Free Trade, working towards zero tariffs [1]
Saturday, November 30, 2002 - 09:00. Updated on Thursday, February 18, 2016 - 18:44.
From Matangi Tonga Magazine Vol. 17, no. 3, November 2002.
The ultimate purpose of the flurry of trade talks in recent years is to prepare Tonga for becoming a member of the World Trade Organisation, when it will introduce free trade and zero tariffs between Tonga and the 136 member states of the WTO.
Tonga signed a bilateral free trade agreement with Fiji in 1995, and has held free trade negotiations with Samoa during the past few years. In 1999 Tonga signed a Bilateral Trade Agreement with China, and in 2001 was among the first four Pacific Forum countries to ratify the Pacific Island Countries Free Trade Agreement, known as PICTA. Last year Tonga was among the six Pacific Forum countries to ratify the Pacific Agreement on Closer Economic Relations (PACER) with Australia and New Zealand.
At the end of September this year Tonga, as a member of the African Caribbean and Pacific Group of countries (ACP) participated in the negotiation for an Economic Partnership Agreement with the European Union. The agreement is an EU initiative, with the intention of helping ACP countries with their own efforts to integrate into the mainstream of globalisation and to benefit from it.
Reforms needed
The Secretary for the Ministry of Labour, Commerce and Industries, Paulo Kautoke, said that Tonga could expedite its membership of the WTO, if we can show the WTO our economic reform program will comply with WTO membership requirements. “We don’t have to wait until some of our economic reform programs are completed. If we can show them that we have a program, and a time table to complete their requirement, the 136-member organisation may by consensus approve our membership.” Paulo said that Fiji, the Solomon Islands and Papua New Guinea were already members of the WTO, and the Pacific island countries with observer status, but yet to become full members, were Tonga, Samoa and Vanuatu.
So far Tonga has gain few economic benefits from the Free Trade agreements that we have already signed or ratified
The bilateral agreement that we signed with Fiji has had no positive impact in our trade with Fiji, and Tonga’s annual trade deficit with Fiji remains at about $10 million per annum.
With regards to PICTA, introduced in 2001, Tonga was among the four Pacific Forum island countries to have ratified, two short of the required six, and it has yet to come into force.
Paulo explained that the intention of PICTA was for small island states to learn how to operate under free trade, “and for small islands to gradually lower their tariffs when they are trading between themselves.” Paulo said that basically that was the main reason why New Zealand and Australia were excluded from PICTA. “Because the main source of revenue for these small island states, including Tonga, is from Custom Duties, and New Zealand and Australia are our major trading partners.
“The intention was for Forum Island Countries to use PICTA as a learning exercise before they proceeded to become members of the WTO and to have free trade with our major trading partners of Australia and New Zealand.”
Paulo said that New Zealand and Australia initiated PACER to secure they would not be left out if the Forum Island Countries negotiated Free Trade agreements with non-members, “as was the case when APC countries started negotiating with the European Union at the end of September.”
Europe
The Economic Partnership Agreement that was negotiated between the ACP and the EU, set a new direction in trade between the two groups of countries. The Economic Partnership Agreement is seen as a definite move beyond trade to develop the economies of ACP countries. The Trade Commissioner of EU, Pascal Lamy, is reported to have said that the introduction of the Economic Partnership Agreement was not because the preference trade arrangement under Lomé did not work. “Moreover, funding for development will be closely linked to the EPA process. We want to make sure trade aspects are main-streamed into development co-operation. This is one of the best ways to contribute to development in ACP countries.”
Paulo pointed out that trade talks between the ACP and EU had also been restructured and a new term, the Pacific ACP had been introduced to identify the 14 Pacific states, which belonged to the ACP. Paulo said that with regards to trade the EU would like to deal only with a regional entity. “With regards to aid projects the EU would deal with individual countries, but with regional issues such as trade, the EU will deal with the Pacific ACP.”
Paulo explained that the reason for these other trade talks, “is because of a belief that it would be faster to implement Free Trade by working through the regional bodies, instead of waiting for the WTO. There is dissatisfaction with multi-trade agreements,” he said that there were no clashes among these trade talks. “All these trade agreements comply with Article 24 of the WTO, which stated that any other agreements should not hamper the membership with WTO.”