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ON THE RIGHT: Benefits flow both ways from treaty

Henderson Holmes

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One hundred and five years ago, Canada established a Trade Commission in Barbados. Barbados has enjoyed diplomatic relations with Canada since 1966, and in 1980 the two countries cemented their partnership through a Double Taxation Agreement (DTA), which was amended in 2011.
Today, small Barbados is the third largest recipient of Canadian Direct Investment (CDI) across the globe. According to official statistics provided by Canada, over CAN$53 billion (BDS$93.1 billion) in direct investment flowed to our shores in 2011.
Canadian firms are today the largest foreign investors in Barbados, creating thousands of direct and indirect jobs and helping to make the international business and financial services sector one of the largest contributors to the economy of Barbados. These firms take the form of well known entities including the subsidiaries of three of Canada’s “big banks” with a commercial presence (Scotiabank, the Royal Bank of Canada, and CIBC) plus subsidiaries of Toronto Dominion and Bank of Montreal; the sales and marketing operations of one of the world’s largest leisure apparel manufacturers (Gildan Activewear) and subsidiaries of several oil, gas, and mining operations, including Barrick Gold, the world’s largest gold mining operation.
However, the Barbados-Canada relationship is not a one-way street. While Barbados benefits significantly from the foreign exchange inflows generated by these firms which pay millions of dollars in corporation taxes, licences and other fees, salaries and rents, the Canadian companies – and by extension the Canadian economy – also benefit extensively from the efficiency that companies’ operations derive from being located here.
In 2007, Professor Walid Hejazi, of the prestigious Rotman School of Management at the University of Toronto, conducted a groundbreaking study with the support of the Barbados International Business Association (BIBA) that showed the positive impact that the flow of CDI through Barbados, and other similar jurisdictions, had on Canada.
Professor Hejazi posited that Canadian companies, which receive incentives approved by both governments upon establishing operations in Barbados, from which they do business with the rest of the world, have their cost of doing business reduced allowing them to deliver increased benefits back to Canada. Their lower cost of operations makes them more globally competitive and able to expand into new markets and this increased market access leads to increased Canadian exports, increased profits that result in dividend payments to the Canadian-based owners, increased employment, and capital formation in Canada.
Moreover, Hejazi, who was recently in Barbados for the annual International Business Conference, hosted during International Business Week 2013 by BIBA and its Strategic Partners, noted that when these Canadian companies are clustered with other similar multinationals in these overseas jurisdictions, they are exposed to new knowledge, technology, and human resources that are imported into Canada to benefit the operations of their headquarters.
During the conference, Hejazi noted that Canada had an overdependence on the United States and Europe as destination markets for their goods and services and there was a compelling need for Canadian companies to diversify into emerging economies.
He pointed out that Barbados, with its network of DTAs and bilateral investment treaty agreements, which include one with China, could be vital to Canada’s global strategy and further open foreign markets to Canadian exports. This concept was also expanded upon by another conference speaker, Alison Manzer of Canadian law firm Cassels Brock and Blackwell, who said that Barbados’s treaty arrangements could also facilitate investment inflows to Canada from China and other treaty partners.
Given the aforementioned, it is clear that the relationship between Barbados and Canada is a mutually beneficial one that has served both economies well and should be nurtured to continue to do so for generations to come.
• Henderson Holmes is executive director of the Barbados International Business Association.