Barry Coates

SUVA, Fiji (Fiji Times, April 16) - Sugar is a commodity that has gained from preferential treatment but will now feel the pinch.

It is easy to convince people in Fiji that trade deals are important.

The sugar and garments industries are very clear evidence of the impacts of past trade preferences, and now are even clearer evidence of what happens when those preferences are withdrawn.

Now there is just as important a trade agreement looming for Fiji.

By the end of this year, the Economic Partnership Agreement (EPA) is supposed to replace the preferential trade access to Europe enjoyed by Fiji and 13 other Pacific island governments.

The Pacific Islands Forum Secretariat, which is providing technical support to the negotiators, stresses the significance of the EPA: "we are rewriting the trading and commercial rules that have governed relations between the Pacific and the EU since independence. What will emerge from these negotiations will shape the economic future of an entire generation."

The European Union may be a generous donor and significant development partner in the Pacific, but Oxfam and other non-governmental organizations and private sector groups are increasingly concerned the EPA will harm Pacific economies and livelihoods.

It is particularly worrisome that the EPA sets the stage for follow-on agreements with the Pacific's largest trading partners, Australia and New Zealand.

Concessions provided to the EU might be extended to Australia and New Zealand, potentially magnifying the harm created by the EPA.

Unlike the existing arrangement with the EU, the EPA will require Fiji and other Pacific countries to reduce their import taxes on goods arriving from the EU.

This will expose Pacific businesses to competition from larger, and often subsidized, EU industry, and is likely to mean business closures and job losses.

Reducing import taxes reduces government revenue, putting even more pressure on public sector salaries and reducing the Government's ability to provide essential services such as healthcare and education.

Of perhaps even greater concern is the inclusion of services in the EPA.

This is an enormously broad area, covering "everything you can't drop on your foot," such as healthcare, education, water supply, sewerage treatment, banking and so on.

The danger in signing up to agreements on services is that they essentially restrict the ability of Pacific governments to legislate or regulate the activities of foreign companies, even if it is in the public interest.

For instance, efforts to protect the environment, local land ownership, or traditional uses of resources could be forbidden under the EPA unless there have been specific exceptions made.

The goods and services agreements would mean that governments cannot favor local companies.

This is of deep concern because today's rich countries achieved their own development by giving initial preferences to local businesses until they were strong enough to compete internationally.

The EU is proposing to prevent Pacific governments from following the same policies.

It is not only civil society that is concerned about the proposed EPA.

Before he stepped down as the lead Pacific negotiator for the EPA in December 2006, then Fijian Trade Minister Kaliopate Tavola had noted the Pacific's expectations that the EPA could become, "a tool for development, but as things stand now, the agreement is threatening to overwhelm our fragile economies."

Samoa's Associate Minister for Commerce, Hans Joachim Keil, is now leading the Pacific EPA negotiations and has expressed deep concerns.

In a December 2006 letter to the EU's trade commissioner Peter Mandelson, Keil complained the European Commission, which is negotiating on behalf of the 27 EU member states, " has offered little, if any, positive response on the key substantive issues of basic importance."

The EU is sensitive to criticism that it is forcing the EPA on some of the world's smallest and most vulnerable developing countries.

Last month, it signed over some funding to assist Pacific governments with the EPA negotiations.

Yet, the EU has steadfastly refused to provide a far larger amount of funding that is needed to assist Pacific governments to adjust their economies to the significant changes that will be required from the EPA.

The costs of complying and administering the rules are likely to be high, while the benefits of being part of an EPA are questionable.

Oxfam, NGOs, business groupings and an increasing number of parliamentarians are saying no deal is better than a bad deal.

However, the EU is saying there is no alternative, even though they have a legal obligation to provide at least as good a deal as is the case for the Pacific.

Instead the EU has threatened to reduce Pacific access to the European market from January 1, 2008, evidently in an attempt to put unfair pressure on Pacific negotiators.

This is particularly insulting to the Pacific, because the EU already gives better market access to other countries that are far richer than the Pacific.

The EU is playing negotiating games, but the Pacific's exporters and people are going to the ones who suffer.

The EU should immediately take heed of the region's concerns by providing the Pacific with alternatives that guarantee access to the European market and pave the way for a true "partnership" agreement.