The rapidly changing nature of global financial services has seen the proliferation of bilateral and multilateral treaty regimes creating opportunities for some and pitfalls for others. Successful international financial centres must enhance their research and monitoring capabilities on trade and other international agreements, in order to maximize opportunity in a time of rapid evolution and to remain on the cutting edge.
As a result, a key agenda item at the successive 2006, 2007 and 2008 Bahamas Financial Services Retreats has been the use of international agreements as a financial services engine. BFSB has continued to monitor how treaty arrangements are being used more and more for the attraction of investment and ancillary services.
Countries such as The Bahamas must take steps to review and establish the range of policy options that would be acceptable when negotiating treaties. Experts also point to the need to educate the broad international community on the value that can be brought to international commerce by nations such as The Bahamas.
BFSB has long supported the importance of elevating the profile of trade and treaty regimes, prompting national debate on this critical issue, and concurrently assessing the needed resources in this connection. The challenge for the sector will be to review how treaty regimes can specifically advance financial services – appraising benefits versus cost – given the economic model of this nation and the absence of direct taxation. It is this that has occupied the dialogue both inside and outside of the annual retreats.
Empirical examination of the relationship between financial services trade and macroeconomic performance highlights "links in a causal chain that lead from trade to more competition in the financial services sector, from more competition to lower intermediation prices, and from there to higher long-run capital stocks and income levels". Studies on the linkages between financial services trade and growth argue that "trade, through the fostering of financial market integration, yields important long-run effects related to increased competition". There is a strong positive relationship between financial sector competition and financial sector openness, and between growth and financial sector competition.
Any strategic plan for growth of the sector must address trade in financial services, now globally worth trillions of dollars, and included under the WTO's multilateral rules that cover more than 95 per cent of trade in banking, insurance, securities and financial information.
Public Sector Trade Unit
Minister of State for Finance, the Hon. Zhivargo Laing, has announced that the government is developing a comprehensive policy on international trade and tax. "Such a comprehensive policy developed by an established, professionally-staffed, academic-research supported International Trade Unit* within the Ministry of Finance will ensure that all implications of agreements affecting our financial services sector are clearly defined and addressed,"* he said. Already, the Ministry of Finance coordinates a Bahamas Trade Commission, comprising private sector representation, including BFSB’s CEO & Executive Director.
BFSB Member Fora
In addition to the annual Retreat deliberations, BFSB has hosted a number of Tax and Trade Symposiums to update members and the general business community on key international tax and trade initiatives and their current or potential impact on the financial services sector. And, more importantly, to garner industry feedback.
Working Sessions have included World Trade Organisation (WTO) Agreements; the EU Economic Partnership Agreement; International Tax Initiatives, highlighting The Bahamas’ Positioning & Response; the IOSCO Multilateral Memorandum of Understanding (MMOU); and the Society of Trust & Estate Practitioner’s (STEP) view on the evolving protocols for the cross-border exchange of financial data for tax enforcement purposes; and an update on Level Playing Field issues from a global perspective. Strategy sessions have included outlooks on The Bahamas’ response to both tax and trade initiatives, particularly looking at its ability to negotiate meaningful benefits as a non-tax jurisdiction.
It is anticipated that these business forums will continue in the coming months.