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Time for new trade approach from Pacific leaders

Aug 02, 2009

Oxfam is calling for a new approach to negotiations on the Pacific Agreement on Closer Economic Relations (PACER) which are likely to be launched at the Pacific Islands Forum in Australia August 5-6, 2009. Development for the Pacific Island countries and their peoples must be the priority for any agreement with their largest trading partners New Zealand and Australia.

Oxfam’s research shows that achieving the aim of benefiting the Pacific, as called for by the New Zealand Minister for Trade, Tim Groser, is not possible if Australia and New Zealand push for a standard free trade agreement.

In its new report, PACER Plus and its Alternatives: Which way for Trade and Development in the Pacific?, Oxfam points out that there are viable alternatives. The report argues that it is an economic co-operation agreement, with the Pacific’s development at its core, that is needed, not the ‘business as usual’ path of a standard free trade agreement that could cause irreparable damage the Islands’ economies and their development prospects.

The report shows that the Pacific Island countries are on the wrong side of a nearly 6:1 trade imbalance with Australia and New Zealand. A poor agreement is likely to widen the trade deficit even further and worsen economic performance, at a time of global economic recession and growing hardship and conflict in the region.

The report provides an assessment of the risks associated with a standard free trade agreement. A key risk is the loss of government revenue from tariff reductions that could see Tonga losing 19 per cent of government income from a free trade agreement with Australia and New Zealand, Vanuatu 18 per cent, Kiribati 15 per cent, and Samoa 12 per cent. For many of these countries, the projected loss of government revenue is more than their total health or education budgets.

Oxfam New Zealand’s Executive Director, Barry Coates, calls for new thinking rather than continuing the fundamentalist approach to free trade negotiations that have been evident in the European Union’s approach to Pacific trade. “Against a backdrop of the enormous trade imbalance with Australia and New Zealand, and the lack of a strong base of productive industry in the Pacific, it is clear that a new approach is needed.”

The report affirms the decision to focus on improved development outcomes for the Pacific as the aim for any economic cooperation agreement. Only sub-Saharan Africa is further behind in progress towards achieving the Millennium Development Goals and over one third of the Pacific’s people live below nationally defined poverty lines.

“A development-friendly economic cooperation agreement must build on the region’s assets, accelerate broad-based and sustainable economic development, strengthen the Pacific’s resilience during the twin crises of global economic recession and climate change, and contribute to real progress towards the Millennium Development Goals,” says Barry Coates.

The report has an up-beat message. “It’s entirely possible to construct an economic cooperation agreement that would improve the Pacific’s trade prospects while avoiding many of the risks,” says Coates.

However, there are conditions that must be put in place immediately. The timetable must be slower than Trade Ministers have recommended, there must be more resources available at the regional and national levels and a new style of relationship must be forged between the Pacific Island countries and New Zealand and Australia, rather than the usual adversarial negotiations that are typical of trade agreements.

“Since a new type of agreement is needed, it will take time and resources to develop the right approach. Since the aim is to develop the economic base, there must be cross-Departmental approaches within government, and strong collaboration with civil society organisations, the private sector, churches, parliamentarians, traditional leaders and women’s groups.”

The report calls for a new framework that identifies constraints to economic development, and targets new funding and support for priority sectors in Pacific countries, including small business, agriculture, fisheries, tourism and cultural sectors.

“The report shows that it is technically possible to use trade rules to enhance the PICs development prospects – but that will only happen with a truly innovative approach. Forcing the pace of negotiations will only lead to an abject failure to meet the worthy aims for an economic cooperation agreement,” Coates concluded.

Time for new trade approach from Pacific leaders

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