Nov 29, 2020 Last Updated 3:47 AM, Nov 26, 2020

Post-COVID-19 propositions for various sectors of the economy currently abound. Credit to those who are churning out these fine ideas for public consumption. One in particular, by Dr. Transform Aqorau: ‘Imagining a new post-COVID-19 international economic order (NIEO) for the Pacific Islands’ is essentially regional in essence and in application. Dr. Aqorau refers to it as ‘a single custom and development union’, or alternatively, ‘a single economic and development union’.

His article goes on to describe this NIEO for the Pacific Islands. In the lexicon of regionalism, Aqorau’s NIEO is essentially regional economic integration, with a degree of specificity on extractive industries, structured on the basis of a free trade agreement, and which has progressed to a customs union, common market and economic union. But it goes beyond that to include advanced regional integration measures to coordinate policies beyond economic, including the coordination of institutions through a regional parliament, for example.

Professor Biman Chand Prasad had earlier suggested something similar: a ‘Pacific community and Pacific Parliament.’ It is this regional architecture that is the face of regionalism and necessarily the counterpart to the rest of the world. This thus earns its ‘NIEO’ lexicon in Aqorau’s perspectives.

But all this rings a loud bell. The regional leaders, way back in 1971 at the first ever meeting of the then South Pacific Forum, were also deeply immersed in imagining the various solutions to the challenges they faced. Then, the unprecedented challenges for the five Pacific Island Countries (PICS) related to their newly independent state. A solution, they imagined, was ‘the possibility of establishing an economic union for the area.”

‘The area’ in this specific instance can be deduced from the formulation of the leaders’ decision as trading between and amongst the five PICs, ‘whose senior officials were to meet within three months’ to progress the establishment of an economic union; and officials from Australia and New Zealand were to join this task by way of promoting ‘trade and economic cooperation in the region.’

The sense of creativity and adventure that characterised the decision-making above is worthy of notice. It all came about notwithstanding the two-caucus approach to conferencing that existed then. This two-caucus approach, however, disappeared the following year (1972) on Australia’s initiative. It remains to be seen whether this structural re-organisation to merge the two unequal groups was responsible for the dilution of the natural impulse to bridge the socio-economic gaps and inequality that existed then and has continued to frustrate the Pacific Island Forum’s membership and its inherent unity.

Dr. Aqorau is correct in acknowledging that the idea behind a ‘single custom and development union’ or ‘single economic and development union’ (SCDU) is not new. “What might be novel,’ he says, “is the idea of integrating our economies to have a SCDU…….” The latter is so because Pacific regionalism has not faithfully committed itself to progressing the idea. Many factors have come into play.

The question to be asked, therefore, is what has happened to this bullish concept of an economic union that was envisaged some 49 years ago. The events of Pacific regionalism over the decades are revealing and instructive and from them we can learn to better strategise to avoid the mistakes of the past.

It took nine long years for the South Pacific Forum (SPF) to make the first move towards an economic union. In 1980, the SPF opted for a preferential, non-reciprocal trade arrangement to establish the foundation for an economic union. Such a preferential arrangement was considered with greater compliancy at the time by the global trading system. The dichotomy of SPF membership, resulting from Australia and New Zealand’s privileged positions as developed countries vis-à-vis others, played a pivotal role as well.

The idea of a Free Trade Agreement (FTA) amongst the PICS as basis for an economic union was still over a decade away.

Australia and New Zealand thus agreed to establish the preferential South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA). This was signed in 1980 and came into force in 1981.

SPARTECA was unidirectional. PICs’ exports were provided market access in Australia and New Zealand. Rules of Origin (ROO) were devised for the conduct of trade. The agreement however lacked provisions and resources to support and promote the supply side of the PICs’ export trade. Thus in 1984, SPF noted the decline in PICs’ exports under the agreement. In the following year, SPF queried the relevance of SPARTECA. Later in 1988, SPF noted PICs’ problems of production capacity and the inadequacy of the agreement’s ROO.

Fiji was factoring all these issues in its approach to regionalism. So much so that Fiji’s delegation to the 1993 Leaders’ meeting opted to propose a SPARTECA-look-alike agreement to the rest of the PICs. This, however, did not see the light of day. Had that progressed, it would have been interesting to note its formative impact on economic union at the time.

Fiji, furthermore, took advantage of its close bilateralism with Australia and New Zealand to negotiate changes in the SPARTECA Rules of Origin. This consequently boosted the development of Fiji’s garment industry at the time.

Sometime later, however, further negotiations to expand to capitalise on the same ROO proved negative. The global trade scenario had changed somewhat. The catchphrase of ‘free trade’ prevailed over preferential trade. Australia and New Zealand were thus prevailed upon to advise PICs that SPARTECA (and its ROO), had outlived its time.

In the late 1990s, it was back to basics in considering a basis for an economic union. SPF members negotiated an FTA: the Pacific Regional Trade Agreement (PARTA). This was to be an intra-regional trade agreement, including Australia and New Zealand.  The idea for a FTA just for PICs as the basis for the development of an economic union did not get the nod at the time. It was to come later, however, when PARTA was discarded. Did political economy considerations of SPF’s dichotomous and differentiated membership get in the way? Did geopolitical considerations cloud rationality in this instance?

When it came to signing PARTA, the PICs rebelled, unhappy with their treatment under the agreement, and refused to sign. PARTA’s provisions lacked the trade and trade rules concessions that would persuade Pacific Island trade ministers to readily commit to the agreement.

This predicament was resolved when SPF discarded PARTA and quickly negotiated the Pacific Island Countries Trade Agreement (PICTA) – an FTA for PICs only, and the Pacific Agreement on Closer Economic Relations (PACER) – an economic framework agreement between the PICs and Australia and New Zealand.  PACER then gave rise to PACER Plus, a FTA between twelve PICs and ANZ. This is finally to come into force with Cook Islands’ ratification. But its 16 years of negotiations diverted much energy and intellectual competencies from the task of properly establishing the economic union envisaged for PICs in 1971.

In the meantime, PICTA came into force after it was signed in 2001. However, in 2020, only seven members (50 per cent of membership) are implementing the agreement. The envisaged economic union remains a dream.  Professor Chand’s advanced regional integration scenario of a regional parliament will remain on the ‘to do’ list for the time being. Much was discussed on these advanced regional integration projects in the early 2000s during the formulation of the Pacific Plan. However, little or no progress eventuated due to claims they were ill-conceived and lacked buy-in.

Yes, it is time for new normal. Post-COVID-19 demands all that. But history still has a role to play. Pacific regionalism is best advised to occasionally cast its eyes back at its own history and re-evaluate events, and itself, from the perspectives particularly of political economy and geopolitics. The Blue Pacific should not become a cliché. It should learn from George Orwell: “Who controls the past controls the future. Who controls the present controls the past.”

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

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.

 

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