Fiji^[32]

1 Introduction

Fiji is a small, relatively isolated country, yet it has been able to provide its population with a reasonable standard of living. The current GDP per capita is around $US1 200, more than 90 percent of the population can read and write, life expectancy is around 72 years, infant mortality is 22 per thousand, and there is a reasonable level of food security. All this was put at risk with the armed takeover of Parliament in May 2000. Despite a return to constitutional government in September 2001, investment and economic growth levels remain low in the face of political uncertainty and a sugar industry in crisis.

The Fiji Islands have a total land area of approximately 18 400 km² made up of some 300 islands. The two largest islands make up 88 percent of the area. Approximately 16 percent of the land is suitable for arable agriculture, and a further 43 percent can be used for tree cropping and grazing.

Fiji’s generally benign climate is punctuated by climatic extremes in the form of hurricanes and floods and, more insidiously, drought. These climatic extremes have far-reaching impacts on land-use patterns. There have been around 136 cyclones recorded in the Fiji group over the last 120 years. From time to time, extreme drought conditions prevail. The worst drought of the century occurred in 1997/98.

Fiji’s population is about 800 000, with indigenous Fijians making up about 51 percent. Indo-Fijians (mainly the descendants of indentured labourers brought to work on the sugar cane plantations) account for some 44 percent of the population. The population growth rate is less than 1 percent per annum. The average population density is not high by world standards. However, it is distorted by a land tenure system that created substantial inequities in the distribution of land. Fiji is rapidly evolving from an agrarian to a semi-urban society, with almost half the population living in urban or peri-urban areas. The decline in the rural population has been greatest in the outer islands and sugar cane areas.

1.1 Structure of the agriculture sector and contribution to the economy

The contribution of the agriculture sector to total GDP has declined from 19 percent in 1989 to 10 percent in 2001 and has been surpassed by tourism and textiles. The foreign exchange earnings of the agricultural sector have remained fairly constant in real terms over recent decades, and the sector remains the main source of employment. Despite substantial government and aid expenditure in various agricultural development projects, the overall pattern of production has changed little. The structure of the various agricultural subsectors, their performance and contribution to the economy are presented in Table 1.

Table 1. Overall analysis of the performance of the Fiji agricultural sector and contribution to the economy

Source: Derived and updated from ADB (1996).

1.2 Sector performance over the last two decades

Traditional food crops

An impressive quantity and range of traditional food crops are grown in Fiji. These are grown throughout Fiji and are identified as a “hidden strength” of the economy (Asian Development Bank [ADB], 1996). Yet, only 40 percent of energy needs come from locally grown food (FAO, 1999, p. 6). Food imports are still relatively low when compared with other small island developing states (SIDS). These imports have fallen slightly as a percentage of total imports over the last decade despite deregulation. This suggests that food supply has been able to expand to meet increases in demand from a rapidly growing urban population. Government’s investment in roading has been a major contributing factor to this process (ADB, 1996, p. 4).

The contribution of subsistence production to GDP is similar to that of sugar (average of 40 percent of total agricultural GDP at current prices) as shown in Figure 1. Farming systems and the crops grown have not changed over the last two decades. From a policy viewpoint, the nation’s food security is dependent on the continuation of subsistence farming and its ongoing transformation to semicommercial farming of crops for which Fiji has a competitive advantage.

Figure 1. Percentage of agricultural GDP by activity (current prices at factor cost).

Source: Fiji Bureau of Statistics.

Sugar

The sugar industry remains of fundamental importance to the economy. Cane occupies over 50 percent of arable land, and the industry directly employs 13 percent of the labour force, contributes around 9 percent of GDP and generates some 30 percent of total domestic exports (ADB, 2000). The import leakage from growing and processing cane remains relatively small, and because of its small farm structure, the multiplier linkages are more favourable than for most other foreign exchange generating industries.^[33] The industry, and thus the Fiji economy, is now facing a major crisis. Production is being severely affected by the nonrenewal of the leases of many Indo-Fijian tenant farmers. There is also price and quota uncertainty regarding sugar sold to the EU under preferential arrangements.

Traditional tree crops

Copra, the traditional cash crop of the outer islands, has experienced continuing decline over the last few decades. Several attempts to diversify the industry have been made, but with little success. Copra production varies with price, but the trend continues to be downward. Much of the area under coconuts has now been abandoned. Cocoa, promoted as a major diversification crop with substantial government funding, has all but disappeared.

Horticultural exports

The situation for horticultural export crops is more encouraging. This entirely small farmer-based subsector includes ginger, tropical fruit, root crops and vegetables. Horticulture is now, after years of disappointment, the fastest growing part of the agricultural sector. However, it is being impeded by unreasonable quarantine constraints of importing countries. Fruit exports would have been significantly greater had the Australian market not remained closed to fruit fly host products. The continued growth in niche horticultural exports has confirmed the competitive advantage of this area of Fiji’s agriculture, although this has not been anywhere near sufficient to offset the accelerating demise of the sugar industry.

Import substitution products

For many years, Fiji’s import substitution industries (rice, dairying, poultry, beef, pork and tobacco) were protected by a complex array of quotas, tariffs and subsidies. Since the early 1990s, de-licensing has widened, and there has been a gradual reduction in the overall level of tariff protection. These reform measures have not had the significant adverse effect on the import substitution industries that was expected.

1.3 Policy changes and programmes over the last two decades

Policies of import substitution and direct government investment in agricultural development projects were vigorously pursued during the two decades following independence in 1970. The costs of this approach were high and the production gains unsustainable.

The import substitution policy focused on growing local food to directly replace products that were imported: rice, beef, dairy, poultry and feed grains. There was also a drive to develop new commodity exports, notably cocoa. Not only did government set the policy, but it provided project managers, extension and administration staff to implement these projects. The role of farmers (the private sector) was merely to respond to the benefits provided and increase production.

To reduce competition from imported food, and to enable local producers to “get a fair return for their labour”, imports were restricted either by tariff or by licences. Government also became involved in the processing and marketing of some products (rice and cocoa) to fill the perceived gap in the marketing of agricultural produce.

In 1989, there was a major shift in national economic policy, with a broad range of economic reforms being adopted. These reforms were aimed at reducing the cost of business, providing flexibility in pricing, and exposing domestic firms to international pricing. There was a switch from licensing and import controls to tariff protection with a gradual reduction in tariffs. Import licensing controls were removed on 34 food items, and the overall level of tariff protection was reduced. The monopoly status afforded the National Trading Corporation, a marketing parastatal, was withdrawn.

Deregulation represented a fundamental change for the agricultural sector after decades of protection and government-led investment projects. The private sector, which had grown dependent on government, suddenly found itself faced with unfamiliar responsibilities. The private sector (farmers, processors and exporters) now had to lead the way and set the course for the sector (which crops, which markets). Overall, the sector has responded positively to the opportunities offered.

