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GUEST COMMENTARY: Lobbying in U.S. Important to Caribbean Interests

Posted by kinchendavid on October 20, 2006

By Sir Ronald Sanders

A strong lobby for Caribbean interests in Washington is becoming increasingly more important as, despite rhetoric to the contrary, governments of other countries are aggressively seeking the US government’s attention.

The need for a strong lobby in Washington on issues vital to the region has been advocated by several regional commentators, me included. Others include David Jessop, Director of the Caribbean Council for Europe, Dr Anthony Bryan, Professor Emeritus at the University of Miami, and Dr David Lewis, Vice President of Manchester Trade based in Washington.

A few weeks ago I drew attention to the latest initiative by European Union (EU) tax officials to try extend the European Union Savings Directive (EUSD) to Hong Kong, Singapore, Japan, Macao, Bahrain, Dubai, Canada and the Bahamas, and I urged that the Caribbean keep a close eye on this development in order to protect their low-tax jurisdictions and preserve their financial services industry.

The EUSD requires countries either to provide information on interest paid into the bank accounts of EU citizens to the tax collectors in their country of origin, or to apply a withholding tax on the interest payments that is then remitted to the revenue departments of the relevant EU countries.

I pointed out that when, in 2001, the Organisation for Economic Cooperation and Development (OECD) launched its “Harmful Tax Competition Initiative” in which it blacklisted several Caribbean countries, EU countries were the principal advocates of the initiative.

I also recalled that, fortunately, the Republican administration, which came to power in the United States under President George W Bush, disagreed with the high-tax stance implicit in the OECD initiative, and this helped to weaken the OECD resolve, and dampened the enthusiasm for punishing jurisdictions with low tax offshore financial centres.

On Oct. 11, 2006, EU Ambassadors gave the European Commission (EC) a mandate to start exploratory talks on the EUSD with Hong Kong, Singapore and Macao. This mandate is significant because just the week before Singapore refused to discuss the matter with the EU, and Hong Kong indicated that it would not provide information of the finances of foreigners. Nonetheless, EU Ambassadors proceeded with their mandate.

Then, as David Jessop wrote recently, during negotiations between EU and Caribbean countries over the EU’s proposed Economic Partnership Agreements, Caribbean representatives rejected proposals from Europe “that sought to place conditions on the availability of development assistance if the region did not fully comply with OECD financial services initiatives”.

Nonetheless, the EC has “reserved the right to reintroduce these issues into negotiations at a later stage”.

In the meantime, the OECD has been lobbying the US Congress to reverse language that was included in the Foreign Operations appropriation bill that would have stopped the OECD from pursuing measures against competition from low-tax jurisdictions.

According to The Washington Times newspaper, the head of the OECD’s Washington office has written to US Senate and administration officials requesting “that this language be reversed”.

This is a further sign that the OECD, pushed by EU countries, still has offshore financial services and tax competition very much on their agenda, and efforts are being made to bring Washington on board.

In the absence of strong lobbying efforts in Washington by Caribbean and other countries which want to develop offshore financial services, the US Congress will be hearing the OECD tune, and may be tempted to dance to it. And, while the capacity to compete in financial services is important to the Caribbean, it is not the only issue on which lobbying in Washington is important.

Dealing with a complaint earlier this year by Trinidad and Tobago’s Prime Minister, Patrick Manning, that there is a lack of interest in the region by the US in matters of trade and drug trafficking, Professor Anthony Bryan said that the twin-island state needed “a strong lobby in Washington”.

Professor Bryan is reported to have made the pointed remark that staying in the Caribbean and complaining about the US will not work.

Dr David Lewis, from a vantage point in Washington itself, where his organisation sees groups of countries intensely lobbying the US administration and Congress on issues vital to their welfare, has long argued that the Caribbean needs to engage the US proactively.

He has pointed out that Caribbean Ministers met the former US Trade Representative Rob Portman who left his post one week after the meeting, but the Caribbean is yet to advance the region’s trade and investment interests with his replacement Susan Schwab.

On October 13th, a US-Caricom trade and investment committee met. It was an important meeting, but for Caribbean needs to be addressed in trade arrangements, the US Congress needs to be on board.

This was obvious – if it wasn’t already – in the passage recently of an amendment to the Western Hemisphere Travel Initiative which required US passengers on airplanes entering the US from the Caribbean to hold valid passports from January 2007. When this bill was passed, extending the deadline to 2009 for travellers from Mexico and Canada, most of the Congressmen, who voted for it, were unaware of the implications for the Caribbean’s vital tourist industry.

Lobbying in Washington is not genuflecting at the altar of power or pandering to the US; it is simply recognising how decisions are made, and acting to ensure that your country’s interests are understood. After, all the US is still the Caribbean’s biggest trading partner; still the prime provider of tourists to the region; still home to the largest number of Caribbean people outside the area.

* * *

Sir Ronald Sanders is a business executive and former Caribbean Ambassador to the World Trade Organisation who publishes widely on Small States in the global community. Responses to: ronaldsanders29@hotmail.com

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