Enough is enough
The SPARTECA agreement was originally formed to help give Fiji a leg up in the competitive global textile clothing and footwear sector. But in light of a review of the scheme, TFIA executive director Ashley Van Krieken asks: should assistance to a foreign country come at the expense of the Australian TCF industry?
For the past 24 years the SPARTECA arrangements have allowed unilateral free trade from the Forum Island Nations to Australia and since 2001 the SPARTECA-TCF scheme has been in operation. This scheme - unique to SPARTECA - was designed to provide the Fiji TCF industry with greater flexibility to enable it to be more global in its approach, but with the distinct pre-requisite that this support was not to come at the cost of the Australian industry.
Contrary to certain claims, the scheme was never designed or intended to assist or protect the Australian industry. Having received this concession and its benefits for many years, Fiji is now asking for more, but this time the resultant scheme would most definitely be detrimental to the Australian TCF manufacturing industry.
There is little doubt that Fiji has suffered under the pressures of the global marketplace and the dominance of China and other low cost producers. But Australia has also faced these pressures and unlike Fiji, Australia's TCF industries have risen to the challenge and significantly restructured to meet this new global market place.
For this reason, Australia's Foreign Minister currently has before him a proposal from Fiji that seeks a reduction in the S-TCF scheme's Rule of Origin Threshold; the inclusion of wool fabrics; removal of deeming provisions; and greater flexibility in allowable costs in the determination of local content. Fiji has noted that it cannot effectively compete with China under the current system and that its industry has already seen significant declines in TCF employment which is producing significant social problems.
The Australian industry is sympathetic to these concerns, and invested significant time into a review of the Fiji industry almost two years, supporting Fiji in calling for the recommendations arising out of that review (the Werner Report) to be implemented. Unfortunately the Australian Government rejected many of the Werner recommendations.
But regardless of its recommendations, the Werner Report made it clear that the Fiji industry's future would be limited if it did not restructure to improve its production efficiencies and to develop more flexible manufacturing systems to optimally service customers. This is Fiji's responsibility - no one else's.
Further, after extensive investigation, the Werner Report actually concluded that the very changes now requested would have a detrimental affect on Australia's TCF industry. That is, even the independent internationally-recognised TCF consultants rejected the proposals currently before the government.
The reality is that the Fiji proposal will have a twofold impact on Australia's textiles sector. Firstly by displacing fabrics sold to Fiji with cheaper overseas sources and secondly in placing domestic fabric sales under pressure through lower demand by Australian garment manufacturers, as their market share is eroded by cheaper product entering the market from Fiji. That is, the clothing manufacturers would be forced to compete against products containing up to 75 per cent content from other low cost countries (principally China) entering Australia duty free under the SPARTECA arrangements (not at the 17.5 per cent general tariff duty applied to such direct imports).
Conservative estimates of the impact, based on TFIA members input suggest employment losses in excess of 1,000 jobs, many in regional areas not to mention the flow on effects to the broader community.
The TFIA position is simple, assistance to a foreign industry should not come at the cost of the Australian industry even if it is only one job lost. Fiji notes that it cannot compete with China and while the proposed changes may provide Fiji some short-term respite it will never be as cheap as China. And it will never be able to compete with China unless it starts to restructure and reposition itself in global markets.
The question then is, who is Fiji competing with, if not China? The answer of course is Australian garment producers. These Australian companies have established niche, specialised products and markets that would be threatened by Fiji garments under this proposal for the reasons noted above. Fiji seeks to gain Australian market share at the cost of the Australian apparel industry, by manipulating arrangements so that it can have as little Fiji value added in the product as possible. This unduly erodes the assistance regime in Australia that was only reaffirmed by the Government a little over two years ago.
Despite claims the proposal will provide real benefit to the Fiji TCF industry, it will do little for its long-term future as it does not address the fundamental structural change needed by Fiji to compete globally. We are told of the large job losses in Fiji but let us not forget that the majority of these were in one company focused on the United States which found itself no longer competitive once quotas were removed on January 1, 2005 - an event the TCF industry globally has been aware of and planning for since at least 2000.
In this light, one can understand the frustration felt within Australian industry by this perpetual approach from Fiji to introduce changes to a scheme which was a concession in the first place, and which was extended in 2004, that has no benefit for Australia, but which risks real damage to Australia should it be implemented.
The Fiji proposal undermines the Post-2005 TCF arrangements, it breaches the fundamental principle of the original SPARTECA-TCF scheme and if acceded to breaks a commitment by the Department of Foreign Affairs and Trade to the Australian industry in December 2004 that the local content provisions would not be changed.
One therefore wonders why the Australian Government even appears to be countenancing the proposal. Fiji needs to be told - enough is enough!
But there is a solution - one previously recommended in the Werner Report, and collectively supported at that time by Australian industry, Fiji industry and Fiji Government - to provide Fiji industry with a program designed to encourage investment in human resources and capital to improve productivity levels enabling the Fiji industry to become more internationally competitive. This program would provide a means of fundamentally addressing Fiji's structural problems. The funding for this would be from the Aid budget and not from the Australian TCF industry.
The TFIA is not against helping Fiji but it is against sacrificing Australian jobs and production to do so.