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Fiji: April 1997

“ questions were raised concerning the fiscal balance; progress in public enterprise reforms, which were welcomed, and the promotion of greater competition in the Fijian economy; the need for a transparent, stable basis for foreign direct investment; and remaining exchange and price controls.”

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First press release
Summary of Secretariat report
  > Summary of Government report

10 April 1997

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    The Trade Policy Review Body of the World Trade Organization (WTO) concluded its first review of Fiji's trade policies on 9 and 10 April 1996. The text of the Chairperson's concluding remarks is attached as a summary of the salient points which emerged during the two-day discussion.

    The review enables the TPRB to conduct a collective examination of the full range of trade policies and practices of each WTO member country at regular periodic intervals to monitor significant trends and developments which may have an impact on the global trading system.

    The review is based on two reports which are prepared respectively by the WTO Secretariat and the government under review and which cover all aspects of the country's trade policies, including: its domestic laws and regulations; the institutional framework; bilateral, regional and other preferential agreements; the wider economic needs and the external environment.

    A record of the discussions and the Chairperson's summing-up, together with these two reports, will be published in due course as the complete trade policy review of Fiji and will be available from the WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

    Since December 1989, the following reports have been completed: Argentina (1992), Australia (1989 & 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992 & 1996), Cameroon (1995), Canada (1990, 1992, 1994 & 1996), Chile (1991), Colombia (1990 & 1996), Costa Rica (1995), Côte d'Ivoire (1995), the Czech Republic (1996), the Dominican Republic (1996), Egypt (1992), El Salvador (1996), the European Communities (1991, 1993 & 1995), Fiji (1996), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 & 1995), Kenya (1993), Korea, Rep. of (1992 & 1996), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico (1993), Morocco (1989 & 1996), New Zealand (1990 & 1996), Nigeria (1991), Norway (1991 & 1996), Pakistan (1995), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic (1995), South Africa (1993), Sri Lanka (1995), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Tunisia (1994), Turkey (1994), the United States (1989, 1992, 1994 & 1996), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).

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    Over the past two days, the Trade Policy Review Body has conducted the first review of Fiji's trade policies and practices. These remarks, made on my own responsibility, are intended to summarize the salient points of the discussion; they do not substitute for the Body's collective evaluation and appreciation, which will be reflected in the minutes of the meeting.

    The discussion developed under three main themes: (i) macroeconomic and structural questions; (ii) general trade policy questions; and (iii) other specific areas of concern.

    In addition to questions raised during the meeting, several participants submitted a number of questions in writing. The representative of Fiji provided extensive replies to the questions and also undertook to provide further details in writing concerning specific issues.

Macroeconomic and structural questions

    Members highlighted Fiji's relatively slow economic growth in recent years and the challenge to Fiji in achieving more rapid, sustainable development. In this connection, questions were raised concerning the fiscal balance; progress in public enterprise reforms, which were welcomed, and the promotion of greater competition in the Fijian economy; the need for a transparent, stable basis for foreign direct investment; and remaining exchange and price controls. Members also raised issues concerning particular constraints on Fiji's development, such as questions relating to skill development, employment by ethnic and gender groups, and land tenure issues including changes to the Agricultural Landlord and Tenant Act.

    Members referred to the high dependency of Fiji's trade structure on a small number of products exported to preferential markets and the consequent effects that the erosion of existing preferences might have on Fiji's economy and trade. They asked how Fiji would adjust to such erosion and, in particular, on measures to increase domestic productivity and to diversify export products and markets.

    In reply, the representative of Fiji stated that Fiji's economic performance in the 1990s had indeed been modest; this was nevertheless an improvement over the volatile fluctuations of the 1980s. It should be remembered that Fiji has special features including a small market, frequent natural calamities and isolation from major markets; these made it difficult to emulate the growth rates of Fiji's Asian neighbours, although Fiji was drawing appropriate lessons from the economic progress of South East Asian countries.

    The Government recognized the need for fiscal consolidation and aimed to achieve a balanced budget by the year 2000, both by restraints on operating expenditures and improved revenue collection. Indirect taxes now accounted for 53 per cent of Government revenue, compared to 22 per cent from income taxes; this structure reflected a deliberate attempt to provide incentives for hard work and effort. Fiji's trade account was traditionally in deficit, reflecting in part the import of essential raw materials for the production process. The current account had however turned to surplus in 1996 and should remain so for the next three years. Fiji had also managed to keep its inflation rate low, at about 3 per cent at present.

