that The Bahamas has been feeling the impact of the development of the FTAA.
Years ago, the United States, Mexico and Canada signed the North American Free Trade Agreement (NAFTA), which resulted in certain important shifts in the economic arrangements between those three countries.
Mr. Francis said that The Bahamas, as one of the small group of countries offshore the United States, "inevitably" are heavily impacted by those kinds of things.
At the level of fundamental economic activity, "it is probably true to say that this is not entirely new to us," he said. "What would be new are the formal arrangements which we would at some point have to adhere to, initially sign onto in 2005/2006."
The formal implementation of the FTAA would mean that The Bahamas and other small states in the Caribbean and Latin America would sign onto the agreement.
There are ranges of areas, which define how the free trade area would operate.
"We would be expected to adhere to the areas of organization and operations, which include the legal arrangements and administration arrangements which would define FTAA," he said.
Mr. Francis referred to the last Thursday's town meeting on the FTAA and agreed with the Minister of Trade and Industry that "we don't have to believe that becoming a part of this arrangement that we immediately are going to be plunged into some obligation which are going to catastrophic for our economy."
Mr. Francis stated that The Bahamas has the opportunity to negotiate many of the issues, which pose a threat to its economy.
"There are going to be some agreement on issues which need not work in our disfavour," he said. "Some of them could be structured in our favour.
So those where we do have some important risks, it would be possible for small states to be the beneficiary of special arrangements, which would postponed the implementation of certain of the arrangements and would give us more time to prepare ourselves to embrace these new arrangements."
Mr. Francis said he was not sure whether there would be any immediate impact when the FTAA comes on stream.
On the issue of tax structure, Mr. Francis said that The Bahamas would have the opportunity to negotiate, not to put the country in an impossible position.
He said that for The Bahamas, there were some attractions in a Value Added Tax structure.
"We need not feel that it is necessarily a bad thing for The Bahamas, after all, small countries such as Barbados which is quite similar in a number of respects to The Bahamas, have implemented the VAT quite successfully."
Mr. Francis said though that there are risks in signing onto the FTAA, they are risks, which relate to globalisation itself.
He defined globalisation as "a new way of doing business in a more open environment where you are subject to competition, where you have to be able to compete more effectively in certain areas."
Globalisation, he added, also has some benefits; the economy could benefit from the availability of certain goods and services and prices which are preferably, compared with what they are today by the removal of tariffs.
Implicit in that would be certain challenges for the economy notably, the small business sector which would have to face more competition from the producers of the whole range of goods consumed in the country, he said.
"It is reasonable to assume that in time, we would see a reorganisation of our small business sector, which means that we would see a narrowing of the sector in favour of larger more established businesses.
"This is one of the fundamental consequences of an open economic environment," he said.
He said however that there would be opportunities for The Bahamas to develop areas that are dormant.
"The process of opening up our economic arrangements so that international entities have a more important right to sell goods and services within the Bahamian economy, will mean that a certain portion of our small business sector would be under increased pressure," Mr. Francis said.
He said though, that this would happen over a period of five to 10 years, depending on the arrangements the Government put in place to protect small business sector from the impact of FTAA.
By Lindsay Thompson, The Nassau Guardian
