REINVIGORATING THE JOINT COMMERCIAL COMMISSION

Commentary

The following speech was delivered by U.S. Ambassador David L. Lyon to the Fiji Economics Association on June 9 in Suva, Fiji.

By U.S. Ambassador David L. Lyon

SUVA, Fiji (United States Embassy) - Reserve Bank Governor Savenaca Narube, Chairperson Mere Falemaka, government officials, business leaders, honored guests.

Ever since I arrived here, people have asked me about trade with the United States. Garment manufacturers first wanted more access, and, later, protected access to U.S. markets. Sugar producers wanted increased quotas. Fruit producers asked if restrictions on shipments to North America could be eased. Various government to government schemes were proposed.

Some of the questions had commercial merit, just about all of them reflected the legitimate concerns of a small, developing country trying to build prosperity by trading with a large, developed economy.

These were all legitimate complaints and questions, but they were very hard for us to handle. Part of this was a lack of expertise at the Embassy – we haven’t had a trained economist on staff in years – but mostly we together ran into the problems posed by a small economy trying to deal with a huge one. Even when we were able to phrase our questions intelligently, we found it extremely difficult to get the needed attention from experts in Washington.

In this regard, I am happy to say that our dearth of expertise has been remedied with two of the new officers arriving this summer coming from economic-commercial backgrounds.

When I finally took advantage of a trip back to the U.S. last year to hunt down and corner a trade expert, he told me that there was a mechanism for dealing with these trade issues -- the Joint Commercial Commission, or JCC. [PIR editor’s note: The Pacific Islands Development Program, the home of PIR, serves as the Secretariat for the JCC.]

The JCC was first envisioned in an October 1990 speech given by President George Bush Sr., to a meeting of Pacific Island Leaders in Hawaii. In that speech, the President "proposed establishing a joint commercial commission with the (Pacific) island nations to meet each year at senior government levels to identify and address commercial opportunities and trade concerns."

Extensive discussions were held in 1991 and 1992 on the Commission’s goals, organization, and structure. Finally on January 12, 1993, everything was ready, and, at a meeting of the Standing Committee of the Pacific Islands Conference of Leaders at the East-West Center in Honolulu, an MOU was signed by 13 Pacific Leaders and the U.S. establishing the Joint Commercial Commission.

The MOU contained eight specific functions relating to trade and investment, all of which were open to discussion within the JCC context. Included among them were provisions for information exchanges, dialogue mechanisms, education programs, private-sector development, and monitoring program effectiveness. Indeed, it was an ambitious framework for economic progress for the entire Pacific region.

President Clinton confirmed his administration’s commitment to the JCC shortly after he took office in early 1993. The inaugural meeting followed on October 8, 1993, in Washington. During this meeting, the Leaders established a Trade and Investment Working Group, or TIWG. To date the TIWG is the only established working group within the JCC. There could – and should – be more.

The Leaders also agreed to participate in the development of a reliable U.S.-based data bank containing commercial and economic information on Pacific Island countries. This has now become part of the business network system run by the East-West Center. Unfortunately, to date, only a handful of businesses have availed themselves of the opportunities offered by this service, which is still available.

Although the Commission was designed to be a dynamic instrument to promote trade and investment, it actually seemed to function only during the yearly Leaders’ Meetings in Hawaii. During those meetings good ideas were put forward and endorsed, but action was slow or not at all.

In April 1995, President Clinton responded to the JCC’s disappointing early performance by writing to the Chair of the Standing Committee, and saying,

"The United States would like to see the JCC become a vehicle for practical effective steps to increase trade and investment between the United States and the Pacific Island signatories."

This statement not only provided bipartisan endorsement for the Commission, but was the White House’s go-ahead to move on the functions contained in the 1993 MOU.

