Prising Open The Pacific: New Trade Deals Reflect Old Agendas

The winds of change, so the cliché goes, are blowing across the Pacific. Yet looking at the background to two regional trade agreements launched in August makes me think that sometimes the more things change, the more they stay the same.

When the world’s tiniest republic hosted the 32nd Leaders Summit of the Pacific Islands Forum (formerly the South Pacific Forum), free trade was on the agenda. Facing imminent depletion of the high quality phosphate reserves on which its economy is based, most of Nauru resembles a mined-out moonscape. Many fear our entire planet may rapidly meet a similar fate due to the dominant model of “development” that has spread its tentacles far and wide.

Sri Lankan jurist Christopher Weeramantry, who chaired a Commission of Inquiry on Nauru, 3000 km northeast of Australia, concluded that the island’s “wealth and very substance were scattered throughout the world in the form of cheap fertilisers which helped grow food not only for particular countries but through them for all the world”.

Nauru’s history until independence in 1968 was one of colonial exploitation, social and environmental devastation, and great profits for the British, Australian and New Zealand governments which jointly administered the island after a period of German rule.

It now faces being wiped off the map by rising sea levels due to global warming, rising unemployment after the downsizing of the Government and Nauru Phosphate Corporation which provided 95% of all employment, and threats of financial sanctions because of European crackdowns on money laundering and tax haven operations. “Coca-colonisation” has seen healthier traditional diets displaced by processed foods, imported mainly from Australia. Nauruans are the world’s most diabetes-ridden people.

Just as forces outside the Pacific wrought the destruction in Nauru for their own benefit, recent moves to create a regional free trade area to “ease” the island nations’ “smooth and gradual integration into the world economy” are being imposed from beyond the islands.

Just as the British, French and German empires divided the Pacific into spheres of influence by an arbitrary line, the imperial tussles of the 19th century are now being mirrored by the jockeying of bigger powers to protect their political and economic interests in the region. Here, the place of the colonial powers of yesteryear has been taken by the European Union (EU), Australia, and New Zealand.

In August, Fiji’s former president Ratu Sir Kamisese Mara forcefully criticised Australia and New Zealand – the Forum’s “metropolitan members.” “They have sought to impose their solutions in an insensitive way, when left to ourselves we could work things out in what we have come to call the Pacific Way.”

“The Forum comes complete with some crazy maths”, writes New Zealand journalist, Michael Field. “The Marshall Islands has just 181 sq km of land, a third the size of Singapore, and none of it more than 5m above sea-level, yet it sits in an exclusive economic zone the size of Greenland. So small are the states that the populations of five of the smallest combined would nearly half fill Sydney’s Olympic Stadium. Australia, New Zealand and Papua New Guinea make up 93 per cent of the forum’s population and 99 per cent of the land area”.

High-level statements about special “development challenges” and vulnerabilities faced by developing small island states are ubiquitous. They’re in numerous UN and Commonwealth Secretariat documents. Former New Zealand politician, WTO Director General Mike Moore acknowledged “problems of small and vulnerable countries with scarce resources” in a video link to participants in a joint Pacific Island Forum/WTO trade policy course held in Fiji this March. Predictably, he thinks their problems are best addressed in the context of a new round of WTO talks.

The Asian Development Bank (ADB), a major multilateral donor in the Pacific, classifies the special circumstances of Pacific Developing Member Countries to include “smallness, remoteness from major markets, geographic fragmentation, economic vulnerability (because of reliance on a narrow range of primary product exports, aid, and/or remittances), and environmental vulnerability.”

The Lome Convention defining the relations between the EU and the now 77 States of Africa, the Caribbean and the Pacific (ACP) was initially signed in 1975. Lome combined a trade regime of preferential access to the European market for ACP products with a financial and technical aid package. Since the Cold War, the EU has focused more closely on Eastern Europe and the Mediterranean while trying to shore up its other international political and economic interests.

Under the Cotonou agreement signed last year between the EU and ACP, the system of trade preferences which the EU had granted will gradually be replaced by a series of new economic partnerships – free trade agreements. Formal negotiations for these will begin in September 2002, to take effect by January 2008.

The ACP Secretariat says Cotonou was shaped by “the EU’s need to restore its credibility as a ‘global player’ in aid and development” after Seattle and other events. The WTO had pressured the EU to radically reform Lome’s provisions. Cotonou defines the negotiating framework to enable the regional sub-groups or individual countries within the ACP and the EU to conclude new WTO-compatible trade agreements. A major power imbalance has always underscored EU-ACP trade and economic relations. This can only worsen.

Against a backdrop of pressure from the EU, Australia and New Zealand, and multilateral financial institutions like the ADB, in 1999 Forum Island leaders endorsed the development of a Pacific regional free trade agreement and tasked the Forum Secretariat to prepare a text. This was closely based on recommendations of a 1998 report by Robert Scollay, Director of Auckland University’s APEC Study Centre.

Forum Secretary-General Noel Levi has sought to brand the concept of a regional free trade agreement as a regional initiative. He claims that the “vision of trade and economic integration” had been the basis for the Forum’s creation 30 years ago.

However, Fijian activist/academic Claire Slatter believes that the attempt to market the regional free trade agreement “as the culmination of a regional dream is aimed at legitimating the…proposal and engendering region-wide political support – the idea that regional interests, as opposed to external ones, are being realised here is intended to create a strong sense of ownership among Pacific governments.

