Trade Policy Review: Tonga
This first Trade Policy Review of Tonga has provided an excellent opportunity to improve our understanding of Tonga’s economic and trade policies, and the environment in which these policies operate. My sincere thanks go to the Honourable Viliami Latu, Minister for Commerce, Tourism and Labour, and the other members of his team from Tonga, for their well-prepared and constructive engagement throughout this exercise. I would also like to thank Ambassador John Adank, Permanent Representative of New Zealand to the WTO, for his insightful interventions as discussant. Tonga’s written answers to the advance written questions have been well appreciated by Members.
Members acknowledged the significant challenges Tonga is facing as a small island developing country in the Pacific, including its occasional exposure to severe natural disasters. In this context, Members expressed their heart-felt sympathies to Tonga, and all those affected by the devastating cyclone Ian. It was recognized that this tragic event also serves as a reminder of the particular developmental challenges facing Tonga, as well as other countries with similar vulnerabilities, and many Members underlined the need to take such vulnerabilities properly into account in the various activities of the WTO.
While Tonga has performed rather well during the period under review, with stable economic growth despite the global economic crisis, the very limited size of the domestic economy and the distance to overseas markets make Tonga an importer for much of its needs, and an exporter of a narrow range of goods and services. Remittances from a numerous expatriate Tongan community, the earnings of seasonal workers abroad, and donor support ensure that the Tongan economy remains in balance. But it is a source of insecurity for the country’s economic trajectory, not least in combination with significant tax exemptions. Similarly, it was recognized that Tonga is confronted with capacity issues affecting the ability to benefit fully from its WTO membership. Tonga’s focus on technical assistance needs was examined with interest and a number of Members expressed their willingness to provide assistance in the future.
Members commended Tonga for its ambitious accession commitments and for maintaining an open and liberal trade regime, even in a challenging environment. Tonga acceded to the WTO in 2007 with relatively low tariffs, with substantial coverage of services sectors, and with short transitional arrangements to implement WTO provisions. Since then, Tonga has reduced some tariffs to implement the accession package and generally respected its WTO commitments, providing notifications to this effect. Also, international trade and closer private-sector involvement are integral parts of Tonga’s four-year Strategic Development Framework. Accordingly, Tonga has been reforming its business licensing system to improve the ease of doing business, and initiated a review of the foreign investment legislation to attract more investment, all of which was welcomed by Members. A Ministry of Public Enterprises was created already in 2002 to strengthen the management of state-owned businesses and facilitate privatizations. Members recognized that the political will to undertake further reforms appears to be present, and the recent arrival of high speed internet in Tonga should provide additional advantages and opportunities to the private sector.
Against the background of a generally positive and understanding attitude, Members pointed to some areas where Tonga could make further efforts and improvements for its own benefit and the benefit of its many partners. Let me also recall in this context, the constructive and forthcoming statement by the Minister:
- Strengthening the regulatory and institutional framework: Although Members commended Tonga generally for its efforts to develop its legislation and administrative capacity, some Members expressed an interest in the development of particular areas, e.g. the promulgation of a formal bankruptcy law, effective enforcement of intellectual property rights, and the possible revision of Tonga’s Shipping Act.
- Tariff and non-tariff measures: Tonga was encouraged to ensure that all applied tariff rates be kept within bound levels, and to treat all imported and domestic like goods equally under its excise tax regime, in line with its WTO commitments.
- Sanitary and phytosanitary regime: Members noted the importance Tonga attaches to food security, the ongoing consideration of a National Food Bill, and the possible establishment of a National Food Authority. However, Members also sought further details about changes made to Tonga’s SPS processes and their conformity with the WTO SPS Agreement, and the possible use of risk assessment in the granting of import permits.
- Trade agreements and arrangements: Members noted Tonga’s commitment to the completion of ongoing negotiations under the ACP-EU Economic Partnership Agreement and the Pacific Agreement on Closer Economic Relations — PACER Plus, as well as its efforts to implement the Pacific Island Countries Trade Agreement (PICTA). At the same time, a question was raised whether Tonga is exploiting fully existing preferences available within the import schemes of some Members. Members noted Tonga’s indication of constraints limiting its possibilities to make use of such unilateral preferences.
- Sectoral issues: With 70% of Tonga’s population living in rural areas and dependent on agriculture and fisheries, a member stressed the importance for Tonga to achieve greater returns from its agricultural export trade and from fisheries licences sold to other nations. The cyclical nature of fish catches may frequently be ascribed to over-exploitation in the past. A Member also argued that Tonga’s high termination rates for international telephone calls led to rerouting, and had weakened Tonga’s connectivity to the rest of the world.
In conclusion, Members generally commended Tonga for maintaining its focus on policy goals to modernize the economy and streamline its regulatory systems, to encourage investment, and to facilitate business. A WTO-consistent open trade and investment regime should assist Tonga in securing sustainable growth and better realize its economic potential. Members took note in this regard of the intention of Tonga to develop a Trade Policy Framework.
Members warmly welcomed that this first TPR of Tonga has provided an opportunity to assess progress and to identify areas of further work, including areas where capacity needs prevail. The questions posed and the active participation of delegations in this meeting reflect Members’ interest in Tonga’s trade and investment policies and practices. As many Members pointed out, this review not only allowed a detailed exchange of views about Tonga, but also — I hope — furthered our collective appreciation of the developmental conditions facing some of our Membership’s smallest and most vulnerable countries.
In closing, I would like to thank the delegation of Tonga, all the other delegations, the discussant and the Secretariat for this successful review.
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