MANAGING THE CHALLENGES OF WTO PARTICIPATION: CASE STUDY 33
The Pacific Island Nations: Towards Shared Representation
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I. The problem in context
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
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
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
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
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.
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
* Research Fellow, Pacific Policy Project, Asia Pacific School of Economics and Government, Australian National University.