Fiji and PNG opt out as PACER Plus trade deal reached


imageAustralia has finally wrapped negotiations with New Zealand and 12 Pacific Island countries to reach an historic trade and development deal, but two of the region’s major players Fiji and Papua New Guinea have opted out.

Trade Minister Steven Ciobo, flanked by his New Zealand counterpart Todd McClay, said the deal would directly benefit one million people in the Pacific Island region.

The deal, reached in Brisbane, includes 12 Pacific Island nations and was eight years in the making.

The agreement covers goods, services and investment and includes tariff phase-out periods. It will also include a development package of more than $55 million (US$38 million) to help create jobs and boost export capacity in Pacific Island countries, New Zealand trade minister Todd McClay said.

McClay termed PACER Plus “a very modern agreement” that strikes a balance between development and trade.

He said in an interview the deal had the “potential to lift and increase trade, not only between the Pacific and Australia and New Zealand, but between the Pacific islands … You will see over time an increase in investment and trade.”

Significantly, the two biggest island economies, Papua New Guinea and Fiji, said last year they would not sign up to PACER Plus. Papua New Guinea had pulled out, saying it felt it could negotiate better bilateral deals while Fiji said the PACER Plus terms were not attractive enough. But McClay left the door open for further negotiations.

“The door remains open … They will see the benefits in time,” said McClay, calling PACER Plus a “model agreement” that could be replicated elsewhere.

Ciobo confirmed both Fiji and Papua New Guinea had elected not to sign up.

“We of course collectively encourage them to come to the table,” Ciobo said in Brisbane.

“It would certainly be even stronger with Fiji and PNG in it.”

Despite Fiji and PNG opting out, Ciobo said those who backed the agreement collectively felt it was the right time to push ahead and finalise it.

Australian FairTrade and Investment Network slammed the deal.

“PNG and Fiji’s rejection shows that the agreement is heavily skewed towards the interests of Australia and New Zealand – despite early rhetoric that the agreement was about development needs,” spokeswoman Patricia Ranald said.

The trade deal could help these South Pacific nations that face substantial challenges growing their economies as a result of poor infrastructure, limited phytosanitary measures for agricultural exports, weak regulation and low standards. These 14 nations account for just 0.05% of world trade.

In the wake of the collapse of the much bigger Trans-Pacific Partnership Agreement, the Pacific Agreement on Closer Economic Relations (PACER Plus) was touted as a unique, unprecedented trade and development deal for the sustainable economic development of the region.

“This agreement will drive economic growth and raise living standards in our region,” Australian trade minister Steven Ciobo in a statement.

“Closer economic integration of the region with larger economies such as Australia and New Zealand is essential for sustainable economic growth in the Pacific. Australia will … continue to work to increase Pacific-wide trade, tourism and investment.”

PACER Plus includes a development package worth a total of $39 million (US$27 million) that McClay said would help raise standards of living, create employment opportunities and increase export capacity in Pacific countries.

The agreement includes tariff phase-out periods which recognise the vulnerability of many Pacific economies and their strong ties with Australia and New Zealand. Pacific countries currently have duty-free access to Australia and New Zealand and PACER Plus improves this with flexible rules of origin.

But Tess Newton Cain, founder of the Devpacific Thinknet think tank in Port Vila, Vanuatu, said it was hard to see how PACER Plus could be significant in dollar terms given that the two biggest Pacific island economies are not signatories.

The 12 Pacific Island nations participating in the deal are Cook Islands, Federated States of Micronesia, Nauru, Kiribati, Niue, Palau, Republic of Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.

The agreement will be signed in Tonga on 16 June.