Fiji and SPARTECA

Dear Madam, Jemima Garrett’s opinion piece “Aussie Rules: SPARTECA’s death sentence for region” (PIM, October 1997) was basical ly a plea to support Fiji’s garment industry through relaxing the Rules of Origin under

Sparteca.

Garrett sees reducing the local content of Fiji garments exported to Australia and New Zealand as a way of providing the Fijian industry with a “breathing space”, to become competitive as Australian and New Zealand tariff protection is reduced.

She sees this as similar to the “breath ing space” that the Australian government has given the Australian clothing and tex tile industry by agreeing not to reduce its tariffs for five years after the Year 2000.

But SPARTECA countries will auto matically receive the same breathing space as Australian firms frorp the freeze on tar iffs.

Will relaxation of the Rules of Origin really lead to the Fijian industry becoming more internationally competitive? By the time Australia and New Zealand, and other high-income APEC countries, reduce their protection levels to zero (by 2010, and lower-income APEC countries by 2020), along with the World Trade Organisation winding down of the Multi-fibre Agreement, all garment making industries, in Fiji and elsewhere, which expect to be profitable will have to produce in the most efficient way for those markets to which their output is best suited.

Relaxing the Rules of Origin under SPARTECA will mean that the Fijian industry will find it more profitable to do less value adding.

But this applies only so long as Fiji has lower rates of protection than Australia and New Zealand. Once Australia and New Zealand have reduced their tariffs to levels near those of Fiji, the Fijian industry will have to compete with all other countries on an equal footing and the Rules of Origin will be immaterial. At this point, Fiji’s industry will have to have found its market niches and be efficient in producing those

particular products.

Will these market niches be in garments to which Fiji adds little value to mainly

imported material? With Fiji’s relatively

high wage levels compared to the low wage/low productivity countries of South and East Asia, it is highly unlikely. Fiji’s garment industry needs policies which push it in the direction of becoming glob ally efficient. Some would argue that this is not possible - that Fiji’s garment indus try only exists because of the special favours granted under SPARTECA and the

export credit scheme. Favours, I should add, which are condoned by the Australian and New Zealand garment industries only because of the existence of the Rules of Origin and because Fiji’s imports come at the expense of imports from non-SPARTE CA countries.

I believe that the manner in which the Fijian garment industry has grown in the years since the devaluation and other post coup reforms points to the influences being internal policy changes rather than external policy such as SPARTECA.

Therefore, I am optimistic about its prospects in a free-trade situation. One way to push the Fijian industry in this pre ferred direction is for Fiji to adopt the same tariff regime as Australia and New Zealand (which does away with the need for Rules of Origin) and, in the future, lower its tar iffs in line with Australia and New Zealand.

Essentially, this would mean that Fiji would join the Closer Economic Relationship (CER) of Australia and New Zealand which is committed to free trade under APEC by 2010.

Moving to free trade in this way would

be a much better adjustment path for Fiji to follow to find out which activities are real ly in its best interest than that suggested by Garrett.

(Prof) Ron Duncan

Executive Director