And, move they did – at first. In 1995, the Commission agreed to convene yearly meetings. With the cooperation of the U.S. Customs and Quarantine Services, "beachheads" were established at West-Coast ports to process island exports. An Internet site was established to advertise business and trade opportunities in the Pacific. A Trade and Investment Officer position was established to assist Pacific Island Nations in the production of promotional materials and trade missions. Market research programs were undertaken to identify potential markets for island nation products.

[PIR editor’s note: The four activities listed above were part of a package of proposals submitted by the Pacific Islands to the U.S. government in 1995 and agreed to by the U.S. However, a key component of these proposals—a yearly funding request to support the activities—was not provided. Therefore, all these activities have not been fully accomplished.]

As a result of these initiatives, discussions were held between exporters of fruit and other island produce and the U.S. Quarantine Service in Hawaii to resolve problems with the transshipment of produce through American ports. These talks produced an agreement allowing products, mostly originating in Fiji and meeting certain guidelines, to transship Hawaii on their way to Canada.

I understand this arrangement was successful for awhile, but over time dwindled away. I don’t believe it is used at all anymore, perhaps due to problems with the scheduling of air and ship movements. However, if these problems can be overcome, the revival of this concession promises to become an important export tool for island agriculture. [PIR editor’s note: Actually, very few, if any, shipments took place. This highlighted the need for government officials negotiating concessions to communicate better with their private-sector, since a key issue was that Fiji exporters could not afford the additional precautions required by the new transshipment protocols.] 

Productive JCC meetings were held from 1996 to 1999. After that, member interest waned, until by 2003, the Commission amounted to little more than a few odd paragraphs inserted in Leaders’ briefing books at their yearly meetings. This led one observer to describe the Commission as having only "one moving part" – the East-West Center, which continued to sponsor unenthusiastic meetings.

In fact, when I enquired about the JCC last year in Washington, I couldn’t find a single officer working on Pacific Island affairs in the Department of State, who had even heard of it. As it turns out, the officer responsible for the JCC wasn’t in the office that day. When I finally tracked him down, it turned out that he knew a fair amount about the Commission, but began his briefing by telling me it was essentially moribund.

So, you may ask, if it held such little interest, why are we talking about the JCC now? The answer lies in trade and in knowing how to work the U.S. Government.

The expiration of import quotas on manufactured garments in the U.S. and the initiation of a phasing down of subsidies for sugar in the European Community, both the result of WTO agreements, galvanized Fiji and other Pacific nations to examine a list of schemes that might be used to increase their trade with the United States. My Embassy was asked to help in this evaluation process. Some of the schemes considered were:

This brings us to the last scheme to be considered – the Joint Commercial Commission.

This scheme has a lot going for it. The most important aspect is that it already exists!

The JCC doesn’t require any new negotiations, agreements or acts of Congress. It may be a ship lying still in the water, but it is still afloat. All it needs is a crew to make it sail.

The MOU signed by 13 Pacific islands and the United States in 1993 remains a valid document. It provides a vehicle for improved trade with the United States. It may be almost moribund, but it exists and needs only for its island members to press forcefully to bring it back to life.

One enormously valuable aspect of the JCC is that it very nearly approximates a TIFA, or Trade and Investment Framework Agreement. TIFAs are not well known but they are de facto precursors for Free Trade Agreements, or FTAs. One U.S. trade expert told me last year that the U.S. will not negotiate an FTA with a country with which we do not already have a TIFA. He also said that the 1993 JCC agreement is "90%" of the way to a 21st century TIFA.

Now I am not saying that the U.S. will jump from the JCC to an FTA – we won’t. What I am saying is that a near-TIFA is a very good thing, one not to be ignored.

Properly used, a TIFA could have served as a jumping off point for lobbying for a preferential trade/development assistance scheme along the lines of the AGOA I mentioned earlier or a similar arrangement, the Caribbean Basin Agreement.

For example, getting back to garments, which I mentioned earlier. Could Fiji have been successful in obtaining a QIZ type of protection for its industry if it had had done so with regional support through the JCC? We will never know, but if there had been a strong, fully functioning JCC, I am reasonably sure your country would now be in a better trade position on garments.

