Nov 3, 1992


Sydney, Oct 30 (IPS/Kalinga Seneviratne) -- South Pacific nations fear a successful outcome of talks under the General Agreement on Tariffs and Trade (GATT) could spell disaster for their fledgling industries.

The small island states had survived on a subsistence economy for centuries, but over the last two decades, most have been turning towards export-oriented industries to finance their consumer imports.

Virtually every industry set up in recent years has survived because of some form of preferential access to other markets, particularly in Australia and New Zealand under the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA).

Many industries also benefit from the Multifibre Agreement (MFA), the Generalised System of Preferences (GSP) and the Lome Convention, which links 68 African, Caribbean and Pacific (ACP) states with the European Community.

South Pacific countries believe a successful conclusion of the GATT negotiations to liberalise world trade may well mean the end of the road for their industries.

A new car parts assembly plant in Western Samoa, a tuna cannery in the Solomon Islands and Fiji's thriving garments industry are all dependent on generous access to markets under one or more of these agreements.

Fiji's sugar industry, which produces 500,000 tonnes of sugar annually and earned 223 million dollars from exports in 1990, is particularly alarmed by the prospect of losing its preferential access to major markets.

The country has contracts with Singapore, Malaysia and China, but what really counts is its preferential access to the European Community (EC) market which brings in more than 54 million dollars a year from 174,000 tonnes of sugar exported yearly.

The Lome Convention allows Pacific countries to sell up to 1.3 million tonnes of sugar a year to the 12-nation Community at internal EC prices. In 1990, Fiji sold its entire quota at prices 240 percent higher than on other markets.

The European Community has already warned ACP sugar producers that prices could drop by up to 20 percent starting next year.

John May, chief executive of the Fiji Sugar Marketing Company, says prices can be expected to fall in the next five years, and without Lome sales, "our sugar industry would not survive in its current form at all".

Though only 40 percent of Fiji's sugar is sold to EC states, the average Fijian farmer could lose about five dollars per tonne if the Community lowers prices to free market levels. The current profit margin is about 15 dollars per tonne.

The lowering of trade barriers through GATT and the reduction of import duties by Australia and New Zealand will make Pacific nations' products less competitive than those of Asian countries where labour costs are lower.

Under the Lome Convention, ACP countries can export canned tuna to EC states with a 24 percent lower import duty than non-ACP nations. Without this preference, industry experts doubt if the canneries in the Solomon Islands will be able to survive.

In their bid to force the European Community and the United States to lower farm subsidies, Australia and New Zealand have begun dismantling their own tariff barriers and opening up their markets to world trade.

This will hurt Pacific island states that have enjoyed preferential trade terms under SPARTECA, particularly Fiji whose garment exports have grown dramatically in the last six years.

Investments, mainly from Australia and New Zealand, have slowed down after Australia announced plans to phase out quotas by March 1993 and lower import duties for non-SPARTECA countries.

Bill McCabe, senior trade commissioner at the Sydney-based South Pacific Trade Commission, says preferential trade access is not the only reason industries have survived in the region but it did help attract investors and expand the product range.

"With the advent of SPARTECA, people explored the possibility of expanding exports to the Australian and New Zealand markets, so we saw a very rapid expansion of industries," he said.

For the past 30 years, the MFA has allowed United States and the European Community to impose quotas on large garment and textile exporters, allowing access to small exporters like Fiji. If GATT negotiators approve a draft agreement phasing out the MFA by 2003, Fiji will find it hard to compete with big exporters like Hong Kong and the Philippines.