Free Trade

Globalisation and doctrines of free trade potential benefits to Fiji also present dangers. The benefits come in the form of the opportunities for Fiji's exporters to tap new lucrative markets that were previously restricted. Multilateral negotiations through the WTO, combined with the Most Favoured Nation principle, allows small countries such as Fiji to benefit from the access concessions made to larger countries that we would never have been able to negotiate on our own. This increases market access which allows exporters to boost production and thus revenue and employment.

However, freer global trade will lead to erosion of the preferences that Fiji enjoys with developed nations, and thus will cause problems for traditional exports such as sugar, garment and tuna. The benefits from preferential agreements, such as SPARTECA and Cotonou, drive from the beneficiaries enjoying a lower tariff entry rate than other competing countries. As initiatives to increase free trade are undertaken, the tariff barriers for other competitors are reduced and thus the level of competition that Fiji's exporters face is increased. Exporters of these traditional products will thus have to become more competitive through increased efficiency, in order to retain their market share.

Regional Free Trade Areas (PICTA/PACER)

The history of the free trade agreement proposal dates back to the very creation of the South Pacific Bureau of Economic Cooperation in 1971 and subsequently in the Forum Agreement (1991). More recently, the concept was reintroduced at the FEMM meeting in Cairns in Australia 1997. From there on, the concept gained momentum and was deliberated on at the 1999 Forum Trade Minister's meeting (FTMM) which recommended to the Forum that Leaders endorsed in principle a free trade area among Forum members.

On the 18th August 2001, at the 32nd Pacific Islands Forum in Nauru, Forum Leaders endorsed and signed the Pacific Agreement on Closer Economic Relations (PACER) and the Pacific Island Countries Trade Agreement (PICTA) (a Free Trade Agreement amongst the 14 FICs).

Pacific Island Countries Trade Agreement (PICTA), which establishes a free trade area in goods (and, in future, services) among the Forum Island Countries(FICs); The Pacific Island Countries Trade Agreement (PICTA) aims to establish a free-trade area between all fourteen Forum Island Countries. As of November 2006, it had been signed by twelve countries. After entry into force, countries commit to remove tariffs on most goods by 2021. As of April 2008, the Forum Island Countries are also negotiating two other free-trade agreements, the Economic Partnership Agreement (EPA) with the European Union, and the Pacific Agreement on Closer Economic Relations (PACER) with New Zealand and Australia.

PICTA creates a free trade area for goods among all 14 FICs, including Fiji. Fiji - was one of the first FICs to show its solid commitment and support for the building of regional integration through trade. By establishing a free trade area among the FICs, PICTA will encourage specialization and greater efficiency in the economies involved. The PICTA covers all trade in goods between its members; it does not cover trade in services, or capital or labor investment. FICs can increase their exports to other FICs of products in which they can be competitive, and, in turn, increase their imports of goods that are being produced competitively by other FICs. The resulting increase in trade will reflect enhanced efficiency and improved consumer welfare in the FIC economies, and will hopefully contribute to the overall creation of jobs. The creation of a regional market should also encourage increased investment in FICs. Many FICs currently struggle to attract investment, mainly because of the size of their domestic markets. However, the opportunity for goods manufactured in the FICs to reach the regional market of 7 million people, tariff- and quota-free, may attract more investors, including from Australia, who hitherto may have been hesitant to engage with Fiji and other FICs. PICTA provides for the progressive phasing out of tariffs on trade among the FICs. Tariff of developing FICs will be reduced to zero by 2010, and by 2012 for small island sates and least developed countries, except in case of ‘excepted exports’ (the ‘negative list’) for which tariffs are to be reduced to zero by 2016.

PICTA aims to strengthen expand and diversify trade between the partner. Promote and facilitate this expansion and diversification through the elimination of tariff and non-tariff barriers to trade between the parties in gradual and progressive manner, under an agreed timetable, and with a minimum of disruption. Develop trade between the parties under conditions of fair competition. Promote and facilitate commercial industrial, agricultural and technical co-operation between the parties. Furthermore the development and use of the resources of the Pacific Region with a view to the eventual creation of a single regional market among the Pacific Island economies in accordance with the respective social and economic objectives of the parties, including the advancement of indigenous people, contributing to the harmonious development and expansion of world trade in goods and services and to the progressive removal of barriers to it.