I will paraphrase some of the points, but let’s look at some of elements the JCC has to offer.

The first function says the Commission will monitor trade and investment relations and identify and consult regarding the removal of impediments and problems affecting trade and investment between signatories. It immediately comes to mind that new discussions on Customs and Quarantine issues that impede the flow of Pacific island goods could render almost immediate benefits. The U.S. isn’t going to raise these issues, but would be amenable to discussing them through the JCC.

If goods and services are placed on the JCC agenda, I suggest the list be limited in scope, specific in focus, and regional in context. Long laundry lists and endless dialog are hard to deal with and can be counterproductive. A small range of goods that can be produced effectively on a regular basis, meeting quality standards, that could be competitive if specific incentives are put in place, or barriers removed, would stand an excellent chance of acceptance. Off the top of my head, concentrated fruit juices come to mind as being such a product.

The second and seventh functions commit signatories to exchange information on development projects, activities and opportunities. The East-West Center in Hawaii has a business bulletin board on the Internet wherein governments and private businesses can list trade and investment opportunities for viewing around the world.

For small businesses in isolated environments, the Internet is a wonderful, cost-effective tool. The Business Bulletin Board has been in place for many years, but is currently used by fewer than ten companies. [PIR editor’s note: There are currently 74 companies listed on the Pacific Islands Business Network.] More use would bring more interest. It costs the user nothing. Government trade officials should encourage local businesses to post there as a matter of course. The site has the potential to become a virtual market place for the Pacific.

The third function commits signatories to promote educational, training, technical assistance, and exchanges. Much could be done by governments and the private sector under this function. Who needs what training in signatory countries? Surely proposals can be developed and discussed under the terms of the MOU.

Based on my own experience as Ambassador to five signatory countries, several could use training toward meeting U.S. requirements on shipping security developed since 9/11. Fiji’s ports are in good shape, but you are concerned about U.S. regulations that could require Air Pacific to place armed air marshals on flights to and from the U.S. These are exactly the kind of issues that could be discussed within the JCC framework.

The fourth, fifth, and sixth functions commits signatories to "undertake other appropriate actions to promote greater commercial cooperation between the Parties and their private sectors"; and to foster private sector development, initiatives, and policies.

Separate from the JCC, we are already taking steps in these directions. We expect to have, by the end of this month, a new, dynamic American Chamber of Commerce in Fiji, an organization with ties with other AmChams in over 90 countries around the world, and thousands of U.S. cities and businesses in the United States.

If I may give a little plug in favor of AmCham.

AmCham is a private organization, but it could be one of the most important NGOs in Fiji. AmCham’s reason for being is to support business, trade and investment. In fulfilling that role, its U.S. headquarters each year organizes an event in Washington called a "Door Knock" where every AmCham around the world is invited to send representatives to the United States Congress. On Capitol Hill, and with the power of the worldwide American Chambers of Commerce behind them, they lobby on business and trade issues that are important for their industries and home countries. Thanks to AmCham’s clout, and the support of the American trading partners, Congress listens.

Of course, only the most important issues are discussed. Take the garment industry for example. If AmCham Fiji had existed several years ago, and had participated in a Door Knock visit, it could have raised Fiji’s situation as a developing country in danger of losing a key industry due to the end of WTO-mandated country origin quotas. They would have had to pick their targets carefully – staying well away from representatives from textile producing states – but it is conceivable they could have found a small number of sympathetic congressmen – and it often only takes one or two to start the ball rolling on an issue.

How many of you know, for example, that there is a leading congressman who was a Peace Corps volunteer in Fiji or that Senator, and likely presidential candidate, John McCain is a frequent visitor to the Yasawas?

I’m not saying this would have been a sure thing, but the Door Knock represents the best chance possible for a business-related issue to be heard.

