of expectations

JCC - 3 clash of expectations

By David North

THE inaugural meeting of the Joint

Commercial Commission (JCC) was billed as the beginning of a new era in commercial relations between the South Pacific and the United States.

But it played out as a clash of expectations, with the Forum states seeking special consideration for access to US markets and investment capital and the US side urging the islands to compete for the US business dollar by restructuring their investment climate and upgrading their agricultural ex ports to meet stringent US import

regulation.

The exchange over labyrinthine US import requirements, for example, prompted Sir Geoffrey Henry, Prime Minister of the Cook Islands, to ask You mean that if we use a U.S. produced pesticide to grow limes, for instance, to U.S. standards, and there is too much pesticide residue on the fruit, you will reject the shipment? The answer, to the islanders’ frustration, was yes.

The JCC was proposed at the 1990 summit of Pacific island leaders with then US president Bush. The October 8, 1993 meeting in Washington formally launched the JCC as a mechanism to expand commercial relations among the islands and the United States. Thirteen Pacific island nations attended.

Cook PM Henry, as spokesman for the islands, told US State and Commerce Department officials that the islands seek a better place in the sun. The JCC is, in their view, one more step toward that ultimate objective. The islands are not asking for an aid handout, Henry reportedly said. They seek an oppor tunity to further develop their economies by tapping into the vast US market, and reservoir of business technology and financial resources, especially private sector investment.

After US Commerce Secretary Ron Brown offered welcoming remarks and stressed the importance the United States places on the JCC, the United States response, carefully enunciated by high ranking State Department and Commerce officials, stressed the need for structuring an attractive investment cli mate. Led by Ambassador Winston Lord, the former US ambassador to Beijing and now Assistant Secretary for East Asia and the Pacific, the US side explained that the United States sees the JCC as part of its overall Pacific

Com

munity

initiat ive and an el ement of its multi lateral coop eration with the Asia- Pacific Econ omic

Cooperation forum.

APEC, founded in 1989, is a 15-member group of East Asian and Pacific economies aimed at liberalising trade in the region and among the region and the United States and Europe. An APEC summit hosted by President Clinton in Seattle, Washington, on November 19-20, is expected to ratify an agreement to develop a comprehensive code to govern private investment in APEC member economies.

US officials at the JCC inaugural meeting stressed that the competition for the US investment dollar had dramati cally sharpened in the past decade. With the end of the Cold War and the dissolution of the Soviet empire, there had been a radical shift in the way governments around the world viewed outside investors. The atmosphere of distrust of foreign capitalists that had permeated the world two decades ago nad now turned to an unprecedented liberalisation in the investment climate.

Eastern and Central Europe, Russia, and other former Soviet states, Latin America, the Newly Industrialized States and many Third World nations, US officials said, now avidly seek foreign investment dollars, creating an interna tional investment climate extremely favorable to US investors. Citing World Bank studies, the US side laid out key principles US investors would look for in evaluating the investment opportunities in the Pacific.

The investment regime should be transparent, either through bi-lateral or multi-lateral trade and tax treaties or a local investment code. The types of investment for which there will be incentives should be clearly spelled out.

The business sectors from which foreign investors will be excluded or in which their role would be restricted should be clearly promulgated, preferable in law, so there is no governmental discretion in

Martin Tiffany Henry: islands’ spokesman

the matter during the application process. In an optimum scenario, there should be unrestricted entry of foreign investment and repatriation of all profits, royalties, etc. Similarly, access to foreign exchange should be unre stricted. Foreign investors should not be favored over local investors. Expro priation of property, if it must take Clace, should be for a public purpose, ased on international law. Compen sation should be prompt. Investors should have assured access to interna tional arbitration for dispute settle ment and legal protection for intellec tual property rights such as trade marks, patents, and copyrights.

US officials also pointed out that investors look primarily at market access and rate of return when evaluating prospects for investment.

The South racitic’s access to Austra lian and New Zealand markets, for example under SPARTECA, as well as access to ASEAN markets would be a plus for manufacturers looking to maximises their market. A clearly enunciated, non-discriminatory, and stable investment climate would en able the investor to calculate a rate of return. The primary sectors US invest ment might be attracted to include tourism, fisheries, specialty agriculture for “niche” markets, and if access to a wider Asian-Pacific market is avail able, light manufacturing and financial service sectors.

All well and good, from the US point of view, Cook PM Henry responded, but the Pacific islands their private sectors are unaccustomed to the competition such a liberal climate could generate. How can the islands protect themselves, their local inves tors, their resources, environment, and cultures under such a free-wheeling business climate, Henry asked? Could the United States assist in setting up safeguards or help mediate between US investors and the host govern ments?

US officials responded that they could assist the islands in evaluating the public “track records” of U§ investors, and that each nation has the right to protect its local industries and resources.

US officials also outlined the trade programs that might interest the islands, including the General Agree ment on Trade and Tariffs, and General System or Preferences, as well as the federal regulations on import ation of agricultural products. The US rules and procedures, especially the complex system of inspection for imported agricultural produce, are aimed at assuring the quality and safety of importers.

The next JCC meeting is scheduled for the Pacific. In the meantime, the islands agreed to prepare reports on their economies and business opportunities which the US Com merce Department will disseminate via its electronic networks to US business communities. □