Summary
In its analysis of the state of the EU-Fijian EPA implementation the EC skates over the evolution of relations since for large parts of this period political relations and EU development assistance programmes with Fiji were suspended following the military coup. In addition at the economic level, given the direction of EU sugar sector reforms, the value of traditional Fijian trade preferences have been progressively undermined over this period. Given the dominant role sugar plays in EU-Fijian trade this does not bode well for future trade relations. Ironically in the short term the prospect of a ‘no-deal’ Brexit could open up new opportunities for Fijian sugar exports to the UK if the UK imposed standard MFN duties on sugar imports from the EU27 and the Fijian government was able to find a way of rolling over its current duty free-quota free access to the UK market from the 30th March 2019.
- The Scope of the Pacific-EU EPA
There is no regional economic partnership agreement on the Pacific, but rather two bilateral agreements with Papua New Guinea (PNG) and Fiji respectively. Fiji signed its agreement with the EU on 11 December 2009, but the Fijian Parliament has yet to ratify the Agreement. Nevertheless the government of Fiji has notified the EU Council of the provisional application of the agreement since 8 July 2014.
- EU-Fiji Agro-Food Trade
The bilateral EU-Fijian EPA provides duty free-quota free access to the EU market, with Fiji committing to liberalising 87% of current imports from the EU. This needs to be seen in a context where the EU’s export trade to Fiji is ‘bulky’, with individual exports having a profound effect on annual trends. Within this trade EU agro-food exports are marginal but of growing importance given the decline in EU non-agro-food exports. EU agro-food exports consist primarily of preparations of fruit, vegetables and nuts.
Trends in EU Trade with PNG and Fiji
| 2014 | 2015 | 2016 | 2017 | % change | |
| EU Exports Fiji | 99 | 177 | 64 | 65 | -34.3% |
| – Of which agro-food | 4 | 5 | 5 | 6 | |
| – Agro-food % total | 4.0% | 2.8% | 7.8% | 9.2% | |
| EU Imports Fiji | 99 | 86 | 61 | 95 | -4.0% |
| – Of which agro-food | 92 | 79 | 53 | 87 | |
| – Agro-food % total | 92.9% | 91.9% | 86.9% | 91.6% |
Source: Annual Info Sheet on the Implementation of the Economic Partnership Agreement (EPA) Between the EU and Pacific States
Agro-food products however dominate EU imports from Fiji, amounting to over 90% of total exports to the EU. These Fijian exports to the EU are dominated by sugar (95.4% of total Fijian agro-food exports to the EU); with a small level of high value mineral water exports (2.3%). It is noteworthy that the EC makes little reference to the benefits Fiji has derived from the EPA to date.
The absence of any significant reference to the benefits which Fiji has so far derived from the EPA process to date is attributable to two main factors: the political situation which has seen the suspension of cooperation relations between the EU and Fiji for most of the period since 2007; and the EU’s sugar sector reforms which have fundamentally undermined the value of traditional preferential access to the EU market for Fiji’s primary export, sugar.
Between 2007 and 2015 the unit value of Fiji’s sugar exports to the EU fell 26%, so that despite a 14.5% increase in the volume of exports total sugar sector revenues were down 15.6%. While unit value recovered strongly in 2016 and 2017 (+ 35% and then a further 18.7%) (2), this is proving short lived.
The 2017/2018 ACP sugar export season was marked by dramatic changes on the EU market. Fijian sugar exports in the 2017/18 season were down 2/3 compared to the 2015/16 season and by half compared to the immediately preceding 2016/17 season. This needs to be seen in a context where total ACP sugar exports to the EU were down 58% from 1,324,000 tonnes to 557,000 tonnes (3).
Value of Fiji’s Sugar Exports to the EU (1701) to the EU (million)
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
| 86.3 | 104.0 | 85.7 | 33.3 | 61.3 | 37.8 | 74.3 | 87.0 | 72.9 | 49.7 | 82.5 |
Volume of Fiji’s Sugar Exports to the EU (1701) to the EU (tonnes)
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
| 174,597 | 220,089 | 198,875 | 100,189 | 148,903 | 76,350 | 141,362 | 192,664 | 199,982 | 131,694 | 184,205 |
Unit Value Fiji’s Sugar Exports to the EU (1701) to the EU (€/tonnes)
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
| 492.3 | 472.5 | 430.9 | 332.4 | 411.7 | 495.1 | 525.6 | 451.6 | 364.5 | 377.4 | 447.9 |
Source: EC Market Access Data Base
Of more concern in the 2017/18 season was that over half of these ACP sugar exports to the EU went to the UK market (with slightly under half of Fiji’s sugar exports going to the UK market). This needs to be seen in a context where overall the UK accounted for 34% of extra-EU sugar imports in the 2017/18 season.
Given the current political crisis in the UK as a result of the inability of the UK government to secure Parliamentary ratification of EU/UK Withdrawal Agreement, current Fijian preferential access to the UK sugar market could be lost from 30th March 2019 (see companion epamonitoring.net article ‘Deferment of UK Parliamentary Ratification Heightens Uncertainty and Gives Added Urgency to ACP Engagement with EU and UK Contingency Planning Processes’, 13 December, 2018).