Amcham offers other benefits. Members just by virtue of their membership –automatically have bone-fides for their business in the U.S. and overseas. There is a preexisting contact network for specific business opportunities and a platform for addressing commercial concerns with other businesses and governmental organizations.

It is important to note that the AmCham is not, however, an arm of the U.S. Embassy, but a private sector initiative, operating on its own. The Embassy is, however, committed to work with the new AmCham Fiji and to do everything we can to make it a success.

Leaving this unsolicited advertisement for AmCham and getting back to the JCC MOU, the last function brings governments fully into the picture by simply stating that signatories will meet and "discuss related issues of mutual interest." This function opens the door for discussions on all topics of trade and investment. It provides a vehicle for member States’ concerns to be heard and acted upon – if, and only if, the island states get in, start the engine and drive the JCC to our doorstep leaning on the horn the entire way.

In this context, I would caution that issues applying to all the Pacific signatories stand a better chance of being successfully resolved than issues of interest to only one nation. Fiji is a good example. It is clearly the de facto leader of the Pacific. It has the most developed economy; the second largest land mass, a comparatively large population, a good central location, a democratically elected government, and relatively well-developed communications and shipping systems.

Outside the Pacific, however, in the context of world trade, Fiji is miniscule, especially compared to the United States. Yet the very size and opportunities the United States’ market offers are why the Pacific islands want as much access as possible. To gain that access requires getting the attention of the U.S. government.

And getting that attention isn’t easy as we are involved in issues everywhere in the world. Politically, you have to compete with the War on Terrorism, the wars in Iraq and Afghanistan, the ongoing crisis between Israel and the Palestinians, and possible nuclear weapons in North Korea and Iran, to name only a few. In the economic arena, you have to pull our attention away from our trade competition with the EU, China and Japan, our huge trade and budget deficits, and the scores of other countries elbowing and jockeying with each other for trade advantages with the United States.

In that crowd, Fiji, on its own, does not stand a chance of being noticed.

Since I know almost nothing about rugby -- though I was there last Friday cheering on Fiji against the Maoris -- I love using rugby analogies. The Captain cannot win games by himself, but by leading a team in a way that gets the most out of every player, tries can be scored.

Your advantage is you that you already have the JCC on your side, albeit sitting down at the end of the substitutes’ bench. And its not just any player as the JCC has brought along its cousin, a true heavyweight – a prop?—in the form of a Trade and Investment Framework Agreement. Continuing to mangle my metaphor, this means you’re starting at midfield instead of your own ten-meter line.

I can’t emphasize enough, though, that in approaching the United States within the JCC context, your suggestions need to be concrete (practical and clear), achievable (limited in scale), and of benefit to all sides, Pacific Island Nations and the United States.

It also stands to reason that a complaint about a U.S. barrier or practice will stand a much better chance of resolution if the islands, themselves, do not have similar restrictions.

In the area of agricultural products, for example, even as you raise areas where you feel the U.S. could be more open and flexible, be ready for us to come back at you and perhaps demand access for American chicken. We accept many quarantine laws as being necessary against disease, but we strongly believe that Fiji’s (and New Zealand’s) phyto-sanitary barriers on imported poultry are based on protectionism, not science.

In other areas, could internal laws be revised to improve the climate for trade and investment, rather than pose barriers? How difficult is it to register foreign investment in Fiji and other Pacific islands? Are property rights, both physical and intellectual, protected? Traders and investors alike are interested in these questions. Local policies can and do influence commerce.

Let me now go from talking about a commercial institution in mostly political terms to discussing the tremendous impact that politics, particularly political instability, can have on commerce and trade.

I think everyone in this room knows that businesses and their employees are the first to suffer during and after a political crisis, and that there isn’t an investor in the world who wouldn’t take Fiji’s political climate into account when thinking about an investment or even a substantive business relationship.

