International Economics

This document discusses the impact of international trade on Fiji's economy, including its trade deficit and major exporting and importing countries. It also explores the concept of tariffs and their effects on domestic industries and consumers. Additionally, it delves into Fiji's trade policies, including the implementation of a National Export Strategy to boost exports.

International Economics

QUESTION 1..................................................................................................................................1
QUESTION 2..................................................................................................................................2
QUESTION 3..................................................................................................................................3
REFERENCES................................................................................................................................6

QUESTION 1
Fiji which is now officially the Republic of Fiji is an island nation situated in Melanesia,
part of Oceania in South Pacific Ocean which is approximately around 1,100 nautical miles
(2,000 km; 1,300 mi) northeast of the North coast of New Zealand (Le and Quah, 2018). Its
nearest neighbours to west are Vanuatu, New Caledonia to southeast, Kermadec Islands of New
Zealand to southeast, Tonga to east, Wallis and Futuna of the Samoas and France to the
northeast, and Tuvalu to north. Fiji comprises of an island chain of more than 330 islands – about
110 of which are irreversibly occupied – and more than 500 islets, representing a total land area
which is about 18,300 square kilometers (7,100 sq mi). The outermost island is that of Ono-i-
Lau. The two main islands, Viti Levu and Vanua Levu, represent 87 per cent of its total 883,483
population. A capital, Suva, on Viti Levu, acts as main travel-ship port for a country.
Fiji is one of the world's 147th most extensive export economies. Fiji imported $2.44B
and exported $950 M in 2017, resulting in a $1.49B negative trade deficit. It's GDP in 2017 was
$5.06B, and its per capita income was $9.6k (Trading Economics. 2020). The Fiji's major
exporting countries are the United States of America ($266 million), Australia ($164 million),
New Zealand ($57.2 million), Japan ($48.8 million) and China ($40.3 million). The main
countries from Fiji imports are Singapore ($439 million), New Zealand ($403 million), Australia
($402 million), China ($385 million) and South Korea ($120 million). It is a major exporter
of Water ($148 million), Raw Sugar ($106 million), Non-fillet Frozen Fish ($81.5 million),
Processed Fish ($68.7 million), and Gold ($57.9 million), it uses the 1992 update of a HS
(Harmonized System) classification. It is a major importer of Refined Petroleum ($405 million),
Vehicles ($64.3 million), Non-Filet Frozen Fish ($64.3 million), Distribution Trucks ($64.2
million), and Wheat ($44.1 million).
The economy of Fiji is an open economy, and it works (imports and exports) on the
global market. This has been noted and illustrated that Fiji's net exports have declined in recent
years, reflecting slow growth as well, and imports were seen to increase year-on-year
consistently, rising Fiji's trade imbalance and balance of trade. In last several years ratio of
import to GDP has increased dramatically. Export production in Fiji is also decreasing due to
many factors. Recent changes of its balance of trade have brought about cycle of Fiji's
integration with world in prior years (Fidora and Schmitz, 2018). One such growth was signs of
progress in export orientation system of countries, which contributed to a growth in exports of
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Fiji. Due to a end of tax-free areas a main apparel manufacturer 'GIMLI' suspended its activities
in Fiji. Sugar was once the main export earner in Fiji, but hospitality is now one of the biggest
foreign-exchange sources of income in Fiji attributable to several uprisings. As an export earner,
the sugar industry also plays a significant role. Other industries, including such as forestry,
fisheries and agriculture, tends to play an important role in Fiji's economy and contribute
to export income to Fiji. Most of the nations which are buying services and goods from Fiji
include America, Australia, The Pacific Regions, The European Union, New Zealand and Japan.
Incomes from exports are significant for the Fiji economy. Value of exports for Fiji results
showed relatively slow growth in recent years. Value of exports continues to vary and fall
gradually from years 1995 to 2005.