The 1996 ADB Agricultural Sector Review attributed the improved performance of the agricultural sector to the move towards private sector-led agricultural development. The findings of this Sector Review were embodied in Fiji’s 1999 Strategic Plan, which had as its agricultural policy objectives:

• accelerate agricultural diversification in areas of competitive advantage (high value niche exports and traditional food crops);

• private sector-led development of the sector, with Government and other agencies playing a facilitating role;

• privatize public enterprises directly involved in the sector.

Despite the apparent success of the new policy direction, the late 1990s saw a major policy reversal back towards “government-led” agricultural development. A ministerial change saw government embark on a four-year investment programme, known as the Commodity Development Framework (CDF). The rationale for this large increase in public expenditure was to “jump start” the sector which was perceived as providing the best opportunities for employment opportunities. The CDF programme was highly controversial both inside and outside government. The value of any attributable increase in output has been nowhere near the level of expenditure on the CDF programme, let alone the $F1.71 billion increase in export earnings projected by the end of 2000.

A new government took office in May 1999, with a manifesto to restore protection to the rice industry. A programme of quantitative restrictions, increased tariffs and input subsidies was formulated. The government was overthrown in May 2000, before most of this programme was implemented. Following the intervention of the army, an Interim Administration was installed, and new elections were held in September 2001.

In the lead-up to the 2001 elections, the Interim Administration embarked on an interventionist agricultural policy similar to that of the CDF programme. The focus was on indigenous Fijian villages in politically sensitive areas. The justification of this new programme, known as the Farm Assistance Scheme (FAS), was “affirmative action” to uplift the economic well-being of indigenous Fijians. An estimated $F25 million was spent on the distribution of free inputs to mainly village farmers. These ranged from planting material for taro to chainsaws and outboard motors.

The new elected Government has indicated that it wishes to continue its policy of “affirmative action” through its FAS programme - albeit with tighter financial control. Government has also indicated that it wants again to be actively involved in agricultural marketing for village farmers. The Minister of Public Enterprises, in his maiden speech to Parliament, outlined government’s plans to rehabilitate the National Trading Corporation as part of this programme.

1.4 Fiji’s participation in regional and international integration efforts

Fiji has been an active participant in regional integration efforts, commencing in 1981 with the South Pacific Regional Trade Cooperation Agreement (SPARTECA). SPARTECA is a preferential non-reciprocal agreement between the Forum Island Countries and Australia and New Zealand. Specified commodities are allowed duty-free access into the Australian and New Zealand market without quantitative restrictions. SPARTECA has not provided any significant benefits for agricultural exports, as competing countries also have duty-free access. The main barriers to agricultural trade with Australia and New Zealand have been quarantine barriers.

In 1996, Fiji joined the Melanesian Spearhead Group (MSG), which is a trade agreement between Papua New Guinea, Solomon Islands, Vanuatu and Fiji. The MSG provides duty-free access into these markets for over 150 items. In 1998, Fiji entered into a trade agreement with Tonga, which provides reciprocal dutyfree access for around 50 items. Sugar from Fiji and onions and vanilla from Tonga are covered by the agreement. Fiji has been a prime mover in the formation of a free trade area (FTA) among all the Pacific Island Countries (PICs). Most of the benefits would accrue to the much more diversified Fijian economy, with its generally lower tariff structure.

Fiji is a signatory to the Cotonou Agreement, which was signed between the EU and ACP states in 2000 to extend the Lomé Convention until 2007. The EU has obtained a waiver from WTO for the Lomé extension. From 2007, trade preferences between ACP states and the EU will be reciprocal under free trade agreements. Fiji is a significant beneficiary of the Lomé Convention’s Sugar Protocol. Under the Sugar Protocol, Fiji has a 174 000 tonne quota for sugar sold to the EU. The price obtained for this sugar is pegged to the intervention price paid to EU growers. Over the last two decades, this price has been two to four times world market prices (representing an average net transfer of about $F90 million annually to the Fiji sugar industry).

Fiji became a signatory to GATT on November 1993 and a full member of the WTO on January 1996. The first Trade Policy Review Mechanism review was in 1996, and a second review is now due.

2 Experience with implementing the WTO agreements

2.1 Market access

During the 1970s and 1980s, a range of tariff and quantitative trade restrictions protected Fiji’s import substitution industries. The first step in dismantling this system began in 1989, when import licensing controls were removed on 34 food items. Fiji, at accession to WTO in 1996, opted to offer ceiling bindings rather than tariffication. It chose a single bound rate of 40 percent for all agricultural products except for rice and milk powder (bound at 60 percent - to be reduced to 46 percent by 2005).

By 1994, all licensing on agricultural products was removed and replaced by tariffs. At that time, most non-protection tariffs were set at 10 percent and most protection tariffs at 20 percent. An exception was white rice, which had a protective tariff of 40 percent. These high tariffs for rice were designed to provide farmers with some continuing protection and to protect the brown rice-milling industry. At the same time, all agricultural inputs were allowed to enter duty free or were subject to only a 10 percent duty.

The tariff structure was simplified and reduced in subsequent national budgets. By 1999, the maximum ad valorem tariff was set at 27 percent (e.g. whole milk). The numbers of tariff bands were also reduced from seven to four in the 1999 Budget (0 percent, 3 percent, 10 percent and 27 percent). Since 1992, all imports have been subject to a 10 percent value-added tax.

In recent years, there has been some backsliding in tariff levels in response to pressure from local manufacturers. The 1998 Budget saw the protective tariff on many locally manufactured items increased to 35 percent. The current average general level of tariff was 27 percent, with most agricultural products set at 15 percent. Some dairy products were set at 27 percent. The 2002 Budget saw the tariff on meat products increased from 10 percent to 27 percent. However, all the applied tariffs on agricultural and food items lie well within Fiji’s bound rates. The current tariff rates that apply to agricultural products are shown in Table 2.

Table 2. Applied agricultural tariff rates (%)

There has also been some backsliding with respect to licensing. The Labour Government re-imposed licensing on brown rice in its 2000 Budget, which was again removed by the Interim Administration. Licensing has also been used as an instrument to encourage indigenous Fijian business participation, as was the case of the importation of United States chicken in 1995. A 1 600 tonne import quota was set for US chicken, with import licences only being given to indigenous Fijians. This discriminatory measure was inconsistent with Fiji’s WTO commitments (para 2 of Article 4 of the AoA). The current government has given notice that licensing might be used as a measure in its “Affirmative Action” programme.

Fiji enjoys duty-free access for all its agricultural exports to its most important export markets Australia and New Zealand. Prior to the UR, Fiji faced no quota restrictions on agricultural exports, though the volume of sugar exports to the EU at preferential prices is fixed. The UR saw no change in the arrangements for sugar.

2.2 Domestic support

Fiji did not make any domestic support commitments in its schedule of AoA commitments and thus must limit support in future to Green Box and de minimis levels. Fiji currently has very low levels of domestic support as agricultural subsidy (well below the 10 percent de minimis Aggregate Measure of Support). Although Fiji had a range of input subsidies to encourage production of rice, cocoa, copra and dairying in the 1970s and 1980s, most of these subsidies were removed in 1992. All of Fiji’s non-price distorting support is notified under the Green Box procedure (Kunatuba, 1998, p. 4).

