A smoother journey towards PACER Plus Islands Business, August 2009.

The Forum Island Countries (FICs) (minus Fiji) recently agreed in Apia, to bring forward negotiations with Australia and NZ on PACER Plus.

The decision to fast-track the negotiations has faced a barrage of criticisms from organizations such as PANG which has long been an opponent of PACER.  PANG also argues that it was legally wrong to exclude Fiji simply because it had been suspended from Forum; economically, a PACER without Fiji makes little sense; that Australia and NZ were not giving the Office of the Chief Trade Adviser the independence and the resources to provide meaningful guidance to the FICs; and that Australia and NZ were not giving FICs sufficient time to prepare themselves.

Australia and NZ need to heed these criticisms.  They also need to understand the many reasons why many of the FICs would be opposed to PACER Plus, if it were simply a Free Trade Agreement between Australia, NZ and the FICs relevant only for goods and “services” narrowly defined.

While simple econometric models readily show the economic benefits of a FTA for the PICs with Australia and NZ, critics like PANG and others point to very real costs which will be faced by FIC government, industries and people:  large proportions of government revenues will be at risk; a high proportion of industries will face closure with losses of thousands of jobs; the people may face increased taxes on essentials; there may be loss of discretionary national policy, foreign multinationals may become all-powerful in the FICs, indigenous land rights may come under threat, etc etc.  Some of these expected costs are very real, and some are those that come part and parcel of the inevitable process of globalisation.

But one might also add another weakness which was clearly evident from the PICTA process: that the negotiations over PACER Plus, will be a long drawn out affair, with trade officials, Ministers NGOs etc attending meetings after meetings, legal battles after legal battles, discussing consultancy reports after consultancy reports on the theoretical benefits and costs of a future FTA focused on trade in goods and services.

And as was the case with PICTA, Ministers may even sign the eventual PACER Plus in Canberra or Wellington, but totally oppose the operation of the agreement, the moment very real local costs begin to eventuate. This occurred when a small amount of PICTA trade developed between Fiji, Vanuatu, Solomons and PNG, and local manufacturers and producers placed enormous pressure on their respective governments to discourage the PICTA trade- very successfully. PACER Plus poses far more job losses for the PICs than does PICTA.

 

Is there an easier way?

 

For several years now, I have suggested that Australia and NZ need to facilitate PACER Plus, by unilaterally conferring benefits to FICs that reassure them in the very areas that they currently fear PACER Plus:

 

(a) The crucial problem in FICs is finding formal sector employment for thousands of school leavers.  Why have Australia and NZ not opened up their markets for unskilled labour from the FICs when their employers have long been calling for this?  Note only would this release labour supply pressure in the islands, but also generate large remittance incomes which would prop up foreign exchange reserves, and foster development throughout the FICS. Note that Australia and NZ have already sucked up billions of dollars of more than a hundred thousand professionals and skilled personnel from the FICs, worth billions of dollars in human capital.

 

(b)  With nearly all PIC budgets under long-term financial strain, there could be significant Australian and NZ investment in FIC infrastructure – roads, utilities, education, medical services.  This would not only  foster the pre-conditions for investment, but also improve the standards of living for Islanders, and investors alike.

 

(c) Australia and NZ need to foster joint investment projects in WTO-compatible industries in FICs, focusing on tourism, timber, marine resources, service industries (like retirement homes and call-centre industries), to accelerate economic PIC growth, but ensuring that FICs feel in control of their economies, not ruthless and anonymous multinationals.

 

(d) Australia and NZ could encourage donor schemes whereby expert Australian and NZ citizens (including former FIC citizens) are able to be based in the FICs in the areas of urgent technical need, especially in the FIC depleted civil services.

 

(e) Australiaand NZ both face dwindling demand from their civilians for military positions.  Why haveAustraliaand NZ not fostered a revolving deployment of PIC military personnel in the dwindling ANZ defense forces?  The PIC personnel would be taken off their strained PIC budgets; not only might these PIC attachments be invaluable for peace-keeping deployment internationally, but such returned personnel might also be improved in their professionalism and constitutional commitment to law and order- clearly an issue in several FICs.

 

(f) Australiaand NZ both face dwindling demand from their civilians for naval positions while several FICs (such as Kiribati and Tuvalu) have excellent naval personnel.  Why haveAustraliaand NZ not fostered a revolving deployment of FIC naval personnel in the ANZ navies, extremely useful for policing the South Pacific oceanic borders, controlling over-fishing, whaling, monitoring under-sea minerals including oil and gas; and defending Fortress Pacific.

 

(g) Why have Australia and NZ failed to encourage the SANZAR nations to include a FIC Super 14 team in their competition playing home games in Fiji, Samoa and Tonga.  This would not just boost their rugby but also their tourism industries.  Similarly with Rugby League, soccer, netball and other sports.

 

(h) And why have Australia and NZ not fostered the grand annual Pacific wide arts festivals of music, dance, theater, that can showcase to the whole world what a phenomenally rich multicultural community we have in the Pacific?

 

Labour Mobility Part of PACER Plus?

 

Should these benefits, especially labour mobility, be formally made part of PACER Plus?  This is a question which FICs, and Australia and NZ should consider seriously.  Some are vehemently opposed to doing that, claiming that such benefits (such as access to seasonal labour) can and should be an informal aid arrangement.

But an informal aid arrangement for guest workers can also be unilaterally terminated by the donor countries, for instance if there is a slight increase in unemployment in their countries, and it becomes an elections issue.

It is vital for FICs that virtually the only concrete benefits which can compensate them for the unemployment costs of PACER Plus (access for seasonal labour), are not left to the vagaries of donor country policies.  Not only must FICs, but the donor countries also be locked into polices which are for the greater good of all the signatories.

 

What ANZ vision of the PICs?

 

IfAustraliaand NZ were to offer these advantages to the FICs, effectively, the FICs would come to be treated like any remote rural community inAustraliaor NZ, whose skilled human resources continue to flow out toSydneyorAuckland, but they remain civilized rural outposts of their capitals.

There would then be little need to convincePacificIslandleaders that they should relinquish some of their discretionary powers over their economies.

But for that to happen, Australian and NZ political leaders need to have a long term vision of Pacific Islanders as one with Australian and NZ citizens, in all aspects of human endeavor: economic, political and social .

Australia and NZ need to stop treating FICs as “foreign” countries with whom hard trade deals need to be pushed through by fair means or foul, with a paternalistic use of carrots (and sticks).

For a start, Australia and NZ need to face the reality that Fiji’s trade officials, must be allowed to fully participate in the PACER negotiations.

PACER Plus is far too  important for the region’s future, to be used as a stick to make a short-term political point with the Military Regime in Fiji.