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> Case
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> Introduction
ON THIS PAGE:
> I.
The problem in context
> II. Local and external players
> III. Challenges faced and the outcome
> IV. Case study of the shared representative approach
> V. Lessons for others
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I. The problem in context back to top
Most small economies find it difficult to
operate alone in the global economy, and less developed economies face
particular hurdles in their quest for prosperity. The global trading
environment is becoming increasingly integrated, and the last decade has
seen a number of regional groupings form to capitalize on the benefits
of more efficient use of resources and economies of scale. While this
integration has been most evident in the major economies of Europe (the
European Union) and North America (the North American Free Trade
Agreement), similar moves towards economic integration are being
explored in Asia and South and Central America, in a sign that many
countries are recognizing the benefits of a shared approach to trade and
development. As the world’s major economies move towards greater trade
and economic integration, many smaller, less developed economies are at
risk of being left behind. In recognition of this, the World Trade
Organization is paying particular attention to the needs of smaller
economies.
The economies of the Pacific island nations
are among the most disadvantaged in the world today. These nations,
composed of islands that are often little more than specks of land in
the vast expanse of the Pacific Ocean, are at the forefront of concerns
about countries being left behind in the current tide of global economic
development. Of the three WTO member nations in the South Pacific (Fiji,
Papua New Guinea and the Solomon Islands), Papua New Guinea is by far
the largest. Part of one of the largest islands in the world, the
country itself is around the size of California, but the contrast
between their economies could not be greater. Papua New Guinea is
classified by the World Bank as a least developed country, and 46% of
its population of 5.3 million live on less than US$1 a day.(1) It is
difficult for impoverished countries like Papua New Guinea to
participate fully in the global economy. In particular, with its limited
human resources, the demands of providing representatives at myriad
international organizations such as the WTO are a significant public
burden. Despite being a founding member of the WTO, Papua New Guinea has
been unable to afford permanent representation in Geneva. Neither have
the two other permanent members of the WTO, Fiji and the Solomon
Islands, nor the Pacific island nations with observer status — Tonga,
Samoa and Vanuatu. For all the Pacific island nations, even the largest,
joining the WTO involves significant costs, not only in financial terms
but also in the diversion of scarce human capital and leadership skills
to international affairs.
The WTO has recognized this problem and has
sought to address it in a number of ways. The Advisory Centre on WTO Law
was established to assist developing countries in representing their
interests in the multilateral trading system, and it provides legal
advisory services to countries engaged in dispute settlement
proceedings. Another initiative, the Work Program on Small Economies, is
aimed at framing responses to the trade-related problems of small
vulnerable economies like those of the Pacific islands. The WTO also
provides training courses and technical assistance on issues affecting
small developing countries, including accession and trade policy
reviews.
In addition to these initiatives, it was
recognized that there is still a need for countries to maintain
representation in Europe in order to address the bureaucratic aspects of
WTO negotiations, and to ensure that they remain up to date with the
issues addressed in WTO meetings. However, the costs involved in
maintaining European representation, even at the most fundamental level,
have proved to be prohibitive for Pacific island nations, resulting in a
disengagement from the multilateral process. The WTO has recognized this
issue, and has assisted in the establishment of a shared representative
office for Pacific island nations. Based in Geneva, the office will
represent the member nations of the Pacific Islands Forum. The office is
being shared with the Organization of East Caribbean States, which is
similarly a representative body for small island nations.
II. Local and external players
back to top
The Pacific Islands Forum Secretariat is the
peak representative body for the small island nations of the Pacific.
Based in Fiji, it represents sixteen countries (Australia, the Cook
Islands, the Federated States of Micronesia, Fiji, Kiribati, Nauru, New
Zealand, Niue, Palau, Papua New Guinea, the Marshall Islands, Samoa, the
Solomon Islands, Tonga, Tuvalu and Vanuatu), of which five are WTO
members (Australia, New Zealand, Fiji, Papua New Guinea and the Solomon
Islands). While Australia and New Zealand maintain a significant role in
the Forum, its overarching aim is to promote and represent the interests
of the small island nations of the Pacific. Development is a major
concern in the South Pacific, and the Forum is closely focused on
developing international trade to improve the quality of life for the
inhabitants of member countries.