QUESTION 2
Merchandise applies to every kind of products, including private or industrial items,
along with services sold to members of general public (retail) or other (wholesale) firms. It can
also refer to 'freebies' – promotional products which are provided or offered completely for free,
such as the personalized drink bottles (Cingolani, Iapadre and Tajoli, 2018). These items could
include schedules, pieces of metal, picture frames, office supplies, gift items, textile products,
badges, etc. A tariff is a tax that is levied on goods which are imported from some other country
and are levied by importing country's government. By raising their cost of products and services
imported from some other country, tariffs are being used to limit imports, rendering it less
appealing to local customers. There are mainly two kinds of tariffs: A common tariff is imposed
as a set fee depending on product size, such as a tariff of $1,000 on a vehicle. An ad-valorem
tariff is imposed depending on the price of a commodity, like 10 per cent of a car's price.
Government agencies can put tariffs to increase revenue or defend local industries against global
competition — particularly young ones. By increasing the cost of foreign-produced products,
tariff barriers can make domestic production alternative solutions look more appealing.
Government agencies which use tariffs to help specific sectors also do this in order to
protect businesses and employment (Mukhin, 2018). It can also be utilized as an international
relations extension: raising tariffs on a biggest export of a trading nation is a manner of exerting
economic influence. However, duties may have unintentional side effects. By-competition, they
will make domestic producers less competitive and creative. They may harm domestic
customers, as a lack of competition tends to drive rates upwards. By preferring some sectors, or
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geographic areas, over others, they may generate tensions. Tariffs intended to help city
companies, can hurt customers in rural communities who may not gain financially from policy
and are inclined to pay more now for produced goods. Finally, an attempt to force a competing
nation through tariff barriers can turn into more of an unproductive process of retribution,
usually referred to as a trade war. Products which Fiji imports and attracts the highest tariffs are
wood, vegetables, transportation, Textile and clothing and stone and glass. These are some of the
products which country imports from other countries main importer for wood are Wallis and
Futura Islands, Vietnam, Venezula and other (World Integrated Trade Solution. 2020). The main
exporters for vegetables for Fiji are various countries which include Vietnam, Venuatu, Uruguay,
United States of America, United Kingdom, UAE and many others. The major countries which
export transportation in Fiji are such as New Zealand, East Asia & pacific, Australia, United
States of America, United Arab Emirates, etc. for textile and clothing major exporter sending
their goods in Fiji are United States of America, United Kingdom, Thailand, south Asia,
Philippines, New Zealand and different others and for the Stone and glass are majorly imported
from countries such as United States of America, United Kingdom, Thailand, Sub Saharan
Africa, South Asia and South Africa. These are some countries which majorly import their goods
in Fiji and pay high tariffs.
QUESTION 3
Trade policies are essential to a economic priorities of Fiji to establish an effective open
economy to foster export-led development. By lifting restrictions on imports and favouring
export advertising and marketing, Fiji should have introduced an outward-looking strategy in
order to trade, as per the officials (Steckel and Jakob, 2018). Fiji argues that although a relatively
open economy has brought growth and generated employment, it also has contributed to greater
insecurity of the nation, which includes loss of tax revenue through lowered duties. However, in
theory, Fiji argues that import tariffs are export taxes, and protective policies manipulate
investment decisions in favour of non-competitive suppliers.
The change from a consumption-driven economy to exports involves elimination of
previously established policies which includes various things such as barriers and different forms
of protection, custom and tax exclusions, and opportunities, as per the Administration. Fiji states
that the new tariff strategy would just be to prevent cascading custom tariffs by implementing a
small and standardized rate regulatory framework, so a comprehensive adjustment of tariffs and
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taxes should be implemented in order to encourage economic productivity and competitiveness
will help the economic growth of the country far more than perverse incentives.
However, government's approach further to freer trade would be incremental based on profit
issues, governed by a speed of internal modifications to fiscal structures and institutional
adjustment, which would also offer time for non-competitive industrial sectors to modify to
global competition (Lundahl, 2018).
