Reading between the lines of the Narsey Report

Linda Hill

The Narsey study advising governments to include alcohol and tobacco in the Pacific free trade agreement gathered evidence from a range of informants, including industry stakeholders. It provides insights on the alcohol industry and its stage of ‘globalisation’ in the region.ⁱ

The key question the report addresses is whether and how Pacific governments may legitimately protect local alcohol production – at least during a transition period while tariffs are gradually lowered. The report discussed the importance of local production in almost the same breath as it criticises quality and productivity. It becomes almost schizophrenic when it reveals that most production is ‘local’ only in the sense that factories are located on certain islands (see previous article). Most ingredients and material are imported, master brewers are mostly ‘ex-patriots’ – i.e., also imported – and local breweries are part-owned and controlled by Australasian companies now well plugged into the global alcohol oligopoly.

This situation appears to make nonsense of the report’s proposed option on ‘rules of origin’ for alcohol and tobacco products, as products are only considered to originate within the free trade region if 40 per cent or more of their value is created in a PICTA member country. All the options proposed merely offer different time schedules for eliminating barriers against imported alcohol and tobacco. Even ‘negative lists’ of products ‘excepted’ from PICTA must have their import tariffs removed by 2016. Negotiations under PACER will mean additional schedules to reduce tariff barriers against New Zealand and Australian products from around 2012.

The Narsey report providesinformation about the productivity of the various alcohol production plants within the region. All operate below capacity, usual working only two or three days a week. He reports that the Fiji and Papua New Guinea breweries are on ‘a completely different tier of productivity’ from older plants in other Islands.

Economies of scale could perhaps allow one firm to supply the entire PICTA market, meaning reduced share, closure and employment losses for others. This information on productivity/ capacity also suggests that employment is unlikely to increase much in the ‘winning’ country.

Narsey suggests that competition from freeing up trade might not always be ‘feasible or desirable’, as the conflicting interests of multinational owners – predominantly the Fosters Group – may account for missed opportunities, such as marketing ‘unique’ local beers to Pacific communities in Pacific Rim countries. There may be other conflicting interests among local owners. SPC’s Dr Stanton notes that lack of restrictions on alcohol consumption in the Pacific region may suit some individuals in power who have financial interests in the liquor industry.ⁱⁱ

Viewed from the perspective of industry interests, rather than governmental ones, the report makes clear that the PICTA free trade area will enable the rationalisation of alcohol production and supply across the Pacific region. Increased production of beer in Fiji, Papua New Guinea may displace Australian and New Zealand imports in other Island countries. However, when PACER extends PICTA to include Australia and New Zealand, further rationalisation of production across the whole Pacific can be expected. While beer distribution from Fiji may still make sense to Fosters, Narsey notes that local spirits production is ‘virtually certain notto survive’.

This prediction is supported by news that distillers from around the world are lobbying the World Trade Organization for further liberalisation of ‘trade and services’ in alcohol. New Zealand’s Distilled Spirits Association (whose members include the New Zealand branch of the global spirits corporation Diageo) believes that export potential is currently hobbled by excessive trade barriers and tariffs. New Zealand exports gin, vodka, liqueurs and alcopops to more than 30 countries, including the Pacific. “International trade reform, especially a reduction in tariffs or duties, would help New Zealand bottled and bulk spirit exporters, making our pricing more competitive and therefore more profitable,” says chief executive Thomas Chin.ⁱⁱⁱ

What can be expected from regional rationalisation of alcohol production is economies of scale that increase availability and marketing of low priced alcohol in the Islands – with few policies in place to address this.

The likely result is a rise in hazardous drinking among Pacific people, with social and health consequences. This is the experience of Pacific peoples – particularly young people – living in the already saturated alcohol markets of New Zealand and Australia.

Doctor Hill is employed by the Global Alcohol Policy Alliance to further its objectives in the Western Pacific region. She can be contacted at Linda.hill@actrix.co.nz

References
i For tobacco, globalisation is already well advanced. Narsey reports that British American Tobacco dominates the Pacific market with products that include small amounts of local leaf and processing.)

ii Angela Gregory (2004) Pacific health experts seek ways to win their battle of the booze. NZ Herald. 15 October.

iii Distilled Spirits Association of NZ (2004) Global spirits industry supports free