Aussie rules

...SPARTECA’s death sentence for the region

Jemima Garrett

Sydney

In Fiji and Australia the past few months have seen those involved in the rag trade waiting anxiously for the Howard government to announce its strate gy for the clothing, textile and footwear (TCF) industry after Year 2000.

At stake were the tens of thousands of jobs.

They were put in jeopardy by a report by the influential Industry Commission which recommended that tariffs, currently around 34 percent, to be slashed by five percent by 2008.

For Fiji, there was an added blow with the recommendation that the export credit scheme which effectively provides a 20 per cent discount on Australian fabric, be terminated immediately.

The reaction in Fiji was loud and unmistakable.

Mark Halabe, a spokesman for the industry which employs 230 people at his Suva factory, said the recommendations, if implemented would be the death of the industry.

In Australia, there were noisy protests around the country, especially in regional towns where many garment factories are located. Trade unions mounted an effective campaign using paid advertisements on high rating radio networks and worked togeth er with employers to remind backbenchers in marginal seats of their vulnerability. In cabinet, however, the Industry Commission, had its supporters including treasurer, Peter Costello.

On the eve of the Howard government's decision on the future of the industry, Costello backed Industry Commission estimates that job losses as a result of tariff cuts will be around 5000 not the 50,000 claimed the industry.

"The only thing that will give long-term secure business prospects in a competitive world is competitive business,” he said.

The following day the scale of the rift between Costello and his cabinet colleagues was clearly visible.

John Howard announced a five-year tariff freeze from the Year 2000 and a package of measures to assist the industry, including a $lO million TCF Technology Development Fund, an $2.5 million a year Export market Development Program and an expanded Overseas Assembly Program.

The policy was designed to provide job security and encourage investment but as Howard put it still ’with an eye to the trade lib eralisation goals of APEC by the Year 2010’.

To the economic rationalists Howard's move was a cave-in

which confirmed his pragmatism but from within the rag trade it was warmly welcomed.

Not so in Fiji.

Halabe praised Howard’s move as brave but said it gave Fiji only a five-year remission before its death sentence unless urgent action was taken to change the Rules of Origin under the SPARTECA trade agreement.

Ramesh Solanki, from United Apparel (which won last year’s exporter of the year award and employs 830 people), went further saying the value of tariff freeze to Fiji would be totally eroded by the axing of the export credit scheme which Howard said would take effect from 2000.

Solanki also identified the Rules of Origin as Fiji’s biggest obstacle to being able to make the transition to being an interna tionally competitive produce by 2010, when its main competitors, such as China and Indonesia, gain duty free access as a result of the APEC trade liberalisation process.

SPARTECA has become one of those hoary old issues in Fiji- Austral ia relations which just will not die.

Fiji’s $llO million clothing trade with Australia grew under its protective wing, which allows duty free access for any garment providing 50 per cent of its content was sourced from South Pacific Forum countries.

Now the Fiji industry is bigger and manufacturers are com plaining that the inflexibility of that Rules of Origin is preventing them from implementing ‘best practice’ principles that would make them truly competitive.

Halabe’s factories are a good case in point.

In Australia, he employs 100 people who chum out 2000 shirts a day.

In Fiji, he employs 230 people who produce only 1500. Halabe has not pushed them to work faster because he knows if he does his product will drop below the 50 percent local content and have to pay a 34 percent tariff in Australia which will make it uncom petitive.

As he says, if the test for SPARTECA was changed to some thing more flexible such as ‘substantial transformation’ gradual improvements in efficiency would be possible.

Solanki has a different problem with the Rules of Origin. The suits he produces are very labour intensive but if he takes them more upmarket(often seen as the best niche in a trade liberalised world) by using expansive European fabric they will no longer have a 50 per cent Forum content.

At the moment, 30 to 40 percent of Fiji’s garment manufactur ers rely on the export credit scheme to put the cost of Australian fabric within their reach. When that is axed, they too will be caught between a rock and a hard place on the content issue.

Australia has long resisted changing the Rules of Origin, most recently because the World Trade Organisation has yet to come up with an accepted definition of ’substantial transformation’.

Most Fiji manufacturers believe they can become competitive but they just need a similar sort of breathing space to that Howard granted the Australian Industry.

Fiji’s industry employs 15,000 people and is now one of the country’s major export earners. It has proven it is a genuine job creator not just a laundering operation sewing labels onto existing garments to qualify for preferential access.

Maybe it is time for Australia to respond to Fiji’s repeated calls for change. ■