Inter Press Service: 24 August 1999
ECONOMY: PUSH FOR PACIFIC FREE TRADE AREA GROWS AS LOME PACT FADES
The South Pacific's 16 independent nations are giving new impetus to the concept of a free trade area among themselves, as the date for phaseout of the fourth Lome Convention looms closer. The current Lome agreement expires on February 1, 2000.
By DEBBIE SINGH in Suva
THE SOUTH PACIFIC'S 16 independent nations are
giving new impetus to the concept of a free trade
area among themselves, as the date for phaseout of the fourth Lome
Convention looms closer.
Lome is the giant trade and aid agreement between the European Union and
members of the 71 African, Caribbean and Pacific
(ACP) nations. Eight South Pacific countries are Lome signatories.
The current Lome agreement expires on Feb 1, 2000 and negotiations on a
successor pact have been underway since September
1998, amid a backdrop of lesser European interest in former colonies.
Fiji has volunteered its capital, Suva, as the venue for the signing of
the successor Lome pact.
The idea of a Pacific Free Trade Area (FTA) was endorsed by trade
ministers of the South Pacific Forum in June, and will be tabled at the
South Pacific Forum meeting in October.
The Free Trade Area means that goods produced in the region, and in
time, services, will eventually be traded freely across 14 island
countries, with the aim of future extensions to other countries and
territories.
South Pacific officials say the free trade concept has long been on the
agenda, meaning it is separate from the issue of
the ending of the Lome pact under new world trade rules.
But the knowledge that many preferential benefits open to Lome
recipients cannot last forever gives added reason for the South Pacific
economies to look for other ways of integrating and
expanding their own markets.
Noel Levi, head of the Fiji-based South Pacific Forum (SPF) secretariat,
says that under a free trade arrangement,
countries would gradually lower import duties for goods produced in other
island countries over a period of around eight
years.
A South Pacific free trade area would create a regional market of 6
million people.
Some say a South Pacific economic grouping may be too small to have a free
trade area, and add that subsistence economies
continue to play a big factor in the region's economy.
But Levi says it is a ''misconception'' to think that Pacific island
countries have almost nothing to trade among each
other and that products exported from the region have little trade
complementarity.
''This is not exactly true,'' says Levi. ''At the moment there are a
number of goods that can be traded among Forum
Island countries such as Kava and beef from Vanuatu, garments and light
manufactured goods from Fiji, canned tuna from the
Solomon Islands and garden products from Tonga and Papua New Guinea.''
Levi says the increase in the Pacific market's size created by a free
trade area would not solve its economic problems,
but ''it is a step that will create business opportunities that may only be
apparent 10 to 20 years from now''.
Levi refutes claims that the creation of a Pacific Free Trade Area has
been driven by the European Union's negotiations
on a free trade area in light of the phase-out of the Lome Convention next
year.
He says the original agreements setting up the South Pacific Forum
Secretariat (then known as the South Pacific Bureau for Economic
Cooperation) in the early 1970s included an obligation to consider a free
trade area.
''This latest proposal was initiated in early 1997, long before the EU
made its position clear,'' Levi says. ''Our
members want to first decide to proceed with our own regional integration,
at our own pace, and only then consider
integration with our trading partners when we are ready.''
''We feel that the Free Trade Area option is the best way for our
members to deal with the many issues being raised by globalisation. This
option is being pursued because we believe it is
good for us,'' he explains.
The problem with both the Lome Convention and the United States Compact of
Free Association with the Northern Pacific
countries is they are selective in terms of which developing countries get
access to trade preferences, he adds.
So for example, Palau, which is classified as a developing country has
duty-free access to the United States market but
its neighbour, the Philippines, which is also a developing country, does not
have duty-free access to the USA'.
Such preferential treatment under the Lome Convention and the Compact
exist under WTO only because the organisation has
granted an exception in their cases.
''But this waiver will not go on forever,'' Levi explains. ''The WTO
waiver for the Compact runs until 2006, but more
threatening is the Lome waiver which expires in February next year.''
The EU has indicated it will seek another five-year waiver until 2006, but
after that it has said its trade regime with
ACP will have to conform with WTO rules.
Activists say that while the Pacific does not stress the colonial link in
why Lome's benefits should be extended, their
continuation under a mutually advantageous setting would be good for the
region.
Lome's preferential access to main Pacific exports, ranging from tuna to
sugar, has been a lifeline for the region.
''There remains substantial aid dependence on the European market as a
result of the Lome Convention in Fiji, Vanuatu and
the Solomon Islands,'' Dr Roman Grynberg of the SPF secretariat said.
''The Lome Convention has had a major impact on the post-independence
development of the eight Pacific ACP countries,''
he added.
The Lome signatories in the Pacific -- Fiji, Kiribati, Papua New Guinea,
Solomon Islands, Tonga, Tuvalu, Vanuatu and
Western Samoa -- have received more than one billion euro in aid from the
convention since its inception.
Unlike Africa and the Carribean, ''Pacific countries do not emphasise the
colonial burden of the Lome convention,'' said
Feilo'akitau Kaho Tevi of the Suva-based Pacific Concerns Resource Centre
(PCRC).
''What Pacific island governments tend to advocate is that we have had a
relationship with the EU with the Lome
framework, for almost 25 years. And this we do not want to stop,'' he said
in an interview.
In the future, analysts say Pacific countries will only have market
access for exports under the EU's Generalised System of Preferences and many
of the facilities available to ACP states for
the past 25 years will end.
''In practical terms, what this will mean for countries such as Fiji and
Papua New Guinea is that market access for
products like canned tuna into the EU market will disappear, and they will
have to pay the 24 percent import duty paid by
their competitors from Thailand and the Philippines,'' Levi explains.
This change in market access could cost hundreds of jobs by 2005. It could
affect the best chance the region has to
develop processed tuna exports, one of the few natural resources that the
Pacific has in relative abundance.
(END/IPS/ds/js/99)