Forum warns islands countries

Samisoni Pareti

Pacific islands countries run the risk of penalising their local manufacturers if they drag their feet in bringing about tariff reforms associated with the coming into effect of the Pacific Islands Countries Trade Agreement (PICTA).

Director of Trade & Investment at the Suva-based Pacific Islands Forum Secretariat, Jai Kumar, says the warning is particularly true for countries that have yet to ratify the regional trade agreement.

By May this year, nine of the 14 Forum islands nations had signed and ratified PICTA. The two larger countries of Australia and New Zealand are excluded, as PICTA restricts free trade amongst islands nations only.

“The thing we're pointing out is that you are going to do it (reduce duty) anyway,” Kumar told ISLANDS BUSINESS.

“If you leave it for too long, the slide is steeper so it is more injurious to your economy. If you do it in bits and pieces, than you won't feel much.

“This is what we're emphasising to countries that have not ratify, that you've got to do it now because if you come at the end, then you will have to be in line with the liberalised parties and that may be too much to bite.”

Since PICTA came into effect in April 2003, Kumar and his team at the Forum Secretariat have been making the rounds in the islands holding training workshops on the trade agreement. Both public and private sector officials need to understand their role under PICTA, as well as the process each member nations need to abide by.

Kumar said these include rules of origin certification, notification, provision of a negative list of trade as well as legislative changes to allow for gradual reduction in import tariff.

Trading under PICTA is not scheduled to begin until 2006 especially for the three countries listed as the bigger nations in PICTA: Papua New Guinea, Fiji and Tonga.

WHY NEW CALEDONIA WANTS TO JOIN PICTA French territory New Caledonia is interested in joining PICTA with its congress granting President Marie-Noëlle Thémereau powers to begin negotiations with the Pacific Islands Forum secretariat officials. After the Congress decision, officials said the President will still require a parliamentary approval before New Caledonia actually joins the regional free trade pact. Noumea's private sector has reacted cautiously to the development. Chamber of Commerce regional trade specialist Denis Etournaud wondered about the impact of the territory's entry into free trade with its smaller and not-so-rich neighbours. “The differences in GDP per capita, for example. If you take the Gross Domestic Product of New Caledonia, you'll find that it's perhaps four or five times higher than Fiji's or Vanuatu's,” Etournaud told Radio Australia. “So what's important for these trade agreements I think, so they can be successful long term, is to create bilateral agreements where you can have friendly lists where the business communities in each island don't fight and don't create tensions that can affect businesses between the islands but create internal wealth in the Pacific region.” But when he met Forum officials in Suva last March, New Caledonia's head of Regional Cooperation and External Relations, Cameron Diver, told ISLANDS BUSINESS that having a much bigger GDP ought not to be a concern. Cameron Diver “I don't think it's a concern for the Pacific countries,” Diver said. “These are things they see as an advantage which means that we have purchasing powers.” Diver and the general secretary of the Pacific Economic Cooperation Council, Doriane Sanchez le-Bris, do admit that a concern for the French territory would be the impact of PICTA on its revenue. “Fiscal revenue is a big part of our revenue in New Caledonia, so all of these will have to be calculated,” said le-Bris. Added Diver: “We've put in place working groups in New Caledonia, who are looking at all of the broad issues concerning New Caledonia's association with PICTA. We have to find the best ways to minimise eventual losses.” The two meetings in Suva will be followed up with two visits to Noumea by Kumar and his trade officials at the Forum Secretariat. Kumar acknowledges the concern of New Caledonia given that it imposes higher import duties when compared to its Pacific neighbours. But he says the big markets offered by the French territories would allow for economies of scales to the benefit of every one.

Kumar admits that Forum countries have been slow in implementing the pre-requisites necessary for PICTA to come on stream.

“I don't think it has been deliberate by the countries. I think it is because of certain inherent problems in the countries due to their technical capacities, because of officials not realising that things will come on board so early.

“But countries like Samoa, which is an LDC, came on board very quickly. They have done their notification requirements much, much earlier than other countries.

“We have been very vigilant in the sense that we have been writing to these countries and telling them their obligations under PICTA.”

Under PACRIP, the Pacific regional integration project funded by the European Union, Kumar has been sending his officers to assist islands government officials, especially those working in the offices of trade, customs and quarantine.

Early May, it organised a train-the-trainers workshop in Fiji for customs and trade officials focussing on the notification requirements of PICTA. This meeting preceded the annual trade ministers' conference.

Kumar and the trade consultant at the Forum Secretariat Dr Jim Gosselin agreed PICTA's rules of origin have been a point of concern for many.

Because of this, a committee comprising government and business officials from the first five countries that ratified the trade agreement have been busy attempting to streamline the process of determining rules of origin status of products.

Said Kumar: “That committee has been doing a lot of work in terms of drafting the rules of origin and also a booklet, and all those requirements like certificate of origin, what sort of forms to be signed and making clarification on issues that are of importance in terms of trading amongst parties.

“That has been circulated and it coincided also with running workshops in different countries.”

A lot of work is also going into removing trade barriers especially for islands manufacturers who want to break into the highly competitive markets of Australia and New Zealand.

Kumar said through PACER's trade facilitation programme, the two trans-Tasman neighbours have pledged financial and technical support.

“We recognise the fact that trade agreements do not work on themselves. They have to have a facilitative programme in terms of measures like quarantine, customs and standards and conformant, so you have to adhere to certain standards before your product comes in.

“By the time PICTA kicks in, this process of implementation of the regional trade facilitation programme (RTFP) will already be on board, so we've just cleared the letters going out to the component's implementers.

“This means that the custom component of the RTFP is implemented by a competent agency in the region which is the Oceania Customs Organisation because we don't want to create institutions to do that. We want to ride on existing institutions. The same with quarantine, it's the Secretariat of the Pacific Community.

“For standards and conformance, we don't have any competent agency in the region, so in the initial phase of standards and conformance, we have a number of studies to be done on standards certification.

“We have done terms of reference on five studies to be commissioned within a few weeks. That will determine our next course of action on how we should strengthen the region in terms of standards and conformance.”

Gosselin explained conformity in standards does not include standardising documents only, but covers the type of products that islands countries export as well.

“The International Standards Organisation for example sets certain standards. The example we give in workshops is batteries, torch batteries. You go down to the shops, you buy A, AA, AAA and so on, because these are international standards.

“It's no use Fiji making batteries A 1/2, I mean nobody could buy them you know.

“You have to have A, AA batteries and when people buy them, they got to see that those batteries are going to last for so long, they are going to be such a size, they will be such a composition and so on, so you know what you've got.”

The Secretariat's trade & investment division is also busy assisting Forum countries about trading services as well. And unlike the negative list of goods that countries have to negotiate, trade in services Gosselin explained would have a positive list. This means free trade will only be applied in services that are on the list.

“That is what we are looking at because Fiji, Papua New Guinea, Samoa, Solomon and so on, have considerable trade in goods relatively speaking with the EU.

“But the rest of the countries like Nauru, Cook Islands, Palau and so on don't have anything but trade in services like tourism and things like that will be significant,” explains Gosselin.

“That will be more of an attraction for us. So we're looking at what the whole package might be.”

Added Kumar: “I think we have seven areas we're looking at for possible liberalisation. Currently, we are going through the countries, consulting them on each of the issues like telecommunications, financial sector, transport, and things like that.

“Services industry is a very vast area because it involves a lot of people, the whole of government approach and private sector and the whole idea is to go through these, let the countries understand and then take up the decision at an appropriate time to liberalise.

“In the meantime, we expect the trading of goods would have taken its roots to a certain degree.”