From Matangi Tonga Magazine Vol. 18, no. 2, August 2003.

Although the Free Trade area for the Pacific has started to take shape Tonga is not ready to take advantage of it.

Tonga is a signatory to the historic trade agreement between Forum Island Countries that came into force on April 13, creating a Free Trade area that will be phased in over ten years.

The Pacific Islands Trade Agreement (PICTA) required six countries to ratify with Nauru recently joining the Cook Islands, Fiji, Niue, Samoa and Tonga.

“In Tonga we won’t see its real impact until our Tax Reform is fully in place, which will be probably two or three years from now, said Paulo Kautoke, Secretary for Labour, Commerce and Industries.

He explained that the lowering of duties will encourage the establishment of import substitution companies, because manufacturers will pay lower duty for imported materials and will add on their mark-ups on sales. “They will like the lower duties because it will help their cash flows,” he said.

However, two expected stumbling blocks were higher utilities costs and labour costs.

Dumping

Paulo said that one area of concerning is dumping of products, and a regional approach had been organised to form a  counter-dumping body. Members were to be include representatives from the first six members to rectify the treaty.

There is a regional body to deal with the scientific testing of products at the University of the South Pacific in Fiji, but ideally each country should have their own.

Tonga had to look for opportunities, he said, and pointed out that genetically modified products had become a big issue between the European Union and the United States.

Organic

Paulo believed that Tonga should adopt organic farming, because more people in future will be looking at organic products, particularly for export to Japan, he said.

The Melanesian countries of Papua New Guinea, Vanuatu, and the Solomons Islands have not rectified the PICTA treaty, which was opened for signature by the Forum in Nauru in August 2001. It came along with an economic cooperation agreement known as the Pacific Agreement on Closer Economic Cooperation (PACER).