A renowned expert in international trade policy has stated that the potential to provide intermediate inputs in services and manufacturing provides "tremendous opportunities" for the Bahamian economy.
"It's only necessary to become competitive in one of the inputted products into a final good, or one of the inputted services into a final good, to be able to capture a slice of the global economy and global trade," stated Dr. Sherry Stephenson, senior advisor for services trade at the Organization of American States (OAS).
"This opens tremendous opportunities, particularly for small producers and small countries, in ways that were never obvious before."
Stephenson made the remarks before a panel on the possibility of integrating Bahamian goods and services into global value chains (GVCs); she claimed that The Bahamas was well poised to integrate into the global services chain.
"Services are where the promise is, I think, for The Bahamas...they require less capital investment than manufacturing, and they provide tremendous opportunities for small and medium enterprises (SMEs)," said Stephenson.
"If you look at trade in value-added terms and not in gross terms, the importance of services doubles...Rather than constituting 20 percent of world exports in goods and services, as the WTO has officially published for years, in value-added terms it constitutes 46 percent."
Given that the figure was provided in 2008, Stephenson suspects that services currently represent over half of world trade in value-added terms.
According to Stephenson, 70 percent of global trade is composed of trade in intermediates, and not final products. While Stephenson claimed that the Caribbean and Latin America currently only comprise a small part of the intermediate trade, she indicated that the region had the highest growth rate of any region in the world in terms of activity in intermediate goods.
Stephenson argued that The Bahamas needs to shift from exports of completed goods to intermediate inputs. Of the three categories in which The Bahamas was a net exporter, earth products, fish goods and plastics, Stephenson showed that the two natural resource product areas were in decline. However, plastics showed growth.
"It's harder to participate and reap a lot of value-added out of a value chain in a natural resource product area...than participating in a value chain in the industrial...or electronic or manufacturing product area," said Stephenson.
Stephenson warned that Bahamian tariffs remained "very, very high" and that high tariffs are the chief impediments of the functioning of GVCs.
"In a world of [GVCs], tariffs no longer protect, but they punish production and trade...and so do regulatory restrictions in services," stated Stephenson, who also listed excessive port and terminal handling costs and lengthy export delays among the chief challenges facing Bahamian involvement in GVCs.
"What is very interesting is that this production and trade patterns are now following very closely the pattern of foreign direct investment...investment and trade these days are linked inextricably...It's critical to maintain open markets for cross-border trade and [FDI]."
The Bahamas ranked 84th of 189 economies in terms of ease of doing business in the World Bank's 2014 "Doing Business" report, down seven positions from 2013. However, it ranked 33rd of 161 economies in Information and Communication Technology (ICT) development, second only to Trinidad and Tobago in the region.
Minister of Financial Services Ryan Pinder claimed that The Bahamas was already expanding its role in intermediate input through improved port infrastructure and data processing.
"We're putting in place an electronic window...for customs declarations...to help facilitate the logistics and customs clearing mechanisms to support the success in a trade policy in a global value chain," said Pinder.
"We are actively putting together the infrastructure and the modernization initiatives concurrently with developing the strategy, which will fundamentally be a pillar of economic development in the country utilizing our location, with respect to goods, or certainly our human capital, with respect to services."
Stephenson will assess the viability of Bahamian integration into GVCs during her stay in The Bahamas from July 22-24 before presenting her findings at a later date.

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