The move to create a shared representative
office in Geneva for the Pacific island nations was spearheaded by the
Pacific Islands Forum Secretariat at the Forum Trade Ministers Meeting (FTMM)
in June 1999. The ministers recommended that a forum delegation be
established in Geneva to facilitate representation of member countries,
both WTO and non-WTO members, in WTO negotiations. A Forum
representative would be present at all WTO meetings, and would be tasked
with observing WTO operations and reporting on all issues affecting
member states. The WTO welcomed this initiative, and assisted in the
provision and establishment of the office.
The issue of shared representation is a
significant one for the Pacific. There is recognition throughout the
region that the duplication of a wide range of government-provided
services is making significant drains on the scarce operating resources
of island economies. The Pacific Plan, commissioned by leaders at the
Pacific Islands Forum in August 2004, and now being developed by ForSec
and a taskforce of senior officials from Forum governments, has
identified further work to be done in pursuing the aim of regional
co-operation in aviation, shipping, fisheries and counter-terrorism.
Duplication of infrastructure, in particular, is an area of significant
regional concern. The Australian Minister for Trade, Mark Vaile,
recently highlighted the need for greater merging of regional carriers:
‘running national carriers which drain national budgets is
counterproductive and an inefficient use of resources’.(2) Australia has
been actively pursuing a policy of encouraging Pacific co-operation in
the areas of shipping, aviation and economic management. The
establishment of the Pacific Islands Forum Representative Office, though
a small step in and of itself, is nonetheless a significant sign of
emerging recognition among the Pacific island nations of the need for
greater regional co-operation and pooling of resources.
If shared representation is successful in
multilateral trade negotiations it will set a powerful precedent
regarding regional co-operation that will enable improved outcomes for
the region when engaging on issues of international significance. Such
an outcome can only enhance regional unity, and may serve as a model for
co-operation in other areas.
III. Challenges faced and the outcome
back to top
Duplication of resources and high bureaucratic
overheads make effective participation at important global for a
difficult for small economies, especially those of the Pacific that are
often isolated, under-populated, and have low levels of literacy and
education. Regional bureaucratic integration is being pursued to manage
more effectively the international rights and obligations of the Pacific
island nations.
The Pacific Islands Forum Representative
Office in Geneva, sponsored by groups from developed nations including
the European Communities, officially began operations in July 2004.
According to former European Trade Commissioner, Pascal Lamy, the
establishment of the office was an important development not only for
the Pacific island nations themselves, but also for the WTO, because it
would enhance its deliberations. ‘The WTO negotiations have to be
accessible to all, including the smaller members who have special needs
and constraints’, said Lamy. ‘The establishment of the Pacific
Islands Forum Representative Office will help the Pacific region to be
better represented in [the] WTO.’(3) A major strategic purpose of the
Office is to follow closely developments in the WTO negotiations and to
act as a channel of communication between the WTO and the Forum members.
The representative office will also facilitate rotating six-month
placements in Geneva for trade officials of Pacific island nations.
These placements, the first of which commenced in April 2004, enable
trade officials from member states to work closely with the WTO on
issues important to their countries, and promote capacity-building
across a range of trade issues. It is envisaged that, at the conclusion
of their placement, trade officials will return to their countries and
assist their governments in managing their multilateral trade agenda.
Not only will the Pacific Islands Forum
Representative Office enable member countries to improve their
participation in the WTO negotiation process, it is an important first
step towards greater integration of their bureaucratic systems. Greg
Urwin, secretary general of the Pacific Islands Forum Secretariat,
recently spoke of the need for a shared approach to institutions and
bureaucracy, saying that ‘It seems to me impossible to deny that
enhanced regional co-operation and pooling of resources is required.’(4)
In the past, small nations have had great difficulty representing their
interests effectively at international trade negotiations, and a shared
representative approach is being shown to provide significant benefits.
IV. Case study of the shared
representative approach back to top
Kava root is a traditional medicine used
throughout Pacific societies as an analgesic, tranquillizer and
anti-depressant. It was also used as a beverage in traditional
ceremonies, and has a long history of use throughout the Pacific. The
medicinal qualities of kava root were recognized by the neutraceutical
industry, with kava root being developed for use in herbal supplements
and medicines world-wide. A significant Pacific kava industry evolved
during the late 1990s, with kava root being processed and packaged
primarily for the United States and European markets. Production peaked
in 1998, and kava farms are now well established in Vanuatu, Fiji, Samoa
and Tonga. The kava market is estimated to contribute around US$200
million annually to Pacific economies,(5) and around 10, 000 hectares are
under cultivation for kava production. Not only does the kava industry
play an important role in the economies of the Pacific, it provides a
sustainable income based on a traditional crop that can be developed in
an ecologically sensitive manner. Kava production now plays a
significant role in providing incomes and promoting development in the
rural communities of the Pacific islands, many of which remain among the
least developed in the world.