Although the return to “government-led” agricultural development under the CDF and FAS Programmes remains highly controversial within Fiji, it is unlikely to have violated Fiji’s commitments under the AoA, as these programmes satisfy the general requirements for Green Box measures. These farmer support programmes have involved income transfers to largely village-based producers and have not been linked to production. These programmes have not been based on, or linked to, current prices, or the prices of other factors of production. While increased production was seen as an objective of these programmes, it has largely not been realized.

The Ministry of Agriculture’s ongoing programme in research, extension and quarantine is exempt from any reduction commitments. Regrettably, since 1997, there has been a reduction in these core services, with the Ministry’s financial resources diverted to CDF and FAS.

At the end of the 1998 season, the sugar industry had endured a “100-year drought”. A US$43 million rehabilitation programme was initiated, with US$23.7 million coming as a Government grant. Disaster relief is permitted under the Green Box provisions, where production has declined by at least 30 percent compared with average of the previous three years.

The Green Box provisions allow for regional assistance programmes. Payments can be made to overcome difficulties faced by producers in disadvantaged areas. One of the main rationales for CDF and FAS is that village-based farmers are a disadvantaged group. The FAS is now part of the Government’s “Affirmative Action” Policy.

Fiji faces little difficulty, even with CDF and FAS, in meeting its commitments under the current total Aggregate Measure of Support (AMS). Existing WTO provisions are not seen as a constraint to Fiji in pursuing its agricultural policy objectives. However, there are implementation difficulties, which could be a significant constraint in the future. WTO members are required annually to notify the WTO Committee on Agriculture on the extent of their domestic support - this includes all Green Box, SDT and de minimis levels of support. Fiji has made no notification since its accession to WTO in 1996. This is mainly due to the lack of technical capacity to undertake this onerous task. It is important that Fiji look at this as a priority strategic exercise, otherwise its options in the current negotiations will be limited.

2.3 Export subsidies and export competition

Fiji has never used export subsidies as a policy instrument. Thus, it has no commitments to reduce these subsidies.

The Fiji Islands Trade and Investment Board (FITB) has offered, since the early 1990s, attractive fiscal incentives to export-oriented businesses. As a part of the 1996 Budget, businesses producing primary agricultural products for export became eligible for 13-year export incentives renewable for a further five years. In January 2002, the FITB published a new set of incentives for investing in the Fiji Islands, in which enterprises involved in exports are allowed deductions from total income for taxation purposes. As yet, only a small number of agricultural investors have sought out these incentives, and an even smaller number proceeded with the project for which the incentives were granted.

2.4 Sanitary and Phytosanitary Standards

Most of Fiji’s horticultural export markets were closed with the loss of the chemical EDB as a quarantine treatment in 1990. Fiji was proactive in addressing this technological constraint. An ambitious project to acquire HTFA quarantine treatment technology was embarked on with USAID assistance. Today, Fiji has a viable industry-operated quarantine treatment facility and a thriving industry in the export of fruit fly host commodities. Unfortunately, Fiji’s initiative in adopting the necessary technology to facilitate exports has not been matched by the regulatory authorities in the importing countries.

It was expected that the harmonization (Article 3) and equivalence (Article 4) provisions in the Agreement on Sanitary and Phytosanitary Standards (SPS Agreement) would result in the opening up of markets for Fiji’s fruit fly host products. In two areas in particular, it was anticipated that the SPS Agreement would apply:

• the broad adoption of the New Zealand methodology for determining whether a product is not a fruit fly host;

• the acceptance of HTFA quarantine treatment by Australia and the US.

Unfortunately, these expectations are yet to be realized.

The New Zealand non-host methodology, based on an experimental procedure, does not require sampling of large quantities of fruit. The sampling requirements to meet the standard of other importing countries make it prohibitive for a small export industry. Using the New Zealand methodology, it has been shown that a range of fruits are non-fruit fly hosts in Fiji. As a consequence, bilateral quarantine agreements have been negotiated for the export of chilies and cucurbits to New Zealand without quarantine treatment. Fiji, and other PICs, has a strong case for general acceptance of the New Zealand non-host methodology. After all, New Zealand has no fruit flies, and horticulture is the major export industry. However, whether these small countries have the expertise and resources to see the successful outcome of such a case is another matter.

With the re-commencement of papaya exports to New Zealand in 1996, it was assumed that exports to Australia would soon follow. The Australia papaya market was estimated to be four times larger than that of New Zealand and provided a market basis for developing a substantial export diversification industry. Australia is yet to approve HTFA treatment for Fiji papaya, despite this being a likely violation of the SPS Agreement (harmonization and equivalence). Fiji is unlikely to have the expertise or resources to mount a successful WTO challenge against Australia. Also, since May 2000, Fiji has been in a politically weak position to mount such a challenge. Fortunately, the issue seems to be moving towards a satisfactory resolution without having to resort to international law. In 2001, an Australia Quarantine Inspection Service (AQIS) officer finally visited Fiji to inspect the HTFA facility and the papaya growing and marketing system. A draft protocol has now been prepared for submission to the stakeholders for their comment.

USDA, surprisingly, has also not as yet accepted HTFA treatment for fruit transhipped through Hawaii to Canada. HTFA is US technology, developed originally for papaya, which was transferred to Fiji under a USAID programme. In June 1999, the United States Department of Agriculture Animal and Plant Health Inspection Service sent a team to Fiji to inspect the HTFA facility. Approval is yet to be given.

Market access problems with Australia and New Zealand in recent years have been compounded by the adoption of new pest risk assessment and industry consultation procedures. In the case of Australia, this access has been made even more arduous by the lack of clear guidelines on requirements.

New Zealand has also introduced new and more complex pest risk assessment procedures. Complete and up-to-date pest lists are now required for a commodity before a bilateral quarantine agreement (BQA) can be negotiated. The cost of a complete pest list that meets New Zealand requirements poses a major problem for minor products. One such product is cut flower dendrodium orchids, which pose no obvious quarantine risk to New Zealand. The Strategic Plan of the Fiji Floriculture Council illustrates the problem. It highlights the vulnerability of small export industries to the vagaries of the quarantine procedures of larger importing countries, compounded by a weak domestic quarantine service.

Australia’s quarantine restrictions have not only impacted on fruit fly host material. For example, southern Australia potentially offers a sizeable market for Fiji ginger. However, these imports are not permitted on quarantine grounds. Such restrictions are difficult to understand, given that Fiji exports fresh ginger to Hawaii, which in turn is a major distributor of fresh ginger to North America.

