South Pacific Regional Trade and Economic Cooperation Agreement

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The South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) was signed in 1981 between Australia, New Zealand and countries of the South Pacific Forum. It allows duty free access for the products of Forum Island Countries (FICs) to the markets of Australia and New Zealand, subject to "Rules of Origin" regulations. The aim is to redress the unequal trade relationships between the two groups. The Textiles, Clothing and Footwear (TCF) industry has been a major beneficiary of SPARTECA through the preferential access to Australian and New Zealand markets. The local Textiles, Clothing & Footwear (TCF) industry has grown over the last 10 years and is now one of the major industries in Fiji. In 1997 the TCF industry accounted for 26% of Fiji’s total domestic exports; it contributed to some 3.5% of GDP and provided employment for about 18,000 people that account for 16% of those in total paid employment. The rapid expansion of the Fiji TCF industry has been attributed to the removal of TCF quotas by the Australian Government in 1987 which allowed quota free and duty free access under SPARTECA, the introduction of the Tax Free Factory/Zone (TFF/TFZ) Scheme in 1988 and the Australian Import Credit Scheme (ICS).

The Australian Import Credit Scheme (ICS) commenced in July 1991 as part of a larger package of tariff and other industrial reforms in Australia. It was introduced as a temporary measure to encourage Australian TCF exports and terminated on 30 June 2000, except in the case of Fiji, where an extension had been granted to October 2000. Given the Australian and Fiji Governments’ commitment to developing a WTO-friendly arrangement in place of the ICS, the SPARTECA (TCF Provisions) Scheme was developed. SPARTECA (TCF) provisions concept complements the existing SPARTECA treaty and provides for a change in the way local area content (LAC) is calculated for TCF products (goods) entering Australia from Forum Island Countries (FICs). Under the existing SPARTECA arrangements, goods can enter Australia duty free where the Allowable Factory Cost is greater than or equal to 50% of the total ex-factory cost of manufacturing the goods. These arrangements continue to stand. The SPARTECA (TCF provisions) Scheme enables companies to utilise Excess Local Area Content (ELAC) from certain SPARTECA qualifying TCF goods to help meet the 50% content requirement in otherwise non-qualifying Eligible Goods. ELAC is only derived where a product’s LAC exceeds 70%. Similarly, ELAC can only be used where a product’s LAC is greater than 35%, and where there is a last process of manufacture performed in the FIC.

The duration of the S-TCF Scheme is from 1st March 2001 to 31st December 2004.

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