From Matangi Tonga Magazine Vol. 14, no. 3, July 1999.

A Free Trade Area agreement among South Pacific Forum countries is expected to come into force by October next year.

Paulo Kautoke, the Secretary for the Ministry of Labour, Commerce, Trade and Industry, said that Forum Trade Ministers, including Tonga, had agreed in principal to the establishment of a Free Trading Area for the region. Forum Leaders are expected to make their formal approval when they meet at Koror, Palau, on October 5, and free trading among Forum countries is expected to begin by October 2000.

Paulo said that the push for the Free Trading Area for the South Pacific came about because of a desire by the European Union to establish a reciprocal Free Trade arrangement with the eight Pacific states of, Fiji, Kiribati, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu. These countries are members of the African, Caribbean, and Pacific ACP group of countries, which are currently enjoying a trade preference arrangement with the EU under the Lomé convention.

The current Lomé will expire next February, and a new convention is being drafted.

Trading partners

The Pacific Islands major trading partners, including Australia, New Zealand and the United States, have indicated that if the Forum countries make a reciprocal trading arrangement with the EU, then they should also be offered similar access privileges.

Because these more powerful trading nations of the world are eager to establish free trade with the Pacific Islands, Forum Island countries also recognised the need to develop an active trading relationship among themselves, and that was when the Free Trading Area for the region was conceptualised.

Paulo said that the Free Trade Area would help Tonga in its preparations to become a member of the Word Trade Organisation. This was because there was still a lot of work to be done to improve the co-ordination of legislation, and Customs and quarantine requirements in order for Tonga to take advantage of the global trade liberalisation.

Advantages

Paulo said that trade agreements were always very difficult to implement. He said that our Free Trade Agreement with Fiji had not been fully utilised, “and that is with only one country. A Free Trading Area for the region means that we will be dealing with 14 countries—it will be even more difficult, and when we become a member of the WTO we will be dealing with the whole world.”

Despite the number of obstacles that had to be overcome there were a number of advantages for the establishment of Free Trade among Forum countries, he said. Consumers would benefit, “because they will have more varieties of products to chose from, and the quality will be better and cheaper. Under a Free Trade Agreement there will be no add on cost of transhipment and there will also be a reduced tariff on imported goods.”

Paulo explained that the lowering of tariffs would be introduced gradually because of the concern over a loss of revenue for the government. “Depending on the duty imposed, say, for example, if the duty is 30 per cent, it may take five years to reduce, but if it is 20 per cent, it may take less than five years.

“The gradual lowering of the tariffs will allow government to find an alternative source of revenue.”

It is expected that by 2009 there will be free trade among Forum countries, and all tariffs will be removed.