Fiji Quarantine Service has had difficulty in meeting the increased demands placed on it by the SPS Agreement. The 1996 ADB Agricultural Sector Review foreshadowed what would be expected. To quote:

Fiji has become signatory to the WTO, which places the onus on scientific justification for phytosanitary measures. Yet the service is having difficulty satisfactorily meeting current requirements as shown by the ongoing problems of eggplant shipments to New Zealand and chili and mango exports to Australia. Increasing numbers of BQAs will need to be negotiated and enforced, regulatory supervision of the operations of the HTFA facility is required, quarantine rules and regulations that minimise risk but facilitate trade and allow farmers access to improved seeds need to be formulated and implemented; and, public awareness on the need for quarantine developed. (p. 13)

By and large, Fiji Quarantine has not met this challenge. The greatest weaknesses are in timely export protocol development and in establishing efficient pest risk assessment mechanisms for importing planting material. A recent review of the HTFA facility noted:

A more than 5-year delay in the approval of HTFA treated papaya can be blamed on the AQIS ... However, part of the responsibility lies with Fiji Quarantine and their inability to proactively engage AQIS and to supply data in a timely fashion. Eggplant data have not yet been sent to AQIS to at least initiate the long approval process. A whole season of breadfruit exports was lost waiting for Quarantine to put a breadfruit pathway in place. (p. 21)

Only seed sourced via New Zealand and Australia has ready access to Fiji. The Quarantine Service has continued to rely on the technical capability of these countries to vet the phytosanitary safety of imported planting material. Thus, vegetable farmers have not benefited from direct access to improved seeds from suppliers such as Taiwan. Fiji Quarantine’s inability to undertake informed pest risk assessments has also denied the newly emerging floriculture and herb export industries ready access to the best available planting material. The Fiji Floriculture Council highlights the constraints faced:

There are major inconsistencies in quarantine requirements and procedures for the commercial importation of floriculture planting material. For example, in 1997 a permit was issued to a Fiji company to import anthurium-planting material from the world’s largest supplier based in Holland. The very strict and demanding protocol under which these plants were imported took nearly 2 years to negotiate. Yet, anthurium plants from Australia can be imported into Fiji virtually without restrictions. It is the view of the Fiji industry that this imposes a far greater disease risk than imports from leading nurseries in Holland. (Floriculture Council of Fiji, 2000, p. 23)

In summary, the agonizingly slow progress of quarantine approval process for Fiji products can be explained in part by the fact that these are minor products from a small politically weak country. They are given low priority when it comes to allocating scarce resources to pest risk assessments. However, Fiji has not been sufficiently proactive in pushing the process along among quarantine officials in importing countries. Industry complains that the Ministry of Agriculture, Forests and Fisheries - Fiji (MAFF) has been slow in supplying data required by importing countries, and when it is finally supplied, it is not presented in the required format. In hindsight, MAFF Quarantine could have benefited from technical assistance in the preparation of submissions to importing country’s quarantine authorities. Fiji has taken on the commitments implied by the SPS Agreement, without the supporting changes in human resources and institutional structures. Belatedly, a major technical assistance and training programme is required to allow the necessary changes to be made. Making the necessary structural changes will require a political commitment on the part of government.

The Permanent Secretary of Agriculture sums up the disadvantage faced by small countries like Fiji in applying the SPS Agreement:

The WTO places the onus on all member countries to provide scientific justification for sanitary and phytosanitary measures used to block trade, through the Agreement on Sanitary and Phytosanitary Measures. Yet proving whether quarantine restrictions are actually being used as a barrier to trade is very difficult. Fiji is yet to make use of the WTO dispute settlement procedures, although it appears to have good grounds to do so. Fiji is currently requesting technical assistance from New Zealand authorities, with funding from various donors. However, for successful quarantine agreements to be reached, there needs to be good will and cooperation between all sides. Fiji’s experience has been that this cooperation is sadly not always forthcoming. (Kunatuba, 1998, p. 9)

2.5 Safeguard measures

Fiji choose ceiling bindings, and so it does not have the right to use SSGs. Nor have the SSGs of other countries had any impact on Fiji’s agricultural exports.

General safeguards (anti-dumping, subsidies and countervailing measures, emergency safeguards, etc.) are necessary, given the volatility of agricultural trade for small developing countries like Fiji. However, extensive procedural requirements and conditions make these mechanisms difficult to use. Fiji is yet to introduce anti-dumping legislation in line with the Uruguay Round Agreement on Agriculture, owing to a lack of technical capacity and resources. Kunatuba notes “The implementation of these procedures will prove difficult for Fiji, which has only limited legal capacity and no permanent representative in Geneva” (p. 10).

2.6 Food safety and quality

Codex Alimentarius determines quality standards for food. Most of Fiji’s larger food processing enterprises conform to these standards. However, some smaller food processing and handling operations do not. Fiji does not have the financial and technical resources to enforce Codex compliance on these enterprises. Thus, because there is not total domestic compliance, it has not been possible to enforce Codex standards on imports, which leaves Fiji vulnerable to the dumping of poor quality foods.

The constraint of Codex Alimentarius in allowing Fiji to deal effectively with food import quality issues is shown with meat products, particularly sheep meat from New Zealand. The PICs represent a market of US$30 million for these lowgrade meat cuts. This meat poses a major health problem because of its high fat content. The Labour Government, concerned with the health consequences of poor-quality sheep meat imports, imposed a ban on mutton flaps imports in the 2000 Budget. New Zealand meat exporters have argued that such bans are not legal under WTO. Should this prove correct, the AoA has serious health consequences for lower income segments of the community. To quote a recent Fiji Times article:

Concern was raised yesterday over the importation of fatty off-cuts of lamb and mutton into Fiji. An AFP news report from Auckland suggests that the ban on such products was lifted after the May 2000 coup. The report said that New Zealand had over the years exported the more expensive cuts to Europe and for its own markets while the chunks of mainly bone and fat ended up in the Pacific island countries. The report said the addiction to such products was now starting to have serious and diplomatic consequences across the region. Health Minister Pita Nacuva said as far as he knew the ban on such products, including lamb and mutton flaps, was still in place. “If the ban has been lifted then I am really concerned” he said. “Those products are not good for the health and has been a contributing factor to a lot of illness in Fiji”. (Fiji Times 25 March 2002)

2.7 Trade-related intellectual property rights

The TRIPS areas of concern to Fiji are the commercial uses of traditional products. Examples of the commercial exploitation of traditional products by multinational pharmaceutical companies are kava (Piper methysticum) and kura (Morinda citrifolia). There is still no intellectual property rights legislation in Fiji. The Permanent Secretary of Agriculture notes “this is another area where Fiji needs to catch-up and take-stock before entering into more trade reform” (Kunatuba, 1999, p. 10). Fiji not only faces the task of drafting and obtaining parliamentary approval for new TRIPS-compliant legislation - there are other issues that need to be dealt with. For example, Fiji also needs the legal expertise and resources in a number of fields to amend, develop and enforce new legislation. Over the last year or so, Fiji has had other immediate constitutional and legal priorities to contend with.

3 Review of food and agricultural trade

3.1 Exports

Fiji’s agricultural and food exports for the period 1985-2000 are shown in Table 3. To assist with the interpretation of these export flows, real and nominal exchange rates are also presented. These data show no discernible impact of the AoA on Fiji’s agricultural exports. Individual food commodity exports are discussed briefly below.

