Op-Ed

The indispensability of trade, pt. 2

“The trade policy is a strategic tool in moving the country forward economically and systematically.” Michael Halkitis, minister of economic affairs

In part one of this series, we observed that trade is the voluntary action of buying and selling commodities, goods and services.

It can take various forms including barter, which is exchanging goods and services for mutually agreed upon other goods or services of the same value. However, trade is most frequently accomplished by exchanging money or money’s worth for goods or services.

We also affirmed that trade has become such an indispensable activity in our daily lives that we frequently take it for granted.

This week, we will conclude this series and consider this – Is it important for The Bahamas to develop a national trade policy?

Developing a national trade policy

In December 2021, The Bahamas government issued a newly published draft national trade policy for public commentary. This week’s column borrows extensively from material contained in the document, which is appropriately attributed throughout.

The draft national trade policy provides a thorough background analysis of The Bahamas’ trade performance and its underlying challenges, as well as coherent short and longer-term policy actions aligned with the country’s broader development strategies contained in the National Development Plan: Vision2040.

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 rationale and justification for the national trade policy are derived from the National Development Plan (NDP).

The NDP “… formulates a broad vision for The Bahamas, covering the four pillars governance, human capital, environment and infrastructure, and economy, and formulating 16 goals across the four pillars.

“The NDP also provides an explicit framework for the development of a trade policy which specifically calls for us to ‘strengthen trade policy to create advantages for Bahamian entrepreneurs, exporters, and consumers’.”

This aligns with the objective: “The Bahamas will have a competitive business environment for economic success that supports business development, innovation, wealth creation, entrepreneurship and job growth.”

In addition to the recommendations of the NDP, the Economic Recovery Committee (ERC), which the government convened in April 2020 to identify “strategic recommendations for addressing the economic impact of COVID-19”, provides a comprehensive set of measures to be taken to overcome the economic crisis caused by the pandemic.

The ERC report explicitly calls for the development and adoption of a national trade policy. It recommends to: “Develop and adopt a comprehensive trade policy which examines the specific circumstances of the country’s trade and development problems, while at the same time identifying (and prioritizing) high-impact opportunities. A key element of this framework should include a work-scope to complete WTO accession in an effort to further support the government’s policy objectives.

“Such a framework should take into consideration the comparative trade advantages of the country with a view to developing a long-term strategy to leverage such advantages, while also removing structural impediments to international trade.”

The draft national trade policy notes that “… although the NDP and the ERC report guide the country’s trade policy, they lack the required details to operationalize a full-fledged and coherent approach. The present national trade policy fills this gap.

“The vision of the national trade policy is to achieve a diversified, resilient, sustainable and inclusive trade performance of The Bahamas. This vision provides a comprehensive response to the identified challenges, as summarized above. It is also fully in line with the visions formulated in the NDP. In fact, the national trade policy and its measures contribute to several strategies and goals of all four NDP pillars.

“The national trade policy provides a response to the identified problems affecting The Bahamas’ trade performance, with the ultimate aim of contributing to the policy’s vision as outlined above.

“In line with this, the two strategic objectives of the national trade policy are to address the trade deficit as well as to reduce the vulnerability that stems from the high export concentration.

“To achieve these two strategic objectives, the national trade policy aims at four outcomes which correspond to the four main challenges identified that The Bahamas faces in terms of its trade performance, both in the short and long term, and which are addressed through the policy’s four main themes.

“The first two themes – managing imports and expanding exports – address the need to rebalance the combined goods and services trade balance in the short term and thus also provide a response to the economic shock caused by COVID-19 on Bahamian trade.

“The third and fourth themes – diversifying exports and strengthening domestic competitiveness – address more long-term challenges, respectively the root causes of the current weak trade performance.”

Comprehensive, workable proposals

The cogent analysis of how the policy will address the critical components of the NDP pillars, goals and strategies is instructive and distinctly different from the draft national trade policy. Therefore, the national trade policy is proscriptive in its approach.

Each of the four themes delineated in the draft policy document clearly articulate the issues to be addressed, followed by a national trade policy response to the problems to be addressed. Finally, the draft policy delineates the state bodies and organizations involved in managing and responding to each issue.

The draft policy also addresses the need to revitalize Freeport and develop free trade zones to attract new export-oriented businesses to Freeport and other free trade zones in The Bahamas.

Similarly, the draft trade policy addresses the need to review our customs duty and export taxes in light of trade liberalization.

This may be one of the most intractable challenges in developing a national trade policy. However, a national discourse must begin in earnest to address this seemingly insoluble challenge.

A critical review of the national trade policy

The national trade policy, as indicated above, includes four essential components:

1. managing imports;

2. expanding exports;

3. diversifying exports; and

4. strengthening domestic competitiveness

The draft national trade policy extensively covers each of these components in much greater detail than can be accomplished in this short column.

Therefore, we strongly encourage interested Bahamians to obtain a copy of the draft policy, review it and provide their constructive comments on how it should be refined.

The public discussion period for all stakeholders in the Bahamian economy is fast approaching completion when stakeholders’ input could inform the government on the ultimate determination of the national trade policy.

The 53-page draft is available for public viewing on the Ministry of Economic Affairs website.

Conclusion

There is no question that trade is vital to the country’s economic development.

Considerable work must be done in considering how to focus on this activity 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 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.

Most importantly, to begin this transformative process in the most productive way, we must work together to ensure that the commentary and input from as many people as possible on the draft national trade policy is included in the final document that will shape the future of our trade and of our nation.

• 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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