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.

Big Brothers Behaving Badly
Aid increases as NZAID changes focus

Stalled NZ climate change policy worries vulnerable Pacific nations

By Megan Anderson: Pacific Media Centre

As the New Zealand government continues its review into the stalled emissions trading scheme, the nation’s vague climate policy doesn’t look good for some of the most vulnerable countries facing the effects of climate change – the Pacific Islands.

The National-led coalition is delaying the ETS, passed by the Labour administration last year, by putting it before a committee in order to determine whether to implement the scheme at all, impose a carbon tax, or adopt other climate control measures.

The ETS has been criticised by the agriculture sector and businesses as having the potential to stimulate economic disaster, by limiting emissions and requiring those who exceed them to purchase carbon credits to offset emissions.

Oxfam executive director Barry Coates says the ETS review is simply making the scheme “more favourable to big business”, and heaping the cost of climate change onto consumers.

Greenpeace political adviser Geoff Keey says the reviews are “a big exercise to push the price from the polluters back to the taxpayers”.

Keey criticises Federated Farmers’ recent proposal to scrap the scheme, saying it could have serious consequences for both the dairy industry and New Zealand’s reputation overseas.

“If New Zealand’s farming sector shows its finger to the rest of the world and the rest of the world shows its finger back, then there goes our economy.”

New Zealand’s climate policy changed drastically last year with Climate Change Minister Nick Smith saying: “The new government takes a more modest view of New Zealand’s role in the global efforts to tackle climate change.”

National’s “modest view” coincides with increasing worries surrounding New Zealand’s “clean and green” reputation.

Keey notes how New Zealand products are already being taken off the shelves overseas, particularly in the UK, because they are not seen as sustainable.

Latest report
Sean Weaver, principal of Carbon Partnership Ltd, says: “We are one of the highest emitters in the world per capita.”

While the latest report of New Zealand’s total emissions from UNFCCC (the UN Framework Convention on Climate Change) showed carbon emissions were down in 2006/7, this has been ascribed to drought reducing agricultural emissions, mild weather, and the switch from coal to gas at Huntly.

The decrease has meant New Zealand’s Kyoto 2008 deficit of $546 million is now a surplus of $241 million.

None of the emission reductions, however, have been attributed to actual government policy.
Weaver says: “If we don’t demonstrate that we’re playing an active role in combating climate change, a lot of countries – not just governments, but people – might put a lot of energy in damaging the New Zealand brand.”

New Zealand faced further blows to its “green” reputation during the March/April UN climate change talks in Bonn, Germany, which will culminate in the much-anticipated climate change agreement in Copenhagen at the end of the year.

During the talks, the government’s review of the ETS was used as an excuse for New Zealand’s refusal to put forward a mid-term emissions target. Along with Russia and the Ukraine, New Zealand was the only country of the 192 UNFCCC countries that failed to do so.

Greenpeace’s Geoff Keey says New Zealand’s refusal to settle upon a target during the talks is already having consequences.

“New Zealand’s reputation is starting to look very shaky,” he says.

“People are starting to notice overseas that New Zealand is getting quite far behind.”

He adds that one commentator at Bonn referred to New Zealand as “the Cuba of the South Pacific”.

Pacific worries
New Zealand’s failure to deliver on any definitive climate policy is also worrying its Pacific neighbours.

Although the amount of Pacific emissions is insignificant, the Islands are among the most at risk from the effects of climate change.

Jason Garman from Oxfam says: “Communities in the Pacific are among the most vulnerable in the entire world”.

He says such climate policy delays such as the ETS “are making the situation more dire”.

Garman says climate change also puts development in the Pacific at risk.

“[I]f there are stronger cyclones that people aren’t prepared for, or if they simply don’t have the resources to cope, decades of good development work that has improved people’s lives will be wiped out.”

In the climate talks held in Poznan, Poland at the end of last year, the Association of Small Island States (AOSIS), composed of 43 island states inclusive of the Pacific, called for developed countries to reduce their emissions by 40 percent below 1990 levels by 2020 - the minimum reduction required for the survival of the small islands most at risk by climate change.

Coates, however, says a 40 percent reduction – advocated by many, including Oxfam and Greenpeace – is “entirely possible with existing technology”.

At the Bonn talks, in light of gloomy new scientific predictions surrounding the pace and effects of climate change, AOSIS increased this demand to 45 percent emission cuts by 2020.

