Report on the Implementation of the derogation to ... - Trade Websites

Final <strong>Report</strong>
RoO Derogation under the PACP-IEPA
However, while not the primary driver for attracting onshore investment, the derogation will play a
critical role in industry expansion in the future and its survival. The primary intention of negotiating
global sourcing was to reduce the impediment to industry expansion of inadequate supplies of
wholly originating fish for export to the EU market. Global sourcing, amongst other factors, will
assist in efforts to achieve greater economies of scale, such that PNG tuna processing facilities can
improve their competitiveness in the short-medium term. In doing so, if and when PNG’s margin of
preference (24%) to the EU gradually erodes in light of more favourable trade preferences garnered
by PNG’s major competitors (e.g. Thailand, Philippines), global sourcing will be a contributing factor
in sustaining PNG’s processing sector in the future.
4 DEVELOPMENT EFFECTS ON THE PNG ECONOMY
4.1 Definition of ‘Development Effects’
For the purposes of this review, ‘development effects’ is interpreted as ‘long-term income and
employment generation for the Pacific States’ (Protocol II, Article 6(b)).
Income generation pertains to direct contributions to the PNG economy from tuna processing
activities in the form of:
• Government revenue – contributions to Government revenue streams including taxes,
customs duties and charges, port charges, inspection and clearance fees and permits and
licences.
• Net local purchases – the total value of goods and services purchases from local PNG-based
businesses, reduced by an amount representing the imported context of the
products/services purchased to reflect the portion of expenditure fully retained in the PNG
economy.
• Employee earnings – the level of employment earnings of cannery employees, including
salaries/wages, bonuses, provident fund contributions and paid leave. Estimates include
earnings for locally employed staff, as well as a proportion of earnings of expatriate staff
resident in PNG, who are assumed to spend at least some of their salary within PNG.
• Other economic contributions - includes other contributions such as sponsorship/donations
in local communities, interest paid on loans made through PNG banking institutions and
community-based projects.
Income generation also encompasses other macroeconomic benefits:
• Contribution to balance of payments - net foreign exchange earned through exports of
canned tuna and cooked loins; includes the value of local sales of canned tuna, as this is
deemed to generate savings in foreign exchange due to import substitution. 61
• Contribution to gross domestic product – net contribution to economic growth (also
commonly referred to as ‘value-added to GDP’). 62
61 Calculated as gross revenue from export sales, reduced by the imported content of local purchases, direct
imports and payments for off-shore services. Local sales of canned tuna are treated as an addition to balance
of payments, on the basis that this will result in import substitution.
62 Calculated as gross sales minus the cost of intermediate goods and services purchased from other firms.
Alternatively, contribution to GDP may be estimated as the sum of employee earnings plus taxes, plus gross
operating surplus (net profit before depreciation, financial costs, investment income and bad debts). For the
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