However, in 2002 public health authorities in
Germany (BfArM) instituted a ban on kava products, based on evidence
linking the consumption of kava to a range of liver problems. This
prompted a number of other European Community members to review the
effects of kava products in more detail, and market recalls were
instituted. Exports of kava products were effectively halted,
significantly affecting the livelihood of many Pacific farmers and
stifling the further development of the industry.
The sudden withdrawal of kava products from
the world market resulted in great hardship for many rural Pacific
communities. Adimaimalaga Tafuna’i, the executive director of Women in
Business Development in Samoa, noted the problems faced by rural
communities as a result of the ban: ‘The growers are very
disillusioned. The boom in exports meant that they had planted thousands
of plants, involving much time and very hard work…. Many of them have
no other source of income, and (now) have to rely on family members for
their livelihood…. A new wave of poverty is definitely being
experienced because of the ban.’(6) Throughout the region, subsistence
farmers face a soul-destroying loss of livelihood as a result of the
adverse medical findings.
Leaders in the Pacific responded quickly to
this economic threat. Recognizing the difficulties each country would
face if they were to fight the ban alone, the Pacific Islands Forum
Secretariat moved to address this problem with the establishment of a
joint representative body, the International Kava Executive Council (IKEC).
This body comprises stakeholders from the four affected Pacific nations
alongside European representatives from the manufacturing and marketing
industries, including drug associations, extraction manufacturing
associations and nutritional supplement associations. This group is
innovative as a significant shared representative body, including both
public and private organizations, formed to address moves by foreign
countries to restrict trade in kava. After Pacific nation ambassadors
consulted with the WTO it was decided to approach the issue from a
health perspective, and as such the World Health Organisation (WHO) took
the lead role in the ongoing dispute. The Advisory Centre on WTO Law was
also a source of legal advice for the Pacific island nations as they
contested the ban through dispute settlement proceedings.(7)
A comprehensive survey of the medical
literature was then commissioned by IKEC; it questioned the scientific
basis of the argument used to ban kava products. Medical reports were
reviewed by Dr Joerg Grunwald, director of Phytopharm Consulting and a
medical scientist specializing in phytopharmaceuticals and dietary
supplements. The main author of the Physician’s Desk Reference for
Herbal Medicines, the international reference work for botanical
medicines, Dr Grunwald is an expert on natural medicines and their
safety. His report found that the dangers of kava products had been
significantly overestimated by the German health authorities, and he
questioned the scientific basis of the studies used to justify the ban
on kava. With this report as evidence, IKEC approached the WHO to
request an independent scientific evaluation be made to determine the
veracity of the German claims. As a result, in November 2003 the WHO
decided to re-evaluate all existing studies of the health effects of
kava to determine which studies provided accurate scientific evidence.
In early 2004, representatives of IKEC met
with the German Health Ministry to discuss a way forward in the dispute
resolution process. A decision was made to initiate new studies into the
health effects and safety of kava products, with a view to this
independent evidence being used to re-evaluate previous findings. Dr
Grunwald is confident that studies will demonstrate that kava is safe
and effective. ‘Now we finally have the opportunity to prove the
safety of kava conclusively’,(8) he said.
The co-operative and shared approach developed
by the Pacific island nations to the kava ban, particularly through IKEC,
was a major factor in successfully convincing the German health
authorities to review their ban. The director of Kava Traders in
Vanuatu, Frank King, said that ‘the German minister, Dr Schroeder,
admits that the review of the kava position had been brought about by
pressure from Pacific island states and organizations friendly to those
states’.(9) Grunwald believes that the shared advisory group will play an
active role in the resolution of similar disputes in future. When
questioned with regard to the ongoing kava dispute, Grunwald said: ‘We
certainly would hope that the WTO Pacific representative office in
Geneva would further support our activities and [we] are sure that….