    The representative noted nevertheless that Fiji faced a daunting task in the future: in particular, economic performance was not broad-based and domestic demand, especially investment, remained subdued. Measures were being taken to promote investment, including Parliamentary consideration of an Investment Bill, progress in resolving the constitutional and land-lease issues, incentives to promote hotel construction and a relaxation of exchange controls. He stressed that Fiji met the Article XIII requirements of the IMF, with no restrictions on current payments.

    The representative added that Fiji would continue to offer incentives to attract foreign investment and would also focus on improving the infrastructure such as roads and communications. A number of specific questions in the areas of foreign direct investment would require a more detailed response, which would be provided at a later date. He emphasized that there were no barriers to foreign investment in sugar-milling. He went on to note that the Public Enterprise Act was now in place, and implementation was being elaborated; he also indicated that several measures were being taken to promote human resource development and education. He emphasized that, while the Government aimed to abolish price controls, there was strong political and labour pressure for their maintenance.

General trade policy questions

    Members welcomed Fiji's moves since 1989 to more outward-oriented policies, with elimination of quantitative restrictions and reductions in the average level of tariffs. Some members drew attention to the slowing pace of tariff reform and import liberalization; they encouraged Fiji to continue progress on this front and in relation to deregulation. Members also noted the escalation of tariffs through stages of processing, remaining tariff peaks on such products as processed rice and motor vehicles, and the application of duties on beverages and tobacco that exceeded bound levels; they sought information on the future direction of tariff reforms and any particular sectoral focus.

    Some members asked about the importance of tariff revenue for Fiji in the light of its fiscal imbalance. In this context, some sought information on Fiji's policy regarding tariff exemptions and concessions, noting that there was substantial leakage of revenue through such measures, which could introduce additional distortions in the structure of protection.

    Questions were asked about industrial promotion measures, including the use of subsidies and export credits; questions were also posed regarding conditions of operation of Export Processing Zones, Tax-Free Zones and Tax-Free Factories.

    Members noted that although Fiji had as yet no legislation regarding trade remedies (anti-dumping, countervailing and safeguards), the Fair Trading Decree was to be modified to include anti-dumping measures. Some Members asked whether the Decree would also cover countervailing measures and encouraged Fiji to introduce WTO-consistent provisions; however, one Member pointed out that there was no obligation under WTO provisions to introduce such legislation.

    One Member asked if Fiji could ensure MFN and national treatment for foreign suppliers in government procurement and whether Fiji intended to join the relevant WTO Agreement.

    Questions were asked regarding Fiji's growing participation in regional trading arrangements, including SPARTECA and the Melanesian Spearhead Group. The question was asked whether Fiji expected such agreements to compensate for the loss of preferential access in other markets. Particular attention was also paid to the application of rules of origin under regional and preferential agreements and their effects on Fiji's trade.

    One Member and a discussant raised questions regarding the application of internationally recognized core labour standards in Fiji. A number of others stressed that, consistent with the Singapore Ministerial Declaration, such questions should properly be addressed in the ILO.

    In reply, the representative of Fiji stated that in past number of years Fiji had concentrated its efforts on trade liberalisation through the removal of licences and the reduction in tariffs. Tariff reform had slowed in recent years, in recognition of the fact that trade liberalisation needed to take place in concurrence with reforms in other sectors in the economy, including in labour and capital markets and the public sector. For the present, further tariff reductions would await the outcome of the Deregulation Policy Review, which had been commissioned following recommendations of the 1994 National Economic Summit.

    On more specific matters, the representative noted that the application of specific rates of duties on some commodities were an attempt to protect against revenue evasion by importers. All applied agricultural tariffs were below bound rates, with most at 22.5 per cent. The matter of reducing applied rates on alcohol and tobacco to their bound levels needed to be considered in the context of health, revenue and WTO timeframes. The high rates of duty on motor vehicles had been introduced to raise revenue, but were being reduced. Fiji intended to eliminate the disparity in the excise duty on locally manufactured cigarettes with imported tobacco and those with domestically grown tobacco. Licence control on butter was removed in 1995 and in 1997 Fiji removed concessions and import quota restrictions on powdered milk. Further questions on customs valuation matters, such as the confidential treatment on information and the importer's right to written explanations, were being addressed in the process of updating legislation.

