unravel garment industry

Sparteca flaw that could unravel garment industry

A move on export quotas by Australia deals a second crushing blow to Fiji

THE basic flaw in the Sparteca Agreement, under which the South Pacific island nations have almost free access to the Australian and New Zealand trade markets, has long been suspected and now looks to be exposed. The Fiji Trade and Investment Board (FTIB) has revealed that it has been told by Australia that its garment export quotas into that country will be reduced to allow the other island states, including Tonga and Western Samoa, greater access.

Fiji has done especially well under Sparteca: helped by its tax free zone scheme, many Australian and New Zealand garment manufacturers have been attracted to set up in Fiji, importing their raw material cheaply and manufac turing with cheap labour. Tonga has, to a lesser extent, managed to get a small industrial base established by offering the ease of access to Australia and New Zealand.

The basic flaw has been that the agreement only works if the island nation has something to export, which means that countries such as Tuvalu, Kiribati, the Cook Islands or Vaunatu have benefitted only marginally from Sparteca. But while it is possible to find fault with Sparteca, no one had ever come up with anything better.

The Australian move on garment quotas is bound to cause waves within the region. While Australia and New Zealand offer duty free access for goods, Australia has imposed quotas on a small number of imports even under Sparteca to protect vulnerable industries, garment

manufacturing being one of them. These will be gradually eliminated, but that will cause another problem: reducing the Pacific’s market advantage over other Third World exporters.

The FTIB’s statement indicates that Fiji’s quota is to be reduced susbtantially, and that it is concerned the move results from demands from other island countries.

“And given that the quota is shared by all Forum island countries, including Papua New Guinea, an increase to

The flaw has been that the plan only works if an island nation has something to export

Tonga or Western Samoa will be offset by a reduction in someone else’s share,” it said.

FTIB officials are concerned about the precedent the move sets; this is especially significant in that Fiji has by far the largest share of the quota about 100,000 pieces exported to Australia last year came from factories in that country.

FTIB director Ratu Isoa Gavidi said the decision to reduce the quota would be a blow to Fiji’s industry, which was already experiencing a fall in demand from Australian buyers due to the recession.

The director of the South Pacific Trade Office in Auckland, Steve

Houlihan, agrees that Sparteca has not achieved what it set out to do give the kick-start to all the island economies by offering them preferential market access even though it was designed with the best of intentions. This has resulted from a good deal of frustration around the region, apart from Fiji.

The island leaders put a great deal of faith in Sparteca, said Houlihan. “But what do you put in its place?” he said.

Tinkering with the rules-of-origin clauses to allow greater non-Forum content would not really solve the problem of those countries with only a few export items.

Kiribati, for example, faced an uphill battle to find new economic activities.

And the Sparteca deal would be even less effective in years to come as Australia and New Zealand lowered their tariff walls to all comers, allowing cheap Asian goods to flood in.

Houlihan argues that the island na tions have to look further afield for investment now that both Australia and New Zealand are in the economic doldrums. The newly industrialising countries of East Asia would be possible sources of seed money and investment.

But he said that the island states have to lift their own game. They must take a positive attitude toward foreign invest ment and “do some soul-searching”. Too many potential foreign investors gave up when faced with demoralising red tape and bureaucratic delays in dealing with South Pacific governments.

The Sydney-based South Pacific Trade Commissioner, Bill McCabe, also felt that it was time some of the countries “took a good, hard look at themselves”.

New legislation should be introduced to smooth the way for foreign investment, and immigration laws properly codified so that expatriates and their families know where they stand. McCabe said most countries in the region had systems which just forced people to give up, although Fiji, Tonga and Western Samoa all had made great strides to improving their systems. □