The Organisation for Economic Cooperation and Development - OECD - has received another broadside in a written request to President Bush demanding he stop the organisation's initiative on so-called harmful tax competition.

The letter was sent by 200 economists led by Milton Friedman, the celebrated monetarist and Nobel Prize winner.

Mr. Friedman says in his letter, "We urge you to reject the OECD's so-called harmful tax competition initiative. Tax competition is a liberalising force in the world economy, something which should be celebrated rather than persecuted.

"It forces governments to be more fiscally responsive lest they drive economic activity to lower tax environments."

The OECD has threatened sanctions, including withdrawal of use of the dollar, on offshore centres that are not willing to comply with its requirements on anti money laundering procedures and tax harmonisation. A list has been drawn up of those who so far have not agreed to comply and they have been given until July 31 to cooperate. But opposition has been growing to the imposition of sanctions.

Bermuda is not included on this black list, having sent a letter of commitment to comply last May. The Government's letter said: "Bermuda hereby commits to the principles of the OECD's report 'Harmful Tax Competition: an Emerging Global Issue.' In fulfilment of this commitment, the Government of Bermuda undertakes to implement such measures as are necessary to eliminate any harmful aspects of Bermuda's regimes that relate to financial and other services."

Last month US Treasury Secretary Paul O'Neill surprised the OECD and many other bodies when he virtually withdrew US support from the OECD initiative. He said: "I am troubled by the underlying premise that low tax rates are somehow suspect and by the notion that any country, or group of countries, should interfere in any other country's decision about how to structure its own tax system.

"The US does not support efforts to dictate to any country what its own tax rates or tax system should be, and will not participate in any initiative to harmonise world tax systems. The US simply has no interest in stifling the competition that forces governments, like businesses, to create efficiencies."

The US's withdrawal of support made many feel the OECD initiative was dead in the water. Don McKinnon, secretary general of the Commonwealth, said: "It is hard to see a sanctions regime now being imposed given the lack of support from Washington. I am basically supportive of the OECD but on this issue it has gone too far too fast and was not taking people with it."

He was pleased with Mr. O'Neill's intervention and said: "I am pleased that we are not looking like a bus heading off a cliff. This will have a dramatic impact on the thinking within the OECD."

Following these statements Eugene Cox, Bermuda's Finance Minister, said he was not reconsidering Bermuda's commitment to the OECD, but would continue to monitor the situation closely.

He said: "It must be noted that the commitment given by Bermuda to the OECD essentially states that Bermuda will continue to operate in a transparent and cooperative manner, as it has done in the past. Thus, unlike many other jurisdictions that have made commitments to the OECD, Bermuda's commitment did not need to involve making material changes to its financial services regime."

Of Bermuda's reaction to scrutiny from the OECD and other bodies Premier Jennifer Smith recently told the Financial Times: "We are not prepared to be pushed around, but neither are we foolish enough to engage in a brawl with someone who is bigger and stronger. Our philosophy, internally and externally, has always been to work with friends rather than battle enemies. We negotiate and seek solutions that provide the maximum mutual benefits."

But there are some who feel the OECD will continue with its initiative. Frits Bolkenstein, the EU commissioner for taxation, said: "We are not going to sit with our hands crossed and do nothing about these fortunes being stashed away in countries where nobody can look at them."