A major trade agreement covering members of the Pacific Forum would offer mixed blessings for island economies like Tonga’s, a new report warns.
The report, Sustainable Impact Assessment of the proposed PACER Plus Agreement on Forum Island Countries, says there would be winners and losers under the deal.
The report was produced by the Office of the Chief Trade Adviser, an office funded by Australia and New Zealand to help Pacific Island countries in the PACER Plus negotiations.
The Pacific Agreement on Closer Economic Relations (PACER Plus) is a proposed trade and economic integration agreement intended to create jobs, raise standards of living and encourage sustainable economic development in the Pacific region.
Negotiations include all members of the Pacific Islands Forum, including Australia, Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Nauru, New Zealand, Niue, Palau, Papua New Guinea, Republic of Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu.
In January, Chief Trade Advisor for the Pacific Island countries, Edwini Kessie, said he thought the agreement could be signed by mid-year. However, PNG Prime Minister Peter O\Neill said his country would not sign because the agreement was unfair to smaller countries.
Negotiations are still underway.
The Chief Trade Advisor’s report says that, if implemented, benefits from the trade agreement would be spread unevenly across the participating nations and Australia and New Zealand would continue to dominate the market.
Island nations would need to find a way to derive the maximum economic benefits from the agreement without sacrificing social and environmental values.
“Trade liberalisation under PACER Plus would result in a number of positive and negative economic, social and environmental impacts,” the report said.
It warns that the poorest people are unlikely to see the biggest gains from the agreement and that the environment is likely to affected.
Despite this, the report predicts that the agreement would create more jobs, higher wages, cheaper food, access to healthier food and better medical care. Despite the minimum impact of the agreement on the poor, the report says PACER Plus would reduce poverty and improve the lives of some women.
However, as island economies grow, so would the affect on the environment.
“Trade liberalisation contributes to increased exploitation of natural resources,” the report says.
“More land would come into use for agriculture, which can encourage deforestation or increased use of chemicals, overfishing, and increased transport leading to increased emission of pollutants.
“How the private sector does business has a major impact on sustainable growth and development of a country. This can be determined by examining whether companies have adopted sustainable practices. Companies which adopt sustainable practices can gain a competitive edge and increase their market share.”
The growth of island economies would not be uniform and different countries would experience the benefits of the trade agreement unevenly.
Countries with bigger and more mature economies, like Australia and New Zealand, are likely to gain more from the deal than smaller ones. Island states would benefit from the expansion in trade if their domestic economies can take advantage of increased opportunities for trade.
“The PACER Plus Agreement would not usher in unregulated free trade,” the report says.
Members of the agreement would be able to protect social and environmental concerns and there would be periodic reviews to measure the affects of the agreement on each nation.
How the smaller islands benefitted – or coped with – the changes brought by the trade agreement would depend on their capacity to adjust to changes in trade and protect their cultural and environmental heritage.
Smaller nations might not gain anything significant from the agreement because they had higher production costs and would have to compete with Australia and New Zealand as well as larger island states with more efficient economies.
They would also have to compete against imports from Australia, New Zealand and larger island states in their domestic economies.
Different countries would face different costs as they adjust to the trade patterns, prices and market access opportunities.
The report said countries involved in the PACER Plus negotiations should adjust their trade policies to integrate social and environmental issues in order to bring about real social change.
Governments would also have to make sure their people understood what the effects of PACER Plus would be on their economic, social and political lives.
“Educating consumers to demand public sector and private sector transparency and accountability, for example, would help trade and investment to flourish,” the report said.
Island states would need to train their workforce so more people could be involved in producing and exporting goods.
Australia and New Zealand should support island nations develop policies that would help poor or disadvantaged groups to benefit from PACER Plus.
What is PACER Plus?
According to New Zealand’s Ministry of Foreign Affairs and Trade the Pacific Agreement on Closer Economic Relations (PACER Plus) builds on two existing trade agreements, the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) which was signed in 1980 and the original 2001 PACER Agreement.
MFAT said that opportunities for economic development in Pacific Island countries were limited because of their small size and the difficulty achieving the economies of scale needed to compete in international markets.
“A regional trade and economic integration agreement should help create jobs and wealth in the Pacific by making it easier for these countries to trade,” MFAT said.
MFAT said the potential benefits of the agreement were:
- A more predictable trading environment
- More consistent and transparent rules throughout the region on sanitary and phytosanitary measures, technical barriers to trade, and customs procedures
- More liberal and product-specific rules of origin
- Increased investment in the region, in particular by New Zealand and Australian investors into Pacific Island countries
- Greater certainty around tariffs for exporters
- More opportunities for trade-related development assistance for Pacific Island countries
- A more mobile labour force in the region
The main points
- A major trade agreement covering members of the Pacific Forum would offer mixed blessings for island economies like Tonga’s, a new report warns.
- The report on the proposed Pacific Agreement on Closer Economic Relations (PACER Plus) says that, if implemented, benefits from the trade agreement would be spread unevenly across the participating nations and Australia and New Zealand would continue to be the major competitors.
- Island nations would need to find a way to derive the maximum economic benefits from the agreement without sacrificing social and environmental values.
- It warns that the poorest people are unlikely to see the biggest gains from the agreement and that the environment is likely to affected.
For more information
Chief Trade Adviser: “PACER Plus Offers a Unique Opportunity for Pacific Island Countries” (Islands Business)
PNG doubts PACER Plus June deadline (RNZI)
PACER Plus (NZ Ministry of Foreign Affairs and Trade)
PACER Plus (Australian Department of Foreign Affairs and Trade)
