Jun 07, 2020 Last Updated 3:16 AM, Jun 7, 2020

PICTA: Picture of indifference

  • Jun 07, 2020
  • Published in May

PICTA stands for Pacific Island Countries Trade Agreement. It is a Free Trade Agreement (FTA) negotiated amongst the Pacific Island Countries (PICs) to free up trade amongst themselves, under the provisions of ‘GATT 1947’, which morphed into ‘GATT 1994’ that is incorporated into the WTO Agreement. PICTA was signed in 2001 and came into force in 2003. But implementation was delayed until 2007. As of today, only seven PICs are trading under this agreement.

The situation depicted above has not changed since 2010, 10 years ago. In a workshop, sponsored by the Pacific Islands Private Sector Organization (PIPSO), the European Union (EU) and the Pacific Regional Integration Programme (PACREIP) in 2010, its outcomes document had this to say: “They are concerned therefore that only 7 of the 14 PICs are currently implementing PICTA. They believe that this is retarding regional economic integration and delaying the realisation of the collective economic and social benefits and improvements to the living standards of all the peoples of the Pacific region. They further believe that the delay in the benefits of regional economic integration under PICTA will constrain our ability and capacity to negotiate a fully meaningful PACER Plus with Australia and New Zealand.”

Later, on 5-8 November 2012, in a ‘What Can We Learn Symposium’, sponsored by six organisations including regional, United Nations and aid agencies, Dr Roman Grynberg, former Director of Economic Governance at the Forum Secretariat lamented the fact that PICTA “has thus far been of the most limited success.” He put the reasons down to: “there was no appetite amongst island officials and policy makers for any form of liberalisation that involved a direct adjustment cost. Whereas island officials have always been happy to write, sign and even ratify trade agreements, implementing them and accepting the real economic costs were quite another matter.”

After 19 years since signing, and 17 years since the agreement came into force, it can only be said that the current status of this trade agreement, the first for PICs, is most unfortunate indeed. The regional economic integration that PICTA was supposed to bring about is still very much at its infancy.

The founders of Pacific regionalism, way back in 1971, had conceived such a FTA would free up Intra-PIC trade and would further develop into an economic union, permitting initially the free movement of capital, labour, goods and services. By specifically targeting an economic union, the regional leaders then would have envisaged a Pacific-wide common market that went beyond trade, also envisaging prospects of coordination of various social, fiscal and monetary policies amongst participating nations.

However, after 49 years of regionalism, it can be said that the early regional leaders’ dream remains a pipedream. Recent decisions by those who could transform this situation have not helped. The Pacific Islands Forum (PIF) Trade Ministers’ meeting last February failed to give PICTA the thrust it needs to get it urgently going forward and to expediently make a difference to regional economic integration.

The PIF Trade Ministers’ outcomes were a damp squib. For PICTA, the ministers “also recognised the importance of …PICTA and its potential to facilitate intra-regional trade.” This is essentially saying the obvious. The FTA’s importance and potential were the qualities that drove the early regional leaders to negotiate the agreement in the first place. What is to be gained from such reiteration? This speaks volumes of the foresight of our early leaders but not much about our current leaders.

Furthermore, the use of ‘also’ in this context implies that such a statement was an afterthought. This presents an interesting angle. PICTA is a matter for PICs trade ministers only. But in this case, trade ministers from Australia and New Zealand (ANZ) were present during the discussions. Was the language of the outcomes especially aimed at sugar-coating due to the presence of the two elephants in the room?  

It did not stop there. The next part of the decision was extraordinarily naïve. Ministers indicated the direction further discussions could take but provided only if such and such were done. They failed to give concrete direction and action-oriented instructions as how those issues that were thwarting the ratification and implementation of the FTA could be expedited.

Admittedly, the issues involved are not simple. These are to do with what is now termed as the ‘modernisation work on PICTA’, including the extensive PICTA review and the Rules of Origin review. I can imagine that someone had coined ‘modernisation’ since the issues have been there on the table for donkeys’ years and have somewhat lost their vitality.

