Hail 2004:
Despite the freshness of the new year, typical in expectation of new opportunities and a 12 month learning curve, in one sense, 2004 is already over. What lies on the horizon for the world ﾖ whether it is the now somewhat over used term: terrorism, or the increasingly insistent policies of the US or the fraying trade relationships; which are increasingly less cordial ﾖ 2004 it seems will be a year of anxiety.
This is not of necessity a bad thing. Our life in these islands for instance have given us too much of a bearable lightness of being. If we care to admit the truth of it, too little concerns us with a proper degree of seriousness, and now the world is making demands to which we must respond whether we are ready or not. 2004 is the threshold year for the Tax Information Exchange Agreement and so the IRS Qualified Jurisdiction status. As such it may mean that at yearﾴs end, we may be near the end of a 30 year international reputational status as a financial services centre, with constitutionally protected safeguards for client confidentiality. There are many who will say that this is an international trend, but that is nonsense; in fact, it is ﾖ if I may express it indelicately ﾖ barking nonsense.
It is ironic that we begin 2004 as we ended 2003 weakening the constitutional protections mentioned above, whilst Switzerland is in the throes of discussing enacting the very constitutional protection of client confidentiality we seem to have lost.
Readers will also recall that beginning two years ago I wrote – in this space and elsewhere said – that Brazil will have proven to be the wildcard in the FTAA initiative. In the closing months of 2003, Brazil showed its mettle. This year is a pivotal year for where the Bahamas stands on these discussions as well. At the Landfall Centre we will hold a major conference on this and other questions to ease the anxiety we believe will characterise this year.
This Column:
In writing this column, I tried to stay the course even as I travelled more than 150,000 miles in 2003. I was not always successful. I am changing the format for 2004. Usually, I write an entire article on variations of the same subject. What I will now do is write the article in five sections of four hundred words each. The first will be an introduction; the second will deal with a local issue, the third will concern the US (politics and economy), the fourth will take issue with or support a column (whether local or international) and the fifth will deal with a philosophical issue.
I also promised last year to put the Iraqi situation in perspective. But readers will have appreciated that as a scholar, one mustnﾴt simply pour out unrefined commentary on a topic without clear research. I wanted at the very least to do some checking. And by this I do not mean looking though some books, but checking even what a number of books assert, since all texts are written from some point of view, and it is proper that that point of view is factored into our judgment when considering the written representation of any event.
I propose below to complete this first instalment for 2004 for by giving a brief history of Iraq, and giving some forecast commentary on the year 2004 for the Bahamas.
Babylonﾴs Road:
Before commenting on the historical background of Iraqi problems, I shall like to share with the reader a list forwarded to me by a colleague from the US State Department, explaining what he thinks are the goods reports from the Iraqi situation as it stands.
Since President Bush declared an end to major combat on May 1:
The first battalion of the new Iraqi Army has graduated and is on active duty.
Over 60,000 Iraqis now provide security to their fellow citizens.
Nearly all of Iraq’s 400 courts are functioning.
The Iraqi judiciary is fully independent.
On Monday, October 6 power generation hit 4,518 megawatts-exceeding the prewar average.
All 22 universities and 43 technical institutes and colleges are open, as are nearly all primary and secondary schools.
By October 1, Coalition forces had rehab-ed over 1,500 schools ? (500 more than scheduled).
Teachers earn from 12 to 25 times their former salaries.
All 240 hospitals and more than 1200 clinics are open.
Doctors salaries are at least eight times what they were under Saddam.
Pharmaceutical distribution has gone from essentially nothing to 700 tons in May to a current total of 12,000 tons.
The Coalition has helped administer over 22 million vaccination doses to Iraq’s children.
A Coalition program has cleared over 14,000 kilometers of Iraq’s 27,000 kilometers of weed-choked canals which now irrigate tens of thousands of farms. This project has created jobs for more than 100,000 Iraqi men and women.
