The Unfinished business of Pacer Plus

Despite the regional agreement PACER Plus coming into effect on 13 December 2020, serious weaknesses are still being pointed out, as in the influential ANU publication Development Policy Blog (DPB 25 and 26 Nov. 2020), clearly reminding governments of Forum Island Countries (FICs) there is much unfinished business.

While Jim Redden, a regular external adviser to DFAT, gave the expected thumbs up for the agreement, Adam Wolfenden, a Trade Justice Campaigner for the Pacific Network on Globalisation warned about the dire consequences for FICs.

Wesley Morgan, a Research Fellow with the Pacific Hub at the Griffith Asia Institute pointed not only to the weaknesses but also the need for Australia and NZ to do more especially through enhanced access for FIC labor to Australian and NZ markets.

No doubt worried by the persisting criticisms, Alex Hawke (then Australia’s Minister for International Development and the Pacific) again reiterated all the potential benefits (DPB 15 Dec. 2020) but failed to address the criticisms. 

Unfortunately, Development Policy Blog did not present any opposing views from the governments of PNG and Fiji.

It is a pity also that Pacific Island expert voices who used to be heard before on the pros and cons of PACER Plus are somewhat absent from the current debate.

In 2018 DPB had published an excellent article by Island Business correspondent Nic Maclellan which not only highlighted the criticisms by PNG and Fiji, but more importantly, Australian Parliamentary reservations about PACER Plus and the apparent absence of independent advice to the Australian Government, while leadership at Forum Secretariat itself has been questioned.

There is little doubt that Australia and NZ ought to be seriously examining their own positions on PACER Plus for two political and geostrategic reasons.

First, PNG and Fiji, the two economic giants critically needed for PACER Plus to be credible, have refused to sign on the dotted line and are unlikely to do so, despite the official line Australian optimism.

Second, Australia’s current deepening crisis with China suggests that China is now even more likely to counter Australian (and US) influences on the FICs and have some success given the widespread political instability in some FICs.

On the plus side, the COVID pandemic has highlighted the most important benefit that Pacific countries wanted formally embedded in the PACER Plus agreement: the strengthening of labor mobility provisions for Pacific Island seasonal labor.

COVID also suggests a strange new window of opportunity for FICs: that it is some State Governments and Northern Territory rather than the federal government that have been proactive in facilitating the use of Pacific Island labor to save some of this season’s harvests. 

Then there is an uncomfortable “elephant in the room” for FIC signatories to PACER Plus: what happened to the FIC unity promised by PICTA? 

But first, a reminder of what independent FIC advisers have been recommending for PACER Plus for more than fifteen years. 

Pacific views 

As early as 2003, I had warned FICs that PACER Plus might not only lead to serious revenue losses for some FICs, but that Australia and NZ saw PACER Plus as a mechanism to avoid  being excluded by FIC concessions to third parties like the EU (A negotiating framework for EPA negotiations with the EU and fiscal reform issues for Pacific ACP countries.  Report for the Forum Secretariat. 2003).

A year later, my article in Pacific Economic Bulletin (“PICTA, PACER and EPAs: weaknesses in Pacific island countries’ trade policies” (Vol.19 No 3. 2004) predated many of Wolfenden’s criticisms as well as Morgan’s constructive recommendations. Better alternatives to crude integration for FICs were further spelt out in Pacific Futures and Fiji Islands Business.

It is a pity that such Pacific views are missing from the current Australian debate in the DPB, suggesting that Islands Business can be a debating platform for critical regional issues. 

The pro-PACER views of Redden 

Jim Redden gave the “official line” arguments for PACER Plus, that it would help FICs to “modernise and harmonise trade systems, reduce the costs of trade, build the capacity of Pacific businesses to increase market access and value add, and generally boost to intra-regional trade … through more harmonised customs systems, improved border and document compliance and a reduction in cargo and freight rates” etc.

But critics reiterate that merely improving markets for goods and services is not going to lead to any significant improvement to investment and growth rates of GDPs of most FICs.

On the contrary, the alleged benefit of “increased movement of skilled and semi-skilled professionals” may be strongly disadvantageous for the FICs even if, as claimed by Redden, PACER Plus “only facilitates temporary access”.

While Redden admits that while the special ‘Arrangement on Labour Mobility’ for lower-skilled labour “did not go as far as I would have liked in terms of special access for Pacific Islanders” he strangely asserts that FICs which ratify PACER Plus “will gain from first mover advantages on market access and concessional arrangements, such as access to any new or enhanced labour mobility schemes”.  But he paradoxically also admits that non-signatories such as Fiji and PNG have also benefited from participation in Pacific temporary migration programs created or expanded during PACER Plus negotiations, clearly proving that these benefits did not require PACER Plus.

While he ignores the significant criticisms of PACER Plus made by Australia’s most important FIC trading partners (PNG and Fiji), Redden approvingly quotes the endorsement by Cook Islands, a tiny largely underwritten by NZ and not dependent on PACER Plus at all.

Redden merely asserts “Overall, PACER Plus is a win-win agreement”.

The opposing views by Wolfenden 

Wolfenden however pointed out that PACER Plus will merely “facilitate one-way access for Australian and New Zealand exporters and investors into Pacific markets instead of the other way around”. He quoted the PNG Minister Richard Maru who had complained in 2017 about PNG’s “lopsided” trade with Australia.

