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Doubt on future of Pacific trade deal without PNG & Fiji

Sink Pacer PlusMICHAEL FIELD | Nikkei Asian Review | Edited extracts

FOURTEEN Pacific nations, some of the world's smallest and poorest, agreed Thursday to a trade and economic agreement with rich neighbours Australia and New Zealand after eight years of tortuous negotiations.

In the wake of the collapse of the much bigger trans-pacific partnership agreement, the Pacific Agreement on Closer Economic Relations (PACER Plus) was touted as a unique, unprecedented trade and development deal for the sustainable economic development of the region.

The deal was agreed at a meeting of trade ministers in Brisbane, Australia.

New Zealand Trade Minister Todd McClay termed PACER Plus "a very modern agreement" that strikes a balance between development and trade.

He the deal had the "potential to lift and increase trade, not only between the Pacific and Australia and New Zealand, but between the Pacific islands. You will see over time an increase in investment and trade."

Significantly, the two biggest island economies, Papua New Guinea and Fiji, said last year they would not sign up to PACER Plus.

Papua New Guinea had pulled out, saying it felt it could negotiate better bilateral deals while Fiji said the PACER Plus terms were not attractive enough. But McClay left the door open for further negotiations.

"The door remains open. They will see the benefits in time," said McClay.

PACER Plus includes a development package worth a total of $39 million that McClay said would help raise standards of living, create employment opportunities and increase export capacity in Pacific countries.

But Tess Newton Cain, founder of Devpacific Thinknet, said it was hard to see how PACER Plus could be significant in dollar terms given that the two biggest Pacific island economies are not signatories.

"It doesn't give Pacific island countries any access to Australia and New Zealand that they didn't already have under (existing agreements)," Ms Newton Cain said.

Tariffs on imported goods have been a major source of revenue for Pacific governments and under PACER Plus, these will decline for countries importing from Australia and New Zealand.

But Ms Newton Cain said some countries, such as Vanuatu, are already compliant with World Trade Organisation standards, and hence, had already booked the losses from reduced tariffs.

"The development assistance has the potential to be beneficial but that will depend on what the detail is of what it can be used for and how burdensome it is on Pacific Island countries to get access to it," she said.


Meanwhile, Dr Patricia Ranald, convenor of the Australian Free Trade and Investment Network, AFTINET, said in a press statement that Australia should not proceed with the trade deal, due to be formally signed in June.

She said without the two largest Pacific economies, Papua New Guinea and Fiji, PACER-Plus has failed as a regional agreement.

“PNG and Fiji’s rejection shows that the agreement is heavily skewed towards the interests of Australia and New Zealand - despite early rhetoric that the agreement was about development needs,” said Dr Ranald.

The negotiations were conducted in secret but leaked documents revealed many issues of concern to Pacific Island civil society groups.

Dr Ranald said that the smaller economies in the Pacific have less negotiating power than Fiji and PNG, and that the Australian and New Zealand governments should not be pressuring vulnerable economies into a deal which does not benefit them.


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Peter S Kinjap

PNG Trade Minister Richard Maru's take on this is that PNG will be at the receiving end of imbalance in trade.

Maru says the agreement seems to give Australia and New Zealand more flexibility to push their exports into PNG shores while PNG may is not yet ready to equate that import with its exports.

He was more concerned of balance in trade than looking at the development aid package proposed.

This makes sense here, and according to Maru PNG might be also looking at other trading partners apart within the Asia Pacific that would give trading benefit.

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