Table 3. Fiji’s agricultural and food exports, 1985-2000

Source: Fiji Bureau of Statistics, Trade Statistics, Key Statistics, Current Economic Statistics (various issues); MAFF Annual Reports; Natures Way Cooperative (Fiji) Ltd; Fiji Ginger Industry Council.

Sugar

Sweeteners (cane sugar and related products) overwhelmingly dominate food exports. In recent years the value of these exports has ranged from 20 to 30 percent of total exports and around 70 percent of total food exports. For the 15 years commencing in 1985, sugar production and export earnings have oscillated widely, with no discernible trend. However, from 2001 onwards, a downward trend is expected as the impact of the non-renewal of leases to Indo-Fijian farmers is increasingly felt. This downward trend is likely to be accentuated with the declining real value of the preferential price received for sugar sold to the EU.

The wide fluctuations in sugar production and revenue until 2001 have been almost entirely weather induced. There was a major drought in 1987 and a “100- year drought” in 1997-1998. There has been a much smaller price variation over the period. Fiji has a 174 000 tonne quota under the Sugar Protocol of the Lomé Convention, which normally accounts for about 40 percent of production. The price received for this sugar is pegged to the raw sugar intervention price paid to EU growers. This intervention price has remained fairly constant over the last decade or so. There has been a small but declining preferential quota for sugar sold to the United States. The remainder of Fijian sugar is sold to various markets at prices determined by the world market.

The UR led to no change in the world sugar trade regime. Fiji could have expected to benefit from an increase in world market prices had trade liberalization occurred. This would have gone some way to offset any loss of EU preferences. The export of the EU’s chronic sugar surpluses, in particular, has had a major dampening effect on world prices. A wider free market for sugar, which is not a dumping ground for residual production, could be expected to lead to more stable and higher world market prices. Reform of the world sugar economy remains a major area of unfinished business for WTO. Unfortunately, the Fiji industry, in the face of declining production and efficiency, is unlikely to be a beneficiary of sugar trade liberalization when it occurs.

Copra

Copra is the traditional cash crop of the outer islands. Copra production varies with price, but the trend continues to be downward. Much of the total area under coconuts has been abandoned, and there has been virtually no replanting. World prices for coconut oil have been generally unfavourable, and the financial viability of the sector has relied on government price support. A number of attempts to diversify the industry have been made, but with little success. The occasional improvement in copra prices has led to short-term upturns in production with producers having an incentive to gather more of the nuts available. Cyclones and droughts also have an impact on production.

The AoA has had no impact on the copra industry. A free market existed for copra and coconut oil prior to 1995. The largest market for coconut oil is the EU, where no preferential arrangements are on offer. The only other market for copra outside Europe is Bangladesh, which purchased at world market prices.

Cocoa

Cocoa exports achieved a high of some 400 tonnes dry beans in 1990. Since then, the industry all but collapsed in the face of low grower prices. The single parastatal exporter policy was abandoned in 1993, together with government price support. Since then, the private sector has developed niche markets in Australia, New Zealand and the United States. These markets operate independently of the world market and have not been influenced by the AoA.

Fish

Fish products are now firmly established as Fiji’s second major food export earner. The two main product streams are fresh tuna exported to Japan and canned tuna sold to the EU. Under Lomé (and now Cotonou) Agreements, ACP canned tuna enters the EU duty-free, compared with a 24 percent duty incurred on tuna from Thailand, Philippines and Indonesia. Grynberg and White (1998) note that this preference has been crucial in overcoming the disadvantages of location, size and attendant size structure (p. 68). Fortunately for Fiji, the AoA does not cover fish products.

Fiji’s small private exporters have been successful in developing a wide range of niche exports. More significant examples are fresh ginger to North America, papaya to Japan, taro to New Zealand and the United States, breadfruit to New Zealand, eggplant to Canada and New Zealand, coconuts to Australia, organic banana purée to France, cut flowers to Canada and kava to Germany. None of these products receives any protection on the domestic or international markets. All these market niches taken together represent a significant degree of export diversification and represent the future for Fiji’s agricultural exports.

Taro, until recently, was almost entirely a subsistence or locally traded crop. Starting from 1994, taro exports have grown rapidly to become Fiji’s second largest agricultural export earner (excluding fish). The trigger was the decimation of Samoan taro by disease. In 2000, 8 400 tonnes were exported for an f.o.b. value of US$13.9 million. The market is Pacific islanders resident in New Zealand, Australia and the United States. AoA cannot be considered as a contributing factor to this development.

Ginger exports date back to the 1950s, with shipments to New Zealand. Exports to North America commenced in the late 1960s, where a seasonal niche market proved to be highly profitable. Fiji was virtually the only supplier of ginger to North America in the second half of the year. Fresh ginger exports peaked in 1986 at 2 356 tonnes. Since then, the fresh export industry has been in steady decline in the face of competition. In 1999, the industry produced 551 tonnes for fresh exports and 1 500 tonnes for processing, from a harvested area of approximately 90 ha (Fiji Ginger Council). This decline can be explained by a combination of factors unrelated to the AoA.

Kava (piper methysticum) is a traditional beverage crop. The post-independence period has seen rapid growth in the social use of kava. During the 1980s and early 1990s, kava exports enjoyed steady growth. Sales were mainly to the Pacific islanders’ beverage market, with some shipment to Germany for pharmaceutical uses. The value of kava exports in 1994 totalled around US$2 million. In 1998, there was an explosion in the international demand from the pharmaceutical and herbal markets, where it had been identified as a non-addictive alternative to benzodiazepines. The value of kava exports in 1998 reached US$36 million, up from US$3.4 million the previous year. Kava’s spectacular performance in 1998 raised hope that a diversification crop that might approach the importance of sugar had been found. However, by early 1999, there was a substantial decline in export prices. Hopes of a major diversification crop were further dashed in 2001 when Germany placed a ban on kava imports. The ban has been based on claims that capsules containing kavalactons might cause liver cancer. Even if clinical tests do not substantiate these claims, the market damage has already been done. Such was the case with coconut oil two decades ago in the face of claims by the soybean industry.

The roller coaster experience of the kava industry is not related to the AoA. However, it does show the vulnerability of small island exporters to adverse health claims made by competing industries in industrial countries. These small countries do not have the financial and technical resources to defend themselves against these assertions. Irrevocable damage can be done in the eyes of consumers, even if claims subsequently can be refuted. Any future AoA needs to provide some protection and resources to level the playing field for small developing countries in addressing the health claims of industrial countries.

Fresh fruit, particularly papaya, has been promoted as a major diversification crop since the early 1980s. Optimistic projections were based on the excellent growing conditions for papaya and identified markets. The achievement during the 1980s was well below expectations. After numerous disappointments, the fruit export industry is beginning to takeoff. The main constraint has been quarantine. With the certification of an industry-owned and operated HTFA fruit fly quarantine treatment facility in 1996, this constraint was effectively removed. In 2000, the facility treated nearly 1 500 tonnes of produce (papaya, mango, eggplant and breadfruit). It is projected that this will increase threefold over the next five years (Nature’s Way Cooperative). The AoA should have been a facilitating factor in expanding Fiji horticultural exports, by prohibiting the use of quarantine restrictions as a trade barrier. However, this has not proven to be the case. Fiji’s application to Australia for the export of HTFA-treated fruit has now been pending for six years.

