Bridges Weekly Trade News Digest • Volume 13 • Number 29 • 5th August 2009

EU, Papua New Guinea Ink Trade Pact

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The European Union and Papua New Guinea signed a deal on 30 July that will immediately allow the Pacific country to export all of its goods duty free to the European market. In return, PNG will remove tariffs on 88 percent of imports from the EU over the next 15 years.

The EU and Papua New Guinea, joined by Fiji, initialled the accord in 2007 (see Bridges Weekly, 5 December 2007, http://ictsd.net/i/news/bridgesweekly/7641/), and the agreement has been in effect ‘provisionally’ since 1 January 2008. Fiji has yet to sign the deal, but its exports will also enter the European market duty free from now on; in exchange, the country will cut tariffs on 87 percent of European imports over 15 years.

The EU Trade Commission said in a statement that Fiji “decided to sign [the agreement] at a later stage.”

EU Trade Commissioner Catherine Ashton called the deal “an important step towards a strong and lasting EU-Pacific trade and development partnership.”

“We have already seen how the initialling of the agreement has delivered results, with new investment flowing into the fisheries industry, supporting development in Papua New Guinea and creating jobs,” Ashton added.

But the agreement is not without its detractors. The European fishing industry frets that the deal could push their fleets out of the Central and Western Pacific Ocean. And some members of civil society in the Pacific countries say that reducing barriers to the flow of European goods will undercut their domestic producers, perhaps costing jobs and threatening livelihoods.

Total trade between the EU and Pacific ACP countries totalled roughly €1 billion last year. The 27-nation EU exports mainly machinery, vehicles, and oil to the Pacific countries, which in turn export primarily animal and vegetable oils, sugar, coffee, tea, spices, and copper to the European market. Goods from Papua New Guinea and Fiji account for 83 percent of the EU’s total trade with the Pacific region.

The deal, which is officially being billed as an Interim Economic Partnership Agreement (EPA), is meant to replace a system of preferential trade rules that the EU has long granted many of its former colonies. Those preferences became illegal at the end of 2007, when a WTO waiver that allowed the temporary continuation of the schemes - which violated world trade rules - expired.

Brussels has since been working to negotiate replacement deals (the EPAs) with regional groupings of developing countries, a process that has proven quite difficult. To date, only one full-fledged EPA has been negotiated - between the EU and the CARIFORUM coalition of Caribbean countries. However, several bilateral agreements, like that between the EU and PNG, have been struck. But even as that ‘interim’ EPA takes effect, Brussels is continuing its push to negotiate a full-fledged, region-to-region EPA with PNG, Fiji, and 12 other developing countries in the Pacific region.

ICTSD reporting.