PICTA does not affect rights and obligations under existing agreements. Thus the FICs rights and obligations under existing agreement will remain in force:
• WTO (Papua New Guinea, Fiji, Solomon Islands)
The FICs who are WTO members remain bound by their obligations as WTO members, including their obligations towards each other. The emergency action provisions of the PICTA are less stringent than the corresponding WTO provisions, because of the limited capacity of many FICs to implement such provisions. However, if a WTO member in the PICTA becomes subject to emergency action measures by another WTO member in the PICTA, it would be possible for the former FIC to insist that WTO procedures be followed b the latter.
• SPARTECA – (All FICs)
Since the PICTA does not deal with trade relations between the FICs and Australia and New Zealand, it does not have any effect on SPARTECA. Therefore SPARTECA does not affect the right of the FICs to establish an FTA among themselves.
• MSG Trade Agreement – (Papua New Guinea, Vanuatu, Fiji, Solomon Islands)
Existing preferences granted by MSG members to each other are not affected by the PICTA. MSG members would be allowed to continue to reduce barriers among themselves as faster rate than is provided by the PICTA.
• Cotonou Agreement – (All FICs)
The PICTA does not affect the Cotonou Agreement. Under the Cotonou Agreement it is only the preferences granted to other developed countries that can trigger a requirement for comparable preferences to be granted to the EU.

At the Nauru Forum Leaders meeting, the 3 Compact countries as well as PNG and the Solomon Islands did not sign the two agreements. This means that only 11 Forum countries signed PACER and 9 FICs signed the PICTA agreement. PACER will enter into force after 7 countries have ratified the agreement while PICTA on the other hand will come into force after the ratification by 6 FICs.

It is expected that the two agreements will come into force by the next FTMM.

Pacific Closer Economic Relations (PACER) provides a framework for strengthening trade and economic cooperation among all Forum members (including Australia and New Zealand) at an appropriate 'pace', reflecting the differing development status of the matters.

Under the PACER framework, the Pacific Island Countries Trade Agreement (PICTA) provides for the establishment of a free trade area among the 14 Forum Island Countries. The PICTA will be phased in over a decade and aims to create employment and other economic benefits through increased trade and investment opportunities in a large common market.

Cotonou Agreement

In 1972, the European Union (EU) granted a preferential trade regime to ACP (nations within the framework of cooperation agreements). Trade preferences, commodity protocols and instruments of trade cooperation were part of the four successive Lome Conventions (1975-2000).

The Lomé Agreement was succeeded by the Cotonou Agreement (signed in Benin in June 2000). One of the major differences with the Lomé convention is that the partnership is extended to new actors like civil society, private sector, trade unions, local authorities, etc. These will be involved in consultations and planning of national development strategies, provided with access to financial resources and involved in the implementation of programmes. The Cooperation between the European Union and ACP is meant to enhance the production, supply and trading capacity of ACP countries and their capacity to attract foreign investment. This will produce a new trading dynamic that strengthens the ACP’s trade and investment policies. Cotonou Agreement tries to promote and expedite the economic, cultural and social development of the ACP States, with a view to contributing to peace and security and to promoting a stable and democratic political environment. It is the most critical phrase in the entire Cotonou Agreement and cast a lethal shadow over the proposed Economic Partnership Agreement. In the Future, policy choices of all ACP governments on subjects covered by WTO agreements could be trapped within the straitjacket of ‘conformity with the WTO’ or ‘WTO compatibility

The Cotonou Agreement is not a trade agreement, but contains a "commitment to agree" at a later date (2008) on several new ACP-EU reciprocal trade agreements that are compatible with WTO rules and will replace the present non-reciprocal preferential trade arrangement. For the first time, ACP countries will negotiate a reciprocal trade agreement with EU, which had so far granted preferences.

Confronted with this new situation, the ACP Secretariat developed a draft Action Plan that underscored ACP solidarity and consultation process. The Plan recommended a thorough investigation on geographical configuration of the regions that will need to form the basis of the negotiating parties with the EU from the existing ACP regions.

Leading on from ACP draft Action Plan, Fiji has derived its own national Action Plan which concentrates on capacity building, involving relevant government stakeholders and non-state actors (NGOs and the private sector) and formulating a consultative and negotiating mechanism which adequately represents and involves all the major stakeholders in the negotiating process of a new partner-ship agreement with the EU under the Cotonou structure.