Progressive implementation of a National Export Strategy (NES) for boosting
country's exports is a central to Fiji's trade policy. Which involves broadening markets
particularly in the asia-Pacific and goods that are mainly away from sugar and clothing,
negatively impacted by, among other things, deterioration of taste and preferences in New
Zealand, Australia, the United States and the European Countries, a significant "external shock"
to Fiji. Cabinet supported the model NES introduced at National Economic Summit and was
finalized. It binds preference to the growth of production, services and exports, and public and
private partnerships. An NES advisory committee, comprising of top administrators from various
trade agencies/ministries and executives of a corporate sector, tracks compliance and reports
progress to NEDC. Following a delayed adoption of NES since December 2006, committee met
again in September 2008 in order to review an usage of budget allocation which was allotted in
order to help restoring a short-term exports to economy. Originally six of the 13 identified a
sector which includes agri-business; marine products, ICT, audio visual, mineral water and
forestry were selected in order to improve the export efficiency of Fiji (Kenen, 2019).
Contradictory trade policies and a non-level playing ground for entrepreneurs are preventing
exports; and opportunities which are seen as mostly inadequate, limited primarily to specific
industries which discriminate against all the other prospective export industries.
Legislation of obsolete trade-related regulations during testing period was sluggish,
mostly fragmented and disabled by lack of organizational capacity and likely political
uncertainty coupled with shifting priorities and governments. Although departments and
agencies are urged to compile databases of obsolete legislation for examination, several
legislations are obsolete and remain operational such as quarantine regulations and all other
similar laws must be removed. The tariff system of Fiji includes several excise tax bands: 0%,
5%, 15% and 32%. Those tariffs implemented on Most Favoured Nation (MFN) and it is
considered by the Fijian economy. by seeing its development which is fairly open to innovation
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and approximately 70% of the import tariffs attract duties. From 0 to 5 per cent export tax. Five
per cent of tariff lines are also subject to a particular customs duty in order to sustain maximum
tariff rates which are reasonable and customer friendly (Ministry of Industry, Trade and Tourism.
2018). The Government can easily provide an industry encouraging both industrial development
and trade endorsement by carrying out tariff policy updates consistent with its goals for
economic growth and Priorities Set.
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REFERENCES
Books and Journals
Kenen, P.B., 2019. Essays in international economics (Vol. 5332). Princeton University Press.
Lundahl, M., 2018. Themes in international economics. Routledge.
Mukhin, D., 2018. An equilibrium model of the International Price System. In 2018 Meeting
Papers (No. 89). Society for Economic Dynamics.
Cingolani, I., Iapadre, L. and Tajoli, L., 2018. International production networks and the world
trade structure. International economics, 153, pp.11-33.
Fidora, M. and Schmitz, M., 2018. Factors driving the recent improvement in the euro area’s
international investment position. Economic Bulletin Boxes, 3.
Le, T.H. and Quah, E., 2018. Income level and the emissions, energy, and growth nexus:
evidence from Asia and the Pacific. International economics, 156, pp.193-205.
Steckel, J.C. and Jakob, M., 2018. The role of financing cost and de-risking strategies for clean
energy investment. International Economics, 155, pp.19-28.
Baiman, R., 2018. Economics: A tool for critically understanding society. Palgrave.
Online
Trading Economic. 2020 [Online] Available Through:
< https://tradingeconomics.com/fiji/balance-of-trade >
World Integrated Trade Solution., 2020 [Online] Available Through:
<https://wits.worldbank.org/CountryProfile/en/Country/FJI/StartYear/2014/EndYear/
2018/TradeFlow/Import/Partner/wld/Product/All-Groups/indicator/AHS-MXMM-RT >
Ministry of Industry, Trade and Tourism. 2018 [Online] Available Through:
< https://www.mitt.gov.fj/wp-content/uploads/2018/10/Fijian-Trade-Policy-Framework-
min>
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