Eggplant, once a minor export product, has become Fiji’s major horticultural export. Previously, the market for Fiji eggplant was narrow, being principally Auckland in the winter when no locally grown eggplant was available. HTFA treatment has greatly enhanced shelf-life compared with the previously chemically treated fruit. Eggplant shipments are now year-round, resulting in more than a fivefold increase in sales. While the Fiji community remains the foundation of the New Zealand eggplant market, sales are now being made to the broader market. Canada and Australia also have large Indo-Fijian communities, which provide large markets. Yet, as with papaya, USDA and AQIS approval for HTFA-treated fruit is still to be obtained.

Processed fruit exports have also made significant progress. Purées (banana, guava, mango) have expressed strong growth in recent years, which cannot be attributed to the AoA. Currently, around 1 000 tonnes of frozen product are being exported to markets in Europe, Australia, and New Zealand. These products recently acquired organic certification, enhancing their marketability. Fruit for processing is supplied entirely by village-based growers. Overall, the AoA cannot take direct credit for the growth in Fiji non-traditional exports. However, it can be argued that the provisions of the AoA enhance security of access to these markets by guaranteeing that arbitrary import restrictions cannot be introduced in the future, which could facilitate further growth.

3.2 Food imports

The total food imports over the period 1988-2000 are presented in Table 4. Food imports as a percentage of total imports and as a percentage of food exports are plotted in Figure 2. Fiji has a low level of self-sufficiency in terms of the production of major food commodities; in 1994, only 39 percent of energy was derived from local foods (FAO, 1999, p. 6). Yet food imports as a percentage of total imports have remained remarkably constant over the last 20 years, averaging less than 15 percent. The level is somewhat higher than for all developing countries (just under 10 percent for the period 1994-1996). However, if adjustment is made for country size, this is a much more creditable performance. Samoa and Tonga’s food imports as percentage of total imports over the period 1994-1996 were 26 percent and 24 percent, respectively (Sharma, 1999, p. 11).

Table 4. Fiji food imports, 1988-2000

Source: Bureau of Statistics, Key Statistics (various), Current Economic Statistics (various).

Food imports as a percentage of food exports oscillated between 40 and 60 percent, with no discernible trend. The ratio of food imports to total merchandise exports (an indicator of a county’s ability to import food) stands at about 20 percent, having fallen in recent years. This ratio is much lower than other PICs, but somewhat higher than for developing countries as a whole (Sharma, 1999, p. 11). Controlling for size, Fiji has performed well in terms of this food security indicator. The years 1998 and 1999 saw a large increase in the ratio of total food imports to total food exports. This was the result of severe drought conditions, which substantially reduced food exports.

The AoA has had no discernible impact on food imports, as shown by the nominal and real value of food imports for the period 1993-2000 (Table 5). There was some upsurge in food imports in the period immediately following deregulation. However, the real value of food imports has declined over the period 1996-1999. There was again an increase in food imports in 2000 as a result of disruption to domestic food supplies as a result of the political crisis. The increase in the overall price of food over the period 1993-2000 has been slightly below that of the overall consumer price index.

Table 5. Real and nominal value of food imports

Source: Bureau of Statistics.

Cereals, particularly rice, dominate Fiji’s food imports. For the period 1993-1995, imported rice and wheat flour accounted for 59 percent of total dietary energy supply (DES), up from 37 percent in the period 1964-1966 (FAO 1999, p. 10). This high dependency on imported energy led to rice self-sufficiency becoming a prime objective of agricultural policy. However, the closest Fiji got to achieving this objective was in 1989, when domestic production met 66 percent of consumption requirements (Table 6).

Table 6. Fiji rice production and imports, 1980-2000

Source: Prasad 1996; MAFF Annual Reports; Bureau of Statistics, Trade Reports.

During the 1980s, there was a general decline in rice imports. The volume of imports depended on the limits set by the government. From 1990 onwards, imports began to increase as production from the irrigation schemes began to fall. Since 1992, rice production has been grown in more direct competition with imports, with licence controls being fully removed. In 1994, imports more than doubled those of the previous year to reach 63 000 tonnes. Importers had overreacted to the new freedoms of deregulation. However, within a year, imports returned to their 1990 level and have remained at about that level until 2000.

Rice production was in decline before deregulation and well in advance of the AoA coming into effect. The downward trend has just continued at an accelerating pace. The underlying reason has been the low relative returns to farmers (Prasad, 1997, p. 24). With the loss of protection in 1993 the returns from growing irrigated rice became negative. Thus, hardly surprisingly, production from the irrigation schemes, with the exception of the second main island Vanua Levu, has now ceased. Low-input traditional rice remains an important subsistence crop, particularly in the cane areas. The reform of Fiji’s rice policy was not a direct result of the AoA. However, it could be argued that to some extent, the reform of rice policy was undertaken with a view to bringing it into line with the expected disciplines after Fiji acceded to the WTO.

Despite heavy protection, domestic dairy production has not been impressive, and a heavy reliance on milk powder and butter imports has persisted. Dairy production fell away sharply in 1998, more as a result of the drought than the impact of deregulation (Table 7). Production reached a 20-year low in 2000, with the dairying production area bearing the brunt of the insurrection that followed the attempted coup.

Since 1992, the dairy industry has faced more direct competition with imports, with licence controls being removed in 1994. These were replaced with a range of tariffs on imported dairy products - this included a 35 percent tariff on powdered milk.

With deregulation, there was an initial surge in the importation of dairy products, increasing from 3 400 tonnes milk fat equivalent (TMFE) in 1994 to 5 000 TMFE in 1995. However, in 1996 and 1997, imports had subsided somewhat. In the longer term, in a competitive environment, it is probable that only the fresh milk segment of the industry is sustainable.

Table 7. Fiji dairy production and imports, 1980-2000

Source: Sugrim 1998; MAFF Annual Reports, various years; Bureau of Statistics, Trade Reports, various years.

Commercial beef production has been in decline for several decades. Government attempted to develop some beef schemes in the 1990s, but these have suffered from poor management, competition from cheap imported mutton, and distorted marketing structures. Deregulation saw the tariff on imported meat reduced to only a 5 percent tariff, although this was raised to 27 percent in 2002. As a result, sheep meat imports almost doubled over a 5-year period, although these subsided somewhat towards the end of the decade (Table 8). Sheep meat imports are from New Zealand and are dominated by low-value cuts. Beef imports have been largely unaffected by deregulation.

