Is Australia genuine about a "new approach" to the Pacific?

AidWatch (Australia) | 24 Nov 08

Is Australia Genuine About a "New Approach" to the Pacific?

The Rudd government has made much of its ’new approach’ to Australia’s island neighbours, but the view from the Pacific - especially of the aggressive pursuit of a new free trade deal as part of the Pacific Agreement on Closer Economic Relations (PACER) - is that not much has changed.

Maureen Penjueli & Wesley Morgan
Pacific Network on Globalisation (PANG)

PACER itself is a product of John Howard’s unapologetic interventionism in the Pacific - and the Liberal government’s attempts to reshape political and economic decision-making in the region, with an orientation towards ’regional integration, trade liberalisation and security cooperation’.

The Pacific faces its fair share of development challenges. Nearly 8 million people live across the 14 island-country members of the Pacific Island Forum. The economic profile of the Pacific is heavily determined by geographical features shared by most Pacific states. The Pacific’s smaller islands are remarkably vulnerable to the impacts of natural disasters and the impacts of climate change. Further, they are dispersed across a large portion of the Pacific Ocean, which results in high transportation costs. The geographical features and high transportation costs of the Pacific mean that local Pacific businesses face considerable (but not insurmountable) constraints to doing business - like distance from markets, expensive or infrequent inputs, small economies of scale etc.

Many Pacific peoples live a semi-subsistence lifestyle, with limited interactions with the formal economy - usually the selling of excess agriculture and garden produce at well organised local markets. Pacific governments are struggling to create new employment opportunities in value-adding projects that will capitalise on the Pacific’s considerable natural resources - such as minerals, oil and gas, timber, fisheries and tropical agriculture (cocoa, coffee, taro, vegetables etc). Many Pacific governments are also committed to improving opportunities in the tourism sector, to take advantage of the islands’ renowned natural beauty.

The question is, how would a free trade deal with Australia and NZ help the Pacific to meet its development challenges? Would it encourage the development of local businesses in the unique circumstances of the Pacific countries, or would it wipe them out in favour of Australian and NZ investment and exports? Would it create employment, or would it exacerbate unemployment pressures? Would it improve access to essential services (like healthcare and education), or would it lead to two-tiered service delivery and unrestricted profiteering?

In August this year, Australian trade minister Simon Crean explained that "Australia has embarked on a new era of cooperation with the Pacific, based on shared development aspirations." [1] He went on to say that his government supports a "new, comprehensive, region-wide ’trade-plus’ free trade and economic integration agreement, known as PACER-Plus" and said that "PACER Plus is a development deal for the Pacific region".

No-one in the Pacific wants to seem ungrateful for a ’new’ Pacific approach - especially given fraught relationships with the previous conservative government - but one has to ask what exactly is ’new’ about pursuing PACER-Plus (a trade deal that was clearly a policy of the Howard government).

PACER-Plus is envisaged by Australia as a free trade deal that will see Pacific island countries lower tariffs on Australian exports to the region (Pacific nations already have duty free and quota free access to Australian markets). Australia also wants Pacific governments to allow unfettered access to Pacific service ’markets’ for Australian companies, and to remove regulations on Australian investment in the region - to allow companies and individuals to invest with reduced responsibilities to the host nation. Other components of a comprehensive PACER-Plus agreement may include new rules on intellectual property, government procurement and competition policy.

Simon Crean claims that the 2008 Pacific Island Leaders Forum, held in Niue in August, left him in no doubt that "Pacific leaders share our aspiration for enhanced cooperation and integration within our region". The political realities of plans for new FTA negotiations are more nuanced than that. In fact, during the meeting in Niue, Pacific leaders met separately from Australia and NZ, and issued a press release saying that "because of the importance of the trade issues involved" Pacific leaders agreed on "the need for careful preparations by Forum Island Countries (FIC’s), both individually and collectively, before consultations began with Australia and New Zealand" and "recognised the need for the early appointment of a Chief Trade Advisor to assist the FICs in both their preparations and negotiations if the shared objectives of all Forum members were to be realized".

