PRE-NEGOTIATION WORKSHOP TO

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OPENING STATEMENT

REVIEW THEDRAFT
FREE TRADE AREA AGREEMENT

March 29-30, 2000

W. Noel Levi, CBE Secretary General South Pacific Forum Secretariat

Your Excellencies, Forum Trade Officials, Resource Persons, Representatives of CROP Agencies

Ladies and Gentlemen

1. I am pleased to welcome you to the Forum Secretariat for this important workshop.

2. This workshop has been organized for the purposes of preparing members for negotiation of a Forum free trade area, which has appropriate application of the arrangements to Australia and New Zealand. By the end of the meeting we hope that you will be in much better position to participate at the first negotiating session, which is scheduled for July on the form of the negotiating text and what will be an appropriate application for Australia and New Zealand.

3. Since the foundation of SPEC in 1972 and the subsequent creation of the Forum Secretariat in 1991 the creation of a Free Trade area amongst FICs has been part of the Forum's legal agenda. It has been widely discussed and studied. Since this issue was raised at the Cairns Forum it has gradually risen to the head of the policy agenda of the Forum. Last year the Forum Trade Ministers met and endorsed the principle of an FTA amongst Forum members. This decision was endorsed by Leaders who further tasked officials to:

" negotiate the details of the draft Agreement, including negative lists and measures to provide for the application of the arrangements to Australia and New Zealand."

4. Australia and New Zealand are integral and founding members of the Forum. Their contribution as development and trading partners is highly valued by all those around this table today. Both countries have made considerable efforts and sacrifices to assist the development and full participation in international fora of representatives of FICs.

5. However the reality is that while Australia and New Zealand are full members the relationship has always been recognized as not one of complete equals. Australia and New Zealand are both highly industrialized countries and are significant aid donors to the Forum. Forum Island Countries, on the other hand are small vulnerable developing or least developed countries. These differences between FICs and Australia and New Zealand have been recognized from the very beginning of the Forum.

6. However, I do not wish to dwell on our differences. Australia and New Zealand are important members of the South Pacific Forum. They contribute substantially to the work of the Forum both financially and politically and as development partners. We are all neighbors and despite our differences we have always endeavored to cooperate and found ways to amicably settle any differences that may arise. It is in this spirit that I hope you will approach the issues before you at this workshop.

7. In fact I do not think that we should be preoccupied with the question of whether Australia and New Zealand should be in or out of the FTA. Focusing on this question will not only distract us from the real issue, but it will also unnecessarily highlight our differences. We should focus instead on the mandate from the Leaders, which is for us officials to negotiate an FTA and to come up with measures to provide for the application of the FTA arrangements to Australia and New Zealand.

8. It is also clear from the mandate that the existing PARTA draft is to be the working draft for the negotiations. It is therefore clear to me that the first question you should address in this workshop is whether or not the current draft PARTA provides the appropriate measures for applying the FTA arrangements to Australia and New Zealand. The word appropriate is not used in the formulation of the mandate, but we can assume that the Leaders would not want measures that are inappropriate.

9. In determining what is appropriate and what is not, it is also important for you to recall why the PARTA approach was endorsed as the basis for negotiating a Forum FTA. This is where we need to go back to the original intent of the PARTA. The first reason PARTA was proposed is that the world is undergoing a period of globalization and liberalization. It was felt that an FTA would help prepare FICs for this process. It was felt that two of the pillars of our economies in the region - trade preference and aid flows - were being undermined by the process of globalization. The formation of an FTA would allow the FICs to deal with this and hopefully arrest the process of political and economic marginalization.

10. Second, it would create a market of six million which, while still small, would be large enough to allow more local production and thereby large enough to shift away from our dependence upon aid and trade preference towards more solid, production oriented foundations for our economies.

11. Third, because the FTA was intended to be based on a stepping stone approach to trade liberalization, members would make a small adjustment through liberalization towards FICs, which would then allow them to liberalize towards other larger trading partners when they are in a position to do so. Thus PARTA was intended to act as a vehicle for eventually dealing with other trading partners as a group.

12. It is therefore obvious from these objectives that the FTA was intended to be an enabling mechanism for the developing country members of the Forum. I believe that we would not have come up with the same objectives or the current draft PARTA model if we did not intend to underscore the need of our developing country members to receive special and differential treatment. It is for these reasons, together with the careful crafting of the language of the mandate that has led me to believe that the Leaders intended to have an FTA with some differentiation for Australia and New Zealand.

13. Therefore, in looking for measures of applying the FTA arrangements to Australia and New Zealand, I believe you need to be assured that you come up with measures that are appropriate in terms of the original intent or objectives of the FTA.

14.I do not believe that officials have been asked to decide on whether to proceed with the FTA or whether we should be using an MFN-WTO liberalization approach. The studies, discussions and recommendations, on these questions have been completed, considered and agreed by Ministers; and endorsed by Leaders. The task given by Leaders is again very clear:

" negotiate the details of the draft Agreement, including negative lists and measures to provide for the application of the arrangements to Australia and New Zealand."

15. I want to make it absolutely crystal clear that the role of the Forum Secretariat is merely to facilitate your task of finding appropriate ways of applying PARTA to Australia and New Zealand. The Forum Secretariat is not here to tell members how they should proceed - this is a decision to be made by you and the recommendations in the issue paper reflect this view. However, as I have tried to outline in this statement, there are certain expectations that are contained in the Leaders' decision that we have to take on board.

16. Negotiations on PARTA will begin in late July this year. You will need to resolve several issues before we begin and the Forum Secretariat will work with members to help develop negotiating positions where we are requested to do so. We are here to assist all members, but in particular we are here to assist the small states. Those countries where the FTA may result in more serious tax revenue losses will also receive technical assistance in preparing necessary tax changes.

17. The Forum Secretariat can assist in those areas where countries are weakest and need assistance but it is vital that members inform us of those weaknesses.

18. Forum Leaders have given us a mandate to develop an FTA in the form of PARTA. We see this as a collective responsibility for all of us to produce an FTA that is appropriate in terms of the Leaders mandate and intent. The challenge is for all of us to focus on that challenge and not to be sidetracked by issues that are not pertinent to the task.

19 I wish you well in your deliberations on these important issues.

Forum Secretariat, Suva March 29, 2000

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