Tuesday, May 19, 2009

Commentators warn on 'down side' over Pacific free trade

“The neoliberal approaches that are currently in meltdown remain the paradigm that New Zealand and Australia are foisting on Pacific countries.” - Professor Jane Kelsey

By Krista Ferguson: Pacific Media Centre

New Zealand and Australia may be considering a softer approach to free trade negotiations after recent Pacific discussions in Auckland and Vanuatu amid criticisms of being rushed into an agreement and “bullying”.

Informal meetings of trade ministers and officials discussed key issues around extending the Pacific Agreement on Closer Economic Relations (PACER) to a regional trade agreement (PACER-Plus).

The coordinator of the Pacific Network on Globalisation (PANG), Maureen Penjueli, says there are concerns over developed countries negotiating with developing countries around free trade.

“There’s significant loss of government revenue from tariffs, a loss of jobs, and a loss of policy space,” she says.

“It will remove the key policy instruments like export taxes. It also removes the protection for local industries.”

On the investment side, restrictions such as the requirement for foreign investors to partner with local industries are lost, she says.

“A lot would be forfeited.”

Research commissioned by Pacific governments confirmed these potential problems, she says.

She pointed out a gap analysis undertaken for Pacific Island Forum trade ministers by Nathan Associates.

Executive director of Oxfam Barry Coates says the aid agency is hoping for a follow through on stated commitment from officials of Australia and New Zealand that the trade discussion will benefit the Pacific.

“We’re looking for reality of negotiations to echo this stated aim.”

Unequal relationship

There is an unequal relationship in capacity for negotiations, says Coates.

“Attention needs to be paid for Pacific nations to have the right people and time to research.”

The proposal from New Zealand and Australia to start formal negotiations in August is too early, he says.

The chairman of the New Zealand Pacific Business Council, Gilbert Ullrich, also says more time is needed as there are many questions still to answer.

“Vanuatu’s income comes from the tariffs on their imports. This funds government operations. What will replace this if tariffs are reduced?”

According to a PANG newsletter, Vanuatu stands to lose around 17 percent of its government revenue if tariffs are removed.

Ullrich points out that he is a great believer in free trade but says this is about fair trade with multi-lateral dimensions.

“We need to address some issues first including the exclusion of Fiji and the development of common standards across islands. The money should go into food, health and safety.

“Is PACER going to produce any jobs for the young educated people leaving school?”

The Ministry of Foreign Affairs and Trade does not consult with the New Zealand Pacific Business Council, he says.

“The free trade discussions are all theory to keep a lot of bureaucrats busy.

“They haven’t demonstrated how free trade can work properly.”

Neo-colonial behaviour
Dr Jane Kelsey, an Auckland University professor of law, says New Zealand and Australia have displayed neo-colonial behaviour all along.

“New Zealand and Australia will continue to bully their way around and are likely to employ a divide and rule strategy,” she says.

Dr Kelsey says there needs to be a rethink of the model.

“The neoliberal approaches that are currently in meltdown remain the paradigm that New Zealand and Australia are foisting on Pacific countries.”

Pacific countries will remain under enormous pressure, she says.

Dr Kelsey says some Pacific countries are choosing to deflect this by negotiating with other nations, notably China.

Penjueli says PANG is extremely concerned by the interpretation of the Pacific position by Australia and New Zealand to date.

“The region is clear that they are not ready [to begin formal negotiations]. They want an Office of Chief Trade Advisor. They want to have the opportunity to undertake national consultations.”

But Penjueli also says that New Zealand and Australia are starting to show some appreciation of the issues.

No directives were given at the recent Auckland informal meeting, according to information provided to PANG by officials. Penjueli sees this as a very positive sign.

Funding support
Coates says a proposal for a Pacific negotiating office with a chief trade adviser based in Vanuatu has been put forward with a request for funding support.

New Zealand in principal agrees but they have offered insufficient funds to support this, he says.

Penjueli says the role of chief trade adviser is a critical issue.

“There’s a concern that because of the fast tracking of PACER-Plus that the technical skills for negotiation aren’t there.”

The Pacific Islands Forum (PIF) secretariat has provided the technical expertise to date during trade discussions at the request of Pacific Trade Ministers.

New Zealand and Australia are members of PIF along with 14 other Pacific nations.

“There’s a clear tension there and this is a critical issue to resolve.”

Fiji excluded
At the moment, Fiji is excluded from the trade discussions.

Coates says: “It is hard to imagine a Pacific free trade agreement without Fiji.

“The country plays a crucial role as a trade route and as an exporter to other Pacific Islands. There needs to be some careful thinking around this.”

The situation in Fiji is changing rapidly so this is another reason to delay the start of formal negotiations, he says.

Ullrich also asks how Fiji will be dealt with.

“They are the largest manufacturer in the Pacific. Fiji is the hub, the centre of trade. There has been a 50 percent increase in trade between Fiji and China in January alone.”

Penjueli says that a change of thinking is beginning to emerge from New Zealand and Australia on how to engage Fiji in the trade discussions. She believes trade discussions with Fiji will be an exception to the current exclusions.

Dr Kelsey says it is typical hypocrisy that in areas where New Zealand and Australia do have interests they turn a blind eye to their positions on exclusion of Fiji.

Aid and trade
Dr Kelsey says the recent announcement from Foreign Minister Murray McCully about NZAid gives an indication that New Zealand’s aid spending would be aligned with foreign policy and that this would be geared to economic development.

New Zealand is likely to become more intransigent and use aid as leverage in trade discussions, says Dr Kelsey.

Coates says there is a fine line between development aid to facilitate trade and trade discussions.

“There should be no use of aid to sweeten a bad deal. Everyone recognises this.

“But there is a need to provide financial support for Pacific nations to aid development of their export capacity.

“There’s a fine line. Pacific nations will be looking for reassurance on this.”

Road map
Penjueli says a road map proposal developed by PIF members describes a pathway to trade through a phased approach and includes clear criteria for how to proceed.

The recent meeting in Vanuatu sought to refine this document along with the proposal for the chief trade adviser.

The road map identifies 2013 as the preferred date for formal negotiations to begin.

The next formal meeting of trade ministers will be held in Samoa in June. Following this there is a Pacific Trade Forum meeting in Cairns in August.

Krista Ferguson is a Graduate Diploma in Journalism student on the AUT Asia-Pacific Journalism course.

Pictured: Dr Jane Kelsey ... criticisms of bullying by Australia and New Zealand.

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