From Matangi Tonga Magazine Vol. 17, no. 3, November 2002.

Is Tonga ready to become a member of the World Trade Organisation? The Tongan Minister responsible for Trade, Hon. Dr Masaso Paunga, is confident that Tonga has done all the right things by signing the appropriate international conventions, and free trade agreements, and that Tonga is now ready to become a member of the WTO sometime next year.

The situation may be easier to put into perspective with the saying about the thirsty horse, ‘that you can’t take the well to the horse, but you can lead the horse to the well.’ Once Tonga becomes a member of the WTO, its products will have easy access to about 136 countries in the world, but, like the thirsty horse, Tonga will earn foreign dollars only if we can get our quality products to the world market places. A free world market is a competitive market place, and there is no doubt that we have to be aggressive and competitive to get a share of the market.

Tonga’s Minister of Trade believes that it is time to compromise Tonga’s old protectionist policies and open up, allowing foreign investors into areas that Tongans cannot develop efficiently. It is a way to tackle the escalating unemployment and crime rates in the country, because, he says, the local business community has been too slow in developing.

Matangi Tonga interviewed Dr Masaso Paunga when he returned from Brussels, after the launching of the negotiation for the Economic Partnership Agreement between the ACP countries and the European Union on September 27.

Pesi Fonua - Basically, what does the Economic Partnership Agreement between African, Caribbean and the Pacific countries and the European Union mean to the region and to Tonga?

Hon. Dr Masaso Paunga - In 2000 the new Cotonou Agreement was signed, replacing the Lomé Agreement that has been in operation during the past 27 years. Under the Cotonou Agreement, there is a new Economic Partnership Agreement. The slogan for the EPA is Aid and Trade, meaning that aid to ACP countries is to continue with emphasis in the development of their economies in order to sustain development, and reduce poverty. The slogan ‘Aid and Trade’ stresses the need for the development of the Private Sector. Under Lomé, aid went mainly to governments and for the development of the public services, but under Cotonou and EPA ,the aid component will be maintained with the emphasis on developing the Private Sector, and trade-related areas.

What would be a good example of the kind of Private Sector development program that can be funded under EPA?

If you look at regional programs for the development of, say, telecommunications and human resources, training in areas, which you think have the potential, but in the past never received any assistance. So what has became eminent is the essential need for a closer working relationship between government and the Private Sector, so that government can try and secure and endorse the funding, then the Private Sector will become involved with the running of those courses.

Are there any specific allocations for specific areas, for example, human resource development or telecommunications?

That is the good thing about the EPA is that we have to be aggressive in setting up projects, and the Pacific has developed a very good team, in terms of trade.

There are three important groupings that are working in this area, the Council of Ministers, consisting mainly of Ministers of Foreign Affairs, the Trade Ministers, and Ambassadorial groups. The Council of Ministers, the ruling body, endorses the areas where we will be negotiating, then they leave it for the Trade Ministers, to carry out the actual negotiation, of the Economic Partnership Agreement, and we have been given five years to negotiate.

The [Tongan] Prime Minister, Prince ‘Ulukalala Lavaka Ata, chairs the Council of Ministers.

So during the trade meeting that we have just had in Brussels, the trade ministers on September 27 launched the beginning of this partnership negotiation.

The six major areas that were approved by the Council of Ministers are, Market Access, Agriculture and Fisheries, Trade in Services, Trade-Related Issues, Development Co-operation and Legal Issues. The Pacific have been given the task to chair the negotiating team on Trade Related Issues, involving competition, intellectual property, sanitary and phytosanitary issues. I was selected to chair the negotiation on Trade and Services. The

Ambassadorial Committee, also has a Tonga chairman [Tonga’s ambassador to the EU, Colonel Fetu’utolu Tupou].

What is important here is that the EPA agreement is formed to comply with the WTO rules. Also very important, is to look at the development of PICTA and PACER, because even though it is primary for the region but it is designed to comply with WTO rules. The EPA under Cotonou is also under WTO rules.

The Free Trade Agreements that we signed with Fiji and with China, what is going to happen to those, are they going to remain relevant?

They are still relevant. We are still maintaining our bilateral trade agreements with Fiji for the meantime, because nothing has been ratified for the region. The bilateral agreement with Fiji was done with our WTO membership in mind.