We have restored over three-quarters of prewar telephone services and over two-thirds of the potable water production.
There are 4,900 full-service telephone connections. We expect 50,000 by year-end.
The wheels of commerce are turning. From bicycles to satellite dishes to cars and trucks, businesses are coming to life in all major cities and towns.
95 percent of all prewar bank customers have service and first-time customers are opening accounts daily.
Iraqi banks are making loans to finance businesses.
The central bank is open and is fully independent.
Iraq has one of the worlds most growth-oriented investment and banking laws.
Iraq has a single, unified currency for the first time in 15 years.
Satellite TV dishes are legal.
Foreign journalists aren’t on 10-day visas paying mandatory and extortionate fees to the Ministry of Information for minders and other government spies.
There is no Ministry of Information.
There are more than 170 newspapers.
You can buy satellite dishes on what seems like every street corner.
Foreign journalists (and everyone else) are free to come and go.
A nation that had not one single element – legislative, judicial or executive – of a representative government now does.
In Baghdad alone residents have selected 88 advisory councils.
Baghdad’s first democratic transfer of power in 35 years happened when the city council elected its new chairman.
Today in Iraq chambers of commerce, business, school and professional organizations are electing their leaders all over the country.
25 ministers, selected by the most representative governing body in Iraq’s history, run the day-to-day business of government.
The Iraqi government regularly participates in international events.
Since July the Iraqi government has been represented in over two dozen international meetings, including those of the UN General Assembly, the Arab League, the World Bank and IMF and, today, the Islamic Conference Summit.
The Ministry of Foreign Affairs today announced that it is reopening over 30 Iraqi embassies around the world.
Shia religious festivals that were all but banned, aren’t.
For the first time in 35 years, in Karbala thousands of Shiites celebrate the pilgrimage of the 12th Imam.
The Coalition has completed over 13,000 reconstruction projects, large and small, as part of a strategic plan for the reconstruction of Iraq.
Uday and Queasy are dead – and no longer feeding innocent Iraqis to the zoo lions, raping the young daughters of local leaders to force cooperation, torturing Iraq’s soccer players for losing games, or murdering critics.
Children aren’t imprisoned or murdered when their parents disagree with the government.
Political opponents aren’t imprisoned, tortured, executed, maimed, or are forced to watch their families die for disagreeing with Saddam.
Millions of long-suffering Iraqis no longer live in perpetual terror.
Saudis will hold municipal elections.
Qatar is reforming education to give more choices to parents.
Jordan is accelerating market economic reforms.
The Nobel Peace Prize was awarded for the first time to an Iranian — a Muslim woman who speaks out with courage for human rights, for democracy and for peace.
Saddam is gone and in jail.
Take note that whilst these are excellent accomplishments, many thinking commentators may argue rightly, they do not address the issue of ﾑweapons of mass destructionﾴ. A sort of persons who think of themselves as supporting America has come to the fore on this point. They reject that argument and say that the US ﾑfreedﾴ Iraqis. Others say that such a way of arguing is very bad, mostly illogical and ad hominem. Are they right ? Consider this: There are few persons who will defend Saddam or argue for his right to have lordship over the people of Iraq. The answer to this by many, including President Bush is Saddam disobeyed US sanctions. But however one slices it, the US also disobeyed the US in going into Iraq, and Israel has made a routine of such disobedience. This must be admitted whatever oneﾴs support for the parties.
In my dealings with international institutions, or on the international lecture circuit, I have tried to make this point clearly. Recently on C-Span – a discussion channel owned by CNN – I was at pains to make the point that any and all actions by nation-states set precedents. As such, what the US does at the moment will set precedents elsewhere and for the future. I wrote in this space many months ago that rouge nations could use the idea of pre-emptive strikes ﾖ hitting first just in case your enemy may hit you ﾖ will prove to be a negative force in the hope for a safer world. That is every form of protest can now be called terrorist threats, and governments are free to squelch robust debate on the basis that it may lead to terrorism. (Even in the Bahamas we enacted an astounding bad law supporting this view, even as we pay lip service to priding ourselves on the fact that we love free debate and our governments changes without rancour).