    On regional and preferential arrangements, Fiji had sought a relaxation of SPARTECA rules of origin but had been unsuccessful. A bilateral arrangement with Australia and New Zealand was now being explored and was intended to assist Fiji's companies to ultimately adjust to an open, non-preferential trading environment. Fiji's bilateral arrangements with other South Pacific island countries were part of its overall policy to harmonize and liberalize trade on a regional basis. On wider regional interests, Fiji was watching developments with a view to aligning its trade reform with APEC policies. The representative also noted that Lomé and GSP discussions were now underway and that Fiji's position would be given at a later date.

    In respect of core labour standards, he emphasized that the ILO was recognized in the Singapore Ministerial Declaration as the competent body to set and deal with such standards; questions raised in this meeting should therefore be dealt with by the ILO.

Other specific areas of concern

    Members recognized the dependence of Fiji on a few sectors, including agriculture, garments and tourism. They saw an urgent need for diversification within the agricultural sector, in particular away from the present emphasis on sugar to encourage greater commercialization, diversification and increased efficiency of resource use. Agricultural policies should be geared to these ends.

    Members asked questions concerning Fiji's sanitary and phytosanitary (SPS) regulations; while these appeared compatible with the relevant WTO Agreement, specific issues were raised concerning imports of fruit, vegetables, flower seeds, foodstuffs, and various drugs and pharmaceuticals. More generally, one Member suggested that Fiji should, under the TBT Agreement, base its standards on international standards rather than those of major trading partners such as Australia and New Zealand.

    The relatively high level of tariffs on fish was noted. Questions were asked concerning Fiji's management of fishery resources and prohibitions on exports and imports under the Fisheries Act.

    Members posed questions regarding measures to encourage greater competitiveness in the clothing sector, which had increased its importance in exports.

    Members recognized the importance of the services sectors, particularly tourism and transport, to Fiji. The development of a new policy statement by the Fijian Government on services was welcomed and further information was sought on the scope and expected timing of the statement. It was noted that Fiji had not made an offer in the WTO Financial Services negotiations and the authorities were encouraged to participate actively in the resumed negotiations.

    On intellectual property, some Members welcomed the steps taken by Fiji to implement a new Copyright Act, consistent with the TRIPS Agreement; information was sought on the passage of the Bill through Parliament.

    In reply, the representative of Fiji said that a change in its SPS policy from zero to minimal risk had opened up the market for various agricultural products, including poultry, Written replies would be provided to the detailed questions on fisheries. Although structural changes in the sugar industry were being implemented, Fiji regarded the retention of trade preferences as necessary in the foreseeable future. He recalled that Fiji Sugar Corporation was not state-owned, although a majority of the shares were held by the Government; although FSC was the present sole buyer of sugar cane, there was no legal monopoly.

    He noted that diversification of agriculture, which was recognized as important, had to coexist with sugar, which was Fiji's most viable crop; diversification towards manufacturing was proceeding, but agriculture remained the mainstay of the economy.

    The Government was currently seeking to implement recommendations of a study on trading and skill development in respect of niche markets in the clothing sector. He continued that diversification of exports in the services sector was also important to the Government and that work towards a Services Policy was currently being undertaken.

    In the area of intellectual property rights, a draft Copyright Bill was now being examined in consultation with WIPO and was expected to be submitted to Parliament at the end of the year. Fiji was currently consolidating its request for technical assistance to align domestic intellectual property legislation with the TRIPS agreement.

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    Overall, Members welcomed the participation by Fiji in the review process, with a strong delegation led at Ministerial level. They welcomed the steps already taken by Fiji toward greater transparency in trade policy and the authorities' stated commitment to free and open trade, and encouraged Fiji to continue along the path of liberalization and deregulations. They emphasized the importance of diversification of the economy and the need for development to be pursued on a sustainable basis. The TPRB welcomed the answers given by Fiji to questions and looked forward to written replies on outstanding issues.