Political risk is always a factor in developing countries, but it can be a determining factor when a country that has had three coups in 18 years is also experiencing heated and angry political rhetoric. As I said to the Fiji Times on May 30th, the fact that there is open discussion by well-known leaders of the possibility of another coup is not only discouraging, it is downright harmful.

I feel strongly enough about this to have cast aside some of the diplomat’s accustomed discretion to call this coup-mongering a threat to Fiji, a danger to democracy, and, to say it as clearly as possible, downright despicable.

I have no difficulty telling potential American investors that Fiji’s governments since independence have placed a high value on foreign investment and on protecting the rights and investments of foreign companies. In this Prime Minister’s Qarase’s government is no exception, and I have appreciated his personal support for American investment in the country.

As you can no doubt imagine, though, I have more problems in recent months and weeks in answering concerns about political stability. Since I work for the American people, and not for Fiji, I have to be frank and respond that I am worried that angry allegations and accusations could turn into something worse.

For this reason, and for the sake of Fiji’s democracy and the prosperity of its people, I strongly urge all of Fiji’s leaders to abandon confrontation and to replace it with meaningful dialogue and negotiations aimed at truly resolving burning political and communal issues.

Returning again to the JCC, I hope I have illustrated the importance that a functioning Commission could have as a framework for resolving disputes and encouraging trade and investment. To do this, however, it needs to be administered much more effectively than it has in the past. Given the disparities in our economies, and America’s preoccupation elsewhere, the impetus for this is going to have to come from the islands, with Fiji, and perhaps the Pacific Island Forum, doing the hard work.

One of the problems with the JCC has been its reliance on a chairmanship that rotates each year among member governments. When a larger and more sophisticated state such as Fiji held the chair, the JCC was more likely to be used effectively. When a smaller country, and we all know there are more of these in the Pacific than any other size , took over, the process lapsed, allowing the US to take its eye off the ball. The lack of a permanent bureaucracy has also been a problem.

[PIR editor’s note: The Chairmanship of the JCC is vested in the Chairman of the Standing Committee of the Pacific Islands Conference of Leaders. Unlike the Chair of Pacific Islands Forum, the Chairman of the Standing Committee has no set term limits and serves at the will of the Conference. Currently Prime Minister Prince ‘Ulukalala Lavaka Ata of Tonga serves as the Chairman. The Pacific Islands Development Program at the East-West Center serves as the Secretariat for the JCC and has been its bureaucratic home since inception.] 

To risk another sporting analogy, let’s compare the revolving chair to a relay race. Fiji has the JCC baton and is running hard as it finishes its lap. As it hands over to a country with only a few thousand people, and perhaps four professionals in its Ministry of Foreign Affairs, not only does the pace slow measurably, but the baton may never even make it to the next runner. As other teams lap the field, the Pacific loses contact with the U.S. and everyone wanders away from what could be an extremely effective means of keeping our attention.

In addition, many, if not most, of the problems the JCC was designed to address were ongoing – not once-a-year issues to be discussed only by senior political leaders at annual meetings.

I am not here to tell Pacific Island Nations how to organize, but in my opinion the JCC could be much more effective if it had a permanent bureaucracy capable of handling evolving issues, like that of the Pacific Islands Forum Secretariat. This way its chairmanship could still rotate, but a permanent professional staff could give the organization continuity, carry on with ongoing business, and exploit long-term relationships with American trade officials.

To summarize, reinvigoration of the Joint Commercial Commission represents an opportunity for Pacific Island Nations to boost trade and investment between themselves and the United States. The JCC was allowed to languish almost to oblivion in the last few years, but it can be a strong instrument toward removing obstacles and identifying business opportunities. The United States will not take the initiative in rebuilding the JCC, but will be responsive to smart, well-organized efforts by Island states. To fulfill its potential, the JCC needs some form of permanent bureaucracy to provide guidance and continuity. As the largest and most dynamic economy of the member states, Fiji is both well-placed to influence a reinvigorated JCC and to benefit from bilateral and regional trade with the United States.

June 24, 2005

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