The poultry industry developed rapidly during the 1970s under generous trade protection. Deregulation began in 1989 with the removal of import licensing. Tariffs have fallen progressively from 75 percent to 10 percent (increasing again to 27 percent in the 2002 Budget). Yet, domestic production increased significantly to reach 8 760 tonnes in 1995. The highly integrated structure of the poultry industry, in contrast to the beef industry, has been a contributing factor to its strong market performance.

Deregulation has also had minimal impact on the pork industry. With increasing efficiency, commercial pork production increased strongly over the period, reaching a record level of 832 tonnes in 1994. Further gains in efficiency are achievable, and the industry has now reached the stage where it is more than competitive with imported pork.

Deregulation, commencing in 1992, brought with it an initial surge in the imports of some major agriculture products, notably rice, potatoes and sheep meat (Table 8). However, these imports soon subsided towards pre-deregulation levels. This surge in food imports predates the AoA. Other major food import items such as milk powder, onions and garlic appear not to have been measurably affected by deregulation.

Table 8. Imports of rice, potatoes and sheep meat

Source: Bureau of Statistics, Trade Reports (various issues).

4 Food security impacts

Per capita energy requirements in 1995 stood at 2 259 kcal/day, an increase of 4 percent from 1965 (FAO, 1999, p. 7). Over the same period, the DES increased from 2 632 kcal/day to 3 005 kcal/day - an increase of 14 percent. The increase can be attributed to a growth in food imports and domestic food production. The share of fat in total DES has increased by more than 50 percent over the period, while the percentage of carbohydrates decreased by 18 percent. Protein’s share of the total DES remained constant at about 10 percent over the entire 20-year period.

Food security is defined by the FAO Committee on World Food Security as the ability of all people at all times to have both the physical and economic access to the basic food they need. They have to be able to grow or buy their basic food needs. For this objective to be fulfilled, four conditions have to be met:

• adequate food supplies (either domestically grown or imported);
• available food supplies;
• stability of food supply;

• access to food at the household level, especially those with low incomes.

Fiji’s ability to meet the four conditions of food security are summarized in Table 9.

Table 9. Status with respect to food security conditions

The aggregate food import data point to a reasonable level of overall food security, as highlighted in the ADB’s 1999 Economic Report:

Food imports are still comparatively low and had fallen slightly as a percentage of total imports over the last decade despite deregulation. This suggested that food supply had been able to expand with increases in demand from a rapidly growing urban population. This apparent high level of food security was severely tested with the “great” 1997-98 drought. The sustenance of some vulnerable groups (e.g. those whose livelihood depended on cutting sugar cane or growing rain-fed rice) required food rations over an extended period. However, the overall level of food imports as a percentage of total imports did not increase. Since the arrival of the rains there has been a rapid turn around in food production as witnessed by the volume and price of produce in municipal markets.

Aggregate food security has not been adversely affected by deregulation. This is not to say that vulnerable groups, particularly in urban areas, are not obtaining sufficient food to meet their nutritional needs. According to UNDP (1997), around one-quarter of the population in Fiji currently live in poverty. The poor are unevenly distributed spatially and are well represented in both the Indian and Fijian populations. Most poor households are headed by somebody in employment but not earning enough to meet basic family needs.

There are limited recent quantitative data about food consumption patterns at household level. However, data collected from the 1993 National Nutrition Survey showed the following with respect to child nutrition:

• Almost 40 percent of children below five years of age had diets low in iron and protein.

• Over one-quarter of Indian children less than ten years of age were underweight for their age and showed signs of malnutrition.

• At least 20 percent of children live in households that cannot afford to provide a sufficient diet.

• It had become increasingly costly for households to provide a nutritionally adequate diet to children.

In the intervening decade, children are likely to face greater vulnerability with respect to nutrition. Urbanization has accelerated, and large-scale job and livelihood losses have accompanied Fiji’s political crisis However, this vulnerability is not a consequence of deregulation or Fiji’s accession to WTO. For Fiji’s increasingly urban society, deregulation has, if anything, enhanced food security by reducing the price of basic imported staples. Deregulation also allowed for significant employment creation in the manufacturing sector, particularly for women.

Marrakesh Decision and aftermath

The Marrakesh Decision is not currently of relevance to Fiji as it is not a recipient of food aid and is not a net importer of food. Since 1988, food imports have never exceeded 60 percent of food exports. However, this situation could change in the face of a collapsing sugar industry.

5 Negotiating proposals and the future

Fiji’s Permanent Representative to WTO summarized Fiji’s official position on agriculture in the new WTO round in his statement to the Doha Ministerial Conference:

We favour the continuation of a reform process in agriculture that acknowledges and provides for diversity of agricultural systems and situations world wide, in particular the specificities of the small island developing states (SIDS). The latter countries have largely not effectively benefited from the Uruguay Round and they should be afforded concrete, operational and commercially meaningful measures in the context of the negotiations on agriculture. (Mataitoga, 2001, p. 3)

On agricultural trade matters in the past, by and large, Fiji has taken its lead from the position taken by Australia and New Zealand, through the Cairns Group. The principal objective of this group has been to promote free trade in agriculture. Fiji did have some success in getting the Cairns Group to recognize the special needs of microstates. A brief to the 19th Cairns Group Ministerial Meeting in Buenos Aires in 1999 notes:

The inclusion of small states in the Cairns Group Vision Statement in last year’s Ministerial Meeting and its further inclusion in this year’s Agenda item is a victory for Fiji and its consistent cry for differential treatment in the Cairns Group Ministerial Meetings over the past 12 years. This inclusion is also a recognition of the vulnerability of small states and the use of differential trading rules for them in the short to medium term whilst they put in place the policy and legal framework essential for trade liberalization. (Fiji Ministry of Foreign Affairs and External Trade, 1999)

In recent times, Fiji, while formally remaining a member of the Cairns Group, has distanced itself from the Group. There is a conflict between its strong free trade agenda and Fiji’s reliance on the Sugar Protocol. Raghavan noted that when the Cairns Group presented its proposal at the WTO in October 2000 for deep tariff cuts and a substantial increase in market access for all agricultural products, Fiji did not sign (www.twnside.org.sg/title/market.htm). Statements were later made in Suva, suggesting that Fiji, which depends on its preferential import price for sugar, was supportive of the EU idea of “multi-functionality”. To quote Fiji’s Brussels Mission to WTO:

Woven into the idea of multi-functionality is the notion that the built-in agenda set out in article 20 cannot be limited to market access, food security and rural development. It must also encompass issues of environmental sustainability, poverty alleviation and employment creation. There is opposition to this concept amongst members of WTO. The Cairns Group is not interested in widening the next round of negotiations under the AoA to include wider development issues. ... Given our position as regards the linkage between agriculture and poverty alleviation, rural development and rural employment generation, we strongly support the concept of the multi-functional role of agriculture as a separate discipline in the negotiations under AoA. (Mataitoga, 2000, p. 5)

The concept of “multi-functionality” of agriculture was first promoted by the EU, with an element of protectionism embodied it. Fiji, while embracing the concept of “multi-functionality”, should be careful in accepting commitments that it is not ready for, e.g. onerous environmental and animal welfare standards. These issues have the potential of being used as non-tariff trade barriers. Fiji’s experience with enforcing Codex Alimentarius requirements should be a salutary lesson here.

