With PACER Plus, Pacific States are Set for Closer Economic Relations

After a meeting of regional trade ministers in Brisbane in mid-April, the Pacific Agreement on Closer Economic Relations (PACER Plus) has been concluded after almost eight years of negotiations. The goal of the PACER Plus agreement is to enhance the economic development of Pacific Island nations through a greater ease of doing business within the Pacific. The agreement will be officially signed in Tonga in June by 14 Pacific states: Australia, Cook Islands, Federated States of Micronesia, Kiribati, Marshall Islands, Nauru, New Zealand, Niue, Palau, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.

The agreement is designed to help facilitate investment from Australia and New Zealand into Pacific Island countries, and provide more flexible “rules of origin” criteria to allow products that may not be wholly developed within Pacific countries to still gain duty free access to Australia and New Zealand. The agreement also involves sanitary and phytosanitary measures (concerning the health of plants), the streamlining of technical barriers to trade and customs procedures, and further economic and development cooperation.

Part of this cooperation will be a US$38 million development package for Pacific Island states to develop the necessary infrastructure to increase their export capacities. For Australia and New Zealand, enhancing the capacities of Pacific Island states to trade internationally is seen as part of their regional development assistance, and is expected to subsequently enhance regional stability.

At the conclusion of the negotiations, New Zealand Trade Minister Todd McCLay stated, "This is a development and trade agreement and we recognize whilst trade will provide much more for Pacific Island economies, at the same time we have to help them get ready for some of the opportunities and benefits the agreement will deliver."

The Solomon Islands trade minister, Milner Tozaka, confirmed this perspective, saying, "Australia and New Zealand are not only going to help us in implementing the agreement, but we are so pleased that they are also going to help us in modernizing our trade-related infrastructure and enhance our productive capacity."

For most of the Pacific Island states, the trajectory toward increased labor mobility is seen as their primary gain. Tozaka saw this as a way to “upskill our workers, and increase remittances.”

Although no new specific arrangements have been made beyond the current regional workers programs that Australia and New Zealand have, a new Pacific Labor Mobility Annual Meeting has been created to provide a forum for cooperation over the issue.  This meeting will be designed with a practical focus, attempting to connect Pacific Islanders with specific opportunities within Australia and New Zealand, potentially leading to greater liberalization within the current labor mobility arrangements that are in place.

Yet the conclusion of PACER Plus negotiations highlights the absence of both Fiji and Papua New Guinea (PNG), the two largest Pacific Island economies. Both countries were involved in the negotiation processes, but PNG pulled out, believing that it would be able to negotiate better bilateral agreements with Australia and New Zealand on its own. Fiji withdrew from the agreement due to a belief that the terms were not attractive enough. This maintains Fiji’s difficult relationship within the Pacific, and could potentially be seen as a continuation of Prime Minister Frank Bainimarama’s suspicion of, and hostility to, the regional influence of Australia and New Zealand.

Other critics of PACER Plus, like the Australian Fair Trade and Investment Network, have argued that Pacific Islands already have tariff-free access to Australian markets, and this agreement does little further enhance that access. There are also concerns that lowering tariffs on goods from Australia and New Zealand would deprive island states of significant revenue, which may hinder the ability of these governments to provide quality services to their publics.

However, the Australian and New Zealand governments argue that import tariffs stagnate the development of Pacific Island countries by hindering access to products that may improve their people’s capabilities. The belief is that the measures included within PACER Plus will improve the choices of Pacific Islanders, lower prices of consumer goods, and reduce the cost of importing components for local manufacturing and agriculture. This will in turn greatly enhance that productive capacities of these countries and allow them to create more viable industries.