Part of the problem is that the US will become increasingly unable to enforce its will. In two to three years, India will have so much US currency, that the US will have to approach India with the same gentle spirit it does China. As such, even before the gulf war, I wrote that the US should lead with authority, not power. For ﾖ as good students of diplomatic history know well – once power is demonstrated, it is forever limited, and limiting.
Another issue that will set a precedent will be the trial of Saddam. I must say that this will prove a legal quagmire. I do not mean immediately necessarily, although that too seems clear. Usually, after something is done it become almost impossible to disentangle it in a legal sense, because in our system of the rule of law, courts must have rules by which the same thing happens each time that the courts are presented by the same facts. But even before Saddam gets before a court, we know that is not the case, as there are persons equally as brutal and dictatorial ﾖin Zimbabwe for instance ﾖ about whom nothing is being done.
In principal terms, the Iraq constitutions are what may be called ﾑMonarchical constitutionsﾴ. And as in our case, there are some ground upon which one cannot sue the crown, or as legal scholars say bring the crown to law, under the Iraqi constitutions one cannot sue the national leader or certain members of his governing council either under the 1979 Iraq constitution nor the one current with Saddamﾴs disposal. The trial cannot be brought the UN since it did not authorise the action in Iraq. Nor may it be brought under the International Court of Criminal Justice since his ﾓcrimesﾔ were committed before the court was constituted, and its rules do not allow for retroactivity. Moreover the US tried to ruin the court, and could not now be seen to be seeking its jurisdiction. Saddam cannot be tried under a new Iraqi constitution since that would be an affront to the rule of law, since such a constitution will have been drafted with the trial in mind. (In addition, President Bush has spoiled the possibility of impartiality by saying publicly that Saddam should get the ﾑultimate penaltyﾴ. Who will accept the judgment of any court ordaining that as being lawful ? Moreover, Iraq is occupied and so is unable to enact its will so to speak. This shows how complex it is for nations to act without the constraints of law. It may be frustrating and may fly in the face of power, but that is what law is about.
The truth of the matter is that until the US leaves Iraq, and the people of Iraq undertake a process of law to assess the deeds of Saddam, on the basis of Western Law as we know it, there are no grounds for a trial.
Letﾴs face it. I have little if any room now to discuss the history of Iraq. I will do that next week. Let me end with a few comments concerning the Bahamas for 2004.
The Outlook:
The most significant issues facing the country heading into 2004 involved the negotiations surrounding the Free Trade Area of the Americas (FTAA), the implementation and any fall out from the Tax Information Exchange Treaty and the continued pursuit by the US of a cheap dollar policy. the larger issue is whether it the FTAA will be good for the Bahamas at all and if it proves to be beneficial, at least theoretically, in practical terms is the country ready for it. He added however, that whether or not The Bahamas enters the FTAA, Bahamians must prepare themselves for new forms of commercial competition
“The real issues is, is it the responsibility of the government not only to sign up to international agreements, but also to ensure that people are ready to take advantage of it. If the FTAA comes on stream and American corporations acting through Bahamian partners, then there is generally no question that the Bahamas will be richer, but the question remains will it be Bahamians who will be rich. We will have to settle such questions this year, over the next nine months”.
