Australian Trade Minister faces hard sell on Pacific Free Trade tour
6 April 2009
The idea of a South Pacific free trade zone is a dream which has remained elusive for many years, mainly because many island nations are heavily dependent on import tariffs to maintain government services. Despite this, Australian Trade Minister Simon Crean has been touring the region in an attempt to generate new support for the concept.
Presenter Jeff Waters
Speakers: Australian Trade Minister Simon Crean, Vanuatu Foreign Minister Balkoa Kaltonga, Pacific Institute of Public Policy Derek Brien
WATERS: Like a modern day economic missionary, Simon Crean has been touring the Pacific preaching free trade.
CREAN: We had planned to try and do this last year and....
WATERS: In the Solomons, Tonga, Samoa, Auckland and here in Vanuatu, the Trade Minister is attempting to push for real movement towards the Pacific agreement on closer economic relations, otherwise known as PACER Plus.
CREAN: You can’t generate growth unless what you are doing is engaging more effectively with the rest of the world. I mean Australia understands that with 22 million people, we can’t grow simply by producing for ourselves. We do have to engage with the rest of the world. This is not rocket science, this is an issue that all economies regardless of their stages of development are going to have to increasingly adapt to. What we are trying to do is help that adaption. It is not so we can get new access to markets. Our trade surpluses with these countries is already very high. The important thing for us is to develop an economic sustainable base for the region, within the region.
WATERS: With a tiny export industry and relatively poor population, Vanuatu relies heavily on import tariffs for Government income. They may make foreign goods like those from Australia and New Zealand more expensive, but they raise almost 20% of the Government’s budget. To drop them would cripple the economy. So senior Government figures like Foreign Minister, Balkoa Kaltonga seemed reluctant to dive head first into free trade without some form of compensation.
KALTONGA: They are coming to force Pacific Island countries into signing the PACER agreement with the view, for example, for Vanuatu, to reducing tariffs on Australian imports. That will have a major impact on revenues, so maybe again somewhere down the line, we will have to show some form of commitment but again for the right conditions, Australia also must understand that we are losing revenues in the short term. We need budgetary support to cover for the loss.
WATERS: Derek Bryan, from the Pacific Institute of Public Policy, says free trade should be possible so long as an agreement is tailored to aid development.
BRYAN: Looking at PACER as a development tool, as opposed to just a free trade agreement, presents an opportunity for the Pacific Island countries to work with its biggest regional partners, Australia and New Zealand to affect these aims. That is where a true development partnership, as opposed to a free for all trade negotiation is going to be more beneficial to both the bigger players, Australia, New Zealand and the Pacific Island countries.