Jul 07, 2020 Last Updated 11:48 AM, Jul 5, 2020

Delving into PICTA

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.

 

Last modified on Thursday, 25 June 2020 12:21
Annotation 2020 06 29 143441
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