Weaver, who is closely involved with AOSIS, says: “AOSIS has frequently made strong demands of the developed countries because they stand to suffer an awful lot, especially in tropical regions.”

The Bonn talks also revealed the differences in climate change goals between rich and poor countries.

Widening gap
Coates says: “The gap between developed and developing countries is widening.”

He notes “developing countries are taking note of the latest science”, referring to how climate change has been shown to be a process far more rapid and destruction than previously thought.

“The link between impact and human suffering is greater than anticipated.”

A report released by Oxfam last month calculated that in six years the amount of people affected by the consequences of climate change is expected to increase to 375 million a year - a rise of 54 percent.

Weaver says: “The Pacific Islands get to suffer from the effects of climate change without having any real influence over how climate change is dealt with.”

He says climate change in the Pacific will also affect New Zealand economically, in terms of increased migration and an increased need for aid.

While New Zealand and Australia already give money to the Pacific to aid them in dealing with sustainability and climate change, Coates says this is not enough.

Oxfam says US$50 billion needs to be spread across developing countries for dealing with climate change.

Coates says this is a lesser target than the UN’s proposed US$86 billion.

Coates says the establishment of an international ETS would present an opportunity to generate the money needed to support those to be worst hit by climate change – developing countries.

Weaver notes how New Zealand’s own ETS would have the potential to assist development in Pacific countries.

Carbon Partnership has already proposed a project in Vanuatu that would see coconut oil - a plentiful commodity not depended upon for food – being used to make diesel in order to cut Vanuatu’s reliance upon oil imports.

Vanuatu’s production of this diesel would also entitle it, under the Kyoto Protocol, to earn carbon credits, which it could subsequently sell to other carbon markets in order to invest in its industries further.

Weaver is also involved in forestry projects in Vanuatu and Fiji that will generate carbon credits in order to support more sustainable economies in those countries.

For Weaver, an ETS opens opportunities to the Pacific as well as attempting to curb climate change.

“This is an opportunity to help them gain energy independence,” he says.

Picture: Tonga - Oxfam has described the Pacific Islands as "among the most vulnerable in the entire world” when it comes to climate change. Photo: Megan Anderson.

Megan Anderson is a Graduate Diploma in Journalism student on the AUT Asia-Pacific Journalism course.

NZ’s aid 'true agenda' faces probe

By Megan Anderson: Pacific Media Centre

As Foreign Minister Murray McCully’s controversial reviews into NZAid are completed over the next month, questions are being raised over the true agenda of New Zealand work in the Pacific.

McCully has ordered two reviews into NZAid – one by the Chief Executive of Foreign Affairs, and another by the State Services Commissioner – in response to what the minister’s spokesman, James Funnell, says was “part of National’s election policy”.

The reviews have been criticised by non-government organisations, development studies academics and political observers as too hasty, too vague, too secret, and lacking the expertise needed for the complicated issues at stake.

Professor Crosbie Walsh, former director of development studies at the University of the South Pacific, says the minister and many advisers “know next to nothing about the countries to which New Zealand gives aid”.

Oxfam executive director Barry Coates says one of the main demands of the NGO-supported “Don’t corrupt aid” campaign is to open up McCully’s decision-making process.

Don’t Corrupt Aid is launching an appeal to the public against McCully’s reviews through their website, blog and Facebook campaign.

In late February, the minister expressed his desire to see NZAid make a policy change from the “old mantra of poverty alleviation” to a “clear focus on sustainable economic development”.

He also hinted at structural changes within NZAid and the Ministry of Foreign Affairs, aiming for “a much closer alignment between our aid and development activities and our overall foreign policy goals”.

Political agenda
It has been this, alongside McCully’s plans to change NZAid’s OECD-applauded focus of ‘poverty elimination’ to ‘economic development’, which is raising questions about New Zealand’s involvement in the Pacific.

At present, NZAID spends 53 percent of the overall $480 million annual budget they receive from the government in the Pacific.

Dr Roman Grynberg’s recent controversial comments on the Pacific Islands Forum (which accompanied his resignation as Director of Economic Governance at the Pacific Islands Forum Secretariat) raised a number of concerns on the political agenda of Australia and New Zealand aid.

He says McCully’s proposal to align NZAid closer to MFAT would mean NZaid would increasingly become a political vehicle for government aims.

Dr Grynberg says: “In the past NZ aid policy was seen as more independent than Australia, but if this shift occurs NZ aid will become the financier of other arms of government as Australian aid has become over time.”