For the PICs trade officials and PIF Secretariat (PIFS) staff after the ministers’ meeting, it may be just business as usual. They have not heard any plea for urgency and certainly no specificity of actions to be taken both at the national and regional levels. There was no mention of additional resources. There was no mention of the legal, technical, political and consultative measures that need to be mobilised to progress matters. There was no mention of the measures directed at mobilising the private sector representatives at the national level and at the regional level through PIPSO. There was no mention of the prospects of technical assistance (TA) that PIFS staff should extend to members especially to the Smaller Island States (SIS).

It is difficult to be optimistic about PICTA given its dismal history. But one can be proven wrong. The trade officials may have reached a tipping point and could now be driven to do all they can despite the vagueness and the absence of commitment in the ministerial directives. This is a possibility given the commendation they have received recently from Professor Jane Kelsey of Auckland University.

The good professor was a resource person for the ministerial meeting last February. Whilst she was impressed with the quality of some of our trade officials, she was not however with the Forum Secretariat. Her assessment of the latter was that whilst there has been an improvement, the Secretariat is still inadequate in servicing the needs of the PICs. The Secretariat lacks the ‘fundamentals’ and the ‘nuances’ to identify the real needs of the PICs and the ‘independence’ to address them. If there was a vindication for the provisions of TA by PIFS for its deserving members, this was it.  

The case of PICTA and its stunted history raises two big issues for Pacific regionalism. The first is that if PICs are not getting the benefits from this trade agreement as intended, then questions have to be asked about the suitability of the model around which the agreement is built. Professor Kelsey has already told us that the model is broken. So, what can be put in its place?

There is also the question of the suitability of a regional grouping of only small states. Can such create the net benefits needed? Would PACER Plus with ANZ be a better configuration for a regional trade agreement?

Big questions need critical thinking on the part of our regional planners. These are all food for thought for the regional strategists who are developing the 2050 Strategy for the Blue Pacific Continent and for the next PIF Leaders’ meeting scheduled for August later this year in Port Vila.

The Pacific Islands Forum (PIF) Trade Ministers met in February in Suva. Their key outcome on the World Trade Organization (WTO) was: “there is support for the multilateral trading system and the opportunity therein to address global trade concerns including harmful fisheries subsidies.”

In the global context of the roles of WTO and the multilateral trading system, the support above is essentially general affirmation of globalisation. Such formulation of an outcome however is not new for PIF. Previous outcomes statements have reflected the same or similar support.

However, such an expression of support raises more questions than answers. Firstly, out of the eighteen PIF members, only eight are WTO members – six Pacific Island Countries (PICs) – Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga, and Vanuatu; and the two developed countries of Australia and New Zealand. Then why should the other ten PIF members, non-WTO members, be included in the decision, one may ask. Obviously, the Trade Ministers had decided by consensus. That could mean that the non-WTO PIF members did not object to the decision.

The non-objection by the other ten PIF members would have been political to allow a decision to prevail in the interest of group solidarity. But more so, the non-WTO members know very well that regardless of their non-membership, they still benefit from the provisions of the WTO. They know, for instance, that they have benefitted from the WTO initiative of Aid for Trade (AfT). AfT resources, have been re-committed by Australia and New Zealand under the PACER Plus, and a good share of that is being disbursed through the Pacific Horticultural and Agricultural Market Access (see Islands Business July 2019).

The second question is a more substantive one. Despite all the downsides of globalisation, despite the growing inequality globally resulting from capitalism that powers global economic growth, despite the inaction of the Doha Round of trade talks (Doha Development Agenda) that was aimed at elevating the  trade and economic interests of developing countries and the least developed countries—those underprivileged under international trade— why is there still support for WTO and the multilateral trading system (MTS)?

In retrospect, it has to be said that such support is an affirmation of the benefits that WTO and MTS have generated through international trade for the region, despite their shortcomings. And these benefits can potentially increase. Furthermore, the support emanates from the realisation that all other options apart from the existing MTS will render the global trading community worse off.

WTO and the MTS it champions is rules-based. Obviously, some rules are negative and some positive. Their respective applications also create mixed results for the global trading community. Under GATT 1947, incorporated into the WTO Agreement, PICs have been able to negotiate their Free Trade Agreements (FTAs), like PICTA and PACER Plus - the latter with Australia and New Zealand, despite the fact that the negotiating model offered by the WTO is ‘broken’ – according to Professor Jane Kelsey of Auckland University.  

