Minister Maru demands immediate review of Import Tariffs
The Minister for International Trade and Investment Richard Maru, has called for immediate review of import tariffs.
This review is to give protection to local industries who are struggling to compete against cheap and dumped imports.
Minister Maru expressed deep dissatisfaction with the current way tariff policy is being administered, which he described as being done unilaterally, discriminatorily and arbitrarily.
He said Tariff Reduction Program [TRP] was an externally imposed condition under the broader structural adjustment program, which began in 1999.
“The tariff reduction program was agreed to be implemented with the view to encourage economic efficiency and boost productivity. Lowering tariffs was also seen as a way to encourage a competitive private sector by gradually exposing them to foreign competition.
"Under the tariff review program, almost 80 percent of import tariffs have been liberalized with protective rates being progressively reduced.”
Minister Maru queried the economic benefits promised under the tariff reduction program saying, Papua New Guinea’s economic structure remains largely unchanged since the implementation of the program.
He said local manufacturing accounts for only 3 to 6% of GDP with the country continuing to be heavily dependent on exports of raw commodities and imports of goods and services that can be locally produced and manufacturing companies have remained stagnant over the years with not much growth.
Mr. Maru explained that some countries and foreign businesses have been engaged in unfair trade practices using subsidies to gain competitive advantages over highly vulnerable countries like Papua New Guinea [PNG] which are currently not equipped with the legislative and technical capacity to respond to cheap, dumped imports according to agreed international procedures of the World Trade Organization.
“PNG’s production costs are higher than most of our trading partners, and without the use of government sponsored subsidies, their products would not be as competitive in international markets. These cheap dumped goods are then imported into PNG and sold at lower than normal market prices posing steep competition for local manufacturers who are forced to scale down operations just to survive or even in some cases, close operations. Tariffs are, therefore, an important trade policy instrument that can address unfair trade practices,” said Minister Maru.
Minister Maru further highlighted that other countries have successfully leveraged tariffs as a negotiating tool to encourage investment into their local manufacturing industries rather than use them for fiscal purposes only.
“With most of PNG’s tariffs already zero rated, and any remaining protective tariffs envisaged to be progressively reduced under any future tariff reduction program, PNG is essentially giving away its bargaining chips when it comes to negotiating future free trade and investment deals. Through the tariff reduction program, PNG has allowed countries to freely access our markets with nothing in return.”
Minister Maru also questioned why key agencies responsible for trade and investment were left out in final decisions on tariff setting.
He further stated: “The global trading economy is also undergoing substantial transformation driven largely by advancements in digital technology and rising geo-political tensions, PNG’s national tariff policy should therefore respond to the new realities of conducting commerce in a changing trading environment. Therefore, I am calling for an immediate and complete review of the tariff reduction program with an emphasis on inclusive and comprehensive stakeholder engagement.”
Minister Maru has directed the National Trade Office, with support from the Department of International Trade and Investment, to work with the Department of Treasury and establish a Tariff Working Group which should include agencies responsible for trade and investment, as well as private sector and the broader business trading community.
“This Group will look into strategies in which PNG’s Tariff policy can contribute to attracting investments as well as growing the domestic manufacturing sector and future trade arrangements,” said Minister Maru.