“The move of both Australian aid and NZ aid closer to their respective ministries of foreign affairs has meant that both have increasingly become arms of government and part of the 'whole of government approach' to the Pacific.”

Dr John McKinnon, an honorary research fellow at Victoria University (who set up development studies there several years ago) is critical of McCully’s approach to NZAid.
“McCully seems to have a need to flex his muscles but unfortunately most of his muscles are in his head,” he says.

“Why should he be allowed to arrogantly and so hurriedly demolish an agency that has taken more than a decade through careful deliberation to start up?”

Reputation at stake
Dr McKinnon says McCully’s proposed changes to NZAid would do little for New Zealand’s reputation as a leader in government aid.

“I really think NZAid has done a good job in placing itself, as much as possible, outside a political arena and setting its principal goal as poverty reduction”.

“New Zealanders can feel proud of what the agency has achieved in enhancing our national profile as a nation that cares.”

Professor Walsh is less convinced by NZAid’s efforts in the Pacific.

“Poverty is a structural issue that can only be addressed by each Pacific government,” he says.

Professor Walsh says the complicated flow of aid passing from the taxpayer to Island bureaucracies, large foreign-owned firms, NGOs, and “the backflow of aid through the purchase of NZ goods and services and repatriated salaries and profits” make any real positive impact upon the Pacific difficult to come by.

Statistics suggest New Zealanders share Professor Walsh’s scepticism. A NZAid study from July 2007 found that while 76 percent approved of New Zealand government providing overseas aid, “confidence in the effectiveness of overseas aid, whether provided through NGOs or by government, was again limited” (compared to the 2004 study).

Just 39 percent thought New Zealand’s NGOs are helping the impoverished in poorer countries, while only 29 percent were confident in the effectiveness of government aid.

Coates says the implementation of McCully’s mandates would ultimately mean “New Zealand’s reputation will suffer in the developing world”.

Human rights
While Coates says it is important for NZAid to exert some political influence over the Pacific – such as political intervention on the side of human rights, “good governance”, and “getting substantial services to people” – he questions recent government plans to use NZaid money to subsidise Air New Zealand flights between the United States, Tonga and Samoa.

The subsidies would be provided with the purpose of maintaining and strengthening the Pacific trade and tourist link to the United States.

“We think that might be a good idea, but it probably shouldn’t be done from the aid budget,” says Coates.

“It’s all very well to give that sort of support…but that’s not the kind of aid that should be targeted to the poor.”

McCully’s plans to move NZAid towards what he calls a more “hard-headed” economic focus is also calling into question the direction NZAID is heading.

Dr McKinnon says: “Talk of giving priority to economic issues is just another way of saying we should use aid solely for our political and economic advantage.”

One of the reasons McCully gave for the move is the enormous inequality in trade between New Zealand and the Pacific.

Barry Coates calls it “a travesty”.

“There’s a massive trade imbalance,” he says.

While New Zealand exported $794 million to Pacific Islands Forum (PIF) members (excluding Australia) in the year ending June 2008, imports from PIF members totalled at just $237 million, with a trade imbalance of $546 million.

New Zealand exports to Fiji were $337 million, with imports at just $69 million, 0.2 percent of our total imports.

Pacific imports
McCully said last month: “I believe that over time measurable increases in imports from the Pacific will be an important gauge of the effectiveness of New Zealand's development efforts in the region.”

Coates, however, criticises some of New Zealand’s recent moves towards freeing trade with the Pacific. In particular, he highlights the recent Pacific Agreement on Closer Economic Relations (PACER) between the Pacific and Australia and New Zealand, which aims to ultimately establish free trade between all three parties.

“There’s a hard push from New Zealand and Australia for negotiations to start before the Pacific are ready,” says Coates.

Trade Aid general manager Geoff White points to the general murkiness surrounding having economic development as a goal for NZAid.

“While economic development will always be a big part of poverty elimination, unless you have poverty elimination as the focus, economic development can mean anything.”

“We think that aid has to benefit the recipient and not the donor”.

Spokesman James Funnell says people are reading too much into the comments the minister has made concerning NZaid.

On Friday, the Labour Party is due to co-host a summit in Wellington with the Progressives, the Greens, other parties yet to be announced, and NGOs, to discuss the future of NZAid as McCully’s reviews proceed.

Picture: Oxfam's Barry Coates ... trying to open up the decision-making process.

Megan Anderson is a student journalist on the Asia-Pacific Journalism course, AUT University.

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