REPA Booklet - Stop Epa

28
(No) Goods
What might a Pacific Economic Partnership Agreement mean for the Pacific Islands?
In the traditional sense of trade in goods, the main concern is to protect the preferential access of Fiji for sugar
and PNG and the Solomon Islands for canned tuna. An open door for European products would not have a
very significant effect because the amount of trade with Europe is relatively small. . Agreements on services,
investment, competition and other ‘trade-related’ topics would have a much greater impact, mainly by closing the
policy choices available to Pacific Islands governments and opening them to sanctions if they tried to retreat from
the neoliberal agenda.
“I am convinced that
trade, and more
specifically EPAs, are
crucial tools in our
drive for global
prosperity and for
social justice.”
(Peter Mandelson, EU
Trade Commissioner,
December 2004)
What might an agreement on trade in goods provide?
Relying on the Commission’s promise of flexibility, asymmetry and special and differential treatment, the Pacific
Islands are likely to seek full access for all exports from any Island that signs an agreement on goods, free from
duties and quotas, with less rigid Rules of Origin than exist now. In return, they would guarantee the access for
a less extensive range of products from the EU over long transition periods. They will also want financial
assistance with the ‘adjustment’ costs, including fiscal reform to compensate for the loss of tariff revenue.
Who are the Islands’ main exporters of goods to Europe?
The level and source of trade in goods fluctuates. In 2003 the Commission says Europe imported E530 million
of goods from the Pacific Islands, up 10.7% on 2002. They were mainly palm oil (29%), sugar (18%), copper
(9%) and coffee (9%). The main country sources of exports were PNG (67% of the total), Fiji (20%) and the
Marshall Islands (11%). One product dominated the exports from each country: 42% of PNG’s exports were
palm oil, 92% of Fiji’s exports were sugar, and 89% of Marshall Islands exports were transport-related goods
(cruise ships, yachts). Losing these markets would have a significant effect.
Which Islands import most from Europe and how might an EPA affect them?
Imports from the European Union in 2003 were worth E210 million – down 63% over 2002. The main products
were transport goods (56%), machinery (20%) and chemical products (4%). Most went to Fiji and PNG, and
some to Vanuatu. Imports are not expected to increase dramatically if tariffs are removed, although some goods
might be sourced from Europe that would have been bought from other countries (known as ‘trade diversion’).
Loss of tariff revenue would be limited, and most serious for Vanuatu because it relies on tariffs for one third of
its revenue. The impact on local manufacturers would also be relatively small. Most food imports from Europe
complement local products, so there seems little risk that a massive increase in agriculture imports would
threaten food security, either.
How much revenue might be lost by removing tariffs on goods from the European Union?
Not much, if the Commission supports a favourable reading of the WTO rules. The problem is WTO-compatibility.
GATT Article XXIV requires free trade agreements involving the European Union to cover ‘substantially all
trade’ in goods and be implemented within 10 years, unless there are exceptional circumstances. Wadan
Narsey has examined the best ways to define ‘substantially all trade’ from the Islands’ perspective - how to
calculate the quantity of trade (by volume, value or categories of goods); how cuts might be phased in over time
and backloaded to come at the end of the transition period; and the length of the transition. He notes that recent
agreements between rich countries provide much longer than 10 years – the Australia/US free trade agreement
extends to 18 years for some products - so the Islands could argue for a transition of at least 25 years.
Who decides whether such a formula satisfies the GATT rules?
First, the European Commission must agree. It has promised to be flexible. But it will be looking to avoid a
precedent that might be used to its disadvantage elsewhere, so it could insist on a high standard of ‘substantially
all trade’ and time line. The Commission must also be prepared to defend the formula at the WTO (as the
Cotonou Agreement requires it to do). Once such an agreement is signed, it is supposed to be approved by the
WTO’s Committee on Regional Trade Agreements. That process has come to a standstill because WTO
members can’t agree on the interpretation of Article XXIV. It is much more likely that an agreement negotiated
under Cotonou could be challenged in the WTO’s court by a government that believes a weak interpretation of
Article XXIV creates an undesirable precedent. Australia is known to take a hard line on this question – despite
the terms of its own agreement with the US!
A People’s Guide To The Pacific’s Economic Partnership Agreement 57