EU and Pacific ACP trade negotiators have met in Brussels in the first week in October for the first time in three years, for a Joint Technical Working Group meeting, in order to finalise the draft legal text of the EU–Pacific ACP full Economic Partnership Agreement (EPA).
Negotiators discussed on that occasion the fisheries provisions that would allow increased exports of fresh, frozen and chilled fish to the EU from the Pacific through the extension of the global sourcing derogation.
Following the meeting, Fiji’s permanent secretary for industry and trade stated that ‘global sourcing provisions on fresh, frozen and chilled fish, if granted under the comprehensive EPA, will accrue tangible and significant benefits, in terms of investment, employment and growth – It will provide the single major incentive for PACP states to enter into EPA.’
The issue of global sourcing for PACP fish products is also discussed in a new European Parliament study on ‘the application of the system of derogation to the rules of origin of fisheries products in Papua New Guinea and Fiji’, which highlights that, already, ‘there has been a discernible and measurable economic development benefit to PNG’, in terms of foreign investments in local tuna-processing capacity.
The study also discussed the major recent development in PNG–EU trade relations, which is the emergence of cooked loins ‘as a fast growing and sizable component of the trade’. These loins are mainly exported to Spain and Italy, where processors are moving away from labour-intensive processing of whole frozen tuna into using loins. The study highlights that this results in a‘schizophrenic situation’ of PNG being both a competitor for EU tuna canners, and an increasingly important supplier of tuna loins.
However, few other Pacific ACP states are in a position to produce such products, so the iEPA global sourcing provisions have little interest for them. Of much more interest to most ACP countries would be the extension of the global sourcing derogation to fresh/frozen products. ‘Unfortunately, there are a number of barriers to this ambition’, according to the study. As a result of heavy criticism by the EU tuna sector for granting the global sourcing derogation to PNG and Fiji, the EC now has a more cautious attitude to any further global sourcing concessions: ‘Any extension of global sourcing would require the PACP to first provide a very strong economic justification, and may involve conditionalities (species and product restrictions, quotas, etc.)’.
The study also explains why Spanish firms have not shown much interest in investing in PNG onshore processing facilities. Production costs shows that PNG products (canned skipjack and tuna loins) are more expensive than similar Ecuadorian products. Lower productivity rates, higher costs for freight and utilities in PNG, as well as cultural proximity between Ecuador industry and European (Spanish) tuna industry investors are also cited. Ecuadorian canned tuna products and loins also benefit from GSP+ zero duty entry to the EU market. In this regard, the study notes that ‘reported discussion concerning revisiting the eligibility for GSP+ status by Ecuador is highly relevant’. This Latin American tuna industry – and European private investments linked to it – could be affected by PNG becoming a more competitive producer of both loins and canned tuna.
For most Pacific ACP countries, the extension of global sourcing to fresh and frozen products would indeed be an important incentive for local development. The European Parliament study points out that, in order to gain that extension of global sourcing, Pacific ACP countries should first provide economic justification for their demand, and that they may have to accept conditionalities. Inasmuch as Spanish companies are less likely to invest in Pacific ACP onshore processing facilities – they have already committed themselves to investing in such facilities in Latin America, the extension of global sourcing could compensate – as an alternative incentive to promoting local processing and development benefits – for the absence of such private investments.