Current Status

MSG

At present, members of the MSG are discussing broadening the MSGTA (trade in goods agreement) to an MSG Plus agreement which will include Trade in Services, labour mobility and membership from other interested Pacific Island Countries. The MSG has established its own secretariat, based in Vanuatu that facilitates meetings and coordination amongst MSG members. Members are currently further discussing the architecture of the Trade Agreement.

PICTA

The Pacific Island Countries Trade Agreement (PICTA) Trade in Services (TIS); and PICTA is a free trade agreement amongst the 14 Forum Island Countries (FICs). Under this agreement, virtually all barriers (import tariffs and quotas) to merchandise trade between FIC countries will be subsequently removed. The initial PICTA which only covers Trade in Goods (TIG) was ratified by ten (10) FICs. The agreement was signed in 2001 and came into force in 2006. Fiji ratified the agreement in 2002. The PICTA was initially a trade in goods agreement in which countries adopted a negative list approach. Negative list approach requires countries to list products which they do not want to trade in, which may include sensitive products or products associated with infant industries. The rationale for adopting a negative list was to enhance greater liberalization of trade in goods amongst the FICs. To demonstrate its commitment to regional integration and its openness to trade, Fiji did not include any products on negative list in the PICTA.

In 2004, the PICTA Trade Ministers' agreed to broaden the free trade area among the FICs to include trade in services (TIS). The PICTA TIS mirrors the multilateral rules for international services trade under the WTO General Agreement on Trade in Services. It covers eleven (11) services sectors: business communication, construction, distribution, educational, environmental, financial, health, tourism, recreational and transport.

The PICTA TIS under negotiations includes two areas:

  • Trade in services for sectorial liberalization and
  • Temporary Movement of Natural Person. (labour mobility)

At the moment, 11 out of the 14 FICs have ratified PICTA, and only 6 FICs have announced their readiness to trade, presenting considerable challenges in the implementation of the agreement. The FICs that have ratified the PICTA are Cook Islands, Fiji, Kiribati, Nauru, Niue, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu. The FICs have also, to date, undertaken four rounds of PICTA TIS negotiations, however, no substantial commitments or progress has been made in services sector liberalisation or the liberalisation of temporary movement of natural persons. Talks are expected to further in the fifth round of negotiations and perhaps commitments may be made by members.

The South Pacific Regional Trade & Economic Cooperation Agreement (SPARTECA)

SPARTECA was signed in 1981 between Australia, New Zealand and countries of the South Pacific Forum. It allows duty free access for the products of Forum Island Countries (FICs) to the markets of Australia and New Zealand, subject to "Rules of Origin" regulations. The aim is to redress the unequal trade relationships between the two groups. The Textiles, Clothing and Footwear (TCF) industry has been a major beneficiary of SPARTECA through the preferential access to Australian and New Zealand markets.

The local Textiles, Clothing & Footwear (TCF) industry has grown over the last 10 years and is now one of the major industries in Fiji. In 1997 the TCF industry accounted for 26% of Fiji's total domestic exports; it contributed to some 3.5% of GDP and provided employment for about 18,000 people that account for 16% of those in total paid employment. The rapid expansion of the Fiji TCF industry has been attributed to the removal of TCF quotas by the Australian Government in 1987 which allowed quota free and duty free access under SPARTECA, the introduction of the Tax Free Factory/Zone (TFF/TFZ) Scheme in 1988 and the Australian Import Credit Scheme (ICS).The Australian Import Credit Scheme (ICS) commenced in July 1991 as part of a larger package of tariff and other industrial reforms in Australia. It was introduced as a temporary measure to encourage Australian TCF exports and terminated on 30 June 2000, except in the case of Fiji, where an extension had been granted to October 2000.

Given the Australian and Fiji Governments' commitment to developing a WTO-friendly arrangement in place of the ICS, the SPARTECA (TCF Provisions) Scheme was developed. SPARTECA (TCF)provisions concept complements the existing SPARTECA treaty and provides for a change in the way local area content (LAC) is calculated for TCF products (goods) entering Australia from Forum Island Countries (FICs). Under the existing SPARTECA arrangements, goods can enter Australia duty free where the Allowable Factory Cost is greater than or equal to 50% of the total ex-factory cost of manufacturing the goods. These arrangements continue to stand. The SPARTECA (TCF provisions) Scheme enables companies to utilise Excess Local Area Content (ELAC) from certain SPARTECA qualifying TCF goods to help meet the 50% content requirement in otherwise non-qualifying Eligible Goods. ELAC is only derived where a product's LAC exceeds 70%.Similarly, ELAC can only be used where a product's LAC is greater than 35%, and where there is a last process of manufacture performed in the FIC. The duration of the S-TCF Scheme is from 1st March 2001 to 31st December 2004.