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Daily Nation (Barbados)

Sunday-14-January-2001

OECD Tit For Tat

by Tony Best

     If only the walls at the Sherbourne Conference Centre could talk.

     The stories they would tell about the just-concluded two-day, high level consultation on offshore financial services centres in Barbados, the Caribbean and the Pacific would underscore the mood of compromise, a bit of anger, some light-heartedness and a sense determination to get things done, or, as Gabs Makhlouf, the head of the British delegation said, to end the "war of words". 

     Shortly after the opening last Monday morning, Edwin Carrington, the Caribbean Community (Caricom) Secretary-General, used a 15-minute coffee break to switch from a public session to a closed door meeting, one which was designed to allow delegates to speak frankly without the ears of journalists, lobbyists and others interested in the proceedings but who weren't members of an official delegation. 

     But like what happens at most meetings, what is said in private usually ends up being made public anyway. After all, how could the organisers of the meeting, such as the Barbados Government, the Commonwealth Secretariat, the Organisation for Economic Co-operation and Development (OECD) and the Caricom Secretariat have expected that their deliberations would remain confidential with more than 60 people in the room.

     'Bulldog'

     Even so, Makhlouf, director of International Inland Revenue in Britain, probably didn't expect his apology to the developing countries over the way the OECD handled the issue of "harmful tax competition" would have been disclosed first by a representative of an industrialised nation.

     The Englishman, who has a reputation in OECD circles for being a tough negotiator a "bulldog" was the way one European put it won some kudos from the Caribbean when he began a speech on behalf of the OECD saying that the body was sorry for the way it acted in developing the controversial initiative. 

     "I want to begin by apologising" for the OECD action, was the way he put it. 

     Asked later about his apology, Makhlouf said he made it because he felt it was the right thing to do if progress was to be made to end the war of words. 

     Just as important, he conceded that the problem both the OECD and the developing countries were in Barbados to solve, began with "us", meaning the Paris-based organisation, which is often called the rich nations' club. 

     But if the OECD was prepared to compromise to get things moving on the first day, its delegation wasn't about to look the other way when representatives from the Heritage Foundation suddenly entered the room as members of the Antigua delegation.

     Enemy

     As the OECD saw it, the three-member delegation from the Heritage Foundation and the Centre for Freedom and Prosperity were the enemy and they just didn't have a seat at the table. The Foundation, one of America's leading right-wing think tanks with strong ties to conservative Republicans, has been taking the OECD to task for its high-handedness, imperialistic approach to the countries in the Caribbean and its double standards. 

     The day before the meeting began, Dr. Dan Mitchell, senior fellow of the foundation; Bruce Zagaris, a Washington tax attorney; Andrew Quinlan, president of the centre; and Elizabeth Tobias, an economic adviser to Dick Armey, Republican majority leader in the United States House of Representatives, had strongly criticised the OECD at a public meeting at Grand Barbados Resort.

     So when OECD officials spotted them in the room, some delegates from the Caribbean and the United States said the OECD saw red and seemed ready to leave the room. 

     "They were closing their briefcases and whispering to each other," said a delegate. "We couldn't figure out what was going on, but Owen Arthur, the chairman, deftly adjourned the session, supposedly for a coffee break but realistically, as it turned out, to get the Heritage group out of the room."

     That's when the Caricom Secretary-General and a senior member of the Barbados delegation sprung into action. 

     Private appeal 

     Fearing that the meeting would be derailed if nothing was done to get the Heritage team out of the meeting, Carrington appealed privately to the Heritage team to stay away.

     "We didn't want to be unco-operative and, in the spirit of compromise, the decision was made not to be present," said a member of Heritage.

     But compromise wasn't on the mind of France on the second day of the conference. It wanted to ensure that its message got home to everyone: France reserved the right to impose sanctions on the blacklisted countries, and a French official made it quite clear it was his country's sovereign right to take "defensive" measures against tax evasion. 

     Interestingly enough, the French made their stand just when the OECD, Arthur, Makhlouf and others were putting the finishing touches to the plan for the establishment of an international working group to study the harmful tax initiative and report in about a month's time what should be done. The warning from Paris came shortly before the heads of delegations headed to the West Coast for lunch as the guests of the Barbados leader. 

     "I think France attempted to throw a spanner in the works," said an American official. "And they did it when everything seemed to be going so smoothly. The French position came as a kind of shock." 

     But the French weren't the only ones to deliver a shock. 

     Tutoatasi Fakafunua, Minister of Finance of the Kingdom of Tongo, unnerved the OECD with the shocking revelation that his country found itself on the OECD blacklist of tax havens despite the fact that it didn't have an offshore financial services centre.

     "I want to find out how my country got on that list," he is reported to have told a stunned OECD delegation. "We don't have any offshore banks and we don't make any money as an offshore centre. So why Tonga, can someone please tell me?"

     To many participants, the case of Tonga underscored the OECD's sloppy and high-handed approach. 

     Asked afterwards about his statement, the Tonga cabinet minister said all he knew about the OECD exercise was that his ministry received a questionnaire inquiring about offshore legislation and other financial dealings.

     'Ridiculous' 

     "We have legislation on our books that provide for offshore financial services," he said. "That's all there is to it. It was put there in the 1980s. We may even take off the legislation from our books. We don't earn much, if any money from it, and we could hardly be considered a tax haven that is unco-operative. We filled out the questionnaire and the next thing we knew we were listed as a tax haven. That's ridiculous." 

     But if the question from Tonga put the OECD on the spot, the Americans remained unmoved when a pointed question was put to them by one of the British dependent territories in the Caribbean. 

     "Can you tell us if there will be a change of policy on harmful tax competition when the new administration takes office in Washington later this month?" 

     The response was swift: We can't tell you because we don't know. 

     Looking back on what went on behind closed doors, a Caribbean official went away impressed.

     "There were some very interesting moments at the meeting," he said.

     That may be a gross understatement.

 

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