Apr 11, 2021 Last Updated 4:12 AM, Apr 8, 2021

February 2021 marks the first anniversary of the endorsement of the Pacific Aid for Trade Strategy (PAfTS 2020-2025). It was not the first strategy of its type for Pacific regionalism. Clearly, it is too early to make any meaningful assessment of its implementation. I will leave that for later. The occasion, however, should not go to waste. Any anniversary is propitious for strategic reflection. I propose, therefore, to cast an evaluative eye on two aspects of the Strategy – its long and eventful gestation period, and design: and draw out useful learnings that can be incorporated into the 2050 Strategy for Pacific regionalism.

The Strategy was endorsed by Forum Trade Ministers at their meeting (FTMM) in Suva on 3 February 2020. The idea for the formulation of the Strategy was conceived on 11 July 2018 at a Senior Trade Officials meeting during the Pacific ACP (PACP) Trade Officials meeting in Apia. The Strategy had been two years in the making.

The conception of the idea of an Aid for Trade (AfT) strategy during a PACP Trade officials meeting is instructive. The same officials were engaged in the formulation of a first AfT strategy during the time of the negotiations with the EU for an Economic Partnership Agreement (EPA). The EPA negotiations were suspended, and regional geopolitics may have intervened. This led to the rejection of the first strategy, 12 years ago in 2009.

The EU resources earmarked for that were mothballed. Some, if not all, will be recycled to fund the newly endorsed Strategy. The Regional Authorising Officers (RAO) for the PACP states met representatives of the EU in the margins of the 2020 FTMM to sign €94 million AfT financing agreements.

The rejection of the first AfT strategy in 2009 also marked the launching of the PACER Plus negotiations and by the time the Free Trade Agreement (FTA) was signed in 2017, Australia and New Zealand had committed themselves to earmarking millions of dollars for AfT under that agreement. These AfT resources under PACER Plus are currently being disbursed under the extended Pacific Horticultural and Agricultural Market Access (PHAMA Plus) launched on 11 April 2019.

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The Pacific Agreement on Closer Economic Relations Plus (PACER Plus) is to come into force with the Cook Islands ratifying the agreement this week.

Cook Islands is the eighth signatory to PACER Plus, joining Australia, Kiribati, New Zealand, Niue, Samoa, Solomon Islands and Tonga.

Cook Islands Prime Minister Mark Brown says the agreement is important to his country: “economic diversification is a cornerstone of our development strategy and international trade policy must be an important strategic tool we use to strengthen and diversify our economy. We have participated actively over the years in the PACER Plus negotiations and fought hard to ensure that the Agreement will work for us.  We are certain that PACER Plus will open new trade and investment opportunities for the Cook Islands that have not existed before.  As with every Agreement, however, it will be up to us to take advantage of those opportunities in the months ahead.  My Government is committed to that goal and will dedicate resources to support make that possible and working closely with our business community in the months ahead,”

PACER Plus includes detailed provisions on the trade in goods, services and investment.

Cook Islands says the associated commitments by Australia and New Zealand to provide Aid-for-Trade assistance AUD$ 25 million(US$17 million) to enable Forum Island parties to PACER Plus to build their capacities to take advantage of the agreement are also significant.

Globalism is being threatened in the post-Covid-19 global order. However, there is still ample common sense around to counter such a threat. Those engaged are still at an early stage in their coordinated countermove. They are likely to attract reinforcements to ensure some semblance of the familiar multilateralism in the interest of global orderliness and of humanity in general. During this period of enforced unsettledness, regionalism, e.g. Pacific regionalism (Pacific Islands Forum – PIF) will need to be strong, active and react as effectively as is possible, to avoid any major setback in members’ economic, social and geo-political status. This is critical given that the majority of PIF members are vulnerable, small island developing states - globally characterised as developing or least developed countries.

The US under President Trump, with its nationalistic and autarkic ‘Make America Great Again’ is leading the charge for the disintegration of globalism. Its newest trade armament, brought about by COVID-19, straddled new heights of aggressive protectionism. So much so that a new trade lexicon has been coined to mark its undignified entrance. ‘Sicken Thy Neighbour’ relates to US’s export restriction (and even diversion) of medical products to deserving importing countries for, inter alia, protectionist reasons. The new lexicon joins its equally nefarious ‘Beggar Thy Neighbour’ to take autarky and protectionism to a new level.