- The Utilisation of Institutional Structures
The EC makes little reference to the utilisation of EPA institutional structures with specific references to issues facing Fiji beyond the general reference to the last Committee meeting in 2017 having covered ‘the state of play of EPA implementation (particularly PNG and Fiji’s tariff schedules) and ratification, as well as rules of procedure, rules of origin, sustainability issues (fisheries management and regulations, progress on labour issues, environmental protection reforms, etc.) and possible areas for deepening cooperation under the EPA’ (1).
While the EC acknowledges that ‘development cooperation is essential for EPA implementation’ it is ‘not part of the Pacific-EU EPA or its accession process’. The EC nevertheless highlights how the EDF regional indicative programme in the Pacific is used to;
- ‘strengthen regional trade and business enabling environment and
- better involve the private sector in order to strengthen the economic integration of the Pacific region’.
No specific references to cooperation programmes in Fiji however are included in the report.
The EU concludes its 2017 implementation report on the EU-Pacific EPA process with the observation that ‘effective implementation, coupled with corresponding domestic reforms (especially in areas of trade facilitation and improvement of value chains and business climate) will enable Fiji and PNG to take full advantage of the EPA, including to attract EU investment’. However, the EC’s report lacks any specific reference to what these advantages could be for Fiji and how these advantages could be more fully exploited.
| Comments and Analysis
In the face of the importance of the UK market to Fiji’s sugar trade with the EU developments around Brexit are critical to the future value of the EU-Fijian EPA. However, the situation is complex in the sugar sector. If the UK/EU Withdrawal Agreement is ratified by the UK Parliament then Article 129 of the Withdrawal Agreement will bind the UK to ‘the obligations stemming from the international agreements concluded by the Union’. This means the market access enjoyed to the UK market under the EU EPA with Fiji will continue to apply throughout the transition period, (which is currently scheduled to run until 1st January 2021). Indeed, the provisions of the Irish border ‘back-stop’ could ensure these international obligations continue to apply to the UK beyond 1st January 2021. This ‘back-stop’ which maintains UK membership of the EU customs union would run until an alternative UK/EU trade arrangement is in place which prevents the emergence of a ‘hard border’ on the island of Ireland. However the ratification of the UK/EU Withdrawal Agreement would also mean EU27 sugar producers continue to enjoy full duty free quota free access to the sugar deficit UK market. This needs to be seen in the context of the expansion of sugar production which has taken place in EU27 member states since the abolition of EU sugar production quotas. This has seen ACP sugar exporters lose market share on the UK market. This has profoundly impacted on the overall level of not only ACP but also Fijian sugar exports to EU-28 markets. Against this background, for the Fijian sugar sector the best scenario would be a ‘no-deal’ Brexit which saw the UK impose standard MFN tariffs on imports from the EU27 while political initiatives by the government of Fiji secure a ‘rolling-over’ of existing duty free quota free access to the UK sugar market for Fijian sugar export from 30th March 2019. This could create considerable short term opportunities for Fijian sugar exports to the UK market. However in the absence of ratification of the Withdrawal Agreement Fiji will lose its preferential access to the UK market from 30th March 2019 unless the government of Fiji can either: a) launch in association with other ACP EPA signatories a concerted campaign to persuade the UK government to unilaterally apply Article 129 of the concluded Withdrawal Agreement regardless of the state of play in the ratification process; b) take immediate steps to be in a position to sign a ‘rolled over’ ‘interim-UK-only’ reciprocal trade agreement based on a revised EPA text by 29th March 2019. Option a) would provide certainty for UK and 3rd country commercial operators in the run up to the UK’s withdrawal from the EU, thereby averting disruption of Fijian sugar exports to the UK market in a context where new market opportunities could emerge if the UK were to apply standard MFN duties on sugar imports from EU27 member states. While option b) could also ensure Fiji was well placed to exploit any new market opportunities which would emerge if the UK were to apply standard MFN duties on sugar imports from EU27 member states, it would also need to include a special annex setting out a detailed list of Fijian concerns which would need to be addressed under the final agreement with the UK prior to ratification of the agreement in Fiji. This would be essential for ensuring a favourable long term basis for future Fiji-UK relations. The government of Fiji will need to closely monitor developments and ensure its sugar exporter is well placed to take advantage of a ‘no-deal’ Brexit situation. This will require the Fijian sugar exporting company to take concrete steps to ensure it has ‘Brexit-Proofed’ its export supply chain to the UK, given the potential border management issues which could arise in the UK as a result of a no-deal’ Brexit outcome to the current EU/UK negotiations (see companion epamonitorinhg.net article, ‘UK National Audit Office Warns of Lack of Border Preparedness for Brexit’, 22 November 2018). |
Source:
(1) EC, ‘Individual reports and info sheets on implementation of EU Free Trade Agreements’, Commission Staff Working Documents, SWD(2018) 454 final, 31 October 2018
http://trade.ec.europa.eu/doclib/docs/2018/october/tradoc_157473.PDF
(2) EC, Market Access Data Base,
http://madb.europa.eu/madb/statistical_form.htm
(3) EC, ‘Sugar Market situation’, AGRI G 4, Committee for the Common Organisation of Agricultural Markets, 29 November 2018
https://ec.europa.eu/agriculture/sites/agriculture/files/market-observatory/sugar/doc/market-situation_en.pdf