By Roderick A. Simms II

An advocate for sustainable Family Islands growth and development

E-mail: RASII@ME.com

Agriculture, light manufacturing and entrepreneurship, both in the Family Islands and New Providence, are some of the key industries that will be impacted if The Bahamas completes the process of becoming a full World Trade Organisation (WTO) member. WTO membership is promoted as helping local producers, exporters and importers to co-exist in more a conducive business environment. Yet it is still up to the government to meet certain legislative, social, economic, educational, and environmental objectives to achieve greater collaboration between the private and public sector. Therefore, to a certain extent, any benefits from joining the WTO hinge on government policies in certain sectors to ensure proper regulations and the correct business climate are in place before joining.

Entrepreneurship

Entrepreneurship is two-fold. It can involve the creation of small and medium-sized enterprises (SMEs) that target a niche in the local market, or Innovation Driven Enterprises (IDE) that aim to target local, global and regional markets. Both types can find it difficult to succeed in The Bahamas given the high costsof doing business, high labour costs, high utility costs and, in some instances, high barriers to entry. However, the WTO accession should help to encourage innovation and cross-border trade, facilitating the start-up of more local businesses.

WTO could also help to lower the barriers impacting efficiency, and the cost of doing business, through trade facilitation. Another plus is that IDEs will have an opportunity to grow in The Bahamas and actively participate in rules-based global trade via regulations that protect fair competition. From a “bigger picture” perspective, WTO could eventually (in the medium to long-term) help to boost sustainable job creation and wages, and expand innovation throughout all islands of The Bahamas. However, one concern is that foreign companies with larger economies of scale and easier access to finance can make it difficult for Bahamian businesses to survive in the same space of doing business. The government must therefore be aware of these issues and processes when negotiating the terms of The Bahamas’ WTO accession.

Light Manufacturing

It was reported last year that the light manufacturing sector employs an estimated 3,800 Bahamians. The Bahamas Light Industries Development Council (BLIDC) has already expressed concerns about the impact of lower tariff rates on rival imports as a result of WTO accession. If tariffs are lower, Bahamian consumers will be more inclined to import or purchase goods made outside The Bahamas, substituting them for products made by Bahamian manufacturers. Members of the BLIDC, along with smaller business owners in this sector, rely on protective tariffs to remain competitive.

As a result of lower barriers to trade, concerns have also been expressed about increased foreign competition entering The Bahamas, making it difficult for local companies to survive in industries/sectors that are difficult to both enter or sustain. The Oxford Economics report confirmed that the main WTO-related threat is tariff reductions on imports competing with domestic goods. This is a fair assessment considering that The Bahamas has a high standard of living, high utilities costs, and high costs of doing business. Therefore, lower tariffs mean that consumers believe they will get a better value for their dollar. This is not always the case, but it does have a resounding impact on the choices that Bahamians make when choosing to shop locally or abroad.

But business owners (new or existing) in the light manufacturing sector can use this opportunity to find ways to improve business processes and expand. The Bahamas already has a somewhat modern infrastructure in terms of ports (cargo vessels and freighters), telecommunications and six major international airports. This means there is always room for growth, especially with lower tariffs, resulting in lower overall costs for materials and other start-up capital goods. However, there are some costs that manufacturers cannot escape when it comes to facilitating trade, particularly for those businesses that export local products. Those costs include transportation costs (the highest barrier to trade), logistics costs, and then information and transaction costs. Manufacturing businesses on Family Islands will be more exposed to this impact, and placed more at a disadvantage, if negotiations to maintain protective tariffs are not handled properly. It is therefore important for the government to properly review WTO-related tariff amendments so that membership is beneficial for both Bahamian consumers and business owners in this sector.

Agriculture

Similar to light manufacturing, lowering tariffs could have an adverse impact on the agriculture industry in The Bahamas. Over the past decade this sector has not experienced significant growth, mainly because it has been unable to supply fresh produce on a viable commercial scale. However, governments have touted the Bahamas Agriculture and Marine Science Institute (BAMSI) as a “game changer” despite an Inter-Development Bank (IDB) report suggesting that it reduce fiscal ties within the sector. Agriculture development and research is key to boosting commercial activity in this sector, but it is still in its early stages of transitioning from subsistence farming.

ONe WTO-related concern would be that lower tariffs mean businesses and consumers continue to import large amounts of fruits and vegetables, despite efforts to encourage Bahamians to buy locally. The availability of goods from BAMSI is another concern for businesses that sell fruits and vegetables on a large scale. However, there are economic benefits to buying local produce such as accessibility, fresher produce, better quality control, creating and maintaining jobs, and affordability. The government should make it mandatory for food stores and wholesalers to purchase a small percentage a small percentage of their inventory locally. However, this would require sufficient crop production to sustain demand.

Conclusion

In closing, these three sectors are pivotal to economic growth in The Bahamas. Whether their contribution is big or small, it is important that Bahamians get the best deal possible from WTO. There is no attempt being made to say that WTO would not be beneficial to these sectors. However, the government should build more awareness of how it will impact businesses already in these sectors and potential entrants. It is laudable that nearly 4,000 new Bahamian businesses were registered as of last year, and it does speak to economic growth. But the key to success is consistency. With that being said, more research is needed on government’s plans to enable more Bahamians to benefit from these industries with or without WTO.