The volume of our trade with China is very small, but what we did was to try to open as many doors as we can. No body ever dreamt 50 years ago that we would become a major player in satellite telecommunications. I think that is why we need to develop our trade and our access to other potential industries that we haven’t been able to get into, and I am talking here about intellectual property. You may be aware that during this parliamentary session I have passed six legislations, covering Copyright, Geographical Indications, Integrated Circuits, Foreign Investment, Business Licences, and this is to create an environment to promote other trade-related activities and services that we never put much emphasis on developing in the past. They are also required by WTO.

Is it right then to say that the Free Trade Agreements that we have signed so far is like a trade training exercise for us, before WTO?

Yes I think it is. Government had been hesitant in joining WTO during 1994-95. Had we become a WTO member, then we could have been under the GATT agreement, and there would have been no need for us to go through all these exercises, but the government chose to wait and see, and that is why we are an observer member, to see how it develops before we make a firm decision to be part of the WTO.

Why is it taking so long to ratify PICTA, considering that PACER  was launched later?

PICTA I think depends on individual countries, but PACER is a partnership agreement and it is the protection of the interests of Australia and New Zealand. The PACER is like an umbrella to enable us to trade with New Zealand and Australia. But once PICTA is agreed upon then it is easier for the PACER to function.

Our trade deficit is growing. With the advent of free trade and the WTO, do you think we will be able to narrow our deficit?

What is important here is to be able to invite genuine investors. The key issue is to employ our people, and to be able to produce something to try and deal with the trade imbalance. The way it is at the moment, it is very difficult to attract genuine investors, and that is why we are trying to put in place ways that are transparent.

There is a totally new area in intellectual property, it is more trade incentive related, and we should be able to gain more ground in addition to our conventional trade with agriculture and fisheries products, and also tourism.

What are other areas you think we should focus on that possibly may attract a major investor?

We don’t have many resources, but we are trying to put before the investors the transparency issue, and that foreign investment is regulated, and with that the infrastructure to trade that is going to help them.

Take, for example, the development in communications. In terms of isolation, they should be able to see that they can gain more from the benefit of telecommunications than other things that require the shipping or air freight cost. That is why we are looking at areas where we can export without the need for freight. With telecommunications and intellectual properties, distance is no big problem. My Ministry is trying to make sure that for foreign

investors to come here our procedure is very simple, easy and transparent, which areas they can invest in and which areas they cannot invest in. Company registration is simple now, but when it comes to a licence that is where they get stuck, so we are trying to take away all the stumbling blocks. But quite apart from all this the investor will have to identify the area where he can make the most profit.

The public view is why doesn’t the Ministry identify and focus on a particular industry that we should try and exploit. It seems that your concern is only to make the system transparent, and for ease of registration, then it is for the investors to decide for themselves?

The argument that has been going in the House is that government is not considerate of the local businessman, but I emphatically stated in government, and I know that there is a lot of opposition to my view, that Tongans need to understand where we are, our limits, what we can do and what we can’t do. For example, I think the issue here, is that government has been blamed that we need to protect the local industry and the local businesses.

During the past five or six years, which I have observed very well, we will continue to protect, and we want everything to be Tongan and that is where my heart is but, and we want all the opportunities to be with local Tongans.

The other issue is that the crime rate is escalating, and you will ask why. The first answer is unemployment. My thought is that the business community has been very slow in developing and expanding to employ the unemployed. According to statistics we have about 2,000 school leavers every year and only about 500 find employment, while the other 1,500 are just roaming around the place. Tonga needs to make a decision, and we need to compromise, and it is a choice that we have to make, either to protect the small amount of Tongan industry here, which will expand at a rate which is lower than our rate of high unemployment. So I came to the conclusion that we need to open it up and make it transparent. What are the areas that the Tongan business people are not able to do it efficiently? If they cannot do it, then it is better to invite foreign investors to come in. We push for joint ventures every time, especially in the restricted areas in order to address some of the Tongan concerns.

The development of the Private Sector is very slow, while globalisation and our membership with the WTO calls for a major change in the way we do business and even in our lifestyle and our attitude to work. Don’t you think there is a need to inform people of the magnitude of what we are facing?

