Defining a Pacific Agreement on Closer Economic Relations between the island countries, Australia and New Zealand
Informal meetings between Pacific island trade officials and their Australian and New Zealand counterparts have been underway since mid 2008. Behind closed doors, trade officials have sought to define a mutually acceptable structure to commence formal discussions. Australia and New Zealand are evidently frustrated at the pace of proceedings. The Pacific island countries, without the same hang ups about time and potentially more at stake, are adamant there should be a phased approach to entering into negotiations. In the public arena, the debate has forged ahead with many interpreting PACER Plus as a free trade agreement. Others simply argue against any new trading arrangements between the Pacific islands and their bigger regional neighbours.
The pacific Institute of Public Policy (PiPP) has released a briefing paper PACER Plus: the art of negotiation in an attempt to focus discussion to address the fundamental question: What should a Pacific Agreement on Closer Economic Relations between the Pacific island countries, Australia and New Zealand entail?
Mr Derek Brien, Deputy Executive Director of PiPP says “PACER Plus is essentially a blank canvas waiting to be painted jointly by the parties”. He adds “as with any painting, first the artist needs to have an idea of what they want to paint, then sketch it out, often many times, and finally, start applying the paint to canvas. Essentially, Australia and New Zealand want to start painting now. The Pacific island countries are in some cases still formulating ideas, and in others going through the process of sketching out these ideas”.
The Pacific islands have called for a “phased approach” to negotiations, and this is understood to include national consultations and further research to determine national interests. This may come as a surprise to many, including Australian and New Zealand officials, having assumed these tasks would have been completed during the EPA negotiations with Europe.
It is not yet clear what a PACER Plus version of Pacific economic integration will look like, but two issues look set to dominate discussions: first, labour mobility; and second, how much, if at all, governments will be compensated for import tariff revenue losses. Whilst the establishment of new job opportunities under PACER Plus presents an opportunity – albeit a slim one – many island governments worry about the costs of the agreement.
The negotiating capacity of Pacific island governments is so limited that they will probably succumb to the demands of their bigger neighbours on tariffs. This is unlikely to be catastrophic. The islands will maintain market access to Australia and New Zealand, even if this is increasingly worthless owing to preference erosion. Further, any tariff cuts by the island governments are likely to be gradual and may be back-loaded by up to 10 years.
Other than people, the islands have very little to export, meaning that the upside is limited. After more than a decade of trade liberalisation, resulting in broad-ranging goods market access, most regional countries continue to run trade deficits, as they have since independence. Poor infrastructure, unreliable transport, limited access to credit, and growing social inequalities all restrict the development of productive capacity in both goods and services. In this woefully under-developed environment, new foreign competition will do little to generate growth.
Freer trade is not a panacea and PACER Plus needs to be considered as more than just a free trade agreement.
Auckland and Canberra should at the very least formalise access to jobs in their own countries, invest in infrastructure, fund financial institutions, enact measures to combat inequality, and deliver more effective aid programmes in line with the Paris Declaration and Accra Forum.
For their part, Pacific governments need to look beyond the massive imbalances of today and yesteryear to best position their countries in the ever shifting global political and economic landscapes. Nation building requires political foresight to guide the government officials charged with the task of delivering the services and environment to improve the standard of living of the population. Against the backdrop of protecting the national interest, the fundamental challenge for Pacific governments will be how, and over what time frame, to introduce the necessary economic and structural adjustments to maximise future opportunities.
In looking beyond just a free trade agreement, PiPP Board Member Mr Kaliopate Tavola suggests “the challenge for PACER negotiators is really to put meat into this concept with the aim of producing an agreement that is unique, visionary and enterprising that the region can be proud of”.
It will take time, hard work and creative thinking, but through the fine art of negotiation, PACER Plus offers all parties an opportunity to turn a blank canvas into a collective regional masterpiece.
The full briefing note can be downloaded HERE