it will be of benefit to the Pacific Island nations.’(10)
V. Lessons for others back to top
There is no doubt that small island economies
are uniquely disadvantaged by the size of their economies and the
resources available to them, both in human and in financial terms, when
they come to compete in the global economy. It is essential that small
economies are able to maintain a level of representation at an
international level that ensures that their prospects for future
development are not overshadowed or neglected by wealthier, more
powerful countries. The formation of shared representative groups has
been shown to assist significantly the process of international
representation, and the work of the International Kava Executive Council
has demonstrated that a combined, co-operative approach to international
issues can create an environment for the effective resolution of issues
affecting Pacific livelihoods and economies. Asif Chida, private-sector
advisor to the Pacific Islands Forum Secretariat, said that the shared
approach taken by the Forum had proved to be very effective: ‘It has
brought together stakeholders in both the Pacific and Europe to discuss
the problem and map out a strategy for the way forward that is aimed at
eventually removing the bans and restrictions currently in place.
Similar approaches…. will continue to be made, upon the request of
Forum members.’(11)
The Geneva office will be able to take a lead
role in future trade negotiations and provide direction and guidance to
those participating in review processes. In the near future, the
representative office will provide Pacific countries with better
representation during the implementation of the Doha Development Agenda
(DDA), which seeks to promote trade liberalization and provide
commitments to strengthen assistance to developing countries. The DDA
aims to allow the WTO to play a more active role in pursuing economic
growth and poverty reduction in developing nations, and the Pacific
island nations have been active in discussions relating to the agenda.
The office will play a key role in facilitating the participation of the
Pacific nations in this important initiative. As former EC Trade
Commissioner Pascal Lamy observed at the opening of the office, ‘[The
office will] facilitate the active participation of the small islands
and economies in our joint efforts to move the Doha Agenda forward.’(12)
Further, the Cotonou Agreement, which covers
aid, political issues and trade between the European Communities and
seventy-seven developing countries, including those of the Pacific, will
be renegotiated between 2002 and 2007. The Cotonou Agreement will create
a free trade area between these developing countries and the European
Communities from 2008, resulting in significant market liberalization by
the developing nations and an end to many preferential purchasing
arrangements for exports from less developed countries. Pacific leaders
are very aware of the impact the removal of preferential agreements will
have on their economies. Sir Michael Somare, Prime Minister of Papua New
Guinea, observed that ‘Unless Pacific island countries actively
participate in these negotiations, we will run the risk of further
marginalizing our capacity to trade with Europe as a result of
dissipating trade preferences on which many of us rely.’(13) The shared
representative office will address these concerns by playing a leading
role in future trade negotiations. In a statement in late 2003, the
Pacific Islands Forum Secretariat expressed hope that the new office
will play a role in the negotiation of issues arising from the
agreement, and emphasized ‘It [is] important for PICs to ensure that
their trade interests [are] considered in a new trade arrangement and in
the WTO rules.’(14) With shared representation in Geneva, the people of
the Pacific islands can be confident that they will speak with a louder
voice at the negotiating table.
NOTES:
1.- World Bank. back to text
2.- ‘Fiji and Australia: New Economic Partners’,
speech to the 17th Australia-Fiji Business Forum, Gold Coast, Queensland,
18 Oct. 2004. back to text
3.- Press release, Delegation of the
European Commission of the Pacific, 28 June 2004. back to text
4.- Greg Urwin, ‘Globalization and its
Impact on the Pacific Islands Region’, presentation at the Reserve
Bank of Fiji Symposium, 15-16 July 2004. back to text
5.- Kava Report 2003: In-depth
Investigation into EU Member States Market Restrictions on Kava Products,
Centre for the Development of Enterprise, 2003. back to text
6.- Ibid. back to text
7.- Ibid. back to text
8.- ‘Kava Back — International Kava
Executive Council (IKEC)’, Port Vila Press, 21 April 2004. back to text
9.- Ibid. back to text
10.- E-mail conversation with author, 13
Oct. 2004. back to text
11.- E-mail conversation with author, 4
Nov. 2004. back to text
12.- Delegation of the European
Commission of the Pacific, press release, 28 June 2004. back to text
13.- Office of the Prime Minister, press
release, 17 May 2003. back to text
14.- Pacific Islands Forum Secretariat, Forum
Monthly Review, March 2003. back to text
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* Research Fellow, Pacific Policy Project, Asia Pacific School of Economics and Government, Australian National University.
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