Op-Ed

The indispensability of trade, pt. 1

“Trade has been a cornerstone of our growth and global development. But we will not be able to sustain this growth if it favors the few, and not the many.” — Barack Obama

Trade is the voluntary action of buying and selling commodities, goods and services.

Trade can take various forms. It could include barter, which is exchanging goods and services for mutually agreed upon other goods or services.

However, trade is most frequently accomplished by exchanging money or money’s worth for a product or service.

Trade is an indispensable activity. Whenever we go to the food store or pay for vitally needed utilities, pay our children’s school tuition, buy clothing, secure housing, or simply fuel our automobiles with gasoline, we are engaged in trade.

The same applies to tourists in The Bahamas who purchase room nights, food and beverage, entertainment, or similar activities. They are also engaged in trade.

When clients pay for financial services, the client and the service provider are involved in trade.

Trade has become such a natural activity in our daily lives that we frequently take it for granted, and we often do not consider such activities as trading activities. However, that is precisely what we do every day, many times each day.

One of the essential activities affecting countries is the quantity of trade between nation states and the level of international trade.

This week, we will consider this — Is trade an indispensable activity, and how does trade improve our standard and quality of living?

GDP and GNP

A country’s gross domestic product (GDP) and gross national product (GNP) are essential trade indicators.

GDP is the value of goods and services exchanged in the domestic market or the measure of trade within national borders.

GDP typically includes aggregating private consumption or consumer spending, government spending, capital spending by businesses, and net exports, that is, exports minus imports.

A country’s GDP is important because it indicates whether the economy is growing or contracting.

A good example is the fishing industry in The Bahamas. The value of fish and other animals or products harvested from our ocean and sold in the domestic market is factored into the country’s GDP.

On the other hand, the GNP is the total value of goods and services exchanged at the national and international levels. GNP, therefore, includes a country’s net overseas economic activity.

Let’s look at the same fishing industry in The Bahamas. The value of all things harvested from the seas surrounding The Bahamas and sold in the international market is factored into the country’s GNP.

GDP is the most commonly used measure of a country’s economy and represents the market value of goods and services produced over a specific time frame.

Many factors affect the important GDP metric.

In 2019, before the COVID-19 pandemic, the GDP of The Bahamas was $13.58 billion. In the following year, that same metric significantly diminished because of the substantial decrease in economic activity in many sectors of the Bahamian economy. Accordingly, the country’s GDP fell to $9.7 billion at the height of the pandemic in 2020.

The country’s GDP significantly declined during the pandemic because of the closure of many businesses where Bahamians would normally spend their money like restaurants, gyms, barber and beauty shops, and clothing stores, to name just a few businesses that were shuttered.

Consequently, job losses resulted in Bahamians losing large amounts of disposable income because thousands were furloughed during that period. Many sectors, such as tourism, financial services and construction, suffered an enormous contraction, thereby reducing our GDP.

GDP is also used to compare the performance of two or more economies. It is used as a critical input for investment decisions and helps the government to draft policies to drive economic growth.

The Bahamas Trade Commission

Fully aware of the importance of trade to The Bahamas, in the early years of this century, the government established the Bahamas Trade Commission (the commission).

The current commission, which is appointed and of which I am honored to serve as chairman, has been charged with accomplishing several very important objectives.

The commission falls within the purview of the Ministry of Economic Affairs and is assisted by a talented cadre of trade specialists within the ministry.

The commission’s primary mandate is to increase public awareness of all matters related to trade, assess the full implications of the trade agreements with other countries and international agencies, and recommend and create a plan to integrate the trade agreements into everyday business activity in The Bahamas.

The commission’s public awareness objectives are to:

• Serve as the primary artery between the government and the public regarding the government’s trade agenda;

• Provide information to the public and various industry constituents regarding trade liberalization, in general, and the government’s trade agenda, in particular;

• Educate the public on economic partnership agreements, the World Trade Organization access process, and negotiations of a replacement agreement to CARIBCAN;

• Market the benefits of trade liberalization;

• Inform on the risks associated with trade liberalization; and

• Expand the use of social media with respect to the trade agenda.

The commission’s industry protection, development and stimulation objectives are to:

• Identify industries and sectors vulnerable to trade liberalization;

• Assess and determine the extent to which industries are vulnerable to trade liberalization;

• Provide recommendations to the government on how to bolster those vulnerable industries and sectors;

• Identify industries and sectors which stand to benefit most from trade liberalization;

• Identify export opportunities; and

• Inform the private sector on how to prepare for trade liberalization.

The commission’s market access and anti-dumping objectives are to:

• Assess from industry constituents the extent to which there have been limitations on market access abroad for their respective products or services;

• Provide recommendations to the government on the posture to assume during trade negotiations in respect of increasing market access;

• Identify sectors that are suffering from “dumping”; and

• Provide recommendations to the government to counteract this trade phenomenon and violation.

The commission is also tasked with integrating trade agreements into everyday business activities. It is mandated to accomplish this objective by:

• Engaging the public in dialogue on the timing and mechanism for various liberalization steps; and

• Recommending and creating a plan to integrate the trade agreements into everyday business activity in The Bahamas

Finally, the commission is also mandated to advise on the government’s trade legislative agenda.

The National Trade Policy

To realize these ambitious objectives, the government has published a Draft National Trade Policy for public commentary.

The introduction to the Draft National Trade Policy states, “Trade has an important role to play in the new normal. But for this to happen, The Bahamas needs a coherent National Trade Policy which aligns with the broader development strategy and to avoid a piecemeal approach of uncoordinated and sometimes conflicting measures affecting the country’s exports and imports of goods and services.

“Such a trade policy has so far been lacking in the country, which may, at least in part, explain the long-term declining trend that trade has played for The Bahamas (up to the mid-1990s, trade in goods and services was equivalent to more than 100 percent of GDP, compared to the less than 80 percent in recent years).”

The Draft National Trade Policy will be discussed in greater detail in part two of this series.

Conclusion

There is no question that trade is vital to the country’s economic development. There is considerable work that must be done in considering how to focus on this activity in order to reap the most significant benefits for our citizens and residents.

We can no longer take trade for granted or minimize its impact.

We must engage in a deliberative, comprehensive approach to consider how we can best educate all our citizens to appreciate the indispensability of trade for our economic development.

We must also ensure that everyone knows how they can best take advantage of the enormous benefits that will inure to all our citizens from vigorous and dynamic trade.

Philip C. Galanis is the managing partner of HLB Bahamas, Advisors and Chartered Accountants. He served 15 years in Parliament. Please send your comments to pgalanis@gmail.com.

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