While acknowledging the theoretical benefits that could result from changes in the rule of trade and investment, Wolfenden noted that these benefits already existed under previous agreements with Australia and NZ such as SPARTECA, and that even these be would progressively eroded by Australian and NZ concessions to other third countries.

Ultimately, overall lack of capacity in trade negotiations meant that FICs would always struggle to maintain or grow their infant industries while PACER Plus would require FIC economies “to be open to foreign investment and to prioritise the needs of investors over other concerns”.

For Wolfenden PACER Plus represented “a squandered opportunity to address the real development needs of the region and a waste of time and significant resources.”

He urged Australia and NZ to focus on “assisting PIC exporters to meet quarantine standards in Australia and New Zealand… supporting the emergence of new PIC industries, promoting the diversification of PIC economies and ensuring that the traditional systems and cultural practices in the Pacific aren’t displaced by Western-style investments.”

The Middle Path of Wesley Morgan

Wesley Morgan, drawing on earlier joint work with Tess Newton Cain published with the Griffith University’s Griffith Asia Institute, also argued that “a standard regional free trade agreement was never going to stimulate significant economic growth in the Pacific islands”.

Pacific trade negotiators had argued that PACER Plus should be an ‘FTA-Plus’ arrangement, including trade-related aid and allowing Pacific islanders to work temporarily in Australia and New Zealand.

Unfortunately, Australian negotiators resisted these proposals and their minor concession of a labour mobility ‘side arrangement’ to PACER Plus “proved sufficient enticement for most Pacific island states to sign the deal”.

But Papua New Guinea and Fiji had refused to sign on, citing limited benefits and accused Australia and NZ of “backtracking” on their initial commitments by “leaving labour mobility and development assistance out of the deal itself”.

Morgan argued for the expansion of existing labour mobility schemes to new industries and sectors and “creating a new ‘Pacific Integration Visa’ that would allow Pacific islanders to become permanent residents after a period of employment in Australia”.

Morgan suggested that Australia and NZ ought to assist FICs especially for niche high value added agricultural exports in which FICs had comparative advantage, such as kava, single-source chocolate and coffee, ginger, vanilla and other spices, high-value hardwood timbers, coconut oils and indigenous nuts.  This did not require PACER Plus.

Morgan urged Australia “to learn from the experience of negotiating PACER Plus and ensure the current Pacific Step Up creates new trade and labour mobility opportunities” whose value to Australia had been clearly demonstrated by COVID-19.

The Australian JSCT

While the Australian Government does not particularly need to take on board the views of critical academics, it surely ought to heed its own Parliamentary Joint Standing Committee on Treaties, as quoted extensively by Nic Maclellan. (DPB, May 16, 2018). 

The JCST noted that the absence of Papua New Guinea and Fiji from PACER-Plus “significantly diminishes the utility of the agreement for Australian business” given that Australian trade with the Pacific signatories of PACER Plus was less than 5% of the trade with PNG and Fiji.

While the JCST did not see PACER Plus providing any significant additional benefits, it noted that the respected Public Health Association of Australia (PHAA) had pointed to likely negatives: such as risks for FICs associated with liberalisation of health services; reduced government capacity to raise revenue and provide health services; and burdensome requirements to justify public health measures such as bans on tobacco or junk food imports.

A severe indictment of the PACER Plus negotiation process itself that the JCST worried about the “lack of independent assessment of social and economic benefits claimed by the Australian government”.

FICs also ought to be concerned given that former Forum Secretary General Sir Noel Levi who had guided the initial drafting of PICTA and PACER in the late 1990s, was critical of the Forum Secretariat leadership in failing to give sufficient weight to the views of PNG and Fiji. His scathing conclusion what that the result was a “Pacific Minus” which served more the interests of Australia and NZ.

Maclellan also quoted Dr. Patricia Ranald of the Australian Fair Trade and Investment Network “at a time when many commentators are concerned about China’s influence in the region, resentment about such a deal could contribute to a reduction in Australia’s and New Zealand’s influence.”

Conclusion 

One cannot disagree with the concluding statement by Australian Minister Hawke: “People are at the heart of Australia’s partnerships in the Pacific. Greater economic integration will bring people closer together, underpin recovery, and build a region that is more stable, prosperous and secure – for all of us.”  A reiteration of Australian PM Morrison’s vuvale. Unfortunately, PACER Plus does little to advance this cause beyond the rhetoric. 

All indications are that despite the use of limited numbers of Pacific Island labour for the current Australian harvest, much will still remain unharvested despite thousands more Pacific Islanders being available. This should surely highlight for Australia the inadequacy of the labour mobility provisions in PACER Plus.

The current deepening political crisis between Australia and China suggests that the latter will try even more to counter Australian influence in the Pacific, with political instability in Melanesian countries providing ample fodder.

Then there is the uncomfortable “elephant in the room” for all FICs: given that a fully operational PICTA was intended to create unity for international trade negotiations, why did the smaller FICs sign PACER Plus without the participation of PNG and Fiji, the two largest FICs with more than 80% of the trade with Australia?

This clear disunity among the FICs does not reflect well on the signatories. Neither does it reflect well on the Forum Secretariat or the Office of the Chief Trade Advisor, which were supposed to guide FICs in the PACER Plus negotiations.

Sadly, this is not the only example of FIC disunity, with another tragic one being the lukewarm support of West Papuan independence.

More than ever, there is need for leadership at Forum Secretariat to be more committed to FIC interests.