Statement as delivered by Michael Punke,
U.S. Permanent Representative to the World Trade Organization
December 13, 2016
Thank you, Madame Chair. I am pleased to join today’s Trade Policy Review of Solomon Islands and to welcome the delegation headed by Minister Tozaka. Thanks to the Secretariat for its usual fine report, and thanks as well to the Government of Solomon Islands for its report, and for answers to the questions we submitted. We have a special word of concern about the recent earthquakes – we note that damage reports are still incomplete but would like to share our thoughts and prayers with your people.
Solomon Islands is a valued friend and partner of the United States. We are linked by close ties of history, as well as a shared commitment to peace and prosperity in the Pacific. Trade between us is growing – U.S. exports to Solomon Islands are increasing, and in 2016 appear poised to hit their highest level in over two decades – and Solomon Islands is also a beneficiary under our Generalized System of Preferences. In bilateral terms, the United States does not represent one of Solomon Islands’ biggest trading partners, but some major U.S. businesses are present there through regional affiliates and distributors in ways the bilateral data do not fully reflect.
Solomon Islands continues to face serious development challenges. It is a small island nation, and a least developed country, with an excessive reliance on fast-depleting natural resource exports. In addition to these development-related challenges come the additional challenges associated with being a chain of hundreds of vulnerable islands, and continued recovery from a political crisis at the start of this century. There have been numerous positive steps taken – which I’ll turn to in a minute – but despite those useful steps, the trend lines are not all in a positive direction. I hope our discussion can highlight ways the Solomon Islands can use trade, and its WTO membership, to sustain and accelerate positive trends, and to promote its development.
First, Solomon Islands should be commended on the important steps taken since the last review (in 2009) to strengthen the economic policy framework. There have been reforms to the monetary policy framework and to exchange rate policy. There have been important reforms to the tax regime and to compliance efforts. Legislation to implement the Customs Valuation Agreement was enacted. Legislation for public procurement was enacted. Competition was successfully introduced in the important telecommunications sector. Anti-corruption legislation has been introduced. And the overall results have been positive: six years of solid economic growth, increases in per capita incomes, and a significant fall in government debt.
However, we must also speak candidly of the fact that not all the recent trend lines are in a positive direction. Overall GDP growth rates have been declining. Trade has also been declining, with both exports and imports posting declines in each of the last three years, even at a time of economic growth. The over-reliance on logging exports – already noted as a key concern at the last review – continues to increase, even as experts predict forest resources could be completely depleted in less than five years. And as the Secretariat report notes, foreign direct investment – critical for the diversification of the country’s economy and export base – has actually been declining.
Reversing these trends is not just desirable, it is critical, given the imminent depletion of forest resources. It is good that the Government has identified diversification of the economy as a top priority, and recognized that increasing foreign investment can play a key role in achieving that. But while the report details many recent reforms in other areas, there doesn’t appear to have been comparable progress on improving the investment climate; and while the Secretariat report notes that an investment policy document is under preparation, no specific reforms or new measures are previewed. We urge Solomon Islands to consider ways to address the land ownership issues that many foreign investors consider an impediment to investing in Solomon Islands. We would also encourage reforms to increase transparency and to establish clearer parameters for government discretionary powers.
We would also urge prioritization of measures to combat illegal logging and illegal forest products trade and to promote reforestation. Log exports already represent by far the largest share of Solomon Islands exports, and the huge disparity between Solomon Islands’ trade statistics and those of some of its major log export markets suggests much of the trade may be illegal. Moreover, reforestation and plantation management appear to be impeded in part by the land ownership issues that affect the entire economy but are especially acute in this sector. Given the importance of timber for Solomon Islands trade, and the adverse environmental, economic and social consequences that loom if this resource is depleted through illegal logging, we urge the Government to prioritize meaningful measures to combat illegal logging and ensure that timber products are legally harvested and exported. We encourage you to draw on the expertise of your trading partners in addressing this challenge.
Finally, the Secretariat report highlights a number of instances where Solomon Islands has yet to fully comply with its WTO obligations. 58 tariff lines have applied tariffs that exceed their bindings, while another 28 tariff lines may exceed their tariff bindings. The internal goods tax is applied at a higher rate on imports than on domestically produced goods. The Government has not adopted legislation to implement the TBT agreement, nor made any notifications under that Agreement, including of existing measures. The Government has not implemented any legislation to implement the TRIPS agreement, nor made a notification under the TRIPS Agreement or a submission to the TRIPS council. The Government has not notified any SPS measures to the WTO. These are just the most obvious examples.
While we recognize the capacity challenges that Solomon Islands faces, it is disappointing that these same issues were flagged during the last review, and in the interceding seven years of growth and political stability, they have still not been addressed. This is important for the WTO system, which relies on each of us to fully implement the commitments we signed up to. But the importance of these rules is arguably greater for the Solomon Islands than it is for the WTO, because the transparency and predictability of these WTO commitments will help make the Solomon Islands more attractive to traders and investors, and promote the economic diversification on which the country’s future depends. We would urge the Government to prioritize addressing these gaps, and encourage it to seek the assistance of the WTO Secretariat or other Members should it encounter difficulties in doing so.
Solomon Islands is closer to achieving its development objectives than it was at the last review, thanks to its hard work; and we want to help our Solomon Islands friends address the more complex challenges ahead and keep moving forward.