The Solomon Islands has entered into a non-reciprocal duty-free access agreement with China.
Foreign Minister Jeremiah Manele has signed and formalized the arrangement with the Resident Ambassador of China (PRC) in Honiara.
“This new development will serve to deepen and materialise part of the agreements through which both Solomon Islands and PRC had committed to continue to build and grow cooperation since the two countries established relations in September 2019,” the government said in a prepared statement.
In 2018 the top 5 export market for Solomon Islands are.
1. China - worth US$ 380 million, with a partner share of 66.83%.
2. Italy - worth US$ 41 million, with a partner share of 7.22%.
3. India - worth US$ 29 million, with a partner share of 5.08%.
4. Switzerland - worth US$ 14 million, with a partner share of 2.44%.
5. Thailand - worth US$ 12 million, with a partner share of 2.10%.
With China holding a 66.83% partner share in export receipts it seems clear that such an arrangement is important for the Solomon Islands. Proponents of such arrangements say it could help prop up the local economy, given that exported goods from the Solomon Islands will now be cheaper, compared to other countries that trade in similar goods with China.
But there are other issues we need to look at carefully. Around 78% of goods exported to China are raw materials – most of it are round logs. The logging sector continues to be the mainstay of the Solomon Islands economy.
Three important issues need to be considered when the agreement is being implemented.
1) With such an arrangement our logs will be cheaper as compared to others that export to China. There will be a spike in demand for our logs, which may lead to a “harvest race” by those that engage in commercial logging in Solomon Islands. The government should have control measures in place to ensure that our people and our resources are protected from further exploitation.
2) Similar to the above, there is a massive push within the mining sector to open up new tenements around the Solomon Islands. Such favorable trading arrangements with China will see an influx of investors, perhaps from China, within the mining sector. It is important that the government protects its people and resources from unscrupulous ‘investors.’ The government should also be serious about reforms within the mining sector – such non-renewable resources must be guarded and harvested sustainably.
3) An extremely high dependence on one market should be a cause for concern for any responsible government. China understands the importance of its market for the Solomon Islands – and with such control it can be used against us. China has used its market power to punish those that have questioned or challenged its core interest - this is well documented. If our core interests are aligned with China than perhaps it should not be an issue in the foreseeable future.
Having said that it is true that the agreement has the potential to give the Solomon Islands the much-needed economic boost post Covid-19. The only proviso to this arrangement is that it will cease once the Solomon Islands graduates from its Least Developed Country (LDC) status in 2024 – four years from now. A lot can happen in four years, let us hope that this agreement will bring much needed growth and development for the country.