PICs continue to use the model since it produces a rules-based regional trading system that is better than a trading framework with no, vague or draconian rules. Furthermore, they continue to place their hopes on the model believing that the same model can result in better regional FTAs – better concessions, more creative special and differential treatments, derogation from general provisions and waivers - if there is genuine political solidarity and commitment to configure/reconfigure Pacific regionalism to something that we can all be proud of.

Furthermore, the immense benefits that PICs/Pacific African Caribbean and Pacific States (PACPs) have accrued from their membership of the ACP-EU Agreements can also be attributed to the WTO Agreement. This is so since the ACP-EU Agreement has been notified under the WTO, and its preferential arrangements are granted exceptionality under the Organization. Over the years, such exceptionality has been extended. It may also have been preserved for posterity under the application of a ‘grandfather clause.’

Fiji, for example, has benefitted immensely from the Sugar Protocol - an arrangement that offers supply quotas and preferential pricing. The Sugar Protocol, like all the other protocols offered by the EU, are formulated and implemented under the EU’s Common Agricultural Policy (CAP).

The CAP offers other preferential arrangements that have benefitted other PACPs. Fiji and others have benefitted also from EU’s Generalized System of Preferences (GSP) and may even so  from its more liberal version of GSP+. PACPS that are least developed countries (LDCs) and that export to the EU benefit under another preferential arrangement known as ‘Everything But Arms.’ The term denotes exactly what it can do and what LDCs can export preferentially to the EU.

The Americans have their own version as well. Under the African Growth and Opportunity Act (AGOA), 2000, the US offers enhanced market access to qualifying Sub-Saharan African countries. This has been extended to 2025. Fiji, in the early 2000s, was contemplating negotiating a similar arrangement that could be extended to other PICs.

As stated above, these benefits can potentially increase. Developing countries and LDCs still hold on to the hope that developed country members of the WTO will find sufficient unity and determination in their ranks to progress the provisions of the Doha Development Agenda thus creating new levels in LDCs’ respective integration into the global economy. Under that framework, it is hoped, that new creative concepts to improve the lot of developing countries and the LDCs will become more palatable.

Two concepts in this respect have entered the lexicon of the WTO recently. Emily Jones wrote in 2013: “The Right to Trade: A Mechanism for Revitalizing Pro-Development WTO Negotiations?” She later introduced in the same article: ‘right to development’. She added: “Having raised deep concerns about the failure of ‘aid for trade’ (Joseph) Stiglitz and (Andrew) Charlton make ambitious proposals for rebalancing the global trading system. The first pillar of their proposal is to enshrine and enforce a ‘right to trade’ and a ‘right to development’ through the WTO’s dispute settlement mechanism (DSM).”  

For the PIC members of the WTO, that will be most welcome. Wilfred Golman of the University of the South Pacific wrote in 2017: “The WTO DSM and the South Pacific Island Nations’ (SPIN) Participation.” Golman concluded from his research that SPIN countries were notably absent from the WTO’s DSM. He discussed a number of reasons why this was so, including: the continuing debate as to whether the DSM accommodated the interests of the developing countries or LDCs; the issue of fairness in DSM’s decisions (that the process favours richer countries as they were able to argue more effectively and settle their cases), and that the poorer countries were disadvantaged by constraints on their ability to pursue any trade infringements at the WTO level.

As tools for globalisation, there is a sense of inevitability around supporting the WTO and the MTS, regardless of their respective downsides.  This essentially evolves from the understanding that global traders, large or small, lack a better trading framework option than that presented by the existing MTS.  With the benefit of history, it can be concluded that any setback to the MTS and a reversion to excessive and uncontrolled trade protectionism will inevitably return the global trading system to one of ‘Beggar Thy Neighbour’ situation, or much worse. When that happens, international traders will essentially be engaged in a kind of zero-sum game. The end result is likely to be unprecedented global inequality.

The author is a former Fijian Ambassador and Foreign Minister and runs his own consultancy company in Suva, Fiji.

 

Pathway across the Pacific

  • Jun 07, 2020
  • Published in April

For only the third time in the last 20 years, the Pacific Islands Forum has invoked the Biketawa Declaration to respond to the global coronavirus pandemic. Forum member governments have agreed to establish a Pacific Humanitarian Pathway, to co-ordinate the regional medical response to the Covid-19 coronavirus.

