Islands Business (Suva) | August 2008
Viewpoint: LABOUR MOBILITY DEALS
Under pressure to sign on to new free trade agreements, Pacific Islands governments interested in securing positive outcomes for their peoples see deals on labour mobility as potential development gains. But is this the right approach? And what are the potential costs?
For much of the past decade the Pacific Islands Countries have faced pressure from developed-country partners and aid donors to move towards trade liberalisation through new free trade agreements (FTAs).
Free trade agreements involving the region include the Pacific Islands Countries Trade Agreement (PICTA), the Economic Partnership Agreement (EPA) with the European Union, and the extension of the Pacific Agreement on Closer Economic Relations (PACER) with Australia and New Zealand to include deeper “economic integration”.
The move towards free trade is driven largely by the interests of business (exporters, service suppliers and potential new investors) based in the Pacific’s developed-country ‘partners’.
Businesses in Australia and New Zealand, in particular, want to see tariffs reduced on their exports to the Pacific and changes to laws in the region to allow multinational corporations to establish new enterprises and invest (and remove profits) without obligations to the countries in which they invest.
Concerns have been raised by many in the region, particularly civil society and academics, that these free trade deals will lead to rising inequality, dramatic losses in government revenue, de-industrialisation, business closures, job losses, a reduction in the quality and supply of essential services and the closing off of important ‘policy space’ that governments use to stimulate development.
Pacific governments have approached this push towards FTAs from a defensive position-understanding that trade liberalisation with much larger economies will have very real costs for the Pacific Islands, but hoping to win some concessions in areas of key interest to the region.
The link between labour mobility and FTAs
One of the areas Pacific governments have been keen to gain concessions in is in the area of labour mobility.
The unique challenges faced by most Pacific Islands (small size, distance from markets, high transport costs, etc.) means that relatively few investors are interested in putting their money into the region.
Understanding that capital is not coming to labour in the region, governments are calling for the introduction of carefully regulated labour movement schemes that would see unskilled and semi-skilled workers temporarily move to developed countries to work-increasing remittance flows to the islands, improving skills for returning workers, and easing economic and social pressures created through unemployment (especially youth unemployment).
The temporary movement of labour (not permanent migration) is linked to FTAs through agreements on trade in services.
The General Agreement on Trade in Services (GATS) at the World Trade Organisation (WTO) generally forms the basis for bilateral FTAs that include agreements on services-trade.
The ‘temporary movement of natural persons’ (people who travel to another country to deliver a service) is known as Mode 4 under the GATS.
Pacific governments have spent much of the past decade arguing that concessions on Mode 4 labour mobility should be included in any FTAs with the EU, or with Australia and New Zealand-and this has become a central negotiating position for the region.
So important does the Pacific hold temporary labour movement that current negotiations with the EU for a comprehensive FTA (called an Economic Partnership Agreement) have stalled because the EU is refusing to offer any new concessions on Mode 4 labour mobility. This has become the ‘red line’ non-negotiable regional position in the EPA negotiations.
At a recent seminar on EPA negotiations, held in Madang, Papua New Guinea, Pacific trade ministers and regional trade negotiators told EU ambassadors they have “no mandate” to discuss services liberalisation until the EU gives way.
PNG Foreign Minister Sam Abal said the EU was “hearing, but not listening to the Pacific Countries” when it came to their key demand.
The EU forced Fiji and PNG to initial an interim free trade deal (covering goods trade) in late 2007, under threats the EU would raise tariffs on tuna and sugar exports to the EU, and is seeking to conclude a full FTA in 2008 (covering issues like services and investment, government procurement and intellectual property rights. At the time of writing, Pacific states had in fact requested a suspension on EPA Trade in Services negotiations with the EU, with a view to potentially returning to the negotiating table in the future.
An unrealistic option?
The EU has made it clear they will not offer concessions for movement of the categories of workers proposed by the Pacific, largely because immigration is the responsibility of Member States. In a letter from the European Commission’s deputy director for trade, Karl Falkenberg and the director-general for development, Stefano Manservisi, to the (then) Pacific lead negotiator (dated October 20, 2006), the EC stated the Pacific’s “ambitions in this area go far beyond the possible offers we will be able to make in the end”.
Evaluating the costs
The Pacific prepared a raft of proposals for the EPA negotiations to try to blunt some of the more damaging aspects of a free trade agreement with the EU and to argue for movement on issues of key interest to the Pacific (including labour mobility, but also improved Rules of Origin for tuna exports, innovative proposals for targeting investment at small enterprises, and duty/quota free access to EU markets for exports).
Not only have most of the Pacific’s proposals been rejected, but also, by focusing on what ‘concessions’ the Pacific could gain from FTAs (including labour mobility), Pacific governments have been drawn into the notion that FTAs will offer benefits for the region-ignoring the very real costs that will be incurred by signing these deals.
Pacific civil society, church groups and trade unions have all pointed out that FTAs will have negative consequences for Pacific societies that should not be underestimated.