Prime Minister Chaudhary, in his speech to the Seattle WTO meeting, referred to “the need to raise living standards in rural areas and to reduce poverty and that these are the issues to be addressed in the context of any review of the AoA”. This has remained the position of the newly elected government.

A feature of the current negotiations is the number of developing countries participating. These include the “like-minded group”, the African group, the members of the Caribbean Community and many individual countries, which have submitted a wide range of proposals. The common feature is that special and differential treatment is needed for developing countries. The Fiji Country Paper to the Fourth FAO Roundtable Meeting for PICs on WTO Agreement Provisions notes:

Since the Uruguay Round, the SDT provision of the AoA has been given restricted meaning by the developed countries to mean only technical assistance. ... A recent study by FAO supports our concern that poverty and unemployment will rise in developing countries, as a result of the type of trade liberalization that the AoA has brought about. Fiji is of the view SDT should be given a more flexible interpretation to allow the developing countries to use domestic support measures and transparent import controls as national government sees fit, to encourage domestic food production and reduce poverty. These measures will not be trade distorting because they support small farmers and households who supply the local economy and do not distort trade internationally. (p. 3)

The “like-minded group” with whom Fiji now aligns itself stresses the need for developed countries to stop distorting trade in agricultural products through subsidies. At the same time, they want developing countries to be given more flexibility to remove some products from disciplines and for others to be able to increase tariffs and use subsidies for production (Mathur, 2002, p. 54). Herein lies the negotiating dilemma faced by Fiji and other ACP sugar exporters. The foundation of the Sugar Protocol, on which they heavily depend, is domestic price support for European sugar farmers. Ambassador Mataitoga argued Fiji’s position on sugar at Doha as follows:

Fiji depends on one major agricultural commodity (sugar) for export. The earnings from this export is so vital to the socio-economic development of the country, it is crucial that market access for this commodity is guaranteed, predictable and secure. We would like to see that existing market access of countries like ours which are single producers be protected, given that the share of world trade covered is so small that it cannot be considered to have any trade distorting effect. (p. 4)

The elimination of all trade-distorting support would see the end of the EU’s existing sugar regime, which is still characterized by “high domestic market prices buttressed by significant taxes on imports and an aggressive export subsidy program” (Swinbank et al., 1998, p. 32). Liberalization of the EU sugar regime implies linking the price to sugar growers with world market prices. If this occurred, it is politically inconceivable that the EU would be willing in the future to pay more for sugar grown in ACP countries than it pays for domestically grown sugar.

The pace of reform of the world sugar economy will likely depend on the second round of WTO negotiations. A shakeout of the world sugar economy should benefit efficient sugar producers in the longer term. The current free market for sugar has structural characteristics that lead to prolonged price troughs punctuated by extreme, but short, price peaks. The major depressing impact on prices has been the chronic EU sugar surpluses that have entered the market. A wider free market for sugar, which is not used as a dumping ground for residual production, can be expected to lead to more stable and higher world market prices.

If the Fiji industry can become efficient, it can survive and potentially thrive - if it cannot, then it is doomed. The last few years have seen a haphazard uncontrolled reduction in the size of the sugar industry, as a high percentage of leases have not been renewed. This has made the longer-term survival of the Fiji sugar industry even more problematic. The loss of the sugar industry would have catastrophic consequences for the economy and income distribution. The economic impact of the drought of 1997 and 1998 is an indication of how dependent the economy is on the sugar industry. With two successive years of low sugar production, the economy contracted by 4 percent despite a very strong performance of the tourism, garments and kava sectors. While recent years have seen good progress made in export diversification, no single crop or group of crops have been identified that could replace sugar in the foreseeable future.

Specifically on the issue of export competition, Ambassador Mataitoga’s statement noted (2001):

Fiji believes that a cautious and pragmatic approach should be adopted when dealing with all forms of export competition. ... A small economy like Fiji, whose major markets are on the other side of the global village, should be exempt from reduction in commitments in respect to subsidies aimed at reducing the cost of marketing its agricultural products and to lower internal transport and freight charges on export shipment. (p. 4)

It is the area of SPS that Fiji makes its most telling argument for reform. To quote Ambassador Mataitoga:

Fiji exports tropical fruits and food products to markets in Australia, New Zealand ... Our ability to increase market share is severely impaired by quarantine standards used by these countries, which are all different, yet all claim to be WTO consistent. Our concern is that SPS measures are not used as a barrier to trade. In this regard, Article 4 of the SPS Agreement should be operationalized so that developing countries may enter into equivalency agreements. (p. 4)

References

Asian Development Bank. 1985. Fiji agricultural sector study: A program for crop intensification.

Asian Development Bank. 1996. Fiji agricultural sector review: A strategy for growth and diversification, Pacific Studies Series.

Asian Development Bank. 2000. Republic of Fiji islands 1999 economic report.

FAO, 1999. Nutritional country profile of Fiji islands.

Fiji Floriculture Council. 2000. The strategic plan of the Fiji floriculture council. January.

Fiji Islands Ministry of Foreign Affairs and External Trade. 1999. Minister’s Brief: Cairns Group Ministerial Conference, Buenos Aires, August 1999.

Grynberg, R. & White, M. 1998. EU tuna preferences in the post-Lomé environment. In Grynberg, R., ed. The Lomé Convention and the Pacific. Forum Secretariat and University of the South Pacific.

Kunatuba, P. 1998. Fiji country paper to the FAO Round Table on the Uruguay Round Agreements: Implications for agriculture and fisheries in Pacific island countries. Auckland.

Mataitoga, I. 2001. Republic of the Fiji islands statement, Ambassador, Permanent Representative to WTO. Ministerial Conference, Fourth Session, Doha, 9-13 November 2001.

Mataitoga, I. 2000. Post Seattle negotiations under WTO Agreement on Agriculture - Special sessions on the Committee on Agriculture (working paper).

Mathur, S. 2002. Notes on the Agreement on Agriculture. Third WTO/Forum Secretariat Trade Policy Course for Pacific Island Countries. Forum Secretariat, Suva. March.

Prasad, K.D. 1996. Deregulation of the rice industry in Fiji, an assessment of macro and micro effects. Unpublished, University of the South Pacific MA thesis, Suva, Fiji.

Sharma, R. 1999. Overview of global market developments in the post-Uruguay Round period. FAO Round Table on the Uruguay Round Agreements: Implications for agriculture and fisheries in Pacific island countries. Auckland.

Sugrim, A. 1998. Overview of Fiji’s dairy industry: A paper presented at the South Pacific Regional Training Workshop on Milk Production and Processing in Fiji-Tonga-Samoa.

Swinbank, A., Jordan, K. & Beard, N. 1997. Implications for developing countries of likely reforms on the Common Agricultural Policy of the EU. Report prepared for the Economic Affairs Division of the Commonwealth Secretariat and published in the ISO Sugar Year Book.