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The Caribbean Basin Initiative (CBI) Extended Two Years... It Will Ultimately Be Replaced With A Reciprocal One In Keeping With World Trade Organization (WTO) Standards, Forcing Caribbean Nations To Lower Or Remove Duties On U.S. Goods
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PM—CBI extension won:
By INDERIA SAUNDERS, Guardian Business Desk -
Nassau, Bahamas:



WASHINGTON, DC — Bahamian exporters can now breathe a sigh of relief with Prime Minister Hubert Ingraham announcing a two-year extension to the Caribbean Basin Initiative, likely just enough time for the creation of a reciprocal trade pact to replace it and satisfy South American countries calling for a level-playing field.

In an interview with Guardian Business yesterday, Ingraham said last week's Caribbean Heads of Government meetings with Charlie Rangel, chairman of the House of Representatives Ways and Means committee, were quite productive. Anxiety the CBI would fail to win that extra time has apparently now been eased ahead of the U.S. elections in November.

"It's been extended (and) the (change in) administration will not affect it because it's an act of Congress," he said. "CARICOM and The Bahamas continue to seek to get improvement to the benefit, but the existing arrangement will continue for another two years from here on."

Just last week, it appeared likely that it would either fall to U.S. presidential candidate Barack Obama or his GOP rival, John McCain, to push through Congress an extension for that comprehensive trade pact granting Bahamian goods unfettered access to the U.S. while allowing us to tax American goods to the tune of $600 million annually. A promise by President George Bush to do the same seemed to have gone nowhere since a similar meeting a year ago, one followed by discussions with Rangel.

And while the agreement has indeed been extended during the Bush administration, the agreement will ultimately be replaced with a reciprocal one in keeping with World Trade Organization standards, forcing Caribbean nations to lower or remove duties on U.S. goods.

However, The Bahamas and the rest of the Caribbean argue they need time to fully prepare for that sea-change. They appear to have now bought themselves that time.

The news should be welcomed by Grand Bahama's Polymers, a Styrofoam manufacturer, and, to a much lesser extent, seafood exporters. The former depends on that international agreement to ensure the price competitiveness of its product on the American market. It has in fact hinted that without the preferential pact — first floated as a way of allowing Caribbean nations to deepen their economies — it would be forced to quit The Bahamas.

They're alarm bells that were first sounded last year in the build-up to signing of the Economic Partnership Agreement between CARICOM countries and the European Union.

That reciprocal agreement was considered key to protecting seafood exports to that crucial market as well as Bacardi rum shipments leaving the Nassau distillery. That company has since announced its intention to fly the Bahamian coup despite concessions won with the EPA.

It's something the government will likely study as it looks at the pro and cons of signing onto a replacement to the CBI, which would do little more than protect Polymers and a modest number of jobs at its Freeport facility while forcing this country to give up hundreds of millions in import duties on U.S. goods.

Professional associations like the Bahamas Institute of Chartered Accountants are now working toward mapping out their own individual bargaining positions for talks with U.S. negotiators. They're also looking for the government to provide them with the kind of technical expertise they now lack.

Still, with the Ingraham administration's suggestion it will seek WTO membership, which would virtually compel it to abandon its schedule of customs duties, it seems increasingly likely The Bahamas will sign onto that CBI replacement. The move would come despite comments from the Minister of State for Finance Zhivargo Laing, suggesting the country would be ill-prepared to give up those tax revenues in order to protect one or two exporters like Polymers.

The government would likely have to bring in a VAT or income tax system to make up for the revenue loss, although in its 2008-09 budget the government has already moved to protect some of that money by switching the point of taxation on some goods from the border to inland.

One thing's for certain; the clock is ticking on the current agreement, with at least two South American countries prepared to press their case for an immediate end to the CBI with WTO officials. It's unclear whether Rangel's assurances can effectively keep them at bay, considering the CBI has already formally ended. It is in fact already on an extension.

While Obama has voiced his intentions to assist his Caribbean brothers and sisters, it is unlikely he or McCain will offer unending support for the agreement in its current format. It is a deal with very obvious benefits for the Caribbean with no real counterbalance for their single largest trading partner, the U.S.

On Monday, Ingraham said the group of regional heads were in meetings for hours before coming to a decision on this and a number of other topics.

Other discussion points include investment opportunities the Caribbean has to offer Wall Street "movers and shakers."

While the exact details of these talks are still not clear, Guardian Business understands that Caribbean heads have all expressed a desire for a single CARICOM stock exchange. In the past, Laing has rejected the idea of Bahamian participation, perhaps another indication of just how up in the air this country's position on any future free trade agreements really is.

June 24, 2008 | 7:15 AM Comments  0 comments

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