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.
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.”
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.
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.
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.