The counter-movers to recapture lost grounds from globalism have globalisation and multilateralism at heart. Despite the downsides of globalisation, they believe that a multilateral approach to solving humanity’s challenges, including existential threats like climate change, can only be effectively addressed at the global level. A number of great world thinkers share the same view. Historian Yuval Noah Harari, for example, believes that the three challenges he identified for the world, viz: ecological collapse, technological disruption and nuclear war, can only be resolved at the global level.

For PIF members, especially the 16 Pacific Island Countries, Pacific regionalism is a critical pathway and an effective collective tool linking them additionally to the multilateral framework. Strong, active and effective regionalism will complement national initiatives to benefit through regional outputs and outcomes. Further, through Pacific regionalism, PIF members can aspire to increasing levels of integration amongst them and PICs especially can effectively exercise their collective innate agency on global issues that matter to them. At the multilateral level, they would benefit from, inter alia, the articulation of reasoned, effective and efficient advocacy of critical global issues.

For Pacific regionalism, therefore, it is now a critical time for self-analysis. PIF needs to step up its game in order to raise its levels of aspiration. The post-COVID-19 new normal demands this. Apart from the propitiousness of timing, PIF also needs to critically think about its own strategy given the disunity that reigns within. There is disunity in PIF’s stance on climate change. There may also be disunity as regards PIF’s stance on the disintegration of globalism. Australia, for instance, is known for having attacked the UN last year, speaking against ‘negative globalism’ and ‘unaccountable international bureaucracies.’ PIF needs the global pathway. It should be its core geostrategy.

At the practical level, PIF needs to double and treble its efforts at integration and especially economic integration. I have written at length about the delayed economic integration amongst the Pacific Island Countries (PICs) as regards Pacific Island Countries Trade Agreement (PICTA). The same scenario can definitely be said about integration between the PICs, on one hand, and Australia and New Zealand (ANZ), on the other hand, under the PACER Plus trade agreement. This trade agreement is yet to be implemented. However, the demand on its deliverables for economic integration has intensified under current circumstances to warrant immediacy of action. And I believe that the opportunity desperately beckons.

When the collective negotiations on PACER Plus were declared concluded to facilitate signing, Fiji opted to continue negotiating. There was no dissension on this matter. Fiji was upfront as regards its intention to improve some aspects of the ‘agreed texts’. The bilateral negotiations thus ensued and have yet to be declared closed.

This article endorses the need for greater economic integration within PIF to raise its profile in addressing the disintegration of globalism. Therefore, PIF needs to sanction the continued negotiations on PACER Plus with the view of attributing the trade agreement with all the concessions, special and differential treatments, waivers and derogation possible to render maximum benefits especially to the PICs. This can all be done with the requisite dosage of political will, by both Australia and New Zealand, the two developed country members of PIF.    

The opportunity should also be taken to effectively engage with Papua New Guinea (PNG) in the extended negotiations. PNG had opted out of the earlier negotiations. In the context of Pacific regionalism, there is just no logic to having a trade agreement with ANZ without the biggest economy of all the PICs involved. From statements released from Port Moresby, it can be appreciated that the issues of concern to PNG are similar to those that Fiji had highlighted.

Additionally, Vanuatu’s concern about lost tax revenue resulting from hasty and hefty tariff reduction, can also be addressed with more concessionary tariff reduction scheduling. This may require, firstly, reviewing the contents of Vanuatu’s allowable schedule of protected goods and services. Secondly, it may also need increased tolerance level as regards the definition of ‘substantial part of the trade’ – to be subjected to trade liberalisation under the agreement.

The renewed negotiations can therefore focus on these specific issues with targeted outputs. It has to be made clear at the start that new improved agreed texts should be merged onto previous texts to benefit all PICs, parties to the negotiations, including those who earlier signed the then existing agreement.

