Rethinking Australia’s economic role in the Pacific
1 Dec 2014|

BuffetAustralia’s remaking its relationship with Fiji and promising a rethink of South Pacific regionalism. But there’s another even bigger topic on the regional renewal menu—Australia’s economic role in the South Pacific.

Having ticked off Free Trade Agreements with Japan, South Korea and China, the Abbott government can turn its attention to the Islands and the Pacific Agreement on Closer Economic Relations (PACER) Plus. Begun in 2009, PACER is argued dry. The one thing the Islands want from Australia and New Zealand—labour mobility—is the one thing Australia and New Zealand won’t give. Stalemate.

Time to do a deal. Time for a multi-course buffet, not a one-size-suits-all banquet; smaller dishes and more courses, so each Pacific state can move at its own pace. The Abbott government proclaims its supreme attachment to economic diplomacy. Applying the flexibility and commitment needed to get deals with Northeast Asia to what’s on offer in the South Pacific could change the game.

First, consider what the game is in the Islands. Too often in Canberra the old formula still applies: that Pacific policy is essentially aid policy with a bit of diplomacy sprinkled on top and a defence guarantee held in reserve. That’s the policy strait-jacket that has often confined Canberra since its departure from PNG in 1975.

The problem with having aid as our main policy instrument is that it cops all the blame as well as carrying all the promise: if the Islands are failing, Australian policy is failing and, ergo, so is aid.

The whole-of-government mantra chanted in Canberra for more than a decade in discussing the South Pacific is a repudiation of the formulation that aid is the start and finish of Pacific policy. True, aid still speaks loudly—because Australia provides half the international assistance that goes to the Islands. But all those dollars don’t guarantee Australia leadership, nor Island followership.

What would a trade deal look like? First, Australia and New Zealand need to shift their thinking to match what they’ve promised. Here’s DFAT’s description of the intent:

Australia’s approach to the PACER Plus negotiations is different to that taken in traditional free trade agreement negotiations. Australia’s primary objective is to promote the economic development of Forum Island Countries through greater regional trade and economic integration.

Time for Canberra and Wellington to prove this isn’t a search for a ‘traditional’ deal. Time to get smart about integration. Time to demonstrate our primary aim is to help the Islands. When God creates trade negotiators, he gives them a high boredom threshold, strong wills and even stronger bladders—but large helpings of vision or imagination tend to be optional.

The Islands already have a form of duty-free and quota-free access to Australia through the 1981 South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA). What’s left to negotiate? Goods and services can move freely, it’s now about people—and economic integration.

If PACER Plus is going to deliver new opportunities to the Islands then it must tackle the taboo of labour mobility. The enormity of that issue explains the sluggish PACER process—the same way the Pacific seasonal worker scheme had such a slow birth in Australia compared to New Zealand.

The fresh start with Fiji offers a chance to think anew about the region, because that fight marginalised so much else. The clue to what PACER Plus should be is in the name: it’s based on the Oz-Kiwi creation, Closer Economic Relations (CER), which marked its 30th anniversary last year. It’s one of the cleanest FTAs in the world, but after 30 years there’s still more to do. See the joint review by the two Productivity Commissions based on either side of the Tasman ditch.

Australia and New Zealand should take the detailed and effective CER built over decades—a long and pragmatic history—and translate it into a set-course meal of many courses. Present that new design to the Islands as a series of courses to be embraced over a long period, as each nation is ready. Each Island can move through the courses—the economic commitments—at its own pace. You’d expect a Samoa or Fiji to get through the stages much quicker than the smaller states or Papua New Guinea.

CER offers a host of buffet headings beyond tariff and quantitative restrictions (which were eliminated by Australia and New Zealand in 1990, five years ahead of schedule). The Oz-Kiwi march towards a single economic market takes you through a trade-negotiator dreamscape—single aviation market, rules of origin, single economic market, banking supervision, quarantine, and a host of integration tasks both achieved and yet to be tackled.

The politics of that prescription lie in that word ‘integration’. Make no mistake, this is an intensely political idea about the workings of a Pacific Community led by Australia and New Zealand. The reluctance of the Kiwis to embrace every aspect of integration—such as adopting the Oz dollar—shows what a difficult discussion this will be for the Islands. And at the top of the mountain—say three decades away—the prize of labour mobility.

Graeme Dobell is the ASPI journalist fellow. Image courtesy of Flickr user lhongchou’s photography.