Monday, May 27, 2019
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Pugnacious Pierre Dupuch rides again

Dear Editor,

The pugnacious Pierre Dupuch strayed off the metaphorical reservation. Again.

Dupuch galloped into town to mount a defense of supermarket boss Rupert Roberts when no slight or aspersion was ever cast his way.

Dupuch engaged in his favorite sport – jumping to conclusions. He took more offense at who he thought was asking Roberts to evolve in his thinking on the World Trade Organization (this writer) than he did at what was actually said.

A lot of Dupuch’s confusion appears to stem from the fact that even he is perplexed on the substantive issue. Says he, the argument that the Bahamas must join the WTO in order to eliminate import duties is not true. Indeed. Were that to have been the argument then it is back-to-front.

On the one hand, there was never a plan to completely do away with customs duties. Only Hong Kong and Macau have done that. On the other hand, a country generally lowers import duties as a precondition to joining the WTO.

To us, high customs duties are a means of funding the government. To the rest of the world it is a penalty tax that hurts exporters who sell their goods to us because it makes their products more expensive for Bahamians.

Roberts admitted as much in a follow-up remark where he defended high duties on imported toilet paper, which allow his domestic made rolls to appear cheaper. In other words, he can’t produce a competitive product, so for him to stay in business the government must tax competing imports. His homemade product is actually more expensive to produce than the imported brands which benefit from economies of scale.

Roberts is obviously a fan of protectionism. A consensus of economists indicates that protectionism has a negative effect on economic growth.

The WTO believes that high import duties are unfair especially in light of the fact that Bahamian exporters sell just under $600 million a year.

We import about $3.5 billion giving us a whopping trade imbalance. Between five and 10 percent of what we export is lobster, which is generally allowed into foreign markets at or near duty free. A pound of exported Bahamian lobster is often cheaper in Florida than it is in Nassau.

We can all agree that our local fishermen would suffer if other countries increased the duty they charge for our crawfish to be landed in their ports. Same goes for our local beer manufacturers whose share of exports, though tiny now, could grow.

Dupuch points out that on his ministerial watch Family Island farmers had a surplus of peppers and that Roberts saved the day by buying the lot. Perhaps it might have been better for the farmers and for our trade imbalance if those peppers were exported to the U.S. or the E.U. They charge a weighted average import duty of anywhere from 0.1 to 2.1 percent on our agricultural exports.

Dupuch also makes a factitious rebuttal about foreign investment in the supermarket business to try and mock the argument in favor of cross-border partnerships.

Dupuch’s challenges with math notwithstanding, he posited that if a foreign partner buys 45 percent of Robert’s Super Value conglomerate, that minority stake would give the foreigner control over the 55 percent Bahamian majority owner.

What Dupuch also ignores is the fact that if Roberts values his business at (say) $500 million, then the foreign partner would have to pay Roberts $225 million for 45 percent of his company.

A cursory check would reveal that despite Perry Christie’s Houdini-style logic, the foreign partners who invested in BTC did so for control.

In the end, Dupuch sees eye-to-eye with this writer on the point that our customs duties are too high and that this is pushing up the cost of imported merchandise, which is just about everything we consume.

His point about car dealers making less in profits on the sale of a vehicle than the government takes in taxes is a red herring. Buy a car in Florida and it’s likely the taxman there rakes in more than the dealer also. That business model is based on trade-ins, used car sales and parts and service.

With customs duties high, we all agree that the pilloried “little man” is being squeezed.

If we drastically reduce customs duties the government has three tools to work with: grow the economy, reduce expenditure and find new tax options.

I refer Dupuch to a chart which lists all countries by the weighted mean average of the import duties they charge. We are number two on that list at 18.5 percent, behind only Bermuda. Hong Kong is number 180 at zero percent. The U.S. averages 1.66 percent duty and Canada is lower still at 1.52.

Regionally, Trinidad and Tobago averages 8.6 percent duty and Jamaica 10.8. Our CARICOM neighbors are members of the WTO and they have lower customs duties than we do. Their VAT rate is 12.5 and 16.5 percent respectively, they have robust supermarket competition and they both export peppers.

– The Graduate

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