The various issues raised by Fiji, if addressed fairly and objectively, can result in greater economic integration amongst PIF members and offer more solid bases of economic growth and development. The infant industry clause, for instance, can be improved through strategic choices of industry to be protected and with appropriate liberalisation timelines.

The mandatory ‘most favoured nation’ (MFN) clause can also be subjected to concession and derogation. As it is, the MFN clause requires that any concession obtained by a party to an agreement would necessarily apply to the other party. However, this can be avoided through a waiver. The waiver, for instance, could be formulated to say that the MFN clause (on the PICs’ side) will only apply to concessions obtained from developed countries or a group of developed countries. It will not apply to concessions obtained from developing or least developed countries or a group of these countries.

Fiji was also not happy with the provision on Labour Mobility. As it is, Fiji believes that it is really nothing to write home about. Merely providing a forum for annual talkfests is hardly the stuff for considered and enhanced regional economic integration.

Another concern raised is the need to enjoy the security of the market access provided for by the agreement. Essentially, this is an oblique reference to unsupervised and unjustified non-tariff barriers (NTBs) imposed by the importing markets, ANZ in this case. On the plus side, it has to be said that both ANZ are ably addressing this matter through provisions of relevant systematic processes and training of PIC exporters with joint ANZ-funding provided for under the PACER Plus for Aid for Trade. Pacific Horticultural and Agricultural Market Access (PHAMA), an initiative by ANZ, is leading the charge on this matter.

In the first place, Fiji’s concerns were about the lack of balance and the loss of policy space for PICs in the texts of the PACER Plus agreement at that time. If improvements, as discussed above, are finally incorporated into the legal texts, they would certainly render the agreement a more consolidated basis for determined regional economic integration. Pacific regionalism would then grow from strength to strength. It, moreover, would be better placed to address its inherent disunities and contradictions. The flow-on effects from there would have positive implications on multilateralism and on PIF’s/PICs’ agency in the global scheme of things.

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

 

Delving into PICTA

  • Apr 11, 2021
  • Published in June

In the last issue of Islands Business, I discussed the abysmal state of the Pacific Island Countries Trade Agreement (PICTA) and concluded that there was indifference in the way signatory countries have regarded and treated this trade agreement. This article further pursues this matter to try to find out what is really going on and what lies behind the surface of the immediate problem.

I wanted therefore to use a political economy analysis (PEA) to get behind the scene. My search for any PEA of PICTA or of Pacific Island Countries (PICs)/Pacific Islands Forum (PIF) in general was unrewarded. The Pacific region lacks the depth of analysis and research that other regions take for granted.

I searched elsewhere for a guide. I was rewarded with a PEA of regional integration in Africa’s East African Community (EAC) with its finding pointing directly to the twin shortages of ‘political will’ and ‘capacity’ as being responsible for obstructing regional integration.

I opted therefore to use the finding as first basis of my own attempt at a PEA of PICTA. I figured out that if these twin shortages were obstructing regional integration in EAC, they are likely to be doing the same with the more specific regional economic integration driven by a trade agreement. And, given therefore, the similarities in developmental status of the EAC and PICs – comprising both developing and least developed countries, it can be concluded that those twin shortages would also apply to regional economic integration involving PICs.

On reflection, such a methodology and its deductive conclusion is not far off the mark. The shortages of political will and capacity resonate loudly with Pacific regionalism. For example, regional commentators, from time to time, have identified shortage of political will to explain the wide implementation gap regarding decisions reached by regional leaders. As regards capacity, a paper tabled at the ‘What We Can Learn’ regional symposium of 2012 stated: “….capacity is a key constraint both to policy development and policy implementation……Building capacity is at the top of all our priorities. It is however a long-term issue.”

Having come this far, I opted to apply a PEA to PICTA and of related regional economic integration, albeit, in a non-rigorous manner. Political economists have their own tool for PEA – a five lenses framework, with series of sub-lenses under each category.

From historical, geographical and other related lenses, the PICTA signatory countries – with exception of Papua New Guinea (PNG) are all small island developing states (SIDS), with small economies characterised by lack of resources that give rise, for example, to rent-seeking. Capacity is clearly a constraint. All are recipients of overseas development assistance (ODA). On a per capita basis, the region as a recipient of ODA scores very highly.  

