WTO Trade Policy Review of the Solomon Islands

Statement by Ambassador Peter F. Allgeier
Geneva, 6 May 2009

Thank you very much, Chair.

On behalf of the United States, I would like to welcome Minister for Foreign Affairs and External Trade William Haomae, Ambassador Joseph Ma’ahaua, and the rest of the delegation of the Solomon Islands. We thank the Secretariat and the government of the Solomon Islands for their informative reports. , which provide a useful economic context for reviewing the Solomon Islands’ trade and investment policies. Finally, I would like to welcome the valuable contribution of Mr. Jaime Ho of Singapore as our discussant.

We recognize the convergence of challenges facing the Solomon Islands during the period of this review, including its narrow economic base and need to develop long-term sources of balanced growth, and the consequences of political instability between 1999 and 2002. We also recognize the efforts of Prime Minister Sikua and his government to meet these challenges through a reform program aimed at diversifying the economy and reaching out to foreign investors.

There have been positive developments on trade and investment policy since the last review in 1998. First, we commend the impressive measures taken to reduce tariffs. During the time period of this review, the simple average applied MFN rate declined significantly from almost 23 percent in 1998 to around 9 percent in 2008. Tariff dispersion also fell sharply, with most products carrying a rate of 10 percent. We applaud efforts to automate customs procedures to enhance control and revenue collection. In addition, the government’s efforts to revise tax and investment codes, including by shortening the negative list of investment restrictions as part of the Foreign Investment Act of 2005, are important and positive steps in making the Solomon Islands more attractive to foreign investors.

Though the United States is not one of the Solomon Islands’ top trading partners, our countries had $6.5 million in total bilateral goods trade last year. Consistent sources of U.S. imports from the Solomon Islands during the review period have been shells and fish, while leading U.S. exports include machinery and fish. We hope to grow our trade in coming years.

As pointed out by the discussant Mr. Ho, we would like to highlight our growing concern about unsustainable logging in the Solomon Islands. We note that the Solomon Islands relies on natural resources, specifically timber harvesting and log exports, for its economic welfare. Unfortunately, we also note that current levels of harvest and export are not sustainable; that is, according to the Secretariat’s report, logging exceeds the sustainable harvesting rate by a factor of three or more and, the government’s own report points out that logging is estimated to decline rapidly over the next two years. In our view, these problems underscore the importance of having a policy framework that will enhance the prospects for economic diversification and help avoid environmental problems. This is perhaps the most important message of this review.

The Secretariat’s report draws attention to weaknesses in the legal framework for the forest sector, including the false declaration of export quantities and the species of wood being exported. These are serious problems. We are interested to learn more about the steps being taken by the government to address these problems including, for example, by participating in initiatives designed to build capacity for sustainable forest management. In this context, it is important to note that many timber-importing countries, including the United States and China – the Solomon Islands’ primary export market for logs – have been working together to promote the legal sourcing of timber products and to combat illegal logging. We also encourage the Solomon Islands to complete the steps needed to adopt and effectively implement new forestry legislation.

As the Secretariat’s report also notes, the Solomon Islands has significant fishery resources, but governance issues including inadequate data collection on catches pose challenges. We hope that in view of the importance of fisheries to its economy, the Solomon Islands will support stronger disciplines on fisheries subsidies in the DDA negotiations, including on access arrangements for foreign vessels. Concerning access arrangements, the South Pacific Tuna Treaty among the United States and the Solomon Islands and other countries in the region can serve as a model. The Treaty’s strong focus on sustainability conditions, along with the requirements for the U.S. fishing fleet and provisions for technical assistance, has been highly beneficial for all participants.

Chair, we welcomed the opportunity to submit written questions to the delegation of the Solomon Islands on a number of issues. We thank the delegation of the Solomon Islands for its attention to our questions and will examine the written responses we have just received with great interest. We would simply like to underscore our primary interests with our remaining time.

First, in light of the current issues in the timber sector, we would be interested in learning more about the government’s plans for economic diversification and for building a stronger legal and institutional capacity, and its priorities in those areas.

Second, we would like to get an update on the government’s future plans for trade and investment liberalization in several areas. On tariffs, the Secretariat’s report notes that the Solomon Islands maintains applied tariffs in excess of bound rates and that it has not yet fully adopted the Harmonized Description and Coding System. Other issues on which we would find updates useful are: the excise tax discrepancy that currently exists between imported and domestic goods; the potential for further improvements in the investment climate that would come from the further streamlining of business licensing procedures, particularly by provincial authorities; and the strengthening of overall property rights. We would welcome more information on the government’s current plans for addressing these issues.

In closing, Chair, we wish the Solomon Islands a successful second trade policy review and we thank the delegation for the responses provided to
our questions.
Thank you.