Organisations like the Pacific Council of Churches, the Pacific Network on Globalisation, Fiji Women’s Rights Movement (FWRM), the Ecumenical Centre for Research, Education, and Advocacy (ECREA) and Oxfam NZ have highlighted the fact that FTAs will lead to dramatic falls in government revenue, business closures, job losses, an undermining of access to health, education and basic services, increased pressure for privatisation, restricted access to medicine and educational materials (through strict intellectual property rules), a reduction in policy options for creating local employment and stimulating local business, and restrictions on the ability of Pacific governments to regulate foreign investment in the social interest. These negative consequences arising from FTAs cannot simply be ignored, while looking for illusive gains-like new labour mobility schemes.
Separating development and free trade
When Pacific governments consider ways relationships with developed countries could be improved with positive development outcomes for the Pacific, it should be noted that there is no need for new proposals to be included within FTAs.
At the moment, Australia and NZ are looking at ways to induce Pacific governments to enter into a new FTA (dubbed ‘PACER+’) and are looking at using seasonal worker programmes as a ‘bargaining chip’ in negotiations set to get underway later this year.
Certainly New Zealand Trade Minister Phil Goff sees New Zealand’s Recognised Seasonal Employment (RSE) scheme, initiated in April 2007 as leverage for the creation of the PACER+ agreement.
In March this year, he explained; “it’s something the Pacific nations have been seeking and would be a major inducement for those countries to become part of an integrated economy in the Pacific region”.
NZ’s Ministry of Foreign Affairs sees RSE as “an excellent example of the benefits of regional integration. It may help stimulate deeper economic integration through the Pacific Plan and the Pacific Agreement on Closer Economic Relations”.
Australian Prime Minister Kevin Rudd will formally announce a pilot seasonal workers’ scheme (similar to the NZ scheme) at the Pacific Islands Forum Leaders Meeting in Niue in August. Australia can be expected, like NZ, to link this scheme implicitly, if not explicitly, to the PACER negotiations.
Pacific governments should be extremely wary of any such linkage.
The NZ seasonal labour scheme is employer driven - horticulture operators in NZ are struggling to find workers domestically, and are keen to find reliable labour from the Pacific.
In Australia, the National Farmers Federation has come out fully in favour of a similar scheme, anticipating a shortfall of 22,000 unskilled workers in Australia’s $7 billion-a-year horticulture industry as the drought ends.
With farmers in Australia and NZ desperate for workers and Pacific countries keen to supply them, such a scheme is a ‘win-win’. It would be completely cynical for Australia and NZ to use a seasonal workers’ scheme as a bargaining concession in negotiations.
Pacific governments should be asking whether it’s more feasible to pursue labour mobility agreements completely separate from FTAs. New Zealand’s RSE is an example of a temporary labour migration scheme (employing thousands of Pacific Islanders) that is not linked to an FTA.
As the New Zealand Council of Trade Unions explains: “If the seasonal labour development plan is a genuine development opportunity, then it should not be linked to discussion around free trade agreements”.
Some close followers of the labour mobility debate have argued that labour mobility needs to be included within an FTA in order to make any workers scheme binding-and thereby preventing governments in Australia or NZ sending thousands of workers home when unemployment rises, or if political relations sour with a particular country (like Fiji’s exclusion from NZ’s current seasonal workers scheme).
But we know already the EU, Australia and NZ do not believe GATS Mode 4 is supposed to cover workers in seasonal labour schemes, and it seems the binding nature of an agreement is likely to be more apparent than real.
The recent NZ/China FTA relegates short-term access to NZ’s employment market for Chinese on a working holiday to a side-letter with onerous qualifications. NZ can suspend the scheme for political reasons (in the event of a military coup for example) or end it with three months notice if unemployment rises dramatically. The issue here is the separating out of what should be a mutually beneficial labour mobility arrangement that has development benefits from FTAs that could have a whole raft of negative consequences for the Pacific.
Development in the Pacific: new visions required
One advantage of the Pacific’s defensive position in relation to the current free trade agenda is Pacific governments have (to a degree) had to ask what development outcomes can be gained through trade arrangements.
There seems to be a growing acknowledgement that the Pacific’s key offensive priorities, such as setting Rules of Origin for exports, development of regional fisheries, attracting investment, labour mobility, quarantine requirements or regional assistance, are not necessarily best served by FTAs at all.
The insistence of government and trade officials in Australia, NZ and the EU on linking aid with a free trade agenda is a form of neo-colonialism that ignores the Pacific’s right to set its own trade agenda.
Pacific people need a model of development that is sustainable and culturally and environmentally suitable. We need a renewed focus on addressing the real constraints in the Pacific-like access to health and education services, improving key infrastructure (transport, electricity, telecommunications, etc.), building service industry capacity (in tourism for example), supporting niche agricultural and industrial products, developing new markets (and improving market access) for Pacific exports, improving management and local value-adding for Pacific resources (in areas like mining, fishing, and forestry) and targeting investment at small and medium enterprises.
Labour mobility schemes can improve remittance flows, provide skills training, and ease unemployment pressures in the Pacific.
However, addressing the constraints faced by Pacific societies should not be linked with selling our sovereignty and exposing our markets to unequal foreign competition in binding FTAs.