Prime Minister of Tuvalu Kausea Natano, chair of the Pacific Islands Forum, said: “The Covid-19 pandemic is a global health emergency of unprecedented scale. It poses a real and extreme danger to the health and security of Pacific peoples. Never before has the formal Forum membership simultaneously been in crisis.”

In a video hook-up on 7 April, Forum foreign ministers and officials responded to a call from the World Health Organisation (WHO) and agreed to establish a “Pacific Humanitarian Pathway on Covid-19.” Regional agencies want donors to use the humanitarian pathway to assist island governments with medical supplies and equipment as they respond to the Covid-19 pandemic.

This co-ordinated response will be overseen by a Ministerial Action Group (MAG), involving Australia, New Zealand, Fiji, Nauru, Vanuatu, Marshall Islands and Tuvalu. The MAG will be supported by a regional task force to ensure that medical supplies, technical assistance and essential equipment can be moved seamlessly through the region. This is especially important for some smaller island states that must tranship goods through regional transport hubs like Guam, Nadi or Brisbane. The humanitarian pathway aims to expedite customs clearance of medical supplies and fast-track diplomatic approval for chartered flights and commercial shipping.

This new pathway will complement existing regional meetings, as finance and trade ministers prepare to address the economic woes looming on the horizon. These include the loss of remittances, tourism and export opportunities; increased debt burden; and the double whammy of loss and damage from climate change and Cyclone Harold, which hit Vanuatu, Fiji and Tonga in April.

Read more in the April issue of Islands Business.

Pacific Islands Forum members have heard nationals stranded in other member countries will be ‘treated fairly’  during their virtual meeting on a Pacific Humanitarian Pathway for COVID-19 this week.

Tuvalu’s Foreign Minister Simon Kofe chaired the meeting and says the fate of nationals stuck in other countries was a major concern: “there was an assurance from the members that any national from another country in their country at this point in time would be treated fairly and would have equal access to services. So that I think was very reassuring to us to hear that, coming from our members.”

“We hope that that’s the way we respond to this crisis,” Kofe continued. “That we do it the Pacific way. That we look after each other. Because I know there is a tendency that when we face crisis of this nature, that we tend to look inwardly and to drive our own national interest, but I think it's important to work tougher the Pacific way to resolve issues like this.”

As an example, Forum Secretary General Dame Meg Taylor says Nauru is working to get home not only its own people, but some of its neighbours.

“The government of Nauru has made provision for aircraft to pick up citizens of Nauru and Marshall Islands and other northern Pacific member states, particularly from here in Fiji where we had students. And we’ve been able to assist where we can to get discussions to get clearances so this can happen.

Air Nauru has also flown home its athletes and other nationals, including a Tuvaluan, from New Caledonia.

Repatriation will be an ongoing effort as part of the work of the humanitarian pathway. Overnight PNG’s police minister said 306 Papua New Guineans had registered their interest in returning home. 116 of them are in Australia, four in Fiji, one in Solomon Islands, four in New Caledonia and one in Vanuatu, all Pacific Island Forum members.

The Pacific Humanitarian Pathway is prioritising the movement of medical supplies and expertise.

Pacific Island Forum Leaders will establish a Pacific Humanitarian Pathway on COVID-19 which could see the expediting of medical assistance and customs clearance of medical supplies, and facilitating of diplomatic clearances for chartered flights and commercial shipping.

Forum Foreign Ministers met virtually yesterday and established a Pacific Humanitarian Pathway on COVID-19 to allow for faster and easier assistance and cooperation between member countries in response to the pandemic.

 “The COVID-19 pandemic is a global health emergency of unprecedented scale. It poses a real and extreme danger to the health and security of the Pacific peoples. Never before has the full Forum Membership simultaneously been in crisis,” said the Tuvalu Prime Minister and Pacific Islands Forum Chair, Kausea Natano.

The Chair of yesterday’s meeting, Simon Kofe of Tuvalu, said that responding to COVID-19 as a region reflected the Tuvaluan concept of te fale-pili, which literally means houses in close proximity to one another, and which implies a moral responsibility to protect neighbours.

Forum members to already report diagnosed cases of COVID-19 are: Australia, Fiji, French Polynesia, New Caledonia, New Zealand and Papua New Guinea.

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