THE recent attack mounted by Caribbean foreign ministers on US Secretary of State Colin Powell at a Bahamas summit meeting is "a classic example" of how Bermuda's economic and social stability could be jeopardised by the Government decision to join Caricom, former Premier Sir John Swan warned this week.

The leading businessman said the stridently anti-American tone of the agenda pursued by Caribbean foreign ministers at last month's meeting - held the same week Bermuda's application for associate membership in the Caribbean Community trade and political bloc was approved - demonstrated how vulnerable the island could be to a future US backlash now it falls under the Caricom umbrella.

"This is a typical if not classic example of my concerns," he said. "The US Secretary of State has primary responsibility for the formulation of American foreign policy. For the Secretary to find himself the recipient of abuse by the foreign ministers of Caricom within days of Bermuda's bid for associate membership being approved means that we became - whether we like it or not - a party to that process.

"And since we don't have any active representation in Washington, DC to rectify the unpleasant impression created in the Bahamas at the governmental level, Bermuda will likely suffer from guilt by association. As I have said since the idea of joining Caricom was first floated, their agenda is not necessarily Bermuda's agenda. And now we have been put in a position where they speak for us on regional matters."

The Bermuda Government's secretive bid for associate membership in Caricom - a 14-member organisation of Caribbean islands with the ultimate objective of creating a regional common market with the free flow of labour between countries, a common currency and a Caribbean passport - was approved at a meeting in Belize on February 5.

The agenda at that meeting was dominated by Caricom criticism of the US decision to suspend $500 million in American aid to Haiti following disputed legislative and local elections in 2000. Haitian President Jean Bertrand Aristide is accused by opponents of rigging the vote in elections that left his party with a stranglehold on the country's democratic institutions.

The US has cut off all but humanitarian aid to the impoverished island-nation until the political crisis is resolved. Aristide and members of his inner-circle are also believed to have looted millions of dollars from the almost $1 billion in American aid and loans that Washington provided prior to freezing support for the corrupt regime.

Two days later the Caricom foreign ministers held a summit meeting with Secretary of State Powell in the Bahamian capital Nassau at which both the US stance on Haiti and American pressure to persuade rogue Caribbean off-shore business jurisdictions to reform their banking regulations came under intense criticism.

"We have," said Sir John, "worked very hard to establish Bermuda's bona fides as a reputable service economy. Again, we are risking creating the impression of guilt by association through associate membership in a regional trade bloc that pleads the cases of disreputable off-shore financial centres."

The US renewed efforts to enforce Caribbean compliance with international banking standards intended to combat money laundering and the financing of international terror in the wake of the September 11 al-Qaeda attacks on America.

Four islands - Dominica, Grenada St. Kitts & Nevis and St. Vincent & the Grenadines - are currently on the US list of states deemed "not fully co-operative". Sir John pointed out the same islands have previously been "named and shamed" by both the Organisation for Economic Co-operation & Development and the G-7 task force on money laundering for questionable off-shore banking practices.

"Colin Powell is a long-time personal friend of mine and, more importantly, he is a long-time friend of Bermuda," he said. "When he was National Security Adviser to President George Bush in the 1980s he worked very hard on the island's behalf to help ensure passage of the US/Bermuda Tax Treaty, the foundation upon which our present prosperity is built.

"However, as Secretary of State he does not work in a vacuum.

"The State Department is made up of hundreds of civil servants who were there before Colin Powell became Secretary and who will be there long after he leaves office. The State Department, which formulates and facilitates American foreign policy, has to view America's recent experience in the Caribbean as representative of official thinking in the region and act accordingly. And they will naturally include Bermuda as part of that unpleasant process which took place in Nassau.

"Bermuda has elected to throw in its lot with Caricom's political and economic agenda despite the fact its objectives are not always in keeping with Bermuda's. For Bermuda to be party - even indirectly - to the abrasive attitudes these Caribbean countries demonstrate towards the United States cannot stand us in good stead at this particular juncture.

"Traditionally, matters impacting on Bermuda's relations with the US were dealt with by the European desk at the State Department - not the Caribbean desk. We worked very hard to establish an independent identity for ourselves and that has always worked very much to our advantage. But now Bermuda could well find itself defined by those responsible for directing US foreign policy by the views expressed by Caricom."

