Fiji: An Established Regional Trading Partner
Fiji’s economy is considered to be one of the Pacific’s most forward and developed, and part of its growth can be attributed to a recovery in the tourism industry and improved performance in mining, harvesting and processing of mahogany and fresh fish exports.
There are also new opportunities in the emerging high-tech and telecommunication sectors with a variety of incentives, including the IT industry, with call centres being a major attraction.
Sugar and garments continue to be Fiji’s largest two commodity exports, with the garment industry developing rapidly since the introduction of tax exemptions in 1988.
Other strong export sectors include fishing, agro-processing, gold, silver and timber, with Fiji’s extensive mahogany timber reserve confidently emerging. Fiji mahogany is widely regarded as one of the world’s best.
Mineral water, biscuits and beauty products have recently made impressive breakthroughs, with the Fiji Water brand making a big impact in the United States.
Manufacturing is a large industry with one of the most reasonable manufacturing environments with low overheads and efficient labour. Fiji also boasts an efficient port which acts as a gateway to the lucrative Asia Pacific region.
Our main export trading partners are Australia, the UK, the USA and New Zealand, with increasing market access opportunities now available. Major imports include manufactured goods, machinery and transport equipment, petroleum products, food and chemicals.
Fiji is a member of the WTO and a signatory to a number of other trading pacts. The Cotonou Agreement provides access to European markets, the GSP Agreement, to the US, Canadian and Japanese markets, and SPARTECA, allowing for preferential access to markets in Australia and New Zealand. PACER – Pacific Agreement on Closer Economic Relations and PICTA – Pacific Island Countries Trade Agreement. Under the PACER framework, PICTA provides for the establishment of a free trade area among 14 Forum Island countries.
Fiji-EU Trade Relations
Fiji over the years has enjoyed a favourable balance of trade with the EU. Fiji’s exports grew from 2010 to 2012, on average, at 29%. Fiji’s exports decreased by 14.6% in 2013 before increasing by 29% in 2014 and then further decreasing in 2015 and 2016.
Over 90% of total exports to the EU consist of raw sugar, followed by fresh and frozen fish (tuna), crystallised and glazed ginger, garments, mineral water, prepacked meals, beauty care products and life jackets. The EU has consistently remained the top five (5) export destination for Fiji.
Until 2013 imports from the EU grew at a steady pace, but there was a sharp increase in 2013 of 870%, largely due to the purchase of aircraft from France. In 2013 the EU was Fiji’s second largest import destination. However, from 2014 2016, a decline in imports was noted. Apart from aircrafts, other major imports include machinery, parts of machinery, mineral fuel and preparations of vegetables and fruits.
Sugar Trade in the context of the Fijian Economy
Sugar in Fiji, as in many ACP small island developing States, is a primary agricultural export, at the very core of our economies and the lifeblood of huge segments of our populations. In Fiji, our economy has been built on the sugar cane industry. Before the growth of tourism and other sectors, the sugar cane industry was almost the sole contributor to the prosperity of our country for close to 100 years.
EU Sugar Market
The EU has remained a key market for Fiji sugar exports despite the ups and downs in the recent past. The last major reform of the EU sugar sector in 2006, the advent of the Economic Partnership Agreements in 2008 and the denunciation of the ACP-EU Sugar Protocol represented some of the major challenges that Fiji, along with other ACP small and vulnerable economies, had to grapple with. As a consequence, many of the sugar industries had embarked on major reform and restructuring programmes to ensure continued and long-term sustainability of this vital industry.
On 1st October 2017, the EU undertook further reforms by abolishing quotas on beet sugar and isoglucose but maintained external tariffs. Moreover, all beet farmers will receive decoupled single farm payments, while beet farmers in 10 out of 19 sugar-producing member states will receive voluntary coupled supports (VCS). While the final outcome of this reform is uncertain, production of beet sugar and isoglucose is expected to increase. This, in turn, will increase the level of competition within the EU, reduce imports and erode the price preference from which ACP countries have benefitted in the past. It is also expected to result in an increase of EU sugar exports.
In a recent study, LMC International concluded that the impact of the erosion of preferences on the ACP will differ from country to country, depending on their (a) level of exposure to the EU market, (b) access to alternative markets (domestic, regional or other preferential) and whether these markets will continue to offer premiums over the world price following the EU reforms and (c) their cost structure. Fiji was categorised as a country with large exposure to the EU market and higher costs of production.