Article – Adam Wolfenden
In the middle of July Pacific Island Trade Ministers will meet in Samoa with their Australian and New Zealand counterparts to discuss the regional free trade agreement known as PACER-Plus. This meeting comes on the back of a tense round of intersessional …
Services Negotiations will make Regional Trade Agreement more Lopsided against Pacific
by Adam Wolfenden
July 4, 2013
In the middle of July Pacific Island Trade Ministers will meet in Samoa with their Australian and New Zealand counterparts to discuss the regional free trade agreement known as PACER-Plus. This meeting comes on the back of a tense round of intersessional negotiations and Australia becoming the latest Pacific Islands Forum country to undergo a leadership change.
The distinguishing feature about this years Ministerial will be focussed on whether or not to expand the negotiations of PACER-Plus to include services and investment. Unlike the physical transportation between countries that is trade in goods, trade in services and investment focusses more on what regulations governments can and can’t use when it comes providing the environment for services and investment.
The argument runs that if a country would like more investment and cheaper, better services then they should commit to opening up those areas under a binding international agreement. This would give the foreign investors’ confidence that their money and investment would be safe.
Unsurprisingly, it’s not so straight forward.
Whilst there can be benefits in liberalising they are not a foregone conclusion. Liberalising services and investment can lower prices and raise levels of services but for the Pacific with its small customer base means that there are natural limits to service suppliers and barriers to just how competitive they can be. It also doesn’t guarantee increased levels of foreign investment, investors make investment decisions on a number of grounds, size of the market and proximity being two factors that can work against the Islands.
If the Pacific is to go down the liberalising services and investment path, it should do so outside of PACER-Plus. Unilateral liberalisation (which is the current practice) would mean that the Pacific Islands have the opportunity to reverse the liberalisation in case things go wrong (for example if they make a mistake in their commitments like the US and EU have done), if government policy changes (if a government wants to ensure majority local ownership in sensitive sectors), or when their developmental needs change (as countries develop their ability to introduce new regulations and policies increases).
However as we’re told PACER-Plus is about the development of the Pacific Islands and that there is nothing in it for Australia and New Zealand, this is to be a development agreement with the Pacific’s needs at the centre. A Pacific official was recently quoted as saying that Australia and New Zealand were happy to help with assistance for implementation of any PACER-Plus agreement but were “not as forthcoming on the broader assistance that would ensure that we, the FICs, are able to take advantage of the entire agreement”.
The scenario thus remains that if the Pacific were to bind their services liberalisation they would receive some assistance to ensure that they can enforce their commitments. In effect, the Pacific are being paid to keep their markets open to Australian and New Zealand service providers and investors – hardly what anyone would call an agreement that was about Pacific development.
If the Pacific needs assistance for regulatory reform then that should be dealt with through the aid budget, not contingent on the Pacific removing their developmental policy space under trade agreements. Negotiating trade in services and investment has to be about more than just some time-bound assistance.
Further to this is the lack of analysis about what the impacts of such negotiations would be. Services perform social functions and are multi-functional, meaning that governments need to be able to regulate for a mix of social and commercial objectives, ensuring that services are accessible, affordable and quality. On top of this is the very unique and diverse social needs of the Pacific Islands.
Systems of social obligation, small, remote islands, kustom control of land and other characteristics of the Pacific Islands mean that they sit outside the logic of free trade. Liberalising services and investment could have far-reaching consequences for the Pacific way of life, land usage, access to health and education among others. Before any decisions on negotiating services and investment is made there should be a thorough and comprehensive social impact assessment to determine whether or not this is something that is in the developmental interests of the Pacific.
A rushed decision on launching negotiations on services and investment will not help the Pacific development, if anything it will further make PACER-Plus become what Papua New Guinea’s Trade Minister Maru called an agreement that was “lopsided” in Australia and New Zealand’s favour.