The success of any trade agreement comes down to whether or not the country is prepared, a point he emphasized continually He said that a recent report published in Business Week looked at the Mexican experience under the North American Free Trade Agreement (NAFTA). While it is true that the economy grew significantly after NAFTA was implemented, there was and is however a great deal of painful destabilization. Some questioned whether the Mexican government made the best deal for its people, building into the deal all the benefits they could have possibly received. This is a point of grave importance, since no trade agreement is good or bad on its own. It depends on whether a people feel ready to compete in new ways, and whether the terms of such new competition are arranged such that they can capitalize. Many scholars agree that the Mexican government failed in two ways: First, they failed to determine a comprehensive readiness criteria for entrance into NAFTA. Second, they failed to assess the impact of any agreement on Mexican development or whether other developments in the world would outpace the terms to which they agreed. The end result of the study showed that Mexico was not prepared for the implementation of NAFTA and as a result has suffered major losses to China and India as trading partners with US, despite the fact that Mexico is the only one of the three to have entered a free trade agreement with the US. He said that the article surmises two further conclusions: that one, Mexico’s infrastructure can not compete at the level necessary for the country to access all of the benefits made available to it by its trade position, two, the government did not have the relevant competition laws in place to protect such things as the intellectual property of its citizenry and copyrighted material.
Another factor that will weigh in on whether the Bahamas country experiences a positive economic year is the US’ pursuit of a cheap dollar policy. He said that in order to understand the Bahamas economic prospects, one has to understand the US economic system, and to understand that one must reflect on the function of the world economy. At the moment, the US is pursuing an orderly devaluation of its currency, with the result that exports are cheaper because the purchasing power of the euro and Asian currencies are higher. The danger with such a policy however, is that European and Asian investors, particularly Japanese investors, will eventually begin to dump their US currency on world market, which will eventually find its way back to the US, causing severe inflation in the economy and possibly leading to a rise in interest rates which would slow growth in both the US and global economy. ﾓI think the US Federal Reserve has kept good discipline during the consumptive explosion of the last 3 years. However, thinking persons will worry about the US economy going forward as I submit that one cannot run a 500 billion dollar deficit, lose a billion and a half dollar a month in Iraq, that much in Afghanistan and Kosovo monthly, and drive investment away from the US because of the Patriot Act and sustain growth. I think the US went from ﾑirrational exuberanceﾴ in the 1990s to an 11 month stagnation period and this current period may be called one of ﾑeconomic aberrationﾴ. For instance, the car industry has gone from zero interest rates to giving cars away through delayed payment schemes. The car companies will pay for this in their earnings reports in later quarters, and that delayed payment is passed on throughout the economy. In addition, low interest rates drive capital away from the banking system.
The Bahamasﾴ US dollar reserves, which experienced a 26 per cent reduction in value over the last few months, which technically reduces the purchasing power of the Bahamian dollar, which is tied to the US dollar, and when the transaction costs for exchange control is factored in, it becomes even more expensive to do business from the Bahamas, particularly where non-US goods are being purchased and service charges that finance the supply chains to the Bahamas have to be paid.
If the US pursues a policy of making its goods cheaper, then investors and buyers on the world market will get more US dollars for their euros and the yen. Already this is leading to company failures in European countries, and could have a severe negative impact on the world economy. The difficulty for the Bahamas is that a cheap dollar policy also weakens the value of the Bahamian reserves. To the extent that Bahamians and Bahamian-based investors buy US-made goods in US dollars from the US, the move will not create a problem, but if Bahamian investors are converting currencies from B-dollar to US dollar and then to the euro, pound or yen, then the investor will be hit very hard. For most Bahamians the US’ policy may not matter because most of the country’s goods are bought from the US, but speaking theoretically The Bahamian dollar has already suffered a devaluation though its peg to US currency.
“In actual terms mathematically, we should have suffered devaluation some time ago, but the Bahamas’ proximity to the US is its continued salvation and is a phenomenon which has perplexed economic scholars for decades. We have become a default location. When Americans say they do not wish to travel, they still come to the Bahamas because they regard it as very much in their backyard. We are always able to attract at least a trickling in of US currency”. This means that Bahamian businesses have continued access to US currencies to make their purchases. Itﾴs a very narrow plank on which we survive. We have done little to expand it. The question is is this the year in which we will pay the price ?ﾔ
By Dr. Gilbert Morris