When it comes to the acquisition of imported resources, these SIDS are constrained by the quantity and range of exports and thus by their ability to purchase their imports. They are further constrained by the tyranny of distance. Their relatively low degree of integration into the global economy restricts them from taking full advantage of various trade concessions, preferences and incentives that are available to them.

On the other hand, PNG and Nauru have/have had relatively large mineral resources. However, there is evidence of Resource Curse and Dutch disease. The abuse and mismanagement of the economy resulting from them tend be linked to capacity constraint and thus underdevelopment generally.

As regards the shortage of political will, the evidence also speaks for itself. The most prominent lens that irrefutably points to lack of political will is what can be referred to as ‘rules of the game’. That is that Pacific regionalism is - generally speaking, voluntary. Leaders and ministers who readily make decisions at the regional level are not obliged legally to comply and implement those decisions - either at national or regional levels. Furthermore, there is no political cost for non-compliance. Ministers do not lose their jobs for not implementing those decisions.  This has contributed directly to the growing implementation gaps that characterise Pacific regionalism.

This situation has changed somewhat under the Biketawa Declaration when it comes to regional security. It should be noted that it was under the provision of this Declaration that Fiji was suspended from PIF in 2009. However, there are other lenses that bring up the same evidence of lack of political will.

The 14 PICTA signatory countries belong to four sub-regional groupings, viz: Melanesian Spearhead Group (MSG), Polynesian Leaders Group, Micronesian Chief Executives Summit and the Smaller Island States (SIS). Five of these signatory countries have cross membership of two subregions. Only the SIS is structurally part of PIF. It can be envisaged that for these PICTA signatory countries, there would be a tendency to prioritise subregional issues before PICTA, which transcends subregional borders. This is particularly true for the MSG members who already have their own Free Trade Agreement in the MSG Trade Agreement.

The same can be said for PICTA signatory countries that have strong bilateral relations. The three Micronesian signatory countries, for example, have the Compact agreement with the US; The Cook Islands and Niue enjoy a special political arrangement with New Zealand; Nauru and PNG have special bilaterals with Australia.  Bilateral interests, in these cases, are likely to prevail over any PICTA issues. This can spill over to politics.

Another aspect of the ‘rules of the game’ is that Australia and New Zealand are PIF members. They also happen to be two of the largest aid donors to PICs and are the biggest contributors to the PIF budget. Their influence in regional matters can be overwhelming. Add their respective bilateral influences on specific PICs, they do indeed represent sizable diversionary forces form PICs’ own regional economic integration. Australia and New Zealand’s seasonal labour schemes, for example, may have contributed to the lack of political will for PICTA and the prospects for its regional economic integration benefits.

Related also to the ‘rules of the game’ is PICTA’s Rules of Origin (ROO). This is being modernised. It can be deduced therefore that such ROO currently lacks concessions such as cumulation that can incentivise value adding amongst the signatory countries. This is unlikely to motivate politicians.

There is also the factor relating to the diversity of size of countries and economies – from tiny Niue, to large PNG; from the smaller islands of Polynesia to the relatively larger islands of Melanesia. Such diversity can be divisive. It can breed indifference and lack of drive for any regional integration by way of PICTA, for example, especially if national development and economic growth are already proving difficult to sustain. This can only raise questions as to whether this wider engagement will be cost-effective – PICTA being the first Free Trade Agreement for the PICs concerned. The status of the private sector development in the region and its lack of concerted influence is perhaps reflective of assumed cost-ineffectiveness of regional economic integration.

The realisation that the twin shortages of capacity and political will are constraining regional economic integration in PICTA signatory countries is perhaps not unprecedented. Regional commentators have entertained and affirmed such ideas in the past. For them, such a revelation is nothing to write home about. What this intimation hopes to achieve however is that it may drive the regional planners and strategists, who are currently formulating the 2050 Strategy for the Blue Pacific Continent, to seriously factor in shortages of capacity and political will in their planning to the extent of having to design new, imaginative and enterprising operational and structural features of Pacific regionalism, even if unprecedented, to take us through the post-Covid-19 new world order.

 

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.

 

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