This wariness about entering PACER-Plus negotiations with Australia and NZ is not reflected in the outcomes document of the Niue meeting itself (where Australia and NZ were present). This indicates the position of Australia and NZ as major donors in the region, and the importance that Pacific leaders place on maintaining good relations with Australia and NZ. It is not the Pacific way to confront ’friends’ directly.

Governments in the Pacific continue to be wary of a new FTA with Australia and New Zealand because they have a lot to lose. The findings of an AusAid-commissioned report which suggests there will be in a 30 per cent increase in trade [2] fails to indicate that the vast majority of that increase will be in favour of Australian and NZ exporters - since the Pacific already receives duty free access for goods into Australia and New Zealand.

Academics in the Pacific are predicting that 80 per cent of Pacific manufacturing could close down under PACER-Plus, leading to unemployment for thousands of workers. Most Pacific countries lack secure social nets, such as state welfare, to assist unemployed workers. At the same time, Pacific governments will face a ’double burden’ as revenues fall (through tariff slashing), undermining further the provision of public services in the region [3]. These expected outcomes of PACER-Plus could leave many Pacific people faced with a bleak future.

This picture is a very different one to that painted by Simon Crean - that PACER-Plus is good for the Pacific and is in its development interest. Touting PACER-Plus as a development agreement has a rather familiar and hollow ring to it. The Economic Partnership Agreement (EPA) under negotiation with the European Union was also touted as being about development. Unfortunately the content of the proposals put forward by the EU have shown this to be largely empty rhetoric.

If the Labor government really wants to offer a ’new approach to development in the Pacific’, it could acknowledge the special and different circumstance of the Pacific Island Countries, and offer the region alternatives to the kind of reciprocal free trade agreement being pushed by the EU and negotiated by Australia and New Zealand with other states. Alternatives could include improvements to the status quo (SPARTECA) with a focus on overcoming the difficulties the Pacific Island Countries and their peoples have in using their access to Australian and New Zealand markets to overcome poverty.

If the Labor government is really genuine and wants to help the Pacific improve its trade opportunities, they should do so now. Improvements in Rules of Origin requirements, removal of trade barriers (including Australia’s kava ban) and assistance with meeting necessary sanitary and phytosanitary rules in Australia and NZ are all initiatives that would expand Pacific export opportunities. These initiatives can be undertaken without requiring a new FTA between Australia/ NZ and the PIC’s. Experience with the EPA negotiations shows that areas of services, investment, competition and procurement are designed to advance the interests of foreign investors, not the social and development needs of Pacific peoples

This is an opportune time for the Australian government to look at new initiatives that will make a difference to the lives of nearly 8 million people in its ’backyard’. Trade is obviously important for the Pacific, but it must be harnessed to the service of development in the region. Linking development outcomes to a free trade deal that will expand Australian trade in the region is not a new approach. It is a continuation of an old theme - using aid money and political influence to advance Australian interests.

The challenge for the Australian government is this: does it have the political will to address the development needs of the region - independently of its free trade aspirations. Now that would be a new approach to the development aspirations of the Pacific. Otherwise we are merely window-dressing the same old issues and approaches with new rhetoric.

Maureen Penjueli is coordinator of the Pacific Network on Globalisation (PANG), based in Suva, Fiji. Wesley Morgan is PANG’s communications officer.

Footnotes:

[1Crean, S. McMullen, B (2008) "International engagement begins in own backyard" - Letters to the Editor. Canberra Times 26/8/08. NewsCorp.

[2Institute for International Trade (University of Adelaide). Research Study on the Benefits, Challenges and Ways Forward for PACER Plus - Final Report. Institute for International Trade, June 2008.

[3Responding to the Revenue Consequences of Trade Reforms in the Forum Island Countries - a report commissioned by the Pacific Islands Forum Secretariat and released in November 2007, found that "countries such as the Solomon Islands, Cook Islands, FSM, Niue and Nauru could lose between five to ten per cent of their recurrent revenue" and "for about half the Pacific, including Samoa, Vanuatu, Tonga, Kiribati, RMI and Tuvalu full trade liberalisation would present a major fiscal challenge as the adjustments would be between ten and thirty per cent of revenue

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source: AidWatch