The emergence of discordant thinking within the South Pacific Forum since 1997, and steadily growing criticism from NGOs and leaders of other regional institutions and organisations about the programme of economic restructuring being undertaken in the region under its direction and leadership, have made ownership and legitimacy key concerns of the Forum Secretariat since 1999.”

Controversy and tension surrounded the nature of Australia and New Zealand involvement in any eventual free trade agreement. New Zealand government documents show that the Melanesian Spearhead Group countries (Fiji, Papua New Guinea, Solomon Islands and Vanuatu) and the small island states were concerned at the impact on small and fragile economies of opening up to competition from larger countries, and wanted Australia and New Zealand – the economic heavyweights in the South Pacific – to be separate signatories to a separate protocol. Australia and New Zealand had sought to be full participants and parties principal at any negotiations.

So two agreements were approved at Nauru. The Pacific Agreement on Closer Economic Relations (PACER), is not a free trade agreement as such but an “umbrella” framework agreement for future free trade agreements and economic relations in the region as a whole – including Australia and New Zealand. It provides for cooperation on trade facilitation and financial and technical assistance including in the areas of trade facilitation and promotion, capacity building and structural adjustment.

PACER allows for the start of negotiations of Forum-wide free trade arrangements no later than 8 years after PICTA enters into force. Should Forum Island Countries (FICs) wish to start free trade negotiations with developed countries (like the EU) they must first approach Australia and New Zealand to make sure they do not miss out. PACER, its proponents say, supposedly allows for Pacific Island nations to conclude trade agreements at their own pace. Such statements ignore the fact that commitments to start free trade negotiations next year with the EU – thus triggering talks with Australia and New Zealand – have already been made.

PICTA (Pacific Island Countries Trade Agreement) is a goods-only agreement, which will come into force after six countries have ratified it. Goods trade liberalisation will take place among the 14 FICs over an 8-year period to 2010 for developing countries, and 2012 for Small Island States and Least Developed Countries. Protection of sensitive industries will be maintained over a longer period, by country-specific “negative” lists to be eliminated by 2016. Eventually these agreements can be extended to cover services and investment liberalisation.

Like Cotonou, the trade arrangements are presented as “stepping stones” to allow FICs to gradually become part of a single regional market and integrate into the global economy.

New Zealand government documents show alarm and indignation about the prospect of being excluded from a Pacific regional agreement, and the EU clinching a free trade deal allowing its exports better market access in the Pacific islands than its own. “We have important trade, economic and investment relations with the South Pacific.” New Zealand and Australia waged a “concerted effort” to preserve their interests through the PACER/PICTA package. Both are ardent advocates of trade and investment liberalisation.

An important objective for Australia and New Zealand has been to ensure that their trading interests in Forum Island markets are adequately defended should FICs begin free trade negotiations with non-Forum partners. Australia and New Zealand “can accept FICs-only liberalisation as a first step so long as our situation vis-a-vis third parties is safeguarded.” said New Zealand officials.

The Pacific Islands are a valuable market for Australia and New Zealand, whose products have long flooded into the region. For exporting FICs like Fiji and the Solomon Islands, tariff cuts in Australia effectively spell an end to preferential trade arrangements that have helped them develop their industries. Pacific countries, few of which enjoyed preferential access to European markets in the first place, have no real prospect of gaining further EU market access. The balance of trade between Australia/New Zealand and the Pacific Islands has always been unequal.

In the year to June 2001, New Zealand received NZ$ 134 million in imports from Forum Island Countries, while its exports to them totaled $489 million. Australia’s trade with the region is worth A$ 1.5 billion annually.

Many island countries depend greatly for their government revenue on customs duties. According to a 1998 report tariffs represented 64% of the total tax revenue in Kiribati, 57% in Vanuatu, and 46% in Tuvalu. Value Added Tax or Goods and Services Tax are being advanced as alternative revenue sources. Social budgets will be first to feel the pinch.

At Nauru President Tebururo Tito of Kiribati warned: “Globalisation and economic liberalisation …may create untameable and unpredictable free market forces. These forces, in my view, steer the most powerful economies on earth in a direction that could take humankind back to the sociologists’ adaptation of Darwin’s theory of the survival of the fittest where life for the weak and the poor in the family, village and society is more precarious than that for the strong and powerful. I believe that this is the most important ideological challenge for the leaders in our region over the next decade.”

The structural adjustment programmes applied to the islands will arguably have a much greater impact than the new trade deals. But these agreements will help to lock in economic reforms. The EU sees its new agreements acting as an “anchor” for this purpose.

External pressure to prise open these small island economies and the region’s fragile ecosystem to the global market smacks of the same callous disregard with which the Pacific and its peoples have long been treated by Pacific Rim powers and Europe. Pacific peoples still have little input into the development of the macroeconomic policies sold to them as the only alternative.

Fine words about “special circumstances” and vulnerabilities of developing small island states are frequently used to justify external intervention and to disempower the very countries to which they refer. Such noises of concern mean little when backed by pressure to conform to economic policies that have already been tried, tested and failed elsewhere.

Nauru’s President Rene Harris recently warned that failure to address global warming and rising sea levels would lead to a “modern holocaust” for the Pacific’s low-lying islands. The Pacific certainly doesn’t deserve to be locked into a neoliberal nightmare.

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