I am very concerned, but we are very happy with the consultation that has been carried out by the Reform Committee and the Private Sector. We are continually inviting WTO officials to come and help us, even the EPA. We want people to look at it as an opportunity within the globalisation. From my point of view, [when] globalisation is well-understood and people are prepared, they are adaptable to certain influences of globalisation. Because … I promise you if we were out of WTO, we would be overrun by globalisation anyway, without even touching WTO and globalisation issues.

We have to change our way of life and the way we do business in order to take advantage of WTO?

We need to change, certainly, however, we can change around things and still hold on to things that are most important for us. The most important thing for me here is peace and freedom for the people here, and to be able to have sufficient food for Tonga’s population. It is also interesting that we are concerned here with things after food sufficiency. …We are talking here about things after we have addressed our basic needs, so that our families are secure, food is secure.

The other countries of the world are still struggling trying to meet their basic needs, while we are talking here about things, which are outside of our basic needs.

Some are saying that that is really is the problem, because of that we have a very slow movement toward changing our working attitudes.

Exactly, that is what is happening now. It was interesting when we had our consultative meeting with the Private Sector, [to find] that Tongan employers are having problems with their Tongan workers, [who are] lazy and thieving. In the service industry there are the same kind of problems, and when they are pressured to do their job properly they refuse to work and go home, and that is a problem.

It has been said that while the major problem for people overseas is lack of food, it is the opposite in Tonga, it is too much food. We need to change our frame of mind.

Ministers are often away from the House while bills have been pushed through. Some Members feel that going to WTO meetings is a waste of time, and because Tonga is so small, we should concentrate on getting our production going.

Unfortunately, some of these meetings take place while Parliament is in session. If you look at the ACP meeting, then you can ask yourself who is most happy about the outcome of our relationship during the past 25 years? I think it is Tonga, and that was because of work that was carried out earlier.…What we are working on now, is for the future and the next generation. With these kinds of negotiation only government can do it. The Pacific ACP had a very good presentation and right after the meeting the EU Commissioner visited the region because he was impressed. We have carried out feasibility studies and completed what was required. The fund is expected to be distributed next year. This does not mean that those who come first will get more, but it means that Tonga and the Pacific region have presented a very united front.

Meanwhile, Africa and the Caribbean are still working. We are well ahead, and we need to get those opportunities.

You have already touched on unemployment, but it is growing every year do you have any immediate solution to the problem?

Because it is very slow in getting a practical employment, we are looking at trying to introduce more training in various areas, so that you can lengthen the time that you employ people, especially the school leavers. We started this as a test last year with fisheries and it started to work well. We are preparing not only for those here they can do part time, but also for those who are able to go overseas, they also have certification. It better to train our school leavers for certification in various areas in order for them to prepare for whatever job is available.

Secondly, with unemployment, we are making it easier for the unemployed to find jobs. The unemployed can register with us…then we try to approach the companies, and ask if the companies require more training for these unemployed, we are talking here about basic training, for example, mixing cement, and understanding the name of tools.

At the same time we are constantly looking for foreign investors, but we are very isolated and the cost of freight is still very high.

The area of computers and e-commerce is another area that we may be able to develop in the future, but for the time being that is what we are doing.

The market in Pago Pago, and I know you are looking at starting up another one in Auckland. How does it work, say if a grower wants to export some root crops there?

It is free, and they can send their produce directly to Pago Pago. The Ministry [at first] had given licences to a selected few, but two years ago because of pressure from parliament we opened it up. What has happened now is that the price of Tongan produce at the [Pago Pago] market place dropped by about 40 per cent to 45 per cent from what it was at the beginning, and that is the problem.  

We have a facility in Pago Pago, and I think the corporation is very interested in having that run by the Private Sector. At the moment there is a caretaker there but the Tonga Corporation is going to tender it out for someone to lease and run the facility. For a Tongan to utilise the facility he has to contact the caretaker and make his own arrangement.

When will Tonga become a member of the WTO?

We have done the legislation, and the memorandum, and we are doing the bilateral [agreements]. In fact, today we requested our first working party with New Zealand and they are here, instead of going all the way to Europe.

We are looking at maybe next year. Some of the requirements have been completed, [except for] the Tax reform, as long as we have a schedule.

A practical time will be next year. I don’t think it will make a very big difference with regards to government revenue.