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Background

The Treaty establishing the Micronesian Trade and Economic Community (MTEC) was negotiated between 2012 and 2014 and was concluded and signed recently on September 3, 2014 by the Presidents of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau. The vision and long-term goals of the MTEC are to endeavor towards the creation of a trade and economic “community” of shared prosperity to support the achievement of sustainable and equitable socio-economic development of the Member States and improve the standard and quality of life of their People.


Rationale/Benefits of the Treaty

1.      to establish the MTC as a legal entity with the juridical personality required to develop programs, mobilize the resources, and carry out the work necessary to achieve the vision and goals of the MTC and its Member States;

2.      to address aspects of trade and economic of interest to the three Countries that were not adequately addressed in the MOU, in particular trade and economic infrastructure, enhancement of the capacity of the productive sector;

3.      to reinforce their commitments to sub-regional trade and economic cooperation and integration, and sends a positive signal to Development Partners about their determination to pursue sustainable economic development through trade and investment promotion and development, rather than relying solely on Overseas Development Assistance;

4.      to lay out the steps leading to the realization of their vision of establishing a Micronesian Bloc as formulated in 2007; and

5.      to provide an institutional framework through which the actions related to sustainable economic development spearheaded by several Development Partners could be implemented and monitored in the short, medium and long-term within the Micronesian sub-region.


Overview of the Treaty

KEY CHARACTERISTICS AND PROVISIONS OF THE TREATY

1.      Several parts and provisions are merely transposition from the MOU either in their entirety or with minor changes.

2.      The Treaty reflects the consensus reached during past MTC Meetings, national consultations, and the Working Group Meeting.

3.      The Treaty borrows from the Agreement establishing the Melanesian Spearhead Group (MSG) and Treaties establishing some of the economic groupings between developing countries (Treaties establishing the Southern African Development Community (SADC), the Economic Community of West African States (ECOWAS), and the Caribbean Community (CARICOM Treaties).

KEY PROVISIONS OF THE TREATY AND PROTOCOL

Vision, goals and principles (Article 3)

The vision of the MTEC is to endeavor towards the creation of a Micronesian Trade and Economic “community” through the promotion of sub-regional trade and economic cooperation and integration to support the achievement of sustainable and equitable socio-economic development of its Member States and improve the standard and quality of life of their People, thus contributing to the progress and development of Asia and the Pacific Region.

The guiding principles are: cooperation and integration; solidarity; collective self-reliance; equitable and just distribution of the costs and benefits of sub-regional cooperation and integration, rule of law, good governance, human rights, and democracy.

Objectives pursued under the Treaty (Article 4)

New elements included in the Treaty are: (1) the strengthening and consolidation of the long-standing historical, social and cultural affinities and links among the people of the sub-region, (2) industrial development, sustainable utilization of natural resources and protection of environment, (3) strengthening the private sector, and (4) greater integration into the global trading system.

Priority Areas of Cooperation phases leading towards the vision, goals and objectives of the MTEC (Article 5)

Article 5 is the most important provision of the Treaty because it lays out four phases of up to five years each, leading to the creation of a trade and economic community between the Member States:

1.      Phase one: setting the rules, institutions, and infrastructure for preferential trade and investment,

2.      Phase two: towards free trade and investment;

3.      Phase three: harmonization of trade and investment policies - towards a customs union; and

4.      Phase four: realization of a common market leading to an economic union.

Article 5 provides that the passage from one phase to another is subject to progress achieved by the Member States. A review will take place one year prior to the end of each phase. The transition from one phase to another can be accelerated if two thirds of the Member States enter into an arrangement of similar nature with a third country.

The Micronesian Presidents’ Summit as the supreme constituent body of the MTEC (Article 7)

The annual meeting of all Heads of State and Government of the Member States or their designated representatives has full competency on all MTEC matters, including appointment of the Director General, admission of new Members, Associate Members, and Observes.” The MPS is assisted by MTEC Ministers (Article 8) to whom certain legislative powers can be delegated. MTEC Officials are responsible for advising the Ministers on MTEC matters (Article 9).

The MTEC Secretariat (Articles 11-12)

A permanent Secretariat with its headquarters in Pohnpei, FSM, headed by a Director General, will replace the Interim Secretariat, headed by the FSM (FSM Department of Resources and Development). The Secretariat will have a juridical personality with all immunities and privileges necessary to perform its duties.

Involvement and participation of stakeholders including the Private Sector (Article 13)

The Treaty ensures that designated representatives of the national private sector, civil society and non-governmental organizations of each Member State shall be invited to participate in Technical Working Groups established under the MTEC. It also provides that they shall be consulted and supported in developing and implementing MTEC programs and activities. Finally, designated representatives of the national private sector, civil society and nongovernmental organizations of each Member State may also be invited to meetings of other MTEC constituent bodies as appropriate.

Financial Contributions (Article 16)

The Treaty provides that Member States to contribute funds to carry out the MTEC’s responsibilities.