And he stressed again that while he would welcome Bermuda building closer cultural and business ties with the Caribbean, he does not believe associate membership in Caricom is the appropriate vehicle for achieving these objectives.

"For instance, the US, Canada and Mexico are all members of the North American Free Trade Association," pointed out Sir John. "But that does not mean Washington speaks for Ottawa and Mexico City on foreign policy issues; each country maintains its independence of action.

"But Bermuda has abdicated that independence by allowing its identity to be subsumed by Caricom."

Sir John said the timing of Government's decision to pursue associate membership with Caricom could not be worse given the convergence of recent events in the United States that could threaten the Bermudian insurance and reinsurance industries - the only growth sectors in the island's otherwise stagnant economy.

"According to figures released by the US General Accounting Office just this week, the War Against Terror is costing the US taxpayer an additional $2 billion a month," he said. "That money has to come from somewhere. So Bermuda is in a very vulnerable position right now because the combination of the cost of the war, the recession, the American budget deficit and the fall-out from the Enron scandal have all served to revive momentum in Congress for closing down the tax advantages enjoyed by certain of the companies that operate here."

For the last two years a powerful lobby of on-shore insurance companies have been pressuring the US Congress to close the "Bermuda loophole" in the US tax code, arguing insurance and reinsurance firms domiciled in Bermuda enjoy unfair competitive advantages because they do not have to pay US income tax on American premiums - which account for two-thirds of their world-wide business.

The business-friendly Bush Administration - which is pursuing a policy of economic globalisation that could be jeopardised by protectionist legislation aimed at the Bermuda insurance/reinsurance sector - helped to derail legislation proposed last year by US Representatives Nancy Johnson and Richard Neal that would have imposed additional taxes on the American subsidiaries of insurance and reinsurance companies operating out of the island.

However, a front page spread in last week's New York Times accusing Bermuda-based companies of placing "profits ahead of patriotism" should, said Sir John, have telegraphed "a clear and unmistakeable warning" to Bermuda's political and business leadership that there will be a renewed legislative effort on the part of the US Congress to put the island out of business.

Sir John's fears of an impending Capitol Hill assault on the Bermudian insurance/reinsurance sector appear to have been confirmed by Representative Lloyd Doggett, a ranking Democrat on the House of Representatives Ways & Means Committee which controls the Congressional purse strings.

"Everyone has a responsibility to contribute to paying for our national security and some of these corporations appear to be non-conscientious objectors," Rep. Doggett told the Mid-Ocean News last week, charging Bermuda-based firms with going Absent Without Leave in the War On Terror. "Disapproval of these practices is mounting but the cause is primarily because the Enron debacle has focused attention on corporate tax dodging."

Two years ago Rep. Doggett was part of a bipartisan Congressional effort for an inquiry into the loophole that allows American companies to slash their tax bills by moving their headquarters to Bermuda.

At that time he said: "It is legal but it shouldn't be. It's a new type of Bermuda Triangle where revenues disappear and we do need to do something about it."

Bermuda has not maintained a strong relationship with the United States in recent years, Sir John said, noting that despite strong backing for the US-Bermuda Tax Treaty from both the Reagan and Bush Administrations, it took five years of intense negotiations with key Congressional players on Capitol Hill before the initiative was finally approved by the Senate Foreign Relations Committee.

"Today we have no active presence in Washington and that makes me very concerned," he said. "If we make the wrongs steps now, I think future generations will pay the price.

"If we are not prudent in the management of our affairs, if we are not in visionary in both finding and applying meaningful solutions to our problems, Bermuda's going to end up losing all that it has by default. We are going to lose because of our own inertia, we are going to lose because of a lack of initiative on the part of our leadership, we are going to lose because of our associaton with an organisation like Caricom.

"Throughout most of our recent history Bermuda's leaders always put the island at the forefront of change. We were an island of trail-blazers - whether it was creating the modern tourism industry in the 1950s after the building of the US bases here during the war opened us up to the world or whether it was negotiating the US/Bermuda Tax Treaty in the 1980s, which created an entirely new economy for the island.

"Now we are allowing inertia and the mistaken belief that organisations like Caricom are going to solve our problems for us to distract us from the pressing matters to hand. Caricom won't solve our problems; only we can do that. We are standing at a crossroads and only we can decide which direction we are going to take."